APPROVAL OF A LEASE-LEASEBACK FINANCING TO FUND PHASE 1 OF THE DOWNTOWN SMART STATION IMPROVEMENTS

Transcription

1 STAFF REPORT MEETING DATE: January 10, 2017 TO: FROM: Novato Public Finance Authority Regan M. Candelario, City Manager Brian Cochran, Finance Manager 922 Machin Avenue Novato, CA / FAX 415/ PRESENTER: Brian Cochran, Finance Manager SUBJECT: APPROVAL OF A LEASE-LEASEBACK FINANCING TO FUND PHASE 1 OF THE DOWNTOWN SMART STATION IMPROVEMENTS REQUEST Consider adopting a Novato Public Finance Authority resolution approving the loan from the Hamilton Trust Fund via a lease-leaseback financing mechanism to fund the phase 1 improvements to the Downtown Novato SMART Station. RECOMMENDATION Adopt the resolution. DISCUSSION The City Council authorized approval of a funding agreement with Sonoma Marin Area Rail Transit ( SMART ) on February 9, 2016 that initiated the construction of Phase 1 of the Downtown SMART Station improvements. At the same meeting, the City Council also approved the use of a 20-year loan of up to $2.2 million from the Hamilton Trust Fund, via a leaseleaseback financing arrangement, to fund the phase 1 construction. With the construction of phase 1 nearing completion, the attached resolution would approve the financing documents necessary to consummate the loan. The City s financial advisor provided staff with data that showed a comparable 20-year AA-rated taxable municipal debt instrument averaging an interest rate of 3.60%, so that is what staff has used as the interest rate in this transaction. The basic structure of the loan is that the Novato Public Financing Authority ( NPFA ), as the trustee of the Hamilton Trust Fund, agrees to loan the City $2.2 million from the Hamilton Trust Fund. The City agrees to pay back the loan, with interest, over a 20-year time period. The benefit for the Hamilton Trust, as the investor in the transaction, is that it gets a competitive interest rate on a 20-year investment. The benefit for the City, as the beneficiary of the Hamilton Trust and the borrower, is that it receives 80% of the interest revenue generated by the trust; therefore, this transaction is effectively an ultra-low interest method of financing improvements. The lease-leaseback structure is a commonly used method for California cities to effectuate longterm financing, utilizing a City-owned asset as the security for the loan similar to a mortgage on a cc17_

2 house. The City used a nearly-identical financing structure in 2004 when it used Hamilton Trust Fund monies to finance improvements to the Public Works Department s Corporation Yard facility. In the case of the Downtown SMART Station, staff is again proposing to use the Corporation Yard property as the security for this transaction. The documents are structured as follows: 1. Site and Facility Lease The City agrees to lease the Corporation Yard property to the NPFA; as consideration for such use of the property, the NPFA will pay the City $2.2 million up front. 2. Lease Agreement The NPFA agrees to lease the property back to the City and the City agrees to make the lease payments back to the NPFA, which are simply structured as the debt service payments due on the loan. 3. Assignment Agreement The NPFA assigns the lease payments received from the City back to the Hamilton Trust, as trustee. PUBLIC OUTREACH Significant public outreach was conducted in January and February 2016 leading up to the City Council s decision on the Downtown SMART Station, including multiple City Council meetings, notices mailed to all residents and property owners within 1,000 feet of the station, and an item on OpenNovato that received 259 comments. The City has also maintained a project page on its website at novato.org/downtownstation with news and updates about the project. FISCAL IMPACT Repayment of the loan will come from the City s General Fund. The total annual debt service on the loan is $157,000. However, as mentioned above, 80% of the interest on the loan comes back to the General Fund; therefore, the average annual net cost to the General Fund is approximately $120,000. ALTERNATIVES 1) Approve the financing documents with modified terms and conditions. 2) Do not approve the financing documents and designate an alternate funding source for the project (Emergency Reserves, Measure F, etc). ATTACHMENTS 1. NPFA Resolution 2. Site and Facility Lease 3. Lease Agreement 4. Assignment Agreement 2 2

3 NOVATO PUBLIC FINANCE AUTHORITY BOARD RESOLUTION NO. RESOLUTION OF THE CITY OF NOVATO PUBLIC FINANCE AUTHORITY AUTHORIZING A LEASE FINANCING RELATING TO THE NEW TRAIN STATION TO BE LOCATED IN DOWNTOWN NOVATO IN THE MAXIMUM PRINCIPAL AMOUNT OF $2,200,000, AND APPROVING RELATED DOCUMENTS AND ACTIONS WHEREAS, the City of Novato (the City ) has determined to finance a portion of the new Novato SMART rail station to be located in downtown Novato (the Project ); and WHEREAS, in order to raise the funds for the Project, the City has proposed leasing to the City of Novato Public Finance Authority (the Authority ) the City s Corporation Yard (the Property ), in consideration of the agreement by the Authority to make available to the City moneys in an amount which is sufficient to enable the City to finance improvements to the Project and to pay certain related costs; and WHEREAS the Authority has proposed leasing the Property back to the City, and the City will make lease payments to the Authority, for its use and occupancy of the Property; and WHEREAS, the Authority has proposed assigning its right to receive lease payments to the Authority, as trustee (the "Trustee") of the Hamilton Trust Funds, pursuant to the Acknowledgment and Agreement Re Developer Trust Funds Payments dated as of January 22, 2004 (the "Trust Agreement"); and WHEREAS, the Authority, wishes at this time to authorize and approve all proceedings and documents relating to the financing of improvements to the Property. NOW, THEREFORE, IT IS HEREBY RESOLVED by the Governing Board of the City of Novato Public Finance Authority as follows: Section 1. Approval of Financing Plan and Related Documents. The Governing Board hereby approves the financing described above in the principal amount of not to exceed $2,200,000. The Governing Board hereby approves each of the following financing documents in substantially the respective forms on file with the Secretary of the Authority, together with any changes therein or additions thereto deemed advisable by the Executive Director or the Treasurer of the Authority (each, an Authorized Officer ), whose execution thereof shall be conclusive evidence of such approval: res5028_npfa Site and Facility Lease between the City and the Authority, whereby the City leases to the Authority the Property in consideration of the payment by the Authority to the City of an up-front rental payment. Lease Agreement between the Authority as lessor and the City as lessee, whereby the Authority agrees to lease the Property back to the City in consideration of the payment by the City of semiannual lease payments. 3

