HomeMy WebLinkAboutCC Reso No 2013-068 City Council ResoRESOLUTION NO. 2013 -068
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF LAKE
ELSINORE, CALIFORNIA, ACTING AS THE LEGISLATIVE BODY OF
CITY OF LAKE ELSINORE COMMUNITY FACILITIES DISTRICT NO.
2003 -2 (CANYON HILLS), AUTHORIZING THE ISSUANCE OF CITY OF
LAKE ELSINORE COMMUNITY FACILITIES DISTRICT NO. 2003 -2
(CANYON HILLS) SPECIAL TAX BONDS, 2014 SERIES A
(IMPROVEMENT AREA D), APPROVING THE ISSUANCE OF THE
LAKE ELSINORE PUBLIC FINANCING AUTHORITY LOCAL AGENCY
REVENUE BONDS (CANYON HILLS IA D), 2014 SERIES A, AND THE
EXECUTION AND DELIVERY OF A FISCAL AGENT AGREEMENT, A
COMMITMENT AGREEMENT AND PURCHASE CONTRACT FOR
PURCHASE AND SALE OF LOCAL OBLIGATION BONDS, A
PURCHASE CONTRACT AND A CONTINUING DISCLOSURE
AGREEMENT
WHEREAS, the City Council (the "Council ") of the City of Lake Elsinore (the
"City ") has previously formed the City of Lake Elsinore Community Facilities District No.
2003 -2 (Canyon Hills) (the "District ") pursuant to the Mello -Roos Community Facilities
Act of 1982, as amended (the "Act "); and
WHEREAS, the District desires to issue not to exceed $8,000,000 aggregate
principal amount of bonds designated "City of Lake Elsinore Community Facilities
District No. 2003 -2 (Canyon Hills) Special Tax Bonds, 2014 Series (Improvement Area
D)" (the "Bonds "), to be purchased by the Lake Elsinore Public Financing Authority (the
"Authority "), for the purpose of financing the purchase, construction, expansion or
rehabilitation of certain real and other tangible property with an estimated useful life of
five years or longer, including public infrastructure facilities which the City or the District
is authorized by law to construct, own or operate, which are necessary to meet
increased demands placed upon the City as a result of development or rehabilitation
occurring within the District (the "Facilities "); and
WHEREAS, the Authority intends to issue its Local Agency Revenue Bonds
(Canyon Hills IA D), 2014 Series A (the "Authority Bonds "), the proceeds of which will
be used to purchase the Bonds; and
WHEREAS, the City has heretofore held a public hearing pursuant to Section
6586.5 of Articles 1 through 4 of Chapter 5, Division 7, Title 1 of the Government Code
of the State of California (the "Bond Law "); and
WHEREAS, proposed forms of a Fiscal Agent Agreement, a Commitment
Agreement and Purchase Contract for Purchase and Sale of Local Obligation Bonds, a
Purchase Contract and a Continuing Disclosure Agreement have been presented to the
City Council and are on file with the City Clerk;
NOW, THEREFORE, the City Council of the City of Lake Elsinore, California,
acting as the legislative body of City of Lake Elsinore Community Facilities District No.
2003 -2 (Canyon Hills), does hereby resolve as follows:
City Council Resolution No. 2013 -068
Page 2 of 3
Section 1. The City Council, as the legislative body of the District, hereby
authorizes the issuance of the Bonds in the aggregate principal amount not to exceed
$8,0001000.
Section 2. The City hereby finds and determines that (i) the Facilities are to be
located within the boundaries of the City and (ii) there are significant public benefits
arising from the Authority's issuance of the Authority Bonds to finance the Facilities,
including, but not limited to, employment benefits from undertaking the acquisition of the
Facilities in a timely fashion, as contemplated by Section 6586 of the Bond Law,
Section 3. The City Council, as the legislative body of the District, hereby
approves the Fiscal Agent Agreement, in substantially the form on file with the City
Clerk. The Mayor, the City Manager, the Director of Administrative Services, and any
designee of any of them (each, a "Responsible Officer ") are hereby authorized to
execute the Fiscal Agent Agreement in substantially the form presented hereto, with
such revisions, amendments and completions as shall be approved by any Responsible
Officer, with the advice of Bond Counsel, such approval to be conclusively evidenced by
the execution and delivery thereof by any Responsible Officer.
Section 4. The City Council, as the legislative body of the District, hereby
approves the Continuing Disclosure Agreement, in substantially the form on file with the
City Clerk. Any Responsible Officer is hereby authorized to execute the Continuing
Disclosure Agreement in substantially the form presented hereto, with such revisions,
amendments and completions as shall be approved by any Responsible Officer, with
the advice of Bond Counsel, such approval to be conclusively evidenced by the
execution and delivery thereof by any Responsible Officer.
Section 5. The City Council, acting on its behalf and as the legislative body of
the District, hereby approves the Commitment Agreement and Purchase Contract, in
substantially the form on file with the City Clerk. Any Responsible Officer is hereby
authorized to execute the Commitment Agreement and Purchase Contract, in
substantially the form presented hereto, with such revisions, amendments and
completions as shall be approved by any Responsible Officer, with the advice of Bond
Counsel, such approval to be conclusively evidenced by the execution and delivery
thereof by any Responsible Officer, provided that, the Bonds shall bear interest at a rate
not to exceed 7.00 %.
Section 6. The City Council, acting on its behalf and as the legislative body of
the District, hereby approves the sale of the Authority Bonds to the Underwriter
pursuant to and in accordance with the Purchase Contract, in substantially the form on
file with the City Clerk. Any Responsible Officer is hereby authorized to execute the
Purchase Contract, with such revisions, amendments and completions as shall be
approved by any Responsible Officer, with the advice of Bond Counsel, such approval
to be conclusively evidenced by the execution and delivery thereof by any Responsible
Officer.
City Council Resolution No. 2013 -068
Page 3 of 3
Section 7. Pursuant to Section 53344.1 of the Act, the Council hereby reserves
to itself, in its sole discretion, the right and authority by subsequent resolution to allow
any owner of property within the District, subject to the provisions of Section 53344.1 of
the Act and those conditions as it may impose, and any applicable prepayment
penalties as prescribed in the bond indenture or comparable instrument or document, to
tender to the District treasurer or fiscal agent in full payment or partial payment of any
installment of the special taxes or the interest or penalties thereon which may be due or
delinquent, but for which a bill has been received, any bond or other obligation secured
thereby, the bond or other obligation to be taken at par and credit to be given for the
accrued interest shown thereby computed to the date of tender.
Section 8. The City Manager, the Director of Administrative Services, the City
Clerk and all other officers of the City are hereby authorized and directed, for and in the
name and on behalf of the City and the District, to do any and all things and take any
and all other actions, including the publication of any notices necessary or desirable in
connection with the sale of the Bonds and execution and delivery of any and all
assignments, certificates, requisitions, agreements, notices, consents, instruments of
conveyance, warrants and other documents, which they, or any of them, deem
necessary or advisable in order to consummate the lawful issuance and sale of the
Bonds and the consummation of the transactions as described herein.
Section 9. This Resolution shall take effect from and after the date of its
passage and adoption.
PASSED, APPROVED AND ADOPTED at a regular meeting f the City Council
D�
of the City of Lake Elsinore, California, this 10th day of i r be , zC�l4.
rt E. Magee, Mayor
ATTEST:
Virginia C loom if'y Clerk
APPROVED AS TO FORM:
ra Z. Loib�ld; City Attorney
STATE OF CALIFORNIA )
COUNTY OF RIVERSIDE ) ss.
CITY OF LAKE ELSINORE )
I, Virginia J. Bloom, City Clerk of the City of Lake Elsinore, California, hereby certify that
Resolution No. 2013 -068 was adopted by the City Council of the City of Lake Elsinore,
California, at a regular meeting held on the 10 day of December 2013, and that the
same was adopted by the following vote:
AYES: Council Member Tisdale, Council Member Hickman, Council Member
Manos, Mayor Pro Tem Johnson and Mayor Magee
NOES:
None
ABSENT:
None
ABSTAIN:
None
FISCAL AGENT AGREEMENT
by and between
CITY OF LAKE ELSINORE COMMUNITY FACILITIES
DISTRICT NO. 2003-2 (CANYON HILLS)
and
UNION BANK, N.A.,
as Fiscal Agent
Dated as of January 1, 2014
Relating to:
City of Lake Elsinore Community Facilities District No. 2003 -2 (Canyon Hills)
Special Tax Bonds, 2014 Series (Improvement Area D)
79361199.1
TABLE OF CONTENTS
ARTICLE .1 STATUTORY AUTHORITY AND DEFINITIONS ....... ............................... 2
Authority for this Agreement, , . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
..2 Agreement for Benefit of Bond Owners,,,,,, ... ............... 2
.3 Definitions, I I . . I I I I I . I I . I I I I I I I I . I I I I . I I . . I I I I I I I I . . I I I I I I 1 2
ARTICLEII THE BONDS .................................................................. ............................... 11
2.1
Principal Amounts; Designations .........................................
11
2.2
...............................
Terms of Bonds, . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
I 1
2.3
Redemption,
I I I I I I I I I * I I I I 1 0 6 , 4 . . 0 8 1 6 1 1 . I I I I * * , & 0 #
13
2.4
Form of Bonds ......................................................................
15
...............................
2.5
Execution of Bonds ...............................................................
15
...............................
2.6
Transfer of Bonds .................................................................
15
...............0...............
2.7
Exchange of Bonds ...............................................................
16
...............................
2.8
Bond Register ........................................................................ ...............................
16
2.9
Temporary Bonds, ,
16
2.10
. . . . . . 0
Bonds Mutilated, Lost, Destroyed or Stolen ......................... ..........................1111.
16
2.11
Limited Obligation ................................................................
17
2.12
...............................
No Acceleration,
. . . . . . . . . . . . . . . . . . . . . . . . . . I 1 1
17
2.13
Additional Bonds ..................................................................
17
...............................
ARTICLE III ISSUANCE OF BONDS ................................................ ............................... 17
3.1 Issuance and Delivery of the Bonds ...................................... ............................... 17
3.2 Application of Proceeds of Sale of the 2014 Bonds 17
33 Validity of Bonds .................................................................. ............................... 18
3.4 Special Taxes Receipt Fund and Special Tax Fund 18
3.5 Reserved.,... I I I,',, .................. ........................ ...... so ......... ...... 00 .......... 0,00#000 19
3.6 Administrative Expense Fund,,,,,..,,,,,, ... 19
3.7 Improvement Fund ................................................................ ............................... 19
3.8 Costs of Issuance Fund ......................................................... ............................... 20
3.9 Delinquency Management Fund ........................................... ............................... 20
3.10 Redemption Fund .................................................................. ............................... 21
ARTICLE IV SPECIAL TAX REVENUES; BOND FUND 22
4.1 Pledge of Special Tax Revenues ........................................... ............................... 22
42 Bond Fund ............................................................................. ............................... 22
ARTICLE V OTHER COVENANTS OF THE DISTRICT ................ ............................... 23
5.1 Punctual Payment..,.,,, .... .......... .................. ..... 23
52 Limited Obligation, , I I I . . I . . I I I . 4 9 * * 4 1 4 a * . . * I I I I I I I . . I . . . o . . 9 . . . . . . . . . . . . . . . . . . . . . . . 23
5.3 Extension of Time for Payment ............................................ ............................... 23
5.4 Against Encumbrances .................... ......................... ......... .... .. .... I ........ ................ 23
5.5 Books and Records ....... -- ------- _... 1A
. ....................... ............................... ....9..........6......94.......
5.6 Protection of Security and Rights of Owners ....................... ............................... 24
79361199.1 i
TABLE OF CONTENTS
(continued)
MOW
5.7 Compliance with Law, Completion of Facilities .................. .................6....6........ 24
568 Collection of Special Tax Revenues ............. 6......................... .........................111124
5.9 Further Assurances ................................................................ ............................... 25
5.10 Tax Covenants ........................................................................ ......................I.I...125
5.11 Covenant to Foreclose..,.,....,......, . . . . . . 6 . . . . . . 6 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 0 0 0 0 1 0 # 0 * 4 0 9 # 0 0 1 . I . . . 29
5.12 Annual Reports to CDIAC .................................................... ............................... 29
5.13 Continuing Disclosure to Owners ......................................... ............................... 30
5.14 Reserve Account Replenishment ............. ............................... ............................130
ARTICLE VI INVESTMENTS; DISPOSITION OF INVESTMENT PROCEEDS;
LIABILITY OF THE DISTRICT. 30
6.1 Deposit and Investment of Moneys in Funds ....................... ......................06.0.4... 30
62 Limited Obligation ................................................................ ............................... 31
6.3 Liability of District ............................................................... ............................... 31
6.4 Employment of Agents by District or the City ..................... ............................... 32
ARTICLE VII EVENTS OF DEFAULT AND REMEDIES OF BOND OWNERS............ 32
7.1 Events of Default. I I I I I I 1 0 0 1 1 6 1 1 1 1 1 1 1 1 1 1 1 1 1 1 0 0 0 1 1 1 1 0 1 1 1 1 1 1 1 1 . I , 0 a 9 6 0 0 0 & 0 0 $ 0 , I I I I I I 1 0 .............. 0 0 0 0 * 0 0 32
7.2 Remedies of Bond Owners ................................................... ............................... 33
73 Application of Special Taxes and Other Funds After Default ............................. 33
7A Absolute Obligation of the District. 34
7.5 Termination of Proceedings, . I I I I I I I I I 1 34
7.6 Remedies Not Exclusive ....................................................... ............................... 34
73 No Waiver of Default ............................................................ ............................... 34
7.8 Actions by Fiscal Agent as Attorney -in- Fact ........................ ............................... 35
ARTICLE VIII THE FISCAL AGENT ................................................... ............................... 35
8.1 Appointment of Fiscal Agent ........................:....................... ............................... 35
82 Liability of Fiscal Agent ....................................................... ............................... 36
83 Information ........................................................................... ............................... 37
8.4 Notice to Fiscal Agent .......................................................... ............................... 37
8.5 Compensation, Indemnification, . I I . I . I . I . I , 0 , 6 . & * 4 * a * 6 6 0 a I I I I I I I I I I I I I I 1 0 * a 0 * * * * 0 4 * * 0 6 0 38
ARTICLE IX MODIFICATION OR AMENDMENT OF THIS AGREEMENT ............... 38
9.1 Amendments Permitted ......................................................... ............................... 38
9.2 Owners' Meetings ................................................................. ............................... 39
93 Procedure for Amendment with Written Consent of Owners, . I I I I I I 1 1 6 1 1 1 1 1 1 1 39
9A Disqualified Bonds, . . I I I I I I I I I I I I , 0 9 * 6 6 0 & 0 # * 0 0 0 0 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 . I . . . . . . . I I . I I . I . 1 1 40
9.5 Effect of Supplemental Agreement ....................................... ............................... 40
9.6 Endorsement or Replacement of Bonds Issued After Amendments.....,.... ..... 1.11, 40
9.7 Amendatory Endorsement of Bonds ..................................... ............................... 40
9.8 Opinion of Bond Counsel.., I . I I I I I . I I I I I I I I I I I 1 1 6 1 1 1 1 1 * 4 0 0 a 0 6 6 # 0 4# ........................................ 40
79361199.1 -ii_
TABLE OF CONTENTS
(continued)
Page
ARTICLE X MISCELLANEOUS ....................................................... ............................... 41
10.1 Benefits of Agreement Limited to Parties .............................. ............................141
10.2 Successor is Deemed Included in All References to Predecessor ....................... 41
10.3 Discharge of Agreement ....................................................... ............................... 41
10.4 Execution of Documents and Proof of Ownership by Owners,,, ......................... 42
10.5 Waiver of Personal Liability .................. ............................... ....................1111....... 42
10.6 Notices to and Demands on District and Fiscal Agent 42
10.7 Partial Invalidity.... I . I I I I I I I . I I I 1 1 6 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 . I I I I I I I I . . I I I I I I I . I I I I I I I # I I I I 1 1 6 1 1 , 0 0 0 0 * * , 0 , , 0 . . . 43
1 0. 8 Unclaimed Moneys. I 1 0 0 0 1 1 1 1 1 43
10.9 Applicable Law, I I I t 4 C . . . . . . 43
10.10 Conflict with Act, , I I I I . . . . . . . . . . I I 1 0 0 1 43
10.11 Conclusive Evidence of Regularity ...................................... ............................... 44
10.12 Payment on Business Day ...................... ............................... ......................00.00.... 44
10.13 Counterparts..............................................................................................44
EXHIBIT A — FORM OF BOND.. I I I I 1 0 * I I I I I I 1 1 6 a # 0 0 0 a 0 6 6 0 * 0 * .......... A -1
EXHIBIT B — FORM OF OFFICER'S CERTIFICATE,.* ......... 0 to 4 4 * , * 0 0 0 0 0 4 1 1 1 1 1 1 4 1 1 1 1 1 13-1
79361199.1 -iii-
FISCAL AGENT AGREEMENT
THIS FISCAL AGENT AGREEMENT (this "Agreement ") is made and entered
into as of January 1, 2014, by and between the City of Lake Elsinore Community Facilities
District No. 2003 -2 (Canyon Hills) (the "District "), a community facilities district organized and
existing under and by virtue of the laws of the State of California, and Union Bank, N.A., a
national banking association organized and existing under the laws of the United States of
America, as fiscal agent (the "Fiscal Agent"),
WITNESSETH:
WHEREAS, the City Council (the "City Council ") of the City of Lake Elsinore
(the "City ") has formed the District under the provisions of the Mello -Roos Community
Facilities Act of 1982, as amended (Section 53311 et seq. of the California Government Code)
(the "Act "), and Resolution No. 2004 -6 of the City Council adopted on January 13, 2004; and
WHEREAS, the City Council is authorized under the Act and pursuant to
Ordinance No. 1114 adopted on January 13, 2004 to levy special taxes to pay for the costs of
facilities provided by the District; and
WHEREAS, under the provisions of the Act, on October 14, 2003, the City
Council, acting as the legislative body of the District, adopted Resolution No. 2003 -51, which
resolution, among other matters, expressed the intent of the City Council to authorize the
issuance of one or more series of bonds (the "Bonds ") in the maximum aggregate principal
amount as set forth therein, secured by the special taxes under the Act; and
WHEREAS, on December 10, 2013, the City Council adopted Resolution No.
2014- (the "Resolution ") authorizing the issuance and sale of bonds for the District
pursuant to this Agreement, designated "City of Lake Elsinore Community Facilities District No.
2003 -2 (Canyon Hills) Special Tax Bonds, 2014 Series (Improvement Area D)" (the "2014
Bonds "), for the purpose of financing the acquisition, rehabilitation and construction of certain
public improvements and capital fees eligible to be financed through the District (the
"Facilities "); and
WHEREAS, it is in the public interest and for the benefit of the City, the District,
the persons responsible for the payment of special taxes and the owners of the Bonds that the
District enters into this Agreement to provide for the issuance of the Bonds, the disbursement of
proceeds of the Bonds; the disposition of the special taxes securing the Bonds, and the
administration and payment of the Bonds; and
WHEREAS, all things necessary to cause the Bonds, when authenticated by the
Fiscal Agent and issued as provided in the Act, the Resolution and this Agreement, to be legal,
valid and binding and limited obligations in accordance with their terms, and all things necessary
to cause the creation, authorization, execution and delivery of this Agreement and the creation,
authorization, execution and issuance of the Bonds, subject to the terms hereof, have in all
respects been duly authorized;
79361199.1
NOW, THEREFORE, that in order to secure the payment of the principal o
premium, if any, and the interest on all Bonds at any time issued and outstanding under this
Agreement, according to their tenor, and to secure the performance and observance of all the
covenants and conditions therein and herein set forth, and to declare the terms and conditions
upon and subject to which the Bonds are to be issued and received, and in consideration of the
premises and of the mutual covenants herein contained and of the purchase and acceptance of the
Bonds by the holders thereof, and for other valuable consideration, the receipt of which is hereby
acknowledged, the District does hereby covenant and agree with the Fiscal Agent, for the benefit
of the respective holders from time to time of the Bonds, as follows:
ARTICLE I
STATUTORY AUTHORITY AND DEFINITIONS
101 Authority for this Agreement.
provisions of the Act and the Resolution.
This Agreement is entered into pursuant to the
1.2 Agreement for Benefit of Bond Owners. The provisions, covenants and
agreements herein set forth to be performed by or on behalf of the City and the District shall be
for the equal benefit, protection and security of the Owners from time to time. In consideration
of the acceptance of the Bonds by the Owners thereof, this Agreement shall be deemed to be and
shall constitute a contract between the District and the Owners; and the covenants and
agreements herein set forth to be performed by the District shall be, for the equal and
proportionate benefit, security and protection of ail Owners of the Bonds without pi "e1Gi'eiiCe,
priority or distinction as to security or otherwise of any of the Bonds over any of the others by
reason of the number, or date thereof or the time of sale, execution or delivery thereof, or
otherwise for any cause whatsoever, except as expressly provided, therein or herein. All of the
Bonds, without regard to the time or times of their issuance or maturity, shall be of equal rank
without preference, priority or distinction of any of the Bonds over any other thereof, except as
expressly provided in or permitted by this Agreement.
The Fiscal Agent may become the owner of any of the Bonds in its own or any
other capacity with the same rights it would have if it were not Fiscal Agent.
13 Definitions. Unless the context otherwise requires, the terms defined in this
Section 1.3 shall, for all purposes of this Agreement, of any Supplemental Agreement, and of
any certificate, opinion or other document herein mentioned, have the meanings herein specified.
All references herein to "Articles," "Sections" and other subdivisions are to the corresponding
Articles, Sections or subdivisions of this Agreement, and the words "herein," "hereof,"
"hereunder" and other words of similar import refer to this Agreement as a whole and not to any
particular Article, Section or subdivision hereof.
"Act" means the Mello -Roos Community Facilities Act of 1982, as amended,
being Section 53311 et seq. of the California Government Code.
"Additional Bonds" means bonds issued pursuant to Section 2.13 hereof.
"_Administrative Expense Fund" means the fund by that name established by
Section 3.6(a) hereof.
79361199.1 2
"Administrative Expenses" means any or all of the following: the fees and
expenses of the Fiscal Agent (including any fees or expenses of its counsel); the expenses of the
City or the District (including fees and expenses of counsel) in carrying out their duties
hereunder including, but not limited to, the levying and collection of the Special Taxes
(including costs associated with foreclosure proceedings or work -outs with property owners) and
complying with the disclosure provisions of the Act, the Continuing Disclosure Agreement and
this Agreement; the costs of the City and the District or their designees related to an appeal of the
Special Tax; any costs of the City and the District (including fees and expenses of counsel) to
defend the first lien on and pledge of the Special Taxes Revenues to the payment of the Bonds or
otherwise in respect of litigation relating to the District or the Bonds or with respect to any other
obligations of the District; any amounts required to be rebated to the federal government in order
for the District to comply with Section 5.10(h)(iii), including the fees and expenses of its
counsel; the costs of any dissemination agent under the continuing disclosure agreements entered
into by the City and the District; an allocable share of the salaries of City staff directly related
thereto and a proportionate amount of City general administrative overhead related thereto; and
all other costs and expenses of the City, the District, or the Fiscal Agent incurred in connection
with the discharge of their respective duties hereunder, and in the case of the City, in any way
related to the administration of the District and all actual costs and expenses incurred in
connection with the administration of the Bonds and the Authority Bonds.
"Agreement" means this Fiscal Agent Agreement, as it may be amended or
supplemented from time to time by any Supplemental Agreement adopted pursuant to the
provisions hereof.
"Annual Debt Service" means, for each Bond Year, the sum of (i) the interest due
on the Outstanding Bonds in such Bond Year, assuming that the Outstanding Bonds are retired as
scheduled, and (ii) the principal amount of the Outstanding Bonds due in such Bond Year
(including mandatory sinking payments, if any).
"Auditor" means the auditor /tax collector of the County of Riverside.
"Authority Bonds" means $ Lake Elsinore Public Financing
Authority Local Agency Revenue Bonds (Canyon Hills IA D), 2014 Series A or such other series
of local agency revenue bonds issued by the Authority, the proceeds of which are used to acquire
one or more series of Additional Bonds.
"Authority Indenture" means the Indenture of Trust, dated as of January 1, 2014,
between the Lake Elsinore Public Financing Authority and Union Bank, N.A., as trustee, or such
other indenture of trust, fiscal agent agreement, trust agreement, or other documents, as the case
may be, relating to an issue of Authority Bonds.
"Authorized Officer" means the Mayor, City Manager, Assistant City Manager,
Director of Administrative Services or City Clerk of the City, or any other officer or employee
authorized by the City Council of the City or by an Authorized Officer to undertake the action
referenced in this Agreement as required to be undertaken by an Authorized Officer.
79361199.1 3
"Bond Counsel" means (i) Fnlhriaht k Taworck; T T P nN t;;i nn[, nttnvnp,, r v
. . - - a __ �..� , `l,J N,ly "LLVA I Icy U1 11,111
of attorneys acceptable to the District and nationally recognized for expertise in rendering
opinions as to the legality and tax - exempt status of securities issued by public entities.
"Bond Fund" means the fund by that name established by Section 4.2(a) hereof.
"Bond Year" means each twelve -month period beginning on September 2 of each
year and ending September 1 of the following year, except that the first Bond Year shall begin on
the Closing Date and end on September 1, 2014.
"Bonds" means, collectively, the 2014 Bonds and the Additional Bonds.
"Business Day" means any day other than (i) a Saturday or a Sunday, (ii) a day on
which the offices of the City are not open for business, or (iii) a day on which banking
institutions in the state in which the Fiscal Agent has its principal corporate trust office is
authorized or obligated by law or executive order to be closed.
"Capitalized Interest Account" means the account by that name established by
Section 4.2(c) hereof.
"CDIAC" means the California Debt and Investment Advisory Commission of the
office of the State Treasurer of the State of California or any successor agency or bureau thereto.
"City" means the City of Lake Elsinore, California.
"City Council" means the City Council of the City.
"City Manager" means the City Manager of the City.
"Closing Date" means the date upon which there is a physical delivery of the
Bonds in exchange for the amount representing the purchase price of the Bonds by the Original
Purchaser.
"Code" means the Internal Re
issuance of the Bonds or (except as otherwise
to obligations issued on the date of issuance
temporary and final regulations promulgated,
under the Code.
.venue Code of 1986 as in effect on the date of
referenced herein) as it may be amended to apply
of the Bonds, together with applicable proposed,
and applicable official public guidance published,
"Continuing Disclosure Agreement" shall mean any Continuing Disclosure
Agreement, by and between the District and a Dissemination Agent, relating to the Authority
Bonds, executed on the Closing Date, as originally executed and as it may be amended from time
to time in accordance with the terms thereof.
"Corporate Trust Office" means the corporate trust office of the Fiscal Agent at
Los Angeles, California, or such other office designated from time to time by the Fiscal Agent in
writing to the District.
79361199.1 4
"Costs of Issuance" means all expenses incurred in connection with the
authorization, issuance, sale and delivery of the Bonds, including, but not limited to, all
compensation, fees and expenses (including, but not limited to, fees and expenses for legal
counsel) of the City and the Fiscal Agent, compensation to any financial consultants or
underwriters, legal fees and expenses, filing and recording costs, rating agency fees, costs of
preparation and reproduction of documents and costs of printing.
hereof.
"Costs of Issuance Fund" means the fund established pursuant to Section 3.8
"County" means the County of Riverside, California.
"Debt Service" means the scheduled amount of interest and amortization of
principal payable on the Bonds during the period of computation, excluding amounts scheduled
during such period which relate to principal which has been retired before the beginning of such
period.
"Delinquency Management Fund" means the fund by that name established by
Section 3.9(a) hereof.
"Delinquency anagement Fund Requirement" means, as of any calculation date,
an amount equal to 15% of the Maximum Annual Debt Service.
"Dissemination Agent" means Union Bank, N.A. or such other Dissemination
Agent as may be appointed by the City pursuant to a Continuing Disclosure Agreement.
"District" means the City of Lake Elsinore Community Facilities District No.
2003 -2 (Canyon Hills) formed pursuant to the Resolution of Formation.
"Facilities"
means the
public facilities
more particularly described in the
Resolution of Formation, or
any portion
of the Facilities or
any authorized capital fees.
"Fair Market Value" means the price at which a willing buyer would purchase the
investment from a willing seller in a bona fide, arm's length transaction (determined as of the
date the contract to purchase or sell the investment becomes binding) if the investment is traded
on an established securities market (within the meaning of Section 1273 of the Code) and,
otherwise, the term "Fair Market Value" means the acquisition price in a bona fide arm's length
transaction (as referenced above) if (i) the investment is a certificate of deposit that is acquired in
accordance with applicable regulations under the Code, (ii) the investment is an agreement with
specifically negotiated withdrawal or reinvestment provisions and a specifically negotiated
interest rate (for example, a guaranteed investment contract, a forward supply contract or other
investment agreement) that is acquired in accordance with applicable regulations under the Code,
(iii) the investment is a United States Treasury Security - State and Local Government Series that
is acquired in accordance with applicable regulations of the United States Bureau of Public Debt,
or (iv) any commingled investment fund in which the City and related parties do not own more
than a ten percent (10 %) beneficial interest therein if the return paid by the fund is without
regard to the source of the investment.
79361199.1 5
"Federal Securities" means any of the fnUmving XI111,0h are n n- eaiiabie and
which at the time of investment are legal investments under the laws of the State of California
for funds held by the Fiscal Agent, as shall be certified by the District to the Fiscal Agent:
(1) direct general obligations of the United States of America (including
obligations issued or held in book -entry form on the books of the United
States Department of the Treasury) and obligations, the payment of
principal of and interest on which are directly or indirectly guaranteed by
the United States of America, including, without limitation, such of the
foregoing which are commonly referred to as "stripped" obligations and
coupons; and
(2) any of the following obligations of the following agencies of the United
States of America: (a) direct obligations of the Export -Import Bank, (b)
certificates of beneficial ownership issued by the Farmers Home
Administration, (c) participation certificates issued by the General
Services Administration, (d) mortgage- backed bonds or pass- through
obligations issued and guaranteed by the Government National Mortgage
Association, (e) project notes issued by the United States Department of
Housing and Urban Development, and (f) public housing notes and bonds
guaranteed by the United States of America; or refunded municipal
obligations, the timely payment of principal of and interest on are fully
guaranteed by the United States ofAmerica.
"Fiscal Agent" means the Fiscal Agent appointed by the District and acting as an
independent fiscal agent with the duties and powers herein provided, its successors and assigns,
and any other corporation or association which may at any time be substituted in its place, as
provided in Section 8.1.
"Fiscal Year" means the twelve -month period extending from July I in a calendar
year to June 30 of the succeeding year, both dates inclusive.
"Improvement Fund" means the fund by that name established by Section 3.7
hereof.
"Interest Account" means the account by that name established in the Bond Fund
pursuant to Section 4.2 hereof.
"Interest Payment Date" means March 1 and September 1 of each year,
commencing September 1, 2014 with respect to the 2014 Bonds.
"Investment Earnings" means all interest earned and any gains and losses on the
investment of moneys in any fund or account created by this Agreement.
"Legislative Body" means the City Council of the City.
79361199.1 6
"Maximum Annual Debt Service" means the largest Annual Debt Service for any
Bond Year after the calculation is made through the final maturity date of any Outstanding
Bonds.
3
"Net Taxes" means Special Taxes less Administrative Expenses.
"Officer's Certificate" means a written certificate of the District or the City signed
by an Authorized Officer of the City.
"Original
Purchaser"
means the Lake Elsinore
Public
Financing
Authority with
respect to the 2014
Bonds and the initial purchaser with respect
to any
Additional
Bonds.
"Outstanding," when used as of any particular time with reference to Bonds,
means (subject to the provisions of Section 9.4) all Bonds except: (i) Bonds theretofore canceled
by the Fiscal Agent or surrendered to the Fiscal Agent for cancellation; (ii) Bonds paid or
deemed to have been paid within the meaning of Section 10.3; and (iii) Bonds in lieu of or in
substitution for which other Bonds shall have been authorized, executed, issued and delivered by
the District pursuant to this Agreement or any Supplemental Agreement.
"Owner" or "Bond Owner" means any person who shall be the registered owner
of any Outstanding Bond.
"Participating Underwriter" means any of the original underwriter(s) of the
Authority Bonds required to comply with Rule 15c2- 12(b)(5) adopted by the Securities and
Exchange Commission under the Securities and Exchange Act of 1934, as the same may be
amended from time to time, in connection with the offering of the Authority Bonds.
"Permitted
Investments"
means any of
the following which
at the time of
investment are legal investments under the laws
of the
State for the moneys
proposed to be
invested therein (the Fiscal Agent is entitled to
rely on
written investment
direction of the
District as a determination that such investment is
a legal
investment), but only to the extent that
the same are acquired at Fair Market Value:
(a) Federal Securities;
(b) bonds, debentures, notes or other evidence of indebtedness issued or
guaranteed by any of the following federal agencies and provided such obligations are backed by
the full faith and credit of the United States of America (stripped securities are only permitted if
they have been stripped by the agency itself): (i) direct obligations or fully guaranteed
certificates of beneficial ownership of the U.S. Export-Import Bank; (ii) certificates of beneficial
ownership of the Farmers Home Administration; (iii) obligations of the Federal Financing Bank;
(iv) debentures of the Federal Housing Administration; (v) participation certificates of the
General Services Administration; (vi) guaranteed mortgage- backed bonds or guaranteed pass -
through obligations of the Government National Mortgage Association; (vii) guaranteed Title XI
financings of the U.S. Maritime Administration; and (viii) project notes, local authority bonds,
new communities debentures and U.S. public housing notes and bonds of the U.S. Department of
Housing and Urban Development;
79361199.1 7
(c) bonds, debentures, notes or other evidence of indebtedness issued or
guaranteed by any of the following non -full faith and credit United States government agencies
(stripped securities are only permitted if they have been stripped by the District itself): (i) senior
debt obligations of the Federal Home Loan Bank System; (ii) participation certificates and senior
debt obligations of the Federal Home Loan Mortgage Corporation; (iii) mortgage- backed
securities and senior debt obligations of the Federal National Mortgage Association (excluding
stripped mortgage securities which are valued greater than par on the portion of unpaid
principal); (iv) senior debt obligations of the Student Loan Marketing Association; (v)
obligations (but only the interest component of stripped obligations) of the Resolution Funding
Corporation; and (vi) consolidated systemwide bonds and notes of the Farm Credit System;
(d) money market funds (including funds of the Fiscal Agent or its affiliates)
registered under the Federal Investment Company Act of 1940, whose shares are registered
under the Federal Securities Act of 1933, and having a rating by S &P of "AAAm -G," "AAAm,"
or "AAm," and, if rated by Moody's, rated "Aaa," "Aal" or "Aa2;"
(e) certificates of deposit secured at all times by collateral described in (a) or
(b) above, which have a maturity of one year or less, which are issued by commercial banks,
savings and loan associations or mutual savings banks, and such collateral must be held by a
third party, and the Fiscal Agent must have a perfected first security interest in such collateral;
(f} certificates of deposit, savings accounts, deposit accounts or money
market deposits (including those of the Fiscal Agent and its affiliates) which are fully insured by
the Federal Deposit Insurance Corporation;
(g) investment agreements, including guaranteed investment contracts,
forward purchase agreements and Reserve Account put agreements, which are general
obligations of an entity whose long -term debt obligations, or claims paying ability, respectively,
is rated in one of the two highest rating categories by Moody's or S &P;
(h) commercial paper rated, at the time of purchase, "Prime -1" by Moody's
and "A -1" or better by S&P;
(i) bonds or notes issued by any state or municipality which are rated by
Moody's and S &P in one of the two highest rating categories assigned by such agencies;
0) federal funds or bankers acceptances with a maximum term of one year of
any bank which has an unsecured, uninsured and unguaranteed obligation rating of "Prime -1" or
"A3" or better by Moody's and "A -1" or "A" or better by S &P;
(k) repurchase agreements which provide for the transfer of securities from a
dealer bank or securities firm (seller /borrower) to the Fiscal Agent and the transfer of cash from
the Fiscal Agent to the dealer bank or securities firm with an agreement that the dealer bank or
securities firm will repay the cash plus a yield to the Fiscal Agent in exchange for the securities
at a specified date, which satisfy the following criteria:
(i) repurchase agreements must be between the Fiscal Agent and (A) a
primary dealer on the Federal Reserve reporting dealer list which falls under the jurisdiction of
79361199.1 8
the Securities Investors Protection Corporation which are rated "A" or better by Moody's and
S &P, or (B) a bank rated "A" or better by Moody's and S &P;
(ii) the written repurchase agreement contract must include the
following: (A) securities acceptable for transfer, which may be direct United States government
obligations, or federal agency obligations backed by the full faith and credit of the United States
government; (B) the term of the repurchase agreement may be up to 30 days; (C) the collateral
must be delivered to the Fiscal Agent or a third party acting as agent for the Fiscal Agent
simultaneously with payment (perfection by possession of certificated securities); (D) the Fiscal
Agent must have a perfected first priority security interest in the collateral; (E) the collateral
must be free and clear of third -party liens and, in the case of a broker which falls under the
jurisdiction of the Securities Investors Protection Corporation, are not subject to a repurchase
agreement or a reverse repurchase agreement; (F) failure to maintain the requisite collateral
percentage, after a two -day restoration period, will require the Fiscal Agent to liquidate the
collateral; and (G) the securities must be valued weekly, marked -to- market at current market
price plus accrued interest and the value of collateral must be equal to 104% of the amount of
cash transferred by the Fiscal Agent to the dealer bank or securities firm under the repurchase
agreement plus accrued interest (unless the securities used as collateral are obligations of the
Federal National Mortgage Association or the Federal Home Loan Mortgage Corporation, in
which case the collateral must be equal to 105% of the amount of cash transferred by the Fiscal
Agent to the dealer bank or securities firm under the repurchase agreement plus accrued interest).
If the value of securities held as collateral falls below 104% of the value of the cash transferred
by the Fiscal Agent, then additional cash and /or acceptable securities must be transferred; and
(iii) a legal opinion must be delivered to the Fiscal Agent to the effect
that the repurchase agreement meets guidelines under state law for legal investment of public
funds; and
(1) the Local Agency Investment Fund of the State of California, created
pursuant to Section 16429.1 of the California Government Code, to the extent the Fiscal Agent is
authorized to register such investment in its name.
"Person" means an individual, corporation, firm, association, partnership, trust, or
other legal entity or group of entities, including a governmental entity or any agency or political
subdivision thereof.
"Principal Account" means the account by that name established in the Bond
Fund pursuant to Section 4.2 hereof.
"Record Date" means the fifteenth day of the month next preceding the month of
the applicable Interest Payment Date.
"Redemption Fund" means the fund by that name established by Section 3.10
hereof.
"Redemption Revenues" means (a) prepayments of the Special Taxes, (b) any
amounts transferred pursuant to the Authority Indenture for the redemption of Bonds, (c)
amounts transferred from the Delinquency Management Fund for the redemption of Bonds, and
79361199.1 9
(d) any amounts deposited for the special mandatory redemption of Bonds pursuant to
Section 2.3 (a)(ii) hereof.
"Registration Books" means the records maintained by the Fiscal Agent pursuant
to Section 2.8 hereof for the registration and transfer of ownership of the Bonds.
"Reserve Account" means the account by that name established pursuant to the
Authority Indenture.
"Resoluti
on December 10, 2014,
with respect to the 2014
to a series of Additional
time.
Dn" means
as now in
Bonds, any
Bonds, as
Resolution No. 2014- , adopted by the Legislative Body
effect or as it may hereafter be amended from time to time,
i any resolution adopted by the Legislative Body with respect
such resolution is in effect or may amended from time to
"Resolution of Formation" means Resolution No. 2004 -6, adopted by the City
Council on January 13, 2004, as now in effect or as it may hereafter be amended from time to
time.
"RMA" means the Rate and Method of Apportionment for City of Lake Elsinore
Community Facilities District No. 2003 -2 (Canyon Hills) (Improvement Area D).
"S &P" means Standard & Poor's, a division of The McGraw -Hill Companies,
Inc., and its successors.
"Special Tax Fund" means the fund by that name established by Section 3.4(a)
hereof.
"Special Tax Revenues" means (a) the proceeds of the Special Taxes received by
the District, (b) income and gains with respect to the investment of amounts on deposit in the
funds and accounts established hereunder for the Bonds; and (c) proceeds of the redemption or
sale of property sold as a result of foreclosure of the lien of the Special Taxes. Notwithstanding
the foregoing, "Special Tax Revenues" does not include any penalties or interest in excess of the
interest payable on the Bonds collected in connection with delinquent Special Taxes.
"Special Taxes" means the special taxes levied within Improvement Area D of the
District pursuant to the Act, this Agreement and the RMA.
"State" means the State of California.
"Supplemental Agreement" means an agreement the execution of which is
authorized by a resolution which has been duly adopted by the Legislative Body of the District
under the Act and which agreement is amendatory of or supplemental to this Agreement, but
only if and to the extent that such agreement is specifically authorized hereunder.
"Treasurer" means the person who is acting in the capacity as finance director or
administrative services director to the City.
79361199.1 10
"2014 Bonds" means the City of Lake Elsinore Community Facilities District No.
2003 -2 (Canyon Hills) Special Tax Bonds, 2014 Series (Improvement Area D),
ARTICLE 11
THE BONDS
2.1 Principal Amounts; Designations. Bonds are hereby authorized to be issued
under and subject to the terms of the Resolution and this Agreement, the Act and other
applicable laws of the State of California. Each series of Bonds shall be designated "City of
Lake Elsinore Community Facilities District No. 2003 -2 (Canyon Hills) Special Tax Bonds,
Series — " This Agreement constitutes a continuing agreement of the District with
the Owners from time to time of the Bonds to secure the full payment of the principal of,
premium, if any, and interest on all such Bonds subject to the covenants, provisions and
conditions herein contained.
The 2014 Bonds in the aggregate principal amount of Thousand
and 00 /100 Dollars ($ ) are hereby authorized to be issued under and subject to the
terms of the Resolution and this Agreement, the Act and other applicable laws of the State of
California. The 2014 Bonds shall be designated "City of Lake Elsinore Community Facilities
District No. 2003 -2 (Canyon Hills) Special Tax Bonds, 2014 Series (Improvement Area D)."
21 Terms of Bonds.
(a) Form; Denominations. The Bonds shall be issued as fully- registered
bonds without coupons in the denomination of $5,000 or any integral multiple thereof. The
Bonds shall be lettered and numbered in a customary manner as determined by the Fiscal Agent.
(b) Date of the Bonds. The Bonds shall be dated the Closing Date.
(c) Maturities, Interest_ Rates. The 2014 Bonds shall mature on the dates and
shall bear interest at the rates as follows:
Maturity Date Principal
(September 1) Amount
79361199.1 11
Coupon
(d) Interest. The 2014 Bonds shall bear interest at the rates set forth above
payable on the Interest Payment Dates in each year. Interest shall be calculated on the basis of a
360 -day year composed of twelve 30 -day months. Each 2014 Bond shall bear interest from the
Interest Payment Date next preceding the date of authentication thereof unless (i) it is
authenticated after a Record Date and on or before an Interest Payment Date and after the close
of business on the preceding Record Date, in which event it shall bear interest from such Interest
Payment Date, or (ii) it is authenticated on or before August 15, 2014, in which event it shall
bear interest from the Closing Date, or (iii) interest with respect to any Outstanding 2014 Bond is
in default, in which event interest with respect thereto will be payable from, the date to which
interest has previously been paid or made available for payment thereon.
(e) Method of Payment, Interest on the Bonds (including the final interest
payment upon maturity or earlier redemption) is payable by check of the Fiscal Agent mailed on
the Interest Payment Dates by first -class mail to the registered Owner thereof at such registered
Owner's address as it appears on the registration books maintained by the Fiscal Agent at the
close of business on the Record Date preceding the Interest Payment Date, or by wire transfer
made on such Interest Payment Date upon instructions of any Owner of $1,000,000 or more in
aggregate principal amount of Bonds.
The principal of the Bonds and any premium on the Bonds are payable in lawful
money of the United States of America upon surrender of the Bonds at the Corporate Trust
Office of the Fiscal Agent,
79361199.1 12
All Bonds paid by the Fiscal Agent pursuant to this Section shall be canceled by
the Fiscal Agent. The Fiscal Agent shall destroy the canceled Bonds.
2.3 Redemption.
(a) Redemption Dates.
(i) Optional Redemption. The 2014 Bonds are subject to redemption
prior to maturity at the option of the District from any source of funds, as a whole or in part, on
any date on or after September 1, 2024, from such maturities as selected by the District and by
lot within a maturity, at the redemption prices and schedules applicable to the Authority Bonds.
Notwithstanding anything in this Agreement to the contrary, with respect to optional
redemptions related to the Authority Bonds, the District shall abide by the priority of redemption
relating to the Authority Bonds permitted by the Authority Indenture.
Special Mandatory Redemption from Prepayment of Special Taxes
and from Surplus Funds. The 2014 Bonds shall also be subject to mandatory redemption on any
date on or after September 1, 2014 in whole or in part from such maturities as selected by the
District and by lot within a maturity, from amounts constituting prepayments of Special Taxes,
from amounts transferred from the Delinquency Management Fund hereunder and from amounts
transferred by the Authority to the District from the Cash Flow Management Fund under the
Authority Indenture at the following redemption prices (expressed as a percentage of the
principal amount of 2014 Bonds to be redeemed) together with accrued interest thereon to the
redemption date:
Redemption Date Redemption Price
September
1,
2014
through August 31, 2024
102.0%
September
1,
2024
and thereafter
100.0
(iii) Mandatory Sinking Payment Redemption. The 2014 Bonds are not
subject to mandatory sinking payment redemption.
(b) Notice to Fiscal Agent. The District shall give the Fiscal Agent written
notice of its intention to redeem Bonds pursuant to subsection (a)(i) not less than sixty (60) days
prior to the applicable redemption date, unless such notice shall be waived by the Fiscal Agent.
Notwithstanding any provisions in this Agreement to the contrary, upon any optional redemption
or special mandatory redemption in part, the District shall deliver an Officer's Certificate to the
Fiscal Agent at least sixty (60) days prior to the proposed redemption date or such later date as
shall be acceptable to the Fiscal Agent so stating that the remaining payments of principal and
interest on the Bonds will be sufficient on a timely basis to pay debt service on the Authority
Bonds, as demonstrated in a cash flow certificate delivered to the Fiscal Agent with such
Officer's Certificate.
The District shall in such Officer's Certificate certify to the Fiscal Agent that
sufficient moneys for purposes of such redemption are or will be on deposit in the Redemption
Fund and is required to deliver such moneys to the Fiscal Agent together with other Special Tax
79361199.1 13
Revenues, if any, then to be delivered to the Fiscal Agent pursuant to this Agreement, which
moneys are required to be identified to the Fiscal Agent in the Officer's Certificate delivered
with the Special Tax Revenues.
(c) Redemption Procedure by. Fiscal Agent. The Fiscal Agent shall cause
notice of any redemption to be mailed by first -class mail, postage prepaid, at least thirty (30)
days but not more than sixty (60) days prior to the date fixed for redemption, to the respective
registered Owners of any Bonds designated for redemption, at their addresses appearing on the
Bond registration books in the Corporate Trust Office of the Fiscal Agent; but such mailing shall
not be a condition precedent to such redemption and failure to mail or to receive any such notice,
or any defect therein, shall not affect the validity of the proceedings for the redemption of such
Bonds.
Such notice shall state the redemption date and the redemption price and, if less
than all of the then Outstanding Bonds are to be called for redemption, shall designate the Bond
numbers of the Bonds to be redeemed or shall state that all Bonds between two stated Bond
numbers, both inclusive, are to be redeemed or that all of the Bonds of one or more maturities
have been called for redemption, shall state as to any Bond called in part the principal amount
thereof to be redeemed, and shall require that such Bonds be then surrendered at the Corporate
Trust Office of the Fiscal Agent for redemption at the said redemption price, and shall state that
further interest on such Bonds will not accrue from and after the redemption date. The cost of
mailing any such redemption notice and any expenses incurred by the Fiscal Agent in connection
1_ 1 1 11 1 1 the
therewith shall be paid by te District.
Upon the payment of the redemption price of Bonds being redeemed, each check
or other transfer of funds issued for such purpose shall, to the extent practicable, bear the number
identifying, by issue and maturity, the Bonds being redeemed with the proceeds of such check or
other transfer.
Whenever provision is made in this Agreement for the redemption of less than all
of the Bonds or any given portion thereof, the Fiscal Agent shall select the Bonds to be
redeemed, from all Bonds or such given portion thereof not previously called for redemption,
among maturities as specified by the District in a written certificate delivered to the Fiscal Agent,
and by lot within a maturity in any manner which the District in its sole discretion shall deem
appropriate and fair. In providing such certificate, the District shall provide for the redemption
of Bonds such that the remaining Debt Service payable on the Bonds shall remain as level as
possible.
Upon surrender of Bonds redeemed in part only, the District shall execute and the
Fiscal Agent shall authenticate and deliver to the registered Owner, at the expense of the District,
a new Bond or Bonds, of the same series and maturity, of authorized denominations in aggregate
principal amount equal to the unredeemed portion of the Bond or Bonds.
(d) Effect of Redemption. From and after the date fixed for redemption, if
funds available for the payment of the principal of, and interest and any premium on, the Bonds
so called for redemption shall have been deposited in the Bond Fund, such Bonds so called shall
cease to be entitled to any benefit under this Agreement other than the right to receive payment
79361199.1 14
of the redemption price, and no interest shall accrue thereon on or after the redemption date
specified in such notice.
All Bonds redeemed and purchased by the Fiscal Agent pursuant to this
Section 2.3 shall be canceled by the Fiscal Agent. The Fiscal Agent shall destroy the canceled
Bonds.
(e) Partial Redemption. If in the event only a portion of any Bond is called
for redemption, then upon surrender of such Bond the City will execute, on behalf of the District,
and the Fiscal Agent will authenticate and deliver to the Bond Owner thereof, at the expense of
the District, a new Bond or Bonds of the same series and maturity date, of authorized
denominations in an aggregate principal amount equal to the unredeemed portion of the Bond to
be redeemed.
2.4 Form of Bonds. The Bonds, the form of Fiscal Agent's certificate of
authentication and the form of assignment to appear thereon, shall be substantially in the forms,
respectively, set forth in Exhibit A attached hereto and by this reference incorporated herein,
with necessary or appropriate variations, omissions and insertions, as permitted or required by
this Agreement, the Resolution and the Act.
2.5 Execution of Bonds. The Bonds shall be executed on behalf of the District by
the manual or facsimile signatures of the Mayor and City Clerk, who are in office on the date of
adoption of this Agreement or at any time thereafter. Unless otherwise provided in any
Supplemental Agreement with respect to the Bonds, the Bonds shall then be delivered to the
Fiscal Agent for authentication. If any officer whose signature appears on any Bond ceases to be
such officer before delivery of the Bonds to the owner, such signature shall nevertheless be as
effective as if the officer had remained in office until the delivery of the Bonds to the owner.
Any Bond may be signed and attested on behalf of the District by such persons as at the actual
date of the execution of such Bond shall be the proper officers of the District although at the
nominal date of such Bond any such person shall not have been such officer of the District.
Only such Bonds as shall bear thereon a certificate of authentication in
substantially the form set forth in Exhibit A, executed and dated by the Fiscal Agent, shall be
valid or obligatory for any purpose or entitled to the benefits of this Agreement, and such
certificate of authentication of the Fiscal Agent shall be conclusive evidence that the Bonds
registered hereunder have been duly authenticated, registered and delivered hereunder and are
entitled to the benefits of this Agreement.
2.6 Transfer of Bonds. Any Bond may, in accordance with its terms, be transferred
upon the books required to be kept pursuant to the provisions of Section 2.8 hereof by the person
in whose name it is registered, in person or by his duly authorized attorney, upon surrender of
such Bond for cancellation, accompanied by delivery of a duly written instrument of transfer in
form approved by the Fiscal Agent. The cost for any services rendered or any expenses incurred
by the Fiscal Agent in connection with any such transfer shall be paid by the District. The Fiscal
Agent shall collect from the Owner requesting such transfer any tax or other governmental
charge required to be paid with respect to such transfer.
79361199.1 15
No transfers of Bonds shall be required to be made (i) fifteen (15) days prior to
the date established by the Fiscal Agent for selection of Bonds for redemption, (ii) with respect
to a Bond after such Bond has been selected for redemption, or (iii) between the 15th day of the
month next preceding any Interest Payment Date and such Interest Payment Date,
2.7 Exchange of Bonds. Bonds may be exchanged at the Corporate Trust Office of
the Fiscal Agent for a like aggregate principal amount of Bonds of authorized denominations and
of the same maturity. The cost for any services rendered or any expenses incurred by the Fiscal
Agent in connection with any such exchange shall be paid by the District. The Fiscal Agent shall
collect from the Owner requesting such exchange any tax or other governmental charge required
to be paid with respect to such exchange.
No exchanges of Bonds shall be required to be made (i) fifteen (15) days prior to
the date established by the Fiscal Agent for selection of Bonds for redemption, (ii) with respect
to a Bond, after such Bond has been selected for redemption or (iii) between the 15th day of the
month next preceding any Interest Payment Date and such Interest Payment Date,
2.8 Bond Register. The Fiscal Agent will keep or cause to be kept, at its Corporate
Trust Office sufficient books for the registration and transfer of the Bonds, which books shall
show the series number, date, amount, rate of interest and last known owner of each Bond and
shall at all times be open to inspection by the District or the City during regular business hours
upon reasonable notice; and, upon presentation for such purpose, the Fiscal Agent shall, under
such reasonable regulations as it may prescribe, register or tranSfur or cause to be registered or
transferred, on said books, the ownership of the Bonds as hereinbefore provided,
The District and the Fiscal Agent will treat the Owner of any Bond whose name
appears on the Bond register as the absolute Owner of such Bond for any and all purposes, and
the District and the Fiscal Agent shall not be affected by any notice to the contrary. The District
and the Fiscal Agent may rely on the address of the Bond Owner as it appears in the Bond
register for any and all purposes.
19 Temporary Bonds. The Bonds may be initially issued in temporary form
exchangeable for definitive Bonds when ready for delivery. The temporary Bonds may be
printed, lithographed or typewritten, shall be of such authorized denominations as may be
determined by the District, and may contain such reference to any of the provisions of this
Agreement as may be appropriate. Every temporary Bond shall be executed by the District upon
the same conditions and in substantially the same manner as the definitive Bonds. If the District
issues temporary Bonds it will execute and furnish definitive Bonds without delay and thereupon
the temporary Bonds shall be surrendered, for cancellation, in exchange for the definitive Bonds
at the Corporate Trust Office of the Fiscal Agent or at such other location as the Fiscal Agent
shall designate, and the Fiscal Agent shall authenticate and deliver in exchange for such
temporary Bonds an equal aggregate principal. amount of definitive Bonds of authorized
denominations. Until so exchanged, the temporary bonds shall be entitled to the same benefits
under this Agreement as definitive Bonds authenticated and delivered hereunder.
2.10 Bonds Mutilated, Lost, Destroyed or Stolen. If any Bond shall become
mutilated, the District, at the expense of the Owner of said Bond, shall execute, and the Fiscal
79361199.1 16
Agent shall authenticate and deliver, a new Bond of like tenor and principal amount in exchange
and substitution for the Bond so mutilated, but only upon surrender to the Fiscal Agent of the
Bond so mutilated. Every mutilated Bond, so surrendered to the Fiscal Agent shall be canceled
by it and destroyed by the Fiscal Agent who shall deliver a certificate of destruction thereof to
the District. If any Bond shall be lost, destroyed or stolen, evidence of such loss, destruction or
theft may be submitted to the Fiscal Agent and, if such evidence be satisfactory to it and
indemnity for the District and the Fiscal Agent satisfactory to the Fiscal Agent shall be given, the
District, at the expense of the Owner, shall execute, and the Fiscal Agent shall authenticate and
deliver a new Bond of like tenor and principal amount in lieu of and in substitution for the Bond
so lost, destroyed or stolen. The District may require payment of a sum not exceeding the actual
cost of preparing each new Bond delivered under this Section and of the expenses which may be
incurred by the District and the Fiscal Agent for the preparation, execution, authentication and
delivery. Any Bond delivered under the provisions of this Section in lieu of any Bond alleged to
be lost, destroyed or stolen shall constitute an original additional contractual obligation on the
part of the District whether or not the Bond so alleged to be lost, destroyed or stolen is at any
time enforceable by anyone, and shall be equally and proportionately entitled to the benefits of
this Agreement with all other Bonds issued pursuant to this Agreement.
2.11 Limited Obligation. All obligations of the District under this Agreement and the
Bonds shall be special obligations of the District, payable solely from the Special Tax Revenues
and the funds pledged therefor hereunder. Neither the faith and credit nor the taxing power of
the District (except to the limited extent set forth herein) or the State of California or any
political subdivision thereof is pledged to the payment of the Bonds.
2.12 No Acceleration. The principal of the Bonds shall not be subject to acceleration
hereunder. Nothing in this Section shall in any way prohibit the prepayment or redemption of
Bonds under Section 2.3 hereof, or the defeasance of the Bonds and discharge of this Agreement
under Section 10.3 hereof.
2.13 Additional Bonds. The District may issue bonds payable out of the Special Tax
Revenues on a parity with the 2014 Bonds provided that such Additional Bonds shall be issued
in accordance with the following:
(a) the amount of such Additional Bonds shall not, together with the Bonds
then Outstanding, exceed the total amount of bonded indebtedness authorized to be issued by the
District;
(b) the District shall be in compliance with all covenants set forth in this
Agreement and a certificate of the District to that effect shall have been filed with the City Clerk
on behalf of the District; provided, however, that Additional Bonds may be issued
notwithstanding that the District is not in compliance with all such covenants so long as
immediately following the issuance of such Additional Bonds, the District will be in compliance
with all such covenants; and
(c) the District shall have received the following documents, all of such
documents dated or certified, as the case may be, as of the date of delivery of such Additional
Bonds by the Fiscal Agent (unless the Fiscal Agent shall accept any of such documents bearing a
79361199.1 17
prior date):
(i) An opinion of Bond Counsel and /or counsel to the City to the
effect that (a) the District has the right and power under the Act to execute and deliver the
Supplemental Agreement relating to such Additional Bonds, and such Supplemental Agreement
has been duly and lawfully adopted, executed and delivered by the District, is in full force and
effect and is valid and binding upon the District and enforceable in accordance with its terms
(except as enforcement may be limited by bankruptcy, insolvency, reorganization and other
similar laws relating to the enforcement of creditors' rights); (b) this Agreement creates the valid
pledge which it purports to create of the Special Tax Revenues and Redemption Revenues,
subject to the application thereof to the purposes and on the conditions permitted by this
Agreement; and (c) such Additional Bonds are valid and binding limited obligations of the
District, enforceable in accordance with their terms (except as enforcement may be limited by
bankruptcy, insolvency, reorganization and other similar laws relating to the enforcement of
creditors' rights) and the terms of this Agreement and entitled to the benefits of this Agreement,
and such Additional Bonds have been duly and validly authorized and issued in accordance with
the Act (or other applicable laws) and this Agreement, and further opinion of Bond Counsel to
the effect that, assuming compliance by the District with certain tax covenants, the issuance of
the Additional Bonds will not adversely affect the exclusion from gross income for federal
income tax purposes of interest on any Outstanding Bonds theretofore issued or the exemption
from State of California personal income taxation of interest on any Outstanding Bonds
theretofore issued; and
(ii) A certificate of an Independent Financial Consultant certifying as
of the Closing Date of the Additional Bonds that (a) the ratio of the appraised or assessed (or a
combination thereof) value of the property included within Improvement Area D of the District
to the amount of any governmental lien which will be on the property after the issuance of the
Additional Bonds, including the amount of any assessment bonds or bonds issued under the Act,
is not less than 4:1 and (b) the total Net Taxes which could be generated by Improvement Area D
of the District by the levy of the Special Tax at the maximum level allowed under the RMA
(subject to the City's policies relating to community facilities districts, the Act and the applicable
resolutions of the District) on all then taxable property in any Fiscal Year, is at least 1.10 times
Maximum Annual Debt Service on all Outstanding Bonds (including Additional Bonds
previously issued and the Additional Bonds proposed to be issued).
No Additional Bonds shall be issued later than 18 months from the issuance of the
final certificate of occupancy for a new home within Improvement Area D of the District, or
such later date as the Authorized Officer may determine.
ARTICLE III
ISSUANCE OF BONDS
3.1 Issuance and Delivery of the Bonds. At any time after the execution of this
Agreement, the District may issue the Bonds in the aggregate principal amount set forth in
Section 2.2 hereof and deliver the Bonds to the Original Purchaser. The Authorized Officers of
the District are hereby authorized and directed to deliver any and all documents and instruments
necessary to cause the issuance of the Bonds in accordance with the provisions of the Act, the
79361199.1 18
Resolution and this Agreement and to do and cause to be done any and all acts and things
necessary or convenient for delivery of the Bonds to the Original Purchaser, upon payment of the
purchase price for the Bonds.
3.2 Application of Proceeds of Sale of the 2014 Bonds. On the Closing Date, the
proceeds of the sale of the 2014 Bonds in the amount of $ (being the principal
amount of the 2014 Bonds of $ less the purchase discount of $ ) shall be
paid to the Fiscal Agent and deposited or transferred by the Fiscal Agent as follows (the Fiscal
Agent may establish temporary funds or accounts to record or facilitate any such deposit or
transfer):
(a)
Issuance Fund.
(b)
Improvement Fund.
The Fiscal Agent shall deposit the amount of $
The Fiscal Agent shall deposit the amount of $
(c) The Fiscal Agent shall deposit the amount of $
Capitalized Interest Account of the Bond Fund.
(d) The Fiscal Agent shall deposit the amount of $
Delinquency Management Fund.
(e) The Fiscal Agent shall deposit the amount of $
Administrative Expense Fund,
in the Costs of
in the
in the
in the
in the
3.3 Validity of Bonds. The validity of the authorization and issuance of the Bonds
shall not be dependent upon the completion of the acquisition of the Facilities or upon the
performance by any person of his obligation with respect to the Facilities.
3.4 Special Taxes Receipt Fund and Special Tax Fund.
(a) Establishment of Special Taxes Receipt Fund and Special Tax Fund. The
City shall establish and hold for the benefit of the Owners a fund known as the "Special Taxes
Receipt Fund." The City shall deposit Special Taxes when received in the account established
for the District and immediately thereafter transfer such amounts to the Fiscal Agent for deposit
in the "Special Tax Fund," which is hereby established as a separate fund to be held by the Fiscal
Agent. Moneys in the Special Tax Fund shall be held by the Fiscal Agent for the benefit of the
District and the Owners of the Bonds, shall be disbursed as provided below and, pending any
disbursement, shall be subject to a lien in favor of the Owners of the Bonds.
(b) Disbursements. After depositing an amount of Special Taxes budgeted for
Administrative Expenses to the Administrative Expense Fund pursuant to a written direction of
the District, no later than ten (10) Business Days prior to each Interest Payment Date, the Fiscal
Agent shall withdraw from the Special Tax Fund and transfer to the Bond Fund as follows:
79361199.1 19
(i) To the Interest Account of the Bond Fund, an amount such that the
balance in the Interest Account shall be equal to the installment of interest due on the Bonds on
said Interest Payment Date.
(ii) To the Principal Account of the Bond Fund, an amount such that
the balance in the Principal Account shall at least equal the principal payment (including
mandatory sinking payments, if any) due on the Bonds on said Interest Payment Date.
Notwithstanding the foregoing, amounts shall be transferred to the Principal
Account or the Interest Account from the Special Tax Fund and immediately be paid to the
Owners of the Bonds in respect of past due payments on the Bonds.
(c) Investment. Moneys in the Special Tax Fund shall be invested and
deposited in accordance with Section 6.1 hereof. Interest earnings and profits resulting from
such investment and deposit shall be retained in the Special Tax Fund to be used for the purposes
thereof.
(d) Disposition of Surplus. On September 2 of each year, commencing
September?., 2014, the Fiscal Agent shall transfer any amounts remaining in the Special Tax
Fund following payment of each disbursement required pursuant to subsection (b) above, to the
Delinquency Management Fund,
3.5 Reserved,
3.6 Administrative Expense Fund.
(a) Establishment of Administrative Expense Fund. There is hereby
established as a separate fund to be held by the Fiscal Agent, the "Administrative Expense
Fund," to the credit of which the amount budgeted and levied for Administrative Expenses shall
be made. Moneys in the Administrative Expense Fund shall be held by the Fiscal Agent for the
benefit of the District, and shall be disbursed as provided below.
(b) Disbursement. Amounts in the Administrative Expense Fund shall be
withdrawn by the Fiscal Agent and paid to the District or the City or its order upon receipt by the
Fiscal Agent of an Officer's Certificate stating the amount to be withdrawn, that such amount is
to be used to pay an Administrative Expense, and the nature of such Administrative Expense.
Annually, at least five (5) days prior to the last day of each Bond Year, the Fiscal
Agent shall withdraw any amounts then remaining in the Administrative Expense Fund that have
not been allocated to pay Administrative Expenses incurred but not yet paid, and which are not
otherwise encumbered or expected to be needed for the purposes of such fund, and transfer such
amounts to the Special Tax Fund.
(c) Investment. Moneys in the Administrative Expense Fund shall be
invested and deposited in accordance with Section 6.1 hereof. Interest earnings and profits
resulting from said investment shall be retained in the Administrative Expense Fund to be used
for the purposes of such fund.
79361199.1 20
3.7 Improvement Fund.
(a) Establishment of Improvement Fund. There is hereby established as a
separate fund to be held by the Fiscal Agent, the "Improvement Fund," to the credit of which a
deposit shall be made as required by Section 3.2(b) hereof or as required by a Supplemental
Agreement. Moneys in the Improvement Fund shall be held by the Fiscal Agent for the benefit
of the City and the District and shall be disbursed, except as otherwise provided in subsection (b)
of this Section 3.7, for the payment or reimbursement of costs of Facilities.
(b) Disbursement. Disbursements from the Improvement Fund shall be made
by the Fiscal Agent upon receipt of an Officer's Certificate in the form attached hereto as Exhibit
B.
The Fiscal Agent may conclusively rely on such Officer's Certificate received as
complete authorization to disburse funds in accordance with this Section 3.7(b) and shall not be
responsible for the contents of such Officer's Certificate.
(c) Investment. Moneys in the Improvement Fund shall be invested and
deposited by the Fiscal Agent in accordance with Section 6.1 hereof. Interest earnings and
profits from such investment and deposit shall be retained in the Improvement Fund until all
Facilities have been fully funded. Upon closing the Improvement Fund, all amounts remaining
in the Improvement Fund shall be transferred for deposit in the Redemption Fund to be used for
the purposes of such fund.
(d) Closing of Fund. Upon the filing of an Officer's Certificate executed by
the Treasurer stating that all costs of the Facilities have been paid or are not required to be paid
from the Improvement Fund, the Fiscal Agent shall transfer the amount, if any, remaining in the
Improvement Fund to the Redemption Fund for application to the payment of Bonds, and the
Improvement Fund shall be closed.
3.8 Costs of Issuance Fund. The Fiscal Agent shall establish and maintain a
separate fund to be held by the Fiscal Agent known as the "Costs of Issuance Fund" into which
shall be deposited the amounts set forth in Section 3.2(a) above or as required by a Supplemental
Agreement. The moneys in the Costs of Issuance Fund shall be used to pay Costs of Issuance
from time to time upon receipt of a written requisition of the District. On the date which is one
hundred eighty (180) days following the Closing Date, or upon the earlier receipt by the Fiscal
Agent of a written request of the District stating that all Costs of Issuance have been paid, the
Fiscal Agent shall transfer all remaining amounts in the Costs of Issuance Fund to be deposited
in the one or more accounts of the Improvement Fund.
79361199.1 21
19 Delinquency Management Fund.
(a) Establishment of Delinquency Management Fund. There is hereby
established as a separate fund to be held by the Fiscal Agent, the "Delinquency Management
Fund," to the credit of which a deposit shall be made as required by Sections 3.2 and 3.4 hereof.
Moneys in the Delinquency Management Fund shall be held by the Fiscal Agent for the benefit
of the District, and shall be disbursed as provided below.
(i) The Fiscal Agent shall transfer to the appropriate accounts within
the Bond Fund to pay debt,service on the Bonds to the extent Special Taxes are insufficient for
such purpose.
(ii) The Fiscal Agent shall transfer from any amounts in the
Delinquency Management Fund to the Administrative Expense Fund in an amount determined
by the District to pay Administrative Expenses to the extent amounts in the Administrative
Expense Fund are insufficient therefore.
(iii) Upon the written direction of the District, the Fiscal Agent shall
transfer all remaining amounts in the Delinquency Management Fund in excess of the
Delinquency Management Fund Requirement to the Special Mandatory Redemption Account of
the Redemption Fund for redemption of the District Bonds on the next redemption date for
which notice of redemption can timely be given, unless the Fiscal Agent has received written
direction from the District to expend such remaining funds held in the Delinquency Management
Fund for any lawful purposes of the District including, but not limited to, paying costs of public
capital improvements or reducing the Special Taxes which are to be levied in the current or the
succeeding Fiscal Year upon the properties which are subject to the Special Tax.
of the Bonds. Amounts in the Delinquency Management Fund are not pledged to the repayment
(b) Investment. Moneys in the Delinquency Management Fund shall be
invested and deposited in accordance with Section 6.1 hereof Interest earnings and profits
resulting from said investment shall be retained in the Delinquency Management Fund to be used
for the purposes of such fund.
3.10 Redemption Fund.
(a) Establishment of the Redemption Fund There is hereby established as a
separate fund to be held by the Fiscal Agent, the "Redemption Fund" (in which there shall be
established and created an "Optional Redemption Account" and a "Special Mandatory
Redemption Account" upon receipt of a written direction of the District), to the credit of which
the District or the City, on behalf of the District, shall deposit, immediately upon receipt, all
Redemption Revenues received by the District or the City on behalf of the District. Moneys in
the Redemption Fund shall be held by the Fiscal Agent for the benefit of the District and the
Owners of the Bonds, shall be disbursed as provided below and, pending any disbursement, shall
be subject to a lien in favor of the Owners of the Bonds.
79361199.1 22
(b) Disbursement.
(1) All prepayments of Special Taxes and amounts transferred from the
Delinquency Management Fund for the redemption of Bonds or transferred from the Authority
under the Authority Indenture for the redemption of Bonds shall be deposited in the Special
Mandatory Redemption Account to be used to redeem Bonds on the next date for which notice of
redemption can timely be given.
(2) Any amounts transferred for the optional redemption of Bonds shall be
deposited into the Optional Redemption Account to be used to redeem Bonds on the next date for
which notice of redemption can timely be given.
(c) Investment. Moneys in the Redemption Fund shall be invested and
deposited in accordance with Section 6.1 hereof. Interest earnings and profits resulting from said
investment shall be retained in the Redemption Fund to be used for the purposes of such fund.
ARTICLE IV
SPECIAL TAX REVENUES; BOND FUND
4.1 Pledge of Special Tax Revenues. The Bonds shall be secured by a first pledge
(which pledge shall be effected in the manner and to the extent herein provided) of all of the
Special Tax Revenues and Redemption Revenues and all moneys deposited in the Bond Fund
and, until disbursed, as provided herein, in the Special Tax Fund, the Redemption Fund and the
Delinquency Management Fund. The Special Tax Revenues and all moneys deposited into said
funds (except as otherwise provided herein) are hereby dedicated to the payment of the principal
of, and interest and any premium on the Bonds as provided herein and in the Act until all of the
Bonds have been paid and retired or until moneys or Federal Securities have been set aside
irrevocably for that purpose in accordance with Section 10.3 hereof.
Amounts in the Administrative Expense Fund and the Improvement Fund are not
pledged to the repayment of the Bonds. The Facilities acquired with the proceeds of the Bonds
are not in any way pledged to pay the Debt Service on the Bonds. Any proceeds of
condemnation or destruction of any Facilities financed with the proceeds of the Bonds are not
pledged to pay the Debt Service on the Bonds and are free and clear of any lien or obligation
imposed hereunder.
4.2 Bond Fund.
(a) Establishment of Bond Fund. There is hereby established as a separate
fund to be held by the Fiscal Agent known as the "Bond Fund" (in which there shall be
established and created an Interest Account and a Principal Account) to the credit of which
deposits shall be made as required by Section 3.4(b) and Section 3.9 hereof, and any other
amounts required to be deposited therein by this Agreement, a Supplemental Agreement or the
Act. Moneys in the Bond Fund shall be held by the Fiscal Agent for the benefit of the Owners of
the Bonds, shall be disbursed for the payment of the principal of (including mandatory sinking
payments, if any) and interest on the Bonds as provided below, and, pending such disbursement,
shall be subject to a lien in favor of the Owners of the Bonds.
