HomeMy WebLinkAboutItem No. 12 CFD No. 2003-2 (Canyon Hills) Improve Area B 2017 Special Tax BondsText File
City of Lake Elsinore 130 South Main Street
Lake Elsinore, CA 92530
www.lake-elsinore.org
File Number: RES 2014-059
Agenda Date: 11/28/2017 Status: Public HearingVersion: 1
File Type: ResolutionIn Control: City Council / Successor Agency
Agenda Number: 12)
Page 1 City of Lake Elsinore Printed on 11/21/2017
CITY COUNCIL AND FACILITIES FINANCING AUTHORITY
To:Honorable Mayor/Chair Members of the City Council/Facilities Financing
Authority
From:Grant Yates, City Manager/ Executive Director
Prepared by: Jason Simpson, Assistant City Manager/Assistant Chair of the
Financing Authority
Date:November 28, 2017
Subject:Community Facilities District (CFD) No. 2003-2 (Canyon Hills), Improvement
Area B 2017 Special Tax Bonds
Recommendation
adopt A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF LAKE ELSINORE,
CALIFORNIA, ACTING AS THE LEGISLATIVE BODY OF CITY OF LAKE ELSINORE
COMMUNITY FACILITIES DISTRICT NO. 2003-2 (CANYON HILLS), AUTHORIZING THE
ISSUANCE OF ITS IMPROVEMENT AREA B 2017 SPECIAL TAX BONDS IN A PRINCIPAL
AMOUNT NOT TO EXCEED $7,975,000 AND APPROVING CERTAIN DOCUMENTS AND
TAKING CERTAIN OTHER ACTIONS IN CONNECTION THEREWITH; AND,
adopt A RESOLUTION OF THE BOARD OF DIRECTORS OF THE LAKE ELSINORE
FACILITIES FINANCING AUTHORITY, CALIFORNIA, AUTHORIZING THE ISSUANCE OF ITS
LOCAL AGENCY REVENUE BONDS IN AN AGGREGATE PRINCIPAL AMOUNT NOT TO
EXCEED $7,975,000 AND APPROVING CERTAIN DOCUMENTS AND TAKING CERTAIN
OTHER ACTIONS IN CONNECTION THEREWITH
Background
On January 13, 2004, the City of Lake Elsinore (City) formed the CFD No. 2003-2 (District) by
the adoption of Resolution No. 2004-6. The District originally consisted of four improvement
areas (Improvement Areas A through D). Another improvement area (Improvement Area E) was
added in early 2016. Pardee Homes serves as the master developer and primary merchant
builder of the community within the District, which is part of a larger planned residential
community commonly referred to as “Canyon Hills.” At build-out, Canyon Hills is expected to
include approximately 3,689 dwelling units.
Improvement Area B of the District consists of two non-contiguous areas, one of which is fully
built out and consists of 806 single family detached homes that have been sold to individual
homeowners. The second area (Westridge) is planned to consist of 456 single family detached
homes and a commercial parcel. Construction is underway in the Westridge portion of
Improvement Area B and as of September 1, 2017, there were 177 homes sold and closed to
CFD 2003-2 IA B Canyon Hills
November 28, 2017
Page 2
homeowners, 15 completed model homes, 55 completed but unsold homes, 73 homes under
construction and 136 finished/vacant lots. Pardee Homes expects that construction of the 128
residential dwelling units completed or still under construction, and the 136 finished lots (as of
September 1, 2017), will be complete and conveyed to homeowners by June 2020.
Construction Stages Total
Model Units 15
Production Units
Completed 232*
Under Construction 73
Physically Finished Lots 136
Commercial Parcel **
Total 456
*177 are owned by individual homeowners.
**The Commercial Parcel consists of 7.9 acres.
Tonight, the City and the Lake Elsinore Facilities Financing Authority (Authority), the City’s
recently formed joint powers authority between the City and the Parking Authority of the City of
Lake Elsinore, are being asked to approve the 2017 Bonds and certain documents as described
herein, to finance a portion of public facilities within Improvement Area B.
Discussion
The Bonds to be issued by the Authority (Authority Bonds) are expected to be issued and sold
to the public in a par amount not to exceed $7,975,000. The proceeds of the Authority Bonds
will be applied to purchase bonds to be issued by the District (District Bonds) in a principal
amount equal to the Authority Bonds, which is the remaining bonded indebtedness capacity in
Improvement Area B. Debt service paid by the District on the District Bonds (which will consist
of Special Taxes levied within Improvement Area B) to the Authority will be applied to make debt
service payments on the Authority Bonds.
Proceeds from the District Bonds will be used to finance a portion of public facilities within
Improvement Area B. Because the term of the special tax may not be levied on a taxable parcel
after fiscal year 2043-44 (pursuant to the Rate and Method of Apportionment for Improvement
Area B), the Authority Bonds and the District Bonds will have a final maturity on September 1,
2044 (approximate 27-year financing term). The District Bonds will be issued on a parity basis
with the District’s Improvement Area B 2015 Special Tax Refunding Bonds (“2015 Bonds”).
Final interest rates of the Authority Bonds and District Bonds will be determined on the sale
date, which is estimated to be in early December and the closing expected to follow a few
weeks later. The following table provides estimated statistics of the 2017 Bonds, based on
current market conditions.
CFD 2003-2 IA B Canyon Hills
November 28, 2017
Page 3
Preliminary Financing Statistics*
2017 Bonds
Par Amount $7,975,000
Avg. Bond Yield 4.00%
Final Maturity 9/1/2044
Avg. Annual Assessment (on 456 Parcels Only) **$1,013
*Preliminary; Subject to Change; Based on Current Market Conditions
**A Portion of the 2017 Bonds are Expected to be Defeased and Redeemed by September
1, 2018 (further described below) and as a result, the Average Annual Assessment will be
Adjusted; Assessment Applicable only to the 456 Parcels in Improvement Area B
Because there will be no more remaining bonded indebtedness capacity in Improvement Area B
after the issuance of the District Bonds, the City expects to facilitate the issuance of additional
bonds by September 1, 2018 (detailed below) to finance additional infrastructure within
Improvement Area B.
The City formed Community Facilities District No. 2016-2 (CFD No. 2016-2) in December 2016,
the boundary of which is coterminous with the Westridge portion of Improvement Area B. CFD
No. 2016-2 was formed with the intention of further assisting in the financing of public
infrastructure necessary for the construction of units within a portion of Improvement Area B.
Depending on market conditions and status of construction within the Westridge portion of
Improvement Area B, CFD No. 2016-2 Bonds are expected to be issued in early summer of
2018, a portion of the proceeds of which (in an anticipated amount of $11,900,000) will be used
to defease and redeem (on a pro rata basis) a portion of the bonds associated with
Improvement Area B, which include the 2015 Bonds as well as the District Bonds. Pursuant to
the formation documents and rate and method for CFD No. 2016-2, the special taxes of CFD
No. 2016-2 will not be levied until such time as such defeasance and redemption of the portion
of the 2015 Bonds and the District Bonds is accomplished and a notice of cancellation of special
tax of the District is recorded on the affected property within Westridge.
Documents to be Approved
Approval of the attached resolutions approves and authorizes the issuance of the 2017 Bonds
and the execution of, as applicable, the following documents:
Indenture of Trust
Preliminary Official Statement
Bond Purchase Agreement
Local Bond Purchase Agreement
Continuing Disclosure Certificate
First Supplement to Bond Indenture
Appraisal
Bond Counsel and the City Attorney have reviewed the attached financing documents on behalf
of the Authority and District. If these resolutions are approved by both the Authority and the
District, City staff will continue to work with the financing team to finalize all of the
aforementioned documents.
CFD 2003-2 IA B Canyon Hills
November 28, 2017
Page 4
Fiscal Impact
Because the 2017 Bonds are payable from special taxes levied on taxable parcels in
Improvement Area B, there is no cost to the City. While property owners are expected to pay
approximately $1,032 starting in fiscal year 2018-19 and increasing 2% per year until fiscal year
2044 (only on 456 parcels), a portion of the District Bonds is expected to be defeased and
redeemed by September 1, 2018 as described above. After fiscal year 2018-19, the average
assessment levied on property owners will be determined after the issuance of the CFD No.
2016-2 Bonds.
Exhibits
A Authority Resolution
B District Resolution
C Indenture of Trust
D Preliminary Official Statement
E Bond Purchase Agreement
F Local Bond Purchase Agreement
G Continuing Disclosure Certificate
H First Supplement to Bond Indenture
RESOLUTION NO. 2017 ____
RESOLUTION OF THE BOARD OF DIRECTORS OF THE LAKE
ELSINORE FACILITIES FINANCING AUTHORITY, RIVERSIDE
COUNTY, CALIFORNIA, AUTHORIZING THE ISSUANCE OF
ITS LOCAL AGENCY REVENUE BONDS IN AN AGGREGATE
PRINCIPAL AMOUNT NOT TO EXCEED SEVEN MILLION NINE
HUNDRED SEVENTY-FIVE THOUSAND DOLLARS
($7,975,000) AND APPROVING CERTAIN DOCUMENTS AND
TAKING CERTAIN OTHER ACTIONS IN CONNECTION
THEREWITH
WHEREAS,the Lake Elsinore Facilities Financing Authority (the “Authority”) is a joint
exercise of powers authority duly organized and existing 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 to provide financing and refinancing for capital improvements of
member entities of the Authority and other local agencies; and
WHEREAS, City of Lake Elsinore Community Facilities District No. 2003-2 (Canyon
Hills) (the “District”) previously issued the $20,570,000 City of Lake Elsinore Community
Facilities District No. 2003-2 (Canyon Hills) Special Tax Bonds (Improvement Area B) 2006
Series A (the “2006 District Bonds”) to finance certain public improvements; and
WHEREAS, the District previously issued the $25,795,000 City of Lake Elsinore
Community Facilities District No. 2003-2 (Canyon Hills) Improvement Area B 2015 Special Tax
Refunding Bonds (the “2015 District Bonds”) to refund the outstanding 2006 District Bonds and
to finance additional public improvements; and
WHEREAS, the District desires to issue a third series of bonds (the “2017 District
Bonds”) which will be payable from special taxes levied within Improvement Area B of the
District (“Improvement Area B”) on a parity with the outstanding 2015 District Bonds; and
WHEREAS,the Authority, for the purpose of acquiring the 2017 District Bonds, the
proceeds of which will be utilized by the District to finance additional public improvements, has
determined to issue its Local Agency Revenue Bonds, Series 2017 (the “Authority Bonds”)
pursuant to and secured by the Indenture (as defined below) providing for the issuance of the
Authority Bonds, all in the manner provided therein; and
WHEREAS,the Authority Bonds will be secured by debt service payments paid with
respect to the 2017 District Bonds; and
WHEREAS, for this financing there has been filed with the Secretary of the Board of
Directors of the Authority the forms of the following documents to be executed by the Authority
with respect to the issuance of the Authority Bonds, which documents the Board desires to
approve for execution as described herein:
(1)The Indenture of Trust, dated as of December 1, 2017 (the “Indenture”), by and
between the Authority and Wilmington Trust, National Association, as Trustee;
2
(2)The Preliminary Official Statement for the Authority Bonds (the “Preliminary
Official Statement”);
(3)The Bond Purchase Agreement, to be dated the date of sale, by and between
Stifel, Nicolaus & Company, Incorporated, as Underwriter (the “Underwriter”) and the Authority
(the “Bond Purchase Agreement”); and
(4)The 2017 District Bonds Bond Purchase Agreement, to be dated the date of sale,
by and between the Authority and the District (the “Local Bond Purchase Agreement”);
The documents described in (1) through (4) above are collectively referred to herein as
the “Authority Documents”).
WHEREAS, the District has held a duly noticed public hearing regarding the issuance of
the 2017 District Bonds and determined that such financing will result in significant public
benefits of the type described in Section 6586 of the Bond Law; and
WHEREAS, the Authority has determined and hereby finds that the issuance of the
Authority Bonds and the acquisition of the 2017 District Bonds will result in significant public
benefits of the type described in Section 6586 of the Bond Law; and
WHEREAS, the Authority has determined to adopt the City’s Debt Management Policy
adopted by the City Council of the City on July 11, 2017 as the debt management policy of the
Authority;
NOW, THEREFORE, the Board of Directors of the Lake Elsinore Facilities Financing
Authority does hereby resolve, determine and order as follows:
Section 1.Each of the above recitals is true and correct and is adopted by the Board
of Directors.
Section 2.The Authority Bonds shall be issued in an aggregate principal amount not
to exceed $7,975,000 with the exact principal amount to be determined by the official signing
the Bond Purchase Agreement in accordance with Section 4 below. The Authority Bonds shall
mature on the dates and pay interest at the rates set forth in the Bond Purchase Agreement to
be executed on behalf of the Authority in accordance with Section 4 below. The Authority
Bonds shall be issued under the terms of the Indenture, the form of which is on file with the
Secretary of the Board of Directors. The form of the Indenture presented at this meeting is
hereby approved and each of the Chair of the Board of Directors, the Executive Director and the
Treasurer, or their respective written designees (collectively, the “Authorized Officers”), is
hereby authorized to execute the Indenture, in the form hereby approved, with such additions
thereto and changes therein as the officer or officers executing the same deem necessary to
accomplish the issuance of the Authority Bonds as contemplated by this Resolution. Approval
of such changes shall be conclusively evidenced by the execution and delivery of the Indenture
by one or more of such Authorized Officers.
Section 3.The Authority Bonds shall be executed on behalf of the Authority by the
manual or facsimile signature of the Chair of the Board of Directors, and the seal of the
Authority, or a facsimile thereof, shall be impressed or imprinted thereon and attested with the
manual or facsimile signature of the Secretary of the Board of Directors. Wilmington Trust,
National Association is hereby appointed to act as the trustee for the Authority Bonds under the
3
Indenture. If the Executive Director determines at any time while the Authority Bonds are
outstanding that another bank should be selected to act as trustee for the Authority Bonds, in
order to ensure the efficient administration of the Authority Bonds, then the Executive Director,
or his designee, is hereby authorized and directed to select and engage a bank or trust
company meeting the requirements set forth in the Indenture to act as the trustee for the
Authority Bonds under the terms of the Indenture.
Section 4.The form of the Bond Purchase Agreement presented at this meeting is
hereby approved; and each of the Authorized Officers is hereby authorized to execute the Bond
Purchase Agreement in the form so approved, with such additions thereto and changes therein
as are necessary to conform the Bond Purchase Agreement to the dates, amounts and interest
rates applicable to the Authority Bonds as of the sale date or to cure any defect or ambiguity
therein. Approval of such additions and changes shall be conclusively evidenced by the
execution and delivery of the Bond Purchase Agreement by one or more of such Authorized
Officers; provided, however, that the Bond Purchase Agreement shall be signed only if the
Underwriter’s discount (exclusive of original issue discount) does not exceed 2.00% of the
principal amount of the Authority Bonds and the true interest cost of the Authority Bonds is less
than 5.00%. Each of the Executive Director, the Treasurer and their written designees is
authorized to determine the day on which the Authority Bonds are to be priced in order to
attempt to produce the lowest borrowing cost for the Authority and may reject any terms
presented by the Underwriter to the Authority if determined not to be in the best interest of the
Authority.
Section 5.The form of the Local Bond Purchase Agreement presented at this
meeting is hereby approved; and each of the Authorized Officers is hereby authorized to
execute the Local Bond Purchase Agreement in the form so approved, with such additions
thereto and changes therein as are necessary to conform the Local Bond Purchase Agreement
to the dates, amounts and interest rates applicable to the 2017 District Bonds as of the sale
date or to cure any defect or ambiguity therein. Approval of such additions and changes shall
be conclusively evidenced by the execution and delivery of the Local Bond Purchase
Agreement by one or more of such officers.
Section 6.The form of the Preliminary Official Statement presented at this meeting
is hereby approved; and the Underwriter is hereby authorized to distribute the Preliminary
Official Statement to prospective purchasers of the Authority Bonds in the form hereby
approved, together with such additions thereto and changes therein as are determined
necessary by the Treasurer of the Authority, or his written designee, to make such Preliminary
Official Statement final as of its date for purposes of Rule 15c2-12, including, but not limited to,
such additions and changes as are necessary to make the information therein accurate and not
misleading. Each of the Authorized Officers is hereby authorized to execute a final Official
Statement in the form of the Preliminary Official Statement, together with such changes as are
determined necessary by the Treasurer of the Authority, or his written designee, to make such
Official Statement complete and accurate as of their date. The Underwriter is further authorized
to distribute the final Official Statement for the Authority Bonds and any supplement thereto to
the purchasers thereof upon its execution on behalf of the Authority as described above.
Section 7.The Authorized Officers are hereby appointed as the authorized officers
of the Authority for all purposes required to effect the issuance of the Authority Bonds and are
hereby authorized, empowered, and directed, jointly and severally, to do all such acts and
things and to execute all such documents as may be necessary to carry out and comply with the
foregoing actions.
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Each of the Executive Director and the Treasurer, or their respective written designees,
acting alone, is hereby authorized to negotiate the terms of a commitment (the “Insurance
Commitment”) for bond insurance for some or all of the Authority Bonds and a commitment for a
reserve fund surety bond (the “Surety Commitment”) for all or a portion of the Reserve Fund (as
defined in the Indenture) from one or more municipal bond insurance companies (an “Insurer”)
and, if such officer determines that the acquisition either of a policy or a reserve fund surety
bond, or both, from an Insurer will result in net interest rate savings, to pay the premiums for
such policy and surety bond from the proceeds of the Authority Bonds and to amend the
Authority Documents to the extent necessary to conform to the terms of the Insurance
Commitment and the Surety Commitment. Each of the Authorized Officers, acting alone, is
further authorized to execute a reimbursement agreement required by the Surety Commitment.
Section 8.The Authority hereby adopts the City’s Debt Management Policy, as
amended, supplemented and restated from time to time, as the debt management policy of the
Authority pursuant to California Government Code Section 8855.
Section 9.The Authorized Officers are hereby authorized and directed, to do any
and all things and to execute and deliver any and all documents which they may deem
necessary or advisable in order to consummate the issuance and sale of the Authority Bonds
and otherwise to effectuate the purposes of this Resolution.
Section 10.This Resolution shall take effect immediately upon its adoption.
PASSED, APPROVED AND ADOPTED at a regular meeting of the Board of Directors
of the Lake Elsinore Facilities Financing Authority this 28
th day of November, 2017.
_____________________________
ROBERT E. MAGEE
CHAIR
ATTEST:
__________________________
SUSAN M. DOMEN, MMC
SECRETARY
RESOLUTION NO. _____
RESOLUTION OF THE CITY COUNCIL OF THE CITY OF LAKE
ELSINORE, ACTING AS THE LEGISLATIVE BODY OF CITY OF
LAKE ELSINORE COMMUNITY FACILITIES DISTRICT
NO. 2003-2 (CANYON HILLS), AUTHORIZING THE ISSUANCE
OF ITS IMPROVEMENT AREA B 2017 SPECIAL TAX BONDS
IN A PRINCIPAL AMOUNT NOT TO EXCEED SEVEN MILLION
NINE HUNDRED SEVENTY-FIVE THOUSAND DOLLARS
($7,975,000), AND APPROVING CERTAIN DOCUMENTS AND
TAKING CERTAIN OTHER ACTIONS IN CONNECTION
THEREWITH
Whereas, the City Council of the City of Lake Elsinore (the “City”), located in Riverside County,
California (hereinafter sometimes referred to as the “legislative body of the District”), has
heretofore undertaken proceedings to form City of Lake Elsinore Community Facilities District
No. 2003-2 (Canyon Hills) (the “District”) and designate Improvement Area B therein
(“Improvement Area B”) pursuant to the terms and provisions of the Mello-Roos Community
Facilities Act of 1982, as amended, being Chapter 2.5, Part 1, Division 2, Title 5 of the
Government Code of the State of California (the “Act”); and
Whereas, the District is authorized to finance certain public facilities and other governmental
facilities that are necessary to meet increased demands placed upon the City as a result of
development or rehabilitation occurring within the District, which facilities may be physically
located outside the boundaries of the District (the “Facilities”); and
Whereas, the District has previously issued its $20,570,000 Special Tax Bonds (Improvement
Area B) 2006 Series A (the “2006 Bonds”) to finance certain Facilities; and
Whereas, the District previously issued its $25,795,000 City of Lake Elsinore Community
Facilities District No. 2003-2 (Canyon Hills) Improvement Area B 2015 Special Tax Refunding
Bonds (the “2015 Bonds”) to refund the outstanding 2006 Bonds and to finance additional
Facilities; and
Whereas, the 2015 Bonds were issued pursuant to a Bond Indenture dated as of March 1, 2015
(the “2015 Indenture”), by and between the District and Wilmington Trust, National Association
as successor trustee thereunder (the “Trustee”), and were sold to the Lake Elsinore Public
Financing Authority in connection with the issuance of the Lake Elsinore Public Financing
Authority Local Agency Revenue Refunding Bonds, Series 2015; and
Whereas, the legislative body of the District now desires to finance additional Facilities through
the issuance of bonds in an aggregate principal amount not to exceed $7,975,000 designated
as the “City of Lake Elsinore Community Facilities District No. 2003-2 (Canyon Hills)
Improvement Area B 2017 Special Tax Bonds” (the “2017 Bonds”); and
Whereas, the legislative body of the District has determined in accordance with
Section 53360.4 of the Code that a negotiated sale of the 2017 Bonds to the Lake Elsinore
Facilities Financing Authority (the “Authority”) in accordance with the terms of the Local
Obligations Purchase Agreement to be entered into by and between the Authority and the
District (the “Bond Purchase Agreement”) approved as to form by this legislative body herein will
result in a lower overall cost to the District than a public sale; and
WHEREAS,the Authority, for the purpose of acquiring the 2017 Bonds has authorized the
issuance of its Local Agency Revenue Bonds Series 2017 (the “Authority Bonds”); and
Whereas, in order to effect the issuance of the 2017 Bonds, the legislative body of the District
desires to enter into a First Supplement to Bond Indenture, dated as of December 1, 2017 (the
“First Supplement to Bond Indenture”), with Wilmington Trust, National Association, as Trustee,
in substantially the form presented herewith; and
Whereas, Kitty Siino & Associates, Inc., a state-certified real estate appraiser, as defined in
Section 11340 of the California Business and Professions Code, has delivered to the City an
appraisal report, dated October 12, 2017 (the “Appraisal”), which was made in a manner
consistent with City’s policies for community facilities district financings; and
Whereas, the legislative body of the District has duly noticed and held a public hearing and
hereby determines that it is prudent in the management of its fiscal affairs to issue the 2017
Bonds and that the issuance of the 2017 Bonds will result in significant public benefits of the
type described in Government Code Section 6586; and
Whereas, the District has determined to adopt the City’s Debt Management Policy adopted by
the City Council of the City on July 11, 2017 as the debt management policy of the District;
NOW, THEREFORE, the City Council, acting as the legislative body of the District, does
hereby resolve, order and determine as follows:
Section 1.Each of the above recitals is true and correct.
Section 2.The legislative body of the District is authorized pursuant to the Act to issue the
2017 Bonds for the benefit of the District for purposes set forth herein and to take the necessary
steps to finance the Facilities.
Section 3.The issuance of the 2017 Bonds in an aggregate principal amount not to exceed
$7,975,000 is hereby authorized with the exact principal amount to be determined by the official
signing the Bond Purchase Agreement in accordance with Section 6 below. The legislative
body of the District hereby determines that it is prudent in the management of its fiscal affairs to
issue the 2017 Bonds. The 2017 Bonds shall mature on the dates and pay interest at the rates
set forth in the Bond Purchase Agreement to be executed on behalf of the District in accordance
with Section 6 hereof. The 2017 Bonds shall be governed by the terms and conditions of the
2015 Indenture, as supplemented by the First Supplement to Bond Indenture, presented at this
meeting. The First Supplement to Bond Indenture shall be prepared by Bond Counsel to the
District and executed by one or more of the Mayor, the City Manager, the Assistant City
Manager, or their written designees (collectively, the “Authorized Officers”) substantially in the
form presented at this meeting, with such additions thereto and changes therein as the officer or
officers executing the same deem necessary to cure any ambiguity or defect therein, to insert
the offering price(s), interest rate(s), selling compensation, principal amount per maturity,
redemption dates and prices and such other related terms and provisions as limited by
Section 6 hereof, to conform any provisions therein to the Bond Purchase Agreement and the
Official Statement for the Authority Bonds. Approval of such changes shall be conclusively
evidenced by the execution and delivery of the First Supplement to Bond Indenture by one or
more Authorized Officers. Capitalized terms used in this Resolution which are not defined
herein have the meanings ascribed to them in the 2015 Indenture, as supplemented by the First
Supplement to Bond Indenture. The District hereby determines that the execution and delivery
of the First Supplement to Bond Indenture is not materially adverse to the interests of the
owners of the 2015 Bonds.
Section 4.The 2017 Bonds shall be executed on behalf of the District by the manual or
facsimile signature of the Mayor of the City, and the seal of the District, or a facsimile thereof,
shall be impressed or imprinted thereon and attested with the manual or facsimile signature of
the City Clerk. Wilmington Trust, National Association is hereby appointed to act as Trustee for
the 2017 Bonds.
Section 5.The covenants set forth in the 2015 Indenture, as supplemented by the First
Supplement to Bond Indenture to be executed in accordance with Section 3 above are hereby
approved, shall be deemed to be covenants of the City Council in its capacity as the legislative
body of the District and shall be complied with by the District and its officers.
Section 6.The form of the Bond Purchase Agreement presented herewith is hereby
approved; and any one of the Authorized Officers is hereby authorized and directed, for and in
the name of the District, to execute and the City Clerk, or her written designee, is authorized to
attest to the Bond Purchase Agreement substantially in the form approved, with such additions
thereto and changes therein as may be approved or required by an Authorized Officer, including
changes relating to dates and numbers as are necessary to conform the Bond Purchase
Agreement to the dates, amounts and interest rates applicable to the 2017 Bonds as of the sale
date. Approval of such additions and changes shall be conclusively evidenced by the execution
and delivery of the Bond Purchase Agreement; provided, however, that the Bond Purchase
Agreement shall be signed only if the true interest cost on the 2017 Bonds is less than 5.00%.
Section 7.The form of the Preliminary Official Statement for the Authority Bonds presented
at this meeting is hereby approved, and the underwriter of the Authority Bonds is hereby
authorized to distribute the Preliminary Official Statement to prospective purchasers of the
Authority Bonds in the form hereby approved, together with such additions thereto and changes
therein as are determined necessary or desirable by the Authorized Officers, to make such
Preliminary Official Statement final as of its date for purposes of Rule 15c2-12 of the Securities
and Exchange Commission (“Rule 15c2-12”), including, but not limited to, such additions and
changes as are necessary to make all information set forth therein accurate and not misleading.
Any one of the Authorized Officers is hereby authorized to execute a final Official Statement in
the form of the Preliminary Official Statement, together with such changes as are determined
necessary by the Authorized Officers, and their written designees, to make such Official
Statement complete and accurate as of its date. The underwriter of the Authority Bonds is
further authorized to distribute the final Official Statement for the Authority Bonds and any
supplement thereto to the purchasers thereof upon its execution on behalf of the District as
described above.
Section 8.In accordance with the requirements of Section 53345.8 of the Act, the legislative
body of the District hereby determines that the value of the real property in Improvement Area B
subject to the special tax to pay debt service on the 2017 Bonds, as set forth in the Appraisal, is
at least three times the principal amount of the 2017 Bonds, the outstanding principal amount of
the 2015 Bonds, and the principal amount of all other bonds outstanding that are secured by a
special tax levied pursuant to the Act or a special assessment levied on property within
Improvement Area B.
Section 9.The form of the Continuing Disclosure Certificate presented at this meeting is
hereby approved; and each of the Authorized Officers is authorized to execute the Continuing
Disclosure Certificate in the form hereby approved, with such additions thereto and changes
therein as the officers executing the same deem necessary to comply with the requirements of
Rule 15c2-12 and to cure any ambiguity or defect therein. Approval of such changes shall be
conclusively evidenced by the execution and delivery of the Continuing Disclosure Certificate by
one or more of such officers.
Section 10.The City Manager, the Assistant City Manager, the City Clerk or their written
designee, are authorized to provide for all services necessary to effect the issuance of the 2017
Bonds. Such services shall include, but not be limited to, obtaining legal services, Trustee
services and any other services deemed appropriate as set forth in a certificate of the City
Manager, the Assistant City Manager, the City Clerk or their written designee. The City
Manager, the Assistant City Manager, the City Clerk, or their written designee, are authorized to
pay for the cost of such services, together with other Costs of Issuance from 2017 Bond
proceeds.
Section 11.The City Manager, the Assistant City Manager, the City Clerk and all other
officers of the City are hereby authorized and directed to take any actions and execute and
deliver any and all documents as are necessary to accomplish the issuance, sale and delivery
of the 2017 Bonds in accordance with the provisions of this Resolution, the fulfillment of the
purposes of the 2017 Bonds as described in the First Supplement to Bond Indenture, including
the execution of one or more cash or letter of credit depository agreements with the developer
owning property within Improvement Area B and Wilmington Trust, National Association relating
to any security provided by such developer with respect to the special taxes to be levied within
Improvement Area B. Any document authorized herein to be signed by the City Clerk may be
signed by a duly appointed deputy clerk.
Section 12.The District hereby adopts the City’s Debt Management Policy, as amended,
supplemented and restated from time to time, as the debt management policy of the District
pursuant to California Government Code Section 8855.
Section 13.This Resolution shall take effect immediately upon its adoption.
Passed and Adopted on this 28th day of November, 2017.
_____________________________
Robert E. Magee, Mayor
Attest:
_____________________________
Susan M. Domen, MMC
City Clerk
Stradling Yocca Carlson & Rauth
Draft of 11/16/17
INDENTURE OF TRUST
by and between
LAKE ELSINORE FACILITIES FINANCING AUTHORITY
and
WILMINGTON TRUST, NATIONAL ASSOCIATION,
as Trustee
Dated as of December 1, 2017
$___________
LAKE ELSINORE FACILITIES FINANCING AUTHORITY
LOCAL AGENCY REVENUE BONDS, SERIES 2017
TABLE OF CONTENTS
Page
i
ARTICLE I
DEFINITIONS; AUTHORIZATION AND PURPOSE OF BONDS; EQUAL SECURITY
Section 1.1 Definitions..................................................................................................................2
Section 1.2 Rules of Construction...............................................................................................12
Section 1.3 Authorization and Purpose of Bonds.......................................................................12
Section 1.4 Equal Security..........................................................................................................12
ARTICLE II
ISSUANCE OF BONDS
Section 2.1 Terms of Bonds........................................................................................................12
Section 2.2 Redemption of Bonds...............................................................................................14
Section 2.3 Form of Bonds .........................................................................................................16
Section 2.4 Execution of Bonds..................................................................................................16
Section 2.5 Transfer of Bonds.....................................................................................................17
Section 2.6 Exchange of Bonds..................................................................................................17
Section 2.7 Temporary Bonds.....................................................................................................17
Section 2.8 Bond Register...........................................................................................................17
Section 2.9 Bonds Mutilated, Lost, Destroyed or Stolen............................................................17
Section 2.10 Book-Entry System..................................................................................................18
ARTICLE III
DEPOSIT AND APPLICATION OF PROCEEDS
Section 3.1 Issuance of Bonds....................................................................................................19
Section 3.2 Application of Proceeds of Sale of 2017 Bonds and Funds Received from
the Community Facilities District............................................................................20
Section 3.3 Revenue Fund ..........................................................................................................20
Section 3.4 Costs of Issuance Fund ............................................................................................20
Section 3.5 Purchase Fund..........................................................................................................20
Section 3.6 Reserve Fund ...........................................................................................................21
Section 3.7 Rebate Fund.............................................................................................................21
Section 3.8 Surplus Fund............................................................................................................21
Section 3.9 Administrative Expense Fund..................................................................................21
Section 3.10 Validity of Bonds.....................................................................................................21
ARTICLE IV
REVENUES; FLOW OF FUNDS
Section 4.1 Pledge of Revenues; Assignment of Rights.............................................................21
Section 4.2 Receipt, Deposit and Application of Revenues; Revenue Fund..............................22
Section 4.3 Reserve Fund ...........................................................................................................23
TABLE OF CONTENTS
(continued)
Page
ii
Section 4.4 Surplus Fund............................................................................................................24
Section 4.5 Investments..............................................................................................................24
Section 4.6 Valuation and Disposition of Investments...............................................................25
ARTICLE V
COVENANTS OF THE AUTHORITY
Section 5.1 Punctual Payment.....................................................................................................25
Section 5.2 Extension of Payment of Bonds...............................................................................26
Section 5.3 Against Encumbrances.............................................................................................26
Section 5.4 Power to Issue Bonds and Make Pledge and Assignment.......................................26
Section 5.5 Accounting Records and Financial Statements........................................................26
Section 5.6 Conditions to Issuance of Additional Obligations...................................................26
Section 5.7 Tax Covenants .........................................................................................................27
Section 5.8 Rebate Fund.............................................................................................................28
Section 5.9 Local Obligations.....................................................................................................30
Section 5.10 Sale of Local Obligations.........................................................................................31
Section 5.11 Continuing Disclosure Agreement...........................................................................31
Section 5.12 Further Assurances...................................................................................................32
Section 5.13 Pledged Revenues....................................................................................................32
ARTICLE VI
THE TRUSTEE
Section 6.1 Appointment of Trustee...........................................................................................32
Section 6.2 Acceptance of Trusts................................................................................................32
Section 6.3 Fees, Charges and Expenses of Trustee...................................................................35
Section 6.4 Notice to Bond Owners of Default ..........................................................................35
Section 6.5 Intervention by Trustee............................................................................................36
Section 6.6 Removal of Trustee..................................................................................................36
Section 6.7 Resignation by Trustee.............................................................................................36
Section 6.8 Appointment of Successor Trustee..........................................................................36
Section 6.9 Merger or Consolidation..........................................................................................36
Section 6.10 Concerning any Successor Trustee..........................................................................36
Section 6.11 Appointment of Co-Trustee.....................................................................................37
Section 6.12 Indemnification; Limited Liability of Trustee.........................................................37
ARTICLE VII
MODIFICATION AND AMENDMENT OF THE INDENTURE
Section 7.1 Amendment Hereof..................................................................................................38
Section 7.2 Effect of Supplemental Indenture............................................................................39
Section 7.3 Endorsement or Replacement of Bonds After Amendment.....................................39
Section 7.4 Amendment by Mutual Consent..............................................................................39
TABLE OF CONTENTS
(continued)
Page
iii
ARTICLE VIII
EVENTS OF DEFAULT AND REMEDIES OF BOND OWNERS
Section 8.1 Events of Default .....................................................................................................39
Section 8.2 Remedies; Rights of Bond Owners..........................................................................40
Section 8.3 Application of Revenues and Other Funds After Event of Default.........................40
Section 8.4 Power of Trustee to Control Proceedings................................................................41
Section 8.5 Appointment of Receivers .......................................................................................41
Section 8.6 Non Waiver..............................................................................................................42
Section 8.7 Rights and Remedies of Bond Owners....................................................................42
Section 8.8 Termination of Proceedings.....................................................................................42
ARTICLE IX
MISCELLANEOUS
Section 9.1 Limited Liability of Authority .................................................................................43
Section 9.2 Benefits of Indenture Limited to Parties..................................................................43
Section 9.3 Discharge of Indenture.............................................................................................43
Section 9.4 Successor is Deemed Included in All References to Predecessor............................44
Section 9.5 Content of Certificates.............................................................................................44
Section 9.6 Execution of Documents by Bond Owners..............................................................45
Section 9.7 Disqualified Bonds...................................................................................................45
Section 9.8 Waiver of Personal Liability....................................................................................45
Section 9.9 Partial Invalidity.......................................................................................................45
Section 9.10 Destruction of Cancelled Bonds ..............................................................................46
Section 9.11 Funds and Accounts.................................................................................................46
Section 9.12 Notices .....................................................................................................................46
Section 9.13 Unclaimed Moneys..................................................................................................47
Section 9.14 Payment Due on Other than a Business Day ...........................................................47
Signature Page ................................................................................................................................ S-1
Exhibit A Form of Series 2017 Bonds....................................................................................A-1
INDENTURE OF TRUST
THIS INDENTURE OF TRUST (this “Indenture”), dated as of December 1, 2017, by and
between the LAKE ELSINORE FACILITIES FINANCING AUTHORITY, a joint powers authority
organized and existing under the laws of the State of California (the “Authority”) and
WILMINGTON TRUST, NATIONAL ASSOCIATION, a national banking association organized
and existing under the laws of the United States of America (the “Trustee”);
WITNESSETH:
WHEREAS, the Lake Elsinore Facilities Financing Authority (the “Authority”) is a joint
exercise of powers authority duly organized and existing 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 to borrow
money for the purpose of financing the acquisition of bonds, notes and other obligations to provide
financing and refinancing for capital improvements of member entities of the Authority and other
local agencies; and
WHEREAS, City of Lake Elsinore Community Facilities District No. 2003-2 (Canyon Hills) (the
“Community Facilities District”) has previously issued its $20,570,000 Special Tax Bonds (Improvement
Area B) 2006 Series A (the “2006 Bonds”) to finance certain public improvements and its $25,795,000
City of Lake Elsinore Community Facilities District No. 2003-2 (Canyon Hills) Improvement Area B
2015 Special Tax Refunding Bonds (the “2015 Bonds”) to refund the outstanding 2006 Bonds and
finance additional public improvements; and
WHEREAS, the Authority has determined to issue its Local Agency Revenue Bonds, Series
2017 (the “2017 Bonds”) in the aggregate principal amount of $__________ for the primary purpose
of acquiring special tax bonds of the Community Facilities District, the proceeds of which will be
utilized to finance the acquisition of or reimbursement for certain public improvements; and
WHEREAS, the Bonds will be issued pursuant to and secured by this Indenture in the
manner provided herein; 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 and interest thereon, the Authority has authorized the execution and
delivery of this Indenture; and
WHEREAS, the Authority hereby certifies that all acts and proceedings required by law
necessary to make the Bonds, when executed by the Authority, authenticated and delivered by the
Trustee and duly issued, the valid, binding and legal special obligations of the Authority, and to
constitute this Indenture a valid and binding agreement for the uses and purposes herein set forth in
accordance with its terms, have been done and taken, and the execution and delivery of the 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
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and conditions upon and subject to which the Bonds are to be issued and received, and in
consideration of the premises and of the mutual covenants herein contained and of the purchase and
acceptance of the Bonds by the Owners thereof, and for other valuable considerations, the receipt and
sufficiency of which is hereby acknowledged, the Authority does hereby covenant and agree with the
Trustee, for the benefit of the respective Owners from time to time of the Bonds, as follows:
ARTICLE I
DEFINITIONS; AUTHORIZATION AND PURPOSE OF BONDS; EQUAL SECURITY
Section 1.1 Definitions. Unless the context otherwise requires, the terms defined in this
Section shall for all purposes of this Indenture and of any Supplemental Indenture and of the Bonds
and of any certificate, opinion, request or other documents herein mentioned have the meanings
herein specified.
“Act” means Articles 1 through 4 (commencing with Section 6500) of Chapter 5, Division 7,
Title 1 of the Government Code of the State, as it may hereafter be amended from time to time.
“Additional Bonds” means additional bonds issued pursuant to Section 5.6 and secured on a
parity with the Bonds.
“Alternative Penalty Account” means the account by that name established pursuant to
Section 5.8 hereof.
“Annual Debt Service” means, for each Bond Year, the sum of (a) the interest payable on the
Outstanding Bonds in such Bond Year, and (b) the principal amount of the Outstanding Bonds
scheduled to be paid in such Bond Year.
“Authority Administrative Expenses” means the fees and expenses of the Trustee, including
legal fees and expenses (including fees and expenses of outside counsel and the allocated costs of
internal attorneys) and the out of pocket expenses incurred by the Trustee, the City and the Authority
in carrying out their duties hereunder including payment of amounts payable to the United States
pursuant to Sections 5.7 and 5.8 hereof.
“Authorized Officer” means the Chair, Vice Chair, Executive Director or Treasurer of the
Authority or any other Person authorized by the Authority to perform an act or sign a document on
behalf of the Authority for purposes of this Indenture.
“Authority” means the Lake Elsinore Facilities Financing Authority, a joint exercise of
powers agency established pursuant to the laws of the State, whose members as of the date hereof are
the City and the Parking Authority of the City of Lake Elsinore, until a successor organization shall
have become such, and thereafter “Authority” shall mean such successor organization.
“Beneficial Owners” means the actual purchasers of the Bonds whose ownership interests are
recorded on the books of the DTC Participants.
“Bond Counsel” means any attorney at law or firm of attorneys selected by the Authority, of
nationally recognized standing in matters pertaining to the federal tax exemption of interest on bonds
issued by states and political subdivisions, and duly admitted to practice law before the highest court
of any state of the United States of America.
3
“Bond Law” means the Marks-Roos Local Bond Pooling Act of 1985, constituting Article 4
of the Act (commencing with Section 6584), as it may hereafter be amended from time to time.
“Bond Register” means the registration books for the Bonds maintained by the Trustee in
accordance with Section 2.8 hereof.
“Bond Year” means each twelve month period extending from September 2 in one calendar
year to September 1 of the succeeding calendar year, except in the case of the initial Bond Year
which shall be the period from the Closing Date of the Bonds to September 1, 2018, both dates
inclusive.
“Bonds” means collectively, the Lake Elsinore Facilities Financing Authority Local Agency
Revenue Bonds, Series 2017 and any Additional Bonds authorized by and at any time Outstanding
pursuant to the Bond Law and this Indenture.
“Business Day” means a day which is not a Saturday or Sunday or a day of the year on which
the New York Stock Exchange or banks in New York, New York or Costa Mesa, California, or
where the Trust Office is located, are not required or authorized to remain closed.
“Certificate of the Authority” means a certificate in writing signed by the Executive Director
or Treasurer of the Authority, or by any other officer of the Authority duly authorized in writing by
the Board for that purpose.
“CFD Act” means the Mello-Roos Community Facilities Act of 1982, constituting
Chapter 2.5 (commencing with Section 53311), Article 1 of Division 2 of Title 5 of the Government
Code of that State of California, as amended from time to time.
“City” means the City of Lake Elsinore, County of Riverside, California.
“Closing Date” means for each Series the date on which the Bonds of such Series were
executed and delivered to the Original Purchaser thereof.
“Code” means the Internal Revenue Code of 1986, as amended, and the United States
Treasury Regulations proposed or in effect with respect thereto.
“Community Facilities District” or “CFD” means City of Lake Elsinore Community Facilities
District No. 2003-2 (Canyon Hills).
“Costs of Issuance” means the costs and expenses incurred in connection with the issuance
and sale of the Bonds, the Local Obligations, and the acquisition of the Local Obligations by the
Authority, including the acceptance and initial annual fees and expenses (including legal fees and
expenses) of the Trustee, legal fees and expenses, costs of printing the Bonds and the preliminary and
final Official Statements, fees of financial consultants, the Underwriter’s discount and other fees and
expenses set forth in a Request of the Authority.
“Costs of Issuance Fund” means the fund by that name established in Section 3.4.
“Dated Date” means the date on which the Bonds are issued and authenticated by the Trustee.
4
“Defeasance Securities” means non-callable, non-prepayable obligations of the type set forth
in clause 1 of the definition of Permitted Investments.
“DTC” means The Depository Trust Company, New York, New York, and its successors
and assigns.
“DTC Participants” means securities brokers and dealers, banks, trust companies, clearing
corporations and other organizations maintaining accounts with DTC.
“Event of Default” means any of the events described in Section 8.1 hereof.
“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.
“Improvement Area B” means Improvement Area B of the Community Facilities District.
“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 accountant or firm of such 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 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.
“Independent Financial Consultant” means any financial consultant or firm of such
consultants 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 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 such services providing information with respect to called
bonds in accordance with then current guidelines of the Securities and Exchange Commission, such
as the Trustee may select in its sole discretion.
5
“Interest Account” means the account by that name established and held by the Trustee
pursuant to Sections 3.3 and 4.2(a) hereof.
“Interest Payment Date” means March 1 and September 1 in each year, beginning March 1,
2018, and continuing thereafter so long as any Bonds remain Outstanding.
“Local Obligations” means the City of Lake Elsinore Community Facilities District No. 2003-2
(Canyon Hills) Improvement Area B 2017 Special Tax Bonds.
Local Obligations shall also include any additional Local Obligations issued pursuant to and
in accordance with the provisions of the Local Obligation Indenture.
“Local Obligations Delinquency Revenues” means Revenues received by the Trustee from
the Local Obligations Trustee representing the payment of delinquent debt service on the Local
Obligations.
“Local Obligation Indenture” means the Bond Indenture dated as of March 1, 2015, as
supplemented by the First Supplement to Bond Indenture dated as of December 1, 2017, each by and
between the Community Facilities District and Wilmington Trust, National Association, as successor
trustee thereunder.
“Local Obligations Trustee” means Wilmington Trust, National Association, a national
banking association duly organized and existing under the laws of the United States of America, with
a principal corporate trust office in Costa Mesa, California, and its successors and assigns, and any
other corporation or association which may at any time be substituted in its place as provided in the
Local Obligations Indenture.
“Maximum Annual Debt Service” means, as of the date of any calculation, the largest Annual
Debt Service on a series during the current or any future Bond Year.
“Original Purchaser” means Stifel, Nicolaus & Company, Incorporated.
“Outstanding” when used as of any particular time with reference to Bonds, means (subject
to the provisions of Section 9.7 hereof) all Bonds theretofore executed and issued by the Authority
and authenticated and delivered by the Trustee under this Indenture except –
(a)Bonds theretofore cancelled by the Trustee or surrendered to the Trustee for
cancellation pursuant to Section 2.9 hereof;
(b)Bonds paid or deemed to have been paid within the meaning of Section 9.2
hereof or Bonds called for redemption for which funds have been provided as described in
Section 2.2(g) hereof; and
(c)Bonds in lieu of or in substitution for which other Bonds shall have been
executed, issued and delivered pursuant to this Indenture or any Supplemental Indenture.
“Owner” or “Bond Owner”, when used with respect to any Bond, means the person in whose
name the ownership of such Bond shall be registered on the Bond Register.
6
“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:
1.(a)Direct obligations (other than an obligation subject to variation in principal
repayment) of the United States of America (“United States Treasury Obligations”), (b) obligations
fully and unconditionally guaranteed as to timely payment of principal and interest by the United
States of America, (c) obligations fully and unconditionally guaranteed as to timely payment of
principal and interest by any agency or instrumentality of the United States of America when such
obligations are backed by the full faith and credit of the United States of America, or (d) evidences of
ownership of proportionate interests in future interest and principal payments on obligations
described above held by a bank or trust company as custodian, under which the owner of the
investment is the real party in interest and has the right to proceed directly and individually against
the obligor and the underlying government obligations are not available to any person claiming
through the custodian or to whom the custodian may be obligated.
2.Federal Housing Administration debentures.
3.The listed obligations of government-sponsored agencies which are not backed by the
full faith and credit of the United States of America:
(a)Federal Home Loan Mortgage Corporation (FHLMC)
(i)Participation certificates (excluded are stripped mortgage securities
which are purchased at prices exceeding their principal amounts)
(ii)Senior Debt obligations
(b)Farm Credit Banks (formerly: Federal Land Banks, Federal
(i)Intermediate Credit Banks and Banks for Cooperatives)
(ii)Consolidated system-wide bonds and notes
(c)Federal Home Loan Banks (FHL Banks)
(i)Consolidated debt obligations
(d)Federal National Mortgage Association (FNMA)
(i)Senior debt obligations
(ii)Mortgage-backed securities (excluded are stripped mortgage
securities which are purchased at prices exceeding their principal amounts)
(e)Financing Corporation (FICO)
(i)Debt obligations
(f)Resolution Funding Corporation (REFCORP)
7
(i)Debt obligations
4.Unsecured certificates of deposit, time deposits, and bankers’ acceptances (having
maturities of not more than 30 days) of any bank (including the Trustee and any affiliate) the short-
term obligations of which are rated “A-1” or better by Standard & Poor’s.
5.Deposits the aggregate amount of which are fully insured by the Federal Deposit
Insurance Corporation (FDIC), in banks (including the Trustee and any affiliate) which have capital
and surplus of at least $5 million.
6.Commercial paper (having original maturities of not more than 270 days rated “A-
1+” by Standard & Poor’s and “Prime-1” by Moody’s.
7.Money market funds rated “AAm” or “AAm-G” by Standard & Poor’s, or better
(including those of the Trustee or its affiliates).
8.“State Obligations,” which means:
(a)Direct general obligations of any state of the United States of America or any
subdivision or agency thereof to which is pledged the full faith and credit of a state the
unsecured general obligation debt of which is rated “A3” by Moody’s and “A” by Standard
& Poor’s, or better, or any obligation fully and unconditionally guaranteed by any state,
subdivision or agency whose unsecured general obligation debt is so rated.
(b)Direct general short-term obligations of any state agency or subdivision or
agency thereof described in (A) above and rated “A-1+” by Standard & Poor’s and “Prime-l”
by Moody’s.
(c)Special Revenue Bonds (as defined in the United States Bankruptcy Code) of
any state, state agency or subdivision described in (A) above and rated “AA” or better by
Standard & Poor’s and “Aa” or better by Moody’s.
9.Pre-refunded municipal obligations rated “AAA” by Standard & Poor’s and “Aaa” by
Moody’s meeting the following requirements:
(a)the municipal obligations are (1) not subject to redemption prior to maturity
or (2) the paying agent for the municipal obligations has been given irrevocable instructions
concerning their call and redemption and the issuer of the municipal obligations has
covenanted not to redeem such municipal obligations other than as set forth in such
instructions;
(b)the municipal obligations are secured by cash or United States Treasury
Obligations which may be applied only to payment of the principal of, interest and premium
on such municipal obligations;
(c)the principal of and interest on the United States Treasury Obligations (plus
any cash in the escrow) has been verified by the report of independent certified public
accountants to be sufficient to pay in full all principal of, interest, and premium, if any, due
and to become due on the municipal obligations (“Verification”);
8
(d)the cash or United States Treasury Obligations serving as security for the
municipal obligations are held by an escrow agent or paying agent in trust for owners of the
municipal obligations;
(e)no substitution of a United States Treasury Obligation shall be permitted
except with another United States Treasury Obligation and upon delivery of a new
Verification; and
(f)the cash or United States Treasury Obligations are not available to satisfy any
other claims, including those by or against the paying agent or escrow agent.
10.Repurchase agreements:
With (1) any domestic bank, or domestic branch of a foreign bank, the long term debt of
which is rated at least “A” by Standard & Poor’s and Moody’s; or (2) any broker-dealer with “retail
customers” or a related affiliate thereof which broker-dealer has, or the parent company (which
guarantees the provider) of which has, long-term debt rated at least “A” by Standard & Poor’s and
Moody’s, which broker-dealer falls under the jurisdiction of the Securities Investors Protection
Corporation; or (3) any other entity rated “A” or better by Standard & Poor’s and Moody’s:
(a)The market value of the collateral is maintained at levels equal to 104% of the
amount of cash transferred by the Trustee to the provider of the repurchase agreement plus
accrued interest with the collateral being valued weekly and marked-to-market at one current
market price plus accrued interest;
(b)The Trustee or a third party acting solely as agent therefor or for the
Authority (the “Holder of the Collateral”) has possession of the collateral or the collateral has
been transferred to the Holder of the Collateral in accordance with applicable state and
federal laws (other than by means of entries on the transferor’s books);
(c)The repurchase agreement shall state and an opinion of counsel shall be
rendered at the time such collateral is delivered that the Holder of the Collateral has a
perfected first priority security interest in the collateral, any substituted collateral and all
proceeds thereof (in the case of bearer securities, this means the Holder of the Collateral is in
possession);
(d)The repurchase agreement shall provide that if during its term the provider’s
rating by either Moody’s or Standard & Poor’s is withdrawn or suspended or falls below “A “
by Standard & Poor’s or “A3” by Moody’s, as appropriate, the provider must, at the direction
of Trustee, within 10 days of receipt of such direction, repurchase all collateral and terminate
the agreement, with no penalty or premium to the Trustee.
Notwithstanding the above, if a repurchase agreement has a term of 270 days or less (with no
evergreen provision), collateral levels need not be as specified in (a) above, so long as such collateral
levels are 103% or better and the provider is rated at least “A” by Standard & Poor’s and Moody’s,
respectively.
11.Investment agreements with a domestic or foreign bank or corporation (other than a
life or property casualty insurance company) the long-term debt of which or, in the case of a
9
guaranteed corporation the long-term debt, or, in the case of a monoline financial guaranty insurance
company, claims paying ability, of the guarantor is rated at least “AA” by Standard & Poor’s and
“Aa” by Moody’s; provided that, by the terms of the investment agreement:
(a)interest payments are to be made to the Trustee at times and in amounts as
necessary to pay debt service on the Bonds;
(b)the invested funds are available for withdrawal without penalty or premium,
at any time upon not more than seven days’ prior notice; the Trustee hereby agrees to give or
cause to be given notice in accordance with the terms of the investment agreement so as to
receive funds thereunder with no penalty or premium paid;
(c)the investment agreement shall state that it is the unconditional and general
obligation of, and is not subordinated to any other obligation of, the provider thereof, or, in
the case of a bank, that the obligation of the bank to make payments under the agreement
with the obligations of the bank to its other depositors and its other unsecured and
unsubordinated creditors;
(d)the Trustee receives the opinion of domestic counsel (which opinion shall be
addressed to Trustee) that such investment agreement is legal, valid, binding and enforceable
upon the provider in accordance with its terms and of foreign counsel (if applicable) in form
and substance acceptable, and addressed to, the Trustee;
(e)the investment agreement shall provide that if during its term
(i)the provider’s rating by either Standard & Poor’s or Moody’s falls
below “AA-” or “Aa3”, respectively, the provider shall, at its option, within 10 days
of receipt of publication of such downgrade, either (y) collateralize the investment
agreement by delivering or transferring in accordance with applicable state and
federal laws (other than by means of entries on the provider’s books) to the Trustee or
a third party acting solely as agent therefor (the “Holder of the Collateral”) collateral
free and clear of any third-party liens or claims the market value of which collateral is
maintained at levels and upon such conditions as would be acceptable to Standard &
Poor’s and Moody’s to maintain an “A” rating in an “A” rated structured financing
(with a market value approach); or (z) repay the principal of and accrued but unpaid
interest on the investment; and
(ii)the provider’s rating by either Standard & Poor’s or Moody’s is
withdrawn or suspended or falls below “A-” or “A3”, respectively, the provider must,
at the direction of the Trustee, within 10 days of receipt of such direction, repay the
principal of and accrued but unpaid interest on the investment, in either case with no
penalty or premium to the Trustee; and
(f)the investment agreement shall state and an opinion of counsel shall be
rendered, in the event collateral is required to be pledged by the provider under the terms of
the investment agreement at the time such collateral is delivered, that the Holder of the
Collateral has a perfected first priority security interest in the collateral, any substituted
collateral and all proceeds thereof (in the case of bearer securities, this means the Holder of
the Collateral is in possession);
10
(g)the investment agreement must provide that if during its term
(i)the provider shall default in its payment obligations, the provider’s
obligations under the investment agreement shall, at the direction of the Trustee, be
accelerated and amounts invested and accrued but unpaid interest thereon shall be
repaid to the Trustee, and
(ii)the provider shall become insolvent, not pay its debts as they become
due, be declared or petition to be declared bankrupt, etc. (“event of insolvency”), the
provider’s obligations shall automatically be accelerated and amounts invested and
accrued but unpaid interest thereon shall be repaid to the Trustee.
12.The State of California Local Agency Investment Fund.
“Principal Account” means the account by that name established and held by the Trustee
pursuant to Sections 3.3 and 4.2(a) hereof.
“Purchase Fund” means the fund by that name established and held by the Trustee pursuant
to Section 3.5 hereof.
“Rebate Fund” means the fund by that name established pursuant to Section 5.8 hereof.
“Rebate Regulations” means the Treasury Regulations issued under Section 148(f) of the
Code.
“Record Date” means, with respect to any Interest Payment Date, the fifteenth calendar day
of the month preceding the month in which such Interest Payment Date occurs, whether or not such
day is a Business Day.
“Redemption Fund” means the fund by that name established with respect to any Local
Obligation.
“Request of the Authority” means a written certificate or request executed by an Authorized
Officer.
“Request of the City” means a written certificate or request executed by the Mayor of the
City, its City Manager, its Assistant City Manager, its Finance Manager or any other officer of the
City duly authorized by the City Council of the City to sign documents on its behalf with respect to
the matters referred to therein.
“Representation Letter” means the Letter of Representations from the Authority to DTC, or
any successor securities depository for any Series of Book-Entry Bonds, in which the Authority
makes certain representations with respect to issues of its securities for deposit by DTC or such
successor depository.
“Reserve Fund” means the fund by that name established and held by the Trustee pursuant to
Section 3.6 hereof.
“Reserve Requirement” means an amount equal to the lowest of (i) 10% of the initial
principal amount of the Bonds, (ii) Maximum Annual Debt Service on the Outstanding Bonds, or
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(iii) 125% of Average Annual Debt Service on the Outstanding Bonds. Notwithstanding the
foregoing, in no event shall the Reserve Requirement exceed the initial deposit thereto.
“Responsible Officer” means any officer of the Trustee assigned to administer the Trustee’s
duties under this Indenture.
“Revenue Fund” means the fund by that name established and held by the Trustee pursuant to
Sections 3.3 and 4.2 hereof.
“Revenues” means: (a) all amounts received from the Local Obligations; (b) any proceeds of
the Bonds originally deposited with the Trustee and all moneys deposited and held from time to time
by the Trustee in the funds and accounts established hereunder with respect to the Bonds (other than
the Rebate Fund and the Surplus Fund); and (c) investment income with respect to any moneys held
by the Trustee in the funds and accounts established hereunder with respect to the Bonds (other than
investment income on moneys held in the Rebate Fund and the Surplus Fund).
“Securities Depositories” means The Depository Trust Company, 55 Water Street,
50th Floor, New York, NY 10041-0099 Attn. 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.
“Series” means each series of Bonds and Additional Bonds issued hereunder.
“Six Month Period” shall mean the period of time beginning on the Closing Date and ending
six months thereafter, and each six month period thereafter until the latest maturity date of the Bonds
(and any obligations that refund the Bonds).
“Special Taxes” means the taxes authorized to be levied by the Community Facilities District
on parcels within Improvement Area B therein, which have been pledged to repay the Local
Obligations pursuant to the CFD Act.
“Standard & Poor’s” and “S&P” means S&P Global Ratings, a Standard & Poor’s Financial
Services LLC business, its successors and assigns.
“State” means the State of California.
“Supplemental Indenture” means any indenture, agreement or other instrument hereafter duly
executed by the Authority in accordance with the provisions of Article VII of this Indenture.
“Surplus Fund” means the fund by that name established pursuant to Section 3.8 hereof.
“Tax Certificate” means the certificate by that name to be executed by the Authority on the
Closing Date to establish certain facts and expectations and which contains certain covenants
relevant to compliance with the Code.
“Trust Office” means the office of the Trustee at which at any particular time its corporate
trust business with respect to this Indenture shall be administered, which office at the date hereof is
located in Costa Mesa, California, or such other place as designated by the Trustee except that with
respect to presentation of Bonds for payment or for registration of transfer and exchange, such term
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shall mean the office or agency of the Trustee at which, at any particular time, its corporate trust
agency business shall be conducted.
“Trustee” means Wilmington Trust, National Association, a national banking association
duly organized and existing under the laws of the United States of America, with a corporate trust
office in Costa Mesa, California, and its successors and assigns, and any other corporation or
association which may at any time be substituted in its place as provided in Article VI hereof.
“2017 Bonds” means the Lake Elsinore Facilities Financing Authority Local Agency
Revenue Bonds, Series 2017.
“Underwriter” means Stifel, Nicolaus & Company, Incorporated, the initial purchaser of the
2017 Bonds and the underwriters of any Additional Bonds identified in a Supplemental Indenture.
“Yield” has the meaning given to such term in the Code.
Section 1.2 Rules of Construction. All references in this Indenture to “Articles,”
“Sections,” and other subdivisions are to the corresponding Articles, Sections or subdivisions of this
Indenture; and the words “herein,” “hereof,” “hereunder,” and other words of similar import refer to
this Indenture as a whole and not to any particular Article, Section or subdivision hereof.
Section 1.3 Authorization and Purpose of Bonds. The Authority has reviewed all
proceedings heretofore taken relative to the authorization of the Bonds and has found, as a result of
such review, and hereby finds and determines, that all things, conditions and acts required by law to
exist, happen and/or be performed precedent to and in the issuance of the Bonds do exist, have
happened and have been performed in due time, form and manner as required by law, and the
Authority is now authorized under the Bond Law and each and every other requirement of law, to
issue the Bonds in the manner and form provided in this Indenture. Accordingly, the Authority
hereby authorizes the issuance of the Bonds pursuant to the Bond Law and this Indenture for the
primary purpose of providing funds to acquire the Local Obligations.
Section 1.4 Equal Security. In consideration of the acceptance of the Bonds by the
Owners thereof, this Indenture shall be deemed to be and shall constitute a contract between the
Authority and the Owners from time to time of the Bonds; and the covenants and agreements herein
set forth to be performed on behalf of the Authority shall be for the equal and proportionate benefit,
security and protection of all Owners of the Bonds and for the equal and proportionate benefit,
security and protection of all Owners of the Bonds as their respective interests appear without
preference, priority or distinction as to security or otherwise of any of the Bonds over other Bonds or
any of the Bonds over any other Bonds by reason of the number or date thereof or the time of sale,
execution or delivery thereof, or otherwise for any cause whatsoever, except as expressly provided
therein or herein.
ARTICLE II
ISSUANCE OF BONDS
Section 2.1 Terms of Bonds. The 2017 Bonds authorized to be issued by the Authority
under and subject to the Bond Law and the terms of this Indenture shall be dated as of their Closing
Date and be designated the “Lake Elsinore Facilities Financing Authority Local Agency Revenue
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Bonds, Series 2017,” which shall be issued in the original aggregate principal amount of
_____________ Dollars ($_________).
The 2017 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 mature on September 1 in each of the years and in the amounts, and shall bear
interest (calculated on the basis of a 360-day year of twelve 30-day months) at the rates, as follows:
Maturity Date
(September 1)Principal Amount Interest Rate Per Annum
Interest on the Bonds shall be payable on each Interest Payment Date to the person whose
name appears on the Bond Register 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
on such Interest Payment Date by first class mail, postage prepaid, to the Owner at the address of
such Owner as it appears on the Bond Register or by wire transfer to an account in the United States
of America made on such Interest Payment Date upon written instructions of any Owner of
$1,000,000 or more in aggregate principal amount of Bonds of a Series provided to the Trustee in
writing at least five (5) Business Days before the Record Date for such Interest Payment Date.
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 Trust Office of the Trustee. 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 after a Record Date and on or before the
following Interest Payment Date, in which event it shall bear interest from such Interest Payment
Date; or (b) it is authenticated on or before the first Record Date, in which event it shall bear interest
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from the Dated Date; provided, however, that if, as of the date of authentication of any Bond, interest
thereon is in default, such Bond shall bear interest from the Interest Payment Date to which interest
has previously been paid or made available for payment thereon, or from the Dated Date if no
interest has been paid or made available for payment.
Section 2.2 Redemption of Bonds.
(a)Optional Redemption. The 2017 Bonds maturing on or before September 1,
20__ are not subject to optional call and redemption prior to maturity. The 2017 Bonds maturing on
or after September 1, 20__ may be redeemed at the option of the Authority, from any source of
available funds, prior to maturity on any date on or after September 1, 20__ as a whole, or in part
from maturities of the Local Obligations simultaneously redeemed, if any redemption of Local
Obligations is being made in conjunction with such optional redemption, and otherwise from such
maturities as are selected by the Authority, and by lot within a maturity, at a redemption price equal
to the par amount of the 2017 Bonds to be redeemed, together with accrued interest thereon to the
date of redemption, without premium.
Prior to consenting to the optional redemption of any Local Obligation which it has
purchased and is held under this Indenture, the Authority shall deliver to the Trustee a certificate of
an Independent Accountant verifying that, following such optional redemption of the Local
Obligations and redemption of Bonds, the principal and interest generated from the remaining Local
Obligations is adequate to make the timely payment of principal and interest due on the Bonds
remaining Outstanding following such optional redemption. The Authority shall be required to give
the Trustee written notice of its intention to redeem Bonds under this Section (a) at least forty-five
(45) days prior to the date fixed for redemption (or such later date as shall be acceptable to the
Trustee, in the sole determination of the Trustee, such notice intended for the convenience of the
Trustee). The optional redemption provisions (if any) of any Series of Additional Bonds shall be set
forth and provided for in a Supplemental Indenture.
