HomeMy WebLinkAboutAgenda 6City Council Meeting
May 14, 2013
AGENDA ITEM NO. 6
EXHIBIT
NEW ISSUE -BOOK ENTRY ONLY NOT RATED
(see "CONCLUDING INFORMATION - NO RATINGS ON THE BONDS" herein)
In the opinion of Fulbright & Jovorski L.L.P., Los Angeles, California, Bond Counsel, under existing law, and assuming compliance
with the tax covenants described herein, interest on the Bonds is excluded pursuant to section 103(x) of the internal Revenue Code of
1986fivin the gross income of the owners thereoffor federal income tax proposes and is not an item of tax preference for pmpo.ses of Fire
federal alternative nlninaan tax. It is also the opinion of Bond Counsel that under existing law, interest on the Bonds is exempt from
personal income Inses of (he State of California. See "LEGAL MN14T ERS - TAX MATTERS° herein.
COUNTY OF RIVERSIDE STATE OF CALIFORNIA
$396509000*
LAKE ELSINORE PUBLIC FINANCING
AUTHORITY
LOCAL AGENCY REVENUE BONDS
(SUMMERLY IA A),
2013 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 factor that should be considered in evaluating the investment quality of the
Bonds.
Interest on the Bonds is payable semiannually on March 1 and September I of each year, commencing March 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 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 2013 District Bonds (as
defined herein) to be issued under the Mello -Roos Community Facilities Act of 1982, as amended (Section 53311 el 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 2013 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 2013 District Bonds will be from
Special Taxes (as defined herein) to be levied against taxable real property within Improvement Area A of the City of Lake
Elsinore Community Facilities District No. 2006 -1 (Su nmerly), 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 June 13, 2013 (see "APPENDIX G - BOOK -ENTRY SYSTEM ").
The dale of the Official Statement is
Preliminary, subject to change.
O'CONNOR & COMPANY SECURITIES
LAKE ELSINORE PUBLIC FINANCING AUTHORITY
LAKE ELSINORE, CALIFORNIA
AUTHORITY GOVERNING BOARD
Steve Manes, Chairperson
Brian Tisdale, Vice Chairperson
Daryl Hickman, Board Member
Robert E. Magee, Board Member
Natasha Johnson, Board Member
CITY COUNCIL
Robert E. Magee, Mayor
Natasha Johnson, Mcn�or Pro Tem
Daryl Hickman, Council Member
Brian Tisdale, Council Member
Steve Manos, Council Member
CITY AND AUTHORITY STAFF
Grant Yates, Chy Manager /Authority Executive Director
Barbara Leibold, Esq., CityAnorney/AuthoriiyCounsel
James R. Riley, CPA, Director ofAdministrative Services /Authority Treasurer
PROFESSIONAL SERVICES
Bond Counsel and Disclosure Counsel Appraiser
Fulbright & Jaworski L.L.P. Harris Realty Appraisal
Los Angeles, California Newport Beach, California
City Attorney
Leibold, McClendon & Mann, P.C.
Laguna Hills, California
Special Tax Consultant
Harris & Associates
Irvine, California
Financing Consultant
Rod Gunn Associates, Inc.
Huntington Beach, California
Trustee and Fiscal Agent
Union Bank, N.A.
Los Angeles, California
Underwriter
O'Connor & Company Securities, Inc.
Newport Beach, California
Underwriter's Counsel
McFarlin &Anderson LLP
Laguna Hills, California
FOR ADDITIONAL INFORMATION
James R. Riley, CPA, City of Lake Elsinore (951) 674 -3124
O'Connor & Company Securities, Inc. (949) 706 -0444
TABLE, OF CONTENTS
VicinityMap ................................ .............................iv
8
SUMMARY STATEMENT ...... . ..............................
I
THE AUTHORITY ................... ..............................I
Authority Formation; Members ... ..............................I
29
Bond Authorization and Issuance ..............................2
I1
Repayment of the Bonds .............. ..............................2
Purchase of Local Obligations ..... ..............................2
Financing Purpose of the Bonds .. ..............................3
THE DI STRICT ......................... ..............................3
35
Enabling Legislation .................... ..............................3
13
Formation.................................... ...............................
3
General Location and Description of the District ......
3
Map of the District ....................... ..............................4
IMPROVEMENT AREA A ....... ..............................5
Formation..................................... ..............................5
Bond Authorization ...................... ..............................5
14
Repayment of the 2013 District Bonds ......................5
Financing Propose of the 2013 District Bonds ..........6
15
THE SPECIALTAXES ............. ..............................6
Special Tax Requirement ............. ..............................6
Apportionment of the Special Tax .............................6
Assigned Special Tax; Maximum Special Tax ...........
7
Lien of the Special Tax ................ ..............................7
Special Tax Collections ................ ..............................7
DEVELOPMENT WITHIN
IMPROVEMENTAREA A OF THE
DISTRICT .............................. ...............................
8
Property Ownership ..................... ..............................8
Description of Developed Property .........................10
Description of Undeveloped Property .....................10
29
VALUE -TO -LIEN RATIO ..... ...............................
I1
REDEMPTION OF THE BONDS .......................12
Optional Redemption .................. .............................12
Special Mandatory Redemption .. .............................12
Mandatory Sinking Payment Redemption ...............13
35
THE BONDS - GENERAL PROVISIONS ..........
13
Denominations.......................... ...............................
13
Registration, Transfer and Exchange .......................
13
Payment...................................... .............................13
Notice.......................................... .............................13
LEGAL MA' 1' TERS .................. .............................13
PROFESSIONAL SERVICES.. ............................
14
CONTINUING DISCLOSURE ............................14
AVAILABILITY OF LEGALDOCUMENTS .....
15
Aerial Photo of Improvement Area A of the
District..................................... .............................16
SELECTED FACTS .................... .............................17
ESTIMATED SOURCES AND USES OF
FUNDS..................................... ............................... 2 0
THEBONDS ............................. .............................20
THE 2013 DISTRICT BONDS .............................21
DEBT SERVICE COVERAGE TABLES ..............22
DEBT SERVICE COVERAGE ON ]'HE
AUTHORITY BONDS .......... .............................22
DEBT SERVICE COVERAGE ON ]'HE
2013 DISTRICT BONDS ...... .............................23
SCHEDULED DEBT SERVICE SCHEDULES.... 25
SCHEDULED DEBT SERVICE ON THE
BONDS................................... .............................25
SCHEDULED DEBT SERVICE ON THE
2013 DISTRICT BONDS ...... .............................27
THEBONDS ................................ .............................29
GENERAL PROVISIONS ....... .............................29
33
Repayment of the Bonds ............. .............................29
Transferor Exchange of Bonds .. .............................29
Bonds Mutilated, Lost, Destroyed or Stolen ............
29
REDEMPTION ....................... ...............................
30
Optional Redemption .................. .............................30
Special Mandatory Redemption . .............................30
Mandatory Sinking Payment Redemption ...............30
Open Market Purchase of Bonds .............................31
35
Notice of Redemption; Rescission ...........................31
Effect of Redemption... ............................................
32
Partial Redemption ..................... .............................32
INVESTMENT OF FUNDS ..... .............................32
ADDITIONAL OBLIGATIONS ..........................32
TheAuthority .............................. .............................32
TheDistrict ................................. .............................32
SOURCES OF PAYMENT FOR THE BONDS..... 33
REPAYMENT OFT14E BONDS ..........................
33
General....................................... .............................33
Application of Revenues; Flow of Funds ................33
Reserve Account ......................... .............................34
Cash Flow Management Fund .... .............................34
Redemption Fund ....................... .............................35
REPAYMENT OFTHE 2013 DISTRICT
BONDS................................... .............................35
General.................................... ...............................
35
Special Taxes .............................. .............................35
Application of Special Taxes; Flow of Funds ..........
36
Delinquency Management Fund . .............................36
Redemption Fund ....................... .............................37
Covenant for Superior Court Foreclosure ................37
BOND OWNERS' RISKS ........... .............................39
THEBONDS ............................. .............................39
No Liability of the Authority to the Bond
Owners................................... ............................... 39
Loss of Tax Exemption ............... .............................39
IRSAudits .................................. .............................39
Early Bond Redemption ............. .............................39
Vicinity Map
(insert map #1)
iv
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 May 14, 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 June 13, 2013 (see "APPENDIX C - BOOK - ENTRY SVS'rEM" ).
Repayment of the Bonds
The Bonds are secured under an Indenture of Trust, dated as of June 1, 2013 (the `Indenture "), between
the Authority and Union Bank, N.A., Los Angeles, California, as trustee (the "Trustee ") (see "APPENDIX
A - SUMMARY OFTHE 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
field pursuant to the Indenture (see "SOURCES OF PAYMENT FOR THE BONDS - REPAYMENT OF THE
BONDS - Reserve Account' herein);
3. Any investment earnings with respect to Such monies (See "THE BONDS - INVESTMENT OF
FUNDS" herein); and
4. Any moneys that may be available from the Cash Plow Management Fund established and held
pursuant to the Indenture ( "SOURCES OF PAYMENT FOR THE BONDS - REPAYMEN't' OF'1'HE BONDS -
Cash Flow Management Fund" 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'FHE BONDS" and `BOND OWNERS' RISKS"
herein).
The Bonds are special obligations of the Authority. The 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. 2006 -1 (Summerly) Special Tax Bonds, 2013 Series (Improvement Area A) (the
"2013 District Bonds ") to be issued by City of Lake Elsinore Community Facilities District No. 2006 -1
(Summerly) (the "District "), as described herein, for the benefit of Improvement Area A ( "Improvement
Area A ") of the District. The 2013 District Bonds are secured and payable from Special Taxes levied
within Improvement Area A (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 2013 District Bonds except for refunding purposes. The
Map of the District
(Insert Map 2)
Financing Purpose of the 2013 District Bonds
The District will apply proceeds from the sale of the 2013 District Bonds to the Authority as follows:
1. To provide the District with funds to finance public infrastructure and capital fees related to
Sununerly development;
2. To fund that portion of the Special Tax levy representing Undeveloped Properties until
September 1, 2014;
3. To pay the expenses of the District in connection with the issuance of the 2013 District Bonds
(see "ESTIMATED SOURCES AND USES OF FUNDS —THE 2013 DISTRICT BONDS" herein); and
4. To fund, in part, the Delinquency Management Fund. The Delinquency Management Fund
requirement is 15% ($48,766.88 *) of maximum annual debt service on the 2013 District Bonds.
