HomeMy WebLinkAbout06 2013 SPECIAL TAX REFUNDING BONDS CFD 04-1Agenda Item 6
AGENDA REPORT Reviewed
City Manager
Finance Director RT
MEETING DATE: May 21, 2013
TO: JEFFREY C PARKER, CITY MANAGER
FROM: PAMELA ARENDS -KING, FINANCE DIRECTOR /INTERIM CITY
TREASURER
SUBJECT: APPROVAL OF ISSUANCE OF 2013 SPECIAL TAX REFUNDING
BONDS FOR CITY OF TUSTIN COMMUNITY FACILITIES DISTRICT
NO. 04 -01 ( TUSTIN LEGACY /JOHN LAING HOMES)
SUMMARY:
In 2004, after the receipt of a petition of the property owner the City formed Community
Facilities District No. 04 -1 (Tustin Legacy /John Laing Homes) (the "District') pursuant to
the provisions of the Mello -Roos Community Facilities Act of 1982 as amended to
finance the acquisition of public improvements incident to the development of the John
Laing Homes residential project. The District issued bonds on December 15, 2004 in the
amount of $11,415,000 with the final maturity in 2034 and the proceeds of the bonds
were used to finance the authorized public improvements. All of the 563 residential units
in the District have been built and sold to homebuyers.
RECOMMENDATION:
1. Adopt Resolution No. 13 -40, A Resolution of the City Council of the City of
Tustin, California, Authorizing the Issuance of Community Facilities District No.
04 -1 (Tustin Legacy /John Laing Homes) 2013 Special Tax Refunding Bonds (the
"Refunding Bonds "), and Approving related Documents and Actions.
FISCAL IMPACT:
The City is authorized to levy special taxes to repay District indebtedness, and to pay the
annual costs of administration of the District. The City is only authorized to levy special
taxes for the District on the 563 residential units located within the boundaries of the
District.
The Refunding Bonds will not be general obligations of the City of Tustin, but will be limited
obligations of the City for the District payable solely from and secured solely by a pledge of
the special taxes levied on property in the District and amounts held in certain funds and
accounts established under the Fiscal Agent Agreement for the Refunding Bonds. All
3001an
Approval of Issuance of Special Tax Refunding Bonds
May 21, 2013 PAGE 2
costs of issuance of the Refunding Bonds will be paid from the proceeds of the Refunding
Bonds. All administrative costs of the District and the Refunding Bonds will be paid from
proceeds of the special taxes levied on property in the District.
BACKGROUND:
The City issued $11.415 million Special Tax Bonds, Series 2004 (the "Outstanding
Bonds ") in December of 2004 to finance infrastructure improvements for the Tustin
Legacy /John Laing Homes Project. The final maturity of the Outstanding Bonds is
September 1, 2034. From now until the final maturity date of the Outstanding Bonds the
interest rates on the various maturities of the Outstanding Bonds go from 4.25% to
5.50°/x.
Due to favorable interest rates in the financial markets, the Outstanding Bonds can now
be refunded and the debt to be payable on the Refunding Bonds will be less than the
remaining debt service due on the Outstanding Bonds. The proposed Refunding Bonds
will have a final maturity of September 1, 2034 and are expected to have an initial
principal amount of $9.850 million. The Refunding Bonds will require a reserve fund and
the estimated interest rates for the various maturities of the Refunding Bonds are
estimated to range from 2.00% to 4.50 %. The average annual savings on debt service
payments between the Refunding Bonds and the Outstanding Bonds is expected to be
approximately $76,000. These savings total over $1.58 million over the remaining
twenty -two years to the final maturity of the Refunding Bonds. The savings will be
applied towards reducing property owners' special tax payments starting in FY 2013-
2014 and is estimated to save each property owner approximately $135 per year. Actual
savings is dependent upon market conditions at the time of sale of the Refunding
Bonds, as well as the credit quality of the District based upon the BBB + /Stable rating for
the Refunding Bonds received from Standard & Poor's.
TONIGHT'S ACTIONS:
The Refunding Bonds for CFD No. 04 -1 are proposed to be issued pursuant to a Fiscal
Agent Agreement setting forth the various terms and provisions for the Refunding
Bonds. The proceeds of the Refunding Bonds are expected to be applied to the
redemption of the Outstanding Bonds pursuant to an Escrow Agreement. The
Refunding Bonds are expected to be offered to investors for sale pursuant to the
Preliminary Official Statement, and are expected to be sold to Stifel, Nicolaus &
Company, Incorporated, the underwriter for the Refunding Bonds, pursuant to a Bond
Purchase Agreement subject to parameters set forth in the Resolution authorizing the
issuance of the Refunding Bonds the title of which is set forth above. Those parameters
allow for the issuance of up to $11,000,000 of Refunding Bonds for the District, at a net
interest cost not to exceed 5.25% and with an underwriter's discount (without regard to
any original issue discount) not in excess of 1.0% of the principal amount of the
Refunding Bonds. The City will enter into a Continuing Disclosure Agreement for the
Refunding Bonds, which is an Exhibit to the Preliminary Official Statement, and that will
require that the City provide certain ongoing information for the District on an annual
basis until the Refunding Bonds have been paid in full, and the City will be obligated to
take action to collect delinquent special tax levies in certain circumstances set forth in
919682.1
Approval of Issuance of Special Tax Refunding Bonds
May 21, 2013
PAGE 3
the Fiscal Agent Agreement. City Staff and consultants have reviewed the documents
described above and they are now in form ready for approval by the City Council so that
the sale and issuance of the Refunding Bonds can occur.
NEXT STEPS:
Following tonight's action, the proposed schedule to complete the sale of the Refunding
Bonds is as follows:
• June 4, 2013: Bond Sale date
• June 18, 2013: Bond Closing date
Pamela Arends -King
Finance Director /Interim City Treasurer
Attachments: Resolution 13 -40
Fiscal Agent Agreement
Escrow Agreement
Bond Purchase Agreement
Preliminary Official Statement, with Continuing Disclosure Agreement
attached as Appendix E
919682.1
RESOLUTION NO. 13-40
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF TUSTIN, CALIFORNIA,
AUTHORIZING THE ISSUANCE OF COMMUNITY FACILITIES DISTRICT NO. 04 -1
(TUSTIN LEGACY /JOHN LAING HOMES) 2013 SPECIAL TAX REFUNDING BONDS,
AND APPROVING RELATED DOCUMENTS AND ACTIONS
The City Council of the City of Tustin does hereby resolve as follows
WHEREAS, this City Council has conducted proceedings under and pursuant to the Mello -Roos
Community Facilities Act of 1982, as amended (the "Act "), to form the City of Tustin Community Facilities
District No. 04 -1 (Tustin Legacy /John Laing Homes) (the "District), to authorize the levy of special taxes
upon the land within the District, and to issue bonds secured by said special taxes to finance public
improvements authorized to be funded by the District; and
WHEREAS, on December 15, 2004, the District issued its City of Tustin Community Facilities District No.
04 -1 (Tustin Legacy /John Laing Homes) Special Tax Bonds, Series 2004 (the "Prior Bonds "), pursuant to
an Indenture, dated as of December 1, 2004, between the District and U.S. Bank National Association, as
trustee (the "Trustee'); and
WHEREAS, due to favorable interest rates in the financial markets, the City Council has determined that it
is in the best interests of the City, the District and the homeowners in the District paying special taxes that
the Prior Bonds be refunded; and
WHEREAS, there has been submitted to this City Council a fiscal agent agreement (the "Fiscal Agent
Agreement ") providing for the issuance of special tax refunding bonds of the City for and on behalf of the
District (the "Bonds ") under the authority provided in the Act, and this City Council, with the aid of City
Staff, has reviewed the Fiscal Agent Agreement and found it to be in proper order, and now desires to
approve the Fiscal Agent Agreement and the issuance of the Bonds; and
WHEREAS, there has been presented to this City Council an escrow agreement (the "Escrow
Agreement ") providing for the creation of an escrow fund which will be used to defease and refund the
Prior Bonds, and this City Council now desires to approve the Escrow Agreement in connection with the
refunding of the Prior Bonds; and
WHEREAS, the City proposes to sell the Bonds to Stifel, Nicolaus & Company, Incorporated (the
"Underwriter ") pursuant to the terms of a bond purchase agreement (the "Bond Purchase Agreement ") by
and between the City and the Underwriter, and the Underwriter proposes to offer the Bonds to the
investing public by means of a preliminary official statement (the "Preliminary Official Statement "), and
WHEREAS, it appears that each of said documents and instruments which are now before the City
Council at this meeting is in appropriate form and is an appropriate document or instrument to be
executed and delivered for the purpose intended; and
WHEREAS, all conditions, things and acts required to exist, to have happened and to have been
performed precedent to and in the issuance of the Bonds as contemplated by this Resolution and the
documents referred to herein exist, have happened and have been performed in due time, form and
manner as required by the laws of the State of California, including the Act.
NOW, THEREFORE, it is hereby ORDERED and DETERMINED as follows:
SECTION 1. Issuance of Bonds: Approval of Fiscal Agent Agreement and Escrow Agreement Pursuant
to the Act, this Resolution and the Fiscal Agent Agreement, special tax refunding bonds of the City for the
District designated as "City of Tustin Community Facilities District No. 04 -1 (Tustin Legacy /John Laing
Homes) 2013 Special Tax Refunding Bonds' in an aggregate principal amount not to exceed $11,000,000
are hereby authorized to be issued. The Bonds shall be executed in the form set forth in and otherwise
as provided in the Fiscal Agent Agreement.
In furtherance of the issuance of the Bonds, the City Council hereby makes the following findings and
determinations: (a) it is prudent in the management of the fiscal affairs of the City and the District to issue
the Bonds for the purpose of refunding the Prior Bonds, (ii) the total net interest cost to maturity on the
Bonds plus the principal amount of the Bonds will not exceed the total net interest cost to maturity on the
Prior Bonds to be refunded plus the principal amount of the Prior Bonds to be refunded, and (iii) the
Bonds satisfy the requirements of Section 53345.8(a) of the Act in that the assessed value of the land in
the District is more than three times the principal amount of the Bonds.
The City Council hereby approves the Fiscal Agent Agreement in the form on file with the City Clerk. The
City Manager is hereby authorized to execute the Fiscal Agent Agreement, for and in the name and on
behalf of the City and the District, in such form, together with any additions thereto or changes therein
deemed necessary or advisable by the Finance Director upon consultation with Bond Counsel. The
proceeds of the Bonds shall be applied by the City for the purposes and in the amounts as set forth in the
Fiscal Agent Agreement. The City Council hereby authorizes the delivery and performance by the City of
the Fiscal Agent Agreement. For purposes of Section 53363.2 of the Act, (i) it is expected that the
purchase of the Bonds will occur on or after June 4, 2013, (ii) the date, denomination, maturity dates,
places of payment and form of the Bonds shall be as set forth in the Fiscal Agent Agreement, (iii) the
minimum rate of interest to be paid on the Bonds shall be one -half percent (0.5 %) with the actual rate or
rates to be set forth in the Fiscal Agent Agreement as executed, (iv) the place of payment for the Prior
Bonds shall be as set forth in the indenture for the Prior Bonds, and (v) the designated costs of issuing
the Bonds shall be as described in Section 53363.8(a) of the Act, and as otherwise described in the
Fiscal Agent Agreement, in the Official Statement for the Bonds and the closing certificates for the Bonds,
including Bond Counsel and Disclosure Counsel fees and expenses, financial advisor fees, Underwriter's
discount, printing costs for the Official Statement, initial fiscal agent fees, and costs of City staff incurred
in connection with the sale and issuance of the Bonds.
The City Council hereby approves the refunding of the Prior Bonds with the proceeds of the Bonds, in
accordance with the provisions of the indenture pursuant to which such Prior Bonds were issued and the
Escrow Agreement between the City and U.S. Bank National Association, as Escrow Bank. The City
Council hereby approves the Escrow Agreement in the form on file with the City Clerk. The City Council
hereby authorizes the City Manager to execute and deliver the Escrow Agreement for and in the name
and on behalf of the City, in such form, together with any changes therein or additions thereto deemed
advisable by the Finance Director upon consultation with Bond Counsel. The City Council hereby
authorizes the delivery and performance by the City of the Escrow Agreement.
SECTION 2. Delivery of the Bonds. The Bonds, when executed, shall be delivered to the Fiscal Agent
for authentication. The Fiscal Agent is hereby requested and directed to authenticate the Bonds by
executing the Fiscal Agent's certificate of authentication and registration appearing thereon, and to deliver
the Bonds, when duly executed and authenticated, to the Underwriter or its order in accordance with
written instructions executed on behalf of the City by the City Manager, which instructions such officer is
hereby authorized and directed, for and in the name and on behalf of the City, to execute and deliver to
the Fiscal Agent. Such instructions shall provide for the delivery of the Bonds to the Underwriter or its
order in accordance with the Bond Purchase Agreement, upon payment of the purchase price therefor.
SECTION 3. Sale of the Bonds. This City Council hereby approves the sale of the Bonds to the
Underwriter. The Bond Purchase Agreement, in the form on file with the City Clerk, is hereby approved
and the City Manager is hereby authorized and directed to execute the Bond Purchase Agreement in said
form, with such changes, insertions and omissions as may be approved by the Finance Director, provided
that the aggregate principal amount of the Bonds does not exceed the amount set forth in Section 1 of
this Resolution, the net interest cost of the Bonds is not in excess of 5.25 %, and the Underwriter's
discount (without regard to any original issue discount) is not in excess of 1.00% of the principal amount
of the Bonds.
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The City Council hereby finds and determines that (i) the issuance of the Bonds should proceed for the
public policy reason that, as a result of such issuance, the annual special taxes to be levied in the District
will be lower than if the refunding contemplated with the proceeds of the Bonds did not occur, and (ii) the
sale of the Bonds by negotiated sale to the Underwriter as contemplated by the Bond Purchase
Agreement will result in a lower overall cost.
SECTION 4. Official Statement. This City Council hereby approves the preliminary official statement for
the Bonds (the "Preliminary Official Statement') in the form on file with the City Clerk, together with any
changes therein or additions thereto deemed advisable by the Finance Director. The City Council
authorizes and directs the City Manager, on behalf of the City and the District, to deem "final' pursuant to
Rule 15c2 -12 under the Securities Exchange Act of 1934 (the "Rule') the Preliminary Official Statement
prior to its distribution by the Underwriter to prospective purchasers of the Bonds.
The Underwriter, on behalf of the City and the District, is authorized and directed to cause the Preliminary
Official Statement to be distributed to such municipal bond broker - dealers, to such banking institutions
and to such other persons as may be interested in purchasing the Bonds.
The Finance Director is hereby authorized and directed to assist the Disclosure Counsel in causing the
Preliminary Official Statement to be brought into the form of final official statement (the "Final Official
Statement'), and the City Manager is hereby authorized to execute the Final Official Statement and a
statement that the facts contained in the Final Official Statement, and any supplement or amendment
thereto (which shall be deemed an original part thereof for the purpose of such statement) were, at the
time of sale of the Bonds, true and correct in all material respects and that the Final Official Statement did
not, on the date of sale of the Bonds, and do not, as of the date of delivery of the Bonds contain any
untrue statement of material fact with respect to the City or the District or omit to state material facts with
respect to the City or the District required to be stated where necessary to make any statement made
therein not misleading in the light of the circumstances under which it was made. The execution and
delivery by the City Manager of the Final Official Statement, which shall include such changes and
additions thereto deemed advisable by the Finance Director and such information permitted to be
excluded from the Preliminary Official Statement pursuant to the Rule, shall be conclusive evidence of the
approval of the Final Official Statement by the City.
The Final Official Statement, when prepared, is approved for distribution in connection with the offering
and sale of the Bonds.
SECTION 5. Continuing Disclosure Agreement. The Continuing Disclosure Agreement, in the form on
file with the City Clerk, is hereby approved. The City Manager is hereby authorized to execute and
deliver the Continuing Disclosure Agreement in said form, with such additions thereto or changes therein
as are deemed necessary, desirable or appropriate by the Finance Director, the approval of such
changes to be conclusively evidenced by the execution and delivery by the City Manager of the
Continuing Disclosure Agreement.
SECTION 6. Foreclosure Covenant. The City hereby covenants, for the benefit of the Bondowners, to
commence and diligently pursue to completion any foreclosure action regarding delinquent installments of
any amount levied as a special tax for the payment of interest or principal of the Bonds, said foreclosure
action to be commenced and pursued as more completely set forth in the Fiscal Agent Agreement.
SECTION 7. Official Actions. All actions heretofore taken by the officers and agents of the City with
respect to the sale and issuance of the Bonds are hereby approved, confirmed and ratified, and the
proper officers of the City are hereby authorized and directed to do any and all things and take any and all
actions and execute any and all certificates, agreements and other documents, which they, or any of
them, may deem necessary or advisable in order to consummate the lawful issuance and delivery of the
Bonds and the refunding of the Prior Bonds in accordance with this Resolution, and any certificate,
agreement, and other document described in the documents herein approved. In furtherance of the
foregoing, the Finance Director is hereby authorized to obtain municipal bond insurance for the Bonds,
and to approve changes to the documents approved by this Resolution as required in connection
MCI
therewith if the Finance Director, with the assistance of the City's Financial Advisor for the Bonds,
determines that the provision of such insurance is economic in the circumstances.
Whenever in this Resolution any officer of the City 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 8. Effective Date. This Resolution shall take effect upon its adoption.
PASSED AND ADOPTED at a regular meeting of the Tustin City Council held on the 21s' day of May,
2013.
ELWYN A. MURRAY
Mayor
ATTEST:
JEFFREY C. PARKER
City Clerk
STATE OF CALIFORNIA )
COUNTY OF ORANGE )
CITY OF TUSTIN )
I, Jeffrey C. Parker, 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 of the City of Tustin is five; and
that the above and foregoing Resolution No. 13-40 was duly passed and adopted at a regular meeting of
the Tustin City Council, held on the 21s' day of May, 2013 by the following vote:
COUNCILMEMBER AYES:
COUNCILMEMBER NOES:
COUNCILMEMBER ABSTAINED:
COUNCILMEMBER ABSENT:
Jeffrey C. Parker
City Clerk
20015.04:J12079
4/5/13
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Quint & 77ilmmig LLP
FISCAL AGENT AGREEMENT
by and between
CITY OF TUSTIN, CALIFORNIA
and
U.S. BANK NATIONAL ASSOCIATION,
as Fiscal Agent
dated as of June 1, 2013
relating to:
City of Tustin
Community Facilities District No. 04 -1
(Tustin Legacy/John Laing Homes)
2013 Special Tax Refunding Bonds
3/27/13
4/5/13
4/23/13
20015.04:J12073
TABLE OF CONTENTS
ARTICLE I
STATUTORY AUTHORITY AND DEFINITIONS
Section 1.01. Authority for this Agreement ................................................................................. ..............................3
Section 1.02. Agreement for Benefit of Bondowners ................................................................. ..............................3
Section1.03. Definitions ................................................................................................................. ..............................3
ARTICLE II
THE 2013 BONDS
Section 2.01.
Principal Amount; Designation ............................................................................ .............................12
Section2.02.
Terms of 2013 Bonds ............................................................................................... .............................12
Section2.03.
Redemption ............................................................................................................. .............................13
Section2.04.
Form of 2013 Bonds ................................................................................................ .............................16
Section 2.05:
Execution of Bonds ................................................................................................. .............................16
Section2.06.
Transfer of Bonds .................................................................................................... .............................16
Section2.07.
Exchange of Bonds .................................................................................................. .............................17
Section2.08.
Bond Register .......................................................................................................... .............................17
Section2.09.
Temporary Bonds ................................................................................................... .............................17
Section 2.10.
Bonds Mutilated, Lost, Destroyed or Stolen ....................................................... .............................17
Section2.11.
Limited Obligation .................................................................................................. .............................18
Section2.12.
No Acceleration ....................................................................................................... .............................18
Section 2.13.
Book -Entry Only System ........................................................................................ .............................18
Section 2.14.
Issuance of Parity Bonds ...................................................................................... ...............................
20
ARTICLE III
ISSUANCE OF 2013 Bonds
Section 3.01.
Issuance and Delivery of 2013 Bonds ................................................................... .............................21
Section 3.02.
Application of Proceeds of Sale of 2013 Bonds ................................................... .............................21
Section3.03.
Validity of Bonds .................................................................................................... .............................22
Section3.04.
Special Tax Fund ..................................................................................................... .............................22
Section 3.05.
Administrative Expense Fund .............................................................................. .............................23
Section3.06.
Costs of Issuance Fund ........................................................................................... .............................24
ARTICLE IV
SPECIAL TAX REVENUES; BOND FUND AND RESERVE FUND
Section 4.01.
Pledge of Special Tax Revenues ............................................................................ .............................25
Section4.02.
Bond Fund ............................................................................................................... .............................25
Section4.03.
Reserve Fund ........................................................................................................... .............................26
ARTICLE V
OTHER COVENANTS OF THE CITY
Section5.01.
Punctual Payment ................................................................................................... .............................29
Section5.02.
Limited Obligation .................................................................................................. .............................29
Section 5.03.
Extension of Time for Payment ............................................................................. .............................29
Section5.04.
Against Encumbrances ........................................................................................... .............................29
Section5.05.
Books and Records ................................................................................................ ...............................
29
Section 5.06.
Protection of Security and Rights of Owners .................................................... ...............................
29
Section5.07.
Compliance with Law ............................................................................................ .............................29
222
Section 5.08.
Private Activity Bond Limitation ..........................................................................
.............................30
Section 5.09.
Federal Guarantee Prohibition ..............................................................................
.............................30
Section 5.10.
Collection of Special Tax Revenues ......................................................................
.............................30
Section 5.11.
Further Assurances .................................................................................................
.............................31
Section5.12.
No Arbitrage ............................................................................................................
.............................31
Section 5.13.
Maintenance of Tax - Exemption ............................................................................
.............................31
Section 5.14.
Covenant to Foreclose ............................................................................................
.............................31
Section 5.15.
No Additional Bonds ..............................................................................................
.............................32
Section 5.16.
Yield of the 2013 Bonds ..........................................................................................
.............................32
Section 5.17.
Continuing Disclosure ...........................................................................................
.............................32
Section 5.18.
Reduction of Special Taxes ....................................................................................
.............................32
Section 5.19.
State Reporting Requirements ..............................................................................
.............................32
Section 5.20.
Limits on Special Tax Waivers and Bond Tenders .............................................
.............................34
Section 5.21.
City Bid at Foreclosure Sale .................................................................................
............................... 34
ARTICLE VI
INVESTMENTS; DISPOSITION OF INVESTMENT PROCEEDS; LIABILITY OF THE COUNTY
Section 6.01.
Deposit and Investment of Moneys in Funds .....................................................
.............................35
Section 6.02.
Rebate of Excess Investment Earnings to the United States ..............................
.............................36
Section6.03.
Liability of City .......................................................................................................
.............................37
Section 6.04.
Employment of Agents by City. - .... .................................................................................................
38
Section 8.05.
ARTICLE VII
Section 8.06.
THE FISCAL AGENT
Section 7.01.
Appointment of Fiscal Agent ................................................................................
.............................39
Section 7.02.
Liability of Fiscal Agent .........................................................................................
.............................40
Section 7.03.
Information; Books and Accounts ........................................................................
.............................42
Section 7.04.
Notice to Fiscal Agent ............................................................................................
.............................42
Section 7.05.
Compensation, Indemnification ............:..............................................................
.............................42
ARTICLE VIII
MODIFICATION OR AMENDMENT OF THIS AGREEMENT
Section 8.01.
Amendments Permitted ......................................................................................... .............................44
Section8.02.
Owners' Meetings ................................................................................................... .............................45
Section 8.03.
Procedure for Amendment with Written Consent of Owners .......................... .............................45
Section8.04.
Disqualified Bonds ................................................................................................ ...............................
46
Section 8.05.
Effect of Supplemental Agreement ....................................................................... .............................46
Section 8.06.
Endorsement or Replacement of Bonds Issued After Amendments ............... .............................46
Section 8.07.
Amendatory Endorsement of Bonds .................................................................... .............................46
ARTICLE IX
MISCELLANEOUS
Section 9.01.
Benefits of Agreement Limited to Parties ............................................................ .............................47
Section 9.02.
Successor is Deemed Included in All References to Predecessor ..................... .............................47
Section 9.03.
Discharge of Agreement ........................................................................................ .............................47
Section 9.04.
Execution of Documents and Proof of Ownership by Owners ........................ .............................48
Section 9.05.
Waiver of Personal Liability .................................................................................. .............................48
Section 9.06.
Notices to and Demands on City and Fiscal Agent ............................................ .............................48
Section9.07.
Partial Invalidity ..................................................................................................... .............................49
Section9.08.
Unclaimed Moneys ................................................................................................. .............................49
Section9.09.
Applicable Law ....................................................................................................... .............................49
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Section 9.10.
Conflict with Act ...................... ...............................
Section 9.11.
Conclusive Evidence of Regularity .......................
Section 9.12.
Payment on Business Day ....... ...............................
Section 9.13.
Counterparts ............................. ...............................
EXHIBIT A — FORM OF 2013 BOND
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........... ............................... 49
........... ............................... 49
........... ............................... 50
........... ............................... 50
FISCAL AGENT AGREEMENT
THIS FISCAL AGENT AGREEMENT (the "Agreement "), dated as of June 1, 2013, is by
and between the City of Tustin, California, a municipal corporation and general law city
organized and existing under the laws of the State of California (the "City"), for and on behalf
of the City of Tustin Community Facilities District No. 04 -1 (Tustin Legacy /John Laing Homes)
(the "District'), and U.S. Bank National Association, a national banking association duly
organized and existing under the laws of the United States of America, as fiscal agent (the
"Fiscal Agent').
RECITALS.
WHEREAS, the City Council of the City (the "City Council") has formed the District
under the provisions of the Mello -Roos Community Facilities Act of 1982, as amended (Section
53311 et seq. of the California Government Code) (the "Act') and Resolution No. 04-67 of the
City Council adopted on July 19, 2004;
WHEREAS, the City Council, as the legislative body with respect to the District, is
authorized under the Act to levy special taxes to pay for the costs of facilities eligible to be
financed by the District and to authorize the issuance of bonds, including bonds to refund any
bonds issued for the District, secured by said special taxes under the Act;
WHEREAS, under the provisions of the Act, on December 15, 2004, the District issued
$11,415,000 initial principal amount of its City of Tustin Community Facilities District No. 04 -1
(Tustin Legacy /John Laing Homes) Special Tax Bonds, Series 2004 (the "2004 Bonds ") to finance
facilities eligible to be funded by the District;
WHEREAS, due to favorable interest rates in the financial markets, the City Council now
has determined to refund the 2004 Bonds in full;
WHEREAS, under the provisions of the Act, on May 21, 2013, the City Council adopted
its Resolution No. 13 -_ (the "Resolution "), which Resolution, among other matters, authorized
the issuance of the City of Tustin Community Facilities District No. 04 -1 (Tustin Legacy /John
Laing Homes) 2013 Special Tax Refunding Bonds (the "2013 Bonds ") to provide moneys to
defease and currently refund in whole the outstanding 2004 Bonds and provided that said
issuance would be in accordance with this Agreement, and authorized the execution hereof;
WHEREAS, it is in the public interest and for the benefit of the City, the District, the
persons responsible for the payment of special taxes to be levied in the District and the owners
of the 2013 Bonds that the City enter into this Agreement to provide for the issuance of the 2013
Bonds, the disbursement of proceeds of the 2013 Bonds, the disposition of the special taxes
securing the 2013 Bonds and the administration and payment of the 2013 Bonds; and
WHEREAS, the City has determined that all things necessary to cause the 2013 Bonds,
when authenticated by the City for the District and issued as in the Act, the Refunding Law, the
Resolution and this Agreement provided, to be legal, valid and binding and special obligations
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of the City for the District in accordance with their terms, and all things necessary to cause the
creation, authorization, execution and delivery of this Agreement and the creation,
authorization, execution and issuance of the 2013 Bonds, subject to the terms hereof, have in all
respects been duly authorized.
AGREEMENT:
NOW, THEREFORE, in consideration of the covenants and provisions herein set forth
and for other valuable consideration the receipt and sufficiency of which is hereby
acknowledged, the parties hereto do hereby agree as follows:
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ARTICLE I
STATUTORY AUTHORITY AND DEFINITIONS
Section 1.01. Authority for this Agreement. This Agreement is entered into pursuant
to the provisions of the Act and the Resolution.
Section 1.02. Agreement for Benefit of Bondowners. The provisions, covenants and
agreements herein set forth to be performed by or on behalf of the City shall be for the equal
benefit, protection and security of the Owners. All of the Bonds, without regard to the time or
times of their issuance or maturity, shall be of equal rank without preference, priority or
distinction of any of the Bonds over any other thereof, except as expressly provided in or
permitted by this Agreement. Any action by any Owner to enforce the provisions of this
Agreement shall be for the equal benefit and protection of all Owners of the Bonds.
The Fiscal Agent may become the owner of any of the Bonds in its own or any other
capacity with the same rights it would have if it were not Fiscal Agent.
Section 1.03. Definitions. Unless the context otherwise requires, the terms defined in
this Section 1.03 shall, for all purposes of this Agreement, of any Supplemental Agreement, and
of any certificate, opinion or other document herein mentioned, have the meanings herein
specified. All references herein to "Articles', "Sections' and other subdivisions are to the
corresponding Articles, Sections or subdivisions of this Agreement, and the words "herein",
"hereof', "hereunder" and other words of similar import refer to this Agreement as a whole
and not to any particular Article, Section or subdivision hereof.
"Act" means the Mello-Roos Community Facilities Act of 1982, as amended, being
Sections 53311 et seq. of the California Government Code.
"Administrative Expenses" means any or all of the following: the fees and expenses of
the Fiscal Agent (including any fees or expenses of its counsel), the expenses of the City in
carrying out its duties hereunder (including, but not limited to, the levying and collection of the
Special Taxes, and the foreclosure of the liens of delinquent Special Taxes) including the fees
and expenses of its counsel, an allocable share of the salaries of City staff related thereto and a
proportionate amount of City general administrative overhead related thereto, any amounts
paid by the City from its general funds pursuant to Section 6.02, any amounts paid or payable
to any persons or entities employed by the City in connection with the discharge of any of the
City's obligations hereunder (including, but not limited to, the calculation of the levy of the
Special Taxes, foreclosures with respect to delinquent taxes, and the calculation of amounts
subject to rebate to the United States), any fees or expenses of the Escrow Bank and any costs
incurred by the City under or in connection with the Escrow Agreement, and all other costs and
expenses of the City or the Fiscal Agent incurred in connection with the discharge of their
respective duties hereunder or in connection with the 2013 Bonds or the refunding of the 2004
Bonds and, in the case of the City, in any way related to the administration of the Bonds or the
District. Administrative Expenses shall include any such expenses incurred in prior years but
not yet paid.
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"Administrative Expense Fund" means the fund by that name established by Section
3.05(A) hereof.
"Agreement" means this Fiscal Agent Agreement, as it may be amended or
supplemented from time to time by any Supplemental Agreement adopted pursuant to the
provisions hereof.
"Annual Debt Service" means, for each Bond Year, the sum of (i) the interest due on the
Outstanding Bonds in such Bond Year, assuming that the Outstanding Bonds are retired as
scheduled (including by reason of the provisions of Section 2.03(A)(ii) providing for mandatory
sinking payments), and (ii) the principal amount of the Outstanding Bonds due in such Bond
Year (including any mandatory sinking payment due in such Bond Year pursuant to Section
2.03(A)(ii)).
"Auditor" means the auditor/ controller of the County, as such other official at the
County who is responsible for preparing property tax bills.
"Authorized Officer" means the City Manager, the Finance Director, the City Clerk, or
any other officer or employee of the City authorized by the City Council of the City or by an
Authorized Officer to undertake the action referenced in this Agreement as required to be
undertaken by an Authorized Officer.
"Bond Counsel" means (i) Quint & Thimmig LLP, or (ii) any attorney or other firm of
attorneys acceptable to the City and nationally recognized for expertise in rendering opinions
as to the legality and tax - exempt status of securities issued by public entities.
"Bond Fund" means the fund by that name established by Section 4.02(A) hereof.
"Bond Register" means the books for the registration and transfer of Bonds maintained
by the Fiscal Agent under Section 2.08 hereof.
"Bond Year" means the one -year period beginning on September 2 in each year and
ending on September 1 in the following year except that the first Bond Year shall begin on the
Closing Date and end on September 1, 2013.
"Bonds" means, collectively, the 2013 Bonds, and, if the context requires, any Parity
Bonds, at any time Outstanding under this Agreement or any Supplemental Agreement.
"Business Day" means any day other than (i) a Saturday or a Sunday, or (ii) a day on
which banking institutions in the state in which the Fiscal Agent has its corporate trust office
are authorized or obligated by law or executive order to be closed.
"CDIAC" means the California Debt and Investment Advisory Commission of the office
of the State Treasurer of the State of California or any successor agency or bureau thereto.
"Qty" means the City of Tustin, Califomia.
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"Closing Date" means June . 2013, being the date upon which there is a physical
delivery of the 2013 Bonds in exchange for the amount representing the purchase price of the
2013 Bonds by the Original Purchaser.
"Code" means the Internal Revenue Code of 1986 as in effect on the date of issuance of
the 2013 Bonds or (except as otherwise referenced herein) as it may be amended to apply to
obligations issued on the date of issuance of the 2013 Bonds, together with applicable temporary
and final regulations promulgated, and applicable official public guidance published, under the
Code.
"Continuing Disclosure Agreement" means the Continuing Disclosure Agreement,
executed by the City and Willdan Financial Services as the initial Dissemination Agent, as
originally executed and as it may be amended from time to time in accordance with the terms
thereof.
"Costs of Issuance" means items of expense payable or reimbursable directly or
indirectly by the City and related to the authorization, sale and issuance of the 2013 Bonds and
the refunding and defeasance of the 2004 Bonds, which items of expense shall include, but not
be limited to, printing costs, costs of reproducing and binding documents, closing costs, filing
and recording fees, initial fees and charges of the Fiscal Agent including its first annual
administration fee, fees and expenses of Fiscal Agent's counsel, expenses incurred by the City in
connection with the issuance of the 2013 Bonds and the defeasance and redemption of the 2004
Bonds, Escrow Bank fees and expenses, special tax consultant fees and expenses, Bond
(underwriter's) discount, legal fees and charges, including bond counsel and disclosure counsel,
financial advisor fees, rating agency fees, costs of bond insurance (if applicable), charges for
execution, transportation and safekeeping of the 2013 Bonds and other costs, charges and fees in
connection with the foregoing.
"Cost of Issuance Fund" means the fund by that name established by Section 3.06(A)
hereof.
"Coun " means the County of Orange, California.
"DTC" means The Depository Trust Company, New York, New York, and its successors
and assigns.
"Debt Service" means the scheduled amount of interest and amortization of principal
(including principal payable by reason of Section 2.03(A)(ii)) on the Bonds and the scheduled
amount of interest and amortization of principal payable on any Parity Bonds during the period
of computation, excluding amounts scheduled during such period which relate to principal
which has been retired before the beginning of such period.
"Depository" means (a) initially, DTC, and (b) any other Securities Depository acting as
Depository pursuant to Section 2.13.
1.2
"District" means the City of Tustin Community Facilities District No. 04 -1 (Tustin
Legacy /John Laing Homes), formed pursuant to the Act and the Resolution of Formation.
"Escrow Agreement" means the Escrow Agreement, dated as of June 1, 2013, by and
between the City, for and on behalf of the District, and the Escrow Bank.
"Escrow Bank" means U.S. Bank National Association, in its capacity as escrow bank
under the Escrow Agreement.
"Fair Market Value" means the price at which a willing buyer would purchase the
investment from a willing seller in a bona fide, arm's length transaction (determined as of the
date the contract to purchase or sell the investment becomes binding) if the investment is traded
on an established securities market (within the meaning of section 1273 of the Code) and,
otherwise, the term "Fair Market Value" means the acquisition price in a bona fide arms length
transaction (as referenced above) if (i) the investment is a certificate of deposit that is acquired
in accordance with applicable regulations under the Code, (ii) the investment is an agreement
with specifically negotiated withdrawal or reinvestment provisions and a specifically
negotiated interest rate (for example, a guaranteed investment contract, a forward supply
contract or other investment agreement) that is acquired in accordance with applicable
regulations under the Code, or (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.
"Federal Securities " means any of the following which are non - callable and which at the
time of investment are legal investments under the laws of the State of California for funds held
by the Fiscal Agent:
(i) direct general obligations of the United States of America (including
obligations issued or held in book entry form on the books of the United States
Department of the Treasury) and obligations, the payment of principal of and interest on
which are directly or indirectly guaranteed by the United States of America, including,
without limitation, such of the foregoing which are commonly referred to as "stripped"
obligations and coupons; or
(ii) any of the following obligations of the following agencies of the United
States of America: (a) direct obligations of the Export- Import Bank, (b) certificates of
beneficial ownership issued by the Farmers Home Administration, (c) participation
certificates issued by the General Services Administration, (d) mortgage- backed bonds
or pass- through obligations issued and guaranteed by the Government National
Mortgage Association, (e) project notes issued by the United States Department of
Housing and Urban Development, and (f) public housing notes and bonds guaranteed
by the United States of America.
"Finance Director" means the Finance Director of the City or any person otherwise
acting as the chief financial officer of the City, or such persons written designee.
M
"Fiscal Agent" means the Fiscal Agent appointed by the City and acting as an
independent fiscal agent with the duties and powers herein provided, its successors and
assigns, and any other corporation or association which may at any time be substituted in its
place, as provided in Section 7.01.
"Fiscal Year" means the twelve -month period extending from July 1 in a calendar year
to June 30 of the succeeding year, both dates inclusive.
"Independent Financial Consultant" means any consultant or firm of such consultants
appointed by the City or any Authorized Officer, and who, or each of whom: (i) is judged by the
person or entity that approved them to have experience in matters relating to the issuance
and /or administration of bonds under the Act; (ii) is in fact independent and not under the
domination of the City; (iii) does not have any substantial interest, direct or indirect, with or in
the City, or any owner of real property in the District, or any real property in the District; and
(iv) is not connected with the City as an officer or employee of the City, but who may be
regularly retained to make reports to the City.
"Information Services" means the Electronic Municipal Market Access System (referred
to as "EMMA "), a facility of the Municipal Securities Rulemaking Board, (at
http: / /emma.msrb.org); and, in accordance with then current guidelines of the Securities and
Exchange Commission, such other addresses and /or such services providing information with
respect to called bonds as the City may designate in an Officer's Certificate delivered to the
Fiscal Agent.
"Interest Payment Dates" means March 1 and September 1 of each year, commencing
March 1, 2014.
"Maximum Annual Debt Service, means the largest Annual Debt Service for any Bond
Year after the calculation is made through the final scheduled maturity date for any
Outstanding Bonds.
"Officer's Certificate" means a written certificate of the City signed by an Authorized
Officer of the City.
"Ordinance" means Ordinance No. 1286, adopted by the City Council of the City on
August 2, 2004, and any other ordinance of the City levying the Special Taxes.
"Original Purchaser" means the first purchaser of the 2013 Bonds from the City, being
Stifel, Nicolaus & Company, Incorporated.
"Outstandine", when used as of any particular time with reference to Bonds, means
(subject to the provisions of Section 8.04) all Bonds except: (i) Bonds theretofore canceled by the
Fiscal Agent or surrendered to the Fiscal Agent for cancellation; (ii) Bonds paid or deemed to
have been paid within the meaning of Section 9.03; and (iii) Bonds in lieu of or in substitution
for which other Bonds shall have been authorized, executed, issued and delivered by the City
pursuant to this Agreement or any Supplemental Agreement.
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"Owner" or "Bondowner" means any person who shall be the registered owner of any
Outstanding Bond.
"Parity Bonds" means bonds issued by the City for the District payable and secured on a
parity with any then Outstanding Bonds, pursuant to Section 2.14 hereof.
"Participating Underwriter" shall have the meaning ascribed thereto in the Continuing
Disclosure Agreement.
"Permitted Investments" means the following, but only to the extent that the same are
acquired at Fair Market Value and are otherwise legal investments for funds of the City:
(a) Federal Securities.
(b) Registered state warrants or treasury notes or bonds of the State of California
(the "State "), including bonds payable solely out of the revenues from a revenue -
producing property owned, controlled, or operated by the State or by a department,
board, agency, or authority of the State, which are rated in one of the two highest short -
term or long -term rating categories by either Moody's Investors Service or Standard and
Poor's Ratings Group, and which have a maximum term to maturity not to exceed three
years.
(c) Time certificates of deposit or negotiable certificates of deposit issued by a
state or nationally chartered bank or trust company, or a state or federal savings and
loan association which may include the Fiscal Agent and its affiliates; provided, that the
certificates of deposit shall be one or more of the following: continuously and fully
insured by the Federal Deposit Insurance Corporation or the Federal Savings and Loan
Insurance Corporation, and /or continuously and fully secured by securities described in
subdivision (a) or (b) of this definition of Permitted Investments which shall have a
market value, as determined on a marked -to- market basis calculated at least weekly,
and exclusive of accrued interest, or not less than 102 percent of the principal amount of
the certificates on deposit.
(d) Commercial paper which at the time of purchase is of "prime" quality of the
highest ranking or of the highest letter and numerical rating as provided by either
Moody's Investors Service or Standard and Poor's Ratings Group, which commercial
paper is limited to issuing corporations that are organized and operating within the
United States of America and that have total assets in excess of five hundred million
dollars ($500,000,000) and that have an "A" or higher rating for the issuer's debentures,
other than commercial paper, by either Moody's Investors Service or Standard and
Poor's Ratings Group, provided that purchases of eligible commercial paper may not
exceed 180 days' maturity nor represent more than 10 percent of the outstanding
commercial paper of an issuing corporation. Purchases of commercial paper may not
exceed 20 percent of the total amount invested pursuant to this definition of Permitted
Investments.
lid
(e) A repurchase agreement with a state or nationally charted bank or trust
company or a national banking association or government bond dealer reporting to,
trading with, and recognized as a primary dealer by the Federal Reserve Bank of New
York, provided that all of the following conditions are satisfied: (1) the agreement is
secured by any one or more of the securities described in subdivision (a) of this
definition of Permitted Investments, (2) the underlying securities are required by the
repurchase agreement to be held by a bank, trust company, or primary dealer having a
combined capital and surplus of at least one hundred million dollars ($100,000,000) and
which is independent of the issuer of the repurchase agreement, and (3) the underlying
securities are maintained at a market value, as determined on a marked -to- market basis
calculated at least weekly, of not less than 103 percent of the amount so invested.
(f) An investment agreement or guaranteed investment contract with, or
guaranteed by, a financial institution the long -term unsecured obligations of which are
rated Aa2 and "AA" or better, respectively, by Moody's Investors Service and Standard
and Poor's Ratings Group at the time of initial investment. The investment agreement
shall be subject to a downgrade provision with at least the following requirements: (1)
the agreement shall provide that within five business days after the financial
institution's long -term unsecured credit rating has been withdrawn, suspended, other
than because of general withdrawal or suspension by Moody's hlvestors Service or
Standard and Poor's Ratings Group from the practice of rating that debt, or reduced
below "AA -" by Standard and Poor's Ratings Group or below "Aa3" by Moody's
Investors Service (these events are called "rating downgrades ") the financial institution
shall give notice to the City and, within the five -day period, and for as long as the rating
downgrade is in effect, shall deliver in the name of the City or the Fiscal Agent to the
City or the Fiscal Agent Federal Securities allowed as investments under subdivision (a)
of this definition of Permitted Investments with aggregate current market value equal to
at least 105 percent of the principal amount of the investment agreement invested with
the financial institution at that time, and shall deliver additional allowed federal
securities as needed to maintain an aggregate current market value equal to at least 105
percent of the principal amount of the investment agreement within three days after
each evaluation date, which shall be at least weekly, and (2) the agreement shall provide
that, if the financial institution's long -term unsecured credit rating is reduced below
"A3'" by Moody's Investors Service or below "A -" by Standard and Poor's Ratings
Group, the Fiscal Agent or the City may, upon not more than five business days' written
notice to the financial institution, withdraw the investment agreement, with accrued but
unpaid interest thereon to the date, and terminate the agreement.
(g) The Local Agency Investment Fund of the State of California.
(h) Investments in a money market fund (including any funds of the Fiscal
Agent or its affiliates and including any funds for which the Fiscal Agent or its affiliates
provides investment advisory or other management services) rated in the highest rating
category (without regard to plus ( +) or minus ( -) designations) by Moody's or S &P.
(i) Any other lawful investment for City funds.
In
"Principal Office" means the corporate trust office of the Fiscal Agent as identified
pursuant to Section 9.06 hereof; provided, however, for the purpose of maintenance of the
Registration Books and surrender of Bonds for payment, transfer or exchange such term means
the office at which the Fiscal Agent conducts its corporate agency business, or such other or
additional offices as may be designated by the Fiscal Agent.
"Project„ means the facilities eligible to be funded by the District, as specified by the
Resolution of Formation.
"Rate and Method of Apportionment" means the Rate and Method of Apportionment
of Special Tax for the District, as approved by the Resolution of Formation, and as it may be
amended from time to time in accordance with the provisions of the Act.
"Rating Category" means one of the two highest rating categories then in effect under
the rating systems of Moody's Investors Service or Standard and Poor's Ratings Group, a
division of McGraw -Hill, without regard to plus or minus sign or numerical or other qualifying
designation.
"Record Date" means the fifteenth (15f) day of the month next preceding the month of
the applicable Interest Payment Date, whether or not such fifteenth (15th) day is a Business Day.
"Refundin Bond onds" means bonds issued by the City for the District the net proceeds of
which are used to refund all or a portion of the then Outstanding Bonds; provided that the debt
service on the Refunding Bonds in any Bond Year is not in excess of the debt service on the
Bonds being refunded, and the final maturity of the Refunding Bonds is not later than the final
maturity of the Bonds being refunded.
"Refunding Fund" means the fund by that name created by and held by the Escrow
Bank pursuant to the Escrow Agreement.
"Registration Books" means the records maintained by the Fiscal Agent pursuant to
Section 2.08 for the registration and transfer of ownership of the Bonds.
"Regulations" means temporary and permanent regulations promulgated under the
Code.
"Reserve Fund" means the fund by that name established pursuant to Section 4.03(A)
hereof.
"Reserve Requirement" means, as of any date of calculation, an amount equal to
seventy -five percent (75 %) of the then Maximum Annual Debt Service. The Reserve
Requirement as of the Closing Date is $
"Resolution" means Resolution No. 13 -_ adopted by the City Council of the City on
May 21, 2013, authorizing the issuance of the 2013 Bonds.
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"Resolution of Formation" means Resolution No. 04 -67, adopted by the City Council of
the City on July 19, 2004.
"Securities Depositories" means The Depository Trust Company, 55 Water Street, 1SL,
New York, New York 10041 -0099, Fax (212) 855 -7232; and, in accordance with then current
guidelines of the Securities and Exchange Commission, such other addresses and /or such other
securities depositories as the City may designate in an Officer's Certificate delivered to the
Fiscal Agent.
"Special Tax A" has the meaning given to such term in the Rate and Method of
Apportionment.
"Special Tax B" has the meaning given to such term in the Rate and Method of
Apportionment.
"Special Tax Fund" means the fund by that name established by Section 3.04(A) hereof.
"Special Tax Prepa moments° means the proceeds of any prepayments of Special Taxes
received by the City, as calculated pursuant to the Rate and Method of Apportionment, less any
administrative fees or penalties collected as part of any such prepayment.
"Special Tax Prepayments Account" means the account by that name within the Bond
Fund established by Section 4.02(A) hereof.
"Special Tax Revenues" means the proceeds of the Special Taxes received by the City,
including any scheduled payments and any prepayments thereof, interest and penalties thereon
and proceeds of the redemption or sale of property sold as a result of foreclosure of the lien of
the Special Taxes to the amount of said lien, but shall not include interest and penalties, if any,
collected with the Special Taxes that are in excess of the rate of interest payable on the Bonds.
"Special Taxes" means the Special Tax A levied within the District pursuant to the Act,
the Ordinance and this Agreement. "Special Taxes" do not include any Special Tax B levied in
the District.
"Supplemental Agreement" means an agreement the execution of which is authorized
by a resolution which has been duly adopted by the City under the Act and which agreement is
amendatory of or supplemental to this Agreement, but only if and to the extent that such
agreement is specifically authorized hereunder.
"2004 Bonds" means the City of Tustin Community Facilities District No. 04 -1 (Tustin
Legacy/ John Laing Homes) Special Tax Bonds, Series 2004.
"2013 Bonds" means the City of Tustin Community Facilities District No. 04 -1 (Tustin
Legacy /John Laing Homes) 2013 Special Tax Refunding Bonds at any time Outstanding under
this Agreement.
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ARTICLE II
THE 2013 BONDS
Section 2.01. Principal Amount; Designation. 2013 Bonds in the aggregate principal
amount of Million Thousand Dollars ($ ) are hereby
authorized to be issued by the City for the District under and subject to the terms of the
Resolution, this Agreement, the Act and other applicable laws of the State of California. The
2013 Bonds are hereby designated the "City of Tustin Community Facilities District No. 04 -1
(Tustin Legacy /John Laing Homes) 2013 Special Tax Refunding Bonds."
Section 2.02. Terms of 2013 Bonds. The 2013 Bonds shall be issued in fully registered
form without coupons in denominations of $5,000 or any integral multiple in excess thereof.
The 2013 Bonds shall be dated the Closing Date, shall be in the principal amounts, shall mature
on September 1 in the years 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
(September 1) Amount Interest Rate
Interest on the 2013 Bonds shall be payable on each Interest Payment Date to the person
whose name appears on the registration books maintained by the Fiscal Agent 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 Fiscal Agent mailed by first class mail, postage prepaid, on
each Interest Payment Date to the Owner at the address of such Owner as it appears on the
registration books maintained by the Fiscal Agent as of the preceding Record Date. Principal of
and premium (if any) on any 2013 Bond shall be paid by check upon presentation and surrender
thereof, at maturity or the prior redemption thereof, at the Principal Office of the Fiscal Agent.
The principal of and interest and premium (if any) on the 2013 Bonds shall be payable in lawful
money of the United States of America.
Each 2013 Bond shall bear interest from the Interest Payment Date next preceding the
date of authentication thereof, unless (a) it is authenticated after a Record Date and on or before
the following Interest Payment Date, in which event it shall bear interest from such Interest
Payment Date; or (b) it is authenticated on or before February 15, 2014, in which event it shall
bear interest from the Closing Date; provided, horoever, that if, as of the date of authentication of
any 2013 Bond, interest thereon is in default, such 2013 Bond shall bear interest from the Interest
Payment Date to which interest has previously been paid or made available for payment
thereon.
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" CUSIP" identification numbers shall be imprinted on the 2013 Bonds, but such
numbers shall not constitute a part of the contract evidenced by the 2013 Bonds, and any error
or omission with respect thereto shall not constitute cause for refusal of any purchaser to accept
delivery of and pay for the 2013 Bonds. In addition, failure on the part of the City or the Fiscal
Agent to use such CUSIP numbers in any notice to Owners shall not constitute any violation of
the City's contract with such Owners and shall not impair the effectiveness of any such notice.
All 2013 Bonds paid by the Fiscal Agent pursuant to this Article shall be canceled by the
Fiscal Agent. The Fiscal Agent shall destroy the canceled 2013 Bonds and, upon written request
of the City, issue a certificate of destruction thereof to the City.
Section 2.03. Redemption.
(A) Redemption Dates.
(i) Optional Redemption. The 2013 Bonds maturing on and after September 1,
are subject to optional redemption prior to their stated maturity on any Interest
Payment Date occurring on or after September 1, . as a whole, or in part among
maturities as determined by the Finance Director and by lot within a maturity, at a
redemption price equal to the principal amount of the 2013 Bonds to be redeemed,
together with accrued interest thereon to the date fixed for redemption, without
premium.
(ii) Mandatory Sinking Payment Redemption. The 2013 Bonds maturing on
September 1, J are subject to mandatory sinking payment redemption in part on
September 1, . and on each September 1 thereafter to maturity, by lot, at a
redemption price equal to the principal amount thereof to be redeemed, together with
accrued interest to the date fixed for redemption, without premium, from sinking
payments as follows:
Redemption Date
(September 1) Sinker Pam
The amounts in the foregoing table shall be reduced to the extent practicable so
as to maintain level debt service on the 2013 Bonds, as a result of any prior partial
redemption of the 2013 Bonds pursuant to Section 2.03(A)(i) above or Section 2.03(A)(iii)
below, as specified in writing by the Finance Director to the Fiscal Agent.
(iii) Mandatonj Redemption From Special Tax Prepayments. Special Tax
Prepayments and any corresponding transfers from the Reserve Fund pursuant to clause
(iii) of the second paragraph of Section 3.04(A) and Section 4.03(F), respectively, shall be
used to redeem 2013 Bonds on the next Interest Payment Date for which notice of
redemption can timely be given under Section 2.03(E), by lot and allocated among
maturities of the 2013 Bonds so as to maintain substantially level debt service on the
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Bonds, at a redemption price (expressed as a percentage of the principal amount of the
2013 Bonds to be redeemed), as set forth below, together with accrued interest to the
date fixed for redemption:
Redemption Dates Redemption Prices
any Interest Payment Date to and including 103%
March 1, 2021
September 1, 2021 and March 1, 2022 102
September 1, 2022 and March 1, 2023 101
September 1, 2023 and thereafter 100
(B) Notice to Fiscal Agent. The City shall give the Fiscal Agent written notice of its
intention to redeem 2013 Bonds pursuant to subsection (A)(i) or (iii) above not less than forty-
five (45) days prior to the applicable redemption date, or such lesser number of days as the
Fiscal Agent shall allow. No notice need be given by the City to the Fiscal Agent of a
redemption of 2013 Bonds pursuant to subsection (A)(ii) above.
(C) Priority of Redemption. Whenever provision is made in this Agreement for the
redemption of less than all of the 2013 Bonds or any given portion thereof pursuant to Section
2.03(A)(i), the Fiscal Agent shall select the 2013 Bonds to be redeemed, from all 2013 Bonds or
such given portion thereof not previously called for redemption among maturities as directed in
writing by the Finance Director, and within a maturity by lot in any manner which the Fiscal
Agent in its sole discretion shall deem appropriate and fair. Whenever provision is made in this
Agreement for the redemption of less than all of the 2013 Bonds or any given portion thereof
pursuant to Section 2.03(A)(iii), the Fiscal Agent shall select the 2013 Bonds to be redeemed,
from all 2013 Bonds or such given portion thereof not previously called for redemption among
maturities so as to maintain substantially level debt service on the Bonds, and within a maturity
by lot in any manner which the Fiscal Agent in its sole discretion shall deem appropriate and
fair. In each case, for purposes of selection of Bonds to be redeemed, all Bonds shall be deemed
to be comprised of separate $5,000 portions and such portions shall be treated as separate Bonds
which may be separately redeemed.
(D) Purchase of Bonds in lieu of Redemption. In lieu of redemption under Section
2.03(A) above, moneys in the Bond Fund may be used and withdrawn by the Fiscal Agent for
purchase of Outstanding 2013 Bonds, upon the filing with the Fiscal Agent of an Officer's
Certificate requesting such purchase prior to the selection of 2013 Bonds for redemption, at
public or private sale as and when, and at such prices (including brokerage and other charges)
as such Officer's Certificate may provide, but in no event may 2013 Bonds be purchased at a
price in excess of the principal amount thereof, plus interest accrued to the date of purchase.
(E) Redemption Procedure by Fiscal Agent. The Fiscal Agent shall cause notice of any
redemption to be mailed by first class mail, postage prepaid, at least thirty (30) days but not
more than sixty (60) days prior to the date fixed for redemption, to the Securities Depositories
and to one or more Information Services (or by such other means as permitted by such services),
and to the respective registered Owners of any 2013 Bonds designated for redemption, at their
addresses appearing on the 2013 Bond registration books in the Principal Office of the Fiscal
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Agent; but such mailing shall not be a condition precedent to such redemption and failure to
mail or to receive any such notice, or any defect therein, shall not affect the validity of the
proceedings for the redemption of such Bonds.