(b)Special Redemption. The 2017 Bonds are subject to special redemption on
any Interest Payment Date from proceeds of early redemption of Local Obligations from
prepayments of Special Taxes within Improvement Area B, in whole or in part, from maturities
corresponding proportionately to the maturities of the Local Obligations simultaneously redeemed,
at the principal amount thereof, plus a premium expressed below as a percentage of the principal
amount so redeemed, plus accrued interest to the date of redemption thereof:
Redemption Dates Redemption Prices
(c)Mandatory Sinking Fund Redemption. The 2017 Bonds maturing on
September 1, 20__ are subject to mandatory sinking fund redemption prior to maturity, in part, on
September 1, 20__, and on each September 1 thereafter by lot, from sinking fund payments at a
redemption price equal to the principal amount of 2017 Bonds to be redeemed, together with accrued
interest to the date of redemption, without premium, as follows:
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Redemption Date
(September 1)
Redemption
Amount
(maturity)
In the event that 2017 Bonds maturing on September 1, 20__ are redeemed pursuant
to the optional or special redemption provisions described above, the sinking fund payments for the
applicable Series will be reduced as nearly as practicable on a proportionate basis in integral
multiples of $5,000.
(d)Notice of Redemption. The Trustee on behalf, and at the expense, of the
Authority shall send notice of any redemption to the respective Owners of any Bonds designated for
redemption at their respective addresses appearing on the Bond Register, and to the Securities
Depositories and to the Information Services, at least thirty (30) but not more than sixty (60) days
prior to the date fixed for redemption. Neither failure to receive any such notice so sent nor any
defect therein shall affect the validity of the proceedings for the redemption of such Bonds or the
cessation of the accrual of interest thereon. Such notice shall state the date of the notice, the
redemption date, the redemption place and the redemption price and shall designate the CUSIP
numbers, Bond numbers and the maturity or maturities (in the event of redemption of all of the
Bonds of such maturity or maturities in whole) of the Bonds to be redeemed, and shall require that
such Bonds be then surrendered at the Trust Office of the Trustee for redemption at the redemption
price, giving notice also that further interest on such Bonds will not accrue after the redemption date.
In addition to the foregoing notice, further notice shall be sent by the Trustee in said
form by to any Bondowner whose Bond has been called for redemption but who has failed to submit
his Bond for payment by the date which is sixty days after the redemption date, but no defect in said
further notice nor any failure to give or receive all or any portion of such further notice shall in any
manner defeat the effectiveness of a call for redemption.
In the case of an optional or special redemption of Bonds, such notice may state that
such redemption is subject to receipt by the Trustee, on or before the date fixed for redemption, of
moneys sufficient to pay the redemption price of the Bonds to be redeemed.
Unless funds for the optional or special redemption of any Bonds are irrevocably
deposited with the Trustee prior to rendering notice of redemption to the Bondowners, such notice
shall state that such redemption is subject to the deposit of funds by the Authority. Any notice of
optional 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 this 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 send notice of such rescission of redemption
in the same manner as the original notice of redemption was sent.
Upon the payment by the Trustee from the applicable account in the Revenue Fund of
the redemption price of the Bond being redeemed, each check or other transfer of funds issued for
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such purpose shall, to the extent practicable, bear the CUSIP number identifying, by issue and
maturity, the Bonds being redeemed with the proceeds of such check or other transfer.
(e)Selection of Bonds of a Maturity for Redemption. Unless otherwise provided
hereunder, whenever provision is made in this Indenture or in the applicable Supplemental Indenture
for the redemption of less than all of the Series of Bonds of a maturity, the Trustee shall select the
Bonds to be redeemed from all Bonds of such maturity not previously called for redemption, by lot
in any manner which the Trustee in its sole discretion shall deem appropriate and fair. For purposes
of such selection, all Bonds shall be deemed to be comprised of separate $5,000 authorized
denominations, and such separate authorized denominations shall be treated as separate Bonds
which may be separately redeemed.
(f)Partial Redemption of Bonds. In the event only a portion of any Bond is
called for redemption, then upon surrender of such Bond the Authority shall execute and the Trustee
shall authenticate and deliver to the Owner thereof, at the expense of the Authority, a new Bond or
Bonds of the same maturity date, of authorized denominations in aggregate principal amount equal
to the unredeemed portion of the Bond to be redeemed.
(g)Effect of Redemption. From and after the date fixed for redemption, if funds
available for the payment of the principal of and interest (and premium, if any) on the Bonds so
called for redemption shall have been duly provided, such Bonds so called shall cease to be entitled
to any benefit under this Indenture other than the right to receive payment of the redemption price,
and no interest shall accrue thereon from and after the redemption date specified in such notice. All
Bonds redeemed pursuant to this Section 2.2 shall be cancelled and destroyed.
Section 2.3 Form of 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 2.4 Execution of Bonds. All the Bonds shall, from time to time, be executed on
behalf of the Authority by, or bear the manual or facsimile signature of, one of the members of the
Board of Directors of the Authority and be attested by the manual or facsimile signature of the
Secretary or by any deputy thereof. If any of the directors or officers who shall have signed or sealed
any of the Bonds or whose facsimile signature shall be upon the Bonds shall cease to be such officer
of the Authority before the Bond so signed and sealed shall have been actually authenticated by the
Trustee or delivered, such Bonds nevertheless may be authenticated, issued and delivered with the
same force and effect as though the person or persons who signed or sealed such Bonds or whose
facsimile signature shall be upon the Bonds had not ceased to be such officer of the Authority; and
any such Bond may be signed and sealed on behalf of the Authority by those persons who, at the
actual date of the execution of such Bonds, shall be the proper officers of the Authority, although at
the date of such Bond any such person shall not have been such officer of the Authority.
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 obligatory for any
purpose or entitled to the benefits of this Indenture, and such certificate of the Trustee shall be
conclusive evidence that the Bonds so authenticated have been duly authenticated and delivered
hereunder and are entitled to the benefits of this Indenture.
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Section 2.5 Transfer of Bonds. Subject to Section 2.10, any Bond may in accordance
with its terms, be transferred, upon the Bond Register, by the person in whose name it is registered,
in person or by his duly authorized attorney, upon surrender of such Bond for cancellation,
accompanied by delivery of a written instrument of transfer in a form approved by the Trustee, duly
executed. Whenever any Bond shall be surrendered for transfer, the Authority shall execute and the
Trustee shall thereupon authenticate and deliver to the transferee a new Bond or Bonds of like tenor,
maturity and aggregate principal amount. No Bonds selected for redemption shall be subject to
transfer pursuant to this Section nor shall any Bond be subject to transfer during the fifteen days prior
to the selection of Bonds for redemption.
The cost of printing any Bonds and any services rendered or any expenses incurred by the
Trustee in connection with any transfer or exchange shall be paid by the Authority. However, the
Owners of the Bonds shall be required to pay any tax or other governmental charge required to be
paid for any exchange or registration of transfer and the Owners of the Bonds shall be required to pay
the reasonable fees and expenses of the Trustee and Authority in connection with the replacement of
any mutilated, lost or stolen Bonds.
Section 2.6 Exchange of Bonds. Subject to Section 2.10, Bonds may be exchanged at
the Trust Office of the Trustee for Bonds of the same tenor and maturity and of other authorized
denominations. No Bonds selected for redemption shall be subject to exchange pursuant to this
Section, nor shall any Bond be subject to exchange during the fifteen days prior to the selection of
Bonds for redemption. The cost of printing Bonds and any services rendered or expenses incurred by
the Trustee in connection with any transfer or exchange shall be paid by the Authority.
Section 2.7 Temporary Bonds. The Bonds may be issued initially in temporary form
exchangeable for definitive Bonds when ready for delivery. The temporary Bonds may be printed,
lithographed or typewritten, shall be of such denominations as may be determined by the Authority
and may contain such reference to any of the provisions of this Indenture as may be appropriate.
Every temporary Bond shall be executed by the Authority and be registered and authenticated by the
Trustee upon the same conditions and in substantially the same manner as the definitive Bonds. If
the Authority issues temporary Bonds, it will execute and furnish definitive Bonds without delay, and
thereupon the temporary Bonds may be surrendered for cancellation, in exchange therefor at the
Trust Office of the Trustee, and the Trustee 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 Indenture as definitive Bonds authenticated and delivered hereunder.
Section 2.8 Bond Register. The Trustee will keep or cause to be kept at its Trust Office
sufficient records for the registration and transfer of the Bonds, which shall be the Bond Register and
shall at all times during regular business hours be open to inspection by the Authority upon
reasonable notice; and, upon presentation for such purpose, the Trustee shall, under such reasonable
regulations as it may prescribe, register or transfer or cause to be registered or transferred, on said
records, Bonds as hereinbefore provided.
Section 2.9 Bonds Mutilated, Lost, Destroyed or Stolen. If any Bond shall become
mutilated, the Authority, at the expense of the Owner of said Bond, shall execute, and the Trustee
shall thereupon authenticate and deliver, a new Bond of like tenor and authorized denomination in
exchange and substitution for the Bond so mutilated, but only upon surrender to the Trustee of the
Bond so mutilated. Every mutilated Bond so surrendered to the Trustee shall be cancelled by it and
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destroyed in accordance with the retention policy of the Trustee then in effect. If any Bond issued
hereunder shall be lost, destroyed or stolen, evidence of such loss, destruction or theft may be
submitted to the Trustee and, if such evidence be satisfactory to it and indemnity satisfactory to it
shall be given, at the expense of the Bond Owner, the Authority shall execute, and the Trustee shall
thereupon authenticate and deliver, a new Bond of like tenor in lieu of and in substitution for the
Bond so lost, destroyed or stolen (or if any such Bond shall have matured or shall have been called
for redemption, instead of issuing a substitute Bond the Trustee may pay the same without surrender
thereof upon receipt of indemnity satisfactory to the Trustee). The Trustee may require payment of a
reasonable fee for each new Bond issued under this Section and of the expenses which may be
incurred by the Authority and the Trustee. Any Bond issued under the provisions of this Section 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 2.10 Book-Entry System.
(a)All Bonds shall be initially issued in the form of a separate single certificated
fully registered Bond for each maturity date of the Bonds. Upon initial issuance, the ownership of
each Bond shall be registered in the Bond Register in the name of Cede & Co., as nominee of DTC.
Except as provided in Section 2.10(d) hereof, all Outstanding Bonds shall be registered in the Bond
Register in the name of Cede & Co., as nominee of DTC.
(b)With respect to Bonds registered in the Bond Register in the name of Cede &
Co., as nominee of DTC, the Authority and the Trustee shall have no responsibility or obligation
with respect to (i) the accuracy of the records of DTC, Cede & Co. or any DTC Participant with
respect to any ownership interest in the Bonds, (ii) the delivery to any DTC Participant or any other
person, other than an Owner, as shown in the Bond Register, of any notice with respect to the Bonds,
including any notice of redemption, or (iii) the payment to any DTC Participant or any other person,
other than an Owner, as shown in the Bond Register, of any amount with respect to principal of,
premium, if any, or interest on the Bonds. The Authority and the Trustee may treat and consider the
person in whose name each Bond is registered in the Bond Register as the holder and absolute owner
of such Bond for the purpose of payment of principal, premium, if any, and interest on such Bond,
for the purpose of giving notices of redemption and other matters with respect to such Bond, for the
purpose of registering transfers with respect to such Bond, and for all other purposes whatsoever.
The Trustee shall pay all principal of, premium, if any, and interest on the Bonds only to or upon the
order of the respective Owners, as shown in the Bond Register, as provided in Section 2.8 hereof, or
their respective attorneys duly authorized in writing, and all such payments shall be valid and
effective to fully satisfy and discharge the Authority’s obligations with respect to payment of
principal of, premium, if any, and interest on the Bonds to the extent of the sum or sums so paid. No
person other than an Owner, as shown in the Bond Register, shall receive a certificated Bond
evidencing the obligation of the Authority to make payments of principal, premium, if any, and
interest pursuant to this Indenture. Upon delivery by DTC to the Trustee of written notice to the
effect that DTC has determined to substitute a new nominee in place of Cede & Co., and subject to
the provisions herein with respect to record dates, the word “Cede & Co.” in this Indenture shall
refer to such new nominee of DTC.
(c)The delivery of the Representation Letter shall not in any way limit the
provisions of Section 2.10(b) hereof or in any other way impose upon the Authority or the Trustee
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any obligation whatsoever with respect to persons having interests in the Bonds other than the
Owners, as shown on the Bond Register. The Trustee shall take all action necessary for all
representations in the Representation Letter with respect to the Trustee to be complied with at all
times.
(d)(i)DTC may determine to discontinue providing its services with respect
to the Bonds at any time by giving written notice to the Authority and the Trustee and discharging its
responsibilities with respect thereto under applicable law.
(ii)The Authority, in its sole discretion and without the consent of any
other person, may terminate the services of DTC with respect to the Bonds if the Authority
determines that:
(A)DTC is unable to discharge its responsibilities with respect to
the Bonds, or
(B)a continuation of the requirement that all Outstanding Bonds
be registered in the Bond Register in the name of Cede & Co., or any other nominee of DTC, is not
in the best interest of the beneficial owners of such Bonds.
(iii)Upon the termination of the services of DTC with respect to the
Bonds pursuant to subsection 2.10(d)(ii)(B) hereof, or upon the discontinuance or termination of the
services of DTC with respect to the Bonds pursuant to subsection 2.10(d)(i) or
subsection 2.10(d)(ii)(A) hereof after which no substitute securities depository willing to undertake
the functions of DTC hereunder can be found which, in the opinion of the Authority, is willing and
able to undertake such functions upon reasonable and customary terms, the Authority is obligated to
deliver Bond certificates, as described in this Indenture and the Bonds shall no longer be restricted to
being registered in the Bond Register in the name of Cede & Co. as nominee of DTC, but may be
registered in whatever name or names DTC shall designate to the Trustee in writing, in accordance
with the provisions of this Indenture.
(e)Notwithstanding any other provisions of this Indenture to the contrary, as
long as any Bond is registered in the name of Cede & Co., as nominee of DTC, all payments with
respect to principal or, premium, if any, and interest on such Bond and all notices with respect to
such Bond shall be made and given, respectively, in the manner provided in the Representation
Letter.
ARTICLE III
DEPOSIT AND APPLICATION OF PROCEEDS
Section 3.1 Issuance of Bonds. Upon the execution and delivery of this Indenture, the
Authority shall execute and deliver the 2017 Bonds in the original aggregate principal amount set
forth in Section 2.1 hereof to the Trustee for authentication and delivery to the Original Purchaser
thereof upon the Request of the Authority.
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Section 3.2 Application of Proceeds of Sale of 2017 Bonds and Funds Received from
the Community Facilities District.
(a)Upon the receipt by the Trustee of payment for the 2017 Bonds, the amount
of $__________ of the proceeds of the 2017 Bonds shall be deposited in the Purchase Fund for the
acquisition of the Local Obligations in accordance with Section 3.5 hereof.
(b)Upon the receipt by the Trustee of payment for the 2017 Bonds $_________
of the proceeds of the 2017 Bonds, representing the Community Facilities District’s contribution for
Costs of Issuance, shall be retained by the Trustee and deposited in the Costs of Issuance Fund for
the payment of Costs of Issuance in accordance with Section 3.4 hereof.
(c)Upon the receipt by the Trustee of payment for the 2017 Bonds,
$__________ of proceeds of the 2017 Bonds, representing the the Community Facilities District’s
contribution to the Reserve Requirement, shall be retained by the Trustee for deposit in the Reserve
Fund as set forth in Section 4.3(a) hereof to satisfy the Reserve Requirement.
The application of proceeds from the sale of a Series of Additional Bonds shall be set forth in
the Supplemental Indenture providing for the issuance of such Series of Additional Bonds.
Section 3.3 Revenue Fund. The Trustee shall establish and maintain a separate fund to
be known as the “Revenue Fund” and the following separate accounts therein: Interest Account and
Principal Account. Except as otherwise provided herein, the Trustee shall deposit all Revenues
received after the Closing Date to the Revenue Fund and shall apply amounts in the Revenue Fund as
described in Section 4.2 below.
Section 3.4 Costs of Issuance Fund. The Trustee shall establish and maintain a fund
known as the “Costs of Issuance Fund” into which shall be deposited the amounts set forth in
Section 3.2(b) above. The moneys in the Costs of Issuance Fund shall be used to pay Costs of
Issuance from time to time upon receipt by the Trustee of a Request of the Authority. Each such
Request of the Authority shall be sufficient evidence to the Trustee of the facts stated therein and the
Trustee shall have no duty to confirm the accuracy of such facts. On the date which is one hundred
twenty (120) days following the Closing Date, or upon the earlier receipt by the Trustee of a 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. Upon such transfer, the
Costs of Issuance Fund shall be closed and the Trustee shall no longer be obligated to make
payments for Costs of Issuance. The Authority may at any time file a 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 upon receipt of such request by the Trustee, the Trustee
shall comply with such request.
Section 3.5 Purchase Fund. The Trustee shall establish and maintain a separate fund to
be known as the “Purchase Fund” into which shall be deposited a portion of the proceeds of sale of
the Bonds pursuant to Section 3.2(a) hereof (or pursuant to the provisions of a Supplemental
Indenture). The Trustee shall use the proceeds of the Bonds to purchase Local Obligations on the
Closing Date; provided, however, that such Local Obligations may be purchased only if the Trustee
has received a certificate of the Original Purchaser of the Bonds or an Independent Financial
Consultant stating that the Revenues to be available to the Trustee, assuming timely payment of the
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Local Obligations, will be sufficient to permit the timely payment of the principal of and interest on
all Outstanding Bonds.
Section 3.6 Reserve Fund. The Trustee shall establish and maintain a separate fund to
be known as the “Reserve Fund” which fund shall be administered as provided in Section 4.3(a)
hereof.
Section 3.7 Rebate Fund. The Trustee shall establish and maintain a separate fund,
when needed, to be known as the “Rebate Fund” and a separate Rebate Account and Alternative
Penalty Account therein for the Bonds. The Rebate Fund shall be administered as described in
Section 5.8 hereof.
Section 3.8 Surplus Fund. The Trustee shall establish and maintain a separate fund,
when needed, to be known as the “Surplus Fund” which shall be administered as described in
Section 4.4 hereof.
Section 3.9 Administrative Expense Fund. The Trustee shall establish and maintain a
separate fund to be held by the Trustee and known as the “Administrative Expense Fund” into which
shall be deposited the amounts specified in Section 4.2(d). The moneys in the Administrative
Expense Fund shall be used to pay Authority Administrative Expenses or shall be transferred to the
Surplus Fund, in either case, upon receipt of a Requisition of the Authority.
Section 3.10 Validity of Bonds. The validity of the authorization and issuance of the
Bonds shall not be affected in any way by any proceedings taken by the Authority or the City with
respect to the application of the proceeds of the Bonds, and the recital contained in the Bonds that the
same are issued pursuant to the Bond Law shall be conclusive evidence of their validity and of the
regularity of their issuance.
ARTICLE IV
REVENUES; FLOW OF FUNDS
Section 4.1 Pledge of Revenues; Assignment of Rights. Subject to the provisions of
Sections 6.3 and 9.3 hereof, the Bonds shall be secured by a first lien on and pledge (which shall be
effected in the manner and to the extent hereinafter provided) of all of the Revenues. The Bonds
shall be equally secured by a pledge, charge and lien upon the Revenues without priority for any
Bond over any other Bond; and the payment of the interest on and principal of the Bonds and any
premiums upon the redemption of any Bonds shall be and are secured by an exclusive pledge, charge
and lien upon the Revenues. So long as any of the Bonds are Outstanding, the Revenues shall not be
used for any purpose except as is expressly permitted by this Indenture.
The Authority hereby transfers in trust, grants a security interest in and assigns to the Trustee,
for the benefit of the Owners from time to time of the Bonds, respectively, all of the Revenues and all
of the right, title and interest of the Authority in the Local Obligations, subject to the terms of this
Indenture. The Trustee shall be entitled to and shall collect and receive all of the Revenues and any
Revenues collected or received by the Authority shall be deemed to be held, and to have been
collected or received, by the Authority as the agent of the Trustee and shall forthwith be paid by the
Authority to the Trustee. The Trustee also shall be entitled to and, subject to the provisions of this
Indenture, the Trustee shall take all steps, actions and proceedings reasonably necessary in its
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judgment to enforce, either jointly with the Authority or separately, all of the rights of the Authority
and all of the obligations of the City and the Community Facilities District under the Local
Obligations.
Upon the deposit with the Trustee of moneys sufficient to pay all principal of, premium, if
any, and interest on the Bonds, and upon satisfaction of all claims against the Authority hereunder
with respect to the Bonds, including all fees, charges and expenses of the Trustee and the Authority
which are properly payable hereunder, or upon the making of adequate provisions for the payment of
such amounts as permitted hereby, all moneys remaining in all funds and accounts pertaining to such
Bonds, (except any amounts on deposit in the Rebate Fund and except moneys necessary to pay
principal of, premium, if any, and interest on the Bonds, which moneys shall be held by the Trustee
pursuant to Section 9.3), shall no longer be considered Revenues and are not pledged to repay the
Bonds. Such amounts shall be transferred to the Local Obligations Trustee. In the event that the
Local Obligations have been paid or defeased, then any such amounts shall be paid by the Trustee to
the Authority to be used by the Authority for any lawful purpose.
Section 4.2 Receipt, Deposit and Application of Revenues; Revenue Fund. Subject to
Section 4.2(a)(iv) below, all Revenues described in clause (a) of the definition thereof in Section 1.1
shall be promptly deposited by the Trustee upon receipt thereof in the Revenue Fund.
(a)On each Interest Payment Date, the Trustee shall transfer from the Revenue
Fund, and deposit into the following respective accounts for the Bonds, the following amounts in the
following order of priority, the requirements of each such account (including the making up of any
deficiencies in any such account resulting from lack of 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 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 on such date. All moneys in the Interest Account shall be used and
withdrawn by the Trustee solely for the purpose of paying interest on the Bonds as it shall become
due and payable (including accrued interest on any Bonds redeemed prior to maturity). In the event
that the amounts on deposit in the Interest Account on any Interest Payment Date, after any transfers
from the Reserve Fund pursuant to Section 4.3 hereof, are insufficient for any reason to pay the
aggregate amount of interest then coming due and payable on the Outstanding Bonds, the Trustee
shall apply such amounts to the payment of interest on each of the Outstanding Bonds on a pro rata
basis.
(ii)Principal Account. On each September 1 on which 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 principal amount of, and
premium (if any) on, the Bonds coming due and payable on such date, or required to be redeemed on
such date pursuant to Section 2.2 hereof; provided, however, that no amount shall be deposited to
effect a redemption pursuant to Section 2.2(a) hereof unless the Trustee has first received a certificate
of an Independent Accountant certifying that such deposit to effect an optional redemption of the
Bonds will not impair the ability of the Authority to make timely payment of the principal of and
interest on the Bonds, assuming for such purposes that the Community Facilities District continue to
make timely payments on all Local Obligations not then in default. All moneys in the Principal
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Account shall be used and withdrawn by the Trustee solely for the purpose of (i) paying the principal
of the Bonds at the maturity thereof or (ii) paying the principal of and premium (if any) on any Bonds
upon the redemption thereof pursuant to Section 2.2 hereof.
(iii)Reserve Fund. On each Interest Payment Date on which the balance
in the Reserve Fund is less than the Reserve Requirement, after making deposits required under (i)
and (ii) above, the Trustee shall transfer from the Revenue Fund an amount sufficient to increase the
balance in the Reserve Fund to the Reserve Requirement by depositing the amount necessary to make
the amount therein total the Reserve Requirement, provided the value of the moneys deposited
therein, as invested, shall be valued at market value on such transfer date for purposes of making
such determination.
(iv)Local Obligations Delinquency Revenues. The Trustee shall disburse
or transfer all Revenues representing Local Obligations Delinquency Revenues in the following order
of priority:
First, to make payments required pursuant to Section 8.3 upon the occurrence of an
Event of Default as described in Section 8.1(a),
Second, to the Reserve Fund to replenish the amount on deposit therein to the
Reserve Requirement as set forth in Section 4.3, and
Third, to make the deposits specified in Section 4.2(a)(i) through (iii) above.
(b)If on any Interest Payment Date or date for redemption the amount on deposit
in the Revenue Fund is inadequate to make the transfers described in subsection (a) above as a result
of a payment default on the Local Obligations, the Trustee shall immediately notify the Community
Facilities District of the amount needed to make the required deposits under subsection (a) above. In
the event that following such notice the Trustee receives additional payments from Community
Facilities District to cure such shortfall, the Trustee shall deposit such amounts to the Revenue Fund
for application in accordance with subsection (a) above.
(c)On each Interest Payment Date after making the transfers required under
subsections (a) and (b) above, upon receipt of a Request of the Authority to do so, the Trustee shall
transfer from the Revenue Fund to the Rebate Fund for deposit in the accounts therein the amounts
specified in such Request.
(d)On September 1 of each year, after making the deposits required under
subsections (a), (b), and (c) above, the Trustee shall transfer all amounts remaining on deposit in the
Revenue Fund to the Administrative Expense Fund unless the Trustee has received a Request of the
Authority directing it to transfer all or a portion of the said amounts to the Surplus Fund, in which
case the Trustee shall make the transfer to the Surplus Fund so specified.
Section 4.3 Reserve Fund.
(a)There shall be maintained in the Reserve Fund an amount equal to the
Reserve Requirement of which $________ shall initially be deposited from proceeds of the 2017
Bonds.
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(b)Moneys in the Reserve Fund shall be used solely for the purposes set forth in
this Section 4.3. Subject to the limitations set forth in the following paragraph, amounts in the
Reserve Fund may be applied to pay the principal of and interest on the Bonds when the moneys in
the Interest Account and the Principal Account of the Revenue Fund are insufficient therefor. In
addition, amounts in the Reserve Fund may be applied (i) in connection with an optional redemption
of Bonds pursuant to Section 2.2 or a defeasance pursuant to Section 9.3, (ii) when the balance
therein equals the principal and interest due on the Bonds to and including maturity, or (iii) when the
amount in the Reserve Fund is transferred to the Interest Account and the Principal Account as a
credit against the payments due on the Local Obligations on the transfer dates specified in
subsection (d) below.
(c)Except as otherwise provided herein, all money in the Reserve Fund shall be
used and withdrawn by the Trustee solely for the purpose of making transfers as described in this
Section 4.3. If the amounts in the Interest Account or the Principal Account are insufficient to pay
the principal of or interest on the Bonds when due or mandatory sinking fund payments on the
Bonds when due, the Trustee shall withdraw from the Reserve Fund an amount equal to the
deficiency resulting from the delinquency in the payment of scheduled debt service on the Local
Obligations and transfer such amount to the Interest Account, the Principal Account or both, as
applicable. The Trustee shall notify the Authority immediately following any withdrawal made
pursuant to this Section 4.3.
(d)When amounts in the Reserve Fund are sufficient to repay the remaining
principal and interest due on the Local Obligations that will be applied to the Bonds, such amounts
will be transferred to the Interest Account and the Principal Account as a credit against the payments
due on the Local Obligations, with the amount transferred from an account being deposited first to
the Interest Account as a credit on the interest due on the Local Obligations on such date and the
balance being deposited to the Principal Account as a credit on the principal due on the Local
Obligations on such date.
Section 4.4 Surplus Fund. Any amounts transferred to the Surplus Fund pursuant to
subsection 4.2 hereof shall no longer be considered Revenues and are not pledged to repay the
Bonds. So long as Local Obligations are outstanding, on September 1 of each year after setting aside
any amount specified in a Request of the Authority as necessary to pay Administrative Expenses, the
remaining balance, if any, in the Surplus Fund shall (i) be transferred by the Trustee to the City
Treasurer for credit to the special tax fund of the Community Facilities District, or (ii) as set forth in
a Request of the City be applied to the redemption of Local Obligations pursuant to the terms of the
Local Obligations Indenture. In the event the Community Facilities District is no longer obligated to
levy Special Taxes to repay the Local Obligations, then any amounts in the Surplus Fund may be
used by the Authority for any lawful purpose, including, but not limited to, the payment of expenses
of the Authority, the City or the Community Facilities District relating to the Bonds, the Local
Obligations, or any other purpose as specified in a Request of the Authority delivered to the Trustee.
On September 1 of the year preceding the year of the final maturity of the Bonds, the
remaining balance in the Surplus Fund shall be credited by the Trustee to the special tax fund
established with respect to the Local Obligations. Such amounts shall be applied to reduce debt
service payments on Local Obligations.
Section 4.5 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
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Investments, as directed pursuant to the Request of the Authority filed with the Trustee at least two
(2) Business Days in advance of the making of such investments. The Trustee shall be entitled to
conclusively rely on any such Request of the Authority and shall be fully protected in relying
thereon. In the absence of any such Request of the Authority the Trustee shall hold such moneys
uninvested. Permitted Investments purchased as an investment of moneys in any fund or account
established pursuant to this Indenture 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; provided, however, that all interest or gain derived from the investment of amounts in the
Reserve Fund shall, to the extent the balance therein exceeds, on August 15 of each year, the Reserve
Requirement as set forth in Section 4.3(a) hereof, be withdrawn by the Trustee on such August 15,
commencing August 15, 2018, and deposited to the special tax fund of the Community Facilities
District to be applied to the payment of debt service on the Local Obligations on the next Interest
Payment Date.
For purposes of acquiring any investments hereunder, the Trustee may commingle moneys
held by it in any of the funds and accounts held by it hereunder. The Trustee and its affiliates may
act as advisor, sponsor, principal or agent in the acquisition or disposition of any investment and may
impose its customary charges therefor. The Trustee and its affiliates may make any and all
investments permitted herein through its own investment department. The Trustee shall incur no
liability for losses arising from any investments made pursuant to this Section 4.5.
The Authority acknowledges that to the extent regulations of the Comptroller of the Currency
or other applicable regulatory entity grant the Authority the right to receive brokerage confirmations
of security transactions effected by the Trustee as they occur, the Authority specifically waives
receipt of such confirmations to the extent permitted by law. The Authority further understands that
trade confirmations for securities transactions effected by the Trustee will be available upon request
and at no additional cost and other trade confirmations may be obtained from the applicable broker.
The Trustee will furnish the Authority periodic cash transaction statements which include detail for
all investment transactions made by the Trustee hereunder or brokers selected by the Authority.
Upon the Authority’s election, such statements will be delivered via the Trustee’s online service and
upon electing such service, paper statements will be provided only upon request.
Section 4.6 Valuation and Disposition of Investments. For the purpose of determining
the amount in any fund or account, the value of Permitted Investments credited to such fund or
account shall be valued at the original cost thereof (excluding any brokerage commissions and
excluding any accrued interest) provided that the investment of any funds held in the Reserve Fund,
shall be valued at fair market value and marked to market at least quarterly by the Authority.
ARTICLE V
COVENANTS OF THE AUTHORITY
Section 5.1 Punctual Payment. The Authority shall punctually pay or cause to be paid
the principal and interest and premium (if any) to become due in respect of all the Bonds, in strict
conformity with the terms of the Bonds and of this Indenture, according to the true intent and
meaning thereof, but only out of Revenues, and other assets pledged for such payment as provided in
this Indenture.
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Section 5.2 Extension of Payment of Bonds. The Authority shall not directly or
indirectly extend or assent to the extension of the maturity of any of the Bonds or the time of
payment of any claims for interest by the purchase of such Bonds or by any other arrangement, and
in case the maturity of any of the Bonds or the time of payment of any such claims for interest shall
be extended, such Bonds or claims for interest shall not be entitled, in case of any default hereunder,
to the benefits of this Indenture, except subject to the prior payment in full of the principal of all of
the Bonds then Outstanding and of all claims for interest thereon which shall have been so extended.
Nothing in this Section shall be deemed to limit the right of the Authority to issue Bonds for the
purpose of refunding any Outstanding Bonds, and such issuance shall not be deemed to constitute an
extension of maturity of the Bonds.
Section 5.3 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 other
programs under the Bond Law, and reserves the right to issue other obligations for such purposes.
Section 5.4 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 Local Obligations and other assets purported to be pledged and assigned,
respectively, under this Indenture. The Bonds and the provisions of this Indenture are and will be the
legal, valid and binding limited, special obligations of the Authority in accordance with their terms,
and the Authority and the Trustee shall at all times, subject to the provisions of Article VI hereof and
to the extent permitted by law, defend, preserve and protect said pledge and assignment of the
Revenues, the Local Obligations and other assets and all the rights of the Bond Owners under this
Indenture against all claims and demands of all persons whomsoever.
Section 5.5 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
corporate trust industry standards in which complete and accurate entries shall be made of
transactions made by it relating to the proceeds of Bonds, the Revenues, the Local Obligations and
all funds and accounts established pursuant to this Indenture. Such books of record and account shall
be available for inspection by the Authority and the Community Facilities District upon reasonable
prior notice during regular business hours and under reasonable circumstances, in each case as agreed
to by the Trustee.
Not later than 45 days following each Interest Payment Date, the Trustee shall prepare and
file with the Authority a report in the Trustee’s standard statement format setting forth: (i) amounts
withdrawn from and deposited into each fund and account maintained by the Trustee under this
Indenture; (ii) the balance on deposit in each fund and account as of the date for which such report is
prepared; and (iii) a brief description of all obligations held as investments in each fund and account.
Copies of such reports may be mailed to any Owner upon the Owner’s written request to the Trustee
at the expense of such Owner at a cost not to exceed the Trustee’s actual costs of duplication and
mailing.
Section 5.6 Conditions to Issuance of Additional Obligations. Except as set forth in
this Section 5.6, the Authority covenants that no additional bonds, notes or other indebtedness shall
be issued or incurred which are payable out of Revenues in whole or in part.
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The Authority may issue Additional Bonds in such principal amount as shall be determined
by the Authority, pursuant to a Supplemental Indenture adopted or entered into by the Authority.
Such Additional Bonds may be issued subject to the following conditions precedent:
(a)The Authority shall be in compliance with all covenants set forth in this
Indenture and all Supplemental Indentures;
(b)The proceeds of such Additional Bonds shall be applied to accomplish a
refunding of all or a portion of the Bonds or any Additional Bonds Outstanding.
(c)The Supplemental Indenture providing for the issuance of such Additional
Bonds shall provide that interest thereon shall be payable on September 1 and March 1, and
principal thereof shall be payable on September 1 in any year in which principal is payable.
(d)Prior to the delivery of any Additional Bonds, a written certificate must be
provided to the Authority and the Trustee by an Independent Financial Consultant which certifies
that following the issuance of the Series of Additional Bonds and the Local Obligations, the
principal and interest generated from the Local Obligations is adequate to make the timely payment
of principal and interest due on the Bonds and the Series of Additional Bonds to be issued
hereunder.
(e)The Supplemental Indenture providing for the issuance of such Additional
Bonds may provide for the establishment of separate funds and accounts.
(f)No Event of Default shall have occurred and be continuing with respect to the
Bonds or any of the Local Obligations.
(g)The Authority shall deliver to the Trustee a written Certificate of the
Authority certifying that the conditions precedent to the issuance of such Additional Bonds set forth
in subsections (a), (b), (c), (d) and (f) of this Section 5.6 above have been satisfied and that, upon the
issuance of such Additional Bonds an amount equal to the Reserve Requirement, as adjusted (if
necessary) to reflect the issuance of such Additional Bonds will be on deposit in the Reserve Fund.
Section 5.7 Tax Covenants. Notwithstanding any other provision of this Indenture,
absent an opinion of Bond Counsel that the exclusion from gross income of interest on the Bonds
will not be adversely affected for federal income tax purposes, the Authority covenants to comply
with all applicable requirements of the Code necessary to preserve such exclusion from gross income
and specifically covenants, without limiting the generality of the foregoing, as follows:
(a)Private Activity. The Authority will not take or omit to take any action or
make any use of the proceeds of the Bonds or of any other moneys or property which would cause
the Bonds to be “private activity bonds” within the meaning of Section 141 of the Code.
(b)Arbitrage. The Authority will make no use of the proceeds of the Bonds or of
any other amounts or property, regardless of the source, or take or omit to take any action which
would cause the Bonds to be “arbitrage bonds” within the meaning of Section 148 of the Code.
(c)Federal Guarantee. The Authority will make no use of the proceeds of the
Bonds or take or omit to take any action that would cause the Bonds to be “federally guaranteed”
within the meaning of Section 149(b) of the Code.
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(d)Information Reporting. The Authority will take or cause to be taken all
necessary action to comply with the informational reporting requirement of Section 149(e) of the
Code.
(e)Miscellaneous. The Authority will take no action inconsistent with its
expectations stated in any Tax Certificate executed with respect to the Bonds and will comply with
the covenants and requirements stated therein and incorporated by reference herein.
This Section and the covenants set forth herein shall not be applicable to, and nothing
contained herein shall be deemed to prevent the Authority from issuing Bonds the interest on which
has been determined by the Board to be subject to federal income taxation.
Section 5.8 Rebate Fund.
(a)Establishment. The Trustee shall establish a Rebate Fund, when needed, and
shall maintain therein separate accounts (solely from amounts deposited by the Authority)
designated the “Rebate Account” and the “Alternative Penalty Account.” Absent an opinion of
Bond Counsel that the exclusion from gross income for federal income tax purposes of interest on
the Bonds will not be adversely affected, the Authority shall cause to be deposited in each such
account of the Rebate Fund such amounts as are required to be deposited therein pursuant to this
Section and the Tax Certificate. All money at any time deposited in the Rebate Fund shall be held
by the Trustee in trust for payment to the United States Treasury. All amounts on deposit in the
Rebate Fund shall be governed by this Section 5.8 and the Tax Certificate unless and to the extent
that the Authority delivers to the Trustee an opinion of Bond Counsel that the exclusion from gross
income for federal income tax purposes of interest on the Bonds will not be adversely affected if
such requirements are not satisfied. Notwithstanding any other provision of this Indenture, the
Trustee shall be deemed conclusively to have complied with this Section 5.8 and the Tax Certificate
if it follows the directions set forth in any Request of the Authority or Certificate of the Authority
and shall be fully protected in so doing. The Trustee shall have no independent responsibility to, or
liability resulting from its failure to, enforce compliance by the Authority with the terms of this
Section 5.8 or the Tax Certificate.
(b)Rebate Account. The following requirements shall be satisfied with respect
to the Rebate Account:
(i)Annual Computation. Within 55 days of the end of each Bond Year,
the Authority shall calculate or cause to be calculated the amount of rebatable arbitrage, in
accordance with Section 148(f)(2) of the Code and Section 1.148-3 of the Rebate Regulations (taking
into account any applicable exceptions with respect to the computation of the rebatable arbitrage,
described, if applicable, in the Tax Certificate (e.g., the temporary investments exceptions of
Section 148(f)(4)(B) and (C) of the Code), and taking into account whether the election pursuant to
Section 148(f)(4)(C)(vii) of the Code (the “1½% Penalty”) has been made), for this purpose treating
the last day of the applicable Bond Year as a computation date, within the meaning of
Section 1.148-1(b) of the Rebate Regulations (the “Rebatable Arbitrage”). The Authority shall
obtain expert advice as to the amount of the Rebatable Arbitrage to comply with this Section 5.8.
(ii)Annual Transfer. Within 55 days of the end of each applicable Bond
Year, upon receipt of the Request of the Authority, an amount shall be deposited to the applicable
Rebate Account by the Trustee from any Revenues specified by the Authority in the aforesaid
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Request, if and to the extent required so that the balance in the Rebate Account shall equal the
amount of Rebatable Arbitrage so calculated in accordance with (i) of this Subsection (b). In the
event that immediately following the transfer required by the previous sentence, the amount then on
deposit to the credit of a Rebate Account exceeds the amount required to be on deposit therein, upon
receipt of a Request of the Authority, the Trustee shall withdraw the excess from the applicable
Rebate Account and then credit the excess to the Revenue Fund.
(iii)Payment to the Treasury. The Trustee shall pay, as directed by
Request of the Authority, to the United States Treasury, out of amounts in the Rebate Account,
(A)Not later than 60 days after the end of (A) the fifth Bond
Year, and (B) each applicable fifth Bond Year thereafter, an amount equal to at least 90% of the
Rebatable Arbitrage as set forth in a Certificate of the Authority delivered to the Trustee calculated
as of the end of such Bond Year; and
(B)Not later than 60 days after the payment of all the Bonds, an
amount equal to 100% of the Rebatable Arbitrage as set forth in a Certificate of the Authority
delivered to the Trustee calculated as of the end of such applicable Bonds Year, and any income
attributable to the Rebatable Arbitrage, as set forth in a Certificate of the Authority delivered to the
Trustee computed in accordance with Section 148(f) of the Code.
In the event that, prior to the time of any payment required to be made from a Rebate
Account, the amount in such Rebate Account is not sufficient to make such payment when such
payment is due, the Authority shall calculate or cause to be calculated the amount of such deficiency
and deposit with the Trustee an amount received from any legally available source equal to such
deficiency prior to the time such payment is due. Each payment required to be made pursuant to this
Subsection (b) shall be made to the Internal Revenue Service Center, Ogden, Utah 84207 on or
before the date on which such payment is due, and shall be accompanied by Internal Revenue Service
Form 8038 T (which form shall be completed and provided by the Authority to the Trustee), or shall
be made in such other manner as provided under the Code, in each case as specified in a Request of
the Authority delivered to the Trustee.
(c)Alternative Penalty Account.
(i)Six Month Computation. If the 1½% Penalty has been elected, within
85 days of each particular Six Month Period, the Authority shall determine or cause to be determined
whether the 1½% Penalty is payable (and the amount of such penalty) as of the close of the
applicable Six Month Period. The Authority shall obtain expert advice in making such
determinations.
(ii)Six Month Transfer. Within 85 days of the close of each Six Month
Period, upon receipt of the Request of the Authority, the Trustee shall deposit in the Alternative
Penalty Account from any source of funds (specified by the Authority in the aforesaid Request), if
and to the extent required, so that the balance in the Alternative Penalty Account for a Series equals
the amount of 1½% Penalty (as specified in such Request) due and payable to the United States
Treasury determined by the Authority as provided in subsection (c)(i) above. In the event that
immediately following the transfer provided in the previous sentence, the amount then on deposit to
the credit of the Alternative Penalty Account exceeds the amount required to be on deposit therein to
make the payments required by subsection (c)(iii) below, the Trustee, pursuant to a Certificate of the
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Authority, may withdraw the excess from the Alternative Penalty Account and credit the excess to
the Revenue Fund.
(iii)Payment to the Treasury. The Trustee shall pay, as directed by
Request of the Authority, to the United States Treasury, out of amounts in the Alternative Penalty
Account, not later than 90 days after the close of each Six Month Period the 1½% Penalty (as
specified by the Authority in the aforesaid Request), if applicable and payable, computed by the
Authority in accordance with Section 148(f)(4) of the Code. In the event that, prior to the time of
any payment required to be made from the Alternative Penalty Account, the amount in such account
is not sufficient to make such payment when such payment is due, the Authority shall calculate the
amount of such deficiency and deposit with the Trustee an amount received from any legally
available source of funds equal to such deficiency for transfer into the Alternative Penalty Account
prior to the time such payment is due. Each payment required to be made pursuant to this
Subsection (c)(iii) shall be made to the Internal Revenue Service, Ogden, Utah 84207 on or before
the date on which such payment is due, and shall be accompanied by Internal Revenue Service
Form 8038-T (which form shall be completed and provided by the Authority to the Trustee) or shall
be made in such other manner as provided under the Code.
(d)Disposition of Unexpended Funds. Any funds remaining in the accounts of
the Rebate Fund after redemption and payment of the Bonds and the payments of all amounts
described in Subsection (b)(iii) or (c)(iii) (whichever is applicable) or provision made therefor
satisfactory to the Trustee, including accrued interest and payment of all applicable fees to the
Trustee, may, upon written request, be withdrawn by the Trustee and remitted to the Authority and
utilized in any manner by the Authority.
(e)Survival of Defeasance. Notwithstanding anything in this Section to the
contrary, the obligation to comply with the requirements of this Section shall survive the defeasance
of the Bonds.
(f)Trustee. The Trustee shall have no responsibility to monitor or calculate any
amounts payable to the U.S. Treasury pursuant to this Section and shall be deemed conclusively to
have complied with its obligations hereunder if it follows the written instructions of the Authority
given pursuant to this Section.
Section 5.9 Local Obligations. Subject to the provisions of this Indenture (including
Article VI), the Authority and the Trustee shall use reasonable efforts to collect all amounts due from
the Community Facilities District pursuant to the Local Obligations and shall enforce, and take all
steps, actions and proceedings which the Authority and Trustee determine to be reasonably necessary
for the enforcement of all of the rights of the Authority thereunder and for the enforcement of all of
the obligations and covenants of the City and the Community Facilities District thereunder. The
Authority shall instruct the Community Facilities District to authenticate and deliver to the Trustee
the Local Obligations registered in the name of the Trustee.
The Authority, the Trustee and the Community Facilities District may at any time consent to,
amend or modify the Local Obligations pursuant to the terms thereof, (a) with the prior consent of
the Owners of a majority in aggregate principal amount of the Bonds then Outstanding, or
(b) without the consent of any of the Owners if such amendment or modification is for any one or
more of the following purposes:
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(a)to add to the covenants and agreements of the Community Facilities District
contained in such Local Obligations, other covenants and agreements thereafter to be observed, or to
limit or surrender any rights or power therein reserved to or conferred upon the Community
Facilities District; or
(b)to make such provisions for the purpose of curing any ambiguity, or of
curing, correcting or supplementing any defective provision contained in such Local Obligations, or
in any other respect whatsoever as the Community Facilities District may deem necessary or
desirable, provided under any circumstances that such modifications or amendments shall not
materially adversely affect the interests of the Owners of the Bonds in the opinion of Bond Counsel
filed with the Trustee; or
(c)to amend any provision thereof to the extent necessary to comply with the
Code, but only if and to the extent such amendment will not, in and of itself, adversely affect the
exclusion from gross income of the interest on any of the Bonds under the Code, in the opinion of
Bond Counsel filed with the Trustee.
Section 5.10 Sale of Local Obligations. Notwithstanding anything in this Indenture to the
contrary, the Authority may cause the Trustee to sell, from time to time, all or a portion of the Local
Obligations, provided that the Authority shall deliver to the Trustee:
(a)a certificate of an Independent Accountant certifying that, following the sale
of such Local Obligations and the Revenues to be paid to the Authority (assuming the timely
payment of amounts due thereon with respect to any Local Obligations not then in default), together
with interest and principal due on any Defeasance Securities pledged to the repayment of the Bonds
and the Revenues then on deposit in the funds and accounts established hereunder (valuing any
Permitted Investments held hereunder at the then fair market value thereof), will be sufficient to pay
the principal of and interest on the Bonds when due;
(b)if any Bonds are then rated by Standard & Poor’s a notification from
Standard & Poor’s to the effect that such rating will not be withdrawn or reduced as a result of such
sale of Local Obligations;
(c)an opinion of Bond Counsel that such sale of Local Obligations is authorized
under the provisions of this Indenture and will not adversely affect the exclusion of interest on the
Bonds from gross income for purposes of federal income taxation; and
(d)to provide for the issuance of an additional Local Obligations subject to and
in accordance with the provisions of the Local Obligation Indenture.
Upon compliance with the foregoing conditions by the Authority, the Trustee shall sell such
Local Obligations in accordance with the Request of the Authority and disburse the proceeds of the
sale of such Local Obligations to the Authority or upon the receipt of a Request of the Authority shall
deposit such proceeds in the Revenue Fund.
Section 5.11 Continuing Disclosure Agreement. The Authority hereby covenants and
agrees that it will comply with and carry out all of its obligations under the Continuing Disclosure
Agreement to be executed and delivered by the Authority and Wilmington Trust, National
Association, as dissemination agent, in connection with the issuance of the Bonds. Notwithstanding
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any other provision of this Indenture, failure of the Authority to comply with the Continuing
Disclosure Agreement shall not be considered an Event of Default; however, any Owner or
Beneficial Owner may take such actions as may be necessary and appropriate, including seeking
mandate or specific performance by court order, to cause the Authority to comply with its obligations
under this Section 5.11. For purposes of this Section, “Beneficial Owner” means any person which
has or shares the power, directly or indirectly, to make investment decisions concerning ownership of
any Bonds (including persons holding Bonds through nominees, depositories and other
intermediaries).
Section 5.12 Further Assurances. 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 5.13 Pledged Revenues. The Authority represents it has not heretofore made a
pledge of, granted a lien on or security interest in, or made an assignment or sale of the Revenues that
ranks on a parity with or prior to the pledge granted under this Indenture. The Authority shall not
hereafter make any pledge or assignment of, lien on, or security interest in the Revenues payable
senior to or on a parity with the pledge of Revenues established under this Indenture.
ARTICLE VI
THE TRUSTEE
Section 6.1 Appointment of Trustee. Wilmington Trust, National Association, with a
corporate trust office presently located in Costa Mesa, California, a national banking association
organized and existing under and by virtue of the laws of the United States of America, is hereby
appointed Trustee by the Authority for the purpose of receiving all moneys required to be deposited
with the Trustee hereunder and to allocate, use and apply the same as provided in this Indenture. The
Authority agrees that it will maintain a Trustee which is a trust company, association or bank of good
standing located in or incorporated under the laws of the State, duly authorized to exercise trust
powers, 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, association 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 6.1, the combined capital and surplus shall be deemed
to be its combined capital and surplus as set forth in its most recent report of condition so published.
The Trustee is hereby authorized to pay the principal of and interest and redemption premium
(if any) on the Bonds when duly presented for payment at maturity, or on redemption prior to
maturity, to make regularly scheduled interest payments, and to cancel any Bond upon payment
thereof.
Section 6.2 Acceptance of Trusts. The Trustee hereby accepts the trusts imposed upon it
by this Indenture, and agrees to perform said trusts, but only upon and subject to the following
express terms and conditions:
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(a)The Trustee undertakes to perform such duties and only such duties as are
specifically set forth in this Indenture. In case an Event of Default hereunder has occurred (which
has not been cured or waived), the Trustee may exercise such of the rights and powers vested in it by
this Indenture, and shall use the same degree of care and skill and diligence in their exercise, as a
reasonable person would exercise or use under the circumstances in the conduct of his own affairs.
(b)The Trustee may execute any of the trusts or powers hereof and perform the
duties required of it hereunder by or through attorneys, agents, or receivers, but shall not be
responsible for the acts of any agents, attorneys or receivers appointed by it unless such appointment
was the result of negligence or willful misconduct. The Trustee may consult with and act upon the
advice of counsel (which may be counsel to the Authority) concerning all matters of trust and its
duty hereunder and shall be wholly protected in reliance upon the advice or opinion of such counsel
in respect of any action taken or omitted by it in good faith and in accordance herewith.
(c)The Trustee shall not be responsible for any recital herein, or in the Tax
Certificate or the Bonds, or for any of the supplements thereto or instruments of further assurance, or
for the validity, effectiveness or the sufficiency of the security for the Bonds issued hereunder or
intended to be secured hereby and the Trustee shall not be bound to ascertain or inquire as to the
observance or performance of any covenants, conditions or agreements on the part of the Authority
hereunder or under the Tax Certificate. The Trustee shall have no responsibility, opinion, or liability
with respect to any information, statement, or recital in any offering memorandum, official
statement, or other disclosure material prepared or distributed with respect to the issuance of the
Bonds.
(d)Except as provided in Section 3.2 hereof, the Trustee shall not be accountable
for the use of any proceeds of sale of the Bonds delivered hereunder. The Trustee may become the
Owner of Bonds secured hereby with the same rights which it would have if not the Trustee; may
acquire and dispose of other bonds or evidences of indebtedness of the Authority with the same
rights it would have if it were not the Trustee; and may act as a depository for and permit any of its
officers or directors to act as a member of, or in any other capacity with respect to, any committee
formed to protect the rights of Owners of Bonds, whether or not such committee shall represent the
Owners of the majority in aggregate principal amount of the Bonds then Outstanding.
(e)The Trustee shall be protected and shall incur no liability in acting, or
refraining from acting in good faith and without negligence, in reliance upon any notice, request,
consent, certificate, order, affidavit, letter, telegram, facsimile or other paper or document believed
by it to be genuine and correct and to have been signed or sent by the proper person or persons. Any
action taken or omitted to be taken by the Trustee in good faith and without negligence pursuant to
this Indenture upon the request or authority or consent of any person who at the time of making such
request or giving such authority or consent is the Owner of any Bond, shall be conclusive and
binding upon all future Owners of the same Bond and upon Bonds issued in exchange therefor or in
place thereof. The Trustee shall not be bound to recognize any person as an Owner of any Bond or
to take any action at such person’s request unless the ownership of such Bond by such person shall
be reflected on the Bond Register.
(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
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deemed to have notice, as provided in Section 6.2(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, and shall be fully protected in relying thereon, 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 notwithstanding any other provision of this Indenture, the
Trustee 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 where a Responsible Officer has actual knowledge of such
Event of Default and except for the failure by the Authority to make any of the payments to the
Trustee required to be made by the Authority pursuant hereto, including payments on the Local
Obligations, or 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 a Responsible Officer 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 Outstanding Bonds and all notices or
other instruments required by this Indenture to be delivered to the Trustee must, in order to be
effective, be delivered to a Responsible Officer at the Trust Office of the Trustee, and in the absence
of such notice so delivered the Trustee may conclusively assume there is no Event of Default
hereunder except as aforesaid. Delivery of a notice to the officer and address for the Trustee set
forth in Section 9.12 hereof, as updated by the Trustee from time to time, shall be deemed notice to a
Responsible Officer.
(i)At any and all reasonable times the Trustee, and its duly authorized agents,
attorneys, experts, accountants and representatives, shall have the right 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.
(j)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 performance of its duties
hereunder.
(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 by the Trustee in its sole discretion
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.
(l)Before taking any action referred to in Sections 6.5, 8.2, or this Article, the
Trustee may require that an indemnity bond satisfactory to it be furnished for the reimbursement of
all expenses to which it may be put and to protect it against all liability, except liability which is
adjudicated to have resulted from its negligence or willful misconduct in connection with any such
action.
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(m)All moneys received by the Trustee shall, until used or applied or invested as
herein provided, be held in trust for the purposes for which they were received but need not be
segregated from other funds.
(n)Whether or not expressly so provided, every provision of this Indenture
relating to the conduct or affecting the liability of, or affording protection to, the Trustee shall be
subject to the provisions of this Article VI.
(o)The Trustee shall not be considered in breach of or in default in its
obligations hereunder or progress in respect thereto in the event of enforced delay (“unavoidable
delay”) in the performance of such obligations due to unforeseeable causes beyond its control and
without its fault or negligence, including, but not limited to, Acts of God or of the public enemy or
terrorists, acts of a government, acts of the other party, fires, floods, epidemics, quarantine
restrictions, strikes, freight embargoes, earthquakes, explosion, mob violence, riot, inability to
procure or general sabotage or rationing of labor, equipment, facilities, sources of energy, material
or supplies in the open market, litigation or arbitration involving a party or others relating to zoning
or other governmental action or inaction pertaining to the project, malicious mischief,
condemnation, and unusually severe weather or delays of supplies or subcontractors due to such
causes or any similar event and/or occurrences beyond the control of the Trustee.
(p)The Trustee agrees to accept and act upon facsimile or electronic transmission
of written instructions and/or directions pursuant to this Indenture provided, however, that: (a) such
originally executed instructions and/or directions shall be signed by a person as may be designated
and authorized to sign for the party signing such instructions and/or directions, and (b) the Trustee
shall have received a current incumbency certificate containing the specimen signature of such
designated person. Any such instructions, directions and other communications furnished by
electronic transmission shall be in the form of attachments in PDF format.
(q)The Trustee shall not be liable in connection with the performance of its
duties hereunder except for its own negligence or willful misconduct.
Section 6.3 Fees, Charges and Expenses of Trustee. The Trustee shall be entitled to
payment and reimbursement by the Authority for reasonable fees for its services rendered hereunder
and all advances (including any interest on advances), counsel fees and expenses (including fees and
expenses of outside counsel and the allocated costs of internal attorneys) and other expenses
reasonably and necessarily made or incurred by the Trustee in connection with such services. Upon
the occurrence of an Event of Default hereunder, but only upon an Event of Default with respect to a
Series, the Trustee shall have a first lien with right of payment prior to payment of any Bond upon
the amounts held in Funds and accounts for such Series hereunder for the foregoing fees, charges and
expenses incurred by it respectively. The Trustee’s right to payment of its fees and expenses shall
survive the discharge and payment or defeasance of the Bonds and termination of this Indenture, and
the resignation or removal of the Trustee.
Section 6.4 Notice to Bond Owners of Default. If an Event of Default hereunder occurs
with respect to any Bonds of which the Trustee has been given, or is deemed to have notice, as
provided in Section 6.2(h) hereof, then the Trustee shall promptly give written notice thereof to the
Owner of each such Bond unless such Event of Default shall have been cured before the giving of
such notice.
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Section 6.5 Intervention by Trustee. In any judicial proceeding to which the Authority
is a party which, in the opinion of the Trustee and its counsel, has a substantial bearing on the
interests of Owners of any of the Bonds, the Trustee may intervene on behalf of such Bond Owners,
and subject to Section 6.2(1) hereof, shall do so if requested in writing by the Owners of at least
twenty five percent (25%) in aggregate principal amount of such Bonds then Outstanding.
Section 6.6 Removal of Trustee. The Owners of a majority in aggregate principal
amount of the Outstanding Bonds may and the Authority may, so long as no Event of Default then
exists, upon 30 days’ prior written notice to the Trustee, remove the Trustee initially appointed, and
any successor thereto, by an instrument or concurrent instruments in writing delivered to the Trustee.
Upon any such removal, the Authority shall appoint a successor or successors thereto; provided that
any such successor shall be a bank, association or trust company meeting the requirements set forth
in Section 6.1 hereof.
Section 6.7 Resignation by Trustee. The Trustee and any successor Trustee may at any
time give prior written notice of its intention to resign as Trustee hereunder, such notice to be given
to the Authority, the Community Facilities District and the City by registered or certified mail. Upon
receiving such notice of resignation, the Authority shall promptly appoint a successor Trustee. Any
resignation or removal of the Trustee and appointment of a successor Trustee shall become effective
only upon acceptance of appointment by the successor Trustee. Upon such acceptance, the Authority
shall cause notice thereof to be sent to the Bond Owners at their respective addresses set forth on the
Bond Register.
Section 6.8 Appointment of Successor Trustee. In the event of the removal or
resignation of the Trustee pursuant to Sections 6.6 or 6.7, respectively, the Authority shall promptly
appoint a successor Trustee. In the event the Authority shall for any reason whatsoever fail to
appoint a successor Trustee within thirty (30) days following the delivery to the Trustee of the
instrument described in Section 6.6 or within thirty (30) days following the receipt of notice by the
Authority, the Community Facilities District and the City pursuant to Section 6.7, the Trustee may
petition any court of competent jurisdiction for the appointment of a successor Trustee meeting the
requirements of Section 6.1 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 thirty day period.
Section 6.9 Merger or Consolidation. Any company into which the Trustee may be
merged or converted or with which it may be consolidated or any company resulting from any
merger, conversion or consolidation to which it shall be a party or any company to which the Trustee
may sell or transfer all or substantially all of its corporate trust business, provided that such company
shall meet the requirements set forth in Section 6.1 hereof, 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. The Trustee may assign its rights, duties
and obligations hereunder in whole or in part, to an affiliate or subsidiary thereof, provided such
Corporation, affiliate or subsidiary shall meet the requirements set forth in Section 6.1 hereof.
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 to the predecessor Trustee an
instrument indemnifying the predecessor Trustee for any costs or claims arising during the time the
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successor Trustee serves as Trustee 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.
Section 6.11 Appointment of Co-Trustee. It is the purpose of this Indenture that there
shall be no violation of any law of any jurisdiction (including particularly the law of the State)
denying or restricting the right of banking corporations or associations to transact business as a
trustee in such jurisdiction. It is recognized that in the case of litigation under this Indenture, and in
particular in case of the enforcement of the rights of the Trustee on default, or in the case the Trustee
deems that by reason of any present or future law of any jurisdiction it may not exercise any of the
powers, rights or remedies herein granted to the Trustee or hold title to the properties, in trust, as
herein granted, or take any other action which may be desirable or necessary in connection therewith,
it may be necessary that the Trustee appoint an additional individual or institution as a separate
co-trustee. The following provisions of this Section 6.11 are adopted to these ends.
In the event that the Trustee or the Authority appoints an additional individual or institution
as a separate or co-trustee, each and every remedy, power, right, claim, demand, cause of action,
immunity, estate, title, interest and lien expressed or intended by this Indenture to be exercised by or
vested in or conveyed to the Trustee with respect thereto shall be exercisable by and vest in such
separate or co-trustee but only to the extent necessary to enable such separate or co-trustee to
exercise such powers, rights and remedies, and every covenant and obligation necessary to the
exercise thereof by such separate or co-trustee shall run to and be enforceable by either of the Trustee
or separate or co-Trustee.
Should any instrument in writing from the Authority be required by the separate trustee or
co-trustee so appointed by the Trustee or the Authority for more fully and certainly vesting in and
confirming to it such properties, rights, powers, trusts, duties and obligations, any and all such
instruments in writing shall, on request, be executed, acknowledged and delivered by the Authority.
In case any separate trustee or co-trustee, or a successor to either, shall become incapable of acting,
resign or be removed, all the estates, properties, rights, powers, trusts, duties and obligations of such
separate trustee or co-trustee, so far as permitted by law, shall vest in and be exercised by the Trustee
until the appointment of a new trustee or successor to such separate trustee or co-trustee.
Section 6.12 Indemnification; Limited Liability of Trustee. The Authority further
covenants and agrees to indemnify and save the Trustee and its officers, officials, directors, agents
and employees, harmless from and against any loss, expense, including legal fees and expenses, and
liabilities which it may incur arising out of or in the exercise and performance of its powers and
duties hereunder, including the costs and expenses of defending against any claim of liability, but
excluding any and all losses, expenses and liabilities which are due to the negligence or intentional
misconduct of the Trustee, its officers, directors, agents or employees. In no event shall the Trustee
be liable for any consequential, punitive or special damages. No provision in this Indenture shall
require the Trustee to risk or expend its own funds or otherwise incur any financial liability
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hereunder unless indemnity reasonably satisfactory to it against such liability or risk is provided to it.
The Trustee shall not be liable for any action taken or omitted to be taken by it in accordance with
the direction of a majority (or any lesser amount that may direct the Trustee in accordance with the
provisions of the Indenture) of the Owners of the principal amount of Bonds Outstanding relating to
the time, method and place of conducting any proceeding or remedy available to the Trustee under
this Indenture. The rights of the Trustee and the obligations of the Authority under this Section 6.12
shall survive termination of this Indenture, discharge of the Bonds and resignation or removal of the
Trustee.
ARTICLE VII
MODIFICATION AND AMENDMENT OF THE INDENTURE
Section 7.1 Amendment Hereof. 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 when 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 redemption premiums 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 written consent of the
Trustee, modify any of the rights or obligations of the Trustee.
This Indenture and the rights and obligations of the Authority and of the Owners of the
Bonds may also be modified or amended at any time by a Supplemental Indenture which shall
become binding upon adoption, without consent of any Bond Owners, to the extent permitted by law
but only for any one or more of the following purposes:
(a)to add to the covenants and agreements of the Authority contained in this
Indenture, other covenants and agreements thereafter to be observed, or to limit or surrender any
rights or powers herein reserved to or conferred upon the Authority so long as such addition,
limitation or surrender of such rights or powers shall not materially adversely affect the Owners of
the Bonds; or
(b)to make such provisions for the purpose of curing any ambiguity, or of
curing, correcting or supplementing any defective provision contained in this Indenture, or in any
other respect whatsoever as the Authority may deem necessary or desirable, provided under any
circumstances that such modifications or amendments shall not materially adversely affect the
interests of the Owners of the Bonds; or
(c)to amend any provision hereof relating to the Code as may be necessary or
appropriate to assure compliance with the Code and the exclusion from gross income of interest on
the Bonds, including, but not limited to, amending the procedures set forth in Section 5.8 hereof with
respect to the calculation of Rebatable Arbitrage; or
(d)to amend or clarify any provision hereof to provide for the issuance of any
Additional Bonds on a parity with the Bonds for all purposes of this Indenture, including, but not
limited to, for the purpose of exercising all rights and remedies hereunder; or
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(e)to amend the provisions of Section 4.4 hereof.
The Trustee shall be furnished, at the expense of the Authority, 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 and shall
be fully protected in relying thereon.
Section 7.2 Effect of Supplemental Indenture. From and after the time any
Supplemental Indenture becomes effective pursuant to this Article VII, this Indenture shall be
deemed to be modified and amended in accordance therewith, the respective rights, duties and
obligations of the parties hereto or thereto and all Owners of Outstanding Bonds, as the case may be,
shall thereafter be determined, exercised and enforced hereunder subject in all respects to such
modification and amendment, and all the terms and conditions of this Indenture for any and all
purposes.
