HomeMy WebLinkAbout12 ISSUANCE OF TAX ALLOCATION HOUSING BONDS• Agenda Item 1
~~- ~ AGENDA REPORT Reviewed:
,,
City Manager
Finance Director N/A
MEETING DATE: FEBRUARY 2, 2010
TO: WILLIAM A. HUSTON, CITY MANAGER & EXECUTIVE DIRECTOR OF
TUSTIN PUBLIC FINANCING AUTHORITY AND TUSTIN COMMUNITY
REDEVELOPMENT AGENCY
FROM: PAMELA ARENDS-KING, FINANCE DIRECTOR
SUBJECT: ISSUANCE OF TAX ALLOCATION HOUSING BONDS BY THE TUSTIN
COMMUNITY REDEVELOPMENT AGENCY
SUMMARY:
Approval by the City of Tustin ("City"), Tustin Public Financing Authority ("TPFA") and
Tustin Community Redevelopment Agency (" Agency") is requested to authorize the
issuance and sale of Tax Allocation Housing Bonds ("Bonds") in an aggregate principal
amount not to exceed $30 million to reimburse the City for certain costs and expenses
the City has incurred relating to Agency affordable housing programs.
RECOMMENDATION:
It is recommended that the Agency adopt RDA Resolution 10-05 authorizing the
issuance and sale of the Bonds by the Agency to finance Low and Moderate Income
Housing activities within the City of Tustin, approving the form of related documents
and authorizing all actions necessary by the Agency's officers to consummate the
issuance and sale of the Bonds.
a. Indenture of Trust;
b. Bond Purchase Agreement; and
c. Preliminary Official Statement.
2. It is recommended that the City Council adopt City Council Resolution 10-22
approving the issuance and sale by the Agency of Bonds to finance Low and
Moderate Income Housing Activities within the boundaries of the City.
3. It is recommended that the TPFA adopt TPFA Resolution 10-01 authorizing the
purchase and sale of the Bonds from the Agency for re-sale to the Underwriter
approving all related documents and authorizing all actions necessary by the officers
of the TPFA including but not limited to the execution of the Bond Purchase
Agreement.
Issuance Of Tax Allocation Housing Bonds By The Tustin Community Redevelopment Agency
February 2, 2010 Page 2
FISCAL IMPACT:
The Bonds will have no financial impact on the City or the TPFA, as all payments of
principal and interest on the Bonds will be paid solely from the Low and Moderate
Income Housing Tax Revenues of the Agency. The Agency will be obligated to use
Low and Moderate Income Housing Tax Revenues from the redevelopment projects
each year to pay the debt service on the Bonds, and to pay the annual costs of
administering the Bond program.
BACKGROUND:
The Agency's ten year production and expenditure obligations under California
Redevelopment Law ("CRL") related to the MCAS Tustin Project Area put a high financial
burden on the redevelopment agency where a high number of new dwelling units were
being developed during the early years of the Plan. There was insufficient tax increment
revenue in the MCAS Tustin Project Area's early years for the Agency to make subsidies
available to developer at the levels that would permit the development of the state required
affordable housing on an economically feasible basis. In order to assist the Agency in
meeting its affordable housing obligations in the MCAS Tustin Project Area, the City of
Tustin has and will enter into agreements to sell property at a discount sufficient to permit
developers to economically develop the required affordable housing units. In order to meet
the Agency's obligations to provide affordable housing in the MCAS Tustin Project Area,
the City had to write down the cost of land that was resold to developers. The affordable
housing units created as a result are encumbered with covenants, promissory notes and
deeds of trust that will ensure that they remain affordable for the periods required by CRL.
On June 5, 2007, the City and the Agency entered into an agreement ("Reimbursement
Agreement"), amended on January 5, 2010, pursuant to which the Agency agreed to
reimburse the City for its financial assistance to the Agency in carrying out the MCAS
Tustin Project Area, including underwriting land sales to produce affordable housing units
within the MCAS Tustin Project Area. Under the Reimbursement Agreement the Agency
was permitted to reimburse the City from the Agency's Low and Moderate Income
Housing Fund generated from all Redevelopment project areas (MCAS Tustin, South
Central and Town Center) since the affordable housing units at MCAS Tustin benefit all
three project areas and other available sources (City Obligation). At the time the
Reimbursement Agreement was entered into, the amount of the City Obligation was
$46,407,736. The Agency has made payments to the City over the last several years as
part of the budget process and the current City Obligation is $39,604,360.
The Agency has determined at this time to prepay a portion of the City Obligation. To
provide moneys for such purposes, the Agency has determined to issue its Tustin
Community Redevelopment Agency Tax Allocation Housing Bonds, Series 2010, in the
aggregate principal amount of not to exceed $30,000,000. Proceeds from the sale of
the bonds will be used to (1) finance low and moderate income housing activity
throughout the geographical boundaries of the City, and in particular, to repay the City
Obligation, (2) fund a reserve account for the bonds, and (3) provide for the costs of
issuing the bonds. The City will use the partial reimbursement of the obligation due
Issuance Of Tax Allocation Housing Bonds By The Tustin Community Redevelopment Agency
February 2, 2010 Page 3
from the Low and Moderate Income Housing Fund to offset the City's recent land
acquisition of property from AAE Pacific Park Associates, LLC along the 55 freeway and
Edinger Avenue.
The proposed Bond issue will be payable solely from a pledge of the Housing Tax
Revenues arising from each of the Agency's three project areas; Town Center Project
Area, South Central Project Area, and MCAS-Tustin Project Area. No City general
funds or other moneys will in any way be pledged or obligated towards the payment of
the Bonds.
The Agency is proposing to issue approximately $26,000,000 par amount of Bonds to
fund a partial repayment of the City Obligation in an amount of $23,500,000. This would
still leave a remaining $16,104,360 City Obligation under the Reimbursement
Agreement. While current interest rates indicate that the aggregate initial principal
amount of the Bonds will be approximately $26,000,000, the Agency is seeking a bond
authorization of up to $30,000,000 in the event that interest rates decrease prior to the
sale of the Bonds thereby allowing for more Bond principal to be supported by the same
level of Tax Revenues. In the event that interest rates rise prior to the sale of the
Bonds, less principal may be sold than currently projected.
In order to issue the Bonds, Redevelopment Law requires that the City Council approve
the issuance of the Bonds by the Agency. In addition, in order for the Agency to sell the
Bonds on a negotiated basis with Piper Jaffray & Co., the bond underwriter (the
"Underwriter") that has been working with the Agency on the Bond issue, relevant State
law requires that the TPFA buy the Bonds from the Agency for resale to the
Underwriter. The purchase price from the Agency to be paid by the TPFA will be the
same as the sale price of the Bonds by the TPFA to the Underwriter, so no TPFA
funds are involved in the transaction. The proposed resolution of the TPFA approves
the purchase and sale by it of the Bonds and makes related findings required by
applicable law.
The Agency resolution being presented for approval authorizes the issuance of the
Bonds and approves the related financing documents including a draft of an "Official
Statement" that describes the terms of the Bonds. These documents will be finalized
when the exact terms of the Bonds are determined at the time the Bonds are sold to
investors, expected to occur in late February. The date for the closing of the Bond
issue, and the time when Bond proceeds are expected to be available, is currently
expected to be March 9, 2010.
Issuance Of Tax Allocation Housing Bonds By The Tustin Community Redevelopment Agency
February 2, 2010 Page 4
Pamela Arends-King
Finance Director
Attachment(s): Resolution RDA 10-05
Resolution City 10-22
Resolution Tustin Public Financing Authority 10-01
Indenture of Trust
Preliminary Official Statement
Bond Purchase Agreement
RDA RESOLUTION NO. 10-05
A RESOLUTION OF THE REDEVELOPMENT AGENCY OF
THE CITY OF TUSTIN, CALIFORNIA, DESIGNATING
CONSULTANTS IN CONNECTION WITH THE PROPOSED
ISSUANCE OF TAX ALLOCATION HOUSING BONDS AND
AUTHORIZING AND DIRECTING CERTAIN ACTIONS WITH
RESPECT THERETO
The Tustin Community Redevelopment Agency (the "Agency") of the City of Tustin does
hereby resolve as follows:
SECTION 1: In connection with housing activities of the Agency related to its (a)
Town Center Redevelopment Project, (b) South Central Redevelopment Project, and (c)
MCAS Tustin Redevelopment Project (collectively, the "Redevelopment Projects"), the
Agency has entered into various agreements obligating it to provide funds to assist in
the development of housing for persons and families of low and moderate income, and
the Agency expects that it will enter into additional agreements to provide monetary
assistance to other developers of such housing.
SECTION 2: In order to finance its housing activities, the Agency is considering
the issuance of tax allocation housing bonds (the "Bonds"), the principal of and interest
on which will be payable from tax increment revenues received by the Agency from the
Redevelopment Projects that are required by the California Redevelopment Law to be
used to increase, improve and preserve the supply of low and moderate income
housing.
SECTION 3: Officers and officials of the Agency are hereby authorized to
proceed with the preparation of documents necessary to provide for the issuance and
sale of the Bonds. All such documents to which the Agency will be a party shall be
subject to the final approval thereof by the Agency at a subsequent meeting of the
Agency.
SECTION 4: Fieldman, Rolapp & Associates is hereby designated as financial
advisor to the Agency; Quint & Thimmig LLP is hereby designated as bond counsel and
as disclosure counsel to the Agency; and HdL Coren & Cone is hereby designated as
fiscal consultant to the Agency, each in connection with the issuance and sale of the
bonds. The Executive Director is hereby authorized and directed to execute agreements
with such firms for their services with respect to the Bonds, in forms acceptable to the
Executive Director and Agency counsel; provided that any and all compensation
payable to such firms shall be contingent upon the sale and issuance of the Bonds.
SECTION 5: Piper Jaffray & Co. is hereby designated as underwriter to the
Agency in connection with the issuance and sale of the Bonds.
RDA Resolution No. 10-05
Page 2
SECTION 6: The Chairperson, the Vice Chairperson, the Executive Director, the
Treasurer, Agency Counsel, and Secretary and all other appropriate officials of the
Agency are hereby authorized and directed to execute such other agreements,
documents and certificates as may be necessary to effect the purposes of this
Resolution and the financing herein authorized.
SECTION 7: This Resolution shall be in full force and effect immediately upon its
adoption.
PASSED AND ADOPTED at a regular meeting of the Tustin Community
Redevelopment Agency held on the 2nd day of February, 2010.
Jerry Amante,
Chairperson
ATTEST:
PAMELA STOKER,
Recording Secretary
STATE OF CALIFORNIA )
COUNTY OF ORANGE) SS
CITY OF TUSTIN )
I, Pamela Stoker, City Clerk and ex-officio Secretary of the Tustin Community
Redevelopment Agency of the City of Tustin, California, do hereby certify that the whole
number of the members of the Tustin Community Redevelopment Agency of the City of
Tustin is five; that the above and foregoing Resolution No. RDA 10-005 was duly
passed and adopted at a regular meeting of the Tustin Community Redevelopment
Agency, held on the 2nd of February, 2010 by the following vote:
AGENCYMEMBER AYES:
AGENCYMEMBER NOES:
AGENCYMEMBER ABSTAINED:
AGENCYMEMBER ABSENT:
PAMELA STOKER
Recording Secretary
RESOLUTION NO. 10-22
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF
TUSTIN, CALIFORNIA, APPROVING THE ISSUANCE AND
SALE BY THE TUSTIN COMMUNITY REDEVELOPMENT
AGENCY OF TAX ALLOCATION BONDS TO REFINANCE
LOW AND MODERATE INCOME HOUSING ACTIVITIES
WITHIN THE GEOGRAPHIC BOUNDARIES OF THE CITY
The City Council of the City of Tustin (the "City") does hereby resolve as follows:
WHEREAS, the Tustin Community Redevelopment Agency (the "Agency") is a
public body, corporate and politic, duly established and authorized to transact business
and exercise powers under and pursuant to the provisions of the Community
Redevelopment Law of the State of California, constituting Part 1 of Division 24 of the
California Health and Safety Code (the "Law"), including the power to issue bonds for
any of its corporate purposes; and
WHEREAS, (a) a redevelopment plan for the Town Center Redevelopment
Project in the City has been adopted in compliance with all requirements of the Law, (b)
a redevelopment plan for the South Central Redevelopment Project in the City has been
adopted in compliance with all requirements of the Law; and (c) a redevelopment plan
for the MCAS Tustin Redevelopment Project in the City has been adopted in
compliance with all requirements of the Law; and
WHEREAS, the Agency has determined that, due to prevailing financial market
conditions and for other reasons, it is in the best interests of the Agency at this time to
refinance low and moderate income housing activities throughout the geographic
boundaries of the City and, in particular, to repay a reimbursement obligation from the
Agency to the City, relating to the City's write down of land for use for affordable
housing purposes; and
WHEREAS, to provide moneys for such purposes, the Agency has determined to
issue its Tustin Community Redevelopment Agency Tax Allocation Housing Bonds,
Series 2010, in the aggregate principal amount of not to exceed $30,000,000 (the
"Bonds"), under the provisions of Part 1 of Division 24 of the California Health and
Safety Code, commencing with section 33640 of said Code (the "Bond Law"); and
WHEREAS, in accordance with the requirements of section 33640 of the
California Health and Safety Code, the City Council wishes at this time to approve the
issuance and sale of the Bonds by the Agency;
NOW, THEREFORE, it is hereby ORDERED and DETERMINED, as follows:
SECTION 1: Approval of the Bonds. The issuance and sale of the Bonds by the
Agency to refinance low and moderate income housing activities throughout the
geographic boundaries of the City and, in particular, to repay a reimbursement
Resolution No. 10-22
Page 2
obligation from the Agency to the City, relating to the City's write down of land for use
for affordable housing purposes, is hereby approved.
SECTION 2: Effect. This Resolution shall take effect from and after the date of its
passage and adoption.
PASSED AND ADOPTED at a regular meeting of the City Council of the City of
Tustin held on the 2nd day of February, 2010.
Jerry Amante
Mayor
ATTEST:
PAMELA STOKER,
City Clerk
STATE OF CALIFORNIA
COUNTY OF ORANGE
CITY OF TUSTIN
I, Pamela Stoker, City Clerk and ex-officio Clerk of the City Council of the City of
Tustin, California, do hereby certify that the whole number of the members of the City
Council is five; that the above and foregoing Resolution No. 10-22 was duly and
regularly passed and adopted at a regular meeting of the City Council held on the 2nd
day of February, 2010 by the following vote:
Resolution No. 10-22
Page 3
COUNCILMEMBER AYES:
COUNCILMEMBER NOES:
COUNCILMEMBER ABSTAINED:
COUNCILMEMBER ABSENT:
PAMELA STOKER,
City Clerk
TPFA RESOLUTION NO. 10-01
A RESOLUTION OF THE TUSTIN PUBLIC FINANCING
AUTHORITY AUTHORIZING THE PURCHASE AND SALE OF
TAX ALLOCATION BONDS OF THE TUSTIN COMMUNITY
REDEVELOPMENT AGENCY ISSUED TO REFINANCE LOW
AND MODERATE INCOME HOUSING ACTIVITIES WITHIN THE
GEOGRAPHIC BOUNDARIES OF THE CITY OF TUSTIN AND
APPROVING RELATED DOCUMENTS AND ACTIONS
The Tustin Public Financing Authority of the City of Tustin (the"TPFA") does hereby
resolve as follows:
WHEREAS, the City of Tustin (the "City") and the Tustin Community
Redevelopment Agency (the "Agency") have heretofore entered into a Joint Exercise of
Powers Agreement, dated as of May 1, 1995, establishing the TPFA for the purpose,
among others, of issuing its bonds to be used to provide financial assistance to the City
and to the Agency; and
WHEREAS, the Agency is a public body, corporate and politic, duly established
and authorized to transact business and exercise powers under and pursuant to the
provisions of the Community Redevelopment Law of the State of California, constituting
Part 1 of Division 24 of the California Health and Safety Code (the "Law"), including the
power to issue bonds for any of its corporate purposes; and
WHEREAS, (a) a redevelopment plan for the Town Center Redevelopment
Project in the City has been adopted in compliance with all requirements of the Law; (b)
a redevelopment plan for the South Central Redevelopment Project in the City has been
adopted in compliance with all requirements of the Law; and (c) a redevelopment plan
for the MCAS Tustin Project Area in the City, has been adopted in compliance with all
requirements of the Law; and
WHEREAS, the Agency has determined that, due to prevailing financial market
conditions and for other reasons, it is in the best interests of the Agency at this time to
refinance low and moderate income housing activities throughout the geographic
boundaries of the City and, in particular, to repay a reimbursement obligation from the
Agency to the City, relating to the City's write down of land for use for affordable
housing purposes; and
WHEREAS, to provide moneys for such purposes, the Agency has determined to
issue its Tustin Community Redevelopment Agency Tax Allocation Housing Bonds,
Series 2010, in the aggregate principal amount of not to exceed $30,000,000 (the
"Bonds"), under the provisions of Part 1 of Division 24 of the California Health and
Safety Code, commencing with section 33640 of said Code (the "Bond Law"); and
TPFA Resolution No. 10-01
Page 2
WHEREAS, the TPFA has duly considered such transactions and wishes at this
time to authorize the purchase and sale of the Bonds and to approve the form and
authorize execution of a bond purchase agreement in connection therewith;
NOW, THEREFORE, it is hereby ORDERED and DETERMINED, as follows:
SECTION 1. Purchase and Sale of the Bonds. The Board hereby authorizes the
purchase by the TPFA of the Bonds from the Agency for concurrent re-sale to Piper
Jaffray & Co. (the "Underwriter"), so long as the total Underwriter's discount, excluding
original issue discount which does not constitute compensation to the Underwriter, does
not exceed 0.7% of the principal amount of the Bonds. The TPFA hereby approves the
bond purchase agreement, by and among the Underwriter, the Agency and the TPFA,
in substantially the form on file with the Secretary (the "Bond Purchase Agreement"),
together with such additions thereto and changes therein as the Chair, the Executive
Director or the Treasurer shall deem necessary, desirable or appropriate, and the
execution thereof by the Chair, the Executive Director or the Treasurer shall be
conclusive evidence of the approval of any such additions and changes. The Chair, the
Executive Director or the Treasurer is hereby authorized and directed to execute the
final form of the Bond Purchase Agreement for and in the name and on behalf of the
TPFA.
SECTION 2. Official Actions. The Chair, the Executive Director and the Treasurer
of the TPFA, and any and all other officers of the TPFA, are hereby authorized and
directed, for and in the name and on behalf of the TPFA, to do any and all things and
take any and all actions, including execution and delivery of any and all assignments,
certificates, requisitions, agreements, notices, consents, instruments of conveyance,
warrants and other documents which they, or any of them, may deem necessary or
advisable in order to consummate the lawful issuance and sale of the Bonds as
described herein. Whenever in this resolution any officer of the TPFA is authorized to
execute or countersign any document or take any action, such execution,
countersigning or action may be taken on behalf of such officer by any person
designated by such officer to act on his or her behalf in the case such officer shall be
absent or unavailable.
SECTION 3. Effect. This Resolution shall take effect from and after the date of its
passage and adoption.
PASSED AND ADOPTED at a special meeting of the Tustin Public Financing
Authority held on the 2"d day of February, 2010.
Jerry Amante,
Chairperson
TPFA Resolution No. 10-01
Page 3
PAMELA STOKER,
Recording Secretary
STATE OF CALIFORNIA )
COUNTY OF ORANGE ) SS
CITY OF TUSTIN )
I, Pamela Stoker, Recording Secretary of the Tustin Public Financing Authority of
the City of Tustin, California, do hereby certify that the whole number of the members of
the Directors of the Tustin Public Financing Authority is five; that the above and
foregoing TPFA Resolution No. 10-01 was duly passed and adopted at a regular
meeting held on the 2"d day of February, 2010 by the following vote:
DIRECTORS AYES:
DIRECTORS NOES:
DIRECTORS ABSTAINED:
DIRECTORS ABSENT:
PAMELA STOKER,
Recording Secretary
Quint & Thimmig LLP
INDENTURE OF TRUST
Dated as of March 1, 2010
by and between the
TUSTIN COMMUNITY REDEVELOPMENT AGENCY
and
12/14/09
12/29/09
01/13/10
01/20/10
01/26/10
THE BANK OF NEW YORK MELLON TRUST COMPANY, N.A., as Trustee
Relating to
Tustin Community Redevelopment Agency
Tax Allocation Housing Bonds, Series 2010
TABLE OF CONTENTS
Page
ARTICLE I
DETERMINATIONS; DEFINITIONS
Section 1.01. Findings and Determinations ........................................................................................................3
Section 1.02. Definitions ........................................................................................................................................3
Section 1.03. Rules of Construction ...................................................................................................................13
ARTICLE II
AUTHORIZATION AND TERMS
Section 2.01. Authorization of Bonds ................................................................................................................ 14
Section 2.02. Terms of Bonds .............................................................................................................................. 14
Section 2.03. Redemption of Bonds ................................................................................................................... 15
Section 2.04. Form of Bonds ................................................................................................................................ 17
Section 2.05. Execution of Bonds ....................................................................................................................... 17
Section 2.06. Transfer of Bonds .......................................................................................................................... 18
Section 2.07. Exchange of Bonds ........................................................................................................................ 18
Section 2.08. Registration of Bonds .................................................................................................................... 18
Section 2.09. Temporary Bonds .......................................................................................................................... 18
Section 2.10. Bonds Mutilated, Lost, Destroyed or Stolen ............................................................................. 19
Section 2.11. CUSIP Numbers ............................................................................................................................ 19
Section 2.12. Use of Depository .......................................................................................................................... 19
ARTICLE III
DEPOSIT AND APPLICATION OF PROCEEDS OF BONDS; PARITY DEBT
Section 3.01. Issuance of Bonds ..........................................................................................................................21
Section 3.02. Application of Proceeds of Sale ...................................................................................................21
Section 3.03. Housing Projects Fund .................................................................................................................21
Section 3.04. Costs of Issuance Fund .................................................................................................................21
Section 3.05. Issuance of Parity Debt .................................................................................................................22
Section 3.06. Issuance of Subordinate Debt ......................................................................................................23
Section 3.07. Validity of Bonds ...........................................................................................................................23
ARTICLE IV
SECURITY OF BONDS; FLOW OF FUNDS
Section 4.01. Security of Bonds; Equal Security ...............................................................................................24
Section 4.02. Special Fund; Deposit of Housing Tax Revenues .....................................................................24
Section 4.03. Deposit of Amounts by Trustee ..................................................................................................24
ARTICLE V
OTHER COVENANTS OF THE AGENCY
Section 5.01. Punctual Payment .........................................................................................................................27
Section 5.02. Limitation on Additional Indebtedness; Against Encumbrances .................... ............:.........27
Section 5.03. Extension of Payment ............................................................................................. ......................27
Section 5.04. Payment of Claims .................................................................................................. ......................27
Section 5.05. Books and Accounts; Financial Statements ......................................................... ......................27
Section 5.06. Protection of Security and Rights of Owners ...................................................... ......................27
Section 5.07. Payments of Taxes and Other Charges ................................................................ ......................28
Section 5.08. Taxation of Leased Property .................................................................................. ......................28
Section 5.09. Disposition of Property .......................................................................................... ......................28
Section 5.10. Maintenance of Housing Tax Revenues; Compliance with Plan Limitations ......................28
Section 5.11. Management and Operations of Properties ........................................................ ......................29
Section 5.12. Continuing Disclosure ............................................................................................ ......................29
Section 5.13. Further Assurances ................................................................................................. ......................29
-i-
Section 5.14. Covenant ......................................................................................................................................... 29
Section 5.15. Tax Covenants ............................................................................................................................... 29
Section 5.16. Reservation of Funds for SERAF Payment ................................................................................ 30
ARTICLE VI
THE TRUSTEE
Section 6.01. Duties, Immunities and Liabilities of Trustee ........................................................................... 31
Section 6.02. Merger or Consolidation .............................................................................................................. 32
Section 6.03. Liability of Trustee ........................................................................................................................ 32
Section 6.04. Right to Rely on Documents and Opinions ............................................................................... 34
Section 6.05. Preservation and Inspection of Documents .............................................................................. 35
Section 6.06. Compensation and Indemnification ........................................................................................... 35
Section 6.07. Deposit and Investment of Moneys in Funds ........................................................................... 35
Section 6.08. Accounting Records and Financial Statements ......................................................................... 36
Section 6.09. Appointment of Co-Trustee or Agent ....................................................................................... .37
Section 6.10. Other Transactions with Agency ............................................................................................... .37
ARTICLE VII
MODIFICATION OR AMENDMENT OF THIS INDENTURE
Section 7.01. Amendment .......................................:.......................................................................................... .38
Section 7.02. Effect of Supplemental Indenture .............................................................................................. .38
Section 7.03. Endorsement or Replacement of Bonds After Amendment .................................................. .38
Section 7.04. Amendment by Mutual Consent ............................................................................................... .39
ARTICLE VIII
EVENTS OF DEFAULT AND REMEDIES OF OWNERS
Section 8.01. Events of Default ...........................................................................................................................40
Section 8.02. Application of Funds Upon Default ...........................................................................................40
Section 8.03. Limitation on Owner's Right to Sue ...........................................................................................41
Section 8.04. Non-Waiver ....................................................................................................................................41
Section 8.05. Actions by Trustee as Attorney-in-Fact .....................................................................................42
Section 8.06. Remedies Not Exclusive ...............................................................................................................42
Section 8.07. Parties Interested Herein ..............................................................................................................42
ARTICLE IX
MISCELLANEOUS
Section 9.01. Benefits Limited to Parties ........................................................................................................... 43
Section 9.02. Successor is Deemed Included in All References to Predecessor .......................................... 43
Section 9.03. Discharge of Indenture ................................................................................................................. 43
Section 9.04. Execution of Documents and Proof of Ownership by Owners .............................................. 44
Section 9.05. Disqualified Bonds ........................................................................................................................ 44
Section 9.06. Waiver of Personal Liability ........................................................................................................ 44
Section 9.07. Destruction of Canceled Bonds ................................................................................................... 44
Section 9.08. Notices ............................................................................................................................................ 45
Section 9.09. Partial Invalidity ............................................................................................................................ 45
Section 9.10. Unclaimed Moneys ....................................................................................................................... 45
Section 9.11. Execution in Counterparts ........................................................................................................... 45
Section 9.12. Governing Law .............................................................................................................................. 46
EXHIBIT A: FORM OF BOND
-u-
INDENTURE OF TRUST
THIS INDENTURE OF TRUST (this "Indenture") is dated as of March 1, 2010, by and
between the TUSTIN COMMUNITY REDEVELOPMENT AGENCY, a public body corporate
and politic, duly organized and existing under the laws of the State of California (the
"Agency"), and THE BANK OF NEW YORK MELLON TRUST COMPANY, N.A., a national
banking association organized and existing under the laws of the United States of America, as
trustee (the "Trustee");
WITNESSETH:
WHEREAS, the Agency is a public body, corporate and politic, duly established and
authorized to transact business and exercise powers under and pursuant to the provisions of
the Community Redevelopment Law of the State of California, constituting Part 1 of Division 24
of the California Health and Safety Code (the "Law"), including the power to issue bonds for
any of its corporate purposes;
WHEREAS, (a) a redevelopment plan for the Town Center Redevelopment Project (the
"Town Center Project") in the City of Tustin (the "City"), has been adopted in compliance with
all requirements of the Law, (b) a redevelopment plan for the South Central Redevelopment
Project (the "South Central Project") in the City, has been adopted in compliance with all
requirements of the Law; and (c) a redevelopment plan for the MCAS Tustin Redevelopment
Project (the "MCAS Tustin Project" and, with the Town Center Project and the South Central
Project, the "Redevelopment Projects") in the City, has been adopted in compliance with all
requirements of the Law;
WHEREAS, the City has written down the cost of land that has been re-sold and
developed with affordable housing in the MCAS Tustin Project, which units ("Affordable
Units") are encumbered with covenants and deeds of trust that will ensure they remain
affordable for the periods of time required by the Law;
WHEREAS, on June 5, 2007, the City and the Agency entered into an agreement,
amended on January 5, 2010 ("Reimbursement Agreement"), pursuant to which the Agency has
agreed to reimburse the City for the difference between the market price of the land on which
the Affordable Units have been developed and the actual subsidized price for which the land
was sold from money deposited in the low and moderate income housing fund for the MCAS
Tustin Redevelopment Projects and other available sources (the "City Obligation");
WHEREAS, the Agency has determined that, due to prevailing financial market
conditions and for other reasons, it is in the best interests of the Agency at this time to prepay a
portion of the City Obligation;
WHEREAS, to provide moneys for such purpose, the Agency has determined to issue its
Tustin Community Redevelopment Agency Tax Allocation Housing Bonds, Series 2010, in the
aggregate principal amount of $ (the "Bonds"), under the provisions of Part 1 of
Division 24 of the California Health and Safety Code, commencing with section 33640 of said
Code;
WHEREAS, in order to provide for the authentication and delivery of the Bonds, to
establish and declare the terms and conditions upon which the Bonds are to be issued and
secured and to secure the payment of the principal thereof and interest and redemption
premium (if any) thereon, the Agency and the Trustee have duly authorized the execution and
delivery of this Indenture; and
WHEREAS, all acts and proceedings required by law necessary to make the Bonds when
executed by the Agency, and authenticated and delivered by the Trustee, the valid, binding and
legal special obligations of the Agency, and to constitute this Indenture a legal, valid and
binding agreement for the uses and purposes herein set forth in accordance with its terms, have
been done or taken;
NOW, THEREFORE, THIS INDENTURE WITNESSETH, that in order to secure the
payment of the principal of and the interest and redemption premium (if any) on all the Bonds
issued and Outstanding under this Indenture, according to their tenor, and to secure the
performance and observance of all the covenants and conditions therein and herein set forth,
and to declare the terms and conditions upon and subject to which the Bonds are to be issued
and received, and in consideration of the premises and of the mutual covenants herein
contained and of the purchase and acceptance of the Bonds by the Owners thereof, and for
other valuable considerations, the receipt of which is hereby acknowledged, the Agency and the
Trustee do hereby covenant and agree with one another, for the benefit of the respective
Owners from time to time of the Bonds, as follows:
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ARTICLE I
DETERMINATIONS; DEFINITIONS
Section 1.01. Findings and Determinations. The Agency has reviewed all proceedings
heretofore taken and has found, as a result of such review, and hereby finds and determines
that all things, conditions and acts required by law to exist, happen or be performed precedent
to and in connection with the issuance of the Bonds do exist, have happened and have been
performed in due time, form and manner as required by law, and the Agency is now duly
empowered, pursuant to each and every requirement of law, to issue the Bonds in the manner
and form provided in this Indenture.
Section 1.02. Definitions. Unless the context otherwise requires, the terms defined in this
Section 1.02 shall, for all purposes of this Indenture, of any Supplemental Indenture, and of any
certificate, opinion or other document herein mentioned, have the meanings herein specified.
"Additional Revenues" means, as of the date of calculation, the amount of Housing Tax
Revenues which, as shown in the Report of a Redevelopment Consultant, are estimated to be
receivable by the Agency within the Fiscal Year following the Fiscal Year in which such
calculation is made as a result of increases in the assessed valuation of taxable property in the
Redevelopment Projects due to the completion of construction which is not then reflected on the
tax rolls, or due to transfer of ownership or any other interest in real property which has been
recorded but which is not then reflected on the tax rolls. For purposes of this definition, the
term "increases in the assessed valuation" means the amount by which the assessed valuation
of taxable property in the Redevelopment Projects is estimated to increase above the assessed
valuation of taxable property in the Redevelopment Projects (as evidenced in the written
records of the County) as of the date on which such calculation is made.
"Agency" means the Tustin Community Redevelopment Agency, a public body
corporate and politic duly organized and existing under the Law.
"Annual Debt Service" means, for each Bond Year, the sum of (a) the interest payable on
the Outstanding Bonds and any Parity Debt in such Bond Year, assuming that the Outstanding
Bonds and Parity Debt are retired as scheduled, and (b) the principal or sinking fund amount of
the Outstanding Bonds and Parity Debt payable by their terms in such Bond Year.
"Bonds" means the $ Tustin Community Redevelopment Agency Tax Allocation
Housing Bonds, Series 2010.
"Bond Counsel" means (a) Quint & Thimmig LLP, or (b) any other attorney or firm of
attorneys appointed by or acceptable to the Agency of nationally-recognized experience in the
issuance of obligations the interest on which is excludable from gross income for federal income
tax purposes under the Tax Code.
"Bond Year" means any twelve-month period beginning on September 2 in any year and
ending on the next succeeding September 1, both dates inclusive, except that the first Bond Year
shall begin on the Closing Date, and end on September 1, 2010.
"Business Day" means a day of the year, other than a Saturday or Sunday, on which
banks in New York, New York, Los Angeles and San Francisco, California, are not required or
permitted to be closed and on which the New York Stock Exchange is not closed.
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"Closing Date" means the date on which the Bonds are delivered by the Agency to the
original purchaser thereof.
"Continuing Disclosure Certificate" means that certain Continuing Disclosure Certificate
executed by the Agency dated as of the Closing Date, as originally executed and as it may be
amended from time to time in accordance with the terms thereof.
"Costs of Issuance" means all items of expense directly or indirectly payable by or
reimbursable to the Agency relating to the authorization, issuance, sale and delivery of the
Bonds, including but not limited to printing expenses, operating expenses, rating agency fees,
filing and recording fees, initial fees and charges and first annual administrative fee of the
Trustee and fees and expenses of its counsel, fees, charges and disbursements of attorneys,
financial advisors, fiscal consultants, accounting firms, consultants and other professionals, fees
and charges for preparation, execution and safekeeping of the Bonds, and any other cost, charge
or fee in connection with the original issuance of the Bonds.
"Costs of Issuance Fund" means the fund by that name established and held by the
Trustee pursuant to Section 3.04.
"County" means Orange County, a county duly organized and existing under the laws of
the State.
"Debt Service Fund" means the fund by that name established and held by the Trustee
pursuant to Section 4.03.
"Defeasance Obligations" means any of the following, or any combination thereof: (a)
cash; (b) non-callable Federal Securities (including State and Local Government Securities); (c)
direct obligations of the United States of America which have been stripped by the Department
of the Treasury of the United States of America; (d) CATS, TIGRS and similar securities; (d)
interest component of obligations of the Resolution Funding Corp. (REFCORP), which have
been stripped by request to the Federal Reserve Bank of New York; (e) pre-refunded municipal
bonds rated "Aaa" by Moody's and "AAA" by S&P; provided, however, if the issue is only rated
by S&P (i.e., there is no Moody's rating), then the pre-refunded bonds must have been pre-
refunded with cash, direct U.S. or U.S. guaranteed obligations, or "AAA" rated pre-refunded
municipals; and (f) bonds, debentures, notes or other evidence of indebtedness issued or
guaranteed by any of the following federal agencies and provided such obligations are backed
by the full faith and credit of the United States of America: (i) direct obligations or fully
guaranteed certificates of beneficial ownership of the U.S. Export-Import Bank; (ii) certificates of
beneficial ownership of the Farmers Home Administration; (iii) obligations of the Federal
Financing Bank; (iv) participation certificates of the General Services Administration; (v)
guaranteed Title XI financings of the U.S. Maritime Administration; (vi) U.S. government
guaranteed public housing notes and bonds; and (vii) project notes and local authority bonds of
the U.S. Department of Housing and Urban Development.
"Event of Default" means any of the events described in Section 8.01.
"Fair Market Value" means the price at which a willing buyer would purchase the
investment from a willing seller in a bona fide, arm's length transaction (determined as of the
date the contract to purchase or sell the investment becomes binding) if the investment is traded
on an established securities market (within the meaning of section 1273 of the Tax Code) and,
otherwise, the term "Fair Market Value" means the acquisition price in a bona fide arm's length
transaction (as referenced above) if (i) the investment is a certificate of deposit that is acquired
in accordance with applicable regulations under the Tax Code, (ii) the investment is an
agreement with specifically negotiated withdrawal or reinvestment provisions and a
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specifically negotiated interest rate (for example, a guaranteed investment contract, a forward
supply contract or other investment agreement) that is acquired in accordance with applicable
regulations under the Tax Code, (iii) the investment is a United States Treasury Security-State
and Local Government Series that is acquired in accordance with applicable regulations of the
United States Bureau of Public Debt, or (iv) the investment is the Local Agency Investment
Fund of the State of California, but only if at all times during which the investment is held, its
yield is reasonably expected to be equal to or greater than the yield on a reasonably comparable
direct obligation of the United States.
"Federal Securities" means: (a) any direct general obligations of the United States of
America (including obligations issued or held in book-entry form on the books of the
Department of the Treasury of the United States of America), the payment of principal of and
interest on which are unconditionally and fully guaranteed by the United States of America; (b)
obligations of any agency or department of the United States of America which represent the
full faith and credit of the United States of America or the timely payment of the principal of
and interest on which are secured or guaranteed by the full faith and credit of the United States
of America; and (c) any obligations issued by the State or any political subdivision thereof the
payment of the principal of and interest and premium (if any) on which are fully secured by
Federal Securities described in the preceding clauses (a) or (b).
"Fiscal Year" means any twelve-month period beginning on July 1 in any year and
extending to the next succeeding June 30, both dates inclusive, or any other twelve month
period selected and designated by the Agency to the Trustee in writing as its official fiscal year
period.
"Housing Project Fund" means the fund by that name established and held by the Trustee
pursuant to Section 3.03.
"Housing Tax Revenues" means all taxes pledged and annually allocated within the Plan
Limitations, beginning in the Agency's fiscal year ending June 30, 2010, and paid to the Agency
with respect to the Redevelopment Projects pursuant to Article 6 of Chapter 6 (commencing
with section 33670) of the Law and section 16 of Article XVI of the Constitution of the State, or
pursuant to other applicable State laws, and as provided in the Redevelopment Plans, and all
payments, subventions and reimbursements, if any, to the Agency specifically attributable to ad
valorem taxes lost by reason of tax exemptions and tax rate limitations, which are required to be
deposited into the Low and Moderate Income Housing Fund of the Agency in any Fiscal Year
pursuant to section 33334.3 of the Law.
"Indenture" means this Indenture of Trust by and between the Agency and the Trustee,
as originally entered into or as it may be amended or supplemented by any Supplemental
Indenture entered into pursuant to the provisions hereof.
"Independent Accountant" means any accountant or firm of such accountants duly
licensed or registered or entitled to practice and practicing as such under the laws of the State,
appointed by the Agency, and who, or each of whom: (a) is in fact independent and not under
domination of the Agency; (b) does not have any substantial interest, direct or indirect, with the
Agency; and (c) is not connected with the Agency as an officer or employee of the Agency, but
who may be regularly retained to make reports to the Agency.
"Independent Financial Consultant" means any financial consultant or firm of such
consultants appointed by the Agency, and who, or each of whom: (a) is in fact independent and
not under domination of the Agency; (b) does not have any substantial interest, direct or
indirect, with the Agency, other than as original purchaser of the Bonds or any Parity Debt; and
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(c) is not connected with the Agency as an officer or employee of the Agency, but who may be
regularly retained to make reports to the Agency.
"Independent Redevelopment Consultant" means any consultant or firm of such consultants
appointed by the Agency, and who, or each of whom: (a) is judged by the Agency to have
experience in matters relating to the collection of Housing Tax Revenues or otherwise with
respect to the financing of redevelopment projects; (b) is in fact independent and not under
domination of the Agency; (c) does not have any substantial interest, direct or indirect, with the
Agency; and (d) is not connected with the Agency as an officer or employee of the Agency, but
who maybe regularly retained to make reports to the Agency.
"Information Services" means Financial Information, Inc.'s "Daily Called Bond Service," 1
Cragwood Road, South Plainfield, New Jersey 07080, Attention: Editor; Mergent Incorporated,
580 Kingsley Park Drive, Fort Mill, South Carolina 29715; Standard & Poor's Corporation, 55
Water Street, 45"' Floor, New York, New York 10041, Attention: Called Bond Data; and, in
accordance with then current guidelines of the Securities and Exchange Commission, such other
addresses and/or such other services providing information with respect to the redemption of
bonds as the Agency may designate in a Request of the Agency delivered to the Trustee.
"Interest Account" means the account by that name established and held by the Trustee
pursuant to Section 4.03(a).
"Interest Payment Date" means March 1 and September 1 in each year, commencing
September 1, 2010, so long as any of the Bonds remain Outstanding hereunder.
"Law" means the Community Redevelopment Law of the State, constituting Part 1 of
Division 24 of the California Health and Safety Code, and the acts amendatory thereof and
supplemental thereto.
"Low and Moderate Income Housing Fund" means the fund of the Agency established by
the Agency pursuant to section 33334.3 of the Law.
"Maximum Annual Debt Service" means, as of the date of calculation, the largest Annual
Debt Service for the current or any future Bond Year following the anticipated issuance of
Parity Debt. For purposes of such calculation, there shall be excluded a pro rata portion of each
installment of principal of any Parity Debt, together with the interest to accrue thereon, in the
event and to the extent that the proceeds of such Parity Debt are deposited in an escrow fund
from which amounts may not be released to the Agency unless the Housing Tax Revenues for
the current Fiscal Year (as evidenced in a written document from an appropriate official of the
Agency) plus, at the option of the Agency, Additional Revenues, equal at least one hundred
twenty-five percent (125%) of the amount of Maximum Annual Debt Service.
"MCAS Tustin Redevelopment Plan" means the Redevelopment Plan for the MCAS Tustin
Redevelopment Project, approved by Ordinance No. 1276, enacted by the City Council of the
City on June 13, 2003, as amended by Ordinance No. 1334, enacted by the City Council of the
City on April 3, 2007, together with any amendments thereof at any time duly authorized
pursuant to the Law.
"MCAS Tustin Redevelopment Project" means the MCAS Tustin Redevelopment Project,
as described in the MCAS Tustin Redevelopment Plan.
"Moody's" means Moody's Investors Service, its successors and assigns.
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"Original Purchaser" means the original purchaser of the Bonds upon their delivery by
the Trustee on the Closing Date.
"Outstanding" when used as of any particular time with reference to Bonds, means
(subject to the provisions of Section 9.05) all Bonds except: (a) Bonds theretofore canceled by the
Trustee or surrendered to the Trustee for cancellation; (b) Bonds paid or deemed to have been
paid within the meaning of Section 9.03; and (c) Bonds in lieu of or in substitution for which
other Bonds shall have been authorized, executed, issued and delivered by the Agency
pursuant hereto.
"Owner" or "Bondowner" means, with respect to any Bond, the person in whose name
the ownership of such Bond shall be registered on the Registration Books.
"Parity Debt" means any loans, advances or indebtedness issued or incurred by the
Agency on a parity with the Bonds pursuant to Section 3.05.
"Parity Debt Instrument" means any resolution, indenture of trust, trust agreement, loan
agreement or other instrument authorizing the issuance and/or execution and delivery of any
Parity Debt.
"Participating Underwriter" has the meaning ascribed thereto in the Continuing
Disclosure Certificate.
"Permitted Investments" means any of the following, which at the time of investment are
legal investments under the laws of the State for the moneys proposed to be invested therein
(provided, however, that the Trustee shall have no duty to determine such legality of any such
investment, and may conclusively rely on a representation of the Agency with respect thereto),
but only to the extent that the same are acquired at Fair Market Value:
(a) Federal Securities;
(b) bonds, debentures, notes or other evidence of indebtedness issued or guaranteed by
any of the following federal agencies and provided such obligations are backed by the full faith
and credit of the United States of America (stripped securities are only permitted if they have
been stripped by the agency itself): (i) direct obligations or fully guaranteed certificates of
beneficial ownership of the U.S. Export-Import Bank (Eximbank); (ii) certificates of beneficial
ownership of the Farmers Home Administration; (iii) obligations of the Federal Financing Bank;
(iv) debentures of the Federal Housing Administration (FHA); (v) participation certificates of
the General Services Administration; (vi) guaranteed mortgage-backed bonds or guaranteed
pass-through obligations (participation certificates) of the Government National Mortgage
Association (GNMA); (vii) guaranteed Title XI financings of the U.S. Maritime Administration;
and (viii) project notes, local authority bonds, new communities debentures (U.S. government
guaranteed debentures) or U.S. public housing notes and bonds (U.S. government guaranteed
public housing notes and bonds) of the U.S. Department of Housing and Urban Development
(HUD);
(c) bonds, debentures, notes or other evidence of indebtedness issued or guaranteed by
any of the following non-full faith and credit U.S. government agencies (stripped securities are
only permitted if they have been stripped by the agency itself): (i) senior debt obligations of the
Federal Home Loan Bank System; (ii) participation certificates or senior debt obligations of the
Federal Home Loan Mortgage Corporation (FHLMC); (iii) mortgaged-backed securities and
senior debt obligations of the Federal National Mortgage Association (FNMA); (iv) senior debt
obligations of the Student Loan Marketing Association (SLMA); (v) obligations of the
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Resolution Funding Corporation (REFCORP); and (vi) consolidated systemwide bonds and
notes of the Farm Credit System;
(d) money market funds registered under the Federal Investment Company Act of 1940,
whose shares are registered under the Federal Securities Act of 1933, and having a rating by
S&P of "AAAm-G," "AAAm" or "AAm" and, if rated by Moody's, having a rating by Moody's
of "Aaa," "Aa1" or "Aa2," including money market funds from which the Trustee or its
affiliates derive a fee for investment advisory or other services to the fund;
(e) certificates of deposit secured at all times by collateral described in (a) or (b) above,
issued by commercial banks, savings and loan associations or mutual savings banks (such
collateral must be held by a third party and the Trustee must have a perfected first security
interest in such collateral);
(f) certificates of deposit, savings accounts, deposit accounts or money market deposits
which are fully insured by the Federal Deposit Insurance Corporation, including BIF and SAIF,
including those of the Trustee or its affiliates;
(g) Investment agreements, including guaranteed investment contracts, with (i) a
domestic or foreign bank or corporation (other than a life or property casualty insurance
company) the long-term debt of which, or, in the case of a guaranteed corporation the long term
debt is rated at least "AA" by S&P and "Aa2" by Moody's; or (ii) a monoline municipal bond
insurance company or a subsidiary thereof whose claims paying ability is rated at least "AA" by
S&P and "Aa2" by Moody's; provided, that in all cases, by the terms of the investment
agreement:
(i) the invested funds are available for withdrawal without penalty or premium,
at any time upon not more than seven days' prior notice;
(ii) the investment agreement shall state that it is the unconditional and general
obligation of, and is not subordinated to any other obligation of, the provider thereof;
(iii) a fixed guaranteed rate of interest is to be paid on invested funds and all
future deposits, if any, required to be made to restore the amount of such funds to the
level specified under this Indenture;
(iv) the Trustee receives the opinion of domestic counsel that such investment
agreement is legal, valid, binding and enforceable upon the provider in accordance with
its terms and of foreign counsel (if applicable);
(v) the investment agreement shall provide that if during its term:
(A) the provider's rating by either S&P or Moody's falls below "AA-" or
"Aa3," respectively, the provider must, at the direction of the Agency or the
Trustee, within 10 days of receipt of such direction, either (1) collateralize the
investment agreement by delivering or transferring in accordance with
applicable state and federal laws (other than by means of entries on the
provider's books) to the Trustee or its agent Permitted Collateral which are free
and clear of any third-party liens or claims at the Collateral Levels set forth
below; or (2) repay the principal of and accrued but unpaid interest on the
investment, and
(B) the provider's rating by either Moody's or S&P is withdrawn or
suspended or falls below "A-" or "A3" by S&P or Moody's, as appropriate, the
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provider must, at the direction of the Agency or the Trustee, within 10 days of
receipt of such direction, repay the principal of and accrued but unpaid interest
on the investment in either case with no penalty or premium to the Agency or
Trustee;
(vi) the investment agreement shall state that the Trustee has a perfected first
priority security interest in the Permitted Collateral, any substituted collateral and all
proceeds thereof (in the case of bearer securities, this means the trustee is in possession);
(vii) the investment agreement must provide that if during its term
(A) the provider shall default in its payment obligations, the provider's
obligations under the investment agreement shall, at the direction of the Agency
or the Trustee, be accelerated and amounts invested and accrued but unpaid
interest thereon shall be repaid to the Trustee;
(B) the provider shall become insolvent, not pay its debts as they become
due, be declared or petition to be declared bankrupt, etc. ("event of insolvency"),
the provider's obligations shall automatically be accelerated and amounts
invested and accrued but unpaid interest thereon shall be repaid to the Trustee;
(C) the provider fails to perform any of its obligations under the
Investment Agreement (other than obligations related to payment or rating) and
such breach continues for ten (10) Business Days or more after written notice
thereof is given by the Agency or the Trustee to the provider, it shall be an Event
of Default; or
(D) a representation or warranty made by the provider proves to have
been incorrect or misleading in any material respect when made, it shall be an
event of default; and
(viii) permitted collateral for investment agreements ("Permitted Collateral")
includes, and "Collateral Levels" for purposes of the foregoing are:
(A) U.S. direct Treasury obligations,
(B) senior debt and/or mortgage backed obligations of GNMA, FNMA or
FHLMC and other government sponsored agencies backed by the full faith and
credit of the U.S. government,
(C) collateral levels must be 104% of the total principal deposited under
the investment agreement for U.S. direct Treasury obligations, GNMA
obligations and full faith and credit U.S. government obligations and 105% of the
total principal deposited under the investment agreement for FNMA and
FHLMC, and
(D) the collateral must be held by the Trustee or a third party on behalf of
the Trustee, and marked to market at least weekly;
(h) commercial paper rated, at the time of purchase, "Prime-1" by Moody's and "A-1+"
or better by S&P;
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(i) bonds or notes issued by any state or municipality which, at the time of purchase, are
rated by Moody's and S&P in one of the two highest long-term rating categories assigned by
such agencies;
(j) federal funds or bankers acceptances with a maximum term of one year of any bank
which has an unsecured, uninsured and unguaranteed obligation rating of "Prime-1" or "A3"
or better by Moody's and "A-1+" or better by S&P;
(k) repurchase agreements for thirty days or less which provide for the transfer of
securities from a dealer bank or securities firm (seller/borrower) to the Trustee and the transfer
of cash from the Trustee to the dealer bank or securities firm with an agreement that the dealer
bank or securities firm will repay the cash plus a yield to the Trustee in exchange for the
securities at a specified date, which satisfy the following criteria:
(i) repurchase agreements must be between the Trustee and (A) a primary dealer
on the Federal Reserve reporting dealer list which is rated "A" or better by Moody's and
S&P, or (B) a bank rated "A" or better by Moody's and S&P;
(ii) the written repurchase agreement contract must include the following: (A)
securities acceptable for transfer, which may be direct U.S. government obligations, or
federal agency obligations backed by the full faith and credit of the U.S. government
(including FNMA and the FHLMC); (B) the term of the repurchase agreement may be
up to 30 days; (C) the collateral must be delivered to the Trustee or a third party acting
as agent for the Trustee before or simultaneous with payment (perfection by possession
of certificated securities); (D) the Trustee must have a perfected first priority security
interest in the collateral; (E) the collateral must be free and clear of third-party liens and,
in the case of a broker which falls under the jurisdiction of the Securities Investors
Protection Corporation, are not subject to a repurchase agreement or a reverse
repurchase agreement; (F) failure to maintain the requisite collateral percentage, after a
two-day restoration period, will require the Trustee to liquidate the collateral; and (G)
the securities must be valued weekly, marked-to-market at current market price plus
accrued interest and the value of collateral must be equal to 104% of the amount of cash
transferred by the Trustee to the dealer bank or securities firm under the repurchase
agreement plus accrued interest (unless the securities used as collateral are obligations
of the Federal National Mortgage Association or the Federal Home Loan Mortgage
Corporation, in which case the collateral must be equal to 105% of the amount of cash
transferred by the Trustee to the dealer bank or securities firm under the repurchase
agreement plus accrued interest). If the value of securities held as collateral falls below
104% (or 105%, if applicable) of the value of the cash transferred by the Trustee, then
additional cash and/or acceptable securities must be transferred; and
(iii) a legal opinion must be delivered to the Trustee to the effect that the
repurchase agreement meets guidelines under state law for legal investment of public
funds;
(1) the Local Agency Investment Fund of the State of California, created pursuant to
Section 16429.1 of the California Government Code, to the extent the Trustee is authorized to
register such investment in its name; and
(m) any other lawful investment for Agency funds.
"Plan Limitations" means, subject to the suspension of the limit on the total amount of tax
increment funds that may be received by set forth in section 33333.8(e) of the Law, the
limitations contained or incorporated in the Redevelopment Plans on (a) the aggregate principal
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amount of indebtedness payable from Housing Tax Revenues derived under the
Redevelopment Plans which may be outstanding at any time, (b) the aggregate amount of taxes
which may be divided and allocated to the Agency pursuant to the Redevelopment Plans, and
(c) the period of time for establishing, incurring or repaying indebtedness payable from
Housing Tax Revenues derived under the Redevelopment Plans.
"Principal Account" means the account by that name established and held by the Trustee
pursuant to Section 4.03(b).
"Principal Corporate Trust Office" means such principal corporate trust office of the
Trustee as may be designated from time to time by written notice from the Trustee to the
Agency, initially being at 633 West Fifth Street, 24th Floor, Los Angeles, CA 90071, Attention:
Corporate Trust Services, except that, with respect to presentation of Bonds for payment or for
registration of transfer and exchange, such term shall mean the office or agency of the Trustee at
which, at any particular time, its corporate trust agency business shall be conducted.
"Rating Category" means any generic rating category of Moody's or S&P, without regard
to any refinement of such category by plus or minus sign or by numerical or other qualifying
designation.
"Record Date" means, with respect to any Interest Payment Date, the close of business on
the fifteenth (15th) calendar day of the month preceding such Interest Payment Date, whether
or not such fifteenth (15th) calendar day is a Business Day.
"Redemption Account" means the account by that name established and held by the
Trustee pursuant to Section 4.03(d).
"Redevelopment Plans" means, collectively, (a) the MCAS Tustin Redevelopment Plan, (b)
the South Central Redevelopment Plan, and (c) the Town Center Redevelopment Plan.
"Redevelopment Projects" means, collectively, (a) the MCAS Tustin Redevelopment
Project, (b) the South Central Redevelopment Project, and (c) the Town Center Redevelopment
Project.
"Refunding Debt" means any loan, bond, note, advance or indebtedness the proceeds
thereof are used to refund all or a portion of the Bonds or any Parity Debt (and to pay costs of
issuance of and fund a reserve fund or account for such Refunding Debt), and the debt service
due on such Refunding Debt in any Bond Year in which the Refunding Debt is outstanding is
not greater than the debt service due in such Bond Year on the portion of the Bonds or Parity
Debt refunded with the proceeds of such Refunding Debt.
"Registration Books" means the records maintained by the Trustee pursuant to Section
2.08 for the registration and transfer of ownership of the Bonds.
"Report" means a document in writing signed by an Independent Financial Consultant
or an Independent Redevelopment Consultant and including: (a) a statement that the person or
firm making or giving such Report has read the pertinent provisions of this Indenture to which
such Report relates; (b) a brief statement as to the nature and scope of the examination or
investigation upon which the Report is based; and (c) a statement that, in the opinion of such
person or firm, sufficient examination or investigation was made as is necessary to enable said
consultant to express an informed opinion with respect to the subject matter referred to in the
Report.
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"Reserve Account" means the account by that name established and held by the Trustee
pursuant to Section 4.03(c), which shall serve as the reserve fund for the Bonds and all Parity
Debt.
"Reserve Requirement" means, as of any calculation date, an amount, calculated by or on
behalf of the Agency and certified to the Trustee in writing, equal to the least of (a) Maximum
Annual Debt Service on all Outstanding Bonds and any Parity Debt, (b) 125% of average annual
debt service on the Bonds and any Parity Debt, and (c) the then outstanding principal amount of
the Bonds and any Parity Debt. The Reserve Requirement as of the Closing Date is
"Responsible Officer" means any Vice President, Assistant Vice President or Trust Officer
of the Trustee with responsibility for matters related to this Indenture.
"S&P" means Standard & Poor's Ratings Services, a division of The McGraw-Hill
Companies, Inc., New York, New York, or its successors.
"Securities Depositories" means The Depository Trust Company, 55 Water Street, 50th
Floor, New York, NY 10041-0099, Attention: Call Notification Department, Fax (212) 855-7232;
and, in accordance with then current guidelines of the Securities and Exchange Agency, such
other addresses and/or such other securities depositories as the Agency may designate in a
Written Certificate of the Agency delivered to the Trustee.
"Sinking Account" means the account by that name established and held by the Trustee
pursuant to Section 4.03(b).
"South Central Redevelopment Plan" means the Redevelopment Plan for the South Central
Redevelopment Project, approved by Ordinance No. 890, enacted by the City Council of the
City on August 1, 1983, as amended by Ordinance No. 939, enacted by the City Council of the
City on August 5, 1985, as amended by Ordinance No. 1142, enacted by the City Council of the
City on November 21, 1994, as amended by Ordinance No. 1223, enacted by the City Council of
the City on November 1, 1999, as amended by Ordinance No. 1290, enacted by the City Council
of the City on February 22, 2005, as amended by Ordinance No. 1307, enacted by the City
Council of the City on October 17, 2005, as amended by Ordinance No. 1333, enacted by the City
Council of the City on April 3, 2007, and as amended by Ordinance No. 1349, enacted by the
City Council of the City on February 5, 2008, together with any amendments thereof at any time
duly authorized pursuant to the Law.
"South Central Redevelopment Project" means the South Central Redevelopment Project, as
described in the South Central Redevelopment Plan.
"Special Fund" means the fund by that name established and held by the Agency
pursuant to Section 4.02, which shall serve as the special fund for the Bonds and all Parity Debt.
"State" means the State of California.
"Subordinate Debt" means any loans, advances or indebtedness issued or incurred by the
Agency pursuant to Section 3.06, which are either: (a) by its terms payable from, but not secured
by a pledge of or lien upon, the Housing Tax Revenues; or (b) secured by a pledge of or lien
upon the Housing Tax Revenues which is expressly subordinate to the pledge of and lien upon
the Housing Tax Revenues hereunder for the security of the Bonds.
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"Supplemental Indenture" means any resolution, agreement or other instrument which
has been duly adopted or entered into by the Agency, but only if and to the extent that such
Supplemental Indenture is specifically authorized hereunder.
"Tax Code" means the Internal Revenue Code of 1986, as in effect on the date of issuance
of the Bonds or (except as otherwise referenced herein) as it may be amended to apply to
obligations issued on the date of issuance of the Bonds, together with applicable proposed,
temporary and final regulations promulgated, and applicable official public guidance
published, under the Tax Code (including the Tax Regulations).
"Tax Regulations" means temporary and permanent regulations promulgated under
Section 103 and all related provisions of the Tax Code.
"Term Bonds" means the Bonds maturing on September 1, ,and September 1,
"Trustee" means The Bank of New York Mellon Trust Company, N.A., as trustee
hereunder, or any successor thereto appointed as trustee hereunder in accordance with the
provisions of Article VI.
"Town Center Redevelopment Plan" means the Redevelopment Plan for the Town Center
Redevelopment Project, approved by Ordinance No. 701 enacted by the City Council of the City
on November 22, 1976, amended by Ordinance No. 855 enacted by the City Council of the City
on September 8, 1981, Ordinance No. 1021 enacted by the City Council of the City on March 20,
1989, Ordinance No. 1141, enacted by the City Council of the City on November 21, 1994,
Ordinance No. 1291, enacted by the City Council of the City on November February 22, 2005,
Ordinance No. 1306, enacted by the City Council of the City on October 17, 2005, and Ordinance
No. 1348, enacted by the City Council of the City on February 5, 2008, together with any
amendments thereof at any time duly authorized pursuant to the Law.
"Town Center Redevelopment Project" means the Town Center Redevelopment Project, as
described in the Town Center Redevelopment Plan.
"Written Request of the Agency" or "Written Certificate of the Agency" means a request or
certificate, in writing signed by the Chairman, the Executive Director and the Treasurer or the
Secretary of the Agency or by any other officer of the Agency duly authorized by the Agency
for that purpose.
Section 1.03. Rules of Construction. All references herein to "Articles," "Sections" and
other subdivisions are to the corresponding Articles, Sections or subdivisions of this Indenture,
and the words "herein," "hereof," "hereunder" and other words of similar import refer to this
Indenture as a whole and not to any particular Article, Section or subdivision hereof.
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ARTICLE II
AUTHORIZATION AND TERMS
Section 2.01. Authorization of Bonds. Bonds in the aggregate principal amount of
dollars ($ )are hereby authorized to be issued by the Agency
under and subject to the terms of this Indenture and the Law. This Indenture constitutes a
continuing agreement with the Owners of all of the Bonds issued or to be issued hereunder and
then Outstanding to secure the full and final payment of principal and redemption premiums
(if any) and the interest on all Bonds which may from time to time be executed and delivered
hereunder, subject to the covenants, agreements, provisions and conditions herein contained.
The Bonds shall be designated the "Tustin Community Redevelopment Agency Tax Allocation
Housing Bonds, Series 2010."
Section 2.02. Terms of Bonds.
(a) The Bonds shall be issued in fully registered form without coupons in the
denomination of $5,000 or any integral multiple thereof. The Bonds shall mature on the dates
and shall bear interest (calculated on the basis of a 360-day year of twelve 30-day months) at the
rates per annum as follows:
Maturity Date Principal Interest Rate
(September 1~ Amount Per Annum
(b) Interest on the Bonds (including the final interest payment upon maturity or earlier
redemption) shall be payable on each Interest Payment Date to the person whose name appears
on the Registration Books as the Owner thereof as of the Record Date immediately preceding
each such Interest Payment Date, such interest to be paid by check of the Trustee mailed by first
class mail, postage prepaid, on the Interest Payment Date, to such Owner at the address of such
Owner as it appears on the Registration Books as of such Record Date; provided however, that
payment of interest may be by wire transfer to an account in the United States of America to
any registered owner of Bonds in the aggregate principal amount of $1,000,000 or more who
shall furnish written wire instructions to the Trustee on or before the applicable Record Date.
Such instructions shall remain in effect until rescinded in writing by the Owner. Principal of
and redemption premium (if any) on any Bond shall be paid upon presentation and surrender
thereof, at maturity or redemption, at the Principal Corporate Trust Office. Both the principal of
and interest and premium (if any) on the Bonds shall be payable in lawful money of the United
States of America.
(c) Each Bond shall be dated as of its date of delivery and shall bear interest from the
Interest Payment Date next preceding the date of authentication thereof, unless (i) it is
authenticated after a Record Date and on or before the following Interest Payment Date, in
which event it shall bear interest from such Interest Payment Date; or (ii) a Bond is
authenticated on or before August 15, 2010, in which event it shall bear interest from its date of
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delivery; provided, however, that if, as of the date of authentication of any Bond, interest thereon
is in default, such Bond shall bear interest from the Interest Payment Date to which interest has
previously been paid or made available for payment thereon.
Section 2.03. Redemption of Bonds.
