$62,810,000 Anaheim Public Financing Authority Revenue

NEW ISSUE - BOOK-ENTRY ONLY In the opinion of Co-Bond Counsel, under existing law and assumingcompliance with the tax covenant describedherein, the interest receivedby the owners of the 1993Bonds is excluded from gross income for Federal income tax purposesand is not a specific preferenceitem for purposesof the Federal alternative minimum tax. In the further opinion of Co-Bond Counsel, the interest received by the owners of the 1993 Bonds is exempt from personal income taxes of the State of California. See, however, "TAX EXEMPTION" herein for a descnption of other taxes on corporations. Credit Ratings: Moody's: Aaa Duff & Phelps: AAA Standard & Poor's: AAA (see "Credit Ratings" herein) $62,810,000 Anaheim Public Financing Authority Revenue Bonds, Second Series 1993 (City of Anaheim Electric Utility San Juan Unit 4 Project) Dated: July 1, 1993 Due: October 1, as shown herein The 1993 Bonds arebeing executed and delivered as fullyregistered bonds. The 1993 Bonds when initially executed and delivered will be registered in the name of Cede & Co., as registered owner and nominee for the Depository Trust Company, New York, New York ("OTC"), and will be available to ultimate purchasers in book-entry form only in denominations of $5,000 or any integral multiple thereof. Interest on the 1993 Bonds is payable semi-annually on April l and October l of each year, commencing October l, 1993. Payments of principal of and interest on the 1993 Bonds are to be made to purchasers by OTC through OTC Participants. Purchasers will not receive physical delivery of the 1993 Bonds purchased by them. See "DESCRIPTION OF THE 1993 BONDS-Book-Entry System." The 1993 Bonds are subject to optional and mandatory redemption prior to their stated maturities as described herein. The 1993 Bonds are secured by, among other things, Project Revenues, which consist of 1993 Purchase Payments to be made by the City under the Installment Purchase Agreement. The 1993 Purchase Payments and all other payments with respect to Qualified Obligations are payable from Surplus Revenues in the Qualified Obligations Account of the City's Electric System Surplus Revenue Fund, subject to application as provided in the Indenture and the Installment Purchase Agreement. The 1993 Purchase Payments will rank junior to the City's approximately $210,694,000 outstanding electric revenue bonds and any additional electric revenue bonds which may be issued in the future on a parity with such bonds. As Qualified Obligations of the City, the 1993 Purchase Payments will rank on a parity with all other Qualified Obligations of the City, including the purchase payments in connection with the outstanding Electric System Certificates of Participation (Public Utilities Building) and Electric System Certificates of Participation (Combustion Turbine Peaking Plant) and the purchase payments in connection with the Anaheim Public Financing Authority's Revenue Bonds, Series 1993 (City of Anaheim Electric Utility Projects). See "SECURITY AND SOURCES OF PAYMENT FOR THE 1993 BONDS." THE OBLIGATION OF THE CITY TO MAKE 1993 PURCHASE PAYMENTS UNDER THE INSTALLMENT PURCHASE AGREEMENT IS PAYABLE SOLELY FROM SURPLUS REVENUES IN THE QUALIFIED OBLIGATIONS ACCOUNT UNLESS OTHERWISE PAID FROM OTHER SOURCES OF LEGALLY AVAILABLE FUNDS. THE 1993 BONDS SHALL NOT IN ANY WAY BE CONSTRUED TO BE A DEBT OF THE CITY. THE FINANCING AUTHORITY OR THE STATE OF CALIFORNIA, OR ANY POLITICAL SUBDIVISION THEREOF, IN CONTRAVENTION OF ANY APPLICABLE CONSTITU­ TIONAL OR STATUTORY LIMITATION OR REQUIREMENT CONCERNING THE CREATION OF INDEBTEDNESS BY THE CITY, THE FINANCING AUTHORITY, THE STATE OF CALIFORNIA, OR ANY POLITICAL SUBDIVISION THEREOF, NOR WILL ANYTHING CONTAINED IN THE INSTALLMENT PURCHASE AGREEMENT OR INDENTURE CONSTITUTE A PLEDGE OF GENERAL REVENUES, FUNDS OR MONEYS OF THE CITY OR THE FINANCING AUTHORITY OR AN OBLIGATION OF THE CITY OR THE FINANCING AUTHORITY FOR WHICH THE CITY OR THE FINANCING AUTHORITY IS OBLIGATED TO LEVY OR PLEDGE ANY FORM OF TAXATION OR FOR WHICH THE CITY OR THE FINANCING AUTHORITY HAS LEVIED OR PLEDGED ANY FORM OF TAXATION.

Payment of the principal of and interest on the 1993 Bonds when due wilt be insured by an irrevocable municipal bond insurance policy more fully described herein to be issued simultaneously with the delivery of the 1993 Bonds by = Financial Guaranty lnsurdJlce FGIC. Company FCJC ii.1.1_.-.l[� �i 1n111\. tnI.Rlf"d Fllw1<·11UC,JIIOll'1� ln,unt11o:

Maturity Schedule $5,090,000 Serial Bonds Price Price Due Principal Interest or Due Principal Interest or October I Amount Rate Yield October I Amount Rate Yield 1994 $540,000 4.500% 2.90% 2002 $250,000 4.800% 100% 1995 535,000 4.500 3.60 2003 215,000 4.900 100 1996 510,000 4.500 3.85 2004 175,000 5.000 100 1997 485,000 4.500 4.00 2005 140,000 5.100 100 1998 465,000 4.500 4.20 2006 200,000 5.200 100 1999 440,000 4.500 4.35 2007 170,000 5.250 5.30 2000 410,000 4.500 100 2008 145,000 5.375 5.40 2001 290,000 4.600 4.65 2009 120,000 5.400 5.50 $57,720,000 5.75% Tenn Bonds due October l, 2022@ 100.00% (Accrued interest from July 1, 1993 to be added)

The 1993 Bonds are offered when, as and if delivered to and received by the Underwriter, subject to approval of legality by Mudge Rose Guthrie Alexander & Ferdon, Los Angeles, California, and Rourke, Woodruff & Spradlin, a Professional Corporation, Orange, California, Co-Bond Counsel. Certain legal matters will be passed upon for the City and the Financing Authority by the City Attorney and Financing Authority Counsel. O'Brien Partners Inc. is serving as financial advisor to the City in connection with the issuance of the 1993 Bonds. It is expectedthat the 1993 Bonds will be available fordelivery through the facilities of the OTC book-entrysystem on or about August 11, 1993. July 28, 1993 ANAHEIM PUBLIC FINANCING AUTHORITY MEMBERS OF THE FINANCING AUTHORITY - CITY COUNCIL Tom Daly, Chairman of the Financing Authority- Mayor Bob D. Simpson, Vice-Chairman of the Financing Authority - Mayor Pro Tempore Frank Feldhaus, Director of the Financing Authority - Councilman Irv Pickler, Director of the FinancingAuthority - Councilman Fred Hunter, Director of the Financing Authority- Councilman

CITY PUBLIC UTILITIES BOARD Bob Kazarian, Chairman Richard J. McMillan, Member Joseph R. White, Member Maggie Carillo Mejia, Member S. Dale Stanton, Member Robert 0. Schmahl, Member Ward Wiseman, Member

FINANCING AUTHORITY OFFICIALS AND CITY OFFICIALS James D. Ruth, City Manager David Morgan, Assistant City Manager Tom Wood, Deputy City Manager George P. Ferrone, City Finance Director and Financing Authority Financial Advisor Jack L. White, City Attorney and Financing Authority Counsel Leonora N. Sohl, City Clerk and Financing Authority Secretary Charlene Jung, City Treasurer and Financing Authority Treasurer

CITY PUBLIC UTILITIES DEPARTMENT 201 South Anaheim Boulevard Anaheim, California 92805 Edward K. Aghjayan, General Manager Edward G. Alario, Assistant General Manager - Water Services Brian J. Brady, Assistant General Manager - Electric Services and Operations Michael A. Bell, Financial Services Manager Darrell L. Ament, Consumer Services Manager Stephen E. Albright, Electric Field and Systems Operations Manager Greg Broeking, Operations Analysis Manager Antoinette D. Christovale, Financial Planning Manager John J. Hills, Environmental Services Manager Renee H. Hoffman, Financial Requirements Manager David X. Kolk, Power Resources Manager Mariann S. Long, Efficiency Programs Manager Daniel R. McCann, Power Resources Manager Robert M. Mullen, Financial Accounting Manager Susan V. Stephens, Power Resources Manager Jafar T. Taghavi, Electrical Engineering Manager Steven H. Takahashi, Water Field and Operations Manager Felipe Tobilla, Information Services Manager Diem X. Vuong, Water Engineering Manager Bonnie A. Woodson, Customer Services Manager

CO-BOND COUNSEL Mudge Rose Guthrie Alexander & Ferdon Los Angeles, California Rourke, Woodruff & Spradlin, a Professional Corporation Orange, California FINANCIAL ADVISOR O'Brien Partners Inc. Los Angeles, California and New York, New York TRUSTEE The Bank of New York Trust Company of California Los Angeles, California No dealer, broker, salesman or other person has been authorized by the Anaheim Public Financing Authority, the City of Anaheim or the Public Utilities Department to give any information or to make any representationsother than as contained in this OfficialStatement, and if given or made such other information or representations must not be relied upon as having been authorized by the Anaheim Public Financing Authority, the City of Anaheim or the Public Utilities Department. This Official Statement does not constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of, the 1993 Bonds by any person in any jurisdiction in which it is unlawful for such person to make such offer, solicitation or sale. The information set forth herein has been furnished by the Anaheim Public Financing Authority, the City of Anaheim and the Public Utilities Department and includes information obtained from sources which are believed to be reliable, but is not guaranteed as to accuracy or completeness. The information and expressions of opinion contained herein are subject to change without notice and neither the delivery of this Official Statement nor any sale made hereunder shall, under any circumstances, create any implication that there has been no change in the affairs of the Anaheim Public Financing Authority, the City of Anaheim or the Public Utilities Department since the date hereof. IN CONNECTION WITH THE OFFERING OF THE 1993 BONDS, THE UNDERWRITER MAY OVERALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF SUCH 1993 BONDS AT LEVELS ABOVE THAT WHICH MIGHT OTHER­ WISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME. TABLE OF CONTENTS

Page Page INTRODUCTION...... 1 Integration Under 1990 IOA ...... 41 Purpose of the 1993 Bonds ...... 1 De livery of San Juan Unit 4 Project Output ...... 41 Security for the 1993 Bonds ...... 2 Participants and Unit Participants in the San Juan Powe r Supply ...... 3 Generating Station...... 42 THE CITY'S PUBLIC UTILITIES DEPARTMENT.. . 4 Availability of Operating Funds and Available Information Concerning Other Owners of San Juan General De scription...... 4 Generating Station...... 43 Management of the Public Utilities Department ...... 4 OTHER ELECTRIC RESOURCES...... 44 Public Utilities Board ...... 5 Intermountain Power Proje ct ...... 44 THE FINANCING AUTHORITY...... 6 Hoover Uprating Proje ct...... 44 DESCRIPTION OF THE 1993 BONDS ...... 7 De seret Power Purchase ...... 45 Gene ral...... 7 Bonneville Power Administration Agreement...... 45 Book-Entry System ...... 7 Power Sale Agreement with Edison ...... 45 Optional Redemption ...... 9 Other...... 45 Mandatory Redemption ...... 9 Future Power Supply Resource s ...... 45 Creditsfor Re tired 1993 Bonds ...... IO CERTAIN FACTORS AFFECTING THE UTILITY Selection of 1993 Bonds for Redemption ...... IO INDUSTRY ...... 47 Notice...... IO SUMMARY OF THE INSTALLMENT PURCHASE SECURITY AND SOURCES OF PAYMENT FOR AGREEMENT ...... 47 THE 1993 BONDS...... IO Purchase of the San Juan Unit 4 Project...... 47 1993 Purchase Payments ...... IO Acquisition ...... 47 Electric System Flow of Funds ...... 11 1993 PurchasePayments; Additional Purchase Rate Covenant ...... 14 Payme nts ...... 48 Reserve Account ...... 14 Covenants of the City and the Financing Authority . . . . 48 Electric Revenue Anticipation Notes ...... 15 Events of De fault; Remedies ...... 48 Insurance ...... 15 Amendment ...... 49 Additional Qualified Obligations...... 16 SUMMARY OF THE INDENTURE ...... 49 Constitutional Limitation on Governmental Spending .. . 16 Funds and Accounts ...... 49 Limited Recourse on Default...... 17 Investment of Accounts ...... 51 BOND INSURANCE ...... 17 The Trustee...... 53 ESTIMATED SOURCES AND USES OF FUNDS. ... 18 Eve nts of De fault; Reme dies ...... 54 THE ELECTRIC SYSTEM...... 18 Defeasance ...... 55 History of the Electric System ...... 18 Unclaimed Moneys ...... 55 Principal Existing Facilities ...... 19 Amendment ...... 55 Power Supply and Demand ...... 20 LITIGATION...... 56 Customers and Energy Sales ...... 22 CREDIT RATINGS ...... 56 Electric Rates and Charges ...... 23 TAX EXEMPTION ...... 56 Historical Financial Results ...... 26 UNDERWRITING ...... 57 Accounting Policies...... 28 CERTAIN LEGAL MATTERS ...... 58 Qualified Obligations Purchase Payments ...... 29 Appendix A - Electric Utility Fund Audite d Financial State ments Years Ended June 30, 1992 and 1991...... A-I Senior Bond Debt Service Requirements...... 30 Appendix B- City of Anaheim Electric Utility Fund Summary Projection of Operating Results of the Unaudited Financial Statements Nine Months Ended Electric System ...... 31 March 31, 1993 and March 31, 1992 ...... B-1 Loads and Resources...... 32 Appendix C - The City of Anaheim ...... C-1 Labor Relations ...... 33 o f e i f THE SAN JUAN UNIT 4 PROJECT ...... 33 A1to�:t�� -� -� -��� -� � ���� -� -�������- ... D-l San Juan Ge nerating Station ...... 33 Appendix E- Form of Municipal Bond New Issue Purchase Agreement...... 41 Insurance Policy ...... E-1 OFFICIAL STATEMENT

relating to $62,810,000 Anaheim Public Financing Authority Revenue Bonds, Second Series 1993 (City of Anaheim Electric Utility San Juan Unit 4 Project)

INTRODUCTION This Official Statement, which includes the cover page and attached appendices, provides certain information in connection with the sale and delivery of the $62,810,000 aggregate principal amount of the Anaheim Public Financing Authority Revenue Bonds, Second Series 1993 (City of Anaheim Electric Utility San Juan Unit 4 Project) (the "1993 Bonds"). The 1993 Bonds will be secured by, among other things, Project Revenues, which consist of purchase payments (the "1993 Purchase Payments") to be made by the City of Anaheim, California (the "City") pursuant to an Installment Purchase Agreement, dated as of May 1, 1993 (the "Installment Purchase Agreement"), between the Anaheim Public Financing Authority (the "Financing Authority"), a joint powers authority organized and existing under the laws of the State of California, and the City relating to the acquisition of the San Juan Unit 4 Project (as defined herein). Pursuant to the Installment Purchase Agreement, the Financing Authority will appoint the City as its agent in connection with the acquisition of the San Juan Unit 4 Project.

Purpose of the 1993 Bonds The 1993 Bonds are being issued to provide moneys to pay costs of the acquisition of the San Juan Unit 4 Project, to provide funds for the Reserve Account and to pay costs of issuance related thereto. See "ESTIMATED SOURCES AND USES OF FUNDS" and "THE SAN JUAN UNIT 4 PROJECT." The 1993 Bonds are to be executed and delivered pursuant to an Indenture of Trust, dated as of May 1, 1993 (the "Indenture"), by and between the Financing Authority and The Bank of New York Trust Company of California, as trustee (the "Trustee"). Pursuant to the Indenture, the Financing Authority will assign and transfer in trust to the Trustee substantially all of its rights under the Installment Purchase Agreement, including the right to receive 1993 Purchase Payments and any and all other rights of the Financing Authority under the Installment Purchase Agreement as may be necessary to enforce the payment of 1993 Purchase Payments under the Installment Purchase Agreement. Under the Installment Purchase Agreement, the City is required to make 1993 Purchase Payments from Surplus Revenues in the Qualified Obligations Account (as such terms are hereinafter defined). The 1993 Purchase Payments consist of the purchase payments paid in connection with the San Juan Unit 4 Project. The City is also required to pay, as additional purchase payments ("Additional Purchase Payments"), any taxes or assessments charged to the Financing Authority or to the Trustee affecting the amount available to the Financing Authority or the Trustee from payments to be received under the Installment Purchase Agreement or arising due to the transactions contemplated thereby, any taxes which may be imposed on the sale, resale, use, possession or ownership of the San Juan Unit 4 Project pursuant to the Installment Purchase Agreement, the reasonable fees, charges and expenses of the Trustee, the reasonable fees and expenses of such accountants, consultants, attorneys and other experts as may be engaged by the Financing Authority or the Trustee to provide services required under the Installment Purchase Agreement or the Indenture, the reasonable costs and expenses of the Financing Authority incurred in connection with the Installment Purchase Agreement, the 1993 Bonds and the Indenture or any other documents contemplated thereby and amounts required to be rebated to the United States Treasury Department pursuant to the Installment Purchase Agreement. The City is obligated to make Additional Purchase Payments solely from Surplus Revenues in the Remaining Surplus Account ( the "Remaining Surplus Account") of the Surplus Revenue Fund (the "Surplus Revenue Fund"). Brief descriptions of the 1993 Bonds and the City's Electric System (the "Electric System") and summaries of the Installment Purchase Agreement, the Indenture and certain other documents are included in this Official Statement. Such descriptions and summaries do not purport to be comprehensive or definitive. All references herein to the 1993 Bonds, the Installment Purchase Agreement, the Indenture and any other documents are qualified in their entirety by reference to such documents, copies of which are available for inspection at the principal corporate trust office of the Trustee. Terms capitalized but not defined herein have the meanings set forth in the respective documents.

Security for the 1993 Bonds The 1993 Bonds are secured by a pledge, charge and lien upon Project Revenues which consist of 1993 Purchase Payments to be made by the City under the Installment Purchase Agreement. The 1993 Bonds are also secured by (i) all moneys deposited and held from time to time by the Trustee in the fundsand accounts established under the Indenture, other than the Acquisition Account, and (ii) income and gains with respect to the investment of amounts on deposit in the funds and accounts established under the Indenture, other than the Acquisition Account. Pursuant to the Installment Purchase Agreement, the City is obligated to make 1993 Purchase Payments solely from Surplus Revenues in the Qualified Obligations Account (the "Qualified Obligations Account") of the Surplus Revenue Fund. Notwithstanding the foregoing, the 1993 Purchase Payments shall be made from the proceeds of the sale of the 1993 Bonds deposited in the Purchase Payment Account, in the amount and at the times set forth in the Indenture, and other moneys transferred to or deposited in the Purchase Payment Account pursuant to the Indenture. The 1993 Purchase Payments are payable on a parity with the purchase payments in connection with the outstanding Electric System Certificates of Participation (Public Utilities Building) (the "1990 Certificates") executed and delivered in the aggregate principal amount of $41,605,000, the outstanding Electric System Certificatesof Participation ( Combustion Turbine Peaking Plant) (the "1989 Certificates") executed and delivered in the aggregate initial amount of $44,336, 145.10 (collectively, the "Prior Certificates") and the outstanding Anaheim Public Financing Authority Revenue Bonds, Series 1993 (City of Anaheim Electric Utility Projects) (the "Prior 1993 APFA Bonds") executed and delivered in the aggregate principal amount of $71,300,000. 1993 Purchase Payments and Additional Purchase Payments and the purchase payments and additional purchase payments in connection with the Prior Certificates and the Prior 1993 APFA Bonds rank junior to the City's outstanding electric revenue bonds and any additional electric revenue bonds, notes or other evidences of indebtedness which may be issued in the futureon a parity with such bonds. Additional Purchase Payments rank junior to the City's outstanding Electric Revenue Anticipation Notes ("ERANs") and any ERANs that may be issued in the future. See "SECURITY AND SOURCES OF PAYMENT FOR THE 1993 BONDS-Electric System Flow of Funds." The City has covenanted in the Installment Purchase Agreement to collect charges for the services and facilities of the Electric System so that in each fiscal year moneys deposited in the Surplus Revenue Fund ("Surplus Revenues") shall equal at least the sum of (a) 1.25 times the amount of Qualified Obligation Service (as defined in "SECURITY AND SOURCES OF PAYMENT FOR THE 1993 BONDS­ Electric System Flow of Funds") with respect to such fiscal year, (b) 1.00times the principal of and interest on the ERANs due and payable and to be paid from Surplus Revenues in such fiscalyear, and (c) 1.00times all other payments required to be made from Surplus Revenues in such fiscal year. See "SECURITY AND SOURCES OF PAYMENT FOR THE 1993 BONDS- Rate Covenant." Under the Installment Purchase Agreement, the obligation of the City to make 1993 Purchase Payments from Surplus Revenues in the Qualified Obligations Account is absolute and unconditional, and is not to be abated, rebated, set-off, reduced, abrogated, terminated, waived, diminished, postponed or otherwisemodified in any manner while any 1993 Purchase Payments remain unpaid, regardless of any contingency, act of God, event or cause whatsoever, including failure of consideration, eviction or constructive eviction, the taking by eminent domain, or destruction of or damage to the San Juan Unit 4 Project. The 1993 Bonds are additionally secured by amounts on deposit in the Reserve Account established under the Indenture. The Reserve Account is to be funded out of the proceeds of the sale of the 1993 Bonds in

2 an amount equal to the Reserve Requirement (as such term is hereinafter defined) . If on any date on which 1993 Purchase Payments are required to be made as provided in the Installment Purchase Agreement, the amount available in the Purchase Payment Account established under the Indenture is less than the amount necessary to pay the principal or the interest to be paid on such date with respect to any 1993 Bond, the Trustee will transfermoneys fromthe Reserve Account to the Purchase Payment Account in an amount equal to the lesser of (i) an amount sufficient to enable the Trustee to pay such amounts, or (ii) all amounts on deposit in the Reserve Account. Any 1993 Purchase Payment or portion thereof made after the date on which it is due will be deposited in the Reserve Account in an amount equal to the amount transferred from the Reserve Account to the Purchase Payment Account on such date. See "SECURITY AND SOURCES OF PAYMENT FOR THE 1993 BONDS - Reserve Account." THE OBLIGATION OF THE CITY TO MAKE 1993 PURCHASE PAYMENTS UNDER THE INSTALLMENT PURCHASE AGREEMENT IS PAYABLE SOLELY FROM SURPLUS REVENUES IN THE QUALIFIED OBLIGATIONS ACCOUNT UNLESS OTHERWISE PAID FROM OTHER SOURCES OF LEGALLY AVAILABLE FUNDS. THE 1993 BONDS ARE NOT A DEBT OF THE CITY, THE FINANCING AUTHORITY, THE STATE OF CALIFORNIA OR ANY POLITICAL SUBDIVISION THEREOF. NEITHER THE INSTALLMENT PURCHASE AGREEMENT NOR THE INDENTURE CONSTITUTES A PLEDGE OF GENERAL REVENUES, FUNDS OR MONEYS OF THE CITY OR THE FINANCING AUTHORITY. SEE "SECURITY AND SOURCES OF PAYMENT FOR THE 1993 BONDS - 1993 PURCHASE PAYMENTS."

Power Supply The Electric System serves the entire area within the limits of the City (an area of approximately 48.7 square miles). For the fiscal year ended June 30, 1992, the average number of customers of the Electric System was 102,762 and the total megawatt-hours sold was 2.6 million. The Electric System's peak load of 530 megawatts ("MW") occurred on August 17, 1992. The City has a 3.16% (67.9 MW) undivided ownership interest in Units 2 and 3 of the San Onofre Nuclear Generating Station ("SONGS") and owns 100% of a 48 MW natural gas fired combustion turbine peaking plant located in the northeast part of the City. In addition, the City purchases firm power from the Intermountain Power Agency ("IPA") under the City's 13.225% (211.6 MW) generation entitlement in IPA's Intermountain Power Project ("IPP") in Millard County in central Utah. The City also has an entitlement to purchase power (approximately 40 MW) from the Hoover Uprating Project, and contracts for firmsystem power purchases of 84 MW from Deseret Generationand Transmission Co-operative ("Deseret") and 24 MW fromBonneville Power Administration ("BPA") under a capacity/energy exchange agreement. In addition, the City purchases economy energy from various western utilities, and firm power from Southern California Edison Company ("Edison") under the terms of a Power Sale Agreement ("PSA") and at wholesale rates ("Partial Requirements Rate") filed with the Federal Energy Regulatory Commission ("FERC"). The City is a member of the Southern California Public Power Authority (the "Authority"), a joint powers agency created forplanning, financing, developing, acquiring, constructing, operating and maintaining electric generating and transmission projects for participation by some or all of its members. The City is a participant in the Authority's financing of the IPP Southern Transmission System, a 490-mile transmission line from the IPP generating station to Adelanto, California, and the Hoover Uprating Project involving the 40 MW entitlement described in the preceding paragraph. The City, other members of the Authority and other western utilities have committed to undertake the construction of the Mead-Phoenix Transmission Project and the Mead-Adelanto Transmission Project. The Mead-Phoenix Transmission Project is a 256-mile, 500 kV AC transmission line to be constructed between Marketplace Substation, a substation in the Boulder City, Nevada area and Westwing Substation, a substation in the Phoenix, Arizona area. The Mead-Adelanto Transmission Project is a 202-mile, 500 kV AC transmission line to be constructed from Marketplace Substation, in the Boulder City, Nevada area to a substation near Adelanto, California. The estimated commercial operation date for these projects is December 1995. The City is not a participant in the Authority's purchase of a portion of the Palo Verde Nuclear Generating Station near Phoenix, Arizona.

3 The City also is considering part1c1pation in certain other transm1ss1on and generation projects. Participation in such projects may be on a purchase or ownership basis, with the City's obligation for costs being payable, in certain instances, on a "take or pay" basis. For a discussion of SONGS, IPP and other transmission and generation projects, see "THE ELECTRIC SYSTEM" and "OTHER ELECTRIC RESOURCES."

THE CITY'S PUBLIC UTILITIES DEPARTMENT General Description Under the provisions of the California Constitution, the City Charter (the "Charter") and Title 10 of the Municipal Code of the City, the City owns and operates both the Electric System and the City's water system (the "Water System") for the citizens of the City. The Public Utilities Department (the "Department") exercises jurisdiction over both the Electric System and the Water System and is under the supervision of the Public Utilities General Manager (the "General Manager"). The General Manager is responsible for the supervision of the design, construction, maintenance and operation of both the Electric System and the Water System. The Finance Director of the City is charged with the accounting and the administration of the financial affairs of the City. The General Manager and Finance Director are under the direction of the City Manager who is appointed by the City Council. The Department provides electricity as well as water to virtually all the residential, commercial and industrial customers within the City limits. During fiscal year 1992 the Water System distributed 19.2 billion gallons of water to approximately 56,275 customers. The City had $27,515,000 of water revenue bonds outstanding as of June 30, 1993. The funds and accounts of the Electric System and the Water System are held separately, and the funds and accounts of one System are not pledged to the other System's obligations.

Management of the Public Utilities Department EDWARD K. AGHJAYAN, Public Utilities General Manager, has been with the Department since July 1990. Mr. Aghjayan has 29 years of utility industry experience. He has full management responsibility to plan, direct and manage the day-to-day activities and operations of the Department. As Deputy City Manager in Pasadena from September of 1985 to July of 1990, Mr. Aghjayan was responsible for overseeing the major public enterprise activities of Pasadena, including the electric, water, and public works departments, the library system, the recreation department and the Rose Bowl. While in Pasadena, he developed an award­ winning water and electric conservation program. He was employed with the City of Austin, Texas, from 1982 to 1984, first as Director of the Electric Utility, and later as Director of Public Utilities. He was Director of Municipal Utilities for theCity of Palo Alto from 1974 to 1982. Mr. Aghjayan began his career as an engineer with the New England Gas and Electric Association in 1964 and later worked for the Middleborough Gas and Electric Department in Massachusetts. He earned an M.B.A. from Boston University in 1974, graduating with honors. He also attended Harvard University's "Senior Executives in State and Local Government" program and the Massachusetts Institute for Technol­ ogy's "Energy for Energy Decision Makers" program. He holds a bachelor's degree in mechanical engineering from Tufts University. EDWARD G. ALARIO, Assistant General Manager-Water Services, has been employed with the Department since 1977. In the 15 years prior to his employment with the City, Mr. Alario served as the City Administrator of the City of Bellflower,and as City Manager, Assistant City Manager and Director of Finance forthe City of South San Francisco. He also served as a Revenue Officer for the City of Sunnyvale. Mr. Alario is responsible for Water Services, which encompasses engineering, system operations, maintenance, construction of the water transmission and distribution systems, the production system and the water quality laboratory. He is a former member of the Board of Directors of the California Municipal Utilities Association. Mr. Alario holds a bachelor's degree in business administration from California State University, San Jose.

4 DARRELL L. AMENT, Consumer Services Manager, has been with the Department since 1967. He has held various positions within the Department, including Assistant General Manager, Finance and Administra­ tion. In his current position, Mr. Ament is responsible for the Department's electric and water conservation and demand management programs, customer services, environmental, safety, and training services. He is a former member of the Board of Directors of the California Municipal Utilities Association. Mr. Ament has a B.A. (1961) and an M.A. (1963) in government from Kent State University and has completed additional graduate work in government and public administration at UCLA. BRIAN J. BRADY, Assistant General Manager- Electric Services and Operations, joined the Depart­ ment in March 1992 after being chosen in a nationwide recruitment to fill the position of Assistant General Manager - Electric Services and Operations. Mr. Brady joined Edison in 1971, and most recently held the position of Vice President and General Manager of Energy Services, Inc., a wholly-owned subsidiary of Edison. During his career, he has had responsibility for the construction of wastewater treatment facilities, power station licensing, program and contract negotiations, EPA liaison at the Federal level, property accounting management, investor relations management, valuation management, energy demand side man­ agement and international sales of utilities related services. Mr. Brady is responsible for the Department's long-range electric system demand and energy forecast, and the planning, procurement and operation of the Department's power generation and transmission resources. His responsibilities also include electric system operations, and bulk power purchases and sales. Mr. Brady has a B.A. (1971) in engineering from Loyola Marymount University and an M.B.A. (1976) from the University of Southern California. He is a registered professional engineer. MICHAEL A. BELL, Financial Services Manager, has been with the Department since 1984. He is responsible for managing the financial affairs of the Electric and Water Systems, including formation of overall financialpolicies and long-range financialplans, long-term and short-term financing, budget coordina­ tion, electric and water cost of service studies and rate design, utility accounting, operations analysis, information services and administrative services. Mr. Bell has a B.A. ( 1979) in economics from St. Louis University and an M.B.A. (1988) from Pepperdine University. He also attended Harvard University's "Senior Executives in State and Local Government" program. Prior to his employment with the City, he spent five years with the City of Springfield, Illinois Utilities Department, first as a Financial Analyst and Economic Planner, then as the Manager of Finance.

Public Utilities Board The City Council, by Ordinance No. 3557 approved July 6, 1976, established a Public Utilities Board (the "Board") with the power and duty to make recommendations to the City Council concerning (i) the operation and conduct of the Electric System and the Water System, (ii) the establishment of rules and regulations and rates for the operation of the Electric System and the Water System, (iii) the duties and qualifications of the General Manager and other employees of the Department, (iv) the acquisition, construction, improvement, extension, enlargement, diminution or curtailment of all or any part of the Electric System and the Water System, (v) the annual budget of the Department and (vi) financing, including the issuance of bonds for the Electric System and the Water System. The Board may also exercise such other powers and duties as may be prescribed by ordinance not inconsistent with the Charter. The Board consists of seven members, none of whom may hold any paid office or employment in the City government.The members of the Board are appointed by the City Council and may be removed by a majority vote of the City Council. Board members serve four-year overlapping terms. Board members serve until their successors have been appointed and qualified. The present members of the Board and their terms of appointment are: Boe KAZARIAN, Chairman, term expires June 30, 1997. Mr. Kazarian is a registered petroleum engineer, consultant and businessman. He is active in community affairs and is past chairman and director of the Anaheim Memorial Hospital Foundation. Mr. Kazarian is a member of the Anaheim Memorial Hospital Board and a member and past Chairman of the Board of Directors of the Anaheim YMCA.

5 S. DALE STANTON, Vice Chairman, term expires June 30, 1997. Mr. Stanton is a registered professional electrical engineer and is currently Vice President and General Manager of a local engineering consulting firm. RICHARD J. McMILLAN, term expires June 30, 1994. Mr. McMillan is recently retired from the Electronic Systems Division of Northrop Corporation. He was responsible for the development and implementation of productivity improvement programs. MAGGIE CARILLO MEJIA, term expires June 30, 1995. Ms. Mejia is the principal at Savanna High School in the Anaheim Union High School District. She is also a doctoral student in Education at the University of Southern California. ROBERT 0. SCHMAHL, term expires June 30, 1994. Mr. Schmahl is the retired Deputy Director of Fire Services for the County of Orange where he was responsible for the County's Fire Protection Services, Emergency Management Division and Hazardous Materials Program. He also represents Orange County as a member of the Watershed Fire Council of Southern California. JOSEPH R. WHITE, term expires June 30, 1995. Mr. White is a realtor in the City and has been active in civic and community affairs, including 25 years as an active member of the Anaheim Chamber of Commerce. L. WARD WISEMAN, M.D., term expires June 30, 1997. Dr. Wiseman is an orthopedic surgeon and consultant. He is also chairman of R.A.P (Residents for Anaheim Plaza) and a longtime Anaheim resident.

THE FINANCING AUTHORITY The Anaheim Public Financing Authority is a joint powers authority, organized purusant to a Joint Exercise of Powers Agreement, dated January 28, 1992 ( the "Joint Powers Agreement") by and between the Anaheim Redevelopment Agency (the "Agency") and the City. The Joint Powers Agreement was entered into pursuant to the provisions of Articles 1 through 4 of Chapter 5 of Division 7 of Title 1 of the California Government Code (the "Act") . The governing body of the Financing Authority consists of the same individuals who comprise the City Council of the City and the governing body of the Agency. The Financing Authority was createdfor the purpose of providing financing for public capital improvements for the City, the Agency and other public agencies through the acquisition by the Financing Authority of such public capital improvements and/ or the purchase by the Financing Authority of local obligations within the meaning of the Act. Under the Act, the Financing Authority has the power to issue bonds to pay the cost of any public capital improvement.

6 DESCRIPTION OF THE 1993BONDS General The 1993 Bonds are secured by, among other things, Project Revenues consisting of the 1993 Purchase Payments to be paid by the City pursuant to the Installment Purchase Agreement. The 1993 Bonds will be issued in the aggregate principal amount of $62,810,000. Interest on the 1993 Bonds will accrue at the respective rates per annum set forth on the cover page hereof, payable semiannually on October 1 and April 1 (each, an "Interest Payment Date") of each year, commencing October l, 1993. The 1993 Bonds will mature on October 1 in the respective years and in the respective principal amounts set forth on the cover page hereof. Interest on each 1993 Bond accrues from the Interest Payment Date next preceding the date of authentication thereof unless (i) it is executed on an Interest Payment Date, in which event interest accrues fromthe date of execution thereof, (ii) it is authenticated on or before September 15, 1993, in which event interest accrues from July 1, 1993, or (iii) it is authenticated after the fifteenth calendar day of the month immediately preceding an Interest Payment Date, in which case interest accrues from such Interest Payment Date. If, at the time of authentication of any 1993 Bond, interest thereon is in default, such 1993 Bond will bear interest fromthe Interest Payment Date to which such interest has previously been paid in fullor made available for payment on such outstanding 1993 Bond. Interest on the 1993 Bonds will be computed on the basis of a 360-day year of twelve 30-day months.