Such notice shall state the redemption date and the redemption price and, if less than all
of the then Outstanding Bonds are to be called for redemption, shall designate the CUSIP
numbers and Bond numbers of the 2013 Bonds to be redeemed by giving the individual CUSIP
number and Bond number of each Bond to be redeemed or shall state that all Bonds between
two stated Bond numbers, both inclusive, are to be redeemed or that all of the 2013 Bonds of
one or more maturities have been called for redemption, shall state as to any 2013 Bond called
in part the principal amount thereof to be redeemed, and shall require that such Bonds be then
surrendered at the Principal Office of the Fiscal Agent for redemption at the said redemption
price, and shall state that further interest on such Bonds will not accrue from and after the
redemption date.
Notwithstanding the foregoing, in the case of any redemption of the 2013 Bonds under
Section 2.03(A)(i) or (iii) above, the notice of redemption may state that the redemption is
conditioned upon receipt by the Fiscal Agent of sufficient moneys to redeem the 2013 Bonds on
the anticipated redemption date, and that the redemption shall not occur if by no later than the
scheduled redemption date sufficient moneys to redeem the 2013 Bonds have not been
deposited with the Fiscal Agent. In the event that the Fiscal Agent does not receive sufficient
funds by the scheduled redemption date to so redeem the 2013 Bonds to be redeemed, the Fiscal
Agent shall send written notice to the owners of the 2013 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 2013 Bonds for which notice of redemption was given shall remain
Outstanding for all purposes of this Agreement.
Upon the payment of the redemption price of 2013 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, of the 2013 Bonds being redeemed with the
proceeds of such check or other transfer.
Upon surrender of 2013 Bonds redeemed in part only, the City shall execute and the
Fiscal Agent shall authenticate and deliver to the registered Owner, at the expense of the City, a
new 2013 Bond or 2013 Bonds, of the same maturity, of authorized denominations in aggregate
principal amount equal to the unredeemed portion of the 2013 Bond or 2013 Bonds.
(F) Effect of Redemption. From and after the date fixed for redemption, if funds
available for the payment of the principal of, and interest and any premium on, the 2013 Bonds
so called for redemption shall have been deposited in the 2013 Bond Fund, such Bonds so called
shall cease to be entitled to any benefit under this Agreement other than the right to receive
payment of the redemption price, and no interest shall accrue thereon on or after the
redemption date specified in such notice.
All Bonds redeemed and purchased by the Fiscal Agent pursuant to this Section shall be
canceled by the Fiscal Agent. The Fiscal Agent shall destroy the canceled Bonds and, upon
written request of the City, issue a certificate of destruction thereof to the City.
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(G) Redemption of Parity Bonds. Redemption provisions, if any, pertaining to any
Parity Bonds shall be set forth in the Supplemental Agreement providing for such Parity Bonds.
Section 2.04. Form of 2013 Bonds. The 2013 Bonds, the form of Fiscal Agent's certificate
of authentication and the form of assignment, to appear thereon, shall be substantially in the
forms, respectively, set forth in Exhibit A attached hereto and by this reference incorporated
herein, with necessary or appropriate variations, omissions and insertions, as permitted or
required by this Agreement, the Resolution and the Act.
Section 2.05. Execution of Bonds. The Bonds shall be executed on behalf of the City by
the facsimile signatures of the Mayor of the City and the City Clerk who are in office on the date
of adoption of this Agreement or at any time thereafter, and the seal of the City shall be
impressed, imprinted or reproduced by facsimile signature thereon. If any officer whose
signature appears on any Bond ceases to be such officer before delivery of the Bonds to the
owner, such signature shall nevertheless be as effective as if the officer had remained in office
until the delivery of the Bonds to the owner. Any Bond may be signed and attested on behalf of
the City by such persons as at the actual date of the execution of such Bond shall be the proper
officers of the City although at the nominal date of such Bond any such person shall not have
been such officer of the City.
Only such Bonds as shall bear thereon a certificate of authentication in substantially the
form set forth in Exhibit A executed manually and dated by the Fiscal Agent, shall be valid or
obligatory for any purpose or entitled to the benefits of this Agreement, and such certificate of
authentication of the Fiscal Agent shall be conclusive evidence that the Bonds registered
hereunder have been duly authenticated, registered and delivered hereunder and are entitled to
the benefits of this Agreement.
Section 2.06. Transfer of Bonds. Any Bond may, in accordance with its terms, be
transferred, upon the books required to be kept pursuant to the provisions of Section 2.08 by the
person in whose name it is registered, in person or by his duly authorized attorney, upon
surrender of such Bond for cancellation, accompanied by delivery of a duly written instrument
of transfer in a form approved by the Fiscal Agent. The cost for any services rendered or any
expenses incurred by the Fiscal Agent in connection with any such transfer shall be paid by the
City from any lawfully available funds of the District, including but not limited to amounts in
the Administrative Expense Fund. The Fiscal Agent shall collect from the Owner requesting
such transfer any tax or other governmental charge required to be paid with respect to such
transfer.
Whenever any Bond or Bonds shall be surrendered for transfer, the City shall execute
and the Fiscal Agent shall authenticate and deliver a new Bond or Bonds, for like aggregate
principal amount.
No transfers of Bonds shall be required to be made (i) fifteen days prior to the date
established by the Fiscal Agent for selection of Bonds for redemption, or (ii) with respect to a
Bond after such Bond has been selected for redemption.
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Section 2.07. Exchange of Bonds. Bonds may be exchanged at the Principal Office of
the Fiscal Agent for a like aggregate principal amount of Bonds of authorized denominations of
the same series and of the same maturity. The cost for any services rendered or any expenses
incurred by the Fiscal Agent in connection with any such exchange shall be paid by the City.
The Fiscal Agent shall collect from the Owner requesting such exchange any tax or other
governmental charge required to be paid with respect to such exchange.
No exchanges of Bonds shall be required to be made (i) fifteen days prior to the date
established by the Fiscal Agent for selection of Bonds for redemption, or (ii) with respect to a
Bond after such Bond has been selected for redemption.
Section 2.05. Bond Register. The Fiscal Agent will keep or cause to be kept, at its
Principal Office sufficient books for the registration and transfer of the Bonds which books shall
show the series number, date, amount, rate of interest and last known owner of each Bond and
shall at all times be open to inspection by the City during regular business hours upon
reasonable notice; and, upon presentation for such purpose, the Fiscal Agent shall, under such
reasonable regulations as it may prescribe, register or transfer or cause to be registered or
transferred, on said books, the ownership of the Bonds as hereinbefore provided.
The City and the Fiscal Agent will treat the Owner of any Bond whose name appears on
the Bond register as the absolute Owner of such Bond for any and all purposes, and the City
and the Fiscal Agent shall not be affected by any notice to the contrary. The City and the Fiscal
Agent may rely on the address of the Bondowner as it appears in the Bond register for any and
all purposes.
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 authorized denominations as may be
determined by the City, and may contain such reference to any of the provisions of this
Agreement as may be appropriate. Every temporary Bond shall be executed by the City upon
the same conditions and in substantially the same manner as the definitive Bonds. If the City
issues temporary Bonds it will execute and furnish definitive Bonds without delay and
thereupon the temporary Bonds shall be surrendered, for cancellation, in exchange for the
definitive Bonds at the Principal Office of the Fiscal Agent or at such other location as the Fiscal
Agent shall designate, and the Fiscal Agent shall authenticate and deliver in exchange for such
temporary Bonds an equal aggregate principal amount of definitive Bonds of authorized
denominations. Until so exchanged, the temporary bonds shall be entitled to the same benefits
under to this Agreement as definitive Bonds authenticated and delivered hereunder.
Section 2.10. Bonds Mutilated, Lost, Destroyed or Stolen. If any Bond shall become
mutilated, the City, at the expense of the Owner of said Bond, shall execute, and the Fiscal
Agent shall authenticate and deliver, a new Bond of like tenor and principal amount in
exchange and substitution for the Bond so mutilated, but only upon surrender to the Fiscal
Agent of the Bond so mutilated. Every mutilated Bond so surrendered to the Fiscal Agent shall
be canceled by it and destroyed by the Fiscal Agent.
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If any Bond shall be lost, destroyed or stolen, evidence of such loss, destruction or theft
may be submitted to the Fiscal Agent and, if such evidence be satisfactory to it and indemnity
for the City and the Fiscal Agent satisfactory to the Fiscal Agent shall be given, the City, at the
expense of the Owner, shall execute, and the Fiscal Agent shall authenticate and deliver, a new
Bond of like tenor and principal amount in lieu of and in substitution for the Bond so lost,
destroyed or stolen. The City may require payment of a sum not exceeding the actual cost of
preparing each new Bond delivered under this Section and of the expenses which may be
incurred by the City and the Fiscal Agent for the preparation, execution, authentication and
delivery. Any Bond delivered under the provisions of this Section in lieu of any Bond alleged to
be lost, destroyed or stolen shall constitute an original additional contractual obligation on the
part of the City whether or not the Bond so alleged to be lost, destroyed or stolen is at any time
enforceable by anyone, and shall be equally and proportionately entitled to the benefits of this
Agreement with all other Bonds issued pursuant to this Agreement.
Section 2.11. Limited Obligation. All obligations of the City under this Agreement and
the Bonds shall be special obligations of the City, payable solely from the Special Tax Revenues
and the funds pledged therefore hereunder. Neither the faith and credit nor the taxing power
of the City (except with respect to the levy of Special Taxes in the District, to the limited extent
set forth herein) or the State of California or any political subdivision thereof is pledged to the
payment of the Bonds.
Section 2.12. No Acceleration. The principal of the Bonds shall not be subject to
acceleration hereunder. Nothing in this Section shall in any way prohibit the prepayment or
redemption of Bonds under Section 2.03 hereof, or the defeasance of the Bonds and discharge of
this Agreement under Section 9.03 hereof.
Section 2.13. Book -Entry Only System. DTC shall act as the initial Depository for the
2013 Bonds. One 2013 Bond for each maturity of the 2013 Bonds shall be initially executed,
authenticated, and delivered as set forth herein with a separate fully registered certificate (in
print or typewritten form). Upon initial execution, authentication, and delivery, the ownership
of the 2013 Bonds shall be registered in the Registration Books kept by the Fiscal Agent for the
Bonds in the name of Cede & Co., as nominee of DTC or such nominee as DTC shall appoint in
writing.
The representatives of the City and the Fiscal Agent are hereby authorized to take any
and all actions as may be necessary and not inconsistent with this Agreement to qualify the 2013
Bonds for the Depository's book -entry system, including the execution of the Depository's
required representation letter.
With respect to Bonds registered in the Registration Books in the name of Cede & Co., as
nominee of DTC, neither the City nor the Fiscal Agent shall have any responsibility or
obligation to any broker - dealer, bank, or other financial institution for which DTC holds Bonds
as Depository from time to time (the "DTC Participants ") or to any person for which a DTC
Participant acquires an interest in the Bonds (the 'Beneficial Owners "). Without limiting the
immediately preceding sentence, neither the City nor the Fiscal Agent shall have any
responsibility or obligation with respect to (i) the accuracy of the records of DTC, Cede & Co., or
any DTC Participant with respect to any ownership interest in the Bonds, (ii) the delivery to any
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DTC Participant, any Beneficial Owner, or any other person, other than DTC, of any notice with
respect to the Bonds, including any notice of redemption, (iii) the selection by the Depository of
the beneficial interests in the Bonds to be redeemed in the event the City elects to redeem the
Bonds in part, (iv) the payment to any DTC Participant, any Beneficial Owner, or any other
person, other than DTC, of any amount with respect to the principal of or interest on the Bonds,
or (v) any consent given or other action taken by the Depository as Owner of the Bonds; except
that so long as any Bond is registered in the name of Cede & Co., as nominee of DTC, any
Beneficial Owner of $1,000,000 or more in aggregate principal amount of any series of Bonds
who has filed a written request to receive notices, containing such Beneficial Owner's name and
address, with the Fiscal Agent shall be provided with all notices relating to such Bonds by the
Fiscal Agent.
Except as set forth above, the Fiscal Agent may treat as and deem DTC to be the absolute
Owner of each Bond for which DTC is acting as Depository for the purpose of payment of the
principal of and interest on such Bonds, for the purpose of giving notices of redemption and
other matters with respect to such Bonds, for the purpose of registering transfers with respect to
such Bonds, and for all purposes whatsoever. The Fiscal Agent shall pay all principal of and
interest on the Bonds only to or upon the order of the Owners as shown on the Registration
Books, and all such payments shall be valid and effective to fully satisfy and discharge all
obligations with respect to the principal of and interest on the Bonds to the extent of the sums or
sums so paid.
No person other than an Owner, as shown on the Registration Books, shall receive a
physical Bond. Upon delivery by DTC to the Fiscal Agent of written notice to the effect that
DTC has determined to substitute a new nominee in place of Cede & Co., and subject to the
transfer provisions in Section 2.06 hereof, references to "Cede & Co." in this Section 2.13 shall
refer to such new nominee of DTC.
DTC may determine to discontinue providing its services with respect to the 2013 Bonds
at any time by giving written notice to the Fiscal Agent during any time that the 2013 Bonds are
Outstanding, and discharging its responsibilities with respect thereto under applicable law.
The City may terminate the services of DTC with respect to the 2013 Bonds if it determines that
DTC is unable to discharge its responsibilities with respect to the 2013 Bonds or that
continuation of the system of book -entry transfers through DTC is not in the best interest of the
Beneficial Owners, and the City shall mail notice of such termination to the Fiscal Agent.
Upon the termination of the services of DTC as provided in the previous paragraph, and
if no substitute Depository willing to undertake the functions hereunder can be found which is
willing and able to undertake such functions upon reasonable or customary terms, or if the City
determines that it is in the best interest of the Beneficial Owners of the 2013 Bonds that they be
able to obtain certificated Bonds, the 2013 Bonds shall no longer be restricted to being registered
in the Registration Books of the Fiscal Agent in the name of Cede & Co., as nominee of DTC, but
may be registered in whatever name or name the Owners shall designate at that time, in
accordance with Section 2.06.
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To the extent that the Beneficial Owners are designated as the transferee by the Owners,
in accordance with Section 2.06 the 2013 Bonds will be delivered to such Beneficial Owners as
soon as practicable.
Section 2.14. Issuance of Parity Bonds. The City may issue one or more series of Parity
Bonds, in addition to the 2013 Bonds authorized under Section 2.01 hereof, by means of a
Supplemental Agreement and without the consent of any Bondowners, upon compliance with
the provisions of this Section 2.14. Only Refunding Bonds that comply with the requirements of
this Section 2.14 shall be Parity Bonds, and such Parity Bonds shall constitute Bonds hereunder
and shall be secured by a lien on the Special Tax Revenues and funds pledged for the payment
of the Bonds hereunder on a parity with all other Bonds Outstanding hereunder. The City may
issue Refunding Bonds that are Parity Bonds subject to the following specific conditions
precedent:
(A) Current Compliance. The City shall be in compliance on the date of issuance
of the Parity Bonds with all covenants set forth in this Agreement and all Supplemental
Agreements.
(B) Payment Dates. The Supplemental Agreement providing for the issuance of
such Parity Bonds shall provide that interest thereon shall be payable on March 1 and
September 1, and principal thereof shall be payable on September 1 in any year in which
principal is payable (provided that there shall be no requirement that any Parity Bonds
pay interest on a current basis).
(C) Funds and Accounts; Reserve Fund Deposit. The Supplemental Agreement
providing for the issuance of such Parity Bonds may provide for the establishment of
separate funds and accounts, and shall provide for a deposit to the Reserve Fund (or to a
separate account created for such purpose) in an amount necessary so that the amount
on deposit in the Reserve Fund (together with the amount in any such separate
account), following the issuance of such Parity Bonds, is equal to the Reserve
Requirement.
(D) Refunding Bonds. The Parity Bonds must be Refunding Bonds.
(E) Officer's Certificate. The City shall deliver to the Fiscal Agent an Officer's
Certificate certifying that the proposed issue of Parity Bonds constitute Refunding
Bonds, and that the conditions precedent to the issuance of such Parity Bonds set forth
in subsections (A), (B), (C) and (D) of this Section 2.14 have been satisfied. In delivering
such Officer's Certificate, the Authorized Officer that executes the same may
conclusively rely upon such certificates of the Fiscal Agent and others selected with due
care, without the need for independent inquiry or certification.
Nothing in this Section 2.14 shall prohibit the City from issuing bonds or otherwise
incurring debt for the District secured by a pledge of Special Tax Revenues subordinate to the
pledge thereof under Section 4.01 of this Agreement.
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ARTICLE III
ISSUANCE OF 2013 Bonds
Section 3.01. Issuance and Delivery of 2013 Bonds. At any time after the execution of
this Agreement, the City may issue the 2013 Bonds for the District in the aggregate principal
amount set forth in Section 2.01 and deliver the 2013 Bonds to the Original Purchaser. The
Authorized Officers of the City are hereby authorized and directed to deliver any and all
documents and instruments necessary to cause the issuance of the 2013 Bonds in accordance
with the provisions of the Act, the Refunding Law, the Resolution and this Agreement, to
authorize the payment of Costs of Issuance (including the costs of the refunding of the 2004
Bonds from the proceeds of the 2013 Bonds), and to do and cause to be done any and all acts
and things necessary or convenient for delivery of the 2013 Bonds to the Original Purchaser.
Section 3.02. Application of Proceeds of Sale of 2013 Bonds. (A) The proceeds of the
purchase of the 2013 Bonds by the Original Purchaser (being $ ) shall be paid to the
Fiscal Agent, who shall forthwith set aside, pay over and deposit such proceeds on the Closing
Date as follows (for record keeping purposes, the Fiscal Agent may establish such accounts as
may be necessary to reflect such transfer of proceeds):
(i) Deposit in the Reserve Fund $ (being an amount equal to the
initial Reserve Requirement).
(ii) Deposit in the Costs of Issuance Fund an amount equal to $
(iii) Transfer to the Escrow Bank for deposit by the Escrow Bank in the
Refunding Fund an amount equal to $
(B) In addition to the foregoing, on the Closing Date the City shall transfer or cause to be
transferred certain moneys held with respect to the 2004 Bonds as follows:
(i) Transfer from the administrative expense fund held with respect to the
2004 Bonds to the Fiscal Agent for deposit by the Fiscal Agent in the Administrative
Expense Fund, all amounts on deposit in such administrative expense fund.
(ii) Transfer from the special tax fund held with respect to the 2004 Bonds (a)
to the Escrow Bank for deposit by the Escrow Bank in the Refunding Fund $
and (b) to the Fiscal Agent for deposit by the Fiscal Agent in the Special Tax Fund, all
remaining amounts on deposit in such special tax fund.
(iii) Transfer from the reserve fund held with respect to the 2004 Bonds to the
Escrow Bank for deposit by the Escrow Bank in the Refunding Fund, the $ on
deposit in such reserve fund.
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(iv) Transfer from the bond fund and the redemption fund held with respect
to the 2004 Bonds to the Fiscal Agent for deposit by the Fiscal Agent in the Special Tax
Fund, any amounts on deposit in such bond fund.
(C) The Fiscal Agent may establish a temporary fund or account in its records to
facilitate any of the deposits or transfers referred to in this Section 3.02.
Section 3.03. Validity of Bonds. The validity of the authorization and issuance of the
Bonds shall not be dependent upon the performance by any person of his obligation with
respect to the Project.
Section 3.04. Special Tax Fund.
(A) Establishment of Special Tax Fund. There is hereby established as a separate fund
to be held by the Fiscal Agent, the Community Facilities District No. 04 -1 (Tustin Legacy /John
Laing Homes) 2013 Special Tax Refunding Bonds, Special Tax Fund. The City shall transfer or
cause to be transferred to the Fiscal Agent, as soon as practicable following receipt, all Special
Tax Revenues received by the City (and expressly not including any Special Tax B, which is to
be retained by the City) and any amounts required by Section 3.02(13)(ii)(b) and Section
3.02(B)(iv) to be deposited to the Special Tax Fund, all which amounts shall be deposited by the
Fiscal Agent to the Special Tax Fund. In addition, the Fiscal Agent shall deposit in the Special
Tax Fund amounts to be transferred thereto pursuant to Section 3.05(B) hereof.
Notwithstanding the foregoing,
(i) with respect to the first $20,000.00 of Special Tax Revenues (which do not
include Special Tax B, which is to be retained by the City in any event) collected by the
City in any Fiscal Year; first, the City may retain all or any portion thereof, and not remit
the same to the Fiscal Agent, to the extent the City determines that it needs said amount
to pay Administrative Expenses of the City; and second, any remaining portion of such
amount shall be separately identified by the City and shall be deposited by the Fiscal
Agent in the Administrative Expense Fund;
(ii) any Special Tax Revenues constituting the collection of delinquencies in
payment of Special Taxes shall be separately identified by the City and shall be
deposited by the Fiscal Agent first, in the Bond Fund to the extent needed to pay any
past due debt service on the Bonds; second, to the Reserve Fund to the extent needed to
increase the amount then on deposit in the Reserve Fund up to the then Reserve
Requirement, and third, to the Special Tax Fund for use as described in Section 3.04(B)
below; and
(iii) any proceeds of Special Tax Prepayments shall be separately identified by
the City and shall be deposited by the Fiscal Agent in the Special Tax Prepayments
Account established pursuant to Section 4.02(A).
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Moneys in the Special Tax Fund shall be held by the Fiscal Agent for the benefit of the
City and the Owners of the Bonds, shall be disbursed as provided below and, pending and
disbursement, shall be subject to a lien in favor of the Owners of the Bonds and the City.
(B) Disbursements. From time to time as needed to pay the obligations of the District,
but no later than the Business Day before each Interest Payment Date, the Fiscal Agent shall
withdraw from the Special Tax Fund and transfer the following amounts in the following order
of priority (i) to the Bond Fund an amount, taking into account any amounts then on deposit in
the Bond Fund and any expected transfers from the Reserve Fund and the Special Tax Fund to
the Bond Fund pursuant to Sections 4.03(C), (E), (F) and (G), and 3.04(A), such that the amount
in the Bond Fund equals the principal (including any sinking payment, or principal due
pursuant to optional or special tax prepayment redemptions), premium, if any, and interest due
on the Bonds on the next Interest Payment Date, and (ii) to the Reserve Fund an amount, taking
into account amounts then on deposit in the Reserve Fund, such that the amount in the Reserve
Fund is equal to the Reserve Requirement; provided that no such transfers shall exceed the
amount then available to be transferred from the Special Tax Fund.
In addition to the foregoing, if in any Fiscal Year there are sufficient funds in the Special
Tax Fund to make the foregoing transfers to the Bond Fund and the Reserve Fund in respect of
the Interest Payment Dates occurring in the Bond Year that commences in such Fiscal Year, the
Finance Director may direct the Fiscal Agent to transfer to the Administrative Expense Fund,
from time to time, any amount in the Special Tax Fund in excess of the amount needed to make
such transfers to the Bond Fund and the Reserve Fund, if the Finance Director determines that
monies are needed to pay Administrative Expenses in excess of the amount then on deposit in
the Administrative Expense Fund.
(C) Investment. Moneys in the Special Tax Fund shall be invested in accordance with
Section 6.01. Interest earnings and profits resulting from investment of amounts in the Special
Tax Fund shall be retained in the Special Tax Fund to be used for the purposes thereof.
Section 3.05. Administrative Expense Fund.
(A) Establishment of Administrative Expense Fund. There is hereby established as a
separate fund to be held by the Fiscal Agent, the Community Facilities District No. 04 -1 (Tustin
Legacy /John Laing Homes) 2013 Special Tax Refunding Bonds, Administrative Expense Fund,
to the credit of which deposits shall be made as required by Section 3.02(B)(i), clause (i) of the
second paragraph of Section 3.04(A) and Section 3.06(B). Moneys in the Administrative
Expense Fund shall be held by the Fiscal Agent for the benefit of the City, and shall be
disbursed as provided below.
(B) Disbursement. Amounts in the Administrative Expense Fund shall be withdrawn
by the Fiscal Agent and paid to the City or its order upon receipt by the Fiscal Agent of an
Officer's Certificate stating the amount to be withdraw, that such amount is to be used to pay an
Administrative Expense, and the nature of such Administrative Expense. Amounts transferred
to the Administrative Expense Fund pursuant to Section 3.06(B) shall be used for purposes of
such fund prior to using other available amounts therein.
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Annually, on the last day of each Fiscal Year, the Fiscal Agent shall withdraw any
amounts then remaining in the Administrative Expense Fund in excess of $20,000.00 that have
not otherwise been allocated to pay Administrative Expenses incurred but not yet paid, and
which are not otherwise encumbered, and transfer such amounts to the Special Tax Fund.
(C) Investment. Moneys in the Administrative Expense Fund shall be invested in
accordance with Section 6.01. Interest earnings and profits resulting from said investment shall
be retained in the Administrative Expense Fund to be used for the purposes of such fund.
Section 3.06. Costs of Issuance Fund.
(A) Establishment of Costs of Issuance Fund. There is hereby established as a separate
fund to be held by the Fiscal Agent, the Community Facilities District No. 04 -1 (Tustin
Legacy /John Laing Homes) 2013 Special Tax Refunding Bonds, Costs of Issuance Fund, to the
credit of which a deposit shall be made as required by clause (ii) of Section 3.02(A). Moneys in
the Costs of Issuance Fund shall be held by the Fiscal Agent and shall be disbursed as provided
in subsection (B) of this Section.
(B) Disbursement. Amounts in the Costs of Issuance Fund shall be disbursed from time
to time to pay Costs of Issuance, as set forth in a requisition containing respective amounts to be
paid to the designated payees, signed by an Authorized Officer and delivered to the Fiscal
Agent concurrently with the delivery of the 2013 Bonds. The Fiscal Agent shall pay all Costs of
Issuance upon receipt of an invoice from any such payee which requests payment in an amount
which is less than or equal to the amount set forth with respect to such payee in such
requisition, or upon receipt of an Officer's Certificate requesting payment of a Cost of Issuance
not listed on the initial requisition delivered to the Fiscal Agent on the Closing Date. Each such
Officer's Certificate shall be sufficient evidence to the Fiscal Agent of the facts stated therein and
the Fiscal Agent shall have no duty to confirm the accuracy of such facts. The Fiscal Agent shall
maintain the Cost of Issuance Fund for a period of 90 days from the Closing Date and then shall
transfer any moneys remaining therein, including any investment earnings thereon, to the
Administrative Expense Fund.
(C) Investment. Moneys in the Cost of Issuance Fund shall be invested in accordance
with Section 6.01. Interest earnings and profits resulting from said investment shall be retained
by the Fiscal Agent in the Cost of Issuance Fund to be used for the purposes of such fund.
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ARTICLE IV
SPECIAL TAX REVENUES; BOND FUND AND RESERVE FUND
Section 4.01. Pledge of Special Tax Revenues. The Bonds shall be secured by a first
pledge of all of the Special Tax Revenues (other than the Special Tax Revenues to be retained by
the City or deposited to the Administrative Expense Fund pursuant to clause (i) of the second
paragraph of Section 3.04(A)) and all moneys deposited in the Bond Fund, the Reserve Fund
and, until disbursed as provided herein, in the Special Tax Fund. The Special Tax Revenues and
all moneys deposited into said funds (except as otherwise provided herein) are hereby
dedicated to the payment of the principal of, and interest and any premium on, the Bonds as
provided herein and in the Act until all of the Bonds have been paid and retired or until moneys
or Federal Securities have been set aside irrevocably for that purpose in accordance with Section
9.03.
Amounts in the Administrative Expense Fund, the Costs of Issuance Fund, the
Refunding Fund, the Special Tax Revenues to be retained by the City or deposited to the
Administrative Expense Fund pursuant to clause (i) of the second paragraph of Section 3.04(A),
and the proceeds of any Special Tax B levied in the District, are not pledged to the repayment of
the Bonds. The facilities financed by the District are not in any way pledged to pay the debt
service on the Bonds. Any proceeds of the sale, condemnation or destruction of any facilities
financed by the District are not pledged to pay the debt service on the Bonds and are free and
clear of any lien or obligation imposed hereunder.
Section 4.02. Bond Fund.
(A) Establishment of Bond Fund. There is hereby established as a separate fund to be
held by the Fiscal Agent, the Community Facilities District No. 04 -1 (Tustin Legacy /John Laing
Homes) 2013 Special Tax Refunding Bonds, Bond Fund to the credit of which deposits shall be
made as required by the first subclause of clause (ii) of the second paragraph of Section 3.04(A),
Section 3.04(B), and Section 4.03, and any other amounts required to be deposited therein by
this Agreement or the Act, and within said fund a Special Tax Prepayments Account to the
credit of which deposits shall be made as required by clause (iii) of the second paragraph of
Section 3.04(A). Moneys in the Bond Fund and the account therein shall be held by the Fiscal
Agent for the benefit of the Owners of the Bonds, shall be disbursed for the payment of the
principal of, and interest and any premium on, the Bonds as provided below, and, pending
such disbursement, shall be subject to a lien in favor of the Owners of the Bonds.
(B) Disbursements. (i) Bond Fund Disbursements. On each Interest Payment Date, and
following any transfers required pursuant to Sections 3.04(B), 4.02(B)(ii) and 4.03(C), (E), (F) and
(G) in connection with such Interest Payment Date, the Fiscal Agent shall withdraw from the
Bond Fund and pay to the Owners of the Bonds the principal of, and interest and any premium,
then due and payable on the Bonds, including any amounts due on the Bonds by reason of the
sinking payments set forth in Section 2.03(A)(ii), or a redemption of the Bonds required by
Section 2.03(A)(i) or (iii), such payments to be made in the priority listed in the second
succeeding paragraph. Notwithstanding the foregoing, amounts in the Bond Fund as a result of
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a transfer pursuant to clause (ii) of the second paragraph of Section 3.04(A) shall be immediately
disbursed by the Fiscal Agent to pay past due amounts owing on the Bonds.
In the event that amounts in the Bond Fund are insufficient for the purpose set forth in
the preceding paragraph, the Fiscal Agent shall withdraw from the Reserve Fund to the extent
of any funds therein amounts to cover the amount of such Bond Fund insufficiency. Amounts
so withdrawn from the Reserve Fund shall be deposited by the Fiscal Agent in the Bond Fund.
If, after the foregoing transfers, there are insufficient funds in the Bond Fund to make
the payments provided for in the first sentence of the first paragraph of this Section 4.02(B), the
Fiscal Agent shall apply the available funds first to the payment of interest on the Bonds, then to
the payment of principal due on the Bonds other than by reason of sinking payments, and then
to payment of principal due on the Bonds by reason of sinking payments. Each such payment
shall be made ratably to the Owners of the Bonds based on the then Outstanding principal
amount of the Bonds, if there are insufficient funds to make the corresponding payment for all
of the then Outstanding Bonds. Any sinking payment not made as scheduled shall be added to
the sinking payment to be made on the next sinking payment date.
(ii) Special Tax Prepayments Account Disbursements. Moneys in the Special Tax
Prepayments Account shall be transferred by the Fiscal Agent to the Bond Fund on the next
date for which notice of redemption of Bonds under Section 2.03(A)(iii) can timely be given by
the Fiscal Agent under Section 2.03(E), and shall be used (together with any amounts
transferred pursuant to Section 4.03(F)) to redeem Bonds on the redemption date selected in
accordance with Section 2.03.
(C) Investment. Moneys in the Bond Fund and the Special Tax Prepayments Account
shall be invested in accordance with Section 6.01. Interest earnings and profits resulting from
investment of amounts in the Bond Fund and the Special Tax Prepayments Account shall be
retained in the Bond Fund and the Special Tax Prepayments Account, respectively, to be used
for the purposes of such fund and account as applicable.
(D) State Reporting. If at any time the Fiscal Agent fails to pay principal and interest
due on any scheduled payment date for the Bonds, or if funds are withdrawn from the Reserve
Fund to pay principal and /or interest on the Bonds, the Fiscal Agent shall notify the Finance
Director in writing of such failure or withdrawal, and (in addition to any notice required under
the Continuing Disclosure Agreement) the Finance Director shall notify CDIAC of such failure
or withdrawal within 10 days of the failure to make such payment or the date of such
withdrawal.
Section 4.03. Reserve Fund.
(A) Establishment of Reserve Fund. There is hereby established as a separate fund to be
held by the Fiscal Agent, the Community Facilities District No. 04 -1 (Tustin Legacy /John Laing
Homes) 2013 Special Tax Refunding Bonds, Reserve Fund to the credit of which a deposit shall
be made as required by clause (i) of Section 3.02(A), which deposit is equal to the initial Reserve
Requirement, and deposits shall be made as provided in subclause second of clause (ii) of the
second paragraph of Section 3.04(A), and Section 3.04(B). Moneys in the Reserve Fund shall be
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held by the Fiscal Agent for the benefit of the Owners of the Bonds as a reserve for the payment
of principal of, and interest and any premium on, the Bonds and shall be subject to a lien in
favor of the Owners of the Bonds.
(B) Use of Reserve Fund. Except as otherwise provided in this Section, all amounts
deposited in the Reserve Fund shall be used and withdrawn by the Fiscal Agent solely for the
purpose of making transfers to the Bond Fund in the event of any deficiency at any time in the
Bond Fund of the amount then required for payment of the principal of, and interest and any
premium on, the Bonds or, in accordance with the provisions of this Section, for the purpose of
redeeming Bonds from the Bond Fund.
(C) Transfer of Excess of Reserve Requirement. Whenever, on the Business Day before
any Interest Payment Date, or on any other date at the request of an Authorized Officer, the
amount in the Reserve Fund exceeds the Reserve Requirement, the Fiscal Agent shall provide
written notice to the City of the amount of the excess and shall transfer an amount equal to the
excess from the Reserve Fund to the Bond Fund to be used for the payment of interest on the
Bonds on the next Interest Payment Date in accordance with Section 4.02.
(D) Transfer for Rebate Purposes. Amounts in the Reserve Fund shall be withdrawn, at
the written request of an Authorized Officer, for purposes of making payment to the federal
government to comply with Section 6.02.
(E) Transfer When Balance Exceeds Outstanding Bonds. Whenever the balance in the
Reserve Fund exceeds the amount required to redeem or pay the Outstanding Bonds, including
interest accrued to the date of payment or redemption and premium, if any, due upon
redemption, the Fiscal Agent shall transfer the amount in the Reserve Fund to the Bond Fund to
be applied, on the next succeeding Interest Payment Date to the payment and redemption, in
accordance with Section 4.02 or 2.03, as applicable, of all of the Outstanding Bonds. In the event
that the amount so transferred from the Reserve Fund to the Bond Fund exceeds the amount
required to pay and redeem the Outstanding Bonds, the balance in the Reserve Fund shall be
transferred to the City to be used for any lawful purpose under the Act.
Notwithstanding the foregoing, no amounts shall be transferred from the Reserve Fund
pursuant to this Section 4.03(E) until after (i) the calculation, pursuant to Section 6.02, of any
amounts due to the federal government following payment of the Bonds and withdrawal of any
such amount under Section 4.03(D) for purposes of making such payment to the federal
government, and (ii) payment of any fees and expenses due to the Fiscal Agent.
(F) Transfer Upon Special Tax Prepayment. Whenever Special Taxes are prepaid and
Bonds are to be redeemed with the proceeds of such prepayment pursuant to Section 2.03(A)(iii)
and 4.02(B)(ii), a proportionate amount in the Reserve Fund (determined by the Finance
Director on the basis of the principal of Bonds to be redeemed and the then original principal of
the Bonds) shall be transferred on the Business Day prior to the redemption date by the Fiscal
Agent to the Bond Fund to be applied to the redemption of the Bonds pursuant to Section
2.03(A)(iii).
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(G) Investment. Moneys in the Reserve Fund shall be invested in accordance with
Section 6.01. One Business Day before each Interest Payment Date, interest earnings and profits
resulting from said investment shall be transferred by the Fiscal Agent to the Bond Fund to be
used by the Fiscal Agent for the purposes of such fund, but any such transfer shall be made
only to the extent that following such transfer the amount on deposit in the Reserve Fund
equals the then Reserve Requirement.
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ARTICLE V
OTHER COVENANTS OF THE CITY
Section 5.01. Punctual Payment. The City will punctually pay or cause to be paid the
principal of and interest and any premium on, the Bonds when and as due in strict conformity
with the terms of this Agreement and any Supplemental Agreement, and it will faithfully
observe and perform all of the conditions, covenants and requirements of this Agreement and
all Supplemental Agreements and of the Bonds.
Section 5.02. Limited Obligation. The Bonds are limited obligations of the City on
behalf of the District and are payable solely from and secured solely by the Special Tax
Revenues and the amounts in the Bond Fund (including the Special Tax Prepayments Account
therein), the Reserve Fund and the Special Tax Fund created hereunder.
Section 5.03. Extension of Time for Payment. In order to prevent any accumulation of
claims for interest after maturity, the City shall not, directly or indirectly, extend or consent to
the extension of the time for the payment of any claim for interest on any of the Bonds and shall
not, directly or indirectly, be a party to the approval of any such arrangement by purchasing or
funding said claims for interest or in any other manner. In case any such claim for interest shall
be extended or funded, whether or not with the consent of the City, such claim for interest so
extended or funded shall not be entitled, in case of default hereunder, to the benefits of this
Agreement, except subject to the prior payment in full of the principal of all of the Bonds then
Outstanding and of all claims for interest which shall not have been so extended or funded.
Section 5.04. Against Encumbrances. The City will not encumber, pledge or place any
charge or lien upon any of the Special Tax Revenues or other amounts pledged to the Bonds
superior to or on a parity with the pledge and lien herein created for the benefit of the Bonds,
except as permitted by this Agreement.
Section 5.05. Books and Records. The City will keep, or cause to be kept, proper books
of record and accounts, separate from all other records and accounts of the City, in which
complete and correct entries shall be made of all transactions relating to the Special Tax
Revenues. Such books of record and accounts shall at all times during City business hours and
following reasonable prior written notice be subject to the inspection of the Fiscal Agent and the
Owners of not less than ten percent (10 %) of the principal amount of the Bonds then
Outstanding, or their representatives duly authorized in writing.
Section 5.06. Protection of Security and Rights of Owners. The City will preserve and
protect the security of the Bonds and the rights of the Owners, and will warrant and defend
their rights against all claims and demands of all persons. From and after the delivery of any of
the Bonds by the City, the Bonds shall be incontestable by the City.
Section 5.07. Compliance with Law. The City will comply with all applicable
provisions of the Act in administering the District; provided that the City shall have no
obligation to advance any of its own funds for any purpose whatsoever under this Agreement.
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Section 5.05. Private Activity Bond Limitation. The City shall assure that the proceeds
of the 2004 Bonds and of the 2013 Bonds are not so used as to cause the 2004 Bonds or the 2013
Bonds to satisfy the private business tests of section 141(b) of the Code or the private loan
financing test of section 141(c) of the Code.
Section 5.09. Federal Guarantee Prohibition. The City shall not take any action or
permit or suffer any action to be taken if the result of the same would be to cause any of the
2013 Bonds to be "federally guaranteed" within the meaning of section 149(b) of the Code.
Section 5.10. Collection of Special Tax Revenues. The City shall comply with all
requirements of the Act so as to assure the timely collection of Special Tax Revenues, including
without limitation, the enforcement of delinquent Special Taxes.
On or about July 1 of each year, the Fiscal Agent shall provide the Finance Director with
a notice stating the amounts then on deposit in the Bond Fund and the Reserve Fund. The
receipt of such notice by the Finance Director shall in no way affect the obligations of the City
under the following three paragraphs. Upon receipt of such notice, the Finance Director shall
communicate with the Auditor or other appropriate official of the County to ascertain the
relevant parcels on which the Special Taxes are to be levied, taking into account any parcel
splits during the preceding and then current year. In computing the amount of Special Taxes to
be levied, the City shall take into account funds available in the Bond Fund and the Special Tax
Fund to make the payment of debt service on the Bonds due on the Interest Payment Dates
occurring in the next calendar year, along with any transfers of investment earnings pursuant to
Sections 4.03(C) or 4.03(G) to the Bond Fund expected to occur on such Interest Payment Date.
The City shall effect the levy of the Special Taxes from time to time during each Fiscal
Year in accordance with the Ordinance and the Rate and Method of Apportionment.
Specifically, the City shall compute the amount of Special Taxes to be so levied each Fiscal Year
before the final date on which the Auditor will accept the transmission of the Special Tax
amounts for the parcels within the District for inclusion on the next secured or unsecured, as
applicable, real property tax roll. Upon the completion of the computation of the amounts of
the levy, the City shall prepare or cause to be prepared, and shall transmit to the Auditor, such
data as the Auditor requires to include the levy of the Special Taxes on the next real property
tax roll. The Special Taxes so levied shall be payable and be collected in the same manner and
at the same time and in the same installment as the taxes on property levied on the tax roll are
payable, and have the same priority, become delinquent at the same times and in the same
proportionate amounts and bear the same proportionate penalties and interest after
delinquency as do the general ad valorem taxes levied on the County tax roll.
In the event that the City determines to levy all or a portion of the Special Taxes by
means of direct billing of the property owners within the District, and to the extent permitted
by the Ordinance, the City shall, not less than forty-five (45) days prior to the first Interest
Payment Date for which the levy is being made, send bills to the property owners in the District
for Special Taxes necessary to meet the financial obligations of the District due on the Interest
Payment Dates for which the levy is being made, said bills to specify that the amounts so levied
shall be due and payable in two equal installments with each installment due not less than
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thirty (30) days prior to the related Interest Payment Date and each installment shall be
delinquent if not paid when due.
In any event, the City shall fix and levy the amount of Special Taxes within the District
required for the timely payment of principal of and interest on any outstanding Bonds
becoming due and payable, including any necessary replenishment or expenditure of the
Reserve Fund for the Bonds and an amount estimated to be sufficient to pay the Administrative
Expenses, and shall take into account any prepayments of Special Taxes theretofore received by
the City. The Special Taxes so levied shall not exceed the maximum amounts as provided in the
Rate and Method of Apportionment.
The Finance Director is hereby authorized to employ consultants to assist in computing
the levy of the Special Taxes hereunder and any reconciliation of amounts levied to amounts
received. The fees and expenses of such consultants and the costs and expenses of the Finance
Director (including a charge for City staff time) in conducting its duties hereunder shall be an
Administrative Expense hereunder.
Section 5.11. Further Assurances. The City 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 Agreement, and for the
better assuring and confirming unto the Owners of the rights and benefits provided in this
Agreement.
Section 5.12. No Arbitrage. The City shall not take, or permit or suffer to be taken by
the Fiscal Agent or otherwise, any action with respect to the proceeds of the 2013 Bonds which,
if such action had been reasonably expected to have been taken, or had been deliberately and
intentionally taken, on the date of issuance of the 2013 Bonds would have caused the 2013
Bonds to be "arbitrage bonds" within the meaning of section 148 of the Code.
Section 5.13. Maintenance of Tax - Exemption. The City shall take all actions necessary
to assure the exclusion of interest on the 2013 Bonds from the gross income of the owners of the
2013 Bonds to the same extent as such interest is permitted to be excluded from gross income
under the Code as in effect on the date of issuance of the 2013 Bonds.
Section 5.14. Covenant to Foreclose. Pursuant to Section 53356.1 of the Act, the City, on
behalf of the District, hereby covenants with and for the benefit of the Owners of the Bonds that
it will determine or cause to be determined, no later than August 15 of each year, whether or
not any owners of property within the District are delinquent in the payment of Special Taxes
and, if such delinquencies exist, the City, on behalf of the District, will order and cause to be
commenced no later than October 1, and thereafter diligently prosecute, an action in the
superior court to foreclose the lien of any Special Taxes or installment thereof not paid when
due; provided, however, that the City shall not be required to order the commencement of
foreclosure proceedings if (a) the total Special Tax delinquency in the District for such Fiscal
Year is less than 5% of the total Special Tax levied in such Fiscal year, or (b) the amount then on
deposit in the Reserve Fund is equal to the Reserve Requirement. Notwithstanding the
foregoing, if the City determines that any single property owner in the District is delinquent in
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excess of $5,000 in the payment of the Special Tax, then the City, on behalf of the District, will
diligently institute, prosecute and pursue foreclosure proceedings against such property owner.
The Finance Director is hereby authorized to employ counsel to conduct any such
foreclosure proceedings. The fees and expenses of any such counsel (including a charge for City
staff time) in conducting foreclosure proceedings shall be an Administrative Expense
hereunder.
Section 5.15. No Additional Bonds. Except as expressly permitted by Section 2.14
hereof, the City shall not issue any additional bonds secured by (A) a pledge of Special Taxes on
a parity with or senior to the pledge thereof under Section 4.01 hereof; or (B) any amounts in
any funds or accounts established hereunder.
Section 5.16. Yield of the 2013 Bonds. In determining the yield of the 2013 Bonds to
comply with Section 5.12 and 6.02 hereof, the City will take into account redemption (including
premium, if any) in advance of maturity based on the reasonable expectations of the City, as of
the Closing Date, regarding prepayments of Special Taxes and use of prepayments for
redemption of the 2013 Bonds, without regard to whether or not prepayments are received or
2013 Bonds redeemed.
Section 5.17. Continuing Disclosure. The City hereby covenants and agrees that it will
comply with and carry out all of the provisions of the Continuing Disclosure Agreement.
Notwithstanding any other provision of this Agreement, failure of the City to comply with the
Continuing Disclosure Agreement shall not be considered a default on the Bonds or a breach of
any other provision of this Agreement; however, at the request of any Participating
Underwriter or the holders of at least a majority aggregate principal amount of Outstanding
2013 Bonds, and in either case upon receipt of satisfactory indemnity by the Fiscal Agent (which
indemnity shall include payment of its fees and expenses, including attorneys' fees), the Fiscal
Agent shall, or in any event the Participating Underwriter or any 2013 Bondholder may, take
such actions as may be necessary and appropriate to compel performance by the City, of its
obligations under the Continuing Disclosure Agreement, including seeking mandate or specific
performance by court order.
Section 5.15. Reduction of Special Taxes. The City covenants and agrees to not consent
or conduct proceedings with respect to a reduction in the maximum Special Taxes that may be
levied in the District below an amount, for any Fiscal Year, equal to 110% of the aggregate of the
debt service due on the Bonds in such Fiscal Year, plus a reasonable estimate of Administrative
Expenses for such Fiscal Year. It is hereby acknowledged that Bondowners are purchasing the
Bonds in reliance on the foregoing covenant, and that said covenant is necessary to assure the
full and timely payment of the Bonds.
Section 5.19. State Reporting Requirements. The following requirements shall apply
to the 2013 Bonds, in addition to those requirements under Section 5.17:
(A) Annual Reporting. Not later than October 30 of each calendar year,
beginning with the October 30, 2013, and in each calendar year thereafter until the
October 30 following the final maturity of the Bonds, the City shall cause the following
information to be supplied to CDIAC: (i) the name of the City; (ii) the full name of the
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District; (iii) the name, title, and series of the Bond issue; (iv) any credit rating for the
Bonds and the name of the rating agency; (v) the Closing Date of the Bond issue and the
original principal amount of the Bond issue; (vi) the amount of the Reserve
Requirement; (vii) the principal amount of Bonds outstanding; (viii) the balance in the
Reserve Fund; (ix) that there is no capitalized interest account for the Bonds; (x) the
number of parcels in the District that are delinquent with respect to Special Tax
payments, the amount that each parcel is delinquent, the total amount of Special Taxes
due on the delinquent parcels, the length of time that each has been delinquent, when
foreclosure was commenced for each delinquent parcel, the total number of foreclosure
parcels for each date specified, and the total amount of tax due on the foreclosure
parcels for each date specified; (xi) that there is no balance in any improvement fund for
the District; (xii) the assessed value of all parcels subject to the Special Tax to repay the
Bonds as shown on the most recent equalized roll, the date of assessed value reported,
and the source of the information; (xiii) the total amount of Special Taxes due, the total
amount of unpaid Special Taxes, and whether or not the Special Taxes are paid under
the County's Teeter Plan (Chapter 6.6 (commencing with Section 54773) of the California
Government Code); (xiv) the reason and the date, if applicable, that the Bonds were
retired; and (xv) contact information for the party providing the foregoing information.
The annual reporting shall be made using such form or forms as may be prescribed by
CDIAC.
(B) Other Reporting. If at any time the Fiscal Agent fails to pay principal and
interest due on any scheduled payment date for the Bonds, or if funds are withdrawn
from the Reserve Fund to pay principal and interest on the Bonds, the Fiscal Agent shall
notify the City of such failure or withdrawal in writing. The City shall notify CDIAC
and the Original Purchaser of such failure or withdrawal within 10 days of such failure
or withdrawal, and the City shall provide notice under the Continuing Disclosure
Agreement of such event as required thereunder.
(C) Special Tax Reporting. The Finance Director shall file, or cause to be filed, a
report with the City no later than January 1, 2014, and at least once a year thereafter,
which annual report shall contain: (i) the amount of Special Taxes collected and
expended with respect to the District, (ii) the amount of Bond proceeds collected and
expended with respect to the District, and (iii) the status of the Project. It is
acknowledged that the Special Tax Fund and the Special Tax Prepayments Account are
the accounts into which Special Taxes collected on the District will be deposited for
purposes of Section 50075.1(c) of the California Government Code, and the funds and
accounts listed in Section 4.01 are the funds and accounts into which Bond proceeds will
be deposited for purposes of Section 53410(c) of the California Government Code, and
the annual report described in the preceding sentence is intended to satisfy the
requirements of Sections 50075.1(4), 50075.3(d) and 53411 of the California Government
Code.
(D) Amendment. The reporting requirements of this Section 5.19 shall be
amended from time to time, without action by the City or the Fiscal Agent (i) with
respect to subparagraphs (A) and (B) above, to reflect any amendments to Section
53359.5(b) or Section 53359.5(c) of the Act, and (ii) with respect to subparagraph (C)
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above, to reflect any amendments to Section 50075.1, 50075.3, 53410 or 53411 of the
California Government Code. Notwithstanding the foregoing, any such amendment
shall not, in itself, affect the City's obligations under the Continuing Disclosure
Agreement. The City shall notify the Fiscal Agent in writing of any such amendments
which affect the reporting obligations of the Fiscal Agent under this Agreement.
(E) No Liability. None of the City and its officers, agents and employees
(including but not limited to the Finance Director), or the Fiscal Agent, shall be liable for
any inadvertent error in reporting the information required by this Section 5.19.
The Finance Director shall provide, or cause to be provided, copies of any reports
prepared pursuant to this Section 5.19 to any Bondowner upon the written request of a
Bondowner and payment by the person requesting the information of the cost of the City to
produce such information and pay any postage or other delivery cost to provide the same, as
determined by the Finance Director. The term " Bondowner" for purposes of this Section 5.19
shall include any beneficial owner of the Bonds.
Section 5.20. Limits on Special Tax Waivers and Bond Tenders. The City covenants
not to exercise its rights under the Act to waive delinquency and redemption penalties related
to the Special Taxes or to declare Special Tax penalties amnesty program if to do so would
materially and adversely affect the interests of the owners of the Bonds. The City further
covenants not to permit the tender of Bonds in payment of any Special Taxes except upon
receipt of a certificate of an Independent Financial Consultant that to accept such tender will not
result in the City having insufficient Special Tax Revenues to pay the principal of and interest
on the Bonds that will remain Outstanding following such tender.
Section 5.21. City Bid at Foreclosure Sale. The City will not bid at a foreclosure sale of
property in respect of delinquent Special Taxes unless it expressly agrees to take the property
subject to the lien for Special Taxes imposed by the District and that the Special Taxes levied on
the property are payable while the City owns the property.
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ARTICLE VI
INVESTMENTS; DISPOSITION OF INVESTMENT PROCEEDS;
LIABILITY OF THE COUNTY
Section 6.01. Deposit and Investment of Moneys in Funds. Moneys in any fund or
account created or established by this Agreement and held by the Fiscal Agent shall be invested
by the Fiscal Agent in Permitted Investments, as directed pursuant to an Officer's Certificate
filed with the Fiscal Agent at least two (2) Business Days in advance of the making of such
investments. The Officer's Certificate shall contain a certification to the Fiscal Agent that the
investments being directed are Permitted Investments as required hereunder. In the absence of
any such Officer's Certificate, the Fiscal Agent shall invest any such moneys in Permitted
Investments described in clause (h) of the definition thereof; provided, however, that any such
investment shall be made by the Fiscal Agent only if, prior to the date on which such
investment is to be made, the Fiscal Agent shall have received an Officer's Certificate specifying
a specific money market fund into which the funds shall be invested and, if no such Officer's
Certificate is so received, the Fiscal Agent shall hold such moneys uninvested.
Moneys in any fund or account created or established by this Agreement and held by
the City shall be invested by the City in any lawful investments that the City may make or in
any Permitted Investment, which in any event by their terms mature prior to the date on which
such moneys are required to be paid out hereunder. Obligations purchased as an investment of
moneys in any fund shall be deemed to be part of such fund or account, subject, however, to the
requirements of this Agreement for transfer of interest earnings and profits resulting from
investment of amounts in funds and accounts. Whenever in this Agreement any moneys are
required to be transferred by the City to the Fiscal Agent, such transfer may be accomplished by
transferring a like amount of Permitted Investments.
The Fiscal Agent or the Finance Director may act as principal or agent in the acquisition
or disposition of any investment, and all investments may be made through the Fiscal Agent's
investment department or that of its affiliates. The Fiscal Agent or its affiliates may act as
sponsor, agent manager or depository with regard to any Permitted Investment. Neither the
Fiscal Agent nor the Finance Director shall incur any liability for losses arising from any
investments made pursuant to this Section.
Except as otherwise provided in the next sentence, the City shall direct or make
investments hereunder such that all investments of amounts deposited in any fund or account
created by or pursuant to this Agreement, or otherwise containing gross proceeds of the Bonds
(within the meaning of section 148 of the Code) shall be acquired, disposed of, and valued (as of
the date that valuation is required by this Agreement or the Code) at Fair Market Value. The
City shall direct or make investments hereunder such that investments in funds or accounts (or
portions thereof) that are subject to a yield restriction under applicable provisions of the Code
and (unless valuation is undertaken at least annually) investments in the Reserve Fund shall be
valued at their present value (within the meaning of section 148 of the Code). The Fiscal Agent
shall have no duty in connection with the determination of the Fair Market Value of any
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investment other than to follow: (A) its normal practices in the purchase, sale and determining
the value of Permitted Investments; and (B) the investment directions of the City.
Investments in any and all funds and accounts may be commingled in a separate fund or
funds for purposes of making, holding and disposing of investments, notwithstanding
provisions herein for transfer to or holding in or to the credit of particular funds or accounts of
amounts received or held by the Fiscal Agent or the Finance Director hereunder, provided that
the Fiscal Agent or the Finance Director, as applicable, shall at all times account for such
investments strictly in accordance with the funds and accounts to which they are credited and
otherwise as provided in this Agreement.
The Fiscal Agent shall sell in a commercially reasonably manner, or present for
redemption, any investment security whenever it shall be necessary to provide moneys to meet
any required payment, transfer, withdrawal or disbursement from the fund or account to which
such investment security is credited and neither the Fiscal Agent nor the Finance Director shall
be liable or responsible for any loss resulting from the acquisition or disposition of such
investment security in accordance herewith.
The City acknowledges that regulations of the Comptroller of the Currency grant the
City the right to receive brokerage confirmations of security transactions to be effected by the
Fiscal Agent hereunder as they occur. The City specifically waives the right to receive such
notification to the extent permitted by applicable law and agrees that it will instead receive
monthly cash transactions statements which include detail for the investment transactions
effected by the Fiscal Agent hereunder; provided, however, that the City retains its rights to,
upon written request to the Fiscal Agent, receive brokerage confirmation on any investment
transaction requested by the City.
