HomeMy WebLinkAbout0034_6_CFD 2006-1 (IA HH) 2019 Bonds - Exhibit E Preliminary Official StatementStradling Yocca Carlson & Rauth
Draft of11/6/19
4829-1999-3000v2/022042-0030
PRELIMINARY OFFICIAL STATEMENT DATED NOVEMBER __, 2019
NEW ISSUE—BOOK-ENTRYONLY NO RATING
In the opinion of Stradling Yocca Carlson & Rauth, a Professional Corporation, 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
(and original issue discount) on the Bonds described herein is excluded from gross income for federal income tax purposes andis not an item of tax
preference for purposes of calculating the federal alternative minimum tax imposed on individuals. 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”with respect to tax
consequences relating to the Bonds.
$5,360,000*
CITY OF LAKE ELSINORE
COMMUNITY FACILITIES DISTRICT NO.2006-1 (SUMMERLY)
SPECIAL TAX BONDS, SERIES 2019
(IMPROVEMENT AREA HH)
Dated: Delivery Date Due: September1, as shown on inside cover page
The City of Lake Elsinore Community Facilities District No. 2006-1 (Summerly)Special Tax Bonds, Series 2019(Improvement Area HH) (the
“Bonds”) are being issued by City of Lake Elsinore Community Facilities District No. 2006-1 (Summerly)(the “District”) to: (i) finance certain public
improvements to be owned by the City andwater and sewer facilities to be owned and operated by the Elsinore Valley Municipal Water District;(ii) fund
a reserveaccount for the Bonds;(iii)fund capitalized interest on the Bonds through March 1, 2020; and (iv)pay costs of issuance for the Bonds.
Improvement Area HH(“Improvement Area HH”) is located within the District. The Bonds are authorized to be issued pursuant to the Mello-Roos
Community Facilities Act of 1982, as amended (Section 53311 etseq. of the Government Code of the State of California) (the “Act”), and pursuant to that
certain Bond Indenture, dated as of December 1, 2019(the “Indenture”), by and between the District and Wilmington Trust, National Association, as trustee
(the “Trustee”).
The Bonds are payable from Net Taxes (as defined herein) derived from a certain annual Special Tax (as defined herein) to be levied on taxable
parcels within Improvement Area HHof the District and from certain other funds pledged under the Indenture, all as further described herein. The Special
Tax is to be levied according to the rate and method of apportionment approved by the City Council of the City and the qualified electors within Improvement
Area HHof the District. See the caption “SOURCES OF PAYMENT FOR THE BONDS—Special Taxes”and AppendixA—“RATE AND METHOD
OF APPORTIONMENT OF SPECIAL TAX.”
The Bonds will be issued in fully registered form and when issued will be registered in the name of Cede& Co., as nominee of The Depository
Trust Company, New York, New York (“DTC”). Individual purchases of the Bonds may be made in principal amounts of $5,000 and integral multiples
thereof and will be in book-entry form only. Purchasers of the Bonds will not receive certificates representing their beneficial ownership of the Bonds but
will receive credit balances on the books of their respective nominees. The Bonds will not be transferable or exchangeable except for transfer to another
nominee of DTC or as otherwise described herein. Interest on the Bonds willbe payable on eachMarch1 and September1, commencing March 1, 2020.
Principal of and interest on the Bonds will be paid by the Trustee to DTC for subsequent disbursement to DTC Participants, who will remit such payments
to the Beneficial Owners of the Bonds.
NEITHER THE FAITH AND CREDIT NOR THE TAXING POWER OF THE CITY, THE COUNTY OF RIVERSIDE, THE STATE OF
CALIFORNIA OR ANY POLITICAL SUBDIVISION THEREOF IS PLEDGED TO THE PAYMENT OF THE BONDS. EXCEPT FOR THE NET
TAXES, NO OTHER REVENUES OR TAXES ARE PLEDGED TO THE PAYMENT OF THE BONDS. THE BONDS ARE NOT GENERAL OR
SPECIAL OBLIGATIONS OF THE CITY OR GENERAL OBLIGATIONS OF THE DISTRICT BUT ARE LIMITED OBLIGATIONS OF THE
DISTRICT PAYABLE SOLELY FROM NET TAXES AND OTHER AMOUNTS HELD UNDER THE INDENTURE AS MORE FULLY DESCRIBED
HEREIN.
The Bonds are subject to optional redemption, special mandatory redemption and mandatory sinking fund redemption prior to maturity as set
forth herein. See the caption “THE BONDS—Redemption.”
Investment in the Bonds involves risks that are not appropriate for certain investors. Certain events could affect the ability of the
District to pay the principal of and interest on the Bonds when due. See the caption “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 ofthe Bonds.
THIS COVER PAGE CONTAINS CERTAIN INFORMATIONFOR GENERAL REFERENCE ONLY. IT IS NOT INTENDED TO BE A
SUMMARY OF THE SECURITY OR TERMS OF THISISSUE. INVESTORS ARE ADVISED TO READ THE ENTIRE OFFICIAL STATEMENT
TO OBTAIN INFORMATION ESSENTIAL TO THE MAKING OF AN INFORMEDINVESTMENT DECISION.
MATURITY SCHEDULE
(See Inside Cover Page)
The Bonds are offered when, as and if issued and accepted by the Underwriter, subject to approval as to their legality by Stradling Yocca
Carlson& Rauth, a Professional Corporation, Newport Beach, California, BondCounsel, and subject to certain other conditions. Certain legal matters
will be passed on for the City and the District by Leibold McClendon, & Mann, Irvine, California, City Attorney, and for the District by Stradling Yocca
Carlson & Rauth, a Professional Corporation, Disclosure Counsel, for the Underwriter by Kutak RockLLP, Irvine, California, and for the Trustee by its
counsel. It is anticipated that the Bonds in book-entry form will be available fordelivery on or about December __, 2019.
[STIFEL LOGO]
Dated: December __,2019
* 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 them be accepted, prior to
the time the Official Statement is delivered in final form. Under no circumstances shall this Preliminary Official Statement constitute an offer to sell or the solicitation of an offer to buy, nor shall there
be any sale of, these securities in any jurisdiction in which such offer, solicitation or sale would be
unlawful.
4829-1999-3000v2/022042-0030
$5,360,000*
CITY OF LAKE ELSINORE
COMMUNITY FACILITIES DISTRICT NO. 2006-1 (SUMMERLY)
SPECIAL TAX BONDS, SERIES 2019
(IMPROVEMENT AREA HH)
MATURITY SCHEDULE
BASE CUSIP®†*______
$__________Serial Bonds
Maturity Date
(September1)
Principal
Amount Interest Rate Yield Price CUSIP No.†
$%%
$______________% Term Bonds due September1, 20__ Yield: _____% Price: _____ CUSIP No.†___
$_________ _____% Term Bonds due September1, 20__ Yield: _____% Price: _____ CUSIP No.†___
*Preliminary, subject to change.
*†CUSIP® is a registered trademark of the American Bankers Association. CUSIP data herein is provided by CUSIP Global Services, managed
by S&P Global Market Intelligence on behalf of The American Bankers Association. This information is not intended to create adatabase and does
not serve in any way as a substitute for the CUSIP Services Bureau. CUSIP numbers have been assigned by an independent company not affiliated
with the City, the District or the Underwriter and are included solely for the convenience of the registered owners of the applicable Bonds. None
of the City, the District or the Underwriter is responsible for the selection or uses of these CUSIP numbers, and no representation is made as to
their correctness on the applicable Bonds or as included herein. The CUSIP number for a specific maturity is subject to being changed after the
issuance of the Bonds as a result of various subsequent actions including, but not limited to, a refunding in whole or in part or as a result of the
procurement of secondary market portfolio insurance or other similar enhancement by investors that is applicable to all or a portion of certain
maturities of the Bonds.
4829-1999-3000v2/022042-0030
CITY OF LAKE ELSINORE
COUNTY OF RIVERSIDE, CALIFORNIA
CITY COUNCIL
Steve Manos, Mayor
Brian Tisdale, Mayor Pro Tem
Timothy J. Sheridan, Councilmember
Robert E. Magee, Councilmember
Natasha Johnson, Councilmember
CITY ADMINISTRATORS
Grant Yates, City Manager
Jason Simpson, Assistant City Manager
CITY ATTORNEY
Leibold McClendon, & Mann
Irvine, California
BOND AND DISCLOSURE COUNSEL
Stradling Yocca Carlson & Rauth, a Professional Corporation
Newport Beach, California
MUNICIPAL ADVISOR
Urban Futures Incorporated
Tustin, California
SPECIAL TAX CONSULTANT
Spicer Consulting Group, LLC
Temecula, California
APPRAISER
Kitty Siino & Associates, Inc.
Tustin, California
TRUSTEE
Wilmington Trust, National Association
Costa Mesa, California
4829-1999-3000v2/022042-0030
Except where otherwise indicated, all information contained in this Official Statement has been provided by the
City and the District. No dealer, broker, salesperson or other person has been authorized by 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 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 tomake such an offer, solicitation or sale.
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 and 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 or 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 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.
IN CONNECTION WITH THE OFFERING OF THE BONDS, THE UNDERWRITER MAY
OVERALLOT OR EFFECTTRANSACTIONS 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.
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, Section21E of the
United States Securities Exchange Act of 1934, as amended, and Section27A of the United States Securities Act of 1933,
as amended. Such statements are generally identifiable by the terminology used such as a “plan,”“expect,”“estimate,”
“project,”“budget,”or similar words. Such forward-looking statements include, but are not limited to certain statements
contained in the information under the captions“IMPROVEMENT AREA HH”and “PROPERTY OWNERSHIP AND
THE DEVELOPMENT.”
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
DISTRICT DOES NOT PLAN TO ISSUE ANY UPDATES OR REVISIONS TO THE FORWARD-LOOKING
STATEMENTS SET FORTH IN THIS OFFICIAL STATEMENT. IN EVALUATING SUCH STATEMENTS,
POTENTIAL INVESTORS SHOULD SPECIFICALLY CONSIDER THE VARIOUS FACTORS WHICH COULD
CAUSE ACTUAL EVENTS OR RESULTS TO DIFFER MATERIALLY FROM THOSE INDICATED BY SUCH
FORWARD-LOOKING STATEMENTS.
The City maintains a website. However, the information presented on such website is not part of this Official
Statement and should not be relied upon in making an investment decision with respect to the Bonds.
TABLE OF CONTENTS
Page
i
4829-1999-3000v2/022042-0030
INTRODUCTION................................................................................................................................................1
The City, District and Improvement Area HH..................................................................................................1
Sources of Payment for the Bonds....................................................................................................................3
Appraisal Report...............................................................................................................................................4
Description of the Bonds..................................................................................................................................4
Tax Exemption..................................................................................................................................................4
Professionals Involved in the Offering.............................................................................................................5
Continuing Disclosure......................................................................................................................................5
Parity Bondsfor Refunding Purposes Only......................................................................................................5
Bond Owners’ Risks.........................................................................................................................................6
Other Information.............................................................................................................................................6
FINANCING PLAN.............................................................................................................................................6
Estimated Sources and Uses of Funds..............................................................................................................6
THE BONDS........................................................................................................................................................6
General Provisions............................................................................................................................................6
Debt Service Schedule......................................................................................................................................8
Redemption.......................................................................................................................................................9
Registration, Transfer and Exchange..............................................................................................................12
SOURCES OF PAYMENT FOR THE BONDS................................................................................................12
Limited Obligations........................................................................................................................................12
Special Taxes..................................................................................................................................................13
Reserve Account of the Special Tax Fund......................................................................................................19
No Teeter Plan................................................................................................................................................20
Parity Bonds for Refunding Purposes Only....................................................................................................20
Builders’ Letters of Credit..............................................................................................................................20
IMPROVEMENT AREA HH.............................................................................................................................20
General Description of the District and Improvement Area HH....................................................................20
Authorized Uses of Bond Proceeds................................................................................................................22
Appraisal Report.............................................................................................................................................22
Estimated Appraised Value-to-Lien Ratios....................................................................................................23
Direct and Overlapping Debt..........................................................................................................................26
Delinquency History.......................................................................................................................................30
PROPERTY OWNERSHIP AND THE DEVELOPMENT...............................................................................30
The District and Improvement Area HH.........................................................................................................30
Richmond American Development and Financing Plan.................................................................................31
Beazer Development and Financing Plan.......................................................................................................33
D.R. Horton Development and Financing Plan..............................................................................................34
SPECIAL RISK FACTORS...............................................................................................................................36
Risks of Real Estate Secured Investments Generally.....................................................................................37
Tax Cuts and Jobs Act....................................................................................................................................37
Insufficiency of Special Tax Revenues...........................................................................................................37
Concentration of Ownership...........................................................................................................................39
Property Values...............................................................................................................................................39
Natural Disasters.............................................................................................................................................39
Hazardous Substances.....................................................................................................................................40
Enforcement Delays –Bankruptcy.................................................................................................................40
FDIC/Federal Government Interests in Parcels..............................................................................................41
Direct and Overlapping Indebtedness.............................................................................................................42
Payment of Special Taxes is not a Personal Obligation of the Property Owners...........................................42
TABLE OF CONTENTS
(continued)
Page
ii
4829-1999-3000v2/022042-0030
No Acceleration Provision..............................................................................................................................42
Limited Obligations........................................................................................................................................42
Ballot Initiatives..............................................................................................................................................43
Proposition218...............................................................................................................................................43
Shapiro Case...................................................................................................................................................44
Loss of Tax Exemption...................................................................................................................................44
No Ratings –Limited Secondary Market.......................................................................................................45
Limitations on Remedies................................................................................................................................45
Potential Early Redemption of Bonds from Prepayments or Assessment Bond Proceeds.............................45
CONTINUING DISCLOSURE..........................................................................................................................45
District Continuing Disclosure.......................................................................................................................45
Developer Continuing Disclosure...................................................................................................................46
TAX EXEMPTION............................................................................................................................................47
LEGAL OPINION..............................................................................................................................................48
ABSENCE OF LITIGATION............................................................................................................................48
NO RATING......................................................................................................................................................49
UNDERWRITING.............................................................................................................................................49
FINANCIAL INTERESTS.................................................................................................................................49
MUNICIPAL ADVISOR...................................................................................................................................49
MISCELLANEOUS...........................................................................................................................................49
APPENDIXA RATE AND METHOD OF APPORTIONMENT OF SPECIAL TAX.........................A-1
APPENDIXB CERTAIN ECONOMIC AND DEMOGRAPHIC INFORMATION............................B-1
APPENDIXC FORM OF OPINION OF BOND COUNSEL................................................................C-1
APPENDIXD APPRAISAL REPORT..................................................................................................D-1
APPENDIXE SUMMARY OF THE INDENTURE.............................................................................E-1
APPENDIXF FORM OFDISTRICTCONTINUING DISCLOSURE CERTIFICATE.......................F-1
APPENDIXG FORM OFDISTRICTCONTINUING DISCLOSURE CERTIFICATE......................G-1
APPENDIXH BOOK-ENTRY ONLY SYSTEM..................................................................................H-1
4829-1999-3000v2/022042-0030
[INSERT VICINITY MAP]
4829-1999-3000v2/022042-0030
[INSERT AERIAL PHOTOGRAPH]
1
4829-1999-3000v2/022042-0030
$5,360,000*
CITY OF LAKE ELSINORE
COMMUNITY FACILITIES DISTRICT NO. 2006-1 (SUMMERLY)
SPECIAL TAX BONDS, SERIES 2019
(IMPROVEMENT AREA HH)
INTRODUCTION
The purpose of this Official Statement, which includes the cover page, the table of contents and the
attached appendices (collectively, the “Official Statement”), is to provide certain information concerning the
issuance by City of Lake Elsinore Community Facilities District No. 2006-1 (Summerly)(the “District”) of its
Special Tax Bonds, Series 2019(Improvement Area HH) in the aggregate principal amount of $5,360,000*(the
“Bonds”). The proceeds of the Bonds will be usedto:(i) finance certain public improvements to be owned by
the City and water and sewer facilities to be owned and operated by the Elsinore Valley Municipal Water District;
(ii) fund a reserve account for the Bonds; (iii) fund capitalized interest on the Bonds through March 1, 2020; and
(iv) pay costs of issuance for the Bonds.
The Bonds are authorized to be issued pursuant to the Mello-Roos Community Facilities Act of 1982,
as amended (Section53311 etseq. of the Government Code of the State of California) (the “Act”), and a Bond
Indenture, dated as of December 1, 2019(the “Indenture”), by and between the District and Wilmington Trust,
National Association, as trustee (the “Trustee”). The Bonds are secured under the Indenture by a pledge of and
lien upon Net Taxes (as such term is defined herein) and all moneys in the Special Tax Fund (other than the
Administrative Expense Account therein) as described in the Indenture.
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 sale and delivery of Bonds to potentialinvestors is made only by means of the entire Official Statement.
All capitalized terms used in this Official Statement and not defined have the meanings set forth in AppendixE.
The City, Districtand Improvement Area HH
General. The Cityis located inthewestern portion of the County of Riverside (the “County”),
California (the “State”). The District comprises a portion of Summerly, a planned residential community located
in the southeast portion of the City, to the east of Lake Elsinore. McMillin Summerly, LLC, a Delaware limited
liability company (“McMillin”or the “Developer”), acquired the partially-developed Summerly project in 2010
and is the master developer of property in the District.
At build-out, the Summerly project is expected to include approximately 1,677residential units and
recreation and open spaceon approximately 700 acres. Of the 1,677 planned residential units in Summerly, 1,542
lots have been conveyed to merchant buildersor built within fee-build ventures with the McMillin.
Approximately 1,224completed homes have been sold and 1,172 have closed to individual homebuyers.
McMillin owns 135 lots in the final two neighborhoods that remain to be sold to merchant builders which are in
a blue top condition.
Improvement Area HH. Improvement Area HHis located within Summerly andis borderedto the
northby Sunset Park and land planned forfuture Summerly neighborhoods, to the east by Diamond Drive, and
to the southand westby vacant lands.
*Preliminary, subject to change.
2
4829-1999-3000v2/022042-0030
McMillin has sold all of the property in Improvement Area HH that is planned for residential
development to three merchant builders. The property within Improvement Area HHis planned for 180single-
family detached residential unitswhich are being developed into the neighborhoodsof Sendero by Richmond
American Homes of Maryland, Inc. a Maryland corporation (“Richmond American”),The Glenat Summerly
by Beazer HomesHoldings, LLC, a Delaware limited liability company(“Beazer”), and Laurel Pointe by
Western Pacific Housing, Inc., a Delaware corporation (dba D.R. Horton America’s Builder) (“D.R. Horton”),
respectively.
As of the October 1, 2019date of value of the Appraisal (as defined below), 45 of the 180planned
residential units within Improvement Area HHhad been completed and conveyed to individual homeowners.
As of such date, the three merchant builders in Improvement Area HH,in the aggregate,owned sixcompleted
model homes, 51homes under construction and 78finished lots.
The prior master developer, John Laing Homes, and the current master developer, McMillin, completed
the backbone infrastructure (sewer, water, storm drains, utilities, and arterial roads) necessary to complete the
phases of Summerly thathave been developed to date, including the property in Improvement Area HH. Certain
backbone infrastructure remains to be completed by McMillin to achieve full buildout of Summerly, however,
completion of such infrastructure is not a condition to complete the development in Improvement Area HH.
The merchant builders within Improvement Areas HHare responsible for the in-tract infrastructure,
which primarily consists of streets for individual lot access and associated gutters and landscape improvements.
The substantial majority of such in-tract infrastructure is complete. Richmond American,Beazer, and D.R.
Hortonexpectto completeconstruction of the in-tract improvements associated with the remaining lots that they
ownwithin Improvement Area HHashome construction on such lots is completed.
See the captions “IMPROVEMENT AREA HH”and “PROPERTY OWNERSHIP AND THE
DEVELOPMENT”for further information with respect tothe development withinImprovement Area HH,
Richmond American, Beazer, and D.R. Horton.
Formation Proceedings. The District was formed on February 28, 2006pursuant to the Act. The Act
was enacted to provide an alternative method of financing certain public capital facilities and services, especially
in developing areas of the State. Anylocal agency (as defined in the Act) may establish a community facilities
district to provide for and finance the cost of eligible public facilities and services. Generally, the legislative
body of the local agency which forms a community facilities district acts on behalf of such district as its
legislative body. Subject to approval by two-thirds of the votes cast at an election and compliance with the other
provisions of the Act, a legislative body of a local agency may issue bonds for a community facilities districtor
improvement area thereinand may levy and collect a special tax within such districtor improvement areato
repay such indebtedness.
Pursuant to the Act, on January 24, 2006, the City Council adopted Resolution No.2006-08, stating its
intention to form the District and to authorize the levy of a special tax on the taxable property within the District.
Subsequent to a noticed public hearing on February 28, 2006, the City Council adopted Resolution No.2006-30
on February 28, 2006, which established the District and designated three improvement areastherein.
As a result of the changes in, among other matters,product type and development phasing which
occurred overthe course of the development of Summerly,certain change proceedingsfor the District were
undertaken by the Citywhich reorganizedthe original improvement areas in the District,and revised the special
tax ratesfor such improvement areas. OnFebruary 25, 2014, pursuant to a petition signed by McMillin, the
then owner of all the property within Improvement AreasC through Fpreviously formed in the District, the City
adopted Resolution Nos. 2014-010 and 2014-011 dissolving Improvement Areas C through Ftherein,
establishingImprovement Areas CC, DD, EE, FF, GG, HH and IIfrom territorywithin the Improvement Areas
C through F, and declaring the intentionto incur bonded indebtednessof the District for Improvement Areas
3
4829-1999-3000v2/022042-0030
CC, DD, EE, FF, GG, HH and IItofinancethe purchase, construction, modification, expansion, improvement
or rehabilitation of certain public facilities to serve the area within the District.
At a special election held on April 8, 2014,within Improvement Area HH, the qualified electors within
Improvement Area HH(i) authorized the District to incur bonded indebtedness in an amount not to exceed
$9,000,000for Improvement Area HH, (ii) approvedthe levy of a special tax (the “Special Tax”) within
Improvement Area HHpursuant to the Rate and Method of Apportionment of Special Taxes for Improvement
Area HHattached hereto as Appendix A (the “Rate and Method”), and (iii) increased theappropriations limit
for the District.
A Notice of Special Tax Lien for Improvement Area HHof the District was recorded in the office of
the County Recorder on April 29, 2014as Document No.2014-0154282. On April 22, 2014, the City Council
adopted Ordinance No.2014-1325(the “Ordinance”) which authorizes the levy of a special tax pursuant to the
Rate and Method approved at the April 8, 2014election, a copy of which is attached hereto as AppendixA.
Sources of Payment for the Bonds
Special Taxes. As used in this Official Statement, the term “Special Tax”means the annual Special
Tax for Facilities (as defined in the Rate and Method) which has been authorized pursuant to theAct to be levied
in accordance withthe Rate and Methodupon taxable property within Improvement Area HHof the District.
See the caption “SOURCES OF PAYMENT FOR THE BONDS—Special Taxes”and AppendixA—“RATE
AND METHOD OF APPORTIONMENT OF SPECIAL TAX.” See the caption “IMPROVEMENT AREA
HH.”
Under the Indenture, the District has pledged to repay the Bonds and any Parity Bonds (as defined
herein) from the Special Tax revenues remaining after the payment of certain annual Administrative Expenses
of the District (the “Net Taxes”) and from other amounts in the Special Tax Fund (other than the Administrative
Expense Account therein) established under the Indenture. The Special Taxes are the primary source of security
for the repayment of the Bondsand any Parity Bonds. In the event that the Special Taxes are not paid when due,
the only sources of funds available to pay the debt service on the Bondsand any Parity Bondsare amounts held
by the Trustee in the Special Tax Fund, including amounts held in the Reserve Account therein, to the limited
extent described in the Indenture. See the caption “SOURCES OF PAYMENT FOR THE BONDS—Reserve
Account of the Special Tax Fund.”
The Rate and Method authorizes the District to levy a Special Tax for Services (as defined in the Rate
and Method). The Special Tax for Services is not pledged to and is not available to pay debt service on the
Bonds.
Foreclosure Proceeds. The District will covenant in the Indenturefor the benefit of the owners of the
Bondsand Parity Bondsthat it will: (i) commence judicial foreclosure proceedings against parcels with
delinquent Special Taxes in excess of $5,000 by the October1 following the close of each Fiscal Year in which
such Special Taxes were due; and (ii) commence judicial foreclosure proceedings against all parcels with
delinquent Special Taxes by the October1 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 (iii)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 Account is at least equal to the Reserve Requirement. See the caption “SOURCES OF PAYMENT
FOR THE BONDS—Special Taxes—Proceeds of Foreclosure Sales.” There is no assurance that the property
within Improvement Area HHcan be sold for theappraised orassessed values described herein, or for a price
sufficient to pay the principal of and interest on the Bonds in the event of a default in payment of Special Taxes
by the current or future landowners within Improvement Area HH. See the caption “SPECIAL RISK
FACTORS—PropertyValues.”
4
4829-1999-3000v2/022042-0030
EXCEPT FOR THE NET TAXES, NO OTHER TAXES ARE PLEDGED TO THE PAYMENT
OF THE BONDS. THE BONDS ARE NOT GENERAL OR SPECIAL OBLIGATIONS OF THE CITY
OR GENERAL OBLIGATIONS OF THE DISTRICT, BUT ARE LIMITED OBLIGATIONS OF THE
DISTRICT PAYABLE SOLELY FROM NET TAXES AND AMOUNTS HELD UNDER THE
INDENTURE, AS MORE FULLY DESCRIBED HEREIN.
Appraisal Report
Kitty Siino & Associates, Inc. (the “Appraiser”) has conducted an appraisal (the “Appraisal Report”)
with a date of value of October 1, 2019(the “Date of Value”)ofcertain land and existing improvements within
Improvement Area HHto provide an estimate of the market value of the fee simple interest of such land and
improvements. The Appraisal Report provides an estimate of the approximate market value of the “as-is”
condition of the property in Improvement Area HHsubject to the levy of Special Taxes, assuming that
development of the property as currently planned will consist of 180single-family detachedresidential units.
Based on the assumptions and limiting conditions in the Appraisal Report, the Appraiser concluded that the
minimum market value of all of the parcels within Improvement Area HHsubject to the Special Tax was
$37,290,748as of the Date of Value.
The Appraisal Report isbased upon a variety of assumptions and limiting conditions that are described
in Appendix D. The District makes no representation as to the accuracy of the Appraisal Report. See
“IMPROVEMENT AREA HH—Appraisal Report”and “—Estimated Appraised Value-to-Lien Ratios.”
There is no assurance that property within Improvement Area HHcan be sold for the prices set forth in the
Appraisal Report or that any parcel can be sold for a price sufficient to pay the Special Tax for that parcel in the
event of a default in payment of Special Taxes by theproperty owner. See “IMPROVEMENT AREA HH,”
“SPECIAL RISK FACTORS —PropertyValues”herein and Appendix D.
Description of the Bonds
The Bonds will be issued and delivered as fully registered Bonds, registered in thename 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 of $5,000 or any integral multiple
thereof, under the book-entry system maintained by DTC, only through brokers and dealers who are or act
through DTC Participants as described herein. Beneficial Owners will not be entitled to receive physical delivery
of the Bonds. In the event that the book-entryonly system described herein is no longer used with respect to the
Bonds, the Bonds will be registered and transferred in accordance with the Indenture. See AppendixH—
“BOOK-ENTRY ONLY SYSTEM.”
Principal of, premium, if any, and interest on the Bonds is payable by the Trustee to DTC. Disbursement
of such payments to DTC Participants is the responsibility of DTC and disbursement of such payments to the
Beneficial Owners is the responsibility of DTC Participants. See AppendixH—“BOOK-ENTRY ONLY
SYSTEM.”
The Bonds are subject to optional redemption, special mandatory redemption and mandatory sinking
fund redemption prior to maturity as described herein. See the caption “THE BONDS—Redemption.” For a
more complete description of the Bonds and the basic documentation pursuant to which they are being sold and
delivered, see the caption “THE BONDS”and AppendixE—“SUMMARY OF THE INDENTURE.”
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 herein, interest (and
original issue discount) on the Bonds is excluded from gross income for federal income tax purposes and is not
5
4829-1999-3000v2/022042-0030
an item of tax preference for purposes of calculating the federal alternative minimum tax imposed on individuals.
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.”
Set forth in Appendix C 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 such opinion and certain tax consequences
incident to the ownership of the Bonds, see the caption “TAX EXEMPTION.”
Professionals Involved in the Offering
Wilmington Trust, National Association, Costa Mesa, California, will act as Trustee underthe
Indenture. Stifel, Nicolaus & Company, Incorporated(the “Underwriter”) is the Underwriter of the Bonds.
Certain proceedings in connection with the issuance and delivery of the Bonds are subject to the approval of
Stradling Yocca Carlson & Rauth, a Professional Corporation, Newport Beach, California, Bond Counsel and
Disclosure Counsel to the District in connection with the issuance of the Bonds. Certain legal matters will be
passed on for the City and the District by Leibold McClendon, & Mann, Irvine, California, City Attorney, for
the Underwriter by Kutak RockLLP, Irvine, California, and for the Trustee by its counsel. Other professional
services have been performed by Spicer Consulting Group, LLC, Temecula, California, as Special Tax
Consultant (the “Special Tax Consultant”)and by Kitty Siino& Associates, Tustin, California, as Appraiser.
For information concerning circumstances in which certain of the above-mentioned professionals,
advisors, counsel and consultants may have a financial or other interest in the offering of the Bonds, see the
caption “FINANCIAL INTERESTS.”
Continuing Disclosure
Pursuant to a Continuing Disclosure Certificate to be executed by the District (the “District Continuing
Disclosure Certificate”), the District willagreeto provide, or cause to be provided, to the Municipal Securities
Rulemaking Board’s Electronic Municipal Market Access system (“EMMA”), maintained on the Internet at
http://emma.msrb.org, certain annual financial information and operating data and notices of certain enumerated
events. These covenants are beingmade in order to assist the Underwriter in complying with subsection (b)(5)
of Rule15c2-12 adopted by the Securities and Exchange Commission (“Rule 15c2-12”).
The Underwriter does not consider Richmond American or Beazerto be an “obligated person” with
respect to the Bonds for purposes of the Rule. Notwithstanding the foregoing, to assist in the marketing of the
Bonds, Richmond American and Beazerwill each agree to provide, or cause to be provided to EMMA, certain
updates with respect to their projects within Improvement Area HHand notices of certain enumerated events.
See Appendix G for a description of the specific nature of the annual reports and enumerated event notices to be
filed by Richmond American and Beazer.
See “CONTINUING DISCLOSURE,” AppendixF —“FORM OF DISTRICT CONTINUING
DISCLOSURE CERTIFICATE” and Appendix G —“FORM OF DEVELOPERCONTINUING
DISCLOSURE AGREEMENT.”
Parity Bonds for Refunding Purposes Only
The District will covenant in the Indenture not to issue additional indebtedness secured by the Net Taxes
on a parity with the Bonds (“Parity Bonds”) other than for refunding all or a portion of the Bondsor Parity
Bonds. See the caption “SOURCES OF PAYMENT FOR THE BONDS—Parity Bonds for Refunding
Purposes Only.” Other taxes and/or special assessments with liens equal in priority to the continuing lien of the
Special Taxes may also be levied in the future on the property within ImprovementArea HHof the District,
which could adversely affect the willingness of the landowners to pay the Special Taxes when due. See the
6
4829-1999-3000v2/022042-0030
captions “IMPROVEMENT AREA HH—Direct and Overlapping Debt”and “SPECIAL RISK FACTORS—
Direct and Overlapping Indebtedness.”