(a) Optional Redemption. The Bonds maturing on or before September 1, ,are not
subject to optional redemption prior to maturity. The Bonds maturing on or after September 1,
,are subject to redemption, at the option of the Agency on any date on or after September 1,
as a whole or in part, by such maturities as shall be determined by the Agency (and, in
lieu of such determination, pro rata among maturities), and by lot within a maturity, from any
available source of funds, at a redemption price equal to the principal amount thereof, together
with accrued interest to the date fixed for redemption, without premium.
The Agency shall be required to give the Trustee written notice of its intention to redeem
Bonds under this subsection (a) with a designation of the maturities to be redeemed at least
forty-five (45), but not more than seventy-five (75) days, or such shorter period of time as
agreed to by the Trustee, prior to the date fixed for such redemption.
(b) Sinking Account Redemption. The Term Bonds maturing on September 1, (the
Term Bonds") are subject to mandatory redemption, in part by lot, from Sinking Account
payments set forth in the following schedule on September 1, ,and on each September 1
thereafter to and including September 1, at a redemption price equal to the principal
amount thereof to be redeemed (without premium), together with interest accrued thereon to
the date fixed for redemption; provided, however, that if some but not all of the Term Bonds
have been redeemed pursuant to subsection (a) above, the total amount of Sinking Account
payments to be made subsequent to such redemption shall be reduced in an amount equal to
the principal amount of the Term Bonds so redeemed by reducing each such future
Sinking Account payment on a pro rata basis (as nearly as practicable) in integral multiples of
$5,000, as shall be designated pursuant to written notice filed by the Agency with the Trustee.
Redemption Date Principal Redemption Date Principal
(September 1~ Amount (September 1~ Amount
t Maturity.
In lieu of such redemption, the Trustee may apply amounts in the Sinking Account to
the purchase of Term Bonds at public or private sale, as and when and at such prices
(including brokerage and other charges, but excluding accrued interest, which is payable from
the Interest Account) as may be directed by the Agency, except that the purchase price
(exclusive of accrued interest) may not exceed the redemption price then applicable to the
Term Bonds, as set forth in a Written Request of the Agency.
The Term Bonds maturing on September 1, (the "Term Bonds") are subject to
mandatory redemption, in part by lot, from Sinking Account payments set forth in the
following schedule on September 1, ,and on each September 1 thereafter to and including
September 1, , at a redemption price equal to the principal amount thereof to be redeemed
(without premium), together with interest accrued thereon to the date fixed for redemption;
provided, however, that if some but not all of the Term Bonds have been redeemed pursuant
to subsection (a) above, the total amount of Sinking Account payments to be made subsequent
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to such redemption shall be reduced in an amount equal to the principal amount of the
Term Bonds so redeemed by reducing each such future Sinking Account payment on a pro rata
basis (as nearly as practicable) in integral multiples of $5,000, as shall be designated pursuant to
written notice filed by the Agency with the Trustee.
Redemption Date Principal Redemption Date Principal
(September 1) Amount (September 1) Amount
t Maturity
In lieu of such redemption, the Trustee may apply amounts in the Sinking Account to
the purchase of Term Bonds at public or private sale, as and when and at such prices
(including brokerage and other charges, but excluding accrued interest, which is payable from
the Interest Account) as may be directed by the Agency, except that the purchase price
(exclusive of accrued interest) may not exceed the redemption price then applicable to the
Term Bonds, as set forth in a Written Request of the Agency.
(c) Notice of Redemption. The Trustee on behalf and at the expense of the Agency shall
mail (by first class mail, postage prepaid) notice of any redemption at least thirty (30) but not
more than sixty (60) days prior to the redemption date, to (i) the Owners of any Bonds
designated for redemption at their respective addresses appearing on the Registration Books,
and (ii) the Securities Depositories and to one or more Information Services designated in a
Written Request of the Agency filed with the Trustee; but such mailing shall not be a condition
precedent to such redemption and neither failure to receive any such notice nor any defect
therein shall affect the validity of the proceedings for the redemption of such Bonds or the
cessation of the accrual of interest thereon. Such notice shall state the redemption date and the
redemption price if an optional redemption, shall designate the CUSIP number of the Bonds to
be redeemed, shall state the individual number of each Bond to be redeemed or shall state that
all Bonds between two stated numbers (both inclusive) or all of the Bonds Outstanding are to be
redeemed, and shall require that such Bonds be then surrendered at the Principal Corporate
Trust Office for redemption at the redemption price, giving notice also that further interest on
such Bonds will not accrue from and after the redemption date.
Notwithstanding the foregoing, in the case of any optional redemption of the Bonds
under paragraph (a) above, the notice of redemption shall state that the redemption is
conditioned upon receipt by the Trustee of sufficient moneys to redeem the Bonds on the
anticipated redemption date, and that the optional redemption shall not occur if, by no later
than the scheduled redemption date, sufficient moneys to redeem the Bonds have not been
deposited with the Trustee. In the event that the Trustee does not receive sufficient funds by the
scheduled optional redemption date to so redeem the Bonds to be optionally redeemed, such
event shall not constitute an Event of Default; the Trustee shall send written notice to the
Owners, to the Securities Depositories and to one or more of the Information Services to the
effect that the redemption did not occur as anticipated, and the Bonds for which notice of
optional redemption was given shall remain Outstanding for all purposes of this Indenture.
Upon the payment of the redemption price of Bonds being redeemed, each check or
other transfer of funds issued for such purpose shall, to the extent practicable, bear the CUSIP
number identifying, by issue and maturity, the Bonds being redeemed with the proceeds of
such check or other transfer.
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(d) Partial Redemption of Bonds. In the event only a portion of any Bond is called for
redemption, then upon surrender of such Bond the Agency shall execute and the Trustee shall
authenticate and deliver to the Owner thereof, at the expense of the Agency, a new Bond or
Bonds of the same interest rate and maturity, of authorized denominations, in aggregate
principal amount equal to the unredeemed portion of the Bond to be redeemed.
(e) Effect of Redemption. From and after the date fixed for redemption, if funds available
for the payment of the redemption price of and interest on the Bonds so called for redemption
shall have been duly deposited with the Trustee, such Bonds so called shall cease to be entitled
to any benefit under this Indenture other than the right to receive payment of the redemption
price and accrued interest to the redemption date, and no interest shall accrue thereon from and
after the redemption date specified in such notice.
(f) Manner of Redemption. Whenever any Bonds or portions thereof are to be selected for
redemption by lot, the Trustee shall make such selection, in such manner as the Trustee shall
deem appropriate, and shall notify the Agency thereof. In the event of redemption by lot of
Bonds, the Trustee shall assign to each Bond then Outstanding a distinctive number for each
$5,000 of the principal amount of each such Bond. The Bonds to be redeemed shall be the Bonds
to which were assigned numbers so selected, but only so much of the principal amount of each
such Bond of a denomination of more than $5,000 shall be redeemed as shall equal $5,000 for
each number assigned to it and so selected. All Bonds redeemed or purchased pursuant to this
Section 2.03 shall be canceled.
(g) Selection of Bonds for Redemption. Whenever provision (other than pursuant to Section
2.03(b)) is made in this Indenture for the redemption of Bonds and less than all Bonds then
currently outstanding are called for redemption, the Trustee will select Bonds for redemption
from Bonds then currently Outstanding and not previously called for redemption, at the written
direction of the Agency in such order of maturity as shall be designated by the Agency, and in
the absence of such direction, pro rata among maturities and by lot within a maturity. The
Trustee will promptly notify the Agency in writing of the Bonds so selected for redemption.
Section 2.04. Form of Bonds. The Bonds, the form of Trustee's Certificate of
Authentication, and the form of Assignment to appear thereon, shall be substantially in the
form set forth in Exhibit A, which is attached hereto and by this reference incorporated herein,
with necessary or appropriate variations, omissions and insertions, as permitted or required by
this Indenture.
Section 2.05. Execution of Bonds. The Bonds shall be executed on behalf of the Agency
by the signature of its Chairman and the signature of its Secretary who are in office on the date
of execution and delivery of this Indenture or at any time thereafter. Either or both of such
signatures may be made manually or may be affixed by facsimile thereof. If any officer whose
signature appears on any Bond ceases to be such officer before delivery of the Bonds to the
purchaser, such signature shall nevertheless be as effective as if the officer had remained in
office until the delivery of the Bonds to the purchaser. Any Bond may be signed and attested on
behalf of the Agency by such persons as at the actual date of the execution of such Bond shall be
the proper officers of the Agency although on the date of such Bond any such person shall not
have been such officer of the Agency.
Only such of the Bonds as shall bear thereon a Certificate of Authentication in the form
hereinafter set forth, manually executed and dated by the Trustee, shall be valid or obligatory
for any purpose or entitled to the benefits of this Indenture, and such Certificate shall be
conclusive evidence that such Bonds have been duly authenticated and delivered hereunder
and are entitled to the benefits of this Indenture. In the event temporary Bonds are issued
pursuant to Section 2.09 hereof, the temporary Bonds may bear thereon a Certificate of
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Authentication executed and dated by the Trustee, may be initially registered by the Trustee,
and, until so exchanged as provided under Section 2.09 hereof, the temporary Bonds shall be
entitled to the same benefits pursuant to this Indenture as definitive Bonds authenticated and
delivered hereunder.
Section 2.06. Transfer of Bonds. Any Bond may, in accordance with its terms, be
transferred, upon the Registration Books, by the person in whose name it is registered, in
person or by a duly authorized attorney of such person, upon surrender of such Bond to the
Trustee at its Principal Corporate Trust Office for cancellation, accompanied by delivery of a
written instrument of transfer in a form acceptable to the Trustee, duly executed. Whenever any
Bond or Bonds shall be surrendered for registration of transfer, the Agency shall execute and
the Trustee shall deliver a new Bond or Bonds, of like series, interest rate, maturity and
principal amount of authorized denominations. The Trustee shall collect from the Owner any
tax or other governmental charge on the transfer of any Bonds pursuant to this Section 2.06. The
cost of printing Bonds and any services rendered or expenses incurred by the Trustee in
connection with any transfer shall be paid by the Agency.
The Trustee may refuse to transfer, under the provisions of this Section 2.06, either (a)
any Bonds during the period fifteen (15) days prior to the date established by the Trustee for the
selection of Bonds for redemption, or (b) any Bonds selected by the Trustee for redemption.
Section 2.07. Exchange of Bonds. Bonds may be exchanged at the Principal Corporate
Trust Office for a like aggregate principal amount of Bonds of other authorized denominations
of the same series, interest rate and maturity. The Trustee shall collect any tax or other
governmental charge on the exchange of any Bonds pursuant to this Section 2.07. The cost of
printing Bonds and any services rendered or expenses incurred by the Trustee in connection
with any exchange shall be paid by the Agency.
The Trustee may refuse to exchange, under the provisions of this Section 2.07, either (a)
any Bonds during the fifteen (15) days prior to the date established by the Trustee for the
selection of Bonds for redemption or (b) any Bonds selected by the Trustee for redemption.
Section 2.08. Registration of Bonds. The Trustee will keep or cause to be kept, at its
Principal Corporate Trust Office, sufficient records for the registration and registration of
transfer of the Bonds, which shall at all times during normal business hours be open to
inspection by the Agency, upon reasonable prior notice to the Trustee; and, upon presentation
for such purpose, the Trustee shall, under such reasonable regulations as it may prescribe,
register or transfer or cause to be registered or transferred, on the Registration Books Bonds as
hereinbefore provided.
Section 2.09. Temporary Bonds. The Bonds may be initially issued in temporary form
exchangeable for definitive Bonds when ready for delivery. The temporary Bonds may be
printed, lithographed or typewritten, shall be of such denominations as may be determined by
the Agency, and may contain such reference to any of the provisions of this Indenture as may be
appropriate. Every temporary Bond shall be executed by the Agency upon the same conditions
and in substantially the same manner as the definitive Bonds. If the Agency issues temporary
Bonds, it will execute and furnish definitive Bonds without delay, and thereupon the temporary
Bonds shall be surrendered, for cancellation, in exchange therefor at the Principal Corporate
Trust Office, and the Trustee shall deliver in exchange for such temporary Bonds an equal
aggregate principal amount of definitive Bonds of authorized denominations, interest rates and
like maturities. Until so exchanged, the temporary Bonds shall be entitled to the same benefits
pursuant to this Indenture as definitive Bonds authenticated and delivered hereunder.
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Section 2.10. Bonds Mutilated Lost, Destroyed or Stolen. If any Bond shall become
mutilated, the Agency, at the expense of the Owner of such Bond, shall execute, and the Trustee
shall thereupon deliver, a new Bond of like tenor and amount in exchange and substitution for
the Bond so mutilated, but only upon surrender to the Trustee of the Bond so mutilated. Every
mutilated Bond so surrendered to the Trustee shall be canceled by it. If any Bond shall be lost,
destroyed or stolen, evidence of such loss, destruction or theft may be submitted to the Agency
and the Trustee and, if such evidence be satisfactory to both and indemnity satisfactory to them
shall be given, the Agency, at the expense of the Owner, shall execute, and the Trustee shall
thereupon deliver, a new Bond of like tenor and amount in lieu of and in substitution for the
Bond so lost, destroyed or stolen (or if any such Bond has matured or has been called for
redemption, instead of issuing a substitute Bond, the Trustee may pay the same without
surrender thereof upon receipt of indemnity satisfactory to the Trustee and the Agency). The
Agency may require payment by the Owner of a sum not exceeding the actual cost of preparing
each new Bond issued under this Section 2.10 and of the expenses which may be incurred by the
Agency and the Trustee in the premises. Any Bond issued under the provisions of this Section
2.10 in lieu of any Bond alleged to be lost, destroyed or stolen shall constitute an original
additional contractual obligation on the part of the Agency whether or not the Bond so alleged
to be lost, destroyed or stolen be at any time enforceable by anyone, and shall be equally and
proportionately entitled to the benefits of this Indenture with all other Bonds issued pursuant to
this Indenture.
Section 2.11. CUSIP Numbers. The Trustee and the Agency shall not be liable for any
defect or inaccuracy in the CUSIP number that appears on any Bond, check, advice of.payment
or redemption notice and any such document may contain a statement to the effect that CUSIP
numbers have been assigned by an independent service for convenience of reference and that
neither the Agency nor the Trustee shall be liable for any inaccuracy in such numbers.
Section 2.12. Use of Depository. Notwithstanding any provision of this Indenture to the
contrary:
(a) At the request of the Original Purchaser, the Bonds shall be initially issued registered
in the name of "Cede & Co.," as nominee of The Depository Trust Company, the depository
designated by the Original Purchaser, and shall be evidenced by one Bond for each maturity, as
set forth in Section 2.02. Registered ownership of such Bonds, or any portions thereof, may not
thereafter be transferred except:
(i) to any successor of The Depository Trust Company or its nominee, or of any
substitute depository designated pursuant to paragraph (ii) of this subsection (a)
("substitute depository"); provided that any successor of The Depository Trust
Company or substitute depository shall be qualified under any applicable laws to
provide the service proposed to be provided by it;
(ii) to any substitute depository designated in a Written Request of the Agency,
upon (A) the resignation of The Depository Trust Company or its successor (or any
substitute depository or its successor) from its functions as depository or (B) a
determination by the Agency that The Depository Trust Company or its successor is no
longer able to carry out its functions as depository; provided that any such substitute
depository shall be qualified under any applicable laws to provide the services proposed
to be provided by it; or
(iii) to any person as provided below, upon (A) the resignation of The Depository
Trust Company or its successor (or any substitute depository or its successor) from its
functions as depository or (B) a determination by the Agency that The Depository Trust
Company or its successor is no longer able to carry out its functions as depository;
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provided that no substitute depository which is not objected to by the Agency and the
Trustee can be obtained.
(b) In the case of any transfer pursuant to paragraph (i) or paragraph (ii) of subsection
(a) of this Section 2.12, upon receipt of all Outstanding Bonds by the Trustee, together with a
Written Request of the Agency to the Trustee, a single new Bond shall be executed and
delivered, registered in the name of such successor or such substitute depository or their
nominees, as the case may be, all as specified in such Written Request of the Agency. In the case
of any transfer pursuant to paragraph (iii) of subsection (a) of this Section 2.12, upon receipt of
all Outstanding Bonds by the Trustee together with a Written Request of the Agency, new
Bonds shall be executed and delivered in such denominations and registered in the names of
such persons as are requested in a Written Request of the Agency provided the Trustee shall not
be required to deliver such new Bonds within a period less than sixty (60) days from the date of
receipt of such a Written Request of the Agency.
(c) In the case of partial redemption or an advance refunding of any Bonds evidencing
all of the principal maturing in a particular year, The Depository Trust Company shall deliver
the Bonds to the Trustee for cancellation and re-registration to reflect the amounts of such
reduction in principal.
(d) The Agency and the Trustee shall be entitled to treat the person in whose name any
Bond is registered as the absolute Owner thereof for all purposes of this Indenture and any
applicable laws, notwithstanding any notice to the contrary received by the Trustee or the
Agency; and the Agency and the Trustee shall have no responsibility for transmitting payments
to, communication with, notifying or otherwise dealing with any beneficial owners of the
Bonds. Neither the Agency nor the Trustee will have any responsibility or obligations, legal or
otherwise, to the beneficial owners or to any other party including The Depository Trust
Company or its successor (or substitute depository or its successor), except for the registered
owner of any Bond.
(e) So long as all outstanding Bonds are registered in the name of Cede & Co. or its
registered assign, the Agency and the Trustee shall reasonably cooperate with Cede & Co., as
sole registered Owner, or its registered assign in effecting payment of the principal and interest
due with respect to the Bonds by arranging for payment in such manner that funds for such
payments are properly identified and are made immediately available on the date they are due.
(f) So long as all Outstanding Bonds are registered in the name of Cede & Co. or its
registered assign (hereinafter, for purposes of this paragraph (f), the "Owner"):
(i) All notices and payments addressed to the Owners shall contain the Bonds'
CUSIP number.
(ii) Notices to the Owner shall be forwarded in the manner set forth in the form
of Blanket Agency Letter of Representations executed by the Agency and received and
accepted by The Depository Trust Company.
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ARTICLE III
DEPOSIT AND APPLICATION OF PROCEEDS OF BONDS;
PARITY DEBT
Section 3.01. Issuance of Bonds. Upon the execution and delivery of this Indenture, the
Agency shall execute and deliver to the Trustee Bonds in the aggregate principal amount of
dollars ($ )and the Trustee shall authenticate and deliver the
Bonds upon the Written Request of the Agency.
Section 3.02. Application of Proceeds of Sale. Upon the receipt of payment for the Bonds
on the Closing Date of $ ,being the principal amount of the Bonds of $ ,
less an underwriter's discount of $ ,and less an original issue discount of $ ,
the Trustee shall apply the proceeds of sale thereof as follows:
(a) The Trustee shall deposit the amount of $ in the Costs of Issuance Fund;
(b) The Trustee shall deposit the amount of $ in the Reserve Account; and
(c) The Trustee shall deposit the amount of $ for deposit in the Housing
Project Fund.
The Trustee may establish, as it deems necessary, a temporary fund or account on its
records to facilitate the deposits and transfers set forth herein.
Section 3.03. Housing Project Fund. There is hereby established a separate fund to be
known as the "Housing Project Fund," which shall be held by the Trustee. Amounts on deposit
in the Housing Project Fund shall be used solely in the manner provided by the Law and the
Redevelopment Plans to provide financing for low and moderate income housing purposes
within the geographic boundaries of the City. The moneys in the Housing Project Fund shall be
used and withdrawn by the Trustee from time to time upon submission of a Written Request of
the Agency stating the person to whom payment is to be made, the amount to be paid, the
purpose for which the obligation was incurred and that such payment is a proper charge
against said fund. Each such Written Request of the Agency shall be sufficient evidence to the
Trustee of the facts stated therein and the Trustee shall have no duty to confirm the accuracy of
such facts. At •such time as the Trustee receives a Written Request of the Agency to the effect
that amounts, if any, then on deposit in the Housing Project Fund are no longer needed for the
purposes of such fund, any remaining amounts in the Housing Project Fund shall be transferred
by the Trustee to the Interest Account and shall be used for the purposes of the Interest
Account.
The Agency shall maintain records as to the disposition of all amounts transferred to it
by the Trustee pursuant to this Section 3.03, in sufficient detail as necessary to comply with the
requirements of the Law and the Tax Code.
Section 3.04. Costs of Issuance Fund. There is hereby established a separate fund to be
known as the "Costs of Issuance Fund," which shall be held by the Trustee in trust. The moneys
in the Costs of Issuance Fund shall be used and withdrawn by the Trustee from time to time to
pay the Costs of Issuance upon submission of a Written Request of the Agency stating the
person to whom payment is to be made, the amount to be paid, the purpose for which the
obligation was incurred and that such payment is a proper charge against said fund. Each such
Written Request of the Agency shall be sufficient evidence to the Trustee of the facts stated
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therein and the Trustee shall have no duty to confirm the accuracy of such facts. On the date six
months following the Closing Date, or upon the earlier Written Request of the Agency stating
that all known Costs of Issuance have been paid, all amounts, if any, remaining in the Costs of
Issuance Fund shall be withdrawn therefrom by the Trustee and transferred to the Housing
Project Fund and the Costs of Issuance Fund shall be closed.
Section 3.05. Issuance of Parity Debt. In addition to the Bonds, the Agency may issue or
incur Parity Debt to finance low and moderate income housing projects within the geographic
boundaries of the City in such principal amount as shall be determined by the Agency. The
Agency may issue and deliver any such Parity Debt subject only to the following specific
conditions:
(a) The Agency shall be in compliance with all covenants set forth in this Indenture and
all existing Parity Debt Instruments.
(b) Subject to paragraph (e) below, Housing Tax Revenues for the then current Fiscal
Year, based on the most recent assessed valuation of property in the Redevelopment Projects as
evidenced in written documentation from an appropriate official of the County, plus, at the
option of the Agency, the Additional Revenues, shall be at least equal to one hundred twenty-
five percent (125%) of Maximum Annual Debt Service which will be Outstanding following the
issuance of such Parity Debt.
(c) The aggregate amount of the principal and sinking fund installments of and interest
on all Outstanding Bonds, Parity Debt and Subordinate Debt coming due and payable
following the issuance of such Parity Debt shall not exceed the maximum amount of tax
increment revenues permitted under the Plan Limitations;
(d) The aggregate amount of the all Bonds, Parity Debt and Subordinate Debt to be
outstanding following the issuance of such Parity Debt shall not exceed the maximum amount
of obligations permitted under the Plan Limitations to be outstanding at any time;
(e) In computing the Maximum Annual Debt Service for purposes of paragraph (b)
above, if interest on any Bonds or Parity Debt is payable or to be payable at a variable rate or is
otherwise incapable of determination, (i) if the Agency has entered into a variable to fixed swap
arrangement with respect to such Bonds or Parity Debt, the term of which extends for the term
of such Bonds or Parity Debt and payments by the counterparty on the swap arrangement are
guaranteed or insured by an entity whose unsecured debt obligations are rated in the highest
rating category by Moody's or S&P, the maximum annual debt service due by the Agency
under the swap arrangement shall be used rather than Maximum Annual Debt Service on such
Bonds or Parity Debt, or (ii) the Bonds or Parity Debt shall be assumed to bear interest at a fixed
rate equal to the average of the daily interest rate on such Bonds or Parity Debt during the
three-year period preceding the first day of the month in which the determination is made (and,
if such Bonds or Parity Debt have not been outstanding for the entire three-year period, for the
portion of such time period such Bonds or Parity Debt were not outstanding, the interest rate on
a debt instrument or similar credit quality and maturity as determined by an Independent
Financial Consultant).
(f) The Parity Debt shall be payable as to principal on September 1 in each year in which
principal becomes due, and shall be payable as to interest semiannually on March 1 and
September 1, except that the first installment of interest may be payable on either March 1 or
September 1 and shall be for a period not longer than twelve (12) months.
(g) The Trustee shall act as trustee for such Parity Debt.
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(h) The Parity Debt Instrument providing for the issuance of such Parity Debt may
provide for the establishment of separate funds and accounts or may make reference to and
include any fund or account established under this Indenture;
(i) The Parity Debt Instrument providing for the issuance of such Parity Debt shall
provide for the deposit of moneys in the Reserve Account if required to increase the balance of
the Reserve Account to at least equal to the Reserve Requirement upon the issuance of such
Parity Debt.
(j) The Agency shall deliver to the Trustee a Written Certificate of the Agency certifying
that the conditions precedent to the issuance of such Parity Debt set forth in subsections (a), (b),
(c), (d), (e), (f), (g), (h) and (i) of this Section 3.05 have been satisfied.
Notwithstanding the foregoing, the Agency may issue or incur Refunding Debt in such
principal amount as shall be determined by the Agency so long as the conditions set forth in
subsections (a), (c), (d), (f), (g) and (i) of this Section 3.05 are met, and the Agency delivers to the
Trustee a Certificate of the Agency certifying that such conditions precedent to the issuance of
such Refunding Debt set forth in subsections (a), (c), (d), (f), (g) and (i) of this Section 3.05 have
been met and such Refunding Debt is otherwise in accordance with the definition of Refunding
Debt.
Section 3.06. Issuance of Subordinate Debt. From time to time the Agency may issue or
incur Subordinate Debt in such principal amount as shall be determined by the Agency;
provided that (a) the Agency shall be in compliance with all of its covenants set forth in this
Indenture and any Parity Debt Instruments, (b) the issuance of such Subordinate Debt (after
taking into account the Bonds and all other obligations of the Agency payable from Housing
Tax Revenues, as well as all other bonded indebtedness of the Agency) shall not cause the
Agency to exceed any applicable Plan Limitations, and (c) the Agency will at all times that the
Bonds and any Parity Debt are Outstanding have sufficient capacity to receive Housing Tax
Revenues in an amount at least equal to the remaining Debt Service on the Bonds and any
Parity Debt as well as all fixed debt service or other obligations of the Agency (including such
Subordinate Debt) payable from Housing Tax Revenues.
Section 3.07. Validity of Bonds. The validity of the authorization and issuance of the
Bonds shall not be dependent upon the completion of the Redevelopment Projects or upon the
performance by any person of his obligation with respect to the Redevelopment Projects.
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ARTICLE IV
SECURITY OF BONDS; FLOW OF FUNDS
Section 4.01. Security of Bonds; Equal Security. Except as provided in Section 6.06, the
Bonds shall be equally secured by a pledge of, security interest in and a first and exclusive lien
on all of the Housing Tax Revenues, and a first and exclusive pledge of, security interest in and
lien upon all of the moneys in the Special Fund and the Debt Service Fund, without preference
or priority for series, issue, number, dated date, sale date, date of execution or date of delivery.
Except for the Housing Tax Revenues and such other moneys, no funds or properties of the
Agency shall be pledged to, or otherwise liable for, the payment of principal of or interest or
redemption premium (if any) on the Bonds.
In consideration of the acceptance of the Bonds by those who shall hold the same from
time to time, this Indenture shall be deemed to be and shall constitute a contract between the
Agency and the Owners from time to time of the Bonds, and the covenants and agreements
herein set forth to be performed on behalf of the Agency shall be for the equal and
proportionate benefit, security and protection of all Owners of the Bonds without preference,
priority or distinction as to security or otherwise of any of the Bonds over any of the others by
reason of the number or date thereof or the time of sale, execution and delivery thereof, or
otherwise for any cause whatsoever, except as expressly provided therein or herein.
Section 4.02. Special Fund; Deposit of Housing Tax Revenues. There is hereby
established a special fund to be known as the "Special Fund," which shall be held by the
Agency. The Agency shall deposit all of the Housing Tax Revenues received in any Bond Year
to the Special Fund promptly upon receipt thereof by the Agency, until such time during such
Bond Year as the amounts on deposit in the Special Fund equal the aggregate amounts required
to be transferred to the Trustee for deposit into the Interest Account, the Principal Account, the
Sinking Account, the Reserve Account and the Redemption Account in such Bond Year
pursuant to Section 4.03, except as maybe required by a Parity Debt Instrument.
All Housing Tax Revenues received by the Agency during any Bond Year in excess of
the amount required to be deposited in the Special Fund during such Bond Year pursuant to the
preceding paragraph of this Section 4.02, including delinquent amounts if any, shall be released
from the pledge and lien hereunder for the security of the Bonds and may be applied by the
Agency for any lawful purposes of the Agency, including but not limited to the payment of
Subordinate Debt, or the payment of any amounts due and owing to the United States of
America pursuant to Section 5.11.
Prior to the payment in full of the principal of and interest and redemption premium (if
any) on the Bonds and the payment in full of all other amounts payable hereunder and under
any Parity Debt Instrument, the Agency shall not have any beneficial right or interest in the
moneys on deposit in the Special Fund, except as may be provided in this Indenture and in any
Supplemental Indenture.
Amounts in the Special Fund shall be invested by the Agency only in Permitted
Investments.
Section 4.03. Deposit of Amounts by Trustee. There is hereby established a trust fund to
be known as the Debt Service Fund, which shall be held by the Trustee hereunder in trust.
Moneys in the Special Fund shall be transferred by the Agency to the Trustee in the following
amounts, at the following times, and deposited by the Trustee in the following respective
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special accounts, which are hereby established in the Debt Service Fund, and in the following
order of priority:
(a) Interest Account. On or before the fifth Business Day preceding each Interest Payment
Date, the Agency shall withdraw from the Special Fund and transfer to the Trustee, for deposit
in the Interest Account an amount which when added to the amount contained in the Interest
Account on that date, will be equal to the aggregate amount of the interest becoming due and
payable on the Outstanding Bonds on such Interest Payment Date. No such transfer and deposit
need be made to the Interest Account if the amount contained therein is at least equal to the
interest to become due on the next succeeding Interest Payment Date upon all of the
Outstanding Bonds. All moneys in the Interest Account shall be used and withdrawn by the
Trustee solely for the purpose of paying the interest on the Bonds as it shall become due and
payable (including interest payable on any Bonds redeemed prior to maturity pursuant to this
Indenture).
(b) Principal Account; Sinking Account. On or before the fifth Business Day preceding each
principal payment date in each year, or date on which any Outstanding Term Bonds become
subject to mandatory Sinking Account redemption, beginning September 1, 2010, the Agency
shall withdraw from the Special Fund and transfer to the Trustee for deposit (i) in the Principal
Account an amount which, when added to the amount then contained in the Principal Account,
will be equal to the principal becoming due and payable on the Outstanding Bonds on the next
September 1, and (ii) in the Sinking Account an amount which, when added to the amount then
contained in the Sinking Account, will be equal to the aggregate principal amount of the Term
Bonds subject to mandatory Sinking Account redemption on such date. In the event that the
amount then in the Special Fund, following the transfer described in the preceding
subparagraph (a), is not sufficient to fully fund the amounts described in the preceding clauses
(i) and (ii), the Trustee shall deposit the available funds in the Special Fund pro rata to the
Principal Account and the Sinking Account, based on the aggregate principal and Sinking
Account payments then due on the Bonds. No such transfer and deposit need be made to the
Principal Account if the amount contained therein is at least equal to the principal or sinking
fund installment to become due on the next September 1 on all of the Outstanding Bonds. All
moneys in the Principal Account shall be used and withdrawn by the Trustee solely for the
purpose of paying the principal of the Bonds as it shall become due and payable.
(c) Reserve Account. In the event that the Trustee has actual knowledge that the amount
on deposit in the Reserve Account at any time is less than the Reserve Requirement, the Trustee
shall promptly notify the Agency of such fact. Promptly upon receipt of any such notice, the
Agency shall transfer to the Trustee, Housing Tax Revenues sufficient to maintain the Reserve
Requirement on deposit in the Reserve Account. If there shall then not be sufficient Housing
Tax Revenues to transfer an amount sufficient to maintain the Reserve Requirement on deposit
in the Reserve Account, the Agency shall be obligated to continue making transfers as Housing
Tax Revenues become available in the Special Fund until there is an amount sufficient to
maintain the Reserve Requirement on deposit in the Reserve Account. No such transfer and
deposit need be made to the Reserve Account so long as there shall be on deposit therein a sum
at least equal to the Reserve Requirement. Amounts in the Reserve Account shall be used and
withdrawn by the Trustee solely for the purpose of making transfers to (i) the Interest Account,
and (ii) the Principal Account and the Sinking Account in such order of priority (pro rata to the
Principal Account and the Sinking Account, based upon the principal and sinking account
payments then due, if the amount then in the Reserve Account, after satisfying any deficiency in
the Interest Account, is not sufficient to fully satisfy any then deficiencies in the Principal
Account and the Sinking Account), in the event of any deficiency at any time in any of such
accounts or for the retirement of all the Bonds then Outstanding, except that so long as the
Agency is not in default hereunder, any amount in the Reserve Account in excess of the Reserve
Requirement (as determined by the Trustee based upon a valuation of investments held in such
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account performed in accordance with Section 6.07) shall be withdrawn from the Reserve
Account semiannually on or before the Business Day preceding each March 1 and September 1
by the Trustee and deposited in the Interest Account. If a valuation discloses that amounts in
the Reserve Account are less than the Reserve Requirement, which valuation must occur not
less than semi-annually, the Agency shall immediately cause the cure thereof from any available
moneys. All amounts in the Reserve Account on the Business Day preceding the final Interest
Payment Date shall be withdrawn from the Reserve Account and shall be transferred either (i)
to the Interest Account and the Principal Account, in such order, to the extent required to make
the deposits then required to be made pursuant to this Section 4.03 or, (ii) if the Agency shall
have caused to be transferred to the Trustee an amount sufficient to make the deposits required
by this Section 4.03, then, at the Written Request of the Agency, to the Agency for deposit by the
Agency into the Special Fund. The Trustee may conclusively presume that there has been no
change in the Reserve Requirement unless notified in writing by the Agency.
The Reserve Account may be maintained in the form of one or more separate sub-
accounts which are established for the purpose of holding the proceeds of separate issues of the
Bonds in conformity with applicable provisions of the Tax Code.
(d) Redemption Account. On or before the fifth Business Day preceding any date on which
Bonds are to be redeemed pursuant to Section 2.03(a), the Agency shall withdraw from the
Special Fund and transfer to the Trustee for deposit in the Redemption Account an amount
required to pay the principal of and premium, if any, on the Bonds to be redeemed on such date
pursuant to Section 2.03(a), taking into account any funds then on deposit in the Redemption
Account. The Trustee shall also deposit in the Redemption Account any other amounts received
by it from the Agency designated by the Agency in writing to be deposited in the Redemption
Account. All moneys in the Redemption Account shall be used and withdrawn by the Trustee
solely for the purpose of paying the principal of and premium, if any, on the Bonds to be
redeemed pursuant to Section 2.03(a) on the respective dates set for such redemption.
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ARTICLE V
OTHER COVENANTS OF THE AGENCY
Section 5.01. Punctual Payment. The Agency shall punctually pay or cause to be paid the
principal and interest to become due in respect of all the Bonds together with the premium
thereon, if any, in strict conformity with the terms of the Bonds and of this Indenture. The
Agency shall faithfully observe and perform all of the conditions, covenants and requirements
of this Indenture, all existing Parity Debt Instruments, the Bonds and any Parity Debt. Nothing
herein contained shall prevent the Agency from making advances of its own moneys
howsoever derived to any of the uses or purposes referred to herein.
Section 5.02. Limitation on Additional Indebtedness; Against Encumbrances. The
Agency hereby covenants that, so long as the Bonds are Outstanding, the Agency shall not issue
any bonds, notes or other obligations, enter into any agreement or otherwise incur any
indebtedness, for which all or any part of the Housing Tax Revenues are pledged as security for
payment, excepting only the Bonds, any Parity Debt and any Subordinate Debt. The Agency
will not otherwise encumber, pledge or place any charge or lien upon any of the Housing Tax
Revenues or other amounts pledged to the Bonds superior to the pledge and lien herein created
for the benefit of the Bonds.
Section 5.03. Extension of Payment. The Agency will not, directly or indirectly, extend or
consent to the extension of the time for the payment of any Bond or claim for interest on any of
the Bonds and will not, directly or indirectly, be a party to or approve any such arrangement by
purchasing or funding the Bonds or claims for interest in any other manner. In case the maturity
of any such Bond or claim for interest shall be extended or funded, whether or not with the
consent of the Agency, such Bond or claim for interest so extended or funded shall not be
entitled, in case of default hereunder, to the benefits of this Indenture, except subject to the prior
payment in full of the principal of all of the Bonds then Outstanding and of all claims for
interest which shall not have been so extended or funded.
Section 5.04. Payment of Claims. The Agency shall promptly pay and discharge, or cause
to be paid and discharged, any and all lawful claims for labor, materials or supplies which, if
unpaid, might become a lien or charge upon the properties owned by the Agency or upon the
Housing Tax Revenues or other amounts pledged to the payment of the Bonds, or any part
thereof, or upon any funds in the hands of the Trustee, or which might impair the security of
the Bonds. Nothing herein contained shall require the Agency to make any such payment so
long as the Agency in good faith shall contest the validity of said claims.
Section 5.05. Books and Accounts; Financial Statements. The Agency shall keep, or cause
to be kept, proper books of record and accounts, separate from all other records and accounts of
the Agency and the County, in which complete and correct entries shall be made of all
transactions relating to the Redevelopment Projects, the Housing Tax Revenues the Special
Fund and the Housing Project Fund. Such books of record and accounts shall at all times during
business hours be subject to the inspection of the Owners of not less than ten percent (10%) in
aggregate principal amount of the Bonds then Outstanding, or their representatives authorized
in writing.
Section 5.06. Protection of Security and Rights of Owners. The Agency will preserve and
protect the security of the Bonds and the rights of the Owners. From and after the Closing Date,
the Bonds shall be incontestable by the Agency.
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Section 5.07. Payments of Taxes and Other Charges. Except as otherwise provided
herein, the Agency will pay and discharge, or cause to be paid and discharged, all taxes, service
charges, assessments and other governmental charges which may hereafter be lawfully imposed
upon the Agency or the properties then owned by the Agency in the Redevelopment Projects, or
upon the revenues therefrom when the same shall become due. Nothing herein contained shall
require the Agency to make any such payment so long as the Agency in good faith shall contest
the validity of said taxes, assessments or charges. The Agency will duly observe and conform
with all valid requirements of any governmental authority relative to the Redevelopment
Projects or any part thereof.
Section 5.08. Taxation of Leased Property. All amounts derived by the Agency pursuant
to section 33673 of the Law with respect to the lease of property for redevelopment shall be
treated in the same manner as amounts derived pursuant to section 33670(b) of the Law for
purposes of determining Housing Tax Revenues under this Indenture.
Section 5.09. Disposition of Property. The Agency will not participate in the disposition
of any land or real property in the Redevelopment Projects to anyone which will result in such
property becoming exempt from taxation because of public ownership or use or otherwise
(except property dedicated for public right-of-way and except property planned for public
ownership or use by the Redevelopment Plans in effect on the date of this Indenture) so that
such disposition shall, when taken together with other such dispositions, aggregate more than
ten percent (10%) of the land area in, or total assessed valuation of, the Redevelopment Projects
unless such disposition is permitted as hereinafter provided in this Section 5.09. If the Agency
proposes to participate in such a disposition, it shall thereupon appoint an Independent
Redevelopment Consultant to report on the effect of said proposed disposition. If the Report of
the Independent Redevelopment Consultant concludes that the Housing Tax Revenues
following such disposition will be at least equal to one hundred twenty-five percent (125%) of
Maximum Annual Debt Service on the Bonds and on any Parity Debt, the Agency may
thereafter make such disposition. If said Report concludes that, following said proposed
disposition, the Housing Tax Revenues will not be at least equal to one hundred twenty-five
percent (125%) of Maximum Annual Debt Service on the Bonds and on any Parity Debt, the
Agency shall not participate in said proposed disposition. For purposes of this Section 5.09, the
amount of Housing Tax Revenues shall be determined as provided in Section 3.05(a)(ii).
Section 5.10. Maintenance of Housing Tax Revenues• Compliance with Plan Limitations.
The Agency shall comply with all requirements of the Law to insure the allocation and payment
to it of the Housing Tax Revenues, including without limitation the timely filing of any
necessary statements of indebtedness with appropriate officials of the County and (in the case
of supplemental revenues and other amounts payable by the State) appropriate officials of the
State. Without limiting the generality of the foregoing, the Agency covenants that it shall
deposit or cause to be deposited in the Low and Moderate Income Housing Fund, all amounts
when, as and if required to be deposited therein pursuant to the Law.
The Agency shall not enter into any agreement with the County or any other
governmental unit, or modify the Redevelopment Plans in any manner, which would have the
effect of reducing the amount of Housing Tax Revenues available to the Agency under the
Redevelopment Plans for payment of the Bonds and any Parity Debt, unless in the written
opinion of an Independent Redevelopment Consultant filed with the Trustee such reduction
will not materially adversely affect the interests hereunder of or the security granted hereunder
to the owners of the Bonds and any Parity Debt.
The Agency agrees not to make any findings of the character described in
subparagraphs (1)(A), (2)(A) or (3)(A) of section 33334.2(a) of the Law with the purpose or effect
of reducing the percentage of taxes allocated to the Agency pursuant to Section 33670 of the
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Law that are required by sections 33334.2(a) and 33334.3(a) to be deposited in the Agency's Low
and Moderate Income Housing Fund.
Section 5.11. Management and Operations of Properties. The Agency will manage and
operate all properties owned by the Agency and comprising any part of the Redevelopment
Projects, in a sound and businesslike manner, and will keep such properties insured at all times
in conformity with sound business practice.
Section 5.12. Continuing Disclosure. The Agency hereby covenants and agrees that it
will comply with and carry out all of the provisions of the Continuing Disclosure Certificate.
Notwithstanding any other provision of this Indenture, failure of the Agency to comply with
the Continuing Disclosure Certificate shall not be an Event of Default hereunder. However, any
Participating Underwriter or any holder or beneficial owner of the Bonds may take such actions
as may be necessary and appropriate, including seeking specific performance by court order, to
cause the Agency to comply with its obligations under this Section 5.13.
Section 5.13. Further Assurances. The Agency will adopt, make, execute and deliver any
and all such further resolutions, instruments and assurances as may be reasonably necessary or
proper to carry out the intention or to facilitate the performance of this Indenture, and for the
better assuring and confirming unto the Owners of the Bonds the rights and benefits provided
in this Indenture.
Section 5.14. Covenant Regarding Receipt of Tax Increment Revenues. In the event the
Agency receives the maximum amount of tax increment revenues permitted under the Plan
Limitations, the Agency covenants that it will take such action to continue to make all required
requests to the County to ensure the allocation and payment to it of tax increment revenues as
permitted by section 33333.8(e) of the Law.
Section 5.15. Tax Covenants.
(a) Federal Guarantee Prohibition. The Agency shall not take any action or permit or suffer
any action to be taken if the result of the same would be to cause the Bonds to be "federally
guaranteed" within the meaning of section 149(b) of the Tax Code.
(b) No Arbitrage. The Agency shall not take, or permit or suffer to be taken by the Trustee
or otherwise, any action with respect to the Bond proceeds which, if such action had been
reasonably expected to have been taken, or had been deliberately and intentionally taken, on
the Closing Date, would have caused the Bonds to be "arbitrage bonds" within the meaning of
section 148 of the Tax Code.
(c) Private Activity Bond Limitation. The Agency shall assure that the proceeds of the
Bonds are not so used as to cause the Bonds to satisfy the private business tests of section 141(b)
of the Tax Code or the private loan financing test of section 141(c) of the Tax Code.
(d) Rebate Requirement. The Agency shall take any and all actions necessary to assure
compliance with section 148(f) of the Tax Code, relating to the rebate of excess investment
earnings, if any, to the federal government, to the extent that such section is applicable to the
Bonds.
(e) Maintenance of Tax-Exemption. The Agency shall take all actions necessary to assure
the exclusion of interest on the Bonds from the gross income of the Owners of the Bonds to the
same extent as such interest is permitted to be excluded from gross income under the Tax Code
as in effect on the date of issuance of the Bonds.
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Section 5.16. Reservation of Funds for SERAF Payment. The Agency shall maintain
(sufficient funds on hand to make any required payment due for Fiscal Years 2009-10 and 2010-
11 to the County Supplemental Education Revenue Augmentation Fund, until such time as such
payments are made by the Agency or a court of competent jurisdiction finds, in a final non-
appealable judgment, that the Agency is not required to make such payments.
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ARTICLE VI
THE TRUSTEE
Section 6.01. Duties Immunities and Liabilities of Trustee.
(a) The Trustee shall, prior to the occurrence of an Event of Default, and after the curing
or waiver of all Events of Default which may have occurred, perform such duties and only such
duties as are specifically set forth in this Indenture and no implied covenants, duties or
obligations shall be read into this Indenture against the Trustee. The Trustee shall, during the
existence of any Event of Default (which has not been cured or waived), exercise such of the
rights and powers vested in it by this Indenture, and use the same degree of care and skill in
their exercise, as a reasonable person would exercise or use under the circumstances in the
conduct of its own affairs.
(b) The Agency may remove the Trustee at any time, unless an Event of Default shall
have occurred and then be continuing, and shall remove the Trustee (i) if at any time requested
to do so by an instrument or concurrent instruments in writing signed by the Owners of not less
than a majority in aggregate principal amount of the Bonds then Outstanding (or their attorneys
duly authorized in writing), or (ii) if at any time the Agency has knowledge that the Trustee
shall cease to be eligible in accordance with subsection (e) of this Section 6.01, or shall become
incapable of acting, or shall be adjudged a bankrupt or insolvent, or a receiver of the Trustee or
its property shall be appointed, or any public officer shall take control or charge of the Trustee
or of its property or affairs for the purpose of rehabilitation, conservation or liquidation. In each
case such removal shall be accomplished by the giving of written notice of such removal by the
Agency to the Trustee, whereupon the Agency shall immediately appoint a successor Trustee
by an instrument in writing.
(c) The Trustee may at any time resign by giving written notice of such resignation to the
Agency and by giving the Owners notice of such resignation by first class mail, postage
prepaid, at their respective addresses shown on the Registration Books. Upon receiving such
notice of resignation, the Agency shall promptly appoint a successor Trustee by an instrument
in writing.
(d) Any removal or resignation of the Trustee and appointment of a successor Trustee
shall become effective upon acceptance of appointment by the successor Trustee. If no successor
Trustee shall have been appointed and have accepted appointment within forty-five (45) days of
giving notice of removal or notice of resignation as aforesaid, the resigning Trustee or any
Owner (on behalf of such Owner and all other Owners) may petition any court of competent
jurisdiction at the expense of the Agency for the appointment of a successor Trustee, and such
court may thereupon, after such notice (if any) as it may deem proper, appoint such successor
Trustee. Any successor Trustee appointed under this Indenture shall signify its acceptance of
such appointment by executing, acknowledging and delivering to the Agency and to its
predecessor Trustee a written acceptance thereof, and thereupon such successor Trustee,
without any further act, deed or conveyance, shall become vested with all the moneys, estates,
properties, rights, powers, trusts, duties and obligations of such predecessor Trustee, with like
effect as if originally named Trustee herein; but, nevertheless at the Written Request of the
Agency or the request of the successor Trustee, such predecessor Trustee shall execute and
deliver any and all instruments of conveyance or further assurance and do such other things as
may reasonably be .required for more fully and certainly vesting in and confirming to such
successor Trustee all the right, title and interest of such predecessor Trustee in and to any
property held by it under this Indenture and shall pay over, transfer, assign and deliver to the
successor Trustee any money or other property subject to the trusts and conditions herein set
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forth. Upon request of the successor Trustee, the Agency shall execute and deliver any and all
instruments as may be reasonably required for more fully and certainly vesting in and
confirming to such successor Trustee all such moneys, estates, properties, rights, powers, trusts,
duties and obligations. Upon acceptance of appointment by a successor Trustee as provided in
this subsection, the Agency shall mail a notice of the succession of such Trustee to the trusts
hereunder to each rating agency which then has a current rating on the Bonds and to the
Owners at their respective addresses shown on the Registration Books. If the Agency fails to
mail such notice within fifteen (15) days after acceptance of appointment by the successor
Trustee, the successor Trustee shall cause such notice to be mailed at the expense of the Agency.
(e) Any Trustee appointed under the provisions of this Section 6.01 in succession to the
Trustee shall be a financial institution having a trust office in the State, having (or in the case of
a corporation or trust company included in a bank holding company system, the related bank
holding company shall have) a combined capital and surplus of at least $75,000,000, and subject
to supervision or examination by federal or state authority. If such financial institution
publishes a report of condition at least annually, pursuant to law or to the requirements of any
supervising or examining authority above referred to, then for the purpose of this subsection
the combined capital and surplus of such financial institution shall be deemed to be its
combined capital and surplus as set forth in its most recent report of condition so published. In
case at any time the Trustee shall cease to be eligible in accordance with the provisions of this
subsection (e), the Trustee shall resign immediately in the manner and with the effect specified
in this Section 6.01.
Section 6.02. Merger or Consolidation. Any bank, national banking association,
corporation or trust company into which the Trustee may be merged or converted or with
which either of them may be consolidated or any bank, corporation or trust company resulting
from any merger, conversion or consolidation to which it shall be a party or any bank, national
banking association, corporation or trust company to which the Trustee may sell or transfer all
or substantially all of its corporate trust business, provided such bank, corporation or trust
company shall be eligible under subsection (e) of Section 6.01, shall be the successor to such
Trustee without the execution or filing of any paper or any further act, anything herein to the
contrary notwithstanding.
Section 6.03. Liability of Trustee.
(a) The recitals of facts herein and in the Bonds contained shall be taken as statements of
the Agency, and the Trustee shall not assume responsibility for the correctness of the same, nor
make any representations as to the validity or sufficiency of this Indenture or of the security for
the Bonds or the tax status of interest thereon nor shall incur any responsibility in respect
thereof, other than as expressly stated herein. The Trustee shall, however, be responsible for its
representations contained in its certificate of authentication on the Bonds. The Trustee shall not
be liable in connection with the performance of its duties hereunder, except for its own
negligence or willful misconduct. The Trustee shall not be liable for the acts of any agents of the
Trustee selected by it with due care. The Trustee and its officers and employees may become the
Owner of any Bonds with the same rights it would have if they were not Trustee and, to the
extent permitted by law, may act as depository for and permit any of its officers or directors to
act as a member of, or in any other capacity with respect to, any committee formed to protect
the rights of the Owners, whether or not such committee shall represent the Owners of a
majority in principal amount of the Bonds then Outstanding.
(b) The Trustee shall not be liable for any error of judgment made by a responsible
employee or officer, unless the Trustee shall have been negligent in ascertaining the pertinent
facts.
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(c) The Trustee shall not be liable with respect to any action taken or omitted to be taken
by it in good faith in accordance with the direction of the Owners of not less than a majority in
aggregate principal amount of the Bonds at the time Outstanding relating to the time, method
and place of conducting any proceeding for any remedy available to the Trustee, or exercising
any trust or power conferred upon the Trustee under this Indenture.
(d) The Trustee shall not be liable for any action taken by it and believed by it to be
authorized or within the discretion or rights or powers conferred upon it by this Indenture,
except for actions arising from the negligence or intentional misconduct of the Trustee. The
permissive right of the Trustee to do things enumerated hereunder shall not be construed as a
mandatory duty.
(e) The Trustee shall not be deemed to have knowledge of any Event of Default
hereunder unless and until a Responsible Officer shall have actual knowledge thereof, or shall
have received written notice thereof from the Agency at its Principal Corporate Trust Office. In
the absence of such actual knowledge or notice, the Trustee may conclusively assume that no
default has occurred and is continuing under this Indenture. Except as otherwise expressly
provided herein, the Trustee shall not be bound to ascertain or inquire as to the performance or
observance of any of the terms, conditions, covenants or agreements herein or of any of the
documents executed in connection with the Bonds, or as to the existence of an Event of Default
thereunder. The Trustee shall not be responsible for the validity or effectiveness of any
collateral given to or held by it. Without limiting the generality of the foregoing, the Trustee
may rely conclusively on the Agency's certificates to establish the Agency's compliance with its
financial covenants hereunder, including, without limitation, its covenants regarding the
deposit of Housing Tax Revenues into the Special Fund and the investment and application of
moneys on deposit in the Special Fund (other than its covenants to transfer such moneys to the
Trustee when due hereunder).
The Trustee shall have no liability or obligation to the Bond Owners with respect to the
payment of debt service by the Agency or with respect to the observance or performance by the
Agency of the other conditions, covenants and terms contained in this Indenture, or with
respect to the investment of any moneys in any fund or account established, held or maintained
by the Agency pursuant to this Indenture or otherwise.
No provision of this Indenture shall require the Trustee to expend or risk its own funds
or otherwise incur any financial liability in the performance of any of its duties hereunder, or in
the exercise of any of its rights or powers. The Trustee shall be entitled to interest on all
amounts advanced by it at the maximum rate permitted by law.
The Trustee may execute any of the trusts or powers hereunder or perform any duties
hereunder either directly or by or through agents, attorneys or receivers and shall be entitled to
opinion and advice of counsel concerning all matters of trust and its duties hereunder. The
Trustee shall not be responsible for any action taken or not taken on the part of any agent,
attorney or receiver appointed with due care by it hereunder.
The Trustee shall have no responsibility, opinion, or liability with respect to any
information, statements or recital in any offering memorandum or other disclosure material
prepared or distributed with respect to the issuance of these Bonds.
Before taking any action under Article VIII or this Article at the written request of a
majority of the Owners, the Trustee may require that a satisfactory indemnity bond be
furnished by the Owners for the reimbursement of all expenses to which it may be put and to
protect it against all liability, except liability which is adjudicated to have resulted from its
negligence or willful misconduct in connection with any action so taken.
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Under no circumstances shall the Trustee be liable in its individual capacity for the
obligations evidenced by the Bonds. The Trustee shall not be accountable for the use or
application by the Agency or any other party of any funds which the Trustee has released in
accordance with the terms of this Indenture. The immunities and exceptions from liability of the
Trustee shall extend to its officers, directors, employees, agents and attorneys. Whether or not
expressly so provided, every provision of this Indenture relating to the conduct or affecting the
liability of the Trustee shall be subject to the provisions of this Article VI.
The Trustee agrees to accept and act upon facsimile transmission of written instructions
and/or directions pursuant to this Indenture; provided, however, that: (a) subsequent to such
facsimile transmission of written instructions and/or directions the Trustee shall forthwith
receive the originally executed instructions and/or directions, (b) such originally executed
instructions and/or directions shall be signed by a person as may be designated and authorized
to sign for the party signing such instructions and/or directions, and (c) the Trustee shall have
received a current incumbency certificate containing the specimen signature of such designated
person.
The Trustee shall not be considered in breach of or in default in its obligations hereunder
or progress in respect thereto in the event of enforced delay ("unavoidable delay") in the
performance of such obligations due to unforeseeable causes beyond its control and without its
fault or negligence, including, but not limited to, Acts of God or of the public enemy or
terrorists, acts of a government, acts of the other party, fires, floods, epidemics, quarantine
restrictions, strikes, freight embargoes, earthquakes, explosion, mob violence, riot, inability to
procure or general sabotage or rationing of labor, equipment, facilities, sources of energy,
material or supplies in the open market, litigation or arbitration involving a party or others
relating to zoning or other governmental action or inaction pertaining to the project, malicious
mischief, condemnation, and unusually severe weather or delays of suppliers or subcontractors
due to such causes or any similar event and/or occurrences beyond the control of the Trustee.
Section 6.04. Right to Rely on Documents and Opinions. The Trustee shall be protected
in acting upon any notice, resolution, request, consent, order, certificate, report, opinion or other
paper or document believed by it to be genuine and to have been signed or prescribed by the
proper party or parties, and shall not be required to make any investigation into the facts or
matters contained thereon. The Trustee may consult with counsel, including, without limitation,
counsel of or to the Agency, with regard to legal questions, and the opinion of such counsel
shall be full and complete authorization and protection in respect of any action taken or
suffered by the Trustee hereunder in accordance therewith.
The Trustee shall not be bound to recognize any person as the Owner of a Bond unless
and until such Bond is submitted for inspection, if required, and such person's title thereto is
established to the satisfaction of the Trustee.
Whenever in the administration of the trusts imposed upon it by this Indenture the
Trustee shall deem it necessary or desirable that a matter be proved or established prior to
taking or suffering any action hereunder, such matter (unless other evidence in respect thereof
be herein specifically prescribed) may be deemed to be conclusively proved and established by
a Written Certificate of the Agency, which shall be full warrant to the Trustee for any action
taken or suffered under the provisions of this Indenture in reliance upon such Written
Certificate, but in its discretion the Trustee may, in lieu thereof, accept other evidence of such
matter or may require such additional evidence as to it may deem reasonable. The Trustee may
conclusively rely on any certificate or Report of any Independent Accountant or Independent
Redevelopment Consultant appointed by the Agency.
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Section 6.05. Preservation and Inspection of Documents. All documents received by the
Trustee under the provisions of this Indenture shall be retained in its possession and shall be
subject at all reasonable times upon reasonable notice to the inspection of the Agency and any
Owner, and their agents and representatives duly authorized in writing, during regular
business hours and under reasonable conditions.
Section 6.06. Compensation and Indemnification. The Agency shall pay to the Trustee
from time to time reasonable compensation for all services rendered under this Indenture in
accordance with the letter proposal from the Trustee approved by the Agency and also all
reasonable expenses, charges, legal and consulting fees and other disbursements and those of its
attorneys (including the allocated costs and disbursement of in-house counsel to the extent such
services are not redundant with those provided by outside counsel), agents and employees,
incurred in and about the performance of its powers and duties under this Indenture. The
Trustee shall have a first lien on the Housing Tax Revenues and all funds and accounts held by
the Trustee hereunder to secure the payment to the Trustee of all fees, costs and expenses,
including reasonable compensation to its experts, attorneys and counsel (including the allocated
costs and disbursement of in-house counsel to the extent such services are not redundant with
those provided by outside counsel).
The Agency further covenants and agrees to indemnify, defend and save the Trustee
and its officers, directors, agents and employees, harmless against any loss, expense and
liabilities, including legal fees and expenses, which it may incur arising out of or in connection
with the exercise and performance of its powers and duties hereunder, including the costs and
expenses of defending against any claim of liability, but excluding any and all losses, expenses
and liabilities which are due to the negligence or willful misconduct of the Trustee, its officers,
directors, agents or employees. The obligations of the Agency and the rights of the Trustee
under this Section 6.06 shall survive resignation or removal of the Trustee under this Indenture
and payment of the Bonds and discharge of this Indenture.
Section 6.07. Deposit and Investment of Moneys in Funds.
(a) Investment by Trustee of Moneys in Funds. Moneys in the Debt Service Fund, the
Interest Account, the Principal Account, the Sinking Account, the Reserve Account, the
Redemption Account, the Costs of Issuance Fund and the Housing Project Fund shall be
invested by the Trustee in Permitted Investments as directed by the Agency in the Written
Request of the Agency filed with the Trustee at least two (2) Business Days in advance of the
making of such investments. In the absence of any such Written Request of the Agency, the
Trustee shall invest any such moneys in Permitted Investments described in clause (h) of the
definition thereof, which by their terms mature prior to the date on which such moneys are
required to be paid out hereunder. Investments purchased with moneys deposited in the
Reserve Account shall have an average aggregate weighted term to maturity not greater than
five years; provided, however, that qualifying investment agreements permitting draws at any
time need not be restricted to a maturity of five years or less. The Trustee shall be entitled to
rely conclusively upon the written instructions of the Agency directing investments in
Permitted Investments as to the fact that each such investment is permitted by the laws of the
State, and shall not be required to make further investigation with respect thereto. With respect
to any restrictions set forth in the above list which embody legal conclusions (e.g., the existence,
validity and perfection of security interests in collateral), the Trustee shall be entitled to rely
conclusively on an opinion of counsel or upon a representation of the provider of such
Permitted Investment obtained at the Agency's expense. Moneys in the Special Fund may be
invested by the Agency in any obligations in which the Agency is legally authorized to invest its
funds. Obligations purchased as an investment of moneys in any fund shall be deemed to be
part of such fund or account. All interest or gain derived from the investment of amounts in any
of the funds or accounts held by the Trustee hereunder shall be deposited in the Interest
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Account; provided, however, that all interest or gain from the investment of amounts in the
Reserve Account shall be deposited by the Trustee in the Interest Account, to the extent not
required to cause the balance in the Reserve Account to equal the Reserve Requirement. The
Trustee or an affiliate may act as principal or agent in the acquisition or disposition of any
investment and may impose its customary charges therefor. The Trustee shall incur no liability
for losses arising from any investments made at the direction of the Agency or otherwise made
pursuant to this Section 6.07.
All moneys held by the Trustee shall be held in trust, but need not be segregated from
other funds unless specifically required by this Indenture. Except as specifically provided in this
Indenture, the Trustee shall not be liable to pay interest on any moneys received by it, but shall
be liable only to account to the Agency for earnings derived from funds that have been
invested.
The Trustee or any of its affiliates may act as principal, agent, sponsor, advisor or
manager in connection with any investments made by the Trustee hereunder.
(b) Valuation of Investments.
(i) Except as otherwise provided in subparagraph (ii) of this Paragraph (b), all
investments of amounts deposited in any fund or account created by or pursuant to this
Indenture, or otherwise containing gross proceeds of the Bonds (within the meaning of
section 148 of the Tax Code) shall be acquired, disposed of, and valued (as of the date
that valuation is required by this Indenture or the Tax Code) at Fair Market Value.
(ii) Such investments shall be valued by the Trustee not less often than quarterly,
provided as to any such valuation made by the Trustee, such valuation shall be at the
market value of such investments and the Trustee may utilize computerized securities
pricing services that may be available to it, including those available. through its regular
accounting system.
(iii) For purposes of computations required under the Tax Code, investments in
funds or accounts (or portions thereof) that are subject to a yield restriction under
applicable provisions of the Tax Code and (unless valuation is undertaken at least
annually) investments in the Reserve Account shall be valued by the Agency at their
present value (within the meaning of section 148 of the Tax Code).
(iv) The Trustee shall have no responsibility to determine Fair Market Value or
present value of any Permitted Investment, and may rely upon any determination made
by or on behalf of the Agency. This Section subparagraph (iv) shall in no way limit the
Trustee's obligations under Section 6.08 hereof.
Section 6.08. Accounting Records and Financial Statements. The Trustee shall at all times
keep, or cause to be kept, proper books of record and account, prepared in accordance with
corporate trust industry standards, in which complete and accurate entries shall be made of all
transactions relating to the proceeds of the Bonds made by it and all funds and accounts held by
the Trustee established pursuant to this Indenture. Such books of record and account shall be
available for inspection by the Agency upon reasonable prior notice, at reasonable hours and
under reasonable circumstances. The Trustee shall furnish to the Agency, at least monthly, an
accounting of all transactions in the form of its customary statements relating to the proceeds of
the Bonds and all funds and accounts held by the Trustee pursuant to this Indenture. The
Trustee shall maintain and store such records for a period of one year after the stated maturity
of the Bonds.
