south feather water and power agency · soares, sexton & cooper, llp, and by stradling yocca...

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NEW ISSUE-BOOK-ENTRY ONLY RATINGS: S&P (Uninsured/Underlying): “A” S&P (Insured Certificates):“AA” See “RATINGS” herein. In the opinion of Orrick Herrington & Sutcliffe LLP, Special Counsel, based on existing laws, regulations, rulings and court decisions and assuming, among other matters, the accuracy of certain representations and compliance with certain covenants, the portion of each 2016 Installment Payment designated as and constituting interest paid by the Agency under the 2016 Installment Purchase Contract and received by the owners of the 2016 Certificates is excluded from gross income for federal income tax purposes under Section 103 of the Internal Revenue Code of 1986 and is exempt from State of California personal income taxes. Such interest evidenced by the 2016 Certificates is not a specific preference item for purposes of the federal individual or corporate alternative minimum taxable income, although Special Counsel observes that it is included in adjusted current earnings in calculating corporate alternative minimum taxable income. Special Counsel expresses no opinion regarding other federal or State tax consequences relating to the ownership or disposition of the 2016 Certificates, or the amount, accrual or receipt of each 2016 Installment Payment constituting interest. See “TAX MATTERS” herein with respect to tax consequences of the 2016 Certificates. $27,010,000 SOUTH FEATHER WATER AND POWER AGENCY 2016 CERTIFICATES OF PARTICIPATION (MINERS RANCH WATER TREATMENT PLANT IMPROVEMENT PROJECT) Evidencing Proportionate Undivided Interests in 2016 Installment Payments to be Made by the SOUTH FEATHER WATER AND POWER AGENCY Dated: Date of Delivery Due: April 1, as shown on inside cover The South Feather Water and Power Agency (the “Agency”) 2016 Certificates of Participation (Miners Ranch Water Treatment Plant Improvement Project) (the “2016 Certificates”) will be executed and delivered as fully registered certificates in book-entry form only, initially registered in the name of Cede & Co., New York, New York, as nominee of The Depository Trust Company (“DTC”), New York, New York. Purchasers will not receive certificates representing their interest in the 2016 Certificates. Individual purchases of the 2016 Certificates will be in principal amounts of $5,000 or in any integral multiples of $5,000. Interest payable with respect to the 2016 Certificates will be payable on April 1 and October 1 of each year, commencing April 1, 2017 (the “Payment Dates”), and principal payable with respect to the 2016 Certificates will be paid on the dates set forth on the inside cover. Payments of principal of and interest with respect to the 2016 Certificates will be paid by U.S. Bank National Association, California, as trustee (the “Trustee”), to DTC for subsequent disbursement to DTC Participants who will remit such payments to the Beneficial Owners of the 2016 Certificates. The 2016 Certificates are being executed and delivered pursuant to the provisions of a Trust Agreement, dated as of October 1, 2016 (the “Trust Agreement”), among the Agency, the South Feather Water and Power Agency Financing Corporation, a California non-profit corporation (the “Corporation’’) and the Trustee. The 2016 Certificates are being issued (i) to pay the costs of acquiring, constructing, rehabilitating and equipping the Agency’s water treatment plant (the “Miners Ranch Water Treatment Plant”) by the South Feather Water and Power Agency (see “THE MINERS RANCH PROJECT” herein), (ii) refund in full the Agency’s Outstanding 2012 Water Revenue Refunding Bonds (the “Refunded Bonds”)(see “PLAN OF FINANCE” herein); and (iii) to pay certain costs of issuing the 2016 Certificates (see “ESTIMATED SOURCES AND USES OF FUNDS” herein), including costs of the Policy (defined herein) and a municipal bond debt service reserve insurance policy (as more particularly described herein, the “Reserve Policy”). The 2016 Certificates evidence undivided proportionate interests in certain installment payments (the “2016 Installment Payments”), and the interest thereon, to be made by the Agency pursuant to an 2016 Installment Purchase Contract, dated as of October 1, 2016 (the “2016 Installment Purchase Contract”), between the Agency and the Corporation. The payment of 2016 Installment Payments, and the interest thereon, is secured by a pledge of the Net Revenues (as defined herein) of the Agency’s water and hydroelectric system (the “Enterprise”). The Corporation, for the benefit of the Owners of the 2016 Certificates, has assigned, among other things, its right to receive 2016 Installment Payments to the Trustee pursuant to an Assignment Agreement, dated as of October 1, 2016 (the “Assignment Agreement”), by and between the Corporation and the Trustee. The 2016 Certificates are subject to prepayment prior to their scheduled payment dates as described herein. See “THE 2016 CERTIFICATES” herein. This cover page contains information for general reference only, and is not a summary of the security or terms of this issue. Investors must read the entire Official Statement, including the section entitled “RISK FACTORS,” for a discussion of special factors which should be considered, in addition to the other matters set forth herein, in considering the investment quality of the 2016 Certificates. Capitalized terms used on this cover page and not otherwise defined shall have the meanings set forth herein. THE AGENCY’S OBLIGATION TO MAKE 2016 INSTALLMENT PAYMENTS, AND THE INTEREST THEREON, IS A SPECIAL OBLIGATION OF THE AGENCY PAYABLE SOLELY FROM NET REVENUES AND OTHER FUNDS PROVIDED FOR IN THE 2016 INSTALLMENT PURCHASE CONTRACT. NEITHER THE 2016 CERTIFICATES NOR THE OBLIGATION OF THE AGENCY TO MAKE 2016 INSTALLMENT PAYMENTS, AND THE INTEREST THEREON, CONSTITUTES A DEBT OF THE AGENCY OR OF THE STATE OF CALIFORNIA OR OF ANY POLITICAL SUBDIVISION THEREOF WITHIN THE MEANING OF ANY CONSTITUTIONAL OR STATUTORY DEBT LIMIT OR RESTRICTION, OR AN OBLIGATION FOR WHICH THE AGENCY IS OBLIGATED TO LEVY OR PLEDGE ANY FORM OF TAXATION OR FOR WHICH THE AGENCY HAS LEVIED OR PLEDGED ANY FORM OF TAXATION. The scheduled payment of principal of and interest on the 2016 Certificates maturing on April 1 of the years 2019 through 2046, inclusive (the “Insured Certificates”), when due will be guaranteed under an insurance policy (the “Policy”) to be issued concurrently with the delivery of the Insured Certificates by Assured Guaranty Municipal Corp. The 2016 Certificates are offered when, as and if sold, executed and delivered, subject to the approval of their legality by Orrick Herrington & Sutcliffe LLP, Special Counsel to the Agency. Certain legal matters will be passed upon for the Agency by its general counsel, Minasian, Meith, Soares, Sexton & Cooper, LLP, and by Stradling Yocca Carlson & Rauth, a Professional Corporation, Disclosure Counsel. Certain legal matters will be passed upon for the Underwriter by their counsel, Hawkins Delafield & Wood LLP. FirstSouthwest, a Division of Hilltop Securities Inc., is serving as municipal advisor to the Agency. It is anticipated that the 2016 Certificates in book-entry form, will be available for delivery to DTC in New York, New York, on or about October 20, 2016. Date: October 6, 2016

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Page 1: South Feather Water and Power Agency · Soares, Sexton & Cooper, LLP, and by Stradling Yocca Carlson & Rauth, a Professional Corporation, Disclosure Counsel. Certain legal matters

NEW ISSUE-BOOK-ENTRY ONLY RATINGS: S&P (Uninsured/Underlying): “A”S&P (Insured Certificates):“AA”

See “RATINGS” herein.

In the opinion of Orrick Herrington & Sutcliffe LLP, Special Counsel, based on existing laws, regulations, rulings and court decisions and assuming, among other matters, the accuracy of certain representations and compliance with certain covenants, the portion of each 2016 Installment Payment designated as and constituting interest paid by the Agency under the 2016 Installment Purchase Contract and received by the owners of the 2016 Certificates is excluded from gross income for federal income tax purposes under Section 103 of the Internal Revenue Code of 1986 and is exempt from State of California personal income taxes. Such interest evidenced by the 2016 Certificates is not a specific preference item for purposes of the federal individual or corporate alternative minimum taxable income, although Special Counsel observes that it is included in adjusted current earnings in calculating corporate alternative minimum taxable income. Special Counsel expresses no opinion regarding other federal or State tax consequences relating to the ownership or disposition of the 2016 Certificates, or the amount, accrual or receipt of each 2016 Installment Payment constituting interest. See “TAX MATTERS” herein with respect to tax consequences of the 2016 Certificates.

$27,010,000SOUTH FEATHER WATER AND POWER AGENCY

2016 CERTIFICATES OF PARTICIPATION(MINERS RANCH WATER TREATMENT PLANT IMPROVEMENT PROJECT)

Evidencing Proportionate Undivided Interests in2016 Installment Payments to be Made by the

SOUTH FEATHER WATER AND POWER AGENCY

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

The South Feather Water and Power Agency (the “Agency”) 2016 Certificates of Participation (Miners Ranch Water Treatment Plant Improvement Project) (the “2016 Certificates”) will be executed and delivered as fully registered certificates in book-entry form only, initially registered in the name of Cede & Co., New York, New York, as nominee of The Depository Trust Company (“DTC”), New York, New York. Purchasers will not receive certificates representing their interest in the 2016 Certificates. Individual purchases of the 2016 Certificates will be in principal amounts of $5,000 or in any integral multiples of $5,000. Interest payable with respect to the 2016 Certificates will be payable on April 1 and October 1 of each year, commencing April 1, 2017 (the “Payment Dates”), and principal payable with respect to the 2016 Certificates will be paid on the dates set forth on the inside cover. Payments of principal of and interest with respect to the 2016 Certificates will be paid by U.S. Bank National Association, California, as trustee (the “Trustee”), to DTC for subsequent disbursement to DTC Participants who will remit such payments to the Beneficial Owners of the 2016 Certificates.

The 2016 Certificates are being executed and delivered pursuant to the provisions of a Trust Agreement, dated as of October 1, 2016 (the “Trust Agreement”), among the Agency, the South Feather Water and Power Agency Financing Corporation, a California non-profit corporation (the “Corporation’’) and the Trustee. The 2016 Certificates are being issued (i) to pay the costs of acquiring, constructing, rehabilitating and equipping the Agency’s water treatment plant (the “Miners Ranch Water Treatment Plant”) by the South Feather Water and Power Agency (see “THE MINERS RANCH PROJECT” herein), (ii) refund in full the Agency’s Outstanding 2012 Water Revenue Refunding Bonds (the “Refunded Bonds”)(see “PLAN OF FINANCE” herein); and (iii) to pay certain costs of issuing the 2016 Certificates (see “ESTIMATED SOURCES AND USES OF FUNDS” herein), including costs of the Policy (defined herein) and a municipal bond debt service reserve insurance policy (as more particularly described herein, the “Reserve Policy”). The 2016 Certificates evidence undivided proportionate interests in certain installment payments (the “2016 Installment Payments”), and the interest thereon, to be made by the Agency pursuant to an 2016 Installment Purchase Contract, dated as of October 1, 2016 (the “2016 Installment Purchase Contract”), between the Agency and the Corporation. The payment of 2016 Installment Payments, and the interest thereon, is secured by a pledge of the Net Revenues (as defined herein) of the Agency’s water and hydroelectric system (the “Enterprise”). The Corporation, for the benefit of the Owners of the 2016 Certificates, has assigned, among other things, its right to receive 2016 Installment Payments to the Trustee pursuant to an Assignment Agreement, dated as of October 1, 2016 (the “Assignment Agreement”), by and between the Corporation and the Trustee.

The 2016 Certificates are subject to prepayment prior to their scheduled payment dates as described herein. See “THE 2016 CERTIFICATES” herein.

This cover page contains information for general reference only, and is not a summary of the security or terms of this issue. Investors must read the entire Official Statement, including the section entitled “RISK FACTORS,” for a discussion of special factors which should be considered, in addition to the other matters set forth herein, in considering the investment quality of the 2016 Certificates. Capitalized terms used on this cover page and not otherwise defined shall have the meanings set forth herein.

THE AGENCY’S OBLIGATION TO MAKE 2016 INSTALLMENT PAYMENTS, AND THE INTEREST THEREON, IS A SPECIAL OBLIGATION OF THE AGENCY PAYABLE SOLELY FROM NET REVENUES AND OTHER FUNDS PROVIDED FOR IN THE 2016 INSTALLMENT PURCHASE CONTRACT. NEITHER THE 2016 CERTIFICATES NOR THE OBLIGATION OF THE AGENCY TO MAKE 2016 INSTALLMENT PAYMENTS, AND THE INTEREST THEREON, CONSTITUTES A DEBT OF THE AGENCY OR OF THE STATE OF CALIFORNIA OR OF ANY POLITICAL SUBDIVISION THEREOF WITHIN THE MEANING OF ANY CONSTITUTIONAL OR STATUTORY DEBT LIMIT OR RESTRICTION, OR AN OBLIGATION FOR WHICH THE AGENCY IS OBLIGATED TO LEVY OR PLEDGE ANY FORM OF TAXATION OR FOR WHICH THE AGENCY HAS LEVIED OR PLEDGED ANY FORM OF TAXATION.

The scheduled payment of principal of and interest on the 2016 Certificates maturing on April 1 of the years 2019 through 2046, inclusive (the “Insured Certificates”), when due will be guaranteed under an insurance policy (the “Policy”) to be issued concurrently with the delivery of the Insured Certificates by Assured Guaranty Municipal Corp.

The 2016 Certificates are offered when, as and if sold, executed and delivered, subject to the approval of their legality by Orrick Herrington & Sutcliffe LLP, Special Counsel to the Agency. Certain legal matters will be passed upon for the Agency by its general counsel, Minasian, Meith, Soares, Sexton & Cooper, LLP, and by Stradling Yocca Carlson & Rauth, a Professional Corporation, Disclosure Counsel. Certain legal matters will be passed upon for the Underwriter by their counsel, Hawkins Delafield & Wood LLP. FirstSouthwest, a Division of Hilltop Securities Inc., is serving as municipal advisor to the Agency. It is anticipated that the 2016 Certificates in book-entry form, will be available for delivery to DTC in New York, New York, on or about October 20, 2016.

Date: October 6, 2016

Page 2: South Feather Water and Power Agency · Soares, Sexton & Cooper, LLP, and by Stradling Yocca Carlson & Rauth, a Professional Corporation, Disclosure Counsel. Certain legal matters

MATURITY SCHEDULE

$27,010,000 SOUTH FEATHER WATER AND POWER AGENCY

2016 CERTIFICATES OF PARTICIPATION (MINERS RANCH WATER TREATMENT PLANT IMPROVEMENT PROJECT)

Maturity Date

(April 1)

Principal Amount

Interest

Rate Yield Price

CUSIP

Numbers†

2017 $250,000 2.000% 0.840% 100.516 837838AC5 2018 570,000 2.000 0.960 101.490 837838AD3 2019* 580,000 3.000 1.030 104.748 837838AE1 2020* 600,000 3.000 1.140 106.269 837838AF8 2021* 615,000 3.000 1.260 107.501 837838AG6 2022* 635,000 3.000 1.390 108.417 837838AH4 2023* 655,000 3.000 1.540 108.927 837838AJ0 2024* 675,000 3.000 1.650 109.423 837838AK7 2025* 695,000 4.000 1.800 117.167 837838AL5 2026* 720,000 4.000 1.960 117.514 837838AM3 2027* 750,000 4.000 2.130 115.924** 837838AN1 2028* 780,000 4.000 2.320 114.177** 837838AP6 2029* 810,000 4.000 2.520 112.372** 837838AQ4 2030* 845,000 4.000 2.600 111.659** 837838AR2 2031* 880,000 3.000 3.050 99.418 837838AS0 2032* 905,000 3.000 3.100 98.778 837838AT8 2033* 930,000 3.000 3.130 98.337 837838AU5 2034* 960,000 3.000 3.180 97.602 837838AV3 2035* 990,000 3.000 3.230 96.821 837838AW1 2036* 1,015,000 3.000 3.270 96.136 837838AX9

$5,590,000 3.250% Series 2016 Term Certificates Due April 1, 2041* – Yield 3.380% Price 97.847- CUSIP 837838AY7†

$6,560,000 3.250% Series 2016 Term Certificates Due April 1, 2046* – Yield 3.430% Price 96.678- CUSIP 837838AZ4†

* Insured Bonds ** Priced to par call on April 1, 2026.

† Copyright 2016, American Bankers Association. CUSIP® is a registered trademark of the American Bankers Association. CUSIP data herein is provided by the CUSIP Service Bureau, managed on behalf of the American Bankers Association by Standard & Poor’s. This data is not intended to create a database and does not serve in any way as a substitute for the CUSIP Services Bureau. CUSIP numbers are included solely for the convenience of the registered owners of the applicable 2016 Certificates. None of the Agency or the Underwriter are responsible for the selection or uses of these CUSIP numbers, and no representation is made as to their correctness on the applicable 2016 Certificates or as included herein.

Page 3: South Feather Water and Power Agency · Soares, Sexton & Cooper, LLP, and by Stradling Yocca Carlson & Rauth, a Professional Corporation, Disclosure Counsel. Certain legal matters

SOUTH FEATHER WATER AND POWER AGENCY (Butte County, California)

BOARD OF DIRECTORS

Lou Lodigiani, President Dennis Moreland, Vice President

Jim Edwards, Director Tod Hickman, Director

John Starr, Director

AGENCY STAFF

Michael C. Glaze, Chief Executive Officer Rath Moseley, General Manager

W. Steven Wong, Finance Division Manager Minasian, Meith, Soares, Sexton & Cooper, LLP, Agency Counsel

SPECIAL SERVICES

Special Counsel Orrick Herrington & Sutcliffe LLP

Disclosure Counsel Stradling Yocca Carlson & Rauth, a Professional Corporation

Municipal Advisor FirstSouthwest, a Division of Hilltop Securities Inc.

Trustee U.S. Bank National Association

Page 4: South Feather Water and Power Agency · Soares, Sexton & Cooper, LLP, and by Stradling Yocca Carlson & Rauth, a Professional Corporation, Disclosure Counsel. Certain legal matters

No dealer, broker, salesperson or other person has been authorized by the Corporation, the Agency or the Underwriter to give any information or to make any representations with respect to the offer or sale of the 2016 Certificates other than as set forth in this Official Statement and, if given or made, such other information or representation must not be relied upon as having been authorized by the Agency or the Underwriter. This Official Statement does not constitute an offer to sell or the solicitation of an offer to buy nor shall there be any sale of the 2016 Certificates by a person in any jurisdiction in which it is unlawful for such person to make such an offer, solicitation or sale.

This Official Statement is not to be construed as a contract with the purchasers of the 2016 Certificates. Statements contained in this Official Statement that involve estimates, forecasts or matters of opinion, whether or not expressly so described herein, are intended solely as such and are not to be construed as representations of facts.

The information set forth in this Official Statement has been obtained from official sources and other sources that are believed to be reliable, but it is not guaranteed as to accuracy or completeness, and is not to be construed as a representation of the Underwriter. The information and expressions of opinion herein are subject to change without notice, and neither the delivery of this Official Statement nor any sale made hereunder shall under any circumstances create any implication that there has been no change in the affairs of the Corporation or the Agency since the date hereof. This Official Statement is submitted in connection with the sale of the 2016 Certificates referred to herein and may not be reproduced or used, in whole or in part, for any other purpose.

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

Certain statements included or incorporated by reference in this Official Statement constitute “forward-looking statements” within the meaning of the United States Private Securities Litigation Reform Act of 1995, Section 21E of the United States Securities Exchange Act of 1934, as amended, and Section 27A of the United States Securities Act of 1933, as amended. Such statements are generally identifiable by the terminology used such as “plan,” “expect,” “estimate,” “budget” or other similar words. The achievement of certain results or other expectations contained in such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause actual results, performance or achievements described to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. No assurance is given that actual results will meet the Corporation’s or the Agency’s forecasts in any way, regardless of the level of optimism communicated in the information. The Corporation is not obligated to issue any updates or revisions to the forward-looking statements if or when its expectations, or events, conditions or circumstances on which such statements are based occur. See “CONTINUING DISCLOSURE” herein.

Assured Guaranty Municipal Corp. (“AGM”) makes no representation regarding the 2016 Certificates or the advisability of investing in the 2016 Certificates. In addition, AGM has not independently verified, makes no representation regarding, and does not accept any responsibility for the accuracy or completeness of this Official Statement or any information or disclosure contained herein, or omitted herefrom, other than with respect to the accuracy of the information regarding AGM supplied by AGM and presented under the heading “Bond Insurance” and “Appendix F - Specimen Municipal Bond Insurance Policy”.

In connection with the offering of the 2016 Certificates, the Underwriter may overallot or effect transactions that stabilize or maintain the market prices of the 2016 Certificates at levels above that which might otherwise prevail in the open market. Such stabilizing, if commenced, may be discontinued at any time. The Underwriter may offer and sell the 2016 Certificates to certain dealers, dealer banks and banks acting as agent at prices lower than the public offering prices stated on the inside cover page of this Official Statement, and those public offering prices may be changed from time to time by the Underwriter.

The 2016 Certificates have not been registered under the Securities Act of 1933, as amended (the “Securities Act”), in reliance upon an exemption from the registration requirements contained in the Securities Act. The 2016 Certificates have not been registered or qualified under the securities laws of any state.

The Agency maintains a website, however, the information presented on the website is not a part of this Official Statement and should not be relied on in making an investment decision with respect to the 2016 Certificates.

Page 5: South Feather Water and Power Agency · Soares, Sexton & Cooper, LLP, and by Stradling Yocca Carlson & Rauth, a Professional Corporation, Disclosure Counsel. Certain legal matters

i

TABLE OF CONTENTS

Page

INTRODUCTION ........................................................................................................................................ 1 General ...................................................................................................................................................... 1 The Agency and the Corporation .............................................................................................................. 1 The 2016 Certificates ................................................................................................................................ 1 Purpose ...................................................................................................................................................... 2 Security for the 2016 Certificates ............................................................................................................. 2 Bond Insurance ......................................................................................................................................... 2 Prepayment ............................................................................................................................................... 2 Reserve Fund ............................................................................................................................................ 3 Assignment ............................................................................................................................................... 3 Risk Factors .............................................................................................................................................. 3 Limited Obligations .................................................................................................................................. 3 Summaries Not Definitive ........................................................................................................................ 4

CONTINUING DISCLOSURE .................................................................................................................... 4 PLAN OF FINANCE .................................................................................................................................... 4 THE MINERS RANCH PROJECT .............................................................................................................. 4 ESTIMATED SOURCES AND USES OF FUNDS .................................................................................... 6 THE 2016 CERTIFICATES ......................................................................................................................... 6

General ...................................................................................................................................................... 6 Prepayment of the 2016 Certificates ......................................................................................................... 7 Book-Entry System ................................................................................................................................... 9

SCHEDULE OF 2016 INSTALLMENT PAYMENTS ............................................................................. 10 SECURITY FOR THE 2016 CERTIFICATES .......................................................................................... 11

General .................................................................................................................................................... 11 2016 Installment Payments ..................................................................................................................... 12 Limitations on Parity Obligations and Superior Obligations .................................................................. 12 Rate Covenant ......................................................................................................................................... 14 Reserve Fund .......................................................................................................................................... 14 Rate Stabilization Fund ........................................................................................................................... 15 2016 Installment Payments to be Unconditional .................................................................................... 15 Additional Covenants .............................................................................................................................. 15 Bond Insurance ....................................................................................................................................... 16

BOND INSURANCE ................................................................................................................................. 17 Bond Insurance Policy ............................................................................................................................ 17 Assured Guaranty Municipal Corp. ........................................................................................................ 17

THE AGENCY ........................................................................................................................................... 19 General .................................................................................................................................................... 19 Land and Land Use ................................................................................................................................. 19 Governance and Management ................................................................................................................. 19 Powers ..................................................................................................................................................... 22

Page 6: South Feather Water and Power Agency · Soares, Sexton & Cooper, LLP, and by Stradling Yocca Carlson & Rauth, a Professional Corporation, Disclosure Counsel. Certain legal matters

ii

Budget Process ........................................................................................................................................ 22 Insurance ................................................................................................................................................. 22 Outstanding Indebtedness ....................................................................................................................... 22 Retirement Benefits................................................................................................................................. 23 Other Post-Employment Benefits ........................................................................................................... 23

WATER FACILITIES, OPERATIONS AND REVENUES ...................................................................... 24 Generally ................................................................................................................................................. 24 Water Rights ........................................................................................................................................... 26 NYWD Agreement ................................................................................................................................. 27 Historical Water Use ............................................................................................................................... 28 Current Drought ...................................................................................................................................... 28 Historical Water Connections ................................................................................................................. 30 Historical Water Deliveries ..................................................................................................................... 31 Largest Customers ................................................................................................................................... 32 Water System Rates and Charges ........................................................................................................... 32 Water Facilities Capital Improvements ................................................................................................... 33 Historical Water Sale Revenues .............................................................................................................. 35 Property Tax Revenues ........................................................................................................................... 35

HYDROELECTRIC FACILITIES, OPERATIONS AND REVENUES ................................................... 36 Generally ................................................................................................................................................. 36 Power Purchase Agreement .................................................................................................................... 37 FERC License Renewal .......................................................................................................................... 37 Historical Hydroelectric Revenues ......................................................................................................... 38

AGENCY FINANCIAL INFORMATION ................................................................................................ 38 Financial Statements ............................................................................................................................... 38 Historical Operating Results and Debt Service Coverage ...................................................................... 39 Projected Operating Results and Debt Service Coverage ....................................................................... 40 Reserves .................................................................................................................................................. 42

THE CORPORATION ............................................................................................................................... 42 CONSTITUTIONAL LIMITATIONS ....................................................................................................... 42

Constitutional Limitations on Governmental Spending .......................................................................... 42 Proposition 218 ....................................................................................................................................... 43 Proposition 26 ......................................................................................................................................... 44 Future Initiatives ..................................................................................................................................... 45

RISK FACTORS ........................................................................................................................................ 45 Rate Covenant Not a Guarantee .............................................................................................................. 45 Water Service Demand ........................................................................................................................... 45 Enterprise Expenses ................................................................................................................................ 46 Construction Risks .................................................................................................................................. 46 Limitations on Revenues ......................................................................................................................... 46 Statutory and Regulatory Compliance .................................................................................................... 46 Limited Recourse on Default .................................................................................................................. 47

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Limitations on Remedies Available; Bankruptcy ................................................................................... 47 No Obligation to Tax .............................................................................................................................. 47 Expiration of Power Purchase Contract .................................................................................................. 47 Change in Law ........................................................................................................................................ 48 Seismic Considerations ........................................................................................................................... 48

UNDERWRITING ..................................................................................................................................... 48 LEGAL MATTERS .................................................................................................................................... 48 TAX MATTERS ......................................................................................................................................... 48 LITIGATION .............................................................................................................................................. 50 RATINGS ................................................................................................................................................... 51 MUNICIPAL ADVISOR ............................................................................................................................ 51 AUDITED FINANCIAL STATEMENTS ................................................................................................. 51 MISCELLANEOUS ................................................................................................................................... 51 APPENDIX A – SUMMARY OF PRINCIPAL LEGAL DOCUMENTS ............................................... A-1 APPENDIX B – AUDITED FINANCIAL STATEMENTS OF THE AGENCY FOR FISCAL

YEAR 2015 AND 2014 ................................................................................................ B-1 APPENDIX C – PROPOSED FORM OF FINAL OPINION .................................................................. C-1 APPENDIX D – FORM OF CONTINUING DISCLOSURE CERTIFICATE ....................................... D-1 APPENDIX E – BOOK-ENTRY PROVISIONS ..................................................................................... E-1 APPENDIX F – SPECIMEN MUNICIPAL BOND INSURANCE POLICY .......................................... F-1

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$27,010,000 SOUTH FEATHER WATER AND POWER AGENCY

2016 CERTIFICATES OF PARTICIPATION (MINERS RANCH WATER TREATMENT PLANT IMPROVEMENT PROJECT)

Evidencing Proportionate Undivided Interests in 2016 Installment Payments to be Made by the

SOUTH FEATHER WATER AND POWER AGENCY

INTRODUCTION

General

The purpose of this Official Statement (which includes the cover page and the Appendices attached hereto) is to provide information concerning the execution and delivery of the South Feather Water and Power Agency 2016 Certificates of Participation (Miners Ranch Water Treatment Plant Improvement Project) (the “2016 Certificates”), in the aggregate principal amount of $27,010,000, evidencing proportionate interests of the registered owners thereof in certain installment payments (described herein) to be made by the South Feather Water and Power Agency (the “Agency”) to the South Feather Water and Power Agency Financing Corporation (the “Corporation”).

The Agency and the Corporation

The Agency was formed in 1919 as an irrigation district under the Irrigation District Law, Division 11 of the Water Code (§ 20500 et seq.) of the State of California, for purpose of supplying water for irrigation purposes. The Agency includes approximately 54,000 acres in southern and southeastern Butte County and encompasses the unincorporated areas adjacent to the City of Oroville, as well as the unincorporated communities of Kelly Ridge, Bangor, and Palermo. The Agency has a population of approximately 17,500 and currently provides water services to approximately 6,700 residential connections and approximately 500 agricultural connections.

The Agency currently has certain water rights from the south fork of the Feather River and certain tributaries for hydroelectric generating purposes, which water may be diverted by the Agency each year for consumptive uses. The Agency owns and operates certain hydroelectric facilities, the power and energy from which are sold to Pacific Gas and Electric Company (“PG&E”) pursuant to a Power Purchase Agreement between the Agency and PG&E, dated April, 2009 (the “Power Purchase Agreement”). Unless extended by the parties, the Power Purchase Agreement expires on June 30, 2020. In connection with such hydroelectric facilities the Agency receives certain fixed and variable payments from PG&E, which constitute a significant portion of the Agency’s revenues. See “HYDROELECTRIC FACILITIES, OPERATIONS AND REVENUES– Power Purchase Contract” herein.

The Corporation is a nonprofit public benefit corporation created in 1995 for the purpose of aiding the financing of projects for the Agency. The board of directors of the Agency serves as the board of directors of the Corporation.

The 2016 Certificates

The 2016 Certificates are being executed and delivered pursuant to the provisions of a Trust Agreement, dated as of October 1, 2016 (the “Trust Agreement”), among the Agency, the Corporation and U.S. Bank National Association, as trustee (the “Trustee”). The 2016 Certificates evidence undivided proportionate interests in certain installment payments (the “2016 Installment Payments”), and the interest thereon, to be made by the Agency pursuant to an 2016 Installment Purchase Contract, dated as of

Page 10: South Feather Water and Power Agency · Soares, Sexton & Cooper, LLP, and by Stradling Yocca Carlson & Rauth, a Professional Corporation, Disclosure Counsel. Certain legal matters

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October 1, 2016 (the “2016 Installment Purchase Contract”), between the Agency and the Corporation. The 2016 Certificates are subject to prepayment prior to their scheduled payment dates as described herein.

Purpose

The proceeds of the sale of the 2016 Certificates will be used (i) to pay the costs of acquiring, constructing, rehabbing and equipping the Miners Ranch Project by the Agency; (ii) to refund in full the Agency’s Outstanding 2012 Water Revenue Refunding Bonds (the “Refunded Bonds”); and (iii) to pay certain costs of issuing the 2016 Certificates including costs of the Policy (defined herein) and a debt service reserve insurance policy (as more particularly described herein, the “Reserve Policy”). See “THE MINERS RANCH PROJECT,” “PLAN OF FINANCE” and “ESTIMATED SOURCES AND USES OF FUNDS” herein.

Security for the 2016 Certificates

The 2016 Certificates evidence undivided proportionate interests in the 2016 Installment Payments, and the interest thereon, to be made by the Agency pursuant to the 2016 Installment Purchase Contract. The payment of 2016 Installment Payments, and the interest thereon, is secured by a pledge of the Net Revenues (as defined herein) of the Enterprise.

Under the 2016 Installment Purchase Contract, the Agency has irrevocably pledged all Net Revenues (as defined herein) to the payment of the 2016 Installment Payments, subject to the terms and conditions of the 2016 Installment Purchase Contract. See “SECURITY FOR THE 2016 CERTIFICATES” herein. The 2016 Installment Purchase Contract further provides that the Agency may incur obligations payable from Net Revenues on a parity basis with the 2016 Installment Payments (“Parity Obligations”) only upon the satisfaction of certain conditions as described therein (see “SECURITY FOR THE 2016 CERTIFICATES- Parity Obligations” herein). Upon issuance of the 2016 Certificates and refunding of the Refunded Bonds, the 2016 Certificates will be the only Parity Obligations outstanding.

Pursuant to the 2016 Installment Purchase Contract, the Agency has covenanted to fix, prescribe and collect certain rates and charges for service provided by the Enterprise. See “SECURITY FOR THE 2016 CERTIFICATES - Rate Covenant” herein.

Bond Insurance

The scheduled payment of principal of and interest on the 2016 Certificates maturing on April 1 of the years 2019 through 2046, inclusive (the “Insured Certificates”), when due will be guaranteed under an insurance policy (the “Policy”) to be issued concurrently with the delivery of the Insured Certificates by Assured Guaranty Municipal Corp. (the “Insurer”). The Policy does not guarantee payment of the 2016 Certificates maturing on April 1, 2017 and April 1, 2018 (the “Uninsured Certificates”). See “SECURITY FOR THE 2016 CERTIFICATES – Bond Insurance,” “BOND INSURANCE” and APPENDIX F — “SPECIMEN MUNICIPAL BOND INSURANCE POLICY.”

Prepayment

The 2016 Certificates are subject to optional and mandatory prepayment as described herein.

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Reserve Fund

A Certificate Payment Reserve Fund is established pursuant to the Agreement in an amount equal to the Reserve Requirement, to be used and withdrawn by the Trustee solely for the purpose of paying 2016 Installment Payments, when due and payable to the extent that moneys deposited in the 2016 Installment Payment Fund are not sufficient for such purpose. The Agency is satisfying the Reserve Requirement through the use of the Reserve Policy to be provided by the Insurer concurrently with the issuance of the 2016 Certificates. See SECURITY FOR THE 2016 CERTIFICATES – Reserve Fund.”

Assignment

Pursuant to an Assignment Agreement, dated as of October 1, 2016 (the “Assignment Agreement”) between the Corporation and the Trustee, the Corporation has assigned to the Trustee for the benefit of the Owners of the 2016 Certificates (i) its right to receive 2016 Installment Payments from the Agency under the 2016 Installment Purchase Contract, (ii) its rights under the 2016 Installment Purchase Contract and (iii) without any further act on the part of the Corporation, any and all of the other rights of the Corporation under the 2016 Installment Purchase Contract as may be necessary to enforce payments of 2016 Installment Payments when due and otherwise to protect the interests of the Owners.

Risk Factors

There can be no assurance that the local demand for the services provided by the Enterprise will be maintained at levels described in this Official Statement, or that the Agency’s expenses for the Enterprise will be consistent with the levels described in this Official Statement. Changes in technology, decreased demand, new regulatory requirements, declines in revenues from the sale of hydroelectric power, increases in the cost of energy used by the Agency or other expenses would reduce Net Revenues, and could require substantial increases in rates or charges in order to comply with the rate covenant. Such rate increases could increase the likelihood of nonpayment, and could also further decrease demand.

If the Agency defaults on its obligation to make 2016 Installment Payments, the Trustee has the right to accelerate the total unpaid principal amount of the 2016 Certificates. However, in the event of a default and such acceleration there can be no assurance that the Agency will have sufficient Net Revenues to pay the accelerated payments.

See “RISK FACTORS” herein for a discussion of special factors which should be considered, in addition to the other matters set forth herein, in considering the investment quality of the 2016 Certificates, including a discussion of the impact of Proposition 218, Constitutional limits on fees and charges, seismic considerations, limitation on remedies and changes in law.

Limited Obligations

THE AGENCY’S OBLIGATION TO MAKE 2016 INSTALLMENT PAYMENTS, AND THE INTEREST THEREON, IS A SPECIAL OBLIGATION OF THE AGENCY PAYABLE SOLELY FROM NET REVENUES AND OTHER FUNDS PROVIDED FOR IN THE 2016 INSTALLMENT PURCHASE CONTRACT. NEITHER THE 2016 CERTIFICATES NOR THE OBLIGATION OF THE AGENCY TO MAKE 2016 INSTALLMENT PAYMENTS, AND THE INTEREST THEREON, CONSTITUTES A DEBT OF THE AGENCY OR OF THE STATE OF CALIFORNIA OR OF ANY POLITICAL SUBDIVISION THEREOF WITHIN THE MEANING OF ANY CONSTITUTIONAL OR STATUTORY DEBT LIMIT OR RESTRICTION, OR AN OBLIGATION FOR WHICH THE AGENCY IS OBLIGATED TO LEVY OR PLEDGE ANY FORM OF TAXATION OR FOR WHICH THE AGENCY HAS LEVIED OR PLEDGED ANY FORM OF TAXATION.

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Summaries Not Definitive

The summaries and references of documents, statutes, reports and other instruments referred to herein do not purport to be complete, comprehensive or definitive, and each such summary and reference is qualified in its entirety by reference to each document, statute, report, or instrument. The capitalization of any word not conventionally capitalized, or otherwise defined herein, indicates that such word is defined in a particular agreement or other document and, as used herein, has the meaning given it in such agreement or document. See “APPENDIX A – SUMMARY OF PRINCIPAL LEGAL DOCUMENTS” for the definitions of certain terms used herein and for a summary of certain provisions of the Trust Agreement and the 2016 Installment Purchase Contract.

Copies of the documents described herein will be available at the office of the Agency General Manager, 2310 Oro Quincy Highway, Oroville, California 95966.

CONTINUING DISCLOSURE

The Agency has covenanted for the benefit of Owners to provide certain financial information and operating data relating to the Agency by not later than the end of the ninth month after the end of the Agency’s Fiscal Year (presently December 31) in each year commencing with its report for the 2016 Fiscal Year (the “Agency Annual Report”) and to provide notices of the occurrence of certain enumerated events. The Agency Annual Report and notices of enumerated events will be filed by the Agency with the Municipal Securities Rulemaking Board through the Electronic Municipal Market Access (“EMMA”) website. These covenants have been made in order to assist the Underwriter in complying with Securities Exchange Commission Rule 15c2-12(b)(5). The specific nature of the information to be contained in the Agency Annual Report or the notices of enumerated events by the Agency is contained in “APPENDIX D- FORM OF CONTINUING DISCLOSURE CERTIFICATE.”