Section 6.02. Rebate of Excess Investment Earnings to the United States. The City
shall take any and all actions necessary to assure compliance with section 148(f) of the 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 2013 Bonds.
The City shall direct the Fiscal Agent to withdraw such amounts from the Reserve Fund
pursuant to Section 4.03(D) as necessary to make any required rebate payments, and pay such
amounts to the federal government as required by the Code and the Regulations. In the event
of any shortfall in amounts available to make such payments under Section 4.03(D), the City
shall make such payment from any amounts available in the Administrative Expense Fund or
from any other lawfully available funds of the District. Any fees or expenses incurred by the
City under or pursuant to this Section 6.02 shall be Administrative Expenses.
In order to provide for the administration of this Section 6.02, the Finance Director may
provide for the employment of independent attorneys, accountants and consultants
compensated on such reasonable basis as the Finance Director may deem appropriate and in
addition, and without limitation of the provisions of Sections 7.01 and 7.02, the Finance Director
may rely conclusively upon and be fully protected from all liability in relying upon the
opinions, determinations, calculations and advice of such agents, attorneys and consultants
employed hereunder.
5@11
The Fiscal Agent may rely conclusively upon the City's determinations, calculations and
certifications required by this Section. The Fiscal Agent shall have no responsibility to
independently make any calculation or determination or to review the City's calculations
hereunder.
Section 6.03. Liability of City. The City shall not incur any responsibility in respect of
the Bonds or this Agreement other than in connection with the duties or obligations explicitly
herein or in the Bonds assigned to or imposed upon it. The City shall not be liable in connection
with the performance of its duties hereunder, except for its own negligence or willful default.
The City shall not be bound to ascertain or inquire as to the performance or observance of any
of the terms, conditions covenants or agreements of the Fiscal Agent herein or of any of the
documents executed by the Fiscal Agent in connection with the Bonds, or as to the existence of a
default or event of default thereunder.
In the absence of bad faith, the City, including the Finance Director, may conclusively
rely, as to the truth of the statements and the correctness of the opinions expressed therein,
upon certificates or opinions furnished to the City and conforming to the requirements of this
Agreement. The City, including the Finance Director, shall not be liable for any error of
judgment made in good faith unless it shall be proved that it was negligent in ascertaining the
pertinent facts.
No provision of this Agreement shall require the City to expend or risk its own general
funds or otherwise incur any financial liability (other than with respect to the Special Tax
Revenues) in the performance of any of its obligations hereunder, or in the exercise of any of its
rights or powers, if it shall have reasonable grounds for believing that repayment of such funds
or adequate indemnity against such risk or liability is not reasonably assured to it.
The City may rely and shall be protected in acting or refraining from acting upon any
notice, resolution, request, consent, order, certificate, report, warrant, bond or other paper or
document believed by it to be genuine and to have been signed or presented by the proper
party or proper parties. The City may consult with counsel, who may be the City Attorney,
with regard to legal questions, and the opinion of such counsel shall be full and complete
authorization and protection in respect of any action taken or suffered by it hereunder in good
faith and in accordance therewith.
The City shall not be bound to recognize any person as the Owner of a Bond unless and
until such Bond is submitted for inspection, if required, and his title thereto satisfactory
established, if disputed.
Whenever in the administration of its duties under this Agreement the City shall deem it
necessary or desirable that a matter be proved or established prior to taking or suffering any
action hereunder, such matter (unless other evidence in respect thereof be herein specifically
prescribed) may, in the absence of willful misconduct on the part of the City, be deemed to be
conclusively proved and established by a certificate of the Fiscal Agent or other appropriate
agent or consultant, and such certificate shall be full warrant to the City for any action taken or
suffered under the provisions of this Agreement or any Supplemental Agreement upon the faith
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thereof, but in its discretion the City may, in lieu thereof, accept other evidence of such matter
or may require such additional evidence as to it may seem reasonable.
Section 6.04. Employment of Agents by City. In order to perform its duties and
obligations hereunder, the City and /or the Finance Director may employ such persons or
entities as it deems necessary or advisable. The City shall not be liable for any of the acts or
omissions of such persons or entities employed by it in good faith hereunder, and shall be
entitled to rely, and shall be fully protected in doing so, upon the opinions, calculations,
determinations and directions of such persons or entities.
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ARTICLE VII
THE FISCAL AGENT
Section 7.01. Appointment of Fiscal Agent. U.S. Bank National Association, at its
corporate trust office in Los Angeles, California is hereby appointed Fiscal Agent and paying
agent for the Bonds. The Fiscal Agent undertakes to perform such duties, and only such duties,
as are specifically set forth in this Agreement, and no implied covenants or obligations shall be
read into this Agreement against the Fiscal Agent.
Any company or association into which the Fiscal Agent may be merged or converted or
with which it may be consolidated or any company or association resulting from any merger,
conversion or consolidation to which it shall be a party or any company or association to which
the Fiscal Agent may sell or transfer all or substantially all of its corporate trust business,
provided such company or association shall be eligible under the following paragraph of this
Section, shall be the successor to such Fiscal Agent without the execution or filing of any paper
or any further act, anything herein to the contrary notwithstanding. The Fiscal Agent shall give
the Finance Director written notice of any such succession hereunder.
The City may remove the Fiscal Agent initially appointed, and any successor thereto,
and may appoint a successor or successors thereto, but any such successor shall be a bank,
association or trust company having a combined capital (exclusive of borrowed capital) and
surplus of at least Fifty Million Dollars ($50,000,000), and subject to supervision or examination
by federal or state authority. If such bank, association or trust company publishes a report of
condition at least annually, pursuant to law or to the requirements of any supervising or
examining authority above referred to, then for the purposes of this Section 7.01, combined
capital and surplus of such bank, association or trust company shall be deemed to be its
combined capital and surplus as set forth in its most recent report of condition so published.
The Fiscal Agent may at any time resign by giving written notice to the City and by
giving to the Owners notice by mail of such resignation. Upon receiving notice of such
resignation, the City shall promptly appoint a successor Fiscal Agent by an instrument in
writing. Any resignation or removal of the Fiscal Agent shall become effective only upon
acceptance of appointment by the successor Fiscal Agent. Upon such acceptance, the successor
Fiscal Agent shall be vested with all rights and powers of its predecessor hereunder without
any further act.
If no appointment of a successor Fiscal Agent shall be made pursuant to the foregoing
provisions of this Section within forty-five (45) days after the Fiscal Agent shall have given to
the City written notice or after a vacancy in the office of the Fiscal Agent shall have occurred by
reason of its inability to act, the Fiscal Agent or any Bondowner may apply to any court of
competent jurisdiction to appoint a successor Fiscal Agent. Said court may thereupon, after
such notice, if any, as such court may deem proper, appoint a successor Fiscal Agent.
If, by reason of the judgment of any court, or reasonable agency, the Fiscal Agent is
rendered unable to perform its duties hereunder, all such duties and all of the rights and
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powers of the Fiscal Agent hereunder shall be assumed by and vest in the Finance Director for
the benefit of the Owners. The City covenants for the direct benefit of the Owners that its
Finance Director in such case shall be vested with all of the rights and powers of the Fiscal
Agent hereunder, and shall assume all of the responsibilities and perform all of the duties of the
Fiscal Agent hereunder, in trust for the benefit of the Owners of the Bonds. In such event, the
Finance Director may designate a successor Fiscal Agent qualified to act as Fiscal Agent
hereunder.
Section 7.02. Liability of Fiscal Agent. The recitals of facts, covenants and agreements
herein and in the Bonds contained shall be taken as statements, covenants and agreements of
the City, and the Fiscal Agent assumes no responsibility for the correctness of the same, or
makes any representations as to the validity or sufficiency of this Agreement or of the Bonds, or
shall incur any responsibility in respect thereof, other than in connection with the duties or
obligations herein or in the Bonds assigned to or imposed upon it. The Fiscal Agent shall not be
liable in connection with the performance of its duties hereunder, except for its own negligence
or willful default. The Fiscal Agent assumes no responsibility or liability for any information,
statement or recital in any offering memorandum or other disclosure material prepared or
distributed with respect to the issuance of the Bonds.
In the absence of bad faith, the Fiscal Agent may conclusively rely, as to the truth of the
statements and the correctness of the opinions expressed therein, upon certificates or opinions
furnished to the Fiscal Agent and conforming to the requirements of this Agreement; but in the
case of any such certificates or opinions by which any provision hereof are specifically required
to be furnished to the Fiscal Agent, the Fiscal Agent shall be under a duty to examine the same
to determine whether or not they conform to the requirements of this Agreement. Except as
provided above in this paragraph, Fiscal Agent shall be protected and shall incur no liability in
acting or proceeding, or in not acting or not proceeding, in good faith, reasonably and in
accordance with the terms of this Agreement, upon any resolution, order, notice, request,
requisition, Officer's Certificate, consent or waiver, certificate, statement, affidavit, or other
paper or document which it shall in good faith reasonably believe to be genuine and to have
been adopted or signed by the proper person or to have been prepared and furnished pursuant
to any provision of this Agreement, and the Fiscal Agent shall not be under any duty to make
any investigation or inquiry as to any statements contained or matters referred to in any such
instrument.
The Fiscal Agent shall not be liable for any error of judgment made in good faith by a
responsible officer unless it shall be proved that the Fiscal Agent was negligent in ascertaining
the pertinent facts.
No provision of this Agreement shall require the Fiscal Agent to expend or risk its own
funds or otherwise incur any financial liability in the performance of any of its duties
hereunder, or in the exercise of any of its rights or powers.
The Fiscal Agent shall be under no obligation to exercise any of the rights or powers
vested in it by this Agreement at the request or direction of any of the Owners pursuant to this
Agreement unless such Owners shall have offered to the Fiscal Agent security or indemnity
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satisfactory to it against the fees, expenses and liabilities (including reasonable attorney's fees)
which might be incurred by it in compliance with such request or direction.
The Fiscal Agent may become the owner of the Bonds with the same rights it would
have if it were not the Fiscal Agent.
The Fiscal Agent shall have no duty-or obligation whatsoever to enforce the collection of
Special Taxes or other funds to be deposited with it hereunder, or as to the correctness of any
amounts received, and its liability shall be limited to the proper accounting for such funds as it
shall actually receive.
The Fiscal Agent may consult with counsel, who may be counsel of or to the City, with
regard to legal questions, and the opinion of such counsel shall be full and complete
authorization and protection in respect of any action taken or suffered by it hereunder in good
faith and in accordance therewith.
In order to perform its duties and obligations hereunder, the Fiscal Agent may employ
such persons or entities as it deems necessary or advisable. The Fiscal Agent shall not be liable
for any of the acts or omissions of such persons or entities employed by it in good faith
hereunder, and shall be entitled to rely, and shall be fully protected in doing so, upon the
opinions, calculations, determinations and directions of such persons or entities.
The Fiscal Agent agrees to accept and act upon instructions or directions pursuant to
this Agreement sent by unsecured e-mail, facsimile transmission or other similar unsecured
electronic methods; provided, however, that the Fiscal Agent shall have received an
incumbency certificate listing persons designated to give such instructions or directions and
containing specimen signatures of such designated persons, which such incumbency certificate
shall be amended and replaced whenever a person is to be added or deleted from the listing. If
the City elects to give the Fiscal Agent e -mail or facsimile instructions (or instructions by a
similar electronic method) and the Fiscal Agent in its discretion elects to act upon such
instructions, the Fiscal Agent's reasonable understanding of such instructions shall be deemed
controlling. The Fiscal Agent shall not be liable for any losses, costs or expenses arising directly
or indirectly from the Fiscal Agent's reliance upon and compliance with such instructions
notwithstanding such instructions conflict or are inconsistent with a subsequent written
instruction. The City agrees to assume all risks arising out of the use of such electronic methods
to submit instructions and directions to the Fiscal Agent, including without limitation the risk of
interception and misuse by third parties.
The Fiscal Agent 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, 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, malicious mischief, condemnation, and unusually severe weather or delays of suppliers
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or subcontractors due to such causes or any similar event and /or occurrences beyond the
control of the Fiscal Agent.
Section 7.03. Information; Books and Accounts. The Fiscal Agent shall provide to the
City such information relating to the Bonds and the funds and accounts maintained by the
Fiscal Agent hereunder as the City shall reasonably request, including but not limited to
quarterly statements reporting funds held and transactions by the Fiscal Agent.
The Fiscal Agent will keep, or cause to be kept, proper books of record and accounts,
separate from all other records and accounts of the Fiscal Agent, in which complete and correct
entries shall be made of all transactions relating to the expenditure of amounts disbursed from
the Special Tax Fund, the Bond Fund, the Special Tax Prepayments Account, the Reserve Fund,
the Administrative Expense Fund and the Costs of Issuance Fund. Such books of record and
accounts shall upon reasonable prior notice at all times during business hours be subject to the
inspection of the City and the Owners of not less than ten percent (10 %) of the principal amount
of the Bonds then Outstanding, or their representatives duly authorized in writing.
Section 7.04. Notice to Fiscal Agent. The Fiscal Agent may rely and shall be protected
in acting or refraining from acting upon any notice, resolution, request, requisition, Officer's
Certificate, consent, order, certificate, report, warrant, Bond or other paper or document
believed by it to be genuine and to have been signed or presented by the proper party or proper
parties.
The Fiscal Agent shall not be bound to recognize any person as the Owner of a Bond
unless and until such Bond is submitted for inspection, if required, and his title thereto
satisfactorily established, if disputed.
Whenever in the administration of its duties under this Agreement the Fiscal Agent shall
deem it necessary or desirable that a matter be proved or established prior to taking or suffering
any action hereunder, such matter (unless other evidence in respect thereof be herein
specifically prescribed) may, in the absence of willful misconduct on the part of the Fiscal
Agent, be deemed to be conclusively proved and established by a certificate of the City, and
such certificate shall be full warrant to the Fiscal Agent for any action taken or suffered under
the provisions of this Agreement or any Supplemental Agreement upon the faith thereof, but in
its discretion the Fiscal Agent may, in lieu thereof, accept other evidence of such matter or may
require such additional evidence as to it may seem reasonable.
Section 7.05. Compensation, Indemnification. The City shall pay to the Fiscal Agent
from time to time, promptly upon written request, reasonable compensation for all services
rendered as Fiscal Agent under this Agreement, and also all reasonable expenses, charges,
counsel fees and other disbursements, including those of their attorneys, agents and employees,
incurred in and about the performance of their powers and duties under this Agreement, but
the Fiscal Agent shall not have a lien therefor on any funds at any time held by it under this
Agreement. The City further agrees, to the extent permitted by applicable law, to indemnify
and save the Fiscal Agent, its officers, employees, directors and agents harmless against any
liabilities which it may incur in the exercise and performance of its powers and duties
hereunder (including legal fees and expenses) which are not due to its negligence or willful
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misconduct. The obligation of the City under this Section shall survive resignation or removal
of the Fiscal Agent under this Agreement and payment of the Bonds and discharge of this
Agreement, but any monetary obligation of the City arising under this Section shall be limited
solely to amounts on deposit in the Administrative Expense Fund.
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ARTICLE VIII
MODIFICATION OR AMENDMENT OF THIS AGREEMENT
Section 8.01. Amendments Permitted. This Agreement and the rights and obligations
of the City and of the Owners of the Bonds may be modified or amended at any time by a
Supplemental Agreement pursuant to the affirmative vote at a meeting of Owners, or with the
written consent without a meeting, of the Owners of at least sixty percent (60 %) in aggregate
principal amount of the Bonds then Outstanding, exclusive of Bonds disqualified as provided in
Section 8.04. No such modification or amendment shall (i) extend the maturity of any Bond or
reduce the interest rate thereon, or otherwise alter or impair the obligation of the City to pay the
principal of, and the interest and any premium on, any Bond, without the express consent of the
Owner of such Bond, or (ii) permit the creation by the City of any pledge or lien upon the
Special Taxes superior to or on a parity with the pledge and lien created for the benefit of the
Bonds (except as otherwise permitted by the Act, the laws of the State of California or this
Agreement), or reduce the percentage of Bonds required for the amendment hereof. Any such
amendment may not modify any of the rights or obligations of the Fiscal Agent without its
written consent.
This Agreement and the rights and obligations of the City and of the Owners may also
be modified or amended at any time by a Supplemental Agreement, without the consent of any
Owners, only to the extent permitted by law and only for any one or more of the following
purposes:
(A) to add to the covenants and agreements of the City in this Agreement
contained, other covenants and agreements thereafter to be observed, or to limit or
surrender any right or power herein reserved to or conferred upon the City;
(B) to make modifications not adversely affecting any outstanding series of
Bonds of the City in any material respect;
(C) to make such provisions for the purpose of curing any ambiguity, or of
curing, correcting or supplementing any defective provision contained in this
Agreement, or in regard to questions arising under this Agreement, as the City may
deem necessary or desirable and not inconsistent with this Agreement, and which shall
not adversely affect the rights of the Owners of the Bonds;
(D) to make such additions, deletions or modifications as may be necessary or
desirable to assure the exclusion from gross income, for purposes of federal income
taxation, of interest on the 2013 Bonds; and
(E) in connection with the issuance of Parity Bonds under and pursuant to
Section 2.14.
The Fiscal Agent may in its discretion, but shall not be obligated to, enter into any such
Supplemental Agreement authorized by this Section which materially adversely affects the
ERA
Fiscal Agent's own rights, duties or immunities under this Fiscal Agent Agreement or otherwise
with respect to the Bonds or any agreements related thereto. The Fiscal Agent may request and
shall be fully protected in relying upon, an opinion of Bond Counsel that any proposed
Supplemental Agreement complies with the applicable requirements of this Section 8.01
Section 8.02. Owners' Meetings. The City may at any time call a meeting of the
Owners. In such event the City is authorized to fix the time and place of said meeting and to
provide for the giving of notice thereof, and to fix and adopt rules and regulations for the
conduct of said meeting.
Section 8.03. Procedure for Amendment with Written Consent of Owners. The City
and the Fiscal Agent may at any time adopt a Supplemental Agreement amending the
provisions of the Bonds or of this Agreement or any Supplemental Agreement, to the extent that
such amendment is permitted by Section 8.01, to take effect when and as provided in this
Section. The City or the Fiscal Agent may obtain an opinion of Bond Counsel that such
Supplemental Agreement complies with the provisions of this Article VIII, and the City and
Fiscal Agent may rely conclusively upon such opinion. A copy of such Supplemental
Agreement, together with a request to Owners for their consent thereto, shall be mailed by first
class mail, by the Fiscal Agent to each Owner of Bonds Outstanding, but failure to mail copies
of such Supplemental Agreement and request shall not affect the validity of the Supplemental
Agreement when assented to as in this Section provided.
Such Supplemental Agreement shall not become effective unless there shall be filed with
the Fiscal Agent the written consents of the Owners of at least sixty percent (60 %) in aggregate
principal amount of the Bonds then Outstanding (exclusive of Bonds disqualified as provided in
Section 8.04) and a notice shall have been mailed as hereinafter in this Section provided. Each
such consent shall be effective only if accompanied by proof of ownership of the Bonds for
which such consent is given, which proof shall be such as is permitted by Section 9.04. Any
such consent shall be binding upon the Owner of the Bonds giving such consent and on any
subsequent Owner (whether or not such subsequent Owner has notice thereof) unless such
consent is revoked in writing by the Owner giving such consent or a subsequent Owner by
filing such revocation with the Fiscal Agent prior to the date when the notice hereinafter in this
Section provided for has been mailed.
After the Owners of the required percentage of Bonds shall have filed their consents to
the Supplemental Agreement, the City shall mail a notice to the Owners in the manner
hereinbefore provided in this Section for the mailing of the Supplemental Agreement, stating in
substance that the Supplemental Agreement has been consented to by the Owners of the
required percentage of Bonds and will be effective as provided in this Section (but failure to
mail copies of said notice shall not affect the validity of the Supplemental Agreement or
consents thereto). Proof of the mailing of such notice shall be filed with the Fiscal Agent. A
record, consisting of the papers required by this Section 8.03 to be filed with the Fiscal Agent,
shall be proof of the matters therein stated until the contrary is proved. The Supplemental
Agreement shall become effective upon the filing with the Fiscal Agent of the proof of mailing
of such notice, and the Supplemental Agreement shall be deemed conclusively binding (except
as otherwise hereinabove specifically provided in this Article) upon the City and the Owners of
all Bonds at the expiration of sixty (60) days after such filing, except in the event of a final
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decree of a court of competent jurisdiction setting aside such consent in a legal action or
equitable proceeding for such purpose commenced within such sixty-day period.
Section 8.04. Disqualified Bonds. Bonds owned or held for the account of the City,
excepting any pension or retirement fund, shall not be deemed Outstanding for the purpose of
any vote, consent or other action or any calculation of Outstanding Bonds provided for in this
Article VIII, and shall not be entitled to vote upon, consent to, or take any other action provided
for in this Article VIII. Upon written request, the City shall specify to the Fiscal Agent those
Bonds disqualified pursuant to this Section 8.04. The Fiscal Agent may conclusively rely upon
such request.
Section 8.05. Effect of Supplemental Agreement. From and after the time any
Supplemental Agreement becomes effective pursuant to this Article VIII, this Agreement shall
be deemed to be modified and amended in accordance therewith, the respective rights, duties
and obligations under this Agreement of the City and all Owners of Bonds Outstanding shall
thereafter be determined, exercised and enforced hereunder subject in all respects to such
modifications and amendments, and all the terms and conditions of any such Supplemental
Agreement shall be deemed to be part of the terms and conditions of this Agreement for any
and all purposes.
Section 8.06. Endorsement or Replacement of Bonds Issued After Amendments. The
City may determine that Bonds issued and delivered after the effective date of any action taken
as provided in this Article VIII shall bear a notation, by endorsement or otherwise, in form
approved by the City, as to such action. In that case, upon demand of the Owner of any Bond
Outstanding at such effective date and presentation of his Bond for that purpose at the Principal
Office of the Fiscal Agent or at such other office as the City may select and designate for that
purpose, a suitable notation shall be made on such Bond. The City may determine that new
Bonds, so modified as in the opinion of the City is necessary to conform to such Owners' action,
shall be prepared, executed and delivered. In that case, upon demand of the Owner of any
Bonds then Outstanding, such new Bonds shall be exchanged at the Principal Office of the
Fiscal Agent without cost to any Owner, for Bonds then Outstanding, upon surrender of such
Bonds.
Section 8.07. Amendatory Endorsement of Bonds. The provisions of this Article VIII
shall not prevent any Owner from accepting any amendment as to the particular Bonds held by
him, provided that due notation thereof is made on such Bonds.
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ARTICLE IX
MISCELLANEOUS
Section 9.01. Benefits of Agreement Limited to Parties. Nothing in this Agreement,
expressed or implied, is intended to give to any person other than the City, the Fiscal Agent and
the Owners, any right, remedy, claim under or by reason of this Agreement. Any covenants,
stipulations, promises or agreements in this Agreement contained by and on behalf of the City
shall be for the sole and exclusive benefit of the Owners and the Fiscal Agent.
Section 9.02. Successor is Deemed Included in All References to Predecessor.
Whenever in this Agreement or any Supplemental Agreement either the City or the Fiscal
Agent is named or referred to, such reference shall be deemed to include the successors or
assigns thereof, and all the covenants and agreements in this Agreement contained by or on
behalf of the City or the Fiscal Agent shall bind and inure to the benefit of the respective
successors and assigns thereof whether so expressed or not.
Section 9.03. Discharge of Agreement. The City shall have the option to pay and
discharge the entire indebtedness on all or any portion of the Bonds Outstanding in any one or
more of the following ways:
(A) by well and truly paying or causing to be paid the principal of, and interest
and any premium on, such Bonds Outstanding, as and when the same become due and
payable;
(B) by depositing with the Fiscal Agent, in trust, at or before maturity, money
which, together with the amounts then on deposit in the funds and accounts provided
for in Sections 4.02 and 4.03 is fully sufficient to pay such Bonds Outstanding, including
all principal, interest and redemption premiums; or
(C) by irrevocably depositing with the Fiscal Agent, in trust, cash and Federal
Securities in such amount as the City shall determine as confirmed by Bond Counsel, an
Independent Financial Consultant or an independent certified public accountant will,
together with the interest to accrue thereon and moneys then on deposit in the fund and
accounts provided for in Sections 4.02 and 4.03, be fully sufficient to pay and discharge
the indebtedness on such Bonds (including all principal, interest and redemption
premiums) at or before their respective maturity dates.
If the City shall have taken any of the actions specified in (A), (B) or (C) above, and if
such Bonds are to be redeemed prior to the maturity thereof notice of such redemption shall
have been given as in this Agreement provided or provision satisfactory to the Fiscal Agent
shall have been made for the giving of such notice, then, at the election of the City, and
notwithstanding that any Bonds shall not have been surrendered for payment, the pledge of the
Special Taxes and other funds provided for in this Agreement and all other obligations of the
City under this Agreement with respect to such Bonds Outstanding shall cease and terminate.
Notice of such election shall be filed with the Fiscal Agent. Notwithstanding the foregoing, the
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obligations of the City to pay or cause to be paid to the Owners of the Bonds not so surrendered
and paid all sums due thereon, to pay all amounts owing to the Fiscal Agent pursuant to
Section 7.05, and otherwise to assure that no action is taken or failed to be taken if such action or
failure adversely affects the exclusion of interest on the Bonds from gross income for federal
income tax purposes, shall continue in any event.
Upon compliance by the City with the foregoing with respect to all Bonds Outstanding,
any funds held by the Fiscal Agent after payment of all fees and expenses of the Fiscal Agent,
which are not required for the purposes of the preceding paragraph, shall be paid over to the
City and any Special Taxes thereafter received by the City shall not be remitted to the Fiscal
Agent but shall be retained by the City to be used for any purpose permitted under the Act.
Section 9.04. Execution of Documents and Proof of Ownership by Owners. Any
request, declaration or other instrument which this Agreement may require or permit to be
executed by Owners may be in one or more instruments of similar tenor, and shall be executed
by Owners in person or by their attorneys appointed in writing.
Except as otherwise herein expressly provided, the fact and date of the execution by any
Owner or his attorney of such request, declaration or other instrument, or of such writing
appointing such attorney, may be proved by the certificate of any notary public or other officer
authorized to take acknowledgments of deeds to be recorded in the state in which he purports
to act, that the person signing such request, declaration or other instrument or writing
acknowledged to him the execution thereof, or by an affidavit of a witness of such execution,
duly sworn to before such notary public or other officer.
Except as otherwise herein expressly provided, the ownership of registered Bonds and
the amount, maturity, number and date of holding the same shall be proved by the registry
books.
Any request, declaration or other instrument or writing of the Owner of any Bond shall
bind all future Owners of such Bond in respect of anything done or suffered to be done by the
City or the Fiscal Agent in good faith and in accordance therewith.
Section 9.05. Waiver of Personal Liability. No Boardmember, officer, agent or
employee of the City shall be individually or personally liable for the payment of the principal
of, or interest or any premium on, the Bonds; but nothing herein contained shall relieve any
such member, officer, agent or employee from the performance of any official duty provided by
law.
Section 9.06. Notices to and Demands on City and Fiscal Agent. Any notice or
demand which by any provision of this Agreement is required or permitted to be given or
served by the Fiscal Agent to or on the City may be given or served by being deposited postage
prepaid in a post office letter box addressed (until another address is filed by the City with the
Fiscal Agent) as follows:
IM
City of Tustin, California
300 Centennial Way
Tustin, CA 92780
Attention: Finance Director
Any notice or demand which by any provision of this Agreement is required or
permitted to be given or served by the City to or on the Fiscal Agent may be given or served by
being deposited postage prepaid in a post office letter box addressed (until another address is
filed by the Fiscal Agent with the City) as follows:
U.S. Bank National Association
633 W. Fifth Street, 24th Floor
Los Angeles, CA 90071
Attention: Corporate Trust Services
Reference: Tustin CFD 04 -1
Section 9.07. Partial Invalidity. If any Section, paragraph, sentence, clause or phrase of
this Agreement shall for any reason be held illegal or unenforceable, such holding shall not
affect the validity of the remaining portions of this Agreement. The City hereby declares that it
would have adopted this Agreement and each and every other Section, paragraph, sentence,
clause or phrase hereof and authorized the issue of the Bonds pursuant thereto irrespective of
the fact that any one or more Sections, paragraphs, sentences, clauses, or phrases of this
Agreement may be held illegal, invalid or unenforceable.
Section 9.08. Unclaimed Moneys. Anything contained herein to the contrary
notwithstanding, any moneys held by the Fiscal Agent in trust for the payment and discharge of
the principal of, and the interest and any premium on, the Bonds which remains unclaimed for
two (2) years after the date when the payments of such principal, interest and premium have
become payable, if such moneys were held by the Fiscal Agent at such date, shall be repaid by
the Fiscal Agent to the City as its absolute property free from any trust, and the Fiscal Agent
shall thereupon be released and discharged with respect thereto and the Bond Owners shall
look only to the City for the payment of the principal of, and interest and any premium on, such
Bonds. Any right of any Owner to look to the City for such payment shall survive only so long
as required under applicable law.
Section 9.09. Applicable Law. This Agreement shall be governed by and enforced in
accordance with the laws of the State of California applicable to contracts made and performed
in the State of California.
Section 9.10. Conflict with Act. In the event of a conflict between any provision of this
Agreement with any provision of the Act as in effect on the Closing Date, the provision of the
Act shall prevail over the conflicting provision of this Agreement.
Section 9.11. Conclusive Evidence of Regularity. Bonds issued pursuant to this
Agreement shall constitute conclusive evidence of the regularity of all proceedings under the
Act relative to their issuance and the levy of the Special Taxes.
-49-
Section 9.12. Payment on Business Day. In any case where the date of the maturity of
interest or of principal (and premium, if any) of the Bonds or the date fixed for redemption of
any Bonds or the date any action is to be taken pursuant to this Agreement is other than a
Business Day, the payment of interest or principal (and premium, if any) or the action need not
be made on such date but may be made on the next succeeding day which is a Business Day
with the same force and effect as if made on the date required and no interest shall accrue for
the period from and after such date.
Section 9.13. Counterparts. This Agreement may be executed in counterparts, each of
which shall be deemed an original.
Rallis
IN WITNESS WHEREOF, the City has caused this Agreement to be executed in its name
and the Fiscal Agent has caused this Agreement to be executed in its name, all as of June 1, 2013.
20015.04:)72073
S-1
CITY OF TUSTIN, CALIFORNIA, for and
on behalf of the CITY OF TUSTIN
COMMUNITY FACILITIES DISTRICT NO.
04 -1 (TUSTIN LEGACY /JOHN LAING
HOMES)
as
Jeffrey C. Parker,
City Manager
U.S. BANK NATIONAL ASSOCIATION, as
Fiscal Agent
10
Authorized Officer
fM
EXHIBIT A
FORM OF 2013 BOND
UNITED STATES OF AMERICA
STATE OF CALIFORNIA
CITY OF TUSTIN
COMMUNITY FACILITIES DISTRICT NO. 04-1
( TUSTIN LEGACY /JOHN LAING HOMES)
2013 SPECIAL TAX REFUNDING BOND
INTEREST RATE
MATURITY DATE
BOND DATE
CUSIP
September 1, _
June . 2013
901047
REGISTERED OWNER:
PRINCIPAL AMOUNT:
DOLLARS
The City of Tustin, California (the "City "), for and on behalf of the City of Tustin
Community Facilities District No. 04-1 (Tustin Legacy /John Laing Homes) (the "District'), for
value received, hereby promises to pay solely from the Special Tax (as hereinafter defined) to be
collected in the District or amounts in the funds and accounts held under the Agreement (as
hereinafter defined), to the registered owner named above, or registered assigns, on the
maturity date set forth above, unless redeemed prior thereto as hereinafter provided, the
principal amount set forth above, and to pay interest on such principal amount from the Bond
Date shown above, or from the most recent Interest Payment Date (defined below) to which
interest has been paid or duly provided for, semiannually on March 1 and September 1,
commencing March 1, 2014 (each, an "Interest Payment Date "), at the interest rate set forth
above, until the principal amount hereof is paid or made available for payment. The principal
of this Bond is payable to the registered owner hereof in lawful money of the United States of
America upon presentation and surrender of this Bond at the principal corporate trust office of
U.S. Bank National Association (the "Fiscal Agent'). Interest on this Bond shall be paid by
check of the Fiscal Agent mailed on each Interest Payment Date to the registered owner hereof
as of the close of business on the 15th day of the month preceding the month in which the
Interest Payment Date occurs (the "Record Date ") at such registered owner's address as it
appears on the registration books maintained by the Fiscal Agent, or (i) if the Bonds are in book -
entry -only form, or (ii) otherwise upon written request filed with the Fiscal Agent prior to any
Record Date by a registered owner of at least $1,000,000 in aggregate principal amount of
Bonds, by wire transfer in immediately available funds to the depository for the Bonds or to an
Exhibit A
Page 1
account in the United States designated by such registered owner in such written request,
respectively.
Interest on this Bond shall be payable from the interest payment date next preceding the
date of authentication hereof, unless (i) it is authenticated on an interest payment date, in which
event it shall bear interest for such Interest Payment Date, or (ii) such date of authentication is
after a Record Date but on or prior to an Interest Payment Date, in which event interest will be
payable from such Interest Payment Date, or (iii) such date of authentication is prior to the first
Record Date, in which event interest will be payable from the Bond Date shown above;
provided however, that if at the time of authentication of this Bond, interest is in default hereon,
this Bond shall bear interest from the Interest Payment Date to which interest has previously
been paid or made available for payment hereon.
This Bond is one of a duly authorized issue of bonds in the aggregate principal amount
of $ approved by the City Council of the City on May 21, 2013 pursuant to the
California Government Code (the "Act') for the purpose of refunding the City of Tustin
Community Facilities District No. 04 -1 (Tustin Legacy /John Laing Homes) Special Tax Bonds,
Series 2004, and is one of the series of Bonds designated "City of Tustin Community Facilities
District No. 04 -1 (Tustin Legacy /John Laing Homes) 2013 Special Tax Refunding Bonds" (the
'Bonds "). The creation of the Bonds and the terms and conditions thereof are provided for the
Fiscal Agent Agreement, dated as of June 1, 2013, between the City, for and on behalf of the
District, and the Fiscal Agent (the "Agreement") and this reference incorporates the Resolution
and the Agreement herein, and by acceptance hereof the owner of this Bond assents to said
terms and conditions. Pursuant to and as more particularly provided in the Agreement,
additional bonds may be issued by the City from time to time secured by a lien on certain funds
held under the Agreement on a parity with the lien securing the Bonds. The Agreement is
authorized under and this Bond is issued under, and both are to be construed in accordance
with, the laws of the State of California.
The Bonds are not general obligations of the City, but are limited obligations payable
solely from the revenues and funds pledged therefor under the Agreement. Neither the faith
and credit nor the taxing power of the City (except to the extent of the Special Tax A levy in the
District, as set forth in the Agreement) or the State of California or any political subdivision
thereof is pledged to the payment of the Bonds.
Pursuant to the Act, and the Agreement, the principal of and interest on this Bond are
payable solely from the annual Special Tax A authorized under the Mello -Roos Community
Facilities Act of 1982 to be collected within the District and certain funds held under the
Agreement. Any tax for the payment hereof shall be limited to the Special Tax A, except to the
extent that provision for payment has been made by the City, as may be permitted by law. The
Bonds do not constitute obligations of the City for which said City is obligated to levy or
pledge, or has levied or pledged, general or special taxation other than described hereinabove.
The City has covenanted for the benefit of the owners of the Bonds that it will commence
and pursue to completion appropriate foreclosure actions in the event of delinquencies of any
Special Tax A installments levied for payment of principal and interest as more particularly set
forth in the Agreement.
Exhibit A
Page 2
The Bonds maturing on or after September 1, are subject to redemption prior to
their stated maturity on any interest payment date occurring on or after September 1, J as a
whole or in part among maturities as provided in the Agreement, at a redemption price equal to
the principal amount of the Bonds to be redeemed, together with accrued interest thereon to the
date fixed for redemption, without premium.
The Bonds maturing on September 1, . are subject to mandatory sinking payment
redemption in part on September 1, and on each September 1 thereafter to maturity, by lot,
at a redemption price equal to the principal amount thereof to be redeemed, together with
accrued interest to the date fixed for redemption, without premium, from sinking payments as
follows:
Redemption Date
(September 1) Sinking Payments
The Bonds are also subject to redemption from the proceeds of Special Tax Prepayments
and any corresponding transfers from the Reserve Fund pursuant to the Agreement, on any
Interest Payment Date, among maturities as specified in the Agreement and by lot within a
maturity, at a redemption price (expressed as a percentage at the principal amount of the Bonds
to be redeemed), as set forth below, together with accrued interest to the date fixed for
redemption:
Redemption Dates Redemption Prices
any Interest Payment Date to and including 103%
March 1, 2021
September 1, 2021 and March 1, 2022 102
September 1, 2022 and March 1, 2023 101
September 1, 2023 and thereafter 100
Notice of redemption with respect to the Bonds to be redeemed shall be given to the
registered owners thereof, in the manner, to the extent and subject to the provisions of the
Agreement. Notices of optional redemption may be conditioned upon receipt by the Fiscal
Agent of sufficient moneys to redeem the Bonds on the anticipated redemption date, and if the
Fiscal Agent does not receive sufficient funds by the scheduled redemption date the redemption
shall not occur and the Bonds for which notice of redemption was given shall remain
outstanding for all purposes of the Agreement.
The Bonds are issuable as fully registered Bonds without coupons in denominations of
$5,000 or any integral multiple thereof. Subject to the limitations and upon payment of the
charges, if any, provided in the Agreement, Bonds may be exchanged at the Principal Office of
the Fiscal Agent for a like aggregate principal amount and maturity of Bonds of other
authorized denominations.
Exhibit A
Page 3
Each registration and transfer of registration of this Bond shall be entered by the Fiscal
Agent in books kept by it for this purpose and authenticated by its manual signature upon the
certificate of authentication endorsed hereon.
No transfer or exchange hereof shall be valid for any purpose unless made by the
registered owner, by execution of the form of assignment endorsed hereon, and authenticated
as herein provided, and the principal hereof, interest hereon and any redemption premium
shall be payable only to the registered owner or to such owner's order. The Fiscal Agent shall
require the registered owner requesting transfer or exchange to pay any tax or other
governmental charge required to be paid with respect to such transfer or exchange. No transfer
or exchange hereof shall be required to be made (i) fifteen days prior to the date established by
the Fiscal Agent for selection of Bonds for redemption or (ii) with respect to a Bond after such
Bond has been selected for redemption.
The Agreement and the rights and obligations of the City thereunder may be modified
or amended as set forth therein. The Agreement contains provisions permitting the City to
make provision for the payment of the interest on, and the principal of the Series 2013 Bonds so
that such Series 2013 Bonds shall no longer be deemed to be outstanding under the terms of the
Agreement.
This Bond shall not become valid or obligatory for any purpose until the certificate of
authentication and registration hereon endorsed shall have been dated and manually signed by
the Fiscal Agent.
Unless this Bond is presented by an authorized representative of The Depository Trust
Company to the Fiscal Agent for registration of transfer, exchange or payment, and any Bond
issued is registered in the name of Cede & Co. or such other name as requested by an
authorized representative of The Depository Trust Company and any payment is made to Cede
& Co., ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE
BY OR TO ANY PERSON IS WRONGFUL since the registered owner hereof, Cede & Co., has
an interest herein.
IT IS HEREBY CERTIFIED, RECITED AND DECLARED that all acts, conditions and
things required by law to exist, happen and be performed precedent to and in the issuance of
this Bond have existed, happened and been performed in due time, form and manner as
required by law, and that the amount of this Bond does not exceed any debt limit prescribed by
the laws or Constitution of the State of California.
Exhibit A
Page 4
IN WITNESS WHEREOF, CITY OF TUSTIN, California, has caused this Bond to be
dated the Bond Date shown above, to be signed by the facsimile signature of the Mayor of the
City and countersigned by the facsimile signature of the City Clerk.
[SEAL]
ATTEST:
CITY OF TUSTIN. CALIFORNIA
a
City Clerk
Mayor
FISCAL AGENT'S CERTIFICATE OF AUTHENTICATION
This is one of the Bonds described in the Resolution and the Agreement which has been
authenticated on
U.S. BANK NATIONAL ASSOCIATION,
as Fiscal Agent
0
Authorized Signatory
Exhibit A
Page 5
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned do(es) hereby sell, assign and transfer unto
(Name, address and Tax identification Number of Assignee)
the within - mentioned registered Bond and hereby irrevocably constitute(s) and appoint(s)
attorney,
to transfer the same on the books of the Fiscal Agent with full power of substitution in the
premises.
Dated:
Signatures Guaranteed:
Note: Signature guarantee shall be made by a Note: The signature(s) on this Assignment must
guarantor institution participating in the correspond with the name(s) as written on the
Securities Transfer Agents Medallion Program face of the within Bond in every particular
or in such other guarantee program acceptable without alteration or enlargement or any
to the Fiscal Agent. change whatsoever.
Exhibit A
Page 6
Quint &'Phi.ig LLP
L�Y0M9 r].%C I&CIA"A WN Y
by and between the
CITY OF TUSTIN, CALIFORNIA
and
U.S. BANK NATIONAL ASSOCIATION,
as Escrow Bank
dated as of June 1, 2013
relating to:
City of Tustin
Community Facilities District No. 04 -1
(Tustin Legacy/John Laing Homes)
Special Tax Bonds, Series 2004
3/27/13
4/5/13
20015.04:p2074
TABLE OF CONTENTS
Section 1.
Appointment of Escrow Bank; Notice of Election to Discharge Indenture .................2
Section 2.
Establishment of Refunding Fund ....................................................... ..............................2
Section 3.
Deposit into Refunding Fund; Investment of Amounts ................... ..............................2
Section 4.
Instructions as to Application of Deposit ........................................... ..............................2
Section 5.
Compensation to Escrow Bank ............................................................ ..............................3
Section 6.
Liabilities and Obligations of Escrow Bank ....................................... ..............................3
Section7.
Amendment ............................................................................................ ..............................5
Section8.
Severability ............................................................................................. ..............................5
Section 9.
Notices to Escrow Bank and City ........................................................ ..............................6
Section 10.
Merger or Consolidation of Escrow Bank .......................................... ..............................6
Section 11.
Unclaimed Moneys ................................................................................ ..............................6
Section 12.
Execution of Counterparts .................................................................... ..............................6
Section13.
Governing Law ...................................................................................... ..............................6
EXHIBIT A:
REDEMPTION SCHEDULE FOR THE 2004 BONDS
n
ESCROW AGREEMENT
This ESCROW AGREEMENT, dated as of June 1, 2013 (this "Escrow Agreement "), is by
and between the CITY OF TUSTIN, CALIFORNIA, a municipal corporation and general law
city organized and existing under the laws of the State of California (the "City "), for and on
behalf of the City of Tustin Community Facilities District No. 04 -1 (Tustin Legacy /John Laing
Homes) (the "District "), and U.S. BANK NATIONAL ASSOCIATION, a national banking
association organized and existing under the laws of the United States of America, in its
capacity as trustee under the Indenture (as defined below), and in its capacity as escrow bank
hereunder (the "Escrow Bank').
RECITALS:
WHEREAS, the City has heretofore issued its $11,415,000 initial principal amount of
Community Facilities District No. 04 -1 (Tustin Legacy /John Laing Homes) Special Tax Bonds,
Series 2004 (the "2004 Bonds ") pursuant to an Indenture, dated as of December 1, 2004 (the
"Indenture "), between the District and the Escrow Bank, as trustee (the "Trustee "); and
WHEREAS, Section 10.01 of the Indenture provides that if the District shall pay or cause
to be paid or there shall otherwise be paid to the owners of all outstanding 2004 Bonds the
principal thereof and the interest and premium, if any, thereon at the times and in the manner
stipulated in the Indenture and in the 2004 Bonds, then the owners of the 2004 Bonds shall cease
to be entitled to the pledge of the Net Special Tax Revenues (as defined in the Indenture) and
the other assets as provided in the Indenture, and all agreements, covenants and other
obligations of the District to the owners of the 2004 Bonds under the Indenture shall thereupon
cease, terminate and become void and be discharged and satisfied; and
WHEREAS, the City has determined, for and on behalf of the District, to provide for the
refunding in full of the outstanding 2004 Bonds and the discharge of the Indenture; and
WHEREAS, for the purpose of providing funds for the discharge of the Indenture, the
City has determined to issue, for and on behalf of the District, its $ City of Tustin
Community Facilities District No. 04 -1 (Tustin Legacy /John Laing Homes) 2013 Special Tax
Refunding Bonds (the "2013 Bonds "), pursuant to a Fiscal Agent Agreement, dated as of June 1,
2013 (the "Fiscal Agent Agreement "), by and between the City and U.S. Bank National
Association, as fiscal agent (the "Fiscal Agent "); and
WHEREAS, the City wishes to make a deposit of proceeds of the 2013 Bonds with the
Escrow Bank as contemplated by Section 10.01 of the Indenture, and the City desires to enter
into this Escrow Agreement for the purpose of providing the terms and conditions for the
deposit and application of amounts so deposited with the Escrow Bank; and
WHEREAS, the Escrow Bank has full powers to act with respect to the irrevocable
escrow created herein and to perform the duties and obligations to be undertaken by it
pursuant to this Escrow Trust Agreement.
It
AGREEMENT:
NOW, THEREFORE, in consideration of the above premises and of the mutual promises
and covenants herein contained and for other valuable consideration the receipt and sufficiency
of which are hereby acknowledged, the parties hereto do hereby agree as follows:
Section 1. Appointment of Escrow Bank; Notice of Election to Discharge Indenture. The
City hereby appoints the Escrow Bank as escrow bank for all purposes of this Escrow
Agreement and in accordance with the terms and provisions of this Escrow Agreement, and the
Escrow Bank hereby accepts such appointment.
The City hereby gives notice to the Escrow Bank, in its capacity as the Trustee, of the
City's election to defease the 2004 Bonds and terminate the Indenture, as provided in Section
10.01 of the Indenture.
Section 2. Establishment of Refunding Fund. There is hereby created by the City with,
and to be held by, the Escrow Bank, as security for the payment of the principal of and
premium and interest on the 2004 Bonds as hereinafter set forth, an irrevocable escrow to be
maintained in trust by the Escrow Bank for the benefit of the owners of the 2004 Bonds, said
escrow to be designated the "Refunding Fund." All moneys deposited in the Refunding Fund
shall constitute a special fund for the payment of the principal of and premium and interest on
the 2004 Bonds in accordance with this Escrow Agreement and the provisions of the Indenture.
If at any time the Escrow Bank shall receive actual knowledge that the moneys in the
Refunding Fund will not be sufficient to make any payment required by Section 4 hereof, the
Escrow Bank shall notify the City of such fact and the City shall immediately cure such
deficiency from any lawful funds of the District.
Section 3. Deposit into Refunding Fund; Investment of Amounts. Concurrent with
delivery of the 2013 Bonds, the City shall cause to be transferred to the Escrow Bank for deposit
into the Refunding Fund the amount of $ in immediately available funds derived as
follows: (a) $ from the proceeds of sale of the 2013 Bonds, (b) $ from
funds held in the Reserve Fund for the 2004 Bonds, and (c) $ from funds held in the
Special Tax Fund for the 2004 Bonds. The Escrow Bank, in its capacity as Trustee for the 2004
Bonds, is hereby directed by the City to make the transfers of funds from the Reserve Fund and
the Special Tax Fund under the Indenture to the Refunding Fund as described in clauses (b) and
(c) of the preceding sentence.
The Escrow Bank shall hold the $ deposited to the Refunding Fund in cash,
uninvested. The cash in the Refunding Fund shall be held by the Escrow Bank in the Refunding
Fund solely for the uses and purposes set forth herein. The Escrow Bank shall have no lien
upon or right of set off against the funds at any time on deposit in the Refunding Fund.
Section 4. Instructions as to Application of Deposit. The total amount held in the
Refunding Fund pursuant to Section 3 shall be applied by the Escrow Bank to redeem in full
the 2004 Bonds on September 1, 2013, by paying on such date from the amount in the Refunding
-2-
Fund the redemption price of the 2004 Bonds, being 100.5% of the then outstanding principal
amount thereof, plus accrued interest to the Redemption Date, as more fully set forth in Exhibit
A hereto.
The City, on behalf of the District, hereby gives notice to the Escrow Bank, in its capacity
as Trustee for the 2004 Bonds, of the redemption of the 2004 Bonds on September 1, 2013, as
required by the second paragraph of Section 4.01(a) of the Indenture, and the City, on behalf of
the District, hereby irrevocably directs the Escrow Bank, as Trustee for the 2004 Bonds, to give
notice of the redemption on September 1, 2013 of the 2004 Bonds, said notice to be given by the
Escrow Bank in the form and as otherwise required by Section 4.02 of the Indenture.
Following the final payment of the 2004 Bonds, the Escrow Bank shall transfer any
remaining amounts held by it as Escrow Bank or Trustee relating to the 2004 Bonds or the
Indenture on September 2, 2013, to the Fiscal Agent for deposit by the Fiscal Agent to the
Special Tax Fund established under the Fiscal Agent Agreement.
Section 5. Compensation to Escrow Bank. The City shall pay the Escrow Bank
compensation for its duties under this Escrow Agreement, including out -of- pocket costs such as
publication costs, legal fees and other costs and expenses relating hereto, pursuant to a separate
agreement between the City and the Escrow Bank. Under no circumstances shall amounts
deposited in the Refunding Fund or any general funds of the City be deemed to be available for
said purposes. The obligation of the City under this Section 5 to pay compensation already
earned by the Escrow Bank and to pay costs and expenses already incurred shall survive
termination of this Escrow Agreement and shall survive the resignation or removal of the
Escrow Bank.
Section 6. Liabilities and Obligations of Escrow Bank. The Escrow Bank shall have no
obligation to make any payment or disbursement of any type or incur any financial liability in
the performance of its duties under this Escrow Agreement unless the City shall have deposited
sufficient funds with the Escrow Bank. The Escrow Bank may rely and shall be protected in
acting upon the written or oral instructions of the City or its agents relating to any matter or
action as Escrow Bank under this Escrow Agreement. The protections, immunities and
limitations from liability provided to the Trustee under the Indenture shall be afforded the
Escrow Bank hereunder and are incorporated herein by this reference.
The Escrow Bank and its respective successors, assigns, agents and servants shall not be
held to any personal liability whatsoever, in tort, contract, or otherwise, in connection with the
execution and delivery of this Escrow Agreement, the establishment of the Refunding Fund, the
acceptance of the moneys deposited therein, the sufficiency of the moneys held in the
Refunding Fund hereunder to accomplish the discharge of the 2004 Bonds, or any payment,
transfer or other application of moneys by the Escrow Bank in accordance with the provisions
of this Escrow Agreement or by reason of any non - negligent act, non - negligent omission or
non - negligent error of the Escrow Bank made in good faith in the conduct of its duties. The
recitals of fact contained in the recital clauses herein shall be taken as the statements of the City
and the Escrow Bank assumes no responsibility for the correctness thereof. The Escrow Bank
makes no representations as to the sufficiency of the moneys in the Refunding Fund to
accomplish the redemption of the 2004 Bonds pursuant to the Indenture, or to the validity of
-3-
this Escrow Agreement as to the City and, except as otherwise provided herein, the Escrow
Bank shall incur no liability in respect thereof. The Escrow Bank shall not be liable in connection
with the performance of its duties under this Escrow Agreement except for its own negligence,
willful misconduct or default, and the duties and obligations of the Escrow Bank shall be
determined by the express provisions of this Escrow Agreement and no implied duties shall be
read into this Escrow Agreement against the Escrow Bank. The Escrow Bank may consult with
counsel, who may or may not be counsel to the City, and in reliance upon the written opinion of
such counsel selected by it with due care shall have full and complete authorization and
protection in respect of any action taken, suffered or omitted by it in good faith in accordance
therewith.
The City hereby assumes liability for, and hereby agrees (whether or not any of the
transactions contemplated hereby are consummated), to the extent permitted by law, to
indemnify, protect, save and hold harmless the Escrow Bank and its respective successors,
assigns, agents and servants from and against any and all liabilities, obligations, losses,
damages, penalties, claims, actions, suits, costs, expenses and disbursements (including
reasonable legal fees and disbursements) of whatsoever kind and nature which may be imposed
on, incurred by, or asserted against, at any time, the Escrow Bank (whether or not also
indemnified against by any other person under any other agreement or instrument) and in any
way relating to or arising out of the execution and delivery of this Escrow Agreement, the
establishment of the Refunding Fund, the retention of the moneys therein and any payment,
transfer or other application of moneys by the Escrow Bank in accordance with the provisions
of this Escrow Agreement, or as may arise by reason of any act, omission or error of the Escrow
Bank made in good faith in the conduct of its duties, provided, houvever, that the City shall not be
required to indemnify the Escrow Bank against its own negligence or willful misconduct and
any liability of the City under this paragraph shall be payable solely from funds of the District.
The indemnities contained in this Section 6 and the compensation and reimbursement of
expenses set forth in Section 5 shall survive the termination of this Escrow Agreement.
Whenever, in the administration of this Escrow Agreement, the Escrow Bank shall deem
it necessary or desirable that a matter be proved or established prior to taking or suffering any
action hereunder, such matter (unless other evidence in respect thereof be herein specifically
prescribed) may, in the absence of negligence or willful misconduct on the part of the Escrow
Bank, be deemed to be conclusively proved and established by a certificate of an authorized
representative of the City, and such certificate shall, in the absence of negligence or willful
misconduct on the part of the Escrow Bank, be full warrant to the Escrow Bank for any action
taken or suffered in good faith by it under the provisions of this Escrow Agreement.
The Escrow Bank shall not be responsible for any of the recitals or representations
contained herein.
The Escrow Bank shall not be liable for the accuracy of any calculations provided as to
the sufficiency of moneys deposited with it to pay the redemption price of the 2004 Bonds.
The Escrow Bank shall incur no liability for losses arising from any disposition made
pursuant to and in accordance with this Escrow Agreement.
-4-
No provision of this Escrow Agreement shall require the Escrow Bank to expend or risk
its own funds or otherwise incur any financial liability in the performance or exercise of any of
its duties hereunder or in the exercise of its rights or powers.
Any bank, federal savings association or trust company into which the Escrow Bank
may be merged or with which it may be consolidated shall become the Escrow Bank without
any action of the City.
The Escrow Bank shall have no liability or obligation to the holders of the 2004 Bonds
with respect to the payment of debt service by the City on any of such bonds or with respect to
the observance or performance by the City of the other conditions, covenants and terms
contained in the Indenture, or with respect to the investment of any moneys in any fund or
account established, held or maintained by the City pursuant to the Indenture.
The Escrow Bank shall not be liable for any error of judgment made in good faith by an
authorized officer.
The Escrow Bank may at any time resign by giving written notice to the City, which
notice shall indicate the date (not earlier than 60 days after receipt by the City of such notice) on
which the resignation is to be effective (the "resignation date "). The City shall promptly appoint
a successor Escrow Bank by the resignation date. Resignation of the Escrow Bank will be
effective upon acceptance of appointment by a successor Escrow Bank. If the City does not
appoint a successor Escrow Bank by the resignation date, the Escrow Bank may petition any
court of competent jurisdiction for the appointment of a successor Escrow Bank, which court
may thereupon, after such notice, if any, as it may deem proper and prescribe and as may be
required by law, appoint a successor Escrow Bank. The City may at any time terminate the
services of the Escrow Bank and appoint a new Escrow Bank hereunder, such termination to
take effect only upon acceptance of the appointment by the replacement Escrow Bank.
