ACTION CALENDAR July 6_ 2010 To Honorable ... - City of Berkeley by xiuliliaofz

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Office of the City Manager
                                                                             ACTION CALENDAR
                                                                             July 6, 2010

To:              Honorable Mayor and Members of the City Council
From:            Phil Kamlarz, City Manager
Submitted by: Robert Hicks, Director, Finance
              Donna Corbeil, Director, Library Services

Subject:         Authorizing the Issuance of $16 million in General Obligation Bonds for
                 Measure FF, Series 2010 – Branch Library Improvement Project

RECOMMENDATION
Adopt a Resolution authorizing the issuance of $16 million aggregate principal amount
of general obligation bonds, series 2010 (Measure FF – Branch Library Improvement
Project), and authorizing actions related hereto.

FISCAL IMPACTS OF RECOMMENDATION
Authorization of the resolution will provide the City with the remaining $16 million in
proceeds for the library branch improvements. Debt service on the general obligation
bonds will be paid from ad valorem taxes collected on all taxable assessed value
located in the City. Proceeds for the new library bond will be deposited to the following
cash accounts: 308-0000-101-11-00 and 714-0000-101-00-00. The proceeds from the
bond issue will be credited to account 308-9707-393-10-17, and expenditures will be
charged to account 308-9301-450-30-35. An amendment to the annual appropriations
ordinance will need to be made in FY 2011.
The tax rate will be $12.09 per $100,000 of assessed value, which reflects the debt
service payment on $26 million of bonds.
This bond issuance was reflected in the tax rate adopted by Council on June 1, 2010
(first reading), so there will be no fiscal impact to the City’s general fund from the
issuance of the general obligation bonds.

CURRENT SITUATION AND ITS EFFECTS
At the November 12, 2008 regular meeting, the Board of Library Trustees (the Board)
approved Resolution No. R08-103 authorizing the initiation of the project schedule, with
the process to select architectural service firms for the North Branch Library and the
South Branch Library. Staff brought project specifications to the Board on February 11,
2009, and the Board adopted Resolution No. R-09-14 to approve the budget for the $26
million Library bond program, and the project schedule.



    2180 Milvia Street, Berkeley, CA 94704 ● Tel: (510) 981-7000 ● TDD: (510) 981-6903 ● Fax: (510) 981-7099
                E-Mail: manager@ci.berkeley.ca.us Website: http://www.ci.berkeley.ca.us/manager
Authorizing the Issuance of $16,000,000 in General Obligation Bonds     ACTION CALENDAR
For Measure FF, Series 2010 – Branch Library Improvement Project               July 6, 2010




By the end of October 2009, all the primary project contracts, i.e., project manager,
architects, and program consultants were signed and budgeted at $4,391,658.
Thereafter, all four of the branch projects began an ongoing series of developmental
and progress public outreach workshops and Board of Library Trustees meetings, as
well as meetings with the City’s Planning and Transportation departments, and
presentations before City boards and commissions.
The North, West, and Claremont branches are regarded as historical structures;
consequently, the Library has engaged with the Landmarks Preservation Commission
on project design based on each site’s historical and architectural designation.
Concurrently, the Library is moving forward on securing the necessary permits and EIR
studies for all four branches.
At the end of May 2010, the North and Claremont branches have entered the
construction phase of the program, South branch is in design development, and West
branch is in schematic design. The South and West branches are proposed as fully
new structures with the unanimous support of the Library Board of Trustees. Key
milestone dates on a calendar year basis that will materially impact the actual
drawdown of program funds from projections include the closure and subsequent
commencement of construction of the North and Claremont branches estimated to
occur first quarter 2011. South is projected to close and enter construction in the fourth
quarter of 2011, and West in the first quarter of 2012. Program conclusion is currently
forecasted by the second quarter of 2013; however, the Library continues to seek
opportunities to expedite project schedules.
Approval of the City Council Resolution will begin the financing, rating and bond sale
preparation process.

BACKGROUND
In November 2008, the residents of Berkeley voted for and approved Ballot Measure
FF, in the sum of $26 million of General Obligation Bonds to renovate, expand, and
make seismic and access improvements at the four neighborhood branch libraries
(excluding the Central Library). $10 million of the $26 million in authorized bonds was
issued on April 14, 2009. It is expected that the remaining $16 million of bonds will be
issued during the summer of 2010, and the tax rate for FY 2011 will be $12.09 per
$100,000 of assessed value, which reflects the debt service payment on $26 million of
bonds.


RATIONALE FOR RECOMMENDATION
The Library Board is advancing towards the construction phase of the North and
Claremont branches and will need bond proceeds to pay for the expected expenditures.
Approval by council will result in bond proceeds being available around May 1.




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Authorizing the Issuance of $16,000,000 in General Obligation Bonds   ACTION CALENDAR
For Measure FF, Series 2010 – Branch Library Improvement Project             July 6, 2010




CONTACT PERSON
Robert Hicks, Director, Finance Department, 510-981-7301
Donna Corbeil, Director of Library Services, 510-981-6108


Attachments:
1: Resolution
       Exhibit A – Form of Bond
       Exhibit B – Form of Notice of Sale
       Exhibit C – Form of Notice of Intention
       Exhibit D – Form of Certificate of Award
       Exhibit E – Form of Continuing Disclosure
2: Draft Preliminary Official Statement




                                               Page 3
                                                               Attachment 1




                          CITY OF BERKELEY

                         RESOLUTION NO. ______

             A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF
          BERKELEY AUTHORIZING THE ISSUANCE OF NOT TO EXCEED
           $16,000,000 AGGREGATE PRINCIPAL AMOUNT OF GENERAL
                OBLIGATION BONDS, SERIES 2010 (MEASURE FF—
         NEIGHBORHOOD BRANCH LIBRARY IMPROVEMENTS PROJECT),
                AND AUTHORIZING ACTIONS RELATED THERETO



                           Adopted July 6, 2010




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                                               TABLE OF CONTENTS

                   [Table Of Contents Not Expected To Be Accurate Until Document Finalized]
                                                                                                                                     Page

                                                   ARTICLE I
                                            DEFINITIONS; AUTHORITY
Section 1.01           Definitions........................................................................................................ 2
Section 1.02           Interpretation .................................................................................................... 5
                                                         ARTICLE II
                                                         THE BONDS
Section 2.01           Authorization ................................................................................................... 6
Section 2.02           Terms of Bonds ................................................................................................ 6
Section 2.03           Redemption ...................................................................................................... 7
Section 2.04           Form of Bonds ................................................................................................. 9
Section 2.05           Execution of Bonds .......................................................................................... 9
Section 2.06           Transfer of Bonds .......................................................................................... 10
Section 2.07           Exchange of Bonds ........................................................................................ 10
Section 2.08           Registration Books ......................................................................................... 10
Section 2.09           Bonds Mutilated, Lost, Destroyed or Stolen.................................................. 10
Section 2.10           Use of Depository .......................................................................................... 11
                                          ARTICLE III
                            SALE OF BONDS; SECURITY FOR THE BONDS
Section 3.01           Sale of Bonds ................................................................................................. 13
Section 3.02           Security for the Bonds ................................................................................... 14
                                                  ARTICLE IV
                                              FUNDS AND ACCOUNTS
Section 4.01           Application of the Proceeds of the Sale of Bonds ......................................... 15
Section 4.02           Costs of Issuance Account ............................................................................. 15
Section 4.03           Debt Service Account .................................................................................... 15
Section 4.04           Project Fund ................................................................................................... 16
Section 4.05           Investment of Moneys.................................................................................... 16
                                               ARTICLE V
                                      OTHER COVENANTS OF THE CITY
Section 5.01           Punctual Payment; Faithful Performance ...................................................... 17
Section 5.02           Extension of Time for Payment ..................................................................... 17
Section 5.03           Tax Covenants Relating to the Bonds ............................................................ 17



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                                               TABLE OF CONTENTS
                                                    Continued

                                                                                                                                    Page

Section 5.04           Continuing Disclosure ................................................................................... 18
                                                    ARTICLE VI
                                                 THE PAYING AGENT
Section 6.01           Appointment; Acceptance; Designated Office .............................................. 19
Section 6.02           Protection of Paying Agent ............................................................................ 19
Section 6.03           Reliance on Documents, Etc. ......................................................................... 19
Section 6.04           Recitals of City .............................................................................................. 20
Section 6.05           Paying Agent May Own Bonds ..................................................................... 20
Section 6.06           Money Held by Paying Agent........................................................................ 20
Section 6.07           Other Transactions ......................................................................................... 20
Section 6.08           Interpleader .................................................................................................... 20
Section 6.09           Indemnification .............................................................................................. 21
                                           ARTICLE VII
                                   AMENDMENT OF THIS RESOLUTION
Section 7.01           Amendments Effective Without Consent of the Owners ............................... 22
Section 7.02           Amendments Effective With Consent of the Owners .................................... 22
                                                      ARTICLE VIII
                                                    MISCELLANEOUS
Section 8.01           Benefits of Resolution Limited to Parties ...................................................... 23
Section 8.02           Defeasance ..................................................................................................... 23
Section 8.03           Execution of Documents and Proof of Ownership by Bond Owners ............ 25
Section 8.04           Waiver of Personal Liability .......................................................................... 25
Section 8.05           Destruction of Canceled Bonds ..................................................................... 25
Section 8.06           Partial Invalidity............................................................................................. 25
Section 8.07           Execution of Documents ................................................................................ 25
Section 8.08           Effective Date of Resolution .......................................................................... 26




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                                     CITY OF BERKELEY

                                  RESOLUTION NO. ______

              A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF
           BERKELEY AUTHORIZING THE ISSUANCE OF NOT TO EXCEED
            $16,000,000 AGGREGATE PRINCIPAL AMOUNT OF GENERAL
                 OBLIGATION BONDS, SERIES 2010 (MEASURE FF—
          NEIGHBORHOOD BRANCH LIBRARY IMPROVEMENTS PROJECT),
                 AND AUTHORIZING ACTIONS RELATED THERETO



         RESOLVED, by the City Council of the City of Berkeley, California (the “City”), that:

        WHEREAS, pursuant to Chapter 4 (commencing with Section 43600) of Division 4 of
Title 4 of the California Government Code (the “Act”) and the Charter of the City (the
“Charter”), the City is empowered to issue bonds which are authorized by two-thirds of the
electors voting on the proposition;

       WHEREAS, more than two-thirds of the electors voting at a general municipal election,
held in the City on November 4, 2008, approved a proposition authorizing the issuance by the
City of bonds in the aggregate principal amount of $26,000,000 to finance renovations,
construction, seismic and access improvements, and expansion of program areas at four
neighborhood branch libraries in the City (the “Project”);

       WHEREAS, the City Council has heretofore issued or caused to be issued its “City of
Berkeley General Obligation Bonds, Series 2009 (Measure FF—Neighborhood Branch Library
Improvements Project),” on April 29, 2009, in the amount of $10,000,000;

       WHEREAS, the City now intends to authorize the issuance and sale of the remaining
portion of said bonds pursuant to such authority in an aggregate principal amount not to exceed
$16,000,000 (the “Bonds”) pursuant to this Resolution and in conformity with the Act and the
Charter; and

       WHEREAS, a form of official statement containing information material to the offering
and sale of the Bonds authorized hereby (the “Official Statement”), has been prepared and filed
with the City Clerk; and

        WHEREAS, forms of a notice of sale, notice of intention to sell bonds, continuing
disclosure certificate, and certificate of award of the bonds to the winning bidder, all relating to
the sale of the Bonds, have been prepared and attached as exhibits to this resolution;

       NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of Berkeley as
follows:




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                                           ARTICLE I

                                 DEFINITIONS; AUTHORITY

        Section 1.01 Definitions. The terms defined in this Section 1.01, as used and
capitalized herein, shall, for all purposes of this Resolution, have the meanings ascribed to them
below, unless the context clearly requires some other meaning.

        “Act” means Chapter 4 of Division 4 of Title 4 of the California Government Code and
other applicable laws, as in effect on the date of adoption hereof and as amended hereafter.

       “Authorized City Officer” has the meaning ascribed to such term in Section 3.01(a) of this
Resolution.

       “Authorized Investments” means any investments permitted by law to be made with
moneys belonging to, or in the custody of, the City, as set forth in applicable law, and as limited
by the City’s investment policy.

        “Beneficial Owner” means any person which has or shares the power, directly or
indirectly, to make investment decisions concerning ownership of any Bonds (including persons
holding Bonds through nominees, depositories or other intermediaries).

        “Bond Counsel” means (a) the firm of Orrick, Herrington & Sutcliffe LLP, or (b) any
other attorney or firm of attorneys nationally recognized for expertise in rendering opinions as to
the legality and tax exempt status of securities issued by public entities.

       “Bonds” means the City of Berkeley General Obligation Bonds, Series 2010 (Measure
FF—Neighborhood Branch Library Improvements Project), at any time Outstanding pursuant to
this Resolution.

        “Bond Year” means the one-year period beginning on September 2 in each year and
ending on the next succeeding September 1; except that the first Bond Year shall begin on the
Closing Date and end on September 1, 2010 (or such other dates as may be designated in the Tax
Certificate).

       “Certificate of Award” has the meaning ascribed to such term in Section 2.02(b) of this
Resolution.

      “Charter” means the Charter of the City in effect as of July 1, 1909, as subsequently
amended.

        “City” means the City of Berkeley, a charter city and municipal corporation organized
under the Constitution and laws of the State of California and its Charter, and any successor
thereto.

        “City Council” means the City Council of the City.




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       “City Representative” means the Mayor, City Manager, Deputy City Manager, Director
of Finance, City Clerk or City Treasurer or any other person authorized by resolution of the City
Council to act on behalf of the City with respect to this Resolution and the Bonds.

       “City Treasurer” means the treasurer of the City or other duly appointed officer of the
City authorized by resolution of the City Council to perform the functions of the treasurer.

       “Closing Date” means the date, designated on the face of each Bond as the date thereof,
upon which there is a physical delivery of the Bonds in exchange for the amount representing the
purchase price of the Bonds by the initial purchaser.

        “Code” means the Internal Revenue Code of 1986 as in effect on the date of issuance of
the Bonds or (except as otherwise referenced herein) as it may be amended to apply to
obligations issued on the date of issuance of the Bonds, together with regulations adopted
pursuant thereto.

        “Continuing Disclosure Certificate” shall mean that certain Continuing Disclosure
Certificate relating to the Bonds, substantially in the form attached hereto as Exhibit E, executed
by the City and dated the date of issuance and delivery of the Bonds, as it may be amended from
time to time in accordance with the terms thereof.

         “County” means the County of Alameda, California.

        “Costs of Issuance” means all items of expense directly or indirectly payable by or
reimbursable to the City under the Act and the Charter, necessary and incidental to the
authorization, issuance, sale and delivery of the Bonds, including but not limited to the costs of
conducting the election, costs of preparation and reproduction of documents, printing expenses,
filing and recording fees, initial fees and charges of the Paying Agent, fees and disbursements of
consultants and professionals, rating agency fees, fees and charges for preparation, execution and
safekeeping of the Bonds, and any other cost, charge or fee in connection with the original
issuance of the Bonds.

       “Costs of Issuance Account” means the account established within the Project Fund and
held by the Paying Agent pursuant to Section 4.02.

       “Debt Service” means the payment of the interest on and the principal of all Bonds
required to be made under this Resolution.

       “Debt Service Account” means the account within the City’s General Fund established
pursuant to Section 4.03.

       “Federal Securities” means United States Treasury notes, bonds, bills or certificates of
indebtedness, or obligations for which the faith and credit of the United States are pledged for
the payment of principal and interest.

       “Financial Advisor” has the meaning ascribed to such term in Section 3.01(a) of this
Resolution.


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      “Interest Payment Date” means March 1 and September 1 of each year, commencing
September 1, 2010 (or such other dates as provided in the Certificate of Award).

       “Outstanding,” when used as of any particular time with reference to Bonds, means all
Bonds except: (a) Bonds theretofore canceled by the Paying Agent or surrendered to the Paying
Agent for cancellation; (b) Bonds paid or deemed to have been paid within the meaning of
Section 8.02; and (c) Bonds in lieu of or in substitution for which other Bonds shall have been
authorized, executed, issued and delivered by the City pursuant to this Resolution.

       “Owner,” whenever used herein with respect to a Bond, means the person in whose name
the ownership of such Bond is registered on the Registration Books.

       “Participating Underwriter” shall have the meaning ascribed thereto in the Continuing
Disclosure Certificate.

       “Paying Agent” means the entity appointed by the City pursuant to Section 6.01 to act as
paying agent, registrar and authenticating agent for the Bonds, its successors and assigns, and
any other corporation or association which may at any time be substituted in its place, as
provided in Section 6.01.

      “Principal Payment Date” means September 1 of each year, commencing
September 1, 2011 (or such other dates as provided in the Certificate of Award).

       “Project” means any of the renovations, construction, seismic and access improvements,
and expansion of program areas at four neighborhood branch libraries in the City, as authorized
by Measure FF, approved by the voters of the City on November 4, 2008.

       “Project Fund” means the account within the City’s General Fund established pursuant to
Section 4.04.

       “Project Costs” means (i) all costs of payment of, or reimbursement for, acquisition,
construction, installation and equipment of the Project including, but not limited to, architect and
engineering fees, contractor payments, costs of feasibility and other reports, inspection costs,
performance bond premiums and permit fees, and any costs necessary and incidental thereto,
provided that any such costs are for the acquisition or improvement of real property; (ii) Costs of
Issuance; or (iii) costs of administration of this Resolution.

      “Record Date” means the 15th day of the month preceding an Interest Payment Date,
whether or not such day is a business day.

       “Redemption Date” means the date on which any Bonds which are called are to be
presented for redemption, pursuant to Section 2.03.

        “Registration Books” means the records maintained by the Paying Agent for the
registration of ownership and registration of transfer of the Bonds pursuant to Section 2.08.




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       “Resolution” means this Resolution, as originally adopted by the City Council and
including all amendments hereto and supplements hereof which are duly adopted by the City
Council from time to time in accordance herewith.

       “Supplemental Resolution” means any resolution supplemental to or amendatory of this
Resolution, adopted by the City Council in accordance with Article VII.

       “Tax Certificate” has the meaning ascribed to such term in Section 5.03(a) of this
Resolution.

       “Written Request of the City” means an instrument in writing signed by a City
Representative or by any other officer of the City duly authorized in writing to act on behalf of a
City Representative, or on behalf of the City with respect to the Bonds.

         Section 1.02 Interpretation.

        (a) Unless the context otherwise indicates, words expressed in the singular shall include
the plural and vice versa and the use of any reference to gender is for convenience only and shall
be deemed to include all genders.

       (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 shall 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 Resolution; the words “herein,” “hereof,”
“hereby,” “hereunder” and other words of similar import refer to this Resolution as a whole and
not to any particular Article, Section or subdivision hereof.




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                                          ARTICLE II

                                          THE BONDS

        Section 2.01 Authorization. Bonds in the aggregate principal amount not to exceed
$16,000,000 are hereby authorized to be issued by the City under and subject to the terms of the
Act, the Charter and this Resolution. This Resolution constitutes a continuing agreement with
the Owners of all of the Bonds issued or to be issued hereunder and then Outstanding to secure
the full and final payment of principal of and premium, if any, and the interest on all Bonds
which may from time to time be executed and delivered hereunder, subject to the covenants,
agreements, provisions and conditions herein contained. The Bonds shall be designated the
“City of Berkeley General Obligation Bonds, Series 2010 (Measure FF—Neighborhood Branch
Library Improvements Project).”

         Section 2.02 Terms of Bonds.

        (a) Denominations; Numbering. The Bonds shall be issued as fully registered Bonds,
without coupons, in the denomination of $5,000 each or any integral multiple thereof. Bonds
shall be lettered and numbered as the Paying Agent shall prescribe.

        (b) Date of Bonds. The Bonds shall be dated as of the Closing Date, or such other date
as shall be specified in the Certificate of Award.

        (c) CUSIP Identification Numbers. “CUSIP” identification numbers, if provided by the
initial purchaser of the Bonds, shall be imprinted on the Bonds, but such numbers shall not
constitute a part of the contract evidenced by the Bonds and any error or omission with respect
thereto shall not constitute cause for refusal of any purchaser to accept delivery of and pay for
the Bonds. In addition, failure on the part of the City to use such CUSIP numbers in any notice
to Owners of the Bonds shall not constitute an event of default or any violation of the City’s
contract with such Owners and shall not impair the effectiveness of any such notice.

        (d) Maturities; Interest. The Bonds shall mature on the date or dates, in each of the
years, in the principal amounts and in the aggregate principal amount as shall be specified in the
Certificate of Award. The Bonds shall bear interest at a nominal rate not to exceed 12.00% per
annum, payable on each Interest Payment Date, computed on the basis of a 360-day year of
twelve 30-day months.

        Each Bond authenticated on or before the first Record Date shall bear interest from the
Closing Date. Each Bond authenticated following a Record Date and prior to the following
Interest Payment Date shall bear interest from that Interest Payment Date. Any other Bond shall
bear interest from the Interest Payment Date immediately preceding its authentication; provided,
however, that if at the time of authentication of a Bond, interest is in default thereon, such Bond
shall bear interest from the Interest Payment Date to which interest has previously been paid or
made available for payment thereon.

       (e) Payment. Interest on the Bonds (including the final interest payment upon maturity
or redemption) is payable in lawful money of the United States of America by check of the
Paying Agent mailed to the Owner thereof at such Owner’s address as it appears on the

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Registration Books at the close of business on the preceding Record Date; provided that at the
written request of the owner of at least $1,000,000 aggregate principal amount of the Bonds,
which written request is on file with the Paying Agent as of any Record Date, interest on such
Bonds shall be paid by wire transfer on the succeeding Interest Payment Date to an account in
the United States of America as shall be specified in such written request. Principal of and
premium (if any) on the Bonds is payable in lawful money of the United States of America upon
presentation and surrender upon maturity or redemption prior to maturity at the office of the
Paying Agent designated for that purpose.

         Section 2.03 Redemption.

        (a) Optional Redemption. The Bonds shall be subject to redemption prior to their
respective stated maturity dates at the option of the City from any source of lawfully available
funds, upon terms as shall be specified in the Certificate of Award. The Certificate of Award
may provide that the Bonds shall not be subject to optional redemption.

        If less than all of the Bonds are called for redemption, such bonds shall be redeemed in
inverse order of maturities or as otherwise directed by the City, and if less than all of the Bonds
of any given maturity are called for redemption, the portions of such bonds of a given maturity to
be redeemed shall be determined by lot. For purposes of such selection, each maturity of Bonds
shall be deemed to consist of individual Bonds of $5,000 denominations each, which may be
separately redeemed.

        (b) Mandatory Sinking Fund Redemption. The Bonds, if any, which are designated (at
the option of the initial purchaser thereof) in the Certificate of Award as Term Bonds shall also
be subject to redemption prior to their stated maturity dates, without a redemption premium, in
part by lot, from mandatory sinking fund payments in the amounts and in accordance with the
terms to be specified in the Certificate of Award. The principal amount of each mandatory
sinking fund payment of any maturity shall be reduced proportionately by the amount of any
Bonds of that maturity optionally redeemed prior to the mandatory sinking fund payment date.
The Certificate of Award may provide that the Bonds shall not be subject to mandatory sinking
fund redemption.

       The City Treasurer is hereby authorized to create such sinking funds or accounts for the
Bonds as shall be necessary to accomplish the purposes of this Section and to establish refunding
escrow accounts with the Paying Agent or an escrow agent as necessary for the purpose.

        (c) Redemption Procedure. The Paying Agent shall cause notice of any redemption to be
mailed, first class mail, postage prepaid, at least 30 days but not more than 60 days prior to the
Redemption Date to the respective Owners of any Bonds designated for redemption, at their
addresses appearing on the Registration Books; but failure of any Owner to receive any such
notice or any defect therein shall not affect the validity of the proceedings for the redemption of
such Bonds.




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         Each notice of redemption shall contain all of the following information:

         (i)      the date of such notice;

         (ii)     the name of the Bonds and the date of issue of the Bonds;

         (iii)    the Redemption Date;

         (iv)     the redemption price;

         (v)      the dates of maturity of the Bonds to be redeemed;

      (vi)    (if less than all of the Bonds of any maturity are to be redeemed) the distinctive
numbers of the Bonds of each maturity to be redeemed;

       (vii) (in the case of Bonds redeemed in part only) the respective portions of the
principal amount of the Bonds of each maturity to be redeemed;

         (viii)   the CUSIP number, if any, of each maturity of Bonds to be redeemed;

       (ix)   a statement that such Bonds must be surrendered by the Owners at the office of
the Paying Agent designated by the Paying Agent for such purpose; and

     (x)    notice that further interest on such Bonds will not accrue after the designated
Redemption Date

       Upon surrender of Bonds redeemed in part only, the City shall execute and the Paying
Agent shall authenticate and deliver to the Owner, at the expense of the City, a new Bond or
Bonds, of the same maturity and interest rate, of authorized denominations in aggregate principal
amount equal to the unredeemed portion of the Bond or Bonds.

        From and after the Redemption Date, if notice of such redemption shall have been duly
given and funds available for the payment of the principal of and interest (and premium, if any)
on the Bonds so called for redemption shall have been duly provided, such Bonds so called shall
cease to be entitled to any benefit under this Resolution other than the right to receive payment
of the redemption price, and no interest shall accrue thereon on or after the Redemption Date
specified in such notice. All Bonds redeemed pursuant to this Section shall be canceled by the
Paying Agent, and a certificate of cancellation shall be submitted by the Paying Agent to the
City.

        (d) Right to Rescind Notice. The City may rescind any optional redemption and notice
thereof for any reason on any date prior to the Redemption Date by causing written notice of the
rescission to be given to the owners of the Bonds so called for redemption. Any optional
redemption and notice thereof shall be rescinded if for any reason on the Redemption Date
moneys are not available in the Debt Service Account or otherwise held in trust for such purpose
in an amount sufficient to pay in full on said date the principal of, interest, and any premium due
on the Bonds called for redemption. Notice of rescission of redemption shall be given in the
same manner in which notice of redemption was originally given. The actual receipt by the

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owner of any Bond of notice of such rescission shall not be a condition precedent to rescission,
and failure to receive such notice or any defect in such notice shall not affect the validity of the
rescission.

        (d) Purchase in Lieu of Redemption. Notwithstanding anything in this Resolution to the
contrary, at any time during which the Bonds are subject to optional redemption as provided in
Section 2.03(a) of this Resolution, the Bonds to be redeemed may be purchased by the Paying
Agent (for the account of the City) on the date which would be the Redemption Date, at a
purchase price equal to the redemption price which would have been applicable to such Bonds
on the Redemption Date, plus accrued interest, if any. In order to exercise such option, the City
shall deliver to the Paying Agent an Opinion of Bond Counsel and shall direct the Paying Agent
to provide notice of mandatory purchase in lieu of redemption, such notice to be provided, as and
to the extent applicable, in accordance with the provisions set forth in Section 2.03(c) if this
Resolution. On the date fixed for purchase of any Bond pursuant to this Section, the City shall
pay the purchase price of such Bond to the Paying Agent in immediately available funds and the
Paying Agent shall pay the same to the Owners of Bonds being purchased against delivery
thereof. Following such purchase, the Paying Agent shall register such Bonds in accordance
with the written instructions of the City. No purchase of any Bond pursuant to this Section shall
operate to extinguish the indebtedness evidenced by such Bond. No Owner may elect to retain a
Bond subject to mandatory purchase pursuant to this Section. In the event that the City lacks
sufficient funds to pay the purchase price of any Bond subject to mandatory purchase in lieu of
redemption pursuant to this Section on the date fixed for such purchase, the City shall cancel
such mandatory purchase in lieu of redemption and shall return each such Bond to the Owner
who shall have tendered such Bond for mandatory purchase in lieu of redemption pursuant to
this Section. The Paying Agent shall give notice that such mandatory purchase was not effected
promptly following the date fixed for such purchase.

        Section 2.04 Form of Bonds. The Bonds, the form of the Paying Agent’s Certificate of
Authentication and the form of Assignment to appear thereon shall be substantially in the forms,
respectively, with necessary or appropriate variations, omissions and insertions, as permitted or
required by this Resolution, as are set forth in Exhibit A attached hereto.

        Section 2.05 Execution of Bonds. The Bonds shall be executed on behalf of the City by
the manual or facsimile signatures of its Mayor and its City Treasurer or any deputy of either
officer, and attested by its City Clerk or any deputy thereof. If any officer whose signature
appears on any Bond ceases to be such officer before delivery of the Bonds to the initial
purchaser, such signature shall nevertheless be as effective as if the officer had remained in
office until the delivery of the Bonds to the purchaser.

        Only such Bonds as shall bear thereon a Certificate of Authentication in the form set
forth in Exhibit A attached hereto, manually executed and dated by the Paying Agent, shall be
valid or obligatory for any purpose or entitled to the benefits of this Resolution, and such
Certificate of Authentication of the Paying Agent shall be conclusive evidence that the Bonds so
registered have been duly authenticated, registered and delivered hereunder and are entitled to
the benefits of this Resolution.




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        Section 2.06 Transfer of Bonds. Any Bond may, in accordance with its terms, be
transferred, upon the Registration Books, by the person in whose name it is registered, in person
or by his duly authorized attorney, upon surrender of such Bond for cancellation at the office of
the Paying Agent designated for that purpose, accompanied by delivery of a written instrument
of transfer in a form approved by the Paying Agent, duly executed. The City may charge the
Owner a reasonable sum for each new Bond issued upon any transfer.

         Whenever any Bond or Bonds shall be surrendered for transfer, the City shall execute and
the Paying Agent shall authenticate and deliver a new Bond or Bonds, of the same maturity and
interest rate, for like aggregate principal amount. No transfer of any Bond shall be required to be
made by the Paying Agent during the period from (1) the close of business on the applicable
Record Date to and including the succeeding Interest Payment Date, or (2) the close of business
on the date on which notice is given that such Bond has been selected for redemption in whole or
in part, to and including the designated Redemption Date.

       Section 2.07 Exchange of Bonds. Bonds may be exchanged at the office of the Paying
Agent designated for that purpose, for a like aggregate principal amount of Bonds of authorized
denominations and of the same maturity and interest rate. The City may charge the Owner a
reasonable sum for each new Bond issued upon any exchange.

       No exchange of Bonds shall be required to be made by the Paying Agent during the
period from (1) the close of business on the applicable Record Date to and including the
succeeding Interest Payment Date, or (2) the close of business on the date on which notice is
given that such Bond has been selected for redemption in whole or in part, to and including the
designated Redemption Date.

        Section 2.08 Registration Books. The Paying Agent shall keep or cause to be kept
sufficient Registration Books for the registration and transfer of the Bonds, which shall at all
times be open to inspection by the City upon reasonable notice; and, upon presentation for such
purpose, the Paying Agent shall, under such reasonable regulations as it may prescribe, register
or transfer or cause to be registered or transferred, on the Registration Books, Bonds as herein
before provided.