On the delivery date of the 2013 District Bonds, the initial deposit into the Delinquency
Management Fund will be $23,620.62* (see "ESTIMATED SOURCES AND USES OF FUNDS —THE
2013 DISTRICT BONDS" and "SOURCES OF PAYMENT FOR THE BONDS — REPAYMENT OF THE 2013
DISTRICT BONDS - Delinquency Management Fund" herein).
TILE SPECIAL TAXES
Applicability. There are two types of special taxes that are levied under the Rate and Method of
Apportionment. The first is the Special Tax for Services (as such term is defined in the Rate and Method
of Apportionment) which is set at the amount of $283.53 per single family dwelling unit in Fiscal Year
2013/2014, increasing 2% each Fiscal Year thereafter. The second is the Special Tax for Facilities (as
defined in the Rate and Method of Apportionment) which is described herein and is to be used to pay debt
service on the 2013 District Bonds, Administrative Expenses, and replenishment of the Reserve Fund (if
necessary). As used in this Official Statement, the terms "Special Tax," "Special Taxes," "Special Tax for
Facilities," and "Special Taxes for Facilities" shall refer exclusively to the Special Tax for Facilities, and
all references to the Special Tax Requirement, the Special Tax rates, the Maximum Special Taxes, and the
apportionment of the Special Tax shall be a reference to the Special 'fax for Facilities only.
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)."
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 "FIDE SPECIAL. TAXES — SPECIAL TAX REQUIREMENT"
herein) for Improvement Area A 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 A.
Generally, the "Special Tax Requirement" is the amount necessary to pay debt service on the 2013
District Bonds issued on behalf of Improvement Area A, 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
The Rate and Method of Apportionment requires the Special Tax levy to be apportioned between 2 classes
of taxable property currently existing in Improvement Area A ( "Developed Property" and "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 Assigned
Special Tax as needed to satisfy the Special Tax Requirement. Secondly, if additional monies are needed
COMMUNITY FACILITIES DISTRICT NO. 2006 -1 (SUMMERLY)
IMPROVEMENTAREAA
SPECIAL TAX RECEIPTS
FISCAL YEAR 2012/13
First Second
First Installment Installment Percent Second Installment Percent
Levy Receipts Delinquent Installment Levv Receipts Delinquent
FY 2012113 $14,175.52 $13,655.32 3.67% $14,175.52 N/A N/A
Somme: City of Lake Elsinore.
It has been the City's experience that during the initial stages of development, delinquencies remain high
until such time as the records of the County Assessor are updated to reflect the correct owner and address
after the sale of the parcels being assessed. This update and the cure of delinquencies typically occur
during the first fiscal year after sale of properties. The District and the Authority have taken several
actions to assist in mitigating against future delinquencies (see "BOND OWNERS' RISKS — THE 2013
DISTRICT BONDS - Risk Factors Relating to the Levying and Collection of the Special Taxes," and
"DISTRICFADMINISTRATION — DELINQUENCIES" herein).
DEVELOPMENT WITHIN IMPROVEMENT AREA A OF THE DISTRICT
Property Ownership
The property owners within Improvement Area A of the District, as of April 1, 2013, consisted of 67
individual owners, Beazer Homes Holding Corp ( "Beazer ") (30 parcels), Richmond American Homes of
Maryland, Inc. ( "Richmond American ") (43 parcels) and McMillin Daybreak, LLC ( "McMillin
Daybreak ") (74 parcels). Beazer, Richmond American and McMillin Daybreak (the `Builders" herein)
are currently in various stages of building homes in Improvement Area A. There are expected to be
transfers of ownership of the property within Improvement Area A to individual owners of single family
homes during the development of the land within Improvement Area A by the builders. During the period
of time a significant portion of the land in Improvement Area A 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. However, the Special Tax levy on Undeveloped Properties
owned by the Builders is funded until September 1, 2014 and during that period of time, it is currently
expected, ownership of a substantial amount of the remaining parcels currently classified as Undeveloped
Properties will transfer ownership to individual homeowners.
A brief description of the top three property owners is below
McMillin Daybreak. McMillin Daybreak is a subsidiary of the Corky McMillin Companies, a private
family run company. McMillin Daybreak LLC is a Delaware limited liability company, the sole member
of which is McMillin Summerly, LLC ( "McMillin Summerly "). McMillin Summerly is the master
developer of the Summerly development and is affiliated with The Corky McMillin Real Estate Group,
LLC. The Corky McMillin Real Estate Group was formed in 2009 and is affiliated with The Corky
McMillin Companies ( "McMillin "). Started in 1960 as a remodeling and custom -home builder,
McMillin, doing business for over 50 years, has grown into a fully integrated real estate investment, land
development and home- building company and in recent years expanded its operations outside the San
Diego area, where it was founded. McMillin now operates in the California regional markets of San
Diego, Lake Elsinore, Imperial Valley, Bakersfield, Fresno, Hanford, and Visalia, as well as San Antonio,
Texas and Branson, Missouri. McMillin has built nearly 30,000 residences since 1960. In addition, it
has created 16 mixed -use master- planned communities, more than 20 community parks, thousands of
miles of new roads, schools, shopping centers, commercial office and industrial parks, college dormitories
and 2,000 military residences on seven bases.
Description of Developed Property
Defined. As defined in the Rate and Method of Apportionment, Developed Property can include
completed homes including model homes, homes under construction and finished lots for which a
building permit has been issued but vertical construction has not commenced.
Development Status. Shown below is the status and composition of Developed Property as of April 1,
2013.
COMMUNITY FACILITIES DISTRICT NO. 2006 -1
(SUMMERLY)
IMPROVEMENTAREAA
DEVELOPED PROPERTY
(AS OFAPRIL 1, 2013)
Finished Lots
HmnesUnder w/Iluilding
Property Owner Completed Construction Permit Total
Individual Owners 67 N/A N/A 67
Beazer 5 25 0 30
Richmond American 6 12 0 18
McMillin Daybreak 0 0 0 0
Total 78 37 0 115
Source: The City of Lake Elsinore and the Appraisal Report
All the remaining parcels owned by Beazer have completed homes (5 parcels including 3 model homes)
or are under construction (25 parcels). It is currently expected that Beazer will complete and sell the
remaining homes in their development in the 2013/14 Fiscal Year. The homes under construction range in
size from 1,856 square feet to 2,412 square feet and range in price from $299,990 to $349,990.
SUNSET HILLS BY BEAZER
HISORTICAL SALE CHARACTERISTICS
(1) As of April 1, 2013
Source: "the Appraisal Report.
Description of Undeveloped Property
Defined. As defined in the Rate and Method of Apportionment, Undeveloped Property includes all
parcels not classified as Developed Property.
10
Average Sales
Average Size
Average Sales
Average Price per
Year
Number of Sales per Month
(Square Fect)
Fr=ee
Square Foot
2012
19 1.58
21183
$253,105
$115.93
2013")
17 5.67
2,089
$251,824
$120.56
(1) As of April 1, 2013
Source: "the Appraisal Report.
Description of Undeveloped Property
Defined. As defined in the Rate and Method of Apportionment, Undeveloped Property includes all
parcels not classified as Developed Property.
10
Based on the appraised value of the property within Improvement Area A of $31,394,250, as reported in
the Appraisal (as defined herein), the estimated value -to -lien ratio is 8.60* 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 A.
See "BONDOWNERS' RISKS — Risk Factors Relating to Land Values" herein and "APPENDIX C —
APPRAISAL REPORT."
The District expects the ratio of Assigned Special Taxes in any fiscal year to the corresponding annual
debt service on the 2013 District Bonds to be not less than 1.10 to 1 (see "DEBT SERVICE COVERAGE -
DEBT SERVICE COVERAGE ON THE 2013 DISTRICT BONDS" herein for a discussion of the District's
assumptions in making such projections).
Shown below is the estimated value -to -lien ratio in Improvement Area A of the District, as of April 1,
2013.
COMMUNITY FACILITIES DISTRICT NO. 2006 -1
(SUMMERLY)
IMPROVEMENT AREA A
VALUE -TO -LIEN RATIO
(AS OF APRIL 1, 2013)
Number of Parcels
Developed Property
Completed (Individual Homeowners)
Under Construction (includes model homes)
Undeveloped Property
Total
Principal Amount of 2013 District Bonds
Value to Lien
Source: the Appraisal Report.
REDEMPTION OF THE BONDS
Optional Redemption
67
48
99
Total Estimated Value
$17,874,000
8,970.250
4.550,000
$31,394,250
$1650,000*
8.60* to 1
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,
2023, 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).
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 2013 District Bonds from amounts constituting prepayments of Special Taxes, from surplus
revenues transferred by the Authority to the District front 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 2013 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 "THE BONDS - REDEMPTION— Special Mandatory Redemption" herein).
* Preliminsry,subjecttochaoge.
12
L.L.P., Los Angeles, California, 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 Trustee under the Indenture 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 2013 District Bonds (see "CONCLUDING INFORMATION — Experts" herein).
Rod Gunn Associates, Inc., Huntington Beach, California, 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.
CONTINUING DISCLOSURE
'rile 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 and McMillin Daybreak have each covenanted in separate agreements for the benefit of
Owners of the Bonds to provide certain financial information, operating data and development
information relating to Improvement Area A. The District has agreed to make such information available
not later than December 31 of each year, commencing December 31, 2013, and, until its obligations
terminate, McMillin Daybreak has agreed to make such information available not later than May I of
each year, commencing May 1, 2014 (each an "Annual Report" and collectively the "Annual Reports "),
and to provide notices of the occurrences of certain enumerated events. Each Annual Report and the
notice of enumerated events will be filed by the Trustee, acting as dissemination agent, with the
Municipal Securities Rulemaking Board ( "MSRB ") in an electronic format as prescribed by the MSRB.
The specific nature of information to be contained in the Annual Reports or the notice of enumerated
events is set forth in "APPENDIX E - FORM OF CONTINUING DISCLOSURE AGREEMENT:" These
covenants have been made by the District and McMillin Daybreak in order to assist the Underwriter in
complying with the Rule 15c2 -12 of the Securities Exchange Act of 1934, as amended (the "Rule "). The
District has never been required to meet continuing disclosure requirements under such Rule.