Section 7.3 Endorsement or Replacement of Bonds After Amendment. After the
effective date of any action taken as hereinabove provided, the Authority may determine that any
affected Bonds shall bear a notation, by endorsement in form approved by the Authority, as to such
action, and in that case upon demand of the Owner of any Bond Outstanding at such effective date
and presentation of its Bond for that purpose at the Trust Office of the Trustee, a suitable notation as
to such action shall be made on such Bond. If the Authority shall so determine, new Bonds so
modified as, in the opinion of the Authority, shall be necessary to conform to such Bond Owners’
action shall be prepared and executed, and in that case upon demand of the Owner of any Bond
Outstanding at such effective date such new Bonds shall be exchanged at the Trust Office of the
Trustee, without cost to each Bond Owner, for Bonds then Outstanding, upon surrender of such
Outstanding Bonds.
Section 7.4 Amendment by Mutual Consent. The provisions of this Article VII shall
not prevent any Bond Owner from accepting any amendment as to the particular Bond held by such
Owner, provided that due notation thereof is made on such Bond.
ARTICLE VIII
EVENTS OF DEFAULT AND REMEDIES OF BOND OWNERS
Section 8.1 Events of Default. The following events shall be Events of Default
hereunder.
(a)Default in the due and punctual payment of the principal of any Bond when
and as the same shall become due and payable, whether at maturity as therein expressed, by
proceedings for redemption, by declaration or otherwise.
(b)Default in the due and punctual payment of any installment of interest on any
Bond when and as such interest installment shall become due and payable.
(c)Default by the Authority in the observance of any of the other covenants,
agreements or conditions on its part in this Indenture or in the Bonds contained, if such default shall
have continued for a period of thirty (30) days after written notice thereof, specifying such default
and requiring the same to be remedied, shall have been given to the Authority by the Trustee, or to
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the Authority and the Trustee by the Owners of not less than twenty five percent (25%) in aggregate
principal amount of the Bonds at the time Outstanding, provided that such default (other than a
default arising from nonpayment of the Trustee’s fees and expenses, which must be cured within
such 30 day period) shall not constitute an Event of Default hereunder if the Authority shall
commence to cure such default within said thirty (30) day period and thereafter diligently and in
good faith shall cure such default within a reasonable period of time; or
(d)The filing by the Authority of a petition or answer seeking reorganization or
arrangement under the federal bankruptcy laws or any other applicable law of the United States of
America, or if a court of competent jurisdiction shall approve a petition, filed with or without the
consent of the Authority, seeking reorganization under the federal bankruptcy laws or any other
applicable law of the United States of America, or if, under the provisions of any other law for the
relief or aid of debtors, any court of competent jurisdiction shall assume custody or control of the
Authority or of the whole or any substantial part of its property.
Section 8.2 Remedies; Rights of Bond Owners. Upon the occurrence 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, premium, if any, and interest on the Outstanding Bonds, and to enforce any rights of
the Trustee under or with respect to this Indenture. Subject to Section 8.3, in the event of an Event of
Default arising out of a nonpayment of Trustee’s fees and expenses, the Trustee may sue the
Authority to seek recovery of its fees and expenses, provided, however, that such recovery may be
made only from the funds of the Authority and not from Revenues.
If an Event of Default shall have occurred and be continuing and if requested to do so by the
Owners of at least twenty-five percent (25%) in aggregate principal amount of Outstanding Bonds,
and, in each case, if indemnified as provided in Section 6.2(1), the Trustee shall be obligated to
exercise such one or more of the rights and powers conferred by this Article VIII and, as applicable,
under the Local Obligations, as the Trustee, being advised by counsel, shall deem most expedient in
the interests of the Bond Owners.
No remedy by the terms of this Indenture conferred upon or reserved to the Trustee (or to the
Bond Owners) is intended to be exclusive of any other remedy, but each and every such remedy shall
be cumulative and shall be in addition to any other remedy given to the Trustee or to the Bond
Owners hereunder or now or hereafter existing at law or in equity.
No delay or omission to exercise any right 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.
In no event shall the principal of the Bonds be accelerated.
Section 8.3 Application of Revenues and Other Funds After Event of Default. All
amounts received by the Trustee with respect to the Bonds pursuant to any right given or action taken
by the Trustee under the provisions of this Indenture relating to the Bonds 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 –
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First, to the payment of the costs and expenses of the Trustee in declaring such Event of
Default and in carrying out the provisions of this Article VIII, including reasonable compensation to
its agents, attorneys and counsel (including outside counsel and the allocated costs of internal
attorneys), and to the payment of all other 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 amount of such interest and
principal, then such amounts shall be applied in the following order of priority;
(a)first to the payment of all installments of interest on the Bonds then due and
unpaid,
(b)second, to the payment of all installments of principal of the Bonds then due
and unpaid, and
(c)third, to the payment of interest on overdue installments of principal and
interest on Bonds.
Section 8.4 Power of Trustee to Control Proceedings. In the event that the Trustee,
upon the happening of an Event of Default, shall have taken any action, by judicial proceedings or
otherwise, pursuant to its duties hereunder, whether upon its own discretion or upon the request of
the Owners of a majority in aggregate principal amount of the Bonds then Outstanding, it may, in the
exercise of its discretion for the best interests of the Owners of the Bonds, with respect to the
continuance, discontinuance, withdrawal, compromise, settlement or other disposal of such action;
provided, however, that the Trustee shall not, unless there no longer continues an Event of Default,
discontinue, withdraw, compromise or settle, or otherwise dispose of any litigation pending at law or
in equity, if at the time there has been filed with it a written request signed by the Owners of a
majority in aggregate principal amount of the Outstanding Bonds opposing such discontinuance,
withdrawal, compromise, settlement or other such litigation and provided further that the Trustee
shall have the right to decline to comply with such written request unless indemnification satisfactory
to it has been provided. Any suit, action or proceeding which any Owner of Bonds shall have the
right to bring to enforce any right or remedy hereunder may be brought by the Trustee for the equal
benefit and protection of all Owners of Bonds similarly situated and the Trustee is hereby appointed
(and the successive respective Owners of the Bonds issued hereunder, by taking and holding the
same, shall be conclusively deemed so to have appointed it) the true and lawful attorney in fact of the
respective Owners of the Bonds for the purposes of bringing any such suit, action or proceeding and
to do and perform any and all acts and things for and on behalf of the respective Owners of the
Bonds as a class or classes, as may be necessary or advisable in the opinion of the Trustee as such
attorney in fact.
Section 8.5 Appointment of Receivers. Upon the occurrence of an Event of Default
hereunder, and upon the filing of a suit or other commencement of judicial proceedings to enforce the
rights of the Trustee and of the Bond Owners under this Indenture, the Trustee shall be entitled, as a
matter of right, to the appointment of a receiver or receivers of the Revenues and other amounts
pledged hereunder, pending such proceedings, with such powers as the court making such
appointment shall confer.
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Section 8.6 Non Waiver. Nothing in this Article VIII or in any other provision of this
Indenture, or in the Bonds, shall affect or impair the obligation of the Authority, which is absolute
and unconditional, to pay the interest on and principal of the Bonds to the respective 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 of 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 shall impair any such right or
power or shall be construed to be a waiver of any such default 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 8.7 Rights and Remedies of Bond Owners. 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 the Bonds then Outstanding shall have made written request upon
the Trustee to exercise the powers hereinbefore granted or to institute such action, suit or proceeding
in its own name; (c) said Owners shall have tendered to the Trustee indemnity reasonably acceptable
to the Trustee against the costs, expenses and liabilities to be incurred in compliance with such
request; and (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.
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 or any other provision of this Indenture.
Section 8.8 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 to the
property subject to this Indenture, and all rights, remedies and powers of the Trustee shall continue as
if no such proceedings had been taken.
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ARTICLE IX
MISCELLANEOUS
Section 9.1 Limited Liability of Authority. Notwithstanding anything in this Indenture
contained, the Authority shall not be required to advance any moneys derived from any source of
income other than the Revenues or for the payment of the principal of or interest on the Bonds, or
any premiums upon the redemption thereof, or for the performance of any covenants herein
contained (except to the extent any such covenants are expressly payable hereunder from the
Revenues). The Authority may, however, advance funds for any such purpose, provided that such
funds are derived from a source legally available for such purpose and may be used by the Authority
for such purpose without incurring indebtedness.
The Bonds shall be revenue bonds, payable exclusively from the Revenues and other funds as
in this Indenture provided. The general fund of the Authority is not liable, and the credit of the
Authority is not pledged, for the payment of the interest and premium (if any) on or principal of the
Bonds. The Owners of the Bonds shall never have the right to compel the forfeiture of any property
of the Authority. The principal of and interest on the Bonds and any premiums upon the redemption
of any thereof, shall not be a legal or equitable pledge, charge, lien or encumbrance upon any
property of the Authority or upon any of its income, receipts or revenues except the Revenues and
other funds pledged to the payment thereof as in this Indenture provided.
Section 9.2 Benefits of Indenture Limited to Parties. Nothing in this Indenture,
expressed or implied, is intended to give to any person other than the Authority, the Trustee and the
Owners of the Bonds, any right, remedy or claim under or by reason of this Indenture. Any
covenants, stipulations, promises or agreements in this Indenture contained by and on behalf of the
Authority shall be for the sole and exclusive benefit of the Trustee and the Owners of Bonds.
Section 9.3 Discharge of Indenture. The Authority may pay and discharge any or all of
the Outstanding Bonds in any one or more of the following ways:
(a)by well and truly paying or causing to be paid the principal of and interest and
premium (if any) on such Bonds, as and when the same become due and payable;
(b)by irrevocably depositing with the Trustee, in trust, at or before maturity,
money which, together with the available amounts then on deposit in the funds and accounts
established with the Trustee pursuant to this Indenture and available for such purpose, is fully
sufficient to pay such Bonds, including all principal, interest and redemption premiums; or
(c)by irrevocably depositing with the Trustee or any other fiduciary, in trust,
Defeasance Securities in such amount as an Independent Accountant shall determine will, together
with the interest to accrue thereon and available moneys then on deposit in the funds and accounts
established with the Trustee pursuant to this Indenture and available for such purpose, be fully
sufficient to pay and discharge the indebtedness on such Bonds (including all principal, interest and
redemption premiums) at or before their respective maturity dates.
Any Outstanding Bond or Bonds shall be deemed to have been paid and discharged under
(c) above if (i) in the case of Bonds to be redeemed prior to the maturity thereof, notice of such
redemption shall have been provided pursuant to Section 2.2(d) hereof or provision satisfactory to the
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Trustee shall have been made for the provision of such notice, (ii) a verification report of an
Independent Accountant shall be delivered to the Trustee, and (iii) an opinion of Bond Counsel shall
be delivered to the Trustee to the effect that the requirements of this Indenture have been satisfied
with respect to such discharge of Bonds. Upon a discharge of one or more Bonds as described
above, 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, as
applicable, and all other pecuniary obligations of the Authority under this Indenture with respect to
such Bonds, shall cease and terminate, except only the obligation of the Authority to comply with the
covenants contained in Sections 5.7 and 6.12 hereof, 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, to
pay all expenses and costs of the Trustee and to comply with the covenants contained in Section 5.7
hereof. Any funds thereafter held by the Trustee, which are not required for said purposes, shall be
paid over to the Authority or upon a Request of the Authority to the City or the Community Facilities
District, as applicable.
Defeasance shall be accomplished only with an irrevocable deposit in escrow of Defeasance
Securities. Further substitutions of securities in the escrow are not permitted. The deposit in the
escrow must be sufficient, without reinvestment, to pay all principal and interest as schedule on the
Bonds to and including the date of redemption.
Section 9.4 Successor is Deemed Included in All References to Predecessor.
Whenever in this Indenture or any Supplemental Indenture either 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 9.5 Content of Certificates. Every certificate by or on behalf of the Authority
with respect to compliance with a condition or covenant provided for in this Indenture shall include
(a) a statement that the person or persons making or giving such certificate have read such covenant
or condition and the definitions herein relating thereto; (b) a brief statement as to the nature and
scope of the examination or investigation upon which the statements or opinions contained in such
certificate are based; (c) a statement that, in the opinion of the signers, they have made or caused to
be made such examination or investigation as is necessary to enable them to express an informed
opinion as to whether or not such covenant or condition has been complied with; and (d) a statement
as to whether, in the opinion of the signers, such condition or covenant has been complied with.
Any such certificate made or given by an officer of the Authority may be based, insofar as it
relates to legal matters, upon a certificate or opinion of or representations by counsel, unless such
officer knows that the certificate or opinion or representations with respect to the matters upon which
his certificate may be based, as aforesaid, are erroneous, or in the exercise of reasonable care should
have known that the same were erroneous. Any such certificate or opinion or representation made or
given by counsel may be based, insofar as it relates to factual matters, on information with respect to
which is in the possession of the Authority, or upon the certificate or opinion of or representations by
an officer or officers of the Authority, unless such counsel knows that the certificate or opinion or
representations with respect to the matters upon which his certificate, opinion or representation may
be based, as aforesaid, are erroneous, or in the exercise of reasonable care should have known that
the same were erroneous.
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Section 9.6 Execution of Documents by Bond Owners. Any request, consent or other
instrument required by this Indenture to be signed and executed by Bond Owners may be in any
number of concurrent writings of substantially similar tenor and may be signed or executed by such
Bond Owners in person or by agent or agents duly appointed in writing. Proof of the execution of
any such request, consent or other instrument or of a writing appointing any such agent, shall be
sufficient for any purpose of this Indenture and shall be conclusive in favor of the Trustee and of the
Authority if made in the manner provided in this Section 9.6.
The fact and date of the execution by any person of any such request, consent or other
instrument or writing may be proved by the affidavit of a witness of such execution or by the
certificate of any notary public or other officer of any jurisdiction, authorized by the laws thereof to
take acknowledgements of deeds, certifying that the person signing such request, consent or other
instrument or writing acknowledged to him the execution thereof.
The ownership of Bonds shall be conclusively proved by the Bond Register. Any request,
consent or vote of the Owner of any Bond shall bind every future Owner of the same Bond and the
Owner of any Bond issued in exchange therefor or in lieu thereof, in respect of anything done or
suffered to be done by the Trustee or the Authority in pursuance of such request, consent or vote. In
lieu of obtaining any demand, request, direction, consent or waiver in writing, the Trustee may call
and hold a meeting of the Bond Owners upon such notice and in accordance with such rules and
obligation as the Trustee considers fair and reasonable for the purpose of obtaining any such action.
Section 9.7 Disqualified Bonds. In determining whether the Owners of the requisite
aggregate principal amount of Bonds have concurred in any demand, request, direction, consent or
waiver under this Indenture, Bonds which are owned or held by or for the account of the Authority,
the City or the Community Facilities District (but excluding Bonds held in any employees’ or
retirement fund) shall be disregarded and deemed not to be Outstanding for the purpose of any such
determination, provided, however, that for the purpose of determining whether the Trustee shall be
protected in relying on any such demand, request, direction, consent or waiver, only Bonds which the
Trustee knows to be so owned or held shall be disregarded. Upon request, the Authority shall specify
to the Trustee those Bonds disqualified pursuant to this Section 9.7 and the Trustee may conclusively
rely upon such certificate.
Section 9.8 Waiver of Personal Liability. No officer, agent or employee of the
Authority shall be individually or personally liable for the payment of the interest on or principal of
the Bonds; but nothing herein contained shall relieve any such officer, agent or employee from the
performance of any official duty provided by law.
Section 9.9 Partial Invalidity. If any one or more of the covenants or agreements, or
portions thereof, provided in this Indenture on the part of the Authority (or of the Trustee) to be
performed should be contrary to law, then such covenant or covenants, such agreement or
agreements, or such portions thereof, shall be null and void and shall be deemed separable from the
remaining covenants and agreements or portions thereof and shall in no way affect the validity of this
Indenture or of the Bonds; but the Bond Owners shall retain all rights and benefits accorded to them
under the Bond Law or any other applicable provisions of law. The Authority hereby declares that it
would have entered into this Indenture and each and every other section, paragraph, subdivision,
sentence, clause and phrase hereof and would have authorized the issuance of the Bonds pursuant
hereto irrespective of the fact that any or more sections, paragraphs, subdivisions, sentences, clauses
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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 Cancelled Bonds. Whenever in this Indenture provision is
made for the surrender to the Authority or the Trustee of any Bonds which have been paid or
cancelled pursuant to the provisions of this Indenture, the Trustee shall destroy such Bonds in
accordance with the retention policy of the Trustee then in effect.
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 corporate trust
industry practices; in each case with due regard for the protection of the security of the Bonds and the
rights of every Owner thereof.
Section 9.12 Notices. Any notice, request, complaint, demand, communication or other
paper shall be sufficiently given and shall be deemed given when delivered or mailed by registered or
certified mail, return receipt requested, postage prepaid, or sent by fax or other electronic
transmission, addressed as follows:
If to the Authority:Lake Elsinore Facilities Financing Authority
c/o City of Lake Elsinore
130 South Main Street
Lake Elsinore, CA 92530
Attention: Assistant City Manager
If to the Community
Facilities District:City of Lake Elsinore Community Facilities District No.
2003-2 (Canyon Hills)
c/o City of Lake Elsinore
130 South Main Street
Lake Elsinore, CA 92530
Attention: Assistant City Manager
If to the Trustee:Wilmington Trust, National Association
650 Town Center Drive, Suite 600
Costa Mesa, CA 92626
Attention: Corporate Trust
The Authority, the City and the Trustee may designate any further or different addresses to
which subsequent notices, certificates or other communications shall be sent. Any such notice,
certificates or other communications furnished by electronic transmission shall be in the form of
attachments in PDF format.
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Section 9.13 Unclaimed Moneys. Anything in this Indenture to the contrary
notwithstanding, any moneys held by the Trustee in trust for the payment and discharge of any of the
Bonds which remain unclaimed for two (2) years after the date when such Bonds have become due
and payable, either at their stated maturity dates or by call for earlier redemption, if such moneys
were held by the Trustee at such date, or for two (2) years after the date of deposit of such moneys if
deposited with the Trustee after said date when such Bonds become due and payable, shall be repaid
by the Trustee to the Authority, as its absolute property and free from trust, and the Trustee shall
thereupon be released and discharged with respect thereto and the Bond Owners shall look only to
the Authority for the payment of such Bonds; provided, however, that before being required to make
such payment to the Authority, the Trustee shall, at the expense of Authority, cause to be mailed to
the Owners of all such Bonds, at their respective addresses appearing on the Bond Register, a notice
that said moneys remain unclaimed and that, after a date in said notice, which date shall not be less
than thirty (30) days after the date of mailing such notice, the balance of such moneys then
unclaimed will be returned to the Authority.
Section 9.14 Payment Due on Other than a Business Day. If the date for making any
payment or the last date for performance of any act or the exercising of any right, as provided in the
Indenture, is not a Business Day, such payment, with no interest accruing for the period after such
nominal date, may be made or act performed or right exercised on the next succeeding Business Day
with the same force and effect as if done on the nominal date provided in this Indenture.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK.]
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IN WITNESS WHEREOF, the Authority has caused this Indenture to be executed by the
Treasurer of the Authority, attested by its Secretary, and the Trustee has caused this Indenture to be
executed by one of its authorized officers, all as of the day and year first above written.
LAKE ELSINORE FACILITIES FINANCING
AUTHORITY
By:
Treasurer
ATTEST:
Secretary
WILMINGTON TRUST, NATIONAL
ASSOCIATION, as Trustee
By:
Authorized Officer
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EXHIBIT A
FORM OF SERIES 2017 BOND
R-__$__________
UNLESS THIS BOND IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY TO THE
AUTHORITY OR THE TRUSTEE FOR REGISTRATION OR TRANSFER,
EXCHANGE OR PAYMENT, AND ANY BOND ISSUED IS REGISTERED IN
THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS REQUESTED
BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST
COMPANY AND ANY PAYMENT IS MADE TO CEDE & CO., ANY
TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL SINCE THE
REGISTERED OWNER HEREOF, CEDE & CO. HAS AN INTEREST
HEREIN.
UNITED STATES OF AMERICA
STATE OF CALIFORNIA
COUNTY OF RIVERSIDE
LAKE ELSINORE FACILITIES FINANCING AUTHORITY
LOCAL AGENCY REVENUE REFUNDING BOND, SERIES 2017
INTEREST RATE:MATURITY DATE:DATED DATE:CUSIP NUMBER:
____%September 1, 20_________, 2017 _________
REGISTERED OWNER:CEDE & CO.
PRINCIPAL AMOUNT:AND NO/100 DOLLARS
The LAKE ELSINORE FACILITIES FINANCING AUTHORITY, a joint powers authority
organized and existing under the laws of the State of California (the “Authority”), for value received,
hereby promises to pay (but only out of the Revenues and other funds hereinafter referred to) to the
Registered Owner identified above or registered assigns (the “Registered Owner”), on the Maturity
Date identified above (subject to any right of prior redemption hereinafter mentioned), the Principal
Amount identified above in lawful money of the United States of America; and to pay interest
thereon at the Interest Rate identified above in like money from the Interest Payment Date (as
hereinafter defined) next preceding the date of authentication of this Bond (unless this Bond is
authenticated on or before an Interest Payment Date and after the fifteenth calendar day of the month
preceding the month in which such Interest Payment Date occurs, in which event it shall bear interest
from such Interest Payment Date, or unless this Bond is authenticated on or prior to February 15,
2018, 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 September 1 and March 1 in each year,
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commencing March 1, 2018 (each, an “Interest Payment Date”) until the Maturity Date stated above
or date of redemption of this Bond. The Principal Amount hereof is payable upon presentation and
surrender hereof at the Trust Office (as defined in the Indenture) of Wilmington Trust, National
Association (the “Trustee”). Interest hereon is payable by check of the Trustee mailed by first class
mail, postage prepaid, 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 fifteenth
calendar day of the month preceding the month in which such Interest Payment Date occurs;
provided, however, that payment of interest may be made by wire transfer to an account in the United
States of America to any registered owner of Bonds in the aggregate principal amount of $1,000,000
or more upon written instructions of any such registered owner filed with the Trustee in writing at
least five (5) Business Days before the Record Date for such Interest Payment Date.
This Bond is one of a duly authorized issue of bonds of the Authority designated the “Lake
Elsinore Facilities Financing Authority Local Agency Revenue Bonds, Series 2017” (the “Bonds”),
limited in principal amount to ______________ Dollars ($____________), secured by an Indenture
of Trust dated as of December 1, 2017 (the “Indenture”), by and between the Authority and the
Trustee. Reference is hereby made to the Indenture and all indentures supplemental thereto for a
description of the rights thereunder of the owners of the Bonds, of the nature and extent of the
Revenues (as that term is defined in the Indenture), of the rights, duties and immunities of the Trustee
and of the rights and obligations of the Authority thereunder; and all of the terms of the Indenture are
hereby incorporated herein and constitute a contract between the Authority and the Registered Owner
hereof, and to all of the provisions of which Indenture the Registered Owner hereof, by acceptance
hereof, assents and agrees.
This Bond is a limited obligation of the Authority, payable solely from the Revenues and
funds pledged under the Indenture. This Bond is not a debt of the City of Lake Elsinore (the “City”)
or the State of California (the “State”) or any of its political subdivisions (except the Authority and
only to the extent set forth in the Indenture), and none of said City, the State or any of its political
subdivisions is liable hereon. The Authority has no taxing power.
The Bonds are authorized to be issued pursuant to the provisions of the Marks-Roos Local
Bond Pooling Act of 1985, as amended, constituting Article 4 (commencing with Section 6584) of
Chapter 5 of Division 7 of Title 1 of the Government Code of the State of California (the “Act”).
The Bonds are limited obligations of the Authority and, as and to the extent set forth in the Indenture,
are payable solely from and secured by a first lien on and pledge of the Revenues and certain other
funds held by the Trustee as provided in the Indenture. The Revenues and such other funds
constitute a trust fund for the security and payment of the principal of and interest on the Bonds,
except to the extent otherwise provided in the Indenture. The full faith and credit of the Authority is
not pledged to the payment of the principal of or interest or redemption premiums (if any) on the
Bonds. The Bonds are not secured by a legal or equitable pledge of, or charge, lien or encumbrance
upon, any of the property of the Authority or any of its income or receipts, except the Revenues and
such other funds as provided in the Indenture.
The Bonds have been issued to provide funds to purchase certain obligations of City of Lake
Elsinore Community Facilities District No. 2003-2 (Canyon Hills) (the “Community Facilities
District”) as identified in the Indenture (the “Local Obligations”). The Community Facilities District
or the City, as applicable, in turn, will take the proceeds that it receives from the sale of the Local
Obligations to the Authority to finance public facilities, all as more particularly described in the
Indenture. The obligation of the Community Facilities District to make payments of principal and
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interest on the Local Obligations is a limited obligation of the Community Facilities District secured
only as set forth therein.
The Bonds maturing on or before September 1, 20__ are not subject to optional call and
redemption prior to maturity. The Bonds maturing on or after September 1, 20__ may be redeemed
at the option of the Authority, from any source of available funds, prior to maturity on any Interest
Payment Date on or after September 1, 20__ as a whole, or in part from maturities of the Local
Obligations simultaneously redeemed, if any redemption of Local Obligations is being made in
conjunction with such optional redemption, and otherwise from such maturities as are selected by the
Authority, and by lot within a maturity, at a redemption price equal to the par amount of the Bonds to
be redeemed, together with accrued interest thereon to the date of redemption, without premium.
The Bonds are subject to special redemption on any Interest Payment Date from proceeds of
early redemption of the Local Obligations from prepayments Special Taxes (as such terms are
defined in the Indenture), in whole or in part, from maturities corresponding proportionately to the
maturities of the Local Obligations simultaneously redeemed at the principal amount thereof, plus a
premium expressed below as a percentage of the principal amount so redeemed, plus accrued interest
to the date of redemption thereof:
Redemption Dates Redemption Prices
The Bonds maturing on September 1, 20__ are subject to mandatory sinking fund redemption
prior to maturity, in part on September 1, 20__, and on each September 1 thereafter by lot, in
accordance with the schedule of sinking fund payments set forth in the Indenture at a redemption
price equal to the principal amount of the Bonds to be redeemed, together with accrued interest to the
redemption date, without premium.
In the event that Bonds maturing on September 1, 20__ are redeemed pursuant to the optional
or special redemption provisions described above, the sinking fund payments for the applicable
Series will be reduced as nearly as practicable on a proportionate basis in integral multiples of
$5,000.
The Trustee on behalf, and at the expense of, the Authority shall mail by first class mail,
postage prepaid, notice of any redemption (other than mandatory sinking fund redemption) to the
respective owners of any Bonds designated for redemption, at their respective addresses appearing on
the registration books maintained by the Trustee and to the Securities Depositories and to the
Information Services (as such terms are defined in the Indenture), at least thirty (30) but not more
than sixty (60) days prior to the redemption date; provided, however, that neither failure to receive
any such notice so mailed nor any defect therein shall affect the validity of the proceedings for the
redemption of such Bonds or the cessation of the accrual of interest thereon.
If this Bond is called for redemption and payment is duly provided therefor as specified in the
Indenture, interest shall cease to accrue hereon from and after the date fixed for redemption.
A-4
The Bonds are issuable as fully registered Bonds without coupons in denominations of
$5,000 or any integral multiple thereof. Subject to the limitations and upon payment of the charges,
if any, provided in the Indenture, fully registered Bonds may be exchanged at the Trust Office of the
Trustee for a like aggregate principal amount and maturity of fully registered Bonds of other
authorized denominations.
This Bond is transferable by the Registered Owner hereof, in person or by its attorney duly
authorized in writing, at the Trust Office of the Trustee, but only in the manner, subject to the
limitations and upon payment of the charges provided in the Indenture, and upon surrender and
cancellation of this Bond. Upon such transfer a new fully registered Bond or Bonds, of authorized
denomination or denominations, for the same aggregate principal amount will be issued to the
transferee in exchange herefor. The Trustee shall not be required to register the transfer or exchange
of any Bond (i) during the 15 days prior to selection of Bonds for redemption, or (ii) selected for
redemption.
The Authority and the Trustee may treat the Registered Owner hereof as the absolute owner
hereof for all purposes, and the Authority and the Trustee shall not be affected by any notice to the
contrary. The Indenture and the rights and obligations of the Authority and of the owners of the
Bonds and of the Trustee may be modified or amended from time to time and at any time in the
manner, to the extent, and upon the terms provided in the Indenture; provided that 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 redemption
premiums 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, all as more fully set forth in
the Indenture.
It is hereby certified by the Authority 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 signed by the
Trustee.
A-5
IN WITNESS WHEREOF, the LAKE ELSINORE FACILITIES FINANCING
AUTHORITY has caused this Bond to be executed in its name and on its behalf by the facsimile
signature of its Chair and attested by the facsimile signature of its Secretary, all as of the date set
forth above.
LAKE ELSINORE FACILITIES FINANCING
AUTHORITY
By:
Chair
Attest:
Secretary
[FORM OF CERTIFICATE OF AUTHENTICATION]
This is one of the Bonds described in the within-mentioned Indenture.
Date: __________, 2017 WILMINGTON TRUST, NATIONAL
ASSOCIATION, as Trustee
By:
Authorized Signatory
[FORM OF LEGAL OPINION]
The attached is a true copy of the opinion rendered by Stradling Yocca Carlson & Rauth, a
Professional Corporation, Newport Beach, California, in connection with the issuance of, and dated
as of the date of the original delivery of, the Bonds. A signed copy is on file in my office.
Secretary of the Board of Directors of Lake
Elsinore Facilities Financing Authority
A-6
[FORM OF ASSIGNMENT]
For value received the undersigned do(es) hereby sell, assign and transfer unto
whose tax identification number is ,
the within mentioned registered Bond and hereby irrevocably constitute(s) and appoint(s)
attorney to transfer the same on the books of the Trustee with full power of substitution in the
premises.
Dated: _______________
Signature guaranteed:
NOTE: Signature guarantee shall be made by
a guarantor institution participating in the
Securities Transfer Agents Medallion Program
or in such other guarantee program acceptable
to the Trustee.
NOTE: The signatures(s) on this Assignment
must correspond with the name(s) as written on
the face of the within Bond in every particular
without alteration or enlargement or any
change whatsoever
PRELIMINARY OFFICIAL STATEMENT DATED _____________, 2017
NEW ISSUE-FULL BOOK ENTRY UNRATED
In the opinion of Stradling Yocca Carlson & Rauth, a Professional Corporation, Newport Beach, California (“Bond
Counsel”), under existing statutes, regulations, rulings and judicial decisions, and assuming certain representations and
compliance with certain covenants and requirements described herein, interest (and original issue discount) on the Bonds
is excluded from gross income for federal income tax purposes and is not an item of tax preference for purposes of calculating
the federal alternative minimum tax imposed on individuals and corporations. In the further opinion of Bond Counsel, interest
(and original issue discount) on the Bonds is exempt from State of California personal income tax. See “LEGAL MATTERS
— Tax Matters.”
$7,975,000*
LAKE ELSINORE FACILITIES FINANCING AUTHORITY
LOCAL AGENCY REVENUE BONDS, SERIES 2017
Dated: Date of Delivery Due: September 1 as shown on inside cover
The Bonds described in this Official Statement are being issued by the Lake Elsinore Facilities Financing Authority
(the “Authority”) to acquire special tax bonds (the “Local Obligations”) of the City of Lake Elsinore Community Facilities
District No. 2003-2 (Canyon Hills) (the “District”), formed by the City of Lake Elsinore (the “City”). The Local Obligations are
being issued to (i) finance a portion of certain public facilities eligible to be financed by the District for Improvement Area B
of the District (“Improvement Area B”), (ii) fund a deposit to a reserve fund, and (iii) pay costs of issuance of the Bonds. See
“FINANCING PLAN.”
The Bonds are payable solely from “Revenues” pledged by the Authority pursuant to that certain Indenture of Trust,
dated as of November 1, 2017 (the “Indenture”), by and between the Authority and Wilmington Trust, National Association
(the “Trustee”). Revenues consist primarily of debt service on the Local Obligations paid to the Authority by the District. See
“SECURITY FOR THE BONDS.”
The Local Obligations will be secured by a pledge of and payable from Net Special Taxes, derived from an annual
Special Tax (as defined in this Official Statement) to be levied on taxable parcels within Improvement Area B, less amounts
used to pay administrative expenses. The Local Obligations are being issued on a parity basis with the District’s previously
issued Improvement Area B 2015 Special Tax Refunding Bonds which are originally issued in the aggregate principal amount
of $25,795,000
The Bonds will be issued in denominations of $5,000 or any integral multiple thereof. Interest on the Bonds is
payable on September 1 and March 1 each year, commencing March 1, 2018. The Bonds will be initially issued only in
book-entry form and registered in the name of Cede & Co. as nominee of The Depository Trust Company, New York, New
York (“DTC”), which will act as securities depository of the Bonds. Principal and interest (and premium, if any) on the Bonds
is payable by the Trustee to DTC, which remits such payments to its Participants for subsequent distribution to the beneficial
owners of the Bonds. See “THE BONDS — General Provisions” and — Book-Entry Only System.”
The Bonds are subject to redemption prior to maturity as described herein. See “THE BONDS — Redemption.”
CERTAIN EVENTS COULD AFFECT THE ABILITY OF THE AUTHORITY TO PAY THE PRINCIPAL OF AND
INTEREST ON THE BONDS WHEN DUE. THE PURCHASE OF THE BONDS INVOLVES SIGNIFICANT INVESTMENT
RISKS, AND THE BONDS MAY NOT BE SUITABLE INVESTMENTS FOR MANY INVESTORS. SEE THE SECTION OF
THIS OFFICIAL STATEMENT ENTITLED “SPECIAL RISK FACTORS” FOR A DISCUSSION OF CERTAIN RISK
FACTORS THAT SHOULD BE CONSIDERED, IN ADDITION TO THE OTHER MATTERS SET FORTH HEREIN, IN
EVALUATING THE INVESTMENT QUALITY OF THE BONDS.
___________________________
Maturity Schedule
(see inside cover)
___________________________
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.
The Bonds are offered when, as and if issued and accepted by the Underwriter, subject to the approval as to their
legality by Stradling Yocca Carlson & Rauth, a Professional Corporation, as Bond Counsel. Jones Hall, A Professional Law
Corporation, is acting as disclosure counsel to the Authority. The City Attorney of the City of Lake Elsinore will pass upon
certain matters for the Authority and the District. Nossaman LLP is acting as counsel to the Underwriter. It is anticipated
that the Bonds in definitive form will be available for delivery to DTC or its agent on or about [_____], 2017.
STIFEL
[LOGO]
Dated: [_____], 2017
__________________
*Preliminary; subject to change
This Preliminary Official Statement and the information contained herein are subject to completion or amendment. These securities may not be sold nor may offers to buy be accepted prior to the time the Official Statement is delivered in final form. Under no circumstances will this Preliminary Official Statement constitute an offer to sell or a solicitation of an offer to buy nor will there be any sale of these securities in any jurisdiction in which such offer solicitation or sale would be unlawful.
MATURITY SCHEDULE
$7,975,000*
LAKE ELSINORE FACILITIES FINANCING AUTHORITY
LOCAL AGENCY REVENUE BONDS, SERIES 2017
Maturity
(September 1)
Principal
Amount Interest Rate Yield Price
CUSIP†No.
([______])
$[______][______]% Term Bonds due 20[__], Yield: [______]%, Price: [______]C CUSIP
†No. [______]
*Preliminary; subject to change.
C:[Priced to optional redemption date of September 1, 20[__] at par].
† Copyright 2017, CUSIP Global Services, and a registered trademark of the American Bankers Association. CUSIP data is
provided by CUSIP Global Services, which is managed on behalf of American Bankers Association by S&P Capital IQ. None of
the Authority, the District or the Underwriter assumes any responsibility for the accuracy of the CUSIP data.
LAKE ELSINORE FACILITIES FINANCING AUTHORITY
BOARD OF DIRECTORS/CITY COUNCIL
Robert Magee, Member/Mayor
Natasha Johnson, Member/Mayor Pro Tem
Daryl Hickman, Vice-Chair/Councilmember
Brian Magee, Chair/Councilmember
Steve Manos, Member/Councilmember
AUTHORITY STAFF
Grant Yates, City Manager
Jason Simpson, Assistant City Manager
CITY ATTORNEY/AUTHORITY COUNSEL
Leibold McClendon & Mann
Irvine, California
_______________________
PROFESSIONAL SERVICES
FINANCIAL ADVISOR
Urban Futures, Inc.
Tustin, California
BOND COUNSEL
Stradling Yocca Carlson & Rauth, a Professional Corporation
Newport Beach, California
DISCLOSURE COUNSEL
Jones Hall, A Professional Law Corporation
San Francisco, California
TRUSTEE/LOCAL OBLIGATIONS TRUSTEE
Wilmington Trust, National Association
Los Angeles, California
SPECIAL TAX CONSULTANT
SCG - Spicer Consulting Group
Murrieta, California
APPRAISER
Kitty Siino & Associates, Inc.
Tustin, California
Investment in the Bonds involves risks that are not appropriate for certain investors. Therefore,
only persons with substantial financial resources (in net worth or income) who understand (either alone or
with competent investment advice) those risks should consider such an investment.
Except where otherwise indicated, all information contained in this Official Statement has been
provided by the Authority or the City. No dealer, broker, salesperson or other person has been authorized
by the Authority, the City, the District, the Trustee or the Underwriter to give any information or to make any
representations in connection with the offer or sale of the Bonds other than those contained herein; and, if
given or made, such other information or representations must not be relied upon as having been authorized
by the Authority, the City, the District, the Trustee or the Underwriter. This Official Statement does not
constitute an offer to sell or the solicitation of an offer to buy nor shall there be any sale of the Bonds by a
person in any jurisdiction in which it is unlawful for such person to make such an offer, solicitation or sale.
The information set forth herein which has been obtained from third party sources is believed to be
reliable but is not guaranteed as to accuracy or completeness by the District, the City or the Authority. This
Official Statement is not to be construed as a contract with the purchasers or Owners of the Bonds.
Statements contained in this Official Statement which involve estimates, forecasts or matters of opinion,
whether or not expressly so described herein, are intended solely as such are not to be construed as
representations of fact.
The Underwriter has provided the following sentence for inclusion in this Official Statement:
The Underwriter has reviewed the information in this Official Statement in
accordance with, and as a part of, its responsibilities to investors under the federal
securities laws as applied to the facts and circumstances of this transaction, but the
Underwriter does not guarantee the accuracy of completeness of such information.
The information and expressions of opinion herein are subject to change without notice and neither
the delivery of this Official Statement nor any sale made hereunder shall, under any circumstances, create
any implication that there has been no change in the affairs of the Authority, the City, the District or any
other parties described herein since the date hereof. All summaries of the Indenture or other documents
are made subject to the provisions of such documents respectively and do not purport to be complete
statements of any or all of such provisions. Reference is hereby made to such documents on file with the
City for further information in connection therewith.
Certain statements included or incorporated by reference in this Official Statement constitute
“forward-looking statements” within the meaning of the United States Private Securities Litigation Reform
Act of 1995, Section 21E of the United States Securities Exchange Act of 1934, as amended, and
Section 27A of the United States Securities Act of 1933, as amended. Such statements are generally
identifiable by the terminology used such as “plan,” “expect,” “estimate,” “project,” “budget” or other similar
words.
The achievement of certain results or other expectations contained in such forward-looking
statements involve known and unknown risks, uncertainties and other factors which may cause actual
results, performance or achievements described to be materially different from any future results,
performance or achievements expressed or implied by such forward-looking statements. The Authority
does not plan to issue any updates or revisions to the forward-looking statements set forth in this Official
Statement. The Authority is obligated to provide continuing disclosure for certain historical information only.
See the caption “MISCELLANEOUS — Continuing Disclosure” herein.
IN CONNECTION WITH THE OFFERING OF THE BONDS, THE UNDERWRITER MAY
OVERALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE
OF SUCH BONDS AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
THE BONDS HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, IN RELIANCE UPON AN EXEMPTION CONTAINED IN SUCH ACT. THE BONDS HAVE
NOT BEEN REGISTERED OR QUALIFIED UNDER THE SECURITIES LAWS OF ANY STATE.
The City maintains a website, but the information on the website is not incorporated in this Official
Statement.
i
TABLE OF CONTENTS
Page
INTRODUCTION.....................................................................................................................1
The Bonds; The Local Obligations; Financing Purpose.........................................................................1
Legal Authority........................................................................................................................................2
Sources of Payment for the Bonds and the Local Obligations...............................................................2
Description of the Bonds ........................................................................................................................3
The City, Authority, District and Improvement Area B............................................................................3
Current and Proposed Development Within Improvement Area B.........................................................4
Foreclosure Proceeds. ...........................................................................................................................5
Tax Exemption........................................................................................................................................5
Appraisal Report.....................................................................................................................................6
Bond Owners’ Risks ...............................................................................................................................8
Professionals Involved in the Offering....................................................................................................8
Continuing Disclosure.............................................................................................................................8
Other Information....................................................................................................................................8
FINANCING PLAN ................................................................................................................10
Purpose of Issue...................................................................................................................................10
Estimated Sources and Uses of Funds................................................................................................10
THE BONDS .........................................................................................................................12
General Provisions ...............................................................................................................................12
Redemption ..........................................................................................................................................12
Payment, Registration, Transfer and Exchange of Bonds ...................................................................15
Book-Entry Only System ......................................................................................................................15
Estimated Debt Service Schedules: Bonds and Local Obligations.....................................................17
Debt Service Coverage for the Bonds..................................................................................................19
SECURITY FOR THE BONDS..............................................................................................19
General.................................................................................................................................................19
Revenues and Flow of Funds...............................................................................................................19
Reserve Fund .......................................................................................................................................21
Surplus Fund ........................................................................................................................................21
Additional Bonds of the Authority .........................................................................................................22
SECURITY AND SOURCES OF PAYMENT FOR THE LOCAL OBLIGATIONS....................22
General.................................................................................................................................................22
Special Taxes; Gross Special Taxes; Net Special Taxes ....................................................................23
Administrative Expense Requirement ..................................................................................................24
Local Obligation Parity Bonds ..............................................................................................................24
Priority of Lien.......................................................................................................................................26
Covenants of the District ......................................................................................................................27
THE COMMUNITY FACILITIES DISTRICT AND IMPROVEMENT AREA B..........................29
General Description of the District........................................................................................................29
Improvement Area B.............................................................................................................................29
History of the District and Improvement Area B ...................................................................................30
Appraisal Report...................................................................................................................................34
Direct and Overlapping Indebtedness..................................................................................................37
Estimated Appraised Value-To-Lien Ratios .........................................................................................39
Estimated Tax Burden on Single Family Home....................................................................................43
Concentration of Taxpayers .................................................................................................................44
Property Tax Delinquencies .................................................................................................................44
CURRENT AND PROPOSED DEVELOPMENT OF PROPERTY WITHIN IMPROVEMENT
AREA B.....................................................................................................................................44
General Description of Development; Pardee Homes .........................................................................45
Ownership by Pardee Homes...............................................................................................................46
Status of Development .........................................................................................................................46
Financing Plan......................................................................................................................................48
History of Pardee Homes’s Property Tax Payments; Loan Defaults; Litigation; Bankruptcy...............49
SPECIAL RISK FACTORS....................................................................................................51
ii
Risks of Real Estate Secured Investments Generally..........................................................................52
The Bonds are Limited Obligations of the Authority.............................................................................52
No Obligation of City.............................................................................................................................52
Potential Early Redemption of Bonds from Prepayments....................................................................53
Payment of Special Taxes is not a Personal Obligation of the Property Owners................................53
Assessed and Appraised Valuations....................................................................................................53
Land Values..........................................................................................................................................54
Concentration of Property Ownership ..................................................................................................55
Natural Disasters..................................................................................................................................55
Hazardous Substances ........................................................................................................................55
Parity Taxes and Special Assessments...............................................................................................56
Disclosures to Future Purchasers ........................................................................................................57
Special Tax Delinquencies ...................................................................................................................57
Insufficiency of Special Taxes..............................................................................................................57
FDIC/Federal Government Interests in Properties...............................................................................58
Bankruptcy and Foreclosure.................................................................................................................60
No Acceleration Provision ....................................................................................................................60
Limitations on Remedies......................................................................................................................60
Loss of Tax Exemption.........................................................................................................................61
IRS Audit of Tax-Exempt Bond Issues.................................................................................................61
Impact of Legislative Proposals, Clarifications of the Code and Court Decisions on Tax Exemption .61
Limited Secondary Market....................................................................................................................61
Proposition 218.....................................................................................................................................62
Ballot Initiatives.....................................................................................................................................63
LEGAL MATTERS.................................................................................................................64
Tax Matters...........................................................................................................................................64
Absence of Litigation ............................................................................................................................66
Legal Opinion........................................................................................................................................66
MISCELLANEOUS................................................................................................................67
Underwriting..........................................................................................................................................67
Continuing Disclosure...........................................................................................................................67
Additional Information...........................................................................................................................68
APPENDIX A SUMMARY OF PRINCIPAL LEGAL DOCUMENTS........................................................A-1
APPENDIX B DEMOGRAPHIC INFORMATION REGARDING THE CITY OF LAKE ELSINORE
AND THE COUNTY OF RIVERSIDE ..............................................................................B-1
APPENDIX C RATE AND METHOD OF APPORTIONMENT OF SPECIAL TAXES FOR
IMPROVEMENT AREA B............................................................................................... C-1
APPENDIX D FORM OF BOND COUNSEL OPINION ......................................................................... D-1
APPENDIX E FORM OF CONTINUING DISCLOSURE CERTIFICATE ...............................................E-1
APPENDIX F DTC AND THE BOOK-ENTRY-ONLY SYSTEM............................................................G-1
APPENDIX G APPRAISAL REPORT.................................................................................................... H-1
Regional Map and Aerial Photos of Each District
-1-
OFFICIAL STATEMENT
$7,975,000*
LAKE ELSINORE FACILITIES FINANCING AUTHORITY
LOCAL AGENCY REVENUE BONDS, SERIES 2017
INTRODUCTION
The purpose of this Official Statement, which includes the cover page and Appendices
(the “Official Statement”), is to provide certain information concerning the sale and issuance of
the Lake Elsinore Facilities Financing Authority Local Agency Revenue Bonds, Series 2017 (the
“Bonds”). The Bonds are issued pursuant to an Indenture of Trust dated as of November 1, 2017
(the “Indenture”), by and between the Lake Elsinore Facilities Financing Authority (the
“Authority”) and Wilmington Trust, National Association, as trustee (the “Trustee”).
This Introduction is not a summary of this Official Statement. It is only a brief description
of and guide to, and is qualified by, more complete and detailed information contained in the entire
Official Statement and the documents summarized or described herein. A full review should be
made of the entire Official Statement. The offering of the Bonds to potential investors is made
only by means of the entire Official Statement.
The Bonds; The Local Obligations; Financing Purpose
The Bonds. The Bonds are payable from “Revenues,” as more completely defined
below, generally consisting of revenues received by the Authority as the result of the payment of
debt service on the Local Obligations, and amounts held in the funds and accounts established
and held for the benefit of the Bonds under the Indenture. See “SECURITY FOR THE BONDS.”
Local Obligations. The Local Obligations consist of the $7,975,000* City of Lake
Elsinore (the “City”) Community Facilities District No. 2003-2 (Canyon Hills) Improvement Area B
2017 Special Tax Bonds being issued by the City’s Community Facilities District No. 2003-2
(Canyon Hills) (the “District”). The Local Obligations are payable from Special Taxes levied on
taxable property in Improvement Area B (“Improvement Area B”) within the District. The Local
Obligations are being issued on a parity basis with the District’s previously issued Improvement
Area B 2015 Special Tax Refunding Bonds (the “2015 Bonds”) which were originally issued in
the aggregate principal amount of $25,795,000.
Purpose of the Bonds. The Bonds are being issued by the Authority to acquire the Local
Obligations (see “FINANCING PLAN”).
__________________
*Preliminary; subject to change
-2-
Purpose of the Local Obligations. The net proceeds of the Local Obligations, along
with other available funds, will be used as follows (see “FINANCING PLAN” herein):
(i)to finance a portion of certain public facilities eligible to be financed by the
District for Improvement Area B of the District, asauthorized by the Act (as defined herein);
(iii)to pay the costs of issuing the Bonds; and
(iv)to fund a reserve fund held by the Trustee for the Bonds.
Parity Bonds. The Authority has covenanted in the Indenture that no additional bonds
will be issued on a Parity with the Bonds, payable out of the Revenues in whole or in part, unless
such additional bonds are issued for the purposes of refunding all or a portion of the Bonds.
See the caption “SECURITY FOR THE BONDS — Additional Bonds of the Authority.”
Legal Authority
The Bonds. The Bonds are being issued under Article 4 of Chapter 5 of Division 7 of
Title 1 of the Government Code of the State of California (the “Act”) and the Indenture.
The Local Obligations. The Local Obligations are being issued pursuant to the
Mello-Roos Community Facilities Act of 1982, as amended, being Chapter 2.5, Part 1, Division 2,
Title 5 of the Government Code of the State of California (the “Mello-Roos Act”), and a Bond
Indenture (the “Original Indenture”) dated as of March 1, 2015, by and between the District and
MUFG Union Bank, N.A. (the “Original Trustee”), as supplemented by a First Supplement to
Bond Indenture (the “First Supplement” which, along with the Original Indenture, are collectively
referred to as the “Local Obligation Bond Indenture”) dated as of November 1, 2017, by and
between the District and Wilmington Trust, National Association (the “Local Obligations
Trustee”), as successor trustee to the Original Trustee.
Sources of Payment for the Bonds and the Local Obligations
The Bonds are secured by a first lien on and pledge of all of the Revenues. “Revenues”
are defined in the Indenture to include:
(a)all amounts received from the Local Obligations;
(b)any proceeds of the Bonds originally deposited with the Trustee and all moneys
deposited and held from time to time by the Trustee in the funds and accounts established under
the Indenture with respect to the Bonds (other than the Rebate Fund and the Surplus Fund); and
(c)investment income with respect to any moneys held by the Trustee in the funds
and accounts established under the Indenture with respect to the Bonds (other than investment
income on moneys held in the Rebate Fund and the Surplus Fund).
See “SECURITY FOR THE BONDS — Revenues and Flow of Funds.”
Local Obligations. Each Local Obligation will be payable from Net Special Taxes
collected in Improvement Area B as a result of the levy of Special Taxes. See “SECURITY AND
SOURCES OF PAYMENT FOR THE LOCAL OBLIGATIONS.”
-3-
Description of the Bonds
Payments. Interest is payable September 1 and March 1 each year (each, an “Interest
Payment Date”), commencing on March 1, 2018. Principal of and premium, if any, on the Bonds
will be payable by the Trustee. See “THE BONDS — General Provisions” and “ — Book-Entry
Only System.”
Denominations. The Bonds will be issued in denominations of $5,000 each or integral
multiples thereof.
Redemption. The Bonds are subject to redemption prior to their maturity. See “THE
BONDS — Redemption” herein.
Record Date. The Indenture defines “Record Date” as the 15th calendar day of the
month preceding the month in which the related Interest Payment Date occurs, whether or not a
Business Day.
Registration, transfers and exchanges. The Bonds will be issued as fully registered
bonds, registered in the name of Cede & Co. as nominee of The Depository Trust Company, New
York, New York (“DTC”), and will be available to actual purchasers of the Bonds (the “Beneficial
Owners”) under the book-entry system maintained by DTC. See “THE BONDS — Payment,
Registration, Transfer and Exchange of Bonds” and “— Book-Entry Only System.”
The City, Authority, District and Improvement Area B
City. The City was founded in 1883 and incorporated as a general law city effective April
23, 1888 in San Diego County. In 1893, the Elsinore Valley, previously located in San Diego
County, became part of the new County of Riverside (the “County”). The City encompasses
approximately 43 square miles, with over 10 miles of lakeshore, and is located at the southwestern
end of the County, 73 miles southeast of downtown Los Angeles and 74 miles north of downtown
San Diego.
Neither the Bonds nor the Local Obligations are a debt of the City or the County,
and no revenues of the City or County are pledged to repayment of the Bonds or the Local
Obligations.
Authority.The Authority is a joint exercise of powers authority organized and existing
pursuant to the Act. Its members are the City and the Parking Authority of the City (the “Parking
Authority”).
District.The District includes a portion of Canyon Hills, a planned residential community
located in the southeast portion of the City, to the east of Lake Elsinore. Pardee Homes, a
California corporation (“Pardee Homes”), acquired the partially-developed Canyon Hills project
in 1988 and serves as the master developer and primary merchant builder. At build-out, the
Canyon Hills project is expected to include approximately 3,689 dwelling units.
See the caption “THE COMMUNITY FACILITIES DISTRICT AND IMPROVEMENT AREA
B - General Description of the District” for further information with respect to the District.
Improvement Area B. Improvement Area B consists of two non-contiguous areas. One
of these non-contiguous areas is fully built out and consists of 806 single family detached homes
-4-
which have all been sold to individual homeowners (the “Fully Built Area”). The second non-
contiguous area (also known as “Westridge”) comprises Phase 8 of the Canyon Hills Specific
Plan and is planned for 456 single family detached homes and a commercial parcel (the
“Commercial Parcel”) on approximately 72 acres. Westridge includes six planning areas: 1A, 1B
north/south, 2A, 2B, 2C and 2D. The 456 lots have been developed into five neighborhoods by
Pardee Homes: Aura, Overlook, Starling, Vantage, and Viewpoint, and include single-family
subdivisions in various states of development from actively selling and occupied production
homes to lots in a physically finished condition. See “CURRENT AND PROPOSED
DEVELOPMENT OF PROPERTY WITHIN IMPROVEMENT AREA B” below. The Fully Built Area
comprises Tax Zones 2 and 3 of Improvement Area B and Westridge comprises Tax Zone 1.
Current and Proposed Development Within Improvement Area B
Public Infrastructure.The public infrastructure is completely built in the five
neighborhoods in Westridge. The Commercial Parcel has been mass graded, but additional
grading at the site would be required before structures could be built on it.
Private Development. The single-family residential lots in Westridge are being developed
by Pardee Homes, as the primary merchant builder. The Commercial Parcel is zoned for an
estimated 60,000 square feet of retail uses but there are currently no plans to develop the site.
A summary of planned dwelling units and property development in Westridge broken down
by neighborhood as of September 1, 2017, is set forth below:
Construction Stages
PA 1A and
PA 1B South PA 1B North PA 2A PA 2B PA 2C PA 2D Total
Model Units 3 3 3 0 3 3 15
Production Units
Completed 47 10 69 0 72 34 232*
Under Construction 8 9 3 0 21 32 73
Physically Finished Lots 25 85 0 0 16 10 136
Commercial Parcel 0 0 0 1**0 0 N/A
Total 83 107 75 1 112 79 456
*177 are owned by individual homeowners.
**The Commercial Parcel consists of 7.9 acres.
Source: Special Tax Consultant and Pardee Homes.
Ownership by Pardee Homes.As of September 1, 2017, 177 homes had been built and
transferred to individual purchasers, and Pardee Homes owned within Westridge:
15 completed model homes (one of which is in escrow)
55 completed but unsold homes (43 of which are in escrow)
73 homes under construction (30 of which are in escrow)
136 physically finished lots (2 of which are in escrow)
A 7.9 acre commercial parcel
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In fiscal year 2018-19, the property owned by Pardee Homes in Westridge is expected to
be responsible for approximately 24.76% of the estimated Special Tax levy.
See “CURRENT AND PROPOSED DEVELOPMENT OF PROPERTY WITHIN
IMPROVEMENT AREA B” for more detailed information about the current and proposed
development in Improvement Area B.
Community Facilities District No. 2016-2 and Partial Prepayment of the Local Obligations
The City formed Community Facilities District No. 2016-2 of the City of Lake Elsinore
(Canyon Hills) (the “CFD No. 2016-2”) in December, 2016. The boundary of CFD No. 2016-2 is
co-terminous with the Westridge area of Improvement Area B and does not include the Fully Built
Area. CFD No. 2106-2 was formed with the intention of further assisting in the financing of public
infrastructure necessary for the construction of units within Westridge. Bonds for CFD No. 2016-
2 CFD (the “CFD No. 2016-2 Bonds”) are expected to be issued in early summer of 2018, a
portion of the proceeds of which (in an anticipated amount of $11,900,000) will be used to defease
and redeem (on a pro rata basis) certain maturities of the 2015 Bonds and the Local Obligations.
See “COMMUNITY FACILITIES DISTRICT NO. 2016-2 AND THE PROPOSED ELIMINATION
OF THE SPECIAL TAX LIEN SECURING THE LOCAL OBLIGATIONS” herein for more
information.
Foreclosure Proceedings
The District has covenanted for the benefit of the Owners of the Local Obligations to
undertake judicial foreclosure in certain instances. See the caption “SECURITY AND SOURCES
OF PAYMENT FOR THE LOCAL OBLIGATIONS- Covenants of the District.”
Other Taxes and Assessments. Property in Improvement Area B is subject to other
taxes and/or special assessments with liens equal in priority to the continuing lien of the Special
Taxes, and additional such taxes and/or special assessments may be levied in the future. These
other taxes and/or special assessments, when combined with the Special Taxes, could adversely
impact the willingness of the Improvement Area B landowners to pay the Special Taxes when
due. See the captions “THE COMMUNITY FACILITIES DISTRICT AND IMPROVEMENT AREA
B—Direct and Overlapping Indebtedness” and “SPECIAL RISK FACTORS—Parity Taxes and
Special Assessments.”
Tax Exemption
In the opinion of Stradling Yocca Carlson & Rauth, a Professional Corporation, Newport
Beach, California (“Bond Counsel”), under existing statutes, regulations, rulings and judicial
decisions, and assuming certain representations and compliance with certain covenants and
requirements described in this Official Statement, interest (and original issue discount) on the
Bonds is excluded from gross income for federal income tax purposes and is not an item of tax
preference for purposes of calculating the federal alternative minimum tax imposed on individuals
and corporations. In the further opinion of Bond Counsel, interest (and original issue discount)
on the Bonds is exempt from State of California personal income tax. See the caption “TAX
EXEMPTION.”
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Set forth in APPENIDX D is the form of opinion of Bond Counsel expected to be delivered
in connection with the issuance of the Bonds. For a more complete discussion of Bond Counsel’s
opinion and certain tax consequences incident to the ownership of the Bonds, see the caption
“LEGAL MATTERS.”
Appraisal Report
Initial Appraisal Report. An MAI appraisal of the land and existing improvements within
Improvement Area B was prepared Kitty Siino & Associates, Inc., Tustin, California (the
“Appraiser”). The appraisal is dated October 12, 2017 and is entitled “Appraisal Report portion
of Community Facilities District No. 2003-2 (Canyon Hills - Westridge) Improvement Area “B” of
the City of Lake Elsinore” (the “Initial Appraisal Report”). See “THE COMMUNITY FACILITIES
DISTRICT AND IMPROVEMENT AREA B - Appraisal Report” and APPENDIX G — “APPRAISAL
REPORT.”
In connection with the appraisal of the taxable property within Improvement Area B as of
the date of value, September 1, 2017 (the “Date of Value”), the Authority requested both a Fiscal
Year 2017-18 County assessed valuation (the “Assessed Valuation”) for certain of the homes
and an appraised valuation for certain of the homes. The Assessed Valuation is provided for
completed homes in the Fully Built Area and is $252,529,763.
The appraised valueconsists of the estimated minimum market value of the as-is condition
and ownership of the taxable property within Westridge as of the Date of Value. The Initial
Appraisal Report reached the following market value conclusions:
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Ownership Total
Minimum
Market Value
Owned by Pardee Homes
Aura 52 $7,632,631
Overlook 61 10,071,595
Starling 107 13,388,595
Vantage 46 7,646,513
Viewpoint 13 2,961,784
Commercial Parcel 7.9 (acres)2,071,560
Total Owned by Pardee Homes 279 $43,772,678
Owned by Individuals
Aura 27 $9,549,795
Overlook 51 16,468,426
Starling 0 0
Vantage 37 14,352,580
Viewpoint 62 19,092,540
Total Owned by Individuals 177 $59,463,341
Total Value (Lots & Commercial
Parcel)456 $103,236,019
The total estimated aggregate valuation of property in Improvement Area B is
$355,756,782.
Supplement to Appraisal Report. The Appraiser subsequently issued a supplement to
the Initial Appraisal Report dated [ ] (the “Supplement to Appraisal Report”), in which
the Appraiser looked at development and ownership as of [ ] and concluded that the
market values of the taxable property in Improvement Area B are not less than the concluded
values in the Initial Appraisal Report.
Together, the Initial Appraisal Report and the Supplement to Appraisal Report are
referred to in this Official Statement as the “Appraisal Report”.
See “THE COMMUNITY FACILITIES DISTRICT AND IMPROVEMENT AREA B -
Appraisal Report” and APPENDIX G - “APPRAISAL REPORT”.
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Bond Owners’ Risks
Certain events could affect the ability of the Authority to pay the principal of and interest
on the Bonds when due. See the caption “SPECIAL RISK FACTORS” for a discussion of certain
factors which should be considered, in addition to other matters set forth in this Official Statement,
in evaluating an investment in the Bonds. The purchase of the Bonds involves risks, and the
Bonds may not be appropriate investments for some types of investors.
Professionals Involved in the Offering
All proceedings in connection with the issuance of the Bonds are subject to the approval
of Stradling Yocca Carlson & Rauth, a Professional Corporation, Newport Beach, California, Bond
Counsel. Wilmington Trust, National Association, Costa Mesa, California, will act as the
Trustee/Local Obligations Trustee. Jones Hall, A Professional Law Corporation, is acting as
Disclosure Counsel to the Authority. Leibold McClendon & Mann acts as counsel for the District
and the Authority. Stifel, Nicolaus & Company, Incorporated is acting as Underwriter (the
“Underwriter”) in connection with the issuance and delivery of the Bonds. Nossaman LLP, Irvine,
California, is acting as counsel to the Underwriter. Other professional services have been
performed by Kitty Siino & Associates, Inc., Tustin, California, as Appraiser (the “Appraiser”),
SCG - Spicer Consulting Group, Murrieta, California as Special Tax Consultant (the “Special Tax
Consultant”) to the Authority, and Urban Futures Incorporated, Orange, California, as Financial
Advisor (the “Financial Advisor”).
Bond Counsel, Disclosure Counsel, Underwriter’s Counsel, the Financial Advisor, the
Underwriter and the Special Tax Consultant will receive compensation contingent upon issuance
of the Bonds. Each of Bond Counsel and Disclosure Counsel represents the Underwriter in
connection with financings unrelated to the Bonds and the Local Obligations.
Continuing Disclosure
The Authority will execute a Continuing Disclosure Certificate and will covenant therein for
the benefit of holders and beneficial owners of the Bonds to provide certain financial information
and operating data relating to the Authority and Improvement Area B by not later than February
15 of each year. See “MISCELLANEOUS — Continuing Disclosure.”
Other Information
This Official Statement speaks only as of its date, and the information contained in this
Official Statement is subject to change.
Brief descriptions of the Bonds, the Local Obligations, the Indenture and the Local
Obligation Bond Indenture are included in this Official Statement. Such descriptions and
information do not purport to be comprehensive or definitive. All references in this Official
Statement to the Indenture, the Local Obligation Bond Indenture,the Bonds, the Local Obligations
and the Constitution and laws of the State, as well as the proceedings of the City Council acting
as the legislative body of the District or the Board of Directors of the Authority, are qualified in
their entirety by references to such documents, laws and proceedings, and with respect to the
Bonds and Local Obligations, by reference to the Indenture and the Local Obligation Bond
Indenture. Capitalized terms not otherwise defined in this Official Statement have the meanings
set forth in APPENDIX A.
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Copies of the Indenture, the Local Obligation Bond Indenture and other documents and
information are available for inspection and copies may be obtained from the City, 130 S. Main
Street, Lake Elsinore, California, 92530, Attention: City Clerk.
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FINANCING PLAN
Purpose of Issue
Acquisition of the Local Obligations. The Authority is issuing the Bonds to purchase
the Local Obligations.
Proceeds of the Local Obligations will be (i) used to finance public facilities for
Improvement Area B of the District, (ii) used to pay the costs of issuing the Bonds and the Local
Obligations and (iii) applied to fund a Reserve Fund held by the Trustee for the Bonds.
Estimated Sources and Uses of Funds
The Bonds. The anticipated sources and uses of funds relating to the Bonds are as
follows:
Sources:
Principal Amount of the Bonds $[________].00
Net Original Issue Premium [________]
Total Sources $[________]
Uses:
Purchase Fund
(1)$[________]
Cost of Issuance Fund(2)[________]
Reserve Fund(3)[________]
Total Uses $[________]
(1)A portion of the proceeds of the Bonds will be deposited in the Purchase Fund under the Indenture
to be used to acquire the Local Obligations.
(2)The Local Obligations Trustee will transfer to the Trustee for deposit in the Costs of Issuance Fund
the District’s share of the costs of issuance of the Bonds. Amounts in the Cost of Issuance Fund will be
used to pay the Trustee fees, legal fees, Underwriter’s Discount, printing costs and other related costs.
(3)The Local Obligations Trustee will transfer to the Trustee for deposit into the Reserve Fund the
District’s initial Proportionate Share of the Reserve Requirement with respect to the Bonds.