In connection with a continuing disclosure undertaking which the Agency entered into in connection with certain obligations which were refunded in 2012, the Agency failed to make an annual filing for Fiscal Year 2010, and made the annual filing for Fiscal Year 2011 several months late. In addition, the annual filing for Fiscal Year 2011 also did not conform to the requirements of the applicable undertaking. The Agency did not file the required notices of late filing for these occurrences.

PLAN OF FINANCE

The 2016 Certificates are being issued (i) to pay for the Miners Ranch Project, (ii) refund certain outstanding obligations of the Agency described below; and (iii) to pay certain costs of issuing the 2016 Certificates, including the cost of the Policy and Reserve Policy.

The Miners Ranch Project. $25 million of the proceeds of the 2016 Certificates will be used to pay the cost of the Miners Ranch Improvement Project. See “THE MINERS RANCH PROJECT.”

Refunding. Approximately $2.06 million of the proceeds of the 2016 Certificates will be used on the date of issuance of the 2016 Certificates to repay in full the principal amount under a Refunding Bond Agreement, by and between the Agency and Bank of Nevada, dated as of October 1, 2012 (the “Refunded Bonds”).

THE MINERS RANCH PROJECT

The Miners Ranch Water Treatment Plant was originally constructed and brought on line in 1981. Although the Miners Ranch Water Treatment Plant is currently operating at less than its rated capacity,

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future population growth projections are driving the need for increased capacity and more stringent drinking water regulations are driving the need for facility improvements.

The Miners Ranch Project generally consists of the design and construction of expansion and enhancement of treatment processes at the Miners Ranch Water Treatment Plant.

On March 24, 2015 the Agency entered into an agreement with the C. Overaa and Company (the “Design-Builder”) for the Progressive Design-Build Project to upgrade and expand the Miners Ranch Water Treatment Plant. Stantec Consulting Services Inc. was retained by the Design-Builder to provide engineering design services. The Alternative Analysis and Improvement Selection Report documents the recommended alternative treatment processes that will meet current and anticipated future drinking water regulations under changing water quality and flow conditions.

The Miners Ranch Water Treatment Plant is permitted by the State Water Resources Control Board (“SWRCB”) to treat up to 14.5 million gallons per day (“MGD”) of raw water through in-line treatment. Recently, the actual peak water demand has exceeded 11.5 MGD and is now approaching the permitted hydraulic capacity of the plant. To meet the expected future water demands of the service areas the proposed project expands the capacity of the Miners Ranch Water Treatment Plant to 21 MGD with a firm reliable capacity of 18 MGD. An Initial Study/Mitigated Negative Declaration and Mitigation Monitoring and Reporting Plan for the Miners Ranch Water Project were adopted by the Agency’s Board of Directors on January 28, 2014.

The in-line treatment process currently provided at the Miners Ranch Water Treatment Plant provides only partial flocculation and therefore is not a standard practice recognized by the Federal Environmental Protection Agency (“EPA”), and limits the credits for removal of pathogens in the raw water. SWRCB has allowed this practice specifically for the Miners Ranch Water Treatment Plant due to the high quality of the source water. However, this practice has the potential, in the future, to be more restrictive by the SWRCB and could make it very challenging to reliably comply with the drinking water regulations. The Miners Ranch Project will upgrade the Miners Ranch Water Treatment Plant to provide year around conventional treatment capacity by adding new high adsorption clarifiers for full flocculation and solids removal capability. The Miners Ranch Project also upgrades other aspects of the treatment processes at the Miners Ranch Water Treatment Plant. Other elements of the Miners Ranch Project include replacement of pumps and other equipment, construction of a new two million gallon concrete clearwell to increase treated water storage capacity, increase disinfection contact time credits, protect water quality and security, and provide long term structural integrity, upgrades of power service to the site to meet future electrical loads from new process equipment, and installation of a new emergency backup generator sized to meet the power requirements for operating the plant after improvements during times of line power interruption.

The Miners Ranch Project is being designed and constructed by the Design-Builder pursuant to the Progressive Design-Build Agreement for Miners Ranch Water Treatment Plant Improvement Project, effective as of March 24, 2015 (the “Design-Build Agreement”). The Design-Build Agreement provides for a guaranteed maximum price (“GMP”) of approximately $25.2 million which includes a contingency amount of $1.1 million. The GMP is subject to adjustment under certain circumstances specified in the Design-Build Agreement, including the occurrence of force majeure events. The Design-Build Agreement specifies a guaranteed completion date of March 24, 2018 (which is also subject to adjustment under circumstances specified in the Design-Build Agreement).

The Agency issued a notice to proceed to the Contractor on March 24, 2016. The Agency intends to fund the costs of the Miners Ranch Project with approximately $25 million of proceeds of the 2016 Certificates, $1.6 million from the System Capacity Fund and $500,000 from the General Fund. The

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Agency has expended approximately $2 million to date, which it intends to reimburse itself from the proceeds of the 2016 Certificates.

ESTIMATED SOURCES AND USES OF FUNDS

The proceeds to be received from the sale of the 2016 Certificates, together with other moneys, are anticipated to be applied as follows:

SOURCES: Principal Amount of 2016 Certificates $27,010,000.00Net Original Issue Premium 507,110.40

TOTAL SOURCES: $27,517,110.40 USES: Project Fund $25,000,000.00Payment of Refunded Bonds 2,054,665.02Costs of Issuance(1) 462,445.38

TOTAL USES: $27,517,110.40__________________ (1) Includes fees of Special Counsel, Municipal Advisor, Disclosure Counsel and Trustee, costs of the Policy and the Reserve

Policy, Underwriter’s discount and other costs of issuing the 2016 Certificates.

THE 2016 CERTIFICATES

General

The 2016 Certificates shall be delivered in the form of fully registered Certificates, without coupons, in denominations of $5,000 or any integral multiple thereof, and shall be dated the date of delivery to the initial purchaser thereof. The 2016 Certificates, when executed and delivered, will be registered in the name of Cede & Co., as registered owner and nominee of The Depository Trust Company, New York, New York (“DTC”). So long as DTC, or Cede & Co. as its nominee is the registered owner of all Certificates, all payments with respect to the 2016 Certificates will be made directly to DTC, and disbursement of such payments to the DTC Participants (defined below) will be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners (defined below) will be the responsibility of the DTC Participants, as more fully described hereinafter. (See “Book-Entry System” below.)

Interest evidenced by the 2016 Certificates shall be payable on April 1 and October 1 of each year, commencing April 1, 2017 (each, an “Interest Payment Date”), and continuing to and including the date of maturity or prior prepayment, whichever is earlier. Principal evidenced by the 2016 Certificates shall be payable on April 1 in each of the years and in the amounts set forth on the cover page of this Official Statement. Principal and premium, if any, evidenced by the 2016 Certificates shall be payable to the Owner upon presentation and surrender of such Certificate at the corporate trust office of the Trustee in Los Angeles, California. Interest evidenced by the 2016 Certificates shall be calculated on the basis of a 360-day year consisting of twelve 30-day months and shall be payable by check mailed by first class mail on each Interest Payment Date to the Owners as of the close of business on the 15th day of the month (whether or not such day is a Business Day) preceding an Interest Payment Date (the “Record Date”) at their addresses shown on the registration books maintained by the Trustee; provided however, that upon the written request from any Owner of any Certificate in a denomination of, or Certificates aggregating, at least $1,000,000 in principal amount, received on or prior to the fifteenth day of the month

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preceding an applicable Payment Date, payment may be made by wire in Federal Reserve Funds on the Payment Date with regard to which such payment is made.

Prepayment of the 2016 Certificates

Optional Prepayment. The 2016 Certificates shall not be subject to optional prepayment prior to April 1, 2026. The 2016 Certificates maturing on and after April 1, 2027 are subject to prepayment, in whole or in part in any integral multiple of $5,000, at the option of the Agency on any date on or after April 1, 2026 from any available source of funds, at a prepayment price equal to the principal amount of the 2016 Certificates to be prepaid, together with accrued interest thereon to the prepayment date, without premium.

Mandatory Sinking Account Prepayment. Certificates maturing on April 1, 2041 (the “2041 Term Certificates”) shall also be subject to mandatory prepayment in whole, or in part by lot, on April 1 in each year, commencing April 1, 2037, from 2016 Installment Payments made by the Agency, at a prepayment price equal to the principal amount evidenced thereby to be prepaid, without premium, in the aggregate respective principal amounts and on April 1 in the respective years as set forth in the following table; provided, however, that (i) in lieu of prepayment thereof the 2041 Term Certificates may be purchased by a Agency and tendered to the Trustee, and (ii) if some but not all of such 2041 Term Certificates have been prepaid pursuant to optional prepayment or due to a casualty loss or governmental taking of the Water System, the total amount of all future sinking fund 2016 Installment Payments shall be reduced by the aggregate principal amount of such 2041 Term Certificates so prepaid, to be allocated among such sinking fund 2016 Installment Payments on a pro rata basis in integral multiples of $5,000, as determined by the Agency.

2041 Term Certificates

Payment Date (April 1) Principal Amount 2037 $1,050,000 2038 1,080,000 2039 1,115,000 2040 1,155,000 2041* 1,190,000

*Final Maturity

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Certificates maturing on April 1, 2046 (the “2046 Term Certificates”) shall also be subject to mandatory prepayment in whole, or in part by lot, on April 1 in each year, commencing April 1, 2042, from 2016 Installment Payments made by the Agency, at a prepayment price equal to the principal amount evidenced thereby to be prepaid, without premium, in the aggregate respective principal amounts and on April 1 in the respective years as set forth in the following table; provided, however, that (i) in lieu of prepayment thereof the 2046 Term Certificates may be purchased by a Agency and tendered to the Trustee, and (ii) if some but not all of such 2046 Term Certificates have been prepaid pursuant to optional prepayment or due to a casualty loss or governmental taking of the Water System, the total amount of all future sinking fund 2016 Installment Payments shall be reduced by the aggregate principal amount of such 2046 Term Certificates so prepaid, to be allocated among such sinking fund 2016 Installment Payments on a pro rata basis in integral multiples of $5,000, as determined by the Agency.

2046 Term Certificates

Payment Date (April 1) Principal Amount 2042 $1,230,000 2043 1,270,000 2044 1,310,000 2045 1,355,000 2046* 1,395,000

*Final Maturity

Selection of 2016 Certificates for Prepayment. Whenever less than all the Outstanding 2016 Certificates of any one Certificate Payment Date are to be prepaid on any one date, the Trustee (upon receipt of a Written Request of the Agency) shall select the 2016 Certificates of such Certificate Payment Date to be prepaid from the Outstanding 2016 Certificates of such Certificate Payment Date in any manner that the Trustee deems appropriate, and the Trustee shall promptly notify the Corporation and the Agency in writing of the numbers of the 2016 Certificates so selected for prepayment on such date.

Notice of Prepayment. Each notice of prepayment shall state the date of notice, the prepayment date, the prepayment place (including the name and address of the Trustee) and the prepayment price, shall designate the Certificate Payment Date, the CUSIP numbers, if any, and, if less than all Certificates of any one Certificate Payment Date are to be prepaid, the serial numbers of the 2016 Certificates to be prepaid by giving the individual number of each Certificate or by stating that all Certificates between two stated numbers, both inclusive, have been called for prepayment, shall (in the case of any Certificate called for prepayment in part only) state the portion of the principal amount evidenced and represented thereby which is to be prepaid, and shall state that the interest evidenced and represented by the 2016 Certificates or the portions thereof designated for prepayment shall cease to accrue from and after such prepayment date and that on such prepayment date there will become due and payable on each of the 2016 Certificates or portions thereof designated for prepayment the prepayment price evidenced and represented thereby, and shall require that such Certificates be surrendered for prepayment at the address of the Trustee so designated, and if any Certificate chosen for prepayment shall not be prepayable in whole, such notice shall also state that such Certificate is to be prepaid in part only and that upon presentation of such Certificate for prepayment in part there will be executed and delivered in lieu of the unprepaid principal amount evidenced and represented thereby a new Certificate or Certificates of the same Certificate Payment Date of authorized denominations equal in aggregate principal amount to such unrepaid principal amount; provided, that the Trustee shall have no responsibility for any defect in the CUSIP number that appears on any Certificate or in the prepayment notice thereof and such notice shall state that the CUSIP numbers have been assigned by an independent service and are included in such

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notice solely for the convenience of the Owners and that the Agency and the Trustee are not liable for any inaccuracies in such numbers.

Notice of any prepayment of Certificates to be prepaid in accordance with the Trust Agreement may be conditioned on any fact or circumstance stated therein, and if such condition shall not have been satisfied on or prior to the prepayment date stated in such notice, said notice shall be of no force and effect on and as of the stated prepayment date, the prepayment shall be cancelled, and the Agency shall not be required to prepay the Certificates that were the subject of the notice. The Trustee shall give notice of such cancellation and the reason therefor in the same manner in which notice of prepayment was originally given. The actual receipt by the owner of any Certificate of notice of such cancellation shall not be a condition precedent to cancellation, and failure to receive such notice or any defect in such notice shall not affect the validity of the cancellation.

Effect of Notice of Prepayment. If notice of prepayment of any Certificates has been duly given to the Owners thereof as aforesaid and money for the payment of the prepayment price of such Certificates or the portions thereof to be prepaid is held by the Trustee, then on the prepayment date designated in such notice such Certificates or such portions thereof so called for prepayment shall become due and payable at the prepayment price evidenced and represented thereby as specified in such notice; and from and after the date so designated the interest evidenced and represented by such Certificates or such portions thereof so called for prepayment shall cease to accrue, such Certificates or such portions thereof shall cease to be entitled to any benefit, protection or security hereunder and the Owners of such Certificates shall have no rights in respect thereof except to receive payment of the prepayment price evidenced and represented by such Certificates or such portions to be prepaid. All money held by or on behalf of the Trustee for the prepayment of any particular Certificates shall be held in trust for the account of the Owners of the 2016 Certificates to be prepaid, and the Trustee shall not be liable for any interest earned on the amounts so held by it.

Book-Entry System

DTC will act as securities depository for the 2016 Certificates. The 2016 Certificates will be issued as fully-registered Certificates registered in the name of Cede & Co., (DTC’s partnership nominee). One fully-registered Bond will be issued for each maturity of the 2016 Certificates, each in the aggregate principal amount of such maturity, and will be deposited with DTC. See “APPENDIX E - BOOK ENTRY PROVISIONS” herein.

The Agency and the Trustee cannot and do not give any assurances that DTC, DTC Participants or others will distribute payments of principal, interest or premium with respect to the 2016 Certificates paid to DTC or its nominee as the registered owner, or will distribute any redemption notices or other notices, to the Beneficial Owners, or that they will do so on a timely basis or will serve and act in the manner described in this Official Statement. The Agency and the Trustee are not responsible or liable for the failure of DTC or any DTC Participant to make any payment or give any notice to a Beneficial Owner with respect to the 2016 Certificates or an error or delay relating thereto.

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SCHEDULE OF 2016 INSTALLMENT PAYMENTS

The table below shows the annual payments of principal of and interest with respect to the 2016 Certificates.

Period Ending (April 1) Principal Interest Total

2017 $ 250,000 $ 392,874 $ 642,874 2018 570,000 873,475 1,443,475 2019 580,000 862,075 1,442,075 2020 600,000 844,675 1,444,675 2021 615,000 826,675 1,441,675 2022 635,000 808,225 1,443,225 2023 655,000 789,175 1,444,175 2024 675,000 769,525 1,444,525 2025 695,000 749,275 1,444,275 2026 720,000 721,475 1,441,475 2027 750,000 692,675 1,442,675 2028 780,000 662,675 1,442,675 2029 810,000 631,475 1,441,475 2030 845,000 599,075 1,444,075 2031 880,000 565,275 1,445,275 2032 905,000 538,875 1,443,875 2033 930,000 511,725 1,441,725 2034 960,000 483,825 1,443,825 2035 990,000 455,025 1,445,025 2036 1,015,000 425,325 1,440,325 2037 1,050,000 394,875 1,444,875 2038 1,080,000 360,750 1,440,750 2039 1,115,000 325,650 1,440,650 2040 1,155,000 289,413 1,444,413 2041 1,190,000 251,875 1,441,875 2042 1,230,000 213,200 1,443,200 2043 1,270,000 173,225 1,443,225 2044 1,310,000 131,950 1,441,950 2045 1,355,000 89,375 1,444,375 2046 1,395,000 ____45,338 1,440,338

Total* $27,010,000 $15,479,049 $42,489,049

*Totals may not add due to rounding.

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SECURITY FOR THE 2016 CERTIFICATES

General

THE AGENCY’S OBLIGATION TO MAKE 2016 INSTALLMENT PAYMENTS, AND INTEREST THEREON, IS A SPECIAL OBLIGATION OF THE AGENCY PAYABLE SOLELY FROM NET REVENUES AND OTHER FUNDS PROVIDED FOR IN THE 2016 INSTALLMENT PURCHASE CONTRACT. NEITHER THE 2016 CERTIFICATES NOR THE OBLIGATION OF THE AGENCY TO MAKE 2016 INSTALLMENT PAYMENTS, AND INTEREST THEREON, CONSTITUTES A DEBT OF THE AGENCY OR OF THE STATE OF CALIFORNIA OR OF ANY POLITICAL SUBDIVISION THEREOF WITHIN THE MEANING OF ANY CONSTITUTIONAL OR STATUTORY DEBT LIMIT OR RESTRICTION OR ANY OBLIGATION FOR WHICH THE AGENCY IS OBLIGATED TO LEVY OR PLEDGE ANY FORM OF TAXATION OR FOR WHICH THE AGENCY HAS LEVIED OR PLEDGED ANY FORM OF TAXATION.

Each 2016 Certificate evidences an undivided proportionate interest in the 2016 Installment Payments, and interest thereon, to be made by the Agency under the 2016 Installment Purchase Contract. The Corporation, pursuant to the Assignment Agreement, has transferred, conveyed and assigned to the Trustee, for the benefit of the Owners, all of the Corporation’s rights, title and interest under the 2016 Installment Purchase Contract, including the right to receive 2016 Installment Payments, and interest thereon, from the Agency and the right to exercise any remedies provided therein in the event of a default by the Agency thereunder.

All Net Revenues (defined below) are pledged to the payment of the 2016 Installment Payments and debt service on other Parity Obligations as provided in the 2016 Installment Purchase Contract, and the Net Revenues shall not be used for any other purpose while any of’ the 2016 Installment Payments remain unpaid; provided, however, that out of the Net Revenues there may be apportioned such sums for such purposes as are expressly permitted by the 2016 Installment Purchase Contract, including payment of debt service on any Parity Obligations. This pledge constitutes a first lien on the Net Revenues for the payment of the 2016 Installment Payments and debt service on any Parity Obligations in accordance with the 2016 Installment Purchase Contract. The 2016 Certificates are not secured by a direct lien on the Enterprise.

The “Enterprise” means the Agency’s domestic water system and hydroelectric system, including the South Feather Power Project, including all facilities, works, properties and structures of the Agency for the storage, treatment, transmission and distribution of water and power, including all contractual rights to power and water, transmission, easements, rights-of-way and other works, property or structures necessary or convenient for such facilities, together with all additions, betterments, extension and improvements to such facilities or any party thereof hereafter acquired or constructed.

“Net Revenues” means, for any period, all of the Revenues during such period less all of the Maintenance and Operation Costs during such period. “Revenues” means all gross income and revenue received or receivable by the Agency from the ownership and operation of the Enterprise, calculated in accordance with Generally Accepted Accounting Principles, including all rates, fees and charges (including connection fees) received by the Agency and all other income and revenue howsoever derived by the Agency from the enterprise or arising from the Enterprise; provided, however, that (i) any specific charges levied for the express purpose of reimbursing others for all or a portion of the cost of the acquisition or construction of the specific facilities, (ii) grants that are designated by the grantor for a specific purpose and are therefore not available for other purposes, or (iii) customers’ deposits or any other deposits subject to refund until such deposits have become the property of the Agency are not

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Revenues and are not subject to the lien hereof. Revenues shall include amounts on deposit in the Revenue Fund that have been previously released from the pledge and lien hereof. .

“Maintenance and Operation Costs” means all reasonable and necessary costs paid or incurred by the Agency for maintaining and operating the Enterprise, determined in accordance with Generally Accepted Accounting Principles, including expenses related to the storage, treatment, transmission and distribution of water and power and any costs that would be found to constitute maintenance and operation costs under the “Agreement Between South Feather Water and Power Agency and Yuba County Water District,” by and between the Agency and the North Yuba Water District, formerly the Yuba County Water District, dated May 27, 2005, as amended, all costs of water purchased for the Enterprise (except those costs paid from taxes), and including all reasonable expenses of management and repair and other expenses necessary to maintain and preserve the Enterprise in good repair and working order, and including all administrative costs of the Agency that are charged directly or apportioned to the operation of the Enterprise, such as salaries and wages of employees, overhead, taxes (if any) and insurance premiums, and including all other reasonable and necessary costs of the Agency or charges required to be paid by it to comply with the terms hereof and of any resolution authorizing the execution of any Installment Purchase Contract or of such Installment Purchase Contract or of any resolution or indenture authorizing the issuance of any Parity Obligations or of such Parity Obligations, such as compensation, reimbursement and indemnification of the trustee for any such Installment Purchase Contracts or Parity Obligations and fees and expenses of Independent Certified Public Accountants and Independent Engineers, but excluding in all cases depreciation, replacement and obsolescence charges or reserves therefor and amortization of intangibles.

In the 2016 Installment Purchase Contract, the Agency covenants that it will not make any pledge of or place any lien on Net Revenues senior to the pledge and lien for the payment of the 2016 Installment Payments and will not make any pledge of or place any lien on the Net Revenues on a parity with the pledge and lien for 2016 Installment Payments, or subordinate thereto, except as otherwise provided in the 2016 Installment Purchase Contract. The Agency has the right to issue or incur indebtedness or other obligations on a parity with the 2016 Installment Payments (see “Limitations on Parity Obligations and Superior Obligations” below).

2016 Installment Payments

The 2016 Installment Purchase Contract requires the Agency make payments of 2016 Installment Payments prior to a related Interest Payment Date (each a “Due Date”), and continuing thereafter during the term of the 2016 Certificates, in amounts as specified in the 2016 Installment Purchase Contract (see “Application of Revenues” below, and “APPENDIX A” hereto). The 2016 Installment Payments shall be paid directly to the Trustee.

Limitations on Parity Obligations and Superior Obligations

Obligations Superior to 2016 Installment Payments. The Agency has covenanted in the 2016 Installment Purchase Contract that it will not enter into other 2016 Installment Purchase Contracts or issue any type of securities permitted by law and secured by revenues of the Agency having a priority on Net Revenues superior to that of the 2016 Certificates or the 2016 Installment Payments.

Obligations on a Parity with the 2016 Installment Payments. The 2016 Installment Agreement provides that Agency may at any time execute any Installment Purchase Contract or issue any Parity Obligations, as the case may be, to finance or refinance any Project the Debt Service on which Installment Purchase Contract or Parity Obligations is payable on a parity with the payment by the Agency of the 2016 Installment Payments from the Net Revenues if:

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The Net Revenues for the most recently audited Fiscal Year preceding the date of the adoption by the Board of Directors of the resolution authorizing the execution of such Installment Purchase Contract or the issuance of such Parity Obligations, as the case may be (including adjustments to give effect to increases or decreases in charges, fees or rates for the use of the Enterprise approved and in effect as of the date of calculation), calculated (with respect to fees) on the basis of the average annual connection fees, annexation fees and other one-time fees received by the Agency during the immediately preceding three (3) audited Fiscal Year period, as evidenced by both a calculation prepared by the Agency and a special report prepared by an Independent Certified Public Accountant on such calculation on file with the Agency, shall have produced a sum equal to at least one hundred twenty-five per cent (125%) of the Debt Service for such Fiscal Year on all then outstanding Installment Purchase Contracts and Parity Obligations; and

the estimated Net Revenues for the first Fiscal Year after the latest Date of Operation of any uncompleted Project (or the period for which interest is capitalized, whichever is longer), as evidenced by a calculation prepared by an Independent Engineer on file with the Agency, plus (after giving effect to the completion of all uncompleted Projects) an allowance for estimated Revenues for such Fiscal Year arising from any increase in the charges, fees or rates estimated to be fixed and prescribed for the use of the Enterprise in an amount equal to ninety per cent (90%) of the amount by which such Revenues would have been increased if such increase had been in effect during such Fiscal Year (as similarly evidenced), shall produce a sum equal to at least one hundred twenty-five per cent (125%) of the estimated Debt Service for such Fiscal Year; after giving effect, in either case, to the execution of all Installment Purchase Contracts and the issuance of all Parity Obligations estimated to be required to be executed or issued to pay the costs of completing all uncompleted Projects, assuming that all such Installment Purchase Contracts and Parity Obligations have maturities, interest rates and proportionate principal repayment provisions similar to the Installment Purchase Contract last executed or then being executed or the Parity Obligations last issued or then being issued for the purpose of acquiring and constructing any of such uncompleted Projects; and

the Project to be acquired and constructed with the proceeds of such Installment Purchase Contract or such Parity Obligations, as the case may be, is technically feasible and the estimated cost of the acquisition and construction thereof is reasonable, and (after giving effect to the completion of all uncompleted Projects) the rates, fees and charges estimated to be fixed and prescribed for the use of the Enterprise for such Fiscal Year from the Fiscal Year in which such Installment Purchase Contract is executed or such Parity Obligations are issued, as the case may be, to and including the first complete Fiscal Year after the latest Date of Operation of any uncompleted Project are economically feasible and reasonably considered necessary based on projected operations for such period, as evidenced by an Engineer’s Report (prepared at the time of the execution of the initial Installment Purchase Contract or the issuance of the initial Parity Obligations, as the case may be, for the purpose of acquiring and constructing the Project) on file with the Agency;

provided, that notwithstanding the foregoing conditions, any Installment Purchase Contract may be executed and delivered and any Parity Obligations may be issued without regard to such conditions if the Debt Service in each Fiscal Year after the execution and delivery of any such 2016 Installment Purchase Contract or the issuance of any such Parity Obligations, as the case may be, is not increased by reason of the execution and delivery of such Installment Purchase Contract or the issuance of such Parity Obligations; and provided further, that notwithstanding the foregoing conditions, no such Installment Purchase Contract shall be

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executed and delivered nor such Parity Obligations shall be issued if an Event of Default shall have occurred and shall be then continuing.

Rate Covenant

The Agency has covenanted that the Agency will fix, prescribe and collect charges, fees and rates for the Enterprise which are reasonably fair and nondiscriminatory and which will be at least sufficient to yield, during each Fiscal Year, Net Revenues equal to one hundred twenty-five per cent (125%) of the Debt Service for such Fiscal Year, plus the amount necessary to restore the 2016 Reserve Fund to the Reserve Requirement in such Fiscal Year as provided in the 2016 Installment Purchase Contract, including any amount required to reimburse the Insurer with respect to the Reserve Policy, if any. The Agency may make adjustments from time to time in such charges, fees and rates and may make such classification thereof as it deems necessary, but shall not reduce the charges, fees and rates then in effect unless the Net Revenues from such reduced charges, fees and rates will at all times be sufficient to meet the requirements of this section. If for any Fiscal Year the Agency does not meet the rate covenant, the Agency will engage an Independent Engineer to recommend revised charges, fees and rates, and the Agency will, to the extent practicable and subject to applicable requirements and restrictions imposed by law and subject to a good faith determination by the Agency that such recommendations, in whole or in part, are in the best interests of the Agency, implement such revised charges, fees and rates so as to produce the necessary Net Revenues.

Reserve Fund

The Agency has agreed to establish and maintain so long as any 2016 Certificates are outstanding a separate fund, to be held by the Trustee for and on behalf of the Agency, to be known as the Certificate Payment Reserve Fund (the “Reserve Fund”). As of the date of issuance of the 2016 Certificates, the Required Reserve will be $ $1,445,275.00. The Agency is satisfying the Required Reserve through the use of the Reserve Policy to be provided by the Insurer concurrently with the issuance of the 2016 Certificates. See “BOND INSURANCE.”

All amounts in the Reserve Fund shall be used and withdrawn by the Trustee solely for the purpose of paying interest on or principal of the 2016 Certificates, when due and payable to the extent that moneys deposited in the 2016 Installment Payment Fund are not sufficient for such purpose, and making the final payments of principal of and interest on the 2016 Certificates. After the initial deposit has been made, the Agency shall maintain or cause to be maintained in the Reserve Fund an amount equal to the Reserve Requirement. In the event of a deficiency in the Reserve Fund, the Agency shall pay from Net Revenues in an amount sufficient to cure such deficiency by the earlier of the end of the Fiscal Year in which such deficiency occurs, or the date on which the next 2016 Installment Payment is due and payable.

“Reserve Requirement” means, as of any date of calculation, the least of (a) ten per cent (10%) of the initial offering price to the public of the 2016 Certificates (as determined under the Code), or (b) the maximum annual 2016 Installment Payments payable in the current or in any future one-year period ending on April 1 under the 2016 Installment Purchase Contract, or (c) one hundred twenty-five per cent (125%) of the average annual 2016 Installment Payments payable in the current and in all future one-year periods ending on April 1 under the 2016 Installment Purchase Contract; provided, that such requirement (or any portion thereof) may at any time be provided by one or more policies of municipal bond insurance or surety bonds issued by a municipal bond insurer or by a letter of credit issued by a bank if the obligations insured by which insurer or issued by which bank, as the case may be, have ratings at the time of issuance of such policy or surety bond or letter of credit equal in one of the two highest rating categories by Moody’s or S&P.

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If, on any Interest Payment Date, the moneys on hand in the 2016 Installment Payment Fund do not equal the amount of the interest payment or principal payment then due and payable with respect to the 2016 Certificates, the Trustee shall apply the moneys on hand in the Reserve Fund to make such payment on behalf of the Agency by transferring the amount necessary to the, 2016 Installment Payment Fund. Upon receipt by the Trustee from the Agency of any delinquent 2016 Installment Payment with respect to which moneys have been advanced from the Reserve Fund, such 2016 Installment Payment shall be deposited in the Reserve Fund to the extent of such advance.

All money on deposit in the Reserve Fund in excess of the Reserve Requirement shall, on April 1 and October 1 of each year (beginning in April 2017), be transferred to the Agency (upon receipt of a Certification of the Agency certifying that the Agency is in compliance with the 2016 Installment Purchase Contract) for deposit in the Revenue Fund; and for this purpose all investments in the Reserve Fund shall be valued on or before April 1 and October 1 of each year (beginning in April, 2017) at the market value of such investments.

For additional provisions relating to the Reserve Policy and the Reserve Fund, see “APPENDIX A – SUMMARY OF PRINCIPAL LEGAL DOCUMENTS – Certain Provisions Relating to the Certificate Insurance Policy, the Reserve Policy and the Certificate Insurer – Reserve Policy Requirements” attached hereto.

Rate Stabilization Fund

The Agency covenants in the 2016 Installment Purchase Contract to maintain and hold an Enterprise Rate Stabilization Fund. The Agency may deposit Net Revenues or any other lawfully available funds in the Enterprise Rate Stabilization Fund as the Agency may determine, provided, that deposits for each Fiscal Year may be made until (but not after) 120 days following the end of such Fiscal Year. The Agency may withdraw amounts from the Enterprise Rate Stabilization Fund for inclusion in Revenues for any Fiscal Year, but only until (but not after) 120 days after the end of such Fiscal Year. All interest earnings on the deposits in the Enterprise Rate Stabilization Fund shall be withdrawn and deposited in the Revenue Fund and accounted for as Revenues. Withdrawals from the Enterprise Rate Stabilization Fund may be made at any time by the Agency for any lawful purpose of the Enterprise.

2016 Installment Payments to be Unconditional

The 2016 Installment Purchase Contract provides that the obligation of the Agency to pay the 2016 Installment Payments from the Net Revenues as provided in the 2016 Installment Purchase Contract is absolute and unconditional, and until such time as the 2016 Installment Payments shall have been fully paid (or provision for the payment thereof shall have been made pursuant to the Trust Agreement), the Agency will not discontinue or suspend any 2016 Installment Payments required to be made by it under the 2016 Installment Purchase Contract, whether or not the Enterprise or any part thereof is operating or operable, or its use is suspended, interfered with, reduced or curtailed or terminated in whole or in part, and such payments shall not be subject to abatement because of any damage to or destruction or condemnation of the Enterprise or any part thereof, and such payments shall not be subject to reduction whether by offset or otherwise and shall not be conditional upon the performance or nonperformance by any party of any agreement for any cause whatsoever.

Additional Covenants

Additional covenants of the Agency contained in the 2016 Installment Purchase Contract include, but are not limited to, the following (see “APPENDIX A- 2016 Installment Purchase Contract” hereto):

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(a) Maintenance and Operation. The 2016 Installment Purchase Contract provides that the Agency will maintain and preserve the Enterprise in good repair and working order at all times and will operate the Enterprise in an efficient and economical manner and will pay all Maintenance and Operation Costs as they become due and payable.

(b) Budgets. On or before the first day of each Fiscal Year, the Agency will adopt a budget approved by the Board of Directors setting forth the estimated Maintenance and Operation Costs for such Fiscal Year, which budget may be amended at any time during such Fiscal Years.

(c) Sale or Eminent Domain of Water System. The 2016 Installment Purchase Contract provides that the Agency will not sell, lease or otherwise dispose of the Enterprise or any part thereof essential to the proper operation of the Enterprise or to the maintenance of the Net Revenues. The Agency will not enter into any agreement or lease which impairs the operation of the Enterprise or any part thereof necessary to secure adequate Net Revenues for the payment of the 2016 Installment Payments, or which would otherwise impair the rights of the Owners with respect to the Net Revenues or the operation of the Enterprise. Any real or personal property which has become nonoperative or which is not needed for the efficient and proper operation of the Enterprise, or any material or equipment which has become worn out, may be sold if such sale will not reduce the Net Revenues and if the proceeds of such sale are deposited in the Revenue Fund.

(d) Insurance. The 2016 Installment Purchase Contract provides that the Agency will procure and maintain insurance on the Enterprise with responsible insurers in such amounts and against such risks (including accident to or destruction of the Enterprise) as are usually covered in connection with Enterprises similar to the Enterprise so long as such insurance is available from reputable insurance companies. In the event of any damage to or destruction of the Enterprise caused by the perils covered by such insurance, the Net Proceeds thereof shall be applied to the reconstruction, repair or replacement promptly after such damage or destruction shall occur, and the Agency shall continue and properly complete such reconstruction, repair or replacement as expeditiously as possible, and shall pay out of such Net Proceeds all costs and expenses in connection with such reconstruction, repair or replacement so that the same shall be completed and the Enterprise shall be free and clear of all claims and liens; provided, that if such Net Proceeds are sufficient to enable the Agency to retire all 2016 Installment Purchase Contracts and Parity Obligations, the Agency may elect not to reconstruct, repair or replace the damaged or destroyed portion of the Enterprise, and thereupon such Net Proceeds shall be applied to the retirement of all such 2016 Installment Purchase Contracts and Parity Obligations. The Agency will procure and maintain such other insurance which it shall deem advisable or necessary to protect its interests and the interests of the Owners, which insurance shall afford protection in such amounts and against such risks as are usually covered in connection with Enterprises similar to the Enterprise; provided, that any such insurance may be maintained under a self-insurance program so long as such self-insurance is maintained in the amounts and manner usually maintained in connection with Enterprises similar to the Enterprise.

(e) Covenants Relating to Renewal Contracts. The Agency shall use commercially reasonable efforts to maintain Revenues at reasonable commercial levels and shall, at or prior to the expiration of any contracts or agreements from which Revenues are derived, use commercially reasonable efforts to enter into new agreements or contracts such that it will continue to derive Revenues at commercially reasonable rates.

Bond Insurance

The scheduled payment of principal of and interest on the 2016 Certificates maturing on April 1 of the years 2019 through 2046, inclusive (the “Insured Certificates”), when due will be guaranteed under

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the Policy to be issued concurrently with the delivery of the Insured Certificates by Assured Guaranty Municipal Corp. (the “Insurer”). See “BOND INSURANCE” and APPENDIX F — “SPECIMEN MUNICIPAL BOND INSURANCE POLICY.”

For additional provisions relating to the Policy and certain rights of the Insurer, see “APPENDIX A – SUMMARY OF PRINCIPAL LEGAL DOCUMENTS – Certain Provisions Relating to the Certificate Insurance Policy, the Reserve Policy and the Certificate Insurer.”

BOND INSURANCE

Bond Insurance Policy

Concurrently with the issuance of the 2016 Certificates, Assured Guaranty Municipal Corp. (the “Insurer” or “AGM”) will issue its Municipal Bond Insurance Policy (the “Policy’) for the 2016 Certificates maturing on April 1 of the years 2019 through 2046, inclusive (the “Insured Certificates”). The Policy guarantees the scheduled payment of principal of and interest on the Insured Certificates when due as set forth in the form of the Policy included as Appendix G to this Official Statement.

The Policy is not covered by any insurance security or guaranty fund established under New York, California, Connecticut or Florida insurance law.

Assured Guaranty Municipal Corp.

AGM is a New York domiciled financial guaranty insurance company and an indirect subsidiary of Assured Guaranty Ltd. (“AGL”), a Bermuda-based holding company whose shares are publicly traded and are listed on the New York Stock Exchange under the symbol “AGO”. AGL, through its operating subsidiaries, provides credit enhancement products to the U.S. and global public finance, infrastructure and structured finance markets. Neither AGL nor any of its shareholders or affiliates, other than AGM, is obligated to pay any debts of AGM or any claims under any insurance policy issued by AGM.

AGM’s financial strength is rated “AA” (stable outlook) by S&P Global Ratings, a business unit of Standard & Poor’s Financial Services LLC (“S&P”), “AA+” (stable outlook) by Kroll Bond Rating Agency, Inc. (“KBRA”) and “A2” (stable outlook) by Moody’s Investors Service, Inc. (“Moody’s”). Each rating of AGM should be evaluated independently. An explanation of the significance of the above ratings may be obtained from the applicable rating agency. The above ratings are not recommendations to buy, sell or hold any security, and such ratings are subject to revision or withdrawal at any time by the rating agencies, including withdrawal initiated at the request of AGM in its sole discretion. In addition, the rating agencies may at any time change AGM’s long-term rating outlooks or place such ratings on a watch list for possible downgrade in the near term. Any downward revision or withdrawal of any of the above ratings, the assignment of a negative outlook to such ratings or the placement of such ratings on a negative watch list may have an adverse effect on the market price of any security guaranteed by AGM. AGM only guarantees scheduled principal and scheduled interest payments payable by the issuer of bonds insured by AGM on the date(s) when such amounts were initially scheduled to become due and payable (subject to and in accordance with the terms of the relevant insurance policy), and does not guarantee the market price or liquidity of the securities it insures, nor does it guarantee that the ratings on such securities will not be revised or withdrawn.