Bond Owners’Risks
Certain events could affect the ability of the District 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 herein, 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.
Other Information
This Official Statement speaks only as of its date, and the information contained herein is subject to
change.
Brief descriptions of the Bonds and the Indenture are included in this Official Statement. Such
descriptions and information do not purport to be comprehensive or definitive. All references herein to the
Indenture, the Bonds 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, are qualified in their entirety by references to such documents, laws
and proceedings, and with respect to the Bonds, by reference to the Indenture. Capitalized terms not otherwise
defined in this Official Statement have the meanings set forth in Appendix E.
Copies of the 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.
FINANCING PLAN
Estimated Sources and Uses of Funds
The following table sets forth the expected sources and uses of Bond proceeds.
Sources of Funds
Principal Amount of Bonds $
Plus/LessOriginal Issue Premium/Discount
Total Sources $
Uses of Funds:
Interest Account(1)
Acquisition and Construction Fund $
Costs of Issuance Account(2)
Reserve Account of the Special Tax Fund
Total Uses $
(1)Reflects capitalized interest on the Bonds through March 1, 2020.
(2)To pay costs of issuanceof the Bonds, including legal fees,Underwriter’s discount,printing costs, and fees of the Appraiser,
Special Tax Consultantand the Trustee.
THE BONDS
General Provisions
The Bonds will be dated their date of delivery and will bear interest at the rates per annum set forth on
the inside cover page hereof, payable semiannually on each March1 and September1, commencing March 1,
2020(each, an “Interest Payment Date”), and will mature in the amounts and on the dates set forth on the inside
7
4829-1999-3000v2/022042-0030
cover page of this Official Statement. The Bonds will be issued in fully registered form in denominations of
$5,000 or any integral multiple thereof.
Interest will be calculated on the basis of a 360-day year comprised of twelve 30-day months. Interest
on any Bond will be payable from the Interest Payment Date next preceding the date of authentication of that
Bond, unless: (i) such date of authentication is an Interest Payment Date, in which event interest will be payable
from such date of authentication; (ii)the date of authentication is after the fifteenth day of the month preceding
an Interest Payment Date, regardless of whether such day is a Business Day (each, a “Record Date”) but prior to
the immediately succeeding Interest Payment Date, in which event interest will 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 will be payable from the dated date of the
Bonds; provided, however, that if at the time of authentication of a Bond, interest is in default, interest on such
Bond will 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 on such Bond, interest on such Bond
will be payable from its dated date.
Interest on any Bond will be paid to the person whose name appears as its owner in the registration
books held by the Trustee on the close of business on the Record Date. Principal of, premium, if any, due upon
redemption is payable upon presentation and surrender of the Bonds at the principal corporate trust office of the
Trustee in Costa Mesa, California.
The Bonds will be issued as fully registered bonds and will be registered in the name of Cede & Co., as
nominee of 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 thereof. So long as
DTC is the securities depository all payments of principal and interest on the Bonds will be made to DTC and
will be paid to the Beneficial Owners in accordance with DTC’s procedures and the procedures of DTC’s
Participants. See APPENDIXH—“BOOK-ENTRY-ONLY SYSTEM.”
In the event the Bonds are not held in book-entry form, interest will be paid by check of the Trustee
mailed by first class mail, postage prepaid, to the Bondowner at its address on the registration books kept by the
Trustee. Pursuant to a written request prior to the Record Date of a Bondowner of at least $1,000,000 in aggregate
principal amount of Bonds, payment will be made by wire transfer in immediately available funds to a designated
account in the United States.
8
4829-1999-3000v2/022042-0030
Debt Service Schedule
The following table presents the annual debt service on the Bonds (including sinking fund redemptions),
assuming that there are no optional or special mandatory redemptions. See the caption “—Redemption”below.
Year Ending
September1 Principal Interest Total Debt Service
$ $ $
Total $ $ $
Source: Underwriter.
9
4829-1999-3000v2/022042-0030
Redemption
Optional Redemption.* The Bonds may be redeemed at the option of the District from any source of
funds on any Interest Payment Date on or after September1, 20__, in whole or in part, from such maturities as
are selected by the District and by lot within a maturity, at the following redemption prices, expressed as a
percentage of the principal amount to be redeemed, together with accrued interest to the date of redemption:
Redemption Date Redemption Price
September 1, 20__ and March1, 20__103%
September 1, 20__ and March1, 20__102
September 1, 20__ and March1, 20__101
September1, 20__ and any Interest Payment Date Thereafter 100
In the event that the District elects to redeem Bonds as provided above, the District will give written
notice to the Trustee of its election to so redeem, the redemption date and the principal amount of the Bonds of
each maturity to be redeemed. The notice to the Trustee will be given at least 30 but no more than 60 days prior
to the redemption date, or by such later date as is acceptable to the Trustee.
Mandatory Sinking Fund Redemption.* The Bonds maturing on September1, 20__ (the “20__ Term
Bonds”) will be calledbefore maturity and redeemed, from the Sinking Fund Payments that have been deposited
into the Redemption Account established by the Indenture, on September1, 20__, and on each September1
thereafter prior to maturity, in accordance with the schedule of Sinking Fund Payments set forth below. The
20__ Term Bonds so called for redemption will be selected by the Trustee by lot and will be redeemed at a
redemption price for each redeemed 20__ Term Bond equal to the principal amount thereof, plus accrued interest
to the redemption date, without premium, as follows:
Term Bonds Maturing September 1, 20__
Sinking Fund Redemption Date
(September1)Sinking Payments
$
†
†Maturity.
The Bonds maturing on September1, 20__ (the “20__ Term Bonds” and together with the 20__ Term
Bonds, the “Term Bonds”) will be called before maturity and redeemed, from the Sinking Fund Payments that
have been deposited into the Redemption Account established by the Indenture, on September1, 20__, and on
each September1 thereafter prior to maturity, in accordance with the schedule of Sinking Fund Payments set
forth below. The 20__ Term Bonds so called for redemption will be selected by the Trustee by lot and will be
redeemed at a redemption price for each redeemed 20__ Term Bond equal to the principal amount thereof, plus
accrued interest to the redemption date, without premium, as follows:
*Preliminary, subject to change.
10
4829-1999-3000v2/022042-0030
Term Bonds Maturing September 1, 20__
Sinking Fund Redemption Date
(September1)Sinking Payments
$
†
†Maturity.
If the District purchases Term Bonds during the Fiscal Year immediately preceding one of the sinking
fund redemption dates specified above, the District will notify the Trustee at least 45 days prior to the redemption
date as to the principal amount purchased, and the amount purchased will be credited at the time of purchase to
the next Sinking Fund Payment for the Term Bond so purchased, to the extent of the full principal amount of the
purchase. All Term Bonds purchased will be cancelled pursuant to the Indenture.
In the event of a partial optional redemption or special mandatory redemption of the Term Bonds, each
of the remaining Sinking Fund Payments for such Term Bonds will be reduced, as nearly as practicable, on a
pro rata basis.
Special Mandatory Redemption from Special Tax Prepayments. The Bonds are subject to special
mandatory redemption as a whole or in part on a pro rata basis among maturities and by lot within a maturity,
on any Interest Payment Dateon and after March 1, 2020,and will be redeemed by the Trustee, from any amounts
paid by the District to the Trustee and designated by the District as a prepayment of Special Taxes for one or
more parcels in Improvement Area HHmade in accordance with the Rate and Method (the “Prepayments”)
deposited to the Redemption Account pursuant to the Indenture, plus amounts transferred from the Reserve
Account pursuant to the 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 Date Redemption
Price
Any Interest Payment DatefromMarch 1, 2020through and including March1, 20__103%
September 1, 20__ and March1, 20__102
September1, 20__ and March 1, 20__101
September 1, 20__ and any Interest Payment Date thereafter 100
See the caption “SPECIAL RISK FACTORS—Potential Early Redemption of Bonds from Prepayments
or Assessment Bond Proceeds” for a discussion of the potential for a lower than expected yield on the Bonds as
a result of a special mandatory redemption from prepayment of Special Taxes.
Notice of Redemption. So long as the Bonds are held in book-entry form, notice of redemption will be
sentby the Trustee to DTC under the DTC book-entry only system and not to the Beneficial Owners of the
Bonds. Neither the District nor the Trustee is responsible for notifying the Beneficial Owners, who are to be
notified in accordance with the procedures in effect for the DTC book-entry system. See AppendixH—
“BOOK-ENTRY ONLY SYSTEM.”
The Trustee will give notice, in the name of the District, of the redemption of Bonds. Such notice of
redemption will: (i)specify the CUSIP numbers (if any), the bond numbers and the maturity date or dates of the
Bonds selected for redemption, except that where all of the Bonds are subject to redemption, or all of the Bonds
of one maturity are to be redeemed, the bond numbers of such issue need not be specified; (ii)state the date fixed
11
4829-1999-3000v2/022042-0030
for redemption and surrender of the Bonds to be redeemed; (iii)state the redemption price; (iv)state the place
or places where the Bonds are to be redeemed; (v)in the case of Bonds to be redeemed only in part, state the
portion of such Bond which is to be redeemed; (vi)state the date of issue of the Bonds as originally issued;
(vii)state the rate of interest borne by each Bond being redeemed; and (viii)state any other descriptive
information needed to identify accurately the Bonds being redeemed as specified by the Trustee. Such notice
will further state that on the date fixed for redemption, there will become due and payable on each Bond, or
portion thereof called for redemption, the principal thereof, together with any premium, and interest accrued to
the redemption date, and that from and after such date, interest thereon will cease to accrue and be payable. At
least 30 days but no more than 45 days prior to the redemption date, the Trustee will mail a copy of such notice
of redemption, by first class mail, postage prepaid, to the respective Owners thereof at their addresses appearing
on the Bond Register, and to the original purchaser of any Bonds; provided, however, so long as the Bonds are
registered in the name of the Nominee, such notice shall be given in such manner as complies with the
requirements of the Depository. The actual receipt by the Owner of any Bond of notice of such redemption is
not a condition precedent to redemption, and neither the failure to receive nor any defect in such notice will
affect the validity of the proceedings for the redemption of such Bonds, or the cessation of interest on the
redemption date. A certificate by the Trustee that notice of such redemption has been given as provided in the
Indenture will be conclusive as against all parties and the Owner is not entitled to show that he or she failed to
receive notice of such redemption.
In addition to the foregoing notice, further notice will be given by the Trustee as set out below, but no
defect in said further notice nor any failure to give all or any portion of such further notice will in any manner
defeat the effectiveness of a call for redemption if notice thereof is given as above prescribed.
Each further notice of redemption will be sent not later than the date that notice of redemption is given
to theOwners pursuant to the Indenture by first class mail or facsimile to the Depository and to any other
registered securities depositories then in the business of holding substantial amounts of obligations of types
comprising the Bonds as determined by the Trustee and to one or more of the national information services that
the Trustee determines are in the business of disseminating notice of redemption of obligations such as the
Bonds.
Upon the payment of the redemption price of any Bonds being redeemed, each check or other transfer
of funds issued for such purpose will 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.
With respect to any notice of optional redemption of Bonds, such notice maystate that such redemption
is conditional upon the receipt by the Trustee on or prior to the date fixed for such redemption of moneys
sufficient to pay the principal of, premium, if any, and interest on such Bonds to be redeemed and that, if such
moneys have not been so received, said notice will be of no force and effect and the Trustee will not be required
to redeem such Bonds. In the event that such notice of redemption containssuch a condition and such moneys
are not so received, the redemption will not be made, and the Trustee will within a reasonable time thereafter
give notice, in the manner in which the notice of redemption was given, that such moneys were not so received.
Selection of Bonds for Redemption. If less than all of the Bonds Outstanding are to be redeemed, the
portion of any Bond of a denomination of more than $5,000 to be redeemed will be in the principal amount of
$5,000 or an integral multiple thereof. In selecting portions of such Bonds for redemption, the Trustee will treat
such Bonds, as applicable, as representing that number of Bonds of $5,000 denominations which is obtained by
dividing the principal amount of such Bonds to be redeemed in part by $5,000. The procedure for the selection
of Parity Bonds for redemption may be modified as set forth in the Supplemental Indenture for such Parity
Bonds. The Trustee will promptly notify the District in writing of the Bonds, or portions thereof, selected for
redemption.
Partial Redemption of Bonds. Upon surrender of any Bond to be redeemed in part only, the District
will execute and the Trustee will authenticate and deliver to the Owner, at the expense of the District, a new
12
4829-1999-3000v2/022042-0030
Bond or Bonds of authorized denominations equal in aggregate principal amount to the unredeemed portion of
the Bonds surrendered, with the same interest rate and the same maturity.
Effect of Notice and Availability of Redemption Money. Notice of redemption having been duly given,
as providedin the Indenture, and the amount necessary for the redemption having been made available for that
purpose and being available therefor on the date fixed for such redemption: (i) the Bonds, or portions thereof,
designated for redemption will, on the date fixed for redemption, become due and payable at the redemption
price thereof as provided in the Indenture, anything in the Indenture or in the Bonds to the contrary
notwithstanding; (ii) upon presentation and surrender thereof at the office of the Trustee, the redemption price
of such Bonds will be paid to the Owners thereof; (iii) as of the redemption date the Bonds, or portions thereof
so designated for redemption will be deemed to be no longer Outstanding and such Bonds, or portions thereof,
will cease tobear further interest; and (iv) as of the date fixed for redemption no Owner of any of the Bonds, or
portions thereof so designated for redemption will be entitled to any of the benefits of the Indenture, or to any
other rights, except with respect to payment of the redemption price and interest accrued to the redemption date
from the amounts so made available.
Registration, Transfer and Exchange
Registration. The Trustee will keep sufficient books for the registration and transfer of the Bonds. The
ownership of the Bonds will be established by the Bond registration books held by the Trustee.
Transfer or Exchange. Subject to the limitations set forth in the following paragraph, the registration
of 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 or her duly authorized attorney, upon surrender of such Bond for
cancellation at the office of the Trustee, accompanied by delivery of written instrument of transfer in a form
acceptable to the Trustee and duly executed by the Owner or his or her duly authorized attorney.
Bonds may be exchanged at the office of the Trustee for a like aggregate principal amount of Bonds for
other authorized denominations of the same maturity and issue. The Trustee may not collect from the Owner
any charge for any new Bond issued upon any exchange or transfer, but will require the Owner requesting such
exchange or transfer to pay any tax or other governmental charge required to be paid with respect to such
exchange or transfer. Whenever any Bonds are surrendered for registration of transfer or exchange, the District
will execute and the Trustee will authenticate and deliver a new Bond or Bonds, as applicable, of the same issue
and maturity, for a like aggregate principal amount; provided that the Trustee is not required to register transfers
or make exchanges of: (i) Bonds for a period of 15 days next preceding any selection of the Bonds to be
redeemed; or (ii) any Bonds chosenfor redemption.
SOURCES OF PAYMENT FOR THE BONDS
Limited Obligations
The Bonds are special, limited obligations of the District payable only from amounts pledged under the
Indenture and from no other sources.
The Special Taxes are the primary source of security for the repayment of the Bonds. Under the
Indenture, the District has pledged to repay the Bonds from the Net Taxes (which are Special Tax revenues
remaining after the payment of the annual Administrative Expenses in an amount not to exceed the
Administrative Expenses Cap(as defined in the Indenture)) and from amounts held in the Special Tax Fund
(other than amounts held in the Administrative Expense Account therein). Special Tax revenues include the
proceeds of the annual Special Tax levywithin Improvement Area HHreceived by the District, including any
scheduled payments and Prepayments thereof, and the net proceeds of the redemption of delinquent Special
Taxes or sale of property sold as a result of foreclosure of the lien of delinquent SpecialTaxes to the amount of
said lien, and penalties and interest thereon; provided that any delinquent Special Tax sold to an independent
13
4829-1999-3000v2/022042-0030
third-party or to the City for 100% of the delinquent amount shall no longer be pledged under the Indentureto
the payment of the Bonds or Parity Bonds.
In the event that the Special Tax revenues are not received when due, the only sources of funds available
to pay the debt service on the Bonds are amounts held by the Trustee in the Special Tax Fund (other than the
Administrative Expense Account therein), including amounts held in the Reserve Account therein, for the
exclusive benefit of the Owners of the Bonds.
NEITHER THE FAITH AND CREDIT NOR THE TAXING POWER OF THE CITY, THE COUNTY,
THE STATE OR ANY POLITICAL SUBDIVISION THEREOF IS PLEDGED TO THE PAYMENT OF THE
BONDS. EXCEPT FOR THE NET TAXES, NO OTHER TAXES ARE PLEDGED TO THE PAYMENT OF
THE BONDS. THE BONDS ARE NOT GENERAL OR SPECIAL OBLIGATIONS OF THE CITY BUT ARE
LIMITED OBLIGATIONS OF THE DISTRICT PAYABLE SOLELY FROM THE NET TAXES AND
OTHER AMOUNTS PLEDGED UNDER THE INDENTURE AS MORE FULLY DESCRIBED HEREIN.
Special Taxes
Authorization and Pledge. In accordance with the provisions of the Act, the City established the
District on February 28, 2006for the purpose of financing ofvarious public improvementsrequired in connection
with the proposed development within the District. On February 25, 2014, the City designated Improvement
Area HHin the District. At a special election held on April 8, 2014, the qualified electorswithin Improvement
Area HHat the time of such election, authorized the District to incur indebtednessin an amount not to exceed
$9,000,000for Improvement Area HH, and tolevy of the Special Taxes on property within Improvement Area
HHto repay such bonds and to finance the Facilities (as defined below).
The Bonds will be repaid only from annual Net Taxes derived from the levy and collection of Special
Taxes pursuant to the Rate and Method. The Rate and Method permits the prepayment of Special Taxes for an
Assessor’s Parcel, and any such Prepayments will be applied to redeem Bonds and Parity Bonds, if any. The
Net Taxes collected from the annual Special Tax levy and the proceeds of any Prepaymenthave been pledged
under the Indentureto the repayment of the Bonds and Parity Bonds.
The Special Taxes levied in any Fiscal Year may not exceed the maximum rates authorized pursuant to
the Rate and Method. See “—Rate and Method of Apportionmentof Special Tax”and AppendixA—”RATE
AND METHOD OF APPORTIONMENT OF SPECIAL TAX.” There is no assurance that the Net Taxes will,
in all circumstances, be adequate to pay the principal of and interest on the Bonds when due. See the caption
“SPECIAL RISK FACTORS—Insufficiency of Special Tax Revenues.”
Rate and Method of Apportionment of Special Tax. The Rate and Method applicable to the Districtis
contained in AppendixA —“RATE AND METHOD OF APPORTIONMENT OF SPECIAL TAX.” The
meaning of the defined terms used in this section are as set forth in AppendixA.
In general, the Rate and Method imposes a different Maximum Special Taxfor Facilitieson Taxable
Property within Improvement Area HHdepending upon whether such Taxable Property is classified as:
(i)“Developed Property”(in general, Taxable Property, exclusive of Taxable Public Property and Taxable
Property Owner Association Property,pursuant to the provisions of the Rate and Method and which is included
in a Final Subdivisionrecorded prior to the January1 preceding the Fiscal Year in which the Special Tax for
Facilities is being levied and a building permit for new construction has beenissued on or before May1
preceding such Fiscal Year), (ii)“Approved Property”(in general, parcels of Taxable Property included in a
Final Map recorded prior to the January1 preceding the Fiscal Year in which the Special Tax for Facilities is
being levied but for which no building permit was issued before March1 preceding such Fiscal Year),
(iii)“TaxableProperty Owner Association Property”(in general, parcels of Property Owner Association
Property that are not exempt pursuant to the Rate and Method), (iv) “Taxable Public Property”(in general,
parcels of Public Property that are not exempt pursuant to the Rate and Method), or (v) “Undeveloped Property”
14
4829-1999-3000v2/022042-0030
(in general, all Taxable Property not classified as Developed Property, Taxable Property Owner Association
Property, or Taxable Public Property).
Pursuant to the Rate and Methodthe District is required to determine the “Special Tax for Facilities
Requirement”for each Fiscal Year. The Special Taxfor FacilitiesRequirement for Improvement Area HHof
the Districtis the amount required in any Fiscal Year to: (i)pay debt service on all Outstanding Bondsand
Parity Bondsdue in the calendar year commencingin such Fiscal Year, (ii)pay period costs on the Bondsand
Parity Bonds, including but not limited to, credit enhancement and rebate payments on the Bondsand Parity
Bondsdue in the calendar year commencing in such Fiscal Year, (iii)pay Administrative Expenses, (iv) pay any
amounts required to establish or replenishany reserve funds for all Outstanding Bondsand Parity Bonds, (v) pay
for reasonably anticipated Special Tax for Facilities delinquencies, (vi)pay directly for acquisition or
construction of the Facilities to the extentthat the inclusion of such amount does not increase the Special Tax
for Facilities levy on Undeveloped Property, less (vii)a credit for fundsavailable to reduce the annual Special
Tax for Facilities levy, as determined by the CFD Administrator pursuant to the Indenture.
The Special Tax for Facilities RequirementforImprovement Area HHofthe Districtis to be satisfied
first by levying the Special Tax for Facilities on eachAssessor’s Parcel of Developed Propertyin an amount
equal to100% of the applicable Assigned Special Taxfor Facilities. If additional moneys are needed to satisfy
the Special TaxRequirementfor Facilities, the Special Tax for Facilities shall be levied Proportionately on each
Assessor’s Parcel of Approved Property at up to 100% of the Maximum Special Tax for Facilities for Approved
Property. If additional moneys are still needed to satisfy the Special TaxRequirementfor Facilities, the Special
Taxfor Facilitiesshall be levied Proportionately on each Assessor’s Parcel of Undeveloped Property at up to
100% of the Maximum Special Tax for Facilities for Undeveloped Property. If additional moneys are needed
to satisfy the Special Tax Requirementfor Facilities, the Special Taxfor Facilities shall be levied on each
Assessor’s Parcel of Developed Property whose Maximum Special Tax for Facilities is derived by the
application of the Backup Special Tax for Facilitiesshall be increased in equal percentages from the Assigned
Special Tax for Facilities up to the Maximum Special Tax for Facilities. Finally, if additional moneys are needed
to satisfy the Special Taxfor FacilitiesRequirement, the Special Tax for Facilities shall be levied Proportionately
on eachAssessor’s Parcelsof Taxable Property Owner Association Property and Taxable Public Property at up
to 100% of the Maximum Special Tax for Facilities for Taxable Property Owner Association Property or Taxable
Public Property. Notwithstanding the above, under no circumstances will the Special Tax for Facilities levied
against any Assessor’s Parcel of Residential Property be increasedby more than 10% per Fiscal Yearas a
consequence of delinquency or defaultby the owner of any other Assessor’s Parcel within Improvement Area
HHof the District.
In Fiscal Year 2019-20, the District levied Special Taxes on 79parcels of Developed Property within
Improvement Area HHin the amount of $133,043.14. Based on the number of building permitsissued within
Improvement Area HHas of the Date of Value, 153parcels will be classified as Developed Property and 27
parcels will be classified as Approved Property for the Fiscal Year 2020-21Special Tax levy in accordance with
the Rate and Method.
For Fiscal Year 2020-21, theAssigned Special Taxfor Developed Property within Improvement Area
HHthat is classified as Residential Property will rangefrom $1,188.52per taxable unit witha Residential Floor
Area less than1,100square feet to $2,712.26per taxable unit with a Residential Floor Area greater than
3,499square feet.
On each July 1the Assigned Special Taxfor Facilitiesratefor Developed Propertyand the Maximum
Special Tax for Facilities for Approved Property, Taxable Property Owner Association Property, Taxable Public
Property, and Undeveloped Property,shall be increased by two percent (2.00%) of the amount in effect in the
prior Fiscal Year.
Annual Debt Service for the Bonds has been structured so thatDeveloped Propertyat buildoutlevied at
the Assigned Special Tax for Facilities rate,assuming no delinquencies, will generate in each Fiscal Year not
15
4829-1999-3000v2/022042-0030
less thanthe Administrative Expenses Cap plus110% of debt service payable with respect to the Bonds in the
calendar year that begins in that Fiscal Year, assuming that Special Taxes are levied and collected on such
Developed Property pursuant to the Rate and Method.
Table 1 below sets forth the Assigned Special Tax forFacilities of Developed Property,the Maximum
Special Tax for Approved Property,the projected Fiscal Year 2020-21Special Tax levy and the percent of such
levy based on land use type(based on development status as of October 1, 2019).
TABLE 1
CITY OF LAKE ELSINORE
COMMUNITY FACILITIES DISTRICT NO. 2006-1 (SUMMERLY)
(IMPROVEMENT AREA HH)
ASSIGNED SPECIAL TAX RATES FOR FISCAL YEAR 2020-21
Land Use Type
Residential
Floor Area
(sq. ft.)
Maximum/
Assigned
Special Tax
Rates
Fiscal Year
2020-21(1)
Estimated
Fiscal Year
2020-21
Special
Tax Levy
No. of
Taxable
Units
Aggregate
Estimated
Special Taxes
Fiscal Year
2020-21 (1)
Percent of
Total
Estimated
Fiscal Year
2020-21
Special Tax
Levy
Residential Property < 1,100 $ 1,188.52 $ 1,188.52 0 $0.00 0.0
Residential Property 1,100-1,299 1,279.94 1,279.94 0 0.00 0.0
Residential Property 1,300-1,499 1,371.37 1,371.37 0 0.00 0.0
Residential Property 1,500-1,699 1,462.79 1,462.79 16 23,404.72 7.3
Residential Property 1,700-1,899 1,554.22 1,554.22 16 24,867.47 7.8
Residential Property 1,900-2,099 1,645.64 1,645.64 16 26,330.22 8.2
Residential Property 2,100-2,299 1,737.07 1,737.07 0 0.00 0.0
Residential Property 2,300-2,499 1,828.49 1,828.49 52 95,081.67 29.8
Residential Property 2,500-2,699 1,889.44 1,889.44 42 79,356.54 24.8
Residential Property 2,700-2,899 1,980.86 1,980.86 0 0.00 0.0
Residential Property 2,900-3,099 2,163.72 2,163.72 11 23,800.90 7.5
Residential Property 3,100-3,299 2,346.56 2,346.56 0 0.00 0.0
Residential Property 3,300-3,499 2,529.42 2,529.42 0 0.00 0.0
Residential Property > 3,499 2,712.26 2,712.26 0 0.00 0.0
Approved Property N/A 17,605.99 1,726.91 27 46,626.56 14.6
Non-Residential Property N/A 17,605.99 N/A 0 0.00 0.0
Total 180 $319,468.08 100.0%
(1)Reflects the Assigned Special Tax Rates for Developed Property and the Maximum Special Tax Rate forApproved Property
and Non-Residential Property.
(2)Includes the Fiscal Year 2020-21Administrative ExpensesCapof $20,400.
Source: Spicer Consulting Group, LLC.
Backup Special Tax Rates. The Fiscal Year 2020-21Backup Special Tax for Facilities attributable to
a Final Subdivision will equal $17,605.99, multiplied by the Acreage of all Taxable Property, exclusive of any
Taxable Property Owner Association Property and Taxable Public Property, therein. The Backup Special Tax
for Facilities for each Assessor’s Parcel of Residential Property shall be computed by dividing the Backup
Special Tax for Facilities attributable to the applicable Final Subdivision by the number of Assessor’s Parcels
for which building permits for residential construction have or may be issued (i.e., the number or residential
lots). The Backup Special Tax for Facilities for each Assessor’s Parcel of Non-Residential Property therein shall
equal $17,605.99multiplied by the Acreage of such Assessor’s Parcel.
If a Final Subdivision includes Assessor’s Parcels of Taxable Property for which building permits for
both residential and non-residential construction may be issued, exclusive of Taxable Property Owner
Association Property and Taxable Public Property, then the Backup Special Tax for Facilities foreach Assessor’s
16
4829-1999-3000v2/022042-0030
Parcel of Residential Property shall be computed exclusive of the Acreage and Assessor’s Parcels of property
for which building permits for non-residential construction may be issued.
Notwithstanding the foregoing, if all or any portion of the Final Subdivision(s) described in above is
subsequently changed or modified by recordation of a lot line adjustment or similar instrument, and only if the
CFD Administrator determines that such change or modification results in a decrease in the number of Assessor’s
Parcels of Taxable Property for which building permits for residential construction have or may be issued within
such Final Subdivision, then the Backup Special Tax for Facilities for each Assessor’s Parcel of Developed
Property that is part of the lot line adjustment or similar instrument for such Final Subdivision shall be a rate per
Acre as calculated in accordance with the Rate and Method. The Backup Special Tax for Facilities previously
determined for an Assessor’s Parcel of DevelopedProperty that is not a part of the lot line adjustment or similar
instrument for such Final Subdivision shall not be recalculated.
All Assessor’s Parcels within Improvement AreaHHwill be relieved simultaneously and permanently
from the obligation to payand disclose the Backup Special Tax if the CFD Administrator determines that the
annual debt service required for the Outstanding Bondsand Parity Bonds, when compared to the Assigned
Special Taxes for Facilities that maybe levied against all Assessor’s Parcels of Developed Property results in
110% debt service coverage (i.e., the aggregate Assigned Special Taxes for Facilities that may be levied against
all Developed Property in each remaining Fiscal Year based on then existing development in ImprovementArea
HHis at least equal to the sum of (i) the Administrative Expenses and (ii) 1.10 times maximum annual debt
service, in each remaining Fiscal Year on the Outstanding Bondsand Parity Bonds).
On each July 1, the Backup Special Tax for Facilities rate shall be increased by two percent (2.00%) of
the amount in effect in the prior Fiscal Year.
In some instances, an Assessor’s Parcel of Developed Property may contain more than one Land Use
Class(as defined in the Rate and Method). The Maximum Special Tax for Facilities levied on an Assessor’s
Parcel shall be the sum of the Maximum Special Tax for Facilities for all Land Use Classes located on that
Assessor’s Parcel. The CFD Administrator’s allocation to each type of property shall be final.
Prepayment of Special Taxes. The Annual Special Tax obligation for an Assessor’s Parcel of
Developed Property, or Undeveloped Property for which a building permit has been issued, may be prepaid in
full, or in part, provided that the terms set forth under the Rate and Method are satisfied. The Prepayment amount
is calculated based on the sum of the Bond Redemption Amount, the Redemption Premium, the Future Facilities
Amount, the Defeasance Amount, Administrative Fees and Expensesand less a credit for the resulting reduction
in the Reserve Requirement for the Bonds (if any)and less capitalized interest (if any), all as specified in
SectionG of the Rate and Method attached as AppendixA. Prepayments of Special Taxes will be applied to
effect an extraordinary redemption of Bonds and Parity Bonds. See “THE BONDS —Redemption —Special
Mandatory Redemption from Special Tax Prepayments”and “SPECIAL RISK FACTORS—Potential Early
Redemption of Bonds from Prepayments or Assessment Bond Proceeds.”
Estimated Debt Service Coverage. In connection with the issuance of the Bonds, the Special Tax
Consultant will certify that the Maximum Special Taxfor Facilitiesthat may be levied in each Fiscal Year on
Assessor’s Parcels within Improvement Area HHclassified as Taxable Property will be at least equal to the sum
of:(i)110% of Maximum Annual Debt Service on the Bonds; plus (ii) the Administrative Expenses Cap. Actual
collections of the Special Tax will depend on the amount of Special Tax delinquencies.