The Authority did not 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 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.
Iml
Aerial Photo of Improvement Area A of the District
(Insert MAP 3)
16
Primary Sources for Repayment of the 2013 Special 'faxes levied within Improvement Area A of the
District Bonds: District (see "SOURCES OF PAYMENT FOR THE BONDS —
REPAYMENT OE THE 2013 DIS'172IC'1' BONDS" and `'rHE
SPECIAL TAXES" herein).
Priority: The 2013 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 A of the District (see "SOURCES Or PAYMENT
FOR THE BONDS — REPAYMENT OF THE 2013 DISTRICT'
BONDS" and `BOND OWNERS' RISKS" herein).
First Optional Redemption Date:
The lien of the Special Taxes on the taxable real
property in Improvement Area A 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 I, 2023, at 100% of principal amount (see
"THE BONDS - REDEMPTION" herein).
IMPROVEMENT AREA A OF THE DISTRICT
Property Owners
Property Owners as of April I, 1.013 (see
"BOND OWNERS' RISKS — THE 2013
DISTRICT BONDS — Risk Factor Relating to
the Levying and Collection of the Special
Taxes — Concentration of Ownership" herein):
Appraised Values
Appraised Valuation of property within
Improvement Area A of the District as of
April 1, 2013:
Principal amount of the 2013 District
Bonds:
67 Individual Homeowners
74 parcels owned by McMillin Daybreak
43 Parcels owned by Richmond American
30 Parcels owned by Beazer
$31,394,250 (see "APPENDIX C — APPRAISAL REPORT"
herein).
$3,6505000*
Ratio of Appraised Value of property within 8.60* to I
Improvement Area A of the District to
aggregate principal amount of the 2013
District Bonds (1):
Preliminary, subject to change.
18
ESTIMATED SOURCES AND USES OF FUNDS
THE BONDS
Proceeds from the sale of the Bonds will be used to provide funds to acquire the 2013 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
Other Available Funds
Total Available
Uses of Funds
Bond Purchase Fund t'1
Costs of Issuance Fund (2)
Reserve Account (3)
Cash Flow Management Fund t4I
Total
(1) To be used to acquire the 2013 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.
(4) See "SOURCES OF PAYMENT FOR THE BONDS — REPAYMENT OF THE BONDS — Cash Flow
Management Fund" herein.
20
DEBT SERVICE COVERAGE TABLES
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 2013 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 pursuant to the Indenture 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 13ONDS — REPAYMENT OF THE BONDS — Application of
Revenues; Flow of Funds" herein).
22
LAKE ELSINORE
PUBLIC FINANCING AUTHORITY
LOCAL AGENCY REVENUE
BONDS (SUMMERLY
IA A)
2013 SERIES A
DEBT
SERVICE COVERAGE
Bond
2013 District Bond Debt
Debt Service Payments
Coverage
Year
Service Payments*
on the Bonds *
Ratio
2014
$207.502.50
$207,502.50
N/A
2015
185,550.00
185,550.00
100%
2016
190,250.00
1W250.00
100%
2017
194,850.00
194,850.00
100%
2018
199,225.00
199,225.00
100%
2019
203,400.00
203,400.00
100%
2020
207,262.50
207,262.50
100%
2021
210,962.50
210,962.50
100%
2022
214,387.50
214387.50
100%
2023
217,512.50
217,512.50
100%
2024
225,312.50
225,312.50
100%
2025
227,387.50
227,387.50
100%
2026
234,237.50
234,237.50
100%
2027
235,637.50
235,637.50
100%
2028
241,812.50
241,812.50
100%
2029
247,537.50
247,537.50
100%
2030
252,550.00
252,550.00
100%
2031
257,087.50
257,087.50
100%
2032
261,150.0(1
261,150.00
100%
2033
269,737.50
269,737.50
t00%
2034
272,612.50
272,612.50
100%
2035
279,812.50
279,812.50
100%
2036
286,281.26
286,281.26
100%
2037
292,018.76
292,018.76
100%
2038
297,025.00
297,025.00
100%
2039
301,300.00
301,300.00
100%
2040
309,843.76
309,84176
100%
2041
312,412.50
312,412.50
100%
2042
319,250.00
319,250.00
100%
2043
325,112.50
325,112.50
100%
* Prelimnary, subject to change.
22
CITY OF LAKE ELSINORE
COMMUNITY FACILITIES DISTRICT NO. 2006 -1
(SUMMERLY)
IMPROVEMENT AREA A
2013 DISTRICT BONDS
DEBT SERVICE COVERAGE
Preliminary, subject to
24
Debt Service
Total Assigned
Less
Payments on
the
Fiscal
Annual
Administrative
Net Assigned
2013 District
Coverage
Year
Snccial Tax
Expense
Special Tax
Bonds*
Ratio*
2014
$219,086.62
($15,000.00)
$204,086.62
$207,502.50
N/A
2015
223,468.35
(15,300.00)
$208,168.35
185,550.00
1.12
2016
227,937.72
(15,606.00)
$212,331.72
190,250.00
1.12
2017
232,496.47
(15,918.12)
$216,578.35
194,850.00
1.11
2018
237,146.40
(16,236.48)
$220,909.92
199,225.00
1.11
2019
241,889.33
(16,561.21)
$225,328.12
203,400.00
1.11
2020
246,727.12
(16,892.44)
$229,834.68
207,262.50
1.11
2021
251,661.66
(17,230.29)
$234,431.37
210,962.50
1.11
2022
256,694.89
(17,574.89)
$239,120.00
214,387.50
1.12
2023
261,828.79
(17,926.39)
$243,902.40
217,512.50
1.12
2024
267,065.37
(18,284.92)
$248,780.45
225,312.50
1.10
2025
272,406.67
(18,650.61)
$253,756.06
227,387.50
1.12
2026
277,854.81
(19,023.63)
$258,831.18
234,237.50
1.10
2027
283,411.90
(19,404.10)
$264,007.80
235,637.50
1.12
2028
289,080.14
(197792.18)
$2697287.96
241,812.50
1.11
2029
294,861.75
(20,188.03)
$274,673.72
247,537.50
1.11
2030
300,758.98
(20,591.79)
$280,167.19
252,550.00
1.11
2031
306,774.16
(21,003.62)
$285,770.54
257,087.50
1.11
2032
311909.64
(21,423.69)
$291,485.95
261,150.00
1.12
2033
319,167.84
(21,852.17)
$297,315.67
269,737.50
1.10
2034
325,551.19
(21289.21)
$303,261.98
272,612.50
1.11
2035
332,062.22
(21735.00)
$309,327.22
279,812.50
1.11
2036
338,703.46
(231189.70)
$315,513.76
286,281.26
1.10
2037
345,477.53
(23,653.49)
$321,824.04
292,018.76
1.10
2038
352,387.08
(24,126.56)
$328,26052
297,025.00
1.11
2039
359,434.82
(24,609.09)
$334,825.73
301300.00
1.11
2040
366,623.52
(25,101.27)
$341,522.25
309,843.76
1.10
2041
373,955.99
(25,603.30)
$348352.69
312,412.50
1.12
2042
381,435.11
(26,115.36)
$355,319.75
319,250.00
1.11
2043
389,063.81
(26,637.67)
$362,426.14
325,112.50
1.11
Preliminary, subject to
24
Scheduled Debt Service on the Bonds (Continued)
Annual Debt Bond
Interest Payment Datc Principal Carron Interest Debt Service selwice Balance
September 1, 2034
March 1.2035
September 1, 2035
March 1. 2036
September 1, 2036
March 1, 2037
September L 2037
March 11 2038
September I, 2038
March L 2039
September I, 2039
March 1. 2040
September 1. 2040
March 1.2041
September 1, 2041
March 1, 2042
September I, 2042
March 1, 2043
September I, 2043
26
Scheduled Debt Service on the 2013 District Bonds (Continued)
Annual Debt Bond
Interest Pavnrent Date Principal Couppn. Interest DebtSewice Service Balance
September 1, 2034
March 1. 2035
September 1, 2035
March I, 2036
September 1, 2036
March I, 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 L 2041
March I. 2042
September I, 2042
March 1, 2043
September 1, 2043
28
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 to the contrary, upon any optional redemption or special
mandatory, in part, the Authority shall deliver a Written Certificate (as defined in the Indenture) 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 2013
District Bonds, together with other Revenues to be available, will be sufficient on a timely basis to pay
debt service on the Bonds.
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, 2023, 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 2013 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 I, 2014 through August 31, 2023 102.0%
September 1, 2023 and thereafter 100.0%
Mandatory Sinking Payment Redemption
The Bonds maturing September 1, 2028, September 1, 2033 and September 1, 2043, 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, 2043, 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
30
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 monies 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 monies in money market funds. Obligations purchased as an investment of
monies 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 Permit't'ed Investment's credited to such fund will be calculated at the
market value thereof (excluding any accrued interest).
ADDITIONAL OBLIGATIONS
The Authority
Except for refunding proposes, additional bonds secured by the Revenues are not authorized.
The District
Pursuant to the provisions of the Fiscal Agent Agreement, the District is not authorized to issue additional
bonds for Improvement Area A of the District on a parity with the 2013 District Bonds except for
refunding purposes.
32
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 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
$325,112.50 (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 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 put-pose.
(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.
(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
34
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 "TILE SPECIAL TAXES — METHOD OF APPou'rION,MENT"
herein.
Although the Special Taxes will constitute a lien on parcels of real property within Improvement Area A
of the District, they do not constitute a personal indebtedness of the owner(s) of real property within
Improvement Area A 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 A 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 valorevz 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 2013 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 2013 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 amount's 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 2013 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 coining due and payable on the
next Interest Payment Date on the Outstanding 2013 District Bonds upon the stated maturity or
redemption thereof.
Delinquency Management Fund
On 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:
(i) The Fiscal Agent shall transfer to the appropriate account within the Bond Fund the amount
required to pay debt service on the 2013 District Bonds to the extent Special Taxes are
insufficient for such purpose.
36
delinquency remains uncured) the District will cause judicial foreclosure proceedings to be filed in the
superior covet within 90 days of such determination against any property for which the Special Taxes
remain delinquent.
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 2013 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 A 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 2013 District Bonds under the Fiscal Agent Agreement.