Current Financial Strength Ratings. On July 27, 2016, S&P issued a credit rating report in which it affirmed AGM’s financial strength rating of “AA” (stable outlook). AGM can give no assurance as to any further ratings action that S&P may take.

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On August 8, 2016, Moody’s published a credit opinion affirming its existing insurance financial strength rating of “A2” (stable outlook) on AGM. AGM can give no assurance as to any further ratings action that Moody’s may take.

On December 10, 2015, KBRA issued a financial guaranty surveillance report in which it affirmed AGM’s insurance financial strength rating of “AA+” (stable outlook). AGM can give no assurance as to any further ratings action that KBRA may take.

For more information regarding AGM’s financial strength ratings and the risks relating thereto, see AGL’s Annual Report on Form 10-K for the fiscal year ended December 31, 2015.

Capitalization of AGM. At June 30, 2016, AGM’s policyholders’ surplus and contingency reserve were approximately $3,841 million and its net unearned premium reserve was approximately $1,459 million. Such amounts represent the combined surplus, contingency reserve and net unearned premium reserve of AGM, AGM’s wholly owned subsidiary Assured Guaranty (Europe) Ltd. and 60.7% of AGM’s indirect subsidiary Municipal Assurance Corp.; each amount of surplus, contingency reserve and net unearned premium reserve for each company was determined in accordance with statutory accounting principles.

Incorporation of Certain Documents by Reference. Portions of the following documents filed by AGL with the Securities and Exchange Commission (the “SEC”) that relate to AGM are incorporated by reference into this Official Statement and shall be deemed to be a part hereof:

(i) the Annual Report on Form 10-K for the fiscal year ended December 31, 2015 (filed by AGL with the SEC on February 26, 2016);

(ii) the Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2016 (filed by AGL with the SEC on May 5, 2016); and

(iii) the Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2016 (filed by AGL with the SEC on August 4, 2016).

All consolidated financial statements of AGM and all other information relating to AGM included in, or as exhibits to, documents filed by AGL with the SEC pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, excluding Current Reports or portions thereof “furnished” under Item 2.02 or Item 7.01 of Form 8-K, after the filing of the last document referred to above and before the termination of the offering of the 2016 Certificates shall be deemed incorporated by reference into this Official Statement and to be a part hereof from the respective dates of filing such documents. Copies of materials incorporated by reference are available over the internet at the SEC’s website at http://www.sec.gov, at AGL’s website at http://www.assuredguaranty.com, or will be provided upon request to Assured Guaranty Municipal Corp.: 1633 Broadway, New York, New York 10019, Attention: Communications Department (telephone (212) 974-0100). Except for the information referred to above, no information available on or through AGL’s website shall be deemed to be part of or incorporated in this Official Statement.

Any information regarding AGM included herein under the caption “BOND INSURANCE – Assured Guaranty Municipal Corp.” or included in a document incorporated by reference herein (collectively, the “AGM Information”) shall be modified or superseded to the extent that any subsequently included AGM Information (either directly or through incorporation by reference) modifies or supersedes such previously included AGM Information. Any AGM Information so modified or superseded shall not constitute a part of this Official Statement, except as so modified or superseded.

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Miscellaneous Matters. AGM makes no representation regarding the 2016 Certificates or the advisability of investing in the 2016 Certificates. In addition, AGM has not independently verified, makes no representation regarding, and does not accept any responsibility for the accuracy or completeness of this Official Statement or any information or disclosure contained herein, or omitted herefrom, other than with respect to the accuracy of the information regarding AGM supplied by AGM and presented under the heading “BOND INSURANCE”.

THE AGENCY

General

The Agency was formed in 1919 as an irrigation district of the State of California for the purpose of supplying water for agricultural use. The Agency currently includes approximately 54,000 acres of land and is headquartered in the City of Oroville (“Oroville”), approximately 70 miles north of Sacramento, California. The Agency commenced water deliveries to irrigation users in 1923 after purchasing the assets of two private utilities. Beginning in 1944, the Agency began providing domestic water to residents within the jurisdiction of the Agency. In 1980 the Agency constructed a water treatment plant and began delivery of treated water to certain residents in the Agency.

The Agency services a portion of the population of the unincorporated area of Butte County, including the populated areas adjacent to Oroville. The Agency has a current population of approximately 17,500, and currently provides treated water service to approximately 6,700 connections. The Agency provides raw water to approximately 500 connections.

The Agency also owns and operates two hydroelectric power projects, the South Fork Project (the “South Fork Project”) constructed in 1963 and the Sly Creek Project (the “Sly Creek Project”), constructed in 1983 (collectively the “South Feather Power Project”).

Land and Land Use

The Agency encompasses an area of approximately 54,000 acres that contain about 5,000 acres of urban or suburban lands, 20,000 acres in rural or agricultural use and 29,000 acres that are undeveloped. Urban areas in the Agency include areas within and adjacent to the City of Oroville’s corporation boundary, as well as the unincorporated communities of Kelly Ridge, Bangor, and Palermo located in southern Butte County. The Agency does not include, nor does the Agency serve the predominant portion of the City of Oroville.

Lands in the Agency are hilly in nature ranging from 100’ elevation in the southeast portion of the Agency to 2,000’ in elevation in the northeast portion of the Agency. The Agency has hot, dry summers and cool, moist winters; average precipitation in the Agency’s mountain division watershed is 63 inches per year, and the frost-free growing season is generally 240 days, with 125 days between killing frosts. Major crops in the Agency are irrigated pastures and hay on 1,200 acres, olives on approximately 3,200 acres, deciduous fruits on approximately 200 acres, oranges on approximately 250 acres, and parks and family gardens on approximately 1,800 acres. Of the approximately 22,000 irrigable acres within the Agency, approximately 5,200 receive irrigation water from the Agency.

Governance and Management

The Agency is governed by a five-member board of directors (the “Board of Directors”), the members of which are elected by the registered voters within Agency boundaries to staggered four-year

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terms. The current members of the Board of Directors, the expiration dates of their terms, and their occupations are set forth below.

Board of Directors Expiration of Term Occupation Lou Lodigiani 2016 Farmer/Small Business Owner Dennis Moreland 2018 Retired Jim Edwards 2016 Retired Tod Hickman 2018 Farmer/Small Business Owner John Starr 2018 Builder/Farmer

The Agency employs 58 people, of whom 37 work in the water utility division, and 21 work in the hydroelectric division. Eighteen employees are in the Hydropower Generation Employees Unit, and 26 are in the Water Treatment and Distribution Employees Unit, both of which are represented by International Brotherhood of Electrical Workers, Local #1245 (IBEW). Five employees are in the Clerical and Support Employees Unit, and seven are in the Management and Professional Employees Unit. These two units are self-represented as are the Finance Division Manager and the General Manager. The Agency’s collective bargaining arrangements generally expire on December 31, 2016.

Day-to-day management of the Agency is delegated to the General Manager. Set forth below is a brief resume of the General Manager, Water Division Manager and Finance Division Manager:

Michael C. Glaze is the Chief Executive Officer of the Agency, a position created in connection with the transition to the recently appointed General Manager Rath Moseley. Mr. Glaze had been the General Manager of the Agency since 1992. As the Agency’s Chief Executive Officer, Mr. Glaze reports to the Agency’s Board of Directors and is responsible for implementing its policies, directives and general goals. He has direct supervisory control over the operating divisions of the Agency, including the water division and the hydroelectric division, and directs those operations in a manner consistent with the annual budget adopted by the board of directors. He also serves as the board’s negotiator in the meet-and-confer process with employee representatives. Mr. Glaze is responsible for the hiring, supervision, direction, discipline, promotion, demotion, and termination of all Agency employees, subject to the applicable memorandum of understanding. Mr. Glaze received his undergraduate degree from CSU Chico and Bethany University, and post-graduate work in public administration at CSU Chico and the University of Southern California. He began his career in 1972 in the engineering department of the Butte County Public Works Department. From 1978 to 1982 he worked as a consulting engineer for Cook Associates in Oroville, and then held the position of General Manager at Lake Oroville Area Public Utility District from 1982 until moving to South Feather Water and Power Agency (then named Oroville-Wyandotte Irrigation District). Mr. Glaze is expected to retire on January 27, 2017. Upon his retirement, the position of Chief Executive Officer is not expected to be filled, and the General Manager will be the chief executive position in the Agency.

Rath Moseley began employment with South Feather Water and Power Agency as its General Manager on October 3, 2016. Mr. Moseley comes to the Agency with over 20 years of leadership experience combined with degrees in business, management and technology. His present job requires leadership of over 650 employees with responsibilities in the areas of manufacturing, engineering, supply chain, marketing, finance, EH&S, quality control, customer service, human resources and facilities for locations in California, Utah, Indiana and Mexico.

Matt Colwell has been the Water Division Manager of South Feather Water and Power Agency since 2004. As a division manager under the direction of the General Manager he supervises approximately 30 Water Division personnel to effect operational efficiency and productivity as required for the water system. He has primary responsibility managing operations and maintenance of Agency

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water treatment and distribution facilities. With the prerequisite qualifications of a bachelor’s degree in Engineering and a California Professional Engineer Registration, Matt performs professional and technical engineering duties that may include the reviewing of plan proposals from consulting engineers for compliance with Agency standards, and prepares reports and recommendations for the enhancement of efficiency, productivity, and services; directs and coordinates the extension of potable and non-potable water service; and with the assistance of supervisors, coordinates project activities, and formulation of budgets for the various departments. Mr. Colwell is a registered civil engineer and possesses a Bachelor of Science degree in Agricultural Engineering from California Polytechnic State University (1988). Mr. Colwell has 23 years of experience in water resource engineering and management in California. His experience includes Project Manager for the water resources consulting firm CDM located in Sacramento. Mr. Colwell served as the General Manager for the 70,000 acre Western Canal Water District where he managed 70 miles of 1,275 cfs capacity open canal water system for the delivery of 295,000 acre-feet annually. Mr. Colwell began his career as a water resource engineer for the California DWR performing water supply forecasting during the 1987-94 drought, flood forecasting during the winter floods of 1995, and State Water Project (Lake Oroville) operations during the January 1998 flood event.

Dan Leon has been employed with South Feather Water and Power Agency since January of 2014. In 2015, he was promoted to Power Division Manager and works under the direction of the General Manager. Mr. Leon supervises approximately 20 Power Division personnel who operate and maintain a Power Project that is comprised of two water storage reservoirs, eight dams, conveyance structures, and four hydro-electric generators. Mr. Leon has the primary responsibility to operate the Project in a safe and efficient manner, and maintain compliance with the Agency’s existing Federal Energy Regulatory Agency (FERC) license, and requirements as defined by the North American Electric Reliability Corporation (NERC). He is also responsible for the planning, budgeting, and management of Power Division construction and upgrade projects, and he interacts regularly with staff to coordinate operational activities for the Project. Born in Southern California, Mr. Leon received his B.S. Electrical Engineering degree from San Jose State University, and is a California Registered Professional Engineer.

Mr. Leon possesses over 25 years of experience in the water and electric utility industry, and has been involved in the engineering and design of power systems, communication networks, SCADA systems, and control systems that are used in hydro-electric facilities, water treatment plants, pumping stations, reservoirs, and dams. He started his career as a service technician where he gained a great deal of hands-on electrical and mechanical experience. After completing his education, Mr. Leon worked for many years in the engineering consulting field, where he successfully led teams through the design, construction, commissioning, and closeout phases of projects. More recently, he was employed with the Eugene Water and Electric Board, a water and electric utility located in Eugene, Oregon. There, he worked as the Generation Engineering Supervisor with a team of eight multidisciplinary engineers, and provided engineering oversight for a multitude of capital improvement projects and other assignments.

Steve Wong has been the Finance Division Manager for the Agency since 2008. Under direction of the General Manager, Mr. Wong plans, organizes and directs the financial activities and the Finance Division of the Agency. The Division is responsible for budgeting and financial planning, receipt and disbursement of all Agency funds, cash management, accounting and the preparation and presentation of an annual audit of the Agency’s finances. The Finance Division also assists with the personnel and other administrative functions of the Agency. Mr. Wong received his B.S. Business Administration (Accounting) degree from California State University, Sacramento, and a Masters in Public Administration from Golden Gate University. A recipient of the Certified Management Accountant certificate, Mr. Wong was previously employed in finance positions with Sacramento County, the Community Action Agency of Yolo County, Woodland Joint Unified School District, and the City of

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Chico, and as a consultant with Sungard/Bi-Tech Public Sector Software prior to his position with the Agency.

Powers

Under State law, the Agency has broad general powers over the use of water within its boundaries, including the right of eminent domain, authority to acquire, control, distribute, store, spread, sink, treat, purify, reclaim, process and salvage any water for beneficial use, to sell treated or untreated water, to contract with the United States, other political subdivisions, public utilities, or other persons, and subject to Article XIII A of the State Constitution to levy taxes on lands for certain purposes, to fix rates and charges for raw and treated water and to levy standby charges and capacity fees.

Budget Process

Prior to January 1 of each year, the Board of Directors approves a budget and a schedule of fees, rates, and charges for the Fiscal Year commencing January 1 of the next year. The Board of Directors approved the budget and schedule of fees, rates, and charges for the 2016 Fiscal Year on November 24, 2015. The Agency’s budget includes both the Agency’s water and hydroelectric operations and finances.

Insurance

The Agency is insured for property damage through the Association of California Water Agencies’ Joint Powers Insurance Authority (“ACWA/JPIA”) up to $150 million, with up to $10,000 deductible per occurrence on building, contents, and fixed equipment; actual cash value on mobile equipment and vehicles with a $1,000 deductible per occurrence. Flood coverage applies to vehicles and mobile equipment only. It is included with the property program, and has a $5 million program aggregate limit (all members in one policy year). ACWA/JPIA is self-insured up to $100,000 per occurrence and maintains reinsurance coverage through XL Insurance America, Inc. (limit is $150 million).

The Agency is also insured for auto and general liability up to $58,000,000 (excluding dams) per occurrence with a $25,000 retrospective allocation point; ACWA/JPIA is self-insured up to $2,000,000 and maintains excess insurance coverage through Great American Insurance Co. of New York and Endurance Risk Solutions Assurance Company.

The Agency maintains workers’ compensation insurance with the ACWA/JPIA as follows: workers’ compensation limit is statutory excess $2 million; employer’s liability limit is $2 million excess, $2 million per accident and per disease. The JPIA pools for the first $2 million on each coverage part. Excess coverage is through Arch Insurance.

Outstanding Indebtedness

As of the date of issuance of the 2016 Certificates, the 2016 Certificates will be the only Parity Obligations outstanding. The Agency expects that PG&E will provide construction funding to the Agency for the Lost Creek Dam improvements pursuant to the Lost Creek Dam Agreement. See “WATER FACILITIES, OPERATIONS AND REVENUES – Water Facilities Capital Improvements.” The obligations of the Agency under the Lost Creek Dam Agreement are not secured by a pledge of the Revenues or Net Revenues of the Enterprise.

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Retirement Benefits

This section contains certain information relating to Agency’s contributions to the California Public Employees Retirement System (“CalPERS”). Much of the information is primarily derived from information produced by CalPERS, its independent accountants and actuaries. The District has not independently verified the information provided by CalPERS and neither makes any representations nor expresses any opinion as to the accuracy of the information provided by CalPERS.

The comprehensive annual financial reports of CalPERS are available on its website at www.calpers.ca.gov. The CalPERS website also contains CalPERS’ most recent actuarial valuation reports and other information concerning benefits and other matters. The reference to such website is provided for convenience only. None of the information on such website is incorporated by reference herein. The Agency cannot guarantee the accuracy of such information. Actuarial assessments are forward-looking statements that reflect the judgment of the fiduciaries of the pension plans, and they are based upon a variety of assumptions, one or more of which may not materialize or be changed in the future. Actuarial assessments will change with the future experience of the pension plans.

The Agency contributes to CalPERS, which is an agent multiple-employer public employee defined benefit pension plan. CalPERS provides retirement and disability benefits, annual cost-of-living adjustments and death benefits to plan members and beneficiaries. CalPERS acts as a common investment and administrative agent for participating public entities within the State. The Agency’s pension expenditures for employees for Fiscal Years 2014 and 2015 amounted to $431,342 and $729,747, respectively, and are budgeted for $875,000 for the fiscal year ending December 31, 2016. For a description of the Agency’s benefit plan, actuarial assumptions, and funding status, see Note F in Appendix C – “Audited Financial Statements, for the Fiscal Years Ended December 31, 2014 and 2015.”

The Agency’s obligation to make annual payments to CalPERS is a significant financial obligation of the Agency, and, as a result of changes in CalPERS’ funding policies and actuarial assumptions, is expected to significantly continue to significantly increase.

Changes to Pension Reporting. On June 25, 2012, the Governmental Accounting Standards Board (“GASB”) approved two new standards with respect to pension accounting and financial reporting standards for state and local governments and pension plans. The new standards are set forth in GASB Statements 67 and 68 and replaced GASB Statement 27 and most of GASB Statements 25 and 50.

While the new accounting standards change financial statement reporting requirements, they do not impact funding policies of the pension systems. The reporting requirements for pension plans took effect for the fiscal year beginning mid-2013 and the reporting requirements for government employers will took effect for the fiscal year beginning mid-2014. The audited financial report of the Agency for the Fiscal Year ended December 31, 2015 reflects implementation of the new GASB requirements, and resulted in the recognition of a net pension liability of approximately $2.9 million. For a description of the Agency’s post-employment benefit liabilities, see Note G in Appendix C – “Audited Financial Statements, for the Fiscal Years Ended December 31, 2014 and 2015.”

Other Post-Employment Benefits

The Agency provides continued health insurance coverage (the “Health Plan”) for retired Agency employees, officials and dependents who meet CalPERS eligibility requirements and have been employed by the Agency for a minimum of 10 years. As of December 31, 2015, the Agency had 30 eligible participants in the Health Plan. The Agency has financed the Health Plan on a pay-as-you-go basis, and in fiscal years ended December 31, 2013, 2014 and 2015, the Agency expended approximately $217,143,

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$232,686 and $253,823, respectively, for these benefits. (The Agency has budgeted approximately $320,000 for these benefits for the Fiscal Year ending December 31, 2016.) Under GASB 45, however, such costs must be accounted for on an accrual basis. The retiree health benefits are the Agency’s only OPEB. With its implementation of GASB 45 for the Fiscal Year ended June 30, 2009, the District now reports an annual OPEB cost based on actuarially determined amounts that, if paid on an ongoing basis, will provide sufficient resources to pay these benefits as they come due.

The Agency has created a Retiree Benefits Fund, with a December 31, 2015 net position balance of $3,333,160. The Agency currently plans to transfer $1,000,000 to the Retiree Benefit Fund whenever Joint Facilities Operating Fund gross revenue exceed $20 million for two consecutive years.

Based on an actuarial study using age-adjusted premiums as of December 31, 2014 (the most recent actuarial report), the Agency had an unfunded actuarial accrued liability of $9,487,575. For a description of the Agency’s post-employment benefit plan, actuarial assumptions, and funding status see Note G in Appendix B– “AUDITED FINANCIAL STATEMENTS OF THE AGENCY FOR FISCAL YEARS 2015 AND 2014.”

WATER FACILITIES, OPERATIONS AND REVENUES

Generally

Water supplied by the Agency originates in the snowpack at the upper reaches of the south fork of the Feather River and in the natural flows of several tributary systems. Prior to 1963, the Agency’s primary water transportation facilities were the Forbestown Ditch and Palermo Canal. The Forbestown Ditch was constructed in the 1850s to take water out of Lost Creek in Butte County at a point northwest of Strawberry Valley and to take water from Oroleve Creek by way of Woodville (now Woodleaf), Forbestown, Robinson Sawmill, South Honcut Creek, and by Buffalo Ranch (now vicinity of Lake Wyandotte). The Palermo Canal was constructed in the late 1880s to divert water from the south fork of the Feather River to distribute water to the Palermo area for agricultural purposes. The Agency estimates that approximately 80% of current raw water sales are to customers who do not derive their primary income from farming or use for agricultural purposes and approximately 20% current of raw water sales are to customers who derive their primary income from farming.

The South Fork Project was constructed in 1963 by the Agency and serves as the Agency’s primary water transportation facility. The South Fork Project captures rain and snowmelt in its five reservoirs and dams: Little Grass Valley; Sly Creek; Lost Creek; Ponderosa and Miners Ranch. The water stored in these reservoirs is used for consumption and generating hydroelectric power from Woodleaf, Forbestown and Kelly Ridge power plants. The Sly Creek Project consists of a hydroelectric power plant located at the downstream face of the Sly Creek Dam on Lost Creek (the “Lost Creek Dam”). See “HYDROELECTRIC FACILITIES, OPERATIONS AND REVENUES” for a description of the Agency’s power operations and sales arrangements. See “WATER FACILITIES, OPERATIONS AND REVENUES – Water Facilities Capital Improvements” for a description of significant capital improvement currently in progress at the Lost Creek Dam.

As of January 1, 2016, the South Fork Project reservoirs have a total combined maximum capacity of approximately 165,568 acre-feet, as listed below:

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TABLE 1 SOUTH FEATHER WATER AND POWER AGENCY

STORAGE RESERVOIRS (As of January 1, 2016)

Reservoir and Year Constructed

Maximum Acre Feet Storage

Capacity Height (in feet) Type of Dam

Current Storage(1)

(Acre Feet) Little Grass Valley, 1962 89,804 202 Earth 88,000Sly Creek, 1962 64,338 289 Earth 60,600Lost Creek, 1924 5,780 112 Concrete 4,000Ponderosa, 1962 4,750 160 Earth 3,540Miners Ranch, 1962 896 57 Earth 680

___________________ (1) As of June 1, 2016. Source: The Agency.

Commencing in 1944, the Agency began providing domestic water to residents of the Agency. Between 1944 and 1967 the Agency installed over 80 miles of pipeline for the domestic water system. Starting in the early 1980’s the Agency began a program of steel pipeline replacement and since 1983 the Agency has replaced approximately 70 miles of its domestic water pipelines.

In 1980, the Agency commenced construction of the Miners Ranch Water Treatment Plant, a 14.5 MGD water treatment facility. The Miners Ranch Water Treatment Plant commenced operation in 1981. The Miners Ranch Water Treatment Plant currently operates at approximately 75% of peak capacity and is expected to have sufficient capacity to provide treated water service to most areas of the Agency through 2020. As described herein in “THE MINERS RANCH PROJECT,” the Agency is undertaking significant improvements at the Miners Ranch Water Treatment Plant. When completed, the Miners Ranch Project will provide an additional 50% capacity, which is expected to be sufficient through 2046.

In 1988, the Agency constructed the Bangor Treatment Plant (the “Bangor Treatment Plant”), a 0.144 MGD plant that serves the Bangor area. The Bangor Treatment Plant is currently operating at approximately 85% capacity.

The Agency’s current treated water system includes approximately 110 miles of transmission and distribution pipelines ranging in size from 4 inches to 30 inches in diameter, 5 storage facilities with a combined capacity of approximately 6.5 million gallons, and two treatment plants.

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The following table shows the daily capacities for each of the Agency’s treatment plants. As described in “THE MINERS RANCH PROJECT,” the Agency is increasing the capacity of the Miners Ranch Water Treatment Plant to approximately 21 MGD.

TABLE 2 SOUTH FEATHER WATER AND POWER AGENCY’S

TREATMENT PLANT CAPACITY (As of January 1, 2016)

Treatment Plant Maximum Daily Capacities

(Millions of Gallons) Miners Ranch 14.500 Bangor 0.144

Total 14.644 ___________________ Source: The Agency.

Water Rights

The Agency holds substantial water rights with respect to the South Fork Feather River. The Agency’s sources of water are derived from pre-1914 water rights of the South Feather Land and Water Company and the Palermo Land and Water Company to which the Agency succeeded in 1913 upon acquisition of such land and water companies. Post-1914 rights include the right to appropriate available water from the South Fork Feather River and its tributaries. The water rights of the Agency provide supply to meet the current and projected demand for consumptive water within the Agency. As described above, the Agency has storage capacity of approximately 165,568 acre-feet. In Fiscal Year 2015 the total consumptive use of the Agency was 28,082 acre-feet, and the supply available from the South Fork Project was approximately 283,800 acre-feet.

As a result of the Agency’s acquisition of the South Feather Land and Water Company and the Palermo Land and Water Company in 1923, the Railroad Commission ordered the terms of the purchase agreement to include the provision that the Agency must serve water to any lands outside the boundaries of the Agency which had previously been served by the private water companies, plus any water users that applied for water between 1923 and 1933. The order further stated that the additional service areas must receive water at the same rate as users within the Agency area and that such additional users could not be charged additional fees to compensate for the taxes being paid by the users within the Agency area.

The Agency has on file before the California State Water Resources Control Board (“SWRCB”) petitions to extend its currently held water rights on the South Fork of the Feather River. These water right permits, which otherwise were due to expire in December of 2004, are the subject of an administrative process before the SWRCB. The Agency has taken all steps required to extend the permits, including making the necessary filings and providing the appropriate environmental documentation, as well as required agreements with the other entity using the same water supply, the North Yuba Water District. (See “NYWD Agreement” below.) No adverse comments, protests, or requests for hearings were filed by any party in connection with the Agency’s application. On January 5, 2009, the SWRCB’s staff issued an order denying the extension. The result of such order would require the Agency to limit its consumptive demand to current use, to license those quantities, and would require it, at substantial expense, to file a new application for new rights to accommodate growth. The Agency has sought rehearing of that order. No action has been taken by the SWRCB with respect to the staff order since 2009. If the Staff decision is upheld by the SWRCB, the Agency will consider pursuing available appeals.

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NYWD Agreement

The Agency’s ability to utilize its rights in the South Fork of the Feather River is impacted by the provisions of an agreement between the Agency and the Yuba County Water District, now known as the North Yuba Water District (“NYWD”), effective in 2005 (the “NYWD Agreement”). The NYWD Agreement was entered into by the parties to settle disputes concerning waters in the watersheds of the South Fork of the Feather River and North Fork of the Yuba River, the right to construct and operate a system of hydroelectric power plants and related facilities, and to consumptively use water from these watersheds. In 1958 and 1959, NYWD and the Agency entered into agreements to resolve the disputes and NYWD agreed to support the Agency in certain proceedings before FERC and the State Water Resources Control Board concerning the then-current licensing of the South Feather Power Project (described herein in “HYDROELECTRIC FACILITIES, OPERATIONS AND REVENUES”). The NYWD Agreement entered into in 2005 superseded all prior agreements between the parties and addresses all issues pertinent to the use of the storage, diversion and conveyance system for the South Fork Power Project and for the consumptive uses of water by NYWD and the Agency.

The NYWD Agreement also requires the Agency maintain a South Fork Power Project Contingent Reserve Account (initially funded at $15 million, escalated annually), to be used to pay for capital repairs, emergencies, replacements and improvements to the South Fork Power Project, as well as an operating reserve. (The South Fork Power Project Contingent Reserve Account and operating reserve are currently funded at approximately $18 million.) The South Fork Power Project Contingent Reserve Account is used to pay for major repairs, emergencies, and replacements of the South Fork Power Project and, if necessary, during dry years when revenues are less than operating, maintenance, administrative, and regulatory expenses. If withdraws are made from the Contingent Reserve Account for any purpose, then the account will be replenished with the next available revenues that are not needed for immediate operation, maintenance, administrative and regulatory expenses. The obligation to replenish the South Fork Power Project Contingent Reserve Account constitutes a Maintenance and Operation Expenses of the Agency pursuant to the 2016 Installment Purchase Contract.

The NYWD Agreement also requires the Agency to deposit revenues related to the South Fork Power Project in the South Fork Power Project/ Joint Facilities Operating Fund and to pay to NYWD 50% of the net revenues generated from the operation of the South Fork Power Project (including revenue derived from the generation of energy and water transfers), after payment of costs of operating and maintaining the South Fork Power Project, including long term and deferred maintenance, transmission expenses, capital upgrades, maintenance of working capital, relicensing costs and regulatory and insurance costs. (Revenues related to the South Fork Power Project deposited into the South Fork Power Project/ Joint Facilities Operating Fund constitute Revenues of the Agency and costs of operating and maintaining the South Fork Power Project paid from the South Fork Power Project/ Joint Facilities Operating Fund constitute Maintenance and Operation Expenses of the Agency pursuant to the 2016 Installment Purchase Contract.) See “AGENCY FINANCIAL INFORMATION – Historical Operating Results and Debt Service Coverage” and “- Projected Operating Results and Debt Service Coverage” for a description of the amounts paid to NYWD from the South Fork Power Project/ Joint Facilities Operating Fund pursuant to the NYWD Agreement.

In addition to requiring sharing of a portion of the South Fork Power Project net revenues, the provisions of the NYWD Agreement impact the amount of hydroelectric revenues received since, under certain circumstances, the NYWD Agreement limits the amount of water that the Agency may release from its reservoirs, potentially reducing hydroelectric revenues.

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Historical Water Use

Set forth below is an estimate of water diverted by the Agency for consumptive use during the last ten years. The estimate exceeds water deliveries as a result of transmission losses and other circumstances.

TABLE 3 SOUTH FEATHER WATER AND POWER AGENCY

HISTORICAL WATER USE (IN ACRE-FEET PER YEAR)

Fiscal Year

Water Diverted to Miners Ranch

Treatment Plant

Irrigation Water

Diverted Total Agency

Consumptive Use 2006 5,651 16,701 22,352 2007 5,810 20,312 26,122 2008 6,081 20,423 26,504 2009 5,490 17,072 22,562 2010 5,081 16,215 21,296 2011 4,894 10,853 15,747 2012 5,512 13,123 18,635 2013 5,890 13,538 19,428 2014 5,372 14,549 19,921 2015 4,748 13,159 17,907

___________________ Source: The Agency.

The amount of water available to the Agency in the future is primarily determined by hydrological conditions in the watersheds above Agency reservoirs and regulatory requirements relating to downstream releases and system losses. For planning purposes, however, the Agency assumes the availability of 100% of the maximum historical Agency consumptive use. During the recent drought, water available to the Agency for consumptive use never fell below 60,000 acre-feet per year.

Current Drought

On January 17, 2014, the State Governor declared a drought state of emergency (the “Declaration”) with immediate effect. The Declaration included the following orders, among others: (a) local urban water suppliers are encouraged to implement their local water shortage contingency plans; (b) local urban water suppliers are encouraged to update their urban water management plans to prepare for extended drought conditions; (c) DWR and the SWRCB are directed to expedite the processing of water transfers; (d) the SWRCB is directed to put water rights holders on notice that they may be required to cease or reduce water diversions in the future; (e) the SWRCB is directed to consider modifying requirements for reservoir releases or diversion limitations; and (f) DWR is directed to take necessary actions to protect water quality and supply in the Sacramento-San Joaquin River Delta/San Francisco Bay Estuary (the “Bay-Delta”), including the installation of temporary barriers or temporary water supply connections, while minimizing impacts to aquatic species. In addition, on July 15, 2014, the SWRCB adopted emergency measures requiring water suppliers to implement mandatory Statewide water conservation actions.

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On March 17, 2015, the SWRCB adopted additional emergency regulations limiting outdoor irrigation to two days per week, extending certain measures set forth in the July 15, 2014 action for an additional 270 days, prohibiting outdoor irrigation for 48 hours following rain and prohibiting restaurants from serving water to customers unless requested.

On April 1, 2015, the Governor issued an executive order extending the measures set forth in the Declaration and adopting the following additional orders, among others: (i) the SWRCB is directed to impose restrictions to reduce potable urban water usage, including usage by commercial, industrial and institutional properties and golf courses, by 25% from 2013 amounts through February 28, 2016; portions of a water supplier’s service area with higher per capita use must achieve proportionally greater reductions than areas with lower per capita use; (ii) DWR is directed to lead a statewide initiative to replace 50 million square feet of lawns with drought tolerant landscaping; (iii) the California Energy Commission is directed to implement a rebate program for replacement of inefficient appliances; (iv) urban water suppliers are required to provide monthly water usage, conservation and enforcement information; (v) service providers are required to monitor groundwater basin levels in accordance with California Water Code § 10933; (vi) permitting agencies are required to prioritize approval of water infrastructure and supply projects; and (vii) DWR is required to plan salinity barriers in the Bay-Delta.

On May 6, 2015, the SWRCB adopted regulations in response to the Governor’s executive order that require the Agency to effect a 36% reduction from 2013 treated water usage. The SWRCB’s emergency regulations did not mandate a reduction in the Agency’s raw water deliveries or water used for the generation of hydroelectricity. On November 13, 2015, the Governor issued Executive Order B-36-15, which calls for an extension of urban water use restrictions until October 31, 2016 should drought conditions persist through January 2016.

On February 2, 2016, the SWRCB extended its previous emergency regulations through October 2016 while making available credits and adjustments of up to 8% in urban water suppliers’ conservation mandates based upon climate, water-efficient growth and investments in drought-resilient supply sources. On May 18, 2016, the SWRCB adopted a statewide water conservation approach that replaced the prior percentage reduction based water conservation standard with a localized “stress test” approach – that mandates urban water suppliers now act to ensure at least a three year supply of treated water to their customers under drought conditions. Urban suppliers that demonstrate adequate supplies for three years of continued drought can self-certify that it is not required to achieve a percentage reduction in water use. The Agency self-certified that it has adequate supply in the event of three years continued drought conditions and has lifted requirements designed to achieve a percentage reduction in treated water use, while at the same time encouraging customers to continue certain wise water use practices.

Under the modified regulation (the “May 2016 SWRCB Drought Regulation”), each water agency in the State is required to self-certify the level of water supplies it will have available assuming three additional dry years, and the level of conservation necessary to assure adequate supply over that time. Urban water suppliers are required to reduce potable water use in a percentage equal to their projected shortfall in the event of three more dry years (e.g., if a water agency projects it will have a 10% supply shortfall at the current rate of water use, assuming the next three years are dry years, the mandatory conservation standard for that water agency would be 10%). The May 2016 SWRCB Drought Regulation is to be in effect from June 2016 through January 2017.

During this period of drought, the Agency informed its customers of the drought conditions and programs to promote the conservation of water. Potable and non-potable water consumption declined by approximately 25% with a corresponding decrease in revenues of about 10%. The drought also resulted in increased demand for surplus water sales by the Agency. See “AGENCY FINANCIAL INFORMATION – Historical Operating Results.”

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Historical Water Connections

The following table shows the number of treated water and raw water connections to the Agency’s Enterprise for the ten most recent Fiscal Years.

TABLE 4 SOUTH FEATHER WATER AND POWER AGENCY

HISTORICAL WATER CONNECTIONS

Fiscal Year

Treated Water Connections

Increase (Decrease)

Raw Water Connections

Increase (Decrease)

2006 6,649 106 435 12 2007 6,727 78 425 (10) 2008 6,765 38 441 16 2009 6,647 (118) 440 (1) 2010 6,641 (6) 424 (16) 2011 6,634 (7) 425 1 2012 6,647 13 484 59 2013 6,671 24 507 23 2014 6,694 23 506 (1) 2015 6,719 25 519 13

___________________ Source: The Agency.

While the Miners Ranch Water Treatment Plant improvement project will effectively double the capacity of the existing facility, because future growth and the timing of that growth is uncertain at this time, only a 1% increase in water sales annually is assumed in the revenue projections.

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Historical Water Deliveries

The following table presents a summary of historical water deliveries for the Enterprise in acre-feet per year for the ten most recent Fiscal Years.

TABLE 5 SOUTH FEATHER WATER AND POWER AGENCY HISTORICAL CUSTOMER WATER DELIVERIES

(IN ACRE FEET PER YEAR)

Fiscal Year

Treated Water Deliveries Increase

Raw Water Deliveries Increase

Total Water

Delivered 2006 4,925 370 2,749 313 7,674 2007 5,239 314 3,140 391 8,379 2008 5,259 20 3,047 (92) 8,306 2009 4,810 (448) 2,646 (401) 7,457 2010 4,336 (474) 2,586 (60) 6,922 2011 4,251 (85) 2,300 (286) 6,551 2012 4,920 669 2,964 664 7,884 2013 5,271 351 3,108 143 8,379 2014 4,774 (497) 3,056 (52) 7,829 2015 4,012 (762) 3,255 200 7,267

___________________ Source: The Agency.

Variations in treated water deliveries over the past ten years reflect local precipitation levels and weather patterns, with water deliveries increasing in years of relatively low local precipitation and decreasing in years of relatively high local precipitation.

From time to time, the Agency sells surplus water to purchasers outside of the Agency. See “THE ENTERPRISE –Historical Water Sales Revenue” for more information concerning historical and surplus water sales information.

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Largest Customers

The following table sets forth the Agency’s ten largest Agency customers for Fiscal Year 2015, as determined by annual payments. All of the ten largest customers are treated water customers except as noted.

TABLE 6 SOUTH FEATHER WATER AND POWER AGENCY

LARGEST WATER CUSTOMERS (Fiscal Year 2015)

Customer 2015 Payments C J Marcotte $28,586 Oroville Pacific Assn. c/o Hillview Ridge 20,443 Olive Hill Manufactured Home Community 14,480 Kendall Square #2 11,094 Saleh Al-Nasrawi 10,773 Gold Country Casino 10,469 Oro Cemetery District 6,451 Lake Oroville Country RV Community 6,104 Hidden Valley Mobile Home Park 4,700 Feather Falls Casino 4,383 10 largest customers $113,100 % of domestic sales 5.63% % of total water sales 5.02% ___________________ Source: The Agency.

Water System Rates and Charges

General. The Agency reviews rates and charges for water service on an annual basis. Under current law, the Agency’s rates and charges are not subject to the approval of the voters of the Agency or any governmental agency or body. Rates are subject to Proposition 218. See “CONSTITUTIONAL LIMITATIONS – proposition 218.”