Limitation on Special Tax Levy and Potential Impact on Coverage. Pursuant to Section53321(d) of
the Government Code, the special tax levied against any Assessor’s parcel for which an occupancy permit for
private residential use has been issued shall not be increased as a consequence of delinquency or default by the
owner of any other Assessor’s parcel within Improvement Area HHby more than 10% above the amount that
would have been levied in that fiscal year had there never been any such delinquencies or defaults. As a result,
17
4829-1999-3000v2/022042-0030
itis possible that the District may not be able to increase the tax levy to the MaximumSpecial Taxratesin all
years.
Levy, Collection and Application of Special Taxes. The Special Taxes are leviedand collected by the
Treasurer-Tax Collector of the County in the same manner and at the same time as advalorem property taxes,
although it is possible that the District could elect to provide handbills to property owners within Improvement
Area HH.
The District will covenant in the Indenture that each year it will levy Special Taxes up to the maximum
rates permitted under the Rate and Method in an amount sufficient, together with other amounts on deposit in
the Special Tax Fund, to pay the principal of and interest on any Outstanding Bonds and Parity Bonds, to
replenish the Reserve Account to the Reserve Requirement and to pay Administrative Expenses.
The District will makecertain covenants in the Indenture which are intended to ensure that the current
maximum Special Tax rates and method of collection of the Special Taxes are not altered in a manner that would
impair the District’s ability to collect sufficient Special Taxes to pay debt service on the Bonds, Parity Bonds
and Administrative Expenses when due.
First, the District will covenant in the Indenture 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 Bonds and anyParity Bonds are Outstanding.
Second, the District will covenant in the Indenture, to the maximum extent that the law permits it to do
so, not to initiate proceedings to reduce the maximum Special Tax rates for Improvement Area HH, unless, in
connection therewith, the District receives a certificate from one or more Independent Financial Consultants
which, when taken together, certify that: (i)such changes do not reduce the maximum Special Taxes that may
be levied in each year on property within Improvement Area HHto an amount which is lessthan the
Administrative Expense Cap plus 110% of the Annual Debt Service due in each corresponding future Bond Year
with respect to the Bonds and Parity Bonds Outstanding as of the date of such proposed reduction; and (ii)the
District is not delinquent in the payment of the principal of or interest on the Bonds or any Parity Bonds.
Third, the District will covenant in the Indenture that, in the event that any initiative is adopted by the
qualified electors within Improvement Area HHwhich purports to reduce the maximum Special Tax below the
levels specified in the preceding paragraphor to limit the power of the District to levy the Special Taxes for the
purposes set forth in the Indenture, it will commence and pursue legal action in order to preserve its ability to
comply with such covenants. The District can provide no assurance that any such legal action will be successful.
See the caption “SPECIAL RISK FACTORS—Proposition 218.”
Fourth, the District will covenant in the Indenture that it will not adopt any policy pursuant to the Act
permitting the tender of Bonds or Parity Bonds in full payment or partial payment of any Special Taxes unless
the District has first received a certificate from an Independent Financial Consultant that the acceptance of such
a tender will not result in the District having insufficient Net Taxes to pay the principal of and interest on the
Bonds and Parity Bonds when due.
See Appendix Eunder the caption “COVENANTS AND WARRANTY.”
Although the Special Taxes constitute liens ontaxed parcels within Improvement Area HH, they do not
constitute a personal indebtedness of the owners of property within Improvement Area HH. Moreover, other
liens for taxes and assessments already exist on the property located within Improvement Area HHand others
could come into existence in the future in certain situations without the consent or knowledge of the City or the
landowners in Improvement Area HH. See the captions “IMPROVEMENT AREA HH—Direct and
Overlapping Debt”and “SPECIAL RISK FACTORS—Direct and Overlapping Indebtedness.” There is no
assurance that property owners will be financially able to pay the annual Special Taxes or that they will pay such
18
4829-1999-3000v2/022042-0030
taxes even if financially able to do so, all as more fully described under the caption “SPECIAL RISK
FACTORS.”
Proceeds of Foreclosure Sales. The net proceeds received following a judicial foreclosure sale of
property within Improvement Area HHresulting from a property owner’s failure to pay the Special Taxes when
due are included within the Net Taxes pledged to the payment of principal of and interest on the Bondsand any
Parity Bondsunder the Indenture.
Pursuant to Section53356.1 of the Act, in the event of any delinquency in the payment of any Special
Tax or receipt by the District of Special Taxes in an amount which is less than the Special Taxes levied, the City
Council, as the legislative body of the District, may order that Special Taxes be collected by a Superior Court
action to foreclose the lien within specified time limits. In such an action, the real property subject to the unpaid
amount may be sold at a judicial foreclosure sale. Under the Act, the commencement of judicial foreclosure
following the nonpayment of a Special Tax is not mandatory. However, the District will covenant in the
Indenturefor the benefit of the owners of the Bonds and any Parity Bonds that it will: (i) commence judicial
foreclosure proceedings against parcels with delinquent Special Taxes in excess of $5,000 by the October1
following the close of each Fiscal Year in which such Special Taxes were due; and (ii) commence judicial
foreclosure proceedings against all parcels with delinquent Special Taxes by the October1 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 (iii)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 Account is at least equal to the Reserve Requirement.
The District will covenant in the Indenture that it will deposit the net proceeds of any foreclosure in the
Special Tax Fund and will apply such proceeds remaining after the payment of Administrative Expenses to make
current payments of principal and interest on the Bonds and any Parity Bonds, to bring the amount on deposit in
the Reserve Account up to the Reserve Requirement and to pay any delinquent installments of principal or
interest due on the Bonds and any Parity Bonds.
If foreclosure is necessary and other funds (including amounts in the Reserve Account) have been
exhausted, debt service payments on the Bonds could be delayed unless the foreclosure proceedings produce
sufficient net foreclosure sale proceeds. Judicial foreclosure actions are subject to the normal delays associated
with court cases and may be further slowed by bankruptcy actions, involvement by agencies of the federal
government and other factors beyond the control of the City and the District. See the caption “SPECIAL RISK
FACTORS—Enforcement Delays –Bankruptcy.” Moreover, no assurances can be given that the real property
subject to foreclosure and sale at a judicial foreclosure sale will be sold or, if sold, that the net proceeds of such
sale will be sufficient to pay any delinquent Special Tax installment. See the caption “SPECIAL RISK
FACTORS—Property Values.” Although the Act authorizes the District to cause such an action to be
commenced and diligently pursued to completion, the Act does not impose on the District or the City any
obligation to purchase or acquire any lot or parcel of property sold at a foreclosure sale if there is no other
purchaser at such sale. The Act provides that, in the case of a delinquency, the Special Tax will have the same
lien priority as is provided for advalorem taxes.
Collection of Special Taxes and Flow of Funds. The SpecialTaxes will be leviedand collected by the
Treasurer-Tax Collector of the County in the same manner and at the same time as advalorem property taxes,
although it is possible that the District could elect to provide handbills to property owners within Improvement
Area HH. When the County apportions Special Taxes to the District, the District will transmit the Special Taxes
to the Trustee for deposit in the Special Tax Fund established by the Indenture.
Except for Prepayments, which shall be deposited to the Redemption Account of the Special Tax Fund,
the Trustee shall, 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 Owners. The Trustee shall transfer the Special Taxes
on deposit in the Special Tax Fund on the dates,in the amounts andin the following order of priority, to:
19
4829-1999-3000v2/022042-0030
First:To the Administrative Expense Account in an amount up to the Administrative Expenses
Cap.
Second:To the Interest Account, an amount such that the balance in the Interest Account one
Business Day prior to each Interest Payment Date is equal to the installment of interest
due on the Bonds and any Parity Bonds on said Interest Payment Dateand any installment
of interest due on a previous Interest Payment Date which remains unpaid. Moneys in the
Interest Account will be used for the payment of interest on the Bonds and any Parity
Bonds as the same become due.
Third:To the Principal Account, an amount such that the balance in the Principal Account one
Business Day prior to September1 of each year, commencing September1, 2020, isequal
to the principal payment due on the Bonds and any Parity Bonds maturing on such
September1 and any principal payment due on a previous September1 which remains
unpaid. Moneys in the Principal Account shall be used for the payment of the principal
of such Bonds and any Parity Bonds as the same become due at maturity.
Fourth:To the Redemption Account, the amount needed to make the balance in the Redemption
Account one Business Day prior to each September1 on which a Sinking Fund Payment
is due equal to the Sinking Fund Payment due on any Outstanding Bonds and Parity Bonds
on such September1 and thereafter, to pay the principal and premium, if any, due in
connection with an optional redemption of Bonds or Parity Bonds.
Fifth:To the Reserve Account of the Special Tax Fund to the extent necessary to replenish the
Reserve Account to the Reserve Requirement.
Sixth:To the Administrative Expense Account ofthe Special Tax Fund the amount of any
Administrative Expenses for the current Bond Year in excess of the Administrative
Expenses Cap as directed by the City.
Seventh:To the Rebate Fund established by the Indenture to the extent directed by the City pursuant
to the Indenture.
Eighth:To the Surplus Fund established by the Indenture such remaining amounts in the Special
Tax Fund after making the foregoing transfers on September1.
Reserve Account of the Special Tax Fund
In order to secure further the payment of principal of and interest on the Bonds, the District is required,
upon delivery of the Bonds, to deposit in the Reserve Account and thereafter to maintain in the Reserve Account
an amount equal to the Reserve Requirement. The term “Reserve Requirement”is defined in the Indenture to
mean, that amount as of any date of calculation equal to the lesser of: (i)10% of the initial principal amount of
the Bonds and Parity Bonds, if any; (ii)Maximum Annual Debt Service on the then Outstanding Bonds and
Parity Bonds, if any; (iii)125% of average Annual Debt Service on the then Outstanding Bonds and Parity
Bonds;and(iv) $________, the initial Reserve Requirement. On the date of issuance of the Bonds, the District
will deposit $________from the proceeds of the Bondsinto the Reserve Accountto satisfy the initial Reserve
Requirement.
Subject to the limits on the maximum annual Special Tax levy set forth in the Rate and Method and in
the Indenture, the District will covenant in the Indenture to levy Special Taxes in an amount sufficient, in light
of the other intended uses of the Special Tax proceeds, to maintain the balance in the Reserve Account at the
Reserve Requirement. Amounts in the Reserve Account are to be applied: (i)to pay debt service on the Bonds,
or any Parity Bonds, including Sinking Fund Payments,to the extent that other monies are not available therefor;
20
4829-1999-3000v2/022042-0030
(ii)to redeem Bonds or Parity Bonds in the event of prepayment of Special Taxes,to optionally redeemBonds
or Parity Bonds or in connection with a partial defeasance of Bonds or Parity Bonds, in accordance with the
Indenture; and (iii)to pay any rebate requirements. See AppendixEunder the caption “CREATION OF FUNDS
AND APPLICATION OF PROCEEDS—Reserve Account of the Special Tax Fund.”
No Teeter Plan
Although the Riverside County Board of Supervisors has adopted the Alternative Method of
Distribution of Tax Levies and Collections and of Tax Sale Proceeds (the “Teeter Plan”) which allows each
entity levying secured property taxes in the County to draw on the amount of property taxes levied rather than
the amount actually collected, as provided for in Section4701 etseq. of the California Revenue and Taxation
Code, the District is not included in the County Teeter Plan. Consequently, the District may not draw on the
County Tax Loss Reserve Fund in the event of delinquencies in Special Tax payments within Improvement Area
HH.
Parity Bonds for Refunding Purposes Only
The District will covenant in the Indenture not to issue Parity Bonds except as provided in the Indenture
and only for the purposes of refunding all or a portion of the Bondsand any Parity Bonds. See AppendixE
under the caption “DEFEASANCE AND PARITY BONDS.”
Builders’Letters of Credit
Each of Richmond American, Beazer and D.R. Hortonhas providedan irrevocable letter of credit to
secure payment of Special Taxes leviedon the property in Improvement Area HHowned by it, each of which
identifies the Cityas beneficiary.During each Fiscal Year in which abuilder’s respectiveLettersof Credit isin
effect, the “Stated Amount” of itsLetter of Credit must equal the estimated amount of Special Taxes to be levied
on property owned by suchbuilderor itssuccessors-in-interest (other than individual homeowners) during that
Fiscal Yearand the following Fiscal Year. The initial amount of the Letter of Creditfor Richmond American,
Beazer and D.R. Horton, shall be $134,914.06,$192,812.31and $127,060.01, respectively. The initial term of
eachLetter of Credit is one yearfrom their respective dates of issuance, and each of Richmond American, Beazer
and D.R. Horton will maintain and cause the issuing bankto annually renew itsLetter of Crediteach year prior
to the expiration dateuntilit has conveyed 80% or more of the homesthat it plans to develop in Improvement
Area HH. When a builder has conveyed 80% or moreof the residential lots that it is developing within
Improvement Area HH, such builder’sLetter of Creditwill be released. Notwithstanding the foregoing, the
District may elect to waive the requirement for any of suchbuilders to obtain a Letterof Credit or may release
any of the Letters of Credit at any time.
IMPROVEMENT AREA HH
General Description of the Districtand Improvement Area HH
The District comprises a portion of Summerly, a planned residential community located in the southeast
portion of the City, to the east of Lake Elsinore. JohnLaingHomes was the original master developer of
Summerly and commenced construction thereof in 2007. Development of Summerly was delayed due to the
severe economic recession in the late 2000’s. McMillin acquired the partially-developed Summerly project in
2010 and is thecurrentmaster developer of property in the District.
At build-out, the Summerly project is expected to include approximately 1,677 residential units and
recreation and open space on approximately 700 acres. Of the 1,677 planned residential units in Summerly, 1,542
lots have been conveyed to merchant builders or built within fee-build ventures with the McMillin.
Approximately 1,224 completed homes have been sold and 1,172 have closed to individual homebuyers.
McMillin owns 135 lots in the final two neighborhoods that remain to be sold to merchant builders which are in
21
4829-1999-3000v2/022042-0030
a blue top condition. Completed amenities which serve the Summerly community include the Summer House,”
whichfeatures a fitness pool, a resort-style pool, picnic and lawn areas, restrooms, a barbeque terrace, a splash
park, an event room, and outdoor covered dining areas with barbeques.
Improvement Area HH is located within Summerly and is bordered to the north by Sunset Park and land
planned for future Summerly neighborhoods, to the east by Diamond Drive, and to the south and west by vacant
lands. McMillin has sold all of the property in Improvement Area HH that is planned for residential development
to three merchant builders–Richmond American, Beazer and D.R. Horton.
The property within Improvement Area HH is planned for 180single-family detached residential units.
As of the October 1, 2019Date of Value of the Appraisal, 45 of the 180planned residential units within
Improvement Area HH had been completed and conveyed to individual homeowners. As of such date, the three
merchant builders in Improvement Area HH in the aggregate owned sixcompleted model homes, 51homes
under construction and 78finished lots, as described below.
As of October 1, 2019, of the 65units plannedwithin its Senderoproject, Richmond Americanhad
completed and conveyed 23homes to individual homeowners and owned twomodel homes, 17 homes under
construction (oneof which wasover 95% complete), and 23finished lots.
As of October 1, 2019, of the 57units within its The Glen at Summerly project, Beazerhad completed
and conveyed fivehomes to individual homeowners and owned twomodel homes, 16 homes under construction
(twoof which were over 95% complete), and 34finished lots.
As of October 1, 2019, of the 58 units within its Laurel Pointeproject, D.R. Hortonhad completed and
conveyed 17homes to individual homeowners and owned two model homes, 18 homes under construction (nine
of which were over 95% completed), and 21finished lots.
The prior master developer, John Laing Homes, and the current master developer, McMillin, completed
the backbone infrastructure (sewer, water, storm drains, utilities, and arterial roads) necessary to complete the
phases of Summerly that have been developed to date, including the property in Improvement Area HH. Certain
backbone infrastructure remains to be completed by McMillin to achieve full buildout of Summerly, however,
completion of such infrastructure is not a condition to complete the development in Improvement Area HH. The
merchant builders within Improvement Areas HH are responsible for the in-tract infrastructure, which primarily
consists of streets for individual lot access and associated gutters and landscape improvements. The substantial
majority of such in-tract infrastructure is complete. Richmond American,Beazer, and D.R. Hortonexpect to
completeconstruction of the in-tract improvements associated with the remaining lots that they own within
Improvement Area HH as home construction on such lots is completed.
See the caption“PROPERTY OWNERSHIP AND THE DEVELOPMENT” for further information
with respect to the development within Improvement Area HH, Richmond American, Beazer, and D.R. Horton.
Water and sewer service to the property within Improvement Area HHis currently supplied by the
Elsinore Valley Municipal Water District. Electricity is currently supplied by Southern California Edison and
gas by Southern California Gas Company. Public education instruction is provided bythe Lake Elsinore Unified
School District.
The property within Improvement Area HHof the District is not located in an Alquist-Priolo Earthquake
Study Zone and is not located within one-half mile of an active earthquake fault. Additionally, Improvement
Area HHis not located in a flood plain area or in an area which the Department of Forestry and Fire Protection
of the State of California has designated as a high fire hazard severity zone. Notwithstanding the foregoing, the
property in Improvement Area HHmay be subject to unpredictable seismic activity, fires, flood, or other natural
disasters. See “SPECIAL RISK FACTORS —Natural Disasters.”
22
4829-1999-3000v2/022042-0030
A map showing the location of the Districtand Improvement Area HH,and an aerial photograph thereof
appear following the Table of Contents.
Authorized Uses of Bond Proceeds
Proceeds of the Bonds are authorized to be used to pay for the costs of construction of City facilities,
includingbut not limited to streets, streetscape, park and recreation facilities and fees of the Elsinore Valley
Municipal Water District, and related costs including designs, inspections, professional fees, annexation fees,
connection fees and acquisition costs.
Appraisal Report
The estimated assessed value of the property within Improvement Area HH, as shown on the County’s
assessment roll for Fiscal Year 2020-21, is approximately $1,069,143, which as aresult of timing of the County’s
determination of the assessed values for Fiscal Year 2020-21, did not reflecttheimprovement value of the
completed homes and homes under construction in Improvement Area HH.
Aproperty’s assessed value is not necessarily indicative of its market value. In order to provide
information with respect to the value of the taxable propertywithin Improvement Area HH, the Cityengaged
the Appraiserto prepare the Appraisal Report. The Appraiser has an “MAI”designation from the Appraisal
Institute and has prepared numerous appraisals for the sale of land-secured municipal bonds. The Appraiser was
selected by the City and has no material relationships with the City or the owners of the land within Improvement
Area HHother than the relationship represented by the engagement to prepare the Appraisal Report. The City
instructed the Appraiser to prepare its analysis and report in conformity with City-approved guidelines and the
Appraisal Standards for Land Secured Financings published in 1994 and revised in 2004 by the California Debt
and Investment Advisory Commission. A copy of the Appraisal Reportis included as AppendixD—
“APPRAISAL REPORT”to this Official Statement.
The purpose of the Appraisal Report was to estimate the minimum market value of the property within
Improvement Area HHsubject to the lien of the Special Taxes. The estimate of market value assumes that all
improvements and benefits to the subject properties, which are to be funded with the proceeds of the Bonds are
completed and in place.
Subject to the assumptions and limiting conditions set forth in the Appraisal Report, the Appraiser
concluded that, as of the Date of Value (October 1, 2019), the minimum market value of the Taxable Property
within Improvement Area HHwas $37,290,748. The table below summarizes the appraised value of the
property by ownership as of the Date of Value of the Appraisal Report.
CITY OF LAKE ELSINORE
COMMUNITY FACILITIES DISTRICT NO. 2006-1 (SUMMERLY)
(IMPROVEMENT AREA HH)
SUMMARY OF APPRAISED VALUES
Owner No. of Units AppraisedValue
Individual Owners 45 $16,822,706
Richmond American 42 6,401,773
Beazer 52 7,459,814
D.R. Horton 41 6,606,455
Total 180 $37,290,748
Source: The Appraiser.
23
4829-1999-3000v2/022042-0030
In valuing the residential property within Improvement Area HH, the Appraiser used a concluded base
value for each plan and a mass appraisal techniquefor theindividually owned homes. With respect to the
finished lots, model homes and production units which were more than 95% complete owned by D.R. Horton,
RichmondAmerican, andBeazer, asales comparison approach was applied, followed by adiscounted cash flow
analysis. The discounted cash flow analysis accounts for remaining development costs, marketing and carrying
costs and a discount rate through the estimatedabsorption period for themodels and production units. Homes
under construction which were less than 95% complete as of the Date of Value were valued by the Appraiser as
finished lots.
The Appraisal Report is based upon a variety of assumptions and limiting conditions that are described
in AppendixD. The City,the Districtand the Underwritermakeno representation as to the accuracy of the
Appraisal Report. There is no assurance thatthe propertywithin Improvement Area HHof the Districtcan be
sold for the prices set forth in the Appraisal Report or that any parcel can be sold for a price sufficient to pay the
Special Tax for that parcel in the event of a default in payment of Special Taxes by the landowner. See
“SPECIAL RISK FACTORS —PropertyValues”and AppendixD—“APPRAISAL REPORT.”
EstimatedAppraised Value-to-Lien Ratios
The aggregate appraisedvalue of property within Improvement Area HHis $37,290,748. Dividing the
aggregate estimate ofvalue by the principal amount of the Bonds results in value to lien ratio of 6.96-to-1*for
Improvement Area HH. See “SPECIAL RISK FACTORS —Direct and Overlapping Indebtedness.”
Based on ownership statusas of the Date of Value, individual homeowners, Richmond American,
Beazer, and D.R. Hortonare expected to be responsible for approximately 24.52%, 24.31%, 31.26%and 19.92%,
respectively,of the projected Fiscal Year 2020-21Special Tax levy.
Based on building permits issued within Improvement Area HH as of the Date of Value, 153 lots will
be classified as Developed Property and 27lots will be classified as Approved Property with respect to the Fiscal
Year 2020-21Special Tax levy in accordance with the Rate and Method.
Table 2 below sets forth the appraised value-to-lien ratio of the Taxable Property within Improvement
Area HHbased on the appraised values set forth in the Appraisal Report andthe principal amount of the Bonds.
Table 3 below sets forth the estimated appraisedvalue-to-lien ratios for TaxableProperty within Improvement
Area HHbyvarious ranges based upon the principal amount of the Bonds.
*Preliminary, subject to change.
24
4829-1999-3000v2/022042-0030
TABLE2
CITY OF LAKE ELSINORE
COMMUNITY FACILITIES DISTRICT NO. 2006-1 (SUMMERLY)
(IMPROVEMENT AREA HH)
ESTIMATED VALUE-TO-LIEN RATIOS
ALLOCATED BY PROPERTY OWNER AS OF OCTOBER 1, 2019
Property Owner
No. of
Parcels
Appraised
Property
Value(1)
Percentage
of
Appraised
Value
Maximum
Fiscal Year
2020-21
Special Tax
Levy(2)
Percentage
of
Maximum
Fiscal Year
2020-21
Special Tax
Levy
Estimated
Fiscal Year
2020-21
Special Tax
Levy(3)*
Percentage
of Estimated
Fiscal Year
2020-21
Special Tax
Levy
CFD 2006-1
IA HH2019
Bonds(4)*
Overlapping
Debt(5)
Appraised
Value-to-
Lien
Ratio*
Developed Property
Individually Owned 45 $16,822,706 45.11%$115,442 24.10%$78,320 24.52%$1,314,051 $42,117 12.40:1
Richmond American(6)25 4,039,987 10.83 63,105 13.17 46,566 14.58 781,273 25,041 5.01:1
Beazer(7)52 7,459,814 20.00 153,591 32.06 99,866 31.26 1,675,544 53,703 4.31:1
D.R.Horton(8) 31 5,423,043 14.54 77,714 16.22 48,089 15.05 806,837 25,860 6.51:1
Subtotal Developed 153 $33,745,550 90.49%$409,853 85.55%$272,842 85.40%$4,577,705 $146,721 7.14:1
Approved Property
Richmond American (6)17 $2,361,786 6.33%$45,253 9.45%$31,084 9.73%$521,530 $16,716 4.39:1
D.R. Horton(8) 10 1,183,412 3.17 23,970 5.00 15,542 4.87 260,765 8,358 4.40:1
Subtotal Approved Property 27 $3,545,198 9.51%$69,223 14.45%$46,627 14.60%$782,295 $25,074 4.39:1
Total 180 $37,290,748 100.00%$479,076 100.00%$319,468 100.00%$5,360,000 $171,795 5.80:1
*Preliminary, subject to change.
(1)Based on the appraised value set forth in the Appraisal Report as of October 1, 2019, the Date of Value.
(2)Based on 100% of the Backup Special Tax rate on Developed Property and the Maximum Special Tax rate on Approved Property.
(3)Estimated Fiscal Year 2020-21Special Tax Levy based upon development status as of October 1, 2019and an Administrative Expense Cap for Fiscal Year 2020-21of $20,400.
The estimated levy on Developed Property shown is equal to 100% of the Assigned Special Tax rates on Developed Property.
(4)Allocated based on estimated Fiscal Year 2020-21Special Tax levy reflecting development status as of October 1, 2019, the Dateof Value.
(5)Includes overlapping general obligation debt. See Table 4below.
(6)Reflects appraised value for 17homes under construction, 2 model homesand 23finished lots.
(7)Reflects appraised value for 16homes under construction, 2 model homesand 34finished lots.
(8)Reflects appraised value for 18homes under construction, 2 model homesand 21finished lots
Source: County of Riverside Assessor’s Office; Spicer Consulting Group, LLC.
25
4829-1999-3000v2/022042-0030
TABLE 3
CITY OF LAKE ELSINORE
COMMUNITY FACILITIES DISTRICT NO. 2006-1 (SUMMERLY)
(IMPROVEMENT AREA HH)
VALUE-TO-LIEN STRATIFICATION*
Value-to-Lien Category
No. of
Parcels
Percentage
of Parcels
Appraised
Value(1)
Percentage
of
Appraised
Value
Estimated
Fiscal Year
2020-21 Special
Tax Levy
Percentage
Share of
Estimated
Fiscal Year
2020-21
Special Tax
Levy
CFD 2006-1
IA HH2019
Bonds (2)
Percentage
Share of CFD
2006-1 IA HH
2019Bonds
Overlapping
Debt(3)
Aggregate
Value-to-
Lien
Less than 4.00:1(4)27 15.00%$3,499,563 9.38%$54,032 16.91%$906,542 16.91%$29,056 3.74:1
Between 4.00:1 to 8.00:1 90 50.00 11,690,333 31.35 156,976 49.14 2,633,727 49.14 84,414 4.30:1
Between 8.01:1 to 12.00:1 35 19.44 11,607,926 31.13 61,224 19.16 1,027,210 19.16 32,923 10.95:1
Greater than 12.01:1(4)28 15.56 10,492,926 28.14 47,236 14.79 792,521 14.79 25,401 12.83:1
Totals 180 100.00%$37,290,748 100.00%$319,468 100.00%$5,360,000 100.00%$171,795 6.74:1
*Preliminary, subject to change.
(1)Based on the appraised value set forth in the Appraisal Report as of October 1, 2019, the Date of Value.
(2)Allocated based on the estimated Fiscal Year2020-21Special Tax levy.
(3)Includes overlapping general obligation debt. See Table 4below.
(4)The minimum value to lien in the less than 4.00:1 category is 3.45:1*. The maximum value to lien in the greater than 12.01:1 category is 13.99:1*.
Source: Spicer Consulting Group, LLC.
26
4829-1999-3000v2/022042-0030
Direct and Overlapping Debt
The Districtis included within the boundaries of overlapping local agencies providing governmental
services. Some of these local agencies have outstanding bonds, and/or the authority to issue bonds, payable from
taxes or assessments. The existing and authorized indebtedness payable from taxes and assessments that may
be levied upon the property within Improvement Area HHis shown in Table 4below. In addition to current
debt, new community facilities districts and/or special assessment districts could be formed in the future
encompassing all or a portion of the property within Improvement Area HH; and such districts or the agencies
that formed them could issue more bonds and levy additional special taxes or assessments.
27
4829-1999-3000v2/022042-0030
TABLE 4
CITY OF LAKE ELSINORE
COMMUNITY FACILITIES DISTRICT NO. 2006-1(SUMMERLY)
(IMPROVEMENT AREA HH)
DIRECT AND OVERLAPPING DEBT
AS OF OCTOBER 1, 2019
I.Appraisal Value(1)$37,290,748
II.Land Secured Bond Indebtedness
Outstanding Direct and Overlapping Bonded Debt Type Issued Outstanding
%
Applicable
Amount
Applicable
CITY OF LAKE ELSINORE CFD NO. 2006-1 IA HH CFD $5,360,000*$5,360,000*100.000%$5,360,000*
TOTAL LAND SECURED BONDED DEBT $5,360,000*
Authorized but Unissued Direct and Overlapping Indebtedness Type Authorized Outstanding
%
Applicable
Amount
Applicable
LAKE ELSINORE UNIFIED SCHOOL DISTRICT CFD NO. 2006-2 IA C CFD $16,000,000 $0 30.506%(2)$4,880,892
TOTAL UNISSUED LAND SECURED INDEBTEDNESS $4,880,892
TOTAL OUTSTANDING AND UNISSUED LAND SECURED
INDEBTEDNESS
$10,240,892
III.General Obligation BondedIndebtedness
Outstanding Direct and Overlapping Bonded Debt Type Issued Outstanding
%
Applicable(3)
Amount
Applicable
METROPOLITAN WATER DEBT SERVICE GO $850,000,000 $50,105,000 0.035%$17,351
MT. SAN JACINTO JR COLLEGE DEBT SERVICE GO 190,000,000 172,650,000 0.040 68,474
LAKE ELSINORE UNIFIED SCHOOL DISTRICT DEBT SERVICE GO 32,415,000 30,590,000 0.281 85,969
TOTAL OUTSTANDING GENERAL OBLIGATION BONDED DEBT $171,795
Authorized but Unissued Direct and Overlapping Indebtedness Type Authorized Unissued
%
Applicable(3)
Amount
Applicable
METROPOLITAN WATER DEBT SERVICE GO $850,000,000 $0 0.035%$0
MT. SAN JACINTO JR COLLEGE DEBT SERVICE GO 295,000,000 105,000,000 0.040 41,644
LAKE ELSINORE UNIFIED SCHOOL DISTRICT DEBT SERVICE GO 105,000,000 72,585,000 0.281 203,991
TOTAL UNISSUED GENERAL OBLIGATION INDEBTEDNESS $245,635
TOTAL OUTSTANDING AND UNISSUED GENERAL OBLIGATION INDEBTEDNESS $417,429
TOTAL OF ALL OUTSTANDING DIRECT AND OVERLAPPING BONDED DEBT $5,531,795
TOTAL OF ALL OUTSTANDING DIRECT AND UNISSUED DIRECT OVERLAPPING INDEBTEDNESS $5,777,429
IV.Ratios to Appraisal Value
Outstanding Land Secured Bonded Debt 6.96:1
Total Outstanding Bonded Debt 6.74:1
*Preliminary, subject to change.
(1)Based on the appraised value set forth in the Appraisal Report as of October 1, 2019, the Date of Value.
(2)Reflects the estimated percentage applicable to Improvement Area HH should CFD No. 2006-2 formed by the Lake Elsinore
Unified School District issue debt.
(3)General obligation debt is allocated based on the appraised value withinImprovement Area HH as set forth in the Appraisal Report
as a percentage of the total Fiscal Year 2019-20 assessed valuation within the respective taxing jurisdiction.
Source: County of Riverside Assessor’s Office; Spicer Consulting Group, LLC.
28
4829-1999-3000v2/022042-0030
Based on the appraised value of the propertywithin Improvement Area HHset forth in the Appraisal
Report, the projected debt service on the Bonds, and Administrative ExpensesCapof $24,000, which amount
shallescalate at 2% per Fiscal Year, the Districtexpects that, in Fiscal Year 2020-21, the projected effective tax
rates levied on taxable property in Improvement Area HH, will range from approximately 2.00%to 2.11%of
the average appraised value of homes within each Land Use Category(asdefined in the Rate and Method).