4 Assignment of Lease Payments between the Authority and the Trustee, whereby the Authority assigns its rights to receive Lease Payments under the Lease Agreement to the Trustee and the Trustee provides funds to enable the Authority to make the up-front rental payment to the City. An Authorized Officer is authorized and directed for and in the name and on behalf of the Authority to execute, and the Secretary is hereby authorized and directed to attest and affix the seal of the Authority to, the final form of each of the foregoing documents. Section 2. Official Actions. The Executive Director, the Treasurer, the Secretary and all other officers of the Authority are each authorized and directed in the name and on behalf of the Authority to make any and all assignments, certificates, requisitions, agreements, notices, consents, leases and other instruments of conveyance, warrants and other documents, which they or any of them might deem necessary or appropriate in order to consummate any of the transactions contemplated by the agreements and documents approved pursuant to this Resolution. Whenever in this resolution any officer of the Authority is authorized to execute or countersign any document or take any action, such execution, countersigning or action may be taken on behalf of such officer by any person designated by such officer to act on his or her behalf in the case such officer is absent or unavailable. Section 3. Participation of Authority as Trustee. The Authority hereby determines that the execution of the Assignment of Lease Payments enables the Hamilton Trust Funds to meet its investment objectives under the Trust Agreement, and that the lease financing described herein results in savings to the City and a higher rate of return to the Trustee and the Hamilton Trust Funds than would be result if the City were to utilize a lease revenue bond financing structure. The Trustee is entering into the Assignment of Lease Payments in accordance with the relevant provisions of the Trust Agreement and Section 53601(d) of the California Government Code. Section 4. Findings Regarding Investment. The Authority, as Trustee hereby determines that it is entering into the Assignment of Lease Payments as an eligible investment pursuant to Section 53601(d) of the California Government Code and in accordance with (i) the City's investment policy approved by the City Council of the City by Resolution No adopted on January 20, 2004 and (ii) Section 3.03 of the Trust Agreement. Section 5. Effective Date. This Resolution shall take effect from and after the date of its passage and adoption. * * * * * * PASSED AND ADOPTED this 10th day of January, 2017, by the following vote: AYES: NOES: ABSTAIN: ABSENT: Boardmembers, Boardmembers, Boardmembers, Boardmembers, -2-4

5 Secretary Approved as to form: Jones Hall, A Professional Law Corporation Bond Counsel By: Shareholder -3-5

6 JH:SM:mwk Recording Requested By CITY OF NOVATO When Recorded Mail To: Stephen Melikian, Esq. Jones Hall, A Professional Law Corporation 475 Sansome Street, Suite 1700 San Francisco, California THIS TRANSACTION IS EXEMPT FROM CALIFORNIA DOCUMENTARY TRANSFER TAX UNDER SECTION OF THE CALIFORNIA REVENUE AND TAXATION CODE. THIS DOCUMENT IS EXEMPT FROM RECORDING FEES UNDER SECTION OF THE CALIFORNIA GOVERNMENT CODE. SITE AND FACILITY LEASE (Train Station Project) This SITE AND FACILITY LEASE (this Site Lease ), dated for convenience as of January 1, 2017, is between the CITY OF NOVATO, a general law city and municipal corporation duly organized and existing under the Constitution and laws of the State of California, as lessor (the City ), and the CITY OF NOVATO PUBLIC FINANCE AUTHORITY, a joint powers agency duly organized and existing under the laws of the State of California, as lessee (the Authority ). B A C K G R O U N D : 1. The City of Novato (the City ) desires to finance a portion of the costs of a Novato SMART rail station in downtown Novato (the Project ). 2. In order to raise the funds needed to finance the Project, the City is entering into this Site Lease whereby the City is leasing to the City of Novato Public Finance Authority (the Authority ) the real property set forth in Exhibit A hereto (the Property ), in consideration of the agreement by the Authority to make available to the City moneys in an amount which is sufficient to enable the City to finance the Project. 3. The Authority has proposed to lease the Property back to the City under a Lease Agreement (the Lease Agreement ) dated as of January 1, 2017, and the City, under the Lease Agreement, will make lease payments to the Authority for the use and occupancy of the Property. 6