        Section 2.09 Bonds Mutilated, Lost, Destroyed or Stolen. If any Bond shall become
mutilated, the City, at the expense of the Owner of said Bond, shall execute, and the Paying
Agent shall thereupon authenticate and deliver, a new Bond of like maturity and principal
amount in exchange and substitution for the Bond so mutilated, but only upon surrender to the
Paying Agent of the Bond so mutilated. Every mutilated Bond so surrendered to the Paying
Agent shall be canceled by it and delivered to, or upon the order of, the City. If any Bond shall
be lost, destroyed or stolen, evidence of such loss, destruction or theft may be submitted to the
City and, if such evidence be satisfactory to the City and indemnity satisfactory to it shall be
given, the City, at the expense of the Owner, shall execute, and the Paying Agent shall thereupon
authenticate and deliver, a new Bond of like maturity, interest rate and principal amount in
substitution for the Bond so lost, destroyed or stolen. The City may require payment by the
Owner of a sum not exceeding the actual cost of preparing each new Bond issued under this
Section and of the expenses which may be incurred by the City and the Paying Agent. Any
Bond issued under the provisions of this Section in lieu of any Bond alleged to be lost, destroyed

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or stolen shall constitute an original additional contractual obligation on the part of the City
whether or not the Bond so alleged to be lost, destroyed or stolen be at any time enforceable by
anyone, and shall be equally and proportionately entitled to the benefits of this Resolution with
all other Bonds issued pursuant to this Resolution.

       Notwithstanding any other provision of this Section, in lieu of delivering a new Bond for
which principal has or is about to become due for a Bond which has been mutilated, lost,
destroyed or stolen, the Paying Agent may, at its option or upon a Written Request of the City,
make payment of such Bond in accordance with its terms.

       Section 2.10 Use of Depository. Notwithstanding any provision of this Resolution to
the contrary:

      (a) The Bonds shall be initially registered in the name of “Cede & Co.,” as nominee of
The Depository Trust Company. Registered ownership of such Bonds, or any portions thereof,
may not thereafter be transferred except:

                 (i) to any successor of The Depository Trust Company or its nominee, or of any
         substitute depository designated pursuant to paragraph (ii) of this subsection (a)
         (“substitute depository”); provided that any successor of The Depository Trust Company
         or substitute depository shall be qualified under any applicable laws to provide the
         service proposed to be provided by it;

                  (ii) to any substitute depository designated in a written request of the City, upon
         (i) the resignation of The Depository Trust Company or its successor (or any substitute
         depository or its successor) from its functions as depository or (ii) a determination by the
         City that The Depository Trust Company or its successor is no longer able to carry out its
         functions as depository; provided that any such substitute depository shall be qualified
         under any applicable laws to provide the services proposed to be provided by it; or

                (iii) to any person as provided below, upon (A) the resignation of The Depository
         Trust Company or its successor (or any substitute depository or its successor) from its
         functions as depository or (B) a determination by the City that The Depository Trust
         Company or its successor is no longer able to carry out its functions as depository;
         provided that no substitute depository which is not objected to by the City and the Paying
         Agent can be obtained.

        (b) In the case of any transfer pursuant to paragraph (i) or paragraph (ii) of
subsection (a) of this Section, upon receipt of all Outstanding Bonds by the Paying Agent,
together with a Written Request of the City to the Paying Agent, a single new Bond shall be
executed and delivered, registered in the name of such successor or such substitute depository or
their nominees, as the case may be, all as specified in such Written Request of the City. In the
case of any transfer pursuant to paragraph (iii) of subsection (a) of this Section, upon receipt of
all Outstanding Bonds by the Paying Agent together with a Written Request of the City, new
Bonds shall be executed and delivered in such denominations and registered in the names of such
persons as are requested in a Written Request of the City, provided the Paying Agent shall not be



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required to deliver such new Bonds within a period less than 60 days from the date of receipt of
such a Written Request of the City.

       (c) In the case of payment or defeasance pursuant to Section 8.02 hereof of less than all
of the principal maturing in a particular year, The Depository Trust Company or substitute
depository may, according to its own operating procedures, deliver such Bonds to the Paying
Agent for cancellation and re-registration to reflect the amounts of such reduction in principal.

       (d) The City and the Paying Agent shall be entitled to treat the person in whose name
any Bond is registered as the Owner thereof for all purposes of this Resolution and any
applicable laws, notwithstanding any notice to the contrary received by the Paying Agent or the
City; and the City and the Paying Agent shall have no responsibility for transmitting payments
to, communicating with, notifying or otherwise dealing with any Beneficial Owners of the
Bonds. Neither the City nor the Paying Agent will have any responsibility or obligations, legal
or otherwise, to the Beneficial Owners or to any other party including The Depository Trust
Company or its successor (or substitute depository or its successor), except for the registered
owner of any Bond.

         (e) So long as all outstanding Bonds are registered in the name of Cede & Co. or its
registered assign, the City and the Paying Agent shall reasonably cooperate with Cede & Co. or
its registered assign, as sole registered Owner, in effecting payment of the principal and interest
due with respect to the Bonds by arranging for payment in such manner that funds for such
payments are properly identified and are made immediately available on the date they are due.




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                                          ARTICLE III

                       SALE OF BONDS; SECURITY FOR THE BONDS

         Section 3.01 Sale of Bonds.

        (a) Official Notice of Sale; Date of Sale. The Official Notice of Sale inviting bids for the
Bonds, in substantially the form of the Official Notice of Sale attached hereto as Exhibit B (the
“Official Notice of Sale”), is hereby approved, and the City Council is hereby requested to adopt
and use said form as the Official Notice of Sale inviting bids for the Bonds, subject to such
corrections, revisions or additions as deemed necessary by the City Manager, the Deputy City
Manager, the Director of Finance, or any designee thereof (each, an “Authorized City Officer”),
or by the City Attorney. Northcross, Hill & Ach, Inc., San Rafael, California (herein called the
“Financial Advisor”), is hereby authorized and directed to cause to be mailed to prospective
bidders for the Bonds (including by posting to an appropriate Internet website which shall be
accessible to interested bidders) copies of said Official Notice of Sale in the form finally
approved by the City.

       Bids for the Bonds shall be received on behalf of this City Council on July 8, 2010 (or on
such other date as shall be determined by the Director of Finance, so long as such date is not later
than August 10, 2010) at the hour and place designated in said Official Notice of Sale.

       (b) Notice of Intention to Sell Bonds. The Notice of Intention to Sell Bonds, in
substantially the form of Notice of Intention to Sell Bonds attached hereto as Exhibit C (the
“Notice of Intention to Sell Bonds”), is hereby approved, and the City Clerk is hereby authorized
and directed to cause the Notice of Intention to Sell Bonds, subject to such corrections, revisions
or additions thereto as shall be deemed necessary upon consultation with the Authorized City
Officer or the City Attorney, to be published, as required by Section 53692 of the California
Government Code, in a financial publication generally circulated throughout the State of
California or which the Financial Advisor advises is expected to be disseminated among
prospective bidders for the Bonds, and such publication is hereby expressly ratified and
approved.

        (c) Award of Bonds; Certificate of Award. The Authorized City Officer, as delegate of
this City Council, is hereby authorized to entertain bids for the Bonds, and to accept the lowest
true interest cost bid, provided that (i) such true interest cost shall be no greater than 6.00%,
calculated as specified in the Official Notice of Sale; (ii) the nominal interest rate on any Bonds
shall not be in excess of 12.00% per annum; (iii) the price to be paid for the Bonds shall not be
less than the principal amount thereof, plus accrued interest, if any, to the date of delivery;
(iv) the purchaser shall agree to pay Costs of Issuance in the amount and as provided in the
Official Notice of Sale; and (v) the bid otherwise conforms to the requirements of this
Resolution.

        If such true interest cost and price are acceptable to the Authorized City Officer, the
Authorized City Officer is hereby authorized to award the sale of the Bonds by executing a
Certificate of Award, in substantially the form attached hereto as Exhibit D, naming the
successful bidder and determining all remaining terms of the Bonds as permitted and directed by


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this Resolution, and such execution shall constitute conclusive evidence of the approval of the
Authorized City Officer and of this City Council of the terms of the Bonds and the sale thereof,
including any change therein from the terms specified in the Official Notice of Sale; provided
that the terms of the Bonds and the sale thereof shall conform in all respects with the limitations
contained in this Resolution.

        The Certificate of Award shall recite the aggregate principal amount of the Bonds, the
date thereof, the maturity and principal payment dates, principal amounts and annual rates of
interest of each maturity thereof, the initial and semiannual interest payment dates thereof, and
the terms of optional and mandatory sinking fund redemption thereof.

       If no bid for the Bonds is acceptable, the Authorized City Officer is requested to reject all
bids and to re-bid the Bonds or, if necessary, sell the Bonds by negotiated sale as permitted by
the Act and the Charter, in consultation with the Financial Advisor, upon terms and conditions
otherwise in conformity with the limitations contained in this Resolution.

        (d) Official Statement. The Official Statement relating to the Bonds, in substantially the
form on file with the City Clerk, is hereby approved with such changes, additions and corrections
as the Authorized City Officer or the City Attorney may hereafter approve, and the Financial
Advisor is hereby authorized to prepare and distribute copies of such Official Statement in
preliminary form to persons who may be interested in purchasing the Bonds. The Authorized
City Officer is hereby authorized to certify on behalf of the City that the preliminary form of the
Official Statement was deemed final as of its date, within the meaning of Rule 15c2-12
promulgated under the Securities Exchange Act of 1934 (except for the omission of certain final
pricing, rating and related information as permitted by said Rule). The Authorized City Officer
is hereby authorized and directed to sign said Official Statement in its final form, including the
final pricing information, and the initial purchaser is hereby authorized and directed to deliver
copies of such Official Statement in final form to subsequent purchasers of the Bonds.

         Section 3.02 Security for the Bonds.

        The City has the power and is obligated by the Act and the Charter, and hereby
covenants, to levy ad valorem taxes upon all property within the City subject to taxation by the
City, without limitation of rate or amount, for the payment of the Bonds and the interest thereon,
in accordance with Section 43632 of the Act, and to take such action in each year as necessary to
provide for the collection of the tax by the Treasurer-Tax Collector of the County. The City
reserves the right to levy and request the Treasurer-Tax Collector to collect additional amounts in
each year as the City may deem prudent in order to responsibly manage the City’s debt
obligations and tax burdens.




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                                           ARTICLE IV

                                   FUNDS AND ACCOUNTS

        Section 4.01 Application of the Proceeds of the Sale of Bonds. On the Closing Date,
the proceeds of sale of the Bonds shall be paid by the initial purchaser to the Paying Agent. The
Paying Agent shall immediately deposit or transfer all of such amounts on the Written Request
of the City, as follows:

      (a) The Paying Agent shall transfer to the City, for deposit in the Debt Service Account,
an amount equal to the accrued interest, plus premium if any, on the Bonds;

       (b) The Paying Agent shall deposit in the Costs of Issuance Account of the Project Fund
any proceeds of the Bonds designated to pay the Costs of Issuance; and

       (c) The Paying Agent shall transfer the remaining proceeds of the Bonds to the City for
deposit in the Project Fund.

         Section 4.02 Costs of Issuance Account.

        (a) There is hereby created the “City of Berkeley General Obligation Bonds, Series 2010
(Measure FF—Neighborhood Branch Library Improvements Project), Costs of Issuance Account
(the “Costs of Issuance Account”) within the Project Fund, which shall be held and maintained
by the Paying Agent as a separate fund on behalf of the City, distinct from all other funds held by
the Paying Agent, into which shall be paid on receipt thereof, the portion of the Bond proceeds
designated in Section 4.01(b). Amounts on deposit in the Costs of Issuance Account shall be
disbursed on the Written Request of the City for the purpose of paying all items of expense
directly or indirectly reimbursable to the City for Costs of Issuance.

        (b) On the date which is 180 days following the Closing Date, all amounts remaining on
deposit in the Costs of Issuance Account shall be withdrawn therefrom by the Paying Agent and
transferred to the City for deposit in the Project Fund and the Costs of Issuance Account shall be
closed.

         Section 4.03 Debt Service Account.

        (a) There is hereby created, as an account within the General Fund of the City, the
“General Obligation Bonds, Series 2010 (Measure FF—Neighborhood Branch Library
Improvements Project), Debt Service Account,” which shall be maintained by the City Treasurer
as a separate account, distinct from all other funds of the City, into which shall be paid on receipt
thereof, the portion of the Bond proceeds designated in Section 4.01(a).

        (b) In accordance with the Act and Section 3.02 hereof, the City Treasurer shall deposit
in the Debt Service Account all property taxes levied and collected by the County and paid to the
City for payment of the Bonds pursuant to Section 43632 of the Act.




                                                -15-
OHS West:260922405.2
        (c) All moneys in the Debt Service Account shall be used and withdrawn by the City
Treasurer solely for the purpose of paying the principal of and interest on the Bonds as the same
shall become due and payable.

         Section 4.04 Project Fund

        (a) There is hereby created, a fund within the General Fund of the City, the “General
Obligation Bonds, Series 2010 (Measure FF—Neighborhood Branch Library Improvements
Project), Project Fund,” which shall be maintained by the City Treasurer as a separate account,
distinct from all other funds of the City, into which shall be paid on receipt thereof, the portion of
the Bond proceeds designated in Section 4.01(c).

        (b) Amounts in the Project Fund shall be withdrawn and paid by the City Treasurer as
other funds of the City are disbursed, but only for authorized Project Costs.

        (c) Upon the order of City Manager upon a determination that no further amounts are
required to be disbursed for costs and expenses of the Project, the City Treasurer shall transfer
any balance in the Project Fund to the Debt Service Account to be used for payment of Debt
Service on the Bonds in accordance with Section 4.03, and the Project Fund shall thereupon be
closed.

         Section 4.05 Investment of Moneys.

       (a) Amounts on deposit in the Project Fund and the Debt Service Account may be
invested in Authorized Investments. Earnings on the investment of amounts held in any fund or
account established hereunder shall be credited to the respective fund or account from which
such investments are made.

        (b) Moneys on deposit in the Costs of Issuance Account shall be invested in money
market mutual funds that are rated by each rating agency then rating the Bonds in one of its two
highest rating categories, including funds for which the Paying Agent, its affiliates or
subsidiaries provide investment, advisory or other management or administrative services.
Interest and earnings derived from the investment of amounts on deposit in the Costs of Issuance
Account shall be retained therein until the Costs of Issuance Account is closed.




                                                -16-
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                                            ARTICLE V

                              OTHER COVENANTS OF THE CITY

       Section 5.01 Punctual Payment; Faithful Performance. The City hereby covenants to
punctually pay, or cause to be paid, the principal of and interest on the Bonds, in strict
conformity with the terms of the Bonds and of this Resolution, and to faithfully observe and
perform all of the conditions, covenants and requirements of this Resolution and of the Bonds.

        Section 5.02 Extension of Time for Payment. In order to prevent any accumulation of
claims for interest after maturity, the City will not, directly or indirectly, extend or consent to the
extension of the time for the payment of any claim for interest on any of the Bonds and will not,
directly or indirectly, approve any such arrangement by purchasing or funding said claims for
interest or in any other manner. In case any such claim for interest shall be extended or funded,
whether or not with the consent of the City, such claim for interest so extended or funded shall
not be entitled, in case of default hereunder, to the benefits of this Resolution, except subject to
the prior payment in full of the principal of all of the Bonds then Outstanding and of all claims
for interest which shall not have so extended or funded.

         Section 5.03 Tax Covenants Relating to the Bonds.

                (a) General. The City shall not take any action, or fail to take any action, if such
action or failure to take such action would adversely affect the exclusion from gross income of
the interest payable on the Bonds under Section 103 of the Code. To that end, and without
limiting the generality of the foregoing, the City hereby covenants that on the date of delivery of
any series of the Bonds, it will deliver its Tax Certificate to the initial purchaser of the Bonds
containing representations and covenants with respect to such actions (the “Tax Certificate”),
and that it will comply with the requirements of the Tax Certificate. The provisions of this
subsection (a) shall survive payment in full or defeasance of the Bonds.

               (b) Yield Restriction. In the event that at any time the City is of the opinion that
for purposes of this Section it is necessary or helpful to restrict or limit the yield on the
investment of any moneys held by the City Treasurer or by the Paying Agent on behalf of the
City, in accordance with this Resolution or pursuant to the Act and the Charter, the Authorized
City Officer shall so direct the City Treasurer or the Paying Agent in writing, and the City
Treasurer or the Paying Agent shall take such action as may be necessary in accordance with
such instructions.

               (c) Reliance on Opinion of Bond Counsel. Notwithstanding any provision of this
Section, if the City shall provide to the City Treasurer an opinion of counsel of nationally
recognized standing in the field of law relating to municipal bonds (an “Opinion of Bond
Counsel”) that any specified action required under this Section is no longer required or that some
further or different action is required to maintain the exclusion from federal income tax of
interest on the Bonds, the City Treasurer may conclusively rely on such Opinion of Bond
Counsel in complying with the requirements of this Section and of the Tax Certificate, and the
covenants hereunder shall be deemed to be modified to that extent.



                                                 -17-
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       Section 5.04 Continuing Disclosure. The City hereby covenants and agrees that it will
comply with and carry out all of the provisions of the Continuing Disclosure Certificate, which
shall be executed by an Authorized City Officer and delivered on the Closing Date.
Notwithstanding any other provision of this Resolution, failure of the City to comply with the
Continuing Disclosure Certificate shall not be considered a default by the City hereunder or
under the Bonds; however, any Participating Underwriter (as such term is defined in the
Continuing Disclosure Certificate) or any holder or Beneficial Owner of the Bonds may take
such actions as may be necessary and appropriate to compel performance, including seeking
mandate or specific performance by court order.




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                                          ARTICLE VI

                                     THE PAYING AGENT

        Section 6.01 Appointment; Acceptance; Designated Office. (a) Appointment and
Acceptance of Duties. The Bank of New York Mellon Trust Company, N.A., is hereby
appointed Paying Agent for the Bonds, and hereby accepts and agrees to perform the duties and
obligations of the Paying Agent, registrar and transfer agent specifically imposed upon it by this
Paying Agent Agreement, and no implied duties shall be read into this Paying Agent Agreement
against the Paying Agent.

        The Paying Agent is hereby authorized and hereby agrees to pay or redeem the Bonds
when duly presented for payment at maturity, or on prior redemption, and to cancel all Bonds
upon payment thereof. The Paying Agent shall keep accurate records of all funds administered
by it and of all Bonds paid and discharged.

        (b)    Office of the Paying Agent. The Paying Agent, and any successor Paying Agent,
shall designate each place or places where it will conduct the functions of transfer, registration,
exchange, payment, and surrender of the Bonds. If no office is so designated for a particular
purpose, such functions shall be conducted at the office of The Bank of New York Mellon Trust
Company, N.A., in Los Angeles, California, or the principal corporate trust office of any
successor Paying Agent.

       (c)     Resignation, Removal, Replacement of Paying Agent. The City may remove the
Paying Agent initially appointed, and any successor thereto, and may appoint a successor or
successors thereto.

       The Paying Agent may at any time resign by giving written notice to the City of such
resignation. Upon receiving notice of such resignation, the City shall promptly appoint a
successor Paying Agent by an instrument in writing. Any resignation or removal of the Paying
Agent and appointment of a successor Paying Agent shall become effective upon acceptance of
appointment by the successor Paying Agent. In the absence of the appointment of a successor
Paying Agent, the City Treasurer may instead at any time, and shall, upon the resignation or
removal of the then-acting Paying Agent and prior to the acceptance of duties by a successor
Paying Agent, assume the duties of the Paying Agent.

        Section 6.02 Protection of Paying Agent. The Paying Agent hereby agrees, provided
sufficient immediately available funds have been provided to it for such purpose by or on behalf
of the City, to use the funds deposited with it solely for payment of the principal of and interest
on the Bonds as the same shall become due or become subject to earlier redemption.

         Section 6.03 Reliance on Documents, Etc.

       (a) The Paying Agent may conclusively rely, as to the truth of the statements and
correctness of the opinions expressed therein, on certificates or opinions furnished to the Paying
Agent by the City.



                                               -19-
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       (b) The Paying Agent shall not be liable for any error of judgment made in good faith.
The Paying Agent shall not be liable for other than its negligence or willful misconduct in
connection with any act or omission hereunder.

         (c) No provision of this Paying Agent Agreement shall require the Paying Agent to
expend or risk its own funds or otherwise incur any financial liability for performance of any of
its duties hereunder, or in the exercise of any of its rights or powers.

       (d) The Paying Agent may rely, or be protected in acting or refraining from acting, upon
any resolution, certificate, statement, instrument, opinion, report, notice, request, direction,
consent, order, bond, note, security or other paper or document believed by it to be genuine and
to have been signed or presented by the proper party or parties. The Paying Agent need not
examine the ownership of any Bond, but is protected in acting upon receipt of Bonds containing
an endorsement or instruction of transfer or power of transfer which appears on its face to be
signed by the Bondowner or agent of the Bondowner.

        (e) The Paying Agent may consult with counsel, and the written advice of such counsel
or any Opinion of Counsel shall be full authorization and protection with respect to any action
taken, suffered or omitted by it hereunder in good faith and reliance thereon.

       (f) The Paying Agent may exercise any of the powers hereunder and perform any duties
hereunder either directly or by or through agents or attorneys.

       (g) The Paying Agent shall be afforded the same rights, protections, immunities,
indemnities and standard of care hereunder (including, without limitation, with respect to
investments) as accorded to it under the Agreement to Provide Registrar and Paying Agent
Services for Fully Registered Municipal Bonds dated as of July 1, 2010, between the City and
the Paying Agent.

       Section 6.04 Recitals of City. The recitals contained herein and in the Bonds shall be
taken as the statements of the City, and the Paying Agent assumes no responsibility for their
correctness.

        Section 6.05 Paying Agent May Own Bonds. The Paying Agent, in its individual or
any other capacity, may become the owner or pledgee of Bonds with the same rights it would
have if it were not the Paying Agent for the Bonds.

        Section 6.06 Money Held by Paying Agent. Money held by the Paying Agent
hereunder may be commingled with other funds held by the Paying Agent, but shall be
separately accounted for. Except as otherwise provided herein, the Paying Agent shall have no
duties with respect to investment of funds deposited with it and shall be under no obligation to
pay interest on any money received by it hereunder.

       Section 6.07 Other Transactions. The Paying Agent may engage in or be interested in
any financial or other transaction with the City.

       Section 6.08 Interpleader. The Paying Agent may seek adjudication of any adverse
claim, demand, or controversy over its person as well as funds on deposit, in a court of

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competent jurisdiction. The Paying Agent has the right to file an action in interpleader in any
court of competent jurisdiction to determine the rights of any person claiming any interest herein.

        Section 6.09 Indemnification. The City shall indemnify the Paying Agent, its officers,
directors, employees, and agents (“Indemnified Parties”) for, and hold them harmless against any
loss, cost, claim, liability or expense arising out of or in connection with the Paying Agent’s
acceptance or administration of the Paying Agent’s duties hereunder or under the Bonds (except
any loss, liability or expense as may be adjudicated by a court of competent jurisdiction to be
attributable to the Paying Agent’s negligence or willful misconduct), including without limitation
the cost and expense (including its counsel fees and disbursements, including the allocated costs
and disbursements of internal counsel) of defending itself against any claim or liability (except
such action as may be brought against the Paying Agent by the City, unless the Paying Agent did
not commit willful misconduct or negligence) in connection with the exercise or performance of
any of its powers or duties under this Paying Agent Agreement. The provisions of this
Section 6.09 shall survive termination of this Paying Agent Agreement and shall continue for the
benefit of any Paying Agent after its resignation as Paying Agent hereunder.




                                               -21-
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                                          ARTICLE VII

                           AMENDMENT OF THIS RESOLUTION

       Section 7.01 Amendments Effective Without Consent of the Owners. For any one or
more of the following purposes and at any time or from time to time, the City may adopt a
Supplemental Resolution, which, without the requirement of consent of the Owners of the
Bonds, shall be fully effective in accordance with its terms:

        (a) To add to the covenants and agreements of the City in this Resolution, other
covenants and agreements to be observed by the City which are not contrary to or inconsistent
with this Resolution as theretofore in effect;

        (b) To cure any ambiguity, supply any omission, or cure or correct any defect or
inconsistent provision in this Resolution, which in any event shall not materially adversely affect
the interests of the Bond Owners, in the opinion of Bond Counsel filed with the City; or

       (c) To make such additions, deletions or modifications as may be necessary or desirable
to ensure exemption from federal income taxation of interest on the Bonds.

         Section 7.02 Amendments Effective With Consent of the Owners. Any modification or
amendment of this Resolution and of the rights and obligations of the City and of the Owners of
the Bonds, in any particular, may be made by a Supplemental Resolution, with the written
consent of the Owners of a majority in aggregate principal amount of the Bonds Outstanding at
the time such consent is given. No such modification or amendment shall permit a change in the
terms of maturity of the principal of any Outstanding Bonds or of any interest payable thereon or
a reduction in the principal amount thereof or in the rate of interest thereon without the written
consent of the affected Owner, or shall reduce the percentage of Bonds the consent of the
Owners of which is required to effect any such modification or amendment, or shall change or
modify any of the rights or obligations of any Paying Agent without its written assent thereto.
No such amendment shall modify the constitutional or statutory obligations or duties of the City
or its officers with respect to the Bonds.




                                               -22-
OHS West:260922405.2
                                            ARTICLE VIII

                                         MISCELLANEOUS

        Section 8.01 Benefits of Resolution Limited to Parties. Nothing in this Resolution,
expressed or implied, is intended to give to any person other than the City and the Owners of the
Bonds, any right, remedy, or claim under or by reason of this Resolution. Any covenants,
stipulations, promises or agreements in this Resolution contained by and on behalf of the City
shall be for the sole and exclusive benefit of the Owners of the Bonds.

         Section 8.02 Defeasance.

         (a) Discharge of Resolution. Bonds may be paid by the City in any of the following
ways:

                 (i) by paying or causing to be paid the principal or redemption price of and
         interest on such Bonds, as and when the same become due and payable;

                 (ii) by irrevocably depositing, in trust, at or before maturity, money or securities
         in the necessary amount (as provided in Section 8.02(c) hereof) to pay or redeem such
         Bonds; or

                  (iii) by delivering such Bonds to the Paying Agent for cancellation by it.

        If the City shall pay all Outstanding Bonds and shall also pay or cause to be paid all other
sums payable hereunder by the City, then and in that case, and notwithstanding that any Bonds
shall not have been surrendered for payment, this Resolution, all taxes and other assets pledged
under this Resolution and all covenants, agreements and other obligations of the City under this
Resolution shall cease, terminate, become void and be completely discharged and satisfied,
except only as provided in Section 8.02(b). In such event, upon the Written Request of the City,
the Paying Agent shall cause an accounting for such period or periods as may be requested by
the City to be prepared and filed with the City and shall execute and deliver to the City all such
instruments as may be necessary to evidence such discharge and satisfaction, and the Paying
Agent shall pay over, transfer, assign or deliver to the City all moneys or securities or other
property held by it pursuant to this Resolution which are not required for the payment or
redemption of Bonds not theretofore surrendered for such payment or redemption.

        (b) Discharge of Liability on Bonds. Upon the irrevocable deposit, in trust, at or before
maturity, of money or securities in the necessary amount (as provided in Section 8.02(c) hereof)
to pay or redeem any Outstanding Bond (whether upon or prior to its maturity or the Redemption
Date of such Bond), provided that, if such Bond is to be redeemed prior to maturity, notice of
such redemption shall have been given as provided in Section 2.03 or provision satisfactory to
the Paying Agent shall have been made for the giving of such notice, then all liability of the City
in respect of such Bond shall cease and be completely discharged, except only that thereafter the
Owner thereof shall be entitled only to payment of the principal of and interest on such Bond by
the City, and the City shall remain liable for such payment, but only out of such money or
securities deposited in trust as aforesaid for such payment, provided further, however, that the
provisions of Section 8.02(d) shall apply in all events.

                                                  -23-
OHS West:260922405.2
       The City may at any time surrender to the Paying Agent for cancellation by it any Bonds
previously issued and delivered, which the City may have acquired in any manner whatsoever,
and such Bonds, upon such surrender and cancellation, shall be deemed to be paid and retired.

       (c) Deposit of Money or Securities with Paying Agent. Whenever in this Resolution it is
provided or permitted that there be deposited with or held in trust money or securities in the
necessary amount to pay or redeem any Bonds, the money or securities so to be deposited shall
be:

                 (i) lawful money of the United States of America in an amount equal to the
         principal amount of such Bonds and all unpaid interest thereon to maturity, except that, in
         the case of Bonds which are to be redeemed prior to maturity and in respect of which
         notice of such redemption shall have been given as provided in Section 2.03 or provision
         satisfactory to the Paying Agent shall have been made for the giving of such notice, the
         amount to be deposited or held shall be the principal amount or redemption price of such
         Bonds and all unpaid interest thereon to the Redemption Date; or

                 (ii) Federal Securities the principal of and interest on which when due, in the
         opinion of a certified public accountant delivered to the City, will provide money
         sufficient to pay the principal or redemption price of and all unpaid interest to maturity,
         or to the Redemption Date, as the case may be, on the Bonds to be paid or redeemed, as
         such principal or redemption price and interest become due, provided that, in the case of
         Bonds which are to be redeemed prior to the maturity thereof, notice of such redemption
         shall have been given as provided in Section 2.03 or provision satisfactory to the Paying
         Agent shall have been made for the giving of such notice.

        (d) Payment of Bonds After Discharge of Resolution. Notwithstanding any provisions of
this Resolution, any moneys held by the Paying Agent for the payment of the principal or
redemption price of, or interest on, any Bonds and remaining unclaimed for two years after the
principal of all of the Bonds has become due and payable (whether at maturity or upon call for
redemption as provided in this Resolution), if such moneys were so held at such date, or two
years after the date of deposit of such moneys if deposited after said date when all of the Bonds
became due and payable, shall, upon request of the City, be repaid to the City free from the trusts
created by this Resolution, and all liability of the Paying Agent with respect to such moneys shall
thereupon cease; provided, however, that before the repayment of such moneys to the City as
aforesaid, the Paying Agent may (at the Written Request of and cost of the City) first mail to the
Owners of all Bonds which have not been paid at the addresses shown on the Registration Books
a notice in such form as may be deemed appropriate by the Paying Agent, with respect to the
Bonds so payable and not presented and with respect to the provisions relating to the repayment
to the City of the moneys held for the payment thereof.




                                                -24-
OHS West:260922405.2
       Section 8.03 Execution of Documents and Proof of Ownership by Bond Owners. Any
request, declaration or other instrument which this Resolution may require or permit to be
executed by Bond Owners may be in one or more instruments of similar tenor, and shall be
executed by Bond Owners in person or by their attorneys appointed in writing.

       Except as otherwise herein expressly provided, the fact and date of the execution by any
Bond Owner or his attorney of such request, declaration or other instrument, or of such writing
appointing such attorney, may be proved by the certificate of any notary public or other officer
authorized to take acknowledgments of deeds to be recorded in the state in which he purports to
act, that the person signing such request, declaration or other instrument or writing
acknowledged to him the execution thereof, or by an affidavit of a witness of such execution,
duly sworn to before such notary public or other officer.