79361199.1 23
(b) Disbursements on ear..h TnierpSt Pq impnt nl tp flip 1-Iiq� n1 A /TpN4 l 11
• .....,.L tlu�., 111V 1 101 Ul J-- kp+lll shall
withdraw from the Principal Account and the Interest Account and pay to the Owners of the
Bonds the principal of (including mandatory sinking payments, if any) and interest on the Bonds,
respectively; provided that available_ amounts in the Principal Account and the Interest Account
shall first be used to pay any past due installments of principal of (including mandatory sinking
payments, if any) and interest on the Bonds, respectively. Notwithstanding the foregoing,
amounts transferred to the Principal Account or the Interest Account from the Special Tax Fund
constituting delinquent payments of Special Taxes pursuant to Section 3.4(b) hereof shall
immediately be paid to the Owners of the Bonds in respect of past due payments on the Bonds.
Any installment of principal (including mandatory sinking payments, if any) or
interest on the Bonds which is not paid when due shall accrue interest at the rate of interest on
the Bonds until paid, and shall be paid whenever funds in the Bond Fund are sufficient therefor.
If at any time the Fiscal Agent fails to pay principal and interest due on any
scheduled payment date for the Bonds, the Fiscal Agent shall notify the District and the
Treasurer in writing of such failure, and the Treasurer shall notify the CDIAC of such failure
within 10 days of the failure to make such payment, as required by Section 53359(c)(1) of the
Act.
(c) Capitalized Interest Account. There is hereby established a separate
account within the Bond Fund, designated as the "Capitalized Interest Account," to the credit of
which a deposit shall be made as required by Section 12(c) hereof or as required by a
Supplemental Agreement. Moneys in the Capitalized Interest Account shall be held by the
Fiscal Agent and used and withdrawn solely for the purpose of paying the interest on the
applicable series of Bonds as it shall become due and payable until all funds in the Capitalized
Interest Account are expended.
(d) Investment. Moneys in the Bond Fund shall be invested and deposited in
accordance with Section 6.1 hereof. Interest earnings and profits resulting from the investment
and deposit of amounts in the Bond Fund shall be retained in the Bond Fund,
ARTICLE V
OTHER COVENANTS OF THE DISTRICT
541 Punctual Payment. The District shall punctually pay or cause to be paid the
principal of, and interest and any premium on, the Bonds when and as due in strict conformity
with the terms of this Agreement and any Supplemental Agreement, and it will faithfully observe
and perform all of the conditions, covenants and requirements of this Agreement and all
Supplemental Agreements and of the Bonds.
5.2 Limited Obligation. The Bonds are limited obligations of the District and are
payable solely from and secured solely by the Special Tax Revenues and the amounts in the
Bond Fund and the Special Tax Fund created hereunder.
5.3 Extension of Time for Payment. In order to prevent any accumulation of claims
for interest after maturity, the District shall 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 shall not,
79361199.1 24
directly or indirectly, be a party to the approval of 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 District, such claim for interest so
extended or funded shall not be entitled, in case of default hereunder, to the benefits of this
Agreement, 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 been so extended or funded.
Nothing in this section shall be deemed to limit the right of the District to issue bonds for the
purpose of refunding any outstanding Bonds, and such issuance shall not be deemed to constitute
an extension of maturity of the Bonds.
5.4 Against Encumbrances. The District will not encumber, pledge or place any
charge or lien upon any of the Special Tax Revenues, or other amounts pledged to the Bonds
superior to or on a parity with the pledge and lien herein created for the benefit of the Bonds,
except as permitted by this Agreement.
5.5 Books and Records. The District will keep, or cause to be kept, proper books of
record and accounts, separate from all other records and accounts of the District, in which
complete and correct entries shall be made of all transactions relating to the expenditure of
amounts disbursed from the Administrative Expense Fund and the Special Tax Fund and relating
to the Special Tax Revenues. Such books of record and accounts shall at all times during
business hours and upon reasonable prior notice be subject to the inspection of the Fiscal Agent
and the Owners of not less than ten percent (10 %) of the principal amount of the Bonds then
Outstanding, or their representatives duly authorized in writing.
The Fiscal Agent will keep, or cause to be kept, proper books of record and
accounts, separate from all other records and accounts of the Fiscal Agent, in which complete
and correct entries shall be made of all transactions relating to the expenditure of amounts
disbursed from the Bond Fund and the Costs of Issuance Fund. Such books of record and
accounts shall at all times during business hours and upon reasonable prior notice be subject to
the inspection of the City, the District and the Owners of not less than ten percent (10 %) of the
principal amount of the Bonds then Outstanding, or their representatives duly authorized in
writing.
5.6 Protection of Security and Rights of Owners. The District will preserve and
protect the security of the Bonds and the rights of the Owners, and will warrant and defend their
rights against all claims and demands of all persons. From and after the delivery of any of the
Bonds by the District, the Bonds shall be incontestable by the District. In furtherance of the
foregoing, the District shall not approve any reduction of the Assigned Special Taxes as provided
in the RMA which would prohibit the District from levying the Special Taxes in any Fiscal Year
at a level that would generate Net Taxes at least equal to 110% of annual debt service in such
Fiscal Year for the Bonds and any Additional Bonds expected to be issued.
5.7 Compliance with Law, Completion of Facilities. The District and the City will
comply with all applicable provisions of the Act and law in completing the acquisition and
construction of the Facilities.
79361199.1 25
508 Collection of Special Tax Revenues. The District shall comply with all
requirements of the Act so as to assure the timely collection of Special Tax Revenues, including
without limitation, the enforcement of delinquent Special Taxes.
The Treasurer shall effect the levy of the Special Taxes each Fiscal Year on the
parcels within Improvement Area D of the District in accordance with the RMA, such that the
computation of the levy is complete before the final date on which the Auditor will accept the
transmission of the Special Tax amounts for the parcels within Improvement Area D of the
District for inclusion on the next secured tax roll. Upon the completion of the computation of the
amounts of the levy, the Treasurer shall prepare or cause to be prepared, and shall transmit to the
Auditor, such data as the Auditor requires to include the levy of the Special Taxes on the next
secured tax roll. The Special Taxes so levied shall be payable and be collected in the same
manner and at the same time and in the same installments as the general taxes on real property
are payable, and have the same priority, become delinquent at the sane time and in the same
proportionate amounts and bear the same proportionate penalties and interest after delinquency
as do the general taxes on real property, unless otherwise provided by the District.
In the event that the Treasurer determines to levy all or a portion of the Special
Taxes by means of direct billing of the property owners of the parcels within Improvement Area
D of the District, the Treasurer shall, not less than forty -five (45) days prior to each Interest
Payment Date, send bills to the owners of such real property located within Improvement Area D
of the District subject to the levy of the Special Taxes for Special Taxes in an aggregate amount
necessary to meet the financial obligations of the District due on the ,next interest Payment Date,
said bills to specify that the amounts so levied shall be due and payable not less than thirty (30)
days prior to such Interest Payment Date and shall be delinquent if not paid when due.
In any event, the Treasurer shall fix and levy the amount of Special Taxes within
Improvement Area D of the District required (i) for the payment of principal of and interest on
any outstanding Bonds of the District becoming due and payable during the ensuing year (taking
into consideration anticipated delinquencies), and (ii) to pay the Administrative Expenses during
such year, all in accordance with the RMA. The Special Taxes so levied shall not exceed the
authorized amounts as provided in the proceedings pursuant to the Resolution of Formation.
The Treasurer is hereby authorized to employ consultants to assist in computing
the levy of the Special Taxes hereunder and any reconciliation of amounts levied to amounts
received. The fees and expenses of such consultants and the costs and expenses of the Treasurer
(including a charge for City or District staff time) in conducting its duties hereunder shall be an
Administrative Expense hereunder.
509 Further Assurances. The District shall adopt, make, execute and deliver any and
all such further resolutions, instruments and assurances as may be reasonably necessary or proper
to carry out the intention or to facilitate the performance of this Agreement, and for the better
assuring and confirming unto the Owners of the rights and benefits provided in this Agreement.
5.10 Tax Covenants.
79361199.1 26
(a) Special Definitions. When used in this Section, the following terms have
the following meanings:
"Bonds" means the 2014 Bonds.
"Code" means the Internal Revenue Code of 1986, as amended.
"Computation Date" has the meaning set forth in section 1.148 -1(b) of the Tax
Regulations.
"Gross Proceeds" means any proceeds as defined in section 1.148 -1(b) of the Tax
Regulations (referring to sales, investment and transferred proceeds), and any replacement
proceeds as defined in section 1.148 -1(c) of the Tax Regulations, of the Bonds.
"Investment" has the meaning set forth in section 1.148 -1(b) of the Tax
Regulations.
"Nonpurpose Investment" means any investment property, as defined in
section 148(b) of the Code, in which Gross Proceeds of the Bonds are invested and that is not
acquired to carry out the governmental purposes of that series of Bonds.
"Rebate Amount" has the meaning set forth in section 1.148 -1(b) of the Tax
Regulations.
"Tax Regulations" means the United States Treasury Regulations promulgated
pursuant to sections 103 and 141 through 150 of the Code, or section 103 of the 1954 Code, as
applicable.
"Yield" of any Investment has the meaning set forth in section 1.148 -5 of the Tax
Regulations; and of any issue of governmental obligations has the meaning set forth in
section 1.148 -4 of the Tax Regulations.
(b) Not to Cause Interest to Become Taxable. The District covenants that it
shall not use, and shall not permit the use of, and shall not omit to use Gross Proceeds or any
other amounts (or any property the acquisition, construction or improvement of which is to be
financed directly or indirectly with Gross Proceeds) in a manner that if made or omitted,
respectively, could cause the interest on any Bond to fail to be excluded, pursuant to section
103(a) of the Code, from the gross income of the owner thereof for federal income tax purposes.
Without limiting the generality of the foregoing, unless and until the Fiscal Agent receives a
written opinion of Bond Counsel to the effect that failure to comply with such covenant will not
adversely affect such exclusion of the interest on any Bond from the gross income of the owner
thereof for federal income tax purposes, the District shall comply with each of the specific
covenants in this Section.
(c) Private Use and Private Pam. Except as would not cause any Bond to
become a "private activity bond" within the meaning of section 141 of the Code and the Tax
Regulations, the District shall take all actions necessary to assure that the District at all times
prior to the final cancellation of the last of the Bonds to be retired:
79361199.1 27
(i) exclusively owns, onerate.s and nnssPSSPS all property the
acquisition, construction or improvement of which is to be financed or refinanced directly or
indirectly with Gross Proceeds of the Bonds and not use or permit the use of such Gross
Proceeds (including through any contractual arrangement with terms different than those
applicable to the general public) or any property acquired, constructed or improved with such
Gross Proceeds in any activity carried on by any person or entity (including the United States or
any agency, department and instrumentality thereof) other than a state or local government,
unless such use is solely as a member of the general public; and
(ii) does not directly or indirectly impose or accept any charge or other
payment by any person or entity (other than a state or local government) who is treated as using
any Gross Proceeds of the Bonds or any property the acquisition, construction or improvement of
which is to be financed or refinanced directly or indirectly with such Gross Proceeds.
(d) No Private Loan. Except as would not cause any Bond to become a
"private activity bond" within the meaning of section 141 of the Code and the Tax Regulations
and rulings thereunder, the District shall not use or permit the use of Gross Proceeds of the
Bonds to make or finance loans to any person or entity other than a state or local government.
For purposes of the foregoing covenant, such Gross Proceeds are considered to be "ioaned55 to a
person or entity if. (i) property acquired, constructed or improved with such Gross Proceeds is
sold or leased to such person or entity in a transaction that creates a debt for federal income tax
purposes; (ii) capacity in or service from such property is committed to such person or entity
under a take -or -pay, output or similar contract or arrangement; or (iii) indirect benefits of such
Gross Proceeds, or burdens and benefits of ownership of any property acquired, constructed or
improved with such Gross Proceeds, are otherwise transferred in a transaction that is the
economic equivalent of a loan.
(e) Not to Invest at Higher Yield. Except as would not cause the Bonds to
become "arbitrage bonds" within the meaning of section 148 of the Code and the Tax
Regulations and rulings thereunder, the District shall not (and shall not permit any person to), at
any time prior to the final cancellation of the last Bond to be retired, directly or indirectly invest
Gross Proceeds in any Investment, if as a result of such investment the Yield of any Investment
acquired with Gross Proceeds, whether then held or previously disposed of, would materially
exceed the Yield of the Bonds within the meaning of said section 148.
(f) Not Federally Guaranteed. Except to the extent permitted by
section 149(b) of the Code and the Tax Regulations and rulings thereunder, the District shall not
take or omit to take (and shall not permit any person to take or omit to take) any action that
would cause any Bond to be "federally guaranteed" within the meaning of section 149(b) of the
Code and the Tax Regulations and rulings thereunder.
(g) Information Report, The District shall timely file any information
required by section 149(e) of the Code with respect to Bonds with the Secretary of the Treasury
on Form 8038 -G or such other form and in such place as the Secretary may prescribe.
(h) Rebate of Arbitrage Profits. Except to the extent otherwise provided in
section 148(f) of the Code and the Tax Regulations:
79361199.1 28
(i) The District shall account for all Gross Proceeds (including all
receipts, expenditures and investments thereof) on its books of account separately and apart from
all other funds (and receipts, expenditures and investments thereof) and shall retain all records of
accounting for at least six years after the day on which the last Bond is discharged. However, to
the extent permitted by law, the District may commingle (and may allow the City to commingle)
Gross Proceeds of Bonds with its other moneys, provided that it separately accounts for each
receipt and expenditure of Gross Proceeds and the obligations acquired therewith.
(ii) Not less frequently than each Computation Date, the District shall
calculate the Rebate Amount in accordance with rules set forth in section 148(f) of the Code and
the Tax Regulations and rulings thereunder. The District shall maintain a copy of the calculation
with its official transcript of proceedings relating to the issuance of the Bonds until six years
after the final Computation Date.
(iii) In order to assure the excludability pursuant to section 103(a) of
the Code of the interest on the Bonds from the gross income of the owners thereof for federal
income tax purposes, the District shall pay to the United States the amount that when added to
the future value of previous rebate payments made for the Bonds equals (i) in the case of the
Final Computation Date as defined in section 1.148- 3(e)(2) of the Tax Regulations, one hundred
percent (100 %) of the Rebate Amount on such date; and (ii) in the case of any other
Computation Date, ninety percent (90 %) of the Rebate Amount on such date. In all cases, such
rebate payments shall be made by the District at the times and in the amounts as are or may be
required by section 148(f) of the Code and the Tax Regulations and rulings thereunder, and shall
be accompanied by Form 8038 -T or such other, forms and information as is or may be required
by section 148(f) of the Code and the Tax Regulations and rulings thereunder for execution and
filing by the District.
(i) Not to Divert Arbitrage Profits. Except to the extent permitted by
section 148 of the Code and the Tax Regulations and rulings thereunder, the District shall not
and shall not permit any person to, at any time prior to the final cancellation of the last of the
Bonds to be retired, enter into any transaction that reduces the amount required to be paid to the
United States pursuant to paragraph (h) of this Section because such transaction results in a
smaller profit or a larger loss than would have resulted if the transaction had been at arm's length
and had the Yields on the Bonds not been relevant to either party.
0) Bonds Not Hedge Bonds.
(i) The District represents that none of the Bonds is or will become a
"hedge bond" within the meaning of section 149(g) of the Code.
(ii) Without limitation of paragraph (i) above: the District believes
(upon appropriate investigation) (A) that on the date of issuance of the Bonds the District
reasonably expected that at least 85% of the spendable proceeds of the Bonds will be expended
within the three -year period commencing on such date of issuance, and (B) no more than 50% of
the proceeds of the Bonds will be invested in Nonpurpose Investments having a substantially
guaranteed yield for a period of four years or more.
79361199.1 29
(k) Elections. The District hereby directs and authorizes any Author.zed
Officer to make elections permitted or required pursuant to the provisions of the Code or the Tax
Regulations, as such Representative (after consultation with Bond Counsel) deems necessary or
appropriate in connection with the Bonds, in the Tax Certificate as to Arbitrage and the
Provisions of Sections 103 and 141 -150 of the Internal Revenue Code of 1986, or similar or other
appropriate certificate, form or document.
(1) Closing Certificate. The District agrees to execute and deliver in
connection with the issuance of the Bonds a Tax Certificate as to Arbitrage and the Provisions of
Sections 103 and 141 -150 of the Internal Revenue Code of 1986, or similar document containing
additional representations and covenants pertaining to the exclusion of interest on the Bonds
from the gross income of the owners thereof for federal income tax purposes, which
representations and covenants are incorporated as though expressly set forth herein.
5.11 Covenant to Foreclose. The District will review the public records of the County
of Riverside, California, in connection with the collection of the Special Tax not later than July 1
of each year to determine the amount of Special Tax collected in the prior Fiscal Year; and with
respect to individual delinquencies, if the District determines that any single property owner
subject to the Special Tax is delinquent in the payment of Special Taxes in the aggregate of
$1,500 or more or that the delinquent Special Taxes represent more than 5% of the aggregate
Special Taxes levied within Improvement Area D of the District, then the District will send or
cause to be sent a notice of delinquency and a demand for immediate payment thereof to the
property owner within 45 days of such determination, and if the delinquency remains uncured,
except as provided below, the District will cause judicial foreclosure proceedings to be filed in
the superior court within ninety (90) days of such determination against all properties for which
the Special Taxes remain delinquent. In the event the aggregate of delinquent Special Taxes
represent less than 5% of the aggregate Special Taxes levied within Improvement Area D of the
District, the District shall cause judicial foreclosure proceedings to be filed in the superior court
no later than one year from the date of such determination against all properties for which the
Special Taxes remain delinquent. Prior to commencement of any judicial foreclosure
proceedings, the District shall continue with its efforts to collect the delinquent Special Taxes by
sending subsequent notice of delinquency and a demand for immediate payment thereof.
The City Attorney is hereby authorized to employ counsel to conduct any such
foreclosure proceedings. The fees and expenses of any such counsel and costs and expenses of
the City Attorney (including a charge for City or District staff time) in conducting foreclosure
proceedings shall be an Administrative Expense hereunder.
Notwithstanding any provision of the Act or other law of the State to the contrary,
in connection with any foreclosure related to delinquent Special Taxes:
(a) The City, or the Fiscal Agent, is hereby expressly authorized to credit bid
at any foreclosure sale, without any requirement that funds be placed in the Bond Fund or
otherwise be set aside in the amount so credit bid, in the amount specified in Section 53356.5 of
the Act, or such less amount as determined under clause (b) below or otherwise under
Section 53356.6 of the Act.
79361199.1 30
(b) The District may permit, in its sole and absolute discretion, property with
delinquent Special Tax payments to be sold for less than the amount specified in Section 53356.5
of the Act, if it determines that such sale is in the interest of the Bond Owners. The Bond
Owners, by their acceptance of the Bonds, hereby consent to such sale for such lesser amounts
(as such consent is described in Section 53356.6 of the Act), and hereby release the District and
the City, and their respective officers and agents from any liability in connection therewith.
(c) The District is hereby expressly authorized to use amounts in the Special
Tax Fund to pay costs of foreclosure of delinquent Special Taxes.
(d) The District may forgive all or any portion of the Special Taxes levied or
to be levied on any parcel in Improvement Area D of the District, so long as the District
determines that such forgiveness is not expected to adversely affect its obligation to pay principal
of and interest on the Bonds under Section 3.4(b) hereof.
5.12 Annual Reports to CDIAC. Not later than October 30 of each year,
commencing October 30, 2014, and until the October 30 following the final maturity of the
Bonds, the Treasurer shall supply the information required by Section 53359.5(b) or (c) of the
Act to CDIAC (on such forms as CDIAC may specify) and the District.
5.13 Continuing Disclosure to Owners. In addition to its obligations under
Section 5.12, the District hereby covenants and agrees that it will carry out all of its obligations
under the Continuing Disclosure Agreement relating to the Authority Bonds. Notwithstanding
any other provision of this Agreement, failure of the District to comply with the Continuing
Disclosure Agreement shall not be considered a default hereunder; however, any Participating
Underwriter or any holder or beneficial owner of the Authority Bonds may take such actions as
may be necessary and appropriate to compel performance by the District of its obligations under
this Section 5.13, including seeking mandate or specific performance by court order.
5.14 Reserve Account Replenishment. The District hereby covenants that to the
extent there is a draw upon the Reserve Account pursuant to the Authority Indenture as a result
of a delinquency in the collection of Special Taxes, the District shall cause the Treasurer to effect
the next annual levy of Special Taxes in an amount sufficient to replenish such delinquency in
addition to those required by Section 5.8 hereof and in addition to amounts that would be levied
if there were no such delinquency; provided, however, the amount of Special Taxes levied shall
not exceed the maximum permitted by the RMA.
ARTICLE VI
INVESTMENTS; DISPOSITION OF INVESTMENT PROCEEDS;
LIABILITY OF THE DISTRICT
6.1 Deposit and Investment of Moneys in Funds. Moneys in any fund or account
created or established by this Agreement and held by the Fiscal Agent shall be invested by the
Fiscal Agent in Permitted Investments, as directed pursuant to an Officer's Certificate filed with
the Fiscal Agent at least two (2) Business Days, in advance of the making of such investments,
which by their terms mature prior to the date on which such moneys are required to be paid out
hereunder. In the absence of any such Officer's Certificate, the Fiscal Agent shall invest any
79361199.1 31
such moneys in Permitted Investments described in clause (d) of the definition thereof. The
Treasurer shall make note of any investment of funds hereunder in excess of the yield on the
Bonds, so that appropriate actions can be taken to assure compliance with Section 6.2 hereof.
Moneys in any fund or account created or established by this Agreement and held
by the Treasurer shall be invested by the Treasurer in Permitted Investments, which in any event
by their terms mature prior to the date on which such moneys are required to be paid out
hereunder. Obligations purchased as an investment of moneys in any fund shall be deemed to be
part of such fund or account, subject, however, to the requirements of this Agreement for transfer
of interest earnings and profits resulting from investment of amounts in funds and accounts.
Whenever in this Agreement any moneys are required to be transferred by the District to the
Fiscal Agent, such transfer may be accomplished by transferring a like amount of Permitted
Investments.
The Fiscal Agent or an affiliate or the Treasurer may act as principal or agent in
the acquisition or disposition of any investment and shall be entitled to its customary fee
therefor. Neither the Fiscal Agent nor the Treasurer shall incur any liability for losses arising
from any investments made pursuant to this Section. For purposes of determining the amount on
deposit in any fund or account held 'hereunder, all Permitted Investments or investments credited
to such fund or account shall be valued at the cost thereof (excluding accrued interest and
brokerage commissions, if any).
Except as otherwise provided iti the next sentence, all investments of amounts
deposited in any fund, or account created by or pursuant to this Agreement, or otherwise
containing gross proceeds of the Bonds (within the meaning of section 148 of the Code) shall be
acquired, disposed of, and valued (as of the date that valuation is required by this Agreement or
the Code) at Fair Market Value. Notwithstanding the previous sentence, investments in funds or
accounts (or portions thereof) that are subject to a yield restriction under the applicable
provisions of the Code shall be valued at their present value (within the meaning of section 148
of the Code). The Fiscal Agent shall not be liable for verification of the application of such
sections of the Code.
Investments in any and all funds and accounts may be commingled in a separate
fund or funds for purposes of making, holding and disposing of investments, notwithstanding
provisions herein for transfer to or holding in or to the credit of particular funds or accounts of
amounts received or held by the Fiscal Agent or the Treasurer hereunder, provided that the Fiscal
Agent or the Treasurer, as applicable, shall at all times account for such investments strictly in
accordance with the funds and accounts to which they are credited and otherwise as provided in
this Agreement.
The Fiscal Agent or the Treasurer, as applicable, shall sell at the highest price
reasonably obtainable, or present for redemption, any investment security whenever it shall be
necessary to provide moneys to meet any required payment, transfer, withdrawal or disbursement
from the fund or account to which such investment security is credited and neither the Fiscal
Agent nor the Treasurer shall be liable or responsible for any loss resulting from the acquisition
or disposition of such investment security in accordance herewith.
79361199.1 32
61 Limited Obligation. The District's obligations hereunder are limited obligations
of the District and are payable solely from and secured solely by the Special Tax Revenues and
the amounts in the Special Tax Fund and the Bond Fund.
6.3 Liability of District. The District shall not incur any responsibility in respect of
the Bonds or this Agreement other than in connection with the duties or obligations explicitly
herein or in the Bonds assigned to or imposed upon it. The District shall not be liable in
connection with the performance of its duties hereunder, except for its own negligence or willful
default. The District shall not be bound to ascertain or inquire as to the performance or
observance of any of the terms, conditions, covenants or agreements of the Fiscal Agent herein
or of any of the documents executed by the Fiscal Agent in connection with the Bonds, or as to
the existence of a default or event of default thereunder.
In the absence of bad faith, the District, including the Treasurer, may conclusively
rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon
certificates or opinions furnished to the District and conforming to the requirements of this
Agreement. The District, including the Treasurer, shall not be liable for any error of judgment
made in good faith unless it shall be proved that it was negligent in ascertaining the pertinent
facts.
No provision of this Agreement shall require the District to expend or risk its own
general funds or otherwise incur any financial liability (other than with respect to the Special Tax
Revenues) in the performance of any of its obligations hereunder, or in the exercise of any of its
rights or powers, if it shall have reasonable grounds for believing that repayment of such funds
or adequate indemnity against such risk or liability is not reasonably assured to it.
The District may rely and shall be protected in acting or refraining from acting
upon any notice, resolution, request, consent, order, certificate, report, warrant, bond or other
paper or document believed by it to be genuine and to have been signed or presented by the
proper party or proper parties. The District may consult with counsel, who may be the City
Attorney, with regard to legal questions, and the opinion of such counsel shall be full and
complete authorization and protection in respect of any action taken or suffered by it hereunder
in good faith and in accordance therewith.
The District shall not be bound to recognize any person as the Owner of a Bond
unless and until such Bond is submitted for inspection, if required, and his title thereto
satisfactorily established, if disputed.
Whenever in the administration of its duties under this Agreement the District
shall deem it necessary or desirable that a matter be proved or established prior to taking or
suffering any action hereunder, such matter (unless other evidence in respect thereof be herein
specifically prescribed) may, in the absence of willful misconduct on the part of the District, be
deemed to be conclusively proved and established by a certificate of the Fiscal Agent, and such
certificate shall be full warranty to the District for any action taken or suffered under the
provisions of this Agreement or any Supplemental Agreement upon the faith thereof, but in its
discretion the District may, in lieu thereof, accept other evidence of such matter or may require
such additional evidence as to it may seem reasonable.
79361199.1 33
6.4 Employment of Agents by District or
respective duties and obligations hereunder, the City,
employ such persons or entities as they deem necessar
and /or the Treasurer shall not be liable for any of the acts
employed by them in good faith hereunder, and shall
protected in doing so, upon the opinions, calculations,
persons or entities.
ARTICLE VII
the City, In order in rnprfnr;n their
the District and /or the Treasurer may
y or advisable. The City, the District
or omissions of such persons or entities
be entitled to rely, and shall be fully
determinations and directions of such
EVENTS OF DEFAULT AND REMEDIES OF BOND OWNERS
7.1 Events of Default. The following events shall be Events of Default:
(a) Failure to pay any installment of principal of any Bonds when and as the
same shall become due and payable whether at maturity as therein expressed, by proceedings for
redemption or otherwise.
(b) Failure to pay any installment of interest on any Bonds when and as the
same shall become due and payable.
(c) Failure by the District to observe and perform any of the other covenants,
agreements or conditions on its part in this Agreement or in the Bonds contained, if such failure
shall have continued for a period of 60 days after written notice thereof, specifying such failure
and requiring the same to be remedied, shall have been given to the District by the Fiscal Agent
or the Owners of not less than 25% in aggregate principal amount of the Bonds at the time
Outstanding; provided, however, if in the reasonable opinion of the District the failure stated in
the notice can be corrected, but not within such 60 -day period, such failure shall not constitute an
Event of Default if corrective action is instituted by the District within such 60 -day period and
the District shall thereafter diligently and in good faith cure such failure in a reasonable period of
time.
(d) Commencement by the District of a voluntary case under Title 11 of the
United States Code or any substitute or successor statute.
(e) Default under a Supplemental Agreement securing the issuance of
Additional Bonds.
7.2 Remedies of Bond Owners. Subject to the provisions of Section 7.8 hereof, any
Bond Owner shall have the right, for the equal benefit and protection of all Bond Owners
similarly situated:
(a) by mandamus, suit, action or proceeding, to compel the District and its
officers, agents, or employees to perform each and every term, provision and covenant contained
in this Agreement and in the Bonds, and to require the carrying out of any or all such covenants
and agreements of the District and the fulfillment of all duties imposed upon it by the Act;
(b) by suit, action or proceeding in equity, to enjoin any acts or things which
are unlawful, or the violation of any of the Bond Owners' rights; or
79361199.1 34
(c) upon the happening of any Event of Default, by suit, action or proceeding
in any court of competent jurisdiction, to require the District and its officers and employees to
account as if it and they were the trustees of an express trust.
7.3 Application of Special Taxes and Other Funds After Default. If an Event of
Default shall occur and be continuing, all Special Taxes, including any penalties, costs, fees and
other charges accruing under the Act, and any other funds then held or thereafter received by the
Fiscal Agent under any of the provisions of this Agreement shall be applied by the Fiscal Agent
as follows and in the following order:
(a) To the payment of any expenses necessary in the opinion of the Fiscal
Agent to protect the interest of the Owners of the Bonds, and payment of reasonable fees,
charges and expenses of the Fiscal Agent (including reasonable fees and disbursements of its
counsel) incurred in and about the performance of its powers and duties under this Agreement;
(b) To the payment of the principal of and interest then due with respect to the
Bonds (upon presentation of the Bonds to be paid, and stamping thereon of the payment if only
partially paid, or surrender thereof if fully paid) subject to the provisions of this Agreement, as
follows:
First: To the payment to the Persons entitled thereto of all installments of interest
then due in the order of the maturity of such installments, and, if the amount available shall not
be sufficient to pay in full any installment or installments maturing on the same date, then to the
payment thereof ratably, according to the amounts due thereon, to the Persons entitled thereto,
without any discrimination or preference; and
Second: To the payment to the Persons entitled thereto of the unpaid principal of
any Bonds which shall have become due, whether at maturity or by call for redemption, with
interest on the overdue principal at the rate borne by the respective Bonds on the date of maturity
or redemption, and, if the amount available shall not be sufficient to pay in full all the Bonds,
together with such interest, then to the payment thereof ratably, according to the amounts of
principal due on such date to the Persons entitled thereto, without any discrimination or
preference; and
(c) Any remaining funds shall be transferred by the Fiscal Agent to the Bond
Fund,
7.4 Absolute Obligation of the District. Nothing in Section 7.7 or in any other
provision of this Agreement or in the Bonds contained shall affect or impair the obligation of the
District, which is absolute and unconditional, to pay the principal of and interest on the Bonds to
the respective Owners of the Bonds at their respective dates of maturity, or upon call for
redemption, as herein provided, but only out of the Special Taxes and other moneys herein
pledged therefor and received by the District or the Fiscal Agent, or affect or impair, the right of
such Owners, which is also absolute and unconditional, to enforce such payment by virtue of the
contract embodied in the Bonds.
7.5 Termination of Proceedings. In case any proceedings taken by any one or more
Bond Owners on account of any Event of Default shall have been discontinued or abandoned for
79361199.1 35
any reason or shall have been determined adversely to the Bond Owners, then in every such case
the District, and the Bond Owners, subject to any determination in such proceedings, shall be
restored to their former positions and rights hereunder, severally and respectively, and all rights,
remedies, powers and duties of the City, and the Bond Owners shall continue as though no such
proceedings had been taken.
766 Remedies Not Exclusive. No remedy herein conferred upon or reserved to the
Fiscal Agent or to the Owners of the Bonds is intended to be exclusive of any other remedy or
remedies, and each and every such remedy, to the extent permitted by law, shall be cumulative
and in addition to any other remedy given hereunder or now or hereafter existing at law or in
equity or otherwise.
7.7 No Waiver of Default. No delay or omission of any Owner of the Bonds to
exercise any right or power arising upon the occurrence of any default shall impair any such right
or power or shall be construed to be a waiver of any such default or acquiescence therein; and
every power and remedy given by this Agreement to the Owners of the Bonds may be exercised
from time to time and as often as may be deemed expedient.
7.8 Actions by Fiscal Agent as Attorney -iii -Fact. Any suit, action or proceeding
which any Owner shall have the right to bring to enforce any right or remedy hereunder may be
brought by the Fiscal Agent for the equal benefit and protection of all Owners, and the Fiscal
Agent is hereby appointed (and the successive respective Owners of the Bonds, by taking and
holding the same, shall be conclusively deemed so to have appointed it) the true and lawful
attorney -in -fact of the Owners for the purpose of bringing any such suit, action or proceeding
and to do and perform any and all acts and things for and on behalf of the Owners as a class or
classes, as may be necessary or advisable in the opinion of the Fiscal Agent as such attorney -in-
fact.
ARTICLE VIII
THE FISCAL AGENT
801 Appointment of Fiscal Agent. Union Bank, N.A., is hereby appointed Fiscal
Agent and paying agent for the Bonds. The Fiscal Agent undertakes to perform such duties, and
only such duties, as are specifically set forth in this Agreement, and no implied covenants or
obligations shall be read into this Agreement against the Fiscal Agent.
Any company into which the Fiscal Agent may be merged or converted or with
which it may be consolidated or any company resulting from any merger, conversion or
consolidation to which it shall be a party or any company to which the Fiscal Agent may sell or
transfer all or substantially all of its corporate trust business, provided such company shall be
eligible under the following paragraph of this Section, shall be the successor to such Fiscal Agent
without the execution or filing of any paper or any further act, anything herein to the contrary
notwithstanding.
So long as there is no Event of Default hereunder, the District may remove the
Fiscal Agent initially appointed, and any successor thereto, and may appoint a successor or
successors thereto, but any such successor shall be a bank or trust company having a combined
79361199.1 36
capital (exclusive of borrowed capital) and surplus of at least Fifty Million Dollars
($50,000,000), and subject to supervision or examination by federal or state authority. If such
bank or trust company publishes a report of condition at least annually, pursuant to law or to the
requirements of any supervising or examining authority above referred to, then for the purposes
of this Section 8. 1, combined capital and surplus of such bank or trust company shall be deemed
to be its combined capital and surplus as set forth in its most recent report of condition so
published.
The Fiscal Agent may at any time resign by giving written notice to the District
and by giving to the Owners notice by mail of such resignation. Upon receiving notice of such
resignation, the District shall promptly appoint a successor Fiscal Agent by an instrument in
writing. Any resignation or removal of the Fiscal Agent shall become effective upon acceptance
of appointment by the successor Fiscal Agent.
If no appointment of a successor Fiscal Agent shall be made pursuant to the
foregoing provisions of this Section 8.1 within forty -five (45) days after the Fiscal Agent shall
have given to the District written notice or after a vacancy in the office of the Fiscal Agent shall
have occurred by reason of its inability to act, the Fiscal Agent or any Bond Owner may apply to
any court of competent jurisdiction to appoint a successor Fiscal Agent. Said court may
thereupon, after such notice, if any, as such court may deem proper, appoint a successor Fiscal
Agent.
If, by reason of the judgment of any court, the Fiscal Agent is rendered unable to
perform its duties hereunder, all such duties and all of the rights and powers of the Fiscal Agent
hereunder shall be assumed by and vest in the Treasurer of the City in trust for the benefit of the
Owners. The District covenants for the direct benefit of the Owners that the Treasurer in such
case shall be vested with all of the rights and powers of the Fiscal Agent hereunder, and shall
assume all of the responsibilities and perform all of the duties of the Fiscal Agent hereunder, in
trust for the benefit of the Owners of the Bonds.
8.2 Liability of Fiscal Agent. The recitals of facts, covenants and agreements herein
and in the Bonds contained shall be taken as statements, covenants and agreements of the
District, and the Fiscal Agent assumes no responsibility for the correctness of the same, nor
makes any representations as to the validity'or sufficiency of this Agreement or of the Bonds, nor
shall incur any responsibility in respect thereof, other than in connection with the duties or
obligations herein or in the Bonds assigned to or imposed upon it. The Fiscal Agent shall not be
liable in connection with the performance of its duties hereunder, except for its own negligence
or willful default. The Fiscal Agent assumes no responsibility or liability for any information,
statement or recital in any offering memorandum or other disclosure material prepared or
distributed with respect to the issuance of the Bonds.
In the absence of bad faith, the Fiscal Agent may conclusively rely, as to the truth
of the statements and the correctness of the opinions expressed therein, upon certificates or
opinions furnished to the Fiscal Agent and conforming to the procedural requirements of this
Agreement; but in the case of any such certificates or opinions by which any provision hereof are
specifically required to be furnished to the Fiscal Agent, the Fiscal Agent shall be under a duty to
examine the same to determine whether or not they conform to the procedural requirements of
79361199.1 37
this Agreement. Except as Drovided above in this naraornnh flip Picral 0 RAri� �i, ,, 1,, .. a
i A" A I �E)j J1L J11U11 Ul/ proLUULGU
and shall incur no liability in acting or proceeding, or in not acting or not proceeding, in good
faith, reasonably and in accordance with the terms of this Agreement, upon any resolution, order,
notice, request, consent or waiver, certificate, statement, affidavit, or other paper or document
which it shall in good faith reasonably believe to be genuine and to have been adopted or signed
by the proper person or to have been prepared and furnished pursuant to any provision of this
Agreement, and the Fiscal Agent shall not be under any duty to make any investigation or
inquiry as to any statements contained or matters referred to in any such instrument.
The Fiscal Agent shall not be bound to ascertain or inquire as to the performance
or observance of any of the terms, conditions, covenants or agreements of the City or the District
herein or of any of the documents executed by the City or the District in connection with the
Bonds, or as to the existence of a default or event of default thereunder.
The Fiscal Agent shall not be liable for any error of judgment made in good faith
by a responsible officer unless it shall be proved that the Fiscal Agent was negligent in
ascertaining the pertinent facts.
No provision of this Agreement shall require the Fiscal Agent to expend or risk its
own funds or otherwise incur any financial liability in the performance of any of its duties
hereunder, or in the exercise of any of its rights or powers, if it shall have reasonable grounds for
believing that repayment of such funds or adequate indemnity against such risk or liability is not
reasonably assured to it.
The Fiscal Agent shall be under no obligation to exercise- any of -the ,rights or
powers vested in it by this Agreement at the request or direction of any of the Owners pursuant
to this Agreement unless such Owners shall have offered to the Fiscal Agent reasonable security
or indemnity against the costs, expenses and liabilities which might be incurred by it in
compliance with such request or direction.
The Fiscal Agent may become the owner of the Bonds with the same rights it
would have if it were not the Fiscal Agent.
All indemnifications and releases from liability granted to the Fiscal Agent
hereunder shall extend to the directors, officers and employees of the Fiscal Agent,
83 Information. The Fiscal Agent shall provide to the District such information
relating to the Bonds and the funds and accounts maintained by the Fiscal Agent hereunder as the
District shall reasonably request, including, but not limited to, quarterly statements reporting
funds held and transactions by the Fiscal Agent,
The Fiscal Agent shall furnish the District quarterly cash transaction statements
which include detail for all investment transactions effected by the Fiscal Agent or brokers
selected by the District. Upon the District's election, such statements will be delivered via the
Fiscal Agent's online service and upon electing such service, paper statements will be provided
only upon request. The District waives the right to receive brokerage confirmations of security
transactions effected by the Fiscal Agent as they occur, to the extent permitted by law. The
District further understands that trade confirmations for securities. transactions effected by the
79361199.1 38
Fiscal Agent will be available upon request and at no additional cost and other trade
confirmations may be obtained from the applicable broker.
8A Notice to Fiscal Agent. The Fiscal Agent may rely and shall be protected in
acting or refraining from acting upon any notice, resolution, request, consent, order, certificate,
report, warrant, Bond or other paper or document believed by it to be genuine and to have been
signed or presented by the proper party or proper parties. The Fiscal Agent may consult with
counsel, who may be counsel to the District, with regard to legal questions, and the opinion of
such counsel shall be full and complete authorization and protection in respect of any action
taken or suffered by it hereunder in good faith and in accordance therewith.
The Fiscal Agent shall not be bound to recognize any person as the Owner of a
Bond unless and until such Bond is submitted for inspection, if required, and his title thereto
satisfactorily established, if disputed.
Whenever in the administration of its duties under this Agreement the Fiscal
Agent shall deem it necessary or desirable that a matter be proved or established prior to taking
or suffering any action hereunder such matter (unless other evidence in respect thereof be herein
specifically prescribed) may, in the absence of willful misconduct on the part of the Fiscal
Agent, be deemed to be conclusively proved and established by a certificate of the District, and
such certificate shall be full warrant to the Fiscal Agent for any action taken or suffered under
the provisions of this Agreement or any Supplemental Agreement upon the faith thereof, but in
its discretion the Fiscal Agent may, in lieu thereof, accept other evidence of such matter or may
require such additional evidence as to it may seem reasonable.
8.5 Compensation, Indemnification. The District shall pay to the Fiscal Agent from
time to time reasonable compensation for all services rendered as Fiscal Agent under this
Agreement, and also all reasonable expenses, charges, counsel fees and other disbursements,
including those of their attorneys, agents and employees, incurred in and about the performance
of their powers and duties under this Agreement, but the Fiscal Agent shall not have a lien
therefor on any funds at any time held by it under this Agreement. The District further agrees, to
the extent permitted by applicable law, to indemnify and save the Fiscal Agent, its officers,
employees, directors and agents harmless against any liabilities which it may incur in the
exercise and performance of its powers and duties hereunder which are not due to its negligence
or willful misconduct. The obligation of the District under this Section shall survive resignation
or removal of the Fiscal Agent under this Agreement and payment of the Bonds and discharge of
this Agreement, but any monetary obligation of the District arising under this Section shall be
limited solely to amounts on deposit in the Administrative Expense Fund.
ARTICLE IX
MODIFICATION OR AMENDMENT OF THIS AGREEMENT
901 Amendments Permitted. This Agreement and the rights and obligations of the
District and of the Owners of the Bonds may be modified or amended at any time by a
Supplemental Agreement pursuant to the affirmative vote, at a meeting of Owners, or with the
written consent without a meeting, of the Owners of at least sixty percent (60 %) in aggregate
principal amount of the Bonds then Outstanding, exclusive of Bonds disqualified as provided in
79361199.1 39
Section 9.4 hereof. No such modification or amendment shall ail Pxtp„.l t>1A ,r ,,,, :, � �..
\A, viiu uiv iilttLUl lly 01 ally
Bond or reduce the interest rate thereon, or otherwise alter or impair the obligation of the District
to pay the principal of, and the interest and any premium on, any Bond, without the express
consent of the Owner of such Bond, or (ii) permit the creation by the District of any pledge or
lien upon the Special Taxes superior to or on a parity with the pledge and lien created for the
benefit of the Bonds (except as otherwise permitted by the Act, the laws of the State of
California or this Agreement), or (iii) reduce the percentage of Bonds required for the
amendment hereof. Any such amendment may not modify any of the rights or obligations of the
Fiscal Agent without its written consent.
This Agreement and the rights and obligations of the District and of the Owners
may also be modified or amended at any time by a Supplemental Agreement, without the consent
of any Owners, only to the extent permitted by law and only for anyone or more of the following
purposes:
(a) to add to the covenants and agreements of the District in this Agreement
contained, other covenants and agreements thereafter to be observed, or to limit or surrender any
right or power herein reserved to or conferred upon the District;
(b) to make modifications not adversely affecting any Outstanding Bonds of
the District in any material respect;
(c) to make such provisions for the purpose of curing any ambiguity,
inconsistency or omission of curing, correcting or supplementing any defective provision
contained in this Agreement, or in regard to questions arising under this Agreement, as the
District and the Fiscal Agent may deem necessary or desirable and not inconsistent with this
Agreement, and which shall not adversely affect the rights of the Owners of the Bonds in any
material respect;
(d) to make such additions, deletions or modifications as may be necessary or
desirable to assure the exclusion from gross income for federal income tax purposes of interest
on the Bonds; or
(e)
to provide for the issuance of Additional Bonds in accordance with the
provisions of this Agreement.
9.2 Owners' Meetings. The District may at any time call a meeting of the Owners.
In such event the District is authorized to fix the time and place of said meeting and to provide
for the giving of notice thereof, and to fix and adopt rules and regulations for the conduct of said
meeting.
993 Procedure for Amendment with Written Consent of Owners. The District and
the Fiscal Agent may at any time adopt a Supplemental Agreement amending the provisions of
the Bonds or of this Agreement or any Supplemental Agreement, to the extent that such
amendment is permitted by Section 9.1 hereof, to take effect when and as provided in this
Section. A copy of such Supplemental Agreement, together with a request to Owners for their
consent thereto, shall be mailed by first -class mail by the Fiscal Agent to each Owner of Bonds
79361199.1 40
Outstanding, but failure to mail copies of such Supplemental Agreement and request shall not
affect the validity of the Supplemental Agreement when assented to as in this Section provided.
Such Supplemental Agreement shall not become effective unless there shall be
filed with the Fiscal Agent the written consents of the Owners of at least sixty percent (60 %) in
aggregate principal amount of the Bonds then Outstanding (exclusive of Bonds disqualified as
provided in Section 9.4 hereof) and a notice shall have been mailed as hereinafter in this
Section provided. Each such consent shall be effective only if accompanied by proof of
ownership of the Bonds for which such consent is given, which proof shall be such as is
permitted by Section 10.4 hereof. Any such consent shall be binding upon the Owner of the
Bonds giving such consent and on any subsequent Owner (whether or not such subsequent
Owner has notice thereof) unless such consent is revoked in writing by the Owner giving such
consent or a subsequent Owner by filing such revocation with the Fiscal Agent prior to the date
when the notice hereinafter in this Section provided for has been mailed.
After the Owners of the required percentage of Bonds shall have filed their
consents to the Supplemental Agreement, the District shall mail a notice to the Owners in the
manner hereinbefore provided in this Section for the mailing of the Supplemental Agreement,
stating in substance that the Supplemental Agreement has been consented to by the Owners of
the required percentage of Bonds and will be effective as provided in this Section (but failure to
mail copies of said notice shall not affect the validity of the Supplemental Agreement or consents
thereto). Proof of the mailing of such notice shall be filed with the Fiscal Agent. A record,
consisting of the papers required by this Section 9.3 to be filed with the Fiscal Agent, shall be
proof of the matters therein stated until the contrary is proved. The Supplemental Agreement
shall become effective upon the filing with the Fiscal Agent of the proof of mailing of such
notice, and the Supplemental Agreement shall be deemed conclusively binding (except as
otherwise hereinabove specifically provided in this Article) upon the District and the Owners of
all Bonds at the expiration of sixty (60) days after such filing, except in the event of a final
decree of a court of competent jurisdiction setting aside such consent in a legal action, or
equitable proceeding for such purpose commenced within such 60 -day period.
9.4 Disqualified Bonds. Bonds owned or held for the account of the City or the
District, excepting any pension or retirement fund, shall not be deemed Outstanding for the
purpose of any vote, consent or other action or any calculation of Outstanding Bonds provided
for in this Article IX, and shall not be entitled to vote upon, consent to, or take any other action
provided for in this Article IX.
9.5 Effect of Supplemental Agreement. From and after the time any Supplemental
Agreement becomes effective pursuant to this Article IX, this Agreement shall be deemed to be
modified and amended in accordance therewith, the respective rights, duties and obligations
under this Agreement of the District and all Owners of Bonds Outstanding shall thereafter be
determined, exercised and enforced hereunder subject in all respects to such modifications and
amendments, and all the terms and conditions of any such Supplemental Agreement shall be
deemed to be part of the terms and conditions of this Agreement for any and all purposes.
9.6 Endorsement or Replacement of Bonds Issued After Amendments. The
District may determine that Bonds issued and delivered after the effective date of any action
79361199.1 41
taken as provided in this Article IX shall bear a notation by endorsement or ,, e.., l" .�
approved by the District, as to such action. In that case, upon demand of the Owner of any Bond
Outstanding at such effective date and presentation of his Bond for that purpose at the Corporate
Trust Office of the Fiscal Agent or at such other office as the District may select and designate
for that purpose, a suitable notation shall be made on such Bond. The District may determine
that new Bonds, so modified as in the opinion of the District is necessary to conform to such
Owners' action, shall be prepared, executed and delivered. In that case, upon demand of the
Owner of any Bonds then Outstanding, such new Bonds shall be exchanged at the Corporate
Trust Office of the Fiscal Agent, without cost to any Owner, for Bonds then Outstanding, upon
surrender of such Bonds.
997 Amendatory Endorsement of Bonds. The provisions of this Article IX shall not
prevent any Owner from accepting any amendment as to the particular Bonds held by him,
provided that due notation thereof is made on such Bonds.
908 Opinion of Bond Counsel. In connection with any Supplemental Agreement, the
Fiscal Agent shall be entitled to receive an opinion of Bond Counsel that any such Supplemental
Agreement is authorized or permitted by this Agreement and the Fiscal Agent may conclusively
rely upon such opinion.
ARTICLE X
MISCELLANEOUS
10.1 Benefits of Agreement Limited to Parties. Nothing in this Agreement,
expressed or implied, is intended to give to any person other than the District, City, the Fiscal
Agent and the Owners, any right, remedy, or claim under or by reason of this Agreement. Any
covenants, stipulations, promises or agreements in this Agreement contained by and on behalf of
the District shall be for the sole and exclusive benefit of the Owners and the Fiscal Agent,
10.2 Successor is Deemed Included in All References to Predecessor. Whenever in
this Agreement or any Supplemental Agreement either the District or the Fiscal Agent is named
or referred to, such reference shall be deemed to include the successors or assigns thereof, and all
the covenants and agreements in this Agreement contained by or on behalf of the District or the
Fiscal Agent shall bind and inure to the benefit of the respective successors and assigns thereof
whether so expressed or not.
10.3 Discharge of Agreement. The District shall have the option to pay and discharge
the entire indebtedness on all or any portion of the Bonds Outstanding in any one or more of the
following ways:
(a) by well and truly paying or causing to be paid the principal of, and interest
and any premium on, such Bonds Outstanding, as and when the same become due and payable;
(b) by depositing with the Fiscal Agent, in trust, at or before maturity, money
which, together with the amounts then on deposit in the funds and accounts established with the
Fiscal Agent pursuant to this Agreement, is fully sufficient to pay such Bonds Outstanding,
including all principal, interest and redemption premiums; or
79361199.1 42
(c) by irrevocably depositing with the Fiscal Agent, in trust, cash and Federal
Securities and /or investments described in clause (i) of the definition of Permitted Investments in
such amount as the District shall determine as confirmed by Bond Counsel or an independent
certified public accountant will, together with the interest to accrue thereon and moneys then on
deposit in the funds and accounts established with the Fiscal Agent pursuant to this Agreement,
be fully sufficient to pay and discharge the indebtedness on such Bonds (including all principal,
interest and redemption premiums) at or before their respective maturity dates.
If the District shall have taken any of the actions specified in (a), (b) or (c) above,
and if such Bonds are to be redeemed prior to the maturity thereof, notice of such redemption
shall have been given as in this Agreement provided or provision satisfactory to the Fiscal Agent
shall have been made for the giving of such notice, then, at the election of the District, and
notwithstanding that any Bonds shall not have been surrendered for payment, the pledge of the
Special Taxes and other funds provided for in this Agreement and all other obligations of the
District under this Agreement with respect to such Bonds Outstanding shall cease and terminate.
Notice of such election shall be filed with the Fiscal Agent. Notwithstanding the foregoing, the
obligation of the District to pay or cause to be paid to the Owners of the Bonds not so
surrendered and paid all sums due thereon and all amounts owing to the Fiscal Agent pursuant to
Section 8.5 hereof, and otherwise to assure that no action is taken or failed to be taken if such
action or failure adversely affects the exclusion of interest on the Bonds from gross income for
federal income tax purposes, shall continue in any event.
Upon compliance by the District with the foregoing with respect to all Bonds
Outstanding, any funds held by the Fiscal Agent after payment of all fees and expenses of the
Fiscal Agent, which are not required for the purposes of the preceding paragraph, shall be paid
over to the District and any Special Taxes thereafter received by the District shall not be remitted
to the Fiscal Agent but shall be retained by the District to be used for any purpose permitted
under the Act.
Notwithstanding the foregoing, the payment of Outstanding Bonds and the
termination of the pledge of the Special Tax Revenues shall not prevent the District from issuing
Additional Bonds secured by a pledge of the Special Tax Revenues.
10.4 Execution of Documents and Proof of Ownership by Owners. Any request,
declaration or other instrument which this Agreement may require or permit to be executed by
Owners may be in one or more instruments of similar tenor, and shall be executed by 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 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.
79361199.1 43
Except as otherwise herein expressly provided, the ownershin of regictei•ed Rnnrk
and the amount, maturity, number and date of holding the same shall be proved by the registry
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 District or the Fiscal Agent in good faith and in accordance therewith.
10.5 Waiver of Personal Liability. No member, officer, agent or employee of the
District or the City shall be individually or personally liable for the payment of the principal of,
or interest or any premium on, the Bonds; but nothing herein contained shall relieve any such
member, officer, agent or employee from the performance of any official duty provided by law.
10.6 Notices to and Demands on District and Fiscal Agent. Any notice or demand
which by any provision of this Agreement is required or permitted to be given or served by the
Fiscal Agent to or on the District may be given or served by being deposited postage prepaid in a
post office letter box addressed (until another address is filed by the District with the Fiscal
Agent), or by facsimile or other form of electronic communication, as follows:
City of Lake Elsinore Community Facilities District
No. 2003 -2 (Canyon Hills)
c/o City of Lake Elsinore
130 South Mair. Street
Lake Elsinore, California 92530
Attn: City Manager
(951) 674 -3124
(951) 674 -2392 - Fax
Any notice or demand which by any provision of this Agreement is required or
permitted to be given or served by the District to or on the Fiscal Agent may be given or served
by being deposited postage prepaid in a post office letter box addressed (until another address is
filed by the Fiscal Agent with the District) as follows:
Union Bank, N.A.
120 South San Pedro Street, 4th Floor
Los Angeles, California 90012
Attention: Corporate Trust Department
(213) 972 -5677
(213) 972 -5694 - Fax
10.7 Partial Invalidity. If any Section, paragraph, sentence, clause or phrase of this
Agreement shall for any reason be held illegal or unenforceable, such holding shall not affect the
validity of the remaining portions of this Agreement. The District hereby declares that it would
have adopted this Agreement and each and every other Section, paragraph, sentence, clause or
phrase hereof and authorized the issue of the Bonds pursuant thereto irrespective of the fact that
any one or more Sections, paragraphs, sentences, clauses, or phrases of this Agreement may be
held illegal, invalid or unenforceable.
79361199.1 44
10.8 Unclaimed Moneys. Anything contained herein to the contrary notwithstanding,
any moneys held by the Fiscal Agent for the payment and discharge of the principal of, and the
interest and any premium on, the Bonds which remains unclaimed for two (2) years after the date
when the payments of such principal, interest and premium have become payable, if such money
was held by the Fiscal Agent at such date, shall be repaid by the Fiscal Agent to the District as its
absolute property free from any trust, and the Fiscal Agent shall thereupon be released and
discharged with respect thereto and the Bond Owners shall look only to the District for the
payment of the principal of, and interest and any premium on, such Bonds.
10.9 Applicable Law. This Agreement shall be governed by and enforced in
accordance with the laws of the State of California applicable to contracts made and performed
in the State of California.
10.10 Conflict with Act. In the event of a conflict between any provision of this
Agreement with any provision of the Act as in effect on the Closing Date, the provision of the
Act shall prevail over the conflicting provision of this Agreement.
10.11 Conclusive Evidence of Regularity. Bonds issued pursuant to this Agreement
shall constitute conclusive evidence of the regularity of all proceedings under the Act relative to
their issuance and the levy of the Special Taxes,
10.12 Payment on Business Day. In any
or of principal (and premium, if any) of the Bonds
or the date any action is to be taken pursuant to thi
payment of interest or principal (and premium, if
date but may be made on the next succeeding day
and effect as if made on the date required and no
date.
case where the date of the maturity of interest
or the date fixed for redemption of any Bonds
s Agreement is other than a Business Day, the
any) or the action need not be made on such
which is a Business Day with the same force
interest shall accrue for the period after such
10.13 Counterparts. This Agreement may be executed in counterparts, each of which
shall be deemed an original.
79361199.1 45
IN WITNESS WHEREOF, the District has cal�Sed this A greement to be executed
in its name and the Fiscal Agent has caused this Agreement to be executed in its name, all as of
January 1, 2014,
ATTEST:
By:
City Clerk
CITY OF LAKE ELSINORE COMMUNITY
FACILITIES DISTRICT NO, 2003-2
(CANYON HILLS)
By:
Mayor of the City of Lake Elsinore
UNION BANK, N.A.,
as Fiscal Agent
By:
Authorized Officer
79361199.1 46
No,
EXHIBIT A
FORM OF BOND
UNITED STATES OF AMERICA
STATE OF CALIFORNIA
COUNTY OF RIVERSIDE
6
W
CITY OF LAKE ELSINORE COMMUNITY FACILITIES DISTRICT NO. 2003 -2
(CANYON HILLS) SPECIAL TAX BOND, SERIES (IMPROVEMENT AREA D)
INTEREST RATE MATURITY DATE DATED DATE
September 1,
REGISTERED OWNER: UNION BANK, N.A., AS TRUSTEE FOR THE LAKE
ELSINORE PUBLIC FINANCING AUTHORITY
PRINCIPAL AMOUNT:
DOLLARS
The City of Lake Elsinore Community Facilities District No. 2003 -2 (Canyon
Hills) (the "District "), for value received, hereby promises to pay solely from the Special Tax (as
hereinafter defined) to be collected within Improvement Area D of the District or amounts in the
funds and accounts held under the Agreement (as hereinafter defined), to the registered owner
named above, or registered assigns, on the maturity date set forth above, unless redeemed prior
thereto as hereinafter provided, the principal amount set forth above, and to pay interest on such
principal amount from the Interest Payment Date (as hereinafter defined) next preceding the date
of authentication thereof, unless (a) it is authenticated after a Record Date (as hereinafter
defined) and on or before an Interest Payment Date and after the close of business on the
preceding Record Date, in which event interest with respect thereto will be payable from such
Interest Payment Date; (b) it is authenticated on or before 15, , in which event
interest with respect thereto will be payable from its Dated Date; or (c) interest with respect to
any Outstanding Bond is in default, in which event interest with respect thereto will be payable
from the date to which interest has been paid in full, payable on each Interest Payment Date,
payable semiannually on March 1 and September 1 in each year, commencing 1,
(each an "Interest Payment Date "), at the interest rate set forth above, until the principal
amount hereof is paid or made available for payment. The principal of this Bond is payable to the
registered owner hereof in lawful money of the United States of America upon presentation and
surrender of this Bond at the Corporate Trust Office of Union Bank, N.A. (the "Fiscal Agent ").
Interest on this Bond shall be paid by check of the Fiscal Agent mailed on each Interest Payment
Date to the registered owner hereof as of the close of business on the fifteenth day of the month
preceding the month in which the interest payment date occurs (the "Record Date ") at such
registered owner's address as it appears on the registration books maintained by the Fiscal
Agent.
79361199.1 A-1
This Bond is one of a duly authorized issue of bonds in the aggregate principal
amount of $ approved by the qualified electors of the District on January 13, 2004,
pursuant to the Mello -Roos Community Facilities Act of 1982, as amended, Section 53311 et
seq., of the California Government Code (the "Mello -Roos Act ") for the purpose of financing the
acquisition of certain facilities, and is one of the Bonds designated "City of Lake Elsinore
Community Facilities District No. 2003 -2 (Canyon Hills) Special Tax Bonds, Series
(Improvement Area D)" (the "Bonds "). The creation of the Bonds and the terms and conditions
thereof are provided for by the Fiscal Agent Agreement, dated as of January 1, 2014, [and a
Supplemental Agreement, dated as ] ([collectively, the] "Agreement "), [each] by
and between the District and the Fiscal Agent and this reference incorporates the Agreement
herein, and by acceptance hereof the owner of this Bond assents to said terms and conditions.
Pursuant to the Mello -Roos Act and the Agreement, the principal of and interest
on this Bond are payable solely from the annual special tax authorized under the Mello -Roos Act
to be collected within Improvement Area D of the District (the "Special Tax ") and certain funds
held under the Agreement.
Any tax for the payment hereof shall be limited to the Special Tax, except to the
extent that provision for payment has been made by the City, as may be permitted by law. The
Bonds do not constitute obligations of the City of Lake Elsinore for which said City is obligated
to levy or pledge, or has levied or pledged, general or special taxation other than described
hereinabove. The District has covenanted for the benefit of the owners of the Bonds that it will
order, and cause to be commenced as provided in the Agreement, and thereafter diligently
prosecute to judgment, an action in the superior court to foreclose, under the circumstances set
forth in the Agreement, the lien of any Special Tax or installment thereof not paid when due.
[Insert Redemption Terms. For the 2014 Bonds: The Bonds are subject to
redemption prior to maturity at the option of the District from any source of funds, as a whole or
in part, on any date on or after September 1, 2024, from such maturities as selected by the
District and by lot within a maturity, at the redemption prices and schedules applicable to the
Authority Bonds (as defined in the Fiscal Agent Agreement). Notwithstanding anything in this
Agreement to the contrary, with respect to optional redemptions related to the Authority Bonds,
the District shall abide by the priority of redemption relating to the Authority Bonds permitted by
the Authority Indenture (as defined in the Fiscal Agent Agreement).
The Bonds shall also be subject to mandatory redemption on any date on or after
September 1, 2014, in whole or in part from such maturities as selected by the District and by lot
within a maturity, from amounts constituting prepayments of Special Taxes, from amounts
transferred from the Delinquency Management Fund under the Agreement and from amounts
transferred by the Authority to the District from the Cash Flow Management Fund under the
Authority Indenture at the following redemption prices (expressed as a percentage of the
principal amount of Bonds to be redeemed) together with accrued interest thereon to the
redemption date:
79361199.1 A -2
Redemption Date Redemption Price
September 1,
2014
through August 31, 2024
102.0%
September 1,
2024
and thereafter
100.0
The Bonds are not subject to mandatory sinking payment redemption.]
Notice of redemption with respect to the Bonds to be redeemed shall be given to
the registered owners thereof, in the manner, to the extent and subject to the provisions of the
Agreement.
This Bond shall be registered in the name of the owner hereof, as to both principal
and interest.
Each registration and transfer of registration of this Bond shall be entered by the
Fiscal Agent in books kept by it for this purpose and authenticated by its manual signature upon
the certificate of authentication endorsed hereon.
Except as provided in the Agreement, any Bond may, in accordance with its
terms, be transferred, upon the books required to be kept pursuant to the provisions of the
Agreement by the person in whose name it is registered, in person or by his duly authorized
attorney, upon surrender of such Bond for cancellation, accompanied by delivery of a duly
written instrument of transfer in a form approved by the Fiscal Agent. The cost for any services
rendered or any expenses incurred by the Fiscal Agent in connection with any such transfer shall
be paid by the District. The Fiscal Agent shall collect from the Owner requesting such transfer
any tax or other governmental charge required to be paid with respect to such transfer.
Whenever any Bond or Bonds shall be surrendered for transfer, the District shall
execute and the Fiscal Agent shall authenticate and deliver a new Bond or Bonds, for like
aggregate principal amount.
No transfers of Bonds shall be required to be made (i) fifteen (15) days prior to
the date established by the Fiscal Agent for selection of Bonds for redemption, (ii) with respect
to a Bond, after such Bond has been selected for redemption, or (iii) between the 15th day of the
month next preceding any Interest Payment Date and such Interest Payment Date.
Bonds may be exchanged at the Corporate Trust Office of the Fiscal Agent for a
like aggregate principal amount of Bonds of authorized denominations and of the same maturity.
The cost for any services rendered or any expenses incurred by the Fiscal Agent in connection
with any such exchange shall be paid by the District. The Fiscal Agent shall collect from the
Owner requesting such exchange any tax or other governmental charge required to be paid with
respect to such exchange.
No exchanges of Bonds shall be required to be made (i) fifteen (15) days prior to
the date established by the Fiscal Agent for selection of Bonds for redemption, (ii) with respect
to a Bond, after such Bond has been selected for redemption, or (iii) between the 15th day of the
month next preceding any Interest Payment Date and such Interest Payment Date,
79361199.1 A-3
The Agreement and the rights and obligations of the District thereunder may be
modified or amended as set forth therein.
This Bond shall not become valid or obligatory for any purpose until the
certificate of authentication and registration hereon endorsed shall have been dated and signed by
the Fiscal Agent,
IT IS HEREBY CERTIFIED, RECITED AND DECLARED that all acts,
conditions and things required by law to exist, happen and be performed precedent to and in the
issuance of this Bond have existed, happened and been performed in due time, form and manner
as required by law, and that the amount of this Bond does not exceed any debt limit prescribed
by the laws or Constitution of the State of California.
IN WITNESS WHEREOF, the City of Lake Elsinore on behalf of City of Lake
Elsinore Community Facilities District No. 2003 -2 (Canyon Hills) has caused this Bond to be
dated as of the date first above written and to be signed by the manual signature of its Mayor and
countersigned by the manual signature of the City Clerk.
CITY OF LAKE ELSINORE
BY:
Mayor
BY:
City Clerk
79361199.1 A -4
FISCAL AGENT'S CERTIFICATE OF A UTHENTICA TION
This is one of the Bonds described in the Resolution and the Agreement which
has been authenticated on
UNION BANK, N.A.,
as Fiscal Agent
BY:
Authorized Officer
79361199.1 A -5
AS'SIGNMEN7 '
For value received, the undersigned do(es) hereby sell, assign and transfer unto
(Name, Address and Tax Identification or Social Security Number of Assignee)
the within Bond and do(es) hereby irrevocably constitute and appoint
, attorney, to transfer the same on the registration books of the Fiscal Agent,
full power of substitution in the premises.
Dated:
Signature Guaranteed: Signature:
Note: Signature(s) must be guaranteed by an
eligible guarantor institution.
with
Note: The signature(s) on this assignment
must correspond with the name(s) as written on
the face of the within- registered Bond in every
particular without alteration or enlargement or
any change whatsoever.
79361199.1 A_6
EXHIBIT B
FORM OF OFFICER'S CERTIFICATE
City of Lake Elsinore Community Facilities
District No. 2003 -2 (Canyon Hills)
Officer's Certificate
Directing Disbursements From the Improvement Fund
The undersigned hereby states and certifies:
(i) That he is the duly qualified City Manager of the City of Lake
Elsinore, a general law city and public body, corporate and politic, duly organized and existing
under the laws of the State of California (the "City "), acting on behalf of City of Lake Elsinore
Community Facilities District No. 2003 -2 (Canyon Hills) (the "District "), and, as such, is
familiar with the facts herein certified and is authorized and qualified to execute and deliver this
certificate;
(ii) That he is an "Authorized Officer," as defined in the Fiscal Agent
Agreement, dated as of January 1, 2014 (the "Fiscal Agent Agreement "), by and between the
District and Union Bank, N.A., as Fiscal Agent (the "Fiscal Agent ");
(iii) That pursuant to Section 3.7(b) of the Fiscal Agent Agreement, the
Fiscal Agent is hereby directed to disburse this date from the Improvement Fund established
pursuant to the Fiscal Agent Agreement to the payee, designated on Exhibit A attached hereto
and by this reference incorporated herein, at the address set forth below such payee name, the
respective sums set forth opposite such payees, in payment for the obligation described on said
Exhibit "A;"
(iv) That each obligation shown on Exhibit A has been properly
verified and approved by the District and is a proper charge against the Improvement Fund and
that all conditions to release of such funds have been satisfied, including those conditions in
Section 3.7(b) of the Fiscal Agent Agreement;
(v) That no item to be paid pursuant to this Officer's Certificate has
been previously paid or reimbursed from the Improvement Fund;
(vi) That capitalized terms used herein and not otherwise defined shall
have the meanings ascribed thereto in the Fiscal Agent Agreement; and
79361199.1 B -1
(vii) That there has not been filed or served upon the District notice of
any lien, right to lien or attachment, stop notice or claim affecting the right to receive payment of
any moneys payable to any of the persons named in this requisition which has not been released
or which will not be released simultaneously with the payment of such obligation other than
materialmen's or mechanic's liens accruing by mere operation of law.
DATED: 20
CITY OF LAKE ELSINORE COMMUNITY
FACILITIES DISTRICT NO. 2003 -2
(CANYON HILLS)
City Manager
79361199.1 B -2
INDENTURE OF TRUST
by and between the
LAKE ELSINORE PUBLIC FINANCING AUTHORITY
and
UNION BANK, N.A.,
as Trustee
Dated as of January 1, 2014
Relating to
Lake Elsinore Public Financing Authority
Local Agency Revenue Bonds (Canyon Hills IA D), 2014 Series A
79361194.1
TABLE OF CONTENTS
ARTICLE I DEFINITIONS; AUTIIORIZATION AND PURPOSE OF BONDS;
EQUALSECURITY ........................................................ ............................... 2
Section1.01 Def nitions ............................................................. ............................... 2
Section 1.02 Rules of Construction ......................................... ............................... 10
Section 1.03 Authorization and Purpose of Bonds .................. ............................... 10
Section 1.04 Equal Security ..................................................... ............................... 10
ARTICLE II ISSUANCE OF THE BONDS,, I 1 0 #1 1 1 1#* 1 1 1&& a* 4 0 * * , 0 a 0 * 0 6 1 1 1 1 1 1 1 10
Section 2.01 Terms of the Bonds ............................................. ............................... 10
Section 2.02 Redemption of Bonds ......................................... ............................... 12
Section 2.03 Form of the Bonds, 1 4 1 1 1 1 1 1 1 1 1 6 1 a 9 0 0*66 4 0 1 1 1 1 6 15
Section 2.04 Execution of Bonds, a I I I I I I I 1 0 1 1 1 1 , 0 0 a 6 a 0 6 0 0 0 9 1 1 1 1 1 1 15
Section 2.05 Transfer of Bonds..,,, I I I I I I I I I 1 6 # 0 , 9 * * 6 0 0 , 6 1 1 1 1 1 1 # 1 16
Section 2.06 Exchange of Bonds ............................................. ............................... 16
Section 2.07 Registration Books. , 1 16
Section 2.08 Bonds Mutilated, Lost, Destroyed or Stolen.,,,,,,,,, I., I "**tea 6 6.000 0 *4 , ....... 16
Section 2.09 CUSIP Numbers, I I I I I I I I I I * I I I I I 1 0 1 1 1 1 1 1 0 1 1 1 1 0 a 9 9 0 0 * a 6 0 0 0 6 1 1 1 1 6 1 0 1 1 1 1 1 1 1 1 0 a * a 0 0 4 a # 0 , 9 a 0 8 . . . . . . 17
Section 2.10 Use of Securities Depository .............................. ............................... 17
Section 2.11 Temporary Bonds........................................................................ 18
ARTICLE III DEPOSIT AND APPLICATION OF PROCEEDS OF BONDS .................. 19
Section 3.01 Issuance of Bonds ............................................... ..:............................ 19
Section 3.02 Application of Proceeds of Sale of Bonds and Other Amounts........, 19
Section 3.03 Bond Purchase Fund ........................................... ............................... 19
Section 3.04 Costs of Issuance Fund. 19
Section 3.05 Validity of Bonds ................................................ ............................... 20
ARTICLE IV REVENUES; FLOW OF FUNDS .................................. ............................... 20
Section 4.01 Pledge of Revenues; Assignment of Rights ........ ............................... 20
Section 4.02 Receipt, Deposit and Applications of Revenues 20
Section 4.03 Cash Flow Management Fund ............................ ............................... 22
Section 4.04 Redemption Fund ................................................ ............................... 23
Section4.05 Reserved .............................................................. ............................... 23
Section 4.06 Investments, 23
Section 4.07 Valuation and Disposition of Investments .......... ............................... 24
ARTICLE V COVENANTS OF THE AUTHORITY ............... .......... .... a.......................... 24
Section 5.01 Punctual Payment ................................................ ............................... 24
Section 5.02 Extension of Payment of Bonds ............................ ............................124
Section 5.03 Against Encumbrances ........................................ ............................... 25
Section 5.04 Power to Issue Bonds and Make Pledge and Assignment ................. 25
Section 5.05 Accounting Records and Financial Statements ... ............................... 25
Section 5.06 No Parity Debt . ... I'll ... .. ... ............................................ .. ... a ... .............. 25
79361194.1
TABLE OF CONTENTS
(continued)
mi
Section
5.07
Tax Covenants
Relating to Bonds..... .....
25
Section5.08
Remedies Upon Event of Default ....................... .......I.......................