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Section 6.09. Appointment of Co-Trustee or Agent. It is the purpose of this Indenture
that there shall be no violation of any law of any jurisdiction (including particularly the law of
the State) denying or restricting the right of banking corporations or associations to transact
business as Trustee in such jurisdiction. It is recognized that in the case of litigation under this
Indenture, and in particular in case of the enforcement of the rights of the Trustee on default, or
in the case the Trustee deems that by reason of any present or future law of any jurisdiction it
may not exercise any of the powers, rights or remedies herein granted to the Trustee or hold
title to the properties, in trust, as herein granted, or take any other action which may be
desirable or necessary in connection therewith, it may be necessary that the Trustee appoint an
additional individual or institution as a separate trustee or co-trustee. The following provisions
of this Section 6.09 are adopted to these ends.
In the event that the Trustee appoints an additional individual or institution as a
separate or co-trustee, each and every remedy, power, right, claim, demand, cause of action,
immunity, estate, title, interest and lien expressed or intended by this Indenture to be exercised
by or vested in or conveyed to the Trustee with respect thereto shall be exercisable by and vest
in such separate or co-trustee but only to the extent necessary to enable such separate or co-
trustee to exercise such powers, rights and remedies, and every covenant and obligation
necessary to the exercise thereof by such separate or co-trustee shall run to and be enforceable
by either of them; provided, however, in no event shall the Trustee be responsible or liable for the
acts or omissions of any co-trustee.
Should any instrument in writing from the Agency be required by the separate trustee
or co-trustee so appointed by the Trustee for more fully and certainly vesting in and confirming
to it such properties, rights, powers, trusts, duties and obligations, any and all such instruments
in writing shall, on request, be executed, acknowledged and delivered by the Agency. In case
any separate trustee or co-trustee, or a successor to either, shall become incapable of acting,
resign or be removed, all the estates, properties, rights, powers, trusts, duties and obligations of
such separate trustee or co-trustee, so far as permitted by law, shall vest in and be exercised by
the Trustee until the appointment of a new trustee or successor to such separate trustee or co-
trustee.
Section 6.10. Other Transactions with Agency. The Trustee, either as principal or agent,
may engage in or be interested in any financial or other transaction with the Agency.
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ARTICLE VII
MODIFICATION OR AMENDMENT OF THIS INDENTURE
Section 7.01. Amendment. This Indenture and the rights and obligations of the Agency
and of the Owners may be modified or amended at any time by a Supplemental Indenture
which shall become binding upon adoption, without the consent of any Owners, to the extent
permitted by law and only for any one or more of the following purposes:
(a) to add to the covenants and agreements of the Agency in this Indenture contained,
other covenants and agreements thereafter to be observed, or to limit or surrender any rights or
powers herein reserved to or conferred upon the Agency; or
(b) to make such provisions for the purpose of curing any ambiguity, or of curing,
correcting or supplementing any defective provision contained in this Indenture, or in any other
respect whatsoever as the Agency may deem necessary or desirable, provided under any
circumstances that such modifications or amendments shall not, in the reasonable
determination of the Agency, materially adversely affect the interests of the Owners; or
(c) to provide for the issuance of Parity Debt in accordance with Section 3.05.
Except as set forth in the preceding paragraph, this Indenture and the rights and
obligations of the Agency and of the Owners may be modified or amended at any time by a
Supplemental Indenture which shall become binding when the written consent of the Owners
of a majority in aggregate principal amount of the Bonds then Outstanding are filed with the
Trustee. No such modification or amendment shall (a) extend the maturity of or reduce the
interest rate on any Bond or otherwise alter or impair the obligation of the Agency to pay the
principal, interest or redemption premiums (if any) at the time and place and at the rate and in
the currency provided therein of any Bond without the express written consent of the Owner of
such Bond, or (b) reduce the percentage of Bonds required for the written consent to any such
amendment or modification. In no event shall any Supplemental Indenture modify any of the
rights or obligations of the Trustee without its prior written consent. In addition, the Trustee
shall be entitled to an opinion of counsel concerning the Supplemental Indenture's lack of any
material adverse effect on the Owners and that all conditions precedent for any supplement or
amendment has been satisfied.
Section 7.02. Effect of Supplemental Indenture. From and after the time any
Supplemental Indenture becomes effective pursuant to this Article VII, this Indenture shall be
deemed to be modified and amended in accordance therewith, the respective rights, duties and
obligations of the parties hereto or thereto and all Owners, as the case may be, shall thereafter
be determined, exercised and enforced hereunder subject in all respects to such modification
and amendment, and all the terms and conditions of any Supplemental Indenture shall be
deemed to be part of the terms and conditions of this Indenture for any and all purposes.
Section 7.03. Endorsement or Replacement of Bonds After Amendment. After the
effective date of any amendment or modification hereof pursuant to this Article VII, the Agency
may determine that any or all of the Bonds shall bear a notation, by endorsement in form
approved by the Agency, as to such amendment or modification and in that case upon demand
of the Agency, the Owners of such Bonds shall present such Bonds for that purpose at the
Principal Corporate Trust Office, and thereupon a suitable notation as to such action shall be
made on such Bonds. In lieu of such notation, the Agency may determine that new Bonds shall
be prepared at the expense of the Agency and executed in exchange for any or all of the Bonds,
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and in that case, upon demand of the Agency, the Owners of the Bonds shall present such
Bonds for exchange at the Principal Corporate Trust Office, without cost to such Owners.
Section 7.04. Amendment by Mutual Consent. The provisions of this Article VII shall not
prevent any Owner from accepting any amendment as to the particular Bond held by such
Owner, provided that due notation thereof is made on such Bond.
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ARTICLE VIII
EVENTS OF DEFAULT AND REMEDIES OF OWNERS
Section 8.01. Events of Default .The following events shall constitute Events of Default
hereunder:
(a) if default shall be made by the Agency in the due and punctual payment of the
principal or sinking fund payment of or interest or redemption premium (if any) on any Bond
when and as the same shall become due and payable, whether at maturity as therein expressed,
by declaration or otherwise;
(b) if default shall be made by the Agency in the observance of any of the covenants,
agreements or conditions on its part in this Indenture or in the Bonds contained, other than a
default described in the preceding clause (a), and such default shall have continued for a period
of sixty (60) days following receipt by the Agency of written notice from the Trustee or any
Owner of the occurrence of such default provided that if in the reasonable opinion of the
Agency the failure stated in the notice can be corrected, but not within such 60 day period, such
failure will not constitute an event of default if corrective action is instituted by the Agency
within such 60 day period and the Agency thereafter diligently and in good faith cures such
failure within 120 days;
(c) if the Agency files a petition seeking reorganization or arrangement under the federal
bankruptcy laws or any other applicable law of the United States of America, or if a court of
competent jurisdiction will approve a petition seeking reorganization under the federal
bankruptcy laws or any other applicable law of the United States of America, or, if under the
provisions of any other law for the relief or aid of debtors, any court of competent jurisdiction
will approve a petition, seeking reorganization under the federal bankruptcy laws or any other
applicable law of the United States of America, or, if under the provisions of any other law for
the relief or aid of debtors, any court of competent jurisdiction will assume custody or control of
the Agency or of the whole or any substantial part of its property; or
(d) an event of default shall have occurred and be continuing with respect to any Parity
Debt.
If an Event of Default has occurred and is continuing, the Trustee may, and if requested
in writing by the Owners of a majority in aggregate principal amount of the Bonds then
Outstanding the Trustee shall exercise any remedies available to the Trustee and the Owners in
law or at equity, subject in any event to the provisions of Section 8.08.
Immediately upon becoming aware of the occurrence of an Event of Default, the Trustee
shall give notice of such Event of Default to the Agency by telephone confirmed in writing.
With respect to any Event of Default described in clauses (a) or (b) above the Trustee shall, and
with respect to any Event of Default described in clause (c) above the Trustee in its sole
discretion may, also give such notice to the Owners in the same manner as provided herein for
notices of redemption of the Bonds.
Section 8.02. Application of Funds Upon Default. So long as an Event of Default exists,
all sums received by the Trustee hereunder shall be applied by the Trustee as follows and in the
following order:
(a) To the payment of the reasonable fees, costs and expenses of the Trustee (including
reasonable fees and expenses of its counsel) incurred in and about the performance of its
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powers and duties under this Indenture and the payment of all reasonable fees, costs and
expenses owing to the Trustee pursuant to Section 6.06 hereof; and
(b) To the payment of the whole amount of interest on and principal (including Sinking
Account installment) of the Bonds then due and unpaid, with interest on overdue installments
of principal and interest to the extent permitted by law at the net effective rate of interest then
borne by the Outstanding Bonds; provided, however, that in the event such amounts shall be
insufficient to pay the full amount of such interest and principal (including Sinking Account
installment), then such amounts shall be applied in the following order of priority:
(i) first, to the payment of all installments of interest on the Bonds then due and
unpaid, on a pro rata basis in the event that the available amounts are insufficient to pay
all such interest in full,
(ii) second, to the payment of principal of all installments of the Bonds then due
and unpaid (including Sinking Account installment), on a pro rata basis in the event that
the available amounts are insufficient to pay all such principal and Sinking Account
installments in full, and
(iii) third, to the payment of interest on overdue installments of principal and
interest, on a pro rata basis in the event that the available amounts are insufficient to pay
all such interest in full.
Section 8.03. Limitation on Owner's Right to Sue. No Owner of any Bond issued
hereunder shall have the right to institute any suit, action or proceeding at law or in equity, for
any remedy under or upon this Indenture, unless (a) such Owner shall have previously given to
the Trustee written notice of the occurrence of an Event of Default; (b) the Owners of a majority
in aggregate principal amount of all the Bonds then Outstanding shall have made Written
Request upon the Trustee to exercise the powers hereinbefore granted or to institute such
action, suit or proceeding in its own name; (c) said Owners shall have tendered to the Trustee
indemnity reasonably acceptable to the Trustee against the costs, expenses and liabilities to be
incurred in compliance with such request; and (d) the Trustee shall have refused or omitted to
comply with such request for a period of sixty (60) days after such Written Request shall have
been received by, and said tender of indemnity shall have been made to, the Trustee.
Such notification, request, tender of indemnity and refusal or omission are hereby
declared, in every case, to be conditions precedent to the exercise by any Owner of any remedy
hereunder; it being understood and intended that no one or more Owners shall have any right
in any manner whatever by his or their action to enforce any right under this Indenture, except
in the manner herein provided, and that all proceedings at law or in equity to enforce any
provision of this Indenture shall be instituted, had and maintained in the manner herein
provided and for the equal benefit of all Owners of the Outstanding Bonds.
The right of any Owner of any Bond to receive payment of the principal of (and
premium, if any) and interest on such Bond as herein provided, shall not be impaired or
affected without the written consent of such Owner, notwithstanding the foregoing provisions
of this Section 8.03 or any other provision of this Indenture.
Section 8.04. Non-Waiver. Nothing in this Article VIII or in any other provision of this
Indenture or in the Bonds, shall affect or impair the obligation of the Agency, which is absolute
and unconditional, to pay from the Housing Tax Revenues and other amounts pledged
hereunder, the principal of and interest and redemption premium (if any) on the Bonds to the
respective Owners on the respective Interest Payment Dates, as herein provided, or affect or
impair the right of action, which is also absolute and unconditional, of the Owners or the
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Trustee to institute suit to enforce such payment by virtue of the contract embodied in the
Bonds.
A waiver of any default by any Owner or the Trustee shall not affect any subsequent
default or impair any rights or remedies on the subsequent default. No delay or omission of any
Owner to exercise any right or power accruing upon any default shall impair any such right or
power or shall be construed to be a waiver of any such default or an acquiescence therein, and
every power and remedy conferred upon the Owners and the Trustee by the Law or by this
Article VIII may be enforced and exercised from time to time and as often as shall be deemed
expedient by the Owners and the Trustee.
If a suit, action or proceeding to enforce any right or exercise any remedy shall be
abandoned or determined adversely to the Owners or the Trustee, the Agency, the Trustee and
the Owners shall be restored to their former positions, rights and remedies as if such suit, action
or proceeding had not been brought or taken.
Section 8.05. Actions by Trustee as Attorney-in-Fact. Any suit, action or proceeding
which any Owner shall have the right to bring to enforce any right or remedy hereunder may be
brought by the Trustee for the equal benefit and protection of all Owners similarly situated and
the Trustee is hereby appointed (and the successive respective Owners by taking and holding
the Bonds or Parity Debt shall be conclusively deemed so to have appointed it) the true and
lawful attorney-in-fact of the respective Owners for the purpose of bringing any such suit,
action or proceeding and to do and perform any and all acts and things for and on behalf of the
respective Owners as a class or classes, as may be necessary or advisable in the opinion of the
Trustee as such attorney-in-fact, provided, however, the Trustee shall have no duty or obligation
to exercise any such right or remedy unless it has been indemnified to its satisfaction from any
loss, liability or expense (including fees and expenses of its outside counsel and the allocated
costs and disbursements of its in-house counsel).
Section 8.06. Remedies Not Exclusive. No remedy herein conferred upon or reserved to
the Owners is intended to be exclusive of any other remedy. Every such remedy shall be
cumulative and shall be in addition to every other remedy given hereunder or now or hereafter
existing, at law or in equity or by statute or otherwise, and may be exercised without exhausting
and without regard to any other remedy conferred by the Law or any other law.
Section 8.07. Parties Interested Herein. Nothing in this Indenture expressed or implied is
intended or shall be construed to confer upon, or to give to, any person or entity, other than the
Agency and the Trustee, their officers, employees and agents, and the Owners any right,
remedy or claim under or by reason of this Indenture, or any covenant, condition or stipulation
of this Indenture, and all covenants, stipulations, promises and agreements in this Indenture
shall be for the sole and exclusive benefit of the Agency and the Trustee, their officers,
employees and agents, and the Owners.
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ARTICLE IX
MISCELLANEOUS
Section 9.01. Benefits Limited to Parties. Nothing in this Indenture, expressed or implied,
is intended to give to any person other than the Agency, the Trustee and the Owners, any right,
remedy or claim under or by reason of this Indenture. Any covenants, stipulations, promises or
agreements in this Indenture contained by and on behalf of the Agency shall be for the sole and
exclusive benefit of the Trustee and the Owners.
Section 9.02. Successor is Deemed Included in All References to Predecessor. Whenever
in this Indenture or any Supplemental Indenture either the Agency or the Trustee is named or
referred to, such reference shall be deemed to include the successors or assigns thereof, and all
the covenants and agreements in this Indenture contained by or on behalf of the Agency or the
Trustee shall bind and inure to the benefit of the respective successors and assigns thereof
whether so expressed or not.
Section 9.03. Discharge of Indenture. If the Agency shall pay and discharge the entire
indebtedness on all Bonds or any portion thereof in any one or more of the following ways:
(a) by well and truly paying or causing to be paid the principal of and interest and
premium (if any) on all or the applicable portion of Outstanding Bonds, as and when the same
become due and payable;
(b) by irrevocably depositing with the Trustee or another Trustee, in trust, at or before
maturity, money which, together with the available amounts then on deposit in the funds and
accounts established pursuant to this Indenture, is fully sufficient to pay all or the applicable
portion of Outstanding Bonds, including all principal, interest and redemption premiums; or
(c) by irrevocably depositing with the Trustee or another Trustee, in trust, Defeasance
Obligations in such amount as an Independent Accountant shall determine will, together with
the interest to accrue thereon and available moneys then on deposit in the funds and accounts
established pursuant to this Indenture, be fully sufficient to pay and discharge the indebtedness
on all Bonds or the applicable portion of (including all principal, interest and redemption
premiums) at or before maturity;
and, if such Bonds are to be redeemed prior to the maturity thereof, notice of such redemption
shall have been given pursuant to Section 2.03(c) or provision satisfactory to the Trustee shall
have been made for the giving of such notice, then, at the election of the Agency, and
notwithstanding that any Bonds shall not have been surrendered for payment, the pledge of the
Housing Tax Revenues and other funds provided for in this Indenture and all other obligations
of the Trustee and the Agency under this Indenture shall cease and terminate with respect to all
Outstanding Bonds or, if applicable, with respect to that portion of the Bonds which has been
paid and discharged, except only (a) the obligation of the Trustee to transfer and exchange
Bonds hereunder, (b) the obligations of the Agency under Section 6.06 hereof, and (c) the
obligation of the Agency to pay or cause to be paid to the Owners, from the amounts so
deposited with the Trustee, all sums due thereon and to pay the Trustee all fees, expenses and
costs of the Trustee. In the event the Agency shall, pursuant to the foregoing provision, pay and
discharge any portion or all of the Bonds then Outstanding, the Trustee shall be authorized to
take such actions and execute and deliver to the Agency all such instruments as may be
necessary or desirable to evidence such discharge, including, without limitation, selection by lot
of Bonds of any maturity of the Bonds that the Agency has determined to pay and discharge in
part.
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In the case of a defeasance or payment of all of the Bonds Outstanding, any funds
thereafter held by the Trustee which are not required for said purpose or for payment of
amounts due the Trustee pursuant to Section 6.06 shall be paid over to the Agency.
To accomplish defeasance the Agency shall cause to be delivered (i) a Report of an
Independent Accountant verifying the sufficiency of the escrow established to pay the Bonds in
full on the maturity or earlier redemption date ("Verification"), (ii) an escrow deposit
agreement, and (iii) an opinion of nationally recognized bond counsel to the effect that the
Bonds are no longer "Outstanding" under this Indenture; each Verification and defeasance
opinion shall be acceptable in form and substance, and addressed, to the Agency and the
Trustee.
Section 9.04. Execution of Documents and Proof of Ownership by Owners. Any request,
declaration or other instrument which this Indenture may require or permit to be executed by
any Owner may be in one or more instruments of similar tenor, and shall be executed by such
Owner in person or by their attorneys appointed in writing.
Except as otherwise herein expressly provided, the fact and date of the execution by any
Owner or his attorney of such request, declaration or other instrument, or of such writing
appointing such attorney, may be proved by the certificate of any notary public or other officer
authorized to take acknowledgments of deeds to be recorded in the state in which he purports
to act, that the person signing such request, declaration or other instrument or writing
acknowledged to him the execution thereof, or by an affidavit of a witness of such execution,
duly sworn to before such notary public or other officer.
The ownership of Bonds and the amount, maturity, number and date of ownership
thereof shall be proved by the Registration Books.
Any request, declaration or other instrument or writing of the Owner of any Bond shall
bind all future Owners of such Bond in respect of anything done or suffered to be done by the
Agency or the Trustee and in accordance therewith; provided, however, that the Trustee shall not
be deemed to have knowledge that any Bond is owned by or for the account of the Agency
unless the Agency is the registered Owner or the Trustee has received written notice that any
other registered Owner is such an affiliate.
Section 9.05. Disqualified Bonds. In determining whether the Owners of the requisite
aggregate principal amount of Bonds have concurred in any demand, request, direction,
consent or waiver under this Indenture, Bonds which are owned or held by or for the account of
the Agency or the County (but excluding Bonds held in any employees' retirement fund) shall
be disregarded and deemed not to be Outstanding for the purpose of any such determination.
Upon request of the Trustee, the Agency shall specify to the Trustee those Bonds disqualified
pursuant to this Section 9.05.
Section 9.06. Waiver of Personal Liability. No member, officer, agent or employee of the
Agency shall be individually or personally liable for the payment of the principal of or interest
or any premium on the Bonds; but nothing herein contained shall relieve any such member,
officer, agent or employee from the performance of any official duty provided by law.
Section 9.07. Destruction of Canceled Bonds. Whenever in this Indenture provision is
made for the surrender to the Trustee of any Bonds which have been paid or canceled pursuant
to the provisions of this Indenture, the Trustee shall destroy such bonds and upon request of the
Agency provide the Agency a certificate of destruction. The Agency shall be entitled to rely
-44-
upon any statement of fact contained in any certificate with respect to the destruction of any
such Bonds therein referred to.
Section 9.08. Notices. Any notice, request, complaint, demand, communication or other
paper shall be sufficiently given and shall be deemed given when delivered or mailed by first
class, registered or certified mail, postage prepaid, or sent by telegram, addressed as follows:
If to the Agency: Tustin Community Redevelopment Agency
300 Centennial Way
Tustin, CA 92780
Attention: Executive Director
Phone: (714) 573-3000
Fax: (714) 838-1602
If to the Trustee: The Bank of New York Mellon Trust Company, N.A.
700 South Flower Street, Suite 500
Los Angeles, CA 90017-4104
Attention: Corporate Trust Department
Phone: (213) 630-6249
Fax: (213) 630-6210
The Agency and the Trustee, by notice given hereunder, may designate different
addresses to which subsequent notices, certificates or other communications will be sent.
Section 9.09. Partial Invalidity. If any Section, paragraph, sentence, clause or phrase of
this Indenture shall for any reason be held illegal, invalid or unenforceable. such holding shall
not affect the validity of the remaining portions of this Indenture. The Agency hereby declares
that it would have adopted this Indenture and each and every other Section, paragraph,
sentence, clause or phrase hereof and authorized the issue of the Bonds pursuant thereto
irrespective of the fact that any one or more Sections, paragraphs, sentences, clauses, or phrases
of this Indenture may be held illegal, invalid or unenforceable. If, by reason of the judgment of
any court, the Trustee is rendered unable to perform its duties hereunder, all such duties and all
of the rights and powers of the Trustee hereunder shall, pending appointment of a successor
Trustee in accordance with the provisions of Section 6.01 hereof, be assumed by and vest in the
Treasurer of the Agency in trust for the benefit of the Owners. The Agency covenants for the
direct benefit of the Owners that its Treasurer in such case shall be vested with all of the rights
and powers of the Trustee hereunder, and shall assume all of the responsibilities and perform
all of the duties of the Trustee hereunder, in trust for the benefit of the Bonds, pending
appointment of a successor Trustee in accordance with the provisions of Section 6.01 hereof.
Section 9.10. Unclaimed Moneys. Anything contained herein to the contrary
notwithstanding, any money held by the Trustee in trust for the payment and discharge of the
interest or premium (if any) on or principal of the Bonds which remains unclaimed for two (2)
years after the date when the payments of such interest, premium and principal have become
payable, if such money was held by the Trustee at such date, or for two (2) years after the date
of deposit of such money if deposited with the Trustee after the date when the interest and
premium (if any) on and principal of such Bonds have become payable, shall be repaid by the
Trustee to the Agency as its absolute property free from trust, and the Trustee shall thereupon
be released and discharged with respect thereto and the Bond Owners shall look only to the
Agency for the payment of the principal of and interest and redemption premium (if any) on of
such Bonds.
Section 9.11. Execution in Counterparts. This Indenture may be executed in several
counterparts, each of which shall be an original and all of which shall constitute but one and the
same instrument.
-45-
Section 9.12. Governing Law. This Indenture shall be construed and governed in
accordance with the laws of the State.
-46-
IN WITNESS WHEREOF, the TUSTIN COMMUNITY REDEVELOPMENT AGENCY,
has caused this Indenture to be signed in its name by its officer thereunto duly authorized and
attested by its Secretary, and THE BANK OF NEW YORK MELLON TRUST COMPANY, N.A.
in token of its acceptance of the trusts created hereunder, has caused this Indenture to be signed
in its corporate name by its officer thereunto duly authorized, all as of the day and year first
above written.
Attest:
Name
Secretary
TUSTIN COMMUNITY
REDEVELOPMENT AGENCY
By
Name
Title
THE BANK OF NEW YORK MELLON
TRUST COMPANY, N.A., as Trustee
By
Name
Title
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Quint & Thimmig LLP
EXHIBIT A
FORM OF BOND
United States of America
State of California
Orange County
TUSTIN COMMUNITY REDEVELOPMENT AGENCY
Tax Allocation Housing Bond, Series 2010
12/14/09
12/29/09
01/13/10
01/20/10
INTEREST RATE MATURITY DATE DATED DATE CUSIP
Se tember 1, March _, 2010
REGISTERED OWNER: CEDE & CO.
PRINCIPAL SUM: DOLLARS
The TUSTIN COMMUNITY REDEVELOPMENT AGENCY, a public body, corporate
and politic, duly organized and existing under and by virtue of the laws of the State of
California (the "Agency"), for value received hereby promises to pay to the Registered Owner
stated above, or registered assigns (the "Registered Owner"), on the Maturity Date stated above
(subject to any right of prior redemption hereinafter provided for), the Principal Sum stated
above, in lawful money of the United States of America, and to pay interest thereon in like
lawful money from the Interest Payment Date (as hereinafter defined) next preceding the date
of authentication of this Bond, unless (i) this Bond is authenticated on or before an Interest
Payment Date and after the close of business on the fifteenth (15th) day of the month
immediately preceding an Interest Payment Date (the "Record Date"), in which event it shall
bear interest from such Interest Payment Date, or (ii) this Bond is authenticated on or before
August 15, 2010, in which event it shall bear interest from the Dated Date above; provided
however, that if at the time of authentication of this Bond, interest is in default on this Bond, this
Bond shall bear interest from the interest payment date to which interest has previously been
paid or made available for payment on this Bond, until payment of such Principal Sum in full,
at the Interest Rate per annum stated above, payable semiannually on each March 1 and
September 1, commencing September 1, 2010, or, if such day is not a Business Day (as such term
is defined in the Indenture, hereinafter defined), on the next succeeding Business Day (each an
"Interest Payment Date"), calculated on the basis of 360-day year comprised of twelve 30-day
months. Principal hereof and premium, if any, upon early redemption hereof are payable upon
surrender of this Bond at the Principal Corporate Trust Office (as such term is defined in the
Indenture) of The Bank of New York Mellon Trust Company, N.A., as trustee (the "Trustee"), or
at such other place as designated by the Trustee. Interest hereon (including the final interest
payment upon maturity or earlier redemption) is payable by check of the Trustee mailed by first
class mail, postage prepaid, on the Interest Payment Date to the Registered Owner hereof at the
Registered Owner's address as it appears on the registration books maintained by the Trustee as
of the Record Date for which such Interest Payment Date occurs; provided however, that payment
of interest may be by wire transfer to an account in the United States of America to any
Exhibit A 20006.04
Page 1
registered owner of Bonds in the aggregate principal amount of $1,000,000 or more upon
written instructions of any such registered owner filed with the Trustee for that purpose on or
before the Record Date preceding the applicable Interest Payment Date.
This Bond is one of a duly authorized issue of bonds of the Agency designated as
"Tustin Community Redevelopment Agency Tax Allocation Housing Bonds, Series 2010
(Housing Projects)" (the "Bonds"), of an aggregate principal amount of
dollars ($ ), all of like tenor and date (except for such variation, if any, as may be
required to designate varying series, numbers, maturities, interest rates, or redemption and
other provisions) and all issued pursuant to the provisions of Community Redevelopment Law
of the State of California, constituting Part 1 of Division 24 of the California Health and Safety
Code, commencing with section 33640 of said Code (the "Redevelopment Law"), and pursuant
to Resolution No. of the Agency, adopted February 2, 2010, and an Indenture of Trust,
dated as of March 1, 2010, entered into by and between the Agency and the Trustee (the
"Indenture"), authorizing the issuance of the Bonds. Additional bonds, or other obligations may
be issued on a parity with the Bonds, but only subject to the terms of the Indenture. Reference is
hereby made to the Indenture (copies of which are on file at the office of the Agency) and all
indentures supplemental thereto and to the Redevelopment Law for a description of the terms
on which the Bonds are issued, the provisions with regard to the nature and extent of the
Housing Tax Revenues (as that term is defined in the Indenture), and the rights thereunder of
the registered owners of the Bonds and the rights, duties and immunities of the Trustee and the
rights and obligations of the Agency thereunder, to all of the provisions of which Indenture the
Registered Owner of this Bond, by acceptance hereof, assents and agrees.
The Bonds have been issued by the Agency for the purpose of providing funds to (a)
refinance low and moderate income housing activities throughout the geographic boundaries of
the City and, in particular, to repay a reimbursement obligation from the Agency to the City,
relating to the City's write down of land for use for affordable housing purposes, (b) fund a
reserve account for the Bonds, and (c) pay certain expenses of the Agency in issuing the Bonds.
The Bonds are special obligations of the Agency and this Bond and the interest hereon
and on all other Bonds and the interest thereon (to the extent set forth in the Indenture), are
payable from, and are secured by a pledge of, security interest in and lien on the Housing Tax
Revenues (as defined in the Indenture) derived by the Agency from the Redevelopment Project.
There has been created and will be maintained by the Agency, the Special Fund (as
defined in the Indenture) into which Housing Tax Revenues shall be deposited and from which
the Agency shall transfer amounts to the Trustee for payment of the principal of and the interest
and redemption premium, if any, on the Bonds when due. As and to the extent set forth in the
Indenture, all such Housing Tax Revenues are exclusively and irrevocably pledged to and
constitute a trust fund, in accordance with the terms hereof and the provisions of the Indenture
and the Redevelopment Law, for the security and payment or redemption of, including any
premium upon early redemption, and for the security and payment of interest on, the Bonds. In
addition, the Bonds shall be additionally secured at all times by a first and exclusive pledge of,
security interest in and lien upon all of the moneys in the Special Fund, the Debt Service Fund,
the Interest Account, the Principal Account, the Sinking Account, the Reserve Account, and the
Redemption Account (as such terms are defined in the Indenture). Except for the Housing Tax
Revenues and such moneys, no funds or properties of the Agency shall be pledged to, or
otherwise liable for, the payment of principal of or interest or redemption premium, if any, on
the Bonds.
The Bonds maturing on or before September 1, ,are not subject to optional
redemption prior to maturity. The Bonds maturing on or after September 1, ,are subject to
redemption, at the option of the Agency on any date on or after September 1, , as a whole
Exhibit A
Page 2
or in part, from any available source of funds, at a redemption price equal to the principal
amount thereof, together with accrued interest to the date fixed for redemption, without
premium.
The Bonds maturing on September 1, (the Term Bonds") are subject to
mandatory redemption, in part by lot, from Sinking Account payments set forth in the
following schedule on September 1, ,and on September 1 in each year thereafter to and
including September 1, , at a redemption price equal to the principal amount thereof to be
redeemed (without premium), together with interest accrued thereon to the date fixed for
redemption; provided, however, that if some but not all of the Term Bonds have been
optionally redeemed, the total amount of Sinking Account payments to be made subsequent to
such redemption shall be reduced in an amount equal to the principal amount of the Term
Bonds so redeemed by reducing each such future Sinking Account payment on a pro rata basis
(as nearly as practicable) in integral multiples of $5,000, as shall be designated pursuant to
written notice filed by the Agency with the Trustee.
Redemption Date Principal Redemption Date Principal
(September 1) Amount (September 1) Amount
t Maturity.
In lieu of such redemption, the Trustee may apply amounts in the Sinking Account to
the purchase of Term Bonds at public or private sale, as and when and at such prices
(including brokerage and other charges, but excluding accrued interest, which is payable from
the Interest Account) as may be directed by the Agency, except that the purchase price
(exclusive of accrued interest) may not exceed the redemption price then applicable to the
Term Bonds, as set forth in a Written Request of the Agency.
The Bonds maturing on September 1, (the Term Bonds") are subject to
mandatory redemption, in part by lot, from Sinking Account payments set forth in the
following schedule on September 1, ,and on September 1 in each year thereafter to and
including September 1, , at a redemption price equal to the principal amount thereof to be
redeemed (without premium), together with interest accrued thereon to the date fixed for
redemption; provided, however, that if some but not all of the Term Bonds have been
optionally redeemed, the total amount of Sinking Account payments to be made subsequent to
such redemption shall be reduced in an amount equal to the principal amount of the Term
Bonds so redeemed by reducing each such future Sinking Account payment on a pro rata basis
(as nearly as practicable) in integral multiples of $5,000, as shall be designated pursuant to
written notice filed by the Agency with the Trustee.
Redemption Date Principal Redemption Date Principal
(September lZ Amount September 11 Amount
t Maturity.
Exhibit A
Page 3
In lieu of such redemption, the Trustee may apply amounts in the Sinking Account to
the purchase of Term Bonds at public or private sale, as and when and at such prices
(including brokerage and other charges, but excluding accrued interest, which is payable from
the Interest Account) as may be directed by the Agency, except that the purchase price
(exclusive of accrued interest) may not exceed the redemption price then applicable to the
Term Bonds, as set forth in a Written Request of the Agency.
As provided in the Indenture, notice of redemption shall be given by first class mail no
less than thirty (30) nor more than sixty (60) days prior to the redemption date to the respective
registered owners of any Bonds designated for redemption at their addresses appearing on the
Bond registration books maintained by the Trustee, but neither failure to receive such notice nor
any defect in the notice so mailed shall affect the sufficiency of the proceedings for redemption.
If this Bond is called for redemption and payment is duly provided therefor as specified
in the Indenture, interest shall cease to accrue hereon from and after the date fixed for
redemption.
If an Event of Default, as defined in the Indenture, shall occur, the principal of all Bonds
may be declared due and payable upon the conditions, in the manner and with the effect
provided in the Indenture, but such declaration and its consequences may be rescinded and
annulled as further provided in the Indenture.
The Bonds are issuable as fully registered Bonds without coupons in denominations of
$5,000 and any integral multiple thereof. Subject to the limitations and conditions and upon
payment of the charges, if any, as provided in the Indenture, Bonds may be exchanged for a like
aggregate principal amount of Bonds of other authorized denominations and of the same
maturity.
This Bond is transferable by the Registered Owner hereof, in person or by his attorney
duly authorized in writing, at the Principal Corporate Trust Office of the Trustee, but only in
the manner and subject to the limitations provided in the Indenture, and upon surrender and
cancellation of this Bond. Upon registration of such transfer a new fully registered Bond or
Bonds, of any authorized denomination or denominations, for the same aggregate principal
amount and of the same maturity will be issued to the transferee in exchange herefor. The
Trustee may refuse to transfer or exchange (a) any Bonds during the fifteen (15) days prior to
the date established for the selection of Bonds for redemption, or (b) any Bonds selected for
redemption.
The Agency and the Trustee may treat the Registered Owner hereof as the absolute
owner hereof for all purposes, and the Agency and the Trustee shall not be affected by any
notice to the contrary.
The rights and obligations of the Agency and the registered owners of the Bonds may be
modified or amended at any time in the manner, to the extent and upon the terms provided in
the Indenture, but no such modification or amendment shall (a) extend the maturity of or
reduce the interest rate on any Bond or otherwise alter or impair the obligation of the Agency to
pay the principal, interest or redemption premiums (if any) at the time and place and at the rate
and in the currency provided herein of any Bond without the express written consent of the
registered owner of such Bond, (b) reduce the percentage of Bonds required for the written
consent to any such amendment or modification or (c) without its written consent thereto,
modify any of the rights or obligations of the Trustee.
Unless this Bond is presented by an authorized representative of The Depository Trust
Company, a New York corporation ("DTC"), to the Agency or the Trustee for registration of
Exhibit A
Page 4
transfer, exchange, or payment, and any Bond issued is registered in the name of Cede & Co. or
in such other name as is requested by an authorized representative of DTC (and any payment is
made to Cede & Co. or to such other entity as is requested by an authorized representative of
DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE
BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered owner hereof, Cede &
Co., has an interest herein.
This Bond is not a debt of the City of Tustin, the State of California, or any of its political
subdivisions, and neither said City, said State, nor any of its political subdivisions is liable
hereon, nor in any event shall this Bond be payable out of any funds or properties other than
those of the Agency. The Bonds do not constitute an indebtedness within the meaning of any
constitutional or statutory debt limitation or restriction.
It is hereby certified that all of the things, conditions and acts required to exist, to have
happened or to have been performed precedent to and in the issuance of this Bond do exist,
have happened or have been performed in due and regular time and manner as required by the
Redevelopment Law and the laws of the State of California, and that the amount of this Bond,
together with all other indebtedness of the Agency, does not exceed any limit prescribed by the
Redevelopment Law or any laws of the State of California, and is not in excess of the amount of
Bonds permitted to be issued under the Indenture.
This Bond shall not be entitled to any benefit under the Indenture or become valid or
obligatory for any purpose until the Trustee's Certificate of Authentication hereon shall have
been manually signed by the Trustee.
Exhibit A
Page 5
IN WITNESS WHEREOF, the Tustin Community Redevelopment Agency has caused
this Bond to be executed in its name and on its behalf with the facsimile signature of its
Chairman and attested by the facsimile signature of its Secretary, all as of Dated Date stated
above.
By
ATTEST:
Secretary
TUSTIN COMMUNITY
REDEVELOPMENT AGENCY
Chairman
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Bonds described in the within-mentioned Indenture.
Authentication Date:
THE BANK OF NEW YORK MELLON
TRUST COMPANY, N.A., as Trustee
By:
Authorized Signatory
Exhibit A
Page 6
ASSIGNMENT
For value received, the undersigned do(es) hereby sell, assign and transfer unto
(Name, Address and Tax Identification or Social Security Number of Assignee)
the within Certificate and do(es) hereby irrevocably constitute and appoint
attorney, to transfer the same on the registration books of the Trustee, with full power of
substitution in the premises.
Dated:
Signature Guaranteed:
NOTICE: Signature(s) must be guaranteed by an
eligible guarantor institution (banks, stock brokers,
savings and loan associations and credit unions with
membership in an approved signature guarantee
medallion program) pursuant to Securities and
Exchange Commission Rule 17 Ad-15.
NOTICE: The signature(s) on this Assignment must
correspond with the name(s) as written on the face of
the within Certificate in every particular, without
alteration or enlargement or any change whatsoever.
Exhibit A
Page 7
Quint & Thimmig LLP 12/14/09
12/29/09
01/13/10
01/20/10
TUSTIN COMMUNITY REDEVELOPMENT AGENCY
Tax Allocation Housing Bonds, Series 2010
BOND PURCHASE AGREEMENT
2010
Tustin Public Financing Authority
300 Centennial Way
Tustin, California 92780
Tustin Community Redevelopment Agency
300 Centennial Way
Tustin, California 92780
Ladies and Gentlemen:
Piper Jaffray & Co. (the "Underwriter") offers to enter into this Bond Purchase
Agreement (the "Bond Purchase Agreement") with the Tustin Public Financing Authority (the
"Authority") and the Tustin Community Redevelopment Agency (the "Agency"), which will be
binding upon the Authority, the Agency and the Underwriter upon the acceptance hereof by
the Authority and the Agency. This offer is made subject to its acceptance by the Authority and
the Agency by execution of this Bond Purchase Agreement and its delivery to the Underwriter
on or before 9:00 A.M., California time, on the date hereof.
Terms not otherwise defined herein shall have the same meanings as set forth in the
Indenture, described below.
1. Purchase and Sale. Upon the terms and conditions and in reliance upon the
representations, warranties and covenants herein, the Authority hereby agrees to purchase from
the Agency for sale to the Underwriter, the Agency hereby agrees to sell to the Authority, and
the Underwriter hereby agrees to purchase from the Authority for offering to the public, and
the Authority hereby agrees to sell to the Underwriter for such purpose, all (but not less than
all) of the $ Tustin Community Redevelopment Agency Tax Allocation Housing
Bonds, Series 2010 (the "Bonds"), at the purchase price of $ (the "Purchase Price")
(being the principal amount of the Bonds of $ ,less an Underwriter's discount of
$ ), less net original issue discount of $
The Purchase Price is to be paid on the Closing Date (as defined in Section 7 below). The
Bonds shall be dated the Closing Date, and shall bear interest at the rates and shall mature on
the dates and in the principal amounts, all as set forth in the attached Exhibit A.
The Bonds are special, limited obligations of the Agency, payable from, and secured by a
lien on Housing Tax Revenues (as such term is defined in that certain Indenture of Trust, dated
20006.04
as of March 1, 2010 (the "Indenture"), by and between the Agency and The Bank of New York
Mellon Trust Company, N.A., as trustee (the "Trustee"), on a parity with any Parity Debt issued
under and as such term is defined in the Indenture. The Bonds shall bear interest, shall be
subject to mandatory and optional redemption and shall mature all as described in the
Indenture.
The City of Tustin (the "City") has written down the cost of land that has been re-sold
and developed with affordable housing in the MCAS Tustin Project, which units ("Affordable
Units") are encumbered with covenants and deeds of trust that will ensure they remain
affordable for the periods of time required by the Community Redevelopment Law of the State
of California (the "State"), constituting Part 1 of Division 24 of the California Health and Safety
Code (the "Redevelopment Law").
On June 5, 2007, the City and the Agency entered into an agreement, amended on
January 5, 2010 ("Reimbursement Agreement"), pursuant to which the Agency has agreed to
reimburse the City for the difference between the market price of the land on which the
Affordable Units have been developed and the actual subsidized price for which the land was
sold from money deposited in the low and moderate income housing fund for the
Redevelopment Projects and other available sources (the "City Obligation");
The Agency has determined that, due to prevailing financial market conditions and for
other reasons, it is in the best interests of the Agency at this time to prepay a portion of the City
Obligation;
The Bonds are being issued for the purpose of (i) repaying a portion of the City
Obligation, (ii) depositing an amount in the Reserve Account equal to the Reserve Requirement
(as defined in the Indenture), and (iii) paying the costs of issuing the Bonds.
Issuance of the Bonds is authorized by a resolution of the Agency adopted on February
2, 2010 (the "Agency Resolution"), a resolution of the City Council of the City of Tustin,
adopted on February 2, 2010 (the "City Resolution") and a resolution of the Authority adopted
on February 2, 2010 (the "Authority Resolution").
2. Bona Fide Public Offering. The Underwriter agrees to make a bona fide public offering
of all of the Bonds, at prices not in excess of the initial public offering yields or prices set forth
on the cover page of the Official Statement. The Bonds may be offered and sold to certain
dealers at prices lower than such initial public offering prices.
3. Official Statement. The Agency shall deliver or cause to be delivered to the Underwriter
promptly after acceptance of this Bond Purchase Agreement copies of the Official Statement
relating to the Bonds, dated the date hereof (the "Official Statement"). The Agency authorizes
the Official Statement, including the cover page and Appendices thereto and the information
contained therein, to be used in connection with the sale of the Bonds and ratifies, confirms and
approves the use and distribution by the Underwriter for such purpose, prior to the date hereof,
of the Preliminary Official Statement dated 2010 (the "Preliminary Official
Statement"). The Agency deems such Preliminary Official Statement final as of its date for
purposes of Rule 15c2-12 under the Securities Exchange Act of 1934, as amended ("Rule 15c2-
12"), except for information allowed to be omitted by Rule 15c2-12. The Agency also agrees to
deliver to the Underwriter, at the Agency's sole cost and at such address as the Underwriter
shall specify, as many copies of the Official Statement as the Underwriter shall reasonably
request as necessary to comply with paragraph (b)(4) of Rule 15c2-12 with Rule G-32 and all
other applicable rules of the Municipal Securities Rulemaking Board. The Agency agrees to
deliver such copies of the Official Statement within seven (7) business days after the date hereof.
Such Official Statement shall contain all information previously permitted to be omitted by Rule
-2-
15c2-12. The Underwriter agrees to give written notice to the Agency of the date after which the
Underwriter shall no longer be obligated to deliver Official Statements pursuant to paragraph
(b)(4) of Rule 15c2-12 which shall be no later than 25 days after the end of the underwriting
period.
The Underwriter agrees to promptly file a copy of the final Official Statement, including
any supplements prepared by the Agency, with a nationally recognized municipal securities
information repository, and to take any and all other actions necessary to comply with
applicable Securities and Exchange Commission rules and Municipal Securities Rulemaking
Board rules governing the offering, sale and delivery of the Bonds to the ultimate purchasers
thereof.
4. Representations, Warranties and Agreements of the Authority. The Authority represents
and warrants to the Underwriter that, as of the Closing Date:
(a) The Authority is a joint exercise of powers authority organized and existing
under the laws of the State.
(b) The Authority has the full right, power and authority (i) to enter into this
Bond Purchase Agreement, and (ii) to carry out and consummate all other transactions
on its part contemplated by this Bond Purchase Agreement, and the Authority has
complied with all provisions of applicable law in all matters relating thereto.
(c) The Authority has duly authorized (i) the execution, delivery and due
performance by the Authority of this Bond Purchase Agreement, and (ii) the taking of
any and all such action as maybe required on the part of the Authority to carry out, give
effect to and consummate the transactions on its part contemplated by this Bond
Purchase Agreement. All consents or approvals necessary to be obtained by the
Authority in connection with this Bond Purchase Agreement have been received, and
the consents or approvals so received are still in full force and effect.
(d) The information relating to the Authority contained in the Official Statement
is true and correct in all material respects, and the Official Statement does not contain
any untrue or misleading statement of a material fact relating to the Authority or omit to
state any material fact relating to the Authority necessary to make the statements
therein, in the light of the circumstances under which they were made, not misleading.
(e) Neither the execution and delivery by the Authority of this Bond Purchase
Agreement nor the consummation of the transactions on the part of the Authority
contemplated herein or the compliance with the provisions hereof will conflict with, or
constitute on the part of the Authority a violation of, or a breach of or default under, (i)
any statute, indenture, mortgage, note or other agreement or instrument to which the
Authority is a party or by which it is bound, (ii) any provision of the State Constitution,
or (iii) any existing law, rule, regulation, ordinance, judgment, order or decree to which
the Authority (or the members of the Authority or any of its officers in their respective
capacities as such) is subject.
(f) Except as will be specifically disclosed in the Official Statement, there is no
action, suit, proceeding, inquiry or investigation, at law or in equity, before or by any
court, public board or body, which has been served on the Authority or, to the best
knowledge of the Authority, threatened, which in any way questions the powers of the
Authority referred to in paragraph (b) above, or the validity of any proceeding taken by
the Authority in connection with the issuance of the Bonds, or wherein an unfavorable
decision, ruling or finding could materially adversely affect the transactions
-3-
contemplated by this Bond Purchase Agreement or the Indenture, or which, in any way,
could adversely affect the validity or enforceability of the Indenture, the Bonds or this
Bond Purchase Agreement or, to the knowledge of the Authority, which in any way
questions the status of the Bonds under federal or state tax laws or regulations.
(g) Any certificate signed by any official of the Authority and delivered to the
Underwriter in connection with the offer or sale of the Bonds shall be deemed a
representation and warranty by the Authority to the Underwriter as to the truth of the
statements therein contained.
(h) The Authority will furnish such information, execute such instruments and
take such other action in cooperation with the Underwriter and at the expense of the
Underwriter as the Underwriter may reasonably request in order (i) to qualify the Bonds
for offer and sale under the Blue Sky or other securities laws and regulations of such
states and other jurisdictions of the United States as the Underwriter may designate and
(ii) to determine the eligibility of the Bonds for investment under the laws of such states
and other jurisdictions, and will use its best efforts to continue such qualifications in
effect so long as required for the distribution of the Bonds; provided, however, that the
Authority will not be required to execute a special or general consent to service of
process or qualify as a foreign corporation in connection with any such qualification in
any jurisdiction.
(i) All authorizations, approvals, licenses, permits, consents, elections, and orders
of or filings with any governmental authority, legislative body, board, Authority or
commission having jurisdiction in the matters which are required by the Closing Date
for the due authorization of, which would constitute a condition precedent to or the
absence of which would adversely affect the due performance by the Authority of, its
obligations in connection with this Bond Purchase Agreement have been duly obtained
or made and are in full force and effect.
5. Representations, Warranties and Agreements of the Agency. The Agency represents and
warrants to the Underwriter that, as of the Closing Date:
(a) The Agency is a public body, corporate and politic, organized and existing
under the laws of the State, including the Redevelopment Law and is authorized, among
other things, (i) to issue bonds, such as the Bonds, and (ii) to secure the Bonds in the
manner contemplated by the Indenture.
(b) The Agency has the full right, power and authority (i) to enter into the
Reimbursement Agreement, (ii) to enter into the Indenture, (iii) to enter into this Bond
Purchase Agreement, (iv) to issue, sell and deliver the Bonds to the Authority as
provided herein, and (v) to carry out and consummate all other transactions on its part
contemplated by each of the aforesaid documents, and the Agency has complied with all
provisions of applicable law in all matters relating to such transactions.
(c) The Agency has duly authorized (i) the execution and delivery of the Bonds
and the execution, delivery and due performance by the Agency of this Bond Purchase
Agreement and the Indenture, (ii) the distribution and use of the "deemed final"
Preliminary Official Statement and the execution, delivery and distribution of the final
Official Statement, and (iii) the taking of any and all such action as may be required on
the part of the Agency to carry out, give effect to and consummate the transactions on its
part contemplated by such instruments. All consents or approvals necessary to be
obtained by the Agency in connection with the foregoing have been received, and the
consents or approvals so received are still in full force and effect.
-4-
(d) The information relating to the Agency, the City of Tustin (the "City") and
the County of Orange (the "County") contained in the Official Statement is true and
correct in all material respects, and the Official Statement does not contain any untrue or
misleading statement of a material fact relating to the Agency, the City or the County or
omit to state any material fact relating to the Agency, the City or the County necessary
to make the statements therein, in the light of the circumstances under which they were
made, not misleading.
(e) Neither the execution by the Agency of the Indenture and execution and
delivery by the Agency of this Bond Purchase Agreement and of the Bonds nor the
consummation of the transactions on the part of the Agency contemplated herein or
therein or the compliance with the provisions hereof or thereof will conflict with, or
constitute on the part of the Agency a violation of, or a breach of or default under, (i)
any statute, indenture, mortgage, note or other agreement or instrument to which the
Agency is a party or by which it is bound, (ii) any provision of the State Constitution, or
(iii) any existing law, rule, regulation, ordinance, judgment, order or decree to which the
Agency (or the members of the Agency or any of its officers in their respective capacities
as such) is subject.
(f) The Agency has never been in default at any time, as to principal of or interest
on any obligation which it has issued except as otherwise specifically disclosed in the
Official Statement; and the Agency has not entered into any contract or arrangement of
any kind which might give rise to any lien or encumbrance on the Housing Tax
Revenues pledged to the payment of the Bonds except as is specifically disclosed in the
Official Statement.
(g) Except as will be specifically disclosed in the Official Statement, there is no
action, suit, proceeding, inquiry or investigation, at law or in equity, before or by any
court, public board or body, which has been served on the Agency or, to the best
knowledge of the Agency, threatened, which in any way questions the powers of the
Agency referred to in paragraph (b) above, or the validity of any proceeding taken by
the Agency in connection with the issuance of the Bonds, or wherein an unfavorable
decision, ruling or finding could materially adversely affect the transactions
contemplated by this Bond Purchase Agreement or the Indenture, or which, in any way,
could adversely affect the validity or enforceability of the Indenture, the Bonds or this
Bond Purchase- Agreement or, to the knowledge of the Agency, which in any way
questions the status of the Bonds under federal or state tax laws or regulations.
(h) Any certificate signed by any official of the Agency and delivered to the
Underwriter in connection with the offer or sale of the Bonds shall be deemed a
representation and warranty by the Agency to the Underwriter as to the truth of the
statements therein contained.
(i) The Agency has not been notified of any listing or proposed listing by the
Internal Revenue Service to the effect that it is a bond issuer whose arbitrage
certifications may not be relied upon.
(j) The Agency will furnish such information, execute such instruments and take
such other action in cooperation with the Underwriter and at the expense of the
Underwriter as the Underwriter may reasonably request in order (i) to qualify the Bonds
for offer and sale under the Blue Sky or other securities laws and regulations of such
states and other jurisdictions of the United States as the Underwriter may designate and
(ii) to determine the eligibility of the Bonds for investment under the laws of such states
-5-
and other jurisdictions, and will use its best efforts to continue such qualifications in
effect so long as required for the distribution of the Bonds, provided; however, that the
Agency will not be required to execute a special or general consent to service of process
or qualify as a foreign corporation in connection with any such qualification in any
jurisdiction.
(k) All authorizations, approvals, licenses, permits, consents, elections, and
orders of or filings with any governmental authority, legislative body, board, agency or
commission having jurisdiction in the matters which are required by the Closing Date
for the due authorization of, which would constitute a condition precedent to or the
absence of which would adversely affect the due performance by the Agency of, its
obligations in connection with the Indenture have been duly obtained or made and are
in full force and effect.
(1) Between the date of this Bond Purchase Agreement and the Closing Date, the
Agency will not offer or issue any bonds, notes or other obligations for borrowed money
not previously disclosed to the Underwriter.
(m) The issuance and sale of the Bonds is not subject to any transfer or other
documentary stamp taxes of the State or any political subdivision thereof.
(n) The Agency will apply the proceeds of the Bonds in accordance with the
Indenture.
(o) As of the time of acceptance hereof and as of the Closing Date, except as
otherwise disclosed in the Official Statement, the Agency has complied with the filing
requirements of Sections 33080 to 33080.6 and with Sections 33334.2, 33334.3 and 33334.6
of the Redevelopment Law.
(p) The Agency has never failed to comply in all material respects with any
undertaking of the Agency pursuant to Rule 15c2-12.
6. Covenants of the Agency. The Agency covenants with the Underwriter as of the Closing
Date as follows:
(a) The Agency covenants and agrees that it will execute a continuing disclosure
certificate, constituting an undertaking to provide ongoing disclosure about the Agency,
for the benefit of the owners of the Bonds as required by Section (b)(5)(i) of Rule 15c2-12,
substantially in the form attached to the Preliminary Official Statement (the "Disclosure
Certificate").
(b) The Agency agrees to cooperate with the Underwriter in the preparation of
any supplement or amendment to the Official Statement deemed necessary by the
Underwriter to comply with the Rule and any applicable rule of the Municipal Securities
Rulemaking Board.
(c) If at any time prior to the Closing Date, any event occurs with respect to the
Agency as a result of which the Official Statement, as then amended or supplemented,
might include an untrue statement of a material fact, or omit to state any material fact
necessary to make the statements therein, in light of the circumstances under which they
were made, not misleading, the Agency shall promptly notify the Underwriter in
writing of such event. Any information supplied by the Agency for inclusion in any
amendments or supplements to the Official Statement will not contain any untrue or
misleading statement of a material fact relating to the Agency or omit to state any such
-6-
fact necessary to make the statements therein, in the light of the circumstances under
which they were made, not misleading.
(d) The Agency will not knowingly take or omit to take any action, which action
or omission will in any way cause the proceeds from the sale of the Bonds to be applied
in a manner other than as provided in the Indenture.
7. Closing. On 2010, or at such other date and times as shall have been
mutually agreed upon by the Agency, the Authority and the Underwriter (the "Closing Date"),
the Agency will deliver or cause to be delivered the Bonds to the Authority, and the Authority
shall deliver or cause to be delivered the Bonds to the Underwriter, and the Agency shall
deliver or cause to be delivered to the Underwriter the certificates, opinions and documents
hereinafter mentioned, each of which shall be dated as of the Closing Date. The activities
relating to the execution and delivery of the Bonds, opinions and other instruments as described
in Section 8 of this Bond Purchase Agreement shall occur on the Closing Date. The delivery of
the certificates, opinions and documents as described herein shall be made at the offices Quint
& Thimmig LLP, in San Francisco, California ("Bond Counsel"), or at such other place as shall
have been mutually agreed upon by the Agency, the Authority and the Underwriter. Such
delivery is herein called the "Closing."
The Bonds will be prepared and physically delivered to the Trustee on the Closing Date
in the form of a separate single fully registered bond for each of the maturities of the Bonds. The
Bonds shall be registered in the name of the Cede & Co., as registered owner and nominee for
The Depository Trust Company ("DTC"), New York, New York. The Bonds will be
authenticated by the Trustee in accordance with the terms and provisions of the Indenture and
shall be delivered to DTC prior to the Closing Date as required by DTC to assure delivery of the
Bonds on the Closing Date. It is anticipated that CUSIP identification numbers will be printed
on the Bonds, but neither the failure to print such number on any Bonds nor any error with
respect thereto shall constitute cause for a failure or refusal by the Underwriter to accept
delivery of and pay for the Bonds in accordance with the terms of this Bond Purchase
Agreement.
At or before 10:00 a.m., San Francisco Time, on the Closing Date, the Agency will
deliver, or cause to be delivered, the Bonds to DTC, in definitive form duly executed and
authenticated by the Trustee, and the Underwriter will pay the Purchase Price of the Bonds by
delivering to the Trustee, for the account of the Agency a wire transfer in federal funds of the
Purchase Price payable to the order of the Trustee.
8. Closing Conditions. The obligations of the Underwriter hereunder shall be subject to the
performance by the Agency of its obligations hereunder at or prior to the Closing Date and are
also subject to the following conditions:
(a) the representations, warranties and covenants of the Agency contained herein
shall be true and correct in all material respects as of the Closing Date;
(b) as of the Closing Date, there shall have been no material adverse change in
the financial condition of the Agency;
(c) as of the Closing Date, all official action of the Agency relating to this Bond
Purchase Agreement, the Disclosure Certificate and the Indenture shall be in full force
and effect;
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(d) as of the Closing Date, the Underwriter shall receive the following
certificates, opinions and documents, in each case satisfactory in form and substance to
the Underwriter:
(i) a copy of the Indenture, as duly executed and delivered by the Agency
and the Trustee;
(ii) a copy of the Disclosure Certificate, as duly executed and delivered by
the Agency;
(iii) an opinion of Bond Counsel, dated the Closing Date and addressed to
the Underwriter, in the form attached as Appendix D to the Official Statement;
(iv) a certificate, dated the Closing Date, of the Agency executed by the
Chairman or Executive Director of the Agency (or other duly appointed officer of
the Agency authorized by the Agency by resolution of the Agency) to the effect
that (A) there is no action, suit, proceeding or investigation at law or in equity
before or by any court, public board or body which has been served on the
Agency or, to the knowledge of the Agency, threatened against or affecting the
Agency to restrain or enjoin the Agency's participation in, or in any way
contesting the existence of the Agency or the powers of the Agency with respect
to, the transactions contemplated by this Bond Purchase Agreement and the
Indenture, and consummation of such transactions; and (B) the representations
and warranties of the Agency contained in this Bond Purchase Agreement are
true and correct in all material respects, and the Agency has complied with all
agreements and covenants and satisfied all conditions to be satisfied at or prior
to the Closing Date as contemplated by the Indenture and this Bond Purchase
Agreement;
(v) an opinion of the City Attorney, counsel to the Agency, dated the
Closing Date and addressed to the Agency and the Underwriter to the effect that:
(A) the Agency is a public body, corporate and politic, organized
and existing under the laws of the State, including the Redevelopment
Law;
(B) the Agency Resolution approving and authorizing the
execution and delivery of the Bonds, the Indenture, this Bond Purchase
Agreement and the Official Statement was duly adopted at a meeting of
the Agency which was called and held pursuant to law and with all
public notice required by law and at which a quorum was present and
acting throughout and has not been amended from the date of its
adoption;
(C) the Reimbursement Agreement, the Indenture and this Bond
Purchase Agreement are valid and binding agreements of the Agency,
enforceable against the Agency in accordance with their respective terms
subject to the laws relating to bankruptcy, insolvency, reorganization of
creditors' rights generally and to the application of equitable principles;
(D) All payments required to be paid by the Agency to the City
pursuant to the Reimbursement Agreement are legally payable from the
Agency's Low and Moderate Income Housing Fund pursuant to section
33334.3 of the Redevelopment Law.
-8-
(E) to the best of such counsel's actual knowledge after due
inquiry, there is no action, suit, proceeding or investigation at law or in
equity before or by any court, public board or body pending with respect
to which the Agency has been served with process or threatened in
writing against the Agency to restrain or enjoin the Agency's
participation in, or in any way contesting the existence of the Agency or
the powers of the Agency with respect to, the transactions on the part of
the Agency contemplated by the Official Statement, this Bond Purchase
Agreement and the Indenture and the consummation of such
transactions;
(F) to the best of such counsel's actual knowledge after due
inquiry, there is no action, suit, proceeding or investigation pending with
respect to which the Agency has been served with process, or threatened
in writing, which if adversely determined, could materially adversely
affect (a) the financial position of the Agency; (b) the ability of the Agency
to perform its obligations under the Indenture; or (c) the allocation and
payment of the Housing Tax Revenues to the Agency and the other
security for the Bonds provided by the Indenture; and
(G) to the best of such counsel's actual knowledge after due
inquiry, the execution and delivery by the Agency of the Bonds, the
Indenture, this Bond Purchase Agreement and compliance by the Agency
with the provisions thereof, under the circumstances contemplated
thereby, do not and will not conflict with or constitute on the part of the
Agency a breach of or default under any agreement or other instrument
to which the Agency is a party or by which it is bound (other than the
Indenture) or any court order or consent decree to which the Agency is
subject;
(vi) an opinion of counsel to the Trustee, dated the Closing Date and
addressed to the Agency and the Underwriter, to the effect that:
(A) The Trustee is a national banking association organized and
existing under the laws of the United States of America, having full
power to enter into, accept and administer the trust created under the
Indenture;
(B) The Indenture has been duly authorized, executed and
delivered by the Trustee and the Indenture constitutes a legal, valid and
binding obligation of the Trustee enforceable in accordance with its
terms, except as enforcement thereof may be limited by bankruptcy,
insolvency or other laws affecting the enforcement of creditors' rights
generally and by the application of equitable principles, if equitable
remedies are sought; and
(C) No consent, approval, authorization or other action by any
governmental or regulatory authority having jurisdiction over the Trustee
that has not been obtained is or will be required for the execution and
delivery of the Indenture or the consummation of the transactions
contemplated by the Indenture;
-9-
(vii) a certificate, dated the Closing Date, of the Trustee, signed by a duly
authorized officer of the Trustee, to the effect that (A) the Trustee is duly
organized and validly existing as a corporation, with full corporate power to
undertake the trust of the Indenture; (B) the Trustee has duly authorized,
executed and delivered the Indenture and by all proper corporate action has
authorized the acceptance of the trust of the Indenture; and (C) to the best of
such officer's knowledge, there is no action, suit, proceeding or investigation at
law or in equity before or by any court, public board or body which has been
served on the Trustee (either in state or federal courts), or to the knowledge of
the Trustee which would restrain or enjoin the execution or delivery of the
Indenture, or which would affect the validity or enforceability of the Indenture,
or the Trustee's participation in, or in any way contesting the powers or the
authority of the Trustee with respect to, the transactions contemplated by the
Indenture, or any other agreement, document or certificate related to such
transactions;
(viii) a supplemental opinion of Bond Counsel, dated the Closing Date
and addressed to the Underwriter, to the effect that:
(A) this Bond Purchase Agreement has been duly authorized,
executed and delivered by the Agency, and assuming the valid execution
and delivery by the Underwriter, is valid and binding upon the Agency,
subject to the laws relating to bankruptcy, insolvency, reorganization of
creditors' rights generally and to the application of equitable principles;
(B) the Bonds are exempt from registration pursuant to Section
3(a)(2) of the Securities Act of 1933, as amended, and the Indenture are
exempt from qualification pursuant to the Trust Indenture Act of 1939, as
amended; and
(C) the statements contained in the Official Statement under the
captions "THE BONDS," "SECURITY FOR THE BONDS" and
"APPENDIX C" thereto are accurate insofar as such statements purport
to expressly summarize certain provisions of the Bonds and the
Indenture;
(ix) an opinion of Quint & Thimmig LLP, as disclosure counsel to the
Agency, dated the Closing Date and addressed to the Agency and the
Underwriter stating that based upon its participation in the preparation of the
Official Statement and without having undertaken to determine independently
the fairness, accuracy or completeness of the statements contained in the Official
Statement, such counsel has no reason to believe that, as of the date of the
Closing, the Official Statement (excluding therefrom the reports, financial and
statistical data and forecasts therein, the information included in the Appendices
thereto, information relating to The Depository Trust Company and its book-
entry system as to which no opinion need be expressed) contains any untrue
statement of a material fact or omits to state a material fact required to be stated
therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading;
(x) an opinion of Stradling Yocca Carlson & Rauth, Newport Beach,
California, Underwriter's Counsel, dated the Closing Date and addressed to the
Underwriter, in such form as shall be satisfactory to the Underwriter;
-10-
(xi) an Arbitrage Certificate in the form satisfactory to Bond Counsel;
(xii) the final Official Statement executed by an authorized officer of the
Agency;
(xiii) certified copies of the Agency Resolution, the City Resolution and
the Authority Resolution;
(xiv) specimen Bonds;
(xv) the rating letter from Standard & Poor's Ratings Services assigning
the rating of " " to the Bonds;
(xvi) a certificate of the Authority, dated the date of the Closing, signed
on behalf of the Authority by the Executive Director or other duly authorized
officer of the Authority to the effect that this Bond Purchase Agreement has been
duly authorized, executed and delivered by the Authority, and is duly
enforceable in accordance with its terms;
(xvii) a certificate of an officer of HdL Coren & Cone, dated the date of
the Closing, addressed to the Agency and the Underwriter, to the effect that, to
the best of his knowledge, the assessed valuations and other fiscal information
contained in the Official Statement, including such firm's Fiscal Consultant's
Report attached thereto as Appendix F, are presented fairly and accurately; and
(xviii) such additional legal opinions, certificates, instruments and other
documents as the Underwriter may reasonably deem necessary to evidence the
truth and accuracy as of the time of the Closing Date of the representations and
warranties of the Agency contained in this Bond Purchase Agreement and the
due performance or satisfaction by the Agency at or prior to such time of all
agreements then to be performed and all conditions then to be satisfied by the
Agency pursuant to this Bond Purchase Agreement.