Section 7. Amendment. This Escrow Agreement may be modified or amended at any
time by a supplemental agreement which shall become effective when the written consents
thereto of the owners of one hundred percent (100 %) in aggregate principal amount of the 2004
Bonds then outstanding shall have been filed with the Escrow Bank. This Escrow Agreement
may be modified or amended at any time by a supplemental agreement, without the consent of
any such 2004 Bondowners, but only (a) to add to the covenants and agreements of any party,
other covenants to be observed, or to surrender any right or power herein or therein reserved to
the City, (b) to cure, correct or supplement any ambiguous or defective provision contained
herein, or (c) in regard to questions arising hereunder as the parties hereto may deem necessary
or desirable and which, in the opinion of counsel, shall not materially adversely affect the
interests of the owners of the 2004 Bonds, and that such amendment will not cause interest on
the 2004 Bonds to become subject to federal income taxation.
Section 8. Severability. If any section, paragraph, sentence, clause or provision of this
Escrow Agreement shall for any reason be held to be invalid or unenforceable, the invalidity or
unenforceability of such section, paragraph, sentence, clause or provision shall not affect any of
the remaining provisions of this Escrow Agreement.
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Section 9. Notices to Escrow Bank and City. Any notice to or demand upon the Escrow
Bank may be served and presented, and such demand may be made, at the principal corporate
trust office of the Escrow Bank at U.S. Bank National Association, 633 West Fifth Street, 24th
Floor, Los Angeles, CA 90071, Attention: Corporate Trust Services (or such other address as
may have been filed in writing by the Escrow Bank with the City). Any notice to or demand
upon the City shall be deemed to have been sufficiently given or served for all purposes by
being mailed by registered or certified mail, and deposited, postage prepaid, in a post office
letter box, addressed to the City of Tustin, 300 Centennial Way, Tustin, California 92780,
Attention: Finance Director (or such other address as may have been filed in writing by the City
with the Escrow Bank).
Section 10. Merger or Consolidation of Escrow Bank. Any company into which the
Escrow Bank may be merged or converted or with which may it be consolidated or any
company resulting from any merger, conversion or consolidation to which it shall be a party or
any company to which the Escrow Bank may sell or transfer all or substantially all of its
corporate trust business, provided such company shall be eligible to act as trustee under the
Indenture, shall be the successor hereunder to the Escrow Bank without the execution or filing
of any paper or any further act.
Section 11. Unclaimed Moneys. Anything contained herein to the contrary
notwithstanding, any moneys held by the Escrow Bank in trust for the payment and discharge
of the principal of, and the interest and any premium on, the 2004 Bonds which remains
unclaimed for two (2) years after the date when the payment of such principal, interest and
premium have become payable, if such moneys were held by the Escrow Bank at such date,
shall be repaid by the Escrow Bank to the City as its absolute property free from any trust, and
the Escrow Bank shall thereupon be released and discharged with respect thereto and the
owners of such 2004 Bonds shall look only to the City for the payment of the principal of, and
interest and any premium on, such 2004 Bonds. Any right of any 2004 Bondowner to look to the
City for such payment shall survive only so long as required under applicable law.
Section 12. Execution of Counterparts. This Escrow Agreement may be executed in any
number of counterparts, each of which shall for all purposes be deemed to be an original and all
of which shall together constitute but one and the same instrument.
Section 13. Governing Law. This Escrow Agreement shall be construed and governed in
accordance with the laws of the State of California applicable to contracts made and performed
in such State.
M
IN WITNESS WHEREOF, the CITY OF TUSTIN, CALIFORNIA has caused this Escrow
Agreement to be signed in its name by its City Manager, and U.S. BANK NATIONAL
ASSOCIATION, has caused this Escrow Agreement to be signed in its corporate name by its
officer identified below, all as of the day and year first above written.
20015.04:J12074
CITY OF TUSTIN, CALIFORNIA, for and on
behalf of the CITY OF TUSTIN COMMUNITY
FACILITIES DISTRICT NO. 04-1 (TUSTIN
LEGACY/ JOHN LIANG HOMES)
W3
Jeffrey C. Parker,
City Manager
U.S. BANK NATIONAL ASSOCIATION, as
Escrow Bank
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Authorized Officer
EXHIBIT A
REDEMPTION SCHEDULE FOR THE 2004 BONDS
Redemption Principal Redemption Accrued
Date Redeemed Premium Interest
September 1, 2013
A -1
Total
Payment
Quint & Thimmig LLP
CITY OF TUSTIN
COMMUNITY FACILITIES DISTRICT NO. 04 -1
( TUSTIN LEGACY/JOHN LAING HOMES)
2013 SPECIAL TAX REFUNDING BONDS
. 2013
City of Tustin, California
300 Centennial Way
Tustin, California 92780
Attention: Finance Director
Ladies and Gentlemen:
3/22/13
Stifel, Nicolaus & Company, Incorporated (the "Underwriter') offers to enter into this
Bond Purchase Agreement (this "Purchase Contract ") with the City of Tustin, California (the
"Issuer "), for and on behalf of the City of Tustin Community Facilities District No. 04 -1 (Tustin
Legacy /John Laing Homes) (the "District'), which, upon your acceptance of this offer, will be
binding upon the Issuer and the Underwriter. Capitalized terms used in this Purchase Contract
and not otherwise defined herein have the meanings given to such terms in the Fiscal Agent
Agreement described below.
This offer is made subject to the acceptance by the Issuer of this Purchase Contract on or
before 5:00 p.m. on the date set forth above.
1. Upon the terms and conditions and in reliance upon the respective
representations, warranties and covenants herein, the Underwriter hereby agrees to purchase
from the Issuer, and the Issuer hereby agrees to sell to the Underwriter, all (but not less than all)
of the above - captioned bonds (the 'Bonds ") at a purchase price (the "Purchase Price ") of
$ (equal to the initial principal amount of the Bonds ($ ) less original issue
discount of $. less an Underwriter's discount of $ ).
The Issuer acknowledges and agrees that (i) the purchase and sale of the Bonds pursuant
to this Purchase Contract is an arm s- length commercial transaction between the Issuer and the
Underwriter, (ii) in connection with such transaction and with the discussions, undertakings
and procedures leading up to the consummation of such transaction, the Underwriter is and has
been acting solely as principal and is not acting as the agent or fiduciary of the Issuer, (iii) the
Underwriter has not assumed an advisory or fiduciary responsibility in favor of the Issuer with
respect to the offering of the Bonds or the discussions, undertakings and procedures leading
thereto (irrespective of whether the Underwriter has provided other services or is currently
providing services to the Issuer on other matters) and the Underwriter has no obligation to the
Issuer with respect to the offering contemplated by this Purchase Contract except the
obligations expressly set forth in this Purchase Contract, and (iv) the Issuer has consulted with
20015.04:]12076
its own legal, financial and other advisors to the extent it deemed appropriate in connection
with the offering of the Bonds.
The Bonds are being issued by the Issuer for and on behalf of the District under the
authority of the Mello-Roos Community Facilities Act of 1982 (constituting Section 53311 et seq.
of the California Government Code) (the "Act"), and Resolution No. 13 -_ adopted on May 21,
2013 (the "Bond Resolution ") by the City Council of the Issuer (the "City Council') acting as the
legislative body of the District. The special taxes that will provide a source of payment for the
Bonds (the "Special Taxes ") are being levied pursuant to Resolution No. 04 -67, adopted by the
City Council on July 19, 2004, which established the District and authorized the levy of a special
tax within the District, and Ordinance No. 1286, adopted by the City Council on August 2, 2004
(the "Ordinance "), which provided for the levy of the Special Taxes on property in the District.
The Bonds will be issued pursuant to the terms of a Fiscal Agent Agreement (the "Fiscal
Agent Agreement "), dated as of June 1, 2013, between the Issuer, for and on behalf of the
District, and U.S. Bank National Association, Los Angeles, California, as fiscal agent (the "Fiscal
Agent "). The proceeds of the sale of the Bonds will be applied by the Issuer in accordance with
the Fiscal Agent Agreement to (i) currently refund in full and legally defease the City of Tustin
Community Facilities District No. 04 -1 (Tustin Legacy /John Laing Homes) Special Tax Bonds,
Series 2004 (the "2004 Bonds "); (ii) fund a debt service reserve fund for the Bonds; and (iii) pay
costs of issuing the Bonds and of defeasing and redeeming the 2004 Bonds.
The refunding and defeasance of the 2004 Bonds will be accomplished as described in an
Escrow Agreement, dated as of June 1, 2013 (the "Escrow Agreement'), by and between the
Issuer, for and on behalf of the District, and U.S. Bank National Association, as escrow bank (the
"Escrow Bank"), and as trustee for the 2004 Bonds.
2. The Bonds will mature on the dates and in the principal amounts, and will bear
interest at the rates, as set forth in Exhibit B hereto. The Underwriter agrees to make a bona fide
public offering of all of the Bonds at the offering prices set forth on the inside cover page of the
Final Official Statement described below.
3. The Issuer agrees to deliver to the Underwriter as many copies of the Official
Statement, dated the date hereof, relating to the Bonds (as supplemented and amended from
time to time, the "Final Official Statement") as the Underwriter shall reasonably request as
necessary to comply with paragraph (b)(4) of Rule 15c2 -12 under the Securities Exchange Act of
1934, as amended (the "Rule "). The Issuer agrees to deliver such Final Official Statements
within seven (7) business days after the execution hereof, or such earlier date identified by the
Underwriter to be necessary to allow the Underwriter to meet its obligations under the Rule
and Rule G -32 of the Municipal Securities Rulemaking Board ( "MSRB "). The Underwriter
agrees to file the Final Official Statement with the MSRB on or as soon as practicable after the
Closing Date (defined below). The Underwriter agrees to deliver a copy of the Final Official
Statement to each of its customers purchasing Bonds no later than the settlement date of the
transaction.
The Issuer has authorized and approved the Preliminary Official Statement dated May
2013, relating to the Bonds (the "Preliminary Official Statement') and the Final Official
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Statement and consents to their distribution and use by the Underwriter in connection with the
offer and sale of the Bonds. The Issuer deems such Preliminary Official Statement final as of its
date for purposes of the Rule, except for information allowed by the Rule to be omitted, and has
executed a certificate to that effect in the form of Exhibit C.
In connection with issuance of the Bonds, and in order to assist the Underwriter in
complying with the Rule, the Issuer will execute a Continuing Disclosure Agreement dated as
of June 1, 2013 (the "Continuing Disclosure Agreement'). The form of the Continuing
Disclosure Agreement is attached as Appendix E to the Final Official Statement.
4. The Issuer represents and warrants to the Underwriter that:
(a) The District is a community facilities district duly established and validly
existing under the laws of the State, including the Act.
(b) The Issuer is duly organized and validly existing as a municipal
corporation and general law city under the laws of the State of California (the "State ")
and has the full legal right, power and authority (i) upon satisfaction of the conditions in
this Purchase Contract and the Fiscal Agent Agreement, to issue the Bonds for the
District for the purposes specified in Section 1 hereof, and (ii) to secure the Bonds in the
manner contemplated in the Fiscal Agent Agreement.
(c) The City Council has the full legal right, power and authority to adopt the
Bond Resolution and the Ordinance, and the Issuer has the full legal right, power and
authority for and on behalf of the District (i) to enter into this Purchase Contract, the
Fiscal Agent Agreement, the Escrow Agreement and the Continuing Disclosure
Agreement, (ii) to issue, sell and deliver the Bonds to the Underwriter as provided
herein, and (iii) to carry out and consummate all other transactions on its part
contemplated by each of the aforesaid documents (such documents are collectively
referred to herein as the "Issuer Documents "), and the Issuer and the City Council have
complied with all provisions of applicable law, including the Act, in all matters relating
to such transactions.
(d) The Issuer has duly authorized (i) the execution and delivery by the
Issuer for and on behalf of the District of the Bonds and the execution, delivery and due
performance by the Issuer of its obligations under the Issuer Documents, (ii) the
distribution and use of the Preliminary Official Statement and 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 Issuer to carry out, give effect to and consummate
the transactions on its part contemplated by such instruments. To the best of its
knowledge, all consents or approvals necessary to be obtained by the Issuer in
connection with the foregoing have been received, and the consents or approvals so
received are still in full force and effect.
(e) The Bond Resolution and the Ordinance have been duly adopted by the
City Council and are in full force and effect; and the Issuer Documents, when executed
and delivered by the Issuer and the other party or parties thereto, will constitute legal,
-3-
valid and binding obligations of the Issuer for and on behalf of the District enforceable
against the Issuer in accordance with its terms, except as enforceability thereof may be
limited by bankruptcy, insolvency or other laws affecting creditors' rights generally.
(f) When delivered to the Underwriter, the Bonds will have been duly
authorized by the City Council and duly executed, issued and delivered by the Issuer
and will constitute legal, valid and binding obligations of the Issuer for and on behalf of
the District enforceable against the Issuer in accordance with their respective terms,
except as enforceability thereof may be limited by bankruptcy, insolvency or other laws
affecting creditors' rights generally, and will be entitled to the benefit and security of the
Fiscal Agent Agreement.
(g) The information contained in the Preliminary Official Statement is, and as
of the Closing Date the information in the Final Official Statement will be, true and
correct in all material respects, and neither the Preliminary Official Statement nor the
Final Official Statement will as of the Closing Date contain any untrue or misleading
statement of a material fact or omit to state any material fact necessary to make the
statements therein, in the light of the circumstances under which they were made, not
misleading.
(h) If, at any time prior to the earlier of receipt of notice from the
Underwriter that the Final Official Statement is no longer required to be delivered under
the Rule and the Closing (as described in Section 6 below), any event known to the
officers of the Issuer participating in the issuance of the Bonds occurs as a result of
which the Final Official Statement, as then amended or supplemented, includes an
untrue statement of a material fact or omits any material fact necessary to make the
statements in the Final Official Statement, in light of the circumstances under which they
were made, not misleading, the Issuer shall promptly notify the Underwriter in writing
of such event. Any information supplied by the Issuer for inclusion in any amendments
or supplements to the Final Official Statement will not contain any untrue or misleading
statement of a material fact or omit to state any material fact necessary to make the
statements therein, in the light of the circumstances under which they were made, not
misleading.
(i) None of the adoption of the Bond Resolution and the Ordinance, the
execution and delivery of the Issuer Documents, the consummation of the transactions
on the part of the Issuer contemplated herein or therein and the compliance by the Issuer
with the provisions hereof or thereof will conflict in any material respect with, or
constitute on the part of the Issuer a material violation of, or a material breach of or
default under, (i) any indenture, mortgage, commitment, note or other agreement or
instrument to which the Issuer 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 Issuer (or the members of the City Council or any of its
officers in their respective capacities as such) is subject, that would have a material
adverse affect on the ability of the Issuer to perform its obligations under the Issuer
Documents.
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0) The Issuer has never been in default at any time, as to principal of or
interest on any obligation which it has issued, including those which it has issued as a
conduit for another entity, which default may have an adverse effect on the ability of the
Issuer to consummate the transactions on its part under the Issuer Documents, except as
specifically disclosed in the Final Official Statement; and other than the Fiscal Agent
Agreement, the Issuer has not entered into any contract or arrangement of any kind
which might give rise to any lien or encumbrance on the Special Taxes following
issuance of the Bonds.
(k) Except as is specifically disclosed in the Final Official Statement, to the
best knowledge of the Issuer, there is no action, suit, proceeding, inquiry or
investigation, at law or in equity, before or by any court, public board or body, pending
with respect to which the Issuer has been served with process or known by the official of
the Issuer executing this Purchase Contract to be threatened, which in any way
questions the powers of the City Council or the Issuer referred to in paragraph (b)
above, or the validity of any proceeding taken by the City Council in connection with
the issuance of the Bonds, or wherein an unfavorable decision, ruling or finding could
materially adversely affect the transactions on the part of the Issuer contemplated by this
Purchase Contract, or of any other Issuer Document, or which, in any way, could
adversely affect the validity or enforceability of the Bond Resolution, the Ordinance, the
Fiscal Agent Agreement, the Escrow Agreement, the Bonds or this Purchase Contract or,
to the knowledge of the officer of the Issuer executing this Purchase Contract, which in
any way questions the exclusion from gross income of the recipients thereof of the
interest on the Bonds for federal income tax purposes or in any other way questions the
status of the Bonds under California tax laws or regulations.
(1) Any certificate signed by an official of the Issuer authorized to execute
such certificate and delivered to the Underwriter in connection with the transactions
contemplated by the Issuer Documents shall be deemed a representation and warranty
by the Issuer to the Underwriter as to the truth of the statements therein contained.
(m) The Issuer 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.
(n) The Bonds will be paid from Special Tax Revenues received by the Issuer
and moneys held in certain funds and accounts established under the Fiscal Agent
Agreement and pledged thereunder to the payment of the Bonds.
(o) The Special Taxes may lawfully be levied in accordance with the rate and
method of apportionment of special taxes for the District (the "Rate and Method ") and
the Ordinance, and, when levied, the Special Taxes so levied will be secured by a lien on
the property on which they are levied.
(p) The Fiscal Agent Agreement creates a valid pledge of and first lien upon
the Special Tax Revenues deposited thereunder, and the moneys in certain funds and
accounts established pursuant to the Fiscal Agent Agreement, subject in all cases to the
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provisions of the Fiscal Agent Agreement permitting the application thereof for the
purposes and on the terms and conditions set forth therein.
(q) The Issuer has not failed in any material respect to comply with any
undertaking of the Issuer under the Rule in the previous five years.
(r) The total net interest cost to maturity on the Bonds plus the principal
amount of the Bonds is less than the total remaining net interest cost to maturity on the
2004 Bonds plus the outstanding principal amount of the 2004 Bonds.
5. The Issuer covenants with the Underwriter that the Issuer will cooperate with the
Underwriter (at the cost and written direction of the Underwriter), in qualifying the Bonds for
offer and sale under the securities or Blue Sky laws of such jurisdictions of the United States as
the Underwriter may reasonably request; provided, however, that the Issuer shall not be
required to consent to suit or to service of process, or to qualify to do business, in any
jurisdiction. The Issuer consents to the use by the Underwriter of the Issuer Documents, the
Preliminary Official Statement and the Final Official Statement in the course of its compliance
with the securities or Blue Sky laws of the various jurisdictions related to the offering and sale
of the Bonds.
6. At 9:00 a.m. on June . 2013 (the "Closing Date') or at such other time and /or
date as shall have been mutually agreed upon by the Issuer and the Underwriter, the Issuer will
deliver or cause to be delivered to the Underwriter the Bonds in definitive form duly executed
and authenticated by the Fiscal Agent together with the other documents mentioned in Section
8 hereof; and the Underwriter will accept such delivery and pay the Purchase Price of the Bonds
by delivering to the Fiscal Agent for the account of the Issuer a check payable in federal funds
or making a wire transfer in federal funds payable to the order of the Fiscal Agent.
The activities relating to the final execution and delivery of the Bonds and the Fiscal
Agent Agreement and the payment therefor and the delivery of the certificates, opinions and
other instruments as described in Section 8 of this Purchase Contract shall occur at the offices of
Quint & Thimmig LLP, San Francisco, California ('Bond Counsel'). The payment for the Bonds
and simultaneous delivery of the Bonds to the Underwriter is herein referred to as the
"Closing."
The Bonds will be delivered as fully registered, book -entry only Bonds initially in
denominations equal to the principal amount of each maturity thereof. The Bonds will be
registered in the name of Cede & Co., as nominee of The Depository Trust Company, and will
be made available for checking by the Underwriter at such place as the Underwriter and the
Fiscal Agent shall agree not less than 24 hours prior to the Closing.
7. The Underwriter shall have the right to cancel its obligations to purchase the
Bonds if between the date hereof and the date of Closing:
(a) the House of Representatives or the Senate of the Congress of the United
States, or a committee of either, shall have pending before it, or shall have passed or
recommended favorably, legislation introduced previous to the date hereof, which
In
legislation, if enacted in its form as introduced or as amended, would have the purpose
or effect of imposing federal income taxation upon revenues or other income of the
general character to be derived by the Issuer or by any similar body under the Fiscal
Agent Agreement or upon interest received on obligations of the general character of the
Bonds, or of causing interest on obligations of the general character of the Bonds, to be
includable in gross income for purposes of federal income taxation, and such legislation,
in the Underwriter's opinion, materially adversely affects the market price of the Bonds;
or
(b) a tentative decision with respect to legislation shall be reached by a
committee of the House of Representatives or the Senate of the Congress of the United
States, or legislation shall be favorably reported or re- reported by such a committee or
be introduced, by amendment or otherwise, in or be passed by the House of
Representatives or the Senate, or recommended to the Congress of the United States for
passage by the President of the United States, or be enacted or a decision by a federal
court of the United States or the United States Tax Court shall have been rendered, or a
ruling, release, order, circular, regulation or official statement by or on behalf of the
United States Treasury Department, the Internal Revenue Service or other governmental
agency shall have been made or proposed to be made having the purpose or effect, or
any other action or event shall have occurred which has the purpose or effect, directly or
indirectly, of adversely affecting the federal income tax consequences of owning the
Bonds, including causing interest on the Bonds to be included in gross income for
purposes of federal income taxation, or imposing federal income taxation upon revenues
or other income of the general character to be derived by the Issuer under the Fiscal
Agent Agreement or upon interest received on obligations of the general character of the
Bonds, or the Bonds and also including adversely affecting the tax - exempt status of the
Issuer under the Code, which, in the reasonable opinion of the Underwriter, materially
adversely affects the market price of or market for the Bonds; or
(c) legislation shall have been enacted, or actively considered for enactment
with an effective date prior to the Closing, or a decision by a court of the United States
shall have been rendered, the effect of which is that the Bonds, including any underlying
obligations, or the Fiscal Agent Agreement, 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
(d) a stop order, ruling, regulation or official statement 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 and delivery of the Fiscal Agent Agreement as
contemplated hereby or by the Final Official Statement, is or would be in violation of
any provision 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
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(e) any event shall have occurred or any information shall have become
known to the Underwriter which causes the Underwriter to reasonably believe that the
Final 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, and
the Issuer fails to amend or supplement such Final Official Statement to cure such
omission or misstatement pursuant to Section 4(g); or
(f) 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
(g) 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
(h) a general banking moratorium shall have been declared by federal, New
York or State authorities; or
(i) any proceeding shall be pending or threatened by the Securities and
Exchange Commission against the Issuer or the District; or
(j) 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 which in the reasonable judgment of the
Underwriter materially adversely affects the Underwriter's ability to sell the Bonds; or
(k) the New York Stock Exchange or other national securities exchange, or
any governmental authority, shall impose, as to the Bonds or obligations of the general
character of the Bonds, any material restrictions not now in force, or increase materially
those now in force, with respect to the extension of credit by, or the charge to the net
capital requirements of, the Underwriter; or
(1) an amendment to the federal or State constitution shall be enacted or
action taken by any federal or State court, legislative body, regulatory body or other
authority materially adversely affecting the tax status of the Issuer, its property, income
or securities (or interest thereon), the validity or enforceability of the Special Tax or the
ability of the Issuer to issue the Bonds and levy the Special Tax as contemplated by the
Fiscal Agent Agreement, the Rate and Method and the Final Official Statement.
8. The obligation of the Underwriter to purchase the Bonds shall be subject (a) to
the performance by the Issuer of its obligations to be performed by it hereunder at and prior to
the Closing, (b) to the accuracy as of the date hereof and as of the time of the Closing of the
representations and warranties of the Issuer herein, and (c) to the following conditions,
93
including the dehvery by the Issuer of such documents as are enumerated herein in form and
substance satisfactory to the Underwriter:
(a) At the time of Closing, (i) the Final Official Statement, this Purchase
Contract, the Continuing Disclosure Agreement, the Escrow Agreement and the Fiscal
Agent Agreement shall be in full force and effect and shall not have been amended,
modified or supplemented except as may have been agreed to by the Underwriter, and
(ii) the Issuer shall have duly adopted and there shall be in full force and effect such
resolutions and ordinances (including, but not limited to, the Bond Resolution and the
Ordinance) as, in the opinion of Bond Counsel, shall be necessary in connection with the
transactions contemplated hereby.
(b) Receipt of the Bonds, executed by the Issuer and authenticated by the
Fiscal Agent, at or prior to the Closing. The terms of the Bonds, when delivered, shall in
all instances be as described in Final Official Statement.
(c) At or prior to the Closing, the Underwriter shall receive the following
documents in such number of counterparts as shall be mutually agreeable to the
Underwriter and the Issuer:
(f) A final approving opinion of Bond Counsel dated the date of
Closing in the form attached to the Final Official Statement as Appendix D.
(ii) A letter or letters of Bond Counsel addressed to the Underwriter,
which includes a statement to the effect that Bond Counsel's final approving
opinion may be relied upon by the Underwriter to the same extent as if such
opinion were addressed to the Underwriter, and further provides:
(A) the statements contained in the Official Statement on the
cover page and under the captions "INTRODUCTION," "THE 2013
BONDS" (other than information relating to DTC and its book -entry only
system, as to which no opinion need be expressed), "SECURITY FOR
THE 2013 BONDS," and "TAX MATTERS," and in Appendices C and D
thereto, are accurate insofar as such statements expressly summarize
certain provisions of the Bonds, the Fiscal Agent Agreement and Bond
Counsel's opinion concerning certain federal tax matters relating to the
Bonds;
(B) the Issuer has duly and validly executed and delivered this
Purchase Contract and the Escrow Agreement, and this Purchase
Contract and the Escrow Agreement constitute legal, valid and binding
obligations of the Issuer enforceable against the Issuer in accordance with
their respective terms, subject to bankruptcy, insolvency, reorganization,
moratorium and other laws affecting enforcement of creditors rights in
general and to the application of equitable principles if equitable
remedies are sought; and
M
(C) the Bonds are not subject to the registration requirements
of the Securities Act of 1933, as amended, and the Fiscal Agent
Agreement is exempt from qualification pursuant to the Trust Indenture
Act of 1939, as amended.
(iii) A letter of Bond Counsel, in its capacity as disclosure counsel to
the Issuer in connection with the Bonds ( "Disclosure Counsel "), addressed to the
Issuer and the Underwriter, to the effect that during the course of serving as
Disclosure Counsel in connection with the issuance of the Bonds and without
having undertaken to determine independently or assuming any responsibility
for the accuracy, completeness or fairness of the statements contained in the Final
Official Statement, no information came to the attention of the attomevs in such
firm rendering legal services in connection with the issuance of the Bonds that
would lead them to believe that the Final Official Statement (excluding therefrom
the financial statements, any financial or statistical data, or forecasts, charts,
numbers, estimates, projections, assumptions or expressions of opinion included
in the Official Statement, information regarding DTC, and the appendices to the
Official Statement, as to which no opinion need be expressed), as of the date
thereof or the Closing Date, contains any untrue statement of a material fact or
omits to state a material fact required to be stated therein or necessary in order to
make the statements therein, in the light of the circumstances under which they
were made, not misleading.
(iv) The Final Official Statement executed on behalf of the Issuer by a
duly authorized officer of the Issuer.
(v) Certified copies of the Bond Resolution and the Ordinance.
(vi) Evidence of recordation in the real property records of the County
of Orange of the Notice of Special Tax Lien in the form required by the Act.
(vii) A certificate, in form and substance as set forth in Exhibit A
hereto, of the Issuer, dated as of the Closing Date.
(viii) Evidence that Federal Form 8038 has been executed by the Issuer
and will be filed with the Internal Revenue Service.
(ix) Executed copies of the Fiscal Agent Agreement, the Escrow
Agreement and the Continuing Disclosure Agreement.
(x) An arbitrage certificate in form satisfactory to Bond Counsel.
QiDE
(xi) An opinion, dated the Closing Date and addressed to the
Underwriter, of the City Attorney, to the effect that:
(A) the Issuer is a municipal corporation and general law city
duly organized and existing under and by virtue of the Constitution and
laws of the State;
(B) the Bond Resolution approving and authorizing the
execution and delivery of the Issuer Documents and approving the Final
Official Statement was duly adopted at a meeting of the City Council of
the Issuer which was called and held on May 21, 2013, pursuant to law
and with all public notice required by law and at which a quorum was
present and acting throughout, and the Bond Resolution is in full force
and effect and has not been modified, amended or rescinded;
(C) there is no litigation, action, suit, proceeding or
investigation at law or in equity before or by any court, governmental
agency or body, pending and notice of which has been served on and
received by the Issuer or, to the best of knowledge of such counsel,
threatened against the Issuer, challenging the creation, organization or
existence of the Issuer or the District, or the validity of the Bonds, the
Final Official Statement, the other Issuer Documents or contesting the
authority of the Issuer to enter into or perform its obligations under any
of the such documents, or which, in any manner, questions the right of
the Issuer to issue the Bonds, or the allocation and payment of the Special
Tax Revenues to the Issuer and the other security for the Bonds provided
by the Fiscal Agent Agreement; and
(D) to the best of such counsel's knowledge, the authorization,
execution and delivery of the Bonds, the Final Official Statement and the
other Issuer Documents by the Issuer, the compliance with the provisions
thereof by the Issuer, and the performance by the Issuer of its obligations
thereunder, will not conflict with, or constitute a breach or default under,
in any material respect, any law, administrative regulation, court decree,
resolution, ordinance or other agreement to which the Issuer or the
District is subject or by which the Issuer or the District is bound.
(xii) In connection with printing and distribution of the Preliminary
Official Statement, an executed certificate of the Issuer in the form attached
hereto as Exhibit C.
(xiii) A certificate in form and substance as set forth in Exhibit D hereto
of the Fiscal Agent and Escrow Bank.
(xiv) An opinion of counsel to the Fiscal Agent and Escrow Bank in
form and substance satisfactory to the Underwriter dated the Closing Date and
addressed to the City and the Underwriter to the effect that the Fiscal Agent has
11-
duly authorized the execution and delivery of the Fiscal Agent Agreement and
the Escrow Agreement, and that each of such documents is a valid and binding
obligation of the Fiscal Agent enforceable in accordance with its terms.
(xv) A certificate in form and substance as set forth in Exhibit E hereto,
of Willdan Financial Services ( "Special Tax Consultant "), dated as of the Closing
Date.
(xvi) An opinion of Bond Counsel addressed to the City and the Fiscal
Agent, to the effect that, assuming amounts held by the Escrow Bank under the
Escrow Agreement are sufficient to pay the full redemption price of the 2004
Bonds on the Redemption Date (as such capitalized term is defined in the Escrow
Agreement), upon the execution and delivery of the Escrow Agreement by the
parties thereto and the funding of the Refunding Fund thereunder, the 2004
Bonds will have been legally defeased and will no longer be outstanding under
the fiscal agent agreement pursuant to which they were issued.
(xvii) A certificate of Willdan Financial Services in a form acceptable to
the Underwriter to the effect that the City and any district formed by the City
Council have fully complied during the immediately preceding five years with
all of their undertakings under the Rule with respect to any community facilities
district bonds or assessment bonds issued by the City or otherwise by any such
community facilities district or assessment district, including any annual reports
or material event notices required by any such undertakings.
(xviii) A certificate of Applied Best Practices in a form acceptable to the
Underwriter to the effect that the City, its former redevelopment agency and any
other entity controlled by the City Council have fully complied during the
immediately preceding five years with all of their undertakings under the Rule
by any of such entities, including any annual reports or material event notices
required by any such undertakings; provided, however, that such certificate need
not address any undertakings under the Rule referred to in the preceding clause
(xvii).
(xix) Such additional legal opinions, certificates, proceedings,
instruments and other documents as the Underwriter or Bond Counsel may
reasonably request to evidence compliance by the Issuer with legal requirements,
the truth and accuracy, as of the time of Closing, of the respective representations
of the Issuer herein contained and the due performance or satisfaction by the
Issuer at or prior to such time of all agreements then to be performed and all
conditions then to be satisfied.
If the Issuer shall be unable to satisfy the conditions to the obligations of the
Underwriter contained in this Purchase Contract, or if the obligations of the Underwriter to
purchase and accept delivery of the Bonds shall be terminated for any reason permitted by this
Purchase Contract, this Purchase Contract shall terminate and neither the Underwriter nor the
6`A
Issuer shall be under further obligation hereunder; except that the respective obligations to pay
expenses, as provided in Section 11 hereof shall continue in full force and effect.
9. The obligations of the Issuer to issue and deliver the Bonds on the Closing Date
shall be subject, at the option of the Issuer, to the performance by the Underwriter of its
obligations to be performed hereunder at or prior to the Closing Date, and to the delivery by
Bond Counsel and Disclosure Counsel of the opinions described in Sections 8(c)(i) and (iii)
above.
10. All representations, warranties and agreements of the Issuer hereunder shall
remain operative and in full force and effect, regardless of any investigations made by or on
behalf of the Underwriter, and shall survive the Closing.
11. The Issuer shall pay or cause to be paid all expenses incident to the performance
of its obligations under this Purchase Contract, including, but not limited to, delivery of the
Bonds, costs of printing the Bonds, the Preliminary Official Statement and the Final Official
Statement, any amendment or supplement to the Preliminary Official Statement or Final Official
Statement and this Purchase Contract, fees and disbursements of Bond Counsel and Disclosure
Counsel, fees and expenses of the financial advisor and other consultants engaged by the Issuer,
including the fees and expenses of the Special Tax Consultant, and fees of the Fiscal Agent and
the Escrow Bank.
The Underwriter shall pay any applicable fees of the California Debt and Investment
Advisory Commission, Depository Trust Company, Municipal Securities Rulemaking Board,
CUSIP Bureau, California Public Securities Association and Securities Industry and Financial
Markets Association (SIFMA) that pertain to the initial offer and sale of the Bonds, the cost of
preparation of any Blue Sky and Legal Investment Memoranda and any applicable Blue Sky
filing fees in connection with the public offering of the Bonds, all advertising expenses in
connection with the public offering of the Bonds, and all other expenses incurred by it in
connection with its public offering and distribution of the Bonds, including fees and expenses of
its counsel.
12. Any notice or other communication to be given to the Issuer under this Purchase
Contract may be given by delivering the same in writing at its address set forth above, and any
notice or other communication to be given to the Underwriter under this Purchase Contract
may be given by delivering the same in writing to the following: Stifel, Nicolaus & Company,
Incorporated, One Ferry Building, Suite 275, San Francisco, California 94111, Attn: Sara Oberfles
Brown.
13. This Purchase Contract is made solely for the benefit of the Issuer 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.
14. This Purchase Contract shall be governed by and construed in accordance with
the laws of the State applicable to contracts made and performed in the State.
13-
15. This Purchase Contract shall become effective upon acceptance hereof by the
Issuer.
Accepted and agreed to as of
the date first above written:
CITY OF TUSTIN, CALIFORNIA, for and
on behalf of the CITY OF TUSTIN
COMMUNITY FACILITIES DISTRICT NO.
04 -1 (TUSTIN LEGACY /JOHN LAING
HOMES)
0
Jeffrey C. Parker,
City Manager
20015.04:J12076
-14-
STIFEL, NICOLAUS & COMPANY,
INCORPORATED
a
Sara Oberlies Brown,
Managing Director
EXHIBIT A
CITY OF TUSTIN
COMMUNITY FACILITIES DISTRICT NO. 04 -1
( TUSTIN LEGACY /JOHN LAING HOMES)
2013 SPECIAL TAX REFUNDING BONDS
ISSUER CLOSING CERTIFICATE
I, the undersigned, hereby certify that I am the City Manager of the City of Tustin,
California, the City Council of which is the legislative body for City of Tustin Community
Facilities District No. 04 -1 (Tustin Legacy /John Laing Homes) (the "Community Facilities
District "), a community facilities district duly organized and existing under the laws of the State
of California (the "State ") and that as such, I am authorized to execute this Certificate on behalf
of the Issuer in connection with the issuance of the above - referenced 2013 Special Tax
Refunding Bonds (the 'Bonds ").
I hereby further certify on behalf of the Issuer that:
(A) to my best knowledge, after reasonable inquiry, no litigation is pending
with respect to which the Issuer has been served with process or known to me to be
threatened (1) to restrain or enjoin the issuance of any of the Bonds or the collection of
Special Taxes pledged under the Fiscal Agent Agreement; (2) in any way contesting or
affecting the authority for the issuance of the Bonds or the validity or enforceability of
the Bonds, the Fiscal Agent Agreement, the Escrow Agreement, the Continuing
Disclosure Agreement or the Purchase Contract, or (3) in any way contesting the
existence or powers of the Issuer;
(B) the representations and warranties made by the Issuer in the Issuer
Documents are true and correct in all material respects on the Closing Date, with the
same effect as if made on the Closing Date;
(C) no event has occurred since the date of the Final Official Statement that,
as of the Closing Date, would cause any statement or information contained in the Final
Official Statement to be incorrect or incomplete in any material respect or would cause
the information in the Final Official Statement to contain an untrue statement of a
material fact or omit to state a material fact necessary in order to make such statements
therein, in the light of the circumstances under which they were made, not misleading,
and
(D) as of the date hereof, the Fiscal Agent Agreement is in full force and effect
in accordance with its terms and has not been amended, modified or supplemented
except in such case as may have been agreed to by the Underwriter; and
/:MI
(E) the Issuer has complied with all the agreements and satisfied all the
conditions on its part to be performed or satisfied under the Issuer Documents prior to
issuance of the Bonds.
Capitalized terms used in this Certificates and not defined herein shall have the same
meaning set forth in the Bond Purchase Agreement dated May . 2013, between the Issuer, for
and on behalf of the Community Facilities District, and Stifel, Nicolaus & Company,
Incorporated.
IN WITNESS WHEREOF, the undersigned has executed this certificate as of the date
hereinbelow set forth.
Dated: June , 2013
A -2
CITY OF TUSTIN, CALIFORNIA, for and
on behalf of the CITY OF TUSTIN
COMMUNITY FACILITIES DISTRICT NO.
04 -1 (TUSTIN LEGACY /JOHN LAING
HOMES)
as
Jeffrey C. Parker,
City Manager
EXHIBIT B
CITY OF TUSTIN
COMMUNITY FACILITIES DISTRICT NO. 04-1
( TUSTIN LEGACY /JOHN LAING HOMES)
2013 SPECIAL TAX REFUNDING BONDS
Maturity Date Principal Interest
(September 1) Amount Rate Yield Price
[a]
EXHIBIT C
CITY OF TUSTIN
COMMUNITY FACILITIES DISTRICT NO. 04-1
(TUSTIN LEGACY/ JOHN LAING HOMES)
2013 SPECIAL TAX REFUNDING BONDS
RULE 15C2 -12 CERTIFICATE
The undersigned hereby certifies and represents that he is the duly appointed and acting
City Manager of the City of Tustin, California (the "Issuer "), the City Council of which is the
legislative body of the City of Tustin Community Facilities District No. 04 -1 (Tustin
Legacy /John Laing Homes) (the "District "), and is duly authorized to execute and deliver this
Certificate and further hereby certifies on behalf of the Issuer as follows:
(1) This Certificate is delivered in connection with the offering and sale of the above -
referenced bonds (the 'Bonds ") in order to enable the underwriter of the Bonds to comply with
Securities and Exchange Commission Rule 15c2 -12 under the Securities Exchange Act of 1934,
as amended (the "Rule ").
(2) In connection with the offering and sale of the Bonds, there has been prepared a
Preliminary Official Statement, setting forth information concerning the Bonds, the Issuer and
the District (the "Preliminary Official Statement").
(3) As used herein, "Permitted Omissions" shall mean the offering price(s), interest
rate(s), selling compensation, aggregate principal amount, principal amount per maturity,
delivery dates, ratings and other terms of the Bonds depending on such matters, all with respect
to the Bonds.
(4) The Preliminary Official Statement is, except for the Permitted Omissions,
deemed final within the meaning of the Rule.
IN WITNESS WHEREOF, I have hereunto set my hand as of May . 2013.
CITY OF TUSTIN, CALIFORNIA, for and
on behalf of the CITY OF TUSTIN
COMMUNITY FACILITIES DISTRICT NO.
04 -1 (TUSTIN LEGACY /JOHN LAING
HOMES)
WS
C -1
Jeffrey C. Parker,
City Manager
EXHIBIT D
CITY OF TUSTIN
COMMUNITY FACILITIES DISTRICT NO. 04-1
( TUSTIN LEGACY /JOHN LAING HOMES)
2013 SPECIAL TAX REFUNDING BONDS
CERTIFICATE OF FISCAL AGENT/ ESCROW BANK
The undersigned hereby states and certifies that the undersigned is an authorized officer
of U.S. Bank National Association (the 'Bank'), which is acting (A) as fiscal agent (the "Fiscal
Agent ") under that certain Fiscal Agent Agreement, dated as of June 1, 2013 (the "Fiscal Agent
Agreement'), by and between the City of Tustin, California (the "Issuer "), for and on behalf of
the City of Tustin Community Facilities District No. 04 -1 (Tustin Legacy /John Laing Homes)
(the "District'), and the Fiscal Agent, relating to the captioned bonds (the 'Bonds ") and (B) as
escrow bank (the "Escrow Bank') under that certain Escrow Agreement, dated as of June 1,
2013 (the "Escrow Agreement'), between the Issuer, for and on behalf of the District, and the
Escrow Bank, and as such, is familiar with the following facts and is authorized and qualified to
certify the following facts on behalf of the Bank:
(1) The Bank is duly organized and existing as a national banking association
under the laws of the United States of America, having the full power and authority to
enter into and perform its duties under the Fiscal Agent Agreement and the Escrow
Agreement.
(2) The Fiscal Agent Agreement and the Escrow Agreement have been duly
authorized, executed and delivered by the Bank, and are legal, valid and binding
agreements of the Bank enforceable upon the Bank in accordance with their respective
terms.
(3) The Bonds have been authenticated by a duly authorized representative of
the Bank in accordance with the Fiscal Agent Agreement.
(4) To the best knowledge of the undersigned, after due inquiry, there is no
action, suit, proceeding or investigation, at law or in equity, before or by any court or
governmental agency, public board or body pending against the Bank or threatened
against the Bank which in the reasonable judgment of the undersigned would affect the
existence of the Bank or in any way contesting or affecting the validity or enforceability
of the Fiscal Agent Agreement or the Escrow Agreement or contesting the powers of the
Bank or its authority to enter into and perform its obligations under the Fiscal Agent
Agreement and the Escrow Agreement.
Dated: June. 2011
D -1
U.S. BANK NATIONAL ASSOCIATION
m
ERIN
Authorized Officer
EXHIBIT E
CITY OF TUSTIN
COMMUNITY FACILITIES DISTRICT NO. 04 -1
( TUSTIN LEGACY /JOHN LAING HOMES)
2013 SPECIAL TAX REFUNDING BONDS
CERTIFICATE OF SPECIAL TAX CONSULTANT
Willdan Financial Services ( "Willdan') has been retained as Special Tax administrator
for the City of Tustin Community Facilities District No. 04 -1 (Tustin Legacy /John Laing Homes)
(the "District "), and hereby certifies as follows:
(i) the Special Tax levy and collection, assessed valuation and other fiscal
information provided by Willdan for inclusion in the Official Statement, including statements
and tables attributable to Willdan under the captions "SECURITY FOR THE 2013 BONDS -
Summary of Rate and Method," and "THE DISTRICT" were fairly and accurately presented as
of the date of the Official Statement;
(ii) nothing has come to Willdan s attention which would cause Willdan to believe
that the information in the Official Statement provided by or attributed to Willdan contains any
untrue or misleading statement of a material fact or fails to state a material fact required to be
stated therein, or necessary in order to make the information contained therein, not misleading;
(iii) Willdan is duly authorized to accept its appointment as Dissemination Agent
under the Continuing Disclosure Agreement and to perform the duties of Dissemination Agent
thereunder, and has accepted such appointment; and
(iv) Willdan's acceptance of the appointment and performance as Dissemination
Agent under the Continuing Disclosure Agreement do not and will not conflict in any way with
any law, judgment, agreement or other instrument to which Willdan is a party or is subject.
Capitalized terms used in this Certificate and not otherwise defined herein have the
meanings given to them in the Bond Purchase Agreement, dated 2013, between the
City of Tustin, California, for and on behalf of the District, and Stifel, Nicolaus & Company,
Incorporated.
Dated: June .2013
E -1
WILLDAN FINANCIAL SERVICES
By:
Its:
E o PRELIMINARY OFFICIAL STATEMENT DATED AS OF MAY � 2013
w
t NEW ISSUE - BOOK ENTRY ONLY RATING: S &P:
a
g (See "Rating" herein.)
m
o w
In the opinion of Quint & Thinnnig LLP, San Francisco, California, Bond Counsel, subject however, to certain qualifications described in
v L this Official Slalennent, under existing law, interest our the 2013 Bonds is excludable from gross income of the oton ers thereof far federal income tax
n" purposes and is not included as an item of tax preference in computing the federal alternative minimum tax for individuals and corporations under
P the Internal Revenue Code of 1986, as amended, but such interest is taken into account in computing an adjustment used in detennining the
m w federal alternative nuininunu tax for certain corporations. In the further opinion of Bond Counsel, interest on the 2013 Bonds is exempt foul
°= personal income taxation unposed by the State of California. See "TAX MATTERS."
T T .
J ] C
° ° • $9,850,000'
CITY OF TUSTIN
o
a COMMUNITY FACILITIES DISTRICT NO. 04-1
E _� ( TUSTIN LEGACY/JOHN LAING HOMES)
2013 SPECIAL TAX REFUNDING BONDS
3
m
Dated: date of issuance Due: September 1, as shown on inside cover
w N
° N
o v The City of Tustin, California (the "City"), for and on behalf of the City of Tustin Community Facilities District No. 04 -1 (Tustin
N Legacy /John Laing Homes) (the "District "), is issuing the above - captioned bonds (the "2013 Bonds ") to (i) refund in full and defense
o=
the City of Tustin Community Facilities District No. 04 -1 (Tustin Legacy /John Laing Homes) Special Tax Bonds, Series 2004 (the
m'Z "2004 Bonds "), (ii) fund a reserve fund for the 2013 Bonds, and (iii) pay costs of issuing the 2013 Bonds and refunding the 2004
° Bonds. See "PLAN OF REFUNDING." The 2004 Bonds were issued by the District to finance public improvements authorized to be
"°woo funded by the District. The 2013 Bonds are being issued pursuant to a Fiscal Agent Agreement, dated as of June 1, 2013 (the "Fiscal
o u Agent Agreement "), by and between the City, for and on behalf of the District, and U.S. Bank National Association, as fiscal agent
0" (the "Fiscal Agent ").
N �
C
The 2013 Bonds are payable from the proceeds of an annual Special Tax A (as defined in the Fiscal Agent Agreement) being
E w levied on property located within the District (see "THE DISTRICT "), and from certain funds pledged under the Fiscal Agent
E o Agreement. The Special Tax A is being levied according to a rate and method of apportionment of Special Taxes approved in 2004 by
E m N the then - qualified elector of the District. See "SECURITY FOR THE 2013 Bonds - Special Tax A" and Appendix B - "Rate and
m N .om Method"
o m 2
o ° Interest on the 2013 Bonds is payable on March 1 and September 1 of each year, commencing on March 1, 2014. The 2013 Bonds
d O o will be issued in book -entry form only and, when delivered, will be registered in the name of Cede & Co., as nominee of the
oDepository Trust Company, New York, New York ( "DTC "), which will act as securities depository for the 2013 Bonds. Individual
° E `3 purchases of the 2013 Bonds will be made in book -entry form only. Purchasers of the 2013 Bonds will not receive physical certificates
° E representing their ownership interests in the 2013 Bonds purchased. The 2013 Bonds will be issued in the principal amount of $5,000
nw and any integral multiple thereof. Principal of and interest on the 2013 Bonds are payable directly to DTC by the Fiscal Agent. Upon
N receipt of payments of principal and interest, DTC will in turn distribute such payments to the beneficial owners of the 2013 Bonds.
m r -'o See "THE 2013 Bonds" and Appendix F - "DTC and the Book -Entry Only System"
° w 3
N w The 2013 Bonds are subject to optional and mandatory redemption prior to maturity. See "THE 2013 Bonds - Redemption."
w w E
`m 5 The City, may issue additional bonded indebtedness that is secured by a lien on the Special Tax Revenues and by funds pledged
E o under the Fiscal Agent Agreement for the payment of the 2013 Bonds on a parity with the 2013 Bonds ( "Parity Bonds "), but only for
u' m the purpose of refunding all or a portion of the 2013 Bonds or of any outstanding Parity Bonds. See "SECURITY FOR THE 2013
`o6 .0 Bonds - Issuance of Additional Bonds."
U O O
NONE OF THE FAITH AND CREDIT OF THE DISTRICT, THE CITY OR THE STATE OF CALIFORNIA OR OF ANY OF
E o THEIR RESPECTIVE POLITICAL SUBDIVISIONS IS PLEDGED TO THE PAYMENT OF THE 2013 BONDS. EXCEPT FOR THE
o s SPECIAL TAX REVENUES, NO OTHER TAXES ARE PLEDGED TO THE PAYMENT OF THE 2013 BONDS. THE 2013 BONDS ARE
o m NEITHER GENERAL NOR SPECIAL OBLIGATIONS OF THE CITY NOR GENERAL OBLIGATIONS OF THE DISTRICT, BUT ARE
u LIMITED OBLIGATIONS OF THE CITY FOR THE DISTRICT, PAYABLE SOLELY FROM CERTAIN AMOUNTS PLEDGED
m -
,E 3 THEREFOR UNDER THE FISCAL AGENT AGREEMENT, AS MORE FULLY DESCRIBED IN THIS OFFICIAL STATEMENT.
c .c This cover page contains certain information for quick reference only. Investors should read the entire Official Statement to
E obtain information essential to the making of an informed investment decision with respect to the 2013 Bonds. The purchase of the
m a 2013 Bonds involves significant risks, and the 2013 Bonds are not appropriate investments for all types of investors. See "SPECIAL
N a RISK FACTORS" in this Official Statement for a discussion of certain risk factors that should be considered, in addition to the other
N .-
- >. matters set forth in this Official Statement, in evaluating the investment quality of the 2013 Bonds.
u
v o
O E The 2013 Bonds are offered when, as and if issued, subject to approval as to their legality by Quint & Thimmig LLP, San
2!, 2 .
M w Francisco, California, Bond Counsel, and certain other conditions. Certain legal matters with respect to the 2013 Bonds will be passed
E� upon for the City by Woodruff, Spradlin & Smart, A Professional Corporation, Costa Mesa, California, acting as City Attorney, and
2 :u 00 by Quint & Thimmig LLP, San Francisco, California, in its capacity as Disclosure Counsel to the City for the 2013 Bonds. Certain legal
a p N matters related to the 2013 Bonds will be passed upon for the Underwriter by Stradling Yocca Carlson & Rauth, a Professional
1E V Y Corporation, Newport Beach, California, acting as Underwriter's Counsel. It is anticipated that the 2013 Bonds in definitive form will
be available for delivery to DTC on or about June _ 2013.
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The date of this Official Statement is June _ 2013.
Preliminary, subject to change.
STIFEL
MATURITY SCHEDULE
$ Serial Bonds, CUSIP Prefix 901047*
Maturity Date Principal Interest CUSIP
(September 1) Amount Rate Yield Price Suffix*
$ % Term Bonds Due September 1, 2034 Yield % CUSIP Number 901047
Copyright 2013, American Bankers Association. CUSIP data is provided by Standard & Poor's CUSIP Service
Bureau, a division of The McGraw -Hill Companies, Inc.
GENERAL INFORMATION ABOUT THIS OFFICIAL STATEMENT
The information contained in this Official Statement has been obtained from sources that are
believed to be reliable. No representation, warranty or guarantee, however, is made by the Underwriter
as to the accuracy or completeness of any information in this Official Statement, including, without
limitation, the information contained in the Appendices, and nothing contained in this Official Statement
should be relied upon as a promise or representation by the Underwriter.
Neither the City nor the Underwriter has authorized any dealer, broker, salesperson or other
person to give any information or make any representations with respect to the offer or sale of 2013
Bonds other than as contained in this Official Statement. If given or made, any such information or
representations must not be relied upon as having been authorized by the City or the Underwriter. The
information and expressions of opinion in this Official Statement are subject to change without notice,
and neither the delivery of this Official Statement nor any sale of the 2013 Bonds shall under any
circumstances create any implication that there has been no change in the affairs of any party described in
this Official Statement, or in the status of any property described in this Official Statement, subsequent to
the date as of which such information is presented.
This Official Statement and the information contained in this Official Statement are subject to
amendment without notice. The 2013 Bonds may not be sold, and no offer to buy the 2013 Bonds may be
accepted, prior to the time the Official Statement is delivered in final form. Under no circumstances shall
this Official Statement constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any
sale of, the 2013 Bonds in any jurisdiction in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such jurisdiction.
When used in this Official Statement and in any continuing disclosure by the City, in any press
release and in any oral statement made with the approval of an authorized officer of the City or any other
entity described or referenced in this Official Statement, the words or phrases "will likely result," "are
expected to," "will continue," "is anticipated," "estimate," "project," "forecast," "expect," "intend" and
similar expressions identify "forward looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995. 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.
All summaries of the documents referred to in this Official Statement are qualified by the
provisions of the respective documents summarized and do not purport to be complete statements of any
or all of such provisions.
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, its
responsibilities to investors under the federal securities laws as applied to the facts and circumstances of
this transaction, but the Underwriter does not guarantee the accuracy or the completeness of such
information.
In connection with the offering of the 2013 Bonds, the Underwriter may overallot or effect
transactions that stabilize or maintain the market prices of the 2013 Bonds at levels above that which
might otherwise prevail in the open market. Such stabilizing, if commenced, may be discontinued at
any time.
-i-
The 2013 Bonds have not been registered under the Securities Act of 1933, as amended (the
"Securities Act "), in reliance upon an exemption from the registration requirements contained in the
Securities Act. The 2013 Bonds have not been registered or qualified under the securities laws of any
state.
The City maintains an Internet website, but the information on the website is not incorporated in
this Official Statement.
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-iii-
CITY OF TUSTIN
City Council
Al Murray, Mayor
Charles E. "Chuck" Puckett, Mayor Pro Tem
John Nielsen, Councilmember
Rebecca "Beckie" Gomez, Councilinember
Dr. Allan Bernstein, Councibneniber
City Officials
Jeffrey C. Parker, City Manager and City Clerk
Pamela Arends -King, Finance Director
Sean Tran, Administrative Services Manager
PROFESSIONAL SERVICES
City Attorney
Woodruff, Spradlin Smart, A Professional Corporation
Costa Mesa, California
Financial Advisor
Fieldman, Rolapp & Associates
Irvine, CA
Fiscal Agent and Escrow Bank
U.S. Bank National Association
Los Angeles, California
District Administrator
Willdan Financial Services
Temecula, California
Bond Counsel and Disclosure Counsel
Quint & Thimmig LLP
San Francisco, California
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am
TABLE OF CONTENTS
INTRODUCTION ..... ...............................
General.................. ...............................
Authority for Issuance ............. ..............................1
The 2013 Bonds ......................... ..............................2
Security for the 2013 Bonds .... ..............................2
ReserveFund ............................ ..............................3
TheDistrict ................................ ..............................3
Limited Obligation ................... ..............................4
Issuance of Additional Bonds . ..............................4
Bondowners' Risks .................. ..............................5
Continuing Disclosure ............. ..............................5
Other Information .................... ..............................5
PLAN OF REFUNDING .............. ..............................5
Redemption of 2004 Bonds ..... ..............................5
Estimated Sources and Uses of Funds .................6
THE 2013 BONDS ........................ ...............................
6
Authority for Issuance ............. ..............................6
12
General Provisions ................... ..............................7
50
Redemption.............................. ..............................8
50
Transfer or Exchange of Bonds ..........................10
25
Discontinuance of DTC Services ........................10
DTC AND THE BOOK -ENTRY ONLY SYSTEM
Scheduled Debt Service .......... .............................11
51
SECURITY FOR THE 2013 BONDS .......................12
21
General., ................................................................
12
Limited Obligation .................. .............................12
50
SpecialTax A ........................... .............................12
50
Special Tax Fund ..................... .............................14
25
Summary of Rate and Method ...........................15
DTC AND THE BOOK -ENTRY ONLY SYSTEM
ReserveFund ........................... .............................17
51
Covenant for Superior Court Foreclosure ........18
No Teeter Plan ......................... .............................20
Investment of Moneys ............ .............................20
Issuance of Additional Bonds .............................20
THE DISTRICT .......................... ...............................