Book-Entry System The 1993 Bonds will be available in book-entry form only in denominations of $5,000 or any integral multiple thereof and, when delivered, will initially be evidenced by one fully registered 1993 Bond for each maturity in the name of Cede & Co. ("Cede"), as nominee for The Depository Trust Company, New York, New York ("DTC") . As long as DTC, or its nominee, Cede is the registered owner of all 1993 Bonds, the principal of, premium, if any, and interest on the 1993 Bonds will be paid directly to DTC. Disbursement of such payments to the DTC Participants (as defined below) will be the responsibility of DTC, and disbursement of such payments to the actual purchasers of the 1993 Bonds ( the "BeneficialOwners") will be the responsibility of the DTC Participants. DTC is a limited-purpose trust company organized under the laws of the State of New York, a member of the Federal Reserve System, a "clearing corporation" within the meaning of the New York Uniform Commercial Code and a "clearing agency" registered pursuant to the provisions of Section 17A of the Securities Exchange Act of 1934, as amended. DTC was created to hold securities on behalf of its participants ("DTC Participants") and to facilitate the clearance and settlement of securities transactions among DTC Participants through electronic book-entry changes in accounts of DTC Participants, thereby eliminating the need for physical movement of securities certificates. DTC Participants include securities brokers and dealers, banks, trust companies, clearing corporations and certain other organizations, some of which (and/or their representatives) own DTC. Access to the DTC system is also available to others such as bankers, brokers, dealers and trust companies that clear through or maintain a custodial relationship with a DTC Participant, either directly or indirectly ( the "Indirect Participants"). Purchases of 1993 Bonds under the book-entry system may be made only through brokers and dealers who are, or act through, DTC Participants. Each DTC Participant will receive a credit balance in the records of DTC in the amount of such DTC Participant's 1993 Bonds. The ownership interest of each Beneficial Owner is to be recorded through the records of a DTC Participant or Indirect Participant. BeneficialOwners will not receive written confirmation from DTC of their purchases, but each Beneficial Owner is expected to receive a written confirmationof their purchase providing certain details of the 1993 Bonds acquired. Transfers of ownership interests in the 1993 Bonds will be accomplished only by book entries made by DTC and, in tum, by DTC Participants who act on behalf of the Beneficial Owners and Indirect Participants. Beneficial Owners of the 1993 Bonds or interests therein will not receive or have the right to receive physical delivery of 1993 Bonds, and will not be or be considered to be owners thereof under the Indenture, except as specifically provided in the Indenture, in the event participation in the book-entry system is discontinued.

7 The Trustee may treat OTC ( or its nominee) as the sole and exclusive owner of the 1993 Bonds registered in its name for the purposes of payments of the principal of and interest on the 1993 Bonds, giving any notice permitted or required to be given to the owners of 1993 Bonds under the Indenture, registering the transferof 1993 Bonds, obtaining any consent or other action to be taken by owners of 1993 Bonds and for any other purpose; the Trustee will not be affected by any notice to the contrary. The Trustee shall not have any responsibility or obligation to any OTC Participant, any person claiming a beneficial ownership interest in the 1993 Bonds under or through OTC or any OTC Participant or any other person not shown on the registration books kept by the Trustee as being a registered owner of 1993 Bonds. Neither the Financing Authority, the City nor the Trustee shall have any responsibility with respect to the accuracy of any records maintained by OTC, Cede or any OTC Participant with respect to any ownership interest in the 1993 Bonds; the payment by OTC to any OTC Participant or the payment by any OTC Participant to any Beneficial Owner of any principal amount of or interest or redemption premiums payable with respect to the 1993 Bonds; the delivery to any OTC Participant or any Beneficial Owner of any notice which is permitted or required to be given to owners of 1993 Bonds under the Indenture; the selection by OTC or any OTC Participant of any person to receive payment in the event of a partial redemption of 1993 Bonds; or any consent given or other action taken by OTC as owner of 1993 Bonds. The Financing Authority, the City and the Trustee cannot give any assurances that OTC, OTC Participants, Indirect Participants or others will distribute payments of principal of, redemption premium, if any, and interest on 1993 Bonds paid to OTC or its nominee, as the registered owner, or any redemption or other notice, to the Beneficial Owners or that they will do so on a timely basis or that OTC will serve and act in a manner described in this Official Statement. As long as the book-entry system is used for the 1993 Bonds, the Trustee will give any notice of redemption or any other notices required to be given to owners of 1993 Bonds only to OTC or its nominee. Any failure of OTC to advise any OTC Participant, or of any OTC Participant or Indirect Participant to notify the BeneficialOwners, of any such notice and its content or effect will not affectthe validity of the redemption of the 1993 Bonds called for redemption or of any other action premised on such notice. Beneficial Owners may desire to make arrangements with a OTC Participant so that all communications to OTC which affect such Beneficial Owner will be forwarded in writing by such OTC Participant. The Trustee will pay the principal, interest and redemption premiums, if any, with respect to the 1993 Bonds to OTC or Cede, as nominee of OTC, and all such payments shall be valid and effective to fully satisfy and discharge the Financing Authority's obligations with respect to the 1993 Bonds to the extent of the sum or sums so paid. Disbursement of such payments to the OTC Participants is the responsibility of OTC and disbursements of such payments to the Beneficial Owners is the responsibility of the OTC Participants. Upon receipt of moneys, DTC's current practice is to credit immediately the accounts of OTC Participants in accordance with their respective holdings shown on the records of OTC for subsequent disbursements to the Beneficial Owners. If appropriate, OTC Participants will forward such payments to Indirect Participants. Payments by OTC Participants or Indirect Participants to Beneficial Owners will be governed by standing instructions and customary practices, such as those which are now the case with municipal securities held for the accounts of customers in bearer formor registered in "street name," and will be the responsibility of OTC Participants and Indirect Participants and not of OTC, the Trustee, the City or the Financing Authority, subject to any statutory and regulatory requirements as may be in effect from time to time. Discontinuation of the Book-Entry Sy stem. In the event that OTC determines not to continue to act as securities depository by giving notice to the Financing Authority and the Trustee and discharging its responsibilities with respect thereto under applicable law and there is no successor securities depository,or the Financing Authority determines that it is in the best interest of the Beneficial Owners of the 1993 Bonds that they be able to obtain certificates, the Trustee will execute, transfer and exchange 1993 Bonds as requested by OTC and will deliver new 1993 Bonds in fully registered form in denominations of $5,000principal amount or any integral multiple thereof in the names of Beneficial Owners or OTC Participants. In the event the book-entrysystem is discontinued, the principal amount of and redemption premiums, if any, payable with respect to the 1993 Bonds will be payable by check or draft upon surrender thereof at the

8 CorporateTrust Officeof the Trustee. The interest on the 1993 Bonds will be payable by check or draft mailed to the owners thereof at their addresses as they appear on the books maintained by the Trustee on the fifteenth day of the month immediately preceding the applicable Interest Payment Date. The registration of any 1993 Bond may be transferred upon the surrender of such 1993 Bond at the Corporate Trust Office of the Trustee by the owner thereof or by such owner's duly authorized attorneywith a duly executed written instrument of transfer in a form satisfactory to such Trustee. The 1993 Bonds may be exchanged upon their surrender at the Corporate Trust Office of the Trustee for an equal aggregate principal amount of such 1993 Bonds of the same maturity of any other authorized denominations. The Trustee may charge the owner of a 1993 Bond surrendered fortransfer or exchange a sum sufficient to cover any tax, fee or other governmental charge required to be paid with respect to such transferor exchange. The Trustee is not required to transfer or exchange any 1993 Bond in the fifteen days prior to selection of 1993 Bonds for redemption (whether or not such 1993 Bond is thereafter selected for redemption) or any 1993 Bond selected for redemption in whole or in part. The fo regoing description concerningDTC and DTC's book-entry system is based solely on information fu rnishedby DTC. No representation is made herein by the City or the Financing Authority as to the accuracy or completeness of such information.

Optional Redemption The 1993 Bonds maturing on or after October 1, 2003 are subject to redemption at the option of the Financing Authority in whole at any time, or in part on any Interest Payment Date in integral multiples of $5,000 on or after April 1, 2003, at the redemption price (expressed as a percentage of the total principal amount redeemed) and the related interest due with respect thereto on the date fixed for redemption, from any source of funds, upon notice as described below. The redemption price is set forth below: Period During Which Redeemed Redemption (both dates inclusive) Price April 1, 2003 through March 31, 2004 ...... 102% April 1, 2004 through March 31, 2005 ...... 101 April 1, 2005 and thereafter ...... 100

Mandatory Redemption

The 1993 Bonds maturing on October 1, 2022 are subject to mandatory redemption at the principal amount thereof, without premium, from the principal components of the 1993 Purchase Payments to be made in the years and amounts as set forth below: Mandatory Redemption Date Principal October 1 Amount 2010 ...... $ 85,000 201 1 ...... 45,000 2012 ...... 4,025,000 201 3 ...... 4,220,000 2014 ...... 4,435,000 2015 ...... 4,660,000 2016 ...... 4,900,000 2017 ...... 5,150,000 2018 ...... 5,425,000 2019 ...... 5,71 5,000 2020 ...... 6,025,000 2021 ...... 6,345,000 2022 (final maturity) ...... 6,690,000

9 Giving effect to the mandatory redemption schedule set forth above, the average lives of the 1993 Bonds maturing on October 1, 2022 would be approximately 24 years, 6 months as calculated from the delivery date.

Credits forRetired 1993 Bonds The Financing Authority shall have the right, at the direction of the City, to satisfy all or any part of any mandatory redemption obligation or 1993 Purchase Payment in connection with 1993 Bonds of any maturity, by crediting at their principal amount outstanding 1993 Bonds of such maturity purchased or optionally redeemed and delivered by the Financing Authority to the Trustee (not less than 45 days in advance of the date on which such mandatory redemption obligation or 1993 Purchase Payment is due). The Trustee shall credit the 1993 Purchase Payments with an amount equal to the principal amount of the 1993 Bonds so delivered to the Trustee.

Selection of 1993 Bonds for Redemption In the case of redemption of less than all outstanding 1993 Bonds, the Trustee is required to select the 1993 Bonds to be redeemed to correspond to the principalcomponents of the 1993 Purchase Payments prepaid by the City in accordance with the Installment Purchase Agreement; provided, however, that, in the case of any mandatory redemption of any 1993 Bond, or portion thereof, prior to its maturity, the Trustee shall first select those 1993 Bonds delivered to such Trustee by the Financing Authority previously redeemed or acquired by the Financing Authority in lieu of making such redemption and then shall select by lot within a maturity the other 1993 Bonds to be redeemed. Upon surrender of a 1993 Bond to be redeemed in part only, the Financing Authority will execute and the Trustee will deliver to the owner thereof a new 1993 Bond or 1993 Bonds representing principal amounts equal to the unredeemed portion of the 1993 Bond to be redeemed.

Notice Notice of redemption is to be mailed by the Trustee by first-class mail not less than 30 days nor more than 60 days prior to the redemption date to the owners of the 1993 Bonds designated for redemption at their addresses appearing on the registration books of the Trustee and to each Securities Depository and Information Service ( each as defined in the Indenture) . Each notice of redemption will state the date of the notice, the redemption date, the redemption price, the place or places of redemption, the CUSIP number, if any, of the maturity or maturities to be redeemed, and if less than all of the outstanding 1993 Bonds are to be redeemed, the distinctive numbers of the 1993 Bonds to be redeemed and the maturity or maturities in the event of redemption of all of the 1993 Bonds of such maturity or maturities in whole of the 1993 Bonds to be redeemed. Each notice shall also state that fromand after the redemption date interestwill cease to accrue on such 1993 Bonds.

SECURITY AND SOURCES OF PAYMENT FOR THE 1993 BONDS 1993 Purchase Payments The 1993 Bonds are secured by, among other things, Project Revenues, which consist of 1993 Purchase Payments to be made by the City under the Installment Purchase Agreement. Pursuant to the Indenture, the Financing Authority assigns and transfers in trust to the Trustee substantially all of its rights in and to the Installment Purchase Agreement, including the right to receive the 1993 Purchase Payments and any and all of the other rights of the Financing Authority under the Installment Purchase Agreement as may be necessary to enforce the payment of 1993 Purchase Payments under the Installment Purchase Agreement. Pursuant to the Installment Purchase Agreement, the City is obligated to make 1993 Purchase Payments solely from Surplus Revenues in the QualifiedObligations Account. Notwithstanding the foregoing, the 1993 Purchase Payments shall be made from the proceeds of the sale of the 1993 Bonds deposited in the Purchase Payment Account, in the amounts and at the times set forthin the Indenture, and other moneys transferred to

IO or deposited in the Purchase Payment Account pursuant to the Indenture. The City is obligated to make Additional Purchase Payments under the Installment Purchase Agreement solely from Surplus Revenues in the Remaining Surplus Account. Nothing in the Installment Purchase Agreement precludes the City from making 1993 Purchase Payments and Additional Purchase Payments from other lawfully available moneys of the City. Subject to· the limitations set forth in the preceding paragraph, the obligation of the City to make the 1993 Purchase Payments and Additional Purchase Payments required by the Installment Purchase Agreement is absolute and unconditional, and is not to be abated, rebated, set-off, reduced or otherwise modified in any manner or to any extent whatsoever while any 1993 Purchase Payments or Additional Purchase Payments remain unpaid, regardless of any contingency, act of God, event or cause whatsoever, including, without limiting the generality of the foregoing, any acts or circumstances that may constitute failure of consideration, eviction or constructive eviction, taking by eminent domain of or destruction of or damage to the San Juan Unit 4 Project, commercial frustration of purpose, any change in the laws of the United States or the State of Californiaor any political subdivision of either or the rules or regulations of any governmentalauthority or any failure of the Financing Authority or the Trustee to perform and observe any agreement, duty, liability or obligation arising out of or connected with the Installment Purchase Agreement or the Indenture. The Installment Purchase Agreement is deemed to constitute a "net contract" pursuant to which the City will pay absolutely net amounts of the 1993 Purchase Payments, Additional Purchase Payments and all other payments required thereunder, regardless of any rights of set-off, recoupment, abatement or counterclaim the City might otherwise have against the Financing Authority, the Trustee or any other party. The City has covenanted in the Installment Purchase Agreement to take such action as may be necessary to include and maintain the applicable 1993 Purchase Payments and Additional Purchase Payments due under the Installment Purchase Agreement in its budget for the appropriate fiscal year or pursuant to a separate resolution of the City Council and to make the appropriations necessary for the payment of all such 1993 Purchase Payments and Additional Purchase Payments required under the Installment Purchase Agreement. The performance of this covenant by the City is to be deemed and understood under the Installment Purchase Agreement to be a ministerial duty. THE OBLIGATION OF THE CITY TO MAKE 1993 PURCHASE PAYMENTS UNDER THE INSTALLMENT PURCHASE AGREEMENT IS PAYABLE SOLELY FROM SURPLUS REVE­ NUES IN THE QUALIFIED OBLIGATIONS ACCOUNT UNLESS OTHERWISE PAID FROM OTHER SOURCES OF LEGALLY AVAILABLE FUNDS. THE 1993 BONDS SHALL NOT IN ANY WAY BE CONSTRUED TO BE A DEBT OF THE CITY, THE FINANCING AUTHORITY, THE STATE OF CALIFORNIA, OR ANY POLITICAL SUBDIVISION THEREOF IN CONTRA VEN­ TION OF ANY APPLICABLE CONSTITUTIONAL OR STATUTORY LIMITATION OR RE­ QUIREMENT CONCERNING THE CREATION OF INDEBTEDNESS BY THE CITY, THE FINANCING AUTHORITY, THE STATE OF CALIFORNIA, OR ANY POLITICAL SUBDIVISION THEREOF, NOR WILL ANYTHING CONTAINED IN THE INSTALLMENT PURCHASE AGREEMENT OR THE INDENTURE CONSTITUTE A PLEDGE OF GENERAL REVENUES, FUNDS OR MONEYS OF THE CITY OR THE FINANCING AUTHORITY OR AN OBLIGATION OF THE CITY OR THE FINANCING AUTHORITY FOR WHICH THE CITY OR THE FINANC­ ING AUTHORITY IS OBLIGATED TO LEVY OR PLEDGE ANY FORM OF TAXATION OR FOR WHICH THE CITY OR THE FINANCING AUTHORITY HAS LEVIED OR PLEDGED ANY FORM OF TAXATION.

Electric System Flow of Funds 1993 Purchase Payments are to be made from the QualifiedObligations Account of the Surplus Revenue Fund (a special fund of the City held by the Treasurer of the City and created pursuant to Resolution No. 76R-276). The City is required by the Installment Purchase Agreement to pay, on or before each Purchase Payment Date, fromthe Qualified Obligations Account to the Trustee fordeposit in the Purchase Payment Account, the amount of the 1993 Purchase Payments due on the next succeeding April 1 and October 1. Additional Purchase Payments are to be made from the Remaining Surplus Account of the

11 Surplus Revenue Fund. See "SUMMARY OF THE INSTALLMENT PURCHASE AGREEMENT - 1993 Purchase Payments; Additional Purchase Payments." Electric System Funds and Accounts. Pursuant to the Installment Purchase Agreement, all rates, feesand charges for providing electric service to persons and real property and all other fees, rents and charges and other income derived by the City fromthe ownership, operation, use or services of the Electric System ( the "Gross Revenues") are to be deposited as received by the City Treasurer to the Revenue Account in the Electric Revenue Fund held by the Treasurer. On or beforethe 20th day of each calendar month, the Finance Director of the City is required, so long as any 1993 Bonds are outstanding, to withdraw the entire amount on deposit in the Revenue Account and allocate and deposit such amount in the funds and accounts, in the order of priority listed below. Bond Service Account; Bond Sinking Account Maintenance and Operation Account Reserve Fund Renewal and Replacement Account Rebate Account Surplus Revenue Fund The amount to be deposited in each such account is set forth below. First, to the Bond Service Account, one-sixth of the interest which will become due and payable (less any interest which has already been provided for) on the outstanding Senior Bonds within the next six month period and one-twelfth of the principal amount which will mature and be payable on the outstanding Senior Bonds within the next twelve month period and, to the Bond Sinking Account, the amount required with respect to any term Senior Bonds to provide for mandatory sinking fund installments. "Senior Bonds" comprise the City's outstanding (i) Electric Revenue Bonds, Issue of 1976; (ii) Electric Revenue Bonds, Issues A, B and C of 1983; (iii) Electric Revenue Bonds, Issue of 1986; (iv) Electric Revenue Bonds, Second Issue of 1986; (v) Electric Revenue Bonds, Issue of 1991; and (vi) Electric Revenue Bonds, Issue of 1993, together with any other revenue bonds, revenue notes or other similar evidences of indebtedness issued at any time in connection with the acquisition, construction or financingof extensions of, additions to, repairs and replacements to, renewals of, and improvements of, the Electric System, payable out of Gross Revenues. The aggregate principal amount of the Senior Bonds outstanding as of June 30, 1993 was $210,694,000. Second, to the Maintenance and Operation Account, an amount sufficient forthe payment of the Maintenance and Operation Expenses of the Electric System as said expenses become due and payable. "Maintenance and Operation Expenses" mean the reasonable and necessary current expenses of maintaining, repairing and operating the Electric System, including City administrative expenses directly attributable to Electric System functions, but excluding depreciation, interest and amortization, all computed in accordance with sound accounting principles and consistent with existing accounting practices of the City. Third, to the Reserve Fund, the amount required, if any, for such Fund to equal the Maximum Annual Debt Service as defined in the 1986 Bond Resolution. Fourth, to the Renewal and Replacement Account, an amount equal to one percent of the Gross Revenues received in the preceding calendar month until a balance is established or reestablished therein equal to two percent of the depreciated book value of the land, general plant and equipment which constitute the net utility plant of the Electric System. The moneys contained in the Renewal and Replacement Account may be used for extraordinary maintenance and repairs, renewals and replace­ ments to the Electric System, but not for additions to or extensions of the Electric System. Fifth, to the Rebate Account, the amount required with respect to Senior Bonds in accordance with the Internal Revenue Code of 1986, as amended.

12 Sixth, to the Surplus Revenue Fund, all moneys in the Revenue Account remaining after the above transfers have been made and all covenants required by the resolutions relating to the Senior Bonds have been performed. The moneys in the Surplus Revenue Fund constitute the Surplus Revenues. Surplus Revenues. So long as any 1993 Bonds are Outstanding, promptly after the deposit in any month to the Surplus Revenue Fund, the entire amount of the Surplus Revenues in the Surplus Revenue Fund shall be transferred to the following accounts in the order of priority listed below. Qualified Obligations Account ERAN Account Remaining Surplus Account The amount to be deposited in each such account is set forth below. First, to the Qualified Obligations Account, the amount of Qualified Obligation Service with respect to such calendar month ( to the extent not already transferred to such Account in such month) or, if less, the entire amount of Surplus Revenues then available for transfer to such Account. Second, to the ERAN Account, the amount required to be transferred thereto in such month forthe payment of the principal of and interest on the ERANs to the extent required by the ordinance(s) and resolution(s) pursuant to which the ERANs are issued (to the extent not already transferred to such Account in such month), or, if less, the entire amount of Surplus Revenues then available for transfer to such Account. As of June 30, 1993, the City had outstanding $20,450,000of ERANs issued for the purpose of financing the acquisition, processing, enrichment, storage and disposal of nuclear fuel for use in connection with the City's ownership interest in SONGS, and plans to continue to renew such ERANs for the life of SONGS to defray expenditures for nuclear fuel. The payment of the ERANs is currently supported, in addition to the security described above, by a revolving credit agreement with Bank of America National Trust and Savings Association ("Bank of America") and Morgan Guaranty Trust Company of New York ("Morgan Guar­ anty") which expires June 28, 1994 and would support up to $28,000,000 principal amount of ERANs. The City anticipates expanding the use of the ERANs to finance improvements to the Electric System with an expected resulting increase to the size of the program of approximately $6,000,000 in 1993. Third, to the Remaining Surplus Account, all remaining Surplus Revenues, to be used for anylawful purpose of the City, provided, however, that in the event of any deficiency in the Qualified Obligations Account or the ERAN Account, moneys in the Remaining Surplus Account shall be transferred to such Accounts in the order of priority indicated above to cover such deficiency. "QualifiedOb ligation Service " means, with respect to any period, the amount of principal and interest or other payments accrued or to accrue in such period with respect to all outstanding Qualified Obligations ( excluding the amount of proceeds of Qualified Obligations held in any fund or account for the payment of Qualified Obligation Service accrued or to accrue during such period). For purposes of accrual under this definition, all payments with respect to Qualified Obligations due in a calendar month are to be deemed due on the first day of such calendar month. "Qualified Obligations" means, without duplication, (i) purchase payments in connection with the Prior Certificates, (ii) purchase payments in connection with the Prior 1993 APFA Bonds, (iii) the 1993 Purchase Payments, and (iv) Bonds and Obligations which at the time of initial delivery thereof satisfy the issuance test set forth in the Installment Purchase Agreement (see "Additional Qualified Obligations") . "Bond" is defined to include any revenue bond, revenue note, warrant or other evidence of indebtedness issued, incurred or delivered for the financing, or refinancing of extensions of, additions to, repairs and replacements to, renewals of, and improvements of, the Electric System, designated by the City at the initial delivery thereof as payable from Surplus Revenues in the Qualified Obligations Account, to the extent that the payments under such revenue bond, revenue note, warrant or other evidence of indebtedness are payable from Surplus Revenues in the Qualified Obligations Account, but does not include any Obligation. "Obligation" means any contract, instrument or other agreement forthe purchase, acquisition or lease of facilities, properties, structures or equipment for the Electric System, designated by the City at the initial delivery thereof as payable from Surplus Revenues in the Qualified Obligations Account to the extent

13 that payments under such contract, instrument or agreement are payable from Surplus Revenues in the Qualified Obligations Account, and the final payments under which are due more than one year followingthe incurrencether eof. "Obligation " does not include any Bond. As described above, (i) the payment of Qualified Obligations, including 1993 Purchase Payments, ranks junior to payment of the Senior Bonds, (ii) the 1993 Purchase Payments rank on a parity with the payment of purchase payments and additional purchase payments in connection with the Prior Certificates and with purchase payments in connection with the Prior 1993 APFA Bonds, (iii) the payment of Qualified Obligations, including 1993 Purchase Payments, ranks senior to the payment of the ERANs, and (iv) the payment of Additional Purchase Payments ranks junior to the payment of the ERANs.

Rate Covenant The City has agreed pursuant to the Installment Purchase Agreement to prescribe, revise and collect such charges for the services and facilities of the Electric System so that, in each fiscal year, the Surplus Revenues shall at least equal the sum of (i) 1.25 times the amount of Qualified Obligation Service with respect to such fiscal year, (ii) 1.00 times the principal of and interest on the outstanding ERANs due and payable and to be paid from Surplus Revenues in such fiscal year, and (iii) 1.00 times all other payments required to be made from Surplus Revenues in such fiscal year. Pursuant to the City's Ordinance No. 5032, the principal amount of ERANs which may be outstanding at any time shall not exceed 25% of the gross revenue earned by the Electric System during the immediately preceding fiscalyear as set forthin the audited financialstatements of the Electric System forsuch year or the maximum aggregate amount of the revolving Electric System Credit available to the City as described in such a revolving credit agreement or other loan agreement, whichever is less.

Reserve Account A Reserve Account established under the Indenture is to be funded out of the proceeds of the sale of the 1993 Bonds. The Reserve Account will be funded in an amount equal to the Reserve Requirement. The Reserve Requirement forthe 1993 Bonds is defined as an amount equal to, at any date of determination, the least of (i) an amount equal to the maximum amount of the 1993 Purchase Payments due on any October l and the next succeeding April l of any year with respect to then Outstanding 1993 Bonds, (ii) an amount equal to 10% of the proceeds, within the meaning of Section 148 of the Internal Revenue Code of 1986, as amended, of all 1993 Bonds, and (iii) an amount equal to 125% of the average annual 1993 Purchase Payments due on any October 1 and the next succeeding April 1 of any year with respect to then Outstanding 1993 Bonds; provided, however, that the Reserve Requirement or a portion thereof may be provided by one or more Reserve Account Policies or Credit Facilities, upon the filing by the Financing Authority with the Trustee of written evidence that the use of such Reserve Account Policies or Credit Facilities to satisfy the Reserve Requirement or any portion thereof will not by itself result in the downgrading or withdrawal of the credit ratings then in effect with respect to the 1993 Bonds. In no event shall the amount of the Reserve Requirement in any year be greater than the amount of the Reserve Requirement for any prior year. For purposes of determining average annual 1993 Purchase Payments pursuant to clause (iii) above, if any amount remains due on an October 1 or the next succeeding April 1 of any year, such year shall be treated as a full year. A ''Reserve Account Policy " means a policy of insurance or surety bond issued by a municipal bond insurer, obligations insured by which have a rating by Moody's Investors Service ("Moody's") and Standard & Poor's Corporation ("S&P") which at the time of issuance is the highest rating then issued by Moody's and S&P, to satisfy all or a portion of the Reserve Requirement. "Credit Facility " means an irrevocable and unconditional letter of credit, a standby purchase agreement, a line of credit or other similar credit arrangement issued by a Qualified Bank to satisfy all or a portion of the Reserve Requirement. A "Qualified Bank" means a state or national bank or trust company or savings and loan association or a foreign bank with a domestic branch or agency which is organized and in good standing under the laws of the United States or any state thereof or any foreign country, which has a capital and surplus of $25,000,000 or more and which has a

14 short-term debt rating of the highest ranking or of the highest letter and numerical rating as provided by Moody's or by S&P. If on any date on which 1993 Purchase Payments are required to be made as provided in the Installment Purchase Agreement, such dates being October I and April 1, commencing October 1, 1993 (each, a "Purchase Payment Date"), the amount available in the Purchase Payment Account is less than the amount necessary to pay the principal or the interest to be paid on such date with respect to the 1993 Bonds, the Trustee will transfer from the Reserve Account to the Purchase Payment Account the lesser of an amount sufficient to enable the Trustee to pay such amounts or all amounts on deposit in the Reserve Account. Any 1993 Purchase Payment or portion thereof made after the appropriate Purchase Payment Date will be deposited in the Reserve Account in an amount equal to the amount transferredfrom the Reserve Account to the Purchase Payment Account on such Purchase Payment Date. Until the Acquisition Certificate (as defined in "SUMMARY OF THE INDENTURE - Funds and Accounts") with respect to the San Juan Unit 4 Project is filed, moneys in excess of the Reserve Requirement on deposit in the Reserve Account shall be transferredto the Acquisition Account on the first Business Day of each month, or as soon thereafter as practicable, to the extent that such moneys constitute investment income received at or prior to the end of the immediately preceding month. After the Acquisition Certificate is filed forthe San Juan Unit 4 Project, on each Purchase Payment Date moneys in the Reserve Account in excess of the Reserve Requirement will be transferred by the Trustee to the Purchase Payment Account, to the extent that such moneys constitute investment income received since the immediately preceding Purchase Payment Date. After the Acquisition Certificate is filed with respect to the San Juan Unit 4 Project, surplus moneys on deposit (other than that required for the redemption of the 1993 Bonds) on the day after any Purchase Payment Date in the Purchase Payment Account after paying all principal, premium and interest which became due and payable on or before such Purchase Payment Date will be transferredto the Reserve Account as necessary to maintain the Reserve Requirement. Moneys in the Reserve Account in excess of the Reserve Requirement because of a reduction in the Reserve Requirement due to a refunding of 1993 Bonds or otherwiseshall be released to the City to be used forany lawful purpose of the City, upon the direction of an Authorized City Representative and compliance with the requirements of the Indenture.

Electric Revenue Anticipation Notes In order to financethe acquisition, processing, enrichment, storage and disposal of nuclear fuelfor use in connection with the City's ownership interest in SONGS, the City has issued $20,450,000 of ERANs and plans to continue to renew such ERANs for the life of SONGS to defray expenditures for nuclear fuel. The ERANs are secured by a lien upon moneys in the ERAN Account of the Surplus Revenue Fund. The payment of the ERANs is additionally supported by a revolving credit agreement with Bank of America and Morgan Guaranty which expires June 28, 1994 and would support up to $28,000,000 principal amount of ERANs. The City anticipates expanding the use of the ERANs to finance improvements to the Electric System with an expected resulting increase to the size of the program of approximately $6,000,000 in 1993.

Insurance The City agrees in the Installment Purchase Agreement to maintain at all times with responsible insurers all such insurance on the Electric System as is customarily maintained by similar utilities systems with respect to works and properties of like character against accident to, loss of, or damage to, such works or properties and against loss of revenues. The City further agrees that any useful parts of the Electric System that are damaged or destroyed shall be restored to use. Proceeds of insurance against accident, loss or damage shall be used for repairing or rebuilding the lost, damaged or destroyed works and properties, and, to the extent not so used, shall be applied

15 to the retirement of outstanding Senior Bonds and Qualified Obligations. Moneys collected from any loss of revenue insurance shall be deposited in the Revenue Account. The City is permitted under the Installment Purchase Agreement to satisfy the foregoing covenant through a self-insurance program or to provide such insurance as part of any blanket coverages maintained by the City.

Additional QualifiedObligations The City has agreed pursuant to the Installment Purchase Agreement, after the date on which the 1993 Bonds are delivered by the Trustee pursuant to the Indenture to the original purchasers thereof, not to issue, incur or deliver any Bonds or Obligations payable from the Surplus Revenues in the Qualified Obligations Account unless, at the initial delivery thereof, the Surplus Revenues, calculated on sound accounting principles, as shown by the books of the City for each of the last two completed fiscal years prior to the adoption of the resolution approving the delivery of such Bonds or Obligations (as shown by an audit certificate or opinion of an independent certified public accountant or firm of certified public accountants employed by the City), plus, at the option of the City, the allowance for earnings described in the following paragraph, shall have amounted to at least 1.25 times the Maximum Annual Qualified Obligation Service on all Qualified Obligations to be outstanding immediately subsequent to the initial delivery of such Bonds or Obligations. Notwithstanding the foregoing, the City may issue Bonds or Obligations to refund outstanding QualifiedObligations if, after giving effect to the application of the proceeds thereof, either (i) total Qualified Obligation Service will not be increased in any fiscal year in which Qualified Obligations (outstanding on the date of issuance or incurrence of such refundingBonds or Obligations, but excluding such refundingBonds or Obligations) not being refunded are outstanding, or (ii) the Surplus Revenues, calculated on sound accounting principles, as shown by the books of the City for each of the last two completed fiscal years prior to the adoption of the resolution approving the delivery of such Bonds or Obligations (as shown by an audit certificate or opinion of an independent certified public accountant or firm of certified public accountants employed by the City), plus, at the option of the City, the allowance for earnings described in the following paragraph, shall have amounted to at least 1.25 times total Qualified Obligation Service in the fiscal year next succeeding the fiscal year in which such Bond or Obligation is initially delivered. For the purpose of applying the restrictions set forth in the preceding paragraph, the following allowance may be added to the Surplus Revenues: an allowance for earnings arising from any increase in the charges made for service from the Electric System which has become effective prior to the initial delivery of such Bonds or Obligations but which, during all or any part of said last two completed fiscalyears, was not in effect, in an amount equal to 95% of the amount by which the Surplus Revenues would have been increased if such increase in charges had been in effect during the whole of said last two completed fiscal years, as shown by the certificate or opinion of an independent certified accountant or firm of certified public accountants employed by the City. The City has also agreed pursuant to the Installment Purchase Agreement that the Surplus Revenues will not be mortgaged, encumbered, sold, leased, pledged, any charge placed thereon, or disposed of or used except as permitted by the Installment Purchase Agreement.

Constitutional Limitation on Governmental Spending Article XIIIB of the California Constitution (adopted by a vote of the people on November 6, 1979) limits the annual appropriations of state and local governmentalentities to the amount of appropriations of the entity for the prior fiscal year, as adjusted for changes in the cost of living, changes in population and changes in services rendered by the entity. Article XIIIB remains subject to review and clarification by the courts and the California Legislature. The City believes, however, that to the extent moneys in the Electric Revenue Fund are used to pay the costs of maintaining and operating the Electric System, debt service on the Senior Bonds and payments with respect to Qualified Obligations, such moneys should not, under the terms of Article XIIIB as supplemented by legislation and based upon the officialballot argument supporting the measure at the November 1979 election,

16 be held to be subject to the appropriation limit. See "Constitutional Amendments Affecting City Revenues" in Appendix C.

Limited Recourse on Default If the City defaults under the Installment Purchase Agreement, the Trustee, as assignee of the Financing Authority pursuant to the Indenture, may exercise any right to enforcethe Installment Purchase Agreement provided therein or by law. In the event of such default, the Installment Purchase Agreement does not provide any remedy of acceleration of the 1993 Purchase Payments due over the term of the Installment Purchase Agreement, and the Trustee is not empowered to sell the San Juan Unit 4 Project or any portion thereof and use the proceeds of such sale to prepay any obligations in respect of the 1993 Bonds. The City will only be liable for 1993 Purchase Payments on a semiannual basis, and the Trustee would be required to seek a separate judgment for each period's defaulted 1993 Purchase Payments. Any such suit for money damages would be subject to limitations on legal remedies against cities in California, including a limitation on enforcement of judgments against funds needed to serve the public welfare and interest.

BOND INSURANCE Concurrently with the issuance of the 1993 Bonds, Financial Guaranty Insurance Company, doing business in California as FGIC Insurance Company ("Financial Guaranty") will issue its Municipal Bond New Issue Insurance Policy for the 1993 Bonds (the "Policy"). The Policy unconditionally guarantees the payment of that portion of the principal of and interest on the 1993 Bonds which has become due forpayment, but shall be unpaid by reason of nonpayment by the Financing Authority. Financial Guaranty will make such payments to State Street Bank and Trust Company, N .A., or its successor as its agent ( the "Fiscal Agent"), on the later of the date on which such principal and interest is due or on the business day next following the day on which Financial Guaranty shall have received telephonic or telegraphic notice, subsequently confirmed in writing, or written notice by registered or certified mail, from an owner of 1993 Bonds or the Trustee of the nonpayment of such amount by the Financing Authority. The Fiscal Agent will disburse such amount due on any 1993 Bond to its owner upon receipt by the Fiscal Agent of evidence satisfactoryto the Fiscal Agent of the owner's right to receive payment of the principal and interest due for payment and evidence, including any appropriate instruments of assignment, that all of such owner's rights to payment of such principal and interest shall be vested in Financial Guaranty. The term "nonpayment" in respect of a 1993 Bond includes any payment of principal or interest made to an owner of a 1993 Bond which has been recovered fromsuch owner pursuant to the United States Bankruptcy Code by a trustee in bankruptcy in accordance with a final, nonappealable order of a court having competent jurisdiction. The Policy is non-cancellable and the premium will be fully paid at the time of delivery of the 1993 Bonds. The Policy covers failureto pay principal of the 1993 Bonds on their respective stated maturity dates or dates on which the same shall have been duly called for mandatory sinking fund redemption, and not on any other date on which the 1993 Bonds may have been otherwise called for redemption, accelerated or advanced in maturity, and covers the failure to pay an installment of interest on the stated date for its payment. Generally, in connection with its insurance of an issue of municipal securities, Financial Guaranty requires, among other things, (i) that it be granted the power to exercise any rights granted to the holders of such securities upon the occurrence of an event of default, without the consent of such holders, and that such holders may not exercise such rights without Financial Guaranty's consent, in each case so long as Financial Guaranty has not failed to comply with its payment obligations under its insurance policy; and (ii) that any amendment or supplement to or other modification of the principal legal documents be subject to Financial Guaranty's consent.The specificrights, if any, granted to Financial Guaranty in connection with its insurance of the 1993 Bonds are set forth in the description of the principal legal documents appearing elsewhere in this Official Statement. Reference should be made as well to such description for a discussion of the circum­ stances, if any, under which the Financing Authority is required to provide additional or substitute credit enhancement, and related matters.