District Bonds
..................................................... ...............................
29
Section 5.09 Further Assurances"........ ..... 6 1 1 6 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 29
Section5.10 Immunity ............................................................. ............................... 29
Section 5.11 No Acceleration .................................................. ............................... 29
ARTICLEVI THE TRUSTEE ..... ..... .................................................... ..............................' 29
Section 6.01
Section 6.02
Section 6.03
Section 6.04
Section
Section
Section
Section
Section
Section
6.05
6.06
6.07
6.08
6.09
6.10
Section 6.11
Section 6.12
Appointment of Trustee ...................................... ............................... 29
Acceptance of Trusts ........................................... ............................... 30
Fees, Charges and Expenses of Trustee .............. ............................... 32
Notice to Bond Owners of Default ..................... ............................... 32
Intervention by Trustee ....................................... ............................... 32
Removal of Trustee ............................................. ............................... 32
Resignation by Trustee ....................................... ............................... 33
Appointment of Successor Trustee ..................... ............................... 33
Merger or Consolidation ..................................... ............................... 33
Concerning any Successor Trustee....."", 33
Appointment to Co- Trustee ................................ ..............................6 34
Indemnification; Limited Liability of Trustee,".....,...... ........... $* .... 0,$ 34
ARTICLE VII MODIFICATION AND AMENDMENT OF THE INDENTURE ............... 35
Section 7.01 Amendment Hereof ............................................. ............................... 35
Section 7.02 Effect of Supplemental Indenture ....................... ............................... 36
Section 7.03 Endorsement or Replacement of Bonds After Amendment .............. 36
Section 7.04 Amendment by Mutual Consent ......................... ............................... 36
ARTICLE VIII EVENTS OF DEFAULT AND REMEDIES ................. ............................... 36
Section
8.01
Events of Default ................................................ ...............................
36
Section
8.02
Remedies Upon Event of Default ....................... .......I.......................
37
Section
8.03
Application of Revenues and Other Funds After Default ..................
37
Section
8.04
Power of Trustee to Control Proceedings. I I .......... 111111111111
38
Section
8.05
Appointment of Receivers .................................. ...............................
38
Section8.06
Non - Waiver......................................................... ...............................
38
Section
8.07
Right to Institute Suit, Action or Proceeding ...... ...............................
39
Section
8.08
Termination of Proceedings., I . . I I 1 1 6 1 1 1 1 1 1 1 * * * 0 0 9 9 0 0 0 a . a 0 . . . 4 . . . . . I....................
39
ARTICLEIX MISCELLANEOUS ............... .................... 6111. .......... .. ...... late ........................ 40
Section
9.01
Section
9.02
Section
9.03
Section
9.04
Section
9.05
Section 9.06
Section 9.07
Limited Liability of Authority ............................ ............................... 40
Benefits of Indenture Limited to Parties ............. ............................... 40
Discharge of Indenture ........................................ ............................... 40
Is Deemed Included in All References to Predecessor ...................... 41
Content of Certificates ........................................ ............................... 41
Execution of Documents by Bond Owners.,'..,...... ... $0 ............. 0660*#*#6 42
DisqualifiedBonds .............................................. ............................... 42
79361194.1 11
TABU OF CONTENTS
(continued)
Page
Section 9.08 Waiver of Personal Liability ............................... ............................... 42
Section 9.09 Partial Invalidity .................................................. ............................... 42
Section 9.10 Destruction of Canceled Bonds 43
Section 9.11 Funds and Accounts, 1 0 6 1 1 1 . 0 1 1 1 1 1 1 , 9 .... 43
Section 9.12 Payment on Business Days .... ............................... .......................11.00.43
Section9.13 Notices ................................................................ ....1.......................... 43
Section 9.14 Unclaimed Moneys .............. ............................... .....................11.11..... 44
Section 9.15 Governing Law .................... ..............................1 111......0..................... 44
Section 9.16 Execution of Counterparts .................................. ............................... 44
EXHIBITA — FORM OF BOND ................................ ............................... ........6.114.................. A -1
79361194.1 iii
INDENTURE OF TRUST
THIS INDENTURE OF TRUST (this "Indenture ") is made and entered into as of
January 1, 2014, by and between the LAKE ELSINORE PUBLIC FINANCING AUTHORITY,
a joint powers authority organized and existing under the laws of the State of California (the
"Authority "), and UNION BANK, N.A., a national banking association organized and existing
under the laws of the United States of America having a corporate trust office in Los Angeles,
California, and being qualified to accept and administer the trusts hereby created (the "Trustee ");
WITNESSETH:
WHEREAS, the Authority is a joint powers authority duly organized and existing under
and pursuant to that certain Joint Exercise of Powers Agreement, dated July 25, 1989, by and
between the City of Lake Elsinore (the "City ") and the Redevelopment Agency of the City of
Lake Elsinore (the "Agency "), and under the provisions of Articles 1 through 4 (commencing
with Section 6500) of Chapter 5 of Division 7 of Title 1 of the Government Code of the State of
California (the "Act "), and is authorized pursuant to Article 4 of the Act (the "Bond Law ") to
borrow money for the purpose of financing the acquisition of bonds, notes and other obligations
of, or for the purpose of making loans to, the City, the Agency and any associate member to
provide financing for public capital improvements of the City, the Agency and any associate
member; and
WHEREAS, for the purpose of funding certain public facilities, the Authority desires to
provide for the issuance of its Local Agency Revenue Bonds (Canyon Hills IA D), 2014 Series A
(the "Bonds "); and
WHEREAS, in order to provide for the authentication and delivery of the Bonds, to
establish and declare the terms and conditions upon which the Bonds are to be issued and to
secure the payment of the principal thereof, premium (if any) and interest thereon, the Authority
has authorized the execution and delivery of this Indenture; and
WHEREAS, the Authority has found and determined, and hereby affirms, that all acts
and proceedings required by law necessary to make the Bonds, when executed by the Authority,
authenticated and delivered by the Trustee and duly issued, the valid, binding and legal special
obligations of the Authority, and to constitute this Indenture a valid and binding agreement for
the uses and purposes herein set forth in accordance with its terms, have been done and taken,
and the execution and delivery of this Indenture have been in all respects duly authorized:
NOW, THEREFORE, THIS INDENTURE WITNESSETH, that in order to secure the
payment of the principal of and the interest and premium (if any) on all Bonds at any time issued
and Outstanding under this Indenture, according to their tenor, and to secure the performance and
observance of all the covenants and conditions therein and herein set forth, and to declare the
terms and conditions upon and subject to which the Bonds are to be issued and repaid, and in
consideration of the premises and of the mutual covenants herein contained and of the purchase
and acceptance of the Bonds by the Owners thereof, and for other valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the Authority does hereby covenant
79361194.1
and agree with the Trustee, for the benefit of the respective Owners from time to time of the
Bonds, as follows:
ARTICLE I
DEFINITIONS; AUTHORIZATION AND
PURPOSE OF BONDS; EQUAL SECURITY
Section 1.01 Definitions. Unless the context otherwise requires, the terms defined in
this Section 1.01 shall for all purposes of this Indenture of any Supplemental Indenture and of
the Bonds and of any certificate, opinion, request or other documents herein mentioned have the
meanings herein specified.
"Act" means Articles 1 through 4 (commencing with Section 6500) of Chapter 5,
Division 7, Title 1 of the Government Code of the State, as in existence on the Closing Date or
as thereafter amended from time to time.
"Additional District Bonds" means Additional Bonds as such term is defined in the Fiscal
Agent Agreement.
"Agency" means the Redevelopment Agency of the City of Lake Elsinore, a public body
corporate and politic organized under the laws of the State, and any successor thereto.
"Annual Debt Service" means, for each Bond Year, the sum of (a) the interest payable on
the Outstanding Bonds in such Bond Year, and (b) the principal amount of the Outstanding
Bonds scheduled to be paid in such Bond Year.
"Authority" means the Lake Elsinore Public
authority duly organized and existing under the Joint
July 25, 1989, by and between the City and the Agency,
and supplements thereto and under the laws of the State.
Financing Authority, a joint powers
Exercise of Powers Agreement, dated
together with any amendments thereof
"Authority Representative" means the Chairperson, Vice Chairperson, Executive Director
or Treasurer of the Authority, or any other authorized representative of the Authority as
evidenced by a certificate of the Chairperson or Executive Director.
"Board" means the Board of Directors of the Authority.
"Bond Counsel" means Fulbright & Jaworski LLP, or any attorney or firm of attorneys
appointed by or acceptable to the Authority of nationally- recognized experience in the field of
municipal law whose opinions are generally accepted by purchasers of municipal bonds or notes.
"Bond Fund" means the fund by that name established and held by the Trustee pursuant
to Section 4.02(b) hereof.
"Bond Law" means the Marks -Roos Local Bond Pooling Act of 1985, constituting
Article 4 of the Act (commencing with Section 6584), as in existence on the Closing Date or as
thereafter amended from time to time.
79361194.1 2
"Bond Purchase Fund" means the fund established pursuant to Section 3.03 hereof.
"Bond Year" means each twelve -month period beginning on September 2 of each year
and ending September 1 of the following year, except that the first Bond Year shall begin on the
Closing Date and end on September 1, 2014.
"Bonds" means the Lake Elsinore Public Financing Authority Local Agency Revenue
Bonds (Canyon Hills IA D), 2014 Series A, authorized by, and at any time Outstanding pursuant
to, the Bond Law and this Indenture.
"Business Day" means any day other than (i) a Saturday or a Sunday, (ii) a day on which
the offices of the City are not open for business, or (iii) a day on which banking institutions in
the state in which the Trustee has its principal corporate trust office is authorized or obligated by
law or executive order to be closed.
"Cash Flow Management Fund" means the fund by that name established by
Section 4.03(a) hereof.
"Cash Flow Management Fund Requirement" means, as of any calculation date, an
amount equal to 15% of the Maximum Annual Debt Service.
"Certificate" or "Written Request" of the Authority means a written certificate or written
request signed in the name of the Authority by an Authority Representative. Any such certificate
or request may, but need not, be combined in a single instrument with any other instrument,
opinion or representation, and the two or more so combined shall be read and construed as a
single instrument.
"City" means the City of Lake Elsinore, a political subdivision organized and existing
under the laws of the State.
"Closing Date" means the date of delivery of the Bonds to the original purchasers
thereof.
"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 applicable proposed,
temporary and final regulations promulgated, and applicable official public guidance published,
under the Code.
"Corporate Trust Office" means the corporate trust office of the Trustee at the address set
forth in Section 9.13 and such office as the Trustee may designate in writing to the Authority
from time to time.
"Costs of Issuance" means all expenses incurred in connection with the authorization,
issuance, sale and delivery of the Bonds, the purchase of the District Bonds, including, but not
limited to, all compensation, fees and expenses (including, but not limited, to fees and expenses
for legal counsel) of the Authority, the Trustee and the developer, compensation to any financial
79361194.1 3
consultants or underwriters, legal fees and expenses, filing and recording costs, rating agency
fees, costs of preparation and reproduction of documents and costs of printing.
"Costs of Issuance Fund" means the fund established and held by the Trustee pursuant to
Section 3.04 hereof.
"District" means City of Lake Elsinore Community Facilities District No. 2003 -2
(Canyon Hills).
"District Bonds" means the City of Lake Elsinore Community Facilities District No.
2003 -2 (Canyon Hills) Special Tax Bonds, 2014 Series (Improvement Area D).
"DTC" means The Depository Trust Company, New York, New York, and its successors
and assigns.
"Event of Default" means any of the events described in Section 8.01 hereof.
"Excess Investment Earnings" means the amount of excess investment earnings
determined to be subject to rebate to the United States of America with respect to the investment
of the gross proceeds of the Bonds, determined pursuant to Section 148(f) of the Code.
"Fair Market Value" means the price at which a willing buyer would purchase the
investment from, a willing seller in a bona fide, arm's length transaction (determined as of the
date the contract to purchase or sell the investment becomes binding) if the investment is traded
on an established securities market ,(within the meaning of Section 12'73 of the, Code) and,
otherwise, the term "Fair Market Value" means the acquisition price in a bona fide, arm's length
transaction (as referenced above) if (i) the investment is a certificate of deposit that is acquired in
accordance with applicable regulations under the Code, (ii) the investment is an agreement with
specifically negotiated withdrawal or reinvestment provisions and a specifically negotiated
interest rate (for example, a guaranteed investment contract, a forward supply contract or other
investment agreement) that is acquired in accordance with applicable regulations under the Code,
(iii) the investment is a United States Treasury Security - State and Local Government Series that
is acquired in accordance with applicable regulations of the United States Bureau of Public Debt,
or (iv) any commingled investment fund in which the City and related parties do not own more
than a ten percent (10 %) beneficial interest therein if the return paid by the fund is without
regard to the source of the investment.
"Federal Securities" means any of the following which are non - callable and which at the
time of investment are legal investments under the laws of the State of California for funds held
by the Trustee, as shall be certified by the Authority to the Trustee:
(1) direct general obligations of the United States of America (including obligations
issued or held in book -entry form on the books of the United States Department of
the Treasury) and obligations, the payment of principal of and interest on which
are directly or indirectly guaranteed by the United States of America, including,
without limitation, such of the foregoing which are commonly referred to as
"stripped" obligations and coupons; and
79361194.1 4
(2) any of the following obligations of the following agencies of the United States of
America: (a) direct obligations of the Export- Import Bank, (b) certificates of
beneficial ownership issued by the Farmers Home Administration, (c)
participation certificates issued by the General Services Administration, (d)
mortgage- backed bonds or pass- through obligations issued and guaranteed by the
Government National Mortgage Association, (e) project notes issued by the
United States Department of Housing and Urban Development, and (f) public
housing notes and bonds guaranteed by the United States of America; or refunded
municipal obligations, the timely payment of principal of and interest on are fully
guaranteed by the United States of America.
"Fiscal Agent" means Union Bank, N.A., as fiscal agent under the Fiscal Agent
Agreement.
"Fiscal Agent Agreement" means the Fiscal Agent Agreement, dated as of January 1,
2014, by and between the District and Union Bank, N.A., as said agreement may be amended
from time to time in accordance with its terms.
"Fiscal Year" means any twelve -month period extending from July 1 in one calendar year
to June 30 of the succeeding calendar year, both dates inclusive, or any other twelve -month
period selected and designated by the Authority as its official fiscal year period and certified to
the Trustee in writing by an Authority Representative.
"Indenture" means this Indenture of Trust, as originally executed or as it may from time
to time be supplemented, modified or amended by any Supplemental Indenture pursuant to the
provisions hereof.
"Independent Accountant" means any certified public accountant or firm of certified
public accountants appointed and paid by the Authority, and who, or each of whom (a) is, in fact,
independent and not under domination of the Authority or the City; (b) does not have any
substantial interest, direct or indirect, in the Authority or the City; and (c) is not connected with
the Authority or the City as an officer or employee of the Authority or the City but who may be
regularly retained to make annual or other audits of the books of or reports to the Authority or
the City.
"Information Services" means Electronic Municipal Market Access system (referred to as
"EMMA "), a facility of the Municipal Securities Rulemaking Board, at www.emma.msrb.org;
and, in accordance with then current guidelines of the Securities and Exchange Commission,
such other services providing information with respect to the redemption of bonds as the
Authority may designate in a Written Request of the Authority delivered to the Trustee.
"Interest Account" means the account by that name established and held by the Trustee
pursuant to Section 4.02(c)(i) hereof.
"Interest Payment Date"
means March 1 and
September 1 in
each year, beginning
September 1, 2014, and continuing
thereafter so long as
any Bonds remain
Outstanding.
79361194.1 5
"Letter of Representations" means the letter of the Authority and the 'Trustee delivered to
and accepted by DTC (or such other applicable Securities Depository) on or prior to the issuance
of the Bonds in book -entry form setting forth the basis on which .DTC (or such other applicable
Securities Depository) serves as depository for the Bonds issued in book -entry form, as
originally executed or as it may be supplemented or revised or replaced by a letter to a substitute
Securities Depository.
"Maximum Annual Debt Service" means, as of the date of calculation, the maximum
amount obtained by totaling, for the current or any future Bond Year, the sum of: (a) the
principal amount of all such Outstanding Bonds maturing in such Bond Year; and (b) the interest
which would be due during such Bond Year on the aggregate principal amount of such Bonds
which would be Outstanding in such period if such Bonds are retired as scheduled, but deducting
and excluding from such aggregate principal amount the aggregate principal amount of such
Bonds no longer Outstanding.
" Moody's" means Moody's Investors Service, and its successors and assigns.
"Outstanding," when used as of any particular time with reference to Bonds, means all
Bonds theretofore executed, issued and delivered by the Authority under this Indenture except:
(a) Bonds theretofore canceled by the Trustee or surrendered to the Trustee for cancellation; (b)
Bonds paid or deemed to have been paid within the meaning of Section 9.03; and (c) Bonds in
lieu of or in substitution for which other Bonds shall have been executed, issued and delivered
pursuant to this Indenture or any Supplemental Indenture.
"Owner" or "Bond Owner," when used with respect to any Bond, means the person in.
whose name the ownership of such Bond shall be registered on the Registration Books.
"Permitted Investments" means any of the following which at the time of investment are
legal investments under the laws of the State for the moneys proposed to be invested therein (the
Trustee entitled to rely on written investment direction of the Authority as a determination that
such investment is a legal investment), but only to the extent that the same are acquired at Fair
Market Value:
(a) Federal Securities;
(b) bonds, debentures, notes or other evidence of indebtedness issued or
guaranteed by any of the following federal agencies and provided such obligations are
backed by the full faith and credit of the United States of America (stripped securities are
only permitted if they have been stripped by the agency itself): (i) direct obligations or
fully guaranteed certificates of beneficial ownership of the U.S. Export -Import Bank; (ii)
certificates of beneficial ownership of the Farmers Home Administration; (iii) obligations
of the Federal Financing Bank; (iv) debentures of the Federal Housing Administration;
(v) participation certificates of the General Services Administration; (vi) guaranteed
mortgage - backed bonds or guaranteed pass- through obligations of the Government
National Mortgage Association; (vii) guaranteed Title XI financings of the U.S. Maritime
Administration; and (viii) project notes, local authority bonds, new communities
79361194.1 6
debentures and U.S. public housing notes and bonds of the U.S. Department of Housing
and Urban Development;
(c) bonds, debentures, notes or other evidence of indebtedness issued or
guaranteed by any of the following non -full faith and credit U.S. government agencies
(stripped securities are only permitted if they have been stripped by the agency itself): (i)
senior debt obligations of the Federal Home Loan Bank System; (ii) participation
certificates and senior debt obligations of the Federal Home Loan Mortgage Corporation;
(iii) mortgage- backed securities and senior debt obligations of the Federal National
Mortgage Association (excluding stripped mortgage securities which are valued greater
than par on the portion of unpaid principal); (iv) senior debt obligations of the Student
Loan Marketing Association; (v) obligations (but only the interest component of stripped
obligations) of the Resolution Funding Corporation; and (vi) consolidated systemwide
bonds and notes of the Farm Credit System;
(d) money market funds (including funds of the Trustee or its affiliates)
registered under the Federal Investment Company Act of 1940, whose shares are
registered under the Federal Securities Act of 1933, and having a rating by S &P of
"AAAm -G," "AAAm," or "AAm," and, if rated by Moody's, rated "Aaa," "Aal" or
"Aa2;"
(e) certificates of deposit secured at all times by collateral described in (a) or
(b) above, which have a maturity of one year or less, which are issued by commercial
banks, savings and loan associations or mutual savings banks, and such collateral must be
held by a third party, and the Trustee must have a perfected first security interest in such
collateral;
(f) certificates of deposit, savings accounts, deposit accounts or money
market deposits (including those of the Trustee and its affiliates) which are fully insured
by the Federal Deposit Insurance Corporation or secured at all times by collateral
described in (a) or (b) above;
(g) investment agreements, including guaranteed investment contracts,
forward purchase agreements and Reserve Account put agreements, which are general
obligations of an entity whose long -term debt obligations, or claims paying ability,
respectively, is rated in one of the two highest rating categories by Moody's or S &P or
collateralized by Federal Securities;
(h) commercial paper rated, at the time of purchase, "Prime -1" by Moody's
and "A -1" or better by S &P;
(i) bonds or notes issued by any state or municipality which are rated by
Moody's and S &P in one of the two highest rating categories assigned by such agencies;
0) federal funds or bankers acceptances with a maximum term of one year of
any bank which has an unsecured, uninsured and unguaranteed obligation rating of
"Prime -1" or "A3" or better by Moody's and "A -1" or "A" or better by S &P;
79361194.1 7
(k) repurchase agreements which provide for the transfer of
dealer bank or securities firm (seller /borrower) to the Trustee and the
from the Trustee to the dealer bank or securities firm with an agreemel
bank or securities firm will repay the cash plus a yield to the Trustee in
securities at a specified date, which satisfy the following criteria:
cPriiritiPQ frp; a
;
transfer of cash
it that the dealer
exchange for the
(i) repurchase agreements must be between the Trustee and (A) a
primary dealer on the Federal Reserve reporting dealer list which falls under the
jurisdiction of the Securities Investors Protection Corporation which are rated "A"
or better by Moody's and S &P, or (B) a bank rated "A" or better by Moody's and
S &P;
(ii) the written repurchase agreement contract must include the
following: (A) securities acceptable for transfer, which may be direct U.S.
government obligations, or federal agency obligations backed by the full faith and
credit of the U.S. government; (B) the term of the repurchase agreement may be
up to 30 days; (C) the collateral must be delivered to the Trustee or a third party
acting as agent for the Trustee simultaneous with payment (perfection by
possession of certificated securities); (D) the Trustee must have a perfected first
priority security interest in the collateral; (E) the collateral must be free and clear
of third -party liens and, in the case of a broker which falls under the jurisdiction
of the Securities Investors Protection Corporation, are not subject to a repurchase
agreement or a reverse repurchase agreement; (F) failure to maintain the requisite
collateral percentage, after a two -day restoration period, will require the Trustee
to liquidate the collateral; and (G) the securities must be valued weekly, marked -
to- market at current market price plus accrued interest and the value of collateral
must be equal to 104% of the amount of cash transferred by the Trustee to the
dealer bank or securities firm under the repurchase agreement plus accrued
interest (unless the securities used as collateral are obligations of the Federal
National Mortgage Association or the Federal Home Loan Mortgage Corporation,
in which case the collateral must be equal to 105% of the amount of cash
transferred by the Trustee to the dealer bank or securities firm under the
repurchase agreement plus accrued interest). If the value of securities held as
collateral falls below 104% of the value of the cash transferred by the Trustee,
then additional cash and /or acceptable securities must be transferred; and
(iii) a legal opinion must be delivered to the Trustee to the effect that
the repurchase agreement meets guidelines under state law for legal investment of
public funds; and
(1) the Local Agency Investment Fund of the State of California, created
pursuant to Section 16429.1 of the California Government Code, to the extent the Trustee
is authorized to register such investment in its name.
"Principal Account" means the account by that name established and held by the Trustee
pursuant to Section 4.02(c)(ii) hereof.
79361194.1 8
"Rebate Account" means the account established and held by the Trustee pursuant to
Section 4.02(c)(v) hereof.
"Record Date" means, with respect to any Interest Payment Date, the fifteenth (15th)
calendar day of the month preceding such Interest Payment Date.
"Redemption Fund" means the fund by such name established and held by the Trustee
pursuant to Section 4.04 hereof.
"Redemption Revenues" means (a) amounts received from the redemption of the District
Bonds from amounts constituting prepayments of Special Taxes, (b) amounts received from the
optional redemption of the District Bonds, and (c) amounts received from the special mandatory
redemption and mandatory redemption of the District Bonds.
"Registration Books" means the records maintained by the Trustee pursuant to
Section 2.07 for the registration and transfer of ownership of the Bonds.
"Reserve Account" means the account by that name established and held by the Trustee
pursuant to Section 4.02(c)(iii) hereof.
"Reserve Requirement" means, as of any calculation date, an amount equal to the least of
(i) ten percent (10 %) of the proceeds of the Bonds (within the meaning of section 148 of the
Code); (ii) 125% of average Annual Debt Service; or (iii) Maximum Annual Debt Service.
Provided, however, the Reserve Requirement on any calculation date shall not be greater than the
Reserve Requirement amount on the Closing Date.
"Revenue Fund" means the fund by that name established and held by the Trustee
pursuant to Section 4.02(a) hereof.
"Revenues" means: (a) all amounts received by the Authority from the District as
principal of or interest on the District Bonds; (b) all moneys deposited and held from time to
time by the Trustee in the funds and accounts established hereunder for the Bonds, other than the
Rebate Account and the Redemption Fund; and (c) income and gains with respect to the
investment of amounts on deposit in the funds and accounts established hereunder for the Bonds,
other than the Rebate Account and the Redemption Fund.
"S &P" means Standard & Poor's, a division of The McGraw -Hill Companies, Inc., its
successors and assigns.
"Securities Depositories" means DTC, 55 Water Street, New York 10041, Attention:
Call Notification Department, Fax -(212) 855 -7232 and, in accordance with then current
guidelines of the Securities and Exchange Commission, such other addresses and /or such other
securities depositories as the Authority may designate in a Certificate of the Authority delivered
to the Trustee.
"State" means the State of California.
79361194.1 9
"Supplemental Indenture" means any indenture, agreement or other instrument herea.lter
duly executed by the Authority and the Trustee in accordance with the provisions of Section 7.01
hereof.
"Tax Regulations" means temporary and permanent regulations promulgated under or
with respect to Section 103 and Sections 141 through 150, inclusive, of the Code.
"Trustee" means Union Bank, N.A., and its successors and assigns, and any other
corporation or association which may at any time be substituted in its place as provided in
Article VI hereof.
Section 1.02 Rules of Construction. All references in this Indenture to "Articles,"
"Sections" and other subdivisions are to the corresponding Articles, Sections or subdivisions of
this Indenture, and the words "herein," "hereof," "hereunder" and other words of similar import
refer to this Indenture as a whole and not to any particular Article, Section or subdivision hereof.
Section 1.03 Authorization and Purpose of Bonds. The Authority has reviewed all
proceedings heretofore taken relative to the authorization of the Bonds and has found, as a result
of such review, and hereby finds and determines that all things, conditions, and acts required by
law to exist, happen and be performed precedent to and in the issuance of the Bonds do exist,
have happened and have been performed in due time, form and manner as required by law, and
the Authority is now authorized under the Bond Law and each and every requirement of law, to
issue the Bonds in the manner and form provided in this Indenture. Accordingly, the Authority
hereby authorizes the issuance of the Bonds pursuant to the Bond Law and this Indenture for the
purpose of providing funds to pay for Bonds of the District.
Section 1.04 Equal Security. In consideration of the acceptance of the Bonds by the
Owners thereof, this Indenture shall be deemed to be and shall constitute a contract among the
Authority, the Trustee and the Owners from time to time of the Bonds; and the covenants and
agreements herein set forth to be performed on behalf of the Authority shall be for the equal and
proportionate benefit, security and protection of all Owners of Bonds without preference, priority
or distinction as to security or otherwise of any of the Bonds over any of the others by reason of
the number or date thereof or the time of sale, execution or delivery thereof, or otherwise for any
cause whatsoever, except as expressly provided therein or herein.
ARTICLE II
ISSUANCE OF THE BONDS
Section 2.01 Terms of the Bonds. The Bonds authorized to be issued by the Authority
under and subject to the Bond Law and the terms of this Indenture shall be designated the "Lake
Elsinore Public Financing Authority Local Agency Revenue Bonds (Canyon Hills IA D), 2014
Series A" which shall be issued in the original aggregate principal amount of $
The principal of and interest and premium (if any) on the Bonds shall be payable in
lawful money of the United States of America.
79361194.1 10
The Bonds shall be issued in fully- registered form without coupons in denominations of
$5,000 or any integral multiple thereof, so long as no Bond shall have more than one maturity
date. The Bonds shall be initially registered in the name of Cede & Co., as nominee of The
Depository Trust Company, New York, New York, and shall be evidenced by one Bond for each
of the maturities in the principal amounts set forth below, and DTC is hereby appointed
depository for the Bonds, and registered ownership may not thereafter be transferred except as
set forth in Section 2.05 hereof. The Bonds shall be dated as of the Closing Date, shall mature in
the following amounts and shall bear interest (calculated on the basis of a 360 -day year of twelve
30 -day months) at the following rates:
Maturity Date Principal Interest
September 1 Amount Rate
Interest on the Bonds shall be payable on each Interest Payment Date to the person whose
name appears on the Registration Books as the Owner thereof as of the Record Date immediately
preceding each such Interest Payment Date, such interest to be paid by check of the Trustee
mailed by first -class mail, postage prepaid, on each Interest Payment Date to the Owner at the
address of such Owner as it appears on the Registration Books as of the preceding Record Date;
provided, however, that at the written request of the Owner of at least $1,000,000 in aggregate
principal amount of Outstanding Bonds filed with the Trustee prior to any Record Date, interest
on such Bonds shall be paid to such Owner on each succeeding Interest Payment Date by wire
transfer of immediately available funds to an account in the continental United States designated
in such written request. Any such written request shall remain in effect until rescinded in writing
by the Owner. Principal of and premium (if any) on any Bond shall be paid upon presentation
and surrender thereof, at maturity or the prior redemption thereof, at the Corporate Trust Office.
The principal of and interest and premium (if any) on the Bonds shall be payable in lawful
money of the United States of America.
Each Bond shall bear interest from the Interest Payment Date next preceding the date of
authentication thereof, unless (a) it is authenticated on or before the Interest Payment Date and
after the close of business on the preceding record date, in which event it shall bear interest from
such Interest Payment Date; or (b) it is authenticated on or before August 15, 2014, in which
event it shall bear interest from the Closing Date; or (c) interest with respect to any outstanding
Bond is in default, such Bond shall bear interest from the Interest Payment Date to which interest
79361194.1 11
has previously paid in full or made available for payment thereon payable on each Interest
Payment Date.
Section 2.02 Redemption of Bonds.
(a) Optional Redemption, The Bonds are subject to redemption prior to
maturity at the option of the Authority on any date on or after September 1, 2024, as a whole or
in part from such maturities as selected by the Authority and by lot within a maturity, from any
available source of funds at the redemption price equal to the principal amount of Bonds to be
redeemed, together with accrued interest thereon to the date fixed for redemption, without
premium.
(b) Mandatory Sinking Payment Redemption. The Bonds maturing on
September 1, 20, September 1, 20 and September 1, 20 are subject to mandatory
redemption in part by lot, on September 1 in each year, commencing September 1, 20_,
September 1, 20 and September 1, 20, respectively, from mandatory sinking payments
made by the Authority into the Principal Account of the Bond Fund, at a redemption price equal
to the principal amount thereof to be redeemed, without premium, plus accrued interest thereon
to the date of redemption in the aggregate principal amounts and on September 1 in the
respective years as set forth in the following schedules; provided, however, that (i) in lieu of
redemption thereof, such Bonds may be purchased by the Authority and tendered to the Trustee,
and (ii) if some but not all of such Bonds have been redeemed pursuant to the redemption
provisions described in subsections (a) above or (c) or (d) below, the total amount of all future
mandatory sinking payments will be reduced by the aggregate principal amount of such Bonds so
redeemed, to be allocated among such mandatory sinking payments on a pro rata basis (as nearly
as practicable) in integral multiples of $5,000, as determined by the Authority.
Bonds Maturing on September 1, 20
Sinking Fund
Redemption Date
(September 1)
79361194.1 12
Principal Amount
to be Redeemed
Bonds Maturing on September 1, 20
Sinking Fund
Redemption Date
(September 1)
Principal Amount
to be Redeemed
Bonds Maturing on September 1, 20
Sinking Fund
Redemption Date
(September 1)
Principal Amount
to be Redeemed
(c) Special Mandatory Redemption From Prepayment of Special Taxes and
from Surplus Funds, The Bonds shall also be subject to mandatory redemption prior to maturity
on any date on or after September 1, 2014, in whole or in part from such maturities as selected
by the Authority and by lot within a maturity, from the redemption of District Bonds from
amounts constituting prepayments of Special Taxes and from amounts held in the Delinquency
Management Fund under the Fiscal Agent Agreement and from amounts in the Cash Flow
Management Fund at the following redemption prices (expressed as a percentage of the principal
amount of Bonds to be redeemed) together with accrued interest thereon to the redemption date.
Redemption Dates Redemption Prices
September 1,
2014
through August 31, 2024
102.0%
September 1,
2024
and thereafter
100.0%
(d) Selection of Bonds for Redemption. If less than all of the Bonds
Outstanding are to be redeemed, the portion of any Bond of a denomination of more than $5,000
to be redeemed shall be in the principal amount of $5,000 or an integral multiple thereof. In
selecting portions of such Bonds for redemption, the Trustee shall treat such Bonds as
79361194.1 13
representing that number of Bonds of $5,000 denominations which is obtained by dividing the
principal amount of such Bonds to be redeemed in part by $5,000. The Trustee shall promptly
notify the Authority in writing of the Bonds, or portions thereof, selected for redemption.
(e) Notice of Redemption. The Trustee on behalf and at the expense of the
Authority shall mail (by first -class mail) notice of any redemption to the respective Owners of
any Bonds designated for redemption at their respective addresses appearing on the Registration
Books, to the Securities Depositories and to one or more Information Services, at least thirty (30)
but not more than sixty (60) days prior to the date fixed for redemption. Neither failure to
receive any such notice so mailed nor any defect therein shall affect the validity of the
proceedings for the redemption of such Bonds or the cessation of the accrual of interest thereon.
Such notice shall state the date of the notice, the redemption date, and the redemption price and
shall designate the CUSIP numbers, the Bond numbers (but only if less than all of the
Outstanding Bonds are to be redeemed) and the maturity of the Bonds to be redeemed, and shall
require that such Bonds be then surrendered at the Corporate Trust Office for redemption at the
redemption price, giving notice also that further interest on such Bonds will not accrue from and
after the redemption date.
If at the time of mailing of any notice of optional redemption there shall not have been
deposited with the Trustee moneys sufficient to redeem all the Bonds called for redemption, such
notice shall state that it is subject to the deposit of the redemption moneys with the Trustee not
later than the opening of business on the redemption date and will be of no effect unless such
moneys are so deposited.
The Authority shall have the right to rescind any notice of optional redemption by written
notice to the Trustee on or prior to the date fixed for redemption. Any notice of such redemption
shall be cancelled and annulled if for any reason funds will not be or are not available on the date
fixed for redemption for the payment in full of the Bonds then called for redemption, and such
cancellation shall not constitute an Event of Default hereunder. The Authority and the Trustee
shall have no liability to the Owners or any other party related to or arising from such rescission
of redemption. The Trustee shall mail notice of such rescission of redemption in the same
manner as the original notice of redemption was sent.
In addition to the foregoing notice, further notice shall be given by the Trustee in said
form by first -class mail to any Bond Owner whose Bond has been called for redemption but who
has failed to tender his Bond for payment by the date which is sixty days after the redemption
date, but no defect in said further notice nor any failure to give all or any portion of such further
notice shall in any manner defeat the effectiveness of a call for redemption.
Upon the payment of the redemption price of Bonds being redeemed, each check or other
transfer of funds issued for such purpose shall, to the extent practicable, bear the CUSIP number
identifying, by issue and maturity, the Bonds being redeemed with the proceeds of such check or
other transfer.
(f) Partial Redemption of Bonds. In the event only a portion of any Bond is
called for redemption, then, upon surrender of such Bond, the Authority shall execute and the
Trustee shall authenticate and deliver to the Owner thereof, at the expense of the Authority, a
79361194.1 14
new Bond or Bonds of the same series and maturity date, of authorized denominations in
aggregate principal amount equal to the unredeemed portion of the Bond to be redeemed.
(g) Effect of Redemption. From and after the date fixed for redemption, if
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 Indenture other than the right to receive payment of the
redemption price, and no interest shall accrue thereon from and after the redemption date
specified in such notice. All Bonds redeemed pursuant to this Section 2.02 shall be canceled and
destroyed.
(h) Purchase in Lieu of Redemption. In lieu of redemption of any Bond,
amounts on deposit in the Revenue Fund may also be used and withdrawn by the Trustee at any
time, upon the Written Request of the Authority, for the purchase of such Bonds at public or
private sale as and when and at such prices (including brokerage and other charges, but
excluding accrued interest, which is payable from the Interest Account) as the Authority may in
its discretion determine in accordance with all applicable laws and in accordance with the
priority afforded the relative Bond under the Indenture.
(i) Authority Notice. Notwithstanding any provisions in this Indenture to the
contrary, upon any optional redemption or mandatory redemption from Special Taxes in part, the
Authority shall deliver a Written Certificate to the Trustee at least sixty (60) days prior to the
proposed redemption date or such later date as shall be acceptable to the Trustee so stating that
the remaining payments of principal and interest on the District Bonds, together with other
Revenues will be sufficient on a timely basis to pay debt service on the Bonds. The Authority
shall certify in such Written Certificate that sufficient moneys for purposes of such redemption
are or will be on deposit in the Redemption Fund, and is required to deliver such moneys to the
Trustee together with other Revenues, if any, then to be delivered to the Trustee, which moneys
are required to be identified to the Trustee in the Written Certificate delivered with the Revenues.
Section 2.03 Form of the Bonds. The Bonds, the form of Trustee's certificate of
authentication, and the form of assignment to appear thereon, shall be substantially in the form
set forth in Exhibit A attached hereto and by this reference incorporated herein, with necessary or
appropriate variations, omissions and insertions, as permitted or required by this Indenture.
Section 2.04 Execution of Bonds. The Bonds shall be signed in the name and on
behalf of the Authority with the manual or facsimile signatures of its Chairperson or Executive
Director and attested with the manual or facsimile signature of its Secretary or any assistant duly
appointed by the Board, and shall be delivered to the Trustee for authentication by it. In case any
officer of the Authority who shall have signed any of the Bonds shall cease to be such officer
before the Bonds so signed shall have been authenticated or delivered by the Trustee or issued by
the Authority, such Bonds may nevertheless be authenticated, delivered and issued and, upon
such authentication, delivery and issue, shall be as binding upon the Authority as though the
individual who signed the same had continued to be such officer of the Authority. Also, any
Bond may be signed on behalf of the Authority by any individual who on the actual date of the
execution of such Bond shall be the proper officer although on the nominal date of such Bond
such individual shall not have been such officer.
79361194.1 15
Only such of the Bonds as shall bear thereon a certificate. of a„ thentic.atinn i„
substantially the form set forth in Exhibit A manually executed by the Trustee, shall be valid or
obligatory for any purpose or entitled to the benefits of this Indenture, and such certificate of the
Trustee shall be conclusive evidence that the Bonds so authenticated have been duly
authenticated and delivered hereunder and are entitled to the benefits of this Indenture.
Section 2.05 Transfer of Bonds. Subject to Section 2.10, 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, accompanied by delivery of a written instrument of transfer in a form acceptable
to the Trustee, duly executed. Whenever any Bond or Bonds shall be surrendered for transfer,
the Authority shall execute and the Trustee shall authenticate and deliver to the transferee a new
Bond or Bonds of like maturity and aggregate principal amount of authorized denominations.
The Trustee may require payment by the Bond Owner requesting such transfer or exchange of
any tax or other governmental charge required to be paid with respect to such transfer or
exchange. The Trustee shall not be required to transfer, pursuant to this Section, either (a) all
Bonds during the period established by the Trustee for the selection of Bonds for redemption, or
(b) any Bonds selected for redemption pursuant to Section 2.02. The cost of printing Bonds and
any services rendered or expenses incurred by the Trustee in connection with any transfer shall
be paid by the Authority.
Section 2.06 Exchange of Bonds. The Bonds of any series may be exchanged at the
Corporate Trust Office for a like aggregate principal amount of Bonds of the same series of other
authorized denominations and of the same maturity. The Trustee shall not be required to
exchange, pursuant to this Section, either (a) all Bonds during the period established by the
Trustee for the selection of Bonds for redemption, or (b) any Bonds selected for redemption
pursuant to Section 2.02. The cost of printing Bonds and any service rendered or expenses
incurred by the Trustee in connection with any exchange shall be paid by the Authority.
Section 2.07 Registration Books. The Trustee, will keep or cause to be kept at its
Corporate Trust Office sufficient records for the registration and transfer of the Bonds which
shall at all reasonable times during regular business hours be open to inspection by the Authority
with reasonable prior notice; and, upon presentation for such purpose, the Trustee shall, under
such reasonable regulations as it may prescribe, register or transfer or cause to be registered or
transferred, on said records Bonds as hereinbefore provided.
Section 2.08 Bonds Mutilated, Lost, Destroyed or Stolen. If any Bond shall become
mutilated, the Authority, at the expense of the Owner of said Bond, shall execute, and the
Trustee shall thereupon authenticate and deliver, a new Bond of like series, tenor and authorized
denomination in exchange and substitution for the Bond so mutilated, but only upon surrender to
the Trustee of the Bond so mutilated. Every mutilated Bond so surrendered to the Trustee shall
be cancelled by it and destroyed. If any Bond hereunder shall be lost, destroyed or stolen,
evidence of such loss, destruction or theft may be submitted to the Trustee and the Authority and,
if such evidence be satisfactory to the Trustee and the Authority and indemnity for the Trustee
and the Authority satisfactory to the Trustee shall be given, the Authority, at the expense of the
Bond Owner, shall execute, and the Trustee shall thereupon authenticate and deliver, a new Bond
of like series and tenor in lieu of and in substitution for the Bond so lost, destroyed or stolen (or
79361194.1 16
if any such Bond shall have matured or shall have been called for redemption, instead of issuing
a substitute Bond, the Trustee may pay the same without surrender thereof upon receipt of
indemnity satisfactory to the Trustee). The Authority may require payment of a fee for preparing
and authenticating each new Bond issued under this Section and of expenses which may be
incurred by the Authority and the Trustee. Any Bond issued under the provisions of this
Section 2.08, in lieu of any Bond alleged to be lost, destroyed or stolen shall constitute an
original contractual obligation on the part of the Authority whether or not the Bond 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 Indenture with all other Bonds secured by this
Indenture.
Section 2.09 CUSIP Numbers. The Trustee and the Authority shall not be liable for
any defect or inaccuracy in the CUSIP number that appears on any Bond or in any redemption
notice. The Trustee may, in its discretion, include in any redemption notice a statement to the
effect that the CUSIP numbers on the Bonds have been assigned by an independent service and
are included in such notice solely for the convenience of the Owners and that neither the Trustee,
nor the Authority shall be liable for any inaccuracies in such numbers.
Section 2.10 Use of Securities Depository.
(a) The Bonds shall be initially registered as provided in Section 2.01.
Registered ownership of the Bonds, or any portion thereof, may not thereafter be transferred
except:
(i) to any successor of Cede & Co., as nominee of DTC, as its
nominee, or to any substitute depository designated pursuant to clause (ii) of this Section (a
"substitute depository "); provided, that any successor of Cede & Co., as nominee of DTC or a
substitute depository, shall be qualified under any applicable laws to provide the services
proposed to be provided by it;
(ii) to any substitute depository upon (1) the resignation of DTC or its
successor (or any substitute depository or its successor) from its functions as depository, or (2) a
determination by the Authority to substitute another depository for DTC (or its successor)
because DTC or its successor (or any substitute depository 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 (1) the resignation of DTC
or its successor (or substitute depository or its successor) from its functions as depository, or (2)
a determination by the Authority to remove DTC or its successor (or any substitute depository or
its successor) from its functions as depository.
(b) In the case of any transfer pursuant to clause (i) or clause (ii) of subsection
(a) hereof, upon receipt of the Outstanding Bonds by the Trustee, together with a Written
Request of the Authority to the Trustee, a new Bond for each maturity shall be authenticated and
delivered in the aggregate principal amount of the Bonds then Outstanding, registered in the
79361194.1 17
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 Authority.
(c) In the case of any transfer pursuant to clause (iii) of subsection (a) hereof
upon receipt of the Outstanding Bonds by the Trustee, together with a Written Request of the
Authority to the Trustee, new Bonds shall be authenticated and delivered in such denominations
numbered in the manner determined by the Trustee and registered in the names of such persons
as are requested in such a Written Request of the Authority, subject to the limitations of
Section 2.01 hereof, provided, the Trustee shall not be required to deliver such new Bonds within
a period of less than sixty (60) days from the date of receipt of such a Written Request of the
Authority. After any transfer pursuant to this subsection, the Bonds shall be transferred pursuant
to Section 2.05.
(d) The Authority and the Trustee shall be entitled to treat the person in whose
name any Bond is registered as the Owner thereof for all purposes of the Indenture and any
applicable laws, notwithstanding any notice to the contrary received by the Trustee or the
Authority; and the Authority and the Trustee shall have no responsibility for transmitting
payments to, communication with, notifying, or otherwise dealing with any beneficial owners of
the Bonds, and neither the Authority nor the Trustee will have any responsibility or obligations,
legal or otherwise, to the beneficial owners or to any other party, including DTC or its successor
(or substitute depository or its successor), except for the Owner of any Bonds.
(e) So long as the Outstanding Bonds are registered in the name of Cede &
Co. or its registered assigns, the Authority and the Trustee shall cooperate with Cede & Co., as
sole registered Owner, or its registered assigns in effecting payment of the principal of and
interest on 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.
(f) Notwithstanding anything to the contrary contained herein, so long as the
Bonds are registered as provided in this Section 2. 10, payment of principal of and interest on the
Bonds shall be made in accordance with the Letter of Representations delivered to DTC with
respect to the Bonds.
Section 2.11 Temporary Bonds. The Bonds may be initially delivered in temporary
form exchangeable for definitive Bonds when ready for delivery, which temporary Bonds shall
be printed, lithographed or typewritten, shall be of such denominations as may be determined by
the Trustee, shall be in fully- registered form and shall contain such reference to any of the
provisions hereof as may be appropriate. Every temporary Bond shall be authenticated and
delivered by the Trustee upon the same conditions and terms and in substantially the same
manner as definitive Bonds. If the Trustee authenticates and delivers temporary Bonds, it will
register and authenticate definitive Bonds, and in that case, upon demand of the Owner of any
temporary Bonds, such definitive Bonds shall be exchanged by the Trustee at its Corporate Trust
Office, without cost to such Owner for temporary Bonds upon surrender of such temporary
Bonds, and until so exchanged such temporary Bonds shall be entitled to the same benefit,
protection and security hereunder as the definitive Bonds executed and delivered hereunder. All
temporary Bonds surrendered pursuant to the provisions of this Section shall be canceled by the
Trustee and shall not be redelivered.
79361194.1 18
ARTICLE III
DEPOSIT AND APPLICATION OF PROCEEDS OF BONDS
Section 3.01 Issuance of Bonds. Upon the execution and delivery of this Indenture,
the Authority shall execute and deliver the Bonds in the aggregate principal amount of
Thousand Dollars ($ ) to the Trustee for authentication and delivery
to the original purchaser thereof upon the Written Request of the Authority.
Section 3.02 Application of Proceeds of Sale of Bonds and Other Amounts. Upon
the receipt of payment for the Bonds on the Closing Date, the Trustee shall apply the proceeds of
sale thereof in the amount of $ (being the principal amount of $ , [less /plus
original issue discount /premium of $ ], and less an underwriter's discount of
$ ), along with other available moneys in the amount of $ , as follows:
(a) The Trustee shall deposit the amount of $ in the Bond
Purchase Fund, which amount constitutes the purchase price of the District Bonds.
(b) The Trustee shall deposit the amount
Account, which amount equals the initial Reserve Requirement,
(c)
Issuance Fund.
(d)
Management Fund.
•
The Trustee shall deposit the amount of $
The Trustee shall deposit the amount of $
in the Reserve
in the Costs of
in the Cash Flow
Section 3.03 Bond Purchase Fund. The Trustee shall establish and maintain a
separate fund to be known as the "Bond Purchase Fund" into which shall be deposited a portion
of the proceeds of the sale of the Bonds in the amount set forth in Section 3.02(a). The Trustee
shall disburse all amounts in the Bond Purchase Fund on the Closing Date to purchase the
District Bonds. The Trustee shall transfer all amounts in the Bond Purchase Fund to the Fiscal
Agent for deposit pursuant to the Fiscal Agent Agreement. The Trustee shall hold the District
Bonds in the Bond Purchase Fund.
Section 3.04 Costs of Issuance Fund. There is hereby established a fund to be held by
the Trustee known as the "Costs of Issuance Fund" into which shall be deposited a portion of the
Bond proceeds as set forth in Section 3.02(c). The moneys in the Costs of Issuance Fund shall
be used to pay Costs of Issuance from time to time upon receipt of a Written Request of the
Authority. On the date which is one hundred twenty (120) days following the Closing Date or
upon the earlier receipt by the Trustee of a Written Request of the Authority stating that all Costs
of Issuance have been paid, the Trustee shall transfer all remaining amounts in the Costs of
Issuance Fund to the Revenue Fund. The Authority may at any time file a Written Request of
the Authority requesting that the Trustee retain a specified amount in the Costs of Issuance Fund
and transfer to the Revenue Fund all remaining amounts, and the Trustee shall comply with such
request.
79361194.1 19
Section 3.05 Validity of Bonds. The
Bonds shall not be affected in any way of any
the application of the proceeds of the sale of tl;
Bonds that the same are issued pursuant to the
validity and of the regularity of their issuance.
validity of the authorization and issuance of the
proceedings taken by the District with respect to
e District Bonds, and the recital contained in the
Bond Law shall be conclusive evidence of their
ARTICLE IV
REVENUES; FLOW OF FUNDS
Section 4.01 Pledge of Revenues; Assignment of Rights. The Bonds shall be secured
by a first lien on and pledge (which shall be effected in the manner and to the extent hereinafter
provided) of all of the Revenues and Redemption Revenues and a first pledge of all of the
moneys in the Bond Fund, the Revenue Fund, the Redemption Fund and the Cash Flow
Management Fund, including all amounts derived from the investment of such moneys. The
Bonds shall be equally secured by a pledge, charge and first lien upon the Revenues and
Redemption Revenues and such moneys without priority for number, date of Bonds, date of
execution or date of delivery; and the payment of the interest on and principal of the Bonds and
any premiums upon the redemption of any thereof shall be and are secured by an exclusive
pledge, charge and first lien upon the Revenues and Redemption Revenues and such moneys.
So long as any of the Bonds are Outstanding, the Revenues and Redemption Revenues
and such other money shall not be used for any other purpose except as described hereunder for
the payment of the Bonds; except that out of the Revenues and Redemption Revenues there may
be apportioned such sums, for such purposes, as are expressly permitted by ,Section 4.02.
The Authority hereby transfers in trust and assigns to the Trustee, for the benefit of the
Owners from time to time of the Bonds, all of the Revenues and all of the right, title and interest
of the Authority in the District Bonds. The Trustee shall be entitled to and shall receive all of the
Revenues, and any Revenues collected or received by the Authority shall be deemed to be held,
and to have been collected or received, by the Authority as the agent of the Trustee and shall
forthwith be paid by the Authority to the Trustee. The assignment to the Trustee is solely in its
capacity as Trustee under this Indenture and in accepting such assignment and taking any actions
with respect to the District Bonds, the Trustee shall be entitled to all the indemnities, protections,
immunities and limitations from liability afforded it as Trustee under this Indenture. The Trustee
also shall be entitled to and, subject to the provisions hereof, shall take all steps, actions and
proceedings reasonably necessary in its judgment to enforce, either jointly with the Authority or
separately, all of the rights of the Authority and all of the obligations of the District under the
District Bonds,
Section 4.02 Receipt, Deposit and Applications of Revenues.
(a) Deposit of Revenues; Revenue Fund. All Revenues (excluding
Redemption Revenues) shall be promptly deposited by the Trustee upon receipt thereof in a
special fund designated as the "Revenue Fund" which the Trustee shall establish, maintain and
hold in trust hereunder.
79361194.1 20
(b) Deposit of Revenues; Bond Fund: The Trustee shall establish, maintain
and hold in trust a fund, entitled "Bond Fund." Within such fund, the Trustee shall establish,
maintain and hold in trust separate special accounts entitled "Interest Account," "Principal
Account" and "Reserve Account." On or before each Interest Payment Date, the Trustee shall
transfer from the Revenue Fund for deposit into the Bond Fund the following amounts, in the
priority set forth in Subsection (c) below.
(c) Application of Revenues; Bond Fund. On or before each Interest Payment
Date, the Trustee shall transfer from the Revenue Fund and deposit into the Bond Fund and the
following respective special accounts therein, the following amounts in the following order of
priority, the requirements of each such special account (including the making up of any
deficiencies in any such account resulting from lack of Revenues sufficient to make any earlier
required deposit) at the time of deposit to be satisfied before any transfer is made to any account
subsequent in priority:
(i) Interest Account. On or before each Interest Payment Date, the
Trustee shall deposit in the Interest Account an amount required to cause the aggregate amount
on deposit in the Interest Account to equal the amount of interest becoming due and payable on
such Interest Payment Date on all Outstanding Bonds. No deposit need be made into the Interest
Account if the amount contained therein is at least equal to the interest becoming due and
payable upon all Outstanding Bonds on such Interest Payment Date. All moneys in the Interest
Account shall be used and withdrawn by the Trustee solely for the purpose of paying the interest
on the Bonds as it shall become due and payable (including accrued interest on any Bonds
redeemed prior to maturity).
(ii) Principal Account. On or before each date on which the principal
of the Bonds shall be payable, the Trustee shall deposit in the Principal Account an amount
required to cause the aggregate amount on deposit in the Principal Account to equal the
aggregate amount of principal (including sinking fund payments) coming due and payable on
such date on the Bonds pursuant to Section 2.01. All moneys in the Principal Account shall be
used and withdrawn by the Trustee solely for the purpose of paying the principal of the Bonds
(including sinking fund payments).
(iii) Reserve Account. All amounts on deposit in the Revenue Fund on
or before each Interest Payment Date, to the extent not required to pay any interest on or
principal of any Outstanding Bonds then having come due and payable, shall be credited to the
replenishment of the Reserve Account in an amount sufficient to maintain the Reserve
Requirement therein.
The Authority shall deposit from the repayment of the District Bonds, and, to the extent
necessary and to the extent permitted by law, from available surplus revenues with respect to
other series of bonds issued by the Authority relating to community facilities districts, and
maintain an amount of money equal to the Reserve Requirement in the Reserve Account at all
times while the Bonds are Outstanding. Amounts in the Reserve Account will be used to pay
debt service on the Bonds to the extent other moneys (including amounts in the Cash Flow
Management Fund) are not available therefor. Earnings on amounts in the Reserve Account in
excess of the Reserve Requirement shall be deposited into the Revenue Fund, if and to the extent
79361194.1 21
such earnings are not required to be retained in the Reserve Account to meet the Reserve
Requirement. Upon redemption of the Bonds, amounts on deposit in the Reserve Account shall
be reduced (to an amount not less than the Reserve Requirement) and the excess moneys shall be
transferred to the Redemption Account and used for the redemption of the Bonds. Amounts in
the Reserve Account may be used to pay the final year's debt service on the Bonds.
(iv) Surplus. All remaining amounts on September 2 (or the next
Business Day to the extent September 2 is not a Business Day) of each year, commencing
September 2, 2014, on deposit in the Revenue Fund shall be transferred to the Cash Flow
Management Fund.
(v) Rebate Account, The Trustee shall deposit in the Rebate Account
(which account shall be established as a separate account to be held by the Trustee upon receipt
of a Written Request from the Authority) from time to time, as set forth in this Indenture, an
amount determined by the Authority to be subject to rebate to the United States of America in
accordance with Section 5.07(h). Amounts in the Rebate Account shall be applied and disbursed
by the Trustee solely for the purposes and at the times set forth in written requests of the
Authority filed with the Trustee pursuant to Section 5.07(h). The Trustee shall not be
responsible for calculating rebate amounts or for the adequacy or correctness of any rebate report
or rebate calculations. The Trustee shall be deemed conclusively to have complied with the
provisions of this Indenture and any other agreement relating to the Bonds regarding calculation
and payment of rebate if it follows the directions of the Authority and it shall have no
independent duty to review, such calculations or enforce the compliance with such rebate
requirements by the Authority.
Section 4.03 Cash Flow Management Fund.
(a) Establishment of Cash Flow Management Fund. There is hereby
established as a separate fund to be held by the Trustee, the "Cash Flow Management Fund," to
the credit of which a deposit shall be made as required by Section 4.02 hereof. The Cash Flow
Management Fund may also be funded at the election of the Authority from any available
surplus revenues with respect to other series of local agency revenue bonds issued by the
Authority to the extent such surplus revenues are loaned to replenish the Cash Flow Management
Fund to the Cash Flow Management Fund Requirement. Amounts, if any, deposited into the
Cash Flow Management Fund shall be applied for the following purposes in the following order
of priority:
(i) The Trustee shall, prior to any draw on the Reserve Account, pay
debt service on the Bonds to the extent Revenues are insufficient for such purpose.
(ii) Upon the written direction of the Authority, the Trustee shall
transfer any amounts in the Cash Flow Management Fund to the trustee of any other series of
local agency revenue bonds issued by the Authority to the extent any surplus revenues from such
other series of local agency revenue bonds were loaned to replenish the Cash Flow Management
Fund.
79361194.1 22
(iii) Upon the written direction of the Authority, the Trustee shall
transfer any amounts in the Cash Flow Management Fund to the trustee of any other series of
local agency revenue bonds issued by the Authority in an amount estimated by the Authority to
be necessary to prevent a shortfall in the amount required to pay debt service on such other series
of local agency revenue bonds or to the fiscal agent of any local agency bonds issued by the City
an amount estimated by the Authority necessary to prevent a shortfall in the amount required to
pay debt service on such local agency bonds, which all such transfers shall be treated as loaned
amounts.
(iv) Upon the written direction of the Authority, the Trustee shall
transfer such amount as may be directed by the Authority for deposit in the Redemption Fund.
(v) On or after September 2 of each year, commencing September 2,
2014, upon the written direction of the Authority, the Trustee shall transfer all remaining
amounts in the Cash Flow Management Fund in excess of the Cash Flow Management Fund
Requirement to the Fiscal Agent for the District Bonds for deposit in the Delinquency
Management Fund held under the Fiscal Agent Agreement.
Section 4.04 Redemption Fund. There is hereby established as a separate fund to be
held by the Trustee, the "Redemption Fund," to the credit of which the Authority shall deposit,
immediately upon receipt, all Redemption Revenues. Moneys in the Redemption Fund shall be
held in trust by the Trustee for the benefit of the Authority and the Owners of the Bonds, and
shall be used and withdrawn by the Trustee to redeem Bonds pursuant to Sections 2.02(a),
2.02(c) and 2.02(d) hereof on the applicable date thereof.
Section 4.05 Reserved.
Section 4.06 Investments. All moneys in any of the funds or accounts established with
the Trustee pursuant to this Indenture shall be invested by the Trustee solely in Permitted
Investments pursuant to the Written Request of the Authority given to the Trustee at least two (2)
Business Days in advance of the making of such investments, which by their terms mature prior
to the date on which such moneys are required to be paid out hereunder. Each such written
direction shall contain the representation of the Authority that the investments identified therein
constitute Permitted Investments hereunder upon which the Trustee may conclusively rely. In
the absence of any such direction from the Authority, the Trustee shall invest any such moneys
in clause (d) of the definition of Permitted Investments. Obligations purchased as an investment
of moneys in any funds shall be deemed to be part of such fund or account.
All interest or gain derived from the investment of amounts in any of the funds or
accounts established hereunder shall be deposited in the fund or account from which such
investment was made. For purposes of acquiring any investments hereunder, the Trustee may
commingle funds held by it hereunder upon the Written Request of the Authority. The Trustee
or its affiliate may (but shall not be obligated to) act as principal or agent in the acquisition or
disposition of any investment and shall be entitled to its customary fees therefor. The Trustee is
required to sell or present for redemption, any Permitted Investment it purchases whenever it
shall be necessary to provide moneys to meet any required payment, transfer, withdrawal or
79361194.1 23
dishtirsement from the fund to which such permitted investment is created. The Trustee shall
incur no liability for losses arising from any investments made pursuant to this Section.
The Trustee shall furnish the Authority periodic cash transaction statements which
include detail for all investment transactions effected by the Trustee or brokers selected by the
Authority. Upon the Authority's election, such statements will be delivered via the Trustee's
online service and upon electing such service, paper statements will be provided only upon
request. The Authority waives the right to receive brokerage confirmations of security
transactions effected by the Trustee as they occur, to the extent permitted by law. The Authority
further understands that trade confirmations for securities transactions effected by the Trustee
will be available upon request and at no additional cost and other trade confirmations may be
obtained from the applicable broker. Copies of such cash statements may be mailed to any
owner of at least 50% aggregate principal amount of Bonds Outstanding, upon the Owner's
written request at a cost not to exceed the Trustee's actual costs of duplication and mailing.
The Trustee may purchase or sell to itself or any affiliate, as principal or agent,
investments authorized by this Section. The Trustee may act as purchaser or agent in the making
or disposing of any investment. Such investments, if registered, shall be registered in the name
of the Trustee for the benefit of the Owners and held by the Trustee.
The Trustee or any of its affiliates may act as sponsor, advisor or manager or provide
administrative services in connection with any Permitted Investments,
Section 4.07 Valuation and Disposition of Investments. Except as otherwise
provided in the next sentence, all investments of amounts deposited in any fund, or account
created by or pursuant to this Indenture, or otherwise containing gross proceeds of the Bonds
(within the meaning of section 148 of the Code) shall be acquired, disposed of, and valued (as of
the date that valuation is required by this Indenture or the Code) at Fair Market Value.
Investments in funds or accounts (or portions thereof) that are subject to a yield restriction under
the applicable provisions of the Code shall be valued at their present value (within the meaning
of section 148 of the Code).
ARTICLE V
COVENANTS OF THE AUTHORITY
Section 5.01 Punctual Payment. The Authority shall punctually pay or cause to be
paid the principal, interest and premium (if any) to become due in respect of all the Bonds, in
strict conformity with the terms of the Bonds and of this Indenture, according to the true intent
and meaning thereof, but only out of Revenues and other assets pledged for such payment as
provided in this Indenture.
Section 5.02 Extension of Payment of Bonds. The Authority shall not directly or
indirectly extend or assent to the extension of the maturity of any of the Bonds or the time of
payment of any claims for interest by the purchase of such Bonds or by any other arrangement,
and in case the maturity of any of the Bonds or the time of payment of any such claims for
interest shall be extended, such Bonds or claims for interest shall not be entitled, in case of any
79361194.1 24
default hereunder, to the benefits of this Indenture, except subject to the prior payment in full of
the principal of all of the Bonds then Outstanding and of all claims for interest thereon which
shall not have been so extended. Nothing in this Section shall be deemed to limit the right of the
Authority to issue Bonds for the purpose of refunding any Outstanding Bonds, and such issuance
shall not be deemed to constitute an extension of maturity of the Bonds.
Section 5.03 Against Encumbrances, The Authority shall not create, or permit the
creation of, any pledge, lien, charge or other encumbrance upon the Revenues and other assets
pledged or assigned under this Indenture while any of the Bonds are Outstanding, except the
pledge and assignment created by this Indenture. Subject to this limitation, the Authority
expressly reserves the right to enter into one or more other indentures for any of its corporate
purposes, including, but not limited to, the purchase of Additional District Bonds and other
programs under the Bond Law, and reserves the right to issue other obligations for such
purposes.
Section 5.04 Power to Issue Bonds and Make Pledge and Assignment. The
Authority is duly authorized pursuant to law to issue the Bonds and to enter into this Indenture
and to pledge and assign the Revenues, the District Bonds and other assets purported to be
pledged and assigned, respectively, under this Indenture in the manner and to the extent provided
in this Indenture. The Bonds and the provisions of this Indenture are and will be the legal, valid
and binding special obligations of the Authority in accordance with their terms and priority of
payment, and the Authority and the Trustee, subject to the provisions of this Indenture, shall at
all times, to the extent permitted by law, defend, preserve and protect said pledge and assignment
of Revenues and other assets and all the rights of the Bond Owners under this Indenture against
all claims and demands of all persons whomsoever.
Section 5.05 Accounting Records and Financial Statements. The Trustee shall at all
times keep, or cause to be kept, proper books of record and account, prepared in accordance with
industry standards, in which complete and accurate entries shall be made of all transactions made
by the Trustee relating to the proceeds of Bonds, the Revenues and all funds and accounts
established by the Trustee pursuant to this Indenture. Such books of record and account shall be
available for inspection by the Authority, during regular business hours with reasonable prior
notice.
Section 5.06 No Parity Debt. Except for the Bonds, or bonds issued for the purpose of
refunding the Bonds, the Authority covenants that no additional bonds, notes or other
indebtedness shall be issued or incurred which are payable out of the Revenues in whole or in
part.
Section 5.07 Tax Covenants Relating to Bonds.
(a) Special Definitions. When used in this Section, the following terms have
the following meanings:
(i) "Code" means the Internal Revenue Code of 1986.
(ii) "Computation Date" has the meaning set forth in section 1.148 -
1(b) of the Tax Regulations.
79361194.1 25
"Gross Proceeds" means any proceeds as defined in section 1.148,
1(b) of the Tax Regulations (referring to sales, investment and transferred proceeds), and any
replacement proceeds as defined in section 1.148 -1(c) of the Tax Regulations, of the Bonds.
Tax Regulations. (iv) "Investment" has the meaning set forth in section 1.148 -1(b) of the
(v) "Nonpurpose Investment" means any investment property, as
defined in section 148(b) of the Code, in which Gross Proceeds of the Bonds are invested and
that is not acquired to carry out the governmental purposes of that series of Bonds.
(vi) "Rebate Amount" has the meaning set forth in section 1.148 -1(b)
of the Tax Regulations.
(vii) "Tax Regulations" means the United States Treasury Regulations
promulgated pursuant to sections 103 and 141 through 150 of the Code, or section 103 of the
1954 Code, as applicable.
(viii) "Yield" of any Investment has the meaning set forth in section
1.148 -5 of the Tax Regulations; and of any issue of governmental obligations has the meaning
set forth in section 1.148 -4 of the Tax Regulations.
(b) Not to Cause Interest to Become Taxable. The Authority covenants that it
shall not use, and shall not permit the use of, and shall not omit to use Gross Proceeds or any
other amounts (or any property the acquisition, construction or improvement of which is to be
financed directly or indirectly with Gross Proceeds) in a manner that if made or omitted,
respectively, could cause the interest on any Bond to fail to be excluded, pursuant to
Section 103(a) of the Code, from the gross income of the owner thereof for federal income tax
purposes. Without limiting the generality of the foregoing, unless and until the Trustee receives
a written opinion of Bond Counsel to the effect that failure to comply with such covenant will
not adversely affect such exclusion of the interest on any Bond from the gross income of the
owner thereof for federal income tax purposes, the Authority shall comply with each of the
specific covenants in this Section.
(c) Private Use and Private Payments. Except as would not cause any Bond
to become a "private activity bond" within the meaning of section 141 of the Code and the Tax
Regulations, the Authority shall take all actions necessary to assure that the District or City or
other public agency at all times prior to the final cancellation of the last of the Bonds to be
retired:
(i) exclusively owns, operates and possesses all property the
acquisition, construction or improvement of which is to be financed or refinanced directly or
indirectly with Gross Proceeds of the Bonds and not use or permit the use of such Gross
Proceeds (including through any contractual arrangement with terms different than those
applicable to the general public) or any property acquired, constructed or improved with such
Gross Proceeds in any activity carried on by any person or entity (including the United States or
any agency, department and instrumentality thereof) other than a state or local government,
unless such use is solely as a member of the general public; and
79361194. I 26
(ii) does not directly or indirectly impose or accept any charge or other
payment by any person or entity (other than a state or local government) who is treated as using
any Gross Proceeds of the Bonds or any property the acquisition, construction or improvement of
which is to be financed or refinanced directly or indirectly with such Gross Proceeds.
(d) No Private Loan. Except as would not cause any Bond to become a
"private activity bond" within the meaning of section 141 of the Code and the Tax Regulations
and rulings thereunder, the Authority shall not use or permit the use of Gross Proceeds of the
Bonds to make or finance loans to any person or entity other than a state or local government.
For purposes of the foregoing covenant, such Gross Proceeds are considered to be "loaned" to a
person or entity if: (i) property acquired, constructed or improved with such Gross Proceeds is
sold or leased to such person or entity in a transaction that creates a debt for federal income tax
purposes; (ii) capacity in or service from such property is committed to such person or entity
under a take -or -pay, output or similar contract or arrangement; or (iii) indirect benefits of such
Gross Proceeds, or burdens and benefits of ownership of any property acquired, constructed or
improved with such Gross Proceeds, are otherwise transferred in a transaction that is the
economic equivalent of a loan.
(e) Not to Invest at Higher Yield. Except as would not cause the Bonds to
become "arbitrage bonds" within the meaning of section 148 of the Code and the Tax
Regulations and rulings thereunder, the Authority shall not (and shall not permit any person to),
at any time prior to the final cancellation of the last Bond to be retired, directly or indirectly
invest Gross Proceeds in any Investment, if as a result of such investment the Yield of any
Investment acquired with Gross Proceeds, whether then held or previously disposed of, would
materially exceed the Yield of the Bonds within the meaning of said section 148.
(f) Not Federally- Guaranteed. Except to the extent permitted by section
149(b) of the Code and the Tax Regulations and rulings thereunder, the Authority shall not take
or omit to take (and shall not permit any person to take or omit to take) any action that would
cause any Bond to be "federally guaranteed" within the meaning of section 149(b) of the Code
and the Tax Regulations and rulings thereunder.
(g) Information Report. The Authority shall timely file any information
required by section 149(e) of the Code with respect to Bonds with the Secretary of the Treasury
on Form 8038 -G or such other form and in such place as the Secretary may prescribe.
(h) Rebate of Arbitrage Profits. Except to the extent otherwise provided in
section 148(f) of the Code and the Tax Regulations:
(i) The Authority shall account for all Gross Proceeds (including all
receipts, expenditures and investments thereof) on its books of account separately and apart from
all other funds (and receipts, expenditures and investments thereof) and shall retain all records of
accounting for at least six years after the day on which the last Bond is discharged. However, to
the extent permitted by law, the Authority may commingle Gross Proceeds of Bonds with its
other moneys, provided that it separately accounts for each receipt and expenditure of Gross
Proceeds and the obligations acquired therewith.
79361194.1 27
Not less frequently than
shall calculate the Rebate Amount in accordance with
Code and the Tax Regulations and rulings thereunder.
the calculation with its official transcript of proceeding
until six years after the final Computation Date.
each Computation Date,
rules set forth in section
The Authority shall main
;s relating to the issuance
the Authority
148(f) of the
tain a copy of
of the Bonds
(iii) In order to assure the excludability pursuant to section 103(a) of
the Code of the interest on the Bonds from the gross income of the owners thereof for federal
income tax purposes, the Authority shall pay to the United States the amount that when added to
the future value of previous rebate payments made for the Bonds equals (i) in the case of the
Final Computation Date as defined in section 1.148- 3(e)(2) of the Tax Regulations, one hundred
percent (100 %) of the Rebate Amount on such date; and (ii) in the case of any other
Computation Date, ninety percent (90 %) of the Rebate Amount on such date. Upon the Written
Request of the Authority, the Trustee shall pay over to the Authority amounts in the Rebate
Account for such purpose. In all cases, such rebate payments shall be made by the Authority at
the times and in the amounts as are or may be required by section 148(f) of the Code and the Tax
Regulations and rulings thereunder, and shall be accompanied by Form 8038 -T or such other
forms and information as is or may be required by section 148(f) of the Code and the Tax
Regulations and rulings thereunder for execution and filing by the Authority. Notwithstanding
the foregoing, and provided that the Authority takes all steps available to it to cause the provision
of such amounts, the monetary obligation of the Authority under this paragraph (iii) shall be
limited to amounts provided to it for such purpose by the District.
(i) Not to Divert Arbitrage Profits. Except to the extent permitted by section
148 of the Code and. the Tax Regulations and rulings thereunder, the Authority shall not and
shall not permit any person to, at any time prior to the final cancellation of the last of the Bonds
to be retired, enter into any transaction that reduces the amount required to be paid to the United
States pursuant to paragraph (h) of this Section because such transaction results in a smaller
profit or a larger loss than would have resulted if the transaction had been at arm's length and
had the Yields on the Bonds not been relevant to either party.
0) Bonds Not Hedge Bonds.
(i) The Authority represents that none of the Bonds will become a
"hedge bond" within the meaning of section 149(g) of the Code.
(ii) Without limitation of paragraph (i) above: the Authority believes
(upon appropriate investigation) (A) that on the date of issuance of the Bonds, the District
reasonably expected that at least 85% of the spendable proceeds of the Bonds would be
expended within the three -year period commencing on such date of issuance, and (B) no more
than 50% of the proceeds of the Bonds will be invested in Nonpurpose Investments having a
substantially guaranteed yield for a period of four years or more.