9. Termination. The Underwriter shall have the right to cancel its obligations to purchase
the Bonds if between the date hereof and the Closing Date:
(a) legislation shall have been enacted, or considered for enactment with an
effective date prior to the Closing Date, or a decision by a court of the United States shall
have been rendered, the effect of which is that of the Bonds, including any underlying
obligations, or the Indenture, as the case may be, is not exempt from the registration,
qualification or other requirements of the Securities Act of 1933, as amended and as then
in effect, the Securities Exchange Act of 1934, as amended and as then in effect, or the
Trust Indenture Act of 1939, as amended and as then in effect; or
(b) a stop order, ruling, regulation or offering circular by the Securities and
Exchange Commission or any other governmental agency having jurisdiction of the
subject matter shall have been issued or made or any other event occurs, the effect of
which is that the issuance, offering or sale of the Bonds, including any underlying
obligations, or the execution of the Indenture, as contemplated hereby or by the Official
Statement, is or would be in violation of any provisions of the federal securities laws,
including the Securities Act of 1933, as amended and as then in effect, the Securities
Exchange Act of 1934, as amended and as then in effect, or the Trust Indenture Act of
1939, as amended and as then in effect; or
-11-
(c) any event shall have occurred or any information shall have become known to
the Underwriter which causes the Underwriter to reasonably believe that the Official
Statement as then amended or supplemented includes an untrue statement of a material
fact, or omits to state any material fact necessary to make the statements therein, in light
of the circumstances under which they were made, not misleading; or
(d) there shall have occurred any outbreak of hostilities or any national or
international calamity or crisis, including a financial crisis, the effect of which on the
financial markets of the United States is such as, in the reasonable judgment of the
Underwriter, would materially adversely affect the market for or market price of the
Bonds; or
(e) there shall be in force a general suspension of trading on the New York Stock
Exchange, the effect of which on the financial markets of the United States is such as, in
the reasonable judgment of the Underwriter, would materially adversely affect the
market for or market price of the Bonds; or
(f) a general banking moratorium shall have been declared by federal, New York
or State authorities; or
(g) any proceeding shall be pending or threatened by the Securities and
Exchange Commission against the Agency; or
(h) additional material restrictions not in force as of the date hereof shall have
been imposed upon trading in securities generally by any governmental authority or by
any national securities exchange; or
(i) the New York Stock Exchange or other national securities exchange, or any
governmental or regulatory authority, shall impose, as to the Bonds or obligations of the
general character of the Bonds, any material restrictions not now in force, or increase
materially those now in force, with respect to the extension of credit by, or the charge to
the net capital requirements of the Underwriter; or
(j) any change, which in the reasonable opinion of the Underwriter, materially
adversely affects the marketability of the Bonds or, the financial condition of the
Agency.
10. Contingency of Obligations. The obligations of the Agency hereunder are subject to the
performance by the Underwriter of its obligations hereunder.
11. Duration of Representations, Warranties, Agreements and Covenants. All representations,
warranties, agreements and covenants of the Agency shall remain operative and in full force
and effect, regardless of any investigations made by or on behalf of the Underwriter or the
Agency and shall survive the Closing Date.
12. Expenses. The Agency will pay or cause to be paid all reasonable expenses incident to
the performance of its obligations and the obligations of the Authority under this Bond
Purchase Agreement, including, but not limited to, mailing or delivery of the Bonds, costs of
printing the Bonds, printing, distribution and delivery of the Preliminary Official Statement, the
Official Statement and any amendment or supplement thereto, the fees and disbursements of
Bond Counsel, Disclosure Counsel, and counsel to the Agency, the fees and expenses of the
Agency's accountants and fiscal consultants, fees of the Agency's financial advisor, any fees
charged by investment rating agencies for the rating of the Bonds and fees of the Trustee. In the
event this Bond Purchase Agreement shall terminate because of the default of the Underwriter,
-12-
the Agency will, nevertheless, pay, or cause to be paid, all of the expenses specified above. The
Underwriter shall pay the fees and expenses of any counsel retained by it, all advertising
expenses incurred in connection with the public offering of the Bonds, CDIAC fees, CUSIP fees
and all other expenses incurred by it in connection with the public offering and distribution of
the Bonds, fees (including out-of-pocket expenses and related regulatory expenses).
13. Notices. Any notice or other communication to be given to the Agency or the
Authority under this Bond Purchase Agreement maybe given by delivering the same in writing
to Mr. William A. Huston, Executive Director, Tustin Community Redevelopment Agency, 300
Centennial Way, Tustin, CA 92780, and any notice or other communication to be given to the
Underwriter under this Bond Purchase Agreement may be given by delivering the same in
writing to Piper Jaffray & Co., 53 Vantis Drive, Aliso Viejo, CA 92656, Attention: Ms. Katherine
A. Koster, Senior Vice President.
14. Parties in Interest. This Bond Purchase Agreement is made solely for the benefit of the
Agency, the Authority and the Underwriter (including the successors or assigns of the
Underwriter) and no other person, including any purchaser of the Bonds, shall acquire or have
any right hereunder or by virtue hereof.
15. Governing Law. This Bond Purchase Agreement shall be governed by and construed
in accordance with the laws of the State.
16. Headings. The headings of the paragraphs of this Bond Purchase Agreement are
inserted for convenience of reference only and shall not be deemed to be a part hereof.
17. Severability. In case any one or more of the provisions contained herein shall for any
reason be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other provision hereof.
18. Effectiveness. This Bond Purchase Agreement shall become effective upon acceptance
hereof by the Authority and the Agency.
-13-
19. Counterparts. This Bond Purchase Agreement may be executed in several
counterparts which together shall constitute one and the same instrument.
Accepted and agreed to as of
the date first above written:
TUSTIN PUBLIC FINANCING AUTHORITY
By
William A. Huston
Executive Director
TUSTIN COMMUNITY REDEVELOPMENT
AGENCY
By
William A. Huston
Executive Director
Very truly yours,
PIPER JAFFRAY & CO.
BY
Name
Title
-14-
EXHIBIT A TO THE
BOND PURCHASE AGREEMENT
TUSTIN COMMUNITY REDEVELOPMENT AGENCY
Tax Allocation Housing Bonds, Series 2010
MATURITY SCHEDULE
Maturity Date Principal Interest Reoffering
(September 1) Amount Rate Price
REDEMPTION PROVISIONS
Optional Redemption of Bonds. The Bonds maturing on or before September 1, ,are not subject
to optional redemption prior to maturity. The Bonds maturing on or after September 1, ,are subject
to redemption, at the option of the Agency on any date on or after September 1, , as a whole or in
part, from any available source of funds, at a redemption price equal to the principal amount thereof,
together with accrued interest to the date fixed for redemption, without premium.
Sinking Account Redemption. The Bonds maturing on September 1, (the " Term Bonds")
are subject to mandatory redemption, in part by lot, from Sinking Account payments set forth in the
following schedule on September 1, ,and on September 1 in each year thereafter to and including
September 1, , at a redemption price equal to the principal amount thereof to be redeemed (without
premium), together with interest accrued thereon to the date fixed for redemption; provided, however, that
if some but not all of the Term Bonds have been optionally redeemed, the total amount of Sinking
Account payments to be made subsequent to such redemption shall be reduced in an amount equal to the
principal amount of the Term Bonds so redeemed by reducing each such future Sinking Account
payment on a pro rata basis (as nearly as practicable) in integral multiples of $5,000, as shall be designated
pursuant to written notice filed by the Agency with the Trustee.
Exhibit A
Page 1
Redemption Date Principal Redemption Date Principal
(September 1) Amount (September 1) Amount
t Maturity.
The Bonds maturing on September 1, (the " Term Bonds") are subject to mandatory
redemption, in part by lot, from Sinking Account payments set forth in the following schedule on
September 1, ,and on September 1 in each year thereafter to and including September 1, , at a
redemption price equal to the principal amount thereof to be redeemed (without premium), together with
interest accrued thereon to the date fixed for redemption; provided, however, that if some but not all of the
Term Bonds have been optionally redeemed, the total amount of Sinking Account payments to be
made subsequent to such redemption shall be reduced in an amount equal to the principal amount of the
Term Bonds so redeemed by reducing each such future Sinking Account payment on a pro rata basis
(as nearly as practicable) in integral multiples of $5,000, as shall be designated pursuant to written notice
filed by the Agency with the Trustee.
Redemption Date Principal Redemption Date Principal
(September 1) Amount (September 1) Amount
t Maturity.
Exhibit A
Page 2
i'RELI~iINARY OFE1C[AL 5TA'TE~iENT DATED , '010
NEW ISSUE-BOOK-ENTRY ONLY RATING
- See "RATING" herein.
In [he opinion of Quint &Thimmig LLP, San Francisco, California, Bond Counsel, subject, however, to certain qualifications described in this Official Statement, under
- existing law, interest on the Bonds (i) is excludable from gross income of the owners thereof for federal income tax purposes, (ii) is not included as an item of tax
- - preference in computing the federal alternative minimum tax for individuals and corporations, and (iii) is not taken into account in computing adjusted current
earnings, which is used as an adjustment in determining the federal alternative minimum tax for certain corporations. hi addition, in the opinion of Bond Counsel,
interest on the Bonds is exempt from personal income taxation imposed by the State of Califomia. See "TAX MATTERS" herein.
= TUSTI N
" = ~ ~ ><.
' ~ TUSTIN COMMUNITY REDEVELOPMENT AGENCY
- __ (Orange County, California)
= Tax Allocation Housing Bonds, Series 2010
=r . ', _
- ~~' ~: f1~~N FIIItIN1
- li,i~',inin(,iniR 1'-~~i
- - Dated: Date of Delivery Due: September 1, as shown below
- ' Proceeds from the sale of the $ "Tustin Community Redevelopment Agency Tax Allocation Housing Bonds, Series 2010 (the "Bonds"), will be used by the Tustin Community
- _ Redevelopment Agency (the "Agency") to (a) refinance low and moderate income housing activities throughout the geographic boundaries of the City and, in particular, to repay a
-_ reimbursement obligation from the Agency to the City, relating to the City's write down of land for use Eor affordable housing purposes, (b) fund a reserve account for the Bonds, and
(c) provide for the costs of issuing the Bonds. See "FINANCING PLAN" herein.
_ Interest on the Bonds will be payable semi-annually on each March 1 and September 1, commencing September 1, 2010 (each, an "Interest Payment Date"). The Bonds will be issued in
_ fully registered form without coupons and will be registered in the name of Cede & Co., as nominee for The Depository Trust Company, New York, New York ("DTC"). DTC will act
- as securities depository for the Bonds. Purchases of beneficial interests in the Bonds wiB be made thbook-entry form only th denominations of $5,000 or any integral multiple thereof.
- Purchasers of such beneficial interests will not receive physical certificates representing their interests in the Bonds. Payment of principal of, interest and premium, if any, on the Bonds
_ will be made directly to DTC or its nominee, Cede & Co., so long as DTC or Cede & Co. is the registered owner of the Bonds. Disbursement of such payments to the DTC Participants
_ _ (as defined herein) is the responsibility of DTC and disbursement of such payments to the Beneficial Owners (as defined herein) is the responsibility of the DTC Participants, as more
fully described herein. See "THE BONDS-Book-Entry System" herein.
- The Bonds will be issued under and pursuant to an Indenture of Trust, dated as of March 1, 2010 (the "Indenture'), by and between the Agency and The Bank of New York Mellon
- - Trust Company, N.A., as trustee (the "Trustee"). The Bonds are special obligations of the Agency and are payable solely from and secured by a pledge of the Housing Tax Revenues (as
defined herein), subject to the provisions of the Indenture permitting the application thereof for other purposes, and by a pledge of amounts in certain funds and accounts established
J under the Indenture, as further discussed herein.
_ - The Bonds are subject to optional and mandatory sinking account redemption prior to maturity. See "THE BONDS-Redemption" herein.
THE BONDS ARE SPECIAL OBLIGATIONS OF THE AGENCY PAYABLE SOLELY FROM THE HOUSING TAX REVENUES, AS DESCRIBED HEREIN, AND AMOUNTS IN
CERTAIN FUNDS AND ACCOUNTS MAINTAINED UNDER THE INDENTURE AND ARE NOT A DEBT OF THE AUTHORITY, THE CITY OR THE STATE OF CALIFORNIA
- (THE "STATE") OR ANY POLITICAL SUBDIVISIONS THEREOF (OTHER THAN THE AGENCY, TO THE LIMITED EXTENT SET FORTH IN THE INDENTURE), AND NONE OF
- THE AUTHORITY, THE CITY OR THE STATE OR ANY POLITICAL SUBDMSIONS THEREOF (OTHER THAN THE AGENCY) IS LIABLE THEREFOR. THE BONDS ARE NOT
= PAYABLE FROM, AND ARE NOT SECURED BY, ANY FUNDS OF THE AGENCY, OTHER THAN THE HOUSING TAX REVENUES PLEDGED PURSUANT TO THE INDENTURE.
THE BONDS DO NOT CONSTITUTE AN INDEBTEDNESS WITHIN THE MEANING OF ANY CONSTITUTIONAL OR STATUTORY DEBT LIMITATION OR RESTRICTION.
- NEITHER THE MEMBERS OF THE AGENCY NOR ANY PERSONS RESPONSIBLE FOR THE EXECUTION OF THE BONDS IS LIABLE PERSONALLY FOR PAYMENT OF THE
- BONDS BY REASON OF THEIR ISSUANCE.
MATURITY DATES PRINCIPAL AMOUNTS, INTEREST RATES, PRICES OR YIELDS AND CUSIPS'
- $ Serial Bonds
- CUSIP Prefix: t
Maturity Principal Interest CUSIP Maturity Principal Interest CUSIP
-- (September l] ~1 t~gynt R~tfl Yic1d ~Xt (September 1) Am n Rate Yi Suffixt
$ _% Term Bonds due September 1, J Price: _%, to Yield _%; CUSIP: t
- ~ $ _% Tenn Bonds due September 1, _~ Price: _%, to Yield _%; CUSIP: _t
_ -_ This cover page is not intended to be a summary of the Bonds or the security therefor. Investors are advised to read the Official Statement in its entirety to obtain information essential
to the making of an informed investment decision with respect to the Bonds.
- The Bonds are offered when, as and if issued and accepted by the Underwriter, subject to the approval as to their legality by Quint &Thimmig LLP, San Francisco, California, Bond
- Counsel. Certain other legal matters related to this offering will be passed upon for the Authority and the Agency by Woodruff, Spradlin & Smart, P.C., Costa Mesa, California, Agency
- Counsel, and by Quint &Thimmig LLP, San Francisco, Califomia, as Disclosure Counsel. Certain legal matters related to this offering will be passed upon for the Underwriter by
' _ Stradling Yocca Carlson & Rauth, Newport Beach, California, as Underwriter's Counsel. It is expected that the Bonds in definitive form will be available for delivery to DTC in New
= York, New York on or about 2010.
PiperJaffray
February ~ 2010
"Preliminary, subject to change.
t Copyright 2010, American Bankers Association. CUSIP® is a registered trademark of the American Bankers Association. CUSIP data herein is provided by the CUSIP Service Bureau, operated by
Standard & Poor's, a division of The McCraw-Hill Companies, Inc. This data is not intended to create a database and does not serve in any way as a substitute for the CUSIP Services Bureau. CUSIP
numbers have been assigned by an independent company not affiliated with the Agency and are included solely for the convenience of the registered owners of the Bonds. The Agency is not responsible
for the selection or uses of these CUSIP numbers, and no representation is made as to their correctness on the 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.
No dealer, broker, salesperson or other person has been authorized by the Agency to give any
information or to make any representations in connection with the offeror 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 Agency. This Official Statement does not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of the Bonds by a person in any jurisdiction in which
it is unlawful for such person to make such an offer, solicitation or sale.
This Official Statement is not to be construed as a contract with the purchasers 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 information set forth herein has been obtained from sources which are believed to be reliable
but such information is not guaranteed as to accuracy or completeness. The information and expressions of
opinions 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 Agency since the date hereof. 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 part of this transaction but the Underwriter does not guarantee
the accuracy or completeness of such information. All summaries of the Indenture and other documents are
made subject to the provisions of such documents and do not purport to be complete statements of any or all
such provisions.
While the City of Tustin maintains an Internet website for various purposes, none of the
information on such website is incorporated by reference herein or intended to assist investors in making
any investment decision or to provide any continuing information with respect to the Bonds.
This Official Statement is submitted in connection with the sale of the Bonds referred to herein and
may not be reproduced or used, in whole or in part, for any other purpose.
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITER MAY OVER-ALLOT OR
EFFECT TRANSACTIONS WHICH STABILIZE OR MAIN'T'AIN THE MARKET PRICE OF THE BONDS
AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME. THE UNDERWRITER MAY
OFFER AND SELL THE BONDS TO CERTAIN DEALERS AND DEALER BANKS AND BANKS ACTING
AS AGENT AT PRICES LOWER THAN THE PUBLIC OFFERING PRICES STATED ON THE COVER
PAGE HEREOF AND SAID PUBLIC OFFERING PRICES MAY BE CHANGED FROM TIME TO TIME BY
THE UNDERWRITER.
This Official Statement contains forward looking statements by the Agency concerning future
conditions affecting the Agency, the City, the State and the United States which may relate to its business
operations and financial condition of the Agency. The Official Statement contains the words or phrases "will
likely result;' "are expected to;' "will continue;' "is anticipated;' "estimate;' "project;' "forecast;' "expect;'
"intend" or variations of those terms to identify "forward looking statements" within the meaning of the
U.S. Private Securities Litigation Reform Act of 2000 Section 21E of the U.S. Securities and Exchange Act of
1934, as amended, and Section 27A of the U.S. Securities and Exchange Act of 1933, as amended. You should
not rely on these forward-looking statements which speak only as to the Agency's expectations as of the
date of this Official Statement. Such statements are subject to risks and uncertainties that could cause actual
results to differ materially from those contemplated in such forward-looking statements. Except as required
bylaw, neither the Agency, the City or the Underwriter undertake any duty to update any forward looking
statements after the date of this Official Statement, either to confirm any statement to reflect actual results or
to reflect the occurrence of unanticipated events.
THE BONDS HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, IN RELIANCE UPON AN EXCEPTION FROM THE REGISTRATION REQUIREMENTS
CONTAINED IN SECTION 3(a)(2) OF SUCH ACT. THE BONDS HAVE NOT BEEN REGISTERED OR
QUALIFIED UNDER THE SECURITIES LAWS OF ANY STATE. THE INDENTURE HAS NOT BEEN
QUALIFIED UNDER THE TRUST INDENTURE ACT OF 1939, AS AMENDED, IN RELIANCE UPON AN
EXEMPTION CONTAINED IN SUCH ACT.
TABLE OF CONTENTS
Page
INTRODUCTION ............................................................................ ......1
General .......................................................................................... ...... l
Purpose of Issuance .................................................................... ......1
The City ........................................................................................ ......1
The Agency .................................................................................. ...... 2
The Redevelopment Project ....................................................... ......2
Tax Allocation Financing ........................................................... ...... 3
The Bonds ..................................................................................... ......3
Source of Payment for the Bonds .............................................. ......3
Reserve Account .......................................................................... ......4
Parity Debt ................................................................................... ......4
Fiscal Consultant's Report ......................................................... ......4
Risk Factors .................................................................................. ...... 4
Continuing Disclosure ................................................................ ...... 4
Tax Matters ................................................................................... ...... 5
Professionals Involved in the Offering .................................... ......5
Forward-Looking Statements .................................................... ......5
Other Matters ............................................................................... ...... 6
Other Information ....................................................................... ...... 6
ESTIMATED SOURCES AND USES OF FUNDS 7
:::::::::::::::::::::::
FINANCING PLAN .............................................. ::::::
7
DEBT SERVICE SCHEDULE .......................................................... ......8
THE BONDS ..................................................................................... ...... 8
General Provisions ...................................................................... ......8
Redemption .................................................................................. ...... 9
Book-Entry System ..................................................................... ..... l l
TAX ALLOCATION FINANCING .............................................. .....12
General ......................................................................................... .....12
Allocation of Taxes ..................................................................... .....12
SECURITY FOR THE BONDS ...................................................... .....13
Pledge of Housing Tax Revenues ............................................ .....13
Security of Bonds; Equal Security ............................................ .....14
Special Fund; Deposit of Housing Tax Revenues .................. ..... 14
Deposit of Amounts by Trustee ............................................... .....14
County Payment of Tax Increment .......................................... .....16
Issuance of Parity Debt .............................................................. .....16
Issuance of Subordinate Debt ................................................... .....18
THE CTTY ......................................................................................... .....18
THE AGENCY ................................................................................. .....18
Agency Members ....................................................................... .....18
Agency Administration ............................................................. .....19
Agency Powers ........................................................................... .....19
Redevelopment Projects ............................................................ .....20
Outstanding Indebtedness of the Agency .............................. ..... 22
Agency Financial Statements .................................................... .....22
Redevelopment Plans ................................................................ ..... 22
Redevelopment Plan Limits ...................................................... ..... 23
Annual Tax Receipts to Tax Levy ............................................ ..... 24
Appeals of Assessed Values ..................................................... ..... 26
ALL REDEVELOPMENT PROJECTS .......................................... .....27
Assessed Valuation .................................................................... .....27
THE TOWN CENTER REDEVELOPMENT PROJECT ............. .....30
General ......................................................................................... ..... 30
Description of the Town Center Redevelopment Project..... ..... 31
Redevelopment Activity ........................................................... ..... 32
Redevelopment Plan Limitations ............................................. ..... 34
Assessed Valuation .................................................................... .....34
Appeals of Assessed Values ..................................................... ..... 36
Fiscal Consultant's Report ........................................................ ..... 36
Housing Tax Revenue Projections ........................................... .....37
Adjustments to Tax Increment Revenues ............................... .....37
THE SOUTH CENTRAL REDEVELOPMENT PROJECT ......... ..... 38
General ......................................................................................... ..... 38
Description of the South Central Redevelopment Project.... ..... 39
Redevelopment Activity ........................................................... ..... 40
Page
Redevelopment Plan Limitations ................................................. .41
Assessed Valuation ........................................................................ ..42
Appeals of Assessed Values ......................................................... ..44
Fiscal Consultant's Report ............................................................ ..44
Housing Tax Revenue Projections ............................................... ..45
Adjustments to Tax Increment Revenues .................................. ..45
THE MCAS TUSTIN REDEVELOPMENT PROJECT ................... ..46
General ............................................................................................ ..46
Description of the MCAS Tustin Redevelopment Project ....... ..47
Redevelopment Activity ............................................................... ..48
Redevelopment Plan Limitations ................................................ ..50
Assessed Valuation ........................................................................ ..50
Appeals of Assessed Values ......................................................... ..53
Fiscal Consultant's Report ............................................................ ..53
Housing Tax Revenue Projections ............................................... ..54
Adjustments to Tax Increment Revenues .................................. ..55
BONDOWNERS' RISKS .................................................................... ..55
Limited Obligations ....................................................................... ..55
No Acce]eration on Default .......................................................... ..55
Bankruptcy ...................................................................................... ..56
Federal Tax-Exempt Status of the Bonds .................................... ..56
Investment Risk .............................................................................. ..57
Secondary Market .......................................................................... ..57
Reduction in Taxable Values ........................................................ ..57
Risks to Real Estate Market .......................................................... ..58
Development Risks ........................................................................ ..58
Changes in the Law ....................................................................... ..58
Reductions in Inflationary Rate ................................................... ..59
Assessment Appeals ...................................................................... ..59
Additional Obligations ................................................................. ..60
Proposition 8 Adjustments ........................................................... ..60
Levy and Collection of Taxes ....................................................... ..60
Real Estate and General Economic Risks ................................... ..60
Future Land Use Regulations and Growth Control
Initiatives ...................................................................................... ..61
Estimates of Housing Tax Revenues ........................................... ..61
Hazardous Substances .................................................................. ..61
Seismic Risk and Flood Risk ........................................................ ..63
State Budgets .................................................................................. ..63
Educational Revenue Augmentation Fund Transfers .............. ..64
CONSTITUTIONAL AND STATUTORY PROVISIONS
AFFECTING TAX REVENUES ........................................................ ..65
Property Tax Limitations-Article XIIIA ...................................... ..65
Challenges to Article XIIIA .......................................................... ..66
Implementing Legislation ............................................................. ..66
Unitary Property ............................................................................ ..67
Property Tax Collection Procedures ........................................... ..67
Appropriations Limitations-Article XIIIB .................................. ..68
State Board of Equalization and Property Assessment
Practices ........................................................................................ ..69
Exclusion of Housing Tax Revenues for General Obligation
Bonds Debt Service ...................................................................... ..69
Proposition 218 .............................................................................. ...69
AB 1290 ........................................................................................... ...69
Future Initiatives ........................................................................... ...70
Low and Moderate Income Housing .......................................... ..70
Statement of Indebtedness ........................................................... ...70
CERTAIN LEGAL MATTERS ......................................................... ...71
ENFORCEABILITY OF REMEDIES ............................................... ...71
RATING .............................................................................................. ...71
CONTINUING DISCLOSURE ......................................................... ...72
ABSENCE OF LITIGATION ............................................................ ...72
TAX MATTERS .................................................................................. ...72
UNDERWRITING ............................................................................. ...75
MISCELLANEOUS ........................................................................... ...76
APPENDIX A SUMMARY OF CERTAIN PROVISIONS OF THE INDENTURE
APPENDIX B GENERAL INFORMATION REGARDING THE CITY
APPENDIX C AUDITED FINANCIAL STATEMENTS OF THE AGENCY FOR THE FISCAL YEARENDED JUNE 30, 2009
APPENDIX D FISCAL CONSULTANT'S REPORT
APPENDIX E FORM OF BOND COUNSEL'S OPINION
APPENDIX F FORM OF CONTINUING DISCLOSURE CERTIFICATE
APPENDIX G BOOK-ENTRY ONLY SYSTEM
TUSTIN COMMUNITY REDEVELOPMENT AGENCY
300 Centennial Way
Tustin, CA 92780
(714)573-3000
(714) 832-0825 (Fax)
http:/ /www.tustinca.org
Agency Board/City Council
Jerry Amante,Chair/Mayor
John Nielsen, Vice Chair/Mayor Pro Tem
Debora Gavello,Boardmember/Councilmember
Doug Davert, Boardmember/Councilmember
Jim Palmer, Boardmember/Councilmember
Agency/City Staff and Officials
William A. Huston, Executive Director/City Manager
Christine A. Shingleton, Assistant Executive Director/Assistant City Manager
George Jeffries,Treasurer/City Treasurer
Pamela Stoker, Secretary/City Clerk
Pamela Arends-King, Director of Finance
Douglas C. Holland, Agency Counsel/City Attorney
Special Services
Fieldman Rolapp & Associates
Irvine, California
Financial Advisor
HdL Coren & Cone
Diamond Bar, California
Fiscal Consultant
Quint & Thimmig LLP
San Francisco,California
Bond Counsel and Disclosure Counsel
The Bank of New York Mellon Trust Company, N.A.
Los Angeles, California
Trustee
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OFFICIAL STATEMENT
$ *'
TUSTIN COMMUNITY REDEVELOPMENT AGENCY
Tax Allocation Housing Bonds, Series 2010
INTRODUCTION
General
This Official Statement of the Tustin Community Redevelopment Agency (the
"Agency') provides information regarding the sale by the Agency of $__________* aggregate
principal amount of its Tustin Community Redevelopment Agency (Tustin Redevelopment
Project) Tax Allocation Housing Bonds, Series 2010 (the "Bonds").
Definitions of certain capitalized terms used in this Official Statement are set forth in
APPENDIX A-"SUMMARY OF CERTAIN PROVISIONS OF THE INDENTURE." This
Official Statement contains brief descriptions of the Bonds, the Indenture, the Agency, the
Agency's Town Center Redevelopment Project Area (the "Town Center Redevelopment
Project"), the Agency's South Central Redevelopment Project Area (the "South Central
Redevelopment Project") and the Agency's MCAS-Tustin Redevelopment Project Area (the
"MCAS-Tustin Redevelopment Project" and, with the Town Center Redevelopment Project
and the South Central Redevelopment Project, the "Redevelopment Projects"). Such
descriptions do not purport to be comprehensive or definitive. All references in this Official
Statement to specific documents are qualified in their entirety by reference to such documents
and references to the Bonds are qualified in their entirety by reference to the form of the Bonds
included in the Indenture. Copies of the Indenture and other documents described in this
Official Statement may be obtained from the Agency as described under the subheading
"Other Information" below.
Purpose of Issuance
Proceeds from the sale of the Bonds will be used to (a) prepay a portion of the City
Obligation (hereinafter defined), (b) fund a reserve account for the Bonds, and (c) provide for
the costs of issuing the Bonds. See "ESTIMATED SOURCES AND USES OF FUNDS" and
"FINANCING PLAN."
The City
The City of Tustin (the "City") is located in Orange County (the "County"),
approximately 22 miles south of the City of Los Angeles and approximately 90 miles north of
the City of San Diego. Incorporated in 1927, the City operates as a general law city with a
Council-Manager form of government. The Mayor is selected by the City Council from among
its members. For certain information with respect to the City, see "THE CITY" and
APPENDIX B-"GENERAL INFORMATION REGARDING THE CITY."
Preliminary, subject to change.
The Agency
The Agency was established pursuant to the California Community Redevelopment
Law, constituting Part 1 of Division 24 of the California Health and Safety Code (the
"Redevelopment Law"), and was activated by the City Council by Ordinance No. 696-A,
enacted by the City Council of the City on October 20, 1976. The Agency has the authority,
and is charged generally with the responsibility, to redevelop and upgrade blighted areas of the
City. The members of the City Council serve as the governing body of the Agency and exercise
all rights, powers, duties and privileges of the Agency. See "THE AGENCY."
The Redevelopment Project
The Agency maintains three redevelopment project areas.
Town Center Project Area. The Town Center Redevelopment Project, established in 1976,
encompasses approximately 360 acres in the center of the City which includes historic Old
Town and the Civic Center complex and all the commercial properties within the central city.
The Town Center Redevelopment Project has already seen a number of major development
projects including new retail, office, residential and public improvement efforts.
The total assessed valuation of taxable property in the Town Center Redevelopment
Project in Fiscal Year 2009-10 is approximately $556,823,652, $501,949,518 greater than the
adjusted assessed valuation in the base year (1976-77). Assessed valuations in the Town
Center Redevelopment Project are subject to numerous risks which could result in decreases
from those reported for Fiscal Year 2009-10. See "BONDOWNERS' RISKS." Also see "THE
TOWN CENTER REDEVELOPMENT PROJECT."
South Central Project Area. The South Central Redevelopment Project, established in
1983, encompasses approximately 370 acres and is generally that area generally bounded by
Bryan Avenue on the north, portions of Orange Avenue, Red Hill Avenue and Newport
Avenue on the east, Valencia Avenue on the south, the Costa Mesa (SR-55) on the west and
Santa Ana (I-5) Freeways and Newport Avenue on the northwest. Portions of the area lack
right-of-way improvements such as street lights, sidewalks, adequate street capacity and
circulation. The City adopted the Pacific Center Specific Plan (located in the South Central
Redevelopment Project) which provided for an extension of Newport Avenue and much
needed improvements to the SR-55 Freeway northbound off-ramp at Edinger Avenue. The
South Central Redevelopment Project includes residential, commercial, office, hotel and limited
light industrial technology uses.
The total assessed valuation of taxable property in the South Central Redevelopment
Project in Fiscal Year 2009-10 is approximately $549,870,193, $432,443,836 greater than the
adjusted assessed valuation in the base year (1982-83). Assessed valuations in the South
Central Redevelopment Project are subject to numerous risks which could result in decreases
from those reported for Fiscal Year 2009-10. See "BONDOWNERS' RISKS." Also see "THE
SOUTH CENTRAL REDEVELOPMENT PROJECT."
MCAS-Tustin Project Area. The MCAS-Tustin Redevelopment Project, established in
2003, is comprised of 1,508.6 acres, including 1,504.5 acres that were part of the former
Marine Corps Air Station Tustin and 4.1 acres that are located outside of the former base
boundaries, at the northwest corner of Edinger Avenue and Jamboree Road. Development of
the MCAS-Tustin Redevelopment Project, known as Tustin Legacy, will ultimately include
4,210 homes, over 10 million square feet of non-residential space including major office, retail,
entertainment, business park, educational and community support facilities. Significant
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acreage will be dedicated to parkland and recreational open spaces which will feature atwo-
mile community lineal park with walking spaces, playgrounds, tranquil natural areas and
sports facilities.
The total assessed valuation of taxable property in the Town Center Redevelopment
Project in Fiscal Year 2009-10 is approximately $1,197,694,279, $1,196,580,201 greater than
the adjusted assessed valuation in the base year (2002-03). Assessed valuations in the MCAS-
Tustin Redevelopment Project are subject to numerous risks which could result in decreases
from those reported for Fiscal Year 2009-10. See "BONDOWNERS' RISKS." Also see "THE
MCAS-TUSTIN REDEVELOPMENT PROJECT."
Tax Allocation Financing
The Redevelopment Law provides a means for financing redevelopment projects based
upon an allocation of taxes collected within a project area. The taxable valuation of a project
area last equalized prior to adoption of the redevelopment plan, or "base roll," is established
and, except for any period during which the taxable valuation drops below the base year level,
the taxing agencies thereafter receive the taxes produced by the levy of the then current tax rate
upon the base roll. Taxes collected upon any increase in taxable valuation over the base roll
(the tax increment revenues) are allocated to the applicable redevelopment agency and may be
pledged by the redevelopment agency to the repayment of any indebtedness incurred in
financing or refinancing a redevelopment project. Redevelopment agencies themselves have no
authority to levy property taxes and must look specifically to the allocation of taxes produced
as above indicated.
The Bonds
The Bonds are being issued pursuant to the Redevelopment Law, a resolution adopted
by the Agency on February 2, 2010, and an Indenture of Trust, dated as of March 1, 2010 (the
"Indenture"), by and between the Agency and The Bank of New York Mellon Trust Company,
N.A., as trustee (the "Trustee'). See "THE BONDS" and APPENDIX A-"SUMMARY OF
CERTAIN PROVISIONS OF THE INDENTURE."
The Bonds will be issued in denominations of $5,000 each or integral multiples thereof.
Interest on the Bonds will be payable on each March 1 and September 1, commencing March 1,
2010. Principal of and interest on the Bonds will be payable by the Trustee to The Depository
Trust Company ("DTC") which will be responsible for remitting such principal and interest to
the DTC participants which will in tum be responsible for remitting such principal and interest
to the beneficial owners of the Bonds. No physical distribution of the Bonds will be made to the
public. See "THE BONDS-Book-Entry System."
Source of Payment for the Bonds
The Bonds are special obligations of the Agency and are payable from and secured by a
pledge of Housing Tax Revenues and amounts in certain funds and accounts held under the
Indenture. The term "Housing Tax Revenues" is defined in the Indenture as all taxes pledged
and annually allocated within the Plan Limitations, beginning in the Agency's fiscal year
ending June 30, 2010, and paid to the Agency with respect to the Redevelopment Project
pursuant to Article 6 of Chapter 6 (commencing with section 33670) of the Law and section 16
of Article XVI of the Constitution of the State, or pursuant to other applicable State laws, and
as provided in the Redevelopment Plans, and all payments, subventions and reimbursements,
if any, to the Agency specifically attributable to ad valorem taxes lost by reason of tax
exemptions and tax rate limitations, which are required to be deposited into the Low and
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Moderate Income Housing Fund of the Agency in any Fiscal Year pursuant to section 33334.3
of the Redevelopment Law.
The Housing Tax Revenues are not subject to the pledge and lien of any indebtedness of
the Agency other than the Bonds and any Parity Debt hereafter issued in accordance with the
Indenture, and certain other obligations which are made or are by their terms subordinate to
the payment of the Bonds. See "CONSTITUTIONAL AND STATUTORY PROVISIONS
AFFECTING TAX REVENUES" and "THE AGENCY-Outstanding Indebtedness of the
Agency." The Bonds are not payable from, and are not secured by, any funds of the Agency
other than the Housing Tax Revenues and amounts in certain funds and accounts pledged
therefore under the Indenture. See "SECURITY FOR THE BONDS."
Reserve Account
A reserve account (the "Reserve Account") will be established and held under the
Indenture in order to secure the payment of principal of and interest on the Bonds in an
amount, as of the Closing Date, equal to the Reserve Requirement. If, on any Interest Payment
Date for the Bonds, the amounts on deposit under the Indenture to pay the principal of or
interest due on the Bonds are insufficient therefor, the Trustee will draw on the Reserve
Account to replenish the Interest Account, the Principal Account or the Sinking Account, in
that order, to make up such deficiencies. See "SECURITY FOR THE BONDS-Deposit of
Amounts by Trustee-Reserve Account" and APPENDIX A-"SUMMARY OF CERTAIN
PROVISIONS OF THE INDENTURE" for additional information on the Reserve Account.
Parity Debt
The Indenture provides that in addition to the Bonds, the Agency may provide for the
issuance of Parity Debt secured by a lien on Housing Tax Revenues on a parity with the Bonds
to finance low and moderate income housing activities throughout the geographic boundaries
of the City in such principal amount as shall be determined by the Agency. The Agency may
deliver Parity Debt subject to certain specific conditions set forth in the Indenture. See
"SECURITY FOR THE BONDS-Issuance of Parity Debt."
Fiscal Consultant's Report
HdL Coren & Cone, Diamond Bar, California (the "Fiscal Consultant") has been
retained to prepare a report (the "Fiscal Consultant's Report") for the Bonds. See APPENDIX
D-"FISCAL CONSULTANT'S REPORT."
Risk Factors
Prospective investors should review this Official Statement and the appendices hereto
in their entirety and should consider certain risk factors associated with the purchase of the
Bonds, some of which have been summarized in the section herein entitled "BONDOWNERS'
RISKS."
Continuing Disclosure
The Agency will covenant, pursuant to a continuing disclosure certificate (the
"Continuing Disclosure Certificate") to be executed on the date of delivery of the Bonds, for
the benefit of owners and beneficial owners of the Bonds, to provide certain financial
information and operating data related to the Agency and the Redevelopment Project by not
later than nine months following the end of the Agency's Fiscal Year (the "Annual Report"),
and to provide notices of the occurrence of certain enumerated events, if material. The Annual
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Report and notices of material events will be filed by the Agency with the Municipal Securities
Rulemaking Board. The specific nature of the information to be contained in the Annual Report
and any notices of material events is summarized below under the caption "CONTINUING
DISCLOSURE." The form of the Continuing Disclosure Certificate is set forth in APPENDIX
F-"FORM OF CONTINUING DISCLOSURE CERTIFICATE." The covenants of the Agency
in the Continuing Disclosure Certificate have been made in order to assist the Underwriter in
complying with S.E.C. Rule 15c2-12(b)(5).
Tax Matters
In the opinion of Quint & Thimmig LLP, San Francisco, California, Bond Counsel,
subject, however, to certain qualifications described in this Official Statement, under existing
law, interest on the Bonds (i) is excludable from gross income of the owners thereof for federal
income tax purposes, (ii) is not included as an item of tax preference in computing the federal
alternative minimum tax for individuals and corporations, and (iii) is not taken into account in
computing adjusted current earnings, which is used as an adjustment in determining the
federal alternative minimum tax for certain corporations. In addition, in the opinion of Bond
Counsel, interest on the Bonds is exempt from personal income taxation imposed by the State
of California. See "TAX MATTERS."
Professionals Involved in the Offering
The proceedings of the Agency in connection with the issuance of the Bonds are subject
to the approval as to their legality of Quint & Thimmig LLP, San Francisco, California, Bond
Counsel. Certain legal matters will be passed upon for the Agency by Quint & Thimmig LLP,
San Francisco, California, as Disclosure Counsel, by Woodruff, Spradlin & Smart, P.C., Costa
Mesa, California, Agency Counsel. Certain legal matters related to this offering will be passed
upon for the Underwriter by Stradling Yocca Carlson & Rauth, a Professional Corporation,
Newport Beach, California, as Underwriter's Counsel. The Bank of New York Mellon Trust
Company, N.A., Los Angeles, California, will act as the Trustee under the Indenture.
Fieldman, Rolapp and Associates, Irvine, California, is serving as financial advisor to the
Agency for the Bonds (the "Financial Advisor"). The Fiscal Consultant has been retained to
prepare the Fiscal Consultant's Report for the Bonds. The fees of Bond Counsel, Disclosure
Counsel, the Financial Advisor and the Trustee are contingent upon the sale and delivery of the
Bonds.
Forward-Looking Statements
This Official Statement, and particularly the information contained under the headings
entitled "FINANCING PLAN," "ESTIMATED SOURCES AND USES OF FUNDS,"
"SECURITY FOR THE BONDS," "THE TOWN CENTER REDEVELOPMENT PROJECT,"
"THE SOUTH CENTRAL REDEVELOPMENT PROJECT," "THE MCAS-TUSTIN
REDEVELOPMENT PROJECT" and APPENDIX B-"GENERAL INFORMATION
REGARDING THE CITY," contains statements relating to future results that are "forward-
looking statements" as defined in the Private Securities Litigation Reform Act of 2000. When
used in this Official Statement, the words "estimate," "forecast," "intend," "expect" and
similar expressions identify forward-looking statements. Such statements are subject to risks
and uncertainties that could cause actual results to differ materially from those contemplated
in such forward-looking statements. Any forecast is subject to such uncertainties. Inevitably,
some assumptions used to develop the forecasts will not be realized and unanticipated events
and circumstances may occur. Therefore, there are likely to be differences between forecasts
and actual results, and those differences may be material. The Agency is not obligated to issue
any updates or revisions to the forward-looking statements if or when its expectations, or
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events, conditions or circumstances on which such statements are based occur. See
"BONDOWNERS' RISKS" and "LINIITATIONS ON HOUSING TAX REVENUES."
Other Matters
There follows in this Official Statement brief descriptions of the Bonds, the security for
the Bonds, the Indenture, the Agency, the City, the Redevelopment Projects, and certain other
information relevant to the issuance of the Bonds. The descriptions and summaries of
documents herein do not purport to be comprehensive or definitive, and reference is made to
each such document for the complete details of all its respective terms and conditions. All
statements herein with respect to such documents are qualified in their entirety by reference to
each such document for the complete details of all of their respective terms and conditions. All
statements herein with respect to certain rights and remedies are qualified by reference to laws
and principles of equity relating to or affecting creditors' rights generally. Copies of the
Indenture are available for inspection during business hours at the corporate trust office of the
Trustee.
The information and expressions of opinion herein speak only as of the date of this
Official Statement and are subject to change without notice. Neither delivery of this Official
Statement nor any sale made hereunder nor any future use of this Official Statement shall,
under any circumstances, create any implication that there has been no change in the affairs of
the Agency or the City since the date hereof.
All financial and other information presented in this Official Statement has been
provided by the Agency and the City from their records, except for information expressly
attributed to other sources. The presentation of information, including the table of receipts
from taxes and other revenues, is intended to show recent historic information and is not
intended to indicate future or continuing trends in the financial or other affairs of the Agency
or the City. No representation is made that past experience, as it might be shown by such
financial and other information, will necessarily continue or be repeated in the future.
Other Information
This Official Statement speaks only as of its date and the information contained herein
is subject to change without notice. Copies of the Indenture are available from the Agency
upon written request to the Agency, 300 Centennial Way, Tustin, CA 92780, Attention:
Executive Director. The Agency may impose a charge for copying, mailing and handling
expenses related to any request for documents.
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ESTIMATED SOURCES AND USES OF FUNDS
The following table sets forth a summary of the estimated sources and uses of funds
associated with the issuance and sale of the Bonds.
Sources of Funds
Par Amount of Bonds
[Less: Original Issue Discount]
[Plus: Original Lssue Premium]
Total Sources
Uses of Funds
Deposit to Housing Project Fund (1)
Deposit to Reserve Account (2)
Costs of Issuance (3)
Total Uses
(1) Represents amount required to _____________________________.
(2) Represents an amount equal to the initial Reserve Account Requirement for the Bonds.
(3) Includes Underwriter's discount, fees and expenses of the Trustee, the Financial Advisor, the Fiscal
Consultant, Bond Counsel and Disclosure Counsel, printing expenses and other costs of issuance.
FINANCING PLAN
The City has written down the cost of land that has been re-sold and developed with
affordable housing in the MCAS Tustin Redevelopment Project. Those units ("Affordable
Units") are encumbered with covenants and deeds of trust that will ensure they remain
affordable for the periods of time required by the Redevelopment Law.
On June 5, 2007, the City and the Agency entered into an agreement, as amended on
January 5, 2010 ("Reimbursement Agreement"), pursuant to which the Agency has agreed to
reimburse the City for the difference between the market price of the land on which the
Affordable Units have been developed and the actual subsidized price for which the land was
sold from money deposited in the low and moderate income housing fund for the MCAS
Tustin Redevelopment Project and other available sources (the "City Obligation"). At the time
the Reimbursement Agreement was entered into, the amount of the City Obligation was over
$46 million. The Agency has made payments to the City and the current obligation is
$39,604,360.
Proceeds from the sale of the Bonds will be used to (a) prepay a portion of the City
Obligation, (b) fund a reserve account for the Bonds, and (c) provide for the costs of issuing
the Bonds.
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DEBT SERVICE SCHEDULE
The following table sets forth the scheduled annual debt service for the Bonds.
Bond Year Ending Principal
(September 1) Amount (1) Interest Total
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
2031
2032
2033
2034
2035
2036
2037
2038
2039
(1) Includes sinking fund installments
THE BONDS
General Provisions
The Bonds will be delivered in fully registered form, without coupons, in the
denomination of $5,000 each or any integral multiple thereof. Interest on the Bonds will be
payable semiannually on each March 1 and September 1, commencing September 1, 2010
(each, an "Interest Payment Date"), to the Owner thereof as of the close of business on the
fifteenth (15th) calendar day of the month preceding each Interest Payment Date, whether or
not such fifteenth (15th) calendar day is a business day (each, a "Record Date'). Principal of
the Bonds will be payable on September 1 in each of the years and in the amounts shown on
the cover page hereof.
The Bonds will be dated as of their date of delivery. Each Bond will bear interest from
the Interest Payment Date next preceding the date of authentication thereof, unless (i) it is
executed during the period from the day after the Record Date for an Interest Payment Date to
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and including such Interest Payment Date, in which event it will bear interest from such
Interest Payment Date, or (ii) it is executed on or prior to the Record Date for the first Interest
Payment Date, in which event it will bear interest from the date of its initial delivery; provided,
however, that if, at the time of registration of any Bond, interest with respect to such Bond is in
default, such Bond will bear interest from the Interest Payment Date to which interest has been
paid or made available for payment with respect to such Bond.
Interest on the Bonds will be payable in lawful money of the United States of America
on each Interest Payment Date to the Owner thereof as of the close of business on the Record
Date. Subject to the book-entry system established for the Bonds (see "Book-Entry System"
below), such interest to be paid by check of the Trustee, mailed by first class mail no later than
the Interest Payment Date to the Owners at their addresses as they appear, on such Record
Date, on the bond registration books maintained by the Trustee; provided, however, that at the
written request of the Owner of at least $1,000,000 in aggregate principal amount of
Outstanding Bonds filed with the Trustee prior to any Record Date, interest on such Bonds will
be paid to such Owner on each succeeding Interest Payment Date (unless such request has
been revoked in writing) by wire transfer of immediately available funds to an account in the
continental United States designated in such written request. Payments of defaulted interest
with respect to the Bonds will be paid by check to the registered Owners of the Bonds as of a
special record date to be fixed by the Trustee, notice of which special record date shall be given
to the Owners of the Bonds not less than ten days prior thereto. The principal of and premium,
if any, on the Bonds are payable when due upon surrender thereof at the principal corporate
trust office of the Trustee in San Francisco, California, in lawful money of the United States of
America.
Redemption
Optional Redemption of Bonds. The Bonds maturing on or before September 1, ____, are
not subject to optional redemption prior to maturity. The Bonds maturing on or after
September 1, ____, are subject to redemption, at the option of the Agency on any date on and
after September 1, ____, as a whole or in part, from any available source of funds, at a
redemption price equal to the principal amount thereof, together with a accrued interest to the
date fixed for redemption, without premium.
The Agency is required to give the Trustee written notice of its intention to optionally
redeem Bonds under the Indenture with a designation of the maturities to be redeemed at least
forty-five (45) days, but not more than seventy-five (75) days, or such shorter period as shall
be acceptable to the Trustee, prior to the date fixed for such redemption, and shall transfer to
the Trustee for deposit in the Debt Service Fund all amounts required for such redemption on
or prior to the date fixed for such redemption. The maturity or maturities of Bonds to be called
for redemption shall be determined by the Agency. If the Agency shall fail to select a particular
maturity or maturities for redemption, such redemption shall be made on a pro rata basis.
Sinking Account Redemption of Bonds. The Bonds maturing on September 1, ____ (the
"____ Term Bonds") are subject to mandatory redemption, in part by lot, from Sinking
Account payments set forth in the following schedule on September 1, ____, and on September
1 in each year thereafter to and including September 1, ____, at a redemption price equal to the
principal amount thereof to be redeemed (without premium), together with interest accrued
thereon to the date fixed for redemption; provided, however, that if some but not all of the ____
Term Bonds have been optionally redeemed, the total amount of Sinking Account payments to
be made subsequent to such redemption shall be reduced in an amount equal to the principal
amount of the ____ Term Bonds so redeemed by reducing each such future Sinking Account
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payment on a pro rata basis (as nearly as practicable) in integral multiples of $5,000, as shall
be designated pursuant to written notice filed by the Agency with the Trustee.
Redemption Date Principal Redemption Date Principal
(September 11 Amount (September 1~ Amount
t Maturity.
In lieu of such redemption, the Trustee may apply amounts in the Sinking Account to
the purchase of ____ Term Bonds at public or private sale, as and when and at such prices
(including brokerage and other charges, but excluding accrued interest, which is payable from
the Interest Account) as may be directed by the Agency, except that the purchase price
(exclusive of accrued interest) may not exceed the redemption price then applicable to the ____
Term Bonds, as set forth in a Written Request of the Agency.
The Bonds maturing on September 1, ____ (the "__~ Term Bonds") are subject to
mandatory redemption, in part by lot, from Sinking Account payments set forth in the
following schedule on September 1, ____, and on September 1 in each year thereafter to and
including September 1, ____, at a redemption price equal to the principal amount thereof to be
redeemed (without premium), together with interest accrued thereon to the date fixed for
redemption; provided, however, that if some but not all of the ____ Term Bonds have been
optionally redeemed, the total amount of Sinking Account payments to be made subsequent
to such redemption shall be reduced in an amount equal to the principal amount of the ____
Term Bonds so redeemed by reducing each such future Sinking Account payment on a pro
rata basis (as nearly as practicable) in integral multiples of $5,000, as shall be designated
pursuant to written notice filed by the Agency with the Trustee.
Redemption Date Principal Redemption Date Principal
September 11 Amount ~Seotember 1) Amount
t Maturity.
In lieu of such redemption, the Trustee may apply amounts in the Sinking Account to
the purchase of ____ Term Bonds at public or private sale, as and when and at such prices
(including brokerage and other charges, but excluding accrued interest, which is payable from
the Interest Account) as may be directed by the Agency, except that the purchase price
(exclusive of accrued interest) may not exceed the redemption price then applicable to the ____
Term Bonds, as set forth in a Written Request of the Agency.
Notice of Redemption. The Trustee on behalf and at the expense of the Agency is required
to mail (by first class mail, postage prepaid) notice of any redemption at least thirty (30) but
not more than sixty (60) days prior to the redemption date, to (i) the Owners of any Bonds
designated for redemption at their respective addresses appearing on the Registration Books,
and (ii) the Securities Depositories and to one or more Information Services designated in a
Written Request of the Agency filed with the Trustee; but such mailing is not a condition
precedent to such redemption and neither failure to receive any such notice nor any defect
therein will affect the validity of the proceedings for the redemption of such Bonds or the
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cessation of the accrual of interest thereon. Such notice must state the redemption date and the
redemption price, must designate the CUSIP number of the Bonds to be redeemed, must state
the individual number of each Bond to be redeemed or must state that all Bonds between two
stated numbers (both inclusive) or all of the Bonds Outstanding are to be redeemed, and must
require that such Bonds be then surrendered at the Principal Corporate Trust Office for
redemption at the redemption price, giving notice also that further interest on such Bonds will
not accrue from and after the redemption date.
Notwithstanding the foregoing, in the case of any optional redemption of the Bonds, the
notice of redemption shall state that the redemption is conditioned upon receipt by the Trustee
of sufficient moneys to redeem the Bonds on the anticipated redemption date, and that the
optional redemption shall not occur if, by no later than the scheduled redemption date,
sufficient moneys to redeem the Bonds have not been deposited with the Trustee. In the event
that the Trustee does not receive sufficient funds by the scheduled optional redemption date to
so redeem the Bonds to be optionally redeemed, such event shall not constitute and Event of
Default, the Trustee shall send written notice to the owners of the Bonds, to the Securities
Depositories and to one or more of the Information Services to the effect that the redemption
did not occur as anticipated, and the Bonds for which notice of optional redemption was given
shall remain Outstanding for all purposes of the Indenture.
Partial Redemption of Bonds. In the event only a portion of any Bond is called for
redemption, then upon surrender of such Bond the Agency is required to execute and the
Trustee is required to authenticate and deliver to the Owner thereof, at the expense of the
Agency, a new Bond or Bonds of the same interest rate and maturity, of authorized
denominations, in aggregate principal amount equal to the unredeemed portion of the Bond to
be redeemed.
Effect of Redemption. From and after the date fixed for redemption, if funds available for
the payment of the redemption price of and interest on the Bonds so called for redemption
have been duly deposited with the Trustee, such Bonds so called shall cease to be entitled to
any benefit under the Indenture other than the right to receive payment of the redemption price
and accrued interest to the redemption date, and no interest shall accrue thereon from and
after the redemption date specified in such notice.
Manner of Redemption. Whenever any Bonds or portions thereof are to be selected for
redemption by lot, the Trustee shall make such selection, in such manner as the Trustee shall
deem appropriate, and shall notify the Agency thereof. In the event of redemption by lot of
Bonds, the Trustee shall assign to each Bond then Outstanding a distinctive number for each
$5,000 of the principal amount of each such Bond. The Bonds to be redeemed shall be the
Bonds to which were assigned numbers so selected, but only so much of the principal amount
of each such Bond of a denomination of more than $5,000 shall be redeemed as shall equal
$5,000 for each number assigned to it and so selected. All Bonds redeemed or purchased shall
be canceled.
Book-Entry System
The Bonds will be subject to a book-entry system of registration, transfer and payment
and each Bond will initially be registered in the name of Cede & Co, as nominee of The
Depository Trust Company, New York, New York ("DTC"). As part of such book-entry
system, DTC has been appointed securities depository for the Bonds, and registered ownership
may not thereafter be transferred except as provided in the Indenture. The Bonds are being
delivered in book-entry form only. Purchasers will not receive securities certificates representing
their interests in the Bonds. Rather, in accordance with the book-entry system, purchasers of
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the Bonds will have beneficial ownership interest in the purchased Bonds through DTC
Participants (as hereinafter defined). For more information concerning the book-entry system,
see APPENDIX ~"BOOK-ENTRY ONLY SYSTEM."
TAX ALLOCATION FINANCING
General
Tax Allocations. The Redevelopment Law provides a means for financing redevelopment
projects based upon an allocation of taxes collected within a project area. The taxable
valuation of a project area last equalized prior to adoption of the redevelopment plan for the
project area, or base roll, is established as of the adoption of the redevelopment plan.
Thereafter, except for any period during which the taxable valuation drops below the base year
level, the taxing bodies receive the taxes produced by the levy of the then current tax rate upon
the base roll. Taxes collected upon any increase in taxable valuation over the base roll (with the
exception of taxes derived from increases in the tax rate imposed by Taxing Agencies
(hereinafter defined) to support new bonded indebtedness) (the "Tax Increment Revenues")
are allocated to the redevelopment agency and may be pledged to the repayment of any
indebtedness incurred in financing or refinancing redevelopment. Redevelopment agencies
themselves have no authority to levy property taxes and must look exclusively to such
allocation of taxes.
Allocation of Taxes
As provided in the redevelopment plan for the project area, and pursuant to Article 6
of Chapter 6 of the Redevelopment Law and Section 16 of Article XVI of the State
Constitution, taxes levied upon taxable property in the project area each year by or for the
benefit of the State, cities, counties, districts or other public corporations (collectively, the
"Taxing Agencies"), for fiscal years beginning after the effective date of the redevelopment
plan, will be divided as follows:
(1) To Taxing Agencies: The portion equal to the amount of those taxes which would
have been produced by the then current tax rate, applied to the taxable valuation of such
property in the redevelopment project area as last equalized prior to the establishment of the
redevelopment project, or base roll, is paid into the funds of those respective Taxing Agencies
as taxes by or for said Taxing Agencies; and
(2) To the Agency: The portion of said levied taxes each year in excess of the amount
referred to in (1) above is allocated to, and when collected, is paid to the agency; provided that
the portion of the tax increment revenues which are attributable to a tax rate levied by a taxing
agency to pay indebtedness approved by the voters of that taxing agency on or after January 1,
1989, shall be allocated to, and when collected shall be paid into, the fund of such taxing
agency.
Housing Set-Aside Amounts. Sections 33334.2 and 33334.3 of the Redevelopment Law
require each agency to set aside not less than 20% of all Tax Increment Revenues in a low and
moderate income housing fund (the "Low and Moderate Income Housing Fund") to be
expended for authorized low and moderate income housing purposes (the "Housing Set-Aside
Amount"). Amounts on deposit in the Low and Moderate Income Housing Fund may also be
applied to pay debt service on bonds, loans or advances used to provide financing for such
low and moderate income housing purposes. Under the Redevelopment Law, the Housing Set-
Aside Amount could be reduced or eliminated if the agency finds that (1) no need exists in the
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community to improve or increase the supply of low and moderate income housing, (2) that
some stated percentage less than 20% of the tax increment is sufficient to meet the housing
need or (3) that other substantial efforts, including the obligation of funds from certain local,
state or federal sources for low and moderate income housing, or equivalent impact are being
provided for in the community. See "LIMITATIONS ON HOUSING TAX REVENUES."
Prior to September 1, 1986, in accordance with section 33334.6(f) of the Redevelopment
Law, the Agency adopted a Statement of Existing Obligations and a Statement of Existing
Programs for the Town Center Project. Section 33334.6(f) of the Redevelopment Law specifies
that a Statement of Existing Obligations be adopted if an Agency is depositing less than 20
percent of a project area's tax increment revenue into the Agency's low and moderate-income
housing fund. The Agency developed and adopted a housing plan to remedy its deferred
housing set-aside obligation. As of June 30, 2008, the deferred low and moderate-income
housing obligation within the Town Center Redevelopment Project was $2,216,474. Under the
terms of the Deficit Reduction Plan, the Agency will make the necessary deposits in the
Housing Fund by November 22, 2015.
The Housing Set-Aside Amount requirement within the Town Center Redevelopment
Project is presently being fulfilled and no additional deficits have been incurred. The Agency is
currently setting aside 20 percent of the Town Center Redevelopment Project's tax increment
revenue and the projection assumes that the Agency will continue to do so for the duration of
the projection. The remaining repayment amounts will be made from Agency revenues
remaining after making the debt service payments for the Bonds and all prior obligations.
SECURITY FOR THE BONDS
Pledge of Housing Tax Revenues
The Bonds and all payments required of the Agency under the Indenture are not general
obligations of the Agency but are limited special obligations of the Agency and are secured by
an irrevocable pledge of, and are payable as to principal and interest, from Housing Tax
Revenues and other funds as hereinafter described, including similar revenues derived from
any redevelopment project that may be created by the City in the future. The Bonds and
interest thereon are not a debt of the City, the State or any of its political subdivisions, and
neither the City, the State nor any of its political subdivisions is liable on them. In no event
shall the Bonds or interest thereon be payable out of any funds or properties other than those
of the Agency as set forth in the Indenture. The Bonds do not constitute an indebtedness within
the meaning of any constitutional or statutory debt limitation or restriction. Neither the
members of the Agency nor any persons executing the Bonds are liable personally on the Bonds
by reason of their issuance.
The Agency has no independent power to levy and collect property taxes, and any property tax
limitation, legislative measure, voter initiative or provision of additional sources of income to taxing
agencies having the effect of reducing the property tax rate or collections, could reduce the amount of
Housing Tax Revenues that would otherwise be available to pay the principal of, and interest on, the
Bonds. Likewise, broadened property tax exemptions could have a similar effect. See "BONDOWNERS'
FACTORS."
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Security of Bonds; Equal Security
The Bonds are secured by a pledge of, security interest in and a first and exclusive lien
on all of the Housing Tax Revenues, and a first and exclusive pledge of, security interest in and
lien upon all of the moneys in the Special Fund and the Debt Service Fund, without preference
or priority for series, issue, number, dated date, sale date, date of execution or date of
delivery. Except for the Housing Tax Revenues and such other moneys, no funds or properties
of the Agency shall be pledged to, or otherwise liable for, the payment of principal of or
interest or redemption premium (if any) on the Bonds.