The Agency currently charges a service charge of $15 per month for each treated-water connection. In addition, the Agency charges $0.42 per 100 cubic feet for the first 10,000 cubic feet of treated water used, and $0.31 per 100 cubic feet for the remaining volume of treated water used. The Agency charges a service charge of $17.50 per month per raw water connection. In addition, the Agency charges a rate of $1.95 per miners inch of raw water, or 8.67¢ per 100 cubic feet of raw water, depending on the type of volumetric measurement used. The Agency charges a flat rate of $56.50 per month for “flat rate” raw water connections, which is approximately equivalent to $39 per acre foot.

The Agency reduced rates in 2012 and 2014 as part of a strategic financial plan adopted in April, 2010. Reducing water rates affected two important goals. One, it eliminated a discriminatory pricing structure that favored high-volume users of water, and two, it also provided a mechanism to stimulate the local economy by attracting both residential and municipal/industrial customers to the Agency’s service area to take advantage of cheaper water.

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Development Fees. The Agency presently charges a system capacity charge (i.e., development or capital facilities fee) for each new connection to the treated water system. The new-connection fee ranges from $4,222 for a typical single-family residence (5/8” meter) to $211,051 for a 6” meter, and more for larger connections. This fee is indexed annually to the Engineering News Record’s National Construction Cost Index. The Agency does not anticipate significant growth in connections in the foreseeable future. See “AGENCY FINANCIAL INFORMATION – Projected Operating Results.”

Collection Procedures. The Agency is on a monthly billing cycle for water charges, billing for the prior month’s service. Payment is due and payable when presented and is considered delinquent if not paid within 30 days of the billing date. If payment is not received within 60 days of the billing date, a delinquent notice is sent to the customer. If not paid within five days of the delinquent notice, a 48-hour notice is placed on the premises and a $31 Shutoff Notice Service Fee is added to the account. Failure to pay within 48 hours of the on-site notice results in disconnection of water service by the Agency. If a delinquent service is shut off for non-payment, a customer must bring the account current, with an added fee of $57. Uncollected accounts are annually attached to the Butte County property tax rolls for collections. The amounts forwarded to Butte County for collection through this process is approximately $2,000 per year, or 0.1% of total water sales revenues.

Water Facilities Capital Improvements

In addition to the Miners Ranch Project, the Agency is currently undertaking significant capital improvements to the Lost Creek Dam as described below.

Lost Creek Dam Improvements. In the early 2000’s, FERC ordered the Agency to implement improvements to the Lost Creek Dam intended to enable the Lost Creek Dam (“Lost Creek Dam Improvements”) to withstand probable maximum flood (“PMF”) flows without risk of failure. The Lost Creek Dam Improvements generally consist of applying a five-foot thick reinforced concrete facing on the downstream side of the Lost Creek Dam for enhanced seismic stability, added scour protection to prevent undermining the toe of the Lost Creek Dam during a PMF, and the demolition and construction of a new spill crest and bridge deck to support the predicted flow during a PMF. Construction of the Lost Creek Dam Improvements commenced in May, 2015, and is expected to be completed in November, 2017.

The cost of the Lost Creek Dam Improvements is being funded pursuant to the Lost Creek Dam Agreement between PG&E and the Agency, originally executed in 2010 (the “Lost Creek Dam Agreement”). The Lost Creek Dam Agreement was executed by the parties to settle a dispute concerning responsibility for the Lost Creek Dam Improvements costs, and generally provides that, as Lost Creek Dam Improvements costs are incurred, the Agency invoices PG&E for all expenses, PG&E reimburses the Agency, who then pays the contractor. PG&E provides construction funding for the entire amount expended by the Agency by transferring funds to the Agency within 30 days of expenditure. The Agency is obligated to repay 60% of the payment received from PG&E. (The other 40% is PG&E’s contribution to the Lost Creek Dam Improvements.) This 60%/40% split is maintained for the projected construction cost (stipulated by the parties to be approximately $31.8 million). If construction costs exceed this stipulated sum, the Agency’s responsibility increases by 20% on the excess costs, resulting in an 80%/20% split on the remaining project expenses. As of the date hereof the expected total cost of the Lost Creek Dam Improvements is approximately $30.2 million. Total expenditures to date are approximately $19.0 million ($11.4 million of which were paid by the Agency), resulting in future expected costs of approximately $11.2 million (approximately $6.7 million of which are payable by the Agency).

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In 2004, the Agency procured an engineering firm to design the project and to manage construction of the work. In 2014, the Agency selected a construction contractor utilizing the competitive bidding process established for California public works projects. The contractor placed most of the concrete facing (more than 4,000 cubic yards of concrete) on the downstream side of the dam during the 2015 construction season; however, there was concern regarding the quality of the contractor’s work. Subsequent analysis determined the work sufficiently met the design requirements, and all parties are now actively working toward ensuring the remaining work is completed on schedule and in compliance with the design specification.

Additional Capital Improvements. In addition to the Miners Ranch Project and the Lost Creek Dam Improvements, the Agency anticipates that pipelines and other distribution facilities will be expanded and improved as funds are available and can be paid on a “pay-as-you-go” basis.

Capital Improvement Cost Funding. The following table shows the expected capital improvement costs of the Agency during the next five years as well as the expected sources of funding.

TABLE 7 SOUTH FEATHER WATER AND POWER AGENCY

Capital Improvement Program

2016 2017 2018 2019 2020 Sources 2016 Certificates Proceeds $6,000,000 $19,000,000 -- -- -- System Capacity Charges(1) 100,000 100,000 $100,000 $100,000 $100,000Agency Contribution(2) 9,800,000 7,900,000 3,400,000 3,400,000 2,400,000Total Sources $15,900,000 $27,000,000 $3,500,000 $3,500,000 $2,500,000 Uses Lost Creek Dam(3) $8,900,000 $6,000,000 -- -- --Miners Ranch Plant 6,000,000 20,000,000 -- -- --Other Capital Expenses 1,000,000 1,000,000 $3,500,000 $3,500,000 $2,500,000Total Sources $15,900,000 $27,000,000 $3,500,000 $3,500,000 $2,500,000________________ (1) See “Water System Rates and Charges – Development Fees.” (2) Generally consists of Net Revenues after payment of debt service each fiscal year. Fiscal Years 2016 and 2017 include

use of approximately $2.1 million and $2.5 million of Agency reserves, respectively. (3) Amount in table for Lost Creek Dam Improvements is net of PG&E contributions. See “- Lost Creek Dam

Improvements” above. Source: The Agency.

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Historical Water Sale Revenues

The following table shows the Agency’s annual water sale revenues from Agency water sales to customers within the Agency for the ten most recent Fiscal Years. All figures shown below are excerpted from the audited financial statements of the Agency.

TABLE 8 SOUTH FEATHER WATER AND POWER AGENCY

HISTORICAL CUSTOMER WATER SALES REVENUES

Fiscal Year

Treated Water Revenues

% Change

Raw Water Revenues

% Change

Total Water Revenues

% Change

2006 $2,497,776 5.52% $230,804 7.05% $2,728,580 5.65% 2007 2,552,208 2.18 252,594 9.44 2,804,802 2.79 2008 2,580,749 1.12 252,038 -0.22 2,832,787 1.00 2009 2,444,993 -5.26 229,598 -8.90 2,674,591 (5.58) 2010 2,354,324 -3.71 223,461 -2.67 2,577,785 (3.62) 2011 2,493,849 5.93 211,159 -5.51 2,705,008 4.94 2012 2,319,951 -6.97 233,909 10.77 2,553,860 (5.59) 2013 2,394,442 3.21 243,757 4.21 2,638,199 3.30 2014 2,115,927 -11.63 233,369 -4.26 2,349,296 (10.95) 2015 2,009,002 -5.05 242,306 3.83 2,251,308 (4.17)

___________________ Source: The Agency.

In addition to the revenues from water sales to customers in the Agency’s service area, in October, 2015 the Agency sold surplus water not required for use by its customers to other water agencies. This sale resulted in $7.4 of extraordinary revenues in 2015 and offset a decline in revenues from power generation and conservation efforts by customers in response to the drought conditions experienced in recent years. Agency reserves were also utilized to minimize the impact of the reduced revenues on operations, maintenance and capital projects.

In the Projected Operating Results, water sales revenues are projected to increase one percent per year. Because of the recent drought conditions in the western United States, the State of California imposed major water conservation requirements on the public. The projections of water sales revenues are also based on current Agency rates and charges described under “WATER FACILITIES, OPERATIONS AND REVENUES - Water System Rates and Charges.”

The Projected Operating Results of the Agency assumed modest levels of surplus water sales in the future. There can be no assurance, however, that such surplus water sales will occur in the future.

In addition, there are significant ongoing planning efforts at the State and federal level intended to provide enhanced environmental protection to the Bay-Delta and increase the reliability and availability of water in the State. The Agency cannot predict what effect, if any, these efforts may have on the Agency’s water supply including its ability to make surplus water sales in the future.

Property Tax Revenues

General. Butte County (the “County”) levies a 1% property tax on behalf of all taxing agencies in the County, including the Agency. The taxes collected are allocated to taxing agencies within the

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County, including the Agency, on the basis of a formula established by State law enacted in 1979. Under this formula, the County and all other taxing entities receive a base year allocation plus an allocation on the basis of “situs” growth in assessed value (new construction, change of ownership, and inflation) prorated among the jurisdictions which serve the tax rate areas within which the growth occurs. Tax rate areas are specifically defined geographic areas which were developed to permit the levying of taxes for less than county-wide or less than city-wide special districts.

There can be no assurance that the allocation formula currently established by State law will be continued in the future. If the formula is changed in the future it could have a material adverse effect on the receipt of property tax revenue of the Agency.

Property Tax Collections. The following table shows tax collections received by the Agency as its share of the 1% property tax during the ten most recent Fiscal Years.

TABLE 9 SOUTH FEATHER WATER AND POWER AGENCY

HISTORICAL PROPERTY TAX COLLECTIONS

Fiscal Year

Property Tax Collections

2006 $297,089 2007 494,987 2008 529,166 2009 517,253 2010 513,770 2011 509,266 2012 488,954 2013 503,840 2014 510,239 2015 517,354

The Agency projects receiving $520,000 in property tax revenues in the fiscal year ending December 31, 2016.

HYDROELECTRIC FACILITIES, OPERATIONS AND REVENUES

Generally

The Agency has four power plants: (i) the Woodleaf, Forbestown and Kelly Ridge power plants, which collectively make up the South Fork Power Project, and (ii) the Sly Creek power plant.

The two projects capture rain and snowmelt in its five reservoirs and dams. The water stored in the reservoirs and dams at Little Grass Valley, Sly Creek, Lost Creek, Ponderosa and Miners Ranch is used for consumption and generating hydroelectric power at the Woodleaf, Forbestown and Kelly Ridge power plants.

The Sly Creek Project consists of a hydroelectric power plant located at the downstream face of the Sly Creek Dam on Lost Creek. The Sly Creek Project power plant became operational in 1983. The generating capacities of the Agency’s power plants are 13.0 MW for Sly Creek; 60.0 MW for Woodleaf; 37.5 MW for Forbestown; and 11.0MW for Kelly Ridge

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Power Purchase Agreement

The Agency currently sells power generated at the Agency’s hydroelectric facilities to PG&E pursuant to the Power Purchase Contract. Pursuant to the Power Purchase Contract, PG&E has the exclusive right to the generated power and the scheduling and transmission of the hydroelectric power generated at the Agency’s facilities. For this exclusive right, PG&E pays the Agency fixed monthly payments (which in the aggregate, result in approximately $3.3 million of fixed payments annually). In addition, PG&E is required to make variable payments (at a price based on the then-prevailing cost of power in the California energy markets) for the amount of power actually utilized by PG&E (which in turn depends on demand by PG&E customers and other factors outside of the Agency’s control). In 2015, the average price per kilowatt hour paid by PG&E was approximately $.051. PG&E also receives renewable energy credits for the hydroelectric power generated from the Agency’s facilities.

PG&E’s obligation to pay depends on the continuing generation of power from the Agency’s facilities. In addition, the Power Purchase Contract specifies events of default such as continued failure to perform material obligations and the bankruptcy of either party. Upon such termination, the non-defaulting party is entitled to a termination payment generally equal to its losses, if any, calculated based on the difference between the then-prevailing market value of the power generated at the Agency’s hydroelectric facilities and the amount that would have been payable pursuant to the Power Purchase Contract had it not been terminated.

The Agency’s hydroelectric operations and revenues are dependent in large part on the prevailing water conditions, as well as the demand for electricity. The current drought in California has resulted in reduced flows of water on the South Fork River, which reduced the amount of electricity generated at the Agency’s hydroelectric facilities. See “WATER FACILITIES, OPERATIONS AND REVENUES – Current Drought.” In addition, since the minimum amount of power required to be purchased pursuant to the Power Purchase Agreement is a relatively small portion of historical amounts purchased, demand for power throughout the State affects the Agency’s hydroelectric revenues. Reduced power demand generally could result in significantly reduced power revenues. However, the Agency believes that, since power generated from the Agency’s hydroelectric facilities constitute “renewable” resources for purposes of state laws that mandate increasing use of renewable resources, there will be continued demand for the Agency’s hydroelectric power. For purposes of the Projected Operating Results, hydroelectric revenues for Fiscal Years 2017 through 2020 are projected using the average actual revenue received by the Agency from July, 2010 through June, 2016.

FERC License Renewal

The Agency holds a license with the Federal Energy Regulatory Commission (“FERC”) to operate the South Fork Power Project. The Agency’s original 50 year license with the FERC lapsed March 31, 2009. Prior to its lapse, the Agency initiated efforts to renew the license. The Agency believes it is currently in the final stages of the renewal process and will be receiving a new license in the near future. The Agency is awaiting issuance of a Clean Water Act section 401 water quality certification from the SWRCB, which is expected in the first quarter of 2017. All other environmental studies and regulatory prerequisites to secure a new license have been completed by the Agency. Within approximately 90 days of issuance of the 401 certification by the SWRCB, it is expected that FERC will issue a new license with a term of not less than 30 years and not more than 50 years.

The Agency continues to operate the South Fork Power Project under annual license extensions and anticipates continuing to do so until issuance of the new license by FERC. The Agency is not aware of any issues that would delay or impact the issuance of the new license and is prepared to implement the new license conditions upon issuance.

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Historical Hydroelectric Revenues

The following table summarizes hydroelectric revenues received by the Agency for the five most recent Fiscal Years.

TABLE 10 SOUTH FEATHER WATER AND POWER AGENCY

HISTORICAL HYDROELECTRIC REVENUES

Fiscal Year

South Feather Power Project/ Joint Facilities Operating

Fund Sly Creek

Power Project

Total Hydroelectric

Revenues 2011 $18,727,496 $2,422,874 $21,150,370 2012 16,028,985 1,761,927 17,790,912 2013 14,387,050 1,618,871 16,005,921 2014 11,804,137 1,447,004 13,251,141 2015 11,278,062 1,263,159 12,541,221

__________________ Source: The Agency

As described above, the Agency attributes the decrease in hydroelectric revenues in fiscal year 2014 and 2015 to reduced water flow resulting from the drought as well as reduced electric demand from PG&E. Based on year-to-date receipts, the Agency projects that hydroelectric revenues in 2016 will be approximately $16.8 million.

AGENCY FINANCIAL INFORMATION

Financial Statements

A copy of the most recent audited financial statements of the Agency (“Auditor’s Report) for the Fiscal Years ended December 31, 2015 and 2014, prepared by Richardson & Company LLP, Sacramento, California (the “Auditor”), approved by the Agency’s Board of Directors on June 22, 2016, is included as APPENDIX B hereto (the “Financial Statements”).

The summary operating results contained under the caption “AGENCY FINANCIAL INFORMATION -- Historical Operating Results and Debt Service Coverage” are derived from these financial statements and are qualified in their entirety by reference to such statements, including the notes thereto.

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Historical Operating Results and Debt Service Coverage

The following table is a summary of operating results of the Enterprise for the last five Fiscal Years. These results have been derived from the Agency’s Financial Statements but exclude certain non-cash items and include certain other adjustments. The Agency’s Auditor has not audited the table.

TABLE 11 SOUTH FEATHER WATER AND POWER AGENCY

HISTORICAL OPERATING RESULTS (Fiscal Year ended December 31)

2011 2012 2013 2014 2015 REVENUES:

Domestic Water Sales $2,493,849 $2,319,951 $2,394,442 $2,115,927 $2,009,002 Irrigation Water Sales 211,159 233,909 243,757 233,369 242,306 Hydroelectric Revenues 21,150,370 17,790,912 16,005,921 13,251,141 12,541,221 Surplus Water Sales 0 0 0 0 7,400,000 Property Taxes 509,266 488,954 503,840 510,239 517,354 Other Revenues(1) 1,106,806 1,000,790 876,654 668,260 392,444

Total Revenues $25,471,450 $21,834,516 $20,024,614 $16,778,936 $23,102,327 MAINTENANCE AND OPERATIONS EXPENSE:

Water Treatment $846,119 $891,926 $1,109,795 $1,186,224 $1,139,272 Transmission & Distribution 1,904,754 1,916,830 1,808,436 1,850,480 1,855,041 Customer Accounts 448,757 557,255 653,150 741,837 703,032 Plant Operations(2) 4,953,976 5,952,110 6,222,504 8,106,972 5,804,762 General & Administrative(3) 3,308,452 6,757,093 3,713,611 3,592,181 3,561,808 Other M&O Expenses 266,670 301,776 271,607 290,207 619,043

Total M&O $11,728,728 $16,376,990 $13,779,103 $15,767,901 $13,682,958 Net Revenue $13,742,722 $5,457,526 $6,245,511 $1,011,035 $9,419,369 DEBT SERVICE:

1980 Revenue Bonds $210,000 $1,365,000 $0 $0 $0 2003 Certificates 235,245 2,697,967 0 0 0 2012 Revenue Bonds 0 0 446,538 376,151 379,673

Total Debt Service $445,245 $4,062,967 $446,538 $376,151 $379,673

COVERAGE OF DEBT SERVICE 30.86x 1.34x 13.99x 2.69x 24.81x

___________________ 1. Other Revenues include interest income, backflow installation and inspection, sale of assets, insurance refunds and other

miscellaneous service charges. 2011 Other Revenues include grant revenue of $704,359. 2. Plant Operations expenses include the Miners Ranch Water Treatment Plant, Sly Creek, Woodleaf, Forbestown and Kelly Ridge

powerhouses and Agency campgrounds. Plant Operations expenses include payments to NYWD of $94,000 in 2012, $303,916 in 2013 and $2,139,677 in 2014. No payment was made in 2015.

3. 2012 General and Administrative expenses include a one-time $2,965,462 payment to CalPERS for purchase of prior service credits. Source: Audited financial statements of the Agency

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Projected Operating Results and Debt Service Coverage

The Agency’s estimated projected operating results for the Enterprise for the Fiscal Years ending December 31, 2016 through 2020 are set forth below, reflecting certain significant assumptions concerning future events and circumstances. The financial forecast represents the Agency’s estimate of projected financial results based on the assumptions set forth in the footnotes to the chart set forth below. Such assumptions are material in the development of the Agency’s financial projections, and variations in the assumptions may produce substantially different financial results. Actual operating results achieved during the projection period may vary from those presented in the forecast and such variations may be material. Among other things the Agency has made certain assumptions with respect to the Power Purchase Contract, which expires on June 30, 2020. The Projected Operating Results assume that for the second half of 2020 (after the expiration of the Power Purchase Contract) the Agency will either renew the current Power Purchase Contract or make other arrangements which will result in hydroelectric revenues equal to the average actual revenue received by the Agency from July, 2010 through June, 2016. Although the Agency does not currently have any transmission arrangements with respect to its hydroelectric power since it is currently selling such power directly to PG&E, PG&E is obligated to provide transmission services to the Agency if the event the Agency discontinues sales to PG&E in 2020. See “HYDROELECTRIC FACILITIES, OPERATIONS AND REVENUES” for a discussion of the Agency’s current expectations with respect to sale of power from its hydroelectric facilities after the expiration of the Power Sales Contract. Although the Projected Operating Results do not include projections for fiscal years after 2020, the Agency believes that it will continue to receive revenues from sales of its hydroelectric power at the same levels as it has historically received.

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TABLE 12 SOUTH FEATHER WATER AND POWER AGENCY

PROJECTED OPERATING RESULTS (Fiscal Year ended December 31)

2016(1) 2017 2018 2019 2020 REVENUES:

Domestic Water Sales $2,010,000 $2,030,100 $2,050,401 $2,070,905 $2,091,614 Irrigation Water Sales 242,500 244,925 247,374 249,848 252,346 Hydroelectric Revenues(2) 16,775,000 16,775,000 16,775,000 16,775,000 16,775,000 Surplus Water Sales 275,000 277,750 280,528 283,333 286,166 Property Taxes 520,000 525,200 530,452 535,757 541,114 Other Revenues(2) 309,000 312,090 315,211 318,363 321,547

Total Revenues $20,131,500 $20,165,065 $20,198,966 $20,233,205 $20,267,787 MAINTENANCE AND OPERATION EXPENSES(4):

Water Treatment $1,265,295 $1,281,111 $1,297,125 $1,313,339 $1,329,756 Transmission & Distribution 2,018,675 2,043,908 2,069,457 2,095,326 2,121,517 Customer Accounts 758,718 768,202 777,804 787,527 797,371 Plant Operations(5) 5,533,170 5,602,335 6,672,364 6,868,268 7,188,497 General & Administrative 4,041,467 4,091,985 4,143,135 4,194,924 4,247,361

Total M&O $13,617,325 $13,787,542 $14,959,886 $15,259,384 $15,684,502

Net Revenue $6,514,175 $6,377,523 $5,239,080 $4,973,821 $4,583,286 DEBT SERVICE:

2012 Revenue Bonds $379,323 $0 $0 $0 $0 2016 Certificates 0 1,079,611 1,437,775 1,433,375 1,435,675

Total Debt Service $379,323 $1,079,611 $1,437,775 $1,433,375 $1,435,675

COVERAGE OF DEBT SERVICE(6) 17.17x 5.91x 3.64x 3.47x 3.19x

___________________ 1. Fiscal Year 2016 Revenue amounts are projections based on year-to-date results through July 27, 2016. Beginning

in Fiscal Year 2017, revenues assume annual 1% growth, except for hydroelectric revenues (described in Note 2). 2. Hydroelectric Revenues for Fiscal Years 2017 through 2020 are projected using the average actual revenue received

by the Agency from July, 2010 through June, 2016. 3. Other Revenues include interest income, backflow installation and inspection, sale of assets, insurance refunds and

other miscellaneous service charges. 4. Maintenances and Operation Expenses amounts for 2016 are budgeted amounts. Beginning in 2017, Maintenances

and Operation Expenses assume annual 1.25% growth. 5. Plant Operations expenses include costs related to the Miners Ranch Water Treatment Plant, Sly Creek, Woodleaf,

Forbestown and Kelly Ridge powerhouses and Agency campgrounds. Plant Operations expenses include projected distributions to NYWD of $1,000,000 in 2018, $1,250,000 in 2019 and $1,500,000 in 2020. Actual distributions will depend on actual net revenues relating to the South Fork Power Project. See “WATER FACILITIES, OPERATIONS AND REVENUES – NYWD Agreement.”

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Reserves

The following table shows the Agency’s expected reserves for Fiscal Years 2016 through 2020.

TABLE 13 SOUTH FEATHER WATER AND POWER AGENCY

PROJECTED RESERVES (Fiscal Year ended December 31)

2016 2017 2018 2019 2020 Unrestricted Cash Designated(1) $21,400,000 $21,614,000 $21,830,140 $22,048,441 $22,268,926Undesignated $4,912,154 $2,222,199 $2,342,389 $2,191,259 $2,639,809 $26,312,154 $23,836,199 $24,172,529 $24,239,700 $24,908,735

(1) Includes amounts on deposit in the South Fork Power Project Contingent Reserve Account. See “-WATER FACILITIES, OPERATIONS AND REVENUES – NYWD Agreement.”

Source: The Agency.

THE CORPORATION

The South Feather Water and Power Agency Financing Corporation is a nonprofit public benefit corporation created in 1995 for the purpose of aiding the financing of projects for the Agency. The Corporation’s articles of incorporation and bylaws empower it to act as the seller in the financing described in this Official Statement. The Board of Directors of the Agency serve as the Board of Directors of the Corporation.

Neither the Corporation nor its members have any obligations or liabilities to the Owners of the 2016 Certificates with respect to the payment of the 2016 Installment Payments by the Agency when due, or with respect to the performance by the Agency of any other covenant made by it in the 2016 Installment Purchase Contract.

CONSTITUTIONAL LIMITATIONS

Constitutional Limitations on Governmental Spending

Article XIIIA of the California Constitution limits the taxing powers of California public agencies. Article XIIIA provides that the maximum ad valorem tax on real property cannot exceed one percent of the “full cash value” of the property, and effectively prohibits the levying of any other ad valorem property tax except for taxes above that level required to pay debt service on voter-approved general obligation bonds. “Full cash value” is defined as “the County Assessor’s valuation of real property as shown on the 1975/76 tax bill under ‘full cash value’ or, thereafter, the appraisal value of real property when purchased, newly constructed, or a change in ownership has occurred after the 1975 assessment.” The “full cash value” is subject to annual adjustment to reflect inflation at a rate not to exceed two percent or a reduction in the consumer price index or comparable local data, or declining property value caused by damage, destruction or other factors.

The foregoing limitation does not apply to ad valorem taxes or special assessments to pay the interest and redemption charges on any indebtedness approved by the voters before July 1, 1978 or any bonded indebtedness for the acquisition or improvement of real property approved by two-thirds of the votes cast by the voters voting on the proposition.

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Under Article XIIIB of the California Constitution, state and local government entities have an annual “appropriations limit” which limits their ability to spend certain moneys called “appropriations subject to limitation,” which consist of tax revenues, certain state subventions and certain other moneys, including user charges to the extent they exceed the costs reasonably borne by the entity in providing the service for which it is levying the charge. The Agency believes that the water service and use charges imposed by the Agency do not exceed the costs the Agency reasonably bears in providing water service. In general terms, the “appropriations limit” is to be based on certain 1978/79 expenditures, and is to be adjusted annually to reflect changes in the consumer price index, population, and services provided by these entities. Among other provisions of Article XIIIB, if an entity’s revenues in any year exceed the amount permitted to be spent, the excess would have to be returned by revising tax rates or fee schedules over the subsequent two years.

Proposition 218

On November 5, 1996, the voters of the State approved Proposition 218, known as the “Right to Vote on Taxes Act” (“Proposition 218”). Proposition 218 added Articles XIIIC (“Article XIIIC”) and XIIID (“Article XIIID”) to the State Constitution, which contain a number of provisions affecting the ability of the local governments to levy and collect both existing and future taxes, assessments, fees, and charges. The Agency is a local government within the meaning of Articles XIIIC and XIIID.

Section 3 of Article XIIIC expressly extends the initiative power to give voters the power to reduce or repeal local taxes, assessments, fees and charges, regardless of the date such taxes, assessments, fees or charges were imposed. Section 3 expands the initiative power to include reducing or repealing assessments, fees and charges, which had previously been considered administrative rather than legislative matters and therefore beyond the initiative power. This extension of the initiative power is not limited by the terms of Article XIIIC to fees imposed after November 6, 1996, the effective date of Proposition 218, and absent other legal authority could result in the reduction in any existing taxes, assessments or fees and charges imposed prior to November 6, 1996. “Fees” and “charges” are not expressly defined in Article XIIIC or in Senate Bill 919, the Proposition 218 Omnibus Implementation Act (“SB 919”), which was enacted in 1997 to prescribe specific procedures and parameters for local jurisdictions in complying with Article XIIIC and Article XIIID. However, on July 24, 2006, the California Supreme Court ruled in Bighorn-Desert View Water Agency v. Verjil (the “Bighorn Decision”) that charges for ongoing water delivery are property-related fees and charges within the meaning of Article XIIID and are also fees or charges within the meaning of Section 3 of Article XIIIC. The California Supreme Court held that such water service charges may, therefore, be reduced or repealed through a local voter initiative pursuant to Section 3 of Article XIIIC, although the water agency’s governing board may then raise other fees or impose new fees without prior voter approval.

In the Bighorn Decision, the California Supreme Court stated that nothing in Section 3 of Article XIIIC authorizes initiative measures that impose voter-approval requirements for future increases in fees or charges for water delivery. The California Supreme Court stated that water providers may determine rates and charges upon proper action of the governing body and that the governing body may increase a charge which was not affected by a prior initiative or impose an entirely new charge. The California Supreme Court further stated in the Bighorn Decision that it was not holding that the initiative power is free of all limitations and was not determining whether the initiative power is subject to the statutory provision requiring that water service charges be set at a level that will pay debt service on bonded debt and operating expenses. Such initiative power could be subject to the limitations imposed on the impairment of contracts under the contract clause of the United States Constitution. Additionally, SB 919 provides that the initiative power provided for in Proposition 218 “will not be construed to mean that any owner or beneficial owner of a municipal security, purchased before or after (the effective date of Proposition 218) assumes the risk of, or in any way consents to, any action by initiative measure that

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constitutes an impairment of contractual rights” protected by the United States Constitution. However, no assurance can be given that the Agency’s voters will not, in the future, approve an initiative which reduces or repeals local taxes, assessments, fees or charges.

Article XIIID defines a “fee” or “charge” as any levy other than an ad valorem tax, special tax, or assessment imposed upon a parcel or upon a person as an incident of property ownership, including a user fee or charge for a property-related service. A “property-related service” is defined as “a public service having a direct relationship to a property ownership.” In the Bighorn Decision, the California Supreme Court held that a public water agency’s charges for ongoing water delivery are fees and charges within the meaning of Article XIIID. Article XIIID requires that any agency imposing or increasing any property-related fee or charge must provide written notice thereof to the record owner of each identified parcel upon which such fee or charge is to be imposed and must conduct a public hearing with respect thereto. The proposed fee or charge may not be imposed or increased if a majority of owners of the identified parcels file written protests against it. As a result, the local government’s ability to increase such fee or charge may be limited by a majority protest.

In addition, Article XIIID also includes a number of limitations applicable to existing fees and charges including provisions to the effect that (i) revenues derived from the fee or charge will not exceed the funds required to provide the property-related service; (ii) such revenues will not be used for any purpose other than that for which the fee or charge was imposed; (iii) the amount of a fee or charge imposed upon any parcel or person as an incident of property ownership will not exceed the proportional cost of the service attributable to the parcel; and (iv) no such fee or charge may be imposed for a service unless that service is actually used by, or immediately available to, the owner of the property in question. Property-related fees or charges based on potential or future use of a service are not permitted.

The Agency believes that it has complied with the requirements of Proposition 218 with respect to the water charges that it currently imposes. Such compliance included mailing of notices to affected property owners (and separately, to ratepayers) in connection with rate changes implemented immediately subsequent to the Bighorn Decision. The Agency expects to comply with the requirements of Proposition 218 with respect to future proposed water rate increases.

In the event that proposed increased rates or charges cannot be imposed as a result of a majority protest or an initiative, such circumstances may adversely affect the ability of the Agency to generate revenues sufficient to pay the principal of or the interest on the Series 2016A Bonds.

As discussed above, Article XIIIC removes limitations on the initiative power in matters of local taxes, assessments, fees, and charges. In addition, a California court has held that utility rates are not subject to the same constitutional restrictions that are applied to the use of the initiative process for tax measures. Consequently, the voters of the Agency could, by future initiative, repeal, reduce, or prohibit the future imposition or increase of any local tax, assessment, fee, or charge.

Proposition 26

Proposition 26 was approved by the electorate at the November 2, 2010 election and amended California Constitution Articles XIIIA and XIIIC. The proposition imposes a two-thirds voter approval requirement for the imposition of fees and charges by the State. It also imposes a majority voter approval requirement on local governments with respect to fees and charges for general purposes, and a two-thirds voter approval requirement with respect to fees and charges for special purposes. Proposition 26, according to its supporters, is intended to prevent the circumvention of tax limitations imposed by the voters in California Constitution Articles XIIIA, XIIIC and XIIID pursuant to Proposition 13, approved in 1978, Proposition 218, approved in 1996, and other measures through the use of non-tax fees and charges.

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Proposition 26 expressly excludes from its scope a charge imposed for a specific government service or product provided directly to the payor that is not provided to those not charged, and which does not exceed the reasonable cost to the State or local government of providing the service or product to the payor. Proposition 26 applies to charges imposed or increased by local governments after the date of its approval. The Agency believes its water rates and charges are not taxes under Proposition 26. The Agency is unable to predict at this time how Proposition 26 will be interpreted by the courts or what its ultimate impact will be.

Future Initiatives

Article XIIIA, Article XIIIB and Articles XIIIC and XIIID were each adopted as measures that qualified for the ballot pursuant to the State’s initiative process. From time to time, other initiatives have been, and could be, proposed, and if qualified for the ballot, could be adopted affecting the Agency revenues or the Agency’s ability to expend revenues. The Agency is unable to predict either the likelihood of qualification for ballot or passage of these measures or the nature and impact of these measures on the finances or operations of the Enterprise.

RISK FACTORS

The following factors, along with other information in this Official Statement, should be considered by potential investors in evaluating the risks in the purchase of the 2016 Certificates.

Rate Covenant Not a Guarantee

The 2016 Installment Payments are payable from Net Revenues of the Enterprise. “SECURITY FOR THE SERIES 2016 CERTIFICATES.” The Agency’s ability to make 2016 Installment Payments depends on its ability to generate Net Revenues at the levels required by the 2016 Installment Purchase Agreement. Although the Agency has covenanted in the 2016 Installment Purchase Agreement to impose rates, fees, and charges as more particularly described herein, and expects that sufficient revenues will be generated through the imposition and collection of such rates, fees, charges, and other revenues described herein, there is no assurance that the imposition and collection of such rates, fees, charges, and other revenues will result in the generation of Net Revenues in the amounts required by the 2016 Installment Purchase Agreement. No assurance can be made that revenues of the Enterprise, estimated or otherwise, will be realized by the Agency in amounts sufficient to pay the 2016 Installment Payments. Among other matters, the availability of water, demand for electricity and changes in law and government regulations could adversely affect the amount of revenues realized by the Agency. A continuation of the drought could reduce the amount of water used by residences and business in the Agency and the generation of power from the Agency’s hydroelectric facilities, which thereby could reduce Net Revenues of the Sewer Enterprise. In particular, while the Agency has the right to set rates for water provided to users of water from the Enterprise, the Agency does not control the amount of revenues received under the Power Purchase Contract with PG&E, or under any contract or other arrangement that the Agency may enter into after the expiration of the Power Purchase Contract on June 30, 2020. Significant declines in hydroelectric revenues could result in extraordinary increases in water rates. See “WATER FACILITIES, OPERATIONS AND REVENUES – Water System Rates and Charges” herein.

Water Service Demand

There can be no assurance that the local demand for water service provided by the Enterprise will be maintained at levels described in this Official Statement under the heading “WATER FACILITIES, OPERATIONS AND REVENUES.” Demand for water services could be reduced as a result of hydrological conditions, conservation efforts (including in response to the current drought as described

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herein or future droughts) and other factors. Reduction in the level of demand could require an increase in rates or charges in order to produce Net Revenues sufficient to comply with the Agency’s rate covenant in the 2016 Installment Purchase Contract. Such rate increases could increase the likelihood of nonpayment, and could also further decrease demand. Furthermore, there can be no assurance that any other entity with regulatory authority over the Enterprise will not adopt further restrictions on operation of the Enterprise.

Enterprise Expenses

There can be no assurance that Operation and Maintenance Costs of the Enterprise will be consistent with the levels described in this Official Statement. Changes in technology, increases in the cost of energy or other expenses would reduce Net Revenues, and could require substantial increases in rates or charges in order to comply with the rate covenant. Such rate increases could increase the likelihood of nonpayment, and could also decrease demand.

Construction Risks

New construction, such as the construction of the Miners Ranch Water Treatment Plant Project and the Lost Creek Dam Improvements, entails a number of risks due to weather, labor issues, unexpected site conditions, cost overruns or other problems that may delay construction completion. Although the Agency believes it has made arrangements sufficient to provide for completion of the Miners Ranch Water Treatment Plant Project and the Lost Creek Dam Improvements, it cannot provide any assurance that there will not be any construction delays or overruns, or that such delays or overruns will not adversely effect the Agency’s operations or finances.

Limitations on Revenues

The ability of the Agency to comply with its covenants under the 2016 Installment Purchase Agreement and to generate Net Revenues sufficient to pay the required 2016 Installment (which are needed to pay principal of and interest on the 2016 Certificates) may be adversely affected by actions and events outside of the control of the Agency and may be adversely affected by actions taken (or not taken) by voters, property owners, taxpayers or persons obligated to pay assessments, fees and charges. See “CONSTITUTIONAL LIMITATIONS.” Furthermore, the remedies available to the owners of the 2016 Certificates upon the occurrence of an event of default under the Trust Agreement are in many respects dependent upon judicial actions which are often subject to discretion and delay and could prove both expensive and time consuming to obtain.

Statutory and Regulatory Compliance

Laws and regulations governing the treatment and delivery of water are enacted and promulgated by federal, State and local government agencies. Compliance with these laws and regulations is and will continue to be costly, and, as more stringent standards are developed, such costs will likely increase.

Claims against the Agency for failure to comply with applicable laws and regulations could be significant. Such claims may be payable from assets of the Agency or from other legally available sources. In addition to claims by private parties, changes in the scope and standards for public agency water systems such as that operated by the Agency may also lead to administrative orders issued by federal or State regulators. Future compliance with such orders can also impose substantial additional costs on the Agency. No assurance can be given that the cost of compliance with such laws, regulations and orders would not adversely affect the ability of the Agency to generate Net Revenues sufficient to pay the 2016 Installment Payments.

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The Agency is currently involved in a number of regulatory proceedings, including proceedings to extend the Agency’s water rights as well as the relicensing of the South Fork Power Project, from which the Agency derives the majority of its revenues. See “WATER FACILITIES, OPERATIONS AND REVENUES – Water Rights” and “HYDROELECTRIC FACILITIES, OPERATIONS AND REVENUES – FERC License Renewal” for a description of current regulatory proceedings involving the Agency. In the event that the Agency is not able to extend its water rights, and/or relicense the South Fork Power Project, such circumstances could adversely affect the ability of the Agency to generate Net Revenues sufficient to pay the 2016 Installment Payments

Limited Recourse on Default

If the Agency defaults on its obligation to make 2016 Installment Payments, the Trustee, as assignee of the Corporation, has the right to accelerate the total unpaid principal amount of the 2016 Installment Payments. However, in the event of a default and such acceleration there can be no assurance that the Agency will have sufficient Net Revenues to pay the accelerated 2016 Installment Payments.