7 A G R E E M E N T : In consideration of the foregoing and the material covenants hereinafter contained, the City and the Authority formally covenant, agree and bind themselves as follows: SECTION 1. Lease of Property. The City leases to the Authority, and the Authority leases from the City, the Property as described more fully in Exhibit A hereto, on the terms and conditions hereinafter set forth. SECTION 2. Term; Possession. The term of this Site Lease commences, and the Authority becomes entitled to possession of the Property, on January, 2017 (the Closing Date ). This Site Lease ends, and the right of the Authority hereunder to possession of the Property thereupon ceases, on the date on which all of the outstanding Lease Payments are paid in full under the Lease Agreement, or provision has been made for such payment in accordance with the Lease Agreement, provided that in no event shall the term of this Site Lease extend beyond April 1, SECTION 3. Rental. The Authority shall pay to the City as and for rental of the Property the amount of $ (the Site Lease Payment ). The Site Lease Payment is due and payable on the Closing Date and is payable by the Authority from amounts received pursuant to the Assignment (as defined in the Lease Agreement). The Site Lease Payment shall be used by the City to fund improvements to the Project and to pay financial, legal and other costs incurred in connection with the execution of this Site Lease and the Lease Agreement. The Authority and the City hereby find and determine that the amount of the Site Lease Payment does not exceed the fair market value of the leasehold interest hereunder in the Property. No other amounts of rental are due and payable by the Authority for the use and occupancy of the Property under this Site Lease. SECTION 4. Assignments and Subleases. Unless the City is in default under the Lease Agreement, the Authority may not assign its rights under this Site Lease or sublet all or any portion of the Property, without the prior written consent of the City. SECTION 5. Right of Entry. The City reserves the right for any of its duly authorized representatives to enter upon the Property, or any portion thereof, at any reasonable time to inspect the same or to make any repairs, improvements or changes necessary for the preservation thereof. SECTION 6. Termination. The Authority agrees, upon the termination of this Site Lease, to quit and surrender the Property in the same good order and condition as the Property was in at the time of commencement of the term hereof, reasonable wear and tear excepted, and agrees that all buildings, improvements and structures then existing upon the Property shall remain thereon and title thereto shall vest thereupon in the City for no additional consideration. SECTION 7. Default. If the Authority defaults in the performance of any obligation on its part to be performed under the terms of this Site Lease, which default continues for 30 days following notice and demand for correction thereof to the Authority, the City may exercise any and all remedies granted by law. No merger of this Site Lease and of the Lease Agreement may occur as a result of the exercise of any such remedies -2-7

8 SECTION 8. Quiet Enjoyment. The Authority shall peaceably and quietly have, hold and enjoy all of the Property at all times during the term of this Site Lease, subject to the provisions of the Lease Agreement and subject only to Permitted Encumbrances. SECTION 9. Waiver of Personal Liability. All liabilities under this Site Lease on the part of the Authority are solely corporate liabilities of the Authority as a public agency, and the City releases each and every member and officer of the Authority from personal or individual liability under this Site Lease. No member or officer of the Authority or its governing board may be individually or personally liable under this Site Lease for anything done or omitted to be done by the Authority hereunder. SECTION 10. Taxes. The City shall pay any and all assessments of any kind or character and also all taxes, if any, including possessory interest taxes, lawfully levied or assessed upon the Property and any improvements thereon. SECTION 11. Eminent Domain. If all or any part of the Property, or any improvements thereon, are taken by eminent domain proceedings, the interest of the Authority will be recognized and is hereby determined to be the aggregate amount of the then unpaid principal components of the Lease Payments; and the balance of the award, if any, shall be paid to the City. The City waives any and all rights that it has or may hereafter have to acquire the interest of the Authority in and to the Property through the eminent domain powers of the City. SECTION 12. Partial Invalidity. If any one or more of the terms, provisions, covenants or conditions of this Site Lease are to any extent declared invalid, unenforceable, void or voidable for any reason whatsoever by a court of competent jurisdiction, the finding or order or decree of which becomes final, none of the remaining terms, provisions, covenants and conditions of this Site Lease will be affected thereby, and each provision of this Site Lease will be valid and enforceable to the fullest extent permitted by law. SECTION 13. Notices. Any notice, request, complaint, demand or other communication under this Site Lease shall be given by first class mail or personal delivery to the party entitled thereto at its address set forth below, or by telecopy, telex or other form of telecommunication, at its number set forth below. Notice shall be effective either (a) upon transmission by telecopy, telex or other form of telecommunication, (b) 48 hours after deposit in the United States mail, postage prepaid, or (c) in the case of personal delivery to any person, upon actual receipt. The City and the Authority may, by written notice to the other party, from time to time modify the address or number to which communications are to be given hereunder. If to the Authority: If to the City: City of Novato Public Finance Authority 922 Machin Avenue Novato, California Attention: Secretary City of Novato 922 Machin Avenue Novato, California Attention: City Clerk SECTION 14. Governing Law. This Site Lease is governed by the Constitution and laws of the State of California. -3-8

9 SECTION 15. Binding Effect. This Site Lease inures to the benefit of and is binding upon the Authority and the City and their respective successors and assigns, subject, however, to the limitations contained herein. SECTION 16. Section Headings. All section headings contained herein are for convenience of reference only and are not intended to define or limit the scope of any provision of this Site Lease. SECTION 17. Execution in Counterparts. This Site Lease may be executed in any number of counterparts, each of which shall be deemed to be an original but all together shall constitute but one and the same lease. It is also agreed that separate counterparts of this Site Lease may be separately executed by the Authority and the City, all with the same force and effect as though the same counterpart had been executed by both the Authority and the City. SECTION 18. Amendments. This Site Lease may be amended in a written agreement executed by both of the parties hereto. SECTION 19. Defined Terms. All capitalized terms used herein and not otherwise defined have the respective meanings given those terms in the Lease Agreement. -4-9