17 This Official Statement contains a section regarding the ratings assigned to the 1993 Bonds and references should be made to such section for a discussion of such ratings and the basis for their assignment to the 1993 Bonds. Reference should be made to the description of the Financing Authority for a discussion of the ratings, if any, assigned to such entity's outstanding parity debt that is not secured by credit enhancement. The Policy is not covered by the Property/Casualty Insurance Security Fund specifiedin Article 76 of the New York Insurance Law. Financial Guaranty is a wholly-owned subsidiary of FGIC Corporation (the "Corporation"), a Delaware holding company. The Corporation is a subsidiary of General Electric Capital Corporation ("GE Capital"). Neither the Corporation nor GE Capital is obligated to pay the debts of or the claims against Financial Guaranty. Financial Guaranty is a monoline financial guaranty insurer domiciled in the State of New York and subject to regulation by the State of New York Insurance Department. As of June 30, 1993, the total capital and surplus of Financial Guaranty was approximately $686, 140,000. Financial Guaranty prepares financial statements on the basis of both statutory accounting principles and generally accepted accounting principles. Copies of such financial statements may be obtained by writing to Financial Guaranty at 115 Broadway, New York, New York 10006, Attention: Communications Department (telephone number: (212) 312-3000) or to the New York State Insurance Department at 160 West Broadway, 18th Floor, New York, New York 10013, Attention: Property Companies Bureau (telephone number: (212) 602-0389).

ESTIMATED SOURCES AND USES OF FUNDS The sources and uses of funds ( excluding accrued interest) in connection with the issuance of the 1993 Bonds are estimated to be applied as follows: SOURCES: Principal Amount of 1993 Bonds ...... $62,810,000 Less: Underwriter's Discount ...... (643,803) Net Original Issue Premium ...... 44,582 Total Sources ...... $62,210, 779 USES: Deposit to Acquisition Account( l) ...... $55,813,615 Deposit to Reserve Account ...... 6,106,152 Costs of Issuance(2) ...... 291,012 Total Uses ...... $62,210, 779

( 1) See "THE SAN JUAN UNIT 4 PROJECT - Purchase Agreement." Reflects estimated cost of prepaid items. To the extent actual cost of prepaid items exceeds the amount available in the Acquisition Account, the City will make a cash contribution. (2) Also deposited to Acquisition Account.

THE ELECTRIC SYSTEM History of the Electric System The Electric System was established in 1894. The original City-owned generating plant was placed in service in 1895 and consisted of a steam-driven generator of 500 lights capacity. By 1896, the maximum capacity of the original generating plant had been reached and Anaheim voters authorized bonds for the combined rebuilding of both the electric light plant and the City water system. In 1916, the City entered into an agreement to purchase electricity at wholesale rates from Edison rather than generate its own power. In 1934, the City, working with the Federal Public Works Administration, rebuilt and expanded the distribution system sufficiently to serve the needs of its citizens until the end of World War II. The City has since continued to expand its distribution system to meet the growing demands of its customers. From 1916 through 1982, the City met substantially all of its electric capacity and energy requirements by purchases from Edison. In the mid-l 970s, the City instituted a program to meet its electric capacity and energy requirements from its own resources and by long-term purchases from sources other than Edison, taking the first capacity

18 and energy from such resources in 1983. As a result of this program, in the fiscal year ended June 30, 1992, the City purchased only four percent of its energy requirements from Edison. Unless otherwise noted, all statistical and financial information herein has been provided by the City or the Department.

Principal Existing Facilities As of June 30, 1993, the principal facilities of the Electric System consisted of transmission and distribution lines, both overhead and underground, aggregating approximately 1,398 circuit miles, 10 distribution substations, the City's 3.16% (67.9 MW) ownership interest in Units 2 and 3 of SONGS and a 48 MW combustion turbine generating unit. SONGS Units 2 and 3 are jointly owned by the City, Edison, San Diego Gas & Electric Company and the City of Riverside. In late 1980 the City purchased a 1.66% interest in SONGS Units 2 and 3 from Edison, effective November 1, 1977. The City purchased an additional 1.5% interest in SONGS Units 2 and 3, effective September 1, 1981. SONGS Units 2 and 3 are currently rated at 1,070 MW and 1,080 MW, respectively, and have been in commercial operation since October 1983 and April 1984, respectively. The principal owner and operating agent forSONGS Units 2 and 3 is Edison. The capacity available to the City from SONGS Units 2 and 3 is currently 33.8 MW and 34.1 MW, respectively. Federal regulations and state statutes require the City to provide its share of the future costs of decommissioning SONGS Units 2 and 3. To meet the requirements of such federal regulations, the City is making periodic deposits to a decommissioning trust fund. The City owns and operates a 48 MW natural-gas fired Combustion Turbine Peaking Plant (the "CT") within the City limits directly adjacent to the City's Dowling Substation. The CT is equipped with a state of the art, effective emission reduction system which is expected to allow the CT to be operated as planned by the Department and in compliance with any currently proposed air quality standards. The CT has been in operation since May 1991 and was integrated into the Edison system as a resource on June 1, 1991.

19 The following table sets forthstatistical information relating to the facilitiesof the Electric System for the five fiscal years shown and the nine months ended March 31, 1993.

ELECTRIC SYSTEM STATISTICS ($000) Nine Months Ended March 31, Fiscal YearEnded June 30 1993 1992 1991 1990 1989 1988 Investment in Utility Plant: Production ...... $ 217,667 $ 217,667 $ 209,797 $ 175,529 $ 172,914 $ 171,198 Transmission ...... 13,052 13,052 15,357 12,370 12,315 12,313 Distribution ...... 118,712 118,712 106,286 103,685 94,691 89,323 General ...... 11,740 11,740 12,198 11,581 11,288 10,380 361,171 361,171 343,638 303,165 291,208 283,214 Less - accumulated depreciation (105,319) (95,052) (84,136) (74,441) {65,838) (58,433) 255,852 266,119 259,502 228,724 225,370 224,781 Construction work in progress ... 58,189 40,568 21,239 27,919 8,419 7,013 Nuclear fuel, at amortized cost .. 5,354 8,098 7,519 8,543 9,213 10,199 Total utility plant ...... $ 319,395 $ 314,785 $ 288,260 $ 265,186 $ 243,002 $ 241,993 Transmission-69 kV Circuit Miles 60 59 60 60 59 59 Distribution Overhead Circuit Miles ...... 884 884 887 888 888 888 Underground Circuit Miles .... 448 440 425 410 404 398 Transformer Capacity (in kV A) 220 kV to 69 kV ...... 840,000 840,000 840,000 840,000 840,000 840,000 69 kV to 12 kV ...... 780,200 662,000 632,000 632,000 592,000 592,000 12 kV to Customer ...... 1,120,295 1,100,290 1,079,000 1,034,000 1,021,000 974,000

Power Supply and Demand The electric resources of the City currently consist of power from the City's ownership interest in SONGS Units 2 and 3, ownership of the CT, firm power purchases under an entitlement in IPP and the Hoover Uprating Project, firm power purchases from Deseret, a capacity I energy exchange with BPA, other short-term and non-firm energy purchases from other utilities and firm power purchases from Edison at the Partial Requirements Rate and under the terms of the PSA. In the nine months ended March 31, 1993, the Electric System generated or purchased a total of 2.4 million MWh of electricity. About 53% was provided by IPP and 18% was generated by the City's interest in SONGS Units 2 and 3. Approximately 1% was provided by the City's interest in the Hoover Uprating Project; 15% was provided under firm power contracts; 10% was obtained through non-firmpurchases fromother western utilities; and approximately 0.5% was provided by the CT. Purchases from Edison were 2.5% of total Electric System generation and production. On August 1 7, 1992, combined customer electric requirements created the historic distribution system peak demand of 530 MW. The following table sets forth the total Electric System energy generated and purchased and electric distribution system peak demand during the five fiscal years shown and the nine months ended March 31, 1993.

20 TOTAL MEGAWATT-HOURS GENERATED AND PURCHASED AND PEAK DEMAND (000) Nine Months Ended March Fiscal Year Ended June 30 31, 1993 1992 1991 1990 1989 1988 Own Generation: San Onofre Nuclear Generating Station ...... 439 419 480 418 493 427 Combustion Turbine ...... 9 11 0 0 0 0 Firm Purchases: lntermountain Power Project ...... l,259 1,556 1,495 1,694 1,434 1,585 Hoover ...... 24 44 47 48 46 53 Power Contracts ...... 361 486 701 702 690 634 Southern California Edison Company (includes PSA) .. 65 121 77 55 73 59 Non-Firm Purchases ...... 228 198 25 37 108 87 System Total (1) ...... 2, 385 2, 835 2,825 2,954 2,844 2,845 Distribution System Peak Demand, MW ...... 530 491 497 523 493 471

( 1) Includes energy generated or purchased that was ultimately sold to other utilities. The City and Edison entered into a settlement agreement in August 1972 (the "1972 Settlement Agreement"). The 1972 Settlement Agreement addressed certain principles for the integrated operationof the City's and Edison's electric resources. The City and Edison, pursuant to the 1972 Settlement Agreement, entered into an Integrated Operations Agreement (the "JOA") in November 1977, which provided for the integrated operations of the City's electric resources and Edison's electric resources. In 1984, Edison revised its Partial Requirements Rate to permit the City, upon notice, to acquire non-integrated resources and operate those resources so as to reduce purchases from Edison pursuant to its applicable Partial Requirements Rate. The City entered into firm power purchase agreements with Deseret, Pacific Gas & Electric Company ("PG&E"), and the CaliforniaDepartment of Water Resources ("CDWR") and operated those resources as non-integrated resources. In 1987, a dispute arose between the City and Edison over the method of accounting forthe operations of both the integrated and non-integrated resources. In March 1990, the City and Edison entered into a settlement agreement (the "1990 Settlement Agreement") in order to resolve this dispute and other disputes regarding the JOA which were litigated in FERC Docket No. ER 81-177. The cities of Azusa, Banning, Colton and Riverside, which had similar disputes with Edison, are also parties to the 1990 Settlement Agreement. The 1990 Settlement Agreement provides for a new Integrated Operations Agreement (the "1990 JOA") expiring June 30, 2028 unless otherwise terminated in accordance with its terms and for a PSA between the City and Edison terminating December 31, 1998. The 1990 Settlement Agreement provides for the City to integrate all of its existing and future resources for as long as the 1990 JOA remains in effect. The PSA provides for Edison to sell, and the City to purchase, certain amounts of capacity and energy at rates that are lower than Edison's Partial Requirements Rate. Such purchases are separate and apart from purchases under Edison's Partial Requirements Rate. On December 17, 1992, the City along with the cities of Azusa, Banning, Colton and Riverside entered into a settlement agreement with Edison (the "1992 Settlement Agreement") to resolve outstanding issues in FERC Docket Nos. ER76-205, ER79-150, ER82-427, ER84-75, ER86-271, ER87-483 and FA85-67 concerning Edison's Partial Requirements Rates. As part of the 1992 Settlement Agreement, the City expects to receive $2.2 million in cash refunds and $2.6 million in reduced power purchase costs under the PSA. In addition, Edison agreed to a moratorium to seeking any changes in the current Partial Requirements Rate until January 1, 1998 unless requested to do so by the City or one of the other cities. In addition, the City

21 expects to release approximately $6.5 million plus accumulated interest which has been set aside in a restricted account, pending the completion of the 1992 Settlement Agreement. The 1992 Settlement Agreement also clarifies procedures for the City to integrate capacity resources under the 1990 JOA and provides mechanisms for a more timely resolution of disputes between the City and Edison regarding the terms and conditions of integrating resources under the 1990 JOA should they arise. A final decision from FERC on the 1992 Settlement Agreement is expected in 1993. The City believes that the 1990 JOA, the 1990 Settlement Agreement and the 1992 Settlement Agreement will enable the City to integrate resources to better meet its own electrical requirements and will provide for more economical operation of the City's resources than was possible under the previous IOA. In the event the City's resources are not adequate to supply its electrical needs, Edison is required, under the 1990 IOA, to supply those electrical needs to the City.

Customers and EnergySales The Electric System serves the entire area within the City limits (an area of approximately 48.7 square miles) . The following tables set forth the average number of customers and total electrical energy sold during the five fiscal years shown and the nine months ended March 31, 1993.

AVERAGE NUMBER OF CUSTOMERS Nine Months Ended March Fiscal Year Ended June 30 31, 1993 1992 1991 1990 1989 1988 Residential ...... 87,305 86,854 86,220 84,540 83,13 1 82,030 Commercial ...... 15,912 15,118 14,957 14,674 14,337 13,942 Industrial ...... 572 601 607 606 589 559 Other ...... 170 188 199 178 169 167 Other Utilities ...... 2 1 6 2 --1 Total - all classes ...... 103,961 102,762 101,984 100,004 98,228 96,699

TOTAL MEGAWATT-HOURS SOLD (000) Nine Months Ended March Fiscal Year Ended June 30 31, 1993 1992 1991 1990 1989 1988 Residential ...... 416 500 52 1 499 499 484 Commercial ...... 436 535 536 524 519 510 Industrial ...... 869 1,142 1,144 1,160 1,139 1, 122 Other ...... 31 38 34 36 37 35 Other Utilities ...... 419 370 401 588 225 510 Total(l) ...... 2,171 2,585 2,636 2,807 2,419 2,661

(1) The difference between the total megawatt-hours generated and purchased and total megawatt-hours sold is due principally to transmission and distribution system losses.

22 The following table sets forth the ten largest commercial and industrial customers and the two largest public agency customers of the Electric System in terms of total energy sales for the twelve months ended March 31, 1993. The Electric System's ten largest commercial and industrial customers together accounted for approximately 18% of total energy sales and annual billings of the Electric System; the largest five accounted forapproximately 14% of total energy sales and annual billings of the Electric System. The largest customer accounted for 5% of total energy sales and annual billings of the Electric System. The two public agencies noted below accounted for 4% of total energy sales and total annual billings. MAJOR ELECTRIC CUSTOMERS Customer Type of Business Disney Corporation Recreation, Entertainment and Hotels Rockwell International Corporation Aerospace Electronics Pacific Telephone Telephone Service Delco-Remy Division, General Motors Corporation Batteries Anaheim Hilton and Towers Hotels and Restaurants Interstate Electronics Corporation Electronic Equipment K wikset Corporation, Division of Black and Decker Locks Minute Maid Company, Division of Coca Cola Corporation Beverages BASF Structural Materials Ciba-Geigy Corporation Pharmaceuticals

Public Agencies City of Anaheim Anaheim Elementary School District

Electric Rates and Charges The City is obligated by its Charter and by certain resolutions of the City Council to establish rates and collect charges in an amount sufficient to service the Electric System's indebtedness, to meet the Electric System's operation and maintenance expenses and to pay other obligations payable fromGross Revenues, with specified requirements as to priority and coverage. Electric rates for the City are recommended by the Board and are established by the City Council and are not subject to regulation by the California Public Utilities Commission ( the "CPUC") or by any other state or federal agency; however, the City is subject to certain ratemaking provisions of the Public Utility Regulatory Policies Act of 1978. The City is operating in compliance with such Act. Subject to certain exceptions, the Charter requires that electric rates be based upon the cost of service to the various customer classes. The City Council most recently approved changes to the Electric Rates, Rules and Regulations effective March 24, 1993. The Electric System now has 29 rate schedules, including the Power Cost Adjustment. Generally, all costs of the Electric System, including power supply costs, are recovered through application of the base rates. In the event that substantial changes in projected power supply costs occur, either as an increase or decrease, the Power Cost Adjustment Billing Factor ( the "PCABF") will be activated to ensure that the Electric System charges appropriately for electric service. When activated, the PCABF will remain in effect until the next base rate change or until a revision to the PCABF is necessary. At the time of a base rate change, the power supply costs recovered through the PCABF will be included in base rates and the PCABF will be deactivated and returned to zero. Continuation of this mechanism will enable the Department, with City Council approval, to take rapid rate action in order to protect the financial stability of the Electric System.

23 PRIMARY RATE SCHEDULES FOR RESIDENTIAL, COMMERCIAL AND INDUSTRIAL CUSTOMERS (Effective March 24, 1993)

Per Meter Per Month Type and Description of Service Charge Domestic Services Single Family Customers (Basic): Customer Charge ...... $ 2.85 Energy Charge ( to be added to Customer Charge) : First 240 kWh, per kWh ...... 6.77¢ All Excess kWh, per kWh ...... 11.15¢ General Service Small Commercial and Industrial Customers: Customer Charge ...... $ 10.50 Energy Charge ( to be added to Customer Charge): All kWh, per kWh ...... 10.96¢ General Service Large Commercial and Industrial Customers: Customer Charge: ...... $ 300.00 Demand Charge ( added to Customer Charge) : First 200 kW or less of billing demand ...... $1,400.00 All excess kW of billing demand, per kW ...... $ 8.50 Energy Charge ( added to Demand Charge): For the first 540 kWh per kW of billing demand, per kWh ...... 6.809¢ All excess kWh, per kWh ...... 4.000¢ Electric System rates have been changed 10 times over the period beginning July 1, 1985. The following table sets forth the percentage changes in rates for the indicated customer classes.

AVERAGE PERCENTAGE INCREASE (OR DECREASE) IN ELECTRIC RATES Overall Efl'ective Date System Residential Commercial Industrial July 17, 1985* ...... 3.4% 3.1% 3.3% 3.6% August 1, 1986* ...... (5.0) (4.6) (4.9) (5.3) November 1, 1986* ...... (4.6) ( 4.1) (4.5) (4.9) October 12, 1988 • ...... (3.5) (3.5) (2.9) (3.7) April 1, 1989* ...... 3.6 3.8 3.0 3.1 October 1, 1989 ...... 7.0 9.0 7.2 6.0 August 1, 1990 ...... 3.7 8.0 4.5 1.0 January 1, 1992 ...... 3.5 2.8 3.6 3.8 April 1, 1992 ...... (0.3) 0.0 0.0 (0.7) March 24, 1993 ...... 1.0 0.0 1.4 1.3 * Due to PCABF adjustment only. The Department intends to recommend to the Board and the City Council a rate decrease to industrial customers only of 1.3%, effective September 1, 1993. This rate decrease is expected to improve the City's competitive rate relationship with Edison. Charges the City pays Edison for power purchases pursuant to the Partial Requirements Rate are based upon rates filedwith FERC and collected, subject to refund, until such time as the rates are determined to be "just and reasonable" by FERC. As a result of the City's challenges to previous Edison rate filings, and as a resultof subsequent FERC decisions, the City has received significant refunds, plus interest, from Edison for wholesale rate overcharges.

24 On January28, 1986, the City Council established a Rate Stabilization Account ("RSA") and adopted a Wholesale Rate Refund Policy (the "Policy") under which wholesale rate refunds would be placed in the RSA. The RSA was initially fundedwith approximately $11.4 million of refunds (including interest) received from Edison for previous wholesale electric rate overcharges, as ordered by FERC. The Policy establishes a rate, in cents per kilowatt-hour of sales, by which funds are transferred from RSA to the Electric Utility Revenue Fund. This transfer is made on a monthly basis. Since initial funding of the RSA, the City has received $102 million in refunds from Edisonwhich have been deposited to the RSA. During fiscal year 1991-92, the City received total refunds of $67.2 million from Edison as partial payment forFERC cases. Of the $67 .2 million received, $60. 7 million were transferred to the RSA for use in stabilizing rates. The remaining $6.5 million were placed in a restricted account within the RSA pending the Department's appeal of an appellate court ruling favorable to Edison. The City received no refunds from Edison during fiscal year 1992-93. The City estimates that it will receive $22.5 million in remaining refunds from Edison upon FERC approval of Edison's compliance filings in previously decided wholesale rate cases. The following table sets forth electric billings in seven cities in Southern California, three of which are served directly as retail customers of Edison.

ELECTRIC RATE COMPARISON BY MONTHLY BILL (As of July 1, 1993) Residential Commercial Industrial 100kW(2) 200kW(3) 5,000kW(4) 200 500 1100 500 3000 43,200 86,400 2,555,000 kWh kWh kWh kWh(l) kWh(l) kWh kWh kWh Anaheim ( 5) ...... $16.39 $48.09 $114.99 $65.30 $339.30 $3,890.43 $7,269.22 $207,191.55 Santa Ana(6) ...... 22.19 62.05 146.16 70.37 357.69 4,109.71 7,474.60 201,114.80 Fullerton(6) ...... 22.19 62.05 146.16 70.37 357.69 4,109.71 7,474.60 201,114.80 Orange(6) ...... 22.19 62.05 146.16 70.37 357.69 4,109.71 7,474.60 201,114.80 Riverside(5) ...... 18.82 51.96 122.01 57.42 309.52 4,262.28 8,299.90 21 9,933.25 Los Angeles (DWP) (5) ...... 19.49 48.28 105.82 58.49 285.97 3,449.95 6,668.19 171 ,187.51 Pasadena(5) ...... 15.74 45.86 106.10 50.70 281 .45 3,878.15 6,877.28 191,056.75

(1) General Service - Single Phase less than 20 kW demand. (2) Assumes 60% load factor. (3) Assumes 60% load factorand seasonal energy consumption. (4) Assumes 70% load factor and seasonal energy consumption. (5) Served by municipal electric system. (6) Adjacent cities served by Edison at retail.

25 The table below sets forth the average billing price per kilowatt-hour for the various customer classes during the fivefiscal years shown and the nine months ended March 31, 1993.

AVERAGE BILLING PRICE (MILLS) PER KILOWATT-HOUR Nine Months Ended March Fiscal Year Ended June 30 31, 1993 1991 1991 1990 1989 1988 Residential ...... 94.9 92.1 90.5 81.9 76.1 76.9 Commercial ...... 101.2 100.0 97.6 91.9 86.3 87.9 Industrial ...... 85.4 84.3 83.1 80.6 76.1 76.8 Other ...... 83.1 78.3 76.4 75.0 72.1 78.0 Other Utilities ...... 19.3 17.2 16.1 14.5 16.3 15.5 Average All Classes Combined(!) 77.6 79.4 77.3 69.0 72.7 67.2

(1) Weighted average. Historical Financial Results The following table shows a summary of the financial results of the Electric System, together with calculation of debt service coverage of outstanding Senior Bonds and QualifiedObligations, forthe fivefiscal years shown and the nine months ended March 31, 1993.

26 FINANCIAL RESULTS OF fflE ELECTRIC SYSTEM

(000)

Nine Months Ended March Fiscal Year Ended June 30 31, 1993 1992 1991 1990 1989 1988 Revenues: Sale of electricity: Residential ...... $ 39,493 $ 46,106 $ 47,117 $ 40,845 $ 37,970 $ 37,211 Commercial ...... 44,130 53,464 52,294 48,174 44,767 44,874 Industrial ...... 74,221 96,300 95,122 93,430 86,746 86, 172 Other ...... 2,575 3,057 2,7 16 2,708 2,693 2,730 Other utilities ...... 8,079 6,449 6,452 8,520 3,655 7,882 Billed revenue from sale of electricity ... 168,498 205,376 203,701 193,677 175,831 178,869 Change in unbilled electric revenue ...... (235) 1,161 2,443 2,192 (369) (667) Total revenue from sale of electricity ...... 168,263 206,537 206,144 195,869 175,462 178,202 Provision forpower cost adjustment ...... 0 0 0 (9,090) 15,936 3,416 Provision forrate stabilization ...... 9,819 11,355 5, 115 4,952 12,288 9,427 Other (including interest income) ...... 6,676 7,483 8,612 8,363 8,009 6,499 Total gross revenues ...... $184,758 $225,375 $219,871 $200,094 $21 1,695 $197,544 Operating expenses ( excluding depreciation and amortization): Cost of purchased power ...... 103,609 132,962 127,730 124,439 136,570 124,936 Fuel used forgeneration ...... 3,574 3,343 3,941 3,549 4,023 4,399 Operations ...... 18,337 22,518 22,094 20,673 18,956 17,174 Maintenance ...... 10,788 19,847 12,175 11,534 10,719 8,937 Total operating expenses ...... $136,308 $178,670 $165,940 $160,195 $170,268 $155,446 Net revenues ...... $ 48,450 $ 46,705 $ 53,931 $ 39,899 $ 41,427 $ 42,098 Senior Bond debt service requirements .. $ 21,021 (1) $ 20,930 $ 21,381 $ 21,387 $ 21,370 $ 21,394 Times Senior Bond debt service covered by net revenues ...... 2.3 2.2 2.5 1.9 1.9 2.0 Deposits to Renewal and Replacement Account ...... 916 132 616 67 12 51 Surplus Revenues ...... $ 26,513 $ 25,643 $ 31,934 $ 18,445 $ 20,045 $ 20,653 Qualified Obligations Purchase Payments (2) 5,320(1) 1,301 0 0 0 0 Times Qualified Obligations Purchase Payments covered by surplus revenues ..... 4.98 19.7 ERANs interest and related expenses ...... 401 798 1,160 1,172 1,270 965 Net revenues after debt service payments .... $ 20,792 $ 23,544 $ 30,774 $ 17,273 $ 18,775 $ 19,688 Transfers to City General Fund ...... 8,962(1) 8,695 7,749 7,937 7,51 1 7,333 Balance available for other purposes ...... $ 11,830 $ 14,849 $ 23,025 $ 9,336 $ 11,264 $ 12,355

(1) Annual twelve month figure. (2) Interest for1989 Certificates was capitalized through October 1, 1991, and interest for19 90 Certificates was capitalized through October 31, 1992. The above results reflect moderate growth in electric demand by all principal classes of customers over the past five years. As discussed under "Electric Rates and Charges," the City has used the PCABF to increase or decrease rates to provide for substantial changes in power supply costs. Increases in "Provision for power cost adjustment" from 1988 to 1989 reflect use of the PCABF, together with use of certain internal funds to achieve a planned pattern of rate increases. In 1990, the PCABF was reduced to zero. Negative

27 amounts shown in "Provision forpower cost adjustment" for 1990 reflect repayment of certain internal funds as planned rate increases were implemented. Variations in "Provision forrate stabilization" are due to periodic changes in the rate of transfers fromthe RSA. See "Electric Rates and Charges". The increase in "Cost of purchasedpower" in the fiscalyear ended June 30, 1989 was the result of several factors. The expiration of the Interim Operating Procedures Agreement with Edison in October 1988 resulted in the Department purchasing additional capacity and higher priced energy from Edison. The result was a $3.1 million increase in power costs. Other increases in "Cost of purchased power" were caused by planned increases in debt service forIPP and Northernand SouthernTransmission Systems totalling $8.5 million. The decrease in "Cost of purchased power" in 1990 principally reflects the favorable impact of the 1990 Settlement Agreement with Edison. Transfers of Electric System funds to the City's General Fund are made annually in January. Under the Charter, annual transfers are limited to 4% of gross revenues of the Electric Revenue Fund of the prior fiscal year. Such transfers may be further limited by Article XIIIB of the California Constitution. See "SECUR­ ITY AND SOURCES OF PAYMENT FOR THE 1993 BONDS - Constitutional Limitation on Govern­ mental Spending" and "Constitutional Amendments Affecting City Revenues" in Appendix C.

Accounting Policies The Electric System's accounting records, financial transactions and billing are computerized. Annual audits of the Electric System are made by the City's independent auditors. The Electric System audit is made simultaneously with the audits of the other City financial activities. Prior to July 1971, the Electric System was treated, for accounting purposes, as an account in the City's General Fund. Since July 1971, fundsof the Electric System have been separated from the General Fund of the City and the books and records are maintained separate and apart from all other funds andacco unts of the City. For further information concerning the Electric System's financial position, see the audited financial statements forthe fiscalyears ended June 30, 1992 and June 30, 1991 attached hereto as Appendix A and the unaudited financial statements for the nine months ended March 31, 1993 and March 31, 1992 attached hereto as Appendix B. At present, and prior to fiscal year 1991-92, KPMG Peat Marwickserved as the City's independent auditors. In fiscal year 1991-92, Deloitte & Touche served as the City's independent auditors.

28 Qualified Obligations Purchase Payments The schedule of 1993 Purchase Payments and other purchase payments in connection with Qualified Obligations is set forth below.

ELECTRIC SYSTEM QUALIFIED OBLIGATION SERVICE (Cash Basis) Total Total 1993 Purchase Principal Interest Purchase Payments and Com nent Com nent Total Payments Purchase p� ents Fiscal 1; 3 1 ; 3 1993 Outstanding Outstandc ng Year Ending Purchase Purchase Purchase Qualified Qualified June 30 Payments Payments Payments Obligations Obligations 1994 ...... $ 0 $ 2,667,441.56 $ 2,667,441.56 $ 5,748,808.54 $ 8,416,250.10 1995 ...... 540,000 3,544,438.75 4,084,438.75 6,695,253.75 10, 779,692.50 1996 ...... 535,000 3,520,25 1.25 4,055,251.25 6,722,628.75 10,777 ,880.00 1997 ...... 510,000 3,496,738.75 4,006,738. 75 6,771,593.75 10, 778,332.50 1998 ...... 485,000 3,4 7 4,351.25 3,959,351.25 6,820,281.25 10,779,632.50 1999 ...... 465,000 3,452,976.25 3,917,976.25 6,862,421.25 10,780,397.50 2000 ...... 440,000 3,432,613.75 3,872,613.75 6,905,836.25 10, 778,450.00 2001 ...... 410,000 3,413,488.75 3,823,488.75 6,953,008.75 10,776,497.50 2002 ...... 290,000 3,397,593.75 3,687 ,593.75 7 ,092,046.25 10,779,640.00 2003 ...... 250,000 3,384,923.75 3,634,923.75 7, 141,796.25 10,776,720.00 2004 ...... 215,000 3,373,656.25 3,588,656.25 7, 191,921 .25 10, 780,577.50 2005 ...... 175,000 3,364,013.75 3,539,013.75 7,241,648.75 10, 780,662.50 2006 ...... 140,000 3,356,068.75 3,496,068.75 7 ,280,231.25 10,776,300.00 2007 ...... 200,000 3,347,298.75 3,547,298.75 7,232,473.75 10,779,772.50 2008 ...... 170,000 3,337,636.25 3,507 ,636.25 7,272,848.75 10,780,485.00 2009 ...... 145,000 3,329,276.88 3,474,276.88 7,301,741.25 10,776,018.13 2010 ...... 120,000 3,322,140.00 3,442, 140.00 7,334,971.25 10, 777, 111.25 2011 ...... 85,000 3,316,456.25 3,401,456.25 7,374,258.75 10,775,715.00 20 12 ...... 45,000 3,312,718.75 3,357,718.75 7,418,083.75 10,775,802.50 20 13 ...... 4,025,000 3,195,706.25 7,220,706.25 3,557 ,596.25 10,778,3 02.50 2014 ...... 4,220,000 2,958,662.50 7, 178,662.50 3,597,983.75 10,776,646.25 2015 ...... 4,435,000 2,709,831 .25 7,144,831 .25 3,634,356.25 10,779,187.50 2016 ...... 4,660,000 2,448,350.00 7,108,350.00 3,67 1,256.25 10,779,606.25 20 17 ...... 4,900,000 2, 173,500.00 7,073,500.00 3, 703, 776.25 10,777,276.25 20 18 ...... 5,150,000 1,884,562.50 7 ,034,562.50 3,741,015.63 10,775,578.13 2019 ...... 5,425,000 1,580,531.25 7 ,005,531.25 3,772,390.63 10,777,921.88 2020 ...... 5,71 5,000 1,260,256.25 6,975,256.25 3,802,796.88 10,778,0 53.13 2021 ...... 6,025,000 922,731.25 6,947,731.25 3,831,671.88 10,779,403.13 2022 ...... 6,345,000 567,093.75 6,912,093.75 3,868, 171.88 10,780,265.63 2023 ...... 6,690,000 192,337.50 6,882,337.50 3,896,593.75 10, 778,931.25 Totals ...... $62,810,000 $83,737,645.94 $146,547,645.94 $174,439,462.94 $320,987,108.88

29 Senior Bond Debt Senice Requirements

The following table indicates the debt service on the outstanding Senior Bonds. See "Qualified Obligations Purchase Payments" for payments with respect to outstanding Qualified Obligations.

ELECTRIC SYSTEM SENIOR BOND DEBT SERVICE REQUIREMENTS (Cash Basis) Outstanding Senior Bonds Fiscal Year Principal and Ending Sinking Fund June 30 Installments Interest Total 1994 ...... $ 8,305,000 $ 11,426,062.08 $ 19,731,062.08 1995 ...... 9,325,000 11,404,312.50 20,729,312.50 1996 ...... 9,865,000 10,884,495 .00 20,749,495.00 1997 ...... 10,470,000 10,255,812.50 20,725,812.50 1998 ...... 11,210,000 9,573,577.50 20, 783,577.50 1999 ...... 11,945,000 8,833,845.00 20, 778,845.00 2000...... 13,365,000 8,053,242.50 21,418,242.50 2001 ...... 14,185,000 7,230,817.50 21,415,817.50 2002...... 15,070,000 6,344,066.25 21,414,066.25 2003 ...... 15,970,000 5,448,420.00 21,418,420.00 2004 ...... 16,240,500 4,570,973.75 20,811,473.75 2005 ...... 17,478,500 3,647,687.50 21,126,187.50 2006...... 17,985,000 2,670,612.50 20,655,612.50 2007 ...... 19,065,000 1,646,911.25 20,711,911 .25 2008...... 20,215,000 559,682.50 20, 774,68 2.50 TOTALS ...... $210,694,000 $102,550,518.33 $313,244,518.33

30 Summary Projection of Operating Results of the Electric System The City has prepared a projection of operating results of the Electric System for the fiscal years ending June 30, 1993 through 1997. These projections show increases in revenue requirements beyond the revenues generated by the City's existing rates and the use of fundsfrom the PCABF and RSA based on policies and procedures established by the City. See "Electric Rates and Charges." Revenue requirements are based on paying projected operating expenses, 1993 Purchase Payments, purchase payments in connection with the Prior Certificates and in connection with the Prior 1993 APFA Bonds and debt service on Senior Bonds previously issued by the City, and on meeting the Electric System's projected capital improvement program and other non-operating financial commitments. The projected amounts set forth below are based on certain assumptions made by the City. To the extent that actual future conditions vary from those assumed in preparing the projections, the actual results will varyfrom those projected. A 3.8% compound annual increase is indicated in revenue requirements for the five-year forecast period over the 1992 average charge level.

PROJECTED OPERATING RESULTS (000) Fiscal Year EndingJune 30 1993 1994 1995 1996 1997 Total Revenues From Sales(l) ...... $229,241 $230,123 $252,778 $269,965 $289,543 Other Operating Revenues ...... 536 442 441 444 447 Surplus Sales Revenue(2) ...... 6,328 8,097 5,807 9, 145 8,890 Other Income ( 3) ...... 5,509 5,680 5,144 5,361 5,714 Total Gross Revenues ...... $241,614 $244,342 $264,170 $284,915 $304,594 Operating Expenses: Power Supply(4) San Juan Unit 4 ...... $ 1,612 $ 7,428 $ 10,105 $ 10,965 $ 11,933 Combustion Turbine ...... 1,137 1,186 1,475 1,493 1,511 San Onofre ...... 15,933 15,861 16,918 17,508 18,121 Intermountain Power ...... 81,800 85,326 90,638 91,976 93,580 Hoover ...... 848 1,057 961 990 1,019 Deseret ...... 21,889 22,197 18,384 14,083 14,900 BPA ...... 572 572 641 663 698 Power Contracts ...... 6,700 7,105 7,573 9,205 8,787 Other Power Supply ...... 28,835 26,806 31,299 35,929 44,456 Other O&M(5) ...... 26,873 20,615 24,476 24,197 25,355 Total Operating Expenses ...... $186,199 $188,153 $202,470 $207,009 $220,360 Total Net Revenues Excluding Depreciation and Amortization ...... $ 55,415 $ 56,189 $ 61,700 $ 77,906 $ 84,234 Senior Bond Debt Service ( 6) ...... 21,020 19,731 20,729 20,750 20,726 Senior Bond Debt Service Coverage ...... 2.64 2.85 2.98 3.75 4.06 Renewal and Replacement Transfers(?) ..... 916 1,467 199 219 197 Net Surplus Revenue(8) ...... $ 33,479 $ 34,991 $ 40,772 $ 56,937 $ 63,311 Purchase Payments forPrior Certificates(9) .. 5,320 2,520 2,543 2,570 2,619 Purchase Payments for Prior 1993 APF A Bonds(lO) ...... 0 3,229 4,152 4,153 4,152 1993 Purchase Payments(ll) ...... 0 2,667 4,084 4,055 4,007 Estimated Purchase Payments for energy efficiency financing( 12) ...... 0 50 331 712 1,020 Total Purchase Payments ...... 5,320 8,466 11,110 11,490 11,798 Total Purchase Payments Coverage ...... 6.29 4.13 3.67 4.96 5.37 Balance forOther Purposes(13) ...... $ 28,159 $ 26,525 $ 29,662 $ 45,447 $ 51,513 (footnotes on following page)

31 (1) Includes rate increases of 1% effective in 1993 and assumes a projected rate decrease of 0.6% in 1993 and rate increases of 2% in 1994, 6% in 1995, 5% in 1996 and 5% in 1997. Includes refundsfro m Edison which the City disburses through the RSA. (2) Revenue from sales of surplus energy available from integrated resources and resulting from contract minimums for certain purchases. (3) Includes unrestricted interest income and miscellaneous income. ( 4) Power Supply costs as forecastby the Department. Includes credits pursuant to the Plan forDisposition of Surplus Funds from IPP as elected by the City. Power Contracts include contracts with Deseret, a capacity I energy exchange with BPA, and a Power Sales Agreement with Edison. Other Power Supply includes transmission expenses, nonfirm energy purchases, and purchases fromEdison under wholesale rates. (5) Includes other operating expenses and equipment purchases. Excludes overhead expenses applied to capital projects. (6) Amounts shown on a cash basis. (7) Payments to the Renewal and Replacement Account for the Electric System. (8) Surplus revenue available for application to Qualified Obligations or other purposes designated by the City. (9) Shown on a cash basis. The first principal payment is due October 1, 1993. (10) Shown on a cash basis, based on the purchase payment schedule for the Prior 1993 APFA Bonds. The first principal payment is due October 1, 1994. ( 11) Debt service on 1993 Bonds. (12) Estimated debt service on bonds to be issued through the Financing Authority forResource Efficiency of California to finance energy efficiency equipment for utility customers. (13) Includes, among other things, transfers to the City's General Fund, ERANs, fundsfor Electric System capital improvements, working capital changes and developer's contribution. Loads and Resources The following table sets forth historical and projected Electric System loads and resources.