Table 5below describes the estimated Fiscal Year 2020-21effective tax burden for the residential
developmentswithin Improvement Area HHbased on the estimatedFiscal Year 2020-21Special Taxlevy and
Fiscal Year 2019-20actual levies for all other overlapping taxing jurisdictions.
29
4829-1999-3000v2/022042-0030
TABLE 5
CITY OF LAKE ELSINORE
COMMUNITY FACILITIES DISTRICT NO. 2006-1 (SUMMERLY)
(IMPROVEMENT AREA HH)
ESTIMATED FISCAL YEAR 2020-21TAX OBLIGATION
TR31920-17 TR31920-18 TR39120-19
Sendero The Glen Laurel Pointe
Richmond American Beazer Homes D.R.Horton
Rate and Method Land Use Class 2,300 to 2,300 to 2,500 to 2,300 to 2,300 to 2,500 to 2,900 to 1,500 to 1,700 to 1,900 to
2,499 S.F.2,499 S.F.2,699 S.F.2,499 S.F.2,499 S.F.2,699 S.F.3,099 S.F.1,699 S.F.1,899 S.F.2,099 S.F.
Home Size(1)2,320 2,380 2,640 2,304 2,442 2,651 3,053 1,576 1,868 1,960
Appraised Value(2)$371,200 $373,660 $390,720 $368,640 $385,836 $397,650 $412,155 $354,600 $364,260 $372,400
Ad Valorem Property Taxes:
General Purpose $3,712 $3,737 $3,907 $3,686 $3,858 $3,977 $4,122 $3,546 $3,643 $3,724
Metro Water West (0.00350%)13 13 14 13 14 14 14 12 13 13
Mt. San Jacinto Jr College (0.01320%)49 49 52 49 51 52 54 47 48 49
Lake Elsinore Unified School District (0.0190%)71 71 74 70 73 76 78 67 69 71
Total General Property Taxes $3,845 $3,870 $4,047 $3,818 $3,996 $4,118 $4,269 $3,673 $3,773 $3,857
Assessment, Special Taxes & Parcel Charges:
Flood Control Stormwater / Cleanwater / Santa Ana $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
City of Lake Elsinore CFD Public Safety 420 420 420 420 420 420 420 420 420 420
City of Lake Elsinore Citywide LLMD 25 25 25 25 25 25 25 25 25 25
City of Lake Elsinore LLMD No. 1, Zone 11 187 187 187 187 187 187 187 187 187 187
Lake Elsinore USD CFD 2006-2 IA C 1,142 1,142 1,241 1,142 1,142 1,241 1,540 943 943 943
Northwest Mosquito and Vector Control 8 8 8 8 8 8 8 8 8 8
MWD Standby charge 9 9 9 9 9 9 9 9 9 9
Elsinore Valley Muni Water District Standby 10 10 10 10 10 10 10 10 10 10
Elsinore Valley Muni Water District Regional Sewer 10 10 10 10 10 10 10 10 10 10
City of Lake Elsinore CFD 2006-1 Services 326 326 326 326 326 326 326 326 326 326
City of Lake Elsinore CFD 2006-1 IA HH Facilities(3)1,828 1,828 1,889 1,828 1,828 1,889 2,164 1,463 1,554 1,646
Total Assessments & Special Taxes $3,982 $3,982 $4,143 $3,982 $3,982 $4,143 $4,716 $3,418 $3,510 $3,601
Projected Total Property Tax $7,827 $7,852 $8,189 $7,800 $7,979 $8,261 $8,895 $7,091 $7,283 $7,458
Projected Effective Tax Rate 2.11%2.10%2.10%2.12%2.07%2.08%2.18%2.00%2.00%2.00%
(1)Reflects the average home size of each plan type within Improvement Area HH.
(2)Based on the average appraised value for homes in each Land Use Class (as defined in the Rate and Method) set forth in the Appraisal Report as of the Date of Value.
(3)Reflects estimated Fiscal Year 2020-21Special Tax levy based on development status as of October1, 2019,and includes the Fiscal Year 2020-21Administrative Expenses
Cap in the amount of $20,400.
Source: County of Riverside Assessor’s Office; Spicer Consulting Group, LLC.
30
4829-1999-3000v2/022042-0030
Delinquency History
The District levied Special Taxes on 79 parcels of Developed Property in Fiscal Year 2019-20 (which
was the first year of the Special Tax levy) in the amount of $133,043.14. The first installment for the Fiscal
Year 2019-20Special Tax levy will become delinquent on December 10, 2019.
PROPERTY OWNERSHIP AND THE DEVELOPMENT
The information about the property in Improvement Area HHcontained in this Official Statement has
been provided by representatives ofthe Developer,Richmond American, Beazer, D.R. Hortonand others, and
has not been independently confirmed or verified by the Underwriter, the City or the District. The Underwriter,
the City, 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 Bonds nor the Net Taxes securing the Bonds and any Parity Bonds are personal
obligations of the Developer,Richmond American,Beazer, D.R. Hortonor 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 ofany property owner or any
affiliate thereof. See the caption “SPECIAL RISK FACTORS.”
Notwithstanding the belief of Richmond American, Beazer and D.R. Hortonthat theywill have sufficient
funds to complete their respectiveplanned development in Improvement Area HH, no assurance can be given
that amounts necessary to fund the remaining planned development by Richmond American, Beazer and D.R.
Hortonin Improvement Area HHwill be available when needed. NoneRichmond American, Beazer and D.R.
Horton,or any other entity or person is under any legal obligation of any kind to expend funds for the development
of the property owned by Richmond American, Beazer and D.R. Hortonin Improvement Area HH. Any
contributions by Richmond American, Beazer, D.R. Hortonor any other entity or person to fund the costs of such
developmentsare entirely voluntary. If and to the extent the aforementioned sources are inadequate to pay the
costs to complete the planned development by Richmond American, Beazer or D.R. Hortonwithin Improvement
Area HH, the remaining portions of such development may not be completed. None of Richmond American,
Beazer or D.R. Hortonhas anylegal obligation to Bond holders to make any such funds available for
construction or development, or the payment of ad valorem property taxes or the Special Taxes.
The District and Improvement Area HH
The District comprises a portion of Summerly, a planned residential community located in the southeast
portion of the City, to the east of Lake Elsinore. John Laing Homes was the original master developer of
Summerly and commenced construction thereof in 2007. Development of Summerly was delayed due to the
severe economic recession in the late 2000’s. McMillin acquired the partially-developed Summerly project in
2010 and is the current master developer of property in the District.
At build-out, the Summerly project is expected to include approximately 1,677 residential units and
recreation and open space on approximately 700 acres. Of the 1,677 planned residential units in Summerly, 1,542
lots have been conveyed to merchant builders or built within fee-build ventures with the McMillin.
Approximately 1,224 completed homes have been sold and 1,172 have closed to individual homebuyers.
McMillin owns 135 lots in the final two neighborhoods that remain to be sold to merchant builders which are in
a blue top condition. Completed amenities which serve the Summerly community include the Summer House,”
whichfeatures a fitness pool, a resort-style pool, picnic and lawn areas, restrooms, a barbeque terrace, a splash
park, an event room, and outdoor covered dining areas with barbeques.
Improvement Area HH is located within Summerly and is bordered to the north by Sunset Park and land
planned for future Summerly neighborhoods, to the east by Diamond Drive, and to the south and west by vacant
lands. McMillin has sold all of the property in Improvement Area HH that is planned for residential development
to three merchant builders–Richmond American, Beazer and D.R. Horton.
31
4829-1999-3000v2/022042-0030
The prior master developer, John Laing Homes, and the current master developer, McMillin, completed
the backbone infrastructure (sewer, water, storm drains, utilities, and arterial roads) necessary to complete the
phases of Summerly that have been developed to date, including the property in Improvement Area HH. Certain
backbone infrastructure remains to be completed by McMillin to achieve full buildout of Summerly, however,
completion of such infrastructure is not a condition to complete the development in Improvement Area HH.
Completed amenities which serve the Summerly community include theSummer House,”whichfeatures a
fitness pool, a resort-style pool, picnic and lawn areas, restrooms, a barbeque terrace, a splash park, an event
room, and outdoor covered dining areas with barbeques.
McMillin has sold all of the property in Improvement Area HH that is planned for residential
development to three merchant builders–Richmond American, Beazer and D.R. Horton. The property within
Improvement Area HH is planned for 180single-family detached residential units. As of the October 1, 2019
Date of Value of the Appraisal, 45 of the 180planned residential units within Improvement Area HH had been
completed and conveyed to individual homeowners. As of such date, the three merchant builders in
Improvement Area HH in the aggregate owned sixcompleted model homes, 51 homes under construction and
78finished lots, as described below. Their respective development and financing plans are described in further
detail below.
Richmond American Development and Financing Plan
General. Richmond American isa wholly-owned subsidiary of M.D.C. Holdings, Inc., a Delaware
corporation (“MDC”). MDC is a publicly traded company whose common stock is listed on the New York
Stock Exchange under the symbol “MDC.” Richmond American and its predecessor entity have been building
homes in California since 1986. Richmond American’s Riverside division based in Corona, California, is
responsible for the development of Richmond American’s project in Improvement Area HH.
MDC has two primary operations, homebuilding and financial services. MDC’s homebuilding
operations consist of wholly-owned subsidiary companies that build and sell homes under the name “Richmond
American Homes.” MDC’s financial services operations include subsidiary companies that provide mortgage
financing, place title insurance and homeowner insurance for Richmond American’s homebuyers, and provide
general liability insurance for MDC subsidiaries and most of Richmond American’s subcontractors.
MDC is subject to the informational reporting requirements of the Exchange Act, and in accordance
therewith is obligated to file reports, proxy statements, and other information, including financial statements,
with the SEC. Such filings, including particularly MDC’s Annual Report on Form 10-K for the fiscal yearended
December 31, 2018, as filed with the SEC on January 31, 2019, and MDC’s Quarterly Report on Form 10-Q for
the quarterly period ended June 30, 2019, as filed with the SEC on July 31, 2019, set forth certain data relative
to such consolidated results of operations and financial position of MDC and its subsidiaries as of such dates.
The SEC maintains an internet web site that contains reports, proxy and information statements and other
information regarding registrants that file electronically with theSEC, including MDC. The address of such
internet web site is www.sec.gov. All documents subsequently filed by MDC 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 MDC’s Annual Report and related financial statements, prepared in accordance with
generally accepted accounting standards, are also available from MDC on MDC’s website at
www.richmondamerican.com.
Development Plan. In 2018, Richmond American purchased Tract No. 31920-17 (totaling
approximately 11.88acres) within Improvement Area HHfrom the Developer. Richmond American plans to
develop this property into65single-familydetached homes in a neighborhood being marketedas “Sendero at
Summerly.” As of October 1, 2019, Richmond American had completed and conveyed 23homes within
Improvement Area HHto individual homeowners. As of such date, Richmond American ownedtwo model
homes,17homes under construction(one of which was over 95% complete)and 23finished lots. As of October
1, 2019, 21 of the homes under construction and finished lots owned by Richmond American were in escrow.
32
4829-1999-3000v2/022042-0030
Richmond American expects to complete and convey all remaining homes within its project in Improvement
Area HH to individual homeowners by _______, 20__.
All approvals and permits required for development of property within Richmond American’s project
within Improvement Area HHhave been secured except for the issuance of building permitsfor residential
construction and other approvals required in the normal course of development. As of October1, 2019, in-tract
improvements remaining to be completed within Richmond American’s development consisted primarily of
street paving, curbs, gutters, dry utilities and landscaping. Richmond American expects to completeconstruction
of the in-tract improvements associated with the remaining lots that it owns within Improvement Area HHas
home construction on such lots is completed.
Richmond American’s Sendero at Summerlyproject is planned to consist of 65single-familydetached
homes. The table below summarizes,as of October1, 2019, the product mix and development status of
Richmond American’s project within Improvement Area HH.
COMMUNITY FACILITIES DISTRICT NO.2006-1 (SUMMERLY)
(IMPROVEMENT AREA HH)
RICHMOND AMERICAN
SENDEROAT SUMMERLY
Plan
Total
Units
Planned
Estimated
Home
Square
Footage
Closings as of
October1,
2019
Completed
Homes/Homes
Under
Construction(1)
Finished
Lots
Base Home
Prices(2)
1 2,320 3 $388,990
2 2,380 11 393,990
3 2,640 9 404,990
Total 65 23 19 23
(1)Includes two model homes.
(2)Base home prices shown exclude lot premiums, options and extras and any incentives or price reductions. Base sales prices
are subject to change.
Source: Richmond American.
No assurance can be given that home construction and sales will be carried out on the schedule and
according to the plans outlined herein, or that the home construction and sale plans or base prices set forth
above will not change after the date of this Official Statement. Additionally, homes sold may not result in closed
escrows as sales contracts are subject to cancellation.
Financing Plan. Through October1, 2019, Richmond American had spent approximately
$__________in acquiring its land in Improvement Area HHand approximately $_____________in site
development costs, permits and impact fees, home construction costs, and other development, marketing and
sales costs (exclusive of corporate overhead and other carry costs). Richmond American expects to spend
approximately $___________in additional site development costs, permit and impact fees, home construction
costs, and other development, marketing and sales costs (exclusive of corporate overhead and other carrycosts)
between October 1, 2019and full build-out of the homes proposed to be constructed in Improvement Area HH.
To date, Richmond American has financed its land acquisition, site development and home construction
costs related to its property within Improvement Area HHthrough internally generated funds. Richmond
American expects touse internal funding (which may include home sales revenues from its project within
Improvement Area HH) to complete its development activities within Improvement Area HH.
33
4829-1999-3000v2/022042-0030
BeazerDevelopment and Financing Plan
General. Beazer is a wholly-owned subsidiary of Beazer Homes USA, Inc.(“Beazer Homes”), a
geographically diversified homebuilder with active operations in 13states within three geographic regions in the
United States: the West, East, and Southeast.
Beazer Homes is subject to the informationalreporting requirements of the Exchange Act, and in
accordance therewith is obligated to file reports, proxy statements, and other information, including financial
statements, with the SEC. Such filings, including particularly Beazer Homes’s Annual Report on Form 10-K
for the fiscal year ended September 30, 2018, as filed with the SEC on November 13, 2018, and Beazer Homes’
Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2019, as filed with the SEC on August
1, 2019, set forth certain data relative to such consolidated results of operations and financial position of Beazer
Homes and its subsidiaries as of such dates. 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 Beazer Homes. The address of such internet web site is www.sec.gov. All documents subsequently
filed by Beazer Homes 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.
Development Plan. Beazeris developing a project within Improvement Area HHbeing marketed as
“The Glen at Summerly.” The Glenat Summerly project is planned to include 57single-familydetached homes.
In 2018, Beazerpurchased Tract No. 31920-18 (totaling approximately 12.31acres) within Improvement Area
HHfrom the Developer. As of October 1, 2019, Beazerhad completed and conveyed fivehomes within
Improvement Area HHto individual homeowners. As of such date, Beazerowned two model homes, 16homes
under construction (two of which were over 95% complete) and 34finished lots. As of October 1, 2019, seven
of the homes under construction and finished lots owned by Beazerwere in escrow. Beazerexpects to complete
and convey all remaining homes within its project in Improvement Area HH to individual homeowners by
_______, 20__.
All approvals and permits required for development of property within Beazer’sproject within
Improvement Area HHhave been secured (including all building permits) except for approvals required in the
normal course of development. As of October1, 2019, in-tract improvements remaining to be completed within
Beazer’s development consisted primarily of street paving, curbs, gutters, dry utilities and landscaping. Beazer
expects to completeconstruction of the in-tract improvements associated with the remaining lots that it owns
within Improvement Area HHas home construction on such lots is completed.
Beazer’s The Glenat Summerly project is planned to consist of 57single-familydetached homes. The
table below summarizes, as of October1, 2019, the product mix and development status of Beazer’s project
within Improvement Area HH.
34
4829-1999-3000v2/022042-0030
COMMUNITY FACILITIES DISTRICT NO.2006-1 (SUMMERLY)
(IMPROVEMENT AREA HH)
BEAZER
THE GLENAT SUMMERLY
Plan
Total
Units
Planned
Estimated
Home
Square
Footage
Closings as of
October1,
2019
Completed
Homes/Homes
Under
Construction(1)
Finished
Lots
Base Home
Prices(2)
1 2,304 3 $349,990
2 2,442 1 404,990
3 2,651 1 416,990
4 3,053 0 432,990
Total 57 5 18 34
(1)Includes two completed model homes.
(2)Base home prices shown exclude lot premiums, options andextras and any incentives or price reductions. Base sales prices
are subject to change.
Source: Beazer.
Financing Plan. Through October 1, 2019, Beazer had spent approximately $__________in acquiring
its land in Improvement Area HHand approximately $_____________in site development costs, permits and
impact fees, home construction costs, and other development, marketing and sales costs (exclusive of corporate
overhead and other carry costs). Beazerexpects to spend approximately $___________in additional site
development costs, permit and impact fees, home construction costs, and other development, marketing and sales
costs (exclusive of corporate overhead and other carrycosts) between October 1, 2019and full build-out of the
homes proposed to be constructed in Improvement Area HH.
To date, Beazerhas financed its land acquisition, site development and home construction costs related
to its property within Improvement Area HHthrough internally generated funds. Beazerexpects to use internal
funding (which may include home sales revenues from its project within Improvement Area HH) to complete
its development activities within Improvement Area HH.
D.R. Horton Development and Financing Plan
General. As previously defined in this Official Statement, “D.R. Horton” is Western Pacific Housing,
Inc., a Delaware corporation. D.R. Horton is marketing the homes that it is constructing in Improvement Area
HHunder the tradename “Express Homes by D.R. Horton, America’s Builder.” D.R. Horton is a subsidiary of
D.R. Horton, Inc., a Delaware corporation (“D.R. Horton, Inc.”), a public company whose common stock is
traded on the New York Stock Exchange under the symbol “DHI.” Founded in 1978 and headquartered in Fort
Worth, Texas, D.R. Horton, Inc. constructs and sells homes in 27 states and 81metropolitan markets of the
United States under the names of D.R. Horton, America’s Builder, Emerald Homes, Express Homes, Freedom
Homes, and Pacific Ridge Homes.
D.R. Horton, Inc. is subject to the informational requirements of the Exchange Act, and in accordance
therewith files reports, proxy statements and other information, including financial statements, with the SEC.
Such filings, particularly, D.R. Horton, Inc.’sAnnual Report on Form 10-K for the fiscal year ended September
30, 2018, as filed with the SEC on November 16, 2018,and D.R. Horton, Inc.’s Quarterly Report on Form 10-
Q for the quarterly period ended June 30, 2019, as filed with the SEC on July 31, 2019set forth certain data
relative to the consolidated results of operations and financial position of D.R. Horton, Inc. and its subsidiaries,
including D.R. Horton, as of such dates.
D.R. Horton, Inc./Forestar Merger. On October 5, 2017, D.R. Horton, Inc.announced the acquisition
of approximately 75% of the then outstanding shares of Forestar Group, Inc. (NYSE: FOR) (“Forestar”). The
35
4829-1999-3000v2/022042-0030
transaction establishes a strategic relationship between Forestar and D.R. Horton, Inc. for the supply of
developed lots, as an extension of D.R. Horton’s strategy of increasing its optioned land and lot position to
enhance operational efficiency and returns.
The SEC maintains an internet website that contains reports, proxy and information statements and other
information regarding registrants that file electronically with the SEC, including D.R. Horton, Inc. The address
of such Internet website is www.sec.gov. All documents subsequently filed by D.R. Horton, Inc. 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 D.R. Horton, Inc.’s Annual Report and each of its other quarterly and
current reports, including any amendments, are available from D.R. Horton, Inc.’s website at
www.drhorton.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. No representation is made in this
Official Statement as to the accuracy or adequacy of the information contained on these internet sites. Neither
D.R. Horton nor D.R. Horton, Inc. is obligated to advance funds for construction or development or to pay ad
valorem property taxes or the Special Taxes and investors should not rely on the information and financial
statements contained on such internet sites in evaluating whether to buy, hold or sell the Bonds.
Development Plan. In 2018, D.R. Horton purchased Tract No. 31920-19 (totaling approximately 10.17
acres) within Improvement Area HHfrom the Developer. D.R. Horton plans to develop this property to include
58single-familydetached homes in a neighborhood being marketed as “LaurelPointe.” As of October 1, 2019,
D.R. Horton had completed and conveyed fivehomes within Improvement Area HHto individual homeowners.
As of such date, D.R. Horton owned two model homes, 18homes under construction (nine of which were over
95% complete) and 21finished lots. As of October 1, 2019, four of the homes under construction owned by
D.R. Horton were in escrow. D.R. Horton expects to complete and convey all remaining homes within its project
in Improvement Area HH to individual homeowners by August 2020.
All approvals and permits required for development of property within D.R. Horton’s project within
Improvement Area HHhave been secured (including all building permits) except for approvals required in the
normal course of development. As of October 1, 2019,in-tract improvements remaining to be completed within
D.R. Horton’s development consisted primarily of street paving, curbs, gutters, dry utilities and landscaping.
D.R. Horton expects to completeconstruction of the in-tract improvements associated with the remaining lots
that it owns within Improvement Area HHas home construction on such lots is completed.
D.R. Horton’s LaurelPointe project is planned to consist of 58single-familydetached homes. The table
below summarizes, as of October 1, 2019, the product mix and development status of D.R. Horton’s project
within Improvement Area HH.
36
4829-1999-3000v2/022042-0030
COMMUNITY FACILITIES DISTRICT NO.2006-1 (SUMMERLY)
(IMPROVEMENT AREA HH)
D.R. HORTON
LAURELPOINTE
Plan
Total
Units
Planned
Estimated
Home
Square
Footage
Closings as of
October1,
2019
Completed
Homes/Homes
Under
Construction(1)
Finished
Lots
Base Home
Prices(2)
1 20 1,576 5 7 8 $359,000
2 19 1,868 6 6 7 382,000
3 19 1,960 6 7 6 384,000
Total 58 17 20 21
(1)Includes two completed model homes.
(2)Base home prices shown exclude lot premiums, options and extras and any incentives or price reductions. Base sales prices
are subject to change.
Source: D.R. Horton.
Financing Plan. As of October 1, 2019, D.R. Hortonhad expended approximately $5,921,234in
acquiring its land in Improvement Area HHand approximately $6,430,619 in land improvements, home
construction costs and other development, marketing and sales costs (exclusive of corporate overhead and other
carrycosts). As of October 1, 2019, D.R. Horton expects its remaining land improvements, home construction
costs and other development, marketing and sales costs within Improvement Area HHto be approximately
$5,453,126.
D.R. Horton is financing its development activities in Improvement Area HHthrough internal sources
and home sales revenue and intends to use these sources of funds to finance remaining home construction costs
and carrying costs for its property in Improvement Area HH(including property taxesand the Special Taxes
while it owns the property) until full sell-out of its proposed single-family residential homes in Improvement
Area HH. However, home sales revenues from D.R. Horton’s project within Improvement Area HHare not
segregated and set aside for completing its project within Improvement Area HH. Home sales revenues are
swept daily from D.R. Horton, Inc.’s divisions for use in operations, to pay down debt and for other corporate
purposes and might get diverted to other D.R. Horton, Inc. needs at the discretion of D.R. Horton, Inc.’s
management. Notwithstanding the foregoing, D.R. Horton believes that it will have sufficient funds available
to complete its proposed development within Improvement Area HHcommensurate with the development
timing described in this Official Statement.
SPECIAL RISK FACTORS
The Bonds have not been rated by any rating agency, and the purchase of the Bonds involves significant
risks that are not appropriate for certain investors. The following is a discussion of certain risk factors which
should be considered, in addition to other matters set forth herein, in evaluating the investment quality of the
Bonds. This discussion does not purport to be comprehensive or definitive and does not purport to be a complete
statement of all factors which may be considered as risks in evaluating the credit quality of the Bonds. The
occurrence of one or more of the events discussed herein could adversely affect the ability or willingness of
property owners in Improvement Area HHto pay their Special Taxes when due. Such failures to pay Special
Taxes could result in the inability of the District to make full and punctual payments of debt service on the
Bonds. In addition, the occurrence of one or more of the events discussed herein could adversely affect the value
of the property in Improvement Area HH. See “—Property Values”below.
37
4829-1999-3000v2/022042-0030
Risks of Real Estate Secured Investments Generally
The BondOwners will be subject to the risks generally incident to an investment secured by real estate,
including, without limitation: (i)adverse changes in local market conditions, such as changes in the market value
of real property in the vicinity of the District, the supply of or demand for competitive properties in such area
(including those in other portions of Summerly), 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; (iii)natural disasters (including, without limitation, earthquakes,
wildfires and floods), which may result in uninsured losses; (iv)adverse changes in local market conditions; and
(v)increased delinquencies due to rising mortgage costs and other factors.
No assurance can be given that the property ownerswithin Improvement Area HHwill pay Special
Taxes inthefuture or that they will be able to pay such Special Taxes on a timely basis. See the caption “—
Enforcement Delays—Bankruptcy”for a discussion of certain limitations on the District’s ability to pursue
judicial proceedings with respect to delinquent parcels.
Tax Cuts and Jobs Act
H.R. 1 of the 115th U.S. Congress, known as the “Tax Cuts and Jobs Act,”was enacted into law on
December 22, 2017 (the “Tax Act”). The Tax Act makes significant changes to many aspects of the Internal
Revenue Code of 1986, as amended (the “Code”). For example, the Tax Act reduces the amount of mortgage
interest expense and state and local income tax and property tax expense that individuals may deduct from their
gross income for federal income tax purposes, which could increase the cost of home ownership within
Improvement Area HH. However, neither the City nor the District can predict the effect that the Tax Act may
have on the cost of home ownership or the price of homes in Improvement Area HH, the pace at which homes
in Improvement Area HHare sold to individual homeowners by Richmond American,Beazer, or D.R. Horton,
or the ability or willingness of homeowners to pay Special Taxes or property taxes.
Insufficiency of Special Tax Revenues
As discussed below, the Special Taxes may not produce revenues sufficient to pay the debt service on
the Bonds either due to nonpayment of the amounts levied or because acreage within Improvement Area HH
becomes exempt from taxation due to the transfer of title to a public agency.
In order to pay debt service on the Bonds, it is generally necessary that the Special Taxes be paid in a
timely manner. Should the Special Taxes not be paid on time, the District has established a Reserve Account
under the Indenture to be maintained in an amount equal to the Reserve Requirement to pay debt service on the
Bonds to the extent other funds are not available. See “SOURCES OF PAYMENTFOR THE BONDS —
Reserve Accountof the Special Tax Fund.” The District will covenant in the Indenture to maintain in the Reserve
Account an amount equal to the Reserve Requirement, subject, however, to the availability of Net Taxes in
amounts sufficient to do so and to the limitation that the District may not levy the Special Tax in any Fiscal Year
at a rate in excess of the maximum amounts permitted under the Rate and Method. See Appendix Ehereto. As
a result, if a significant number of Special Tax delinquencies occurs within Improvement Area HH, the District
could be unable to replenish the Reserve Account to the Reserve Requirement due to the limitations on the
amount of the Special Tax that may be levied. If such defaults were to continue in successive years, the Reserve
Account could be depleted and a default on the Bonds could occur.
The Act provides that, if any property within Improvement Area HHnot 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 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
38
4829-1999-3000v2/022042-0030
special assessment and be paid from the eminent domain award. The constitutionality and operation of these
provisions of the Act have not been tested in the courts, but it is doubtful that they would be upheld as to, for
example, property owned by the federal government. If for any reason property within Improvement Area HH
becomes exempt from taxation by reason of ownership by a non-taxable entity such as the federal government
or another public agency, subject to the limitation of the Maximum Special Tax, the Special Tax will be
reallocated to the remaining taxable parcels within Improvement Area HH. This would result in the owners of
such property paying a greater amount of the Special Tax and could have an adverse impact upon their
willingness and/or ability to pay the Special Tax. Moreover, if a substantial portion of additional land within
Improvement Area HHbecame exempt from the Special Tax because of public ownership, or otherwise, the
Maximum Special Tax which could be levied upon the remaining acreage might not be sufficient to pay principal
of and interest on the Bonds when due and a default will occur with respect to the payment of such principal and
interest.
The District will covenant in the Indenture that, under certain circumstances, it will institute foreclosure
proceedings to sell any property with delinquent Special Taxes in order to obtain funds to pay debt service on
the Bonds. If foreclosure proceedings were ever instituted, any mortgage or deed of trust holder could, but would
not be required to, advance the amount of the delinquent Special Tax to protect its security interest. See
“SOURCES OF PAYMENTFOR THE BONDS —Special Taxes —Proceeds of Foreclosure Sales”for
provisions which apply in the event of such foreclosure and which the District is required to follow in the event
of delinquencies in the payment of the Special Tax.
In the event that sales or foreclosures of property are necessary, there could be a delay in payments to
Owners of the Bonds (if the Reserve Account has been depleted) pending such sales or the prosecution of such
foreclosure proceedings and receipt by the Cityon behalf of the District of the proceeds of sale. The District
may adjust thefuture Special Tax levied on taxable parcels in Improvement Area HH, subject to limitations
described above under the caption “IMPROVEMENT AREA HH—Rate and Method of Apportionment,”to
provide an amount required to pay interest on and principal of the Bonds, and the amount, if any, necessary to
replenish the Reserve Account to an amount equal to the Reserve Requirement, and to pay all current expenses.
There is, however, no assurance that the total amount of the Special Tax that could be levied and collectedagainst
taxable parcels in Improvement Area HHwill be at all times sufficient to pay the amounts required to be paid
by the Indenture, even if the Special Tax is levied at the Maximum Special Tax rates. See “—Enforcement
Delays –Bankruptcy.”
No assurance can be given that the real property subject to sale or foreclosure will be sold, or if sold,
that the proceeds of sale will be sufficient to pay any delinquent installments of the Special Tax. The Act does
not require the Cityto purchase or otherwise acquire any lot or parcel of property to be sold at foreclosure if
there is no other purchaser at such sale. The Act and the Indenture do specify that the Special Tax will have the
same lien priority as for advalorem property taxes in the case of delinquency. Section53356.6 of the Act
requires that property sold pursuant to foreclosure under the Act be sold for not less than the amount of judgment
in the foreclosure action, plus post judgment interest and authorized costs, unless the consent of the owners of
75% of the Outstanding Bonds is obtained.
Prior to July1, 1983, the right of redemption from foreclosure sales was limited to a period of one year
from the date of sale. Under legislation effective July1, 1983, the statutory right of redemption from such
foreclosure sales has been repealed. However, a period of 20 days must elapse after the date on which the notice
of levy of the interest in real property was served on the judgment debtor before the sale of such lot or parcel
can be made. Furthermore, if the purchaser at the sale is the judgment creditor (e.g., the District), an action may
be commenced by the delinquent property owner within 90 days after the date of sale to set aside such sale. The
constitutionality of the aforementioned legislation, which repeals the one year redemption period, has not been
tested and there can be no assurance that, if tested, such legislation will be upheld. (Section701.680 of the Code
of Civil Procedure of the State.)
39
4829-1999-3000v2/022042-0030
Concentration of Ownership
Based on development and ownership status as of October 1, 2019, individual homeowners, Richmond
American,Beazer, and D.R. Horton are expected to be responsible for approximately 24.52%, 24.31%, 31.26%
and 19.92%, respectively, of the projected Fiscal Year 2020-21Special Tax levy.