       Except as otherwise herein expressly provided, the ownership of registered Bonds and the
amount, maturity, number and date of holding the same shall be proved by the Registration
Books.

        Any request, declaration or other instrument or writing of the Owner of any Bond shall
bind all future Owners of such Bond in respect of anything done or suffered to be done by the
City, the Paying Agent or the City Treasurer in good faith and in accordance therewith.

        Section 8.04 Waiver of Personal Liability. No City Council member, officer, agent or
employee of the City shall be individually or personally liable for the payment of the principal of
or interest on the Bonds; but nothing herein contained shall relieve any such City Council
member, officer, agent or employee from the performance of any official duty provided by law.

        Section 8.05 Destruction of Canceled Bonds. Whenever in this Resolution provision is
made for the surrender to the City of any Bonds which have been paid or canceled pursuant to
the provisions of this Resolution, a certificate of destruction duly executed by the Paying Agent
shall be deemed to be the equivalent of the surrender of such canceled Bonds and the City shall
be entitled to rely upon any statement of fact contained in any certificate with respect to the
destruction of any such Bonds therein referred to.

        Section 8.06 Partial Invalidity. If any section, paragraph, sentence, clause or phrase of
this Resolution shall for any reason be held illegal or unenforceable, such holding shall not affect
the validity of the remaining portions of this Resolution. The City hereby declares that it would
have adopted this Resolution and each and every other section, paragraph, sentence, clause or
phrase hereof and authorized the issue of the Bonds pursuant hereto irrespective of the fact that
any one or more sections, paragraphs, sentences, clauses, or phrases of this Resolution may be
held illegal, invalid or unenforceable.

        Section 8.07 Execution of Documents. The Mayor, the City Administrator, the City
Clerk, the Director of Finance and the City Treasurer, and the deputies thereof, and any and all
other officers of the City, are each authorized and directed in the name and on behalf of the City
to make any and all certificates, requisitions, agreements, notices, consents, warrants and other
documents, which they or any of them might deem necessary or appropriate in order to
consummate the lawful issuance, sale, delivery and payment of the Bonds. Whenever in this


                                               -25-
OHS West:260922405.2
Resolution any officer of the City 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 officer or agent of the City designated by such officer to act on his or her behalf in the case
such officer shall be absent or unavailable.

        Section 8.08 Effective Date of Resolution. This Resolution shall take effect from and
after the date of its passage and adoption.

      The foregoing is a full, true and correct copy of a resolution duly adopted by the City
Council of the City at a meeting thereof on the 6th day of July, 2010, by the following vote of the
members thereof:

         AYES:

         NOES:

         ABSTAIN:

         ABSENT:


                                                                         Mayor



                   City Clerk




                                               -26-
OHS West:260922405.2
                                          EXHIBIT A

                                  DRAFT FORM OF BOND


                              UNITED STATES OF AMERICA
                                STATE OF CALIFORNIA
                                  ALAMEDA COUNTY

                                CITY OF BERKELEY
                      GENERAL OBLIGATION BOND, SERIES 2010
             (Measure FF—Neighborhood Branch Library Improvements Project)

        INTEREST RATE:         MATURITY DATE:              ISSUE DATE:            CUSIP:
            _____%               ___________               ________, 2010         ______

REGISTERED OWNER:               CEDE & CO.

PRINCIPAL SUM:                                               DOLLARS

        The CITY OF BERKELEY, a charter city and municipal corporation duly organized and
existing under and by virtue of the Constitution and laws of the State of California and of its
charter (the “City”), for value received, hereby promises to pay to the Registered Owner stated
above, or registered assigns (the “Owner”), on the Maturity Date stated above (subject to any
right of prior redemption hereinafter provided for), the Principal Sum stated above, in lawful
money of the United States of America, and to pay interest thereon in like lawful money at the
interest rate per annum stated above, calculated on the basis of a 360-day year comprising twelve
30-day months, and payable on March 1 and September 1 in each year, commencing
September 1, 2010 (each an “Interest Payment Date”), until payment of said principal sum. If
this bond is authenticated and registered on any date prior to the close of business on August 15,
2011, it shall bear interest from the date hereof. If authenticated during the period between a
Record Date (as defined below) and the close of business on its corresponding Interest Payment
Date, it shall bear interest from such Interest Payment Date. Otherwise, this bond shall bear
interest from the Interest Payment Date immediately preceding the date of its authentication;
provided that, if, at the time of authentication of any Bond, interest is in default on any
outstanding Bonds, such Bond shall bear interest from the Interest Payment Date to which
interest has previously been paid or made available for payment on the outstanding Bonds.

        Principal hereof and premium, if any, upon early redemption hereof are payable at the
place or places designated for the purpose by the paying agent (herein called the “Paying
Agent”), initially, The Bank of New York Mellon Trust Company, N.A. Interest hereon
(including the final interest payment upon maturity or earlier redemption) is payable by check of
the Paying Agent mailed to the Owner at the Owner’s address as it appears on the registration
books maintained by the Paying Agent as of the close of business on the 15th day of the month
next preceding such Interest Payment Date (the “Record Date”), provided that at the written
request of the owner of at least $1,000,000 aggregate principal amount of the Bonds, which

                                            Exhibit A
                                             Page 1
OHS West:260922405.2
written request is on file with the Paying Agent as of any Record Date, interest on such Bonds
shall be paid by wire transfer on the succeeding Interest Payment Date to an account in the
United States of America as shall be specified in such written request.

        This Bond is one of a duly authorized issue of bonds of the City designated as
“City of Berkeley General Obligation Bonds, Series 2010 (Measure FF—Neighborhood Branch
Library Improvements Project)” (the “Bonds”), in an aggregate principal amount of $16,000,000,
all of like tenor and date (except for such variation, if any, as may be required to designate
varying numbers, maturities, interest rates or redemption and other provisions) and all issued
pursuant to the provisions of Chapter 4 of Division 4 of Title 4 of the California Government
Code and other applicable law (the “Act”), pursuant to the City’s powers under and consistent
with the Charter of the City (the “Charter”) and pursuant to a resolution adopted by the City
Council of the City on July 6, 2010 (the “Resolution”) authorizing the issuance of the Bonds.
Reference is hereby made to the Resolution (copies of which are on file at the office of the City
Clerk) and the Act for a description of the terms on which the Bonds are issued and the rights
thereunder of the owners of the Bonds and the rights and obligations of the City thereunder, to all
of the provisions of which Resolution the Owner of this Bond, by acceptance hereof, assents and
agrees. The Bonds are issued and sold by the City, pursuant to and in strict conformity with the
provisions of the Constitution and laws of the State of California, the Charter and of the
Resolution, and subject to the more particular terms specified in the Certificate of Award of the
Bonds executed by the Director of Finance of the City on _______, 2010.

        The issuance of the Bonds was authorized by a vote of more than two-thirds of the
qualified voters of the City voting at a special municipal election held on November 4, 2008.

        The City has the power and is obligated to levy ad valorem taxes without limitation as to
rate or amount for the payment of the Bonds and the interest thereon upon all property within the
City which is subject to taxation by the City.

        Bonds maturing on or before September 1, _____, shall not be subject to redemption
prior to their respective stated maturity dates. Bonds maturing on and after September 1,
______, shall be subject to redemption prior to their respective stated maturity dates, at the
option of the City, from any available source of funds, as a whole or in part on any date after
September 1, ______, at a redemption price (expressed as a percentage of the principal amount
of the Bonds called for redemption), together with accrued interest thereon to the Redemption
Date, as shown below:

                             Redemption Date           Optional
                              (September 1)        Redemption Price




       Notice of redemption shall be given by the Paying Agent by first class mail, not less than
30 nor more than 60 days prior to the redemption date, to the respective owners of any Bonds
designated for redemption at their addresses appearing on the Bond registration books

                                            Exhibit A
                                             Page 2
OHS West:260922405.2
maintained by the Paying Agent, but neither failure to receive such notice nor any defect in the
notice so mailed shall affect the sufficiency of the proceedings for redemption.

        If this Bond is called for redemption and payment is duly provided therefor as specified
in the Resolution, interest shall cease to accrue hereon from and after the Redemption Date.

       The Bonds are issuable as fully registered Bonds, without coupons, in denominations of
$5,000 and any integral multiple thereof. Subject to the limitations and conditions and upon
payment of the charges, if any, as provided in the Resolution, Bonds may be exchanged for a like
aggregate principal amount of Bonds of other authorized denominations and of the same
maturity and interest rate.

       This Bond is transferable by the Owner hereof, in person or by the Owner’s attorney duly
authorized in writing, at the corporate trust office designated by the Paying Agent, but only in the
manner and subject to the limitations provided in the Resolution, and upon surrender and
cancellation of this Bond. Upon registration of such transfer a new Bond or Bonds, of authorized
denomination or denominations, for the same aggregate principal amount and of the same
maturity and interest rate will be issued to the transferee in exchange herefor.

        The City and the Paying Agent may treat the Owner hereof as the absolute owner hereof
for all purposes, and the City and the Paying Agent shall not be affected by any notice to the
contrary.

       The Resolution may be amended without the consent of the owners of the Bonds, but
only under the circumstances and to the extent set forth in the Resolution.

        It is hereby certified that all of the things, conditions and acts required to exist, to have
happened or to have been performed precedent to and in the issuance of this Bond do exist, have
happened or have been performed in due and regular time and manner as required by the laws of
the State of California, and that the amount of this Bond, together with all other indebtedness of
the City, does not exceed any limit prescribed by any laws of the State of California, and is not in
excess of the amount of Bonds permitted to be issued under the Resolution.

       This Bond shall not be entitled to any benefit under the Resolution or become valid or
obligatory for any purpose until the Certificate of Authentication hereon shall have been
manually signed by the Paying Agent.

        Unless this Bond is presented by an authorized representative of The Depository Trust
Company, a New York corporation (“DTC”) to the City or the Paying Agent for registration of
transfer, exchange or payment, and any Bond issued is registered in the name of Cede & Co. or
such other name as requested by an authorized representative of DTC (and any payment is made
to Cede & Co. or to such other entity as is requested by an authorized representative of DTC),
ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY
OR TO ANY PERSON IS WRONGFUL in as much as the registered owner hereof, Cede & Co.,
has an interest herein.



                                             Exhibit A
                                              Page 3
OHS West:260922405.2
       IN WITNESS WHEREOF, the City of Berkeley has caused this Bond to be executed in
its name and on its behalf with the manual or facsimile signatures of its Mayor and its City
Treasurer and attested to by the manual or facsimile signature of its City Clerk, all as of the Issue
Date stated above.

                                                  CITY OF BERKELEY


                                                  By
                                                                       Mayor


                                                  By
                                                                   [City Treasurer]

ATTEST:



                 City Clerk

                  PAYING AGENT’S CERTIFICATE OF AUTHENTICATION


       This is one of the City of Berkeley General Obligation Bonds, Series 2010 (Measure
FF—Neighborhood Branch Library Improvements Project) described in the within-mentioned
Resolution.

         Authentication Date:_____________

                                                  THE BANK OF NEW YORK MELLON
                                                  TRUST COMPANY, N.A., as Paying Agent



                                                                Authorized Signatory




                                             Exhibit A
                                              Page 4
OHS West:260922405.2
                                     DRAFT ASSIGNMENT


For value received the undersigned hereby sells, assigns and transfers unto



          (Name, Address and Tax Identification or Social Security Number of Assignee)

the within-registered Bond and hereby irrevocably constitute(s) and appoints(s)



attorney, to transfer the same on the registration books of the City with full power of substitution
in the premises.

Dated:


Signature Guaranteed:                                     Signature:



Note: Signature guarantee shall be made by a              Note: The       signature(s)   on     this
guarantor institution participating in the Securities     Assignment must correspond with the
Transfer Agents Medallion Program or in such other        name(s) as written on the face of the
guarantee program acceptable to the Paying Agent.         within registered Bond in every particular
                                                          without alteration or enlargement or any
                                                          change whatsoever.




                                              Exhibit A
                                               Page 5
OHS West:260922405.2
                          REDEMPTION SCHEDULE


                       [to be completed on pricing of Bonds]




                                    Exhibit A
                                     Page 6
OHS West:260922405.2
                                                    EXHIBIT B

                              DRAFT FORM OF OFFICIAL NOTICE OF SALE


                                         $16,000,000*
                                    CITY OF BERKELEY
                             General Obligation Bonds, Series 2010
                 (Measure FF—Neighborhood Branch Library Improvements Project)

       NOTICE IS GIVEN that the City of Berkeley, State of California (the “City”), will
receive bids pursuant to this Official Notice of Sale (the “Official Notice of Sale”) for the
purchase of all of an issue of bonds of the City described above (the “Bonds”).

      All bids must be submitted electronically only on Grant Street Group’s MuniAuction
(“MuniAuction”) website on:

                                             __________, ________, 2010

                                      commencing at 8:30 A.M. through 9:00 a.m.

Pacific Time (unless extended in accordance with the Two-Minute Rule described under
“BIDDING DETAILS” below), The MuniAuction website is accessible via the auction link on
the Grant Street Group Home Page at either www.GrantStreet.com or www.MuniAuction.com.

       To bid via the MuniAuction website, bidders must have (1) completed the registration
form on Grant Street Group’s MuniAuction website, and (2) requested and received admission to
bid on the Bonds (as described under “Registration and Admission to Bid” below). No fax or
hand delivery bids will be accepted.

Important Note: The winning bidder will be required to pay, from underwriter’s gross
spread, certain costs of issuance of the Bonds. See “MUNIAUCTION INSTRUCTIONS—
Payment of Issuance Costs”, herein.


        Amendment. The City reserves the right to amend this Official Notice of Sale at any time
prior to the bidding start time for the Bonds on ______, _______, 2010, by publishing such
amendments on the Amendments Page of the MuniAuction website.

        Postponement. The City reserves the right to postpone, from time to time, the date
established for the receipt of bids. Any such postponement will be announced through the
Amendments Page of the MuniAuction website prior to the then-scheduled date and time for
receipt of bids. If any date fixed for the receipt of bids and the sale of the Bonds is postponed,


*
    Preliminary, subject to change.



                                                      Exhibit B
                                                       Page 1
OHS West:260922405.2
the alternative sale date will be announced via the Amendments Page of the MuniAuction
website at least 20 hours prior to such alternative sale date.

        Bidders are urged to check MuniAuction website for any change in the terms of the sale
or the date and time for the receipt of bids. Failure by the City to announce any such change on
any particular information or news service other than through MuniAuction, or the failure of any
such information or news service, other than through MuniAuction, to publish such change, does
not affect the validity of such change.

                                     TERMS OF THE BONDS

        Issue: The terms of issuance, principal and interest repayment, optional redemption,
security, tax opinion, and all other information regarding the Bonds and the City are given in the
Preliminary Official Statement which each bidder must have obtained and reviewed prior to
bidding for the Bonds. This notice governs only the terms of sale, bidding and closing
procedures.

                  Principal Payments (preliminary; subject to adjustment):

                                  Maturity Date           Principal
                                  (September 1)           Amount




        Optional Redemption – Summary of Terms. Bonds maturing on or before September 1,
_____, shall not be subject to redemption prior to their respective stated maturity dates. Bonds
maturing on and after September 1, ______, shall be subject to redemption prior to their
respective stated maturity dates, at the option of the City, from any available source of funds, as
a whole or in part on any date after September 1, ______, at a redemption price (expressed as a
percentage of the principal amount of the Bonds called for redemption), together with accrued
interest thereon to the date fixed for redemption, without premium.

       If less than all of the Bonds are called for redemption, such bonds shall be redeemed in
inverse order of maturities or as otherwise directed by the City, and if less than all of the Bonds


                                              Exhibit B
                                               Page 2
OHS West:260922405.2
of any given maturity are called for redemption, the portions of such bonds of a given maturity to
be redeemed shall be determined by lot. For purposes of such selection, each shall be deemed to
consist of individual Bonds of $5,000 denominations each, which may be separately redeemed.

       Serial Bonds and/or Term Bonds: The Bonds shall be issued as serial maturities as
shown in the table above, unless the bidder requests the creation of one or more term Bonds by
combining any two or more consecutive serial maturities. For any term Bond, the amount of
principal paid in each year as the mandatory sinking fund payment shall be the amount shown
above as maturing in such year.

        Adjustment of Principal Amounts: The principal amounts of each maturity of Bonds set
forth above reflect certain estimates of the City and its financial advisor, Northcross, Hill & Ach,
Inc. (the “Financial Advisor”) with respect to the likely interest rates of the winning bid and the
premium contained in the winning bid. Following the determination of the successful bidder, the
Director of Finance of the City reserves the right to increase or decrease the principal amount of
each maturity of the Bonds, in $5,000 increments in order to achieve level debt service;
provided, however, that the adjusted aggregate principal amount of the Bonds shall not exceed
$16,000,000. Such adjustment shall be made within 26 hours of the bid opening and in the sole
discretion of the Director of Finance. The aggregate price bid by the successful bidder will be
adjusted by the Director of Finance proportionate to any increase or decrease in the aggregate
principal amount of the Bonds and without consideration for the reoffering price by the
successful bidder to the public of any individual maturity of the Bonds. THE SUCCESSFUL
BIDDER MAY NOT WITHDRAW ITS BID OR CHANGE THE INTEREST RATES BID OR
ANY INITIAL REOFFERING PRICES AS A RESULT OF ANY CHANGES MADE TO THE
STATED PRINCIPAL AMOUNTS.

        Interest: Interest is payable on March 1 and September 1 of each year, commencing
[September] 1, 2010. Interest is calculated on the basis of a 30-day month, 360-day year from
the date of the Bonds. Each Bond shall bear interest at the specified rate from its date to its
stated maturity date, and all Bonds maturing at any one time shall bear the same rate of interest.

       Bidders must specify the rate or rates of interest which the Bonds hereby offered for sale
shall bear. Bidders will be permitted to bid a single rate of interest for each bond maturity,
according to the following:

                  (i)     No interest rate may be more than 4% higher than any other interest rate.

                  (ii)    Each interest rate must be a multiple of 1/8 or 1/20 of 1% per annum.

                  (iii)   Each interest rate must be greater than zero and no interest rate may
                          exceed 12% per annum.

      The true interest cost (“TIC”) to the City may not exceed 6.00%, calculated as provided
in “MUNIAUCTION INSTRUCTIONS—Bid Procedure and Basis of Award” herein.




                                               Exhibit B
                                                Page 3
OHS West:260922405.2
                                MUNIAUCTION INSTRUCTIONS

        Registration and Admission to Bid: To bid via the MuniAuction website, bidders must
have: (1) completed the registration form on Grant Street Group’s MuniAuction website and
(2) requested and received admission to bid on the Bonds. Bidders will be notified prior to the
scheduled bidding time of their eligibility to bid. Bidders who have previously registered may
call Grant Street Group’s auction support at (412) 391-5555 (x370) for their ID number or
password.

        Procedures for Submission of Bids: Bidders should be aware of the following bidding
details associated with the sale of Bonds:

     (1) All bids must be unconditional and submitted on the MuniAuction website at
www.MuniAuction.com. No fax or hand delivery bids will be accepted.

                (2) Bidders may change and submit bids as many times as they like during the
         bidding time period; provided, however, each and any bid submitted subsequent to a
         bidder’s initial bid must result in a lower TIC when compared to the immediately
         preceding bid of such bidder. In the event that the revised bid does not produce a lower
         TIC the initial bid will remain valid.

                 (3) The last bid submitted by a bidder before the end of the bidding time period
         will be compared to all other final bids submitted by others to determine the winning
         bidder.

                (4) During the bidding, no bidder will see any other bidder’s bid, but each bidder
         will see the rank order of its bid relative to other bids (e.g., “LEADER,” “COVER”
         “THIRD PLACE” etc.).

                  (5) Bidders will be able to see whether any bid has been submitted.

         Two Minute Rule: If a bid becomes a leading bid two (2) minutes prior to the scheduled
end of the auction, the time period for submission of bids will be automatically extended by two
(2) minutes from the time such new leading bid was received by MuniAuction. The auction end
time will continue to be extended, indefinitely, until a single leading bid remains the leading bid
for at least two minutes.

       [Rules of MuniAuction: The “Rules” of MuniAuction can be viewed on the
MuniAuction website. Bidders must comply with the Rules of MuniAuction in addition to the
requirements of this Official Notice of Sale. Further information about MuniAuction can be
obtained from Grant Street Group, Inc., 429 Forbes Avenue, Suite 1800, Pittsburgh, PA 15219,
Auction Support (412) 391-5555 (x370). To the extent there is a conflict between the Rules of
MuniAuction and this Official Notice of Sale, this Official Notice of Sale and any changes hereto
posted at the Amendment Page of MuniAuction shall control.]

      Basis of Award: Subject to the right reserved to the City to reject any or all bids, the
Bonds will be sold to the highest responsible bidder. The Bonds will be awarded to the bidder

                                              Exhibit B
                                               Page 4
OHS West:260922405.2
whose bid produces the lowest TIC for the City on the Bonds and otherwise complies with this
Official Notice of Sale. The TIC for the Bonds will be determined by doubling the semi-annual
interest rate, compounded semiannually, necessary to discount the semiannual debt service
payments from the payment dates to the dated date of the Bonds and to the aggregate purchase
price, excluding interest accrued to the date of delivery. The City will calculate the TIC for all
bids and award on the basis of such calculation, and is not bound by any bidder’s calculation or
that of MuniAuction.

Payment of Issuance Costs: The successful bidder will be required to pay $__________ in
costs of issuance of the Bonds from underwriter’s gross compensation at the time of
delivery of the Bonds. This amount should not be added to the price paid for the bonds.
Payment of this amount is not optional. Therefore, bidders should include payment of such
costs in calculating their bids.

       Representations of Bidder: By submission of its bid, a bidder shall be deemed to have
made the following representations:

                 (1) The bidder has received and reviewed the Preliminary Official Statement with
         respect to the Bonds (the “Preliminary Official Statement”) and as a condition to bidding
         on the Bonds, has determined that it can comply with the requirements of Rule 15c2-12
         of the Securities and Exchange Commission under the Securities Exchange Act of 1934,
         as amended.

                 (2) As of the date of its bid and as of the date of delivery of the Bonds, all
         members of the bidder’s syndicate either participate in The Depository Trust Company,
         New York, New York (“DTC”) or clear through or maintain a custodial relationship with
         an entity that participates in said depository.

                (3) The bidder understands that it will be required to pay costs of issuance as
         described in the box below.

                 (4) Northcross, Hill & Ach, Inc. is not a participant in this bidding syndicate or
         other similar account formed for the purpose of purchasing the Bonds directly or
         indirectly from the City, nor is any parent company, subsidiary of, or entity controlled by
         or controlling Northcross, Hill & Ach, Inc.


                        CLOSING PROCEDURES AND DOCUMENTS

        Delivery and Payment: Delivery of the Bonds through the facilities of The Depository
Trust Company will be made to the successful bidder in New York, New York, as soon as the
Bonds can be prepared, which it is estimated will be on or about _______, 2010. Payment for
the Bonds must be made in funds immediately available in San Francisco, California, on the date
of delivery. Any expense of providing immediately available funds, whether by transfer of
Federal Reserve Bank funds or otherwise, shall be borne by the successful bidder. The cost of
printing the Bonds will be borne by the City.


                                             Exhibit B
                                              Page 5
OHS West:260922405.2
       If the successful bidder fails or neglects to complete the purchase of the Bonds when the
Bonds are tendered by the City for delivery, the City may reoffer the Bonds for public or
negotiated sale. The successful bidder will not be required to accept delivery of the Bonds if
they are not tendered for delivery within 60 days from the date herein stated for opening bids.
The City contemplates effecting delivery of the Bonds to the successful bidder on or about
_________, 2010.

        CUSIP Numbers and Other Fees: It is expected that the successful bidder will apply for
CUSIP identification numbers for the Bonds, and furnish such numbers to Orrick, Herrington &
Sutcliffe LLP (“Bond Counsel”). It is anticipated that such CUSIP numbers will be printed on the
Bonds being delivered to DTC, but neither the failure to print such number on any Bond nor any
error with respect thereto shall constitute cause for a failure or refusal by the successful bidder to
accept delivery of and pay for the Bonds in accordance with the terms and conditions of its bid.
All expenses in relation to the printing of CUSIP numbers on the Bonds shall be paid by the
City, but the CUSIP Service Bureau charge for the assignment of such numbers shall be paid by
the successful bidder. The successful bidder shall also be required to pay all fees required by
DTC, The Securities Industry and Financial Markets Association, the Municipal Securities
Rulemaking Board, and any other similar entity imposing a fee in connection with the issuance
of the Bonds.

        California Debt and Investment Advisory Commission Fee: Attention of bidders is
directed to California Government Code Section 8856, which provides that the lead underwriter
or the purchaser of the Bonds shall be charged any California Debt and Investment Advisory
Commission fee payable with respect to the Bonds.

         Certification of Reoffering Prices: Upon notification of award of the bid, the successful
bidder shall provide initial offering prices for each maturity of the bonds. Prior to Closing, as a
condition to delivery of the Bonds, the successful bidder shall be required to provide to the City
initial offering price information in form and substance as Bond Counsel may require, including:
(i) certification that as of the date of sale, all of the Bonds were expected to be reoffered in a
bona fide public offering at stated initial offering prices; (ii) certification that as of the date of the
certification, all of the Bonds had actually been offered to the general public at such prices; and
(iii) the maximum initial bona fide offering prices at which at least 10% of each maturity of the
Bonds was sold to the general public, and identification of any Bond maturity of which less than
10% was sold to the general public at its initial offering price.

        Litigation: There is no litigation pending concerning the validity of the Bonds, the
existence of the City or the entitlement to their respective offices of the officers of the City who
will execute the Bonds and other documents or certificates, or the power of the City to levy and
collect taxes for payment of, and to pay interest and principal on, the Bonds, and the City will
furnish to the successful bidder a no-litigation certificate or certificates certifying the foregoing
as of and at the time of the delivery of the Bonds.

        Legal Opinion: The legal opinion of Orrick, Herrington & Sutcliffe LLP approving the
validity of the Bonds, addressed to the City, will be furnished to the successful bidder upon
delivery of the Bonds. Copies of the opinion will be filed with DTC and with the Paying Agent.

                                               Exhibit B
                                                Page 6
OHS West:260922405.2
        Tax Matters: Orrick, Herrington & Sutcliffe LLP will render to the City its legal opinion
with respect to tax-exemption of the interest paid on the Bonds. See the discussion of Tax
Matters in the Official Statement hereinafter referred to. In the event that prior to the delivery of
the Bonds (a) the income received by private holders from obligations of the same type and
character shall be declared to be includable in gross income (either at the time of such
declaration or at any future date) for purposes of federal income tax laws, either by the terms of
such laws or by ruling of a federal income tax authority or official which is followed by the
Internal Revenue Service, or by decision of any federal court, or (b) any federal income tax law
is adopted which will have a substantial adverse tax effect on holders of the Bonds as such, the
successful bidder may, at its option, prior to the tender of the Bonds by the Board, be relieved of
its obligation to purchase the Bonds, and in such case the deposit accompanying its bid will be
returned. For purposes of the preceding sentence, interest will be treated as excludable from
gross income for federal income tax purposes whether or not it is includable as an item of tax
preference for calculating alternative minimum taxes or otherwise includable for purposes of
calculating certain other tax liabilities.

        Official Statement: The City has authorized the adoption of an official statement relating
to the Bonds. A copy of the Preliminary Official Statement will be furnished upon request to the
Financial Advisor at the address given on page one of this notice. The Preliminary Official
Statement is in form “deemed final” by the issuer for purposes of Securities and Exchange
Commission Rule 15c2-12(b)(1), but is subject to revision, amendment and completion in a final
Official Statement. The City will furnish to the successful bidder, at no expense to the successful
bidder, up to 100 copies of the final Official Statement within seven business days of the award
date.

        Official Statement Certificate: The City will provide to the successful bidder for the
Bonds a certificate, signed by an official of the City, confirming to the successful bidder that, at
the time of the acceptance of the bid for the Bonds and at the time of delivery thereof, to the best
of the knowledge of said official, the Official Statement does not contain any untrue statement of
a material fact or omit to state any material fact necessary in order to make the statements made
therein, in the light of the circumstances under which they were made, not misleading (except
that no view shall be expressed concerning information regarding DTC and its book-entry only
system, information provided by the City Treasurer regarding City investments, information
provided by the successful bidder regarding the underwriting, reoffering, and CUSIP
identification numbers of the Bonds, and information regarding a municipal bond insurance
policy with respect to the Bonds and the provider thereof), and that there has been no material
adverse change in the financial condition or affairs of the City which would make it
unreasonable for the purchaser of the Bonds to rely upon the Official Statement in connection
with the resale of the Bonds.

       Continuing Disclosure Certificate: In order to assist bidders in complying with Securities
and Exchange Commission Rule 15c2-12(b)(5), the City will undertake, pursuant to a
Continuing Disclosure Certificate, to provide certain annual financial information and notices of
the occurrence of certain events, if material. A description of this undertaking is set forth in the
Preliminary Official Statement and will also be set forth in the final Official Statement. The City


                                             Exhibit B
                                              Page 7
OHS West:260922405.2
has never failed to comply in all material respects with any previous undertakings with regard to
said Rule to provide annual reports or notices of material events.

       Additional Information: Additional information and the Preliminary Official Statement
may be obtained from the Financial Advisor, Northcross, Hill & Ach, Inc., 999 Fifth Avenue,
Suite 560, San Rafael, CA 94901, telephone (415) 506-3400 (www.nhainc.net). The Official
Notice of Sale and the Preliminary Official Statement may be viewed on the MuniAuction
website. Additional information relating to the auction or a private bidding tutorial may be
obtained by calling the Grant Street Group’s auction support at (412) 391-5555 (x370).

Dated: _________, 2010




                                           Exhibit B
                                            Page 8
OHS West:260922405.2
                                              EXHIBIT C

                  DRAFT FORM OF NOTICE OF INTENTION TO SELL BONDS


                                     NOT TO EXCEED
                                        $16,000,000*
                                   CITY OF BERKELEY
                            General Obligation Bonds, Series 2010
                (Measure FF—Neighborhood Branch Library Improvements Project)


        NOTICE IS HEREBY GIVEN, that the City of Berkeley, California (the “City”) invites
bids for the purchase of the above-captioned bonds. Bids will be received on

                                            __________, 2010

                                commencing at 8:30 A.M. (California Time)

Pacific Time, electronically, through the facilities of Grant Street Group/MuniAuction. The sale
of the Bonds will be conducted upon the terms and conditions set forth in the Official Notice of
Sale for the Bonds. Such Official Notice of Sale and the Preliminary Official Statement
describing the Bonds will be distributed to prospective bidders upon request of the financial
advisor to the City, Northcross, Hill & Ach, Inc., 999 Fifth Avenue, Suite 560, San Rafael,
CA 94901, telephone (415) 506-3400 (www.nhainc.net), or from the Grant Street
Group/MuniAuction website. Legal Opinion: Orrick, Herrington & Sutcliffe LLP, San
Francisco, California.