HISTORICAL AND PROJECTED LOADS AND RESOURCES (MW) (1) HistoricaJ Projected Fiscal Year Ending June 30 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 Peak loads ...... --470.9 --493.0 --522.7 --496.8 --511.2 --530.0 --531.5 --544.8 --571.6 --591.8 Resources: BPA ...... 0.0 0.0 0.0 24.0 24.0 24.0 24.0 24.0 24.0 24.0 Combustion Turbine ...... 0.0 0.0 0.0 46.6 46.6 48.2 48.2 48.2 48.2 48.2 CDWR ...... 30.0 30.0 30.0 30.0 0.0 0.0 0.0 0.0 0.0 0.0 Deseret ...... 83.2 83.2 83.2 84.0 84.0 84.0 84.0 84.0 40.0 40.0 Edison PSA ...... 0.0 0.0 0.0 125.0 150.0 150.0 121.0 88.0 35.0 35.0 Hoover ...... 9.9 16.4 29.1 33.8 33.5 40.0 40.0 40.0 40.0 40.0 Intermountain Power Project ...... 211.6 211.6 211.6 211.6 21 1.6 211.6 211.6 211.6 211.6 211.6 PG&E ...... 20.0 20.0 20.0 20.0 20.0 0.0 0.0 0.0 0.0 0.0 San Juan Unit 4(2) ...... 0.0 0.0 0.0 0.0 0.0 0.0 45.0 50.0 50.0 50.0 SONGS ...... 67.9 67.9 67.9 67.9 67.9 67.9 67.9 67.9 67.9 67.9 Subtotal ...... 422.6 429.1 44 1.8 642.9 637.6 625.7 641.7 613.7 516.7 516.7 Less Reserves and Losses(3) ...... 79.0 90.2 --87.4 113.2 116.7 106.5 105.6 110.7 95.3 95.3 Net Resources ...... � ...... --343.6 --338.9 --354.4 --529.7 --520.9 --519.2 --536.1 --503.0 --421.4 --421.4 (footnotes on fo llowing page)

32 ( 1) Maximum resource capacity shown which may not coincide with City's peak demand. Differences between peak loads and net resources result in purchases of capacity from Edison under the Partial Requirements Rate and purchases of energy from Edison and others. (2) Assumes integration forcapacity credit under the 1990 IOA of 45 MW beginning on the day following the date of the City's acquisition of the San Juan Unit 4 Project and City's entire entitlement of 50 MW on January 1, 1995. ( 3) Reserves and transmission losses associated with integrated capacity resources. Beginning August 1, 1990, the City's reserve obligation to Edison is fixed at 15.25% of the resources' rated capacity delivered to the Edison system. Prior to August 1, 1990, the CDWR, Deseret, and PG&E resources were non­ integrated resources and therefore, not subject to the reserve requirements of the IOA.

Labor Relations City employees are represented by various unions. See "Labor Relations" in Appendix C.

THE SAN JUAN UNIT 4 PROJECT On April 26, 1991, the City and Public Service Company of New Mexico ("PNM") entered into the San Juan Unit 4 Purchase and Participation Agreement (as amended, the "Purchase Agreement"). Under the terms of the Purchase Agreement, PNM agreed to sell to the City and the City agreed to purchase fromPNM a 10.04 percent undivided ownership interest (providing approximately 50 MW) in the San Juan Generating Station Unit 4 ("Unit 4"). The undivided ownership interest of the City in Unit 4 and the San Juan Generating Station common facilities is referred to herein and in the Indenture and Installment Purchase Agreement as the "San Juan Unit 4 Project."

San Juan Generating Station History and Ownership As early as approximately 1960, PNM acquired coal leases and began planning the construction of the coal-fired power plant which is now known as the San Juan Generating Station ("San Juan"). On July 25, 1969, PNM and Tucson Gas & Electric Company (the predecessor of Tucson Electric Power Company) signed a letter of intent to jointly own and construct the proposed station. All four units are presently in operation. The first San Juan unit, Unit 2, began commercial operation in 1973. Units 1 and 3 began commercial operation in 1976 and 1979, respectively. Unit 4 was declared commercially operational in April 1982. According to PNM, the remaining book life of Unit 4 extends through March 2022. San Juan consists of fourunits, Units 1, 2, 3 and 4, with net rated capacities of 316 MW, 312 MW, 488 MW and 498 MW, respectively. As noted below, PNM and Tucson Electric Power Company {"TEP") are still equal owners of Units 1 and 2, whereas other entities, known as "unit participants," along with PNM, own undivided interests in Units 3 or 4. The lands upon which San Juan Units 1, 2, 3 and 4 are situated are owned by PNM and TEP as co-tenants. On May 27, 1993, PNM and Utah Associated Municipal Power Systems ("UAMPS") entered into a purchase and participation agreement for the purchase by UAMPS from PNM of not less than a 6.024 percent (30 MW) and up to an 8.032 percent ( 40 MW) undivided ownership interest in Unit 4. Closing of that transaction will depend upon the fulfillment of various closing conditions, including obtaining required regulatory approvals. Units 1 and 2 are owned 50 percent by PNM and 50 percent by TEP. Unit 3 is owned 50 percent by PNM, 8.2 percent by Century Power Corporation ("Century") and 41.8% by the Authority. Unit 4 is owned 55.525 percent by PNM, 8.475 percent by the City of Farmington, New Mexico ("COF''), 28.8 percent by M-S-R Public Power Agency ("M-S-R") and 7.2 percent by The County of Los Alamos, New Mexico ("Los Alamos County"). Upon transfer of the San Juan Unit 4 Project to the City, Unit 4 will be jointly owned by PNM (45.485 percent) , COF (8.475 percent), M-S-R (28.8 percent), Los Alamos County (7.20 percent) and the City (10.04 percent) .

33 Committees, Voting and Representation The San Juan participants and unit participants are represented on the coordination, engineering and operating, and audit committees established by the San Juan Project Operating Agreement and Co-Tenancy Agreement and on ad hoc committees created from time to time. COF, M-S-R, Los Alamos County, Century and the Authority are entitled to vote in such committees on matters relating solely to the generating units in which they have an ownership interest. TEP retains the voting rights of M-S-R, Century and the Authority, and PNM retains the voting rights of COF and Los Alamos County, with respect to those committee matters that affect, but do not relate solely to, such units. However, TEP is obligated to consult with M-S-R, Century and the Authority, while PNM consults with COF and Los Alamos County, regarding such matters. Voting must be unanimous by participants and unit participants on matters that affect such units. The Purchase Agreement establishes the terms and conditions for the City's participation in San Juan and its relationship with PNM regarding the operation of Unit 4. Under the Purchase Agreement, the City has the same rights and obligations as the other unit participants in Unit 4. The City has voting rights on all matters relating solely to Unit 4. With respect to matters affecting the common facilities, the City does not have any voting rights; however, PNM is required to consult with the City regarding such matters before taking any action. The City does not have any voting rights with respect to matters relating solely to the other San Juan units.

PNM Responsibility and Management PNM is the operating agent for San Juan. PNM's responsibilities as operating agent are governed by the San Juan Project Operating Agreement, as amended. Certain provisions of the Operating Agreement have been included by reference in the purchase and participation agreements between PNM and COF, M-S-R and Los Alamos County, and are included in the Purchase Agreement. These provisions include such items as payment of expenses by participants, annual budgets, capital additions, capital betterments, capital replace­ ments, operating emergencies, operation and maintenance expenses, fuel costs, payment of taxes, operating insurance, liability and surplus or retired property.

Labor Status As of July 28, 1993, there were 636 employees budgeted for San Juan, of whom 450 are members of the International Brotherhood of Electrical Workers ("IBEW") Local 611. The current collective bargaining agreementbetween PNM and IBEW covering these employees became effective October 2, 1991 and expires on April 1, 1994. A class action discrimination lawsuit was filedin 1986 in a case entitled McKelly Begay v. Public Service Company of New Mexico, United States District Court, District of New Mexico. As a result of this litigation a settlement was entered into, with court approval, providing certain relief to the plaintiffs and establishing certain hiring programs with respect to specified entry level positions at San Juan. This settlement agreement was entered into in March 1988 and the court retains jurisdiction of the matter, unless extended by the terms of the settlement for six years, through March 1994.

General Description and Operations of San Juan San Juan is a coal-fired steam electric generating plant. Certain facilities at the plant are common to more than one unit. The plant is located in San Juan County in northwestern New Mexico, near Waterflow, New Mexico, within 15 miles of Farmington, New Mexico. An access road connects San Juan to US Highway 550. The plant is located on approximately 1,800 acres of land owned jointly by PNM and TEP which includes the plant site ( 550 acres), eight evaporation ponds ( 105 acres) and 110 surface acres for the water storage reservoir. In addition, San Juan is a mine mouth plant to which low sulfur coal is delivered fromthe San Juan Mine and the La Plata Mine to the crushers at the plant where the coal is crushed and then conveyed to one of the

34 four coal storage piles. This stockpile assures a steady fuel supply in the event of fluctuations in mining operations. Number 2 distillate fuel oil is used both as ignitor fuel and as a flame stabilizing fuel. Electrical power leaves the generators at 22,500 volts and is increased to 345,000 volts at the step-up transformers for distribution through the switchyard and transmission line systems. The 345 and 230 kV switchyards are located just west of the generating units. The Unit 4 turbine and associated equipment are enclosed in a building. The turbine area has a sliding roof hatch with an outdoor gantrycrane common to Units 3 and 4. The boiler and ash storage and unloading systems are outdoors. Most pumping and chemical systems located out of the main power plant building area are enclosed in metal buildings. The Support Services Complex houses warehousing, administrative and engineering personnel, and vehicle, carpentry, machine and plant maintenance shops. The support complexes consist of six maintenance shops, one plant operations laboratory, two administrative complexes, one training facility and six warehouse buildings. A river pump station pumps water fromthe San Juan River to the 110 acre reservoir located just south of the plant which holds a total of 3,000acre feet of water. A 30-day supply of usable water is stored at this reservoir and provides all the plant's water needs for cooling tower make-up, fire protection, boiler feedwater supply and pollution control equipment. Potable water for the plant is supplied by the Lower Valley Water­ Users Association. The combustion of coal at San Juan produces sulfur dioxide ("SOi"), nitrogen oxides ("NO/) , and particulate emissions (fly ash) and other emissions. As required by state and federal law, a number of

pollution control protection systems have been installed to control S02, NOx and particulate emissions. Pollution control facilities at San Juan are extensive and represent approximately 45 percent of the original capital investments of the plant. These systems, discussed below, consist of electrostatic precipitators, ash collection and conveying systems, S02 scrubber absorber systems with associated chemical plant and an extensive waste water treatment system including evaporation ponds. ParticulateRemoval : Electrostatic precipitators are used to remove up to 99 .9 percent of all the airborne fly ash from each unit. This fly ash along with the boiler bottom ash is conveyed to and collected in ash storage bins. One hundred ton capacity ash haul trucks are used to transport this wetted ash back into the mine for disposal.

NOx Requirements: The Unit 4 boiler is equipped with low NOx burners to minimize the generation of nitrogen oxides during the combustion process and meet stringent state and federal emission requirements. Unit 4 has a requirement not to exceed 0.45 pounds of NOx per million BTUs of energy input to the boiler.

S02 System: Unit 4's S02 compliance requirement is based on both state and federal regulations. Federal regulations limit S02 emissions to 1.2 lbs. per million British thermal units ("mmbtu") based on a three hour average. New Mexico regulations limit S02 emissions to 0.65 lbs./mmbtu based on a 30-day rolling average. A Wellman-Lord S02 removal process is used to remove S02 from the flue gas. Four prescrub­ ber/absorber modules, with four booster blowers per unit, are in place. The Unit 4 absorbers are multi-stage counter flow. The gas train also has an indirect reheat section which reheats the scrubbed flue gas with steam supplied by the boiler units. The chemical plant has four evaporator trains common to the power plant.

Concentrated S02 is drawn from the evaporators through condensers and routed to a sulfuric acid plant by compressors. Up to 180 tons of sulfuric acid can be produced in one day with all four San Juan units in operation. Sulfuric acid thus produced is disposed pursuant to a marketing contract. Regeneration absorbing solution is returned to the absorbers for the removal of additional S0 2. Water Management Sy stem: The Water Management System is an amalgamation of various compo­ nents into an integrated interconnected system designed to eliminate off-site discharges and maximize the use of reclaimed water. This wastewater treatment system collects water from each unit's cooling towers, boilers, ash handling areas, power block, and absorber-scrubber drain systems and chemical plant processing drains. Two major systems make up the Water Management System. The Northside Wastewater Recovery System consists of process ponds, a reverse osmosis system with a capacity of 2,000 gallons per minute ("gpm"), a dewatering system, a lime/soda softening clarifier system, two brine concentrators with a total capacity of

35 940 gpm, and 30 acres of evaporation ponds. The Southside S02 Waste Treatment System consists of process ponds, a lime system, two oxidation towers, two brine concentrators with a total capacity of 1,200 gpm, and 75 acres of evaporation ponds.

San Juan Unit 4 Operational History The Unit 4 steam generator is designed by Babcock & Wilcox. The turbine-generator for Unit 4 is a 60 hertz synchronous generator manufactured by General Electric, with a nameplate rating of 616,700kVA, and with a power factor of .90. Unit 4 commenced commercial operation in April 1982. The annual average operational availability and capacity factors and net generation of Unit 4, for the calendar years 1982 through 1992, and for the five months ending May 1993, provided by PNM, are presented below. Net Generation Calendar Availability Capacity (000 Year Factor(l) Factor(2) MWb) 1982 ...... · · · · · · · · 87.49% 79.17% 2,227 1983 ...... · · · · · · · · · 97.30% 83.11% 3,504 1984 ...... 83.12% 74.73% 3,222 1985 ...... · · · · · · · · · 92.71% 85.59% 3,700 1986 ...... 93.78% 68.93% 2,959 1987 ...... · · · · · · · · 85.53% 59.84% 2,570 1988 ...... · · · · · · · · 85.00% 66.90% 2,904 1989 ...... 96.26% 82.31% 3,586 1990 ...... 78.26% 62.76% 2,717 1991 ...... · · · · · · · · 95.44% 63.34% 2,707 1992 ...... · · · · · · · · 89.64% 63.16% 2,715 1993(3) ...... 98.63% 82.61% 1,307

( 1) Availability Factor: The percent of time the unit was available for service, whether operated or not. It is equal to available hours divided by the total hours, during the year, expressed as a percentage. (2) Capacity Factory: The ratio of the average load on the unit, during the year, to the capacity rating of the unit. (3) Through May.

Cu"ent Status Of Unit 4 Current Outage Schedule and Activity: The last scheduled outage on Unit 4 was completed in May 1992. This outage was classified as a minor outage, lasting three weeks. A complete boiler internal inspection was completed, boiler tube mapping program continued, selected flue gas expansion joints replaced, precipitator internal inspection and repairs completed, all turbine control valves and boiler safety valves overhauled and miscellaneous electrical motor and equipment work completed. Minor outages are scheduled every eighteen months with the next minor outage scheduled for the fall of 1993. The last major outage on Unit 4 was completed in the fall of 1990. During this major outage, the turbine­ generator was completely dismantled foroverhaul. The front pedestal was regrouted to facilitate realignment requirements. New generator rotor retaining rings were installed in accordance with a recommendation from General Electric due to the potential of the original rings being subject to stress-corrosion cracking and subsequent catastrophic failure. A major outage includes all activities normally done during minor outages plus the turbine-generator dismantle, inspection, and overhaul. The next Unit 4 major outage is scheduled for the fall of 1996. Major outages are normally scheduled for six weeks duration.

Renewals, Replacements and Betterments: The acid brick liners in all four of the Unit 4 S02 absorber modules are unstable as originally designed and have deteriorated in recent years. Repairs based upon the original design have not prevented the liner failures. As a result, new redesigned linings are being installed in the absorber modules on a module-by-module basis as each acid brick liner fails. At present, two modules

36 have been relined; it is anticipated that relining the two remaining Unit 4 absorber modules will be completed by the end of 1994. The Unit 4 concrete turbine pedestal has experienced expansion which has required close observationand correctiveaction to maintain turbine alignment. During the last major outage in the fall of 1990, the turbine front standard was regrouted to facilitate alignment requirements. Detailed engineering study and evaluation has led to the conclusion that the expansion process has subsided and only normal realignment activities should be required during future major equipment overhauls. Anticipated future major betterment projects with respect to Unit 4 may include the following: (i) absorber module wall upgrade, (ii) stack fluegas volumetric flow monitor installation pursuant to the 1990 Clean Air Act amendments, (iii) Unit 4 main process computer upgrade, (iv) Unit 4 high pressure feedwater heater tube replacement, (v) low pressure turbine rotor last stage blade and bucket upgrade, (vi) chemical plant process drain line improvements, and (vii) chemical plant evaporator heater replacement. The City's estimated share of such capital improvements is approximately $300,000 per year for the next two years.

Coa l Supply The supply of coal for San Juan is acquired by PNM as the San Juan operating agent. Coal is priced uniformly with respect to all four units of San Juan and the availability of coal is shared by all four units in proportion to their generating capabilities. All participants and unit participants own and are charged for their proportionate share of the coal inventory, including force majeure piles. The coal requirements for San Juan, including Unit 4, are being supplied by San Juan Coal Company ("SJCC"), a wholly-owned subsidiary of BHP Minerals International, Inc. ("BHP") from certain federal, state and private coal leases, under a coal sales agreement by and among PNM, TEP and SJCC, pursuant to which SJCC will supply processed coal for operation of San Juan until 2017. BHP has guaranteed the obligations of SJCC under the coal sales agreement. The coal sales agreement contains certain minimum payment requirements applicable if deliveries of coal do not meet contract minimums for a given year; and such minimum payments, if required, could affect the cost responsibilities of San Juan participants and unit participants. PNM initiated discussions with SJCC in September 1991 to modify the coal sales agreement in order to increaseproductivity, reduce minimum take obligations and include incentives and escalation factors which would keep electricity produced with SJCC coal more competitive in retail and wholesale markets. Effective as of July 27, 1992, PNM, TEP and SJCC executed Amendment No. 7 and Supplement No. 1 to the coal sales agreement. Amendment No. 7 provides for reduction in the base cost of delivered coal. In addition, the costs associated with ash disposal were removed from the coal sales agreement and will be recovered under a separate agreement among PNM, TEP and SJCC. Supplement No. 1 to the coal sales agreement provides delivery of coal priced to reflect incremental costs incurred in its production. Such incremental pricing provisions apply to coal delivered in excess of 5.0 million tons annually through December 1995. This pricing provision may be extended beyond December 1995 by the mutual agreement of PNM, TEP and SJCC. As of July 1, 1993, the remaining coal supply necessary for the San Juan's four units through the year 201 7 was estimated at approximately 136 million tons. The primary sources of coal are a mine adjacent to San Juan and a mine located approximately 25 miles northeast of San Juan in the La Plata area of northwestern New Mexico. As of July 1, 1993, the remaining combined contracted reserves of the leases adjacent to San Juan (approximately 64 million tons), the La Plata leases (approximately 37 million tons) and supplemental sources, including the addition of other uncontracted reserves, were expected by PNM to yield 136 million tons. PNM, as operating agent, will seek to obtain any necessary coal supplies required for San Juan in a timely fashion. However, contractual arrangements for coal for San Juan are presently in place only as noted above. On September 11, 1992, PNM, TEP and SJCC entered into an agreement for SJCC to study alternatives for the provision of the currently uncontracted portion of the long term supply of coal for San Juan through

37 2017. Such study is to be completed in 1993 and negotiations among PNM, TEP and SJCC regarding such coal supply will commence prior to the end of 1993.

Water Supply As the San Juan operating agent, PNM also acquires the water rights necessary for the plant. The water is priced uniformly with respect to all fourunits of San Juan, and the availability of water is shared by all four units in proportion to their generating capabilities. The present water supply for San Juan, including Unit 4, is obtained from the San Juan River under contract 14-06-400-4821 dated April 11, 1968, as amended in 1977, with the United States Bureau of Reclamation (the "USBR") which expires December 31, 2005 (the "USBR Contract"). The USBR Contract authorizes the consumption of 16,200 acre feetof water peryear for San Juan. In addition, San Juan has been granted authority to consume 8,000acre feetof water per year under New Mexico state permit 2838 that is held by BHP, which continues for so long as San Juan is operational; however, the grant will terminate upon termination of the coal sales agreement with SJCC if such termination arises due to a material and uncured default of the participants. PNM believes that sufficient water has been secured for San Juan until 2005. PNM, as operating agent, will seek to obtain any additional water required for the plant. PNM is seeking to extend the USBR Contract at this time and is investigating the availability of alternative water supplies. On June 20, 1985, the New Mexico Interstate Stream Commission recommended to the Secretary of the Interior that the existing USBR Contract for 16,200 acre feet per year be extended to the year 2025. The contract, as thus extended, would also include a provision requiring the sharing of water shortages in the event of a deficiency in New Mexico's Upper Basin entitlement resulting from the construction of the Animas-La Plata Project. On August 14, 1989, PNM requested that the USBR consider negotiation of an extension of the USBR Contract termination date to at least December 31, 2025. However, in connection with ongoing settlement discussions between the Federal Government and the Jicarilla Apache Tribe related to an action entitled Jicaril/a Apache Tn'be v. United States, et al., pending in the United States District Court for the District of New Mexico, the USBR has refrainedfrom entering into certain new contracts or extending certain existing contracts for delivery of water from the Navajo Reservoir in northwestern New Mexico. Included among the latter group of contracts is the USBR Contract. An out of court settlement of this lawsuit was reached and was codified by federal legislation enacted in December 1992. PNM has entered into informal discussions with the USBR to facilitate formal negotiations. PNM expects, on the basis of informal negotiations with the USBR, that the USBR will grant such an extension of the USBR Contract; however, no assurance can be given that the USBR Contract will be extended beyond the year 2005. In addition, it should be noted that endangered fish species foundin the San Juan River have, within the last two years, caused the USBR to conduct a "Section 7 consultation" under the Endangered Species Act before approving any new depletions or renewal of existing depletions. The Fish and Wildlife Service is conducting five to seven years of research which is expected to culminate in the adoption of a final recovery plan. A draft recovery plan written by the Fish and WildlifeService identifies San Juan depletions as part of the endangered species baseline existing environment. On January 29, 1993, the U.S. Fish and WildlifeService declared a portion of the San Juan River and its flood plain as a critical habitat for two endangered fishspecies. San Juan's water intake structure is within this critical habitat area. PNM is unable to predict what impact, if any, this declaration will have on the operation of San Juan.

In 1975, the State of New Mexico filed an action entitled State of New Mexico v. United States, et al., in the District Court of San Juan County, New Mexico, to adjudicate all water rights in the "San Juan River Stream System." This action is expected to adjudicate water rights used at San Juan. The effect, if any, of any water rights adjudication on the present arrangements for water at San Juan cannot be anticipated at this time. PNM believes no final resolution of the case can be expected for several years.

38 Permits and Environmental Issues To PNM's knowledge, PNM is presently in compliance, in all material respects, with all applicable laws and regulations. Various environmental permits have to be renewed from time to time and PNM does not foresee any problems with the renewal of these permits for San Juan. Air QualityMatters: As a part of its on-going compliance with applicable air quality standards, and in compliance with the 1990 amendments to the Clean Air Act, PNM has established a project to handle the new continuous emission monitoring regulatory requirements. The San Juan Engineering and Operating Committee has approved the use of a differentialpressure method for measuring fluegas volumetric flow rate. In addition, the existing NOx and S02 analyzers will be replaced with more accurate and reliable analyzers. An in-situ 02 probe and analyzer will be installed in order to provide a moisture measurement for wet basis calculation of S02 annual emissions. In addition, the existing software system will be modified and software will be developed to meet the new reporting requirements. These modifications and additions to the existing continuous emission monitoring system are estimated to cost $265,000 and are scheduled for installation on Unit 4 in October 1993. The 1990 amendments to the Clean Air Act established the Grand Canyon Visibility Transport Commission (the "Commission") and charged it with assessing adverse impacts on visibility at the Grand Canyon. The Commission broadened its scope to assess visibility impairment in mandatory Class I areas (parks and wilderness areas) located in the Colorado Plateau ("Golden Circle"). The Commission must report to the United States Environmental Protection Agency ("EPA") by November 1995 on its findingsand make recommendations regarding what actions, if any, should be pursued in order to remedy the visibility impairment in the Golden Circle. Depending on the recommendations of the Commission, the EPA may require stricter controls on sources that may be contributing to the visibility impairment. Both the Four CornersPower Plant and San Juan are located near the Golden Circle. The exact nature and cost of additional controls, if any, that may be required as a result of the recommendations cannot be estimated at this time. PNM is also reviewing the OperatingPermit finalrule ( 40 CFR part 70). The New Mexico Environment Department ("NMED") must submit its Operating Permit Program to the EPA by November 15, 1993 pursuant to the finaloperating permit regulations. NMED draft regulations establish a $15 per ton fee fornon­ hazardous air pollutants and a $150 per ton fee for hazardous air pollutants to be assessed on an annual basis as part of the operating permit pollutants program. NMED has agreed to a 4,000 ton cap per pollutant and stated its intention to assess the operating permit fee based on San Juan as one source. New Mexico will begin assessing the feeduring the last quarter of 1993 in order to have fundsavailable to initiate the operating permit program. PNM has budgeted $300,000 for such fee for 1993. The fee will be allocated among San Juan participants according to common facility ownership shares. PNM is also following the development of the final nitrogen oxides emissions reduction regulations ( 40 CFR part 76). The proposed regulations would allow a Phase II unit with a Type 1 boiler (wall-fired, dry bottom) and a NOx emission limit equal to or less than 0.5 lb./mmbtu to become subject to the applicable NOx regulations before January 1, 2000. Early election would protect a unit from more stringent NOx regulations that may be proposed forPhase II units. If the final regulations contain this provision, PNM will elect to have Unit 4 become subject to the applicable NOx regulations before January 1, 2000.

On March 23, 1993, the EPA published Phase II S02 emission allowance allocations in the Federal Register. Unit 4 was allocated 12,944 allowances for the period 2000 through 2009 and 12,156 allowances from 2010 onward. PNM believes that Unit 4 has been allocated sufficientemission allowances for annual S02 emissions from the unit when operating at an annual capacity factor in the range of 70%-80% and high acid plant availability. Water Quality Matters: San Juan disposes of liquid waste into lined process ponds and evaporation ponds. Wash down water and storm water runoff from secondary coal crushing operations, a force majeure coalpile, other coal and ash handling facilities, reclaim sumps and haul roads are disposed of into clay lined retention basins for evaporation or transfer of water to process ponds for recycling. Other lined process ponds and evaporation ponds are used fordisposal of thiosulfate purges, accumulated flows and other overflowsand

39 wastewater. These evaporation ponds and process ponds are utilized pursuant to NMED-approved discharge plans. The plans continue to be subject to periodic renewal by NMED and require, among other things, PNM to undertake continued monitoring and periodic reporting. San Juan maintains a zero discharge National Pollutant Discharge Elimination System ("NPDES") permit, covering the regulation of process wastewaters, and has timely submitted a notice of intent to be covered under a NPDES General Permit in connection with storm water discharges.

Solid Waste Disposal Matters PNM has registered the San Juan Solid Waste DisposalSite ("SWDS") with NMED and is operating under an exemption available under the New Mexico Solid Waste Management Regulations for the disposal of construction and demolition debris or yard refuse on property for materials generated on that property. An inspection of the SWDS by NMED on June 30, 1992 identified domestic waste disposed of at the SWDS. The letter received from NMED, dated July 15, 1992, identifieda violation of the PNM exemption but did not issue a Notice of Violation. PNM responded in writing on July 23, 1992, outlining revisions to the SWDS operating procedures (limit access, disposal inventory listing, supervisorload inspections) to facilitate exemption compliance. NMED acknowledged acceptance of the revised operating procedures by letter dated August 20, 1992; that acknowledgement and acceptance resolved the matter.

Hazardous Waste/PCB/Asbestos Control Matters PNM has pursued an aggressive PCB risk reduction program forSan Juan. For Unit 4, a transformer and several capacitors have been replaced. For the common areas, four load center transformers are in the process of retrofill/reclassification, which is expected to be completed by March 1994. The NMED conducted the most recent compliance audit for hazardous waste activities at San Juan in May 1991. The inspection resulted in a Notice of Violation on three counts which were subsequently successfully resolved in July 1991. No fines were issued. PNM maintains an on-going program forremoving or repairing asbestos containing materials and adheres to all local and federal notification, removal, transport disposal and worker safety requirements as needed.

Financial Information The following table summarizes data provided by PNM detailing historical fuel expenses for Unit 4 for the last six years, and also provides a five-year projection of future fuel expenses. The projections reflect an estimate of the changes to the San Juan Coal Sales Agreement referred to above.

San Juan Unit 4 Fuel Cost Calendar Year Mills/KWh 1987 ...... $17.331 1988 ...... 19.094 1989 ...... 17.437 1990 ...... 20.022 1991 ...... 21.726 1992 ...... 20.433 1993 (Projected) 20.151 1994 (Projected) 20.163 1995 (Projected) 21.021 1996 (Projected) 21.573 1997 (Projected) 23.794 For data detailing the City's projected share of operation and maintenance expenses for the San Juan Unit 4 Project forthe years 1993, 1994, 1995, 1996 and 1997 see "THE ELECTRIC SYSTEM - Summary Projection of Operating Results of the Electric System."

40 Purchase Agreement Under the Purchase Agreement, the City has agreed to purchase from PNM a 10.04 percent undivided ownership interest in Unit 4, a 5.07 percent undivided ownership interest in facilities common to Units 3 and 4, and a 3.10 percent undivided ownership interest in facilities common to all four units of San Juan. The purchase price to be paid by the City is $55,000,000, plus the City's proportionate share of the prepaid items (insurance, coal inventory, etc.), estimated to be $800,000 to $900,000. The closing date is currently scheduled to be no later than August 31, 1993. The closing of the City's purchase is conditioned upon the City and PNM fulfilling several conditions specified in the Purchase Agreement, such as obtaining all required regulatory approvals and Edison's acceptance of the San Juan Unit 4 Project for integration under the 1990 IOA. All required regulatory approvals have been obtained. Before executing the Purchase Agreement, City staff and engineering consultants hired by the City investigated the economic feasibility, reliability and environmental aspects of the San Juan Unit 4 Project. They concluded that the San Juan Unit 4 Project represents an economical and reliable resource to meet the City's forecasted needs. Over the next 20-year period the City estimates that the San Juan Unit 4 Project will save about $38 million ( 1992 dollars) in power supply costs compared to purchasing an equivalent amount of capacity and energy from Edison under the Partial Requirements Rate. The City has a projected need for additional capacity and energy to meet anticipated load growth and to replace existing resources that will be terminating. On December 31, 1994, the City's 84 MW Deseret power sale agreement will terminate. In addition, beginning in fiscal year ended June 30, 1993, the monthly capacity purchased by the City under the PSA began declining from a high of 150 MW to 35 MW by 1997. Purchases under the PSA will terminate completely on December 31, 1998. Due to the advantageous incremental energy costs associated with the San Juan Unit 4 Project, the City expects to use the San Juan Unit 4 Project as a base load resource.

Integration Under 1990 IOA Beginning on the day following the date of the City's acquisition of the San Juan Unit 4 Project, Edison will integrate 45 MW of capacity and associated energy from the San Juan Unit 4 Project. On January 1, 1995, Edison will integrate the remainder of the San Juan Unit 4 Project. On the date of such acquisition, the City may integrate energy from the SanJuan Unit 4 Project with Edison under the 1990 IOA as non-firm energy. In addition, the City and PNM have entered into an energy banking arrangement to deal with the City's must take energy obligations under the Purchase Agreement prior to June 1, 1994. Under this banking arrangement, when the City is unable to use such energy the City may bank the energy with PNM for use by the City at a later time. As a result, the City's potential financial exposure to losses associated with its must take energy obligations is virtually eliminated during that period.

Delivery of San Juan Unit 4 Project Output The output of the San Juan Unit 4 Project will be delivered to the City through several transmission service arrangements. In accordance with Service Schedule F attached to the Interconnection Agreement between PNM and the City, executed concurrently with the Purchase Agreement, PNM will provide the City with firm transmission service from Unit 4 to the Four Corners Generating Station Switchyard located near Shiprock, in northwestern New Mexico. From the Four Corners Switchyard, PacifiCorp Electric Operations Group ("PacifiCorp") will provide the City with firmtransmission serviceto Mona Substation in central Utah under the Firm Transmission Service Agreement between PacifiCorp and the City, executed on April 11, 1991. From Mona Substation to the point of interconnection between the Los Angeles Department of Water and Power ("LADWP") and Edison located midway between the Victorville and Lugo Substations in California ("Victorville-Lugo"), the City has the following firm transmission service arrangements: (i) the NorthernTransmission System Agreement between the City and LADWP executed on June 10, 1986 under which LADWP transferred and assigned to the City a percentage share of LADWP's rights to capacity and use of the transmission facilities between Mona Substation and the IPP Generating Station; (ii) the Southern

41 Transmission System Transmission Service Contract between the Authority and City executed on May l, 1983, under which the City acquired an entitlement to firm transmission service on the high voltage direct current transmission system between the IPP Generating Station and Adelanto Substation in California; and (iii) the IPP Additional Capacity Transmission Service Agreement between the City and LADWP executed on June 10, 1986 under which LADWP provides firm transmission service to the City from Adelanto Substation to Victorville-Lugo. Edison has agreed to provide firm transmission service to the City from Victorville-Lugo to the City's Lewis Substation commencing on the day following the date of acquisition. The City's entitlement to transmission service under the Northern Transmission System Agreement is subject to reduction should the Utah participants in IPP exercise their rights to recall the sale of certain excess power in IPP made to the other California participants in IPP. The City does not anticipate any reduction or withdrawal of its transmission service rights under the Northern Transmission System Agreement for the foreseeable future. Should those rights be reduced or withdrawn, however, the City anticipates that it can secure alternative transmission arrangements from the Utah participants utilizing the excess transmission capacity which they would acquire as a result of the recall. PNM has an easement forright-of-way with the Navajo Nation for an approximately fourmile portion of two parallel 345 kV transmission lines, one of which connects San Juan and the Four Corners Switchyard. This easement expired on January 17, 1993. PNM is engaged in formal negotiations with the Navajo Nation to develop an interim and long term resolution of the renewal of such easement. In addition, PNM is studying potential alternative transmission arrangements should negotiations with the Navajo Nation prove to be unsuccessful.