(k) Elections. The Authority hereby directs and authorizes any Authority
Representative to make elections permitted or required pursuant to the provisions of the Code or
the Tax Regulations, as such Representative (after consultation with Bond Counsel) deems
necessary or appropriate in connection with the Bonds, in the Tax Certificate as to Arbitrage and
79361194.1 28
the Provisions of Sections 103 and 141 -150 of the Internal Revenue Code of 1986, or similar or
other appropriate certificate, form or document.
(1) Closing_ Certificate. The Authority agrees to execute and deliver in
connection with the issuance of the Bonds a Tax Certificate as to Arbitrage and the Provisions of
Sections 103 and 141 -150 of the Internal Revenue Code of 1986, or similar document containing
additional representations and covenants pertaining to the exclusion of interest on the Bonds
from the gross income of the owners thereof for federal income tax purposes, which
representations and covenants are incorporated as though expressly set forth herein.
Section 5.08 District Bonds. The Trustee, as assignee of the Authority rights pursuant
to Section 4.01, shall (subject to the provisions of this Indenture) promptly collect all amounts
due as principal and interest on District Bonds from the District and, subject to the provisions
hereof, shall enforce, and take all steps, actions and proceedings reasonably necessary for the
enforcement of all of the rights of the Authority thereunder and for the enforcement of all of the
obligations of the District thereunder.
Section 5.09 Further Assurances. The Author
to the Trustee all Revenues as such Revenues become
adopt, make, execute and deliver any and all such further
as may be reasonably necessary or proper to carry
performance of this Indenture, and for the better assuring
Bonds the rights and benefits provided in this Indenture.
ity shall cause to be collected and paid
due and payable. The Authority will
resolutions, instruments and assurances
out the intention or to facilitate the
and confirming unto the Owners of the
Section 5.10 Immunity. The Authority is not entitled to any immunity, sovereign or
otherwise, from any legal proceedings to enforce or collect upon this Indenture or the Bonds. To
the extent that the Authority has or hereafter may acquire any right to immunity, the Authority
hereby waives such rights for itself in respect of its obligations arising under this Indenture and
the Bonds.
Section 5.11 No Acceleration. The principal of the Bonds shall not be subject to
acceleration hereunder. Nothing in this Section shall in any way prohibit the prepayment or
redemption of Bonds or the defeasance of the Bonds and discharge of this Indenture.
ARTICLE VI
THE TRUSTEE
Section 6.01 Appointment of Trustee. Union Bank, N.A., in Los Angeles, California,
is hereby appointed Trustee by the Authority for the purpose of receiving all moneys required to
be deposited with the Trustee hereunder and to allocate, use and apply the same as provided in
this Indenture. The Authority agrees that it will maintain a Trustee having a corporate trust
office in the State, with a combined capital and surplus of at least Seventy -Five Million Dollars
($75,000,000), and subject to supervision or examination by federal or State authority, so long as
any Bonds are Outstanding. If such bank or trust company publishes a report of condition at
least annually pursuant to law or to the requirements of any supervising or examining authority
above referred to, then for the purpose of this Section 6.01 the combined capital and surplus of
79361 194.1 29
such bank or trust company shall be deemed to be its combined capital and surplus as set forth in
its most recent report of condition so published.
The Trustee is hereby authorized to pay the principal of and interest and redemption
premium (if any) on the Bonds when duly presented for payment at maturity, or on redemption
or purchase prior to maturity, and to cancel all Bonds upon payment thereof. The Trustee shall
keep accurate records of all funds administered by it and of all Bonds paid and discharged.
Section 6.02 Acceptance of Trusts. The Trustee hereby accepts the trusts imposed
upon it by this Indenture, and agrees to perform said trusts, but only upon and subject to the
following express terms and conditions:
(a) The Trustee, prior to the occurrence of an Event of Default and after
curing of all Events of Default which may have occurred, undertakes to perform such duties and
only such duties as are specifically set forth in this Indenture. In case an Event of Default
hereunder has occurred (which has not been cured or waived), the Trustee may exercise such of
the rights and powers vested in it by this Indenture, and shall use the same degree of care and
skill and diligence in their exercise, as a prudent person would use in the conduct of its own
affairs.
(b) The Trustee may execute any of the trusts or powers hereof and perform
the duties required of it hereunder by or through attorneys, agents, or receivers, and shall be
entitled to advice of counsel concerning all matters of trust and its duty hereunder. The Trustee
may conclusively rely on an opinion of counsel as full and complete protection for any action
taken or suffered by it hereunder.
(c) The Trustee shall not be responsible for any recital herein or in the Bonds,
or for any of the supplements hereto or thereto or instruments of further assurance, or for the
sufficiency of the security for the Bonds issued hereunder or intended to be secured hereby and
the Trustee shall not be bound to ascertain or inquire as to the observance or performance of any
covenants, conditions or agreements on the part of the Authority hereunder.
(d) The Trustee may become the Owner of Bonds secured hereby with the
same rights which it would have if not the Trustee; may acquire and dispose of other bonds or
evidences of indebtedness of the Authority with the same rights it would have if it were not the
Trustee; and may act as a depository for and permit any of its officers or directors to act as a
member of, or in any other capacity with respect to, any committee formed to protect the rights
of Owners of Bonds, whether or not such committee shall represent the Owners of the majority
in aggregate principal amount of the Bonds then Outstanding.
(e) The Trustee shall be protected in acting upon any notice, request, consent,
certificate, order, affidavit, letter, telegram or other paper or document believed by it to be
genuine and correct and to have been signed or sent by the proper person or persons. Any action
taken or omitted to be taken by the Trustee pursuant to this Indenture upon the request or
authority or consent of any person who at the time of making such request or giving such
authority or consent is the Owner of any Bond, shall be conclusive and binding upon all future
Owners of the same Bond and upon Bonds issued in exchange therefor or in place thereof. The
79361 194.1 30
Trustee shall not be bound to recognize any person as an Owner of any Bond or to take any
action at his request unless the ownership of such Bond by such person shall be reflected on the
Registration Books.
(f) As to the existence or non - existence of any fact or as to the sufficiency or
validity of any instrument, paper or proceeding, the Trustee shall be entitled to rely upon a
Certificate of the Authority as sufficient evidence of the facts therein contained and prior to the
occurrence of an Event of Default hereunder of which the Trustee has been given notice or is
deemed to have notice, as provided in Section 6.02(h) hereof, shall also be at liberty to accept a
Certificate of the Authority to the effect that any particular dealing, transaction or action is
necessary or expedient, but may at its discretion secure such further evidence deemed by it to be
necessary or advisable, but shall in no case be bound to secure the same.
(g) The permissive right of the Trustee to do things enumerated in this
Indenture shall not be construed as a duty and it shall not be answerable for other than its
negligence or willful misconduct. The immunities and exceptions from liability of the Trustee
shall extend to its officers, directors, employees and agents.
(h) The Trustee shall not be required to take notice or be deemed to have
notice of any Event of Default hereunder except failure by the Authority to file with the Trustee
any document required by this Indenture to be so filed subsequent to the issuance of the Bonds,
unless the Trustee shall be specifically notified in writing of such default by the Authority or by
the Owners of at least twenty -five percent (25 %) in aggregate principal amount of the Bonds
then Outstanding and all notices or other instruments required by this Indenture to be delivered
to the Trustee must, in order to be effective, be delivered at the Corporate Trust Office, and in
the absence of such notice so delivered the Trustee may conclusively assume there is no Event of
Default hereunder except as aforesaid.
(i) At any and all reasonable times the Trustee, and its duly authorized agents,
attorneys, experts, accountants and representatives, shall have the right (but not the duty) fully to
inspect all books, papers and records of the Authority pertaining to the Bonds, and to make
copies of any of such books, papers and records such as may be desired but which is not
privileged by statute or by law.
0)
The Trustee
shall not be required
to give any bond or surety in respect of
the execution of the
said trusts and
powers or otherwise in
respect of the premises hereof.
(k) Notwithstanding anything elsewhere in this Indenture with respect to the
execution of any Bonds, the withdrawal of any cash, the release of any property, or any action
whatsoever within the purview of this Indenture, the Trustee shall have the right, but shall not be
required, to demand any showings, certificates, opinions, appraisals or other information, or
corporate action or evidence thereof, as may be deemed desirable for the purpose of establishing
the right of the Authority to the execution of any Bonds, the withdrawal of any cash, or the
taking of any other action by the Trustee.
(1) Before taking the action referred to in Section 8.02, the Trustee may
require that a satisfactory indemnity bond be furnished for the reimbursement of all expenses to
79361194.1 31
which it may be put and to protect it against all liability, except liability which is adjudicated to
I
ave resulted from its negligence or willful default in connection with any such action.
(m) All moneys received by the Trustee shall, until used or applied or invested
as herein provided, be held in trust for the purposes for which they were received but need not be
segregated from other funds except to the extent required by law.
(n) The Trustee shall have no responsibility or liability with respect to any
information, statements or recital in any offering memorandum or other disclosure material
prepared or distributed with respect to the issuance of the Bonds.
Section 6.03 Fees, Charges and Expenses of Trustee. The Trustee shall be entitled to
payment and reimbursement for reasonable fees for its services rendered hereunder and all
advances, counsel fees (including expenses) and other expenses reasonably and necessarily made
or incurred by the Trustee in connection with such services. Upon the occurrence of an Event of
Default hereunder, but only upon an Event of Default, the Trustee shall have a first lien with
right of payment prior to payment of any Bond upon the amounts held hereunder for the
foregoing fees, charges and expenses incurred by it respectively. The Trustee's right to payment
of its fees and expenses shall survive the discharge and payment or defeasance of the Bonds and
termination of the Indenture, and the resignation or removal of the Trustee.
Section 6.04 Notice to Bond Owners of Default. If an Event of Default hereunder
occurs with respect to any Bonds of which the Trustee has been given or is deemed to have
notice, as provided in Section 6.02(h) hereof, then the Trustee shall promptly give written notice
thereof by first -class mail to the Owner of each such Bond, unless such Event of Default shall
have been cured before the giving of such notice; provided, however, that unless such Event of
Default consists of the failure by the Authority to make any payment when due, the Trustee may
elect not to give such notice to the Bond Owners if and so long as the Trustee in good faith
determines that such Event of Default does not materially adversely affect the interests of the
Bond Owners or that it is otherwise not in the best interests of the Bond Owners to give such
notice.
Section 6.05 Intervention by Trustee. In any judicial proceeding to which the
Authority is a party which, in the opinion of the Trustee and its counsel, has a substantial bearing
on the interests of Owners of any of the Bonds arising under this Indenture, the Trustee may
intervene on behalf of such Bond Owners, and subject to Section 6.02(1) hereof, shall do so if
requested in writing by the Owners of at least twenty -five percent (25 %) aggregate principal
amount of such Bonds then Outstanding.
Section 6.06 Removal of Trustee. The Owners of a majority in aggregate principal
amount of the Outstanding Bonds may at any time, or the Authority may (and the Authority, at
the request of the District shall), so long as no Event of Default shall have occurred and then be
continuing, remove the Trustee initially appointed, and any successor thereto, by an instrument
or concurrent instruments in writing delivered to the Trustee at least thirty (30) days prior to the
effective date of such removal, whereupon the Authority or such Owners, as the case may be,
shall appoint a successor or successors thereto; provided that any such successor shall be a bank
or trust company meeting the requirements set forth in Section 6.01,
79361194.1 32
Section 6.07 Resignation by Trustee. The Trustee and any successor Trustee may at
any time give thirty (30) days' written notice of its intention to resign as Trustee hereunder, such
notice to be given to the Authority and the District by registered or certified mail. Upon
receiving such notice of resignation, the Authority shall promptly appoint a successor Trustee.
Section 6.08 Appointment of Successor Trustee. In the event of the removal or
resignation of the Trustee pursuant to Sections 6.06 or 6.07, respectively, with the prior written
consent of the District, the Authority shall promptly appoint a successor Trustee. In the event the
Authority shall for any reason whatsoever fail to appoint a successor Trustee within ninety (90)
days following the delivery to the Trustee of the instrument described in Section 6.06 or within
ninety (90) days following the receipt of notice by the Authority pursuant to Section 6.07, the
Trustee may apply to a court of competent jurisdiction for the appointment of a successor
Trustee meeting the requirements of Section 6.01 hereof. Any such successor Trustee appointed
by such court shall become the successor Trustee hereunder notwithstanding any action by the
Authority purporting to appoint a successor Trustee following the expiration of such 90 -day
period.
Any resignation or removal of the Trustee pursuant to Section 6.06 or Section 6.07 and
appointment of a successor Trustee shall become effective upon written acceptance of
appointment by the successor Trustee. Upon such acceptance, the Authority shall cause notice
thereof to be given by first -class mail, postage prepaid, to the Bond Owners at their respective
addresses set forth on the Registration Books.
Section 6.09 Merger or Consolidation. Any company into which the Trustee may be
merged or converted or with which it may be consolidated or any company resulting from any
merger, conversion or consolidation to which it shall be a party or any company to which the
Trustee may sell or transfer all or substantially all of its corporate trust business, provided that
such company shall meet the requirements set forth in Section 6.01, shall be the successor to the
Trustee and vested with all of the title to the trust estate and all of the trusts, powers, discretions,
immunities, privileges and all other matters as was its predecessor, without the execution or
filing of any paper or further act, anything herein to the contrary notwithstanding.
Section 6.10 Concerning any Successor Trustee. Every successor Trustee appointed
hereunder shall execute, acknowledge and deliver to its predecessor and also to the Authority an
instrument in writing accepting such appointment hereunder and thereupon such successor,
without any further act, deed or conveyance, shall become fully vested with all the estates,
properties, rights, powers, trusts, duties and obligations of its predecessors; but such predecessor
shall, nevertheless, on the request of the Authority, or of the Trustee's successor, execute and
deliver an instrument transferring to such successor all the estates, properties, rights, powers and
trusts of such predecessor hereunder; and every predecessor Trustee shall deliver all securities
and moneys held by it as the Trustee hereunder to its successor. Should any instrument in
writing from the Authority be required by any successor Trustee for more fully and certainly
vesting in such successor the estate, rights, powers and duties hereby vested or intended to be
vested in the predecessor Trustee, any and all such instruments in writing shall, on request, be
executed, acknowledged and delivered by the Authority.
79361194.1 33
Section 6.11 Appointment to Co- Trustee. It is the purpose of this Indenture that there
shall be no violation of any law of any jurisdiction (including particularly the law of the State)
denying or restricting the right of banking corporations or associations to transact business as
Trustee in such jurisdiction. It is recognized that in the case of litigation under this Indenture,
and in particular in case of the enforcement of the rights of the Trustee on default, or in the case
the Trustee deems that by reason of any present or future law of any jurisdiction it may not
exercise any of the powers, rights or remedies herein granted to the Trustee or hold title to the
properties, in trust, as herein granted, or take any other action which may be desirable or
necessary in connection therewith, it may be necessary that the Trustee appoint an additional
individual or institution as a separate or co- trustee. The following provisions of this Section 6.11
are adopted to these ends.
In the event that the Trustee appoints an additional individual or institution as a separate
or co- trustee, each and every remedy, power, right, claim, demand, cause of action, immunity,
estate, title, interest and lien expressed or intended by this Indenture to be exercised by or vested
in or conveyed to the Trustee with respect thereto shall be exercisable by and vested in such
separate or co- trustee but only to the extent necessary to enable such separate or co- trustee to
exercise such powers, rights and remedies, and every covenant and obligation necessary to the
exercise thereof by such separate or co- trustee shall run to and be enforceable by either of them.
Should any instrument in writing from the Authority be required by the separate trustee
or co- trustee so appointed by the Trustee for more fully and certainly vesting in and confirming
to it such properties, rights, powers, trusts, duties and obligations, any and all such instruments in
writing shall, on request, be executed, acknowledged and delivered by the Authority. In case any
separate trustee or co- trustee, or a successor to either, shall become incapable of acting, resign or
be removed, all the estates, properties, rights, powers, trusts; duties and obligations of such
separate trustee or co- trustee, so far as permitted by law, shall vest in and be exercised by the
Trustee until the appointment of a new trustee or successor to such separate trustee or co- trustee.
Section 6.12 Indemnification; Limited Liability of Trustee. The Authority further
covenants and agrees to indemnify and save the Trustee and its officers, directors, agents and
employees, harmless against any loss, costs, claims, expense and liabilities which it may incur
arising out of or in the exercise and performance of its powers and duties hereunder, including
the costs and expenses of defending against any claim of liability, but excluding any and all
losses, costs, claims, expenses and liabilities which are due to the negligence or willful
misconduct of the Trustee, its officers, directors, agents or employees. No provision in this
Indenture shall require the Trustee to risk or expend its own funds or otherwise incur any
financial liability hereunder if it is not assured to its satisfaction that repayment of such funds or
adequate indemnity against such liability or risk is not assured to it. The Trustee shall not be
liable for any action taken or omitted to be taken by it in accordance with the direction of the
Owners of a majority in aggregate principal amount of Bonds Outstanding relating to the time,
method and place of conducting any proceeding or remedy available to the Trustee under this
Indenture. The obligations of the Authority under this paragraph shall survive the resignation or
removal of the Trustee under this Indenture or any defeasance of the Bonds.
79361194.1 34
ARTICLE VII
MODIFICATION AND AMENDMENT OF THE INDENTURE
Section 7.01 Amendment Hereof.
(a) This Indenture and the rights and obligations of the Authority and of the
Owners of the Bonds may be modified or amended at any time by a Supplemental Indenture
which shall become binding upon execution by the Authority and the Trustee and upon prior
written consent of the District, without consent of any Bond Owners, to the extent permitted by
law but only for any one or more of the following purposes:
(i) to add to the covenants and agreements of the Authority contained
in this Indenture, other covenants and agreements hereafter to be observed, to pledge or assign
additional security for the Bonds (or any portion thereof), or to surrender any right or power
herein reserved to or conferred upon the Authority;
(ii) to make such provisions for the purpose of curing any ambiguity,
inconsistency or omission, or of curing or correcting any defective provision, contained in this
Indenture, or in any other respect whatsoever, as the Authority may deem necessary or desirable,
provided that such modification or amendment does not materially adversely affect the interests
of the Bond Owners in the opinion of Bond Counsel;
(iii) to modify, amend or supplement the Indenture in such manner as
to permit the qualification of this Indenture under the Trust Indenture Act of 1939, as amended,
or any similar federal statute hereafter in effect, and to add such other terms, conditions and
provisions as may be permitted by said act or similar federal statute; or
(iv) to make such additions, deletions or modifications as may be
necessary or desirable to assure exemption from federal income taxation of interest on the
Bonds.
(b) Except as set forth in the preceding paragraph of this Section 7.01, this
Indenture and the rights and obligations of the Authority and of the Owners of the Bonds may
only be modified or amended at any time by a Supplemental Indenture which shall become
binding when the written consents of the Owners of a majority in aggregate principal amount of
the Bonds then Outstanding are filed with the Trustee. No such modification or amendment shall
(a) extend the maturity of or reduce the interest rate on any Bond or otherwise alter or impair the
obligation of the Authority to pay the principal, interest or premiums (if any) at the time and
place and at the rate and in the currency provided therein of any Bond without the express
written consent of the Owner of such Bond, (b) reduce the percentage of Bonds required for the
written consent to any such amendment or modification, or (c) without its written consent
thereto, modify any of the rights or obligations of the Trustee.
(c) The Trustee shall be provided an opinion of Bond Counsel that any such
Supplemental Indenture entered into by the Authority and the Trustee complies with the
provisions of this Article VII and the Trustee may conclusively rely upon such opinion.
79361194.1 35
Section 7.02 Effect of Supplemental Indenture. From and after the time a..y
Supplemental Indenture becomes effective pursuant to this Article VII, this Indenture shall be
deemed to be modified and amended in accordance therewith, the respective rights, duties and
obligations of the parties hereto or thereto and all Owners of Outstanding Bonds, as the case may
be, shall thereafter be determined, exercised and enforced hereunder subject in all respects to
such modification and amendment, and all the terms and conditions of any Supplemental
Indenture shall be deemed to be part of the terms and conditions of this Indenture for any and all
purposes.
Section 7.03 Endorsement or Replacement of Bonds After Amendment. After the
effective date of any action taken as hereinabove provided, the Authority may determine that the
Bonds shall bear a notation, by endorsement in form approved by the Authority, as to such
action, and in that case upon demand of the Owner of any Bond Outstanding at such effective
date and presentation of his Bond for that purpose at the Corporate Trust Office, a suitable
notation as to such action shall be made on such Bond. If the Authority shall so determine, new
Bonds so modified as, in the opinion of the Authority, shall be necessary to conform to such
Bond Owners' action shall be prepared and executed, and in that case upon demand of the
Owner of any Bond Outstanding at such effective date such new Bonds shall be exchanged at the
Corporate Trust Office, without cost to each Bond Owner, for Bonds then Outstanding, upon
surrender of such Outstanding Bonds.
Section 7.04 Amendment by Mutual Consent. The provisions of this Article VII
shall not prevent any Bond Owner from accepting any amendment as to the particular Bond held
by him, provided that due notation thereof is made on such Bond.
ARTICLE VIII
EVENTS OF DEFAULT AND REMEDIES
Section 8.01 Events of Default. The following events shall be Events of Default
hereunder:
(a) Default in the due and punctual payment of the principal of any Bond
when and as the same shall become due and payable, whether at maturity as therein expressed,
by proceedings for redemption or otherwise.
(b) Default in the due and punctual payment of any installment of interest on
any Bond when and as such interest installment shall become due and payable.
(c) Failure by the Authority to observe and perform any of the covenants,
agreements or conditions on its part in this Indenture or in the Bonds contained, other than as
referred to in the preceding clauses (a) and (b), for a period of thirty (30) days after written
notice, specifying such failure and requesting that it be remedied has been given to the Authority
by the Trustee, or to the Authority and the Trustee by the Owners of the Bonds of not less than
twenty -five percent (25 %) in the aggregate principal amount of the Bonds at that time
Outstanding, provided, however, that if in the reasonable opinion of the Authority, provided to
the Trustee in writing, the failure stated in such notice can be corrected, but not within such
79361194.1 36
thirty (30) day period, such failure shall not constitute an Event of Default if corrective action is
instituted by the Authority within such thirty (30) day period and diligently pursued until such
failure is corrected.
(d) The filing by the Authority of a petition or answer seeking reorganization
or arrangement under the federal bankruptcy laws or any other applicable law of the United
States of America, or if a court of competent jurisdiction shall approve a petition, filed with or
without the consent of the Authority, seeking reorganization under the federal bankruptcy laws
or any other applicable law of the United States of America, or if, under the provisions of any
other law for the relief or aid of debtors, any court of competent jurisdiction shall assume
custody or control of the Authority or of the whole or any substantial part of its property.
Section 8.02 Remedies Upon Event of Default. Upon the occurrence and during the
continuance of an Event of Default, the Trustee may pursue any available remedy at law or in
equity to enforce the payment of the principal of and interest and premium (if any) on the Bonds,
and to enforce any rights of the Trustee under or with respect to this Indenture.
If an Event of Default shall have occurred and be continuing, the Trustee may, if
requested so to do by the Owners of a majority in aggregate principal amount of Outstanding
Bonds, and indemnified as provided in Section 6.02(1), the Trustee shall be obligated to exercise
such one or more of the rights and powers conferred by this Article VIII, as the Trustee, being
advised by counsel, shall deem most expedient in the interests of the Bond Owners.
No remedy by the terms of this Indenture conferred upon or reserved to the Trustee (or to
the Bond Owners) is intended to be exclusive of any other remedy, but each and every such
remedy shall be cumulative and shall be in addition to any other remedy given to the Trustee or
to the Bond Owners hereunder or now or hereafter existing at law or in equity.
No delay or omission to exercise any rights or power accruing upon any Event of Default
shall impair any such right or power or shall be construed to be a waiver of any such Event of
Default or acquiescence therein; such right or power may be exercised from time to time as often
as may be deemed expedient.
Section 8.03 Application of Revenues and Other Funds After Default. All amounts
received by the Trustee pursuant to any right given or action taken by the Trustee under the
provisions of this Indenture shall be applied by the Trustee in the following order upon
presentation of the several Bonds, and the stamping thereon of the amount of the payment if only
partially paid, or upon the surrender thereof if fully paid.
First, to the payment of the fees, costs and expenses of the Trustee in declaring such
Event of Default and in carrying out the provisions of this Article VIII, including reasonable
compensation to its agents, attorneys and counsel and any outstanding fees and expenses of the
Trustee; and
Second, to the payment of the whole amount of interest on and principal of the Bonds
then due and unpaid, with interest on overdue installments of principal and interest to the extent
permitted by law at the net effective rate of interest then borne by the Outstanding Bonds;
provided, however, that in the event such amounts shall be insufficient to pay in full the full
79361194.1 37
amount of such interest and principal, then such amounts shall be applied in the following order
of priority:
(a)
and unpaid,
(b)
due and unpaid,
first, to the payment of all installments of interest on the Bonds then due
second, to the payment of all installments of principal of the Bonds then
(c) third, to the payment of the redemption price (including principal and
interest accrued to the redemption date, but excluding any premium) of the Bonds to be
redeemed pursuant to this Indenture, and
(d) fourth, to the payment of interest on overdue installments of principal and
interest on the Bonds.
Section 8.04 Power of Trustee to Control Proceedings. In the event that the Trustee,
upon the happening of an Event of Default, shall have taken any action, by judicial proceedings
or otherwise, pursuant to its duties hereunder, whether upon its own discretion or upon the
request of the Owners of at least a majority in aggregate principal amount of the Bonds then
Outstanding, it shall have full power, in the exercise of its discretion for the best interests of the
Owners of the Bonds, with respect to the continuance, discontinuance, withdrawal, compromise,
settlement or other disposal of such action; provided, however, that the Trustee shall not, unless
there no longer continues an Event of Default, discontinue, withdraw, compromise or settle, or
otherwise dispose of any litigation pending at law or in equity, if at the time there has been filed
with it a written request signed by the Owners of a majority in aggregate principal amount of the
Outstanding Bonds, opposing such discontinuance, withdrawal, compromise, settlement or other
disposal of such litigation. Any suit, action or proceeding which any Owner of Bonds shall have
the right to bring to enforce any right or remedy hereunder may be brought by the Trustee for the
equal benefit and protection of all Owners of Bonds similarly situated and the Trustee is hereby
appointed (and the successive respective Owners of the Bonds issued hereunder, by taking and
holding the same, shall be conclusively deemed so to have appointed it) the true and lawful
attorney -in -fact of the respective Owners of the Bonds for the purpose of bringing any such suit,
action or proceeding and to do and perform any and all acts and things for and on behalf of the
respective Owners of the Bonds as a class or classes, as may be necessary or advisable in the
opinion of the Trustee as such attorney -in -fact.
Section 8.05 Appointment of Receivers. Upon the occurrence of an Event of Default
hereunder, and upon the filing of a suit or other commencement of judicial proceedings to
enforce the rights of the Trustee and of the Bond Owners under this Indenture, the Trustee shall
be entitled, as a matter of right, to the appointment of a receiver or receivers of the Revenues and
other amounts pledged hereunder, pending such proceedings, with such powers as the court
making such appointment shall confer.
Section 8.06 Non - Waiver. Nothing in this Article VIII or in any other provision of this
Indenture, or in the Bonds, shall affect or impair the obligation of the Authority, which is
absolute and unconditional, to pay the interest on and principal of the Bonds to the respective
79361194.1 38
Owners of the Bonds at the respective dates of maturity, as herein provided, out of the Revenues
and other moneys herein pledged for such payment.
A waiver of any default or breach or duty or contract by the Trustee or any Bond Owners
shall not affect any subsequent default or breach of duty or contract, or impair any rights or
remedies on any such subsequent default or breach. No delay or omission of the Trustee or any
Owner of any of the Bonds to exercise any right or power accruing upon any default or breach
shall impair any such right or power or shall be construed to be a waiver of any such default or
breach or an acquiescence therein; and every power and remedy conferred upon the Trustee or
Bond Owners by the Bond Law or by this Article VIII may be enforced and exercised from time
to time and as often as shall be deemed expedient by the Trustee or the Bond Owners, as the case
may be.
Section 8.07 Right to Institute Suit, Action or Proceeding. No Owner of any Bond
issued hereunder shall have the right to institute any suit, action or proceeding at law or in
equity, for any remedy under or upon this Indenture, unless (a) such Owner shall have previously
given to the Trustee written notice of the occurrence of an Event of Default; (b) the Owners of a
majority in aggregate principal amount of all Bonds then Outstanding shall have made written
request upon the Trustee to exercise the powers hereinbefore granted or to institute such action,
suit or proceeding in its own name; (c) said Owners shall have tendered to the Trustee indemnity
reasonably acceptable to the Trustee against the costs, expenses and liabilities to be incurred in
compliance with such request; (d) the Trustee shall have refused or omitted to comply with such
request for a period of sixty (60) days after such written request shall have been received by, and
said tender of indemnity shall have been made to, the Trustee; and (e) no direction inconsistent
with such written request has been given to the Trustee during such sixty (60) day period by the
Owners of majority in aggregate principal amount of the Bonds then Outstanding.
Such notification, request, tender of indemnity and refusal or omission are hereby
declared, in every case, to be conditions precedent to the exercise by any Owner of Bonds of any
remedy hereunder; it being understood and intended that no one or more Owners of Bonds shall
have any right in any manner whatever by his or their action to enforce any right under this
Indenture, except in the manner herein provided, and that all proceedings at law or in equity to
enforce any provision of this Indenture shall be instituted, had and maintained in the manner
herein provided and for the equal benefit of all Owners of the Outstanding Bonds.
The right of any Owner of any Bond to receive payment of the principal of and interest
and premium (if any) on such Bond as herein provided or to institute suit for the enforcement of
any such payment, shall not be impaired or affected without the written consent of such Owner,
notwithstanding the foregoing provisions of this Section 8.07 or any other provision of this
Indenture.
Section 8.08 Termination of Proceedings. In case the Trustee shall have proceeded to
enforce any right under this Indenture by the appointment of a receiver or otherwise, and such
proceedings shall have been discontinued or abandoned for any reason, or shall have been
determined adversely, then and in every such case, the Authority, the Trustee and the Bond
Owners shall be restored to their former positions and rights hereunder, respectively, with regard
79361194.1 39
to the property subject to this Indenture, and all rights, remedies and powers of the Trustee shall
continue as it no such proceedings had been taken.
ARTICLE IX
MISCELLANEOUS
Section 9.01 Limited Liability of Authority. Notwithstanding anything contained in
this Indenture, the Authority shall not be required to advance any moneys derived from any
source of income other than the Revenues for the payment of the principal of or interest on the
Bonds, or any premiums upon the redemption thereof, or for the performance of any covenants
herein contained (except to the extent any such covenants are expressly payable hereunder from
the Revenues). The Authority may, however, advance funds for any such purpose, provided that
such funds are derived from a source legally available for such purpose and may be used by the
Authority for such purpose without incurring indebtedness.
The Bonds shall be revenue bonds, payable exclusively from the Revenues and other
funds as in this Indenture provided. The general fund of the Authority is not liable, and the
credit of the Authority is not pledged, for the payment of the interest and premium (if any) on or
principal of the Bonds. The Owners of the Bonds shall never have the right to compel the
forfeiture of any property of the Authority. The principal of and interest on the Bonds, and any
premiums upon the redemption of any thereof, shall not be a legal or equitable pledge, charge,
lien or encumbrance upon any property of the Authority or upon any of its income, receipts or
revenues except the Revenues and other funds pledged to the payment thereof as in this
Indenture provided.
Section 9.02 Benefits of Inder
expressed or implied, is intended to give
Trustee, and the Owners of the Bonds,
Indenture. Any covenants, stipulations,
and on behalf of the Authority shall be
District and the Owners of the Bonds.
Iture Limited to Parties. Nothing in this Indenture,
to any person other than the Authority, the District, the
any right, remedy or claim under or by reason of this
promises or agreements in this Indenture contained by
for the sole and exclusive benefit of the Trustee, the
Section 9.03 Discharge of Indenture. The Authority may pay and discharge any or all
of the Outstanding Bonds in any one or more of the following ways:
(a) by well and truly paying or causing to be paid the principal of, and the
interest and premium (if any) on, such Bonds as and when the same become due and payable;
(b) by irrevocably depositing with the Trustee, in trust, at or before maturity,
money which, altogether with the available amounts then on deposit in the funds and accounts
established with the Trustee pursuant to this Indenture, is fully sufficient to pay such Bonds,
including all principal, interest and premiums (if any); or
(c) by irrevocably depositing with the Trustee or any other fiduciary, in trust,
Federal Securities in such amount as an Independent Accountant shall determine will, together
with the interest to accrue thereon and available moneys then on deposit in the funds and
accounts established with the Trustee pursuant to this Indenture, be fully sufficient to pay and
7936 1 194.1 40
discharge the indebtedness on such Bonds (including all principal, interest and redemption
premiums) at or before their respective maturity dates.
If the Authority shall have taken any of the actions specified in (a), (b) or (c) above, and
if such Bonds are to be redeemed prior to the maturity thereof, notice of such redemption shall
have been mailed pursuant to Section 2.02(f) or provision satisfactory to the Trustee shall have
been made, for the mailing of such notice, then, at the election of the Authority, and
notwithstanding that any of such Bonds shall not have been surrendered for payment, the pledge
of the Revenues and other funds provided for in this Indenture with respect to such Bonds,
pledge of Revenues and all other pecuniary obligations of the Authority under this Indenture
with respect to all such Bonds, shall cease and terminate, except only the obligation of the
Authority to pay or cause to be paid to the Owners of such Bonds not so surrendered and paid all
sums due thereon from amounts set aside for such purpose as aforesaid, and all expenses and
costs of the Trustee. Any funds held by the Trustee following any payments or discharge of the
Outstanding Bonds pursuant to this Section 9.03, which are not required for said purposes, shall
be paid over to the Authority.
Section 9.04 Is Deemed Included in All References to Predecessor. Whenever in
this Indenture or any Supplemental Indenture the Authority is named or referred to, such
reference shall be deemed to include the successor to the powers, duties and functions, with
respect to the management, administration and control of the affairs of the Authority, that are
presently vested in the Authority, and all the covenants, agreements and provisions contained in
this Indenture by or on behalf of the Authority shall bind and inure to the benefit of its successors
whether so expressed or not.
Section 9.05 Content of Certificates. Every certificate with respect to compliance
with a condition or covenant provided for in this Indenture shall include (a) a statement that the
person or persons making or giving such certificate have read such covenant or condition and the
definitions herein relating thereto; (b) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions contained in such certificate
are based; (c) a statement that, in the opinion of the signers, they have made or caused to be
made such examination or investigation as is necessary to enable them to express an informed
opinion as to whether or not such covenant or condition has been complied with; and (d) a
statement as to whether, in the opinion of the signers, such condition or covenant has been
complied with.
Any such certificate made or given by an officer of the Authority may be based, insofar
as it relates to legal matters, upon a certificate or opinion of or representations by counsel, unless
such officer knows that the certificate or opinion or representations with respect to the matters
upon which his certificate may be based, as aforesaid, are erroneous, or in the exercise of
reasonable care should have known that the same were erroneous. Any such certificate or
opinion or representation made or given by counsel may be based, insofar as it relates to factual
matters, on information with respect to which is in the possession of the Authority, or upon the
certificate or opinion of or representations by an officer or officers of the Authority, unless such
counsel knows that the certificate or opinion or representations with respect to the matters upon
which his certificate, opinion or representation may be based, as aforesaid, are erroneous, or in
the exercise of reasonable care should have known that the same were erroneous.
79361194.1 41
Section 9.06 Execution of Documents by Bond Owners. Any request, consent or
other instrument required by this Indenture to be signed and executed by Bond Owners may be in
any number of concurrent writings of substantially similar tenor and may be signed or executed
by such Bond Owners in person or by their agent or agents duly appointed in writing. Proof of
the execution of any such request, consent or other instrument or of a writing appointing any
such agent, shall be sufficient for any purpose of this Indenture and shall be conclusive in favor
of the Trustee and of the Authority if made in the manner provided in this Section 9.06.
The fact and date of the execution by any person of any such request, consent or other
instrument or writing may be proved by the affidavit of a witness of such execution or by the
certificate of any notary public or other officer of any jurisdiction, authorized by the laws thereof
to take acknowledgments of deeds, certifying that the person signing such request, consent or
other instrument or writing acknowledged to him the execution thereof.
The ownership of Bonds shall be proved by the Registration Books. Any request,
consent or vote of the Owner of any Bond shall bind every future Owner of the same Bond and
the Owner of any Bond issued in exchange therefor or in lieu thereof, in respect of anything done
or suffered to be done by the Trustee or the Authority in pursuance of such request, consent or
vote. In lieu of obtaining any demand, request, direction, consent or waiver in writing, the
Trustee may call and hold a meeting of the Bond Owners upon such notice and in accordance
with such rules and obligations as the Trustee considers fair and reasonable for the purpose of
obtaining any such action.
Section 9.07 Disqualified Bonds. In determining whether the Owners of the requisite
aggregate principal amount of Bonds have concurred in any demand, request, direction, consent
or waiver under this Indenture, Bonds which are owned or held by or for the account of the
District or the Authority (but excluding Bonds held in any employees' retirement fund) shall be
disregarded and deemed not to be Outstanding for the purpose of any such determination,
provided, however, that for the purpose of determining whether the Trustee shall be protected in
relying on any such demand, request, direction, consent or waiver, only Bonds which the Trustee
knows to be so owned or held shall be disregarded.
Section 9.08 Waiver of Personal Liability. No officer, agent or employee of the
Authority shall be individually or personally liable for the payment of the interest on or principal
of the Bonds; but nothing herein contained shall relieve any such officer, agent or employee from
the performance of any official duty provided by law.
Section 9.09 Partial Invalidity. If any one or more of the covenants or agreements, or
portions thereof, provided in this Indenture on the part of the Authority (or of the Trustee) to be
performed should be contrary to law, then such covenant or covenants, such agreement or
agreements, or such portions thereof, shall be null and void and shall be deemed separable from
the remaining covenants and agreements or portions thereof and shall in no way affect the
validity of this Indenture or of the Bonds; but the Bond Owners shall retain all rights and benefits
accorded to them under the Bond Law or any other applicable provisions of law. The Authority
hereby declares that it would have entered into this Indenture and each and every other section,
paragraph, subdivision, sentence, clause and phrase hereof and would have authorized the
issuance of the Bonds pursuant hereto irrespective of the fact that any one or more sections,
79361194.1 42
paragraphs, subdivisions, sentences, clauses or phrases of this Indenture or the application
thereof to any person or circumstance may be held to be unconstitutional, unenforceable or
invalid.
Section 9.10 Destruction of Canceled Bonds. Whenever in this Indenture provision is
made for the surrender to the Authority of any Bonds which have been paid or canceled pursuant
to the provisions of this Indenture, the Trustee shall destroy such Bonds and deliver a certificate
of destruction to the Authority.
Section 9.11 Funds and Accounts. Any fund or account required by this Indenture to
be established and maintained by the Authority or the Trustee may be established and maintained
in the accounting records of the Authority or the Trustee, as the case may be, either as a fund or
an account, and may, for the purpose of such records, any audits thereof and any reports or
statements with respect thereto, be treated either as a fund or as an account. All such records
with respect to all such funds and accounts held by the Authority shall at all times be maintained
in accordance with generally accepted accounting principles and all such records with respect to
all such funds and accounts held by the Trustee shall be at all times maintained in accordance
with industry practices; in each case with due regard for the protection of the security of the
Bonds and the rights of every Owner thereof. Any fund or account required by this Indenture to
be established and maintained by the Authority or the Trustee may be established and maintained
in the form of multiple funds, accounts or sub - accounts therein.
Section 9.12 Payment on Business Days. Whenever in this Indenture any amount is
required to be paid on a day which is not a Business Day, such payment shall be required to be
made on the Business Day immediately following such day, provided that interest shall not
accrue from and after such day.
Section 9.13 Notices. Any notice, request, complaint, demand or other communication
under this Indenture shall be given by first -class mail or personal delivery to the party entitled
thereto at its address set forth below, or by facsimile or other form of electronic communication,
at its number set forth below. Notice shall be effective either (a) upon transmission by telecopy
or other form of telecommunication, (b) 48 hours after deposit in the United States mail, postage
prepaid, or (c) in the case of personal delivery to any person, upon actual receipt. The Authority,
the District, or the Trustee may, by written notice to the other parties, from time to time modify
the address or number to which communications are to be given hereunder.
If to the Authority: Lake Elsinore Public Financing Authority
130 South Main Street
Lake Elsinore, California 92530
Attention: Executive Director
(951) 674 -3124
(951) 674 -2392 - Fax
79361194.1 43
If to the District: City of Lake Elsinore Community Facilities
District No. 2003 -2 (Canyon Hills)
c/o City of Lake Elsinore
130 South Main Street
Lake Elsinore, California 92530
Attention: City Manager
(951) 674 -3124
(951) 674 -2392 - Fax
If to the Trustee: Union Bank, N.A.
120 South San Pedro Street, 4t1i Floor
Los Angeles, California 90012
Attention: Corporate Trust Department
(213) 972 -5677
(213) 972 -5694 - Fax
Section 9.14 Unclaimed Moneys. Anything in this Indenture to the contrary
notwithstanding, subject to the laws of the State, any moneys held by the Trustee in trust for the
payment and discharge of any of the Bonds which remain unclaimed for two (2) years after the
date when such Bonds or any interest thereon have become due and payable, either at their stated
maturity dates or by call for earlier redemption, if such moneys were held by the Trustee at such
date, or for two (2) years after the date of deposit of such moneys if deposited with the Trustee
after said date when such Bonds become due and payable, shall be repaid by the Trustee to the
Authority, as its absolute property and free from trust, and the Trustee shall thereupon be
released and discharged with respect thereto and the Bond Owners shall look only to the
Authority for the payment of such Bonds; provided, however, that before being required to make
any such payment to the Authority, the Trustee shall, at the expense of the Authority, cause to be
mailed to the Owners of all such Bonds, at their respective addresses appearing on the
Registration Books, a notice that said moneys remain unclaimed and that, after a date named in
said notice, which date shall not be less than thirty (30) days after the date of mailing of such
notice, the balance of such moneys then unclaimed will be returned to the Authority.
Section 9.15 Governing Law. This Indenture shall be construed and governed in
accordance with the laws of the State of California.
Section 9.16 Execution of Counterparts. This Indenture may be executed in any
number of counterparts, each of which shall for all purposes be deemed to be an original and all
of which shall together constitute but one and the same instrument.
79361194.1 44
IN WITNESS WHEREOF, the LAKE ELSINORE PUBLIC FINANCING
AUTHORITY has caused this Indenture to be signed in its name and UNION BANK, N.A., in
token of its acceptance of the trust created hereunder, has caused this Indenture to be signed in its
corporate name by its officer identified below, all as of the day and year first above written.
ATTEST:
By:
Secretary
LAKE ELSINORE PUBLIC FINANCING
AUTHORITY
By:
Executive Director
UNION BANK, N.A., as Trustee
By:
Authorized Officer
79361194.1 45
EXHIBIT A
FORM OF BOND
No. R-
UNLESS THIS BOND IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
SECURITIES DEPOSITORY (AS DEFINED IN THE INDENTURE OF TRUST) TO THE
TRUSTEE FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND
ANY BOND ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH
OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE
SECURITIES DEPOSITORY (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO
SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE
OF THE SECURITIES DEPOSITORY), ANY TRANSFER, PLEDGE, OR OTHER USE
HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL
INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST
HEREIN,
NEITHER THE PAYMENT OF THE PRINCIPAL OR ANY PART THEREOF NOR ANY
INTEREST THEREON CONSTITUTES A DEBT, LIABILITY OR OBLIGATION OF THE
CITY OF LAKE ELSINORE OR THE REDEVELOPMENT AGENCY OF THE CITY OF
LAKE ELSINORE,
UNITED STATES OF AMERICA
STATE OF CALIFORNIA
COUNTY OF RIVERSIDE
LAKE ELSINORE PUBLIC FINANCING AUTHORITY
LOCAL AGENCY REVENUE BOND (CANYON HILLS IA D), 2014 SERIES A
RATE OF INTEREST
REGISTERED OWNER:
PRINCIPAL AMOUNT:
MATURITY DATE
Cede & Co.
DATED DATE CUSIP
The LAKE ELSINORE PUBLIC FINANCING AUTHORITY, a joint powers authority
organized and existing under the laws of the State of California (the "Authority "), for value
received, hereby promises to pay (but only out of the Revenues and other moneys and securities
hereinafter referred to) to the Registered Owner identified above or registered assigns (the
"Registered Owner "), on the Maturity Date identified above, the Principal Amount identified
above in lawful money of the United States of America; and to pay interest thereon at the Rate of
Interest identified above in like money from the Interest Payment Date (as hereinafter defined)
next preceding the date of authentication of this Bond (unless this Bond is authenticated on or
before an Interest Payment Date and after the fifteenth calendar day of the month preceding such
Interest Payment Date occurs, in which event it shall bear interest from such Interest Payment
79361194.1 A-]
Date, or unless this Bond is authenticated on or prior to August 15, 2014, in which event it shall
bear interest from the Dated Date identified above; provided, however, that if, at the time of
authentication of this Bond, interest is in default on this Bond, this Bond shall bear interest from
the Interest Payment Date to which interest hereon has previously been paid or made available
for payment), payable semiannually on March 1 and September 1 in each year, commencing
September 1, 2014 (each, an "Interest Payment Date "), until payment of such Principal Amount
in full. The Principal Amount hereof is payable upon presentation hereof at the corporate trust
office (the "Corporate Trust Office ") of Union Bank, N.A., as trustee (the "Trustee ") or such
other place as designated by the Trustee. Interest hereon is payable by check of the Trustee
mailed by first class mail on each Interest Payment Date to the Registered Owner hereof at the
address of the Registered Owner as it appears on the Registration Books of the Trustee as of the
first calendar day of the month in which such Interest Payment Date occurs; except that at the
written request of the owner of at least $1,000,000 in aggregate principal amount of outstanding
Bonds filed with the Trustee prior to the fifteenth calendar day of the month preceding any
Interest Payment Date, interest on such Bonds shall be paid to such owner on such Interest
Payment Date by wire transfer of immediately available funds to an account in the continental
United States designated in such written request. Notwithstanding any other provision herein to
the contrary, so long as this Bond shall be registered in book - entry -only form, the payment of the
principal of, and redemption premium, if any, and interest on, this Bond shall be paid in
immediately available funds in such manner as determined by the Authority, the Trustee and the
Owner.
It is hereby certified that all things, conditions and acts required to exist, to have
happened and to have been performed precedent to and in the issuance of this Bond do exist,
have happened and have been performed in due time, form and manner as required by the
Constitution and statutes of the State of California and by the Act, and that the amount of this
Bond, together with all other indebtedness of the Authority, does not exceed any limit prescribed
by the Constitution or statutes of the State of California or by the Act.
This Bond shall not be entitled to any benefit under the Indenture, or become valid or
obligatory for any purpose, until the certificate of authentication hereon shall have been
manually signed by the Trustee.
This Bond is one of a duly authorized issue of bonds of the Authority designated the
"Lake Elsinore Public Financing Authority Local Agency Revenue Bonds (Canyon Hills IA D),
2014 Series A" (the "Bonds "), limited in principal amount to $ , secured by an
Indenture of Trust, dated as of January 1, 2014 (the "Indenture "), by and between the Authority
and the Trustee. Reference is hereby made to the Indenture and all indentures supplemental
thereto for a description of the rights thereunder of the owners of the Bonds, of the nature and
extent of the Revenues (as that term is defined in the Indenture), of the rights, duties and
immunities of the Trustee and of the rights and obligations of the Authority thereunder; and all of
the terms of the Indenture are hereby incorporated herein and constitute a contract between the
Authority and the Registered Owner hereof, and to all of the provisions of which Indenture the
Registered Owner hereof, by acceptance hereof, assents and agrees.
The
Bonds are authorized
to be issued
pursuant
to the provisions of
the Marks -Roos
Local Bond
Pooling Act of 1985,
constituting
Article 4
(commencing with
Section 6584) of
79361194.1 A-2
Chapter 5 of Division 7 of Title 1 of the Government Code of the State of California (the "Act ").
The Bonds are special obligations of the Authority and, as and to the extent set forth in the
Indenture, are payable solely from and secured by a first lien and pledge of the Revenues and
certain other moneys and securities held by the Trustee as provided in the Indenture. All of the
Bonds are equally secured by a first pledge of, and charge and lien upon, all of the Revenues and
such other moneys and securities, and the Revenues and such other moneys and securities
constitute a trust fund for the security and payment of the principal of and interest and premium
(if any) on the Bonds. The full faith and credit of the Authority is not pledged for the payment of
the principal of or interest or redemption premiums (if any) on the Bonds. The Bonds are not
secured by a legal or equitable pledge of, or charge, lien or encumbrance upon, any of the
property of the Authority or any of its income or receipts, except the Revenues and such other
moneys and securities as provided in the Indenture.
The Bonds have been issued to provide funds to be applied by the Authority to purchase
of bonds of City of Lake Elsinore Community Facilities District No. 2003 -2 (Canyon Hills)
relating to Improvement Area D thereof (the "District Bonds "), as more particularly described in
the Indenture.
The Bonds are subject to redemption prior to maturity at the option of the Authority on
any date on or after September 1, 2024, as a whole or in part from such maturities as selected by
the Authority and by lot within a maturity, from any available source of funds at the redemption
price equal to the principal amount of Bonds to be redeemed, together with accrued interest
thereon to the date fixed for redemption, without premium.
The Bonds maturing on September 1, 20_, September 1, 20 and September 1,
20 are subject to mandatory redemption in part by lot, on September 1 in each year,
commencing September 1, 20_, September 1, 20 and September 1, 20_, respectively,
from mandatory sinking payments made by the Authority as provided in the Indenture, at a
redemption price equal to the principal amount thereof to be redeemed, without premium, plus
accrued interest thereon to the date, of redemption in the aggregate principal amounts and on
September 1 in the respective years as set forth in the following schedules; provided, however,
that (i) in lieu of redemption thereof, such Bonds may be purchased by the Authority and
tendered to the Trustee, and (ii) if some but not all of such Bonds have been redeemed pursuant
to the redemption provisions described above or below, the total amount of all future mandatory
sinking payments will be reduced by the aggregate principal amount of such Bonds so redeemed,
to be allocated among such mandatory sinking payments on a pro rata basis (as nearly as
practicable) in integral multiples of $5,000, as determined by the Authority.
79361194.1 A -3
Bonds Maturing on September 1, 20
Sinking Fund
Redemption Date
(September 1)
Principal Amount
to be Redeemed
Bonds Maturing on September 1, 20
Sinking Fund
Redemption Date
(September 1)
Principal Amount
to be Redeemed
Bonds Maturing on September 1, 20
Sinking Fund
Redemption Date
(September 1)
79361194.1 A -4
Principal Amount
to be Redeemed
The Bonds shall also be subject to mandatory redemption prior to maturity on any date on
or after September 1, 2014, in whole or in part from such maturities as selected by the Authority
and by lot within a maturity, from the redemption of District Bonds from amounts constituting
prepayments of Special Taxes and from amounts held in the Delinquency Management Fund
under the Fiscal Agent Agreement and from amounts in the Cash Flow Management Fund at the
following redemption prices (expressed as a percentage of the principal amount of Bonds to be
redeemed) together with accrued interest thereon to the redemption date.
Redemption Dates Redemption Prices
September 1, 2014 through August 31, 2024 102.0%
September 1, 2024 and thereafter 100.0%
79361194.1 A -5
IN WITNESS WHEREOF, the Authority has caused this Bond to be executed in its name
and on its behalf by the manual signatures of its Chairperson and Secretary all as of the Dated
Date identified above.
LAKE ELSINORE PUBLIC FINANCING
AUTHORITY
By:
Chairperson
Attest:
Secretary
79361194.1 A'6
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Bonds described in the within - mentioned Indenture and registered on
the registration books of the Trustee.
Dated: , 2014
UNION BANK, N.A.,
as Trustee
By:
Authorized Signatory
79361194.1 A -7
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 Bond and hereby irrevocably constitute(s) and appoint(s)
, attorney, to transfer the same on the registration books of the
Trustee with full power of substitution in the premises.
Dated:
Signature Guaranteed:
Note: Signature(s) must be guaranteed by an
eligible guarantor institution.
79361194.1
Signature:
Note: The signature(s) on this assignment
must correspond with the name(s) as written on
the face of the within - registered Bond in every
particular without alteration or enlargement or
any change whatsoever.
A -8
COMMITMENT AGREEMENT AND PURCHASE CONTRACT
FOR PURCHASE AND SALE OF LOCAL OBLIGATION BONDS
City of Lake Elsinore
Community Facilities District No. 2003 -2 (Canyon Hills)
Special Tax Bonds, 2014 Series (Improvement Area D)
THIS COMMITMENT AGREEMENT AND PURCHASE CONTRACT (the "Purchase
Contract "), dated , is by and between the LAKE ELSINORE PUBLIC FINANCING
AUTHORITY, a joint exercise of powers authority organized and existing under and by virtue of
the laws of the State of California (the "Authority "), and the CITY OF LAKE ELSINORE
COMMUNITY FACILITIES DISTRICT NO. 2003 -2 (CANYON HILLS), a community
facilities district duly organized and existing under the laws of the State of California (the
"District ").
WITNESSETH:
WHEREAS, pursuant to Articles 1 through 4 (commencing with Section 6500) of
Chapter 5, Division 7, Title 1 of the Government Code of the State of California (the "Act "), the
Redevelopment Agency of the City of Lake Elsinore (the "Agency ") and the City of Lake
Elsinore (the "City ") have, by Joint Exercise of Powers Agreement, dated July 25, 1989 (the
"Agreement "), created the Authority for the purposes, among other things, of assisting the City
and the Agency in the financing and refinancing of public capital improvements pursuant to the
Marks -Roos Local Bond Pooling Act of 1985, being Article 4 of the Act (commencing with
Section 6584) (the "Bond Law ");
WHEREAS, the Authority, for the purpose of acquiring certain local obligation bonds, has
determined to issue its Local Agency Revenue Bonds (Canyon Hills IA D), 2014 Series A (the
"Authority Bonds "), pursuant to an Indenture of Trust, dated as of January 1, 2014;
WHEREAS, a portion of the proceeds of the Authority Bonds will be used to purchase
local obligations of the District designated as "City of Lake Elsinore Community Facilities
District No. 2003 -2 (Canyon Hills) Special Tax Bonds, 2014 Series (Improvement Area D)" in
the initial principal amount of $ (referred to herein as the "Local Obligation
Bonds "); and
WHEREAS, the Authority and the District desire to enter into this Purchase Contract
providing for the purchase and sale of the Local Obligation Bonds and containing the other
agreements herein set forth.
NOW, THEREFORE, in consideration of the mutual agreements herein contained, and
for other good and valuable consideration the receipt and sufficiency of which is hereby
acknowledged, the Authority and the District agree as follows:
1. Upon the terms and conditions and upon the basis of the representations,
warranties and agreements hereinafter set forth, the District hereby sells to the Authority, and the
Authority hereby purchases from the District all of the aggregate principal amount of the Local
79361278.1
Obligation Bonds, such Local Obligation Bonds to bear the annual interest rates and to be sold to
the Authority at the purchase price set forth in Exhibit A attached hereto and hereby made a part
hereof, plus accrued interest, if any, from the date of the Local Obligation Bonds to the date of
delivery of the Local Obligation Bonds to the Authority (the "Closing Date ").
2, The City hereby specifies January 30, 2014 (or as soon thereafter as shall be
feasible), as the Closing Date and the District hereby confirms that it reasonably expects to
deliver the Local Obligation Bonds to the Authority on such date.
3. The Authority agrees that Union Bank, N.A., will act as Fiscal Agent for the
Local Obligation Bonds under and as further provided in the Fiscal Agent Agreement, dated as
of January 1, 2014 (the "Fiscal Agent Agreement "), by and between the District and such Fiscal
Agent,
4, The Local Obligation Bonds shall be issued and secured under the provisions of a
resolution authorizing the issuance of the Local Obligation Bonds, adopted by the City Council
of the City, acting as the legislative body of the District, on December 10, 2013 (the
"Resolution "), and related proceedings authorizing the issuance of the Local Obligation Bonds,
including, without limitation, the Fiscal Agent Agreement (collectively, the "Proceedings "). The
Local Obligation Bonds and interest thereon will be payable from Special Taxes (as defined in
the Fiscal Agent Agreement). Proceeds of the sale of the Local Obligation Bonds will be used
by the District in accordance with the Proceedings.
5. Any action under this Purchase Contract taken by the Authority, including
payment for and acceptance of the Local Obligation Bonds, and delivery and execution of any
receipt for the Bonds and any other instruments in connection with the closing on the Closing
Date, shall be valid and sufficient for all purposes and binding upon the Authority, provided that
any such action shall not impose any obligation or liability upon the Authority other than as may
arise as expressly set forth in this Purchase Contract,
6. It is a condition to the District's sale of the Local Obligation Bonds and the
obligation of the District to deliver the Local Obligation Bonds to the Authority, and to the
Authority's purchase of the Local Obligation Bonds and the obligations of the Authority to
accept delivery of and to pay for the Local Obligation Bonds, that the entire_ aggregate principal
amount of the Local Obligation Bonds of $ shall be delivered by the District, and
accepted and paid for by the Authority, on the Closing Date. The Authority will pay for the
Local Obligation Bonds with the proceeds of the Authority Bonds.
7, The District represents and warrants to the Authority that:
(a) The District is an entity duly organized and validly existing under the laws
of the State of California, and has, and on the Closing Date will have, full legal right,
power and authority (i) to enter into this Purchase Contract, (ii) to adopt or enter into the
Proceedings relating to the Local Obligation Bonds, (iii) to issue, sell and deliver the
Local Obligation Bonds to the Authority as provided herein and in the Fiscal Agent
Agreement, and (iv) to carry out and consummate the transactions on its part
79361278.1 2
contemplated by this Purchase Contract, the Proceedings and the Fiscal Agent
Agreement;
(b) The District has complied, and will on the Closing Date be in compliance
in all respects, with the Proceedings;
(c) By official action of the City prior to or concurrently with the acceptance
hereof, the City has duly adopted the Resolution, has duly authorized and approved the
execution and delivery of, and the performance by the District of the District's
obligations contained in, the Fiscal Agent Agreement, the Local Obligation Bonds, this
Purchase Contract and the other Proceedings, and the consummation by the District of all
other transactions on its part contemplated by the Proceedings, including, without
limitation, the application of Special Taxes to the payment of the Local Obligation
Bonds;
(d) The execution and delivery of this Purchase Contract and the Local
Obligation Bonds, the adoption of the Resolution and the adoption or entering into of the
other Proceedings, including, without limitation, the Fiscal Agent Agreement, and
compliance with the provisions of each thereof will not conflict with or constitute a
breach of or a default under any applicable law or administrative regulation of the State
of California or the United States of America, or any applicable judgment, decree,
agreement or other instrument to which the District is a party or is otherwise subject;
(e) There is no action, suit, proceeding or investigation before or by any court,
public board or body pending or, to the knowledge of the District, threatened, wherein an
unfavorable decision, ruling or finding would: (i) affect the creation, organization,
existence or powers of the District or the titles of its members and officers to their
respective offices, (ii) enjoin or restrain the issuance, sale and delivery of the Local
Obligation Bonds, the levy and receipt of the Special Taxes, or the pledge thereof under
the Fiscal Agent Agreement, (iii) in any way question or affect any of the rights, powers,
duties or obligations of the District with respect to the moneys pledged or to be pledged
to pay the principal of, premium, if any, or interest on the Local Obligation Bonds, (iv) in
any way question or affect any authority for the issuance of the Local Obligation Bonds,
or the validity or enforceability of the Local Obligation Bonds, the Fiscal Agent
Agreement or the other Proceedings, or (v) in any way question or affect this Purchase
Contract or the transactions contemplated by this Purchase Contract, the Fiscal Agent
Agreement, or any other agreement or instrument to which the District is a party relating
to the Local Obligation Bonds;
(f) The issuance and sale of the Local Obligation Bonds is not subject to any
transfer or other documentary stamp taxes of the State of California or any political
subdivision thereof;
(g) The District has not been notified of any listing or proposed listing by the
Internal Revenue Service to the effect that the District is a bond issuer whose arbitrage
certifications may not be relied upon;
79361278.1 3
N Any certificate signed by any official of the District mithnrized to do so
and delivered to the Authority shall be deemed a representation and warranty by the
District to the Authority as to the statements made therein; and
(i) The District will apply the proceeds of the Local Obligation Bonds,
including the investment thereof, in accordance with the Fiscal Agent Agreement and the
other Proceedings.
8. At 8:OO a.m., Los Angeles Time, on the Closing Date, or at such other time or on
such other date as is mutually agreed by the District and the Authority, the District will deliver
the Local Obligation Bonds to the Authority in definitive form, duly executed, together with the
other documents hereinafter mentioned, and, subject to the terms and conditions hereof, the
Authority will accept such delivery and pay or cause to be paid the purchase price of the Local
Obligation Bonds as referenced in paragraph 1 hereof by certified or bank cashier's check or
wire transfer or other funds which are good funds on the Closing Date. Delivery and payment,
as aforesaid, shall be made at such place as shall have been mutually agreed upon by the District
and the Authority.
91 The Authority has entered into this Purchase Contract in reliance upon the
representations, warranties and agreements of the District contained herein and to be contained in
the documents and instruments to be delivered. on the Closing Date, and upon the performance
by the District of its obligations hereunder, both as of the date hereof and as of the Closing Date.
Accordingly, the Authority's obligations under this Purchase Contract to purchase, to accept
delivery of and to pay for the Local Obligation Bonds shall be subject to the performance by the
District of its obligations to be performed hereunder and under such documents and instruments
at or prior to the Closing Date, and shall also be subject to the following conditions:
(a) The representations and warranties of the District contained herein shall be
true and correct on the date hereof and on and as of the Closing Date, as if made on the
Closing Date;
(b) On the Closing Date, the Proceedings shall be in full force and effect, and
shall not have been amended, modified or supplemented, except as may have been agreed
to by both the Authority and the District;
(c) As of the Closing Date, all official action of the District relating to the
Proceedings shall be in full force and effect, and there shall have been taken all such
actions as, in the opinion of Fulbright & Jaworski LLP ( "Bond Counsel "), shall be
necessary or appropriate in connection therewith, with the issuance of the Local
Obligation Bonds and with the transactions contemplated hereby;
(d) The Authority shall have the right to terminate the Authority's obligations
under this Purchase Contract to purchase, to accept delivery of and to pay for the Local
Obligation Bonds by notifying the District of their election to do so if, after the execution
hereof and prior to the Closing: (i) the marketability of the Local Obligation Bonds or
the market price thereof, in the opinion of the Authority, has been materially and
adversely affected by any decision issued by a court of the United States (including the
79361278.1 4
United States Tax Court) or of the State of California, by any ruling or regulation (final,
temporary or proposed) issued by or on behalf of the Department of the Treasury of the
United States, the Internal Revenue Service, or other governmental agency of the United
States, or any governmental agency of the State of California, or by a tentative decision
with respect to legislation reached by a committee of the House of Representatives or the
Senate of the Congress of the United States, or by legislation enacted by, pending in, or
favorably reported to either the House of Representatives or the Senate of the Congress of
the United States or either house of the Legislature of the State of California, or formally
proposed to the Congress of the United States by the President of the United States or to
the Legislature of the State of California by the Governor of the State of California in an
executive communication, affecting the tax status of the District, its property or income,
its bonds (including the Local Obligation Bonds) or the interest thereon, or any tax
exemption granted or authorized by the Bond Law; (ii) the United States shall have
become engaged in hostilities which have resulted in a declaration of war or national
emergency, or there shall have occurred any other outbreak of hostilities, or a local,
national or international calamity or crisis, financial or otherwise, the effect of such
outbreak, calamity or crisis being such as, in the reasonable opinion of the Authority,
would affect materially and adversely the marketability of the Bonds (it being agreed by
the Authority that there is no outbreak, calamity or crisis of such a character as of the date
hereof); (iii) there shall have occurred a general suspension of trading on the New York
Stock Exchange or the declaration of a general banking moratorium by the United States,
New York State or California State authorities; (iv) there shall have occurred a
withdrawal or downgrading of any rating assigned to any securities of the District by a
national municipal bond rating agency; (v) any proposed development described in the
Proceedings shall have been repudiated by the applicable developer, or, any litigation or
proceedings shall be pending or threatened questioning the proposed development or
seeking to enjoin the development thereof, or the District shall have received notice from
the applicable developer that it will be unable to proceed with the development as
described in the Proceedings; or (vi) any federal or California court, authority or
regulatory body shall take action materially and adversely affecting the ability of a
developer to proceed with the development as contemplated by the Proceedings;
(e) On or prior to the Closing Date, the Authority shall have received each of
the following documents:
(1) All documents and opinions required to be received by the trustee
for the Authority Bonds prior to the application of proceeds of the Authority
Bonds to the purchase of the Local Obligation Bonds;
(2) An opinion, in form and substance satisfactory to the District and
the Authority, dated as of the Closing Date, of Bond Counsel approving, without
customary qualifications, the validity of the Local Obligation Bonds;
(3) A supplementary opinion, dated the date of the Closing and
addressed to the Authority, of Bond Counsel to the effect that (i) this Purchase
Contract has been duly authorized, executed and delivered by, and, assuming due
authorization, execution and delivery by, the Authority, constitutes a legal, valid
79361278.1 5
and binding agreement of the District enforceable in accordance with its terms;
except as such enforceability may be limited by the application of equitable
principles if equitable remedies are sought; and (ii) the Local Obligation Bonds
are not subject to the registration requirements of the Securities Act of 1933, as
amended, and the Fiscal Agent Agreement is exempt from qualification under the
Trust Indenture Act of 1939, as amended;
(4) A certificate dated the Closing Date, addressed to the Authority,
signed by the City Manager of the City and by the City Clerk, on behalf of the
District, to the effect that:
(i) The representations and warranties of the District contained
herein are true and correct in all material respects on and as of the Closing
Date as if made on the Closing Date;
(ii) There is no action, suit, proceeding or investigation before
or by any court, public board or body pending or threatened, wherein an
unfavorable decision, ruling or finding would: (A) affect the creation,
organization, existence or powers of the District, or the titles of its
members and officers to their respective offices, (B) enjoin or restrain the
issuance, sale and delivery of the Local Obligation Bonds, the levy or
collection of the Special Taxes or any other moneys or property pledged or
to be pledged under the Fiscal Agent Agreement, or the pledge thereof,
(C) in any way question or affect any of the rights, powers, duties or
obligations of the District with respect to the Special Taxes or moneys and
assets pledged or to be pledged to pay the principal of, premium, if any, or
interest on the Local Obligation Bonds, (D) in any way question or affect
any authority for the issuance of the Local Obligation Bonds, or the
validity or enforceability of the Local Obligation Bonds or the
Proceedings, or (E) in any way question or affect this Purchase Contract or
the transactions contemplated by this Purchase Contract, the Fiscal Agent
Agreement or the other Proceedings; and
(iii) The District has complied with all agreements, covenants
and arrangements, and satisfied all conditions, on its part to be complied
with or satisfied on or prior to the Closing Date;
(5) An opinion, dated the date of Closing and addressed to the
Authority, of the City Attorney of the City, as Special Counsel to the District, that
there is no action, suit, proceeding or investigation before or by any court, public
board or body pending or threatened, wherein an unfavorable decision, ruling or
finding would: (i) affect the creation, organization, existence or powers of the
District, or the titles of its members and officers to their respective offices; (ii)
enjoin or restrain the issuance, sale and delivery of the Local Obligation Bonds,
the receipt of any other moneys or property pledged or to be pledged under the
Fiscal Agent Agreement or the pledge thereof; (iii) in any way question or affect
any of the rights, powers, duties or obligations of the District with respect to the
79361278.1 6
Special Taxes or the moneys and assets pledged or to be pledged to pay the
principal of, premium, if any, or interest on the Local Obligation Bonds; (iv) in
any way question or affect any authority for the issuance of the Local Obligation
Bonds, or the validity or enforceability of the Local Obligation Bonds; or (v) in
any way question or affect this Purchase Contract or the transactions
contemplated by this Purchase Contract, the Fiscal Agent Agreement or the other
Proceedings; and
(6) Such additional legal opinions, certificates, instruments and
documents as the Authority may reasonably request to evidence the truth and
accuracy, as of the date hereof and as of the Closing Date, of the District's
representations and warranties contained herein.
In addition to the foregoing, the District shall on the Closing Date provide the
Proceedings, certified by authorized officers of the City, on behalf of the District, under its seal
as true copies and as having been adopted or executed (as applicable), with only such
amendments, modifications or supplements as may have been agreed to by the Authority.
All of the opinions, letters, certificates, instruments and other documents mentioned
above or elsewhere in this Purchase Contract shall be deemed to be in compliance with the
provisions hereof if, but only if, they are in form and substance satisfactory to the Authority, but
the approval of the Authority shall not be unreasonably withheld. Receipt of, and payment for,
the Local Obligation Bonds shall constitute evidence of the satisfactory nature of such as to the
Authority. The performance of any and all obligations of the District hereunder and the
performance of any and all conditions contained herein for the benefit of the Authority may be
waived by the Authority in its sole discretion.
If the District shall be unable to satisfy the conditions to the obligations of the Authority
to purchase, accept delivery of and pay for the Bonds contained in this Purchase Contract, or if
the obligations of the Authority to purchase, accept delivery of and pay for the Bonds shall be
terminated for any reason permitted by this Purchase Contract, this Purchase Contract shall
terminate, and neither the Authority nor the District shall be under further obligation hereunder,
except that the respective obligations of the District and the Authority set forth in paragraphs 10
and 11 hereof shall continue in full force and effect.
10. The Authority shall be under no obligation to pay, and the District shall pay the
following expenses incident to the performance of the District's obligations hereunder: (i) the
cost of the preparation of the Local Obligation Bonds; (ii) the fees and disbursements of Bond
Counsel and of Special Counsel to the District; and (iii) the fees and disbursements of
accountants, advisers and of any other experts or consultants retained by the District.
11. This Purchase Contract is made solely for the benefit of the District and the
Authority (including their successors and assigns), and no other person shall acquire or have any
right hereunder or by virtue hereof. All of the District's representations, warranties and
agreements contained in this Purchase Contract shall remain operative and in full force and effect
regardless of. (i) any investigations made by or on behalf of the Authority or (ii) delivery of and
79361278.1 7
payment for the Bonds pursuant to this Purchase Contract. The agreements contained iii this
paragraph and in paragraph 10 shall survive any termination of this Purchase Contract,
12, This Purchase Contract shall become effective upon the execution of the
acceptance hereof by the signatures of the Mayor or Mayor Pro Tem of the City and the
Executive Director of the Authority, and shall be valid and enforceable as of the time of such
execution.
13. This Purchase Contract may be executed by the parties hereto in separate
counterparts, each of which when so executed and delivered shall be an original, but all such
counterparts shall together constitute but one and the same instrument.
14. In case any one or more of the provisions contained herein shall for any reason be
held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other provision hereof.
15. The validity, interpretation and performance of this Purchase Contract shall be
governed by the laws of the State of California applicable to contracts made and performed in
such State.
79361278.1 8
IN WITNESS WHEREOF, the Authority and the District have each caused this Purchase
Contract to be executed by their duly authorized officers all as of the date first above written.
LAKE ELSINORE PUBLIC FINANCING
AUTHORITY
By:
Executive Director
CITY OF LAKE ELSINORE COMMUNITY
FACILITIES DISTRICT NO. 2003 -2 (CANYON
HILLS)
By:
City Manager of the City of Lake Elsinore
79361278.1 9
EXHIBIT A
CITY OF LAKE ELSINORE
COMMUNITY FACILITIES DISTRICT NO. 2003 -2 (CANYON HILLS)
SPECIAL TAX BONDS, 2014 SERIES (IMPROVEMENT AREA D)
Annual Interest Rates
and Purchase Price
PURCHASE PRICE - $
Maturity Date Principal Interest
(September 1) Amount Rate
Total
79361278.1
CONTINUING DISCLOSURE AGREEMENT
This Continuing Disclosure Agreement (the "Disclosure Agreement "), dated as of
January 1, 2014, is executed and delivered by the City of Lake Elsinore Community Facilities
District No. 2003 -2 (Canyon Hills) (the "District ") and Union Bank, N.A., as Dissemination
Agent (the "Dissemination Agent "), in connection with the issuance of the $ Lake
Elsinore Public Financing Authority Local Agency Revenue Bonds (Canyon Hills IA D), 2014
Series A (the "Bonds "). The Bonds are being issued pursuant to provisions of an Indenture of
Trust, dated as of January 1, 2014 (the "Indenture "), by and between the Lake Elsinore Public
Financing Authority (the "Authority ") and Union Bank, N.A. (the "Trustee "). The District and
the Dissemination Agent covenant and agree as follows:
SECTION 1. Purpose of the Disclosure Agreement. This Disclosure Agreement is being
executed and delivered by the District and the Dissemination Agent for the benefit of the
Beneficial Owners of the Bonds and in order to assist the Participating Underwriter in complying
with Securities and Exchange Commission Rule 15c2- 12(b)(5).