Limitations on Remedies Available; Bankruptcy

The enforceability of the rights and remedies of the Owners and the obligations of the Agency may become subject to the following: the federal bankruptcy code and applicable bankruptcy, insolvency, reorganization, moratorium, or similar laws relating to or affecting the enforcement of creditors’ rights generally, now or hereafter in effect; equitable principles which may limit the specific enforcement under State law of certain remedies; the exercise by the United States of America of the powers delegated to it by the Federal Constitution; and the reasonable and necessary exercise, in certain exceptional situations, of the police power inherent in the sovereignty of the State and its governmental bodies in the interest of servicing a significant and legitimate public purpose. Bankruptcy proceedings, or the exercising of powers by the federal or State government, if initiated, could subject the Owners to judicial discretion and interpretation of their rights in bankruptcy or otherwise and consequently may entail risks of delay, limitation, or modification of their rights.

No Obligation to Tax

The obligation of the Agency to pay the 2016 Installment Payments, and interest thereon, does not constitute an obligation of the Agency for which the Agency is obligated to levy or pledge any form of taxation or for which the Agency has levied or pledged any form of taxation. The obligation of the Agency to pay 2016 Installment Payments, and interest thereon, does not constitute a debt or indebtedness of any Agency, the State of California or any of its political subdivisions, within the meaning of any constitutional or statutory debt limitation or restriction.

Expiration of Power Purchase Contract

As described herein in “HISTORICAL AND PROJECTED HYDROELECTRIC REVENUES,” Revenues from the sale of electricity pursuant to power sales agreement with Pacific Gas & Electric has constituted the most significant source of revenues of the Agency. The Power Purchase Contract expires on June 30, 2020. The Projected Operating Results assume that the Agency will be able to renew the Power Purchase Contract, or otherwise arrange for the sale of hydroelectric power, after the expiration of the current term, and that it will continue to receive the same levels of revenues it receives prior to such expiration. In the event that the Agency is not able to make power sale arrangement after the expiration of the Power Purchase Contract and to continue to receive revenues from the sale of hydroelectric power, such circumstances could materially adversely affect the ability of the Agency to make 2016 Installment Payments.

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Change in Law

In addition to the other limitations described herein, the California electorate or Legislature could adopt a constitutional or legislative property tax decrease or an initiative with the effect of reducing revenues payable to or collected by the Agency. There is no assurance that the California electorate or Legislature will not at some future time approve additional limitations that could reduce the revenues and adversely affect the security of the 2016 Certificates.

Seismic Considerations

The area encompassed by the Agency, like that in much of California, may be subject to unpredictable seismic activity. The Agency is located within a regional network of several active and potentially active faults. If there were to be an occurrence of severe seismic activity in the Agency, there could be an impact on the ability of residents to pay the Enterprise rates and charges, diminishing Net Revenues, which could have an adverse effect on the Agency’s ability to pay the principal of and interest on the 2016 Certificates.

UNDERWRITING

The Agency has agreed to sell the 2016 Certificates to Stifel, Nicolaus & Company, Incorporated, as underwriter (the “Underwriter”), and the Underwriter has agreed, subject to certain conditions, to purchase the 2016 Certificates at a purchase price of $27,399,046.66 (representing the principal amount of the 2016 Certificates of $27,010,000.00, less an underwriter’s discount of $118,063,74, and plus net original issue premium of $507,110.40). The obligations of the Underwriter are subject to certain conditions precedent, and it will be obligated to purchase all such 2016 Certificates if any such 2016 Certificates are purchased. The Underwriter intends to offer the 2016 Certificates to the public initially at the prices and/or yield set forth on the cover page of this Official Statement, which prices or yields may subsequently change without any requirement of prior notice.

The Underwriter reserves the right to join with dealers and other underwriters in offering the 2016 Certificates to the public. The Underwriter may offer and sell 2016 Certificates to certain dealers (including dealers depositing the 2016 Certificates into investment trusts) at prices lower than the public offering prices, and such dealers may reallow any such discounts on sales to other dealers. In reoffering 2016 Certificates to the public, the Underwriter may overallocate or effect transactions which stabilize or maintain the market prices for 2016 Certificates at levels above those which might otherwise prevail. Such stabilization, if commenced, may be discontinued at any time.

LEGAL MATTERS

Upon the delivery of the 2016 Certificates, Orrick, Herrington & Sutcliffe LLP, Bond Counsel, will issue its opinion approving the validity of the 2016 Certificates, the form of which opinion is set forth in APPENDIX C hereto. Certain legal matters will be passed upon for the Agency by Minasian, Meith, Soares, Sexton & Cooper, LLP, its general counsel, and by Stradling Yocca Carlson & Rauth, a Professional Corporation, as Disclosure Counsel. Certain legal matters will be passed upon for the Underwriter by Hawkins Delafield & Wood LLP.

TAX MATTERS

In the opinion of Orrick, Herrington & Sutcliffe LLP, Special Counsel, based upon an analysis of existing laws, regulations, rulings and court decisions, and assuming, among other matters, the accuracy of certain representations and compliance with certain covenants, the portion of each 2016 Installment

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Payment designated as and constituting interest paid by the Agency and received by the Owners of the 2016 Certificates (“interest evidenced by the 2016 Certificates”) is excluded from gross income for federal income tax purposes under Section 103 of the Internal Revenue Code of 1986 (the “Code”) and is exempt from State of California personal income taxes. Such interest evidenced by the 2016 Certificates is not a specific preference item for purposes of the federal individual or corporate alternative minimum taxes, although Special Counsel observes that such interest evidenced by the 2016 Certificates is included in adjusted current earnings when calculating corporate alternative minimum taxable income. A complete copy of the proposed form of opinion of Special Counsel is set forth in Appendix C hereto.

To the extent the issue price of any maturity of the 2016 Certificates is less than the amount to be paid at maturity of such 2016 Certificates (excluding amounts stated to be interest and payable at least annually over the term of such 2016 Certificates), the difference constitutes “original issue discount,” the accrual of which, to the extent properly allocable to each Owner thereof, is treated as interest evidenced by the 2016 Certificates which is excluded from gross income for federal income tax purposes and State of California personal income taxes. For this purpose, the issue price of a particular maturity of the 2016 Certificates is the first price at which a substantial amount of such maturity of the 2016 Certificates is sold to the public (excluding bond houses, brokers, or similar persons or organizations acting in the capacity of underwriters, placement agents or wholesalers). The original issue discount with respect to any maturity of the 2016 Certificates accrues daily over the term to maturity of such 2016 Certificates on the basis of a constant interest rate compounded semiannually (with straight-line interpolations between compounding dates). The accruing original issue discount is added to the adjusted basis of such 2016 Certificates to determine taxable gain or loss upon disposition (including sale, redemption, or payment on maturity) of such 2016 Certificates. Owners of the 2016 Certificates should consult their own tax advisors with respect to the tax consequences of ownership of 2016 Certificates with original issue discount, including the treatment of Owners who do not purchase such 2016 Certificates in the original offering to the public at the first price at which a substantial amount of such 2016 Certificates is sold to the public.

2016 Certificates purchased, whether at original issuance or otherwise, for an amount higher than their principal amount payable at maturity (or, in some cases, at their earlier call date) (“Premium Certificates”) will be treated as having amortizable bond premium. No deduction is allowable for the amortizable bond premium in the case of 2016 Certificates, like the Premium Certificates, the interest on which is excluded from gross income for federal income tax purposes. However, the amount of tax-exempt interest received, and an Owner’s basis in a Premium Certificate, will be reduced by the amount of amortizable bond premium properly allocable to such Owner. Owners of Premium Certificates should consult their own tax advisors with respect to the proper treatment of amortizable bond premium in their particular circumstances.

The Code imposes various restrictions, conditions and requirements relating to the exclusion from gross income for federal income tax purposes of interest evidenced by obligations such as the 2016 Certificates. The Agency has made certain representations and covenanted to comply with certain restrictions, conditions and requirements designed to ensure that interest evidenced by the 2016 Certificates will not be included in federal gross income. Inaccuracy of these representations or failure to comply with these covenants may result in interest evidenced by the 2016 Certificates being included in gross income for federal income tax purposes, possibly from the date of original execution and delivery of the 2016 Certificates. The opinion of Special Counsel assumes the accuracy of these representations and compliance with these covenants. Special Counsel has not undertaken to determine (or to inform any person), whether any actions taken (or not taken) or events occurring (or not occurring) after the date of execution and delivery of the 2016 Certificates may adversely affect the value of, or the tax status of interest evidenced by, the 2016 Certificates. Accordingly, the opinion of Special Counsel is not intended to, and may not, be relied upon in connection with any such actions, events or matters.

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Although Special Counsel is of the opinion that interest evidenced by the Certificates is excluded from gross income for federal income tax purposes and is exempt from State of California personal income taxes, the ownership or disposition of, or the accrual or receipt of amounts treated as interest evidenced by the Certificates may otherwise affect a Certificate holder’s federal, state or local tax liability. The nature and extent of these other tax consequences depend upon the particular tax status of the Owner or the Owner’s other items of income or deduction. Special Counsel expresses no opinion regarding any such other tax consequences.

Current and future legislative proposals, if enacted into law, clarification of the Code or court decisions may cause interest evidenced by the 2016 Certificates to be subject, directly or indirectly, in whole or in part, to federal income taxation or to be subject to or exempted from state income taxation, or otherwise prevent Owners from realizing the full current benefit of the tax status of such interest. For example, the Obama Administration’s budget proposals in recent years have proposed legislation that would limit the exclusion from gross income of interest evidenced by the 2016 Certificates to some extent for high-income individuals. The introduction or enactment of any such legislative proposals or clarification of the Code may also affect, perhaps significantly, the market price for, or marketability of, the 2016 Certificates. Prospective purchasers of the 2016 Certificates should consult their own tax advisers regarding the potential impact of any pending or proposed federal or state tax legislation, regulations or litigation, as to which Special Counsel expresses no opinion.

The opinion of Special Counsel is based on current legal authority, covers certain matters not directly addressed by such authorities, and represents Special Counsel’s judgment as to the proper treatment of the 2016 Certificates for federal income tax purposes. It is not binding on the Internal Revenue Service (“IRS”) or the courts. Furthermore, Special Counsel cannot give and has not given any opinion or assurance about the future activities of the Agency, or about the effect of future changes in the Code, the applicable regulations, the interpretation thereof or the enforcement thereof by the IRS. The Agency has covenanted, however, to comply with the requirements of the Code.

Special Counsel’s engagement with respect to the 2016 Certificates ends with the execution and delivery of the 2016 Certificates, and, unless separately engaged, Special Counsel is not obligated to defend the Agency or the Owners regarding the tax-exempt status of the 2016 Certificates in the event of an audit examination by the IRS. Under current procedures, parties other than the Agency and its appointed counsel, including the Owners, would have little, if any, right to participate in the audit examination process. Moreover, because achieving judicial review in connection with an audit examination of tax-exempt bonds is difficult, obtaining an independent review of IRS positions with which the Agency legitimately disagrees may not be practicable. Any action of the IRS, including but not limited to selection of the 2016 Certificates for audit, or the course or result of such audit, or an audit of obligations presenting similar tax issues may affect the market price for, or the marketability of, the 2016 Certificates, and may cause the Agency or the Owners to incur significant expense.

LITIGATION

There is no action, suit or proceeding known to be pending or threatened, restraining or enjoining the issuance or delivery of the 2016 Certificates, the Trust Agreement or the 2016 Installment Purchase Contract or in any way contesting or affecting the validity of the foregoing or any proceedings of the Agency taken with respect to any of the foregoing. The Agency is not aware of any litigation pending or threatened questioning the existence or powers of the Agency or the ability of the Agency to pay principal of or interest with respect to the 2016 Certificates.

Although the Agency is subject to a number of lawsuits in the ordinary conduct of its affairs, there are no claims or actions, threatened or pending which, if determined against the Agency, either

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individually or in the aggregate, would have a material adverse effect on the financial conditions of the Agency.

RATINGS

Standard & Poor’s (“S&P”) has assigned a rating to the Uninsured Certificates (and an underlying rating to the Insured Certificates) of “A.” S&P is expected to assign the Insured Certificates the long term insured rating of “AA” (assuming issuance of the Policy concurrently with the issuance of the Insured Certificates. Certain information was supplied by the Agency to S&P to be considered in evaluating the 2016 Certificates. The rating reflects only the views of S&P and any explanation of the significance of such rating, any outlook associated with such rating, and any ratings on any of the Agency’s outstanding obligations may be obtained only from such rating agencies. There is no assurance that the rating will remain in effect for any given period of time or that it will not be revised downward or withdrawn entirely by such rating S&P, if, in S&P’s judgment, circumstances so warrant. Any downward revision or withdrawal of the rating may have an adverse effect on the market price of the 2016 Certificates.

MUNICIPAL ADVISOR

The Agency has retained FirstSouthwest, a Division of Hilltop Securities Inc., as Municipal Advisor for the sale of the 2016 Certificates. The Financial Advisor is not obligated to undertake, and has not undertaken to make, an independent verification or to assume any responsibility for the accuracy, completeness or fairness of the information contained in this Official Statement.

AUDITED FINANCIAL STATEMENTS

The audited financial statements of the Agency for the years ended December 31, 2015 and 2014 are included in Appendix B attached hereto. The audited financial statements referred to in the preceding sentence have been audited by Richardson & Company LLP, independent auditors, as stated in its Independent Auditor’s Report included in Appendix B. Richardson & Company LLP has not undertaken to update its report or to take any action intended or likely to elicit information concerning the accuracy, completeness or fairness of the statements made in this Official Statement, and no opinion is expressed by Richardson & Company LLP with respect to any event subsequent to its report dated June 22, 2016.

MISCELLANEOUS

All of the descriptions of the California Government Code, the California Water Code, other applicable legislation, the 2016 Installment Purchase Contract, the Trust Agreement, the Enterprise, the Agency, the Corporation, agreements and other documents are made subject to the provisions of such legislation and documents respectively and do not purport to be complete statements of any or all of such provisions. Reference is hereby made to such documents on file with the Agency for further information in connection therewith.

Any statements made in this Official Statement involving matters of opinion or estimates, whether or not so expressly stated, are set forth as such and not as representations of fact, and no representation is made that any of the estimates will be realized.

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The execution and delivery of this Official Statement has been duly authorized by the Board of Directors of the Agency.

SOUTH FEATHER WATER AND POWER AGENCY

By: Michael C. Glaze General Manager

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APPENDIX A

SUMMARY OF PRINCIPAL LEGAL DOCUMENTS

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APPENDIX A

SUMMARY OF PRINCIPAL LEGAL DOCUMENTS

CERTAIN DEFINITIONS

The following are definitions of certain terms as used in this Official Statement.

“Act” means the Joint Exercise of Powers Act (being Chapter 5 of Division 7 of Title 1 of the California Government Code, as amended) and all laws amendatory thereof or supplemental thereto.

“2016 Certificate Payment Reserve Fund” means the South Feather Water and Power Agency Miners Ranch Water Treatment Plant Improvement Project Installment Purchase Contract Reserve Fund established under the Trust Agreement.

“2016 Installment Payment Date” means any date on which 2016 Installment Payments are scheduled to be paid by the Agency under and pursuant hereto, being April 1 and October 1 of each year in which 2016 Installment Payments are due, commencing on October 1, 2016.

“Installment Payment Fund” means the South Feather Water and Power Agency Miners Ranch Water Treatment Plant Improvement Project Installment Purchase Contract Installment Payment Fund established under the Trust Agreement.

“2016 Installment Payments” means the Installment Payments scheduled to be paid by the Agency under the 2016 Installment Purchase Contract.

“2016 Installment Purchase Contract” means the 2016 Installment Purchase Contract executed and entered into as of October 1, 2016, by and between the Agency and the Corporation, as originally executed and entered into and as it may from time to time be amended or supplemented in accordance therewith.

“Agency” means the South Feather Water and Power Agency created pursuant to the Act and its successors and assigns in accordance with the Trust Agreement.

“Board of Directors” means the Board of Directors of the Agency.

“Bond Counsel” means a firm of recognized standing in the field of obligations, the interest on which is excluded from gross income for purposes of federal income taxation.

“Business Day” means any day (other than a Saturday or a Sunday) on which banks in New York, New York, are open for business and on which the Trustee is open for business at its Principal Corporate Trust Office.

“Certificate Insurance Policy” means the insurance policy issued by the Certificate Insurer guaranteeing the scheduled payment of principal and interest evidenced and represented by the Insured Certificates when due.

“Certificate Insurer” means, with respect to the Insured Certificates, Assured Guaranty Municipal Corp., a New York stock insurance company, or any successor thereto or assignee thereof.

“Certificate Payment Date” means, with respect to any Certificate, the April 1 date that is the Certificate Payment Date designated therein.

“Certificates” means the South Feather Water and Power Agency Miners Ranch Water Treatment Plant Improvement Project 2016 Certificates of Participation authorized under and at any time Outstanding under the Trust Agreement that are executed and delivered by the Trustee pursuant to the Trust Agreement.

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“Certification” means when used with respect to the Agency, means an instrument in writing signed on behalf of the Agency by the General Manager of the Agency or by the Finance Division Manager of the Agency, or by any other officer of the Agency duly authorized by the Board of Directors for the purpose of signing documents on its behalf under the Trust Agreement, and by the Secretary of the Board of Directors, with the seal of the Agency affixed; and when used with respect to the Corporation, means an instrument in writing signed on behalf of the Corporation by the President of the Corporation or the Finance Division Manager of the Corporation, or by any other officer of the Corporation duly authorized by the Board of Directors of the Corporation for the purpose of signing documents on its behalf under the Trust Agreement, and by the Secretary of the Corporation, with the seal of the Corporation affixed thereto.

“Code” means the Internal Revenue Code of 1986, as amended, or any successor statute thereto, and any regulations promulgated thereunder.

“Continuing Disclosure Certificate” means that certain Continuing Disclosure Certificate executed as of October 1, 2016, by the Agency, as originally executed and entered into and as it may from time to time be amended in accordance with its terms.

“Corporation” means the South Feather Water and Power Agency Financing Corporation, a nonprofit public benefit corporation duly organized and existing under the laws of the State of California.

“Costs of Issuance” means all costs and expenses directly or indirectly payable by or reimbursable to the Agency related to the authorization, sale, execution and delivery of the Certificates, including, but not limited to, costs of preparation and reproduction of documents, filing and recording fees, initial fees and charges of the Trustee (including fees and expenses of its counsel), rating agency fees, legal fees and charges, financial advisor fees and charges and fees and charges of other consultants and professionals, together with all fees and charges for preparation, execution and safekeeping of the Certificates, and any other cost, charge, fee or expense in connection with the original execution and delivery of the Certificates.

“Costs of Issuance Fund” means the South Feather Water and Power Agency Miners Ranch Water Treatment Plant Improvement Project 2016 Certificates of Participation Costs of Issuance Fund established under the Trust Agreement.

“Debt Service” means, for any designated period, the sum of (1) the interest accruing during such period on all outstanding Certificates, assuming that all outstanding serial Certificates are retired as scheduled and that all outstanding term Certificates are redeemed or paid from sinking fund payments as scheduled (except to the extent that such interest is to be paid from the proceeds of sale of any Certificates), (2) that portion of the principal amount of all outstanding serial Certificates maturing on the next succeeding principal payment date that would have accrued during such period if such principal amount were deemed to accrue daily in equal amounts from the next preceding principal payment date or during the year preceding the first principal payment date, as the case may be, (3) that portion of the principal amount of all outstanding term Certificates required to be redeemed or paid on the next succeeding redemption date (together with the redemption premiums, if any, thereon) that would have accrued during such period if such principal amount (and redemption premiums) were deemed to accrue daily in equal amounts from the next preceding redemption date or during the year preceding the first redemption date, as the case may be, and (4) that portion of the Installment Payments required to be made at the times provided in the Installment Purchase Contracts that would have accrued during such period if such Installment Payments were deemed to accrue daily in equal amounts from, in each case, the next preceding installment payment date of interest or principal or the date of the pertinent Installment Purchase Contract, as the case may be.

“DTC” means The Depository Trust Company, New York, New York, or any successor thereto.

“Enterprise” means the Agency’s domestic water system and hydroelectric system, including the South Feather Power Project, including all facilities, works, properties and structures of the Agency for the storage, treatment, transmission and distribution of water and power, including all contractual rights to power and water, transmission, easements, rights-of-way and other works, property or structures necessary or convenient for such facilities, together with all additions, betterments, extension and improvements to such facilities or any party thereof hereafter acquired or constructed.

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“Enterprise Rate Stabilization Fund” means the fund by that name established and maintained by the Agency pursuant to the Installment Purchase Contract.

“Event of Default” means an event defined as such in the 2016 Installment Purchase Contract.

“Federal Securities” means direct obligations of (including obligations issued or held in book entry form on the books of the Department of the Treasury of the United States), or obligations the timely payment of the principal of and interest on which are fully and unconditionally guaranteed by, the United States of America.

“Finance Division Manager” means the Finance Division Manager of the Agency.

“Fiscal Year” means any twelve-month period extending from January 1 to December 31 in one calendar year, both dates inclusive, or any other twelve-month period selected and designated by the Agency, as applicable, as its official fiscal year period.

“Generally Accepted Accounting Principles” means the uniform accounting and reporting procedures prescribed by the California State Controller or his or her successor for special districts in the State of California, or failing the prescription of such procedures means generally accepted accounting principles as presented and recommended by the American Institute of Certified Public accountants or its successor, or by any other generally accepted authority on such procedures, and includes, as applicable, the standards set forth by the Governmental Accounting Standards Board or its successor.

“Holder” means any person who will be the registered owner of any Outstanding Bond.

“Independent Certified Public Accountant” means any firm of certified public accountants or firm of such accountants duly licensed and entitled to practice and practicing as such under the laws of the State of California, appointed and paid by the Agency, and each of whom --

(1) is in fact independent and not under the domination of the Agency;

(2) does not have a substantial financial interest, direct or indirect, in the operations of the Agency; and

(3) is not connected with the Agency as a member of the Board of Directors or an officer or employee of the Agency, but may be regularly retained to audit the accounting records of the Agency and make reports thereon to the Agency.

“Independent Engineer” means any firm of civil engineers of national reputation generally recognized to be well qualified in engineering matters relating to municipal water and hydroelectric systems duly licensed and entitled to practice and practicing as such under the laws of the State of California, appointed and paid by the Agency, and each of whom --

(1) is in fact independent and not under the domination of the Agency;

(2) does not have a substantial financial interest, direct or indirect, in the operations of the Agency; and

(3) is not connected with the District as a member of the Board of Directors or an officer or employee of the Agency, but may be regularly retained to make reports to the Agency.

“Installment Payment Date” means any date on which Installment Payments are scheduled to be paid by the Agency under and pursuant to any Installment Purchase Contract.

“Installment Payments” means the installment payments of interest and principal scheduled to be paid by the Agency under all Installment Purchase Contracts.

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“Installment Purchase Contracts” means all installment purchase contracts of the Agency (including the 2016 Installment Purchase Contract) authorized and executed by the Agency under the Law, the Installment Payments under which are payable on a parity with the payment of the Parity Obligations and which are secured on a parity by a pledge of and lien on the Net Revenues.

“Insured Certificates” means the Certificates with Principal Payment Dates on and after April 1, 2019.

“Interest Account” means the account referred to by that name established under the Trust Agreement.

“Interest Payment Date” means a date on which an interest installments of the 2016 Installment Payments is evidenced and represented by the Certificates become due and payable, being April 1 and October 1 of each year to which reference is made, commencing on April 1, 2017.

“Late Payment Rate,” for purposes of the Certificate Insurance Policy, means the lesser of (a) the greater of (i) the per annum rate of interest, publicly announced from time to time by JPMorgan Chase Bank at its principal office in The City of New York, as its prime or base lending rate (any change in such rate of interest to be effective on the date such change is announced by JPMorgan Chase Bank) plus 3%, and (ii) the then applicable highest rate of interest on the Certificates and (b) the maximum rate permissible under applicable usury or similar laws limiting interest rates. The Late Payment Rate will be computed on the basis of the actual number of days elapsed over a year of 360 days.

“Late Payment Rate,” for purposes of the Reserve Policy, means the lesser of (x) the greater of (i) the per annum rate of interest, publicly announced from time to time by JPMorgan Chase Bank at its principal office in the City of New York, as its prime or base lending rate (“Prime Rate”) (any change in such Prime Rate to be effective on the date such change is announced by JPMorgan Chase Bank) plus 3%, and (ii) the then applicable highest rate of interest on the Certificates and (y) the maximum rate permissible under applicable usury or similar laws limiting interest rates. The Late Payment Rate will be computed on the basis of the actual number of days elapsed over a year of 360 days. In the event JPMorgan Chase Bank ceases to announce its Prime Rate publicly, Prime Rate shall be the publicly announced prime or base lending rate of such national bank as the Certificate Insurer will specify.

“Law” means the County Agency Law of the State of California (constituting Sections 20500 et seq. of the Water Code of the State of California) and all laws amendatory thereof or supplemental thereto.

“Maintenance and Operation Costs” means all reasonable and necessary costs paid or incurred by the Agency for maintaining and operating the Enterprise, determined in accordance with Generally Accepted Accounting Principles, including expenses related to the storage, treatment, transmission and distribution of water and power and any costs that would be found to constitute maintenance and operation costs under the “Agreement Between South Feather Water and Power Agency and Yuba County Water District,” by and between the Agency and the North Yuba Water District, formerly the Yuba County Water District, dated May 27, 2005, as amended, all costs of water purchased for the Enterprise (except those costs paid from taxes), and including all reasonable expenses of management and repair and other expenses necessary to maintain and preserve the Enterprise in good repair and working order, and including all administrative costs of the Agency that are charged directly or apportioned to the operation of the Enterprise, such as salaries and wages of employees, overhead, taxes (if any) and insurance premiums, and including all other reasonable and necessary costs of the Agency or charges required to be paid by it to comply with the terms of the Installment Purchase Contract and of any resolution authorizing the execution of any Installment Purchase Contract or of such Installment Purchase Contract or of any resolution or indenture authorizing the issuance of any Parity Obligations or of such Parity Obligations, such as compensation, reimbursement and indemnification of the trustee for any such Installment Purchase Contracts or Parity Obligations and fees and expenses of Independent Certified Public Accountants and Independent Engineers, but excluding in all cases depreciation, replacement and obsolescence charges or reserves therefor and amortization of intangibles.

“Miners Ranch Water Treatment Plant Improvement Project” means the additions, betterments, extensions and improvements to the Enterprise defined and described as the Miners Ranch Water Treatment Plant Improvement Project in the 2016 Installment Purchase Contract.

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“Moody’s” means Moody’s Investors Service, a corporation duly organized and existing under the laws of the State of Delaware, and its successors and assigns, except that if such entity will be dissolved or liquidated or will no longer perform the services of a municipal securities rating agency, then the term “Moody’s” will be deemed to refer to any other nationally recognized municipal securities rating agency selected by the Agency and satisfactory to and approved by the Certificate Insurer.

“Net Proceeds” means, when used with respect to any insurance or condemnation award, the proceeds from such insurance or condemnation award remaining after payment of all expenses (including attorneys’ fees) incurred in the collection of such proceeds.

“Net Revenues” means, for any period, all of the Revenues during such period, less all of the Maintenance and Operation Costs during such period.

“Opinion of Counsel” means a written opinion of counsel of recognized national standing in the field of law relating to municipal Certificates, appointed and paid by the Agency, and satisfactory to and approved by the Certificate Insurer.

“Outstanding,” when used as of any particular time with reference to Certificates, means (subject to the provisions of the Trust Agreement all Certificates except --

(1) Certificates theretofore cancelled by the Trustee or delivered to the Trustee for cancellation;

(2) Certificates paid or deemed to have been paid under the Trust Agreement; and

(3) Certificates in lieu of or in substitution for which other Certificates will have been executed, and delivered by the Trustee pursuant to the Trust Agreement.

“Owner” means the registered owner of any Outstanding Certificate, as shown on the registration books maintained by the Trustee under the Trust Agreement.

“Parity Obligations” means the Certificates, and all other bonds, notes, loan agreements, installment sale agreements, leases, or other obligations of the Agency, the payments of which are payable on a parity with the payment of the Installment Payments and which are secured on a parity by a pledge of and lien on the Net Revenues.

“Permitted Investments” means any of the following to the extent then permitted by law:

(1) Federal Securities;

(2) Obligations issued by banks for cooperatives, federal land banks, federal intermediate credit banks, federal home loan banks, the Federal Home Loan Bank Board or the Tennessee Valley Authority, or obligations, participations or other instruments of or issued by, or fully guaranteed as to interest and principal by, the Federal National Mortgage Association, or guaranteed portions of Small Business Administration notes, or obligations, participations or other instruments of or issued by a federal agency or a United States of America government-sponsored enterprise;

(3) Any obligations which are then legal investments for money of the Agency under the laws of the State of California; provided, that if such investments are not required to be collateralized or insured, such investments are required to be issued by entities the debt securities of which are rated in one of the two highest short-term or long-term rating categories by Moody’s and by S&P; and provided further, that any repurchase agreements must be fully secured by collateral security described in clauses (i) and (ii) of this definition, which collateral (A) is held by the Agency, the Trustee or a third party agent during the term of such repurchase agreement and in which collateral the Agency or the Trustee, as applicable, has a perfected first security interest, (B) has a market value determined at least every thirty (30) days at least equal to one hundred ten per cent (110%) of the amount so invested, and (C) may be liquidated within seven (7) days if the market value of such collateral is at any time less than the amount so invested;

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(4) Investment contracts with entities the debt securities or claims paying ability, as applicable, of which are rated in one of the two highest long-term rating categories by Moody’s and by S&P; provided, that any such investment contract will require that if the credit rating or claims paying ability, as applicable, of the provider of such investment contract is downgraded below either of the above-referenced rating categories by Moody’s or by S&P, respectively, then the provider of such investment contract at its sole expense must either (i) replace itself through a competitive bidding process with another provider the debt securities or claims paying ability, as applicable, of which are rated in the above-referenced rating categories, or (ii) collateralize the remaining obligations under the investment contract with Federal Securities, or (iii) replace the investment contract with a new investment contract embracing all conditions and terms of the existing investment contract, but with the remaining payments thereunder enhanced by a financial guaranty insurance policy issued by an insurer rated in the highest long-term rating category by Moody’s and by S&P;

(5) Units of a money-market fund composed of or collateralized by obligations guaranteed by the full faith and credit of the United States of America, including money market funds for which the Trustee or its affiliates or subsidiaries provide investment advisory or other management services, and, with respect to investments of less than one hundred thousand dollars ($100,000), time or demand deposits which are maintained by a banking department of the Trustee or its affiliates so long as the Trustee (or its affiliates, as appropriate) has a combined capital and surplus of at least fifty million dollars ($50,000,000);

(6) Tax-exempt obligations of a state or a political subdivision thereof which are rated in one of the two highest short-term or long-term rating categories by Moody’s and by S&P;

(7) Tax-exempt obligations of a state or a political subdivision thereof which have been defeased under irrevocable escrow instructions with Federal Securities and which are rated in the highest rating category by Moody’s and by S&P; and

(8) Investments in the Local Agency Investment Fund maintained by the California State Treasurer, which such investments will only be invested in the special portion of the Local Agency Investment Fund for bond proceeds that are not subject to arbitrage restrictions, and for which such investments the Trustee will be designated as the authorized authority to transact investments from such fund.

“Prepayment Account” means the account referred to by that name established under the Trust Agreement.

“Principal Corporate Trust Office” means the corporate trust office of the Trustee in San Francisco, California; provided, that for the purposes of the transfer, registration, exchange, payment and surrender of the Certificates, “Principal Corporate Trust Office” will mean the corporate trust office of the Trustee in San Francisco, California, or such other office designated by the Trustee from time to time.

“Principal Payment Date” means a date on which principal installments of the 2016 Installment Payments evidenced and represented by the Certificates become due and payable, being April 1 of each year to which reference is made (commencing on April 1, 2017).

“Prior Project” means the project refinanced with proceeds of the bonds issued and sold pursuant to the Refunding Bond Agreement, by and between the Agency and Bank of Nevada, dated as of October 1, 2012.

“Project” means, collectively, the Miners Ranch Water Treatment Plant Improvement Project and the Prior Project.

“Project Fund” means the South Feather Water and Power Agency Miners Ranch Water Treatment Plant Improvement Project 2016 Certificates of Participation Acquisition and Construction Fund established under the Trust Agreement.

“Purchase Price” means the portion of the principal amount of the 2016 Installment Payments plus the interest thereon owed by the Agency to the Corporation for the purchase of the Miners Ranch Water Treatment Plant Improvement Project under the conditions and terms of the Installment Purchase Contract.

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“Purchaser” means the initial purchaser of the Certificates.

“Rating Agencies” means Moody’s, S&P and Fitch but in each case only to the extent that any of them is then rating any of the Certificates at the request of the Agency.

“Rebate Fund” means the South Feather Water and Power Agency Miners Ranch Water Treatment Plant Improvement Project 2016 Certificates of Participation Rebate Fund established under the Trust Agreement.

“Refunding Bond Agreement” means that certain Refunding Bond Agreement by and between the Agency and Bank of Nevada, dated as of October 1, 2012, whereby the Agency refunded certain obligations relating to the Enterprise.

“Reserve Policy” means the reserve policy issued by the Certificate Insurer in accordance with the provisions of the Trust Agreement.

“Reserve Requirement” means, as of any date of calculation, the least of (a) ten per cent (10%) of the initial offering price to the public of the Certificates (as determined under the Code), or (b) the maximum annual 2016 Installment Payments payable in the current or in any future one-year period ending on April 1 under the 2016 Installment Purchase Contract, or (c) one hundred twenty-five per cent (125%) of the average annual 2016 Installment Payments payable in the current and in all future one-year periods ending on April 1 under the 2016 Installment Purchase Contract; provided, that such requirement (or any portion thereof) may at any time be provided by one or more policies of municipal bond insurance or surety bonds issued by a municipal bond insurer or by a letter of credit issued by a bank if the obligations insured by which insurer or issued by which bank, as the case may be, have ratings at the time of issuance of such policy or surety bond or letter of credit in one of the two to the highest categories assigned by Moody’s or S&P.

“Reserved Rights” means the rights of the Agency under the 2016 Installment Purchase Contract with respect to reimbursement of costs and indemnification.

“Revenue Fund” means the South Feather Water and Power Agency Revenue Fund now existing in the treasury of the Agency and maintained by the Agency under the 2016 Installment Purchase Contract.

“Revenues” means all gross income and revenue received or receivable by the Agency from the ownership and operation of the Enterprise, calculated in accordance with Generally Accepted Accounting Principles, including all rates, fees and charges (including connection fees) received by the Agency and all other income and revenue howsoever derived by the Agency from the Enterprise or arising from the Enterprise; provided, however, that (i) any specific charges levied for the express purpose of reimbursing others for all or a portion of the cost of the acquisition or construction of the specific facilities, (ii) grants that are designated by the grantor for a specific purpose and are therefore not available for other purposes, or (iii) customers’ deposits or any other deposits subject to refund until such deposits have become the property of the Agency are not Revenues and are not subject to the lien hereof. Revenues will include amounts on deposit in the Revenue Fund that have been previously released from the pledge and lien of the Trust Agreement.

“S&P” means Standard & Poor’s Ratings Services, a division of The McGraw-Hill Companies, Inc., a corporation duly organized and existing under the laws of the State of New York, and its successors or assigns, except that if such entity will be dissolved or liquidated or will no longer perform the functions of a municipal securities rating agency, then “S&P” will be deemed to refer to any other nationally recognized municipal securities rating agency selected by the Agency and satisfactory to and approved by the Certificate Insurer.

“Supplemental Trust Agreement” means an agreement by and among the parties hereto amending or supplementing the Trust Agreement entered into under the conditions and terms of the Trust Agreement.

“Trust Agreement” means that certain Trust Agreement, executed and entered into as of October 1, 2016, by and between the Trustee and the Agency, as originally executed and as it may from time to time be amended or supplemented in accordance with its terms.

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“Tax Certificate” means the certificate executed by the Agency at the time of the original execution and delivery of the Certificates relating to the requirements of Section 148 of the Code, as originally executed and as it may from time to time be amended or supplemented.

“Trust Agreement” means the Trust Agreement executed and entered into as of October 1, 2016, by and among the Trustee, the Corporation and the Agency, as originally executed and entered into and as it may from time to time be amended or supplemented in accordance herewith.

“Trustee” means U.S. Bank National Association, a national banking association duly organized and existing under the laws of the United States of America and authorized to accept and execute trusts of the character set forth in the Trust Agreement, at its Principal Corporate Trust Office, and its successors or assigns, or any other bank or trust company or national banking association which may at any time be substituted in its place as provided under the Trust Agreement.

“Written Request of the Agency” when used with respect to the Agency, means an instrument in writing signed on behalf of the Agency by the General Manager of the Agency or by the Finance Division Manager of the Agency, or by any other officer of the Agency duly authorized by the Board of Directors for the purpose of signing documents on its behalf under the Trust Agreement, and by the Secretary of the Board of Directors, with the seal of the Agency affixed; and when used with respect to the Corporation, means an instrument in writing signed on behalf of the Corporation by the President of the Corporation or the Director of Finance of the Corporation, or by any other officer of the Corporation duly authorized by the Board of Directors of the Corporation for the purpose of signing documents on its behalf under the Trust Agreement, and by the Secretary of the Corporation, with the seal of the Corporation affixed thereto.

SUMMARY OF CERTAIN PROVISIONS OF THE 2016 INSTALLMENT PURCHASE CONTRACT

The following is a summary of certain provisions of the 2016 Installment Purchase Contract. This summary does not purport to be complete or definitive and is qualified in its entirety by reference to the full terms of the 2016 Installment Purchase Contract. The purpose of the 2016 Installment Purchase Contract is to finance the design acquisition and construction of the Project.