“Proportionate Share” is defined in the Local Obligations Indenture to mean 100% of the Reserve
Requirement (as defined in this Official Statement).
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Local Obligations. The anticipated sources and uses of funds relating to the Local
Obligations are as follows:
Sources:
Principal Amount on the Local
Obligations $[________]
Net Original Issue Premium [________]
Total Sources [________]
Uses:
City Facilities Account of the
Improvement Fund [________]
[Water Facilities Account of the
Improvement Fund][________]
Cost of Issuance Fund (1)[________]
Reserve Fund(2)[________]
Total Uses [________]
(1)On the date of issuance of the Bonds and the Local Obligations, the District will transfer its share of
the proceeds of the Local Obligations to the Trustee for deposit into the Cost of Issuance Fund.
(2)The Local Obligations Trustee will transfer to the Trustee for deposit into the Reserve Fund the
District’s Proportionate Share of the initial Reserve Requirement with respect to the Bonds.
“Proportionate Share” is defined in the Local Obligations Indenture to mean 100% of the Reserve
Requirement (as defined in this Official Statement).
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THE BONDS
General Provisions
The Bonds will be dated their date of delivery, and the Bonds will be issued in the
aggregate principal amounts set forth on the inside front cover. The Bonds will bear interest from
their dated date at the rates per annum set forth on the inside front cover hereof, payable
semiannually on each September 1 and March 1, commencing March 1, 2018 (each, an “Interest
Payment Date”), and will mature in the amounts and on the dates set forth on the inside front
cover. The Bonds will be issued in fully registered form in denominations of $5,000 each or any
integral multiple thereof.
Interest on the Bonds will be payable on each Interest Payment Date to the person whose
name appears on the Bond Register as the Owner as of the Record Date immediately preceding
each Interest Payment Date. Interest will be paid by check of the Trustee mailed on the Interest
Payment Date by first class mail, postage prepaid, to the Owner at the address as it appears on
the Bond Register or by wire transfer to an account in the United States of America upon
instructions of any Owner of $1,000,000 or more in aggregate principal amount of Bonds provided
to the Trustee, in writing, at least five Business Days before the Record Date for such Interest
Payment Date. The Bonds are issued in fully registered form and will be registered in the name
of Cede & Co., as nominee of The Depository Trust Company, New York, New York (“DTC”).
DTC will act as securities depository of the Bonds. Ownership interests in the Bonds may be
purchased in book-entry form only in denominations of $5,000 and any integral multiple. See “—
Book-Entry Only System.”
Principal of and premium (if any) on any Bond will be paid upon presentation and surrender
thereof, at maturity or the prior redemption thereof, at the Trust Office of the Trustee.
Each Bond will bear interest from the Interest Payment Date next preceding the date of
authentication thereof, unless (a) it is authenticated after a Record Date (the 15th calendar day
of the month preceding an Interest Payment Date, whether or not it is a Business Day) and on or
before the following Interest Payment Date, in which event it will bear interest from such Interest
Payment Date; or (b) it is authenticated on or before October 15, 2017, in which event it will bear
interest from the Dated Date; provided, however, that if, as of the date of authentication of any
Bond, interest thereon is in default, such Bond will bear interest from the Interest Payment Date
to which interest has previously been paid or made available for payment thereon, or from the
Dated Date if no interest has been paid or made available for payment.
Redemption
Optional Redemption. The Bonds maturing on or before September 1, 20[__] are not
subject to optional call and redemption prior to maturity. The Bonds maturing on or after
September 1, 20[__] may be redeemed at the option of the Authority, from any source of available
funds, prior to maturity on any Interest Payment Date on or after September 1, 20[__] as a whole,
or in part from maturities of the Local Obligations simultaneously redeemed, if any redemption of
Local Obligations is being made in conjunction with such optional redemption, and otherwise from
such maturities as are selected by the Authority, and by lot within a maturity, at a redemption price
equal to the par amount of the Bonds to be redeemed, together with accrued interest thereon to
the date of redemption, without premium.
Special Redemption. The Bonds are subject to special redemption on any Interest
Payment Date from proceeds of early redemption of Local Obligations from the prepayment of
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Special Taxes within Improvement Area B, in whole or in part, from maturities corresponding
proportionately to the maturities of the Local Obligations simultaneously redeemed, at the
principal amount thereof, plus a premium expressed below as a percentage of the principal
amount so redeemed, plus accrued interest to the date of redemption thereof:
Redemption Dates Premium
The City has formed CFD No. 2016-2 (as defined herein) for the purpose of issuing CFD
No. 2016-2 Bonds (also defined herein), anticipated to be issued by early summer of 2018. A
portion of the CFD No. 2016-2 Bonds (in an anticipated amount of $11,900,000) will be used to
defease and redeem (on a pro rata basis) certain maturities of the 2015 Bonds and the Local
Obligations. Such early redemption of the Local Obligations from the prepayment of Special
Taxes will cause a corresponding special redemption of certain maturities of the Bonds. See
“COMMUNITY FACILITIES DISTRICT NO. 2016-2 AND THE PROPOSED ELIMINATION OF
THE SPECIAL TAX LIEN SECURING THE LOCAL OBLIGATIONS” and “SPECIAL RISK
FACTORS - Potential Early Redemption of Bonds from Prepayments” for more information.
Mandatory Sinking Fund Redemption. The Bonds maturing on September 1, 20[__]
(the “20[__]Term Bond”) and September 1, 20[__] (the “20[__]Term Bond” and together with
the 20[__] Term Bond, the “Term Bonds”) are subject to mandatory sinking fund redemption prior
to maturity, in part, on September 1, 20[__] and September 1, 20[__], respectively, and on each
September 1 thereafter by lot, from sinking fund payments at a redemption price equal to the
principal amount of Bonds to be redeemed, together with accrued interest to the date of
redemption, without premium, as follows:
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20[__]Term Bond
Redemption Date
(September 1)
Redemption
Amount
20[__]Term Bond
Redemption Date
(September 1)
Redemption
Amount
Notice of Redemption. The Trustee on behalf, and at the expense, of the Authority will
send notice of any redemption to the respective Owners of any Bonds designated for redemption
at their respective addresses appearing on the Bond Register, and to the Securities Depositories
and to the Information Services, at least thirty (30) but not more than sixty (60) days prior to the
date fixed for redemption. Neither failure to receive any such notice so mailed nor any defect
therein will affect the validity of the proceedings for the redemption of such Bonds or the cessation
of the accrual of interest thereon. The notice will state the date of the notice, the redemption date,
the redemption place and the redemption price and will designate the CUSIP numbers, the Bond
numbers and the maturity or maturities (in the event of redemption of all of the Bonds of such
maturity or maturities in whole) of the Bonds to be redeemed, and will require that such Bonds be
then surrendered at the Trust Office of the Trustee for redemption at the redemption price, giving
notice also that further interest on such Bonds will not accrue after the redemption date.
In addition, further notice will be given by the Trustee by first class mail to any Bondowner
whose Bond has been called for redemption but who has failed to submit his Bond for payment
by the date which is sixty days after the redemption date, but no defect in said further notice nor
any failure to give or receive all or any portion of such further notice will in any manner defeat the
effectiveness of a call for redemption.
In the case of an optional or special redemption of Bonds, such notice may state that such
redemption is subject to receipt by the Trustee, on or before the date fixed for redemption, of
moneys sufficient to pay the redemption price of the Bonds to be redeemed. Unless funds for the
optional or special redemption of any Bonds are irrevocably deposited with the Trustee prior to
rendering notice of redemption to the Bondowners, such notice shall state that such redemption
is subject to the deposit of funds by the Authority. Any notice of optional or special 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.
Selection of Bonds of a Maturity for Redemption. Unless otherwise provided in the
Indenture, whenever provision is made for the redemption of less than all of the Bonds of a
maturity, the Trustee will select the Bonds to be redeemed from all Bonds of such maturity not
previously called for redemption, by lot in any manner which the Trustee in its sole discretion
deems appropriate and fair. For purposes of such selection, all Bonds will be deemed to be
comprised of separate $5,000 authorized denominations, and such separate authorized
denominations will be treated as separate Bonds which may be separately redeemed.
Partial Redemption of Bonds. In the event only a portion of any Bond is called for
redemption, then upon surrender of such Bond the Authority will execute and the Trustee shall
authenticate and deliver to the Owner thereof, at the expense of the Authority, a new Bond or
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Bonds of the same maturity date, of authorized denominations in aggregate principal amount
equal to the unredeemed portion of the Bond to be redeemed.
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 have been duly provided, such Bonds so called will cease to be entitled to any benefit
under the Indenture other than the right to receive payment of the redemption price, and no
interest will accrue thereon from and after the redemption date specified in such notice.
Payment, Registration, Transfer and Exchange of Bonds
Transfer of Bonds. Subject to the book-entry only provisions of the Indenture, any Bond
may in accordance with its terms, be transferred, upon the Bond Register maintained by the
Trustee, by the person in whose name it is registered, in person or by his duly authorized attorney,
upon surrender of such Bond for cancellation, accompanied by delivery of a written instrument of
transfer in a form approved by the Trustee, duly executed. Whenever any Bond is surrendered
for transfer, the Authority will execute and the Trustee will authenticate and deliver to the
transferee a new Bond or Bonds of like tenor, maturity and aggregate principal amount. No Bonds
selected for redemption will be subject to transfer, nor shall any Bond be subject to transfer during
the fifteen days prior to the selection of Bonds for redemption.
The cost of printing any Bonds and any services rendered or any expenses incurred by
the Trustee in connection with any transfer or exchange will be paid by the Authority. However,
the Owners of the Bonds will be required to pay any tax or other governmental charge required
to be paid for any exchange or registration of transfer and theOwners of the Bonds will be required
to pay the reasonable fees and expenses of the Trustee and Authority in connection with the
replacement of any mutilated, lost or stolen Bonds.
Exchange of Bonds. Subject to the book-entry only provisions of the Indenture, Bonds
may be exchanged at the Trust Office of the Trustee for Bonds of the same tenor and maturity
and of other authorized denominations. No Bonds selected for redemption will be subject to
exchange, nor shall any Bond be subject to exchange during the fifteen days prior to the selection
of Bonds for redemption.
Bond Register. The Trustee will keep or cause to be kept at its Trust Office sufficient
records for the registration and transfer of the Bonds, which will be the Bond Register and shall
at all times during regular business hours be open to inspection by the Authority upon reasonable
notice; and, upon presentation for such purpose, the Trustee will, under such reasonable
regulations as it may prescribe, register or transfer or cause to be registered or transferred, on
said records, Bonds as hereinbefore provided.
Book-Entry Only System
The Bonds will be issued as fully registered bonds, registered in the name of Cede & Co.
as nominee of The Depository Trust Company, New York, New York (“DTC”), and will be available
to actual purchasers of the Bonds (the “Beneficial Owners”) in the denominations set forth
above, under the book-entry system maintained by DTC, only through brokers and dealers who
are or act through securities brokers and dealers, banks, trust companies, clearing corporations
and other organizations maintaining accounts with DTC (“DTC Participants”) as described
herein. Beneficial Owners will not be entitled to receive physical delivery of the Bonds. See “THE
BONDS — Book-Entry Only System.” In the event that the book-entry-only system is no longer
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used with respect to the Bonds, the Bonds will be registered and transferred in accordance with
the Indenture. See “THE BONDS — Book-Entry Only System.”
While the Bonds are subject to the book-entry system, the principal, interest and any
redemption premium with respect to a Bond will be paid by the Trustee to DTC, which in turn is
obligated to remit such payment to its DTC Participants for subsequent disbursement to Beneficial
Owners of the Bonds, as described in APPENDIX F — “DTC AND THE BOOK-ENTRY-ONLY
SYSTEM.” So long as Cede & Co. is the registered owner of the Bonds, references in this Official
Statement to the Owners of the Bonds will mean Cede & Co. and not the Beneficial Owners of
the Bonds. The Authority gives no assurance that DTC or the DTC Participants will
distribute payments or notices to Beneficial Owners.
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Estimated Debt Service Schedules: Bonds and Local Obligations
The following table presents the debt service schedule for the Bonds, assuming there are
no early redemptions of Bonds prior to their respective maturities (other than as a result of
mandatory sinking fund payments).
TABLE 1
DEBT SERVICE SCHEDULE FOR THE BONDS
Year
Ending
September
1 Principal Interest
Total
Debt Service
Total $$$
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The following table summarizes the scheduled debt service payments of the Local
Obligations, assuming there are no early redemptions of Local Obligations prior to their maturities
(other than as a result of mandatory sinking fund payments).
TABLE 2
DEBT SERVICE SCHEDULE FOR THE LOCAL OBLIGATIONS
Bond Year
Ending
Sept. 1 Principal Interest
19
Debt Service Coverage for the Bonds
Scheduled payments of principal of, including mandatory sinking fund payments, and
interest on the Bonds equals 100% of the aggregate scheduled debt service on the Local
Obligations. Annual debt service for the Local Obligations has been structured so that Maximum
Special Taxes levied on property categorized as Developed Property in Improvement Area B for
Fiscal Year 2018-19, less the District’s Administrative Expense Requirement and assuming no
delinquencies, would generate in each Fiscal Year not less than 110% of debt service payable
with respect to the Local Obligations. See “THE COMMUNITY FACILITIES DISTRICT AND
IMPROVEMENT AREA B.”
SECURITY FOR THE BONDS
General
As described below, the Bonds are payable from Revenues, consisting primarily of
amounts received by the Authority as the result of its acquisition of the Local Obligations.
The Bonds are special obligations of the Authority payable solely from and secured
solely by the Revenues. The Bonds are not a debt or liability of the City, the County, the
State of California or any political subdivisions thereof other than the Authority to the
limited extent described in this Official Statement. The faith and credit of the Authority are
not pledged to secure the payment of Bonds, nor are any of its members liable therefor,
nor in any event shall the Bonds or any interest or redemption premium thereunder be
payable out of any funds or properties other than those of the Authority as set forth in the
Indenture. The Authority has no taxing power.
Revenues and Flow of Funds
Bonds; Revenues. The Bonds are secured by a first lien on and pledge of all of the
Revenues. So long as any of the Bonds are Outstanding, the Revenues will not be used for any
purpose except as is expressly permitted by the Indenture.
Collection by the Trustee. The Trustee will collect and receive all of the Revenues, and
any Revenues collected or received by the Authority will be deemed to be held, and to have been
collected or received, by the Authority as the agent of the Trustee and shall forthwith be paid by
the Authority to the Trustee. The Trustee is also entitled to and will take all steps, actions and
proceedings reasonably necessary in its judgment to enforce, either jointly with the Authority or
separately, all of the rights of the Authority and all of the obligations of the City and the District
under the Local Obligations.
Deposit of Revenues. All Revenues derived from the Local Obligations will be promptly
deposited by the Trustee upon receipt thereof in the Revenue Fund. Any Revenues which
represent the payment of delinquent principal of or interest on an issue of Local Obligations will
first applied to cure any event of default on the Bonds and then will be deposited to the Reserve
Fund to the extent necessary to replenish, to the extent the Reserve Fund deficiency resulted
from the delinquency in the payment of scheduled debt service on such Local Obligations, the
amount in the Reserve Fund to the Reserve Requirement, with any amount in excess of that
needed to replenish the Reserve Fund to be deposited to the Revenue Fund for transfer as
provided in the Indenture.
20
Application of Revenues. On each Interest Payment Date, the Trustee shall transfer
from the Revenue Fund, and deposit into the following respective accounts for the Bonds, the
following amounts in the following order of priority, the requirements of each such account
(including the making up of any deficiencies in any such account resulting from lack of Revenues
sufficient to make any earlier required deposit) at the time of deposit to be satisfied before any
transfer is made to any account subsequent in priority:
Interest Account. On each Interest Payment Date, the Trustee will 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 on such date. All moneys in the Interest
Account will be used and withdrawn by the Trustee solely for the purpose of paying interest
on the Bonds as it shall become due and payable (including accrued interest on any Bonds
redeemed prior to maturity). In the event that the amounts on deposit in the Interest
Account on any Interest Payment Date, after any transfers from the Reserve Fund, are
insufficient for any reason to pay the aggregate amount of interest then coming due and
payable on the Outstanding Bonds, the Trustee will apply such amounts to the payment
of interest on each of the Outstanding Bonds on a pro rata basis.
Principal Account. On each September 1 on which principal of the Bonds is
payable, the Trustee will deposit in the Principal Account an amount required to cause the
aggregate amount on deposit in the Principal Account to equal the principal amount of,
and premium (if any) on, the Bonds coming due and payable on such date, or required to
be redeemed on such date pursuant to the Indenture; provided, however, that no amount
will be deposited to effect an optional redemption unless the Trustee has first received a
certificate of an Independent Accountant certifying that such deposit to effect an optional
redemption of the Bonds will not impair the ability of the Authority to make timely payment
of the principal of and interest on the Bonds, assuming for such purposes that the District
continues to make timely payments on all Local Obligations not then in default. All moneys
in the Principal Account will be used and withdrawn by the Trustee solely for the purpose
of (i) paying the principal of the Bonds at the maturity thereof or (ii) paying the principal of
and premium (if any) on any Bonds upon the redemption thereof.
Reserve Fund. On each Interest Payment Date on which the balance in the
Reserve Fund is less than the Reserve Requirement, after making deposits required into
the Interest Account and the Principal Account, the Trustee shall transfer from the
Revenue Fund an amount sufficient to increase the balance in the Reserve Fund to the
Reserve Requirement by depositing the amount necessary to make the amount therein
total the Reserve Requirement, provided the value of the moneys deposited therein, as
invested, will be valued at market value on such transfer date for purposes of making such
determination.
Deficiencies. If on any Interest Payment Date the amount on deposit in the Revenue
Fund is inadequate to make the transfers described above as a result of a payment default on an
issue of Local Obligations, the Trustee will immediately notify the District of the amount needed
to make the required deposits described above under “Application of Revenues.” In the event
that following such notice the Trustee receives additional payments from the District to cure such
shortfall, the Trustee shall deposit such amounts to the Revenue Fund for application in
accordance with the Indenture.
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Deposit into Rebate Fund. On each Interest Payment Date after making the transfers
described above, upon receipt of a Request of the Authority to do so, the Trustee will transfer
from the Revenue Fund to the Rebate Fund for deposit in the accounts therein the amounts
specified in such Request.
Surplus Fund. On September 1 of each year, after making the deposits described above,
the Trustee will transfer all amounts remaining on deposit in the Revenue Fund to the
Administrative Expense Fund unless the Trustee has received a Request of the Authority directing
it to transfer all or a portion of the remaining amounts to the Surplus Fund, in which case the
Trustee will make the requested transfer to the Surplus Fund.
Reserve Fund
A Reserve Fund for the Bonds will be established and there will be maintained in the
Reserve Fund an amount equal to the “Reserve Requirement.” The Reserve Requirement is an
amount equal to the lowest of (i) 10% of the initial principal amount of the Bonds, (ii) Maximum
Annual Debt Service on the Outstanding Bonds, or (iii) 125% of Average Annual Debt Service on
the Outstanding Bonds. Notwithstanding the foregoing, in no event shall the Reserve
Requirement exceed the initial deposit thereto. The Reserve Requirement will initially be
deposited into the Reserve Fund in the amount of $_________.
Subject to the limitations set forth in the following paragraph, moneys in the Reserve Fund
will be used to pay the principal of and interest on the Bonds when the moneys in the Interest
Account and the Principal Account of the Revenue Fund are insufficient for that purpose. In
addition, amounts in the Reserve Fund may be applied (i) in connection with an optional
redemption or defeasance of Bonds, (ii) when the balance therein equals the principal and interest
due on the Bonds to and including maturity, or (iii) when the amount in the Reserve Fund is
transferred to the Interest Account and the Principal Account as a credit against the payments
due on the Local Obligations on the transfer dates specified below.
If the amounts in the Interest Account or the Principal Account of the Revenue Fund are
insufficient to pay the principal of or interest on the Bonds when due or mandatory sinking fund
payments on the Bonds when due, the Trustee will withdraw from the Reserve Fund an amount
equal to the deficiency resulting from the delinquency in the payment of scheduled debt service
on the Local Obligations and transfer such amount to the Interest Account, the Principal Account
of the Revenue Fund or both, as applicable.
When amounts in an account of the Reserve Fund are sufficient to repay the remaining
principal and interest due on the Local Obligations that will be applied to the Bonds, such amounts
will be transferred to the Interest Account and the Principal Account as a credit against the
payments due on such Local Obligations, with the amount transferred from an account being
deposited first to the Interest Account as a credit on the interest due on the Local Obligations on
such date and the balance being deposited to the Principal Account as a credit on the principal
due on such Local Obligations on such date.
Surplus Fund
Any amounts transferred to the Surplus Fund will no longer be considered Revenues and
will not be pledged to repay the Bonds. So long as the Local Obligations are outstanding, on
September 1 of each year after setting aside any amount specified in a Request of the Authority
as necessary to pay Administrative Expenses, all of the remaining balance, if any, in the Surplus
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Fund will (i) be transferred by the Trustee to the City Treasurer for credit to the special tax fund
of the District, or (ii) as set forth in a request of the City be applied to the redemption of Local
Obligations pursuant to the terms of the Local Obligations Indenture.
On September 1 of the year preceding the year of the final maturity of the Bonds, the
remaining balance in the Surplus Fund will be credited by the Trustee to the special tax fund
established with respect to the Local Obligations. Such amounts will be applied to reduce debt
service payments on Local Obligations.
Additional Bonds of the Authority
Additional Bonds may only be issued subject to the following conditions precedent
established by the Indenture:
(a)The Authority shall be in compliance with all covenants set forth in the Indenture
and all Supplemental Indentures.
(b)The proceeds of such Additional Bonds will be applied to accomplish a refunding
of all or a portion of the Bonds or any Additional Bonds Outstanding.
(c)The Supplemental Indenture providing for the issuance of such Additional Bonds
must provide that interest thereon will be payable on September 1 and March 1, and principal
thereof will be payable on September 1 in any year in which principal is payable.
(d)Prior to the delivery of any Additional Bonds, a written certificate must be provided
to the Authority and the Trustee by an Independent Financial Consultant which certifies that
following the issuance of the Additional Bonds and the Local Obligations, the principal and interest
generated from the Local Obligations is adequate to make the timely payment of principal and
interest due on the Bonds and the Additional Bonds to be issued under the Indenture.
(e)The Supplemental Indenture providing for the issuance of Additional Bonds may
provide for the establishment of separate funds and accounts.
(f)No Event of Default has occurred and be continuing with respect to the Bonds or
any of the Local Obligations.
(g)The Authority will deliver to the Trustee a written Certificate of the Authority
certifying that the conditions precedent to the issuance of such Additional Bonds set forth in
subsections (a), (b), (c), (d) and (f) above have been satisfied and that, upon the issuance of such
Additional Bonds an amount equal to the Reserve Requirement, as adjusted (if necessary) to
reflect the issuance of such Additional Bonds will be on deposit in the Reserve Fund.
SECURITY AND SOURCES OF PAYMENT FOR THE LOCAL OBLIGATIONS
General
The Local Obligations are a limited obligation of the District payable solely from Net
Special Taxes (defined below) collected in Improvement Area B and amounts deposited by the
District in the Special Tax Fund (exclusive of the Administrative Expense Account). The District’s
limited obligation to pay the principal of, premium, if any, and interest on the Local Obligations
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from Net Special Taxes collected in Improvement Area B and amounts in the Special Tax Fund
is absolute and unconditional.
No Local Obligation (and no Parity Bonds issued under the Local Obligation Bond
Indenture relating to the Local Obligations, each a “Local Obligation Parity Bond”) is a legal or
equitable pledge, charge, lien or encumbrance upon the District’s property, or upon its income,
receipts or revenues, except the Net Special Taxes collected in Improvement Area B and other
amounts in the Special Tax Fund.
Except for the Net Special Taxes for the District, neither the credit nor the taxing
power of the District or the City is pledged for the payment of the Local Obligations or
related interest, and no Owner of the Bonds may compel the exercise of taxing power by
the District or the forfeiture of any of its property. The principal of and interest on the Local
Obligations and premiums upon the redemption thereof, if any, are not a debt of the District
or the City, the State of California or any of its political subdivisions within the meaning of
any constitutional or statutory limitation or restriction.
Special Taxes; Gross Special Taxes; Net Special Taxes
At a special election held on January 13, 2004, the qualified electors within Improvement
Area B authorized the District to incur indebtedness in an amount not to exceed $26,995,660 for
Improvement Area B and approved the rate and method of apportionment of special tax for
Improvement Area B (the “Original Rate and Method”). The Original Rate and Method was
amended in 2009 (as amended, the “Rate and Method”). The “Special Taxes” for Improvement
Area B are levied and collected according to Rate and Method. See “THE COMMUNITY
FACILITIES DISTRICT AND IMPROVEMENT AREA B - History of the District and Improvement
Area B” and APPENDIX C — “RATE AND METHOD OF APPORTIONMENT OF SPECIAL
TAXES FOR IMPROVEMENT AREA B.”
The Special Taxes levied in any fiscal year may not exceed the maximum rates
authorized pursuant to the Rate and Method. There is no assurance that the Net Special Taxes
will, in all circumstances, be adequate to pay the principal of and interest on the Local Obligations
when due. See the caption “SPECIAL RISK FACTORS—Insufficiency of Special Taxes.”
The “Net Special Taxes” pledged by the District to the Local Obligations (and any related
Parity Bonds) is defined in the Local Obligation Bond Indenture as “Gross Special Taxes” minus
amounts set aside to pay Administrative Expenses. See “— Administrative Expense
Requirement” below.
“Gross Special Taxes” is defined as the amount of all Special Taxes received by a
District, together with the proceeds collected from the sale of property pursuant to the foreclosure
provisions of the Local Obligation Bond Indenture for the delinquency of such Special Taxes
remaining after the payment of all costs related to the foreclosure actions.
The District covenants in the Local Obligation Bond Indenture that it will receive all Special
Taxes in trust for the Owners of the Local Obligations, and will instruct the Treasurer to deposit
all Special Taxes with the Local Obligations Trustee immediately upon their apportionment to the
District, and the District shall have no beneficial right or interest in the amounts so deposited
except as provided by the Local Obligation Bond Indenture.
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Except for the portion of any prepayment of Special Taxes to be deposited into the
Redemption Account or the Improvement Fund, as applicable, established under the Local
Obligation Bond Indenture, the Local Obligations Trustee under the Local Obligation Bond
Indenture will, on each date on which the Special Taxes are received from the District, deposit
the Special Taxes in the Special Tax Fund to be held in trust for the Authority as the owner of the
Local Obligations. The Local Obligations Trustee will transfer the Special Taxes on deposit in the
Special Tax Fund on the dates and in the amounts set forth in the Local Obligation Bond
Indenture, in the following order of priority, to:
(1)The Administrative Expense Account up to the Administrative Expense
Requirement;
(2)The Interest Account of the Special Tax Fund;
(3)The Principal Account of the Special Tax Fund;
(4)The Reserve Account held by the Trustee up to the District’s Proportionate Share
of the Reserve Requirement;
(5)The Redemption Account of the Special Tax Fund;
(6)The Improvement Fund; and
(7)The Surplus Fund.
The District’s Proportionate Share of the Reserve Requirement is equal to 100% of the
Reserve Requirement with respect to the Local Obligations.
The Special Tax is collected in the manner and at the same time as ad valorem property
taxes are collected and is subject to the same penalties and the same procedure, sale, and lien
priority in case of delinquency as is provided for ad valorem property taxes.
Administrative Expense Requirement
The Local Obligations Trustee will deposit the first available Special Taxes from the
Special Tax Fund to the Administrative Expense Fund in an amount such that the total amounts
transferred to the Administrative Expense Fund in any Bond Year do not exceed the
Administrative Expense Requirement. The initial Administrative Expense Requirement for the
District is $55,000.
The Administrative Expense Requirement for the District is subject to increase under the
Local Obligation Bond Indenture. See APPENDIX A — “SUMMARY OF PRINCIPAL LEGAL
DOCUMENTS.”
Local Obligation Parity Bonds
Refunding Bonds.The Local Obligation Bond Indenture authorizes additional bonds
secured by Net Special Taxes on a parity with the Local Obligations and the 2015 Bonds for the
purpose of refunding the Local Obligations, the 2015 Bonds or other Parity Bonds then
Outstanding, subject to the following conditions:
(a)The District must be in compliance with all covenants set forth in the Local
Obligation Bond Indenture and any supplemental indenture (each a “Local Obligation
Supplemental Indenture”) then in effect and a certificate of the District to that effect must have
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been filed with the Local Obligations Trustee; provided, however, that Local Obligation Parity
Bonds may be issued notwithstanding that the District is not in compliance with all such covenants
so long as immediately following the issuance of such Local Obligation Parity Bonds the District
will be in compliance with all such covenants.
(b)The issuance of such Local Obligation Parity Bonds must have been duly
authorized pursuant to the Mello-Roos Act and all applicable laws, and the issuance of such Local
Obligation Parity Bonds must have been provided for by a Local Obligation Supplemental
Indenture duly adopted by the District which must specify the following:
(1)The purpose for which such Local Obligation Parity Bonds are to be
issued and the fund or funds into which the proceeds thereof are to be deposited;
(2)The authorized principal amount of such Local Obligation Parity
Bonds;
(3)The date and the maturity date or dates of such Local Obligation
Parity Bonds; provided that (i) each maturity date shall fall on a September 1, (ii) all such Local
Obligation Parity Bonds of like maturity shall be identical in all respects, except as to number,
(iii) fixed serial maturities or Sinking Fund Payments, or any combination thereof, shall be
established to provide for the retirement of all such Local Obligation Parity Bonds on or before
their respective maturity dates, and (iv) the maturity of such Parity Bonds shall not exceed the
maturity of the Bonds being refunded;
(4)The description of the Local Obligation Parity Bonds, the place of
payment thereof and the procedure for execution and authentication;
(5)The denominations and method of numbering of such Local
Obligation Parity Bonds;
(6)The amount and due date of each mandatory Sinking Fund
Payment, if any, for such Local Obligation Parity Bonds;
(7)The amount, if any, to be deposited from the proceeds of such Local
Obligation Parity Bonds into a reserve fund for such Local Obligation Parity Bonds;
(8)The form of such Local Obligation Parity Bonds; and
(9)Such other provisions as are necessary or appropriate and not
inconsistent with the applicable Local Obligation Bond Indenture.
(c)The District shall have received the following documents or money or
securities, all of such documents dated or certified, as the case may be, as of the date of delivery
of such Local Obligation Parity Bonds by the Local Obligations Trustee (unless the Local
Obligations Trustee shall accept any of such documents bearing a prior date):
(1)A certified copy of the Local Obligation Supplemental Indenture
authorizing the issuance of such Local Obligation Parity Bonds;
(2)A written request of the District as to the delivery of such Local
Obligation Parity Bonds;
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(3)An opinion of Bond Counsel and/or general counsel to the District
to the effect that (i) the District has the right and power under the Mello-Roos Act to adopt the
Local Obligation Supplemental Indenture relating to such Local Obligation Parity Bonds, and the
Local Obligation Supplemental Indenture has been duly and lawfully adopted by the District, is in
full force and effect and is valid and binding upon the District and enforceable in accordance with
its terms (except as enforcement may be limited by bankruptcy, insolvency, reorganization and
other similar laws relating to the enforcement of creditors’ rights); (ii) the Local Obligation Bond
Indenture creates the valid pledge which it purports to create of the Net Special Taxes and other
amounts as provided in the Local Obligation Bond Indenture, subject to the application thereof to
the purposes and on the conditions permitted by the Local Obligation Bond Indenture; and
(iii) such Local Obligation Parity Bonds are valid and binding limited obligations of the District,
enforceable in accordance with their terms (except as enforcement may be limited by bankruptcy,
insolvency, reorganization and other similar laws relating to the enforcement of creditors’ rights)
and the terms of the Local Obligation Bond Indenture and all Local Obligation Supplemental
Indentures thereto and are entitled to the benefits of the Local Obligation Bond Indenture and all
such Local Obligation Supplemental Indentures, and such Local Obligation Parity Bonds have
been duly and validly authorized and issued in accordance with the Mello-Roos Act (or other
applicable laws) and the Local Obligation Bond Indenture and all such Local Obligation
Supplemental Indentures and a further opinion of Bond Counsel to the effect that, assuming
compliance by the District with certain tax covenants, the issuance of the Local Obligation Parity
Bonds will not adversely affect the exclusion from gross income for federal income tax purposes
of interest on the Local Obligations and any Local Obligation Parity Bonds theretofore issued on
a tax exempt basis, or the exemption from State of California personal income taxation of interest
on any Outstanding Local Obligations and Local Obligation Parity Bonds theretofore issued.
(4)A certificate of the District containing such statements as may be
reasonably necessary to show compliance with the requirements of the Local Obligation Bond
Indenture;
(5)A certificate of an Independent Financial Consultant certifying that
in each Bond Year the Annual Debt Service on Local Obligations and Local Obligation Parity
Bonds to remain Outstanding following the issuance of the Local Obligation Parity Bonds
proposed to be issued is less than the Annual Debt Service on the applicable series of Local
Obligations and Local Obligation Parity Bonds Outstanding prior to the issuance of such Local
Obligation Parity Bonds; and
(6)Such further documents, money and securities as are required by
the provisions of the Local Obligation Bond Indenture and the Local Obligation Supplemental
Indenture providing for the issuance of such Local Obligation Parity Bonds.
See APPENDIX A — “SUMMARY OF PRINCIPAL LEGAL DOCUMENTS” for certain
definitions used and not defined in the above conditions for the issuance of Local Obligation Parity
Bonds.
Remaining Bond Capacity. There is no more remaining bonded indebtedness capacity
in Improvement Area B of the District after the issuance of the Local Obligations.
Priority of Lien
Each installment of the Special Taxes and any interest and penalties thereon, constitutes
a lien on the parcel of land on which it was imposed until the same is paid. Such lien is co-equal
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to and independent of the lien for general taxes, any other community facilities district special
taxes and the lien securing special assessments. See “THE COMMUNITY FACILITIES
DISTRICT AND IMPROVEMENT AND IMPROVEMENT AREA B— General Description of the
District.”
Covenants of the District
In the Local Obligation Bond Indenture, the District covenants as follows, among other
things:
Punctual Payment. It will duly and punctually pay or cause to be paid the principal of
and interest on each Local Obligation (and any Local Obligation Parity Bond) issued under its
Local Obligation Bond Indenture, together with the premium, if any to the extent that Net Special
Taxes and other amounts pledged under the Local Obligation Bond Indenture are available
therefor.
Against Encumbrance. It will not mortgage or otherwise encumber, pledge or place any
charge upon any of the Net Special Taxes except as provided in the related Local Obligation Bond
Indenture, and will not issue any obligation or securityhaving a lien or charge upon the Net Special
Taxes superior to or on a parity with the related Local Obligations (other than related Local
Obligation Parity Bonds). Nothing in the Local Obligation Bond Indenture prevents the District
from issuing or incurring indebtedness which is payable from a pledge of Net Special Taxes which
is subordinate in all respects to the pledge of Net Special Taxes to repay the related Local
Obligations and the related Local Obligation Parity Bonds.
Levy of Special Tax. So long as any Local Obligations or Local Obligation Parity Bonds
are Outstanding, the legislative body of the District will levy the related Special Tax in an amount
sufficient, together with other amounts on deposit in the Special Tax Fund and available for such
purpose, to pay the principal of and interest on such Local Obligations and any such Local
Obligation Parity Bonds when due, the Administrative Expense Requirement and to replenish the
Reserve Account resulting from the delinquency in the payment of scheduled debt service on the
Local Obligations or any Local Obligation Parity Bonds (the “Special Tax Requirement”). Each
District further covenants that it will take no actions that would discontinue or cause the
discontinuance of the Special Tax levy or the District’s authority to levy the Special Tax for so
long as the Local Obligations and any Local Obligation Parity Bonds are outstanding.
Commence Foreclosure Proceedings. The District covenants for the benefit of the
Owners of the Local Obligations (which is the Authority) and any Local Obligation Parity Bonds
that it:
(i)will commence judicial foreclosure proceedings against parcels with delinquent
Special Taxes in excess of $5,000 by the October 1 following the close of each
Fiscal Year in which such Special Taxes were due, and
(ii)will commence judicial foreclosure proceedings against all parcels with delinquent
Special Taxes by the October 1 following the close of each Fiscal Year in which it
receives Special Taxes in an amount which is less than 95% of the total Special
Tax levied and the amount on deposit in the Reserve Fund is at less than the
Proportionate Share of the Reserve Requirement, and
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(iii)will diligently pursue such foreclosure proceedings until the delinquent Special
Taxes are paid; provided that, notwithstanding the foregoing, the District may elect
to defer foreclosure proceedings on any parcel so long as the amount in the
Reserve Fund is at least equal to the Reserve Requirement.
The District may, but is not obligated to, advancefunds from any source of legally available
funds in order to maintain the Reserve Fund. Each District may treat any delinquent Special Tax
sold to an independent third-party or to any funds of the City for at least 100% of the delinquent
amount as having been paid. Proceeds of any such sale up to 100% of the delinquent amount
will be deposited in the Special Tax Fund.
The District covenants that it will deposit the net proceeds of any foreclosure and any other
Delinquency Proceeds in the related Special Tax Fund and will apply such proceeds remaining
after the payment of the Administrative Expense Requirement to pay any delinquent installments
of principal and interest on the Local Obligations of the District and any Local Obligation Parity
Bonds of the District and to make current payments of principal and interest on the Local
Obligations of the District and any Local Obligation Parity Bonds of the District.
Reduction of Maximum Special Taxes. Each District covenants that it will not initiate
proceedings to reduce the maximum Special Tax rates for Improvement Area B, unless, in
connection therewith, (i) the District receives a certificate from one or more Independent Financial
Consultants which, when taken together, certify that, on the basis of the parcels of land and
improvements existing in Improvement Area B as of the July 1 preceding the reduction, the
maximum amount of the Special Tax which may be levied on then existing Developed Property
(as defined in the Rate and Method in effect in Improvement Area B) in each Bond Year for any
related Local Obligations and Local Obligation Parity Bonds Outstanding will equal at least 110%
of the sum of the estimated Administrative Expenses and gross debt service in each Bond Year
on the Local Obligations and any Local Obligation Parity Bonds to remain Outstanding after the
reduction is approved, (ii) the District finds that any reduction made under such conditions will not
adversely affect the interests of the Owners of the related Local Obligations and any related Local
Obligation Parity Bonds, and (iii) the District is not delinquent in the payment of the principal of or
interest on the Local Obligations and any Local Obligation Parity Bonds. For purposes of
estimating Administrative Expenses for the foregoing calculation, the Independent Financial
Consultants shall compute the Administrative Expenses for the current Fiscal Year and escalate
that amount by 2% in each subsequent Fiscal Year.
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THE COMMUNITY FACILITIES DISTRICT AND IMPROVEMENT AREA B
General Description of the District
The District comprises a portion of Canyon Hills, a planned residential community located
in the southeast portion of the City, to the east of Lake Elsinore. The topography of the District is
relatively flat with only gradual sloping down to the south and west.
The District is within an area covered by the Canyon Hills Specific Plan (the “Specific
Plan”), which was originally adopted by the City Council in 1989. In 2016, the City completed
proceedings to annex into the District approximately 21 acres of land owned by Pardee Homes
and designate the area as Improvement Area E of the District. Such land is not included within
the Specific Plan but is expected to be developed with 74 homes as part of the Canyon Hills
project. At build-out, the Canyon Hills project is expected to include approximately 3,689 dwelling
units.
Improvement Area B
General.Improvement Area B consists of two non-contiguous areas. One of these non-
contiguous areas is fully built out and consists of 806 single family detached homes which have
all been sold to individual homeowners (the “Fully Built Area”). The second non-contiguous area
(also known as “Westridge”) comprises Phase 8 of the Canyon Hills Specific Plan and is planned
for 456 single family detached homes and a commercial parcel (the “Commercial Parcel”) on
approximately 72 acres. Westridge includes six planning areas: 1A, 1B north/south, 2A, 2B, 2C
and 2D. The 456 lots have been developed into five neighborhoods by Pardee Homes: Aura,
Overlook, Starling, Vantage, and Viewpoint, and include single-family subdivisions in various
states of development from actively selling and occupied production homes to lots in a physically
finished condition.
Public Infrastructure.The public infrastructure is completely built in the five
neighborhoods in Westridge. The Commercial Parcel has been mass graded, but additional
grading at the sight would be required before structures could be built on it.
Private Development. The single-family residential lots in Westridge are being developed
by Pardee Homes, as the primary merchant builder. Planning Area 2B, the Commercial Parcel,
is zoned for an estimated 60,000 square feet of retail uses but there are currently no plans to
develop the site.
Utilities.Water, sewer and stormwater drainage service to the property within
Improvement Area B is currently supplied by the Elsinore Valley Municipal Water District.
Electricity is currently supplied by Southern California Edison, gas by Southern California Gas
Company and telephone services by Frontier Communications.
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Although, like all of Southern California, the land within Improvement Area B is subject to
seismic activity, it is not located within an Alquist-Priolo Earthquake Fault Zone.
Development of Single-Family Lots.Information about the ownership and planned
development of the single-family lots in Westridge is set forth under the caption “CURRENT AND
PROPOSED DEVELOPMENT OF PROPERTY WITHIN IMPROVEMENT AREA B.”
History of the District and Improvement Area B
On January 13, 2004, the City of Lake Elsinore (the “City”) formed the District by the
adoption of Resolution No. 2004-6. The District originally consisted of four improvement areas
(Improvement Areas A through D) (each an “Improvement Area” and collectively, the
“Improvement Areas”). As described above, Improvement Area E was added to the District in
2016. Each Improvement Area has a separate rate and method of apportionment of special tax
approved by the City and the qualified electors within each respective Improvement Area.
On January 13, 2004, the qualified electors within each Improvement Area voted in favor
of the incurring of bonded indebtedness and each improvement area has a separate bond
authorization. The qualified electors in Improvement Area B authorized, among other things, the
issuance of bonds in an amount not to exceed $26,995,660, to finance public improvements. On
January 13, 2004, the City Council, acting as the legislative body of the District, introduced
Ordinance No. 1114 (the “Ordinance”), which provides for the “Rate and Method.” The
Ordinance was adopted on January 27, 2004.
Rate and Method; Special Tax Levy by Land Use; Debt Service Coverage
Rate and Method of Apportionment of Special Tax. The District is legally authorized
to levy the Special Taxes in Improvement Area B in an amount determined according to the Rate
and Method. The Rate and Method apportions the total amount of Special Taxes to be collected
among the taxable parcels in Improvement Area B as more particularly described below. The full
text of the Rate and Method is set forth in APPENDIX C.
Property to be taxed pursuant to the Rate and Method of Apportionment is classified as “Taxable
Property.” Taxable Property consists of the following categories:
“Developed Property”: all Assessor’s Parcels of Taxable Property that: (i) are included in
a Final Map that was recorded prior to the January 1st preceding the Fiscal Year in which
the Special Tax is being levied and (ii) a building permit was issued on or before March
1st preceding the Fiscal Year in which the Special Tax is being levied.
“Approved Property”: all Assessor’s Parcels of Taxable Property: (i) that are included in
a Final Map that was recorded prior to the January 1st preceding the Fiscal Year in which
the Special Tax is being levied, and (ii) that have not been issued a building permit on or
before March 1st preceding the Fiscal Year in which the Special Tax is being levied.
“Undeveloped Property”: all Assessor’s Parcels of Taxable Property which are not
Developed Property, Approved Property or Provisional Undeveloped Property.
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“Provisional Undeveloped Property”: all Assessor’s Parcels of Taxable Property that
would otherwise be classified as Exempt Property pursuant to the Rate and Method, but
cannot be classified as Exempt Property because to do so would reduce the Acreage of
all Taxable Property below the required minimum Acreage set forth in the Rate and
Method for Tax Zone 1 (27.4 acres), Tax Zone 2 (56.6 acres) or Tax Zone 3 (31.0) as
applicable.
The amount of Special Tax that the District may levy is limited by the Maximum Special
Tax rates set forth in the Rate and Method. The Maximum Special Tax for each Assessor’s Parcel
of Developed Property shall be the greater of (i) the amount derived by application of the Assigned
Annual Special Tax or (ii) the amount derived by application of the Backup Annual Special Tax.
Estimated Fiscal Year 2018-19 Special Tax Levy by Land Use. The tables on the
following tables presents the estimated Special Tax levy for fiscal year 2018-19 for each parcel
in Improvement Area B by land use. Table 3 relates to Tax Zones 1 and 2, while Table 4 relates
to Tax Zone 3. The District currently expects to levy 89.24% of the Assigned Annual Special
Tax in fiscal year 2018-19 on Developed Property. Westridge comprises Tax Zone 1 and the
Fully Built Area comprises Tax Zones 2 and 3.
32
TABLE 3
CITY OF LAKE ELSINORE
COMMUNITY FACILITIES DISTRICT NO. 2003-2 (CANYON HILLS)
(IMPROVEMENT AREA B)
ASSIGNED SPECIAL TAX RATES BY LAND USE
TAX ZONES 1 and 2 RATES
Land Use Type
Residential
Floor Area
(sq. ft.)
Assigned
Special Tax
Rate
FY 2018-19
Estimated
Special Tax
Rates
FY 2018-19(1)No. of Units
No. of
Acres
Aggregate
Estimated
Special Taxes
FY 2018-19
Percent of
Total
Residential Property < 1,175 $1,379.52 $1,379.52 0 N/A $0.00 0.0%
Residential Property 1,175-1,324 1,501.99 1,501.99 0 N/A 0.00 0.0
Residential Property 1,325-1,549 1,701.18 1,701.18 0
N/A
0.00 0.0
Residential Property 1,550-1,649 1,823.65 1,823.65 27
N/A
49,238.59 2.0
Residential Property
1,650-1,749 1,944.78 1,944.78 15 N/A 29,171.70 1.2
Residential Property
1,750-1,949 2,014.76 2,014.76 273 N/A 550,029.48 22.4
Residential Property 1,950-2,199 2,083.40 2,083.40 108 N/A 225,007.20 9.2
Residential Property 2,200-2,449 2,328.35 2,328.35 159 N/A 370,207.65 15.1
Residential Property 2,450-2,699 2,450.83 2,450.83 98 N/A 240,180.97 9.8
Residential Property 2,700-2,949 2,574.65
2,574.65
98 N/A 252,315.32 10.3
Residential Property > 2,950 2,818.25 2,818.25 150 N/A 422,737.25 17.2
Apartment Unit N/A 807.52 0.00 0 N/A 0.00 0.0
Approved Property N/A 6,729.34 2,499.79 105 N/A 262,478.25 10.7
Non-Residential
Property N/A 6,729.34 6,729.34 N/A 7.92 53,296.39 2.2
Total 1,033 7.92 $2,454,662.79 100.0%
(1)Includes estimated Administrative Expenses of $55,000.
Source: Special Tax Consultant.
33
TABLE 4
CITY OF LAKE ELSINORE
COMMUNITY FACILITIES DISTRICT NO. 2003-2 (CANYON HILLS)
(IMPROVEMENT AREA B)
ASSIGNED SPECIAL TAX RATES BY LAND USE
TAX ZONE 3 RATES
Land Use Type
Residential
Floor Area
(sq. ft.)
Assigned
Special Tax
Rate
FY 2018-19
Estimated
Special Tax
Rates
FY 2018-19(1)No. of Units
Aggregate
Estimated
Special
Taxes
FY 2018-19
Percent of
Total
Residential Property < 1,175 $1,086.12 $1,086.12 0 $0.00 0.0%
Residential Property 1,175-1,324 1,208.59 1,208.59 0 0.00 0.0
Residential Property 1,325-1,549 1,407.78 1,407.78 0 0.00 0.0
Residential Property 1,550-1,649 1,530.25 1,530.25 0 0.00 0.0
Residential Property 1,650-1,749 1,651.38 1,651.38 3 4,954.14 1.0
Residential Property 1,750-1,949 1,721.37 1,721.37 28 48,198.36 10.0
Residential Property 1,950-2,199 1,771.16 1,771.16 39 69,075.24 14.4
Residential Property 2,200-2,449 2,004.00 2,004.00 37 74,148.00 15.4
Residential Property 2,450-2,699 2,119.74 2,119.74 35 74,190.90 15.4
Residential Property 2,700-2,949 2,294.71 2,294.71 42 96,377.82 20.1
Residential Property > 2,950 2,524.85 2,524.85 45 113,618.25 23.6
Apartment Unit N/A 807.52 0.00 0 0.00 0.0
Approved Property N/A 6,729.34 0.00 0 0.00 0.0
Non-Residential
Property N/A 6,729.34 0.00 0 0.00 0.0
229 $480,562.71 100.0%
(1)Includes estimated Administrative Expenses of $55,000.
Source: Special Tax Consultant.
For each fiscal year, the City Council will determine the Special Tax Requirement. The
Special Tax will be levied pursuant to the Rate and Method on each Assessor’s Parcel of Taxable
Property, up to the applicable Maximum Special Tax, to satisfy the Special Tax Requirement.
Notwithstanding the foregoing, under no circumstances will the Special Taxes levied against any
34
Assessor’s Parcel used as a private residence be increased as a consequence of delinquency or
default by the owner or owners of any other Assessor’s Parcel or Assessor’s Parcels within
Improvement Area B by more than 10% above the amount that would have been levied in such
fiscal year had there never been any such delinquencies or defaults.
The Rate and Method provides that Special Taxes may be prepaid in whole under the
circumstances described in Section G of the Rate and Method.
Estimated Debt Service Coverage. Scheduled payments of principal of, including
mandatory sinking fund payments, and interest on the Bonds equals 100% of the aggregate
scheduled debt service on the Local Obligations. Annual debt service for the Local Obligations
has been structured so that Maximum Special Taxes levied on property categorized as Developed
Property in Improvement Area B for Fiscal Year 2017-18, less the District’s Administrative
Expense Requirement and assuming no delinquencies, would generate in each Fiscal Year not
less than 110% of debt service payable with respect to the Local Obligations
The Rate and Method provides that the Special Tax may not be levied on a parcel of
Taxable Property after fiscal year 2043-44.
See the caption “SPECIAL RISK FACTORS—Proposition 218” for a discussion of certain
provisions of State law that could allow property owners within Improvement Area B to reduce the
maximum amount of Special Taxes that may be levied.
Levy, Collection and Application of Special Taxes. The Special Taxes are levied and
collected by the Treasurer and Tax Collector of the County in the same manner and at the same
time as ad valorem property taxes.
The District has covenanted in the Local Obligations Indenture that it will fix and levy the
amount of Special Taxes within Improvement Area B required (i) for the payment of principal of
and interest on any outstanding Local Obligations, 2015 Bonds, and any Parity Bonds 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 Rate and
Method.
Although the Special Taxes constitute liens on taxed parcels within Improvement Area B,
they do not constitute a personal indebtedness of the owners of property within Improvement Area
B. Moreover, other liens for taxes and assessments already exist on the property located within
Improvement Area B and others could come into existence in the future in certain situations
without the consent or knowledge of the City or the landowners therein. See the captions “THE
COMMUNITY FACILITIES DISTRICT AND IMPROVEMENT AREA B —Direct and Overlapping
Indebtedness” and “SPECIAL RISK FACTORS—Parity Taxes and Special Assessments.” There
is no assurance that property owners in Improvement Area B will be financially able to pay the
annual Special Taxes or that they will pay such taxes even if financially able to do so, all as more
fully described under the caption “SPECIAL RISK FACTORS.”
Appraisal Report
35
Initial Appraisal Report. An MAI appraisal of the land and existing improvements within
Improvement Area B was prepared by Kitty Siino & Associates, Inc., Tustin, California (the
“Appraiser”). The appraisal is dated October 12, 2017 and is entitled “Appraisal Report portion
of Community Facilities District No. 2003-2 (Canyon Hills - Westridge) Improvement Area “B” of
the City of Lake Elsinore” (the “Initial Appraisal Report”). See APPENDIX G — “APPRAISAL
REPORT.”
In connection with the appraisal of the taxable property within Improvement Area B as of
the date of value, September 1, 2017 (the “Date of Value”), the Authority requested both a Fiscal
Year 2017-18 County assessed valuation (the “Assessed Valuation”) for certain of the homes
and an appraised valuation for certain of the homes. The Assessed Valuation is provided for the
completed homes owned by individual homeowners in the Fully Built Area, and is $252,529,763.
The appraised value consists of the estimatedminimummarket value of the as-is condition
and ownership of the taxable property within Westridge as of the Date of Value. The Initial
Appraisal Report reached the following market value conclusions, as presented on the following
page:
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
36
Ownership Total
Minimum
Market Value
Owned by Pardee Homes
Aura 52 $7,632,631
Overlook 61 10,071,595
Starling 107 13,388,595
Vantage 46 7,646,513
Viewpoint 13 2,961,784
Commercial Parcel 1*2,071,560
Total Owned by Pardee
Homes (Lots & Commercial
Parcel)
279 $43,772,678
Owned by Individuals
Aura 27 $9,549,795
Overlook 51 16,468,426
Starling 0 0
Vantage 37 14,352,580
Viewpoint 62 19,092,540
Total Owned by Individuals 177 $59,463,341
Total Value (Lots & Commercial
Parcel)456 $103,236,019
________________________
* The Commercial Parcel is comprised of 7.9 acres.
The information in the table above is accurate as of the Date of Value; [updated
development and ownership information was included in the Supplement to Appraisal Report
(described below) and is included elsewhere in this Official Statement].
The Initial Appraisal Report utilizes the Sales Comparison Approach in valuing the various
properties in Westridge, including the Commercial Parcel. The analysis of the homes under the
Sales Comparison Approach takes the finished lot value along with the remaining costs to develop
the property to a finished lot condition in determining a sales price. Homes which are under
construction (under 95 percent complete) are valued on the basis of a finished lot rather than
attributing value to a partially complete improvement. Completed homes sold to individual
homeowners are analyzed using an aggregate value and on a mass appraisal basis.
37
Supplement to Appraisal Report. The Appraiser subsequently issued a supplement to
the Initial Appraisal Report dated [_______] (the “Supplement to Appraisal Report”), in which
the Appraiser looked at development and ownership as of [________] and concluded that the
market values of the taxable property in Improvement Area B are not less than the concluded
values in the Initial Appraisal Report.
Together, the Initial Appraisal Report and the Supplement to Appraisal Report are
referred to in this Official Statement as the “Appraisal Report”.
See “THE COMMUNITY FACILITIES DISTRICT AND IMPROVEMENT AREA B - Appraisal
Report” and APPENDIX G - “APPRAISAL REPORT”.
[Updated Ownership Information. Ownership information as of [____], 2017 is
presented elsewhere in this Official Statement. See “CURRENT AND PROPOSED
DEVELOPMENT OF PROPERTY WITHIN IMPROVEMENT AREA B.”]
Direct and Overlapping Indebtedness
The ability of an owner of land within Improvement Area B to pay the Special Taxes could
be affected by the existence of other taxes and assessments imposed upon the property. Certain
of those taxes and assessments relate to direct and overlapping debt which is set forth in Table 5
below (the “Debt Report”). The Debt Report includes the principal amount of the Local
Obligations.
The Debt Report has been derived from data assembled and reported to the District by
the Special Tax Consultant as of the Date of Value. Neither the Authority, the District, the City
nor the Underwriter has independently verified the information in the Debt Report or guarantees
its completeness or accuracy.
The Debt Report sets forth those entities which have issued debt and does not include
entities which only levy or assess fees, charges, ad valorem taxes or other special taxes. The
Debt Report is included for general information purposes only.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
38
TABLE 5
CITY OF LAKE ELSINORE
COMMUNITY FACILITIES DISTRICT NO. 2003-2 (CANYON HILLS)
(IMPROVEMENT AREA B)
DIRECT AND OVERLAPPING DEBT (1)
AS OF SEPTEMBER 1, 2017
I. Total Value (1)$355,756,784
II. Land Secured Bond Indebtedness
Outstanding Direct and Overlapping Bonded Debt Type Issued Outstanding
%
Applicable
Parcels in CFD
No. 2003-2 IA
B(4)
Amount
Applicable
LAKE ELSINORE AD 93-1 AD $15,345,000 $12,770,000 32.773%939 $4,185,088
CFD 98-1 TEMESCAL VALLEY PROJECT CFD $25,890,013 $24,476,459 12.171%939 $2,979,095
PERRIS UNION HIGH SCHOOL CFD 92-1 CFD $36,315,000 $34,620,000 1.628%233 $563,606
CITY OF LAKE ELSINORE CFD NO. 2003-2 IA B, 2015 SERIES CFD $29,025,000 $25,795,000 100.000%939 $25,795,000
CITY OF LAKE ELSINORE CFD NO. 2003-2 IA B, 2017 SERIES CFD $7,975,000 $7,975,000 100.000%939 $7,975,000
TOTAL OUTSTANDING LAND SECURED BONDED DEBT (2)(3)$41,497,789
Authorized but Unissued Direct and Overlapping Indebtedness Type Authorized Unissued
%
Applicable
Parcels in CFD
No. 2003-2 IA
B(4)
Amount
Applicable
LAKE ELSINORE AD 93-1 AD $15,345,000 $0 32.773%939 $0
CFD 98-1 TEMESCAL VALLEY PROJECT CFD $25,890,013 $0 12.171%939 $0
PERRIS UNION HIGH SCHOOL CFD 92-1 CFD $40,000,000 $3,685,000 1.628%232 $59,991
CITY OF LAKE ELSINORE CFD NO. 2003-2 IA B, 2015 SERIES CFD $37,000,000 $0 100.000%939 $0
CITY OF LAKE ELSINORE CFD NO. 2003-2 IA B, 2017 SERIES CFD $37,000,000 $0 100.000%939 $0
TOTAL OUTSTANDING AND UNISSUED LAND SECURED
INDEBTNESS (2)(3)$59,991
TOTAL OUTSTANDING AND UNISSUED LAND SECURED
INDEBTNESS (2)(3)$41,557,780
III. General Obligation Bond Indebtedness
Outstanding Direct and Overlapping Bonded Debt Type Issued Outstanding
%
Applicable
Parcels in CFD
No. 2003-2 IA
B(4)
Amount
Applicable
METROPOLITAN WATER DEBT SERVICE GO $850,000,000 $110,420,000 0.373%939 $411,457
PERRIS UNION HIGH SCHOOL DISTRICT DEBT SERVICE GO $61,997,260 $51,087,260 0.436%233 $222,559
MENIFEE UNION SCHOOL DISTRICT DEBT SERVICE GO $45,958,923 $44,683,923 0.711%233 $317,650
LAKE ELSINORE UNIFIED SCHOOL DISTRICT DEBT SERVICE GO $32,415,000 $32,415,000 2.525%706 $818,468
TOTAL OUTSTANDING GENERAL OBLIGATION BOND DEBT (2)$1,770,134
Authorized but Unissued Direct and Overlapping Indebtedness Type Issued Outstanding
%
Applicable
Parcels in CFD
No. 2003-2 IA
B(4)
Amount
Applicable
METROPOLITAN WATER DEBT SERVICE GO $850,000,000 $0 0.373%939 $0
PERRIS UNION HIGH SCHOOL DISTRICT DEBT SERVICE GO $215,420,000 $153,422,740 0.436%233 $668,377
MENIFEE UNION SCHOOL DISTRICT DEBT SERVICE GO $45,960,000 $0 0.711%233 $0
LAKE ELSINORE UNIFIED SCHOOL DISTRICT DEBT SERVICE GO $105,000,000 $72,585,000 2.525%706 $1,832,747
TOTAL UNISSUED GENERAL OBLIGATION INDEBTEDNESS (2)$2,501,124
TOTAL OUTSTANDING AND UNISSUED GENERAL OBLIGATION
INDEBTEDNESS $4,271,259
TOTAL OF ALL OUTSTANDING DIRECT AND OVERLAPPING
BONDED DEBT $43,267,923
TOTAL OF ALL OUTSTANDING DIRECT AND UNISSUED DIRECT
OVERLAPPING INDEBTEDNESS $44,058,904
IV. Ratios to Appraisal Value
Outstanding Land Secured Bonded Debt 8.57:1
Total Outstanding Bonded Debt 8.22:1
(1) Based on the Appraisal Report as of September 1, 2017, reflecting $103,236,019 based on the appraised value of the 456 Residential Lots and one Commercial Parcel in Westridge, and
$252,529,763 based on the Assessed Valuation of the 806 Residential Lots within the Fully Built Area.
(2) Spicer Consulting Group is not aware of any additional bonded debt for parcels in CFD No. 2003-2 IA B for the referenced Fiscal Year 2018-19 Issued, Outstanding and Authorized amounts
are for Improvement Area B.
39
(3)Amount includes $7,975,000 of the Local Obligations.
(4) At total build out, the planning areas will have a total of 1,262 Residential Lots for Improvement Area B. As of Fiscal Year 2017-18, there were a total of 939 levied parcels enrolled on the tax
bill. As of the date of the appraisal, September 1, 2017, 1,157 parcels are considered Developed Property, 105 parcels are considered as Approved Property and 1 parcel containing 7.92 acres
is considered Non-Residential Property per the Rate and Method of Apportionment.
Source: Special Tax Consultant.
Estimated Appraised Value-To-Lien Ratios
The total appraised value of the Taxable Property in Westridge is $103,236,019 and the
total Assessed Valuation in the Fully Built Area is $252,529,763 for a total of $355,765,782. The
aggregate estimated appraised value-to-lien ratio for the Taxable Property based on (i) the
appraised values, (ii) the Assessed Valuation and (iii) the Local Obligations and the overlapping
land-secured debt described in the previous table is 8.57:1.
The following tables describe the estimated appraised value-to-lien ratios for parcels of
Taxable Property in Improvement Area B based upon each parcel’s share of the estimated fiscal
year 2018-19 Special Taxes and overlapping land-secured debt.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
40
TABLE 6
CITY OF LAKE ELSINORE
COMMUNITY FACILITIES DISTRICT NO. 2003-2 (CANYON HILLS)
Property Owner
No. of
Parcels Total Value (2)
% of Total
value
Maximum
Tax
Percentage
of
Maximum
Tax
Estimated
FY 2018-19
Levy(3)
% of
Estimated
FY 2018-
19 Levy
Proposed
Local
Obligations(5)
All Other
Overlapping
Debt
Total
Value-to-
Lien Ratio
Residential
Developed
Developed Individually Owned 983 $311,984,106 87.70%$2,208,345 75.24%$2,208,345 75.24%$6,000,073 $25,360,782 9.95:1
Developed Pardee Homes
Owned (1)174 $31,334,537 8.81%$411,103 14.01%$411,103 14.01%$1,116,967 $4,616,220 5.47:1
Subtotal Developed 1,157 $343,318,643 96.50%$2,619,448 89.24%$2,619,448 89.24%$7,117,040 $29,977,003 9.26:1
Undeveloped
Approved - Pardee Homes
Owned 105 $10,366,581 2.91%$262,478 8.94%$262,478 8.94%$713,153 $2,947,330 2.83:1
Subtotal Developer Owned 105 $10,366,581 2.91%$262,478 8.94%$262,478 8.94%$713,153 $2,947,330 2.83:1
Non-Residential
Undeveloped -Pardee Homes
Owned 1 $2,071,560 0.58%$53,296 1.82%$53,296 1.82%$144,806 $598,457 2.79:1
Subtotal Developer Owned 1 $2,071,560 0.58%$53,296 1.82%$53,296 1.82%$144,806 $598,457 2.79:1
41
(IMPROVEMENT AREA B)
ESTIMATED VALUE-TO-LIEN RATIOS ALLOCATED BY PROPERTY OWNER
(1) Reflects Appraised Value for 73 Homes Under Construction, 15 Model Homes, 55 Homes over 95% Complete, and 31 Finished Lots for Pardee Homes which have
building permits issued and are therefore considered developed per the Rate and Method.
(2) Based on the Appraisal Report as of September 1, 2017, reflecting $103,236,019 based on the appraised value of the 456 Lots and Commercial Parcel in Westridge and
$252,529,763 based on the Assessed Valuation of the 806 Residential Lots in the Fully Built Area, all within Improvement Area B.
(3)Estimated Fiscal Year 2018-19 Special Tax Levy based upon development status as of September 1, 2017 and preliminary debt service with administration of $55,000.
(4)Includes the principal amount of the Local Obligations. Responsibility of the principal amount of the Local Obligations has been allocated based on the projected Fiscal
Year 2018-19 Special Tax levy based on development status in Improvement Area B as of September 1, 2017.
Source: Special Tax Consultant.
Total 1,263 $355,756,784 100.00%$2,935,223 100.00%$2,935,223 100.00%$7,975,000 $33,522,789 8.57:1
42
TABLE 7
CITY OF LAKE ELSINORE
COMMUNITY FACILITIES DISTRICT NO. 2003-2 (CANYON HILLS)
(IMPROVEMENT AREA B)
VALUE-TO-LIEN STRATA FOR DEVELOPED PROPERTY†
† Numbers may not add because of rounding.