Participantsand Unit Participants in the San Juan Generating Station PNM· PNM was incorporated in the State of New Mexico in 1917 and is a public utility engaged in the generation, transmission, distribution and sale of electricity and in the gathering, processing, transmission, distribution and sale of natural gas within the State of New Mexico. PNM also owns facilities for the pumping, storage, transmission, distribution and sale of water in Santa Fe, New Mexico. The total population of the area served by one or more of PNM's utility services is estimated to be approximately 1.1 million, of which some 52 percent live in the greater Albuquerque area. For the year ended December 31, 1992, PNM derived 70.0 percent of its utility operating revenues from electric operations, 28.5 percent from natural gas operations and 1.5 percent from water operations. The total net capacity of generation facilities owned or leased by PNM was 1,591 MW as of December 31, 1992, comprised of generation froma nuclear plant, located in Arizona, and from two coal-fired plants and two gas/oil-fired plants, located in New Mexico. The two gas/oil-fired plants are used for peaking capacity and transmission support requirements only. PNM's estimated generation mix for 1993 is 70.2 percent coal, 29.7 percent nuclear and .1 percent gas and oil. TEP: TEP, incorporated under the laws of the State of Arizona in 1963, is the successor to a Colorado corporation formed in 1902. TEP supplies electricity in the City of Tucson and the surrounding area. In July 1991, a group of TEP's creditors in TEP's sale and leaseback transactions filed an involuntary petition for reorganization under Chapter 11 of the United States Bankruptcy Code. On December 31, 1991, the Bankruptcy Court dismissed, without prejudice, the petition. Century: Century, which was incorporated in the State of Arizona on June 2, 1986, has its principal office in Tucson, Arizona. Prior to adopting the liquidation basis of accounting, Century owned and operated electric generating facilities and sold electric utility services on a wholesale basis. As of December 31, 1992, Century adopted the liquidation basis of accounting and is now in the process of selling its remaining utility plant assets. On July 1, 1993, Century sold 204 MW of its 244 MW ownership interest in San Juan Unit 3 to the Authority; the City did not participate in the sale. Centurycontinues to seek to sell the remainder of its assets. Authority: The Authority is a joint powers agency and public entity organized under the laws of the State of California. The Authority was created in 1980 for planning, financing, developing, acquiring, constructing, operating and maintaining electric generating and transmission projects for participation by some or all of its

42 members. The membership of the Authority is comprised of ten cities, including the City, and one irrigation district of the State of California. For a description of some of the Authority's other activities, see "INTRODUCTION - Power Supply" and "OTHER ELECTRIC RESOURCES." COF· COF is a political subdivision organized under New Mexico law. It is located in San Juan County, New Mexico, and was incorporated in 1901. Covering an area of 23.8 square miles, COF's population totalled approximately 34,000 as of July 1, 1993. PNM and COF entered into an agreement whereby PNM will furnish firm-requirements wholesale power to COF through 2011. As of June 30, 1993 COF provided electric services to approximately 30,679 customers. COF's electric service systemrevenue for the year ended June 30, 1992 totalled $40,882,056. As of June 30, 1992, COF's bonded debt included sales tax and utility system revenue bonds. Los Alamos County: Los Alamos County is a political subdivision organized under New Mexico law. In 1989, Los Alamos County acquired the White Rock distribution center from PNM to complete Los Alamos County's county-wide utility service system. Los Alamos County uses a joint utility system, and reported net income which equalled $2,830,360 for the year ended June 30, 1992. Los Alamos County provides electric system service to approximately 8,000 customers, with electric service system revenues totalling $25,777,043 for the year ended June 30, 1992. As of June 30, 1992, total bonded debt equalled $104,460,000, including general obligation bonds and sales tax and utility system revenue bonds. M-S-R: M-S-R is a public entity, without taxing power, created pursuant to provisions of the Act and a Joint Exercise of Powers Agreement (the "Joint Powers Agreement") dated April 29, 1980, as amended and restated on November 17, 1982, among three California entities: the Modesto Irrigation District, the City of Santa Clara, and the City of Redding. M-S-R is authorized in part to acquire, construct, maintain, and operate any facility for the generation and transmission of electrical energy for the benefit of any of the members. M-S-R is also authorized to sell bonds, notes, or other evidences of indebtedness in accordance with the provisions of the Act and the Joint Powers Agreement for the purpose of acquiring or constructing any generation or transmission projects. The objective of M-S-R is to minimize the power costs of the members by supplying portions of their power requirements through the development or acquisition of generating and transmission facilities and through contractual power entitlements.

Availability of Operating Funds and Available Information Concerning Other Owners of San Juan Generating Station Continued operation of San Juan is dependent upon, among other things, the participants and unit participants making timely payment of their respective payment obligations. The capability of the participants and unit participants to provide such payment is dependent upon their continued ability to generate the necessary funds from internal or external sources. If a participant or unit participant defaults in the performance of its obligations under the project agreements, other participants or unit participants may be required to provide funds to continue the operation of the San Juan Generating Station. Information concerning other owners of San Juan is available from a number of sources. TEP and PNM are subject to the informational requirements of the Securities Exchange Act of 1934 and in accordance therewith file reports and other information with the SEC, which can be inspected and copied at the offices of the Commission at Room 1024, 450 Fifth Street, N.W., Washington D.C.; Room 1204, Everett McKinley Dirksen Building, 219 South Dearborn Street, Chicago, Illinois; 14th Floor, 75 Park Place, New York, New York; and Suite 500 East, 5757 Wilshire Boulevard, Los Angeles, California. Copiesof such material can also be obtained at prescribed rates from the Public Reference Section of the SEC at its principal office at 450 Fifth Street, N.W., Washington D.C. 20549. Information concerning the Authority is available from the Executive Director, Southern California Public Power Authority, 200 South Los Robles Avenue, Suite 155, Pasadena, California 91 IOI. Information regarding PNM, which is listed on the New York Stock Exchange, may be obtained at said Exchange's offices located on the 7th Floor, 20 Broad Street, New York, New York. TEP's common stock is listed on the New York and Pacific Stock Exchanges. Reports, proxy statements and other information concerning TEP can also be inspected and copied at the offices of such Exchanges at 20 Broad Street, New York, New York and at 301 Pine Street, San Francisco, California, respectively.

43 OTHER ELECTRIC RESOURCES The City is a participant in a number of projects with other utilities. Construction and/ or operation of these projects is dependent upon, among other things, such other utilities timely meeting their respective payment obligations with respect to such projects. The capability of such utilities to provide such payment is dependent upon their continued ability to generate the necessary funds from internal or external sources. If a utility defaults in the performance of its obligations with respect to a project, the non-defaulting utilities may be required to expend additional funds or undertake additional activities.

Intermountain Power Project The City has a 13 .225% (211.6 MW) entitlement in the coal-fired IPP Units 1 and 2 located near Lynndyl, Utah. Units 1 and 2 are rated at 800 MW net each, were declared in commercial operation in June 1986 and May 1987, respectively, and are integrated under the 1990 JOA with Edison. The City has entered into a power sales agreement with the IPA which obligates the City to its share of capacity and energy on a "take or pay" basis. IPA has issued bonds for the generating station of which there were approximately $5,079,953,000 principal amount outstanding as of June 30, 1993. Transmission of the output of IPP to the City and fiveother Southern Californiamunicipalities is provided by a ± 500kV DC transmission line rated at 1,920 MW from the generation station to Adelanto, California with an AC/DC converter at each end (the "Southern Transmission System"), which was placed in operation in May 1987. The Authority has provided payments-in-aid of construction with respect to the Southern Transmission System. The City's entitlement in the Southern Transmission System is 17.647% (338.8 MW). The Authority has issued bonds to fund such payments-in-aid of construction of which approximately $1.13 billion principal amount was outstanding as of June 30, 1993. The City's entitlement in the Southern Transmission System is on a "take or pay" contract basis. Transmission service from Adelanto to the City is provided under agreements with the LADWP and Edison. On May 23, 1988, the IPP Coordinating Committee approved the Plan forDisposition of Surplus Funds (the "Plan") which set forththe manner in which about $370 million in surplus IPP construction funds were to be returnedto the IPP participants by IPA. The Plan provided that each participant receivea portion of the surplus construction funds based upon each respective participant's debt service obligation to IPA. The City is entitled to 13.225% of the surplus funds or about $49 million. In fiscal year 1987-88, the Electric System received about $13 million in the form of reduced bills for power purchased from IPA. The Electric System used $12 million of the remaining $36 million to offset the cost of power purchased from IPA in fiscal year 1988-89. The Electric System used $10 million of the remaining $24 million to offset the cost of power purchased in fiscal year 1989-90. The Electric System used $10 million of the remaining $14 million to offset the cost of power purchased in fiscal year 1990-91. In fiscal year 1991-92, the Electric System received an additional $4.8 million, which was added to the remaining $4 million. The Electric System used $8 million to offset the cost of power purchased in fiscal year 1991-92. The remaining $0.8 million, plus interest earnings, was used to offset portions of future power bills from IPA.

Hoover Uprating Project On August 17, 1984 the Hoover Power Plant Act of 1984 was signed into law. Pursuant to the Hoover Power Plant Act, the City was allocated 40 MW of capacity and approximately 52,000 MWh of associated energy annually by the Western Area Power Administration ("Western") . The City entered into contracts with the USBR for the advancement of funds for construction and with Western for the purchase of power from the Hoover Uprating Project. Subsequently, the City entered into an assignment agreement with the Authority to assign its entitlement in return for the Authority's agreement to provide funds to the USBR. As of June 30, 1993, the Authority had outstanding approximately $41.3 million principal amount of its bonds (including refunding bonds) to fund the City's share, as well as fiveother municipalities' shares, of fundsto be advanced to the USBR. Additionally, the City and the Authority have executed a power sales contract under which the City is entitled to its share of capacity and associated energy as it becomes available and has agreed to make monthly payments on a "take or pay" basis. A portion of the City's entitlement has been available

44 since June 1987 at the Mead Substation. Transmission from Mead Substation to the City is provided by Edison. The City's full entitlement is now available.

Deseret Power Purchase The City entered into a power sales agreement with Deseret pursuant to which the City is entitled to purchase up to 90 MW, plus losses, of firm capacity and associated energy. Service began in May 1987 and will extend through December 1994. The City integrated 84 MW of capacity purchased from Deseret under provisions of the 1990 JOA. Power from Deseret is transmitted to the JPP plant and then via the Southern Transmission System and other transmission facilities to the City. The City has entered into a new 40 MW power sale agreement with Deseret that will begin on the expiration of the existing contract and extend through 2004. Edison has agreed to integrate the new Deseret power sale agreement and provide firm transmission service.

Bonneville Power Administration Agreement The City entered into a 20 year capacity sale/ exchange agreement with BP A. Under the agreement, the City purchases from BPA 16 MW of capacity from November through April and 24 MW during May. From June through October, BPA provides 24 MW of capacity in exchange for the City providing 28.8 gigawatt hours of energy between October 1 and April 15 of each year. Energy associated with the capacity acquired from BPA that is used is returned to BPA during off-peak hours on the following day. The City has also entered into a 20 year firm transmission service agreement with the cities of Pasadena and Burbank for transmission of energy associated with the BPA agreement between the Nevada/Oregon border and the Edison control area at Sylmar Substation. The remaining firm transmission service from Sylmar to the City is provided by Edison. The City started receiving capacity and energy benefits from the BPA agreement under the provisions of the 1990 JOA in February 1991.

Power Sale Agreement with Edison As part of the 1990 Settlement Agreement, the City and Edison negotiated a power sales agreement which terminates December 31, 1998. Under the terms of the PSA the City purchases varying amounts of capacity and associated energy monthly. Capacity purchases range from zero to 150 MW at costs significantly below Edison's Partial Requirements Rate.

Other In addition to the City's integrated firm resources, the City purchases very small amounts of capacity and energy from Edison under the Partial Requirements Rate. The City has executed agreements with a number of other utilities to provide economy energy to the City as such energy is available at an economically attractive price and the City is able to use such energy. Recent operations have resulted in the overall reduction of energy purchases from Edison under the Partial Requirements Rate to a level of less than 1 % of the City's total energy requirements.

Future Power Supply Resources The City is continually in the process of evaluating its existing power supply resources in combination with new power supply alternatives which consist of proposed resources and transmission facilities currently under study. Mead-Phoenix Transmission Project. The Mead-Phoenix Transmission Project consists of a 256-mile, 500 kV AC transmission line that will extend between a southern terminus at the existing Westwing Substation (in the vicinity of Phoenix, Arizona) and a northern terminus at Marketplace Substation, a new substation to be located approximately 17 miles southwest of Boulder City, Nevada. The new line will be looped through the new 500 kV switchyard to be constructed in the existing Mead Substation in southern Nevada and will have an estimated initial transfer capability of 1,300 MW. By connecting to Marketplace Substation, the Mead-Phoenix Transmission Project will interconnect with the Mead-Adelanto Transmission

45 Project and with the existing McCullough Substation in southern Nevada. The Authority has executed an ownership agreement providing it with an 18.3077% member-related ownership share in the Westwing-Mead project component, a 17.7563% member-related ownership share in the Mead Substation project component, and a 22.4082% member-related ownership share in the Mead-Marketplace project component. The Authority has sold, on a "take-or-pay" basis, the entire capability of its member-related ownership interest through transmission service contracts with the City and eight other members of the Authority. The City's entitlement shares in the three components are 3.6154%, 8.8781% and 5.9395%, respectively. The Authority will have two separate and independent ownership interests in this project: one interest for the Authority's members participating in the project, and one interest for Western which will provide the funding for that interest. The construction manager has estimated the construction costs for the project at $330 million, of which $63.5 million would be the Authority's member-related share. The Authority has set aside approxi­ mately $96 million of the proceeds of its Multiple Project Revenue Bonds, issued January 1990, for capital costs, reserves, interest during construction and other owner costs for this project. The schedule for the project indicates that construction will begin in the fourth quarter of 1993 for the transmission line and the second quarter of 1994 for the substations and switchyards. The estimated commercial operation date for the project is December 1995. See "Multiple Project Revenue Bonds." Mead-Adelanto Transmission Project. In connection with the Mead-Phoenix Transmission Project, the City, certain members of the Authority and other utilities have undertaken the Mead-Adelanto Transmission Project. The Mead-Adelanto Transmission Project consists of a 202-mile, 500 kV AC transmission line that will extend between a southwest terminus at the existing Adelanto Substation in southern California and a northeast terminus at Marketplace Substation, a new substation to be located approximately 17 miles southwest of Boulder City, Nevada. By connecting to Marketplace Substation, the new line will interconnect with the Mead-Phoenix Transmission Project and the existing McCullough Substation in southern Nevada. The new line will have an estimated initial transfer capability of 1,200 MW. The Authority has executed an ownership agreement providing it with a total of a 67 .9 167% member-related ownership share in the project. The other owners of the line are M-S-R and the City of Vernon. The Authority has sold the entire capability of its member-related ownership interest, on a "take-or-pay" basis, through transmission service contracts with the City and eight other members of the Authority. The City's entitlement share is 9.1666%. The Authority will have two separate and independent ownership interests in this project: one interest for the Authority's members participating in the project, and one interest for Western which will provide the funding for that interest. The construction manager has estimated the construction costs for the project at $274.4 million, of which $186.3 million would be the Authority's member-related share. The Authority has set aside approximately $264.0 million of the proceeds of its Multiple Project Revenue Bonds, issued January 1990, for capital costs, reserves, interest during construction and other owner costs for this project. The contract to construct the transmission line was awarded on May 26, 1993. The schedule for the project indicates that modifications to the Adelanto Substation will begin in the fourth quarter of 1993 and that construction of the Marketplace Substation will begin in the first quarter of 1994. The estimated commercial operation date for the project is December 1995, which coincides with the scheduled completion of the Mead-Phoenix Transmission Project. See "Multiple Project Revenue Bonds." Adelanto-Lugo Transmission Project. The City, together with the cities of Azusa, Banning, Burbank, Colton, Glendale, Pasadena, Riverside and Vernon (all members of the Authority) are participating with other entities in studying alternatives for securing additional transmission capability between the existing Adelanto Switching Station owned by the LADWP and the existing Lugo Substation owned by Edison. These entities have executed the Adelanto-Lugo Transmisson Project Planning Agreement to study the alternatives, which include a new transmission line and various long-term transmission service arrangements with Edison and LADWP that would address transmission capability between Adelanto Switching Station and the point of delivery of each of such entities. If constructed, it is presently envisioned that the new transmission line would be 15 to 20 miles in length, and would operate at 500 kV. It is also expected that, to the extent its members participate in this project, the Authority will own and finance a portion of the project on behalf of its participating members, who would purchase transmission service from the Authority.

46 Multiple Project Revenue Bonds. In January 1990, the Authority issued $647,750,000principal amount of Multiple Project Revenue Bonds for the purpose of funding electric generation and/ or transmission projects undertaken by the Authority. The Authority intends that as a project progresses and Authority members indicate their interest in the transmission project, the requisite contracts will be executed to permit a portion of the proceeds of the bonds to be used for the project, with take-or-pay contracts for the interested Authority members. In October 1992, the Authority transferred approximately $96 million of proceeds to fund costs of the Authority's interest in the Mead-Phoenix Transmission Project. In October 1992, the Authority transferred approximately $264 million of such proceeds to fund costs of the Authority's interest in the Mead­ Adelanto Transmission Project. Other. The City, along with the cities of Azusa, Banning, Colton and Riverside, is evaluating the feasibility of the Lake Elsinore Pumped Storage Project and has received a FERC preliminary permit on behalf of itself and Azusa, Banning, Colton, and Riverside.

CERTAIN FACTORS AFFECTING THE UTILITY INDUSTRY The electric utility industry generally has experienced and is experiencing various problems, including increased competition, both in selling electricity and purchasing resources, increased attention focused on environmental protection issues, including increasing concernregarding potential health effects fromelectric and magnetic fields associated with appliances, computers, power lines and other electrical sources, and regulatory agencies that have restricted cost recovery from rates, thereby affecting the planning process of many utilities. The industry continues to face problems related to licensing procedures, litigation and other factors which may delay the construction and increase the cost of new facilities or limit the use of, or necessitate costly modification to, existing facilities. Although the City is generally not affected by the regulatoryapproval process associated with investor-owned utilities, it can be affectedby these activities to the extent that it participates in business arrangements with such utilities. It can be expected that these influences will continue to affect the City and its planning and that their overall effect will be to increase the cost of business for all utility companies.

SUMMARY OF THE INSTALLMENT PURCHASE AGREEMENT Purchase of the San Juan Unit 4 Project Pursuant to the Installment Purchase Agreement, the Financing Authority agrees to sell the San Juan Unit 4 Project to the City and the City agrees to purchase the San Juan Unit 4 Project from the Financing Authority. Title to all or any portion of the San Juan Unit 4 Project will pass to the City on the Acquisition Date.

Acquisition The Financing Authority agrees to acquire the San Juan Unit 4 Project pursuant to the Installment Purchase Agreement and appoints the City as its agent forthe purposes of acquisition of the San Juan Unit 4 Project. The City, as agent of the Financing Authority, shall cause the acquisition of the San Juan Unit 4 Project to be diligently completed. The City, as agent for the Financing Authority, shall have the right to make any changes to the composition and description of the San Juan Unit 4 Project, or of any component thereof, whenever the City deems such changes to be necessary and appropriate. The City is not, however, permitted to make any changes which alter the essential nature of the San Juan Unit 4 Project or impair the ability of the City to make 1993 Purchase Payments. Acquisition costs of the San Juan Unit 4 Project will be paid from the Acquisition Account. See "SUMMARY OF THE INDENTURE - Funds and Accounts." In the event that amounts in the Acquisition Account are insufficient to pay the costs of the San Juan Unit 4 Project in full, the City is nonetheless obligated to pay such costs in excess of amounts available in the Acquisition Account from its own funds, without diminution or postponement of amounts due to the Financing Authority or the Trustee,

47 including any 1993 Purchase Payment or Additional Purchase Payment, and without any right of reimburse­ ment from the Financing Authority.

1993 Purchase Payments; Additional Purchase Payments The 1993 Bonds are secured by, among other things, Project Revenues, which consist of 1993 Purchase Payments to be made by the City under the Installment Purchase Agreement. The Installment Purchase Agreement provides that the City shall make the 1993 Purchase Payments which, in the aggregate, shall be in an amount sufficient for the payment in full of all obligations to the owners of the 1993 Bonds from time to time Outstanding under the Indenture, including the interest components and principal components payable with respect to such 1993 Purchase Payments, less the aggregate amount of other moneys available forsuch payment pursuant to the Indenture. The 1993 Purchase Payments shall be paid to the Trustee, as assignee of the Financing Authority, from Surplus Revenues in the Qualified Obligations Account (described in "SECURITY AND SOURCES OF PAYMENT FOR THE 1993 BONDS - Electric System Flow of Funds") and deposited by the Trustee in the Purchase Payment Account. For the purpose of determining the amount to be deposited into the Qualified Obligations Account with respect to the 1993 Bonds in any month, each principal component of 1993 Purchase Payments shall accrue ratably over the 12 months immediately preceding the October 1 on which such principal component is due and each interest component of 1993 Purchase Payments shall accrue ratably over the six months immediately preceding the Interest Payment Date on which such interest component is due. The Installment Purchase Agreement also provides that the City shall, in addition to the 1993 Purchase Payments, make Additional Purchase Payments, which are to be paid to the Trustee, the Financing Authority or the United States Treasury Department upon demand by the Trustee or the Financing Authority, as the case may be.

Covenants of the City and the Financing Authority Certain other covenants by the City and the Financing Authority in the Installment PurchaseAgreement are summarized below: (i) The City will not create, assume or suffer to exist any mortgage, deed of trust, pledge, security interest, encumbrance, lien or charge of any kind upon the Electric System which impairs the City's ability to comply with the rate covenant set forth in the Installment Purchase Agreement. (ii) The City will operate and maintain the Electric System in accordance with all governmental laws, ordinances, approvals, rules, regulations and requirements and to keep the Electric System in good repair, working order and condition. (iii) The City and the Financing Authority will not invest the proceeds of the 1993 Bonds in a manner which would result in a loss of the exclusion from gross income for Federal income tax purposes of the interest on the 1993 Bonds. (iv) The City and the Financing Authority will comply with the applicable requirements of the Internal Revenue Code of 1986, as amended, necessary to maintain the exclusion from gross income for Federal income tax purposes of the interest on the 1993 Bonds. ( v) The City will keep, or cause to be kept, proper books of record and account, prepared in accordance with generally accepted accounting principles, in which complete and accurate entries shall be made of all transactions of or in relation to the business, properties and operations of the Electric System.

Events of Default; Remedies Each of the following eventsconstitutes an Event of Default: (i) the failure by the City to pay in fullany 1993 Purchase Payment, Additional Purchase Payment or other payment required under the Installment Purchase Agreement at the time and in the manner specified therein; (ii) the failure by the City to observe or

48 performany covenant, condition, agreement or provision in the Installment Purchase Agreement on its part to be observed or performed, other than as referred to in clause (i), or breach of any warranty by the City contained in the Installment Purchase Agreement, fora period of 60 days after written notice has been given to the City by the Financing Authority or the Trustee specifying such failure or breach and requesting that it be remedied; provided, however, in the reasonable opinion of the City if such failure or breach can be remedied but not within such 60 day period and if the City has taken all action reasonably possible to remedy such failure or breach within such 60 day period, such failure or breach shall not become an Event of Default forso long as the City shall diligently proceed to remedy it in accordance with and subject to any directions or limitations of time established by the Financing Authority or the Trustee; (iii) the filing by the City of a petitionin voluntary bankruptcy, forthe composition of its affairs or for its corporate reorganization under any state or federal bankruptcy or insolvency law, or making an assignment for the benefit of creditors, or admitting in writing to its insolvency or inability to pay debts as they mature, or consenting in writing to the appointment of a trustee or receiver for itself or the whole or any substantial part of the Electric System; (iv) the entering of an order, judgment or decree by a court of competent jurisdiction declaring the City insolvent, or bankrupt, or the appointment of a trustee or receiver of the City or of the whole of or any substantial part of the Electric System, or approvinga petitionfiled against the City seeking reorganizationof the City under any applicable law or statute of the United States or any state thereof, which order, judgment or decree shall not be vacated or set aside or stayed within 60 days from the date of the entry thereof; or (v) the assumption under the provisions of any other law for the relief or aid of debtors by any court of competent jurisdiction of custody or control of the City, which custody or control shall not be terminated within 60 days. Upon the occurrence of an Event of Default under theInstallment Purchase Agreement,and in each and everycase during the continuance of such Event of Default, the Trustee may take whatever action, at law or in equity, as may appear necessary or desirable to collect the 1993 Purchase Payments, Additional Purchase Payments and any other payments then due and thereafter to become due under the Installment Purchase Agreement or to enforce the performance and observance of any obligation, covenant, agreement or provision contained in the Installment Purchase Agreement. In addition, the Trustee may take whatever other legal action may appear necessary or desirable to enforce their rightsand the rightsof the owners of the 1993 Bonds. Notwithstanding the foregoing, no such action shall include any remedy of acceleration.

Amendment The Installment Purchase Agreement may not be amended except by the written agreement of the City and the Financing Authority, with the written consent of the Trustee pursuant to the terms of the Indenture. The Indenture provides that the Financing Authority shall not consent to any amendment, alteration or modification of the Installment Purchase Agreement, other than amendments which (i) cure ambiguities, supply omissions, or cure or correct a defect or inconsistent provision, (ii) clarify matters or questions arising under the Installment Purchase Agreement as are necessary or desirable and not contrary to or inconsistent with the Indenture, (iii) in the opinion of Counsel do not materially adversely affect the rightsof the owners of the 1993 Bonds, or (iv) with the written consent of the owners of the 1993 Bonds representing a majority in aggregate principal amount of the outstanding 1993 Bonds, exclusive of Financing Authority-owned 1993 Bonds. No such amendment, alteration or modificationshall be effective unless and until there shall have been filed with the Trustee an opinion of Counsel stating that such amendment, alteration or modification has been duly and lawfullyentered into by the parties thereto, is authorized or permitted by the Indenture and is valid and binding upon the parties thereto in accordance with its terms.

SUMMARY OF THE INDENTURE

Funds and Accounts The Indenture establishes a special trust fund for the 1993 Bonds which is comprised of the following accounts: the Purchase Payment Account, the Reserve Account and the Acquisition Account.

49 Purchase Payment Account. The Trustee is required pursuant to the Indenture to deposit into the Purchase Payment Account the following amounts: (i) on the date of initial issuance of the 1993 Bonds, from the proceeds of the sale of the 1993 Bonds, a specified amount of accrued interest; (ii) when received, the 1993 Purchase Payments made by the City pursuant to the Installment Purchase Agreement; (iii) after the Acquisition Certificate (as defined below) is filed for the San Juan Unit 4 Project, excess investment income transferred from the Reserve Account pursuant to the Indenture; (iv) pursuant to the Indenture, certain moneys transferred from the Acquisition Account; ( v) from time to time, moneys transferredfrom the Reserve Account to the extent that the amount available in the Purchase Payment Account on any Purchase Payment Date is less than the amount necessary to pay the principal and interest on any 1993 Bond on such date; (vi) amounts delivered to the Trustee by the Financing Authority for the payment of any redemption premiums pursuant to the Indenture; and (vii) other moneys received by the Trustee pursuant to the Installment Purchase Agreement required to be or accompanied by directions that they be paid into the Purchase Payment Account. The Trustee shall withdraw moneys from the Purchase Payment Account at such times and in such amounts as are necessary to make payments of the principal, interest and redemption premiums, if any; provided, however, that such payments shall be deemed made firstfrom investment income, if any, transferred to the Purchase Payment Account from the Reserve Account pursuant to the Indenture and investment income, if any, received with respect to moneys deposited to the Purchase Payment Account from the proceeds of the sale of the 1993 Bonds. The amounts deposited in the Purchase Payment Account from the proceeds of the sale of the 1993 Bonds, and the investment income therefrom, will be applied to the payment of interest on the 1993 Bonds as set forth in the Indenture. After a certificate (the "A cquisition Certificate ") , signed by the Public Utilities General Manager or his designee and stating, among other things, that the acquisition of the San Juan Unit 4 Project has been completed, is filed with respect to the San Juan Unit 4 Project, if, on the day after any Purchase Payment Date, the principal, premium, if any, and interest on the 1993 Bonds which became due and payable on or before such date have been paid in fulland there are moneys in the Purchase Payment Account not required for the redemption of the 1993 Bonds and the amount in the Reserve Account is less than the Reserve Requirement, the Trustee shall transfer from the Purchase Payment Account to the Reserve Account the lesser of (i) an amount of money which, when added to the amount of money in such Reserve Account, will equal such Reserve Requirement or (ii) all amounts on deposit in such Purchase Payment Account. In addition, after the Acquisition Certificate is filed, if, on the day after any Purchase Payment Date, the Reserve Requirement is satisfied and there are moneys on deposit in the Purchase Payment Account not required for the redemption of the 1993 Bonds and other than excess moneys in the Acquisition Account transferred pursuant to the Indenture, then the Trustee shall, at the request of the Financing Authority, transfer such moneys to the Financing Authority or apply such moneys to reduce the next succeeding 1993 Purchase Payment or Additional Purchase Payment payable by the City. Reserve Account. The Reserve Account is established with the Trustee as a reserve for payment when due of the principal and interest on the 1993 Bonds. See "SECURITY AND SOURCES OF PAYMENT FOR THE 1993 BONDS - Reserve Account." Acquisition Account. The Trustee is required pursuant to the Indenture to deposit into the Acquisition Account the portion of the proceeds of the 1993 Bonds specifiedin the Indenture. The Trustee is also required pursuant to the Indenture to transfer to the Acquisition Account moneys constituting investment income

50 transferred from the Reserve Account. See "SECURITY AND SOURCES OF PAYMENT FOR THE 1993 BONDS - Reserve Account." The costs or expenses of preparing, authorizing, issuing, selling and delivering the 1993 Bonds shall be paid from the Acquisition Account. Disbursement of moneys is to be made by the Trustee upon the receipt of a requisition signed by the Executive Director or his designee. The costs of acquisition of the San Juan Unit 4 Project shall be paid from the Acquisition Account. To the extent other moneys are not available for the purpose of paying the principal and interest on the 1993 Bonds, amounts in the Acquisition Account shall be transferred to the Purchase Payment Account and applied by the Trustee forsuch purpose. After the Acquisition Certificate is filed for the San Juan Unit 4 Project, the Indenture requires the Executive Director of the Financing Authority or his designee to direct the Trustee to transfer any moneys held in the Acquisition Account and not required for the payment of any remaining part of the cost of the San Juan Unit 4 Project, as stated in the Acquisition Certificate, to the Reserve Account to the extent the amount on deposit in such Reserve Account is less than the Reserve Requirement. Thereafter, the Indenture requires the Financing Authority to direct the Trustee to apply such moneys, at the Financing Authority's discretion, to (i) the expansion or enlargement of the San Juan Unit 4 Project, (ii) the betterment or improvement of the San Juan Unit 4 Project, (iii) the expansion, enlargement or improvement of the Electric System, (iv) transfersuch moneys to the Purchase Payment Account for the payment of interest, redemption of principal under certain circumstances, and purchases of 1993 Bonds on the open market under certain circumstances, or (v) any combination of the foregoing (i) through (iv).

Investment of Accounts All moneys held by the Trustee in the Acquisition Account and the Purchase Payment Account are to be invested and reinvested to the fullest extent practicable in Permitted Investments ( defined below) in accordance with the Indenture. Such deposits and investments shall mature not later than such times as shall be necessary to provide moneys when needed for payments to be made from such accounts and in any event not later than the final maturity of the 1993 Bonds. Notwithstanding the foregoing, moneys deposited in the Purchase Payment Account from the proceeds of the sale of the 1993 Bonds will be held in cash by the Trustee or will be invested and reinvested by the Trustee in obligations described in clauses (i) through (iv) of the definition of Government Obligations. Moneys in the Reserve Account are to be invested and reinvested by the Trustee to the fullest extent practicable in Permitted Investments which mature or will be available not more than 15 years from the date of investment. Permitted Investments ("Permitted Investments") shall include, except to the extent not permitted by the laws of the State of California: (i) Government Obligations; (ii) any of the following obligations of federal agencies not guaranteed by the United States of America: (a) debentures issued by the Federal Housing Administration; (b) participation certificates or senior debt obligations of the Federal Home Loan Mortgage Corporation or Farm Credit Banks ( consisting of Federal Land Banks, Federal Intermediate Credit Banks or Banks for Cooperatives); ( c) bonds of any federal home loan bank established under said act and stocks, bonds, debentures, participations and other obligations of or issued by the Federal National Mortgage Association, the Student Loan Marketing Association, the Government National Mortgage Association and the Federal Home Loan Mortgage Corporation; and bonds, notes or other obligations issued or assumed by the International Bank forReconstruction and Development; (iii) interest-bearing demand or time deposits (including certificates of deposits) in federal banks and banking associations ( including the Trustee) or State of California chartered banks, provided that in the case of a savings and loan association and a bank, such demand or time deposits shall be fully insured by the Federal Deposit Insurance Corporation, or the unsecured long term obligations of such savings and

51 loan association or such bank ( or the unsecured obligations of the parent bank holding company of which such bank is the lead bank) shall be rated in one of the two highest rating categories of Moody's or S&P; (iv) repurchase agreements entered into with financial institutions such as banks or trust companies organized under the laws of the State of California or national banks or banking associations, insurance companies or governmentbond dealers reporting to, trading with, and recognized as a primary dealer by, the Federal ReserveBank of New York and a member of the Securities Investors' Protection Corporation or with a dealer or parent holding company provided that: (a) the unsecured obligations of any financial institution shall be rated in one of the two highest rating categories of Moody's or S&P, or such financial institution shall be the lead bank of a banking holding company whose unsecured long-term obligations are rated in one of the two highest rating categories of Moody's or S&P; (b) the most recent reported combined capital, surplus and undivided profits of such financial institution shall be not less than $100 million; ( c) the repurchase obligation under any such repurchase obligation shall be required to be performed in not more than thirty (30) days or upon demand; and (d) the entity holding such securities shall have a valid and perfected first security interest therein for the benefit of the Trustee under the California Commercial Code or pursuant to the book entry procedures described by 31 C.F.R. 306.1 et seq. or 31 C.F.R. 850.0 et seq. and are rated in one of the two highest rating categories of Moody's or S&P; (v) bankers' acceptances endorsed and guaranteed by financial institutions described in clause (iv) above; (vi) obligations, the interest on which is excluded from federal income taxation under Section 103 of the Internal Revenue Code of 1986, as amended and which are rated in one of the two highest rating categories of Moody's or S&P; (vii) money market or mutual funds which invest solely in Government Obligations or in obligations described in the preceding clause (ii) of this definition or money market funds which are rated in the highest rating category by Moody's or S&P; (viii) units of a taxable government money market portfolio comprised solely of obligations listed in (i), (ii) or (iv) above; (ix) any investment which is made pursuant to an agreement between the Financing Authority or the Trustee or any successor Trustee and a financial institution or governmental body whose long term obligations are rated in one of the two highest rating categories of Moody's or S&P; (x) commercial paper of "prime" quality of the highest ranking or of the highest letter and numerical rating as provided for by Moody's or S&P, of issuing corporations that are organized and operating within the United States and having total assets in excess of five hundred million dollars ($500,000,000) and having an "AA" or "Aa" or higher rating for the issuer's debentures or other long­ term unsecured obligations, other than commercial paper, as provided for by Moody's or S&P and provided that purchases of eligible commercial paper may not exceed 180 days maturity nor represent more than 10 percent of the outstanding paper of an issuing corporation; (xi) any general obligation of a bank or insurance company whose long term debt obligations are rated in one of the two highest rating categories of Moody's or S&P; (xii) any other lawful investment for City funds under the Government Code of the State of California as amended from time to time; or (xiii) investment agreements with any corporation, including banking or financial institutions, the corporate debt of which is rated, at the time of investment, "Aa" or better by Moody's and "AA" or better by S&P.

52 "Government Obligations" means any of the following, to the extent noncallable by the issuer thereof: (i) obligations of, including specified portions thereof ( which may consist of specified portions of the interest thereon), or obligations, including specified portions thereof ( which may consist of specified portions of the interest thereon), the payment of the principal of and interest on which are unconditionally guaranteed by, the United States; (ii) bonds, debentures or notes issued by any of the following Federal Agencies: Banks for Cooperatives, Federal Land Banks, Federal Financing Bank or Federal National Mortgage Association (including Participation Certificates); (iii) public housing bonds, temporary notes, or preliminary loan notes, fully secured by contracts with the United States; (iv) bonds, debentures or notes issued by any Federal agency created by an act of Congress after the execution and delivery of the Indenture, the payment of the principal of and interest on which are unconditionally guaranteed by the United States; and (v) direct general obligations of, or obligations the payment of the principal of and interest on which are unconditionally guaranteed by, the State of California, or local agencies thereof. Obligations purchased as an investment of moneys in any account created under the provisions of the Indenture shall be deemed at all times to be a part of such account or subaccount and any profitrealized from the liquidation of such investment and any income or interest received on account of such investment shall be credited to, and any loss resulting from the liquidation of such investment shall be charged to, such account. In determining the amount in any fund or account established under the provisions of the Indenture, the value of investments credited to such fund or account shall be calculated at the lower of cost or par of such obligations (including accrued interest and brokerage commissions, if any); except that any investments having a maturity of more than 5 years from the date of investment shall be valued at least annually at the market value thereof. Except as otherwise provided in the Indenture, the Trustee shall sell at the best price obtainable or present for prepayment or transfer as provided in the next sentence any obligation so purchased as an investment whenever it shall be requested in writing by an Authorized Authority Representative to do so or whenever it shall be necessary in order to provide moneys to meet any payment or transferfrom any account held by it. In lieu of such sale or presentment for prepayment, the Trustee may, in making the payment or transfer from any account mentioned in the preceding sentence, transfer such investment obligations or interest appertaining thereto at its acquisition cost if such investment obligations shall mature or be collectable at or prior to the time the proceeds thereof shall be needed and such transferof investment obligations may be made in book-entry form.The Trustee shall not be liable or responsible formaking any such investment in the manner provided above or for anyloss resulting from any such investment. The Trustee may act as principal or agent in the acquisition or disposition of any investment.