10 IN WITNESS WHEREOF, the City and the Authority have caused this Site Lease to be executed by their respective officers thereunto duly authorized, all as of the day and year first above written. CITY OF NOVATO, as lessor Attest: By City Manager By City Clerk CITY OF NOVATO PUBLIC FINANCE AUTHORITY Attest: By Executive Director By Secretary -5-10

11 EXHIBIT A DESCRIPTION OF THE PROPERTY ALL THAT CERTAIN real property situate in the City of Novato, County of Marin, State of California, described below as follows: PARCEL ONE: BEGINNING at the most Easterly corner of that certain parcel of land conveyed by Joseph A. Nunes & Anthony T. Nunes to Western California Telephone Company by deed recorded June 27, 1966, in Book 2060 at Page 235, Official Records of Marin County; running thence along the Southerly line of said parcel North 88 47' West feet; thence leaving said line North 51 06' West feet; thence along a curve to the, left whose center bears South 38 54' West, with a radius of 500 feet, and an arc length of feet through a central angle of 14 52' 48" to a point on the Southerly line of the easement for roadway and utilities conveyed by Richard W. Goodspeed to Sanitary District No. 6 of Marin County by deed recorded April 3, 1956 in Book 1020 at page 129 Official Records of Marin County. Said point is a point on a curve to the left, whose center bears North 8 14' 28" East with a radius of 370 feet; thence Easterly along said 370 foot radius curve an arc length of feet through a central angle of 21 16' 28"; thence North 76 58' East feet to a point on the Northeasterly line of the parcel of land conveyed by Jack Perlman and Blanche Perlman and William Veprin and Ruth Jeanette Veprin to Western California Telephone Company by deed recorded June 18, 1959 in Book 1288 at page 239, Official Records of Marin County; thence running along said line South 28 36' East feet; thence North 61 24' East feet; thence South 51 06' East feet to the point of beginning. EXCEPTING THEREFROM that portion of the above described property which lies within the parcel of land described as Parcel Two herein. PARCEL TWO: BEGINNING AT THE Northwesterly corner of the 4 acre tract of land described in the deed from Home and Farm Company of California, a corporation, to David Myers, recorded June 21,1893 in Book 26 of Deeds at page 280, Marin County Records; thence Northerly in a direct line, 40 feet, more or less, to the Southwesterly corner of the parcel of land described in the deed from Home and Farm Company of California, a corporation to N.F. Barnum, recorded July 7, 1893 in book 26 of Deeds at page 327, Marin County Records, thence along the Southwesterly line of the last mentioned property south 70 35' East 400 feet and South 35 East 60 feet to the Northeasterly corner of the property described in the deed to Myers, first above referred to; thence along the Northeasterly line of said Myers property North ' West 463 feet to the point of beginning. BEING a portion of Lot 3, in Division "A" as shown upon that certain map entitled, "Map of East Part of Rancho de Novato in Marin County, California", filed for record March 22, 1889 in Rack 2 at Pull 3, Marin County Records. EXCEPTING THEREFROM that portion thereof which lies outside the boundaries of the property described as Parcel One above. A-1 11

12 EXCEPTING FROM Parcels One and Two above described, that portion conveyed by the City of Novato to Sanitary District No. 6 of Marin County, by deed recorded, October 27, 1970 in Book 2412 of Official Records at Page 229, Marin County Records more particularly described as follows: BEGINNING at the intersection of the courses North 76 58' East feet and South 28 36' East feet as said intersection and courses are described in the Deed from Western California Telephone Company to the City of Novato recorded December 22, 1967 in Book 2181 at page 174, Marin County Records; thence along said parcel boundary South 11 56' East (called 28 36' East in said Deed) feet to a point on the Northerly line of that certain easement conveyed by Joseph F. Azevedo to Sanitary District No. 6 of Marin County by Deed recorded May 5, 1948 in Book 583 of Official Records at page 261 Marin County Records; thence along said Northerly line South 84 49' 30" West 5.94 feet; thence leaving said line North 34 26' West feet; thence along the arc of a tangent curve to the left which has a radius of feet through a central, angle of r 41' 43" a distance of feet to a point on the most Northerly line of the parcel first referred to (2181 OR 174) said point being a point on the arc of a curve; thence along said boundary Easterly along the arc of said curve to the left which has a radius of feet through a central angle of 10 14' 26" a distance of feet; thence South 86 22' East (called North ' East in said Deed) feet to the Point of Beginning. PARCEL THREE: That portion conveyed by the Sanitary District No. 6 of Marin County to the City of Novato, a municipal corporation by deed recorded October 27, 1970 in Book 2412 of Official Records at Page 228, Marin County Records and more particularly described as follows: BEGINNING at the intersection of the courses North ' East feet and South ' East feet as said intersection and courses are described in the Grant Deed from Western California Telephone Company to the City of Novato recorded December 22, 1967 in Book 2181 of Official Records, at page 174, Marin County Records; thence along the boundary of said parcel South 78 04' West (called North ' East in said Deed) feet; thence North 11 56' West (called South 2SC 36' East in said Deed) feet; thence leaving said boundary North ' 30" East feet; thence South ' East feet to the Point of Beginning. A-2 12