The timely payment of principal of and interest on the Bonds depends upon the willingness and ability
of the current and future property owners in Improvement Area HHto pay the Special Taxes prior to delinquency.
General and local economic conditions and governmental requirements or restrictions may affect the willingness
of the current property owners, or any successor property owners, to pay the Special Taxes, and there is no
assurance that the current property owners, or any successor property owners, will pay such Special Taxes even
if financially able to do so. Due to the concentration of ownership of the property within Improvement Area
HH, a failure by Richmond American,Beazer, or D.R. Hortonor any successor property owner thereto to pay
the Special Taxes may result in a default in the payment of debt service on the Bonds. See “PROPERTY
OWNERSHIP AND THE DEVELOPMENT.”
PropertyValues
The value of the property within Improvement Area HHis a critical factor in determining the investment
quality of the Bonds. If a property owner is delinquent in the payment of Special Taxes, the District’s only
remedy is to commence foreclosure proceedings against the delinquent parcel in an attempt to obtain funds to
pay the Special Taxes. Reductions in property values due to a downturn in the economy, physical events such
as earthquakes, fires or floods, stricter land use regulations, delays in development or other events will adversely
impact the security underlying the Special Taxes. See“IMPROVEMENT AREA HH—Appraisal Report”and
Appendix D—“APPRAISAL REPORT.”
The Appraiser has estimated, on the basis of certain assumptions and limiting conditions contained in
the Appraisal Report, that as of the Date of Value, the market value of theland and improvements within
Improvement Area HHwas approximately $37,290,748.See “IMPROVEMENT AREA HH—Appraisal
Report.” The Appraisal Report indicates the Appraiser’s opinion as to the market value of the properties referred
to therein as of the date and under the conditions specified therein. The Appraiser’s opinion reflects conditions
prevailing in the applicable market as of the Date of Value. The Appraiser’s opinion does not predict the future
value of the subject property, and there can be no assurance that market conditions will not change adversely in
the future.
Prospective purchasers of the Bonds should not assume that the taxable land within Improvement Area
HHcould be sold for the appraised amount or for the assessed values at a foreclosure sale for delinquent Special
Taxes. In arriving at the estimate of market valueof the property in Improvement Area HH, the Appraiser
assumes that any sale will be unaffected by undue stimulus and will occur following a reasonable marketing
period, which is not always present in a foreclosure sale. See AppendixDfor a description of other assumptions
made by the Appraiser and for the definitions and limiting conditions used by the Appraiser. Any event which
causes one of the Appraiser’s assumptions to be untrue could result in a reduction of the value of the taxable
land and improvements within Improvement Area HHfrom the market value estimated by the Appraiser.
No assurance can be given that any bid will be received for a parcel with delinquent Special Taxes
offered for sale at foreclosure or, if a bid is received, that such bid will be sufficient to pay all delinquent Special
Taxes. See “SOURCES OF PAYMENT FOR THE BONDS —Special Taxes —Proceeds of Foreclosure
Sales.”
Natural Disasters
The District, like all California communities, may be subject to unpredictable seismic activity, fires,
flood, or other natural disasters. Southern California is a seismically active area. Seismic activity represents a
40
4829-1999-3000v2/022042-0030
potential risk for damage to buildings, roads, bridges and property within Improvement Area HH. In addition,
land susceptible to seismic activity may be subject to liquefaction during the occurrence of such event. The
property within Improvement Area HHis not located in an Alquist Priolo Earthquake Study Zone and is not
located within one-half mile of an active earthquake fault. Additionally, the District is not located in a flood
plain area.
In recent years, wildfires have caused extensive damage throughout the State, including within the
County. Certain of these fires have burned thousands of acres and destroyed hundreds and in some cases
thousands of homes. In some instances entire neighborhoods have been destroyed. Several fires in recent years
damaged or destroyed property in areas that were not previously considered to be at risk from such events.
Improvement Area HHis not located in an area which the Department of Forestry and Fire Protection of the
State of California has designated as a high fire hazard severity zone. Additionally, property located adjacent
to burn areas can be subject to mudslides and flooding, which can cause significant damage and destruction to
property. However, there is a risk of residential property within Improvement Area HHbeing destroyed by
wildfires and no assurance can be given as to the severity or frequency of wildfires within the vicinity of the
District.
In the event of a severe earthquake, fire, flood or other natural disaster, there may be significant damage
to both property and infrastructure in Improvement Area HH. As a result, a substantial portion of the property
owners may be unable or unwilling to pay the Special Taxes when due. In addition, the value of land in
Improvement Area HHcould be diminished in the aftermath of such a natural disaster, reducing the resulting
proceeds of foreclosure sales in the event of delinquencies in the payment of the Special Taxes.
Hazardous Substances
While government taxes, assessments and charges are a common claim against the value of a parcel,
other less common claims may also be relevant. One of the most serious in terms of the potential reduction in
the value of a parcel is a claim with regard to a hazardous substance. In general, the owners and operators of a
parcel may be required by law to remedy conditions relating to releases or threatened releases of hazardous
substances. The federal Comprehensive Environmental Response, Compensation and Liability Act of 1980,
sometimes referred to as “CERCLA”or the “Super Fund 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 in effect. Under
many of these laws, the owner (or operator) is obligated to remedy a hazardous substance condition of a parcel
whether or not the owner (or operator) had anything to do with creating or handling the hazardous substance.
The effect, therefore, should any of the parcels within Improvement Area HHbe affected by a hazardous
substance, is to reduce the marketability and value by the costs of remedying the condition.
The District isnot aware of the presence of any federally or state classified hazardous substances in
violation of any environmental laws, located on the property within Improvement Area HH. However, it is
possible that such materials do currently exist and that the Districtis not aware of them.
It is possible that property in Improvement Area HHmay be liable for hazardous substances in the future
as a result of the existence, currently, of a substance presently classified as hazardous but which has not been
released or the release of which is not presently threatened, or the existence, currently, on the property of a
substance not presently classified as hazardous but which may in the future be so classified. Additionally, such
liabilities may arise not simply from the existence of a hazardous substance but from the method of handling
such substance. All of these possibilities could have the effect of reducing the value of the applicable property.
Enforcement Delays –Bankruptcy
In the event of a delinquency in the payment of the Special Taxes, the District is required to commence
enforcement proceedings under the circumstances described under the heading “SECURITY FOR THE BONDS
—Covenant for Superior Court Foreclosure.” However, prosecution of such proceedings could be delayed due
41
4829-1999-3000v2/022042-0030
to crowded local court calendars or 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 person or entity withan interest in the applicable property 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 applicable Bonds. The various legal opinions to be 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 and the Indenture by reference to bankruptcy, reorganization, moratorium,
insolvency and other laws affecting the rights of creditors generally or against public entitiessuch as the District.
FDIC/Federal Government Interests in Parcels
The ability of the Districtto collect interest and penalties specified by the Act and to foreclose the lien
of delinquent Special Taxes may be limited in certain respects with regard to parcels in which the Federal Deposit
Insurance Corporation (the “FDIC”), or other federal government entities such as Fannie Mae or Freddie Mac,
has or obtains an interest.
In the case of FDIC, in the event that any financial institution making a loan which is secured by parcels
is taken over by the FDIC and the applicable Special Tax is not paid, the remedies available to the Districtmay
be constrained. The FDIC’s policy statement regarding the payment of state and local real property taxes (the
“Policy Statement”) provides that taxes other than ad valorem taxes which aresecured by a valid lien in effect
before the FDIC acquired an interest in a property will be paid unless the FDIC determines that abandonment of
its interests is appropriate. The Policy Statement provides that the FDIC generally will not pay installmentsof
non-ad valorem taxes which are levied after the time the FDIC acquires its fee interest, nor will the FDIC
recognize the validity of any lien to secure payment except in certain cases where the Resolution Trust
Corporation had an interest in property on or prior to December 31, 1995. Moreover, the Policy Statement
provides that, with respect to parcels on which the FDIC holds a mortgage lien, the FDIC will not permit its lien
to be foreclosed out by a taxing authority without its specific consent, nor will the FDIC pay or recognize liens
for any penalties, fines or similar claims imposed for the non payment of taxes.
The FDIC has taken a position similar to that expressed in the Policy Statement in legal proceedings
brought against Orange County in United States Bankruptcy Court and in Federal District Court. The
Bankruptcy Court issued a ruling in favor of the FDIC on certain of such claims. Orange County appealed that
ruling, and the FDIC cross-appealed. On August 28, 2001, the Ninth Circuit Court of Appeals issued a ruling
favorable to the FDIC except with respect to the payment of pre-receivership liens based upon delinquent
property tax.
The Districtis unable to predict what effect the application of the Policy Statement would have in the
event of a delinquency with respect to parcels in which the FDIC has or obtains an interest, although prohibiting
the lien of the FDIC to be foreclosed out at a judicial foreclosure sale would prevent or delay the foreclosure
sale.
In the case of Fannie Mae and Freddie Mac, in the event a parcel of taxable property is owned by a
federal government entity or federal government sponsored entity, such as Fannie Mae or Freddie Mac, or a
private deed of trust secured by a parcel of taxable property is owned by a federal government entity or federal
government sponsored entity, such as Fannie Mae or Freddie Mac, the ability to foreclose on the parcel or to
collect delinquent Special Taxes may be limited. Federal courts have held that, based on the supremacy clause
of the United States Constitution “this Constitution, and the Laws of the United States which shall be made in
Pursuance thereof; and all Treaties made, or which shall be made, under the Authority of the United States, shall
be the supreme Law of the Land; and the Judges in every State shall be bound thereby, anything in the
Constitution or Laws of any State to the contrary notwithstanding.” In the absence of Congressional intent to
the contrary, a state or local agency cannot foreclose to collect delinquent taxes or assessments if foreclosure
42
4829-1999-3000v2/022042-0030
would impair the federal government interest. This means that, unless Congress has otherwise provided, if a
federal government entity owns a parcel of taxable property but does not pay taxes and assessments levied on
the parcel (including Special Taxes), the applicable state and local governments cannot foreclose on the parcel
to collect the delinquent taxes and assessments.
Moreover, unless Congress has otherwise provided, if the federal government has a mortgageinterest
in the parcel and the Districtwishes to foreclose on the parcel as aresult 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 theSpecialTaxes and preserve the federal government’s mortgage interest. For a
discussion ofrisksassociated with taxable parcels within Improvement Area HHbecoming owned by
thefederalgovernment, federal government entities or federal government sponsored entities, see “—
Insufficiency of Special Tax Revenues.”
The District’s remedies may also be limited in the case of delinquent Special Taxes with respect to
parcels in which other federal agencies (such as the Internal Revenue Service and the Drug Enforcement
Administration) have or obtain an interest.
Direct and Overlapping Indebtedness
The ability of an owner of property within Improvement Area HHto pay the applicable Special Taxes
could be affected by the existence of other taxes and assessments imposed upon taxable parcels. See
“IMPROVEMENT AREA HH—Direct and Overlapping Debt”herein. The Cityand other public agencies
whose boundaries overlap those of the Districtcould impose additional taxes or assessment liens on the property
within Improvement Area HHin order to finance public improvements or services to be located or provided
inside of or outside of such area. The lien created on the property within Improvement Area HHthrough the
levy of such additional taxes may be on a parity with the lien of the Special Taxes applicable to the property
within Improvement Area HH.
The imposition of additional liens on a parity with the Special Taxes may reduce the ability or
willingness of property owners to pay the Special Taxes and increase the possibility that foreclosure proceeds
will not be adequate to pay delinquent Special Taxes.
Payment of Special Taxes is not a Personal Obligation of the Property Owners
An owner of a taxable parcel is not personally obligated to pay Special Taxes. Rather, Special Taxes
are an obligation which is secured only by a lien against the taxable parcel. If the value of a taxable parcel is not
sufficient, taking into account other liens imposed by public agencies, to secure fully Special Taxes, the District
has no recourse against the property owner.
No Acceleration Provision
The Bonds do not contain a provision allowing for the acceleration of the Bonds in the event of a
paymentdefault or other default under the terms of the Bonds or the Indenture.
Limited Obligations
The Bonds and interest thereon are not payable from the general funds of the City. Except with respect
to the Net Taxes, neither the credit nor the taxing power of the District or the City is pledged for the payment of
the Bonds or the interest thereon, and, except as provided in the Indenture, no Owner of the Bonds may compel
the exercise of any taxing power by the District or the City or force the forfeiture of any City or District property.
The principal of, premium, if any, and interest on the Bonds are not a debt of the City or a legal or equitable
pledge, charge, lien or encumbrance upon any of the City’s or the District’s property or upon any of the City’s
43
4829-1999-3000v2/022042-0030
or the District’s income, receipts or revenues, except the Net Taxes and other amounts pledged under the
Indenture.
The District’s legal obligations with respect to any delinquent Special Taxes are limited to: (i)payments
from the Reserve Account to the extent of funds on deposit therein; and (ii)the institution of judicial foreclosure
proceedings under certain circumstances with respect to any parcels for which Special Taxes are delinquent. See
the caption “SOURCES OF PAYMENT FOR THE BONDS—Special Taxes—Proceeds of Foreclosure Sales.”
The Bonds cannot be accelerated in the event of any default.
The obligation to pay Special Taxes does not constitute a personal obligation of the current or
subsequent owners of the respective parcels which are subject to such liens. See the caption “—Payment of the
Special Tax is Not a Personal Obligation of the Property Owners.” Enforcement of Special Tax payment
obligations by the District is limited to judicial foreclosure in the Superior Court of California, County of
Riverside. There is no assurance that any current or subsequent owner of a parcel subject to a Special Tax lien
will be able to pay the amounts due or that such owner will choose to pay such amounts even though financially
able to do so.
Failure by owners of the parcels to pay Special Tax installments when due, delay in foreclosure
proceedings, or the inability of the District to sell parcels that 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 Bonds, which may in turn
result in the depletion of the Reserve Account. See the caption “—Enforcement Delays –Bankruptcy.”
Ballot Initiatives
Articles XIIIA, XIIIB, XIIIC, and XIIID of the California Constitution were adopted pursuant to
measures qualified for the ballot pursuant to the State’s constitutional initiative process. From time to time,
other initiative measures could be adopted by California voters. The adoption of any such initiative might place
limitations on the ability of the State, the City, or other local agencies to increase revenues or to increase
appropriations.
Proposition218
An initiativemeasure entitled “The Right to Vote on Taxes Act”(“Proposition218”) was approved by
the voters at the November5, 1996 statewide general election. Among other things, Proposition218 added a
new ArticleXIIIC to the California Constitution which 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 Act
provides for a procedure which includes notice, hearing, protest and voting requirementsto alter the rate and
method of apportionment of an existing special tax. However, the 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 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. While the application of Proposition218
in this context has not yet been interpreted by the courts and the matter is not completely free from doubt, it is
not likely that Proposition218 has conferred on the voters the power to effect a repeal or reduction of the Special
Tax if the result thereof would be to impair the security of the Bonds.
It may be possible, however, for voters or the City Council, 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 Bonds, but
which does reduce the maximum amount of Special Taxes that may be levied in any year below the existing
levels. Therefore, no assurance can be given with respect to the future levy of Special Taxes in amounts greater
than the amount necessary for the timely retirement of the Bonds. Nevertheless, to the maximum extent that the
law permits it to do so, the Districtwill covenant that it will not initiate proceedings under the Act to reduce the
maximum Special Tax rates for the District, unless, in connection therewith, (i)such changes do not reduce the
44
4829-1999-3000v2/022042-0030
maximum Special Taxes that may be levied in each year on property within Improvement Area HHto an amount
which is less than the Administrative Expense Cap plus 110% of the Annual Debt Service due in each
corresponding future Bond Year with respect to the Bonds and Parity Bonds Outstanding as of the date of such
proposed reduction; and (ii)the District is not delinquent in the payment of the principal of or interest on the
Bonds or any Parity Bonds. The Districtalso will covenant that, in the event an initiative is adopted which
purports to reduce or otherwise 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.
Shapiro Case
With respect to the approval of the Special Taxes, onAugust 1, 2014, the California Court of Appeal,
Fourth Appellate District, Division One, issued its opinion in City of San Diego v. Melvin Shapiro, et al.
(D063997) (the “San Diego Decision”). The case involved a Convention Center Facilities District (the “CCFD”)
established by the City of San Diego (the “Cityof San Diego”). The CCFD is a financing district much like a
community facilities district established under the provisions of the Act. The CCFD is comprised of all of the
real property in the entire City of San Diego. However, the special tax to be levied within the CCFD was to be
levied only on hotel properties located within the CCFD.
The election authorizing the special tax was limited to owners of hotel properties and lessees of real
propertyowned by a governmental entity on which a hotel is located. Thus, the election was not a registered
voter election. Such approach to determining who would constitute the qualified electors of the CCFD was
modeled after Section 53326(c) of the Act, which generally provides that, if a special tax will not be apportioned
in any tax year on residential property, the legislative body may provide that the vote shall be by the landowners
of the proposed district whose property would be subject to the special tax.The Court held that the CCFD special
tax election was invalid under the California Constitution because Article XIIIA, Section 4 thereof and Article
XIIIC, Section 2 thereof require that the electors in such an election be the registered voters within theCCFD.
The facts of the San Diego Decision show that there were hundreds of thousands of registered voters
within the CCFD (viz., all of the registered voters in the City of San Diego). The elections held in Improvement
Area HHat the time of had no registered voters at the time of suchelection. In the San Diego Decision, the
Court expressly stated that it was not addressing the validity of landowner voting to impose special taxes pursuant
to the Act in situations where there are fewer than 12 registeredvoters. Thus, by its terms, the Court’s holding
does not apply to the electionsin connection withthe formation of the District, Improvement Area HHor the
authorization of the Special Tax levy. Moreover, Section 53341 of the Act provides that any “action or
proceeding to attack, review, set aside, void or annul the levy of a special tax…shall be commenced within 30
days after the special tax is approved by the voters.” Similarly, Section 53359 of the Act provides that any action
to determine the validity of bonds issued pursuant to the Act be brought within 30 days of the voters approving
the issuance of such bonds. Voters in Improvement Area HHapproved the Special Taxlevy in accordance with
the Rate and Methodon April 8, 2014. Based on Sections 53341 and 53359 of the Act and analysis of existing
laws, regulations, rulings and court decisions, Bond Counsel is of the opinion that no successful challenge to the
Special Tax being levied in accordance with the Rate and Method may now be brought.
Theinterpretation and application of Proposition218 will ultimately be determined by the courts with
respect to a number of the matters discussed above, and it is not possible at this time to predict with certainty the
outcome of such determination or the timeliness of any remedy afforded by the courts.
Loss of Tax Exemption
As discussed under the heading “TAX MATTERS,”interest on the Bonds could cease to be excluded
from 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 District. In addition, it is possible that future changes in applicable
45
4829-1999-3000v2/022042-0030
federal tax laws could cause interest on the Bonds to be included in gross income for federal income taxation or
could otherwise reduce the equivalent taxable yield of such interest and thereby reduce the value of the Bonds.
No Ratings –Limited Secondary Market
The Districthas not applied to have the Bonds rated by any nationally recognized bond rating company,
and it doesnot expect to do so in the future.
There can be no guarantee that there will be a secondary market for the Bonds or, if a secondary market
exists, that such Bonds can be sold for any particular price. Although the Districthas committed to provide
certain financial and operating information, there can be no assurance that such information will be available to
Bond owners on a timely basis. The failure to provide the required annual financial 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 for the Bonds or because of adverse
history or economic prospects connected with a particular issue, secondary marketing practices in connection
with a particular issue are suspended or terminated. Additionally, prices of issues for which a market is being
made will depend upon then prevailing circumstances. Such prices could be substantially different from the
original purchase price.
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 tax-exempt
status 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 reorganization, fraudulent conveyance or
transfer, moratorium or other similar laws affecting generally the enforcement of creditor’s rights, by equitable
principles and by the exercise of judicial discretion and by limitations on remedies against public agencies in the
State of California. 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.
Potential Early Redemption of Bonds from Prepaymentsor Assessment Bond Proceeds
Property owners within Improvement Area HH, including Richmond American,Beazer, and D.R.
Hortonand any individual property owner,are permitted to prepay their Special Taxes at any time. Such
prepayments could also be made from the proceeds of bonds issued by or on behalf of an overlapping special
assessment district or community facilities district.Such prepayments will result in a redemption of the Bonds
on the Interest Payment Date for which timely notice may be given under the Indenture following the receipt of
the prepayment. The resulting redemption of Bonds that were purchased at a price greater than par could reduce
the otherwise expected yield on such Bonds. See the caption “THE BONDS—Redemption—Special Mandatory
Redemption from Special Tax Prepayments.”
CONTINUING DISCLOSURE
District Continuing Disclosure
Pursuant to a Continuing Disclosure Certificate, dated as of December 1, 2019(the “Disclosure
Agreement”), to be executed and delivered by the District at the time of issuance of the Bonds, the District will
covenant for the benefit of the holders and Beneficial Owners of the Bonds to provide certain financial
information and operating data relating to the Districtand Improvement Area HHby February 15 following the
end of the District’s Fiscal Year (currently its Fiscal Year ends on June 30) (the “Annual Report”), commencing
with the report for theFiscal Year ended June 30, 2020, and to provide notices of the occurrence of certain
46
4829-1999-3000v2/022042-0030
enumerated events. The Annual Report and the notices of enumerated events will be filed by the Districtwith
EMMA. The specific nature of the information to be contained in the Annual Report and the notice of
enumerated events is set forth in Appendix F—”FORM OF DISTRICT CONTINUING DISCLOSURE
CERTIFICATE.” These covenants have been made in order to assist the Underwriter in complying with
subsection (b)(5) of Rule 15c2-12.
During the last five years, the District has been subject to continuing disclosure undertakings entered
into pursuant to Rule 15c2-12in connection with bonds issued for its improvement areas (other than
Improvement Area HH). During the last five years, the District failed in to comply with such continuing
disclosure undertakings in the following respects: (i) the District did not file the City’s Fiscal Year 2014-15
audited financial statements for such Fiscal Year on a timely basis (33 days late); and (ii) the District did not
include information relating to special tax prepayments and improvement fund balances in an annual report for
Fiscal Year 2013-14. The District did not file notices of failure to file the foregoing items.
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 (the “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, and failure to provide notice of late annual
financial information, more specifically:
(1) Comprehensive audited financial statements of the City, the Agency or certain community
facilities districts, as applicable for Fiscal Year 2014-15 were filed more than 30 days late.
(2) Updated tabular and other operating information relating to the City, the Agency and
community facilities districts for Fiscal Years 2013-14, and 2016-17 were filed late, and certain instances more
than 180 days late.
(3)Failure to provide notices of the late filing of certain of the annual financial information that is
described in items (1) and (2) above.
(4)Several of the annual reports included incomplete information relating to community facilities
districts, including tax prepayment information, improvement fund balances and special tax delinquency
information.
(5)Certain material event notices of changes in bond ratings were not filed ina timely fashion.
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 Spicer Consulting Group, LLC 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.
Developer Continuing Disclosure
To provide updated information with respect to theirprojectswithin Improvement Area HH, Richmond
American and Beazerwill each enter into a Continuing Disclosure Agreement of the Developer (each a
“Developer Continuing Disclosure Agreement”) withSpicer Consulting Group, LLC, as dissemination agent,
and will covenant to provide Semiannual Reportson eachJune 15 andDecember 15, beginning June15, 2020,
47
4829-1999-3000v2/022042-0030
until satisfaction of certain conditions set forth in the Developer Continuing Disclosure Agreement. The
Semiannual Reports to be provided by Richmond American and Beazerwill contain updates regarding their
respectiveprojectswithin Improvement Area HHas outlined in Section 4 of theform ofDeveloper Continuing
Disclosure Agreement attached hereto as Appendix G. In addition to its Semiannual Reports,Richmond
American and Beazerwill agree to provide notices of certain events set forth in the form of Developer Continuing
Disclosure Agreement.
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 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. In the further
opinion of Bond Counsel, interest on the Bonds is exempt from State of California personal income tax.
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 Beneficial Owner before receipt of cash attributable to such
excludable income. The amount of original issue discount deemed received by the Beneficial Owner will
increase the Beneficial Owner’s basis in the Bond. In the opinion of Bond Counsel, the amount of original issue
discount that accrues to the Beneficial Owner of a Bond is excluded from the gross income of such Beneficial
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 is exempt from State of California personal income tax.
Bond Counsel’s opinion as to the exclusion from gross income of interest (and original issue discount)
on the Bonds is based upon certain representations of fact and certifications made by the District, the Cityand
others and is subject to the condition that the District, the City and others making such representations comply
with all requirements of 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 grossincome 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 District and the City will covenant to comply with all such requirements.
The amount by which a Beneficial 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 Section171 of the Code; such
amortizable Bond premium reduces the Beneficial 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 Beneficial Owner realizing a taxable gain when a
Bond is sold by the Beneficial Owner for an amount equal to or less (under certain circumstances) than the
original cost of the Bond to the Beneficial Owner. Purchasers of the Bonds should consult their own tax advisors
as to the treatment, computation and collateral consequences of amortizable Bond premium.
The Internal Revenue Service (the “IRS”) has initiated an expanded program for the auditing of tax-
exempt bond issues, including both random and targeted audits. It is possible that the Bonds will be selected for
audit by the IRS. It is also possible that the market value of the Bonds might be affected as a result of such an
audit of the Bonds (or by an audit of 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.
48
4829-1999-3000v2/022042-0030
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 INCLUDING THE IMPOSITION OF ADDITIONAL
FEDERAL INCOME OR STATE TAXES BEING IMPOSED ON OWNERS OF TAX-EXEMPT STATE OR
LOCAL OBLIGATIONS, SUCH AS THE BONDS. THESE CHANGES COULD ADVERSELY AFFECT
THE MARKET VALUE OR LIQUIDITY OF THE BONDS. NO ASSURANCE CAN BE GIVEN THAT
SUBSEQUENT TO THE ISSUANCE OF THE BONDS STATUTORY CHANGES WILL NOT BE
INTRODUCED OR ENACTED OR JUDICIAL OR REGULATORY INTERPRETATIONS WILL NOT
OCCUR HAVING THE EFFECTS DESCRIBED ABOVE.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 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 will render 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 and the Citycontinue
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.
A copy of the proposed form of opinion of Bond Counsel is attachedhereto as AppendixC.
LEGAL OPINION
The legal opinion of Bond Counsel approving the validity of the Bonds, in substantially the form set
forth as AppendixC hereto, will be made available to purchasers of the Bonds at the time of original delivery of
the Bonds. Certain legal matters will be passed upon for the City and the District by Leibold McClendon, &
Mann, Irvine, California, City Attorney, and for the District by Stradling Yocca Carlson & Rauth, a Professional
Corporation, Disclosure Counsel, for the Underwriter by Kutak RockLLP, Irvine, California, and for the Trustee
by its counsel. Bond Counsel undertakes no responsibility to the purchasers of the Bonds forthe accuracy,
completeness or fairness of this Official Statement.
ABSENCE OF LITIGATION
In connection with the issuance of the Bonds, the City Attorney will deliver an opinion to the effect that,
to theiractual knowledge, after due inquiry and investigation, there is no action, suit, proceeding or investigation
at law or in equity before or by any court, public board or body, pending or threatened, or any unfavorable
decision, ruling or finding, against or affecting the District, which would adversely impact the District’s ability
49
4829-1999-3000v2/022042-0030
to complete the transactions described in, or contemplated by, the Indenture or this Official Statement, restrain
or enjoin the collection of the Special Taxes, or in any way contest or affect the validity of the Bonds, the
Indenture, the Special Taxes, or the transactions described herein.
NO RATING
The District has not made,and does not contemplate making,an application to any rating organization
for the assignment of a rating on the Bonds.
UNDERWRITING
The Bonds are being purchased by Stifel, Nicolaus & Company, Incorporated(the “Underwriter”). The
Underwriter has agreed to purchase the Bonds at a price of $__________(being the $__________aggregate
principal amount of the Bonds, less an Underwriter’sdiscount of $__________and plus/less original issue
premium/discountof $__________). The Bond Purchase Agreement relating to the Bonds provides that the
Underwriter will purchase all of the Bonds if any are purchased,the obligation to make such purchase being
subject to certain terms and conditions set forth in the Bond Purchase Agreement, the approval of certain legal
matters by counsel and certain other conditions. The Underwriter’s compensation is contingent upon the
successful issuance of the Bonds.
Under certain circumstances, the Underwriter may offer and sell the Bonds to certain dealersand others
at prices lower or yields higher than thosestated on thepage immediately following thecover page of this
Official Statement. The offering pricesmay be changed from time to time by the Underwriter.
FINANCIAL INTERESTS
The fees being paid to the Underwriter and its counsel, Bond Counsel, Disclosure Counsel and the
Trustee are contingent upon the issuance and delivery of the Bonds. From time to time, Stradling Yocca Carlson
& Rauth, a Professional Corporation,representsthe Underwriter on matters unrelated to the Bonds.
MUNICIPAL ADVISOR
The District has retained Urban Futures Incorporated, Tustin, California, as Municipal Advisor for the
sale of the Bonds. The Municipal Advisor is not obligated to undertake, and has not undertaken to make, an
independent verification or to assume any responsibility for the accuracy, completeness or fairness of the
information contained in this Official Statement.
Urban Futures Incorporated, is an independent advisory firm and is not engaged in the business of
underwriting, trading or distributing municipal or other public securities.
MISCELLANEOUS
So far as any statements made in this Official Statement involve matters of opinion, assumptions,
projections, anticipated events or estimates, whether or not expressly stated, they are set forth as such and not as
presentations of fact, and actual results may differ substantially from those set forth therein. Neither this Official
Statement nor any statement that may have been made verbally or in writing is to be construed as a contract with
the Owners of the Bonds.
The summaries of certain provisions of the Bonds, statutes and other documents or agreements referred
toin this Official Statement do not purport to be complete, and reference is made to each of them for a complete
statement of their provisions. Copies are available for review by making requests to the City.
50
4829-1999-3000v2/022042-0030
The execution and delivery of this Official Statement by the City Manager of the City has been duly
authorized by the City Council of the City acting in its capacity as the legislative body of the District.
CITY OF LAKE ELSINORE COMMUNITY FACILITIES
DISTRICT NO. 2006-1 (SUMMERLY)
By:
City Manager of the City of Lake Elsinore
A-1
4829-1999-3000v2/022042-0030
APPENDIXA
RATE AND METHOD OF APPORTIONMENT OF SPECIAL TAX
CITY OF LAKE ELSINORE COMMUNITY FACILITIES DISTRICT NO.2006-1(SUMMERLY)
IMPROVEMENT AREA HH
A Special Tax shall be levied on all Assessor’s Parcels in City of Lake Elsinore Community Facilities
District No.2006-1 (Summerly) Improvement Area HH (“CFD No.2006-1 (IAHH)”) and collected each Fiscal
Year commencing in Fiscal Year 2014-2015, in an amount determined through the application of this Rate and
Method of Apportionment as described below. All of the real property in CFD No.2006-1 (IAHH), unless
exempted by law or by the provisions hereof, shall be taxed for the purposes, to the extent and in the manner
herein provided.
A.DEFINITIONS
The terms hereinafter set forth have the following meanings:
“Acre or Acreage”means the land area of an Assessor’s Parcel as shown on an Assessor’s Parcel Map,
or ifthe land area is not shown on an Assessor’s Parcel Map, the land area shown on the applicable final
map, parcel map, condominium plan, or other recorded County parcel map.
“Act”means the Mello-Roos Community Facilities Act of 1982, being Chapter2.5, Part1, Division2
of Title5 of the California Government Code.