No assurances can be given that the real property subject to foreclosure and sale at ajudicial 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
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 A of the District is also subject to several overlapping liens. A default
in the payment of Special Taxes in Improvement Area A of the District is also likely to result in a default
in the payment of other overlapping liens. Since the lien of other overlapping special districts are on a
parity with the Special Taxes, the foreclosure of the lien of the Special Taxes will not extinguish the lien
of the other overlapping special districts.
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 2013 District
Bonds (see "BOND OWNERS' RISKS — TBE 2013 DISTRICT BONDS — Risk Factors Relating to the Levying
and Collection of the Special Taxes — Foreclosure and Sale Proceedings," "BOND OWNERS' RISKS —THE 2013
DISTRICT BONDS — Risk Factors Relating to the Levying and Collection of the Special Taxes - Bankruptcy
and Foreclosure Delays" and "BOND OWNERS' RISKS — THE 2013 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
Apportionment. Any prepayment of Special Taxes will result in redemption of the 2013 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.
TI3E 2013 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 A 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.
Availability of Mortgage Financing. There has been a tightening of underwriting criteria for mortgage
loans such that lenders no longer offer 100% financing or require stricter verification, higher income to
loan ratio, higher credit ratios or some combination of such factors. There has also been tightening of the
credit market, especially with respect to the availability of jumbo" loans (loans in excess of $417,000).
As a result, potential homeowners in Improvement Area A of the District may have difficulty finding
financing and rising interest rates may price potential homeowners out of the market. This could result in
a slowdown in the construction of homes in Improvement Area A of the District, a reduction in home
sales prices, and increase the length of time that the District would need to levy Special Taxes on partially
developed and undeveloped property owned by builders in order to pay debt service on the 2013 District
Bonds.
Risk Factors Relating to Land Values
Land Values. 11'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 A 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 A
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 A 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 A of the District.
1. Appraisal Report Lake Elsinore Financing Authority Local Agency Revenue Bonds (Summerly IA
A), 2013 Series A, prepared by Harris Realty Appraisal, Newport Beach, California (the "Appraiser "),
with an April 1, 2013, date of value (the "Appraisal" or the "Appraisal Report" herein).
40
reducing the resulting proceeds of foreclosure sales in the event of delinquencies in the payment of
Special Taxes.
Geologic, Topographic and Climatic Conditions. The value of the taxable property in Improvement
Area A 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 A of the District could be insufficient to pay principal of, interest and premium,
if any, on the 2013 District Bonds due to nonpayment of the Special Taxes levied and insufficient or lack
of proceeds received from a foreclosure sale of land within Improvement Area A 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 2013 District Bonds (see
"DIST121Cr 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 PAVMENT FOR'rm BONDS -
REPAVMENT OP THE 2013 DISTRICT BONDS - Covenant for Superiors 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 A of the District to provide an amount
required to pay debt service on the 2013 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 A 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 °°reE SPECIAL,
TAXES— MAXIMUM SPE(IAL'rAX" herein).
No Personal Liability for Special Taxes. No property owner, including the Developer, will be
personally liable for the payment of the Special Taxes to be applied to pay the principal of and interest on
the 2013 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 A of the
District (see "BOND OWNERS' RISKS — THE 2013 DISTRICT BONDS — Risk Factors Relating to Real Estate
42
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 2013 District Bonds, it is
necessary that the Special Tax levied against land within Improvement Area A 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 funds
to pay debt service on the 2013 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 2013 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 — IMPAYMEAT OF'I'llE 2013 DISTRICT BONDS -
Covenant for Superior Court Foreclosure" herein).
Sufficiency of the foreclosure sales proceeds to cover the delinquent amount depends in part upon the
market for and the value of the parcel at the time of the foreclosure sale (see "BOND OWNERS' RISKS -
THE 2013 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 2013 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 A 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 2013
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.
44
years will attach even if the property is part of the bankruptcy estate. Bond Owners should be aware that
the potential effect of I1 U.S. C. Section 362(b)(18) on the Special Taxes depends upon whether a coma
were to determine that the Special Taxes should be treated like ad valore»r 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 A of the District as of the date of recording the Notice, and the boundaries of
Improvement Area A 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 A 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 A 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 A 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
'Fax; provided, however, that property within Improvement Area A of the District acquired by a public
entity through negotiated transactions, or by gift or devise, which is not otherwise exempt from the
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 A 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 A 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 2013 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 2013 District Bonds (see "BOND OWNERS' RISKS — THE 2013 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
46
Moreover, unless Congress has otherwise provided, if the federal government 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
governments 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 A of
the District which were entered on the Assessment Roll of the County Assessor by January I 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 THE 2013 DISTRICT BONDS -Covenant for
Superior Court Foreclosure" for a discussion of the provisions which apply, and procedures which
Improvement Area A 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 1% 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 A of the District.
Value -to -Lien Ratios. The value of the land and improvements within Improvement Area A 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 A 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 2013 District Bonds. Such value -to -lien
ratios are derived by dividing the value of the property by the principal amount of the 2013 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 2013
District Bonds is not allocable among the parcels in Improvement Area A 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.
48
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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 2013 District Bonds.
Except for the Special Taxes derived from Improvement Area A of the District, no other taxes are pledged
to the payment of the 2013 District Bonds. The 2013 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.
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 2013
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 2013 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
2013 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 2013 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 2013 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 2013 District Bonds in the event of a payment default or other default
under the terms of the 2013 District Bonds or the Fiscal Agent Agreement. Accordingly, the Indenture
does not contain a provision allowing for acceleration of the Bonds.
52
THE SPECIAL TAXES
Capitalized terms not defined in this section have the respective meanings ascribed to then? in the Rate
and Method of Apportionment.
DETERMINATION OF THE SPECIAL TAX
The District is required each fiscal year to determine the amount of Special Taxes needed to pay debt
service on the 2013 District Bonds, an allowance for delinquencies within Improvement Area A and
Administrative Expenses of the District related to Improvement Area A. The District is expected to incur
among other things Administrative Expenses for the levy and collection of the Special Taxes, foreclosure
proceedings (to the extent not recovered pursuant to statutory authorization), Trustee fees, annual
reporting requirements and arbitrage rebate calculations.
The District is required pursuant to the Rate and Method of Apportionment (see "APPENDIX D — RATE
AND METHOD oEAPPORTIONMENT "), the Fiscal Agent Agreement and the Act to amorally determine the
Special Tax Requirement, as defined below, and apportion such amount (see "— METHOD 0141
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 'fax Requirement," as defined in the Rate and Method of Apportionment means that amount
required, subject to the Maximum Special Tax, in any fiscal year to pay:
(i) pay debt service on all Outstanding Bonds due in the calendar year commencing in such
Fiscal Year;
(ii) pay periodic costs on the 2013 District Bonds, including but not limited to, credit
enhancement and rebate payments on the 2013 District Bonds due in the calendar year
commencing in such Fiscal Year;
(iii) pay Administrative Expenses;
(iv) pay any amounts required to establish or replenish any reserve funds for all Outstanding
2013 District Bonds;
(v) pay for reasonably anticipated Special Tax delinquencies;
(vi) pay directly for acquisition or construction of Authorized Facilities to the extent that the
inclusion of such amount does not increase the Special Tax levy on Undeveloped
Property; less
(vii) a credit for funds available to reduce the annual Special Tax levy, as determined by the
CFD Administrator pursuant to the Indenture.
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 A. Accordingly, the District may not be able to levy the Maximum Special Tax
in certain circumstances.
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. In the
case of any capitalized interest on the Bonds, such amounts shall be applied to offset any Special Tax levy
against Undeveloped Property, as defined below, and shall not be used to offset any Special Taxes against
Developed Property, as defined below.
54
Undeveloped Property. Each year, the District on behalf of Improvement Area A 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 Special
Taxes for Developed Property are not sufficient to meet the Special Tax Requirement during the period of
time there is Undeveloped Property (generally all Assessor's Parcels that are included in a recorded final
map where a building permit has not been issued), the Rate and Method of Apportionment provides for
the levy of a Special Tax against Undeveloped Property (see "BON DOWNERS' RISKS -THE 2013 DISTRICT
BONDS - Risk Factors Relating to the Levying and Collection of the Special Taxes - Concentration of
Ownership" herein and "APPENDIX D - RATE AND METHOD OFAPPORTIONMENT ").
The Maximum Special Tax rate for an Assessor's Parcel classified as Undeveloped Property, for Fiscal
Year 2013 -14 is $7,252.29 per acre.
There are 99 finished lots in Improvement Area A owned by Richmond American (25 parcels) and
McMillin Daybreak (74 parcels). For all lots classified as Undeveloped Property, the projected Assigned
Special Tax as Developed Property was assumed to be in the lowest Special Tax Category of the product
line projected by the Builder to be built on such Undeveloped Property.
Backup Special Tax
The Fiscal Year 2013 -2014 Backup Special Tax attributable to a Final Subdivision will equal $7,305.36,
multiplied by the Acreage of all Taxable Property.
All Assessor's Parcels within Improvement Area A will be relieved simultaneously and permanently from
the obligation to pay and disclose the backup Special Tax if the CFD Administrator determines that the
annual debt service required for the Outstanding Bonds, when compared to the Assigned Special Taxes
that may be levied against all Assessor's Parcels of Developed Property results in 110% debt service
coverage (i.e., the aggregate Assigned Special Taxes that may be levied against all Developed Property in
each remaining Fiscal Year based on then existing development in Improvement Area A is at least equal
to the sum of (i) the Administrative Expenses and (ii) 1.10 times maximum annual debt service, in each
remaining Fiscal Year on the Outstanding Bonds).
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."
Commencing with Fiscal Year 2010 -2011 and for each following Fiscal Year, the City Council shall
determine the Special Tax Requirement for Facilities and levy the Special Tax for Facilities until the
amount of Special Tax for Facilities levy equals the Special Tax Requirement for Facilities. The Special
Tax for Facilities shall be levied each Fiscal Year as follows:
First: The Special Tax for Facilities shall be levied on each Assessor's Parcel of Developed Property
in an amount equal to 100% of the applicable Assigned Special Tax for Facilities;
Second: If additional monies are needed to satisfy the Special Tax Requirement for Facilities after
the first step has been completed, the Special Tax for Facilities shall be levied Proportionately on
each Assessor's Parcel of Undeveloped Property at up to 100% of the Maximum Special Tax for
Facilities for Undeveloped Property;
56
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 and 3 assessment districts containing approximately 2,783
parcels (see "CITY OF LAKE ELSINORE - COMMUNITY FACILITIES DISTRICTS MAP" herein). To date,
there has not been a draw on any Reserve Account within one of the districts administered by the City.