13 JH:SM:mwk Recording Requested By CITY OF NOVATO When Recorded Mail To: Stephen Melikian, Esq. Jones Hall, A Professional Law Corporation 475 Sansome Street, Suite 1700 San Francisco, California THIS TRANSACTION IS EXEMPT FROM CALIFORNIA DOCUMENTARY TRANSFER TAX UNDER SECTION OF THE CALIFORNIA REVENUE AND TAXATION CODE. THIS DOCUMENT IS EXEMPT FROM RECORDING FEES UNDER SECTION OF THE CALIFORNIA GOVERNMENT CODE. LEASE AGREEMENT (Train Station Project) This LEASE AGREEMENT (this Lease ), dated as of January 1, 2017, is between the CITY OF NOVATO PUBLIC FINANCE AUTHORITY, a joint powers agency duly organized and existing under the laws of the State of California, as lessor (the Authority ), and the CITY OF NOVATO, a general law city and municipal corporation duly organized and existing under the Constitution and laws of the State of California, as lessee (the City ). B A C K G R O U N D : 1. The City of Novato (the City ) has determined to finance a portion of the costs of a Novato SMART rail station in downtown Novato (the Project ). 2. In order to raise the funds needed to finance the Project, the City has entered into a Site and Facility Lease dated as of January 1, 2017 (the Site Lease ), whereby the City has leased to the City of Novato Public Finance Authority (the Authority ) the real property set forth in Exhibit A hereto (the Property ), in consideration of the agreement by the Authority to make available to the City moneys in an amount which is sufficient to enable the City to finance the Project. 3. The Authority has proposed to lease the Property back to the City under this Lease, and the City has agreed to pay to the Authority lease payments for the use and occupancy of the Property. 13

14 A G R E E M E N T : In consideration of the foregoing and the material covenants hereinafter contained, the City and the Authority formally covenant, agree and bind themselves as follows: ARTICLE I DEFINITIONS; RULES OF INTERPRETATION SECTION 1.1. Definitions. All terms defined in this Section 1.1 shall for all purposes of this Lease have the meanings herein specified. "Assignment" means the Assignment of Lease Payments dated as January 1, 2017 between the Authority and the Trustee. Authority means City of Novato Public Finance Authority, a joint powers agency duly organized and existing under the laws of the State of California. Bond Counsel means (a) Jones Hall, A Professional Law Corporation, or (b) any other attorney or firm of attorneys of nationally recognized expertise with respect to legal matters relating to the debt obligations of local governments. City means the City of Novato, a general law city and municipal corporation duly organized and existing under the Constitution and laws of the State of California. Closing Date means the date of execution and delivery of this Lease by the parties hereto, being January, Environmental Law means all federal, state or local laws, statutes, regulations, ordinances and other provisions having the force or effect of law, all judicial and administrative orders and determinations, all contractual obligations and all common law relating to public health and safety, worker health and safety, pollution, the environment, wetlands, the preservation and reclamation of natural resources or waste management, including without limitation all those relating to the presence, use, production, generation, handling, transportation, treatment, storage, disposal, distribution, labeling, testing, processing, discharge, release, threatened release, control or cleanup of any hazardous materials, substances or wastes, chemical substances or mixtures, pesticides, pollutants, contaminants, toxic chemicals, petroleum products or byproducts, asbestos, solvents, urea formaldehyde, dioxins, polychlorinated biphenyls, noise or radiation, each as amended and as now or hereafter in effect. The term Environmental Law shall include (by way of illustration rather than limitation) the Clean Water Act, 33 U.S.C. Section 1251, et seq., the Clean Air Act, 42 U.S.C. Section 7401, et seq., the Resource Conservation and Recovery Act, 42 U.S.C. Section 6901, et seq., the Comprehensive Environmental Response, Compensation and Liability Act of 1980, 42 U.S.C. Section 9601, et seq., the Toxic Substances Control Act, 15 U.S.C. Section 2601, et seq., the Federal Insecticide, Fungicide and Rodenticide Act, 7 U.S.C. Section 135, et seq., and the Hazardous Materials Transportation Act, 39 U.S.C. Section 1801, et seq. and any regulations, guidelines, directives or other interpretations of any such enactment, all as amended from time to time

15 Event of Default means any of the events of default as defined in Section 7.1 Fiscal Year means each twelve-month period during the Term of this Lease commencing on July 1 in any calendar year and ending on June 30 in the next succeeding calendar year, or any other twelve-month period selected by the City as its fiscal year period. Hazardous Materials means any hazardous, dangerous or toxic chemical, waste, byproduct, pollutant, contaminant, compound, product or substance the manufacture, storage, transport, generation, use, treatment, exposure to, release, threatened release, discharge, remediation, cleanup, abatement, removal, possession, recycling, disposal or other disposition of which is prohibited or regulated (including without limitation, being subjected to notice, reporting, record keeping, or clean-up requirements) by any Environmental Law. Lease Payment means all payments required to be paid by the City on any date pursuant to Section 3.4, including any prepayment thereof under Section 8.1 or 8.2. Lease Payment Date means April 1 and October 1 in each year, beginning October 1, 2016, and continuing to and including the date on which the Lease Payments are paid in full. Net Proceeds means any insurance proceeds or condemnation awards paid with respect to the Property remaining after payment therefrom of all expenses incurred in the collection thereof. Project means the financing of a portion of the costs of the train station to be located in downtown Novato. Property means the real property, including all of the improvements located thereon, described more fully in Exhibit A attached hereto and by this reference incorporated herein. Rental Period means the twelve-month period commencing on April 1 in each year during the Term of this Lease and extending to and including the succeeding March 31, except that the first Rental Period begins on the Closing Date and extends to and including March 31, Site Lease means the Site and Facility Lease dated as of January 1, 2017, between the City as lessor and the Authority as lessee, under which the City has leased the Property to the Authority, as amended from time to time in accordance with its terms. "Site Lease Payment" means the payment made by the Authority to the City under the Site Lease, being $. Term of this Lease or Term means the time during which this Lease is in effect, as provided in Section 3.3. "Trust Agreement" means the Acknowledgement and Agreement Re Developer Trust Fund Payments dated as of January 22, "Trustee" means the Authority, as trustee of the Hamilton Trust Funds pursuant to the Trust Agreement