21
Location and Description of the District...........
21
History of the District ............. .............................22
50
Land Ownership and Current Special Tax
50
Levy........................................ ...............................
25
Assessed Property Values ...... .............................26
DTC AND THE BOOK -ENTRY ONLY SYSTEM
Value -to- Burden Ratio ............ .............................27
51
Special Tax Levies and Delinquencies ..............29
Direct and Overlapping Governmental
Obligations............................. ...............................
30
Projected Debt Service Coverage .......................
35
SPECIAL RISK FACTORS .......... .............................36
50
No General Obligation of the City or the
50
District...................................... .............................36
50
Payment of the Special Tax is not a Personal
DTC AND THE BOOK -ENTRY ONLY SYSTEM
Obligation................................ .............................36
51
PropertyValue ........................ .............................36
Exempt Properties ................... .............................37
Parity Taxes and Special Assessments ..............37
Insufficiency of Special Taxes .............................38
Tax Delinquencies ................... .............................38
Bankruptcy Delays .................. .............................39
Proceeds of Foreclosure Sales .............................39
Natural Disasters and Potential Drought
Conditions.............................. ...............................
40
Hazardous Substances ........... .............................41
Disclosure to Future Purchasers ........................41
FDIC /Federal Government Interests in
Properties................................. .............................41
No Acceleration Provision ..... .............................43
Taxability Risk ......................... .............................43
Enforceability of Remedies .... .............................44
No Secondary Market ............. .............................44
Proposition 218 ........................ .............................44
Ballot Initiatives ....................... .............................46
IRS Audit of Tax- Exempt Bond Issues ..............46
Impact of Legislative Proposals, Clarifications
of the Code and Court Decisions on Tax
Exemption................................ .............................46
TAX MATTERS ............................ .............................47
LEGAL MATTERS ...................... .............................49
CITY AND COUNTY GENERAL DEMOGRAPHIC INFORMATION
FINANCIAL ADVISOR .............. .............................50
RATE AND METHOD
RATING...................................... ...............................
50
LITIGATION.............................. ...............................
50
UNDERWRITING ..................... ...............................
50
CONTINUING DISCLOSURE ... .............................51
DTC AND THE BOOK -ENTRY ONLY SYSTEM
MISCELLANEOUS ................... ...............................
51
APPENDIX A
CITY AND COUNTY GENERAL DEMOGRAPHIC INFORMATION
APPENDIX B
RATE AND METHOD
APPENDIX C
SUMMARY OF THE FISCAL AGENT AGREEMENT
APPENDIX D
FORM OF OPINION OF BOND COUNSEL
APPENDIX E
FORM OF CONTINUING DISCLOSURE AGREEMENT
APPENDIX F
DTC AND THE BOOK -ENTRY ONLY SYSTEM
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-VI-
OFFICIAL STATEMENT
$9,850,000'
CITY OF TUSTIN
COMMUNITY FACILITIES DISTRICT NO. 04-1
( TUSTIN LEGACY/JOHN LAING HOMES)
2013 SPECIAL TAX REFUNDING BONDS
INTRODUCTION
This introduction is not a suninary of this Official Statement and is only a brief description of
and guide to, and is qualified by, more complete and detailed information contained in this entire Official
Statement and the documents summarized or described in this Official Statement. A fill review should be
made of this entire Official Statement by those interested in purchasing the 2013 Bonds. The sale and
delivenj of 2013 Bonds to potential investors is made only by means of this entire Official Statement.
Certain capitalized tennis used in this Official Statement and not defined herein have the meaning set
forth in Appendix C— "Sunimanj of the Fiscal Agent Agreement — Definitions" and in Appendix B—
"Rate and Method."
General
The purpose of this Official Statement, which includes the cover page, the inside cover
page, the table of contents and the attached appendices (the "Official Statement "), is to provide
certain information concerning the issuance of the above - captioned bonds (the "2013 Bonds ").
The 2013 Bonds are being issued by the City of Tustin, California (the "City"), for and on behalf
of the City of Tustin Community Facilities District No. 04 -1 (Tustin Legacy /John Laing Homes)
(the "District "), to (i) refund in full and defease the City of Tustin Community Facilities District
No. 04 -1 (Tustin Legacy/ John Laing Homes) Special Tax Bonds, Series 2004 (the "2004 Bonds ")
of which $9,845,000 principal amount is currently outstanding, (ii) fund a reserve fund for the
2013 Bonds, and (iii) pay costs of issuing the 2013 Bonds and the refunding of the 2004 Bonds.
See "PLAN OF REFUNDING." The 2004 Bonds were issued to finance public improvements
authorized to be funded by the District (the "Improvements ").
Authority for Issuance
General. The District was formed under the authority of the Mello -Roos Community
Facilities Act of 1982, as amended, commencing at Section 53311, et seq., of the California
Government Code (the "Act "), which was enacted by the California Legislature to provide an
alternative method of financing certain public capital facilities and services, especially in
developing areas of the State. The Act authorizes local governmental entities to establish
community facilities districts as legally constituted governmental entities within defined
boundaries, with the legislative body of the local applicable governmental entity acting on
behalf of the district. Subject to approval by at least a two- thirds vote of the votes cast by the
qualified electors within a district and compliance with the provisions of the Act, the legislative
Preliminary, subject to change.
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body may issue bonds for the community facilities district established by it and may levy and
collect a special tax within such district to repay such bonds.
Bond Authority. The 2013 Bonds are authorized to be issued pursuant to the Act, a
resolution adopted on May 21, 2013 by the City Council of the City (the "City Council ") acting
as the legislative body of the District, and the Fiscal Agent Agreement dated as of June 1, 2013
(the "Fiscal Agent Agreement "), between the City, for and on behalf of the District, and U.S.
Bank National Association, as fiscal agent (the "Fiscal Agent "). For more detailed information
about the formation of the District and the authority for issuance of the 2013 Bonds, see "THE
2013 BONDS — Authority for Issuance" and "THE DISTRICT — History of the District."
The 2013 Bonds
General. The 2013 Bonds will be issued only as fully registered bonds, in denominations
of $5,000 or any integral multiple thereof, and will bear interest at the rates per annum and will
mature on the dates and in the principal amounts set forth on the inside cover page of this
Official Statement. The 2013 Bonds will be dated the date of their issuance and interest on the
2013 Bonds will be payable on March 1 and September 1 of each year (individually an "Interest
Payment Date "), commencing March 1, 2014. See "THE 2013 BONDS." The 2013 Bonds will be
issued in book -entry form only and, when delivered, will be registered in the name of Cede &
Co., as nominee of the Depository Trust Company, New York, New York ( "DTC"), which will
act as securities depository for the 2013 Bonds. See "THE 2013 Bonds — General Provisions."
Redemption Prior to Maturity. The 2013 Bonds are subject to optional and mandatory
redemption prior to maturity. See "THE 2013 Bonds — Redemption."
Security for the 2013 Bonds
Pledge Under the Fiscal Agent Agreement. Pursuant to the Fiscal Agent Agreement, the
2013 Bonds are secured by a first pledge of all of the Special Tax Revenues (other than the first
$20,000 of Special Tax Revenues received by the City in each Fiscal Year, which are to be used to
pay Administrative Expenses) and all moneys deposited in the Bond Fund, the Reserve Fund
and, until disbursed in accordance with the Fiscal Agent Agreement, in the Special Tax Fund.
"Special Tax Revenues," as defined in the Fiscal Agent Agreement, means the proceeds of the
Special Tax A levied on the Taxable Property in the District and received by the City, including
any scheduled payments and any prepayments thereof, interest and penalties thereon and
proceeds of the redemption or sale of property sold as a result of foreclosure of the lien of the
Special Tax A to the amount of said lien, but does not include interest and penalties, if any,
collected with the Special Tax A that are in excess of the rate of interest payable on the Bonds.
The Special Tax Revenues (other than the first $20,000 of Special Tax Revenues received by the
City in each Fiscal Year, which are to be used to pay Administrative Expenses) and all moneys
deposited into said funds are dedicated to the payment of the principal of, and interest and any
premium on, the 2013 Bonds in accordance with the Fiscal Agent Agreement until all of the 2013
Bonds have been paid or defeased. See "SECURITY FOR THE 2013 Bonds — Special Taxes" and
Appendix B— "Rate and Method"
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The first $20,000 of Special Tax Revenues received by the City in each Fiscal Year, as well
as amounts in the Administrative Expense Fund and the Costs of Issuance Fund, each of which
is established under the Fiscal Agent Agreement, are not pledged to the repayment of the 2013
Bonds. Proceeds of the 2013 Bonds and other amounts deposited to the Refunding Fund
established under the Escrow Agreement are not pledged to, and are not available for, the
repayment of the 2013 Bonds. Proceeds of the levy of Special Tax B (described below) are not
pledged to the repayment of the 2013 Bonds.
Special Tax A, Rate and Method. The Special Tax A to be used to pay debt service on the
2013 Bonds will be levied in accordance with the Rate and Method (as described under the
heading "THE 2013 Bonds — Authority for Issuance'). "Special Taxes' as defined in the Fiscal
Agent Agreement, means the Special Tax A levied on the Taxable Property within the District
pursuant to the Rate and Method and the Fiscal Agent Agreement. The Rate and Method also
allows for a Special Tax B to be levied on Taxable Property in the District to fund certain
Authorized Services, but proceeds of the levy of Special Tax B are not pledged to, and will not
be available for, the repayment of the 2013 Bonds. See "SECURITY FOR THE 2013 BONDS —
Special Tax A" and "— Summary of Rate and Method."
Limitations. The Improvements are not pledged to pay the debt service on the 2013
Bonds. The proceeds of condemnation or destruction of any of the Improvements are not
pledged to pay the debt service on the 2013 Bonds. In the event that the Special Taxes are not
paid when due, the only sources of funds available to repay the 2013 Bonds are amounts held
by the Fiscal Agent in the Bond Fund, the Special Tax Fund and the Reserve Fund established
under the Fiscal Agent Agreement, and the proceeds, if any, from foreclosure sales of land and
improvements within the District in respect of delinquent Special Taxes.
Reserve Fund
The Fiscal Agent Agreement establishes a Reserve Fund as a reserve for the payment of
principal of and interest on the 2013 Bonds. The Reserve Fund is required to be funded in an
amount equal to seventy-five percent (75 %) of the Maximum Annual Debt Service (the
"Reserve Requirement "). The Reserve Fund will be available to pay the debt service on the
2013 Bonds and any Parity Bonds in the event of a shortfall in the amount in the Bond Fund for
such purpose, which Parity Bonds may be issued only for refunding purposes. The Reserve
Requirement as of the date of issuance of the 2013 Bonds will be $ See " SECURITY
FOR THE 2013 Bonds — Reserve Fund."
The District
The District was formed by the City Council pursuant to proceedings conducted under
the Act on July 19, 2004. The District includes 563 separate Orange County Assessor's parcels in
the City that are subject to the levy of Special Taxes, all of which have been improved with
single family detached or attached (including paired homes, cluster townhomes and row
townhomes) dwellings. The District constitutes one of the phases of development of the former
Marine Air Corps Station Tustin (the "Air Station "). The portion of the Air Station located in
the City and certain adjacent property is being developed as an approximately 1,511 gross acre
-3-
master planned community called Tustin Legacy. Approximately 95 acres of the former Air
Station are located in the City of Irvine.
At the time of formation of the District in 2004, all of the Taxable Property (as defined in
the Rate and Method) was owned by WL Homes LLC, which planned to construct 565
residential units in the District in seven different neighborhoods. The first building permit for
construction of a residential dwelling in the District (for a model home) was issued by the City
in December of 2003, and the first building permit for a production unit was issued in March of
2004. The certificates of occupancy for the last of the 563 residential dwelling units actually
constructed in the District were provided by the City in July of 2006.
The land and improvements comprising the Taxable Property subject to the levy of
Special Taxes in the District were valued by the Orange County Assessor for ad valorem
property tax purposes on the 2012 -13 property tax roll at an aggregate of $278,758,282. Based on
the County's Fiscal Year 2012 -13 property valuation, all but 17 of the 563 parcels of Taxable
Property in the District have assessed value to estimated share of 2013 Bond principal ratios in
excess of 12:1, and those 17 parcels each have value to estimated share of 2013 Bond principal
ratios in excess of 9:1. See "THE DISTRICT— Value -to- Burden Ratio."
The value of individual parcels vary significantly. In addition, County assessed values
may not reflect current market values. No recent independent appraisal of the Taxable Property
subject to the levy of Special Taxes has been conducted in connection with the 2013 Bonds, and
no assurance can be given that should Special Taxes levied on one or more of the parcels
become delinquent, and should the delinquent parcels be offered for sale at a judicial
foreclosure sale, that any bid would be received for the property or, if a bid is received, that
such bid would be sufficient to pay such parcel's delinquent Special Taxes. See "SPECIAL RISK
FACTORS — Property Value" and "SPECIAL RISK FACTORS — Insufficiency of Special Taxes."
Limited Obligation
NONE OF THE FAITH AND CREDIT OF THE DISTRICT, THE CITY OR THE STATE
OF CALIFORNIA OR OF ANY OF THEIR RESPECTIVE POLITICAL SUBDIVISIONS IS
PLEDGED TO THE PAYMENT OF THE 2013 BONDS. EXCEPT FOR THE SPECIAL TAX
REVENUES, NO OTHER TAXES ARE PLEDGED TO THE PAYMENT OF THE 2013 BONDS.
THE 2013 BONDS ARE NEITHER GENERAL NOR SPECIAL OBLIGATIONS OF THE CITY
NOR GENERAL OBLIGATIONS OF THE DISTRICT, BUT ARE LIMITED OBLIGATIONS OF
THE CITY FOR THE DISTRICT PAYABLE SOLELY FROM CERTAIN AMOUNTS PLEDGED
THEREFOR UNDER THE FISCAL AGENT AGREEMENT, AS MORE FULLY DESCRIBED IN
THIS OFFICIAL STATEMENT.
Issuance of Additional Bonds
The City may issue additional bonded indebtedness that is secured by a lien on the
Special Tax Revenues and on the funds pledged under the Fiscal Agent Agreement for the
payment of the 2013 Bonds on a parity with the 2013 Bonds ( "Parity Bonds "), but only for the
purpose of refunding the 2013 Bonds or any outstanding Parity Bonds. See "SECURITY FOR
THE 2013 Bonds — Issuance of Additional Bonds."
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Bondowners' Risks
Certain events could affect the ability of the City to pay the principal of and interest on
the 2013, Bonds when due. Except for the Special Tax A, no other taxes are pledged to the
payment of the 2013 Bonds. See "SPECIAL RISK FACTORS" for a discussion of certain factors
that should be considered in evaluating an investment in the 2013 Bonds. The purchase of the
2013 Bonds involves significant risks, and the 2013 Bonds are not appropriate investments for
all types of investors.
Continuing Disclosure
For purposes of complying with Rule 15c2- 12(b)(5) promulgated under the Securities
Exchange Act of 1934, as amended (the "Rule "), the City has agreed to provide, or cause to be
provided, to the Municipal Securities Rulemaking Board (the "MSRB ") certain annual financial
information and operating data and notice of certain significant events. These covenants have
been made in order to assist the Underwriter in complying with the Rule. See "CONTINUING
DISCLOSURE" and Appendix E for a description of the specific nature of the annual reports
and notices of significant events, as well as the terms of the Continuing Disclosure Agreement
pursuant to which such reports and notices are to be made.
Other Information
This Official Statement speaks only as of its date, and the information contained in this
Official Statement is subject to change without notice. Except where otherwise indicated, all
information contained in this Official Statement has been provided by the City on behalf of the
District.
Copies of the Fiscal Agent Agreement and certain other documents referenced in this
Official Statement are available for inspection at the office of, and (upon written request and
payment to the City of a charge for copying, mailing and handling) are available for delivery
from, the City's Finance Director, 300 Centennial Way, Tustin, California 92780.
PLAN OF REFUNDING
Redemption of 2004 Bonds
The net proceeds of the sale of the 2013 Bonds, together with certain other funds held
under the Indenture, dated as of December 1, 2004, pursuant to which the 2004 Bonds were
issued (the "2004 Indenture "), will be deposited in an escrow account (the "Refunding Fund ")
held by U.S. Bank National Association, as escrow bank (the "Escrow Bank ") pursuant to an
Escrow Deposit and Trust Agreement, dated as of June 1, 2013, and applied to legally defease
all of the outstanding 2004 Bonds on the date of delivery of the 2013 Bonds.
Amounts in the Refunding Fund will be held by the Escrow Bank uninvested, and will
be sufficient to pay the principal and interest due on the 2004 Bonds on September 1, 2013, and
-5-
to redeem on September 1, 2013 all of the 2004 Bonds maturing after September 1, 2013 at a
redemption price of 100.5% of the principal amount thereof plus accrued interest to the
redemption date. Upon the deposit of funds with the Escrow Bank in the Refunding Fund and
in accordance with the Escrow Agreement, the 2004 Bonds will be legally defeased and will no
longer be entitled to the benefits of, or be secured by, the 2004 Indenture or any pledge of, or
lien on, the Special Taxes levied in the District.
Amounts deposited in the Refunding Fund are not in any way pledged to the payment
of, or available to pay, the debt service on the 2013 Bonds.
Estimated Sources and Uses of Funds
The sources and uses of funds in connection with the 2013 Bonds are expected to be as
follows:
Principal of 2013 Bonds $
Amounts relating to the 2004 Bonds
Less: Original Issue Discount
Less: Underwriter's Discount
Total Sources
Deposit to Refunding Fund(') $
Deposit to Reserve Fund(z)
Deposit to Costs of Issuance Fund(3) _
Total Uses
(1) See "PLAN OF REFUNDING — Redemption of 2004 Bonds."
(2) Equal to the initial Reserve Requirement. See "SECURITY FOR THE 2013 Bonds — Reserve Fund."
(3) Costs of issuance include, without limitation, Fiscal Agent fees and expenses, Financial Advisor fees and
expenses, Bond Counsel and Disclosure Counsel and other legal fees and expenses, Escrow Bank fees and
expenses, rating agency fees and printing costs.
THE 2013 BONDS
Authority for Issuance
Pursuant to the Act, on July 19, 2004, the City Council adopted Resolution No. 04 -67
establishing the District ( "Resolution of Formation'). Also on July 19, 2004, WL Homes, LLC,
as the then owner of all of the land in the District and the sole qualified elector for the District,
authorized the issuance of bonded indebtedness to finance certain public facilities, and
approved the rate and method of apportionment of Special Tax (the "Rate and Method "), a
copy of which is attached to this Official Statement as Appendix B. See "THE DISTRICT."
The 2013 Bonds are authorized to be issued pursuant to the Act, a resolution adopted on
May 21, 2013, by the City Council, acting as the legislative body of the District, and the Fiscal
0
Agent Agreement. The Special Tax A to be used to pay debt service on the 2013 Bonds will be
levied in accordance with the Rate and Method.
General Provisions
The 2013 Bonds will be issued only as fully registered 2013 Bonds, in the denomination
of $5,000 or any integral multiple thereof, and will bear interest at the rates per annum and will
mature on the dates set forth on the inside cover page of this Official Statement. The 2013 Bonds
will be dated the date of their issuance and interest will be payable on each Interest Payment
Date, commencing March 1, 2014.
Each 2013 Bond will bear interest from the Interest Payment Date next preceding the
date of authentication thereof, unless (a) it is authenticated after a Record Date and on or before
the following Interest Payment Date, in which event it will bear interest from such Interest
Payment Date; or (b) it is authenticated on or before February 15, 2014, in which event it will
bear interest from the date of issuance of the 2013 Bonds; provided, however, that if, as of the
date of authentication of any 2013 Bond, interest thereon is in default, such 2013 Bond will bear
interest from the Interest Payment Date to which interest has previously been paid or made
available for payment thereon. The term "Record Date' as defined in the Fiscal Agent
Agreement means the fifteenth (15th) day of the month next preceding the month of the
applicable Interest Payment Date, whether or not such fifteenth (15th) day is a Business Day.
The 2013 Bonds will be payable both as to principal and interest, and as to any premium
upon the redemption thereof, in lawful money of the United States of America. The principal of
the 2013 Bonds and any premium due upon the redemption thereof will be payable by check of
the Fiscal Agent upon presentation and surrender of the applicable 2013 Bonds at the Principal
Office of the Fiscal Agent. Interest with respect to each Bond will be computed using a year of
360 days comprised of twelve 30 -day months.
The 2013 Bonds will be issued in book -entry form only and, when delivered, will be
registered in the name of Cede & Co., as nominee of DTC, which will act as securities
depository for the 2013 Bonds. Individual purchases of the 2013 Bonds will be made in book -
entry form only. Purchasers of the 2013 Bonds will not receive physical certificates representing
their ownership interests in the 2013 Bonds purchased. Principal and interest payments
represented by the 2013 Bonds are payable directly to DTC by the Fiscal Agent. Upon receipt of
payments of principal and interest, DTC will in turn distribute such payments to the beneficial
owners of the 2013 Bonds. See Appendix F — "DTC and the Book -Entry Only System." So long
as the 2013 Bonds are registered in the name of Cede & Co., as nominee of DTC, references in
this Official Statement to the owners shall mean Cede & Co., and shall not mean the
purchasers or Beneficial Owners of the 2013 Bonds. .
-7-
Redemption
Optional Redemption *. The 2013 Bonds maturing on and after September 1, — are
subject to optional redemption prior to their stated maturity on any Interest Payment Date
occurring on or after September 1, . as a whole, or in part among maturities as determined
by the Finance Director and by lot within a maturity, at a redemption price equal to the
principal amount of the 2013 Bonds to be redeemed, together with accrued interest thereon to
the date fixed for redemption, without premium.
Mandatory Sinking Payment Redemption. The 2013 Bonds maturing on September 1,
are subject to mandatory sinking payment redemption in part on September 1, and
on each September 1 thereafter to maturity, by lot, at a redemption price equal to the principal
amount thereof to be redeemed, together with accrued interest to the date fixed for redemption,
without premium, from sinking payments as follows:
Redemption Date
(September 1) Sinking Pam
The amounts in the foregoing table shall be reduced as a result of any prior partial
redemption of the 2013 Bonds pursuant to the optional redemption or redemption from special
tax prepayments provisions of the Fiscal Agent Agreement, in the manner provided in the
Fiscal Agent Agreement and as specified in writing by the Finance Director to the Fiscal Agent.
Mandatory Redemption From Special Tax Prepayments. The 2013 Bonds are subject to
mandatory redemption prior to their stated maturity on any Interest Payment Date, from the
proceeds of Special Tax Prepayments and corresponding transfers of funds from the Reserve
Fund (as described below under "SECURITY FOR THE 2013 Bonds— Reserve Fund "), as a
whole or in part by lot and allocated among maturities of the 2013 Bonds so as to maintain
substantially level debt service on the Bonds, at a redemption price (expressed as a percentage
of the principal amount of the 2013 Bonds to be redeemed), as set forth below, together with
accrued interest to the date fixed for redemption:
Redemption Dates' Redemption Prices'
any Interest Payment Date to and including 103%
March 1, 2021
September 1, 2021 and March 1, 2022 102
September 1, 2022 and March 1, 2023 101
September 1, 2023 and thereafter 100
There have been no Special Tax Prepayments since the District was formed in 2004;
however, no assurance can be given that Special Tax Prepayments will not occur in the future.
Preliminary, subject to change.
IMI
purchase of 2013 Bonds In Lieu of Redemption. In lieu of redemption as described
above, moneys in the Bond Fund may be used and withdrawn by the Fiscal Agent for purchase
of Outstanding 2013 Bonds, upon the filing with the Fiscal Agent of an Officer's Certificate
requesting such purchase prior to the selection of 2013 Bonds for redemption, at public or
private sale as and when, and at such prices (including brokerage and other charges) as such
Officer's Certificate may provide, but in no event may 2013 Bonds be purchased at a price in
excess of the principal amount thereof, plus interest accrued to the date of purchase.
Selection of 2013 Bonds for Redemption. Whenever provision is made in the Fiscal
Agent Agreement for the redemption of less than all of the 2013 Bonds or any given portion
thereof pursuant to the optional redemption provisions of the Fiscal Agent Agreement, the
Fiscal Agent shall select the 2013 Bonds to be redeemed, from all 2013 Bonds or such given
portion thereof not previously called for redemption among maturities as directed in writing by
the Finance Director, and within a maturity by lot in any manner which the Fiscal Agent in its
sole discretion shall deem appropriate and fair. Whenever provision is made in the Fiscal
Agent Agreement for the redemption of less than all of the 2013 Bonds pursuant to the Special
Tax Prepayment provisions of the Fiscal Agent Agreement, the Fiscal Agent will select the 2013
Bonds to be redeemed, from among the maturities of the 2013 Bonds or such given portion
thereof not previously redeemed, so as to maintain substantially level debt service on the
Bonds, and within a maturity by lot in any manner which the Fiscal Agent in its sole discretion
shall deem appropriate and fair. In each case, for purposes of selection of 2013 Bonds to be
redeemed, all 2013 Bonds shall be deemed to be comprised of separate $5,000 portions, and
such portions shall be treated as separate 2013 Bonds that may be separately redeemed.
Notice of Redemption. The Fiscal Agent will cause notice of any redemption to be
mailed by first class mail, postage prepaid, at least 30 days but not more than 60 days prior to
the date fixed for redemption, to the Securities Depositories and to one or more Information
Services, and to the respective registered Owners of any 2013 Bonds designated for redemption,
at their addresses appearing on the Bond registration books in the Principal Office of the Fiscal
Agent, but such mailing is not a condition precedent to redemption and failure to mail or to
receive any such notice, or any defect therein, will not affect the validity of the proceedings for
the redemption of such 2013 Bonds. The redemption notice will state the redemption date and
the redemption price and, if less than all of the then Outstanding 2013 Bonds are to be called for
redemption, will designate the CUSIP numbers and Bond numbers of the 2013 Bonds to be
redeemed by giving the individual CUSIP number and Bond number of each Bond to be
redeemed or will state that all 2013 Bonds between two stated Bond numbers, both inclusive,
are to be redeemed or that all of the 2013 Bonds of one or more maturities have been called for
redemption, will state as to any Bond called in part the principal amount thereof to be
redeemed, and will require that such 2013 Bonds be then surrendered at the Principal Office of
the Fiscal Agent for redemption at the said redemption price, and will state that further interest
on such 2013 Bonds will not accrue after the redemption date.
Notwithstanding the foregoing, any notice of redemption in connection with an optional
redemption or redemption from Special Tax Prepayments may state that the redemption is
conditioned upon receipt by the Fiscal Agent of sufficient moneys to redeem the 2013 Bonds on
the anticipated redemption date, and that the redemption will not occur if by no later than the
scheduled redemption date sufficient moneys to redeem the 2013 Bonds have not been
0
deposited with the Fiscal Agent. In the event that the Fiscal Agent does not receive sufficient
funds by the scheduled redemption date to so redeem the 2013 Bonds to be redeemed, the Fiscal
Agent will send written notice to the owners of the 2013 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 2013 Bonds for which notice of redemption was given will remain
Outstanding for all purposes of the Fiscal Agent Agreement.
Effect of Redemption. From and after the date fixed for redemption, if funds available
for the payment of the principal of, and interest and any premium on, the 2013 Bonds so called
for redemption have been deposited in the Bond Fund, such 2013 Bonds so called will cease to
be entitled to any benefit under the Fiscal Agent Agreement other than the right to receive
payment of the redemption price, and no interest will accrue thereon on or after the redemption
date specified in such notice.
Tender of 2013 Bonds in Payment of Special Taxes. The City has covenanted in the
Fiscal Agent Agreement not to permit the tender of 2013 Bonds in payment of any Special Taxes
except upon receipt of a certificate of an Independent Financial Consultant that to accept such
tender will not result in the City having insufficient Special tax Revenues to pay the principal or
and interest on the 2013 Bonds that will remain Outstanding following such tender.
Transfer or Exchange of 2013 Bonds
So long as the 2013 Bonds are registered in the name of Cede & Co., as nominee of DTC,
transfers and exchanges of 2013 Bonds shall be made in accordance with DTC procedures. See
Appendix F — "DTC and the Book -Entry Only System." If the book -entry only system for the
2013 Bonds is ever discontinued, any Bond may, in accordance with its terms, be transferred or
exchanged by the person in whose name it is registered, in person or by his duly authorized
attorney, upon surrender of such Bond for cancellation, accompanied by delivery of a duly
written instrument of transfer in a form approved by the Fiscal Agent. Whenever any 2013
Bond or 2013 Bonds are surrendered for transfer or exchange, the City will execute and the
Fiscal Agent will authenticate and deliver a new 2013 Bond or 2013 Bonds, for a like aggregate
principal amount of 2013 Bonds of authorized denominations and of the same maturity. The
Fiscal Agent will collect from the Owner requesting such transfer any tax or other governmental
charge required to be paid with respect to such transfer or exchange.
No transfers or exchanges of 2013 Bonds will be required to be made (i) within the 15
days prior to the date designated by the Fiscal Agent as the date for selecting 2013 Bonds for
redemption, or (ii) with respect to any 2011 Bond after such 2011 Bond has been selected for
redemption.
Discontinuance of DTC Services
DTC may determine to discontinue providing its services with respect to the 2013 Bonds
at any time by giving written notice to the Fiscal Agent during any time that the 2013 Bonds are
Outstanding, and discharging its responsibilities with respect to the 2013 Bonds under
applicable law. The City may terminate the services of DTC with respect to the 2013 Bonds if it
determines that DTC is unable to discharge its responsibilities with respect to the 2013 Bonds or
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that continuation of the system of book -entry transfers through DTC is not in the best interest of
the Beneficial Owners. The City will mail any such notice of termination to the Fiscal Agent.
Upon the termination of the services of DTC as provided in the previous paragraph, and
if no substitute Depository willing to undertake the functions can be found which is willing and
able to undertake such functions upon reasonable or customary terms, or if the City determines
that it is in the best interest of the Beneficial Owners of the 2013 Bonds that they obtain
certificated Bonds, the 2013 Bonds will no longer be restricted to being registered in the
Registration Books of the Fiscal Agent in the name of Cede & Co., as nominee of DTC, but may
be registered in whatever name or name the Owners designate at that time, in accordance with
the Fiscal Agent Agreement.
To the extent that the Beneficial Owners are designated as the transferee by the Owners,
the 2013 Bonds will be delivered to such Beneficial Owners as soon as practicable in accordance
with the Fiscal Agent Agreement.
Scheduled Debt Service
The following is the debt service schedule for the 2013 Bonds, assuming no optional
redemption of the 2013 Bonds or any redemption of 2013 Bonds with proceeds of Special Tax
Prepayments:
Period Ending
September 1 Principal Interest Total Debt Service
2014 $ $ $
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
2031
2032
2033
2034
Totals $ $ $
Its
SECURITY FOR THE 2013 BONDS
General
Pursuant to the Fiscal Agent Agreement, the 2013 Bonds are secured by a first pledge of
all of the Special Tax Revenues (other than the first $20,000 of Special Tax Revenues received by
the City in each Fiscal Year, which are to be used to pay Administrative Expenses), and all
moneys deposited in the Bond Fund, the Reserve Fund and, until disbursed in accordance with
the Fiscal Agent Agreement, the Special Tax Fund. Special Tax Revenues do not include interest
and penalties on foreclosure of the lien of Special Taxes in excess of the rate of interest payable
on the 2013 Bonds, and do not include the proceeds of any Special Tax B levied on Taxable
Property in the District. The Special Tax Revenues and all moneys deposited into said funds
(except as otherwise provided in the Fiscal Agent Agreement) are dedicated to the payment of
the principal of, and interest and any premium on, the 2013 Bonds in accordance with the Fiscal
Agent Agreement until all of the 2013 Bonds have been paid or defeased.
Amounts in the Administrative Expense Fund and the Costs of Issuance Fund are not
pledged to the repayment of the 2013 Bonds. The Improvements are not pledged to pay the
Debt Service on the 2013 Bonds. The proceeds of condemnation or destruction of any of the
Improvements are not pledged to pay the Debt Service on the 2013 Bonds. Proceeds of the levy
of Special Tax B are not pledged to the repayment of the 2013 Bonds.
Limited Obligation
The 2013 Bonds are limited obligations of the City on behalf of the District and are
payable solely from and secured solely by the Special Tax Revenues (other than the first $20,000
of Special Tax Revenues received by the City in each Fiscal Year, which are to be used to pay
Administrative Expenses), and the amounts in the Bond Fund, the Reserve Fund and the Special
Tax Fund created pursuant to the Fiscal Agent Agreement.
In the event that the Special Taxes are not paid when due, the only sources of funds
available to repay the 2013 Bonds are amounts held by the Fiscal Agent under the Fiscal Agent
Agreement in the Bond Fund, the Special Tax Fund and the Reserve Fund, and the proceeds, if
any, from foreclosure sales of parcels with delinquent Special Tax A levies.
Special Tax A
In accordance with the provisions of the Act, the Rate and Method was approved in 2004
by the then qualified elector and sole owner of land in the District and is set forth in its entirety
in Appendix B. The Rate and Method provides for the levy of (a) a "Special Tax A" in order to
fund the annual "Special Tax Requirement for Facilities," which includes the amounts needed
to pay the debt service on the Bonds, to pay a proportionate share of the costs of administering
the District, and to replenish any draws on the Reserve Fund; and (b) a "Special Tax B" in order
to fund the annual "Special Tax Requirement for Services" which includes amounts needed to
pay for services authorized to be funded by the District (see "THE DISTRICT — Location and
Description of the District" for a description of the services authorized to be funded by the
District) and a proportionate share of the costs of administering the District. Under the Fiscal
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Agent Agreement, and as used in this Official Statement, the capitalized term "Special Taxes'
only includes the Special Tax A, and the capitalized term "Special Tax Revenues," which are
pledged to the payment of the Bonds, only includes the Special Tax A levied and actually
collected by the City, subject in any event to the provisions of the Fiscal Agent Agreement
regarding the use of the Special Tax Revenues (see "SECURITY FOR THE 2013 BONDS —
Special Tax Fund "). The Special Tax B is not pledged to the payment of the debt service on the
Bonds and will not be available for that purpose.
Under the Fiscal Agent Agreement, the City is obligated to fix and levy the amount of
Special Taxes within the District required for the timely payment of principal of and interest on
the outstanding 2013 Bonds becoming due and payable, including any necessary replenishment
of the Reserve Fund and an amount estimated to be sufficient to pay the Administrative
Expenses, taking into account any prepayments of Special Taxes previously received by the
City. The Special Tax A levied on any parcel of Taxable Property (as defined in "— Summary of
Rate and Method ") may not exceed the maximum amount as provided in the Rate and Method.
The Special Taxes are payable and are collected in the same manner, at the same time
and in the same installment as the County ad valorem taxes on property levied on the secured
tax roll are payable, and pursuant to the Act have the same priority, become delinquent at the
same times and in the same proportionate amounts and bear the same proportionate penalties
and interest after delinquency as do the taxes levied on the tax roll; provided, however, that the
Special Taxes may be collected at a different time or in a different manner if necessary to meet
the District's financial obligations.
Although the Special Taxes will constitute a lien on taxed parcels within the District,
they do not constitute a personal indebtedness of the owners of the property within the District.
Pursuant to Section 53356.1 of the Act, in the event of any delinquency in the payment of the
Special Tax on a parcel of Taxable Property, the City may order the institution of a superior
court action to foreclose the lien on the parcel of Taxable Property within specified time limits.
In such an action, the real property subject to the unpaid amount of the Special Tax lien may be
sold at judicial foreclosure sale. The Act provides that the Special Taxes are secured by a
continuing lien which is subject to the same lien priority in the case of delinquency as ad valorem
property taxes. See "— Summary of Rate and Method," "— Covenant for Superior Court
Foreclosure" and "SPECIAL RISK FACTORS —Parity Taxes and Special Assessments."
Other liens for taxes and assessments already exist on the property located within the
District and others could come into existence in the future. See "SPECIAL RISK FACTORS —
Parity Taxes and Special Assessments." There is no assurance that any owner of a parcel subject
to the Special Tax levy will be financially able to pay the annual Special Taxes or that it will pay
such taxes even if financially able to do so. See "SPECIAL RISK FACTORS."
For historic information regarding the payment of, or delinquencies with respect to,
Special Taxes in the District, see "THE DISTRICT — Special Tax Levies and Delinquencies."
1931
Special Tax Fund
Deposit of Special Tax Revenues. The City is obligated by the Fiscal Agent Agreement to
transfer, or cause to be transferred, to the Fiscal Agent, as soon as practicable following receipt,
all Special Tax Revenues received by the City, which amounts shall be deposited by the Fiscal
Agent in the Special Tax Fund.
Notwithstanding the foregoing,
(i) with respect to the first $20,000 of Special Tax Revenues (which do not
include Special Tax B, the proceeds of the levy of which are to be retained by the City to
pay costs of services eligible to be funded by the District in any event) collected by the
City in any Fiscal Year; first, the City may retain all or any portion thereof, and not remit
the same to the Fiscal Agent, to the extent the City determines that it needs said amount
to pay Administrative Expenses of the City; and second, any remaining portion of such
amount will be separately identified by the City and will be deposited by the Fiscal
Agent in the Administrative Expense Fund;
(ii) any Special Tax Revenues constituting the collection of delinquencies in
payment of Special Taxes will be separately identified by the City and will be disposed
of by the Fiscal Agent first, in the Bond Fund to pay any past due debt service on the
Bonds; second, in the Reserve Fund to the extent needed to increase the amount then on
deposit in the Reserve Fund to the then Reserve Requirement; and third, to be held in
the Special Tax Fund and used for its purposes; and
(iii) any proceeds of Special Tax Prepayments will be separately identified by
the City and will be deposited by the Fiscal Agent in the Special Tax Prepayments
Account and used to redeem Bonds.
Moneys in the Special Tax Fund will be held by the Fiscal Agent for the benefit of the
City and the Owners of the Bonds, will be disbursed as provided below and, pending and
disbursement, will be subject to a lien in favor of the Owners of the Bonds and the City.
Disbursements. From time to time as needed to pay the obligations of the District, but
no later than the Business Day before each Interest Payment Date, the Fiscal Agent will
withdraw from the Special Tax Fund and transfer the following amounts in the following order
of priority:
(i) to the Bond Fund an amount, taking into account any amounts then on
deposit in the Bond Fund and any expected transfers under the Fiscal Agent Agreement
from the Reserve Fund and the Special Tax Fund to the Bond Fund, such that the
amount in the Bond Fund equals the principal (including any mandatory sinking
payment), premium, if any, and interest due on the Bonds on the next Interest Payment
Date, and
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(ii) to the Reserve Fund an amount, taking into account amounts then on
deposit in the Reserve Fund, such that the amount in the Reserve Fund is equal to the
Reserve Requirement;
provided that no such transfers shall exceed the amount then available to be transferred from
the Special Tax Fund.
In addition to the foregoing, if in any Fiscal Year there are sufficient funds in the Special
Tax Fund to make the foregoing transfers to the Bond Fund and the Reserve Fund in respect of
the Interest Payment Dates occurring in the Bond Year that commences in such Fiscal Year, the
Finance Director may direct the Fiscal Agent to transfer to the Administrative Expense Fund,
from time to time, any amount in the Special Tax Fund in excess of the amount needed to make
such transfers to the Bond Fund and the Reserve Fund, if the Finance Director determines that
monies are needed to pay Administrative Expenses in excess of the amount then on deposit in
the Administrative Expense Fund.
Summary of Rate and Method
The Rate and Method is used to allocate the amount of the Special Tax A that is needed
to be collected each fiscal year to fund the Special Tax Requirement for Facilities, and the
amount of the Special Tax B that is needed to be collected each fiscal year to fund the Special
Tax Requirement for Services, in each case among the Taxable Property within the District
based upon the development status of the Taxable Property and its size, subject to a maximum
tax rate. The Rate and Method is set forth in full in Appendix B and the following is a summary
of the Rate and Method.
The Rate and Method classifies all Taxable Property, i.e., all assessor's parcels in the
District not exempt pursuant to law or the Rate and Method, into four categories: Developed
Property, Taxable Public Property, Taxable Property Owner Association Property and
Undeveloped Property. The Rate and Method further classifies the special taxes as Special Tax
A and Special Tax B. The Special Tax A is the Special Tax levied to fund the Special Tax
Requirement for Facilities. The Special Tax B is the Special Tax levied to fund the provision of
certain services and is not pledged to the payment of the Bonds. The proceeds of the levy of
Special Tax A are pledged to the payment of the Bonds.
The amount of Special Taxes that the District may levy is limited by the Maximum
Special Tax rates set forth in the Rate and Method. Under the Rate and Method, the Maximum
Special Tax A for a parcel of Developed Property is not subject to change and will remain the
same for each fiscal year.
Developed Property is further classified into fourteen categories (each a "Land Use
Class "): (a) eight categories of Single Family Detached Property (with such categories based on
the square footage of residential floor area), (b) two categories of Single Family Attached
Property (with such categories based on the square footage of residential floor area), (c) three
categories of Affordable Units (based on the income -level of the proposed owner) and (d) one
category of Non - Residential Property. The Maximum Special Tax A for Developed Property for
each Land Use Class is shown in the Rate and Method (set forth in Appendix B hereto). The
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Maximum Special Tax B for Developed Property for fiscal year 2004 -2005 is as shown in the
Rate and Method, and is subject to annual increases as described in Section C 1 of the Rate and
Method. In instances where an assessor's parcel contains more than one Land Use Class, the
Maximum Special Tax on such parcel will be the sum of the Maximum Special Taxes for all
Land Use Classes located on such parcel.
Under the Rate and Method, the Maximum Special Tax A for Taxable Property Owner
Association Property, Taxable Public Property and Undeveloped Property is $29,414 per acre
each fiscal year. Currently, there is no longer any Undeveloped Property in the District.
Each fiscal year, the City determines the Special Tax Requirement for Facilities and will
levy the Special Tax A until the total Special Tax Levy A equals the Special Tax Requirement for
Facilities. The Special Tax Requirement for Facilities is defined in the Rate and Method as the
amount required in any fiscal year for the District to pay the sum of (a) debt service on all
outstanding bonds or other debt issued by the District under the Act ( "Outstanding Debt "), (b)
periodic costs on the Outstanding Debt, including but not limited to credit enhancement and
rebate payments thereon, (c) Administrative Expenses and (d) any amounts required to
establish or replenish any reserve funds for all Outstanding Debt. In arriving at the Special Tax
Requirement for Facilities, reasonably anticipated delinquent Special Tax A based on the
delinquency rate for the Special Tax A levied in the previous fiscal year are to be taken into
account and a credit is to be given for funds available to reduce the annual Special Tax A levy.
The City levies the Special Tax A in four steps, in the following order, until the amount
of the levy equals the amount needed to be collected to satisfy the Special Tax Requirement for
Facilities:
First: the Special Tax A is levied proportionately on each assessor's parcel of
Developed Property at up to 100% of the applicable Maximum Special Tax A;
Second: if additional moneys are needed, the Special Tax A is levied
proportionately on each assessor's parcel of Undeveloped Property at up to 100% of the
Maximum Special Tax A for Undeveloped Property;
Third: if additional moneys are needed, the Special Tax A is levied
proportionately on each assessor's parcel of Taxable Property Owner Association at up
to 100% of the Maximum Special Tax A for Taxable Property Owner Association
Property; and
Fourth: if additional moneys are needed, then the Special Tax A is levied
proportionately on each assessor's parcel of Taxable Public Property at up to the
Maximum Special Tax A for Taxable Public Property.
The term "proportionately" as used in the above steps means (a) as applied to
Developed Property, that the ratio of the actual Special Tax A levy to the Maximum Special Tax
A is equal for all assessor's parcels of Developed Property in the District and (b) as applied to
Undeveloped Property, that the ratio of actual Special Tax A levy per acre to the Maximum
Special Tax A per acre is equal for all assessor's parcels of Undeveloped Property in the District.
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The Rate and Method also provides that the Special Tax A will be levied on each
assessor's parcel for a period not to exceed forty years commencing with fiscal year 2004 -05.
Under the Rate and Method, up to 27.1 acres of Property Owner Association Property and 1.4
acres of Public Property in the District are exempt from the levy of Special Taxes.
The amount of Special Tax A that may be levied on Taxable Property in the District in
any year is strictly limited by the Maximum Special Tax A rates set forth in the Rate and
Method, as described above. In addition and pursuant to the Act, under no circumstances may
the Special Tax levied against any Assessor's Parcel of Residential Property for which an
occupancy permit for private residential use has been issued be increased by more than 10% as
a consequence of delinquency or default by the owner of any other Assessor's Parcel within the
District. As defined in the Rate and Method, the term "Residential Property" means all
Assessor's Parcels of Developed Property for which a building permit permitting the
construction thereon of one or more residential dwelling units has been issued by the City.
Accordingly, the Special Tax levied against any such parcel of residential property may not be
increased by more than 10% above the amount that would have been levied in that fiscal year
had there never been any such delinquencies or defaults.
The Special Tax A obligation applicable to a lot within the District may be prepaid and
the obligation to pay any Special Tax A for such lot may be fully or partially satisfied as
described in the Rate and Method. Only one prepayment of Special Tax A has occurred in the
District, however no assurance can be given that prepayments of Special Tax A will not occur in
the future. Prepayments of Special Tax A will result in a mandatory redemption of the Bonds.
See "THE 2013 BONDS — Redemption - Mandatory Redemption From Special Tax
Prepayments."
The Rate and Method contains provisions for a "Special Tax A Buydown" intended to
apply in certain circumstances where there was a change in development in the District that
resulted in the issuance of building permits for developable lots in the District that varied from
those as set forth in a table in Section D of the Rate and Method or that resulted in a decrease in
the number of residential dwelling units in the District below what was anticipated at the time
the District was formed. The provisions of the Special Tax A Buydown, by their terms, never
became applicable.
Reserve Fund
The Fiscal Agent Agreement establishes a debt service reserve fund (the "Reserve
Fund ") as a separate fund to be held in trust by the Fiscal Agent for the benefit of the Owners of
the Bonds (which include the 2013 Bonds and any Parity Bonds), as a reserve for the payment of
principal of, and interest and any premium on, the Bonds and moneys in the Reserve Fund are
subject to a lien in favor of the Owners of the Bonds. The Reserve Fund is required by the Fiscal
Agent Agreement to be funded in an amount equal to the Reserve Requirement which amount
is, as of any date of calculation, an amount equal to seventy-five percent of the then Maximum
Annual Debt Service. The Reserve Requirement as of the date of issuance of the 2013 Bonds will
be $
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Except as otherwise provided in the Fiscal Agent Agreement (with respect to the use of
moneys in the Reserve Fund for the payment of any rebate liability due to the federal
government, and the use of excess moneys in the Reserve Fund to pay debt service on the
Bonds), all amounts deposited in the Reserve Fund will be used and withdrawn by the Fiscal
Agent solely for the purpose of making transfers to the Bond Fund in the event of any
deficiency at any time in the Bond Fund of the amount then required for payment of the
principal of, and interest and any premium on, the Bonds. See Appendix C— "Summary of
Fiscal Agent Agreement"
Whenever the balance in the Reserve Fund exceeds the amount required to redeem or
pay the Outstanding Bonds, including interest accrued to the date of payment or redemption
and premium, if any, due upon redemption, the Fiscal Agent will transfer the amount in the
Reserve Fund to the Bond Fund to be applied, on the next succeeding Interest Payment Date, to
the payment and redemption of all of the Outstanding Bonds. In the event that the amount
transferred from the Reserve Fund to the Bond Fund exceeds the amount required to pay and
redeem the Outstanding Bonds, the balance in the Reserve Fund will be transferred to the City
to be used for any lawful purpose under the Act. Notwithstanding the foregoing, no amounts
will be transferred from the Reserve Fund until after (i) amounts in the Reserve Fund are
withdrawn, at the written request of the Treasurer, for purposes of making payment to the
federal government in accordance with the Fiscal Agent Agreement following payment of the
2013 Bonds, and (ii) payment of any fees and expenses due to the Fiscal Agent. See Appendix
C— "Summary of Fiscal Agent Agreement."
Covenant for Superior Court Foreclosure
Foreclosure Under the Act. Pursuant to Section 53356.1 of the Act, in the event of any
delinquency in the payment of the Special Tax on the taxed parcel, the City may order the
institution of a superior court action to foreclose the lien on the taxed parcel within specified
time limits. In such an action, the real property subject to the unpaid amount of the Special Tax
lien may be sold at judicial foreclosure sale.
City Foreclosure Covenant. Judicial foreclosure proceedings in the event of delinquent
Special Taxes are not mandatory. However, the City has covenanted in the Fiscal Agent
Agreement for the benefit of the Bondowners that it will determine or cause to be determined,
no later than August 15 of each year, whether or not any owners of property within the District
are delinquent in the payment of Special Taxes and, if such delinquencies exist, the City, on
behalf of the District, will order and cause to be commenced no later than October 1, and
thereafter diligently prosecute, an action in the superior court to foreclose the lien of any Special
Taxes or installment thereof not paid when due; provided, however, that under the Fiscal Agent
Agreement, the City is not required to order the commencement of foreclosure proceedings if
(a) the total Special Tax delinquency in the District for such Fiscal Year is less than 5% of the
total Special Tax levied in such Fiscal year, or (b) the amount then on deposit in the Reserve
Fund is equal to the Reserve Requirement. Notwithstanding the foregoing, if the City
determines that any single property owner in the District is delinquent in excess of $5,000 in the
payment of the Special Tax, then the City, on behalf of the District, will diligently institute,
prosecute and pursue foreclosure proceedings against such property owner. No assurance can
10
be given as to the time necessary to complete any foreclosure sale or that any foreclosure sale
will be successful. The City is not required to be a bidder at any foreclosure sale.
In a foreclosure proceeding the City is entitled to recover penalties and interest on the
delinquent Special Taxes through the date that an order of sale is entered. However, under the
Fiscal Agent Agreement, the Special Taxes pledged to the payment of the Bonds does not
include any such penalties and interest collected by the City that are in excess of the rate of
interest payable on the Bonds. Also it should be noted that prompt commencement of
foreclosure proceedings may not, in and of itself, result in a timely or complete payment of
delinquent Special Taxes.
Sufficiency of Foreclosure Sale Proceeds; Foreclosure Limitations and Delays. No
assurances can be given that the real property subject to a judicial foreclosure sale will be sold
or, if sold, that the proceeds of sale will be sufficient to pay any delinquent Special Tax
installment. Subject to the maximum rates, the Rate and Method is designed to generate from
all Taxable Property within the District the current year's debt service, administrative expenses,
and replenishment of the Reserve Fund to the Reserve Requirement. However, if foreclosure
proceedings are necessary, and the Reserve Fund has been depleted, there could be a delay in
payments to owners of the 2013 Bonds pending prosecution of the foreclosure proceedings and
receipt by the City of the proceeds of the foreclosure sale.
The ability of the City to foreclose the lien of delinquent unpaid Special Taxes may be
limited in certain instances and may require prior consent of the obligee in the event the
property is owned by or in receivership of the Federal Deposit Insurance Corporation. See
"SPECIAL RISK FACTORS — FDIC /Federal Government Interests in Properties."
No assurances can be given that a judicial foreclosure action, once commenced, will be
completed or that it will be completed in a timely manner. If a judgment of foreclosure and
order of sale is obtained, the judgment creditor (the City for the District) must cause a Notice of
Levy to be issued. Under current law, a judgment debtor (property owner) has 120 days from
the date of service of the Notice of Levy in which to redeem the property to be sold, which
period may be shortened to 20 days for parcels other than those on which a dwelling unit for
not more than four persons is located. If a judgment debtor fails to redeem and the property is
sold, his only remedy is an action to set aside the sale, which must be brought within 90 days of
the date of sale. If, as a result of such an action, a foreclosure sale is set aside, the judgment is
revived and the judgment creditor is entitled to interest on the revived judgment as if the sale
had not been made (Section 701.680 of the California Code of Civil Procedure). The
constitutionality of the aforementioned legislation, which repeals the former one -year
redemption period, has not been tested; and there can be no assurance that, if tested, such
legislation will be upheld.
Section 53356.6 of the Act requires that property sold pursuant to foreclosure under the
Act be sold for not less than the amount of judgment in the foreclosure action, plus post -
judgment interest and authorized costs, unless the consent of the owners of 75% of the
outstanding Bonds is obtained. However, under Section 53356.6 of the Act, the City, as
judgment creditor, is entitled to purchase any property sold at foreclosure using a "credit bid,"
where the City could submit a bid crediting all or part of the amount required to satisfy the
NO
judgment for the delinquent amount of the Special Tax. If the City becomes the purchaser
under a credit bid, the City must pay the amount of its credit bid into the redemption fund
established for the 2013 Bonds, but this payment may be made up to 24 months after the date of
the foreclosure sale. Neither the Act nor the Fiscal Agent Agreement requires the City to
purchase or otherwise acquire any lot or parcel of property foreclosed upon if there is no other
purchaser at such sale, and the City has no intent to be such a purchaser.
The City will levy the Special Tax to pay the current year's debt service and related
administrative expenses and to replenish the Reserve Fund to the Reserve Requirement, subject
to Maximum Special Tax A rates. However, if superior court foreclosure proceedings are
necessary to collect delinquent Special Taxes, and if the Reserve Fund is depleted, there could
be a delay in payments of principal of and interest on the 2013 Bonds pending prosecution of
the foreclosure proceedings and receipt by the City of the proceeds of the foreclosure sale. See
"SPECIAL RISK FACTORS — Bankruptcy Delays" and "— Proceeds of Foreclosure Sales."
No Teeter Plan
Collection of the Special Taxes is not subject to the "Alternative Method of Distribution
of Tax Levies and Collections and of Tax Sale Proceeds," as provided for in Section 4701 et seq.
of the California Revenue and Taxation Code (known as the "Teeter Plan"). Accordingly,
collections of Special Taxes will reflect actual delinquencies, if any.
Investment of Moneys
Except as otherwise provided in the Fiscal Agent Agreement, all moneys in any of the
funds or accounts established pursuant to the Fiscal Agent Agreement will be invested by the
Fiscal Agent solely in Permitted Investments, as directed by the City. See Appendix C—
"Summary of the Fiscal Agent Agreement" for a definition of "Permitted Investments" and for
additional provisions regarding the investment of funds held under the Fiscal Agent
Agreement.
Issuance of Additional Bonds
Parity Bonds. The Fiscal Agent Agreement does not authorize the City to issue any
additional "new money" bonds for the District on a parity with the 2013 Bonds, but it does
authorize the City to issue one or more series of "Refunding Bonds." The Fiscal Agent
Agreement defines Refunding Bonds as bonds issued by the City for the District the net
proceeds of which are used to refund all or a portion of the then Outstanding Bonds; provided
that the debt service on the Refunding Bonds in any Bond Year is not in excess of the debt
service on the Bonds being refunded, and the final maturity of the Refunding Bonds is not later
than the final maturity of the Bonds being refunded.
Subject to meeting the additional conditions summarized below, Refunding Bonds will
be "Parity Bonds" that will be secured by a lien on the Special Tax Revenues and funds pledged
for the payment of the Bonds under the Fiscal Agent Agreement on a parity with all other
-20-
Bonds Outstanding under the Fiscal Agreement; the Fiscal Agent Agreement defines "Bonds'
as the 2013 Bonds and any Parity Bonds.
The City may issue the Parity Bonds subject to the following specific conditions
precedent, among others set forth in the Fiscal Agent Agreement:
(A) Current Compliance. The City must be in compliance on the date of
issuance of the Parity Bonds with all covenants set forth in the Fiscal Agent Agreement
and all Supplemental Agreements.
(B) Payment Dates. The interest on the Parity Bonds must be payable on
March 1 and September 1, and principal of the Parity Bonds must be payable on
September 1 in any year in which principal is payable (provided that there is no
requirement that any Parity Bonds pay interest on a current basis).