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 A 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 A 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 A 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 A 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 A 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 A 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 A of the District (see "SOURCES OF
PAYMENT FOR THE BONDS — REPAYMENT OF THE 2013 DIS'rRICT 13ONDS -- 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 A of the District if other owners in Improvement Area A 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 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 ol'delinquency or default by an owner of any other
parcel or parcels within such district by more than ten percent (10 %).
58
The debt service coverage ratio based upon the aggregate actual levy of the Assigned Special Tax for all
the community facilities districts with bonded indebtedness administered by the City is shown in the
Table below.
CITY OF LAKE ELSINORE
COMMUNITY FACILITIES DISTRICTS
HISTORICAL SPECIAL TAX LEVY
Fiscal
Special Tax
Administrative
Future
Coverage
Year
Levy
Debt Service
Expense
Facilities
Total Exncuse
Ratio
2007108
$13,486,715
$12,486,715
$316,038
_
$12,802,753
105%
2008/09
14,514,220
13,194,686
329,370
13,524,056
107%
2009/10
15,586,200
13,537,651
353,783
$343,132
14,234,566
109%
2010/11
15,670,029
13,906,075
360,838
359,660
14,626,573
107%
2011/12
20JX812
16,811,502
578,144
264,594
17,654,240
114%
Source: City of Lake Elsinore
DELINQUENCIES
Identification of Delinquencies; Initial Notification
The District has covenanted in the Fiscal Agent Agreement for the benefit of the owners of the 2013
District Bonds that 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 December 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 as to any single parcel the delinquent
Special Taxes represent more than 5% of the aggregate Special Taxes within Improvement Area A 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) the District will cause judicial foreclosure proceedings to be filed in the
superior court within 90 days of such determination against any property for which the Special Taxes
remain delinquent. It is the District's practice to also send copies of the notice of delinquency to the
applicable mortgage lenders.
Special Taxes are due in two equal installments. Special Taxes levied become delinquent if not paid by
December 10 °i (the "First Installment ") and April 10 °' (the "Second Installment "). Generally, the First
Installment pays the March I" interest payment and i/2 of the September I" principal payment on the
Bonds. Generally, the Second Installment pays the September Is' interest payment and '/2 of the
September I" principal payment.
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,facihlies districts in the
City are indicative of special tax delinquencies that uvay be experienced by Improvement Area A 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
60
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
with delinquent Special Taxes as provided in the Fiscal Agent Agreement (see "SOURCES OF PAYMENT
FOR TILE BONDS-REPAYMENT OF THE 2013 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 'Faxes 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.
62
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
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. 11 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 2013 DISTRICT BONDS -
Risk Factors Relating to the Levying and Collection of the Special Taxes - Foreclosure and Sale Proceedings"
and "BOND OWNERS' RISKS - TIIE 2013 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 2013 DISTRICT BONDS - Risk Factors
Relating to Land Values" herein).
64
item of tax preference for purposes of computing the alternative minimum tax imposed by section 55 of
the Code. Receipt or accrual of interest on Bonds owned by a corporation may affect Tile computation of
the alternative minimurn 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 Arhitrage and Other Matters under
Sections 103 and 141 -I50 ofthe 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
66
CONCLUDING INFORMATION
NO RATING 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 less 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., Huntington
Beach, California, 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 21 E 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 CON'T'AINED 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
M,
APPENDIX A.
SUMMARY OF THE INDENTURE
A-1
APPENDIX C.
APPRAISAL REPORT
C -1
APPENDIX E.
FORM OF CONTINUING DISCLOSURE AGREEMENT
L -1
2013
Lake Elsinore Public Financing Authority
130 South Main Street
Lake Elsinore, California 92530
Lake Elsinore Public Financing Authority
Local Agency Revenue Bonds (Summerly IA A),
2013 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 $ _ aggregate principal amount of Lake
Elsinore Public Financing Authority Local Agency Revenue Bonds (Summerly IA A), 2013 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 June 1, 2013 (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
APPENDIX G.
BOOK -ENTRY SYSTEM
G -1
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
City Council Meeting
May 14, 2013
AGENDA ITEM NO. 6
EXHIBIT 2
COMMITMENT AGREEMENT AND PURCHASE CONTRACT
FOR PURCHASE AND SALE OF LOCAL OBLIGATION BONDS
City of Lake Elsinore
Community Facilities District No. 2006 -1 (Summerly)
Special Tax Bonds, 2013 Series (Improvement Area A)
THIS COMMITMENT AGREEMENT AND PURCHASE CONTRACT (the "Purchase
Contract "), dated _ 2013, 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 taws of the State of California (the "Authority "), and the CITY OF LAKE
ELSINORE COMMUNITY FACILITIES DISTRICT NO. 2006 -1 (SUMMERLY), 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 (Summerly IA A), 2013 Series A (the
"Authority Bonds "), pursuant to an Indenture of Trust, dated as of June 1, 2013;
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. 2006 -1 (Summerly) Special Tax Bonds, 2013 Series (Improvement Area A)" 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
75815338/
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;
78815338.1 3
United States Tax Court) or of the State of California, by any ruling or regulation (final,
temporary or proposed) issued by or oil 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
79915338.1 5
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
78815338.1 7
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. 2006 -1 (SUMMERLY)
By:
78815338.1
City Manager of the City of Lake Elsinore
78815338/
City Council Meeting
May 14, 2 013
AGENDA ITEM NO. 6
EXHIBIT 3
CONTINUING DISCLOSURE AGREEMENT
This Continuing Disclosure Agreement (the "Disclosure Agreement "), dated as of June 1,
2013, is executed and delivered by the City of Lake Elsinore Community Facilities District No.
2006 -1 (Summerly) (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 (Summerly IA A), 2013 Series A (the
"Bonds "). The Bonds are being issued pursuant to provisions of an Indenture of Trust, dated as
of June 1, 2013 (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 hitp:llcmnaa.nesrb.org.
78815341,1 1
(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 A 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 Undeveloped
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 A 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 A of the District;
(i) the assessor's parcel number;
(ii) the identity of the owners) of such parcel based on the
County of Riverside Assessor's Roll or County of Riverside (the
"County ") delinquency report received by the City, whichever is more
current; and
(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 A
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 Undeveloped Property status (as such terms
are defined in the RMA) of such parcels;
79815341.1 3
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;
H. 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 Bout 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 tout 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
78811341.1
in addition to that which is required by this Disclosure Agreement. If the District chooses to
include any information in any Annual Report or notice of occurrence of a Listed Event in
addition to that which is specifically required by this Disclosure Agreement, the District shall
have no obligation under this Disclosure Agreement to update such information or include it in
any future Annual Report 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.
78815341.1 7
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. 2006 -1
(SUMMERLY)
By
Mayor, on behalf of the District
UNION BANK, N.A.,
as Dissemination Agent
By
79815341.1
Authorized Officer
City Council Meeting
May 14, 2013
AGENDA ITEM NO. 6
EXHIBIT 4
FISCAL AGENT AGREEMENT
by and between
CITY OF LAKE ELSINORE COMMUNITY FACILITIES DISTRICT NO. 2006 -1
(SUMMERLY)
and
UNION BANK, N.A.
as Fiscal Agent
Dated as of June 1, 2013
Relating to:
City of Lake Elsinore
Community Facilities
District No. 2006 -1
(Summerly)
Special Tax Bonds, 2013
Series (Improvement Area
A)
78915301.1
TABLE OF CONTENTS
(continued)
Page
5.7
Compliance with Law, Completion of Facilities .................. ...............................
25
5.8
Collection of Special Tax Revenues ..................................... ...............................
25
5.9
Further Assurances ................................................................ ...............................
26
5.10
Tax Covenants ...................................................................... ...............................
26
5.11
Covenant to Foreclose ........................................................... ...............................
29
5.12
Annual Reports to CDIAC .................................................... ...............................
30
5.13
Continuing Disclosure to Owners ......................................... ...............................
30
5.14
Reserve Account Replenishment .......................................... ...............................
30
ARTICLE VI INVESTMENTS; DISPOSITION OF INVESTMENT PROCEEDS;
78815301.1 _ii-
LIABILITY OF THE DISTRICT ................................... ...............................
30
6.1
Deposit and Investment of Moneys in Funds ....................... ...............................
30
6.2
Limited Obligation ................................................................ ...............................
32
6.3
Liability of District ............................................................... ...............................
32
6.4
Employment of Agents by District or the City ..................... ...............................
33
ARTICLE
VII EVENTS OF DEFAULT AND REMEDIES OF BOND OWNERS............
33
7.1
Events of Default .................................................................. ...............................
33
7.2
Remedies of Bond Owners ................................................... ...............................
33
7.3
Application of Special Taxes and Other Funds After Default .............................
34
7.4
Absolute Obligation of the District ....................................... ...............................
34
7.5
Termination of Proceedings .................................................. ...............................
35
7.6
Remedies Not Exclusive ....................................................... ...............................
35
7.7
No Waiver of Default ............................................................ ...............................
35
7.8
Actions by Fiscal Agent as Attorney -in -F act ........................ ...............................
35
ARTICLE
VIII THE FISCAL AGENT ................................................... ...............................
35
8.1
Appointment of Fiscal Agent ................................................ ...............................
35
8.2
Liability of Fiscal Agent ....................................................... ...............................
36
8.3
Information ........................................................................... ...............................
37
8.4
Notice to Fiscal Agent .......................................................... ...............................
38
8.5
Compensation, Indemnification ............................................ ...............................
38
ARTICLE
IX MODIFICATION OR AMENDMENT OF THIS AGREEMENT ...............
38
9.1
Amendments Permitted ......................................................... ...............................
38
9.2
Owners' Meetings ................................................................. ...............................
39
9.3
Procedure for Amendment with Written Consent of Owners ..............................
39
9.4
Disqualified Bonds .................................................................. .............................40
9.5
Effect ol'Supplemental Agreement ......................................... .............................40
9.6
Endorsement or Replacement of Bonds Issued After Amendments ....................
40
9.7
Amendatory Endorsement of Bonds ..................................... ...............................
