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<br />soil liquefaction and earthquake-induced landslides. Seismically induced ground shaking has affected the City
<br />in the past and is expected to affect the City in the future.
<br />An earthquake along one of the faults in the vicinity of the City, either known or unknown, could cause
<br />a number of casualties and extensive property damage, particularly to residential buildings, older wooden or
<br />unreinforced masonry buildings and mobile homes. The effects of such an earthquake could be aggravated by
<br />aftershocks and secondary effects such as fires, landslides, dam failure, liquefaction, floods and other threats to
<br />public health, safety and welfare. The potential direct and indirect consequences of a major earthquake could
<br />easily exceed the resources of the City and would require a high level of self-help, coordination and cooperation.
<br />The City currently maintains limited earthquake insurance for certain City facilities, but it is not required to
<br />maintain such insurance or obtain such insurance in the future.
<br />The State, including the City, is periodically subject to wildfires. When wildfires scorch land, they
<br />destroy all vegetation on mountains and hillsides. As a result, when heavy rain falls in the winter, there is nothing
<br />to stop the rain from penetrating directly into the soil. In addition, waxy compounds in plants and soil that are
<br />released during fires create a natural barrier in the soil that prevents rain water from seeping deep into the ground.
<br />The result is erosion, mudslides, and excess water running off the hillsides often causing flash flooding.
<br />The occurrence of natural disasters in the City could result in substantial damage to the City which, in
<br />turn, could substantially affect the City’s economy and reduce its General Fund revenues, which could affect the
<br />payment of the principal of and interest on the Bonds. In particular, if a natural disaster were to result in reduced
<br />assessed valuations of property within the City, the amount of property tax revenues (which constitute the City’s
<br />second largest source of General Fund revenues) could be reduced. See the caption “CITY FINANCIAL
<br />INFORMATION—Property Taxes.”
<br />The City maintains liability insurance and property casualty insurance (exclusive of earthquake
<br />insurance) for City infrastructure. See the caption “THE CITY—Risk Management.” However, there can be
<br />no assurance that specific losses will be covered by insurance or, if covered, that claims will be paid in full by
<br />the applicable insurers.
<br />Climate Change
<br />The State has historically been susceptible to wildfires and hydrologic variability. As greenhouse gas
<br />emissions continue to accumulate in the atmosphere as a result of economic activity, climate change is expected
<br />to intensify, increasing the frequency, severity and timing of extreme weather events such as coastal storm
<br />surges, drought, wildfires, floods and heat waves, and raising sea levels. The future fiscal impact of climate
<br />change on the City is difficult to predict, but it could be significant and it could have a material adverse effect
<br />on the General Fund by requiring greater expenditures to counteract the effects of climate change or by changing
<br />the operations and activities of City residents and business establishments.
<br />Hazardous Substances
<br />The discovery of any hazardous substance that would limit the beneficial use of a property within the
<br />City could result in a reduction in the assessed value of affected parcels. In general, the owners and operators
<br />of a property may be required by law to remedy conditions of the property relating to releases or threatened
<br />releases of hazardous substances. The Federal Comprehensive Environmental Response, Compensation and
<br />Liability Act of 1980, sometimes referred to as “CERCLA” or the “Superfund Act,” is the most well-known and
<br />widely applicable of these laws, but California laws with regard to hazardous substances are also stringent and
<br />similar. Under many of these laws, the owner (or operator) is obligated to remedy a hazardous substance
<br />condition of property whether or not the owner or operator had anything to do with creating or handling the
<br />hazardous substance. The effect, therefore, should any substantial amount of property within the City be affected
<br />by a hazardous substance, would be to reduce the marketability and value of the property by the costs of, and
<br />any liability incurred by, remedying the condition, since a purchaser, upon becoming an owner, will become
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