The Trustee The Bank of New York Trust Company of California has been appointed the Trustee. The Indenture requires the Trustee to be a bank or trust company organized and doing business under the laws of the United States or any state thereof, authorized under such laws to exercise corporate trust powers and subject to supervision or examination by federal or state authority and, if required by law, qualified to do business in the State of California. Any successor Trustee shall have a combined capital and surplus of at least seventy-five million dollars ($75,000,000). The Trustee may at any time resign by giving written notice to the Financing Authority and by giving to the owners of the 1993 Bonds notice by mail. Upon receiving such notice of resignation, the Financing Authority, at the direction of the City (which direction shall not be unreasonably withheld), shall promptly appoint a successor trustee. If no successor trustee has been so appointed and accepted appointment within 60 days after the mailing of such notice of resignation, the resigning trustee or any owner of the 1993 Bonds may petition any court of competent jurisdiction for the appointment of a successor trustee. If at any time (i) the Trustee ceases to satisfy the eligibility requirements and fails toresign after written request by the Financing Authority or by any owner who has been a bona fide owner of a 1993 Bond for at least six months, (ii) the Trustee becomes incapable of acting, or shall be adjudged bankrupt or insolvent, or a receiver or conservator of the Trustee or of substantially all of its property shall be appointed or any public

53 officer takes charge or control of the Trustee or substantially all of its property or affairs for the purpose of rehabilitation, conservation or liquidation, or (iii) at such time as there is no Event of Default under the Indenture, the City shall determine to remove the Trustee, then the Financing Authority, with the written approval of the City (which approval shall not be unreasonably withheld), may remove the Trustee and appoint a successor trustee, or any such owner may petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor trustee. The owners of 1993 Bonds representing a majority of the aggregate principal amount of Outstanding 1993 Bonds may at any time remove the Trustee and appoint a successor trustee by an instrument or concurrent instruments signed in writing by such owners. Any resignation or removal of the Trustee and appointment of a successor trustee becomes effective upon the acceptance of such appointment by the successor trustee. The Trustee under the Indenture may appoint a paying agent (the "Paying Agent") forthe 1993 Bonds with the prior consent of the Financing Authority at the direction of the City. The Paying Agent is required to be a bank or trust company duly organized under the laws of the United States or any state or territory thereof and having a capital stock and surplus aggregating at least $10,000,000. Any Paying Agent may at any time resign by giving at least 60 days' written notice to the Trustee and the Financing Authority. Any Paying Agent may be removed at any time by an instrument filed with such Paying Agent and the Trustee.

Events of Default; Remedies The existence of an Event of Default under the Installment Purchase Agreement is an Event of Default under the Indenture. If an Event of Default happens and is continuing, the Trustee in its discretion may, and upon the written request of the owners of the outstanding 1993 Bonds representing not less than a majority of the aggregate principal amount of the unpaid 1993 Bonds shall, upon notice in writing to the Financing Authority and the City, pursue any available remedy at law or in equity to enforcethe payment of the principal of, interest and premium, if any, on the 1993 Bonds and to enforce the rights of the Trustee under or with respect to the Indenture; provided, that, such remedies shall not include any remedy of acceleration. All moneys received by the Trustee pursuant to any right given or action taken under the Indenture or held in any fund or account established by such Indenture are to be applied, after the payment of all fees, costs and expenses of the Trustee, in the following order: First: To the payment to the persons entitled thereto of all interest then due and unpaid on the 1993 Bonds, if the amount available is not sufficient to pay in full any interest maturing on the same date, ratably to the persons entitled thereto; Second: To the payment to the persons entitled thereto of the unpaid principal on the 1993 Bonds then due and payable on the 1993 Bonds, if the amount available is not sufficient to pay in full all the 1993 Bonds due on any date, ratably to the persons entitled thereto without any discrimination or preference; and Third: To the payment of interest on overdue installments of principal and interest, on a pro rata basis in the event that the available amounts are insufficient to pay all such interest in full. No owner of 1993 Bonds has any right to institute any suit, action or proceeding for any remedy under or upon the Indenture or the Installment Purchase Agreement or the 1993 Bonds unless (i) there has occurred and is continuing an Event of Default of which the Trustee has been notified; (ii) the owners of the Outstanding 1993 Bonds representing at least a majority ( determined pursuant to the Indenture) of the aggregate principal amount of the 1993 Bonds Outstanding thereof have made a written request to the Trustee (iii) said owners have afforded the Trustee 60 days to proceed to exercise its rights, remedies and powers under the Indenture or to institute the suit, action or proceeding in its own name and have offered indemnificationto the Trustee as provided in the Indenture; (iv) the Trustee has failedor refusedthereafter to exercise such rights, remedies and powers or to institute the suit, action or proceeding in its own name; and

54 (v) 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 1993 Bonds then Outstanding ( determined in accordance with the Indenture).

Defeasance The Indenture provides that the Financing Authority may pay and discharge the indebtedness on any or all of the Outstanding 1993 Bonds in any one or more of the following ways: (a) by paying or causing to be paid the principal of and interest and premium ( if any) on the 1993 Bonds, as and when the same become due and payable; (b) by irrevocably depositing with the Trustee, in trust, at or before maturity, money which, together with the available amounts then on deposit in the funds and accounts established with the Trustee pursuant to the Indenture and the Installment Purchase Agreement, is fully sufficientto pay such 1993 Bonds, including all principal, interest and premiums (if any); or (c) by irrevocably depositing with the Trustee or any other fiduciary, in trust, Defeasance Securities (as defined in the Indenture) in such amount as Bond Counsel or an Independent Accountant shall determine will, together with the interest to accrue thereon and available moneys then on deposit in the funds and accounts established with the Trustee pursuant to the Indenture and the Installment Purchase Agreement, be fullysufficient to pay and discharge the indebtedness on such 1993 Bonds (including all principal, interest and redemption premiums) at or before their respective maturity dates; and if such 1993 Bonds are to be redeemed prior to the maturity thereof notice of such redemption shall have been mailed pursuant to the Indenture or provision satisfactory to the Trustee shall have been made for the mailing of such notice then, at the written request of the Financing Authority, and notwithstanding that any of such 1993 Bonds shall not have been surrendered for payment, the pledge of the Project Revenues and other funds provided for in the Indenture with respect to such 1993 Bonds, and all other pecuniary obligations of the Financing Authority under the Indenture with respect to all such 1993 Bonds, shall cease and terminate, except only the obligation of the Financing Authority to pay or cause to be paid to the owners of such 1993 Bonds not so surrendered and paid all sums due thereon from amounts set aside for such purpose as aforesaid, and all expenses and costs of the Trustee. Any funds held by the Trustee following any payment or discharge of the Outstanding 1993 Bonds which are not required for said purposes shall be paid over to the Financing Authority.

Unclaimed Moneys The Indenture provides that any moneys held by the Trustee in trust forthe payment and discharge of the principal, interest and redemption price, if any, on the 1993 Bonds which remain unclaimed for one (1) year after the date when such payment has become due and payable, shall, at the request of the Financing Authority, be repaid by the Trustee to the Financing Authority, and the owners shall look only to the Financing Authority for the payment of the principal, interest and redemption premium, if any, on such 1993 Bonds.

Amendment The Indenture may be modified or amended at any time by a supplemental indenture, without the consent of any 1993 Bond owners, to the extent permitted by law, but only forany one or more of the following purposes: (a) to add to the covenants and agreements of the Financing Authority contained in the Indenture, other covenants and agreements thereafter to be observed, to pledge or assign additional security for the 1993 Bonds ( or any portion thereof), or to surrender any right or power therein reserved to or conferred upon the Financing Authority; (b) to make such provisions for the purpose of curing any ambiguity, inconsistency or omission, or of curing or correcting any defectiveprovision, contained in the Indenture, or in any other respect whatsoever, as the Financing Authority may deem necessary or desirable; ( c) to modify, amend or supplement the Indenture in such manner as to permit the qualificationof the Indenture under the Trust Indenture Act of 1939, as amended, or any similar federal statute in effect after the date of execution and delivery of the Indenture, and to add such other terms, conditions and provisions as may be permitted by said act or similar federal statute; ( d) to amend any provision of the Indenture relating to the InternalRevenue Code of 1986, as amended, to any extent whatsoever but only if and to the extent such amendment will not adversely affect the

55 exclusion fromgross income of interest on any of the 1993 Bonds under the InternalRevenue Code of 1986, as amended, in the opinion of Bond Counsel; or ( e) to facilitatethe issuance of additional obligations of the City pursuant to the Installment Purchase Agreement. Any other modificationor amendment of the Indenture may be made only with the writtenconsent of the owners of the 1993 Bonds representing at least a majority of the aggregateprincipal amount of the 1993 Bonds then Outstanding at the time such consent is given. No modificationor amendment may, however, be made to extend the maturity of or reduce the interest rate on any 1993 Bond or otherwise alter or impair the obligations of the Financing Authority to pay the principal, interest or premium (if any) at the time and place and at the rate and in the currency provided therein of any 1993 Bond without the express written consent of the owner of such 1993 Bond, and no amendment or modification shall reduce the percentages or otherwise affect the classes of 1993 Bonds issued pursuant to the Indenture the consent of the respective owners of which is required to effect any modification or amendment or, without its written consent thereto, modify any of the rights or obligations of the Trustee.

LITIGATION At the time of delivery and payment for the 1993 Bonds, the City Attorney and/ or the Financing Authority Counsel will certify that there is no litigation pending or, to the knowledge of the City and/ or the Financing Authority, threatened, questioning (i) the corporate existence of the City, or the title of the officers of the City to their respective offices, or the validity of the 1993 Bonds or the power and authority of the Financing Authority to issue the 1993 Bonds or (ii) the authority of the City to fix, charge and collect rates for the sale of power and energy by the City as provided in the Installment Purchase Agreement.

CREDIT RATINGS Duff& Phelps Credit Rating Co. has assigned the credit rating shown on the cover page hereof. Moody's Investors Service, Inc. and Standard & Poors Corporation have assigned the creditratings shown on the cover page hereof, with the understanding that upon delivery of the 1993 Bonds, a policy insuring the payment when due of the principal and interest on the 1993 Bonds will be issued by Financial Guaranty. Such ratings reflect only the views of such organizations and an explanation of the significance of such ratings may be obtained only from the agencies at the following addresses: Moody's Investors Service, Inc., 99 Church Street, New York, New York 10007; Duff& Phelps Credit Rating Co., 55 East Monroe Street, Chicago, Illinois 60603; and Standard & PoorsCorporation, 25 Broadway, New York, New York, 10004. There is no assurance such ratings will continue for any given period of time or that they will not be revised downward or withdrawn entirely by the rating agencies, if in the judgment of such rating agencies, circumstances so warrant. Any such downward revision or withdrawal of such ratings may have an adverse effect on the market price of the 1993 Bonds.

TAX EXEMPTION The Internal Revenue Code of 1986, as amended (the "Code") , establishes certain requirements which must be met subsequent to the initial issuance of the 1993 Bonds for the interest received by the owners of the 1993 Bonds to be and remain excluded from gross income for Federal income tax purposes. Noncompliance with such requirements could cause the interest received by the owners of the 1993 Bonds to be included in gross income for Federal income tax purposes retroactive to the date of initial issuance of the 1993 Bonds. These requirements include, but are not limited to, provisions which prescribe yield and other limits within which the proceeds of the 1993 Bonds are to be invested and require, under certain circumstances, that certain amounts be paid on a periodic basis to the Treasury Department of the United States of America. The City has covenanted in the Installment Purchase Agreement and the Indenture to maintain the exclusion of the interest received by the owners of the 1993 Bonds from gross income forFederal income tax purposes pursuant to Section 103 (a) of the Code.

56 In the opinion of Mudge Rose Guthrie Alexander & Ferdon, Los Angeles, California, and Rourke, Woodruff & Spradlin, a Professional Corporation, Orange, California, Co-Bond Counsel, under existing law, and assuming compliance with the aforementioned covenant, the interest received by the owners of the 1993 Bonds is excluded from gross income for Federal income tax purposes. Co-Bond Counsel are also of the opinion that the 1993 Bonds do not represent an interest in "specified private activity bonds" within the meaning of Section 57(a) (5) of the Code and, therefore, the interest received by the owners of the 1993 Bonds will not be treated as a specific preferenceitem forpurposes of computing the alternative minimum tax imposed by Section 55 of the Code. The interest on the 1993 Bonds owned by corporations will, however, be taken into account: ( 1) in determining the alternative minimum tax imposed by section 55 of the Code on 75 percent of the excess of adjusted current earnings over alternative minimum taxable income ( determined without regard to this adjustment and the alternative tax net operating loss deduction); (2) in calculating the environmental tax equal to 0.12 percent of a corporation's modified alternative minimumtaxable income in excess of a certain amount (generally $2 million) imposed by Section 59A of the Code; and (3) in determining the foreign branch profits tax imposed on the effectively connected earnings and profits ( with adjustments) of United States branches of foreign corporations by Section 884 of the Code. Co-Bond Counsel have not undertaken to advise in the future whether any events after the date of issuance of the 1993 Bonds may affectthe tax status of the interest received by the owners of the 1993 Bonds. No assurance can be given that future legislation, or amendments to the Code, if enacted into law, will not contain provisions which could directly or indirectly reduce the benefit of the exclusion of the interest on the 1993 Bonds from gross income for Federal income tax purposes. Although Co-Bond Counsel have rendered an opinion that the interest received by the owners of the 1993 Bonds is excluded fromgross income for Federal income tax purposes, an owner's Federal tax liability may be otherwiseaffected by the ownership or disposition of the 1993 Bonds. The nature and extent of such other tax consequences will depend upon the owner's other items of income or deduction. Co-Bond Counsel have expressed no opinion regarding any such other tax consequences. In the opinion of Co-Bond Counsel, the interest received by the owners of the 1993 Bonds is exempt from personal income taxes of the State of California.

UNDERWRITING The Underwriter has agreed to purchase all, but not less than all, of the 1993 Bonds at a price representing an aggregate discount of $643,802.50 from the initial public offeringprices set forth on the cover page hereof. The Underwriter may offer and sell the 1993 Bonds to certain dealers and others at prices lower than the initial public offering prices and the initial public offering prices may be changed from time to time by the Underwriter.

57 CERTAIN LEGAL MAITERS Legal matters incident to the authorization, issuance and sale of the 1993 Bonds are subject to the unqualified approving opinion of Mudge Rose Guthrie Alexander & Ferdon, Los Angeles, California, and Rourke, Woodruff & Spradlin, a Professional Corporation, Orange, California, Co-Bond Counsel. Said opinion in substantially the form attached as Appendix D will be delivered at the time of delivery of the 1993 Bonds. Co-Bond Counsel have undertaken no responsibilityfor the accuracy, completeness or fairness of this Official Statement or any other offering material related to the 1993 Bonds, and express no opinion with respect thereto. Alan R. Watts, Esq., of Rourke, Woodruff& Spradlin, serves as special counsel to the City for utility matters. Certain legal matters will be passed upon forthe City and the Financing Authority by the City Attorney and Financing Authority Counsel.

ANAHEIM PUBLIC FINANCING AUTHORITY

By Isl Elisa Stipkovich Executive Director

CITY OF ANAHEIM, CALIFORNIA

By Isl Tom Daly Mayor

By Isl James D. Ruth City Manager

By Isl Edward K. Aghjayan Public Utilities General Manager July 28, 1993

58 APPENDIX A Etectric Utility Fund Audited Financial Statements Ye arsEnded June 30, I 992, and 99/J

A-1 ftectric (In thousands) UTILITY FUND BALANCESHEETS June 30, 1992 ------June 30, 1991 Assets Utility plant: Production $21 7,667 $209,797 Transmission 13,052 15,357 Distribution ll 8.71 2 106,286 General 11,740 12,198 361 ,J 71 343,638 Less - accumulated depreciation (95,052) (84,1 36) 266,11 9 259,502 Constructionwork in progress 40,568 21 ,239 Nuclearfuel. at amortized cost 8,098 7,519 31 4,785 288,260 Restricted assets: Cash and investments 90,690 112.286 Other 729 1.168 91 ,419 l l 3,454 Currentassets: Cash and investments 99,366 36,093 Customerand other accountsreceivable , net 24,646 21 ,364 Prepaid purchased power 773 2,719 Accrued interest receivable 2, 102 1.867 Materials and supplies, at average cost 3,435 3,243 130,322 65,286 Other assets: Unamortizedbond refunding costs 18,729 20,839 Unamortized project costs 6,248 6,344 Unamortizeddebt issuancecosts 2,249 2,387 27,226 29,570 Total assets $563,752 $496,570

(Continued on following page)

A-2 81ectric (In thousands)

UnUTYFUND BALANCE SHEETS (CONnNUED) June 30, J 992 June 30, 1991 Equity, Liabilities and Other Credits

Equity: Beginningfund balance contributed by the City $ 14,629 $ 14,629 Retainedearnings 119,758 111,921 Total equity 134,387 126,550 Long-termdebt. less current portion 281 ,279 289.765 Totalcapitalization 41 5,666 416.315 Currentliabilities (payablefrom res trictedassets ): Currentportion of long-tenn debt 7,060 5,465 Accruedinteres t 4.125 3,514 Accounts payable 4,572 4,033 Tax-exemptcommercial paper 20,450 20,450 36,207 33.462

Current liabilities (payablefrom ent curr assets): Current portionof long-tenn debt 2,315 1,792 Accounts payable andaccrued expen ses 6,666 5,686 Obligations underreverse repurchase agreem ents 8,527 955 Customerdeposits 1,010 978 Power cost adjustmentbalancing account Rate stabilizationaccount 52,487 1,034 RestrictedSCE Liability account 7,014 lntermountainPower Agencyrefund account 2,786 7,603 80,805 18,048 Total currentliabilities 117,01 2 51 ,510 Otherli abilities anddeferred credits: Contributionsin aid of construction 23,548 22.734 Decommissioning reserve 7.526 6,01 1 Commitments andcontingen cies Totalequity, liabilitiesand other credits $563,752 $496,570

See accompanying Notes to Financial Statements.

A-3 8tectric (In thousands)

UnunFuND STATEMENTS oP INCOME t June30. 1992 June 30, 1991 ·;:;::' .. :::; :.;:·;.• ;:· ;·_·;·.:, ·'<'· ; ·< :-· ------Operatingrevenues: Sale of electricity ] 1'/'1i�'.st;1 $206,144 Provision forpower cost adjustment . ·. . I Provision forrate stabilization st 5,1 15 Other operating revenues �l.; t 871 Totaloperating revenues ��: 21 2, 130

Operating expenses: Cost of purchasedpower 127,730 Fuel used for generation + i:: 3,941 Other operations ·>}/f ; zzJli1 snr' 22,094 Maintenance l9,847{ 12,175 Depreciation ···;··.·:·. 1L106 10,028 Cancelled project costs \!969) Total operatingexpenses 175,968 Operating income .:··· ·:.·.. t1.69.�y 36,162 Otherincom e (expense}:

Interestincome 7,741 Interestexpense (16,494) (8,753) Net income $ 27,409

See accompanying Notesto Financial State ments.

(In thousands)

UnuTYFuND STATEMENTS oP CHANGESIN RETAINED EARNINGS June 30, 1991 Balanceat beginning of year · · .·· ·····.. · $ 92,261 Net income for the year 27,409 Transferto the General Fund theof City .··· ,!ii (7,749) Balance at end of year $1 11,921

See accompanying Notesto Financial Stat ements.

A-4 8tectric (Intho usands)

UTIUTY FUNDSTA TEMENTS OP CASH FLOWS June 30, 1992 June 30, 1991

Operating activities: Operating income s 27,695 s 36,162 Adjustments to reconcile opera ting income to net cash provided by operations:

Depreciation 11,106 10,028 Amortizationof nuclearfuel 2,934 3,459 Amortizationof cancelledproject costs 969 Amortization of debtcosts 3,206 3.336 Increase indecommissioning reserve 1.515 1,170 Changesin CUTTentassets and liabilities: Customerand other accounts receivable,net (2.820} 10,691 Prepaidpurc hasedpoYll'er l,946 (61 2} Materialsand supplies (1 92} 249 Accounts payable and accrued expenses 1,519 460 Customerdeposits 32 (92) Power costad justmentbalancing account Rate stabilizationaccount 51 ,453 1,034 lntennountain Power Agency refundaccount (4,817) (8.855) Test energybillings (3,635} RestrictedSCE LiabilityAccount 7,01 4 Total adjustments 73,865 17,233 Net cash providedby operations 101 .560 53,395

Capitaland related financingactivities: Proceedsfrom borrowings 45,039 Reduction oflong-term debt (7,258} (7.422} Interest paid (1 7,487} (1 6,661 } Transferto the General Fundof the City (8,695} (7. 749} Contributions inaid of construction 597 476 Debtissuance anddiscount costs (68} (2.285} Net cash providedby (used in) financing activities (32,91 I} 11.398 Investing activities: Capitalexpenditures (36.835} (32,955} Interest received 6,677 7,476 Increase inobligations underreverse repurchaseagree ments 7,572 955 Nuclearfuel expenditures (3,513} (2,435} Projectcosts (873} (584} Net cash used ininvesting activities (26,972} (27,543} Increase in cashand investments 41 ,677 37,250 Cash andinvestments at beginningof year 148,379 111,129 Cash and investmentsat end ofyear $190,056 $148,379

Schedule of noncashfinanci ngand investing activities: Contributionsin aid of construction s 697 S 1,620

Seeaccompanying Notesto Financial Statements.

A-5 8ectric Note I Summaryof Production 30 years Si&nificantAccou ntina Policie, Utility Fund Transmission and Notes to distribution plant 20 to 75 years Financial Basisof Accountin6 The Electric Utility Otherplant Statements Fund (the Electric Utility) of the City of and equipment 5 to SO years Anaheim (the City) wasestabl ishedJune Depreciationon contributed assets is charged 30, 1 971 , at which time theportion of the directlyto Contributions inaid of construc­ City's General Fund equityrelati ng to tion. During fiscal year 1992, $480,000 was electric system operationswas transferred chargedto Contributionsaid. in to Electric Utility equity. Thefinancial statementsof theElectric Utility are presented in conformitywith generally Cashand In vestments The City pools idle accepted accounting principles and cash fromall funds for thepurpose of accounting principles andmethods pre­ increasing income through investment scribed by the Federal Energy Regulatory activities. Investmentsare carried at cost, Commission (FERC). The Electric Utility is which approximatesmarket va lue. Interest not subject to the regulations of the FERC. income on investments is allocatedto the various funds of the City onthe basis of average daily cash andinvestment balances. Utility Plant andDepre ciation Thecost of additions to utility plantand replacement For purposesof the Statements of Cash of retired units is capitalized. Utility plantis Flows, the Electric Utility considers cash recorded at cost, includingcapit alized and investments, including restricted interest,or in thecase of contributed plant, amounts, to becash equivalents. Cash at fai r marketval ueat thedate of the equivalents are cash and highly liquid contribution, except that assets acquired investments whichare included in the prior to July I , 1977 are recorded at Electric Utility's share of the City's pooland appraisedhist orical cost. Cost includes in accounts held by the fiscal agents. labor;materi als; allocated indirect charges such asengineering, supervision, construc­ Revencu Recognition To provide a better tion andtransportation equipment, matching of costsand revenues, the Electric retirement plancon tributions andother Utility accrues estimated unbilled revenues fr inge benefits; and certainadm inistrative forenergy sold butnot billed at theend of a and general expenses. Thecost of relatively fiscal period; previously, revenueswe re minorreplacements is included in mainte­ recognized whenbilled to customers. nanceexpense . Thenet book value of assets Residential and smallercommercial ac­ retiredor disposedof, net of proceeds, is counts are billed bimonthly, and all others recorded in accumulated depreciation. are billed monthly. Depreciation of utility plant is provided by The ElectricUtility's Rates, Rules and the straight-linemethod based on the Regulationsprovide forthe use of a Power followingesti mated service lives of the Cost Adjustment (PCA) billing formula properties: which, whenin use, would be included in

A-6 customer billings to reflectvariat ions in the theagent for SONGS participants. Federal cost of powerto the Electric Utility. 1ne regulationsalso requirethe Electric Utility PCA provides foradj ustmentsto revenues to provide forthe future costs of decommis­ from the sale ofelectricity forove r collec­ sioning SONGS. Decommissioningcosts tion or under collection ofrev enues result­ are charged to otheroperating expenses ing from differences betweenthe Electric and arepro vided forover the remaining life Utility's actual cost of power and the of thepla nt. amount billed to customers th rough the billing formula.These over or under collec­ tions would berecorded in thePCA Deht Issuance Costs Debt issuancecosts balancingaccount until theyare refunded are deferred and amortized over the lives of to, or recovered from, utility customers. the related bond issues on a basiswhich approximatesthe ectiveeff interestmethod . EffectiveOctober 1 , I 989. theElectric Utility electedto recoverall powercosts in base rates and set thePCA at a zerobalance. BondRe funding Costs Bondref unding Shouldsubs t.antial changes inpower costs costs are deferredand amortized overthe occur, the ElectricUtility may seek City lives of the related bond issueson a basis Councilapproval to activatethe PCA. whichappro ximates theeff ective interest On January 28, 1 986, a wholesalerate method. refund policy (Policy) which included establishinga Rate Stabilization Account Pension Plan All full-timeCity employees (RSA) was adopted as partof the Electric are members of the Stateof California Utility's Rates, Rules and Regulations. The Public Employees' RetirementSystem Policy provides for establishment of a rate, (PERS). TheCity's policy is to fund all in cents perkilo watt-hourof sales,by which pensioncosts accrued; suchcosts to be fundsare transf erred from the RSAto the fu nded aredetermined annuallyas of July l Electric Utility RevenueFund . Thistransf er by thePERS' actuary. is made on a monthlybasis.

Vac ation andSiclc Pay Vacation and sick NuclearFwl 1ne Electric Utility amor­ payfor all City employeesare paid by the tizes the cost of nuclearfu el to expense General Benefitsand Insurance Fund of the using the "asburned" method. In accor­ City. TheGeneral Benefits and Insurance dance with theNuclear Waste Disposal Act Fund is reimbursedthrough payroll charges of l 982, the Electric Utility is charged a fe e to the Electric Utility basedon estimates of forthe dis posalof nuclear fue l at the rateof benefits tobe earned during year.the onemill per kWhon theElectric Utility's Vested vacation and sick paybenefits are shareof electricity generated by theSan accruedin theGeneral Benefitsand Insur­ Onofre Nuclear Generating Station, Units 2 anceFund and amounted to $1 ,015,000 and3 (SONGS). TheElectric Utility pays and$978, 000 forthe El ectric Utility at June the fe e quarterlyto Southern California 30, I 992 andI 991, respectively. Edison Company(Edi son) which is acting as

A-7 Transfer• to the Cerwrol ofFund theCity purchasesrel ated to theownership interest Article XII of the City Chartervides pro that in SONGS. Thebalance outstanding at transfersto the General Fundof theCity June 30, l 992and 1991 totaled shall notexceed 4% of thegross revenue of $20,450,000. The interestrates on this theprior year. Such transfers are notin lieu debt at June 30, 1992 ranged between of taxesand arerecorded asdistributions of 2.65% and 3.35% with maturities ranging retainedearnings . from 8 to 71 days. TheEl ectric Utility has obtained a $2 I million revolvingcredit agreement, whichcan be used in theevent Reclos•ificatiom Certainreclassifications thatthe commercial pa r cannot be have beenmade to the I 991 financialstate­ pe refinancedas it matures.During fiscalyear mentsto conformto the992 l presentat ion. I 992, therewere no amounts borrowed from the revolvingcredit agreement. Note 2 Operatin1 Expenses

Note 5 Jointly-Owned UtilityProject

Operating expensesshared with theWate r Utility amountedto $1 7,767,000 and The ElectricUtili ty owns a 3.1 6% interest $18,01 3,000 forthe fiscal years ended June as atenant in commonin SONGS. The 30, 1992 and199 1,res ctively, of which pe otherpart icipantsin Units 2 and3 are $14,21 3,000 and $1 4,410,000 were Edison, 75.05%; San Diego Gas &- Electric allocatedto the Electric Utility. Company, 20%; andthe City of Rjverside, Theshared expenses areallocated to each I . 79°.k.Units 2 and3 becameoperational Utility based on estimates of thebenefits on October9, 1 983 and April l, 1984, each Utility derives fro m thosecommon respectively. The Electric Utility'scumula­ expenses. tive share of constructioncosts , which amounted to $183, 745,000 at June 30, Note 3 Unamortized Project Costs l 992, was included in Utility plant at June 30, l 992. TheElectric Utility recorded depreciation relatedto SONGS of 1heCity plansto participate invarious power $7,422,000 and $6,563,000 forthe fiscal generationproj ects with otherage ncies. years ended June 30, 1 992 andl 991 , Unamortizedproject costs represent advance respectively. The ElectricUtility made paymentsto participatingagencie s for provisions during fiscalyears l 992 and 1991 preliminaryengineering and environmental fordisposal costs of spent nuclearfu el of impact studies forthe related projects. $409,000 and $482,000, respectively, and forfu turedecommissioning costs (see Note

Note 4 Short-Term Debt I) of$985,000 and $1 ,169,000, respec­ tively. Thesecosts along with the Electric

Utility's share SONGSof operating and The Electric Utilityhas outstanding Rev­ maintenance costs have been included in enue Anticipation Notes in the formof Operating expenses forfiscal year I 992. short-term tax-exempt commercial paper forthe purposeof financingnuclear fu el

A-8 Note 6 Loni-Term Debt

TheElectric Utility ia indebted u follows: June SO, 1992 JuneSO, 1991 Electric Revenue Bonds, Issueof 1972, TIC4.9263%, datedApril I, 1972, soldMarch 28, 1972 in the amountof$8,000,000 at rates rangingfrom 2.0% to7.0%, maturingserially toJuly l, 1992 in a

principal installmentof$675,000; total debt service of$682,000to maturity $675,000 $1 ,300,000

ElectricRevenue Bonds, Issueof t 976, TIC 6.07%, dated May I, 1976, soldApril 27, 1976 in the amountof$6,000,000 at rates rangingfrom 5.0% to 8.0%, maturing seriallyto May l, 2006 in

annualprinci pal installmentsranging &om $1 50,000 to $400,000;total debtservice of$6, 381 ,000 to maturity 4, 175,000 4,325,000

Electric Revenue Bonds, Issue A of 1983, TIC 9.3051 %, datedApril l, 1983, sold April 27, 1983 in the amountof$1 0,000,000 at ratesranging &om 8.0% to 9.0%, ofwhich $900,000maturing serially October J, 1995 through 1998 and$8,460,0 00 of termbonds maturingOctober 1, 2007 were advance refunded onMarch 31 , 1 986;the remaining bonds mature onOctober l, 1993 and October 1, 1994 inannual principal installments of$300,000 and$34 0,000, respectively; total debtservice of $745,000 tomaturity 640,000 640,000

ElectricRevenue Bonds, IssueB of 1983, TIC 9.3051 %, datedApril I, 1983, soldApril 27, 1983 in the amountof$40,000,000 at rates ranging&om 8.0% to 9. 0%, of which $3,600,000 maturing serially October I, 1995 through 1998 and $33,840,000 of termbonds maturing October I, 2007 were advance refunded onMarch 31, I 986; theremaining bonds mature onOctober I , 1993 andOctober 1, 1994 inannual principal installmentsof$1 ,200,000 and $1 ,360,000, respectively;total debt serviceof$2 ,98l ,OOO to maturity 2,560,000 2,560,000

Electric Revenue Bonds, Issue C of 1983, TIC 9 .I 023%, dated April I , 1 983, sold.April 27, 1983 in the amountof$80,400,000 at ratesranging &om 5. 25% to 9.0%, ofwhich $5, 650,000 maturingserially October 1, 1995 through 1998 and$52,500,0 00 of termbonds maturing October I, 2007 were advance refundedon March 31 , 1 986; theremaining bonds mature serially through OctoberI , I 994 inannual principal installmentsranging &om $2,350,000 to$2,850 ,000; total debt service of $8,253,000 to maturity 7,400,000 I 0,000,000

ElectricRevenue Bonds, Issueof 1986, TIC 7.006%, datedMarch I, 1986, soldMarch 4, 1986 in the amountof$1 29,275,000, of'M'lich(l ) $55,270,000 at rates of 5.25% to 6.9%mature serially through October l, 200 I inannual principal installmentsranging from $1 ,210,000 to $8, 955,000, (2) $30,665,000 at rates of5.75% are termbonds maturing October I, 2004, subject mandatoryto redemption from October I , 2002 to October I , 2004 in annual principal installmentsranging from $9,590,000 to $10,875,000, and(3) $37,885,000 at rates of5.75% are tenn bonds maturing October I , 2007, subject to mandatory redemption &omOctober I , 2005 toOctober I , 2007 in annual principal installmentsranging &om $1 1 ,550,000 to $1 3,600,000; total debtservice of $199,669,000 to maturity 123,820,000 125,030,000

A-9 Note 6 Loni-Term Debt(continued)

The Electric Utilityi8 indebted u follows: June30, 1992 June30, 199 1 ElectricRevenue Bonds, Second Issueof 1986,TIC 6.7737% datedOctober 15, 1986, soldNovember 25, 1986 in the amountofS77,780,000, of which (I ) S41 ,030,000 at rates of 4.3% to 6.5% man.re seriallythrough October l,2002 in annualprincipal installmentsranging from S2.745,000 to $4,960,000, and(2) S30,l 50,000 at rates of 6.75% areterm bonds maturing October 1, 2007, subjectto mandatory redemptionfrom October1, 2003 to October 1, 2007 in annualpri ncipal installmentsranging from S5, 275,000 to $6,81 5,000; totaldebt service of$1 1 4,881 ,000to matlrity 71 ,180,000 73,790,000

ElectricRevenue Bonds, Issue of l 991 , dated and soldMay 29, 1991 in theamount ofS3,434,000, at rates of 6.50% maturing seriallyfrom October l ,1999to October 1 •2004 in annualprinc ipal installmentsranging from Sl 40,500 to S735,000; total debt service ofS5,565,000 to maturity 3,434,000 3,434,000 Total revenuebond debt S21 3,884,000 $221 ,079,000

Note Payable to Internal Service Fund of the City, 8.95%, issued October 13, 1984, in theamount of SI ,342,000, semi-annualprincipal and interest payments ranging from S55,000to SI 06,000 through October 31 , 2003; total debt serviceof Sl ,606,000 tomaturity 1,047,000 1,110,000

ElectricSystem Certificatesof Participation (CombustionTurbine PeakingPlant) , TIC 7.313%, dated September 15, 1989, sold October 12, 1 989 in theamount of$44, 336,l 45.l Oat rates ranging from 6.20% to 7.20%, of which (I ) Sl 8,730,000 mature serially from October I, 1992 ttroughOctober I, 2000, (2) S5,356,l 45.I O Capital AppreciationCertificates mature seriallyfrom October 1, 2001 through October I, 2005, (3) S6,000,000 at rates of7.20% areterm certificates maturingOctober 1, 2009, subjectto mandatoryredem ptionfrom October l, 2006 to October I, 2009 inannual principal installmentsranging from Sl ,350,000 to SI ,660,000, and(4 ) SI 4,250,000 at rates of 6.50% are termcertifica tes maturingOctober 1, 201 1 , subject to mandatory redemptionfrom October I , 2006 to October I, 21 11 in annualprincipal installments ranging from SI ,495,000 toS3,950,000; total debtservice of$82, 750,000 tomaturity 44,336,000 44,336,000

Electric SystemCertificates of Participation (PublicUtilities Building),TIC 7.1 5%, datedNovember 1, 1990,sold November 12, 1990 in theamount of$41 ,605,000at ratesranging from 5.85% to 6. 75%, ofwhich (1 ) $4,600,000 mature serially from I,October 1994 through October l, 2005, (2) S5,870,000 at ratesof 6. 75% areterm certificatesmaturing October I , 20 I 0, subject tomandatory prepaymentfrom October 1 , 2006 to October I , 20 I O inannual principal installments rangingfrom S940 ,000 to SI .425,000, and(3 ) S31 ,l 35,000 at rates of6.75% areterm certificates maturing October I, 2022, subject to mandatoryprepa yment fromOctober I, 201 1 to October 1, 2022 i, annualprincipal installments rangin g from $30,000 to S3,860,000; total debt serviceof SI 05,91 5,000 to maturity 41 ,605,000 41 ,605,000 Total otherlong-term debt 86,988,000 87,051 ,000 Total long-term debt 300,872,000 308,1 30,000

Less: currentportion 9,375,000 7,257,000 bonddisc ounts 10,21 8,000 11,1 08,000 $281 ,279,000 $289,765,000

A-10 Note 6 Lona-Term Debt (continued)

Annual debt9Cl'Vice requirementsat June 30, 1992 to maturity are follows:u TotalAll --- Revenue Bond Debt --- -- Other Lons-Tenn Debt -­ Lons-Term FiscalYear Principal Interest Total Principal Interest Total Debt 1993 $ 7,705,000 $ 13,315,000 $ 21,020,000 $ 1,670,000 $ 5,437,000 $ 7.107 ,000 $ 28, 127,000 1994 8, 1 45,000 12,806,000 20,951 ,000 1,78 9,000 5,328,000 7, 1 1 7,000 28,068,000 1995 8,765,000 12,226,000 20,991 ,000 I.899,000 5,209,000 7.108,000 28,099,000 1996 9,385,000 11,629,000 21,01 4,000 2,056,000 5,081 ,000 7,1 37,000 28,151 ,000 1997 9,970,000 11,01 8,000 20,988,000 2,244,000 4,943,000 7,1 87,000 28,1 75,000 Thereafter 169,91 4,000 64,281,000 234,1 95,000 77,330,000 77,283,000 154,61 3,000 388,808,000 $213,884,000 $ 125,275,000 $339.1 59,000 $ 86,988,000 $1 03,281 ,000 $190,269,000 $ 529,428,000

Current interest costs of$968,000and from 5.25% to 9.0%. The excess of the $996,000have been included in Construc­ amount required to advance refundthe tion work in progress forfiscal years ended I 982 Bondsover the carryingva lueof those June 30, 1992 and 1991 , respectively. bonds at the refunding date amounted to $ 7, 56 7, 000. In accordance with industry In accordance withthe bond resolutions, a practices, this amount is being deferred and reservefor maximum annual debt service amortized over the life of the IssueC of has beenestablished and areserve for I 983 Bondsusing the effective interest renewaland repla cement is beingac cumu­ method.At June 30, 1992, outstanding lated equal toa maximum of2% of the principalof the refunded I 982 Bonds depreciated bookvalue of the utility plant in totaled $48,600,000. Over the life ofthe service. Issue C of I 983 Bonds, the Electric Utility The bond issuesoutst andingat June 30, expects to save approximately $1 2,297,000 I 992 requirethe establishment of a Bond in debt service as compared to theref unded Service Account by accumulating monthly 1 982 Bonds. one-sixth of the interest which will become On March31 , 1 986, the Electric Utility due and payable on the outstandingbonds defeased a portion of the Electric Revenue within thenext six months and one-twelfth Bonds, IssuesA. B andC of 1 983, in the of theprincipal amountwhich will mature principalamounts of$9,360,000, and bepayable on the outstanding bonds within the nexttwelve months. $37,440,000 and $58, 1 50,000, respec­ tively, at rates ranging from 8.3% to 9.0%, On June I, 1983, the Electric Utility with a portionof thepr oceedsfro m thesale defeased Electric Revenue Bonds, Issue A of $l 29,275,000 of Electric Revenue of 1 982, in the aggregate principalamount Bonds, Issueof I 986, at ratesranging from of$18,000,000 at rates of8.0%, and Issue 5.0% to 6.9°k. The excess of the amount B of I 982, in the principalamount of requiredto advance refund the I 983 Bonds $52,000,000 at rates ranging fro m 7.5% to over the carrying val ue of thosebonds at 1 1 .5%, with a portionof the proceedsfro m the refunding date amounted to the sale of $80,400,000 Electric Revenue $21 ,476,000. This amount is being deferred Bonds, IssueC of! 983, at rates ranging and amortized over the life of the I 986

A-11 Bondsusing theeff ective interestme thod. 3.8% to 6. 75%. Theexcess of theamount At June30, 1992, outstandingprincipal of requiredto advancerefund the I 980Bonds the refunded I 983 bondsto taled overthe carrying value of those bonds at $104,950,000. Overthe lif e of the 1 986 the refunding date amountedto Bonds, the Electric Utility expectsto save $9,693,000. This amount is beingdef erred approximately $10,849,000 in debt service andamortized over thelif e of the Second ascompared to therefunded l 983 Bonds. Issue of 1 986 Bonds using the effective interestmethod . At June 30, 1 992,out­ On November25, 1 986, theElectric Utility standingprincipal of therefunded 980I defeased a portionof theElectric Revenue bondstotaled $70,625,000. Bonds, Issue of 1 980, in thepr incipal amount of$72,775,000, at ratesof 8.0%, Overthe life ofthe Second Issueof 1 986 with a portionof the proceeds fro m the sale Bonds, the Electric Utility expectsto save of$77, 780,000 of Electric Revenue Bonds, approximately $1 0,81 8,000 in debt service Second Issueof I 986, at rates rangingfro m ascompared to the refunded 1980 Bonds.