(1) Based on the Appraisal Report as of September 1, 2017, reflecting $103,236,019 based on the appraised value of the 456 Residential Lots and one Commercial
Parcel in Westridge and $252,529,763 based on the Assessed Valuation of the 806 Residential Lots in the Fully Built Area, all within Improvement Area B.
(2) Responsibility of the par amount has been allocated based on the estimated FY 2018-19 special tax levy, based on development status as of September 1, 2017,
and preliminary bond sizing as provided by the Underwriter.
(3) The minimum value to lien in the Less than 5.00:1 category is 0.231:1.
(4) The maximum value to lien in the Greater than 15.00:1 category is 15.38:1.
Source: Special Tax Consultant.
Value-to-Lien Category
No. of
Parcels
% of
Parcels Total Value (1)
% of
Total
Value
IA B
Estimated
FY 2018-19
Levy
Percent
Share of
Estimated
FY 2018-19
Levy
IA B
Proposed
Local
Obligations(2)
All Other
General
Obligation
Overlappin
g Debt
Percent
Share of
Proposed
2017
Bonds
Aggregate
Value-to-
Lien
Less than 5.00:1 (3)213 16.86%$23,397,511 6.58%$569,904 19.42%$1,548,430 $6,399,370 19.42%2.94:1
Between 5.01:1 to 10.00:1 454 35.95 124,560,402 35.01 1,043,558 35.55 2,835,347 11,930,822 35.55 8.44:1
Between 10.01:1 to 15.00:1 593 46.95 206,392,114 58.01 1,315,500 44.82 3,574,213 15,117,457 44.82 11.04:1
Greater than 15.01:1 (4)3 0.24 1,406,757 0.40 6,261 0.21 17,011 75,141 0.21 15.27:1
Totals 1,263 100.00%$355,756,784 100.00%$2,935,223 100.00%$7,975,000 $33,522,789 100.00%8.57:1
43
Estimated Tax Burden on Single Family Home
The following table shows a sample property tax bill for a single parcel of Taxable Property in Improvement Area B, based on
estimated tax rates for fiscal year 2018-19.
TABLE 8
CITY OF LAKE ELSINORE
COMMUNITY FACILITIES DISTRICT NO. 2003-2 (CANYON HILLS)
(IMPROVEMENT AREA B)
ESTIMATED FISCAL YEAR 2018-19 TAX OBLIGATION
Individually
Owned
TR36117 TR36118 TR36118 TR36118 TR36118 Developer
OwnedStarlingVantageViewpointAuraOverlook
Pardee Homes Pardee Homes Pardee Homes Pardee Homes Pardee Homes
Plan Type Average
Parcel
S-1 S-2 S-3 V-1 V-2 V-3 V-1 V-2 V-2X V-4 A-1 A-2 A-3 O-1 O-2 O-3 Average
Parcel
CFD Tax Category 2,700 to 2,950 to 2,950 to 2,450 to 2,700 to 2,700 to 1,750 to 1,750 to 1,750 to 1,950 to 1,950 to 2,200 to 2,450 to 1,750 to 1,950 to 2,200 to
2,949 S.F.or Greater or Greater 2,699 S.F.2,949 S.F.2,949 S.F.1,949 S.F.1,949
S.F.
1,949
S.F.
2,199
S.F.
2,199
S.F.
2,449
S.F.2,699 S.F.1,949 S.F.2,199 S.F.2,449 S.F.
Home Size 2,193 2,936 3,037 3,255 2,539 2,789 2,870 1,750 1,845 1,871 2,115 2,151 2,339 2,493 1,798 2,059 2,203 2,378
Appraisal Value (1)$335,951 $396,360 $400,884 $406,875 $368,155 $390,460 $396,060 $297,500 $308,115 $308,715 $321,480 $344,160 $350,850 $361,485 $305,660 $319,415 $337,059 $349,952
Ad Valorem Property Taxes(2):
General Purpose $3,360 $3,964 $4,009 $4,069 $3,682 $3,905 $3,961 $2,975 $3,081 $3,087 $3,215 $3,442 $3,509 $3,615 $3,962 $4,070 $4,178 $3,500
Metro Water West (0.00350%)$12 $14 $14 $14 $13 $14 $14 $10 $11 $11 $11 $12 $12 $13 $14 $14 $15 $12
Lake Elsinore Unified School District (0.0190%)$64 $75 $76 $77 $70 $74 $75 $57 $59 $59 $61 $65 $67 $69 $58 $61 $64 $66
Total General Property Taxes $3,435 $4,053 $4,099 $4,160 $3,764 $3,992 $4,050 $3,042 $3,150 $3,157 $3,287 $3,519 $3,587 $3,696 $4,034 $4,145 $4,257 $3,578
Assessment, Special Taxes & Parcel Charges:
Flood Control Stormwater/Cleanwater/Santa Ana $4 $4 $4 $4 $4 $4 $4 $4 $4 $4 $4 $4 $4 $4 $4 $4 $4 $4
CSA #152 City of Lake Elsinore Stormwater $14 $14 $14 $14 $14 $14 $14 $14 $14 $14 $14 $14 $14 $14 $14 $14 $14 $14
City of Lake Elsinore CFD Public Safety $396 $396 $396 $396 $396 $396 $396 $396 $396 $396 $396 $396 $396 $396 $396 $396 $396 $396
City of Lake Elsinore Citywide LLMD $25 $25 $25 $25 $25 $25 $25 $25 $25 $25 $25 $25 $25 $25 $25 $25 $25 $25
EMWD CFD 98-1- Temescal Valley Project $55 $55 $55 $55 $55 $55 $55 $55 $55 $55 $55 $55 $55 $55 $55 $55 $55 $55
Lake Elsinore AD 93-1R $343 $343 $343 $343 $343 $343 $343 $278 $278 $278 $278 $278 $278 $278 $278 $278 $278 $278
Northwest Mosquito and Vector Control $11 $11 $11 $11 $11 $11 $11 $11 $11 $11 $11 $11 $11 $11 $11 $11 $11 $11
MWD Standby Charge $9 $9 $9 $9 $9 $9 $9 $9 $9 $9 $9 $9 $9 $9 $9 $9 $9 $9
CFD 2009-1 Park Maintenance $380 $380 $380 $380 $380 $380 $380 $380 $380 $380 $380 $380 $380 $380 $380 $380 $380 $380
City of Lake Elsinore CFD 2003-2 IA B (4)$2,083 $2,575 $2,818 $2,818 $2,451 $2,575 $2,575 $2,015 $2,015 $2,015 $2,083 $2,083 $2,328 $2,451 $2,014 $2,083 $2,328 $2,312
Total Assessments & Taxes $3,320 $3,812 $4,055 $4,055 $3,688 $3,812 $3,812 $3,187 $3,187 $3,187 $3,255 $3,255 $3,500 $3,623 $3,186 $3,255 $3,500 $3,484
Projected Total Property Tax $6,755 $7,864 $8,154 $8,215 $7,452 $7,804 $7,861 $6,229 $6,337 $6,343 $6,542 $6,774 $7,087 $7,319 $7,220 $7,400 $7,757 $7,062
Projected Effective Tax Rate 2.01%1.98%2.03%2.02%2.02%2.00%1.98%2.09%2.06%2.05%2.04%1.97%2.02%2.02%1.82%1.82%1.86%2.02%
(1)Reflects the appraised value based on ownership status as of September 1, 2017, the date of value.
(2)Perris Union High School (0.05675%) or Menifee Unified School District (0.0608%) were not included in the sample bill as the Westridge units are not located within the Perris Union High School boundary limits or the Menifee Unified School District
and therefore not subject to the tax.
(3) TR 36117 contains 37 units sold to individual property owners and TR 36118 contains 140 units sold to individual property owners. The average appraised value and square footage for 177 individually owned units is included.
(4) Reflects estimated Fiscal Year 2018-19 Special Tax levy based on development as of September 1, 2017 and includes priority Administrative Expenses in the amount of $55,000.
Source: Special Tax Consultant.
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Concentration of Taxpayers
Based on the ownership and development status of the Taxable Property within Westridge
in Improvement Area B as of the Date of Value (and assuming no further development or sales
to individual homeowners), approximately 24.76% of the estimated fiscal year 2018-19 Special
Tax levy will be levied on property owned by Pardee Homes and the remaining approximately
75.24% will be levied on individual property owners. Pardee Homes believes that between
[_______], 2017 (the date for which updated ownership information is presented herein) and the
date of this Official Statement, that it will sell enough homes such that less than 20% of the
estimated fiscal year 2018-19 Special Tax levy will be levied on property that it owns.
Until the construction and sale of all homes to individual homeowners in Westridge, the
receipt of the Special Taxes is dependent, in part, on the willingness and the ability of Pardee
Homes, or its successors, to pay the Special Taxes when due. See the caption “SPECIAL RISK
FACTORS—Concentration of Property Ownership” for a description of the risks associated with
a concentration of ownership within.
Property Tax Delinquencies
The following table is a summary of Special Tax levies, collections and delinquency rates
on taxable properties in the District for fiscal years 2012-13 through 2016-17 based on amounts
levied and outstanding delinquencies as of October 21, 2017.
TABLE 9
CITY OF LAKE ELSINORE
COMMUNITY FACILITIES DISTRICT NO. 2003-2 (CANYON HILLS)
(IMPROVEMENT AREA B)
SPECIAL TAXES LEVIES, DELINQUENCIES AND DELINQUENCY RATES
As of Fiscal Year Ended June 30 Delinquencies as of October 21, 2017
Fiscal Year
Amount
Levied
Parcels
Levied
Parcels
Delinquent
Amount
Delinquent
%
Delinquent
Parcels
Delinquent
Amount
Delinquent
%
Delinquent
2012-13 $1,301,880.08 652 6 $4,214.49 0.32%1 $1,143.10 0.09%
2013-14 $1,456,782.42 721 13 $21,163.58 1.45%2 $3,422.35 0.23%
2014-15 $1,615,065.36 772 10 $15,689.23 0.97%4 $6,160.29 0.38%
2015-16 $1,709,859.26 806 6 $12,190.33 0.71%3 $6,474.36 0.38%
2016-17 $1,744,542.54 806 9 $17,158.31 0.98%5 $10,178.70 0.58%
Source: Special Tax Consultant.
CURRENT AND PROPOSED DEVELOPMENT OF PROPERTY WITHIN IMPROVEMENT
AREA B
The information about the property in Improvement Area B contained in this Official
Statement has been provided by representatives of Pardee Homes, and others, and has not been
independently confirmed or verified by the Underwriter, the City, the Authority or the District. The
45
Underwriter, the City, the Authority and the District make no representation as to the accuracy or
adequacy of the information contained in this caption. There may be material adverse changes
in this information after the date of this Official Statement. Neither the Local Obligations nor the
Special Taxes securing the Local Obligations, or any bonds issued to refund the foregoing are
personal obligations of Pardee Homes, or any affiliate thereof or any other property owner and,
in the event that any property owner defaults in the payment of its Special Taxes, the District may
proceed with judicial foreclosure but has no direct recourse to the assets of any property owner
or any affiliate thereof. See the caption “SPECIAL RISK FACTORS.”
General Description of Development; Pardee Homes
Canyon Hills; Improvement Area B. Pardee Homes acquired Canyon Hills, a portion of
which is included in Improvement Area B, in 1988, and Pardee Homes has been the master
developer and primary merchant builder within Canyon Hills since its acquisition. Pardee Homes’
development within Improvement Area B is planned for a total of 1,262 residential dwelling units.
Entitlement Status. Pardee Homes reports that it has all the necessary entitlements to
construct the 456 planned residential units in Planning Areas 1A, 1B north/south, 2A, 2C and 2D
of Westridge. For Planning Area 2B of Westridge(the Commercial Parcel), Pardee Homes reports
that it has been mass graded but additional on the site would be require before structures could
be built on it. The Commercial Parcel may also require a conditional use permit depending on
what it is ultimately used for. However, there are no current development plans for the Commercial
Parcel.
Pardee Homes is a party to a Development Agreement with the City of Lake Elsinore
related to the Canyon Hills project, which vests Pardee Homes development of the property in
Improvement Area B in accordance with the Specific Plan (as amended, the “Development
Agreement”). In 2010, the term of the Development Agreement was extended to July 1, 2030.
Pardee Homes. Pardee Homes is a California Corporation. It is an indirect, wholly-owned
subsidiary of TRI Pointe Group, Inc., a Delaware corporation (“TRI Pointe Group”), a publicly
traded company whose common stock is traded on the New York Stock Exchange under the
ticker symbol “TPH.” TRI Pointe Group is engaged in the design, construction and sale of single-
family homes through its portfolio of six quality brands across eight states, including Maracay
Homes in Arizona, Pardee Homes in California and Nevada, Quadrant Homes in Washington,
Trendmaker Homes in Texas, TRI Pointe Homes in California and Colorado and Winchester
Homes in Maryland and Virginia.
TRI Pointe Group is subject to the informational requirements of the Securities Exchange
Act of 1934, as amended (the “Exchange Act”), and in accordance therewith files reports, proxy
statements and other information, including financial statements, with the Securities and
Exchange Commission (the “SEC”). Such filings, particularly TRI Pointe Group’s Annual Report
on Form 10-K for the fiscal year ended December 31, 2016, as filed with the SEC on February
24, 2017, its Quarterly Report on Form 10-Q for the quarter ending March 31, 2017 as filed with
the SEC on April 26, 2017, its Quarterly Report on Form 10-Q for the quarter ending June 30,
2017, as filed with the SEC on July 26, 2017, and its Quarterly Report on Form 10-Q for the
quarter ending September 30, 2017, as filed with the SEC on October 25, 2017 set forth, among
other things, certain data relative to the consolidated results of operations and financial position
of TRI Pointe Group and its subsidiaries, including Pardee Homes, as of such dates.
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The SEC maintains an Internet web site that contains reports, proxy and information
statements and other information regarding registrants that file electronically with the SEC,
including TRI Pointe Group. The address of such Internet web site is www.sec.gov. All
documents subsequently filed by TRI Pointe Group pursuant to the requirements of the Exchange
Act after the date of this Official Statement will be available for inspection in such manner as the
SEC prescribes. Copies of TRI Pointe Group’s Annual Report and each of its other quarterly and
current reports, including any amendments, are available from TRI Pointe Group’s website at
www.tripointegroup.com. The foregoing Internet addresses and references to filings with the SEC
are included for reference only, and the information on these Internet sites and on file with the
SEC are not a part of this Official Statement and are not incorporated by reference into this Official
Statement.
Ownership by Pardee Homes
As of the Date of Value, 177 homes had been built and closed to individual purchasers, and
Pardee Homes owned within Westridge:
15 completed model homes (one of which is in escrow)
55 completed but unsold homes (43 of which are in escrow)
73 homes under construction (30 of which are in escrow)
136 physically finished lots (2 of which are in escrow)
A 7.9 acre commercial parcel in Planning Area 2B.
Status of Development
Current Status of Development.A summary of property development in Westridge as
of the Date of Value, is set forth below:
Construction Stages
PA 1A/ PA 1B
South
PA 1B
North PA 2A PA 2B PA 2C PA 2D Total
Model Units 3 3 3 0 3 3 15
Production Units
Completed 47 10 69 0 72 34 232*
Under Construction 8 9 3 0 21 32 73
Physically Finished Lots 25 85 0 0 16 10 136
Commercial Parcel 0 0 0 1**0 0 N/A
Total 83 107 75 1 112 79 456
*177 are owned by individual homeowners.
**The Commercial Parcel consists of 7.9 acres.
Source: Special Tax Consultant and Pardee Homes.
Development in the six Planning Areas as of the Date of Value is summarized below:
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Planning Area 1A/1B South: In Planning Area 1A and Planning Area 1B South ,
homes are being developed in a neighborhood called “Vantage.” As of the Date of Value,
37 of 83 homes have been built and had closed escrow to individual homeowners. Three
model homes have also been constructed in this Planning Area, 10 homes are completed
and unsold (with 6 in escrow), 8 homes are under construction (with 4 in escrow) and there
are 25 finished lots.
Planning Area 1B North: In Planning Area 1B North, homes are being developed
in a neighborhood called “Starling.” As of the Date of Value, 0 of 107 homes have been
built and had closed escrow to individual homeowners. Three model homes have also
been constructed in this Planning Area, 10 homes are completed and unsold (with 3 in
escrow), 9 homes are under construction (with 6 in escrow) and there are 85 finished lots
(with 2 in escrow).
Planning Area 2A: In Planning Area 2A, homes are being developed in a
neighborhood called “Viewpoint.” As of the Date of Value, 62 of 25 homes have been built
and had closed escrow to individual homeowners. Three model homes have also been
constructed in this Planning Area (with 1 in escrow), 7 homes are completed and unsold
(with all 7 in escrow), 3 homes are under construction (with 1 in escrow) and there are 0
finished lots.
Planning Area 2B: Planning Area 2B is a 7.9 acre Commercial Lot which is mass
graded, and consists of 6.0 net usable acres. The Commercial Parcel is currently zoned
for an estimated 60,000 square foot building but there are currently no plans to develop
the site.
Planning Area 2C: In Planning Area 2C, homes are being developed in a
neighborhood called “Overlook.” As of the Date of Value, 51 of 112 homes have been built
and had closed escrow to individual homeowners. Three model homes have also been
constructed in this Planning Area, 21 homes are completed and unsold (with 20 in escrow),
21 homes are under construction (with 14 in escrow) and there are 16 finished lots.
Planning Area 2D: In Planning Area 2D, homes are being developed in a
neighborhood called “Aura.” As of the Date of Value, 27 of 79 homes have been built and
had closed escrow to individual homeowners. Three model homes have also been
constructed in this Planning Area, 7 homes are completed and unsold (with all 7 in
escrow), 32 homes are under construction (with 5 in escrow) and there are 10 finished
lots.
Current Floor Plans of For-Sale Homes.Pardee Homes is currently offering various
floor plans for the homes it is building and selling in Westridge, listed by neighborhood:
Vantage (PA 1A): The Vantage homes currently range in size from 2,539 square feet to
2,883 square feet and currently range in price from $378,000 to $409,000.
Starling (PA 1B North/South): The Starling homes currently range in size from 2,936
square feet to 3,255 square feet and currently range in price from $409,000 to $422,000.
Viewpoint (PA 2A): The Viewpoint homes currently range in size from 1,750 square feet
to 2,115 square feet and currently range in price from $305,000 to $329,000.
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Overlook (PA 2C): The Overlook homes currently range in size from 1,798 square feet to
2,203 square feet and currently range in price from $318,000 to $247,000.
Aura (PA 2D): The Aura homes currently range in size from 2,151 square feet to 2,493
square feet and currently range in price from $355,000 to $371,000.
See “APPENDIX G - Appraisal Report” for additional information regarding the floor plans
being offered.
Estimated Absorption Schedule. Pardee Homes expects that construction of the 128
residential dwelling units completed or still under construction (including the 136 finished lots) as
of the Date of Value will be complete and conveyed to individual homeowners by June 2020.
There can be no assurance that Pardee Home’s development plans described in this
Official Statement will be completed or that the development plans will not be modified in the
future. Additionally, there can be no assurances of the absorption rate of the homes remaining
to be built and sold. In changing market conditions, builders will often revise their product lines
and prices and the rate of sales can fluctuate. Pardee Homes continuously evaluates its product
lines and prices in light of the then current market conditions.
Financing Plan
As of October 27, 2017, Pardee Homes expects its remaining home construction costs
and other development, marketing and sales costs within Westridge, to be approximately
$26,000,000.
Pardee Homes Financing Plan
Pardee Homes finances its land acquisition and home construction costs related to its
activities in Improvement Area B through internal sources, including funding from its parent, TRI
Pointe Group. Pardee Homes intends to use this source of funds, together with proceeds of future
home sales, to finance its remaining home construction costs and carrying costs for its activities
in Improvement Area B (including the payment of property taxes and the Special Taxes) until full
sell-out of all of its planned homes in Improvement Area B. However, home sales revenues from
Pardee Homes’ activities in Improvement Area B are not segregated and set aside for completing
the homes in Improvement Area B. Home sales revenue is swept daily from Pardee Homes for
use in corporate operations, to pay down debt and for other corporate purposes and might get
diverted to other Pardee Homes and TRI Pointe Group needs at the discretion of management.
Notwithstanding the foregoing, Pardee Homes believes that it will have sufficient funds to
complete its construction of homes in Improvement Area B.
As of September 30, 2017, TRI Pointe Group was a party to a $625 million unsecured
revolving credit facility (the “TRI Pointe Group Credit Facility”), which matures on May 18, 2019,
and contains a sublimit of $75 million for letters of credit. TRI Pointe Group may borrow under the
TRI Pointe Group Credit Facility in the ordinary course of business to fund its operations, including
its land development and homebuilding activities. The TRI Pointe Group Credit Facility contains
a borrowing base and certain covenants which may limit the amount TRI Pointe Group may
borrow or have outstanding at any time. As of September 30, 2017, the outstanding balance under
the TRI Pointe Group Credit Facility was $200.0 million with $392.2 million of availability after
considering the borrowing base provisions and outstanding letters of credit. As of September 30,
49
2017, TRI Pointe Group had outstanding letters of credit of $7.8 million. TRI Pointe Group’s ability
to renew the TRI Pointe Group Credit Facility in the future is dependent upon a number of factors
including the state of the commercial lending environment, the willingness of banks to lend to
homebuilders and TRI Pointe Group’s financial condition and strength.
Although Pardee Homes expects to have sufficient funds available to complete its planned
construction of homes in Improvement Area B, no assurance can be given that the sources of
financing available to Pardee Homes will be sufficient to complete the home construction as
currently anticipated. While TRI Pointe Group has made such internal financing available in the
past, there can be no assurance whatsoever of its willingness or ability to do so in the future.
Neither Pardee Homes nor any affiliate thereof has any legal obligation of any kind to make any
such funds available or to obtain loans. If and to the extent that internal financing and home sales
revenues are inadequate to pay the costs to complete Pardee Homes’ planned home construction
within Improvement Area B and other financing by Pardee Homes is not put into place, there could
be a shortfall in the funds required to complete the proposed home construction by Pardee
Homes.
History of Pardee Homes’ Property Tax Payments; Loan Defaults; Litigation; Bankruptcy
Pardee Homes has represented to the District as follows:
1.Except as described in this Official Statement, there material loans outstanding and unpaid
and no material lines of credit of Pardee Homes that are secured by an interest in the Property
(defined below). Pardee Homes is not in material default on any loans, lines of credit or other
obligation, which default is reasonably likely to materially and adversely affect Pardee Homes’
ability to complete the development of the Property as proposed in this Official Statement or to
pay the Special Taxes due with respect to the Property.
2.Except as set forth in this Official Statement, no action, suit, proceeding, inquiry or
investigation at law or in equity, before or by any court, regulatory agency, public board or body
is pending against Pardee Homes (with proper service of process or proper notice to Pardee
Homes having been accomplished) or to the Actual Knowledge of Pardee Homes is threatened
in writing against Pardee Homes (a) to restrain or enjoin the collection of Special Taxes or other
sums pledged or to be pledged to pay the principal of an interest on the Bonds (e.g. the Reserve
Fund established under the Indenture), (b) to restrain or enjoin the development of the Property
as described herein, (c) in any way contesting or affecting the validity of the Special Taxes, or (d)
which is reasonably likely to materially and adversely affect Pardee Homes’ ability to complete
the development and sale of the Property as described herein or pay the Special Taxes due with
respect to the Property. On April 3, 2017, Pardee Homes was named as a defendant in a lawsuit
filed in San Diego County Superior Court by Scripps Health (“Scripps”) related to the April 1989
sale by Pardee Homes of real property located in Carmel Valley, California to Scripps pursuant
to a purchase agreement dated December 18, 1987 (as amended, the “Purchase Agreement”).
In March 2003, Scripps contacted Pardee Homes and alleged Pardee Homes had breached a
covenant in the Purchase Agreement by failing to record a restriction against the development of
the surrounding property then owned by Pardee Homes for medical office use. In November 2003,
the parties entered into a tolling agreement, pursuant to which the parties agreed to toll any
applicable statutes of limitation from November 3, 2003 until the expiration of the agreement. The
tolling agreement did not revive any cause of action already time barred by a statute of limitation
50
as of November 3, 2003. The tolling agreement was terminated as of February 21, 2017. Pardee
Homes intends to vigorously defend the action, and intends to continue challenging Scripps’
claims. Although Pardee Homes cannot predict or determine the timing or final outcome of the
lawsuit or the effect that any adverse findings or determinations may have on Pardee Homes,
Pardee Homes believes Scripps’ claims are without merit and that this dispute will not have a
material impact on its business, liquidity, financial condition and results of operations. An
unfavorable determination could result in the payment by Pardee Homes or TRI Pointe Group of
monetary damages, which could be significant. The complaint does not indicate the amount of
relief sought, and an estimate of possible loss or range of loss cannot presently be made with
respect to this matter. No reserve with respect to this matter has been recorded on TRI Pointe’s
consolidated financial statements.
3.Pardee Homes has been developing or has been involved in the development of
numerous projects over an extended period of time. It is likely that Pardee Homes has been
delinquent at one time or another in the payment of ad valorem property taxes, special
assessments or special taxes. To the Actual Knowledge of Pardee Homes, Pardee Homes is not
delinquent to any material extent in the payment of ad valorem property taxes, special
assessments or special taxes on the Property. Except as disclosed in this Official Statement, to
the Actual Knowledge of Pardee Homes, in the last five years, Pardee Homes has not, during the
period of its ownership, been delinquent to any material extent in the payment of special
assessments or special taxes on property owned by Pardee Homes that is included within the
boundaries of a community facilities district or assessment district within California that (a) would
have caused a draw on a reserve fund relating to such assessment district or community facilities
district financing or (b) resulted in a foreclosure action being commenced against the Pardee
Homes.
As used in the above representations of Pardee Homes, the following defined terms and
phrases have the following meanings:
“Actual Knowledge of Pardee Homes” shall mean the knowledge that the authorized officer of
Pardee Homes signing the certificate containing the above representations (the “Pardee Homes
Letter of Representations”) currently has as of the date of the Pardee Homes Letter of
Representations, or has obtained through (i) interviews with such current officers and responsible
employees of Pardee Homes and its Affiliates as the authorized officer signing the Pardee Homes
Letter of Representations has determined are reasonably likely, in the ordinary course of their
respective duties, to have knowledge of the matters set forth in the Pardee Homes Letter of
Representations and/or (ii) review of documents that were reasonably available to the
undersigned and which the undersigned has reasonably deemed necessary for the undersigned
to obtain knowledge of the matters set forth in this Letter of Representations. The authorized
officer of Pardee Homes signing the Pardee Homes Letter of Representations has not conducted
any extraordinary inspection or inquiry other than such inspections or inquiries as are prudent and
customary in connection with the ordinary course of Pardee Homes’s current business and
operations.
“Affiliate” means, with respect to Pardee Homes, any other Person (i) who directly, or indirectly
through one or more intermediaries, is currently controlling, controlled by or under common
control with Pardee Homes, and (ii) for whom information, including financial information or
operating data, concerning such Person referenced in clause (i) is material potential investors in
their evaluation of the District and investment decision regarding the Bonds (i.e., information
relevant to (a) Pardee Homes’ development plans with respect to its Property and its payment of
51
Special Taxes on the Property prior to delinquency, or (b) such Person’s assets or funds that
would materially affect Pardee Homes’ ability to develop its Property as described in this Official
Statement or to pay its Special Taxes.
“Person” means an individual, a corporation, a partnership, a limited liability company, an
association, a joint stock company, a trust, any unincorporated organization or a government or
political subdivision thereof.
“Control” (including the terms “controlling,” “controlled by” or “under common control with”) means
the possession, direct or indirect, of the power to direct or cause the direction of the management
and policies of a Person, whether through the ownership of voting securities, by contract or
otherwise.
“Property” means the property within Improvement Area B held in the name of Pardee Homes.
COMMUNITY FACILITIES DISTRICT NO. 2016-2 AND THE PROPOSED ELIMINATION OF
THE SPECIAL TAX LIEN SECURING THE LOCAL OBLIGATIONS
On December 13, 2016, the City of Lake Elsinore (the “City”) formed Community Facilities
District No. 2016-2 of the City of Lake Elsinore (Canyon Hills) (the “CFD No. 2016-2”) by the
adoption of Resolution No. 2016-143 (the “Resolution of Formation”). On December 13, 2016,
the qualified electors within CFD No. 2016-2 voted in favor of the incurring of bonded
indebtedness in an amount not to exceed $27,500,000. On December 23, 2016, the City Council,
acting as the legislative body of CFD No. 2016-2, introduced Ordinance No. 2017-1366 (the
“Ordinance”), which provides for the “Rate and Method.” The Ordinance was adopted on
January 10, 2017.
CFD No. 2016-2 is co-terminous with Westridge, and does not include the Fully Built Area.
Since Improvement Area B will have no more authorized bonded indebtedness after the Local
Obligations are issued, CFD No. 2016-2 was formed with the intention of further assisting in the
financing of public infrastructure necessary for the construction of units within Westridge
undertaken by Pardee Homes and described in “CURRENT AND PROPOSED DEVELOPMENT
OF PROPERTY WITHIN IMPROVEMENT AREA B” above. In the Resolution of Formation, the
City Council covenanted that it will not levy a special tax on properties within CFD No. 2016-2
before the special tax lien securing the Special Taxes in the Westridge portion of Improvement
Area B is eliminated. To facilitate this proposed elimination, the City intends to issue bonds (the
“CFD No. 2016-2 Bonds”) by approximately early summer of 2018, in order to: (i) finance certain
public facilities, and (ii) to defease and redeem (on a pro rata basis) certain maturities of the 2015
Bonds and the Local Obligations, in an amount approximately equal to $11,900,000, in
accordance with the procedures outlined in the Local Bonds Indenture, which is anticipated to
take place by September 1, 2018. See “THE BONDS - Redemption -Special Redemption” and
“SPECIAL RISK FACTORS - Potential Early Redemption of Bonds from Prepayments.” After the
proposed defeasance and redemption, the remaining 2015 Bonds and Local Obligations will be
paid from Special Taxes levied on the Fully Built Area only.
SPECIAL RISK FACTORS
The purchase of the Bonds involves certain investment risks which are discussed
throughout this Official Statement. Each prospective investor should make an independent
52
evaluation of all information presented in this Official Statement in order to make an informed
investment decision. Particular attention should be given to the factors described below which,
among others, could affect the payment of debt service on the Bonds in general.
Risks of Real Estate Secured Investments Generally
Because the timely payment of debt service on the Bonds will be dependent upon the
timely payment of the Local Obligations and the timely payment of the Local Obligations will be
dependent upon the timely payment of Special Taxes, which are secured ultimately by the taxable
property within Improvement Area B of the District, 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 and
around the vicinity of Improvement Area B of the District, the supply of or demand for competitive
properties in such area, and the market value of residential property or buildings and/or sites in
the event of sale or foreclosure; (ii) changes in real estate tax rates and other operating expenses,
governmental rules (including, without limitation, zoning laws and laws relating to endangered
species and hazardous materials) and fiscal policies; and (iii) natural disasters (including, without
limitation, earthquakes and floods), which may result in uninsured losses.
The Bonds are Limited Obligations of the Authority
The Bonds are limited obligations of the Authority payable only from amounts pledged
under the Indenture, which consist primarily of payments made to the Trustee on the Local
Obligations and amounts in the Reserve Fund. Funds for the payment of the principal of and the
interest on the Local Obligations are derived only from payments of Special Taxes. The amount
of Special Taxes that are collected could be insufficient to pay principal of and interest on the
Local Obligations due to non-payment of the Special Taxes levied or due to insufficient proceeds
received from a judicial foreclosure sale of land within Improvement Area B following delinquency.
A District’s legal obligation with respect to any delinquent Special Taxes is limited to the institution
of judicial foreclosure proceedings under certain circumstances with respect to any parcels for
which Special Taxes is delinquent. The Bonds cannot be accelerated in the event of any default.
Failure by owners of the parcels within Improvement Area B to pay Special Tax
installments when due, delay in foreclosure proceedings, or the inability of the District to sell
parcels which have been subject to foreclosure proceedings for amounts sufficient to cover the
delinquent installments of Special Taxes levied against such parcels may result in the inability of
the District to make full or timely payments of debt service on the Local Obligations, which may,
in turn, result in the depletion of the Reserve Fund and the inability of the Authority to make full
or timely payment on the Bonds.
No Obligation of City
The Local Obligations and the interest thereon, and in turn, the Bonds, are not payable
from the general funds of the City. Except with respect to the Special Taxes, neither the credit
nor the taxing power of the District is pledged for the payment of the Local Obligations or the
interest thereon, and except to compel a levy of the Special Taxes securing the Local Obligations,
no Owner of the Bonds may compel the exercise of any taxing power by the District or force the
forfeiture of any property of the District. The principal of, premium, if any, and interest on the
Bonds are not a debt of the District or a legal or equitable pledge, charge, lien or encumbrance
upon the District’s property or upon any of the District’s income, receipts or revenues, except the
Revenues and other amounts pledged under the Indenture.
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Potential Early Redemption of Bonds from Prepayments
Property owners within Improvement Area B of the District are permitted to prepay their
Special Taxes at any time. Such prepayments will result in a redemption of Local Obligations on
the first March 1 or September 1 which is more than 30 days following the receipt of the
prepayment. The proceeds of the Local Obligations so redeemed will then be used to make a
mandatory redemption of the Bonds. The Bonds will be called on a pro rata basis from the
proceeds of the Local Obligations redeemed from prepayments.
The City has formed the CFD No. 2016-2 for the purpose of issuing CFD No. 2016-2
Bonds, anticipated to be issued by early summer of 2018. The proceeds of the CFD No. 2016-2
Bonds will be used in part to defease and redeem (on a pro rata basis) certain maturities of the
2015 Bonds and Local Obligations in an estimated amount of $11,900,000. Such early redemption
of the Local Obligations from the prepayment of Special Taxes will cause a corresponding special
redemption of certain maturities of the Bonds and is proposed to take place by September 1,
2018. See “COMMUNITY FACILITIES DISTRICT NO. 2016-2 AND THE PROPOSED
ELIMINATION OF THE SPECIAL TAX LIEN SECURING THE LOCAL OBLIGATIONS” and “THE
BONDS — Redemption — Special Redemption.” for more information.
Payment of Special Taxes is not a Personal Obligation of the Property Owners
Property owners are not personally obligated to pay their respective Special Taxes.
Rather, the Special Taxes are obligations only against the respective parcels against which they
are levied. If, after a default in the payment of the Special Tax and a foreclosure sale, the resulting
proceeds are insufficient, taking into account other obligations also constituting a lien against the
parcel, the District has no personal recourse against the parcel owner.
Assessed and Appraised Valuations
Appraised Value. The Appraisal Report attached as Appendix G estimates the market
value of the 456 parcels of taxable property within Westridge as of the stated date of value. This
market value is merely the present opinion of the Appraiser as of such date, and is subject to the
assumptions and limiting conditions stated in the Appraisal Report. Neither the District nor the
Authority has sought the present opinion of any other appraiser of the value of the taxable parcels.
A different present opinion of value might be rendered by a different appraiser.
The opinion of value relates to sale by a willing seller to a willing buyer, each having similar
information and neither being forced by other circumstances to sell or to buy. Consequently, the
opinion is of limited use in predicting the selling price at a foreclosure sale, because the sale is
forced and the buyer may not have the benefit of full information.
In addition, the opinion is a present opinion, based upon present facts and circumstances.
Differing facts and circumstances may lead to differing opinions of value. The appraised value is
not evidence of future value because future facts and circumstances may differ significantly from
the present.
No assurance can be given that any of the property in Improvement Area B could be sold
for the estimated market value contained in the Appraisal Report if that property should become
delinquent in the payment of Special Taxes and be foreclosed upon.
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See the caption “SOURCES OF PAYMENT FOR THE LOCAL OBLIGATIONS -Covenants
of the District - Commence Foreclosure Proceedings.”
Assessed Value. The Assessed Valuation of the 806 homes that have already been built
and transferred to individual homeowners contained within the Fully Built Area, is based only on
the County Assessor’s values.
No assurance can be given that any of the land for which the Assessed Valuation is given
could be sold for the assessed value if it should become delinquent and subject to foreclosure
proceedings.
Assessed values do not necessarily represent market values. Article XIIIA of the
California Constitution (Proposition 13) defines “full cash value” to mean “the County assessor’s
valuation of real property as shown on the 1975/76 roll under ‘full cash value’, or, thereafter, the
appraised value of real property when purchased or newly constructed or when a change in
ownership has occurred after the 1975 assessment,” subject to exemptions in certain
circumstances of property transfer or reconstruction. The “full cash value” is subject to annual
adjustment to reflect increases, not to exceed 2% for any year, or decreases in the consumer
price index or comparable local data, or to reflect reductions in property value caused by damage,
destruction or other factors. Because of the general limitation to 2% per year in increases in full
cash value of properties that remain in the same ownership, the County tax roll does not reflect
values uniformly proportional to actual market values. Moreover, as a result of declines in the
market value of properties, assessed valuations of properties in the County could decline.
Land Values
The value of land within Improvement Area B is an important factor in evaluating the
investment quality of the Bonds. In the event that a property owner defaults in the payment of
Special Tax installment, the District’s only remedy is to judicially foreclose on that property.
Prospective purchasers of the Bonds should not assume that the property within Improvement
Area B could be sold for the appraised value or the Assessed valuation described in this Official
Statement at a foreclosure sale for delinquent Special Tax installments or for an amount adequate
to pay delinquent Special Tax installments.
The actual market value of the property is subject to future events such as downturn in
the economy, occurrences of certain acts of nature and the decisions of various governmental
agencies as to land use, all of which could adversely impact the value of the land in Improvement
Area B which is the security for the Local Obligations, which secure the Bonds. As discussed
herein, many factors could adversely affect property values or prevent or delay further land
development within Improvement Area B.
Property Values and Property Development
Land Development. Land values are influenced by the level of development.
Undeveloped or partially developed land is generally less valuable than developed land and
provides less security to the owners of the Local Obligations should it be necessary for the City
to foreclose on undeveloped or partially developed property due to the nonpayment of Special
Taxes. In addition, failure to complete development on a timely basis could adversely affect the
land values of those parcels that have been completed.
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Lower land values would result in less security for the payment of principal of and interest
on the Local Obligations and lower proceeds from any foreclosure sale necessitated by
delinquencies in the payment of the Special Tax.
Risks of Real Estate Investment Generally. Undeveloped land is even more
susceptible to the general risks of investment in real estate. See “- Risks of Real Estate Secured
Investments Generally” above.
Legal Requirements. Other events that may affect the value of currently Undeveloped
Property within Improvement Area B include changes in the law or application of the law. Such
changes may include, without limitation, local growth control initiatives, local utility connection
moratoriums and local application of statewide tax and governmental spending limitation
measures.
Hazardous Substances. The discovery of hazardous substances on Undeveloped
Property in Improvement Area B could interfere with development therein. See “- Hazardous
Substances” below.
Endangered and Threatened Species. It is illegal to harm or disturb any plants or
animals in their habitat that have been listed as endangered species by the United States Fish &
Wildlife Service under the Federal Endangered Species Act or by the California Fish & Game
Commission under the California Endangered Species Act without a permit. The discovery of an
endangered plant or animal during development of Undeveloped Property could delay
development of vacant property in Improvement Area B or reduce the value of undeveloped
property.
Concentration of Property Ownership
Failure of Pardee Homes, as a significant landowner in Improvement Area B, to pay the
annual Special Taxes when due could eventually result in the rapid, total depletion of the Reserve
Fund prior to replenishment from the resale of the property upon a foreclosure or otherwise or
prior to delinquency redemption after a foreclosure sale, if any. In that event, there could be a
default in payments of the principal of and interest on bonds issues in any of the District.
Natural Disasters
The land within Improvement Area B, like all California communities, may be subject to
unpredictable seismic activity, fires, floods or other natural disasters. The occurrence of one of these
natural disasters in Improvement Area B could result in substantial damage to properties in
Improvement Area B which, in turn, could substantially reduce the value of such properties and
could affect the ability or willingness of the property owners to pay their Special Taxes. Any major
damage to structures as a result of natural disasters could result in a greater reliance on undeveloped
property in the payment of Special Taxes.
Hazardous Substances
The value of a parcel may be reduced as a result of the presence of a hazardous
substance. In general, the owners and operators of a parcel may be required by law to remedy
conditions of the parcel relating to releases or threatened releases of hazardous substances. The
Federal Comprehensive Environmental Response, Compensation and Liability Act of 1980,
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sometimes referred to as “CERCLA” or the “Superfund Act,” is the most well-known and widely
applicable of these laws, but California laws with regard to hazardous substances are also
stringent and similar. Under many of these laws, the owner or operator is obligated to remedy a
hazardous substance condition of property whether or not the owner or operator has anything to
do with creating or handling the hazardous substance. The effect, therefore, should any of the
taxed parcels be affected by a hazardous substance, is to reduce the marketability and value of
the parcel by the costs of remedying the condition, because the purchaser, upon becoming owner,
will become obligated to remedy the condition just as is the seller.
Further, it is possible that liabilities may arise in the future with respect to any of the parcels
resulting from the existence, currently, on the parcel of a substance presently classified as
hazardous but which has not been released or the release of which is not presently threatened,
or may arise in the future resulting from the existence, currently on the parcel of a substance not
presently classified as hazardous but which may in the future be so classified. Further, such
liabilities may arise not simply from the existence of a hazardous substance but from the method
of handling it. All of these possibilities could significantly affect the value of a parcel that is
realizable upon a delinquency.
None of the Authority, the District or the City has knowledge of any hazardous substances
being located on the property within Improvement Area B; however, such entities have not
conducted any investigation with respect to hazardous substances within Improvement Area B.
Parity Taxes and Special Assessments
Property within Improvement Area B is subject to taxes and other charges levied by
several other public agencies. See the discussion of direct and overlapping indebtedness under
the heading “THE COMMUNITY FACILITIES DISTRICT AND IMPROVEMENT AREA B - Direct
and Overlapping Indebtedness.” Neither the Authority, the District nor the City has control over
the ability of other entities and District to issue indebtedness secured by special taxes or
assessments payable from all or a portion of the property within the District.
The Special Taxes and any penalties thereon will constitute a lien against the lots and
parcels of land on which they will be annually imposed until they are paid. Such lien is on a parity
with the lien of all special taxes and special assessments levied by other agencies and is co-equal
to and independent of the lien for general ad valorem property taxes regardless of when they are
imposed upon the same property. The Special Taxes have priority over all existing and future
private liens imposed on the property. See “ — Bankruptcy and Foreclosure” below.
None of the Authority, the District or the City has control over the ability of other entities
and District to issue indebtedness secured by special taxes, ad valorem taxes or assessments
payable from all or a portion of the property within Improvement Area B. In addition, the
landowners within Improvement Area B may, without the consent or knowledge of the Authority,
the District or the City, petition other public agencies to issue public indebtedness secured by
special taxes, ad valorem taxes or assessments. Any such special taxes, ad valorem taxes or
assessments may have a lien on such property on a parity with the Special Taxes and could
reduce the estimated value-to-lien ratios for property within Improvement Area B described in this
Official Statement.
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Disclosures to Future Purchasers
The willingness or ability of an owner of a parcel to pay the Special Tax may be affected
by whether or not the owner was given due notice of the Special Tax authorization at the time the
owner purchased the parcel, was informed of the amount of the Special Tax on the parcel should
the Special Tax be levied at the maximum tax rate and the risk of such a levy and, at the time of
such a levy, has the ability to pay it as well as pay other expenses and obligations. The City has
caused a notice of the Special Tax that may be levied against the taxable parcels in Improvement
Area B to be recorded in the Office of the Recorder for the County. While title companies normally
refer to such notices in title reports, there can be no guarantee that such reference will be made
or, if made, that a prospective purchaser or lender will consider such Special Tax obligation in the
purchase of a property within Improvement Area B or lending of money thereon.
The Mello-Roos Act requires the subdivider (or its agent or representative) of a subdivision
to notify a prospective purchaser or long-term lessor of any lot, parcel, or unit subject to a
Mello-Roos special tax of the existence and maximum amount of such special tax using a
statutorily prescribed form. California Civil Code Section 1102.6b requires that in the case of
transfers other than those covered by the above requirement, the seller must at least make a
good faith effort to notify the prospective purchaser of the special tax lien in a format prescribed
by statute. Failure by an owner of the property to comply with the above requirements, or failure
by a purchaser or lessor to consider or understand the nature and existence of the Special Tax,
could adversely affect the willingness and ability of the purchaser or lessor to pay the Special Tax
when due.
Special Tax Delinquencies
Under provisions of the Mello-Roos Act, the Special Taxes, from which funds necessary
for the payment of principal of and interest on the Local Obligations and, thus, the Bonds are
derived, are customarily billed to the properties within each District on the ad valorem property
tax bills sent by the County to owners of such properties. The Mello-Roos Act currently provides
that such Special Tax installments are due and payable, and bear the same penalties and interest
for non-payment, as do ad valorem property tax installments.
See “SECURITY AND SOURCES OF PAYMENT FOR THE LOCAL OBLIGATIONS —
Covenants of the District —Commence Foreclosure Proceedings,” for a discussion of the
provisions which apply, and procedures which the District is obligated to follow under the Local
Obligation Bond Indenture, in the event of delinquencies in the payment of Special Taxes. See “
— Bankruptcy and Foreclosure” below for a discussion of limitations on the District’s ability to
foreclose on the lien of the Special Taxes in certain circumstances.
Insufficiency of Special Taxes
Notwithstanding that the maximum Special Taxes that may be levied in Improvement Area
B exceeds debt service due on the Local Obligations, the Special Taxes collected could be
inadequate to make timely payment of debt service either because of nonpayment or because
property becomes exempt from taxation.
The Rate and Method of Apportionment of Special Tax governing the levy of the Special
Taxes within Improvement Area B expressly exempts up to a specified number of acres of
property owned by public entities, homeowner associations, churches and other specified owners.
If for any reason property within Improvement Area B becomes exempt from taxation by reason
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of ownership by a non-taxable entity such as the federal government, another public agency or
other organization determined to be exempt, subject to the limitations of the maximum authorized
rates, the Special Tax will be reallocated to the remaining taxable properties within Improvement
Area B. This could result in certain owners of property paying a greater amount of the Special
Tax and could have an adverse impact upon the ability and willingness of the owners of such
property to pay the Special Tax when due.
The Mello-Roos Act provides that, if any property within Improvement Area B not
otherwise exempt from the Special Tax is acquired by a public entity through a negotiated
transaction, or by gift or devise, the Special Tax will continue to be levied on and enforceable
against the public entity that acquired the property. In addition, the Mello-Roos 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 Mello-Roos Act have not been tested in the courts. Due
to problems of collecting taxes from public agencies, if a substantial portion of land within
Improvement Area B became exempt from the Special Tax because of public ownership, or
otherwise, the maximum Special Taxes which could be levied upon the remaining taxable
property therein might not be sufficient to pay principal of and interest on the related Local
Obligations when due and a default could occur with respect to the payment of such principal and
interest, and, in turn, a default could occur in the payment of the principal and interest on the
Bonds.
In addition, the District’s ability to increase Special Tax levies on residential property to
make up for delinquencies for prior fiscal years is limited by Government Code § 53321(d), which
provides that the special tax levied against any parcel for which an occupancy permit for private
residential use has been issued may not be increased as a consequence of delinquency or default
by the owner of any other parcel by more than 10% above the amount that would have been
levied in such fiscal year had there never been any such delinquencies or defaults.
FDIC/Federal Government Interests in Properties
General. The ability of the District to foreclose the lien of delinquent unpaid Special Tax
installments may be limited with regard to properties in which the Federal Deposit Insurance
Corporation (the “FDIC”), the Drug Enforcement Agency, the Internal Revenue Service, or other
federal agency has or obtains an interest.
Federal courts have held that, based on the supremacy clause of the United States
Constitution, in the absence of Congressional intent to the contrary, a state or local agency cannot
foreclose to collect delinquent taxes or assessments if foreclosure would impair the federal
government interest.
The supremacy clause of the United States Constitution reads as follows: “This
Constitution, and the Laws of the United States which shall be made in Pursuance thereof; and
all Treaties made, or which shall be made, under the Authority of the United States, shall be the
supreme Law of the Land; and the Judges in every State shall be bound thereby, any Thing in
the Constitution or Laws of any State to the contrary notwithstanding.”
This means that, unless Congress has otherwise provided, if a federal governmental entity
owns a parcel that is subject to Special Taxes within Improvement Area B but does not pay taxes
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and assessments levied on the parcel (including Special Taxes), the applicable state and local
governments cannot foreclose on the parcel to collect the delinquent taxes and assessments.
Moreover, unless Congress has otherwise provided, if the federal government has a
mortgage interest in the parcel and a District wishes to foreclose on the parcel as a result of
delinquent Special Taxes, the property cannot be sold at a foreclosure sale unless it can be sold
for an amount sufficient to pay delinquent taxes and assessments on a parity with the Special
Taxes and preserve the federal government’s mortgage interest. In Rust v. Johnson (9th Circuit;
1979) 597 F.2d 174, the United States Court of Appeal, Ninth Circuit held that the Federal National
Mortgage Association (“FNMA”) is a federal instrumentality for purposes of this doctrine, and not
a private entity, and that, as a result, an exercise of state power over a mortgage interest held by
FNMA constitutes an exercise of state power over property of the United States.
The District have not undertaken to determine whether any federal governmental entity
currently has, or is likely to acquire, any interest (including a mortgage interest) in any of the
parcels subject to the Special Taxes within Improvement Area B, and therefore expresses no view
concerning the likelihood that the risks described above will materialize while the Bonds are
outstanding.
FDIC. In the event that any financial institution making any loan which is secured by real
property within Improvement Area B is taken over by the FDIC, and prior thereto or thereafter the
loan or loans go into default, resulting in ownership of the property by the FDIC, then the ability
of the District to collect interest and penalties specified by State law and to foreclose the lien of
delinquent unpaid Special Taxes may be limited.
The FDIC’s policy statement regarding the payment of state and local real property taxes
(the “Policy Statement”) provides that property owned by the FDIC is subject to state and local
real property taxes only if those taxes are assessed according to the property’s value, and that
the FDIC is immune from real property taxes assessed on any basis other than property value.
According to the Policy Statement, the FDIC will pay its property tax obligations when they
become due and payable and will pay claims for delinquent property taxes as promptly as is
consistent with sound business practice and the orderly administration of the institution’s affairs,
unless abandonment of the FDIC’s interest in the property is appropriate. The FDIC will pay
claims for interest on delinquent property taxes owed at the rate provided under state law, to the
extent the interest payment obligation is secured by a valid lien. The FDIC will not pay any
amounts in the nature of fines or penalties and will not pay nor recognize liens for such amounts.
If any property taxes (including interest) on FDIC-owned property are secured by a valid lien (in
effect before the property became owned by the FDIC), the FDIC will pay those claims. The
Policy Statement further provides that no property of the FDIC is subject to levy, attachment,
garnishment, foreclosure or sale without the FDIC’s consent. In addition, the FDIC will not permit
a lien or security interest held by the FDIC to be eliminated by foreclosure without the FDIC’s
consent.
The Policy Statement states that the FDIC generally will not pay non-ad valorem taxes,
including special assessments, on property in which it has a fee interest unless the amount of tax
is fixed at the time that the FDIC acquires its fee interest in the property, nor will it recognize the
validity of any lien to the extent it purports to secure the payment of any such amounts. Special
taxes imposed under the Mello-Roos Act and a special tax formula which determines the special
tax due each year are specifically identified in the Policy Statement as being imposed each year
and therefore covered by the FDIC’s federal immunity. The Ninth Circuit issued a ruling on August
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28, 2001 in which it determined that the FDIC, as a federal agency, is exempt from Mello-Roos
special taxes.
The District are unable to predict what effect the application of the Policy Statement would
have in the event of a delinquency in the payment of Special Taxes on a parcel within
Improvement Area B in which the FDIC has or obtains an interest, although prohibiting the lien of
the Special Taxes to be foreclosed out at a judicial foreclosure sale could reduce or eliminate the
number of persons willing to purchase a parcel at a foreclosure sale. Such an outcome could
cause a draw on the Reserve Fund and perhaps, ultimately, if enough property were to become
owned by the FDIC, a default in payment on the Bonds.
Bankruptcy and Foreclosure
In the event of a delinquency in the payment of the Special Taxes, the District, under
certain circumstances, is required to commence enforcement proceedings as described under
the heading “SECURITY AND SOURCES OF PAYMENT FOR THE LOCAL OBLIGATIONS —
Covenants of the District.” However, prosecution of such proceedings could be delayed due to
crowded local court calendars, dilatory legal tactics, or bankruptcy. It is also possible that a
District will be unable to realize proceeds in an amount sufficient to pay the applicable
delinquency. Moreover, the ability of the District to commence and prosecute enforcement
proceedings may be limited by bankruptcy, insolvency and other laws generally affecting
creditors’ rights (such as the Soldiers’ and Sailors’ Relief Act of 1940) and by the laws of the State
relating to judicial and non-judicial foreclosure. Although bankruptcy proceedings would not
cause the liens of the Special Taxes to become extinguished, bankruptcy of a property owner
could result in a delay in the enforcement proceedings because federal bankruptcy laws provide
for an automatic stay of foreclosure and tax sale proceedings. Any such delay could increase the
likelihood of delay or default in payment of the principal of and interest on the Local Obligations.
The various legal opinions delivered in connection with the issuance of the Bonds,
including Bond Counsel’s approving legal opinion, are qualified as to the enforceability of the
Bonds, the Indenture, the Local Obligations and the Local Obligation Bond Indenture by reference
to bankruptcy, reorganization, moratorium, insolvency and other laws affecting the rights of
creditors generally or against public corporations such as the District.
No Acceleration Provision
The Bonds do not contain a provision allowing for the acceleration of the Bonds in the
event of a payment default or other default under the terms of the Bonds or the Indenture.
Pursuant to the Indenture, an Owner of the Bonds is given the right for the equal benefit and
protection of all owners similarly situated to pursue certain remedies described in APPENDIX A
— “SUMMARY OF PRINCIPAL LEGAL DOCUMENTS.”
Limitations on Remedies
Remedies available to the Owners of the Bonds may be limited by a variety of factors and
may be inadequate to assure the timely payment of principal of and interest on the Bonds or to
preserve the exclusion from gross income for federal income tax purposes of interest on the
Bonds.
Bond Counsel has limited its opinion as to the enforceability of the Bonds and of the
Indenture to the extent that enforceability may be limited by bankruptcy, insolvency,
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reorganization, fraudulent conveyance or transfer, moratorium, or other similar laws affecting
generally the enforcement of creditors’ rights, by equitable principles, by the exercise of judicial
discretion and by limitations on remedies against public agencies in the State. 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 of the Bonds.
Loss of Tax Exemption
As discussed under the caption “LEGAL MATTERS — Tax Matters,” interest on the Bonds
could become includable in gross income for purposes of federal income taxation retroactive to
the date the Bonds were issued, as a result of future acts or omissions of the Authority, the City
or the District in violation of covenants in the Indenture or the Local Obligation Bond Indentures,
respectively. Legislative changes have been proposed in Congress, which, if enacted, would
result in additional federal income tax being imposed on certain owners of tax-exempt state or
local obligations, such as the Bonds. The introduction or enactment of any of such changes could
adversely affect the market value or liquidity of the Bonds. Should such an event of taxability
occur, the Bonds are not subject to a special redemption and will remain outstanding until maturity
or until redeemed under one of the other redemption provisions contained in the Indenture.
IRS Audit of Tax-Exempt Bond Issues
The Internal Revenue Service (the “IRS”) has initiated an expanded program for the
auditing of tax-exempt bond issues, including both random and targeted audits. It is possible that
the Bonds will be selected for audit by the IRS. It is also possible that the market value of such
Bonds might be affected as a result of such an audit of such Bonds (or by an audit of similar bonds
or securities).
Impact of Legislative Proposals, Clarifications of the Code and Court Decisions on Tax
Exemption
Future legislative proposals, if enacted into law, clarification of the Code (as defined
herein) or court decisions may cause interest on the Bonds to be subject, directly or indirectly, to
federal income taxation or to be subject to or exempted from state income taxation, or otherwise
prevent Bond owners from realizing the full current benefit of the tax status of such interest.
For example, various proposals have been made in Congress and by the President which,
if enacted, would subject interest on bonds that is otherwise excludable from gross income for
federal income tax purposes, including interest on the Bonds, to a tax payable by certain
bondholders that are individuals, estates or trusts with adjusted gross income in excess of certain
specified thresholds.
The introduction or enactment of any such legislative proposals, clarification of the Code
or court decisions may also affect the market price for, or marketability of, the Bonds. Prospective
purchasers of the Bonds should consult their own tax advisors regarding any pending or proposed
federal or state tax legislation, regulations or litigation.
Limited Secondary Market
There can be no guarantee that there will be a secondary market for the Bonds, or, if a
secondary market exists, that the Bonds can be sold for any particular price. Although the
Authority has committed to provide certain financial information and operating data on an annual
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basis, there can be no assurance that such information will be available to Beneficial Owners of
the Bonds on a timely basis. The failure to provide the required annual information does not give
rise to monetary damages but merely an action for specific performance. Occasionally, because
of general market conditions, lack of current information, the absence of a credit rating, or 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.
Proposition 218
An initiative measure commonly referred to as the “Right to Vote on Taxes Act” (the
“Initiative”) was approved by the voters of the State of California at the November 5, 1996 general
election. The Initiative added Article XIIIC and Article XIIID to the California Constitution.
According to the “Title and Summary” of the Initiative prepared by the California Attorney General,
the Initiative limits “the authority of local governments to impose taxes and property-related
assessments, fees and charges.” The provisions of the Initiative continue to be interpreted by
the courts. The Initiative could potentially impact the Special Taxes available to the District to pay
the principal of and interest on the Local Obligations as described below.
Among other things, Section 3 of Article XIII states that “. . . the initiative power shall not
be prohibited or otherwise limited in matters of reducing or repealing any local tax, assessment,
fee or charge.” The Mello-Roos Act provides for a procedure which includes notice, hearing,
protest and voting requirements to alter the rate and method of apportionment of an existing
special tax. However, the Mello-Roos Act prohibits a legislative body from adopting any resolution
to reduce the rate of any special tax or terminate the levy of any special tax pledged to repay any
debt incurred pursuant to the Mello-Roos Act unless such legislative body determines that the
reduction or termination of the special tax would not interfere with the timely retirement of that
debt. On August 1, 1997, a bill was signed into law by the Governor of the State enacting
Government Code Section 5854, which states that:
Section 3 of Article XIIIC of the California Constitution, as adopted at the
November 5, 1996, general election, shall not be construed to mean that any
owner or beneficial owner of a municipal security, purchased before or after that
date, assumes the risk of, or in any way consents to, any action by initiative
measure that constitutes an impairment of contractual rights protected by
Section 10 of Article I of the United States Constitution.
Accordingly, although the matter is not free from doubt, it is likely that the Initiative has not
conferred on the voters the power to repeal or reduce the Special Taxes if such reduction would
interfere with the timely retirement of the Local Obligations.
It may be possible, however, for voters or the City Council of the City, acting as the
legislative body of the District, to reduce the Special Taxes in a manner which does not interfere
with the timely repayment of the Local Obligations, but which does reduce the maximum amount
of Special Taxes that may be levied in any year below the existing levels. Therefore, no
assurance can be given with respect to the levy of Special Taxes for Administrative Expenses.
Furthermore, no assurance can be given with respect to the future levy of the Special Taxes in
amounts greater than the amount necessary for the timely retirement of the Local Obligations.
Nevertheless, to the maximum extent that the law permits it to do so, each District will covenant
in each Local Obligation Bond Indenture executed by it that it will not initiate proceedings under
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the Mello-Roos Act to reduce the maximum Special Tax rates in Improvement Area B below an
amount equal to 110% of the debt service for the Local Obligations in each Bond Year. The
District also will covenant in the Local Obligation Bond Indenture executed by it that, in the event
an initiative is adopted which purports to alter the Rate and Method, it will commence and pursue
legal action in order to preserve its ability to comply with the foregoing covenant. However, no
assurance can be given as to the enforceability of the foregoing covenants.
The interpretation and application of the Initiative will ultimately be determined by the
courts with respect to a number of the matters discussed above. For example, in August 2014, in
City of San Diego. v. Melvin Shapiro, an Appellate Court invalidated an election held by the City
of San Diego to authorize the levying of special taxes on hotels city-wide pursuant to a San Diego
charter ordinance creating a convention center facilities district which specifically defined the
electorate to consist solely of (1) the owners of real property in San Diego on which a hotel is
located, and (2) the lessees of real property owned by a governmental entity on which a hotel is
located. The court held that such landowners and lessees are neither “qualified electors” of the
special tax district for purposes of Articles XIII A, Section 4 of the California Constitution, nor a
proper “electorate” under Article XIIIC, Section 2(d) of the California Constitution. The court
specifically noted that the decision did not require the Court to consider the distinct question of
whether landowner voting to impose special taxes under Section 53326(b) of the Mello-Roos Act
(which was the nature of the voter approval through which the District was formed) violates the
California Constitution in District that lack sufficient registered voters to conduct an election
among registered voters. Accordingly, this case should have no effect on the levy of the Special
Taxes.
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. See “SPECIAL RISK FACTORS —
Limitations on Remedies.”
Ballot Initiatives
Articles XIII A, XIII B, XIII C and XIII D, all of which placed certain limitations on the power
of local agencies to tax, collect and expend revenues, were adopted pursuant to measures
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 legislature. The
adoption of any such initiative or legislation might place limitations on the ability of the State, the
City, or the District to increase revenues or to increase appropriations or on the ability of the
landowners within Improvement Area B to complete proposed future development.
64
LEGAL MATTERS
Tax Matters
In the opinion of Stradling Yocca Carlson & Rauth, a Professional Corporation, Newport
Beach, California (“Bond Counsel”), under existing statutes, regulations, rulings and judicial
decisions, and assuming the accuracy of certain representations and compliance with certain
covenants and requirements described herein, interest on the Bonds is excluded from gross
income for federal income tax purposes and is not an item of tax preference for purposes of
calculating the federal alternative minimum tax imposed on individuals and corporations. In the
further opinion of Bond Counsel, interest on the Bonds is exempt from State of California personal
income tax. Bond Counsel notes that, with respect to corporations, interest on the Bonds may be
included as an adjustment in the calculation of alternative minimum taxable income which may
affect the alternative minimum tax liability of such corporations.
The difference between the issue price of a Bond (the first price at which a substantial
amount of the Bonds of the same maturity is to be sold to the public) and the stated redemption
price at maturity with respect to such Bond constitutes original issue discount. Original issue
discount accrues under a constant yield method, and original issue discount will accrue to a Bond
Owner before receipt of cash attributable to such excludable income. The amount of original
issue discount deemed received by the Bond Owner will increase the Bond Owner’s basis in the
Bond. In the opinion of Bond Counsel, the amount of original issue discount that accrues to the
owner of a Bond is excluded from the gross income of such owner for federal income tax
purposes, is not an item of tax preference for purposes of the federal alternative minimum tax
imposed on individuals and corporations, and is exempt from State of California personal income
tax.
Bond Counsel’s opinion as to the exclusion from gross income of interest for federal
income tax purposes (and original issue discount) on the Bonds is based upon certain
representations of fact and certifications made by the Authority, the District and others and is
subject to the condition that the Authority and the District comply with all requirements of the
Internal Revenue Code of 1986, as amended (the “Code”), that must be satisfied subsequent to
the issuance of the Bonds to assure that interest (and original issue discount) on the Bonds will
not become includable in gross income for federal income tax purposes. Failure to comply with
such requirements of the Code might cause the interest (and original issue discount) on the Bonds
to be included in gross income for federal income tax purposes retroactive to the date of issuance
of the Bonds. The Authority and the District will covenant to comply with all such requirements.
The amount by which a Bond Owner’s original basis for determining loss on sale or
exchange in the applicable Bond (generally, the purchase price) exceeds the amount payable on
maturity (or on an earlier call date) constitutes amortizable Bond premium, which must be
amortized under Section 171 of the Code; such amortizable Bond premium reduces the Bond
Owner’s basis in the applicable Bond (and the amount of tax-exempt interest received), and is
not deductible for federal income tax purposes. The basis reduction as a result of the amortization
of Bond premium may result in a Bond Owner realizing a taxable gain when a Bond is sold by the
Owner for an amount equal to or less (under certain circumstances) than the original cost of the
Bond to the Owner. Purchasers of the Bonds should consult their own tax advisors as to the
treatment, computation and collateral consequences of amortizable Bond premium.
The IRS has initiated an expanded program for the auditing of tax-exempt bond issues,
including both random and targeted audits. It is possible that the Bonds will be selected for audit
65
by the IRS. It is also possible that the market value of the Bonds might be affected as a result of
such an audit of the Bonds (or by an audit of other similar bonds). No assurance can be given
that in the course of an audit, as a result of an audit, or otherwise, Congress or the IRS might not
change the Code (or interpretation thereof) subsequent to the issuance of the Bonds to the extent
that it adversely affects the exclusion from gross income of interest (and original issue discount)
on the Bonds or their market value.