16 Section 1.2. Interpretation. (a) Unless the context otherwise indicates, words expressed in the singular include the plural and vice versa and the use of the neuter, masculine, or feminine gender is for convenience only and includes the neuter, masculine or feminine gender, as appropriate. (b) Headings of articles and sections herein and the table of contents hereof are solely for convenience of reference, do not constitute a part hereof and do not affect the meaning, construction or effect hereof. (c) All references herein to Articles, Sections and other subdivisions are to the corresponding Articles, Sections or subdivisions of this Lease; the words herein, hereof, hereby, hereunder and other words of similar import refer to this Lease as a whole and not to any particular Article, Section or subdivision hereof. ARTICLE II COVENANTS, REPRESENTATIONS AND WARRANTIES SECTION 2.1. Covenants, Representations and Warranties of the City. The City makes the following covenants, representations and warranties to the Authority as of the date of the execution and delivery of this Lease: (a) Due Organization and Existence. The City is a general law city and municipal corporation duly organized and validly existing under the Constitution and laws of the State of California, has full legal right, power and authority under the laws of the State of California to enter into the Site Lease and this Lease and to carry out and consummate all transactions contemplated thereby and hereby, and by proper action the City has duly authorized the execution and delivery of the Site Lease and this Lease. (b) (c) (d) Due Execution. The representatives of the City executing the Site Lease and this Lease have been fully authorized to execute the same pursuant to a resolution duly adopted by the City Council of the City. Valid, Binding and Enforceable Obligations. The Site Lease and this Lease have been duly authorized, executed and delivered by the City and constitute the legal, valid and binding agreements of the City enforceable against the City in accordance with their respective terms. No Conflicts. The execution and delivery of the Site Lease and this Lease, the consummation of the transactions herein and therein contemplated and the fulfillment of or compliance with the terms and conditions hereof and thereof, do not and will not conflict with or constitute a violation or breach of or default (with due notice or the passage of time or both) under any applicable law or administrative rule or regulation, or any applicable court or administrative decree or order, or any indenture, mortgage, deed of trust, lease, contract or other agreement or instrument to which the City is a party or by which it or its properties are otherwise subject or bound, or result in -4-16

17 the creation or imposition of any prohibited lien, charge or encumbrance of any nature whatsoever upon any of the property or assets of the City, which conflict, violation, breach, default, lien, charge or encumbrance would have consequences that would materially and adversely affect the consummation of the transactions contemplated by the Site Lease and this Lease or the financial condition, assets, properties or operations of the City. (e) No Defaults. To the best knowledge of its representatives executing this Lease, the City has never failed to appropriate or pay any obligations the payment of which it was lawfully required to appropriate or make, nor has the City failed to perform any obligations or covenants which it was lawfully required to perform, under any of its bonds, notes or other obligations or indebtedness for which its revenues or general credit was pledged. SECTION 2.2. Covenants, Representations and Warranties of the Authority. The Authority makes the following covenants, representations and warranties as the basis for its undertakings herein contained: (a) (b) (c) (d) Due Organization and Existence. The Authority is a joint powers agency duly organized and validly existing under the laws of the State of California, has full legal right, power and authority, as Trustee, to enter into the Site Lease, this Lease and the Assignment and to carry out and consummate all transactions contemplated thereby and hereby, and by proper action the Authority has duly authorized the execution and delivery of this Lease and the Site Lease. Due Execution. The representatives of the Authority executing the Site Lease, this Lease and the Assignment are fully authorized to execute the same pursuant to official action taken by the governing body of the Authority. Valid, Binding and Enforceable Obligations. The Site Lease, this Lease and the Assignment have been duly authorized, executed and delivered by the Authority and constitutes the legal, valid and binding agreement of the Authority, enforceable against the Authority in accordance with their respective terms. No Conflicts. The execution and delivery of the Site Lease, this Lease and the Assignment, the consummation of the transactions therein and herein contemplated and the fulfillment of or compliance with the terms and conditions thereof and hereof, do not and will not conflict with or constitute a violation or breach of or default (with due notice or the passage of time or both) under any applicable law or administrative rule or regulation, or any applicable court or administrative decree or order, or any indenture, mortgage, deed of trust, lease, contract or other agreement or instrument to which the Authority is a party or by which it or its properties are otherwise subject or bound, or result in the creation or imposition of any prohibited lien, charge or encumbrance of any nature whatsoever upon any of the property or assets of the Authority, which conflict, violation, breach, default, lien, charge or encumbrance would have consequences that would materially and adversely affect the consummation of the transactions -5-17