SECTION 2. Definitions. In addition to the definitions set forth in the Indenture, which
apply to any capitalized term used in this Disclosure Agreement unless otherwise defined in this
Section, the following capitalized terms shall have the following meanings:
"Annual Report" shall mean any Annual Report provided by the District pursuant to, and
as described in, Sections 3 and 4 of this Disclosure Agreement.
"Beneficial Owner" shall mean any person which (a) has the'power, directly or indirectly,
to vote or consent with respect to, or to dispose of ownership of, any Bonds (including persons
holding Bonds through nominees, depositories or other intermediaries), or (b) is treated as the
owner of any Bonds for federal income tax purposes.
"Disclosure Representative" shall mean the City Manager of the City or his or her
designee, or such other officer or employee as the District shall designate in writing to the
Dissemination Agent from time to time.
"Dissemination Agent" shall mean Union Bank, N.A., acting in its capacity as
Dissemination Agent hereunder, or any successor Dissemination Agent designated in writing by
the District.
"Listed Events" shall mean any of the events listed in Section 5(a) of this Disclosure
Agreement.
"MSRB" shall mean the Municipal Securities Rulemaking Board established pursuant to
Section 1513(b)(1) of the Securities Exchange Act of 1934 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 Marketplace Access (EMMA)
website of the MSRB, currently located at http: / /emma.msrb.org.
79361274.1 1 1
"Participating jTnde,tur;rer" shall A mean any of the original Lirjderwritcrs of t he Bonds kJA.
required to comply with the Rule in connection with offering of the Bonds.
"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.
"State" shall mean the State of California.
SECTION 3. Provision of Annual Reports.
(a) The District shall, or shall cause the Dissemination Agent to, not later than
December 31 of each year, commencing December 31, 2014, provide to the MSRB and the
Participating Underwriter an Annual Report which is consistent with the requirements of Section
4 of this Disclosure Agreement. The Annual Report may be submitted as a single document or
as separate documents comprising a package, and may include by reference other information as
provided in Section 4 of this Disclosure Agreement.
(b) Not later than fifteen (15) Business Days ,prior to the date specified in
subsection (a) for providing the Annual Report to the MSRB, the District shall provide the
Annual Report to the Dissemination Agent. If by such date, the Dissemination Agent has not
received a copy of the Annual Report, the Dissemination Agent shall contact the District to
determine if the District is in compliance with the first sentence of this subsection (b). The
District shall provide a written certification with each Annual Report furnished to the
Dissemination Agent to the effect that such Annual Report constitutes the Annual Report
required to be furnished by it hereunder. The Dissemination Agent may conclusively rely upon
such certification of the District and shall have no duty or obligation to review such Annual
Report.
(c) If the Dissemination Agent is unable to verify that an Annual Report has
been provided to the MSRB by the date required in subsection (a), the Dissemination Agent shall
send a notice to the MSRB in substantially the form attached as Exhibit A.
(d) The Dissemination Agent shall, to the extent information is known to it,
file a report with the Authority and (if the Dissemination Agent is not the Trustee) the Trustee
certifying that the Annual Report has been provided pursuant to this Disclosure Agreement,
stating the date it was provided.
SECTION 4. Content of Annual Reports. The District's Annual Report shall contain or
include by reference the following (as of June 30 next preceding the Annual Report date or the
most recent readily available information):
(a) The principal amount of the Bonds outstanding.
(b) The balance of the Reserve Account and the Reserve Requirement.
(c) The balance of the Improvement Fund,
79361274.1 2
(d) A table showing value -to -lien ratios (either individually or in categories
such as "below 3:1," "3:1 to 4:1," "4:1 to 5:1," etc.) for all parcels subject to special taxes in
Improvement Area D of the District based on the ratio of assessed valuation of such parcels to all
overlapping direct debt. Such information shall be provided separately for Approved Property
and Developed Property (as such terms are defined in the RMA).
(e) The status of the payment of special taxes for the properties within
Improvement Area D of the District which were due and payable during the preceding fiscal year
(the "Special Taxes "), including as to delinquent parcels:
(1) the number of parcels delinquent in the payment of Special Taxes;
(2) the aggregate amount of the delinquent Special Taxes;
(3) as to any parcel for which the delinquent Special Taxes represent
more than 5% of the aggregate Special Taxes within Improvement
Area D of the District;
(i) the assessor's parcel number;
(ii) the identity of the owner(s)
County of Riverside Assessor's Roll o:
"County ") delinquency report received by
current; and
of such parcel based on the
County of Riverside (the
the City, whichever is more
(iii) the aggregate amount of delinquent property taxes,
assessments (both fixed lien and annual) and Special Taxes and the
accrued penalties and interest on such aggregate amount; and
(4) the assessment delinquency rate for such preceding fiscal year.
(f) The status of any judicial foreclosure proceedings initiated by the District
as a result of the delinquency in the payment of Special Taxes and the summary of the results of
foreclosure sales, if available.
(g) As to any parcel for which the annual special tax levy represents more
than 5% of the aggregate special tax levy within Improvement Area D of the District:
(1) names of the owners of such parcels as shown on the Assessor's
Roll or County delinquency report received by the City, whichever
is more current;
(2) percentage of the special tax levy allocated to such parcels;
(3) Developed Property or Approved Property status (as such terms
are defined in the RMA) of such parcels;
79361274.1 3
(4) significant amendments to applicable District granted land use
entitlements;
(5) status of any significant conditions of approval of development
imposed by the District as to any undeveloped parcel; and
(6) status of any significant legislative, administrative or judicial
challenges to the development of any undeveloped parcels or to the
use or continuing use of any parcel known to the District.
(h) A table showing the total amount of Special Tax actually levied and the
total amount of Maximum Special Tax (as such term is defined in the RMA).
(i) The audited financial statements for the City for the preceding fiscal year
(or if not available at the time of filing, the unaudited financial statements). The audited
financial statements shall be prepared in accordance with generally accepted accounting
principles as prescribed for governmental units by the Governmental Accounting Standards
Board; provided, however, that the City may from time to time, if required by federal or state
legal requirements, modify the basis upon which its financial statements are prepared.
(j) The principal amount of prepayments of the Special Tax for the preceding
fiscal year.
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 District or related public entities, which are
available to the public on the MSRB's Internet Web site or filed with the Securities and
Exchange Commission.
SECTION 5. Reporting of Listed Events.
(a) Pursuant to the provisions of this section, upon the occurrence of any of
the following events (in each case to the extent applicable) with respect to the Bonds, the District
shall give, or cause to be given by so notifying the Dissemination Agent in writing and
instructing the Dissemination Agent to give, notice of the occurrence of such event, in each case,
pursuant to Section 5(c) hereof.
1. principal or interest payment delinquencies;
2. non - payment related defaults, if material;
3, modifications to the rights of the Bond Owner, if material;
4* optional, contingent or unscheduled calls, if material, and tender offers;
5. defeasances;
6. rating changes;
79361274.1 1 4
7. adverse tax opinions or the issuance by the Internal Revenue Service of
proposed or final determinations of taxability, Notices of Proposed Issue
(IRS Form 5701 -TEB) or other material notices or determinations with
respect to the tax status of the Bonds or other material events affecting the
tax status of the Bonds;
8, unscheduled draws on the debt service reserves reflecting financial
difficulties;
9* unscheduled draws on the credit enhancements reflecting financial
difficulties;
10, substitution of the credit or liquidity providers or their failure to perform;
11. release, substitution or sale of property securing repayment of the Bonds,
if material;
12, bankruptcy, insolvency, receivership or similar proceedings of the
Authority, which shall occur as described below;
13, appointment of a successor or additional trustee or the change of name of
a trustee, if material, or;
14, the consummation of a merger, consolidation, or acquisition involving the
Authority or the sale of all or substantially all of the assets of the
Authority other than in the ordinary course of business, the entry into a
definitive agreement to undertake such an action or the termination of a
definitive agreement relating to any such actions, other than pursuant to its
terms, if material.
For these purposes, any event described in item 12 of this Section 5(a) is considered to
occur when any of the following occur: the appointment of a receiver, fiscal agent, or similar
officer for the Authority in a proceeding under the United States Bankruptcy Code or in any
other proceeding under state or federal law in which a court or governmental authority has
assumed jurisdiction over substantially all of the assets or business of the Authority, or if such
jurisdiction has been assumed by leaving the existing governing body and officials or officers in
possession but subject to the supervision and orders of a court or governmental authority, or the
entry of an order confirming a plan of reorganization, arrangement, or liquidation by a court or
governmental authority having supervision or jurisdiction over substantially all of the assets or
business of the Authority.
(b) Upon receipt of notice from the District and instruction by the District to
report the occurrence of any Listed Event, the Dissemination Agent shall provide notice thereof
to the MSRB in accordance with Section 5(c) hereof. In the event the Dissemination Agent shall
obtain actual knowledge of the occurrence of any of the Listed Events, the Dissemination Agent
shall, immediately after obtaining such knowledge, contact the Disclosure Representative,
inform such person of the event, and request that the District promptly notify the Dissemination
Agent in writing whether or not to report the event pursuant to Section 5(c). For purposes of this
79361274.1 1 5
Disclosure Agreement, "actual knowledge" of the occurrence of such Listed Event shall mean
actual knowledge by the Dissemination Agent, if other than the Trustee, and if the Dissemination
Agent is the Trustee, then by the officer at the corporate trust office of the Trustee with regular
responsibility for the administration of matters related to the Indenture. The Dissemination
Agent shall have no responsibility to determine the materiality, if applicable, of any of the Listed
Events.
(c) The District, or the Dissemination Agent, if the Dissemination Agent has
been instructed by the District to report the occurrence of a Listed Event, shall file a notice of
such occurrence with the MSRB in a timely manner not more than ten business days after the
occurrence of the event.
SECTION 6. Termination of Reporting Obligation. The District's obligations under this
Disclosure Agreement 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
District shall give notice of such termination in the same manner as for a Listed Event under
Section 5(c),
SECTION 7. Dissemination Agent. The District may, from time to time, appoint or
engage a Dissemination Agent to assist it in carrying out its obligations under this Disclosure
Agreement, and may discharge any such Dissemination Agent, with or without appointing a
successor Dissemination Agent. The Dissemination Agent shall not be responsible in any
manner for the content of any notice or report prepared by the District pursuant to this Disclosure
Agreement. The initial Dissemination Agent shall be Union Bank, N.A. The Dissemination
Agent may resign by providing thirty days' written notice to the District. The Dissemination
Agent shall not be responsible for the content of any report or notice prepared by the District.
The Dissemination Agent shall have no duty to prepare any information report nor shall the
Dissemination Agent be responsible for filing any report not provided to it by the District in a
timely manner and in a form suitable for filing.
SECTION 8. Amendment, Waiver. Notwithstanding any other provision of this
Disclosure Agreement, the District and the Dissemination Agent may amend this Disclosure
Agreement (and the Dissemination Agent shall agree to any amendment so requested by the
District) provided, the Dissemination Agent shall not be obligated to enter into any such
amendment that modifies or increases its duties or obligations hereunder, and any provision of
this Disclosure Agreement may be waived, provided that in the opinion of nationally recognized
bond counsel, such amendment or waiver is permitted by the Rule. In the event of any
amendment or waiver of a provision of this Disclosure Agreement, the District 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 District.
SECTION 9, Additional Information. Nothing in this Disclosure Agreement shall be
deemed to prevent the District from disseminating any other information, using the means of
dissemination set forth in this Disclosure Agreement or any other means of communication, or
including any other information in any Annual Report or notice of occurrence of a Listed Event,
79361274.1 1 6
in addition to that which
include any information
addition to that which is
have no obligation under
any future Annual Report
is required by this Disclosure Agreement. If the District chooses to
in any Annual Report or notice of occurrence of a Listed Event in
specifically required by this Disclosure Agreement, the District shall
this Disclosure Agreement to update such information or include it in
or notice of occurrence of a Listed Event,
SECTION 10. Filings with the MSRB. All financial information, operating data,
financial statements, notices, and other documents provided to the MSRB in accordance with this
Disclosure Agreement shall be provided in an electronic format prescribed by the MSRB and
shall be accompanied by identifying information as prescribed by the MSRB.
SECTION 11. Default. In the event of a failure of the District or the Dissemination
Agent to comply with any provision of this Disclosure Agreement, any Owner 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 District or Dissemination
Agent, as the case may be, to comply with its obligations under this Disclosure Agreement. A
default under this Disclosure Agreement shall not be deemed an Event of Default under the
Indenture, and the sole remedy under this Disclosure Agreement in the event of any failure of the
District or the Dissemination Agent to comply with this Disclosure Agreement shall be an action
to compel performance.
SECTION 12, Duties, Immunities and Liabilities of Dissemination Agent. Article VI of
the Indenture pertaining to the Trustee is hereby made applicable to this Disclosure Agreement
as if this Disclosure Agreement were (solely for this purpose) contained in the Indenture and the
Dissemination Agent shall be entitled to the protections, limitations from liability and
indemnities afforded the Trustee thereunder. The Dissemination Agent shall have only such
duties as are specifically set forth in this Disclosure Agreement, and the District agrees to
indemnify and save the Dissemination Agent, its officers, directors, employees and agents,
harmless against any loss, expense and liabilities which they may incur arising out of or in the
exercise or performance of its powers and duties hereunder, including the costs and expenses
(including attorneys' fees) of defending against any claim of liability, but excluding liabilities
due to the Dissemination Agent's negligence or willful misconduct. The Dissemination Agent
shall be paid compensation by the District for its services provided hereunder in accordance with
its schedule of fees as amended from time to time and all expenses, legal fees and advances made
or incurred by the Dissemination Agent in the performance of its duties hereunder. The
Dissemination Agent shall have no duty or obligation to review any information provided to it
hereunder and shall not be deemed to be acting in any fiduciary capacity for the District, the
Bond Owners, or any other party. The Dissemination Agent shall not have any liability to the
Bond Owners or any other party for any monetary damages or financial liability of any kind
whatsoever related to or arising from this Disclosure Agreement. The obligations of the District
under this Section shall survive resignation or removal of the Dissemination Agent and payment
of the Bonds.
79361274.1 1 1 7
SECTION 13, Notices. Anv notices nr commumcat�ons to or among any of the patties
to this Disclosure Agreement may be given as follows:
To the District: City of Lake Elsinore Community Facilities District
No. 2003 -2 (Canyon Hills)
c/o City of Lake Elsinore
130 South Main Street
Lake Elsinore, California 92530
Attn: City Manager
To the Dissemination Agent: Union Bank, N.A.
120 South San Pedro Street, 4th Floor
Los Angeles, California 90012
Attn: Corporate Trust Department
Any person may, by written notice to the other persons listed above, designate a different address
or telephone number(s) to which subsequent notices or communications should be sent.
SECTION 14. Beneficiaries. This Disclosure Agreement shall inure solely to the benefit
of the District, the Dissemination Agent, the Participating Underwriter and Owners and
Beneficial Owners from time to time of the Bonds, and shall create no rights in any other person
or entity.
79361274.1 8
SECTION 15. Counterparts. This Disclosure Agreement may be executed in several
counterparts, each of which shall be an original and all of which shall constitute but one and the
same instrument.
CITY OF LAKE ELSINORE COMMUNITY
FACILITIES DISTRICT NO. 2003-2
(CANYON HILLS)
Loom
Mayor, on behalf of the District
UNION BANK, N.A.,
as Dissemination Agent
LIM
Authorized Officer
79361274.1 1 9
EXHIBIT A
NOTICE TO MSRB OF FAILURE TO FILE ANNUAL REPORT
Name of Obligated Party: City of Lake Elsinore Community Facilities District No. 2003 -2
(Canyon Hills)
Name of Bond Issue: Lake Elsinore Public Financing Authority
Local Agency Revenue Bonds (Canyon Hills IA D),
2014 Series A
Date of Issuance:
January 30, 2014
NOTICE IS HEREBY GIVEN that the District has not provided an Annual Report with
respect to the above -named Bonds as required by the Continuing Disclosure Agreement, dated as
of January 1, 2014, with respect to the Bonds. [The District anticipates that the Annual Report
will be filed by 11
Dated:
UNION BANK, N.A.,
as Dissemination Agent
on behalf of District
cc: Authority
79361274.1
$[Principal Amount]
Lake Elsinore Public Financing Authority
Local Agency Revenue Bonds (Canyon Hills IA D), 2014 Series A
Purchase Contract
[Purchase Date], 2014
Lake Elsinore Public Financing Authority
130 South Main Street
Lake Elsinore, California 92530
City of Lake Elsinore
Community Facilities District No. 2003 -2
(Canyon Hills)
c/o City of Lake Elsinore
130 South Main Street
Lake Elsinore, California 92530
Ladies and Gentlemen.
O'Connor & Company Securities, Inc. (the "Underwriter ") hereby offers to enter
into the following agreement (the "Purchase Contract ") with the Lake Elsinore Public Financing
Authority (the "Authority ") and the City of Lake Elsinore Community Facilities District No.
2003 -2 (Canyon Hills) (the "District "). Upon the acceptance hereof by you, this offer will be
binding upon the Authority, the District and the Underwriter. This offer is made subject to
(i) the written acceptance hereof by you and (ii) withdrawal by the Underwriter upon written
notice (by facsimile or otherwise) delivered to you at any time prior to the acceptance hereof by
you.
The Authority and the City acknowledge and agree that: (i) the purchase and sale
of the Bonds (as defined below) pursuant to this Purchase Contract is an arm's - length
commercial transaction among the Authority, the City and the Underwriter; (ii) in connection
with such transaction, the Underwriter is acting solely as a principal and not as an agent or a
fiduciary of the Authority or the City; (iii) the Underwriter has not assumed (individually or
collectively) a fiduciary responsibility in favor of the Authority or the City with respect to: (x)
the offering of the Bonds or the process leading thereto (whether or not any Underwriter, or any
affiliate of the Underwriter, has advised or is currently advising the Authority or the City on
other matters); or (y) any other obligation to the Authority or the City except the obligations
expressly set forth in the Purchase Contract; and (iv) the Authority and the City have consulted
with their own legal and financial advisors to the extent they deemed appropriate in connection
with the offering of the Bonds. The Authority and the City acknowledge that each has
previously provided the Underwriter with an acknowledgement of receipt of the required
Underwriter disclosure under Rule G -17 of the MSRB.
LE (CH) 2014 BPAb.doc
1. Purchase and Sale. Upon the ternis and conditions and upon the basis of
the representations, warranties and agreements set forth herein, the Underwriter hereby agrees to
purchase from the Authority, at the Closing Time on the Closing Date (both as defined herein),
and the Authority hereby agrees to sell and deliver to the Underwriter, $[Principal Amount]
aggregate principal amount of its Local Agency Revenue Bonds (Canyon Hills IA D), 2014
Series A (the "Bonds "). The Bonds shall be dated the date of their initial delivery, and shall
mature on September 1 in the years shown on Exhibit A hereto, shall bear interest at the rates
shown on Exhibit A hereto and shall be subject to redemption and have such other terms as are
provided in the Indenture of Trust, dated as of [Closing Month] 1, 2014 (the "Indenture "), by and
between the Authority and Union Bank, N.A., as trustee (the "Trustee "). Interest on the Bonds
shall be payable each March 1 and September 1 to maturity or earlier redemption of the Bonds,
beginning September 1, 2014. The purchase price for the Bonds shall be an amount equal to
$ (being the aggregate principal amount thereof ($[Principal Amount].00), less an
underwriter's discount of $ and [plus /less] a net original issue [premium /discount] of
$ ). (The date of such payment and delivery is referred to herein as the "Closing
Date," the hour and date of such delivery and payment is referred to herein as the "Closing
Time," and the other actions contemplated hereby to take place at the time of such payment and
delivery being herein sometimes called the "Closing. ")
2. The Bonds. The Bonds shall be described in, and shall be issued and
secured pursuant to, the provisions of the Constitution and the laws of the State of California
including the provisions of the Marks -Roos Local Bond Pooling Act of 1985, constituting Article
4 of Chapter 5 (commencing with Section 6584) of Division 7 of Title 1 of the Government
Code of the State of California (the `Bond Law"), and the Indenture, authorizing the issuance of
the Bonds.
The Bonds are being issued for the purpose of funding a reserve fund for the
Bonds, to acquire from the District the District Bonds (as defined in the Indenture) being issued
by the District pursuant to the Fiscal Agent Agreement, dated as of [Closing Month] 1, 2014 (the
"Fiscal Agent Agreement "), by and between the District and Union Bank, N.A., as fiscal agent
(the "Fiscal Agent "), and to pay the costs of issuance of the Bonds and the District Bonds. The
Bonds are secured by the Revenues (as defined in the Indenture), consisting primarily of
amounts received by the Authority from the District pursuant to the District Bonds,
The Bonds shall be payable and shall be subject to redemption as provided in the
Indenture and shall be as described in the Preliminary Official Statement of the Authority, dated
[POS Date], 2014 (the "Preliminary Official Statement "), and the Official Statement of the
Authority dated of even date herewith. Such Official Statement, including the cover page and
the appendices thereto, relating to the Bonds, as amended to conform to the terms of this
Purchase Contract and with such changes and amendments thereto as have been mutually agreed
to by the Authority, the District and the Underwriter, is hereinafter referred to as the "Official
Statement."
This Purchase Contract and the Indenture are referred to herein as the "Authority
Documents." This Purchase Contract, the Fiscal Agent Agreement and the Continuing
Disclosure Agreement, dated as of [Closing Month] 1, 2014 (the "Continuing Disclosure
2
Agreement "), by and between the District and Union Bank, N.A., as dissemination agent, are
referred to herein as the "District Documents."
3. Offering by the Underwriter. It shall be a condition to the Authority's
obligations to sell and to deliver the Bonds to the Underwriter and to the Underwriter's
obligation to purchase, to accept delivery of and to pay for the Bonds that the entire principal
amount of the Bonds shall be issued, sold and delivered by the Authority and purchased,
accepted and paid for by the Underwriter at the Closing. It is understood that the Underwriter
proposes to offer the Bonds for sale to the public (which may include selected dealers) at prices
or yields as set forth on the inside cover page of the Official Statement. Concessions from the
public offering price may be allowed to selected dealers. It is understood that the initial public
offering price and concessions set forth in the Official Statement may vary after the initial public
offering. It is further understood that the Bonds may be offered to the public at prices other than
the par value thereof. The net premium on the sale of the Bonds to the public, if any, shall
accrue to the benefit of the Underwriter.
4, Official Statement, Delivery of Other Documents, Use of Documents.
, (a) The Authority and the District hereby authorize the use by the Underwriter
of the Preliminary Official Statement and the Official Statement (including any supplements or
amendments thereto) and the Indenture and the Fiscal Agent Agreement and the information
therein contained, in connection with the public offering and sale of the Bonds.
(b) The Authority shall deliver to the Underwriter, within seven business days
from the date hereof, such number of copies of the final Official Statement, executed on behalf
of and approved for distribution by the Authority, as the Underwriter may reasonably request in
order for the Underwriter to comply with the rules of the Municipal Securities Rulemaking
Board (the "MSRB ") and Rule 15c2- 12(b)(4) under the Securities Exchange Act of 1934.
(c) As soon as practicable following receipt thereof, the Underwriter shall
deliver the Official Statement, and any supplements or amendments thereto, to the Electronic
Municipal Market Access system ( "EMMA ") through the MSRB.
5, Representations, Warranties and Agreements of the Authority. The
Authority represents, warrants and agrees as follows:
(a) The Authority is a joint exercise of powers authority duly organized and
validly existing under the laws of the State of California.
(b) The Authority has full legal right, power and authority (i) to enter into the
Authority Documents, (ii) to sell, issue and deliver the Bonds to the Underwriter as provided
herein, and (iii) to carry out and consummate the transactions on its part contemplated by the
Authority Documents and the Official Statement.
(c) By all necessary official action, the Authority has duly authorized and
approved the Authority Documents, has duly authorized and approved the Preliminary Official
Statement and the Official Statement and has duly authorized and approved the execution and
delivery of, and the performance by the Authority of the obligations in connection with the
3
issuance of the Bonds on its part c.onrained in the Bonds and the Authority Docunients, and the
consummation by it of all other transactions contemplated by the Authority Documents in
connection with the issuance of the Bonds.
(d) To the best of its knowledge, the Authority is not in any material respect
in breach of or default under any applicable constitutional provision, law or administrative
regulation of any state or of the United States, or any agency or instrumentality of either, or any
applicable judgment or decree, or any loan agreement, indenture, bond, note, resolution,
agreement (including, without limitation, the Indenture) or other instrument to which the
Authority is a party which breach or default has or may have an adverse effect on the ability of
the Authority to perform its obligations under the Indenture, and no event has occurred and is
continuing which with the passage of time or the giving of notice, or both, would constitute such
a default or event of default under any such instrument; and the execution and delivery of the
Bonds and the Authority Documents, and compliance with the provisions on the Authority's part
contained therein, will not conflict in any material way with or constitute a material breach of or
a material default under any constitutional provision, law, administrative regulation, judgment,
decree; loan agreement, indenture, bond, note, resolution, agreement or other instrument to
which the Authority is a party nor will any such execution, delivery, adoption or compliance
result in the creation or imposition of any lien, charge or other security interest or encumbrance
of any nature whatsoever upon any of the property or assets of the Authority or under the terms
of any such law, regulation or instrument, except as provided by the Bonds and the Indenture.
(e) To the best of its knowledge, all authorizations, approvals, licenses,
permits, consents and orders of any governmental authority, legislative body, board, agency or
commission having jurisdiction of the matter which are required for the due authorization by, or
which would constitute a condition precedent to or the absence of which would materially
adversely affect the due performance by, the Authority of its obligations in connection with the
issuance of the Bonds under the Authority Documents have been duly obtained, except for such
approvals, consents and orders as may be required under the "Blue Sky" or securities laws of any
state or of the United States in connection with the offering and sale of the Bonds; except as
described in or contemplated by the Official Statement, all authorizations, approvals, licenses,
permits, consents and orders of any governmental authority, board, agency or commission
having jurisdiction of the matters which are required for the due authorization by, or which
would constitute a condition precedent to or the absence of which would materially adversely
affect the due performance by, the Authority of its obligations under the Indenture have been
duly obtained.
(f) The Bonds when issued will conform to the descriptions thereof contained
in the Official Statement under the captions "SUMMARY STATEMENT" and "THE BONDS —
GENERAL PROVISIONS," and the Authority Documents when executed and delivered will
conform to the descriptions thereof contained in the Official Statement under the captions
"SUMMARY STATEMENT," "THE BONDS — GENERAL PROVISIONS," "SOURCES OF
PAYMENT FOR THE BONDS" and "APPENDIX A — SUMMARY OF THE INDENTURE."
(g) The Bonds, when issued, authenticated and delivered in accordance with
the Indenture, and sold to the Underwriter as provided herein, will be validly issued and
outstanding obligations of the Authority, entitled to the benefits of the Indenture, and upon such
0
issuance and delivery, the Indenture will provide, for the benefit of the owners from time to time
of the Bonds, the legally valid and binding pledge of and lien and security interest it purports to
create.
(h) As of the date hereof, there is no action, suit, proceeding, inquiry or
investigation, notice of which has been served on the Authority, at law or in equity before or by
any court, government agency, public board or body, pending or to the best knowledge of the
officer of the City executing this Purchase Contract on behalf of the Authority, threatened
against the Authority, affecting the existence of the Authority, or affecting or seeking to prohibit,
restrain or enjoin the sale, issuance or delivery of the Bonds or the pledge and lien on the
Revenues pursuant to the Indenture, or contesting or affecting as to the Authority the validity or
enforceability of the Bond Law, the Bonds or the Authority Documents, or contesting the tax -
exempt status of interest on the Bonds, or contesting the completeness or accuracy of the
Preliminary Official Statement or the Official Statement, or contesting the powers of the
Authority for the issuance of the Bonds, or the execution and delivery or adoption by the
Authority of the Authority Documents, or in any way contesting or challenging the
consummation of the transactions contemplated hereby or thereby; nor, to the best knowledge of
the Authority, is there any basis for any such action, suit, proceeding, inquiry or investigation,
wherein an unfavorable decision, ruling or finding would materially adversely affect the validity
of the Bond Law, as to the Authority, or the authorization, execution, delivery or performance by
the Authority of the Bonds or the Authority Documents.
(i) The Authority will furnish such information, execute such instruments and
take such other action in cooperation with the Underwriter as the Underwriter may reasonably
request in order (x) to qualify the Bonds for offer and sale under the "Blue Sky" or other
securities laws and regulations of such states and other jurisdictions of the United States as the
Underwriter may designate, (y) to determine the eligibility of the Bonds for investment under the
laws of such states and other jurisdictions, and will use its best efforts to continue such
qualifications in effect so long as required for the distribution of the Bonds; provided, however,
that the Authority shall not be required to execute a general or special consent to service of
process or qualify to do business in connection with any such qualification or determination in
any jurisdiction, provided, that the Underwriter shall bear all costs in connection with the
Authority's action under' (x) and (y) herein, and (z) to assure or maintain the tax - exempt status of
the interest on the Bonds.
0) As of the date thereof, the Preliminary Official Statement does not, except
for the omission of certain information permitted to be omitted in accordance with Rule 15c2 -12
(as defined below), contain any untrue statement of a material fact or omit to state a material fact
necessary to make the statements therein with respect to the Authority, in light of the
circumstances under which they were made, not misleading.
(k) At the time of the Authority's acceptance hereof, and (unless an event
occurs of the nature described in paragraph (m) of this Section 5) at all times subsequent thereto
up to and including the date of the Closing, the Official Statement does not and will not contain
any untrue statement of a material fact or omit to state a material fact necessary to make the
statements therein, in light of the circumstances under which they were made, not misleading;
5
pNOvi d, however flint the c representations d 1' L ..1_ _ 1
• dew, , , .x.w� �... ,e .. ar�U VJarrantics o� the Authority snail apply only to
the information contained in the Official Statement relating to the Authority.
(1) If the Official Statement is supplemented or amended pursuant to
paragraph (m) of this Section 5, at the time of each supplement or amendment thereto and
(unless subsequently again supplemented or amended pursuant to such paragraph) at all times
subsequent thereto up to and including the date of the Closing, the Official Statement as so
supplemented or amended will not contain any untrue statement of a material fact or omit to state
a material fact necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading; provided, however, that these representations and
warranties of the Authority shall apply only to the information contained in the Official
Statement relating to the Authority.
(m) If between the date of this Purchase Contract and that date which is 25
days after the end of the underwriting period (as determined in accordance with Section 14
hereof) any event known to the Authority shall occur affecting the Authority which might
adversely affect the marketability of the Bonds or the market prices thereof, or which might
cause the Official Statement, as then supplemented or amended, to contain any untrue statement
of a material fact or to omit to state a material fact necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading, the Authority shall
notify the Underwriter thereof; and if in the opinion of the Underwriter such event requires the
preparation and publication of a supplement or amendment to the Official Statement, the
Authority will at its expense prepare and furnish to the Underwriter a reasonable number of
copies of such supplement to, or amendment of, the Official Statement in a form and in a manner
approved by the Underwriter.
(n) The Authority will refrain from taking any action, or permitting any action
to be taken, with regard to which the Authority may exercise control, that results in the loss of
the tax - exempt status of the interest on the Bonds.
(o) Any certificate signed by any officer of the City on behalf of the Authority
and delivered to the Underwriter pursuant to the Indenture, this Purchase Contract or any
document contemplated thereby shall be deemed a representation and warranty by the Authority
to the Underwriter as to the statements made therein.
(p) The Authority will cause the proceeds from the sale of the Bonds to be
paid to the Trustee for the purposes specified in the Indenture and the Official Statement. So
long as any of the Bonds are outstanding and except as may be authorized by the Indenture, the
Authority will not issue or sell any bonds or other obligations, other than the Bonds sold thereby,
the interest on and premium, if any, or principal of which will be payable from the payments to
be made under the Indenture.
(q) The Authority shall honor all other covenants on its part contained in the
Indenture which are incorporated herein and made a part of this Purchase Contract,
6. Representations, Warranties and Agreements of the District. The
District represents, warrants and agrees as follows:
02
(a) The District is a community facilities district duly organized and validly
existing under the laws of the State of California.
(b) The District has full legal right, power and authority (i) to enter into the
District Documents, and (ii) to carry out and consummate the transactions on its part
contemplated by the District Documents and the Official Statement.
(c) By all necessary official action, the District has duly authorized and
approved the District Documents, has duly authorized and approved the Preliminary Official
Statement and the Official Statement and has duly authorized and approved the execution and
delivery of, and the performance by the District of the obligations in connection with the
issuance of the Bonds on its part contained in the Bonds and the District Documents, and the
consummation by it of all other transactions contemplated by the District Documents in
connection with the issuance of the District Bonds.
(d) To the best of its knowledge, the District is not in any material respect in
breach of or default under any applicable constitutional provision, law or administrative
regulation of any state or of the United States, or any agency or instrumentality of either, or any
applicable judgment or decree, or any loan agreement, indenture, bond, note, resolution,
agreement (including, without limitation, the Fiscal Agent Agreement) or other instrument to
which the District is a party which breach or default has or may have an adverse effect on the
ability of the District to perform its obligations under the Fiscal Agent Agreement, and no event
has occurred and is continuing which with the passage of time or the giving of notice, or both,
would constitute such a default or event of default, under any such instrument.; and the execution
and delivery of the Bonds and the District Documents, and compliance with the provisions on the
District's part contained therein, will not conflict in any material way with or constitute a
material breach of or a material default under any constitutional provision, law, administrative
regulation, judgment, decree, loan agreement, indenture, bond, note, resolution, agreement or
other instrument to which the District is a party nor will any such execution, delivery, adoption
or compliance result in the creation or imposition of any lien, charge or other security interest or
encumbrance of any nature whatsoever upon any of the property or assets of the District or under
the terms of any such law, regulation or instrument, except as provided by the District
Documents.
(e) To the best of its knowledge, all authorizations, approvals, licenses,
permits, consents and orders of any governmental authority, legislative body, board, agency or
commission having jurisdiction of the matters which are required for the due authorization by, or
which would constitute a condition precedent to or the absence of which would materially
adversely affect the due performance by, the District of its obligations in connection with the
issuance of the District Bonds under the District Documents have been duly obtained, except for
such approvals, consents and orders as may be required under the "Blue Sky" or securities laws
of any state or of the United States in connection with the offering and sale of the Bonds or.the
District Bonds; except as described in or contemplated by the Official Statement, all
authorizations, approvals, licenses, permits, consents and orders of any governmental authority,
board, agency or commission having jurisdiction of the matters which are required for the due
authorization by, or which would constitute a condition precedent to or the absence of which
7
would materially adversely affect the due performance by, the District of its obligations under
the District Documents have been duly obtained.
(f) The District Bonds when issued will conform to the descriptions thereof
contained in the Official Statement under the captions "SUMMARY STATEMENT" and "THE
BONDS — GENERAL PROVISIONS," and the District Documents when executed and delivered
will conform to the descriptions thereof contained in the Official Statement under the captions
"SUMMARY STATEMENT," "THE BONDS — GENERAL PROVISIONS," "SOURCES OF
PAYMENT FOR THE BONDS" and "APPENDIX B — SUMMARY OF THE FISCAL AGENT
AGREEMENT."
(g) The District Bonds, when issued, authenticated and delivered in
accordance with the Fiscal Agent Agreement, and sold to the Authority as provided in the
Commitment Agreement and Purchase Contract for Purchase and Sale of Local Obligation
Bonds, dated as of [Purchase Date], 2014, by and between the Authority and the District (the
"Local Obligation Purchase Contract "), will be the validly issued and outstanding obligation of
the District, entitled to the benefits of the Fiscal Agent Agreement, and upon such issuance and
delivery, the Fiscal Agent Agreement will provide, for the benefit of the owners from time to
time of the District Bonds, the legally valid and binding pledge of and lien and security interest it
purports to create.
(h) As of the date hereof, there is no action, suit, proceeding, inquiry or
investigation, notice of which has been served on the District, at law or in equity before or by
any court, government agency, public board or body, pending or to the best knowledge of the
officer of the City executing this Purchase Contract on behalf of the District, threatened against
the District, affecting the existence of the District, or affecting or seeking to prohibit, restrain or
enjoin the sale, issuance or delivery of the Bonds or the District Bonds or the pledge and lien on
the Revenues pursuant to the Indenture or the pledge and lien on the Special Tax Revenues
pursuant to the Fiscal Agent Agreement, or contesting or affecting, as to the District, the validity
or enforceability of the Bond Law, the Bonds, the District Bonds or the District Documents, or
contesting the tax - exempt status of interest on the Bonds or the District Bonds, or contesting the
completeness or accuracy of the Preliminary Official Statement or the Official Statement, or
contesting the powers of the District for the issuance of the .District Bonds, or the execution and
delivery or adoption by the District of the District Documents, or in any way contesting or
challenging the consummation of the transactions contemplated hereby or thereby; nor, to the
best knowledge of the District, is there any basis for any such action, suit, proceeding, inquiry or
investigation, wherein an unfavorable decision, ruling or finding would materially adversely
affect the validity of the Bond Law, as to the District, or the authorization, execution, delivery or
performance by the District of the Bonds, the District Bonds or the District Documents.
(i) [RESERVED.]
0) As of the date thereof, the Preliminary Official Statement does not, except
for the omission of certain information permitted to be omitted in accordance with Rule 15c2 -12,
contain any untrue statement of a material fact or omit to state a material fact necessary to make
the statements therein with respect to the District, in light of the circumstances under which they
were made, not misleading.
r�
(k) At the time of the District's acceptance hereof, and (unless an event occurs
of the nature described in paragraph (m) of this Section 6) at all times subsequent thereto up to
and including the date of the Closing, the Official Statement does not and will not contain any
untrue statement of a material fact or omit to state a material fact necessary to make the
statements therein, in light of the circumstances under which they were made, not misleading;
provided, however, that these representations and warranties of the District shall apply only to
the information contained in the Official Statement relating to the District.
(1) If the Official Statement is supplemented or amended pursuant to
paragraph (m) of this Section 6, at the time of each supplement or amendment thereto and
(unless subsequently again supplemented or amended pursuant to such paragraph) at all times
subsequent thereto up to and including the date of the Closing, the Official Statement as so
supplemented or amended will not contain any untrue statement of a material fact or omit to state
a material fact necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading; provided, however, that these representations and
warranties of the District shall apply only to the information contained in the Official Statement
relating to the District.
(m) If between the date of this Purchase Contract and that date which is 25
days after the end of the underwriting period (as determined in accordance with Section 14
hereof) any event known to the District shall occur affecting the District which might adversely
affect the marketability of the Bonds or the market prices thereof, or which might cause the
Official Statement, as then supplemented or amended, to contain any untrue statement of a
material fact or to omit to state a material fact necessary to make the statements therein, in light
of the circumstances under which they were made, not misleading, the District shall notify the
Underwriter thereof; and if in the opinion of the Underwriter such event requires the preparation
and publication of a supplement or amendment to the Official Statement, the District will, at its
expense, prepare and furnish to the Underwriter a reasonable number of copies of such
supplement to, or amendment of, the Official Statement in a form and in a manner approved by
the Underwriter.
(n) The District will refrain from taking any action, or permitting any action
to be taken, with regard to which the District may exercise control, that results in the loss of the
tax - exempt status of the interest on the Bonds or the District Bonds.
(o) Any certificate signed by any officer of the City on behalf of the District
and delivered to the Underwriter pursuant to the Fiscal Agent Agreement, this Purchase
Contract, the Local Obligation Purchase Contract or any document contemplated thereby shall be
deemed a representation and warranty by the District to the Underwriter as to the statements
made therein.
(p) The District shall honor all other covenants on its part contained in the
Fiscal Agent Agreement which are incorporated herein and made a part of this Purchase
Contract.
(q) At or prior to the Closing, the District shall have duly authorized, executed
and delivered the Continuing Disclosure Agreement which shall comply with the provisions of
I
Rule 1__5c2- 12(h / \S/ and shall be substantially in the 6m, appended to the Official Statement as
�b)(51
Appendix B thereto.
7. Closing. At 8:00 a.m., California time, on [Closing Date], 2014, or on
such earlier date or as soon thereafter as practicable, as may be mutually agreed upon by the
Authority, the District and the Underwriter, the Authority will, subject to the terms and
conditions hereof, cause the Trustee to deliver to the Underwriter, the Bonds, in definitive form
duly authenticated by the Trustee, together with the other documents hereinafter mentioned; and
the Underwriter will accept such delivery and will pay the purchase price of the Bonds at the
offices of Fulbright & Jaworski LLP, Los Angeles, California, a member of Norton Rose
Fulbright, as set forth in Section 1 hereof by delivering federal or other immediately available
funds in the amount of such purchase price to the Trustee. The Bonds shall be prepared in fully -
registered form without coupons in authorized denominations and registered in the name of the
Underwriter.
8. Closing Conditions. The Underwriter has entered into this Purchase
Contract in reliance upon the representations and warranties of the Authority and the District
contained herein, and in reliance upon the representations and warranties to be contained in the
documents and instruments to be delivered at the Closing and upon the performance by the
Authority and the District of their respective obligations hereunder, both as of the date hereof
and as of the date of the Closing. Accordingly, the Underwriter's obligations under this
Purchase Contract to purchase, to accept delivery of and to pay for the Bonds shall be
conditioned upon the performance by the Authority and the District of their obligations to be
performed hereunder and under such documents and instruments at or prior to the Closing, and
shall also be subject to the following additional conditions:
(a) The representations and warranties of the Authority and the District
contained herein shall be true, complete and correct on the date hereof and on and as of the date
of the Closing, as if made on the date of the Closing;
(b) At the time of the Closing, the Indenture and the Fiscal Agent Agreement
shall be in full force and effect in accordance with their terms and shall not have been amended,
modified or supplemented and the Official Statement shall not have been supplemented or
amended, except in any such case as may have been agreed to by the Underwriter;
(c) At the time of the Closing, all necessary official action of the Authority
and the District and of the other parties thereto relating to the Authority Documents and the
District Documents shall have been taken and shall be in full force and effect and shall not have
been amended, modified or supplemented in any material respect;
(d) Subsequent to the date hereof, there shall not have occurred any change in
or affecting particularly the Authority, the District, the Bonds or the District Bonds, as the
foregoing matters are described in the Official Statement, which in the reasonable opinion of the
Underwriter materially impairs the investment quality of the Bonds;
(e) At or prior to the Closing, the Underwriter shall have received copies of
each of the following documents:
HE
(1) The Official Statement and each supplement or amendment, if any,
thereto, executed by the Executive Director of the Authority;
(2) A copy of the Indenture, executed by the Authority and the
Trustee;
(3) A copy of the Second Supplement to Fiscal Agent Agreement,
executed by the District and the Fiscal Agent;
(4) A copy of this Purchase Contract, executed by the Authority, the
District and the Underwriter;
(5) A copy of the Local Obligation Purchase Contract, executed by the
Authority and the District;
(6) Certificates of the Authority and the District, respectively, with
respect to the matters described in Sections 5 and 6 and in paragraphs (a), (b), (c) and (d)
of this Section 8;
(7) An opinion (the "Final Approving Legal Opinion "), dated the date
of the Closing and addressed to the District, of Fulbright & Jaworski LLP, a member of
Norton Rose Fulbright, Bond Counsel for the Authority, substantially in the form set
forth in Appendix F to the Official Statement;
(8) A supplemental opinion, dated the date of the Closing and
addressed to the Underwriter, of Fulbright & Jaworski LLP, a member of Norton Rose
Fulbright, Bond Counsel for the Authority, in substantially the form attached hereto as
Exhibit B;
(9) An opinion, dated the date of the Closing and addressed to the
Underwriter, of the City Attorney of the City, as Special Counsel for the District and the
Authority, in substantially the form attached hereto as Exhibit C;
(10) A reliance letter, dated the date of the Closing and addressed to the
Underwriter and the Fiscal Agent, respectively, of Fulbright & Jaworski LLP, a member
of Norton Rose Fulbright, Bond Counsel for the Authority, regarding the final approving
opinion;
(11) An opinion, dated the date of the Closing and addressed to the
Underwriter, the Authority and the District of Fulbright & Jaworski LLP, a member of
Norton Rose Fulbright, Disclosure Counsel, in substantially the form attached hereto as
Exhibit D;
(12) Transcripts of all proceedings relating to the authorization and
issuance of the Bonds certified by the Secretary or an Assistant Secretary of the
Authority;
11
(13) An opinion of counsel to the 'Trustee and the Fiscal Agent, to the
effect that:
(i) Due Organization and Existence — the Trustee and Fiscal
Agent have been duly organized and are validly existing and in good standing,
with full corporate power to undertake the trust duties and obligations under the
Indenture and the Fiscal Agent Agreement;
(ii) Corporate Action — the Trustee and Fiscal Agent have duly
authorized, executed and delivered the Indenture and the Fiscal Agent Agreement,
and by all proper corporate action have authorized the acceptance of the duties
and obligations of the Trustee and the Fiscal Agent under the Indenture and the
Fiscal Agent Agreement, respectively, and have authorized in such capacity the
authentication and delivery of the Bonds and the District Bonds;
(iii) Due Authorization, Execution and Delivery — assuming due
authorization, execution and delivery by the Authority and the District, the
Indenture and the Fiscal Agent Agreement are the valid, legal and binding
agreements of the Trustee and the Fiscal Agent, respectively, enforceable in
accordance with their terms, except as such enforcement may be limited by
bankruptcy, insolvency, reorganization or other similar laws affecting the
enforcement of creditors' rights in general and by general equity principles
(regardless of whether such enforcement is considered in a proceeding in equity
or at law); and
(iv) Consents — exclusive of federal or state securities laws and
regulations, to the best of such counsel's knowledge after reasonable inquiry and
investigation, other than routine filings required to be made with governmental
agencies in order to preserve the Trustee and the Fiscal Agent's authority to
perform a trust business (all of which routine filings such counsel believes, after
reasonable inquiry and investigation, to have been made), no consent, approval,
authorization or other action by any governmental or regulatory authority having
jurisdiction over the Trustee or the Fiscal Agent is or will be required for the
execution by the Trustee or the Fiscal Agent of the Indenture or the Fiscal Agent
Agreement or the authentication and delivery of the Bonds or the District Bonds;
(14) The general resolutions of the Trustee and the Fiscal Agent
authorizing the execution and delivery of certain documents by certain officers of the
Trustee and Fiscal Agent, which resolutions authorize the execution and delivery of the
Indenture and the Fiscal Agent Agreement;
(15) A certificate of the Trustee and the Fiscal Agent, dated the date of
Closing, certifying that, subject to the limitations provided herein, the Trustee and the
Fiscal Agent represent and warrant and agree with the Underwriter that as of the date of
Closing:
12
(i) Due Organization and Existence — the Trustee and the
Fiscal Agent are duly organized and existing as a national banking association in
good standing under the laws of the United States having the full power and
authority to enter into and perform their duties under the Indenture and the Fiscal
Agent Agreement, respectively, and to authenticate and deliver the Bonds and the
District Bonds to the Underwriter pursuant to the terms of the Indenture and the
Fiscal Agent Agreement, respectively;
(ii) No Conflict — to the best of the knowledge of the Trustee
and the Fiscal Agent, after due investigation, the execution and delivery by the
Trustee of the Indenture and by the Fiscal Agent of the Fiscal Agent Agreement
and the authentication and delivery by the Trustee and the Fiscal Agent of the
Bonds and the District Bonds, respectively, and compliance with the terms thereof
will not, in any material respect, conflict with, or result in a violation or breach of,
or constitute a default under, any loan agreement, indenture, bond, note,
resolution or any other agreement or instrument to which the Trustee or the Fiscal
Agent is a party or by which it is bound, or any law or any rule, regulation, order
or decree of any court or governmental agency or body having jurisdiction over
the Trustee or the Fiscal Agent or any of its activities or properties, or result in the
creation or imposition of any lien, charge or other security interest or
encumbrance of any nature whatsoever upon any of the property or assets of the
Trustee or the Fiscal Agent; and
(iii) No Litigation — to the best of the knowledge of the Trustee
and the Fiscal Agent, no litigation has been served upon the Trustee or the Fiscal
Agent to restrain or enjoin the Trustee's or the Fiscal Agent's participation in, or
in any way contesting the powers of the Trustee or the Fiscal Agent with respect
to, the transactions contemplated by the Indenture or the Fiscal Agent Agreement,
respectively;
(16) Executed copies of the Continuing Disclosure Agreement by and
between the District and Union Bank, N.A., as dissemination agent, substantially in the
form presented in Appendix E to the Official Statement;
(17) A certificate dated the Closing Date, signed by an authorized
principal of Harris Realty Appraisal (the "Appraiser "), in a form satisfactory to the
Underwriter and its counsel to the effect that (i) the individual signing the certificate is an
authorized representative of the Appraiser, and, as such, is familiar with the facts certified
and is authorized and qualified to certify the same; (ii) in the opinion of the Appraiser the
assumptions made in the appraisal report with respect to City of Lake Elsinore
Community Facilities District No. 2003 -2 (Canyon Hills), dated [Appraisal Date], 2013
(the "Appraisal "), are reasonable; (iii) the Appraiser consents to the reproduction of the
Appraisal as Appendix C to the Official Statement and to the references to the Appraiser
and the Appraisal made in the Official Statement; (iv) that the Official Statement has
been reviewed on behalf of the Appraiser and to the best knowledge of the Appraiser the
statements concerning the Appraisal and the value of the property contained in the
Official Statement are true, correct and complete in all material respects and do not
13
COn.tain any iintriie stateme t Of a maLel "lUl faCL k-JI W111L t0 Statc a i11MCI`iai fact required t0
be stated therein or necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading; and (v) the District and the
Underwriter are entitled to rely on the Certificate;
(18) A copy of the Appraisal;
(19) A certificate from Harris & Associates ( "Special Tax Consultant ")
to the effect that (i) the Special Tax, if applied in accordance with the terms as set forth in
the rate and method of apportionment of special taxes with respect of the District (the
"RMA "), after deducting Administrative Expenses, will annually yield sufficient revenue
to make timely payments of debt service on the District Bonds, provided that information
and other data supplied by the District, by the Appraiser, by the Underwriter or by any of
their agents, which has been relied upon by the Special Tax Consultant, is true and
correct, (ii) the Special Tax, if collected in the maximum amounts permitted pursuant to
the RMA on the Closing Date, would generate at least 110% of the maximum debt
service payable with respect to the District Bonds payable from such Special Tax during
each fiscal year, based on a debt service schedule supplied by O'Connor & Company
Securities, Inc., (iii) the debt service with respect to the District Bonds, if paid in
accordance with their terms, will be sufficient to pay debt service payable with respect to
the Bonds, (iv) the information supplied by such firm for use in the section of the Official
Statement captioned "APPENDIX D — RATE AND METHOD OF APPORTIONMENT"
is true and correct as of the date of the Official Statement and as of the Closing Date, and
(v) the description of the Special Tax Formula contained in the section of the Official
Statement captioned "RATE AND METHOD OF APPORTIONMENT OF THE
SPECIAL TAX — METHOD OF APPORTIONMENT" is correctly presented in all
material respects; and
(20) Such additional legal opinions, certificates, instruments and other
documents as the Underwriter may reasonably request to evidence the truth and accuracy,
as of the date hereof and as of the date of the Closing, of the Authority's and the
District's representations and warranties contained herein and of the statements and
information contained in the Official Statement and the due performance or satisfaction
by the Authority and the District on or prior to the date of the Closing of all the
agreements then to be performed and conditions then to be satisfied by it.
All the opinions, letters, certificates, instruments and other documents mentioned
above or elsewhere in this Purchase Contract shall be deemed to be in compliance with the
provisions hereof if, but only if, they are in form and substance satisfactory to Bond Counsel and
the Underwriter. The opinions and other documents presented as exhibits to this Purchase
Contract or as appendices to the Official Statement shall be deemed satisfactory provided they
are substantially in the forms attached as exhibits to this Purchase Contract or as appendices to
the Official Statement.
If the Authority and the District shall be unable to satisfy the conditions to the
obligations of the Underwriter to purchase, to accept delivery of and to pay for the Bonds
contained in this Purchase Contract, or if the obligations of the Underwriter to purchase, to
14
accept delivery of and to pay for the Bonds shall be terminated for any reason permitted by this
Purchase Contract, this Purchase Contract shall terminate and neither the Underwriter nor the
District shall be under any further obligation hereunder.
9. Termination. The Underwriter shall have the right to terminate the
Underwriter's obligations under this Purchase Contract to purchase, to accept delivery of and to
pay for the Bonds by notifying the Authority and the District in writing or by telegram, of their
election to do so, if, after the execution hereof and prior to the Closing: (a) the United States has
become engaged in hostilities which have resulted in a declaration of war or a national
emergency; (b) there shall have occurred the declaration of a general banking moratorium by any
authority of the United States or the States of New York or California; (c) an event shall have
occurred or been discovered as described in paragraph (m) of Section 5 or paragraph (m) of
Section 6 hereof which, in the opinion of the Underwriter, requires the preparation and
publication of disclosure material or a supplement or amendment to the Official Statement; (d)
any legislation, ordinance, rule or regulation shall be introduced in, or be enacted by any
governmental body, department or agency in the State of California, or a decision by any court of
competent jurisdiction within the State of California shall be rendered which, in the
Underwriter's reasonable opinion, materially adversely affects the market price of the Bonds; (e)
legislation shall be introduced, by amendment or otherwise, or be enacted by the House of
Representatives or the Senate of the Congress of the United States, or a decision by a court of the
United States shall be rendered, or a stop order, ruling, regulation or official statement by or on
behalf of the Securities and Exchange Commission or other governmental agency having
jurisdiction, of the subject matter shall be made or proposed, to the effect that the issuance,
offering or sale of obligations of the general character of the Bonds, or the Bonds, as
contemplated hereby or by the Official Statement, is or would be in violation of any provision of
the Securities Act of 1933, as amended and as then in effect, or the Securities Exchange Act of
1934, as amended and as then in effect, or the Trust Indenture Act of 1939, as amended and as
then in effect, or with the purpose or effect of otherwise prohibiting the issuance, offering or sale
of obligations of the general character of the Bonds, or the Bonds, as contemplated hereby or by
the Official Statement; (f) additional material restrictions not in force as of the date hereof shall
have been imposed upon trading in securities generally by any governmental authority or by any
national securities exchange; (g) the New York Stock Exchange, or other national securities
exchange or association or any governmental authority, shall impose as to the Bonds, or
obligations of the general character of the Bonds, any material restrictions not now in force, or
increase materially those now in force, with respect to the extension of credit by or the charge to
the net capital requirements of broker - dealers; (h) trading in securities on the New York Stock
Exchange or the American Stock Exchange shall have been suspended or limited or minimum
prices have been established on either such exchange; or (i) any action shall have been taken by
any government in respect of its monetary affairs which, in the reasonable opinion of the
Underwriter, has a material adverse effect on the United States securities market.
If this Purchase Contract shall be terminated pursuant to Section 8 or this
Section 9, or if the purchase provided for herein is not consummated because any condition to
the Underwriter's obligation hereunder is not satisfied or because of any refusal, inability or
failure on the part of the Authority or the District to comply with any of the terms or to fulfill any
of the conditions of this Purchase Contract, or if for any reason the Authority or the District shall
be unable to perform all of its obligations under this Purchase Contract, neither the Authority nor
15
the District shall be liable to the Underwriter for damages on account of loss of aVmticipated
profits arising out of the transactions covered by this Purchase Contract.
109 Payment of Costs and Expenses. (a.) All costs and expenses incident to
the sale and delivery of the Bonds to the Underwriter, including, but not limited to: (i) the fees
and expenses of the Authority and its Counsel, the Financing Consultant, Disclosure Counsel and
other consultants; (ii) the fees and expenses of the District, its Counsel, the Financing
Consultant, Disclosure Counsel and other consultants; (iii) the fees and expenses of Bond
Counsel; (iv) all costs and expenses incurred in connection with the preparation and printing of
the Bonds and the District Bonds; (v) all expenses in connection with the preparation, printing,
distribution and delivery of the Preliminary Official Statement, the Official Statement and any
amendment or supplement thereto; (vi) California Municipal Statistics fees, CUSIP® Bureau
charges, fees of Public Securities Association and California Public Securities Association,
MSRB fees, California Debt and Investment Advisory Commission fees; and (vii) the fees and
expenses of the Trustee and Fiscal Agent and its counsel and all other fees and expenses of the
Underwriter, except as provided in paragraph (b) below shall be payable by the Authority from
the proceeds of the Bonds.
(b) The Underwriter shall pay all advertising expenses in connection with the
public offering of the Bonds and all other expenses incurred by it in connection with its public
offering and distribution of the Bonds.
11, Representations, Warranties and Agreements to Survive Delivery.
The representations, warranties, indemnities, agreements and other statements of the Authority,
the District and the Underwriter or their officers or partners set forth in, or made pursuant to, this
Purchase Contract will remain operative and in full force and effect regardless of any
investigation made by or on behalf of the Authority, the District or the Underwriter or any
controlling person and will survive delivery of and payment for the Bonds.
12, Notices. Any notice or other communication to be given under this
Purchase Contract may be given by delivering the same in writing:
To the Authority: Lake Elsinore Public Financing Authority
c/o City of Lake Elsinore
130 South Main Street
Lake Elsinore, California 92530
Attention: City Manager
To the District: City of Lake Elsinore
Community Facilities District No. 2003 -2
(Canyon Hills)
c/o City of Lake Elsinore
130 South Main Street
Lake Elsinore, California 92530
Attention: City Manager
fC
To the Underwriter: O'Connor & Company Securities, Inc.
234 East 17th Street, Suite 114
Costa Mesa, California 92627
Attention: Tony Wetherbee
13. Parties in Interest. This Purchase Contract is made solely for the benefit
of the Authority, the District and the Underwriter (including the successors or assigns of the
Underwriter) and no other person shall acquire or have any right hereunder or by virtue hereof.
All of the Authority's and the District's representations, warranties and agreements contained in
this Purchase Contract shall remain operative and in full force and effect, regardless of: (i) any
investigations made by or on behalf of the Underwriter; (ii) delivery of and payment for the
Bonds pursuant to this Purchase Contract; and (iii) any termination of this Purchase Contract,
14. Determination of End of the Underwriting Period. For purposes of this
Purchase Contract, the "End of the Underwriting Period" for the Bonds shall mean the earlier of
(a) the day of the Closing unless the Authority and the District have been notified in writing by
the Underwriter, on or prior to the day of the Closing, that the "end of the underwriting period"
for the Bonds for all purposes of Rule 15c2 -12 of the Securities and Exchange Commission
promulgated under the Securities Exchange Act of 1934 (the "Rule ") will not occur on the day of
the Closing, or (b) the date on which notice is given to the Authority and the District by the
Underwriter in accordance with the following sentence. In the event that the Underwriter has
given notice to the Authority and the District pursuant to clause (a) above that the "end of the
underwriting period" for the Bonds will not occur on the day of the Closing, the Underwriter
agrees to notify the Authority and the District in writing as soon as practicable following the
"end of the underwriting period" for the Bonds for all purposes of the Rule.
15, Effectiveness. This Purchase Contract shall become effective upon the
execution of the acceptance by the designees of the Authority and the District and shall be valid
and enforceable at the time of such acceptance.
16. Headings. The headings of the sections of this Purchase Contract are
inserted for convenience only and shall not be deemed to be a part hereof.
17. Governing Law. This Purchase Contract shall be construed in
accordance with the laws of the State of California.
counterparts.
18, Counterparts. This Purchase Contract may be executed in any number of
17
Tf the foregoing is in accordance with your understanding of the Purchase
)lease sign and return to us the enclosed duplicate copies hereof, whereupon it will
binding agreement among the Authority, the District and the Underwriter in
with its terms.
Contract, lay of January], 2014
become a
accordanc61NORE PUBLIC FINANCING
[TY
Accepted:
cutive Director
JAKE ELSINORE
ITY FACILITIES DISTRICT
(CANYON HILLS)
Manager
This [30th d
ration
LAKE EL;
AUTHOR]
By:
Exe
CITY OF I
COMMUN
NO* 2003-2
By:
City.
Time of Exec
[Purchase Date], 2014,
II:
Very truly yours,
O'CONNOR & COMPANY
SECURITIES, INC.
By:
Title:
Exhibit A
$[Principal Amount]
Lake Elsinore Public Financing Authority
Local Agency Revenue Bonds (Canyon Hills IA D), 2014 Series A
Maturity Date Principal
(September 1) Amount - Coupon Yield Price
Serial Bonds:
20XX $ % % %
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
20XX
Term Bond:
30 $ % % %
20 % % %
20 % % %
$[Principal
Amount]
*Yield to first par call date of September 1, 20_
A -1
F.xhihit R
Supplemental Opinion of Fulbright & Jaworski LLP, a Member of Norton Rose Fulbright
Addressed to the Underwriter
$[Principal Amount]
Lake Elsinore Public Financing Authority
Local Agency Revenue Bonds (Canyon Hills IA D), 2014 Series A
[Closing Date], 2014
O'Connor & Company Securities, Inc.
250 Newport Center Drive, Suite 303
Newport Beach, California 92660
Ladies and Gentlemen:
This letter is addressed to you, as the Underwriter, pursuant to Section 8(e)(8) of
the Purchase Contract, dated [Purchase Date], 2014 (the "Purchase Contract "), by and among
you, the Lake Elsinore Public Financing Authority (the "Authority ") and the City of Lake
Elsinore Community Facilities District No. 2003 -2 (Canyon Hills) (the "District "), providing for
the purchase of $[Principal Amount] aggregate principal amount of Lake Elsinore Public
Financing Authority Local Agency Revenue Bonds (Canyon Hills IA D), 2014 Series A (the
"Authority Bonds "). The Authority Bonds are being issued pursuant to the Indenture of Trust,
dated as of [Closing Month] 1, 2014, between the Authority and Union Bank, N.A. (the
"Trustee "). Capitalized terms not otherwise defined herein shall have the meanings ascribed
thereto in the Indenture of Trust or, if not defined in the Indenture of Trust, in the Purchase
Contract.
In addition to the opinions set forth in our final legal
validity of the Authority Bonds and certain other matters, dated the date
the Authority (but which may be relied upon by you to the same extent
addressed to you), and based on and subject to the matters referred tc
fourth paragraphs of said final legal opinion (but excluding the last
paragraph thereof) (which are hereby incorporated herein by reference),
as of the date hereof, we are of the following opinions or have
conclusions:
opinion concerning the
hereof and addressed to
as if such opinion were
in the second through
sentence of the fourth
and in reliance thereon,
reached the following
1. The Authority Bonds are not subject to the registration requirements of the
Securities Act of 1933, as amended, and the Indenture of Trust is exempt from qualification
pursuant to the Trust Indenture Act of 1939, as amended.
B -1
2. The Purchase Contract has been duly executed and delivered by the
Authority and the District and (assuming due authorization, execution and delivery by, and
validity against, the Underwriter) is a valid and binding agreement of the Authority and the
District. We call attention to the fact that the rights and obligations under the Purchase Contract
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 entities formed pursuant to Government Code Section 6500
and following in the State of California. We express no opinion with respect to any
indemnification, contribution, choice of law, choice of forum or waiver provisions contained
therein.
3. The statements contained in the Official Statement, dated [Purchase Date],
2014, with respect to the Authority Bonds, on the cover of the Official Statement and under the
captions "SUMMARY STATEMENT," "THE BONDS — GENERAL PROVISIONS,"
"SOURCES OF PAYMENT FOR THE BONDS," "LEGAL MATTERS — TAX MATTERS,"
"APPENDIX A — SUMMARY OF THE INDENTURE" and "APPENDIX B — SUMMARY OF
THE FISCAL AGENT AGREEMENT" insofar as such statements expressly summarize certain
provisions of the Indenture, the Fiscal Agent Agreement, the Authority Bonds and our opinion
concerning certain federal tax matters relating to the Authority Bonds, are accurate in all material
respects.
This letter is furnished by us as bond counsel to the Authority. No attorney - client
relationship has existed or exists between our firm and you in connection with the Authority
Bonds or by virtue of this letter. Our engagement with respect to the Authority Bonds has
terminated as of the date hereof, and we disclaim any obligation to update this letter. This letter
is delivered to you as Underwriter, is solely for your benefit as such Underwriter and is not to be
used, circulated, quoted or otherwise referred to or relied upon for any other purpose or by any
other person. This letter is not intended to be relied upon by owners of the Authority Bonds.
The foregoing represent our interpretation of applicable law to the facts as
described herein. We bring to your attention the fact that our conclusions are an expression of
professional judgment and are not a guarantee of a result.
Respectfully submitted,
B -2
LA111U11. %�
Opinion of City Attorney of the City of Lake Elsinore, as Special Counsel
to the Authority and the District and addressed to the Underwriter
$[Principal Amount]
Lake Elsinore Public Financing. Authority
Local Agency Revenue Bonds (Canyon Hills IA D), 2014 Series A
[Closing Date]
Lake Elsinore Public Financing Authority
130 South Main Street
Lake Elsinore, California 92530
City of Lake Elsinore
Community Facilities District No. 2003 -2
(Canyon Hills)
c/o City of Lake Elsinore
130 South Main Street
Lake Elsinore, California 92530
O'Connor & Company Securities, Inc.
250 Newport Center Drive, Suite 303
Newport Beach, California 92660
Ladies and Gentlemen:
We are acting as counsel for the Lake Elsinore Public Financing Authority (the
"Authority "), the City of Lake Elsinore Community Facilities District No. 2003 -2 (Canyon Hills)
(the "District ") and the City of Lake Elsinore (the "City ") and have acted as counsel to the
Authority, the District and the City in connection with the matters referred to herein. As such
counsel we have examined and are familiar with (i) documents relating to the existence,
organization and operation of the Authority, the District and the City provided to us by the
Authority, the District and the City, (ii) certifications by officers of the Authority, the District
and the City and (iii) all necessary documentation of the Authority, the District and the City
relating to the authorization, execution and delivery of the Indenture of Trust (the "Authority
Indenture "), dated as of [Closing Month] 1, 2014, by and between the Authority and Union
Bank, N.A. (the "Trustee "). Terms used herein and not otherwise defined have the respective
meanings set forth in the Purchase Contract, dated [Purchase Date], 2014, by and among
O'Connor & Company Securities, Inc., the Authority and the District.
Based upon the foregoing and such examination of law and such other
information, papers and documents as we deem necessary or advisable to enable us to render this
opinion, including the Constitution and laws of the State of California, together with the
C -1
resolutions, ordinances and public proceedings of the Authority and the District, we are of the
following opinions:
(1) The Authority is duly organized and existing under the laws of the
State of California.
(2) The District is duly organized and existing under the laws of the
State of California.
(3) The City is duly organized and existing under the laws of the State
of California.
(4) To the best of our knowledge, the Resolution of the Authority
authorizing the Indenture, the Purchase Contract and the Local Obligation Purchase
Contract were duly adopted at meetings of the Authority which were duly called and
held.
(5) To the best of our knowledge, the Resolutions of the City Council,
acting on behalf of the District, relating to formation of the District, the levy of the
Special Tax in the District and authorizing the Fiscal Agent Agreement and the Local
Obligation Purchase Contract were duly adopted at meetings of the City Council which
were duly called and held.
(6) To the best of our knowledge, the Ordinance of the City
authorizing the levy of the Special Tax in the District was duly read and adopted at a
meeting of the City Council which was duly called and held.
(7) To the best of our knowledge, the statements and information
contained in the Official Statement in the section entitled "LEGAL MATTERS," as of
the date thereof and as of the date hereof, does not contain an untrue statement of a
material fact or omit to state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were made,
not misleading.
(8) To the best of our knowledge, there is no action, suit, proceeding,
inquiry or investigation, at law or in equity, before or by any court, governmental agency,
public board or body, pending or threatened against the Authority, the District or the
City, wherein an unfavorable decision, ruling or finding would: (i) affect the creation,
organization, existence or powers of the Authority, the District or the City, or the title of
their respective members and officers to their respective offices; (ii) enjoin or restrain the
issuance, sale or delivery of the Authority Bonds or the District Bonds, the receipt of any
other moneys or property pledged or to be pledged under the Indenture, the Fiscal Agent
Agreement or the pledge thereof; (iii) in any way question or affect any of the rights,
powers, duties or obligations of the Authority under the Indenture or of the District under
the Fiscal Agent Agreement or with respect to the Special Taxes in the District or the
moneys and assets pledged or to be pledged to pay the principal of, premium, if any, or
interest on the Bonds or the District Bonds; (iv) in any way questioning or affecting any
authority for the issuance of the Bonds, the District Bonds or the validity or
C -2
entOrceab- -;%/ of the RnAA i or the DIStAICt Ronds; or (V) III ally, way questioning or
affecting the Purchase Contract or the Local Obligation Purchase Contract or the
transactions contemplated by the Purchase Contract, the Local Obligation Purchase
Contract, the Indenture or the Fiscal Agent Agreement.
(9) The execution and delivery of the Authority Documents and the
other instruments contemplated by any of such documents to which the Authority is a
party, and compliance with the provisions of each thereof, will not conflict with or
constitute a breach of or default under any applicable law or administrative rule or
regulation of the State of California, the United States or any department, division,
agency or instrumentality of either thereof, or any applicable court or administrative
decree or order or any loan agreement, note, resolution, indenture, contract, agreement or
other instrument to which the Authority is a party or is otherwise subject or bound in a
manner which would materially adversely affect the Authority's performance under the
Authority Documents.
(10) The execution and delivery of the District Documents and the other
instruments contemplated by any of such documents to which the District is a party, and
compliance with the provisions of each thereof, will not conflict with or constitute a
breach of or default under any applicable law or administrative rule or regulation of the
State of California, the United States or any department, division, agency or
instrumentality of either thereof, or any applicable court or administrative decree or order
or any loan agreement, note, resolution, indenture, contract, agreement or other
instrument to which the District is a party or is otherwise subject or bound in a manner
which would materially adversely affect the District's performance under the District
Documents.
(11) All approvals, consents, authorizations, elections and orders of or
filings or registrations with any governmental authority, board, agency or commission
having jurisdiction which would constitute a condition precedent to, or the absence of
which would materially adversely affect, the performance by the Authority and the
District of their obligations under the Authority Documents and the District Documents,
respectively, have been obtained and are in full force and effect.
C -3
This opinion is rendered only with respect to the laws of the State of California
and the United States and is addressed only to the Authority, the District, the City and O'Connor
& Company Securities, Inc. This letter is furnished by us as counsel to the Authority, the
District and the City. Other than the Authority, the District and the City, no attorney - client
relationship has existed or exists between us and O'Connor & Company Securities, Inc. in
connection with the Bonds or by virtue of this letter. Our engagement with respect to the Bonds
has terminated as of the date hereof, and we disclaim any obligation to update this letter. This
letter is delivered to you, is solely for your benefit and is not to be used, circulated, quoted or
otherwise referred to or relied upon for any other purpose or by any other person. This letter is
not intended to, and may not, be relied upon by owners of the Bonds. No other person is entitled
to rely on this opinion, nor may the addressees rely on it, in connection with any transactions
other than those described herein.
Respectfully submitted,
C -4
Exhibit D
Opinion of Fulbright & Jaworski, LLP, a Member of Norton Rose Fulbright, Disclosure Counsel
Addressed to the Issuer, the District and the Underwriter
$[Principal Amount]
Lake Elsinore Public Financing Authority
Local Agency Revenue Bonds (Canyon Hills IA D), 2014 Series A
[Closing Date]
Lake Elsinore Public Financing Authority
130 South Main Street
Lake Elsinore, California 92530
City of Lake Elsinore
Community Facilities District No. 2003 -2
(Canyon Hills)
c/o City of Lake Elsinore
130 South Main Street
Lake Elsinore; California 92530
O'Connor & Company Securities, Inc.
250 Newport Center Drive, Suite 303
Newport Beach, California 92660
Ladies and Gentlemen:
We have acted as Disclosure Counsel to the Lake Elsinore Public Financing
Authority (the "Issuer ") with respect to the issuance of the above captioned bonds (the "Bonds ").
The Bonds are being issued pursuant to the provisions of the Constitution and the laws of the
State of California, including the provisions of the Marks -Roos Local Bond Pooling Act of 1985,
constituting Article 4 of Chapter 5 (commencing with Section 6584) of Division 7 of Title 1 of
the Government Code of the State of California, as in existence on the Closing Date or as
thereafter amended from time to time (the ".Bond Law "). The Bonds shall be issued and secured
pursuant to an Indenture of Trust, dated as of [Closing Month] 1, 2014 (the "Indenture "), by and
between the Authority and Union Bank, N.A., as trustee (the "Trustee "), authorizing the issuance
of the Bonds. The Bonds are more fully described in the final Official Statement of the Issuer,
dated [Purchase Date], 2014 (the "Official Statement "). Capitalized terms not otherwise defined
herein shall have the meaning ascribed thereto in the Official Statement.