SUBSEQUENT TO THE ISSUANCE OF THE BONDS THERE MIGHT BE FEDERAL,
STATE, OR LOCAL STATUTORY CHANGES (OR JUDICIAL OR REGULATORY CHANGES TO
OR INTERPRETATIONS OF FEDERAL, STATE, OR LOCAL LAW) THAT AFFECT THE
FEDERAL, STATE, OR LOCAL TAX TREATMENT OF THE BONDS OR THE MARKET VALUE
OF THE BONDS. TAX REFORM LEGISLATION HAS BEEN INTRODUCED AND IS BEING
CONSIDERED BY CONGRESS THAT, AMONG OTHER MATTERS, SIGNIFICANTLY ALTERS
INCOME TAX RATES AND REPEALS THE ALTERNATIVE MINIMUM TAX. THESE
PROPOSED LEGISLATIVE CHANGES OR OTHER CHANGES WHICH MIGHT BE
INTRODUCED IN CONGRESS COULD ADVERSELY AFFECT THE MARKET VALUE OR
LIQUIDITY OF THE BONDS. IT IS POSSIBLE THAT LEGISLATIVE CHANGES WILL BE
INTRODUCED WHICH, IF ENACTED, WOULD RESULT IN ADDITIONAL FEDERAL INCOME
OR STATE TAX BEING IMPOSED ON OWNERS OF TAX-EXEMPT STATE OR LOCAL
OBLIGATIONS, SUCH AS THE BONDS.NO ASSURANCE CAN BE GIVEN THAT
SUBSEQUENT TO THE ISSUANCE OF THE BONDS STATUTORY CHANGES WILL NOT BE
INTRODUCED OR ENACTED OR INTERPRETATIONS WILL NOT OCCUR.BEFORE
PURCHASING ANY OF THE BONDS, ALL POTENTIAL PURCHASERS SHOULD CONSULT
THEIR TAX ADVISORS REGARDING POSSIBLE STATUTORY CHANGES OR JUDICIAL OR
REGULATORY CHANGES OR INTERPRETATIONS, AND THEIR COLLATERAL TAX
CONSEQUENCES RELATING TO THE BONDS.
Bond Counsel’s opinions may be affected by actions taken (or not taken) or events
occurring (or not occurring) after the date of issuance of the Bonds. Bond Counsel has not
undertaken to determine, or to inform any person, whether any such actions or events are taken
or do occur. The Indenture, the Local Obligation Bond Indenture and the Tax Certificate relating
to the Bonds permit certain actions to be taken or to be omitted if a favorable opinion of Bond
Counsel is provided with respect thereto. Bond Counsel expresses no opinion as to the effect on
the exclusion from gross income of interest (and original issue discount) on the Bonds for federal
income tax purposes with respect to any Bond if any such action is taken or omitted based upon
the advice of counsel other than Stradling Yocca Carlson & Rauth, a Professional Corporation.
Although Bond Counsel has rendered an opinion that interest (and original issue discount)
on the Bonds is excluded from gross income for federal income tax purposes provided that the
District continues to comply with certain requirements of the Code, the ownership of the Bonds
and the accrual or receipt of interest (and original issue discount) with respect to the Bonds may
otherwise affect the tax liability of certain persons. Bond Counsel expresses no opinion regarding
any such tax consequences. Accordingly, before purchasing any of the Bonds, all potential
purchasers should consult their tax advisors with respect to collateral tax consequences relating
to the Bonds.
Should interest on the Bonds (including any original issue discount) become includable in
gross income for federal income tax purposes, the Bonds are not subject to early redemption and
will remain outstanding until maturity or until redeemed in accordance with the Indenture.
66
See APPENDIX D — “FORM OF BOND COUNSEL OPINION” for a form of the opinion
to be provided by Bond Counsel on the date of issuance of the Bonds.
Absence of Litigation
The Authority.The Authority will certify at the time the Bonds are issued that no litigation
is pending or threatened concerning the validity of the Bonds and that no action, suit or proceeding
is known by the Authority to be pending that would restrain or enjoin the delivery of the Bonds, or
contest or affect the validity of the Bonds or any proceedings of the Authority taken with respect
to the Bonds or the Local Obligations.
The District.The District will certify at the time the Bonds are issued that no litigation is
pending or threatened concerning the validity the Local Obligations and that no action, suit or
proceeding is known by the District to be pending that would restrain or enjoin the delivery of the
Local Obligations, or contest or affect the validity of the Local Obligations or any proceedings of
the District taken with respect to the Local Obligations.
Legal Opinion
Certain proceedings in connection with the issuance of the Bonds are subject to the
approval as to their legality of Stradling Yocca Carlson & Rauth, a Professional Corporation,
Newport Beach, California, Bond Counsel for the Authority in connection with the issuance of the
Bonds. The opinion of Bond Counsel approving the validity of the Bonds substantially in the form
attached as APPENDIX D hereto will be attached to each Bond. Bond Counsel’s employment is
limited to a review of legal procedures required for the approval of the Bonds and to rendering an
opinion as to the validity of the Bonds and the exemption of interest on the Bonds from income
taxation. Bond Counsel expresses no opinion to the Owners of the Bonds as to the accuracy,
completeness or fairness of this Official Statement or other offering materials relating to the Bonds
and expressly disclaims any duty to do so.
Payment of the fees of Bond Counsel, Disclosure Counsel and Underwriter’s Counsel is
contingent upon issuance of the Bonds.
67
MISCELLANEOUS
Underwriting
The Bonds are being purchased by Stifel, Nicolaus & Company, Incorporated (the
“Underwriter”) at a purchase price of $[_______], (representing the par amount of the Bonds,
less underwriter’s discount of $[_______] and plus net original issue premium of $[______]).
The bond purchase agreement relating to the Bonds between the Authority and the
Underwriter provides that all Bonds will be purchased if any are purchased, and that the obligation
to make such purchase is subject to certain terms and conditions set forth in said purchase
contract, including, but not limited to, the approval of certain legal matters by counsel.
Continuing Disclosure
Authority Continuing Disclosure. The District will execute a continuing disclosure
certificate in the form attached hereto as APPENDIX E for the benefit of the Owners of the Bonds
to provide certain financial information and operating data relating to the Authority and the District
(the “Annual Report”) and to provide notices of the occurrence of certain enumerated events (the
“Listed Events”). The Annual Report and notices of Listed Events will be filed by SCG - Spicer
Consulting Group as the initial dissemination agent (the “Dissemination Agent”) on the
Electronic Municipal Market Access System of the Municipal Securities Rulemaking Board
(“EMMA”). The specific nature of the information to be included in the Annual Reports and the
notices of Listed Events is set forth in APPENDIX E — “FORM OF CONTINUING DISCLOSURE
CERTIFICATE.” The Continuing Disclosure Certificate will be executed and delivered by the
District in order to assist the Underwriter in complying with SEC Rule 15c2-12(b)(5) (the “Rule”).
The Annual Reports are to be filed by the Authority no later than February 15 of each year. The
first Annual Report will be due February 15, 2018.
It should be noted that the District is required to file certain financial statements with the
Annual Reports. This requirement has been included in the certificate solely to satisfy the
provisions of the Rule. The inclusion of this information does not mean that the Bonds are secured
by any resources or property of the District other than as described in this Official Statement. See
“SECURITY FOR THE BONDS,” “SECURITY AND SOURCES OF PAYMENT FOR THE LOCAL
OBLIGATIONS” and “SPECIAL RISK FACTORS.” It should also be noted that the Listed Events
that the District has agreed to report includes items which have absolutely no application
whatsoever to the Bonds. These items have been included in the list solely to satisfy the
requirements of the Rule. Thus, any implication from the inclusion of these items in the list to the
contrary notwithstanding, there are no credit enhancements applicable to the Bonds, and there
are no credit or liquidity providers with respect to the Bonds.
The Continuing Disclosure Certificate will inure solely to the benefit of any Dissemination
Agent, the Underwriter and Owners from time to time of the Bonds. A default under the Continuing
Disclosure Certificate is not a default under the Indenture and the sole remedy following a default
is an action to compel specific performance by the District with the terms of the Continuing
Disclosure Certificate.
History of Continuing Disclosure Compliance. The District has had obligations
pursuant to existing continuing disclosure undertakings during the previous five-year period. In
the previous five years, with respect to Improvement Area B and other improvement areas in the
District, the District has failed to file its audited financial statements on a timely basis for fiscal
68
year 2011-12 (506 days late), fiscal year 2012-13 (182 days late) and fiscal year 2014-15 (33
days late). The District has also failed to file annual reports on a timely basis for fiscal year 2011-
12 and fiscal year 2012-13, and one of the late annual reports also included incomplete
information, specifically, tax prepayment information and improvement fund balances were
missing. [All of the above instances of non-disclosure have been remedied to the extent
possible][CONFIRM].
In addition, although the City and its affiliated entities other than the District (such as the
Lake Elsinore Public Financing Authority, the City’s former redevelopment agency and its
successor agency, and other community facilities districts formed by the City) are not obligated
persons pursuant to Rule 15c2-12 with respect to the Bonds, during the last five years the City
and such affiliated entities failed to comply in certain respects with continuing disclosure
obligations related to outstanding bonded indebtedness. The failures to comply include late filings
with respect to several annual reports, incomplete filings with respect to other annual reports, and
failure to provide notice of late annual financial information. The incomplete filings omitted one
or more of the following items:
(1)Comprehensive audited financial statements, including the audited financial statements
for fiscal years 2011-12 through 2012-13, which were not linked on EMMA to all required CUSIPs
until July 1, 2014, and for fiscal year 2015;
(2)Updated tabular and other operating information; and
(3)Material event notices of changes in bond ratings.
The City and its affiliated entities have made additional filings to provide certain of the
previously omitted information (including the existing ratings of the outstanding bonds).
The City has retained SCG - Spicer Consulting Group to serve as Dissemination Agent
for the continuing disclosure undertaking related to the Bonds, and has adopted policies and
procedures with respect to its continuing disclosure practices. In addition, the City has reported
the failures in compliance under its previous continuing disclosure undertakings pursuant to the
Municipalities Continuing Disclosure Cooperation Initiative of the U.S. Securities Exchange
Commission.
Additional Information
References are made herein to certain documents and reports which are brief summaries
thereof which do not purport to be complete or definitive, and reference is made to such
documents and reports for full and complete statements of the contents thereof.
Any statements in this Official Statement involving matters of opinion, whether or not
expressly so stated, are intended as such and not as representations of fact. This Official
Statement is not to be construed as a contract or agreement between the Authority and the
purchasers or Owners of any of the Bonds.
The execution and delivery of this Official Statement has been duly authorized by the
Authority and the District.
69
LAKE ELSINORE FACILITIES FINANCING
AUTHORITY
By:____
Executive Director
CITY OF LAKE ELSINORE COMMUNITY
FACILITIES DISTRICT NO. 2003-2
(CANYON HILLS)
By:_____
City Manager
A-1
APPENDIX A
SUMMARY OF PRINCIPAL LEGAL DOCUMENTS
B-1
APPENDIX B
DEMOGRAPHIC INFORMATION REGARDING THE CITY OF LAKE ELSINORE
AND THE COUNTY OF RIVERSIDE
The following information relating to the City of Lake Elsinore (the “City”) and the County
of Riverside (the “County”), California (the “State”) is supplied solely for purposes of information.
Neither the City nor the County is obligated in any manner to pay principal of or interest on the
2017 Bonds or to cure any delinquency or default on the 2017 Bonds. The 2017 Bonds are
payable solely from the sources described in the Official Statement.
General Description
The City was founded in 1883 and incorporated as a general law city effective April 23,
1888 in San Diego County. In 1893, the Elsinore Valley, previously located in San Diego County,
became part of the new County of Riverside. The City encompasses approximately 43 square
miles, with over 10 miles of lakeshore, and is located at the southwestern end of the County, 73
miles east of downtown Los Angeles and 74 miles north of downtown San Diego. As of January
1, 2017, the City’s population was approximately 62,092 people.
Population
The population of the City, the County and the State is shown below for 2013 through 2017.
City of Lake Elsinore, County of Riverside and State of California
Population Estimates
Source:California Department of Finance estimates (as of January 1).
Year (January 1)City of Lake Elsinore County of Riverside State of California
2013 55,444 2,255,653 37,966,471
2014 56,688 2,280,191 38,357,121
2015 58,426 2,308,441 38,714,725
2016 60,876 2,348,213 39,189,035
2017 62,092 2,384,783 39,523,613
B-2
Employment and Industry
The County of Riverside is a part of the Riverside-San Bernardino-Ontario Metropolitan
Statistical Area (the “MSA”). The unemployment rate in the MSA was 6.2 percent in August 2017,
up from a revised 6.1 percent in July 2017, and below the year-ago estimate of 6.4 percent. This
compares with an unadjusted unemployment rate of 5.4 percent for California and 4.5 percent for
the nation during the same period. The unemployment rate was 6.5 percent in Riverside County
and 5.8 percent in San Bernardino County.
The following table summarizes the civilian labor force, employment and unemployment
in the County for the calendar years 2012 through 2016. These figures are county-wide statistics
and may not necessarily accurately reflect employment trends in the City.
RIVERSIDE-SAN BERNARDINO-ONTARIO METROPLITAN STATISTICA AREA
(Riverside and San Bernardino Counties)
Civilian Labor Force, Employment and Unemployment
(Annual Averages)
March 2016 Benchmark
2012 2013 2014 2015 2016
Civilian Labor Force (1)1,882,900 1,897,000 1,919,900 1,956,600 1,987,400
Employment 1,665,600 1,710,500 1,763,300 1,828,400 1,870,200
Unemployment 217,300 186,500 156,600 128,200 117,200
Unemployment Rate 11.5%9.8%8.2%6.6%5.9%
Wage and Salary Employment (2)
Agriculture 15,000 14,500 14,300 14,800 14,700
Mining and Logging 1,200 1,200 1,300 1,300 900
Construction 62,600 70,000 77,000 85,700 92,500
Manufacturing 86,700 87,300 90,200 96,100 98,900
Wholesale Trade 52,200 56,400 59,000 61,600 62,900
Retail Trade 162,400 164,800 168,700 174,300 179,000
Transportation, Warehousing & Utilities 73,900 79,400 87,300 97,400 104,400
Information 11,700 11,500 11,200 11,400 11,600
Finance & Insurance 26,000 26,500 26,500 26,900 27,300
Real Estate & Rental & Leasing 14,900 15,600 16,200 17,000 18,000
Professional & Business Services 127,500 132,400 137,800 147,400 145,800
Educational & Health Services 167,200 184,500 193,600 205,100 214,300
Leisure & Hospitality 129,400 135,900 144,300 151,700 159,700
Other Services 40,100 41,100 43,200 44,000 45,100
Federal Government 20,600 20,300 20,200 20,300 20,500
State Government 28,200 27,800 28,200 28,700 29,700
Local Government 175,800 177,100 180,400 184,400 190,400
Total, All Industries(3)1,193,300 1,246,400 1,299,500 1,367,900 1,415,400
(1) Labor force data is by place of residence; includes self-employed individuals, unpaid family workers, household domestic workers,
and workers on strike.
(2) Industry employment is by place of work; excludes self-employed individuals, unpaid family workers, household domestic workers,
and workers on strike.
(3) Totals may not add due to rounding.
Source: State of California Employment Development Department.
B-3
Major Employers
The following table sets forth the top twenty employers located in the County:
COUNTY OF RIVERSIDE
Largest Employers (Listed Alphabetically)
As of October 2017
Employer Name Location Industry
Amazon Fulfillment Ctr Moreno Valley Distribution Centers (whls)
Corrections Dept Norco Government Offices-State
Desert Regional Medical Ctr Palm Springs Hospitals
Eisenhower Medical Ctr Rancho Mirage Hospitals
Fantasy Springs Resort Casino Indio Casinos
Handsome Rewards Perris Internet & Catalog Shopping
Hemet Valley Medical Ctr Hemet Hospitals
Hotel At Fantasy Springs Indio Casinos
Inland Valley Medical Ctr Wildomar Hospitals
J W Marriott Desert Spgs Resrt Palm Desert Convention & Meeting Facilities & Svc
La Quinta Golf Course La Quinta Golf Courses
La Quinta Resrt-Club A Waldorf La Quinta Resorts
Morongo Resort & Spa Cabazon Casinos
Morongo Tribal Gaming Ent Banning Business Management Consultants
Parkview Community Hospital Riverside Hospitals
Pechanga Resort & Casino Temecula Casinos
Riverside Community Hospital Riverside Hospitals
Riverside University Health Moreno Valley Hospitals
Robertson's Ready Mix Corona Concrete-Ready Mixed
Southwest Healthcare System Murrieta Hospitals
Starcrest of California Perris Internet & Catalog Shopping
Starcrest Products Perris Gift Shops
Sun World Intl LLC Coachella Fruits & Vegetables-Wholesale
Universal Protection Svc Palm Desert Security Guard & Patrol Service
US Air Force Dept March Arb Military Bases
Source: State of California Employment Development Department; America’s Labor Market Information System (ALMIS) Employer
Database, 2017 2nd Edition.
B-4
Effective Buying Income
“Effective Buying Income” is defined as personal income less personal tax and nontax
payments, a number often referred to as “disposable” or “after-tax” income. Personal income is
the aggregate of wages and salaries, other labor-related income (such as employer contributions
to private pension funds), proprietor’s income, rental income (which includes imputed rental
income of owner-occupants of non-farm dwellings), dividends paid by corporations, interest
income from all sources, and transfer payments (such as pensions and welfare assistance).
Deducted from this total are personal taxes (federal, state and local), nontax payments (fines,
B-5
fees, penalties, etc.) and personal contributions to social insurance. According to U.S.
government definitions, the resultant figure is commonly known as “disposable personal income.”
The following table summarizes the total effective buying income for the City, the County,
the State and the United States for the period 2012 through 2016.
CITY OF LAKE ELSINORE
COUNTY OF RIVERSIDE
Effective Buying Income
As of January 1, 2012 through 2016
Year Area
Total Effective
Buying
Income (000’s
Omitted)
Median
Household
Effective
Buying Income
2012 City of Lake Elsinore $846,888 $45,195
County of Riverside 40,157,310 43,860
California 864,088,828 47,307
United States 6,737,867,730 41,358
2013 City of Lake Elsinore $852,698 $45,712
County of Riverside 40,293,518 44,784
California 858,676,636 48,340
United States 6,982,757,379 43,715
2014 City of Lake Elsinore $907,205 $48,563
County of Riverside 41,199,300 45,576
California 901,189,699 50,072
United States 7,357,153,421 45,448
2015 City of Lake Elsinore $977,758 $51,040
County of Riverside 45,407,058 48,674
California 981,231,666 53,589
United States 7,757,960,399 46,738
2016 City of Lake Elsinore $1,092,865 $56,003
County of Riverside 47,509,909 50,287
California 1,036,142,723 55,681
United States 8,132,748,136 48,043
Source: The Nielsen Company (US), Inc.
Commercial Activity
B-6
A summary of historic taxable sales within the County during the past five years in which
data is available is shown in the following table. Total taxable sales during the first two quarters
of calendar year 2016 in the County were reported to be $16.8 billion, a 3.4% increase over the
total taxable sales of $16.2 billion reported during the first two quarters of calendar year 2015.
Annual figures for calendar year 2016 are not yet available.
COUNTY OF RIVERSIDE
Taxable Transactions
Number of Permits and Valuation of Taxable Transactions
(Dollars in Thousands)
Retail Stores Total All Outlets
Number
of Permits
on August 1
Taxable
Transactions
Number
of Permits
on August 1
Taxable
Transactions
2011 33,398 $18,576,285 46,886 $25,641,497
2012 34,683 20,016,668 48,316 28,096,009
2013 33,391 21,306,774 46,805 30,065,467
2014 34,910 22,646,343 48,453 32,035,687
2015(1)18,662 23,281,724 56,846 32,910,910
(1) Permit figures for calendar year 2015 are not comparable to that of prior years due to outlet counts in these reports
including the number of outlets that were active during the reporting period. Retailers that operate part-time are now
tabulated with store retailers.
Source: California State Board of Equalization, Taxable Sales in California (Sales & Use Tax).
A summary of historic taxable sales within the City during the past five years in which data
is available is shown in the following table. Total taxable sales during the first two quarters of
calendar year 2016 in the City were reported to be $397.7 million, a 4.44% increase over the total
taxable sales of $380.7 million reported during the first two quarters of calendar year 2015. Annual
figures for calendar year 2016 are not yet available.
CITY OF LAKE ELSINORE
Taxable Transactions
Number of Permits and Valuation of Taxable Transactions
(Dollars in Thousands)
Retail Stores Total All Outlets
Number of
Permits
on August 1
Taxable
Transactions
Number of
Permits
on August 1
Taxable
Transactions
2011 897 $578,301 1,248 $634,553
2012 923 604,846 1,274 665,409
2013 828 620,558 1,176 688,483
2014 809 647,941 1,176 728,088
2015(1)900 673,669 1,420 765,716
(1) Permit figures for calendar year 2015 are not comparable to that of prior years due to outlet counts in these reports
including the number of outlets that were active during the reporting period. Retailers that operate part-time are now
tabulated with store retailers.
Source: California State Board of Equalization, Taxable Sales in California (Sales & Use Tax).
B-7
Construction Activity
Provided below are the building permits and valuations for the County and the City for
calendar years 2012 through 2016.
COUNTY OF RIVERSIDE
Total Building Permit Valuations
(Valuations in Thousands)
2012 2013 2014 2015 2016
Permit Valuation
New Single-family $904,156.2 $1,138,738.1 $1,296,552.8 $1,313,084.2 $1,526,767.8
New Multi-family 87,878.6 138,636.0 178,116.7 110,458.4 106,291.8
Res. Alterations/Additions 87,370.5 98,219.3 147,081.2 113,120.0 126,475.0
Total Residential 1,079,405.3 1,375,593.4 1,621,750.7 1,536,742.6 1,759,534.6
New Commercial 508,192.8 263,837.7 197,674.9 211,785.1 583,023.5
New Industrial 26,432.5 141,184.4 161,321.1 180,521.3 59,439.2
New Other 11,115.5 109,795.2 128,666.9 204,554.1 583,002.7
Com. Alterations/Additions 171,263.2 369,502.4 327,327.1 314,604.2 371,216.4
Total Nonresidential 717,004.0 884,319.7 814,990.0 911,464.7 1,596,681.8
New Dwelling Units
Single Family 3,720 4,716 5,007 5,007 5,662
Multiple Family 909 1,427 1,931 1,189 1,039
TOTAL 4,629 6,143 6,938 6,196 6,701
Source: Construction Industry Research Board, Building Permit Summary.
CITY OF LAKE ELISNORE
Total Building Permit Valuations
(Valuations in Thousands)
2012 2013 2014 2015 2016
Permit Valuation
New Single-family $17,061.9 $113,359.4 $79,497.9 $75,724.5 $120,449.1
New Multi-family 0.0 0.0 0.0 0.0 0.0
Res. Alterations/Additions 858.0 502.0 661.4 254.5 762.7
Total Residential 71,919.9 113,861.4 80,159.3 75,979.0 121,211.8
New Commercial 4,701.2 2,520.7 260.2 229.1 2,392.4
New Industrial 0.0 0.0 0.0 0.0 11,625.7
New Other 40.0 440.8 3,319.0 2,829.3 5,111.1
Com. Alterations/Additions 3,300.5 1,301.5 1,811.0 2,821.3 1,725.1
Total Nonresidential 8,041.7 4,272.0 5,390.2 5,879.7 20,854.3
New Dwelling Units
Single Family 401 685 429 372 457
Multiple Family 0 0 0 0 0
TOTAL 401 685 429 372 457
Source: Construction Industry Research Board, Building Permit Summary.
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Transportation
Easy access to job opportunities in the County and nearby Los Angeles, Orange and San
Diego Counties is important to the County’s employment figures. Several major freeways and
highways provide access between the County and all parts of Southern California. The Riverside
Freeway (State Route 91) extends southwest through Corona and connects with the Orange
County freeway network in Fullerton. Interstate 10 traverses the width of the County, the western-
most portion of which links up with major cities and freeways in the eastern part of Los Angeles
County and the southern part of San Bernardino County. Interstate 15 and 215 extend north and
then east to Las Vegas, and south to San Diego. The Moreno Valley Freeway (U.S. 60) provides
an alternative (to interstate 10) east-west link to Los Angeles County.
The County seat, located in the City of Riverside, is within 20 miles of the Ontario
International Airport in neighboring San Bernardino County. This airport is operated by the Los
Angeles Department of Airports. Four major airlines schedule commercial flight service at Palm
Springs Regional Airport. County-operated general aviation airports include those in Thermal,
Hemet, Blythe, and French Valley. The cities of Riverside, Corona and Banning also operate
general aviation airports.
Education
There are four elementary school districts, one high school district, eighteen unified (K-
12) school districts and four community college districts in the County. Ninety-five percent of all
K-12 students attend schools in the unified school districts. The three largest unified districts are
Riverside Unified School District, Moreno Valley Unified School District and Corona-Norco Unified
School District.
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APPENDIX C
RATE AND METHOD OF APPORTIONMENT
OF SPECIAL TAXES IMPROVEMENT AREA B
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APPENDIX D
FORM OF BOND COUNSEL OPINION
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APPENDIX E
FORM OF CONTINUING DISCLOSURE CERTIFICATE
THIS CONTINUING DISCLOSURE CERTIFICATE (“Disclosure Certificate”), dated as of
[_____], 2017, is executed and delivered by the CITY OF LAKE ELSINORE COMMUNITY
FACILITIES DISTRICT NO. 2003-2 (CANYON HILLS) (the “District”) on behalf of the LAKE
ELSINORE FACILITIES FINANCING AUTHORITY (the “Issuer”) in connection with the issuance
of $[______] aggregate principal amount the Lake Elsinore Facilities Financing Authority Local
Agency Revenue Bonds, Series 2017 (the “Bonds”). The Bonds are being issued pursuant to an
Indenture of Trust, dated as of November 1, 2017 (the “Indenture”), by and between Wilmington
Trust, N.A., as trustee (the “Trustee”), and the Issuer.
The District covenants and agrees as follows:
Section 1.Purpose of the Disclosure Agreement. This Disclosure Certificate is being
executed and delivered by the District on behalf of the Issuer for the benefit of the Owners and
Beneficial Owners of the Bonds and in order to assist the Underwriter in complying with Rule
15c2-12(b)(5) of the Securities and Exchange Commission.
Section 2.Definitions. In addition to the definitions set forth in the Indenture, which
apply to any capitalized term used in this Disclosure Certificate 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 on behalf of the
Issuer pursuant to, and as described in, Section 3 and 4 of this Disclosure Certificate.
“Annual Report Date” means not later than February 15 of each year.
“City” means the City of Lake Elsinore.
“Dissemination Agent” means SCG - Spicer Consulting Group, or any successor
Dissemination Agent designated in writing by the City and which has filed with the City a written
acceptance of such designation.
“Improvement Area B” means the property designated as Improvement Area B within the
District.
“Listed Events” means any of the events listed in Section 5(a) of this Disclosure Certificate.
“Local Obligations” means, City of Lake Elsinore Community Facilities District No. 2003-2
(Canyon Hills) Improvement Area B 2017 Special Tax Bonds,
“MSRB” means the Municipal Securities Rulemaking Board, which has been designated
by the Securities and Exchange Commission as the sole repository of disclosure information for
purposes of the Rule, or any other repository of disclosure information that may be designated by
the Securities and Exchange Commission as such for purposes of the Rule in the future.
“Official Statement” means the final official statement executed by the Issuer and District
in connection with the issuance of the Bonds.
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“Participating Underwriter” means, Stifel, Nicolaus & Company, Incorporated, the original
underwriter of the Bonds required to comply with the Rule in connection with offering of the Bonds.
“Rule” means Rule 15c2-12(b)(5) adopted by the Securities and Exchange Commission
under the Securities Exchange Act of 1934, as it may be amended from time to time.
Section 3.Provision of Annual Reports.
(a)The District on behalf of the Issuer shall, or shall cause the Dissemination Agent
to, not later than the Annual Report Date, commencing February 15, 2018, with the report for the
2016-17 fiscal year, provide to the MSRB, in an electronic format as prescribed by the MSRB, an
Annual Report that is consistent with the requirements of Section 4 of this Disclosure Certificate.
Not later than 15 Business Days prior to the Annual Report Date, the District shall provide the
Annual Report to the Dissemination Agent (if other than the Issuer). If by 15 Business Days prior
to the Annual Report Date the Dissemination Agent (if other than the Issuer) has not received a
copy of the Annual Report, the Dissemination Agent shall contact the District to determine if the
District is in compliance with the previous sentence. The Annual Report may be submitted as a
single document or as separate documents comprising a package, and may include by reference
other information as provided in Section 4 of this Disclosure Certificate; provided that the audited
financial statements of the Issuer may be submitted separately from the balance of the Annual
Report, and later than the Annual Report Date, if not available by that date. If the Issuer’s fiscal
year changes, it shall give notice of such change in the same manner as for a Listed Event under
Section 5(c). The District shall provide a written certification with each Annual Report furnished to
the Dissemination Agent to the effect that such Annual Report constitutes the Annual Report
required to be furnished by the District hereunder.
(b)If the District does not provide (or cause the Dissemination Agent to provide) an
Annual Report by the Annual Report Date, the District shall provide (or cause the Dissemination
Agent to provide) to the MSRB in a timely manner, in an electronic format as prescribed by the
MSRB, a notice in substantially the form attached as Exhibit A.
(c)With respect to each Annual Report, the Dissemination Agent shall:
(i)determine each year prior to the Annual Report Date the then-applicable
rules and electronic format prescribed by the MSRB for the filing of annual continuing
disclosure reports; and
(ii)if the Dissemination Agent is other than the District, file a report with the
District certifying that the Annual Report has been provided pursuant to this Disclosure
Certificate, and stating the date it was provided.
Section 4.Content of Annual Reports. The Annual Report shall contain or incorporate
by reference the following:
(a)Financial Statements. The District’s audited financial statements prepared in
accordance with generally accepted accounting principles as promulgated to apply to
governmental entities from time to time by the Governmental Accounting Standards Board. If the
District’s audited financial statements are not available by the Annual Report Date, the Annual
Report shall contain unaudited financial statements in a format similar to the financial statements
contained in the final Official Statement, and the audited financial statements shall be filed in the
same manner as the Annual Report when they become available.
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(b)Financial and Operating Data. Unless otherwise provided in the audited financial
statements filed on or before the Annual Report Date, financial information and operating data
with respect to the Issuer and District for the preceding fiscal year, substantially similar to that
provided in the corresponding tables in the Official Statement:
(i)the principal amount of the Bonds outstanding as of the September 2
preceding the filing of the Annual Report;
(ii)the balance in each fund under the Indenture and the Reserve
Requirement as of the September 2 preceding the filing of the Annual Report;
(iii)any changes to the Rate and Method of Apportionment of the Special
Taxes approved or submitted to the qualified electors for approval prior to the filing of the
Annual Report and a description of any parcels for which the Special Taxes have been
prepaid in the Fiscal Year for which the Annual Report is being prepared;
(iv)an update of the estimated assessed value-to-lien ratio for Improvement
Area B based upon the then-outstanding principal amount of the Local Obligations, the
most recent Special Tax levy and the assessed values of property within Improvement
Area B for the current fiscal year;
(v)the percentage of the maximum Special Taxes levied by the District within
Improvement Area B with respect to the Local Obligations;
(vi)the status of any foreclosure actions being pursued by the District with
respect to delinquent Special Taxes;
(vii)a table showing the total Special Taxes levied and the total Special Taxes
collected for the prior fiscal year and the total Special Taxes that remain unpaid for each
prior fiscal year in which Special Taxes were levied in Improvement Area B and the
number of delinquent parcels in Improvement Area B;
(viii)the amount of any Additional Bonds issued by the Authority or Local
Obligation Parity Bonds issued by the District and an update of the estimated assessed
value to lien ratio based upon the outstanding principal amount of the Local Obligations,
the most recent Special Tax levy preceding the date of the Annual Report and the
assessments for the current fiscal year; and
(ix)any information not already included under (i) through (viii) above that the
District is required to file in its annual report to the California Debt and Investment Advisory
Commission pursuant to the provisions of the Mello-Roos Community Facilities Act of
1982, as amended.
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(c)In addition to any of the information expressly required to be provided under this
Disclosure Certificate, the District shall provide such further material information, if any, as may
be necessary to make the specifically required statements, in the light of the circumstances under
which they are made, not misleading.
(d)Any or all of the items listed above may be included by specific reference to other
documents, including official statements of debt issues of the District or related public entities,
which are available to the public on the MSRB’s Internet web site or filed with the Securities and
Exchange Commission. The District shall clearly identify each such other document so included
by reference.
Section 5. Reporting of Significant Events.
(a)The District shall give, or cause to be given, notice of the occurrence of any of the
following Listed Events with respect to the Bonds:
(1)Principal and interest payment delinquencies.
(2)Non-payment related defaults, if material.
(3)Unscheduled draws on debt service reserves reflecting financial difficulties.
(4)Unscheduled draws on credit enhancements reflecting financial difficulties.
(5)Substitution of credit or liquidity providers, or their failure to perform.
(6)Adverse tax opinions, 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 security, or other material events affecting
the tax status of the security.
(7)Modifications to rights of security holders, if material.
(8)Bond calls, if material, and tender offers.
(9)Defeasances.
(10)Release, substitution, or sale of property securing repayment of the
securities, if material.
(11)Rating changes.
(12)Bankruptcy, insolvency, receivership or similar event of the District of the
Issuer or other obligated person.
(13)The consummation of a merger, consolidation, or acquisition involving the
District or the Issuer or an obligated person, or the sale of all or substantially
all of the assets of the District or the Issuer or an obligated person (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
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agreement relating to any such actions, other than pursuant to its terms, if
material.
(14)Appointment of a successor or additional trustee or the change of name of
a trustee, if material.
(b)Whenever the District obtains knowledge of the occurrence of a Listed Event, the
District shall, or shall cause the Dissemination Agent (if not the Issuer) to, file a notice of such
occurrence with the MSRB, in an electronic format as prescribed by the MSRB, in a timely manner
not in excess of ten (10) business days after the occurrence of the Listed Event.
(c)The District acknowledges that the events described in subparagraphs (a)(2),
(a)(7), (a)(8) (if the event is a bond call), (a)(10), (a)(13), and (a)(14) of this Section 5 contain the
qualifier “if material” and that subparagraph (a)(6) also contains the qualifier “material” with
respect to certain notices, determinations or other events affecting the tax status of the Bonds.
The District shall cause a notice to be filed as set forth in paragraph (b) above with respect to any
such event only to the extent that it determines the event’s occurrence is material for purposes of
U.S. federal securities law. Whenever the District obtains knowledge of the occurrence of any of
these Listed Events, the District will as soon as possible determine if such event would be material
under applicable federal securities law. If such event is determined to be material, the District will
cause a notice to be filed as set forth in paragraph (b) above.
(d) For purposes of this Disclosure Certificate, any event described in paragraph (a)(12)
above is considered to occur when any of the following occur: the appointment of a receiver,
fiscal agent, or similar officer for the District in a proceeding under the United States Bankruptcy
Code or in any other proceeding under state or federal law in which a court or governmental
authority has assumed jurisdiction over substantially all of the assets or business of the District,
or if such jurisdiction has been assumed by leaving the existing governing body and officials or
officers in possession but subject to the supervision and orders of a court or governmental
authority, or the entry of an order confirming a plan of reorganization, arrangement, or liquidation
by a court or governmental authority having supervision or jurisdiction over substantially all of the
assets or business of the District.
Section 6. Identifying Information for Filings with the MSRB. All documents provided to
the MSRB under the Disclosure Certificate shall be accompanied by identifying information as
prescribed by the MSRB.
Section 7. Termination of Reporting Obligation. The District’s obligations under this
Disclosure Certificate shall terminate upon the legal defeasance, prior redemption or payment in
full of all of the Bonds. If such termination occurs prior to the final maturity of the Bonds, the District
shall give notice of such termination in the same manner as for a Listed Event under Section 5(c).
Section 8. Dissemination Agent. The District may, from time to time, appoint or engage a
Dissemination Agent to assist it in carrying out its obligations under this Disclosure Certificate,
and may discharge any Dissemination Agent, with or without appointing a successor
Dissemination Agent. The initial Dissemination Agent shall be SCG - Spicer Consulting Group.
Any Dissemination Agent may resign by providing 30 days’ written notice to the District.
Section 9. Amendment; Waiver. Notwithstanding any other provision of this Disclosure
Certificate, the District may amend this Disclosure Certificate, and any provision of this Disclosure
Certificate may be waived, provided that the following conditions are satisfied:
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(a)if the amendment or waiver relates to the provisions of Sections 3(a), 4 or
5(a), it may only be made in connection with a change in circumstances that arises from
a change in legal requirements, change in law, or change in the identity, nature, or status
of an obligated person with respect to the Bonds, or type of business conducted;
(b)the undertakings herein, as proposed to be amended or waived, would, in
the opinion of nationally recognized bond counsel, have complied with the requirements
of the Rule at the time of the primary offering of the Bonds, after taking into account any
amendments or interpretations of the Rule, as well as any change in circumstances; and
(c)the proposed amendment or waiver either (i) is approved by holders of the
Bonds in the manner provided in the Indenture for amendments to the Indenture with the
consent of holders, or (ii) does not, in the opinion of nationally recognized bond counsel,
materially impair the interests of the holders or beneficial owners of the Bonds.
If the annual financial information or operating data to be provided in the Annual Report is
amended pursuant to the provisions hereof, the first Annual Report filed pursuant hereto
containing the amended operating data or financial information shall explain, in narrative form,
the reasons for the amendment and the impact of the change in the type of operating data or
financial information being provided.
If an amendment is made to this Disclosure Certificate modifying the accounting principles
to be followed in preparing financial statements, the Annual Report for the year in which the
change is made shall present a comparison between the financial statements or information
prepared on the basis of the new accounting principles and those prepared on the basis of the
former accounting principles. The comparison shall include a qualitative discussion of the
differences in the accounting principles and the impact of the change in the accounting principles
on the presentation of the financial information, in order to provide information to investors to
enable them to evaluate the ability of the District to meet its obligations. To the extent reasonably
feasible, the comparison shall be quantitative.
A notice of any amendment made pursuant to this Section 9 shall be filed in the same
manner as for a Listed Event under Section 5(c).
Section 10. Additional Information. Nothing in this Disclosure Certificate shall be deemed
to prevent the District from disseminating any other information, using the means of dissemination
set forth in this Disclosure Certificate or any other means of communication, or including any other
information in any Annual Report or notice of occurrence of a Listed Event, in addition to that
which is required by this Disclosure Certificate. If the 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 Certificate, the District shall have no obligation under this
Disclosure Certificate to update such information or include it in any future Annual Report or notice
of occurrence of a Listed Event.
Section 11. Default. If the District fails to comply with any provision of this Disclosure
Certificate, the Participating Underwriter or any holder or beneficial owner of the Bonds may take
such actions as may be necessary and appropriate, including seeking mandate or specific
performance by court order, to cause the District to comply with its obligations under this
Disclosure Certificate. A default under this Disclosure Certificate shall not be deemed an Event
of Default under the Indenture, and the sole remedy under this Disclosure Certificate in the event
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of any failure of the District to comply with this Disclosure Certificate shall be an action to compel
performance.
Section 12. Duties, Immunities and Liabilities of Dissemination Agent. (a) The
Dissemination Agent shall have only such duties as are specifically set forth in this Disclosure
Certificate, 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 have no duty or obligation to review any information provided to it
by the District hereunder, and shall not be deemed to be acting in any fiduciary capacity for the
District, the Bond holders or any other party. The obligations of the District under this Section
shall survive resignation or removal of the Dissemination Agent and payment of the Bonds.
(b) 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
shall be reimbursed for all expenses, legal fees and advances made or incurred by the
Dissemination Agent in the performance of its duties hereunder.
Section 13. Beneficiaries. This Disclosure Certificate shall inure solely to the benefit of the
District, the Issuer, the Dissemination Agent, the Participating Underwriter and the holders and
beneficial owners from time to time of the Bonds, and shall create no rights in any other person
or entity.
Section 14. Counterparts. This Disclosure Certificate may be executed in several
counterparts, each of which shall be regarded as an original, and all of which shall constitute one
and the same instrument.
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Date: [_____], 2017
CITY OF LAKE ELSINORE COMMUNITY
FACILITIES DISTRICT NO. 2003-2
(CANYON HILLS)
By:
Name:
Title:
AGREED AND ACCEPTED:
SCG - SPICER CONSULTING GROUP,
as Dissemination Agent
By:
Name:
Title:
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EXHIBIT A
NOTICE OF FAILURE TO FILE ANNUAL REPORT
Name of Issuer: Lake Elsinore Facilities Financing Authority
Name of Issue: Lake Elsinore Facilities Financing Authority Local Agency Revenue
Bonds, Series 2017
Date of Issuance: [_____], 2017
NOTICE IS HEREBY GIVEN that the City of Lake Elsinore Community Facilities District
No. 2003-2 (the “District”) has not provided an Annual Report on behalf of the Issuer with respect
to the above-named Bonds as required by the Indenture, dated as of [_____] 1, 2017, by and
between the Issuer and Wilmington Trust, National Association, as trustee. The District
anticipates that the Annual Report will be filed by ________________.
Dated:
DISSEMINATION AGENT:
_________________
By:
Its:
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APPENDIX F
DTC AND THE BOOK-ENTRY-ONLY SYSTEM
The information in this section concerning DTC and DTC’s book-entry only system has
been obtained from sources that the Authority believes to be reliable, but the Authority takes no
responsibility for the completeness or accuracy thereof. The following description of the
procedures and record keeping with respect to beneficial ownership interests in the Bonds,
payment of principal, premium, if any, accreted value and interest on the Bonds to DTC
Participants or Beneficial Owners, confirmation and transfers of beneficial ownership interests in
the Bonds and other related transactions by and between DTC, the DTC Participants and the
Beneficial Owners is based solely on information provided by DTC to the Authority which the
Authority believes to be reliable, but the Authority and the Underwriter do not and cannot make
any independent representations concerning these matters and do not take responsibility for the
accuracy or completeness thereof. Neither the DTC, Direct Participants, Indirect Participants nor
the Beneficial Owners should rely on the foregoing information with respect to such matters, but
should instead confirm the same with DTC or the DTC Participants, as the case may be.
The Depository Trust Company (“DTC”), New York, New York, will act as securities
depository for the Bonds. The Bonds will be issued as fully-registered securities registered in the
name of Cede & Co. (DTC’s partnership nominee) or such other name as may be requested by
an authorized representative of DTC. One fully-registered Bond will be issued for each annual
maturity of the Bonds, each in the aggregate principal amount of such maturity, and will be
deposited through the facilities of DTC.
DTC, the world’s largest securities depository, is a limited-purpose trust company
organized under the New York Banking Law, a “banking organization” within the meaning of the
New York Banking Law, a member of the Federal Reserve System, a “clearing corporation” within
the meaning of the New York Uniform Commercial Code, and a “clearing agency” registered
pursuant to the provisions of Section 17A of the Securities Exchange Act of 1934. DTC holds
and provides asset servicing for over 3.5 million issues of U.S. and non-U.S. equity issues,
corporate and municipal debt issues, and money market instruments (from over 100 countries)
that DTC’s participants (“Direct Participants”) deposit with DTC. DTC also facilitates the post
trade settlement among Direct Participants of sales and other securities transactions in deposited
securities, through electronic computerized book-entry transfers and pledges between Direct
Participants’ accounts. This eliminates the need for physical movement of securities certificates.
Direct Participants include both U.S. and non-U.S. securities brokers and dealers, banks, trust
companies, clearing corporations, and certain other organizations. DTC is a wholly-owned
subsidiary of The Depository Trust & Clearing Corporation (“DTCC”). DTCC is the holding
company for DTC, National Securities Clearing Corporation and Fixed Income Clearing
Corporation, all of which are registered clearing agencies. DTCC is owned by the users of its
regulated subsidiaries. Access to the DTC system is also available to others such as both U.S.
and non-U.S. securities brokers and dealers, banks, trust companies, and clearing corporations
that clear through or maintain a custodial relationship with a Direct Participant, either directly or
indirectly (“Indirect Participants”). DTC has a Standard & Poor’s rating of AA+. The DTC Rules
applicable to its Participants are on file with the Securities and Exchange Commission. More
information about DTC can be found at www.dtcc.com.
Purchases of Bonds under the DTC system must be made by or through Direct
Participants, which will receive a credit for the Bonds on DTC’s records. The ownership interest
of each actual purchaser of each Bond (“Beneficial Owner”) is in turn to be recorded on the Direct
and Indirect Participants’ records. Beneficial Owners will not receive written confirmation from
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DTC of their purchase. Beneficial Owners are, however, expected to receive written confirmations
providing details of the transaction, as well as periodic statements of their holdings, from the Direct
or Indirect Participant through which the Beneficial Owner entered into the transaction. Transfers
of ownership interests in the Bonds are to be accomplished by entries made on the books of
Direct and Indirect Participants acting on behalf of Beneficial Owners. Beneficial Owners will not
receive Bonds representing their ownership interests in Bonds, except in the event that use of the
book-entry system for the Bonds is discontinued.
To facilitate subsequent transfers, all Bonds deposited by Direct Participants with DTC are
registered in the name of DTC’s partnership nominee, Cede & Co., or such other name as may
be requested by an authorized representative of DTC. The deposit of Bonds with DTC and their
registration in the name of Cede & Co. or such other DTC nominee do not effect any change in
beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the Bonds; DTC’s
records reflect only the identity of the Direct Participants to whose accounts such Bonds are
credited, which may or may not be the Beneficial Owners. The Direct and Indirect Participants
will remain responsible for keeping account of their holdings on behalf of their customers.
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 prepayments, tenders, defaults, and proposed amendments
to the Bond documents. For example, Beneficial Owners of Bonds may wish to ascertain that the
nominee holding the Bonds for their benefit has agreed to obtain and transmit notices to Beneficial
Owners. In the alternative, Beneficial Owners may wish to provide their names and addresses to
the registrar 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 within a maturity
are being prepaid, 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 any other DTC nominee) will consent or vote with
respect to 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 District 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 Bonds are credited on the record date
(identified in a listing attached to the Omnibus Proxy).
Redemption proceeds, distributions, and dividend payments on the Bonds will be made to
Cede & Co., or such other nominee as may be requested by an authorized representative of DTC.
DTC’s practice is to credit Direct Participants’ accounts upon DTC’s receipt of funds and
corresponding detail information from the District 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 District, subject
to any statutory or regulatory requirements as may be in effect from time to time. Payment of
redemption proceeds, distributions, and dividend payments to Cede & Co. (or such other nominee
as may be requested by an authorized representative of DTC) is the responsibility of the District
or the Trustee, disbursement of such payments to Direct Participants will be the responsibility of
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DTC, and disbursement of such payments to the Beneficial Owners will be the responsibility of
Direct and Indirect Participants.
A Bond Owner shall give notice to elect to have its Bonds purchased or tendered, through
its Participant, to the Trustee, and shall effect delivery of such Bonds by causing the Direct
Participant to transfer the Participant’s interest in the Bonds, on DTC’s records, to the Trustee.
The requirement for physical delivery of Bonds in connection with an optional tender or a
mandatory purchase will be deemed satisfied when the ownership rights in the Bonds are
transferred by Direct Participants on DTC’s records and followed by a book-entry credit of
tendered Bonds to the Trustee’s DTC account.
DTC may discontinue providing its services as depository with respect to the Bonds at any
time by giving reasonable notice to the District or the Trustee. Under such circumstances, in the
event that a successor depository is not obtained, physical certificates are required to be printed
and delivered.
The District may decide to discontinue use of the system of book-entry only transfers
through DTC (or a successor securities depository). In that event, Bonds will be printed and
delivered to DTC.
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APPENDIX G
APPRAISAL REPORT
$__________
LAKE ELSINORE FACILITIES FINANCING AUTHORITY
LOCAL AGENCY REVENUE BONDS, SERIES 2017
BOND PURCHASE AGREEMENT
_____________, 2017
Lake Elsinore Facilities Financing Authority130 South
Main Street
Lake Elsinore, California 92530
Ladies and Gentlemen:
Stifel, Nicolaus & Company, Incorporated, as underwriter (the “Underwriter”), acting not as
a fiduciary or agent for you, but on behalf of itself, offers to enter into this Bond Purchase Agreement
(this “Purchase Agreement”) with the Lake Elsinore Facilities Financing Authority (the “Authority”),
which upon acceptance will be binding upon the Underwriter and the Authority. The agreement of
the Underwriter to purchase the Bonds (as hereinafter defined) is contingent upon the Authority
satisfying all of the obligations imposed upon them under this Purchase Agreement. This offer is
made subject to the Authority’s acceptance by the execution of this Purchase Agreement and its
delivery to the Underwriter at or before 11:59 P.M., local time, on the date hereof, and, if not so
accepted, will be subject to withdrawal by the Underwriter upon notice delivered to the Authority at
any time prior to the acceptance hereof by the Authority. All capitalized terms used herein, which
are not otherwise defined, shall have the meaning provided for such terms in the Bond Indenture,
dated as of November 1, 2017 (the “Indenture”), by and between the Authority and Wilmington
Trust, National Association, as trustee (the “Trustee”).
1.Purchase, Sale and Delivery of the Bonds.
Subject to the terms and conditions and in reliance upon the representations, warranties and
agreements set forth herein, the Underwriter hereby agrees to purchase from the Authority and the
Authority hereby agrees to sell to the Underwriter all (but not less than all) of the $________
aggregate principal amount of the Lake Elsinore Facilities Financing Authority Local Agency
Revenue Bonds, Series 2017 (the “Bonds”), dated the Closing Date (as hereinafter defined), bearing
interest at the rates and maturing on the dates and in the principal amounts set forth in Exhibit A
hereto. The purchase price for the Bonds shall be $_________ (being 100% of the aggregate
principal amount thereof, less/plus net original issue discount/premium of $_______ and less an
Underwriter’s discount of $________).
The Underwriter agrees to make a bona fide public offering of all of the Bonds initially at the
public offering prices (or yields) set forth in Exhibit A attached hereto and incorporated herein by
reference. Subsequent to the initial public offering, the Underwriter reserves the right to change the
public offering prices (or yields) as it deems necessary in connection with the marketing of the Bonds
subject to Section 2 hereof, provided that the Underwriter shall not change the interest rates set forth
in Exhibit A. The Bonds will be offered and sold to certain dealers at prices lower than such initial
offering prices.
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The Authority is a joint exercise of powers authority organized and existing pursuant to the
joint exercise of powers act, constituting Article 1 through 4 (commencing with Section 6500) of
Chapter 5, Division 7, Title 1 of the Government Code of the State of California. The issuance of the
Bonds has been duly authorized by the City Council of the City of Lake Elsinore (the “City”), as the
legislative body for the Authority, pursuant to a resolution (the “Resolution”) adopted on _____ ___,
2017. The Bonds shall be substantially in the form described in, shall be issued and secured under
the provisions of, and shall be payable solely from Revenues as provided in, (i) the Indenture and (ii)
the Marks-Roos Local Bond Pooling Act of 1985, constituting Article 4 of Chapter 5 of Division 7 of
Title 1 of the Government Code of the State of California, as it may hereafter be amended from time
to time (the “Act”).
The net proceeds of the Bonds will be used to acquire the City of Lake Elsinore Community
Facilities District No. 2003-2 (Canyon Hills) Improvement Area B 2017 Special Tax Bonds (the
“Local Obligations”). The Local Obligations are being issued to (i) finance a portion of certain
public facilities eligible to be financed by the City of Lake Elsinore Community Facilities District
No. 2003-2 (Canyon Hills) (the “District”) for Improvement Area B thereof (“Improvement Area
B”); (ii) fund a deposit to a reserve fund; and (iii) pay costs of issuing the Bonds.
The Local Obligations shall be issued and secured under the provisions of (a) a Bond
Indenture (the “Original Indenture”) dated as of March 1, 2015, by and between the District and
MUFG Union Bank, N.A. (the “Original Trustee”), as supplemented by a First Supplement to Bond
Indenture (the “First Supplement” which, along with the Original Indenture, are collectively referred
to as the “Local Obligation Bond Indenture”) dated as of November 1, 2017, by and between the
District and Wilmington Trust, National Association, as successor trustee to the Original Trustee and
(b) the Mello-Roos Community Facilities Act of 1982, constituting Chapter 2.5 (commencing with
Section 53311), Article 1 of Division 2 of Title 5 of the Government Code of that State of California,
as amended from time to time (the “CFD Act”). The Local Obligations are payable solely from a
special tax levied and collected by the District (the “Special Taxes”) authorized to be levied by the
District on parcels within Improvement Area B, which have been pledged to repay the Local
Obligations pursuant to the CFD Act.
The Bonds shall be substantially in the form described in, shall be issued and secured under
the provisions of, and shall be payable from Revenues pledged by the Authority as provided in the
Indenture.
A.The Authority hereby acknowledges that the Underwriter is entering into this
Purchase Agreement in reliance on the representations, warranties and agreements made by the
Authority herein, and the Authority shall take all action necessary to enforce its rights hereunder for
the benefit of the Underwriter and shall immediately notify the Underwriter if it becomes aware that
any representation, warranty or agreement made by the Authority herein is incorrect in any material
respect.
The Authority acknowledges and agrees that (i) the purchase and sale of the Bonds pursuant
to this Purchase Agreement is an arm’s-length commercial transaction between the Authority and the
Underwriter, (ii) in connection therewith and with the discussions, undertakings and procedures
leading up to the consummation of such transaction, the Underwriter is and has been acting solely as
principal and not as the agent or fiduciary of the Authority, (iii) the Underwriter has not assumed an
advisory or fiduciary responsibility in favor of the Authority with respect to (a) the offering of the
Bonds or the process leading thereto (whether or not the Underwriter, or any affiliate of the
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Underwriter, has advised or is currently advising the Authority on other matters) or (b) any other
obligations to the Authority with respect to the offering contemplated hereby, except the obligations
expressly set forth in this Purchase Agreement or otherwise imposed by law, (iv) the Underwriter has
financial interests that differ from those of the Authority and (v) the Authority has consulted their
own legal, financial and other advisors to the extent they have deemed appropriate in connection with
this transaction. The Authority acknowledges that it has previously provided the Underwriter with an
acknowledgement of receipt of the required Underwriter disclosure under Rule G-17 of the
Municipal Securities Rulemaking Board (“MSRB”). The Authority acknowledges and represents that
it has engaged Urban Futures Inc. as its municipal advisor (the “Municipal Advisor”) (as defined in
Securities and Exchange Commission Rule 15Ba1) and will rely solely on the financial advice of the
Municipal Advisor with respect to the Bonds.
B.Pursuant to the authorization of the Authority, the Underwriter has distributed
copies of the Preliminary Official Statement dated ________, 2017, relating to the Bonds, which,
together with the cover page, inside cover page and appendices thereto is herein called the
“Preliminary Official Statement.” By its acceptance of this Purchase Agreement, the Authority
hereby ratifies the use by the Underwriter of the Preliminary Official Statement, and the Authority
agrees to execute a final official statement relating to the Bonds (the “Official Statement”) which will
consist of the Preliminary Official Statement with such changes as may be made thereto, with the
approval of Stradling Yocca Carlson & Rauth, a Professional Corporation, Bond Counsel (“Bond
Counsel”), Jones Hall, A Professional Law Corporation, Disclosure Counsel (“Disclosure Counsel”),
and the Underwriter, and to provide copies thereof to the Underwriter as set forth herein. The
Authority hereby authorizes and requires the Underwriter to use and promptly distribute, in
connection with the offer and sale of the Bonds, the Preliminary Official Statement, the Official
Statement and any supplement or amendment thereto. The Authority further authorizes the
Underwriter to use and distribute, in connection with the offer and sale of the Bonds, the Indenture,
the Continuing Disclosure Certificate executed by the Authority in connection with the Bonds (the
“Continuing Disclosure Certificate”), this Purchase Agreement and all information contained herein,
and all other documents, certificates and statements furnished by or on behalf of the Authority
(including documents, certificates and statements provided to the Authority by the District) to the
Underwriter in connection with the transactions contemplated by this Purchase Agreement.
C.To assist the Underwriter in complying with Securities and Exchange
Commission Rule 15c2-12(b)(5) (the “Rule”), the Authority will undertake pursuant to the
Continuing Disclosure Certificate, in the form attached to the Official Statement as an appendix, to
provide annual reports and notices of certain enumerated events. A description of this undertaking is
set forth in the Preliminary Official Statement and will also be set forth in the Official Statement.
D.Except as the Underwriter and the Authority may otherwise agree, the
Authority will deliver to the Underwriter, at the offices of Bond Counsel in Newport Beach,
California, or at such other location as may be mutually agreed upon by the Underwriter and the
Authority, the documents hereinafter mentioned; and the Authority will deliver to the Underwriter
through the facilities of The Depository Trust Company (“DTC”), the Bonds, in definitive form (all
Bonds bearing CUSIP numbers), duly executed by the Authority and authenticated by the Trustee in
the manner provided for in the Indenture and the Community Facilities District Act at 8:00 a.m.
California time, on ________, 2017 (the “Closing Date”), and the Underwriter will accept such
delivery and pay the purchase price of the Bonds as set forth in paragraph (A) of this Section by wire
transfer, payable in federal or other immediately available funds (such delivery and payment being
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herein referred to as the “Closing”). The Bonds shall be in fully registered book-entry form (which
may be typewritten) and shall be registered in the name of Cede & Co., as nominee of DTC.
2.Establishment of Issue Price.
A.The Underwriter agrees to assist the Authority in establishing the issue price
of the Bonds and shall execute and deliver to the Authority at Closing an “issue price” or similar
certificate, together with the supporting pricing wires or equivalent communications, substantially in
the form attached hereto as Exhibit D, with such modifications as may be appropriate or necessary, in
the reasonable judgment of the Underwriter, the Authority and Bond Counsel (as defined herein), to
accurately reflect, as applicable, the sales price or prices or the initial offering price or prices to the
public of the Bonds. All actions to be taken by the Authority under this section to establish the issue
price of the Bonds may be taken on behalf of the Authority by the Municipal Advisor and any notice
or report to be provided to the Authority may be provided to the Authority’s Municipal Advisor.
B.Except as otherwise set forth in Exhibit A attached hereto, the Authority will
treat the first (meaning single) price at which 10% of each maturity of the Bonds (the “10% test”) is
sold to the public as the issue price of that maturity (if different interest rates apply within a maturity,
each separate CUSIP number within that maturity will be subject to the 10% test). At or promptly
after the execution of this Purchase Agreement, the Underwriter shall report to the Authority the
price or prices at which it has sold to the public each maturity of Bonds. If at that time the 10% test
has not been satisfied as to any maturity of the Bonds, the Underwriter agrees to promptly report to
the Authority the prices at which it sells the unsold Bonds of that maturity to the public. That
reporting obligation shall continue, whether or not the Closing Date (as defined herein) has occurred,
until the 10% test has been satisfied as to the Bonds of that maturity or until all Bonds of that
maturity have been sold to the public.
C.The Underwriter confirms that it has offered the Bonds to the public on or
before the date of this Purchase Agreement at the offering price or prices (the “initial offering
price”), or at the corresponding yield or yields, set forth in Exhibit A attached hereto, except as
otherwise set forth therein. Exhibit A also sets forth, as of the date of this Purchase Agreement, the
maturities, if any, of the Bonds for which the Underwriter represents that (i) the 10% test has been
satisfied (assuming orders are confirmed immediately after the execution of this Bond Purchase
Agreement) and (ii) the 10% test has not been satisfied and for which the Authority and the
Underwriter agree that the restrictions set forth in the next sentence shall apply, which will allow the
Authority to treat the initial offering price to the public of each such maturity as of the sale date as
the issue price of that maturity (the “hold-the-offering-price rule”). So long as the hold-the-offering-
price rule remains applicable to any maturity of the Bonds, the Underwriter will neither offer nor sell
unsold Bonds of that maturity to any person at a price that is higher than the initial offering price to
the public during the period starting on the sale date and ending on the earlier of the following:
1.the close of the fifth (5th) business day after the sale date; or
2.the date on which the Underwriter has sold at least 10% of that maturity of
the Bonds to the public at a price that is no higher than the initial offering price to the public.
The Underwriter shall promptly advise the Authority when it has sold 10% of that maturity of
the Bonds to the public at a price that is no higher than the initial offering price to the public, if that
occurs prior to the close of the fifth (5th) business day after the sale date.
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D.The Underwriter confirms that any selling group agreement and any retail
distribution agreement relating to the initial sale of the Bonds to the public, together with the related
pricing wires, contains or will contain language obligating each dealer who is a member of the selling
group and each broker-dealer that is a party to such retail distribution agreement, as applicable, to
(A) report the prices at which it sells to the public the unsold Bonds of each maturity allotted to it
until it is notified by the Underwriter that either the 10% test has been satisfied as to the Bonds of
that maturity or all Bonds of that maturity have been sold to the public and (B) comply with the hold-
the-offering-price rule, if applicable, in each case if and for so long as directed by the Underwriter.
The Authority acknowledges that, in making the representation set forth in this subsection, the
Underwriter will rely on (i) in the event a selling group has been created in connection with the initial
sale of the Bonds to the public, the agreement of each dealer who is a member of the selling group to
comply with the hold-the-offering-price rule, if applicable, as set forth in a selling group agreement
and the related pricing wires, and (ii) in the event that a retail distribution agreement was employed
in connection with the initial sale of the Bonds to the public, the agreement of each broker-dealer that
is a party to such agreement to comply with the hold-the-offering-price rule, if applicable, as set forth
in the retail distribution agreement and the related pricing wires.
E.The Underwriter acknowledges that sales of any Bonds to any person that is a
related party to the Underwriter shall not constitute sales to the public for purposes of this section.
Further, for purposes of this section:
1.“public” means any person other than an underwriter or a related party;
2.“underwriter” means (A) any person that agrees pursuant to a written contract
with the Authority (or with the lead underwriter to form an underwriting syndicate) to
participate in the initial sale of the Bonds to the public and (B) any person that agrees
pursuant to a written contract directly or indirectly with a person described in clause (A) to
participate in the initial sale of the Bonds to the public (including a member of a selling
group or a party to a retail distribution agreement participating in the initial sale of the Bonds
to the public);
3.a purchaser of any of the Bonds is a “related party” to an underwriter if the
underwriter and the purchaser are subject, directly or indirectly, to (i) at least 50% common
ownership of the voting power or the total value of their stock, if both entities are
corporations (including direct ownership by one corporation of another), (ii) more than 50%
common ownership of their capital interests or profits interests, if both entities are
partnerships (including direct ownership by one partnership of another), or (iii) more than
50% common ownership of the value of the outstanding stock of the corporation or the
capital interests or profit interests of the partnership, as applicable, if one entity is a
corporation and the other entity is a partnership (including direct ownership of the applicable
stock or interests by one entity of the other); and
4.“sale date” means the date of execution of this Bond Purchase Agreement by
all parties.
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3.Representations, Warranties and Covenants of the Authority. The Authority
represents, warrants and covenants to the Underwriter on behalf of itself and the City that:
A.The Authority is a joint powers entity duly organized and existing under the
Constitution and laws of the State of California (the “State”), and has, and at the Closing Date will
have, full legal right, power and authority (i) to enter into this Purchase Agreement, (ii) to execute,
deliver and perform its obligations under the Indenture, the Continuing Disclosure Certificate, and
the Local Obligations Purchase Agreement to be entered into by and between the Authority and the
District (the “Local Obligations Purchase Agreement,” and together with the Indenture, the
Continuing Disclosure Certificate and this Purchase Agreement, the “Authority Documents”), (iii) to
execute the Official Statement, (iv) to issue, sell and deliver the Bonds to the Underwriter as
provided herein, (vi) to purchase the Local Obligations as provided herein, and (vii) to carry out and
consummate the transactions on its part contemplated by the Authority Documents and the Official
Statement.
B.By all necessary official action of the Authority, the Authority has duly
authorized and approved the adoption or execution and delivery by the Authority of, and the
performance by the Authority of the obligations on its part contained in, the Authority Documents,
and has approved the use by the Underwriter of the Preliminary Official Statement and the execution
and delivery of the Official Statement and, as of the date hereof, such authorizations and approvals
are in full force and effect and have not been amended, modified or rescinded. When executed and
delivered by the parties thereto, the Bonds and the Authority Documents will constitute the legally
valid and binding obligations of the Authority enforceable against the Authority in accordance with
their respective terms, except as enforcement may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws or equitable principles relating to or affecting creditors’
rights generally. The Authority has complied, and will at the Closing be in compliance in all
respects, with the obligations on its part to be performed on or prior to the Closing Date under the
Authority Documents.