(C) Reserve Fund Deposit. There must be a deposit to the Reserve Fund (or
to a separate account created for such purpose) in an amount necessary so that the
amount on deposit in the Reserve Fund (together with the amount in any such separate
account), following the issuance of such Parity Bonds, is equal to the Reserve
Requirement.
(D) Refunding Bonds. The Parity Bonds must be Refunding Bonds.
(E) Officer's Certificate. The City must certify to the Fiscal Agent that the
conditions for the issuance of Parity Bonds in the Fiscal Agent Agreement have been
met.
Subordinate Bonds. Nothing in the provisions described above will prohibit the City
from issuing bonds or otherwise incurring debt secured by a pledge of Special Tax Revenues
subordinate to the pledge of such Special Tax Revenues under the Fiscal Agent Agreement.
THE DISTRICT
Location and Description of the District
The District, located in the City, is a community facilities district established by the City
Council of the City pursuant to the Act in 2004 to finance (a) certain public facilities (referred to
in this Official Statement as the "Improvements'), consisting of street improvements, including
curbs and gutters, sidewalks, street signalization and signage, street lights and parkway and
landscaping related thereto, storm drains, public utilities, public parks and recreation facilities,
public library facilities, fire protection facilities and equipment and land, rights -of -way and
easements necessary for any of such facilities; and (b) to finance certain services, including
police protection services, fire protection services, ambulance and paramedic services,
recreation program services, maintenance of parks, parkways and open space and flood and
storm protection services. The District is bordered by a Southern California Regional Rail
Authority right -of -way and railroad line on the north, Harvard Avenue on the east, Moffett
-21-
Avenue on the south and the Peters Canyon Flood Control Channel on the west, and includes
approximately 68 gross acres of land, with approximately 40 acres constituting Taxable
Property subject to the levy of Special Tax A and Special Tax B.
The District includes 563 separate Orange County Assessor's parcels of Taxable
Property, all of which have been improved with single family attached or detached units. The
attached units include paired homes, cluster townhomes and row townhomes. The units
include 118 affordable units, some of which are in cluster townhomes and some of which are
detached homes.
The District encompasses approximately 5.0% of Tustin Legacy (based on gross acreage)
and the development of the property in the District constitutes the first phase of development in
Tustin Legacy. Tustin Legacy is an approximately 1,511 acre planned community in central
Orange County. Tustin Legacy is the City's proposed development for that portion of the
former Marine Corps Air Station (MCAS) Tustin located in the City and an additional four acre
parcel acquired from The Irvine Company. Approximately 95 acres of the original Air Station
are located in the City of Irvine and are not a part of Tustin Legacy.
Tustin Legacy currently includes over 1,680 homes and an additional 2,100 planned
residential units, and includes or is expected to include schools, parks, and numerous business
and commercial uses. Tustin Legacy is generally bounded by single - family residential and
business park uses to the north, light industrial and research and development uses to the west,
light industrial and commercial uses to the south, and residential uses to the east in the City of
Irvine. The Tustin Legacy project area is bounded by the Costa Mesa, Santa Ana, Laguna and
San Diego Freeways. Jamboree Road provides access to the Eastern Transportation Corridor.
John Wayne Airport is located approximately three miles to the south. For more information
regarding Tustin Legacy, see the website at www.tustinleg_acy.com; however, the City has not
reviewed the website and cannot make any representation regarding the accuracy or
completeness of the information therein and the information on the website is not incorporated
into this Official Statement.
History of the District
Pursuant to the Act, the City Council of the City, acting in its capacity as the legislative
body for the District, adopted Resolution No. 04 -53 (the "Resolution of Intention ") on June 7,
2004, stating its intention to establish the District and to levy the special tax within the District.
On July 19, 2004, the City Council formed the District and adopted Resolution No. 04 -67,
authorizing a special election with respect to the incurrence of indebtedness and the levy of the
Special Tax. Also on July 19, 2004, WL Homes LLC, the then sole qualified elector within the
boundaries of the District, authorized the issuance of up to $15,000,000 principal amount of
special tax bonds to finance the Improvements and approved the Rate and Method.
On July 29, 2004, the City recorded a Notice of Special Tax Lien in the Orange County
Recorder's Office as document number 2004000688822. On August 2, 2004, the City Council of
the City, acting as the legislative body for the District, adopted Ordinance No. 1286, levying the
Special Tax A and the Special Tax B on Taxable Property in the District at the rates and in
accordance with the Rate and Method.
-22-
On December 15, 2004, the District issued $11,415,000 initial principal amount of the
2004 Bonds, the net proceeds of which were used to finance the Improvements.
At the time of formation of the District in 2004, all of the Taxable Property (as defined in
the Rate and Method) was owned by WL Homes LLC, which planned to construct 565
residential units in the District in seven different neighborhoods. The first building permit for
construction of a residential dwelling in the District (for a model home) was issued by the City
in December of 2003, and the first building permit for a production unit was issued in March of
2004. The certificates of occupancy for the last of the 563 residential dwelling units actually
constructed in the District were provided by the City in July of 2006.
Pursuant to the Act, on May 21, 2013, the City Council of the City, acting as the
legislative body of the District, adopted a resolution authorizing the issuance of the 2013 Bonds
and the use of the proceeds of the 2013 Bonds to redeem the outstanding 2004 Bonds, and
approving related documents and actions. The net proceeds of the 2013 Bonds will be used to
legally defease the outstanding 2004 Bonds on the date of issuance of the 2013 Bonds, and will
be used on September 1, 2013 to redeem the outstanding 2004 Bonds. See "PLAN OF
REFUNDING — Redemption of 2004 Bonds."
The following page contains an aerial photo of the area included within the boundaries
of the District.
-23-
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11 alrya Avenue
I 47�
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L
Land Ownership and Current Special Tax Levy
The Special Tax A and Special Tax B for fiscal year 2012 -13 have been levied on all
Taxable Property in the District. The following Table 1 presents the Special Tax A levy by
classification of Taxable Property under the Rate and Method based on the County's 2012 -13
secured property tax roll, and the percent of Special Tax A levied on each ownership category
specified in the Rate and Method for the 2012 -13 fiscal year. There was no Special Tax levy on
Undeveloped Property in fiscal year 2012 -13.
Table 1
City of Tustin
Community Facilities District No. 04-1
Fiscal Year 2012 -13 Development Summary
Rate and Method Land Use Category
Developed Property(5)
Single Family Detached Property (Residential
Floor Area = >3,350 sq. ft.)
Single Family Detached Property (Residential
Floor Area 3,150 -3,349 sq. ft.)
Single Family Detached Property (Residential
Floor Area 2,950 -3,149 sq. ft.)
Single Family Detached Property (Residential
Floor Area 2,650 -2,949 sq. ft.)
Single Family Detached Property (Residential
Floor Area 2,350 -2,649 sq. ft.)
Single Family Detached Property (Residential
Floor Area 1,900 -2,349 sq. ft.)
Single Family Detached Property (Residential
Floor Area 1,500 -1,899 sq. ft.)
Single Family Detached Property (Residential
Floor Area <1,500 sq. ft.)
Single Family Attached Property (Residential
Floor Area = >1,700 sq. ft.)
Single Family Attached Property (Residential
Floor Area <1,700 sq. ft.)
Affordable Units (Moderate Income)
Affordable Units (Lower Income)
Affordable Units (Very Low Income)
Totals
(t) Based on the Maximum Special Tax A. Does not include Special Tax B.
(2) Based on the actual levy of the Special Tax A required to fund the Fiscal Year 2012 -13 Special Tax Requirement
for Facilities. Does not include the Special Tax B levied to fund the Special Tax Requirement for Services.
(3) Allocated based on the proportionate share of Fiscal Year 2012 -13 Special Tax A and an estimated $9,850,000
initial principal amount of 2013 Bonds. Preliminary, subject to change.
(4) Based on the Orange County Assessor Roll for Fiscal Year 2012 -13, as of January, 2012.
(5) Based on development status pursuant to the Rate and Method for Fiscal Year 2012 -13.
Source: Willdan Financial Services.
-25-
Percent of
Maximum
Actual
Actual
Number
Fiscal Year
Fiscal
Fiscal
of
2012 -13
Year 2012-
Pro Rata
Year 2012 -
Taxable
Special
13 Special
Share of
13 Special
Assessed
Parcels
Tax0)
Tax(2)
Bonds(3)
Tax
Valuation(4)
31
$105,710
$79,025
$985,999
10.01%
$25,859,571
50
159,100
118,938
1,483,988
15.07
42,644,678
23
69,897
52,253
651,957
6.62
18,566,970
19
56,772
42,441
529,535
5.38
15,762,101
11
29,744
22,236
277,434
2.82
8,275,960
19
46,607
34,842
434,722
4.41
11,932,503
0
0
0
0
0.00
0
126
248,094
185,467
2,314,071
23.49
53,622,550
63
133,056
99,468
1,241,066
12.60
29,715,361
103
177,057
132,362
1,651,480
16.77
44,288,156
62
23,436
17,520
218,597
2.22
20,860,154
23
4,807
3,595
44,837
0.45
3,541,761
33
1,749
1,307
16,314
0.16
3,688,517
563
$1,056,029
$789,454
$9,850,000
100.00%
$278,758,282
(t) Based on the Maximum Special Tax A. Does not include Special Tax B.
(2) Based on the actual levy of the Special Tax A required to fund the Fiscal Year 2012 -13 Special Tax Requirement
for Facilities. Does not include the Special Tax B levied to fund the Special Tax Requirement for Services.
(3) Allocated based on the proportionate share of Fiscal Year 2012 -13 Special Tax A and an estimated $9,850,000
initial principal amount of 2013 Bonds. Preliminary, subject to change.
(4) Based on the Orange County Assessor Roll for Fiscal Year 2012 -13, as of January, 2012.
(5) Based on development status pursuant to the Rate and Method for Fiscal Year 2012 -13.
Source: Willdan Financial Services.
-25-
Assessed Property Values
No Appraisal of Property in the District. The City has not commissioned an appraisal
of the taxable property in the District in connection with the issuance of the 2013 Bonds.
Therefore, the valuation of the taxable property in the District will be estimated for the purposes
of the Act, and set forth in this Official Statement, based on the most recently obtainable County
Assessor's values.
Assessed Valuation. The valuation of real property in the City is established by the
County Assessor. Assessed valuations are reported at 100% of the full cash value of the
property, as defined in Article XIIIA of the California Constitution. Article XIIIA of the
California Constitution defines "full cash value' as the appraised value as of February 1, 1975,
plus adjustments not to exceed 2% per year to reflect inflation, and requires assessment of "full
cash value" upon change of ownership or new construction. Accordingly, the gross assessed
valuation of any particular parcel presented in this Official Statement may not necessarily be
representative of the actual market value of that parcel.
The fiscal year 2012 -13 total assessed value of 563 parcels of Taxable Property in the
District is $278,758,282.
Historical Assessed Values. The following Table 2 shows the historical assessed
valuation for the Taxable Property in the District for fiscal years 2006 -07 through 2012 -13 and
the historical growth rate for Taxable Property in the District for fiscal years 2007 -08 through
2012 -13.
Table 2
City of Tustin
Community Facilities District No. 041
Annual Change in Assessed Value (Taxable Property)
Assessed Valueh>
$281,784,135
364,605,088
316,630,247
271,679,927
290,339,563
287,789,862
278,758,282
Percent Change
29.39 %(3)
-13.16
-14.20
6.87
-0.88
-3.14
(1) Based on the applicable Orange County Assessor Roll for each fiscal year.
(2) According to the Orange County Appraiser's Office, there was a large County-wide economic adjustment due to
a decline in market value thus reducing the assessed values of qualifying properties throughout the County.
(3) Increase largely due to sales of new homes by home builders to home purchasers.
Source: Orange County Secured Rolls, as compiled by Willdan Financial Services.
IrM
Number of Parcels
Fiscal Year
Subject To Levy
2006 -07
530
2007 -08
558
2008 -09(2)
563
2009 -10i2>
563
2010 -11
563
2011 -12(2)
563
2012 -13(2)
563
Assessed Valueh>
$281,784,135
364,605,088
316,630,247
271,679,927
290,339,563
287,789,862
278,758,282
Percent Change
29.39 %(3)
-13.16
-14.20
6.87
-0.88
-3.14
(1) Based on the applicable Orange County Assessor Roll for each fiscal year.
(2) According to the Orange County Appraiser's Office, there was a large County-wide economic adjustment due to
a decline in market value thus reducing the assessed values of qualifying properties throughout the County.
(3) Increase largely due to sales of new homes by home builders to home purchasers.
Source: Orange County Secured Rolls, as compiled by Willdan Financial Services.
IrM
Value -to- Burden Ratio
General Infonnation Regarding Value -to- Burden Ratios. The value -to- burden ratio on
bonds secured by special taxes will generally vary over the life of those bonds as a result of
changes in the value of the property that is security for the special taxes and the principal
amount of the bonds.
In comparing the aggregate assessed value of the real property within the District and
the principal amount of the 2013 Bonds, it should be noted that an individual parcel may only
be foreclosed upon to pay delinquent installments of the Special Taxes attributable to that
parcel. The principal amount of the 2013 Bonds is not allocated equally among the parcels
within the District; rather, the total Special Taxes have been allocated among the parcels within
the District based on their respective share of the total Special Tax levied in fiscal year 2012 -13.
Economic and other factors beyond the property owners' control, such as economic
recession, deflation of land values, financial difficulty or bankruptcy by one or more property
owners, or the complete or partial destruction of Taxable Property caused by, among other
possibilities, earthquake, flood, fire or other natural disaster, could cause a reduction in the
assessed value within the District. See "SPECIAL RISK FACTORS — Property Value' and "-
Bankruptcy Delays."
Value -to- Burden Ratio Distribution. Tables 3 and 4 below set forth the estimated value -
to -lien ratios for the Taxable Property in the District based upon the land ownership status and
the values as of January, 2012.
-27-
Table 3
City of Tustin
Community Facilities District No. 04 -1
Estimated Assessed Value -to -Lien Ratios (Taxable Property)
(Including Overlapping Tax and Assessment Debt)
(1) Based on the actual levy of the Special Tax A required to fund the Fiscal Year 2012 -13 Special Tax Requirement
for Facilities. Does not include Special Tax B.
(Z) Allocated based on proportionate share of the Fiscal Year 2012 -13 Special Tax A and an estimated $9,850,000
initial principal amount of 2013 Bonds.
(3) Includes estimated principal amount of 2013 Bonds, plus overlapping tax and assessment debt outstanding. See
Tables 6 and 7 below for a description of the overlapping indebtedness.
(4) Based on the Orange County Assessor Roll for Fiscal Year 2012 -13, as of January, 2012.
(5) Calculated by dividing the Assessed Valuation by the Total Debt Outstanding.
(6) Based on development status pursuant to the Rate and Method for Fiscal Year 2012 -13.
P) Preliminary, subject to change.
Source: Willdan Financial Services, in reliance in part on direct and overlapping debt as reported by California
Municipal Statistics.
IN-11
Actual
Percent of
Estimated
Number
Fiscal Year
Actual
Pro Rata
Assessed
of
2012 -13
Fiscal Year
Share
Value -to-
Taxable
Special
2012 -13
of 2013
Total Debt
Assessed
Lien
Rate and Method Land Use Category
Parcels
Tax0)
Special Tax
Bondsh).m
Outstandingo),Cn
Valuation(4)
Rations(s).)7)
Developed Property(6)
Single Family Detached Property
31
$ 79,025
10.01%
$985,999
$1,046,077
$25,859,571
24.72
(Residential Floor Area = >3,350 sq. ft.)
Single Family Detached Property
50
118,938
15.07
1,483,988
1,487,343
42,644,678
28.67
(Residential Floor Area 3,150 -3,349 sq.
ft.)
Single Family Detached Property
23
52,253
6.62
651,957
653,417
18,566,970
28.42
(Residential Floor Area 2,950 -3,149 sq.
ft.)
Single Family Detached Property
19
42,441
5.38
529,535
530,775
15,762,101
29.70
(Residential Floor Area 2,650 -2,949 sq.
ft.)
Single Family Detached Property
11
22,236
2.82
277,434
278,085
8,275,960
29.76
(Residential Floor Area 2,350 -2,649 sq.
ft.)
Single Family Detached Property
19
34,842
4.41
434,722
435,661
11,932,503
27.39
(Residential Floor Area 1,900 -2,349 sq.
ft.)
Single Family Detached Property
0
0
0.00
0
0
0
N/A
(Residential Floor Area 1,500 -1,899 sq.
ft.)
Single Family Detached Property
126
185,467
23.49
2,314,071
4,224,713
53,622,550
12.69
(Residential Floor Area <1,500 sq. ft.)
Single Family Attached Property
63
99,468
12.60
1,241,066
2,096,358
29,715,361
14.17
(Residential Floor Area = >1,700 sq. ft.)
Single Family Attached Property
103
132,362
16.77
1,651,480
3,093,604
44,288,156
14.32
(Residential Floor Area <1,700 sq. ft.)
Affordable Units (Moderate Income)
62
17,520
2.22
218,597
624,582
20,860,154
33.40
Affordable Units (Lower Income)
23
3,595
0.45
44,837
118,343
3,541,761
29.93
Affordable Units (Very Low Income)
33
1,307
0.16
16,314
118,721
3,688,517
31.07
Totals
563
$789,454
100.00%
$9,850,000
$14,707,679
$278,758,282
18.95
(1) Based on the actual levy of the Special Tax A required to fund the Fiscal Year 2012 -13 Special Tax Requirement
for Facilities. Does not include Special Tax B.
(Z) Allocated based on proportionate share of the Fiscal Year 2012 -13 Special Tax A and an estimated $9,850,000
initial principal amount of 2013 Bonds.
(3) Includes estimated principal amount of 2013 Bonds, plus overlapping tax and assessment debt outstanding. See
Tables 6 and 7 below for a description of the overlapping indebtedness.
(4) Based on the Orange County Assessor Roll for Fiscal Year 2012 -13, as of January, 2012.
(5) Calculated by dividing the Assessed Valuation by the Total Debt Outstanding.
(6) Based on development status pursuant to the Rate and Method for Fiscal Year 2012 -13.
P) Preliminary, subject to change.
Source: Willdan Financial Services, in reliance in part on direct and overlapping debt as reported by California
Municipal Statistics.
IN-11
Table 4
City of Tustin
Community Facilities District No. 04-1
Distribution of Value -to -Lien Burden Ratios (Taxable Property)
(Including Overlapping Assessment and Special Tax Debt)
10 Based on the actual levy of the Special Tax A required to fund the Fiscal Year 2012 -13 Special Tax Requirement
for Facilities. Does not include Special Tax B.
(2) Based on the Orange County Assessor Roll for Fiscal Year 2012 -13 as of January, 2012.
131 Allocated based on the proportionate share of the Fiscal Year 2012 -13 Special Tax A and an estimated $9,850,000
initial principal amount of 2013 Bonds. Preliminary, subject to change.
141 Represents the 2013 Bonds and overlapping tax and assessment debt outstanding. See Table 6 - Direct and
Overlapping Bonded Debt Summary for a description of the overlapping liens. Preliminary, subject to change.
151 Calculated by dividing the Assessed Valuation by the Total Debt Outstanding. Preliminary, subject to change.
Source: Willdan Financial Services, in reliance in part on direct and overlapping debt as reported by California
Municipal Statistics.
Special Tax Levies and Delinquencies
Special Taxes were first levied in the District in fiscal year 2005 -06.
The following Table 5 is a summary of Special Tax levies, collections and delinquency
rates on Taxable Properties in the District for fiscal years 2006 -07 through 2012 -13, based on
amounts levied and outstanding delinquencies as of June 30 of each year and as of April 22,
2013.
WE
Actual
Fiscal
Number
Year
Value -
of
2012 -13
Percent
Percent
Pro Rata
Total Debt
Percent
to -Lien
Value -to -Lien
Taxable
Special
of Total
Assessed
of Total
Share of
Outstanding(4
of Total
Burden
Burden Category
Parcels
Tax (1)
Tax
Valuatio,u)
Valuation
Bonds(3)
>
Burden
Ratio(5)
18.00:1 and above
255
$357,969
4534—/
$147,275,007
52 .83%
$4,466,365
$4,990163
33.93%
29.51
15.00:1 to 17.99:1
27
24,336
3.08
9,093,875
3.26
303,644
574,806
3.91
15.82
12.00:1 to 14.99:1
264
377,817
47.86
115,318,518
41.37
4,714,009
8,522,754
57.95
13.53
9.00:1 to 11.99:1
17
29,332
3.72
7,070,882
2.54
365,979
619,956
4.21
1141
Less than 9.00:1
0
0
0.00
0
0.00
0
0
0.00
N/A
Totals
563
$789,454
100.00%
$275,758,282
100.00%
$9,850,000
$14,707,679
100.00%
18.95
10 Based on the actual levy of the Special Tax A required to fund the Fiscal Year 2012 -13 Special Tax Requirement
for Facilities. Does not include Special Tax B.
(2) Based on the Orange County Assessor Roll for Fiscal Year 2012 -13 as of January, 2012.
131 Allocated based on the proportionate share of the Fiscal Year 2012 -13 Special Tax A and an estimated $9,850,000
initial principal amount of 2013 Bonds. Preliminary, subject to change.
141 Represents the 2013 Bonds and overlapping tax and assessment debt outstanding. See Table 6 - Direct and
Overlapping Bonded Debt Summary for a description of the overlapping liens. Preliminary, subject to change.
151 Calculated by dividing the Assessed Valuation by the Total Debt Outstanding. Preliminary, subject to change.
Source: Willdan Financial Services, in reliance in part on direct and overlapping debt as reported by California
Municipal Statistics.
Special Tax Levies and Delinquencies
Special Taxes were first levied in the District in fiscal year 2005 -06.
The following Table 5 is a summary of Special Tax levies, collections and delinquency
rates on Taxable Properties in the District for fiscal years 2006 -07 through 2012 -13, based on
amounts levied and outstanding delinquencies as of June 30 of each year and as of April 22,
2013.
WE
Fiscal
Year
2006 -07
2007 -08
2008 -09(4)
2009 -10
2010 -11
2011 -12
2012 -13(5)
Annual
Special Tax
Levied(r)
$1,229,313.65
1,265,607.33
1,281,491.34
1,296,788.83
1,305,444.44
1,315,66771
1,327,324.21
Number
of
Parcels
Subject
to Levy
530
558
563
563
563
563
563
Table 5
City of Tustin
Community Facilities District No. 041
Special Tax Delinquency History
Amount
Collected
$1,123,394.91
1,156,881.39
1,208,527.88
1,205,607.90
1,282,619.92
1,264,531.64
648,158.81
As of Fiscal Year EndM As of April 22, 2013
Amount
Delinquent(3)
$105,918.74
108,725.94
72,963.46
91,180.93
22,824.52
51,136.07
N/A
Number of
Remaining
Remaining
Remaining
Parcels
Percent
Amount
Parcels
Percent
Delinquent
Delinquent
Delinquent131
Delinquent
Delinquent
44
8.62%
$0.00
0
0.00%
49
8.59
0.00
0
0.00
32
5.69
0.00
0
0.00
40
7.03
0.00
0
0.00
15
1.75
1,636.86
1
0.13
29
3.89
6,424.42
3
0.49
N/A
N/A
15,504.06
11
2.39
(1) Delinquency information as of June 30 in the fiscal year in which the Special Taxes were levied.
121 Includes Special Tax A and Special Tax B.
131 Delinquent amount does not include penalties, interest or fees.
01 Delinquency information as of September 4 for this Fiscal Year only.
(5) Totals represent the first installment of Fiscal Year 2012 -13 Special Tax A and Special Tax B collections received
as of April 72, 2013.
Source: Orange County Tax Collector, as compiled by Willdan Financial Services.
Direct and Overlapping Governmental Obligations
General. Property within the District is subject to general obligation and general fund
overlapping debt. Currently, no other assessment liens or special taxes are currently imposed
upon property within the District by other taxing entities. However, the lien for the Special
Taxes is co -equal to the lien for the community facilities districts and assessment districts, if
any, and the lien for general property taxes. Additional indebtedness could be authorized by
other public agencies at any time.
Presently, land within the District is subject to approximately $14,707,678` of total
outstanding general obligation overlapping debt (including the 2013 Bonds, but not the 2004
Bonds). To repay direct and overlapping debt the owners of the land within the District must
pay the annual Special Taxes, special assessments, and the general property tax levy. The
ability of the City to collect the Special Taxes could be adversely affected if additional debt is
issued with respect to the Taxable Property in the District. The land, at any time, could become
subject to additional parity debt either by the formation of additional community facilities
districts or the imposition of other taxes and assessments by public agencies other than the City
on behalf of the property owners within the District. The imposition of additional liens on a
parity with the Special Taxes may reduce the ability or willingness of the landowners to pay the
Special Taxes and may increase the possibility that foreclosure proceeds will not be adequate to
pay delinquent Special Taxes.
Bonded Indebtedness. As shown on Table 6 below, the property in the District is located
within the Irvine Ranch Water District's (the "IRWDs ") Improvement District Nos. 113 and 213
Preliminary, subject to change.
ME
(collectively, the "IRWD Improvement Districts'), and the property receives water and sewer
service from such public agency. At an election held on August 31, 2004, IRWD received
authorization to issue not to exceed $25,770,000 aggregate principal amount of general
obligation bonds for Improvement District No. 113 and $87,648,000 aggregate principal amount
of general obligation bonds for Improvement District No. 213. The District's share of
outstanding debt of the two IRWD Improvement Districts is $4,835,830. The City understands
that the remaining unissued bonds authorized for the IRWD Improvement Districts are
expected to relate to the financing of water and sewer facilities for the undeveloped portion of
the Tustin Legacy project. Accordingly, the Taxable Property's share of the authorized but
unissued debt of the two IRWD Improvement Districts is expected to be zero. The IRWD
Improvement Districts' bonds are general obligation bonds payable from ad valorem taxes; the
amount of the tax levy on each parcel is based on the assessed valuation of the land only. If the
assessed valuation of parcels increases disproportionately to other parcels in the IRWD
Improvement Districts, then such parcels' share of the debt of the IRWD Improvement Districts
would increase.
The City cannot predict the amount of authorized but unissued bonds for the IRWD
Improvement Districts that will ultimately be issued, nor can it predict when such debt would
be issued or the debt service payments thereon. In addition, as stated above, other public
agencies may issue additional indebtedness on property within the District at any time.
Direct and overlapping bonded indebtedness as of April 1, 2013 is shown in the
following Table 6 compiled by Willdan Financial Services. Neither the City nor the Underwriter
has independently verified the information in Table 6 and they make no representation as to its
completeness or accuracy.
Table 6
City of Tustin
Community Facilities District No. 04-1
Direct and Overlapping Bonded Debt Summary
Percent
Applicable to Total Debt
Overlapping District District Outstandingn)
Metropolitan Water District 0.013% $165,085,000
Irvine Ranch Water District, I.D. No. 113 13.051 14,397,500
Irvine Ranch Water District, I.D. No. 213 13.051 22,654,600
Estimated Share of Overlapping Debt Allocable to District
Plus: The Bonds (2)
Estimated Share of Direct and Overlapping Debt Allocable to District
District Share of
Total Debt
Outstanding
$ 21,848
1,879,080
2,956,750
$ 4,857,678
9,850,000
$14,707,678
(1) As of April 1, 2013.
13i Preliminary, subject to change.
Source: Willdan Financial Services, in reliance in part on direct and overlapping debt as reported by California
Municipal Statistics.
Overlapping Public Debt. Contained within the boundaries of the District are certain
overlapping local agencies providing public services and assessing property taxes, assessments,
xis
special taxes and other charges on the property in the District. Many of these local agencies
have outstanding debt.
The current and estimated direct and overlapping obligations affecting the property in
the District are shown in the following table. The table was prepared by California Municipal
Statistics, Inc., and is included for general information purposes only. Neither the City nor the
Underwriter has independently verified the information in the table and they make no
representation as to its completeness or accuracy.
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Table 7
City of Tustin
Community Facilities District No. 041
Total Direct and Overlapping Indebtedness
DIRECT AND OVERLAPPING TAX AND ASSESSMENT DEBT: % Applicable Debt 4/1 /13
Metropolitan Water District 0.013% $ 21,848
Irvine Ranch Water District, I.D. No. 113 13.051 1,879,080
Irvine Ranch Water District, I.D. No. 213 13.051 2,956,750
City of Tustin Community Facilities District No. 04 -10) 100. 9,850,000
TOTAL DIRECT AND OVERLAPPING TAX AND ASSESSMENT DEBT $14,707,678
OVERLAPPING GENERAL FUND DEBT
Orange County General Fund Obligations
0.065%
$139,279
Orange County Pension Obligations
0.065
229,068
Orange County Board of Education Certificates of Participation
0.065
10,407
Municipal Water District of Orange County Water Facilities Corporation
0.078
7,823
TOTAL GROSS OVERLAPPING GENERAL FUND DEBT
non - bonded
$386,577
Less: MWDOC Water Facilities Corporation
7,823
TOTAL NET OVERLAPPING GENERAL FUND DEBT
$378,754
OVERLAPPING TAX INCREMENT DEBT
Tustin Redevelopment Agency Housing Bonds 12.446%
$ 2,925,529
Tustin Redevelopment Agency MCAS Project Area 23.875
10,200,579
TOTAL OVERLAPPING TAX INCREMENT DEBT
$13,126,108
GROSS COMBINED TOTAL DEBT
$28,220,363121
NET COMBINED TOTAL DEBT
$28,212,540
(1) Excludes 2004 Bonds. Includes estimated initial principal amount of the 2013 Bonds.
121 Excludes tax and revenue anticipation notes, enterprise revenue, mortgage revenue and
non - bonded
capital lease obligations.
Ratios to 2012 -13 Local Secured Assessed Valuation
Direct Debt ($9, 850, 000) (1) ......... ............................... ..........................3.53%
Total Direct and Overlapping Tax and Assessment Debt ..............5.27%
Gross Combined Total Debt ..... ............................... .........................10.12%
Net Combined Total Debt ....... ............................... ..........................10.12 %
Ratios to Redevelopment Incremental Valuation ($278,758,282):
Total Overlapping Tax Increment Debt ................. ...........................4.71 %
Source: California Municipal Statistics
99M
Sample Tax Bill. Set forth below is Table 8, which provides, for certain land use
classifications of Taxable Property under the Rate and Method, the expected property tax bill
that would be received by an owner of the applicable Taxable Property for fiscal year 2012 -13.
Table 8
City of Tustin
Community Facilities District No. 041
Sample Tax Bills
Fiscal Year 2012 -2013 Ad
Amount
Amount
Amount
Amount
Amount
Land Use
Valorem Property Taxe5o)
Land Use
Land Use
Land Use
Land Use
Land Use
Class 12
Base Property Tax
Class 1
Class 4
Class 8
Class 9
Class 10
(Low Income
Metropolitan Water District
I => 3,350 s.f.)
(2,650 -2,949 s.f.)
(<1,500 s. f.)
(_> 1,700 s.f.)
(< 1,700 s.f.)
Affordable Unit)
Residential Land Use Type
Detached
Detached
Detached
Attached
Attached
Attached
Average Assessed Value0)
$854,000.00
$ 827,182.00
5425,000.00
5474,700.00
5427,700.00
$143,429.00
Average Land Valueut
$204,000.00
$342,631.00
$211,383.00
$189,798.00
$212,135.00
$83,231.00
Homeowner's Exemption
($7,000.00)
($7,000.00)
($7,000.00)
($7,000.00)
($7,000.00)
($7,000.00)
Equals: Net Taxable Assessed Valuer)
$847,000.00
$ 820, 182.00
$ 418 ,000.00
$467,700.00
$420,700.00
$136,429.00
Fiscal Year 2012 -2013 Ad
Amount
Amount
Amount
Amount
Amount
Valorem Property Taxe5o)
Tax Rate
Amount
Amount
Amount
Amount
Amount
Base Property Tax
1.00000%
$8,470.00
$8, 201.82
$4,180.00
$4,677.00
$4,207.00
Metropolitan Water District
0.66
0.67
10.08
10.08
10.08
1098
G.O. Bonds
0.00350%
29.64
28.70
14.63
16.36
14.72
Irvine Ranch Water District
3,593.66
3,278.18
2,516.42
2,623.32
2,329.53
421.80
G.O. Bonds (Based on land
294.00
294.00
294.00
294.00
294.00
$3,961.24
Value)
0.14660%
0.00
0.00
309.88
278.24
310.98
Subtotal AD Valorem Property Taxes
$8,499.64
$8, 230.52
$4,504.51
$4,971.60
$4,532.70
Parcel Charges, Assessments
and Special Taxes(e
Orange County Mosquito, Fire Ant and
Disease Control Assessment
Orange County Vector Surveillance and
Control Assessment
Metropolitan Water District Water
Standby Charge
Irvine Unified School District Recreation
Improvement and Maintenance
District
Tustin Community Facilities District No.
04 -115)
Orange County Sanitation District Sewer
User Fee
Subtotal Parcel Charges, Assessments
and Special Taxes
Total Property Taxes
Total Effective Tax Rate (As % of Net
Taxable Assessed Value)
Amount
$1,364.29
4.77
122.01
$1,491.07
Amount
Amount
Amount
Amount
Amount
Amount
$5.02
$5.02
$3.00
$3.00
$3.00
$3.00
1.92
1.92
0.67
0.66
0.66
0.67
10.08
10.08
10.08
1098
10.08
10.08
56.56
56.56
56.56
56.56
37.95
56.56
3,593.66
3,278.18
2,516.42
2,623.32
2,329.53
421.80
294.00
294.00
294.00
294.00
294.00
294.00
$3,961.24
$3,645.76
$2,880.73
$2,987.62
$2,675.22
$786.11
$12,460.88
$11,876.28
$7,385.24
$7,959.22
$7,207.92
$2,277.18
1.47%
1.45%
1.77%
170%
1.71%
1.67%
(0 Fiscal Year 2012 -2013 assessed valuation for one single family residential unit selected to represent the average
assessed value within each classification under the Rate and Method.
(2) Net Taxable Assessed Value reflects estimated total assessed value for the parcel net of homeowner's exemption.
Not all residences qualify for the homeowner's exemption.
(3) Based on the Fiscal Year 2012 -2013 ad valorem tax rates for tax rate areas within the District. Ad valorem tax
rates are subject to change in future years.
(4) Based on the Fiscal Year 2012 -2013 charges identified on the Orange County- issued property tax bills. Charges
subject to change in future years.
(5) Based on the actual Fiscal Year 2012 -2013 Special Tax.
Source: Orange County Tax Collector, as compiled by Willdan Financial Services.
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Other Potential Debt. The City has no control over the amount of additional debt
payable from taxes or assessments levied on all or a portion of the Taxable Property within the
District which may be incurred in the future by other governmental agencies having jurisdiction
over all or a portion of the Taxable Property within the District. Furthermore, nothing prevents
the owners of Taxable Property within the District from consenting to the issuance of additional
debt by other governmental agencies which would be secured by taxes or assessments on a
parity with the Special Taxes. To the extent such indebtedness is payable from assessments,
other special taxes levied pursuant to the Act or taxes, such assessments, special taxes and taxes
will be secured by liens on the Taxable Property within the District on a parity with the lien of
the Special Taxes.
Accordingly, the debt on the property within the District could increase, without any
corresponding increase in the value of the property therein, and thereby severely reduce the
estimated value -to -lien ratio that exists at the time the Bonds are issued. The imposition of such
additional indebtedness could reduce the willingness and ability of the owners of the Taxable
Property within the District to pay the Special Taxes when due. See "SPECIAL RISK
FACTORS —Parity Taxes and Special Assessments."
Moreover, in the event of a delinquency in the payment of Special Taxes, no assurance
can be given that the proceeds of any foreclosure sale of Taxable Property with delinquent
Special Taxes would be sufficient to pay the delinquent Special Taxes. See "SPECIAL RISK
FACTORS — Property Value."
Projected Debt Service Coverage
The Maximum Special Tax A that can be levied on Taxable Property in the District in
any fiscal year is $1,056,029.00. See "SECURITY FOR THE 2013 BONDS — Special Tax A" and
"— Summary of Rate and Method." However, pursuant to Section 53321(d) of the California
Government Code, the Special Tax levied against any Assessor's parcel for which an occupancy
permit for private residential use has been issued may not be increased as a consequence of
delinquency of default by the owner of any other Assessor's parcel within the District by more
than ten percent (10 %) above the amount that would have been levied in the fiscal year had
there never been any such delinquencies of defaults. See "SECURITY FOR THE 2013 BONDS —
Summary of Rate and Method. Thus, while the estimated annual debt service on the 2013
Bonds is not more than $702,550' and the amount of Special Tax A that can be deducted for
payment of Administrative Expenses before payment of Bond debt service is $20,000 (see
"SECURITY FOR THE 2013 BONDS — Special Tax Fund "), for a total of $722,550", or
approximately 68.4 %' of the annual Maximum Special Tax A, the aggregate Special Tax A that
could be levied on Taxable Property in the event of delinquencies in payment of Special Tax A
is 110% of the Special Tax A levied in the prior fiscal year.
Preliminary, subject to change.
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SPECIAL RISK FACTORS
The following is a description of certain risk factors affecting the District, the property owners in
the District, the parcels subject to the levy of Special Taxes and the payment of and security for the 2013
Bonds. The following discussion of risks is not meant to be a complete list of the risks associated with the
purchase of the 2013 Bonds and does not necessarily reflect the relative importance of the various risks.
Potential investors are advised to consider the following factors along with all other information in this
Official Statement in evaluating the investment quality of the 2013 Bonds. There can be no assurance
that other risk factors will not become material in the future.
No General Obligation of the City or the District
The City's obligations under the 2013 Bonds and under the Fiscal Agent Agreement are
limited obligations of the City on behalf of the District and are payable solely from and secured
solely by the Special Tax Revenues and amounts in the Special Tax Fund, the Bond Fund and
the Reserve Fund. The 2013 Bonds are neither general or special obligations of the City nor
general obligations of the District, but are limited obligations of the City for the District payable
solely from the revenues and funds pledged therefor and under the Fiscal Agent Agreement.
Neither the faith and credit nor the taxing power of the City or the State of California or of any
of their respective political subdivisions is pledged to the payment of the 2013 Bonds.
Payment of the Special Tax is not a Personal Obligation
The owners and users of the parcels in the District are not personally obligated to pay
the Special Tax. Rather, the Special Tax is an obligation that is secured only by a lien against the
Taxable Property on which it is levied. If the value of a Taxable Property is not sufficient to
secure fully the payment of the Special Tax levied and to be levied on it, the City has no
recourse against the owners of the Taxable Property.
Property Value
If a landowner defaults in the payment of the Special Tax, the only legal remedy is the
institution of a superior court action to foreclose on the delinquent Taxable Property in an
attempt to obtain funds with which to pay the Special Tax. The value of the Taxable Property in
the District could be adversely affected by economic factors beyond the City's control,
including, without limitation, (i) adverse changes in local market conditions, such as changes in
the market value of real property in the vicinity of the District, the supply of or demand for
competitive properties in such area, and the market value of residential property in the event of
sale or foreclosure; (ii) changes in real estate tax rates and other expenses of owning Taxable
Property, governmental rules (including, without limitation, zoning laws and laws relating to
endangered species and hazardous materials) and fiscal policies; and (iii) natural disasters
(including, without limitation, wildfire, earthquakes, tsunamis and floods), which may result in
uninsured losses. See "SPECIAL RISK FACTORS — Natural Disasters and Potential Drought
Conditions."
No assurances can be given that the real property subject to a judicial foreclosure sale
will be sold or, if sold, that the proceeds of such sale will be sufficient to pay the delinquent
QtIS
Special Tax installment. No appraisal of the Taxable Property in the District has been conducted
(see, however, "THE DISTRICT — Value -to- Burden Ratio" for a description of the Orange
County Assessor's valuation of the parcels in the District). Although the Act authorizes the City
to cause such an action to be commenced and diligently pursued to completion, the Act does
not specify any obligation of the City with regard to purchasing or otherwise acquiring any lot
or parcel of property sold at the foreclosure sale in any such action if there is no other purchaser
at such sale. The City is not obligated and does not expect to be a bidder at any such foreclosure
sale. See "SECURITY FOR THE BONDS — Covenant for Superior Court Foreclosure" and
"SPECIAL RISK FACTORS — Proceeds of Foreclosure Sales."
Exempt Properties
Certain properties are exempt from the Special Tax in accordance with the Rate and
Method. In addition, the Act provides that properties or entities of the state, federal or local
government are exempt from the Special Tax; provided, however, that property within the
District acquired by a public entity through a negotiated transaction, or by gift or devise, that is
not otherwise exempt from the Special Tax, will continue to be subject to the Special Tax. It is
possible that property acquired by a public entity following a tax sale or foreclosure based upon
failure to pay taxes could become exempt from the Special Tax. In addition, the Act provides
that if property subject to the Special Tax is acquired by a public entity through eminent domain
proceedings, the obligation to pay the Special Tax with respect to that property, for outstanding
Bonds only, is to be treated as if it were a special assessment. The constitutionality and
operation of these provisions of the Act have not been tested. See "SECURITY FOR THE 2013
BONDS — Special Tax A."
In particular, insofar as the Act requires payment of the Special Tax by a federal entity
acquiring property within the District, it may be unconstitutional. See "SPECIAL RISK
FACTORS — FDIC /Federal Government Interests in Properties." If for any reason property
within the District becomes exempt from taxation by reason of ownership by a nontaxable
entity such as the federal government or another public agency, subject to the limitation of the
Maximum Special Tax A, the Special Tax will be reallocated to the remaining taxable properties
within the District. This would result in the owners of such property paying a greater amount of
the Special Tax A and could have an adverse impact upon the timely payment of the Special
Tax A. Moreover, if a substantial portion of land within the District becomes exempt from the
Special Tax A because of public ownership, or otherwise, the maximum rate that could be
levied upon the remaining acreage might not be sufficient to pay principal of and interest on the
2013 Bonds when due and a default would occur with respect to the payment of such principal
and interest.
The Act further provides that no other properties or entities are exempt from the Special
Tax unless the properties or entities are expressly exempted in a resolution of consideration to
levy a new special tax or to alter the rate or method of apportionment of an existing special tax.
Parity Taxes and Special Assessments
The Special Taxes and any penalties thereon will constitute liens against the taxable
parcels in the District until they are paid. Such lien is on a parity with all special taxes and
-37-
special assessments levied by other agencies and is coequal to and independent of the lien for
general property taxes regardless of when they are imposed upon the taxable parcel. The
Special Taxes have priority over all existing and future private liens imposed on the property.
The Special Tax A and the Special Tax B have the same lien priority with respect to the Taxable
Property. See "THE DISTRICT — Direct and Overlapping Governmental Obligations" for a
description of existing overlapping liens on the Taxable Property.
The City has no control over the ability of other entities and districts to issue
indebtedness secured by special taxes or assessments payable from all or a portion of the
taxable property within the District subject to the levy of Special Taxes. In addition, the
landowners within the District may, without the consent or knowledge of the City, petition
other public agencies to issue public indebtedness secured by special taxes or assessments, and
any such special taxes or assessments may have a lien on such property on a parity with the
Special Taxes. The imposition of additional indebtedness could reduce the willingness and the
ability of the property owners within the District to pay the Special Taxes when due.
Insufficiency of Special Taxes
In order to pay debt service on the 2013 Bonds, it is necessary that the Special Taxes
levied against taxable parcels within the District be paid in a timely manner. The City has
established the Reserve Fund in an amount equal to the Reserve Requirement to pay debt
service on the 2013 Bonds and any Parity Bonds to the extent Special Taxes are not paid on time
and other funds are not available. See "SECURITY FOR THE 2013 BONDS — Reserve Fund" and
Appendix C— "Summary of the Fiscal Agent Agreement." Under the Fiscal Agent Agreement,
the City has covenanted to maintain in the Reserve Fund an amount equal to the Reserve
Requirement; subject, however, to the limitation that the City may not levy the Special Tax in
any fiscal year at a rate in excess of the Maximum Special Tax A rates permitted under the Rate
and Method. In addition, the Act imposes certain limitations on increases in Special Taxes on
residential parcels as a consequence of delinquencies in payment of the Special Taxes. See
"SECURITY FOR THE 2013 Bonds — Special Tax A." Consequently, if a delinquency occurs, the
City may be unable to replenish the Reserve Fund to the Reserve Requirement due to the
limitation of the Maximum Special Tax rates. If such defaults were to continue in successive
years, the Reserve Fund could be depleted and a default on the 2013 Bonds would occur if
proceeds of a foreclosure sale did not yield a sufficient amount to pay the delinquent Special
Taxes.
The City has made certain covenants regarding the institution of foreclosure
proceedings to sell any property with delinquent Special Taxes in order to obtain funds to pay
debt service on the 2013 Bonds. See "SECURITY FOR THE 2013 Bonds— Covenant for Superior
Court Foreclosure." If foreclosure proceedings were ever instituted, any mortgage or deed of
trust holder could, but would not be required to, advance the amount of delinquent Special
Taxes to protect its security interest.
Tax Delinquencies
Under provisions of the Act, the Special Taxes, from which funds necessary for the
payment of principal of, and interest on, the 2013 Bonds are derived, are being billed to the
No
Taxable Property within the District on the regular property tax bills sent to owners of the
parcels. Such Special Tax installments are due and payable, and bear the same penalties and
interest for non - payment, as do regular property tax installments. Special Tax installment
payments cannot be made separately from property tax payments. Therefore, the unwillingness
or inability of a property owner to pay regular property tax bills as evidenced by property tax
delinquencies may also indicate an unwillingness or inability to make regular property tax
payments and Special Tax installment payments in the future. See "SECURITY FOR THE 2013
BONDS — Reserve Fund" and "- Covenant for Superior Court Foreclosure" for a discussion of
the provisions which apply, and procedures which the District is obligated to follow under the
Fiscal Agent Agreement, in the event of delinquency in the payment of Special Tax installments.
See also "THE DISTRICT— Special Tax Levies and Delinquencies" for historical Special Tax
delinquency history.
Bankruptcy Delays
The payment of the Special Tax and the ability of the City to commence a superior court
action to foreclose the lien of a delinquent unpaid Special Tax, as discussed in "SECURITY FOR
THE 2013 BONDS — Covenant for Superior Court Foreclosure," may be limited by bankruptcy,
insolvency or other laws generally affecting creditors' rights or by the laws of the State of
California relating to judicial foreclosure. Any legal opinion to be delivered concurrently with
the delivery of the 2013 Bonds (including Bond Counsel's approving legal opinion) will be
qualified as to the enforceability of the various legal instruments by bankruptcy, insolvency,
reorganization, moratorium and other similar laws affecting creditors' rights, by the application
of equitable principles and by the exercise of judicial discretion in appropriate cases.
Although bankruptcy proceedings would not cause the Special Taxes to become
extinguished, bankruptcy of a property owner or any other person claiming an interest in the
property could result in a delay in superior court foreclosure proceedings and could result in
the possibility of Special Tax installments not being paid in part or in full. Such a delay would
increase the likelihood of a delay or default in payment of the principal of and interest on the
2013 Bonds.
Proceeds of Foreclosure Sales
Pursuant to Section 53356.1 of the Act, in the event of any delinquency in the payment of
any Special Tax, the City Council, as the legislative body of the District, may order that the
Special Taxes be collected by a superior court action to foreclose the lien within specified time
limits. The City has covenanted in the Fiscal Agent Agreement that it will, under certain
circumstances, commence such a foreclosure action. See "SECURITY FOR THE 2013 Bonds —
Covenant for Superior Court Foreclosure."
No assurances can be given that a taxable parcel in the District that would be subject to a
judicial foreclosure sale for delinquent Special Taxes will be sold or, if sold, that the proceeds of
such sale will be sufficient to pay the delinquent Special Tax installment. Although the Act
authorizes the City to cause such an action to be commenced and diligently pursued to
completion, the Act does not specify any obligation of the City with regard to purchasing or
otherwise acquiring any lot or parcel of property sold at the foreclosure sale in any such action
-39-
if there is no other purchaser at such sale and the City has not in any way agreed nor does it
expect to be such a bidder.
In a foreclosure proceeding, a judgment debtor (i.e., the property owner) has 140 days
from the date of service of the notice of levy in which to redeem the property to be sold and
may have other redemption rights afforded by law. If a judgment debtor fails to so redeem and
the property is sold, his only remedy is an action to set aside the sale, which must be brought
within 90 days of the date of sale if the purchaser at the sale was the judgment creditor. If a
foreclosure sale is thereby set aside, the judgment is revived and the judgment creditor is
entitled to interest on the revived judgment as if the sale had not been made.
If foreclosure proceedings were ever instituted, any holder of a mortgage or deed of
trust on the affected property could, but would not be required to, advance the amount of tie
delinquent Special Tax installment to protect its security interest.
In the event such superior court foreclosure or foreclosures are necessary, there could be
a delay in principal and interest payments to the owners of the 2013 Bonds pending prosecution
of the foreclosure proceedings and receipt by the District of the proceeds of the foreclosure sale,
if any. Judicial foreclosure actions are subject to the normal delays associated with court cases
and may be further slowed by bankruptcy actions and other factors beyond the control of the
City, including delay due to crowded local court calendars or legal tactics and, in any event
could take several years to complete. In particular, bankruptcy proceedings involving the
Landowner or any other owner of a taxable parcel in the District could cause a delay, reduction
or elimination in the flow of Special Tax Revenues to the Fiscal Agent. See "SPECIAL RISK
FACTORS — Bankruptcy Delays."
Natural Disasters and Potential Drought Conditions
The value of the Taxable Property in the future can be adversely affected by a variety of
natural occurrences, particularly those that may affect infrastructure and other public
improvements and private improvements on the Taxable Property and the continued
habitability and enjoyment of such private improvements. Such occurrences include, without
limitation, wildfire, earthquakes and floods. Known active faults that could cause significant
ground shaking in the District include, but are not limited to, the San Andreas Fault and the
Newport Beach/ Inglewood Fault.
One or more of such natural disasters could occur and could result in damage to
improvements of varying seriousness. The damage may entail significant repair or replacement
costs and that repair or replacement may never occur either because of the cost, or because
repair or replacement will not facilitate habitability or other use, or because other considerations
preclude such repair or replacement. Under any of these circumstances, the value of the Taxable
Property may well depreciate or disappear.
From time to time the desert southwest and much of California experiences extended
drought conditions. In recent years, rainfall and snowpack has approximated historic normal
conditions. Water service within the District is provided by the Irvine Ranch Water District and
it anticipates being able to supply water within its service area for the foreseeable future.
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However, there can be no assurance that any renewal of drought conditions will not adversely
affect the Irvine Ranch Water District's ability to do so.
Hazardous Substances
The presence of hazardous substances on a parcel may result in a reduction in the value
of a parcel. In general, the owners and operators of a parcel may be required by law to remedy
conditions of the parcel relating to releases or threatened releases of hazardous substances. The
Federal Comprehensive Environmental Response, Compensation and Liability Act of 1980,
sometimes referred to as "CERCLA" or the "Superfund Act," is the most well -known and
widely applicable of these laws, but California laws with regard to hazardous substances are
also stringent and similar. Under many of these laws, the owner or operator is obligated to
remedy a hazardous substance condition of property whether or not the owner or operator has
anything to do with creating or handling the hazardous substance. The effect, therefore, should
any of the taxed parcels be affected by a hazardous substance, is to reduce the marketability and
value of the parcel by the costs of remedying the condition, because the purchaser, upon
becoming owner, will become obligated to remedy the condition just as is the seller.
The City has not independently verified, but is not aware of, the presence of any
hazardous substances within the District.
Disclosure to Future Purchasers
The willingness or ability of an owner of a parcel to pay the Special Tax, even if the
value of the property is sufficient to justify payment, may be affected by whether or not the
owner was given due notice of the Special Tax authorization at the time the owner purchased
the parcel, was informed of the amount of the Special Tax on the parcel should the Special Tax
be levied at the maximum tax rate and, at the time of such a levy, has the ability to pay it as well
as pay other expenses and obligations. The City has caused a notice of the Special Tax to be
recorded in the Office of the Recorder for the County against the Taxable Property in the
District. Although title companies normally refer to such notices in title reports, there can be no
guarantee that such reference will be made or, if made, that a prospective purchaser or lender
will consider such Special Tax obligation when purchasing a Taxable Property within the
District or lending money thereon, as applicable.
California Civil Code Section 1102.6b requires that, in the case of transfers, the seller
must at least make a good faith effort to notify the prospective purchaser of the special tax lien
in a format prescribed by statute. Failure by an owner of the property to comply with the above
requirements, or failure by a purchaser or lessor to consider or understand the nature and
existence of the Special Tax, could adversely affect the willingness and ability of the purchaser
or lessor to pay the Special Tax when due.
FDIC/Federal Government Interests in Properties
General. The ability of the City to foreclose the lien of delinquent unpaid Special Tax
installments may be limited with regard to properties in which the Federal Deposit Insurance
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Corporation (the "FDIC "), the Drug Enforcement Agency, the Internal Revenue Service, or
other federal agency has or obtains an interest.
Federal courts have held that, based on the supremacy clause of the United States
Constitution, in the absence of Congressional intent to the contrary, a state or local agency
cannot foreclose to collect delinquent taxes or assessments if foreclosure would impair the
federal government interest. The supremacy clause of the United States Constitution reads as
follows: "This Constitution, and the Laws of the United States which shall be made in
Pursuance thereof; and all Treaties made, or which shall be made, under the Authority of the
United States, shall be the supreme Law of the Land; and the Judges in every State shall be
bound thereby, anything in the Constitution or Laws of any State to the contrary
notwithstanding." This means that, unless Congress has otherwise provided, if a federal
governmental entity owns a parcel that is subject to Special Taxes within the District but does
not pay taxes and assessments levied on the parcel (including Special Taxes), the applicable
state and local governments cannot foreclose on the parcel to collect the delinquent taxes and
assessments.
Moreover, unless Congress has otherwise provided, if the federal government has a
mortgage interest in the parcel and the District wishes to foreclose on the parcel as a result of
delinquent Special Taxes, the property cannot be sold at a foreclosure sale unless it can be sold
for an amount sufficient to pay delinquent taxes and assessments on a parity with the Special
Taxes and preserve the federal government's mortgage interest. In Rust v. Johnson (9th Circuit;
1979) 597 F.2d 174, the United States Court of Appeal, Ninth Circuit held that the Federal
National Mortgage Association ( "FNMA ") is a federal instrumentality for purposes of this
doctrine, and not a private entity, and that, as a result, an exercise of state power over a
mortgage interest held by FNMA constitutes an exercise of state power over property of the
United States.
The City has not undertaken to determine whether any federal governmental entity
currently has, or is likely to acquire, any interest (including a mortgage interest) in any of the
parcels subject to the Special Taxes within the District, and therefore expresses no view
concerning the likelihood that the risks described above will materialize while the 2013 Bonds
are outstanding.
FDIC. In the event that any financial institution making any loan which is secured by
real property within the District is taken over by the FDIC, and prior thereto or thereafter the
loan or loans go into default, resulting in ownership of the property by the FDIC, then the
ability of the City to collect interest and penalties specified by State law and to foreclose the lien
of delinquent unpaid Special Taxes may be limited.
The FDIC's policy statement regarding the payment of state and local real property taxes
(the "Policy Statement ") provides that property owned by the FDIC is subject to state and local
real property taxes only if those taxes are assessed according to the property's value, and that
the FDIC is immune from real property taxes assessed on any basis other than property value.