In rendering this opinion, we have reviewed such records, documents, certificates
and opinions, and made such other investigations of law and fact as we have deemed necessary
or appropriate.
D -1
This opinion is limited to matters governed by the federal securities law of the
United States, and we assume no responsibility with respect to the applicability or effect of the
laws of any other jurisdiction.
In our capacity as Disclosure Counsel, we have rendered certain legal advice and
assistance to you in connection with the preparation of the Official Statement. Rendering such
legal advice and assistance involved, among other things, discussions and inquiries concerning
various legal matters, review of certain records, documents and proceedings, and participation in
conferences with, among others, your representatives and representatives of Bond Counsel, the
Financing Consultant, the Authority, the City, the District, and other consultants, at which
conferences the contents of the Official Statement and related matters were discussed. On the
basis of the information' made available to us in the course of the foregoing (but without having
undertaken to determine or verify independently, or assuming any responsibility for, the
accuracy, completeness or fairness of any of the statements contained in the Official Statement),
no facts have come to the attention of the personnel in our firm directly involved in rendering
legal advice and assistance in connection with the preparation of the Official Statement which
caused us to believe that the Official Statement as of its date (excluding therefrom financial,
engineering and statistical data; forecasts, projections, estimates, assumptions and expressions of
opinions; the treatment of the Bonds or the interest, discount or premium related thereto for tax
purposes under the law of any jurisdiction; and the statements contained in the Official Statement
under the caption "LEGAL MATTERS — TAX MATTERS," and in the Appendices thereto, as to
all of which we express no view) contained any untrue statement of a material fact or omitted to
state a material fact necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading.
During the period from the date of the Official Statement to the date of this
opinion, except for our review of the certificates and opinions regarding the Official Statement
delivered on the date hereof, we have not undertaken any procedures or taken any actions which
were intended or likely to elicit information concerning the accuracy, completeness or fairness of
any of the statements contained in the Official Statement.
We are furnishing this opinion to you, as Disclosure Counsel to the Issuer, solely
for your benefit. This opinion is rendered in connection with the transaction described herein,
and may not be relied upon by you for any other purpose. This opinion shall not extend to, and
may not be used, circulated, quoted, referred to, or relied upon by, any other person, firm,
corporation or other entity without our prior written consent. Our engagement with respect to
this matter terminates upon the delivery of this opinion to you at the time of the closing relating
to the Bonds, and we have no obligation to update this opinion.
Very truly yours,
D -2
NEW ISSUE -BOOK ENTRY ONLY NOT RATED
(see "CONCLUDING INFORMATION - NO RATINGS ON THE BONDS" herein)
In the opinion of Fulbright & Jaworski LLP, Los Angeles, California, a member of Norton Rose Fulbright, Bond Counsel, under existing
law, and assuming compliance with the tax covenants described herein, interest on the Bonds is excluded pursuant to section 103(a) of
the Internal Revenue Code of 1986 from the gross income of the owners thereof for federal income tax purposes and is not an item of tax
preference for purposes of the federal alternative minimum tax. It is also the opinion of Bond Counsel that under existing law interest on
the Bonds is exempt from personal income taxes of the State of California. See "LEGAL MATTERS -Tax Matters" herein.
COUNTY OF RIVERSIDE STATE OF CALIFORNIA
$7,685,000*
LAKE ELSINORE PUBLIC FINANCING
AUTHORITY
LOCAL AGENCY REVENUE BONDS
(CANYON HILLS IA D),
2014 SERIES A
Dated: Date of Delivery
Due: September 1, as shown below
This cover page contains certain information for quick reference only. It is not a summary of the issue. Potential
investors must read the entire Official Statement to obtain information essential to the making of an informed
investment decision. Investment in the Bonds (as defined herein) involves risks. See "BOND OWNERS' RISKS"
herein for a discussion of special risk factors that should be considered in evaluating the investment quality of the
Bonds.
Interest on the Bonds is payable semiannually on March 1 and September 1 of each year, commencing September 1, 2014,
until maturity or earlier redemption thereof (see "THE BONDS - GENERAL PROVISIONS" and "THE BONDS -
REDEMPTION" herein).
The information contained within this Official Statement was prepared under the direction
of the Lake Elsinore Public Financing Authority (the "Authority ") by the following firm serving as Financing Consultant to the Authority
ROD GUNN ASSOCIATES, INC.
MATURITY SCHEDULE
(see inside cover)
Proceeds from the Bonds will be used, in part, to acquire on the delivery date of the Bonds, the 2014 District Bonds (as
defined herein) to be issued under the Mello -Roos Community Facilities Act of 1982, as amended (Section 53311 et seq. of
the Government Code of the State of California). The Bonds are special obligations of the Authority payable solely from
and secured by revenues from repayment of the 2014 District Bonds, the Reserve Account and the Cash Flow Management
Fund, as defined herein, held by the Trustee and under certain circumstances by any available surplus revenues with respect
to other series of bonds issued by the Authority as described herein. Repayment of the 2014 District Bonds will be from
Special Taxes (as defined herein) to be levied against taxable real property within Improvement Area D of the City of Lake
Elsinore Community Facilities District No. 2003 -2 (Canyon Hills), as described herein (see "SOURCES OF PAYMENT FOR
THE BONDS" and "BOND OWNERS' RISKS" herein).
It is anticipated that the Bonds, in book -entry form, will be available for delivery through the facilities of The Depository
Trust Company on or about January 30, 2014 (see "APPENDIX G - BOOK -ENTRY SYSTEM ").
The date of the Official Statement is
* Preliminary, subject to change.
O'CONNOR & COMPANY SECURITIES
$79685,000X
LAKE ELSINORE r �s LtC
FINANCING AUTHORITY
LOCAL AGENCY REVENUE BONDS
Maturity Date
September 1
2015
2016
2017
2018
2019
2020
2021
2022
2023
(CANYON HILLS IA D),
2014 SERIES A
MATURITY SCHEDULE
(Base CUSIP *:
$410,000 ** Serial Bonds
Principal Interest
Amount ** Rate Yield
$685,000 ** % Term Bond due September 1, 2028, Price
$1,180,000 ** % Term Bond due September 1, 2033, Price
$5,4109000 ** % Term Bond due September 1, 2044, Price
CUSIP
Suffix*
% CUSIP Suffix*
% CUSIP Suffix*
% CUSIP Suffix*
* CUSIP® Copyright 2014. American Bankers' Association. CUSIP® data herein is provided by Standard & Poor's CUSIP
Service Bureau, a Division of The McGraw -Hill Companies, Inc. This data is not intended to create a database and does not
serve in any way as a substitute for the CUSIP Service Bureau. CUSIPC numbers are provided for convenience of reference
only. The Authority and the Underwriter do not guarantee the accuracy of the CUSIP® data herein.
* * Preliminary, subject to change.
LAKE ELSINORE PUBLIC FINANCING AUTHORITY
LAKE ELSINORE, CALIFORNIA
AUTHORITY GOVERNING BOARD
Steve Manos, Chairperson
Brian Tisdale, Nce Chairperson
Daryl Hickman, Board Member
Robert E. Magee, Board Member
Natasha Johnson, Board Member
CITY COUNCIL
Robert E. Magee, Mayor
Natasha Johnson, Mayor Pro Tem
Daryl Hickman, Council Member
Brian Tisdale, Council Member
Steve Manos, Council Member
CITY AND AUTHORITY STAFF
Grant Yates, City Manager /Authority Executive Director
Barbara Leibold, Esq., City Attorney /Authority Counsel
Vacant, Director ofAdministrative Services /Authority Treasurer
PROFESSIONAL SERVICES
Bond Counsel and Disclosure Counsel
Fulbright & Jaworski LLP
Los Angeles, California,
a member of Norton Rose Fulbright
City Attorney
Leibold, McClendon & Mann, P.C.
Laguna Hills, California
Special Tax Consultant
Harris & Associates
Irvine, California
Financing Consultant
Rod Gunn Associates, Inc.,
a California corporation
Appraiser
Harris Realty Appraisal
Newport Beach, California
Trustee and Fiscal Agent
Union Bank, N.A.
Los Angeles, California
Underwriter
O'Connor & Company Securities, Inc.
Costa Mesa, California
Underwriter's Counsel
McFarlin & Anderson LLP
Laguna Hills, California
FOR ADDITIONAL INFORMATION
City of Lake Elsinore (951) 674 -3124
O'Connor & Company Securities, Inc. (949) 706 -9320
G ENERAL rNMRl`V� A. '1!T. -BOUT THE.. 0-IF F& ICiAL S91FAT 1E, MJE%NT
Use of Official Statement. This Official Statement is submitted in connection with the offer and sale of the Bonds
referred to herein and may not be reproduced or used, in whole or in part, for any other purpose. This Official
Statement is not to be construed as a contract with the purchasers of the Bonds.
Estimates and Forecasts. When used in this Official Statement and in any continuing disclosure by the District, in
any press release and in any oral statement made with the approval of an authorized officer of the City, the words or
phrases "will likely result," "are expected to," "will continue," "is anticipated," "estimate," "project," "forecast,"
"expect," "intend," and similar expressions identify "forward- looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995, Section 21E of the United States Securities Exchange Act of 1934, as
amended, and Section 27A of the United States Securities Act of 1933, as amended. Such statements are subject to
risks and uncertainties that could cause actual results to differ materially from those contemplated in such forward -
looking statements. Any forecast is subject to such uncertainties. Inevitably, some assumptions used to develop the
forecasts will not be realized and unanticipated events and circumstances may occur. Therefore, there are likely to
be differences between forecasts and actual results and those differences may be material. The information and
expressions of opinion herein are subject to change without notice, and neither the delivery of this Official
Statement nor any sale made hereunder shall, under any circumstances, give rise to any implication that there has
been no change in the affairs of the District or any other entity described or referenced herein since the date hereof.
Neither the Authority nor the District plan to issue any updates or revisions to the forward- looking statements set
forth in this Official Statement.
Limited Offering. No dealer, broker, salesperson or other person has been authorized by the Authority or the
District to give any information or to make any representations in connection with the offer or sale of the Bonds
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 Authority, the District or the Underwriter. This Official Statement does not
constitute an offer to sell or the solicitation of an offer to buy nor shall there be any sale of the Bonds by a person in
any jurisdiction in which it is unlawful for such person to make such an offer, solicitation or sale.
Involvement of Underwriter. The Underwriter has submitted the following statement for inclusion in this Official
Statement: The Underwriter has reviewed the information in this Official Statement in accordance with, and as a part
of, its responsibilities to investors under the federal securities laws as applied to the facts and circumstances of this
transaction, but the Underwriter does not guarantee the accuracy or completeness of such information. The
information and expressions of opinions 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, the District or any other entity described or referenced herein since the date
hereof. All summaries of the documents referred to in this Official Statement are made subject to the provisions of
such documents and do not purport to be complete statements of any or all of such provisions.
Stabilization of Prices. In connection with this offering, the Underwriter may over allot or effect transactions which
stabilize or maintain the market price of the Bonds at a level above that which might otherwise prevail in the open
market. Such stabilizing, if commenced, may be discontinued at any time. The Underwriter may offer and sell the
Bonds to certain dealers and others at prices lower than the public offering prices set forth on the inside cover page
hereof and said public offering prices may be changed from time to time by the Underwriter.
THE BONDS HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, IN
RELIANCE UPON AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS CONTAINED IN SUCH
ACT. THE BONDS HAVE NOT BEEN REGISTERED OR QUALIFIED UNDER THE SECURITIES LAWS OF
ANY STATE.
i
TABLE OF CONTENTS
VicinityMap ............................................... I......... i_vv -i
General Location Map ........... ..........................0000. W3_1.
SUMMARY STATEMENT ............................. .......... 1
THE AUTHORITY .................... ............................... l
Authority Formation; Members ... ..............................1
Bond Authorization and Issuance... ........................... 2
Repayment of the Bonds .............. ..............................2
Purchase of Local Obligations ..... ..............................2
Financing Purpose of the Bonds .. ..............................3
THE DISTRICT ........................... ..............................3
Authorization ............................... ..............................3
Formation.................................... ............................... 3
General Location and Description .............................4
IMPROVEMENT AREA D ........ ............................... 4
Description.................................. ............................... 4
Formation...................... I.,.......... I ....... 0.0................11... 4
Bond Authorization ...................... ..............................4
Canyon Hills Specific Plan Map'. ...... I., ...... I'll., ..... 1.5.6
Repayment of the 2014 District Bonds ....................67
Financing Purpose of the 2014 District Bonds ........67
THE.............. .............................67
General........................................ .............................67
..
Special Tax Requirement ............ ...........................7.9
Apportionment of the Special Tax ...........................79
Assigned Annual Special Tax ..... .............................89
Projection of Assigned Annual Special Taxes for
BondSizing...., .................000... ............................910
TaxBurden........... I ..................... ............................910
Lien of the Special Tax 0000 ........... ...........................1.01 i
Special Tax Collections ......... ............................... 1112
DEVELOPMENT WITHIN IMPROVEMENT
AREAD .................................. ..........................11 -12
Property Ownership,., ............ M..6404 ................
Description of Development ..... ...........................1213
Value -To -Lien Ratios ..... .. ................. ... ....... . ........ 131-5
REDEMPTION OF THE BONDS ......................1447
Optional Redemption ................ ...........................1417
Special Mandatory Redemption ... ........................15.1 -8
Mandatory Sinking Payment Redemption ...........1518
THE BONDS to GENERAL PROVISIONS. I ....... 154-9
Denominations .......111.1 .................. .......................154 -8
Registration, Transfer and Exchange ......... ..... ..... 154 -8
Payment............... I...................... ................ ......... 154 -8
Notice..................................... ..............................1 6-1-9
LEGALMATTERS .................... . ......................... 1,619
PROFESSIONAL SERVICES ......... . .......... . ..... ....1,6,1-9
CONTINUING DISCLOSURE.. .........................1619
AVAILABILITY OF LEGAL DOCUMENTS ....1720
Aerial Photo of Improvement Area D of the
District......... ............................... ......................18.2..1..
ii
SELECTED FACTS .................. ...........................1922
ESTIMATED SOURCES AND USES OF
FUNDS.. ............................... 00...........0.............0... 2225
THEBONDS ............................. ..........................2225
THE 2014 DISTRICT BONDS . ..........................2326
DEBT SERVICE COVERAGE ...........................2427
DEBT SERVICE COVERAGE ON THE
AUTHORITY BONDS .......... ...........................2427
DEBT SERVICE COVERAGE ON THE 2014
DISTRICT BONDS ............... ........................... 2528
SCHEDULED DEBT SERVICE SCHEDULES 2831-
SCHEDULED DEBT SERVICE ON THE
BONDS.............................. ............................... 2831-
SCHEDULED DEBT SERVICE ON THE 2014
DISTRICT BONDS ........... ............................... 3033
THEBONDS .............................. ...........................3235
GENERAL PROVISIONS ........ ..........................3233
Repayment of the Bonds ............ ..........................3235
Transfer or Exchange of Bonds . ..........................3235
Bonds Mutilated, Lost, Destroyed or Stolen ........3235
REDEMPTION .....I ................... ..........................3336
Optional Redemption ................. ................... ...... .33 - 6
Special Mandatory Redemption ..........................3336
Mandatory Sinking Payment Redemption ........... 3336
Open Market Purchase of Bonds ......................... 3437
Notice of Redemption; Rescission .......................3437
Effect of Redemption ... .............. ..........................35 -3-9
Partial Redemption ................... ........................... 353-9
INVESTMENT OF FUNDS ....... ... ...................... 353 -8
ADDITIONAL OBLIGATIONS ......................... 3538
TheAuthority ........................ ............................... ..............
TheDistrict ............. I................. ...........................3538
SOURCES OF PAYMENT FOR THE BONDS. 3844
REPAYMENT OF THE BONDS ........................ 3841 -
General................................. ............................... 384-1-
Application of Revenues; Flow of Funds ............ 3,841
Reserve Account ....................... ...........................3942
Cash Flow Management Fund ... ..........................394 -2
Redemption Fund .......I .............. ..........................4043
REPAYMENT OF THE 2014 DISTRICT
BONDS.............................. ............................... 4043
General....... ............................... ..........................4043
Special Taxes .......................... . ............................ 4,1,44
Application of Special Taxes; Flow of Funds ......41144
Delinquency Management Fund ..........................4245
Redemption Fund ..................... ...........................4245
Covenant for Superior Court Foreclosure ............ 4346
BOND OWNERS' RISKS ......... ...........................4548
THEBONDS
...................6......... ..........................4548
No Liability of the Authority to the Bond
...........
Owners..., .........................................
4548
4 ................
Loss of Tax Exemption ............. ...........................4548
District Map ........................... ...........................6874
IRSAudits .. ............................... ...........................4548
APPENDIX C.
APPRAISAL REPORT ..........0
Early Bond Redemption ........4 .. ...........................4548
DELINQUENCIES ............... ...............................
6_9.75
Secondary Market ....... pop ... ...... .. . ..........................
4649
Notification.............................
THE 2014 DISTRICT BONDS .. ..........................4.649
..........................6975
Special Tax Collections., .... ....... .....................
DISCLOSURE
Risk Factors Relating to Real Estate Market
E -1
Conditions..........................
4649
...............................
Risk Factors Relating to Land Values ..................4649
COUNSEL OPINION ........... ...............................
Requirement ... I .......................... ...........................
Risk Factors Relating to the Levying and
BOOK -ENTRY SYSTEM.....
Collection of the Special Taxes .........................4854
City Historical Foreclosure Experience ...............
Risk Factors Relating to Tax Burden...,,..,.,,,, ...
Procedure.. ...... "I .......................
Risk Factors Relating to Governmental Rules,
1..54-57-
Initiatives, Etc, . 6 & 1 4 pop i 1 6 4 6 1 . . . .
5965
4 . . . . . . . . . . . . . . . 4 . . . @a*, . .
Risk Factors Relating to Limitations of the
. . . .
Bonds and the District ............ ...........................5965
THE AUTHORITY .................... ..........................6167
AUTHORITY ORGANIZATION ....................... 6167
CITY ORGANIZATION .......... ...........................6167
RATE AND METHOD OF
APPORTIONMENT OF THE SPECTAI
TAX...................................... ............................... 6268
popo
DETERMINATION OF THE ANNUAL w
SPECIAL TAX ....................... ...........................6268
SPECIAL TAX REQUIREMENT .......................6268
ASSIGNMENT TO LAND USE
CATEGORIES ........................ ..........................6369
MAXIMUM SPECIAL TAX,',, .... 1,44 ........... 4, 6369
Assigned Annual Special Tax ... ...........................6369
Backup Special Tax .................. ...........................6470
METHOD OF APPORTIONMENT ..... .............. .6571 -
DISTRICT ADMINISTRATION ........................6773
SUMMARY OF THE
ADMINISTRATION GENERAL ........................6773
A -1
LEVY OF THE SPECIAL TAX ..........................6773
APPENDIX B.
City Of Lake Elsinore Communities Facilities
District Map ........................... ...........................6874
B -1
APPENDIX C.
APPRAISAL REPORT ..........0
-1
DELINQUENCIES ............... ...............................
6_9.75
Identification of Delinquencies; Initial
APPORTIONMENT ............... ............................D -1
Notification.............................
FORM OF CONTINUING
..........................6975
Special Tax Collections., .... ....... .....................
DISCLOSURE
......7076
Delinquency Management Fund ..........................7076
E -1
Cash Flow Management Fund .. ...........................7278
FORM OF BOND
FORECLOSURE ACTIONS .... ...........................7278
COUNSEL OPINION ........... ...............................
Requirement ... I .......................... ...........................
7278
BOOK -ENTRY SYSTEM.....
G -1
City Historical Foreclosure Experience ...............
73-.79
Procedure.. ...... "I .......................
7480
...........................
LEGAL MATTERS .................... ..........................7682
ENFORCEABILITY OF REMEDIES ................7682
APPROVAL OF LEGAL PROCEEDINGS ......... 7G82
iii
TAXMATTERS ....................... ........................... 7682
ABSENCE OF LITIGATION ... ...........................7884
CONCLUDING INFORMATION ......................7985
NO RATINGS ON THE BONDS ........................7985
UNDERWRITING ................... ........................... 7985
EXPERTS..................... ........ ......... opt . ...... I........... 7985
THE FINANCING CONSULTANT ....................7985
-.
FORWARD- LOOKING STATEMENTS ............ 7985
..........
ADDITIONAL INFORMATION,, ............ I ......... 8086
__-
REFERENCES..................... ............................... 8086
EXECUTION....................... ............................... 8086
APPENDIX A.
SUMMARY OF THE
INDENTURE
A -1
APPENDIX B.
SUMMARY OF THE
FISCAL AGENT AGREEMENT .......................
B -1
APPENDIX C.
APPRAISAL REPORT ..........0
-1
APPENDIX D.
RATE AND METHOD OF
APPORTIONMENT ............... ............................D -1
APPENDIX E.
FORM OF CONTINUING
DISCLOSURE
AGREEMENT ..........................
E -1
APPENDIX F.
FORM OF BOND
COUNSEL OPINION ........... ...............................
F -1
APPENDIX G.
BOOK -ENTRY SYSTEM.....
G -1
Vicinity Map
(insert map # 1)
Iv
INSERT MAP 2
General Location Map
u
OFFICIAL STATEMENT
$796859000X
LAKE ELSINORE PUBLIC FINANCING AUTHORITY
LOCAL AGENCY REVENUE BONDS
(CANYON HILLS IA D),
2014 SERIES A
This Official Statement, which includes the cover page and appendices (the "Official Statement "), is
provided to furnish certain information concerning the sale of the Lake Elsinore Public Financing
Authority Local Agency Revenue Bonds (Canyon Hills IA D), 2014 Series A (the "Bonds "), in the
aggregate principal amount of $7,685,000.*
SUMMARY STATEMENT
This Summary Statement contains only a brief description of this issue and does not purport to be
complete. This Summary Statement is subject in all respects to more complete information in the entire
Official Statement including the appendices and the offering of the Bonds to potential investors is made
only by means of the entire Official Statement and the documents summarized herein. Investment in the
Bonds involves risks. Potential investors must read the entire Official Statement to obtain information
essential to the making of an informed investment decision with respect to the Bonds.
THE AUTHORITY
Authority Formation; Members
The Lake Elsinore Public Financing Authority (the "Authority ") is a joint exercise of powers authority
organized and existing under and by virtue of the Joint Exercise of Powers Act, constituting Articles 1
through 4 (commencing with Section 6500) of Chapter 5, Division 7, Title 1 of the Government Code of
the State (the "Joint Powers Act "). The City of Lake Elsinore (the "City "), pursuant to Resolution No.
89 -32, adopted on July 25, 1989, and the Lake Elsinore Redevelopment Agency (the "Agency "), pursuant
to Resolution No. 89 -4, adopted on July 25, 1989, formed the Authority by the execution of a joint
exercise of powers agreement (the "Joint Powers Agreement ") (see "THE AUTHORITY" herein).
On June 28, 2011, the Governor of the State of California (the "State ") signed ABXI 26 (the "Dissolution
Act ") and on December 29, 2011, the State Supreme Court upheld the Dissolution Act which dissolved
all redevelopment agencies in the State. The State Supreme Court decision also extended by 4 months all
deadlines in the Dissolution Act occurring prior to May 2012. Therefore, based on the State Supreme
Court's ruling and the Dissolution Act, all redevelopment agencies were dissolved as of February 1, 2012.
The Dissolution Act creates successor agencies to continue to satisfy enforceable obligations of each
former redevelopment agency. Pursuant to the Dissolution Act, the successor agency (the "Successor
Agency ") is the sponsoring community of the redevelopment agency unless it elects not to serve in that
capacity. In the case of the former Lake Elsinore Redevelopment Agency, the City elected to be the
Successor Agency. Under the Dissolution Act, agreements, contracts, or arrangements between a city or
county, or city and county that created a redevelopment agency and a redevelopment agency are invalid.
However, the Dissolution Act provides that notwithstanding the foregoing, certain of such agreements are
not invalid, including a joint exercise of powers agreement in which a redevelopment agency is a member
of the joint powers authority.
* Preliminary, subject to change.
1
Bond Authorization and Issuance
Pursuant to the Joint Powers Act, the Authority is authorized, among other things, to issue revenue bonds
to provide funds to acquire local obligations issued to finance or refinance public capital improvements,
such revenue bonds to be repaid from the repayment of the local obligations so acquired by the Authority.
The Bonds are being issued pursuant to the Indenture, as defined herein, approved by the Authority
pursuant to the Authority Resolution adopted on December 10, 2013 (the "Authority Resolution "). It is
anticipated that the Bonds, in book -entry form, will be available for delivery through the facilities of The
Depository Trust Company on or about January 30, 2014 (see "APPENDIX G - BOOK -ENTRY SYSTEM ").
Repayment of the Bonds
The Bonds are secured under an Indenture of Trust, dated as of January 1, 2014 (the "Indenture "),
between the Authority and Union Bank, N.A., Los Angeles, California, as trustee (the "Trustee ") (see
"APPENDIX A - SUMMARY OF TIIE INDENTURE").
The Bonds are special obligations of the Authority payable solely from and secured by the proceeds of:
1. Payment of the local obligations to be acquired by the Authority with the proceeds of the Bonds;
2. The Reserve Account (as defined in the Indenture) established with the proceeds of the Bonds and
held pursuant to the Indenture (see "SOURCES OF PAYMENT FOR THE BONDS - REPAYMENT OF THE
BONDS - Reserve Account" herein);
3. Any moneys that may be available from the Cash Flow Management Fund established and held
pursuant to the Indenture ( "SOURCES OF PAYMENT FOR THi BON?�S _ RFPf1Vj�iENT (1F T11 E BONDS _
Cash Flow Management Fund" herein); and
4. Any investment earnings with respect to such moneys (see "THE BONDS - INVESTMENT OF
FUNDS" herein)
(collectively, the "Revenues ").
In addition, the Bonds may be payable from any available surplus revenues with respect to other series of
local agency revenue bonds to the extent such surplus revenues are available to replenish the Reserve
Account to its requirement and to fund the Cash Flow Management Fund to its requirement (see
"SOURCES OF PAYMENT FOR THE BONDS - REPAYMENT OF THE BONDS" and "BOND OWNERS' RISKS"
herein).
The Bonds are special obligations of the Authority. T he Bonds do not constitute a debt or liability
of the City, the State or of any political subdivision thereof, other than the Authority. The Authority
shall only be obligated to pay the principal of the Bonds, or the interest thereon, from the funds
described herein, and neither the faith and credit nor the taxing power of the District (except to the
limited extent described herein), the City, the State or any of its political subdivisions is pledged to
the payment of the principal of or the interest on the Bonds. The Authority has no taxing power.
Purchase of Local Obligations
On the delivery date of the Bonds, the Authority will acquire the City of Lake Elsinore Community
Facilities District No. 2003 -2 (Canyon Hills) Special Tax Bonds, 2014 Series A (Improvement Area D)
(the "2014 District Bonds ") to be issued by the City of Lake Elsinore Community Facilities District No.
2003 -2 (Canyon Hills) (the "District "), as described herein, for the benefit of Improvement Area D
( "Improvement Area D ") of the District. The 2014 District Bonds are secured and payable from Special
Taxes levied within Improvement Area D (the "Special Taxes ") as described herein (see "SOURCES OF
PAYMENT FOR THE BONDS" herein).
The Authority has issued other series of bonds. Each series is separately secured under the terms of the
indenture for such other series of bonds. The Authority is not authorized to issue any additional bonds
under the Indenture secured by repayment of the 2014 District Bonds except for refunding purposes (see
"THE BONDS - ADDITIONAL, OBLIGATIONS - The Authority" herein). However, the District is authorized
2
to issue additional bonds (the "Additional District Bonds ") secured by the Special Taxes on a parity with
the 2014 District Bonds, and the Authority may issue local obligation revenue bonds to acquire the
Additional District Bonds of the District. When and if issued, the Bonds and such additional local
obligation revenue bonds of the Authority would be secured by separate bonds of the District which in
turn will be secured by the same Special Taxes on a parity with each other. Collectively, the 2014 District
Bonds and any Additional District Bonds are referred to herein as the "District Bonds" (see "THE BONDS -
ADDITIONAL OBLIGATIONS - The District — Additional District Bonds" herein).
Financing Purpose of the Bonds
The Bonds are being issued for the following purposes:
1. To provide funds to acquire the 2014 District Bonds on the date of delivery of the Bonds;
2. To fund the Reserve Account. The amount of Bond proceeds deposited into the Reserve Account
will be $704,878.95* (an amount equal to the Reserve Requirement) (see "SOURCES OF PAYMENT
FOR THE BONDS - REPAYMENT OF THE BONDS - Reserve Account" herein); and
3. To pay the expenses of the Authority in connection with the issuance of the Bonds.
See "ESTIMATED SOURCES AND USES OF FUNDS — THE BONDS" herein.
There will not be an initial deposit into the Cash Flow Management Fund. The Cash Flow Management
Fund is expected to be funded during the period of time that interest is funded on the 2014 District Bonds
(see "SOURCES OF PAYMENT FOR THE BONDS — REPAYMENT OF THE BONDS - Cash Flow Management
Fund" herein).
THE DISTRICT
Authorization
The Mello -Roos Community Facilities Act of 1982, as amended, constituting Section 53311 et seq. of the
Government Code of the State of California (the "Act "), was enacted by the California Legislature to
provide an alternative method of financing certain public facilities, improvements and services. The Act
authorizes local governmental entities to establish community facilities districts as legally constituted
governmental entities within defined boundaries, with the legislative body of the local applicable
governmental entity acting on behalf of such district. Subject to approval by at least a two - thirds vote of
the votes cast by qualified electors within such district and compliance with the provisions of the Act, the
legislative body may issue bonds for such community facilities district established by it and may levy and
collect a special tax within such district to repay such bonds.
Pursuant to the Act, the City may designate a portion or portions of a district as one or more improvement
areas. After the designation of an improvement area, all proceedings for purposes of a bond election and
for the purpose of levying special taxes for payment of the bonds shall apply only to such improvement
area.
Formation
On January 13, 2004, the City formed the District by the adoption of Resolution No. 2004 -6. The District
consists of four improvement areas (Improvement Areas A through D) (each an "Improvement Area" and
collectively, the "Improvement Areas "). Each Improvement Area has a separate rate and method of
apportionment of special tax (the "Rate and Method of Apportionment ") approved by the City and the
qualified electors within each respective Improvement Area. On January 13, 2004, the qualified electors
within each improvement area voted in favor of the incurrence of bonded indebtedness and each
improvement area has a separate bond authorization.
* Preliminary, subject to change.
3
General Location and Description
The District is comprised of a portion of Canyon Hills, a planned residential community in the western
portion of Riverside County (the "County ") covering approximately 2,040 acres. Canyon Hills is located
in the southeast portion of the City to the south of the City of Canyon Lake. Improvement Area D is
located south and southeast of Canyon Hills Road. The intersection of Canyon Hills Road and Railroad
Canyon Road is approximately 2 -1/2 miles east of the Corona Freeway (1 -15) (see "General Location
Map" herein).
The District includes the development of 49 planning areas containing a total of approximately 2,040
gross acres and approximately 1,012 net acres (see "Canyon Hills Specific Plan Map" herein). The areas
designated for single family dwelling units contain approximately 770 assessed acres. The area
designated for multi- family dwelling units including detached condominiums contains approximately 93
acres. The area designated for commercial uses consists of approximately 31 acres.
IMPROVEMENT AREA D
Description
Improvement Area D includes Planning Areas 25, 28, 31, 32 and 37 of the Canyon Hills Specific Plan
(see "Canyon Hills Specific Plan Map" next page). Development activities are currently occurring in
Planning Areas 25, 28, 32 and 37.
Formation
Improvement Area D was designated as an Improvement Area by the adoption of Resolution No. 2004 -6
on January 13, 2004. The qualified electors within Improvement Area D approved on January 13, 2004,
the levy of the Special Tax in accordance with the Rate and Method of Apportionment and approved
issuance of bonds by the District for the benefit of Improvement Area D (see "RATE AND METHOD OF
APPORTIONMENT OF THE SPECIAL TAX" herein and "APPENDIX D - RATE AND METHOD OF
APPORTIONMENT").
Bond Authorization
The bond authorization amount for Improvement Area D approved by the qualified electors on January
13, 2004, is $24,000,000. On the date of delivery of the Bonds, the District will issue the 2014 District
Bonds for the benefit of Improvement Area D in the principal amount of $7,685,000.*
The City, as the legislative body of the District, pursuant to a resolution adopted on December 10, 2013
(the "District Resolution "), approved the issuance of the 2014 District Bonds and the sale of 2014 District
Bonds to the Authority. The Board of Directors of the Authority, pursuant to the Authority Resolution,
authorized the Authority to acquire the 2014 District Bonds.
After issuance of the 2014 District Bonds, the District may issue one or more additional series of
Additional District Bonds (not to exceed $16,315,000 *) secured by Special Taxes levied in Improvement
Area D (see "THE BONDS - ADDITIONAL OBLIGATIONS - The District — Additional District Bonds" herein).
The District currently expects to issue Additional District Bonds to finance additional facilities and capital
fees for the benefit of Improvement Area D authorized to be financed by the District with the
development of additional planning areas in Improvement Area D (see "IMPROVEMENT AREA D —
Development within Improvement Area D" below).
* Preliminary, subject to change.
E
Canyon Hills Specific Plan Map
(Insert Map 3)
Repayment of (lie 2014 District Bonds
The 2014 District Bonds are secured under the Fiscal Agent Agreement, dated as of January 1, 2014 (the
"Fiscal Agent Agreement "), between the District and Union Bank, N.A., Los Angeles, California, as
Fiscal Agent (the "Fiscal Agent ") (see "APPENDIX B - SUMMARY OF THE FISCAL AGENT AGREEMENT ").
The 2014 District Bonds are special obligations of the District payable solely from and secured by the
proceeds of
1. The Special Taxes on parcels of land within Improvement Area D pledged to the repayment of
the 2014 District Bonds in an amount sufficient to pay debt service on the 2014 District Bonds
including an allowance for delinquencies, and the administrative expenses related to
Improvement Area D, subject to the Maximum Special Tax, as defined herein, that may be levied
on parcels within Improvement Area D, as set forth in the Rate and Method of Apportionment;
2. Any moneys that may be available from the Delinquency Management Fund established and
held pursuant to the Fiscal Agent Agreement ( "SOURCES OF PAYMENT FOR THE BONDS —
REPAYMENT OF THE 2014 DISTRICT BONDS — Delinquency Management Fund" herein); and
3. Any investment earnings with respect to such moneys (see "THE BONDS — INVESTMENT OF
FUNDS" herein)
Although the Special Taxes will constitute a lien on parcels of real property within Improvement Area D,
they do not constitute a personal indebtedness of the owner(s) of real property within Improvement Area
D.
The 2014 District Bonds are special obligations of the District. The 2014 District Bonds do not
constitute a debt or liability of the City, the State or of any political subdivision thereof, other than
the District. The District shall only be obligated to pay the principal of the 2014 District Bonds, or
the interest thereon, from the funds described herein, and neither the faith and credit nor the taxing
power of the City, the State or any of its political subdivisions is pledged to the payment of the
principal of or the interest on the 2014 District Bonds. The District does not have any ad valorem
taxing power (see "SOURCES OF PAYMENT FOR THE BONDS" and "BOND OWNERS' RISKS" herein).
Financing Purpose of the 2014 District Bonds
The District will apply proceeds from the sale of the 2014 District Bonds to the Authority as follows:
1. To provide the District with funds to finance public infrastructure and capital fees related to
Improvement Area D;
2. To fund interest on the 2014 District Bonds to and including September 1, 2015; and
3. To pay the expenses of the District in connection with the issuance of the 2014 District Bonds.
See "ESTIMATED SOURCES AND USES OF FUNDS — THE 2014 DISTRICT BONDS" herein.
There will not be an initial deposit into the Delinquency Management Fund. The Delinquency
Management Fund is expected to be funded during the period of time that interest is funded on the 2014
District Bonds (see "SOURCES OF PAYMENT FOR THE BONDS — REPAYMENT OF THE 2014 DISTRICT
BONDS - Delinquency Management Fund" herein).
THE SPECIAL TAXES
General
The principal of, premium, if any, and the interest on the 2014 District Bonds and the Administrative
Expenses of the District related to Improvement Area D are payable from the Special Taxes collected on
taxable real property within Improvement Area D. The Special Taxes are to be levied and collected
according to the Rate and Method of Apportionment as briefly summarized below (see "THE SPECIAL
TAXES" herein and APPENDIX D — RATE AND METHOD OF APPORTIONMENT).
6
Special Tax Requirement
The District is required pursuant to the Rate and Method of Apportionment to annually determine the
Special Tax Requirement (as defined herein) (see "RATE AND METHOD OF APPORTIONMENT OF THE
SPECIAL TAX - SPECIAL TAX REQUIREMENT" herein) for Improvement Area D and apportion such
amount subject to the Maximum Special Tax, as defined herein, until the Special Taxes equal the Special
Tax Requirement for Improvement Area D. Generally, the "Special Tax Requirement" is the amount
necessary to pay debt service on the District Bonds, reasonably anticipated delinquencies based on the
delinquency rate for the previous Fiscal Year and the Administrative Expenses of the District.
Apportionment of the Special Tax
Pursuant to the Rate and Method of Apportionment, each fiscal year, each Assessor's Parcel within
Improvement Area D shall be assigned to one of two geographic "Zones" (see "APPENDIX D - RATE AND
METHOD OF APPORTIONMENT,, herein).
After the assignment to a zone, the Rate and Method of Apportionment requires the Special Tax levy to be
apportioned between 3 classes of property currently existing in Improvement Area D ( "Developed
Property ," "Approved Property "Undeveloped Property" as defined in the Rate and Method of
Apportionment). Generally, the Special Tax is levied proportionately, first, on each Assessor's Parcel of
Developed Property at up to 100% of the applicable Special Tax rates as needed to satisfy the Special Tax
Requirement. Secondly, if additional moneys are needed to satisfy the Special Tax Requirement, after the
levy on Developed Property, the Special Tax is levied proportionately on each Assessor's Parcel of
Approved Property, if any, in Improvement Area D, at up to 100% of the Special Tax applicable to each
such Assessor's Parcel as needed to satisfy the Special Tax Requirement Thirdly, if additional moneys are
needed to satisfy the Special Tax Requirement, after the levy on Developed Property and Approved
Property, the Special Tax is levied proportionately on each Assessor's Parcel of Undeveloped Property, if
any, in Improvement Area D, at up to 100% of the Special Tax applicable to each such Assessor's Parcel
as needed to satisfy the Special Tax Requirement (see "RATE AND METHOD OF APPORTIONMENT OF THE
SPECIAL TAX - METHOD OF APPORTIONMENT" herein).
Developed Property. Developed Property, as defined in the Rate and Method of Apportionment,
generally consists of all residential lots created by a recorded final map and for which a building
permit for a dwelling unit has been issued. The Rate and Method of Apportionment does not
differentiate between completed homes and Finished Lots with a building permit where vertical
construction has not commenced, each as defined in the Appraisal Report (see "APPENDIX C -
APPRAISAL REPORT" and "APPENDIX D - RATE AND METHOD OF APPORTIONMENT ").
Shown below is the status and composition of Developed Property as of November 1, 2013 within
Improvement Area D.
COMMUNITY FACILITIES DISTRICT NO, 2003-2
(CANYON HILLS)
IMPROVEMENT AREA D
DEVELOPED PROPERTY
(AS OF NOVEMBER 1, 2013)
Finished Lots
Homes Under w/ Building
Completed Construction Permit Total
106 51 0 157
Source: Pardee Homes and the Appraisal Report.
Approved
Property. Approved Property,
as defined in the
Rate and Method of Apportionment,
generally consists of all residential lots that
are included in a
Final Map that was
recorded prior to
the January
1 st preceding the Fiscal Year in
which the Special
Tax is being levied,
and (ii) that have
7
not been issued a building permit on or before March 1st preceding the Fiscal Year in which the
Special Tax is being levied. The Rate and Method of Apportionment does not differentiate between
finished lots, blue top lots and rough graded lots, each as defined in the Appraisal Report (see
"APPENDIX C — APPRAISAL REPORT" and "APPENDIX D — RATE AND METHOD OF
APPORTIONMENT").
Shown below is the status and composition of Approved Property as of November 1, 2013 within
Improvement Area D.
COMMUNITY FACILITIES DISTRICT NO. 2003 -2
(CANYON HILLS)
IMPROVEMENT AREA D
APPROVED PROPERTY
(AS OF NOVEMBER 1, 2013)
Mass
Finished Lots Blue Ton Lots Graded Lots Total
62 0 0 62
Source: Pardee Homes and the Appraisal Report.
Undeveloped Property. Undeveloped Property, as defined in the Rate and Method of
Apportionment, generally consists of all taxable lots not classified as Developed Property or
Approved Property. The Rate and Method of Apportionment does not differentiate between
finished lots, blue top lots and rough graded lots (see "APPENDIX C — APPRAISAL REPORT" and
"APPENDIX D — RATE AND METHOD OF APPORTIONMENT ").
Shown below is the status and composition of Undeveloped Property as of November 1, 2013,
within Improvement Area D.
COMMUNITY FACILITIES DISTRICT NO, 2003 -2
(CANYON HILLS)
IMPROVEMENT AREA D
UNDEVELOPED PROPERTY
(AS OF NOVEMBER 1, 2013)
Finished Lots
01
Rough Grading
Infrastructure
Under
Construction
Raw Land Total
125 563
Source: Pardee Homes and the Appraisal Report.
Assigned Annual Special Tax
The Rate and Method of Apportionment sets forth an Assigned Annual Special Tax rate for each
class of property as follows:
Developed Property. The Rate and Method of Apportionment establishes Assigned Annual
Special Tax categories for Developed Property based upon Building Square Footage (the same rate
is applicable to any Zone). For Developed Property, the Rate and Method of Apportionment
contains 14 categories based upon building square footage. For the 2013 -14 Fiscal Year, the
Assigned Annual Special Tax for Developed Property ranges from $1,365.75 to $4,551.02 (see
"RATE AND METIIOD OF APPORTIONMENT OF THE SPECIAL TAX — MAXIMUM SPECIAL TAX -
8
Assigned Annual Special Tax" herein). Based upon Pardee Homes current plans for development,
the Assigned Annual Special Tax for individual homes will range from $1,490.51 to $4,551.02 (see
"SUMMARY STATEMENT - IMPROVEMENT AREA D - Development within Improvement Area D —
Description of Development" and "BOND OWNER' RISKS — THE 2014 DISTRICT BONDS — Risk Factors
Relating to Tax Burden" herein).
Approved
Property and Undeveloped
Property. The Rate and
Method of Apportionment
establishes
an Assigned Annual Special Tax rate for Approved Property
and Undeveloped Property
based upon
parcel acreage (different rates
were assigned for both Zone 1 and Zone 2). Approved
Property and
Undeveloped Property have
the same Assigned Special Tax in their respective Zones
(see "RATE
AND METHOD OF APPORTIONMENT
OF THE SPECIAL TAX —
MAXIMUM SPECIAL TAX -
Assigned Annual Special Tax" herein).
For Approved Property, the Rate and Method of Apportionment specifies a flat rate per acre for
each of the two zones in Improvement Area D. Based upon the current lot sizes in Improvement
Area D for Fiscal Year 2013 -14, the Assigned Annual Special Tax for Approved Property will range
from $2,204.42 to $3,857.73 in Zone 1 and from $2,220.27 to $3,885.48 in Zone 2.
Projection of Assigned Annual Special Taxes for Bond Sizing
The 2014 District Bonds have been structured such that the ultimate levy of Special Taxes on the first 219
lots to be classified as Developed Property within Improvement Area D are expected to be sufficient to
meet the Special Tax Requirement including paying debt service on the 2014 District Bonds. Until that
occurs, Special Taxes will be levied first on Developed Property (currently 157 parcels) and then on
Approved Property (currently 62 parcels) to the extent necessary to meet the Special Tax Requirement.
The Assigned Annual Special Taxes on Developed Property was estimated based upon the square footage
shown on the building permit for each such parcel. For all lots classified as Approved Property, the
projected Assigned Annual Special Tax was based upon the assumption that such property was classified
as Developed Property in the lowest Special Tax category (see "DEBT SERVICE COVERAGE — DEBT
SERVICE COVERAGE ON THE 2014 DISTRICT BONDS" herein).
COMMUNITY FACILITIES DISTRICT NO. 2003-2
(CANYON HILLS)
IMPROVEMENT AREA D
PROJECTION OF SPECIAL TAXES BY CLASSIFICATION
(AS OF NOVEMBER 1, 2013)
Developed Property Approved Property Undeveloped
Estimated Special Estimated Special Property Estimated
Taxes (l Taxes (Z Special Taxes (3) Total
$394,702.34 $843676.50 0 $479,378'84
82.34.% 17.66% 0 100%
I . Based upon 157 dwellings at the square footage shown on the building permits for such dwellings.
2. The projected Assigned Annual Special Tax as Developed Property in the lowest Special Tax Category.
3. It is not expected that a levy of the Special Tax will be required on Undeveloped Property.
Tax Burden
A tool for
evaluating the
burden of the Special Taxes
on property owners is
the ratio of total taxes,
special
taxes and
assessments as
a percentage of property
value (the "Effective
Tax Rate "). The size
of the
01
Effective Tax Rate could affect the ability and willingness of the property owners to pay the Special Taxes
when due. Conceptually, bonds issued by a community facilities district secured by special taxes finance
improvements that otherwise would have to be added to the purchase price of a home and, therefore,
homes in such community facilities district would have a lower selling price than comparable homes that
did not have the benefit of such financing. In practice, however, the purchase price of a home is primarily
determined by market forces that may or may not take into account the special taxes. Although the
Special Tax rate may not change, the percentage Effective Tax Rate varies with the value of a dwelling.
Therefore, during periods of a depressed real estate market when home prices decrease, the Effective Tax
Rate increases. In addition, the Special Taxes increase 2% annually but the value of homes in
Improvement Area D will vary with the real estate market.
The size of the Effective Tax Rate could affect the ability and willingness of the property owners to pay
the Special Taxes when due. The Effective Tax Rate is estimated to be approximately 2.08% to 2.63%
based upon the current estimated home prices (see "BOND OWNERS' RISKS — Risk Factors Relating to Tax
Burden - Effective Tax Rate" herein). Currently, City policy states that the Effective Tax Rate at the time
of formation should not exceed 2% of the expected assessed value of the parcel upon completion of the
improvements unless waived by the City Council (the 2% requirement is common in many districts). The
higher Effective Tax Rate in Improvement Area D reflects Pardee Homes offering more affordable homes
during the depressed real estate market and the 2% annual increases in the Special Tax.
Lien of the Special Tax
Payment of the Special. Taxes is secured by the. parcels assessed. in the event an annual installment o f the
Special Taxes included in the County of Riverside (the "County ") tax bill of an assessed parcel is not paid
when due, the District can institute foreclosure proceedings in court to cause the parcel to be sold in order
to recover the delinquent amount from the proceeds of the sale (see "SOURCES OF PAYMENT FOR THE
BONDS - REPAYMENT OF THE 2014 DISTRICT BONDS — Covenant for Superior Court Foreclosure" herein).
Although the Special Taxes will constitute a lien on parcels of real property within Improvement Area D.
they do not constitute a personal indebtedness of the owner(s) of such real property.
Foreclosure and sale may not always result in the recovery of any or the full amount of delinquent Special
Taxes. No assurance can be given that should a parcel or lot with delinquent annual installments be
foreclosed, that any bid will be received for such property or, if a bid is received, that such bid will be
sufficient to pay such delinquent annual installments. However, since a property is sold only for the
amount delinquent and not for the entire outstanding special taxes, it is anticipated that the current value
of Developed Property and Approved Property (depending on the stage of development), as estimated,
should be sufficient to secure any delinquent special taxes (see 'BOND OWNERS' RISKS — THE 2014
DISTRICT BONDS — Risk Factors Relating to Land Values" herein). However, delinquencies in the
payment of property taxes and the Special Taxes may result from any of a number of factors affecting
individual property owners. See "BOND OWNERS' RISKS — THE 2014 DISTRICT BONDS" for discussions of
certain potential causes of property tax and Special Tax delinquencies.
The likelihood of payment of Special Taxes by a property owner depends in part upon the debt secured by
the parcel (see discussion under `BOND OWNERS' RISKS — THE 2014 DISTRICT BONDS — Risk Factors
Relating to Land Values" herein). In particular, property owners with negative equity may default on their
mortgage payments and not pay their Special Taxes. Any holder of a mortgage or deed of trust could, but
would not be required to, advance the amount of delinquent Special Taxes to protect its security interest.
The table below shows the ratio between the average value of land and improvements to the average
Assigned Annual Special Tax for such land and improvements (see "DEBT SERVICE COVERAGE - DEBT
SERVICE+' COVERAGE ON THE 2014 DISTRICT BONDS" herein and "APPENDIX D - RATE AND METHOD OF
APPORTIONMENT ").
Ll
COMMUNITY FACILITIES DISTRICT NO. 2003 -2
(CANYON HILLS)
IMPROVEMENT AREA D
RATIO OF THE AVERAGE VALUE OF LAND AND IMPROVEMENTS
TO THE AVERAGE ANNUAL ASSIGNED SPECIAL TAX
Ratio of Average,
Property
(1) For the City's assumptions used in estimating the Special Taxes see "DEBT SERVICE COVERAGE - DEBT
SERVICE COVERAGE ON THE 2014 DISTRICT BONDS."
Special Tax Collections
The Special Tax levy for Fiscal Year 2013/14 was the first year the Special Tax was levied within
Improvement Area D.
DEVELOPMENT WITHIN IMPROVEMENT AREA D
Property Ownership
The property owners within Improvement Area D of the District, as of November 1, 2013, consisted of
103 individual owners and Pardee Homes which owned 679 parcels of which 116 parcels are expected to
be the subject of the Special Tax levy in Fiscal Year 2014/15 after the issuance of the 2014 District Bonds.
COMMUNITY FACILITIES DISTRICT NO. 2003-2
(CANYON HILLS)
IMPROVEMENT AREA D
PROPERTY OWNERSHIP
(AS OF NOVEMBER 1, 2013)
Appraised Value
Average
to Average
Finished Lots
Number of
Average
Assigned
Assigned
Parcels
Appraised Value
Special Tax (1)
Special Tax
Developed
157
$277,248
$2,514.03
110.28
Property
Raw Land
Total
Individual Owners
Approved
62
$985226
1,365.75
71.92
Property
(1) For the City's assumptions used in estimating the Special Taxes see "DEBT SERVICE COVERAGE - DEBT
SERVICE COVERAGE ON THE 2014 DISTRICT BONDS."
Special Tax Collections
The Special Tax levy for Fiscal Year 2013/14 was the first year the Special Tax was levied within
Improvement Area D.
DEVELOPMENT WITHIN IMPROVEMENT AREA D
Property Ownership
The property owners within Improvement Area D of the District, as of November 1, 2013, consisted of
103 individual owners and Pardee Homes which owned 679 parcels of which 116 parcels are expected to
be the subject of the Special Tax levy in Fiscal Year 2014/15 after the issuance of the 2014 District Bonds.
COMMUNITY FACILITIES DISTRICT NO. 2003-2
(CANYON HILLS)
IMPROVEMENT AREA D
PROPERTY OWNERSHIP
(AS OF NOVEMBER 1, 2013)
Source: the Appraisal Report.
There are expected to be transfers of ownership of the property within Improvement Area D currently
owned by Pardee Homes to purchasers of single family homes during the development of the land within
Improvement Area D. During the period of time a significant portion of the land in Improvement Area D
is owned by a single or limited number of property owner(s), there is a substantial risk to the Bond
Owners that such single or limited number of owners will not pay their Special Taxes (see "BOND
11
Lots with Rough
Finished Lots
Grading and
Homes Under
(no vertical
Infrastructure Under
Property Owner
Completed
Construction
construction)
Construction
Raw Land
Total
Individual Owners
103
0
0
0
0
103
Pardee Homes
3
51
62
438
125
679
Total
106
51
62
438
125
782
Source: the Appraisal Report.
There are expected to be transfers of ownership of the property within Improvement Area D currently
owned by Pardee Homes to purchasers of single family homes during the development of the land within
Improvement Area D. During the period of time a significant portion of the land in Improvement Area D
is owned by a single or limited number of property owner(s), there is a substantial risk to the Bond
Owners that such single or limited number of owners will not pay their Special Taxes (see "BOND
11
OWNERS' RISKS - Risk Factors Relating to the Levying and Collection of the Special Taxes — Concentration
of Ownership- herein). However, the Special Tax for Fiscal Year 2013/14 and Fiscal Year 2014/15 is
funded and during that period of time, it is currently expected, ownership of a substantial number of the
remaining parcels will transfer ownership from Pardee Homes to individual homeowners.
Pardee Homes has been the master developer and the primary merchant builder within Canyon Hills since
acquiring the Canyon Hills property in 1988.
Pardee Homes is generally responsible for the acquisition, planning, engineering, financing, construction,
marketing, sales and management of each of its communities. Pardee Homes is centrally managed with
regional and project management for development, coordination, construction and sales. Pardee Homes is
a California Corporation based in Los Angeles, California. Established in 1921, Pardee Homes brings
more than 90 years of experience to building homes and communities. Pardee Homes is a developer of
new -home neighborhoods, master - planned communities, multi- family developments and business parks
throughout southern California. In 1969, Pardee Homes became a wholly -owned subsidiary of
Weyerhaeuser Real Estate Company. Weyerhaeuser Real Estate Company ( WRECO) is a wholly -owned
subsidiary of Weyerhaeuser Company.
In November 2013, it was announced by Weyerhaeuser Company (NYSE:WY) that it had entered into an
agreement pursuant to which WRECO will combine with a subsidiary of Tri Pointe Homes, Inc.
(NYSE:TPH) ( "Tri Pointe ") in a "Reverse Morris Trust" transaction (the "Transaction "). The
Transaction is currently expected to close in the second quarter of 2014, subject to customary closing
conditions, including regulatory and Tri Pointe shareholder approvals. Following the Transaction,
WRECO will become a wholly -owned subsidiary of Tri Pointe. Tri Pointe and WRECO will continue to
operate separately until the Transaction closes.
The owners of property within Improvement Area D of the District will not be personally liable for
payment of the Special Taxes to be applied to pay the principal of and interest on the District
]bonds.
Description of Development
Pardee Homes is currently offering two product lines in Improvement Area D: Living Smart Iillside and
Meadow Ridge. The homes in the Living Smart Hillside product line currently range in size from 1,296
square feet to 2,256 square feet and range in price from $255,000 to $295,000. The homes in the
Meadow Ridge product line currently range in size from 2,385 square feet to 4,241 square feet and range
in price from $350,000 to $445,000. A third product line (Living Smart) is longer offered. See
"APPENDIX C — APPRAISAL REPORT" for additional information regarding the product lines being offered
by Pardee Homes and their competitive position in the market place. It should be noted, however, that
during the course of development product lines often change. Pardee Homes is continuously evaluating
their product lines and prices in light of the then current market conditions.
The orderly development of property in Improvement Area D is a priority concern of potential investors.
Prolonged development periods translate into longer periods of time a significant portion of the land in
Improvement Area D is owned by a single or limited number of property owner(s) and may be subject to
fluctuations in the real estate market. The developer may be required to reduce prices to sell existing
inventory and may introduce new lower priced product lines in order to maintain sales volume.
The acceptance of the product lines by potential home buyers depends on numerous tangible and
intangible, not fully predictable, factors affecting individual buyers. A reduction in sales prices within
Improvement Area D due to a downturn in the economy or the real estate market, or other events may
adversely impact the value of the security underlying the Special Tax (see "BOND OWNERS' RISKS" herein
for a discussion of risk factors essential to the making of an informed investment decision with respect to
the Bonds).
12
A tool for measuring the current market acceptance of a development is the number of sales per month.
Many in the development community generally consider 3 to 4 sales per month per product line necessary
to reflect market acceptance.
COMMUNITY FACILITIES DISTRICT NO. 2003 -2
(CANYON HILLS)
IMPROVEMENT AREA D
HISTORICAL SALE CHARACTERISTICS
AS OF NOVEMBER 1, 2013
Number of
Average Sales
Average Size
Average
Average Price
Product Line Sales
per Month
(Square Feet)
Sales Price
Per Square Foot
Living Smart hillside
Closed Escrows
49(l)
9.80
1,964
$275,980
$140.52
Current Escrows
15
12.8 (4)
1,950
2745000
140,51
Meadow Ridge
Closed Escrows 10 (Z) 5.0 3,337 392,750 117.70
Current Escrows 18 14.0 (4) 35599 405,556 112.69
Living Smart
Closed Escrows 44 (3) 4.4 23428 299,568 123.38
Current Escrows No longer offered
1. June 2013 thru October 2013
2. September and October 2013
3. 2013
4. The total of closed escrows and current escrows.
Source: The Appraisal Report.
There can be no assurance that the development plans of Pardee Homes described herein and in the
Appraisal Report will be completed or that the development plans will not be modified in the future. In
changing market conditions, builders will often revise their product lines and prices and the rate of sales
can fluctuate.
Value -To -Lien Ratios
The District had an appraisal (the "Appraisal Report") prepared by Harris Realty Appraisal, Newport
Beach, California, in order to estimate the retail value of completed dwellings and the value of the land
and improvements within Improvement Area D of the District in their "as is" condition (see "APPENDIX C
— APPRAISAL REPORT").
The value of the land and improvements within Improvement Area D of the District is a major factor in
determining the investment quality of the Bonds. Reductions in property values within Improvement
Area D of the District due to a downturn in the economy or the real estate market, events such as
earthquakes, droughts or floods, stricter land use regulations or other events may adversely impact the
13
value of the security underlying the Special Tax. To account for such uncertainties, investors typically
require the value of the property upon which the Special Tax is levied to be several times the principal
amount of any district bonds. Such value -to -lien ratios are derived by dividing the value of the property
by the principal amount of the district bonds. For example, a 3:1 ratio means that the value is three times
the total bond amount. The value -to -lien ratio of individual parcels may be less or more than the
aggregate value -to -lien ratio shown below. Pursuant to the Act and the Rate and Method of
Apportiomnent, the principal amount of the 2014 District Bonds is not allocable among the parcels in
Improvement Area D (see "BOND OWNERS' RISKS — THE 2014 DISTRICT BONDS — Risk Factors Relating to
Land Values" herein and "APPENDIX C — APPRAISAL REPORT ").
Based on the appraised value of the property within Improvement Area D of $74,945,000 as reported in
the Appraisal Report, the estimated value -to -lien ratio is 9.75* to 1. The value -to -lien ratio of individual
parcels may be less or more than the aggregate value -to -lien ratio for Improvement Area D. See
"BONDOWNERS' RISKS — THE 2014 DISTRICT BONDS - Risk Factors Relating to Land Values" herein and
"APPENDIX C — APPRAISAL REPORT."
Shown below is the estimated value -to -lien ratio in Improvement Area D, as of November 1, 2013.
COMMUNITY FACILITIES DISTRICT NO, 2003 -2
(CANYON HILLS)
IMPROVEMENT AREA D
VALUE -TO -LIEN RATIO
(AS OF NOVEMBER 1, 2013)
Number of Parcels Total Estimated Value
Developed Property
Completed (Individual Homeowners) 103 $30,500,000
Under Construction (includes model homes) 54 121755,000
Subtotal Developed Properties 167 435255,000
Approved Property 62 6,0905000
Undeveloped Property 563 25,600,000
Total 782 $74,9459000
Principal Amount of 2014 District Bonds $7,6855000`
Value to Lien 9.75* to 1
Source: the Appraisal Report.
REDEMPTION OF THE BONDS
Optional Redemption
The Bonds are subject to optional redemption prior to maturity at the option of the Authority, in whole or
in part, from such maturities as selected by the Authority and by lot within a maturity, on September 1,
2024, from any available source of funds, and on any date thereafter at a redemption price equal to the
principal amount thereof, plus accrued interest to the date of redemption, as described herein (see "THE
BONDS — REDEMPTION - Optional Redemption" herein).
* Preliminary, subject to change.
14
Special Mandatory Redemption
The Bonds are subject to special mandatory redemption, in whole or in part, from such maturities as
selected by the Authority and by lot within a maturity, on any date on or after September 1, 2014, from
redemption of 2014 District Bonds from amounts constituting prepayments of Special Taxes, from surplus
revenues transferred by the Authority to the District from the Cash Flow Management Fund held under
the Indenture, and from surplus revenues transferred from the Delinquency Management Fund under the
Fiscal Agent Agreement for the redemption of the 2014 District Bonds at a redemption price equal to the
principal amount thereof, plus accrued interest to the date of redemption, plus a premium, as described
herein (see "TIIE BONDS - REDEMPTION — Special Mandatory Redemption" herein).
Mandatory Sinking Payment Redemption
The Bonds maturing September 1, 2028, September 1 2033, and September 1, 2044, are subject to
mandatory sinking payment redemption, without premium, prior to their maturity date, in part by lot on
September 1 in each year commencing September 1, 2024, with respect to the Bonds maturing September
1, 2028, September 1, 2029, with respect to the Bonds maturing September 1, 2033, and September 1,
2034, with respect to the Bonds maturing September 1, 2044, from Sinking Account payments under the
Indenture (see "TIIE BONDS - REDEMPTION — Mandatory Sinking Payment Redemption' herein).
THE BONDS - GENERAL PROVISIONS
Denominations
The Bonds will be issued in the minimum denomination of $5,000 each or any integral multiple thereof
(see "THE BONDS - GENERAL PROVISIONS" herein).
Registration, Transfer and Exchange
The Bonds will be issued in fully- registered form without coupons. Any Bond may, in accordance with
its terms, be transferred or exchanged, pursuant to the provisions of the Indenture (see "THE BONDS -
GENERAL PROVISIONS - Transfer or Exchange of Bonds" herein). When delivered, the Bonds will be
registered in the name of The Depository Trust Company, New York, New York ( "DTC "), or its nominee.
DTC will act as securities depository for the Bonds. Individual purchases of Bonds will be made in book -
entry form only in the principal amount of $5,000 each or any integral thereof. Purchasers of the Bonds
will not receive certificates representing their Bonds purchased (see "APPENDIX G - BOOK -ENTRY
SYSTEM" herein).
Payment
Principal of the Bonds and any premium upon redemption will be payable in each of the years and in the
amounts set forth on the cover page hereof upon surrender at the corporate trust office of the Trustee in
Los Angeles, California. Interest on the Bonds will be paid by check of the Trustee mailed by first -class
mail on the Interest Payment Date (as defined in the Indenture) to the person entitled thereto (except as
otherwise described herein for interest paid to an account in the continental United States of America by
wire transfer as requested in writing no later than the applicable record date by owners of $1,000,000 or
more in aggregate principal amount of Bonds) (see "THE BONDS - GENERAL PROVISIONS" herein).
Initially, interest on and principal and premium, if any, of the Bonds will be payable when due by wire of
the Trustee to DTC which will in turn remit such interest, principal and premium, if any, to DTC
Participants (as defined herein), which will in turn remit such interest, principal and premium, if any, to
Beneficial Owners (as defined herein) of the Bonds (see " APPENDIX G - BOOK -ENTRY SYSTEM" herein).
15
Notice
Notice of any redemption will be mailed by first -class mail by the Trustee at least thirty (30) but no more
than sixty (60) days prior to the date fixed for redemption to the registered owners of any Bonds
designated for redemption and to the Securities Depositories and Information Services provided in the
Indenture. Neither failure to receive such notice nor any defect in the notice so mailed will affect the
sufficiency of the proceedings for redemption of such Bonds or the cessation of accrual of interest on the
redemption date (see "THE BONDS - REDEMPTION - Notice of Redemption; Rescission" herein).
LEGAL MATTERS
The legal proceedings in connection with the issuance of the Bonds are subject to the approving opinion
of Fulbright & Jaworski LLP, Los Angeles, California, a member of Norton Rose Fulbright, as Bond
Counsel (see "APPENDIX F — FORM OF BOND COUNSEL OPINION "). Such opinion, and certain tax
consequences incident to the ownership of the Bonds, including certain exceptions to the tax treatment of
interest, are described more fully under the heading "LEGAL MATTERS" herein. Certain legal matters will
be passed on for the City by Leibold, McClendon & Mann, P.C., Laguna Hills, California, as City
Attorney, and by Fulbright & Jaworski LLP, Los Angeles, California, a member of Norton Rose Fulbright,
as Disclosure Counsel. Certain legal matters will be passed on for the Underwriter by McFarlin &
Anderson LLP, Laguna Hills, California, Underwriter's Counsel.
PROFESSIONAL SERVICES
Union Bank, N.A., Los Angeles, California, will serve as TruStec tinder the Indeiitilre and Fiscal Agent
under the Fiscal Agent Agreement. The Trustee will act on behalf of the Bond Owners for the purpose of
receiving all moneys required to be paid to the Trustee, to allocate, use and apply the same, to hold,
receive and disburse the Revenues and other funds held under the Indenture, and otherwise to hold all the
offices and perform all the functions and duties provided in the Indenture to be held and performed by the
Trustee.
Harris & Associates, Irvine, California, Special Tax Consultant, prepared the cash flow certificate for the
District demonstrating that there will be sufficient Special Taxes, assuming timely receipt, to pay debt
service on the 2014 District Bonds (see "CONCLUDING INFORMATION — Experts" herein).
Rod Gunn Associates, Inc., a California corporation, Financing Consultant, advised the City and the
Authority as to the financial structure and certain other financial matters relating to the Bonds.
Fees payable to Bond Counsel, Disclosure Counsel, Underwriter's Counsel and the Financing Consultant
are contingent upon the sale and delivery of the Bonds. The fees of Harris Realty Appraisal, as appraisal,
are not contingent upon the sale of the Bonds.
CONTINUING DISCLOSURE
The Authority has determined that, except for information relating to fund balances held by the Trustee
with respect to the Bonds, no financial or operating data concerning the Authority is material to any
decision to purchase, hold or sell the Bonds and the Authority will not provide any such information. The
District has undertaken all responsibilities for any continuing disclosure to Bond Owners as described
below, and the Authority shall have no liability to the Owners (as defined in the Indenture) of the Bonds
or any other person with respect to such disclosures.
The District has covenanted for the benefit of Owners of the Bonds to provide certain financial
information, operating data and development information relating to Improvement Area D (the "Annual
Report"). The District has agreed to make such information available not later than December 31 of each
year, commencing December 31, 2014, and, until its obligations terminate. The Annual Report and the
notice of enumerated events will be filed by the Trustee, acting as dissemination agent, with the
16
Municipal Securities Rulemaking Board ( "MSRB ")
The specific nature of information to be contained
events is set forth in "APPENDIX E - FORM OF
covenants have been made by the District in order t
15c2 -12 of the Securities Exchange Act of 1934, as
required to meet continuing disclosure requirements
D.
in an electronic format as prescribed by the MSRB.
in the Annual Reports or the notice of enumerated
CONTINUING DISCLOSURE AGREEMENT." These
o assist the Underwriter in complying with the Rule
amended (the "Rule "). The District has never been
under such Rule with respect to Improvement Area
The Authority did not timely submit Annual Reports for the period ending June 30, 2011, as was required
pursuant to the terms of five continuing disclosure agreements for bonds issued in 2010 and 2011, by and
between the Authority and Union Bank, N.A. entered into in connection with three tax allocation revenue
bond financings, one General Fund Lease financing, and one community facilities district financing, and
thus the Authority was not in compliance with its reporting obligations with respect to such continuing
disclosure agreements. The continuing disclosure consultant engaged by the City on behalf of the
Authority to prepare such reports did prepare them on a timely basis, but the Authority failed to submit
them to the Trustee. The Authority has arranged for the continuing disclosure consultant to file future
reports directly with the Trustee.
AVAILABILITY OF LEGAL DOCUMENTS
The summaries and references contained herein with respect to the Indenture, the Bonds, the 2014 District
Bonds, the Fiscal Agent Agreement, and other statutes or documents do not purport to be comprehensive
or definitive and are qualified by reference to each such document or statute, and references to the Bonds
are qualified in their entirety by reference to the form thereof included in the Indenture. Copies of the
documents described herein are available for inspection during the period of initial offering of the Bonds
at the offices of the Underwriter, O'Connor & Company Securities, Inc., 234 East 17`i' Street, Suite 114,
Costa Mesa, California, 92627, telephone (949) 764 -9320. Copies of these documents may be obtained
after delivery of the Bonds from the City at 130 S. Main Street, Lake Elsinore, California 92530,
telephone (951) 674 -3124.
17
Aerial Photo of Improvement Area D of the District
(Insert MAP 4)
IN
SELECTED FACTS
The following summary does not purport to be complete. Reference is hereby made to the complete
Official Statement in this regard. Furthermore, the following summary makes certain assumptions
regarding the valuation of property within Improvement Area D of the District. Neither the Authority nor
the District makes any representation as to the current value of property in Improvement Area D of the
District or provides any assurance as to the estimated values of property being achieved (see "BOND
OWNERs,Rms" herein).
THE BONDS
Principal Amount of Bonds:
Additional Bonds:
First Optional Redemption Date:
First Special Mandatory Redemption Date:
Primary Source of Revenues for
Repayment:
Priority:
* Preliminary, subject to change.
$7,685,000*
The Authority is not authorized to issue any additional
bonds under the Indenture secured by repayment of the
2014 District Bonds except for refunding purposes (see
"THE BONDS - ADDITIONAL OBLIGATIONS - The
Authority" herein). However, the District on behalf of
Improvement Area D is authorized to issue Additional
District Bonds secured by the Special Taxes on a parity
with the 2014 District Bonds (not to exceed
$16,315,000 *), and the Authority may issue bonds to
acquire the Additional District Bonds of the District.
When and if issued, the Bonds and such additional
bonds of the Authority would be secured by separate
bonds of the District which in turn, will be secured by
the same Special Taxes on a parity with each other (see
"THE BONDS - ADDITIONAL OBLIGATIONS - The
District - Additional District Bonds" herein).
September 1, 2024, at 100% of principal amount (see
"THE BONDS - REDEMPTION - Optional Redemption"
herein).
On any date on or after September 1, 2014, from the
special mandatory redemption of 2014 District Bonds
at a premium, as described herein (see "THE BONDS -
REDEMPTION - Special Mandatory Redemption"
herein).
The Bonds are payable from Revenues (as defined
herein) received from the payment of the 2014 District
Bonds and certain other sources (see "SOURCES OF
PAYMENT FOR THE BONDS - REPAYMENT OF THE
BONDS" and "BOND OWNERS' RISKS" herein).
The Bonds are secured by a first pledge of and lien on
the Revenues as described herein (see "SOURCES OF
PAYMENT FOR THE BONDS - REPAYMENT OF THE
BONDS" and "BOND OWNERS' RISKS" herein).
19
Debt Service Coverage from Repayment of Inn%
2014 District Bonds (see "DEBT SERVICE
COVERAGE — DEBT SERVICE COVERAGE
ON THE AUTHORITY BONDS" herein):
THE 2014 DISTRICT ]BONDS
Principal Amount of the 2014 District
Bonds:
Additional District Bonds:
Average Amount of Bonded Debt per Parcel
(219 parcels):
Primary Sources for Repayment of the 2014
District Bonds:
Priority:
First Optional Redemption Date:
VEMENT AREA
Property Owners
Property Owners as of November 1, 2013
(see "BOND OWNERS' RISKS — THE 2014
DISTRICT BONDS — Risk Factors Relating to
the Levying and Collection of the Special
Taxes — Concentration of Ownership" herein):
x Preliminary, subject to change.
$75685,000*
Additional District Bonds (in an amount not to exceed
$16,315,000 *) on a parity with the 2014 District Bonds
are authorized (see "THE BONDS — ADDITIONAL
OBLIGATIONS - The District — Additional District
Bonds" herein).
Approximately $35,091 *
Special Taxes levied within Improvement Area D of the
District (see "SOURCES OF PAYMENT FOR THE BONDS —
REPAYMENT OF THE 2014 DISTRICT BONDS" and "RATE
AND METHOD OF APPORTIONMENT OF THE SPECIAL
TAX" herein).
The District Bonds are secured by a pledge of and lien
on all real property and Special Taxes levied against all
taxable real property within Improvement Area D of the
District (see "SOURCES OF PAYMENT FOR THE BONDS —
REPAYMENT OF THE 2014 DISTRICT BONDS" and
"BOND OWNERS' RISKS" herein).
The lien of the Special Taxes on the taxable real
property in Improvement Area D of the District is on
parity with the lien of all overlapping governmental
liens (see "BOND OWNERS' RISKS — Risk Factors
Relating to Tax Burden" herein).
