The City of Lodi, California ("Lodi" or the "City") was incorporated as a General Law city on December 6, 1906. The City is located in the San Joaquin Valley between Stockton, 6 miles to the south, and Sacramento, 35 miles to the north, and adjacent to U.S. Highway 99. The City is located on the main line of the Southern Pacific Railroad and is within five miles of Interstate 5. The City population is approximately 58,950 (as of January 1, 2001) and is contained in an area of 12 square miles. The City has grown steadily since incorporation in 1906 and is projected to grow to 70,500 people by the year 2007. The City’s growth is provided for in both the general plan and the City’s growth control ordinance that allows an increase in population of 2% per year until the growth limits are reached.

The City provides a wide range of municipal services, including public safety (police, fire and graffiti abatement), public utilities services (electric, water and sewer), transportation services (streets, flood control and transit), leisure, cultural and social services (parks and recreation, library, and community center), and general government services (management, human resources administration, financial administration, building maintenance and equipment maintenance).

Lodi is built on a strong and broad based agricultural industry with national and industrial markets for its commodities and products. Wines, processed foods, nuts, fruit and milk are major commodities of the Lodi area and provide the basic material for food processing and packaging. These commodities support the operations of General Mills, and Pacific Coast Producers, three companies in the business of processing local agricultural commodities.

In addition, Lodi has a wide range of small, financially sound businesses. These companies range in size from 10 to 150 employees and produce a wide variety of products, services and commodities.

Recently, there has been an increase in industrial and residential development within the City. This new development, combined with the growing strength of the wine/grape industry, is a positive economic indicator for Lodi. Recently, several industries moved to Lodi.  These industries collectively have created approximately 850 new jobs.

City Council. All powers of the City are vested in the City Council which is empowered to perform all duties of and obligations of the City as imposed by State law. The City has a five-member City Council comprised of members elected at large. Each council member is elected for four years with staggering terms.

City Council Profiles

City Staff. Biographies of senior management of the City follows:

BLAIR KING, City Manager, was appointed in January 2005.  Mr. King came to Lodi with nearly 25 years experience in city government, which included jobs in Eureka, Coalinga, Soledad, Imperial Beach, Half Moon Bay, and Milpitas.  He earned his Bachelor's and Master's degrees in Public Administration at California State University, Fresno.

D. STEPHEN SCHWABAUER, City Attorney, was appointed in June, 2004.  Mr. Schwabauer served as Lodi’s Deputy City Attorney and worked in private practice in Stockton prior to joining the City Attorney’s office. He obtained his Bachelor’s degree in History from University of California, Davis and earned his Juris Doctorate from the University of California, Berkeley, Boalt Hall School of Law.

JAMES KRUEGER, Finance Director and Treasurer,  was appointed in May 2004.  Mr. Krueger came to Lodi with nearly 20 years experience as a Finance Director/Chief Financial Officer for  city, county and special district governments. His jobs have included tenures with the City of Thousand Oaks (CA), Ventura County (CA), Rogue Sewer Services, Medford (OR), Douglas County ,Roseburg (OR) and the City of Bend (OR). He earned his Bachelor’s in accounting from Cal Poly Pomona and Master’s degree (Business Administration) at Southern Oregon University (Ashland, Oregon). Mr. Krueger passed the Certified Public Accounting examination in California (1978).

City employees are represented by various associations, and labor relations have been generally amicable in that there have been no major strikes, work stoppages or other similar incidents. The following table provides a list of employee organizations in the City and the number of employees these represent as of June 30, 2001.

Substantially all of the employees of the City are members of the California Public Employees Retirement System ("PERS"). As of June 30, 2001, PERS had separate contracts with the State of California and local public agencies, including coverage for school and community college districts. Membership includes safety, state industrial, and miscellaneous groups. Each group has somewhat differing programs and amounts of actuarial liabilities.

Employee contributions to PERS are accomplished through automatic paycheck deductions. The City’s contribution rate is determined by periodic actuarial valuations based on the benefit formula and the number of employees and their respective salary schedules. The combined contribution (the City’s share and each employee’s share, which is made by the City on the employee’s behalf) during the fiscal year ended June 30, 2001, the amount was approximately $542,539. As of June 30, 2001, the City had no unfunded pension benefit obligation.

Budgetary Processes. The fiscal year of the City begins on the first day of July of each year and ends on the thirtieth day of June of the following year. The following procedures are used by the City in establishing the two-year budgetary data reflected in the financial plan and financial statements:

Prior to June 1, the City Manager submits to the City Council a proposed operating budget for the fiscal year commencing the following July 1. The operating budget includes proposed expenditures and the means of financing them.