The Project

Acquisition, Construction, Sale and Purchase of the Project. The Corporation agrees to finance and/or refinance the acquisition, construction, rehabilitation and equipping of the Project for and to sell the Project to the Agency, and the Agency agrees to purchase the Project from the Corporation, all as provided in the Installment Purchase Contract; and in order to implement this provision, the Corporation appoints the Agency as its agent for the purpose of financing and/or refinancing such acquisition and construction, and the Agency agrees to enter into such engineering, design, purchase and construction contracts as may be necessary, as agent for the Corporation, to provide for the acquisition and construction of the Miners Ranch Water Treatment Plant Improvement Project, and the Agency agrees that as such agent it will cause the acquisition, construction, rehabilitation and equipping of the Miners Ranch Water Treatment Plant Improvement Project to be diligently completed from the funds on deposit in the Project Fund for this purpose; provided, that the Agency will only be obligated for the payment of costs or expenses (whether as agent for the Corporation or otherwise) for the acquisition, construction, rehabilitation and equipping of the Miners Ranch Water Treatment Plant Improvement Project from funds on deposit in the Project Fund pursuant to the Trust Agreement. The Corporation agrees to convey and sell, and conveys and sells, the Project to the Agency, and the Agency agrees to purchase, and purchases, the Project from the Corporation under the Installment Purchase Contract. Notwithstanding the foregoing, it is expressly understood and agreed that the Corporation will be under no liability of any kind or character whatsoever for the payment of any costs or expenses incurred by the Agency (whether as agent for the Corporation or otherwise) for the acquisition, construction, rehabilitation and equipping of the Miners Ranch Water Treatment Plant Improvement Project and that all such costs and expenses will be paid by the Agency, regardless of whether the funds deposited in the Project Fund are sufficient to cover all such costs and expenses.

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In the event the Corporation fails to observe or perform any agreement, condition, covenant or term contained in the Installment Purchase Contract required to be observed or performed by it, the Agency may institute such action or proceeding against the Corporation as the Agency may deem necessary to compel the observance or performance of such agreement, condition, covenant or term, or to recover damages for the nonobservance or nonperformance thereof. The Agency may, at its own cost and expense and in its own name or in the name of the Corporation, prosecute or defend any action or proceeding or take any other action involving third persons which the Agency deems reasonably necessary in order to protect or secure its rights under the Installment Purchase Contract, and in such event the Corporation agrees to cooperate fully with the Agency and to take all action necessary to effect the substitution of the Agency for the Corporation in any action or proceeding if the Agency so requests.

Additions to or Deletions from the Miners Ranch Water Treatment Plant Improvement Project. The Agency may at any time make additions to or make deletions from the Miners Ranch Water Treatment Plant Improvement Project, but only if the Agency first files with the Trustee a Certification of the Agency (as that term is defined in the Trust Agreement):

(a) identifying the work to be added to the Miners Ranch Water Treatment Plant Improvement Project and/or the work to be deleted from the Miners Ranch Water Treatment Plant Improvement Project; and

(b) stating (in the case of such an addition) that the estimated costs of the acquisition of such addition to the Miners Ranch Water Treatment Plant Improvement Project are not greater than the funds then on deposit in the Project Fund available to pay such estimated costs.

Title to the Project. Upon acquisition or construction of each portion of the Project by the Agency as agent for the Corporation, all right, title and interest therein will automatically vest in the Agency, which automatic vesting will occur without further action by the Corporation; provided, that the Corporation will, if requested by the Agency or if necessary to assure such automatic vesting of such right, title or interest, execute and deliver any and all documents required to assure such vesting.

Project Fund

The Agency agrees to cause proceeds of the 2016 Certificates to be transferred to the Trustee, as provided in the Trust Agreement, for deposit in the Project Fund, which fund is established and which fund the Agency agrees to maintain with the Trustee until the Project has been acquired and constructed by the Agency, or until all amounts therein are expended towards such acquisition and construction. All money in the Project Fund is required to be applied by the Agency for the payment solely of the costs of the acquisition and construction of the Project. When the acquisition and construction of the Project has been completed, the Agency is required to deposit any remaining balance in the Project Fund in the Installment Payment Fund.

2016 Installment Payments

Purchase Price. The Purchase Price to be paid by the Agency to the Corporation under the Installment Purchase Contract for the purchase of the Project is the sum of the principal installments of the Agency’s obligation under the 2016 Installment Purchase Contract plus the interest to accrue on the unpaid balance of such principal amount over the term of the 2016 Installment Purchase Contract plus the 2016 Certificate Payment Reserve Fund deposits as provided in the 2016 Installment Purchase Contract.

The interest to accrue on the unpaid balance of the principal amount of the Purchase Price will be paid by the Agency and constitutes interest paid on the principal amount of the Agency’s Purchase Price obligations under the 2016 Installment Purchase Contract.

Payment of the 2016 Installment Payments. The Agency will, subject to any right of prepayment as provided in the 2016 Installment Purchase Contract, pay the Corporation the 2016 Installment Payments as provided in the 2016 Installment Purchase contract without offset or deduction of any kind, by paying the principal installments of the 2016 Installment Payments annually in the amounts and on April 1 in each of the years in accordance with Exhibit A attached hereto and incorporated in the Installment Purchase Contract and made a part of

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the Installment Purchase Contract, and by paying the interest installments of the 2016 Installment Payments, which interest installments are required to be paid on October 1, 2016, and semiannually thereafter on April 1 and October 1 in each of the years in the amounts in accordance with Exhibit A attached hereto and incorporated in the Installment Purchase Contract and made a part thereof; provided, that in the event the Agency fails to make any 2016 Installment Payment when due, such 2016 Installment Payment will continue as an obligation of the Agency, and the Agency is required to pay the same with interest thereon from the due date thereof at the rate of interest applicable thereto.

In order to provide for the timely payment of the 2016 Installment Payments, the Agency agrees and covenants that it will, from Net Revenues on deposit in the Installment Payment Fund, on or before the fifth (5th) Business Day immediately preceding each date for which 2016 Installment Payments are due, deposit with the Trustee an amount equal to the 2016 Installment Payments due on such date; and in accordance with the Trust Agreement, amounts so deposited will, until such due date, be invested for the benefit of the Agency and all earnings on such investment will be retained by the Trustee in the Installment Payment Fund and credited against the next ensuing 2016 Installment Payment.

The obligation of the Agency to pay the 2016 Installment Payments from the Net Revenues as provided in the Installment Purchase Contract is absolute and unconditional, and until such time as the 2016 Installment Payments have been fully paid (or provision for the payment thereof have been made pursuant to the Installment Purchase Contract), the Agency will not discontinue or suspend any 2016 Installment Payments required to be made by it under the Installment Purchase Contract, whether or not the Enterprise or any part thereof is operating or operable, or its use is suspended, interfered with, reduced or curtailed or terminated in whole or in part, and such payments will not be subject to abatement because of any damage to or destruction or condemnation of the Enterprise or any part thereof, and such payments will not be subject to reduction whether by offset or otherwise and will not be conditional upon the performance or nonperformance by any party of any agreement for any cause whatsoever.

Prepayment of the 2016 Installment Payments. The Agency may prepay the principal installments of the 2016 Installment Payments becoming due and payable on and after April 1, 2027, on any date on or after April 1, 2026, as a whole or in part (with each prepayment from such dates as may be selected by the Agency in integral multiples of five thousand dollars ($5,000) principal amount), from any source of available funds, at a prepayment price equal to the sum of the principal amount prepaid plus accrued interest thereon to the date of prepayment, without a prepayment premium.

Notwithstanding any such prepayment, the Agency will not be relieved of its obligations under the Installment Purchase contract until all 2016 Installment Payments have been fully paid (or provision for the payment thereof have been made thereunder).

Revenues

Pledge of Net Revenues; Revenue Fund.

All Net Revenues are irrevocably pledged to the payment on a parity of the 2016 Installment Payments and all other Installment Payments and Parity Obligations in accordance with the terms thereof as provided in the Installment Purchase Contract and therein, and the Net Revenues will not be used for any other purpose while any of the 2016 Installment Payments remain unpaid; provided, that out of the Net Revenues there may be apportioned such sums for such purposes as are expressly permitted by this article. This pledge constitutes a first and exclusive lien on the Net Revenues for the payment of the 2016 Installment Payments and all other Installment Purchase Contracts and Parity Obligations in accordance with the terms thereof, and the 2016 Installment Payments will be secured by and payable on a parity with all such payments.

Allocation of Revenues. In order to carry out and effectuate the pledge and lien contained in the Installment Purchase Contract, the Agency agrees and covenants that all Revenues will be received by the Agency in trust under the Installment Purchase Contract and are required to be deposited when and as received in the Revenue Fund, which fund was previously established in the treasury of the Agency and which fund the Agency agrees and covenants to continue to maintain in the treasury of the Agency so long as any 2016 Installment Payments remain

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unpaid, and all money in the Revenue Fund are required to be applied and used as provided in the Installment Purchase Contract. The Agency is required to pay all Maintenance and Operation Costs (including amounts reasonably required to be set aside in contingency reserves for Maintenance and Operation Costs the payment of which is not then immediately required) from the Revenue Fund as they become due and payable, and all remaining money in the Revenue Fund will be set aside by the Agency (on a parity with the transfers for the payment of all other Debt Service, Installment Purchase Contracts and Parity Obligations, as applicable) at the following times in the following respective special funds (each of which is established and each of which the Agency agrees and covenants to maintain so long as any 2016 Installment Payments remain unpaid under the Installment Purchase Contract) in the following order of priority:

(1) Installment Payment Fund (to be held by the Trustee); and

(2) 2016 Certificate Payment Reserve Fund (to be held by the Trustee).

All money in each of such funds will be held in trust and are required to be applied, used and withdrawn only for the purposes authorized in the Installment Purchase Contract.

Additional Installment Purchase Contracts and Parity Obligations. The Agency will not incur any obligations payable from the Net Revenues superior to the payment of the 2016 Installment Payments, although the Agency may at any time execute any Installment Purchase Contract or issue any Parity Obligations, as the case may be, to finance or refinance any Project the Debt Service on which Installment Purchase Contract or Parity Obligations is payable on a parity with the payment by the Agency of the 2016 Installment Payments from the Net Revenues if:

The Net Revenues for the most recently audited Fiscal Year preceding the date of the adoption by the Board of Directors of the resolution authorizing the execution of such Installment Purchase Contract or the issuance of such Parity Obligations, as the case may be (including adjustments to give effect to increases or decreases in charges, fees or rates for the use of the Enterprise approved and in effect as of the date of calculation), calculated (with respect to fees) on the basis of the average annual connection fees, annexation fees and other one-time fees received by the Agency during the immediately preceding three (3) audited Fiscal Year period, as evidenced by both a calculation prepared by the Agency and a special report prepared by an Independent Certified Public Accountant on such calculation on file with the Agency, are required to have produced a sum equal to at least one hundred twenty-five per cent (125%) of the Debt Service for such Fiscal Year on all then outstanding Installment Purchase Contracts and Parity Obligations; and

The estimated Net Revenues for the first Fiscal Year after the latest Date of Operation of any uncompleted Project (or the period for which interest is capitalized, whichever is longer), as evidenced by a calculation prepared by an Independent Engineer on file with the Agency, plus (after giving effect to the completion of all uncompleted Projects) an allowance for estimated Revenues for such Fiscal Year arising from any increase in the charges, fees or rates estimated to be fixed and prescribed for the use of the Enterprise in an amount equal to ninety per cent (90%) of the amount by which such Revenues would have been increased if such increase had been in effect during such Fiscal Year (as similarly evidenced), are required to produce a sum equal to at least one hundred twenty-five per cent (125%) of the estimated Debt Service for such Fiscal Year; after giving effect, in either case, to the execution of all Installment Purchase Contracts and the issuance of all Parity Obligations estimated to be required to be executed or issued to pay the costs of completing all uncompleted Projects, assuming that all such Installment Purchase Contracts and Parity Obligations have maturities, interest rates and proportionate principal repayment provisions similar to the Installment Purchase Contract last executed or then being executed or the Parity Obligations last issued or then being issued for the purpose of acquiring and constructing any of such uncompleted Projects; and

The Project to be acquired and constructed with the proceeds of such Installment Purchase Contract or such Parity Obligations, as the case may be, is technically feasible and the estimated cost of the acquisition and construction thereof is reasonable, and (after giving effect to the completion of all uncompleted Projects) the rates, fees and charges estimated to be fixed and prescribed for the use of the

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Enterprise for such Fiscal Year from the Fiscal Year in which such Installment Purchase Contract is executed or such Parity Obligations are issued, as the case may be, to and including the first complete Fiscal Year after the latest Date of Operation of any uncompleted Project are economically feasible and reasonably considered necessary based on projected operations for such period, as evidenced by an Engineer’s Report (prepared at the time of the execution of the initial Installment Purchase Contract or the issuance of the initial Parity Obligations, as the case may be, for the purpose of acquiring and constructing the Project) on file with the Agency;

provided, that notwithstanding the foregoing conditions, any Installment Purchase Contract may be executed and delivered and any Parity Obligations may be issued without regard to such conditions if the Debt Service in each Fiscal Year after the execution and delivery of any such Installment Purchase Contract or the issuance of any such Parity Obligations, as the case may be, is not increased by reason of the execution and delivery of such Installment Purchase Contract or the issuance of such Parity Obligations; and provided further, that notwithstanding the foregoing conditions, no such Installment Purchase Contract will be executed and delivered nor such Parity Obligations are required to be issued if an Event of Default has occurred and is then continuing.

Covenants of the Agency

Compliance with the 2016 Installment Purchase Contract and the Trust Agreement. The Agency will punctually pay the 2016 Installment Payments in strict conformity with the terms of the Installment Purchase Contract, and will faithfully observe and perform all the agreements, conditions, covenants and terms contained therein required to be observed and performed by it, and will not terminate the 2016 Installment Purchase Contract for any cause whatsoever, including, without limiting the generality of the foregoing, any acts or circumstances that may constitute failure of consideration, destruction of or damage to any portion of the Project, commercial frustration of purpose, any change in the tax or other laws of the United States of America or of the State of California or any political subdivision of either or any failure of the Corporation to observe or perform any agreement, condition, covenant or term contained in the Installment Purchase Contract required to be observed and performed by it, whether express or implied. The Agency will, so long as any 2016 Installment Payments remain unpaid, maintain the Revenue Fund and apply the money therein as provided in the Installment Purchase Contract.

Against Encumbrances. The Agency will not make any pledge of or place any lien on the Net Revenues except as provided in the Installment Purchase Contract; provided, that the Agency may at any time, or from time to time, issue evidences of indebtedness for any lawful purpose which are payable from and secured by a pledge of and lien on any Net Revenues then remaining in the Revenue Fund as provided in the Installment Purchase Contract so long as such pledge and lien is subordinate in all respects to the pledge of and lien on the Net Revenues provided therein.

Against Sale or Disposition of the Enterprise. The Agency will not sell, lease or otherwise dispose of the Enterprise or any part thereof essential to the proper operation of the Enterprise or to the maintenance of the Net Revenues. The Agency will not enter into any agreement or lease which impairs the operation of the Enterprise or any part thereof necessary to secure adequate Net Revenues for the payment of the 2016 Installment Payments, or which would otherwise impair the rights of the Owners with respect to the Net Revenues or the operation of the Enterprise. Any real or personal property which has become nonoperative or which is not needed for the efficient and proper operation of the Enterprise, or any material or equipment which has become worn out, may be sold if such sale will not reduce the Net Revenues and if the proceeds of such sale are deposited in the Revenue Fund.

Against Competitive Facilities. The Agency will not, to the extent permitted by law, acquire, construct, maintain or operate and will not, to the extent permitted by law and within the scope of its powers, permit any other public or private agency, corporation, agency or political subdivision or any person whomsoever to acquire, construct, maintain or operate within the jurisdiction of the Agency any enterprise competitive with the Enterprise; provided, that nothing contained in the Installment Purchase Contract will prevent the Agency from permitting other parties to sell services to retail customers within the area currently served by the Enterprise.

Tax Covenants. The Agency will at all times do and perform all acts and things permitted by law which are necessary or desirable in order to assure that the interest installments of the 2016 Installment Payments will not be included in the gross income of the Owners for federal income tax purposes under the Code and will be exempt

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from State of California personal income taxes, and will take no action that would result in such interest being so included or not being so exempt. Without limiting the foregoing, the Agency and the Corporation will at all times comply with the requirements of the Tax Certificate (as that term is defined in the Trust Agreement) executed in connection with the delivery of the Certificates by the Trustee. This covenant will survive any defeasance or discharge of the 2016 Installment Payments pursuant to Article VII or any prepayment of principal installments of the 2016 Installment Payments pursuant to Article III.

Prompt Acquisition and Construction of the Miners Ranch Water Treatment Plant Improvement Project. The Agency will, as agent for the Corporation, acquire and construct the Miners Ranch Water Treatment Plant Improvement Project with all practicable dispatch, and such acquisition and construction will be made in an expeditious manner and in conformity with law so as to complete the same as soon as possible.

Maintenance and Operation of the Enterprise. The Agency will maintain and preserve the Enterprise in good repair and working order at all times and will operate the Enterprise in an efficient and economical manner and is required to pay all Maintenance and Operation Costs as they become due and payable.

Budgets. On or before the first day of each Fiscal Year, the Agency will adopt a budget approved by the Board of Directors setting forth the estimated Maintenance and Operation Costs and Revenues for such Fiscal Year, which budget may be amended at any time during such Fiscal Year.

Payment of Claims. The Agency is required to pay and discharge any and all lawful claims for labor, materials or supplies which, if unpaid, might become a lien on the Net Revenues or any part thereof or on any funds in the hands of the Agency prior to or superior to the lien of the 2016 Installment Payments or which might impair the security of the 2016 Installment Payments; provided, that nothing contained in the Installment Purchase Contract will require the Agency to make any such payments so long as the Agency in good faith will contest the validity of any such claims.

Compliance with Contracts. The Agency will comply with, keep, observe and perform all agreements, conditions, covenants and terms, express or implied, required to be kept, observed and performed by it contained in all contracts for the use of the Enterprise and all other contracts affecting or involving the Enterprise to the extent that the Agency is a party thereto.

Insurance. (a) The Agency will procure and maintain insurance on the Enterprise with responsible insurers in such amounts and against such risks (including accident to or destruction of the Enterprise) as are usually covered in connection with Enterprises similar to the Enterprise so long as such insurance is available from reputable insurance companies. In the event of any damage to or destruction of the Enterprise caused by the perils covered by such insurance, the Net Proceeds thereof are required to be applied to the reconstruction, repair or replacement promptly after such damage or destruction will occur, and the Agency will continue and properly complete such reconstruction, repair or replacement as expeditiously as possible, and is required to pay out of such Net Proceeds all costs and expenses in connection with such reconstruction, repair or replacement so that the same will be completed and the Enterprise will be free and clear of all claims and liens; provided, that if such Net Proceeds are sufficient to enable the Agency to retire all Installment Purchase Contracts and Parity Obligations, the Agency may elect not to reconstruct, repair or replace the damaged or destroyed portion of the Enterprise, and thereupon such Net Proceeds are required to be applied to the retirement of all such Installment Purchase Contracts and Parity Obligations.

(b) The Agency will procure and maintain such other insurance which it will deem advisable or necessary to protect its interests and the interests of the Owners, which insurance will afford protection in such amounts and against such risks as are usually covered in connection with Enterprises similar to the Enterprise; provided, that any such insurance may be maintained under a self-insurance program so long as such self-insurance is maintained in the amounts and manner usually maintained in connection with Enterprises similar to the Enterprise.

All policies of insurance required to be maintained in the Installment Purchase Contract will provide that the Trustee will be given thirty (30) days’ written notice of any intended cancellation thereof or reduction of coverage provided thereby.

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Accounting Records; Financial Statements and Other Reports

(a) The Agency will keep appropriate accounting records in which complete and correct entries is made of all transactions relating to the Enterprise, which records will be available for inspection by the Corporation and the Owners at reasonable hours and under reasonable conditions.

(b) The Agency will prepare and file with the Corporation, the Certificate Insurer and the Trustee annually within two hundred forty (240) days after the close of each Fiscal Year (commencing with the Fiscal Year ending December 31, 2016) --

(i) financial statements of the Agency for the preceding Fiscal Year prepared in accordance with Generally Accepted Accounting Principles, together with an Accountant’s Report thereon and a special report prepared by the Independent Certified Public Accountant who examined such financial statements stating that nothing came to his attention in connection with such examination that indicated that the Agency was not in compliance with any of the financial agreements or financial covenants contained in the Installment Purchase Contract, and the Trustee will have no duty to review any such financial statements; and

(ii) a Certification of the Agency (as that term is defined in the Trust Agreement) that the Agency is currently maintaining in full force and effect all policies of insurance (or self-insurance provisions) required to be maintained by the Agency under the Installment Purchase Contract, and the Trustee will have no liability for the coverage or amounts of coverage of such policies.

(c) The Agency will prepare annually not more than two hundred forty (240) days after the close of each Fiscal Year (commencing with the Fiscal Year ending December 31, 2016) a Certification of the Agency (as that term is defined in the Trust Agreement) certifying that the Agency is in full compliance with all the agreements, conditions, covenants and terms hereof, and will furnish a copy of such Certification of the Agency to the Trustee, the Certificate Insurer, to any Owner and to any investment bankers, securities dealers and others interested in the Certificates requesting copies thereof.

Protection of Security and Rights of Corporation. The Agency will preserve and protect the security hereof and the rights of the Corporation to the 2016 Installment Payments under the Installment Purchase Contract and will warrant and defend such rights against all claims and demands of all persons.

Payment of Taxes and Compliance with Governmental Regulations. The Agency is required to pay and discharge all taxes, assessments and other governmental charges which may hereafter be lawfully imposed upon the Enterprise or any part thereof or upon the Revenues when the same will become due. The Agency will duly observe and conform with all valid regulations and requirements of any governmental authority relative to the operation of the Enterprise or any part thereof, but the Agency will not be required to comply with any regulations or requirements so long as the validity or application thereof will be contested in good faith.

Amount of Charges, Fees and Rates. The Agency will fix, prescribe and collect charges, fees and rates for the Enterprise which are reasonably fair and nondiscriminatory and which will be at least sufficient to yield, during each Fiscal Year, Net Revenues equal to one hundred twenty-five per cent (125%) of the Debt Service for such Fiscal Year, plus the amount necessary to restore the 2016 Certificate Payment Reserve Fund to the Reserve Requirement in such Fiscal Year as provided in the Installment Purchase Contract, including any amount required to reimburse the Certificate Insurer with respect to any Policy Costs (as defined in the Trust Agreement) related to the Reserve Policy, if any. The Agency may make adjustments from time to time in such charges, fees and rates and may make such classification thereof as it deems necessary, but will not reduce the charges, fees and rates then in effect unless the Net Revenues from such reduced charges, fees and rates will at all times be sufficient to meet the requirements of this paragraph. If for any Fiscal Year the Agency does not meet the within rate covenant, the Agency will engage an Independent Engineer to recommend revised charges, fees and rates, and the Agency will, to the extent practicable and subject to applicable requirements and restrictions imposed by law and subject to a good faith determination by the Agency that such recommendations, in whole or in part, are in the best interests of the Agency, implement such revised charges, fees and rates so as to produce the necessary Net Revenues.

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Collection of Charges, Fees and Rates. The Agency will have in effect at all times rules and regulations requiring each user of the Enterprise to pay the charges, fees and rates applicable to the Enterprise and providing for the billing thereof and for a due date and a delinquency date for each bill, and in each case where such bill remains unpaid in whole or in part after it becomes delinquent, the Agency will enforce the collection procedures contained in such rules and regulations. To the extent permitted by law, the Agency will not permit any part of the Enterprise or any facility thereof to be used or taken advantage of free of charge by any corporation, firm or person, or by any public agency (including the United States of America, the State of California and any city, county, Agency, political subdivision, public corporation or agency of any thereof).

Eminent Domain Proceeds. If all or any part of the Enterprise will be taken by eminent domain proceedings, the Net Proceeds thereof are required to be applied as follows:

(a) If (1) the Agency obtains and files with the Trustee an Engineer’s Report showing (i) the estimated loss of annual Net Revenues, if any, suffered or to be suffered by the Agency by reason of such eminent domain proceedings, (ii) a general description of the additions, betterments, extensions or improvements to the Enterprise proposed to be acquired and constructed by the Agency from such Net Proceeds, and (iii) an estimate of the additional annual Net Revenues to be derived from such additions, betterments, extensions or improvements, and (2) the Agency, on the basis of such Engineer’s Report, determines that the estimated additional annual Net Revenues will sufficiently offset the estimated loss of annual Net Revenues resulting from such eminent domain proceedings so that the ability of the Agency to meet its obligations under the Installment Purchase Contract will not be substantially impaired (which determination will be final and conclusive), then the Agency will promptly proceed with the acquisition and construction of such additions, betterments, extensions or improvements substantially in accordance with such Engineer’s Report and such Net Proceeds are required to be applied as set forth in a Written Request of the Agency (as that term is defined in the Trust Agreement) for the payment of the costs of such acquisition and construction, and any balance of such Net Proceeds not required by the Agency for such purpose are required to be deposited in the Revenue Fund.

(b) If the foregoing conditions are not met, then such Net Proceeds are required to be applied on a pro rata basis to the retirement of the Installment Purchase Contracts and the Parity Obligations.

Further Assurances. The Agency will adopt, deliver, execute and make any and all further assurances, instruments and resolutions as may be reasonably necessary or proper to carry out the intention or to facilitate the performance hereof and for the better assuring and confirming unto the Corporation of the rights and benefits provided to it in the Installment Purchase Contract.

Enterprise Rate Stabilization Fund. The Agency covenants to maintain and hold an Enterprise Rate Stabilization Fund. The Agency may deposit Net Revenues or any other lawfully available funds in the Enterprise Rate Stabilization Fund as the Agency may determine, provided, that deposits for each Fiscal Year may be made until (but not after) 120 days following the end of such Fiscal Year. The Agency may withdraw amounts from the Enterprise Rate Stabilization Fund for inclusion in Revenues for any Fiscal Year, but only until (but not after) 120 days after the end of such Fiscal Year. All interest earnings on the deposits in the Enterprise Rate Stabilization Fund will be withdrawn and deposited in the Revenue Fund and accounted for as Revenues. Withdrawals from the Enterprise Rate Stabilization Fund may be made at any time by the Agency for any lawful purpose of the Enterprise.

Covenants Relating to Enterprise Renewal Contracts. The Agency will use commercially reasonable efforts to maintain Revenues at reasonable commercial levels and will, at or prior to the expiration of any contracts or agreements from which Revenues are derived, use commercially reasonable efforts to enter into new agreements or contracts such that it will continue to derive Revenues at commercially reasonable rates.

Events of Default and Remedies of the Corporation

If one or more of the following Event of Default happen under the 2016 Installment Purchase Contract:

(a) if default is made in the due and punctual payment of any 2016 Installment Payment when and as the same will become due and payable;

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(b) if default is made by the Agency in the payment of Debt Service due under any other Installment Purchase Contract or any Parity Obligations;

(c) if default is made by the Agency in the observance or performance of any of the other agreements, conditions, covenants or terms on its part contained in the Installment Purchase Contract or in any Installment Purchase Contract or in any Parity Obligations required to be observed or performed by it, and such default will have continued for a period of thirty (30) days after the Agency will have been given notice in writing of such default by the Corporation, the Certificate Insurer or the Trustee; provided, that such default will not constitute an Event of Default under the Installment Purchase Contract if the Agency will commence to cure such default within such thirty (30)-day period and thereafter diligently and in good faith will proceed to cure such default within a reasonable period of time; or

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

then, and in each and every such case during the continuance of such Event of Default the Trustee may, with the prior written consent of the Certificate Insurer, and is required to, at the direction of the Certificate Insurer or the Owners of not less than a majority in aggregate principal amount of outstanding Certificates, with the prior written consent of the Certificate Insurer, by notice in writing to the Agency, declare the entire principal amount of the unpaid 2016 Installment Payments and the accrued interest thereon to be due and payable immediately, and upon any such declaration the same will become immediately due and payable, anything continued in the Installment Purchase Contract to the contrary notwithstanding; provided, that if at any time after the entire principal amount of the unpaid 2016 Installment Payments and the accrued interest thereon will have been so declared due and payable and before any judgment or decree for the payment of the money thereby due will have been obtained or entered the Agency will deposit with the Trustee a sum sufficient to pay the unpaid principal amount of the 2016 Installment Payments due prior to such declaration and the accrued interest thereon, and the reasonable expenses of the Trustee, and any and all other defaults known to the Trustee (other than in the payment of the entire principal amount of the unpaid 2016 Installment Payments and the accrued interest thereon due and payable solely by reason of such declaration) will have been made good or cured to the satisfaction of the Trustee or provision deemed by the Trustee to be adequate will have been made therefor and any amounts due and owing to the Certificate Insurer will have been paid in full, then and in every case the Trustee, with the prior written consent of the Certificate Insurer, by written notice to the Agency, may rescind and annul such declaration and its consequences, except that no such rescission and annulment will extend to or will affect any subsequent default or will impair or exhaust any right or power consequent thereon; and provided further, that in the case of an Event of Default, the Corporation will exercise only such remedies as the Certificate Insurer directs or to which it consents.

Application of Funds Upon Acceleration

All money in the Revenue Fund on the date of the declaration of acceleration by the Corporation as provided in the Installment Purchase Contract allocable to the 2016 Installment Payments due thereunder and all Net Revenues thereafter received by the Agency allocable to the 2016 Installment Payments due thereunder are required to be applied as provided in the Trust Agreement.

Other Remedies of the Corporation

The Corporation has the right –

(a) by mandamus or other action or proceeding or suit at law or in equity to enforce its rights against the Agency or any member of the board of directors or officer or employee of the Agency, and to compel the Agency or any such member of the board of directors or officer or employee of the Agency to perform and carry out

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its or his or her duties under agreements and covenants required to be performed by it or him or her contained in the Installment Purchase Contract;

(b) by suit in equity to enjoin any acts or things which are unlawful or violate the rights of the Corporation; or

(c) by suit in equity upon the happening of an Event of Default to require the Agency and the members of the board of directors and the officers and employees of the Agency to account as the trustee of an express trust.

Non-Waiver

Nothing in the Installment Purchase Contract will affect or impair the obligation of the Agency, which is absolute and unconditional, to pay the 2016 Installment Payments to the Corporation at their respective due dates or upon prepayment as provided in the Installment Purchase Contract from the Net Revenues, or will affect or impair the right of the Corporation, which is also absolute and unconditional, to institute suit to enforce such payment by virtue of the contract embodied therein.

A waiver of any default or breach of duty or contract by the Corporation (which waiver will be subject to the prior written consent of the Certificate Insurer) will not affect any subsequent default or breach of duty or contract or impair any rights or remedies on any such subsequent default or breach of duty or contract, and no delay or omission by the Corporation to exercise any right or remedy accruing upon any default or breach of duty or contract will impair any such right or remedy or will be construed to be a waiver of any such default or breach of duty or contract or an acquiescence therein, and every right or remedy conferred upon the Corporation by applicable law or by this article may be enforced and exercised from time to time and as often as will be deemed expedient by the Corporation.

If any action, proceeding or suit to enforce any right or exercise any remedy is abandoned or determined adversely to the Corporation, the Agency and the Corporation and the Certificate Insurer will be restored to their former positions, rights and remedies as if such action, proceeding or suit had not been brought or taken.

Remedies Not Exclusive. No remedy conferred upon or reserved to the Corporation under the Installment Purchase Contract is intended to be exclusive of any other remedy, and each such remedy will be cumulative and will be in addition to every other remedy given thereunder or existing in law or in equity or by statute or otherwise now or after the execution of the Installment Purchase Contract and may be exercised without exhausting and without regard to any other remedy conferred by applicable law.

Discharge of Obligations

(a) If the Agency is required to pay or cause to be paid all the 2016 Installment Payments at the times and in the manner provided in the Installment Purchase Contract, the right, title and interest of the Agency in the Installment Purchase Contract and the obligations of the Agency under the Installment Purchase Contract will thereupon cease, terminate, become void and be completely discharged and satisfied.

(b) All or any portion of any unpaid principal installment of the 2016 Installment Payments will on its scheduled payment date or date of prepayment be deemed to have been paid within the meaning of and with the effect expressed in paragraph (a) if the Agency makes payment of such 2016 Installment Payments and the interest thereon in the manner provided in the Installment Purchase Contract, and money for the purpose of such payment or prepayment is then held by the Trustee.

(c) All or any portion of any unpaid principal installment of the 2016 Installment Payments will, prior to its scheduled payment date or date of prepayment, be deemed to have been paid within the meaning of and with the effect expressed in paragraph (a) (except that the Agency will remain liable for the payment of such 2016 Installment Payments, but only out of the money or securities deposited with the Trustee) if (i) there will have been deposited with the Trustee either money in an amount which will be sufficient, or Federal Securities which are not

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subject to redemption except by the holder thereof prior to maturity (including any such securities issued or held in book entry form), or tax-exempt obligations of a state or a political subdivision thereof which have been defeased under irrevocable escrow instructions with Federal Securities and which are rated in one of the two highest rating category by Moody’s Investors Service and by Standard & Poor’s Ratings Services, a division of S&P Global Inc., the interest on and principal of which when paid will provide money which, together with money, if any, deposited with the Trustee at the same time, will be sufficient (as evidenced by a report of an Independent Certified Public Accountant regarding such sufficiency) to pay when due the principal installments of such 2016 Installment Payments or such portions thereof and the interest thereon on and prior to their payment dates or their dates of prepayment, as the case may be, (ii) notice of such deposit is given by the Agency to the Trustee, and (iii) an Opinion of Counsel (as the term is defined in the Trust Agreement) is filed with the Trustee to the effect that the action taken pursuant to this paragraph will not cause the interest installments of the 2016 Installment Payments to be includable in gross income under the Code for federal income tax purposes and will not cause such interest installments not to be exempt from State of California personal income taxes.

Miscellaneous

Liability of Agency Limited to Net Revenues. Notwithstanding anything contained in the Installment Purchase Contract, the Agency will not be required to advance any money derived from any source of income other than the Net Revenues for the payment of the 2016 Installment Payments or for the performance of any agreements or covenants required to be performed by it contained in the Installment Purchase Contract; provided, that the Agency may advance money for any such purpose so long as such money is derived from a source legally available for such purpose and may be legally used by the Agency for such purpose.

The obligation of the Agency to make the 2016 Installment Payments is a special obligation of the Agency and is payable solely from the Net Revenues, and does not constitute a debt of the Agency or the State of California or of any political subdivision thereof within the meaning of any constitutional or statutory debt limitation or restriction, and does not constitute an obligation for which the Agency is obligated to levy or pledge any form of taxation or for which the Agency has levied or pledged any form of taxation.

Benefits of the 2016 Installment Purchase Contract Limited to Parties. Except as provided in the Installment Purchase Contract, nothing contained therein, expressed or implied, is intended to give to any person other than the Agency, the Corporation and the Certificate Insurer any right, remedy or claim under or pursuant hereto, and any agreement or covenant required in the Installment Purchase Contract to be performed by or on behalf of the Agency or the Corporation will be for the sole and exclusive benefit of the Agency, the Corporation and the Certificate Insurer. The Certificate Insurer is explicitly recognized as being a third party beneficiary to the 2016 Installment Purchase contract and may enforce any such right, remedy or claim conferred, given or granted thereunder.

Net Contract. The 2016 Installment Purchase Contract will be deemed and construed to be a net contract, and the Agency will pay absolutely net during the term hereof the 2016 Installment Payments and all other payments required under the Installment Purchase Contract, free of any deductions and without abatement, diminution or set-off whatsoever.

SUMMARY OF CERTAIN PROVISIONS OF THE TRUST AGREEMENT

The following is a summary of certain provisions of the Trust Agreement. This summary does not purport to be complete or definitive and is qualified in its entirety by reference to the full terms of the Trust Agreement.

Certain provisions of the Trust Agreement setting forth the terms of the Certificates, the redemption provisions thereof and the use of the proceeds of the Certificates are set forth elsewhere in this Official Statement. See “THE CERTIFICATES.”

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2016 Installment Payments; Funds and Accounts

Pledge and use of Installment Payments. The 2016 Installment Payments are irrevocably pledged to and are required to be used for the punctual payment of the interest and principal evidenced and represented by the Certificates, and the 2016 Installment Payments will not be used for any other purposes while any of the Certificates remain Outstanding. This pledge constitutes a first and exclusive lien on the 2016 Installment Payments in accordance with the terms hereof.

All 2016 Installment Payments are required to be paid directly by the Agency to the Trustee, and if received by the Corporation at any time is required to be deposited by the Corporation with the Trustee within one (1) Business Day after the receipt thereof. All 2016 Installment Payments are required to be held in trust by the Trustee in the “South Feather Water and Power Agency Miners Ranch Water Treatment Plant Improvement Project Installment Purchase Contract Installment Payment Fund,” which fund the Trustee agrees to establish and maintain so long as any Certificates are Outstanding for the benefit of the Agency until deposited in the funds provided in the Installment Purchase Contract, whereupon they will be held in trust by the Trustee in such funds for the benefit of the Owners from time to time. The Agency and the Corporation pledge and grant a lien on and a security interest in the money in the Installment Payment Fund to the Trustee for the benefit of the Owners. All deposits made with the Trustee prior to each Interest Payment Date or Certificate Payment Date pursuant to this paragraph are required to be invested by the Trustee in those Permitted Investments described in paragraph (5) of the definition thereof maturing on or prior to such Interest Payment Date or Certificate Payment Date, and all earnings on such investments will be retained by the Trustee in the Installment Payment Fund and credited against the next ensuing 2016 Installment Payment.

Deposit of Money in the Installment Payment Fund. The Trustee is required to deposit the money contained in the Installment Payment Fund at the following respective times in the following respective accounts in the manner provided in the Trust Agreement, each of which accounts the Trustee agrees to establish and maintain so long as any Certificates are Outstanding, and the money in each of such accounts will be disbursed only for the purposes and uses authorized by the Trust Agreement.

Interest Account. The Trustee, on or before each Interest Payment Date (commencing on April 1, 2017), is required to deposit in the Interest Account that amount of money evidencing and representing the portion of the 2016 Installment Payments designated as interest becoming due and payable on such Interest Payment Date. All money in the Interest Account is required to be used and withdrawn by the Trustee solely for the purpose of paying when due the interest evidenced and represented by the Certificates on their respective Interest Payment Dates.

Principal Account. The Trustee, on or before each Principal Payment Date (commencing on April 1, 2017), is required to deposit in the Principal Account that amount of money evidencing and representing the portion of the 2016 Installment Payments designated as principal becoming due and payable on such Principal Payment Date. All money in the Principal Account is required to be used and withdrawn by the Trustee solely for the purpose of paying the principal evidenced and represented by the Certificates on their respective Certificate Payment Dates or on prepayment prior thereto pursuant to the Trust Agreement.