In consideration of the acceptance of the Bonds by those who shall hold the same from
time to time, the Indenture shall be deemed to be and shall constitute a contract between the
Agency and the Owners from time to time of the Bonds, and the covenants and agreements set
forth in the Indenture to be performed on behalf of the Agency shall be for the equal and
proportionate benefit, security and protection of all Owners of the Bonds without preference,
priority or distinction as to security or otherwise of any of the Bonds over any of the others by
reason of the number or date thereof or the time of sale, execution and delivery thereof, or
otherwise for any cause whatsoever, except as expressly provided therein.
Special Fund; Deposit of Housing Tax Revenues
There is established in the Indenture a special fund to be known as the "Special Fund,"
which shall be held by the Agency. The Agency shall transfer all of the Housing Tax Revenues
received in any Bond Year to the Special Fund promptly upon receipt thereof by the Agency,
until such time during such Bond Year as the amounts on deposit in the Special Fund equal
the aggregate amounts required to be transferred to the Trustee for deposit into the Interest
Account, the Principal Account, the Sinking Account and the Reserve Account in such Bond
Year.
All Housing Tax Revenues received by the Agency during any Bond Year in excess of
the amount required to be deposited in the Special Fund during such Bond Year, including
delinquent amounts if any, shall be released from the pledge and lien under the Indenture for
the security of the Bonds and may be applied by the Agency for any lawful purposes of the
Agency, including but not limited to the payment of Subordinate Debt, or the payment of any
amounts due and owing to the United States of America. Prior to the payment in full of the
principal of and interest and redemption premium (if any) on the Bonds and the payment in
full of all other amounts payable under the Indenture and under any Supplemental Indenture,
the Agency shall not have any beneficial right or interest in the moneys on deposit in the Special
Fund, except as may be provided in the Indenture and in any Supplemental Indenture.
Deposit of Amounts by Trustee
There is established in the Indenture a trust fund to be known as the Debt Service Fund,
which shall be held by the Trustee in trust. Moneys in the Special Fund shall be transferred by
the Agency to the Trustee in the following amounts, at the following times, and deposited by
the Trustee in the following respective special accounts, which are established in the Debt
Service Fund, and in the following order of priority:
Interest Account. On or before the fifth Business Day preceding each Interest Payment
Date, the Agency shall withdraw from the Special Fund and transfer to the Trustee, for deposit
in the Interest Account an amount which when added to the amount contained in the Interest
Account on that date, will be equal to the aggregate amount of the interest becoming due and
payable on the Outstanding Bonds on such Interest Payment Date. No such transfer and
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deposit need be made to the Interest Account if the amount contained therein is at least equal
to the interest to become due on the next succeeding Interest Payment Date upon all of the
Outstanding Bonds. All moneys in the Interest Account shall be used and withdrawn by the
Trustee solely for the purpose of paying the interest on the Bonds as it shall become due and
payable (including accrued interest on any Bonds redeemed or purchased prior to maturity
pursuant to the Indenture).
Principal Account; Sinking Account. On or before the fifth Business Day preceding each
principal payment date in each year, or date on which any Outstanding Term Bonds become
subject to mandatory Sinking Account redemption, beginning September 1, 2010, the Agency
shall withdraw from the Special Fund and transfer to the Trustee for deposit (i) in the Principal
Account an amount which, when added to the amount then contained in the Principal
Account, will be equal to the principal becoming due and payable on the Outstanding Bonds
on the next September 1, and (ii) in the Sinking Account an amount which, when added to the
amount then contained in the Sinking Account, will be equal to the aggregate principal amount
of the Term Bonds subject to mandatory Sinking Account redemption on such date. In the
event that the amount then in the Special Fund, following the transfer described in the
preceding paragraph, is not sufficient to fully fund the amounts described in the preceding
clauses (i) and (ii), the Trustee shall deposit the available funds in the Special Fund pro rata to
the Principal Account and the Sinking Account, based on the aggregate principal and Sinking
Account payments then due on the Bonds. No such transfer and deposit need be made to the
Principal Account if the amount contained therein is at least equal to the principal or sinking
fund installment to become due on the next September 1 on all of the Outstanding Bonds. All
moneys in the Principal Account shall be used and withdrawn by the Trustee solely for the
purpose of paying the principal of the Bonds as it shall become due and payable.
Reserve Account. In the event that the Trustee has actual knowledge that the amount on
deposit in the Reserve Account at any time is less than the Reserve Requirement, the Trustee
shall promptly notify the Agency of such fact. Promptly upon receipt of any such notice, the
Agency shall transfer to the Trustee, Housing Tax Revenues sufficient to maintain the Reserve
Requirement on deposit in the Reserve Account. If there shall then not be sufficient Housing
Tax Revenues to transfer an amount sufficient to maintain the Reserve Requirement on deposit
in the Reserve Account, the Agency shall be obligated to continue making transfers as Housing
Tax Revenues become available in the Special Fund until there is an amount sufficient to
maintain the Reserve Requirement on deposit in the Reserve Account. No such transfer and
deposit need be made to the Reserve Account so long as there shall be on deposit therein a sum
at least equal to the Reserve Requirement. Amounts in the Reserve Account shall be used and
withdrawn by the Trustee solely for the purpose of making transfers to (i) the Interest
Account, and (ii) the Principal Account and the Sinking Account in such order of priority (pro
rata to the Principal Account and the Sinking Account, based upon the principal and sinking
account payments then due, if the amount then in the Reserve Account, after satisfying any
deficiency in the Interest Account, is not sufficient to fully satisfy any then deficiencies in the
Principal Account and the Sinking Account), in the event of any deficiency at any time in any
of such accounts or for the retirement of all the Bonds then Outstanding, except that so long as
the Agency is not in default under the Indenture, any amount in the Reserve Account in excess
of the Reserve Requirement (as determined by the Trustee based upon a valuation of
investments held in such account) shall be withdrawn from the Reserve Account semiannually
on or before the Business Day preceding each March 1 and September 1 by the Trustee and
deposited in the Interest Account. If a valuation discloses that amounts in the Reserve
Account are less than the Reserve Requirement, which valuation must occur not less than semi-
annually, the Agency shall immediately cause the cure thereof from any available moneys. All
amounts in the Reserve Account on the Business Day preceding the final Interest Payment
Date shall be withdrawn from the Reserve Account and shall be transferred either (i) to the
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Interest Account and the Principal Account, u1 such order, to the extent required to make the
deposits then required to be made pursuant to the Indenture or, (ii) if the Agency shall have
caused to be transferred to the Trustee an amount sufficient to make the deposits required by
the Indenture, then, at the Written Request of the Agency, to the Agency for deposit by the
Agency into the Debt Service Fund. The Trustee may conclusively presume that there has been
no change in the Reserve Requirement unless notified in writing by the Agency.
As defined in the Indenture, the term "Reserve Requirement" means, as of any
calculation date, an amount, calculated by or on behalf of the Agency and certified to the
Trustee in writing, equal to the least of (a) Maximum Annual Debt Service on all Outstanding
Bonds and any Parity Debt, (b) 125% of average annual debt service on the Bonds and any
Parity Debt, and (c) the then outstanding principal amount of the Bonds and any Parity Debt.
The Reserve Requirement as of the Closing Date is $______________.
Redemption Account. On or before the Business Day preceding any date on which Bonds
are to be redeemed, the Trustee shall withdraw from the Debt Service Fund any amount
transferred by the Agency for deposit in the Redemption Account, such amount being the
amount required to pay the principal of and premium, if any, on the Bonds or Parity Debt to
be redeemed on such date. All moneys in the Redemption Account shall be used and
withdrawn by the Trustee solely for the purpose of paying the principal of and premium, if
any, on the Bonds or Parity Debt to be redeemed on the date set for such redemption. Interest
due on Bonds or Parity Debt to be redeemed on the date set for redemption shall, if applicable,
be paid from funds available therefor in the Interest Account.
County Payment of Tax Increment
The County currently pays to the Agency property tax payments at 100% of the
Agency's share of levied amounts, subject to any tax sharing agreement with the County.
Consequently, delinquent property taxes do not currently impact the Agency's tax increment
revenues. The County Auditor-Controller remits tax increment revenues to the Agency in
periodic payments each fiscal year. However, the foregoing payment description is an
administrative practice of the County that could be subject to change. While the current
administrative practice continues in existence and is carried out as described above, the
County's administrative practice may help protect the Owners of the Bonds from the risk of
delinquencies in ad valorem taxes.
Issuance of Parity Debt
In addition to the Bonds, the Agency may issue or incur Parity Debt to finance low and
moderate income housing projects within the geographic boundaries of the City in such
principal amount as shall be determined by the Agency. The Agency may issue and deliver any
such Parity Debt subject only to the following specific conditions:
(a) The Agency shall be in compliance with all covenants set forth in this Indenture and
all existing Parity Debt Instruments.
(b) Subject to paragraph (e) below, Housing Tax Revenues for the then current Fiscal
Year, based on the most recent assessed valuation of property in the Redevelopment Projects
as evidenced in written documentation from an appropriate official of the County, plus, at the
option of the Agency, the Additional Revenues, shall be at least equal to one hundred twenty-
five percent (125%) of Maximum Annual Debt Service which will be Outstanding following the
issuance of such Parity Debt.
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(c) The aggregate amount of the principal and sinking fund installments of and interest
on all Outstanding Bonds, Parity Debt and Subordinate Debt coming due and payable
following the issuance of such Parity Debt shall not exceed the maximum amount of tax
increment revenues permitted under the Plan Limitations;
(d) The aggregate amount of the all Bonds, Parity Debt and Subordinate Debt to be
outstanding following the issuance of such Parity Debt shall not exceed the maximum amount
of obligations permitted under the Plan Limitations to be outstanding at any time;
(e) In computing the Maximum Annual Debt Service for purposes of paragraph (b)
above, if interest on any Bonds or Parity Debt is payable or to be payable at a variable rate or
is otherwise incapable of determination, (i) if the Agency has entered into a variable to fixed
swap arrangement with respect to such Bonds or Parity Debt, the term of which extends for
the term of such Bonds or Parity Debt and payments by the counterparty on the swap
arrangement are guaranteed or insured by an entity whose unsecured debt obligations are
rated in the highest rating category by Moody's or S&P, the maximum annual debt service due
by the Agency under the swap arrangement shall be used rather than Maximum Annual Debt
Service on such Bonds or Parity Debt, or (ii) the Bonds or Parity Debt shall be assumed to bear
interest at a fixed rate equal to the average of the daily interest rate on such Bonds or Parity
Debt during the three-year period preceding the first day of the month in which the
determination is made (and, if such Bonds or Parity Debt have not been outstanding for the
entire three-year period, for the portion of such time period such Bonds or Parity Debt were not
outstanding, the interest rate on a debt instrument or similar credit quality and maturity as
determined by an Independent Financial Consultant).
(f) The Parity Debt shall be payable as to principal on September 1 in each year in
which principal becomes due, and shall be payable as to interest semiannually on March 1 and
September 1, except that the first installment of interest may be payable on either March 1 or
September 1 and shall be for a period not longer than twelve (12) months.
(g) The Trustee shall act as trustee for such Parity Debt.
(h) The Parity Debt Instrument providing for the issuance of such Parity Debt may
provide for the establishment of separate funds and accounts or may make reference to and
include any fund or account established under this Indenture;
(j) The Parity Debt Instrument providing for the issuance of such Parity Debt shall
provide for the deposit of moneys in the Reserve Account if required to increase the balance of
the Reserve Account to at least equal to the Reserve Requirement upon the issuance of such
Parity Debt.
"Additional Revenues" means, as of the date of calculation, the amount of Housing
Tax Revenues which, as shown in the Report of an Redevelopment Consultant, are estimated
to be receivable by the Agency within the Fiscal Year following the Fiscal Year in which such
calculation is made as a result of increases in the assessed valuation of taxable property in the
Redevelopment Projects due to the completion of construction which is not then reflected on
the tax rolls, or due to transfer of ownership or any other interest in real property which has
been recorded but which is not then reflected on the tax rolls. For purposes of this definition,
the term "increases in the assessed valuation" means the amount by which the assessed
valuation of taxable property in the Redevelopment Projects is estimated to increase above the
assessed valuation of taxable property in the Redevelopment Projects (as evidenced in the
written records of the County) as of the date on which such calculation is made.
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Issuance of Subordinate Debt
From time to time the Agency may issue or incur Subordinate Debt in such principal
amount as shall be determined by the Agency; provided that (a) the Agency shall be in
compliance with all of its covenants set forth in this Indenture and any Parity Debt
Instruments, (b) the issuance of such Subordinate Debt (after taking into account the Bonds
and all other obligations of the Agency payable from Housing Tax Revenues, as well as all
other bonded indebtedness of the Agency) shall not cause the Agency to exceed any applicable
Plan Limitations, and (c) the Agency will at all times that the Bonds and any Parity Debt are
Outstanding have sufficient capacity to receive Housing Tax Revenues in an amount at least
equal to the remaining Debt Service on the Bonds and any Parity Debt as well as all fixed debt
service or other obligations of the Agency (including such Subordinate Debt) payable from
Housing Tax Revenues..
THE CITY
The City is located in the County, approximately 22 miles south of the City of Los
Angeles and approximately 90 miles north of the City of San Diego. Incorporated in 1927, the
City operates as a general law city with aCouncil-Manager form of government. The Mayor is
selected by the City Council from among its members. For certain information with respect to
the City, see APPENDIX B-"GENERAL INFORMATION REGARDING THE CITY."
THE AGENCY
Agency Members
The Agency was established pursuant to the Redevelopment Law and was activated by
the City Council by Ordinance No. 696-A, enacted by the City Council of the City on October
20, 1976. The Agency has the authority, and is charged generally with the responsibility, to
redevelop and upgrade blighted areas of the City. The members of the City Council serve as
the governing body of the Agency and exercise all rights, powers, duties and privileges of the
Agency. The Agency is a separate public body, although it is a City component unit for
financial reporting purposes.
The members of the governing body of the Agency are as follows:
Member Term Expires
Jerry Amante, Chair November 2012
John Nielsen, Vice Chair November 2012
Debora Gavello, Boardmember November 2012
Doug Davert, Boardmember November 2010
Jim Palmer, Boardmember November 2010
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Agency Administration
The City has agreed to provide the Agency with staff, office space and supplies and the
Agency has agreed to reimburse the City for such services, supplies and equipment. The
Agency and the City adopt an annual administrative budget delineating the costs of such
services. The Agency reimburses the City out of available tax increment revenues. Such
reimbursement is subordinate to any outstanding bonded indebtedness of the Agency
including the Bonds. See APPENDIX B-"GENERAL INFORMATION CONCERNING THE
CITY."
Each year, the Agency adopts an administrative budget. The Agency funds
administrative costs out of available revenues. The reimbursement is subordinate to
outstanding bonded indebtedness of the Agency.
Each year the City Council approves a budget submitted by the Agency's Executive
Director prior to the beginning of the new fiscal year. The Agency conducts public hearings
prior to the budget's adoption. The Board approves supplemental appropriations, when
required during the period. In most cases, expenditures are not permitted to exceed
appropriations at the function level. At fiscal year-end, all operating budget appropriations
lapse to the extent they have not been encumbered.
The administrative officers of the Agency are as follows:
William A. Huston, Executive Director and City Manager
Christine A. Shingleton, Assistant Executive Director and Assistant City Manager
Pamela Arends-King, Finance Director
George Jeffries, Treasurer
Pamela Stoker, Secretary
Douglas C. Holland, Agency Attorney
Agency Powers
All powers of the Agency are vested in its members. Pursuant to the Redevelopment
Law, the Agency is a separate public body and exercises governmental functions, including
planning and implementing redevelopment projects.
The Agency may exercise the right to issue bonds for authorized purposes and to
expend their proceeds, and the right to acquire, sell, rehabilitate, develop, administer or lease
property. The Agency may demolish buildings, clear land and cause to be constructed certain
improvements, including streets, sidewalks, parking and utilities, and can further prepare for
use as a building site any real property which it owns or administers.
The Agency may, from any funds made available to it for such purposes, pay for all or
part of the value of land and the cost of buildings, facilities or other improvements to be
publicly owned and operated, provided that such improvements are of benefit to a
redevelopment project and cannot be financed by any other reasonable method. The Agency
may not construct or develop buildings, with the exception of public buildings and housing,
and must sell or lease cleared property which it acquires within a redevelopment project for
redevelopment in conformity with a particular redevelopment plan, and may further specify a
period within which such redevelopment must begin and be completed.
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Redevelopment Projects
The Agency currently has three projects: (a) the Town Center Redevelopment Project,
(b) the South Central Redevelopment Project, and (c) the MCAS-Tustin Redevelopment
Project. Detailed descriptions of such redevelopment projects are described in detail herein
under the captions "THE TOWN CENTER REDEVELOPMENT PROJECT," "THE SOUTH
CENTRAL REDEVELOPMENT PROJECT" and "THE MCAS-TUSTIN REDEVELOPMENT
PROJECT."
A map of the City, highlighting the Redevelopment Projects, is shown on the following
page:
-20-
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Outstanding Indebtedness of the Agency
Certification of Agency Indebtedness. Pursuant to section 33675 of the Redevelopment
Law, on or before October 1 of each year the Agency must file with the County Auditor a
statement of indebtedness certified by the chief fiscal officer of the Agency for each
redevelopment project that receives tax increment. The statement of indebtedness is required to
contain the date on which any bonds were delivered, the principal amount, term, purpose and
interest rate of bonds and the outstanding balance and amount due on bonds. Similar
information must be given for each loan, advance or indebtedness that the Agency has incurred
or entered into to be payable from tax increment. The Agency has complied with the
requirements of section 33675 each year since adoption of the Redevelopment Plan.
Section 33675 also provides that the County Auditor is limited in payment of tax
increment to the Agency to the amounts shown on the Agency's statement of indebtedness.
The section further provides that the statement of indebtedness is prima facie evidence of the
indebtedness of the Agency but that the County Auditor may dispute the amount of
indebtedness shown on the statement in certain cases. Provision is made for time limits under
which the dispute can be made by the County Auditor as well as provisions for determination
by the Superior Court in a declaratory relief action of the proper disposition of the matter. The
issue in any such action must involve only the amount of the indebtedness and not the validity
of any contract or debt instrument, or any expenditures pursuant thereto. An exception is
made for payments to a public agency in connection with payments by such public agency
pursuant to a bond issue which shall not be disputed in any action under section 33675.
Bonded Indebtedness. Following issuance of the Bonds, the Bonds will be the only bonded
indebtedness of the Agency secured by Housing Tax Revenues. See APPENDIX C-
"AUDITED FINANCIAL STATEMENTS OF THE AGENCY FOR THE FISCAL YEAR
ENDED JUNE 30, 2009."
Agency Financial Statements
The Law requires redevelopment agencies to have an independent financial audit
conducted each year. The financial audit is also required to include an opinion of the Agency's
compliance with laws, regulations and administrative requirements governing activities of the
Agency. Audited financial statements for the Agency for the Fiscal Year that ended June 30,
2009, included in Appendix C attached hereto, have been prepared by Macias Gini &
O'Connell LLP, Newport Beach, California. The firm's audit was made in accordance with
generally accepted auditing standards. As is explained in the Notes to the Agency's financial
statements, the Agency follows fund accounting principles reflecting the modified accrual
basis of accounting. Pursuant to those principles, revenue is recognized when earned or
otherwise becomes available, and expenditures are recognized when incurred. See APPENDIX
C-"AUDITED FINANCIAL STATEMENTS OF THE AGENCY FOR THE FISCAL YEAR
ENDED JUNE 30, 2009."
Redevelopment Plans
Under the Redevelopment Law every redevelopment agency is required to adopt, by
ordinance, a redevelopment plan for each redevelopment project specifically authorized in the
adopted redevelopment plan. A redevelopment plan is a legal document, the content of which
is largely prescribed in the Redevelopment Law, rather than a "plan" in the customary sense of
the word. The overall objective of the redevelopment plan is to eliminate blighted conditions in
the project area by undertaking all appropriate projects pursuant to the Redevelopment Law.
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Redevelopment Plan Limits
In accordance with the Law, redevelopment plans adopted after October 1, 1976 but
prior to January 1, 1994 are required to include a time limit on the establishment of
indebtedness to be repaid with tax increment and a limit on the amount of tax increment
revenue that maybe divided and allocated to a project area. In addition, if the plan authorizes
the issuance of tax allocation bonds, a limit on the amount of bonded indebtedness that may
be outstanding at one time must be included. For those redevelopment plans adopted prior to
October 1, 1976 that did not contain these limits, the legislative body was required to amend
the redevelopment plans by ordinance not later than December 31, 1986. The amendment must
include provisions to limit the number of tax increment dollars that could be allocated to the
agency pursuant to the plan, to establish a time limit to create debt to be repaid with tax
increment, and to limit the commencement of eminent domain.
Chapter 942, Statutes of 1993, established further limits on redevelopment plans.
Chapter 942 restricted the life span of redevelopment plans adopted prior to 1994. The time
limit for establishing indebtedness was limited to 20 years from the adoption of the
redevelopment plan or January 1, 2004, whichever is later. The life of the existing
redevelopment plans was limited to 40 years from the date of adoption or January 1, 2009,
whichever is later. Finally, a redevelopment agency was restricted from paying indebtedness
with tax increment beyond 10 years after its redevelopment plan expires except to fund
deferred Housing Set Aside requirements and to repay indebtedness incurred prior to January
1, 1994.
Pursuant to Chapter 942, on November 21, 1994, the Agency adopted Ordinance No.
1141 for the Town Center Redevelopment Project and Ordinance No. 1142 for the South
Central Redevelopment Project. These ordinances amended each Redevelopment Project's time
limits to conform to the provisions of Chapter 942. The MCAS-Tustin Redevelopment Project
was adopted after January 1, 1994 and is conforming to the limits imposed by Chapter 942.
Pursuant to Senate Bi111045, on February 22, 2005, the Agency adopted Ordinance No.
1291 for the Town Center Redevelopment Project and Ordinance No. 1290 for the South
Central Redevelopment to increase each Redevelopment Plan's period of effectiveness and the
period within which those Redevelopment Projects may repay indebtedness by one year.
Pursuant to Senate Bill 1096, the redevelopment agencies may extend the term of their
redevelopment plans effectiveness and the periods within which the agency may repay
indebtedness by up to two additional years. A one year extension of the time limits for
redevelopment projects meeting certain criteria is predicated upon the payment by the agency
of its Educational Revenue Augmentation Fund ("ERAF") obligations for each of 2005 and
2006. For redevelopment projects that have less than 10 years of plan effectiveness remaining
after June 30, 2005 a one year extension is authorized. For redevelopment projects that have
more than 10 years and less than 20 years of plan effectiveness remaining after June 30, 2005,
a one year extension is authorized if the city council can make certain findings. For those
redevelopment projects with more than 20 years of plan effectiveness remaining after June 30,
2005, no extension of time is authorized. In addition, for redevelopment projects that have less
than 10 years of plan effectiveness remaining after June 30, 2006, a one year extension is
authorized. For redevelopment projects that have more than 10 years and less than 20 years of
plan effectiveness remaining after June 30, 2006, a one year extension is authorized if the city
council can make certain findings. For those redevelopment projects with more than 20 years of
plan effectiveness remaining after June 30, 2006 no extension of time is authorized.
On October 17, 2005, the City Council Adopted Ordinance No. 1306, providing for a
one year extension for the Town Center Redevelopment Project. On October 17, 2005, the City
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South Central Redevelopment Project. On February 5, 2008, the City Council Adopted
Ordinance No. 1348, providing fora second one year extension for the Town Center
Redevelopment Project. On February 5, 2008, the City Council Adopted Ordinance No. 1349,
providing for a second one year extension for the South Central Redevelopment Project. The
MCAS-Tustin Redevelopment Project was not eligible for extension by two years pursuant to
SB 1096.
See "TOWN CENTER REDEVELOPMENT PROJECT-Redevelopment Plan
Limitations," "SOUTH CENTRAL REDEVELOPMENT PROJECT-Redevelopment Plan
Limitations," and "MCAS-TUSTIN REDEVELOPMENT PROJECT-Redevelopment Plan
Limitations."
Annual Tax Receipts to Tax Levy
The Agency received a total of $5,652,841 in tax increment revenue from the Town
Center Redevelopment Project for fiscal year 2008-09. This total is inclusive of revenues from
supplemental assessments, homeowner's exemptions, public utilities and prior year collections
and net of County withholdings for refunds. The Agency received a total of $4,555,086 in tax
increment revenue from the South Central Redevelopment Project for fiscal year 2008-09. This
total is inclusive of revenues from supplemental assessments, homeowner's exemptions,
public utilities and prior year collections and net of County withholdings for refunds. The
Agency received a total of $11,621,039 in tax increment revenue from the MCAS-Tustin
Redevelopment Project for fiscal year 2008-09. This total is inclusive of revenues from
supplemental assessments, homeowner's exemptions, public utilities and prior year collections
and net of County withholdings for refunds. The County administration fee of $205.807 was
deducted from the Agency's fiscal year 2008-09 tax increment revenues.
Any property tax levied by the County on real property becomes a lien on that
property. A tax levied on personal property does not become a lien against the personal
property, but may become a lien on certain real property owned by the owner of the personal
property located within the City.
Classifications. Taxes are levied for each fiscal year on taxable real and personal
property which is situated in the County as of the preceding March 1. In California, property
which is subject to ad valorem taxes is classified as "secured" or "unsecured." The secured
classification includes property on which any property tax levied by a county becomes a lien
on that property. A tax levied on unsecured property does not become a lien against such
unsecured property, but may become a lien on certain other property owned by the taxpayer.
Every tax which becomes a lien on secured property has priority over all other liens arising
pursuant to State law on such secured property, regardless of the time of the creation of the
other liens.
Collections. Secured and unsecured property are entered separately on the assessment
roll maintained by the County Assessor. The method of collecting delinquent taxes is
substantially different for the two classifications of property. The taxing authority has four
ways of collecting unsecured personal property taxes: (1) a civil action against the taxpayer;
(2) filing a certificate in the office of the county clerk specifying certain facts in order to obtain
a judgment lien on certain property of the taxpayer; (3) filing a certificate of delinquency for
record in the county recorder's office, in order to obtain a lien on certain property of the
taxpayer; and (4) seizure and sale of personal property improvements or possessory interests
belonging or assessed to the assessee. The exclusive means of enforcing the payment of
delinquent taxes in respect of property on the secured roll is the sale of the property securing
the taxes to the State for the amount of taxes which are delinquent.
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Property taxes on the secured roll are due in two installments, on November 1 and
February 1 of each fiscal year. Property taxes on the unsecured roll are due as of the March 1
lien date and become delinquent, if unpaid, on August 31 of the fiscal year.
A ten percent (10%) penalty is added to delinquent taxes which have been levied with
respect to property on the secured roll. In addition, property on the secured roll with respect to
which taxes are delinquent is sold to the State on or about June 30 of the fiscal year. Such
property may thereafter be redeemed by payment of the delinquent taxes and a delinquency
penalty, plus a redemption penalty of 1-1/2% per month to the time of redemption. If taxes
are unpaid for a period of five years or more, the property is deeded to the State and then is
subject to sale by the County Tax Collector. A ten percent (10%) penalty is also attached to
delinquent taxes in respect of property on the unsecured roll, and further, an additional
penalty of 1-1/2% per month accrues with respect to such taxes beginning the first day of the
third month following the delinquency date.
The valuation of property is determined as of November 1 each year and installments
of taxes levied upon secured property become delinquent on the following December 10 and
April 10. Taxes on unsecured property are due November 10 and become delinquent August
31, and such taxes are levied at the prior year's second tax rate.
Legislation enacted in 1983 (statues of 1983, Chapter 498), provides for the
supplemental assessment and taxation of property upon the occurrence of a change of
ownership or completion of new construction. Previously, statutes enabled the assessment of
such changes only as of the next November 1 tax lien date following the change and thus
delayed the realization of increased property taxes from the new assessments for up to a year.
To the extent such supplemental assessments occur within the Redevelopment Projects,
Agency revenues may increase.
Revenues are paid to the Agency in anticipation of tax receipts. A reconciliation
between tax revenue paid to a redevelopment agency and secured tax collections actually
received by the County for the redevelopment project is prepared in January. A similar
methodology is used for the remainder of the fiscal year, resulting in approximately 85% to
95% of cumulative revenues being allocated through May. Revenue reconciliations due to
county assessor roll changes are prepared for secured taxes in April and July, and subsequent
final apportionments resulting from collection reconciliations are prepared in July.
Unsecured tax revenues are disbursed to redevelopment agencies based upon actually
unsecured taxes received by the County. Payments are generally remitted in December,
January and July of each fiscal year. A reconciliation payment is made in July concurrent with
the final secured reconciliation. Acollection charge of twenty-five hundredths of one percent
(0.25%) of actual taxes collected is deducted by the County from each secured and unsecured
tax disbursement.
Collection of taxes based on supplemental assessments will occur throughout the year.
Taxes due will be prorated according to the amount of time remaining in the tax year, with the
exception of tax bills dated November 1 through March 31, which will be calculated on the
basis of the remainder of the current fiscal year and the full twelve months of the next fiscal
year.
For supplemental tax bills mailed during the months of March through November, the
first installment of taxes becomes delinquent on December 11 of the same year, the second
installment becomes delinquent after the last day of the month following the month in which
the bill was mailed and the second installment becomes delinquent four months later.
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Appeals of Assessed Values
Pursuant to California law, property owners may apply for a reduction of their
property tax assessment by filing a written application, in the form prescribed by the State of
California (the "State") Board of Equalization, with the appropriate county board of
equalization or assessment appeals board. After the applicant and the assessor have presented
their arguments, the Appeals Board makes a final decision on the proper assessed value. The
Appeals Board may rule in the assessor's favor, in the applicant's favor or the Appeals Board
may set its own opinion of the proper assessed value, which may be more or less than either
the assessor's opinion or the applicant's opinion.
Any reduction in the assessment ultimately granted applies to the year for which
application is made and during which the written application was filed. After a reduction is
allowed, the property is reviewed on an annual basis to determine its full cash value and the
valuation may be adjusted accordingly. This may result in further reductions or increases in
value. Such increases are in accordance with the actual cash value of the property and may
exceed the maximum annual inflationary growth rate allowed on other properties under
Article XIIIA of the State Constitution. Once the property has regained its prior value,
adjusted for inflation, it is once again subject to the annual inflationary growth rate allowed
under Article XIIIA.
Appeals for reduction in the "base year" value of an assessment, if successful, reduce
the assessment for the year in which the appeal is taken and prospectively after that. The "base
year' is determined by the completion date of new construction or the date of change of
ownership. Any base year appeal must be made within four years of the change of ownership
or new construction date.
Refunds for taxpayer overpayment of property taxes may include refunds for
overpayment of taxes in years after that which was appealed. Any taxpayer payment of
property taxes that is based on a value that is subsequently adjusted downward will require a
refund for overpayment.
See "TOWN CENTER REDEVELOPMENT PROJECT-Appeals of Assessed Values,"
"SOUTH CENTRAL REDEVELOPMENT PROJECT-Appeals of Assessed Values," and
"MCAS-TUSTIN REDEVELOPMENT PROJECT-Appeals of Assessed Values."
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ALL REDEVELOPMENT PROJECTS
Assessed Valuation
A breakdown of the Fiscal Year 2009-10 aggregate assessed valuation in all three
Redevelopment Projects, by category of use, is as follows:
Table 1
All Redevelopment Projects
Breakdown of Assessed Valuation by Category of Use
Category
Residential
Commercial
Industrial
Miscellaneous
Institutional
Recreational
Agricultural
Vacant Land
Government/Exempt
Cross Reference
Unsecured
Total:
Number of Parcels
2,605
359
42
1
3
1
10
18
660
3,699
Net Taxable Value
$1,275,044,921
688,144,937
116,184,302
46,857
3,422,966
3,219,928
86,699,995
3,136,872
0
413,547
128,073,799
$2,304,388,124
of Total
55.33%
29.86
5.04
0.00
0.15
0.14
3.76
0.14
0.00
0.02
5.56
100.00%
Source: HdL Coren & Cone
Note: The figures include the value for exempt parcels such as those owned by the City, the Agency, the State of
California or other governmental agencies.
*SBE nonunitary, possessory interest and unsecured values are connected with parcels that are already accounted
for in other categories.
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The following table shows the ten largest property taxpayers, by assessed value, u1 all
three Redevelopment Projects.
Table 2
All Redevelopment Projects
Largest Fiscal Year 2009-10 Property Taxpayers, by Assessed Value
Property Owner
Vestar Kimco Tustin LP (2)
Tustin Legacy Community
Partners (2)
PK II Larwin Square SC LP (2)
Tustin Heights SC LP (2)
OC SD Holdings
Costco Wholesale Corporation (2)
Orange County Teachers Federal
Credit Union
Lowes HIW (2)
9 Tustin Plaza Center LP (2)
10 Anaheim Investors (2)
Percent of
Assessed Percent of Incremental
Primary Land Use Valuation (1) Total Value
Commercial $150,656,486 6.54% 7.07%
Agricultural/ 86,699,995 3.76 4.07
Vacant Land
Commercial 50,121,773 2.18 2.35
Commercial 47,130,120 2.05 2.21
Residential 29,580,000 1.28 1.39
Discount Retail 28,747,354 1.25 1.35
Commercial 24,567,017 1.07 1.15
Home Improvement 23,046,667 1.00 1.08
Retail
Commercial 21,835,958 0.95 1.02
Industrial 16,542,360 0.72 0.78
$478,927,730 20.87% 22.47%
Source: HdL Coren & Cone.
(1) Tota12009-10 assessed valuation is $2,304,388,124.
(2) Owner has an assessment value appeal pending.
Housing Tax Revenue Projections and Debt Service Coverage
The following table sets forth the projected growth in Housing Tax Revenues in all
Redevelopment Projects. Assuming no growth in the real property taxable values within the
Redevelopment Projects and assuming the available Housing Tax Revenues remain at the
projected 2009-10 level, the debt service coverage ratio of Housing Tax Revenues to Maximum
Annual Debt Service on the Bonds would be approximately ____ times.
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Table 3
All Redevelopment Projects
Projected Housing Tax Revenues
(Dollars in Thousands)
Projected Projected Projected
Town Center South Central MCAS Tustin Projected
Redevelopment Redevelopment Redevelopment Total
Fiscal Project Housing Project Housing Project Housing Housing Tax
Year Tax Revenues (11 Tax Revenues (2) Tax Revenues (3) Revenues
2009-10 $1,017 $ 898 $2,406 $ 4,321
2010-11 952 878 2,044 3,874
2011-12 972 899 2,085 3,956
2012-13 993 920 2,125 4,038
2013-14 1,014 4,661 2,167 7,842
2014-15 1,035 4,768 2,210 8,013
2015-16 1,057 4,878 2,253 8,188
2016-17 1,079 4,990 2,298 8,367
2017-18 5,454 5,104 2,343 12,901
2018-19 5,568 5,221 2,389 13,178
2019-20 5,684 5,339 2,436 13,459
2020-21 5,802 5,461 2,484 13,747
2021-22 5,923 5,584 2,533 14,040
2022-23 6,046 5,710 2,583 14,339
2023-24 6,172 5,839 2,633 14,644
2024-25 6,300 5,970 2,685 14,955
2025-26 6,431 6,104 2,738 15,273
2026-27 6,564 6,240 2,792 15,596
2027-28 6,700 6,380 2,847 15,927
2028-29 6,839 - 2,904 9,743
2029-30 - - 2,961 2,961
2030-31 - - 3,019 3,019
2031-32 - - 3,079 3,079
2032-33 - - 3,140 3,140
2033-34 - - 3,202 3,202
2034-35 - - 3,265 3,265
2035-36 - - 3,316 3,316
2036-37 - - 3,381 3,381
2037-38 - - 3,448 3,448
2038-39 - - 3,516 3,516
203910 - - 3,586 3586
Debt
Debt Service
Service Coverase
Source: HdL Coren & Cone (for Housing Tax Revenue data)
(1) See Table 8 for computation of project Town Center Redevelopment Project Housing Tax Revenues.
(2) See Table 13 for computation of project South Central Redevelopment Project Housing Tax Revenues.
(3) See Table 18 for computation of project MCAS Tustin Redevelopment Project Housing Tax Revenues.
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THE TOWN CENTER REDEVELOPMENT PROJECT
The following is a summary description of the Town Center Redevelopment Project. Included
within this description are sections discussing the present and current conditions of the Town Center
Redevelopment Project and the future development within the Town Center Redevelopment Project.
These descriptions have been supplied by the Agency. There can be no assurance that the future
developments discussed below will be completed in the manner or in the time periods described in this
Official Statement.
General
The City established the Town Center Redevelopment Project and approved the
redevelopment plan for the Town Center Redevelopment Project (the "Town Center
Redevelopment Plan") by Ordinance No. 701 enacted by the City Council of the City on
November 22, 1976, amended by Ordinance No. 855 enacted by the City Council of the City on
September 8, 1981 (to amend the limitation of finances and bonded indebtedness), Ordinance
No. 1021 enacted by the City Council of the City on March 20, 1989 (to adopt a Second
Amendment which involved 32 comprehensive amendments to change, delete or add certain
language to the Redevelopment Plan including the revision and update of the list of public
improvements needed to further the goals and objectives of the plan, the extension on the time
limit on the use of eminent domain and increases in the Plan financial limitations), Ordinance
No. 1141, enacted by the City Council of the City on November 21, 1994 (to extend the time
limit of the effectiveness of the Plan through November 22, 2016 and extend the time limit for
payment of indebtedness and receipt of property taxes through November 22, 2026),
Ordinance No. 1291, enacted by the City Council of the City on November February 22, 2005
(to extend the time limit of the effectiveness of the Plan through November 22, 2017 and
extend the time limit for payment of indebtedness and receipt of property taxes through
November 22, 2027), Ordinance No. 1306, enacted by the City Council of the City on October
17, 2005 (to extend the time limit of the effectiveness of the Plan through November 22, 2018
and extend the time limit for payment of indebtedness and receipt of property taxes through
November 22, 2028), and Ordinance No. 1348, enacted by the City Council of the City on
February 5, 2008 (to extend the time limit of the effectiveness of the Plan through November
22, 2019 and extend the time limit for payment of indebtedness and receipt of property taxes
through November 22, 2029).
All real property in the Town Center Redevelopment Project is subject to the controls
and restrictions of the Town Center Redevelopment Plan. The Town Center Redevelopment
Plan requires that new construction shall comply with all applicable State statutes and local
laws in effect, including, but not limited to, fire, building, electrical, heating, and zoning codes
of the City. The Town Center Redevelopment Plan allows for commercial, residential and
public uses within the Town Center Redevelopment Project. The Agency may permit an
existing but nonconforming use to remain so long as the existing building is in good condition
and is generally compatible with the development and uses in the Town Center Redevelopment
Project. The owner of any property with a nonconforming use must be willing to enter into an
owner participation agreement with the Agency and agree to the imposition of such reasonable
restrictions as are necessary to protect the development and use of the Town Center
Redevelopment Project.
Within the limits, restrictions and controls established in the Town Center
Redevelopment Plan, the Agency is authorized to establish land coverage, setback
requirements, design criteria, and other development and design controls necessary for the
proper development of both private and public areas within the Town Center Redevelopment
Project.
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Under certain circumstances, the Agency is authorized to permit a minor variation
from the limits, restrictions and controls established by the Town Center Redevelopment Plan.
However, no variation shall be granted which changes the basic land use or which permits a
substantial departure from the Town Center Redevelopment Plan provisions. In permitting a
variation, the Agency shall impose such conditions as are necessary to protect the public
health, safety or welfare, and to assure compliance with the purposes of the Town Center
Redevelopment Plan. No minor variation permitted by the Agency shall be effective until
conditional uses, variances, or other zoning changes, if any, have been effectuated by the City
to the extent necessary to obtain consistency with such minor variations permitted by the
Agency.
Description of the Town Center Redevelopment Project
The Town Center Redevelopment Project includes approximately 360 acres in the center
of the City, an area which includes the historic "old town" and civic center and a majority of
the commercial properties within the central portion of the City. The Town Center
Redevelopment Project contains commercial, service-commercial, neighborhood commercial,
and residential land uses. Although a precise breakdown of land uses is not available, the
predominant land use in the Town Center Redevelopment Project is primarily commercial
retail and service-oriented uses, which is estimated to approximate 90% of the total area.
Residential and public/institutional uses account for approximately 5% each of the Town
Center Redevelopment Project's land. Residential uses are mostly multi-family with a very
small proportion of the Town Center Redevelopment Project containing single-family and
mobile home uses. Public institutional uses include two parks (Columbus-Tustin and
Peppertree), the Civic Center, the Tustin Library, the Tustin School District administrative
offices, Columbus-Tustin Intermediate School, and the Tustin Post Office. The Town Center
Redevelopment Project is generally bounded by portions of Beneta Avenue and Irvine
Boulevard on the north, Interstate Highway 5 (Santa Ana Freeway) on the south, portions of
Prospect Avenue and "B" Street on the west, and portions of Newport Avenue and Main
Street on the east.
The Agency initiated proceedings to establish the Town Center Redevelopment Project
in 1971 after central-city merchants and the Tustin Chamber of Commerce requested its help in
revitalizing and expanding the El Camino Real commercial area in central Tustin. In the early
1970's, the El Camino Real area consisted of mixed residential and commercial uses on
substandard lots. Most of the commercial facilities lacked off-street parking. Some of the
businesses dated back to the early 1900's; only one new structure had been built in the area
during the previous decade.
The general objectives of the Town Center Redevelopment Plan are the elimination and
prevention of blight in the Town Center Redevelopment Project. The Town Center
Redevelopment Plan calls for constructing and improving streets, utilities or other public
improvements; acquiring, disposing of and redeveloping real property; participation of owners
and tenants in the Town Center Redevelopment Project; management of property under
Agency ownership and control; and demolition, rehabilitation or removal of buildings. In the
Town Center Redevelopment Project particularly, the Agency's goal was to eliminate existing
blight and prevent the spread of blight and deterioration by:
• Providing for participation by owners and residents of the Town Center Redevelopment Project by
extending the them preferences to remain or relocate within the redeveloped areas should their
present structures be suffering from deterioration requiring assistance;
• Rehabilitation of structures and improvements by present owners, their successors, or the Agency;
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• Redevelopment of land by private enterprise or public agencies for uses in accordance with the
Town Center Redevelopment Plan;
• Installation, construction or reconstruction of streets, utilities and other public improvements such as
center islands, street trees and landscaping;
• Acquisition of certain real property for public improvements or to help expedite private
development;
• Relocation assistance to displaced residential and non-residential occupants;
• Demolition or removal of certain buildings and improvements;
• Management of any property acquired under the ownership and control of the Agency; and
• Disposition of any property acquired by the Agency for uses in accordance with the Town Center
Redevelopment Plan.
The Tustin City Council in adopting the Town Center Redevelopment Plan also
declared that its purpose and intent with respect to the Redevelopment Area was as follows:
• The creation of a mixed use town center area that combines commercial, office, residential and
public uses which will serve the needs of the community as well as encourage the healthy growth
of the town center area to expand the hours of activity downtown, and make it more attractive as a
place for shopping and entertainment.
• To improve traffic circulation and access in the town center area as a means of reducing congestion,
encouraging business development, attracting new customers to the area, alleviating pass-through
traffic congestion and conflict, improving safety.
• Revitalization and development of amenities in the project area, both public and privately
financed, as a means of aiding the revitalization of the El Camino Real section in particular.
• To increase the level of capital improvement such as the development of Columbus-Tustin Park,
parking facilities, sidewalk and street landscaping, street improvements and related public
improvement projects.
• To increase controlled development of the area to aid in the harmonious and efficient development
of the Redevelopment Area.
• To encourage residential development by actively seeking private development in the
Redevelopment Area to provide an increased market for the business community in this area.
Redevelopment Activity
All properties in the Redevelopment Projects are subject to the Agency's approved
development standards and guidelines. The Redevelopment Plan requires that new
construction comply with all applicable State and local laws and codes in effect from time to
time.
The Redevelopment Plan provides further that no new improvement is to be
constructed, and no existing improvement is to be substantially modified, altered, repaired or
rehabilitated, except in accordance with the Plan and development and design controls and, in
the discretion of the Agency, in accordance with architectural, landscape and site plans
submitted to and approved by the Agency.
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At the time the Redevelopment Plan was adopted, the City recognized that a number
of problems existed in the Project Area, including scattered physical deterioration; limited
renovation or new construction; lack of major street attractions; inadequate parking and
amenities; increased business competition in surrounding areas; and the absence of a central
shopping and commercial district for the City's town center. Since the adoption of the Town
Center Plan, the Agency has provided private development assistance for the rehabilitation of
substandard and deteriorating structures and for the development of new commercial uses in
the Project Area. The Agency has completed vital improvements to upgrade substandard
public infrastructure and to provide needed public facilities to serve the surrounding
community. The Agency has also provided expenditures for business assistance and outreach
programs to support the retention of existing businesses and attraction of new businesses to
the Project Area. Working with the private sector, the Agency has assisted in the development
of new retail commercial centers, offices, and new residential units in the Project Area. The
Agency has also provided first time homeowner loans to low and moderate income
households.
Under the Redevelopment Plan, the Agency since 1976 has facilitated approximately
1,049,626 square feet of new or significant rehabilitation of private sector commercial
development projects in the Project Area and new residential dwelling units representing at the
time of construction over $59.2 million dollars in building valuation, generating 3,112 new
permanent jobs and increasing annual sales tax over $712,000 annually as shown for
individual sites on the tables which follow.
In addition to private developments within the Town Center Project area, significant
public projects have been completed to date including the following:
• Generalstreetwidening
• Holt Avenue/State Route 55 storm drain improvements
• Irvine Boulevard intersection improvements
• Main Streetbanner pole project
• Restriping of Irvine Boulevard
• Street rehabilitation of Newport and Prospect Avenues
• Traffic control improvements (i.e. increased lighting, signalization, traffic signs and left turn
phasing lanes)
• Traffic signal installation at 1st and B Streets
• Undergrounding of utilities and replacement of undersized water mains and new upgraded
storm drains
• Tustin Water Yard Improvements including construction of two Old Town parking lots
adjacent to the Water Yard facility
• Old Town Commeraal District Streetscape Enhancement Project (street lighting, decorative
paving, landscaping, furnishings, and signage)
• Street widening acquisitions and construction documents preparation for Irvine Boulevard and
Newport Avenue intersection widening improvements
• Old Town Respite PocketMini-Park improvements
• Acquisition of land area and construction of a new Tustin Library
• Construction of the Tustin Area Senior Center
• Construction of new Civic Center Improvements
• Improvements to Columbus Tustin Park and construction of the Columbus Park Gym
• Improvements to Peppertree Park
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A 247-space downtown parking structure was also completed on C Street to provide
additional parking for adjacent commercial and office developments. The Agency assisted in
the costs of construction, and has a financial interest in 81 of the parking spaces defined for
public parking use.
Redevelopment Plan Limitations
The following table shows the current Town Center Redevelopment Plan limitations:
Table 4
Town Center Redevelopment Project
Redevelopment Plan Limitations
Plan Ex iration Date: 11/22/2019
Last Date to Establish Debt: 1 1 / 1 /2004
Last Date to Rea Debt: 11/22/2029
Ex iration Date for Eminent Domain Authori 4/20/2001
Cumulative Tax Increment Limit: 2 $90,000,000
Bonded Indebtedness Limit $35,000,000
(1) Does not apply to activities to meet the Agency's affordable housing obligations
(2) Does not apply to Housing Tax Revenues and Taxing Agency pass-through, if any
Assessed Valuation
The Base Year assessed valuation was established in Fiscal Year 1976-77 in the amount
of $54,874,134. The total assessed valuation of taxable property in the Town Center
Redevelopment Project in fiscal year 2009-10 is $556,823,652, with $501,949,518 of such
amount representing incremental assessed value in excess of the adjusted assessed valuation
in the Base Year. A breakdown of the Fiscal Year 2009-10 assessed valuation in the Town
Center Redevelopment Project by category of use is as follows:
Table 5
Town Center Redevelopment Project
Breakdown of Assessed Valuation by Category of Use
CateQOr
Residential
Commercial
Industrial
Miscellaneous
Instituiional
Recreational
Agricultural
Vacant Land
Government/Exempt
Cross Reference
Unsecured
Total:
Number of Parcels Net Taxable Value
305
277
2
1
3
1
0
9
64
732
$108,863,722
391,485,097
241,762
46,857
3,422,966
3,219,928
0
1,614,184
0
21,630
47,907,506
$556,823,652
of Total
19.55%
70.31
0.04
0.01
0.61
0.58
0.00
0.29
0.00
0.00
8.60
100.00%
Source: HdL Coren & Cone
Note: The figures include the value for exempt parcels such as those owned by the City, the Agency, the State of
California or other governmental agencies.
*SBE nonunitary, possessory interest and unsecured values are connected with parcels that are already accounted
for in other categories.
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The following table shows the actual assessed values for Fiscal Years 2005-06 to 2009-
10 based upon the County Auditor/Controller's equalized rolls and incremental values of
property within the Town Center Redevelopment Project based on an exclusion of assessed
values from the unsecured roll.
Secured (1)
Land
Improvements
Personal Property
Exemptions
Total Secured
Unsecured
Land
Improvements
Personal Property
Exemptions
Total Unsecured
GRAND TOTAL
Table 6
Town Center Redevelopment Project
Historical Taxable Values and Tax Increment Revenues
Fiscal Years Ended June 30,
Base Year
1976-77
2005-06 2006-07 2007-08
2008-09 2009-10
19,455,614
27,927,560
341,600
(510,600)
47,214,174
73,600
1,933,920
5,681,120
(28,680)
7,659,960
54,874,134
Annual Incremental Value
Change from Prior Year
Change in Total Value
187,396,818
180,784,329
412,554
(1,808,473)
366,785,228
203,752,245 223,866,152
190,873,975 197,557,000
422,302 374,093
(1,851,413) (1,969,609)
393,197,109 419,827,636
1,122,610 964,277 1,091,439 27,745,135 967,285
14,828,625 17,637,785 12,275,308 38,539,211 20,560,886
27,121,285 33,982,401 31,619,120 28,937,504 27,025,341
(367,932) (915,310) (770,793) (1,336,810) (646,006)
42,704,588 51,669,153 44,215,074 93,885,040 47,907,506
409,489,816 444,866,262 464,042,710 581,179,958 556,823,652
354,615,682 389,992,128 409,168,576 526,305,824 501,949,518
28,957,417 35,376,446 19,176,448 117,137,248 (24,356,306)
7.61% 8.64% 4.31% 25.24% X1.19%
263,226,032 273,653,973
225,755,403 237,041,020
352,319 321,031
(2,038,836) (2,099,878)
487,294,918 508,916,146
Source: HdL Coren & Cone
(1) Secured values include state assessed non-unitary utility property.
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The aggregate total taxable value for the ten largest taxpayers for Fiscal Year 2009-10
totals $_201,621,173. This amount is 40.17% of the Town Center Redevelopment Project
incremental value and 36.21% of the total Town Center Redevelopment Project assessed value.
Table 7
Town Center Redevelopment Project
Largest Fiscal Year 2009-10 Property Taxpayers, by Assessed Value
1
2
3
4
5
6
7
8
9
10
Property Owner
PK R Larwin Square SC LP (2)
Tustin Heights SC LP (2)
Tustin Plaza Center LP
Lafayette Plaza Investors LP
Kohls Department Stores (2)
First Newport (2)
Donahue Schriber Realty Group LP (2)
KAMF Tustin (2)
Pointe Newport Investors
David and Renee Gaon (2)
Assessed Percent of Incremental
Primary Land Use Valuation (1) Total Value
Commercial $ 50,121,773 9.00% 9.99%
Commercial 47,130,120 8.46 9.39
Commercial 21,835,958 3.92 4.35
Commercial 15,074,585 2.71 3.00
Retail Commercial 16,281,491 2.92 3.24
Commercial 11,922,671 2.14 2.38
Commercial 10,500,446 1.89 2.09
Commercial 10,028,700 1.80 2.00
Residential 9,833,841 1.77 1.96
Commercial 8,891,588 1.60 1.77
$201,621,173 36.21% 40.17%
Source: HdL Coren & Cone
(1) Tota12009-10 assessed valuation is $556,823,652.
(2) Owner has an assessment value appeal pending.
Appeals of Assessed Values
Within the Town Center Redevelopment Project there have been 94 assessment appeals
filed since 2005-06. All appeals filed for fiscal years 2005-06 and 2006-07 have been resolved.
Of the 94 appeals filed, 19 have been allowed with a reduction in value and 3 have been
denied. There are 72 appeals currently pending on properties within the Town Center
Redevelopment Project. Based on the historical averages for appeals allowed and value
reduction per successful appeal, it is projected that 62 of the currently pending appeals will be
allowed and that these successful appeals will result in an assessed value reduction of
$33,360,801. This reduction has been incorporated in the projection as a reduction to the 2010-
11 assessed value. Reductions in revenue for refunds resulting from these successful appeals
have not been estimated. Seven of the top ten taxpayers within the Town Center
Redevelopment Project have filed assessment appeals that are currently pending. See
APPENDIX D-"FISCAL CONSULTANT'S REPORT."
Fiscal Consultant's Report
The Fiscal Consultant's Report contains estimates of tax increment collected though
Fiscal Year 2008-09 for the Town Center Redevelopment Project ($57,882,990). The Fiscal
Consultant projects that the Agency will reach its tax increment limit for the Town Center
Redevelopment Project in Fiscal Year 2016-17. If the Agency reaches its tax increment limit for
the Town Center Redevelopment Project in Fiscal Year 2016-17, or in any year thereafter, all tax
increment revenue will be applied to satisfy the Agency's housing obligations. See "Housing
Tax Revenue Projections". See APPENDIX D-"FISCAL CONSULTANT'S REPORT."
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Housing Tax Revenue Projections
The following table sets forth the projected growth in tax increment revenues in the
Town Center Redevelopment Project.
Table 8
Town Center Redevelopment Project
Projected Housing Tax Revenues
(Dollars in Thousands)
Taxable Value
Total Over Base
Fiscal Year Taxable Value 54,874
2009-10 $556,824 $501,950
2010-11 524,814 469,940
2011-12 534,776 479,902
2012-13 544,938 490,064
2013-14 555,303 500,429
2014-15 565,875 511,001
2015-16 576,658 521,784
2016-17 587,657 532,783
2017-18 (1) 598,877 544,002
2018-19 610,320 555,446
2019-20 621,992 567,118
2020-21 633,898 579,024
2021-22 646,042 591,168
2022-23 658,429 603,555
2023-24 671,064 616,190
2024-25 683,951 629,077
2025-26 697,096 642,222
2026-27 710,504 655,630
2027-28 724,180 669,306
2028-29 738,130 683,255
Gross Revenues
$5,083
4,762
4,862
4,964
5A68
5,174
5,283
5,393
5,506
5,621
5,738
5,857
5,979
6,104
6,231
6,360
6,492
6,627
6,764
6,904
$1,017
952
972
993
1,014
1,035
1,057
1,079
5,454
5,568
5,684
5,802
5,923
6,046
6,172
6,300
6,431
6,564
6,700
$48
45
46
47
48
49
50
51
52
53
54
55
56
58
59
60
61
62
64
65
Housing Tax
Revenues
SB 2557
County
Admin Fee
Source: HdL Coren & Cone
(1) Represents 20% of total tax increment revenues. The Fiscal Consultant projects that the Town Center
Redevelopment Project will exceed its tax increment limit during fiscal year 2016-17. If such limit is reached in
fiscal year 2017-18, or any subsequent year, all gross tax increment revenues, other than the SB 2557 County
administrative fees, will be used to pay debt service on the Bonds and any other remaining housing obligations
of the Agency.
The foregoing projections reflect the Agency's understanding of the assessment and tax
apportionment procedures employed by the County. The County procedures are subject to
change as a reflection of policy revisions or legislative mandate. While the Agency believes the
estimates to be reasonable, taxable values resulting from actual appraisals may vary from the
amounts assumed in the projections.
No assurances are provided by the Agency as to the certainty of the projected tax
increment revenues shown on the foregoing table. Actual revenues maybe higher or lower than
what has been projected and are subject to valuation changes resulting from new
developments or transfers of ownership not specifically identified herein, actual resolution of
outstanding appeals, future filing of appeals, or the non-payment of taxes due.
Adjustments to Tax Increment Revenues
Property Tax Administrative Costs. The County currently reduces the amount of total tax
increment revenue allocated to the Agency from the Town Center Redevelopment Project to
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cover property tax administrative costs. Legislation enacted in 1990 (SB 2557), and in 1992
(SB 1559) authorizes county auditors to determine property tax administrative costs
proportionately attributable to local jurisdictions and, for the 1990-91 and 1991-92 Fiscal
Years, to invoice the jurisdictions for such costs. Commencing in the 1992-93 Fiscal Year, the
amounts due as local agencies' contribution to covering county administrative costs are to be
allocated to the county as part of the overall system for the redistribution of property taxes (as
opposed to being paid pursuant to invoices).
SB 2557 expressly includes redevelopment agencies as jurisdictions that are to be
charged for property tax administrative costs. The County's administrative and collection fee
for fiscal year 2009-10 is estimated at $48,000, or approximately 0.943 percent of the
projected 2008-09 gross Town Center Redevelopment Project revenue. As a result, the property
tax administrative charge for future fiscal years is estimated at two percent of gross Town
Center Redevelopment Project revenue.
THE SOUTH CENTRAL REDEVELOPMENT PROJECT
The following is a summary description of the South Central Redevelopment Project. Included
within this description are sections discussing the present and current conditions of the South Central
Redevelopment Project and the future development within the South Central Redevelopment Project.
These descriptions have been supplied by the Agency. There can be no assurance that the future
developments discussed below will be completed in the manner or in the time periods described in this
Official Statement.
General
The City established the South Central Redevelopment Project and approved the
redevelopment plan for the South Central Redevelopment Project (the "South Central
Redevelopment Plan") by Ordinance No. 890, enacted by the City Council of the City on
August 1, 1983, as amended by Ordinance No. 939, enacted by the City Council of the City on
August 5, 1985 (to expand the project boundaries south from Edinger Avenue to Valencia
Avenue), as amended by Ordinance No. 1142, enacted by the City Council of the City on
November 21, 1994 (to amend the limitation on finances and bonded indebtedness), as
amended by Ordinance No. 1223, enacted by the City Council of the City on November 1, 1999
(to make certain changes to the text of the Plan, including reestablishing the Agency's eminent
domain authority for a period not to exceed 12 years), as amended by Ordinance No. 1290,
enacted by the City Council of the City on February 22, 2005 (to extend the time limit of the
effectiveness of the Plan through July 15, 2016 and the time limit for payment and receipt of
property taxes through July 15, 2026), as amended by Ordinance No. 1307, enacted by the
City Council of the City on October 17, 2005 (to extend the time limit of the effectiveness of the
Plan through July 15, 2017 and the time limit for payment and receipt of property taxes
through July 15, 2027), as amended by Ordinance No. 1333, enacted by the City Council of the
City on April 3, 2007 (to describe the Agency's program to acquire real property by eminent
domain), and as amended by Ordinance No. 1349, enacted by the City Council of the City on
February 5, 2008 (to extend the time limit of the effectiveness of the Plan through July 15, 2018
and the time limit for payment and receipt of property taxes through July 15, 2028).
All real property in the South Central Redevelopment Project is subject to the controls
and restrictions of the South Central Redevelopment Plan. The South Central Redevelopment
Plan requires that new construction shall comply with all applicable State statutes and local
laws in effect, including, but not limited to, fire, building, electrical, heating, and zoning codes
of the City. The South Central Redevelopment Plan allows for commercial, residential and
public uses within the South Central Redevelopment Project. The Agency may permit an
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existing but nonconforming use to remain so long as the existing building is in good condition
and is generally compatible with the development and uses in the South Central
Redevelopment Project. The owner of any property with a nonconforming use must be willing
to enter into an owner participation agreement with the Agency and agree to the imposition of
such reasonable restrictions as are necessary to protect the development and use of the South
Central Redevelopment Project.
Within the limits, restrictions and controls established in the South Central
Redevelopment Plan, the Agency is authorized to establish land coverage, setback
requirements, design criteria, and other development and design controls necessary for the
proper development of both private and public areas within the South Central Redevelopment
Project.
Under certain circumstances, the Agency is authorized to permit a minor variation
from the limits, restrictions and controls established by the South Central Redevelopment Plan.
However, no variation shall be granted which changes the basic land use or which permits a
substantial departure from the South Central Redevelopment Plan provisions. In permitting a
variation, the Agency shall impose such conditions as are necessary to protect the public
health, safety or welfare, and to assure compliance with the purposes of the South Central
Redevelopment Plan. No minor variation permitted by the Agency shall be effective until
conditional uses, variances, or other zoning changes, if any, have been effectuated by the City
to the extent necessary to obtain consistency with such minor variations permitted by the
Agency.
Description of the South Central Redevelopment Project
The South Central Redevelopment Project, established in 1983 with additional land
area added to the Project boundaries in 1985 (the "Amended Area"), encompasses
approximately 370 acres and is generally bounded by a small portion of Bryan Avenue on the
north, portions of Orange Avenue, Red Hill Avenue (south of the Southern California Regional
Rail Authority right-of-way) and Newport Avenue (south of the Santa Ana (I-5) Freeways) on
the east, Valencia Avenue on the south, the Costa Mesa (SR-55) on the west and Santa Ana (I-
5) Freeways and Newport Avenue (north of the Santa Ana (I-5) Freeway) on the northwest.
The Project Area was created in response to the need for basic public improvements in the
area, concern for deteriorating conditions of the residential neighborhoods, and the circulation
deficiencies in the Project Area. The Amended Area was included in the Project Area because
development of the area was constrained until proposed public improvements for the Project
Area were funded and completed, particularly the Newport Avenue extension and a new
on/off ramp at Edinger and the Costa Mesa (SR-55) Freeway. Portions of the area lack right-
of-way improvements such as street lights, sidewalks, adequate street capacity and
circulation. The City adopted the Pacific Center Specific Plan (located in the South Central
Redevelopment Project) to provide for an extension of Newport Avenue and much needed
improvements to the SR-55 Freeway off-ramp at Edinger Avenue. The South Central
Redevelopment Project will include residential, commercial, office, hotel and limited industrial
technology land uses. The only public institutional uses within the Project Area include the
Tustin Unified School District's Lambert school site and the small McFadden Parkette. The
general objectives of the South Central Redevelopment Plan are the elimination and prevention
of blight in the South Central Redevelopment Project. The South Central Redevelopment Plan
calls for constructing and improving streets, utilities or other public improvements; acquiring,
disposing of and redeveloping real property; participation of owners and tenants in the South
Central Redevelopment Project; management of property under Agency ownership and
control; and demolition, rehabilitation or removal of buildings. In the South Central
Redevelopment Project, the Agency's goal was to eliminate existing blight and prevent the
spread of blight and deterioration by:
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• Providing for participation by owners and residents presently located in the Project Area by
extending the them preferences to remain or relocate within the redeveloped areas should their
present structures be suffering from deterioration requiring assistance;
• Rehabilitation of structures and improvements by present owners, their successors, or the Agency;
• Redevelopment of land by private enterprise or public agencies for uses in accordance with the
Plan;
• Installation, construction or reconstruction of streets, utilities and other public improvements such as
center islands, street trees and landscaping, extensions of major arterials and required grade
crossings;
• Acquisition of certain real property for public improvements or to help expedite private
development;
• Relocation assistance to displaced residential and non-residential occupants should the need arise;
• Demoliiion or removal of certain buildings and improvements;
• Management of any property acquired under the ownership and control of the Agency;
• Disposition of any property acquired by the Agency for uses in accordance with the Town Center
Redevelopment Plan; and
• Assistance to low and moderate income families by providing housing at affordable costs pursuant
to Sec. 3334.2 of the Community Redevelopment Law.