“Administrative Expenses”means the following actual or reasonably estimated costs directly related
to the administration of CFD No.2006-1 (IAHH): the costs of computing the Special Taxes and
preparing the annual Special Tax collection schedules (whether by the City or designee thereof or both);
the costs of collecting the Special Taxes (whether by the City or otherwise); the costs of remitting the
Special Taxes to the Trustee; the costs ofthe Trustee (including its legal counsel) in the discharge of
the duties required of it under the Indenture; the costs to the City, CFD No.2006-1 (IAHH) or any
designee thereof of complying with arbitrage rebate requirements; the costs to the City, CFD No.2006-
1 (IAHH) or any designee thereof of complying with disclosure requirements of the City, CFD
No.2006-1 (IAHH) or obligated persons associated with applicable federal and state securities laws
and the Act; the costs associated with preparing Special Tax disclosure statements and responding to
public inquiries regarding the Special Taxes; the costs of the City, CFD No.2006-1 (IAHH) or any
designee thereof related to an appeal of the Special Tax; the costs associated with the release of funds
froman escrow account; and the City’s annual administration fees and third party expenses.
Administrative Expenses shall also include amounts estimated by the CFD Administrator or advanced
by the City or CFD No.2006-1 (IAHH) for any other administrative purposes of CFD No.2006-1
(IAHH), including attorney’s fees and other costs, and attorney’s fees and other costs related to
commencing and pursuing to completion any foreclosure of delinquent Special Taxes.
“Approved Property”means all Assessor’s Parcels of Taxable Property: (i)that are included in a
Final Map that was recorded prior to the January1st 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 March1st preceding
the Fiscal Year in which the Special Tax is being levied.
“Assessor’s Parcel”means a lot or parcel shown in an Assessor’s Parcel Map with an assigned
Assessor’s Parcel number.
“Assessor’s Parcel Map”means an official map of the County Assessor of the County designating
parcels by Assessor’s Parcel number.
A-2
4829-1999-3000v2/022042-0030
“Assigned Special Tax for Facilities”means the Special Tax for Facilities for each Land Use Class of
Developed Property, as determined in accordance with SectionC.1.(b) below.
“Authorized Facilities”means those authorized improvements, as listed in an exhibit to the Resolution
of Formation.
“Backup Special Tax for Facilities”means the Special Tax for Facilities applicable to each Assessor’s
Parcel of Developed Property, as determined in accordance with SectionC.1.(c) below.
“CFD Administrator”means an official of the City, or designee thereof, responsible for determining
the Special Tax Requirement for Facilities, the Special Tax Requirement for Services as determined in
accordance with Section1 below, and providing for the levy and collection of the Special Taxes.
“CFD No.2006-1”means City of Lake Elsinore Community Facilities District No.2006-1
(Summerly).
“CFD No.2006-1 (IAHH)”means Improvement Area HH of CFD No.2006-1 as identified on the
boundary map for CFD No.2006-1.
“CFD No.2006-1 (IAHH) Bonds”means any bonds or other debt (as defined in Section53317(d) of
the Act), whether in one or more series, issued by CFD No.2006-1 (IAHH) and secured solely by the
Special Tax for Facilities levy on property within the boundaries of CFD No.2006-1 (IAHH) under the
Act.
“City”means the City of Lake Elsinore.
“City Council”means the City Council of the City of Lake Elsinore, acting as the legislative body of
CFD No.2006-1 (IAHH).
“County”means the County of Riverside.
“Developed Property”means, with respect to the Special Tax for Facilities, for each Fiscal Year, all
Taxable Property, exclusive of Taxable Public Property and Taxable Property Owner Association
Property, for which the Final Subdivision was recorded on or before January1 of the prior Fiscal Year
and a building permit for new construction was issued on or before May1 of the Fiscal Year preceding
the Fiscal Year for which the Special Tax for Facilities is being levied. Once an Assessor’s Parcel has
been designated Developed Property, the Maximum Special Tax for Facilities cannot be reduced for
any reason unless a prepayment in full or partial prepayment is made pursuant to SectionG.
“Final Subdivision”means (i)a final map, or portion thereof, approved by the City pursuant to the
Subdivision Map Act (California Government Code Section66410 et seq.) that creates individual lots
for which building permits may be issued, or (ii)for condominiums, a final map, or portion thereat
approved by the City and a condominium plan recorded pursuant to California Civil Code Section1352
that creates individual lots for which building permits may be issued.
“Funding Agreement”means the Funding, Construction and Acquisition Agreement entered into by
the City, on behalf of CFD No.2006-1, as it may be amended.
“Fiscal Year”means the period starting July1 and ending on the following June30.
“Indenture”means the indenture, fiscal agent agreement, resolution or other instrument pursuant to
which CFD No.2006-1 (IAHH) Bonds are issued, as modified, amended and/or supplemented from
time to time, and any instrument replacing or supplementing the same.
A-3
4829-1999-3000v2/022042-0030
“Land Use Class”means any of the classes listed in Table 1 below.
“Maximum Special Tax for Facilities”means the maximum Special Tax for Facilities, determined in
accordance with SectionC below, that can be levied in any Fiscal Year on any Assessor’s Parcel.
“Non-Residential Property”means all Assessor’s Parcels of Developed Property for which abuilding
permit permitting the construction of one or more non-residential units or facilities has been issued by
the City.
“Outstanding Bonds”means all CFD No.2006-1 (IAHH) Bonds which are deemed to be outstanding
under the Indenture.
“Property Owner Association Property”means, for each Fiscal Year, any property within the
boundaries of CFD No.2006-1 (IAHH) that was owned by a property owner association, including any
master or sub-association, as of January1 of the prior Fiscal Year.
“Proportionately”means for Developed Property that the ratio of the actual Special Tax for Facilities
levy to the Assigned Special Tax for Facilities is equal for all Assessor’s Parcels of Developed Property.
For Undeveloped Property, “Proportionately” means that theratio of the actual Special Tax for Facilities
levy per Acre to the Maximum Special Tax for Facilities per Acre is equal for all Assessor’s Parcels of
Undeveloped Property. The term “Proportionately” may similarly be applied to other categories of
Taxable Property as listed in SectionD below.
“Public Property” means, for each Fiscal Year, (i)any property within the boundaries of CFD
No.2006-1 (IAHH) owned by, irrevocably offered or dedicated to, or over, through or under which an
easement for purposesof public use has been granted, to the federal government, the State, the County,
the City, the Lake Elsinore Unified School District, or any local government or other public agency as
of January1 of the previous Fiscal Year, provided that any property leased by a public agency to a
private entity and subject to taxation under Section53340.1 of the Act shall be taxed and classified
according to its use; or (ii)any property within the boundaries of CFD No.2006-1 (IAHH) that was
encumbered, as of January1 of the previous Fiscal Year, by an unmanned utility easement making
impractical its utilization for other than the purpose set forth in the easement.
“Residential Floor Area”means all of the square footage of living area within the perimeter of a
residential structure, not including any carport, walkway, garage, overhang, patio, enclosed patio, or
similar area. The determination of Residential Floor Area for an Assessor’s Parcel shall be made by
reference to the building permit(s) issued for such Assessor’s Parcel.
“Residential Property”means all Assessor’s Parcels of Developed Property for which a building
permit permitting the construction thereon of one or more residential dwelling units has been issued by
the City.
“Resolution of Formation”means the resolution of formation for CFD No.2006-1 (IAHH).
“Special Tax”means any of the special taxes authorized to be levied by CFD No.2006-1 (IAHH)
pursuant to the Act.
“Special Tax for Facilities”means the special tax to be levied in each Fiscal Year on each Assessor’s
Parcel of Developed Property, Taxable Property Owner Association Property, Taxable Public Property,
and Undeveloped Property to fund the Special Tax Requirement for Facilities.
“Special Tax Requirement for Facilities”means that amount required in any Fiscal Year for CFD
No.2006-1 (IAHH) to: (i)pay debt service on all Outstanding Bonds due in the calendar year
A-4
4829-1999-3000v2/022042-0030
commencing in such Fiscal Year; (ii)pay periodic costs on the CFD No.2006-1 (IAHH) Bonds,
including but not limited to, credit enhancement and rebate payments on the CFD No.2006-1 (IAHH)
Bonds due in the calendar year commencing in such Fiscal Year; (iii)pay Administrative Expenses;
(iv)pay any amounts required to establish or replenish any reserve funds for all Outstanding Bonds;
(v)pay for reasonably anticipated Special Tax for Facilities delinquencies; (vi)pay directly for
acquisition or construction of Authorized Facilities to the extent that the inclusion of such amount does
not increase the Special Tax for Facilities levy on Undeveloped Property; less (vii)a credit for funds
available to reduce the annual Special Tax for Facilities levy, as determined by the CFD Administrator
pursuant to the Indenture.
“State”means the State of California.
“Taxable Property”means all of the Assessor’s Parcels within the boundaries of CFD No.2006-1
(IAHH) which are not exempt from the Special Tax for Facilities pursuant to law or SectionE below.
“Taxable Property Owner Association Property”means all Assessor’s Parcels of Property Owner
Association Property that are not exempt pursuant to SectionE below.
“Taxable Public Property”means all Assessor’s Parcels of Public Property that are not exempt
pursuant to SectionE below.
“Trustee”means the trustee or fiscal agent under the Indenture.
“Undeveloped Property”means, for each Fiscal Year, all Taxable Property not classified as Developed
Property, Taxable Property Owner Association Property, or Taxable Public Property.
B.ASSIGNMENT TO LAND USE CATEGORIES
Each Fiscal Year, all Taxable Property within CFD No.2006-1 (IAHH) shall be classified as Developed
Property, Taxable Public Property, Taxable Property Owner Association Property, or Undeveloped
Property, and shall be subject to Special Taxes in accordance with this Rate and Method of
Apportionment determined pursuant to Sections C and D below. Residential Property shall be assigned
to Land Use Classes 1 through 14 as listed in Table 1 below based on the Residential Floor Area for
each unit. Non-Residential Property shall be assigned to Land Use Class 15. With respect to Residential
Property, the Residential Floor Area shall be determined from the most recent building permit issued
for such Assessor’s Parcel.
C.MAXIMUM SPECIAL TAX FOR FACILITIES
Prior to the issuance ofthe CFD No.2006-1 (IAHH) Bonds within CFD No.2006-1 (IAHH), the
Assigned Special Tax for Facilities on Developed Property (set forth in Table 1), and the Backup Special
Tax for Facilities attributable to a Final Subdivision, may be reduced in accordance with, and subject to
the conditions set forth in this paragraph. If it is reasonably determined by the CFD Administrator that
the overlapping debt burden (as defined in the Statement of Goals and Policies for the Use of the Mello-
Roos Community Facilities Act of 1982 adopted by the City Council, the “Goals and Policies”)
calculated pursuant to the Goals and Policies based upon the Assigned Special Tax for Facilities on
Developed Property exceeds the City’s maximum overlapping debt burden set forth in such document,
the Assigned Special Tax for Facilities on Developed Property, and the Backup Special Tax for
Facilities attributable to a Final Subdivision, may be reduced to the maximum overlapping debt burden
level with the written consent of the CFD Administrator. The reductions permitted pursuant to this
paragraph shall be reflected in an amended Notice of Special Tax Lien which the City shall cause to be
recorded by executing a certificate in substantially the form attached hereto as Exhibit“A”.
A-5
4829-1999-3000v2/022042-0030
In addition, prior to the issuance of CFD No.2006-1 (IAHH) Bonds, the Assigned Special Tax for
Facilities on Developed Property and the Backup Special Tax for Facilities attributable to a Final
Subdivision may be reduced upon the written request of the “Owner”under the Funding Agreement.
Such written request shall include, at a minimum, the amount of the reduced tax requested for each Land
Use Class shown in Table 1 below. The City and CFD Administrator shall review the written request,
and if approved, the reductions permitted pursuant to this paragraph shall be reflected in an amended
Notice of Special Tax Lien which the City shall cause to be recorded by executing a certificate in
substantially the form attached hereto as Exhibit“A”.
1.Developed Property
(a)Maximum Special Tax for Facilities
The Maximum Special Tax for Facilities for each Assessor’s Parcel classified as Developed
Property shall be the greater of (i)the amount derived by application of the Assigned Special
Tax for Facilities or (ii)the amount derived by application of the Backup Special Tax for
Facilities.
(b)Assigned Special Tax for Facilities
The Fiscal Year 2014-2015 Assigned Special Tax for Facilities for each Land Use Class is
shown below in Table 1.
TABLE 1
Assigned Special Tax for Facilities for Developed Property
Community Facilities District No.2006-1
(Improvement Area HH)
Fiscal Year 2014-2015
Land Use
Class Description Residential Floor Area
Assigned Special Tax
for Facilities
1 Residential Property Less than 1,100 sq. ft.$1,055.37 per unit
2 Residential Property 1,100 –1,299 sq. ft.$1,136.55 per unit
3 Residential Property 1,300 –1,499 sq. ft.$1,217.74 per unit
4 Residential Property 1,500 –1,699 sq. ft.$1,298.92 per unit
5 Residential Property 1,700 –1,899 sq.ft.$1,380.10 per unit
6 Residential Property 1,900 –2,099 sq. ft.$1,461.28 per unit
7 Residential Property 2,100 –2,299 sq. ft.$1,542.47 per unit
8 Residential Property 2,300 –2,499 sq. ft.$1,623.65 per unit
9 Residential Property 2,500 –2,699sq. ft.$1,677.77 per unit
10 Residential Property 2,700 –2,899 sq. ft.$1,758.95 per unit
11 Residential Property 2,900 –3,099 sq. ft.$1,921.32 per unit
12 Residential Property 3,100 –3,299 sq. ft.$2,083.68 per unit
13 Residential Property 3,300 –3,499 sq. ft.$2,246.05 per unit
14 Residential Property More than 3,499 sq. ft.$2,408.41 per unit
15 Non-Residential Property NA $15,946.28 per Acre
(c)Backup Special Tax for Facilities
The Fiscal Year 2014-2015 Backup Special Tax for Facilities attributable to a Final Subdivision
will equal $15,946.28, multiplied by the Acreage of all Taxable Property, exclusive of any
A-6
4829-1999-3000v2/022042-0030
Taxable Property Owner Association Property and Taxable Public Property, therein. The
Backup Special Tax for Facilities for each Assessor’s Parcel of Residential Property shall be
computed by dividing the Backup Special Tax for Facilities attributable to the applicable Final
Subdivision by the number of Assessor’s Parcels for which building permits for residential
construction have or may be issued (i.e., the number or residential lots). The Backup Special
Tax for Facilities for each Assessor’s Parcel of Non-Residential Property therein shall equal
$15,946.28 multiplied by the Acreage of such Assessor’s Parcel.
If a Final Subdivision includes Assessor’s Parcels of Taxable Property for which building
permits for both residential and non-residential construction may be issued, exclusive of
Taxable Property Owner Association Property and Taxable Public Property, then the Backup
Special Tax for Facilities for each Assessor’s Parcel of Residential Property shall be computed
exclusive of the Acreage and Assessor’s Parcels of property for which building permits for non-
residential construction may be issued.
Notwithstanding the foregoing, if all or any portion of the Final Subdivision(s) described in the
preceding paragraphs is subsequently changed or modified by recordation of a lot line
adjustment or similar instrument, and only if the CFD Administrator determines that such
change or modification results in a decrease in the number of Assessor’s Parcels of Taxable
Property for which building permits for residential construction have or may be issued within
such Final Subdivision, then the Backup Special Tax for Facilities for each Assessor’s Parcel
of Developed Property that is part of the lot line adjustment or similar instrument for such Final
Subdivision shall be a rate per Acre as calculated below. The Backup Special Tax for Facilities
previously determined for an Assessor’s Parcel of Developed Property that is not a part of the
lot line adjustment or similar instrument for such Final Subdivision shall not be recalculated.
1.Determine the total Backup Special Tax for Facilities anticipated to apply to
the changed or modified portion of the Final Subdivision area prior to the
change or modification.
2.The result of paragraph 1 above shall be divided by the Acreage of Taxable
Property which is ultimately expected to exist in such changed or modified
portion of the Final Subdivision area, as reasonably determined by the CFD
Administrator.
3.The result of paragraph 2 above shall be the Backup Special Tax for Facilities
per Acre which shall be applicable to Assessor’s Parcels of Developed
Property in such changed or modified portion of the Final Subdivision area
for all remaining Fiscal Years in which the Special Tax for Facilities may be
levied.
(d)Release of Obligation to Pay and Disclose Backup Special Tax
All Assessor’s Parcels within CFD No.2006-1 (IAHH) will be relieved simultaneously and
permanently from the obligation to pay and disclose the backup Special Tax if the CFD
Administrator determines that the annual debt service required for the Outstanding Bonds,
when compared to the Assigned Special Taxes for Facilities that may be levied against all
Assessor’s Parcels of Developed Property results in 110% debt service coverage (i.e., the
aggregate Assigned Special Taxes for Facilities that may be levied against all Developed
Property in each remaining Fiscal Year based on then existing development in CFD No.2006-
1 (IAHH) is at least equal to the sum of (i)the Administrative Expenses and (ii)1.10 times
maximum annual debt service, in each remaining Fiscal Year on the Outstanding Bonds).
A-7
4829-1999-3000v2/022042-0030
(e)Increase in the Assigned Special Tax for Facilities and Backup Special Tax for
Facilities
The Fiscal Year 2014-2015 Assigned Special Tax for Facilities, identified in Table 1 above,
and Backup Special Tax for Facilities shall increase thereafter, commencing on July1, 2015
and on July1 of each Fiscal Year thereafter, by an amount equal to two percent (2%) of the
amount in effect for the previous Fiscal Year.
(f)Multiple Land Use Classes
In some instances an Assessor’s Parcel of Developed Property may contain more than one Land
Use Class. The Maximum Special Tax for Facilities levied on an Assessor’s Parcel shall be
the sum of the Maximum Special Tax for Facilities for all Land Use Classes located on that
Assessor’s Parcel. The CFD Administrator’s allocation to each type of property shall be final.
2.Approved Property, Taxable Property Owner Association Property, Taxable Public Property,
and Undeveloped Property
The Fiscal Year 2014-2015 Maximum Special Tax for Facilities for Approved Property,
Taxable Property Owner Association Property, Taxable Public Property, and Undeveloped
Property shall be $15,946.25 per Acre and shall increase thereafter, commencing on July1,
2015 and on July1 of each Fiscal Year thereafter, by an amount equal to two percent (2%) of
the Maximum Special Tax for Facilities in effect for the previous Fiscal Year.
D.METHOD OF APPORTIONMENT OF THE SPECIAL TAX FOR FACILITIES
Commencing with Fiscal Year 2014-2015 and for each following Fiscal Year, the City Council shall
determine the Special Tax Requirement for Facilities and levy the Special Tax for Facilities until the
amount of Special Tax for Facilities levy equals the Special Tax Requirement for Facilities. The Special
Tax for Facilities shall be levied each Fiscal Year as follows:
First: The Special Tax for Facilities shall be levied on each Assessor’s Parcel of Developed Property
in an amount equal to 100% of the applicable Assigned Special Tax for Facilities;
Second: If additional monies are needed to satisfy the Special Tax Requirement for Facilities after the
first step has been completed, the Special Tax for Facilities shall be levied Proportionately on each
Assessor’s Parcel of Approved Property at up to 100% of the Maximum Special Tax for Facilities for
Approved Property;
Third: If additional monies are needed to satisfy the Special Tax Requirement for Facilities after the
first step has been completed, the Special Tax for Facilities shall be levied Proportionately on each
Assessor’s Parcel of Undeveloped Property at up to 100% of the Maximum Special Tax for Facilities
for Undeveloped Property;
Fourth: If additional monies are needed to satisfy the Special Tax Requirement for Facilities after the
first two steps have been completed, then the levy of the Special Tax for Facilities on each Assessor’s
Parcel of Developed Property whose Maximum Special Tax for Facilities is determined through the
application of the Backup Special Tax for Facilities shall be increased in equal percentages from the
Assigned Special Tax for Facilities up to the Maximum SpecialTax for Facilities for each such
Assessor’s Parcel;
Fifth: If additional monies are needed to satisfy the Special Tax Requirement for Facilities after the
first three steps have been completed, then the Special Tax for Facilities shall be levied Proportionately
A-8
4829-1999-3000v2/022042-0030
on each Assessor’s Parcel of Taxable Property Owner Association Property and Taxable Public Property
at up to 100% of the Maximum Special Tax for Facilities for Taxable Property Owner Association
Property or Taxable Public Property.
Notwithstandingthe above, the City Council may, in any Fiscal Year, levy Proportionately less than
100% of the Assigned Special Tax for Facilities in step one (above), when (i)the City Council is no
longer required to levy the Special Tax for Facilities pursuant to steps two through four above in order
to meet the Special Tax Requirement for Facilities; (ii)all authorized CFD No.2006-1 (IAHH) Bonds
have already been issued or the City Council has covenanted that it will not issue any additional CFD
No.2006-1 (IAHH)Bonds (except refunding bonds) to be supported by the Special Tax for Facilities;
and (iii)all Authorized Facilities have been constructed and/or acquired.
Further notwithstanding the above, under no circumstances will the Special Tax for Facilities levied
against any Assessor’s Parcel of Residential Property be increased by more than ten percent as a
consequence of delinquency or default by the owner of any other Assessor’s Parcel within CFD
No.2006-1 (IAHH).
E.EXEMPTIONS
No Special Tax for Facilitiesshall be levied on up to 10.77 Acres of Property Owner Association
Property and/or Public Property in CFD No.2006-1 (IAHH). Tax-exempt status will be assigned by
the CFD Administrator in the chronological order in which property becomes Property Owner
Association Property or Public Property. However, should an Assessor’s Parcel no longer be classified
as Property Owner Association Property or Public Property, its tax-exempt status will be revoked.
Property Owner Association Property or Public Property that is not exempt from Special Tax for
Facilities under this section shall be subject to the levy of the Special Tax for Facilities and shall be
taxed Proportionately as part of the fourth step in SectionD above, at up to 100% of the Maximum
Special Tax for Facilities for Taxable Property Owner Association Property or Taxable Public Property.
F.MANNER OF COLLECTION
The Special Tax for Facilities shall be collected in the same manner and at the same time as ordinary ad
valorem property taxes; provided, however, that CFD No.2006-1 (IAHH) may directly bill the Special
Tax for Facilities, may collect Special Taxes at a different time or in a different manner if necessary to
meet its financial obligations, and may covenant to foreclose and may actually foreclose on delinquent
Assessor’s Parcels as permitted by the Act.
G.PREPAYMENT OF SPECIAL TAX FOR FACILITIES
The following additional definitions apply to this SectionG:
“Buildout”means, for CFD No.2006-1 (IAHH), that all expected building permits have been issued.
“CFD Public Facilities Costs”means either $4,920,000 in 2014 dollars, which shall increase by the
Construction Inflation Index on July1, 2015, and on each July1 thereafter, or such lower number, as
(i)shall be determined by the CFD Administrator as sufficient to fund the Authorized Facilities to be
provided by CFD No.2006-1 (IAHH) under the authorized bonding program for CFD No.2006-1
(IAHH), or (ii)shall be determined by the City Council concurrently with a covenant that it will not
issue any more CFD No.2006-1 (IAHH) Bonds (except refunding bonds) to be supported by the
Special Tax for Facilities levy under this Rate and Method of Apportionment as described in SectionD
above.
A-9
4829-1999-3000v2/022042-0030
“Construction Inflation Index”means the annual percentage change in the Engineering News Record
Building Cost Index for the City of Los Angeles, measured as of the calendar year which ends in the
previous Fiscal Year. In the event this index ceases to be published, the Construction Inflation Index
shall be another index as determined by the CFD Administrator that is reasonably comparable to the
Engineering News Record Building Cost Index for the City of Los Angeles.
“Future Facilities Costs”means the CFD Public Facilities Costs minus (i)public facility costs
previously paid from the Improvement Fund, (ii)moneys currently on deposit in the Improvement Fund,
and (iii)moneys currently on deposit in an escrow fund that are expected to be available to finance the
cost of Authorized Facilities.
“Improvement Fund”means an account specifically identified in the Indenture to hold funds which
are currently available for expenditure to acquire or construct Authorized Facilities eligible under the
Act.
“Previously Issued Bonds”means, for any Fiscal Year, all Outstanding Bonds that are deemed to be
outstanding under the Indenture after the first interest and/or principal payment date following the
current Fiscal Year.
1.Prepayment in Full
Only an Assessor’s Parcel of Developed Property, or Undeveloped Property for which a building permit
has been issued, may be prepaid. The obligation of the Assessor’s Parcel to pay the Special Tax for
Facilities may be permanently satisfied as described herein, provided that a prepayment may be made
with respect to a particular Assessor’s Parcel only if there are no delinquent Special Taxes with respect
to such Assessor’s Parcel at the time of prepayment. An owner of an Assessor’s Parcel intending to
prepay the Special Tax for Facilities obligation shall provide the CFD Administrator with written notice
of intent to prepay. Within 30 days of receipt of such written notice, the CFD Administrator shall notify
such owner of the prepayment amount for such Assessor’s Parcel. The CFD Administrator may charge
a reasonable fee for providing this service. Prepayment must be made not less than 45 days prior to the
next occurring date that notice of redemption of CFD No.2006-1 (IAHH) Bonds from the proceeds of
such prepayment may be given by the Trustee pursuant to the Indenture.
The Special Tax for Facilities Prepayment Amount (defined below) shall he calculated as summarized
below (capitalized terms as defined below):
Bond Redemption Amount
plus Redemption Premium
plus Future Facilities Amount
plus Defeasance Amount
plus Administrative Fees and Expenses
less Reserve Fund Credit
less Capitalized Interest Credit
Total:equalsSpecial Tax for Facilities Prepayment Amount
As of the proposed date of prepayment, the SpecialTax for Facilities Prepayment Amount shall be
calculated as follows:
Paragraph No.:
1.Confirm that no Special Tax delinquencies apply to such Assessor’s Parcel.
A-10
4829-1999-3000v2/022042-0030
2.For Assessor’s Parcels of Developed Property, compute the Assigned Special Tax for Facilities
and Backup Special Tax for Facilities. For Assessor’s Parcels of Undeveloped Property for
which a building permit has been issued, compute the Assigned Special Tax for Facilities and
Backup Special Tax for Facilities for that Assessor’s Parcel as though it was already designated
as Developed Property, based upon the building permit which has already been issued for that
Assessor’s Parcel.
3.(a)Divide the Assigned Special Tax for Facilities computed pursuant to paragraph 2 by the
total estimated Assigned Special Tax for Facilities for the entire CFD No.2006-1 (IAHH)
based on the Developed Property Special Tax for Facilities which could be levied in the current
Fiscal Year on all expected development through Buildout of CFD No.2006-1 (IAHH),
excluding any Assessor’s Parcels which have been prepaid, and
(b)Divide the Backup Special Tax for Facilities computed pursuant to paragraph 2 by the total
estimated Backup Special Tax for Facilities at Buildout for the entire CFD No.2006-1 (IAHH),
excluding any Assessor’s Parcels which have been prepaid.
4.Multiply the larger quotient computed pursuant to paragraph 3(a) or 3(b) by the Previously
Issued Bonds to compute the amount of Previously Issued Bonds to be retired and prepaid (the
“Bond Redemption Amount”).
5.Multiply the Bond Redemption Amount computed pursuant to paragraph 4 by the applicable
redemption premium (e.g., the redemption price-100%), if any, on the Previously Issued Bonds
to be redeemed (the “Redemption Premium”).
6.Compute the current Future Facilities Costs.
7.Multiply the larger quotient computed pursuant to paragraph 3(a) or 3(b) by the amount
determined pursuant to paragraph 6 to compute the amount of Future Facilities Costs to be
prepaid (the “Future Facilities Amount”).
8.Compute the amount needed to pay interest on the Bond Redemption Amount from the first
bond interest and/or principal payment date following the current Fiscal Year until the earliest
redemption date for the Previously Issued Bonds.
9.Determine the SpecialTax for Facilities levied on the Assessor’s Parcel in the current Fiscal
Year which has not yet been paid.
10.Compute the minimum amount the CFD Administrator reasonably expects to derive from the
reinvestment of the Special Tax for Facilities PrepaymentAmount less the Future Facilities
Amount and the Administrative Fees and Expenses (defined below) from the date of
prepayment until the redemption date for the Previously Issued Bonds to be redeemed with the
prepayment.
11.Add the amounts computed pursuant to paragraphs 8 and 9 and subtract the amount computed
pursuant to paragraph 10 (the “Defeasance Amount”).
12.The administrative fees and expenses of CFD No.2006-1 (IAHH) are as calculated by the CFD
Administrator and include the costs of computationof the prepayment, the costs to invest the
prepayment proceeds, the costs of redeeming CFD No.2006-1 (IAHH) Bonds, and the costs
of recording any notices to evidence the prepayment and the redemption (the “Administrative
Fees and Expenses”).
A-11
4829-1999-3000v2/022042-0030
13.The reserve fund credit (the “Reserve Fund Credit”) shall equal the lesser of (a)the expected
reduction in the reserve requirement (as defined in the Indenture), if any, associated with the
redemption of Previously Issued Bonds as a result of the prepayment, or (b)the amount derived
by subtracting the new reserve requirement (as defined in the Indenture) in effect alter the
redemption of Previously Issued Bonds as a result of the prepayment from the balance in the
reserve fund on the prepayment date, but in no event shall such amount be less than zero. No
Reserve Fund Credit shall be granted if the amount then on deposit in the reserve fund for the
Previously Issued Bonds is below 100% of the reserve requirement (as defined in the
Indenture).
14.If any capitalized interest for the Previously Issued Bonds will not have been expended as of
the date immediately following the first interest and/or principal payment following the current
Fiscal Year, a capitalized interest credit shall be calculated by multiplying the larger quotient
computed pursuant to paragraph 3(a) or 3(b) by the expected balance in the capitalized interest
fund or account under the Indenture after such first interest and/or principal payment (the
“Capitalized Interest Credit”).
15.The Special Tax for Facilities prepayment is equal to the sum of the amounts computed
pursuant to paragraphs 4, 5, 7, 11 and 12, less the amounts computed pursuant to paragraphs
13 and 14 (the “Special Tax for Facilities Prepayment Amount”).
From the Special Tax for Facilities Prepayment Amount, the amounts computed pursuant to paragraphs
4, 5, 11, 13 and 14 shall be deposited into the appropriate fund as established under the Indenture and
be used to retire CFD No.2006-1 (IAHH) Bonds or make debt service payments. The amount
computed pursuant to paragraph 7 shall be deposited into the Improvement Fund. The amount computed
pursuant to paragraph 12 shall be retained by CFD No.2006-1 (IAHH).
The Special Tax for Facilities Prepayment Amount may be insufficient to redeem a full $5,000
increment of CFD No.2006-1 (IAHH) Bonds. In such cases, the increment above $5,000 or integral
multiple thereof will be retained in the appropriate fund established under the Indenture to be used with
the next prepayment of CFD No.2006-1 (IAHH) Bonds or to make debt service payments.
As a result of the payment of the current Fiscal Year’s Special Tax for Facilities levy as determined
under paragraph 9 (above), the CFD Administrator shall remove the current Fiscal Year’s Special Tax
for Facilities levy for such Assessor’s Parcel from the County tax rolls. With respect to any Assessor’s
Parcel that is prepaid, the City Council shall cause a suitable notice to be recorded in compliance with
the Act, to indicate the prepayment of the Special Tax for Facilities and the release of the Special Tax
for Facilities lien on such Assessor’s Parcel, and the obligation of such Assessor’s Parcel to pay the
Special Tax for Facilities shall cease.