Prepayment Account. The Trustee, on the prepayment date specified in the Written Request of the Agency filed with the Trustee at the time that any prepaid 2016 Installment Payment is paid to the Trustee pursuant to the 2016 Installment Purchase Contract, is required to deposit in the Prepayment Account that amount of money representing the portion of the 2016 Installment Payments designated as prepaid 2016 Installment Payments. All money in the Prepayment Account is required to be used and withdrawn by the Trustee solely for the purpose of paying the interest and principal evidenced and represented by the Certificates to be prepaid on their respective prepayment dates.

Reserve Policy. The Trustee will reimburse the Certificate Insurer for any amounts owed with respect to the Reserve Policy, if any.

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2016 Certificate Payment Reserve Fund

The Agency agrees to establish and maintain with the Trustee so long as any Certificates are Outstanding a separate fund designated the “South Feather Water and Power Agency Miners Ranch Water Treatment Plant Improvement Project Installment Purchase Contract Reserve Fund” (the “2016 Certificate Payment Reserve Fund”) under the Trust Agreement. All money on deposit in the 2016 Certificate Payment Reserve Fund in excess of the Reserve Requirement will, on April 1 and October 1 of each year (beginning in April, 2017), be transferred to the Agency (upon receipt of a Certification of the Agency certifying that the Agency is in compliance with the 2016 Installment Purchase Contract) for deposit in the Revenue Fund; and for this purpose all investments in the 2016 Certificate Payment Reserve Fund will be valued on or before April 1 and October 1 of each year (beginning in April, 2017) at the market value of such investments. The Agency and the Corporation pledge and grant a first and exclusive lien on and a security interest in the money in the 2016 Certificate Payment Reserve Fund to the Trustee for the benefit of the Owners in order to secure the Agency’s obligation to pay the 2016 Installment Payments due under the 2016 Installment Purchase Contract, and the Trustee is authorized to withdraw any money on deposit in the 2016 Certificate Payment Reserve Fund solely for the payment of 2016 Installment Payments due and payable by the Agency under the 2016 Installment Purchase Contract if and when money has not been provided by the Agency in time sufficient to make such 2016 Installment Payments; provided, that the application of any money on deposit in the 2016 Certificate Payment Reserve Fund to make an 2016 Installment Payment will not relieve the Agency of its obligation to make such 2016 Installment Payment as and when due and payable, and upon receipt by the Trustee from the Agency of any delinquent 2016 Installment Payment for which money has been advanced from the 2016 Certificate Payment Reserve Fund, such delinquent payment is required to be deposited in the 2016 Certificate Payment Reserve Fund to the extent of such advance. Upon the discharge hereof, any balance of money remaining in the 2016 Certificate Payment Reserve Fund will, after payment of amounts due the Trustee under the Trust Agreement, be released from the foregoing pledge, lien and security interest and will be transferred to such other account or fund of the Agency or will be otherwise used by the Agency for any lawful purposes as the Agency may direct in a Written Request of the Agency filed with the Trustee. The Reserve Requirement with respect the 2016 Certificate Payment Reserve Fund will initially be satisfied with the deposit of the Reserve Policy which will be subject to the additional conditions contained in the Trust Agreement as described in “Certain Provisions Relating to the Certificate Insurance Policy, the Reserve Policy and the Certificate Insurer – Reserve Policy Requirements” below.

Covenants of the Trustee

Compliance with the Trust Agreement. The Trustee will not execute or deliver any Certificates in any manner other than in accordance with the provisions of the Trust Agreement, and neither the Corporation nor the Agency will suffer or permit any default by either of them to occur under the Trust Agreement, but both of them will faithfully comply with, keep, observe and perform all the agreements, conditions, covenants and terms hereof required to be complied with, kept, observed and performed by them.

Compliance with and Amendment of or Supplement to the 2016 Installment Purchase Contract. The Corporation and the Agency will faithfully comply with, keep, observe and perform all the agreements, conditions, covenants and terms contained in the 2016 Installment Purchase Contract required to be complied with, kept, observed and performed by them, and together with the Trustee, will enforce the 2016 Installment Purchase Contract against the other party thereto in accordance with its terms.

The Corporation and the Agency will not amend or supplement the 2016 Installment Purchase Contract without the prior written consent of the Trustee and the Certificate Insurer, which consent by the Trustee will be given only (A) if the Trustee has been furnished an Opinion of Counsel or a Certification of the Agency to the effect that such amendments or supplements are not materially adverse to the interests of the Owners and that such amendments or supplements are limited to amendments or supplements (i) to add to the agreements and covenants of either party other agreements and covenants to be observed, or to surrender any right or power therein reserved to the Agency, or (ii) to cure, correct or supplement any ambiguous or defective provision contained therein, or (iii) to resolve questions arising thereunder as the parties thereto may deem necessary or desirable and which do not materially adversely affect the interests of the Owners of the Certificates; or (B) if the Trustee first obtains the written consent of the Owners of at least a majority in aggregate principal amount of the Certificates then Outstanding to such amendment or supplement; provided, that no such amendment or supplement will reduce the

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principal or interest component of any 2016 Installment Payment or reduce the threshold for Owner consent and direction without the written consent of the Owner of each Certificate evidencing and representing an interest therein. The Agency will give notice of any such amendment or supplement to each Rating Agency then rating the Certificates.

Observance of Laws and Regulations. To the extent necessary to perform their respective obligations under the Trust Agreement, the Corporation and the Agency and the Trustee will faithfully comply with, keep, observe and perform all valid and lawful obligations or regulations imposed on them by contract now or after execution of the Trust Agreement, or prescribed by any law of the United States of America or of the State of California, or by any officer, board or commission having jurisdiction or control, as a condition of the continued enjoyment of each and every franchise, right or privilege now owned or hereafter acquired by them, including their right to exist and carry on their respective businesses, to the end that such franchises, rights and privileges will be maintained and preserved and will not become abandoned, forfeited or in any manner impaired.

Other Liens. (So long as any Certificates are Outstanding, the Corporation and the Agency will keep the Enterprise and all portions thereof free from judgments and liens and free from all claims, demands or encumbrances of whatever nature or character, and free from any claim or liability which might embarrass or hamper the Agency in conducting its business or utilizing the Enterprise or any portion thereof. The Agency is required to notify the Trustee within five (5) days of receipt by the Agency of notice of any lien, claim or liability encompassed by this paragraph, and the Trustee in its sole discretion (after first giving the Agency ten (10) days' written notice to comply therewith and failure of the Agency to so comply within such period) may defend against any and all actions or proceedings in which the validity hereof is or might be questioned, or may pay or compromise any claim or demand asserted in any such actions or proceedings; provided, that in defending against any such actions or proceedings or in paying or compromising any such claims or demands, the Trustee will not in any event be deemed to have waived or released the Agency from liability for or on account of the Agency's failure to observe or perform any of the agreements, conditions, covenants or terms contained in the Trust Agreement required to be observed or performed by it, or from its liability thereunder to defend the validity hereof and to observe and perform all such agreements, conditions, covenants and terms.

So long as any Certificates are Outstanding, neither the Corporation nor the Agency will create or suffer to

be created any pledge of or lien on the money in the Installment Payment Fund or the 2016 Certificate Payment Reserve Fund other than as provided in the Trust Agreement.

Prosecution and Defense of Suits. The Agency will promptly, upon request of the Trustee or any Owner, take such action from time to time as may be necessary or proper to remedy or cure any cloud upon or defect in the title to the Enterprise or any part thereof, whether now existing or hereafter developing, will prosecute all actions, suits or other proceedings as may be appropriate for such purpose and will indemnify and save the Trustee and every Owner harmless from all cost, damage, expense or loss, including attorneys’ fees, which they or any of them may incur by reason of any such cloud, defect, action, suit or other proceeding.

The Agency will defend against every action, suit or other proceeding at any time brought against the

Trustee, the Corporation or any Owner upon any claim arising out of the receipt, deposit or disbursement of any of the 2016 Installment Payments or involving any rights or obligations of the Trustee or any Owner thereunder; provided, that the Trustee, the Corporation or any Owner at its or his election may appear in and defend any such action, suit or other proceeding. The Agency will indemnify and hold harmless the Trustee, the Corporation and the Owners against any and all liability claimed or asserted by any person arising out of any such receipt, deposit or disbursement, and will indemnify and hold harmless the Trustee and the Owners against any attorneys' fees or other expenses which any of them may incur in connection with any litigation or otherwise in connection with the foregoing to which any of them may become a party in order to enforce their rights thereunder or under the Certificates; provided, that, in the case of the Owners, such litigation will be concluded favorably to such Owners' contentions therein.

Accounting Records and Reports. The Trustee will keep proper accounting records in accordance with corporate trust industry standards in which complete and correct entries is made of all transactions relating to the receipt, deposit and disbursement of the 2016 Installment Payments, and the Trustee will furnish to the Corporation, to the Agency and to any Owner who may so request in writing (at the expense of such Owner) a complete statement

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covering the receipts, deposits and disbursements of the 2016 Installment Payments for the preceding month prepared in accordance with industry standards.

Recordation and Filing. The Agency will instruct the Trustee to file, record, register, renew, refile and rerecord all such documents, including financing statements (or continuation statements in connection therewith), as may be required by law in order to maintain the 2016 Installment Purchase Contract and the Assignment Agreement and the Trust Agreement at all times as a security interest in the 2016 Installment Payments, all in such manner, at such times and in such places as may be required and to the extent permitted by law in order to fully perfect, preserve and protect the security of the Owners and the rights and security interests of the Trustee, and the Trustee will do whatever else may be necessary or be reasonably required in order to perfect and continue the lien of the 2016 Installment Purchase Contract and of the Assignment Agreement and hereof as specified in writing by the Agency.

Tax Covenants. (a) The Agency will not take any action, or fail to take any action, if any such action or failure to take action would adversely affect the exclusion from gross income of the interest installments of the Certificates or the obligation they evidence and represent under Section 103 of the Code. The Agency will not directly or indirectly use or permit the use of any proceeds of the Certificates or the obligation which they evidence and represent or any other funds of the Agency or take or omit to take any action that would cause the Certificates or the obligation which they evidence and represent to be “private activity bonds” within the meaning of Section 141(a) of the Code or obligations which are “federally guaranteed” within the meaning of Section 149(b) of the Code. The Agency will not allow ten per cent (10%) or more of the proceeds of the Certificates or the obligation which they evidence and represent to be used in the trade or business of any nongovernmental units and will not lend five per cent (5%) or more of the proceeds of the Certificates or the obligation which they evidence and represent to any nongovernmental units.

(b) The Agency will not directly or indirectly use or permit the use of any proceeds of the Certificates or the obligation which they evidence and represent or any other funds of the Agency or take or omit to take any action that would cause the Certificates or the obligation which they evidence and represent to be “arbitrage bonds” within the meaning of Section 148 of the Code. To that end, the Agency will comply with all requirements of Section 148 of the Code to the extent applicable to the Certificates or the obligation which they evidence and represent. In the event that at any time the Agency is of the opinion that for purposes of this paragraph it is necessary to restrict or to limit the yield on the investment of any money held by the Trustee thereunder, the Agency will so instruct the Trustee by a Written Request of the Agency, and the Trustee agrees to take such action as may be necessary in accordance with such instructions.

(c) In addition to the accounts created under the Trust Agreement, the Trustee is required to establish and maintain a fund separate from any other account or fund established and maintained thereunder designated the “South Feather Water and Power Agency Miners Ranch Water Treatment Plant Improvement Project 2016 Certificates of Participation Rebate Fund.” There is required to be deposited in the Rebate Fund such amounts as are required to be deposited therein to the Tax Certificate. All money at any time deposited in the Rebate Fund will be held by the Trustee in trust, to the extent required to satisfy the Rebate Requirement (as defined in the Tax Certificate), for payment to the United States of America. Notwithstanding any other provision hereof or of the 2016 Installment Purchase Contract, all amounts required to be deposited into or on deposit in the Rebate Fund will be governed exclusively by this paragraph and by the Tax Certificate (which is incorporated in the Installment Purchase Contract by reference), and the Trustee will be deemed conclusively to have complied with such provisions if it follows the Written Requests of the Agency, and will have no liability or responsibility to enforce compliance by the Agency with the terms of the Tax Certificate.

Assignment to Trustee; Enforcement of Obligations. (a) The Agency, for good and valuable consideration, the receipt of which is acknowledged, does unconditionally grant, transfer and assign to the Trustee, without recourse, all of its rights, title and interest under the 2016 Installment Purchase Contract, except the Reserved Rights.

(b) Subject to the terms of the Trust Agreement, the Trustee also will be entitled to take all steps, actions and proceedings reasonably necessary in its judgment (1) to enforce the terms, covenants and conditions of, and preserve and protect the priority of its interest in and under, the 2016 Installment Purchase Contract and (2) to

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assure compliance with all covenants, agreements and conditions on the part of the Agency contained in the Trust Agreement with respect to the Revenues.

Continuing Disclosure. The Agency will comply with and carry out all of the provisions of the Continuing Disclosure Certificate executed by the Agency and dated the date of the original execution and delivery of the Certificates, as originally executed and as it may be amended from time to time in accordance with the terms thereof, and notwithstanding any other provision hereof, failure of the Agency to comply with such Continuing Disclosure Certificate will not be considered an Event of Default thereunder; provided, that any Owner of Certificates may take such actions as may be necessary and appropriate, including seeking mandate or specific performance by court order, to cause the Agency to comply with its obligations under the Continuing Disclosure Certificate. Further Assurances. Whenever and so often as requested to do so by the Trustee or any Owner, the Corporation and the Agency will promptly execute and deliver or cause to be executed and delivered all such other and further assurances, documents or instruments and promptly do or cause to be done all such other and further things as may be necessary or reasonably required in order to further and more fully vest in the Trustee and the Owners all advantages, benefits, interests, powers, privileges and rights conferred or intended to be conferred upon them under the Trust Agreement. Amendment of or Supplement to the Trust Agreement

Procedure for Amendment or Supplement of the Trust Agreement.

(a) Amendment or Supplement by Consent of Owners. The Trust Agreement and the rights and obligations of the Corporation and the Agency and the Owners and the Trustee thereunder may be amended or supplemented at any time by an amendment or supplement to the Trust Agreement which will become binding when the written consents of the Owners of at least a majority in principal amount of the Outstanding Certificates, exclusive of Certificates disqualified as provided in the Trust Agreement, and the written consent of the Certificate Insurer are filed with the Trustee. No such amendment or supplement will (1) extend the Certificate Payment Date of any Certificate, or reduce the rate of interest evidenced and represented thereby, or extend the time of payment of such interest, or reduce the amount of principal evidenced and represented thereby, without the prior written consent of the Owner of the Certificate so affected, or (2) reduce the percentage of Owners whose consent is required for the execution of any amendment or supplement to the Trust Agreement, or (3) modify any of the rights or obligations of the Trustee or the Corporation without its prior written consent thereto.

(b) Amendment or Supplement Without Consent of Owners. The Trust Agreement and the rights and obligations of the Corporation and the Agency and the Owners and the Trustee thereunder may also be amended or supplemented at any time by an amendment or supplement to the Trust Agreement which will become binding upon execution without the written consents of any Owners, but only to the extent permitted by law and after receipt of an approving Opinion of Counsel and only for any one or more of the following purposes --

(i) to add to the agreements, conditions, covenants and terms required to be observed or performed by the Corporation, the Trustee or the Agency in the Installment Purchase Contract other agreements, conditions, covenants and terms thereafter to be observed or performed by the Corporation, the Trustee or the Agency, or to surrender any right or power reserved in the Installment Purchase Contract to or conferred in the Installment Purchase Contract on the Corporation, the Trustee or the Agency, and which in either case will not adversely affect the interests of the Owners;

(ii) to make such provisions for the purpose of curing any ambiguity or of correcting, curing or supplementing any defective provision contained in the Installment Purchase Contract or in regard to questions arising thereunder which the Agency may deem desirable or necessary and not inconsistent herewith, and which will not adversely affect the interests of the Owners or the Certificate Insurer;

(iii) to modify, amend or supplement the Trust Agreement in such manner as to preserve the exemption of the Certificates from the registration requirements of the Securities Act of 1933 or any similar

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federal statute hereafter in effect or to permit the qualification of the Trust Agreement under the Trust Indenture Act of 1939 or any similar federal statute hereafter in effect;

(iv) to make any modifications or changes necessary or appropriate in the Opinion of Counsel to preserve or protect the exclusion from gross income for federal income tax purposes or the exemption from State of California personal income taxes of the interest evidenced and represented by the Certificates;

(v) if and to the extent specified in an Opinion of Counsel filed with the Agency, the Corporation and the Trustee, to make such additions, deletions or modifications as may be necessary or appropriate to maintain any then-current Rating on the Certificates; or

(vi) to add to the rights of the Trustee.

Copies of all such Supplemental Trust Agreement are required to be promptly forwarded by the Agency to the Certificate Insurer and to the Rating Agencies.

Disqualified Certificates. Certificates owned or held by or for the account of the Agency (but excluding Certificates held in any pension or retirement fund of the Agency) will not be deemed Outstanding for the purpose of any consent or other action or any calculation of Outstanding Certificates provided in the Trust Agreement, and will not be entitled to consent or to take any other action provided in the Trust Agreement, and the Trustee may adopt appropriate regulations to require each Owner, before his consent provided for in the Installment Purchase Contract will be deemed effective, to reveal if the Certificates as to which consent is given are disqualified as provided in this paragraph.

Endorsement or Replacement of Certificates After Amendment or Supplement. After the effective date of any action taken as provided in the paragraphs above, the Trustee may determine that the Certificates may bear a notation by endorsement in form approved by the Trustee as to such action, and in that case upon demand on the Owner of any Outstanding Certificate and presentation of his Certificate for such purpose at the Principal Corporate Trust Office of the Trustee, a suitable notation as to such action is made on each Certificate. If the Trustee will so determine, new Certificates so modified as in the opinion of the Trustee will be necessary to conform to such action will be prepared, and in that case upon demand on the Owner of any Outstanding Certificates such new Certificates will be exchanged at the Principal Corporate Trust Office of the Trustee without cost to each Owner for Certificates then Outstanding upon surrender of such Outstanding Certificates.

Amendment by Mutual Consent. The provisions of the Trust Agreement will not prevent any Owner from accepting any amendment as to the particular Certificates held by him, provided that due notation thereof is made on such Certificates.

Default and Limitations of Liability

Action on Default. If an Event of Default happens, then in each and every such case during the continuance of such Event of Default the Trustee may, and upon the written direction of the Owners of not less than a majority in principal amount of the Outstanding Certificates will, upon notice in writing to the Agency and the Corporation, exercise the remedies provided to the Corporation in the 2016 Installment Purchase Contract; provided, that nothing contained in the Installment Purchase Contract will affect or impair the right of action of any Owner to institute suit directly against the Agency to enforce payment of the obligation evidenced and represented by such Owner’s Certificate; and provided further, that notwithstanding anything to the contrary contained in the Installment Purchase Contract, upon the occurrence of an Event of Default, the Certificate Insurer, acting alone, has to direct all remedies granted to the Owners or the Trustee for the benefit of the Owners thereunder, and the Certificate Insurer will be recognized as the registered owner of each Certificate for the purposes of exercising all rights and privileges available to the Owners, and in such capacity the Certificate Insurer has to institute any suit, action or proceeding at law or in equity under the same terms as an Owner in accordance with the applicable provisions hereof, and any acceleration of principal of the Certificates will be subject to the Certificate Insurer’s prior written consent.

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Other Remedies of the Trustee. The Trustee has --

(a) by mandamus or other action or proceeding or suit at law or in equity to enforce its rights against the Corporation or the Agency or any director, officer or employee of either thereof, and to compel the Corporation or the Agency or any such director, officer or employee to perform or carry out its or his duties under law and the agreements and covenants required to be performed by it or him contained in the Installment Purchase Contract;

(b) by suit in equity to enjoin any acts or things which are unlawful or violate the rights of the Trustee; or

(c) by suit in equity upon the happening of any default thereunder to require the Agency and its directors, officers and employees to account as the trustee of an express trust.

Non-Waiver. A waiver of any Event of Default by the Trustee thereunder will not affect any subsequent Event of Default or impair any rights or remedies on any such subsequent Event of Default, and no delay or omission by the Trustee to exercise any right or remedy accruing upon any Event of Default thereunder will impair any such right or remedy or will be construed to be a waiver of any such Event of Default or an acquiescence therein, and every right or remedy conferred upon the Trustee by law or by the Trust Agreement may be enforced and exercised from time to time and as often as will be deemed expedient by the Trustee.

If any action, proceeding or suit to enforce any right or to exercise any remedy is abandoned or determined adversely to the Trustee, the Trustee and the Corporation and the Agency will be restored to their former positions, rights and remedies as if such action, proceeding or suit had not been brought or taken.

Application of Funds. All money received by the Trustee pursuant to any right given or action taken under the provisions of the Trust Agreement or of Article VI of the 2016 Installment Purchase Contract are required to be deposited in a segregated account and are required to be applied by the Trustee in the following order and upon presentation of the several Certificates, and the stamping thereon of the payment if only partially paid, or upon the surrender thereof if fully paid --

First, Costs and Expenses: to the payment of the fees, costs and expenses of the Trustee and, after payment in full to the Trustee, of the Owners in declaring such Event of Default, including reasonable compensation to its or their agents, accountants and counsel;

Second, Interest: to the payment to the persons entitled thereto of all payments of interest evidenced and represented by the Certificates then due, and, if the amount available will not be sufficient to pay in full any payment or payments of interest becoming due on the same date, then to the payment thereof ratably, according to the amounts due thereon, to the persons entitled thereto, without any discrimination or preference; and

Third, Principal: to the payment to the persons entitled thereto of the unpaid principal evidenced and represented by any Certificates which have become due, with interest on the overdue principal evidenced and represented by such Certificates to be paid at a rate equal to the rate or rates of interest then applicable to the Certificates if paid in accordance with their terms, and, if the amount available will not be sufficient to pay in full all the amounts due with respect to the Certificates on any date, together with such interest, then to the payment thereof ratably, according to the amounts of principal due on such date to the persons entitled thereto, without any discrimination or preference.

Remedies Not Exclusive. No remedy conferred in the Trust Agreement upon or reserved to the Trustee is intended to be exclusive of any other remedy, and each such remedy will be cumulative and will be in addition to every other remedy given thereunder or now or hereafter existing in law or in equity or otherwise and may be exercised without exhausting and without regard to any other remedy conferred by any law.

No Liability by the Corporation to the Owners. Except as expressly provided in the Installment Purchase Contract, the Corporation will not have any obligation or liability to the Owners with respect to the payment when

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due of the 2016 Installment Payments by the Agency, or with respect to the performance by the Agency of the other agreements and covenants required to be performed by it contained in the 2016 Installment Purchase Contract or in the Installment Purchase Contract, or with respect to the performance by the Trustee of any right or obligation required to be performed by it contained in the Installment Purchase Contract.

No Liability by the Agency to the Owners. Except for the payment when due of the 2016 Installment Payments and the performance of the other agreements and covenants required to be performed by it contained in the 2016 Installment Purchase Contract or in the Installment Purchase Contract, the Agency will not have any obligation or liability to the Owners with respect to the Trust Agreement or the preparation, execution, delivery or transfer of the Certificates or the disbursement of the 2016 Installment Payments by the Trustee to the Owners, or with respect to the performance by the Trustee of any right or obligation required to be performed by it contained in the Installment Purchase Contract.

No Liability by the Trustee to the Owners. Except as expressly provided in the Installment Purchase Contract, the Trustee will not have any obligation or liability to the Owners with respect to the payment when due of the 2016 Installment Payments by the Agency, or with respect to the performance or performances by the Agency of the other agreements, conditions, covenants and terms required to be observed or performed by it contained in the 2016 Installment Purchase Contract or in the Installment Purchase Contract, and the recitals of facts, covenants and agreements contained in the Installment Purchase Contract and in the Certificates will be taken as statements, covenants and agreements of the Agency, and the Trustee neither assumes any responsibility for the accuracy of the same, nor makes any representations as to the validity or sufficiency hereof or of the Certificates, nor will the Trustee incur any responsibility in respect thereof, other than in connection with the duties or obligations in the Installment Purchase Contract or in the Certificates assigned to or imposed upon the Trustee.

Actions by Trustee as Attorney-in-Fact. Any suit, action or proceeding which any Owner has to bring to enforce any right or remedy thereunder may be brought by the Trustee for the equal benefit and protection of all Owners similarly situated, and the Trustee is appointed under the Trust Agreement (and the successive respective Owners, by taking and holding the same, will be conclusively deemed so to have appointed the Trustee) the true and lawful attorney-in-fact of the respective Owners for the purpose of bringing any such suit, action, or proceeding and to do and perform any and all acts and things for and on behalf of the respective Owners as a class or classes, as may be necessary or advisable in the opinion of the Trustee as such attorney-in-fact.

Power of Trustee to Control Proceedings. In the event that the Trustee, upon the occurrence of an Event of Default, will have taken any action, by judicial proceedings or otherwise, pursuant to its duties thereunder, whether upon its own discretion or upon the request of the Owners of at least a majority in principal amount of the Outstanding Certificates, it have full power, in the exercise of its discretion for the best interests of the Owners, with respect to the continuance, discontinuance, withdrawal, compromise, settlement or other disposal of such action; provided, that the Trustee will not, unless there no longer continues such an Event of Default, discontinue, withdraw, compromise, settle or otherwise dispose of any litigation pending at law or in equity if at the time there has been filed with the Trustee a written request signed by the Owners of at least a majority in principal amount of the Outstanding Certificates, together with indemnification satisfactory to the Trustee opposing such discontinuance, withdrawal, compromise, settlement or other disposal of such litigation.

Defeasance

Discharge of Certificates. (a) If the Trustee is required to pay or cause to be paid or there will otherwise be paid to the Owners of all Outstanding Certificates the interest and principal evidenced and represented thereby at the times and in the manner stipulated in the Installment Purchase Contract and therein, then such Owners will cease to be entitled to the pledge of and lien on the 2016 Installment Payments as provided in the Installment Purchase Contract, and all agreements and covenants of the Corporation, the Agency and the Trustee to such Owners hereunder (other than the obligations set forth in the Trist Agreement) will thereupon cease, terminate and become void and will be discharged and satisfied.

(b) Any Outstanding Certificates will on or prior to their Certificate Payment Date be deemed to have been paid within the meaning of and with the effect expressed in paragraph (a) of this paragraph if there will be on

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deposit with the Trustee money which is sufficient to pay the interest and principal evidenced and represented by such Certificates payable on or prior to such Certificate Payment Date.

(c) Any Outstanding Certificates will prior to their Certificate Payment Dates be deemed to have been paid within the meaning of and with the effect expressed in paragraph (a) of this paragraph (except that the Agency will remain liable for the payment of such Certificates, but only out of the money or securities deposited with the Trustee) if (1) there have been deposited with the Trustee either money in an amount which will be sufficient, or Federal Securities which are not subject to redemption except by the holder thereof prior to maturity (including any such securities issued or held in book-entry form), or tax-exempt obligations of a state or a political subdivision thereof which have been defeased under irrevocable escrow instructions with Federal Securities and which are rated in the highest rating category by Moody’s and by S&P, the interest on and principal of which when paid will provide money which, together with money, if any, deposited with the Trustee at the same time, will be sufficient (as evidenced by a report of an Independent Certified Public Accountant regarding such sufficiency) to pay when due the interest evidenced and represented by such Certificates on and prior to their Certificate Payment Dates or prepayment dates and the principal evidenced and represented by such Certificates on their Certificate Payment Dates or prepayment dates, (2) the Agency have given the Trustee in form satisfactory to it irrevocable instructions to give notice by mail in accordance with the Trust Agreement to the Owners of such Certificates that the deposit required by clause (1) above has been made with the Trustee and that such Certificates are deemed to have been paid in accordance with this paragraph and stating the dates upon which money is to be available for the payment of the interest and principal evidenced and represented by such Certificates, and (3) an Opinion of Counsel is filed with the Trustee to the effect that the action taken pursuant to this paragraph will not affect the exclusion from gross income for federal income tax purposes or the exemption from State of California personal income taxes of the interest evidenced and represented by the Certificates.

(d) After the payment of all the interest and principal evidenced and represented by all Outstanding Certificates as provided in this paragraph, the Trustee will execute and deliver to the Corporation and the Agency all such instruments as may be necessary or desirable to evidence the discharge and satisfaction hereof, and the Trustee is required to pay over or deliver to the Agency all money or securities held by it pursuant to the Trust Agreement which are not required for the payment of the interest and principal evidenced and represented by such Certificates. (e) Notwithstanding anything in the Trust Agreement to the contrary, in the event that any interest or principal evidenced and represented by any Certificate are required to be paid by the Certificate Insurer pursuant to the Certificate Insurance Policy, such Certificate will remain Outstanding for all purposes, will not be defeased or otherwise satisfied and will not be considered paid by the Agency, and the assignment and pledge hereof and all agreements, covenants and other obligations of the Agency to the Owner of such Certificate will continue to exist and will run to the benefit of the Certificate Insurer, and the Certificate Insurer will be subrogated to the rights of such Owner. Unclaimed Money. Subject to applicable unclaimed property laws, anything contained in the Installment Purchase Contract to the contrary notwithstanding, any money held by the Trustee in trust for the payment and discharge of the interest or principal evidenced and represented by any of the Certificates which remain unclaimed for two (2) years after the date when the payments represented by such Certificates have become payable, if such moneys were held by the Trustee at such date, or for two (2) years after the date of deposit of such money if deposited with the Trustee after the date when the interest and principal evidenced and represented by such Certificates have become payable, will at the Written Request of the Agency be repaid by the Trustee to the Agency as its absolute property free from trust, and the Trustee will thereupon be released and discharged with respect thereto and the Owners will look only to the Agency for the payment of the interest and principal evidenced and represented by such Certificates; provided, that before being required to make any such payment to the Agency, the Trustee is required to, at the expense of the Agency, cause to be mailed to all such Owners in accordance with the Trust Agreement and to DTC a notice that such money remains unclaimed and that after a date named in such notice, which date will not be less than thirty (30) days after the date of the first mailing of such notice, such money will be returned to the Agency.

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Certain Provisions Relating to the Certificate Insurance Policy, the Reserve Policy and the Certificate Insurer

Certificate Insurance Policy Requirements. So long as the Certificate Insurance Policy is in effect, the following provisions will govern with respect to the Insured Certificates, notwithstanding anything to the contrary set forth in the Trust Agreement or the 2016 Installment Purchase Contract:

(a) Consent to In Lieu Deposit. The prior written consent of the Certificate Insurer will be a condition precedent to the deposit of any credit instrument provided in lieu of a cash deposit into the 2016 Certificate Payment Reserve Fund. Notwithstanding anything to the contrary set forth in the Trust Agreement, amounts on deposit in the 2016 Certificate Payment Reserve Fund will be applied solely to the payment of debt service due on the Certificates.

(b) Certificate Insurer as Sole Owner of Insured Certificates. The Certificate Insurer will be deemed to be the sole Owner of the Insured Certificates for the purpose of exercising any voting right or privilege or giving any consent or direction or taking any other action that the Owners of the Insured Certificates are entitled to take pursuant to the Trust Agreement pertaining to (i) defaults and remedies and (ii) the duties and obligations of the Trustee. In furtherance thereof and as a term of the Trust Agreement and each Insured Certificate, the Trustee and each Owner appoint the Certificate Insurer as their agent and attorney-in-fact with respect to the Insured Certificates and agree that the Certificate Insurer may at any time during the continuation of any proceeding by or against the Agency or the Corporation under the United States Bankruptcy Code or any other applicable bankruptcy, insolvency, receivership, rehabilitation or similar law (an “Insolvency Proceeding”) direct all matters relating to such Insolvency Proceeding, including without limitation, (A) all matters relating to any claim or enforcement proceeding in connection with an Insolvency Proceeding (a “Claim”), (B) the direction of any appeal of any order relating to any Claim, (C) the posting of any surety, supersedes or performance bond pending any such appeal, and (D) the right to vote to accept or reject any plan of adjustment. In addition, the Trustee and each Owner of an Insured Certificate delegate and assign to the Certificate Insurer, to the fullest extent permitted by law, the rights of the Trustee and each Owner of an Insured Certificate with respect to the Insured Certificates in the conduct of any Insolvency Proceeding, including, without limitation, all rights of any party to an adversary proceeding or action with respect to any court order issued in connection with any such Insolvency Proceeding. Remedies granted to the Owners of Insured Certificates will expressly include mandamus.

(c) Security for the Insured Certificates. The security for the Insured Certificates is required to include a pledge of the 2016 Installment Payments under the 2016 Installment Purchase Contract and default under such agreement will constitute an Event of Default under the Trust Agreement.

(d) Acceleration of the Insured Certificates. The maturity of the 2016 Installment Payments evidenced and represented by the Insured Certificates will not be accelerated without the consent of the Certificate Insurer and in the event the maturity of the Insured Certificates is accelerated, the Certificate Insurer may elect, in its sole discretion, to pay accelerated principal and interest accrued, on such principal to the date of acceleration (to the extend unpaid by the Agency or the Corporation) and the Trustee will be required to accept such amounts. Upon payment of such accelerated principal and interest accrued to the acceleration date as provided above, the Certificate Insurer’s obligations under the Insurance Policy with respect to such Insured Certificates will be fully discharged.

(e) Covenant Default Period. No grace period for a covenant default will exceed 30 days or be extended for more than 60 days, without the prior written consent of the Certificate Insurer. No grace period will be permitted for payment defaults.

(f) Insurer as Third Party Beneficiary. The Certificate Insurer is explicitly recognized as being a third party beneficiary to the Trust Agreement and the Installment Purchase Contract and may enforce any such right, remedy or claim conferred, given or granted hereunder or thereunder.

(g) Selection of Insured Certificates for Prepayment. Upon the occurrence of an extraordinary optional, special or extraordinary mandatory Prepayment in part, the selection of Insured Certificates to be prepaid will be subject to the approval of the Certificate Insurer. The exercise of any provision of the Trust Agreement which permits the purchase of Insured Certificates in lieu of Prepayment will require the prior written approval of the Certificate Insurer if any Insured Certificate so purchased is not cancelled upon purchase.

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(h) Insurer Consent to Amendments. Any amendment, supplement, modification to, or waiver of, the Trust Agreement, Installment Purchase Contract or any other transaction document, including any underlying security agreement (each a “Related Document”), that requires the consent of the Owners of the Insured Certificates or adversely affects the rights and interests of the Certificate Insurer will be subject to the prior written consent of the Certificate Insurer.

(i) Amounts on Deposit in the Acquisition and Construction Fund. Unless the Certificate Insurer otherwise directs, upon the occurrence and continuance of an Event of Default or an event which with notice or lapse of time would constitute an Event of Default, amounts on deposit in the Acquisition and Construction Fund will not be disbursed but will instead be applied to the payment of debt service or prepayment price of the Insured Certificates.

(j) Right of the Certificate Insurer. The rights granted to the Certificate Insurer under the Trust Agreement or any other Related Document to request, consent to or direct any action are rights granted to the Certificate Insurer in consideration of its issuance of the Certificate Insurance Policy. Any exercise by the Certificate Insurer of such rights is merely an exercise of the Certificate Insurer’s contractual rights and will not be construed or deemed to be taken for the benefit, or on behalf, of the Owners and such action does not evidence any position of the Certificate Insurer, affirmative or negative, as to whether the consent of the Owners or any other person is required in addition to the consent of the Certificate Insurer.

(k) Defeasance. So long as the Certificate Insurance Policy is in effect, only (1) cash, (2) non-callable direct obligations of the United States of America (“Treasuries”), (3) evidences of ownership of proportionate interests in future interest and principal payments on Treasuries held by a bank or trust company as custodian, under which the owner of the investment is the real party in interest and has the right to proceed directly and individually against the obligor and the underlying Treasuries are not available to any person claiming through the custodian or to whom the custodian may be obligated, (4) subject to the prior written consent of the Certificate Insurer, pre-refunded municipal obligations rated “AAA” or “Aaa” by S&P and Moody’s respectively, or (5) subject to the prior written consent of the Certificate Insurer, securities eligible for “AAA” defeasance under then-existing criteria of S&P or any combination thereof, will be used to effect defeasance of the Insured Certificates unless the Certificate Insurer otherwise approves.

To accomplish defeasance of the Insured Certificates, the Agency or the Corporation will cause to be delivered to the Certificate Insurer (i) a report of an independent firm of nationally recognized certified public accountants or such other accountant as will be acceptable to the Certificate Insurer (“Accountant”) verifying the sufficiency of the escrow established to pay the Insured Certificates in full on the maturity or Prepayment date (“Verification”), (ii) an escrow deposit agreement (which will be acceptable in form and substance to the Certificate Insurer), (iii) an opinion of nationally recognized bond counsel to the effect that the Insured Certificates are no longer “Outstanding” under the Trust Agreement and (iv) a certificate of discharge of the Trustee with respect to the Insured Certificates; each Verification and defeasance opinion will be acceptable in form and substance, and addressed, to the Agency, Corporation, Trustee and Certificate Insurer. The Insurer will be provided with final drafts of the above referenced documentation not less than five business days prior to the funding of the escrow.

Insured Certificates will be deemed “Outstanding” under the Trust Agreement unless and until they are in fact paid and retired or the above criteria are met.

(l) Amounts Paid by Insurer. Amounts paid by the Certificate Insurer under the Insurance Policy will not be deemed paid for purposes of the Trust Agreement and the Insured Certificates relating to such payments will remain Outstanding and continue to be due and owing until paid by the Agency or the Corporation in accordance with the Trust Agreement. This Trust Agreement will not be discharged unless all amounts due or to become due to the Certificate Insurer have been paid in full or duly provided for.

(m) Action to Preserve Pledge. Each of the Agency, Corporation and Trustee covenant and agree to take such action (including, as applicable, filing of UCC financing statements and continuations thereof) as is necessary from time to time to preserve the priority of the pledge of the 2016 Installment Payments under the Trust Agreement pursuant to applicable law.