Redevelopment Activity
All properties in the Redevelopment Projects are subject to the Agency's approved
development standards and guidelines. The Redevelopment Plan requires that new
construction comply with all applicable State and local laws and codes in effect from time to
time.
The Redevelopment Plan provides further that no new improvement is to be
constructed, and no existing improvement is to be substantially modified, altered, repaired or
rehabilitated, except in accordance with the Plan and development and design controls and, in
the discretion of the Agency, in accordance with architectural, landscape and site plans
submitted to and approved by the Agency.
Since the adoption of the South Central Plan, the Agency's efforts have been primarily
centered on planning for redevelopment and addressing immediate needs for improving basic
infrastructure in the Project Area. The Agency has completed numerous street, alley, lighting
and landscaping improvements and constructed public improvements to serve the
surrounding community. Working with private sector developers, the Agency has assisted in
developing new retail commercial uses and offices in the Project area and has constructed
community facilities benefiting the Project Area. The Agency has also assisted private sector
developers in the construction of new for-sale housing units benefiting the project including
units made available for purchase and occupancy by low and moderate income households. In
addition, the Agency has provided First Time Homebuyer Loans to assist Low and moderate
income homebuyers to purchase residential units, and assistance to owners of single family
homes and of multi-family rental units to rehabilitate structures through the Agency's
Residential Rehabilitation Programs. The Agency has also provided expenditures for business
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assistance and outreach programs to support the retention of existing businesses and
attraction of new businesses to the Project Area.
Under the Redevelopment Plan, the Agency has facilitated over 853,300 square feet of
new or significant rehabilitation of private sector commercial, office, or industrial development
projects in the Project Area and residential dwelling units representing at the time of
construction over $72.6 million dollars in valuation, generating 1,907 permanent new jobs and
increasing annual sales tax over $ 749,900 annually as shown for individual sites on the tables
which follow.
In addition to private developments within the South Central Project Area, significant
public projects have been completed to date. A summary of major projects include the
following:
• Alley pavement improvements for alleys between Newport and Orange Avenues, south of San
Juan Street and Newport and Bonita Avenues
• C Street reconstruction
• Right-of-way acquisition and construction of streets and backbone utilities as necessary for:
- Edinger Avenue "Smart Street" widening between SR-55 and Red Hill Avenue
- Extension of Newport Avenue from Edinger to Valencia Avenue
- Realignment and improvements to Del Amo Avenue south of Edinger to Valencia Avenue
- New Northbound on and off-ramp from the Costa Mesa (SR-55) Freeway at Edinger and
Newport Avenue
- Major undergrounding of SCE transmission lines south of Edinger to Valencia Avenue
• General lighting improvements
• Installation of traffic signals at McFadden and Walnut Avenues
• Mitchell Avenue pavement and right-of-way improvements
• Newport Avenue road improvements from Sycamore to McFadden Avenues. Engineering and
environmental assessment of widening Valencia Avenue
• Preliminary studies of Red Hill Avenue grade separation at the AT&SF railroad tracks
• Street improvements coordinated with housing rehabilitation programs to fund off-site
improvements (i.e. alley and right-of-way improvements)
• Widening, pavement improvements, and reconstruction of San Juan Street from Newport Avenue
to Orange Avenue
Redevelopment Plan Limitations
The following table shows the current South Central Redevelopment Plan limitations:
Table 9
South Central Redevelopment Project
Redevelopment Plan Limitations
Ori final Area Added Area
Plan Ex iration Date: 7/15/2018 7/15/2018
Last Date to EstablishDebt: 1 1/1/2004 7/14/2005
Last Date to Rea Debt: 7/15/2028 7/15/2028
Ex irationDateforEminentDomainAuthori 12/1/2011 12/1/2011
Cumulative Tax Increment Limit: 2 $2,500,000/annuall
Bonded Indebtedness Limit 3 $20,000,000
(1) Does not apply to activities to meet the Agency's affordable housing obligations
(2) Does not apply to Housing Tax Revenues
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(3) Averaged over the life of the Plan
Assessed Valuation
The Base Year assessed valuation was established in Fiscal Year 1982-83 in the amount
of $117,426,357. The total assessed valuation of taxable property in the South Central
Redevelopment Project in fiscal year 2009-10 is $549,870,193, with $432,443,836of such
amount representing incremental assessed value in excess of the adjusted assessed valuation
in the Base Year. A breakdown of the Fiscal Year 2009-10 assessed valuation in the South
Central Redevelopment Project by category of use is as follows:
Table 10
South Central Redevelopment Project
Breakdown of Assessed Valuation by Category of Use
Category
Residential
Commercial
Industrial
Miscellaneous
Institutional
Recreational
Agricultural
Vacant Land
Government/Exempt
Cross Reference
Unsecured
Total:
Number of Parcels
579
64
40
0
0
0
0
9
69
Net Taxable Value % of Total
54.83%
18.63
21.09
0.00
0.00
0.00
0.00
0.28
0.00
0.07
5.11
761
$301,474,487
102,458,124
115,942,540
0
0
0
0
1,522,688
0
391,917
28,080,437
$549,870,193
100.00%
Source: HdL Coren & Cone
Note: The figures include the value for exempt parcels such as those owned by the City, the Agency, the State of
California or other governmental agencies.
*SBE nonunitary, possessory interest and unsecured values are connected with parcels that are already accounted
for in other categories.
The following table shows the actual assessed values for Fiscal Years 2005-06 to 2009-
10 based upon the County Auditor/Controller's equalized rolls and incremental values of
property within the South Central Redevelopment Project based on an exclusion of assessed
values from the unsecured roll.
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Table 11
South Central Redevelopment Project
Historical Taxable Values and Tax Increment Revenues
Fiscal Years Ended June 30,
Secured (1)
Land
Improvements
Personal Property
Exemptions
Total Secured
Base Year
(1982-03)
41,251,590
64,968,643
1,506,428
0
107,726,661
2005-06 2006-07 2007-08 2008-09 2009-10
241,551,140 273,604,066 310,724,713 325,964,445 322,202,955
159,872,303 169,670,702 180,250,938 188,136,458 197,895,430
1,515,002 1,587,226 1,661,798 1,693,166 1,691,371
0 0 0 0 0
402,938,445 444,861,994 492,637,449 515,794,069 521,789,756
Unsecured
Land
Improvements
Personal Property
Exemptions
Total Unsecured
GRAND TOTAL
579,350
3,949,867
5,170,479
0
9,699,696
117,426,357
Annual Incremental Value
Change in Value from Prior Year
Change in Total Value
785,196 319,961 10,754,056 202,339 195,412
5,972,538 6,544,392 7,905,764 4,792,909 4,901,926
21,986,278 20,663,827 24,416,912 23,881,292 23,024,945
(210,470) (169,254) (91,708) (26,645) (41,846)
28,533,542 27,358,926 42,985,024 28,849,895 28,080,437
431,471,987 472,220,920 535,622,473 544,643,964 549,870,193
314,045,630 354,794,563 418,196,116 427,217,607 432,443,836
27,083,987 40,748,933 63,401,553 9,021,491 5,226,229
6.70% 9.44% 13.43% 1.68% 0.96%
Source: HdL Coren & Cone
(1) Secured values include state assessed non-unitary utility property.
The aggregate total taxable value for the ten largest taxpayers for Fiscal Year 2009-10
totals $168,828,296. This amount is 39.05% of the South Central Redevelopment Project
incremental value and 30.71% of the total South Central Redevelopment Project assessed
value.
Table 12
South Central Redevelopment Project
Largest Fiscal Year 2009-10 Property Taxpayers, by Assessed Value
Percent of
Assessed Percent of Incremental
Property Owner Primary Land Use Valuation (1) Total Value
1 OC SD Holdings Residential $29,580,000 5.38% 6.84%
2 Orange County Teachers Federal Credit Union Commercial 24,567,017 4.47 5.68
3 Anaheim Investors (2) Industrial 16,542,360 3.01 3.83
4 15482 Pasadena Properties Residential 16,511,060 3.00 3.82
5 AAE Padfic Park Associates Industrial 15,874,512 2.89 3.67
6 15101 Red Hill Holdings Commercial 15,810,000 2.88 3.66
7 CSL TUS PL Commerdal 14,535,000 2.64 3.36
8 New Kenyon Apartments (2) Residential 14,220,178 2.59 3.29
9 DGH 15811 Pasadena Avenue Residential 11,933,191 2.17 2.76
10 Country Squire Apartments Residential 9,254,978 1.68 2.14
$168,828,296 30.71% 39.05%
Source: HdL Coren & Cone
(1) Tota12009-10 assessed valuation is $549,870,193.
(2) Owner has an assessment value appeal pending.
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Appeals of Assessed Values
Within the South Central Redevelopment Project (Original Area) there have been 58
assessment appeals filed since 2005-06. All appeals filed for fiscal years 2005-06 and 2006-07
have been resolved. Of the 94 appeals filed, 24 have been allowed with a reduction in value
and 7 have been denied. There are 27 appeals currently pending on properties within the South
Central Redevelopment Project (Original Area). Based on the historical averages for appeals
allowed and value reduction per successful appeal, it is projectedthat 21 of the currently
pending appeals will be allowed and that these successful appeals will result in an assessed
value reduction of $4,431,520. This reduction has been incorporated in the projection as a
reduction to the 2010-11 assessed value. Reductions in revenue for refunds resulting from
these successful appeals have not been estimated. One of the top ten taxpayers within the
South Central Redevelopment Project (Original Area) has filed an assessment appeal that is
currently pending. See APPENDIX D-"FISCAL CONSULTANT'S REPORT."
Within the South Central Redevelopment Project (Amendment Area) there have been 20
assessment appeals filed since 2005-06. All appeals filed for fiscal years 2005-06 and 2006-07
have been resolved. Of the 20 appeals filed, 6 have been allowed with a reduction in value and
2 have been denied. There are 12 appeals currently pending on properties within the South
Central Redevelopment Project (Amendment Area). Based on the historical averages for
appeals allowed and value reduction per successful appeal, it is projected that 9 of the
currently pending appeals will be allowed and that these successful appeals will result in an
assessed value reduction of $4,328,072. This reduction has been incorporated in the projection
as a reduction to the 2010-11 assessed value. Reductions in revenue for refunds resulting from
these successful appeals have not been estimated. Three of the top ten taxpayers within the
South Central Redevelopment Project (Amendment Area) have filed assessment appeals that
are currently pending. See APPENDIX D-"FISCAL CONSULTANT'S REPORT."
Fiscal Consultant's Report
The Fiscal Consultant's Report contains estimates of tax increment collected though
Fiscal Year 2008-09 for the South Central Redevelopment Project ($55,258,326). The Fiscal
Consultant projects that the Agency will reach its tax increment limit for the South Central
Redevelopment Project in Fiscal Year 2012-13. If the Agency reaches its tax increment limit for
the South Central Redevelopment Project in Fiscal Year 2012-13, or in any year thereafter, all
tax increment revenue will be applied to satisfy the Agency's housing obligations. See
"Housing Tax Revenue Projections". See APPENDIX D-"FISCAL CONSULTANT'S
REPORT."
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Housing Tax Revenue Projections
The following table sets forth the projected growth in tax increment revenues in the
South Central Redevelopment Project.
Table 13
South Central Redevelopment Project
Projected Housing Tax Revenues
(Dollars in Thousands)
Taxable Value
Total Over Base
Fiscal Year Taxable Value ($117,426)
2009-10 $549,870 $432,444
2010-11 540,041 422,614
2011-12 550,348 432,922
2012-13 560,861 443,435
2013-14 (1) 571,585 454,159
2014-15 582,523 465,097
2015-16 593,680 476,254
2016-17 605,060 487,634
2017-18 616,668 499,242
2018-19 628,508 511,082
2019-20 640585 523,158
2020-21 652,903 535,477
2021-22 665,467 548,041
2022-23 678,283 560,857
2023-24 691,355 573,929
2024-25 704,689 587,263
2025-26 718,289 600,863
2026-27 732,162 614,735
2027-28 746,311 628,885
Gross Revenues
$4,511
4,412
4,515
4,621
4,729
4,838
4,951
5,065
5,181
5,300
5,422
5545
5,671
5,800
5,931
6,065
6,202
6,341
6,483
Housing Tax
Revenues
$898
878
899
920
4,661
4,768
4,878
4,990
5,104
5,221
5,339
5,461
5,584
5,710
5,839
5,970
6,104
6,240
SB 2557
County
Admin Fee
$43
42
43
44
45
46
47
48
49
50
51
52
53
55
56
57
58
60
61
Source: HdL Coren & Coe
(1) Represents 20% of total tax increment revenues. The Fiscal Consultant projects that the South Central
Redevelopment Project will exceed its tax increment limit during fiscal year 2012-13. If such limit is reached in
fiscal year 2012-13 or any subsequent year, all gross tax increment revenues, other than the SB 2557 County
administrative fees, will be used to pay debt service on the Bonds and any other remaining housing obligations
of the Agency.
The foregoing projections reflect the Agency's understanding of the assessment and tax
apportionment procedures employed by the County. The County procedures are subject to
change as a reflection of policy revisions or legislative mandate. While the Agency believes the
estimates to be reasonable, taxable values resulting from actual appraisals may vary from the
amounts assumed in the projections.
No assurances are provided by the Agency as to the certainty of the projected tax
increment revenues shown on the foregoing table. Actual revenues may be higher or lower than
what has been projected and are subject to valuation changes resulting from new
developments or transfers of ownership not specifically identified herein, actual resolution of
outstanding appeals, future filing of appeals, or the non-payment of taxes due.
Adjustments to Tax Increment Revenues
Property Tax Administrative Costs. The County currently reduces the amount of total tax
increment revenue allocated to the Agency from the South Central Redevelopment Project to
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cover property tax administrative costs. Legislation enacted in 1990 (SB 2557), and in 1992
(SB 1559) authorizes county auditors to determine property tax administrative costs
proportionately attributable to local jurisdictions and, for the 1990-91 and 1991-92 Fiscal
Years, to invoice the jurisdictions for such costs. Commencing in the 1992-93 Fiscal Year, the
amounts due as local agencies' contribution to covering county administrative costs are to be
allocated to the county as part of the overall system for the redistribution of property taxes (as
opposed to being paid pursuant to invoices).
SB 2557 expressly includes redevelopment agencies as jurisdictions that are to be
charged for property tax administrative costs. The County's administrative and collection fee
for fiscal year 2009-10 is estimated at $43,000, or approximately 0.943 percent of the
projected 2008-09 gross South Central Redevelopment Project revenue. As a result, the
property tax administrative charge for future fiscal years is estimated at two percent of gross
South Central Redevelopment Project revenue.
THE MCAS TUSTIN REDEVELOPMENT PROJECT
The following is a summary description of the MCAS Tustin Redevelopment Project. Included
within this description are sections discussing the present and current conditions of the MCAS Tustin
Redevelopment Project and the future development within the MCAS Tustin Redevelopment Project.
These descriptions have been supplied by the Agency. There can be no assurance that the future
developments discussed below will be completed in the manner or in the time periods described in this
Official Statement.
General
The City established the MCAS Tustin Redevelopment Project and approved the
redevelopment plan for the MCAS Tustin Redevelopment Project (the "MCAS Tustin
Redevelopment Plan') by Ordinance No. 1276, enacted by the City Council of the City on June
13, 2003, as amended by Ordinance No. 1334, enacted by the City Council of the City on April
3, 2007 (to describe the Agency's program to acquire real property by eminent domain in the
Project Area).
All real property in the MCAS Tustin Redevelopment Project is subject to the controls
and restrictions of the MCAS Tustin Redevelopment Plan. The MCAS Tustin Redevelopment
Plan requires that new construction shall comply with all applicable State statutes and local
laws in effect, including, but not limited to, fire, building, electrical, heating, and zoning codes
of the City. The MCAS Tustin Redevelopment Plan allows for commercial, residential and
public uses within the MCAS Tustin Redevelopment Project. The Agency may permit an
existing but nonconforming use to remain so long as the existing building is in good condition
and is generally compatible with the development and uses in the MCAS Tustin
Redevelopment Project. The owner of any property with a nonconforming use must be willing
to enter into an owner participation agreement with the Agency and agree to the imposition of
such reasonable restrictions as are necessary to protect the development and use of the MCAS
Tustin Redevelopment Project.
Within the limits, restrictions and controls established in the MCAS Tustin
Redevelopment Plan, the Agency is authorized to establish land coverage, setback
requirements, design criteria, and other development and design controls necessary for the
proper development of both private and public areas within the MCAS Tustin Redevelopment
Project.
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Under certain circumstances, the Agency is authorized to permit a minor variation
from the limits, restrictions and controls established by the MCAS Tustin Redevelopment Plan.
However, no variation shall be granted which changes the basic land use or which permits a
substantial departure from the MCAS Tustin Redevelopment Plan provisions. In permitting a
variation, the Agency shall impose such conditions as are necessary to protect the public
health, safety or welfare, and to assure compliance with the purposes of the MCAS Tustin
Redevelopment Plan. No minor variation permitted by the Agency shall be effective until
conditional uses, variances, or other zoning changes, if any, have been effectuated by the City
to the extent necessary to obtain consistency with such minor variations permitted by the
Agency.
Description of the MCAS Tustin Redevelopment Project
The MCAS-Tustin Redevelopment Project, established in 2003, is comprised of 1,508.6
acres, including 1,504.5 acres that were part of the former Marine Corps Air Station Tustin
(MCAS-Tustin) and 4.1 acres that are located outside of the former base boundaries, at the
northwest comer of Edinger Avenue and Jamboree Road. Development of the MCAS-Tustin
Redevelopment Project, known as Tustin Legacy, will include low to medium-high density
residential uses, transitional/emergency housing, commercial retail, office, business park and
educational and community support facilities with up to 4,210 homes anticipated and over 10
million square feet of non-residential space. Significant land area will also be dedicated to
parkland and recreational open spaces and will feature atwo-mile community lineal park with
walking spaces, playgrounds, tranquil natural areas and sports facilities.
The major objectives of the MCAS Tustin Project Area as described in the
Redevelopment Plan and focus on the elimination and prevention of the spread of blight and
deterioration of the Project Area by:
1. The acquisition of certain real property and assembly of adequate sites for the
development and construction of uses in conformance with the Plan;
2. The demolition or removal of certain buildings, structures and other improvements;
3. Providing for opportunities for participation by owners and tenants presently located
in the Non-Base Property and for participation by future owners and tenants within the entire
Project Area, and the extension of preferences to business occupants and other tenants desiring
to remain or relocated within the redeveloped Project Area;
4. The management of any property acquired by and under the ownership and control
of the Agency;
5. Providing relocation assistance to any displaced Project occupants;
6. The installation, construction, or reconstruction of streets, utilities, and other public
improvements and facilities, including but not limited to, parks, recreational facilities and
community facilities;
7. The disposition of property for uses in accordance with the Plan;
8. The redevelopment of land by private enterprise or public agencies for use in
accordance with the Plan; and
9. The rehabilitation of structures and improvements;
-47-
10. The expansion, preservation and improvement of the community's supply of
housing available to low and moderate income persons and families;
11. The installation of new or replacement of existing public improvements, facilities,
and utilities in the area which are currently inadequately served with regard to such
improvements, facilities and utilities of new or replacement of existing public improvements,
facilities and utilities in areas which are currently inadequately served with regard to such
improvements, facilities and utilities.
12. Hazardous substance release cleanup.
Redevelopment Activity
All properties in the Redevelopment Projects are subject to the Agency's approved
development standards and guidelines. The Redevelopment Plan requires that new
construction comply with all applicable State and local laws and codes in effect from time to
time.
The Redevelopment Plan provides further that no new improvement is to be
constructed, and no existing improvement is to be substantially modified, altered, repaired or
rehabilitated, except in accordance with the Plan and development and design controls and, in
the discretion of the Agency, in accordance with architectural, landscape and site plans
submitted to and approved by the Agency.
Since adoption of the MCAS Tustin Project, significant progress has occurred. The
Agency has been responsible for administering the conveyance, development and leasing of
City-owned properties conveyed to the City by the Navy under the terms of an Economic
Development Conveyance Agreement approved on May 13, 2002. Since 2002, all properties
conveyed to the City by the Navy intended for conveyance or leasing to private entities, public
agencies, and non-profit institutions have been committed through conveyance agreements,
disposition and development agreements, or interim lease agreements intended for eventual
conveyance, as appropriated.
Under the Redevelopment Plan, significant private and institutional development has
occurred within the Project Area including the following:
• 1,671 dwelling units have been constructed or 40% of the potentia14,210 dwelling units that would
be permitted within the Project Area. An important accomplishment in constructing these units has
been the fact that the Agency has required and facilitated 69 Very Low income, 84 Low income and
116 Moderate income households (for a total of 269 affordable households) being able to purchase
for-sale Affordable Housing Units in the Project.
• Approximately one million square feet of retail space has been constructed within a regional Class
A retail center identified as the "District at Tustin Legacy."
• Two community college districts have completed campus improvements including the Rancho
Santiago Community College Law Enforcement Training Facility and Phase 1 of the South Orange
County Community College District's Advanced Technology Education Campus.
• The Orange County Rescue Mission has completed a transitional homeless facility, known as the
Village of Hope, that contains 192 units.
• The County of Orange Social Services Department has completed The Tustin Family Campus, a
facility intended to provide a supportive living environmental to meet the unmet needs of abused
and neglected children and their families accommodating as many as 90 children and their parents
in residence.
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A considerable amount of demolition has been completed and will occur in the overall
redevelopment of the Project Area. Since adoption of the Project Area, significant demolition
has included the removal of runways and tarmac areas, demolition of obsolete and
substandard buildings and military housing, and demolition of pre-existing roadways and
obsolete utility systems. Over 80% of the materials generated as a result of these demolition
activities have also been recycled on-site and are being used for construction of public and
private streets. In addition, significant progress has been made in both the Navy's
responsibilities for investigating and remediating former military contaminants.
In addition to private developments within the MCAS Tustin Project Area, over $130
million dollars of infrastructure and related capital improvement projects have been completed
to date. An additional $300 million dollars in infrastructure are in the design phase. Work has
been completed on the following roadways with all related utility systems, including storm
drains, dry utilities and traffic control improvements.
• Kensington Park Road
• Valencia Avenue (from Red Hill Avenue to Kensington Park Road)
• Landsdowne Avenue
• Edinger Avenue widening -from approximately 1400 ft. east of Red Hill Avenue to Harvard
Avenue
• Armstrong Avenue -from Valencia Avenue to future Warner Avenue
• Park Avenue -from Warner Avenue to Tustin Ranch Road
• Moffett Avenue -from Harvard to the Peters Canyon Channel
• Tustin Ranch Road -from Warner Avenue to Barranca Parkway
• Barranca Parkway widening -from Jamboree Road to Tustin Ranch Road
• Warner Avenue -from Tustin Ranch Road to Jamboree Road
• Modification to the Warner Ramp at Jamboree Road and the transition area of the west leg of the
Eastern Transportation Corridor
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Redevelopment Plan Limitations
The following table shows the current MCAS Tustin Redevelopment Plan limitations:
Table 14
MCAS Tustin Redevelopment Project
Redevelopment Plan Limitations
Plan Expiration Date: 7/16/2033 or from date of Auditor's
Certification 2 3
Last Date to Establish Debt (1): 7/16/2023 or from date of Auditor's
Certification 2 3
Last Date to Receive Tax Increment 7/ 16/2048
Expiration Date for Eminent Domain Authority 12 years from effective date of ordinance
1276 or 7/16/2048;modified to6/13/2015
Cumulative Tax Increment Limit: $833,000,000
Bonded Indebtedness Limit $180,000,000
(1) The Agency shall not establish or incur loans, advances, or indebtedness to finance in whole or part the Project
beyond 20 years from the date the County of Orange Auditor makes a certification pursuant to Section 33492.9
of CRL. Loans, advances or indebtedness may be repaid over a period of time beyond said limit. This time limit
shall not prevent the Agency from incurring debt to be paid from the Low and Moderate Income Housing Fund
or establishing more debt in order to fulfill the Agency's housing obligations under Section 33413 of the CRL.
(2) County Auditor's Certificate per Redevelopment Plan.
(3) Redevelopment Plan Expiration Date and Last Date to receive Project Area Tax Increment maybe extended for
one year for each year ERAF Payment is made to State pursuant to Health and Safety Code Section 33333.6
(revised by SB1045).
Assessed Valuation
The Base Year assessed valuation was established in Fiscal Year 2002-03 in the amount
of $1,114,078. The total assessed valuation of taxable property in the MCAS Tustin
Redevelopment Project in fiscal year 2009-10 is $1,197,694,279, with $1,196,580,201 of such
amount representing incremental assessed value in excess of the adjusted assessed valuation
in the Base Year. A breakdown of the Fiscal Year 2009-10 assessed valuation in the MCAS
Tustin Redevelopment Project by category of use is as follows:
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Table 15
MCAS Tustin Redevelopment Project
Breakdown of Assessed Valuation by Category of Use
Category
Residential
Commercial
Industrial
Miscellaneous
Institutional
Recreational
Agricultural
Vacant Land
Government/Exempt
Cross Reference
Unsecured
Total:
Number of Parcels
1,651
18
0
0
0
0
10
0
527
2,206
Net Taxable Value
$864,706,712
194,201,716
0
0
0
0
86,699,995
0
0
0
52,085,856
$1,197,694,279
of Total
72.20%
16.21
0.00
0.00
0.00
0.00
7.24
0.00
0.00
0.00
4.35
100.00%
Source: HdL Coren & Cone
Note: The figures include the value for exempt parcels such as those owned by the City, the Agency, the State of
California or other governmental agencies.
*SBE nonunitary, possessory interest and unsecured values are connected with parcels that are already accounted
for in other categories.
The following table shows the actual assessed values for Fiscal Years 2005-06 to 2009-
10 based upon the County Auditor/Controller's equalized rolls and incremental values of
property within the MCAS Tustin Redevelopment Project based on an exclusion of assessed
values from the unsecured roll.
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Secured (1)
Land
Improvements
Personal Property
Exemptions
Total Secured
Unsecured
Land
Improvements
Personal Property
Exemptions
Total Unsecured
GRAND TOTAL
Table 16
MCAS Tustin Redevelopment Project
Historical Taxable V alues and Tax Increment Revenues
Fiscal Years Ended June 30,
Base Year
2002-03 2005-06 2006-07 2007-08 2008-09 2009-10
84,650,875
55,221,668
0
(139,872,543)
0
0
0
1,114,078
0
1,114,078
1,114,078
Annual Incremental Value
Change in Value from Prior Year
Change u1 Total Value
237,829,072
35,427,277
0
0
273,256,349
523,696,799
134,461,228
0
0
658,158,027
622,238,494
304,351,051
0
(927,180)
925,662,365
226,152 311,726 717,637
374,954 607,068 734,689
25,113 68,543 292,079
(141,100) (141,100) 0
485,119 846,237 1,744,405
273,741,468 659,004,264 927,406,770
272,627,390 657,890,186 926,292,692
59,214,307 385,262,796 268,402,506
27.60% 140.74% 40.73%
Source: HdL Coren & Cone
(1) Secured values include state assessed non-unitary utility property.
884,529,289
547,000,540
0
(945,723)
1,430,584,106
511,374
25,959,037
16,329,384
(227,435)
42,572,360
1,473,156,466
1,472,042,388
545,749,696
58.85%
535,509,005
630,218,371
346,322
(20,465,275)
1,145,608,423
2,935,728
30,700,881
18,449,247
0
52,085,856
1,197,694,279
1,196,580,201
(275,462,187)
-18.70%
The aggregate total taxable value for the ten largest taxpayers for Fiscal Year 2009-10
totals $339,682,784. This amount is 28.39% of the MCAS Tustin Redevelopment Project
incremental value and 28.36% of the total MCAS Tustin Redevelopment Project assessed
value.
Table 17
MCAS Tustin Redevelopment Project
Largest Fiscal Year 2009-10 Property Taxpayers, by Assessed Value
Percent of
Assessed Percent of Incremental
Property Owner Primary Land Use Valuation (1) Total Value
1 Vestar Kimco Tustin LP (2) Commercial $150,656,486 12.58% 12.59%
2 Tustin Legacy Community Partners (2) Agricultural/Vacant Land 86,699,995 7.24 7.25
3 Costco Wholesale Corporation (2) Discount Retail 28,747,354 2.40 2.40
4 Lowes HIW (2) Home Improvement Retail 23,046,667 1.92 1.93
5 Tustin Coventry Residential 16,281,491 1.36 1.36
6 ORA Astoria 60 (2) Residential 12,455,000 1.04 1.04
7 Mrs. Gooch's Natural Foods (1) Unsecured 7,487,107 0.63 0.63
8 ORA Verandas 53 Residential 5,054,150 0.42 0.42
9 Lennar Homes of Tustin Residential 4,961,038 0.41 0.41
10 ORA Mirabella 60 (2) Residential 4,293,496 0.36 0.36
$339,682,784 28.36% 28.39%
Source: HdL Coren & Cone
(1) Tota12009-10 assessed valuation is $1 ,197,694,279.
(2) Owner has an assessment value appeal pending.
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Appeals of Assessed Values
Within the MCAS Tustin Redevelopment Project there have been 369 assessment
appeals filed since 2005-06. All appeals filed for fiscal years 2005-06 and 2006-07 have been
resolved. Of the 369 appeals filed, 166 have been allowed with a reduction in value and 20
have been denied. There are 183 appeals currently pending on properties within the MCAS
Tustin Redevelopment Project. Based on the historical averages for appeals allowed and value
reduction per successful appeal, it is projected that 163 of the currently pending appeals will
be allowed and that these successful appeals will result in an assessed value reduction of
$199,641,846. This reduction has been incorporated in the projection as a reduction to the
2010-11 assessed value. Reductions in revenue for refunds resulting from these successful
appeals have not been estimated. Seven of the top ten taxpayers within the MCAS Tustin
Redevelopment Project have filed assessment appeals that are currently pending. See
APPENDIX D-"FISCAL CONSULTANT'S REPORT."
Fiscal Consultant's Report
The Fiscal Consultant's Report contains estimates of tax increment collected though
Fiscal Year 2008-09 for the MCAS Tustin Redevelopment Project ($38,129,647). While the
Fiscal Consultant does not project that the Agency will reach its tax increment limit for the
MCAS Tustin Redevelopment Project prior to the term of the Bonds. However, if the Agency
does reach its tax increment limit for the MCAS Tustin Redevelopment Project, all tax
increment revenue from that date forward will be applied to satisfy the Agency's housing
obligations. See "Housing Tax Revenue Projections". See APPENDIX D-"FISCAL
CONSULTANT'S REPORT."
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Housing Tax Revenue Projections
The following table sets forth the projected growth in tax increment revenues in the
MCAS Tustin Redevelopment Project.
Table 18
MCAS Tustin Redevelopment Project
Projected Housing Tax Revenues
(Dollars in Thousands)
Total
Fiscal Year Taxable Value
2009-10
2010-11
2011-12
2012-13
2013-14
2014-15
2015-16
2016-17
2017-18
2018-19
2019-20
2020-21
2021-22
2022-23
2023-24
2024-25
2025-26
2026-27
2027-28
2028-29
2029-30
2030-31
2031-32
2032-33
2033-34
2034-35
2035-36
2036-37
2037-38
2038-39
2039110
Source: HdL Coren & Cone
$1,197,694
1,017,666
1,037,644
1 p58,021
1,078,805
1,100,005
1,121,630
1,143,686
1,166,184
1,189,132
1,212,539
1,236,413
1,260,766
1,285,605
1,310,941
1,336,784
1,363,144
1,390,031
1,417,456
1,445,429
1,473,962
1,503,065
1,532,750
1,563,029
1,593,914
1,625,417
1,657,549
1,690,324
1,723,755
1,757,854
1,792,635
Taxable Value
Over Base
($1,114)
$1,196,580
1,016,552
1,036,530
1,056,907
1,077,691
1,098,891
1,120,516
1,142,572
1,165,070
1,188,018
1,211,425
1,235,299
1,259,652
1,284,491
1,309,827
1,335,670
1,362,030
1,388,917
1,416,342
1,444,315
1,472,848
1,501,951
1,531,636
1,561,915
1,592,800
1,624,302
1,656,435
1,689,210
1,722,640
1,756,740
1,791,521
Gross
Revenues
$12,030
10,222
10,423
10,627
10,836
11,049
11,266
11,488
11,714
11,944
12,179
12,419
12,663
12,913
13,167
13,427
13,692
13,962
14,237
14,518
14,805
15,097
15,395
15,699
16,009
16,326
16,580
16,905
17,239
17,580
17,928
Housing Tax
Revenues
$2,406
2,044
2,085
2,125
2,167
2,210
2,253
2,298
2,343
2,389
2,436
2,484
2,533
2,583
2,633
2,685
2,738
I 2,792
2,847
2,904
2,961
3,019
3,079
3,140
3,202
3,265
3,316
3,381
3,448
3,516
The foregoing projections reflect the Agency's understanding of the assessment and tax
apportionment procedures employed by the County. The County procedures are subject to
change as a reflection of policy revisions or legislative mandate. While the Agency believes the
estimates to be reasonable, taxable values resulting from actual appraisals may vary from the
amounts assumed in the projections.
No assurances are provided by the Agency as to the certainty of the projected tax
increment revenues shown on the foregoing table. Actual revenues maybe higher or lower than
what has been projected and are subject to valuation changes resulting from new
-54-
developments or transfers of ownership not specifically identified herein, actual resolution of
outstanding appeals, future filing of appeals, or the non-payment of taxes due.
Adjustments to Tax Increment Revenues
Property Tax Administrative Costs. The County currently reduces the amount of total tax
increment revenue allocated to the Agency from the MCAS Tustin Redevelopment Project to
cover property tax administrative costs. Legislation enacted in 1990 (SB 2557), and in 1992
(SB 1559) authorizes county auditors to determine property tax administrative costs
proportionately attributable to local jurisdictions and, for the 1990-91 and 1991-92 Fiscal
Years, to invoice the jurisdictions for such costs. Commencing in the 1992-93 Fiscal Year, the
amounts due as local agencies' contribution to covering county administrative costs are to be
allocated to the county as part of the overall system for the redistribution of property taxes (as
opposed to being paid pursuant to invoices).
SB 2557 expressly includes redevelopment agencies as jurisdictions that are to be
charged for property tax administrative costs. The County's administrative and collection fee
for fiscal year 2009-10 is estimated at $113,000, or approximately 0.943 percent of the
projected 2008-09 gross MCAS Tustin Redevelopment Project revenue. As a result, the
property tax administrative charge for future fiscal years is estimated at two percent of gross
MCAS Tustin Redevelopment Project revenue.
BONDOWNERS' RISKS
The following information should be considered by prospective investors in evaluating
whether to invest in the Bonds. However, the following does not purport to be an exhaustive
listing of risks and other considerations which may be relevant to investing in the Bonds, and
the order in which the following information is presented is not intended to reflect the relative
importance of any such risks.
Limited Obligations
NEITHER THE BONDS, NOR THE OBLIGATIONS OF THE AGENCY UNDER THE
INDENTURE ARE A DEBT OF THE CITY OR THE STATE OR ANY OF ITS POLITICAL
SUBDIVISIONS (OTHER THAN THE AGENCY, TO THE LIMITED EXTENT DESCRIBED
HEREIN), AND NONE OF THE CITY, THE STATE OR ANY OF ITS OTHER POLITICAL
SUBDIVISIONS ARE LIABLE THEREFOR. THE PRINCIPAL OF, PREMIUM, IF ANY, AND
INTEREST ON THE BONDS ARE PAYABLE FROM AND SECURED BY AN ASSIGNMENT
OF AMOUNTS PAYABLE BY THE AGENCY ON THE BONDS AND, IF NEEDED, THE
OBLIGATIONS OF THE AGENCY UNDER THE INDENTURE AND THE BONDS ARE
LIMITED OBLIGATIONS OF THE AGENCY, PAYABLE ONLY OUT OF CERTAIN FUNDS
OF THE AGENCY AS SET FORTH IN THE INDENTURE. THE BONDS DO NOT
CONSTITUTE INDEBTEDNESS WITHIN THE MEANING OF ANY CONSTITUTIONAL OR
STATUTORY DEBT LIMITATION OR RESTRICTION. NONE OF THE MEMBERS OF THE
AGENCY OR THE CITY COUNCIL OR ANY PERSONS EXECUTING THE BONDS ARE
LIABLE PERSONALLY ON THE BONDS BY REASON OF THEIR ISSUANCE.
No Acceleration on Default
The Indenture does not provide for an acceleration of the principal of the Bonds
following the occurrence of an Event of Default under and as defined in the Indenture. The
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Indenture does not contain provisions with respect to the acceleration of the Agency's
obligations thereunder upon the occurrence of an event of default under the Indenture.
In the event of default under the Indenture, as a practical matter, the Trustee will be
limited to obtaining the moneys in the debt service funds held under the Indenture and
enforcing the covenant of the Agency to pay the Housing Tax Revenues on an annual basis to
the extent of such Housing Tax Revenues. No real or personal property in the Redevelopment
Projects is pledged to secure the Bonds and it is not anticipated that the Agency will have
available moneys sufficient to pay any of the Bonds in full upon the occurrence of an event of
default.
Bankruptcy
The enforceability of the rights and remedies of the owners of the Bonds and the
obligations of the Agency may become subject to the following: the federal bankruptcy code
and applicable bankruptcy, insolvency, reorganization, moratorium, or similar laws relating to
or affecting the enforcement of creditors' rights generally, now or hereafter in effect; usual
equitable principles which may limit the specific enforcement under state law of certain
remedies: the exercise by the United States of America of the powers delegated to it by the
federal Constitution; and the reasonable and necessary exercise, in certain exceptional
situations of the police power inherent in the sovereignty of the State of California and its
governmental bodies in the interest of servicing a significant and legitimate public purpose.
Bankruptcy proceedings, or the exercise of powers by the federal or state government, if
initiated, could subject the owners of the Bonds to judicial discretion and interpretation of their
rights in bankruptcy or otherwise and consequently may entail risks of delay, limitation, or
modification of their rights.
On July 30, 1992 the United States Court of Appeals for the Ninth Circuit issued an
opinion in a bankruptcy case entitled In re Glasply Marine Industries holding that ad valorem
property taxes levied by a county in the State of Washington after the date that the property
owner filed a petition for bankruptcy would not be entitled to priority over the claims of a
secured creditor with a prior lien on the property. Similar results were reached by several
circuit courts in other circuits. Subsequently, however, Section 362(b)(18) of the Bankruptcy
Code was enacted, effectively overturning this line of decisions and providing that local
governments may rely on statutory property tax liens to secure payment of property taxes
after the filing of a bankruptcy petition.
Federal Tax-Exempt Status of the Bonds
Tax-Exempt Status of Interest on the Bonds. The Internal Revenue Code of 1986, as
amended (the "Code") imposes a number of requirements that must be satisfied for interest
on state and local obligations, such as the Bonds, to be excludable from gross income for
federal income tax purposes. These requirements include limitations on the use of Bond
proceeds, limitations on the investment earnings of Bond proceeds prior to expenditure, a
requirement that certain investment earnings on Bond proceeds be paid periodically to the
United States and a requirement that the issuers file an information report with the Internal
Revenue Service (the "IRS"). The Agency has covenanted in certain of the documents referred
to herein that they will comply with such requirements. Failure to comply with the
requirements stated in the Code and related regulations, rulings and policies may result in the
treatment of interest on the Bonds as taxable, retroactively to the date of issuance of such
Bonds.
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Audit. As a part of a larger reorganization of the IRS, the IRS commenced operation of
its Tax Exempt and Government Entities Division (the "TE/GE Division"), as the successor to
its Employee Plans and Exempt Organizations division. The TE/GE Division has a
subdivision that is specifically devoted to tax-exempt bond compliance. Public statements by
IRS officials indicate that the number of tax-exempt bond examinations is expected to increase
significantly under the TE/GE Division. There is no assurance that an IRS examination of the
Bonds, if one is undertaken, will not adversely affect the tax-exempt status or market value of
such Bonds.
Investment Risk
Funds held under the Indenture are required to be invested in Permitted Investments as
provided under the Indenture. See Appendix A attached hereto fora summary of the
definition of Permitted Investments. The funds and accounts of the Agency, into which a
portion of the proceeds of the Bonds will be deposited and into which all Housing Tax
Revenues are initially deposited, may be invested by the Agency in any investment authorized
by law. All investments, including the Permitted Investments and those authorized by law
from time to time for investments by municipalities, contain a certain degree of risk. Such risks
include, but are not limited to, a lower rate of return than expected and loss or delayed receipt
of principal. Further, the Agency cannot predict the effects on the receipt of Housing Tax
Revenues if the County were to suffer significant losses in its portfolio of investments or if the
County or the City were to become insolvent or declare bankruptcy. See "BONDOWNERS'
RISKS-Bankruptcy."
Secondary Market
There can be no guarantee that there will be a secondary market for the Bonds, or, if a
secondary market exists, that the Bonds can be sold for any particular price. Occasionally,
because of general market conditions or because of adverse history or economic prospects
connected with a particular issue, secondary marketing practices in connection with a
particular issue are suspended or terminated. Additionally, prices of issues for which a market
is being made will depend upon the then prevailing circumstances. Such prices could be
substantially different from the face amount of the Bonds.
Reduction in Taxable Values
Housing Tax Revenues allocated to the Agency by the State and the County, which
Housing Tax Revenues constitute the primary source of payment of principal of, premium, if
any, and interest on the Bonds, as discussed herein, are determined by the amount of the
incremental taxable value of property in the Redevelopment Projects, the current rate or rates
at which property in the Redevelopment Projects is taxed and the percentage of taxes collected
in each of the Redevelopment Projects. The reduction of taxable values of property in the
Redevelopment Projects caused by economic factors beyond the Agency's control, such as a
relocation out of the Redevelopment Projects by one or more major property owners, or the
complete or partial destruction of such property caused by, among other calamities, an
earthquake, fire, flood or other natural disaster, could cause a reduction in the Housing Tax
Revenues securing the Bonds and, therefore, the Bonds. Such reduction of the Housing Tax
Revenues securing the Bonds could have an adverse effect on the Agency's ability to make
timely payments of principal and interest on the Bonds. Real property values and taxable
valuations of real property in some parts of California have declined. As a consequence of the
decline in property values, property owners may seek a reevaluation of their real property. If
such valuation were reduced, Housing Tax Revenues available to pay debt service on the
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Bonds would also decline. The Agency does not expect this to materially affect its ability to
pay the Bonds on a timely basis.
Application of the provisions of Article XIIIA(2)(d) of the California Constitution and
California Revenue and Taxation Code Section 68 may also result in a reduction of the
assessed valuation of a property within a redevelopment project area. These provisions permit
a person who is displaced from property by eminent domain proceedings or by governmental
action resulting in a judgment of inverse condemnation to transfer the adjusted base year
value of the property from which the person is displaced to another comparable property
anywhere within the State. Persons acquiring replacement property must request assessment
pursuant to these provisions within four (4) years of the date the property was acquired by
eminent domain or purchase or the date the judgment of inverse condemnation becomes final.
Any such assessment pursuant to these provisions of Article XIIIA(2)(d) and California
Revenue and Taxation Code Section 68 could result in an unexpected reduction in the assessed
valuation of a property within the Redevelopment Projects.
Risks to Real Estate Market
The Agency's ability to make payments on the Bonds will be dependent upon the
economic strength of the Redevelopment Projects. The general economy of the Redevelopment
Projects will be subject to all of the risks generally associated with real estate markets. Real
estate prices and development may be adversely affected by changes in general economic
conditions, fluctuations in the real estate market and interest rates, unexpected increases in
development costs and by other similar factors. Further, real estate development within the
Redevelopment Projects could be adversely affected by limitations of infrastructure or future
governmental policies, including governmental policies to restrict or control development. In
addition, if there is a decline in the general economy of the Redevelopment Projects, the owners
of property within the Redevelopment Projects may be less able or less willing to make timely
payments of property taxes or may petition for reduce assessed valuation causing a delay or
interruption in the receipt of tax increment revenue by the Agency from the Redevelopment
Projects.
Development Risks
The general economy of the Redevelopment Projects will be subject to all the risks
generally associated with real estate development. Projected development within the
Redevelopment Projects may be subject to unexpected delays, disruptions and changes. Real
estate development operations may be adversely affected by changes in general economic
conditions, fluctuations in the real estate market and interest rates, unexpected increases in
development costs and by other similar factors. Further, real estate development operations
within the Redevelopment Projects could be adversely affected by future governmental
policies, including governmental policies to restrict or control development. If projected
development u1 the Redevelopment Projects is delayed or halted, the economy of the
Redevelopment Projects could be affected. If such events lead to a decline in assessed values
they could cause a reduction in Housing Tax Revenues.
Changes in the Law
ERAF legislation has required redevelopment agencies, including the Agency, to pay
into a special fund for the benefit of local schools for the 1992-93, 1993-94, 1994-95, 2002-03,
2003-04, 2004-05 and 2005-06 fiscal years. It is possible that, in addition to these payment
requirements, and the limitations on Housing Tax Revenues described herein under
"CONSTITUTIONAL AND STATUTORY PROVISIONS AFFECTING TAX INCREMENT
REVENUES," the California electorate or Legislature could adopt a constitutional or
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legislative property tax decrease with the effect of reducing Housing Tax Revenues payable to
the Agency. There is no assurance that the California electorate or Legislature will not at some
future time approve additional limitations that could reduce the Housing Tax Revenues and
adversely affect the security of the Bonds. See "BONDOWNERS' RISK-State Budgets" and
"-Educational Revenue Augmentation Fund Transfers."
Reductions in Inflationary Rate
As described in greater detail below, Article XIIIA of the California Constitution
provides that the full cash value base of real property used in determining taxable value may
be adjusted from year to year to reflect the inflationary rate, not to exceed a 2% increase for
any given year, or may be reduced to reflect a reduction in the consumer price index or
comparable local data. Such measure is computed on a calendar year basis. Because Article
XIIIA limits inflationary assessed value adjustments to the lesser of the actual inflationary rate
or 2%, there have been years in which the assessed values were adjusted by actual inflationary
rates, which were less than 2%.
Since Article XIIIA was approved, the annual adjustment for inflation has fallen below
the 2% limitation five times; in fiscal year 1983-84, 1%; in fiscal year 1995-96, 1.19%; in fiscal
year 1996-97, 1.11%; in fiscal year 1999-00, 1.85%; and in fiscal year 2004-05, 1.867%.
The State mandated a 2% inflation adjustment for fiscal year 2005-06, and the
projections of Housing Tax Revenues assume a 2% inflation factor will be applied in fiscal
years commencing with 2007-08. The Agency is unable to predict if any adjustment to the full
cash value base on real property within the Redevelopment Projects, whether an increase or
reduction, will be realized in the future.
Assessment Appeals
Property taxable values may be reduced as a result of a successful appeal of the
taxable value determined by the County Assessor. An appeal may result in a reduction to the
County Assessor's original taxable value and a tax refund to the applicant property owner.
Appeal and refund activity within the Redevelopment Projects may result in resolved appeals
which reduce the assessed value of parcels within the Redevelopment Projects.
An assessee may contest either (i) the original determination of the "base assessment
value" of a parcel (i.e. the value assigned after a change of ownership or completion of new
construction), or (ii) the "current assessment value" (i.e., the value as determined by the
County Assessor, which may be no more than the base assessment value plus the
compounded 2% annual inflation factor) when specified factors have caused the market value
of the parcel to drop below current assessment value.
At the time of reassessment, after a change of ownership or completion of new
construction, the assessee may appeal the base assessment value of the property. Under an
appeal of a base assessment value, the assessee appeals the actual underlying market value of
the sales transaction or the recently completed improvement. A successful appeal of the base
assessment value of a parcel has significant future revenue impacts, because a reduced base
year assessment will reduce the compounded future value of the property prospectively.
Except for the two percent inflation factor, the value of the property cannot be increased until a
change in ownership occurs or additional improvements are added.
The Fiscal Consultant has estimated that the aggregate impact of future reductions in
assessed valuation as a result of currently pending appeals will be $33,360,901 in the Town
Center Redevelopment Project (which may result in corresponding refunds of property taxes in
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Fiscal Year 2010-11). The Fiscal Consultant has estimated that the aggregate impact of future
reductions in assessed valuation as a result of currently pending appeals will be $8,759,592 in
the South Central Redevelopment Project (which may result in corresponding refunds of
property taxes in Fiscal Year 2010-11). The Fiscal Consultant has estimated that the aggregate
impact of future reductions in assessed valuation as a result of currently pending appeals will
be $199,641,846 in the MCAS Tustin Redevelopment Project (which may result in
corresponding refunds of property taxes in Fiscal Year 2010-11). See APPENDIX D-"FISCAL
CONSULTANT'S REPORT." No assurance can be given that appeals will not be granted in the
future which alone, or in the aggregate, could adversely affect Housing Tax Revenues.
Additional Obligations
As described in "SECURITY FOR THE BONDS-Additional Parity Bonds," the
Agency's pledge of Housing Tax Revenues to payment of debt service on the Bonds will be on
a parity with the Agency's pledge of Housing Tax Revenues under any Supplemental
Indenture for any additional Parity Bonds. The potential for the issuance of Parity Bonds
increases the risks associated with the Agency's payment of debt service on the Bonds in the
event of a decrease in the Agency's collection of Housing Tax Revenues.
Proposition 8 Adjustments
Proposition 8, approved in 1978 (section 51(b) of the California Revenue and Taxation
Code), provides for the assessment of real property at the lesser of its originally determined
(base year) full cash value compounded annually by the inflation factor, or its full cash value
as of the lien date, taking into account reductions in value due to damage, destruction,
obsolescence or other factors causing a decline in market value. Reductions based on
Proposition 8 do not establish new base year values, and the property may be reassessed on a
following lien date up to the lower of the then current fair market value or the factored base
year value. Certain properties in the Redevelopment Projects have been subject to Proposition 8
adjustments made by the County Assessor. See APPENDIX D-"FISCAL CONSULTANT'S
REPORT."
Levy and Collection of Taxes
The Agency has no independent power to levy and collect property taxes. Any
reduction in the tax rate or the implementation of any constitutional or legislative property tax
decrease could reduce the Housing Tax Revenues, and accordingly, could have an adverse
impact on the ability of the Agency to repay the Bonds. Likewise, delinquencies in the payment
of property taxes and the impact of bankruptcy proceedings on the legal ability of taxing
agencies to collect property taxes could have an adverse effect on the Agency's ability to make
timely Bond payments.
Real Estate and General Economic Risks
As hereinbefore stated in the above paragraph captioned "Reductions in Inflationary
Rate" and as demonstrated hereinbefore in the tables in the sections of this Official Statement
entitled "THE TOWN CENTER REDEVELOPMENT PROJECT-Housing Tax Revenue
Projections, THE SOUTH CENTRAL REDEVELOPMENT PROJECT-Housing Tax
Revenue Projections," and "THE MCAS TUSTIN REDEVELOPMENT PROJECT-Housing
Tax Revenue Projections," Housing Tax Revenues as presented herein as available for payment
of any indebtedness of the Agency are based upon the latest actual amounts for the 2009-10
fiscal year. Redevelopment of real property within the Redevelopment Projects by the Agency,
as well as private development in the Redevelopment Projects, may be adversely affected by
changes in general economic conditions, fluctuations in the real estate markets and interest
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rates, unexpected increases in development costs, changes in or new governmental policies,
including govemmental policies to restrict or control certain kinds of development and by other
similar factors. If development and redevelopment activities in the Redevelopment Projects
encounter significant obstacles of the kind described herein or other impediments, the economy
of the Redevelopment Projects could be adversely affected, causing reduced taxable valuation
of property in the Redevelopment Projects, a reduction of the Housing Tax Revenues and a
consequent reduction in Housing Tax Revenues available to repay the Bonds. If there is a
decline in the general economy of the Redevelopment Projects, the owners of property within
the Redevelopment Projects may be less able or less willing to make timely payments of
property taxes, causing a delay or stoppage of Housing Tax Revenues received by the Agency
from the Redevelopment Projects.
Future Land Use Regulations and Growth Control Initiatives
In the past, citizens of a number of local communities in Southern California have
placed measures on the ballot designed to limit the issuance of building permits or impose
other restrictions to control the rate of future growth in those areas. It is possible that future
initiatives could be enacted, could be applicable to the City and have a negative impact on the
ability of developers in the Redevelopment Projects to complete any existing or proposed
development. Bondowners should assume that any event that significantly affects the ability
to develop land in the City could cause the land values within the Redevelopment Projects to
decrease substantially and could affect the willingness and ability of the owners of land within
the Redevelopment Projects to pay property taxes when due.
There can be no assurance that land development within the City will not be adversely
affected by future governmental policies, including but not limited to, government policies to
restrict or control development. Under current State law, it is generally accepted that proposed
development is not exempt from future land use regulations until building permits have been
issued and substantial work has been performed and substantial liabilities have been incurred
in good faith reliance on the permits prior to the adoption of such regulations.
Estimates of Housing Tax Revenues
In estimating that the total Housing Tax Revenues to be received by the Agency will be
sufficient to pay debt service on the Bonds, the Agency has relied on the actual historical
Housing Tax Revenues and made certain assumptions with regard to future assessed
valuation in the Redevelopment Projects, future tax rates and the percentage of taxes collected.
The Agency believes these assumptions to be reasonable, but there is no assurance these
assumptions will be realized and to the extent that the assessed valuation and the tax rates are
less than expected, the total Housing Tax Revenues available to pay debt service on the Bonds
will be reduced. Such reduced Housing Tax Revenues may be insufficient to provide for the
payment of debt service on the Bonds and hence the Bonds. See "SECURITY FOR THE
BONDS-Pledge of Housing Tax Revenues."
Hazardous Substances
An environmental condition that may result in the reduction in the assessed value of
parcels in the Redevelopment Projects would be the discovery of a hazardous substance that
would limit the beneficial use of the property. In general, the owners and operators of an
assessed parcel may be required by law to remedy conditions of the parcel relating to releases
or threatened releases of hazardous substances. The federal Comprehensive Environmental
Response, Compensation and Liability Act of 1980, sometimes referred to as CERCLA or the
Superfund Act, is the most well known and widely applicable of these laws but California
laws with regard to hazardous substances are also stringent and similar. Under many of these
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laws, the owner (or operator) is obligated to remedy a hazardous substance condition on the
property whether or not the owner (or operator) has anything to do with creating or handling
the hazardous substance. The effect, therefore, should any of the assessed parcels be affected
by a hazardous substance would be to reduce the marketability and value of the parcel by the
costs of remedying the condition, since the purchaser, upon becoming owner, will become
obligated, along with the seller, to remedy the condition.
In the case of the MCAS Tustin Project Area, the federal government under the
Department of the Navy pursuant to their responsibilities as the previous occupant of the site
has certain specific responsibilities for certain known contamination issues related to previous
military operations on the site and for unknown contamination issues that might arise in the
future on the subject site. The Navy conducted an Environmental Baseline Study (EBS) had
has developed a Base Realignment and Closure Cleanup Plan for the site and commenced
remediation of military contaminants to support reuse of the property as proposed in the
MCAS Tustin Redevelopment Plan. Hundreds of sites the former military facility have been
investigated, documented and remediated by the Department of the Navy, as needed and
required under CERCLA. Agency staff actively participate with Navy staff and state and
federal regulatory agencies (the United States Environmental Protection Agency, California
Environmental Protection Agency/Department of Toxic Substances Control, and the Regional
Water Quality Control Board) in reviewing and commenting on Navy remediation documents
and in assisting the Navy in selecting remedies that support rapid economic redevelopment
and reuse of the site. The following excerpts from the Federal statutes apply to hazardous
materials located on sites transferred by the Navy, and are provided for information purposes
only.
Comprehensive Environmental Responses Compensation and Liability Act (CERCLA,
42 USC 9620). "The United States is required, at the time of transfer of title of real property, to provide
covenants and warranties which: Assure that all response action necessary to protect human health and
the environment with respect to any substance remaining on the property on the date of transfer has been
taken before the date of transfer, and commit to undertake any additional remedial action found to be
necessary are the date of such transfer."
The National Defense Authorization Action for Fiscal Year 1993 as amended (Public
Law No. 102-434), Section 330. "The Secretary of Defense, in the case of Base Closure Property
transferred to any state or political subdivision of a state or to any other person or entity that acquires
ownership or control, shall hold harmless defend and indemnify that person or entity form any suit,
claim, demand or action, liability, judgment, cost or other fee arising out of any claim for personal injury
or property damage that results from, or is in any manner predicated upon, the release or threatened
release of any hazardous substance, pollutant or contaminant or petroleum or petroleum derivative as
result of Department of Defense activities."
These two provisions above establish the responsibility of the United States to select
and implement remedies which protect human health and the environment prior to transfer; to
return and remediate any subsequently discovered contamination; and to hold a subsequent
transferee harmless for certain consequences of pre-transfer of Department of Defense
activities. Each quitclaim deed from the Navy is also expected to contain additional covenant
language with regard to the above provisions, as well as the Finding of Suitability to Transfer
(FOST) or Finding of Suitability to Lease (FOSL) and any Lease In Furtherance of Conveyance
(LIFOC) provided by the Navy for the identified carve-out areas not yet ready for conveyance
by the federal government.
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Seismic Risk and Flood Risk
The City, like all California communities, may be subject to unpredictable seismic
activity. There is no evidence that a ground surface rupture will occur in the event of an
earthquake, but there is significant potential for destructive ground shaking during the
occurrence of a major seismic event. In addition, land susceptible to seismic activity may be
subject to liquefaction during the occurrence of such an event. In the event of a severe
earthquake, there may be significant damage to both property and infrastructure in the
Redevelopment Projects. As a result, the value of taxable land in the Redevelopment Projects
could be diminished in the aftermath of such an earthquake, through appeals, thereby
reducing the amount of Housing Tax Revenues. See "Property Tax Appeals." The City has
adopted the 1997 Uniform Building Code and Uniform Building Code Standards adopted by
the State of California. All new construction is required to comply with the highest earthquake
resistance design standard presently in use in California.
The Redevelopment Projects are subject to very minimal flood risk. The sites in the
Redevelopment Projects are located in a federally designated low risk flood zone. There are no
properties within the Redevelopment Projects that are within a 100-year floodplain.
State Budgets
The following information concerning the State of California's budgets has been
obtained from publicly available information which the Agency believes to be reliable; however,
the Agency takes no responsibility as to the accuracy or completeness thereof and has not
independently verified such information.
According to the State Constitution, the Governor of the State (the "Govemor") is
required to propose a budget to the State Legislature no later than January 10 of each year,
and a final budget must be adopted by atwo-thirds vote of each house of the Legislature no
later than June 15, although this deadline is routinely breached. The budget becomes law upon
the signature of the Govemor, who may veto specific items of expenditure.
The Governor signed the 2008-09 Budget Act on September 24, 2008 (the latest in State
history), and the 2009-10 Budget Act (the "2009-10 February Budget") on February 20, 2009
(the earliest). The 2009-10 February Budget contained $42 billion in budget solutions, but it
was balanced by assuming the passage of certain ballot measures, which required approval of
the State's electorate at a special statewide election held on May 19, 2009. All of those
measures failed, resulting in a loss of $6 billion worth of budget solutions, thus necessitating
further revisions. On July 24, 2009, the Legislature approved a new budget package containing
an additional $24 billion in budget solutions, which the Governor signed on July 28, 2009 (the
"2009-10 Final Budget") after vetoing $489 million in general fund appropriations. Taken
together, the 2009-10 February Budget and 2009-10 Final Budget contain $60 billion worth of
budget solutions and close the largest budget gap the State has ever confronted, both in dollar
amount and as a percent of general fund revenues. The impact of the 2009-10 Final Budget on
local governments, including the Town, is discussed further below.
The 2008-09 and 2009-10 State Budget
On September 24, 2008, the Governor signed the State Budget for Fiscal Year 2008-09
(the "2008-09 State Budget"). It is widely acknowledged that by the time of passage of the
2008-09 State Budget, revenue estimates were already too optimistic, in light of continuing
weak performance in the California economy and unprecedented adverse developments in the
global and national financial markets, particularly after September 15, 2008. The Governor
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declared a fiscal emergency in December 2008, and called three concurrent special legislative
sessions in order to address the budget deficit then estimated to be $42 billion.
Although the Governor signed the 2009-10 February Budget, it relied on passage of five
ballot measures proposed to the State's electorate on May 19, 2009. All five failed to gain the
required majority vote. The 2009-10 February Budget also relied on revenue and expenditure
projections for Fiscal Year 2009-10 that, like the revenue estimates supporting the 2008-09
State Budget, also quickly became out of date. The Governor proposed revisions to the 2009-
10 February Budget on May 14, 2009 and July 1, 2009, but it was not until July 24, 2009 that
the Legislature approved a new budget package. The Governor signed the 2009-10 Final
Budget on July 28, 2009, after vetoing $489 in general fund appropriations in order to provide
funding fora $500 million general fund reserve. This final budget package contains $16.1
billion in spending cuts, $2.2 billion of borrowing, $3.5 billion of new revenues, $1 billion in
fund shifts and $1.4 billion in other accounting changes.
According to the Legislative Analyst's Office, features of the 2009-10 Final Budget
affecting local governments include the following:
Proposition 1A Suspension. The 2009-10 Final Budget includes a Proposition lA
diversion of $1.935 billion in local property tax revenues from cities, counties, and special
districts to the State to offset State general fund spending for education and other programs.
Such diverted revenues must be repaid, with interest, no later than June 30, 2013.
Mandates. The 2009-10 Final Budget suspends for one year the requirements of most
mandates, with the exception of mandates relating to public safety, elections or tax collection.
Williamson Act Program Suspension. The Governor vetoed essentially all funding for
this program, which backfills property tax revenues that local governments forego when
property owners agree to preserve land for agriculture or open space.