September 1, 2024, at 100% of principal amount (see
"THE BONDS - REDEMPTION" herein).
DISTRICT
103 Individual Homeowners
679 parcels owned by Pardee Homes
20
Appraised Value
Appraised Valuation of property within
Improvement Area D of the District as of
November 1, 2013:
Principal amount of the 2014 District
Bonds:
Ratio of Appraised Value of property within
Improvement Area D of the District to
aggregate principal amount of the 2014
District Bonds:
Special Taxes
Approximate ratio of the annual Special
Taxes in any Fiscal Year after an allowance
for Administrative Expenses to the
corresponding Annual Debt Service on the
2014 District Bonds:
Estimated Effective Tax Rate:
Special Tax collections in Improvement
Area D of the District Fiscal Year 2012/13:
* Preliminary, subject to change.
$74,945,000 (see "APPENDIX C — APPRAISAL REPORT"
herein).
$796855000*
9.75* to 1
1.10 to 1 (see "DEBT SERVICE COVERAGE — DEBT
SERVICE COVERAGE ON THE 2014 DISTRICT BONDS"
herein).
Approximately 2.08% to 2.63% based upon the current
estimated home prices (see "BOND OWNERS' RISKS —
Risk Factors Relating to Tax Burden - Effective Tax
Rate" herein).
The Special Taxes were levied for the first time for the
2013/14 Fiscal Year.
21
FSTTMATED tq"lTRC'VI. A Nl111 JQVc nF FirTNTnc
THE BONDS
Proceeds from the sale of the Bonds will be used to provide funds to acquire the 2014 District Bonds in
the aggregate principal amounts indicated below. Under the provisions of the Indenture, the Trustee will
receive the proceeds from the sale of the Bonds and will apply them as follows:
Sources of Funds
Principal Amount of the Bonds
Net Original Issue Premium
Underwriter's Discount
Net Bond Proceeds
Uses of Funds
Bond Purchase Fund (1)
Costs of Issuance Fund (1)
Reserve Account (1)
Total
(1) To be used to acquire the 2014 District Bonds.
(2) Expenses include fees of the Authority, Bond Counsel, the Financing Consultant, Disclosure Counsel,
Underwriter's Counsel, the Trustee, costs of printing the Official Statement and other costs of issuance of
the Bonds.
(3) Equal to the Reserve Requirement. See "SOURCES OF PAYMENT FOR THE BONDS — REPAYMENT OF
THE BONDS — Reserve Account" herein.
22
THE 2014 DISTRICT BONDS
The District will deposit the proceeds from the 2014 District Bonds as follows:
Sources of Funds
Principal Amount of 2014 District Bonds
Bond Purchase Discount
Total Net Bond Proceeds
Uses of Funds
Construction Fund
Interest Account (1)
Costs of Issuance Fund (Z)
Administrative Expense Fund c3>
Total
(1) Interest on the 2014 District Bonds is funded until September 1, 2015.
(2) Costs of Issuance include fees of Bond Counsel, the Financing Consultant, Disclosure Counsel, Appraiser, Special Tax
Consultant, the Fiscal Agent and other costs related to the issuance of the 2014 District Bonds.
(3) First year administrative expenses of the District.
23
DERT SERVIr E. f`()X7FU A CL
DEBT SERVICE COVERAGE ON THE AUTHORITY BONDS
The Bonds are special obligations of the Authority payable solely from and secured by revenues from
repayment of the 2014 District Bonds, and certain funds and accounts established under the Indenture
including the Cash Flow Management Fund and the Reserve Account held by the Trustee. In addition, the
Bonds may be payable from any available surplus revenues with respect to other series of local agency
revenue bonds issued by the Authority to the extent such surplus revenues are available to replenish the
Reserve Account to its requirement and to fund the Cash Flow Management Fund to its requirement (see
SOURCES OF PAYMENT FOR THE BONDS — REPAYMENT OF THE BONDS — Application of Revenues; Flow of
Funds" herein).
LAKE ELSINORE PUBLIC FINANCING AUTHORITY
LOCAL AGENCY REVENUE BONDS (CANYON HILLS IA D), 2014 SERIES A
DEBT SERVICE COVERAGE
Bond 2014 District Bond Debt Debt Service Payments Coverage
Year Service Payments* on the Bonds* Ratio
2014 $241,873.40 $2415873.40 100%
2015 417,675.00 417,675.00 100%
2016 427,587.50 427,587.50 100%
2017 437,250.00 437,250.00 100%
2"v18 44o,625.Ov" 4463625.00 i00 %0'
2019 4553487.50 455,487.50 100%
2020 463,912.50 463,912.50 100%
2021 471,712.50 471,712.50 100%
2022 479,031:26 479,031.26 100%
2023 490,750.00 4903750.00 100%
2024 5011700.00 501,700.00 100%
2025 511,450.00 511,450.00 100%
2026 520,450.00 520,450.00 100%
2027 533,700.00 533,700.00 100%
2028 540,950.00 540,950.00 100%
2029 5529450.00 552,450.00 100%
2030 562,000.00 562,000.00 100%
2031 5751450.00 575,450.00 100%
2032 5875525.00 587,525.00 100%
2033 5981225.00 598,225.00 100%
2034 612,550.00 612,550.00 100%
2035 620,225.00 6205225.00 100%
2036 6365525.00 636,525.00 100%
2037 645,900.00 645,900.00 100%
2038 6635625.00 663,025.00 100%
2039 674,150.00 6745150.00 100%
2040 687,750.00 687,750.00 100%
2041 699,150.00 699,150.00 100%
2042 718,350.00 718,350.00 100%
2043 729,800.00 729,800.00 100%
2044 743,775.00 743,775.00 100%
x Preliminary, subject to change.
PA
DEBT SERVICE COVERAGE ON THE 2014 DISTRICT BONDS
The table below presents the projected annual debt service coverage on the 2014 District Bonds based
upon the realization of certain assumptions and the aggregate projected Assigned Annual Special Tax. No
allowance was made for delinquencies.
For the purposes of projecting the Assigned Annual Special Tax, the District used the following
assumptions:
1. For lots classified as Developed Property, the square footage of the dwelling as shown on the
Building Permit of the City was used.
2. For all lots classified as Approved Property, the projected Assigned Annual Special Tax was based
upon the assumption that such property was classified as Developed Property in the lowest
Special Tax Category.
3. The Assigned Annual Special Taxes increases at a rate of two percent (2 %) per year.
Pursuant to the Act, under no circumstances will the Special Tax levied against any parcel of Developed
Property for which an occupancy permit for private residential use has been issued be increased by more
than ten percent (10 %) as a consequence of delinquency or default by the owner of any other parcel
within Improvement Area D. Accordingly, the District may not be able to levy the Maximum Special Tax
in certain circumstances.
The District covenants that no modification of the maximum authorized Special Tax for Improvement
Area D shall be approved by the District which would prohibit the District from levying the Special Tax
in any Fiscal Year at such a rate as could generate Special Taxes in each Fiscal Year after deductions for
Administrative Expenses in an amount at least equal to 110% of annual debt service in such Fiscal Year
for the 2014 District Bonds and any Additional District Bonds.
The following table sets forth the anticipated debt service coverage on the 2014 District Bonds based on
219 parcels classified under the Rate and Method of Apportionment as "Developed Property" which
currently consists of 157 parcels classified as Developed Property and 62 parcels classified as Approved
Property. Until such time as the receipt of Special Taxes from the levy of the Assigned Annual Special
Tax on Developed Property is sufficient to meet the Special Tax Requirement for Improvement Area D,
the Rate and Method of Apportionment provides for the levy of Special Taxes on Approved Property
which currently consists of 62 Finished Lots (see "BONDOWNERS' RISKS — THE 2014 DISTRICT BONDS —
Risk Factors Relating to the Levying and Collection of the Special Taxes — Concentration of Ownership"
herein and "APPENDIX D — RATE AND METHOD OF APPORTIONMENT ").
The receipt of Special Taxes is subject to several variables described herein. The District provides no
assurance that the Assigned Annual Special Tax and the coverage ratios shown will be achieved (see
"BONDOWNERS' RISKS" herein).
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«'14-F.11l1 11,F11 1AF RT SER',N71C'E SCHiMI TE S
SCHEDULED DEBT SERVICE ON THE BONDS
The following is the scheduled debt service (including mandatory sinking fund redemptions) on the
Bonds.
Annual Debt Bond
Interest Payment Date Principal coupon Interest Debt Service Service Balance
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
March 1, 2033
September 1, 2033
March 1, 2034
WV
Scheduled Debt Service on the Bonds (Continued)
Annual Debt Bond
Interest Payment Date Principal Coupon Interest Debt Service Service Balance
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
March 1, 2040
September 1, 2040
March 1, 2041
September 1, 2041
March 1, 2042
September 1, 2042
March 1, 2043
September 1, 2043
March 1, 2044
September 1, 2044
29
SCHEDULED DEBT SERVICE ON THE 2014 DISTRICT BONDS
The following is the scheduled debt service on the 2014 District Bonds,
Interest Payment Date
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
March i, 2033
September 1, 2033
March 1, 2034
Principal Coupon Interest
30
Annual Debt Bond
Debt Service Service Balance
Scheduled Debt Service on the 2014 District Bonds (Continued)
Annual Debt Bond
Interest Payment Date Principal Coupon Interest Debt Service Service Balance
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
March 1, 2040
September 1, 2040
March 1, 2041
September 1, 2041
March 1, 2042
September 1, 2042
March 1, 2043
September 1, 2043
March 1, 2044
September 1, 2044
31
THE BONDS
GENERAL PROVISIONS
Repayment of the Bonds
Interest is payable on the Bonds at the rates per annum set forth on the inside cover page hereof. Interest
with respect to the Bonds will be computed on the basis of a year consisting of 360 days and twelve 30.
day months.
Each Bond will be dated the date of delivery, and interest with respect thereto will be payable from the
Interest Payment Date next preceding the date of authentication thereof, unless (a) it is authenticated on or
before an Interest Payment Date and after the close of business on the preceding Record Date, in which
event interest with respect thereto will be payable from such Interest Payment Date; (b) it is authenticated
on or before August 15, 2014, in which event interest with respect thereto will be payable from the date of
delivery; or (c) interest with respect to any Outstanding Bond is in default, in which event interest with
respect thereto will be payable from the date to which interest has been paid in full, payable on each
Interest Payment Date.
Interest with respect to the Bonds will be payable by check of the Trustee mailed by first -class mail on the
Interest Payment Date to the Owners thereof, provided that in the case of an Owner of $1,000,000 or
greater in principal amount of Outstanding Bonds, such payment may, at such Owner's option, be made
by wire transfer of immediately available funds to an account in the continental United States of America
in accor dance with written, instructions provided prior to the Record Date to the Trustee by such Owner.
The Owners of the Bonds shown on the registration books on the Record Date for the Interest Payment
Date will be deemed to be the Owners of the Bonds on said Interest Payment Date for the purpose of the
paying of interest. Principal of the Bonds and any premium upon early redemption is payable upon
presentation and surrender thereof at the corporate trust office of the Trustee in Los Angeles, California.
Transfer or Exchange of Bonds
Any Bond may, in accordance with its terms, be transferred or exchanged, pursuant to the provisions of
the Indenture, upon surrender of such Bond for cancellation at the corporate trust office of the Trustee.
Whenever any Bond or Bonds shall be surrendered for transfer or exchange, the Trustee shall authenticate
and deliver a new Bond or Bonds for a like aggregate principal amount of authorized denominations. The
Trustee may require the payment by the Bond Owner requesting such transfer or exchange of any tax or
other governmental charge required to be paid with respect to such transfer or exchange. The Trustee is
not required to transfer or exchange (a) any Bonds or portions thereof during the period established by the
Trustee for selection of Bonds for redemption, or (b) any Bonds selected for redemption.
Bonds Mutilated, Lost, Destroyed or Stolen
If any Bond becomes mutilated, the Authority, at the expense of the Bond Owner, will execute, and the
Trustee will thereupon authenticate and deliver, a new Bond of like series, tenor and authorized
denomination in exchange and substitution for the Bond so mutilated, but only upon surrender to the
Trustee of the Bond so mutilated. Every mutilated Bond so surrendered to the Trustee will be canceled by
it. If any Bond issued under the Indenture is lost, destroyed or stolen, evidence of such loss, destruction
or theft may be submitted to the Trustee and the Authority and, if such evidence is satisfactory to them
and indemnity satisfactory to them is given, the Authority, at the expense of the Bond Owner, will
execute, and the Trustee will thereupon authenticate and deliver, a new Bond of like series and tenor in
lieu of and in substitution for the Bond so lost, destroyed or stolen (or if any such Bond has matured or
has been called for redemption, instead of issuing a substitute Bond, the Trustee may pay the same
without surrender thereof upon receipt of indemnity satisfactory to the Trustee). The Authority may
require payment by the Bond Owner of a sum not exceeding the actual cost of preparing each new Bond
32
issued under the provisions of the Indenture described in this paragraph and of the expenses which may
be incurred by the Authority and the Trustee. Any Bond issued under the provisions of the Indenture
described in this paragraph in lieu of any Bond alleged to be lost, destroyed or stolen will be equally and
proportionately entitled to the benefits of the Indenture with all other Bonds secured by the Indenture.
REDEMPTION
Notwithstanding any provisions in the Indenture
mandatory redemption, in part, the Authority
Indenture) to the Trustee at least sixty (60) days
as shall be acceptable to the Trustee so stating &
District Bonds, together with other Revenues to
debt service on the Bonds.
to the contrary, upon any optional redemption or special
shall deliver a Written Certificate (as defined in the
prior to the proposed redemption date or such later date
it the remaining payments of principal and interest on the
be available, will be sufficient on a timely basis to pay
The Authority is required, in such Written Certificate, to certify to the Trustee that sufficient moneys for
purposes of such redemption are or will be on deposit in the Redemption Fund and is required to deliver
such moneys to the Trustee, together with other Redemption Revenues, if any, then to be delivered to the
Trustee pursuant to the Indenture, which moneys are required to be identified to the Trustee in the Written
Certificate delivered with the Redemption Revenues.
Optional Redemption
The Bonds are subject to redemption prior to maturity at the option of the Authority on any date on or
after September 1, 2024, as a whole or in part, from such maturities as selected by the Authority and by
lot within a maturity, from any available source of funds at 100% of the principal amount of the Bonds to
be redeemed, together with accrued interest thereon to the date fixed for redemption.
Special Mandatory Redemption
The Bonds are subject to mandatory redemption prior to maturity on any date on or after September 1,
2014, in whole or in part from such maturities as selected by the Authority and by lot within a maturity,
from the redemption of the 2014 District Bonds from amounts constituting prepayments of Special Taxes
and from amounts held in the Delinquency Management Fund under the Fiscal Agent Agreement and
from amounts in the Cash Flow Management Fund under the Indenture at the following redemption prices
(expressed as a percentage of the principal amount of Bonds to be redeemed), together with accrued
interest thereon to the date fixed for redemption.
Redemption Periods Redemption Prices
September 1,
2014
through August 31, 2024
102.0%
September 1,
2024
and thereafter
100.0%
Mandatory Sinking Payment Redemption
The Bonds maturing September 1, 2028, September 1, 2033 and September 1, 2044, are subject to
mandatory redemption, in part by lot, on September 1 in each year commencing September 1, 2024, with
respect to the Bonds maturing September 1, 2028, September 1, 2029, with respect to the Bonds maturing
September 1, 2033, and September 1, 2034, with respect to the Bonds maturing September 1, 2044, from
mandatory sinking payments made by the Authority pursuant to the Indenture at a redemption price equal
to the principal amount thereof to be redeemed, without premium, plus accrued interest thereon to the date
of redemption in the aggregate principal amounts and on September 1 in the years as set forth in the
following schedule; provided, however, that (i) in lieu of redemption thereof, the Bonds may be
purchased by the Authority and tendered to the Trustee, and (ii) if some but not all of the Bonds have been
redeemed pursuant to optional redemption, special mandatory or mandatory redemption provisions
33
described herein, the total amount of all future mandatory sinking payments will be reduced by the
aggregate principal amount of the Bonds so redeemed, to be allocated among such mandatory sinking
payments on a pro rata basis (as nearly as practicable) in integral multiples of $5,000 as determined by the
Authority.
SCHEDULE OF MANDATORY SINKING PAYMENT REDEMPTIONS
BONDS MATURING SEPTEMBER 1, 2028
September 1
Year
2024
2025
2026
Principal
Amount*
September 1
Year
2027
2028
Principal
Amount*
(maturity)
SCHEDULE OF MANDATORY SINKING PAYMENT REDEMPTIONS
BONDS MATURING SEPTEMBER 1, 2033
September 1
Year
2029
2030
2031
Principal
Amount*
September 1
Year
2032
2033
Principal
Amount*
(maturity)
SCHEDULE OF MANDATORY SINKING PAYMENT REDEMPTIONS
BONDS MATURING SEPTEMBER 1, 2044
September 1
Year
2034
2035
2036
2037
2038
2039
Principal
Amount*
September 1
Year
2040
2041
2042
2043
2044
Principal
Amount*
(maturity)
Open Market Purchase of Bonds
The Authority may at any time buy Bonds at public or private sale at a price which, inclusive of
brokerage fees, will not exceed the par amount of the Bonds so purchased, plus any applicable premium
and any Bonds so purchased shall be tendered to the Trustee for cancellation.
Notice of icedemption; Rescission
When redemption is authorized or required, written notice of redemption is required to be mailed by the
Trustee to the respective Owners of any Bonds designated for redemption at their addresses appearing on
the bond registration books, to the Securities Depositories, and to the Information Services, all as
provided in the Indenture, by first -class mail, postage prepaid, no less than thirty (30), nor more than sixty
(60), days prior to the date fixed for redemption. Neither failure to receive such notice nor any defect in
the notice so mailed will affect the sufficiency of the proceedings for redemption of such Bonds or the
cessation of accrual of interest on the redemption date.
Preliminary, subject to change
34
If at the time of mailing of any notice of optional redemption there shall not have been deposited with the
Trustee moneys sufficient to redeem all the Bonds called for redemption, such notice shall state that it is
subject to the deposit of the redemption moneys with the Trustee not later than the opening of business on
the redemption date and will be of no effect unless such moneys are so deposited.
In addition to the foregoing notice, further notice will be given by the Trustee to any Bond Owner whose
Bond has been called for redemption but who has failed to tender his or her Bond for payment by the date
which is sixty (60) days after the redemption date, but no defect in such further notice will in any manner
defeat the effectiveness of a call for redemption.
The Authority shall have the right to rescind any redemption from optional prepayment under the Fiscal
Agent Agreement by written notice to the Trustee on or prior to the date fixed for redemption. Any notice
of such redemption shall be cancelled and annulled if for any reason funds will not be or are not available
on the date fixed for redemption for the payment in full of the Bonds then called for redemption, and such
cancellation shall not constitute an Event of Default under the Indenture. The Authority and the Trustee
shall have no liability to the Owners or any other party related to or arising from such rescission of
redemption. The Trustee shall mail notice of such rescission of redemption in the same manner as the
original notice of redemption was sent.
Effect of Redemption
The rights of a Bond owner to receive interest will terminate on the date, if any, on which the Bond is to
be redeemed pursuant to a call for redemption. The Indenture contains no provisions requiring any
publication of notice of redemption, and Bond Owners must maintain a current address on file with the
Trustee to receive any notices of redemption.
Partial Redemption
In the event only a portion of any Bond is called for redemption, then upon surrender of such Bond the
Authority will execute and the Trustee will authenticate and deliver to the Bond Owner thereof, at the
expense of the Authority, a new Bond or Bonds of the same maturity date, of authorized denominations in
an aggregate principal amount equal to the unredeemed portion of the Bond to be redeemed.
INVESTMENT OF FUNDS
All moneys in any of the funds or accounts established with the Trustee pursuant to the Indenture, or to be
held by the Fiscal Agent pursuant to the Fiscal Agent Agreement, will be invested solely in Permitted
Investments (as defined in the Indenture), as directed pursuant to the Written Request of the Authority or
the District filed with the Trustee or the Fiscal Agent at least two (2) Business Days (as defined in the
Indenture) in advance of the making of such investments. In the absence of any such Written Request, the
Trustee will invest any such moneys in money market funds. Obligations purchased as an investment of
moneys in any fund shall be deemed to be part of such fund or account. For the purpose of determining
the amount in any fund, the value of Permitted Investments credited to such fund will be calculated at the
market value thereof (excluding any accrued interest).
ADDITIONAL OBLIGATIONS
The Authority
Except for refunding purposes, additional bonds secured by the Revenues are not authorized.
The District
The qualified electors within Improvement Area D authorized bonded indebtedness in the amount of
$24,000,000. Pursuant to the provisions of the Fiscal Agent Agreement, the District on behalf of
Improvement Area D is authorized to issue Additional District Bonds for Improvement Area D (not to
35
exceed $16,315,000 *) and currently expects to issue Additional District Bonds to finance facilities
pursuant to use provisions below.
Additional .District Bonds. The District covenants that any Additional District Bonds payable out of the
Special Taxes of Improvement Area D of the District in whole or in part shall be issued in accordance
with the following:
(a) The amount of such Additional District Bonds shall not, together with all other 2014 District
Bonds and Additional District Bonds then Outstanding, exceed the total amount of bonded
indebtedness authorized to be issued by the District on behalf of Improvement Area D; and
(b) The District shall be in compliance with all covenants set forth in the Fiscal Agent
Agreement and a certificate of the District to that effect shall have been filed with the City
Clerk on behalf of the District; provided, however, that Additional District Bonds may be
issued notwithstanding that the District is not in compliance with all such covenants so long
as immediately following the issuance of such Additional District Bonds, the District will be
in compliance with all such covenants; and
(c) The District shall have received the following documents, all of such documents dated or
certified, as the case may be, as of the date of delivery of such Additional District Bonds by
the Fiscal Agent (unless the Fiscal Agent shall accept any of such documents bearing a prior
date):
(1) An opinion of Bond Counsel and /or counsel to the City to the effect that (a) the District
has the right and power under• tl:e Act *o A ecutP and derive, +rA Supplemental AgrAA,
r V 4 1ecute 11 11 Vl the 1Vllll' rimnent
relating to such Additional District Bonds, and such Supplemental Agreement has been duly
and lawfully adopted, executed and delivered by the District, is in full force and effect and is
valid and binding upon the District and enforceable in accordance with its terms (except as
enforcement may be limited by bankruptcy, insolvency, reorganization and other similar laws
relating to the enforcement of creditors' rights); (b) the Fiscal Agent Agreement creates the
valid pledge which it purports to create of the Special Tax Revenues and Redemption
Revenues as provided in the Fiscal Agent Agreement, subject to the application thereof to the
purposes and on the conditions permitted by the Fiscal Agent Agreement; and (c) such
Additional District Bonds are valid and binding limited obligations of the District, enforceable
in accordance with their terms (except as enforcement may be limited by bankruptcy,
insolvency, reorganization and other similar laws relating to the enforcement of creditors'
rights) and the terms of the Fiscal Agent Agreement and the applicable Supplemental
Agreement thereto and entitled to the benefits of the Fiscal Agent Agreement and the
applicable Supplemental Agreement thereto, and such Additional District Bonds have been
duly and validly authorized and issued in accordance with the Act (or other laws), the Fiscal
Agent Agreement and the applicable Supplemental Agreement thereto and further opinion of
Bond Counsel to the effect that, assuming compliance by the District with certain tax
covenants, the issuance of the Additional District Bonds will not adversely affect the exclusion
from gross income for federal income tax purposes of interest on any Outstanding 2014
District Bonds and Additional District Bonds theretofore issued or the exemption from State
of California personal income taxation of interest on any Outstanding 2014 District Bonds and
Additional District Bonds theretofore issued; and
(2) A certificate of an Independent Financial Consultant certifying as of the closing date that
(a) the ratio of the appraised or assessed value (or a combination thereof) of the property
included within Improvement Area D to the amount of any governmental lien which will be on
the property after the issuance of the Additional District Bonds, including the amount of any
assessment bonds or bonds issued under the Act, is not less than 4:1 and (b) the total Net
Taxes which could be generated by the District on behalf of Improvement Area D by the levy
of the Special Taxes at the maximum level allowed under the Rate and Method of
36
Apportionment (subject to the City's policies relating to community facilities districts, the Act
and the applicable resolutions of the District) on all then taxable property in any fiscal year, is
at least 1.10 times Maximum Annual Debt Service on all Outstanding District Bonds
(including Additional District Bonds previously issued and the Additional District Bonds
proposed to be issued); and
No Additional District Bonds shall be issued later than 18 months from the issuance of the
final certificate of occupancy for a new home within Improvement Area D unless, prior to
such period of time, the District elects to extend such period.
37
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REPAYMENT OF THE BONDS
General
The Bonds are payable solely from and secured by payment of the 2014 District Bonds, the Cash Flow
Management Fund and the Reserve Account held pursuant to the Indenture and certain investment
earnings on the funds and accounts held under the Indenture. In addition, the Bonds may be payable from
any available surplus revenues with respect to other series of local agency revenue bonds in the event of a
shortfall of Revenues available to pay debt service.
The Bonds are special obligations of the Authority. The Bonds shall not be deemed to constitute a
debt or liability of the State or of any political subdivision thereof, other than the Authority. The
Authority shall only be obligated to pay the principal of the Bonds and the interest thereon from the
funds described herein, and neither the faith and credit nor the taxing power of the City or the
District, except to the limited extent described herein, the State or any of its political subdivisions is
pledged to the payment of the principal of or the interest on the Bonds. The Authority has no
taxing power.
Application of Revenues, Flow of Funds
Revenue Fund. The Trustee will deposit all Revenues (excluding Redemption Revenues) upon receipt
thereof in a special fund designated as the "Revenue Fund' which the 'Trustee shall establish, maintain
and hold in trust under the Indenture.
Deposit of Revenues; Bond Fund. The Trustee will establish, maintain and hold in trust a separate fund
entitled the "Bond Fund." Within the Bond Fund, the Trustee will establish, maintain and hold in trust
separate special accounts entitled "Interest Account" and "Principal Account" and the "Reserve Account."
On or before each Interest Payment Date, the Trustee shall transfer from the Revenue Fund for deposit
into the Bond Fund the amounts and in the priority set forth below.
Application of Revenues; Bond Fund. On or before each Interest Payment Date, the Trustee will
transfer from the Revenue Fund and deposit into the Bond Fund and the following special accounts
therein, the following amounts in the following order of priority, the requirements of each such special
account (including the making up of any deficiencies in any such account resulting from lack of Revenues
sufficient to make any earlier required deposit) at the time of deposit to be satisfied before any transfer is
made to any account subsequent in priority;
Interest Account. On or before each Interest Payment Date, the Trustee shall deposit in the Interest
Account an amount required to cause the aggregate amount on deposit in the Interest Account to
equal the amount of interest becoming due and payable on such Interest Payment Date on all
Outstanding Bonds. No deposit need be made into the Interest Account if the amount contained
therein is at least equal to the interest becoming due and payable upon all Outstanding Bonds on
such Interest Payment Date. All moneys in the Interest Account shall be used and withdrawn by the
Trustee solely for the purpose of paying the interest on the Bonds as it shall become due and
payable (including accrued interest on any Bonds redeemed prior to maturity).
Principal Account. On or before each date on which the principal of the Bonds shall be payable,
the Trustee shall deposit in the Principal Account an amount required to cause the aggregate amount
on deposit in the Principal Account to equal the aggregate amount of principal (including sinking
fund payments) coming due and payable on such date on the Bonds. All moneys in the Principal
Account shall be used and withdrawn by the Trustee solely for the purpose of paying the principal
of the Bonds (including sinking fund payments).
t:
Reserve Account. All amounts on deposit in the Revenue Fund on or before each Interest Payment
Date, to the extent not required to pay any interest on or principal of any Outstanding Bonds then
having come due and payable, shall be credited to the replenishment of the Reserve Account in an
amount sufficient to maintain the Reserve Requirement therein.
Surplus. All remaining amounts on or ASAP after September 2 (or the next Business Day to the extent
September 2 is not a Business Day) of each year, commencing September 2, 2014, on deposit in the
Revenue Fund shall be transferred to the Cash Flow Management Fund.
Reserve Account
In order to secure further the timely payment of principal of and interest on the Bonds, the Authority is
required, upon delivery of the Bonds, to deposit in the Reserve Account for the Bonds an amount equal to
the Reserve Requirement. The Reserve Requirement means with respect to the Bonds the least of (i) 10%
of the proceeds of the Bonds (within the meaning of section 148 of the Code), (ii) Maximum Annual Debt
Service, or (iii) 125% of the average Annual Debt Service. Provided, however, the Reserve Requirement
on any calculation date shall not be greater than the Reserve Requirement amount on the closing date.
The amount of Bond proceeds deposited into the Reserve Account will be in an amount equal to
$704,878.95* (see "ESTIMATED SOURCES AND USES OF FUNDS — THE BONDS" herein). Thereafter, the
Authority is required to deposit any amounts received from the District for replenishment of the Reserve
Account and maintain an amount of money equal to the Reserve Requirement in the Reserve Account at
all times while the Bonds are Outstanding. Amounts in the Reserve Account will be used to pay debt
service on the Bonds to the extent other moneys are not available therefor (including amounts in the Cash
Flow Management Fund). Amounts in the Reserve Account in excess of the Reserve Requirement will be
deposited into the Revenue Fund. Amounts in the Reserve Account may be used to pay the final year's
debt service on the Bonds (see "APPENDIX A - SUMMARY OF THE INDENTURE "). Upon redemption,
amounts on deposit in the Reserve Account shall be reduced (to an amount not less than the Reserve
Requirement) and excess money shall be transferred to the Redemption Fund and used for the redemption
of Bonds.
Cash Flow Management Fund
On or ASAP after September 2 of each year (or the next business day to the extent September 2 is not a
business day), commencing September 2, 2014, the Trustee shall transfer any amounts remaining in the
Revenue Fund to the Cash Flow Management Fund (as defined in the Indenture). The Cash Flow
Management Fund may also be funded at the election of the Authority from any available surplus
revenues with respect to other series of local agency revenue bonds issued by the Authority to the extent
such surplus revenues are loaned to replenish the Cash Flow Management Fund to its requirement.
Amounts, if any, deposited into the Cash Flow Management Fund shall be applied for the following
purposes in the following order of priority:
(i) The Trustee
shall,
prior to any draw on the
Reserve
Account, pay debt service on the
Bonds
to the
extent
Revenues are insufficient
for such
purpose.
Upon the written direction of the Authority, the Trustee shall transfer any amounts in the
Cash Flow Management Fund to the trustee of any other series of local agency revenue
bonds issued by the Authority to the extent any surplus revenues from such other series of
local agency revenue bonds were loaned to replenish the Cash Flow Management Fund.
* Preliminary, subject to change.
t
(iii) Upon the written direction of the Authority, the Trustee shall transfer any amounts in the
Cash Flow Management Fund to the trustee of any other series of local agency revenue
bonds issued by the Authority in an amount estimated by the Authority to be necessary to
prevent a shortfall in the amount required to pay debt service on such other series of local
agency revenue bonds or to the fiscal agent of any local agency bonds issued by the City
an amount estimated by the Authority necessary to prevent a shortfall in the amount
required to pay debt service on such local agency bonds; all such transfers shall be treated
as loaned amounts.
(iv) Upon the written direction of the Authority, the Trustee shall transfer such amounts as
may be directed by the Authority for deposit in the Redemption Fund.
(v) On or ASAP after September 2 of each year, commencing September 2, 2014, upon the
written direction of the Authority, the Trustee shall transfer all remaining amounts in the
Cash Flow Management Fund in excess of the Cash Flow Management Fund Requirement
to the Fiscal Agent for the District Bonds for deposit in the Delinquency Management
Fund held under the Fiscal Agent Agreement.
The Cash Flow Management Fund Requirement is 15% ($111,566.25 *) of maximum annual debt service
on the Bonds. There will not be an initial deposit into the Cash Flow Management Fund. The Cash Flow
Management Fund is expected to be funded during the period of time that interest is funded on the 2014
District Bonds,
The Cash .Flo..' Management Fund is pledged as security to the Bonds.
Redemption Fund
The Trustee will establish as a separate fund to be called the "Redemption Fund," to the credit of which
the Authority shall deposit, immediately upon receipt, all Redemption Revenues. Moneys in the
Redemption Fund shall be held in trust by the Trustee for the benefit of the Authority and the Owners of
the Bonds, and shall be used to redeem Bonds (except for mandatory sinking fund redemption) pursuant
to the Indenture.
REPAYMENT OF'l HE 2014 DISTRICT BONDS
General
The principal of, premium, if any, and the interest on the District Bonds, and the Administrative Expenses
of the District, are payable from the Special Taxes collected on real property within Improvement Area D
of the District and funds, including any amounts available in the Delinquency Management Fund (as
defined in the Fiscal Agent Agreement), held by the Fiscal Agent and available for such purposes pursuant
to the Fiscal Agent Agreement.
The District Bonds are limited obligations of the District payable from the proceeds of Special Taxes
levied on certain parcels within Improvement Area D of the District. The District Bonds shall not
be deemed to constitute a debt or liability of the City, the State or of any political subdivision
thereof, other than the District. Neither the faith and credit nor the taxing power of the City, the
District, the State or any of its political subdivisions is pledged to the payment of the principal of or
the interest on the District Bonds except for the limited extent provided herein.
* Preliminary, subject to change.
.o
Special Taxes
The Special Taxes are excepted from the tax rate limitation of California Constitution Article XIIIA
pursuant to Section 4 thereof as a "special tax" authorized by at least a two - thirds vote of the qualified
electors as set forth in the Act. Consequently, the City Council of the City (the "City Council ") on behalf
of the District has the power and is obligated by the Fiscal Agent Agreement to cause the levy and
collection of the Special Taxes.
The District has covenanted in the Fiscal Agent Agreement to levy (subject to the limits set forth in the
Rate and Method of Apportionment) in each fiscal year the Special Taxes within Improvement Area D of
the District in an amount sufficient to pay the debt service on the District Bonds, including an allowance
for delinquencies, and the cost of providing certain administrative expenses of the District and the
Authority.
The Special Taxes are to be levied and collected according to the Rate and Method of Apportionment and
the Act as described in the section entitled "RATE AND METHOD OF APPORTIONMENT OF THE SPECIAL
TAX" herein.
Although the Special Taxes will constitute a lien on parcels of real property within Improvement Area D
of the District, they do not constitute a personal indebtedness of the owner(s) of real property within
Improvement Area D of the District. There is no assurance that the property owner(s), or any successors
and /or assigns thereto or subsequent purchaser(s) of land within Improvement Area D of the District will
be able to pay the annual Special Taxes or if able to pay the Special Taxes that they will do so (see "BOND
OWNERS' RISKS" herein).
The Special Taxes initially are required to be collected by the County of Riverside Tax Collector in the
same manner and at the same time as regular ad valorem property taxes are collected by the Tax Collector
of the County. When received, such Special Taxes will be transferred by the City to the Fiscal Agent as
soon as possible after receipt. Moneys in the Special Tax Fund (as defined in the Fiscal Agent
Agreement) are held in trust for the benefit of the District and owners of the District Bonds and disbursed
pursuant to the Fiscal Agent Agreement.
Application of Special Taxes; Flow of Funds
Bond Fund. The Fiscal Agent will deposit all Special Taxes with respect to the District Bonds, when
received from the City, into the Special Tax Fund (exclusive of Redemption Revenues received which
shall be deposited into the Redemption Fund). The Fiscal Agent, from time to time, pursuant to a written
direction of the District will transfer to the Administrative Expense Fund (as defined in the Fiscal Agent
Agreement) an amount for budgeted Administrative Expenses.
At least ten (10) Business Days prior to each Interest Payment Date, the Fiscal Agent will transfer from
the Special Tax Fund for deposit into the Bond Fund which consists of the following accounts, the
following amounts in the following order of priority, the requirements of each such account (including the
making up of any deficiencies in any such account resulting from lack of Special Taxes sufficient to make
any earlier required deposit) at the time of deposit to be satisfied before any transfer is made to any
account subsequent in priority:
(i) The Fiscal Agent will deposit into the Interest Account an amount which, together with the amount
then on deposit therein is sufficient to cause the aggregate amount on deposit in the Interest Account to
equal the amount then required to make the payment of interest on the District Bonds on the next
Interest Payment Date.
(ii) The Fiscal Agent will deposit into the Principal Account an amount which, together with the
amount then on deposit therein is sufficient to cause the aggregate amount on deposit in the Principal
Account to equal the amount of principal or sinking account payment coming due and payable on the
IN
next Interest Payment Date on the Outstanding District Bonds upon the stated maturity or redemption
thereof.
Delinquency Management Fund
On or ASAP after September 2 of each year, commencing September 2, 2014, the Fiscal Agent shall
transfer any amounts remaining in the Special Tax Fund to the Delinquency Management Fund. Special
Taxes, if any, deposited into the Delinquency Management Fund shall be applied for the following
purposes in the following order of priority:
G) The Fiscal Agent shall transfer to the appropriate account within the Bond Fund to pay debt
service on the District Bonds to the extent Special Taxes are insufficient for such purpose.
(ii) The Fiscal Agent shall transfer to the Administrative Expense Fund in an amount determined
by the District to pay Administrative Expenses to the extent amounts in the Administrative
Expense Fund are insufficient therefore.
(iii) Upon the written direction of the District, the Fiscal Agent shall transfer all remaining
amounts in the Delinquency Management Fund in excess of the Delinquency Management
Fund Requirement, to the Special Mandatory Redemption Account of the Redemption Fund
for redemption of the District Bonds on the next redemption date for which notice of
redemption can be timely given, unless the Fiscal Agent has received written direction from
the District to expend such remaining funds held in the Delinquency Management Fund for
any lawful purposes of the District including, but not limited to, paying costs of public
capital improvements or reducing the Special Taxes which are to be levied in the current or
the succeeding fiscal year upon the properties which are subject to the Special Tax.
The aggregate Delinquency Management Fund Requirement for the District Bonds is 15% ($111,566.25*
for the 2014 District Bonds) of Maximum Annual Debt Service on the District Bonds. There will not be
an initial deposit into the Delinquency Management Fund. The Delinquency Management Fund is
expected to be funded during the period of time that interest is funded on the 2014 District Bonds,
The Delinquency Management Fund is not pledged as security to the 2014 District Bonds.
Redemption Fund
The Fiscal Agent will establish a "Redemption Fund" in which there shall be established and created an
Optional Redemption Account and a Special Mandatory Redemption Account, to the credit of which the
District or the City, on behalf of the District, will deposit, immediately upon receipt, all Redemption
Revenues received by the District or the City on behalf of the District. Moneys in the Redemption Fund
will be disbursed as provided below and, pending any disbursement, shall be subject to a lien in favor of
the Owners of the District Bonds.
1. All prepayments of Special Taxes, any amounts transferred pursuant to the Indenture for the
redemption of District Bonds, and amounts transferred from the Delinquency Management Fund for
the redemption of the District Bonds will be deposited in the Special Mandatory Redemption Account
to be used to redeem District Bonds on the next date for which notice of redemption can timely be
given.
.2_All moneys deposited for the optional redemption of District Bonds will be deposited into the
Optional Redemption Account to be used to redeem the District Bonds on the next date for which
notice of redemption can timely be given.
* Preliminary, subject to change.
42
Covenant for Superior Court Foreclosure
Pursuant to Section 53356.1 of the Act, in the event of a delinquency in the payment of the Special Taxes
levied on a parcel, the District may order the institution of a superior court action to foreclose the lien
therefor, provided such action is brought not later than four years after the final maturity date of the
District Bonds. In such an action, the real property subject to the unpaid amount may be sold at a judicial
foreclosure sale.
The District will review the public records of the County of Riverside, California, in connection with the
collection of the Special Tax not later than July 1 of each year to determine the amount of Special Tax
collected in the prior Fiscal Year; and with respect to individual delinquencies, the District will send or
cause to be sent a notice of delinquency and a demand for immediate payment thereof to the property
owner within 45 days of such determination, and if the District determines that any single property owner
subject to the Special Tax is delinquent in the payment of Special Taxes in the aggregate of 10,000 or
more or delinquent in the payment of three consecutive installments of Special Tax or that the delinquent
Special Taxes represent more than 5% of the aggregate Special Taxes levied within Improvement Area D
of the District or if there has been a draw on the funds on deposit in the Reserve Account established
under the Authority Indenture, and if the delinquency remains uncured, the District will cause judicial
foreclosure proceedings to be filed in the superior court. Prior to commencement of any judicial
foreclosure proceedings, the District shall continue with its efforts to collect the delinquent Special Taxes
by sending subsequent notice of delinquency and a demand for immediate payment thereof.
Notwithstanding any provision of the Act or other law of the State to the contrary, in connection with any
foreclosure related to delinquent Special Taxes:
(A) The City, or the Fiscal Agent, is expressly authorized under the Fiscal Agent Agreement to
credit bid at any foreclosure sale, without any requirement that funds be placed in the District
Bond Fund or otherwise be set aside in the amount so credit bid, in the amount specified in
Section 53356.5 of the Act or such lesser amount as determined under clause (B) below or
otherwise under Section 53356.6 of the Act.
(B) The District may permit, in its sole and absolute discretion,' property with delinquent Special
Tax payments to be sold for less than the amount specified in Section 53356.5 of the Act (but
not for less than the amount of delinquent scheduled principal and interest without written
consent of the Bond Owners), if it determines that such sale is in the interest of the Bond
Owners. The Bond Owners, by their acceptance of the District Bonds, consent to such sale for
such lesser amounts (as such consent is described in Section 53356.6 of the Act), and release the
District, the City, and their officers and agents from any liability in connection therewith.
(C) The District is expressly authorized under the Fiscal Agent Agreement to use amounts in the
Special Tax Fund to pay costs of foreclosure of delinquent Special Taxes.
(D) The District may forgive all or any portion of the Special Taxes levied or to be levied on any
parcel in Improvement Area D of the District, so long as the District determines that such
forgiveness is not expected to adversely affect its obligation to pay principal of and interest on
the District Bonds under the Fiscal Agent Agreement.
No assurances can be given that the real property subject to foreclosure and sale at a judicial foreclosure
sale will be sold or, if sold, that the proceeds of such sale will be sufficient to pay any delinquent Special
Tax installment. Although the Act authorizes the District to cause such an action to be commenced and
diligently pursued to completion, the Act does not require the District or the City to purchase or otherwise
acquire any lot or parcel of property sold at the execution sale pursuant to the judgment in any such action
IT
if there is no other purchaser at such sale, nor does the Act specify the priority relationship, if any,
between the Special 'Taxes and other taxes and assessment liens.
The property in Improvement Area D of the District is
in the payment of Special Taxes in Improvement Area
in the payment of other overlapping liens. Since the
parity with the Special Taxes, the foreclosure of the li
of the other overlapping special districts.
also subject to several overlapping liens. A default
D of the District is also likely to result in a default
lien of other overlapping special districts are on a
an of the Special Taxes will not extinguish the lien
As a result of the foregoing, in the event of a delinquency or nonpayment by the property owners of one
or more Special Tax installments, there can be no assurance that there would be available to the District
sufficient funds to pay when due the principal of, interest on and premium, if any, on the District Bonds
(see "BOND OWNERS' RISKS — THE 2014 DISTRICT BONDS — Risk Factors Relating to the Levying and
Collection of the Special Taxes — Foreclosure and Sale Proceedings," "BOND OWNERS' RISKS — THE 2014
DISTRICT BONDS — Risk Factors Relating to the Levying and Collection of the Special Taxes - Bankruptcy
and Foreclosure Delays" and "BOND OWNERS' RISKS — THE DISTRICT BONDS — Risk Factors Relating to
the Levying and Collection of the Special Taxes - Property Controlled by Federal Deposit Insurance
Corporation and Other Federal Agencies" herein).
M
BOND OWNERS' RISKS
BEFORE PURCHASING ANY OF THE BONDS, PROSPECTIVE INVESTORS AND THEIR PROFESSIONAL
ADVISORS SHOULD CAREFULLY CONSIDER, AMONG OTHER THINGS, THE FOLLOWING RISK
FACTORS, WHICH ARE NOT MEANT TO BE AN EXHAUSTIVE LISTING OF ALL RISKS ASSOCIATED
WITH THE PURCHASE OF THE BONDS. MOREOVER, THE ORDER OF PRESENTATION OF THE RISK
FACTORS DOES NOT NECESSARILY REFLECT TIE ORDER OF THEIR IMPORTANCE.
The purchase of the Bonds involves investment risk. If a risk factor materializes to a sufficient degree, it
could delay or prevent payment of principal of and/or interest on the Bonds. Such risk factors include,
but are not limited to, the following matters.
THE BONDS
The ability of the Authority to pay the principal and interest on the Bonds depends upon the receipt by the
Trustee of sufficient Revenues from repayment of the 2014 District Bonds, amounts on deposit in the
Cash Flow Management Fund, the Reserve Account and interest earnings on amounts in the funds and
accounts for the Bonds established by the Indenture. A number of risks that could prevent the District
from repaying the 2014 District Bonds are outlined below.
No Liability of the Authority to the Bond Owners
Except as expressly provided in the Indenture, the Authority will not have any obligation or liability to the
Owners of the Bonds with respect to the payment when due of the District Bonds, or with respect to the
observance or performance by the District of other agreements, conditions, covenants and terms required
to be observed or performed by it under the 2014 District Bonds, the Fiscal Agent Agreement or any
related documents or with respect to the performance by the Trustee of any duty required to be performed
by it under the Indenture.
Loss of Tax Exemption
As discussed under the caption "LEGAL MATTERS - TAX MATTERS" herein, interest on the Bonds could
become includable in gross income for purposes of federal income taxation retroactive to the date the
Bonds were issued as a result of future acts or omissions of the Authority or the District in violation of
their covenants contained in the Indenture and the Fiscal Agent Agreement. Should such an event of
taxability occur, the Bonds are not subject to special redemption or any increase in interest rate and will
remain outstanding until maturity or until redeemed under one of the redemption provisions contained in
the Indenture.
IRS Audits
The Internal Revenue Service (the "IRS ") has initiated an expanded program for the auditing of tax -
exempt bond issues, including both random and targeted audits. It is possible that the Bonds will be
selected for audit by the IRS. It is also possible that the market value of the Bonds might be affected as a
result of such an audit of the Bonds (or by an audit of similar bonds).
Early Bond Redemption
The Bonds are subject to optional, special mandatory and mandatory redemption prior to their stated
maturities. Special mandatory redemption may occur on any date commencing September 1, 2014 (see
"THE BONDS - REDEMPTION" herein).
The owner
of a
parcel for
which a building
permit has
been issued may voluntarily
prepay
the
Special Tax
obligation
for
a parcel
in whole or part
at certain
times as permitted in the
Rate
and
Method of
I
Apportionment. Any prepayment of Special Taxes will result in redemption of the 2014 District Bonds.
commencing September 1, 2014, and correspondingly the Bonds.
Secondary Market
There can be no guarantee that there will be a secondary market for the Bonds or, if a secondary market
exists, that such Bonds can be sold for any particular price. Occasionally, because of general market
conditions or because of adverse history or economic prospects connected with a particular issue,
secondary marketing practices in connection with a particular issue are suspended or terminated.
Additionally, prices of issues for which a market is being made will depend upon then prevailing
circumstances. Such prices could be substantially different from the original purchase price.
THE 2014 DISTRICT BONDS
Risk Factors Relating to Real Estate Market Conditions
Risks of Real Estate Secured Investments Generally. The Bond Owners will be subject to the risks
generally incident to an investment secured by real estate, including, without limitation, (i) adverse
changes in local market conditions, such as changes in the market value of real property in the vicinity of
Improvement Area D of the District, the supply of or demand for competitive properties in such area, and
the market value of residential property in the event of sale or foreclosure; (ii) changes in real estate tax
rate and other operating expenses, governmental rules (including, without limitation, zoning laws and
laws relating to endangered species and hazardous materials) and fiscal policies; (iii) natural disasters
(including, without limitation, earthquakes, wild fires and floods), which may result in uninsured losses
and (iv) the imposition of overlapping debt by special districts or other public agencies.
Risk Factors Relating to Land Values
Land Values. If a property owner defaults in the payment of the Special Tax, the District's only remedy
is to commence foreclosure proceedings against the defaulting property owner's real property within
Improvement Area D of the District for which the Special Tax has not been paid in an attempt to obtain
funds to pay the delinquent Special Tax. Therefore, the value of the land and improvements within
Improvement Area D of the District is a critical factor in determining the investment quality of any series
of bonds issued by or for the District. Reductions in property values within Improvement Area D of the
District due to a downturn in the economy or the real estate market, events such as earthquakes, droughts,
or floods, stricter land use regulations or other events may adversely impact the value of the security
underlying the Special Tax,
The District had the following study prepared in order to estimate the current market value of land in
Improvement Area D of the District.
1. Appraisal Report Lake Elsinore Financing Authority Local Agency Revenue Bonds (Canyon Hills
IA D), 2014 Series A, prepared by Harris Realty Appraisal, Newport Beach, California (the
"Appraiser "), with a November 1, 2013, date of value (the "Appraisal Report" herein).
The purpose of the Appraisal was to estimate the bulk value of land within improvement Area D of the
District in its "as is" condition.
The Appraisal Report was prepared in accordance with and subject to the requirements of the Appraisal
Standards for Land Secured Financing as published by the California Debt and Investment Advisory
Commission; the Uniform Standards of Professional Appraisal Practice (USPAP) of the Appraisal
Foundation; and the Code of Professional Ethics and the Standards of Professional Appraisal Practice of
the Appraisal Institute.
On the basis of the assumptions and limitations described in the Appraisal Report, the Appraiser has
estimated the "As is" Minimum Market Value of the land and improvements in Improvement Area D of
the District, as of November 1, 2013 to be as shown below.
Total Improvement Area D of the District: $74,945,000
lR
103 Individual Homeowners: $30,500,000
Pardee Homes (675 parcels): $44,445,000
Pursuant to the Act and the Rate and Method of Apportionment, the principal amount of the 2014 District
Bonds is not allocable among the parcels in Improvement Area D of the District. Upon sale of parcels,
the buyer acquires the property subject to the unpaid portion of any special taxes and assessments levied
against the parcel purchased.
Potential purchasers of the Bonds should be aware that if a parcel bears a Special Tax liability in
excess of its market value, then there may be little incentive for the owner of the parcel to pay the
Special Taxes on such parcel and little likelihood that such property would be purchased in a
foreclosure sale.
Prospective purchasers of the Bonds should not assume that the land and improvements could be sold for
the appraised amount at a foreclosure sale for delinquent Special Taxes. In particular, the values of
individual properties in Improvement Area D of the District will vary, in some cases significantly. The
actual value of the land is subject to future events which might render invalid some or all of the basic
assumptions of the Appraiser. The future value of the land can be expected to fluctuate due to many
different, not fully predictable, real estate related investment risk factors, including, but not limited to:
general tax law changes related to real estate, changes in competition, general area employment base
changes, population changes, changes in real estate related interest rates affecting general purchasing
power, advertising, changes in allowed zoning uses and density, natural disasters such as floods,
earthquakes and landslides, and similar factors.
Appraisals in general are the result of an inexact process, and estimated market value is dependent, in
part, upon assumptions which may or may not be realized and upon market conditions and perceptions of
market value, which are likely to change over time. The appraisal valuations represent opinions only and
are not intended to be absolutes or assurances of specific resale values. If more than one appraiser were
employed, it is reasonable to assume that a reasonable range of value opinions on the land and
improvement value within Improvement Area D of the District would be reflected depending upon
personal professional interpretation of data, facts and circumstances reviewed and assumptions employed.
Prospective purchasers should not assume that the land could be sold for the appraised amount at a
foreclosure sale for delinquent Special Taxes.
A copy of the Appraisal Report is included as Appendix C hereto. The summary herein of some of the
conclusions in the Appraisal Report does not purport to be complete. Reference is made to the Appraisal
Report for further information. The District makes no representations as to the value of the real property
within Improvement Area D of the District, and prospective purchasers of the Bonds are referred to the
Appraisal Report referenced above in evaluating the value of real property within Improvement Area D of
the District.
Earthquakes. Southern California is among the most seismically active regions in the United States of
America. The occurrence of seismic activity in Improvement Area D of the District could result in
substantial damage to properties in Improvement Area D of the District which, in turn, could substantially
reduce the value of such properties and could affect the ability or willingness of the property owners to
pay their Special Taxes. Any major damage to structures as a result of seismic activity could result in a
greater reliance on Undeveloped Property in the payment of Special Taxes. In the event of a severe
earthquake, there may be significant damage to both property and infrastructure in Improvement Area D
of the District. As a result, a substantial portion of the property owners may be unable or unwilling to pay
the Special Taxes when due. In addition, the value of land in Improvement Area D of the District could
be diminished in the aftermath of such an earthquake, reducing the resulting proceeds of foreclosure sales
in the event of delinquencies in the payment of Special Taxes.
47
Certain procedures and design standards are required to be followed during the construction of buildinjzs
within Improvement Area D of the District to ensure that each building is designed and constructed to
meet, at a minimum, the highest seismic standards required by law.
Geologic, Topographic and Climatic Conditions. The value of the Taxable Property in Improvement
Area D of the District in the future can be adversely affected by a variety of additional factors,
particularly those which may affect infrastructure and other public improvements and private
improvements on the parcels of Taxable Property and the continued habitability and enjoyment of such
private improvements. Such additional factors include, without limitation, geologic conditions such as
earthquakes and volcanic eruptions, topographic conditions such as earth movements, landslides,
liquefaction, floods or fires, and climatic conditions such as tornadoes, droughts, and the possible
reduction in water allocation or availability. Some homes lie in a hilly area and grading and slopes are to
be constructed in a manner expected to remain stable. It is possible that one or more of the conditions
referenced above may occur and may result in damage to improvements of varying seriousness, that the
damage may entail significant repair or replacement costs and that repair or replacement may never occur
either because of the cost or because repair or replacement will not facilitate habitability or other use, or
because other considerations preclude such repair or replacement. Under any of these circumstances, the
value of the Taxable Property may well depreciate or disappear.
Risk Factors Relating to the Levying and Collection of the Special Taxes
Insufficiency of Special Taxes. As discussed herein, the amount of Special Taxes that are collected
within Improvement Area D of the District could be insufficient to pay principal of, interest and premium,
if any, on the District Bonds due to nonpayment of the Special Taxes levied aiid insufiiCieiit yr rack of
proceeds received from a foreclosure sale of land within Improvement Area D of the District.
The District has covenanted in the Fiscal Agent Agreement to institute foreclosure proceedings upon
delinquencies in the payments of the Special Taxes as described herein and to sell any real property with a
lien of delinquent Special Taxes to obtain funds to pay debt service on the District Bonds (see "DISTRICT
ADMINISTRATION — DELINQUENCIES" herein). If foreclosure proceedings are ever instituted, any holder
of a mortgage or deed of trust could, but would not be required to, advance the amount of delinquent
Special Taxes to protect its security interest. See "SOURCES OF PAYMENT FOR THE BONDS - REPAYMENT
OF THE 2014 DISTRICT BONDS - Covenant for Superior Court Foreclosure" herein for provisions which
apply in the event foreclosure is required and which the District is required to follow in the event of
delinquency in the payment of Special Taxes,
Maximum Rates. Within the limits of the Rate and Method of Apportionment, the District may adjust
the Special Tax levied on all property in Improvement Area D of the District to provide an amount
required to pay debt service on the District Bonds and other obligations of the District, and the amount, if
any, necessary to pay all annual Administrative Expenses and make rebate payments to the United States
government. However, the amount of the Special Tax that may be levied against particular categories of
property in Improvement Area D of the District is subject to the maximum rates provided in the Rate and
Method of Apportionment. There is no assurance that the maximum rates will at all times be sufficient to
pay the amounts required to be paid by the Fiscal Agent Agreement (see "THE SPECIAL TAXES —
MAXIMUM SPECIAL TAX" herein).
No Personal Liability for Special Taxes. No property owner, including Pardee Homes, will be
personally liable for the payment of the Special Taxes to be applied to pay the principal of and interest on
the District Bonds. In addition, there is no assurance that any property owner will be able to pay the
Special Taxes or that any property owner will pay such Special Taxes even if it is financially able to do
so.
Payment of the Special Taxes is dependent upon the current and future property owners' ability or
willingness to pay Special Taxes assessed on their respective property in Improvement Area D of the
District (see "BOND OWNERS' RISKS — THE 2014 DISTRICT BONDS — Risk Factors Relating to Real Estate
Market Conditions — Land Values" herein). The only asset of the current property owners or future
property owners which constitutes security for the District Bonds is their property holdings assessed
within Improvement Area D of the District. There are expected to be transfers of ownership of the
property within Improvement Area D of the District to individual owners of single family homes during
the development of the land within Improvement Area D of the District.
Concentration of Ownership. As of November 1, 2013, there was one major property owner (Pardee
Homes — 675 lots) and 103 individual homeowners within Improvement Area D of the District. Payment
of the Special Taxes is dependent upon the current and future property owners' willingness to pay Special
Taxes assessed on their property in Improvement Area D of the District (see "BOND OWNERS' RISKS —
TI-IE 2014 DISTRICT BONDS — Risk Factors Relating to Real Estate Market Conditions — Values" and " -No
Personal Liability for Special Taxes" above). The only asset of the current property owners or future
property owners which constitutes security for the District Bonds is their property holdings assessed
within Improvement Area D of the District. There are expected to be transfers of ownership of the
property within Improvement Area D of the District to individual owners of single family homes during
the development of the land within Improvement Area D of the District. During the period of time a
significant portion of the land in Improvement Area D of the District is owned by a limited number of
property owners there is a substantial risk to the Bond Owners that such limited number of owners will
not pay their Special Taxes.
No assurance can be made that the Pardee Homes or its successors, will complete the remaining
construction and development in Improvement Area D of the District as described in this Official
Statement. As a result, no assurance can be given that the Pardee Homes, or its successors, will pay
Special Taxes in the future or that they will be able to pay such Special Taxes on a timely basis (see
"Bankruptcy and Foreclosure Delays" below).
Special Taxes Are Not Within Teeter Plan. The County has adopted a Teeter Plan as provided for in
Section 4701 et seq. of the California Revenue and Taxation Code, under which a tax distribution
procedure is implemented and secured roll taxes are distributed to taxing agencies within the County on
the basis of the tax levy, rather than on the basis of actual tax collections. However, by policy, the County
does not include assessments, reassessments and special taxes in its Teeter program. The Special Taxes
are not included in the County's Teeter Program.
Riverside County Property Tax Delinquency Rates. Information available to the City indicates that in
recent years the County Assessor's office has experienced (a) delays in processing property ownership
transfers that in many cases have led to property tax bills being sent to former, not current, owners and to
consequent delays in the actual property owners receiving and paying their property taxes, and (b) delays
in processing property tax payments that have led to delays in crediting special taxes toward the accounts
of the appropriate community facilities district. To the extent these increases in delinquencies are
indicative of a trend toward actual property tax delinquencies by homeowners who received property tax
bills, delinquencies in the payment of property taxes (and, if affecting properties within Improvement
Area D of the District, delinquencies in the payment of Special Taxes) may occur and continue at similar
levels or increase in the near future.
Under the Rate and Method of Apportionment, the District has the authority and the obligation to increase
the levy of Special Taxes against property owners in Improvement Area D of the District if and to the
extent required to replenish any Reserve Account to its requirement due to Special Tax delinquencies.
However, the District's ability to increase Special Tax levies for this purpose is limited by two factors:
(a) the Maximum Special Tax set forth in the Rate and Method of Apportionment; and (b) the limitations
on such increases set forth in the Act, which provides that under no circumstances may the Special Tax
levied against any parcel used for private residential purposes be increased as a consequence of
delinquency or default by an owner of any other parcel or parcels within Improvement Area D of the
District by more than 10% in excess of the amount of Special Taxes that would have been levied absent
..
such delinquency or default. Thus, the District may not be able to increase Special Tax levies in future
fiscal years by enough to make up for delinquencies for prior fiscal years (see "DISTRICT
ADMINISTRATION — DELINQUENCIES" herein).
Foreclosure and Sale Proceedings. In order to pay debt service on the District Bonds, it is necessary
that the Special Tax levied against land within Improvement Area D of the District be paid in a timely
manner. The District has covenanted in the Fiscal Agent Agreement under certain conditions to institute
foreclosure proceedings against property with delinquent Special Taxes in order to obtain fiends to pay
debt service on the District Bonds. If foreclosure proceedings were instituted, any mortgage or deed of
trust holder could, but would not be required to, advance the amount of the delinquent Special Tax to
protect its security interest.
In the event such superior court foreclosure is necessary, there could be a delay in principal and interest
payments to the Authority, as the owner of the District Bonds, pending prosecution of the foreclosure
proceedings and receipt of the proceeds of the foreclosure sale, if any. No assurances can be given that
the real property subject to foreclosure and sale at a judicial foreclosure sale will be sold or, if sold, that
the proceeds of such sale will be sufficient to pay any delinquent Special Tax installment. Although the
Act authorizes the District to cause such an action to be commenced and diligently pursued to completion,
the Act does not specify the obligations of the District with regard to purchasing or otherwise acquiring
any lot or parcel of property sold at the foreclosure sale if there is no other purchaser at such sale (see
"SOURCES OF PAYMENT FOR THE BONDS — REPAYMENT OF THE 2014 DISTRICT BONDS - Covenant for
Superior Court Foreclosure" herein).
Sufficieney of the foreclosure sales procePds to cover the delinquent amount de1Pnds it =f up" the
a � L4tt1 VV AA 11 tl 1 L "F" AA L1.14
market for and the value of the parcel at the time of the foreclosure sale (see 66BOND OWNERS' RISKS -
THE 2014 DISTRICT BONDS — Risk Factors Relating to Land Values" above).
The current assessed value is some evidence of such future value. However, future events may result in
significant changes from the current assessed value. Such events could include a downturn in the
economy, as well as a number of additional factors. Any of these factors may result in a significant
erosion in value, with consequent reduced security of the District Bonds and, consequently, the Bonds.
Sufficiency of foreclosure sale proceeds to cover a delinquency may also depend upon the value of prior
or parity liens and similar claims. A variety of governmental liens may presently exist or may arise in the
future with respect to a parcel which, unless subordinate to the lien securing the Special Taxes, may
effectively reduce the value of such parcel. The property in Improvement Area D of the District is also
subject to several overlapping liens.
Timely foreclosure and sale proceedings with respect to a parcel may be forestalled or delayed by a stay
in the event the owner of the parcel becomes the subject of bankruptcy proceedings. Further, should the
stay not be lifted, payment of Special Taxes may be subordinated to bankruptcy law priorities.
Bankruptcy and Foreclosure Delays. The payment of the Special Taxes and the ability of the District to
foreclose the lien of a delinquent unpaid Special Tax may be limited by bankruptcy, insolvency, or other
laws generally affecting creditors' rights or by the laws of the State of California relating to judicial
foreclosure.
The various legal opinions to be delivered concurrently with the delivery of the Bonds and the 2014
District Bonds (including Bond Counsel's approving legal opinion) will be qualified as to the
enforceability of the various legal instruments, by bankruptcy, reorganization, insolvency or other similar
laws affecting the rights of creditors generally.
50
Although bankruptcy proceedings would not cause the Special Taxes to become extinguished, bankruptcy
of a property owner or of a partner or other owner of a property within Improvement Area D of the
District could result;
1. in a delay in prosecuting superior court foreclosure proceedings;
2. in loss of priority of the lien securing any Special Taxes with respect to Special Taxes levied
while bankruptcy proceedings are pending;
3. in the amount of any lien on property securing the payment of delinquent Special Taxes being
reduced if the value of the property were determined by the bankruptcy court to have become less
than the amount of the lien, and the amount of the delinquent Special Taxes in excess of the
reduced lien could be treated as an unsecured claim by the court; and /or
4. the Bankruptcy Code might prevent moneys on deposit in the funds and accounts created under
the Fiscal Agent Agreement from being applied to pay interest on the Bonds and /or to redeem
Bonds if bankruptcy proceedings were brought by or against the property owner and if the court
found that the property owner had an interest in such moneys within the meaning of Section
541(a)(1) of the Bankruptcy Code.
Such delay or loss of priority or non - payment would increase the likelihood of a delay or default in
payment of the principal of and interest on the District Bonds and the possibility of delinquent Special
Tax installments not being paid in full. To the extent a significant percentage of the property in
Improvement Area D of the District continues to be owned by a limited number of property owners, the
payment of the Special Taxes and the ability of the District to foreclose the lien of a delinquent unpaid
Special Tax installment could be delayed by bankruptcy, insolvency, or other laws generally affecting
creditors' rights or by the laws of the State relating to judicial foreclosure.
On July 30, 1992, the United States Court of Appeals for the Ninth Circuit issued its opinion in a
bankruptcy case entitled In re Glasply Marine Industries. In that case, the court held that ad valorem
property taxes levied by Snohomish County in the State of Washington after the date that the property
owner filed a petition for bankruptcy were not entitled to priority over a secured creditor with a prior lien
on the property. The court upheld the priority of unpaid taxes imposed after the filing of the bankruptcy
petition as "administrative expenses" of the bankruptcy estate, payable after all secured creditors. As a
result, the secured creditor was to foreclose on the property and retain all of the proceeds of the sale
except the amount of the pre - petition taxes.
According to the court's ruling, as administrative expenses, post - petition taxes would have to be paid,
assuming that the debtor has sufficient assets to do so. In certain circumstances, payment of such
administrative expenses may be allowed to be deferred. Once the property is transferred out of the
bankruptcy estate (through foreclosure or otherwise) it would at that time become subject to current ad
valorem taxes.
The Act provides that the Special Taxes are secured by a continuing lien, which is subject to the same lien
priority in the case of delinquency as ad valorem taxes. No case law exists with respect to how a
bankruptcy court would treat the lien for the Special Taxes levied after the filing of a petition in
bankruptcy. Glasply is controlling precedent for bankruptcy courts in the State. If the Glasply precedent
was applied to the levy of the Special Tax, the amount of Special Tax received from parcels whose owners
declared bankruptcy could be reduced.
It should also be noted that on October 22, 1994, Congress enacted I1 U.S. C. Section 362(b)(18), which
added a new exception to the automatic stay for ad valorem property taxes imposed by a political
subdivision after the filing of a bankruptcy petition. Pursuant to this new provision of law, in the event of
a bankruptcy petition filed on or after October 22, 1994, the lien for ad valorem taxes in subsequent fiscal
51
years will attach even if the property is pant of the bankruptcy estate. Bond Owners should be aware that
the potential effect of 11 U.S. C. Section 362(b)(18) on the Special Taxes depends upon whether a court
were to determine that the Special Taxes should be treated like ad valorem taxes for this purpose.
Disclosure to Future Land Buyers. A "Notice of Special Tax Lien" (the "Notice ") for the District has
been recorded pursuant to Section 53328.3 of the Act and Section 3114.5 of the Streets and Highways
Code, with the County Recorder for the County (the "County Recorder "). The Notice sets forth, among
other things, the Rate and Method of Apportionment, the legal description of property within
Improvement Area D of the District as of the date of recording the Notice, and the boundaries of
Improvement Area D of the District by reference to the map(s) recorded with the County Recorder. While
title insurance and search companies normally refer to such notices in title reports, and sellers of property
within Improvement Area D of the District are required to give prospective buyers a notice of special tax
in accordance with Sections 53360.2 or 53341.5 of the Act, there can be no assurances that such reference
will be made or notice given, or if made or given, that prospective purchasers or lenders will consider
such Special Tax obligation in the purchase of land within Improvement Area D of the District or the
lending of money thereon. Failure to disclose the existence of the Special Tax may affect the willingness
and ability of future landowners within Improvement Area D of the District to pay the Special Tax when
due.
Exempt Properties. Certain properties are exempt from the Special Tax in accordance with the Rate and
Method of Apportionment and provisions of the Act. The Act provides that properties or entities of the
State, federal or local government at the time of formation of the District are exempt from the Special
Tax; provided, however, that property within Improvement Area D of the District acquired by a public
entity through negotiated transactions, Cr by gift Cr deVlSe, vJii1C11 1S nit otherwise eXempt fiCni tiie
Special Tax will continue to be subject to the Special Tax. In addition, the Act provides that if property
subject to the Special Tax is acquired by a public entity through eminent domain proceedings, the
obligation to pay the Special Tax with respect to that property is to be treated as if it were a special
assessment and be paid from the eminent domain award. The constitutionality and operation of these
provisions of the Act have not been tested. If for any reason property subject to the Special Tax becomes
exempt from taxation by reason of ownership by a non - taxable entity such as the federal government, or
another public agency, subject to the limitation of the maximum authorized rate of levy, the Special Tax
may be reallocated to the remaining taxable properties within Improvement Area D of the District. This
would result in the owners of such property paying a greater amount of the Special Tax and could have an
adverse impact upon the timely payment of the Special Tax; however, the amount of Special Tax to be
levied and collected from the property owner is subject to the Maximum Special Tax as set forth in the
Rate and Method of Apportionment and to the limitation in the Act that under no circumstances may the
Special Taxes levied on any residential parcel be increased by more than ten percent as a consequence of
delinquency by the owner of any parcel. If a substantial portion of land within Improvement Area D of the
District became exempt from the Special Tax because of public ownership, or otherwise, the maximum
Special Tax which could be levied upon the remaining acreage might not be sufficient to pay principal of
and interest on the District Bonds when due and a default will occur with respect to the payment of such
principal_ and interest.
The Act further provides that no other properties or entities are exempt from the Special Tax unless the
properties or entities are expressly exempted in a resolution of consideration to levy a new special tax or
to alter the rate or method of apportionment of an existing special tax. The Act would prohibit the City
Council, acting as the legislative body of the District, from adopting a resolution to reduce the rate of the
Special Tax or terminate the levy of the Special Tax unless the City Council, acting as the legislative body
of the District, determined that the reduction or termination of the Special Tax "would not interfere with
the timely retirement" of the District Bonds (see "BOND OWNERS' RISKS — THE 2014 DISTRICT BONDS —
Risk Factors Relating to Governmental Rules, Initiatives, Etc. - Right to Vote on Taxes Act" below).
Property Controlled by Federal Deposit Insurance Corporation and Other Federal Agencies. The
District's ability to collect interest and penalties specified by State law and to foreclose the lien of a
delinquent Special Tax payment may be limited in certain respects with regard to properties in which the
52
Internal Revenue Service, the Drug Enforcement Agency, the Federal Deposit Insurance Corporation (the
"FDIC ") or other similar federal agencies has or obtains an interest. Specifically, with respect to the
FDIC, on June 4, 1991, the FDIC issued a Statement of Policy Regarding the Payment of State and Local
Real Property Taxes. The 1991 Policy Statement was revised and superseded by a new Policy Statement
effective January 9, 1997 (the "Policy Statement "). The Policy Statement provides that real property
owned by the FDIC is subject to state and local real property taxes only if those taxes are assessed
according to the property's value, and that the FDIC is immune from real property taxes assessed on any
basis other than property value. According to the Policy Statement, the FDIC will pay its property tax
obligations when they become due and payable and will pay claims for delinquent property taxes as
promptly as is consistent with sound business practice and the orderly administration of the institution's
affairs, unless abandonment of the FDIC's interest in the property is appropriate. The FDIC will pay
claims for interest on delinquent property taxes owed at the rate provided under state law, to the extent the
interest payment obligation is secured by a valid lien. The FDIC will not pay any amounts in the nature
of fines or penalties and will not pay or recognize liens for such amounts. If any property taxes (including
interest) on FDIC -owned property are secured by a valid lien (in effect before the property became owned
by the FDIC), the FDIC will pay those claims. The Policy Statement further provides that no property of
the FDIC is subject to levy, attachment, garnishment, foreclosure or sale without the FDIC's consent. In
addition, the FDIC will not permit a lien or security interest held by the FDIC to be eliminated by
foreclosure without the FDIC's consent.
The Policy Statement states that the FDIC generally will not pay non -ad valorem taxes, including special
assessments, on property in which it has a fee interest unless the amount of tax is fixed at the time that
the FDIC acquires its fee interest in the property, nor will it recognize the validity of any lien to the
extent it purports to secure the payment of any such amounts. Special taxes imposed under the Mello -
Roos Act and a special tax formula which determines the special tax due each year, are specifically
identified in the Policy Statement as being imposed each year and therefore covered by the FDIC's
federal immunity. With respect to property in California owned by the FDIC on January 9, 1997, and
that was owned by the Resolution Trust Corporation (the "RTC ") on December 31, 1995, or that became
property of the FDIC through foreclosure of a security interest held by the RTC on that date, the FDIC
will continue the RTC's prior practice of paying special taxes imposed pursuant to the Mello -Roos Act if
the taxes were imposed prior to the RTC's acquisition of an interest in the property. All other special
taxes, including the Special Taxes which secure the District Bonds may be challenged by the FDIC.