Public hearings are conducted to obtain taxpayer comments.

Prior to July 1, the budget is legally enacted through passage of a resolution.

Expenditures may not legally exceed appropriations at the department level, for each legally adopted annual operating budget. The City Manager is authorized to transfer budgeted amounts between departments within any fund; however, any revisions that alter the total appropriations of any fund must be approved by the City Council.

Formal budgetary integration is employed as a management control device during the year for the General Fund, Special Revenue Funds and Capital Projects Funds.

Budgeted amounts are as originally adopted by June 30, or as amended by the City Council. Individual amendments were not material in relation to the original appropriations.

Under a one-year budget, appropriations lapse at year-end unless they are encumbered by contract or purchase order. The two-year budget allows for the unexpended operating budget balances to be carried forward to the second year of the financial plan. To ensure fund balance projections remain on target, any unexpended operating balances are reduced if the actual revenue received is materially less than the estimated revenue projected in the financial plan.

The City’s 2001-03 Financial Plan and Budget was approved by the City Council on June 27, 2001. The following table sets forth the approved budget for fiscal years 2000-01, 2001-02 and 2002-03, and the actual resources and expenditures for 2000-01.

Expenditures are generally recognized under the modified accrual basis of accounting when the related fund liability is incurred. The exception to this general rule is principal and interest on general long-term debt, which is recognized when due. Some debts and obligations may be payable from self-supporting enterprises or revenue sources other than property taxation. Special assessment bonds are not included in the tabulation; lease revenue obligations payable from the General Fund or equivalent sources are included.

All proprietary funds are accounted for using the accrual basis for accounting. Revenues are recognized when they are earned, and expenses are recognized when they are incurred. Receivables are recorded and determined at the time of consumption, and unbilled receivables are not recorded.

The following five-year summary of the City’s General Fund has been prepared by the City of Lodi Finance Department from audited financial statements. The City’s audited financial statements for the fiscal year ended June 30, 2001 are attached hereto as Appendix B. The City has retained the firm of KPMG Peat Marwick LLP, Sacramento, California to prepare the audit report for the fiscal year ended June 30, 2001.

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Source: City of Lodi Finance Department.

Recent Financial Performance. The City of Lodi ended Fiscal Year 2000-01 with a combined General Fund/Reserved and Unreserved balance of $3,945,678.

One reason for Lodi’s sound financial situation is a diversified revenue base that underscores the City’s strong belief in avoiding dependence on just one industry or major retailer. In fact, Lodi’s top 15 sales tax producers include automobile dealerships, membership warehouse department stores, building materials stores, grocery stores, service stations and light industries.

The following table illustrates the City’s primary General Fund sources (those over $1 million) over the last five years;

* Unaudited.

The primary investment strategy for the City is to provide adequate liquidity. This is achieved by covering the expected cash disbursements with revenues and maturities for the next rolling six-month period. After satisfying liquidity, any idle cash is used to prudently maximize yield. Longer-term strategies are developed and followed after considering long-term cash flow needs, current projected economic conditions and the prudent diversification of maturities.

As of June 30, 2001, the market value of investments was $23,710,079.75 with an original cost of $23,627,373.10. The portfolio’s average life was 409 days with an average weighted purchase yield of 5.774%.

Interfund Borrowing and Cash Flows. General Fund expenditures tend to occur in level amounts throughout the Fiscal Year. Conversely, General Fund receipts have followed an uneven pattern primarily as a result of secured property tax installment payment due dates in April and December and as a result of delays in payments from other governmental agencies, which represent the largest sources of City revenues. As a result, General Fund cash balances have typically declined or been negative for part of the Fiscal Year and, if negative, have been covered by interfund borrowings pursuant to Section 6 of Article XVI of the California Constitution or Tax and Revenue Anticipation Notes. The State Constitution prohibits interfund borrowings by cities after the last Monday of April of each Fiscal Year of amounts that exceed 85% of taxes accrued.

General Fund Obligation Debt Service. Upon the delivery of the Certificates and the defeasance of the Refunded Certificates (see "PLAN OF FINANCE – Refunding of Refunded Certificates" in the forepart of this Official Statement), the City will have no outstanding long-term General Fund obligations other than the Certificates. See "APPENDIX I- LEASE PAYMENT SCHEDULE" for a schedule of the debt service payments for the Certificates.

Assessed Valuation and Tax Collections. Taxes are levied for each Fiscal Year on taxable real and personal property which is situated in the City as of the preceding March 1. For assessment and collection purposes, property is classified either as "secured" or "unsecured" and is listed accordingly on separate parts of the assessment roll. The "secured roll" is that part of the assessment roll containing State-assessed property and real property having a tax lien that is sufficient, in the opinion of the County Assessor, to secure payment of the taxes. Other property is assessed on the "unsecured roll."