According to the Policy Statement, the FDIC will pay its property tax obligations when they
become due and payable and will pay claims for delinquent property taxes as promptly as is
consistent with sound business practice and the orderly administration of the institution's
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affairs, unless abandonment of the FDIC's interest in the property is appropriate. The FDIC will
pay claims for interest on delinquent property taxes owed at the rate provided under state law,
to the extent the interest payment obligation is secured by a valid lien. The FDIC will not pay
any amounts in the nature of fines or penalties and will not pay nor recognize liens for such
amounts. If any property taxes (including interest) on FDIC -owned property are secured by a
valid lien (in effect before the property became owned by the FDIC), the FDIC will pay those
claims. The Policy Statement further provides that no property of the FDIC is subject to levy,
attachment, garnishment, foreclosure or sale without the FDIC's consent. In addition, the FDIC
will not permit a lien or security interest held by the FDIC to be eliminated by foreclosure
without the FDIC's consent.
The Policy Statement states that the FDIC generally will not pay non -ad valorem taxes,
including special assessments, on property in which it has a fee interest unless the amount of
tax is fixed at the time that the FDIC acquires its fee interest in the property, nor will it
recognize the validity of any lien to the extent it purports to secure the payment of any such
amounts. Special taxes imposed under the Mello -Roos Act and a special tax formula which
determines the special tax due each year are specifically identified in the Policy Statement as
being imposed each year and therefore covered by the FDIC's federal immunity. The Ninth
Circuit has issued a ruling on August 28, 2001 in which it determined that the FDIC, as a federal
agency, is exempt from Mello -Roos special taxes.
The City is unable to predict what effect the application of the Policy Statement would
have in the event of a delinquency in the payment of Special Taxes on a parcel within the
District in which the FDIC has or obtains an interest, although prohibiting the lien of the Special
Taxes to be extinguished at a judicial foreclosure sale could reduce or eliminate the number of
persons willing to purchase a parcel at a foreclosure sale. Such an outcome could cause a draw
on the Reserve Fund and perhaps, ultimately, if enough property were to become owned by the
FDIC, a default in payment on the 2013 Bonds.
No Acceleration Provision
The 2013 Bonds and the Fiscal Agent Agreement do not contain a provision allowing for
the acceleration of the 2013 Bonds in the event of a payment default or other default under the
terms of the 2013 Bonds or the Fiscal Agent Agreement or in the event interest on the 2013
Bonds becomes included in gross income for federal income tax purposes.
Taxability Risk
As discussed herein under the caption "TAX MATTERS," interest on the 2013 Bonds
could become includable in gross income for purposes of federal income taxation retroactive to
the date the 2013 Bonds were issued, as a result of future acts or omissions of the City in
violation of its covenants in the Fiscal Agent Agreement. There is no provision in the 2013
Bonds or the Fiscal Agent Agreement for special redemption or acceleration or for the payment
of additional interest should such an event of taxability occur, and the 2013 Bonds will remain
outstanding until maturity or until redeemed under one of the redemption provisions contained
in the Fiscal Agent Agreement.
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In addition, as discussed under the caption "TAX MATTERS," Congress is or may be
considering in the future legislative proposals, including some that carry retroactive effective
dates, that, if enacted, would alter or eliminate the exclusion from gross income for federal
income tax purposes of interest on municipal bonds, such as the 2013 Bonds. Prospective
purchasers of the 2013 Bonds should consult their own tax advisors regarding any pending or
proposed federal tax legislation. The City can provide no assurance that federal tax law will not
change while the 2013 Bonds are outstanding or that any such changes will not adversely affect
the exclusion of interest on the 2013 Bonds from gross income for federal income tax purposes.
If the exclusion of interest on the 2013 Bonds from gross income for federal income tax purposes
were amended or eliminated, it is likely that the market price for the 2013 Bonds would be
adversely impacted.
Enforceability of Remedies
The remedies available to the Fiscal Agent and the registered owners of the 2013 Bonds
upon a default under the Fiscal Agent Agreement or any other document described in this
Official Statement are in many respects dependent upon regulatory and judicial actions that 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. Any legal
opinions to be delivered concurrently with the issuance of the 2013 Bonds will be qualified to
the extent that the enforceability of the legal documents with respect to the 2013 Bonds is
subject to limitations imposed by bankruptcy, reorganization, insolvency or other similar laws
affecting the rights of creditors generally and by equitable remedies and proceedings generally.
Judicial remedies, such as foreclosure and enforcement of covenants, are subject to
exercise of judicial discretion. A California court may not strictly apply certain remedies or
enforce certain covenants if it concludes that application or enforcement would be unreasonable
under the circumstances and it may delay the application of such remedies and enforcement.
No Secondary Market
No representation is made concerning any secondary market for the 2013 Bonds. There
can be no assurance that any secondary market will develop for the 2013 Bonds. Investors
should understand the long -term and economic aspects of an investment in the 2013 Bonds and
should assume that they will have to bear the economic risks of their investment to maturity.
An investment in the 2013 Bonds may be unsuitable for any investor not able to hold the 2013
Bonds to maturity.
Proposition 218
An initiative measure entitled the "Right to Vote on Taxes Act' (the "Initiative ") was
approved by the voters of the State at the November 5, 1996 general election. The Initiative
added Article XIIIC and Article XIIID to the California Constitution. According to the "Title
and Summary" of the Initiative prepared by the California Attorney General, the Initiative
limits "the authority of local governments to impose taxes and property- related assessments,
fees and charges." Provisions of the Initiative have been and will continue to be interpreted by
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the courts. The Initiative could potentially impact the Special Taxes otherwise available to the
District to pay the principal of and interest on the 2013 Bonds as described below.
Among other things, Section 3 of Article XIIIC states, "...the initiative power shall not be
prohibited or otherwise limited in matters of reducing or repealing any local tax, assessment,
fee or charge." The Act provides for a procedure, which includes notice, hearing, protest and
voting requirements to alter the rate and method of apportionment of an existing special tax.
However, the Act prohibits a legislative body from adopting any resolution to reduce the rate of
any special tax or terminate the levy of any special tax pledged to repay any debt incurred
pursuant to the Act unless such legislative body determines that the reduction or termination of
the special tax would not interfere with the timely retirement of that debt. On July 1, 1997, the
Governor of the State signed a bill into law enacting Government Code Section 5854, which
states that:
Section 3 of Article XIIIC of the California Constitution, as
adopted at the November 5, 1996, general election, shall not be
construed to mean that any owner or beneficial owner of a
municipal security, purchased before or after that date, assumes
the risk of, or in any way consents to, any action by initiative
measure that constitutes an impairment of contractual rights
protected by Section 10 of Article I of the United States
Constitution.
Accordingly, although the matter is not free from doubt, it is likely that Article XIIIC has
not conferred on the voters the power to repeal or reduce the Special Taxes if such reduction
would interfere with the timely retirement of the 2013 Bonds.
It may be possible, however, for voters or the City Council acting as the legislative body
of the District to reduce the Special Taxes in a manner that does not interfere with the timely
repayment of the 2013 Bonds, but which does reduce the maximum amount of Special Taxes
that may be levied in any year below the existing levels. Furthermore, no assurance can be
given with respect to the future levy of the Special Taxes in amounts greater than the amount
necessary for the timely retirement of the 2013 Bonds. Therefore, no assurance can be given
with respect to the levy of Special Taxes for Administrative Expenses (as defined in the Fiscal
Agent Agreement). Nevertheless, the City has covenanted that it will not consent to, or conduct
proceedings with respect to, a reduction in the maximum Special Taxes that may be levied in
the District below an amount, for any fiscal year, equal to 110% of the aggregate of the debt
service due on the 2013 Bonds in such fiscal year, plus a reasonable estimate of Administrative
Expenses for such fiscal year. However, no assurance can be given as to the enforceability of the
foregoing covenant.
The interpretation and application of Article XIIIC and Article XIIID will ultimately be
determined by the courts with respect to a number of the matters discussed above, and it is not
possible at this time to predict with certainty the outcome of such determination or the
timeliness of any remedy afforded by the courts. See "— Enforceability of Remedies."
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Ballot Initiatives
Articles XIIIC and XIIID of the California Constitution were adopted pursuant to
measures qualified for the ballot pursuant to California's constitutional initiative process, and
the State Legislature has in the past enacted legislation which has altered the spending
limitations or established minimum funding provisions for particular activities. On March 6,
1995 in the case of Rossi v. Brown, the State Supreme Court held that an initiative can repeal a
tax ordinance and prohibit the imposition of further such taxes and that the exemption from the
referendum requirements does not apply to initiatives. From time to time, other initiative
measures could be adopted by California voters or legislation enacted by the legislature. The
adoption of any such initiative or legislation might place limitations on the ability of the State,
the City, or local districts to increase revenues or to increase appropriations.
IRS Audit of Tax- Exempt Bond Issues
The Internal Revenue Service has initiated an expanded program for the auditing of tax -
exempt bond issues, including both random and targeted audits. It is possible that the 2013
Bonds will be selected for audit by the Internal Revenue Service. It is also possible that the
market value of the 2013 Bonds might be affected as a result of such an audit of the 2013 Bonds
(or by an audit of similar bonds).
Impact of Legislative Proposals, Clarifications of the Code and Court Decisions on Tax
Exemption
Future legislative proposals, if enacted into law, clarification of the Code or court
decisions may cause interest on the 2013 Bonds to be subject, directly or indirectly, to federal
income taxation or to be subject to or exempted from state income taxation, or otherwise
prevent Owners of the 2013 Bonds from realizing the full current benefit of the tax status of
such interest. The introduction or enactment of any such future legislative proposals,
clarification of the Code or court decisions may also affect the market price for, or marketability
of, the 2013 Bonds. Examples of such proposals include a proposal in the fall of 2011 which
would have reduced the tax value of all itemized deductions and targeted tax expenditures for
high - income taxpayers in tax years commencing on or after January 1, 2013. The concept of
"high- income taxpayers" in the proposal generally captured taxpayers with adjusted gross
income of $250,000 or more for married couples filing jointly (or $200,000 for single taxpayers).
Among the targeted tax expenditures was interest on any bond excludable from gross income
under Section 103 of the Code, whether the bond is outstanding on the enactment date of the
proposed legislation or is issued thereafter. Another example of such proposal from the fall of
2011 would have required the Office of Management and Budget to establish steadily declining
annual ratios for debt as a percentage of gross domestic product, effective for taxable years
beginning on or after January 1, 2013. Under the proposal, if the ratios were not met, automatic
cuts in spending and tax preferences, such as tax - exempt interest, would be triggered.
Prospective purchasers of the 2013 Bonds should consult their own tax advisors regarding any
pending or proposed federal or state tax legislation, regulations or litigation as to which Bond
Counsel expresses no opinion.
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TAX MATTERS
Federal tax law contains a number of requirements and restrictions which apply to the
2013 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 City has covenanted in the Fiscal Agent
Agreement to comply with all requirements that must be satisfied in order for the interest on
the 2013 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 2013 Bonds to become
includable in gross income for federal income tax purposes retroactively to the date of issuance
of the 2013 Bonds.
Subject to the City's compliance with the above - referenced covenants, under present
law, in the opinion of Quint & Thimmig LLP, Bond Counsel, interest on the 2013 Bonds (i) is
excludable from the gross income of the owners thereof for federal income tax purposes, and (ii)
is not included as an item of tax preference in computing the federal alternative minimum tax
for individuals and corporations, but interest on the 2013 Bonds is taken into account, however,
in computing an adjustment used in determining the federal alternative minimum tax for
certain corporations.
In rendering its opinion, Bond Counsel will rely upon certifications of the City with
respect to certain material facts within the City's knowledge. 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.
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 alternative 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 2013 Bonds.
Ownership of the 2013 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 Securitv 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 2013 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 2013 Bonds is the price at
which a substantial amount of such maturity of the 2013 Bonds is first sold to the public. The
Issue Price of a maturity of the 2013 Bonds may be different from the price set forth, or the price
corresponding to the yield set forth, on the inside cover page of this Official Statement.
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If the Issue Price of a maturity of the 2013 Bonds is less than the principal amount
payable at maturity, the difference between the Issue Price of each such maturity, if any, of the
2013 Bonds (the "OID 2013 Bonds') and the principal amount payable at maturity is original
issue discount.
For an investor who purchases an OID 2013 Bond in the initial public offering at the
Issue Price for such maturity and who holds such OID 2013 Bond to its stated maturity, subject
to the condition that the City comply with the covenants discussed above, (a) the full amount of
original issue discount with respect to such OID 2013 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 2013
Bond at its stated maturity; (c) such original issue discount is not included as an item of tax
preference in computing the alternative 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 2013 Bonds should consult their own tax advisors with respect to the state and local tax
consequences of original issue discount on such OID 2013 Bonds.
Owners of 2013 Bonds who dispose of 2013 Bonds prior to the stated maturity (whether
by sale, redemption or otherwise), purchase 2013 Bonds in the initial public offering, but at a
price different from the Issue Price or purchase 2013 Bonds subsequent to the initial public
offering should consult their own tax advisors.
If a 2013 Bond is purchased at any time for a price that is less than the 2013 Bond's stated
redemption price at maturity or, in the case of an OID 2013 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 2013 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 as taxable
ordinary income and is recognized when a 2013 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 2013 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 2013
Bond. Purchasers should consult their own tax advisors regarding the potential implications of
market discount with respect to the 2013 Bonds.
An investor may purchase a 2013 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 2013 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
MWI
reduces the investor's basis in the 2013 Bond. Investors who purchase a 2013 Bond at a
premium should consult their own tax advisors regarding the amortization of bond premium
and its effect on the 2013 Bond's basis for purposes of computing gain or loss in connection with
the sale, exchange, redemption or early retirement of the 2013 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 2013 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 2013 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
2013 Bonds. If an audit is commenced, under current procedures the Service may treat the City
as a taxpayer and the 2013 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 2013
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 2013 Bonds, are in certain cases required to be reported to the Service.
Additionally, backup withholding may apply to any such payments to any 2013 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 2013 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.
In the further opinion of Bond Counsel, interest on the 2013 Bonds is exempt from
California personal income taxes.
Ownership of the 2013 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 2013 Bonds. Prospective purchasers of the 2013 Bonds
should consult their tax advisors regarding the applicability of any such state and local taxes.
The complete text of the final opinion that Bond Counsel expects to deliver upon
issuance of the 2013 Bonds is set forth in Appendix D.
LEGAL MATTERS
Concurrent with the issuance of the 2013 Bonds, Quint & Thimmig LLP, San Francisco,
California, Bond Counsel, will render its opinion substantially in the form set forth in Appendix
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D to this Official Statement. Quint & Thimmig LLP, San Francisco, also is acting as Disclosure
Counsel to the City with respect to the 2013 Bonds. Certain legal matters will be passed upon
for the City by Woodruff, Spradlin & Smart, A Professional Corporation, Costa Mesa,
California, acting as City Attorney. Certain legal matters related to the 2013 Bonds will be
passed upon for the Underwriter by Stradling Yocca Carlson & Rauth, a Professional
Corporation, Newport Beach, California. Payment of the fees and expenses of Bond and
Disclosure Counsel, and of Underwriter's Counsel, is contingent on the issuance of the 2013
Bonds.
FINANCIAL ADVISOR
The City has retained Fieldman, Rolapp & Associates, Irvine, California, as Financial
Advisor in connection with the issuance of the 2013 Bonds. The Financial Advisor is not
obligated to undertake, and has not undertaken to make, an independent verification or assume
responsibility for the accuracy, completeness or fairness of the information contained in this
Official Statement. The Financial Advisor is an independent financial advisory firm and is not
engaged in the business of underwriting, trading or distributing municipal securities or other
public securities. Compensation paid to the Financial Advisor is contingent upon the successful
issuance of the 2013 Bonds.
RATING
Standard & Poor's Ratings Services, a division of the McGraw -Hill Companies, Inc., has
assigned a rating of _ to the 2013 Bonds. Such rating reflects only the views of such
organization and any explanation of the significance of such rating should be obtained from the
rating agency furnishing the same at the following addresses: Standard & Poor's Ratings
Services, 55 Water Street, New York, New York 10041. Generally, a rating agency bases its
rating on the information and materials furnished to it and on investigations, studies and
assumptions of its own. There is no assurance that such rating will continue for any given
period of time or that such rating will not be revised downward or withdrawn entirely by the
rating agency, if in the judgment of such rating agency, circumstances so warrant. Except as set
forth in the Continuing Disclosure Agreement, the City undertakes no responsibility to bring to
the attention of Owners of the 2013 Bonds any downward revision or withdrawal of a rating.
The City has no obligation to oppose any such revision or withdrawal.
LITIGATION
The City is not aware of any pending or threatened litigation challenging the validity of
the 2013 Bonds, the Special Taxes securing the 2013 Bonds, or any action taken by the City in
connection with the formation of the District, the levying of the Special Taxes or the issuance of
the 2013 Bonds.
UNDERWRITING
The 2013 Bonds are being purchased through negotiation by Stifel, Nicolaus &
Company, Incorporated (the "Underwriter "). The Underwriter agreed to purchase the 2013
Bonds at a price of $ (which is equal to the par amount of the 2013 Bonds, less an
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original issue discount of $ and less an underwriter's discount of $ ). The
initial public offering prices set forth on the inside cover page may be changed by the
Underwriter. The Underwriter may offer and sell the 2013 Bonds to certain dealers and others at
prices lower than the public offering prices set forth on the inside cover page hereof.
CONTINUING DISCLOSURE
The City has covenanted in a Continuing Disclosure Agreement for the benefit of the
Owners of the 2013 Bonds to provide certain annual financial information and operating data,
and to provide notices of the occurrence of certain enumerated events. The City agreed in its
certificate to file, or cause to be filed, with the MSRB such report and notices. See Appendix E—
"Form of Continuing Disclosure Agreement" for the complete text of the City's Continuing
Disclosure Agreement. The covenants of the City have been made in order to assist the
Underwriter in complying with the Rule. The City has not failed to comply in all material
respects with any undertaking under the Rule in the past five years.
MISCELLANEOUS
Included herein are brief summaries of certain documents and reports, which
summaries do not purport to be complete or definitive, and reference is made to such
documents and reports for full and complete statements of the contents thereof. Any statements
in this Official Statement involving matters of opinion, whether or not expressly so stated, are
intended as such and not as representations of fact. This Official Statement is not to be
construed as a contract or agreement between the City or the District and the purchasers or
Owners of any of the 2013 Bonds.
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The execution and delivery of this Official Statement has been duly authorized by the
City Council.
20015.04:J11474
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CITY OF TUSTIN, CALIFORNIA FOR AND
ON BEHALF OF THE CITY OF TUSTIN
COMMUNITY FACILITIES DISTRICT NO.
04 -1 (TUSTIN LEGACY /JOHN LAING
HOMES)
in
City Manager
APPENDIX A
GENERAL INFORMATION ABOUT THE CITY OF TUSTIN
The information in this section of the Official Statement is presented as general background data. The 2013
Bonds are payable solely from the Special Tax Revenues and amounts held in certain funds under the Fiscal Agent
Agreement, as described in the Official Statement.
Although reasonable efforts have been made to include up -to -date information in this Appendix
A, some of the information is not current due to delays in reporting of information by various sources. It
should not be assumed that the trends indicated by the following data would continue beyond the
specific periods reflected herein.
General
The City covers approximately 11.8 square
bounded by the cities of Orange to the north, Santa
temperate climate, with a mean average temperatur
inches.
miles in central the Orange County. The City is
Ana to the west and Irvine to the south. It has a
e of 63 degrees and average annual rainfall of 13
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 a full -time permanent staff
of approximately 249 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.
Municipal Government
The City is a general law city and was incorporated in 1927. The City has a council- 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 249 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.
RIM
The table below sets out the current City Council members and their incumbency dates.
Name
Al Murray
Charles E. "Chuck" Puckett
John Nielsen
Rebecca "Beckie" Gomez
Dr. Allan Bernstein
Population
Position
Mayor
Mayor Pro Tern
Council Member
Council Member
Council Member
Term Expires
November 2014
November 2016
November 2016
November 2014
November 2016
The City grew along with all of the County during the population boom of the 1960's. From a
population of 2,006 in the 1960 census, the City expanded to 21,178 in 1970. By the year 2000, the City's
population had exceeded 65,000 and has continued to grow in the past decade at a compound rate of
0.97 %.
The following table represents the population for the City and for Orange County for the years
1990 and 2000, and the annual estimates for years 2001 through 2012:
POPULATION
Year
City
of Tustin
Percent
Change
County of
Orange
Percent
Change
1990
50,800
—
2,398,400
--
2000
67,504
32.88%
2,846,289
18.67%
2001
68,366
1.27
2,890,353
1.55
2002
69,126
1.11
2,938,436
1.66
2003
69,753
0.91
2,979,989
1.41
2004
70,291
0.77
3,015,950
1.21
2005
70,524
0.33
3,043,669
0.92
2006
71,383
1.22
3,061,535
0.59
2007
71,931
0.77
3,077,656
0.53
2008
73,670
2.42
3,104,046
0.86
2009
74,736
1.45
3,134,858
0.99
2010
75,488
1.01
3,008,855
-4.02
2011
75,772
1.00
3,028,846
0.66
2012
76,567
1.01
3,055,792
0.88
Source: California State Department of Finance, Demographic Research Unit.
GEra
Employment
The following table summarizes the labor force, employment and unemployment figures over the
past five years for the City, Orange County, the State of California and the nation as a whole.
CIVILIAN LABOR FORCE, EMPLOYMENT AND UNEMPLOYMENT
Annual Averages
Civilian
Year Area Labor Force
Employed Unemployed
Unemployment
Rate
2008
City of Tustin
42,200
40,100
2,200
5.2%
Orange County
1,617,200
1,532,300
84,900
5.3
California
18,191,000
16,883,400
1,307,600
7.2
United States
154,287,000
145,362,000
8,924,000
5.8
2009
City of Tustin
41,500
37,800
3,600
8.7%
Orange County
1,587,900
1,446,900
141,000
8.9
California
18,204,200
16,141,500
2,062,700
11.3
United States
154,142,000
139,877,000
14,265,000
9.3
2010
City of Tustin
41,200
37,400
3,900
9.4%
Orange County
1,580,900
1,429,700
151,200
9.6
California
18,176,200
15,916,300
2,259,900
12.4
United States
153,888,667
139,063,917
14,824,750
9.6
2011
City of Tustin
41,800
38,200
3,600
8.6%
Orange County
1,600,100
1,460,100
140,000
8.8
California
18,404,500
16,237,300
2,167,200
11.8
United States
153,616,667
139,869,250
13,747,417
8.9
2012
City of Tustin
42,300
39,100
3,200
7.5%
Orange County
1,618,700
1,446,000
122,700
7.6
California
18,494,900
16,560,300
1,934,500
10.5
United States
154,975,000
142,469,000
12,506,000
8.1
Source: California Department of Employment Development (March 2012 Benchmark); United States Bureau of
Labor Statistics.
A -3
The following table lists the major employers in the City as of calendar year 2012.
MAJOR EMPLOYERS
Source: City of Tustin 2012 Comprehensive Annual Financial Report for the year ended June 30, 2012.
A -4
No. of
% of Total
Employer
Employees
Employment
Young's Market Co LLC
2,100
5.14%
Tustin Unified School District
1,600
3.92
Lamppost Pizza Corp
1,400
3.43
Ricoh Electronics Inc
1,384
3.39
Toshiba America Medical Systs
900
2.20
Rockwell Collins Inc
600
1.47
Costco
450
1.10
Safmarine
400
0.98
City of Tustin
300
0.73
Cash Plus Inc
250
0.61
Warner Systems Inc
250
0.61
Home Depot
203
0.50
Health South Tustin Rehab Hosp
200
0.49
Logomark Inc
200
0.49
Straub Distributing Co
200
0.49
Tustin Toyota
200
0.49
Shick Records Management
199
0.49
Peregrine Pharmaceuticals
174
0.43
All Green Electronic Recycling LLC
150
0.37
Source: City of Tustin 2012 Comprehensive Annual Financial Report for the year ended June 30, 2012.
A -4
The table below summarizes the State Department of Employment's estimated average annual
employment of wage and salary workers in the Santa Ana - Anaheim - Irvine labor market area between
2008 and 2012. Services, retail trade and manufacturing are the principal sources of employment. These
figures are county -wide statistics and may not necessarily accurately reflect employment trends in the
City.
SANTA ANA - ANAHEIM - IRVINE LABOR MARKET
INDUSTRY EMPLOYMENT & LABOR FORCE
by Annual Average
March 2012 Benchmark
(in thousands)
A -5
2008
2009
2010
2011
2012
Total, All Industries
1,486,200
1,375,900
1,356,700
1,371,900
1,403,000
Total Farm
4,600
3,800
3,800
3,200
2,700
Total Nonfarm
1,481,600
1,372,100
1,352,900
1,368,700
1,400,300
Goods Producing
265,900
229,500
217,800
223,900
229,600
Mining and Logging
600
500
500
500
500
Construction
91,200
74,200
67,100
69,200
71,300
Manufacturing
174,100
154,800
150,200
154,200
157,800
Service Providing
1,215,700
1,142,700
1,135,200
1,114,900
1,170,700
Trade, Transportation & Utilities
271,600
249,500
244,200
245,400
246,600
Wholesale Trade
86,700
79,400
77,400
77,000
76,700
Retail Trade
155,600
142,300
140,100
140,900
142,200
Information
30,100
27,300
25,000
23,800
24,200
Financial Activities
113,100
105,100
103,600
104,700
108,100
Professional & Business Services
266,600
240,200
242,800
245,700
255,900
Educational & Health Services
150,700
152,100
156,000
158,800
163,400
Leisure & Hospitality
176,400
169,100
168,700
15,800
16,500
Other Services
46,500
42,600
42,400
43,200
44,300
Government
160,800
156,600
152,500
149,300
147,800
Source: California State Board of Equalization.
Totals may not add due to independent rounding.
A -5
Income
The following chart shows the yearly median household effective buying income and the total
effective buying income for the City, the County, the State of California and the United States from 2008
through 2012.
Year
2008
2009
2010
2011
2012
EFFECTIVE BUYING INCOME
For Calendar Years 2008 through 2012
Area
Tustin
Orange County
California
United States
Tustin
Orange County
California
United States
Tustin
Orange County
California
United States
Tustin
Orange County
California
United States
Tustin
Orange County
California
United States
Source: Neilsen Claritas.
Total
Effective
Buying Income
(000's omitted)
$ 1,901,250
78,347,278
832,531,445
6,443,994,426
$ 1,904,143
79,478,835
844,823,319
6,571,536,768
$ 1,810,838
75,063,558
801,393,028
6,365,020,076
$ 1,786,446
76,315,505
814,578,457
6,438,704,663
$ 2,026,167
81,079,397
864,088,827
6,737,867,730
MR
Median
Household
Effective
Buying Income
$56,337
58,979
48,952
42,403
$57,325
61,470
49,736
43,252
$54,397
57,849
47,177
41,368
$52,614
57,607
47,062
41,253
$56,223
57,181
47,304
41,358
Construction Activity
The following is a summary of the valuation of building permits issued in the City for the past
five years.
BUILDING PERMIT VALUATION
($000s)
Residential
Single Family
$61,427
$28,672
$12,918
$2,836
$20,613
Multi- Family
0
5,533
1,330
0
25,667
Alteration/ Additions
4,940
3,913
3,046
2,326
5,041
Total
$66,366
$38,118
$17,294
$5,162
$51,321
Non - Residential (1)
New Commercial
$12,279
$ 1,840
$ 0
$ 820
$1,131
New Industry
1,106
0
0
0
0
Other
2,429
2,731
2,331
1,905
0
Alteration/ Additions
30,447
12,693
11,836
12,671
13,475
Total
$46,261
$17,264
$14,167
$15,396
$14,606
Single Family Units
307
152
73
16
94
Multi Family Units
0
41
9
0
237
Total
307
193
82
16
331
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.
A -7
Taxable Transactions
A four -year history of taxable transactions for the County and the City are shown in the
following tables.
ORANGE COUNTY TAXABLE TRANSACTIONS
Calendar Years 2007 through 2010
(in thousands of dollars)
Type of Business
Retail Stores
Apparel
General Merchandise
Specialty Stores
Food Stores
Eating & Drinking Places
Household
Bldg Materials
Auto Dealers & Suppliers
Service Stations
Other Retail Stores
Retail Stores Total
Business and Personal Services
All Other Outlets
Total All Outlets
2007
2008
2009111
201001
201011)
$ 2,217,996
$ 2,340,116
$ 2,742,626
$ 2,923,680
-
-
4,376,154
4,527,201
5,856,810
5,493,287
-
-
1,815,201
1,745,903
1,894,642
1,911,192
5,296,863
5,245,480
5,024,379
5,109,383
2,079,957
1,900,534
850,889
869,868
2,798,938
2,370,154
2,039,686
2,112,467
7,366,864
5,804,517
4,902,480
5,244,266
4,102,725
4,626,569
3,383,678
3,801,651
7,452,873
6,242,035
1,625,880
481,563
38,988,227
35,768,595
31,162,619
32,552,107
2,968,831
2,828,005
259,490
224,785
15,336,413
15, 010,229
14, 500,164
15,115,073
$57,293,471 $45,712,784 $45,712,784 $47,667,179
CITY OF TUSTIN
Taxable Transactions
Calendar Years 2007 through 2010
(in thousands of dollars)
Source: State Board of Equalization "Taxable Sales in California."
(1) In early 2007 the Board of Equalization (the "BOE ") began a process of converting business codes of sales and
use tax permit holders to North American Industry Classification System (NAICS) codes (evidenced by the
elimination of "General Merchandise' and the breakout of "Service Stations" for that year's data). As a result of
the coding change, however, industry -level data for 2009 and subsequent years are not comparable to that of
ra::
2007
2008
20090)
201011)
Retail Stores
Apparel stores
$ 65,705
$ 67,409
$ 95,627
$ 96,688
General merchandise stores
202,882
263,531
234,341
261,861
Food stores
51,967
55,713
71,396
74,366
Eating & drinking places
152,829
175,280
165,565
161,402
Home furnishings/ appliances
33,396
62,537
119,143
130,725
Building materials /farm impl
82,316
76,823
66,179
68,929
Auto dealers/ supplies
543,102
402,335
313,105
335,458
Service stations
106,334
112,072
91,745
104,183
Other retail stores
259,490
224,785
142,719
145,245
Total retail outlets
1,497,731
1,440,485
1,299,819
1,378,857
All other outlets
327,578
331,956
246,317
249,124
Total all outlets
$1,825,309
$1,772,441
$1,546,136
$1,627,981
Source: State Board of Equalization "Taxable Sales in California."
(1) In early 2007 the Board of Equalization (the "BOE ") began a process of converting business codes of sales and
use tax permit holders to North American Industry Classification System (NAICS) codes (evidenced by the
elimination of "General Merchandise' and the breakout of "Service Stations" for that year's data). As a result of
the coding change, however, industry -level data for 2009 and subsequent years are not comparable to that of
ra::
prior years. Categories at the City level, particularly, were significantly altered; for this reason City data are
shown in a separate table.
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
In November 2009, the City completed construction of 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 261) 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.
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.
A -10
APPENDIX B
RATE AND METHOD
RATE AND METHOD OF APPORTIONMENT FOR
CITY OF TUSTIN COMMUNITY FACILITIES DISTRICT NO. 04 -1
( TUSTIN LEGACY /JOHN LAING HOMES)
A Special Tax shall be levied on all Assessor's Parcels in City of Tustin Community Facilities
District No. 04 -1 (Tustin Legacy /John Laing Homes) ( "CFD No. 04-1 ") and collected each Fiscal Year
commencing in Fiscal Year 2004 -2005, in an amount determined through the application of the Rate and
Method of Apportionment as described below. All of the real property in CFD No. 04 -1, unless exempted
by law or by the provisions hereof, shall be taxed for the purposes, to the extent and in the manner herein
provided.
A. DEFINITIONS
The terms hereinafter set forth have the following meanings:
"Acre or Acreage" means the land area of an Assessor's Parcel as shown on an Assessor's Parcel
Map, or if the land area is not shown on an Assessor's Parcel Map, the land area shown on the applicable
final map, parcel map, condominium plan, or other recorded County parcel map. The square footage of
an Assessor's Parcel is equal to the Acreage of such parcel multiplied by 43,560.
"Act" means the Mello -Roos Community Facilities Act of 1982, being Chapter 2.5, Division 2 of
Title 5 of the California Government Code.
"Administrative Expenses" means the following actual or reasonably estimated costs directly
related to the administration of CFD No. 04 -1: the costs of computing the Special Taxes and preparing the
annual Special Tax collection schedules (whether by the City or designee thereof or both); the costs of
collecting the Special Taxes (whether by the County or otherwise); the costs of remitting the Special Taxes
to the Trustee; the costs of the Trustee (including its legal counsel) in the discharge of the duties required
of it under the Indenture; the costs to the City, CFD No. 04 -1 or any designee thereof of complying with
arbitrage rebate requirements; the costs to the City, CFD No. 04 -1 or any designee thereof of complying
with City, CFD No. 04 -1 or obligated persons disclosure requirements of applicable federal and state
securities laws and the Act; the costs associated with preparing Special Tax disclosure statements and
responding to public inquiries regarding the Special Taxes; the costs of the City, CFD No. 04 -1 or any
designee thereof related to an appeal of the Special Tax; the costs associated with the release of funds
from any escrow account; and the City's annual administration fees and third party expenses.
Administrative Expenses shall also include amounts estimated or advanced by the City or CFD No. 04 -1
for any other administrative purposes of CFD No. 04 -1, including attorney's fees and other costs related
to commencing and pursuing to completion any foreclosure as a result of delinquent Special Taxes.
"Affordable Units" means residential dwelling units located on one or more Assessor's Parcels
of Residential Property that are subject to deed restrictions, resale restrictions, and /or regulatory
agreements recorded in favor of the City providing for affordable housing. Affordable Units shall be
further classified as Moderate Income, Lower Income, or Very Low Income (as defined in Sections
50079.5, 50093, and 50105 of the California Health And Safety Code), with the total number of Affordable
Units not to exceed 63 Moderate Income units, 22 Lower Income units and 33 Very Low Income units.
Affordable Units constructed within the CFD shall be designated by the CFD Administrator in the
11
chronological order in which the building permits for such units are issued. However, if the total number
of Affordable Units constructed in any one of the three affordable income categories exceeds the amount
stated above for such income category, then the units exceeding such total shall be not be considered
Affordable Units and shall be assigned to a Land Use Class based on the type of use and Residential Floor
Area for each such unit.
"Assessor's Parcel" means a lot or parcel shown in an Assessor's Parcel Map with an assigned
Assessor's Parcel number.
"Assessor's Parcel Map" means an official map of the County Assessor of the County
designating parcels by Assessor's Parcel number.
"Authorized Services" means those authorized services proposed to be financed by CFD No. 04-
1 pursuant to the Act and listed in Exhibit A to this Rate and Method of Apportionment.
"Bonds" means any bonds or other debt (as defined in Section 53317(d) of the Act), whether in
one or more series, issued by CFD No. 04 -1 under the Act.
"CFD Administrator" means an official of the City, or designee thereof, responsible for
determining the Special Tax Requirement for Facilities and the Special Tax Requirement for Services and
providing for the levy and collection of the Special Taxes.
"CFD No. 04-1" means City of Tustin Community Facilities District No. 04 -1 (Tustin
Legacy /John Laing Homes).
"City" means the City of Tustin.
"Consumer Price Index" means, for each Fiscal Year, the Consumer Price Index published by the
U.S. Bureau of Labor Statistics for "All Urban Consumers" in the Los Angeles - Anaheim - Riverside
Area, measured as of the month of December in the calendar year which ends in the previous Fiscal Year.
In the event this index ceases to be published, the Consumer Price Index shall be another index as
determined by the CFD Administrator that is reasonably comparable to the Consumer Price Index for the
City of Los Angeles.
"Council" means the City Council of the City, acting as the legislative body of CFD No. 04 -1.
"County" means the County of Orange.
"Developed Property" means, for each Fiscal Year, all Taxable Property, exclusive of Taxable
Public Property and Taxable Property Owner Association Property, for which the Final Subdivision was
recorded on or prior to January 1 of the prior Fiscal Year and a building permit for new construction was
issued after January 1, 2004 and prior to May 1 of the prior Fiscal Year.
"Final Subdivision" means a subdivision of property by recordation of a final map, parcel map,
or lot line adjustment, pursuant to the Subdivision Map Act (California Government Code Section 66410
et seq.) or recordation of a condominium plan pursuant to California Civil Code 1352 that creates
individual lots for which building permits may be issued without further subdivision.
"Fiscal Year" means the period starting July 1 and ending on the following June 30.
"Indenture" means the indenture, fiscal agent agreement, resolution or other instrument
pursuant to which Bonds are issued, as modified, amended and /or supplemented from time to time.
II&A
"Land Use Class" means any of the classes listed in Table 1 below.
"Maximum Special Tax" means the maximum Special Tax A and /or maximum Special Tax B, as
applicable.
"Maximum Special Tax A" means the maximum Special Tax A determined in accordance with
Section C below, that can be levied in any Fiscal Year on any Assessor's Parcel.
"Maximum Special Tax B" means the maximum Special Tax B determined in accordance with
Section C below, that can be levied in any Fiscal Year on any Assessor's Parcel.
"Non- Residential Property" means all Assessor's Parcels of Developed Property for which a
building permit permitting the construction of one or more non - residential units or facilities has been
issued by the City.
"Outstanding Bonds" means all Bonds which are deemed to be outstanding under the
Indenture.
"Property Owner Association Property" means, for each Fiscal Year, any property within the
boundaries of CFD No. 04 -1 that was owned by a property owner association, including any master or
sub - association, as of January 1 of the prior Fiscal Year.
"Proportionately" means, for Developed Property, that the ratio of the actual Special Tax A levy
to the Maximum Special Tax A is equal for all Assessor's Parcels of Developed Property and that the ratio
of the actual Special Tax B levy to the Maximum Special Tax B is equal for all Assessor's Parcels of
Developed Property, For Undeveloped Property, "Proportionately" means that the ratio of the actual
Special Tax A levy per Acre to the Maximum Special Tax A per Acre is equal for all Assessor's Parcels of
Undeveloped Property. The term "Proportionately" may similarly be applied to other categories of
Taxable Property as listed in Section E below,
"Public Property" means property within the boundaries of CFD No. 04 -1 owned by, irrevocably
offered or dedicated to, or over, through or under which an easement for purposes of public right -of -way
has been granted, to the federal government, the State, the County, the City, or any local government or
other public agency, provided that any property ]eased by a public agency to a private entity and subject
to taxation under Section 53340.1 of the Act shall be taxed and classified according to its use.
"Residential Floor Area" means all of the square footage of living area within the perimeter of a
residential structure, not including any carport, walkway, garage, overhang, patio, enclosed patio, or
similar area. The determination of Residential Floor Area for an Assessor's Parcel shall be made by
reference to the building permit(s) issued for such Assessor's Parcel.
"Residential Property" means all Assessor's Parcels of Developed Property for which a building
permit permitting the construction thereon of one or more residential dwelling units has been issued by
the City.
"Single Family Attached Property" means all Assessor's Parcels of Residential Property for
which building permits have been issued for attached residential units.
"Single Family Detached Property" means all Assessor's Parcels of Residential Property for
which building permits have been issued for detached residential units.
IN,
"Special Tax" means the Special Tax A and /or Special Tax B, as applicable.
"Special Tax A" means the special tax to be levied in each Fiscal Year on each Assessor's Parcel
of Taxable Property within CFD No. 04-1 to fund the Special Tax Requirement for Facilities.
"Special Tax A Buydown" means a mandatory bond principal buydown payment made by the
property owner to reduce the amount of Outstanding Bonds to compensate for a loss of Special Tax A
revenues resulting from the construction of fewer residential dwelling units, smaller residential dwelling
units, or a modified amount of non - residential Acreage, as determined in accordance with Section D
below.
"Special Tax B" means the special tax to be levied in each Fiscal Year on each Assessor's Parcel of
Taxable Property within CFD No. 04 -1 to fund the Special Tax Requirement for Services.
"Special Tax Requirement for Facilities" means that amount required in any Fiscal Year for CFD
No. 04 -1 to: (i) pay debt service on all Outstanding Bonds due in the calendar year commencing in such
Fiscal Year; (ii) pay periodic costs on the Bonds, including but not limited to, credit enhancement and
rebate payments on the Bonds due in the calendar year commencing in such Fiscal Year; (iii) pay
Administrative Expenses; (iv) pay any amounts required to establish or replenish any reserve funds for
all Outstanding Bonds; (v) pay for reasonably anticipated Special Tax A delinquencies based on the
delinquency rate for the Special Tax A levy in the previous Fiscal Year; less (vi) a credit for funds
available to reduce the annual Special Tax A levy, as determined by the CFD Administrator pursuant to
the Indenture.
"Special Tax Requirement for Services" means that amount required in any Fiscal Year for CFD
No. 04 -1 to (i) pay directly for Authorized Services due in the calendar year commencing in such Fiscal
Year; (ii) pay a proportionate share of Administrative Expenses; less (iii) a credit for funds available to
reduce the annual Special Tax B levy, as determined by the CFD Administrator.
"State" means the State of California.
"Taxable Property" means all of the Assessor's Parcels within the boundaries of CFD No. 04 -1
which are not exempt from the Special Tax pursuant to law or Section F below.
"Taxable Property Owner Association Property" means, for each Fiscal Year, all Assessor's
Parcels of Property Owner Association Property that are not exempt from the Special Tax pursuant to
Section F below.
"Taxable Public Property" means, for each Fiscal Year, all Assessor's Parcels of Public Property
that are not exempt from the Special Tax pursuant to Section F below.
"Trustee" means the trustee or fiscal agent under the Indenture.
"Undeveloped Property" means, for each Fiscal Year, all Taxable Property not classified as
Developed Property, Taxable Public Property or Taxable Property Owner Association Property.
B. ASSIGNMENT TO LAND USE CATEGORIES
Each Fiscal Year, all Taxable Property within CFD No. 04 -1 shall be classified as Developed
Property, Taxable Public Property, Taxable Property Owner Association Property, or Undeveloped
Property, and shall be subject to Special Taxes in accordance with this Rate and Method of
Apportionment determined pursuant to Sections C, D, and E below. Residential Property shall be
N
assigned to Land Use Classes 1 through 13 as listed in Table 1 below based on the type of use and the
Residential Floor Area for each unit. Non - Residential Property shall be assigned to Land Use Class 14.
C. MAXIMUM SPECIAL TAX
1. Developed Property
(a). Maximum Special Tax
The Maximum Special Tax A and the Maximum Special Tax B for each Land Use
Class is shown below in Table 1. The Maximum Special Tax for each Assessor's
Parcel classified as Developed Property shall be the Maximum Special Tax A
plus Maximum Special Tax B.
TABLET
Maximum Special Tax for Developed Property in
City of Tustin Community Facilities District No. 04-1
(Tustin Legacy/John Laing Homes)
Fiscal Year 2004 -2005
Land
Use
Class
Description
1
Single Family Detached Property
2
Single Family Detached Property
3
Single Family Detached Property
4
Single Family Detached Property
5
Single Family Detached Property
6
Single Family Detached Property
7
Single Family Detached Property
8
Single Family Detached Property
9
Single Family Attached Property
10
Single Family Attached Property
11
Affordable Units (Moderate Income)
12
Affordable Units (Lower Income)
13
Affordable Units (Very Low Income)
14
Non - Residential Property
(b).
Residential Floor
Area
_> 3,350 s.f.
3,150 - 3,349 s.f.
2,950 - 3,149 s.f.
2,650 - 2,949 s.f.
2,350 - 2,649 s.f.
1,900 - 2,349 s.f.
1,500 -1,899 s.f.
< 1,500 s.f.
_> 1,700 s.f.
< 1,700 s.f.
NA
NA
NA
NA
Increase in the Maximum Special Tax
Maximum
Special Tax A
$3,410 per unit
$3,182 per unit
$3,039 per unit
$2,988 per unit
$2,704 per unit
$2,453 per unit
$2,254 per unit
$1,969 per unit
$2,112 per unit
$1,719 per unit
$378 per unit
$209 per unit
$53 per unit
$26,322 per Acre
Maximum
Special Tax B
$822 per unit
$822 per unit
$822 per unit
$822 per unit
$822 per unit
$822 per unit
$822 per unit
$822 per unit
$822 per unit
$822 per unit
$822 per unit
$209 per unit
$53 per unit
$10,639 per Acre
The Fiscal Year 2004 -2005 Maximum Special Tax A, identified in Table 1 above,
shall not be subject to change and shall therefore remain the same in every Fiscal
Year. On each July 1, commencing on July 1, 2005, the Maximum Special Tax B
listed in Table 1 above shall be increased based on the percentage change in the
Consumer Price Index, with a maximum annual increase of six percent (6 %) and
a minimum annual increase of two percent (2 %) per Fiscal Year.
(c). Multiple Land Use Classes
In some instances an Assessor's Parcel of Developed Property may contain more
than one Land Use Class. The Maximum Special Tax levied on an Assessor's
I=
Parcel shall be the sum of the Maximum Special Taxes for all Land Use Classes
located on that Assessor's Parcel.
2. Undeveloped Property, Taxable Public Property, and Taxable Property Owner
Association Property
(a). Maximum Special Tax A
The Fiscal Year 2004 -2005 Maximum Special Tax A for Undeveloped Property,
Taxable Public Property, and Taxable Property Owner Association Property shall
be $29,414 per Acre.
(b). Maximum Special Tax B
Undeveloped Property, Taxable Public Property and Taxable Property Owner
Association Property shall not be subject to a Maximum Special Tax B.
(c). Increase in the Maximum Special Tax A
The Fiscal Year 2004 -2005 Maximum Special Tax A shall not be subject to change
and shall therefore remain the same in every Fiscal Year.
D. SPECIAL TAX A BUYDOWN
All of the requirements of this Section D, which describes the need for a Special Tax A Buydown
that may result from a change in development as determined pursuant to this Section D, shall
only apply after the sale of Bonds by CFD No. 04-1. The following definitions apply to this
Section D:
"Certificate of Satisfaction of Special Tax A Buydown" means a certificate from the CFD
Administrator stating that the property described in such certificate has sufficiently met the
Special Tax A Buydown Requirement for such property as calculated under this Section D.
"Letter of Compliance" means a letter from the CFD Administrator allowing the issuance of
building permits based on the prior submittal of a request for Letter of Compliance by a property
owner.
"Special Tax A Buydown Requirement" means the total amount of Special Tax A Buydown
necessary to be prepaid to permit the issuance of building permits listed in a request for Letter of
Compliance, as calculated under this Section D.
"Update Property" means an Assessor's Parcel of Undeveloped Property for which a building
permit has been issued. For purposes of all calculations in this Section D, Update Property shall
be taxed as if it were already Developed Property during the current Fiscal Year.
1. Request for Letter of Compliance
The CFD Administrator must submit a Letter of Compliance to the City for a specific Assessor's
Parcel or lot prior to the issuance by the City of a building permit for the construction of any
residential and /or non - residential development on that Assessor's Parcel or lot. If a Letter of
Compliance has not yet been issued, and a property owner wishes to request a building permit
for an Assessor's Parcel or lot, the property owner must first request a Letter of Compliance from
the CFD Administrator. The request from the property owner shall contain a list of all building
permits currently being requested, the Assessor's Parcels or tract and lot numbers on which the
construction is to take place, and the Residential Floor Area (for each residential dwelling unit) or
the Acreage (for each nonresidential parcel) associated with each building permit.
2. Issuance of Letter of Compliance
Upon the receipt of a request for Letter of Compliance, the CFD Administrator shall assign each
building permit identified in such request to Land Use Classes 1 through 14 as listed in Table 2
below, based on the type of use and the Residential Floor Area identified for each such building
permit. If the CFD Administrator determines (i) that the number of building permits requested
for each Land Use Class, plus those building permits previously issued for each Land Use Class,
will not cause the total number of residential units or non - residential Acreage within any such
Land Use Class to exceed the number of units or Acreage for such Land Use Class identified in
Table 2 below, and (ii) that the total number of residential dwelling units anticipated to be
constructed pursuant to the current development plan for CFD No. 04 -1 will not be less than 565,
then a Letter of Compliance shall be submitted to the City by the CFD Administrator approving
the issuance of the requested building permits. This Letter of Compliance shall be submitted by
the CFD Administrator within ten days of the submittal of the request for Letter of Compliance
by the property owner. However, should (i) the building permits requested, plus those
previously issued, cause the total number of residential units or non - residential Acreage within
any such Land Use Class to exceed the number of units or non- residential Acreage for such Land
Use Class identified in Table 2 below, or (ii) the CFD Administrator determine that changes in the
development plan may cause a decrease in the number of residential dwelling units within CFD
No. 04 -1 to below 565 dwelling units, then a letter of Compliance will not be issued and the CFD
Administrator will be directed to determine if a Special Tax A Buydown shall be required.
TABLE2
Expected Dwelling Units per Land Use Class and Non - Residential Acreage
City of Tustin Community Facilities District No. 04-1
(Tustin Legacy/John Laing Homes)
Land
Use
Residential
Number of
Class
Description
Floor Area
Units /Acreage
1
Single Family Detached Property
=> 3,350 s.f.
27 units
2
Single Family Detached Property
3,150 - 3,349 s.f.
50 units
3
Single Family Detached Property
2,950 - 3,149 s.f.
23 units
4
Single Family Detached Property
2,650 - 2,949 s.f.
19 units
5
Single Family Detached Property
2,350 - 2,649 s.f.
11 units
6
Single Family Detached Property
1,900 - 2,349 s.f.
19 units
7
Single Family Detached Property
1,500 -1,899 s.f.
0 units
8
Single Family Detached Property
< 1,500 s.f.
126 units
9
Single Family Attached Property
=> 1,700 s.f.
63 units
10
Single Family Attached Property
< 1,700 s.f.
109 units
11
Affordable Units (Moderate Income)
NA
63 units
12
Affordable Units (Lower Income)
NA
22 units
13
Affordable Units (Very Low Income)
NA
33 units
14
Non - Residential Property
NA
0 Acres
LI7
3. Calculation of Special Tax A Buydown
If a Special Tax A Buydown calculation is required as a result of item 2, above, the CFD
Administrator shall review the current development plan for CFD No. 04 -1 in consultation with
the current property owners for all remaining Undeveloped Property in CFD No. 04 -1, and shall
prepare an updated version of Table 2 identifying the revised number of units or non - residential
Acreage anticipated within each Land Use Class. The CFD Administrator shall not be responsible
for any delays in preparing the updated Table 2 that results from a refusal on the part of one or
more current property owners of Undeveloped Property to provide information on their future
development.
The CFD Administrator shall then review the updated Table 2 and determine the Special Tax A
Buydown Requirement, if any, to be applied to the property identified in the request for Letter of
Compliance to assure the CFD's ability to collect special taxes equal to 110% debt service
coverage on the Outstanding Bonds, plus the cost of annual CFD administration. The calculations
shall be undertaken by the CFD Administrator as follows:
Step 1. Compute the sum of the Maximum Special Tax A to be levied on all Developed
Property and Update Property within CFD No. 04 -1, plus the sum of the Maximum
Special Tax A to be levied on all future development as identified in the current
development plan as determined by the CFD Administrator in consultation with the
property owner.
Step 2. Determine the amount of Special Tax A required to provide 110% debt service
coverage on the Outstanding Bonds, plus any other costs associated with the Special
Tax Requirement for Facilities.
Step 3. If the total sum computed pursuant to step 1 is greater than or equal to the amount
computed pursuant to step 2, then no Special Tax A Buydown will be required and a
Letter of Compliance shall immediately be issued by the CFD Administrator for all of
the building permits currently being requested. If the total sum computed pursuant to
step 1 is less than the amount computed pursuant to step 2, then continue to step 4.
Step 4. Determine the Maximum Special Tax A shortfall by subtracting the total sum
computed pursuant to step 1 from the amount computed pursuant to step 2. Divide
this Maximum Special Tax A shortfall by the amount computed pursuant to step 2.
Step 5. The Special Tax A Buydown Requirement shall be calculated using the prepayment
formula described in Section I.1, with the following exceptions: (i) skip Paragraphs 1, 2
and 3, and begin with Paragraph 4; (ii) the Bond Redemption Amount in Paragraph 4
of the prepayment formula described in Section I.1 shall equal the product of the
quotient computed pursuant to step 4 above times the Previously Issued Bonds, as
defined in Section I.1; (iii) the Capitalized Interest Credit described in Paragraph 12 of
Section I.1 shall be $0; and (iv) any payments of the Special Tax A Buydown (less
Administrative Fees and Expenses) shall be disbursed pursuant to the Indenture.
The Special Tax A Buydown computed under step 5 shall be billed directly to the property owner
of each Assessor's Parcel identified in the request for Letter of Compliance and shall be due
within 30 days of the billing date. If the Special Tax A Buydown is not paid within 45 days of the
billing date, a delinquent penalty of 10 percent shall be added to the Special Tax A Buydown.
Upon receipt of the Special Tax A Buydown payment, the CFD Administrator shall issue a Letter
ME
of Compliance and a Certificate of Satisfaction of Special Tax A Buydown for the subject
property.
4. Costs and Expenses Related to Implementation of Special Tax A Buydown
The property owner of each Assessor's Parcel identified in the request for Letter of Compliance
shall pay all costs of the CFD Administrator or other consultants required to review the
application for building permits, calculate the Special Tax A Buydown, issue Letters of
Compliance or any other actions required under Section D. Such payments shall be due 30 days
after receipt of invoice by such property owner. A deposit may be required by the CFD
Administrator prior to undertaking work related to the Special Tax A Buydown.
E. METHOD OF APPORTIONMENT OF THE SPECIAL TAX
1. Special Tax A
Commencing with Fiscal Year 2004 -2005 and for each following Fiscal Year, the Council shall
determine the Special Tax Requirement for Facilities and shall levy the Special Tax A until the
total Special Tax A levy equals the Special Tax Requirement for Facilities. The Special Tax A shall
be levied each Fiscal Year as follows:
First: The Special Tax A shall be levied Proportionately on each Assessor's Parcel of Developed
Property at up to 100% of the applicable Maximum Special Tax A;
Second: If additional monies are needed to satisfy the Special Tax Requirement for Facilities after
the first step has been completed, the Special Tax A shall be levied Proportionately on each
Assessor's Parcel of Undeveloped Property at up to 100% of the Maximum Special Tax A for
Undeveloped Property;
Third: If additional monies are needed to satisfy the Special Tax Requirement for Facilities after
the first two steps have been completed, then the Special Tax A shall be levied Proportionately on
each Assessor's Parcel of Taxable Property Owner Association Property at up to the Maximum
Special Tax A for Taxable Property Owner Association Property;
Fourth: If additional monies are needed to satisfy the Special Tax Requirement for Facilities after
the first three steps have been completed, then the Special Tax A shall be levied Proportionately
on each Assessor's Parcel of Taxable Public Property at up to the Maximum Special Tax A for
Taxable Public Property.
2. Special Tax B
Commencing with Fiscal Year 2004 -2005 and for each following Fiscal Year, the Council shall
levy the Special Tax B until the total Special Tax B levy equals the Special Tax Requirement for
Services. The Special Tax B shall be levied Proportionately each Fiscal Year on each Assessor's
Parcel of Developed Property at up to 100% of the applicable Maximum Special Tax B as needed
to satisfy the Special Tax Requirement for Services.
:•
F.
1. Special Tax A
No Special Tax A shall be levied on up to 1.4 Acres of Public Property and up to 27.1 Acres of
Property Owner Association Property. Tax - exempt status will be assigned by the CFD
Administrator in the chronological order in which property becomes Public Property or Property
Owner Association Property. However, should an Assessor's Parcel no longer be classified as
Public Property or Property Owner Association Property, its tax - exempt status will be revoked.
Public Property or Property Owner Association Property that is not exempt from the Special Tax
A under this section shall be subject to the levy of the Special Tax A and shall be taxed
Proportionately as part of the third and fourth steps in Section E.1.
2. Special Tax B
No Special Tax B shall be levied on Undeveloped Property, Public Property and Property Owner
Association Property.
G. APPEALS AND INTERPRETATIONS
Any landowner or resident who feels that the amount of the Special Tax levied on such
landowner's or residents Assessor's Parcel is in error may submit a written appeal to CFD No.