Educational Revenue Augmentation Fund Transfers
The State has required local governments to shift property taxes to the State and/or to
schools through the ERAF in order to mitigate the impact of structural deficits in the State
budget. The State budget for Fiscal Year 1993-94 transferred $2.6 billion to school districts
from cities, counties and other local governments, including redevelopment agencies. As part
of the budget's transfer of moneys to school districts, the State Legislature adopted SB 1135
which required redevelopment agencies to transfer approximately $65 million to ERAF in both
Fiscal Years 1993-94 and 1994-95. The required redevelopment payments were intended to
offset the need for a similar amount of State aid to education. The Agency has been required to
make ERAF payments in Fiscal Years 2002-03, 2003-04, 2004-05, and 2005-06.
As a result of the enactment of AB 1768 (Statutes of 2002, Chapter 1127), the Agency
made an ERAF contribution of $189,587 to the State for Fiscal Year 2002-03 with funds from
the Redevelopment Projects. The State budget for Fiscal Year 2003-04 included a $135 million
shift of redevelopment agency tax increment revenues to ERAF. The Agency paid $332,808 in
2004 from funds on hand in the Redevelopment Projects. The State budget for Fiscal Year
2004-05 included a shift of property tax revenues from local governments to ERAF totaling
approximately $1.3 billion over a period of two years, of which a total of $250 million would
come from redevelopment agencies. The Agency made its ERAF payment of $543,353 in 2005.
For Fiscal Year 2005-06, the Agency's ERAF payment was calculated by the California
Department of Finance to be $533,818. The ERAF obligations, while based on tax increment
revenues generated in each of the Redevelopment Projects in previous fiscal years, have
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historically been payable from any source of funds of the Agency, with the exception of
housing tax increment.
For Fiscal Year 2009-10 and Fiscal Year 2010-11, redevelopment agencies are required
to make a payment to a Supplemental Educational Revenue Augmentation Fund ("SERAF")
pursuant to Chapter 21X?OCX, Statutes of 2009 (Assembly Bill 26) ("AB 26"). The Agency's
SERAF payments over those two fiscal years equal approximately $6,191,557 for Fiscal Year
2009-10 and $1,274,732 for Fiscal Year 2010-11. AB 26 allows redevelopment agencies to pay
SERAF out of housing tax increment that is allocated for deposit into the Low and Moderate
Income Housing Fund during those two fiscal years so long as the housing tax increment
funds are repaid by 2015. AB 26 was further modified by Senate Bill No. 68, Chapter 652 ("SB
68") which modifies AB 26 by allowing redevelopment agencies to use accumulated balances
in their respective Low and Moderate Income Housing Fund (and not just current year set-
aside amounts) to make their SERAF payments. The Agency has a variety of different ways to
meet its requirements to fund SERAF payments, including, but not limited to, funding such
payments out of fund balances other than those with respect to the Low and Moderate Income
Housing Fund. The Agency has determined that it will satisfy its SERAF obligations out of
fund balances. The constitutionality of the SERAF requirement has been challenged by the
California Redevelopment Association (the "CRA") in court. The CRA was successful in
challenging a similar requirement in connection with the State's Fiscal Year 2008-09 budget,
although there can be no assurance that its current challenge will be successful. Agency staff
reports that if the SERAF payments are ultimately required, the Agency will make the required
SERAF payments from available Agency fund balances.
There can be no assurance that the State Legislature will not require similar or other
diversions of tax increment funds in future years to deal with its budget deficits, nor can there
be any assurance that any obligation to make any future payments from tax increment funds
will be deemed subordinate to a pledge of taxes to pay Bond debt service.
The potential impact of future legislation could be material to the Agency and its
ability to repay existing and future obligations and conduct its redevelopment activities. The
Agency cannot predict whether the State Legislature will enact additional legislation which
shifts tax increment revenues away from redevelopment agencies to the State or to schools
(whether through an arrangement similar to ERAF, SERAF or by any other arrangement),
whether any future shifts in tax increment revenue would be limited or affected (such as by an
offset of amounts required to be shifted) by pre-existing agreements between redevelopment
agencies and school districts, community college districts and county superintendents of
schools, or what impact such legislation may have on the Housing Tax Revenues pledged to
pay debt service on the Bonds. Accordingly, the Agency is not able to predict the effect, if any,
such a shift, if enacted, would have on future Housing Tax Revenues.
Information about the State budget and State spending is available at various State-
maintained websites. None of such websites are in any way incorporated into this Official
Statement, and the Agency makes no representation whatsoever as to the accuracy or
completeness of any of the information on such websites.
CONSTITUTIONAL AND STATUTORY PROVISIONS AFFECTING TAX REVENUES
Property Tax Limitations-Article XIIIA
California voters, on June 6, 1978, approved an amendment (commonly known as both
Proposition 13 and the Jarvis-Gann Initiative) to the Califomia Constitution. This amendment,
which added Article XIII A to the California Constitution, among other things, affects the
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valuation of real property for the purpose of taxation in that it defines the full cash value of
property to mean "the county assessor's valuation of real property as shown on the fiscal year
1975-76 tax bill under full cash value, or thereafter, the appraised value of real property when
purchased, newly constructed, or a change in ownership has occurred after the 1975
assessment. The full cash value may be adjusted annually to reflect inflation at a rate not to
exceed two percent per year, or any reduction in the consumer price index or comparable local
data, or any reduction in the event of declining property value caused by damage, destruction
or other factors. The amendment further limits the amount of any ad valorem tax on real
property to one percent of the full cash value except that additional taxes maybe levied to pay
debt service on indebtedness approved by the voters prior to July 1, 1978. In addition, an
amendment to Article XIII was adopted in October 1986 by initiative which exempts any
bonded indebtedness approved by two-thirds (55% in certain instances) of the votes cast by
the voters for the acquisition or improvement of real property from the one percent limitation.
In the general election held November 4, 1986, voters of the State of California
approved two measures, Propositions 58 and 60, which further amend Article XIIIA.
Proposition 58 amends Article XIIIA to provide that the terms "purchased" and "change of
ownership," for purposes of determining full cash value of property under Article XIIIA, do
not include the purchase or transfer of (1) real property between spouses and (2) the principal
residence and the first $1,000,000 of other property between parents and children.
Proposition 60 amends Article XIIIA to permit the Legislature to allow persons over
age 55 who sell their residence to buy or build another of equal or lesser value within two years
in the same county, to transfer the old residence's assessed value to the new residence.
Pursuant to Proposition 60, the Legislature has enacted legislation permitting counties to
implement the provisions of Proposition 60.
Challenges to Article XIIIA
There have been many challenges to Article XIIIA of the California Constitution.
Recently, the United States Supreme Court heard the appeal in Nordlinger v. Hahn, a challenge
relating to residential property. Based upon the facts presented in Nordlinger, the United States
Supreme Court held that the method of property tax assessment under Article XIIIA did not
violate the federal Constitution. The Agency cannot predict whether there will be any future
challenges to California's present system of property tax assessment and cannot evaluate the
ultimate effect on the Agency's receipt of tax increment revenues should a future decision hold
unconstitutional the method of assessing property.
Implementing Legislation
Legislation enacted by the California Legislature to implement Article XIIIA (Statutes
of 1978, Chapter 292, as amended) provides that, notwithstanding any other law, local
agencies may not levy any property tax, except to pay debt service on indebtedness approved
by the voters prior to July 1, 1978, and that each county will levy the maximum tax permitted
by Article XIIIA.
The apportionment of property taxes in fiscal years after 1978-79 has been revised
pursuant to Statutes of 1979, Chapter 282 which provides relief funds from State moneys
beginning in fiscal year 1978-79 and is designed to provide a permanent system for sharing
State taxes and budget surplus funds with local agencies. Under Chapter 282, cities and
counties receive about one-third more of the remaining property tax revenues collected under
Proposition 13 instead of direct State aid. School districts receive a correspondingly reduced
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amount of property taxes, but receive compensation directly from the State and are given
additional relief.
Future assessed valuation growth allowed under Article XIIIA (new construction,
change of ownership, 2% annual value growth) will be allocated on the basis of "situs" among
the jurisdictions that serve the tax rate area within which the growth occurs except for certain
utility property assessed by the State Board of Equalization which is allocated by a different
method discussed herein.
Unitary Property
AB 2890 (Statutes of 1986, Chapter 1457) provides that, commencing with the fiscal
year 1988-89, assessed value derived from State-assessed unitary property (consisting mostly
of operational property owned by utility companies and herein defined as "Unitary Property")
is to be allocated county-wide as follows: (i) each tax rate area will receive the same amount
from each assessed utility received in the previous fiscal year unless the applicable county-
wide values are insufficient to do so, in which case values will be allocated to each tax rate
area on a pro-rata basis; and (ii) if values to be allocated are greater than in the previous fiscal
year, each tax rate area will receive apro-rata share of the increase from each assessed utility
according to a specified formula. Additionally, the lien date on State-assessed property has
been changed to January 1. Railroad property will continue to be assessed and revenues
allocated to all tax rate areas where the railroad property is sited.
To administer the allocation of unitary tax revenues to redevelopment agencies, the
County no longer includes the taxable value of utilities as part of the reported taxable values
of the Redevelopment Projects. For fiscal year 2007-08, the Agency did not receive unitary
revenue for the Redevelopment Projects. The projection of Housing Tax Revenues assumes the
County will not remit unitary revenue in future years for the Redevelopment Projects. See
"THE TOWN CENTER REDEVELOPMENT PROJECT-Housing Tax Increment Revenue
Projections," "THE SOUTH CENTRAL REDEVELOPMENT PROJECT-Housing Tax
Increment Revenue Projections" and "THE MCAS TUSTIN REDEVELOPMENT PROJECT-
Housing Tax Increment Revenue Projections."
Property Tax Collection Procedures
Classifications. In California, property which is subject to ad valorem taxes is classified as
"secured" or "unsecured." Secured and unsecured properties are entered on separate parts of
the assessment roll maintained by the county assessor. The secured classification includes
property on which any property tax levied by the County becomes a lien on that property
sufficient, in the opinion of the county assessor, to secure payment of the taxes. Every tax
which becomes a lien on secured property has priority over all other liens on the secured
property, regardless of the time of the creation of other liens. A tax levied on unsecured
property does not become a lien against unsecured property, but may become a lien on certain
other property owned by the taxpayer.
Collections. The method of collecting delinquent taxes is substantially different for the
two classifications of property. The taxing authority has four ways of collecting unsecured
property taxes in the absence of timely payment by the taxpayer: (1) a civil action against the
taxpayer; (2) filing a certificate in the office of the county clerk specifying certain facts in order
to obtain a judgment lien on certain property of the taxpayer; (3) filing a certificate of
delinquency for record in the county recorder's office, in order to obtain a lien on certain
property of the taxpayer; and (4) seizure and sale of the personal property, improvements or
possessory interests belonging or assessed to the assessee. The exclusive means of enforcing the
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payment of delinquent taxes with respect to property on the secured roll is the sale of property
securing the taxes to the State for the amount of taxes which are delinquent.
Penalties. A 10% penalty is added to delinquent taxes which have been levied with
respect to property on the secured roll. In addition, property on the secured roll on which taxes
are delinquent is declared in default on or about June 30 of the fiscal year. Such property may
thereafter be redeemed by payment of the delinquent taxes and a delinquency penalty, plus a
redemption penalty of 1.5% per month to the time of redemption and a $15 Redemption Fee. If
taxes are unpaid for a period of five years or more, the property is recorded in a "Power to
Sell" status and is subject to sale by the county tax collector. A 10% penalty also applies to the
delinquent taxes on property on the unsecured roll, and further, an additional penalty of 1.5%
per month accrues with respect to such taxes beginning the first day of the third month
following the delinquency date.
Delinquencies. The valuation of property is determined as of January 1 each year and
equal installments of taxes levied upon secured property become delinquent on the following
December 10 and April 10. Taxes on unsecured property are due January 1. Unsecured taxes
enrolled by July 31, if unpaid, are delinquent August 31 at 5:00 p.m. and are subject to
penalty; unsecured taxes added to the roll after July 31, if unpaid, are delinquent on the last
day of the month succeeding the month of enrollment.
Supplemental Assessments. Legislation enacted in 1983 (Chapter 498, Statutes of 1983)
provides for the supplemental assessment and taxation of property as of the occurrence of a
change of ownership or completion of new construction. Chapter 498 provided increased
revenue to redevelopment agencies to the extent that supplemental assessments of new
construction or changes of ownership occur within the boundaries of redevelopment projects
subsequent to the January 1 lien date. To the extent such State supplemental assessments
occur within the Redevelopment Projects, the Housing Tax Revenues for the Redevelopment
Projects may increase.
Tax Collection Fees. In 1990, the State Legislature enacted Senate Bi112557 (Chapter 466,
Statutes of 1990) ("SB 2557") which allows counties to charge for the cost of assessing,
collecting and allocating property tax revenues to local government jurisdictions on a prorated
basis. Two recent decisions have interpreted the provisions of SB 2557 and have upheld the
inclusion of redevelopment agencies as a local government agency which must share the cost of
property tax administration. The 1992 enactment of Senate Bill 1559 (Chapter 697) and the
decision of the California Court of Appeal in Arcadia Redevelopment Agency v. Ikemoto have
clarified that redevelopment agencies, such as the Agency, are to share in the cost of property
tax administration charged by most California counties, including the County. During fiscal
years 2007-08 and 2008-09, the County withheld approximately $123,204 and $205,807,
respectively, from the Agency for such administrative costs with respect to the Redevelopment
Projects.
Appropriations Limitations-Article XIIIB
On November 6, 1979, California voters approved Proposition 4, the so-called Gann
Initiative, which added Article XIIIB to the California Constitution. The principal effect of
Article XIIIB is to limit the annual appropriations of the State and any city, county, school
district, authority or other political subdivision of the State to the level of appropriations for
the prior fiscal year, as adjusted for changes in the cost of living, population and services
rendered by the government entity.
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Effective November 30, 1980, the California Legislature added section 33678 to the
Redevelopment Law which provided that the allocation of taxes to a redevelopment agency for
the purpose of paying principal of, or interest on, loans, advances, or indebtedness will not be
deemed the receipt by such agency of proceeds of taxes levied by or on behalf of the agency
within the meaning of Article XIIIB, nor will such portion of taxes be deemed receipt of taxes
by, or an appropriation subject to the limitation of, any other public body within the meaning
or for the purpose of the Constitution and laws of the State, including section 33678 of the
Redevelopment Law.
State Board of Equalization and Property Assessment Practices
On December 10, 1998, the State Board of Equalization ("SBOE") approved revisions
to its guidelines regarding the valuation of intangible business and commercial property for
property tax purposes. The SBOE approved these revisions over the objections of the
California Assessors Association ("CAA"), an organization representing all 58 County
Assessors in California. The Agency is not able to predict whether the revised SBOE guidelines
will cause any reductions in tax increment revenues and, hence, in Housing Tax Revenues.
However, the Agency does not believe that the SBOE's adoption of the revised guidelines will
affect its ability to pay debt service on the Bonds.
Exclusion of Housing Tax Revenues for General Obligation Bonds Debt Service
An initiative to amend the California Constitution entitled "Property Housing Tax
Revenues Redevelopment Agencies" was approved by California voters at the November 8,
1988 general election. Under prior law, a redevelopment agency using tax increment revenue
received additional property tax revenue whenever a local government increased its property
tax rate to pay off its general obligation bonds. This initiative amended the California
Constitution to allow the California Legislature to prohibit redevelopment agencies from
receiving any of the property tax revenues raised by increased property tax rates imposed by
local governments to make payments on their bonded indebtedness.
The initiative only applies to tax rates levied to finance general obligation bonds
approved by the voters on or after January 1, 1989. Any revenue reduction to redevelopment
agencies would depend on the number and value of the general obligation bonds approved by
voters in prior years, which tax rate will reduce due to increased valuation subject to the tax or
the retirement of the indebtedness. The Agency does not receive a significant amount of tax
increment as a result of general obligation bond tax levies.
Proposition 218
On November 5, 1996, California voters approved Proposition 218-Voter Approval for
Local Government Taxes-Limitation on Fees, Assessments, and Charges-Initiative
Constitutional Amendment. Proposition 218 added Articles XIIIC and XIIID to the California
Constitution, imposing certain vote requirements and other limitations on the imposition of
new or increased taxes, assessments and property-related fees and charges. Housing Tax
Revenues securing the Bonds are derived from property taxes which are outside the scope of
taxes, assessments and property-related fees and charges which were limited by Proposition
218.
AB 1290
In 1993, the California Legislature enacted Assembly Bill 1290 ("AB 1290") which
contained several significant changes in the Redevelopment Law. Among the changes made by
AB 1290 was a provision that limits the period of time for incurring and repaying loans,
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advances and indebtedness payable from tax increment revenues. In general, a redevelopment
plan may terminate not more than 40 years following the date of original adoption, and loans,
advances and indebtedness may be repaid during a period extending not more than 10 years
following the date of termination of the redevelopment plan. See "THE REDEVELOPMENT
PROJECT-Redevelopment Plan Limitations."
Future Initiatives
Article XIIIA, Article XIIIB and certain other propositions affecting property tax levies
were each adopted as measures which qualified for the ballot pursuant to California's
initiative process. From time to time other initiative measures could be adopted, further
affecting Agency revenues or the Agency's ability to expend revenues.
Low and Moderate Income Housing
Sections 33334.2 and 33334.3 of the Redevelopment Law require redevelopment
agencies to set aside not less than 20 percent of all tax increment revenues from project areas
adopted after December 31, 1976 into a low and moderate income housing fund (the Housing
Set-Aside Requirement). An agency can reduce the Housing Set-Aside Requirement if the
agency annually makes certain findings, consistent with the General Plan Housing Element.
These findings are that: (1) no need exists in the community to improve or increase the supply
of low and moderate income housing; or, (2) some stated percentage less than 20 percent of
the tax increment is sufficient to meet the housing need. In order to make findings (1) or (2),
the Agency's finding must be consistent with the Housing Element of the community's General
Plan, including its share of the regional housing needs of very low income households and
persons and families of low or moderate income. The Agency has not made such findings in
the past.
Statement of Indebtedness
Under the Redevelopment Law, the Agency must file with the County Auditor a
statement of indebtedness for the Redevelopment Projects by October 1 of each year. As
described below, the statement of indebtedness controls the amount of tax increment revenue
that will be paid to the Agency in each fiscal year.
Each statement of indebtedness is filed on a form prescribed by the State Controller and
specifies, among other things: (i) the total amount of principal and interest payable on all
loans, advances or indebtedness (including the Bonds and all Additional Bonds) (the "Debt"),
both over the life of the Debt and for the current fiscal year, and (ii) the amount of "Available
Revenue" as of the end of the previous fiscal year.
"Available Revenue" is calculated by subtracting the total payments on Debt during
the previous fiscal year from the total revenues (both tax increment revenues and other
revenues) received during the previous fiscal year, plus any carry-forward from the prior fiscal
year. Available Revenue include amounts held by the Agency and irrevocably pledged to the
payment of Debt other than amounts set aside for low- and moderate-income housing.
The County Auditor may only pay tax increment revenue to the Agency in any fiscal
year to the extent that the total remaining principal and interest on all Debt exceeds the
amount of available revenues as shown on the statement of indebtedness.
The statement of indebtedness constitutes prima facie evidence of the indebtedness of
the Agency; however, the County Auditor may dispute the statement of indebtedness in
certain cases. section 33675 of the Redevelopment Law provides for certain time limits
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controlling any dispute of the statement of indebtedness, and allows for Superior Court
determination of such dispute if it cannot be resolved by the Agency and the County. Any
such action may only challenge the amount of the Debt as shown on the statement, and not the
validity of any Debt or its related contract or expenditures. No challenge can be made to
payments to a trustee in connection with a bond issue or payments to a public agency in
connection with payments by that public agency with respect to a lease or bond issue.
CERTAIN LEGAL MATTERS
The legal opinion of Quint & Thimmig LLP, San Francisco, California, as Bond
Counsel, approving the validity of the Bonds, will be made available to purchasers at the time
of original delivery of the Bonds and the proposed form thereof appears in Appendix E hereto.
Bond Counsel's employment as bond counsel is limited to a review of the legal proceedings
required for the authorization of the Bonds and to rendering the opinions set forth in Appendix
E hereto.
Quint & Thimmig LLP, San Francisco, California, is serving as Disclosure Counsel to
the Agency. Certain legal matters will be passed upon for the Agency by Woodruff, Spradlin &
Smart, P.C. ,Costa Mesa, California, Agency Counsel. Certain legal matters related to this
offering will be passed upon for the Underwriter by Stradling Yocca Carlson & Rauth, a
Professional Corporation, Newport Beach, California, as Underwriter's Counsel.
Payment of the fees and expenses of Bond Counsel, Disclosure Counsel and
Underwriter's Counsel is contingent upon the sale and delivery of the Bonds.
ENFORCEABILITY OF REMEDIES
The remedies available to the Trustee and to the registered owners of the Bonds upon
an event of default under the Indenture and any other document described herein are in many
respects dependent upon regulatory and judicial actions which are often subject to discretion
and delay. Under existing law and judicial decisions, the remedies provided for under such
documents may not be readily available or may be limited. The various legal opinions to be
delivered concurrently with the delivery of the Bonds will be qualified to the extent that the
enforceability of the legal documents with respect to the Bonds are subject to limitations
imposed by bankruptcy, reorganization, insolvency or other similar laws affecting the rights of
creditors generally and by equitable remedies and proceedings generally.
RATING
Standard & Poor's Ratings Services ("S&P") has assigned its rating of "___" to the
Bonds. Such rating reflects only the views of S&P and an explanation of the significance of
such rating may be obtained from it as follows: Standard & Poor's Ratings Services, 55 Water
Street, New York, NY 10041, (212) 208-8000. There is no assurance that such rating will
continue for any given period of time or that it will not be revised downward or withdrawn
entirely by S&P, if in the judgment of S&P, circumstances so warrant. Any such downward
revision or withdrawal of such rating may have an adverse effect on the market price of the
Bonds.
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CONTINUING DISCLOSURE
The Agency has covenanted for the benefit of holders and beneficial owners of the
Bonds to provide certain financial information and operating data relating to the Agency by
not later than nine months following the end of the Agency's Fiscal Year (which reporting date
would be March 31), commencing with the report for the 2009-10 Fiscal Year (the "Annual
Report"), and to provide notices of the occurrence of certain enumerated events, if material.
The Annual Report will be filed by the Agency with each Nationally Recognized Municipal
Securities Information Repository, and with the appropriate State information depository, if
any. The notices of material events will be filed by the Agency with the Municipal Securities
Rulemaking Board (and with the appropriate State information depository, if any). The
specific nature of the information to be contained in the Annual Report or the notices of
material events is set forth in the Form of Continuing Disclosure Certificate in Appendix F
hereto. These covenants have been made in order to assist the Underwriter in complying with
S.E.C. Rule 15c2-12(b)(5). The Agency is current with respect to previous undertakings with
regard to said Rule to provide annual reports or notices of material events.
ABSENCE OF LITIGATION
At the time the Bonds are delivered, the Agency will certify that, to its best knowledge,
there is no litigation pending with respect to which the Agency has been served with process or
know to be threatened against the Agency in any court or other tribunal of competent
jurisdiction, State or federal, which seeks to enjoin or challenges the authority of the Agency to
participate in the transactions contemplated by this Official Statement, the Bonds or the
Indenture.
TAX MATTERS
Federal tax law contains a number of requirements and restrictions which apply to the
Bonds, including investment restrictions, periodic payments of arbitrage profits to the United
States, requirements regarding the proper use of bond proceeds and the facilities financed
therewith, and certain other matters. The Agency has covenanted to comply with all
requirements that must be satisfied in order for the interest on the Bonds to be excludable from
gross income for federal income tax purposes. Failure to comply with certain of such
covenants could cause interest on the Bonds to become includable in gross income for federal
income tax purposes retroactively to the date of issuance of the Bonds.
Subject to the Agency's compliance with the above referenced covenants, under present
law, in the opinion of Quint & Thimmig LLP, Bond Counsel, interest on the Bonds (i) is
excludable from the gross income of the owners thereof for federal income tax purposes, (ii) is
not included as an item of tax preference in computing the federal alternative minimum tax for
individuals and corporations, and (iii) is not taken into account in computing "adjusted
current earnings" as described below.
Bond Counsel expects to deliver an opinion at the time of delivery of the Bonds in
substantially the form set forth in APPENDIX E-"FORM OF BOND COUNSEL'S
OPINION."
Bond Counsel's opinion represents its legal judgment based upon its review of the law
and the facts that it deems relevant to render such opinion and is not a guarantee of a result.
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The Internal Revenue Code of 1986, as amended (the "Code'), includes provisions for
an alternative minimum tax ("AMT") for corporations in addition to the corporate regular tax
in certain cases. The AMT, if any, depends upon the corporation's altemative minimum
taxable income ("AMTI"), which is the corporation's taxable income with certain adjustments.
One of the adjustment items used in computing the AMTI of a corporation (with certain
exceptions) is an amount equal to 75% of the excess of such corporation's "adjusted current
earnings" over an amount equal to its AMTI (before such adjustment item and the alternative
tax net operating loss deduction). "Adjusted current earnings" would include certain tax
exempt interest, including interest on the Bonds.
Ownership of the Bonds may result in collateral federal income tax consequences to
certain taxpayers, including, without limitation, corporations subject to the branch profits tax,
financial institutions, certain insurance companies, certain S corporations, individual recipients
of Social Security or Railroad Retirement benefits and taxpayers who may be deemed to have
incurred (or continued) indebtedness to purchase or carry tax exempt obligations. Prospective
purchasers of the Bonds should consult their tax advisors as to applicability of any such
collateral consequences.
The issue price (the "Issue Price") for each maturity of the Bonds is the price at which a
substantial amount of such maturity of the Bonds is first sold to the public. The Issue Price of
a maturity of the Bonds maybe different from the price set forth, or the price corresponding to
the yield set forth, on the cover page hereof.
If the Issue Price of a maturity of the Bonds is less than the principal amount payable
at maturity, the difference between the Issue Price of each such maturity, if any, of the Bonds
(the "OID Bonds") and the principal amount payable at maturity is original issue discount.
For an investor who purchases an OID Bond in the initial public offering at the Issue
Price for such maturity and who holds such OID Bond to its stated maturity, subject to the
condition that the Agency complies with the covenants discussed above, (a) the full amount of
original issue discount with respect to such OID Bond constitutes interest which is excludable
from the gross income of the owner thereof for federal income tax purposes; (b) such owner
will not realize taxable capital gain or market discount upon payment of such OID Bond at its
stated maturity; (c) such original issue discount is not included as an item of tax preference in
computing the altemative minimum tax for individuals and corporations under the Code, but
is taken into account in computing an adjustment used in determining the alternative
minimum tax for certain corporations under the Code, as described above; and (d) the
accretion of original issue discount in each year may result in an alternative minimum tax
liability for corporations or certain other collateral federal income tax consequences in each year
even though a corresponding cash payment may not be received until a later year. Owners of
OID Bonds should consult their own tax advisors with respect to the state and local tax
consequences of original issue discount on such OID Bonds.
Owners of Bonds who dispose of Bonds prior to the stated maturity (whether by sale,
redemption or otherwise), purchase Bonds in the initial public offering, but at a price different
from the Issue Price or purchase Bonds subsequent to the initial public offering should consult
their own tax advisors.
If a Bond is purchased at any time for a price that is less than the Bond's stated
redemption price at maturity or, in the case of an OID Bond, its Issue Price plus accreted
original issue discount reduced by payments of interest included in the computation of
original issue discount and previously paid (the "Revised Issue Price'), the purchaser will be
treated as having purchased a Bond with market discount subject to the market discount rules
of the Code (unless a statutory de minimis rule applies). Accrued market discount is treated
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as taxable ordinary income and is recognized when a Bond is disposed of (to the extent such
accrued discount does not exceed gain realized) or, at the purchaser's election, as it accrues.
Such treatment would apply to any purchaser who purchases an OID Bond for a price that is
less than its Revised Issue Price even if the purchase price exceeds par. The applicability of the
market discount rules may adversely affect the liquidity or secondary market price of such
Bond. Purchasers should consult their own tax advisors regarding the potential implications of
market discount with respect to the Bonds.
An investor may purchase a Bond at a price in excess of its stated principal amount.
Such excess is characterized for federal income tax purposes as "bond premium" and must be
amortized by an investor on a constant yield basis over the remaining term of the Bond in a
manner that takes into account potential call dates and call prices. An investor cannot deduct
amortized bond premium relating to a tax exempt bond. The amortized bond premium is
treated as a reduction in the tax exempt interest received. As bond premium is amortized, it
reduces the investor's basis in the Bond. Investors who purchase a Bond at a premium should
consult their own tax advisors regarding the amortization of bond premium and its effect on
the Bond's basis for purposes of computing gain or loss in connection with the sale, exchange,
redemption or early retirement of the Bond.
There are or may be pending in the Congress of the United States legislative proposals,
including some that carry retroactive effective dates, that, if enacted, could alter or amend the
federal tax matters referred to above or affect the market value of the Bonds. It cannot be
predicted whether or in what form any such proposal might be enacted or whether, if enacted,
it would apply to bonds issued prior to enactment. Prospective purchasers of the Bonds
should consult their own tax advisors regarding any pending or proposed federal tax
legislation. Bond Counsel expresses no opinion regarding any pending or proposed federal tax
legislation.
The Internal Revenue Service (the "Service") has an ongoing program of auditing tax
exempt obligations to determine whether, in the view of the Service, interest on such tax
exempt obligations is includable in the gross income of the owners thereof for federal income
tax purposes. It cannot be predicted whether or not the Service will commence an audit of the
Bonds. If an audit is commenced, under current procedures the Service may treat the Agency
as a taxpayer and the Bondholders may have no right to participate in such procedure. The
commencement of an audit could adversely affect the market value and liquidity of the Bonds
until the audit is concluded, regardless of the ultimate outcome.
Payments of interest on, and proceeds of the sale, redemption or maturity of, tax
exempt obligations, including the Bonds, are in certain cases required to be reported to the
Service. Additionally, backup withholding may apply to any such payments to any Bond
owner who fails to provide an accurate Form W 9 Request for Taxpayer Identification Number
and Certification, or a substantially identical form, or to any Bond owner who is notified by the
Service of a failure to report any interest or dividends required to be shown on federal income
tax returns. The reporting and backup withholding requirements do not affect the excludability
of such interest from gross income for federal tax purposes.
The Bonds are issued to refund bonds issued before January 1, 2009, and therefore are
treated as issued before 2009 for purposes of section 265(b)(7) of the Code relating to interest
expense deductibility for financial institutions. The treatment of interest expense for financial
institutions owning such Bonds may be less favorable than the treatment provided to owners
of tax exempt bonds treated as issued in 2009 or 2010. Financial institutions should consult
their tax advisors concerning such treatment.
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In the further opinion of Bond Counsel, interest on the Bonds is exempt from California
personal income taxes.
Ownership of the Bonds may result in other state and local tax consequences to certain
taxpayers. Bond Counsel expresses no opinion regarding any such collateral consequences
arising with respect to the Bonds. Prospective purchasers of the Bonds should consult their tax
advisors regarding the applicability of any such state and local taxes.
UNDERWRITING
The Bonds are being purchased for reoffering by Piper Jaffray & Co. (the
"Underwriter"). The Underwriter has entered into an agreement with the Agency to purchase
the Bonds at a price of $__________ (being the initial principal amount of the Bonds of
$__________, less an Underwriter's discount of $_________, less original issue discount of
$___________). The agreement pursuant to which the Underwriter will purchase the Bonds
provides that the Underwriter will purchase all of the Bonds if any of the Bonds are purchased.
The Underwriter intends to reoffer the Bonds to the public initially at the prices or
yields set forth on the cover page of this Official Statement, which yield may subsequently
change without any requirement of prior notice. The Underwriter reserves the right to join with
dealers and other underwriters in reoffering the Bonds to the public. The Underwriter may
reoffer and sell Bonds to certain dealers (including dealers depositing Bonds into investment
trusts) at prices lower than the public offering prices, and such dealers may reallow any such
discounts on sales to other dealers.
The Underwriter has entered into an agreement (the "Distribution Agreement") with
Advisors Asset Management, Inc. ("AAM") for the distribution of certain municipal securities
offerings allocated to the Underwriter at the original offering prices. Under the Distribution
Agreement, if applicable to the Bonds, the Underwriter will share with AAM a portion of the
fee or commission, exclusive of management fees, paid to the Underwriter.
-75-
MISCELLANEOUS
The purpose of this Official Statement is to supply information to prospective buyers
of the Bonds. Quotations from, and summaries and explanations of, the Indenture and other
documents and statutes contained herein do not purport to be complete, and reference is made
to such documents, Indenture and statutes for full and complete statements of their
provisions.
Unless otherwise noted, all information contained in this Official Statement pertaining
to the Agency, the City, the County and the Redevelopment Projects has been furnished by the
Agency. Any statement in this Official Statement involving matters of opinion, whether or not
expressly so stated, are intended as such and not as representations of fact. This Official
Statement is not to be construed as a contract or agreement between the Agency and the
purchasers or registered owners of any of the Bonds.
The execution and delivery of this Official Statement has been duly authorized by the
Agency.
TUSTIN COMMUNITY
REDEVELOPMENT AGENCY
By
Executive Director
-76-
APPENDIX A
SUMMARY OF CERTAIN PROVISIONS OF THE INDENTURE
[TO COME]
Appendix A
THIS PAGE INTENTIONALLY LEFT BLANK
APPENDIX B
GENERAL INFORMATION REGARDING THE CITY
The following information relating to the City of Tustin (the "City") and Orange County (the "County")
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 Housing Tax Revenues and other moneys as described in the Official Statement. The Redevelopment
Projects is located within the boundaries of the City.
The City is substantially larger than the Project Area, and consequently, the information is
presented with that limitation and solely for the general background interest of the information.
General
The City covers approximately 10.8 square miles in central the County. The City is bounded by
the cities of Orange to the north, Santa Ana to the west and Irvine to the south. It has a temperate climate,
with a mean average temperature of 63 degrees and average annual rainfall of 13 inches.
In 1868 Columbus Tustin, the City's Founder and namesake, purchased with a partner 1,300 acres
of Rancho Santiago de Santa Ana, originally with a Spanish land grant. Tustin started "Tustin City" on
his portion of the property. The orange industry began in Tustin City in 1875, when the first sizeable
grove was planted. The City was soon surrounded by orange, walnut and apricot orchards. Between 1900
and 1950 the production of oranges gradually became the City's major agricultural crop, and processing
citrus fruits was the City's most important industry. The rate of agriculture in the City has diminished
since the early 1960's as the City has diversified its economic base.
The City provides a range of municipal services to its residents with afull-time permanent staff
of approximately 289 employees. The City has its own police force and the Orange County Fire
Department provides fire protection services on a contractual basis. Street sweeping, park maintenance
and building inspection are provided by the City. Trash collection is a contracted service and
maintenance of sewer mains is currently provided by the Orange County Sanitation District. The City
cooperates with the County in the provisions and maintenance of flood control facilities. Water services
are provided within portions of the City, including the Town Center and South Central Project Area by
the City of Tustin Water Corporation. Water and sewer services are provided in the easterly portions of
the City (i.e., Tustin Ranch) and MCAS Tustin Project Area by the Irvine Ranch Water District.
Two other legal entities are financially related to the City-the Tustin Community Redevelopment
Agency (the "Agency") and the City of Tustin Water Corporation (the "Water Corporation"). The Agency
was formed in 1976 to eliminate blighted areas by encouraging residential, commercial, industrial and
recreational development. The Agency is discussed in an earlier section of this Official Statement.
Municipal Government
The City is a general law city and was incorporated in 1927. The City has acouncil-manager form
of municipal government. The City Council is composed of five members elected biannually at large to
four-year alternating terms. The Mayor is selected by the City Council from among its members. The City
Manager is appointed by the City Council and serves as the administrative head of the City. The City
Manager implements City Council directives and policies and manages the operational functions of the
City. The City staff is organized into departments, which provide police, community development,
maintenance, general administration, community service and capital improvements. The City employs a
staff of approximately 289 full-time employees under the direction of the City Manager. All full-time City
employees are covered by the Public Employee's Retirement System, which is administered by the State.
Appendix B
Page 1
The table below sets out the current City Council members and their incumbency dates.
Name
Jerry Amante
John Nielsen
Doug Davert
Deborah Gavello
Jim Palmer
Position
Mayor
Mayor Pro Tem
Council Member
Council Member
Council Member
Term Expires
Population
The City's population, as of January 2009, was 74,825 as reported by the California State
Department of Finance. A summary of the City's population for the past 10 years is shown below.
CITY OF TUSTIN
Population
Year Population (1)
2000 67,504
2001 68,376
2002 69,124
2003 69,758
2004 70,304
2005 70,546
2006 71,412
2007 71,986
2008 73,743
2009 74,825
(1) State Department of Finance estimate as of January 1 of each year, except 2000 which is US Census figure as
of April 1.
Commerce
The number of establishments in the City selling merchandise subject to sales tax and
the valuation of taxable transactions is presented in the following table.
CITY OF TUSTIN
Taxable Retail Sales ($000)
Taxable Sales ($000)
2003 2004 2005 2006 2007(1)
Retail Stores
Apparel Stores $ 39,246 $ 52,248 $ 53,843 $ 51,148 $ 65,705
General Merchandise 138,599 142,377 139,692 150,321 202,882
Food Stores 40,277 40,638 43,297 47,589 51,967
Eating And Drinking Places 116,698 125,334 126,619 132,694 152,829
Home Furnishings/Appliances 79,019 50,872 51,721 38,224 33,196
Building Materials/Farm Implements 81,594 97,250 91,931 91,129 82,316
Auto Dealers/Supplies 526,184 603,186 626,897 611,396 543,012
Service stations 69,651 80,433 91,272 101,974 106,334
Other Retail Stores 214,891 229,000 264,432 250,427 259,490
Retail Stores Totals 1,306,159 1,421,338 1,489,704 1,474,902 1,497,731
All Other Outlets 289,870 249,336 263,385 281,184 327,578
Total All Outlets $1,596,029 $1,670,674 $1,753,089 $1,756,086 $1,825,309
Source: California State Board of Equalization.
(1) Latest available full-year data.
Appendix B
Page 2
Effective Buying Income
The following table shows the City's median household effective buying income for 2004 through
2008.
CITY OF TUSTIN
Effective Buying Income
Total Effective Median Household
Buying Income Effective Buying
Year Area (000's Omitted) Income
2004 Tustin $ 1,569,278 $49,193
California 705,108,410 43,915
United States 5,692,909,567 39,324
2005 Tustin $ 1,585,433 $50,466
California 720,798,106 44,681
United States 5,894,663,364 40,529
2006 Tustin $ 1,717,303 $52,701
California 764,120,962 46,275
United States 6,107,092,244 41,255
2007 Tustin $ 1,858,733 $56,126
California 814,894,438 48,203
United States 6,300,794,040 41,792
2008 Tustin $ 1,901,250 $56,337
California 832,531,445 48,952
United States 6,443,994,426 42,303
Source: S&MM (Sales and Marketing Management) Survey of Buying Power (2004); Nielsen Claritas, Inc. (2005-2008).
* In 2005, Sales and Marketing Management ceased publishing the "Survey of Buying Power' report;
however, subsequent years' data has been obtained from Claritas, Inc., who had previously prepared the
data each year for the "Survey of Buying Power."
Appendix B
Page 3
Employment
The following table summarizes the labor force, employment and unemployment figures over the
past five years for the City, County, the State, and the nation as a whole.
LABOR FORCE, EMPLOYMENT AND UNEMPLOYMENT
Yearly Average for Years 2004 through 2008
Year
and Area
Civilian Labor
Force
Employment Unemployment
Unemployment
Rate
2004
Tustin 41,200 39,400 1,700 4.2
Orange County 1,575,100 1,508,000 67,100 4.3
California 17,444,400 16,354,800 1,089,700 6.2
United States 146,401,167 139,251,917 8,149,250 5.5
2005
Tustin 41,700 40,100 1,500 3.7
Orange County 1,594,500 1,534,400 60,100 3.8
California 17,629,200 16,671,900 957,200 5.4
United States 149,297,833 141,707,250 7,590,583 5.1
2006
Tustin 42,200 40,800 1,400 3.3
Orange County 1,613,900 1,558,900 54,900 3.4
California 17,821,100 16,948,400 872,700 4.9
United States 151,427,583 144,427,000 7,000,583 4.6
2007
Tustin 42,400 40,800 1,600 3.8
Orange County 1,623,000 1,559,900 63,100 3.9
California 18,078,000 17,108,700 969,300 5.4
United States 153,167,750 146,093,917 7,073,833 4.6
2008
Tustin 42,800 40,600 2,200 5.2
Orange County 1,638,600 1,552,300 86,200 5.3
Califomia 18,391,800 17,059,600 1,332,300 7.2
United States 153,124,000 146,047,000 7,078,000 4.6
Source: California Employment Development Department; March 2008 Benchmark.
Appendix B
Page 4
The City is included within the Orange County Metropolitan Statistical Area. Services, retail
trade and manufacturing are the principal sources of employment. The following table shows
employment statistics for the County for the past five years. These figures are county-wide statistics and
may not necessarily accurately reflect employment trends in the City.
ORANGE COUNTY MSA
Wage and Salary Workers by Industry
(in thousands)
Industry
Government
Services
Finance, Insurance & Real Estate
Wholesale & Retail Trade
Transportation & Public Utilities
Manufacturing:
Nondurable goods
Durable goods
Construction
Total Nonagricultural
Agriculture
Total (all industries) (1)
2004 2005 2006 2007 2008
153,400 155,300 156,700 159,400 162,100
254,900 264,300 274,500 273,300 267,900
132,300 138,400 138,200 127,700 113,700
235,600 241,100 244,500 248,100 241,600
29,200 28,700 28,200 28,900 29,400
183,500 182,900 182,700 180,400 173,800
127,100 128,300 128,000 126,200 122,300
56,400 54,600 54,700 54,200 51,500
92,200 99,900 106,600 103,100 91,200
1,456,700 1,491,000 1,518,900 1,515,500 1,484,700
6,700 5,600 5,300 5,000 4,700
1,463,400 1,496,500 1,524,300 1,520,500 1,489,300
Source: State of California, Employment Development Department, March 2008 Benchmark.
(1) Does not represent total of columns.
Construction Activity
The following is a summary of the valuation of building permits issued in the City for the past
five years.
CITY OF TUSTIN
Building Permit Valuation
($OOOs)
Residential
Single Family
Multi-Family
Alteration /Additions
Total
Non-Residential (1)
New Commercial
New Industry
Other
Alteration /Additions
Total
Single Family Units
Multi Family Units
Total
2004 2005 2006 2007 2008
$38,046 $59,904 $133,864 $61,427 $28,672
0 0 8,034 0 5,533
2,650 3,010 5,146 4,940 3,913
$40,697 $62,914 $147,034 $66,366 $38,118
$ 9,002 $ 1,591 $25,641 $12,279 $ 1,840
0 0 992 1,106 0
2,079 3,079 5,128 2,429 2,731
11,011 16,675 16,508 30,447 12,693
$22,091 $21,345 $48,270 $46,261 $17,264
254 308 648 307 152
0 0 106 0 41
254 308 754 307 193
Source: Construction Industry Research Board, "Building Permit Summary."
(1) Includes churches and religious buildings, hospitals and institutional buildings, schools and educational
buildings, residential garages, public works and utilities buildings and non-residential alterations and
additions. Totals may not add due to rounding.
Appendix B
Page 5
Education
The City is served by the Tustin Unified School District, which operates 18 elementary schools, 5
middle schools, 4 high schools and alternative and adult education programs, totaling over 22,000
students. In addition, there are 10 private and parochial schools serving the community.
Eight community colleges are located from 5 to 20 miles from the City. The Rancho Santiago
Community College District (RSCCD) and South Orange County Community College District (SOCCCD)
operate two facilities with the City; The RSCCCD operates the Regional Law Enforcement Training
Facility and the SOCCCD operates and Advanced Technology Education Campus. Chapman University,
CSU-Fullerton, Concordia College, UC-Irvine among several institutions also offer college and graduate
level courses of study within easy reach of the City.
Health Care
The closest hospital services provided to Tustin are located on the City's northwesterly boundary
within the City of Santa Ana at Western Medical Center. Western Medical Center is a 283-licensed bed
acute care hospital designated as a Level II trauma center and centrally located in the heart of Orange
County.
The trauma center services are composed of physicians in the specialties of General Surgery,
Emergency Medicine, Anesthesiology, Orthopedic Surgery and Neurosurgery. The Trauma Services
department at Western Medical provides immediate care and on-going follow-up for designated trauma
patients in a collaborative setting. Multidisciplinary practice planning, coordinating and facilitating total
care of all trauma admissions is under the direction of the Trauma Medical Director and the Associate
Medical Director. The program operates 24 hours, 7 days a week and cares for a total spectrum of patients
and of all ages.
Emergency care is also provided for other conditions, including chronic medical problems and
minor injuries and illnesses. The hospital provides emergency services for more than 20,000 patients per
year.
Other Community Facilities
Completed in November 2009, The City of Tustin constructed an expanded new 32,000 square
foot Tustin Library. Orange County Public Libraries, leases the new Tustin Library from the City and
operates the building through the County's library system services. The system contains over 124,195
volumes, and a collection of recordings, tapes and films.
Transportation
The Santa Ana Freeway (Interstate 5), a major northwest-southeast corridor, crosses through the
central section of the City, the Costa Mesa Freeway (State Route 55) crosses north-south along the western
edge of the City and the West Leg of the Eastern Transportation Corridor (State Route 267) is located to
the east of the City's boundaries, with a transitional area of the West Leg of the Eastern Transportation
Corridor traversing the southerly portion of the City adjacent to Jamboree Road. The City is also within
minutes of the San Diego Freeway (Interstate 405, traveling north to the Los Angeles International
Airport), the Riverside Freeway (State Route 91, traveling east-west) to the north and the Orange Freeway
(State Route 57, traveling north-south) to the west and the San Joaquin Toll Road.
Air cargo and passenger flight services are provided at several nearby facilities, including John
Wayne Airport in Orange County (2 miles south) and the Ontario International Airport (50 miles
northeast).
The Orange County Transportation Authority (OCTA) also serves the area. Greyhound Bus Lines
provides service to other local areas and additional transcontinental service.
Appendix B
Page 6
Commercial and passenger rail services are provided by Union Pacific and an Amtrak passenger
station is located approximately two miles from the City. Trucking services are provided through
numerous common and contract carriers.
The Port of Long Beach is approximately 45 miles to the northwest and the Port of Los Angeles is
approximately 50 miles northwest of the City. Both ports are within easy freeway access.
Recreation
The City operates the Clifton C. Miller Community Center, the Tustin Area Senior Center, the
Columbus-Tustin Sports Fields and Gymnasium, and the Tustin Family Youth Center. In addition, there
are more than a dozen parks and recreational facilities located throughout the City. City residents are
offered the use of the City's facilities depending on their intended purpose for both active recreational
facilities and passive open space uses such as ball fields, multi-purpose fields and open turf, game courts,
tot lots, and picnic facilities, natural open pace, pedestrian and bicycle paths, community buildings and
on-site parking. The County also currently operates the Peters Canyon Regional Park within the
northwesterly portion of the City, an 84 acre urban regional park is proposed in the MCAS Tustin Project
Area, and the County maintains a coordinated system of trails including bikeways, equestrian trails and
hiking trails within the City. Tustin also has many private recreational facilities. While some facilities
(e.g., private parks, tennis courts, swimming pools) are available only to residents of a general area or
development, others are available to the public for a fee (the Tustin Ranch Golf Course), In addition, the
City is centrally located for a wide variety of entertainment and recreational activities, including, among
many others, Disneyland and Knott's Berry Farm. The ocean to the south along the Southern California
coastline offer a variety of water sports and the mountains to the north and east provide other kinds of
outdoor recreational activities, including hiking, lake recreation, and winter skiing.
Appendix B
Page 7
THIS PAGE INTENTIONALLY LEFT BLANK
APPENDIX C
AUDITED FINANCIAL STATEMENTS OF THE AGENCY
FOR THE FISCAL YEAR ENDED JUNE 30, 2009
Appendix C
THIS PAGE INTENTIONALLY LEFT BLANK
TUSTIN COMMUNITY
REDEVELOPMENT AGENCY
Annual Financial Report
June 30, 2009
TUSTIN COMMUNITY REDEVELOPMENT AGENCY
Annual Financial Report
June 30, 2009
Table of Contents
Page(s)
Independent Auditor's Report ....................................................................................................................... 1
Management's Discussion and Analysis (Unaudited) ........................................................................................ 3
Basic Financial Statements
Statement of Net Assets ........................................................................................................................ 8
Statement of Activities .......................................................................................................................... 9
Balance Sheet -Governmental Funds ................................................................................................ 10
Reconciliation of the Balance Sheet of Governmental Funds to the
Statement of Net Assets .............................................................................................................. 13
Statement of Revenues, Expenditures and Changes in Fund Balances -
Governmental Funds ................................................................................................................... 14
Reconciliation of the Statement of Revenues, Expenditures and Changes in
Fund Balances of Governmental Funds to the Statement of Activities ...................................... 17
Notes to Financial Statements ............................................................................................................. 19
Independent Auditor's Report on Internal Control Over Financial Reporting and on
Compliance (Including the Provisions Contained in the Guidelines for Compliance
Audits of Redevelopment Agencies) and Other Matters Based on an Audit of
Financial Statements Performed in Accordance with Government Auditing
Standards 33
`~
MACIAS GINI bt OICONNELLu_P
Certified Public Accountants & Management Consultants
The Board of Directors of the
Tustin Community Redevelopment Agency
Independent Auditor's Report
1201 Dove Street, Suite 680
Newport Beach, CA 92660
949.221.0025
We have audited the accompanying financial statements of the governmental activities and each major fund of
the Tustin Community Redevelopment Agency (Agency), a component unit of the City of Tustin, California
as of and for the year ended June 30, 2009, which collectively comprise the Agency's basic fmancial
statements as listed in the table of contents. These fmancial statements are the responsibility of the Agency's
management. Our responsibility is to express opinions on these fmancial statements based on our audit.
We conducted our audit in accordance with auditing standards generally accepted in the United States of
America and the standards applicable to fmancial audits contained in Government Auditing Standards issued
by the Comptroller General of the United States. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the fmancial statements are free of material misstatement. An
audit includes consideration of internal control over financial reporting as a basis for designing audit
procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the Agency's internal control over fmancial reporting. Accordingly, we express no such
opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures
in the fmancial statements, assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall fmancial statement presentation. We believe that our audit
provides a reasonable basis for our opinions.
In our opinion, the fmancial statements referred to above present fairly, in all material respects, the respective
fmancial position of the governmental activities and each major fund of the Agency as of June 30, 2009, and
the respective changes in financial position thereof for the year then ended in conformity with accounting
principles generally accepted in the United States of America.
In accordance with Government Auditing? Standards, we have also issued our report dated November 24,
2009, on our consideration of the Agency's internal control over fmancial reporting and on our tests of its
compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters.
The purpose of that report is to describe the scope of our testing of internal control over fmancial reporting
and compliance and the results of that testing, and not to provide an opinion on the internal control over
financial reporting or on compliance. That report is an integral part of an audit performed in accordance with
Government Auditing Standards and should be considered in assessing the results of our audit.
www., cpa.com An independent Member of the BDO Seidmon Alliance
The management's discussion and analysis identified in the accompanying table of contents is not a required
part of the basic fmancial statements, but is supplementary information required by accounting principles
generally accepted in the United States of America. We have applied certain limited procedures, which
consisted principally of inquiries of management regarding the methods of measurement and presentation of
the required supplementary information. However, we did not audit the information and express no opinion
on it.
Certified Public Accountants
Newport Beach, California
November 24, 2009
TUSTIN COMMUNITY REDEVELOPMENT AGENCY
MANAGEMENT'S DISCUSSION AND ANALYSIS
June 30, 2009
MANAGEMENT'S DISCUSSION AND ANALYSIS
As management of the Tustin Community Redevelopment Agency (Agency), we offer readers of the Agency's
financial statements this narrative overview and analysis of the financial activities of the Agency for the fiscal
year ended June 30, 2009.
FINANCIAL HIGHLIGHTS
• Agency assets exceeded its liabilities at the close of fiscal year 2008-09 by $72,968,466. Net assets
consist of $15,756,553 in capital net assets, $22,720,295 in restricted net assets and $34,491,618 in
unrestricted net assets.
• The Agency's total net assets decreased by $2,543,836 during fiscal year ended June 30, 2009. This
was mostly due to increased expenditures for various community development and capital improvement
projects.
• At the close of fiscal year 2008-09, the Agency's governmental funds reported a combined ending fund
balance of $82,268,199, an increase of $2,694,725 from the prior year. Fund balance consists of
$49,777,973 reserved for specific purposes and $32,490,226 in unreserved - undesignated.
• Total Agency debt decreased by $11,143,000 during fiscal year 2008-09, which consisted entirely of
principal payments.
OVERVIEW OF THE FINANCIAL STATEMENTS
This discussion and analysis are intended to serve as an introduction to the Agency's basic financial statements.
The Agency's basic financial statements are comprised of three components: 1) government-wide financial
statements, (2) fund financial statements, and (3) notes to the basic financial statements.
Government-wide financial statements
The government-wide financial statements are designed to provide readers with a broad overview of the
Agency's finances, in a manner similar to aprivate-sector business.
The statement of net assets presents information on all of the Agency's assets and liabilities, with the difference
between the two reported as net assets. Over time, increases or decreases in net assets may serve as a useful
indicator of whether the financial position of the Agency is improving or deteriorating.
TUSTIN REDEVELOPMENT AGENCY
MANAGEMENT'S DISCUSSION AND ANALYSIS
(CONTINUED)
June 30, 2009
Government-wide financial statements (Continued)
The statement of activities presents information showing how the Agency's net assets changed during the most
recent fiscal year. All changes in net assets are reported as soon as the underlying event giving rise to the
change occurs, regardless of the timing of related cash flows. Thus, all of the current year's revenues and
expenses are taken into account regardless of when cash is received or paid (e.g., uncollected taxes and earned
but unpaid interest expense).
The basic services of the Agency are considered to be governmental activities including Community
Development and Interest Expense on Long-term Debt. All Agency activities are financed with property tax
increment, rental income and investment income.
The government-wide financial statements can be found on pages 8 and 9 of this report.
Fund financial statements
Fund financial statements are designed to report information about groupings of related accounts used to
maintain control over resources that have been segregated for specific activities or objectives. The Agency uses
fund accounting to ensure and demonstrate compliance with legal requirements. The Agency only has
governmental fund types.
Governmental funds are used to account for essentially the same functions reported as governmental activities
in the government-wide financial statements. However, unlike the government-wide financial statements,
governmental fund financial statements focus on near-term inflows and outflows of spendable resources, as well
as on balances of spendable resources available at the end of the fiscal year. Such information may be useful in
evaluating a government's near-term financing requirements.
Because the focus of governmental funds is narrower than that of the government-wide fmancial statements, it is
useful to compare the information presented for governmental funds with similar information presented for
governmental activities in the government-wide financial statements. By doing so, readers may better
understand the long-term impact of the government's near-term financing decisions. Both the governmental
fund balance sheet and the governmental fund statement of revenues, expenditures and changes in fund balances
provide a reconciliation to facilitate this comparison between governmental funds and governmental activities.
The Agency maintains individual governmental funds organized by their type (debt service and capital projects
funds). Information is presented separately in the governmental fund balance sheet and in the governmental
fund statement of revenues, expenditures, and changes in fund balances.
The fund financial statements can be found on pages 10 - 16 of this report.
TUSTIN REDEVELOPMENT AGENCY
MANAGEMENT'S DISCUSSION AND ANALYSIS
(CONTINUED)
June 30, 2009
Notes to the basic financial statements
The notes provide additional information that is essential to a full understanding of the data provided in the
government-wide and fund financial statements. The notes to the basic financial statements can be found on
pages 19 - 32 of this report.
GOVERNMENT-WIDE FINANCIAL ANALYSIS
The Agency's combined net assets are $72,968,466 as outlined in Table 1. This is a decrease of $2,543,836
from the prior year balance of $75,512,302.
TABLE 1
Net Assets
X07-08 Fv08-09 % Chance
Assets:
Current and restricted assets $ 85,381,742 $ 100,120,565 17%
Capital assets 32,557,861 15.756,553 (52%)
Total Assets 117,939,603 115,877,118 (2)%
Liabilities:
Other liabilities 5,452,301 17,076,552 213%
Long-term liabilities outstanding 36,975,000 25.832,000 (30%)
Total Liabilities 42,427,301 42,908,652 11%
Net Assets:
Invested in capital assets 32,557,861 15,756,553 (52%)
Restricted 56,628,272 22,270,295 (61%)
Unrestricted (13.673.831) 34,491.618 (352%)
Total Net Assets ~ 75.512302 ~ 72 968 466 (3%)
Statement of Activities
The statement of activities shows how the government's net assets changed during fiscal year 2008-09. On the
following page is a summary of changes in net assets.
During the current fiscal year, the Agency's net assets decreased $2,543,836. This was mostly due to increased
expenditures for various community development and capital improvement projects.
5
TUSTIN REDEVELOPMENT AGENCY
MANAGEMENT'S DISCUSSION AND ANALYSIS
(CONTINUED)
June 30, 2009
TABLE 2
Changes in Net Assets
Revenues:
General Revenues:
Tax increment
Investment and rental
Other revenues
Total Revenues
Expenses:
Program Expenses:
Community development
Interest on long-term debt
Total Expenses
Change in net assets
Net Assets -Beginning of Year
Net Assets -End of Year
F Oy 7=08 Fy08-09 % Change
$ 16,882,739 $ 19,297,179 14%
2,878,870 2,138,075 (26%)
27,240 44,349 63%
19.788,849 21,479,603 9%
5,577,908 20,456,657 267%
4,689,887 3,566,782 (24%)
10,267,795 24,023,439 134%
9,521,054 (2,543,836) (127%)
65,991,248 75,512,302 14%
~ 75.512.302 ~ 72 968 466 (3%)
The 14% increase in Tax Increment Revenues from prior year is due to the increase in base tax increment for the
Marine Base Project Area. The 267% increase in Community Development Expenses is due to the completion
of an arterial highway extension project that benefited the project areas and transferred to the City of Tustin.
FINANCIAL ANALYSIS OF AGENCY FUNDS
As noted earlier, the Agency uses fund accounting to ensure and demonstrate compliance with finance-related
legal requirements.
Governmental funds
The focus of the Agency's governmental funds is to provide information on near-term inflows, outflows and
balances of spendable resources. Such information is useful in assessing the Agency's financing requirements.
In particular, unreserved fund balance may serve as a useful measure of a Government's net resources available
for spending at the end of the fiscal year. Refer to pages 10 - 16 for more detail of governmental funds.
As of June 30, 2009, the Agency's governmental funds reported combined ending fund balances of $82,268,199,
an increase of $2,694,725 in comparison with the prior year. Of the $82,268,199, $36,568,042 constitutes
unreserved - undesignated fund balance. The remainder of fund balance is reserved to indicate that it is not
available for new spending because it has already been committed (1) to pay debt service of $1,776,505, (2) to
prepaid items of $37,678, (3) to land held for resale of $27,050,000, and (4) for a variety of low income housing
purposes of $16,835,974.
TUSTIN REDEVELOPMENT AGENCY
MANAGEMENT'S DISCUSSION AND ANALYSIS
(CONTINUED)
June 30, 2009
CAPTI'AL ASSET AND DEBT ADMINISTRATION
Capital assets
At the end of 2009, the Agency had $15,756,553 invested in a broad range of capital assets, including buildings
and furniture, fixtures and equipment. The 67% decrease in Land &CIP is due to the completion of an arterial
highway extension project that benefited the project areas and transferred to the City of Tustin.
TABLE 3
Capital Assets at Year-End
Fv07-08 Fv08-09 % Change
Land &CIP $ 24,840,923 $ 8,260,099 (67%)
Building 11,024,198 11,024,198 0%
Furniture and fixtures, and equipment 443,998 443,998 0%
Accumulated depreciation (3,751,258) ~, 3,971,742) 6%
Total 32.557.861 15.756.553 (52%)
Long-term debt
At the end of fiscal year 2009, the Agency had total bonded debt outstanding of $25,832,000, which is an
$11,143,000 decrease from the prior year. Outstanding bonded debt can be found on pages 29-30 in the notes to
the basic financial statements.
REQUESTS FOR INFORMATION
This financial report is designed to provide a general overview of Agency finances for all those with an interest
in the government's finances. Questions concerning any of the information provided in this report or request for
additional financial information should be addressed to the Finance Director, City of Tustin, 300 Centennial
Way, Tustin, California, 92780, or call (714) 573-3060.
7
TUSTIN COMMUNITY REDEVELOPMENT AGENCY
Statement of Net Assets
June 30, 2009
Assets:
Cash and investments
Receivables:
Taxes receivable
Interest receivable
Loans receivable
Notes receivable
Allowance for uncollectibles
Advances to City of Tustin
Prepaid items
Land held for resale
Restricted assets:
Investments with fiscal agent
Capital assets, not depreciated
Capital assets, net of accumulated depreciation
Total assets
Liabilities:
Accounts payable
Deposits payable
Interest payable
Due to the City of Tustin
Noncurrent liabilities:
Due within one year
Due in more than one year
Total liabilities
Net assets:
Invested in capital assets
Restricted for:
Debt service
Low and moderate housing
Unrestricted
Total net assets
See Accompanying Notes to Financial Statements.
Governmental
Activities
$ 50,850,592
698,721
120,913
1,116,170
4,575,980
(5,290,790)
19,284,171
37,678
27,050,000
1,677,130
8,260,099
7,496,454
115,877,118
2,560,113
2,510
43,588
14,470,441
7,913,000
17,919,000
42,908,652
15,756,553
5,854,321
16,865,974
34,491,618
$ 72,968,466
8
TUSTIN COMMUNITY REDEVELOPMENT AGENCY
Statement of Activities
For the Year Ended June 30, 2009
Functions/Programs:
Governmental activities:
Community services
Interest on long term debt
Expenses
$ 20,456,657 $ (20,456,657)
3,566,782 (3,566,782)
Governmental
Activities
Total governmental activities
General revenues:
Taxes:
Tax increment
Rental income
Investment earnings
Miscellaneous
Total general revenues
Change in net assets
Net assets, beginning
Net assets, ending
See Accompanying Notes to Financial Statements.