41
9.8
Opinion of Bond Counsel ....................................................... .............................41
78815301.1 _ii-
FISCAL AGENT AGREEMENT
THIS FISCAL AGENT AGREEMENT (this "Agreement') is made and entered
into as of June 1, 2013, by and between the City of Lake Elsinore Community Facilities District
No. 2006 -1 (Summerly) (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 ").
WITNESSETII:
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. 2006 -30 of the City Council adopted on February 28, 2006,
which District has subsequently undertook change proceedings; and
WHEREAS, the City Council is authorized under the Act and pursuant to
Ordinance No. 2011-1289 adopted on March 22, 2011 to levy special taxes to pay for the costs
of facilities provided by the District; and
WHEREAS, under the provisions of the Act, on March 8, 2011, the City Council,
acting as the legislative body of the District, adopted Resolution No. 2011 -120, 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 May 14, 2013, the City Council adopted Resolution No.
2013 - (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. 2006 -1
(Summerly) Special Tax Bonds, 2013 Series (Improvement Area A)" (the "2013 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;
78815301.E
"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 'faxes 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 (Summerly IA A), 2013 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 June 1, 2013,
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.
78815301.1 3
"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 Management 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.
2006 -1 (Sunnmerly) 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.
78815301/ 5
"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.
"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 2013 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 X1
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;
78815301.1 7
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 tern 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
78915301.1 9
"2013 Bonds" means the City of Lake Elsinore Community Facilities District No.
2006 -1 (Summerly) Special Tax Bonds, 2013 Series (Improvement Area A).
ARTICLE II
THE BONDS
2.1 Principal Amounts; Designations. Bonds are hereby authorized to be issued
wider 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. 2006 -1 (Summerly) 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 2013 Bonds in the aggregate principal amount of _ 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 2013 Bonds shall be designated "City of Lake Elsinore Community Facilities
District No. 2006 -1 (Summerly) Special Tax Bonds, 2013 Series (Improvement Area A)."
2.2 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.
(e) Maturities, Interest Rates. The 2013 Bonds shall mature on the dates and
shall bear interest at the rates as follows:
Maturity Date Principal
(September 1) Amount Coupon
78815301.1
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 2013 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 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.
(ii) Special Mandatory Redemption from Prepayment of Special Taxes
and from Surplus Funds. The 2013 Bonds shall also be subject to mandatory redemption on any
date on or after in whole or in pail 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 2013 Bonds to be redeemed) together with accrued interest thereon to the
redemption date:
Redemption Date Redemption Price
(iii) Mandatory Sinking Payment Redemption. The 2013 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
78915301.7 13
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
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
78815301.1 15
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
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 No Additional Bonds. Other than for the purpose of refunding the Series 2013
Bonds, the District may not issue bonds payable out of the Special Tax Revenues on a parity
with the 2013 Bonds.
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
79915301.1 17
(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 2, 2011, 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.
78915301.1 19
3.9 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 Owners of the Bonds, 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 in excess of the Delinquency Management Fund Requirement 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) The Fiscal Agent shall transfer all remaining amounts in the
Delinquency Management Fund in excess of the Delinquency Management Fund Requirement to
the Improvement Fund until such time the Improvement Fund is closed and thereafter, upon the
written direction of the District, on the next redemption date for which notice of redemption can
timely be given, to the Special Mandatory Redemption Account of the Redemption Fund for
redemption of the District Bonds 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.
(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 a "Mandatory Redemption Account," 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, 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.
78915307.1 21
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.
(b) Disbursements. On each Interest Payment Date, the Fiscal Agent 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 fiords 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 3.2(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
5.1 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.
78815301.1 23
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.
5.8 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 A 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 A 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 same 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
A 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 A
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 oil 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 A 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.
78815301A 25
thereof for federal income tax purposes, the District 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 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:
0) 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
(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 "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 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
78815301.1 27
0) 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.
(k) Elections. The District hereby directs and authorizes any Authorized
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 ofSections 103 and 141 -150 ofthe 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 A 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)
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.
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
78815301) 29
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
such moneys in Permitted Investments described in clause (d) of the definition thereof. The
Treasurer shall make note of any investment of finds 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 terns 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 in 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
78815301) 31
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.
6.4
Employment
of Agents by District or
the City. In order to perform
their
respective
duties and obligations
hereunder, the City,
the District and /or the Treasurer
may
employ such
persons or entities
as they deem necessary or advisable. The City, the District
and /or the
Treasurer shall not
be liable for any of the acts
or omissions of such persons or entities
employed
by them in good
faith hereunder, and shall
be entitled to rely, and shall be
fully
protected
in doing so, upon
the opinions, calculations,
determinations and directions of
such
persons or
entities.
ARTICLE VII
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
78815301.1 33
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
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.
7.6 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 -in -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
8.1 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
78815301.1 35
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
this Agreement. Except as provided above in this paragraph, the Fiscal Agent shall be protected
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 teens 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.
78815301 37
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.
9.3 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
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.
78815301.1 39
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.
9.7 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.
9.8 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
(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
78815301.1 41
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 off,
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. 2006 -1
(Summerly)
c/o City of Lake Elsinore
130 South Main 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 sewed
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, 4"' 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.
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
79815301.1 43
IN WITNESS WHEREOF, the District has caused this Agreement to be executed
in its name and the Fiscal Agent has caused this Agreement to be executed in its name, all as of
1, 2013.
ATTEST:
By:
City Clerk
CITY OF LAKE ELSINORE COMMUNITY
FACILITIES DISTRICT NO. 2006 -1
(SUMMERLY)
By:
Mayor of the City of Lake Elsinore
UNION BANK, N.A.,
as Fiscal Agent
By:
Authorized Officer
788153011 45
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 March 8, 2011,
pursuant to the Mello -Roos Community Facilities Act of 1982, as amended, Section 53311 ez
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. 2006 -1 (Summerly) Special Tax Bonds, Series
(Improvement Area A)" (the `Bonds "). The creation of the Bonds and the terms and conditions
thereof are provided for by the Fiscal Agent Agreement, dated as of June 1, 2013, [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 A 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 2013 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 on a pro rata basis 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
in whole or in part on a pro rata basis 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:
79915301.1 2
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.
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. 2006 -1 (Summerly) 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
78815301,1 A-4
ASSIGNMENT
For value received, the undersigned do(es) hereby sell, assign and transfer unto
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:
Note: Signature(s) must be guaranteed by an
eligible guarantor institution.
Signature:
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.
"78915301.1 A -67
(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. 2006 -1
(SUMMERLY)
City Manager
7981 M11 I B-2
City Council Meeting
May 14, 2013
AGENDA ITEM NO. 5
EXHIBIT 5
Lake Elsinore Public Financing Authority
Local Agency Revenue Bonds (Community Facilities District No. 2006 -1), 2013 Series B
Purchase Contract
May __, 2013
Lake Elsinore Public Financing Authority
130 South Main Street
Lake Elsinore, California 92530
City of Lake Elsinore
Community Facilities District No. 2006 -1
(Smnmerly)
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. 2006 -1 (Summerly) (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.
A'2006-1 2013 BPAI)Aoc
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
R1
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.
0) 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 otherjurisdictions 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 Tong 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.
(j) 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
6. Representations, Warranties and Agreements of the District. The
District represents, warrants and agrees as follows:
(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,
7
the statements therein with respect to the District, in light of the circumstances under which they
were made, not misleading.
(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 amendmment 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.
Le
(e) At or prior to the Closing, the Underwriter shall have received copies of
each of the following documents:
(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 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, L.L.P., Bond
Counsel for the Authority, substantially in the form set forth in Appendix E to the
Official Statement;
(8) A supplemental opinion, dated the date of the Closing and
addressed to the Underwriter, of Fulbright & Jaworski L.L.P., 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 L.L.P., 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 L.L.P., 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;
(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, many 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 coma 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 District 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) Executed copy of the Developer Continuing Disclosure
Agreement, dated as of June 1, 2013, substantially in the form presented in Appendix E
to the Official Statement, by and between Union Bank, N.A., as dissemination agent, and
McMillin Daybreak, LLC, a Delaware limited liability company (the "Developer ");
(18) A certificate dated the date hereof from the Developer, together
with a bring -down certificate dated the Closing Date in substantially the forms attached
hereto as Exhibit E and Exhibit F, respectively;
(19) An opinion, dated the date of the Closing and addressed to the
Authority, the District and the Underwriter, of counsel to the Developer, in a form
acceptable to the Underwriter.
13
(24) 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
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 (in) 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
15
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. 2006 -1
(Summerly)
c/o City of Lake Elsinore
130 South Main Street
Lake Elsinore. California 92530
Attention: City Manager
To the Underwriter: O'Connor & Company Securities, Inc.
250 Newport Center Drive, Suite 303
Newport Beach, California 92660
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 tile underwriting period" for the Bonds for all purposes ofthe 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.
17
If the foregoing is in accordance with your understanding of the Purchase
Contract, please sign and return to us the enclosed duplicate copies hereof, whereupon it will
become a binding agreement among the Authority, the District and the Underwriter in
accordance with its terms.
Accepted:
This ___ _ day of May, 2013
LAKE ELSINORE PUBLIC
FINANCING AUTIiORITY
By:
Executive Director
Very truly yours,
O'CONNOR & COMPANY SECURITIES,
INC.
By:
Title:
CITY OF LAKE ELSINORE
COMMUNITY FACILITIES DISTRICT NO.
2006 -1 (SUMMERL,Y)
By:
City Manager
Time of Execution: May , 2013, PST
19
Exhibit B
Supplemental Opinion of Fulbright & Jaworski L.L.P.
Addressed to the Underwriter
$
Lake Elsinore Public Financing Authority
Local Agency Revenue Bonds (Community Facilities District No. 2006 -1), 2013 Series B
[Closing Date]
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 May , 2013 (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. 2006 -1 (Sunnnerly) (the "District "), providing for the
purchase of $ aggregate principal amount of Lake Elsinore Public Financing
Authority Local Agency Revenue Bonds (Community Facilities District 2006 -1), 2013 Series B
(the "Authority Bonds "). The Authority Bonds are being issued pursuant to the Indenture of
Trust, dated as of June 1, 2013, 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 opinion concerning the
validity of the Authority Bonds and certain other matters, dated the date hereof and addressed to
the Authority (but which may be relied upon by you to the same extent as if such opinion were
addressed to you), and based on and subject to the matters referred to in the second through
fourth paragraphs of said final legal opinion (but excluding the last sentence of the fourth
paragraph thereof) (which are hereby incorporated herein by reference), and in reliance thereon,
as of the date hereof, we are of the following opinions or have reached the following
conclusions:
I . 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 fi-0111 qualification
pursuant to the Trust Indenture Act of 1939, as amended.