Property taxes on the secured roll are due as of the March 1 lien date and become delinquent, if unpaid, on August 31. A 10% penalty attaches to delinquent taxes on property of the unsecured roll, and an additional penalty of 1.5% per month begins to accrue commencing on November 1 of the Fiscal Year. Collection of delinquent unsecured taxes is the responsibility of the County of San Joaquin using the several means legally available to it.

In 1993, the City made an agreement with San Joaquin County to participate the Teeter Plan pursuant to provisions of Sections 4701-4717 of the California Revenue and Taxation Code. The Teeter Plan is an alternative method of apportioning property tax money. Pursuant to those sections the accounts of all political subdivisions that levy taxes on the County tax rolls are credited with 100% of their respective tax levies regardless of actual payments and delinquencies. The cities covered under the plan receive 95% of the property taxes in advance from the County and the 5% remaining after reconciling the cities’ balances at June 30. As part of the agreement, the County keeps the penalties and interest on the delinquent taxes.

Source: City of Lodi audited financial statements.

The following table shows the City’s secured property tax charges and delinquencies.

Source: City of Lodi audited financial statements.

The following table shows the ten largest locally secured taxpayers of the City for the Fiscal Year ended June 30, 2001, the most recent year for which such information is available.

Source: City of Lodi audited financial statements; San Joaquin County Assessor’s Office.

These ten largest locally secured taxpayers represent 11.82% of the City’s assessed valuation.

Population. The following chart indicates the growth in the population of the City since 1992.

Source: State of California, Department of Finance.

Employment. Employment in the City was 25,890 in 1996 and 28,680 in 2000, representing a 10.8% increase over the five-year period. The unemployment rate ranged from 8.2% in 1996 to 6.5% in 2000. Statewide unemployment rates were 7.2% in 1996 and 4.9% in 2000.

Source: State of California, Employment Development Department.

Major Employers. There are several manufacturing plants in the community area with a wide variety of products: cereals, food mixes, wines, rubber products, steel framing and industrial shelving, foundry items, recreational vehicle components, electronic substrates, and plastic piping and injection molded products. In addition, Lodi has a number of small businesses located within the City. The main businesses in Lodi, however, are food processes and plastics.

The largest employers in Lodi as of June 30, 2001 are as follows:

Source: City of Lodi audited financial statements.

Building Permit Activity. The following table shows the value of building permits issued in the City between 1996 and 2000.

Source: Economic Sciences Corporation.

Taxable Sales. The following table indicates taxable transactions in the City by type of business during the calendar years 1996 through 2000.

Source: California State Board of Equalization

Income. The following table, based on data reported in the annual publication "Survey of Buying Power" published by Sales and Marketing Management, summarizes the total EBI and the median household EBI for the City, the County, the State and the nation for the years 1996 through 2000.

Source: "Survey of Buying Power," Sales & Marketing Management.

The following table compares the median household effective buying income for the City, the County, the State and the nation.

Source: "Survey of Buying Power," Sales & Marketing Management.

Agriculture. Lodi is a worldwide agricultural shipping center for the San Joaquin Valley. The surrounding prime agricultural land is a major producer of wine grapes. The following table shows agriculture production in the County from 1996 through 2000.

Source: San Joaquin Office of the Agricultural Commissioner.

Community recreation programs cover a wide range of interests and activities including youth and adult sports and special interest classes, youth-at-risk programs, aquatics, special events, camps/clinics and tournaments.

Lodi Memorial Hospital offers a 181-bed, non-profit, independent, acute-care hospital to the residents of Lodi. Its mission is to provide quality medical care, education and support services to the community. Two hospital campuses and six satellite clinics are used to provide a variety of inpatient, outpatient, urgent, emergency and primary care services.

Housing. The City of Lodi housing market offers both older neighborhoods and newer executive developments. The average list price for residential property is $174,600, and the median price is $148,500.

Education. The Lodi Unified School District provides K-12 and special education programs. The area also is served by several private and parochial schools. The University of the Pacific, San Joaquin Delta Community College, California State University-Stanislaus/Turlock/Stockton Center, and the University of San Francisco satellite center are all within a 20-minute drive of Lodi. The University of California-Davis, California State University-Sacramento and the University of Southern California satellite center are within an hour’s drive from Lodi.

Transportation. Lodi is served by interstate highway 5 and state highways 12 and 99 and is located on the main line of the Southern Pacific Railroad. A deep–water seaport and an airport are located approximately 15 miles south. Air service is available at the Stockton Metropolitan Airport just south of Lodi.