Dated: _______, 2010




*
    Preliminary, subject to change.


                                                Exhibit C
                                                 Page 1
OHS West:260922405.2
                                             EXHIBIT D

                       DRAFT FORM OF CERTIFICATE OF AWARD


               The undersigned, Director of Finance of the City of Berkeley, State of California
(the “City”), pursuant to powers delegated to me by a resolution adopted by the City Council of
the City on July 6, 2010 (the “Resolution”), duly authorizing the issuance and sale of not to
exceed $16,000,000 aggregate principal amount of the City of Berkeley General Obligation
Bonds, Series 2010 (Measure FF—Neighborhood Branch Library Improvements Project) (the
“Bonds”), hereby certify with respect to the award of said Bonds as follows:

                                   ACCEPTANCE OF BID

               1.     On ______, 2010, commencing at 8:30 a.m. Pacific Time, the proposals
for purchase of the Bonds, summarized in Schedule A-Bid Results attached hereto, were
received through [MuniAuction] in accordance with the Official Notice of Sale for the purchase
of the Bonds, dated ________, 2010 (the “Official Notice of Sale”). [The time of sale was
changed to ______ a.m. in accordance with the Resolution and the Official Notice of Sale, and
notice thereof was given through [MuniAuction] as required by the Official Notice of Sale.]

               2.     The final proposal submitted by [Underwriter] is in compliance with all of
the terms and conditions set forth in the Official Notice of Sale.

              3.     The bid of [Underwriter] is the best responsive bid as determined by the
method of calculation for such best responsive bid, set forth in the Official Notice of Sale, as
follows:

                       Purchase Price:
                       ([without/including] premium)                  $________________

                       Total Debt Service:
                       (dated date to maturity)                    $___________________

                       True Interest Cost:                                    __________%

                4.      The Bonds are hereby awarded to [Underwriter] (the “Purchaser”) based
on the true interest cost shown above.

               5.      All proposals set forth in Schedule A-Bid Results other than said accepted
bid of the Purchaser are hereby rejected.




                                              Exhibit D
                                               Page 1
OHS West:260922405.2
                                   TERMS OF THE BONDS

                  1.   The Bonds shall be dated _________, 2010.

               2.      The aggregate principal amount of the Bonds is hereby determined to be
$______________ [adjusted in accordance with the Official Notice of Sale], and the [adjusted]
True Interest Cost is hereby determined to be ________%].

            3.         The [adjusted] purchase price of the Bonds, including accrued interest, is
$___________.
              4.      The maturity dates, principal amounts, and interest rates of each maturity
of the Bonds shall be as set forth in the summary of the accepted bid of the Purchaser attached
hereto as Schedule B.

              5.    Interest on the Bonds shall be payable on March 1 and September 1 of
each year, commencing [September 1], 2010.

               6.       (a) The Bonds shall be subject to optional redemption in accordance with
the terms specified in the Resolution and as further specified below:

        Bonds maturing on or before September 1, _____, shall not be subject to redemption
prior to their respective stated maturity dates. Bonds maturing on and after September 1,
______, shall be subject to redemption prior to their respective stated maturity dates, at the
option of the City, from any available source of funds, as a whole or in part on any date after
September 1, ______, at a redemption price (expressed as a percentage of the principal amount
of the Bonds called for redemption), together with accrued interest thereon to the Redemption
Date, as shown below:

                             Redemption Date          Optional
                              (September 1)       Redemption Price



               (b)     The Bonds shall be subject to mandatory sinking fund redemption prior to
their stated maturity date, without a redemption premium, in part by lot, from mandatory sinking
fund payments in the amounts and years shown in Schedule B-the Purchaser’s “Sinking Fund of
Term Bond” attached hereto.

              This award of the City of Berkeley General Obligation Bonds, Series 2010
(Measure FF—Neighborhood Branch Library Improvements Project), is hereby made at the date
and time below.

Dated: ___________,_______, 2010,
at:    _____________ p.m. [a.m.]
                                             CITY OF BERKELEY


                                             By           [draft – not for signature]
                                                             Director of Finance

                                            Exhibit D
                                             Page 2
OHS West:260922405.2
                                     SCHEDULE A

                                (To Certificate of Award)

                   City of Berkeley General Obligation Bonds, Series 2010
             (Measure FF—Neighborhood Branch Library Improvements Project)

                                    BID RESULTS




                                        Exhibit D
                                         Page 3
OHS West:260922405.2
                                     SCHEDULE B

                                (To Certificate of Award)

                   City of Berkeley General Obligation Bonds, Series 2010
             (Measure FF—Neighborhood Branch Library Improvements Project)

                               MATURITY SCHEDULE
                               (Summary of Accepted Bid)




                                        Exhibit D
                                         Page 4
OHS West:260922405.2
                                          EXHIBIT E

              DRAFT FORM OF CONTINUING DISCLOSURE CERTIFICATE


        This CONTINUING DISCLOSURE CERTIFICATE (the “Continuing Disclosure
Certificate”) is executed and delivered by the CITY OF BERKELEY (the “City”) in connection
with the issuance of $16,000,000 City of Berkeley General Obligation Bonds, Series 2010
(Measure FF—Neighborhood Branch Library Improvements Project) (the “Bonds”). The Bonds
are being issued pursuant to a Resolution adopted on July 6, 2010 (the “Resolution”). The City
covenants and agrees as follows:

       SECTION 1. Purpose of the Continuing Disclosure Certificate. This Continuing
Disclosure Certificate is being executed and delivered by the City for the benefit of the Holders
and Beneficial Owners of the Bonds and in order to assist the Participating Underwriters in
complying with Securities and Exchange Commission (the “S.E.C.”) Rule 15c2-12(b)(5).
       SECTION 2. Definitions. In addition to the definitions set forth in the Resolution, which
apply to any capitalized term used in this Continuing Disclosure Certificate unless otherwise
defined in this Section 2, the following capitalized terms shall have the following meanings:
       “Annual Report” shall mean any Annual Report provided by the City pursuant to, and as
described in, Sections 3 and 4 of this Continuing Disclosure Certificate.
        “Beneficial Owner” shall mean any person which: (a) has or shares the power, directly or
indirectly, to make investment decisions concerning ownership of any Bonds (including persons
holding Bonds through nominees, depositories or other intermediaries) including, but not limited
to, the power to vote or consent with respect to any Bonds or to dispose of ownership of any
Bonds; or (b) is treated as the owner of any Bonds for federal income tax purposes.
        “Dissemination Agent” shall mean The Bank of New York Mellon Trust Company,
N.A., or any successor Dissemination Agent designated in writing by the City and which has
filed with the City a written acceptance of such designation.
        “Holder” shall mean either the registered owners of the Bonds, or, if the Bonds are
registered in the name of The Depository Trust Company or another recognized depository, any
applicable participant in such depository system.
       “Listed Events” shall mean any of the events listed in Section 5(a) of this Continuing
Disclosure Certificate.
       “MSRB” shall mean the Municipal Securities Rulemaking Board or any other entity
designated or authorized by the Securities and Exchange Commission to receive reports pursuant
to the Rule. Until otherwise designated by the MSRB or the Securities and Exchange
Commission, filings with the MSRB are to be made through the Electronic Municipal Market
Access (EMMA) website of the MSRB, currently located at http://emma.msrb.org.
       “Participating Underwriter” shall mean any of the original underwriters or purchasers of
the Bonds required to comply with the Rule in connection with offering of the Bonds.



                                           Exhibit E
                                            Page 1
OHS West:260922405.2
        “Rule” shall mean Rule 15c2-12(b)(5) adopted by the Securities and Exchange
Commission under the Securities Exchange Act of 1934, as the same may be amended from time
to time.
         SECTION 3. Provision of Annual Reports.
         (a)      The City shall, or shall cause the Dissemination Agent to, not later than nine
                  months after the end of the City’s fiscal year (which is June 30), commencing
                  with the report for the 2009-10 Fiscal Year (which is due not later than April 1,
                  2011), provide to the MSRB an Annual Report which is consistent with the
                  requirements of Section 4 of this Continuing Disclosure Certificate. If the
                  Dissemination Agent is not the City, the City shall provide the Annual Report to
                  the Dissemination Agent not later than 15 days prior to said date. The Annual
                  Report must be submitted in electronic format accompanied by such identifying
                  information as is prescribed by the MSRB, and may cross-reference other
                  information as provided in Section 4 of this Continuing Disclosure Certificate;
                  provided, that if the audited financial statements of the City are not available by
                  the date required above for the filing of the Annual Report, the City shall submit
                  unaudited financial statements and submit the audited financial statements as soon
                  as they are available. If the City’s Fiscal Year changes, it shall give notice of
                  such change in the same manner as for a Listed Event under Section 5(c).

         (b)      If the City is unable to provide to the MSRB an Annual Report by the date
                  required in subsection (a), the City shall send a notice to the MSRB in
                  substantially the form attached as Exhibit A.

         (c)      With respect to the Annual Report, the Dissemination Agent shall (if the
                  Dissemination Agent is other than the City), file a report with the City certifying
                  that the Annual Report has been provided pursuant to this Continuing Disclosure
                  Certificate, stating the date it was provided to the MSRB.

       SECTION 4. Content of Annual Reports. The City’s Annual Report shall contain or
incorporate by reference the following information:
         (a)      the audited general purpose financial statements of the City prepared in
                  accordance with generally accepted accounting principles applicable to
                  governmental entities;

         (b)      a summary of budgeted general fund revenues and appropriations;

         (c)      a summary of the assessed valuation of taxable property in the City;

         (d)      a summary of the ad valorem property tax levy and delinquency rate;

         (e)      a schedule of aggregate annual debt service on tax-supported indebtedness of the
                  City; and



                                               Exhibit E
                                                Page 2
OHS West:260922405.2
         (f)      summary of outstanding and authorized but unissued tax-supported indebtedness
                  of the City.

        Any or all of the items listed above may be included by specific reference to other
documents, including official statements of debt issues of the City or related public entities,
which are available to the public on the MSRB website. If the document included by reference is
a final official statement, it must be available from the MSRB. The City shall clearly identify
each such other document so included by reference.
         SECTION 5. Reporting of Significant Events.

         (a)      To the extent applicable and pursuant to the provisions of this Section 5, the City
                  shall give, or cause to be given, notice of the occurrence of any of the following
                  events with respect to the Bonds, if material:

                         1.      Principal and interest payment delinquencies.

                         2.      Non-payment related defaults.

                         3.      Modifications to rights of Bondholders.

                         4.      Optional, contingent or unscheduled bond calls.

                         5.      Defeasances.

                         6.      Rating changes.

                         7.      Adverse tax opinions or events affecting the tax-exempt status of the
                                 Bonds.

                         8.      Unscheduled draws on debt service reserves reflecting financial
                                 difficulties.

                         9.      Unscheduled draws on credit enhancements reflecting financial
                                 difficulties.

                         10.     Substitution of credit or liquidity providers or their failure to
                                 perform.

                         11.     Release, substitution or sale of property securing repayment of the
                                 Bonds.

         (b)      Whenever the City obtains knowledge of the occurrence of a Listed Event, the
                  City shall as soon as possible determine if such event would be material under
                  applicable federal securities laws.



                                                Exhibit E
                                                 Page 3
OHS West:260922405.2
         (c)      If the City determines that knowledge of the occurrence of a Listed Event would
                  be material under applicable federal securities laws, the City shall promptly file a
                  notice of such occurrence with the MSRB. Notwithstanding the foregoing, notice
                  of Listed Events described in Sections 5(a)(4) and 5(a)(5) need not be given under
                  this subsection any earlier than the notice (if any) of the underlying event is given
                  to Holders and Beneficial Owners of affected Bonds pursuant to the Resolution.
                  The notice of Listed Events must be submitted in electronic format, accompanied
                  by such identifying information as is prescribed by the MSRB.

        SECTION 6. Termination of Reporting Obligation. The City’s obligations under this
Continuing Disclosure Certificate shall terminate upon the legal defeasance, prior redemption or
payment in full of all of the Bonds. If such termination occurs prior to the final maturity of the
Bonds, the City shall give notice of such termination in the same manner as that for giving notice
of the occurrence of a Listed Event under Section 5(c).
        SECTION 7. Dissemination Agent. The City may, from time to time, appoint or engage
a Dissemination Agent to assist it in carrying out its obligations under this Continuing Disclosure
Certificate, and may discharge any such Agent, with or without appointing a successor
Dissemination Agent. The Dissemination Agent shall have only such duties as are specifically set
forth in this Continuing Disclosure Certificate. The initial Dissemination Agent shall be The Bank
of New York Mellon Trust Company, N.A.
        SECTION 8. Amendment; Waiver. Notwithstanding any other provision of this
Continuing Disclosure Certificate, the City may amend or waive this Continuing Disclosure
Certificate or any provision of this Continuing Disclosure Certificate, provided that the following
conditions are satisfied:
         (a)      If the amendment or waiver relates to the provisions of Sections 3(a), 3(b), 4 or
                  5(a), it may only be made in connection with a change in circumstances that arises
                  from a change in legal requirements, change in law, or change in the identity,
                  nature or status of an obligated person with respect to the Bonds or the type of
                  business conducted;

         (b)      The undertaking, as amended or taking into account such waiver, would, in the
                  opinion of the City Attorney or nationally recognized bond counsel, have
                  complied with the requirements of the Rule at the time of the original issuance of
                  the Bonds, 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 (i) is approved by the owners of a majority in
                  aggregate principal amount the Bonds or (ii) does not, in the opinion of the City
                  Attorney or nationally recognized bond counsel, materially impair the interests of
                  the Holders.

        In the event of any amendment or waiver of a provision of this Continuing Disclosure
Certificate, the City 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 case of a change of accounting principles, on the presentation) of financial

                                               Exhibit E
                                                Page 4
OHS West:260922405.2
information or operating data being presented by the City. In addition, if the amendment relates to
the accounting principles to be followed in preparing financial statements: (i) notice of such change
shall be given in the same manner as for a Listed Event under Section 5; and (ii) the Annual Report
for the year in which the change is made should 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 9. Additional Information. Nothing in this Continuing Disclosure Certificate
shall be deemed to prevent the City from disseminating any other information, using the means of
dissemination set forth in this Continuing Disclosure Certificate or any other means of
communication, or including any other information in any Annual Report or notice of occurrence
of a Listed Event, in addition to that which is required by this Continuing Disclosure Certificate. If
the City chooses to include any information in any Annual Report or notice of occurrence of a
Listed Event in addition to that which is specifically required by this Continuing Disclosure
Certificate, the City shall have no obligation under this Continuing Disclosure Certificate to update
such information or include it in any future Annual Report or notice of occurrence of a Listed
Event.
        SECTION 10. Default. In the event of a failure of the City to comply with any provision
of this Continuing Disclosure Certificate, any Participating Underwriter, Holder or Beneficial
Owner of the Bonds may take such actions as may be necessary and appropriate, including seeking
mandate or specific performance by court order, to cause the City to comply with its obligations
under this Continuing Disclosure Certificate; provided that any such action may be instituted only
in a federal or state court located in the City of Berkeley, State of California. A default under this
Continuing Disclosure Certificate shall not be deemed an Event of Default under the Resolution
and the sole remedy under this Continuing Disclosure Certificate in the event of any failure of the
City to comply with this Continuing Disclosure Certificate shall be an action to compel
performance.
        SECTION 11. Beneficiaries. This Continuing Disclosure Certificate shall inure solely to
the benefit of the City, the Dissemination Agent, the Participating Underwriters and Holders and
Beneficial Owners from time to time of the Bonds, and shall create no rights in any other person or
entity.
Date: __________, 2010
                                                      CITY OF BERKELEY

                                                      By           [draft – not for signature]
                                                                   City Manager
AGREED AND ACCEPTED:

THE BANK OF NEW YORK MELLON TRUST
COMPANY, N.A., as Dissemination Agent

By
Title




                                              Exhibit E
                                               Page 5
OHS West:260922405.2
                                          EXHIBIT A

      FORM OF NOTICE TO THE MUNICIPAL SECURITIES RULEMAKING BOARD
                    OF FAILURE TO FILE ANNUAL REPORT


Name of Issuer:        City of Berkeley

Name of Bond Issue: City of Berkeley General Obligation Bonds, Series 2010 (Measure FF—
                    Neighborhood Branch Library Improvements Project)

Date of Issuance:      ______, 2010


        NOTICE IS HEREBY GIVEN to that the City has not provided an Annual Report with
respect to the above-named Bonds as required by Section 3 of the Continuing Disclosure
Certificate of the City of Berkeley, dated the date of issuance. The City anticipates that the
Annual Report will be filed by _____________.


Dated:_______________.

                                                   THE BANK OF NEW YORK MELLON
                                                   TRUST COMPANY, N.A., as
                                                   Dissemination Agent

                                                   By
                                                   Title




                                           Exhibit E
                                            Page 6
OHS West:260922405.2
                                             OHS DRAFT PRELIMINARY OFFICIAL STATEMENT 6/10/2010                                                                                Attachment 2
NEW ISSUE – BOOK-ENTRY ONLY                                                                                                                                                 RATINGS
                                                                                                                                                                           S&P: _____
                                                                                                                                                                        Moody’s: _____
                                                                                                                                                                 See “RATINGS” herein.
              In the opinion of Orrick, Herrington & Sutcliffe LLP, Bond Counsel to the City, 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, interest on the Bonds 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. In
the further opinion of Bond Counsel, interest on the Bonds is not a specific preference item for purposes of the federal individual or corporate alternative minimum taxes,
nor is it included in adjusted current earnings when calculating corporate alternative minimum taxable income. Bond Counsel expresses no opinion regarding any other
tax consequences related to the ownership or disposition of, or the accrual or receipt of interest on, the Bonds. See “TAX MATTERS.”

                                                                               $____________
                                                                            CITY OF BERKELEY
                                                                                 (California)
                                                                     General Obligation Bonds, Series 2010
                                                         (Measure FF—Neighborhood Branch Library Improvements Project)


Dated: Date of Delivery                                                                                                                           Due: September 1, as shown below

This cover page is not a summary of this issue; it is only a reference to the information contained in this Official Statement. Investors must read the entire Official
Statement to obtain information essential to the making of an informed investment decision.
The bonds captioned above (the “Bonds”) are being issued under Chapter 4 of Division 4 of Title 4 of the California Government Code and pursuant to the powers of the
City of Berkeley (the “City”) under its Charter (the “Charter”). The Bonds are being issued to finance renovations, construction, seismic and access improvements, and
expansion of program areas at four neighborhood branch libraries in the City (the “Project”), and to pay costs of issuance of the Bonds.
The Bonds will be issued only as fully registered bonds without coupons and when issued will be registered in the name of Cede & Co., as nominee of The Depository
Trust Company, New York, New York (“DTC”). Individual purchases of the Bonds will be made in book-entry form only, in denominations of $5,000 or any integral
multiple thereof. Payments of principal of and interest on the Bonds will be made by The Bank of New York Mellon Trust Company, N.A., as paying agent, to DTC,
which in turn is required to remit such principal and interest to the DTC Participants for subsequent disbursement to the Beneficial Owners of the Bonds. See “THE
BONDS—Form and Registration.” The Bonds will be dated and bear interest from their date of delivery at the annual rates shown below. Interest on the Bonds will be
payable on March 1 and September 1 of each year, commencing March 1, 2010. Principal will be paid at maturity as shown below. See “THE BONDS—Payment of
Interest and Principal; Paying Agent.”
The Bonds will be subject to redemption prior to their respective stated maturities as described herein. See “THE BONDS—Redemption.”
The City has the power and is obligated to levy ad valorem taxes without limitation as to rate or amount upon all property subject to taxation by the City (except as to
certain property which is taxable at limited rates) for the payment of the principal of and interest on the Bonds when due. See “SECURITY FOR THE BONDS.”
The following firm, serving as financial advisor to the City, has structured this issue:




                                                                                  MATURITY SCHEDULE
                                                                                (Base CUSIP Number 084113†)
      Maturity Date           Principal          Interest        Price or           CUSIP                Maturity Date           Principal         Interest         Price or          CUSIP
      (September 1)           Amount               Rate           Yield*            Suffix†              (September 1)           Amount              Rate            Yield*           Suffix†
          2011                                                                                               2020
          2012                                                                                               2021
          2013                                                                                               2022
          2014                                                                                               2023
          2015                                                                                               2024
          2016                                                                                               2025
          2017                                                                                               2026
          2018                                                                                               2027
          2019                                                                                               2028




The Bonds are offered when, as and if issued by the City and accepted by the initial purchasers, subject to the approval of legality by Orrick, Herrington & Sutcliffe LLP,
San Francisco, California, Bond Counsel, and certain other conditions. Certain legal matters will be passed upon for the City by its City Attorney and by Orrick,
Herrington & Sutcliffe LLP, as Disclosure Counsel. It is expected that the Bonds in book-entry form will be available for delivery through the facilities of DTC in New
York, New York, on or about ______, 2010.

Dated: ______
______________________________
*
  Reoffering prices/yields furnished by the initial purchasers. The City takes no responsibility for the accuracy thereof.
†
 Copyright, American Bankers Association. CUSIP data herein is provided by Standard and Poor’s CUSIP Service Bureau. This data is not intended to create a database and does not serve in any way as a
substitute for the CUSIP Service. CUSIP numbers are provided for convenience of reference only. Neither the City nor the initial purchaser takes any responsibility for the accuracy of such numbers.




OHS West:260917701.5
No dealer, broker, salesperson or other person has been authorized by the City to give any information or to make any
representation other than those contained herein and, if given or made, such other information or representation must not
be relied upon as having been authorized by the City. 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 Bonds, by any person in any jurisdiction in which it is
unlawful for such person to make such an offer, solicitation or sale.

The information set forth herein other than that provided by the City, although obtained from sources which are believed
to be reliable, is not guaranteed as to accuracy or completeness. The information and expressions of opinion herein are
subject to change without notice and neither 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 City since the date hereof.

This Official Statement is not to be construed as a contract with the initial purchasers of the Bonds. Statements
contained in this Official Statement which 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 issuance and sale of the Bonds have not been registered under the Securities Act of 1933 in reliance upon the
exemption provided thereunder by Section 3(a)2 for the issuance and sale of municipal securities.

IN CONNECTION WITH THE OFFERING OF THE BONDS, THE INITIAL PURCHASERS MAY OVERALLOT
OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE BONDS AT
LEVELS ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET.           SUCH
STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.




OHS West:260917701.5
                                   CITY OF BERKELEY
                                 Alameda County, California

                                       CITY COUNCIL

                                      Tom Bates, Mayor
                             Linda Maio, Councilmember District 1
                            Darryl Moore, Councilmember District 2
                          Maxwell Anderson, Councilmember District 3
                           Jesse Arreguin, Councilmember District 4
                           Laurie Capitelli, Councilmember District 5
                           Susan Wengraf, Councilmember District 6
                          Kriss Worthington, Councilmember District 7
                          Gordon Wozniak, Councilmember District 8

                                         CITY STAFF

                                 Phil Kamlarz, City Manager
                              Robert Hicks, Director of Finance
                            Zach Cowan, Esq., Acting City Attorney

                                 PROFESSIONAL SERVICES

                              Orrick, Herrington & Sutcliffe LLP
                                   San Francisco, California
                             Bond Counsel and Disclosure Counsel

                                  Northcross, Hill & Ach, Inc.
                                    San Rafael, California
                                      Financial Advisor

                       The Bank of New York Mellon Trust Company, N.A.
                                     Los Angeles, California
                              Registrar, Transfer and Paying Agent




OHS West:260917701.5
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OHS West:260917701.3
                                                                    TABLE OF CONTENTS
                                                                                                                                                                         Page

INTRODUCTION ......................................................................................................................................................... 1
THE CITY ..................................................................................................................................................................... 1
THE BONDS ................................................................................................................................................................. 2
   Authority for Issuance; Purpose ............................................................................................................................... 2
   Form and Registration.............................................................................................................................................. 2
   Payment of Principal and Interest; Paying Agent .................................................................................................... 2
   Redemption .............................................................................................................................................................. 2
   Defeasance; Discharge of Resolution ...................................................................................................................... 4
   Purchase in Lieu of Redemption .............................................................................................................................. 4
   Unclaimed Moneys .................................................................................................................................................. 5
ESTIMATED SOURCES AND USES OF FUNDS ..................................................................................................... 6
DEBT SERVICE SCHEDULE ..................................................................................................................................... 7
SECURITY FOR THE BONDS .................................................................................................................................. 10
   General ................................................................................................................................................................... 10
   Factors Affecting Property Tax Security for the Bonds ......................................................................................... 10
   Property Tax Revenues .......................................................................................................................................... 10
TAX MATTERS ......................................................................................................................................................... 17
OTHER LEGAL MATTERS ...................................................................................................................................... 18
PROFESSIONALS INVOLVED IN THE OFFERING .............................................................................................. 18
INDEPENDENT AUDITORS .................................................................................................................................... 18
ABSENCE OF LITIGATION ..................................................................................................................................... 19
CONTINUING DISCLOSURE................................................................................................................................... 19
RATINGS .................................................................................................................................................................... 19
SALE OF THE BONDS .............................................................................................................................................. 19
MISCELLANEOUS .................................................................................................................................................... 20


                                                                            APPENDICES

APPENDIX A – THE CITY OF BERKELEY
APPENDIX B – COMPREHENSIVE ANNUAL FINANCIAL REPORT OF THE CITY OF BERKELEY FOR
             THE FISCAL YEAR ENDED JUNE 30, 2009
APPENDIX C – FORM OF CONTINUING DISCLOSURE CERTIFICATE
APPENDIX D – DTC AND THE BOOK-ENTRY ONLY SYSTEM
APPENDIX E – PROPOSED FORM OF OPINION OF BOND COUNSEL
APPENDIX F – CITY INVESTMENT POLICY




                                                                                      iii
OHS West:260917701.3
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OHS West:260917701.3
                                            OFFICIAL STATEMENT
                                           $__________
                                       CITY OF BERKELEY
                             GENERAL OBLIGATION BONDS, SERIES 2010
                          (MEASURE FF—NEIGHBORHOOD BRANCH LIBRARY
                                    IMPROVEMENTS PROJECT)


                                                INTRODUCTION

         This Official Statement, including the cover page and the appendices hereto, is provided to furnish
information in connection with the offering by the City of Berkeley (the “City”) of its City of Berkeley General
Obligation Bonds, Series 2010 (Measure FF—Neighborhood Branch Library Improvements Project) (the “Bonds”).
The City has the power and is obligated and has covenanted to levy ad valorem taxes without limitation as to rate or
amount upon all property subject to taxation by the City (except as to certain property which is taxable at limited
rates) for the payment of the principal of and interest on the Bonds when due. See “SECURITY FOR THE
BONDS” herein.

         This Official Statement speaks only as of its date, and the information contained herein is subject to
change. Except as required by the Continuing Disclosure Certificate to be executed by the City, the City has no
obligation to update the information in this Official Statement. See “CONTINUING DISCLOSURE” herein.

         Quotations from and summaries and explanations of the Bonds, the resolution providing for the issuance of
the Bonds, and the constitutional provisions, statutes and other documents described herein, do not purport to be
complete, and the reader is referred to said documents, constitutional provisions and statutes for the complete
provisions thereof. Copies of documents referred to herein and information concerning the Bonds are available from
the City through the Office of the Director of Finance, 2180 Milvia Street, Berkeley, CA 94704. The City may
impose a charge for copying, handling and mailing such requested documents.

                                                    THE CITY

         The City is located in the County of Alameda, California (the “County”) on the east side of the
San Francisco Bay, approximately 10 miles northeast of San Francisco. The City encompasses a total area of
approximately 19 square miles and had an estimated population in 2010 of 108,119, giving it the highest population
density of any city in the so-called East Bay, that part of the San Francisco Bay Area located on the eastern side of
the San Francisco Bay. The City is defined to a large degree, both culturally and economically, by the presence of
the University of California at Berkeley (the “University of California”) campus located on the eastern side of the
City. The University of California is a major component of the City’s economy, employing more than 14,400 full-
time and part-time workers.

         The City is governed by a City Council composed of members elected from eight districts to serve
four-year terms, and a Mayor who serves as the president of the City Council, elected citywide to a four-year term.
Tom Bates has served as the Mayor of the City since 2002, and was re-elected in 2006 and, following an amendment
to the Charter of the City of Berkeley (the “Charter”), again in 2008. The City’s Fiscal Year 2009-10 adopted
budget includes $333 million of expenditures and reserves, of which $148.5 million was allocated to the General
Fund of the City and $184.5 million was allocated to all other funds. The City employs approximately 1,670 full-
time-equivalent employees. Fiscal Year 2009-10 total assessed valuation of taxable property in the City is
$12,806,317,100.

      More detailed information about the City’s governance, organization and finances may be found in
APPENDIX A – “THE CITY OF BERKELEY.”




                                                         1
                                                    THE BONDS

Authority for Issuance; Purpose

         The Bonds are issued under the Government Code of the State, including the provisions of Chapter 4
(commencing with Section 43600) of Division 4 of Title 4 of the California Government Code (the “Law”) and
other applicable law, and pursuant to the City’s powers under and consistent with the Charter of the City. The City
authorized the issuance of the Bonds in Resolution No. ________, adopted by the City Council on _________, 2010
(the “Resolution”). The Bonds constitute the second series of bonds to be issued from an aggregate authorized
amount of $26,000,000 of bonds duly approved by at least two-thirds of the voters voting on Measure FF at an
election held on November 4, 2008, to provide funds to finance renovations, construction, seismic and access
improvements, and expansion of program areas at four neighborhood branch libraries in the City (the “Project”). A
portion of the proceeds of the Bonds will be applied to pay costs of issuance of the Bonds.

Form and Registration

         The Bonds are issued in the principal amounts set forth on the cover hereof, in the denomination of $5,000
each or any integral multiple thereof, and will be dated their date of delivery. The Bonds are issued as fully
registered bonds, without coupons. The Bonds will be initially registered in the name of Cede & Co. as registered
owner and nominee for The Depository Trust Company (“DTC”), New York, New York, which is required to remit
payments of principal and interest to the DTC Participants for subsequent disbursement to the beneficial owners of
the Bonds. See APPENDIX D: “DTC AND THE BOOK–ENTRY ONLY SYSTEM.”

Payment of Principal and Interest; Paying Agent

          The Bank of New York Mellon Trust Company, N.A., Los Angeles, California will act as paying agent,
transfer agent and registrar for the Bonds (the “Paying Agent”). Interest on the Bonds is payable on each
September 1 and March 1 (each an “Interest Payment Date”) to maturity, commencing September 1, 2010, at the
annual rates shown on the cover hereof. Interest is calculated on the basis of a 360-day year comprising twelve
30-day months. The interest on the Bonds shall be payable in lawful money to the person whose name appears on
the Bond registration books of the Paying Agent as the owner thereof as of the close of business on the 15th day of
the month immediately preceding an Interest Payment Date (the “Record Date”), whether or not such day is a
business day. Each Bond authenticated on or before August 15, 2010 shall bear interest from the date of delivery.
Each Bond authenticated following a Record Date and prior to the following Interest Payment Date shall bear
interest from that Interest Payment Date. Any other Bond shall bear interest from the Interest Payment Date
immediately preceding its authentication; provided, however, that if at the time of authentication of a Bond, interest
is in default thereon, such Bond shall bear interest from the Interest Payment Date to which interest has previously
been paid or made available for payment thereon.