$ 24,023,439 (24,023,439)
Net (Expenses)
Revenue and
Change in
Net Assets
19,297,179
583,962
1,554,113
44,349
21,479,603
(2,543,836)
75,512,302
$ 72,968,466
9
TUSTIN COMMUNITY REDEVELOPMENT AGENCY
Balance Sheet
Governmental Funds
June 30, 2009
Debt Service Funds
South Central Town Center Marine Base
Project Area Project Area Project Area
Assets:
Cash and investments $ 1,485,715 $ 1,203 $ 2,296
Investments with fiscal agents - 1,677,130 -
Receivables:
Taxes receivable 64,823 23,281 486,525
Interest receivable 32,085 2,655 4,647
Loans receivable - - -
Notes receivable - - -
Allowance for uncollectibles - - -
Advances to City of Tustin 6,428,058 6,428,057 6,428,056
Prepaid items - - -
Landheld for resale - - -
Total assets $ 8,010,681 $ 8,132,326 $ 6,921,524
Liabilities:
Accounts payable $ - $ - $ 2,331,236
Deposits payable - - -
Deferred revenue 139,119 134,553 134,861
Due to City of Tustin 4,650,000 5,365,014 4,455,427
Total liabilities 4,789,119 5,499,567 6,921,524
Fund balances:
Reserved for:
Debt service 3,221,562 2,632,759 -
Prepaid items - - -
Land held for resale - - -
Low income housing - - -
Unreserved - undesignated - - -
Total fund balances (deficits) 3,221,562 2,632,759 -
Total liabilities and fund balances $ 8,010,681 $ 8,132,326 $ 6,921,524
See Accompanying Notes to Financial Statements.
10
Capital Proiects Funds
South Central Town Center
South Central Low Income Town Center Low Income
Project Area Housing Project Area Housing
$ 15,492,305 $ 6,719,206 $ 9,930,612 $ 7,106,549
450 17,258 450 10,164
4,647 26,159 7,745 27,265
- 912,119 - 204,051
- 1,434,910 - 320,535
- (2,119,424) - (350,831)
4,986 15,000 1,346 15,000
1,345,000 705,000 - -
$ 16,847,388 $ 7,710,228 $ 9,940,153 $ 7,332,733
$ 68,967 $ 7,150 $ 3,447 $ 5,468
- - - 2,510
721 230,043 1,202 176,365
69,688 237,193 4,649 184,343
4,986 15,000 1,346 15,000
1,345,000 705,000 - -
- 6,753,035 - 7,133,390
15,427,714 - 9,934,158 -
16,777,700 7,473,035 9,935,504 7,148,390
$ 16,847,388 $ 7,710,228 $ 9,940,153 $ 7,332,733
(Continued)
11
TUSTIN COMMUNITY REDEVELOPMENT AGENCY
Balance Sheet
Governmental Funds (Continued)
June 30, 2009
Cauital Proiects Funds
Assets:
Cash and investments
Investments with fiscal agents
Receivables:
Taxes receivable
Interest receivable
Loans receivable
Notes receivable
Allowance for uncollectibles
Advances to City of Tustin
Prepaid items
Land held for resale
Total assets
Liabilities:
Accounts payable
Deposits payable
Deferred revenue
Due to City of Tustin
Total liabilities
Marine Base
Marine Base Low Income
Project Area Housing
$ 7,257,288 $ 2,855,418
Total
Governmental
Funds
$ 50,850,592
1,677,130
450 95,320 698,721
8,408 7,302 120,913
- - 1,116,170
- 2,820,535 4,575,980
- (2,820,535) (5,290,790)
- - 19,284,171
1,346 - 37,678
25,000,000 - 27,050,000
$ 32,267,492 $ 2,958,040 $ 100,120,565
$ 136,487 $ 7,358 $ 2,560,113
- - 2,510
1,305 1,133 819,302
- - 14,470,441
137,792 8,491 17,852,366
Fund balances:
Reserved for:
Debt service - - 5,854,321
Prepaid items 1,346 - 37,678
Land held for resale 25,000,000 - 27,050,000
Low income housing - 2,949,549 16,835,974
Unreserved - undesignated 7,128,354 - 32,490,226
Total fund balances (deficits) 32,129,700 2,949,549 82,268,199
Total liabilities and fund balances $ 32,267,492 $ 2,958,040 $ 100,120,565
See Accompanying Notes to Financial Statements.
12
TUSTIN COMMUNITY REDEVELOPMENT AGENCY
Reconciliation of the Balance Sheet of Governmental Funds
to the Statement of Net Assets
June 30, 2009
Amounts reported for governmental activities in the Statement of Net Assets
are different because:
Fund balances for governmental funds $ 82,268,199
When capital assets that are to be used in governmental activities are
purchased or constructed, the costs of those assets are reported as
expenditures in governmental funds. However, the Statement of Net
Assets includes those capital assets among the assets of the Agency as
a whole.
Beginning balance, net of depreciation $ 32,557,861
Current year additions 732,622
Current year deletions (17,313,446)
Current year depreciation (220,484)
Ending balance, net of depreciation 15,756,553
Deferred revenues which are deferred because they are not currently
available are taken into revenue in the Statement of Activities and,
accordingly, increases the net assets on the Statement of Net Assets. 819,302
Long-term liabilities applicable to the Agency's governmental activities
are not due and payable in the current period and, accordingly, are not
reported as fund liabilities. All liabilities, both current and long-term,
are reported in the Statement of Net Assets. (25,832,000)
Interest on long-term debt is not accrued in governmental funds, but rather
is recognized as an expenditure when due. (43,588)
Net assets of governmental activities $ 72,968,466
See Accompanying Notes to Financial Statements.
13
TUSTIN COMMUNITY REDEVELOPMENT AGENCY
Statement of Revenues, Expenditures and Changes in Fund Balances
Governmental Funds
For the Year Ended June 30, 2009
Debt Service Funds
Revenues:
Taxes
Use of money and property
Rental income
Other revenue
Total revenues
Expenditures:
Current:
Community services
Capital outlay
Debt service:
Principal retirement
Interest and fiscal charges
Total expenditures
Excess of revenues over
(under) expenditures
South Central Town Center Marine Base
Project Area Project Area Project Area
$ 3,564,558 $ 4,470,290 $ 6,761,962
388,035 174,219 134,591
- - 2,100
3,952,593 4,644,509 6,898,653
632,000 254,085 157,000
- 1,105,000 10,038,000
99,030 550,665 781,470
731,030 1,909,750 10,976,470
3,221,563
2,734,759 (4,077,817)
Other financing sources (uses):
Transfers in - - -
Transfers out (20,176,849) (10,046,985) (7,010,397)
Total other financing sources (uses) (20,176,849) (10,046,985) (7,010,397)
Net change in fund balances (16,955,286) (7,312,226) (11,088,214)
Fund balances (deficits), beginning 20,176,848 9,944,985 11,088,214
Fund balances (deficits), ending $ 3,221,562 $ 2,632,759 $ -
See Accompanying Notes to Financial Statements.
14
Capital Projects Funds
South Central Town Center
South Central Low Income Town Center Low Income
Project Area Housing Project Area Housing
$ - $ 939,605 $ - $ 1,139,482
24,086 144,962 31,430 152,761
15,000 104,762 - -
4,343 11,128 - 1,128
43,429 1,200,457 31,430 1,293,371
141,412 436,476 136,504 363,400
601,135 - 1,767 -
- 713,223 - 713,223
742,547 1,149,699 138,271 1,076,623
(699,118) 50,758 (106,841) 216,748
20,176,849 - 10,046,985 -
20,176,849 - 10,046,985 -
19,477,731 50,758 9,940,144 216,748
(2,700,031) 7,422,277 (4,640) 6,931,642
$ 16,777,700 $ 7,473,035 $ 9,935,504 $ 7,148,390
(Continued)
15
TUSTIN COMMUNITY REDEVELOPMENT AGENCY
Statement of Revenues, Expenditures and Changes in Fund Balances
Governmental Funds (Continued)
For the Year Ended June 30, 2009
Revenues:
Taxes
Use of money and property
Rental income
Other revenue
Total revenues
Expenditures:
Current:
Community services
Capital outlay
Debt service:
Principal retirement
Interest and fiscal charges
Total expenditures
Excess of revenues over
(under) expenditures
Other fmancing sources (uses):
Transfers in
Transfers out
Total other financing sources (uses)
Net change in fund balances
Fund balances (deficits), beginning
Fund balances (deficits), ending
Capital Projects Funds
Marine Base
Marine Base Low Income
Project Area Housing _
$ - $ 2,421,282 $ 19,297,179
35,263 53,071 1,138,418
464,200 - 583,962
25,650 - 44,349
525,113 2,474,353 21,063,908
279,355 580,886 2,981,118
71,329 - 674,231
- - 11,143,000
- 713,223 3,570,834
350,684 1,294,109 18,369,183
174,429 1,180,244
7,010,397 -
7,010,397 -
7,184,826 1,180,244
2,694,725
37,234,231
(37,234,231)
2,694,725
24,944,874 1,769,305 79,573,474
$ 32,129,700 $ 2,949,549 $ 82,268,199
See Accompanying Notes to Financial Statements.
16
Total
Governmental
Funds
TUSTIN COMMUNITY REDEVELOPMENT AGENCY
Reconciliation of the Statement of Revenues, Expenditures and Changes in
Fund Balances of Governmental Funds to the Statement of Activities
For the Year Ended June 30, 2009
Amounts reported for governmental activities in the Statement of Activities
are different because:
Net change in fund balances -total governmental funds
When capital assets that are to be used in governmental activities are
purchased or constructed, the resources expended for those assets are
reported as expenditures in governmental funds. However, in the
Statement of Activities, the cost of those assets is allocated over their
estimated useful lives and reported as depreciation expense. Capital
asset activities for the fiscal year are as follows:
Capital asset additions 732,622
Capital asset transfer to City (17,313,446)
Depreciation expense (220,4841
Deferred revenue does not provide for current financial resources and,
therefore, is not reported as revenues in the governmental funds.
The issuance of long-term debt provides current financial resources to
governmental funds, while the repayment of the principal of long-term
debt consumes the current financial resources of governmental funds.
Neither transaction, however, has any effect on net assets. This is the
amount of repayment of principal in the current period.
Interest on long-term debt is not due and payable in the current period and,
therefore, is not reported in the governmental funds.
Change in net assets of governmental activities
See Accompanying Notes to Financial Statements.
2,694,725
(16,801,308)
415,695
11,143,000
4,052
$ (2,543,836)
17
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18
TUSTIN COMMUNITY REDEVELOPMENT AGENCY
Notes to Financial Statements
June 30, 2009
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Description of Reporting Entity
The Tustin Community Redevelopment Agency (Agency), a component unit of the City of Tustin
(City), was established October 20, 1976, pursuant to the State of California Health and Safety
Code Section 33000, entitled "Community Redevelopment Law". Its purpose is to prepare and
carry out plans for improvement, rehabilitation, and redevelopment of blighted areas within the
territorial limits of the City of Tustin. The City provides management assistance to the Agency,
and the members of the City Council also act as the governing body of the Agency.
In accordance with Governmental Accounting Standards Board (GASB) Code Section 2100,
"Defining the Reporting Entity", the Agency's financial activities are included (blended) with the
financial activities of the City of Tustin for reporting purposes.
Tax Increment Financing
The Agency's primary source of revenue, other than loans and advances from the City, comes
from property taxes. Property taxes allocated to the Agency are computed in the following
manner:
(a) The assessed valuation of all property within the project area is determined on the date of
adoption of the Redevelopment Plan.
(b) Property taxes related to the incremental increase in assessed values after the adoption of the
Redevelopment Plan are allocated to the Agency. All taxes on the "frozen" assessed
valuation of the property are allocated to the City and other districts.
The Agency has no power to levy and collect taxes, and any legislative property tax reduction
might correspondingly reduce the amount of tax revenues that would otherwise be available to
pay the principal of, and interest on, long-term debt. Broadened property tax exemptions could
have a similar effect. Conversely, any increase in the tax rate or assessed valuation, or any
reduction or elimination of present exemptions would necessarily increase the amount of tax
revenues that would be available to pay principal and interest on long-term debt.
(b) Government-wide and Fund Financial Statements
The government-wide financial statements (i.e., the statement of net assets and the statement of
activities) report information on all of the activities of the Agency. For the most part, the effect
of interfund activity has been removed from these statements.
The statement of activities demonstrates the degree to which the direct expenses of a given
function are offset by program revenues. Direct expenses are those that are clearly identifiable
with a specific function. Program revenues include 1) charges to customers who purchase, use, or
directly benefit from goods, services, or privileges provided by a given function and 2) grants and
19
TUSTIN COMMUNITY REDEVELOPMENT AGENCY
Notes to Financial Statements (Continued)
June 30, 2009
contributions that are restricted to meeting the operational or capital requirements of a particular
function. Taxes and other items not properly included among program revenues are reported
instead as general revenues.
Fund financial statements for the Agency's governmental funds are presented after the
government-wide financial statements. These statements display information about major funds
individually and nonmajor funds in the aggregate for governmental funds. All funds of the
Agency are reported as major funds.
(c) Measurement Focus, Basis of Accounting and Financial Statement Presentation
1. Measurement Focus
Measurement focus is a term used to describe "which" transactions are recorded within
the various financial statements. Basis of accounting refers to "when" transactions are
recorded regardless of the measurement focus applied.
In the government-wide Statement of Net Assets and the Statement of Activities,
activities are presented using the economic resources measurement focus. Under the
economic resources measurement focus, all (both current and long-term) economic
resources and obligations of the government are reported.
In the fund financial statements, all governmental funds are accounted for on a spending
or "financial flow" measurement focus. This means that only current assets and current
liabilities are generally included on their balance sheets. Their reported fund balances
(net current assets) are considered a measure of "available spendable resources".
Governmental fund operating statements present increases (revenues and other financing
sources) and decreases (expenditures and other financing uses) in net current assets.
Accordingly, they are said to present a summary of sources and uses of available
spendable resources during a period.
Noncurrent portions of long-term receivables are reported on the governmental fund
balance sheets in spite of their measurement focus. However, special reporting
treatments are used to indicate that they should not be considered "available spendable
resources", since they do not represent net current assets. Recognition of governmental
fund type revenue represented by noncurrent receivables are deferred until they become
current receivables. Noncurrent portions of other long-term receivables are offset by
fund balance reserve accounts. Revenues, expenses, gains, losses, assets, and liabilities
resulting from nonexchange transaction are recognized in accordance with the
requirements of GASB Statement No. 33.
Because of their spending measurement focus, expenditure recognition for governmental
fund types excludes amounts represented by noncurrent liabilities. Since they do not
affect net current assets, such long-term amounts are not recognized as governmental
fund type expenditures or fund liabilities. Amounts expended to acquire capital assets are
20
TUSTIN COMMUNITY REDEVELOPMENT AGENCY
Notes to Financial Statements (Continued)
June 30, 2009
recorded as expenditures in the year that resources were expended, rather than as a fund
asset. The proceeds of long-term debt are recorded as other financing sources rather than
as a fund liability. Amounts paid to reduce long-term indebtedness are reported as fund
expenditures.
When both restricted and unrestricted resources are combined in a fund, expenses are
considered to be paid first from restricted resources, and then from unrestricted resources.
2. Basis of Accounting
In the government-wide Statement of Net Assets and Statement of Activities, the
governmental activities are presented using the accrual basis of accounting. Under the
accrual basis of accounting, revenues are recognized when earned and expenses are
recorded when the liability is incurred or economic assets used, regardless of timing of
related cash flows. Revenues, expenses, gains, losses, assets, and liabilities resulting
from exchange and exchange-like transactions are recognized when the exchange takes
place. Property tax revenue is recognized in the fiscal year for which taxes have been levied.
Government-mandated and voluntary nonexchange transactions are recognized as
revenues when all applicable eligibility requirements have been met.
In the fund financial statements, governmental funds are presented using the modified-
accrual basis of accounting. Their revenues are recognized when they become
measurable and available as net current assets. Measurable means that the amounts can
be estimated, or otherwise determined. Available means that the amounts were collected
during the reporting period or soon enough thereafter to be available to finance the
expenditures accrued for the reporting period. For this purpose, the Agency considers
levied property tax increment revenues, investment income and rental income to be available
if they are collected within 60 days of the end of the current fiscal period.
Revenue recognition is subject to the measurable and availability criteria for the
governmental funds in the fund financial statements. Exchange transactions are
recognized as revenues in the period in which they are earned (i.e., the related goods or
services are provided).
Investments
Investments are stated at fair value (the value at which a financial instrument would be
exchanged in a current transaction between willing parties other than a forced or
liquidation sale), except for certain investments which have a remaining life of less than
one year when purchased, which are stated at amortized cost.
21
TUSTIN COMMUNITY REDEVELOPMENT AGENCY
Notes to Financial Statements (Continued)
June 30, 2009
Capital Assets
Capital assets are recorded at cost where historical records are available and at an
estimated original cost where no historical records exist. Contributed capital assets are
valued at their estimated fair market value at the date of contribution. Generally, capital
asset purchases in excess of $5,000 are capitalized if they have an expected useful life of
one year or more.
The Agency does not own any infrastructure assets.
Capital assets used in operations are depreciated over their estimated useful lives using
the straight-line method in the Government-wide Financial Statements. The range of
lives used for depreciation purposes of each capital asset class are:
Building 50 years
Furniture, fixtures and equipment 10 years
Land Held for Resale
Land held for resale is carried at the lower of cost or estimated realizable value
determined at the date of an executed disposition and development agreement. Fund
balances are reserved in amounts equal to the carrying value of land held for resale
because such assets are not available to finance the Agency's current operations.
3. Description of Funds
The Agency reports the following funds:
Debt Service Funds are used to account for the current interest and principal payments on
the long-term debt of the Agency.
Capital Projects Funds are used to account for resources used in developing the project
areas as well as the administrative costs incurred in sustaining Agency activities.
The Agency's major governmental funds are as follows:
The South Central Project Area Debt Service Fund is used to account for the tax
increment revenues and expenditures of the South Central Project Area.
The Town Center Project Area Debt Service Fund is used to account for tax increment
revenues and expenditures of the Town Center Project Area.
The Marine Base Project Area Debt Service Fund is used to account for tax increment
revenues and expenditures of the Marine Base Project Area.
22
TUSTIN COMMUNITY REDEVELOPMENT AGENCY
Notes to Financial Statements (Continued)
June 30, 2009
The South Central Project Area Capital Projects Fund is used to account for the fiscal
activity of the South Central Project Area.
The South Central Low Income Housing Capital Projects Fund is used to account for the
redevelopment requirement to set-aside 20% of available tax increment, and to use those
funds only for the benefit of providing low and moderate income housing to residents of
the South Central Project Area.
The Town Center Project Area Capital Projects Fund is used to account for the fiscal
activities of the Town Center Project Area.
The Town Center Low Income Housing Capital Projects Fund is used to account for the
redevelopment requirement to set aside 20% of available tax increment, and to use those
funds only for the benefit of providing low and moderate income housing to residents of
the Town Center Project Area.
The Marine Base Proiect Area Capital Projects Fund is used to account for the fiscal
activities of the Marine Base Project Area.
The Marine Base Low Income Housing Capital Projects Fund is used to account for the
redevelopment requirement to set-aside 20% of available tax increment, and to use those
funds only for the benefit of providing low and moderate income housing to residents of
the Marine Base Project Area.
(2) STEWARDSHIP, COMPLIANCE AND ACCOUNTABILITY
(a) Budgetary Data
The budgets of the Agency are primarily "long-term" budgets which emphasize capital outlay
plans extending over one year. Because of the long-term nature of redevelopment projects,
"annual" budget comparisons are not considered meaningful and, accordingly, no budgetary
information is included in the accompanying financial statements.
23
TUSTIN COMMUNITY REDEVELOPMENT AGENCY
Notes to Financial Statements (Continued)
June 30, 2009
(3)
DETAILED NOTES ON ALL FUNDS
(a) Cash And Investments
Investments held by fiscal agents are owned separately by the Agency. Except for the cash held
in escrow consideration accounts, the Agency's cash and investments not held by fiscal agents are
pooled with the City of Tustin. The Agency does not own specifically identifiable securities in
the City of Tustin Pool. See the City of Tustin's annual report for the year ended June 30, 2009
for additional disclosures on deposits and investments.
Cash and investments as of June 30, 2009 are classified in the accompanying financial statements
as follows:
Statement of net assets:
Cash and investments -unrestricted
Cash and investments with fiscal agent
Total cash and investments
Cash and investments as of June 30, 2009 consist of the following:
Cash pooled with City of Tustin
Investments
Total cash and investments
$ 50,850,592
1,677,130
$ 52,527,722
$ 50,850,592
1,677,130
$ 52,527,722
24
TUSTIN COMMUNITY REDEVELOPMENT AGENCY
Notes to Financial Statements (Continued)
June 30, 2009
Investments Authorized by the Agency's Investment Policy
The table below identifies the investment types that are authorized by the Agency's investment
policy. The table also identifies certain provisions of the Agency's investment policy that address
interest rate risk, credit risk, and concentration of credit risk. This table does not address
investments of debt proceeds held by bond trustee that are governed by the provisions of debt
agreements of the Agency's, rather than the general provision of the Agency's investment policy.
Maximum Maximum
Maximum Percentage Investment in
Authorized Investment Tyne Maturity Allowed One Issuer
Local Agency Bonds 5 years None None
U. S. Treasury Obligations 5 years None None
U. S. Agency Securities 5 years 50% None
Banker's Acceptances 180 days 25% 30%
Commercial Paper 90 days 25% 10%
Negotiable Certificates of Deposit 5 years 30% None
Repurchase Agreements 1 year None None
Corporate Notes 5 years 10% None
Mutual Funds investing in eligible securities N/A 20% 10%
Money Market Funds N/A 20% 10%
County Pooled Investment Funds N/A None None
Local Agency Investment Fund (LAIF) N/A None None
Investments Authorized by Debt Agreements
Investments of debt proceeds held by bond trustee are governed by provisions of the debt
agreements, rather than the Agency's investment policy. The table below identifies the
investment types that are authorized for investments held by bond trustee.
Maximum Maximum
Authorized Maximum Percentage Investment
Investment Type Maturi of Portfolio in One Issuer
U.S. Agency Securities None None None
Banker's Acceptances 180 days None None
Commercial Paper 270 days None None
U.S. Treasury None None None
Money Market Funds N/A None None
Investment Contracts 30 years None None
25
TUSTIN COMMUNITY REDEVELOPMENT AGENCY
Notes to Financial Statements (Continued)
June 30, 2009
Disclosures Relating to Interest Rate Risk
Interest rate risk is the risk that changes in market interest rates will adversely affect the fair value
of an investment. Generally, the longer the maturity of an investment, the greater the sensitivity
of its fair value to changes in market interest rates. One of the ways that the Agency manages its
exposure to interest rate risk is by purchasing a combination of shorter term and longer term
investments and by timing cash flows from maturities so that a portion of the portfolio is
maturing or coming close to maturity evenly over time as necessary to provide the cash flow and
liquidity needed for operations.
Authorized
Investment Type
Investment in City Pool
Held by fiscal agent:
Money Market Funds
Disclosures Relating to Credit Risk
50,850,592
1,677,130
Remaining Maturity
(in Months)
less than 6 months
less than 12 months
Generally, credit risk is the risk that an issue of an investment will not fulfill its obligation to the
holder of the investment. This is measured by the assignment of a rating by a nationally
recognized statistical rating organization. Presented below is the minimum rating required by
(where applicable) the California Government Code, the Agency's investment policy, or debt
agreements, and the actual rating as of year end for each investment type.
Investment Type
Investment in City Pool
Held by fiscal agent:
Money Market Funds
Concentration of Credit Risk
Minimum Actual Rating
Legal at Year End
Amount Rating Not Rated
$ 50,850,592 N/A $ 50,850,592
1,677,130 N/A 1,677,130
$ 52,527,722 $ 52,527,722
The investment policy of the Agency contains no limitations on the amount that can be invested
in any one issuer beyond that stipulated by the California Government Code. At June 30, 2009,
the Agency had no investments in any one issuer (other than U.S. Treasury securities, mutual
funds, and external investment pools) that represent 5% or more of total Agency's investments.
Amount
26
TUSTIN COMMUNITY REDEVELOPMENT AGENCY
Notes to Financial Statements (Continued)
June 30, 2009
Custodial Credit Risk
Custodial credit risk for deposits is the risk that, in the event of the failure of a depository
financial institution, a government will not be able to recover its deposits or will not be able to
recover collateral securities that are in the possession of an outside party. The custodial credit
risk for investments is the risk that, in the event failure of the counterparty (e. g., broker-dealer) to
a transaction, a government will not be able to recover the value of its investment of collateral
securities that are in the possession of another party. The California Government Code and the
Agency's investment policy do not contain legal or policy requirements that would limit the
exposure to custodial credit risk for deposits or investments, other than the following provision
for deposits: The California Govemment Code requires that a financial institution secure deposits
made by state of local governmental units by pledging securities in an undivided collateral pool
half by a depository regulated under state law (unless so waived by the governmental unit). The
market value of the pledged securities in the collateral pool must equal at least 110% of the total
amount deposited by the public agencies. California law also allows financial initiations to
secure Agency deposits by pledging first trust deed mortgage notes having a value of 150% of the
secured public deposits.
(b) Loans Receivable/Notes Receivable
Multi-Family Development Loan: The Agency provided a Bridge Loan to Senior Apartment
Developer to assist in the development of 53 affordable rental units. The total outstanding
balance as of June 30, 2009, was $347,510.
Home Improvement Loans: The Agency has provided deferred home improvement loans to low
and moderate income households (rental and ownership). These deferred loans are due upon sale,
refinance, or when the rental units are no longer available as affordable units. Term is 30 years.
The total outstanding balance as of June 30, 2009, was $59,573. An allowance of $59,573 has
been recorded to reflect the amount of the loans not expected to be collectible.
Homebuyer Program Loans: The Agency has provided down payment assistance to qualified
first time homebuyers. The loans provided in the Ambrose Lane Development are due beginning
in 2016, or when the homeowner sells or refinances. The loans provided in the Tustin Grove
Development are due when the homeowner sells or refinances. If the homeowner does not sell or
refinance before July 2015, the loan is forgiven. The total outstanding balance as of June 30,
2009, was $709,087. An allowance of $655,237 has been recorded to reflect the amount of loans
not expected to be collectible.
Notes Receivable: The City of Tustin is holding second deeds of trust on low and moderate
income homes located in the Tustin Legacy development. The Agency will purchase these notes
from the City as funds are readily available. Total outstanding balance as of June 30, 2009 was
$4,575,980. An allowance of $4,575,980 has been recorded in the fund statements.
27
TUSTIN COMMUNITY REDEVELOPMENT AGENCY
Notes to Financial Statements (Continued)
June 30, 2009
(c) Interfund Transfers
Transfers In
Transfers Out
South Central Project Area
Debt Service Fund
Town Center Project Area
Debt Service Fund
Marine Base Project Area
Debt Service Fund
South Central Town Center Marine Base
Project Area Project Area Project Area
Capital Projects Capital Projects Capital Projects
Fund Fund Fund Totals
$ 20,176,849 $
- $ - $ 20,176,849
10,046,985 - 10,046,985
- 7,010,397 7,010,397
$ 20,176,849 $ 10,046,985 $ 7,010,397 $ 37,234,231
Transfers from Debt Service Funds were made to Capital Projects Funds to provide funding for
current and future capital projects in South Central, Town Center, and Marine Base Project Areas.
(d) Capital Assets
The following is a summary of the capital asset activity for the year ended June 30, 2009:
Capital assets, not being depreciated:
Construction in progress
Total capital assets,
not being depreciated
Capital assets, being depreciated:
Building -Civic Center
Furniture, fixtures and equipment
Total capital assets,
being depreciated
Less accumulated depreciation
Total capital assets,
being depreciated, net
Balance at Balance at
July 1, 2008 Additions Deletions June 30, 2009
$ 24,840,923 $ 732,622 $ 17,313,446 * $ 8,260,099
24,840,923 732,622 17,313,446 8,260,099
11,024,198 - - 11,024,198
443,998 - - 443,998
11,468,196 - - 11,468,196
(3,751,258) (220,484) - (3,971,742)
7,716,938 (220,484) - 7,496,454
Governmental activities
capital assets, net $ 32,557,861 $ 512,]38 $ 17,313,446 $ 15,756,553
* This amount was contributed to the City of Tustin upon the completion of the various projects.
(e) Long-Term Liabilities
28
TUSTIN COMMUNITY REDEVELOPMENT AGENCY
Notes to Financial Statements (Continued)
June 30, 2009
The following is a summary of the long-term liability activity for the year ended June 30, 2009:
Balance Balance Due Within
July 1, 2008 Additions Deletions June 30, 2009 One Year
Tax allocation bonds $ 11,975,000 $ - $ 1,105,000 $ 10,870,000 $ 1,150,000
Notes payable 25,000,000 - 10,038,000 14,962,000 6,763,000
$ 36,975,000 $ - $ 11,143,000 $ 25,832,000 $ 7,913,000
Tax Allocation Bonds:
Serial bonds are payable in annual installments ranging from $775,000 to
$1,315,000 commencing on December 1, 1998. Interest is payable
semiannually on June 1 and December 1, with rates ranging from 3.5%
to 5.0% per annum. The bonds maturing on or after December 1, 2009,
are subject to redemption prior to maturity as a whole or in part, at the
option of the Agency, on any date on or after December 1, 2008 at prices
ranging from 100% to 101 % of principal. ~ 10 870 000
The annual requirements to amortize the tax allocation refunding bonds
are as follows:
Year Ending
June 30, Principal
Interest Total
2010 $ 1,150,000 $ 497,180 $ 1,647,180
2011 1,205,000 443,289 1,648,289
2012 1,255,000 385,466 1,640,466
2013 1,315,000 323,771 1,638,771
2014 1,380,000 258,073 1,638,073
2015-2017 4,565,000 339,906 4,904,906
Total $ 10,870,000 $ 2,247,685 $ 13,117,685
Notes Payable:
On April 1, 2007, the Tustin Community Redevelopment Agency
entered into two related Note Purchase Agreements in the amounts of
$19,900,000 Series B (Tax-exempt) and $5,100,000 Series A (Taxable)
with Citigroup Global Markets, Inc. for the acquisition of a thirty-seven
acre parcel of land adjacent to the Marine Base Project Area that will
29
TU5TIN COMMUNITY REDEVELOPMENT AGENCY
Notes to Financial Statements (Continued)
June 30, 2009
provide freeway access to and from the Marine Base Project Area.
Principal is payable in annual payments due in November of each year.
Interest payments are payable monthly during the Initial Note Period
with a fixed interest rate of 4.32% through November 2008. After the
Initial Note Period, variable rate interest payments are payable monthly
based upon the current Securities Industry and Financial Markets
Association Municipal Swap Index (SIFMA) on the 2007 Series A Note
and the London Interbank Offered Rate (LIBOR) for the 2007 Series B
Note. Interest payments after the Initial Note Period have been calculated
based upon the maximum interest rate of 12% per the Note Agreement.
The Notes are secured by a lien on the aggregate tax increment revenue
generated in the Marine Base Project Area. In addition, any proceeds
from sale of land are pledged to the repayment of the notes. $14,962.900
The annual debt service requirements are as follows:
Year Ending
June 30, Principal Interest Total
2010 $ 6,763,000 $ 1,752,268 $ 8,515,268
2011 8,199,000 765,240 8,964,240
Total $ 14,962,000 $ 2,517,508 $ 17,479,508
Pledged Revenues:
The tax allocation refunding bonds are secured and to be serviced from tax increment revenues
excluding dedicated housing tax increment, through the fiscal year 2017. Total debt service
requirements through 2017 are $13,117,685 consisting of principal payments of $10,870,000 and
interest payments of $2,247,685. Pledged tax increment revenue recognized during the year was
$14.6 million against the total debt service payment of $13.7 million.
The notes payable are secured and to be serviced from the Marine Base Project Area tax
increment revenues excluding dedicated housing tax increment, through the fiscal year 2011.
Total debt service requirements through 2011 are $17,479,508 consisting of principal payments
of $14,962,000 and interest payments of $2,517,508. Pledged tax increment revenue recognized
during the year was $6.8 million against the total debt service payment of $10.8 million.
Although the incremental property taxes were projected to produce sufficient revenues to meet
the debt service requirements over the life of the bonds, certain conditions could have a material,
adverse impact on revenues allocated to the Agency. These include future decreases in the
assessed valuation of the project areas, decreases in the applicable tax rates or collection rates,
30
TUSTIN COMMUNITY REDEVELOPMENT AGENCY
Notes to Financial Statements (Continued)
June 30, 2009
general decline in the economic condition of the project areas, or a change in the law reducing the
tax increment received by the Agency.
(~ Due to Ciry of Tustin
The City made loans to the South Central Project Area, Town Center Project Area, and Marine
Base Project Area. The total amount of the loan outstanding is $14,470,441 and is expected to be
paid with future tax increment revenue.
(g) Commitments and Contingencies
The California Health and Safety Code requires redevelopment agencies to set aside 20 percent of
their tax increment from project areas established before 1976 for low and moderate income
housing. Between fiscal years 1985-86 and 1991-92, the Tustin Community Redevelopment
Agency deferred a total of $2,776,042 from its low and moderate-income housing obligation. On
February 1, 1993, the Agency adopted a plan to eliminate the deficit in subsequent years.
(h) City and Agency Reimbursement Agreement
On June 5, 2007, the City and Tustin Community Redevelopment Agency executed a
Reimbursement Agreement for reimbursement to the City to assist the Agency in meeting
obligations to provide affordable housing under the MCAS Redevelopment Plan and the MCAS
Tustin Specific Plan. In order to assist the Agency in meeting its affordable housing obligations,
the City has entered into an agreement to sell property at a discount sufficient to permit
developers to economically develop the required number of affordable housing units and has
encumbered the sale of the properties and units with covenants, promissory notes and deeds of
trust to ensure maintaining the affordability of those units in accordance with the California
Community Redevelopment Law.
As of June 30, 2009, approximately five hundred sixty-five new units have been constructed in
the Marine Base Project Area, including one hundred eighteen affordable units, which reflect an
average subsidy of $351,000 per unit to secure the long-term affordability covenants. The
affordable units are located at Tustin Fields I and II and are comprised of thirty-three very low,
twenty-three low and sixty-two moderate income units which are secured by promissory notes
and deeds of trusts by the City that reflect an average of approximately $502,600 for very low-
income units, $485,900 for low-income units and $279,100 for moderate-income units. The
City's promissory notes and deeds of trust reflect the difference between the fair market value of
the dwelling unit at the time of purchase and the affordable housing purchase price of the units.
The total promissory notes value associated with the production of the affordable housing units is
$23,585,726 on Tustin Field I and $22,822,010 on Tustin Field II, for a total of $46,407,736.
Reimbursements are to be paid from tax increment revenues, including but not limited to the
Agency's Low and Moderate-Income Housing Set-Aside deposits from the Marine Base Project
Area, Town Center and South Central Project Areas as determined on an annual basis as part of
the budget process. Interest is payable annually by the Agency to the City at the rate of 5% of the
31
TUSTIN COMMUNITY REDEVELOPMENT AGENCY
Notes to Financial Statements (Continued)
June 30, 2009
amount outstanding under the reimbursement agreement. The Agency reimbursed the City in the
amount of $961,605 during the fiscal year and obtained ownership of promissory notes in this
amount. The promissory notes are considered notes receivable in the financial statements. An
allowance of $961,605 has been recorded to reflect the amount of the notes not expected to be
collectible. Interest paid by the Agency to the City under the reimbursement agreement during
the fiscal year was $2,139,668.
(4) SUBSEQUENT EVENT
On July 24, 2009, the State Legislature passed Assembly Bill (AB) 26 4x, which requires
redevelopment agencies statewide to deposit a total of $2.05 billion of property tax increment in
county "Supplemental" Educational Revenue Augmentation Funds (SERAF) to be distributed to
meet the State's Proposition 98 obligations to schools. The SERAF revenue shift of $2.05 billion
will be made over two years, $1.7 billion in fiscal year 2009-2010 and $350 million in fiscal year
2010-2011. The SERAF would then be paid to school districts and the county offices of
education which have students residing in redevelopment project areas, or residing in affordable
housing projects financially assisted by a redevelopment agency, thereby relieving the State of
payments to those schools. The Agency's share of this revenue shift is approximately $6,191,557
in fiscal year 2009-2010 and $1,274,732 in fiscal year 2010-2011. Payments are to be made by
May 10 of each respective fiscal year. In response to AB 26 4x, the Agency intends to make the
required payments from tax increment revenues from the South Central (27.39%) Town Center
(26.46%) and Marine Base Project Areas (46.15%) in May 2010 and 2011.
The California Redevelopment Association (CRA) is the lead petitioner on a lawsuit to invalidate
AB 26 4x, similar to last year's successful lawsuit challenging the constitutionality of AB 1389.
CRA filed its lawsuit on October 20, 2009. The lawsuit asserts that the transfer of property tax
increment to the SERAF is not permitted under Article XVI, Section 16 of the California
Constitution. The complaint also asserts impairment of contract and gift of public funds
arguments. While the State made adjustments in AB 26 4x to address the constitutional issues
raised by the Superior Court over last year's lawsuit challenging AB 1389, the Agency, along
with the CRA and other California redevelopment agencies, believe that the SERAF remains
unconstitutional.
32
1201 Dove Street, Suite 680
} Newport Beach, GA 92660
949.221.0025
MACIAS GINI bt OICONNELLt~P
Certified Public Accountants & Management Consultants
The Board of Directors of the
Tustin Community Redevelopment Agency
Independent Auditor's Report on Internal Control Over Financial Reporting and on
Compliance (Including the Provisions Contained in the Guidelines for Compliance
Audits of Redevelopment Agencies) and Other Matters Based on an Audit of
Financial Statements Performed in Accordance with Government Auditing Standards
We have audited the financial statements of the governmental activities and each major fund of the Tustin
Community Redevelopment Agency (Agency), a component unit of the City of Tustin, California as of
and for the year ended June 30, 2009, which collectively comprise the Agency's basic financial
statements, as listed in the table of contents, and have issued our report thereon dated November 24, 2009.
We conducted our audit in accordance with auditing standards generally accepted in the United States of
America and the standards applicable to financial audits contained in Government Auditing Standards,
issued by the Comptroller General of the United States.
Internal Control Over Financial Reporting
In planning and performing our audit, we considered the Tustin Community Redevelopment Agency's
internal control over financial reporting as a basis for designing our auditing procedures for the purpose
of expressing our opinions on the financial statements, but not for the purpose of expressing an opinion
on the effectiveness of the Agency's internal control over financial reporting. Accordingly, we do not
express an opinion on the effectiveness of the Agency's internal control over financial reporting.
A control deficiency exists when the design or operation of a control does not allow management or
employees, in the normal course of performing their assigned functions, to prevent or detect
misstatements on a timely basis. A significant deficiency is a control deficiency, or a combination of
control deficiencies, that adversely affects the Agency's ability to initiate, authorize, record, process, or
report financial data reliably in accordance with generally accepted accounting principles such that there
is more than a remote likelihood that a misstatement of the Agency's financial statements that is more
than inconsequential will not be prevented or detected by the Agency's internal control.
A material weakness is a significant deficiency, or combination of significant deficiencies, that results in
more than a remote likelihood that a material misstatement of the financial statements will not be
prevented or detected by the Agency's internal control.
Our consideration of internal control over financial reporting was for the limited purpose described in the
first paragraph of this section and would not necessarily identify all deficiencies in internal control that
might be significant deficiencies or material weaknesses. We did not identify any deficiencies in internal
control over financial reporting that we consider to be material weaknesses, as defined above. However,
we noted other control deficiencies that we have reported to management of the City of Tustin in a
separate letter dated November 24, 2009 relating to both the City and the Agency.
33
www. cpa.com An Independent Member of the BDO Seldmon AlUance
Compliance and Other Matters
As part of obtaining reasonable assurance about whether the basic financial statements of the Tustin
Community Redevelopment Agency are free of material misstatement, we performed tests of its
compliance with certain provisions of laws, regulations, contracts and grant agreements, noncompliance
with which could have a direct and material effect on the determination of financial statement amounts.
Such provisions include those provisions of laws and regulations identified in the Guidelines for
Compliance Audits of California Redevelopment A eg ncies issued by the State Controller's Office,
Division of Accounting and Reporting. However, providing an opinion on compliance with those
provisions was not an objective of our audit and, accordingly, we do not express such an opinion. The
results of our tests disclosed no instances of noncompliance or other matters that are required to be
reported under Government Auditing~Standards.
This report is intended for the information of the Board of Directors, management and others within the
Tustin Community Redevelopment Agency and the State Controller's Office, Division of Accounting and
Reporting and is not intended to be and should not be used by anyone other than these specified parties.
Certified Public Accountants
Newport Beach, California
November 24, 2009
34
APPENDIX D
FISCAL CONSULTANT'S REPORT
[TO BE ATTACHED]
Appendix D
Page 1
THIS PAGE INTENTIONALLY LEFT BLANK
APPENDIX E
FORM OF BOND COUNSEL'S OPINION
[Letterhead of Quint & Thimmig LLP]
[Closing Date]
Tustin Community Redevelopment Agency
300 Centennial Way
Tustin, California 92780
OPINION: $ * Tustin Community Redevelopment Agency Tax Allocation Housing
Bonds, Series 2010
Members of the Agency:
We have acted as bond counsel in connection with the issuance by the Tustin Community
Redevelopment Agency (the "Agency") of its $ * Tustin Community Redevelopment Agency
Tax Allocation Housing Bonds, Series 2010 (the "Bonds'), pursuant to the provisions of Part 1 of Division 24
of the California Health and Safety Code, commencing with section 33640 of said Code (the "Law"),
Resolution No. , adopted by the Agency on February 2, 2010, and an Indenture of Trust, dated as of
March 1, 2010 (the "Indenture"), by and between the Agency and The Bank of New York Mellon Trust
Company, N.A., as trustee.
In connection with this opinion, we have examined the law and such certified proceedings and
other papers as we deem necessary to render this opinion. As to questions of fact material to our opinion, we
have relied upon representations of the Agency contained in the Indenture and in the certified proceedings
and certifications of public officials and others furnished to us without undertaking to verify the same by
independent investigation.
Based upon the foregoing we are of the opinion, under existing law, that:
1. The Agency is duly created and validly existing as a public body, corporate and politic, with the
power to enter into the Indenture, perform the agreements on its part contained therein and issue the Bonds.
2. The Indenture has been duly approved by the Agency and constitutes a valid and binding
obligation of the Agency enforceable in accordance with its terms.
3. Pursuant to the Law, the Indenture creates a valid lien on the funds pledged by the Indenture for
the security of the Bonds, on a parity with the lien thereon with respect to any future Parity Debt, as such
term is defined in the Indenture.
4. 'The Bonds have been duly authorized, executed and delivered by the Agency and are valid and
binding special obligations of the Agency, payable solely from the sources provided therefor in the
Indenture.
5. Subject to the Agency's compliance with certain covenants, interest on the Bonds (i) is excludable
from gross income of the owners thereof for federal income tax purposes, (ii) is not included as an item of tax
preference in computing the alternative minimum tax for individuals and corporations under the Internal
Revenue Code of 1986, as amended, and (iii) is not taken into account in computing adjusted current
earnings, which is used as an adjustment in determining the federal alternative minimum tax for certain
Preliminary, subject to change.
Appendix E
Page 1
corporations. Failure by the Agency to comply with one or more of such covenants could cause interest on
the Bonds to be includable in gross income for federal income tax purposes retroactively to the date of
issuance of the Bonds.
6. The interest on the Bonds is exempt from personal income taxation imposed by the State of
California.
Ownership of the Bonds may result in other tax consequences to certain taxpayers, and we express
no opinion regarding any such collateral consequences arising with respect to the Bonds.
The rights of the owners of the Bonds and the enforceability of the Bonds and the Indenture maybe
subject to bankruptcy, insolvency, reorganization, moratorium and other similar laws affecting creditors'
rights heretofore or hereafter enacted and also may be subject to the exercise of judicial discretion in
accordance with general principles of equity.
In rendering this opinion, we have relied upon certifications of the Agency and others with respect
to certain material facts. Our opinion represents our legal judgment based upon such review of the law and
the facts that we deem relevant to render our opinion and is not a guarantee of a result. This opinion is given
as of the date hereof and we assume no obligation to revise or supplement this opinion to reflect any facts or
circumstances that may hereafter come to our attention or any changes in law that may hereafter occur.
Respectfully submitted,
Appendix E
Page 2
APPENDIX F
FORM OF CONTINUING DISCLOSURE CERTIFICATE
'This CONTINUING DLSCLOSURE CERTIFICATE (the "Disclosure Certificate") is executed and
delivered by the TUSTIN COMMUNITY REDEVELOPMENT AGENCY(the "Agency") in connection with
the issuance of $ * aggregate principal amount of Tustin Community Redevelopment Agency
Tax Allocation Housing Bonds (the "Bonds°). The Bonds are being issued pursuant to that certain Indenture
of Trust, dated as of March 1, 2010, by and between the Agency and The Bank of New York Mellon Trust
Company, N.A., as trustee (the "Indenture"). The Agency covenants and agrees as follows:
Section 1. Purpose of the Disclosure Certificate. This Disclosure Certificate is being executed and
delivered by the Agency for the benefit of the holders and beneficial owners of the Bonds and in order to
assist the Participating Underwriter in complying with S.E.C. Rule 15c2-12(b)(5).
Section 2. Definitions. In addition to the definitions set forth in the Resolution, which apply to any
capitalized term used in this Disclosure Certificate unless otherwise defined in this Section 2, the following
capitalized terms shall have the following meanings:
"Annual Report" shall mean any Annual Report provided by the Agency pursuant to, and as
described in, Sections 3 and 4 of this Disclosure Certificate.
"Beneficial Owner" shall mean any person which (a) has the power, directly or indirectly, to vote or
consent with respect to, or to dispose of ownership of, any Bonds (including persons holding Bonds through
nominees, depositories or other intermediaries), or (b) is treated as the owner of any Bonds for federal
income tax purposes.
"Dissemination Agent" shall mean or any successor Dissemination Agent
designated in writing by the Agency and which has filed with the Agency a written acceptance of such
designation. In the absence of such a designation, the Agency shall act as the Dissemination Agent.
"EMMA" or "Electronic Municipal Market Access" means the centralized on-line repository for
documents filed with the MSRB, such as official statements and disclosure information relating to municipal
bonds, notes and other securities as issued by state and local governments.
"Listed Events" shall mean any of the events listed in Section 5(a) of this Disclosure Certificate.
"MSRB" means the Municipal Securifies Rulemaking Board, which has been designated by the
Securities and Exchange Commission as the sole repository of disclosure information for purposes of the
Rule, or any other repository of disclosure information which may be designated by the Securities and
Exchange Commission as such for purposes of the Rule in the future.
"Participating Underwriter" shall mean any of the original underwriters of the Bonds required to
comply with the Rule in connection with offering of the Bonds.
"Rule" shall mean Rule 15c2-12(b)(5) adopted by the Securities and Exchange Commission under
the Securities Exchange Act of 1934, as the same may be amended from time to time.
Section 3. Provision of Annual Reports.
(a) Delivery of Annual Report to MSRB. The Agency shall, or shall cause the Dissemination Agent to,
not later than nine months after the end of the Agency's fiscal year (which currently ends on June 30),
commencing with the report for the 2009-10 Fiscal Year, which is due not later than Apri11, 2011, provide to
the Participating Underwriter and to file with EMMA, in a readable PDF or other electronic format as
prescribed by the MSRB, an Annual Report that is consistent with the requirements of Section 4 of this
' Preliminary, subject to change.
Appendix F
Page 1
Disclosure Certificate. The Annual Report maybe submitted as a single document or as separate documents
comprising a package, and may cross-reference other information as provided in Section 4 of this Disclosure
Certificate; provided that the audited financial statements of the Agency maybe submitted separately from
the balance of the Annual Report and later than the date required above for the filing of the Annual Report
if they are not available by that date.
(b) Change of Fiscal Year. If the Agency's fiscal year changes, it shall give notice of such change in the
same manner as for a Listed Event under Section 5(d).
(c) Delivery of Annual Report to Dissemination Agent. Not later than fifteen (15) Business Days prior to
the date specified in subsection (a) for providing the Annual Report to EMMA, the Agency shall provide the
Annual Report to the Dissemination Agent (if other than the Agency). If by such date, the Dissemination
Agent has not received a copy of the Annual Report, the Dissemination Agent shall notify the Agency.
(d) Report of Non-Compliance. If the Agency is unable to provide an Annual Report by the date
required in subsection (a), the Dissemination Agent shall send a notice to EMMA in substantially the form
attached as Exhibit A.
(e) Annual Compliance Certification. The Dissemination Agent shall, if the Dissemination Agent is
other than the Agency, file a report with the Agency certifying that the Annual Report has been provided
pursuant to this Disclosure Certificate, stating the date it was provided.
Section 4. Content of Annual Reports. The Annual Report shall contain or incorporate by reference
the following:
(a) Audited financial statements of the Agency for the preceding fiscal year, prepared in accordance
with the laws of the State and including all statements and information prescribed for inclusion therein by
the Controller of the State. If the Agency's audited financial statements are not available by the time the
Annual Report is required to be filed pursuant to Section 3(a), the Annual Report shall contain unaudited
financial statements in a format similar to the financial statements contained in the final Official Statement,
and the audited financial statements shall be filed in the same manner as the Annual Report when they
become available.
(b) To the extent not included in the audited final statement of the Agency, the Annual Report shall
also include operating data with respect to the Agency for preceding fiscal year, substantially similar to that
provided in the corresponding tables and charts in the official statement for the Bonds, as follows:
[TO BE DETERNIDVED]
(c) Any or all of the items listed above may be included by specific reference to other documents,
including official statements of debt issues of the Agency or related public entities, which are available to
the public on the MSRB's Internet web site or filed with the Securities and Exchange Commission. The
Agency shall clearly identify each such other document so included by reference.
If the document included by reference is a final official statement, it mustbe available from EMMA.
(d) In addition to any of the information expressly required to be provided under paragraph (b) of
this Section 4, the Agency shall provide such further information, if any, as may be necessary to make the
specifically required statements, in the light of the arcumstances under which they are made, not
misleading.
Appendix F
Page 2
Section 5. Reporting of Significant Events.
(a) Listed Events. Pursuant to the provisions of this Section 5, the Agency shall give, or cause to be
given, notice of the occurrence of any of the following events with respect to the Bonds, if material:
(i) Principal and interest payment delinquencies.
(ii) Non-payment related defaults.
(iii) Unscheduled draws on debt service reserves reflecting financial difficulties.
(iv) Unscheduled draws on credit enhancements reflecting financial difficulties.
(v) Substitution of credit or liquidity providers, or their failure to perform.
(vi) Adverse tax opinions or events affecting the tax-exempt status of the security.
(vii) Modifications to rights of security holders.
(viii) Contingent or unscheduled bond calls.
(ix) Defeasances.
(x) Release, substitution, or sale of property securing repayment of the securities.
(xi) Rating changes.
(b) Determination of Materiality of Listed Events. Whenever the Agency obtains knowledge of the
occurrence of a Listed Event, the Agency shall as soon as possible determine if such event would be material
under applicable federal securities laws.
(c) Notice to Dissemination Agent. If the Agency has determined that knowledge of the occurrence of
a Listed Event would be material under applicable federal securities laws, the Agency shall promptly
notify the Dissemination Agent (if other than the Agency) in writing. Such notice shall instruct the
Dissemination Agent to report the occurrence pursuant to subsection (d).
(d) Notice of Listed Events. The Agency shall file, or cause the Dissemination Agent to file, a notice of
the occurrence of a Listed Event, if material, with EMMA, in a readable PDF or other electronic format as
prescribed by EMMA, with a copy to the Partidpating Underwriter. Notwithstanding the foregoing, notice
of Listed Events described in subsections (a)(viii) and (ix) (defeasances) need not be given under this
subsection any earlier than the notice (if any) of the underlying event is given to Bondholders of affected
Bonds.
Section 6. Identifying Information for Filings with EMMA. All documents provided to EMMA
under this Disclosure Certificate shall be accompanied by identifying information as prescribed by the
MSRB.
Section 7. Termination of Reporting Obligation. The Agency's obligations under this Disclosure
Certificate shall terminate upon the 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 Agency shall give notice of such
termination in the same manner as for a Listed Event under Section 5.
Section 8. Dissemination Agent.
(a) Appointment of Dissemination Agent. The initial Dissemination Agent shall be
The Agency may, from time to time, appointor engage a Dissemination Agent to assist it in carrying out its
obligations under this Disclosure Certificate, and may discharge any such agent, with or without
appointing a successor Dissemination Agent. If the Dissemination Agent is not the Agency, the
Dissemination Agent shall not be responsible in any manner for the content of any notice or report
prepared by the Agency pursuant to this Disclosure Certificate.
(b) Compensation of Dissemination Agent. The Dissemination Agent shall be paid compensation by
the Agency for its services provided hereunder in accordance with its schedule of fees as agreed to between
the Dissemination Agent and the Agency from time to time and all expenses, legal fees and advances made
or incurred by the Dissemination Agent in the performance of its duties hereunder. The Dissemination
Agent shall not be deemed to be acting in any fiduciary capacity for the Agency, Holders or Beneficial
Owners, or any other party. The Dissemination Agent may rely and shall be protected in acting or
refraining from acting upon any direction from the Agency or an opinion of nationally recognized bond
Appendix F
Page 3
counsel. The Dissemination Agent may at any time resign by giving written notice of such resignation to
the Agency.
Section 9. Amendment; Waiver. Notwithstanding any other provision of this Disclosure Certificate,
the Agency may amend this Disclosure Certificate (and the Dissemination Agent shall agree to any
amendment so requested by the Agency that does not impose any greater duties or risk of liability on the
Dissemination Agent), and any provision of this Disclosure Certificate may be waived, provided that the
following conditions are satisfied:
(a) Change in Circumstances. If the amendment or waiver relates to the provisions of Sections 3(a), 4
or 5(a), it may only be made in connection with a change in circumstances that arises from a change in legal
requirements, change in law, or change in the identity, nature, or status of an obligated person with respect
to the Bonds, or the type of business conducted;
(b) Compliance as of Issue Date. The undertaking, as amended or taking into account such waiver,
would, in the opinion of a nationally recognized bond counsel, have complied with the requirements of the
Rule at the time of the original issuance of the Bonds, after taking into account any amendments or
interpretations of the Rule, as well as any change in circumstances; and
(c) Consent of Holders; Non-impairment Opinion. The amendment or waiver either (i) is approved by
the Bondholders in the same manner as provided in the Indenture for amendments to the Indenture with
the consent of Bondholders, or (ii) does not, in the opinion of nationally recognized bond counsel, materially
impair the interests of the Bondholders or Beneficial Owners.
If this Disclosure Certificate is amended or any provision of this Disclosure Certificate is waived, the
Agency shall describe such amendment or waiver in the next following Annual Report and shall include,
as applicable, a narrative explanation of the reason for the amendment or waiver and its impact on the type
(or in the case of a change of accounting principles, on the presentation) of financial information or operating
data being presented by the Agency. In addition, if the amendment relates to the accounting principles to
be followed in preparing financial statements, (i) notice of such change shall be given in the same manner
as for a Listed Event under Section 5(d), and (ii) the Annual Report for the year in which the change is made
should present a comparison (in narrative form and also, if feasible, in quantitative form) between the
financial statements as prepared on the basis of the new accounting principles and those prepared on the
basis of the former accounting principles.
Section 10. Additional Information. Nothing in this Disclosure Certificate shall be deemed to
prevent the Agency 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 Agency 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 Agency shall have no obligation under this Disclosure Certificate to update such information or include
it in any future Annual Report or notice of occurrence of a Listed Event.
Section 11. Default. In the event of a failure of the Agency to comply with any provision of this
Disclosure Certificate, any Bondholder or Beneficial Owner may take such actions as may be necessary and
appropriate, including seeking mandate or specific performance by court order, to cause the Agency to
comply with its obligations under this Disclosure Certificate. The sole remedy under this Disclosure
Certificate in the event of any failure of the Agency to comply with this Disclosure Certificate shall be an
action to compel performance.
Section 12. Duties, Immunities and Liabilities of Dissemination Agent. The Dissemination Agent
shall have only such duties as are specifically set forth in this Disclosure Certificate, and the Agency agrees,
to the extent permitted by law, to indemnify and save the Dissemination Agent, its officers, directors,
employees and agents, harmless against any loss, expense and liabilities which it may incur arising out of
or in the exercise or performance of its powers and duties hereunder, including the costs and expenses
(including attorneys fees) of defending against any claim of liability, but excluding liabilities due to the
Appendix F
Page 4
Dissemination Agent's negligence or willful misconduct. The obligations of the Agency under this Section
shall survive resignation or removal of the Dissemination Agent and payment of the Bonds.
Section 13. Beneficiaries. This Disclosure Certificate shall inure solely to the benefit of the Agency,
the Dissemination Agent, the Participating Underwriters and Holders and Beneficial Owners from time to
time of the Bonds, and shall create no rights in any other person or entity.
Date: [Closing Date]
ACKNOWLEDGED:
as Dissemination Agent
By
Authorized Officer
TUSTIN COMMUNITY REDEVELOPMENT
AGENCY
BY
Name
Title
Appendix F
Page 5
EXHIBIT A
NOTICE TO EMMA OF FAILURE TO FILE ANNUAL REPORT
Name of Issuer: Tustin Community Redevelopment Agency
Name of Issue: Tustin Community Redevelopment Agency Tax Allocation Housing Bonds, Series
2010
Date of Lssuance: [Closing Date]
NOTICE IS HEREBY GIVEN that the Tustin Community Redevelopment Agency (the "Agency")
has not provided an Annual Report with respect to the above-named Bonds as required by that certain
Indenture of Trust, dated as of March 1, 2010, by and between the Agency and The Bank of New York
Mellon Trust Company, NA., as trustee. The Agency anticipates that the Annual Report will be filed by
Dated:
cc: Trustee
Appendix F
Page 6
as Dissemination Agent
By _
Title
APPENDIX G
BOOK-ENTRY ONLY SYSTEM
The information in this Appendix G, concerning The Depository Trust Company, New York, New York
("DTC"), and DTC's book-entry system, has been furnished by DTC for use in official statements and the Agency
takes no responsibility for the completeness or accuracy thereof. The Agency cannot and does not give any
assurances that DTC, DTC Participants or Indirect Participants will distribute to the Beneficial Owners (a)
payments of principal of or interest on the Bonds, (b) certificates representing ownership interest in or other
confirmation of ownership interest in the Bonds, or (c) redemption or other notices sent to DTC or Cede £~ Co., its
nominee, as the registered owner of the Bonds, or that they will so do on a timely basis, or that DTC, DTC
Participants or DTC Indirect Participants will act in the manner described in this Appendix G. The current
"Rules" applicable to DTC are on file with the Securities and Exchange Commission and the current "Procedures"
of DTC to be followed in dealing with DTC Participants are on file with DTC. Information Furnished by DTC
Regarding its Book-Entry Only System
1. The Depository Trust Company ("DTC"), New York, NY, will act as securities depository for the
Bonds (as used in this Appendix G, the "Securities°). The Securities 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 Security certificate will be issued
for each maturity of the Securities, in the aggregate principal amount of such issue, and will be deposited
with DTC. If, however, the aggregate principal amount of any issue exceeds $500 million, one certificate will
be issued with respect to each $500 million of principal amount, and an additional certificate will be issued
with respect to any remaining principal amount of such issue.
2. DTC, the world's largest securities depository, is alimited-purpose trust company organized
under the New York Banking Law, a "banking organization" within the meaning of the New York
Banking Law, a member of the Federal Reserve System, a "clearing corporation" within the meaning of the
New York Uniform Commercial Code, and a "clearing agency" registered pursuant to the provisions of
Section 17A of the Securities Exchange Act of 1934. DTC holds and provides asset servicing for over 3.5
million issues of U.S. and non-U.S. equity issues, corporate and municipal debt issues, and money market
instruments from over 100 countries that DTC's participants ("Direct Participants") deposit with DTC. DTC
also facilitates the post-trade settlement among Direct Participants of sales and other securities transactions
in deposited securities, through electronic computerized book-entry transfers and pledges between Direct
Participants' accounts. This eliminates the need for physical movement of securities certificates. Direct
Participants include both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, clearing
corporations, and certain other organizations. DTC is a wholly-owned subsidiary of The Depository Trust &
Clearing Corporation ("DTCC"). DTCC is the holding company for DTC, National Securities Clearing
Corporation and Fixed Income Clearing Corporation, all of which are registered clearing agencies. DTCC is
owned by the users of its regulated subsidiaries. Access to the DTC system is also available to others such as
both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, and clearing corporations that
clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly
("Indirect Participants"). DTC has Standard & Poor's highest rating: AAA. 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 and www.dtc.org.
3. Purchases of Securities under the DTC system must be made by or through Direct Participants,
which will receive a credit for the Securities on DTC's records. The ownership interest of each actual
purchaser of each Security ("Beneficial Owner") is in turn to be recorded on the Direct and Indirect
Participants' records. Beneficial Owners will not receive written confirmation from DTC of their purchase.
Beneficial Owners are, however, expected to receive written confirmations providing details of the
transaction, as well as periodic statements of their holdings, from the Direct or Indirect Participant through
which the Beneficial Owner entered into the transaction. Transfers of ownership interests in the Securities
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
Securities, except in the event that use of the book-entry system for the Securities is discontinued.
Appendix G
Page 1
4. To facilitate subsequent transfers, all Securities 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 Securities 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 Securities; DTC's records reflect only the identity of the
Direct Participants to whose accounts such Securities 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.
5. Conveyance of notices and other communications by DTC to Direct Participants, by Direct
Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial
Owners will be governed by arrangements among them, subject to any statutory or regulatory
requirements as may be in effect from time to time. Beneficial Owners of Securities may wish to take certain
steps to augment the transmission to them of notices of significant events with respect to the Securities, such
as redemptions, tenders, defaults, and proposed amendments to the Security documents. For example,
Beneficial Owners of Securities may wish to ascertain that the nominee holding the Securities for their
benefit has agreed to obtain and transmit the 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.
6. Redemption notices shall be sent to DTC. If less than all of the Securities within an issue are being
redeemed, DTC's practice is to determine by lot the amount of the interest of each Direct Participant in such
issue tobe redeemed.
7. Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect to the
Securities unless authorized by a Direct Participant in accordance with DTC's NINII Procedures. Under its
usual procedures, DTC mails an Omnibus Proxy to the Agency as soon as possible after the record date. The
Omnibus Proxy assigns Cede & Co.'s consenting or voting rights to those Direct Partiapants to whose
accounts the Securities are credited on the record date (identified in a listing attached to the Omnibus
Proxy).
8. Redemption proceeds, distributions, and dividend payments on the Securities 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 Agency or the paying agent or bond 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 nor its nominee, the paying agent or bond trustee, or the Agency, 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 Agency or the paying agent or bond
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.
9. DTC may discontinue providing its services as depository with respect to the Securities at any
time by giving reasonable notice to the Agency or the paying agent or bond trustee. Under such
circumstances, u1 the event that a successor depository is not obtained, Security certificates are required to be
printed and delivered.
10. The Agency may decide to discontinue use of the system ofbook-entry-only transfers through
DTC (or a successor securities depository). In that event, Security certificates will be printed and delivered to
DTC.
11. T'he information in this section concerning DTC and DTC's book-entry system has been
obtained from sources that the Agency believes to be reliable, but the Agency takes no responsibility for
the accuracy thereof.
Appendix G
Page 2