Notwithstanding the foregoing, no Special Tax for Facilities prepayment shall be allowed unless, at the
time of such proposed prepayment, the amount of Maximum Special Tax for Facilities that may be
levied on Taxable Property within CFD No.2006-1 (IAHH) (after excluding 10.77Acres of Property
Owner AssociationProperty and/or Public Property in CFD No.2006-1 (IAHH) as set forth in
SectionE) both prior to and after the proposed prepayment is at least equal to the sum of (i)the
Administrative Expenses, as defined in SectionA above, and (ii)1.10 times maximum annual debt
service, in each remaining Fiscal Year on the Outstanding Bonds.
2.Prepayment in Part
The Special Tax for Facilities on an Assessor’s Parcel of Developed Property or an Assessor’s Parcel
of Undeveloped Property for which a building permit has been issued may be partially prepaid. The
A-12
4829-1999-3000v2/022042-0030
amount of the prepayment shall be calculated as in SectionG.1; except that a partial prepayment shall
be calculated according to the following formula:
PP = [(PE –A) x F] + A
These terms have the following meaning:
PP =the partial prepayment.
PE =the Special Tax for Facilities Prepayment Amount calculated according to SectionG.1.
F =the percentage, expressed as a decimal, by which the owner of the Assessor’s Parcel is
partially prepaying the Special Tax for Facilities.
A =the Administrative Fees and Expenses calculated according to SectionG.1.
The owner of any Assessor’s Parcel who desires such prepayment shall notify the CFD Administrator
of such owner’s intent to partially prepay the Special Tax for Facilities and the percentage by which the
Special Tax for Facilities shall be prepaid. The CFD Administrator shall provide the owner with a
statement of the amount required for the partial prepayment of the Special Tax for Facilities for an
Assessor’s Parcel within 30 days of the request and may charge a reasonable fee for providing this
service. With respect to any Assessor’s Parcel that is partially prepaid, the City Council shall
(i)distribute the funds remitted to it according to SectionG.1, and (ii)indicate in the records of CFD
No.2006-1 (IAHH) that there has been a partial prepayment of the Special Tax for Facilities and that
a portion of the Special Tax for Facilities with respect to such Assessor’s Parcel, equal to the outstanding
percentage (1.00 –F) of the remaining Maximum Special Tax for Facilities, shall continue to be levied
on such Assessor’s Parcel pursuant to SectionD above.
H.TERM OF SPECIAL TAX FOR FACILITIES
The Special Tax for Facilities shall be levied until Fiscal Year 2056-2057, provided however that the
Special Tax for Facilities will cease to be levied in an earlier Fiscal Year if the CFD Administrator has
determined (i)that all required interest and principal payments on the CFD No.2006-1 (IAHH) Bonds
have been paid; (ii)all Authorized Facilities have been acquired and all reimbursements required by the
Funding Agreement have been paid; and (iii)all other obligations of CFD No.2006-1 (IAHH) have
been satisfied. Bonds shall not be issued after eighteen (18) months have elapsed following the final
inspection of the last Residential Property within CFD No.2006-1 (IAHH), except as otherwise
provided in the Funding Agreement.
I.SPECIAL TAX FOR SERVICES
The following additional definitions apply to this SectionI:
“Developed Multifamily Unit”means a residential dwelling unit within a building in which each of
the individual dwelling units has or shall have at least one common wall with another dwelling unit and
a building permit has been issued by the City for such dwelling unit on or prior to May1 preceding the
Fiscal Year in which the Special Tax for Services is being levied.
“Developed Single Family Unit”means a residential dwelling unit other than a Developed Multifamily
Unit on an Assessor’s Parcel for whicha building permit has been issued by the City on or prior to
May1 preceding the Fiscal Year in which the Special Tax for Services is being levied.
“Maximum Special Tax for Services”means the maximum Special Tax for Services that can be levied
by CFD No.2006-1 (IAHH) in any Fiscal Year on any Assessor’s Parcel.
A-13
4829-1999-3000v2/022042-0030
“Operating Fund”means a fund that shall be maintained for CFD No.2006-1 (IAHH) for any Fiscal
Year to pay for the actual costs of maintenance related to the Service Area, and the applicable
Administrative Expenses.
“Operating Fund Balance”means the amount of funds in the Operating Fund at the end of the
preceding Fiscal Year.
“Service Area”means public parks, open space, and storm drains.
“Special Tax for Services”means any of the special taxes authorized to be levied within CFD
No.2006-1 (IAHH) pursuant to the Act to fund the Special Tax Requirement for Services.
“Special Tax Requirement for Services”means the amount determined in any Fiscal Year for CFD
No.2006-1 (IAHH) equal to (i)the budgeted costs directly related to the Service Area, including
maintenance, repair and replacement of certain components of the Service Area which have been
accepted and maintained or are reasonably expected to be accepted and maintained during the current
Fiscal Year, (ii)pay Administrative Expenses, and (iii)anticipated Special Tax for Services
delinquencies, less (iv)the Operating Fund Balance, as determined bythe CFD Administrator.
1.Rate and Method of Apportionment of the Special Tax for Services
Commencing with Fiscal Year 2014-2015 and for each subsequent Fiscal Year, the City Council shall
levy the Special Tax for Services on (i)all Assessor’s Parcels containing a Developed Single Family
Unit or Developed Multifamily Unit and (ii)all Assessor’s Parcels of Non-Residential Property, up to
the applicable Maximum Special Tax for Services to fund the Special Tax Requirement for Services.
The Maximum Special Tax for Services for Fiscal Year 2014-2015 shall be $289.21 per Developed
Single Family Unit, $144.62 per Developed Multifamily Unit, and $651.33 per Acre for each Assessor’s
Parcel of Non-Residential Property.
On each July1, commencing July1, 2015, the Maximum Special Tax for Services shall be increased
by two percent (2.00%) of the amount in effect in the prior Fiscal Year.
2.Duration of the Special Tax for Services
The Special Tax for Services shall be levied in perpetuity to fund the Special Tax Requirement for
Services, unless no longer required as determined at the sole discretion of the City Council.
3.Collection of the Special Tax for Services
The Special Tax for Services shall be collected in the same manner and at the same time as ordinary ad
valorem property taxes, provided, however, that CFD No.2006-1 (IAHH) may collect the Special Tax
for Services at a different time or in a different manner if necessary to meet its funding requirements.
J.APPEALS AND INTERPRETATIONS
Any landowner or resident who feels that the amount of the Special Tax levied on their Assessor’s
Parcel is in error may submit a written appeal to CFD No.2006-1 (IAHH). The CFD Administrator
shall review the appeal and if the CFD Administrator concurs, the amount of the Special Tax levied
shall be appropriately modified.
The City Council may interpret this Rate and Method of Apportionment for purposes of clarifying any
ambiguity and make determinations relative to the annual administration of the Special Tax and any
A-14
4829-1999-3000v2/022042-0030
landowneror resident appeals. Any decision of the City Council shall be final and binding as to all
persons.
A-15
4829-1999-3000v2/022042-0030
EXHIBIT“A”
CITY OF LAKE ELSINORE AND CFD No.2006-1 (IAHH)CERTIFICATE
1.Pursuant to SectionC of the Rate and Method of Apportionment, the City of Lake Elsinore and City of
Lake Elsinore Community Facilities District No.2006-1 Improvement Area HH (“CFD No.2006-1
(IAHH)”) hereby agree to a reduction in the Assigned Special Tax for Facilities for Developed Property,
and the Backup Special Tax for Facilities attributable to a Final Subdivision within CFD No.2006-1
(IAHH):
(a)The information in Table I relating to the Assigned Special Tax for Facilities for Developed
Property within CFD No.2006-1 (IAHH) shall be modified as follows:
Land Use
Class Description Residential Floor Area
Assigned Special Tax
for Facilities
1 Residential Property Less than 1,100 sq. ft.$_____ per unit
2 Residential Property 1,100 –1,299 sq. ft.$_____ per unit
3 Residential Property 1,300 –1,499 sq. ft.$_____ per unit
4 Residential Property 1,500 –1,699 sq. ft.$_____ per unit
5 Residential Property 1,700 –1,899 sq. ft.$_____ per unit
6 Residential Property 1,900 –2,099 sq. ft.$_____ per unit
7 Residential Property 2,100 –2,299 sq. ft.$_____ per unit
8 Residential Property 2,300 –2,499 sq. ft.$_____ per unit
9 Residential Property 2,500 –2,699 sq. ft.$_____ per unit
10 Residential Property 2,700 –2,899 sq. ft.$_____ per unit
11 Residential Property 2,900 –3,099 sq. ft.$_____ per unit
12 Residential Property 3,100 –3,299 sq. ft.$_____ per unit
13 Residential Property 3,300 –3,499 sq. ft.$_____ per unit
14 Residential Property More than 3,499 sq. ft.$_____ per unit
15 Non-Residential Property NA $_____ per acre
(b)The Backup Special Tax for Facilities attributable to a Final Subdivision within CFD No.2006-
1 (IAHH), as stated in SectionC.1.(c), shall be reduced from $15,946.28 per Acre to $_____
per Acre.
2.The Special Tax for Facilities may be modified prior to the first building permit issuance within CFD
No.2006-1 (IAHH) and prior to the issuance of the first series of Bonds of CFD No.2006-1 (IAHH).
3.Upon execution of the Certificate by the City of Lake Elsinore and “Owner” under the Funding
Agreement, the City shall cause an amended notice of Special Tax lien for CFD No.2006-1 (IAHH) to
be recorded reflecting the modifications set forth herein.
A-16
4829-1999-3000v2/022042-0030
By execution hereof, the undersigned acknowledges, on behalf of the City of Lake Elsinore and CFD No.2006-
1 (IAHH), receipt of this Certificate and modification of the Rate and Method of Apportionment as set forth in
this Certificate.
CITY OF LAKE ELSINORE
By:
CFD Administrator
Date:
Owner per Funding Agreement
By:Date:
B-1
4829-1999-3000v2/022042-0030
APPENDIXB
CERTAIN ECONOMIC AND DEMOGRAPHIC INFORMATION REGARDING
The following information relating to the City of Lake Elsinore (the “City”) and the County of Riverside,
California (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 Bonds or to cure any
delinquency or default on the Bonds. The Bonds are payable solely from the sources described in the Official
Statement.
General
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 southeast of downtown Los Angeles and 74 miles
north of downtown San Diego.
Population
The following table offers population figures for the City, the County and the State for 2014through
2018.
Area 2014 2015 2016 2017 2018
City of Lake Elsinore 57,488 59,404 61,422 62,487 63,365
County of Riverside 2,291,262 2,317,895 2,346,717 2,382,640 2,415,955
State of California 38,568,628 38,912,464 39,179,627 39,500,973 39,809,693
Source:California State Department of Finance, Demographic Research Unit. 2010 Census Benchmark.
Building Activity
The following tables provide summaries of the building permit valuations and the number of new
dwelling units authorized in the City and County from 2013 through 2017.
BUILDING PERMIT VALUATIONS
City of Lake Elsinore
2013-2017
2013 2014 2015 2016 2017
Valuation ($000):
Residential $113,861 $80,159 $75,979 $121,211 $165,978
Non-residential 4,262 5,300 5,879 18,587 14,739
Total*$118,123 $85,459 $81,858 $139,798 $180,717
Residential Units:
Single family 685 429 372 457 569
Multiple family 0 0 0 0 0
Total 685 429 372 457 569
* Totals may not add to sums because of rounding.
Source:Construction Industry Research Board.
B-2
4829-1999-3000v2/022042-0030
BUILDING PERMIT VALUATIONS
County of Riverside
2013-2017
2013 2014 2015 2016 2017
Valuation ($000):
Residential $1,375,593 $1,621,751 $1,536,742 $1,759,535 $1,794,108
Non-residential 873,977 814,990 911,465 1,346,019 1,093,090
Total*$2,249,570 $2,436,741 $2,448,207 $1,433,691 $1,903,417
Residential Units:
Single family 4,716 5,007 5,007 5,662 6,265
Multiple family 1,427 1,931 1,189 1,039 1,070
Total 6,143 6,938 6,196 6,701 7,335
* Totals may not add to sums because of rounding.
Source:Construction Industry Research Board.
Employment
The following tables show the largest employers located in the City and County as of June 30, 2017.
LARGEST EMPLOYERS
City of Lake Elsinore
(as of June 30, 2018)
Rank Name of Business Employees Type of Business
1.Lake Elsinore Unified School District 2,497 School District
2.M & M Framing 500 Construction
3.Stater Bros 329 Supermarkets
4.Lake Elsinore Hotel & Casino 275 Casino & Resort
5.Costco 265 Retail Stores
6.Walmart 234 Retail Stores
7.Riverside County –Dept. of Social Services 164 Government
8.Elsinore Valley Municipal Water District 154 Water District
9.Home Depot 130 Building Supplies
10.Target 140 Retail Stores
Source: City of Lake Elsinore Comprehensive Annual Financial Report for the year ending June 30, 2018.
B-3
4829-1999-3000v2/022042-0030
LARGESTEMPLOYERS
County of Riverside
(as of June 30, 2017)
Rank Name of Business Employees Type of Business
1.County of Riverside 22,538 County Government
2.University of California-Riverside 8,686 University
3.March Air Reserve Base 8,500 Military Reserve Base
4.Amazon 7,500 Distribution Center
5.Kaiser Permanente Riverside Medical Center 5,739 Medical Center
6.Corona-Norco Unified School District 5,399 School District
7.Riverside Unified School District 4,236 School District
8.Pechanga Resort and Casino 4,000 Casino & Resort
9.Riverside University Health Systems-Medical
Center
3,876 Medical Center
10.Eisenhower Medical Center 3,665 Medical Center
Source: County of Riverside Comprehensive Annual Financial Report for the year ending June 30, 2017.
B-4
4829-1999-3000v2/022042-0030
Employment and Industry
Employment data by industry is not separately reported on an annual basis for the City but is compiled
for the Riverside-San Bernardino-Ontario Metropolitan Statistical Area (the “MSA”), which includes all of
Riverside and San Bernardino Counties. In addition to varied manufacturing employment, the MSA has large
and growing commercial and service sector employment, as reflected in the table below.
The following table representsthe Annual Average Labor Force and Industry Employment for the
County for the period from 2013 through 2017.
RIVERSIDE-SAN BERNARDINO-ONTARIO MSA
INDUSTRY EMPLOYMENT & LABOR FORCE -BY ANNUAL AVERAGE
2013 2014 2015 2016 2017
Civilian Labor Force 1,893,100 1,921,000 1,956,900 1,984,900 2,023,200
Civilian Employment 1,706,800 1,765,300 1,828,200 1,866,600 1,920,400
Civilian Unemployment 186,300 155,700 128,600 118,300 102,800
Civilian Unemployment Rate 9.8%8.1%6.6%6.0%5.1%
Total Farm 14,500 14,400 14,800 14,600 14,400
Total Nonfarm 1,233,300 1,289,300 1,353,100 1,401,900 1,451,600
Total Private 1,008,100 1,060,500 1,119,800 1,159,600 1,201,600
Goods Producing 158,600 170,200 183,000 191,500 196,600
Mining and Logging 1,200 1,300 1,300 900 900
Construction 70,000 77,600 85,700 92,000 97,000
Manufacturing 87,300 91,300 96,100 98,600 98,700
Service Providing 1,074,700 1,119,100 1,170,100 1,210,500 1,255,000
Trade, Transportation and Utilities 299,700 314,900 333,200 348,100 366,000
Wholesale Trade 56,400 58,900 61,600 62,800 63,700
Retail Trade 164,800 169,400 174,300 178,000 182,100
Transportation, Warehousing and Utilities 78,400 86,600 97,400 107,300 120,200
Information 11,500 11,300 11,400 11,500 11,300
Financial Activities 41,800 42,900 43,900 44,600 44,500
Professional and Business Services 131,900 138,700 147,400 145,000 147,200
Educational and Health Services 187,600 194,800 205,100 214,300 224,800
Leisure and Hospitality 135,900 144,800 151,700 160,200 165,700
OtherServices 41,100 43,000 44,000 44,600 45,600
Government 225,200 228,800 233,300 242,300 250,000
Total, All Industries 1,247,800 1,303,700 1,367,900 1,416,600 1,466,000
Note:Does not include proprietors, self-employed, unpaid volunteers or family workers, domestic workers in households and persons involved
in labor-management trade disputes. Employment reported by place of work. Items may not add to total due to independent rounding.
The “Total, All Industries”data is not directly comparable to the employment data found in this Appendix B.
Source:State of California, Employment Development Department, March 2017 Benchmark.
B-5
4829-1999-3000v2/022042-0030
The following table summarizes the labor force, employment and unemployment figures for the period
from 2013 through 2017 for the City, the County, the State and the nation as a whole.
CITY OF LAKE ELSINORE,
COUNTY OF RIVERSIDE,
STATE OF CALIFORNIA AND UNITED STATES
Average Annual Civilian Labor Force, Employment and Unemployment
Year and Area Labor Force Employment(2)Unemployment(3)
Unemployment
Rate (%)
2013
City of Lake Elsinore 26,500 23,700 2,800 10.5%
County of Riverside 996,400 897,700 98,700 9.9
State of California 18,625,000 16,958,400 1,666,600 8.9
United States 155,389,000 143,929,000 11,460,000 7.4
2014
City of Lake Elsinore 26,900 24,500 2,300 8.7%
County of Riverside 1,013,500 930,400 83,100 8.2
State of California 18,758,400 17,351,300 1,407,100 7.5
United States 155,922,000 146,305,000 9,617,000 6.2
2015
City of Lake Elsinore 27,500 25,500 2,000 7.1%
County of Riverside 1,035,700 966,300 69,400 6.7
State of California 18,896,500 17,724,800 1,171,700 6.2
United States 157,130,000 148,834,000 8,296,000 5.3
2016
City of Lake Elsinore 27,900 26,100 1,800 6.5%
County of Riverside 1,052,600 988,200 64,500 6.1
State of California 19,093,700 18,048,800 1,044,800 5.5
United States 159,187,000 151,436,000 7,751,000 4.9
2017
City of Lake Elsinore 27,200 25,500 1,600 6.0%
County of Riverside 1,072,500 1,016,200 56,300 5.2
State of California 19,312,000 18,393,100 918,900 4.8
United States 160,320,000 153,337,000 6,982,000 4.4
Note:Data is not seasonally adjusted.
(1)Annual averages, unless otherwise specified.
(2)Includes persons involved in labor-management trade disputes.
(3)The unemployment rate is computed from unrounded data; therefore, it may differ from rates computed from rounded figures
in this table.
Source:U.S. Department of Labor –Bureau of Labor Statistics, California Employment Development Department. 2017
Benchmark.
Personal Income
Personal Income is the income that is received by all persons from all sources. It is calculated as the
sum of wage andsalary disbursements, supplements to wages and salaries, proprietors’income with inventory
valuation and capital consumption adjustments, rental income of persons with capital consumption adjustment,
personal dividend income, personal interest income, and personal current transfer receipts, less contributions for
government social insurance.
B-6
4829-1999-3000v2/022042-0030
The personal income of an area is the income that is received by, or on behalf of, all the individuals who
live in the area; therefore, the estimates of personal income are presented by the place of residence of the income
recipients.
Total personal income in Riverside County increased by 52% between 2005 and 2016. The following
tables summarize personal income for Riverside County for 2005 through 2016.
PERSONAL INCOME
Riverside County
2005-2016
(Dollars in Thousands)
Year Riverside County
Annual
Percent Change
2005 $57,669,741 9.2%
2006 63,538,333 10.2
2007 66,347,611 4.4
2008 67,367,683 1.5
2009 65,359,484 (3.0)
2010 66,904,690 2.4
2011 71,213,948 6.4
2012 73,158,724 2.7
2013 75,223,346 2.8
2014 79,066,137 5.1
2015 84,429,454 6.8
2016 87,827,068 4.0
Source: U.S. Department of Commerce, Bureau of Economic Analysis.
The following table summarizes per capita personal income for Riverside County, California and the
United States for 2005-2016. This measure of income is calculated as the personal income of the residents of
the area divided by the resident population of the area.
PER CAPITA PERSONAL INCOME
Riverside County, State of California and the United States
2005-2016
Year Riverside County California United States
2005 $29,853 $39,521 $35,904
2006 31,574 42,334 38,144
2007 31,972 43,692 39,821
2008 31,932 44,162 41,082
2009 30,446 42,224 39,376
2010 30,380 43,323 40,278
2011 31,847 45,854 42,463
2012 32,301 48,359 44,283
2013 32,828 48,555 44,489
2014 34,044 51,317 46,486
2015 35,883 54,664 48,429
2016 36,782 56,308 49,204
Source: U.S. Department of Commerce, Bureau of Economic Analysis.
B-7
4829-1999-3000v2/022042-0030
Taxable Sales
The table below presents taxable sales for the years 2011through 2017(1)(2)for the City.
TAXABLE SALES
City of Lake Elsinore
2011-2017(1)(2)
(Dollars in Thousands)
Year Permits Taxable Transactions
2011 1,248 $634,553
2012 1,274 665,409
2013 1,716 688,483
2014 1,176 728,088
2015(1)1,420 765,715
2016 1,510 791,622
2017(2)1,517 629,077
(1)Beginning in 2015, the outlet counts in these reports show the number of outlets that were active during the reporting period.
Retailers that operate part-time are now tabulated with store retailers. Industry-level data for 2015 are not comparable to that
of prior years.
(2)Through third quarter of 2017.
Source: “Taxable Sales in California (Sales & Use Tax)”-California State Board of Equalization.
The table below presents taxable sales for the years 2011 through 2017(1)(2)for the County.
TAXABLE SALES
County of Riverside
2011-2017(1)(2)
(Dollars in Thousands)
Year Permits Taxable Transactions
2011 46,886 $25,641,497
2012 46,316 28,096,009
2013 46,805 30,065,467
2014 48,453 32,035,687
2015(1)56,846 32,910,909
2016 57,771 34,231,144
2017(2)57,803 26,659,250
(1)Beginning in 2015, the outlet counts in these reports show the number of outlets that were active during the reporting period.
Retailers that operate part-time are now tabulated with store retailers. Industry-level data for 2015 are not comparable to that
of prior years.
(2)Through third quarter of 2017.
Source: “Taxable Sales in California (Sales & Use Tax)”-California State Board of Equalization.
C-1
4829-1999-3000v2/022042-0030
APPENDIXC
FORM OF OPINION OF BOND COUNSEL
Upon issuance of the Bonds, Stradling Yocca Carlson& Rauth, a Professional Corporation, Bond
Counsel, proposes to render its final approving opinion in substantially the following form:
[Closing Date]
City of Lake Elsinore
Community Facilities District No. 2006-1 (Summerly)
Lake Elsinore, California
Re:$__________City of Lake Elsinore Community Facilities District No. 2006-1 (Summerly)
Special Tax Bonds, Series 2019(Improvement Area HH)
Ladies and Gentlemen:
We have examined the Constitution and the laws of the State of California, a certified record of the
proceedings of the City of Lake Elsinore (the “City”) taken in connection with the formation of City of Lake
Elsinore Community Facilities District No. 2006-1 (Summerly)(the “District”)and the authorization and
issuance of the District’s Special Tax Bonds, Series 2019(Improvement Area HH) in the aggregate principal
amount of $__________(the “Bonds”) and such other information and documents as we consider necessary to
render this opinion. In rendering this opinion, we have relied upon certain representations of fact and
certifications made by the District, the City, the initial purchasers of the Bonds and others. We have not
undertaken to verify through independent investigation the accuracy of the representations and certifications
relied upon by us.
The Bonds have beenissued pursuant to the Mello-Roos Community Facilities Act of 1982, as amended
(comprising Chapter2.5 of Part1 of Division2 of Title5 of the Government Code of the State of California), a
resolution adopted by the City Council of the City, acting in its capacity as the legislative body of the District
(the “City Council”) on November 12, 2019(the “Resolution”), and a Bond Indenture (the “Indenture”) dated
as of December 1, 2019, by and between the District and Wilmington Trust, National Association, as trustee (the
“Trustee”). All capitalized terms not defined herein shall have the meaning set forth in the Indenture.
Based upon our examination of the foregoing, and in reliance thereon and on all matters of fact as we
deem relevant under the circumstances, and upon consideration of applicable laws, we are of the opinion that:
(1)The Bonds have been duly and validly authorized by the District and are legal, valid and binding
limited obligations of the District, enforceable in accordance with their termsand the terms of the Indenture.
The Bonds are limited obligations of the District but are not a debt of the City, the State of California or any
other political subdivision thereof within the meaning of any constitutional or statutory limitation, and, except
for the Net Taxes, neither the faith and credit nor the taxing power of the City, the State of California, or any of
its political subdivisions is pledged for the payment thereof.
(2)The Indenture has been duly executed and delivered by the District. The Indenture creates a
valid pledge of, and the Bonds are secured by, the Net Taxes and the amounts on deposit in certain funds and
accounts established under the Indenture, as and to the extent provided in the Indenture. The Indenture is
enforceable in accordance with its terms; provided, however, we express no opinion as to the enforceability of
the covenant of the District contained in the Indenture to levy Special Taxes for the payment of Administrative
C-2
4829-1999-3000v2/022042-0030
Expenses or as to indemnification, penalty, contribution, choice of law, choice of forum or waiver provisions
contained therein.
(3)Under existing statutes, regulations, rulings and judicial decisions, 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.
(4)Interest on the Bonds is exempt from State of California personal income tax.
(5)The difference between the issue price of a Bond (the first price at which a substantial amount
of the Bonds of a maturity are 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 a Bond Owner will increase the Bond
Owner’s basis in the applicable Bond. Original issue discount that accrues for the Bond Owner is excluded from
the gross income of such Owner for federal income tax purposes, is not an item of tax preference for purposes
of calculating the federal alternative minimum tax imposed on individuals (as described in paragraph (3) above)
and is exempt from State of California personal income tax.
(6)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 Internal
Revenue Code of 1986, as amended (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.
The opinions expressed in paragraphs (3) and (5) above as to the exclusion fromgross income for federal
income tax purposes of interest (and original issue discount) on the Bonds is subject to the condition that the
Districtand the City complywith all requirements of the Code, that must be satisfied subsequent to the issuance
of the Bonds to assure that such interest (and original issue discount) will not become includable in gross income
for federal income tax purposes. Failure to comply with such requirements of the Code might cause 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 Districtand the Cityhavecovenanted to comply with all
such requirements. Except as set forth in paragraphs (3), (4), (5) and (6)above, we express no opinion as to any
tax consequences related to the Bonds.
Certain agreements, requirements and procedures contained or referred to in the Indenture, the Tax
Certificate executed by the District and the City and other documents related to the Bonds may be changed and
certain actions may be taken or omitted, under the circumstances and subject to the terms and conditions set
forth in such documents. We express no opinion as to the effect on the exclusion from gross income for federal
income tax purposes of interest (and original issue discount) on any Bond if any such change occurs or action is
taken or omitted upon advice or approval of bond counsel other than Stradling Yocca Carlson & Rauth, a
Professional Corporation.
Our opinion is limited to matters governed by the laws of the State of California and federal law. We
assume no responsibility with respect to the applicability or the effect of the laws of any other jurisdiction. We
call attention to the fact that the rights and obligations under the Bonds, the Indenture and the Tax Certificate
may be limited by bankruptcy, insolvency, reorganization, arrangement, fraudulent conveyance, moratorium and
other laws relating to or affecting creditors’rights, by the application of equitable principles and the exercise of
judicial discretion in appropriate cases and by the limitations on legal remedies against public agencies in the
State of California.
C-3
4829-1999-3000v2/022042-0030
We express no opinion herein as to the accuracy, completeness or sufficiency of the Official Statement
or other offering material relating to the Bonds and expressly disclaim any duty to advise the Owners of the
Bonds with respect to matters contained in the Official Statement or other offering material.
The opinions expressed herein are based upon an analysis of existing statutes, regulations, rulings and
judicial decisions and cover certain matters not directly addressed by such authorities. Such opinions may be
affected by actions taken (or not taken) or events occurring (or not occurring) after the date hereof. We have not
undertaken to determine, or to inform any person, whether such actions or events are taken (or not taken) or do
occur (or do not occur).
Respectfully submitted,
D-1
4829-1999-3000v2/022042-0030
APPENDIXD
APPRAISAL REPORT
E-1
4829-1999-3000v2/022042-0030
APPENDIXE
SUMMARY OF THE INDENTURE
The following is a summary of certain provisions of the Indenture which are not described elsewhere.
Thissummary does not purport to be comprehensive and reference should be made to the Indenture for a full
and complete statement of the provisions thereof.
F-1
4829-1999-3000v2/022042-0030
APPENDIXF
FORM OFDISTRICTCONTINUING DISCLOSURE CERTIFICATE
THIS CONTINUING DISCLOSURE CERTIFICATE (this “Disclosure Certificate”), dated as of
December 1, 2019, is executed and delivered by City of Lake Elsinore Community Facilities District No. 2006-
1 (Summerly) (the “District”) in connection with the issuance of the City of Lake Elsinore Community Facilities
District No. 2006-1 (Summerly) Special Tax Bonds, Series 2019 (Improvement Area HH) (the “Bonds”). The
Bonds are being issued pursuant to a Resolution of Issuance adopted by the City Council of the City of Lake
Elsinore, acting as the legislative body of the District on November 12, 2019 and a Bond Indenture by and
between the District and Wilmington Trust, National Association, as Trustee, dated as of December 1,2019 (the
“Indenture”).
The District covenants as follows:
SECTION 1.Purpose of the Disclosure Certificate. This Disclosure Certificate is being executed
and delivered, for the benefit of the Owners and Beneficial Owners of the Bonds and in order toassist the
Participating Underwriter in complying with the Rule.
SECTION 2.Definitions. In addition to the definitions set forth in the Indenture and the Rate and
Method of Apportionment, 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 pursuant to, and as described
in, Sections 3 and 4 of this Disclosure Certificate.
“Beneficial Owner” shall mean any person who (a) has the power, directly or indirectly, to vote or
consent with respect to, or to dispose of ownership of, any Bond (including a person holding Bond through a
nominee, depository or other intermediary), or (b) is treated as the owner of any Bond for federal income
purposes.
“City” shall mean the City of Lake Elsinore, County of Riverside, California.
“Disclosure Representative” shall mean the Assistant City Manager of the City, or such other officer or
employee as the District shall designate in writing to the Dissemination Agent from time to time.
“Dissemination Agent” shall mean, initially, Spicer Consulting Group, LLC, or any successor
Dissemination Agent designed in writing by the District.
“EMMA” shall mean the Electronic Municipal Market Access System of the Municipal Securities
Rulemaking Board, which can be found at www.emma.msrb.org, or any other repository of disclosure
information that may be designated by the Securities and Exchange Commission in the future.
“Financial Obligation” means a (i) debt obligation; (ii) derivative instrument entered into in connection
with, or pledged as security or a source of payment for, an existing or planned debt obligation; or (iii) guarantee
of (i) or (ii). The term financial obligation shall not include municipal securities as to which a final official
statement has been provided to the MSRB consistent with the Rule.
“Improvement Area HH” shall mean Improvement Area HH of the District, established pursuant to the
Resolution of Formation.
“Listed Events” shall mean any of the events listed in Section 5(a) of this Disclosure Certificate.
F-2
4829-1999-3000v2/022042-0030
“MSRB” shall mean the Municipal Securities Rulemaking Board or any other entity designated or
authorizedby the Securities and Exchange Commission to receive reports pursuant to the Rule. Until otherwise
designated by the MSRB or the Securities and Exchange Commission, filings with the MSRB are to be made
through the Electronic Municipal Market Access (EMMA) website of the MSRB, currently located at
http://emma.msrb.org.
“Official Statement” shall mean the District’s official statement with respect to the Bonds.