C.The information in the Preliminary Official Statement and in the Official
Statement relating to the Authority and the Bonds (other than statements pertaining to the book entry
system, as to which no view is expressed), 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 necessary to make the
statements therein, in light of the circumstances under which they were made, not misleading. The
Authority will advise the Underwriter promptly of the institution of any proceedings known to it by
any governmental agency prohibiting or otherwise affecting the use of the Official Statement in
connection with the offering, sale or distribution of the Bonds.
D.During the period ending on the 25th day after the End of the Underwriting
Period (as defined below), the Authority (i) will not adopt any amendment of or supplement to the
Official Statement to which, after having been furnished with a copy, the Underwriter objects in
writing or which is disapproved by the Underwriter (the Underwriter’s approval of such amendment
or supplement may not be unreasonably withheld), and (ii) shall notify the Underwriter promptly if
any event shall occur, or information comes to the attention of the Authority that is reasonably likely
to cause the Official Statement (whether or not previously 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 the light of the circumstances under which they were made, not misleading. If, in the
opinion of the Underwriter, such event requires the preparation and distribution of a supplement or
amendment to the Official Statement, the Authority shall immediately prepare and furnish the
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Underwriter (at the expense of the Authority) a reasonable number of copies of an amendment or
supplement to the Official Statement (in form and substance satisfactory to the Underwriter) which
will amend or supplement the Official Statement so that it will not contain an untrue statement of a
material fact or omit to state a material fact necessary in order to make the statements therein, in the
light of the circumstances existing at the time such supplemental Official Statement is delivered to a
purchaser, not misleading. If any such amendment or supplement of the Official Statement shall
occur after the Closing Date, the Authority also shall furnish, or cause to be furnished, such
additional legal opinions, certificates, instruments and other documents as the Underwriter may
reasonably deem necessary to evidence the truth and accuracy of any such amendment or supplement
to the Official Statement. For purposes hereof, the phrase “End of the Underwriting Period” shall
occur on the later of (a) the Closing Date or (b) when the Underwriter no longer retains an unsold
balance of the Bonds; unless otherwise advised in writing by the Underwriter on or prior to the
Closing Date, or otherwise agreed to by the Authority and the Underwriter, the Authority may
assume that the End of the Underwriting Period is the Closing Date.
E.As of the time of acceptance hereof and as of the Closing Date, except as
described in the Preliminary Official Statement and Official Statement, the Authority is not, in any
respect material to the transactions referred to herein or contemplated hereby, in breach of or in
default under, any law or administrative rule or regulation of the State of California, the United
States of America, or of any department, division, agency or instrumentality of either thereof, or
under any applicable court or administrative decree or order, or under any loan agreement, note,
resolution, indenture, contract, agreement or other instrument to which the Authority is a party or is
otherwise subject or bound, and no event has occurred and is continuing which, with the passage of
time or the giving of notice, or both, would constitute a default or event of default under any such
instrument which breach, default or event could have a material adverse effect on the Authority’s
ability to perform its obligations under the Bonds or the Authority Documents. The authorization,
execution and delivery of the Bonds and the Authority Documents and compliance by the Authority
with the obligations on its part to be performed in each of such agreements or instruments does not
and will not conflict with or constitute a breach of or default under any applicable law or
administrative rule or regulation of the State, the United States of America, or of any department,
division, agency or instrumentality of either thereof, or under any applicable court or administrative
decree or order, or under 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 any manner
which would materially and adversely affect the performance by the Authority of its obligations
under the Authority Documents or the performance of the conditions precedent to be performed by
the Authority pursuant to this Purchase Agreement.
F.Except as may be required under the “blue sky” or other securities laws of
any jurisdiction and except for filing of Form 8038-G with the Internal Revenue Service, which form
shall be filed by the Authority in a timely manner so as to ensure the tax-exempt status of the Bonds,
all approvals, consents, authorizations, elections and orders of, or filings or registrations with, any
governmental authority, board, agency or commission having jurisdiction which are required by the
Closing Date for the due authorization of, or which would constitute a condition precedent to, or the
absence of which would materially adversely affect, the performance by the Authority of its
obligations under, the Authority Documents and the performance of the conditions precedent to be
performed by the Authority pursuant to this Purchase Agreement, have been or will be obtained at
the Closing Date and are or will be in full force and effect at the Closing Date.
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G.The Bonds and the Authority Documents conform as to form and tenor to the
descriptions thereof contained in the Official Statement. The Authority represents that the Bonds,
when issued, executed and delivered in accordance with the Indenture and sold to the Underwriter as
provided herein, will be validly issued and outstanding obligations of the Authority, entitled to the
benefits of the Indenture and the security of the pledge of the proceeds of the Revenues received by
the Authority. The Indenture creates a valid pledge of the moneys in certain funds and accounts
established pursuant to the Indenture, including the investments thereof, subject in all cases to the
provisions of the Indenture permitting the application thereof for the purposes and on the terms and
conditions set forth therein.
H.The Preliminary Official Statement was deemed final by a duly authorized
officer of the Authority prior to its delivery to the Underwriter, except for the omission of such
information as is permitted to be omitted in accordance with paragraph (b)(1) of the Rule. The
Authority hereby covenants and agrees that, within seven (7) business days from the date hereof, or
upon reasonable written notice from the Underwriter within sufficient time to accompany any
confirmation requesting payment from any customers of the Underwriter, the Authority shall cause a
reasonable number of copies of the Official Statement to be delivered to the Underwriter in sufficient
quantity to comply with paragraph (b)(4) of the Rule and Rules G-12, G-15, G-32 and G-36 of the
Municipal Securities Rulemaking Board. The Authority authorizes the Underwriter to file, and the
Underwriter agrees to file or cause to be filed, the Official Statement with the MSRB or its designee
(including the MSRB’s Electronic Municipal Market Access system) or other repositories approved
from time to time by the Securities and Exchange Commission (either in addition to or in lieu of the
filings referred to above). A failure of the Authority to comply with the requirements of this
paragraph shall entitle the Underwriter to rescind its offer hereunder.
I.To the knowledge of the Authority, there is no action, suit, proceeding,
inquiry or investigation, at law or in equity, before or by any court, governmental agency, public
board or body pending against the Authority seeking to restrain or enjoin the sale or issuance of the
Bonds, or in any way contesting or affecting any proceedings of the Authority taken concerning the
sale thereof, the pledge or application of any moneys or security provided for the payment of the
Bonds, in any way contesting the validity or enforceability of the Authority Documents or contesting
in any way the completeness or accuracy of the Preliminary Official Statement or the Official
Statement or the existence or powers of the Authority relating to the sale of the Bonds.
J.Any certificate signed on behalf of the Authority by any officer or employee
of the Authority authorized to do so shall be deemed a representation and warranty by the Authority
to the Underwriter on behalf of itself and the Authority as to the statements made therein.
K.The Revenues constituting the security for the Bonds have been duly and
lawfully authorized and may be pledged under the Act and the Constitution and the applicable
laws of the State.
L.Except as disclosed in the Preliminary Official Statement, the Authority has
not failed to comply in all respects with any previous undertakings with regard to the Rule to provide
annual reports or notices of enumerated events in the last five years.
M.The Authority will apply the proceeds of the Bonds in accordance with the
Indenture and as described in the Preliminary Official Statement and Official Statement.
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N.Until all Outstanding Bonds have been paid or discharged pursuant to the
terms of the Indenture, the Authority will faithfully perform and abide by all of the covenants,
undertakings and provisions contained in the Indenture.
O.Between the date of this Purchase Agreement and the date of Closing, the
Authority District will not offer or issue any bonds, notes or other obligations for borrowed money
not previously disclosed to the Underwriter.
P.The Authority shall comply with the Internal Revenue Code of 1986, as
amended, with respect to the Bonds and the Authority shall not knowingly take or omit to take any
action that, under existing law, may adversely affect the exclusion from gross income for federal
income tax purposes, or the exemption from any applicable State tax, of the interest on the Bonds
Q.The Authority will furnish such information, execute such instruments and
take such other action at the expense of and in cooperation with the Underwriter as the Underwriter
may reasonably request at the sole cost and expense of the Underwriter in order (i) to qualify the
Bonds for offer and sale under the “blue sky” or other securities laws and regulations of such states
and other jurisdictions of the United States of America as the Underwriter may designate and (ii) to
determine the eligibility of the Bonds for investment under the laws of such states and other
jurisdictions, and will use its best efforts to continue such qualifications in effect so long as is
required for the distribution of the Bonds; provided, however, that the Authority will not be required
to execute a special or general consent to service of process or qualify as a foreign corporation in
connection with any such qualification in any jurisdiction.
R.Except as disclosed in the Official Statement, to the knowledge of the officer
of the Authority executing this Purchase Agreement and without investigation of any kind, no other
public debt secured by an ad valorem property tax, a special tax or a benefit assessment levied by the
Authority or the District on the land upon which the Special Taxes will be levied in Improvement
Area B of the District is in the process of being authorized by the Authority, the City or the District
and no assessment districts or community facilities districts have been or are in the process of being
formed by the Authority or the City which include any portion of the land upon which the Special
Taxes will be levied. All outstanding debt secured by special taxes, benefit assessment or ad
valorem property tax levies for general obligation bonds of the City, and all authorized but unissued
debt secured by special taxes, benefit assessment or ad valorem property tax levies for general
obligation bonds of the City, or the City on behalf of the District, which is applicable to the property
upon which the Special Taxes will be levied in Improvement Area B of the District is accurately
described in the Official Statement.
The execution and delivery of this Purchase Agreement by the Authority shall constitute a
representation by the Authority to the Underwriter that the representations and warranties contained
in this Section 3 with respect to the Authority are true as of the date hereof; provided, however, that
as to all matters of law the Authority is relying on the advice of bond counsel to the Authority; and
provided further, that no member, officer, agent or employee of the governing body of the Authority
shall be individually liable for the breach of any representation, warranty or agreement contained
herein.
4.Conditions to the Obligations of the Underwriter. The obligation of the Underwriter
to accept delivery of and pay for the Bonds on the Closing Date shall be subject, at the option of the
Underwriter, to the accuracy in all material respects of the representations and warranties on the part
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of the Authority contained herein, to the accuracy in all material respects of the statements of the
officers and other officials of the Authority made in any certificates or other documents furnished
pursuant to the provisions hereof, to the performance by the Authority of their obligations to be
performed hereunder at or prior to the Closing Date, and in reliance upon the representations and
covenants of Pardee Homes, a California corporation (the “Developer”) contained in the certificates
delivered as of the Closing Date, and to the following additional conditions:
A.The representations and covenants of the Authority contained herein shall be
true and correct at the date hereof and at the time of the Closing, as if made on the Closing Date.
B.The Authority Documents shall be in full force and effect, and shall not have
been amended, modified or supplemented in any material respect from the forms of such documents
which have been provided to the Underwriter as of the date hereof (except as may be agreed to by the
Underwriter); all actions which, in the opinion of Bond Counsel shall be necessary in connection
with the transactions contemplated hereby shall have been duly taken and shall be in full force and
effect; and the Authority shall perform or shall have performed its obligations required under or
specified in this Purchase Agreement to be performed at or prior to the Closing.
C.At the time of the Closing, (i) no default shall have occurred or be existing
under this Purchase Agreement or the Authority Documents, (ii) none of the Authority, the City or
the District shall be in default in the payment of principal or interest on any of its bonded
indebtedness which default shall adversely impact the ability of the Authority to make payment on
the Bonds, and (iii) no bankruptcy, insolvency or other similar proceeding in respect of the Authority
shall be pending, nor to the knowledge of the Authority, contemplated.
D.At the time of the Closing, the Official Statement (as amended and
supplemented) shall be true and correct in all material respects, and shall not contain any untrue
statement of a material fact or omit any statement or information necessary to make the statements
therein, in the light of circumstances under which they were made, not misleading.
E.Between the date hereof and the Closing Date, the market price or
marketability, at the initial offering prices set forth on the cover page of the Official Statement, of the
Bonds or the ability of the Underwriter to enforce contracts for the sale of the Bonds, shall not have
been materially adversely affected, in the judgment of the Underwriter (evidenced by a written notice
to the Authority terminating the obligation of the Underwriter to accept delivery of and pay for the
Bonds), by reason of any of the following:
1.The marketability of the Bonds or the market price thereof, or the ability of
the Underwriter to enforce contracts for the sale of the Bonds in the reasonable opinion of the
Underwriter, has been materially adversely affected by an amendment to the Constitution of the
United States of America or by any legislation in or by the Congress of the United States of America
or by the State, or the amendment of legislation pending as of the date of this Purchase Agreement in
the Congress of the United States of America (“Congress”), or the recommendation to Congress or
endorsement for passage (by press release, other form of notice or otherwise) of legislation by the
President of the United States of America, any member of the President’s Cabinet, the Treasury
Department of the United States of America, the Internal Revenue Service or the Chairman or
ranking minority member of the Committee on Finance of the United States Senate or the Committee
on Ways and Means of the United States House of Representatives, or the proposal for consideration
of legislation by either such Committee, or the presentment of legislation for consideration as an
11
option by either such Committee, or by the staff of the Joint Committee on Taxation of the Congress
of the United States of America, or the favorable reporting for passage of legislation to either House
of the Congress of the United States of America by a Committee of such House to which such
legislation has been referred for consideration, or any decision of any federal or State court or any
ruling or regulation (final, temporary or proposed) or official statement on behalf of the United States
Treasury Department, the Internal Revenue Service or other federal or State authority materially
adversely affecting the federal or State tax status of the Authority, the City or the District, the interest
on bonds or notes or obligations of the general character of the Bonds or the market price of the
Bonds;
2.Legislation introduced in or enacted (or resolution passed) by the Congress or
an order, decree or injunction issued by any court of competent jurisdiction, or an order, ruling,
regulation (final, temporary or proposed), press release or other form of notice issued or made by or
on behalf of the Securities and Exchange Commission, or any other governmental agency having
jurisdiction of the subject matter, to the effect that obligations of the general character of the Bonds,
including the Local Obligation and any or all other underlying arrangements, are not exempt from
registration under, any provision of the federal securities laws, including the Securities Act of 1933,
as amended, and as then in effect,, or that the Indenture or the Local Obligation Bond Indenture is not
exempt from qualification under or other requirements of the Trust Indenture Act of 1939, as
amended, or that the issuance, offering or sale of obligations of the general character of the Bonds,
including any or all underlying arrangements, as contemplated hereby or by the Official Statement or
otherwise is or would be in violation of the federal securities laws as amended and then in effect;
3.Additional material restrictions not in force as of the date hereof, including
minimum or maximum prices for trading having been fixed and in force, or maximum ranges for
prices for securities having been required and in force shall have been imposed upon trading in
securities generally by any governmental authority or by any national securities exchange which
restrictions materially adversely affect the Underwriter’s ability to market the Bonds;
4.A general suspension of trading on the New York Stock Exchange or other
major exchange or a general banking moratorium shall have been established by federal, State of
New York or State authorities;
5.The introduction, proposal or enactment of any amendment to the Federal or
California Constitution or any action by any Federal or California court, legislative body, regulatory
body or other authority materially adversely affecting the tax status of the Authority, its property,
income, securities (or interest thereon), the validity or enforceability of Revenues, or the ability of
the Authority to issue the Bonds as contemplated by the Indenture and the Official Statement;
6.There shall have occurred (1) an outbreak or escalation of hostilities or the
declaration by the United States of a national emergency or war, (2) any other calamity or crisis in
the financial markets of the United States or elsewhere, (3) the sovereign debt rating of the United
States is downgraded by any major credit rating agency or a payment default occurs on United States
Treasury obligations, or (4) a default with respect to the debt obligations of, or the institution of
proceedings under any federal bankruptcy laws by or against, any state of the United States or any
city, county or other political subdivision located in the United States, in any such case which, in the
reasonable opinion of the Underwriter, would affect materially and adversely the ability of the
Underwriter to market the Bonds or the ability of the Underwriter to enforce contracts for the sale of
12
the Bonds (it being agreed by the Underwriter that there is no outbreak, calamity or crisis of such
character as of the date hereof); or
7.Except as disclosed in or contemplated by the Official Statement, any
material adverse change in the affairs of the Authority or the District shall have occurred; or
8.Any event or circumstance shall exist that either makes untrue or incorrect in
any material respect any statement or information in the Preliminary Official Statement or in the
Official Statement (other than any statement provided by the Underwriter) or is not reflected in the
Preliminary Official Statement or in the Official Statement but should be reflected therein in order to
make the statements therein, in the light of the circumstances under which they were made, not
misleading and, in either such event, the Authority refuses to permit the Preliminary Official Statement
or the Official Statement to be supplemented to supply such statement or information, or the effect of
the Preliminary Official Statement or the Official Statement as so supplemented is to materially
adversely affect the market price or marketability of the Bonds or the ability of the Underwriter to
enforce contracts for the sale of the Bonds; or
9.A material disruption in securities settlement, payment or clearance services
affecting the Bonds shall have occurred; or
10.Any new restriction on transactions in securities materially affecting the
market for securities (including the imposition of any limitation on interest rates) or the extension of
credit by, or a charge to the net capital requirements of, underwriters shall have been established by
the New York Stock Exchange, the SEC, any other federal or State agency or the Congress of the
United States, or by Executive Order; or
11.A decision by a court of the United States shall be rendered, or a stop order,
release, regulation or no-action letter by or on behalf of the SEC or any other governmental agency
having jurisdiction of the subject matter shall have been issued or made, to the effect that the
issuance, offering or sale of the Bonds, including the Local Obligation and the underlying obligations
as contemplated by this Purchase Agreement and by the Official Statement, or any document relating
to the issuance, offering or sale of the Bonds, is or would be in violation of any provision of the
federal securities laws at the Closing Date, including the Securities Act of 1933, as amended, the
Exchange Act of 1934, as amended, and the Trust Indenture Act of 1939, as amended; or
12.Any proceeding shall have been commenced or be threatened in writing by
the Securities and Exchange Commission against the City, the Authority, or the District.
F.At or prior to the Closing Date, the Underwriter shall have received a
counterpart original or certified copy of the following documents, in each case satisfactory in form
and substance to the Underwriter:
1.Authority Documents. The Authority Documents and the Official
Statement, duly executed and delivered by the respective parties thereto;
2.Resolution. The Resolution, together with a certificate dated as of the
Closing Date of the Secretary to the Board of Directors of the Authority to the effect that the
Resolution is a true, correct and complete copy of that duly adopted by the Board of Directors of the
Authority;
13
3.Bond Opinion. An unqualified approving opinion of Bond Counsel,
dated the Closing Date, in substantially the form included in the Official Statement as an appendix
and addressed to the Authority, together with a reliance letter of Bond Counsel, dated the Closing
Date and addressed to the Underwriter and to the Trustee, to the effect that such opinion addressed to
the Authority may be relied upon by the Underwriter and the Trustee to the same extent as if such
opinion was addressed to them;
4.Supplemental Opinion. A supplemental opinion or opinions of Bond
Counsel, dated the Closing Date and addressed to the Underwriter, to the effect that:
(i)this Purchase Agreement has been duly authorized, executed
and delivered by the Authority and, assuming due authorization, execution and delivery by the other
parties thereto, constitutes the legal, valid and binding agreement of the Authority and is enforceable
in accordance with its terms, except to the extent that enforceability may be limited by moratorium,
bankruptcy, reorganization, insolvency or other similar laws affecting creditors’ rights generally or
by the exercise of judicial discretion in accordance with general principles of equity or otherwise in
appropriate cases and by limitations on legal remedies against public agencies in the State;
(ii)the Bonds are not subject to the registration requirements of
the Securities Act of 1933, as amended, and the Indenture is exempt from qualification under the
Trust Indenture Act of 1939, as amended;
(iii)the Bonds conform as to form and tenor to the description
thereof contained under the captions “INTRODUCTION” and “THE BONDS” in the Official
Statement, and the statements contained in the Official Statement under the captions
“INTRODUCTION,” “THE BONDS,” “SECURITY FOR THE BONDS,” “LEGAL MATTERS –
Tax Exemption,” “LEGAL MATTERS – Legal Opinion,” “SUMMARY OF PRINCIPAL LEGAL
DOCUMENTS” in Appendix A of the Official Statement and “FORM OF BOND COUNSEL
OPINION” in Appendix D of the Official Statement, are accurate insofar as such statements purport
to summarize certain provisions of the Act, the Bonds, the Indenture, Bond Counsel’s final approving
opinion, and applicable provisions of the United States Internal Revenue Code.
5.Disclosure Counsel Opinion. A letter of Disclosure Counsel, dated
the Closing Date and addressed to the Underwriter and the Authority, to the effect that such counsel
is not passing upon and has not undertaken to determine independently or to verify the accuracy or
completeness of the statements contained in the Official Statement, and is, therefore, unable to make
any representation to the Underwriter in that regard, but on the basis of its participation in
conferences with representatives of the Authority, the District, the City Attorney of the City of Lake
Elsinore as the Authority’s counsel, Bond Counsel, Kitty Siino & Associates, Inc., SCG – Spicer
Consulting Group, Urban Futures Inc., representatives of the Underwriter, Nossaman LLP as counsel
to the Underwriter, and others, during which conferences the content of the Official Statement and
related matters were discussed, and its examination of certain documents, and, in reliance thereon
and based on the information made available to it in its role as Disclosure Counsel and its
understanding of applicable law, Disclosure Counsel advises the Underwriter as a matter of fact, but
not opinion, that no information has come to the attention of the attorneys in the firm working on
such matter which has led them to believe that the Official Statement (excluding therefrom the
financial and statistical data, forecasts, charts, numbers, estimates, projections, assumptions and
expressions of opinion included in the Official Statement, information regarding DTC and its book
entry system and the information set forth in the appendices to the Official Statement, as to all of
14
which no opinion is expressed) as of its date and as of the Closing Date contained any untrue
statement of a material fact or omitted to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under which they were made,
not misleading, and advising the Underwriter that, other than reviewing the various certificates and
opinions required by this Purchase Agreement regarding the Official Statement, Disclosure Counsel
has not taken any steps since the date of the Official Statement to verify the accuracy of the
statements contained in the Official Statement;
6.Authority Closing Certificate. A certificate of the Authority, dated
the date of the Closing, signed on behalf of the Authority by a duly authorized representative of the
Authority to the effect that, such representative’s knowledge, (i) the representations contained in this
Purchase Agreement are true and correct in all material respects as of the date of the Closing, (ii) the
Resolutions and the Authority Documents are in full force and effect and have not been amended,
modified or supplemented, (iii) except as described in the Official Statement, there is no action, suit,
proceeding, inquiry or investigation at law or in equity, or by any court or regulatory agency, public
board or body pending, with respect to which the Authority has been served with process, or
threatened wherein an unfavorable decision, ruling or finding would: (a) affect the creation,
organization, existence or powers of the Authority, or the titles of its officers to their respective
offices, (b) enjoin or restrain the issuance, sale and delivery of the Bonds, the Local Obligations, the
levy or collection of the Special Taxes or any other moneys or property pledged or to be pledged
under the Indenture, (c) in any way question or affect any of the rights, powers, duties or obligations
of the Authority with respect to the Revenues, of the District with respect to the Special Taxes, or the
Authority or the District with respect to moneys and assets pledged or to be pledged to pay the
principal of, premium, if any, or interest on the Bonds or the Local Obligations, (d) in any way
question or affect any authority for the issuance of the Bonds, or the validity or enforceability of the
Bonds or the proceedings relating to the issuance of the Bonds, or (e) in any way question or affect
this Purchase Agreement or the transactions contemplated hereby, the Official Statement or the
Authority Documents, (iv) the information regarding the Authority in the Official Statement is true
and correct and does 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 are
made, not misleading; (v) the Authority has complied with all agreements and covenants, and
satisfied all conditions, on its part to be complied with or satisfied under the Purchase Agreement and
under the Authority Documents at or prior to the date hereof; (vi) no event affecting the Authority
has occurred since the date of the Official Statement which should be disclosed in the Official
Statement in order to make the statements therein with respect to the Authority not misleading in any
material respect, and (vii) the use of and distribution by the Underwriter of the Preliminary Official
Statement and the Official Statement in connection with the offer and sale of the Bonds is hereby
ratified;
7.15c2-12 Certificate. A certificate, dated the date of the Preliminary
Official Statement, from the Authority deeming the Preliminary Official Statement final for purposes
of the Rule.
8.Authority Counsel Opinion. An opinion of counsel to the Authority,
dated the date of Closing and addressed to the Underwriter, the Trustee, and the Authority, to the
effect that:
(i)The Authority is a joint powers authority duly organized and
validly existing under the laws of the State;
15
(ii)The Resolution has been duly adopted at a meeting of the
governing body of the Authority, and the Resolution is in full force and effect, and has not been
modified, amended or superseded;
(iii)The Authority Documents have been duly authorized,
executed and delivered by the Authority and constitute the legal, valid and binding obligations of the
Authority enforceable against the Authority in accordance with their terms, subject to bankruptcy,
insolvency, reorganization, moratorium and other similar laws affecting creditors’ rights, to the
application of equitable principles where equitable remedies are sought and to the exercise of judicial
discretion in appropriate cases;
(iv)Except as disclosed in the Official Statement, there is no
action, suit, proceeding or investigation before or by any court, public board or body pending (notice
of which has been served on the City or the Authority) or, to such counsel’s knowledge, threatened
that (a) in any way questions the powers of the Authority or the existence of the Authority or the
titles of the officers of the Authority to their respective offices, or the service of the City Council of
the City as the legislative body for the Authority; (b) affects, contests or seeks to prohibit, restrain or
enjoin the issuance or delivery of the Bonds or the payment or collection of Revenues or any
amounts pledged or to be pledged to pay the principal of and interest on the Bonds, (c) in any way
contests or affects the validity of the Authority Documents or the consummation of the transactions
on the part of the Authority contemplated thereby; or (e) may result in any material adverse change
relating to the financial condition of the Authority.
9.Appraisal Report and Certificate. (i) The final appraisal report with a
date of October 12, 2017 (the “Appraisal Report”) of Kitty Siino & Associates, Inc. (the
“Appraiser”), setting forth appraised values of land and improvements within Improvement Area B
of the District at not less than the appraised values set forth in the Official Statement, a copy of
which appraisal report shall be appended to the Official Statement as an appendix, and (ii) a
certificate dated the Closing Date from the Appraiser, addressed to the Authority and the
Underwriter, to the effect that the statements in the Official Statement provided by the Appraiser
concerning all information supplied by it for use in the Official Statement were as of the date of the
Official Statement and are as of the Closing Date true and correct, and do not contain any untrue
statement of a material fact or omit to state a material fact necessary in order to make the statements
therein, in light of the circumstances under which they were made, not misleading;
10.Certificate of Special Tax Consultant. A certificate dated the Closing
Date from SCG – Spicer Consulting Group, addressed to the Authority and the Underwriter, to the
effect that: (i) the amount of the Net Special Taxes that could be levied in each Fiscal Year on all
parcels subject to the Special Tax (as defined in the Rate and Method of Apportionment of Special
Tax for Improvement Area B of the District) is at least one hundred ten percent (110%) of the total
Annual Debt Service for each such Fiscal Year on the Bonds, and (ii) all information supplied by
them for use in the Official Statement is true and correct as of the date of the Official Statement and
as of the Closing Date;
11.Trustee Certificate. An incumbency certificate of the Trustee,
together with a certificate of the Trustee, addressed to the Underwriter and the Authority, dated the
Closing Date, to the effect that: (i) the Trustee is a national banking association, duly organized and
validly existing and in good standing under the laws of the United States, having full power and
being qualified to enter, accept and administer the trust created under the Indenture, to execute and
16
deliver the Indenture, to accept the obligations created by the Indenture and to authenticate the Bonds
pursuant to the terms of the Indenture; (ii) all approvals, consents and orders of any governmental
authority or agency having jurisdiction in the matter that would constitute a condition precedent to
the performance by the Trustee of its duties and obligations under the Indenture have been obtained
and are in full force and effect; and (iii) the acceptance of the duties and obligations of the Trustee
under the Indenture, and the consummation of the transactions on the part of the Trustee
contemplated therein, and the compliance by the Trustee with the terms, conditions and provisions of
such document do not contravene any provisions of applicable law of regulation or any order or
decree, writ or injunction of the Articles of Incorporation or Bylaws of the Trustee, and, to the best of
such officer’s knowledge, will not require the consent under, or result in a breach of or default under,
any resolution, agreement or other instrument to which the Trustee is a party or by which it may be
bound;
12.Trustee’s Counsel Opinion. An opinion of counsel to the Trustee
dated the Closing Date, addressed to the Underwriter and the Authority, to the effect that (i) the
Trustee is a national banking association duly organized and validly existing and in good standing
under the laws of the United States, having full power and being qualified to enter, accept and
administer the trust created under the Indenture, and (ii) the Indenture has been duly authorized,
executed and delivered by the Trustee, and, assuming due execution and delivery by the other parties
thereto, constitutes the legal, valid and binding obligation of the Trustee, enforceable in accordance
with its terms, subject to bankruptcy, insolvency, reorganization, moratorium and other laws
affecting the enforcement of creditors’ rights in general and except as such enforceability may be
limited by the application of equitable principles if equitable remedies are sought;
13.Nonarbitrage Certificate. A certificate of the Authority dated the
Closing Date, in a form acceptable to Bond Counsel and the Underwriter, that the Bonds are not
arbitrage bonds within the meaning of Section 148 of the Internal Revenue Code of 1986, as
amended;
14.Developer’s Counsel Opinion. An opinion of counsel to the
Developer, dated the date of the Closing, addressed to the Underwriter and the Community Facilities
District, in form and substance acceptable to the Underwriter and Bond Counsel;
15.Developer’s Letter of Representations. A Letter of Representations
from the Developer, dated the date of printing the Preliminary Official Statement, substantially in the
form attached hereto as Exhibit B;
16.Developer’s Closing Certificate. A Closing Certificate of the
Developer, dated the date of the Closing, substantially in the form attached hereto as Exhibit C or as
such Closing Certificate may be modified with the approval of the Underwriter and Disclosure
Counsel;
17.Underwriter’s Counsel Opinion. An opinion of Nossaman LLP,
counsel to the Underwriter (“Underwriter’s Counsel”), dated the date of Closing and addressed to the
Underwriter in form and substance acceptable to the Underwriter;
18.Joint Powers Agreement. A copy of the Joint Exercise of Powers
Agreement relating to the Authority by and between the City and the Parking Authority of the City;
17
19.Form 8038-G. An Information Return for Tax-Exempt Bond Issues
(Internal Revenue Service Form 8038-G), in a form satisfactory to Bond Counsel for filing, executed
by a duly authorized officer of the Authority;
20.Issue Price Certificate. An Executed copy of the Issue Price
Certificate of the Underwriter in the form presented in Exhibit D hereto; and
21.Additional Documents. 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 Closing Date, of the material representations and
warranties of the Authority contained herein, and of the statements and information contained in the
Official Statement and the due performance or satisfaction by the Authority at or prior to the Closing
of all agreements then to be performed and all conditions then to be satisfied by the Authority in
connection with the transactions contemplated hereby and by the Indenture and the Official
Statement.
If the Authority shall be unable to satisfy the conditions to the obligations of the Underwriter
to purchase, accept delivery of and pay for the Bonds contained in this Purchase Agreement, or if the
obligations of the Underwriter to purchase, accept delivery of and pay for the Bonds shall be
terminated for any reason permitted by this Purchase Agreement, this Purchase Agreement shall
terminate and neither the Authority nor the Underwriter shall be under any further obligation
hereunder, except that the respective obligations of the Underwriter and the Authority set forth in
Section 5 hereof shall continue in full force and effect.
5.Expenses. Whether or not the transactions contemplated by this Purchase Agreement
are consummated:
A.The Underwriter shall be under no obligation to pay, and the Authority shall
pay from the proceeds of the Local Obligations, or any other legally available funds of the District or
the Authority, but only as the Authority and such other party providing such services may agree, the
following expenses incident to the issuance of the Bonds and performance of the Authority’s
obligations hereunder: (i) the costs of the preparation and printing of the Bonds, (ii) the fees and
disbursements of Bond Counsel, (iii) the cost of preparation, printing and mailing of the Preliminary
Official Statement and the Official Statement and any supplements and amendments thereto,
including a reasonable number of copies thereof for distribution by the Underwriter, (iv) the fees and
disbursements of the Trustee, Special Tax Consultant, Appraiser, accountants, advisers and any other
experts or consultants retained by the Authority or the District, (v) the fees and expenses of
Disclosure Counsel and (vi) the fees and disbursements of counsel to the Authority.
B.The Underwriter shall pay the following expenses: (i) all advertising expenses in
connection with the public offering of the Bonds, and (ii) all other expenses, CDIAC fee, CUSIP®
Service Bureau fees (including out-of-pocket expenses and related regulatory expenses) incurred by
it in connection with the public offering and distribution of the Bonds, except as noted in Section
5(A) above, including the fees and disbursements of its counsel. Any meals in connection with or
adjacent to meetings, rating agency presentations, pricing activities or other transaction-related
activities shall be considered an expense of the transaction and included in the expense component of
the Underwriter’s discount.
18
6.Notices. Any notice of other communication to be given to the Authority under this
Purchase Agreement may be given by delivering the same in writing to the Authority at the address
set forth above; any notice or other communication to be given to the Underwriter under this
Purchase Agreement may be given by delivering the same in writing to Stifel, Nicolaus & Company,
Incorporated, 515 South Figueroa Street, Suite 1800, Los Angeles, California 90071, Attention: John
Kim, Managing Director.
Notices may be given by personal or courier delivery, registered or certified mail, facsimile
transmission or electronic communication, provided that delivery by facsimile transmission or
electronic communication must be confirmed by the sender.
7.Entire Agreement. This Purchase Agreement is made solely for the benefit of the
Authority and the Underwriter (including their respective successors and assigns), and no other
person shall acquire or have any right hereunder or by virtue hereof. The term “successor” shall not
include any owner of any Bonds merely by virtue of such holding. All of the Authority’s
representations, warranties and agreements contained in this Purchase Agreement shall remain
operative and in full force and effect regardless of (i) any investigations made by or on behalf of the
Underwriter, or (ii) delivery of any payment for the Bonds pursuant to this Purchase Agreement. The
agreements contained in this Section and in Section 8 shall survive any termination of this Purchase
Agreement.
8.Survival of Representations and Warranties. All representations and warranties of the
parties made in, pursuant to or in connection with this Purchase Agreement shall survive the
execution and delivery of this Purchase Agreement notwithstanding any investigation by the parties.
All statements contained in any certificate, instrument or other writing delivered by a party to this
Purchase Agreement or in connection with the transactions contemplated by this Purchase
Agreement constitute representations and warranties by such party under this Purchase Agreement.
9.No Assignment. The rights and obligations created by this Purchase Agreement shall
not be subject to assignment by the Underwriter or the Authority without the prior written consent of
the other parties hereto.
10.Execution in Counterparts. This Purchase Agreement may be executed by the parties
hereto in separate counterparts, each of which when so executed and delivered shall be an original,
but all such counterparts shall together constitute but one and the same instrument.
11.Effective. This Purchase Agreement shall become effective and binding upon the
respective parties hereto upon the execution of the acceptance hereof by the Authority and shall be
valid and enforceable as of the time of such acceptance.
12.No Prior Agreements. This Purchase Agreement supersedes and replaces all prior
negotiations, agreements and understanding among the parties hereto in relation to the sale of the
Bonds by the Authority.
13.Severability. In case any one or more of the provisions contained herein shall for any
reason be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other provision hereof.
19
14.Governing Law. This Purchase Agreement shall be governed by the laws of the State
of California.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
S-1
15.Effective Date. This Purchase Agreement shall become effective and binding upon
the respective parties hereto upon the execution of the acceptance hereof by the Authority and shall
be valid and enforceable as of the time of such acceptance.
STIFEL, NICOLAUS & COMPANY,
INCORPORATED
By:
Its: Managing Director
The foregoing is hereby agreed to and accepted as of the date first above written:
LAKE ELSINORE FACILITIES
FINANCING AUTHORITY
By:
Authorized Officer
Time of Execution: _____________ p.m. California time
[EXECUTION PAGE OF BOND PURCHASE AGREEMENT]
A-1
EXHIBIT A
LAKE ELSINORE FACILITIES FINANCING AUTHORITY
LOCAL AGENCY REVENUE BONDS, SERIES 2017
MATURITY SCHEDULE
Maturity
(September 1)
Principal
Amount
Interest
Rate Yield Price
10% Test
Satisfied*
10% Test
Not
Satisfied
Subject to
Hold-The-
Offering-
Price Rule
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
2031
2032
20__
20__
20__
20__(T)
20__(T)
_________________
(T) Term Bond.
(C) [Priced to optional call at [par] on September 1, 20__.]
* At the time of execution of this Bond Purchase Agreement and assuming orders are confirmed immediately after
the execution of this Bond Purchase Agreement.
B-1
EXHIBIT B
LAKE ELSINORE FACILITIES FINANCING AUTHORITY
LOCAL AGENCY REVENUE BONDS, SERIES 2017
LETTER OF REPRESENTATIONS – PARDEE HOMES
___________, 2017
Lake Elsinore Facilities Financing Authority
Lake Elsinore, California
Stifel, Nicolaus & Company, Incorporated
Los Angeles, California
Ladies and Gentlemen:
Reference is made to the Lake Elsinore Facilities Financing Authority Local Agency
Revenue Bonds, Series 2017 (the “Bonds”) and to the Bond Purchase Agreement to be entered into
in connection therewith (the “Bond Purchase Agreement”). This Letter of Representations (the
“Letter of Representations”) is delivered pursuant to and in satisfaction of Section 4(E)(15) of the
Bond Purchase Agreement. Capitalized terms used herein and not otherwise defined have the
meanings ascribed to them in the Bond Purchase Agreement.
The undersigned certifies that he is familiar with the facts herein certified and is authorized
and qualified to certify the same as an authorized officer or representative of Pardee Homes, a
California corporation (the “Developer”), and the undersigned, on behalf of the Developer, further
certifies as follows:
1.The Developer is duly organized and validly existing under the laws of the State of
California and has all requisite right, power and authority (i) to execute and deliver this Letter of
Representations and (ii) to complete the development (i.e., construction of homes) on its property
in Improvement Area B (the “Improvement Area”) of the City of Lake Elsinore Community
Facilities District No. 2003-2 (Canyon Hills) (the “Community Facilities District”) as described
in the Preliminary Official Statement.
2.As set forth in the Preliminary Official Statement, title to a certain portion of the
property within the Improvement Area is held in the name of the Developer (herein, the
“Property”). The undersigned, on behalf of the Developer, makes the representations herein with
respect to all such Property. Except as otherwise described in the Preliminary Official Statement,
the Developer is and the Developer’s current expectations are that the Developer shall remain the
party responsible for the development of the Property. The Developer has not entered into an
agreement for development or management of the Property by any other entity, except such
subcontracts, consultant agreements and similar agreements for land development activities
associated with the Developer’s development plan as are entered into in the ordinary course of
business.
B-2
3.Except as set forth in the Preliminary Official Statement, no action, suit, proceeding,
inquiry or investigation at law or in equity, before or by any court, regulatory agency, or public
board or body is pending against the Developer (with proper service of process to the Developer
having been accomplished) or, to the Actual Knowledge of the Undersigned,1 is pending against
any current Affiliate2 (with proper service of process to such Affiliate having been accomplished)
or to the Actual Knowledge of the Undersigned is threatened in writing against the Developer or
any such Affiliate (a) to restrain or enjoin the collection of Special Taxes or other sums pledged
or to be pledged to pay the principal of and interest on the Bonds (e.g., the Reserve Fund
established under the Indenture), (b) to restrain or enjoin the development of the Property as
described in the Preliminary Official Statement, (c) in any way contesting or affecting the
validity of the Special Taxes, or (d) which is reasonably likely to materially and adversely affect
the Developer’s ability to complete the development and sale of the Property as described in the
Preliminary Official Statement or to pay the Special Taxes due with respect to the Property.
4.As of the date of the Preliminary Official Statement, to the Actual Knowledge of the
Undersigned, the information contained therein solely with respect to the Developer, its
Affiliates, the proposed development of the Property, ownership of the Property, the Developer’s
development plan, the Developer’s financing plan, the Developer’s lenders, if any, and
contractual arrangements of the Developer or any Affiliates (including, if material to the
Developer’s development plan or the Developer’s financing plan, other loans of such Affiliates)
as set forth under the section of the Preliminary Official Statement captioned “CURRENT AND
PROPOSED DEVELOPMENT OF PROPERTY WITHIN IMPROVEMENT AREA B”
(excluding therefrom in all cases information regarding the Appraisal Report, market value ratios
and annual special tax ratios, and information which is identified as having been provided by a
source other than the Developer), is true and correct in all material respects and did not contain
any untrue statement of a material fact or omit to state a material fact necessary to make the
statements therein, in the light of the circumstances under which they were made, not misleading.
1 “Actual Knowledge of the Undersigned” means the knowledge that the individual signing on behalf of the
Developer currently has as of the date of this Letter of Representations or has obtained through (i) interviews with
such current officers and responsible employees of the Developer and its Affiliates as the undersigned has
determined are reasonably likely, in the ordinary course of their respective duties, to have knowledge of the matters
set forth in this Letter of Representations, and/or (ii) review of documents that were reasonably available to the
undersigned and which the undersigned has reasonably deemed necessary for the undersigned to obtain knowledge
of the matters set forth in this Letter of Representations. The undersigned has not conducted any extraordinary
inspection or inquiry other than such inspections or inquiries as are prudent and customary in connection with the
ordinary course of the Developer’s current business and operations.
2 “Affiliate” means, with respect to the Developer, any other Person (i) who directly, or indirectly through one or
more intermediaries, is currently controlling, controlled by or under common control with the Developer, and (ii) for
whom information, including financial information or operating data, concerning such Person is material to potential
investors in their evaluation of the Improvement Area and investment decision regarding the Bonds (i.e.,
information relevant to (a) the Developer’s development plans with respect to the Property and ability to pay its
Special Taxes on the Property prior to delinquency, or (b) such Person’s assets or funds that would materially affect
the Developer’s ability to develop the Property as described in the Preliminary Official Statement or to pay its
Special Taxes on the Property). “Person” means an individual, a corporation, a partnership, a limited liability
company, an association, a joint stock company, a trust, any unincorporated organization or a government or
political subdivision thereof. For purposes hereof, the term “control” (including the terms “controlling,” “controlled
by” or “under common control with”) means the possession, direct or indirect, of the power to direct or cause the
direction of the management and policies of a Person, whether through the ownership of voting securities, by
contract or otherwise.
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5.Except as described in the Preliminary Official Statement, there are no material loans
outstanding and unpaid and no material lines of credit of the Developer or its Affiliates, that are
secured by an interest in the Property. Neither the Developer nor, to the Actual Knowledge of
the Undersigned, any of its Affiliates is currently in material default on any loans, lines of credit
or other obligation related to the development of the Property or any other project which default
is reasonably likely to materially and adversely affect the Developer’s ability to develop the
Property as described in the Preliminary Official Statement or to pay the Special Taxes due with
respect to the Property prior to delinquency.
6.To the Actual Knowledge of the Undersigned, the Developer is not aware that any of
the Property has a current liability with respect to the presence of a substance presently classified
as hazardous under the federal Comprehensive Environmental Response, Compensation and
Liability Act of 1980 or applicable California law or is adversely affected by the presence of
endangered or threatened species or habitat for endangered or threatened species.
7.The Developer covenants that, while the Bonds or any refunding obligations related
thereto are outstanding, the Developer and its Affiliates which it controls 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
Improvement Area, to challenge the adoption of the ordinance of the Community Facilities
District levying Special Taxes within the Improvement Area, to invalidate the Improvement Area
or any of the Bonds or any refunding bonds related thereto, 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 thereto. The foregoing covenant shall not prevent the
Developer in any way from bringing any other action, suit or proceeding including, without
limitation, (a) an action or suit contending that the Special Tax has not been levied in accordance
with the methodologies contained in the Rate and Method of Apportionment of Special Taxes
pursuant to which Special Taxes are levied, (b) an action or suit with respect to the application or
use of the Special Taxes levied and collected or (c) an action or suit to enforce the obligations of
the City and/or the Community Facilities District under the Community Facilities District
Resolutions, the Indenture, or any other agreements among the Developer, the Authority and/or
the Community Facilities District or to which the Developer is a beneficiary.
8.The Developer consents to the issuance of the Bonds. The Developer acknowledges
and agrees that the proceeds of the Bonds will be used as described in the Preliminary Official
Statement.
9.The Developer intends to comply with the provision of the Mello-Roos Community
Facilities District Act of 1982, as amended relating to the Notice of Special Tax described in
Government Code Section 53341.5 in connection with the sale of the Property, or portions
thereof.
10.To the Actual Knowledge of the Undersigned, the Developer is able to pay its bills as
they become due and no legal proceedings are pending against the Developer (with proper
service of process having been accomplished) or, to the Actual Knowledge of the Undersigned,
threatened in writing in which the Developer may be adjudicated as bankrupt or discharged from
any and all of its debts or obligations, or granted an extension of time to pay its debts or
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obligations, or be allowed to reorganize or readjust its debts, or be subject to control or
supervision of the Federal Deposit Insurance Corporation.
11.To the Actual Knowledge of the Undersigned, Affiliates of the Developer are able to
pay their bills as they become due and no legal proceedings are pending against any Affiliate of
the Developer (with proper service of process having been accomplished) or to the Actual
Knowledge of the Undersigned, threatened in writing in which the Affiliates of the Developer
may be adjudicated as bankrupt or discharged from any or all of their debts or obligations, or
granted an extension of time to pay their debt or obligations, or be allowed to reorganize or
readjust their debts or obligations, or be subject to control or supervision of the Federal Deposit
Insurance Corporation.
12.As a subsidiary of a large, nation-wide developer of residential projects, TRI Pointe
Group, Inc., a Delaware corporation, the Developer cannot represent with assurance that neither
it nor any Affiliate has ever been delinquent in the payment of ad valorem property taxes, special
taxes or special assessments. However, to the Actual Knowledge of the Undersigned, during the
last five years, neither the Developer nor any Affiliate has, during the period of its ownership,
been delinquent to any material extent in the payment of any ad valorem property tax, special
assessment or special tax on property included within the boundaries of a community facilities
district or an assessment district in California that (a) caused a draw on a reserve fund relating to
such assessment district or community facilities district financing or (b) resulted in a foreclosure
action being commenced against the delinquent Developer or Affiliate.
13.The Developer has not filed for the reassessment of the assessed value of portions of
the Property, other than in connection with the sale of homes to individual homebuyers.
14.To the Actual Knowledge of the Undersigned, there are no claims, disputes, suits,
actions or contingent liabilities by and among the Developer, its Affiliates or any contractors
working on the development of the Property which is reasonably likely to materially and
adversely affect the development of the Property as described in the Preliminary Official
Statement or the payment of the Special Taxes due with respect to the Property prior to
delinquency.
15.Based upon the current development plans, including, without limitation, the current
budget and subject to economic conditions and risks generally inherent in the development of
real property, including, but not limited to, the risks described in the Preliminary Official
Statement under the section entitled “SPECIAL RISK FACTORS,” the Developer presently
anticipates that it will have sufficient funds to complete the development of the Property as
described in the Preliminary Official Statement and to pay Special Taxes levied against the
Property when due and does not anticipate that the Authority will be required to resort to a draw
on the Reserve Fund for payment of principal of or interest on the Bonds due to the Developer’s
nonpayment of Special Taxes. However, neither the Developer nor any of its Affiliates are
obligated to make any additional capital contribution or loan to the Developer at any time, and
the Developer reserves the right to change its respective development plan and financing plan for
the Property at any time without notice.
16.An appraisal of the taxable properties within the Improvement Area, dated October
12, 2017 (the “Appraisal Report”), with a date of value of September 1, 2017 (the “Date of
Value”), was prepared by Kitty Siino & Associates, Inc. (the “Appraiser”). The Appraisal Report
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estimates the market value of the appraised taxable properties within the Improvement Area as of
the Date of Value estimates that the market value of the appraised subject property as of the Date
of Value was not less than the value estimated in the Appraisal Report. To Actual Knowledge of
the Undersigned, all information submitted by, or on behalf of and authorized by, the Developer
to the Appraiser and contained in the sections of the Appraisal Report highlighted in yellow or
circled in Exhibit B attached hereto, was true and correct in all material respects as of the Date of
Value and Updated Date of Value, as applicable.
17.Solely as to the limited information described in Paragraph 6 above concerning the
Developer, its Affiliates, the proposed development of the Property, ownership of the Property,
the Developer’s development plan, the Developer’s financing plan, the Developer’s lenders, if
any, and contract arrangements of the Developer and its Affiliates (including, if material to the
Developer’s development plan or the Developer’s financing plan, other loans of such Affiliates),
as set forth under the section of the Preliminary Official Statement captioned “CURRENT AND
PROPOSED DEVELOPMENT OF PROPERTY WITHIN IMPROVEMENT AREA
B” (excluding therefrom in all cases information regarding the Appraisal Report, market value
ratios and annual special tax ratios, and information which is identified as having been provided
by a source other than the Developer), the Developer agrees to indemnify and hold harmless, to
the extent permitted by law, the Authority and the Community Facilities District 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 Exchange Act of 1934, as amended (each, an “Indemnified Party” and, collectively,
the “Indemnified Parties”), against any and all losses, claims, damages or liabilities, joint or
several, to which such Indemnified Party may become subject under any statute or at law or in
equity or otherwise and shall reimburse any such Indemnified Party for any reasonable legal or
other expense incurred by it in connection with investigating any such claim against it and
defending any such action, insofar as such losses, claims, damages, liabilities or actions arise out
of or are based upon any untrue statement or alleged untrue statement of a material fact or the
omission or alleged omission of a material fact by the Developer in the above-referenced
information in the Preliminary Official Statement, as of its date, necessary to make the statements
made by the Developer contained therein, in light of the circumstances under which they were
made not misleading. This indemnity provision shall not be construed as a limitation on any
other liability which the Developer may otherwise have to any Indemnified Party, provided that
in no event shall the Developer be obligated for double indemnification, or for the negligence and
willful misconduct of an Indemnified Party.
If any suit, action, proceeding (including any governmental or regulatory
investigation), claim or demand shall be brought or asserted against any Indemnified Party in
respect of which indemnification may be sought pursuant to the above paragraph, such
Indemnified Party shall promptly notify the Developer in writing; provided that the failure to
notify the Developer shall not relieve it from any liability that it may have hereunder except to the
extent that it has been materially prejudiced (through the forfeiture of substantive rights or defenses)
by such failure; and provided, further, that the failure to notify the Developer shall not relieve it from
any liability that it may have to an Indemnified Party otherwise than under the above paragraph. If
any such proceeding shall be brought or asserted against an Indemnified Party and it shall have
notified the Developer thereof, the Developer shall retain counsel reasonably satisfactory to the
Indemnified Party (who shall not, without the consent of the Indemnified Party, be counsel to the
Developer) to represent the Indemnified Party in such proceeding and shall pay the fees and
expenses of such counsel related to such proceeding, as incurred. In any such proceeding, any
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Indemnified Party shall have the right to retain its own counsel, but the fees and expenses of such
counsel shall be at the expense of such Indemnified Party unless (i) the Developer and the
Indemnified Party shall have mutually agreed to the contrary; (ii) the Developer has failed within
a reasonable time to retain counsel reasonably satisfactory to the Indemnified Party; (iii) the
Indemnified Party shall have reasonably concluded that there may be legal defenses available to
it that are different from or in addition to those available to the Developer; or (iv) the named
parties in any such proceeding (including any impleaded parties) include both the Developer and
the Indemnified Party and representation of both parties by the same counsel would be
inappropriate due to actual or potential differing interest between them. It is understood and
agreed that the Developer shall not, in connection with any proceeding or related proceedings in
the same jurisdiction, be liable for the fees and expenses of more than one separate firm (in
addition to any local counsel) for all Indemnified Parties, and that all such fees and expenses, to
the extent reasonable, shall be paid or reimbursed as they are incurred. Any such separate firm
shall be designated in writing by such Indemnified Parties. The Developer shall not be liable for
any settlement of any proceeding effected without its written consent, but if settled with such
consent or if there be a final judgment for the plaintiff, the Developer agrees to indemnify each
Indemnified Party from and against any loss or liability by reason of such settlement or
judgment. Notwithstanding the foregoing sentence, if at any time an Indemnified Party shall
have requested that the Developer reimburse the Indemnified Party for fees and expenses of
counsel as contemplated by this paragraph, the Developer shall be liable for any settlement of
any proceeding effected without its written consent if (i) such settlement is entered into more
than 60 days after receipt by the Developer of such request and (ii) the Developer shall not have
reimbursed the Indemnified Party in accordance with such request prior to the date of such
settlement (provided that the foregoing shall not be applicable to any failure to reimburse if the
Developer is disputing such payment in good faith and shall have paid any amounts not in
dispute). The Developer shall not, without the written consent of the Indemnified Party, effect
any settlement of any pending or threatened proceeding in respect of which any Indemnified
Party is or could have been a party and indemnification could have been sought hereunder by
such Indemnified Party, unless such settlement (x) includes an unconditional release of such
Indemnified Party, in form and substance reasonably satisfactory to such Indemnified Party, from
all liability on claims that are the subject matter of such proceeding and (y) does not include any
statement as to or any admission of fault, culpability or a failure to act by or on behalf of any
Indemnified Party.
18.If between the date hereof and the Closing Date any event relating to or affecting the
Developer, its Affiliates, the proposed development of the Property, ownership of the Property,
the Developer’s development plan, the Developer’s financing plan, the Developer’s lenders, if
any, and contractual arrangements of the Developer or any Affiliates (including, if material to the
Developer’s development plan or the Developer’s financing plan, other loans of such Affiliates)
shall occur of which the Developer has actual knowledge which would cause the information
under the sections of the Preliminary Official Statement indicated in Paragraph 6 hereof, to
contain an untrue statement of a material fact or to omit to state a material fact necessary to make
the statements therein, in the light of the circumstances under which they were made, not
misleading, the Developer shall notify the Authority, the Community Facilities District and the
Underwriter and if in the opinion of counsel to the Authority or the Underwriter such event
requires the preparation and publication of a supplement or amendment to the Preliminary
Official Statement, the Developer shall reasonably cooperate with the Authority and the
Community Facilities District in the preparation of an amendment or supplement to the
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Preliminary Official Statement in form and substance satisfactory to counsel to the Authority, the
Community Facilities District and to the Underwriter.
19.For the period through 25 days after the “End of the Underwriting Period” as defined
in the Bond Purchase Agreement, if any event relating to or affecting the Developer, its
Affiliates, the proposed development of the Property, ownership of the Property, the Developer’s
development plan, the Developer’s financing plan, the Developer’s lenders, if any, and
contractual arrangements of the Developer or any Affiliates (including, if material to the
Developer’s development plan or the Developer’s financing plan, other loans of such Affiliates)
shall occur as a result of which it is necessary, in the opinion of the Underwriter or counsel to the
Authority or the Community Facilities District, to amend or supplement the Official Statement in
order to make the Official Statement not misleading in the light of the circumstances existing at
the time it was delivered to a purchaser, the Developer shall reasonably cooperate with the
Authority, the Community Facilities District and the Underwriter in the preparation and
publication of a supplement or amendment to the Official Statement, in form and substance
satisfactory to the Underwriter and counsel to the Authority and the Community Facilities
District which will amend or supplement the Official Statement so that it will not contain an
untrue statement of a material fact or omit to state a material fact necessary in order to make the
statements therein, in the light of the circumstances existing at the time the Official Statement is
delivered to a purchaser, not misleading.
20.The Developer agrees to deliver a Closing Certificate dated the date of issuance of the
Bonds at the time of issuance of the Bonds in substantially the form attached as Exhibit A.
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21.On behalf of the Developer, I have reviewed the contents of this Letter of
Representations and have met with counsel to the Developer for the purpose of discussing the
meaning of the contents of this Letter of Representations. The Developer acknowledges and
understands that a variety of state and federal securities laws, including, but not limited to the
Securities Act of 1933, as amended, and Rule 10b-5 promulgated under the Securities Exchange
Act of 1934, as amended, may apply to the Developer and that under some circumstances,
certification as to the matters set forth in this Letter of Representations, without additional
disclosures or other action, may not fully discharge all duties and obligations of the Developer
under such securities laws.
PARDEE HOMES, a California corporation
By:
Name:
Title:
[EXECUTION PAGE OF LETTER OF REPRESENTATIONS – PARDEE HOMES]
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EXHIBIT C
LAKE ELSINORE FACILITIES FINANCING AUTHORITY
LOCAL AGENCY REVENUE BONDS, SERIES 2017
CLOSING CERTIFICATE – PARDEE HOMES
[Closing Date], 2017
Lake Elsinore Facilities Financing Authority
Lake Elsinore, California
Stifel, Nicolaus & Company, Incorporated
Los Angeles, California
Ladies and Gentlemen:
Reference is made to the above-captioned bonds (the “Bonds”) and to the Bond Purchase
Agreement, dated _______, 2017 (the “Bond Purchase Agreement”), entered into in connection
therewith. This certificate is delivered pursuant to the Bond Purchase Agreement. Capitalized terms
used herein and not otherwise defined have the meanings ascribed to them in the Letter of
Representations (the “Letter of Representations”), dated ______, 2017, delivered by Pardee Homes
(the “Developer”), which is attached hereto as Exhibit A.
The undersigned certifies that he is familiar with the facts herein certified and is authorized
and qualified to certify the same as an authorized officer or representative of the Developer, and the
undersigned, on behalf of the Developer, further certifies as follows:
1. The Developer has received the Official Statement relating to the Bonds. To the
Actual Knowledge of the Undersigned, each statement, representation and warranty made in the
Letter of Representations is true and correct in all material respects on and as of the date hereof with
the same effect as if made on the date hereof, except that all references therein to the Preliminary
Official Statement shall be deemed to be references 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 affecting the statements and information described in Paragraph 6
of the Letter of Representations (and subject to the limitations and exclusions contained in Paragraph
6 of the Letter of Representations) relating to the Developer, its Affiliates, the proposed development
of the Property, ownership of the Property, the Developer’s development plan, the Developer’s
financing plan, the Developer’s lenders, if any, and contractual arrangements of the Developer or any
Affiliates (including, if material to the Developer’s development plan or the Developer’s financing
plan, other loans of such Affiliates), which should be disclosed in the Official Statement for the
purposes for which it is to be used in order to make such statements and information contained in the
Official Statement not misleading in any material respect.
C-2
PARDEE HOMES, a California corporation
By:
Name:
Title:
[EXECUTION PAGE OF CLOSING CERTIFICATE – PARDEE HOMES]
D-1
EXHIBIT D
$_________
LAKE ELSINORE FACILITIES FINANCING AUTHORITY
LOCAL AGENCY REVENUE BONDS, SERIES 2017
FORM OF ISSUE PRICE CERTIFICATE
[TO COME AT PRICING]
Stradling Yocca Carlson & Rauth
Draft of 11/16/17
LOCAL OBLIGATIONS PURCHASE AGREEMENT
This LOCAL OBLIGATIONS PURCHASE AGREEMENT (this “Purchase Agreement”),
dated ________, 2017, is by and between the Lake Elsinore Facilities Financing Authority, a joint
exercise of powers authority duly organized and existing under and by virtue of the laws of the State
of California (the “Authority”) and City of Lake Elsinore Community Facilities District No. 2003-
2 (Canyon Hills) (the “District”), a community facilities district organized and existing under the
Mello-Roos Community Facilities Act of 1982, (the “Mello-Roos Act”);
WITNESSETH:
WHEREAS, the Authority is a joint exercise of powers authority duly organized and
existing 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 to provide financing or refinancing for
public capital improvements of local agencies within the State of California;
WHEREAS, the District is issuing its $__________ City of Lake Elsinore Community
Facilities District No. 2003-2 (Canyon Hills) Improvement Area B 2017 Special Tax Bonds (the
“Local Obligations”) pursuant to a Bond Indenture dated as of March 1, 2015, as supplemented by
the First Supplement to Bond Indenture, dated as of December 1, 2017 (together, the “Bond
Indenture”), each by and between the District and Wilmington Trust, National Association, as
trustee, to finance certain public improvements
WHEREAS, the Authority has authorized the issuance of its Lake Elsinore Facilities
Financing Authority Local Agency Revenue Bonds Series 2017 (the “Authority Bonds”), under an
Indenture of Trust dated as of December 1, 2017 (the “Authority Bond Indenture”), by and between
the Authority and Wilmington Trust, National Association, as trustee (the “Trustee”) and under the
Bond Law for the purpose of providing the funds required to acquire the Local Obligations; and
WHEREAS, the Authority and the District desire to enter into this Local Obligations
Purchase Agreement providing for the purchase and sale of the Local Obligations by the District to
the Authority 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 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 commits to sell to the Authority and does
hereby sell to the Authority, and the Authority hereby commits to purchase from the District and
does hereby purchase from the District with the proceeds of the Authority Bonds all of the
$__________ aggregate principal amount of the Local Obligations. The Local Obligations will bear
the annual interest rates and mature at the times set forth in Exhibit A attached hereto and hereby
made a part hereof. The aggregate purchase price of the Local obligations is set forth below.
2
2.All terms not herein defined shall have the meanings given such terms in the
Authority Bond Indenture and if not defined in the Authority Bond Indenture, then in the Bond
Indenture.
3.The District confirms that there are no substantial conditions precedent to the
issuance by the District and to the sale (as provided herein) and the delivery to the Authority of the
Local Obligations.
4.The parties hereto hereby specify December __, 2017, as the date of closing of the
purchase of the Local Obligations hereunder (the “Closing Date”). The Local Obligations shall be
registered in the name of the Trustee, as assignee of the Authority. On the Closing Date, the District
shall issue and deliver the Local Obligations to the Trustee upon payment by the Trustee of the
purchase price of the Local Obligations in the aggregate amount of $_________ (being the aggregate
principal amount of $_________ plus net premium of $________ and less Underwriter’s Discount of
$__________). Said purchase price shall be paid from the proceeds of sale of the Authority Bonds,
and shall be paid by the Trustee from the Purchase Fund established under the Authority Bond
Indenture.
5.The Local Obligations shall be as described in the Official Statement dated as of the
date hereof relating to the Authority Bonds (the “Official Statement”) and shall be issued and secured
under the provisions of the Bond Indenture. The Local Obligations and interest thereon will be
payable from Special Taxes levied and collected in accordance with the District Resolution and the
Bond Indenture.
6.Any action under this Purchase Agreement taken by the Authority, including
payment for and acceptance of the Local Obligations, and delivery and execution of any receipt for
the Local Obligations and any other instruments in connection with the closing on the Closing Date,
shall be valid and sufficient for all purposes and binding upon the Authority, provided that any such
action shall not impose any obligation or liability upon the Authority other than as may arise as
expressly set forth in this Purchase Agreement.
7.It is a condition to the District’s sale and delivery of the Local Obligations to the
Authority, and to the Authority’s purchase of the Local Obligations and the obligations of the
Authority to accept delivery of and to pay for the Local Obligations, that the entire aggregate
principal amount of the Local Obligations shall be delivered by the District, and accepted and paid
for by the Authority, on the Closing Date.
8.The District has furnished some, but not all, of the information contained in the
Official Statement and hereby ratifies the use of that information by the Authority in connection with
the public offering and sale of the Authority Bonds.
9.The District represents and warrants to the Authority that:
(a)It is a community facilities district formed under the Mello-Roos Act, duly
organized and existing under the Constitution and laws of the State of California, and has, and on the
Closing Date will have, full legal right, power and authority (i) to enter into this Purchase Agreement
and the Bond Indenture and to execute and deliver the Continuing Disclosure Certificate to be dated
the Closing Date (the “Continuing Disclosure Certificate” and together with the Bond Indenture and
this Purchase Agreement, the “CFD Documents”), (ii) to adopt the resolution relating to the Local
3
Obligations (the “District Resolution”), (iii) to issue, sell and deliver the Local Obligations to the
Authority as provided herein, and (iv) to carry out and consummate the transactions contemplated by
the CFD Documents, the District Resolution and the Official Statement;
(b)It has complied, and will on the Closing Date be in compliance in all respects,
with the CFD Documents and the District Resolution;
(c)By official action of the City Council of the City of Lake Elsinore (the
“City”), as legislative body of the District, it has duly adopted the District Resolution, has duly
authorized and approved the execution and delivery of, and the performance of its obligations
contained in, the Local Obligations and the CFD Documents, and the consummation by it of all other
transactions contemplated by the Official Statement;
(d)The execution and delivery of the CFD Documents and the Local Obligations
and compliance with the provisions of each thereof, and the carrying out and consummation of the
transactions contemplated by the Official Statement, 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, or any applicable judgment, decree, agreement or other instrument to which it is a
party or are otherwise subject;
(e)To its knowledge, at the time of its acceptance hereof and at all times
subsequent thereto up to and including the Closing Date, with respect to information describing the
District, the District Resolution, the CFD Documents in the Official Statement, does not and will 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;
(f)Except as described in the Official Statement, there is no action, suit,
proceeding or investigation before or by any court, public board or body pending or, to its
knowledge, threatened, wherein an unfavorable decision, ruling or finding would: (i) affect its
creation, organization, existence or powers or the titles of its members and officers to their respective
offices, (ii) enjoin or restrain the issuance, sale and delivery of the Local Obligations, the levy and
receipt of the Special Taxes which secure the Local Obligations, or the pledge thereof, (iii) in any
way question or affect any of its rights, powers, duties or obligations with respect to the moneys
pledged or to be pledged to pay the principal of, premium, if any, or interest on the Local
Obligations, (iv) in any way question or affect any authority for the issuance of the Local
Obligations, or the validity or enforceability of the Local Obligations, the District Resolution or the
CFD Documents, or (v) in any way question or affect this Purchase Agreement or the transactions
contemplated by the CFD Documents, the Official Statement, the District Resolution, the other
documents referred to in the Official Statement, or any other agreement or instrument relating to the
Local Obligations;
(g)It will furnish such information, execute such instruments and take such other
action in cooperation with the Authority, as the Authority may reasonably request, to qualify the
Authority Bonds for offer and sale under the Blue Sky or other securities laws and regulations of
such states and other jurisdictions of the United States as the Authority may designate, and will
assist, if necessary therefor, in the continuance of such qualifications in effect as long as required for
the distribution of the Authority Bonds; provided, however, that it shall not be required to qualify as
a foreign corporation or to file any general consents to service of process under the laws of any state;
4
(h)The issuance and sale of the Local Obligations is not subject to any transfer
or other documentary stamp taxes of the State of California or any political subdivision thereof; and
(i)Any certificate signed by any official of the City authorized to do so on its
behalf shall be deemed a representation and warranty by the District to the Authority as to the
statements made therein.