B -1
Exhibit C
Opinion of City Attorney of the City of Lake Elsinore, as Special Counsel
to the Authority and the District and addressed to the Underwriter
Lake Elsinore Public Financing Authority
Local Agency Revenue Bonds (Community Facilities District 2006 -1), 2013 Series B
[Closing Date]
Lake Elsinore Public Financing Authority
130 South Main Street
Lake Elsinore, California 92530
City of Lake Elsinore
Community Facilities District No. 2006 -1
(Sunnnerly)
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. 2006 -1 (Summerly)
(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 June 1, 2013, by and between the Authority and Union Bank, N.A. (tire
"Trustee "). Terms used herein and not otherwise defined have the respective meanings set forth
in the Purchase Contract, dated May __, 2013, 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
enforceability of the Bonds or the District Bonds; or (v) in any 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
Exhibit D
Opinion of Fulbright & Jaworski, L.L.P., Disclosure Counsel
Addressed to the Issuer, the District and the Underwriter
Lake Elsinore Public Financing Authority
Local Agency Revenue Bonds (Community Facilities District 2006 -1), 2013 Series B
[Closing Date]
Lake Elsinore Public Financing Authority
130 South Main Street
Lake Elsinore, California 92530
City of Lake Elsinore
Community Facilities District No. 2006 -1
(Smumerly)
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 I 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 June 1, 2013 (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
May , 2013 (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
Exhibit E
Lake Elsinore Public Financing Authority
Local Agency Revenue Bonds (Community Facilities District 2006 -1), 2013 Series B
Certificate of the Developer
Reference is made to the Lake Elsinore Public Financing Authority Local Agency
Revenue Bonds (Summerly IA A), 2013 Series A (the "Authority Bonds "), and to the Purchase
Contract (the "Purchase Contract"), by and among the Lake Elsinore Public Financing Authority
(the "Authority "), the City of Lake Elsinore Community Facilities District No. 2006 -1
(Summerly) (the "District') and O'Connor & Company Securities, Inc. (the "Underwriter "),
relating to the Authority Bonds. This Certificate is delivered pursuant to Section (8)(e)(I8) of
the Purchase Contract. Capitalized terms used herein and not otherwise defined have the
meanings ascribed to them in the Purchase Contract.
The undersigned certifies that [he /she] is familiar with the facts herein certified
and is authorized and qualified to certify the same as an authorized officer of McMillin
Daybreak, LLA, a Delaware limited liability company (the "Developer "), and the undersigned,
on behalf of the Developer, further certifies as follows:
1. The Developer has been duly organized and validly exists in good
standing under the laws of the State of California and has all requisite right, corporate
power and authority (i) to execute and deliver this Certificate, and to execute and deliver
at Closing the Continuing Disclosure Agreement (Landowner) (the "Continuing
Disclosure Agreement"), dated as of June 1, 2013, by and between the Developer and
Union Bank, N.A., as dissemination agent, (ii) to own and develop its property within
Improvement Area A of the District (the "Property ") as described in the Preliminary
Official Statement, (iii) to carry on its business as presently conducted, and (iv) to
undertake all of the transactions on its part contemplated by the Continuing Disclosure
Agreement and described in the Preliminary Official Statement.
2. Except as otherwise described in the Preliminary Official Statement, the
Developer is, and the Developer's current expectation is that the Developer shall remain,
the developer of the Property (as described in the Preliminary Official Statement).
Except as otherwise described in the Preliminary Official Statement, the Developer has
not entered into an agreement for development or management of the Property with any
entity.
3. The Developer has, or will have prior to Closing, duly authorized tile
execution and delivery at Closing of the Continuing Disclosure Agreement, and is duly
authorized to perform the obligations on its part to be performed thereunder. Except as
disclosed in the Preliminary Official Statement, to the Actual Knowledge of the
Undersigned (as defined below), the Developer has not previously failed to comply, in all
material respects, with any previous undertakings in a written contract or agreement to
1 -1
service of process to the Developer having been accomplished) or, to the Actual
Knowledge of the Undersigned, overtly threatened (a) to restrain or enjoin collection of
Special Taxes or other sums pledged or to be pledged to pay the principal of and interest
on the Authority Bonds, (b) to restrain or enjoin the execution of and performance of the
Developer's obligations under the Continuing Disclosure Agreement, (c) to restrain or
enjoin development of the Property, (d) in any way contesting or affecting the validity of
the Special Taxes, the Continuing Disclosure Agreement or any other document, license,
permit or approval necessary to the performance on the Developer's part under its
Continuing Disclosure Agreement or (e) which would in any way materially and
adversely affect its ability to develop the Property or to pay Special "Taxes on the
Property.
9. Except as set forth in the Preliminary Official Statement, to the Actual
Knowledge of the Undersigned, no litigation is pending against the Developer (with
service of process to the Developer having been accomplished) or, to the Actual
Knowledge of the Undersigned, overtly threatened against the Developer which would
materially and adversely affect the ability of the Developer to complete the development
and sale of the Property or its ability to pay Special Taxes or ad valorem tax obligations
prior to delinquency on its Property within the District.
10. As of the date hereof, except as clarified below, the Preliminary Official
Statement, solely with respect to information contained therein with respect to the
Developer, the Property, the Developer's development plan, the Developer's financing
plan, and the Developer's contractual arrangements as set forth under the captions
"SUMMARY STATEMENT —THE DISTRICT — Formation;" "— DEVELOPMENT
WITHIN IMPROVEMENT AREA A OF THE DISTRICT — Property Ownership," " —
Description of Developed Property" and " — Description of Undeveloped Property,"
"CONTINUING DISCLOSURE" (only as to the second paragraph); and "SELECTED
FACTS" (excluding the information regarding the Appraisal, the market value ratio and
annual special tax ratio, and any information that is cited as source other than the
Developer) is true and correct in all material respects and does not contain any 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 the light of the circumstances under which
they were made, not misleading.
11. The Developer has full corporate power and authority to own and develop
the Property and to carry on its business as presently conducted and as described in the
Preliminary Official Statement.
12. The Developer covenants that, while the Bonds or any refunding
obligations related thereto are outstanding, the Developer will not bring any action, suit,
proceeding, inquiry or investigation at law or in equity, before any court, regulatory
agency, public board or body, that in any way seeks to challenge or overturn the
formation of the District, to challenge the adoption of the ordinance levying Special
Taxes within the District, to invalidate the District or any of the Bonds or any refunding
obligations, or to invalidate the special tax liens imposed under Section 3115.5 of the
Streets and Highways Code based on recordation of the notices of special tax lien relating
E -3
19. To the Actual Knowledge of the Undersigned, the Developer has not filed
for, nor is the Developer aware of, a reassessment of the assessed value of the Property
other than those which result from the sale of homes to individual homeowners.
20. To the Actual Knowledge of the Undersigned, there are no claims,
disputes, suits, actions or contingent liabilities of the Developer which may materially or
adversely affect the development of the Property.
21. To the Actual Knowledge of the Undersigned, there are no claims,
disputes, suits, actions or contingent liabilities among, by and between the Developer or
its financial partners, or among, by and between the Developer and any contractors
working in the District which may materially adversely affect the development of the
Property or the payment of the Special Taxes on the Property.
22. Based upon its current development plans, including, without limitation,
its current budget and subject to economic conditions and risks generally inherent in the
development of real property, the Developer anticipates that it will have sufficient funds
to cant' on its business presently conducted and develop the Property as described in the
Preliminary Official Statement and to pay Special Taxes assessed against the Property.
However, the Developer is not obligated to make any additional capital contribution or
loan to the Developer at any time and the Developer is not obligated to pay, or to
contribute additional capital for the payment of, Special Taxes on the Property.
23. To the Actual Knowledge of the Undersigned, all information submitted
by, or on behalf of, the Developer to the City, the District, the Special "Tax Consultant or
the Underwriter in connection with the issuance of the Bonds, and to Harris Realty
Appraisal (the "Appraiser ") in connection with the preparation of the appraisal relating to
Improvement Area C of the District was, at the time of submission or as updated through
the date hereof and contained in the Preliminary Official Statement to the Actual
Knowledge of the Undersigned, true and correct in all material respects.
24. The Developer consents to the issuance of the Authority Bonds. The
Developer acknowledges and agrees that the proceeds of such Authority Bonds will be
used, together in some cases with the proceeds of bonds issued for other improvement
areas of the District for the improvements, as described in the Preliminary Official
Statement, and that the costs of acquisition and construction of such improvements are
estimates. Any increase in costs in excess of the estimated costs relating to
improvements will reduce the improvements which may be financed by the District, and
neither the City nor the District has any obligation to provide moneys to pay for any such
costs.
25. Solely as to information indicated in Section 10 hereof concerning the
Developer, and development within the District, and subject to the limitations and
exclusions set forth in Section 10, the Developer agrees to indemnify and hold harmless,
to the extent permitted by law, the District and the City, and their officials, and
employees and each person, if any, who controls any of the foregoing within the meaning
of Section 15 of the Securities Act of 1933, as amended, or of Section 20 of the Securities
E -5
29. The Developer agrees to deliver a bring -down certificate, dated the date of
issuance of the Bonds, at the time of issuance of the Bonds in substantially the form
attached as Exhibit F to the Purchase Contract, to affirm and restate the Developer's
certifications made herein, Provided that if any event related to or affecting the
Developer, its Affiliates or the development of the Property shall occur as a result of
which it is necessary to modify the bring -down certificate, the Developer agrees to
deliver a new bring -down certificate revised to reflect such event.
30. On behalf of the Developer, I have reviewed the contents of this
Certificate and the Developer has consulted with counsel regarding the meaning of its
contents. The Developer acknowledges and understands that a variety of state and
federal laws, including but not limited to the Securities Act of 1933 and Rule lOb -5
promulgated under the Securities Exchange Act of 1934, may apply to the Developer and
that under some circumstances certification as to the matters set forth in this Certificate,
without additional disclosures or other action, may not fully discharge all duties and
obligations of the Developer under such laws.