18 contemplated by the Site Lease, this Lease and the Assignment, or the financial condition, assets, properties or operations of the Authority. ARTICLE III DEPOSIT OF FUNDS; LEASE OF PROPERTY; LEASE PAYMENTS SECTION 3.1. Deposit of Moneys. As provided in the Assignment, the Site Lease Payment shall be applied to finance the Project and to pay financial, legal and other costs relating to the execution and delivery of this Lease and the Site Lease. The City shall establish a project fund and deposit the Site Lease Payment therein. SECTION 3.2. Lease of Property to City. The Authority hereby leases the Property to the City, and the City hereby leases the Property from the Authority. The Property shall be leased to the City under this Lease upon the terms and provisions hereof. SECTION 3.3. Term. The Term of this Lease commences on the Closing Date and ends on the date on which all of the Lease Payments have been paid in full, provided that in no event shall the Term of this Lease extend beyond April 1, The provisions of this Section 3.3 are subject to the provisions of Section 5.2 relating to the taking in eminent domain of the Property or any portion thereof. SECTION 3.4. Lease Payments. (a) Obligation to Pay. Subject to the provisions of Sections 3.5, 5.2 and 5.3 and the provisions of Article VIII, the City agrees to pay to the Authority, and its successors and assigns, the Lease Payments (denominated into components of principal and interest) payable on the Lease Payment Dates and in the amounts set forth in Exhibit B attached hereto and by this reference incorporated herein. The City shall pay the Lease Payments in immediately available funds on each Lease Payment Date. The Lease Payments payable in any Rental Period with respect to the Property are for the use of the Property during such Rental Period. (b) Effect of Prepayment. If the City prepays all Lease Payments in full under Sections 8.1 or 8.2, the City s obligations under this Section shall thereupon cease and terminate. If the City prepays the Lease Payments in part but not in whole under Section 8.1 or 8.2, the principal and interest components of the remaining Lease Payments shall be reduced on a pro rata basis. (c) Rate on Overdue Payments. If the City fails to make any of the payments required in this Section 3.4, the payment in default shall continue as an obligation of the City until the amount in default has been fully paid, and the City agrees to pay the same with interest thereon, from the date of default to the date of payment at the rate of 8% per annum. (d) Fair Rental Value. The Lease Payments coming due and payable during each Rental Period constitute the total rental for the Property for such Rental Period, and shall be paid by the City in each Rental Period for and in consideration of the right of the use and occupancy of, and the continued quiet use and enjoyment of the Property during each Rental Period. The parties hereto have agreed and determined that the total Lease Payments -6-18

19 represent the fair rental value of the Property. In making such determination, consideration has been given to the estimated fair market value of the Property, the costs of financing the purposes set forth in Section 3.1, other obligations of the City and the Authority under this Lease, the uses and purposes which may be served by the Property and the benefits therefrom which will accrue to the City and the general public. (e) Source of Payments. The Lease Payments are payable from any source of available funds of the City, subject to the provisions of Sections 5.2 and 5.3. The City hereby covenants to take all actions as may be necessary to pay the Lease Payments in full when due. The covenants on the part of the City herein contained constitute duties imposed by law and it is the duty of each and every public official of the City to take such action and do such things as are required by law in the performance of the official duty of such officials to enable the City to carry out and perform the covenants and agreements in this Lease agreed to be carried out and performed by the City. SECTION 3.5. Assignment to Trustee. The City understands and agrees that all Lease Payments have been assigned by the Authority to the Trustee under the Assignment, and the City hereby consents to such assignment. As a result of such assignment, the City agrees to pay all Lease Payments to the Trustee. SECTION 3.6. Substitution of Property. The City has, and is hereby granted, the option at any time and from time to time to substitute other real property (the Substitute Property ) for the Property or any portion thereof (the Former Property ), provided that the City has satisfied all of the following requirements which are hereby declared to be conditions precedent to such substitution: (a) (b) (c) (d) The Authority has given its prior written consent to such substitution. No Event of Default has occurred and is continuing. The City has filed with the Authority, and caused to be recorded in the office of the Marin County Recorder sufficient memorialization of, an amendment hereof which adds to Exhibit A a description of the Substitute Property and deletes therefrom the description of the Former Property. The City has certified in writing to the Authority and the Trustee that the Substitute Property serves the municipal purposes of the City and constitutes property which the City is permitted to lease under the laws of the State of California, and has been determined to be essential to the proper, efficient and economic operation of the City and to serve an essential governmental function of the City. (e) The City has certified in writing to the Authority that the fair market value of the Substitute Property is at least equal to the original principal amount of the Site Lease Payment (as defined in the Site Lease), and that the useful life of the Substitute Property extends to the date on which the final Lease Payments are payable hereunder. Upon the satisfaction of all such conditions precedent, the Term of this Lease will thereupon end as to the Former Property and commence as to the Substitute Property, and all -7-19