The Authority and the District are unable to predict what effect the application of the Policy Statement
would have in the event of a delinquency with respect to a parcel in which the FDIC has an interest,
although prohibiting the lien of the FDIC to be foreclosed on at a judicial foreclosure sale would likely
reduce the number of or eliminate the persons willing to purchase such a parcel at a foreclosure sale.
Owners of the Bonds should assume that the Authority and the District will be unable to foreclose on any
parcel owned by the FDIC. The Authority has not undertaken to determine whether the FDIC currently
has, or is likely to acquire, any interest in any of the parcels, and therefore expresses no view concerning
the likelihood that the risks described above will materialize while the Bonds are outstanding.
In the case of Fannie Mae and Freddie Mac, in the event a parcel is owned by a federal government entity
or federal government sponsored entity, such as Fannie Mae and Freddie Mac, the ability to foreclose on
the parcel or to collect delinquent Special Taxes may be limited. Federal courts have held that based on
the supremacy clause of the United States Constitution "this Constitution, and the Laws of the United
States which shall be made in Pursuance thereof, and all treaties made, or which shall be made, under the
Authority of the United States, shall be the supreme Law of the land; and the Judges in every State shall
be bound thereby, anything in the Constitution or Laws of any State to the contrary notwithstanding." In
the absence of Congressional intent to the contrary, a state or local agency cannot foreclose to collect
delinquent taxes or assessments if foreclosure would impair the federal government interest. This means
that, unless Congress has otherwise provided, if a federal government entity owns a parcel but does not
pay taxes and assessments levied on the parcel (including Special Taxes), the applicable state and local
governments cannot foreclose on the parcel to collect the delinquent taxes and assessments.
53
Moreover, unless Congress has otherwise provided, if the fcderal govermnent has a mortgage interest in
the parcel and the City wishes to foreclose on the parcel as a result of delinquent Special Taxes, the
property cannot be sold at a foreclosure sale unless it can be sold for an amount sufficient to pay
delinquent taxes and assessments on a parity with the Special Taxes and preserve the federal
government's mortgage interest.
Risk factors Relating to Tax Burden
Billing of Special Taxes. A special tax can result in a substantially heavier property tax burden being
imposed upon properties within a community facilities district than elsewhere in a city or county, and this
in turn can lead to problems in the collection of the special tax. In some community facilities districts the
taxpayers have refused to pay the special tax and have commenced litigation challenging the special tax,
the community facilities district and the bonds issued by the District.
Under provisions of the Act, the Special Taxes are billed to the properties within Improvement Area D of
the District which were entered on the Assessment Roll of the County Assessor by January 1 of the
previous fiscal year on the regular property tax bills sent to owners of such properties. Such Special Tax
installments are due and payable, and bear the same penalties and interest for non - payment, as do regular
property tax installments. These Special Tax installment payments cannot be made separately from
property tax payments. Therefore, the unwillingness or inability of a property owner to pay regular
property tax bills as evidenced by property tax delinquencies may also indicate an unwillingness or
inability to make regular property tax payments and installment payments of Special Taxes in the future.
See "SOURCES OF PAYMENT FOR THE BONDS - REPAYMENT OF TIIE 2014 DISTRICT BONDS - Covenant for
Superior Court Foreclosure" for a discussion of the provisions which apply, and procedures which
Improvement Area D of the District is obligated to follow; in the event of delinquency in the payment of
installments of Special Taxes,
Additional Taxation. On June 3, 1986, California voters approved an amendment to Article XIIIA of the
California Constitution to allow local governments and school districts to raise their property tax rates
above the constitutionally mandated I% ceiling for the purpose of repaying certain new general obligation
debt issued for the acquisition or improvement of real property and approved by at least two- thirds of the
votes cast by the qualified electorate. If any such voter - approved debt is issued, it may be on a parity with
the lien of the Special Taxes on the parcels within Improvement Area D of the District.
Value -to -Lien Ratios. The value of the land and improvements within Improvement Area D of the
District is a major factor in determining the investment quality of any series of bonds issued by or for the
District. Reductions in property values within Improvement Area D of the District due to a downturn in
the economy or the real estate market, events such as earthquakes, droughts or floods, stricter land use
regulations or other events may adversely impact the value of the security underlying the Special Tax. To
account for such uncertainties, investors typically require the value of the property upon which the
Special Tax is levied to be several times the principal amount of District Bonds. Such value -to -lien ratios
are derived by dividing the value of the property by the principal amount of the District Bonds. For
example, a 3:1 ratio means that the value is three times the total bond amount. The value -to -lien ratio of
individual parcels may be less or more than the aggregate value -to -lien ratio shown below. Pursuant
to the Act and the Rate and Method of Apportionment, the principal amount of the District Bonds is not
allocable among the parcels in Improvement Area D of the District. In addition, a value -to -lien ratio
does not give any indication if a property owner has negative or little equity in their property.
Shown below is the estimated value -to -lien ratio as of November 1, 2013.
54
COMMUNITY FACILITIES DISTRICT NO. 2003 -2
(CANYON HILLS)
IMPROVEMENT AREA D
VALUE -TO -LIEN RATIO
(AS OF NOVEMBER 1, 2013)
Developed Property
Completed (Individual Homeowners)
Under Construction (includes model homes)
Subtotal Developed Properties
Approved Property
Undeveloped Property
Total
Principal Amount of 2014 District Bonds
Value to Lien
Source: the Appraisal Report.
Number of Parcels Total Estimated Value
103 $30,5003000
54 121755,000
157 4312555000
62 6,090,000
563 2500,000
782 $741945,000
$7,685,000*
9.75 * to 1
Parity Taxes and Special Assessments. The property in Improvement Area D of the District is subject to
several overlapping liens.
The Special Taxes and any penalties thereon will constitute a lien against the lots and parcels of land
within Improvement Area D of the District until they are paid in full. Such lien is on a parity with all
special taxes and special assessments levied by other public entities, agencies and districts and is co -equal
to and independent of the lien for general property taxes regardless of when they are imposed upon the
same real property.
The District has no control over the ability of other public entities, agencies and districts to issue
indebtedness secured by special taxes or assessments payable from all or a portion of the real property
within Improvement Area D of the District. Any such special taxes or assessments may have a lien on
such real property on a parity with the Special Taxes. Accordingly, the liens on the real property within
Improvement Area D of the District could greatly increase, without any corresponding increase in the
value of the property within Improvement Area D of the District and thereby severely reduce the value -to-
lien ratio of the land- secured public debt existing at the time the 2014 District Bonds are issued. The
imposition of such additional indebtedness could also reduce the willingness and ability of the property
owners within Improvement Area D of the District to pay the Special Taxes when due.
The Special Taxes have priority over all existing and future private liens imposed on the real property
within Improvement Area D of the District.
As a result of the foregoing, in the event of a delinquency or nonpayment by the property owners of one
or more Special Tax installments, there can be no assurance that there would be available to the District
sufficient funds to pay when due the principal of, interest on and premium, if any, on the District Bonds.
Effective Tax Rate. Another tool for evaluating the tax burden is the ratio of total taxes, special taxes
and assessments as a percentage of property value (the "Effective Tax Rate "). The size of the Effective
Tax Rate could affect the ability and willingness of the property owners to pay the Special Taxes when
due (see "BOND OWNERS' RISKS — THE 2014 DISTRICT BONDS — Risk Factors Relating to Tax Burden"
herein).
55
The tables below sets forth the estimated Fiscal Year 2013 -14 Effective Tax Rates for a hypothetical home
based upon the estimated average assessed value in Improvement Area D of the District. The table sets
forth those entities with fees, charges, ad valorem taxes and special taxes regardless of whether those
entities have issued debt. Based upon average home prices and the Assigned Annual Special Tax rate, it is
expected that the projected Effective Tax Rate in Improvement Area D of the District is approximately
2.08% to 2.63% based upon the current estimated home prices. The estimated tax rates and amounts
presented herein are based on currently available information. The actual amounts charged may vary and
may increase in future years depending on the amount of District Bonds outstanding, the number of
delinquencies, and the status of development, among other factors.
Conceptually, bonds issued by a community facilities district secured by special taxes finance
improvements that otherwise would have to be added to the purchase price of a home and, therefore,
homes in such community facilities district would have a lower selling price than comparable homes that
did not have the benefit of such financing. In practice, however, the purchase price of a home is primarily
determined by market forces that may or may not take into account the special taxes.
A special tax can result in a substantially heavier property tax burden being imposed upon properties
within a community facilities district than elsewhere in a city or county, and this in turn can lead to
problems in the collection of the special tax. In particular, a heavy tax burden could influence property
owners with negative or little equity in their property not to pay the special taxes.
56
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9
Risk Factors Relating to Governmental Rules, Initiatives, Etc.
Right to Vote on Taxes Act. An initiative measure commonly referred to as the "Right to Vote on Taxes
Act" ( "Proposition 218 ") was approved by the voters of the State of California at the November 5, 1996,
general election. Proposition 218 added Article XIIIC ( "Article XIIIC") and Article XIIID to the
California Constitution. According to the "Title and Summary" of Proposition 218 prepared by the
California Attorney General, Proposition 218 limits "the authority of local governments to impose taxes
and property- related assessments, fees and charges." Generally, the provisions of Proposition 218 have
not yet been interpreted by the courts, although a number of lawsuits have been filed requesting the courts
to interpret various aspects of Proposition 218.
Among other things, Section 3 of Article XIIIC states that "the initiative power shall not be prohibited or
otherwise limited in matters of reducing or repealing any local tax, assessment, fee or charge."
Proposition 218 provides for a procedure, which includes notice, hearing, protest and voting requirements
to alter the Rate and Method of Apportionment of an existing special tax. However, Proposition 218
prohibits a legislative body from adopting any resolution to reduce the rate of any special tax or terminate
the levy of any special tax pledged to repay any debt incurred pursuant to Proposition 218 unless such
legislative body determines that the reduction or termination of the special tax would not interfere with
the timely retirement of that debt. Although the matter is not free from doubt, it is likely that the exercise
by the voters in Improvement Area D of the District of the initiative power referred to in Article XIIIC to
reduce or terminate the Special Tax is subject to the same restrictions as is the District, pursuant to the
Act. Accordingly, although the matter is not free from doubt, it is likely that Proposition 218 has not
conferred on the voters in Improvement Area D of the District the power to repeal or reduce the Special
Taxes if such reduction would interfere with the timely retirement of the District Bonds.
It may be possible, however, for voters of Improvement Area D of the District to reduce the Special Taxes
in a manner which does not interfere with the timely repayment of the District Bonds, but which does
reduce the maximum amount of Special Taxes that may be levied in any year below the existing levels.
Therefore, no assurance can be given with respect to the levy of Special Taxes for Administrative
Expenses. Furthermore, no assurance can be given with respect to the future levy of the Special Taxes in
amounts greater than the amount necessary for the timely retirement of the District Bonds.
The interpretation and application of Proposition 218 will ultimately be determined by the courts with
respect to a number of the matters discussed above, and it is not possible at this time to predict with
certainty the outcome of such determination or the timeliness of any remedy afforded by the courts.
Ballot Initiatives and Legislative Measures. Proposition 218 was adopted pursuant to a measure
qualified for the ballot pursuant to California's constitutional initiative process and the State Legislature
has in the past enacted legislation which has altered the spending limitations or established minimum
funding provisions for particular activities. From time to time, other initiative measures could be adopted
by California voters or legislation enacted by the State Legislature. The adoption of any such initiative or
enactment of legislation might place limitations on the ability of the State, the City or local District to
increase revenues or to increase appropriations or on the ability of a property owner to complete the
development of the property.
Risk Factors Relating to Limitations of the Bonds and the District
Limited Obligation. Neither the faith and credit nor the taxing power of the City, the State or any
political subdivision thereof, other than the District, is pledged to the payment of the District Bonds.
Except for the Special Taxes derived from Improvement Area D of the District, no other taxes are pledged
to the payment of the District Bonds. The District Bonds are not general or special obligations of the
City, the State or any political subdivision thereof or general obligations of the District, but are special
obligations of the District, payable solely from Special Taxes and the other assets pledged therefor under
the Fiscal Agent Agreement.
59
Limitations on Remedies. Remedies available to the Bond Owners may be limited by a variety of
factors and may be inadequate to assure the timely payment of principal of and interest on the District
Bonds or to preserve the tax - exempt status of the Bonds. Bond Counsel has limited its opinion as to the
enforceability of the Bonds and the District Bonds and of the Indenture and the Fiscal Agent Agreement
to the extent that enforceability may be limited by bankruptcy, insolvency, reorganization, fraudulent
conveyance or transfer, moratorium, or others similar laws affecting generally the enforcement of
creditors' rights, by equitable principles and by the exercise of judicial discretion. Additionally, the
District Bonds are not subject to acceleration in the event of the breach of any covenant or duty under the
Indenture. The lack of availability of certain remedies or the limitation of remedies may entail risks of
delay, limitation or modification of the rights of the Owners.
Enforceability of the rights and remedies of the owners of the District Bonds, and the obligations incurred
by the District, may become subject to the federal bankruptcy code and bankruptcy, insolvency,
reorganization, moratorium, or similar laws relating to or affecting the enforcement of creditor's rights
generally, now or hereafter in effect, equity principles which may limit the specific enforcement under
State law of certain remedies, the exercise by the United States of America of the powers delegated to it
by the Constitution, the reasonable and necessary exercise, in certain exceptional situations, of the police
powers inherent in the sovereignty of the State and its governmental bodies in the interest of serving a
significant and legitimate public purpose and the limitations on remedies against joint powers authorities
in the State. See "BOND OWNERS' RISKS - THE 2014 DISTRICT BONDS — Risk Factors Relating to the
Levying and Collection of the Special Taxes" above.
No Acceleration Provision. The Fiscal Agent Agreement does not contain a provision allowing for the
acceleration of the principal of the District Bonds in the event of a payment default or other default under
the terms of the 2014 District Bonds or the Fiscal Agent Agreement. Accordingly, the. indenture dGes not
contain a provision allowing for acceleration of the Bonds.
60
THE AUTHORITY
AUTHORITY ORGANIZATION
The Authority is governed by a five- member board which consists of all members of the City Council.
The Authority reorganizes its officers, a chair and vice - chair, annually. The City Manager acts as the
Executive Director and the Secretary and the Director of Administrative Services of the City acts as the
Treasurer of the Authority. The current Authority governing board is as follows:
AUTHORITY GOVERNING BOARD
Steve Manos, Chairperson
Brian Tisdale, Vice- Chairperson
Daryl Hickman, Board Member
Robert E. Magee, Board Member
Natasha Johnson, Board Member
The California Government Code provides for the issuance of revenue bonds of joint exercise of powers
authorities, such as the Authority, to be repaid solely from the revenues of certain public obligations, such
as the District Bonds,
CITY ORGANIZATION
The City is incorporated as a general law city. The City has a Council /Manager form of municipal
government. The City Council appoints the City Manager who is responsible for the day -to -day
administration of City business and the coordination of all departments of the City. The City Council is
composed of five members elected bi- annually at large to four -year alternating terms. The Mayor is
selected by the City Council from among its members. The City Council members and their term
expiration dates are as follows:
City Council Member Term Expires
Robert E. Magee, Mayor November 2016
Natasha Johnson, Mayor Pro Tem November 2016
Daryl Hickman, Council Member November 2014
Brian Tisdale, Council Member November 2014
Steve Manos, Council Member November 2016
The City performs certain general administrative functions for the Authority. The costs of such functions,
as well as additional services performed by City staff, are allocated annually to the Authority. The
Authority reimburses the City for such allocated costs out of available revenues. The Current City staff
assigned to administer the Authority are the following:
CITY STAFF
Grant Yates, City Manager
Vacant, Director ofAdministrative Services
The City Attorney is appointed by and serves at the pleasure of the Lake Elsinore City Council. Legal
services are performed under contract with the firm of Leibold, McClendon & Mann, P.C.:
Barbara Leibold Esq., City Attorney
David Mann Esq., Assistant City Attorney
61
RATE AND MET140D "VARPr 1urrlt11V y 1Vr1p
OF THE SPECIAL TAX
Capitalized terms not defined in this section have the respective meanings ascribed to them in the Rate
and Method of Apportionment.
DETERMINATION OF THE ANNUAL SPECIAL TAX
The District is required each
service on the District Bonds,
and Administrative Expenses
Administrative Expenses for
foreclosure proceedings (to tl
annual reporting requirements
fiscal year to determine the amount of Special Taxes needed to pay debt
an allowance for delinquencies within Improvement Area D of the District
of the District. The District is expected to incur among other things
the levy and collection of the Special Taxes including consultant fees,
ie extent not recovered pursuant to statutory authorization), Trustee fees,
and arbitrage rebate calculations.
The District is required pursuant to the Rate and Method of Apportionment (see "APPENDIX D - RATE
AND METHOD OF APPORTIONMENT "), the Fiscal Agent Agreement and the Act to annually determine the
Special Tax Requirement, as defined below, and apportion such amount (see "- METHOD OF
APPORTIONMENT" below), subject to the Maximum Special Tax, as defined below, until the Special
Taxes equal the Special Tax Requirement.
SPECIAL TAX REQUIREMENT
The "Special Tax Requirement," as defined in the Rate and Method of Apportionment, the Fiscal Agent
Agreement and the Act means that amount required, subject to the Maximum Special Tax, in any fiscal
year to pay:
(i) debt service or the periodic costs on all Outstanding District Bonds due in the calendar year
that commences in such fiscal year;
(ii) Administrative Expenses;
(iii) the costs associated with the release of funds from an escrow account;
(iv) any amount required to establish or replenish any reserve funds established in association with
the Bonds;
(v) the collection or accumulation of funds for the acquisition or construction of facilities
authorized by the District provided that the inclusion of such amount does not cause an
increase in the levy of Special Tax on Undeveloped Property as set forth in Step Three of
"Method of Apportionment" below; and less
(vi) any amounts available to pay debt service or other periodic costs on the Bonds pursuant to any
applicable bond indenture, fiscal agent agreement or trust agreement.
In addition, pursuant to the Act and the Fiscal Agent Agreement, the District determines an amount to pay
for reasonably anticipated Special Tax delinquencies taking into account the delinquency rate for the
Special Tax levy in the previous fiscal year. Pursuant to the Act, under no circumstances will the Special
Tax levied against any parcel of Developed Property for which an occupancy permit for private
residential use has been issued be increased by more than ten percent (10 %) as a consequence of
delinquency or default by the owner of any other parcel within Improvement Area D. Accordingly, the
District may not be able to levy the Maximum Special Tax in certain circumstances.
62
In addition,
pursuant
to
current District policies and the Fiscal Agent Agreement, the District disregards
any moneys
that may
be
available for the purposes of determining the Special Tax Requirement.
ASSIGNMENT TO LAND USE CATEGORIES
Pursuant to the Rate and Method of Apportionment, each fiscal year, each Assessor's Parcel within
Improvement Area D shall be assigned to Zone 1 or Zone 2 (see "Improvement Area D Map" herein) and
shall be classified as Taxable Property or Exempt Property. In addition each Assessor's Parcel of Taxable
Property shall be further classified as Developed Property, Approved Property, Undeveloped Property or
Provisional Undeveloped Property. In addition, each Assessor's Parcel of Developed Property shall
further be classified as Residential Property or Non - Residential Property. Lastly, each Assessor's Parcel
of Residential Property shall further be classified as a Single Family Property or Apartment Property, and
each Single Family Property shall be assigned to its appropriate Assigned Annual Special Tax rate based
on its Building Square Footage (see "APPENDIX D -RATE AND METHOD OF APPORTIONMENT"),
MAXIMUM SPECIAL TAX
As defined in the Rate and Method of Apportionment, the "Maximum Special Tax" means for each
Assessor's Parcel, the greater of the amount derived by application of the Assigned Annual Special Tax,
as defined below, or the amount derived by the Backup Annual Special Tax, as defined below (see
"APPENDIX D - RATE AND METHOD OF APPORTIONMENT ").
Assigned Annual Special Tax
Developed Residential Property. The Rate and Method of Apportionment established Assigned
Annual Special Tax categories for Developed Property based upon Building Square Footage, as
shown in the table below. Developed Property generally is an Assessor's Parcel for which a building
permit has been issued on or before March 1 preceding the fiscal year in which the Special Tax is
being levied. Single Family Residential is the only land use currently planned in Improvement Area
D. The table below shows the Assigned Annual Special Taxes for Fiscal Year 2013 -14. The
Maximum Special Taxes for Developed Property cannot exceed the amounts shown for Fiscal Year
2013 -14, except when the Backup Special Tax is used as discussed below.
Each July 1, the Assigned Annual Special Tax for Developed Property shall be increased by two
percent (2.0 %) of the amount in effect in the prior fiscal year.
63
RATE AND METHOD OF APPORTIONMENT
PROJECTED ASSIGNED SPECIAL TAXES FOR DEVELOPED PROPERTY
FISCAL YEAR 2013/14
AS OF OCTOBER 15, 2013
Number, of Assigned Special Actual Special Tax FY 2013/14 Percentage of
Rate CatesorV Parcels Tax Rate Rate FY 2013/14 Total Levy Total Levv
Less than 1,175 2(l) $12365.75 $15365.75 $2,731.50 0.57%
1,175 — 11324 5 1,490.51 1,490.51 7,452.55 1.55%
13325 — 1,449 0 13741.14 0.00 0.00 0.00%
11450 —1,549 0 13795.24 0.00 0.00 0.00%
11550 —1,649 0 15849.34 0.00 0.00 0.00%
15650 — 1,749 0 13904.54 0.00 0.00 0.00%
1,750 —1,949 29 1,957.54 11957.54 56,768.66 11.84%
11950 — 21199 31 23012.74 2,012.74 62,394.94 13.02%
2,200 — 2,449 47 25262.26 2,262.26 1065326.22 22.18%
2,450 — 29699 2 21388.13 2,388.13 4,776.26 1.00%
2,700 — 25949 0 2,461.00 0.00 0.00 0.00%
2,950 — 35299 17 21648.69 2,648.69 453027.73 9.39%
35300 — 3,649 0 3,923.90 0.00 0.00 0.00%
3,650 or greater 24 43551.02 4,551.02 $1093224.48 22.78%
Subtotal 157 $3941702.34 82.34%
Approved Property 62 $1,365.75 (2) 84,676.50 17.66%
Undeveloped Property (3) 563 0 0 0 0
Total 782 $479,378.84 100.00%
1 There are 2 parcels that building permit data was not available.
2 The projected Assigned Annual Special Tax as Developed Property in the lowest Special Tax Category.
3 it is not expected that a levy of the Special Tax will be required on Undeveloped Property.
Approved Property, Undeveloped Property and Provisional Property. Each year, the District on
behalf of Improvement Area D shall levy the Special Tax, subject to the methodology and Maximum
Special Tax set forth in the Rate and Method of Apportionment, in an amount sufficient to meet the
Special Tax Requirement. If the Assigned Annual Special Taxes for Developed Property are not
sufficient to meet the Special Tax Requirement during the period of time there is Approved Property
(generally all Assessor's Parcels that are included in a recorded final map where a building permit
has not been issued), Undeveloped Property (all Assessor's Parcels that are not Developed Property,
Approved Property, or Provisional Undeveloped Property) and Provisional Undeveloped Property
(currently, there is not any Provisional Undeveloped Property in Improvement Area D), the Rate and
Method of Apportionment provides for the levy of a Special Tax against Approved Property,
Undeveloped Property and Provisional Undeveloped Property (see "BONDOWNERS' RISKS —THE 2014
DISTRICT BONDS — Risk Factors Relating to the Levying and Collection of the Special Taxes —
Concentration of Ownership" herein and "APPENDIX D — RATE AND METHOD OF APPORTIONMENT") -
The Assigned Annual Special Tax rate for an Assessor's Parcel classified as Approved Property,
Undeveloped Property and Provisional Undeveloped Property for Fiscal Year 2013 -14 shall be
$14,061.06 per acre for Zone I and $13,201.84 for Zone 2.
Backup Special Tax
Pursuant to the Rate and Method of Apportionment, the Maximum Special Tax for Developed Property is
the greater of (i) the amount derived by application of the Assigned Annual Special Tax or (ii) the amount
64
derived by application of the Backup Special Tax, if any. The Backup Special Tax will increase at a rate
of 2% per year.
At the time a Final Map is recorded, the Backup Annual Special Tax for all Assessor's Parcels of
Developed Property classified or reasonably expected to be classified as a Single Family Property within
such Final Map area shall be determined by (i) summing the product of (a) the Maximum Special Tax rate
for Undeveloped Property by (b) the total Acreage of Taxable Property of each Assessor's Parcel in such
Final Map area, excluding Acreage classified as Provisional Undeveloped Property and any Acreage
reasonably expected to be classified as Exempt Property in such Final Map area, and (ii) dividing the
results in (i) by the total number of Single Family Units reasonably expected to be constructed within
such Final Map area. The resulting quotient shall be the Backup Annual Special Tax for each Assessor's
Parcel of Developed Property within such Final Map area. The Maximum Special Tax rate(s) applied in
(i) above shall be the applicable Undeveloped Property rate for the Zone in which each Assessor's Parcel
is located; provided, however, if an Assessor's Parcel is located in two Zones, the Maximum Special Tax
rate applied shall be the lower of the two Maximum Special Tax rates.
Under certain circumstances, the Special Tax for some parcels classified as Developed Property will be
increased above the Assigned Annual Special Tax until the Special Tax Requirement is met. However,
under no circumstances will the Special Tax on an Assessor's Parcel of Developed Property be increased
above the greater of the Backup Special Tax or the Assigned Annual Special Tax (see "APPENDIX E -RATE
AND METHOD OF APPORTIONMENT").
METHOD OF APPORTIONMENT
The Special Taxes may be apportioned in any reasonable manner; however, the tax may not be
apportioned on an ad valorem basis. Pursuant to Section 53325.3 of the Act, the tax imposed "is a Special
Tax and not a special assessment, and there is no requirement that the tax be apportioned on the basis of
benefit to any property."
Pursuant to the Rate and Method of Apportionment, for each fiscal year the District shall determine the
Special Tax Requirement and levy the Special Tax, until the amount of Special Taxes equals the Special
Tax Requirement. The Special Tax shall be levied each fiscal year as follows:
Step One: The Annual Special Tax shall be levied Proportionately on each Assessor's Parcel of
Developed Property at up to 100% of the applicable Assigned Annual Special Tax rates to satisfy
the Special Tax Requirement;
Step Two: If additional moneys are needed to satisfy the Special Tax Requirement after the first
step has been completed, the Annual Special Tax shall be levied Proportionately on each
Assessor's Parcel of Approved Property at up to 100% of the Assigned Annual Special Tax
applicable to each such Assessor's Parcel as needed to satisfy the Special Tax Requirement;
Step Three: If additional moneys are needed to satisfy the Special Tax Requirement after the
first two steps have been completed, the Annual Special Tax shall be levied Proportionately on
each Assessor's Parcel of Undeveloped Property at up to 100% of the Assigned Annual Special
Tax applicable to each such Assessor's Parcel as needed to satisfy the Special Tax Requirement;
Step Four: If additional moneys are needed to satisfy the Special Tax Requirement after the first
three steps have been completed, then the levy of the Special Tax on each Assessor's Parcel of
Developed Property whose Maximum Special Tax is the Backup Annual Special Tax shall be
increased Proportionately from the Assigned Annual Special Tax up to 100% of the Backup
Annual Special Taxes needed to satisfy the Special Tax Requirement; and
Step Five: If additional moneys are needed to satisfy the Special Tax Requirement after the first
four steps have been completed, then the Special Tax shall be levied Proportionately on each
Assessor's Parcel of Provisional Undeveloped Property up to 100% of the Assigned Annual
65
Special Tax applicable to each such Assessor's Parccl as needed to satisfy the Special Tax
T
requirement.
Notwithstanding the above, under no circumstances will the Special Tax levied against any Assessor's
Parcel for which an occupancy permit for private residential use has been issued be increased by more
than ten percent (10 %) as a consequence of delinquency or default by the owner of any other Assessor's
Parcel within Improvement Area D.
riot
DISTRICT ADMINISTRATION
ADMINISTRATION GENERAL
The City and its Special Tax Consultant provide administrative and support services to the District as well
as other special districts in the City. The City currently administers 26 community facilities districts
containing approximately 12,560 parcels (see "CITY OF LAKE ELSINORE - COMMUNITY FACILITIES
DISTRICTS MAP" herein).
Principle administrative duties include providing for the levy of the Special Taxes, delinquency
management, pursuing foreclosure actions and cash flow management, including bond redemptions.
LEVY OF THE SPECIAL TAX
The District is required to communicate with the County Auditor to ascertain the relevant parcels on
which the Special Taxes are to be levied within Improvement Area D of the District, taking into account
any parcel splits during the preceding and then current fiscal year. The District is required by resolution
to provide for the levy of the Special Taxes in the current fiscal year. A certified list of all parcels within
Improvement Area D of the District subject to the Special Tax, including the amount of the Special Tax to
be levied on each such parcel, is filed by the District with the County Auditor on or before the tenth (10th)
day of August of that tax year. The Special Taxes so levied may not exceed the authorized amounts as
provided in the Rate and Method of Apportionment and applicable provisions of the Act.
The City Council, acting on behalf of the District, levies the Special Taxes within Improvement Area D of
the District in accordance with the Rate and Method of Apportionment (see "APPENDIX D — RATE AND
METHOD OF APPORTIONMENT "), the Fiscal Agent Agreement and the Act. Because the Special Taxes
have been authorized by a two- thirds (2/3) vote of those qualified electors within Improvement Area D of
the District that cast votes, the Special Taxes are a special tax imposed within the limitations of Section 4
of Article XIIIA of the State Constitution. The City Council, as the legislative body of the District, has
the power and is obligated, pursuant to the covenants contained in the Fiscal Agent Agreement, to cause
the levy and collection of the Special Taxes within Improvement Area D of the District annually.
The Special Taxes are payable and are collected in the same manner and at the same time and in the same
installment as the general taxes on real property are payable and have the same priority, become
delinquent at the same times and in the same proportionate amounts and bear the same proportionate
penalties and interest after delinquency as do the general taxes on real property.
When received, the Special Taxes from Improvement Area D of the District are required to be transferred
by the City to the Fiscal Agent as provided in the Fiscal Agent Agreement and deposited by the Fiscal
Agent in a separate Special Tax Fund for Improvement Area D of the District (see "SOURCES OF
PAYMENT FOR THE BONDS — REPAYME NT OF THE 2014 DISTRICT BONDS — Application of Special Taxes;
Flow of Funds" herein).
Under the Act, the Rate and Method of Apportionment and the Fiscal Agent Agreement, the District has
the authority and the obligation to increase the levy of Special Taxes against non- delinquent property
owners in Improvement Area D of the District if other owners in Improvement Area D of the District are
delinquent in the payment of Special Taxes. However, the District's ability to increase Special Tax levies
for this purpose is limited by two factors:
(a) The Maximum Special Tax set forth in the Rate and Method of Apportionment, and
(b) The limitations on such increases
circumstances may the Special Tax
purposes be increased as a conseque
parcel or parcels within such district
set forth in the Act, which provides that under no
levied against any parcel used for private residential
nee of delinquency or default by an owner of any other
by more than ten percent (10 %).
67
City Of Lake Elsinore Communities Facilities District Map
(insert Map # 5
The debt service coverage ratio based upon the aggregate actual levy of the Special Tax for all the
community facilities districts with bonded indebtedness administered by the City is shown in the table
below. None of the bonds are cross - collateralized by non - applicable districts /improvement areas.
CITY OF LAKE ELSINORE,
COMMUNITY FACILITIES DISTRICTS
HISTORICAL SPECIAL TAX LEVY
Fiscal
Special Tax
Administrative
Future
Coverage
Year
Levy
Debt Service Expense
Facilities
Total Expense Ratio
2007/08 $13,486,715 $12,486,715 $316,038 _ $125802,753 105%
2008/09 1455145220 1351941686 3295370 _ 13,524,056 107%
2009/10 155586,200 13,537,651 353,783 $343,132 1432345566 109%
2010/11 159670,029 13,906,075 3605838 359,660 14,626,573 107%
2011/12 20,1303812 16,8115502 578,144 2645594 17,654,240 114%
2012/13 xxxxxxx
2013/14 16,604,805 149968,830 407,172 450,911 15,826,913 105%
Source: City of Lake Elsinore
DELINQUENCIES
Identification of Delinquencies; Initial Notification
The District will review the public records of the County of Riverside, California, in connection with the
collection of the Special Tax not later than July 1 of each year to determine the amount of Special Tax
collected in the prior Fiscal Year; and with respect to individual delinquencies, the District will send or
cause to be sent a notice of delinquency and a demand for immediate payment thereof to the property
owner within 45 days of such determination, and if the District determines that any single property owner
subject to the Special Tax is delinquent in the payment of Special Taxes in the aggregate of 10,000 or
more or delinquent in the payment of three consecutive installments of Special Tax or that the delinquent
Special Taxes represent more than 5% of the aggregate Special Taxes levied within Improvement Area D
of the District or if there has been a draw on the funds on deposit in the Reserve Account established
under the Authority Indenture, and if the delinquency remains uncured, the District will cause judicial
foreclosure proceedings to be filed in the superior court Prior to commencement of any judicial
foreclosure proceedings, the District shall continue with its efforts to collect the delinquent Special Taxes
by sending subsequent notice of delinquency and a demand for immediate payment thereof.
It is the District's practice to also send copies of the notice of delinquency to the applicable mortgage
lenders if known.
Special Taxes are due in two equal installments. Special Taxes levied become delinquent if not paid by
December 10 "' (the "First Installment ") and April 10`h (the "Second Installment "). Generally, the First
Installment pays the March I` interest payment and `/2 of the September 1st principal payment on the
Bonds. Generally, the Second Installment pays the September I" interest payment and `/2 of the
September I" principal payment.
we
Special Tax Collections
Below are the aggregate delinquency rates for all the districts administrated by the City with bonded
indebtedness. However, it is unclear whether delinquencies of other community,facilities districts in the
City are indicative of special tax delinquencies that may be experienced by Improvement Area D of the
District. Delinquencies may result as a consequence of many factors whether related to current
circumstances in other districts or not (see "BOND OWNERS' RISKS" herein). According to the City's
Special Tax Consultant, Fiscal Year 2008 -09 was the highest year of delinquencies ever experienced by
the City.
CITY OF LAKE ELSINORE
COMMUNITY FACILITIES DISTRICTS
HISTORICAL SPECIAL TAX LEVY
Percentage Percentage
Delinquent First Delinquent Second
Fiscal Year Installment Installment
2008/09 15.67% 8.99%
2009/10 5.58% 7.10%
2010/11 4.31% 4.64%
2011/12 2.10% 3.72%
2012/13 2.98% 4.14%
Source: City of Lake Elsinore.
Delinquency Management Fund
Delinquencies in the payment of property taxes and the Special Taxes may result from any of a number of
factors affecting individual property owners. See "BOND OWNERS' RISKS" for discussions of certain
potential causes of property tax delinquencies. Thus, without mitigation measures, the District may not
receive sufficient Special Taxes in a fiscal year to pay the then current debt service on the 2014 District
Bonds.
It is the City's experience that the majority of delinquencies are cured within the Bond Year (see
"FORECLOSURE ACTIONS — City Historical Foreclosure Experience" below). However, the timing and the
amount of such delinquent payments are not fully predictable. In order to guard against temporary
shortages in cash flow, the District has established a Delinquency Management Fund to be held by the
Fiscal Agent. The Delinquency Management Fund Requirement for the District Bonds is 15%
($111,566.25* on the 2014 District Bonds) of Maximum Annual Debt Service on the District Bonds.
On the delivery date of the 2014 District Bonds, there will not be a deposit into the Delinquency
Management Fund. The Delinquency Management Fund is expected to be funded during the period of
time that interest is funded on the 2014 District Bonds (see "SOURCES OF PAYMENT FOR THE BONDS —
REPAYMENT OF THE 2014 DISTRICT BONDS - Delinquency Management Fund" herein). Replenishment of
the Delinquency Management Fund will be primarily funded from delinquent payments and from Special
Taxes and investment earnings, to the extent the amounts thereof received by the Fiscal Agent are in
excess of the debt service due on the 2014 District Bonds and all administrative expenses of the District
have been paid. Amounts in the Delinquency Management Fund will be used to pay debt service on the
2014 District Bonds to the extent Special Taxes are insufficient for such purpose.
The Delinquency Management Fund is not pledged as security for the 2014 District Bonds.
> 1,
* Preliminary, sul ject to change.
71
Cash Flow Management Fund
In addition to delinquencies in the payment of Special Taxes by individual home owners, there are a
number of less frequent risks such as bankruptcy of a major property owner, earthquakes and other natural
hazards among others (see "BOND OWNERS' RISKS ") that may cause larger disruptions in the receipt of
the Special Taxes that may also take longer to resolve. To assist in mitigating against such future
delinquencies and a possible payment default on the Bonds, the Authority has established the Cash Flow
Management Fund to be held by the Trustee. The Cash Flow Management Fund Requirement is 15% of
Maximum Annual Debt Service on the Bonds ($111,566.25 *). The Cash Flow Management Fund is
expected to be funded during the period of time that interest is funded on the 2014 District Bonds (see
"SOURCES OF PAYMENT FOR THE BONDS — REPAYMENT OF THE BONDS - Cash Flow Management Fund"
herein).
Replenishment of the Cash Flow Management Fund will be from any delinquent payments of debt service
on the 2014 District Bonds, surplus Revenues and, at the election of the Authority, by any available
surplus revenues with respect to other series of local agency revenue bonds issued by the Authority.
The Cash Flow Management Fund may also be funded at the election of the Authority from any available
surplus revenues with respect to other series of local agency revenue bonds issued by the Authority to the
extent such surplus revenues are loaned to replenish the Cash Flow Management Fund to its requirement.
The table below shows the current cash flow management funds of the Authority which may be used for
this purpose. No assurance can be made that balances in the cash flow management funds of the
Authority will be maintain at the current levels.
CITY OF LAKE ELSINORE
COMMUNITY FACILITIES DISTRICTS
CASK FLOW MANAGEMENT FUNDS
Authority Bond Issue
Authority
2008
Series A
(West Lake Elsinore)
Authority
2013
Series
B
(West Lake Elsinore)
Authority
2013
Series
C
(Summerhill)
Authority
2013
Series
A
(Summerly)
Authority
2010
Series
A
(Canyon Hills IA C)
Authority
2012
Series
C
(Canyon Hills IA C)
Authority
2012
Series
B
(AD 93-12000) (Canyon Hills)
Authority
2012
Series
A
(Wasson)
TOTAL
Source: City of Lake Elsinore
Cash Flow Management
Fund Requirement
$377,520.00
121,134.38
162,428.44
48,825.00
117,140.63
189,000.00
214,455.00
40,933.13
$11271,436.58
Amounts in the Cash Flow Management Fund will be used, prior to any draw on the Reserve Account, to
pay debt service on the Bonds to the extent Revenues are insufficient for such purpose and is pledged to
the repayment of the Bonds.
FORECLOSURE ACTIONS
Requirement
Pursuant to Section 53356.1 of the Act, in the event of any delinquency in the payment of the Special Tax,
the District may order the institution of a superior court action to foreclose the lien of the Special Tax
within specified time limits. In such an action, the real property subject to the unpaid amount may be sold
at judicial foreclosure sale. Under the provisions of the Act, such judicial foreclosure action is not
mandatory. The District has covenanted to initiate foreclosure action in the superior court against parcels
72
with delinquent Special Taxes as provided in the Fiscal Agent Agreement (see "SOURCES OF PAYMENT
FOR THE BONDS — REPAYMENT OF THE 2014 DISTRICT BONDS — Covenant for Superior Court Foreclosure"
herein).
City Historical Foreclosure Experience
As the City's Delinquency Consultant, it is the responsibility of Francisco & Associates, Inc., Carlsbad,
California to initially identify parcels where Special Taxes are delinquent. Francisco & Associates, Inc.
also identifies from County Tax Records which of these delinquent parcels have established payment
plans with the County Tax Collector. Francisco & Associates, Inc. develops a list of parcels that are
delinquent and not on a County Payment Plan and sends the listing to Burke, Williams & Sorensen, LLP,
Irvine, California (Foreclosure Counsel). Burke, Williams & Sorensen, LLP sends a reminder letter (the
"Reminder Letter ") to the property owners of delinquent parcels that do not have an established payment
plan with the County Tax Collector giving them 30 days to bring the Special Taxes current. After the 30
day payment period, Burke, Williams & Sorensen, LLP commences the foreclosure process on the
remaining delinquent parcels.
Notwithstanding the prior practices of the District, in the event the aggregate of delinquent
Special Taxes represent less than 5% of the aggregate Special Taxes levied within Improvement Area D
of the District, the District is not required to cause judicial foreclosure proceedings to be filed in the
superior court earlier than one year from the date of such determination against all properties for which
the Special Taxes remain delinquent. Prior to commencement of any judicial foreclosure proceedings, the
District will continue with its efforts to collect the delinquent Special Taxes by sending subsequent notice
of delinquency and a demand for immediate payment thereof. See "SOURCES OF PAYMENT FOR THE
BONDS - REPAYMENT OF THE 2014 DISTRICT BONDS - Covenant for Superior Court Foreclosure" herein.
If foreclosure proceedings were instituted, any mortgage or deed of trust holder could, but would not be
required to, advance the amount of the delinquent Special Tax to protect its security interest. The current
average value of a home in Improvement Area D of the District is approximately 110 times the average
Assigned Annual Special Tax and generally lenders have advanced the amount of the delinquent Special
Tax to protect their security interest. For this reason the amount of short sales and private foreclosures by
mortgage lien holders is not necessarily reflective of the amount of City foreclosure active.
73
Total Parcels Special
Tax Levied
Total Parcels
Delinquent and
Reminder Letter sent
Total Parcels
Resolved
Total Delinquent
Parcels Remaining
Additional Parcels
Remaining but not
Foreclosable per
Covenant
Parcels on Payment
Plan
Parcels Being
Pursued by
Foreclosure by
Foreclosure Counsel
Parcels in
Bankruptcy
CITY OF LAKE ELSINORE
COMMUNITY FACILITIES DISTRICTS
HISTORICAL FORECLOSURE EXPERIENCE
BOND YEARS 2006 -07 THROUGH 2010 -11
Fiscal Year Fiscal Year Fiscal Year Fiscal Year Fiscal Year
2006 -07
6,600
530
526
4
0
2
2
Source: Francisco & Associates, Inc.
Procedure
2007 -08
6,649
992
986
6
0
3
9
K,
2008 -09
6,686
1,019
1010
9
0
5
1
3
2009 -10
6,749
515
7
5
11
23
K
2010 -11
6,966
184
141
1
7
10
3u
2
Fiscal Year
2011 -12
7,168
239
152
19
17
48
2
Foreclosure proceedings are directed by the District through a notification to Foreclosure Counsel as to
the delinquent assessor parcel numbers for which foreclosure proceedings are to be initiated. The District
first removes the delinquent Special Taxes from the County Tax Roll, as required by law. Foreclosure
Counsel then initiates a request for a title search to identify the current legal owner of a delinquent parcel.
Foreclosure Counsel also sends a written demand for payment to the owner shown on the County Tax
Roll, followed by the filing of a complaint with the Superior Court in Riverside County (the "Court") and
recording a lis pendens against the property at the office of the County Recorder.
Each legal owner and all holders of any other interest in the land must file an answer to the complaint
within 30 days following the completion of service of process on them. If no answer is filed within such
30 -day period, Foreclosure Counsel files a request that a default judgment be entered by the Court. If any
74
party files an answer, then the case must be litigated, and Foreclosure Counsel will typically file a motion
for summary judgment.
Following the entry of a judgment, whether by default or otherwise, against all defendants, Foreclosure
Counsel requests a writ of sale from the Court for delivery to the Riverside County Sheriff's Department
(the "Sheriff'). The writ of sale is delivered to the Sheriff with instructions to execute on the delinquent
parcel. Levy by the Sheriff consists of posting notice on the delinquent property, followed by mailing of
notice to the last known address of the legal owner and publication of the notice of levy.
Thereafter, the delinquent property owner is entitled to a redemption period of 120 days. Following such
120 -day period, foreclosure proceedings can continue following the publication and mailing of a notice of
sale of the delinquent parcel or parcels, which sale must be at least 20 days following such notice. The
foreclosure process described above typically takes at least six months from the date on which a judgment
is entered and can take substantially longer. It should be noted that any foreclosure proceedings
commenced as described above could be stayed by the commencement of bankruptcy proceedings by or
against the owner of the delinquent property (see "BOND OWNERS' RISKS — THE 2014 DISTRICT BONDS —
Risk Factors Relating to the Levying and Collection of the Special Taxes — Foreclosure and Sale Proceedings"
and "BOND OWNERS' RISKS — THE 2014 DISTRICT BONDS — Risk Factors Relating to the Levying and
Collection of the Special Taxes — Bankruptcy and Foreclosure Delays" herein).
No assurances can be given that the real property subject to sale or foreclosure will be sold or, if
sold, that the proceeds of sale will be sufficient to pay any delinquent Special Tax installment. The
Act does not require the City or the District to purchase or otherwise acquire any lot or parcel of
property offered for sale or subject to foreclosure if there is no other purchaser at such sale. The
Act does specify that the Special Tax will have the same lien priority in the case of delinquency as
for ad valorem property taxes (see "BOND OWNERS' RISKS — THE 2014 DISTRICT BONDS — Risk Factors
Relating to Land Values" herein).
75
I,FGAI,MATTFIVt
ENFORCEABILITY OF REMEDIES
The remedies available to the Trustee and the Owners of the Bonds upon an event of default under the
Indenture, the Fiscal Agent Agreement or any other document described herein are in many respects
dependent upon regulatory and judicial actions which are often subject to discretion and delay. Under
existing law and judicial decisions, the remedies provided for under such documents may not be readily
available or may be limited. The various legal opinions to be delivered concurrently with the delivery of
the Bonds will be qualified to the extent that the enforceability of certain legal rights related to the
Indenture is subject to limitations imposed by bankruptcy, reorganization, insolvency or other similar
laws affecting the rights of creditors generally and by equitable remedies and proceedings generally.
APPROVAL OF LEGAL PROCEEDINGS
Fulbright & Jaworski LLP, Los Angeles, California, a member of Norton Rose Fulbright, as Bond
Counsel, will render an opinion which states that the Bonds and the Indenture are valid and binding
obligations of the Authority, enforceable in accordance with their terms. The legal opinion of Bond
Counsel will be subject to the effect of bankruptcy, insolvency, moratorium and other similar laws
affecting creditors' rights and to the exercise of judicial discretion in accordance with general principles
of equity.
The Authority has no knowledge of any fact or other information which would indicate that the Bonds
and the Inderacare are not so enforceable against the Authority, except to the extent such enforcement is
limited by principles of equity and by state and federal laws relating to bankruptcy, reorganization,
moratorium or creditors' rights generally.
Certain legal matters will be passed on for the Authority by Leibold, McClendon & Mann, P.C., Laguna
Hills, California, Authority Counsel and by Fulbright & Jaworski LLP, Los Angeles, California, a member
of Norton Rose Fulbright, as Disclosure Counsel. Certain legal matters will be passed on for the
Underwriter by McFarlin & Anderson LLP, Laguna Hills, California, as Underwriter's Counsel.
Fees payable to Bond Counsel, City Attorney, Disclosure Counsel and Underwriter's Counsel are
contingent upon the sale and delivery of the Bonds.
TAX MATTERS
The Internal Revenue Code of 1986 (the "Code ") imposes certain requirements that must be met
subsequent to the issuance and delivery of the Bonds for interest thereon to be and remain excluded
pursuant to section 103(a) of the Code from the gross income of the owners thereof for federal income tax
purposes. Noncompliance with such requirements could cause the interest on the Bonds to be included in
the gross income of the owners thereof for federal income tax purposes retroactive to the date of issuance
of the Bonds. The Authority has covenanted to maintain the exclusion of the interest on the Bonds from
the gross income of the owners thereof for federal income tax purposes.
In the opinion of Fulbright & Jaworski LLP, Los Angeles, California, a member of Norton Rose
Fulbright, Bond Counsel, under existing statutes, regulations, rulings and court decisions, interest on the
Bonds is exempt from personal income taxes of the State of California and, assuming compliance with the
covenants mentioned herein, interest on the Bonds is excluded pursuant to section 103(a) of the Code
from the gross income of the owners thereof for federal income tax purposes. In the further opinion of
Bond Counsel, under existing statutes, regulations, rulings and court decisions, the Bonds are not
"specified private activity bonds" within the meaning of section 57(a)(5) of the Code and, therefore,
interest on the Bonds will not be treated as an item of tax preference for purposes of computing the
76
alternative minimum tax imposed by section 55 of the Code. Receipt or accrual of interest on Bonds
owned by a corporation may affect the computation of the alternative minimum taxable income. A
corporation's alternative minimum taxable income is the basis on which the alternative minimum tax
imposed by section 55 of the Code will be computed.
Pursuant to the Indenture and in the Tax Certificate Pertaining to Arbitrage and Other Matters under
Sections 103 and 141 -150 of the Internal Revenue Code of 1986, to be delivered by the Authority and the
City in connection with the issuance of the Bonds, each of the Authority and the City will make
representations relevant to the determination of, and will make certain covenants regarding or affecting,
the exclusion of interest on the Bonds from the gross income of the owners thereof for federal income tax
purposes. In reaching its opinions described in the immediately preceding paragraph, Bond Counsel will
assume the accuracy of such representations and the present and future compliance by the Authority with
such covenants.
Except as stated in this section above, Bond Counsel will express no opinion as to any federal or state tax
consequences of the receipt of interest on, or the ownership or disposition of, the Bonds. Furthermore,
Bond Counsel will express no opinion as to any federal, state or local tax law consequences with respect
to the Bonds, or the interest thereon, if any action is taken with respect to the Bonds or the proceeds
thereof predicated or permitted upon the advice or approval of other counsel. Bond Counsel has not
undertaken to advise in the future whether any events after the date of issuance of the Bonds may affect
the tax status of interest on the Bonds or the tax consequences of the ownership of the Bonds.
Bond Counsel's opinion is not a guarantee of a result, but represents its legal judgment based upon its
review of existing statutes, regulations, published rulings and court decisions and the representations and
covenants of the Authority described above. No ruling has been sought from the Internal Revenue
Service (the "Service ") with respect to the matters addressed in the opinion of Bond Counsel, and Bond
Counsel's opinion is not binding on the Service. The Service has an ongoing program of auditing the tax-
exempt status of the interest on municipal obligations. If an audit of the Bonds is commenced, under
current procedures the Service is likely to treat the Authority as the "taxpayer" and the owners would
have no right to participate in the audit process. In responding to or defending an audit of the tax - exempt
status of the interest on the Bonds, the Authority may have different or conflicting interest from the
owners. Public awareness of any future audit of the Bonds could adversely affect the value and liquidity
of the Bonds during the pendency of the audit, regardless of its ultimate outcome.
Existing law may change to reduce or eliminate the benefit to bondholders of the exemption of interest on
the Bonds from personal income taxation by the State of California or of the exclusion of the interest on
the Bonds from the gross income of the owners thereof for federal income tax purposes. Any proposed
legislation or administrative action, whether or not taken, could also affect the value and marketability of
the Bonds. Prospective purchasers of the Bonds should consult with their own tax advisors with respect
to any proposed or future changes in tax law.
A copy of the form of opinion of Bond Counsel relating to the Bonds is included in Appendix F.
Tax Accounting Treatment of Bond Premium and Original Issue Discount on Bonds
To the extent that a purchaser of a Bond acquires that Bond at a price in excess of its "stated redemption
price at maturity" (within the meaning of section 1273(a)(2) of the Code), such excess will constitute
"bond premium" under the Code. Section 171 of the Code, and the Treasury Regulations promulgated
thereunder, provide generally that bond premium on a tax - exempt obligation must be amortized over the
remaining term of the obligation (or a shorter period in the case of certain callable obligations); the
amount of premium so amortized will reduce the owner's basis in such obligation for federal income tax
purposes, but such amortized premium will not be deductible for federal income tax purposes. Such
reduction in basis will increase the amount of any gain (or decrease the amount of any loss) to be
recognized for federal income tax purposes upon a sale or other taxable disposition of the obligation. The
77
amount of premium that is amortizable each year by a purchaser is determined by using such purchaser's
yield to maturity. The rate and timing of the amortization of the bond premium and the corresponding
basis reduction may result in an owner realizing a taxable gain when its Bond is sold or disposed of for an
amount equal to or in some circumstances even less than the original cost of the Bond to the owner.
The excess, if any, of the stated redemption price at maturity of Bonds of a maturity over the initial
offering price to the public of the Bonds of that maturity is "original issue discount." Original issue
discount accruing on a Bond is treated as interest excluded from the gross income of the owner thereof for
federal income tax purposes and is exempt from California personal income tax to the same extent as
would be stated interest on that Bond. Original issue discount on any Bond purchased at such initial
offering price and pursuant to such initial offering will accrue on a semiannual basis over the term of the
Bond on the basis of a constant yield method and, within each semiannual period, will accrue on a ratable
daily basis. The amount of original issue discount on such a Bond accruing during each period is added
to the adjusted basis of such Bond to determine taxable gain upon disposition (including sale, redemption
or payment on maturity) of such Bond. The Code includes certain provisions relating to the accrual of
original issue discount in the case of purchasers of Bonds who purchase such Bonds other than at the
initial offering price and pursuant to the initial offering.
Persons considering the purchase of Bonds with original issue discount or initial bond premium should
consult with their own tax advisors with respect to the determination of original issue discount or
amortizable bond premium on such Bonds for federal income tax purposes and with respect to the state
and local tax consequences of owning and disposing of such Bonds.
Othv ) FuMed al 11-110 —11le Tax Curisegilencees
Although interest on the Bonds may be exempt from California personal income tax and excluded from
the gross income of the owners thereof for federal income tax purposes, an owner's federal, state or local
tax liability may be otherwise affected by the ownership or disposition of the Bonds. The nature and
extent of these other tax consequences will depend upon the owner's other items of income or deduction.
Without limiting the generality of the foregoing, prospective purchasers of the Bonds should be aware
that (i) section 265 of the Code denies a deduction for interest on indebtedness incurred or continued to
purchase or carry the Bonds and the Code contains additional limitations on interest deductions applicable
to financial institutions that own tax- exempt obligations (such as the Bonds), (ii) with respect to insurance
companies subject to the tax imposed by section 831 of the Code, section 832(b)(5)(13)(i) reduces the
deduction for loss reserves by 15% of the sum of certain items, including interest on the Bonds, (iii)
interest on the Bonds earned by certain foreign corporations doing business in the United States could be
subject to a branch profits tax imposed by section 884 of the Code, (iv) passive investment income,
including interest on the Bonds, may be subject to federal income taxation under section 1375 of the Code
for Subchapter S corporations that have Subchapter C earnings and profits at the close of the taxable year
if greater than 25% of the gross receipts of such Subchapter S corporation is passive investment income,
(v) section 86 of the Code requires recipients of certain Social Security and certain Railroad Retirement
benefits to take into account, in determining the taxability of such benefits, receipts or accruals of interest
on the Bonds and (vi) under section 32(i) of the Code, receipt of investment income, including interest on
the Bonds, may disqualify the recipient thereof from obtaining the earned income credit. Bond Counsel
will express no opinion regarding any such other tax consequences.
ABSENCE OF LITIGATION
The Authority will furnish a certificate, dated as of the date of delivery of the Bonds, stating that there is
not now known to be pending or threatened any litigation restraining or enjoining the execution or
delivery of the Indenture or the sale or delivery of the Bonds or in any manner questioning the
proceedings and authority under which the Indenture is to be executed and delivered or the Bonds are to
be delivered or affecting the validity thereof.
NH64
CONCLUDING INFORMATION
NO RATINGS ON THE BONDS
The Authority has not made, and does not contemplate making, any application for a rating on the Bonds.
No such rating should be assumed based upon any other Authority rating that may be obtained.
Prospective purchasers of the Bonds are required to make independent determinations as to the credit
quality of the Bonds and their appropriateness as an investment. Should a Bond Owner elect to sell a
Bond prior to maturity, no representations or assurances can be made that a market will have been
established or maintained for the purchase and sale of the Bonds. The Underwriter assumes no obligation
to establish or maintain such a market and is not obligated to repurchase any of the Bonds at the request
of the owner thereof.
UNDERWRITING
O'Connor & Company Securities, Inc. (the "Underwriter ") is offering the Bonds at the prices set forth on
the cover page hereof. The initial offering prices may be changed from time to time and concessions from
the offering prices may be allowed to dealers, banks and others.
The Underwriter has purchased the Bonds at a price equal to approximately %($ of
the aggregate principal amount of the Bonds, which amount represents the principal amount of the Bonds,
less the Underwriter's discount of $ and plus a net original issue discount of $
The Underwriter will pay certain of its expenses relating to the offering.
EXPERTS
The Appraisal prepared by Harris Realty Appraisal, Newport Beach, California, has been included in this
Official Statement in reliance on and upon the authority of said firm as experts in the matters covered
therein.
THE FINANCING CONSULTANT
The material contained in this Official Statement was prepared by Rod Gunn Associates, Inc., a California
corporation, an independent financial consulting firm, who advised the Authority as to the financial
structure and certain other financial matters relating to the Bonds. The information set forth herein has
been obtained by Rod Gunn Associates, Inc. from sources which are believed to be reliable, but such
information is not guaranteed by Rod Gunn Associates, Inc. as to accuracy or completeness, nor has it
been independently verified. Fees paid to Rod Gunn Associates, Inc. are contingent upon the sale and
delivery of the Bonds.
FORWARD- LOOKING STATEMENTS
Certain statements included or incorporated by reference in this Official Statement constitute "forward -
looking statements" within the meaning of the United States Private Securities Litigation Reform Act of
1995, Section 21E of the United States Securities Exchange Act of 1934, as amended, and Section 27A of
the United States Securities Act of 1933, as amended. Such statements are generally identifiable by the
terminology used such as "plan," "expect," "estimate," "project," "budget" or similar words.
THE ACHIEVEMENT OF CERTAIN RESULTS OR OTHER EXPECTATIONS CONTAINED IN
SUCH FORWARD- LOOKING STATEMENTS INVOLVES KNOWN AND UNKNOWN RISKS,
UNCERTAINTIES AND OTHER FACTORS WHICH MAY CAUSE ACTUAL RESULTS,
PERFORMANCE OR ACHIEVEMENTS DESCRIBED TO BE MATERIALLY DIFFERENT FROM
79
ANY FUTURE RESULTS, PERFORMANCE OR ACHIEVEMENTS EXPRESSED OR IMPLIED BY
SUCH FORWARD- LOOKING STATEMENTS. THE AUTHORITY DOES NOT PLAN TO ISSUE
ANY UPDATES OR REVISIONS TO THE FORWARD- LOOKING STATEMENTS SET FORTH IN
THIS OFFICIAL STATEMENT.
ADDITIONAL INFORMATION
The summaries and references contained herein with respect to the Indenture, the Fiscal Agent
Agreement, the Bonds, statutes and other documents, do not purport to be comprehensive or definitive
and are qualified by reference to each such document or statute and references to the Bonds are qualified
in their entirety by reference to the form hereof included in the Indenture. Copies of the Indenture and the
Fiscal Agent Agreement are available for inspection during the period of initial offering of the Bonds at
the offices of the Underwriter, O'Connor & Company Securities, Inc., 234 East 176' Street, Suite 114,
Costa Mesa, California, 92627 (949) 764 -8320. Copies of these documents may be obtained after
delivery of the Bonds from the City through the City Manager, City of Lake Elsinore, 130 S. Main Street,
Lake Elsinore, California 92530,
REFERENCES
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 Authority and the purchasers or owners of any of the Bonds.
EXECUTION
The execution of this Official Statement by the Executive Director has been duly authorized by the Lake
Public Elsinore Financing Authority,
LAKE ELSINORE PUBLIC FINANCING AUTHORITY
By:
Executive Director
M
APPENDIX A.
SUMMARY OF THE INDENTURE
A -1
APPENDIX B.
SUMMARY OF THE FISCAL AGENT AGREEMENT
B -1
APPENDIX C.
APPRAISAL REPORT
C -1
APPENDIX D.
RATE AND METHOD OF APPORTIONMENT
D -1
APPENDIX E.
FORM OF CONTINUING DISCLOSURE AGREEMENT
E -1
FORM OF BOND COUNSEL OPINION
F -1
2014
Lake Elsinore Public Financing Authority
130 South Main Street
Lake Elsinore, California 92530
$7,685,000*
Lake Elsinore Public Financing Authority
Local Agency Revenue Bonds (Canyon Hills IA D),
2014 Series A
Ladies and Gentlemen:
We have acted as bond counsel to the Lake Elsinore Public Financing Authority (the "Authority ")
in connection with the issuance by the Authority of $7,685,000* aggregate principal amount of Lake
Elsinore Public Financing Authority Local Agency Revenue Bonds (Canyon Hills IA D), 2014 Series A
(the "Bonds "), pursuant to the provisions of Article 4 (commencing with section 6584) of Chapter 5 of
Division 7 of Title 1 of the California Government Code (the "Law "), pursuant to an Indenture of Trust,
dated as of January 1, 2014 (the "Indenture "), by and between the Authority and Union Bank, N.A., as
trustee (the "Trustee "). We have examined the Law and such certified proceedings and other papers as we
deem necessary to render this opinion.
As to questions of fact material to our opinion, we have relied upon representations of the
Authority contained in the Indenture and in the certified proceedings and certifications of public officials
and others furnished to us, without undertaking to verify the same by independent investigation.
Based upon the foregoing, we are of the opinion that:
1. The Bonds constitute valid and binding limited obligations of the Authority as
provided in the Indenture, and are entitled to the benefits of the Indenture. The Bonds are
payable from Revenues (as such term is defined in the Indenture).
2. The Indenture has been duly and validly authorized, executed and delivered by the
Authority and, assuming the enforceability thereof against the Trustee, constitutes the legally
valid and binding obligation of the Authority, enforceable against the Authority in accordance
with its terms. The Indenture creates a valid pledge, to secure the payment of principal of and
interest on the Bonds, of the Revenues and other amounts held by the Trustee in the funds and
accounts established pursuant to the Indenture, subject to the provisions of the Indenture
permitting the application thereof for other purposes and on the terms and conditions set forth
therein.
3. Under existing law, and assuming compliance with the covenants mentioned below,
interest on the Bonds is excluded pursuant to section 103(a) of the Internal Revenue Code of 1986
(the "Code ") from the gross income of the owners thereof for federal income tax purposes. We
are further of the opinion that under existing law, the Bonds are not "specified private activity
bonds" within the meaning of section 57(a)(5) of the Code and, therefore, interest on the Bonds
will not be treated as an item of tax preference for purposes of computing the alternative
F -2
minimum tax imposed by section 55 of the Code; however, receipt or accrual of interest on Bonds
owned by a corporation may affect the computation of its alternative minimum taxable income.
A corporation's alternative minimum taxable income is the basis on which the alternative
minimum tax imposed by section 55 of the Code is computed. We are further of the opinion that
interest on the Bonds is exempt from personal income taxes of the State of California under
present state law.
The Code imposes certain requirements that must be met subsequent to the issuance and
delivery of the Bonds for interest thereon to be and remain excluded pursuant to section 103(a) of
the Code from the gross income of the owners thereof for federal income tax purposes. Non-
compliance with such requirements could cause the interest on the Bonds to fail to be excluded
from the gross income of the owners thereof retroactive to the date of issuance of the Bonds.
Pursuant to the Indenture, and in the Tax Certificate Pertaining to Arbitrage and Other Matters
under Sections 103 and 141 -150 of the Internal Revenue Code of 1986 being delivered by the
Authority and the City in connection with the issuance of the Bonds, each of the Authority and
the City is making representations relevant to the determination of, and is undertaking certain
covenants regarding or affecting, the exclusion of interest on the Bonds from the gross income of
the owners thereof for federal income tax purposes. In reaching our opinions described in the
immediately preceding paragraph, we have assumed the accuracy of such representations and the
present and future compliance by the Authority and the City with its covenants. Further, except as
stated in the preceding paragraph, we express no opinion as to any federal or state tax
consequences of the receipt of interest on, or the ownership or disposition of, the Bonds.
Furthermore, we express no opinion as to any federal, state or local tax law consequences with
respect to the Bonds, or the interest thereon, if any action is taken with respect to the Bond or the
proceeds thereof predicated or permitted upon the advice or approval of other counsel.
The opinions expressed in paragraphs 1 and 2 above are qualified to the extent the enforceability
of the Bonds and the Indenture may be limited by applicable bankruptcy, insolvency, debt adjustment,
reorganization, moratorium or similar laws or equitable principles relating to or limiting credltors' rights
generally or as to the availability of any particular remedy. The enforceability of the Bonds and the
Indenture is subject to the effect of general principles of equity, including, without limitation, concepts of
materiality, reasonableness, good faith and fair dealing, to the possible unavailability of specific
performance or injunctive relief, regardless of whether considered in a proceeding in equity or at law, and
to the limitations on legal remedies against governmental entities in California.
Our opinions are based on existing law, which is subject to change. Such opinions are further
based on our knowledge of facts as of the date hereof. We assume no duty to update or supplement our
opinions to reflect any facts or circumstances that may hereafter come to our attention or to reflect any
changes in any law that may hereafter occur or become effective. Moreover, our opinions are not a
guarantee of result and are not binding on the Internal Revenue Service; rather, such opinions represent
our legal judgment based upon our review of existing law that we deem relevant to such opinions and in
reliance upon the representations and covenants referenced above.
No opinion is expressed herein on the accuracy, completeness or sufficiency of the Official
Statement or other offering material relating to the Bonds.
Very truly yours,
F -3
APPENDIX G.
BOOK -ENTRY SYSTEM
G -1
APPENDIX G
HOOD.EN'I'IaY SYSTEM
The following description of the procedures and record keeping with respect to beneficial ownership
interests in the Bonds, payment of principal of and interest on the Bonds to Direct Participants, Indirect
Participants or Beneficial Owners (as such terms are defined below) of the Bonds, confirmation and
transfer of beneficial ownership interests in the Bonds and other Bond - related transactions by and
between DTC, Direct Participants, Indirect Participants and Beneficial Owners of the Bonds is based
solely on information.furnished by DTC to the Authority which the Authority believes to be reliable, but
the Authority and the Underwriter do not and cannot make any independent representations concerning
these matters and do not take responsibility for the accuracy or completeness thereof. Neither the DTC,
Direct Participants, Indirect Participants nor the Beneficial Owners should rely on the foregoing
information with respect to such matters, but should instead confirm the same with DTC or the DTC
Participants, as the case may be.
The Depository Trust Company ( "DTC "), New York, NY, will act as securities depository for 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 will be issued for each maturity of the Bonds, each in the aggregate principal
amount of such maturity, and will be deposited with DTC.
DTC, the world's largest securities depository, is a limited - purpose trust company organized under the
New York Banking Law, a "banking organization" within the meaning of the New York Banking Law, a
member of the Federal Reserve System, a "clearing corporation" within the meaning of the New York
Uniform Commercial Code, and a "clearing agency" registered pursuant to the provisions of Section 17A
of the Securities Exchange Act of 1934. DTC holds and provides asset servicing for over 3.5 million
issues of U.S. and non -U.S. equity issues, corporate and municipal debt issues, and money market
instruments (from over 100 countries) that DTC's participants ( "Direct Participants ") deposit with DTC.
DTC also facilitates the post -trade settlement among Direct Participants of sales and other securities
transactions in deposited securities, through electronic computerized book -entry transfers and pledges
between Direct Participants' accounts. This eliminates the need for physical movement of securities
certificates. Direct Participants include both U.S. and non -U.S. securities brokers and dealers, banks,
trust companies, clearing corporations, and certain other organizations. DTC is a wholly -owned
subsidiary of The Depository Trust & Clearing Corporation ( "DTCC "). DTCC is the holding company
for DTC, National Securities Clearing Corporation and Fixed Income Clearing Corporation all of which
are registered clearing agencies. DTCC is owned by the users of its regulated subsidiaries. Access to the
DTC system is also available to others such as both U.S. and non -U.S. securities brokers and dealers,
banks, trust companies, and clearing corporations that clear through or maintain a custodial relationship
with a Direct Participant, either directly or indirectly ( "Indirect Participants "). DTC has a Standard &
Poor's rating of AA +. The DTC Rules applicable to its Participants are on file with the Securities and
Exchange Commission. More information about DTC can be found at www.dtcc.com.
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 the Bonds, except
in the event that use of the book -entry system for the Bonds is discontinued.
G -2
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 the 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.
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
the Bonds may wish to ascertain that the nominee holding the Bonds for their benefit has agreed to obtain
and transmit notices to Beneficial Owners. In the alternative, Beneficial Owners may wish to provide
their names and addresses to the Trustee and request that copies of notices be provided directly to them.
Redemption notices shall be sent to DTC. If less than all of the Bonds are being redeemed, DTC's
practice is to determine by lot the amount of the interest of each Direct Participant in such maturity to be
redeemed.
Neither DTC nor Cede & Co. (nor such other DTC nominee) will consent or vote with respect to the
Bonds unless authorized by a Direct Participant in accordance with DTC's MMI Procedures. Under its
usual procedures, DTC mails an Omnibus Proxy to the Authority 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).
Principal, redemption price and interest 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
Authority or the Trustee, on payable date in accordance with their respective holdings shown on DTC's
records. Payments by Participants to Beneficial Owners will be governed by standing instructions and
customary practices, as is the case with securities held for the accounts of customers in bearer form or
registered in "street name," and will be the responsibility of such Participant and not of DTC, the Trustee
or the Authority, subject to any statutory or regulatory requirements as may be in effect from time to time.
Payment of principal, redemption price and interest payments to Cede & Co. (or such other nominee as
may be requested by an authorized representative of DTC) is the responsibility of the Authority or the
Trustee, disbursement of such payments to Direct Participants will be the responsibility of DTC, and
disbursement of such payments to the Beneficial Owners will be the responsibility of Direct and Indirect
Participants.
DTC may
discontinue providing its services
as depository with respect to the Bonds at any time by giving
reasonable
notice to the Authority or the Trustee.
Under such
circumstances, in the event that a successor
depository
is not obtained, Bond certificates
are required to be
printed and delivered.
The Authority may decide to discontinue use of the system of book - entry -only transfers through DTC (or
a successor securities depository). In that event, the Bond certificates will be printed and delivered to
DTC.
G -3
The information in this section concerning DTC and DTC's book -entry system has been obtained from
sources that me Authority believes to be reliable, but the Authority takes no responsibility for the
accuracy thereof.
Discontinuance of DTC Services
In the event that (a) DTC determines not to continue to act as securities depository for the Bonds, or (b)
the Authority determines that DTC shall no longer act and delivers a written certificate to the Trustee to
that effect, then the Authority will discontinue the Book -Entry System with DTC for the Bonds. If the
Authority determines to replace DTC with another qualified securities depository, the Authority will
prepare or direct the preparation of a new single separate, fully- registered Bond for each maturity of the
Bonds registered in the name of such successor or substitute securities depository as are not inconsistent
with the terms of the Indenture. If the Authority fails to identify another qualified securities depository to
replace the incumbent securities depository for the Bonds, then the Bonds shall no longer be restricted to
being registered in the Bond registration books in the name of the incumbent securities depository or its
nominee, but shall be registered in whatever name or names the incumbent securities depository or its
nominee transferring or exchanging the Bonds shall designate.
In the event that the Book -Entry System is discontinued, the following provisions would also apply: (i)
the Bonds will be made available in physical form, (ii) principal of, and redemption premiums if any, on
the Bonds will be payable upon surrender thereof at the trust office of the Trustee identified in the
Indenture, and (iii) the Bonds will be transferable and exchangeable as provided in the Indenture.
The Authority or the Trustee do not have any responsibility or obligation to DTC Participants; to the
persons for whom they act as nominees, to Beneficial Owners, or to any other person who is not shown on
the registration books as being an owner of the Bonds, with respect to (i) the accuracy of any records
maintained by DTC or any DTC Participants; (ii) the payment by DTC or any DTC Participant of any
amount in respect of the principal of, redemption price of 'or interest on the Bonds; (iii) the delivery of any
notice which is permitted or required to be given to registered owners under the Indenture; (iv) the
selection by DTC or any DTC Participant of any person to receive payment in the event of a partial
redemption of the Bonds; (J) any consent given or other action taken by DTC as registered owner; or (Vi)
any other matter arising with respect to the Bonds or the Indenture. The Authority or the Trustee cannot
and do not give any assurances that DTC, DTC Participants or others will distribute payments of
principal of or interest on the Bonds paid to DTC or its nominee, as the registered owner, or any notices
to the Beneficial Owners or that they will do so on a timely basis or will serve and act in a manner
described in this Official Statement. The Authority or the Trustee are not responsible or liable for the
failure of DTC or any DTC Participant to make any payment or give any notice to a Beneficial Owner in
respect to the Bonds or any error or delay relating thereto.
G -4