         The Bonds will mature on September 1 of each year shown on the cover page hereof, and are subject to
optional and mandatory redemption prior to their respective stated maturity dates as provided herein. See
“Redemption” below. The principal of the Bonds shall be payable in lawful money of the United States of America
to the owner thereof upon the surrender thereof at maturity or earlier redemption at the office of the Paying Agent.

         For so long as the Bonds are held in book-entry form by DTC or another securities depository selected by
the City, payment shall be made to the registered owner of the Bonds designated by such securities depository by
wire transfer of immediately available funds.

Redemption

        Optional Redemption. The Bonds maturing on or before September 1, 2019 will not be subject to optional
redemption prior to their respective stated maturities. Bonds maturing on and after September 1, 2020 are subject to
redemption prior to their respective stated maturities at the option of the City, from any source of available funds, as
a whole or in part on any date on or after September 1, 2019, at a price equal to the par amount of the Bonds to be




OHS West:260917701.3                                       2
redeemed, together with accrued interest to the date fixed for redemption (each, a “Redemption Date”), without
premium.

         Mandatory Redemption. The $_________ Term Bond maturing on September 1, _____, is also subject to
redemption prior to its stated maturity date, in part, by lot, from mandatory sinking fund payments, on each
September 1 on and after September 1, ____, as shown in the table below, at a redemption price equal to the
principal amount thereof plus accrued interest thereon to the Redemption Date, without premium.

                                 Mandatory Sinking Fund               Sinking Fund
                                     Payment Date                       Payment
                                     (September 1)                  Principal Amount




                          ________________
                          *
                              Maturity

         The $_______ Term Bond maturing on September 1, _____, is also subject to redemption prior to its stated
maturity date, in part, by lot, from mandatory sinking fund payments, on each September 1 on and after
September 1, ______, as shown in the table below, at a redemption price equal to the principal amount thereof plus
accrued interest thereon to the Redemption Date, without premium.

                                 Mandatory Sinking Fund               Sinking Fund
                                     Payment Date                       Payment
                                     (September 1)                  Principal Amount




                          ________________
                          *
                              Maturity

         The $_______ Term Bond maturing on September 1, _____, is also subject to redemption prior to its stated
maturity date, in part, by lot, from mandatory sinking fund payments, on each September 1 on or after
September 1, ______, as shown in the table below, at a redemption price equal to the principal amount thereof plus
accrued interest thereon to the Redemption Date, without premium.

                                 Mandatory Sinking Fund               Sinking Fund
                                     Payment Date                       Payment
                                     (September 1)                  Principal Amount




                          ________________
                          *
                              Maturity

          Selection of Bonds for Redemption. If less than all of the Bonds are called for redemption, such Bonds
shall be redeemed in inverse order of maturities or as otherwise directed by the City, and if less than all of the Bonds
of any given maturity are called for redemption, the portions of such bonds of a given maturity to be redeemed shall
be determined by lot. For purposes of such selection, each maturity of Bonds shall be deemed to consist of
individual Bonds of $5,000 denominations each, which may be separately redeemed.


OHS West:260917701.3                                       3
          Notice of Redemption. So long as DTC or its nominee is the registered owner of the Bonds, the City will
mail notices of redemption to DTC not less than 30 days and not more than 60 days prior to any Redemption Date.
If for any reason DTC or any other securities depository will not be engaged by the City with respect to some or all
of the Bonds so called for redemption, the Paying Agent will give notice of any redemption of such Bonds by mail,
postage prepaid, to the respective registered owners thereof at the addresses appearing on the bond registration
books not less than 30 and not more than 60 days prior to the Redemption Date. See APPENDIX D: “DTC AND
THE BOOK-ENTRY ONLY SYSTEM — Discontinuation of Book-Entry Only System; Payment to Beneficial
Owners.”

          The actual receipt by the owner of any Bond of such notice of redemption will not be a condition precedent
to redemption of such Bond, and failure to receive such notice, or any defect in such notice, will not affect the
validity of the proceedings for the redemption of such Bond or the cessation of the accrual of interest on such Bond
on the Redemption Date.

          Conditional Notice; Right to Rescind Notice of Optional Redemption. The City may provide a
conditional notice of redemption to the owner of any Bond and may rescind any optional redemption for any reason
on any date prior to the Redemption Date by causing written notice of the rescission to be given to the owners of the
Bonds so called for redemption. Notice of rescission of redemption will be given in the same manner in which
notice of redemption was originally given. The actual receipt by the owner of any Bond of notice of such rescission
will not be a condition precedent to rescission, and failure to receive such notice or any defect in such notice will not
affect the validity of the rescission.

Defeasance; Discharge of Resolution

         Bonds may be paid by the City in any of the following ways:

        (i) by paying or causing to be paid the principal or redemption price of and interest on Bonds Outstanding,
as and when the same become due and payable;

          (ii) by depositing, in trust, at or before maturity, money or United States Treasury notes, bonds, bills or
certificates of indebtedness in the necessary amount to pay or redeem Bonds Outstanding; or

         (iii) by delivering to the Paying Agent, for cancellation by it, Outstanding Bonds.

         If the City shall pay all Bonds Outstanding and shall also pay or cause to be paid all other sums payable
under the Resolution by the City and shall have given notice of any redemption prior to maturity, as described
above, then and in that case, and notwithstanding that any Bonds shall not have been surrendered for payment, the
Resolution, the pledge of all taxes and other assets made under the Resolution, and all covenants, agreements and
other obligations of the City under the Resolution and all liability of the City with respect to the Bonds shall cease,
terminate, become void and be completely discharged and satisfied.

         The City may at any time surrender to the Paying Agent for cancellation by it any Bonds previously issued
and delivered, which the City may have acquired in any manner whatsoever, and such Bonds, upon such surrender
and cancellation, shall be deemed to be paid and retired.

Purchase in Lieu of Redemption

         At any time during which the Bonds are subject to optional redemption, the Bonds to be redeemed may be
purchased by the Paying Agent (for the account of the City) on the date which would be the Redemption Date, at a
purchase price equal to the redemption price which would have been applicable to such Bonds on the Redemption
Date, plus accrued interest, if any. In order to exercise such option, the City shall deliver to the Paying Agent an
opinion of Bond Counsel and shall direct the Paying Agent to provide notice of mandatory purchase in lieu of
redemption. The City shall pay the purchase price of such Bond to the Paying Agent in immediately available funds
and the Paying Agent shall pay the same to the Owners of Bonds being purchased against delivery thereof.
Following such purchase, the Paying Agent shall register such Bonds in accordance with the written instructions of



OHS West:260917701.3                                       4
the City. No purchase of such Bond shall operate to extinguish the indebtedness evidenced by such Bond. No
Owner may elect to retain a Bond subject to mandatory purchase. In the event that the City lacks sufficient funds to
pay the purchase price of any Bond subject to mandatory purchase in lieu of redemption on the date fixed for such
purchase, the City shall cancel such mandatory purchase in lieu of redemption and shall return each such Bond to
the Owner who shall have tendered such Bond for mandatory purchase in lieu of redemption. The Paying Agent
shall give notice that such mandatory purchase was not effected promptly following the date fixed for such
purchase.

Unclaimed Moneys

         Any moneys held by the Paying Agent for the payment of the principal or redemption price of, or interest
on, any Bonds and remaining unclaimed for two years after the principal of all of the Bonds has become due and
payable (whether at maturity or upon call for redemption as provided in the Resolution), if such moneys were so
held at such date, or two years after the date of deposit of such moneys if deposited after said date when all of the
Bonds became due and payable, shall, upon request of the City, be repaid to the City free from the trusts created by
the Resolution, and all liability of the Paying Agent with respect to such moneys shall thereupon cease.




OHS West:260917701.3                                     5
                                 ESTIMATED SOURCES AND USES OF FUNDS

         The following are the sources and estimated uses of funds in connection with the Bonds:

                       Estimated Sources of Funds

                                        Principal Amount of Bonds
                                        Original Issue Premium
                                           Total Sources

                       Estimated Uses of Funds

                                        Deposit to Project Fund
                                        Underwriter’s Discount
                                        Costs of Issuance (1)
                                          Total Uses

         _____________________
         (1)
            Includes fees for services of rating agencies, Financial Advisor, Bond Counsel and Disclosure Counsel, printer and
         other miscellaneous costs associated with the issuance of the Bonds.




OHS West:260917701.3                                         6
                                      DEBT SERVICE SCHEDULE

         Scheduled debt service payable with respect to the Bonds (assuming no optional redemption prior to
maturity) is as follows:
                                         City of Berkeley
                               General Obligation Bonds, Series 2010
                   (Measure FF—Neighborhood Branch Library Improvements Project)

                                                                Total Principal      Total Annual
         Payment Date         Principal         Interest         and Interest        Debt Service
       September 1, 2010
       March 1, 2011
       September 1, 2011
       March 1, 2012
       September 1, 2012
       March 1, 2013
       September 1, 2013
       March 1, 2014
       September 1, 2014
       March 1, 2015
       September 1, 2015
       March 1, 2016
       September 1, 2016
       March 1, 2017
       September 1, 2017
       March 1, 2018
       September 1, 2018
       March 1, 2019
       September 1, 2019
       March 1, 2020
       September 1, 2020
       March 1, 2021
       September 1, 2021
       March 1, 2022
       September 1, 2022
       March 1, 2023
       September 1, 2023
       March 1, 2024
       September 1, 2024
       March 1, 2025
       September 1, 2025
       March 1, 2026
       September 1, 2026
       March 1, 2027
       September 1, 2027
       March 1, 2028
       September 1, 2028
       March 1, 2029
       September 1, 2029
       March 1, 2030
       September 1, 2030
       March 1, 2031
       September 1, 2031
       March 1, 2032
       September 1, 2032


                                                    7
                                                   Total Principal   Total Annual
          Payment Date      Principal   Interest    and Interest     Debt Service
        March 1, 2033
        September 1, 2033
        March 1, 2034
        September 1, 2034
        March 1, 2035
        September 1, 2035
        March 1, 2036
        September 1, 2036
        March 1, 2037
        September 1, 2037
        March 1, 2038
        September 1, 2038
        March 1, 2039
        September 1, 2039
        TOTAL




OHS West:260917701.5                        8
         Total scheduled debt service (principal plus interest) payable with respect to all outstanding general
obligation bonds of the City, including the Bonds (assuming no optional redemption prior to maturity), is as follows:

                                               City of Berkeley
                                           General Obligation Bonds
                                    Total Annual Debt Service Requirements
                                           (principal plus interest)*

                                                                 Total Debt Service
            Year Ending                                          Other Outstanding
            September 1                   The Bonds                    Bonds                 Fiscal Year Total
                2010
                2011
                2012
                2013
                2014
                2015
                2016
                2017
                2018
                2019
                2020
                2021
                2022
                2023
                2024
                2025
                2026
                2027
                2028
                2029
                2030
                2031
                2032
                2033
                2034
                2035
                2036
                2037
                2038
                2039

                          TOTAL


               _______________
               *   Totals may appear inconsistent due to rounding of components.




OHS West:260917701.5                                     9
                                          SECURITY FOR THE BONDS

General

         The City has the power and is obligated, and under the Resolution has covenanted, to levy ad valorem taxes
without limitation as to rate or amount upon all property subject to taxation by the City (except as to certain property
which is taxable at limited rates) for the payment of the principal of and interest on the Bonds when due.

         In accordance with the Act and the Resolution, the City Treasurer will deposit in the Debt Service Account
all property taxes levied and collected by the County and paid to the City for payment of the Bonds. All moneys in
the Debt Service Account shall be used and withdrawn by the City Treasurer solely for the purpose of paying the
principal of and interest on the Bonds as the same shall become due and payable.

Factors Affecting Property Tax Security for the Bonds

         The annual property tax rate for repayment of the Bonds will be based on the total assessed value of taxable
property in the City and the scheduled debt service on the Bonds in each year, plus any additional amount the City
elects to collect in order to manage its debt obligations and tax burdens, less any other lawfully available funds
applied by the City for repayment of the Bonds. Fluctuations in the annual debt service on the Bonds, the assessed
value of taxable property in the City, and the availability of such other funds in any year, may cause the annual
property tax rate applicable to the Bonds to fluctuate. Issuance by the City of additional authorized bonds payable
from ad valorem property taxes may cause the overall property tax rate to increase.

         Seismic Risks. The City is located in a seismically active region. Active earthquake faults underlie both
the City and the surrounding Bay Area, including the Hayward Fault, which runs under the City, and the San
Andreas Fault, which runs near San Francisco, approximately 15 miles across the San Francisco Bay. Significant
recent seismic events include the 1989 Loma Prieta earthquake, centered about 60 miles south of San Francisco,
which registered 6.9 on the Richter scale of earthquake intensity. That earthquake caused fires, building collapses,
and structural damage to buildings and highways in the City and environs. The San Francisco-Oakland Bay Bridge,
the only surface connector between the County and San Francisco, was closed for a month for repairs, and several
highways in the San Francisco Bay Area were permanently closed and eventually removed.

         In April 2008, the Working Group on California Earthquake Probabilities (a collaborative effort of the U.S.
Geological Survey (U.S.G.S.), the California Geological Society, and the Southern California Earthquake Center)
reported that there is a 63% chance that one or more quakes of about magnitude 6.7 or larger will occur in the Bay
Area before the year 2038. Such earthquakes may be very destructive. For example, the U.S.G.S. predicts a
magnitude 7 earthquake occurring today on the Hayward Fault would likely cause hundreds of deaths and almost
$100 billion of damage. In addition to the potential damage to City-owned buildings and facilities (on which the
City does not generally carry earthquake insurance), a major earthquake anywhere in the Bay Area may cause
significant temporary and possibly longer-term harm to the City’s economy, tax receipts, and residential and
business real property values.

Property Tax Revenues

          Property Tax System. Property tax revenues result from the application of the appropriate tax rate to the
total assessed value of taxable property in the City. Cities levy property taxes for payment of voter-approved bonds
and receive property taxes for general operating purposes as well. The City receives approximately 26% (Budget,
p.29) of its total general fund revenues from local property taxes.

        Local property taxation in California is the responsibility of various county officers. The County Assessor
computes the value of locally assessed taxable property, and upon approval of the various tax rates by the County
Board of Supervisors, the County Treasurer-Tax Collector prepares and mails tax bills to taxpayers and collects the




OHS West:260917701.5                                      10
taxes. Taxes collected on behalf of the City are remitted to the City Director of Finance for deposit and safekeeping.
The State Board of Equalization also assesses certain special classes of property, as described later in this section.

         Assessed Valuation of Property Within the City. Under the California Constitution, taxable property is
assessed at its “full cash value,” as determined by the county assessor. That “full cash value” generally reflects
market value only upon a change in ownership or upon new construction. If no change in ownership has occurred,
the assessed value may be increased by not more than two percent per year, or the rate of inflation, if less. Assessed
valuation of a property can also be adjusted downward upon a successful taxpayer appeal, if the market value has
declined below the most recent assessment. Recently, the Alameda County Assessor has initiated the reassessment
of many properties to account for a recent decline in market values. See CONSTITUTIONAL AND STATUTORY
LIMITATIONS ON TAXES AND EXPENDITURES—Article XIII A of the California Constitution, in this
Appendix.

         For assessment and tax collection purposes, property is classified either as “secured” or “unsecured,” and is
listed accordingly on separate parts of the assessment roll. The “secured roll” is that part of the assessment roll
containing State-assessed property and property (real or personal) for which there is a lien on real property
sufficient, in the opinion of the County Assessor, to secure payment of the taxes. All other property is “unsecured,”
and is assessed on the “unsecured roll.”

         California law requires that the assessment roll be finalized by August 20 of each year. The greater the
assessed value of taxable property in the City, the lower the tax rate necessary to generate taxes sufficient to pay
scheduled debt service on the Bonds. The table below shows recent history of taxable assessed valuation in the City.

                                           CITY OF BERKELEY
                                 SUMMARY OF TAXABLE ASSESSED VALUATION

Fiscal Year            Local Secured              Utility       Unsecured          Total              Percent Change
 2000-01              $6,614,346,666            $2,639,989    $371,034,275    $6,988,020,930                --
 2001-02               7,110,938,434             2,522,621     399,742,169     7,513,203,224               7.51%
 2002-03               7,646,957,900             2,463,388     391,087,713     8,040,509,001               7.01
 2003-04               8,251,039,596             2,526,768     402,174,941     8,655,741,305               7.65
 2004-05               8,687,909,495             3,075,097     571,603,260     9,262,587,852               7.01
 2005-06               9,499,976,877             2,520,396     574,192,669    10,076,689,942               8.78
 2006-07              10,377,045,760             2,335,203     592,977,821    10,972,358,784               8.89
 2007-08              11,160,531,045             1,324,910     606,785,227    11,768,641,182               7.26
 2008-09              11,918,409,630               473,910     671,983,004    12,590,866,544               6.99
 2009-10              12,085,578,735               473,910     720,264,455    12,806,317,100               1.71

Source: California Municipal Statistics, Inc.

          Taxation of State-Assessed Utility Property. A portion of property tax revenue of the City is derived from
utility property subject to assessment by the State Board of Equalization (“SBE”). State-assessed property, or
“unitary property,” is property of a utility system with components located in many taxing jurisdictions assessed
collectively as part of a “going concern” rather than as individual parcels of real or personal property. Unitary and
certain other state-assessed property is allocated to the counties by the SBE, taxed at special county-wide rates, and
the tax revenues distributed to taxing jurisdictions (including the City) according to statutory formulae generally
based on the distribution of taxes in the prior year.

          Ongoing changes in the structure of California electric utility industry and in the way in which components
of the industry are owned and regulated, including the sale of electric generation assets to largely unregulated,
nonutility companies, may affect how utility assets are assessed in the future, and which local agencies are to receive
the property taxes. The City is unable to predict the impact of these changes on its utility property tax revenues, or
whether future legislation or litigation may affect ownership of utility assets or the State’s methods of assessing
utility property and allocating tax revenues to local taxing agencies, including the City.




OHS West:260917701.5                                         11
         Assessed Valuation by Land Use. The following table gives a distribution of taxable property located in
the City by principal purpose for which the land is used, and the assessed valuation and number of parcels for each
use.

                                         CITY OF BERKELEY
                       2009-10 ASSESSED VALUATION AND PARCELS BY LAND USE


                                                        2009-10                               2009-10
                                                  Assessed Valuation                      Taxable Parcels
                                               Assessed                             Number               % of
                                              Valuation(1)      % of Total         of Parcels           Total
Non-Residential:
 Commercial                               $
 Industrial
 Vacant Industrial
 Vacant Commercial
 Recreational
 Government/Social/Institutional
   Subtotal Non-Residential               $


Residential
 Single Family Residence                  $
 2-4 Residential Units
 5+ Residential Units/Apartments
 Condominium/Townhouse
 Vacant Residential
 Cooperative
   Subtotal Residential                   $

Total                                     $
(1)
    Local Secured Assessed Valuation, excluding tax-exempt property.
Source: California Municipal Statistics, Inc.




OHS West:260917701.5                                         12
         Largest Taxpayers in the City. The twenty taxpayers in the City with the greatest combined assessed
valuation of taxable property on the 2009-10 tax roll, and the assessed valuations thereof, are shown in the following
table. The more property (by assessed value) owned by a single taxpayer, the more exposure of tax collections to
weakness in that taxpayer’s financial situation and ability or willingness to pay property taxes. In 2009-10, no
single taxpayer owned more than 2.30% of the total taxable property in the City.

                                            CITY OF BERKELEY
                                        TWENTY LARGEST TAXPAYERS

                                                                                       2009-10
                                                                                       Assessed                % of
                     Property Owner                        Primary Land Use           Valuation               Total(1)
 1.   Bayer Healthcare LLC                                      Industrial          $277,453,098              2.30%
 2.   EQR Berkeley LP                                          Apartments            102,585,117              0.85
 3.   Granite Library Gardens LP                               Apartments             78,064,549              0.65
 4.   GBC University Associates                              Office Building          46,818,000              0.39
 5.   SC Hillside Berkeley Inc.                                Apartments             45,380,200              0.38
 6.   Hanumandla R. & Hanumandla J. Reddy                      Apartments             33,628,597              0.28
 7.   GAZA Building LLC                                        Apartments             30,194,455              0.25
 8.   BVP Fulton LLC                                           Apartments             27,755,039              0.23
 9.   Kaiser Foundation Health Plan Inc.                        Industrial            27,636,398              0.23
10.   Oxford Street Development LLC                           Commercial              27,521,700              0.23
11.   Durant Investors LP                                     Commercial              27,089,569              0.22
12.   2600 Tenth Street LLC                                  Office Building          26,514,892              0.22
13.   Seventh Street Properties II                           Light Industrial         24,717,552              0.20
14.   Prasad R. & Santi Lakireddy                              Apartments             24,423,142              0.20
15.   Pyramid Gilman Street Property LLC                   Industrial/Brewery         23,837,568              0.20
16.   John K. Gordon & Janis L. Mitchell                     Office Building          23,540,985              0.19
17.   Fifth & Potter Street Associates LLC                   Light Industrial         22,331,654              0.18
18.   Jayaprakash R. & Annapurna Lakireddy                     Apartments             21,263,768              0.18
19.   First Shattuck LLC                                     Office Building          19,597,269              0.16
20.   NFLP Berkeley Center DE LLC                            Movie Theater            18,617,624              0.15
                                                                                    $928,971,176              7.69%
(1)
  2009-10 Local secured assessed valuation: $12,085,578,735.
Source: California Municipal Statistics, Inc.

         Property Tax Rates. The State Constitution permits the levy of an ad valorem tax on taxable property not
to exceed 1% of the full cash value of the property, and State law requires the full 1% tax to be levied. The levy of
special ad valorem property taxes in excess of the 1% levy is permitted as necessary to provide for debt service
payments on voter-approved indebtedness.

          The rate of tax necessary to pay fixed debt service on the Bonds in a given year depends on the assessed
value of taxable property in that year. (Unsecured property is taxed at the secured property tax rate from the prior
year.) Property values could be reduced by factors beyond the City’s control, such as a depressed real estate market
due to general economic conditions in the San Francisco Bay Area. The City is located in a seismically active area,
and property within the City could sustain extensive damage in a major earthquake, and a major earthquake could
adversely affect the Bay Area’s economic activity. Other possible causes for a reduction in assessed values include
the complete or partial destruction of taxable property caused by other natural or manmade disasters, such as flood,
fire, toxic dumping, acts of terrorism, etc., or reclassification of property to a class exempt from taxation, whether by
ownership or use (such as exemptions for property owned by State and local agencies and property used for
qualified educational, hospital, charitable or religious purposes). Lower assessed values could necessitate a
corresponding increase in the annual tax rate to be levied to pay the principal of and interest on the Bonds. Issuance
of additional authorized bonds in the future might also cause the tax rate to increase.




OHS West:260917701.5                                       13
         Other local agencies can also impose ad valorem taxes on property owners in the City, generally for
outstanding voter-approved general obligation debt. One factor in the ability of taxpayers to pay additional taxes for
general obligation bonds is the cumulative rate of tax of all such obligations. The following table shows several
years’ history of ad valorem property tax rates for all taxing agencies in Tax Rate Area 13-000, which contains
approximately 97% of the total assessed value of the City.

                                              CITY OF BERKELEY
                             TYPICAL TAX RATE PER $100 ASSESSED VALUATION
                             (TRA 13-000 – 2009-10 Assessed Valuation: $12,431,372,854)

                                                 Fiscal    Fiscal     Fiscal        Fiscal       Fiscal        Fiscal
                                                  Year     Year        Year         Year         Year           Year
                                                2004-05   2005-06    2006-07       2007-08      2008-09       2009-10
Countywide Rate                                 1.0000    1.0000     1.0000        1.0000       1.0000        1.0000
Berkeley Unified School District                 .1665     .1426      .1352         .1405        .1450         .1502
Bonds
Peralta Community College District               .0208     .0238      .0272         .0223        .0362         .0430
Bay Area Rapid Transit                                —    .0048      .0050         .0076        .0090         .0057
East Bay Municipal Utility District              .0076     .0072      .0068         .0065        .0064         .0069
East Bay Regional Park District                  .0057     .0057      .0085         .0080        .0100         .0109
City of Berkeley                                 .0725     .0650      .0525         .0450        .0550         .0501
Total                                           1.2731    1.2491     1.2352        1.2299       1.2616        1.2669

Source: California Municipal Statistics, Inc.

         Tax Collections and Delinquencies. A city’s share of the 1% countywide tax is based on the actual
allocation of property tax revenues to each taxing jurisdiction in the county in Fiscal Year 1978-79, as adjusted
according to a complex web of statutory modifications enacted since that time. Revenues derived from special ad
valorem taxes for voter-approved indebtedness, including the Bonds, are reserved to the taxing jurisdiction that
approved and issued the debt, and may only be used to repay that debt.

          The County Treasurer-Tax Collector prepares the property tax bills. Property taxes on the regular secured
assessment roll are due in two equal installments: the first installment is due on November 1, and becomes
delinquent after December 10. The second installment is due on February 1 and becomes delinquent after April 10.
If taxes are not paid by the delinquent date, a ten percent penalty attaches. If taxes remain unpaid by June 30, the
tax is deemed to be in default. Penalties then begin to accrue at the rate of 1.5% per month. The property owner has
the right to redeem the property by paying the taxes, accrued penalties, and costs within five years of the date the
property went into default. If the property is not redeemed within five years, it is subject to sale at a public auction
by the County Treasurer-Tax Collector.

         Annual bills for property taxes on the unsecured roll are generally issued in July, are due in a single
payment within 30 days, and become delinquent after August 31. A ten percent penalty attaches to delinquent taxes
on property on the unsecured roll, and an additional penalty of 1.5% per month begins to accrue on November 1.
The date on which taxes on supplemental assessments are due depends on when the supplemental tax bill is mailed.
To collect unpaid taxes, the County Treasurer-Tax Collector may obtain a judgment lien upon and cause the sale of
all property owned by the taxpayer in the County, and may seize and sell personal property, improvements and
possessory interests of the taxpayer. The County Treasurer-Tax Collector may also bring a civil suit against the
taxpayer for payment.




OHS West:260917701.5                                        14
          The following table shows a recent history of real property tax collections and delinquencies in the City.

                                          CITY OF BERKELEY
                                SECURED TAX CHARGES AND DELINQUENCIES

                                                                 Amount Delinquent                % Delinquent
      Fiscal Year                   Secured Tax Charge(1)            June 30                        June 30
        2000-01                       $21,396,029.31               $420,904.01                        1.97
        2001-02                        22,855,012.30                559,616.90                        2.45
        2002-03                        24,637,551.31                570,260.58                        2.31
        2003-04                        25,985,291.16                515,310.65                        1.98
        2004-05                        28,028,117.55                552,435.47                        1.97
        2005-06                        30,573,949.35                684,004.33                        2.24
        2006-07                        33,552,146.54              1,189,361.30                        3.54
        2007-08                        36,038,297.51              1,680,289.97                        4.66
        2008-09                        38,438,858.24              1,757,281.78                        4.57
_____________________
(1)
   1% General Fund apportionment.
Source: California Municipal Statistics, Inc.

         Teeter Plan. The County has adopted the Alternative Method of Distribution of Tax Levies and
Collections and of Tax Sale Proceeds (the “Teeter Plan”), as provided for in Section 4701 and following of the
California Revenue and Taxation Code. Under the Teeter Plan, the County distributes to each participating local
tax-levying agency, including the City, the amount levied on the secured and supplemental tax rolls, instead of the
amount actually collected. In return, the County receives and retains delinquent payments, penalties and interest as
collected, that would have been due the local agency in the absence of the Teeter Plan. The City has elected not to
participate in the Teeter Plan.

         Direct and Overlapping Debt. The following table was prepared by California Municipal Statistics Inc.,
and is included for general information purposes only. The City has not reviewed this table for completeness or
accuracy and makes no representations in connection therewith. The first column in the table names each public
agency which had outstanding debt as of April 1, 2010, and whose territory overlaps the City in whole or in part.
The second column shows the percentage of each overlapping agency’s assessed value located within the boundaries
of the City. This percentage, multiplied by the total outstanding debt of each overlapping agency (which is not
shown in the table) produces the amount shown in the third column, which is the apportionment of each overlapping
agency’s outstanding debt to taxable property in the City.

         The table generally includes long-term obligations sold in the public credit markets by the public agencies
listed. Such long-term obligations generally are not payable from revenues of the City (except as indicated) nor are
they necessarily obligations secured by land within the City. In many cases, long-term obligations issued by a
public agency are payable only from the general fund or other revenues of such public agency.




OHS West:260917701.5                                        15
                                   DIRECT AND OVERLAPPING BONDED DEBT
                                              as of April 1, 2010

2009-10 Assessed Valuation:                            $ 12,806,317,100
Redevelopment Incremental Valuation:                        177,320,992
Adjusted Assessed Valuation:                           $ 12,628,996,108

DIRECT AND OVERLAPPING TAX AND ASSESSMENT DEBT:                 % Applicable                                Debt 4/1/10
Bay Area Rapid Transit District                                     2.892%                                $   12,146,400
East Bay Municipal Utility District, Special District No. 1        21.009                                      5,726,003
Peralta Community College District                                 22.771                                    101,477,823
Berkeley Unified School District                                   99.997                                    213,752,809
City of Berkeley                                                  100.                                        68,700,000
City of Berkeley Community Facilities District No. 1              100.                                         6,990,000
East Bay Regional Park District                                     4.407                                      8,671,874
City of Berkeley Thousand Oaks Heights AFUU Assessment District   100.                                         1,370,000
 TOTAL DIRECT AND OVERLAPPING TAX AND ASSESSMENT DEBT                                                     $ 418,834,909

DIRECT AND OVERLAPPING GENERAL FUND DEBT:
Alameda County and Coliseum Obligations                                                   7.404%          $     31,129,526
Alameda County Pension Obligations                                                        7.404                 13,207,760
Alameda-Contra Costa Transit District Certificates of Participation                       8.980                  3,622,083
Peralta Community College District Pension Obligations                                   22.771                 35,379,095
City of Berkeley Lease Revenue Bonds and Certificates of                                100.                    33,540,000 (1)
Participation
City of Berkeley Pension Obligations                                                    100.                     3,265,000
 TOTAL DIRECT AND OVERLAPPING GENERAL FUND DEBT                                                           $    120,143,464

  COMBINED TOTAL DEBT                                                                                     $    538,978,373(2)


Ratios to 2009-10 Assessed Valuation:
 Direct Debt ($68,700,000[a13])                                                            0.54%
Total Direct and Overlapping Tax and Assessment Debt                                       3.27%

Ratios to Adjusted Assessed Valuation:
  Combined Total Direct Debt ($105,505,000[a14])                                           0.84%
  Combined Total Debt                                                                      4.27%
(1)
      Excludes Certificates to be sold
(2)
      Excludes tax and revenue anticipation notes, enterprise revenue, mortgage revenue and tax allocation bonds and non-bonded
      capital lease obligations.