Restrictedcash and inveatmenta includereserved amounts, aswell asundisbuned bond proceeds, u follows: June30, 1992 June30, 1991 Held by Fiscal Agent: Bond Reserve Fund $22,803,000 $22,344,000 BondService Fund 690,000 662,000 Certificatesof Participation Proceeds 24,907,000 48,11 9,000 Heldby CityTreasurer: BondService Account 10,494,000 8,274,000 Renewaland Replace mentAccount 9,119,000 8,987,000 Decommissioningand fuel reserves 20,603,000 19,867,000 Restrictedbond proceeds 1,222,000 3,596,000 Restrictedrebate 852,000 437,000 Otherrestricted assets 729,000 1,1 68,000 $91 ,41 9,000 $1 1 3,454,000

"TheElectric UtiHtycash expenclituresfor interestexpensefortheyearsendedJune30, I 992and199 1 were$1 4,572,000and$1 5,1 96,000,respectiwly.

Note 7 Pension Plan Note 8 Self-InsuranceProaram

TheCity has a contributorypension plan TheElectric Utility is part of the City's self­ forits fu ll-timeemployees underthe State insuredwork ers' compensationand general of CaliforniaPublic Employees' Retirement liability program. The liability forsuch System. Information is not available claims, including claims incurredbut not separatelyfor the Electric Utility asto the reported, is transferred to the City in cost of benefitsfu nded, the actuarially consideration of self-insurancepr emiums computed presentva lueof vested andnon­ paid by theElectric Utility. Effective July l, vested accumulated planbenefits, the I 986, the City became self-insured. Costs relatedassumed rates ofretum used, and relatingto thelit igationof claims are

theactuarially computed valued of vested charged to expense asinc urred. benefits overthe related pension fund assets.

A-12 Note 9 Refund, U.S. 2ovemment securities $ 1,260,000 U.S. 20vemmentagency seci.rities 36,891,000 Medium-term corporate notes 14,296,000 OrangeCounty Pool 14,827,000 Since fiscalyear I 986 the Electric Utility Localagency investment hasreceived refundsfro m Edison totaling fund (state pool) 7, 171 ,000 $1 09,324,000. These refunds have been Controlled by CityTr easurer 74,445,000 placed in theRSA. TheCity received Amounts investedby refunds fro m Edison during the 1 992 fiscal fiscalagents 97,790,000 Reverserepurchase agreements 8,527,000 yearof$ 67,l 97,000. At June 30, 1992 and Totalinvestments $180, 762,000 1991,totaJ principal and interest in the RSA amounted to $52,487,000 and $1 ,034,000, respectively. The City intends to refund anyfu ture refundsto Electric Utility Fiscalagents on behalfof the City hold and customers in the form ofreductions to invest fu nds fro m long-term debt issuances. future rate increases through the Rate Fiscal agents aremandated by bond inden­ ture as to the typesof investments in which Stabilization Policy (see Note 1 ) . proceeds can be invested. Investments by These refunds have been reflected in the fiscal agents predominantly consist of U.S. Electric Utility's Financial Statements as Government securities heldin bookentry part of the RSA form.

Amounts invested by fiscal agents include Note 10 Cash and lnvestmenta investments thatare insured or registered or for which the securities are held by the City'sagents in the City's name. At June 30, I 992, the carrying amount of the Electric Utility'sshare of the City's pooled depositswas $9,294,000. Of this Note 11 amount, $9,007,000 is insured or Commitment& and Contin1encie1 collateralized with securities held by the City or its agent in the City's name. The remaining$287, 000 is collateralized with Tah orPay Contract• 1ne City has securities held by the pledging financial entered into agreements with the institution's trustdepartme nt in the City's lntermountain Power Agerx:;y (IPA), a name. political sulxiivision theof State of Utah, Utah Power &- Light (UP&-L) and the AtJune 30, 1992, all ofthe City's pooled Southern CaliforniaPublic Power Authority investmentswere insured or registeredwith (SCPPA), a public entity organized under the exception of amountsinvested by fiscal the laws of the State of California.The City agents. has agreed with IPA and UP&-L, pursuant A summaryof the Electric Utility's partici­ to powersales contra cts, to purchase pation in the City's pooled investments is 1 3.225% of the generation output oflPA's allocated based on the overall percentage I ,600 megawatt two unit coal-fueled participationas follows: generating station (the Station) in central Utah.Unit I of the Station became

A- 13 available forcommercial operation June l 0, TheCity doesnot expect these pay ments I 986. Unit 2 was commerciallyavailable tohave an adverse impacton theElectric May I , I 987. Cost of constructionof the Utility's rate structure in thatsuch pay­ Stationand related transmissionlines, mentsare in lieu of paymentswhic h would including the SouthernTransmission have beenmade to purchasepowe r from System (STS} fro m Utahto Southern Edison. The City projects thatthere will be California,was financed principallythrough substantial long-term power supplycost sales oflPA's power supply revenue bonds savings fro m thetake orpay contracts andpay ments in aid of constructionby compared to purchases fromEdison. SCPPA. TheCity has agreed withSCPPA to purchaserights to 1 7.6% of t.hetransmis­ On July I , I 988,the Certificate of sion capacityin the STS. Completion of the initial facilities of the lntermountain Power Project (IPP} was Thecontracts constitute anobligation of executed and as are sult the surplus in IP A's the City to make payments solelyfrom the ConstructionFund was transferredto IPA's revenuesoft.he Electric Utility. These General Reserve Fund and willbe allocated payments, whichare basedon the City's share of IPA's debt service requirements to thevar iousparticipants based on the andproduction costsand SCPPA's debt Plan for the Dispositionof Surplus Funds. TheElectric Utility's share of thesesurplus service requirements, beganin July I 986, fu nds wasappro ximately $35.8 million the month in which Unit I of the Station whichthe Electric Utility is usingto reduce andthe STS began commercial operation. future IPP purchased power costs. These paymentswill beconside red a Cost of purchased power. As of June 30, 1992, IPA hasissued $5.3 billion in revenuebonds At June 30, 1992, theElectric Utility's remainingshare of thesesurplus fu ndswas andreve nue bondanticipation notes to finance constructionof the Stationand approximately $2.8 million,which the Electric Utility 'Nill touse reduceIPP purchased SCPPA hasissued $1 .1 billion in revenue bonds andrevenue bond anticipation notes powercosts over nextthe two years. to financepayments in aid of construction. LJtiaation A numberof claims andsuits are The ElectricUtility's projected minimum pendingagainst the Cityfor alleged damages paymentsfor purchased powerdue under to pe�ns and propertyfor and other alleged thesetake or pay contrac ts forthe next five liabilitiesarising out of matters usually yearsare as follows: incidental to theoperation of a utility suchas FiscalYear theelectric system oft.he City. In opinionthe of management, theexposure under these 1993 $67,194,000 claims and suitswould notmate riallyaff ect 1994 67,359,000 the financial position ofUtility theElectric as 1995 67,440,000 of June30, 1992. 1996 66,356,000 1997 66,013,000

A- 14 Rote Chalknau and OtMr Actiom The Capital &pcnditurw 1be Electric Cityhas filedseveral complaintsagai nst Utility's budget for fiscal 1992-93 provides Edison challenging various rate increases for capital expenditures of approximately and a suit alleging thatEdison has violated $27,000,000, ofwhich $6,743,000 is certain antitrust laws. Theseactions could expected to befunde d fro m electric rev­ potentiallyresult in refunds or paymentof enue bond and certificate of participation damagesto the Electric Utility; however, proceeds. noopinion can be rendered at this time as to the probable outcome of theseactions .

A- 15 /ndependent To theHonorable City Council Those standardsrequire that weplan and performthe audit to obtainreasonable Auditors' City of Anaheim, California Report assurance aboutwhether the financial statementsare fre e of material misstate­ We have audited theaccompan ying balance ment. Anaudit includesexamining, on a sheet of the Electric Utility Fund of the City test basis, evidence supporting the amounts of Anaheim,California, asof June 30, 1992 and disclosuresin the financialstat ements. and the relatedstate mentsof income, Anaudit also includesassessing the ac­ changes in retainedearnings and cashflows counting principlesused andsignif icant for theyear then ended. Thesefinancial estimates made by management, as well as statementsare the responsibility of the evaluatingthe over all financiarstatement Electric Utility's management. Our respon­ presentation. We believe thatour audit sibility is to expressan opinion on these providesa reasonable basisfor our opinion. financial statementsbased on our audit. In our opinion, thefinancial statements The financialstatements of theElectric referred to abovepresent fairly, in all Utility Fund forthe year endedJu ne 30, material respects,the financial positionof I 991 were audited by otherauditors whose the ElectricUtility Fund of theCity of report, dated October l l , l 991 , expressed Anaheim, California, asof June 30, I 992 an unqualifiedopinion on those statements. andthe results of its operationsfor the year We conducted our audits in accordance then ended, in conformitywith generally with generally accepted auditing standards. acceptedacc ounting principles.

Deloitte &-ouche T October9, I 992 CostaMesa, California

A- 16 APPENDIX B

CITY OF ANAHEIM ELECTRIC UTILITY FUND UNAUDITED FINANCIAL STATEMENTS

NINE MONTHS ENDED MARCH 31, 1993 AND MARCH 31, 1992

B- 1 CITY OF ANAHEIM ELECTRIC UTILITY FUND BALANCE SHEET (Unaudited)

March 31 1993 1992 (in thousands ) ASSETS

Ut ility plant:

Production $217,667 $209,797 Transmission 13,052 15,357 Distribution 118, 712 106,286 General 11.740 12,198 361,171 343, 638 Less: accumulated depreciation (105,319) (93,643) 255,852 249,995 Construction work in progress 58, 189 44, 547 Nuclear fuel, at amorti zed cost 5,354 7,399 319.395 301. 941 Restricted cash and investments 88,650 101.395

Current assets:

Cash and investments 102 ,708 92, 450 Customer and other accounts rece ivable 23, 139 21,829 Accrued interest receivable 3,405 3,385 Materials and supplies at average cost 3,392 3,156 Prepaid purchase power 1,107 1,836 133,751 122, 656 Other assets:

Unamorti zed bond refunding costs 17, 203 19,256 Unamortized project costs 2,413 7,082 Unamortized debt issuance costs 2,071 2.299 21,687 28,637

Total assets $563,483 �554,629

B-2 CITY OF ANAHEIM ELECTRIC UTILITY FUND BALANCE SHEET (Unaudited )

March 31 1993 1992 (in thousands) EQUITY , LIABILITIES AND OTHER CREDITS

Equity , liabilities and other credits

Equity : Fund balance transfer $14,629 $14, 629 Retained earnings 132,661 119,246 Total equity 147 , 290 133,875 Long term debt, less current portion 272, 050 281. 237 Total capitali zat ion 419,340 415.112

Current liabilities (payable from restricted assets): Current portion of long term debt 5,053 4,884 Accrued interest 9,462 8,051 Accounts payable 1,742 1,214 Tax exempt commercial paper 20,450 20,450 36,707 34,599

Current liabilities (payable from current assets) : Current port ion of long term debt 5,017 4,488 Accounts payable and accrued expenses 6,249 5,401 Obligations under reverse repurchase agreements 8, 527 8,527 Customer deposits 2, 113 954 Power cost adjustment balancing account 0 0 Rate stabilizat ion account 45, 557 45, 310 SCE restricted liabilities 7,395 6,863 IPA credit account 0 3,515 74,858 75,058 Total current liabilities 111,565 109,657

Contributions in aid of construction 24,002 23,143 Decommissioning reserve 8, 576 6,717

Total equity , liabilities, other credits �563, 483 �554,629

B-3 CITY OF ANAHEIM ELECTRIC UT ILITY FUND STATEMENT OF INCOME Nine Months Ended Ma rch 31, 1993 and 1992 (Unaudited )

March 31 1993 1992 (in thousands)

Operating revenues:

Sale of electric energy $168,263 $154,230 Provision for power cost adjustment 0 0 Rate stabilization adjustment 9,819 8,286 Other operating revenues 469 412 Total operating revenues 178,551 162.928 Operating expenses:

Cost of purchased power 103, 609 98,772 Fuel used for generat ion 3,574 2,368 Other operations 18, 337 16,907 Maintenance 10,788 11,050 Depreciation 10,471 9.751 Total operating expenses 146.779 138. 848

Operating income 31.77 2 24.080 Other income (expenses):

Interest income 6,207 6,034 Interest expense (16, 114) { 14.094) (9,907 ) (8,060}

Net, income $ 21.865 $ 16.020

STATEMENT OF RETAINED EARNINGS (Unaudited )

March 31 1993 1992 (in thousands)

Balance at beginning of the year $119, 758 $111, 921 Net income for the year 21,865 16,020 Transfer to the General Fund of the City 18,962 ) (8.695) Balance at end of six months $132, 661 $119,246

B-4 APPENDIX C

The 1993 Bonds will not be secured by any pledge of ad va/orem taxes or General Fund revenues but will be secured by, among other things, Project Revenues, which consist of 1993 Purchase Payments to be made by the City under the Installment Purchase Agreement. The 1993 Purchase Payments and all other payments with respect to Qualified Obligations are payable from the Surplus Revenues in the Qualified Obligations Account of the City 's Electric System. The description of the financial and economic position of the City of Anaheim set fo rth below and on the fo llowing pages is included in the Offi cial Statement fo r informational purposes only.

THE CITY OF ANAHEIM The community of Anaheim was founded and incorporated in 1857, disincorporated in 1872, reincorpo­ rated in 1876, and reorganized in 1888. No change in organization took place until June 1964, when the local voters approved a City Charter. The City operates under the Charter and with a Council-Manager form of government. The five City Council members are elected to four-year terms in alternate slates of three and two everytwo years, with the Mayor being elected every two years. The Mayor presides over meetings of the City Council and has one vote. The City Council appoints the City Manager, who heads the executive branch of government, implements City Council directives and policies, and manages the administrative and operational functions through the various departmental heads, who are appointed by the City Manager. City full-time employees numbered 2,035 at July 1, 1993, of whom 525 were assigned to the Police Department and 244 to the Fire Department. The latter has ten stations; the City enjoys a Class One fire insurance rating, the highest rating possible. Anaheim is located in northwestern Orange County, about 28 miles southeast of downtown Los Angeles and about 90 miles north of San Diego. The City lies on a coastal plain which is bordered by the PacificOcean on the west and the Santa Ana Mountains on the east. The climate is generally characterized as sunny and mild with mean temperatures ranging between 53 degrees in January and 72 degrees in July. Rainfall averages about 14 inches per year. Afternoon humidity averages 45%-52% throughout the year. Anaheim, Orange County's oldest and most populous city, is strategically situated in relation not only to Orange County's population but also to the economies of San Diego, Los Angeles, Riverside and San Bernardino counties. Major freeways in and through the City conveniently locate industry to labor markets and recreation and commerce to consumers of a much broader area. The Santa Ana Freeway (Interstate 5) connecting Los Angeles and San Diego is the main artery traversing the City. It connects in or near the City with the Artesia/Riverside (State Route 91 ), the Garden Grove (State Route 22), the Orange (State Route 57), and the Costa Mesa (State Route 55) freeways. AMTRAK rail passenger service to a station situated at Anaheim Stadium commenced operation October 30, 1983. Anaheim is also served by three other railroads, the SouthernPacific, the Santa Fe, and the Union Pacific, and by numerous truck carriers in Southern California. The major airports in the area include John Wayne (14 miles south), Ontario International (20 miles northeast), Los Angeles International ( 30 miles northwest) and Long Beach (14 miles west). Frequent daily bus service is provided by various lines including the Orange County Transit District, the Southern California Rapid Transit District, Greyhound Lines and Fun Bus, Inc.

City Council TOM DALY, Mayor, won his firstfour-year termto the City Council in 1988. Active in the community, Mr. Daly is a member of the Club of Greater Anaheim, the Anaheim Community Foundation and the

C-1 Anaheim Museum. Mr. Daly served on the Board of Trustees for the Anaheim Union High School District before his election to the City Council. BOB D. SIMPSON, Mayor Pro Tern, was elected to his first four-year term on the City Council in November, 1990. He served as City Manager from 1987-1990, after serving as Anaheim's Deputy City Manager/Public Safety Director and prior to that as the City's Fire Chief for six years. Mr. Simpson has devoted more than thirty-three years to public service. FRED HUNTER, Councilman, won his first term on the City Council in 1986 before running forthe mayoral seat in 1988. He was re-elected as Mayor in November 1990, and served in that capacity until November 1992 whereupon he was re-elected to the City Council. Mr. Hunter served as an Anaheim police officer for 10 years before he began practicing law in Anaheim in 1975. He is a member of the California Lawyers Association, the Orange County Bar Association and the American Cancer Society. FRANKFELDHAUS, Councilman, was elected to his firstterm on the City Council in November 1992. Prior to his election to the City Council, Mr. Feldhaus was active in civic affairs, serving as an Anaheim Planning Commissioner from 1987 to 1992, as a Redevelopment Commissioner in 1991 and 1992, and as a ReservePolice Officerfrom 1974 to 1976. He has also been a member of the Orange County Juvenile Justice Committee, the Orange County Economic Development Committee and the Orange County Latino Police Officers Association, and has participated in several other community organizations. IRV PICKLER, Councilman, was elected to his first four-year term on the City Council in 1982 and was reelected in 1986 and 1990. Prior to his election, Mr. Pickler served as an elected trustee of the Anaheim Union High School District and as a member of various school boards and commissions, including the Orange County Planning Commission.

City Management JAMES D. RUTH, City Manager, was named to the City's top administrative post on May 1, 1990. Mr. Ruth had previously served the City of Anaheim in the capacities of Parks, Recreation and Community Services Director, Deputy City Manager, Public Works Director, and Assistant City Manager between 1976 and 1984. He rejoined the City as Assistant City Manager in 1987, following3¥ 2 years with the City of Long Beach as Director of Parks, Recreation, and Beaches, where he also chaired the City's highly successful Strategic Plan Implementation Committee. Mr. Ruth is a member of the International City Managers Association and a member and past president of both the National Recreation and Park Association and the California Park and Recreation Society. Since returning to Anaheim, Mr. Ruth has played a major role in implementing the City's Vision 2000Plan and establishing and coordinating major committees and task forces to enhance the City's development activities. GEORGE P. FERRONE, Finance Director, joined the City in August of 1977 with an extensive accounting background which included Vice President of Financial Affairs at Chapman College, Orange, California, Controller of Lightcraft of California and management consulting supervisor for the accounting firm of Ernst & Whinney in Los Angeles. Mr. Ferrone has a B.S. degree in Accounting from California State University at Long Beach and is a member of the American Institute of Certified Public Accountants; the Government Finance Officers Association of the United States and Canada; California Society of Municipal Finance Officers, where he completed a three-year term on the Board of Directors, and is past President and received the Distinguished Service Award in February 1988, the association's highest honor for Finance Directors given to only eleven Finance Directors in the last twenty years; and the League of California Cities, where he completed a term on the Board of Directors, representing all Finance Directors in the State. The Finance Director oversees City-wide financial affairs and internal controls over a $538 million budget including 2,035 full-time and 2,000 part-time employees. Mr. Ferrone's overall responsibilities include the following: centralized accounting functions; budget administration; capital financing, monthly and annual financial reporting; financial systems design, implementation and control; City payroll; all disbursements; purchasing; reprographics and mail operation for the City; and warehousing.

C-2 JACK L WHITE, City Attorney, heads the legal department of the City, which includes a civil division consisting of nine attorneys and a criminal prosecution division with seven attorneys. Mr. White joined the City as Deputy City Attorney in 1977, became an Assistant City Attorney in 1979 and was appointed City Attorneyby the CityCouncil in July 1985. He has an extensive background in municipal law practice. He was formerly a member of the law firm of Martin & Flandrick, San Marino, California, which for seven years represented thirteen Southern California cities as City Attorney. Mr. White has a Juris Doctor degree from the University of California, Los Angeles, and was admitted to the practice of law in 1969. Mr. White is a member of the National Institute of Municipal Law Officers, the American Trial Lawyers' Association, the American Arbitration Association, the California District Attorney's Association and is past president of the Orange County City Attorney's Association. CHARLENE C. JUNG, CityTreasurer, joined the City as Investment Officerin 1990 and was appointed City Treasurer by the City Council in August of 1992. Her municipal treasury experience includes serving as City Treasurer and Assistant City Treasurer forthe City of West Covina. Ms. Jung has a Bachelor's Degree in Psychology from the University of Southern California and has completed postgraduate work in Finance at California State University, Los Angeles. Ms. Jung is a member of the California Municipal Treasurers Association ("CMTA") and is currently serving on the Board of Directors as a Division Chair. She received certification by CMTA as a CaliforniaMunicipal Treasurer in 1988 and was re-certified in 1992. Ms. Jung is also a member of the Municipal Treasurers Association of the United States and Canada and received her certification as a Certified Municipal Finance Administrator in 1991. The City Treasurer's responsibilities include collections, cash management and investments, licensing, transient occupancy tax processing, acting as trustee for certain debt issues, and the administration of the City's deferred compensation and utility users' tax programs. Area and Population Anaheim's land area remained at 3.7 square miles from 1900through 1940. From 1940 to 1993, that area multiplied by 13.16 times to 48.68 square miles. Since World War II, immigration and, to a lesser extent, annexation have produced major population growth in Anaheim. The growth multiple was about 19.6 from 14,556 in 1950 to 285,477 in 1993. Anaheim is California's tenth most populous city. The following chart includes the growth in the area and population of the City since 1900 as well as that of the County. CITY OF ANAHEIM AND ORANGE COUNTY Area and Population Calendar Year Annual Average City City of Anaheim Population Orange Population Size of Square Percent County Percent California Year Miles Population Change (l) Population of County Cities 1900 ...... 3.70 1,456 0.0% 19,696 7.4% 51 1910 ...... 3.70 2,628 8.0 34,436 7.6 66 1920 ...... 3.70 5,526 11.0 61 ,375 9.0 42 1930 ...... 3.70 10,995 9.9 118,674 9.3 44 1940 ...... 3.70 11,031 0.0 130,760 8.4 NIA 1950 ...... 4.40 14,556 3.2 216,224 6.7 68 1960 ...... 27.34 104,184 61.6 703,925 14.8 12 1970 ...... 33.10 166,701 6.0 1,420,386 11.7 8 1980 . " ...... 42.05 219,310 3.2 1,931,570 11.4 8 1990 ...... 45.03 266,406 2.1 2,410,556 11.1 10 1991 ...... 45.03 273,491 2.6 2,453,277 11.1 10 1992 ...... 48.68 279,408 2.2 2,512,198 11.1 10 1993 ...... 48.68 285,477 2.2 2,557,300 11.2 10

( 1) Expressed as the annual average population change over each period as a percent of the prior year. SOURCES: United States Bureau of Census; California Department of Finance; City of Anaheim Planning Department.

C-3 Building Activity According to the 1990 Federal Census, prepared by the U.S. Bureau of Census, the total number of dwelling units in the City increased from 82, 709 in 1980 to 93, l 77 in 1990, an increase of 10,468 ( or 13%). The total valuation of all building permits issued by the City of Anaheim Building Division was approximately $239 million in 1992; the number of total permits issued was 5,273 in 1992.

CITY OF ANAHEIM Building Activities Calendar Year 1988 1989 1990 1991 1992 Total Valuation (thousands) ...... $297,836 $363,785 $210,113 $338,011 $238,909 Total Permits Issued ...... 4,840 5,795 4,649 4,742 5,273 New Construction Residential (thousands) ...... $126,445 $213,386 $ 51,678 $107,927 $ 79,179 Permits ...... 312 1,087 176 360 395 Non-Residential (thousands) ...... $1 09,118 $ 68,993 $ 76,679 $134,440 $ 75,545 Permits ...... 139 138 50 75 48 Additions and Alterations Residential (thousands) ...... $ 20,146 $ 27,447 $ 24,353 $ 21,619 $ 24,304 Permits ...... 2,922 3,158 2,979 3,110 3,436 Other (thousands) ...... $ 42,127 $ 53,959 $ 57,403 $ 74,025 $ 59,881 Permits ...... 1,467 1,412 1,444 1,197 1,394 New Dwelling Units Total Residential Units ...... 1,780 2,298 531 1,188 604 SOURCE: City of Anaheim Planning Department, Building Division.

Employment No annual information is regularly compiled on employment and unemployment for the City alone. Employment in Orange County decreased from about 1,331,800 in 1988 to about 1,316,400 in 1992. The County unemployment rate was lower than that in the State in each of the past fiveyears. The mobile resident labor force of Orange County is employed not only in the County but also in adjacent counties, such as Los Angeles, San Bernardinoand Riverside. The 1990 census indicated that 99.6% of the City's population was in the civilian labor force and 94.4% of that labor force was employed.

ORANGE COUNTY Employment, Unemployment and Labor Force(l) Calendar Year Averages: 1988-1992 (OOO's) 1988 1989 1990 1991 1992 Employment ...... 1,331.8 1,321.2 1,327.9 1,336.6 1,316.4 Unemployment ...... 38.4 32.8 55.8 61.0 85.9 Civilian Labor Force ...... 1,370.2 1,354.0 1,383.7 1,397.6 1,402.3 Unemployment Rate ...... 2.8% 2.4% 4.0% 4.4% 6.1% State Unemployment Rate ...... 5.5% 4.8% 6.6% 7.7% 9.3%

( 1) By place of residence, including workers involved in labor disputes. SOURCE: State of California, Employment Development Department.

C-4 The 1990 Census for Anaheim prepared by the United States Bureau of Census indicated a civilian labor force living within the City of 141,959. The percentages of Anaheim workers in differentindustries so reported were: Percent of Industry Worken Services ...... 29. 7% Manufacturing ...... 24.3 Wholesale and Retail Trade ...... 22.0 Construction ...... 7 .2 Finance, Insurance and Real Estate ...... 6.9 Transportation, Communications and Utilities ...... 5.6 Public Administration ...... 2.5 Agriculture, Forests, Fisheries and Mining ...... 1.8 The table below lists the major manufacturing and non-manufacturing employers within the City.

CITY OF ANAHEIM Major Employers March 1993 Percent of Number Employees to Total of Employment in Company Employees City Products/Purpose Disneyland & Disneyland Hotel ..... 11,000 7.0% Family recreation Rockwell International Corporation .. 4,000 2.5 Guidance and navigation systems, etc. City of Anaheim ...... 3,447 2.2 Municipality Pacific Bell ...... 2,444 1.5 Telephone sales and service Kaiser Permanente Medical Center .. 2,400 1.5 Medical Facility Anaheim Union High School District 1,941 1.2 Junior & Senior High Schools Anaheim City School District ...... 1,561 1.0 Elementary Schools Anaheim Marriott ...... 1,465 .9 Luxury Hotel United Parcel Service, Inc...... 1,400 .9 Small package delivery Anaheim Hilton & Towers ...... 1,200 .8 Luxury Hotel Anaheim Memorial Hospital ...... 1,050 .7 General/ acute care hospital Interstate Electronics Corporation .. . 1,000 . 7 Voice data entry systems, etc. California Computer Products, Inc. 1,000 .7 Computer graphics equipment, etc. K wikset, Division of Emhart Industries ...... 1,000 .7 Residential lock sets Martin Luther Hospital Medical Center ...... 750 .5 Acute care hospital Southern California Gas Company .. 710 .5 Natural gas utility Carl Karcher Enterprises, Inc...... 700 .5 Fast service restaurant chain Subtotal ...... 37,068 23.8% TOTAL EMPLOYED IN CITY OF ANAHEIM ...... 155,464 100.0%

SOURCE: City of Anaheim, City Administration Department.

C-5 Income The following table summarizes the total effective buying income and the median household effective buying income for the City, the State and the nation over the years 1987 through 1991.

CITY OF ANAHEIM PERSONAL INCOME Calendar Years 1987 through 1991 Total Effective Median Household Buying Income Effective Year and Area ($000) Buying Income 1987 City of Anaheim ...... $ 3,838,711 $33,210 California ...... 426,008,347 30,537 United States ...... 3,202,847,131 25,888 1988(1) City of Anaheim ...... 3,816,797 32,807 California...... 426,174,001 30,088 United States ...... 3,064,005,977 24,488 1989 City of Anaheim ...... 3,892,595 33,276 California...... 444,988,647 30,713 United States ...... 3,287 ,489,252 25,976 1990 City of Anaheim ...... 4, 135,131 36,418 California...... 477,784,771 33,342 United States ...... 3,499,365,237 27,912 1991 City of Anaheim ...... 4,243,016 40,461 California...... 490,749,649 36,943 United States ...... 3,728,967 ,043 32,073

( 1) Commencing in 1988, Sales & Marketing Management Survey of Buying Power has excluded other labor­ related income, imputed personal interest income and imputed rental income from the definition of effective buying income. On a national level, these changes result in an 11% reduction in effective buying income. Source: Sales & Marketing Management Survey of Buying Power. Tourism and Community and Recreational Facilities Tourism is a major industry in Anaheim. Much of that industry, including about 142 hotels and motels and over 613 eating establishments, is located to provide convenience to the major local attractions, including Disneyland, Anaheim Stadium, Anaheim Convention Center and the Anaheim Sports and Entertainment Arena. Disneyland occupies a 184 acre site in the City and is one of the major tourist attractions in the nation. Opened in 1955 with an original investment of $17,000,000, Disneyland today is the second largest amusement park in the world, second only to Disney World in Florida. Disney is currently negotiating with the City of Anaheim for a proposed second gate attraction to be built on what is now Disneyland's parking lot. According to Disney studies, the $3 billion project would bring more than 27 ,000jobs to the region and generate $45 million in taxes for the City while serving as the catalyst for revitalization of the entire Commercial Recreation Area. Highlights of Disney's proposed expansion project

C-6 include: the creation of WESTCOT, patterned after Walt Disney World's EPCOT; three new theme hotels and the renovation of the Disneyland Hotel, creating an additional 5,000 hotel rooms; and building the world's largest parking structures with a combined capacity for 30,000 vehicles. In 1964, the City built the Anaheim Stadium for the public presentation of major league baseball, football, soccer, track, field and other sporting and nonsporting events. The stadium now consists of a 70,500 seat athletic stadium and supportive facilities, including a 15,000 car parking lot. In 1966 the City entered into a 35-year agreement with Golden West Baseball Company (the California Angels) for the purpose of exhibiting American League baseball at the Stadium. On November 21, 1978, the City signed a 35-year exhibition agreement with the Los Angeles Rams Football Company (the "Rams") for exhibiting the Rams professional National Football League games in the Stadium, beginning with the 1980 season. To accommodate spectator attendance for the Rams games, the City agreed to expand, and has expanded, the Stadium from its former seating capacity of 43,200 to approximately 70,500 seats. The following improvements were added: 500 parking stalls; press and media facilities; football box office; 108 executive box suites; locker facilities; a training room; storage space; concession stands and ticket booths. The City installed a $5.3 million scoreboard system in July 1988, including one color video system, two black and white matrix scoreboards, two additional auxiliary scoreboards and two boards for display of scores from other games. The Anaheim Convention Center was opened in January 1967 with facilitieswhich included a 9,000-seat arena, a 100,000 square foot exhibit hall, and the north meeting room complex consisting of approximately forty meeting and lobby areas as well as office space. In 1977, the first expansion took place which included the addition of a 100,000square foot exhibit hall and an additional 25,000 square feetwhich can be used for exhibits or meeting purposes. In 1982, the next expansion took place which duplicated the earlier expansion adding another 100,000 square feet of exhibit hall space and approximately 25,000 square feet of ex­ hibit/ meeting room areas. In 1988, a third expansion commenced which consisted of the construction of a two-level expansion to the existing complex and a five-level parking garage. The upper level of the expansion added 158,000 square feet of exhibit space and the lower level was originally designed for additional parking. In 1992, a fourth project commenced which entailed conversion of the subterranean parking area to approximately 150,000 square feet of additional exhibit space. The total square footage of the Convention Center complex will be approximately one million square feet when the project is completed. The Anaheim Convention Center is the largest facility of its kind on the west coast and one of the most successful in operation in the country. In 1991, the City began construction on a $103 million 19,200-seatSports and Entertainment Arena (the "Arena") with approximately 3,900 parking spaces. The Arena project is publicly financedwith bonds secured by a direct pay irrevocable letter of credit. The project is currently 96 percent complete and is within budget and ahead of schedule. The City has entered into an agreement for management of the Arena with Ogden Facility Management Corporation of Anaheim ("Ogden"). The City anticipates that the Arena will accommodate spectator attendance for National Basketball Association games, National Hockey League games, as well as a major concert series. Ogden has entered into an agreement with Disney Sports Enterprises, Inc. ("Disney"), for the use of the Arena by Disney's National League hockey team. The first season of hockey games will begin in September 1993. The Arena opened on June 17, 1993, three months ahead of schedule. Orange County is a major tourist center of Southern California. Forty-fourmiles of shorelines with more than twenty publicly maintained beach areas provide year-round aquatic activities. In Anaheim, there are two 18-hole golf courses, eleven community parks, seven of which contain major athletic facilities, 37 neighborhood parks and playgrounds, a nature center, two senior citizen centers and two community centers. Previously mentioned recreational and amusement facilities in Anaheim include Disneyland, the Anaheim Convention Center, Anaheim Stadium and the Anaheim Sports and Entertainment Arena. Within an hour's drive from the City are Knott's Berry Farm in the adjacent City of Buena Park, the Los Alamitos

C-7 Race Course, the renowned Spanish Mission of San Juan Capistrano, and the Art Colony at Laguna Beach which sponsors an annual art festival. Within a two hour drive are numerous summer and winter resort areas in the San Bernardino and San Jacinto mountains. The Newport Harbor area, a few miles south of the City, provides anchorage facilities for approximately 4,600 private boats. Boat launching ramps, deep sea fishing, skin-diving, and other aquatic activities are readily accessible.