20 references to the Former Property will apply with full force and effect to the Substitute Property. The City is not entitled to any reduction, diminution, extension or other modification of the Lease Payments whatsoever as a result of such substitution. The Authority and the City shall execute, deliver and cause to be recorded all documents required to discharge this Lease of record against the Former Property. SECTION 3.7. Quiet Enjoyment. Throughout the Term of this Lease, the Authority shall provide the City with quiet use and enjoyment of the Property and the City shall peaceably and quietly have and hold and enjoy the Property, without suit, trouble or hindrance from the Authority, except as expressly set forth in this Lease. The Authority will, at the request of the City and at the City s cost, join in any legal action in which the City asserts its right to such possession and enjoyment to the extent the Authority may lawfully do so. Notwithstanding the foregoing, the Authority has the right to inspect the Property as provided in Section 5.2. SECTION 3.8. Title. At all times during the Term of this Lease, the City shall hold title to the Property, including all additions which comprise fixtures, repairs, replacements or modifications thereto, subject to the Site Lease and to the provisions of Section 5.2. Upon the termination of this Lease (other than pursuant to Section 7.2(b) hereof), all right, title and interest of the Authority in and to the Property shall be transferred to and vested in the City. Upon the payment in full of all Lease Payments allocable to the Property, all right, title and interest of the Authority in and to the Property shall be transferred to and vested in the City. The Authority agrees to take any and all steps and execute and record any and all documents reasonably required by the City to consummate any such transfer of title. ARTICLE IV MAINTENANCE; TAXES; INSURANCE; AND OTHER MATTERS SECTION 4.1. Maintenance, Utilities, Taxes and Assessments. Throughout the Term of this Lease, as part of the consideration for the rental of the Property, all improvement, repair and maintenance of the Property are the responsibility of the City, and the City shall pay for or otherwise arrange for the payment of all utility services supplied to the Property, which may include, without limitation, janitor service, security, power, gas, telephone, light, heating, water and all other utility services, and shall pay for or otherwise arrange for the payment of the cost of the repair and replacement of the Property resulting from ordinary wear and tear or want of care on the part of the City or any assignee or sublessee thereof. In exchange for the Lease Payments herein provided, the Authority agrees to provide only the Property, as hereinbefore more specifically set forth. The City waives the benefits of subsections 1 and 2 of Section 1932, Section 1933(4) and Sections 1941 and 1942 of the California Civil Code, but such waiver shall not limit any of the rights of the City under the terms of this Lease. The City shall also pay or cause to be paid all lawfully levied taxes and assessments of any type or nature, if any, charged to the Authority or the City affecting the Property or the respective interests or estates therein; provided that with respect to special assessments or other governmental charges that may lawfully be paid in installments over a period of years, the City shall be obligated to pay only such installments as are required to be paid during the Term of this Lease as and when the same become due

21 The City may, at the City s expense and in its name, in good faith contest any such taxes, assessments, utility and other charges and, in the event of any such contest, may permit the taxes, assessments or other charges so contested to remain unpaid during the period of such contest and any appeal therefrom unless the Authority notifies the City that, in its reasonable opinion, by nonpayment of any such items the interest of the Authority in the Property will be materially endangered or the Property or any part thereof will be subject to loss or forfeiture, in which event the City shall promptly pay such taxes, assessments or charges or provide the Authority with full security against any loss which may result from nonpayment, in form satisfactory to the Authority. SECTION 4.2. Modification of Property. The City has the right, at its own expense, to make additions, modifications and improvements to the Property or any portion thereof. All additions, modifications and improvements to the Property will comprise part of the Property and will become subject to the provisions of this Lease. Such additions, modifications and improvements may not in any way damage the Property, or cause the Property to be used for purposes other than those authorized under the provisions of state and federal law; and the Property, upon completion of any additions, modifications and improvements made thereto pursuant to this Section, must be of a value which is not substantially less than the value thereof immediately prior to the making of such additions, modifications and improvements. SECTION 4.3. Public Liability and Property Damage Insurance. The City shall maintain or cause to be maintained throughout the Term of this Lease a standard comprehensive general insurance policy or policies in protection of the City, and its officers, agents, employees and assigns. Said policy or policies shall provide for indemnification of said parties against direct or contingent loss or liability for damages for bodily and personal injury, death or property damage occasioned by reason of the operation of the Property. Such policy or policies shall provide coverage in such liability limits and be subject to such deductibles as the City deems adequate and prudent. Such insurance may be maintained as part of or in conjunction with any other insurance coverage carried by the City, and may be maintained in whole or in part in the form of the participation by the City in a joint powers authority or other program providing pooled insurance. The City shall apply the proceeds of such liability insurance toward extinguishment or satisfaction of the liability with respect to which such proceeds are paid. SECTION 4.4. Casualty Insurance. The City shall procure and maintain, or cause to be procured and maintained, throughout the Term of this Lease, casualty insurance against loss or damage to any part of the Property, covering such hazards as are customarily covered with respect to works and property of like character, in an amount at least equal to the lesser of (a) 100% of the replacement value of the insured improvements located on the Property, or (b) the unpaid principal balance of the Lease Payments. Such insurance shall be subject to a deductible in such amount as the City deems adequate and prudent. Such insurance may be maintained as part of or in conjunction with any other insurance coverage carried by the City, and may be maintained in whole or in part in the form of the participation by the City in a joint powers authority or other program providing pooled insurance. The City shall apply the Net Proceeds of such insurance as provided in Section 5.1. SECTION 4.5. Insurance Net Proceeds; Form of Policies. All insurance policies (or riders) required by this Article IV shall be taken out and maintained with responsible insurance companies, or through a joint powers authority or other program providing pooled insurance, and shall contain a provision that the insurer shall not cancel or revise coverage thereunder -9-21