STATE SCHOOL BUILDING AID REPAYABLE AS OF 6/30/09: $0
_____________________
Source: California Municipal Statistics, Inc.




OHS West:260917701.5                                          16
                                                   TAX MATTERS

         In the opinion of Orrick, Herrington & Sutcliffe LLP (“Bond 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, interest on the Bonds 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. Bond Counsel is of the further opinion that interest on the Bonds is
not a specific preference item for purposes of the federal individual or corporate alternative minimum taxes, nor is
such interest included in adjusted current earnings when calculating corporate alternative minimum taxable income.
A complete copy of the proposed form of opinion of Bond Counsel is set forth in APPENDIX E hereto.

         To the extent the issue price of the Bonds of any given maturity date is less than the amount to be paid at
maturity of such Bonds (excluding amounts stated to be interest and payable at least annually over the term of such
Bonds), the difference constitutes “original issue discount,” the accrual of which, to the extent properly allocable to
each beneficial owner thereof, is treated as interest on the Bonds 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 Bonds is the first price at which a substantial amount of such maturity of the Bonds 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 Bonds accrues
daily over the term to maturity of such Bonds 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 Bonds to determine taxable gain or loss upon disposition (including sale, redemption, or
payment on maturity) of such Bonds. Beneficial owners of the Bonds should consult their own tax advisors with
respect to the tax consequences of ownership of Bonds with original issue discount, including the treatment of
beneficial owners who do not purchase such Bonds in the original offering to the public at the first price at which a
substantial amount of such Bonds is sold to the public.

        Bonds 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 Bonds”) will be treated as having
amortizable bond premium. No deduction is allowable for the amortizable bond premium in the case of bonds, like
the Premium Bonds, the interest on which is excluded from gross income for federal income tax purposes.
However, the amount of tax-exempt interest received, and a beneficial owner’s basis in a Premium Bond, will be
reduced by the amount of amortizable bond premium properly allocable to such beneficial owner. Beneficial
owners of Premium Bonds 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 on obligations such as the Bonds. The City has made certain
representations and covenanted to comply with certain restrictions, conditions and requirements designed to ensure
that interest on the Bonds will not be included in federal gross income. Inaccuracy of these representations or
failure to comply with these covenants may result in interest on the Bonds being included in gross income for
federal income tax purposes, possibly from the date of original issuance of the Bonds. The opinion of Bond Counsel
assumes the accuracy of these representations and compliance with these covenants. Bond Counsel has not
undertaken to determine (or to inform any person) whether any actions taken (or not taken), or events occurring (or
not occurring), or any other matters coming to Bond Counsel’s attention after the date of issuance of the Bonds may
adversely affect the value of, or the tax status of interest on, the Bonds. Accordingly, this opinion is not intended to,
and may not, be relied upon in connection with any such actions, events or matters.

          Although Bond Counsel is of the opinion that interest on the Bonds 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 interest on, the Bonds may otherwise affect a beneficial owner’s federal,
state or local tax liability. The nature and extent of these other tax consequences depends upon the particular tax
status of the beneficial owner or the beneficial owner’s other items of income or deduction. Bond Counsel expresses
no opinion regarding any such other tax consequences.




OHS West:260917701.5                                       17
           Future legislation, if enacted into law, or clarification of the Code, or court decisions, may cause interest on
the Bonds to be subject, directly or indirectly, to federal income taxation or to be subject to or exempted from state
income taxation, or otherwise prevent beneficial owners from realizing the full current benefit of the tax status of
such interest. The introduction or enactment of any such future legislation or clarification of the Code or court
decision may also affect the market price for, or marketability of, the Bonds. Prospective purchasers of the Bonds
should consult their own tax advisers regarding any pending or proposed federal or state tax legislation, regulations
or litigation, as to which Bond Counsel expresses no opinion.

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

         Bond Counsel’s engagement with respect to the Bonds ends with the issuance of the Bonds, and, unless
separately engaged, Bond Counsel is not obligated to defend the City or the beneficial owners regarding the
tax-exempt status of the Bonds in the event of an audit examination by the IRS. Under current procedures, parties
other than the City and its appointed counsel, including the beneficial 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
City legitimately disagrees may not be practicable. Any action of the IRS, including but not limited to selection of
the Bonds for audit, or the course or result of such audit, or an audit of bonds presenting similar tax issues, may
affect the market price for, or the marketability of, the Bonds, and may cause the City or the beneficial owners to
incur significant expense.

                                            OTHER LEGAL MATTERS

          Upon the delivery of the Bonds, Orrick, Herrington & Sutcliffe LLP, San Francisco, California, Bond
Counsel to the City, will issue its opinion approving the validity of the Bonds, the proposed form of which opinion
is set forth in Appendix E hereto. Certain legal matters will be passed upon for the City by Orrick, Herrington &
Sutcliffe LLP as Disclosure Counsel, and by the City Attorney. Orrick, Herrington & Sutcliffe LLP expresses no
opinion regarding the accuracy, completeness or fairness of information contained in this Official Statement.

                              PROFESSIONALS INVOLVED IN THE OFFERING

         Northcross, Hill & Ach, Inc., San Rafael, California, has served as Financial Advisor to the City with
respect to the sale of the Bonds. The Financial Advisor has assisted the City in the review of this Official Statement
and in other matters relating to the planning, structuring, and sale of the Bonds. The Financial Advisor has not
independently verified any of the data contained herein nor conducted a detailed investigation of the affairs of the
City to determine the accuracy or completeness of this Official Statement and assumes no responsibility for the
accuracy or completeness of any of the information contained herein. The Financial Advisor will receive
compensation from the City contingent upon the sale and delivery of the Bonds. Bond Counsel and Disclosure
Counsel will also receive compensation from the City contingent upon the sale and delivery of the Bonds. The Bank
of New York Mellon Trust Company, N.A., Los Angeles, California, will act as the City’s paying agent, transfer
agent and registrar for the Bonds.

                                            INDEPENDENT AUDITORS

         The financial statements of the City for the Fiscal Year ended June 30, 2009, have been audited by
Caporicci & Larson, Certified Public Accountants, Oakland, California, independent auditors, as indicated in its
report, which is included in APPENDIX B of this Official Statement.

         The City considers its financial statements to be public information, and accordingly has neither requested
nor obtained the consent of Caporicci & Larson to include such financial statements herein and Caporicci & Larson



OHS West:260917701.5                                        18
has not reviewed this Official Statement nor performed any procedures subsequent to rendering its opinion on such
financial statements.

                                           ABSENCE OF LITIGATION

          No litigation is pending or threatened concerning the validity of the Bonds, the ability of the City to levy
the ad valorem tax required to pay debt service on the Bonds, the corporate existence of the City, or the entitlement
to their respective offices of the officers of the City who will execute and deliver the Bonds and other documents
and certificates in connection therewith. The City will furnish to the initial purchasers of the Bonds a certificate of
the City as to the foregoing as of the time of the original delivery of the Bonds.

         The City is routinely subject to lawsuits and claims. In the opinion of the City, the aggregate amount of the
uninsured liabilities of the City under these lawsuits and claims will not materially affect the financial position or
operations of the City.

                                          CONTINUING DISCLOSURE

          The City has covenanted for the benefit of the holders and beneficial owners of the Bonds to provide
certain financial information and operating data relating to the City (the “Annual Report”) not later than nine months
after the end of the City’s Fiscal Year (which currently ends on June 30), commencing with the report for Fiscal
Year 2009-10, which is due not later than April 1, 2011, and to provide notices of the occurrence of certain
enumerated events, if material. The Annual Report and any material event notices will be filed by the City with the
Municipal Securities Rulemaking Board. The specific nature of the information to be contained in the Annual
Report or the notices of material events is summarized in APPENDIX C: “FORM OF CONTINUING
DISCLOSURE CERTIFICATE.” These covenants have been made in order to assist the initial purchasers of the
Bonds in complying with Securities and Exchange Commission Rule 15c2-12(b)(5) (the “Rule”). The City has
never failed to comply in all material respects with any previous undertakings with regard to the Rule to provide
annual reports or notices of material events. [

                                                      RATINGS

         Moody’s Investors Service, Inc. (“Moody’s”) and Standard & Poor’s Ratings Services (“S&P”) have
assigned municipal bond ratings of “___,” and “___,” respectively, to the Bonds. Certain information not included
in this Official Statement was supplied by the City to the rating agencies to be considered in evaluating the Bonds.
The ratings reflect only the views of each rating agency, and any explanation of the significance of any rating may
be obtained only from the respective credit rating agencies: Moody’s, at www.moodys.com and S&P, at
www.sandp.com. Investors are advised to read the entire Official Statement to obtain information essential to the
making of an informed investment decision. No assurance can be given that any rating issued by a rating agency
will be retained for any given period of time or that the same will not be revised or withdrawn entirely by such
rating agency, if in its judgment circumstances so warrant. Any such revision or withdrawal of the ratings obtained
may have an adverse effect on the market price of the Bonds. The City undertakes no responsibility to oppose any
such downward revision, suspension or withdrawal.

                                              SALE OF THE BONDS

         The Bonds were sold at competitive bid on ______, 2010. The Bonds were awarded to _______________
(the “Purchaser”), who made the lowest true interest cost bid, at a purchase price of $_____________. Under the
terms of its bid, the Purchaser will be obligated to purchase all of the Bonds if any are purchased, the obligation to
make such purchase being subject to the approval of certain legal matters by Bond Counsel, and certain other
conditions to be satisfied by the City.

          The Purchaser has certified the reoffering prices or yields set forth on the cover of this Official Statement,
and the City takes no responsibility for the accuracy of those prices or yields. Based on the reoffering prices, the
original issue premium on the reoffering of the Bonds is $____________ and the Purchaser’s gross compensation
(or “spread”) is $__________. The Purchaser may offer and sell the Bonds to certain dealers and others at prices



OHS West:260917701.5                                      19
lower than the offering prices stated on the cover page. The offering prices may be changed from time to time by
the Purchaser.

                                                MISCELLANEOUS

         Any statements in this Official Statement involving matters of opinion, whether or not expressly so stated,
are intended as such and not as representations of fact. This Official Statement is not to be construed as a contract or
agreement between the City and the initial purchasers or owners and beneficial owners of any of the Bonds.

                                           ___________________________________


         The preparation and distribution of this Official Statement have been duly authorized by the City.

                                                                 CITY OF BERKELEY




                                                                 By              /s/ Philip Kamlarz
                                                                                 City Manager


                                                                                 City Manager




OHS West:260917701.5                                       20
                                                   APPENDIX A

                                           THE CITY OF BERKELEY

          The information in this appendix concerning the operations of the City of Berkeley (the “City”) and the
City’s finances is provided as supplementary information only, and it should not be inferred from the inclusion of
this information in this Official Statement that the principal of or interest on the Bonds is payable from the general
fund of the City. The Bonds are payable from the proceeds of an ad valorem tax approved by the voters of the City
pursuant to all applicable laws and Constitutional requirements, and required to be levied by the City on taxable
property within the City in an amount sufficient for the timely payment of principal and interest on the Bonds. See
“SECURITY FOR THE BONDS” in the front section of this Official Statement.

                            FINANCIAL AND DEMOGRAPHIC INFORMATION

General

         The City of Berkeley is located in Alameda County on the eastern shore of the San Francisco Bay (the area
known locally as “the East Bay”), approximately 10 miles northeast of San Francisco, to which it is connected by
means of the San Francisco-Oakland Bay Bridge. The City is bordered on the south by the cities of Oakland and
Emeryville, on the north by the town of Albany in Alameda County, on the north and east by unincorporated areas
of Contra Costa County, including the town of Kensington and Tilden Regional Park in the Berkeley Hills, and on
the west by San Francisco Bay. The City encompasses a total area of approximately 19 square miles and had an
estimated population in 2010 of 108,119, giving it the highest population density of any city in the East Bay. The
following table sets forth historical and estimated population figures for the City.

                                CITY OF BERKELEY AND ALAMEDA COUNTY
                                             POPULATION

               Year                           City of Berkeley                      Alameda County
               1970                               116,716                              1,071,446
               1980                               103,328                              1,105,379
               1990                               102,724                              1,279,182
               2000                               102,743                              1,443,939
               2001                               103,578                              1,465,194
               2002                               104,296                              1,482,597
               2003                               104,208                              1,490,194
               2004                               104,193                              1,494,713
               2005                               104,114                              1,498,963
               2006                               105,269                              1,506,214
               2007                               106,017                              1,519,250
               2008                               106,520                              1,538,054
               2009                               107,250                              1,557,749
               2010                               108,119                              1,574,857
Source: The 1970, 1980 and 1990 totals are U.S. Census figures. The 2001 through 2010 figures are from annual
        estimates provided by the State Department of Finance as of January 1.

         The City is perhaps best known as the home of the University of California at Berkeley, the original and
premier campus of the State’s most prestigious university system, located on the eastern side of the City. The
University of California is also the City’s largest employer, with approximately 14,400 full-time and part-time
workers. Enrollment at the University of California of over 35,000 students significantly swells the City’s
population during the school year.

         Leading industries in Berkeley include educational services, health care and social assistance, professional
services, management consulting, high-tech and biotechnology research, consulting and manufacturing, arts and
entertainment, and hospitality services. Berkeley’s restaurants, food purveyors, and retail corridors attract patrons


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from throughout the Bay Area. The City’s thriving arts scene comprises approximately 130 arts and cultural
organizations, including 20 art galleries, 15 theater groups, twelve museums and nine performance centers,
providing an estimated 3,400 jobs. The Downtown Arts District was formed by the City in 1995 and related capital
improvements were financed in part by a voter-approved tax-supported bond. The Ashby Arts District, an informal
coalition of various performing artists in South Berkeley, was officially recognized by the Mayor in 2003. The
following table gives recent employment information for the City’s largest employers.

                                             CITY OF BERKELEY
                                             MAJOR EMPLOYERS
                                                    2009

                                                                     Type of
                                 Employer                            Business              Employees
           University of California at Berkeley                   Education                  14,444
           Lawrence Berkeley National Laboratory                  Research                    3,735
           Alta Bates Medical Center                              Health Care                 3,100
           City of Berkeley                                       Government                  1,658
           Bayer Corporation                                      Pharmaceutical              1,500
           Berkeley Unified School District                       Education                   1,200
           Kaiser Permanente Medical Group                        Health Care                   700
           Pacific Steel Casting Company                          Manufacturing                 600
           Andronico’s Market                                     Grocer                        325
           Berkeley City College                                  Education                     300
 Source: City of Berkeley, Comprehensive Annual Financial Report 2009 (p. 193)

          The City is served by major freeways and public transportation networks. Interstate 80/580 runs north-
south, connecting San Francisco to the State Capitol in Sacramento and points further east, eventually reaching New
York City; State Route 13 runs east-west from I-80 at San Francisco Bay over the East Bay hills to the bedroom
communities of eastern Contra Costa County; State Route 24 connects Route 13 in the Berkeley Hills to Oakland
and the communities of southern Alameda County and Interstate 580-east (leading to the Central Valley and North-
South Interstate 5). The Bay Area Rapid Transit District (“BART”) serves Berkeley with three stations on the
“Richmond” line, and provides commuter rail service to downtown San Francisco, San Francisco Airport, Oakland
Airport, and throughout the East Bay. Surface bus transportation is provided by the Alameda-Contra Costa Transit
District.

         On average, Berkeley residents are highly educated, with an estimated 65% of the population age 25 or
older having attained a bachelor’s degree or higher. According to the U.S. Census Bureau’s American Communities
Survey data, median household income is estimated at $64,434 during 2008. According to 2008 U.S. Census
estimates, the City’s population is 63.7% white, 18.1% Asian, 9.9% African American, and 8% of another or mixed
race; 15.1% of the population self-identify as Hispanic or Latino.

City Government

         The City is among the oldest in California. It was incorporated as a town in 1878 and was first granted a
limited charter by the State legislature in 1895. After a constitutional amendment in 1896 permitted California
charter cities new expansive powers, the voters of Berkeley approved a new charter in 1909, reserving to the City
the power to make and enforce all laws and regulations relating to municipal affairs, subject only to the limitations
of the Charter and the State Constitution. Since its adoption, the Charter has been amended periodically to keep
pace with changes made to the State Constitution and in response to the electorate, including most recently in
November 2006.

        The City has operated under a Council-Manager form of government since 1926. The City is governed by
a nine-member City Council, eight of whom are elected by district, plus the Mayor who is elected on a city-wide
basis. The Mayor and the City Council members serve four-year terms, with staggered elections being held every
two years. The City Council appoints a City Manager who is responsible for daily administration of City affairs.



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         Tom Bates has served as the Mayor of the City since 2002. He was re-elected a third time in 2008, after
the Charter was amended to have mayoral elections coincide with U.S. presidential elections, prematurely
shortening the 2010 term of the then-sitting mayor. Prior to running for Mayor, Tom Bates was a State legislator
from 1976 to 1996, representing California’s 14th Assembly District, which encompasses Berkeley. Current City
Council members are:

                                        Member               District       Term Expires
                                Linda Maio                      1            11/30/2010
                                Darryl Moore                    2            11/30/2012
                                Maxwell Anderson                3            11/30/2012
                                Jesse Arreguin                  4            11/30/2010
                                Laurie Capitelli                5            11/30/2012
                                Susan Wengraf                   6            11/30/2012
                                Kriss Worthington               7            11/30/2010
                                Gordon Wozniak                  8            11/30/2010

         Phil Kamlarz has served as City Manager since 2003, having previously served as Deputy City Manager
and acting City Manager. The City Manager is appointed by and serves at the will of the City Council. The City
Manager is responsible for implementation of City Council policy, enforcement of City laws and ordinances,
appointment and discipline of City officers and employees, oversight of City departments, preparation and
submission of the City budget to the City Council, and other related functions. The City Manager appoints
department heads, subject to the approval of the City Council.

          Aside from the Mayor and City Council, the Charter provides for election of the City Auditor and Rent
Stabilization Board Commissioners. The City Council appoints members of the Board of Library Trustees and the
City’s numerous other advisory boards and commissions. The Berkeley Housing Authority members are appointed
by the Mayor and confirmed by the City Council. Educational services for grades K-12 are provided by the
Berkeley Unified School District, an arm of the State administered under State law independent of the City; but
trustees are elected pursuant to procedures provided by the Charter.

City Budget Process

         The City employs a two-year budget process. In year one of the biennial budget cycle, the City Council
formally adopts authorized appropriations for the first Fiscal Year and approves “planned” appropriations for the
second Fiscal Year. In year two, the City Council considers revisions and formally adopts authorized appropriations
for the second Fiscal Year. Although the budget cycle covers a two-year period, the City Charter requires that the
City Council adopt an annual appropriations ordinance for each budget year.

         From about January to May of each year, the City Council meets in public to discuss policies and priorities
for the upcoming budget. The City Manager prepares a proposed budget based on input from department heads, and
presents this to the City Council by the first Monday in May of a budget year or as fixed by the City Council. The
City also maintains additional budgetary controls to ensure compliance with the annual appropriated budget. The
City Manager is authorized to transfer budgeted amounts within funds as deemed necessary to meet the City’s
needs. However, revisions that alter the total budget or move amounts from one fund to another must be approved
by the City Council.

        On June 23, 2009, the City Council adopted its two-year budget for Fiscal Year 2009-10 and Fiscal Year
2010-11. The City Council will revise the Fiscal Year 2010-11 budget on June 27, 2010.

         Revenues and expenditures relating to the City’s general governmental operations are budgeted and
accounted for in the City’s general fund, including public safety, highways and streets, health and welfare, culture
and recreation, community development, housing and economic development. General taxes and fees support most
of these activities. The “business” or proprietary activities of the City are accounted for in each of eight funds,
which include those established for Refuse Collection, Marina Operations, Sanitary Sewers, Clean Storm Water,
Permit Service Center, Off-Street Parking, Parking Meter, and Building Purchases & Management. These activities
are intended to be completely or largely self-supporting through user fees and charges. The City’s Fiscal Year



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2009-10 adopted budget includes $371 million of expenditures across all funds, including the proprietary funds. Of
this amount, $147.6 million was allocated to the general fund of the City. The balance of this Appendix A is
concerned with the operations and performance of the City’s general fund, unless otherwise noted.

City’s General Fund Revenues

        In addition to property taxes, the City has several other major tax and fee revenue sources, as described
below. The following table summarizes the City’s actual or budgeted general fund revenues from Fiscal Year 2005-
06 through 2009-10.

                                            CITY OF BERKELEY
                                         GENERAL FUND REVENUES

                          Actual             Actual              Actual              Actual             Adopted
                         Revenue            Revenue             Revenue             Revenue             Revenue
                         FY 2006            FY 2007             FY 2008             FY 2009             FY 2010

  Real                 $ 29,880,100      $ 31,690,025        $ 34,717,302        $ 36,635,911        $ 37,824,652
  Property
  Property              14,608,559          17,612,248          11,880,512           8,043,064          10,000,000
  Transfer Tax
  Unsecured               2,040,353          1,974,876           2,114,996           2,468,138           2,384,369
  Property
  Sales Tax             13,983,673          14,165,288          15,171,335          14,237,320          14,416,706
  Business              11,077,244          11,024,918          13,562,868          13,195,941          13,518,529
  License
  Hotel Tax              3,008,773           3,305,969           3,588,753           3,711,655           4,960,105
  Utility Users         14,367,545          14,091,521          15,310,895          14,658,959          15,838,522
  Vehicle In-            5,692,685           7,748,232           8,040,640           8,396,886           8,544,383
  Lieu
  Parking                 9,010,890         11,860,190          10,186,889          10,029,602          11,397,000
  Fines
  Moving                   772,356             519,643             405,306             491,365             600,000
  Violations
  Interest                3,468,865         5,503,531           6,323,199           4,550,515           5,200,000
  Service Fees            5,353,528         5,690,054           6,138,085           6,791,668           6,681,137
  SUB-                 $113,264,571      $125,186,495        $127,440,780        $123,211,024        $131,365,403
  TOTAL
  Other                 18,492,749          14,762,081          16,865,953          18,290,121          16,742,532
  Revenues
  TOTAL                $131,757,320      $139,948,576        $144,306,733          141,501,145        148,107,935


          Sales and Use Tax. The sales tax is an excise tax imposed on retailers for the privilege of selling or
leasing tangible personal property. The use tax is an excise tax imposed for the storage, use, or other consumption
of tangible personal property purchased from any retailer. The proceeds of sales and uses taxes imposed within the
City are distributed by the State to various agencies, with the City receiving 1.0% of the amount collected less
0.25% shifted to the State pursuant to a mechanism commonly known as “Triple Flip.” The 0.25% reduction in
local sales tax is used to pay State economic recovery bonds, but cities and counties are then provided with ad
volorem property tax revenues in lieu of these revenues. The total sales tax rate for the County is currently 9.75%.
Factors that have historically affected sales tax revenues include the overall economic growth of the Bay Area,
competition from neighboring cities, the growth of specific industries within the City, the City’s business attraction
and retention efforts, and catalog and Internet sales. From July to March 2008, sales tax revenues were
$10,693,741. For the same period in 2009, sales tax revenues were $9,714,130, representing a 10.1% decrease. The
City staff has reduced its projection of sales tax revenue for Fiscal Year 2009-10 by $700,000.



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          Utility Users Tax. The City imposes a 7.5% tax on users of gas, electricity, telephone and water, as well as
cellular telephone services for billing addresses within the City. The tax is not applicable to State, County, or City
agencies, or to insurance companies and banks. Some of the factors affecting this revenue stream include consumer
demand for these utilities, legislative and regulatory action, rate changes, and the evolution of technology.
Telecommunications and cable generate nearly 44% of this revenue, with revenue from gas and electricity usage
making up the remaining 56%. Electricity rates are expected to remain stable, with steady increases anticipated over
the next several years; gas prices have been volatile, although an increase in rates is also anticipated. Due to
changing demand and technology, as well as legislative changes, revenue from telecommunications and cable has
declined and is expected to drop more in the future. In Fiscal Year 2008-09, utility users tax revenues were
$14,658,959, representing a 4.3% decrease from FY 2007-08.

          Business License Tax. The City requires all businesses within the City to be licensed and imposes a
business license tax on all business locations and a new license registration fee on applicants for a new license. The
annual tax is generally determined based on the type of business and the business’s gross receipts. The overall
revenue from this tax is dependent on the number of license renewals each year and the growth of businesses and
industries within the City and the Bay Area more generally. From July to March 2008, business license tax revenues
were $12,887,734. For the same period in 2009, business license tax revenues were $3,073,737, representing a 1.4%
increase.

         Property Transfer Tax. The City collects a 1.5% tax on the value of any documented sale or transfer of
real property within the City. The tax is due when the transfer is recorded with the County. Title companies collect
the tax as part of the sale closing process and remit the funds to the County when sales or transfers are finalized.
The County remits the amounts due monthly, and the amounts are credited to the general fund. A buyer of
residential housing built before 1989 may voluntarily choose to reserve up to one-third of the transfer tax to perform
seismic upgrades. Buyers typically have up to one year to complete the work and file for a rebate. Previously the
title companies held the reserved amount in escrow until the work was completed, but since May 2007, the City has
held the money in escrow accounts, with the interest going to the City. For the first nine months of FY 2010,
Property Transfer Tax revenue declined $148,866 or 2.5%, to $5,744,813, from $5,893,679 received for the same
period in FY 2009. This decline is due primarily to a $22,721,226 or 5.6% decline in property sales in the first three
quarters of FY 2010 to $406,062,194, from $428,783,420 for the same period in FY 2009. During this period, the
number of property sales actually increased by 40 to 7.3%, from 550 in FY 2009 to 590 in FY 2010. Staff has
reduced the FY 2010 Property Transfer Tax revenue projection by $2 million, from $10 million to $8 million (the
level achieved in FY 2009), net of budgeted seismic retrofit rebates of $665,000.

          Parking Fines. The City issues and adjudicates citations and civil penalties for parking violations through
its own administrative structure. It has a great degree of control over the administration of parking fines, although
issuing agencies within the County try to standardize parking penalties to the extent possible. Revenue from parking
fines is affected by the penalties imposed for violations, the number of employees issuing tickets, how many tickets
employees are able to issue, and the number of working parking meters, among other factors. From July to
March 2009, parking fines revenues were $2,535,266, which was $222,374 or 8.1% less than the $2,757,640
received for the same period in 2008. Additionally, effective January 1, 2009, the City must remit an additional
$3 per citation to the State due to the enactment of SB 1407. The Berkeley City Council approved a $5 per ticket
increase in October, 2009, and the City staff has projected parking citation revenue of $9,400,000 for Fiscal Year
2009-10.

          Motor Vehicle In-Lieu. Motor vehicle license fees (“VLF”) are collected by the State in lieu of property
taxes on vehicles and apportioned to cities and counties based on their population, with 5% being withheld by the
State. The fee applies to all vehicles registered in the State. In 1999, the State reduced license fees by 25%,
backfilling lost local receipts out of its general fund. As part of the State’s Fiscal Year 2004-05 Budget, the VLF
rate was reduced to 0.65% of market value of the vehicle, as determined by the State Department of Motor Vehicles
(“DMV”), from 2.0%. The State agreed to backfill the 1.35% difference with property taxes, in exchange for cities
and counties taking cuts of $350 million in Fiscal Years 2004-05 and 2005-06. Beginning in Fiscal Year 2005-06,
this property tax in lieu of VLF will grow at the same rate as the change in gross assessed valuation of taxable
property in the City from the prior year. From July to March 2009, VLF revenue totaled $4,313,246, which was
$46,262 or 1.1% more than the $4,266,984 received for the same period in 2008.




OHS West:260917701.5
          Other Revenues. The City also collects additional general fund revenues from franchise fees, transient
occupancy taxes, ambulance fees, and other more minor sources. Under the City’s cable and electric and gas
franchise fee arrangements, the local cable provider pays an annual franchise fee of 5% of gross revenues, and the
electricity and gas providers pay the greater of 2% of gross receipts attributable to miles of line operated or .5% of
gross receipts. The transient occupancy tax, also known as the hotel tax, is a 12% tax on the room charge for rental
of transient lodging; it is paid by the hotel guest. The City also has an agreement with the County to be the
exclusive provider of all emergency ground ambulance services within the City; the specific ambulance fee depends
on the type of service delivered and is billed to clients or their insurance companies. Finally, other more minor
revenue sources include payments for moving violations, interest on existing funds, and other service fees.

City Expenditures

         The largest part of the City’s general fund budget is used to pay salaries and benefits of its employees.
Changes in salary and benefit expenditures from year to year are generally based on changes in staffing levels,
negotiated salary increases, and the overall cost of employee benefits.

        In its 2009-10 budget, the City projects that it will expend approximately 77% of its general fund
expenditures on salaries and benefits.

         Labor Relations. As of June 30, 2009, the City employed approximately 674 full-time employees. There
are six employee associations as shown below. In addition, the City employs approximately 40 management
employees who are not represented by a union or other collective bargaining agent. The City has not experienced
any work stoppages or strikes by its employees.

                                              CITY OF BERKELEY
                                              LABOR RELATIONS
                                                   As of 2009

                  Labor Organization                          Represented Employees            Contract Expiration

Berkeley Fire Fighters Association/I.A.F.F. Local 1227                   120                      June 26, 2010
Berkeley Police Association                                              184                      June 30, 2011
I. B. E. W. Local 1245                                                    16                      June 23, 2012
Service Employees International Local 1021                               496                      June 28, 2012
Maintenance and Clerical Chapters
Service Employees International Local 1021                               390                      June 28, 2012
Community Services and Part-Time Recreation Leaders
Association Chapters
Public Employees Local 1                                                 143                      June 23, 2012

         Each of these various labor contracts contains its own set of annual cost of living adjustments negotiated
through the term thereof.

         Retirement Programs.

         California Public Employees’ Retirement System. The City contributes to three plans in the California
Public Employees’ Retirement System (“CalPERS”): the Safety Fire Plan (the “Fire Plan”), the Safety Police Plan
(the “Police Plan”) and the Miscellaneous Plan. The Fire Plan and the Police Plan cover all of the City’s full-time
sworn uniformed fire employees, sworn uniformed police employees, and all chiefs in both departments. The
Miscellaneous Plan covers all remaining eligible employees. As of June 30, 2007, the date of the most recent
actuarial report, there were 1,188 active members and 1,588 retirees under the Miscellaneous Plan, 127 active
members and 179 retirees under the Fire Plan, and 176 active members and 234 retirees under the Police Plan. Part-
time and hourly employees working less than half time are excluded from CalPERS participation. Fire Plan and
Police Plan members are required to contribute 9% of their annual covered salary, while Miscellaneous Plan
members are required to contribute 8% of their annual covered salary. The City covers the 8% employee
contribution of the members under the Miscellaneous Plan. The required employer contribution rate for the Fiscal


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Year ended June 30, 2009 was 16.293%, 25.329%, and 36.003% for Miscellaneous Plan, Fire Plan and Police Plan
employees, respectively. The total covered payroll for employees participating in CalPERS for the Fiscal Year
ended June 30, 2009 was $114,056,818.