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(n) Claims Upon the Insurance Policy and Payments by and to the Certificate Insurer. If, on the third Business Day prior to the related scheduled interest payment date or principal payment date (“Payment Date”) there is not on deposit with the Trustee, after making all transfers and deposits required under the Trust Agreement, moneys sufficient to pay the principal and interest evidenced by the Insured Certificates due on such Payment Date, the Trustee will give notice to the Certificate Insurer and to its designated agent (if any) (the “Insurer’s Fiscal Agent”) by telephone or telecopy of the amount of such deficiency by 12:00 noon, New York City time, on such Business Day. If, on the second Business Day prior to the related Payment Date, there continues to be a deficiency in the amount available to pay the principal and interest evidenced by the Insured Certificates due on such Payment Date, the Trustee will make a claim under the Insurance Policy and give notice to the Certificate Insurer and the Certificate Insurer’s Fiscal Agent (if any) by telephone of the amount of such deficiency, and the allocation of such deficiency between the amount required to pay interest on the Insured Certificates and the amount required to pay principal evidenced by the Insured Certificates, confirmed in writing to the Certificate Insurer and the Certificate Insurer’s Fiscal Agent by 12:00 noon, New York City time, on such second Business Day by filling in the form of Notice of Claim and Insured Certificate delivered with the Insurance Policy.

The Trustee will designate any portion of payment of principal evidenced by Insured Certificates paid by the Certificate Insurer, whether by virtue of mandatory sinking fund prepayment, maturity or other advancement of maturity, on its books as a reduction in the principal amount of Insured Certificates registered to the then current Owner, whether DTC or its nominee or otherwise, and is required to issue a replacement Insured Certificate to the Certificate Insurer, registered in the name of Assured Guaranty Municipal Corp., in a principal amount equal to the amount of principal so paid (without regard to authorized denominations); provided that the Trustee’s failure to so designate any payment or issue any replacement Insured Certificate will have no effect on the amount of principal or interest payable by the Corporation on any Insured Certificate or the subrogation rights of the Certificate Insurer.

The Trustee will keep a complete and accurate record of all funds deposited by the Certificate Insurer into the Policy Payments Account (defined below) and the allocation of such funds to payment of interest on and principal of any Insured Certificate. The Insurer will have the right to inspect such records at reasonable times upon reasonable notice to the Trustee.

Upon payment of a claim under the Certificate Insurance Policy, the Trustee will establish a separate special purpose trust account for the benefit of Owners referred to in the Trust Agreement as the “Policy Payments Account” and over which the Trustee will have exclusive control and sole right of withdrawal. The Trustee will receive any amount paid under the Certificate Insurance Policy in trust on behalf of Owners of Insured Certificates and is required to deposit any such amount in the Policy Payments Account and distribute such amount only for purposes of making the payments for which a claim was made. Such amounts will be disbursed by the Trustee to Owners of Insured Certificates in the same manner as principal and interest payments are to be made with respect to the Insured Certificates under the sections hereof regarding payment of Insured Certificates. It will not be necessary for such payments to be made by checks or wire transfers separate from the check or wire transfer used to pay debt service with other funds available to make such payments. Notwithstanding anything in the Trust Agreement to the contrary, the Corporation agrees to pay to the Certificate Insurer solely from Revenues or amounts received from the Agency as 2016 Installment Payments (i) a sum equal to the total of all amounts paid by the Certificate Insurer under the Certificate Insurance Policy (the “Insurer Advances”); and (ii) an amount equal to the interest on such Insurer Advances from the date paid by the Certificate Insurer until payment thereof in full, payable to the Certificate Insurer at the Late Payment Rate per annum (collectively, the “Insurer Reimbursement Amounts”). The Agency and the Corporation hereby covenant and agree that the Certificate Insurer Reimbursement Amounts are secured by a lien on and pledge of the Net Revenues of the Enterprise and payable from such Net Revenues on a parity with debt service due on the Certificates.

Funds held in the Policy Payments Account will not be invested by the Trustee and may not be applied to satisfy any costs, expenses or liabilities of the Trustee. Any funds remaining in the Policy Payments Account following a Certificate Payment Date will promptly be remitted to the Certificate Insurer.

(o) Subrogation of Rights. The Certificate Insurer will, to the extent it makes any payment of principal or interest evidenced by the Insured Certificates, become subrogated to the rights of the recipients of such payments in accordance with the terms of the Insurance Policy (which subrogation rights will also include the rights of any such recipients in connection with any Insolvency Proceeding). Each obligation of the Agency or the

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Corporation to the Certificate Insurer under the Related Documents will survive discharge or termination of such Related Documents.

(p) Reimbursement of Certificate Insurer. The Agency is required to pay or reimburse the Certificate Insurer any and all charges, fees, costs and expenses that the Certificate Insurer may reasonably pay or incur in connection with (i) the administration, enforcement, defense or preservation of any rights or security in any Related Document; (ii) the pursuit of any remedies under the Trust Agreement or any other Related Document or otherwise afforded by law or equity, (iii) any amendment, waiver or other action with respect to, or related to, the Trust Agreement or any other Related Document whether or not executed or completed, or (iv) any litigation or other dispute in connection with the Trust Agreement or any other Related Document or the transactions contemplated thereby, other than costs resulting from the failure of the Certificate Insurer to honor its obligations under the Certificate Insurance Policy. The Certificate Insurer reserves the right to charge a reasonable fee as a condition to executing any amendment, waiver or consent proposed in respect of the Trust Agreement or any other Related Document.

(q) Application of Funds Upon Default. After payment of reasonable expenses of the Trustee, the application of funds realized upon default will be applied to the payment of expenses of the Corporation and the Agency or rebate only after the payment of past due and current debt service on the Insured Certificates and amounts required to restore the 2016 Certificate Payment Reserve Fund to the Reserve Requirement.

(r) Payment on Insured Certificates. The Certificate Insurer will be entitled to pay principal or interest evidenced by the Insured Certificates that will become Due for Payment but will be unpaid by reason of Nonpayment by the Issuer (as such terms are defined in the Certificate Insurance Policy), whether or not the Certificate Insurer has received a Notice of Nonpayment (as such terms are defined in the Certificate Insurance Policy) or a claim upon the Certificate Insurance Policy.

(s) Additional Parity Obligations. Notwithstanding satisfaction of the other conditions to the issuance of additional Parity Obligations set forth in the Trust Agreement, no such issuance may occur (1) if an Event of Default (or any event which, once all notice or grace periods have passed, would constitute an Event of Default) exists unless such default will be cured upon such issuance and (2) unless the 2016 Certificate Payment Reserve Fund is fully funded at the Reserve Requirement upon the issuance of such additional Parity Obligations, in either case unless otherwise permitted by the Certificate Insurer.

(t) Amendments. In determining whether any amendment, consent, waiver or other action to be taken, or any failure to take action, under the Trust Agreement would adversely affect the security for the Insured Certificates or the rights of the Owners, the Trustee will consider the effect of any such amendment, consent, waiver, action or inaction as if there were no Certificate Insurance Policy.

(u) No Contract. No contract will be entered into or any action taken by which the rights of the Certificate Insurer or security for or sources of payment of the Insured Certificates may be impaired or prejudiced in any material respect except upon obtaining the prior written consent of the Certificate Insurer.

Reserve Policy Requirements. So long as the Reserve Policy is in effect, the following provisions will govern, notwithstanding anything to the contrary set forth in the Trust Agreement or the 2016 Installment Purchase Contract:

(a) The Agency will repay any draws under the Reserve Policy and pay all related reasonable expenses incurred by the Certificate Insurer and is required to pay interest thereon from the date of payment by the Certificate Insurer at the Late Payment Rate. If the interest provisions of this subparagraph (a) will result in an effective rate of interest which, for any period, exceeds the limit of the usury or any other laws applicable to the indebtedness created under the Trust Agreement, then all sums in excess of those lawfully collectible as interest for the period in questions will, without further agreement or notice between or by any party thereto, be applied as additional interest for any later periods of time when amounts are outstanding hereunder to the extent that interest otherwise due hereunder for such periods plus such additional interest would not exceed the limit of the usury or other such laws, and any excess will be applied upon principal immediately upon receipt of such moneys by the Certificate Insurer, with the same force and effect as if the Agency or Corporation had specifically designated such

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extra sums to be so applied and the Certificate Insurer had agreed to accept such extra payment(s) as additional interest for such later period. In no event will any agreed-to or actual extraction as consideration for the indebtedness created under the Trust Agreement exceed the limits imposed or provided by the law applicable to this transaction for the use or detention of money or for forbearance in seeking its collection.

Repayment of draws and payment of expenses and accrued interest thereon at the Late Payment Rate (collectively, "Policy Costs") will commence in the first month following each draw, and each such monthly payment will be in an amount at least equal to 1/12 of the aggregate of Policy Costs related to such draw.

Amounts in respect of Policy Costs paid to the Certificate Insurer will be credited first to interest due, then to the expenses due and then to principal due. As and to the extent that payments are made to the Certificate Insurer on account of principal due, the coverage under the Reserve Policy will be increased by a like amount, subject to the terms of the Reserve Policy. The obligation to pay Policy Costs will be secured by a valid lien on all revenues and other collateral pledged as security for the Insured Certificates (subject only to the priority of payment provisions set forth under the Trust Agreement).

All cash and investments in the 2016 Certificate Payment Reserve Fund will be transferred to the debt service fund for payment of debt service on Certificates before any drawing may be made on the Reserve Policy or any other credit facility credited to the 2016 Certificate Payment Reserve Fund in lieu of cash ("Credit Facility"). Payment of any Policy Costs will be made prior to replenishment of any such cash amounts. Draws on all Credit Facilities (including the Reserve Policy) on which there is available coverage will be made on a pro-rata basis (calculated by reference to the coverage then available thereunder) after applying all available cash and investments in the 2016 Certificate Payment Reserve Fund. Payment of Policy Costs and reimbursement of amounts with respect to other Credit Facilities will be made on a pro-rata basis prior to replenishment of any cash drawn from the 2016 Certificate Payment Reserve Fund. For the avoidance of doubt, "available coverage" means the coverage then available for disbursement pursuant to the terms of the applicable alternative credit instrument without regard to the legal or financial ability or willingness of the provider of such instrument to honor a claim or draw thereon or the failure of such provider to honor any such claim or draw.

(b) If the Agency will fail to pay any Policy Costs in accordance with the requirements of subparagraph (a) above, the Certificate Insurer will be entitled to exercise any and all legal and equitable remedies available to it, including those provided under the Trust Agreement other than (i) acceleration of the maturity of the Certificates or (ii) remedies which would adversely affect owners of the Certificates.

(c) The Trust Agreement will not be discharged until all Policy Costs owing to the Certificate Insurer will have been paid in full. The Agency and the Corporation’s obligation to pay such amounts will expressly survive payment in full of the Insured Certificates.

(d) The Agency is required to include any Policy Costs then due and owing to the Certificate Insurer in the calculation of the additional bonds test and the rate covenant in the Installment Purchase Contract.

(e) The Trustee is required to ascertain the necessity for a claim upon the Reserve Policy in accordance with the provisions of subparagraph (a) above and to provide notice to the Certificate Insurer in accordance with the terms of the Reserve Policy at least five business days prior to each date upon which interest or principal is due on the Insured Certificates. Where deposits are required to be made by the Corporation with the Trustee to the debt service fund for the Certificates more often than semi-annually, the Trustee will be instructed to give notice to the Certificate Insurer of any failure of the Corporation to make timely payment in full of such deposits within two business days of the date due.

Miscellaneous

Benefits of the Trust Agreement Limited to Parties. Nothing contained in the Trust Agreement, expressed or implied, is intended or will be construed to confer upon, or to give or grant to, any person or entity, other than the Agency, the Corporation, the Trustee, the Certificate Insurer and the Owners, any right, remedy or claim under or by reason hereof or any covenant, condition or stipulation hereof, and all covenants, stipulations, promises and

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agreements in the Installment Purchase Contract contained by and on behalf of the Corporation or the Agency will be for the sole and exclusive benefit of the Corporation, the Agency, the Trustee, the Certificate Insurer and the Owners; and to the extent that the Trust Agreement confers upon or gives or grants to the Certificate Insurer any right, remedy or claim under or by reason hereof, the Certificate Insurer is explicitly recognized as being a third-party beneficiary under the Trust Agreement and may enforce any such right, remedy or claim conferred, given or granted under the Trust Agreement.

Content of Certifications of the Agency. Every Certification of the Agency with respect to compliance with any agreement, condition, covenant or term contained in the Installment Purchase Contract will include (a) a statement that the person or persons making or giving such certification have read such agreement, condition, covenant or term and the definitions in the Installment Purchase Contract relating thereto; (b) a brief statement as to the nature and scope of the examination or investigation upon which the statements contained in such certification are based; (c) a statement that, in the opinion of the signers, they have made or caused to be made such examination or investigation as is necessary to enable them to express an informed opinion as to whether or not such agreement, condition, covenant or term has been complied with; and (d) a statement as to whether, in the opinion of the signers, such agreement, condition, covenant or term has been complied with.

Any Certification of the Agency may be based, insofar as it relates to legal matters, upon an Opinion of Counsel unless the person making or giving such certification knows that the Opinion of Counsel with respect to the matters upon which his certification may be based, as aforesaid, is erroneous, or in the exercise of reasonable case should have known that the same was erroneous. Any Opinion of Counsel may be based, insofar as it relates to factual matters information with respect to which is in the possession of the Agency, upon a representation by an officer or officers of the Agency unless the counsel executing such Opinion of Counsel knows that the representation with respect to the matters upon which his opinion may be based, as aforesaid, is erroneous, or in the exercise of reasonable care should have known that the same was erroneous.

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APPENDIX B

AUDITED FINANCIAL STATEMENTS OF THE AGENCY FOR FISCAL YEAR 2015 AND 2014

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APPENDIX C

PROPOSED FORM OF FINAL OPINION

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___________, 2016

South Feather Water and Power Agency Oroville, California

South Feather Water and Power Agency Miners Ranch Water Treatment Improvement Project, 2016 Certificates of Participation

(Final Opinion)

Ladies and Gentlemen:

We have acted as bond counsel to the South Feather Water and Power Agency (the “Agency”) in connection with the execution and delivery of the South Feather Water and Power Agency Miners Ranch Water Treatment Improvement Project, 2016 Certificates of Participation (the “Certificates”), evidencing principal in the aggregate amount of $27,010,000, executed and delivered pursuant to the Trust Agreement, dated as of October 1, 2016 (the “Trust Agreement”), among the Agency, the South Feather Water and Power Agency Financing Corporation (the “Corporation”) and U.S. Bank National Association, as trustee (the “Trustee”). The Certificates evidence and represent interests in installment payments to be made by the Agency pursuant to the 2016 Installment Purchase Contract, dated as of October 1, 2016 (the “2016 Installment Purchase Contract”), by and between the Agency and the Corporation. Capitalized terms not otherwise defined herein shall have the meanings ascribed thereto in the Trust Agreement or the 2016 Installment Purchase Contract.

In such connection, we have reviewed the Trust Agreement, the 2016 Installment Purchase Contract, the Tax Certificate of the Agency, dated the date hereof (the “Tax Certificate”), opinions of counsel to the Agency, the Corporation, and the Trustee, certificates of the Agency, the Corporation, the Trustee and others, and such other documents, opinions and matters to the extent we deemed necessary to render the opinions set forth herein.

The opinions expressed herein are based on an analysis of existing laws, regulations, rulings and court decisions and cover certain matters not directly addressed by such authorities. Such opinions may be affected by actions taken or omitted or events occurring after the date hereof. We have not undertaken to determine, or to inform any person, whether any such actions are taken or omitted or events do occur or any other matters come to our attention after the date hereof. Accordingly, this letter speaks only as of its date and is not intended to, and may not, be relied upon or otherwise used in connection with any such actions, events or matters. Our engagement

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South Feather Water and Power Agency __________, 2016 Page 2 of 3

with respect to the Certificates has concluded with their execution and delivery, and we disclaim any obligation to update this letter. We have assumed the genuineness of all documents and signatures presented to us (whether as originals or as copies) and the due and legal execution and delivery thereof by, and validity against, any parties other than the Agency or the Corporation. We have assumed, without undertaking to verify, the accuracy of the factual matters represented, warranted or certified in the documents, and of the legal conclusions contained in the opinions, referred to in the second paragraph hereof. Furthermore, we have assumed compliance with all covenants and agreements contained in the Trust Agreement, the 2016 Installment Purchase Contract and the Tax Certificate, including (without limitation) covenants and agreements compliance with which is necessary to assure that future actions, omissions or events will not cause interest evidenced by the Certificates to be included in gross income for federal income tax purposes. We call attention to the fact that the rights and obligations under the Certificates, the Trust Agreement, the 2016 Installment Purchase Contract and the Tax Certificate and their enforceability may be subject to bankruptcy, insolvency, reorganization, arrangement, fraudulent conveyance, moratorium and other laws relating to or affecting creditors' rights, to the application of equitable principles, to the exercise of judicial discretion in appropriate cases and to the limitations on legal remedies against joint powers authorities or county water districts, as applicable, in the State of California. We express no opinion with respect to any indemnification, contribution, penalty, arbitration, judicial reference, choice of law, choice of forum, choice of venue, waiver or severability provisions contained in the foregoing documents, nor do we express any opinion with respect to the state or quality of title to or interest in any of the assets described in or as subject to the lien of the Trust Agreement or the 2016 Installment Purchase Contract or the accuracy or sufficiency of the description contained therein of, or the remedies available to enforce liens on, any such assets. Our services did not include financial or other non-legal advice. Finally, we undertake no responsibility for the accuracy, completeness or fairness of the Official Statement or other offering material relating to the Certificates and express no opinion with respect thereto.

Based on and subject to the foregoing, and in reliance thereon, as of the date hereof, we are of the following opinions:

1. The Trust Agreement has been duly executed and delivered by, and constitutes the valid and binding obligation of, the Agency and the Corporation.

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South Feather Water and Power Agency __________, 2016 Page 3 of 3

2. Assuming due authorization, execution and delivery of the Trust Agreement and the Certificates by the Trustee, the Certificates are entitled to the Benefits of the Trust Agreement.

3. The 2016 Installment Purchase Contract has been duly executed and delivered by the Agency and the Corporation, and constitutes the valid and binding obligation of the Agency and the Corporation. The obligation of the Agency to make the 2016 Installment Payments in accordance with the terms of the 2016 Installment Purchase Contract is a valid and binding special obligation of the Agency, payable solely from Net Revenues. The 2016 Installment Purchase Contract creates a valid pledge, to secure the payment of the 2016 Installment Payments, of the Net Revenues and any other amounts (including proceeds of the sale of the Certificates), subject to the provisions of the 2016 Installment Purchase Contract permitting the application thereof for the purposes and on the terms and conditions set forth therein.

4. The portion of each 2016 Installment Payment designated as and constituting interest paid by the Agency under the Installment Purchase Contract and received by the registered owners of the Certificates is excluded from gross income for federal income tax purposes under Section 103 of the Internal Revenue Code of 1986 and is exempt from State of California personal income taxes. Interest evidenced by the Certificates is not a specific preference item for purposes of the federal individual or corporate alternative minimum taxes, although we observe that it is included in adjusted current earnings when calculating corporate alternative minimum taxable income. We express no opinion regarding other tax consequences related to the ownership or disposition of, or the amount, accrual or receipt of interest evidenced by, the Certificates.

Faithfully yours,

ORRICK, HERRINGTON & SUTCLIFFE LLP

per

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APPENDIX D

FORM OF CONTINUING DISCLOSURE CERTIFICATE

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CONTINUING DISCLOSURE CERTIFICATE

This Continuing Disclosure Certificate (the “Disclosure Certificate”) is executed and delivered by the South Feather Water and Power Agency (the “Agency”) in connection with the issuance of the 2016 Certificates of Participation (Miners Ranch Water Treatment Plant Improvement Project) (the “2016 Certificates”). The Series 2016 Certificates are being issued pursuant to a Trust Agreement, dated as of October 1, 2016 (the “Trust Agreement”), among the Agency, the South Feather Water and Power Agency Financing Corporation, a California non-profit corporation (the “Corporation’’) and U.S. Bank National Association, California, as trustee (the “Trustee”). In connection therewith the Agency covenants and agrees as follows:

SECTION 1. Purpose of the Disclosure Certificate. The Disclosure Certificate is being executed and delivered by the Agency for the benefit of the Holders and Beneficial Owners of the Series 2016 Certificates and in order to assist the Underwriter in complying with Rule 15c2-12(b)(5) of the Securities and Exchange Commission (“SEC”).

SECTION 2. Definitions. In addition to the definitions set forth above and in the Indenture, which apply to any capitalized term used in the Disclosure Certificate unless otherwise defined in this section, the following capitalized terms have the following meanings:

“Annual Report” means any Annual Report provided by the Agency pursuant to, and as described in, Sections 3 and 4 of the Disclosure Certificate.

“Beneficial Owner” means any person who has the power, directly or indirectly, to vote or consent with respect to, or to dispose of ownership of, any Series 2016 Certificates (including persons holding Series 2016 Certificates through nominees, depositories, or other intermediaries).

“EMMA System” means the MSRB’s Electronic Municipal Market Access system, or such other electronic system designated by the MSRB.

“Listed Event” means any of the events listed in Section 5(a) of the Disclosure Certificate.

“MSRB” means the Municipal Securities Rulemaking Board.

“Rule” means Rule 15c2-12(b)(5) adopted by the SEC under the Securities Exchange Act of 1934, as the same may be amended from time to time.

“State” means the State of California.

“Underwriter” means Stifel, Nicolaus & Company, Incorporated, who is required to comply with the Rule in connection with offering of the Series 2016 Certificates.

SECTION 3. Provision of Annual Reports.

(a) The Agency shall, not later than the end of the ninth month following the end of the Agency’s Fiscal Year (presently December), commencing with the report for the 2016 Fiscal Year, provide to the MSRB through the EMMA System (in an electronic format and accompanied by identifying information all as prescribed by the MSRB) an Annual Report that is consistent with the requirements of Section 4 of the Disclosure Certificate. The Annual Report may be submitted as a single document or as separate documents composing a package and may cross-reference other

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information as provided in Section 4 of the Disclosure Certificate, except that the audited financial statements of the Agency may be submitted separately from the balance of the Annual Report and later than the date required above for the filing of the Annual Report if they are not available by that date. If the Agency’s Fiscal Year changes, then the Agency shall give notice of such change in the same manner as for a Listed Event under Section 5(c).

(b) If the Agency is unable to provide to the MSRB an Annual Report by the date required in Section 3(a), the Agency shall provide to the MSRB, not more than 10 business days after the date set forth in section 3(a), a notice in substantially the form attached hereto as Exhibit A.

SECTION 4. Content of Annual Reports. The Agency’s Annual Report shall contain the CUSIP numbers of the Series 2016 Certificates and include by reference the following:

(a) The audited financial statements of the Agency for the prior Fiscal Year, prepared in accordance with generally accepted accounting principles as promulgated to apply to governmental entities from time to time by the Governmental Accounting Standards Board. If, however, the Agency’s audited financial statements are not available by the time the Annual Report is required to be filed pursuant to Section 3(a), then the Annual Report shall contain unaudited financial statements in a format similar to the financial statements contained in the final Official Statement, and the audited financial statements shall be filed in the same manner as the Annual Report when they become available.

(b) An annual report updating information of the type contained in the following tables in the Official Statement for the Series 2016 Certificates, dated October 6, 2016, to reflect actual results of the most recently completed fiscal year (projections need not be updated):

(1) Table 1 – Storage reservoirs with a column for current storage

(2) Table 2 – Treatment Plant capacity

(3) Table 3 – Historical Water Use

(4) Table 4 – Historical Water Connections

(5) Table 5 – Historical Customer Water Deliveries

(6) Table 6 – Largest water customers

(7) Table 11 – Historical Operating Results

(8) The name of the counterparty to any sales arrangements relating to hydroelectric power and the termination date of such arrangements.

Any or all of the items listed above may be included by specific reference to other documents, including the audited financial statements or the official statements of debt issues of the Agency, that have been submitted to the MSRB or the Securities and Exchange Commission, subject to the following: if any document included by reference is a final official statement, then it must be available from the MSRB, and the Agency shall clearly identify each such other document so included by reference.

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SECTION 5. Reporting of Significant Events.

(a) Pursuant to the provisions of this Section 5, the Agency shall give, or cause to be given, notice of the occurrence of any of the following events with respect to the Series 2016 Certificates in a timely manner not more than 10 business days after the event:

(1) Principal and interest payment delinquencies;

(2) Unscheduled draws on debt service reserves reflecting financial difficulties;

(3) Unscheduled draws on credit enhancements reflecting financial difficulties;

(4) Substitution of credit or liquidity providers, or their failure to perform;

(5) Issuance by the Internal Revenue Service (the “IRS”) of proposed or final determination of taxability or of a Notice of Proposed Issue (IRS Form 5701 TEB);

(6) Tender offers;

(7) Defeasances;

(8) Rating changes; or

(9) Bankruptcy, insolvency, receivership or similar event of the Agency.

Note: for the purposes of the event identified in Section 5(a)(9), the event is considered to occur when any of the following occur: the appointment of a receiver, fiscal agent or similar officer for the Agency in a proceeding under the U.S. Bankruptcy Code or in any other proceeding under state or federal law in which a court or governmental authority has assumed jurisdiction over substantially all of the assets or business of the Agency, or if such jurisdiction has been assumed by leaving the existing governmental body and officials or officers in possession but subject to the supervision and orders of a court or governmental authority, or the entry of an order confirming a plan of reorganization, arrangement or liquidation by a court or governmental authority having supervision or jurisdiction over substantially all of the assets or business of the Agency.

(b) Pursuant to the provisions of this Section 5, the Agency shall give, or cause to be given, notice of the occurrence of any of the following events with respect to the Series 2016 Certificates, if material:

(1) Unless described in Section 5(a)(5), adverse tax opinions or other material notices or determinations by the IRS with respect to the tax status of the Series 2016 Certificates or other material events affecting the tax status of the Series 2016 Certificates;

(2) Modifications to rights of holders of the Series 2016 Certificates;

(3) Optional, unscheduled or contingent bond calls;

(4) Release, substitution, or sale of property securing repayment of the Series 2016 Certificates;

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(5) Non-payment related defaults;

(6) The consummation of a merger, consolidation, or acquisition involving an obligated person or the sale of all or substantially all of the assets of the obligated person, other than in the ordinary course of business, the entry into a definitive agreement to undertake such an action or the termination of a definitive agreement relating to any such actions, other than pursuant to its terms; or

(7) Appointment of a successor or additional trustee or the change of name of a trustee.

(c) Whenever the Agency obtains knowledge of the occurrence of a Listed Event described in Section 5(b), the Agency shall as soon as possible determine if such event would be material under applicable federal securities laws. If the Agency determines that knowledge of the occurrence of a Listed Event under Section 5(b) would be material under applicable federal securities laws, the Agency shall file a notice of such occurrence with EMMA in a timely manner not more than 10 business days after the event.

SECTION 6. Termination of Reporting Obligation. The Agency’s obligations under the Disclosure Certificate shall terminate (a) upon the legal defeasance, prior redemption, or payment in full of all of the Series 2016 Certificates; or (b) if, in the opinion of nationally recognized bond counsel, the Agency ceases to be an “obligated person” (within the meaning of the Rule) with respect to the Series 2016 Certificates, or the Series 2016 Certificates otherwise cease to be subject to the requirements of the Rule. If such termination occurs prior to the final maturity of the Series 2016 Certificates, the Agency shall give notice of such termination in the same manner as for a Listed Event under Section 5(c).

SECTION 7. Amendment; Waiver. Notwithstanding any other provision of the Disclosure Certificate, the Agency may amend the Disclosure Certificate, and any provision of the Disclosure Certificate may be waived, if all of the following conditions are satisfied:

(a) If the amendment or waiver relates to the provisions of Sections 3(a), 4, or 5(a), it may only be made in connection with a change in circumstances that arises from a change in legal requirements, change in law, or change in the identity, nature, or status of an obligated person with respect to the Series 2016 Certificates, or the type of business conducted;

(b) The undertaking, as amended or taking into account such waiver, would, in the opinion of nationally recognized bond counsel, have complied with the requirements of the Rule at the time of the original issuance of the Series 2016 Certificates, after taking into account any amendments or interpretations of the Rule, as well as any change in circumstances; and

(c) The amendment or waiver either (1) is approved by the Holders of the Series 2016 Certificates in the same manner as provided in the Indenture for amendments to the Indenture with the consent of Holders or (2) does not, in the opinion of nationally recognized bond counsel, materially impair the interests of the Holders or Beneficial Owners of the Series 2016 Certificates.

In the event of any amendment or waiver of a provision of the Disclosure Certificate, the Agency shall describe such amendment in the next Annual Report and shall include, as applicable, a narrative explanation of the reason for the amendment or waiver and its impact on the type (or in the

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case of a change of accounting principles, on the presentation) of financial information or operating data being presented by the Agency. In addition, if the amendment relates to the accounting principles to be followed in preparing financial statements, then the Agency shall give notice of such change in the same manner as for a Listed Event under Section 5(c), and the Annual Report for the year in which the change is made must present a comparison (in narrative form and also, if feasible, in quantitative form) between the financial statements as prepared on the basis of the new accounting principles and those prepared on the basis of the former accounting principles.

SECTION 8. Additional Information. Nothing in the Disclosure Certificate prevents the Agency (a) from disseminating any other information, using the means of dissemination set forth in the Disclosure Certificate or any other means of communication; or (b) from including any other information in any Annual Report or notice of occurrence of a Listed Event in addition to that required by the Disclosure Certificate. If the Agency chooses to include any information in any Annual Report or notice of occurrence of a Listed Event in addition to that specifically required by the Disclosure Certificate, the Agency shall have no obligation under the Disclosure Certificate to update such information or include it in any future Annual Report or notice of occurrence of a Listed Event.

SECTION 9. Default. In the event of a failure of the Agency to comply with any provision of the Disclosure Certificate, the Underwriter or any Holder or Beneficial Owner of the Series 2016 Certificates may take such actions as may be necessary and appropriate, including seeking mandate or specific performance by court order, to cause the Agency to comply with its obligations under the Disclosure Certificate. A default under the Disclosure Certificate shall not be deemed an Event of Default under the Indenture, and the sole remedy under the Disclosure Certificate in the event of any failure of the Agency to comply with the Disclosure Certificate shall be an action to compel performance hereunder.

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SECTION 10. Beneficiaries. The Disclosure Certificate shall inure solely to the benefit of the Agency, the Underwriter, and the Holders and Beneficial Owners from time to time of the Series 2016 Certificates, and it creates no rights in any other person or entity.

SOUTH FEATHER WATER AND POWER AGENCY

By: General Manager

Dated: October 20, 2016

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EXHIBIT A

NOTICE OF FAILURE TO FILE ANNUAL REPORT

Name of Issuer: SOUTH FEATHER WATER AND POWER AGENCY

Name of Issue: $27,010,000 2016 Certificates of Participation (Miners Ranch Water Treatment Plant Improvement Project) (the “Series 2016 Certificates”)

Date of Issuance: October 20, 2016

NOTICE IS HEREBY GIVEN that the Agency has not provided an Annual Report with respect to the above-named Bonds as required by the Trust Agreement, dated as of October 1, 2016 (the “Trust Agreement”), among the Agency, the South Feather Water and Power Agency Financing Corporation, a California non-profit corporation (the “Corporation’’) and U.S. Bank National Association, California, as trustee (the “Trustee”). The Agency anticipates that the Annual Report will be filed by _____________

Dated: ___________ __, _____

SOUTH FEATHER WATER AND POWER AGENCY

By: [Title]

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APPENDIX E

BOOK-ENTRY PROVISIONS

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APPENDIX E

BOOK-ENTRY ONLY SYSTEM

The information in this Appendix E concerning The Depository Trust Company, New York, New York (“DTC”), and DTC’s book-entry system has been obtained from DTC and the Agency take no responsibility for the completeness or accuracy thereof. The Agency does not give any assurances that DTC, Direct Participants (as defined below) or Indirect Participants (as defined below) will distribute to the Beneficial Owners (a) payments of interest, principal or premium, if any, with respect to the Series 2016 Certificates, (b) certificates representing ownership interest in or other confirmation of ownership interest in the Series 2016 Certificates, or (c) redemption or other notices sent to DTC or Cede & Co., its nominee, as the registered owner of the Series 2016 Certificates, or that they will do so on a timely basis, or that DTC, Direct Participants or Indirect Participants will act in the manner described in this Appendix E. The Agency is not responsible or liable for the failure of DTC or any DTC Direct or Indirect Participant to make any payment or give any notice to a Beneficial Owner with respect to the Series 2016 Certificates or an error or delay relating thereto. The current “Rules” applicable to DTC are on file with the Securities and Exchange Commission and the current “Procedures” of DTC to be followed in dealing with DTC’s Direct and Indirect Participants are on file with DTC.

General

DTC will act as securities depository for the Series 2016 Certificates. The Series 2016 Certificates will be issued as fully-registered securities registered in the name of Cede & Co. (DTC’s partnership nominee) or such other name as may be requested by an authorized representative of DTC. One fully-registered Bond certificate will be issued for each maturity of the Series 2016 Certificates, in the aggregate principal amount of such maturity, and will be deposited with DTC.

DTC, the world’s largest securities depository, is a limited-purpose trust company organized under the New York Banking Law, a “banking organization” within the meaning of the New York Banking Law, a member of the Federal Reserve System, a “clearing corporation” within the meaning of the New York Uniform Commercial Code, and a “clearing agency” registered pursuant to the provisions of Section 17A of the Securities Exchange Act of 1934. DTC holds and provides asset servicing for over 3.5 million issues of U.S. and non-U.S. equity issues, corporate and municipal debt issues, and money market instruments (from over 100 countries) that DTC’s participants (“Direct Participants”) deposit with DTC. DTC also facilitates the post-trade settlement among Direct Participants of sales and other securities transactions in deposited securities, through electronic computerized book-entry transfers and pledges between Direct Participants’ accounts. This eliminates the need for physical movement of securities certificates. Direct Participants include both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations. DTC is a wholly-owned subsidiary of The Depository Trust & Clearing Corporation (“DTCC”). DTCC is the holding company for DTC, National Securities Clearing Corporation and Fixed Income Clearing Corporation, all of which are registered clearing agencies. DTCC is owned by the users of its regulated subsidiaries. Access to the DTC system is also available to others such as both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, and clearing corporations that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly (“Indirect Participants”). DTC has a Standard & Poor’s rating of AA+. The DTC Rules applicable to DTC’s Participants are on file with the Securities and Exchange Commission. More information about DTC can be found at www.dtcc.com. The information on such web site is not incorporated herein by reference.

Purchases of Series 2016 Certificates under the DTC system must be made by or through Direct Participants, which will receive a credit for the Series 2016 Certificates on DTC’s records. The

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ownership interest of each actual purchaser of each Series 2016 Certificate (“Beneficial Owner”) is in turn to be recorded on the Direct and Indirect Participants’ records. Beneficial Owners will not receive written confirmation from DTC of their purchase. Beneficial Owners are, however, expected to receive written confirmations providing details of the transaction, as well as periodic statements of their holdings, from the Direct or Indirect Participant through which the Beneficial Owner entered into the transaction. Transfers of ownership interests in the Series 2016 Certificates are to be accomplished by entries made on the books of Direct and Indirect Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interests in Series 2016 Certificates, except in the event that use of the book-entry system for the Series 2016 Certificates is discontinued.

To facilitate subsequent transfers, all Series 2016 Certificates deposited by Direct Participants with DTC are registered in the name of DTC’s partnership nominee, Cede & Co., or such other name as may be requested by an authorized representative of DTC. The deposit of Series 2016 Certificates with DTC and their registration in the name of Cede & Co. or such other DTC nominee do not effect any change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the Series 2016 Certificates; DTC’s records reflect only the identity of the Direct Participants to whose accounts such Series 2016 Certificates are credited, which may or may not be the Beneficial Owners. The Direct and Indirect Participants will remain responsible for keeping account of their holdings on behalf of their customers.

Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. Beneficial Owners of the Series 2016 Certificates may wish to take certain steps to augment the transmission to them of notices of significant events with respect to the Series 2016 Certificates, such as redemptions, tenders, defaults, and proposed amendments to the Series 2016 Certificate documents. For example, Beneficial Owners of the Series 2016 Certificates may wish to ascertain that the nominee holding the Series 2016 Certificates for their benefit has agreed to obtain and transmit notices to Beneficial Owners. In the alternative, Beneficial Owners may wish to provide their names and addresses to the registrar and request that copies of notices be provided directly to them.

Redemption notices shall be sent to DTC. If less than all of the Series 2016 Certificates within an issue are being redeemed, DTC’s practice is to determine by lot the amount of the interest of each Direct Participant in such issue to be redeemed.

Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect to Series 2016 Certificates unless authorized by a Direct Participant in accordance with DTC’s MMI Procedures. Under its usual procedures, DTC mails an Omnibus Proxy to the Agency as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co.’s consenting or voting rights to those Direct Participants to whose accounts Series 2016 Certificates are credited on the record date (identified in a listing attached to the Omnibus Proxy).

Payments of principal of, premium, if any, and interest on the Series 2016 Certificates will be made to Cede & Co., or such other nominee as may be requested by an authorized representative of DTC. DTC’s practice is to credit Direct Participants’ accounts upon DTC’s receipt of funds and corresponding detail information from the Agency or the Trustee, on payable date in accordance with their respective holdings shown on DTC’s records. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered in “street name,” and will be the responsibility of such Participant and not of DTC nor its nominee, the Trustee or the Agency, subject to any statutory or regulatory

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requirements as may be in effect from time to time. Payment of such principal, premium, if any, and interest to Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC) is the responsibility of the Agency or Trustee, disbursement of such payments to Direct Participants will be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners will be the responsibility of Direct and Indirect Participants.

DTC may discontinue providing its services as depository with respect to the Series 2016 Certificates at any time by giving reasonable notice to the Agency or the Trustee. Under such circumstances, in the event that a successor depository is not obtained, Series 2016 Certificates are required to be printed and delivered as described in the Trust Agreement.

The Agency may decide to discontinue use of the system of book-entry transfers through DTC (or a successor securities depository). In that event, certificates will be printed and delivered.

Discontinuance of DTC Services

In the event that that DTC shall discontinue providing its services as depository with respect to the Series 2016 Certificates or the Agency shall discontinue the use of a book-entry system of transfers through DTC (or a successor securities depository), the provisions of the Trust Agreement would apply.

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APPENDIX F

SPECIMEN MUNICIPAL BOND INSURANCE POLICY

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MUNICIPAL�BONDINSURANCE�POLICY

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