“Participating Underwriter” shall mean Stifel, Nicolaus & Company, Incorporated.
“Rate and Method of Apportionment” means that certain Rate and Method of Apportionment of Special
Tax approved pursuant to the Resolution of Formation, as amended in accordance with the Act.
“Resolution of Formation” means the resolutions adopted by the City Council pursuant to which the
City Council formed the District, undertook certain change proceedings with respect to the District and
established Improvement Area HH therein.
“Rule” shall mean Rule 15c2-12(b)(5) adopted by the Securities and Exchange Commission under the
Securities Exchange Act of 1934, as the same may be amended from time to time.
“Tax-exempt” shall mean that interest on the Bonds is excluded from gross income for federal income
tax purposes, whether or not such interest is includable as an itemof tax preferences or otherwise includable
directly or indirectly for purposes of calculating any other tax liability, including any alternative minimum tax
or environmental tax.
SECTION 3.Provision of Annual Reports.
(a)Not later than February 15 of each year commencing February 15, 2020, the District shall, or
shall cause the Dissemination Agent to, provide to EMMA and the Participating Underwriter an Annual Report
which is consistent with the requirements of Section 4 of this Disclosure Certificate. If the Dissemination Agent
is other than the District, then not later than 15 business days prior to the date referred to in the prior sentence
hereof, the District shall provide the Annual Report (in a form suitable for filing with EMMA) to the
Dissemination Agent. 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 District may be submitted separately from and
later than the balance of the Annual Report if they are not available by the date required above for the filing of
the Annual Report.
The Official Statement and the District’s audited financial statements, if any are prepared, will serve as
the first Annual Report.
(b)In the event that the Dissemination Agent is an entity other than the District, then the provisions
of this Section 3(b) shall apply. Not later than fifteen (15) Business Days prior to the date specified in subsection
(a) for providing the Annual Report, the District shall provide the Annual Report to the Dissemination Agent. If
by fifteen (15) Business Days prior to the due date for an Annual Report the Dissemination Agent has not
received a copy of the Annual Report, the Dissemination Agent shall contact the District to determine if the
District will be filing the Annual Report in compliance with subsection (a). The District shall provide a written
certification with each Annual Report furnished to the Dissemination Agent to the effect that such Annual Report
constitutes the Annual Report required to be furnished by it hereunder. The Dissemination Agent may
conclusively rely upon such certification of the District and shallhave no duty or obligation to review such
Annual Report.
F-3
4829-1999-3000v2/022042-0030
(c)If the Dissemination Agent is other than the District and if the Dissemination Agent is unable
to verify that an Annual Report has been provided to EMMA by the date required in subsection (a), the
Dissemination Agent shall send a notice in a timely manner to EMMA, in the form required by EMMA. If the
District acts as its own Dissemination Agent, it shall file a notice with EMMA no later than the date specified in
subsection (a) for filing an Annual Report if the District fails to file the Annual Report by that date.
(d)If the Dissemination Agent is other than the District, the Dissemination Agent shall:
(i)determine each year prior to the date for providing the Annual Report the name and
addressof the repository if other than the MSRB through EMMA; and
(ii)promptly after receipt of the Annual Report, file a report with the District certifying
that the Annual Report has been provided to EMMA and the date it was provided.
(e)Notwithstanding any other provision of this Disclosure Certificate, all filings shall be made in
accordance with the MSRB’s EMMA system or in another manner approved under the Rule.
SECTION 4.Content of Annual Reports. The District’s Annual Report shall contain or include by
reference:
(a)Financial Statements. The audited financial statements of the District, if any, for the prior fiscal
year, 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, if any are prepared, are not available by the time the Annual Report is required to
be filed pursuant to Section 3, the Annual Report shall contain unaudited financial statements, and the audited
financial statements shall be filed in the same manner as the Annual Report when they come available.
(b)Financial and Operating Data. The Annual Report shall contain or incorporate by reference the
following information:
(i)the principal amount of Bonds outstanding as of the September 2 preceding the filing
of the Annual Report;
(ii)the balance in each fund under the Indenture as of the September 2 preceding the filing
of the Annual Report;
(iii)the aggregate assessedvaluation of the Taxable Property within Improvement Area
HH;
(iv)any changes to the Rate and Method of Apportionment of the Special Tax approved or
submitted to the qualified electors for approval prior to the filing of the Annual Report;
(v)a table setting forth the annual Special Tax delinquency rate within Improvement Area
HH at June 30 for each fiscal year on which a delinquency exists, listing for each fiscal year the total Special
Tax levy, the amount delinquent and the percent delinquent;
(vi)the status of any foreclosure actions being pursued by the District with respect to
delinquent Special Taxes within Improvement Area HH;
(vii)if Special Taxes are levied on Undeveloped Property, the amount of Special Taxes
levied on Undeveloped Property and the amount of Special Taxes levied on Developed Property (as such terms
are defined in the Rate and Method of Apportionment);
F-4
4829-1999-3000v2/022042-0030
(viii)an update of the value-to-lien of the property within Improvement Area HH based on
the assessed value and the Special Tax levy for then current fiscal year, which update may be provided in a form
similar to Table 2in the Official Statement; provided that such update need not include overlapping special tax,
assessment or general obligation indebtedness.
(c)Any or all of the items listed in (a) or (b) above may be included by specific reference to other
documents, including official statements of debt issues of the District or related public entities, which have been
submitted to EMMA or the Securities and Exchange Commission. If the document included by reference is a
final official statement, it must be available from the MSRB through EMMA. The District shall clearly identify
each such other document so included by reference.
SECTION 5.Reporting of Significant Events.
(a)Pursuant to the provisions of this Section 5, the District shall give, or cause the Dissemination
Agent to give, notice to EMMA in a timely manner not in excess of ten (10) business days after the occurrence
of any of the following events with respect to the Bonds:
1.principal and interest payment delinquencies;
2.unscheduled draws on debt service reserves reflecting financial difficulties;
3.unscheduled draws on credit enhancements reflecting financial difficulties;
4.substitution of credit or liquidity providers, or their failure to perform;
5.adverse tax opinions or the issuance by the Internal Revenue Service of proposed or
final determinations of taxability, Notices of Proposed Issue (IRS Form 5701-TEB) or
other material notices or determinations with respect to the tax status of the Bonds;
6.defeasances;
7.tender offers;
8.bankruptcy, insolvency, receivership or similar proceedings;
9.ratings changes; and
10.default, event of acceleration, termination event, modificationof terms, or other similar
events under the terms of a Financial obligation of the obligated person, any of which reflect financial
difficulties.
(b)Additionally, the District shall give or cause the Dissemination Agent to give notice to EMMA
in a timely manner not in excess of ten (10) business days after the occurrence of any of the following events
with respect to the Bonds, if material:
1.mergers, consolidations, acquisitions, the sale of all or substantially all of the assets of
the obligated persons or their termination;
2.appointment of a successor or additional fiscal agent or the change of the name of a
fiscal agent;
3.nonpayment related defaults;
F-5
4829-1999-3000v2/022042-0030
4.modifications to the rights of Bondholders;
5.bond calls;
6.release, substitution or sale of property securing repayment of the Bonds; and
7.incurrence of a Financial Obligation of the obligated person, or agreement to
covenants, events of default, remedies, priority rights, or other similar terms of a
Financial Obligation of the obligated person, any of which affect security holders.
(c)In the event that the District’s fiscal year changes, the District shall report or shall instruct the
Dissemination Agent to report such change in the same manner and to the same parties as Listed Events would
be reported pursuant to this Section.
(d)The District hereby agrees that the undertaking set forth in this Disclosure Certificate is the
responsibility of the District, and the Dissemination Agent, if other than the District, shall not be responsible for
determining whether the District’s instructions to the Dissemination Agent under this Section comply with the
requirements of the Rule.
SECTION 6.Termination of Reporting Obligation. The obligations of the District and the
Dissemination Agent 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 inthe same manner as for a Listed Event under Section
5.
SECTION 7.Dissemination Agent. The District may, from time to time, appoint or engage a
Dissemination Agent to assist it in carrying out its obligations under the Disclosure Certificate, and may
discharge any such Dissemination Agent, with or without appointing a successor Dissemination Agent. The
initial Dissemination Agent shall be Spicer Consulting Group, LLC. The Dissemination Agent may resign by
providing (i) thirty days written notice to the District, and (ii) upon appointment of a new Dissemination Agent
hereunder.
SECTION 8.Amendment.
(a)This Disclosure Certificate may be amended, by written agreement of the parties, without the
consent of the Owners, and any provision of this Disclosure Certificate may be waived, if all of the following
conditions are satisfied: (1) such amendment or waiver is made in connection with a change in circumstances
that arises from a change in legal (including regulatory) requirements, a change in law, or a change in the identity,
nature or status of the District or the type of business conducted thereby, (2) the undertakings in this Disclosure
Certificate as so amended or waived would, in the opinion of a nationally recognized bond counsel, have
complied with the requirements of the Rule as of the date of this Disclosure Certificate, after taking into account
any amendments or interpretations of the Rule, as well as any change in circumstances, and (3) the amendment
or waiver either (i) is approved by the Owners of the Bonds in the same manner as provided in the Indenture for
amendments to the Indenture with the consent of Owners or (ii) does not, in the determination of the District,
materially impair the interests of the Owners or Beneficial Owners of the Bonds.
(b)To the extent any amendment to this Disclosure Certificate results in a change in the type of
financial information or operating data provided pursuant to this Disclosure Certificate, the first Annual Report
provided thereafter shall include a narrative explanation of the reasons for the amendment and the impact of the
change in the type of operating data or financial information being provided.
(c)If an amendment is made to the basis on which financial statements are prepared, the Annual
Report for the year in which the change is made shall present a comparison between the financial statements or
F-6
4829-1999-3000v2/022042-0030
information prepared on the basis of the new accounting principles and those prepared on the basis of the former
accounting principles. Such comparison shall include a quantitative and, to the extent reasonably feasible,
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.
SECTION 9.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 Agreement to update such information or include it in any future Annual Report
or notice of occurrence of a Listed Event.
SECTION 10.Default. In the event of a failure of the District or the Dissemination Agent to comply
with any provision of this Disclosure Certificate, any Owner or Beneficial Owner of the Bonds may take such
actions as may be necessary and appropriate, including seeking mandate or specific performance by court order,
to cause the District and/or the Dissemination Agent to comply with their respective 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 or
the Dissemination Agent to comply with this Disclosure Certificate shall be an action to compel performance.
SECTION 11.Duties, Immunities and Liabilities of Dissemination Agent. Where an entity other than
the District is acting as the Dissemination Agent, 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 and 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 their powers and duties
hereunder, including the costs and expenses (including attorney’s fees) of defending against any claim of
liability, but excluding liabilities due to the Dissemination Agent’s negligence or willful misconduct. Any
Dissemination Agent shall be paid (i) compensation by the District for its services provided hereunder in
accordance with a schedule of fees to be mutually agreed to; and (ii) all expenses, legal fees and advances made
or incurred by the Dissemination Agent in the performance of its duties hereunder. The Dissemination Agent
shall have no duty or obligation to review any information provided to it by the District pursuant to this
Disclosure Certificate. The obligations of the District under this Section shall survive resignation or removal of
the Dissemination Agent and payment of the Bonds. No person shall have any right to commence any action
against the Dissemination Agent seeking any remedy other than to compel specific performance of this
Disclosure Certificate. The Dissemination Agent shall not be liable under any circumstances for monetary
damages to any person for any breach under this Disclosure Certificate.
SECTION 12.Beneficiaries. This Disclosure Certificate shall inure solely to the benefit of the
District, the Dissemination Agent, the Participating Underwriter and Owners and Beneficial Owners from time
to time of the Bonds; and it shall create no rights in any other person or entity.
F-7
4829-1999-3000v2/022042-0030
SECTION 13.Merger. Any person succeeding to all or substantially all of the Dissemination Agent’s
corporate trust business shall be the successor Dissemination Agent without the filing of any paper or any further
act.
This Disclosure Certificate is executed as of the date and year first set forth above.
CITY OF LAKE ELSINORE COMMUNITY FACILITIES
DISTRICT NO. 2006-1 (SUMMERLY)
By:
Disclosure Representative
G-1
4829-1999-3000v2/022042-0030
APPENDIXG
FORM OF DEVELOPER CONTINUING DISCLOSURE AGREEMENT
This Developer Continuing Disclosure Agreement (the “Disclosure Agreement”) dated as of December
1, 2019is executed and delivered by _____________(the “Landowner”), and Spicer Consulting Group, LLC,
as dissemination agent (the “Dissemination Agent”), in connection with the issuance by City of Lake Elsinore
Community Facilities District No. 2006-1(Summerly) (the “District”) of the $_____________City of Lake
Elsinore Community Facilities District No. 2006-1(Summerly) Special Tax Bonds, Series 2019(Improvement
Area HH) (the “Bonds”). The Bonds are being issued pursuant to the Bond Indenture dated as of December1,
2019(the “Indenture”) by and between the District and Wilmington Trust, National Association, as trustee. The
Landownercovenants and agrees as follows:
SECTION 1.Purpose of the Disclosure Agreement. This Disclosure Agreement is being executed
and delivered by the Landowner to assist the Underwriter in the marketing of the Bonds.
SECTION 2.Definitions. Unless defined herein, capitalized terms used herein shall have the
meanings ascribed thereto in the Indenture.
“Affiliate” means, with respect to the Landowner, any other Person (i) who directly, or indirectly
through one or more intermediaries, is currently controlling,controlled by or under common control with the
Landowner, and (ii) for whom information, including financial information or operating data, concerning such
Person referenced in clause (i) is material to an evaluation of Improvement Area HH and the Bonds (i.e.
information relevant to (a) the Landowner’s development plans with respect to its Property and its payment of
its Special Taxes on the Property, or (b) such Person’s assets or funds that would materially affect the
Landowner’s ability to develop its Property as described in the Official Statement or to pay its Special Taxes on
the Property). For purposes hereof, the term “control” (including the terms “controlling,” “controlled by” or
“under common control with”) means the present 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.
“Beneficial Owner” shall mean any person which has or shares the power, directly or indirectly, to make
investment decisions concerning ownership of the Bonds (including persons holding Bonds through nominees,
depositories or other intermediaries).
“Dissemination Agent” shall mean Spicer Consulting Group, LLC, acting in its capacity as
Dissemination Agent hereunder, or any successor Dissemination Agent designated in writing by the Landowner
and which has filed with the Landowner and the District a written acceptance of such designation.
“District” shall mean City of Lake Elsinore Community Facilities District No. 2006-1(Summerly).
“EMMA” shall mean the Electronic Municipal Market Access system of the MSRB.
“Equity Securities” of any Person shall mean (a) all common stock, preferred stock, participations,
shares, general partnership interests or other equity interests in and of such person (regardless of how designated
and whether or not voting or non-voting) and (b) all warrants, options and other rights to acquire any of the
foregoing.
“Improvement Area HH” shall mean Improvement Area HH of the District.
“Listed Event” shall mean any of the events listed in Section 5(a) of this Disclosure Agreement.
G-2
4829-1999-3000v2/022042-0030
“MSRB” shall mean the Municipal Securities Rulemaking Board and any successor entity as the
repository for filings.
“Official Statement” shall mean the Official Statement, dated December __, 2019, relating to the Bonds.
“Person” shall mean anindividual, corporation, partnership, firm, association, joint stock company,
trust, unincorporated organization, or government or political subdivision thereof.
“Property” means the real property within the boundaries of Improvement Area HHthat is owned by
the Landowneror any Affiliate.
“Repository” shall mean the MSRB or any other entity designated or authorized by the Securities and
Exchange Commission as a repository of disclosure information. Unless otherwise designated by the MSRB or
the Securities and Exchange Commission, filings with the MSRB are to be made through the Electronic
Municipal Market Access (EMMA) website of the MSRB, currently located at http://emma.msrb.org.
“Rule” shall mean Rule 15c2-12(b)(5) adopted by the Securities and Exchange Commission under the
Securities Exchange Act of 1934, as the same may be amended from time to time.
“Semiannual Report” shall mean any report to be provided by the Landowner on or prior to June 15 and
December 15 of each year, commencing with the Semiannual Report due June 15, 2020,pursuant to, and as
described in, Sections 3 and 4 of this Disclosure Agreement.
“State” shall mean the State of California.
“Underwriter” shall mean the original underwriterof the Bonds, which isStifel, Nicolaus & Company,
Incorporated.
SECTION 3.Provision of Semiannual Reports.
(a)The Landowner shall, or upon receipt of the SemiannualReport the Dissemination Agent shall,
not later than June 15and December 15of each year, commencing June 15, 2020, provide to the Repository the
Semiannual Report which is consistent with the requirements of Section 4 of this Disclosure Agreement. If, in
any year, June 15 or December 15 falls on a Saturday, Sunday or a holiday on which the Dissemination Agent’s
offices are closed for business, such deadline shall be extended to the next following day on which the
Dissemination Agent’s offices are open for business. The Semiannual Report may be submitted as a single
document or as separate documents comprising a package, and may include by reference other information as
provided in Section 4 of this Disclosure Agreement.
(b)Not later than fifteen (15) Business Days prior to the date specified in subsection (a) for
providing the Semiannual Report to the Repository, the Landowner shall provide the Semiannual Report to the
Dissemination Agent or shall provide notification to the Dissemination Agent thatthe Landowner is preparing,
or causing to be prepared, the Semiannual Report, and the date which the Semiannual Report is expected to be
available. If by such date, the Dissemination Agent has not received a copy of the Semiannual Report, or
notificationas described in the preceding sentence, the Dissemination Agent shall notify the Landowner of such
failure to receive the Semiannual Report.
(c)If the Dissemination Agent is unable to provide theSemiannual Report to the Repository by
the date required in subsection (a) or to verify that theSemiannual Report has been provided to the Repository
by the date required in subsection (a), the Dissemination Agent shall send a notice to the Repository in the form
required by the Repository.
G-3
4829-1999-3000v2/022042-0030
(d)The DisseminationAgent shall:
(i)determine, prior to the date for providing the Semiannual Report,the name and address
of the Repository; and
(ii)promptly after receipt of the Semiannual Report, file a report with the Landowner and
the District certifying that the Semiannual Report has been provided pursuant to this Disclosure
Agreement, stating the date it was provided to the Repository.
(e)Notwithstanding any other provision of this Disclosure Agreement, any of the required filings
hereunder shall be made in accordance with the MSRB’s EMMA system or in another manner approved by the
MSRB or the Securities and Exchange Commission.
SECTION 4.Content of Semiannual Reports.
(a)The Landowner’s Semiannual Report shall contain or include by reference the information
whichis updated through a date which shall not be more than 60 days prior to the date of the filing of the
applicable Semiannual Report, relating to the following:
1. To the extent not previously disclosed in the Official Statement or in a prior Semiannual
Report, a discussion of the sources of funds to finance development of the Property, and whether any
material defaults exist under any loan arrangement related to such financing.
2. A summary of development activity conducted by the Landowneror any Affiliate within
Improvement Area HH, including the number of parcels for which building permits have been issued,
and the number of parcels for which sales to homebuyers have closed.
3. Any sale by the Landowneror any Affiliate of Property to another Person, other than to
buyers of completed homes, including a description of the property sold (acreage, number of lots, etc.)
and the identity of the Person that so purchased the property, all since the most recent Semiannual
Report.
4. Any major legislative, administrative and judicial challenges known to the Landownerto or
affecting the development of the Property, or the time for construction of any public or private
improvements to be made to the Property by the Landowneror any Affiliate (the “Landowner
Improvements”).
5. Any significant amendments to land use entitlements known to the Landowner with respect
to the Propertyowned by the Landowner or its Affiliates.
6. Information regarding any failure by the Landowneror any of its Affiliates to pay any real
property taxes (including Special Taxes) levied on any Property owned by the Landowneror any
Affiliates.
(b)Any and all of the items listed above may be included by specific reference to other documents,
including official statements of debt issues which have been submitted to the Repository or the Securities and
Exchange Commission. If the document included by reference is a final official statement, it must be available
from the MSRB. The Landowner shall clearly identify each such other document so included by reference.
G-4
4829-1999-3000v2/022042-0030
SECTION 5.Reporting of Significant Events.
(a)Pursuant to the provisions of this Section 5, the Landowner shall give, or cause to be given,
notice of the occurrence of any of the following events with respect to the Bonds, if material under clauses (b)
and (c) as soon as practicable after the occurrence of any of the following events:
1.Failure to pay any real property taxes, special taxes or assessments levied within
Improvement Area HHon aparcel owned by the Landowner or any Affiliate, to the extent such failure
is not promptly cured by the Landowner or any Affiliate upon discovery thereof;
2.Material default by the Landowner or any Affiliate on any loan with respect to the
construction or permanent financing of the Landowner Improvements to which the Landowner or any
Affiliate has been provided a notice of default;
3.Material default by the Landowner or any Affiliate on any loan secured by property
within Improvement Area HH owned by theLandowner or any Affiliate to which the Landowner or any
Affiliate has been provided a notice of default;
4.Material payment default by the Landowner on any loanof the Landowner(whether
or not such loan is secured by property within Improvement Area HH) which is beyond any applicable
cure period in such loan;
5.The filing of any proceedings with respect to the Landowner, in which the Landowner,
may be adjudicated as bankrupt or discharged from any or all of itsdebts or obligations or granted an
extension of time to pay debts or a reorganization or readjustment of debts;
6.The filing of any proceedings with respect to an Affiliate of the Landowner, in which
such Affiliate of the Landownermay be adjudicated as bankrupt or discharged from any or all ofits
respective debts or obligations or granted an extension of time to pay debts or a reorganization or
readjustment of debts if such adjudication could materially adversely affect the completion of the
LandownerImprovements or the development of the Property (including the payment of Special Taxes);
and
7.The filing of any lawsuit against the Landowner or any of its Affiliates (with service
of process on the Landowner or its Affiliates having occurred)which, in the reasonable judgment of the
Landowner,will materially adversely affect the completion of the development of the Propertyowned
by the Landowner or its Affiliates within Improvement Area HH, or litigation which if decided against
the Landowner, or any of its Affiliates, in the reasonable judgment of the Landowner, would materially
adversely affect the financial condition of the Landowner or any Affiliateof the Landowner owning any
Property within Improvement Area HH,or their respective ability to pay Special Taxes levied on their
respective Property within Improvement Area HH when due.
(b)Whenever the Landowner obtains knowledge of the occurrence of a Listed Event, the
Landowner shall as soon as possible determine if such event would be material under applicable federal securities
laws. The Dissemination Agent shall have no responsibility to determine the materiality of any of the Listed
Events.
(c)If the Landowner determines that knowledge of the occurrence of a Listed Event would be
material under applicable federal securities laws, the Landowner shall promptly file a notice of such occurrence
with the Dissemination Agent which shall then distribute such notice to the Repository, with a copy to the
District.
G-5
4829-1999-3000v2/022042-0030
SECTION 6.Termination of Reporting Obligation. The Landowner’s obligations under this
Disclosure Agreement shall terminate upon the earlier to occur of the following events:
(a)the legal defeasance, prior redemption or payment in full of all of the Bonds, or
(b)the date on which the Landowner has conveyed more than ___ of its planned units within
Improvement Area HH to homebuyers.
If such termination occurs prior to the final maturity of the Bonds, the Landowner shall give notice of
such termination in the same manner as for aSemiannual Report hereunder.
SECTION 7.Dissemination Agent. The Landowner may from time to time, appoint or engage a
Dissemination Agent to assist it in carrying out its obligations under this Disclosure Agreement, and may
discharge any such Dissemination Agent, with or without appointing a successor Dissemination Agent. If the
Dissemination Agent is not the Landowner, the Dissemination Agent shall not be responsible in any manner for
the form or content of any notice or report prepared by the Landowner pursuant to this Disclosure Agreement.
The DisseminationAgent may resign by providing (i) thirty days written notice to the Landowner and the
Dissemination Agent and (ii) upon appointment of a new Dissemination Agent hereunder.
SECTION 8.Amendment; Waiver. Notwithstanding any other provision of this Disclosure
Agreement, the Landowner may amend this Disclosure Agreement, and any provision of this Disclosure
Agreement 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, it may only be
made in connection with a change in circumstances that arises from a change in legal requirementsorchange in
law;
(b)The amendment or waiver either (i) is approved by the owners of the Bonds in the same manner
as provided in the Indenturewith the consent of owners of the Bonds, or (ii) does not, in the opinion of nationally
recognized bond counsel addressed to the District and the Dissemination Agent, materially impair the interests
of the owners or Beneficial Owners of the Bonds; and
(c)The Landowner, or the Dissemination Agent, shall have delivered copies of the amendment
and any opinions delivered under (b) above to theDistrictand the Trustee.
SECTION 9.Additional Information. Nothing in this Disclosure Agreement shall be deemed to
prevent the Landowner from disseminating any other information, using the means of dissemination set forth in
this Disclosure Agreement or any other means of communication, or including any other information in any
Semiannual Report or notice of occurrence of a Listed Event, in addition to that which is required by this
Disclosure Agreement. If the Landowner chooses to include any information in any Semiannual Report or notice
of occurrence of a Listed Event in addition to that which is specifically required by this Disclosure Agreement,
the Landowner shall have no obligation under this Disclosure Agreement to update such information or include
it in any future Semiannual Report or notice of occurrence of a Listed Event.
The Landowner acknowledgesand understands that other state and federal laws, including but not
limited to the Securities Act of 1933 and Rule 10b-5 promulgated under the Securities Exchange Act of 1934,
may apply to the Landowner, and that under some circumstances compliance with this Disclosure Agreement,
without additional disclosures or other action, may not fully discharge all duties and obligations of the
Landowner under such laws.
SECTION 10.Default. In the event of a failure of the Landowner or the Dissemination Agent to
comply with any provision of this Disclosure Agreement, any Underwriter or any owner or Beneficial Owner of
the Bonds may, take such actions as may be necessary and appropriate, including seeking mandate or specific
G-6
4829-1999-3000v2/022042-0030
performance by court order, to cause the Landowner or the Dissemination Agent to comply with its obligations
under this Disclosure Agreement. The sole remedy under this Disclosure Agreement in the event of any failure
of the Landowner or the Dissemination Agent to comply with this Disclosure Agreement shall be an action to
compel performance.
SECTION 11.Duties, Immunities and Liabilities of Dissemination Agent. The Dissemination Agent
shall not be deemed to be acting in any fiduciary capacity for the Landowner, the Underwriter, owners of the
Bonds or Beneficial Owners or any other party. The Dissemination Agent may rely and shall be protected in
acting or refraining from acting upon a direction from the Landowner or an opinion of nationally recognized
bond counsel. No person shall have any right to commence any action against the Dissemination Agent seeking
any remedy other than to compel specific performance of this Disclosure Agreement. The Dissemination Agent
may conclusively rely upon the Semiannual Report provided to it by the Landowner as constituting the
Semiannual Report required of the Landowner in accordance with this Disclosure Agreement and shall have no
duty or obligation to review such Semiannual Report. The Dissemination Agent shall have no duty to prepare
the Semiannual Report nor shall the Dissemination Agent be responsible for filing any Semiannual Report not
provided to it by the Landowner in a timely manner in a form suitable for filing with the Repositories. Any
company succeeding to all or substantially all of the Dissemination Agent’s corporate trust business shall be the
successor to the Dissemination Agent hereunder without the execution or filing of any paper or any further act.
SECTION 12.Landowner as Independent Contractor. In performing under this Disclosure
Agreement, it is understood that the Landowner is an independent contractor and not an agent of the District.
SECTION 13.Notices. Notices should be sent in writing to the following addresses. The following
information may be conclusively relied upon until changed in writing.
Landowner:
Dissemination Agent:Spicer Consulting Group
41619 Margarita Road, Suite 101
Temecula, California 92591
Attention: Shane Spicer
Underwriters:Stifel, Nicolaus & Company, Incorporated
515 South Figueroa Street,Suite 1800
Los Angeles, CA 90071
Attn: Public Finance Department
Email: jkim@stifel.com
SECTION 14.Beneficiaries. This Disclosure Agreement shall inure solely to the benefit of the
Landowner, the City,the District,the Dissemination Agent, the Underwriter and owners of the Bonds and
Beneficial Owners from time to time of the Bonds, and shall create no rights in any other person or entity.
G-7
4829-1999-3000v2/022042-0030
SECTION 15. Counterparts. This Disclosure Agreement may be executed in several counterparts, each
of whichshall be an original and all of which shall constitute but one and the same instrument.
[LANDOWNER]
By:
SPICER CONSULTING GROUP, LLC, as Dissemination
Agent
By:
Authorized Officer
H-1
4829-1999-3000v2/022042-0030
APPENDIXH
BOOK-ENTRY ONLY SYSTEM
The information in this Appendix concerning DTC and DTC’s book-entry only system has been obtained
from sources that the District and the Underwriter believe to be reliable, but neither the District nor the
Underwriter takes any 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.
The Depository Trust Company (“DTC”), New York, NY, will act as securities depository for the Bonds.
The Bonds will be issued as fully-registered securities registered in the name of Cede & Co. (DTC’s partnership
nominee) or such other name as may be requested by an authorized representative of DTC. One fully registered bond
will be issued for each annual maturity of the Bonds, each in the aggregate principal amount of such annual maturity,
and will be deposited with DTC.
DTC, the world’s largest securities depository, is a limited-purpose trust company organized under the New
York Banking Law, a “banking organization” within the meaning of the New York Banking Law, a member of the
Federal Reserve System, a “clearing corporation” within the meaning of the New York Uniform Commercial Code,
and a “clearing agency” registered pursuant to the provisions of Section 17A of the Securities Exchange Act of 1934.
DTC holds and provides asset servicing for over 3.5 million issues of U.S. and non-U.S. equity issues, corporate and
municipal debt issues, and money market instruments (from over 100 countries) that DTC’s participants (“Direct
Participants”) deposit with DTC. DTC also facilitates the post-trade settlement among DirectParticipants 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 IndirectParticipants’records. Beneficial Owners
will not receive written confirmation from DTC of their purchase. Beneficial Owners are, however, expected to
receive written confirmations providing details of the transaction, as well as periodic statements of their holdings,
from the Direct or Indirect Participant through which the Beneficial Owner entered into the transaction. Transfers of
ownership interests in the Bonds are to be accomplished by entries made on the books of Direct and Indirect
Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their
ownership interests in the Bonds, except in the event that use of the book-entry system for the Bonds is discontinued.
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.
H-2
4829-1999-3000v2/022042-0030
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 bein effect from time to time.
Beneficial Owners of Bonds may wish to take certain steps to augment the transmission to them of notices of
significant events with respect to the Bonds, such as redemptions, tenders, defaults, and proposed amendments to the
Bond documents. For example, Beneficial Owners of 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 redeemed,
DTC’s practice is to determine by lot the amount of the interest of each Direct Participant in such maturity to be
redeemed.
Neither DTC nor Cede & Co. (nor 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 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.
THE TRUSTEE, AS LONG AS A BOOK-ENTRY ONLY SYSTEM IS USED FOR THE BONDS, WILL SEND
ANY NOTICE OF REDEMPTION OR OTHER NOTICES TO OWNERS ONLY TO DTC. ANY FAILURE OF
DTC TO ADVISE ANY DTC PARTICIPANT, OR OF ANY DTC PARTICIPANT TO NOTIFY ANY
BENEFICIAL OWNER, OF ANY NOTICE AND ITS CONTENT OR EFFECT WILL NOT AFFECT THE
VALIDITY OF SUFFICIENCY OF THE PROCEEDINGS RELATING TO THE REDEMPTION OF THE BONDS
CALLED FOR REDEMPTION OR OF ANY OTHER ACTION PREMISED ON SUCH NOTICE.