          As of June 30, 2007, the date of the most recent actuarial report, the Miscellaneous Plan was 87.9% funded.
The actuarial accrued liability for benefits was $521.0 million, and the actuarial value of the assets was $457.9
million, resulting in an unfunded actuarial accrued liability (“UAAL”) of $63.1 million. As of June 30, 2007, the
date of the most recent actuarial report, the Fire Plan was 90.9% funded. The actuarial accrued liability for benefits
was $167.2 million, and the actuarial value of the assets was $152.0 million, resulting in an UAAL of $15.2 million.
As of June 30, 2007, the date of the most recent actuarial report, the Police Plan was 75.4% funded. The actuarial
accrued liability for benefits was $238.1 million, and the actuarial value of the assets was $179.6 million, resulting
in an UAAL of $58.5 million.

         Since the date of the actuarial valuations, the equity markets have experienced significant turmoil,
increased volatility, and general declines in value. CalPERS reported in November 2008 that its net return in 2007-
08 was -5.1%. Since 2005, CalPERS has adopted a smoothing model to apply the impacts of investment losses and
gains over a 15-year period. CalPERS expects participant contribution rates to increase as a result of market losses
widening the spread between plan assets and pension obligations. The 2007-08 losses will affect contribution rates
in 2010-11. Any change attributable to investment returns in 2008-09 will not be applied until Fiscal Year 2011-12.

         Based on the City’s Fiscal Year 2008-09 Comprehensive Annual Financial Report, the three-year trend
information is as follows:

                                         Annual                   Percentage                   Net
              Fiscal Year                Pension                    of APC                   Pension
                 Ended                 Cost (“APC”)               Contributed               Obligation
           Miscellaneous Plan
               6/30/2007                 12,351,276                  100%                        –
               6/30/2008                 13,568,559                  100%                        –
               6/30/2009                 15,021,060                  100%                        –

                Fire Plan
                6/30/2007                  3,362,255                 100%                        –
                6/30/2008                  3,664,818                 100%                        –
                6/30/2009                  3,827,880                 100%                        –

               Police Plan
                6/30/2007                  6,486,421                 100%                        –
                6/30/2008                  6,855,811                 100%                        –
                6/30/2009                  7,758,151                 100%                        –




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          Police Employees Retiree Income Benefit Plan. The City maintains the Berkeley Police Supplemental
Retirement Plan (“BPSRP”), a single-employer defined benefit income plan, for its police retirees and surviving
spouses. To be eligible for benefits, police employees must retire from the City on or after July 1, 1989, be vested in
a CalPERS pension, have ten years of service with the Berkeley Police Department, and retire from the City at or
after age 50. Benefits commence five years after retirement and are payable for the retiree’s lifetime; they continue
for the retiree’s surviving spouse for his or her lifetime. Benefits are paid as a monthly income benefit equal to the
rate the City pays for two-party active medical benefits from Kaiser Permanente, regardless of the retiree’s marital
status, but pro-rated based on years of service. As of the most recent actuarial valuation, Inc., the BPSRP had 184
active members, 85 retired employees receiving current benefits, and 39 retired employees in deferred pay status.
Plan members are not required to contribute to the plan. The City’s contributions are deposited into a trust fund and
benefits are paid from this trust fund. During Fiscal Year 2008-09, the City contributed $822,000, which was
$1,954,206 less than the annual required contribution of $2,756,206 (or 13.6% of covered payroll). As of July 1,
2008, the most recent actuarial valuation date, the plan was 12.7% funded. The actuarial accrued liability for
benefits was $37.2 million, and the actuarial value of assets was $4.7 million, resulting in an unfunded accrued
liability of $32.5 million.

          Safety Member Pension Fund. The City maintains the Safety Member Pension Fund (“SMPF”), a single-
employer defined benefit income plan for fire and police officers who retired prior to March 1973 and surviving
spouses. In March 1973, all active fire and police officers were transferred from the SMPF to CalPERS. Benefits
are based on a percentage of salary at retirement, multiplied by the employee’s years of service; benefits are adjusted
annually based on salary increases for current active employees or the California Consumer Price Index. As of
June 30, 2008, the date of the most recent actuarial study, there were 30 retirees and surviving spouses in the SMPF.
The City pays SMPF benefits on a pay-as-you-go basis. However, in 1989, the Berkeley Civic Improvement
Corporation purchased, on behalf of the City, a Guaranteed Income Contract (“GIC”) from Massachusetts Mutual.
The GIC is considered a plan asset and provides annual payments through 2018 and an annual guaranteed 9.68%
rate of return. The City pays the difference between actual benefit payments and contract provided annual payments
from the City’s general fund. For the Fiscal Year ended June 30, 2009, the City’s annual required contribution was
$1,763,185. The City contributed this amount through a $745,376 payment from the GIC plus $990,809 paid from
the City’s general fund. As of June 30, 2009, the date of the most recent actuarial report, SMPF was 40% funded.
The actuarial accrued liability for benefits was $7.6 million, and the actuarial value of the assets was $3.0 million,
resulting in a UAAL of $4.6 million.

          Other Post-Employment Benefits. In 2004, the Government Accounting Standards Board (“GASB”)
issued Statement No. 45, Accounting and Financial Reporting by Employers for Post Employment Benefits Other
Than Pensions (“GASB 45”). GASB 45 requires governmental agencies to change their accounting for Other Post-
Employment Benefits (“OPEB”) from pay-as-you-go to an accrual basis. The City implemented the requirements of
GASB 45, including financial statement reporting and disclosure requirements, during Fiscal Year 2006-07. Among
other things, employers that participate in single-employer or agent multiple-employer defined benefit OPEB plans
are required to measure and disclose an amount for annual OPEB cost on the accrual basis of accounting. Annual
OPEB cost is equal to the employer’s annual required contribution to the plan, with certain adjustments. The annual
required contribution is the sum of the “normal cost” (the portion of the present value of estimated total benefits that
is attributed to services received in the current year) and the amortized UAAL. An employer’s net OPEB obligation
is defined as the cumulative difference between annual OPEB cost and the employer’s contributions to a plan.

          Fire Employees Retiree Health Plan. The Fire Employees’ Retiree Health Plan (“FERHF”) is a single-
employer defined benefit medical plan that provides health benefits to eligible fire department retirees and their
spouses or domestic partners. To be eligible for benefits, employees must retire from the City on or after
July 1, 1997, be vested in a CalPERS pension, and retire from the City at or after age 50. Benefits are paid as a
contribution towards the medical premium, adjusted based on the retiree’s years of service. Benefits are payable for
the retiree’s lifetime and continue for his or her covered spouse’s or domestic partner’s lifetime. FERHF plan
members are not required to contribute to the plan. As of July 1, 2008, there were 117 active employees and 38
retirees receiving benefits under FERHF. As of June 30, 2009, the date of the most recent actuarial study performed
by Milliman, Inc., the annual required contribution was 4.55% of annual covered payroll. For Fiscal Year ended
June 30, 2009, the City contributed $620,347, which was $75,225 less than the annual required contribution of
$695,572 for this plan. Additionally, for Fiscal Year ended June 30, 2009, the annual OPEB cost was $694,422 and
the net OPEB asset was $79,313. As of July 1, 2008, the date of the most recent actuarial report, the plan was


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37.0% funded. The actuarial accrued liability for benefits was $9.3 million, and the actuarial value of the assets was
$3.5 million, resulting in an UAAL of $5.9 million.

          Retiree Health Premium Assistance Plan. The Retiree Health Premium Assistance Plan (“RHPAP”) is a
single-employer defined benefit medical plan that provides health benefits to eligible retirees and their spouses or
domestic partners. Retirees who are at least age 50 with at least eight years of service with the City at the time of
separation from service are eligible to receive health benefits commencing at age 55. Benefits are payable for the
retiree’s lifetime and continue for his or her covered spouse’s or domestic partner’s lifetime. The City pays the
monthly cost of the monthly premiums up to a certain amount. RHPAP plan members are not required to contribute
to the plan. As of July 1, 2007, the date of the most recent actuarial study performed by Milliman. Inc., there were
1,160 active employees and 169 retirees. The employer contribution rate for the Fiscal Year ended June 30, 2008
was 1.080% of covered payroll for Miscellaneous Local 1021 Maintenance and Clerical Chapter employees and
1.89% for Miscellaneous Local 1021 Community Services and Part-Time Recreation Leaders Association and
unrepresented employees. As of July 1, 2009, the current annual required contribution of the City is 2.44% of
annual covered payroll. For Fiscal Year 2008-09, the City contributed $1,561,583, which was $634,551 less than
the annual required contribution of $2,196,134 for this plan. Additionally, for Fiscal Year 2008-09 the annual
OPEB cost was $2,217,666 and the net OPEB obligation was $1,022,726. As of July 1, 2008, the RHPAP was
24.6% funded. The actuarial accrued liability for benefits was $22.1 million and the actuarial value of the assets
was $5.5 million, resulting in a UAAL of $16.7 million.

         Defined Contribution Plans.

          Supplemental Retirement and Income Plans. In 1983, the City adopted the Supplemental Retirement and
Income Plan I (“SRIP I”), a defined contribution plan with an employer paid disability portion in lieu of Social
Security payments. All non-safety employees covered under CalPERS and hired before July 22, 1988 are eligible
and enrolled. Under the plan, eligible employees can receive disability income benefits equal to 60% of their
highest compensation, payable for the disabled participant’s lifetime or until recovery from disability. For each
covered employee, the City contributes 5.7% of salary into a tax deferred savings account and 1% of salary into a
disability reserve account, each up to a salary of $32,400. There are currently 56 active employees covered by SRIP
I, and 78 former employees receive benefits. As of July 1, 2008, the unfunded liability for SRIP I was $13,055,000.

          On July 22, 1988, the City closed SRIP I to new enrollees and established SRIP II, a defined contribution
plan with an optional employee paid disability portion. Enrollment is mandatory for eligible employees hired on or
after July 22, 1988 and elective for those hired before then. All non-safety employees covered under CalPERS are
eligible as are police officers hired between 1989 and 2004. Under the plan, the City contributes 6.7% of salary up
to a salary of $32,400 into a tax-deferred savings account for each eligible employee, except that it contributes 2%
of salary, up to a salary of $32,400, for police officers. On January 1, 2005, the City established SRIP III, a defined
contribution plan for police officers, whereby the City contributes 2% of salary, up to a salary of $32,400. Police
employee participants in SRIP II became participants in SRIP III upon SRIP III’s commencement. The SRIP II and
III investments are held by trustees for the benefit of the participants and are not included in the City’s basic
financial statements. The City’s required and actual contributions for all SRIP plans for the Fiscal Year ended
June 30, 2009 were $2,937,805, approximately 6% of the covered payroll of approximately $48.5 million.

         Public Agency Retirement System. Since 1993, the City has contracted with the Public Agency Retirement
System (“PARS”) to administer a 401(a) defined contribution retirement plan for the City’s hourly and daily
employees, as an alternative to participation in Social Security. Under the plan, the City and employees each
contribute 3.5% of salary into a tax-deferred savings account. The investments are held by trustees for the benefit of
participants and are not included in the City’s basic financial statements. The benefits are distributed only upon
retirement, separation from service, or death. All temporary and hourly employees are eligible and enrolled. As of
June 30, 2009, there were a total of 1,062 active and 1,215 inactive participants in this plan. The total assets of
PARS available for benefits as of June 30, 2009 was $2,860,150. The City’s required and actual contribution for
Fiscal Year 2008-09 was $243,429, 3.75% of the covered payroll of $6,491,367.

For a more detailed discussion of the City’s retirement plans and obligations, see APPENDIX B:
“COMPREHENSIVE ANNUAL FINANCIAL REPORT OF THE CITY OF BERKELEY FOR THE FISCAL




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YEAR ENDED JUNE 30, 2009” for the City’s audited financial statements for the year ending June 30, 2009, note
IV(d) and (e).

         Accrued Vacation and Other Obligations. The long-term portion of accumulated and unpaid employee
vacation for the City as of June 30, 2009, was $14,336,077.

         Other Expenditures. The balance of budgeted expenditures includes services and materials, capital outlay,
and internal services provided by one department or program to another.

Summary of City Revenues and Expenditures

         The following table summarizes the City’s actual or budgeted general fund revenue, expenditures and fund
balances from Fiscal Year 2005-06 through 2009-10. Certain adjustments may be made throughout the year based
on actual State funding and actual City experience with revenues and tax collections. The City cannot make any
predictions regarding the disposition of additional pending budget legislation or its effect on the City. The City’s
budget is a planning tool, and does not represent a prediction as to the actual achievement of any of the budgeted
revenues or fund balances. See also APPENDIX B: “COMPREHENSIVE ANNUAL FINANCIAL REPORT OF
THE CITY OF BERKELEY FOR THE FISCAL YEAR ENDED JUNE 30, 2009” for the City’s audited financial
statements for the year ending June 30, 2009.




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                                             CITY OF BERKELEY
                                                GENERAL FUND
                                      Fiscal Years 2005-06 through 2009-10
                                              (Dollars in Thousands)

                                                                                                   Adopted
                                           Actual        Actual         Actual          Actual     Budget
                                          2005-06       2006-07        2007-08         2008-09     2009-10
REVENUES:
Taxes                                    $ 93,078      $ 98,043       $ 100,442       $ 97,988     $103,695
Licenses and Permits                          297            236            272             343          305
Subvention and Grants                       6,546          8,900          8,617           9,051        9,042
Service Fees                                5,354          5,690          6,138           7,214        6,681
Fines and Forfeitures                       9,801         12,408         10,625          10,553       12,027
Rents                                         132            124            101             113          109
Franchises                                  1,532          1,686          1,731           1,848        1,965
Private Contributions and Donations                                                         100            --
Interest                                     3,469         5,505             6,323        8,746        5,200
Indirect Costs reimbursement                                                              5,388            --
Transfers In/Other                          11,548         7,357         10,058             953        8,383
TOTAL REVENUES                           $ 131,757     $ 139,949      $ 144,307       $ 142,296    $ 147,407

EXPENDITURES:
General Government                       $ 26,527      $ 27,904       $ 29,993          31,563        34,289
Public Safety                              65,070        67,785         73,425          74,982        78,050
Highways and Streets                          598           550          1,513           2,204         1,885
Health and Human Services                   8,960         9,088          9,513          10,291         7,065
Culture-Recreation                          4,524         4,710          6,113           5,952         5,240
Community Development                       2,611         2,988          3,347           3,661         3,666
Economic Development                        1,434         1,457          1,790           2,200         2,011
Non-departmental
Debt Service                                 1,112         1,274          1,306          1,033         1,035
Transfers Out/Other                         16,382        18,285         17,354                       15,261
TOTAL EXPENDITURES                       $ 127,218     $ 134,041      $ 144,354       $ 131,885    $ 148,502

Excess Revenues Over (Under)                 4,539         5,908               (47)     10,411        (1,095)
Expenditures

Transfers In(out)/other                                                                 (13,238)           --

Fund Balance, July 1                       33,999         38,538         45,725         48,303        44,991
Prior Period Adjustment                         -          1,279          2,625           (485)            --

Fund Balance, June 30                    $ 38,538      $ 45,725       $ 48,303        44,991          43,896




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State Budget

         Governor’s Proposed Fiscal Year 2010-11 Budget. The Governor submitted his proposed 2010-11
Budget (the “2010-11 Proposed Budget”) to the State Legislature on January 8, 2010. The 2010-11 Proposed
Budget assumes that, without corrective action, the State will face a deficit of $19.9 billion, comprised of a shortfall
of $6.6 billion from the 2009-10 fiscal year, a 2010-11 shortfall of $12.3 billion and a proposed reserve of $1 billion.
The 2010-11 Proposed Budget proposes initial spending reductions of $8.5 billion. Proposed reductions include
program eliminations, further reductions to various health and human services programs, a $2.4 billion reduction to
the anticipated level of funding for Proposition 98 (over a two-year period), substantial changes to employee
compensation, and reductions to the Department of Corrections and Rehabilitation. In addition, the 2010-11
Proposed Budget relies on $6.9 billion in additional federal funding and proposes an additional $4.6 billion in
spending reductions if the federal funding is not received. The 2010-11 Proposed Budget also includes $2.4 billion
in increased revenues and requires external borrowing to meet cash needs during the fiscal year.

        The Governor called the Legislature to a special session to adopt $8.9 billion of the proposed $19.9 billion
in budget solutions and to put measures on the June 2010 ballot to facilitate $1 billion in general fund budget relief
from Proposition 10 early childhood development funds and Proposition 63 mental health funds.

         LAO Report. On January 12, 2010, the LAO commented on the 2010-11 Proposed Budget, stating that
the Governor’s estimate of an $18.9 billion budget problem is reasonable but is a $3.1 billion smaller shortfall than
the LAO estimates and may be exacerbated by various lawsuits. The LAO also noted that the Governor’s plan relies
heavily of federal relief, which the state is unlikely to receive in the amounts requested. The Legislature need to
assume that the federal relief will total billions less than the Governor budgets for and will need to make difficult
decisions regarding both revenues and spending and needs to make many key decisions by the end of March in order
to implement them for the next fiscal year.

         2010-11 Special Session. On March 11, 2010, the California Legislature adjourned the special session
called by the Governor. The Legislature adopted a package of bills that the Legislature said would reduce the deficit
by more than $4 billion. Since then, the Governor vetoed two bills that contained a majority of the deficit
reductions.

City Debt Structure

         Short-Term Debt. The City has issued Tax and Revenue Anticipation Notes (“TRANs”) in each recent
year as shown in the table below. The City’s TRANs are a general obligation of the City, payable from the City’s
general fund and any other lawfully available moneys. At this time, the City expects to issue TRANs for Fiscal
Year 2010-11 in the estimated amount of $50,000,000.

                                          CITY OF BERKELEY
                                TAX AND REVENUE ANTICIPATION NOTES
                                      Balance As of February 28, 2009

       Issuance Date           Principal Amount        Interest Rate        Yield               Due Date
    November 30, 2004            $25,000,000               3.5%             2.00%            November 29, 2005
    November 22, 2005             25,000,000               4.0              3.33             November 21, 2006
    November 1, 2006              25,000,000               4.0              3.38             October 31, 2007
    October 30, 2007              25,000,000               4.0              3.33             October 29, 2008
    October 30, 2008              25,000,000               4.0              2.25             October 29, 2009
    October 29, 2009              25,000,000               1.0              0.42%            October 28, 2009




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           Long-Term General Fund Obligations. As of June 30, 2009, long-term obligations of the City were as
follows:

                                            CITY OF BERKELEY
                                         LONG-TERM OBLIGATIONS
                                          Balance As of June 30, 2009

                Payments Due        Certificates                           Lease             Pension
                 Year Ending             of              Capital         Revenue           Obligation
                  (June 30)        Participation         Leases           Bonds               Bonds
                     2010            1,885,196           553,094           1082,877           672,275
                     2011            1,884,946           553,094          1,083,267           605,500
                     2012            1,887,011           553,094          1,077,512           533,410
                     2013            1,886,811           553,094          1,075,387           473,250
                     2014            1,884,805           553,094          1,083,406           424,250
               Subtotal              9,428,769         2,765,470          5,395,950         2,708,685
               Thereafter           35,847,451         2,765,470         13,499,480         1,271,200
               Less: Interest      (18,521,220)       (1,091,358)         (714,685)          (714,685)
               Total               $26,755,000        $4,439,582        $12,185,000        $3,265,000


         Certificates of Participation. In April 2003, the Berkeley Joint Powers Financing Authority (the
“Authority”) issued certificates of participation on behalf of the City in the aggregate principal amount of
$27,950,000 to purchase and renovate the building at 1947 Center Street, portions of which the City had previously
occupied as a tenant. The 100,000 square-foot building houses a variety of essential City services, including
divisions of the Finance Department, Parks and Recreation, the Public Works Department, Health and Human
Services, and the Police Review Commission, as well as a noncity nonprofit organization. The bonds are secured by
rental payments paid by the City for the use and occupancy of the building. The rental obligation is a general City
obligation payable from any available funds of the City, but is budgeted as an expense in the respective funds of the
various City department tenants. The bonds bear interest at rates between 2.50%-5.00% and the final maturity date
is February 1, 2033. As of March 31, 2010, the principal balance outstanding was $26,080,000.

          Capital Leases. The City has entered into leases for financing the acquisition of energy efficient
equipment, computer upgrades, parking meters and copiers. These lease agreements qualify as capital leases for
accounting purposes and therefore, have been recorded at the present value of their future minimum lease payments
as of the inception date.

           [Description of 2010 Animal Shelter COPS to come]

         Lease Revenue Bonds and Enterprise Revenue Bonds. In October 1999, the Authority issued lease revenue
bonds on behalf of the City in the aggregate principal amount of $9,125,000. The bonds were issued to acquire a
new theater facility constructed in the Downtown Arts District by the Berkeley Repertory Theatre, a California non-
profit public benefit corporation, and a 6.4-acre park located at 4th and Harrison Streets, previously owned by the
Regents of the University of California. The state-of-the-art Roda Theatre (the “Theater”) was completed in 2001
and seats 600 people. The Theater has a proscenium stage, a 80-foot fly tower, a full trap room underneath the
stage, a two-tiered lobby facing Addison Street, and an expanded courtyard. The bonds are secured by rental
payments paid by the City for the use and occupancy of the park and of the Theater, which is leased to the Berkeley
Repertory Theater company for nominal rent. The rental obligation is a general fund obligation of the City. The
bonds bear interest at rates between 4.10%-5.70% and the final maturity date is October 1, 2029. As of March 31,
2010, the principal balance outstanding was $7,460,000.

        In July 2005, the Authority issued revenue bonds in the aggregate principal amount of $5,620,000 to refund
the Authority’s lease revenue bonds originally issued in 1994, which were issued to finance improvements to the
Center Street and Sather Gate garages, and to finance certain new improvements to the garages. The garages are
owned and operated by the City’s Off-Street Parking enterprise. The bonds are payable from installment payments



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made by the City to the Authority from revenues derived from the operation of the garages and mall rentals, and are
not a general fund obligation of the City. The bonds bear interest at rates between 3.25%-4.25% and the final
maturity date is March 1, 2022. As of March 31, 2010, the principal balance outstanding was $4,235,000.

         Pension Obligation Bonds. In May 1998, the City issued pension obligation refunding bonds in the
aggregate principal amount of $12,415,000 to refund the City’s certificates of participation issued in February 1989.
The certificates were sold to satisfy a portion of the City’s obligations under an ordinance adopted to provide
payments to the Safety Members Pension Fund. The bonds bear interest at rates between 3.80%-5.25% and the final
maturity date is June 1, 2018. As of March 31, 2010, the principal balance outstanding was $3,265,000. The
obligation to repay the bonds is a general fund obligation of the City.

         General Obligation Bonds. The City has obtained voter approval from time to time to finance specific
public works projects and capital improvement programs through the issuance of “general obligation” bonds. The
bonds are payable from a special ad valorem tax levied each year at the same rate on all taxable property in the City,
in an aggregate amount sufficient to pay the debt service coming due in that year. Each of the bonds described in
the following table was approved by a two-thirds popular vote.

                                           CITY OF BERKELEY
                                       GENERAL OBLIGATION BONDS

                                                                    Original
                                         Issue      Maturity        Principal         Amount           Authorized
          Name of Bonds                  Date        Date           Amount           Outstanding       and Unused
 Branch Library Improvements           4/14/09       9/1/39        $10,000,000        $10,000,000      $16,000,000
 Animal Shelter Project                11/1/08       9/1/37        $ 7,200,000        $ 7,200,000                0
 2007A Refunding Bonds                  6/1/08       9/1/27          4,340,000          3,915,000               ---
 2007B Refunding Bonds                  6/1/07       9/1/29         41,245,000         35,855,000               ---
 2002 Refunding Bonds                  11/1/02       9/1/20         17,865,000         11,730,000               ---
                                                    TOTAL          $80,650,000        $68,700,000      $16,000,000




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        The following table reflects scheduled principal payments for all of the City’s general obligation bonds
following the issuance of the Bonds. Interest obligations are not shown.

                                        CITY OF BERKELEY
                              OUTSTANDING GENERAL OBLIGATION BONDS
                                  PRINCIPAL MATURITY SCHEDULE

 Year                                                                                               2009
Ending           2002           2007 A           2007 B             2008             The           Library
Sept. 1          Bonds           Bonds            Bonds            Bonds            Bonds          Bonds          Total
 2010            965,000         60,000          1,535,000         437,625             —
 2011          1,005,000         45,000          1,335,000         437,900        $ 150,000
 2012          1,040,000        120,000          1,390,000         443,000          155,000
 2013          1,090,000        155,000          1,450,000         442,750          165,000
 2014          1,145,000        185,000          1,500,000         442,325          175,000
 2015          1,205,000        200,000          1,565,000         446,725          185,000
 2016          1,265,000        210,000          1,625,000         450,775          195,000
 2017          1,325,000        220,000          1,690,000         449,475          205,000
 2018            860,000        225,000          1,760,000         452,075          215,000
 2019            895,000        235,000          1,830,000         449,275          225,000
 2020            935,000        245,000          1,900,000         451,275          240,000
 2021                 —         255,000          1,980,000         447,875          250,000
 2022                 —         265,000          2,060,000         449,275          265,000
 2023                 —         275,000          2,145,000         450,275          280,000
 2024                 —         285,000          2,235,000         450,875          295,000
 2025                 —         300,000          2,330,000         451,075          310,000
 2026                 —         310,000          2,435,000         455,875          330,000
 2027                 —         325,000          2,540,000         454,738          350,000
 2028                 —              —           1,885,000         452,838          365,000
 2029                 —              —             665,000         455,513          385,000
 2030                 —              —                  —          457,550          410,000
 2031                 —              —                  —          458,950          430,000
 2032                 —              —                  —          458,456          455,000
 2033                 —              —                  —          457,269          480,000
 2034                 —              —                  —          455,388          505,000
 2035                 —              —                  —          457,813          535,000
 2036                 —              —                  —          454,313          565,000
 2037                 —              —                  —          455,119          595,000
 2038                 —              —                  —               —           625,000
 2039                 —              —                  —               —           660,000


Other Long Term Obligations
          In addition to the obligations described above, the City has outstanding Special Tax Bonds and State Loans.
These are limited obligations of the City that do not constitute a pledge of the full faith and credit or taxing power of
the State.

Capital Improvement Program

         The City’s Fiscal Year 2007-08 and Fiscal Year 2008-09 Budget includes a five-year Capital Improvement
Program for the period beginning with Fiscal Year 2006-07 and ending Fiscal Year 2010-11. The City revises the
Capital Improvement Program budget each year. The Capital Improvement Program is the City’s blueprint for
funding critical capital projects based on resource availability and capital investment priorities. Capital project costs
are grouped into the following program categories: city buildings, equipment and fleet, information technology,
parks and marina, sidewalk repairs, sewer replacement, storm drain improvements, street repair, and transportation
improvements.

         Capital Improvement Program funding comes from the general fund and a number of other special revenue
funds, as well as grants and loans. Within each program categories, the City identifies resources that it will commit



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to priority capital projects. Capital Improvement Program costs include both one-time expenses as well as recurring
expenses related to capital rehabilitation.

         The proposed five-year Capital Improvement Program funding for Fiscal Year 2006-07 through Fiscal Year
2010-11 is $91.8 million. The five-year Capital Improvement Program budget includes approximately $28.5 million
for sewer replacement work, $17.3 million for street repair, $14 million for equipment and fleet capital costs, $8
million for parks and marinas, and $7 million for city building improvements.

Investment Policy

         The authority to invest the City’s funds is derived from a resolution adopted annually by the City Council
delegating to the Director of Finance and the Treasurer of the City the authority to invest these funds within the
guidelines of Section 53600 et seq. of the Government Code of the State (the “Government Code”). The
Government Code also directs the City to present an annual investment policy (the “Investment Policy”) for
confirmation to the City Council. The City Council adopted an Investment Policy for Fiscal Year 2008-09 on
February 10, 2009. The Investment Policy may be revised by the City Council at any time.

         The objectives of the Investment Policy are preservation of capital, liquidity and yield. The Investment Policy
addresses the soundness of financial institutions in which the City may deposit funds, types of investment instruments
permitted by the City and the Government Code, investment duration and the amount which may be invested in certain
instruments. The Investment Policy also reflects and supports the City’s policy positions on important social and
environmental issues, as contained in formal City Council actions including the Nuclear-Free Berkeley Act, the
Responsible Investment Ordinance and the Oppressive States Contract Resolution. Summarized below are the permitted
investments under the Investment Policy. These policies may further restrict investment options available to the City.


                                                                                       Maximum            Maximum
                                                                    Maximum         Percentage/Dollar   Investment In
Authorized Investment Type                                          Maturity          of Portfolio        One Issuer
Local Agency Bonds                                                   5 years               5%               N/A
U.S. Treasury Securities                                             5 years              25%               N/A
U.S. Agency Securities                                               5 years             100%               N/A
Banker’s Acceptances                                                180 days              40%               30%
Commercial Paper                                                    180 days              25%            $5M or 2%
Negotiable Certificates of Deposit                                   5 years              30%               N/A
Repurchase Agreements                                                 1 year              10%               N/A
Reverse Repurchase Agreements                                        92 days              10%               N/A
Medium-Term Notes                                                    5 years              30%               N/A
Guaranteed Investment Contracts                                      5 years              25%               N/A
Mutual Funds                                                           N/A                10%               10%
Money Market Mutual Funds                                              N/A                10%               N/A
Mortgage Pass-Through Securities                                     5 years              20%               N/A
County Pooled Investment Funds                                         N/A                N/A               N/A
Local Agency Investment Fund (LAIF)                                    N/A                N/A            $40 million
JPA Pools (other investment pools)                                     N/A                N/A               N/A

        See “APPENDIX F – CITY INVESTMENT POLICY” for a complete copy of the City’s Investment Policy
dated February 10, 2009.

Insurance, Risk Pooling and Joint Powers Arrangements

         The City is self-insured for liability claims below $350,000. The City is also a member of the Bay Cities
Joint Powers Insurance Authority (“BCJPIA”). The BCJPIA consists of 19 municipal or public agency members, all
located within the metropolitan San Francisco Bay Area. The BCJPIA provides general liability, auto liability, and
errors and omissions coverage between $350,000 and $1,000,000. The California Affiliated Risk Management
Authority (“CARMA”) provides additional coverage to the BCJPIA and its member entities for claims in excess of


OHS West:260917701.5
$1,000,000, up to $29,000,000. The City’s premium for participation in the BCJPIA pool, approximately $838,000
per year, is established through an annual actuarial analysis. To the extent that allocated losses and administrative
expenses exceed contributions previously paid and other income, the BCJPIA may assess its members additional
premiums. For the Fiscal Year ended June 30, 2009, the BCJPIA had net assets of $8,190,000 and a net income of
$122,000. For that same Fiscal Year, the City paid out approximately $0.6 million for past claims below $350,000
and incurred approximately half that in new claims; this left a net present value of accrued liability for such claims
of approximately $0.9 million.