Other Anaheim facilities include a main public library and four branch libraries. Within the City, there are seven general hospitals with a capacity of 1,276 beds, four AM or FM radio stations, 33 banks and 28 savings and loan associations, and 66 churches of all major denominations.

Retail Sales

The table below presents the City's taxable retail sales for the period 1987 through 1991 in comparison to other cities in Orange County, Orange County and the State of California.

ANAHEIM, MAJOR ORANGE COUNTY CITIES, ORANGE COUNTY, CALIFORNIA Taxable Retail Sales, All Outlets(l)

Calendar Year

($000) 1987 1988 1989 1990 1991 Anaheim ...... $ 2,816,496 $ 2,917,936 $ 3,130,406 $ 3,005,793 $ 2,729,513 Buena Park ...... 834,442 861 ,274 910,125 882,813 787,176 Costa Mesa ...... 1,927,810 2,143,389 2,280,333 2,203,103 2,059,859 Fullerton ...... 1,096,630 1,178,615 1,21 7,264 1,187,141 1,120,552 Garden Grove ...... 1,114,315 1, 181,051 1, 1 90,077 1,142,952 1,046,437 Huntington Beach ...... 1,544,775 1,521,594 1,629,149 1,519,635 1,454,920 Orange ...... 1,510,807 1,742,684 1,938,501 1,793,501 1,698,135 Santa Ana ...... 2,346,771 2,620,122 2,676,423 2,519,262 2,494,842 Westminster ...... 729,868 741,905 763,689 801,284 759,761 Major Cities ...... 13,921,914 14,908,570 15,735,967 15,055,484 14,151,195 All Other ...... 9,698,319 10,500,131 11 ,684,575 12,711,833 12,323,737 Orange County ...... $ 23,620,233 $ 25,408,701 $ 27,420,542 $ 27,767,317 $ 26,474,932 California ...... $231,869,731 $251,078, 129 $272,088,591 $281,860,293 $270,844,829

( 1) Owing to changes in the sales tax base for retail goods, the years are not totally comparable, but the trend in relative magnitude of retail sales tax bases is exhibited.

SOURCE: California State Board of Equalization, Trade Outlets and Taxable Retail Sales in California for 1987, 1988, 1989, 1990 and 1991.

C-8 Following is the breakdown of calendar year 1992 sales tax permits in the City by type of outlet, and the percentage of each type's total dollar transactions: Percent of Type of Outlet Permits Transactions Apparel Stores ...... 128 1.0% General Merchandise Stores ...... 29 2.5 Drug Stores ...... 37 1.2 Food Stores ...... 198 4.8 Packaged Liquor Stores ...... 78 0.8 Eating and Drinking Places ...... 607 8.8 Home Furnishings and Appliances ...... 164 5.0 Building Materials and Farm Implements ...... 99 7.2 Auto Dealers and Auto Supplies ...... 140 7.4 Service Stations ...... 111 5.5 Other Retail Stores ...... 827 10.9 All Other Outlets ...... 6,120 44.9

SOURCE: Taxable Sales in California, Annual Report, State Board of Equalization. Following is a table indicating the growth of taxable transactions for the period 1987 through 1991 in the City by type of business.

CITY OF ANAHEIM TAXABLE TRANSACTION BY TYPE OF BUSINESS Calendar Year (OOO's) 1987 1988 1989 1990 1991 Apparel Stores ...... $ 32,183 $ 29,227 $ 32,362 $ 29,953 $ 28,369 General Merchandise ...... 91,409 74,345 76,805 72,945 68,643 Drug Stores ...... 24,973 25,614 28,498 29,707 31,480 Food Stores ...... 118,119 120,131 124,536 124,920 130,179 Packaged Liquor Stores ...... 22,367 20,855 19,482 20,126 21 ,378 Eating and Drinking Places ...... 231,625 226,757 236,770 243,088 241,151 Home Furnishings Appliances ...... 136, 173 145,068 148,258 141,704 135,821 Building Materials and Farm Implements 225,133 219,591 249,464 219,277 197,713 Auto Dealers and Auto Supplies ...... 268,787 262,420 271,429 238,152 202,969 Service Stations ...... 133,898 147,964 145,197 145,269 150,146 Other Retail Stores ...... 245,437 273,727 314,460 293,614 298,447 Retail Stores Total ...... 1,530,104 1,545,699 1,647,261 1,558,755 1,506,296 All Other Outlets ...... 1,286,392 1,372,237 1,483,145 1,447,038 1,223,217 Total All Outlets ...... $2,816,496 $2,917,936 $3,130,406 $3,005,793 $2,729,513

SOURCES: California State Board of Equalization, Taxable Sales in California, as of December 31, 1987, 1988, 1989, 1990 and 1991 Annual Reports.

C-9 The table below compares the taxable sales per capita for the City of Anaheim and Orange County during the period 1987 to 1991. COMPARISON OF TAXABLE SALES CITY OF ANAHEIM AND ORANGE COUNTY Calendar Year Taxable Sales City of Anaheim Orange County Per Capita Taxable Sales Taxable Sales Orange ($000) Population ($000) Population Anaheim County 1987 ...... $2,816,496 242,200 $23,620,233 2,193,600 $11,629 $10,768 1988 ...... 2,917,936 243,021 25,408,701 2,238,721 12,007 11,350 1989 ...... 3,130,406 244,309 27,420,542 2,280,405 12,813 12,024 1990 ...... 3,005,793 266,406 27,767,317 2,410,556 11,283 11,519 1991 ...... 2,729,513 273,491 26,474,932 2,453,277 9,980 10,792

SOURCES: California State Board of Equalization, Taxable Sales in California, as of December 31, 1987, 1988, 1989, 1990 and 1991 Annual Reports, United States Bureau of Statistics. Education The City is served by nine public high schools, ten public junior high schools and forty-four public elementary schools. Almost all of the City lies within eight districts: the Anaheim City, Magnolia, Savanna and Centralia Elementary School Districts, the Anaheim Union High School District, the Placentia and Orange Unified School Districts, and the North Orange County Community College District. There are eleven institutions of higher learning in Orange County and an additional twelve in adjacent areas of southern Los Angeles County. Within Orange County are the University of California, Irvine; California State University at Fullerton; Chapman University; Southern California College; and public community colleges with grades 13 and 14. CITY FINANCIAL INFORMATION The following unaudited summaries of certain Funds of the City have been prepared by the City of Anaheim Finance Department from audited financial statements. CITY OF ANAHEIM ALL GOVERNMENTAL FUND TYPES(l) SUMMARY OF REVENUE AND TRANSFERS Years Ended June 30 ($000) 1988 1989 1990 1991 1992 Property taxes ...... $ 32,318 $ 36,343 $ 38,832 $ 39,542 $ 39,235 Other taxes (including sales and use taxes) ...... 32,837 33,845 36,554 33,393 30,878 Transient occupancy tax ...... 20,458 24,400 24,473 26,732 28,745 Licenses, fees and permit ...... 8,027 11,19 3 11,896 12,294 16,214 Fines, forfeits and penalties ...... 2,112 2,389 2,440 1,984 1,659 Intergovernmental revenue ...... 32,951 36,605 45,851 43,460 47,204 Use of money and property ...... 11,062 25,473 27,234 25,937 22,042 Charges for services ...... 4,441 5,190 7,063 7,566 7,902 Other revenues ...... 5,064 5,065 6,318 7,029 8,305 Revenue before transfer from other funds 149,270 180,503 200,661 197,937 202,184 Other financing sources ...... 1,419 131,763 (2) 67,997 7,710 31,734(3) Total revenue and other financing sources $150,689 $312,266 $268,658 $205,647 $233,918

(footnotes on fo llowing page)

C-10 ( 1) Table includes the General Fund, Special Revenue Funds, Debt Service Funds and Capital Projects Funds and excludes the Enterprise and Internal Service Funds. (2) Other financing sources were markedly higher in 1989 than in 1988 due to operating transfers, contributions from property owners, restatement of Debt Service Fund balance for 1988 and loan proceeds. (3) Other financing sources were markedly higher in 1992 than in 1991 due to loan proceeds. SOURCE: City Finance Department. SUMMARY OF EXPENDITURES Years Ended June 30 ($000) 1988 1989 1990 1991 1992 General government ...... $ 13,299 $ 15,820 $ 17,124 $ 23,217 $ 19,370 Nondepartmental ...... 26,943 28,497 35,538 49,257 60,672 Public safety ...... 52,194 53,927 59,178 65,276 71,045 Public works/parks/recreation/ community services ...... 32,003 38,765 57,575 50,818 34,0�4 Library ...... 4,782 5,143 5,395 5,608 5,56'.2 Total operating expenditures ...... 129,221 142,152 174,810 194,176 190,683 Redemption of serial bonds, general obligations ...... 2,473 2,600 61 ,592(1) 3,581 3,830 Interest expense, general obligations ..... 15,263 22,688 24,544 26,644 30,122 Advance refunding escrow ...... 20,972 Capital outlay ...... 8,NIA844 10NIA,897 14NIA,674 28,NIA067 6,906 Total expenditures ...... $155,801 $1 78,337 $275,620 $252,468 $252,513

( 1) Redemption of serial bonds, general obligations is significantly higher due to refunding of Certificates of Participation issue. SOURCE: City Finance Department.

Recent Developments - State of California 1993-94 Fiscal Year Budget On June 30, 1993, the Governor of the State signed the State budget for the fiscal year ending June30, 1994 (the "Budget"). The amount of the Budget is approximately $52 billion. Key features of the Budget include a $2.6 billion shift in property tax revenues from counties, cities and special districts to the State for use in education funding and an extension of a one-half cent sales tax through December 31, 1993. The sales tax revenues would be earmarked for local public safety purposes. Under the Budget, the City would receive approximately $1.3 million less in property taxes for the fiscal year ending June 30, 1994; this reduction was anticipated by the City and was taken into consideration by the City in the preparation of the City's 1993-94 budget.

Budgetary Processes The fiscal year of the City begins on the firstday of July of each year and ends on the thirtieth day of June of the following year. At such date as the City Manager determines, each board or commission and each department head must furnish to the City Manager an estimate of revenues and expenditures for such department, board or commission for the ensuing fiscal year, detailed in such manner as may be prescribed by the City Manager. In preparing the proposed budget, the City Manager reviews the estimates, holds conferences thereon with the respective department heads, boards or commissions as necessary, and revises the estimates as he may deem advisable. At least thirty days prior to the beginning of each fiscal year, the City Manager submits to the City Council the proposed budget as prepared by the City Manager. After reviewing and making such revisions as it deems advisable, the City Council determines the time for the holding of a public hearing thereon and

C-11 causes to be published a notice thereof not less than ten days prior to the hearing date. Copies of the proposed budget are available for inspection by the public in the office of the City Clerk at least ten days prior to the hearing. At the conclusion of the public hearing, the City Council further considers the proposed budget and makes any revisions thereof that it deems advisable. On or beforeJune 30 the City Council adopts the budget with revisions, if any, by the affirmative vote of at least a majority of the total members of the City Council. From the effective date of the budget, the amounts stated as proposed expenditures are appropriated to the departments, officesand agencies for the objects and purposes named. The City Manager is empowered to transfer funds from one object or purpose to another within the same department, office or agency, as necessary. All appropriations lapse at the end of the fiscal year to the extent that they have not been expended or lawfully encumbered. At any public meeting after the adoption of the budget, the City Council may amend or supplement the budget by the affirmative vote of at least a majority of the total members of the City Council. Under the City Charter, the City may not incur indebtedness evidenced by general obligation bonds which would in the aggregate exceed fifteen percent of the total assessed valuation, for purposes of City taxation, of all the real and personal property within the City, and no bonded indebtedness which shall constitute a general obligation of the City may be created unless authorized by the affirmative votes of two­ thirds of the electors. The City Council employs, at the beginning of each fiscal year, an independent certified public accountant who, at such time or times as specified by the City Council, at least annually, and at such other times as they shall determine, examines the books, records, inventories and reports of all officers and departments as the City Council may direct. As soon as practicable after the end of the fiscal year, a report is submitted by such accountant to the City Council and a copy of the financial statements as of the close of the fiscal year is published.

Assessed Valuation and Tax Collections Assessed valuation for revenue purposes increased by 3.7% in 1992-93 over 1991-92. Such assessed valuations include secured and unsecured properties assessed by the Orange County Assessor and secured utility properties assessed by the State Board of Equalization. Such assessed valuations exclude State­ reimbursed homeowner's and business inventory exemptions and exclude veterans, religious, charitable, and other such nonrecoverable exemptions. In 1981-82, the assessed valuation became equivalent to the fair market valuation. The tax roll for 1992-93 indicates a full market valuation of $1 3,889,466 for the City.

C-12 The table below shows the assessed and estimated full market values, City tax levies, collections, collection percentage, and per capita estimated full market valuation for the years 1983 through 1992.

CITY OF ANAHEIM Assessed Valuation and Tax Collection Record (In Thousands) Estimated Total Percent of Per Capita Fiscal Assessed Total Current Current Estimated Year Ended Full Market City Tax Levy Tax Levy Full Market June 30 Valuation Tax Levy Collections Collected Population Valuation

1983 ...... , ...... $6,306,823 $ 9,365 $ 9,034 96.5% 229 $28 1984 ...... 6,811,403 9,692 9,693 100.0 233 29 1985 ...... 7,632,556 10,287 10,009 97.3 235 32 1986 ...... 8,435,269 11,469 11,138 97.1 238 35 1987 ...... 9,032,389 13,009 12,938 99.5 242 37 1988 ...... 9,841,449 15,033 15,025 99.9 243 40 1989 ...... 10,491,110 16,573 16,432 99.1 244 43 1990 ...... 11,559,382 17,825 17,621 98.9 266 43 1991 ...... 12,403,261 21,183 20,299 95.8 273 45 1992 ...... 13,392,116 21,211 20,650 97.4 279 48

SOURCE: City of Anaheim Annual Financial Reports; City Finance Director. Summarized below is a 10-year history of property tax rates levied by the City and overlapping taxing agencies in a typical tax code area in Anaheim.

CITY OF ANAHEIM TYPICAL TAX CODE AREA Property Tax Rate History (Per $100of Assessed Valuation) Basic Total County, Orange Rate Per Fiscal City, County Metropolitan $100 Year Ended School County of School Flood Water Assessed June 30 Levy City Orange Districts Control District Valuation 1983 ...... 1.0000 .0066 .0004 .0929 .0024 .0166 1.1189 1984 ...... 1.0000 .0098 .0004 .0865 .0021 .0237 1.1225 1985 ...... 1.0000 .0088 .0003 .1090 .0018 .0156 1.1355 1986 ...... 1.0000 .0010 .0003 .0609 .0016 .0164 1.0802 1987 ...... 1.0000 .0017 .0003 .0244 .0014 .0148 1.0426 1988 ...... 1.0000 .0119 .0002 .0225 .0012 .0112 1.0470 1989 ...... 1.0000 .0113 .0002 .0229 .0011 .0 110 1.0465 1990 ...... 1.0000 .0056 .0002 .0195 .0009 .0121 1.0383 1991 ...... 1.0000 .0048 .0002 .01 18 .0008 .0097 1.0273 1992 ...... 1.0000 .0050 .0001 .0096 .0007 .0089 1.0243

SOURCE: County Tax Rates (various years); Auditor-Controller, County of Orange.

C-13 Direct and Overlapping Debt The direct and overlapping bonded debt of the City as of May 1, 1993 is shown below.

CITY OF ANAHEIM Statement of Direct and Overlapping Debt As of May 1, 1993 1991-92 Assessed Valuation: $14,126,394,117 (after deducting $1,720,020,213 redevelopment tax alloca­ tion increment) Debt Direct and O,erlapping Bonded Debt % Applicable May 1, 1993 Orange County ...... 8.890% $ 87,122 Orange County Building Authorities ...... 8.890 25,368,548 Orange County Flood Control District ...... 8.879 291,675 Orange County Water District Certificates of Participation ...... 13.211 16,879,563 Metropolitan Water District ...... 1. 787 11,900,705 County Sanitation Districts Certificates of Participation ...... 9.350-35.352 63,300,357 Rancho Santiago Community College District Certificates of Participation . . 12.094 200,156 Orange Unified School District and Certificates of Participation ...... 26.291 3,235,108 Placentia Unified School District ...... 15.241 200, 419 Centralia School District and Certificates of Participation ...... 15.435 998,312 Other School Districts and Certificates of Participation ...... Various 32,273 City of Anaheim ...... 100.000 9,235,000 City of Anaheim General Fund Obligations ...... 100.000 300,004,387 ( 1) Community Facilities Districts ...... 100.000 39,870,000 Other Special Districts ...... Various 10,081 TOTAL GROSS DIRECT AND OVERLAPPING BONDED DEBT ...... $471,613,706(2) Less: Anaheim Public Improvement Corporation Refunding Certificates of Participation (100 % self-supporting) ...... 22,385,000 Recycling Equipment Certificates of Participation ( 100% self-supporting) 8,755,000 Convention Center, Stadium Inc. and Parking Facilities Certificates of Participation ( 100% self-supporting) ...... 216,010,627 TOTAL NET DIRECT AND OVERLAPPING BONDED DEBT ...... $224,463,079

( 1) Excludes tax and revenue anticipation notes. (2) Excludes revenue, mortgage revenue and tax allocation bonds and non-bonded capital lease obligations. Ratios to Assessed Valuation: Gross Direct Debt ($302,315,477) ...... 2.19% Net Direct Debt ($62,688,390) ...... 0.44% Total Gross Debt ...... 3.34% Total Net Debt ...... 1.59% STATE SCHOOL BUILDING AID REPAYABLE AS OF 6/30/92: $1,084,140

SOURCE: California Municipal Statistics, Inc.

Constitutional Amendments Affecting City Revenues On June 6, 1978, California voters approved Proposition 13, the Jarvis-Gann Initiative, which added Article XIIIA to the California Constitution. The principal thrust of Article XIIIA is to limit the amount of ad valorem tax on real property to 1 % of "full cash value" as determined by the County Assessor. Article XIIIA defines "full cash value" to mean "the County Assessor's valuation of real property when purchased,

C-14 newly constructed, or a change in ownership has occurred after the 1975 assessment period." Furthermore, all real property valuation may be increased to reflect the inflationary rate, as shown by the consumer price index, not to exceed 2% per year, or may be reduced.

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, and 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. Additionally, Article XIIIA has been amended to provide that there would be no increase in the full cash value base in the event that property title is transferred fromone member of the same immediate family to another member.

Article XIIIA exempts from the l % tax limitation any taxes to repay indebtedness approved by the voters prior to July 1, 1978, and requires a vote of two-thirds of the qualified electorate to impose special taxes, while totally precluding the imposition of any additional ad valorem, sales or transaction tax on real property. In addition, Article XIIIA requires the approval of two-thirds of all members of the State Legislature to change any State tax laws resulting in increased tax revenues. On November 6, 1979, the voters of the State approved Proposition 4, known as the Gann Initiative, which added Article XIIIB. On June 5, 1990, the voters approved Proposition 111, which amended Article XIIIB in certain respects. Under Article XIIIB, as amended, State and local government entities have an annual "appropriations limit" which limits the ability to spend certain moneys which are called "appropria­ tions subject to limitation" (consisting of most tax revenues and certain state subventions, together called "proceeds of taxes" and certain other funds) in an amount higher than the "appropriations limit." Article XIIIB does not affect the appropriation of moneys which are excluded from the definition of "appropriations limit," including debt service on indebtedness existing or authorized as of January 1, 1979, or bonded indebtedness subsequently approved by two-thirds of the voters.

In general terms, the City's "appropriations limit" in each year is based on the City's limit forthe prior year, adjusted annually for changes in the cost of living and changes in population, and adjusted, where applicable, for transfer of financial responsibility of providing services to or from another unit of government. The change in the cost of living reflects changes in California per capita personal income (or, at the City's option, changes in assessed value caused by local nonresidential new construction). Among other provisions of Article XIIIB, if the revenues of such entities in any fiscal year and the following fiscal year exceed the amounts permitted to be spent in such years, the excess would have to be returned by revising tax rates or fee schedules over the subsequent two years. As originally enacted in 1979, the City's appropriations limit was based on 1978-79 authorizations to expend proceeds of taxes and was adjusted annually to reflectchanges in cost of living and population (using different definitions, which were modified by Proposition 111). Starting with fiscal year 1990-91, the City's appropriations limit was recalculated by taking the actual fiscal year 1986-87 limit, and applying the annual adjustments as if Proposition 111 had been in effect. On November 4, 1986, an initiative statute (known as Proposition 62) was approved by the voters of the State which (i) requires that any tax for general government purposes imposed on local governmental entities such as the City be approved by resolution or ordinance adopted by a two-thirds vote of the governmental entity's legislative body and by a majority vote of the electorate of the governmental entity, (ii) requires that any special tax (defined as taxes levied for other than general government purposes) imposed by local governmental entity be approved by a two-thirds vote of the voters within that jurisdiction, (iii) restricts the use of revenues from a special tax to the purposes or for the service for which the special tax was imposed, (iv) prohibits the imposition of ad valorem taxes on real property by local government entities except as permitted by Article XIIIA, (v) prohibits the imposition of transaction taxes and sales taxes on the sale of real property by local governmentalentities, and (vi) requires that any tax imposed by a local governmental entity on or after August 1, 1985, be ratified by a majority vote of the electorate within two years of the adoption of the initiative or be terminated by November 15, 1988.

C-15 A finalState Court of Appeal decision has declared the voter majority provisions referred to above to be unconstitutional. A second appellate court decision held unconstitutional both the effectivedate and majority­ vote provisions of Proposition 62. However, the California Supreme Court has ordered that the latter decision not be published (making it unavailable for citation as precedent) thus creating uncertainty as to the voter­ approval requirement of Proposition 62. Consequently, the effect, if any, the initiative will have on the City is unclear.

Largest Taxpayers The ten largest taxpayers in Anaheim and their full market valuations as of March I, 1992 are as follows: CITY OF ANAHEIM Major Taxpayers ($000) Full Market Valuation Taxpayer of Property Walt Disney Productions ...... $ 586,834 Rockwell International Corporation ...... 265,375 Equitable Pacific ...... 89,775 Catellus Development Corporation ...... 59,837 Anaheim Land Associates ...... 56,163 Ciba-Geigy Corporation ...... 54,541 Pei-Chung Chao ...... 45,630 Canyon Corporate Center ...... 44,707 Weyerhaeuser Co...... 41,210 RREEF USA Fund II ...... 40,967 $1,285,039

SOURCE: Orange County Assessor's Office.

Pensions City personnel belong to the State Public Employees Retirement System (P.E.R.S.). As of June 30, 1991, P.E.R.S. had separate contracts with the State of California, 1,227 local public agencies and 57 master contracts with school districts. Membership includes state, school, city, county, and special district groups. Each has somewhat differing benefit programs and amounts of actuarial liabilities. For the Public Employees' Retirement Fund as a whole, net assets available for benefits at market value on June 30, 1991, according to the annual audit, were $56,569, 177,863, while the unfunded obligation was $7,207,109,872, representing a funded ratio of 87.3 percent. For the City, net assets available for benefits on June 30, 1992 were $388,021,566 while the unfunded obligation was $3,221,781, representing a funded ratio of 99 percent. In 1980 the City's funded ratio was 63.3 percent. The unfunded obligation is the amount by which the excess of the present value of total projected benefits over the sum of the present values of future employer normal costs and future member contributions exceeds the amount of available net assets at carrying value. Based on the actuarial valuation made as of June 30, 1992, the City's unfunded prior service cost relating to the City's participation in P.E.R.S. was zero. As of the middle of October 1982, for most of its miscellaneous employees, the City began paying the full cost to such employees' share of the P.E.R.S. contribution, equal to 7% for such miscellaneous employees' earnings. Additionally, as of July 1987, for Police public safety employees, the City began paying the fullcost of such employees' share of the P.E.R.S. contribution, thereby assuming responsibility forcontributing 9% of such employees' earnings. In January 1989, for Fire public safety employees, the City increased its contribution from 7% to 9% to begin paying the full cost of such employees' share of the P.E.R.S. contribution.

C-16 The City's contribution rate is determined by periodic actuarial valuations based on the benefit formula and the number of employees and their respective salary schedules. As of July 1, 1992, the City's contribution rate was 6.978% for miscellaneous employees and 13.448% for public safety employees. City contributions totaled $10,197,419 (net of P.E.R.S. credit of $6,318,871) in fiscal year 1991-92. During fiscal year 1983, P.E.R.S. refundedto the City their share of an actuarial gain resulting from SB46 which put a cap on the P.E.R.S. System's Reserve for Deficiencies at 1% of system assets. The City's share, $2,571,000, has been deferredin accordance with Accounting Principles Board Opinion No. 8, "Accounting for the Cost of Pension Plans", and will be amortized over a 10-year period. The effectof the amortization for the year ended June 30, 1992 is to reduce pension expense by $257,000.

Labor Relations City employees are represented by various unions, and labor relations have been generally amicable in that there have been no major strikes, work stoppages, or other incidents. Currently, 73.2% of all City employees are represented by unions, including the Anaheim Municipal Employees Association; the Anaheim Police Association; the Anaheim Fire Association; the International Brotherhood of Electrical Workers, Local 47 (IBEW) (utility department employees); the Hospital and Service Employees Union, Local 399; and the General Truck Drivers Union, Local 952. The preceding are designated representatives under the Meyer-Milias-Brown Act (Section 3500 et seq. of the Government Code of California). The expiration dates of current memoranda of understanding are: Anaheim Municipal Employees Association, October 7, 1993; Anaheim Firefighters Association, December 30, 1993; Anaheim Police Association, July 2, 1992; the InternationalBrotherhood of Electrical Workers, July 1, 1993; Hospital and Service Employees Union, Local 399, February2, 1995; and the General Truck Drivers Union, Local 952, February 2, 1995. There are no other organized employee groups. Negotiations are presently underway to renew the agreements with the Anaheim Police Association and the International Brotherhood of Electric Workers. There is no reason to believe that amicable settlements will not be reached with both groups.

Litigation There is no litigation pending or, to the knowledge of the City, threatened, questioning the corporate existence of the City, or the title of the officers of the City to their respective offices, or the power and authority of the City to execute the Resolution and make the payments thereunder. There is no litigation pending, or to the knowledge of the City, threatened, questioning or affecting in any material respect any of the financial information with respect to the City contained in the Official Statement.

Financial Statements Audited financial statements of the City forthe year ended June 30, 1992 are available upon request from the Director of Finance, City of Anaheim, P.O. Box 3222, Anaheim, California 92803.

C- 17 ( This page intentionally left blank) APPENDIX D

[Form of Proposed Opinion of Co-Bond Counsel] [ Delivery Date ] Board of Directors Anaheim Public Financing Authority Anaheim, California

Gentlemen: We have examined the Constitution and the laws of the State of California and a record of the proceedings relating to the issuance of $62,810,000 aggregate principal amount of Anaheim Public Financing Authority Revenue Bonds, Second Series 1993 (City of Anaheim Electric Utility San Juan Unit 4 Project) (the "1993 Bonds"). Pursuant to an Installment Purchase Agreement, dated as of May 1, 1993, between the Anaheim Public Financing Authority (the "Financing Authority") and the City of Anaheim (the "City") (the "Installment Purchase Agreement"), the Financing Authority has agreed to sell an entitlement in San Juan Unit 4, a coal burning power plant ( the "San Juan Unit 4 Project") to the City, and the City has agreed to purchase the San Juan Unit 4 Project and to make certain purchase payments (the "1993 Purchase Payments"). Pursuant to the Indenture of Trust (the "Indenture"), dated as of May 1, 1993, by and between The Bank of New York Trust Company of California, asTrustee ( the "Trustee") and the Financing Authority, the Financing Authority has assigned to the Trustee, among other things, the right to receive 1993 Purchase Payments from the City under the Installment Purchase Agreement. The 1993 Bonds are issued under and pursuant to the provisions relating to the joint exercise of powers found in Chapter 5 of Division 7 of Title 1 of the Government Code of California, as amended (the "Act"), and under and pursuant to the Indenture. The proceeds received fromthe sale of the 1993 Bonds will provide funds to finance costs of the San Juan Unit 4 Project. The 1993 Bonds are secured by, among other things, a pledge, charge and lien upon Project Revenues, which consist of 1993 Purchase Payments to be made by the City under the Installment Purchase Agreement. The Installment Purchase Agreement provides for the payment of 1993 Purchase Payments by the City from Surplus Revenues in the Qualified Obligations Account (as defined in the Installment Purchase Agreement). Capitalized terms used herein which are not defined herein shall have the meanings given such terms in the Installment Purchase Agreement. The City has previously incurred Qualified Obligations. The City reserves the right to issue or incur additional Qualified Obligations, the payments under which are on a parity with the 1993 Purchase Payments, upon the terms and conditions stated in the Installment Purchase Agreement. The 1993 Bonds are dated as provided in the Indenture and mature on October 1 of the years and in the amounts, and the interest on the 1993 Bonds shall be payable at the rates, as set forth below: Principal Principal Maturity Amount of Interest Maturity Amount of Interest (October 1) 1993 Bonds Rate (October 1) 1993 Bonds Rate 1994 $540,000 4.500% 2003 $ 215,000 4.900% 1995 535,000 4.500 2004 175,000 5.000 1996 510,000 4.500 2005 140,000 5.100 1997 485,000 4.500 2006 200,000 5.200 1998 465,000 4.500 2007 170,000 5.250 1999 440,000 4.500 2008 145,000 5.375 2000 410,000 4.500 2009 120,000 5.400 2001 290,000 4.600 2022 57,720,000 5.750 2002 250,000 4.800

D-1 The 1993 Bonds are deliverable in the denomination of $5,000 or any integral multiple thereof. The 1993 Bonds are subject to optional and mandatory redemption prior to maturity in the manner and upon the terms set forth in the Indenture. Neither the 1993 Bonds nor the obligation of the City to make 1993 Purchase Payments constitutes a debt of the City, the State of California or any political subdivision thereof within the meaning of any statutory or constitutional debt limitation. Neither the 1993 Bonds nor the obligation of the City to make 1993 Purchase Payments constitutes a pledge of the faith and credit of the Financing Authority, the City, the State of California or any other political subdivision thereof. We are of the opinion that: 1. Each of the Installment Purchase Agreement and the Indenture has been duly authorized, executed and delivered by the Financing Authority and constitutes a valid, legal and binding obligation of the Financing Authority, enforceable in accordance with its terms. The Installment Purchase Agreement has been duly authorized, executed and delivered by the City and constitutes a valid, legal and binding obligation of the City, enforceable in accordance with its terms. 2. The 1993 Bonds have been duly and validly authorized and issued by the Financing Authority in accordance with the Constitution and statutes of the State of California, including the Act, and the Indenture. The 1993 Bonds constitute the valid and binding obligations of the Financing Authority as provided in the Indenture, are enforceablein accordance with their terms and the terms of the Indenture and are entitled to the benefits of the Act and the Indenture. 3. The InternalRevenue Code of 1986 (the "Code") sets forth certainrequirements which must be met subsequent to the initial issuance of the 1993 Bonds for the interest received by the Owners of the 1993 Bonds to be and remain excluded from gross income for Federal income tax purposes. Noncompli­ ance with such requirements could cause the interest received by the Owners of the 1993 Bonds to be included in gross income retroactive to the date of initial issuance of the 1993 Bonds. The Financing Authority has covenanted in the Indenture to maintain the exclusion of the interest received by the Owners of the 1993 Bonds from gross income forFederal income tax purposes pursuant to section 103 (a) of the Code. In our opinion, under existing law, and assuming compliance with the aforementioned covenant, the interest received by the Owners of the 1993 Bonds is excluded from gross income forFederal income tax purposes. The 1993 Bonds are not "specified private activity bonds" within the meaning of section 57(a) (5) of the Code and, therefore, the interest received by the Owners of the 1993 Bonds will not be treated as a preference item for purposes of computing the alternative minimum tax imposed by section 55 of the Code. However, we note that a portion of the interest received on 1993 Bonds owned by corporations may be subject to the Federal alternative minimum tax, which is based in part on adjusted net book income or adjusted current earnings. The interest received by the Owners of the 1993 Bonds is exempt from personal income taxes of the State of California. Except as stated in the immediately preceding two paragraphs, we express no opinion as to any Federal or state tax consequences of the ownership of or disposition of the 1993 Bonds. The opinions expressed in paragraphs 1 and 2 hereof are qualifiedto the extent that enforceabilityof the Installment Purchase Agreement, the Indenture and the 1993 Bonds may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws or equitable principles relating to or limiting creditors' rights generally and by the application of equitable principles if equitable remedies are sought.

Very truly yours,

D-2 Financial Guaranty Insurance APPENDIX E Company = 115 Broadway FGIC. New Yo rk, NY 10006 (212) 312-3000 (800) 352-0001

A GE Gapital Company

Municipal Bond New Issue Insurance Policy

Issuer: Policy Number:

Control Number:

Bonds: Premium:

Financial Guaranty Insurance Company ("Financial Guaranty"), a New Yo rk

consideration of the payment of the premium and subject to the terms of thi olicy

and irrevocably agrees topay to Citibank, N.A.; or its successor, �ent

benefitof Bondholders, that portion of the principal and int on the "Bonds") which shall become Due for Payment but be un · by

Financial Guaranty will make such paymen p ci becomes Due for Payment or on th F." cial Guaranty shall have received Notice of Nonpay wt urse to the Bondholder the face amount of pri yme ut is unpaid by reason of

Nonpayment b , in form reasonably satisfactory to it, of (i) eviden the t e principal or interest Due for Payment and ments assi ment, that all of the Bondholder's right.:; to ( ii}L.1 -MIQ: gn t . ent shall thereupon vest in Financial Guaranty. Upon ty shall become tht" owner of the Bond, appurtenant coupon or right to erest ch Bond and shall be fully subrogated to all of the Bondholder's rights older's right to payment thereof.

is non-cancellable for any n-,aso n. The premium on this Policy is not refundable for any reason,

payment of the Bonds prior to their maturity. This Po licy doesnot insure against loss of any ment premium which may at any time be payable with respect to any Bond.

As used herein, the term "Bondholder" means, as to a particular Bond, the person other than the Issuer who, at the time of Nonpayment, is entitled under the terms of such Bond to payment thereof. "Due for

Payment" means, when referring to the principal of a Bond, the stated maturity date thereof or the date on which the same shall have been duly called for mandatory sinking fund redemption and does not refer to any earlier date on which payment is due by reason of call for redemption ( other than by mandatory sinking fund redemption), acceleration or other advancement of maturity and means, when referring to interest on a

FGIC is a registered servicemark used by Financial Guaranty Insurance Company under license from its parentcompany. FGIC Corporation. Form 90008/92) ( Page 1 of 2

E-l Financial Guaranty Insurance Company 115 Broadwav FGIC. New Yo rk, NY 10006 (212) 312-3000 (800) 352-0001

A GE Capital Company

Municipal Bond New Issue Insurance Policy

Bond, the stated date for paymf'ntof intf'rf'st . "Nonpayment"' in rt'spect of a Bond me,ans the failure of the Issuer to have provided sufficient funds to the paying agt'nt for paymt'nt in full of all principal and interest Due for Payment on such Bond. "Notire" me,ans telt'phonic or tt'lt'graphic notice. subsequently confirmed i writing, or written notic,e by rt'gistered or certified mail, from a Bondholdf'r or a paying agent for the liOl"il1i� to Financial Guaranty. "Business Day" mt',ans any day othn than a Saturday, Sunday or a datlilll•'*1.1� the Fiscal Agent is authorized by law to remain dost'd.

In Witness Whereof, Financial Guaranty has c,aused this Po licy to be affixed signed by its duly authorized officers in facsimilf' to becornt' effective and b ding by virtue of the c,,o untersignatureof its duly authorizt'd represent ·

President

Authorized Representative

< �<�s that it has agn't"d to perform the duties of Fis<·i1I A�ent under this Poli<·y.

Authorized Officer

FGIC is a registered service mark used by Financial Guaranty Insurance Company under license from its parent company, FGIC Corporation.

Form 9000 ( 8/92) Page 2 of 2

E-2 Financial Guaranty Insurance Company 115 Broadway FGIC. New Yo rk, NY 10006 (212) 312-3000 (800) 352-0001

A GE Capital Company

Endorsement To Financial Guaranty Insurance Company Insurance Policy

PolicyNumber: Control Number:

It is further understood that the term "Nonpayment" in ws pect of a Bond includ or interest made to a Bondholder by or on behalfof the issuer of such Bon such Bondholderpursuant to the United Statf'S Bankruptcy Code by a trus with a final, nonappealable orderof a court having competent ·

In Witness Whereof, Financial Guaranty has caused and to be signed by its duly authorized office

Guaranty by virtue of the countersignature

Authorized Representative

owledgedas of the Effective Date writtenabove :

Authorized Officer

Citibank, N.A., as Fiscal Agent

FGIC is a registered service mark used by Financial Guaranty Insurance Company under license from its parent company, FGIC Corporation .

Form E-0002 (8/92) Page 1 of 1 E-3 ( This page intentionally left blank)