31. As used herein, the tern "Actual Knowledge of the Undersigned" shall
mean the knowledge that the undersigned currently has as of the date of this Certificate or
has obtained from an interview with such officers and responsible employees of the
Developer as the undersigned has reasonably determined are likely, in the ordinary
course of his respective duties, to have knowledge of the matters set forth herein. Other
than as set forth in the immediately preceding sentence, with your permission, the
undersigned has not conducted any additional inspection or inquiry.
32. As used herein, the term "Affiliates" means any entity under the
managerial control of the Developer.
E -7
Exhibit F
Lake Elsinore Public Financing Authority
Local Agency Revenue Bonds (Community Facilities District 2006 -1), 2013 Series B
Bring -Down Certificate of the Developer
Reference is made to the Lake Elsinore Public Financing Authority Local Agency
Revenue Bonds (Summerly IA A), 2013 Series A. and to the Purchase Contract (the "Purchase
Contract "), by and among the Lake Elsinore Public Financing Authority (the "Authority "), the
City of Lake Elsinore Community Facilities District No. 2006 -1 (Summerly) (the "District ") and
O'Connor & Company Securities, Inc. (the "Underwriter "), dated May _, 2013. This
certificate is delivered pursuant to the Purchase Contract. Capitalized terms used herein and not
otherwise defined have the meanings ascribed to them in the Certificate, dated May , 2011
delivered by McMillin Daybreak, LLC, a Delaware limited liability company (the "Certificate "),
which is attached hereto as Exhibit A.
The undersigned certifies that [he/she] is familiar with the facts herein certified
and is authorized and qualified to certify the same as an authorized officer of the Developer, and
the undersigned, on behalf of the Developer, further certifies as follows:
1. Each statement made in the Certificate is affirmed and restated as if made
on the date hereof, provided that each statement made in the Certificate referring to the
Preliminary Official Statement is affirmed as it relates to the final Official Statement.
2. To the Actual Knowledge of the Undersigned, no event has occurred since
the date of the Preliminary Official Statement which has adversely affected or will materially and
adversely affect the business, properties, operations, prospects or financial condition of the
Developer which would materially and adversely affect the Developer's ability to develop the
Property or its ability to pay Special Taxes.
3. Each statement made in the Certificate referring to the Continuing
Disclosure Agreement is affirmed as if it relates to the Continuing Disclosure Agreement as
executed and delivered.
4. The Developer is duly authorized to execute and deliver its Continuing
Disclosure Agreement, and to perform the obligations on its part to be performed thereunder, and
its Continuing Disclosure Agreement constitutes the legal, valid and binding obligations of the
Developer enforceable against it in accordance with its terms, except as such enforcement is
limited by bankruptcy, insolvency, reorganization, arrangement, moratorium, fraudulent
conveyance, and other similar laws relating to or affecting the rights of creditors and certain
equitable, legal, or statutory principles affecting the enforcement of contractual rights generally,
regardless of whether such enforcement is considered in a proceeding in equity or at law.
F -1
City Council Meeting
May 14, 2013
AGENDA ITEM NO. 6
EXHIBIT 6
INDENTURE OF TRUST
by and between the
LAKE ELSINORE PUBLIC FINANCING AUTHORITY
and
UNION BANK, N.A.,
as Trustee
Dated as of June 1, 2013
Relating to
Lake Elsinore Public Financing Authority
Local Agency Revenue Bonds (Surnmerly IA A), 2013 Series A
78815276.1
TA13LF OF CONTENTS
(continued)
Page
Section
5.07
Tax Covenants Relating to Bonds ....................... ...............................
25
Section
5.08
District Bonds ..................................................... ...............................
29
Section
5.09
Further Assurances .............................................. ...............................
29
Section5.10
9.04
Immunity ............................................................. ...............................
29
Section
5.11
No Acceleration .................................................. ...............................
29
ARTICLEVI
9.06
THE
TRUSTEE ................................................................ .............................29
42
Section
6.01
Appointment of Trustee ...................................... ...............................
29
Section
6.02
Acceptance of Trusts ........................................... ...............................
30
Section
6.03
Fees, Charges and Expenses of Trustee ...............4 ...........................4.32
Section
6.04
Notice to Bond Owners of Default ..................... .4..........6..6....4..........
32
Section
6.05
Intervention by Trustee ........ ...........4....666............ ............6.6.4..4...........
32
Section
6.06
Removal of Trustee....... ........... q ..... 6 ..................... 4 ... q.4 ...............
32
Section
6.07
Resignation by Trustee ....................................... .......................6.......
33
Section
6.08
Appointment of Successor Trustee ...6666 64..44 ........ .........664..4.............444
33
Section
6.09
Merger or Consolidation ....................................... .............................33
Section
6.10
Concerning any Successor Trustee ..................... ...............................
33
Section
6.11
Appointment to Co- Trustee ................................ ..............................6
34
Section
6.12
Indemnification; Limited Liability of Trustee ...... .............................34
ARTICLE VII
MODIFICATION AND AMENDMENT OF THE INDENTURE...............
35
Section
7.01
Amendment Hereof... ...... 6..6..4 ......... 4..4 ....... q.q..q ........... 4 ...... q ............
666 35
Section
7.02
Effect of Supplemental Indenture ....................... ...4..........................4
36
Section
7.03
Endorsement or Replacement of Bonds After Amendment ..............
36
Section
7.04
Amendment by Mutual Consent ......................... .............4.................
36
ARTICLE VIH
EVENTS
OF DEFAULT AND REMEDIES ................. ...............................
36
Section
8.01
Events of Default ................................................ ...............................
36
Section
8.02
Remedies Upon Event of Default......... ....................... q ........... 466
....... 37
Section
8.03
Application of Revenues and Other Funds After Default ..................
37
Section
8.04
Power of Trustee to Control Proceedings ........... ..........................6464.
38
Section
8.05
Appointment of Receivers ... ......6464 ..4 .................. ...................4466.464....
38
Section8.06
Non - Waiver .......................... ............................... ....................4......644.
38
Section
8.07
Right to Institute Suit, Action or Proceeding ..... . 66.66 ..........................
39
Section
8.08
Termination of Proceedings............. .............................. 4.4 6
4 4.. 39
ARTICLE IX MISCELLANEOUS
40
Section
9.01
Limited Liability of Authority .............................. .............................40
Section
9.02
Benefits of Indenture Limited to Parties ............. ............6..................
40
Section
9.03
Discharge of Indenture ........................................ ................4..............
40
Section
9.04
Is Deemed Included in All References to Predecessor .....................4
41
Section
9.05
Content of Certificates ......... ........................4...... ...........6...44.4............
41
Section
9.06
Execution of Documents by Bond Owners .......... 6 ......................66..4..
42
Section
9.07
Disqualified Bonds... ..... q.q ..................... ............. 64664 ...............
42
78815276/
INDENTURE OF TRUST
THIS INDENTURE OF TRUST (this "Indenture ") is made and entered into as of June 1,
2013, 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 (Sroumerly IA A), 2013 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 proposes 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
78875276.1
"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, 2013.
"Bonds" means the Lake Elsinore Public Financing Authority Local Agency Revenue
Bonds (Summerly IA A), 2013 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(x) 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 off-ice 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
78815276.1 3
(2) any of the following obligations of the following agencies of the United States of
America: (a) direct obligations of the Export- huport 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 June 1, 2013,
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
March 1, 2014, and continuing thereafter so long as any Bonds remain Outstanding.
78915276.1 5
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 shipped 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;
(j) 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;
78875276/ 7
"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, the Redemption Fund and the Cash Flow Management 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, the Redemption Fund and
the Cash Flow Management 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.
7881527e.r 9
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
7881527e.1 11
Bonds Maturing on September 1, 20__
Sinking Fund
Redemption Date Principal Amount
(September 1) to be Redeemed
Bonds Maturing on September 1, 20 __
Sinking Fund
Redemption Date Principal Amount
(September 1) 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 , 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
through 102.0%
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
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.
75815276 1 13
(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.
Only such of the Bonds as shall bear thereon a certificate of authentication in
substantially the form set forth in Exhibit A manually executed by the Trustee, shall be valid or
78815276.1 15
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
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.
78815276.1 17
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
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 $ .00, plus net
original issue 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 of $ in the Reserve
Account, which amount equals the initial Reserve Requirement.
(c) The Trustee shall deposit the amount of $ in the Costs of
Issuance Fund.
(d) The Trustee shall deposit the amount of $ in the Cash Flow
Management Fund.
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.
7881 5276_ 1 19
(b) Deposit of Reveuues; 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 fi-om the Revenue Fund for deposit into the Bond Fund the following amounts, in the
priority set forth in Subsection (e) 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
78815276.1 21
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 offthe 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 hereundcr, 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
disbursement from the fiord to which such permitted investment is created. The Trustee shall
incur no liability for losses arising from any investments made pursuant to this Section.
7981,5276 1 23
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.
7881 5276.1 25
(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:
0) 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.
78815276.1 27
the Provisions of Sections 103 and 141 -150 of the Internal Revenue Code of 1956, 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 Districts thereunder.
Section 5.09 Further Assurances. The Authority shall cause to be collected and paid
to the Trustee all Revenues as such Revenues become due and payable. The Authority will
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 Indenture, and for the better assuring and confirming unto the Owners of the
Bonds the rights and benefits provided in this Indenture.
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 propose 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
78815276.1 29
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
78815276.1 31
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. hn 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 ally
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.
78815176A 33
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 propose 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.
78815276.1 35
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 tout 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 tile 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 Vlll, 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
78815276,1 37
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 herembefore 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
78815276. 1 39
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(1) 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; (e) 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.
78815276 1 41
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 telecornmunication, (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
78815276 .1 43
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
Executive Director
UNION BANK, N.A., as Trustee
By:
Authorized Officer
7881 5276. 1 45
Date, or unless this Bond is authenticated on or prior to February 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 I in each year, commencing
March 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 (Summerly IA A),
2013 Series A" (the `Bonds "), limited in principal amount to $ , secured by an Indenture
of Trust, dated as of June 1, 2013 (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 terns 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
7881 .5276_ 1 A -2
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)
789 15276,1 A -4
Principal Amount
to be Redeemed
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: . 2013
UNION BANK, N.A.,
as Trustee
By:
Authorized Signatory
78815276.1 A -6