10.If between the date of this Purchase Agreement and the date ninety (90) days after the
Closing Date an event occurs which is materially adverse to the purpose for which the Official
Statement is to be used which is not disclosed in the Official Statement, the District shall notify the
Authority of such fact.
11.At 9:00 a.m., Pacific Time, on the Closing Date, or at such other time or on such
other date as is mutually agreed by the City and the Authority, (a) the District will deliver the Local
Obligations to the Trustee in definitive form, duly executed, together with the other documents
hereinafter mentioned and (b) subject to the terms and conditions hereof, the Trustee solely from
moneys held under the Authority Bond Indenture will accept such delivery and pay the purchase
price of the Local Obligations as referenced in Section 4 hereof by wire transfer or other funds which
are good funds on the Closing Date. Delivery and payment, as aforesaid, shall be made at such place
as shall have been mutually agreed upon by the City and the Authority.
12.The Authority has entered into this Purchase Agreement in reliance upon the
representations, warranties and agreements of the District contained herein and to be contained in the
documents and instruments to be delivered on the Closing Date, and upon the performance by the
District of their respective obligations hereunder, both as of the date hereof and as of the Closing
Date. Accordingly, the Authority’s obligations under this Purchase Agreement to purchase, to accept
delivery of and to pay for the Local Obligations shall be subject to the performance by the District of
its obligations to be performed hereunder and under such documents and instruments at or prior to
the Closing Date, and shall also be subject to the following conditions:
(a)The representations and warranties of the District contained herein shall be
true, complete and correct on the date hereof and on and as of the Closing Date, as if made on the
Closing Date;
(b)On the Closing Date, the District Resolution and the CFD Documents shall be
in full force and effect, and shall not have been amended, modified or supplemented, and the Official
Statement shall not have been amended, modified or supplemented, except in either case as may have
been agreed to by both the Authority and the Underwriter;
(c)As of the Closing Date, all official action of the District relating to the Local
Obligations, including but not limited to the District Resolution, shall be in full force and effect, and
there shall have been taken all such actions as, in the opinion of Stradling Yocca Carlson & Rauth, a
Professional Corporation (“Bond Counsel”), shall be necessary or appropriate in connection
therewith, with the issuance of the Authority Bonds and the Local Obligations, and with the
transactions contemplated hereby, all as described in the Official Statement;
(d)The Authority shall have the right to terminate the Authority’s obligations
under this Purchase Agreement to purchase, to accept delivery of and to pay for the Local
Obligations by notifying the District of its election to do so if, after the execution hereof and prior to
5
the Closing: (i) either the marketability of the Authority Bonds or the market price of the Authority
Bonds, in the opinion of the Authority, has been materially and adversely affected by any decision
issued by a court of the United States (including the United States Tax Court) or of the State of
California, by any ruling or regulation (final, temporary or proposed) issued by or on behalf of the
Department of the Treasury of the United States, the Internal Revenue Service, or other
governmental agency of the United States, or any governmental agency of the State of California, or
by a tentative decision with respect to legislation reached by a committee of the House of
Representatives or the Senate of the Congress of the United States, or by legislation enacted by,
pending in, or favorably reported to either the House of Representatives or the Senate of the
Congress of the United States or either house of the Legislature of the State of California, or formally
proposed to the Congress of the United States by the President of the United States or to the
Legislature of the State of California by the Governor of the State of California in an executive
communication, affecting the tax status of the Authority or the City, their property or income, their
bonds (including the Authority 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 ability of the Authority to market the Authority
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 the Authority Bonds; (v) 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 Official Statement; (vi) an event
described in paragraph (d) hereof occurs which in the opinion of the Authority requires a supplement
or amendment to the Official Statement, and such supplement or amendment is not agreed to by the
City; and
(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
prior to the application of proceeds of the Authority Bonds to the purchase of the Local Obligations;
(2)Opinions, in form and substance satisfactory to the City and the
Authority, dated as of the Closing Date, of Bond Counsel, approving, without qualification, the
validity of the Local Obligations;
(3)A letter of Bond Counsel, dated the date of the Closing and addressed
to the Authority and the Underwriter, to the effect that the opinion referred to in the preceding
subparagraph (2) may be relied upon by the Authority to the same extent as if such opinion were
addressed to it;
(4)A supplemental opinion, dated the date of the Closing and addressed
to the Authority and the Underwriter, of Bond Counsel to the effect that this Purchase Agreement and
the Continuing Disclosure Certificate have been duly authorized, executed and delivered by, and,
assuming due authorization, execution and delivery by the Authority of this Purchase Agreement,
6
constitute the legal, valid and binding obligations of the District enforceable in accordance with their
respective terms, except as such enforceability may be limited by the application of equitable
principles if equitable remedies are sought, and that the statements contained in the Official
Statement (including the cover page and the Appendices thereto), insofar as such statements purport
to summarize certain provisions of the Local Obligations, the CFD Documents or the District
Resolution, are accurate in all material respects;
(5)A certificate dated the Closing Date, signed by an official of the
District having knowledge of the facts, to the effect that:
(i)The representations and warranties of the District contained
herein are true and correct in all material respects on and as of the Closing Date as if made on the
Closing Date;
(ii)Except as described in the Official Statement, there is no
action, suit, proceeding or investigation before or by any court, public board or body pending or
threatened, wherein an unfavorable decision, ruling or finding would: (A) affect the creation,
organization, existence or powers of the District, or the titles of its members and officers to their
respective offices, (B) enjoin or restrain the issuance, sale and delivery of the Local Obligations, the
levy or collection of the Special Taxes or any other moneys or property pledged or to be pledged
under the Bond Indenture, or the pledge thereof, (C) in any way question or affect any of the rights,
powers, duties or obligations of the District with respect to the moneys and assets pledged or to be
pledged to pay the principal of, premium, if any, or interest on the Local Obligations, (D) in any way
question or affect any authority for the issuance of the Local Obligations, or the validity or
enforceability of the Local Obligations, the District Resolution or the CFD Documents, or (E) in any
way question or affect this Purchase Agreement or the transactions contemplated by the District
Resolution, the CFD Documents, the Official Statement or the documents referred to in the Official
Statement;
(iii)The District have complied with all agreements, covenants
and arrangements, and satisfied all conditions, on its part to be complied with or satisfied on or prior
to the Closing Date; and
(iv)To the best of its knowledge, no event affecting the City or
the District has occurred since the date of the Official Statement which should be disclosed in the
Official Statement for the purposes for which it is necessary to disclose therein in order to make the
statements not misleading in any respect;
(6)An opinion, dated the date of Closing and addressed to the Authority
and the Underwriter, of the City Attorney, as counsel to the District, to the effect that (A) the CFD
Documents have been duly authorized, executed and delivered by the District, and, assuming due
authorization, execution and delivery by the other parties thereto, constitute the legal, valid and
binding agreement of the District enforceable in accordance with their terms, except as such
enforceability may be limited by the application of equitable principles if equitable remedies are
sought, (B) the District Resolution has been duly adopted, is in full force and effect and has not been
modified, amended or rescinded, and (C) except as described in the Official Statement, there is no
action, suit, proceeding or investigation before or by any court, public board or body pending or, to
such counsel’s knowledge, threatened, wherein an unfavorable decision, ruling or finding would:
(i) affect the creation, organization, existence or powers of the District, or the authority of the City
7
Council as the legislative body for the District; (ii) enjoin or restrain the issuance, sale and delivery
of the Local Obligations, the receipt of any other moneys or property pledged or to be pledged under
the District Resolution or the Bond Indentures or the pledge thereof; (iii) in any way question or
affect any of the rights, powers, duties or obligations of the District with respect to the moneys and
assets pledged or to be pledged to pay the principal of, premium, if any, or interest on the Local
Obligations; (iv) in any way question or affect any authority for the issuance of the Local
Obligations, or the validity or enforceability of the Local Obligations, the District Resolution or the
CFD Documents; (v) in any way question or affect this Purchase Agreement or the transactions
contemplated by the CFD Documents, the Official Statement or the documents referred to in the
Official Statement;
(7)Such additional legal opinions, certificates, instruments and
documents as the Authority or the Underwriter may reasonably request to evidence the truth and
accuracy, as of the date hereof and as of the Closing Date, of the District’ representations and
warranties contained herein and of the statements and information contained in the Official
Statement;
(8)Executed copies of the Bond Indenture and the Continuing Disclosure
Certificate;
(9)The District Resolution, certified by authorized officers as a true copy
and/or as having been adopted or executed (as applicable), with only such amendments,
modifications or supplements as may have been agreed to by the Authority and the Underwriter.
All of the opinions, letters, certificates, instruments and other documents mentioned above or
elsewhere in this Purchase Agreement 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 and the
Underwriter, but the approval of the Authority and the Underwriter shall not be unreasonably
withheld. Receipt of, and payment for, the Local Obligations shall constitute evidence of the
satisfactory nature of such as to the Authority and the Underwriter. 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 and the Underwriter may be waived by the Authority and the
Underwriter in their 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 Local Obligations contained in this Purchase Agreement,
or if the obligations of the Authority to purchase, accept delivery of and pay for the Authority Bonds
shall be terminated for any reason permitted by this Purchase Agreement, this Purchase Agreement
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 13 and
14 hereof shall continue in full force and effect.
13.The Authority shall be under no obligation to pay, and the District shall pay the
expenses incurred in connection with issuance of the Authority Bonds and the Local Obligations.
14.This Purchase Agreement is made solely for the benefit of the Underwriter, 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’ representations, warranties and
agreements contained in this Purchase Agreement shall remain operative and in full force and effect
8
regardless of: (i) any investigations made by or on behalf of the Authority and the Underwriter or
(ii) delivery of and payment for the Authority Bonds pursuant to the Authority Bond Indenture. The
agreements contained in this paragraph shall survive any termination of this Purchase Agreement.
15.This Purchase Agreement may be executed by the parties hereto in separate
counterparts, each of which when so executed and delivered shall be an original, but all such
counterparts shall together constitute but one and the same instrument.
16.In case any one or more of the provisions contained herein shall for any reason be
held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other provision hereof.
17.The validity, interpretation and performance of this Purchase Agreement shall be
governed by the laws of the State of California.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK.]
S-9
IN WITNESS WHEREOF, the Authority and the District have each caused this Purchase
Agreement to be executed by their duly authorized officers all as of the date first above written.
LAKE ELSINORE FACILITIES FINANCING
AUTHORITY
By
Authorized Officer
CITY OF LAKE ELSINORE COMMUNITY
FACILITIES DISTRICT NO. 2003-2 (CANYON HILLS)
By
Assistant City Manager the City of Lake Elsinore, on behalf
of City of Lake Elsinore Community Facilities District No.
2003-2 (Canyon Hills)
A-1
EXHIBIT A
MATURITY SCHEDULE
CFD 2003-2 BONDS
Maturity Date
Principal
Maturity Interest Rate Yield Price
CONTINUING DISCLOSURE CERTIFICATE
THIS CONTINUING DISCLOSURE CERTIFICATE (“Disclosure Certificate”), dated as of
[_____], 2017, is executed and delivered by the CITY OF LAKE ELSINORE COMMUNITY
FACILITIES DISTRICT NO. 2003-2 (CANYON HILLS) (the “District”) on behalf of the LAKE
ELSINORE FACILITIES FINANCING AUTHORITY (the “Issuer”) in connection with the
issuance of $[______] aggregate principal amount the Lake Elsinore Facilities Financing
Authority Local Agency Revenue Bonds, Series 2017 (the “Bonds”). The Bonds are being
issued pursuant to an Indenture of Trust, dated as of November 1, 2017 (the “Indenture”), by
and between Wilmington Trust, N.A., as trustee (the “Trustee”), and the Issuer.
The District covenants and agrees as follows:
Section 1.Purpose of the Disclosure Agreement. This Disclosure Certificate is
being executed and delivered by the District on behalf of the Issuer for the benefit of the Owners
and Beneficial Owners of the Bonds and in order to assist the Underwriter in complying with
Rule 15c2-12(b)(5) of the Securities and Exchange Commission.
Section 2.Definitions. In addition to the definitions set forth in the Indenture, which
apply to any capitalized term used in this Disclosure Certificate 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 on behalf of the
Issuer pursuant to, and as described in, Section 3 and 4 of this Disclosure Certificate.
“Annual Report Date” means not later than February 15 of each year.
“City” means the City of Lake Elsinore.
“Dissemination Agent” means SCG - Spicer Consulting Group, or any successor
Dissemination Agent designated in writing by the City and which has filed with the City a written
acceptance of such designation.
“Improvement Area B” means the property designated as Improvement Area B within the
District.
“Listed Events” means any of the events listed in Section 5(a) of this Disclosure
Certificate.
“Local Obligations” means, City of Lake Elsinore Community Facilities District No. 2003-2
(Canyon Hills) Improvement Area B 2017 Special Tax Bonds,
“MSRB” means the Municipal Securities Rulemaking Board, which has been designated
by the Securities and Exchange Commission as the sole repository of disclosure information for
purposes of the Rule, or any other repository of disclosure information that may be designated
by the Securities and Exchange Commission as such for purposes of the Rule in the future.
“Official Statement” means the final official statement executed by the Issuer and District
in connection with the issuance of the Bonds.
2
“Participating Underwriter” means, Stifel, Nicolaus & Company, Incorporated, the original
underwriter of the Bonds required to comply with the Rule in connection with offering of the
Bonds.
“Rule” means Rule 15c2-12(b)(5) adopted by the Securities and Exchange Commission
under the Securities Exchange Act of 1934, as it may be amended from time to time.
Section 3.Provision of Annual Reports.
(a)The District on behalf of the Issuer shall, or shall cause the Dissemination Agent
to, not later than the Annual Report Date, commencing February 15, 2018, with the report for
the 2016-17 fiscal year, provide to the MSRB, in an electronic format as prescribed by the
MSRB, an Annual Report that is consistent with the requirements of Section 4 of this Disclosure
Certificate. Not later than 15 Business Days prior to the Annual Report Date, the District shall
provide the Annual Report to the Dissemination Agent (if other than the Issuer). If by 15
Business Days prior to the Annual Report Date the Dissemination Agent (if other than the
Issuer) has not received a copy of the Annual Report, the Dissemination Agent shall contact the
District to determine if the District is in compliance with the previous sentence. The Annual
Report may be submitted as a single document or as separate documents comprising a
package, and may include by reference other information as provided in Section 4 of this
Disclosure Certificate; provided that the audited financial statements of the Issuer may be
submitted separately from the balance of the Annual Report, and later than the Annual Report
Date, if not available by that date. If the Issuer’s fiscal year changes, it shall give notice of such
change in the same manner as for a Listed Event under Section 5(c). The District shall provide
a written certification with each Annual Report furnished to the Dissemination Agent to the effect
that such Annual Report constitutes the Annual Report required to be furnished by the District
hereunder.
(b)If the District does not provide (or cause the Dissemination Agent to provide) an
Annual Report by the Annual Report Date, the District shall provide (or cause the Dissemination
Agent to provide) to the MSRB in a timely manner, in an electronic format as prescribed by the
MSRB, a notice in substantially the form attached as Exhibit A.
(c)With respect to each Annual Report, the Dissemination Agent shall:
(i)determine each year prior to the Annual Report Date the then-applicable
rules and electronic format prescribed by the MSRB for the filing of annual continuing
disclosure reports; and
(ii)if the Dissemination Agent is other than the District, file a report with the
District certifying that the Annual Report has been provided pursuant to this Disclosure
Certificate, and stating the date it was provided.
Section 4.Content of Annual Reports. The Annual Report shall contain or
incorporate by reference the following:
(a)Financial Statements. The District’s audited financial statements prepared in
accordance with generally accepted accounting principles as promulgated to apply to
governmental entities from time to time by the Governmental Accounting Standards Board. If
the District’s audited financial statements are not available by the Annual Report Date, the
Annual Report shall contain unaudited financial statements in a format similar to the financial
3
statements contained in the final Official Statement, and the audited financial statements shall
be filed in the same manner as the Annual Report when they become available.
(b)Financial and Operating Data. Unless otherwise provided in the audited financial
statements filed on or before the Annual Report Date, financial information and operating data
with respect to the Issuer and District for the preceding fiscal year, substantially similar to that
provided in the corresponding tables in the Official Statement:
(i)the principal amount of the Bonds outstanding as of the September 2
preceding the filing of the Annual Report;
(ii)the balance in each fund under the Indenture and the Reserve
Requirement as of the September 2 preceding the filing of the Annual Report;
(iii)any changes to the Rate and Method of Apportionment of the Special
Taxes approved or submitted to the qualified electors for approval prior to the filing of the
Annual Report and a description of any parcels for which the Special Taxes have been
prepaid in the Fiscal Year for which the Annual Report is being prepared;
(iv)an update of the estimated assessed value-to-lien ratio for Improvement
Area B based upon the then-outstanding principal amount of the Local Obligations, the
most recent Special Tax levy and the assessed values of property within Improvement
Area B for the current fiscal year;
(v)the percentage of the maximum Special Taxes levied by the District within
Improvement Area B with respect to the Local Obligations;
(vi)the status of any foreclosure actions being pursued by the District with
respect to delinquent Special Taxes;
(vii)a table showing the total Special Taxes levied and the total Special Taxes
collected for the prior fiscal year and the total Special Taxes that remain unpaid for each
prior fiscal year in which Special Taxes were levied in Improvement Area B and the
number of delinquent parcels in Improvement Area B;
(viii)the amount of any Additional Bonds issued by the Authority or Local
Obligation Parity Bonds issued by the District and an update of the estimated assessed
value to lien ratio based upon the outstanding principal amount of the Local Obligations,
the most recent Special Tax levy preceding the date of the Annual Report and the
assessments for the current fiscal year; and
(ix)any information not already included under (i) through (viii) above that the
District is required to file in its annual report to the California Debt and Investment
Advisory Commission pursuant to the provisions of the Mello-Roos Community Facilities
Act of 1982, as amended.
4
(c)In addition to any of the information expressly required to be provided under this
Disclosure Certificate, the District shall provide such further material information, if any, as may
be necessary to make the specifically required statements, in the light of the circumstances
under which they are made, not misleading.
(d)Any or all of the items listed above may be included by specific reference to other
documents, including official statements of debt issues of the District or related public entities,
which are available to the public on the MSRB’s Internet web site or filed with the Securities and
Exchange Commission. The District shall clearly identify each such other document so included
by reference.
Section 5. Reporting of Significant Events.
(a)The District shall give, or cause to be given, notice of the occurrence of any of
the following Listed Events with respect to the Bonds:
(1)Principal and interest payment delinquencies.
(2)Non-payment related defaults, if material.
(3)Unscheduled draws on debt service reserves reflecting financial
difficulties.
(4)Unscheduled draws on credit enhancements reflecting financial
difficulties.
(5)Substitution of credit or liquidity providers, or their failure to perform.
(6)Adverse tax opinions, 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 security, or other material events affecting
the tax status of the security.
(7)Modifications to rights of security holders, if material.
(8)Bond calls, if material, and tender offers.
(9)Defeasances.
(10)Release, substitution, or sale of property securing repayment of the
securities, if material.
(11)Rating changes.
(12)Bankruptcy, insolvency, receivership or similar event of the District of the
Issuer or other obligated person.
(13)The consummation of a merger, consolidation, or acquisition involving the
District or the Issuer or an obligated person, or the sale of all or
substantially all of the assets of the District or the Issuer or an obligated
5
person (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.
(14)Appointment of a successor or additional trustee or the change of name
of a trustee, if material.
(b)Whenever the District obtains knowledge of the occurrence of a Listed Event, the
District shall, or shall cause the Dissemination Agent (if not the Issuer) to, file a notice of such
occurrence with the MSRB, in an electronic format as prescribed by the MSRB, in a timely
manner not in excess of ten (10) business days after the occurrence of the Listed Event.
(c)The District acknowledges that the events described in subparagraphs (a)(2),
(a)(7), (a)(8) (if the event is a bond call), (a)(10), (a)(13), and (a)(14) of this Section 5 contain
the qualifier “if material” and that subparagraph (a)(6) also contains the qualifier “material” with
respect to certain notices, determinations or other events affecting the tax status of the Bonds.
The District shall cause a notice to be filed as set forth in paragraph (b) above with respect to
any such event only to the extent that it determines the event’s occurrence is material for
purposes of U.S. federal securities law. Whenever the District obtains knowledge of the
occurrence of any of these Listed Events, the District will as soon as possible determine if such
event would be material under applicable federal securities law. If such event is determined to
be material, the District will cause a notice to be filed as set forth in paragraph (b) above.
(d) For purposes of this Disclosure Certificate, any event described in paragraph (a)(12)
above is considered to occur when any of the following occur: the appointment of a receiver,
fiscal agent, or similar officer for the District in a proceeding under the United States Bankruptcy
Code or in any other proceeding under state or federal law in which a court or governmental
authority has assumed jurisdiction over substantially all of the assets or business of the District,
or if such jurisdiction has been assumed by leaving the existing governing body and officials or
officers in possession but subject to the supervision and orders of a court or governmental
authority, or the entry of an order confirming a plan of reorganization, arrangement, or
liquidation by a court or governmental authority having supervision or jurisdiction over
substantially all of the assets or business of the District.
Section 6. Identifying Information for Filings with the MSRB. All documents provided to
the MSRB under the Disclosure Certificate shall be accompanied by identifying information as
prescribed by the MSRB.
Section 7. Termination of Reporting Obligation. The District’s obligations under this
Disclosure Certificate shall terminate upon the legal defeasance, prior redemption or payment in
full of all of the Bonds. If such termination occurs prior to the final maturity of the Bonds, the
District shall give notice of such termination in the same manner as for a Listed Event under
Section 5(c).
Section 8. Dissemination Agent. The District may, from time to time, appoint or engage a
Dissemination Agent to assist it in carrying out its obligations under this Disclosure Certificate,
and may discharge any Dissemination Agent, with or without appointing a successor
Dissemination Agent. The initial Dissemination Agent shall be SCG - Spicer Consulting Group.
Any Dissemination Agent may resign by providing 30 days’ written notice to the District.
6
Section 9. Amendment; Waiver. Notwithstanding any other provision of this Disclosure
Certificate, the District may amend this Disclosure Certificate, and any provision of this
Disclosure Certificate may be waived, provided that the following conditions are satisfied:
(a)if the amendment or waiver relates to the provisions of Sections 3(a), 4 or
5(a), it may only be made in connection with a change in circumstances that arises from
a change in legal requirements, change in law, or change in the identity, nature, or
status of an obligated person with respect to the Bonds, or type of business conducted;
(b)the undertakings herein, as proposed to be amended or waived, would, in
the opinion of nationally recognized bond counsel, have complied with the requirements
of the Rule at the time of the primary offering of the Bonds, after taking into account any
amendments or interpretations of the Rule, as well as any change in circumstances; and
(c)the proposed amendment or waiver either (i) is approved by holders of
the Bonds in the manner provided in the Indenture for amendments to the Indenture with
the consent of holders, or (ii) does not, in the opinion of nationally recognized bond
counsel, materially impair the interests of the holders or beneficial owners of the Bonds.
If the annual financial information or operating data to be provided in the Annual Report
is amended pursuant to the provisions hereof, the first Annual Report filed pursuant hereto
containing the amended operating data or financial information shall explain, in narrative form,
the reasons for the amendment and the impact of the change in the type of operating data or
financial information being provided.
If an amendment is made to this Disclosure Certificate modifying the accounting
principles to be followed in preparing financial statements, the Annual Report for the year in
which the change is made shall present a comparison between the financial statements or
information prepared on the basis of the new accounting principles and those prepared on the
basis of the former accounting principles. The comparison shall include a qualitative discussion
of the differences in the accounting principles and the impact of the change in the accounting
principles on the presentation of the financial information, in order to provide information to
investors to enable them to evaluate the ability of the District to meet its obligations. To the
extent reasonably feasible, the comparison shall be quantitative.
A notice of any amendment made pursuant to this Section 9 shall be filed in the same
manner as for a Listed Event under Section 5(c).
Section 10. Additional Information. Nothing in this Disclosure Certificate shall be deemed
to prevent the District from disseminating any other information, using the means of
dissemination set forth in this Disclosure Certificate or any other means of communication, or
including any other information in any Annual Report or notice of occurrence of a Listed Event,
in addition to that which is required by this Disclosure Certificate. If the 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 Certificate, the District shall have
no obligation under this Disclosure Certificate to update such information or include it in any
future Annual Report or notice of occurrence of a Listed Event.
Section 11. Default. If the District fails to comply with any provision of this Disclosure
Certificate, the Participating Underwriter or any holder or beneficial owner of the Bonds may
take such actions as may be necessary and appropriate, including seeking mandate or specific
7
performance by court order, to cause the District to comply with its obligations under this
Disclosure Certificate. A default under this Disclosure Certificate shall not be deemed an Event
of Default under the Indenture, and the sole remedy under this Disclosure Certificate in the
event of any failure of the District to comply with this Disclosure Certificate shall be an action to
compel performance.
Section 12. Duties, Immunities and Liabilities of Dissemination Agent. (a) The
Dissemination Agent shall have only such duties as are specifically set forth in this Disclosure
Certificate, 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 have no duty or obligation to review any information
provided to it by the District hereunder, and shall not be deemed to be acting in any fiduciary
capacity for the District, the Bond holders or any other party. The obligations of the District
under this Section shall survive resignation or removal of the Dissemination Agent and payment
of the Bonds.
(b) 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
shall be reimbursed for all expenses, legal fees and advances made or incurred by the
Dissemination Agent in the performance of its duties hereunder.
Section 13. Beneficiaries. This Disclosure Certificate shall inure solely to the benefit of
the District, the Issuer, the Dissemination Agent, the Participating Underwriter and the holders
and beneficial owners from time to time of the Bonds, and shall create no rights in any other
person or entity.
Section 14. Counterparts. This Disclosure Certificate may be executed in several
counterparts, each of which shall be regarded as an original, and all of which shall constitute
one and the same instrument.
8
Date: [_____], 2017
CITY OF LAKE ELSINORE COMMUNITY
FACILITIES DISTRICT NO. 2003-2
(CANYON HILLS)
By:
Name:
Title:
AGREED AND ACCEPTED:
SCG - SPICER CONSULTING GROUP,
as Dissemination Agent
By:
Name:
Title:
9
EXHIBIT A
NOTICE OF FAILURE TO FILE ANNUAL REPORT
Name of Issuer: Lake Elsinore Facilities Financing Authority
Name of Issue: Lake Elsinore Facilities Financing Authority Local Agency
Revenue Bonds, Series 2017
Date of Issuance: [_____], 2017
NOTICE IS HEREBY GIVEN that the City of Lake Elsinore Community Facilities District
No. 2003-2 (the “District”) has not provided an Annual Report on behalf of the Issuer with
respect to the above-named Bonds as required by the Indenture, dated as of [_____] 1, 2017,
by and between the Issuer and Wilmington Trust, National Association, as trustee. The District
anticipates that the Annual Report will be filed by ________________.
Dated:
DISSEMINATION AGENT:
_________________
By:
Its:
Stradling Yocca Carlson & Rauth
Draft of 11/16/17
FIRST SUPPLEMENT TO BOND INDENTURE
Between
CITY OF LAKE ELSINORE
COMMUNITY FACILITIES DISTRICT NO. 2003-2 (CANYON HILLS)
And
WILMINGTON TRUST, NATIONAL ASSOCIATION
as Trustee
CITY OF LAKE ELSINORE
COMMUNITY FACILITIES DISTRICT NO. 2003-2 (CANYON HILLS)
IMPROVEMENT AREA B 2017 SPECIAL TAX BONDS
Dated as of December 1, 2017
FIRST SUPPLEMENT TO BOND INDENTURE
THIS FIRST SUPPLEMENT TO BOND INDENTURE dated as of December 1, 2017 (the
“First Supplement”), governs the terms of the City of Lake Elsinore Community Facilities District
No. 2003-2 (Canyon Hills) Improvement Area B 2017 Special Tax Bonds, which are being issued as
Parity Bonds in accordance with the Bond Indenture (the “Original Bond Indenture”) dated as of
March 1, 2015, by and between City of Lake Elsinore Community Facilities District No. 2003-2
(Canyon Hills) (the “District”) and MUFG Union Bank, N.A. (the “Original Trustee”), as trustee.
Wilmington Trust, National Association, as successor Trustee to the Original Trustee shall be
referred to herein as the “Trustee.” The Original Bond Indenture and this First Supplement are
hereinafter collectively referred to as the “Indenture.”
R E C I T A L S :
WHEREAS, the City Council of the City of Lake Elsinore, located in Riverside County,
California (hereinafter sometimes referred to as the “legislative body of the District”), has heretofore
undertaken proceedings and declared the necessity to issue bonds of the District pursuant to the terms
and provisions of the Mello-Roos Community Facilities Act of 1982, as amended, being Chapter 2.5,
Part 1, Division 2, Title 5, of the Government Code of the State of California (the “Act”); and
WHEREAS, based upon Resolution Nos. 2004-6 and 2004-7 adopted by the legislative body
of the District on January 13, 2004 and an election held on January 13, 2004 authorizing the levy of a
special tax and the issuance of bonds by the District for Improvement Area B, the District is now
authorized to issue bonds in an aggregate principal amount not to exceed $24,000,000 for
Improvement Area B; and
WHEREAS, the District previously issued its Special Tax Bonds (Improvement Area B)
2006 Series A (the “2006 Bonds”) in the aggregate principal amount of $20,570,000 to finance
public improvements; and
WHEREAS, pursuant to the Original Bond Indenture, the District previously issued its
Improvement Area B 2015 Special Tax Refunding Bonds (the “2015 Bonds”) in the aggregate
principal amount of $25,795,000 to refund the outstanding 2006 Bonds and to finance additional
public improvements; and
WHEREAS, the legislative body of the District intends to finance additional public
improvements through the issuance of bonds in an aggregate principal amount of $__________
designated as the “City of Lake Elsinore Community Facilities District No. 2003-2 (Canyon Hills)
Improvement Area B 2017 Special Tax Bonds” (the “2017 Bonds”); and
WHEREAS, pursuant to Section 6.1(b) and (f) of the Original Bond Indenture, the District
desires to amend the Original Bond Indenture as set forth herein in connection with the issuance of
the 2017 Bonds; and
WHEREAS, the District has determined all requirements of the Act for the issuance of the
2017 Bonds as Parity Bonds under the terms of the Original Bond Indenture have been satisfied;
NOW, THEREFORE, in order to establish the terms and conditions upon and subject to
which the 2017 Bonds are to be issued, and in consideration of the premises and of the mutual
2
covenants contained herein and of the purchase and acceptance of the 2017 Bonds by the Owners
thereof, and for other valuable consideration, the receipt of which is hereby acknowledged, the
District does hereby covenant and agree, for the benefit of the Owners of the 2015 Bonds, the 2017
Bonds and any additional Parity Bonds (as defined in the Original Bond Indenture) which may be
issued under the Indenture from time to time, as follows:
ARTICLE I
DEFINITIONS
Section 1.1.Definitions. All capitalized terms not otherwise defined herein shall have the
meaning set forth in the Original Bond Indenture provided that the following definitions are added
and, where applicable, shall supersede any different definition of the same capitalized term provided
in the Original Bond Indenture:
“2017 Authority Bonds” means any bonds outstanding under the 2017 Authority Indenture,
which are secured by payments made on the 2017 Bonds.
“2017 Authority Indenture” means that certain Indenture of Trust, dated as of December 1,
2017, by and between the Facilities Financing Authority and the 2017 Authority Trustee, pursuant to
which the Authority Bonds are issued.
“2017 Authority Trustee” means Wilmington Trust, National Association, or any successor
thereto appointed pursuant to the 2017 Authority Indenture.
“City Facilities Account” means the account by that name created and established in the
Improvement Fund pursuant to Section 3.1 hereof.
“Costs of Issuance” shall have the meaning set forth in the 2017 Authority Indenture.
“Facilities Financing Authority” means the Lake Elsinore Facilities Financing Authority.
“Interest Payment Date” means each March 1 and September 1, with respect to the Bonds,
commencing September 1, 2015, and with respect to the 2017 Bonds, commencing March 1, 2018,
and the final maturity date of the Bonds and the 2017 Bonds; provided, however, that, if any such
day is not a Business Day, interest up to the Interest Payment Date, and in the case of the final
Interest Payment Date to and including such date, will be paid on the Business Day next preceding
such date.
“Proportionate Share” means (i) with respect to the Bonds, the calculation set forth in Section
3.2(b)(4), as of the date of calculation, a fraction equal to (A) the principal amount of the Bonds
Outstanding divided by (B) the sum of the principal amount of all of the Local Obligations (as
defined in the Authority Indenture) Outstanding, (ii) with respect to the 2017 Bonds, as of the date of
calculation, 100% of the Reserve Requirement and (iii) with respect to any additional Parity Bonds,
such amount as set forth in a Supplemental Indenture.
“Reserve Account” means, with respect to the Bonds, the District’s Account of the Reserve
Fund established under the Authority Indenture, with respect to the 2017 Bonds, the Reserve Fund
established under the 2017 Authority Indenture, and with respect to any additional Parity Bonds,
such fund or account as may be established under a Supplemental Indenture.
3
“Reserve Requirement” with respect to the Bonds has the meaning set forth in the Authority
Indenture, with respect to the 2017 Bonds, has the meaning set forth in the 2017 Authority Indenture,
and with respect to any additional Parity Bonds, such amount as set forth in a Supplemental
Indenture.
“Term Bonds” means, with respect to the Bonds, the Bonds maturing on September 1, 2035
and September 1, 2040 and, with respect to the 2017 Bonds, the 2017 Bonds maturing on September
1, 20__.
[“Water Facilities Account” means the account by that name created and established in the
Improvement Fund pursuant to Section 3.1 hereof.]
ARTICLE II
GENERAL AUTHORIZATION AND BOND TERMS
Section 2.1.Amount, Issuance, Purpose and Nature of 2017 Bonds. Under and
pursuant to this First Supplement, the 2017 Bonds in the aggregate principal amount of $__________
shall be issued as Parity Bonds governed by the terms of the Original Bond Indenture, as
supplemented by this First Supplement, for the purpose of financing additional public facilities
within the District, funding a deposit to the Reserve Fund and paying the Costs of Issuance.
Section 2.2.Description of Bonds; Interest Rates. The 2017 Bonds shall be issued in
fully registered form in denominations of $5,000 or any integral multiple thereof within a single
maturity. The 2017 Bonds shall be numbered as determined by the Trustee.
The 2017 Bonds shall be designated “CITY OF LAKE ELSINORE COMMUNITY
FACILITIES DISTRICT NO. 2003-2 (CANYON HILLS) IMPROVEMENT AREA B 2017
SPECIAL TAX BONDS.” The 2017 Bonds shall be dated as of their Delivery Date and shall mature
and be payable on September 1 in the years and in the aggregate principal amounts and shall be
subject to and shall bear interest at the rates set forth in the table below payable on March 1, 2018
and each Interest Payment Date thereafter:
4
Maturity Date
(September 1)Principal Amount Interest Rate
Section 2.3.Form of 2017 Bonds; Execution and Authentication. The 2017 Bonds and
the certificate of authentication shall be substantially in the form attached hereto as Exhibit A, which
forms are hereby approved and adopted as the forms of such 2017 Bonds and of the certificate of
authentication. Notwithstanding any provision in the Original Bond Indenture to the contrary, the
District may, in its sole discretion, elect to issue the 2017 Bonds in book entry form.
Only the 2017 Bonds bearing thereon such certificate of authentication in the form set forth
in Exhibit A attached hereto shall be entitled to any right or benefit under the Bond Indenture, and no
2015 Bond shall be valid or obligatory for any purpose until such certificate of authentication shall
have been duly executed by the Trustee.
Section 2.4.Place and Form of Payment. The principal of the 2017 Bonds and any
premiums due upon the redemption thereof shall be payable upon presentation and surrender thereof
at the Principal Office of the Trustee, or at the designated office of any successor Trustee; provided
that so long as the Facilities Financing Authority or the 2017 Authority Trustee on its behalf is the
registered owner of all the 2017 Bonds, such presentment is not required.
Section 2.5.Conditions to Issuance of 2017 Bonds. The 2017 Bonds shall not be issued
unless and until the conditions for the issuance of the 2017 Bonds as Parity Bonds pursuant to 9.2 of
the Original Bond Indenture shall have been satisfied or will be satisfied upon the issuance of the
2017 Bonds.
Section 2.6.Amendment to Section 3.2(b)(4) of the Original Bond Indenture. Section
3.2(b)(4) of the Original Bond Indenture is hereby amended and restated in its entirety to read as
follows:
“(4)transfer to the Authority Trustee and the 2017 Authority Trustee, without preference
or priority and in the event of any insufficiency of such moneys ratably without any discrimination or
5
preference, for deposit in the Reserve Account, the amount necessary to cause the balance on deposit
therein to equal the District’s Proportionate Share of the Reserve Requirement.”
Section 2.7.Amendment to Section 3.2(b) of the Original Bond Indenture. Section
3.2(b) is hereby amended in part by restating the last sentence thereof to read as follows:
“The Trustee shall notify the Authority Trustee and the 2017 Authority Trustee at least five
(5) Business Days prior to each Interest Payment Date if there is not on deposit with the Trustee,
after making all of the transfers required hereunder, moneys sufficient to pay the principal of and
interest on the Bonds and any Parity Bonds.”
Section 2.8.Amendment to Section 3.5(a) of the Original Bond Indenture. Section
3.5(a) is hereby amended and restated in its entirety to read as follows:
“(a)After making the transfers and deposits required by Sections 3.3 and 3.4 above, and
in accordance with the District’s election to call Bonds for optional redemption as set forth in
Section 4.1(a) hereof, or to call Parity Bonds for optional redemption as set forth in any
Supplemental Indenture for Parity Bonds, the Trustee shall transfer from the Special Tax Fund and
deposit in the Redemption Account moneys available for the purpose and sufficient to pay the
principal and the premiums, if any, payable on the Bonds or Parity Bonds called for optional
redemption; provided, however, that amounts in the Special Tax Fund may be applied to optionally
redeem Bonds and Parity Bonds only if immediately following such redemption the amount in the
Reserve Account will equal the Proportionate Share of the Reserve Requirement with respect to the
Bonds or the Parity Bonds to be redeemed.”
Section 2.9.Amendment to Section 4.2 of the Original Bond Indenture. Section 4.2
of the Original Bond Indenture is hereby amended in part by adding the following as the last sentence
thereto:
“If less than all of the Bonds, the 2017 Bonds and any additional Parity Bonds are to be
redeemed, amounts allocated to the redemption thereof shall be applied as nearly as practicable on a
pro rata basis among series as set forth in a Certificate of an Authorized Representative.”
Section 2.10.Amendment to Section 9.2 of the Original Bond Indenture. Section 9.2 of
the Original Bond Indenture is hereby amended and restated in its entirety to read as follows:
“Conditions for the Issuance of Parity Bonds and Other Additional Indebtedness. The
District may at any time after the issuance and delivery of the Bonds hereunder issue Parity Bonds
payable from the Net Special Taxes and other amounts deposited in the Special Tax Fund (other than
in the Administrative Expense Fund therein) and secured by a lien and charge upon such amounts
equal to the lien and charge securing the Outstanding Bonds and any other Parity Bonds theretofore
issued hereunder or under any Supplemental Indenture; provided, however, that Parity Bonds may
only be issued only for the purposes of refunding all or a portion of the Bonds or Parity Bonds then
Outstanding subject to the following specific conditions, which are hereby made conditions
precedent to the issuance of any such Parity Bonds:
(a)The District shall be in compliance with all covenants set forth in this Indenture and
any Supplemental Indenture then in effect and a certificate of the District to that effect shall have
been filed with the Trustee; provided, however, that Parity Bonds may be issued notwithstanding that
6
the District is not in compliance with all such covenants so long as immediately following the
issuance of such Parity Bonds the District will be in compliance with all such covenants.
(b)The issuance of such Parity Bonds shall have been duly authorized pursuant to the
Act and all applicable laws, and the issuance of such Parity Bonds shall have been provided for by a
Supplemental Indenture duly adopted by the District which shall specify the following:
(i)the purpose for which such Parity Bonds are to be issued and the fund or
funds into which the proceeds thereof are to be deposited;
(ii)the authorized principal amount of such Parity Bonds;
(iii)the date and the maturity date or dates of such Parity Bonds; provided that:
(i) each maturity date shall fall on a September 1; (ii) all such Parity Bonds of like maturity shall be
identical in all respects, except as to number; (iii) fixed serial maturities or Sinking Fund Payments,
or any combination thereof, shall be established to provide for the retirement of all such Parity Bonds
on or before their respective maturity dates; and (iv) the maturity of such Parity Bonds shall not
exceed the maturity of the Bonds being refunded;
(iv)the description of the Parity Bonds, the place of payment thereof and the
procedure for execution and authentication;
(v)the denominations and method of numbering of such Parity Bonds;
(vi)the amount and due date of each mandatory Sinking Fund Payment, if any,
for such Parity Bonds;
(vii)the amount, if any, to be deposited from the proceeds of such Parity Bonds in
into a reserve fund for such Parity Bonds;
(viii)the form of such Parity Bonds; and
(ix)such other provisions as are necessary or appropriate and not inconsistent
with this Indenture.
(c)The District shall have received the following documents or money or securities, all
of such documents dated or certified, as the case may be, as of the date of delivery of such Parity
Bonds by the Trustee (unless the Trustee shall be directed by the District to accept any of such
documents bearing a prior date):
(i)a certified copy of the Supplemental Indenture authorizing the issuance of
such Parity Bonds;
(ii)a written request of the District as to the delivery of such Parity Bonds;
(iii)an opinion of Bond Counsel and/or general counsel to the District to the
effect that: (i) the District has the right and power under the Act to adopt this Indenture and the
Supplemental Indentures relating to such Parity Bonds, and this Indenture and all such Supplemental
Indentures have been duly and lawfully adopted by the District, are in full force and effect and are
valid and binding upon the District and enforceable in accordance with their terms (except as
7
enforcement may be limited by bankruptcy, insolvency, reorganization and other similar laws
relating to the enforcement of creditors’ rights); (ii) this Indenture creates the valid pledge which it
purports to create of the Net Special Taxes and other amounts as provided in this Indenture, subject
to the application thereof to the purposes and on the conditions permitted by this Indenture; and
(iii) such Parity Bonds are valid and binding limited obligations of the District, enforceable in
accordance with their terms (except as enforcement may be limited by bankruptcy, insolvency,
reorganization and other similar laws relating to the enforcement of creditors’ rights) and the terms of
this Indenture and all Supplemental Indentures thereto and entitled to the benefits of this Indenture
and all such Supplemental Indentures, and such Parity Bonds have been duly and validly authorized
and issued in accordance with the Act (or other applicable laws) and this Indenture and all such
Supplemental Indentures; and a further opinion of Bond Counsel to the effect that, assuming
compliance by the District with certain tax covenants, the issuance of the Parity Bonds will not
adversely affect the exclusion from gross income for federal income tax purposes of interest on the
Bonds and any Parity Bonds theretofore issued on a tax-exempt basis, or the exemption from State of
California personal income taxation of interest on any Outstanding Bonds and Parity Bonds
theretofore issued;
(iv)a certificate of the District containing such statements as may be reasonably
necessary to show compliance with the requirements of this Indenture;
(v)a certificate of an Independent Financial Consultant certifying that in each
Bond Year the Annual Debt Service on the Bonds and Parity Bonds to remain Outstanding following
the issuance of the Parity Bonds proposed to be issued is less than the Annual Debt Service on the
Bonds and Parity Bonds Outstanding prior to the issuance of such Parity Bonds; and
(vi)such further documents, money and securities as are required by the
provisions of this Indenture and the Supplemental Indenture providing for the issuance of such Parity
Bonds.”
ARTICLE III
APPLICATION OF PROCEEDS OF 2017 BONDS
Section 3.1.Creation of Funds and Application of Proceeds of Sale of 2017 Bonds
(a)There is hereby established with respect to the 2017 Bonds, the City Facilities
Account of the Improvement Fund, [the Water Facilities Account of the Improvement Fund] and the
Rebate Fund. Unless otherwise specified herein, any reference in this First Supplement to any of
such funds shall be deemed to be a reference to the funds established herein for the 2017 Bonds.
(b)The net proceeds of the sale of the 2017 Bonds (less $___________ retained
by the 2017 Authority Trustee for deposit in the Reserve Fund and less $_________ retained by the
2017 Authority Trustee to be deposited in the Costs of Issuance Fund under the 2017 Authority
Indenture) shall be received by the Trustee on behalf of the District and deposited and transferred as
follows:
(i)$_________ shall be transferred to the City Facilities Account of the
Improvement Fund [and $__________ shall be transferred to the Water Facilities
Account of the Improvement Fund] to be applied in accordance with Section 3.7 of
8
the Original Bond Indenture;
The Trustee may, in its discretion, establish a temporary fund or account in its books and
records to facilitate such transfers.
ARTICLE IV
REDEMPTION OF 2017 BONDS
Section 4.1.Redemption of 2017 Bonds
(a)Optional Redemption. The 2017 Bonds maturing on or after September 1,
20__ may be redeemed, at the option of the District from any source of funds on any date on or after
September 1, 20__, in whole, or in part from such maturities as are selected by the District and by lot
within a maturity, at a redemption price equal to the principal amount to be redeemed, together with
accrued interest to the date of redemption, without premium. For so long as the Facilities Financing
Authority is the Owner of the 2017 Bonds, in connection with the calculation of such redemption
price, the District shall receive a credit from the Facilities Financing Authority from the reduction in
the Reserve Requirement resulting from the redemption of the 2017 Bonds and the 2017 Authority
Bonds so redeemed in connection therewith.
In the event the District elects to redeem 2017 Bonds as provided above, the District
shall give written notice to the Trustee of its election to so redeem, the redemption date and the
principal amount of the 2017 Bonds to be redeemed. The notice to the Trustee shall be given at least
60 but no more than 90 days prior to the redemption date, or by such later date as is acceptable to the
Trustee, in its sole discretion. So long as the 2017 Bonds are owned by the Facilities Financing
Authority, the 2017 Bonds may be redeemed pursuant to this Section 4.1(a) only with the prior
consent of the Facilities Financing Authority as set forth in the 2017 Authority Indenture.
(b)Mandatory Sinking Fund Redemption. The Term Bonds maturing on
September 1, 20__ shall be called before maturity and redeemed, from the sinking fund payments
that have been deposited into the Principal Account, on September 1, 20__, and on each September 1
thereafter prior to maturity, in accordance with the schedule of sinking fund payments set forth
below. The Term Bonds so called for redemption shall be selected by the Trustee by lot and shall be
redeemed at a redemption price for each redeemed Term Bond equal to the principal amount thereof,
plus accrued interest to the redemption date, without premium, as follows:
2017 BONDS MATURING SEPTEMBER 1, 20__
Redemption Dates
(September 1)Principal Amount
If the District purchases Term Bonds and delivers them to the Trustee at least 45 days prior to
an applicable redemption date, the principal amount of the Term Bonds so purchased shall be
credited to reduce the Sinking Fund Payment due on such redemption date for the applicable maturity
of the Term Bonds. All Term Bonds purchased pursuant to this subsection shall be cancelled
pursuant to Section 10.1 of the Original Bond Indenture.
9
In the event of a partial optional redemption or special mandatory redemption of Term
Bonds, each of the remaining sinking fund payments for such Term Bonds, as described above, will
be reduced, as nearly as practicable, on a pro rata basis.
(c)Extraordinary Redemption. The 2017 Bonds are subject to extraordinary
redemption as a whole, or in part on a pro rata basis among maturities, on any Interest Payment Date,
and shall be redeemed by the Trustee, from Prepayments deposited to the Redemption Account
pursuant to Section 3.2 of the Original Bond Indenture at the following redemption prices, expressed
as a percentage of the principal amount to be redeemed, together with accrued interest to the
redemption date:
Redemption Dates Redemption Prices
For so long as the Facilities Financing Authority is the Owner of the 2017 Bonds, in
connection with the calculation of such redemption price, the District shall receive a credit from the
Facilities Financing Authority from the reduction in the Reserve Requirement resulting from the
redemption of the 2017 Bonds and the 2017 Authority Bonds so redeemed in connection therewith.
Section 4.2.Notice of Redemption. So long as the Facilities Financing Authority or the
2017 Authority Trustee on the Facilities Financing Authority’s behalf is the registered owner of the
2017 Bonds, no notices set forth in Section 4.3 need be provided.
ARTICLE V
COVENANTS
Section 5.1.Federal Tax Covenants. Notwithstanding any other provision of the
Indenture, absent an opinion of Bond Counsel that the exclusion from gross income of interest on the
2017 Authority Bonds issued on a tax-exempt basis for federal income tax purposes will not be
adversely affected for federal income tax purposes, the District covenants to comply with all
applicable requirements of the Code necessary to preserve such exclusion from gross income and
specifically covenants, without limiting the generality of the foregoing, as follows:
(a)Private Activity. The District will take no action or refrain from taking any
action or make any use of the proceeds of the 2017 Bonds or of any other moneys or property which
would cause the 2017 Authority Bonds issued on a tax-exempt basis for federal income tax purposes
to be “private activity bonds” within the meaning of Section 141 of the Code;
(b)Arbitrage. The District will make no use of the proceeds of the 2017 Bonds
or of any other amounts or property, regardless of the source, or take any action or refrain from
taking any action which will cause the 2017 Authority Bonds issued on a tax-exempt basis for federal
income tax purposes to be “arbitrage bonds” within the meaning of Section 148 of the Code;
(c)Federal Guaranty. The District will make no use of the proceeds of the 2017
10
Bonds or take or omit to take any action that would cause the 2017 Authority Bonds issued on a tax-
exempt basis for federal income tax purposes to be “federally guaranteed” within the meaning of
Section 149(b) of the Code;
(d)Hedge Bonds. The District will make no use of the proceeds of the 2017
Bonds or any other amounts or property, regardless of the source, or take any action or refrain from
taking any action that would cause the 2017 Authority Bonds issued on a tax-exempt basis for federal
income tax purposes to be considered “hedge bonds” within the meaning of Section 149(g) of the
Code unless the District takes all necessary action to assure compliance with the requirements of
Section 149(g) of the Code to maintain the exclusion from gross income for federal income tax
purposes of interest on the 2017 Authority Bonds; and
(e)Other Tax Exempt Issues. The District will not use proceeds of other tax
exempt securities to redeem any 2017 Bonds without first obtaining the written opinion of Bond
Counsel that doing so will not impair the exclusion from gross income for federal income tax
purposes of interest on the 2017 Authority Bonds issued on a tax-exempt basis.
ARTICLE VI
MISCELLANEOUS
Section 6.1.Provisions of Bond Indenture in Effect. Except as expressly modified
herein, all of the provisions of the Original Bond Indenture shall remain in full force and effect.
Section 6.2.Notices to Authority and Authority Trustee. The Trustee shall provide the
Facilities Financing Authority and the 2017 Authority Trustee with any notice that is required to be
provided to the Authority and the Authority Trustee under the Original Bond Indenture.
Section 6.3.Partial Invalidity. If any section, paragraph, sentence, clause or phrase of
this First Supplement shall for any reason be held illegal, invalid or unenforceable, such holding shall
not affect the validity of the remaining portions of this First Supplement. The District hereby
declares that it would have entered into this First Supplement and each and every other Section,
paragraph, sentence, clause or phrase hereof and authorized the issuance of the 2017 Bonds pursuant
thereto irrespective of the fact that any one or more Sections, paragraphs, sentences, clauses, or
phrases of this First Supplement may be held illegal, invalid or unenforceable.
Section 6.4.Execution in Counterparts. This First Supplement 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.
Section 6.5.Governing Law. This First Supplement shall be construed and governed in
accordance with the laws of the State of California applicable to contracts made and performed in
such state.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK.]
S-1
IN WITNESS WHEREOF, the District and the Trustee have executed this First Supplement,
effective the date first written above.
CITY OF LAKE ELSINORE COMMUNITY
FACILITIES DISTRICT NO. 2003-2 (CANYON
HILLS)
By:
Mayor of the City of Lake Elsinore, acting on
behalf of City of Lake Elsinore Community
Facilities District No. 2003-2 (Canyon Hills)
ATTEST:
City Clerk of the City of Lake Elsinore, acting
on behalf of City of Lake Elsinore Community
Facilities District No. 2003-2 (Canyon Hills)
The terms of this First Supplement relating to the Trustee are accepted by Wilmington Trust,
National Association, as Trustee.
WILMINGTON TRUST, NATIONAL
ASSOCIATION, as Trustee
By:
Authorized Officer
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EXHIBIT A
FORM OF 2017 SPECIAL TAX BOND
No. __$[PRINCIPAL AMOUNT]
UNITED STATES OF AMERICA
STATE OF CALIFORNIA
COUNTY OF RIVERSIDE
CITY OF LAKE ELSINORE
COMMUNITY FACILITIES DISTRICT NO. 2003-2 (CANYON HILLS)
IMPROVEMENT AREA B 2017 SPECIAL TAX BOND
INTEREST RATE:MATURITY DATE:DATED DATE:
_________%September 1, 20____________, 2017
REGISTERED OWNER:Wilmington Trust, National Association, as Trustee under that certain
Indenture of Trust dated as of December 1, 2017 by and between the
Lake Elsinore Facilities Financing Authority and Wilmington Trust,
National Association
PRINCIPAL AMOUNT:__________________________________ AND NO/100 DOLLARS
CITY OF LAKE ELSINORE COMMUNITY FACILITIES DISTRICT NO. 2003-2
(CANYON HILLS) (the “District”) situated in the County of Riverside, State of California, FOR
VALUE RECEIVED, hereby promises to pay, solely from certain amounts held under the Indenture
(as hereinafter defined), to the Registered Owner named above, or registered assigns, on the Maturity
Date set forth above, unless redeemed prior thereto as hereinafter provided, the Principal Amount set
forth above, and to pay interest on such Principal Amount from the Interest Payment Date (as
hereinafter defined) next preceding the date of authentication hereof, unless (i) the date of
authentication is an Interest Payment Date in which event interest shall be payable from such date of
authentication, (ii) the date of authentication is after a Record Date (as hereinafter defined) but prior
to the immediately succeeding Interest Payment Date, in which event interest shall be payable from
the Interest Payment Date immediately succeeding the date of authentication, or (iii) the date of
authentication is prior to the close of business on the first Record Date in which event interest shall
be payable from the Dated Date set forth above. Notwithstanding the foregoing, if at the time of
authentication of this Bond interest is in default, interest on this Bond shall be payable from the last
Interest Payment Date to which the interest has been paid or made available for payment or, if no
interest has been paid or made available for payment, interest on this Bond shall be payable from the
Dated Date set forth above. Interest will be paid semiannually on March 1 and September 1 and the
final maturity date of the Bonds (each an “Interest Payment Date”), commencing March 1, 2018 at
the Interest Rate set forth above, until the Principal Amount hereof is paid or made available for
payment. Except as otherwise provided in the Indenture, the principal of and premium, if any, on
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this Bond are payable to the Registered Owner hereof in lawful money of the United States of
America upon presentation and surrender of this Bond at the Principal Office of the Trustee (as such
term is defined in the Indenture), initially Wilmington Trust, National Association (the “Trustee”).
Interest on this Bond shall be paid by check of the Trustee mailed, by first class mail, postage
prepaid, or in certain circumstances described in the Indenture by wire transfer to an account within
the United States of America, to the Registered Owner hereof as of the close of business on the
fifteenth day of the month preceding the month in which the Interest Payment Date occurs (the
“Record Date”) at such Registered Owner’s address as it appears on the registration books
maintained by the Trustee (as defined below).
This Bond is one of a duly authorized issue of “City of Lake Elsinore Community Facilities
District No. 2003-2 (Canyon Hills) Improvement Area B 2017 Special Tax Refunding Bonds” (the
“Bonds”) issued in the aggregate principal amount of $___________ pursuant to the Mello-Roos
Community Facilities Act of 1982, as amended, being Sections 53311, et seq., of the California
Government Code (the “Act”) for the purpose of financing certain public facilities, funding a reserve
fund and paying certain costs related to the issuance of the Bonds. The issuance of the Bonds and the
terms and conditions thereof are provided for by a resolution adopted by the City Council of the City,
acting in its capacity as the legislative body of the District (the “Legislative Body”), on October __,
2017, and a Bond Indenture, dated as of March 1, 2015, as supplemented by the First Supplement to
Bond Indenture dated as of December 1, 2017 (together, the “Indenture”), each by and between the
District and Wilmington Trust, National Association, as successor trustee (the “Trustee”), executed
in connection therewith, and this reference incorporates the Indenture herein, and by acceptance
hereof the Registered Owner of this Bond assents to said terms and conditions. The Indenture is
adopted under and this Bond is issued under, and both are to be construed in accordance with, the
laws of the State of California.
Pursuant to the Act and the Indenture, the principal of, premium, if any, and interest on this
Bond are payable on a parity with the District’s 2015 Bonds, solely from the portion (the “Net
Special Taxes”) of the annual special taxes authorized under the Act to be levied and collected within
Improvement Area B of the District (the “Special Taxes”) and certain other amounts pledged to the
repayment of the Bonds as set forth in the Indenture. Any amounts for the payment hereof shall be
limited to the Net Special Taxes pledged and collected, which include foreclosure proceeds received
following a default in payment of the Special Taxes and other amounts deposited to the Special Tax
Fund established under the Indenture, except to the extent that other provision for payment has been
made by the Legislative Body, as may be permitted by law. The District has covenanted for the
benefit of the owners of the Bonds that under certain circumstances described in the Indenture it will
commence and diligently pursue to completion appropriate foreclosure proceedings in the event of
delinquencies of Special Tax installments levied for payment of principal and interest on the Bonds.
The Bonds maturing on or after September 1, 20__ may be redeemed, at the option of the
District from any source of funds on any date on or after September 1, 20__, in whole, or in part from
such maturities as are selected by the District and by lot within a maturity, at a redemption price
equal to the principal amount to be redeemed, together with accrued interest to the date of
redemption, without premium.
The Bonds maturing on September 1, 20__ shall be called before maturity and redeemed,
from Sinking Fund Payments deposited into the Principal Account, on September 1, 20__, and on
each September 1 thereafter prior to maturity, in accordance with the schedule of Sinking Fund
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Payments set forth in the Indenture at a redemption price equal to the principal amount thereof, plus
accrued interest to the redemption date, without premium.
The Bonds are subject to extraordinary redemption as a whole, or in part on a pro rata basis
among maturities, on any Interest Payment Date, and shall be redeemed by the Trustee, from
Prepayments deposited to the Redemption Account at the following redemption prices, expressed as
a percentage of the principal amount to be redeemed, together with accrued interest to the redemption
date:
Redemption Dates Redemption Prices
Notice of redemption with respect to the Bonds to be redeemed shall be mailed to the
registered owners thereof not less than 30 nor more than 45 days prior to the redemption date by first
class mail, postage prepaid, to the addresses set forth in the registration books. Notwithstanding the
foregoing, so long as the Facilities Financing Authority or the Authority Trustee on the Facilities
Financing Authority’s behalf is the registered owner of the Bonds, no such notices need be provided.
Neither a failure of the Registered Owner hereof to receive such notice nor any defect therein will
affect the validity of the proceedings for redemption. All Bonds or portions thereof so called for
redemption will cease to accrue interest on the specified redemption date; provided that funds for the
redemption are on deposit with the Trustee on the redemption date. Thereafter, the registered owners
of such Bonds shall have no rights except to receive payment of the redemption price upon the
surrender of the Bonds.
This Bond shall be registered in the name of the Registered Owner hereof, as to both
principal and interest, and the District and the Trustee may treat the Registered Owner hereof as the
absolute owner for all purposes and shall not be affected by any notice to the contrary.
The Bonds are issuable only in fully registered form in the denomination of $5,000 or any
integral multiple thereof and may be exchanged for a like aggregate principal amount of Bonds of
other authorized denominations of the same issue and maturity, all as more fully set forth in the
Indenture. This Bond is transferable by the Registered Owner hereof, in person or by his attorney
duly authorized in writing, at the Principal Office of the Trustee, but only in the manner, subject to
the limitations and upon payment of the charges provided in the Indenture, upon surrender and
cancellation of this Bond. Upon such transfer, a new registered Bond of authorized denomination or
denominations for the same aggregate principal amount of the same issue and maturity will be issued
to the transferee in exchange therefor.
The Trustee shall not be required to register transfers or make exchanges of (i) any Bonds for
a period of 15 days next preceding any selection of the Bonds to be redeemed, or (ii) any Bonds
chosen for redemption.
The rights and obligations of the District and of the registered owners of the Bonds may be
amended at any time, and in certain cases without notice to or the consent of the registered owners, to
the extent and upon the terms provided in the Indenture.
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THE BONDS DO NOT CONSTITUTE OBLIGATIONS OF THE CITY OF LAKE
ELSINORE OR OF THE DISTRICT FOR WHICH THE CITY OF LAKE ELSINORE OR THE
DISTRICT IS OBLIGATED TO LEVY OR PLEDGE, OR HAS LEVIED OR PLEDGED,
GENERAL OR SPECIAL TAXES, OTHER THAN THE SPECIAL TAXES REFERENCED
HEREIN. THE BONDS ARE LIMITED OBLIGATIONS OF THE DISTRICT PAYABLE FROM
THE PORTION OF THE SPECIAL TAXES AND OTHER AMOUNTS PLEDGED UNDER THE
INDENTURE BUT ARE NOT A DEBT OF THE CITY OF LAKE ELSINORE, THE STATE OF
CALIFORNIA OR ANY OF ITS POLITICAL SUBDIVISIONS WITHIN THE MEANING OF
ANY CONSTITUTIONAL OR STATUTORY LIMITATION OR RESTRICTION.
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 Trustee.
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 do exist, have happened and have been performed in due time, form and manner as required by
law, and that the amount of this Bond, together with all other indebtedness of the District, does not
exceed any debt limit prescribed by the laws or Constitution of the State of California.
IN WITNESS WHEREOF, City of Lake Elsinore Community Facilities District No. 2003-2
(Canyon Hills) has caused this Bond to be dated as of December __, 2017, to be signed on behalf of
the District by the Mayor by his facsimile signature and attested by the facsimile signature of the City
Clerk.
Mayor of the City of Lake Elsinore
ATTEST:
City Clerk of the City of Lake Elsinore
[FORM OF TRUSTEE’S CERTIFICATE
OF AUTHENTICATION AND REGISTRATION]
This is one of the Bonds described in the within-defined Indenture.
Dated: _______, 2017 Wilmington Trust, National Association, as Trustee
By:
Authorized Officer
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[FORM OF LEGAL OPINION]
The following is a true copy of the opinion rendered by Stradling Yocca Carlson & Rauth, a
Professional Corporation, in connection with the issuance of, and dated as of the date of the original
delivery of, the Bonds. A signed copy is on file in my office.
City Clerk of the City of Lake Elsinore
[FORM OF ASSIGNMENT]
For value received the undersigned do(es) hereby sell, assign and transfer unto
whose tax identification number is ,
the within-mentioned registered Bond and hereby irrevocably constitute(s) and appoint(s)
attorney to transfer the same on the books of the Trustee with full power of substitution in the
premises.
Dated:
Signature guaranteed:
NOTE: Signature guarantee shall be made by a
guarantor institution participating in the
Securities Transfer Agents Medallion Program or
in such other guarantee program acceptable to
the Trustee.
NOTE: The signatures(s) on this Assignment
must correspond with the name(s) as written on
the face of the within Bond in every particular
without alteration or enlargement or any change
whatsoever.