         The City is self-insured for workers’ compensation. Payments are made to the Workers’ Compensation
Self-Insurance Internal Service Fund by transfers from the City’s general fund and other funds of the City on a pay-
as-you-go basis. The City works with a Bickmore Risk Services to determine funding rates for five workers’
compensation classification categories and then assesses each department by the applicable funding rate for each
position. This ensures that positions with the highest exposure to loss pays the correct portion of the overall expense
and that the expense is spread proportionally to the correct funding source. Funds are available to pay claims and
administrative costs of the program. For the Fiscal Year ended June 30, 2009, the net present value of the City’s
unfunded workers’ compensation liability was $21,194,000. The City paid approximately $5.1 million, covering a
portion of incurred claims amounting to $8.4 million, for the Fiscal Year ended June 30, 2009.

Accounting Practices

          Caporicci & Larson, Certified Public Accounts, Oakland, California, serves as independent auditors to the
City and their report for Fiscal Year ended June 30, 2009 are attached hereto as APPENDIX B. The City considers
its audited financial statements to be public information, and accordingly no consent has been sought or obtained
from the auditor in connection with the inclusion of such statements in this Official Statement. The auditor has
made no representation in connection with inclusion of the audit herein that there has been no material change in the
financial condition of the City since the audit was concluded.

                           CONSTITUTIONAL AND STATUTORY LIMITATIONS
                                  ON TAXES AND EXPENDITURES

Limitations on Revenues

          Article XIII A of the State Constitution. Article XIII A of the State Constitution, adopted and known as
Proposition 13, was approved by the voters in June 1978. Section 1(a) of Article XIII A limits the maximum ad
valorem tax on real property to one percent of “full cash value,” and provides that such tax shall be collected by the
Counties and apportioned according to State law. Section 1(b) of Article XIII A provides that the one percent
limitation does not apply to ad valorem taxes levied to pay interest and redemption charges on (i) indebtedness
approved by the voters prior to July 1, 1978, or (ii) bonded indebtedness for the acquisition or improvement of real
property approved on or after July 1, 1978, by two-thirds of the votes cast on the proposition, or (iii) bonded
indebtedness incurred by a school district or community college district for the construction, reconstruction,
rehabilitation or replacement of school facilities or the acquisition or lease of real property for school facilities,
approved by 55% of the voters of the district, but only if certain accountability measures are included in the bond
proposition.

          Section 2 of Article XIII A defines “full cash value” to mean the county assessor’s valuation of real
property as shown on the Fiscal Year 1975-76 tax bill, or, thereafter, the appraised value of real property when
purchased, newly constructed, or a change in ownership has occurred. The full cash value may be adjusted annually
to reflect inflation at a rate not to exceed two percent per year, or to reflect a reduction in the consumer price index
or comparable data for the area under taxing jurisdiction, or may be reduced in the event of declining property value
caused by substantial damage, destruction or other factors. Section 51 of the Revenue and Taxation Code permits
County assessors who have reduced the assessed valuation of a property as a result of natural disasters, economic
downturns or other factors, to subsequently “recapture” such value (up to the pre-decline value of the property) at an
annual rate higher than two percent, depending on the assessor’s measure of the restoration of value of the damaged
property. The California courts have upheld the constitutionality of this procedure. Legislation enacted by the State
Legislature to implement Article XIII A provides that, notwithstanding any other law, local agencies may not levy




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any ad valorem property tax except the one percent base tax levied by each County and taxes to pay debt service on
indebtedness approved by the voters as described above.

         Since its adoption, Article XIII A has been amended a number of times. These amendments have created a
number of exceptions to the requirement that property be reassessed when purchased, newly constructed or a change
in ownership has occurred. These exceptions include certain transfers of real property between family members,
certain purchases of replacement dwellings for persons over age 55 and by property owners whose original property
has been destroyed in a declared disaster, and certain improvements to accommodate disabled persons and for
seismic upgrades to property.

         Both the California State Supreme Court and the United States Supreme Court have upheld the validity of
Article XIII A.

         Article XIII C and Article XIII D of the State Constitution. On November 5, 1996, the voters of the State
approved Proposition 218, known as the “Right to Vote on Taxes Act.” Proposition 218 added Articles XIII C and
XIII D to the California Constitution and contains a number of interrelated provisions affecting the ability of the
City to levy and collect both existing and future taxes, assessments, fees and charges. The interpretation and
application of Proposition 218 will ultimately be determined by the courts with respect to a number of the matters
discussed below, and it is not possible at this time to predict with certainty the outcome of such determination.

         Article XIII C requires that all new local taxes be submitted to the electorate before they become effective.
Taxes for general governmental purposes of the City require a majority vote and taxes for specific purposes, even if
deposited in the City’s general fund, require a two-thirds vote. The voter approval requirements of Proposition 218
reduce the flexibility of the City to raise revenues for the general fund, and no assurance can be given that the City
will be able to impose, extend or increase such taxes in the future to meet increased expenditure needs.

         Article XIII D also adds several provisions making it generally more difficult for local agencies to levy and
maintain property-related fees, charges, and assessments for municipal services and programs. These provisions
include, among other things, (i) a prohibition against assessments which exceed the reasonable cost of the
proportional special benefit conferred on a parcel, (ii) a requirement that assessments must confer a “special
benefit,” as defined in Article XIII D, over and above any general benefits conferred, (iii) a majority protest
procedure for assessments which involves the mailing of notice and a ballot to the record owner of each affected
parcel, a public hearing and the tabulation of ballots weighted according to the proportional financial obligation of
the affected party, and (iv) a prohibition against fees and charges which are used for general governmental services,
including police, fire or library services, where the service is available to the public at large in substantially the same
manner as it is to property owners. If the City is unable to continue to collect these revenues, the services and
programs funded with these revenues would have to be curtailed and/or the City general fund might have to be used
to support them. The City is unable to predict whether or not in the future it will be able to continue all existing
services and programs funded by the fees, charges and assessments in light of Proposition 218 or, if these services
and programs are continued, which amounts (if any) would be used from the City’s general fund to continue to
support these activities.

          Article XIIIC also provides that the initiative power shall not be limited in matters of reducing or repealing
local taxes, assessments, fees and charges. The State Constitution and the laws of the State impose a duty on the
City to levy a property tax sufficient to pay debt service on the Bonds coming due in each year. The initiative power
cannot be used to reduce or repeal the authority and obligation to levy such taxes which are pledged as security for
payment of the Bonds or to otherwise interfere with performance of the duty of the City and the County tax
collection officials with respect to such taxes. Legislation adopted in 1997 provides that Article XIIIC shall not be
construed to mean that any owner or beneficial owner of a municipal security assumes the risk of or consents to any
initiative measure which would constitute an impairment of contractual rights under the contracts clause of the U.S.
Constitution. No assurance can be given that the voters of the City will not, in the future, approve an initiative or
initiatives which reduce or repeal other local taxes, assessments, fees or charges currently comprising a substantial
part of the City’s general fund.

        Proposition 1A. Proposition 1A, proposed by the Legislature in connection with the State's Fiscal Year
2004-05 Budget, approved by the voters in November 2004 and generally effective in Fiscal Year 2006-07, provides


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that the State may not reduce any local sales tax rate, limit existing local government authority to levy a sales tax
rate or change the allocation of local sales tax revenues, subject to certain exceptions. Proposition 1A generally
prohibits the State from shifting to schools or community colleges any share of property tax revenues allocated to
local governments for any Fiscal Year, as set forth under the laws in effect as of November 3, 2004. Any change in
the allocation of property tax revenues among local governments within a county must be approved by two-thirds of
both houses of the Legislature. Proposition 1A provides, however, that beginning in Fiscal Year 2008-09, the State
may shift to schools and community colleges up to 8% of local government property tax revenues, which amount
must be repaid, with interest, within three years, if the Governor proclaims that the shift is needed due to a severe
state financial hardship, the shift is approved by two-thirds of both houses and certain other conditions are met. The
State may also approve voluntary exchanges of local sales tax and property tax revenues among local governments
within a county. Proposition 1A also provides that if the State reduces the motor vehicle license fee rate currently in
effect, 0.65 percent of vehicle value, the State must provide local governments with equal replacement revenues.
Further, Proposition 1A requires the State, beginning July 1, 2005, to suspend State mandates affecting cities,
counties and special districts, excepting mandates relating to employee rights, schools or community colleges, in any
year that the State does not fully reimburse local governments for their costs to comply with such mandates.

          Proposition 1A may result in increased and more stable City revenues. The magnitude of such increase and
stability is unknown and would depend on future actions by the State. However, Proposition 1A could also result in
decreased resources being available for State programs. This reduction, in turn, could affect actions taken by the
State to resolve budget difficulties. Such actions could include increasing State taxes, decreasing spending on other
State programs or other action, some of which could be adverse to the City.

Expenditures and Appropriations

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

         The State and each local government entity has its own appropriations limit. Each year, the limit is
adjusted to allow for changes, if any, in the cost of living, the population of the jurisdiction, and any transfer to or
from another government entity of financial responsibility for providing services.

         Proposition 111 requires that each agency’s actual appropriations be tested against its limit every two years.
If the aggregate “proceeds of taxes” for the preceding two-year period exceeds the aggregate limit, the excess must
be returned to the agency’s taxpayers through tax rate or fee reductions over the following two years. The City has
never exceeded its appropriations limit.

Future Initiatives

         Articles XIII A, XIII B, XIII C and XIII D and Proposition 1A were each adopted as measures that
qualified for the ballot pursuant to the State’s initiative process. From time to time other initiative measures could


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be adopted, further affecting revenues of the City or the City’s ability to expend revenues. The nature and impact of
these measures cannot be anticipated by the City.




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                                     APPENDIX B

                       COMPREHENSIVE ANNUAL FINANCIAL REPORT
                              OF THE CITY OF BERKELEY
                        FOR THE FISCAL YEAR ENDED JUNE 30, 2009




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                                                    APPENDIX C

                           FORM OF CONTINUING DISCLOSURE CERTIFICATE

         This CONTINUING DISCLOSURE CERTIFICATE (the “Disclosure Certificate”) is executed and
delivered by the CITY OF BERKELEY (the “City”) in connection with the issuance of $__________ City of
Berkeley General Obligation Bonds, Series 2010 (Measure FF—Neighborhood Branch Library Improvements
Project) (the “Bonds”). The Bonds are being issued pursuant to a Resolution adopted on ______, 2010 (the
“Resolution”). The City covenants and agrees as follows:

          SECTION 1. Purpose of the Disclosure Certificate. This Disclosure Certificate is being executed and
delivered by the City for the benefit of the Holders and Beneficial Owners of the Bonds and in order to assist the
Participating Underwriters in complying with Securities and Exchange Commission (the “S.E.C.”) Rule 15c2-12(b)(5).

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

         “Annual Report” shall mean any Annual Report provided by the City pursuant to, and as described in,
Sections 3 and 4 of this Disclosure Certificate.

         “Beneficial Owner” shall mean any person which: (a) has or shares the power, directly or indirectly, to
make investment decisions concerning ownership of any Bonds (including persons holding Bonds through
nominees, depositories or other intermediaries) including, but not limited to, the power to vote or consent with
respect to any Bonds or to dispose of ownership of any Bonds; or (b) is treated as the owner of any Bonds for federal
income tax purposes.

          “CPO” means the Internet-based filing system currently located at www.DisclosureUSA.org, or such other
similar filing system approved by the Securities and Exchange Commission.

         “Dissemination Agent” shall mean The Bank of New York Mellon Trust Company, N.A., or any successor
Dissemination Agent designated in writing by the City and which has filed with the City a written acceptance of
such designation.

        “Holder” shall mean either the registered owners of the Bonds, or, if the Bonds are registered in the name
of The Depository Trust Company or another recognized depository, any applicable participant in such depository
system.

         “Listed Events” shall mean any of the events listed in Section 5(a) of this Disclosure Certificate.

         “National Repository” shall mean any Nationally Recognized Municipal Securities Information Repository
for purposes of the Rule. A list of the current National Repositories approved by the S.E.C. may be found at the
S.E.C. website: http://www.sec.gov/info/municipal/nrmsir.htm.

         “Participating Underwriter” shall mean any of the original underwriters or purchasers of the Bonds
required to comply with the Rule in connection with offering of the Bonds.

         “Repository” shall mean each National Repository and each State Repository.

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

         “State” shall mean the State of California.




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         “State Repository” shall mean any public or private repository or entity designated by the State as a state
repository for the purpose of the Rule and recognized as such by the S.E.C. As of the date of this Disclosure
Certificate, there is no State Repository. The current status should be checked on the S.E.C. website,
http://www.sec.gov/info/municipal./nrmsir.htm.

         SECTION 3. Provision of Annual Reports.

         (a)      The City shall, or shall cause the Dissemination Agent to, not later than nine months after the end
                  of the City’s fiscal year (which is June 30), commencing with the report for the 2009-10 Fiscal
                  Year (which is due not later than April 1, 2011), provide to each Repository (or, in lieu of
                  providing to each Repository, provide to the CPO) an Annual Report which is consistent with the
                  requirements of Section 4 of this Disclosure Certificate. If the Dissemination Agent is not the
                  City, the City shall provide the Annual Report to the Dissemination Agent not later than 15 days
                  prior to said date. The Annual Report may be submitted as a single document or as separate
                  documents comprising a package, and may cross-reference other information as provided in
                  Section 4 of this Disclosure Certificate; provided, that if the audited financial statements of the
                  City are not available by the date required above for the filing of the Annual Report, the City shall
                  submit unaudited financial statements and submit the audited financial statements as soon as they
                  are available. If the City’s Fiscal Year changes, it shall give notice of such change in the same
                  manner as for a Listed Event under Section 5(c).

         (b)      If the City is unable to provide to the Repositories an Annual Report by the date required in
                  subsection (a), the City shall send a notice to (i) each National Repository or the Municipal
                  Securities Rulemaking Board and (ii) each appropriate State Repository (with a copy to the Paying
                  Agent) a notice, in substantially the form attached as Exhibit A. In lieu of filing the notice with
                  each Repository, the City or the Dissemination Agent, if not the City, may file such notice with
                  the CPO.

         (c)      With respect to the Annual Report, the Dissemination Agent shall:

                          1.        determine each year prior to the date for providing the Annual Report the name
                  and address of each National Repository and the State Repository, if any; and

                            2.       if the Dissemination Agent is other than the City, file a report with the City
                  certifying that the Annual Report has been provided pursuant to this Disclosure Certificate, stating
                  the date it was provided and listing all the Repositories to which it was provided.

         SECTION 4. Content of Annual Reports. The City’s Annual Report shall contain or incorporate by
reference the following information:

         (a)      the audited general purpose financial statements of the City prepared in accordance with generally
                  accepted accounting principles applicable to governmental entities;

         (b)      a summary of budgeted general fund revenues and appropriations;

         (c)      a summary of the assessed valuation of taxable property in the City;

         (d)      a summary of the ad valorem property tax levy and delinquency rate;

         (e)      a schedule of aggregate annual debt service on tax-supported indebtedness of the City; and

         (f)      summary of outstanding and authorized but unissued tax-supported indebtedness of the City.

          Any or all of the items listed above may be included by specific reference to other documents, including
official statements of debt issues of the City or related public entities, which have been submitted to each of the
Repositories or the S.E.C. If the document included by reference is a final official statement, it must be available

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from the Municipal Securities Rulemaking Board. The City shall clearly identify each such other document so
included by reference.

         SECTION 5. Reporting of Significant Events.

         (a)      To the extent applicable and pursuant to the provisions of this Section 5, the City shall give, or cause
                  to be given, notice of the occurrence of any of the following events with respect to the Bonds, if
                  material:

                           1.       Principal and interest payment delinquencies.

                           2.       Non-payment related defaults.

                           3.       Modifications to rights of Bondholders.

                           4.       Optional, contingent or unscheduled bond calls.

                           5.       Defeasances.

                           6.       Rating changes.

                           7.       Adverse tax opinions or events affecting the tax-exempt status of the Bonds.

                           8.       Unscheduled draws on debt service reserves reflecting financial difficulties.

                           9.       Unscheduled draws on credit enhancements reflecting financial difficulties.

                           10.      Substitution of credit or liquidity providers or their failure to perform.

                           11.      Release, substitution or sale of property securing repayment of the Bonds.

         (b)      Whenever the City obtains knowledge of the occurrence of a Listed Event, the City shall as soon
                  as possible determine if such event would be material under applicable federal securities laws.

         (c)      If the City determines that knowledge of the occurrence of a Listed Event would be material under
                  applicable federal securities laws, the City shall promptly file a notice of such occurrence with
                  (i) each National Repository or with the Municipal Securities Rulemaking Board and (ii) each
                  appropriate State Repository, if any. Notwithstanding the foregoing, notice of Listed Events
                  described in Sections 5(a)(4) and 5(a)(5) need not be given under this subsection any earlier than the
                  notice (if any) of the underlying event is given to Holders and Beneficial Owners of affected Bonds
                  pursuant to the Resolution.

         In lieu of filing the notice of Listed Event with each Repository in accordance with the preceding
         paragraph, the City or the Dissemination Agent, if not the City, may file such notice of a Listed Event with
         the CPO.

          SECTION 6. Termination of Reporting Obligation. The City’s obligations under this Disclosure
Certificate shall terminate upon the legal defeasance, prior redemption or payment in full of all of the Bonds. If such
termination occurs prior to the final maturity of the Bonds, the City shall give notice of such termination in the same
manner as that for giving notice of the occurrence of a Listed Event under Section 5(c).

         SECTION 7. Dissemination Agent. The City may, from time to time, appoint or engage a Dissemination
Agent to assist it in carrying out its obligations under this Disclosure Certificate, and may discharge any such Agent,
with or without appointing a successor Dissemination Agent. The Dissemination Agent shall have only such duties as
are specifically set forth in this Disclosure Certificate. The initial Dissemination Agent shall be The Bank of New
York Mellon Trust Company, N.A.

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         SECTION 8. Amendment; Waiver. Notwithstanding any other provision of this Disclosure Certificate, the
City may amend or waive this Disclosure Certificate or any provision of this Disclosure Certificate, provided that the
following conditions are satisfied:

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

         (b)      The undertaking, as amended or taking into account such waiver, would, in the opinion of the City
                  Attorney or nationally recognized bond counsel, have complied with the requirements of the Rule
                  at the time of the original issuance of the Bonds, 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 (i) is approved by the owners of a majority in aggregate principal
                  amount the Bonds or (ii) does not, in the opinion of the City Attorney or nationally recognized bond
                  counsel, materially impair the interests of the Holders.

          In the event of any amendment or waiver of a provision of this Disclosure Certificate, the City 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 case of a change of accounting principles, on the
presentation) of financial information or operating data being presented by the City. In addition, if the amendment
relates to the accounting principles to be followed in preparing financial statements: (i) notice of such change shall be
given in the same manner as for a Listed Event under Section 5; and (ii) the Annual Report for the year in which the
change is made should 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 9. Additional Information. Nothing in this Disclosure Certificate shall be deemed to prevent the
City from disseminating any other information, using the means of dissemination set forth in this Disclosure Certificate
or any other means of communication, or including any other information in any Annual Report or notice of occurrence
of a Listed Event, in addition to that which is required by this Disclosure Certificate. If the City chooses to include any
information in any Annual Report or notice of occurrence of a Listed Event in addition to that which is specifically
required by this Disclosure Certificate, the City shall have no obligation under this Disclosure Certificate to update
such information or include it in any future Annual Report or notice of occurrence of a Listed Event.

          SECTION 10. Default. In the event of a failure of the City to comply with any provision of this Disclosure
Certificate, any Participating Underwriter, Holder or Beneficial Owner of the Bonds may take such actions as may be
necessary and appropriate, including seeking mandate or specific performance by court order, to cause the City to
comply with its obligations under this Disclosure Certificate; provided that any such action may be instituted only in a
federal or state court located in the City of Berkeley, State of California. A default under this Disclosure Certificate
shall not be deemed an Event of Default under the Resolution and the sole remedy under this Disclosure Certificate in
the event of any failure of the City to comply with this Disclosure Certificate shall be an action to compel performance.

        SECTION 11. Beneficiaries. This Disclosure Certificate shall inure solely to the benefit of the City, the
Dissemination Agent, the Participating Underwriters and Holders and Beneficial Owners from time to time of the
Bonds, and shall create no rights in any other person or entity.

Date: __________, 2010




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                                                  EXHIBIT A

                             NOTICE OF FAILURE TO FILE ANNUAL REPORT

Name of Issuer:           City of Berkeley

Name of Bond Issue:       City of Berkeley General Obligation Bonds, Series 2010 (Measure FF—Neighborhood
                          Branch Library Improvements Project)

Date of Issuance:         _________, 2010


         NOTICE IS HEREBY GIVEN to [(i) each National Repository or the Municipal Securities Rulemaking
Board and (ii) each appropriate State Repository] [the CPO and the Municipal Securities Rulemaking Board] that
the City has not provided an Annual Report with respect to the above-named Bonds as required by Section 3 of the
Continuing Disclosure Certificate of the City of Berkeley, dated _______, 2010. The City anticipates that the
Annual Report will be filed by _____________.



Dated:_______________.
                                                             THE BANK OF NEW YORK MELLON TRUST
                                                             COMPANY, N.A., as Dissemination Agent

                                                             By
                                                             Title




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                                                    APPENDIX D

                                DTC AND THE BOOK-ENTRY ONLY SYSTEM

          The information in numbered paragraphs 1-10 of this Appendix D, concerning The Depository Trust
Company, New York, New York (“DTC”) and DTC’s book-entry system, has been furnished by DTC for use in
official statements and the City takes no responsibility for the completeness or accuracy thereof. The City cannot
and does not give any assurances that DTC, DTC Participants or Indirect Participants will distribute to the
Beneficial Owners (a) payments of interest or principal with respect to the Bonds, (b) certificates representing
ownership interest in or other confirmation or ownership interest in the Bonds, or (c) redemption or other notices
sent to DTC or Cede & Co., its nominee, as the registered owner of the Bonds, or that they will so do on a timely
basis, or that DTC, DTC Participants or DTC Indirect Participants will act in the manner described in this
Appendix. 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 Participants are on file with DTC.

Information Furnished by DTC Regarding its Book-Entry Only System

          1.        The Depository Trust Company (“DTC”), New York, NY, will act as securities depository for the
bonds (the “Bonds”). The Bonds 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 Bonds, in the aggregate principal amount of
such issue, and will be deposited with DTC. If, however, the aggregate principal amount of any issue exceeds
$500 million, one certificate will be issued with respect to each $500 million of principal amount, and an additional
certificate will be issued with respect to any remaining principal amount of such issue.

          2.        DTC, the world’s largest 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 2.2 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, in turn, is owned by a number of Direct Participants
of DTC and Members of the National Securities Clearing Corporation, Fixed Income Clearing Corporation, and
Emerging Markets Clearing Corporation (NSCC, FICC, and EMCC, also subsidiaries of DTCC), as well as by the
New York Stock Exchange, Inc., the American Stock Exchange LLC, and the National Association of Securities
Dealers, Inc. 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 Standard & Poor’s highest
rating: AAA. The DTC Rules applicable to its Participants are on file with the Securities and Exchange
Commission. More information about DTC can be found at www.dtcc.com and www.dtc.org.

         3.        Purchases of Bonds under the DTC system must be made by or through Direct Participants, which
will receive a credit for the Bonds on DTC’s records. The ownership interest of each actual purchaser of each Bond
(“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 Bonds 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 Bonds, except in the event that use of the book-entry system for the Bonds is
discontinued.

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         4.        To facilitate subsequent transfers, all Bonds 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 Bonds 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 Bonds; DTC’s records reflect only the identity of the Direct Participants to whose accounts
such Bonds are credited, which may or may not be the Beneficial Owners. The Direct and Indirect Participants will
remain responsible for keeping account of their holdings on behalf of their customers.

         5.        Conveyance of notices and other communications by 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 Bonds may wish to take certain steps to augment the transmission to them of
notices of significant events with respect to the Bonds, such as redemptions, tenders, defaults, and proposed
amendments to the Bond documents. For example, Beneficial Owners of Bonds may wish to ascertain that the
nominee holding the Bonds for their benefit has agreed to obtain and transmit the notices to Beneficial Owners.

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

         7.        Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect to
the Bonds unless authorized by a Direct Participant in accordance with DTC’s Procedures. Under its usual
procedures, DTC mails an Omnibus Proxy to the issuer 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 the Bonds are
credited on the record date (identified in a listing attached to the Omnibus Proxy).

          8.       Redemption proceeds, distributions, and dividend payments on the Bonds 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 issuer or
the paying agent or bond 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 paying agent or bond
trustee, or the issuer, subject to any statutory or regulatory requirements as may be in effect from time to time.
Payment of redemption proceeds, distributions, and dividend payments to Cede & Co. (or such other nominee as
may be requested by an authorized representative of DTC) is the responsibility of the issuer or the paying agent or
bond 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.

         9.       DTC may discontinue providing its services as securities depository with respect to the Bonds at
any time by giving reasonable notice to the issuer or the paying agent or bond trustee. Under such circumstances, in
the event that a successor securities depository is not obtained, Bond certificates are required to be printed and
delivered.

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

Discontinuation of Book-Entry Only System; Payment to Beneficial Owners

        In the event that the book-entry system described above is no longer used with respect to the Bonds, the
following provisions will govern the payment, registration, transfer, exchange and replacement of the Bonds.

          The Paying Agent shall keep or cause to be kept, at the office of the Paying Agent, or at the designated
office of any registrar appointed by the Paying Agent, sufficient books for the registration and transfer of the Bonds,


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which shall at all times be open to inspection, and upon presentation for such purpose, the Paying Agent shall, under
such reasonable regulations as he or she may prescribe, register or transfer or cause to be registered or transferred,
on said books, Bonds as described below. Any Bond may, in accordance with its terms, be transferred upon the
books of the Paying Agent, by the person in whose name it is registered, in person or by the duly authorized attorney
of such person in writing, upon surrender of such Bond for cancellation, accompanied by delivery of a duly executed
written instrument of transfer in a form approved by the Paying Agent.

         Any Bonds may be exchanged at the office of the Paying Agent for a like aggregate principal amount of
other authorized denominations of the same interest rate and maturity.

          Whenever any Bond shall be surrendered for transfer or exchange, the designated City officials shall
execute and the Paying Agent shall authenticate and deliver a new Bond or Bonds of the same interest rate and
maturity in a like aggregate principal amount. The Paying Agent shall require the payment by any bond owner
requesting any such transfer of any tax or other governmental charge required to be paid with respect to such
transfer or exchange.

         No transfer or exchange of Bonds shall be required to be made by the Paying Agent during the period from
the Record Date (as defined herein) next preceding each interest payment date to such interest payment date or after
a notice of redemption shall have been mailed with respect to such Bond.

          Payment of the interest on any Bond shall be paid by check mailed to such owner at such owner's address
as it appears on the registration books as of the Record Date; provided, however, if any interest payment date occurs
on a day that is not a Business Day, then such payment shall be made on the next succeeding Business Day; and
provided, further, that the registered owner of an aggregate principal amount of at least $1,000,000 of the Bonds
may submit a written request to the Paying Agent on or before a Record Date preceding an interest payment date for
payment of interest by wire transfer to a commercial bank located within the United States.

          The date on which Bonds which are called for redemption are to be presented for redemption is herein
sometimes called the “redemption date”. The Paying Agent shall mail, or cause to be mailed, notice of any
redemption of Bonds postage prepaid, to the respective registered owners thereof at the addresses appearing on the
bond registration books not less than 30 nor more than 60 days prior to the redemption date. The notice of
redemption shall, among other items, (a) state the redemption date; (b) state the redemption price; (c) state the dates
of maturity of the Bonds and, if less than all of any such maturity is called for redemption, the distinctive numbers of
the Bonds of such maturity to be redeemed, and in the case of Bonds redeemed in part only, the respective portions
of the principal amount thereof to be redeemed; (d) state the CUSIP number, if any, of each Bond to be redeemed;
(e) require that such Bonds be surrendered by the owners at the office of the Paying Agent or his or her agent; and
(f) give notice that interest on such Bonds will cease to accrue after the designated redemption date.

         The actual receipt by the owner of any Bond of notice of such redemption shall not be a condition
precedent to redemption, and failure to receive such notice, or any defect in such notice shall not affect the validity
of the proceedings for the redemption of such Bonds or the cessation of accrual of interest on such Bonds on the
redemption date.




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                                                  APPENDIX E

                           PROPOSED FORM OF OPINION OF BOND COUNSEL

                                                 [Date of Delivery]

City Council
City of Berkeley
Berkeley, California


                                              City of Berkeley
                                    General Obligation Bonds, Series 2010
                        (Measure FF—Neighborhood Branch Library Improvements Project)
                                              (Final Opinion)
Ladies and Gentlemen:

We have acted as bond counsel to the City of Berkeley (the “City”) in connection with the issuance of its
$__________ aggregate principal amount of bonds designated as “City of Berkeley General Obligation Bonds,
Series 2010 (Measure FF—Neighborhood Branch Library Improvements Project)” (the “Bonds”), representing a
portion of the $26,000,000 of bonds authorized at an election held in the City on November 4, 2008. The Bonds are
issued under and pursuant to a resolution of the City Council (the “City Council”) adopted on _______, 2010 (the
“Resolution”).

In such connection, we have reviewed the Resolution, the tax certificate of the City dated the date hereof (the “Tax
Certificate”), certificates of the City, and others, and such other documents 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 opinion speaks only as of its date and is not intended to, and may not, be relied upon
in connection with any such actions, events or matters. Our engagement with respect to the Bonds has concluded
with their issuance, 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 City. We have assumed, without undertaking to
verify, the accuracy of the factual matters represented, warranted or certified in the documents referred to in the
second paragraph hereof. Furthermore, we have assumed compliance with all covenants and agreements contained
in the Resolution and the Tax Certificate, including (without limitation) covenants and agreements compliance with
which is necessary to ensure that future actions, omissions or events will not cause interest on the Bonds to be
included in gross income for federal income tax purposes. We call attention to the fact that the rights and
obligations under the Bonds, the Resolution, 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 charter cities in the State of California. We
express no opinion with respect to any indemnification, contribution, penalty, choice of law, choice of forum, choice
of venue, waiver or severability provisions contained in the documents mentioned in the preceding sentence.
Finally, we undertake no responsibility for the accuracy, completeness or fairness of the Official Statement or other
offering materials relating to the Bonds 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 Bonds constitute valid and binding obligations of the City.




OHS West:260917701.5                                    E-1
2.       The Resolution has been duly and legally adopted and constitutes a valid and binding obligation of the
City.

3.       The City Council has power and is obligated to levy ad valorem taxes without limitation as to rate or
amount upon all property within the City’s boundaries subject to taxation by the City (except certain personal
property which is taxable at limited rates) for the payment of the Bonds and the interest thereon.

4.       Interest on the Bonds 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 on the
Bonds is not a specific preference item for purposes of the federal individual or corporate alternative minimum
taxes, nor is it 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
accrual or receipt of interest on, the Bonds.



Faithfully yours,

ORRICK, HERRINGTON & SUTCLIFFE LLP

per




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                             APPENDIX F

                       CITY INVESTMENT POLICY




OHS West:260917701.5

								
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