04 -1. The CFD Administrator shall review the appeal and if the CFD Administrator concurs, the
amount of the Special Tax levied shall be appropriately modified.
The Council may interpret this Rate and Method of Apportionment of Special Tax for purposes of
clarifying any ambiguity and make determinations relative to the amount of Administrative
Expenses and any landowner or resident appeals. Any decision of the Council shall be final and
binding as to all persons.
H. MANNER OF COLLECTION
Special Tax A and Special Tax B will be collected in the same manner as ordinary ad valorem
property taxes or in such other manner as the Council shall determine, including direct billing of
the affected property owners. The Special Tax A Buydown shall be directly billed to the property
owner at the time such Special Tax is being levied.
1. PREPAYMENT OF SPECIAL TAX A
The following definitions apply to this Section I:
"Buildout" means, for CFD No. 04 -1, that all expected building permits have been issued.
"Previously Issued Bonds" means, for any Fiscal Year, all Outstanding Bonds that are deemed to
be outstanding under the Indenture after the first interest and /or principal payment date
following the current Fiscal Year.
1. Prepayment in Full
The obligation of an Assessor's Parcel to pay the Special Tax A may be prepaid and
permanently satisfied as described herein only after the sale of Bonds by CFD No. 04 -1;
09
Paragraph No.:
provided that a prepayment may be made only for Assessor's Parcels of Developed
Property or Undeveloped Property for which a building permit has been issued, and
only if there are no delinquent Special Taxes with respect to such Assessor's Parcel at the
time of prepayment. An owner of an Assessor's Parcel intending to prepay the Special
Tax A obligation shall provide the CFD Administrator with written notice of intent to
prepay. Within 30 days of receipt of such written notice, the CFD Administrator shall
notify such owner of the prepayment amount for such Assessor's Parcel. The CFD
Administrator may charge a reasonable fee for providing this service. Prepayment must
be made not less than 45 days prior to the next occurring date that notice of redemption
of Bonds from the proceeds of such prepayment may be given by the Trustee pursuant to
the Indenture.
The Special Tax B may not be prepaid.
The Special Tax A Prepayment Amount (defined below) shall be calculated as
summarized below (capitalized terms as defined below):
Bond Redemption Amount
plus
Redemption Premium
plus
Defeasance Amount
plus
Administrative Fees and Expenses
less
Reserve Fund Credit
less Capitalized Interest Credit
Total: equals Prepayment Amount
As of the proposed date of prepayment, the Special Tax A Prepayment Amount (defined
below) shall be calculated as follows:
Confirm that no Special Tax delinquencies apply to such Assessor's Parcel.
2. For Assessor's Parcels of Developed Property, compute the Maximum Special Tax A for
the current Fiscal Year applicable for the Assessor's Parcel to be prepaid. For Assessor's
Parcels of Undeveloped Property (for which a building permit has been issued) to be
prepaid, compute the Maximum Special Tax A for the current Fiscal Year applicable for
that Assessor's Parcel as though it was already designated as Developed Property, based
upon such building permit.
3. Divide the Maximum Special Tax A computed pursuant to paragraph 2 by the total
estimated Maximum Special Tax A for CFD No. 04 -1 based on the Developed Property
Special Tax A which could be levied in the current Fiscal Year on all expected
development through Buildout, excluding any Assessor's Parcels the Special Tax A for
which have been prepaid.
4. Multiply the quotient computed pursuant to paragraph 3 by the Previously Issued Bonds
to compute the amount of Previously Issued Bonds to be retired and prepaid (the "Bond
Redemption Amount ").
5. Multiply the Bond Redemption Amount computed pursuant to paragraph 4 by the
applicable redemption premium (e.g., the redemption price- 100%), if any, on the
Previously Issued Bonds to be redeemed (the "Redemption Premium ").
B -11
6. Compute the amount needed to pay interest on the Bond Redemption Amount from the
first bond interest and /or principal payment date following the current Fiscal Year until
the earliest redemption date for the Previously Issued Bonds.
7. Determine the Special Tax A levied on the Assessor's Parcel in the current Fiscal Year
which has not yet been paid.
8. Compute the minimum amount the CFD Administrator reasonably expects to derive
from the reinvestment of the Special Tax A Prepayment Amount less the Administrative
Fees and Expenses from the date of prepayment until the redemption date for the
Previously Issued Bonds to be redeemed with the prepayment.
9. Add the amounts computed pursuant to paragraphs 6 and 7 and subtract the amount
computed pursuant to paragraph 8 (the "Defeasance Amount').
10. Verify the administrative fees and expenses of CFD No. 04 -1, including the costs of
computation of the prepayment, the costs to invest the prepayment proceeds, the costs of
redeeming Bonds, and the costs of recording any notices to evidence the prepayment and
the redemption (the "Administrative Fees and Expenses').
11. If reserve funds for the Previously Issued Bonds, if any, are at or above 100% of the
reserve requirement (as defined in the Indenture) on the prepayment date, a reserve fund
credit shall be calculated as a reduction in the applicable reserve fund for the Previously
Issued Bonds to be redeemed pursuant to the prepayment (the "Reserve Fund Credit').
No Reserve Fund Credit shall be granted if reserve funds are below 100% of the reserve
requirement.
12. If any capitalized interest for the Previously Issued Bonds will not have been expended at
the time of the first interest and /or principal payment following the current Fiscal Year, a
capitalized interest credit shall be calculated by multiplying the quotient computed
pursuant to paragraph 3 by the expected balance in the capitalized interest fund or
account under the Indenture after such first interest and /or principal payment (the
"Capitalized Interest Credit').
13. The Special Tax A Prepayment is equal to the sum of the amounts computed pursuant to
paragraphs 4, 5, 9 and 10, less the amounts computed pursuant to paragraphs 11 and 12
(the "Prepayment Amount ").
14. From the Prepayment Amount, the amounts computed pursuant to paragraphs 4, 5, 9, 11
and 12 shall be deposited into the appropriate fund as established under the Indenture
and be used to retire Previously Issued Bonds or make debt service payments. The
amount computed pursuant to paragraph 10 shall be retained by CFD No. 04 -1.
The Special Tax A Prepayment Amount may be sufficient to redeem other than a $5,000
increment of Bonds. In such cases, the increment above $5,000 or integral multiple thereof will be
retained in the appropriate fund established under the Indenture to be used with the next
prepayment of Bonds or to make debt service payments.
As a result of the payment of the current Fiscal Year's Special Tax A levy as determined under
paragraph 7 (above), the CFD Administrator shall remove the current Fiscal Year's Special Tax A
levy for such Assessor's Parcel from the County tax rolls. With respect to any Assessor's Parcel
B -12
that is prepaid, the Council shall cause a suitable notice to be recorded in compliance with the
Act, to indicate the prepayment of the Special Tax A and the release of the Special Tax A lien on
such Assessor's Parcel, and the obligation of such Assessor's Parcel to pay the Special Tax A shall
cease.
Notwithstanding the foregoing, no Special Tax A prepayment shall be allowed unless, at the time
of such proposed prepayment, the amount of Maximum Special Tax A that may be levied on
Taxable Property within CFD No. 04 -1 (after excluding 1.4 Acres of Public Property and 27.1
Acres of Property Owner Association Property as set forth in Section F) both prior to and after the
proposed prepayment is at least 1.1 times the maximum annual debt service on all Previously
Issued Bonds, plus the cost of annual CFD administration.
2. Prepayment in Part
The Special Tax A on an Assessor's Parcel of Developed Property or an Assessor's Parcel of
Undeveloped Property for which a building permit has been issued may be partially prepaid.
The amount of the prepayment shall be calculated as in Section I.1; except that a partial
prepayment shall be calculated according to the following formula:
PP = PE x F.
These terms have the following meaning:
PP = the partial prepayment
PE = the Special Tax A Prepayment Amount calculated according to Section I.1
F = the percentage, expressed as a decimal, by which the owner of the Assessor's Parcel is
partially prepaying the Special Tax A.
The owner of any Assessor's Parcel who desires such prepayment shall notify the CFD
Administrator of such owner's intent to partially prepay the Special Tax A and the percentage by
which the Special Tax A shall be prepaid. The CFD Administrator shall provide the owner with a
statement of the amount required for the partial prepayment of the Special Tax A for an
Assessor's Parcel within 30 days of the request and may charge a reasonable fee for providing
this service. With respect to any Assessor's Parcel that is partially prepaid, the Council shall (i)
distribute the funds remitted to it according to Section L1, and (ii) indicate in the records of CFD
No. 04 -1 that there has been a partial prepayment of the Special Tax A and that a portion of the
Special Tax A with respect to such Assessor's Parcel, equal to the outstanding percentage (1.00 -
F) of the remaining Maximum Special Tax A, shall continue to be levied on such Assessor's Parcel
pursuant to Section E.1.
J. TERM OF SPECIAL TAX
The Special Tax A shall be levied for a period not to exceed forty years commencing with Fiscal
Year 2004 -2005. The Special Tax B shall be levied as long as necessary to meet the Special Tax
Requirement for Services.
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EXHIBIT A
AUTHORIZED SERVICES
The types of services proposed to be financed by CFD No. 04 -1 are police protection services, fire
protection services, ambulance and paramedic services, recreation program services, maintenance of
parks, parkways and open space and flood and storm protection services.
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APPENDIX C
SUMMARY OF THE FISCAL AGENT AGREEMENT
The following is a summary of certain provisions of the Fiscal Agent Agreement not otherwise described in
the text of this Official Statement. This summary does not purport to be comprehensive or definitive and is subject
to all of the complete terms and provisions of the Fiscal Agent Agreement, to which reference is hereby made.
Definitions
"Act" means the Mello -Roos Community Facilities Act of 1982, as amended, being Sections 53311
et seq. of the California Government Code.
"Administrative Expenses" means any or all of the following: the fees and expenses of the Fiscal
Agent (including any fees or expenses of its counsel), the expenses of the City in carrying out its duties
under the Fiscal Agent Agreement (including, but not limited to, the levying and collection of the Special
Taxes, and the foreclosure of the liens of delinquent Special Taxes) including the fees and expenses of its
counsel, an allocable share of the salaries of City staff related thereto and a proportionate amount of City
general administrative overhead related thereto, any amounts paid by the City from its general funds
pursuant to the Fiscal Agent Agreement, any amounts paid or payable to any persons or entities
employed by the City in connection with the discharge of any of the City's obligations under the Fiscal
Agent Agreement (including, but not limited to, the calculation of the levy of the Special Taxes,
foreclosures with respect to delinquent taxes, and the calculation of amounts subject to rebate to the
United States), any fees or expenses of the Escrow Bank and any costs incurred by the City under or in
connection with the Escrow Agreement, and all other costs and expenses of the City or the Fiscal Agent
incurred in connection with the discharge of their respective duties under the Fiscal Agent Agreement or
in connection with the 2013 Bonds or the refunding of the 2004 Bonds and, in the case of the City, in any
way related to the administration of the Bonds or the District. Administrative Expenses shall include any
such expenses incurred in prior years but not yet paid.
"Administrative Expense Fund" means the fund by that name established by the Fiscal Agent
Agreement.
"Agreement" means the Fiscal Agent Agreement, as it may be amended or supplemented from
time to time by any Supplemental Agreement adopted pursuant to the provisions of the Fiscal Agent
Agreement.
"Annual Debt Service" means, for each Bond Year, the sum of (i) the interest due on the
Outstanding Bonds in such Bond Year, assuming that the Outstanding Bonds are retired as scheduled
(including by reason of the mandatory sinking payment provisions of the Fiscal Agent Agreement)
providing for mandatory sinking payments), and (ii) the principal amount of the Outstanding Bonds due
in such Bond Year (including any mandatory sinking payment due in such Bond Year pursuant to the
Fiscal Agent Agreement).
"Auditor" means the auditor/ controller of the County, as such other official at the County who is
responsible for preparing property tax bills.
"Authorized Officer" means the City Manager, the Finance Director, the City Clerk, or any other
officer or employee of the City authorized by the City Council of the City or by an Authorized Officer to
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undertake the action referenced in the Fiscal Agent Agreement as required to be undertaken by an
Authorized Officer.
"Bond Counsel" means (i) Quint & Thimmig LLP, or (ii) any attorney or other firm of attorneys
acceptable to the City and nationally recognized for expertise in rendering opinions as to the legality and
tax - exempt status of securities issued by public entities.
"Bond Fund" means the fund by that name established by the Fiscal Agent Agreement.
"Bond Register" means the books for the registration and transfer of Bonds maintained by the
Fiscal Agent under the Fiscal Agent Agreement.
"Bond Year" means the one -year period beginning on September 1st in each year and ending on
August 31st in the following year except that the first Bond Year shall begin on the Closing Date and end
on August 31, 2013.
"Bonds" means, collectively, the 2013 Bonds, and, if the context requires, any Parity Bonds, at any
time Outstanding under the Fiscal Agent Agreement or any Supplemental Agreement.
"Business Da v" means any day other than (i) a Saturday or a Sunday, or (ii) a day on which
banking institutions in the state in which the Fiscal Agent has its corporate trust office are authorized or
obligated by law or executive order to be closed.
"CDIAC" means the California Debt and Investment Advisory Commission of the office of the
State Treasurer of the State of California or any successor agency or bureau thereto.
"94" means the City of Tustin, California.
"Closing Date" means June _, 2013, being the date upon which there is a physical delivery of the
2013 Bonds in exchange for the amount representing the purchase price of the 2013 Bonds by the Original
Purchaser.
"Code" means the Internal Revenue Code of 1986 as in effect on the date of issuance of the 2013
Bonds or (except as otherwise referenced in the Fiscal Agent Agreement) as it may be amended to apply
to obligations issued on the date of issuance of the 2013 Bonds, together with applicable temporary and
final regulations promulgated, and applicable official public guidance published, under the Code.
"Continuing Disclosure Agreement" means the Continuing Disclosure Agreement, executed by
the City and Willdan Financial Services as the initial Dissemination Agent, as originally executed and as
it may be amended from time to time in accordance with the terms thereof.
"Costs of Issuance" means items of expense payable or reimbursable directly or indirectly by the
City and related to the authorization, sale and issuance of the 2013 Bonds and the refunding and
defeasance of the 2004 Bonds, which items of expense shall include, but not be limited to, printing costs,
costs of reproducing and binding documents, closing costs, filing and recording fees, initial fees and
charges of the Fiscal Agent including its first annual administration fee, fees and expenses of Fiscal
Agent's counsel, expenses incurred by the City in connection with the issuance of the 2013 Bonds and the
defeasance and redemption of the 2004 Bonds, Escrow Bank fees and expenses, special tax consultant fees
and expenses, Bond (underwriter's) discount, legal fees and charges, including bond counsel and
disclosure counsel, financial advisor fees, rating agency fees, costs of bond insurance (if applicable),
charges for execution, transportation and safekeeping of the 2013 Bonds and other costs, charges and fees
in connection with the foregoing.
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"Cost of Issuance Fund" means the fund by that name established by the Fiscal Agent
Agreement.
"County" means the County of Orange, California.
"DTC" means The Depository Trust Company, New York, New York, and its successors and
assigns.
"Debt Service" means the scheduled amount of interest and amortization of principal (including
principal payable by reason of the mandatory sinking payment provisions of the Fiscal Agent
Agreement) on the Bonds and the scheduled amount of interest and amortization of principal payable on
any Parity Bonds during the period of computation, excluding amounts scheduled during such period
which relate to principal which has been retired before the beginning of such period.
"Depository_" means (a) initially, DTC, and (b) any other Securities Depository acting as
Depository pursuant to the Fiscal Agent Agreement.
"District" means the City of Tustin Community Facilities District No. 04 -1 (Tustin Legacy /John
Laing Homes), formed pursuant to the Act and the Resolution of Formation.
"Escrow Agreement" means the Escrow Agreement, dated as of June 1, 2013, by and between the
City, for and on behalf of the District, and the Escrow Bank.
"Escrow Bank" means U.S. Bank National Association, in its capacity as escrow bank under the
Escrow Agreement.
"Fair Market Value" means the price at which a willing buyer would purchase the investment
from a willing seller in a bona fide, arm's length transaction (determined as of the date the contract to
purchase or sell the investment becomes binding) if the investment is traded on an established securities
market (within the meaning of section 1273 of the Code) and, otherwise, the term "Fair Market Value"
means the acquisition price in a bona fide arm's length transaction (as referenced above) if (i) the
investment is a certificate of deposit that is acquired in accordance with applicable regulations under the
Code, (ii) the investment is an agreement with specifically negotiated withdrawal or reinvestment
provisions and a specifically negotiated interest rate (for example, a guaranteed investment contract, a
forward supply contract or other investment agreement) that is acquired in accordance with applicable
regulations under the Code, or (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.
"Federal Securities" means any of the following which are non - callable and which at the time of
investment are legal investments under the laws of the State of California for funds held by the Fiscal
Agent:
(i) direct general obligations of the United States of America (including obligations
issued or held in book entry form on the books of the United States Department of the Treasury)
and obligations, the payment of principal of and interest on which are directly or indirectly
guaranteed by the United States of America, including, without limitation, such of the foregoing
which are commonly referred to as "stripped" obligations and coupons; or
(ii) any of the following obligations of the following agencies of the United States of
America: (a) direct obligations of the Export- Import Bank, (b) certificates of beneficial ownership
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issued by the Farmers Home Administration, (c) participation certificates issued by the General
Services Administration, (d) mortgage- backed bonds or pass- through obligations issued and
guaranteed by the Government National Mortgage Association, (e) project notes issued by the
United States Department of Housing and Urban Development, and (f) public housing notes and
bonds guaranteed by the United States of America.
"Finance Director" means the Finance Director of the City or any person otherwise acting as the
chief financial officer of the City, or such person's written designee.
"Fiscal Agent" means the Fiscal Agent appointed by the City and acting as an independent fiscal
agent with the duties and powers provided in the Fiscal Agent Agreement, its successors and assigns,
and any other corporation or association which may at any time be substituted in its place, as provided in
the Fiscal Agent Agreement.
"Fiscal Year" means the twelve -month period extending from July 1 in a calendar year to June 30
of the succeeding year, both dates inclusive.
"Independent Financial Consultant" means any consultant or firm of such consultants appointed
by the City or any Authorized Officer, and who, or each of whom: (i) is judged by the person or entity
that approved them to have experience in matters relating to the issuance and /or administration of
bonds under the Act; (ii) is in fact independent and not under the domination of the City; (iii) does not
have any substantial interest, direct or indirect, with or in the City, or any owner of real property in the
District, or any real property in the District; and (iv) is not connected with the City as an officer or
employee of the City, but who may be regularly retained to make reports to the City.
"Information Services" means the Electronic Municipal Market Access System (referred to as
"EMMA "), a facility of the Municipal Securities Rulemaking Board, (at http: / /emma.msrb.org); and, in
accordance with then current guidelines of the Securities and Exchange Commission, such other
addresses and /or such services providing information with respect to called bonds as the City may
designate in an Officer's Certificate delivered to the Fiscal Agent.
"Interest Payment Dates" means March 1 and September 1 of each year, commencing March 1,
2014.
"Maximum Annual Debt Service" means the largest Annual Debt Service for any Bond Year after
the calculation is made through the final scheduled maturity date for any Outstanding Bonds.
"Officer's Certificate" means a written certificate of the City signed by an Authorized Officer of
the City.
"Ordinance" means Ordinance No. 1286, adopted by the City Council of the City on August 2,
2004, and any other ordinance of the City levying the Special Taxes.
"Original Purchaser" means the first purchaser of the 2013 Bonds from the City, being Stifel,
Nicolaus & Company, Incorporated.
"Outstanding ", when used as of any particular time with reference to Bonds, means (subject to
the disqualified bonds provisions of the Fiscal Agent Agreement) all Bonds except: (i) Bonds theretofore
canceled by the Fiscal Agent or surrendered to the Fiscal Agent for cancellation; (ii) Bonds paid or
deemed to have been paid within the meaning of the Fiscal Agent Agreement; and (iii) Bonds in lieu of or
in substitution for which other Bonds shall have been authorized, executed, issued and delivered by the
City pursuant to the Fiscal Agent Agreement or any Supplemental Agreement.
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"Owner" or "Bondowner" means any person who shall be the registered owner of any
Outstanding Bond.
"Pari Bonds" means bonds issued by the City for the District payable and secured on a parity
with any then Outstanding Bonds, pursuant to the Fiscal Agent Agreement.
"Participating Underwriter" shall have the meaning ascribed thereto in the Continuing
Disclosure Agreement.
"Permitted Investments" means the following, but only to the extent that the same are acquired
at Fair Market Value and are otherwise legal investments for funds of the City:
(a) Federal Securities.
(b) Registered state warrants or treasury notes or bonds of the State of California (the
"State "), including bonds payable solely out of the revenues from a revenue - producing property
owned, controlled, or operated by the State or by a department, board, agency, or authority of the
State, which are rated in one of the two highest short -term or long -term rating categories by
either Moody's Investors Service or Standard and Poor's Ratings Group, and which have a
maximum term to maturity not to exceed three years.
(c) Time certificates of deposit or negotiable certificates of deposit issued by a state or
nationally chartered bank or trust company, or a state or federal savings and loan association
which may include the Fiscal Agent and its affiliates; provided, that the certificates of deposit
shall be one or more of the following: continuously and fully insured by the Federal Deposit
Insurance Corporation or the Federal Savings and Loan Insurance Corporation, and /or
continuously and fully secured by securities described in subdivision (a) or (b) of the definition of
Permitted Investments which shall have a market value, as determined on a marked -to- market
basis calculated at least weekly, and exclusive of accrued interest, or not less than 102 percent of
the principal amount of the certificates on deposit.
(d) Commercial paper which at the time of purchase is of "prime" quality of the highest
ranking or of the highest letter and numerical rating as provided by either Moody's Investors
Service or Standard and Poor's Ratings Group, which commercial paper is limited to issuing
corporations that are organized and operating within the United States of America and that have
total assets in excess of five hundred million dollars ($500,000,000) and that have an "A" or
higher rating for the issuer's debentures, other than commercial paper, by either Moody's
Investors Service or Standard and Poor's Ratings Group, provided that purchases of eligible
commercial paper may not exceed 180 days' maturity nor represent more than 10 percent of the
outstanding commercial paper of an issuing corporation. Purchases of commercial paper may
not exceed 20 percent of the total amount invested pursuant to the definition of Permitted
Investments.
(e) A repurchase agreement with a state or nationally charted bank or trust company or a
national banking association or government bond dealer reporting to, trading with, and
recognized as a primary dealer by the Federal Reserve Bank of New York, provided that all of the
following conditions are satisfied: (1) the agreement is secured by any one or more of the
securities described in subdivision (a) of the definition of Permitted Investments, (2) the
underlying securities are required by the repurchase agreement to be held by a bank, trust
company, or primary dealer having a combined capital and surplus of at least one hundred
million dollars ($100,000,000) and which is independent of the issuer of the repurchase
C -5
agreement, and (3) the underlying securities are maintained at a market value, as determined on
a marked -to- market basis calculated at least weekly, of not less than 103 percent of the amount so
invested.
(f) An investment agreement or guaranteed investment contract with, or guaranteed by,
a financial institution the long -term unsecured obligations of which are rated Aa2 and "AA" or
better, respectively, by Moody's Investors Service and Standard and Poor's Ratings Group at the
time of initial investment. The investment agreement shall be subject to a downgrade provision
with at least the following requirements: (1) the agreement shall provide that within five business
days after the financial institution's long -term unsecured credit rating has been withdrawn,
suspended, other than because of general withdrawal or suspension by Moody's Investors
Service or Standard and Poor's Ratings Group from the practice of rating that debt, or reduced
below "AA -" by Standard and Poor's Ratings Group or below "Aa3" by Moody's Investors
Service (these events are called "rating downgrades ") the financial institution shall give notice to
the City and, within the five -day period, and for as long as the rating downgrade is in effect, shall
deliver in the name of the City or the Fiscal Agent to the City or the Fiscal Agent Federal
Securities allowed as investments under subdivision (a) of the definition of Permitted
Investments with aggregate current market value equal to at least 105 percent of the principal
amount of the investment agreement invested with the financial institution at that time, and shall
deliver additional allowed federal securities as needed to maintain an aggregate current market
value equal to at least 105 percent of the principal amount of the investment agreement within
three days after each evaluation date, which shall be at least weekly, and (2) the agreement shall
provide that, if the financial institution's long -term unsecured credit rating is reduced below
"A3" by Moody's Investors Service or below "A -" by Standard and Poor's Ratings Group, the
Fiscal Agent or the City may, upon not more than five business days' written notice to the
financial institution, withdraw the investment agreement, with accrued but unpaid interest
thereon to the date, and terminate the agreement.
(g) The Local Agency Investment Fund of the State of California.
(h) Investments in a money market fund (including any funds of the Fiscal Agent or its
affiliates and including any funds for which the Fiscal Agent or its affiliates provides investment
advisory or other management services) rated in the highest rating category (without regard to
plus ( +) or minus ( -) designations) by Moody's or S &P.
(i) Any other lawful investment for City funds.
"Principal Office" means the corporate trust office of the Fiscal Agent as identified pursuant to
the Fiscal Agent Agreement; provided, however, for the purpose of maintenance of the Registration
Books and surrender of Bonds for payment, transfer or exchange such term means the office at which the
Fiscal Agent conducts its corporate agency business, or such other or additional offices as may be
designated by the Fiscal Agent.
"Project" means the facilities eligible to be funded by the District, as specified by the Resolution
of Formation.
"Rate and Method of Apportionment" means the Rate and Method of Apportionment of Special
Tax for the District, as approved by the Resolution of Formation, and as it may be amended from time to
time in accordance with the provisions of the Act.
C.
"Rating Category_" means one of the two highest rating categories then in effect under the rating
systems of Moody's Investors Service or Standard and Poor's Ratings Group, a division of McGraw -Hill,
without regard to plus or minus sign or numerical or other qualifying designation.
"Record Date" means the fifteenth (15�h) day of the month next preceding the month of the
applicable Interest Payment Date, whether or not such fifteenth (15th) day is a Business Day.
"Refunding Bonds" means bonds issued by the City for the District the net proceeds of which are
used to refund all or a portion of the then Outstanding Bonds; provided that the debt service on the
Refunding Bonds in any Bond Year is not in excess of the debt service on the Bonds being refunded, and
the final maturity of the Refunding Bonds is not later than the final maturity of the Bonds being refunded.
"Refunding Fund" means the fund by that name created by and held by the Escrow Bank
pursuant to the Escrow Agreement.
"Registration Books" means the records maintained by the Fiscal Agent pursuant to the Fiscal
Agent Agreement for the registration and transfer of ownership of the Bonds.
"Regulations" means temporary and permanent regulations promulgated under the Code.
"Reserve Fund" means the fund by that name established pursuant to the Fiscal Agent
Agreement.
'Reserve Requirement' means, as of any date of calculation, an amount equal to seventy-five
percent (75 %) of the then Maximum Annual Debt Service.
"Resolution" means Resolution No. 13 -_, adopted by the City Council of the City on May 21,
2013, authorizing the issuance of the 2013 Bonds.
"Resolution of Formation" means Resolution No. 04 -67, adopted by the City Council of the City
on July 19, 2004.
"Securities Depositories" means The Depository Trust Company, 55 Water Street, 1SL, New
York, New York 10041 -0099, Fax (212) 855 -7232; and, in accordance with then current guidelines of the
Securities and Exchange Commission, such other addresses and /or such other securities depositories as
the City may designate in an Officer's Certificate delivered to the Fiscal Agent.
"Special Tax A" has the meaning given to such term in the Rate and Method of Apportionment.
"Special Tax B" has the meaning given to such term in the Rate and Method of Apportionment.
"Special Tax Fund" means the fund by that name established by the Fiscal Agent Agreement.
"Special Tax Prepayments" means the proceeds of any prepayments of Special Taxes received by
the City, as calculated pursuant to the Rate and Method of Apportionment, less any administrative fees
or penalties collected as part of any such prepayment.
"Special Tax Prepayments Account" means the account by that name within the Bond Fund
established by the Fiscal Agent Agreement.
"Special Tax Revenues" means the proceeds of the Special Taxes received by the City, including
any scheduled payments and any prepayments thereof, interest and penalties thereon and proceeds of
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the redemption or sale of property sold as a result of foreclosure of the lien of the Special Taxes to the
amount of said lien, but shall not include interest and penalties, if any, collected with the Special Taxes
that are in excess of the rate of interest payable on the Bonds.
"Special Taxes" means the Special Tax A levied within the District pursuant to the Act, the
Ordinance and the Fiscal Agent Agreement. "Special Taxes' do not include any Special Tax B levied in
the District.
"Supplemental Agreement" means an agreement the execution of which is authorized by a
resolution which has been duly adopted by the City under the Act and which agreement is amendatory
of or supplemental to the Fiscal Agent Agreement, but only if and to the extent that such agreement is
specifically authorized under the Fiscal Agent Agreement.
"2004 Bonds" means the City of Tustin Community Facilities District No. 04-1 (Tustin
Legacy /John Laing Homes) Special Tax Bonds, Series 2004.
"2013 Bonds" means the City of Tustin Community Facilities District No. 04 -1 (Tustin
Legacy /John Laing Homes) 2013 Special Tax Refunding Bonds at any time Outstanding under the Fiscal
Agent Agreement.
Pledge of Special Tax Revenues
The Bonds are secured by a first pledge of all of the Special Tax Revenues (other than the first
$20,000 of Special Tax Revenues received by the City in any Fiscal Year, which are to be used to pay
Administrative Expenses), and all moneys deposited in the Bond Fund, the Reserve Fund and, until
disbursed as provided in the Fiscal Agent Agreement, in the Special Tax Fund. The Special Tax Revenues
and all moneys deposited into said funds (except as otherwise provided in the Fiscal Agent Agreement)
are dedicated in the Fiscal Agent Agreement to the payment of the principal of, and interest and any
premium on, the Bonds as provided therein and in the Act until all of the Bonds have been paid and
retired or until moneys or Federal Securities have been set aside irrevocably for that purpose in
accordance with the Fiscal Agent Agreement.
Amounts in the Administrative Expense Fund, the Costs of Issuance Fund and the Refunding
Fund, the first $20,000 of Special Tax Revenues collected by the City in any Fiscal Year, and the proceeds
of any Special Tax B are not pledged to the repayment of the Bonds. The facilities financed by the District
are not in any way pledged to pay the debt service on the Bonds. Any proceeds of the sale,
condemnation or destruction of any facilities financed by the District are not pledged to pay the debt
service on the Bonds and are free and clear of any lien or obligation imposed under the Fiscal Agent
Agreement.
Funds and Accounts
Special Tax Fund. There is established under the Fiscal Agent Agreement as a separate fund to be
held by the Fiscal Agent, the Special Tax Fund. The City will transfer or cause to be transferred to the
Fiscal Agent, as soon as practicable following receipt, all Special Tax Revenues received by the City (and
expressly not including any Special Tax B, which is to be retained by the City) and any amounts required
by the Fiscal Agent Agreement to be deposited to the Special Tax Fund, all which amounts shall be
deposited by the Fiscal Agent to the Special Tax Fund.
W.
Notwithstanding the foregoing,
(i) with respect to the first $20,000.00 of Special Tax Revenues (which do not include
Special Tax B, which is to be retained by the City in any event) collected by the City in any Fiscal
Year; first, the City may retain all or any portion thereof, and not remit the same to the Fiscal
Agent, to the extent the City determines that it needs said amount to pay Administrative
Expenses of the City; and second, any remaining portion of such amount shall be separately
identified by the City and shall be deposited by the Fiscal Agent in the Administrative Expense
Fund;
(ii) any Special Tax Revenues constituting the collection of delinquencies in payment of
Special Taxes shall be separately identified by the City and shall be deposited by the Fiscal Agent
first, in the Bond Fund to the extent needed to pay any past due debt service on the Bonds;
second, to the Reserve Fund to the extent needed to increase the amount then on deposit in the
Reserve Fund up to the then Reserve Requirement; and third, to the Special Tax Fund for use as
described in the Fiscal Agent Agreement; and
(iii) any proceeds of Special Tax Prepayments shall be separately identified by the City
and shall be deposited by the Fiscal Agent in the Special Tax Prepayments Account established
pursuant to the Fiscal Agent Agreement.
Moneys in the Special Tax Fund will be held by the Fiscal Agent for the benefit of the City and
the Owners of the Bonds, shall be disbursed as provided below and, pending and disbursement, shall be
subject to a lien in favor of the Owners of the Bonds and the City.
From time to time as needed to pay the obligations of the District, but no later than the Business
Day before each Interest Payment Date, the Fiscal Agent will withdraw from the Special Tax Fund and
transfer the following amounts in the following order of priority (i) to the Bond Fund an amount, taking
into account any amounts then on deposit in the Bond Fund and any expected transfers from the Reserve
Fund and the Special Tax Fund to the Bond Fund pursuant to the Fiscal Agent Agreement, such that the
amount in the Bond Fund equals the principal (including any sinking payment, or principal due pursuant
to optional or special tax prepayment redemptions), premium, if any, and interest due on the Bonds on
the next Interest Payment Date, and (ii) to the Reserve Fund an amount, taking into account amounts then
on deposit in the Reserve Fund, such that the amount in the Reserve Fund is equal to the Reserve
Requirement; provided that no such transfers shall exceed the amount then available to be transferred
from the Special Tax Fund.
In addition to the foregoing, if in any Fiscal Year there are sufficient funds in the Special Tax
Fund to make the foregoing transfers to the Bond Fund and the Reserve Fund in respect of the Interest
Payment Dates occurring in the Bond Year that commences in such Fiscal Year, the Finance Director may
direct the Fiscal Agent to transfer to the Administrative Expense Fund, from time to time, any amount in
the Special Tax Fund in excess of the amount needed to make such transfers to the Bond Fund and the
Reserve Fund, if the Finance Director determines that monies are needed to pay Administrative Expenses
in excess of the amount then on deposit in the Administrative Expense Fund.
Moneys in the Special Tax Fund will be invested in accordance with the Fiscal Agent Agreement.
Interest earnings and profits resulting from investment of amounts in the Special Tax Fund will be
retained in the Special Tax Fund to be used for the purposes thereof.
Administrative Expense Fund. There is established under the Fiscal Agent Agreement as a
separate fund to be held by the Fiscal Agent, the Administrative Expense Fund, to the credit of which
deposits shall be made as required by the Fiscal Agent Agreement. Moneys in the Administrative
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Expense Fund are to be held by the Fiscal Agent for the benefit of the City, and will be disbursed as
provided in the Fiscal Agent Agreement. Moneys in this fund are not pledged as security for the 2013
Bonds.
Amounts in the Administrative Expense Fund will be withdrawn by the Fiscal Agent and paid to
the City or its order upon receipt by the Fiscal Agent of an Officer's Certificate stating the amount to be
withdraw, that such amount is to be used to pay an Administrative Expense, and the nature of such
Administrative Expense. Amounts transferred to the Administrative Expense Fund pursuant to the Fiscal
Agent Agreement will be used for purposes of such fund prior to using other available amounts therein.
Annually, on the last day of each Fiscal Year, the Fiscal Agent will withdraw any amounts then
remaining in the Administrative Expense Fund in excess of $20,000.00 that have not otherwise been
allocated to pay Administrative Expenses incurred but not yet paid, and which are not otherwise
encumbered, and transfer such amounts to the Special Tax Fund.
Moneys in the Administrative Expense Fund will be invested in accordance with the Fiscal Agent
Agreement. Interest earnings and profits resulting from said investment will be retained in the
Administrative Expense Fund to be used for the purposes of such fund.
Costs of Issuance Fund. There is established under the Fiscal Agent Agreement as a separate
fund to be held by the Fiscal Agent, the Costs of Issuance Fund, to the credit of which a deposit will be
made as required by the Fiscal Agent Agreement. Moneys in the Costs of Issuance Fund will be held by
the Fiscal Agent and will be disbursed as provided in the Fiscal Agent Agreement. Moneys in this fund
are not pledged as security for the 2013 Bonds.
Amounts in the Costs of Issuance Fund will be disbursed from time to time to pay Costs of
Issuance, as set forth in a requisition containing respective amounts to be paid to the designated payees,
signed by an Authorized Officer and delivered to the Fiscal Agent concurrently with the delivery of the
2013 Bonds. The Fiscal Agent will pay all Costs of Issuance upon receipt of an invoice from any such
payee which requests payment in an amount which is less than or equal to the amount set forth with
respect to such payee in such requisition, or upon receipt of an Officer's Certificate requesting payment of
a Cost of Issuance not listed on the initial requisition delivered to the Fiscal Agent on the Closing Date.
Each such Officer's Certificate shall be sufficient evidence to the Fiscal Agent of the facts stated therein
and the Fiscal Agent will have no duty to confirm the accuracy of such facts. The Fiscal Agent shall
maintain the Cost of Issuance Fund for a period of 90 days from the Closing Date and then shall transfer
any moneys remaining therein, including any investment earnings thereon, to the Administrative
Expense Fund.
Moneys in the Cost of Issuance Fund will be invested in accordance with the Fiscal Agent
Agreement. Interest earnings and profits resulting from said investment shall be retained by the Fiscal
Agent in the Cost of Issuance Fund to be used for the purposes of such fund.
Bond Fund. There is established under the Fiscal Agent Agreement as a separate fund to be held
by the Fiscal Agent, the Bond Fund to the credit of which deposits shall be made as required by the Fiscal
Agent Agreement, and within said fund a Special Tax Prepayments Account to the credit of which
deposits will be made as required by the Fiscal Agent Agreement. Moneys in the Bond Fund and the
account therein shall be held by the Fiscal Agent for the benefit of the Owners of the Bonds, will be
disbursed for the payment of the principal of, and interest and any premium on, the Bonds as provided
below, and, pending such disbursement, will be subject to a lien in favor of the Owners of the Bonds.
On each Interest Payment Date, and following any transfers required pursuant to the Fiscal
Agent Agreement in connection with such Interest Payment Date, the Fiscal Agent will withdraw from
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the Bond Fund and pay to the Owners of the Bonds the principal of, and interest and any premium, then
due and payable on the Bonds, including any amounts due on the Bonds by reason of the sinking
payments set forth in the Fiscal Agent Agreement, or a redemption of the Bonds required by the Fiscal
Agent Agreement, such payments to be made in the priority listed in the succeeding paragraph.
Notwithstanding the foregoing, amounts in the Bond Fund as a result of a transfer described in clause (ii)
of the second paragraph under "Special Tax Fund" above will be immediately disbursed by the Fiscal
Agent to pay past due amounts owing on the Bonds. In the event that amounts in the Bond Fund are
insufficient for the purpose set forth in the preceding sentence, the Fiscal Agent shall withdraw from the
Reserve Fund to the extent of any funds therein amounts to cover the amount of such Bond Fund
insufficiency. Amounts so withdrawn from the Reserve Fund shall be deposited by the Fiscal Agent in
the Bond Fund.
If, after the foregoing transfers, there are insufficient funds in the Bond Fund to make the
payments provided for in the Fiscal Agent Agreement, the Fiscal Agent shall apply the available funds
first to the payment of interest on the Bonds, then to the payment of principal due on the Bonds other
than by reason of sinking payments, and then to payment of principal due on the Bonds by reason of
sinking payments. Each such payment shall be made ratably to the Owners of the Bonds based on the
then Outstanding principal amount of the Bonds, if there are insufficient funds to make the
corresponding payment for all of the then Outstanding Bonds. Any sinking payment not made as
scheduled shall be added to the sinking payment to be made on the next sinking payment date.
Moneys in the Special Tax Prepayments Account will be transferred by the Fiscal Agent to the
Bond Fund on the next date for which notice of redemption of Bonds can timely be given by the Fiscal
Agent under the Fiscal Agent Agreement, and will be used (together with any amounts transferred
pursuant to the Reserve Fund provisions of the Fiscal Agent Agreement) to redeem Bonds on the
redemption date selected in accordance with the Fiscal Agent Agreement.
Moneys in the Bond Fund and the Special Tax Prepayments Account will be invested in
accordance with the Fiscal Agent Agreement. Interest earnings and profits resulting from investment of
amounts in the Bond Fund and the Special Tax Prepayments Account will be retained in the Bond Fund
and the Special Tax Prepayments Account, respectively, to be used for the purposes of such fund and
account as applicable.
If at any time the Fiscal Agent fails to pay principal and interest due on any scheduled payment
date for the Bonds, or if funds are withdrawn from the Reserve Fund to pay principal and /or interest on
the Bonds, the Fiscal Agent will notify the Finance Director in writing of such failure or withdrawal, and
(in addition to any notice required under the Continuing Disclosure Agreement) the Finance Director will
notify CDIAC of such failure or withdrawal within 10 days of the failure to make such payment or the
date of such withdrawal.
Reserve Fund. There is established under the Fiscal Agent Agreement as a separate fund to be
held by the Fiscal Agent, the Reserve Fund to the credit of which a deposit will be made on the Closing
Date as required by the Fiscal Agent Agreement, which deposit will be equal to the initial Reserve
Requirement, and deposits will be made as provided in the Fiscal Agent Agreement. Moneys in the
Reserve Fund will be held by the Fiscal Agent for the benefit of the Owners of the Bonds as a reserve for
the payment of principal of, and interest and any premium on, the Bonds and will be subject to a lien in
favor of the Owners of the Bonds.
Except as otherwise provided in the Fiscal Agent Agreement, all amounts deposited in the
Reserve Fund will be used and withdrawn by the Fiscal Agent solely for the purpose of making transfers
to the Bond Fund in the event of any deficiency at any time in the Bond Fund of the amount then
required for payment of the principal of, and interest and any premium on, the Bonds or, in accordance
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with the provisions of the Fiscal Agent Agreement, for the purpose of redeeming Bonds from the Bond
Fund.
Whenever, on the Business Day before any Interest Payment Date, or on any other date at the
request of an Authorized Officer, the amount in the Reserve Fund exceeds the Reserve Requirement, the
Fiscal Agent will provide written notice to the City of the amount of the excess and will transfer an
amount equal to the excess from the Reserve Fund to the Bond Fund to be used for the payment of
interest on the Bonds on the next Interest Payment Date in accordance with the Fiscal Agent Agreement.
Amounts in the Reserve Fund will be withdrawn, at the written request of an Authorized Officer,
for purposes of making payment to the federal government to comply with the Fiscal Agent Agreement.
Whenever the balance in the Reserve Fund exceeds the amount required to redeem or pay the
Outstanding Bonds, including interest accrued to the date of payment or redemption and premium, if
any, due upon redemption, the Fiscal Agent will transfer the amount in the Reserve Fund to the Bond
Fund to be applied, on the next succeeding Interest Payment Date to the payment and redemption, in
accordance with the Fiscal Agent Agreement, of all of the Outstanding Bonds. In the event that the
amount so transferred from the Reserve Fund to the Bond Fund exceeds the amount required to pay and
redeem the Outstanding Bonds, the balance in the Reserve Fund will be transferred to the City to be used
for any lawful purpose under the Act. Notwithstanding the foregoing, no amounts will be transferred
from the Reserve Fund pursuant to the Fiscal Agent Agreement until after (i) the calculation, of any
amounts due to the federal government following payment of the Bonds and withdrawal of any such
amount under the Fiscal Agent Agreement for purposes of making such payment to the federal
government, and (ii) payment of any fees and expenses due to the Fiscal Agent.
Whenever Special Taxes are prepaid and Bonds are to be redeemed with the proceeds of such
prepayment pursuant to the Fiscal Agent Agreement, a proportionate amount in the Reserve Fund
(determined by the Finance Director on the basis of the principal of Bonds to be redeemed and the then
original principal of the Bonds) will be transferred on the Business Day prior to the redemption date by
the Fiscal Agent to the Bond Fund to be applied to the redemption of the Bonds pursuant to the Fiscal
Agent Agreement.
Moneys in the Reserve Fund will be invested in accordance with the Fiscal Agent Agreement.
One Business Day before each Interest Payment Date, interest earnings and profits resulting from said
investment will be transferred by the Fiscal Agent to the Bond Fund to be used by the Fiscal Agent for the
purposes of such fund, but any such transfer will be made only to the extent that following such transfer
the amount on deposit in the Reserve Fund equals the then Reserve Requirement.
Certain Covenants of the City
The City will punctually pay or cause to be paid the principal of and interest and any premium
on, the Bonds when and as due in strict conformity with the terms of the Fiscal Agent Agreement and any
Supplemental Agreement, and it will faithfully observe and perform all of the conditions, covenants and
requirements of the Fiscal Agent Agreement and all Supplemental Agreements and of the Bonds.
The Bonds are limited obligations of the City on behalf of the District and are payable solely from
and secured solely by the Special Tax Revenues and the amounts in the Bond Fund (including the Special
Tax Prepayments Account therein), the Reserve Fund and the Special Tax Fund created under the Fiscal
Agent Agreement.
In order to prevent any accumulation of claims for interest after maturity, the City shall not,
directly or indirectly, extend or consent to the extension of the time for the payment of any claim for
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interest on any of the Bonds and shall not, directly or indirectly, be a party to the approval of any such
arrangement by purchasing or funding said claims for interest or in any other manner. In case any such
claim for interest shall be extended or funded, whether or not with the consent of the City, such claim for
interest so extended or funded shall not be entitled, in case of default under the Fiscal Agent Agreement,
to the benefits of the Fiscal Agent Agreement, except subject to the prior payment in full of the principal
of all of the Bonds then Outstanding and of all claims for interest which shall not have been so extended
or funded.
The City will not encumber, pledge or place any charge or lien upon any of the Special Tax
Revenues or other amounts pledged to the Bonds superior to or on a parity with the pledge and lien
created in the Fiscal Agent Agreement for the benefit of the Bonds, except as permitted by the Fiscal
Agent Agreement.
The City will keep, or cause to be kept, proper books of record and accounts, separate from all
other records and accounts of the City, in which complete and correct entries shall be made of all
transactions relating to the expenditure of amounts disbursed from the Administrative Expense Fund and
to the Special Tax Revenues. Such books of record and accounts shall at all times during City business
hours and following reasonable prior written notice be subject to the inspection of the Fiscal Agent and
the Owners of not less than ten percent (10 %) of the principal amount of the Bonds then Outstanding, or
their representatives duly authorized in writing.
The City will preserve and protect the security of the Bonds and the rights of the Owners, and
will warrant and defend their rights against all claims and demands of all persons. From and after the
delivery of any of the Bonds by the City, the Bonds shall be incontestable by the City.
The City will comply with all applicable provisions of the Act in administering the District,
provided that the City shall have no obligation to advance any of its own funds for any purpose
whatsoever under this Agreement.
The City shall assure that the proceeds of the 2004 Bonds and of the 2013 Bonds are not so used as
to cause the 2004 Bonds or the 2013 Bonds to satisfy the private business tests of section 141(b) of the
Code or the private loan financing test of section 141(c) of the Code.
The City shall not take any action or permit or suffer any action to be taken if the result of the
same would be to cause any of the 2013 Bonds to be "federally guaranteed" within the meaning of section
149(b) of the Code.
The City shall comply with all requirements of the Act so as to assure the timely collection of
Special Tax Revenues, including without limitation, the enforcement of delinquent Special Taxes.
On or about July 1 of each year, the Fiscal Agent shall provide the Finance Director with a notice
stating the amounts then on deposit in the Bond Fund and the Reserve Fund. The receipt of such notice
by the Finance Director shall in no way affect the obligations of the City under the following three
paragraphs. Upon receipt of such notice, the Finance Director shall communicate with the Auditor or
other appropriate official of the County to ascertain the relevant parcels on which the Special Taxes are to
be levied, taking into account any parcel splits during the preceding and then current year. In computing
the amount of Special Taxes to be levied, the City shall take into account funds available in the Bond
Fund and the Special Tax Fund to make the payment of debt service on the Bonds due on the Interest
Payment Dates occurring in the next calendar year, along with any transfers of investment earnings on
amounts in the Reserve Fund pursuant to the Fiscal Agent Agreement to the Bond Fund expected to
occur on such Interest Payment Date.
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The City shall effect the levy of the Special Taxes from time to time during each Fiscal Year in
accordance with the Ordinance and the Rate and Method of Apportionment. Specifically, the City shall
compute the amount of Special Taxes to be so levied each Fiscal Year before the final date on which the
Auditor will accept the transmission of the Special Tax amounts for the parcels within the District for
inclusion on the next secured or unsecured, as applicable, real property tax roll. Upon the completion of
the computation of the amounts of the levy, the City shall prepare or cause to be prepared, and shall
transmit to the Auditor, such data as the Auditor requires to include the levy of the Special Taxes on the
next real property tax roll. The Special Taxes so levied shall be payable and be collected in the same
manner and at the same time and in the same installment as the taxes on property levied on the tax roll
are payable, and have the same priority, become delinquent at the same times and in the same
proportionate amounts and bear the same proportionate penalties and interest after delinquency as do
the general ad valorem taxes levied on the County tax roll.
In the event that the City determines to levy all or a portion of the Special Taxes by means of
direct billing of the property owners within the District, and to the extent permitted by the Ordinance, the
City shall, not less than forty-five (45) days prior to the first Interest Payment Date for which the levy is
being made, send bills to the property owners in the District for Special Taxes necessary to meet the
financial obligations of the District due on the Interest Payment Dates for which the levy is being made,
said bills to specify that the amounts so levied shall be due and payable in two equal installments with
each installment due not less than thirty (30) days prior to the related Interest Payment Date and each
installment shall be delinquent if not paid when due.
In any event, the City shall fix and levy the amount of Special Taxes within the District required
for the timely payment of principal of and interest on any outstanding Bonds becoming due and payable,
including any necessary replenishment or expenditure of the Reserve Fund for the Bonds and an amount
estimated to be sufficient to pay the Administrative Expenses, and shall take into account any
prepayments of Special Taxes theretofore received by the City. The Special Taxes so levied shall not
exceed the maximum amounts as provided in the Rate and Method of Apportionment.
The Finance Director is authorized in the Fiscal Agent Agreement to employ consultants to assist
in computing the levy of the Special Taxes under the Fiscal Agent Agreement and any reconciliation of
amounts levied to amounts received. The fees and expenses of such consultants and the costs and
expenses of the Finance Director (including a charge for City staff time) in conducting its duties under the
Fiscal Agent Agreement shall be an Administrative Expense under the Fiscal Agent Agreement.
The City 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 the Fiscal Agent Agreement, and for the better assuring and confirming unto the Owners
of the rights and benefits provided in the Fiscal Agent Agreement.
The City shall not take, or permit or suffer to be taken by the Fiscal Agent or otherwise, any
action with respect to the proceeds of the 2013 Bonds which, if such action had been reasonably expected
to have been taken, or had been deliberately and intentionally taken, on the date of issuance of the 2013
Bonds would have caused the 2013 Bonds to be "arbitrage bonds' within the meaning of section 148 of
the Code.
The City shall take all actions necessary to assure the exclusion of interest on the 2013 Bonds from
the gross income of the owners of the 2013 Bonds to the same extent as such interest is permitted to be
excluded from gross income under the Code as in effect on the date of issuance of the 2013 Bonds.
Pursuant to Section 53356.1 of the Act, the City, on behalf of the District, covenants in the Fiscal
Agent Agreement with and for the benefit of the Owners of the Bonds that it will determine or cause to be
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determined, no later than August 15 of each year, whether or not any owners of property within the
District are delinquent in the payment of Special Taxes and, if such delinquencies exist, the City, on
behalf of the District, will order and cause to be commenced no later than October 1, and thereafter
diligently prosecute, an action in the superior court to foreclose the lien of any Special Taxes or
installment thereof not paid when due; provided, however, that the City shall not be required to order the
commencement of foreclosure proceedings if (a) the total Special Tax delinquency in the District for such
Fiscal Year is less than 5% of the total Special Tax levied in such Fiscal year, or (b) the amount then on
deposit in the Reserve Fund is equal to the Reserve Requirement. Notwithstanding the foregoing, if the
City determines that any single property owner in the District is delinquent in excess of $5,000 in the
payment of the Special Tax, then the City, on behalf of the District, will diligently institute, prosecute and
pursue foreclosure proceedings against such property owner.
The City Attorney is hereby authorized to employ counsel to conduct any such foreclosure
proceedings. The fees and expenses of any such counsel (including a charge for City staff time) in
conducting foreclosure proceedings shall be an Administrative Expense under the Fiscal Agent
Agreement.
Except as expressly permitted by the Fiscal Agent Agreement, the City shall not issue any
additional bonds secured by (A) a pledge of Special Taxes on a parity with or senior to the pledge thereof
under the Fiscal Agent Agreement; or (B) any amounts in any funds or accounts established under the
Fiscal Agent Agreement.
In determining the yield of the 2013 Bonds to comply with the Fiscal Agent Agreement, the City
will take into account redemption (including premium, if any) in advance of maturity based on the
reasonable expectations of the City, as of the Closing Date, regarding prepayments of Special Taxes and
use of prepayments for redemption of the 2013 Bonds, without regard to whether or not prepayments are
received or 2013 Bonds redeemed.
The City covenants and agrees in the Fiscal Agent Agreement that it will comply with and carry
out all of the provisions of the Continuing Disclosure Agreement. Notwithstanding any other provision
of the Fiscal Agent Agreement, failure of the City to comply with the Continuing Disclosure Agreement
shall not be considered a default on the Bonds or a breach of any other provision of the Fiscal Agent
Agreement; however, at the request of any Participating Underwriter or the holders of at least a majority
aggregate principal amount of Outstanding 2013 Bonds, and in either case upon receipt of satisfactory
indemnity by the Fiscal Agent (which indemnity shall include payment of its fees and expenses,
including attorneys' fees), the Fiscal Agent shall, or in any event the Participating Underwriter or any
2013 Bondholder may, take such actions as may be necessary and appropriate to compel performance by
the City, of its obligations under the Continuing Disclosure Agreement, including seeking mandate or
specific performance by court order.
The City covenants and agrees in the Fiscal Agent Agreement to not consent or conduct
proceedings with respect to a reduction in the maximum Special Taxes that may be levied in the District
below an amount, for any Fiscal Year, equal to 110% of the aggregate of the debt service due on the Bonds
in such Fiscal Year, plus a reasonable estimate of Administrative Expenses for such Fiscal Year. It is
hereby acknowledged that Bondowners are purchasing the Bonds in reliance on the foregoing covenant,
and that said covenant is necessary to assure the full and timely payment of the Bonds.
The following reporting requirements apply to the 2013 Bonds:
(A) Annual Reporting. Not later than October 30 of each calendar year, beginning with
the October 30, 2013, and in each calendar year thereafter until the October 30 following the final
maturity of the Bonds, the City shall cause the following information to be supplied to CDIAC: (i)
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the name of the City; (ii) the full name of the District, (iii) the name, title, and series of the Bond
issue; (iv) any credit rating for the Bonds and the name of the rating agency; (v) the Closing Date
of the Bond issue and the original principal amount of the Bond issue; (vi) the amount of the
Reserve Requirement; (vii) the principal amount of Bonds outstanding; (viii) the balance in the
Reserve Fund; (ix) that there is no capitalized interest account for the Bonds; (x) the number of
parcels in the District that are delinquent with respect to Special Tax payments, the amount that
each parcel is delinquent, the total amount of Special Taxes due on the delinquent parcels, the
length of time that each has been delinquent, when foreclosure was commenced for each
delinquent parcel, the total number of foreclosure parcels for each date specified, and the total
amount of tax due on the foreclosure parcels for each date specified; (xi) that there is no balance
in any improvement fund for the District; (xii) the assessed value of all parcels subject to the
Special Tax to repay the Bonds as shown on the most recent equalized roll, the date of assessed
value reported, and the source of the information; (xiii) the total amount of Special Taxes due, the
total amount of unpaid Special Taxes, and whether or not the Special Taxes are paid under the
County's Teeter Plan (Chapter 6.6 (commencing with Section 54773) of the California
Government Code); (xiv) the reason and the date, if applicable, that the Bonds were retired; and
(xv) contact information for the party providing the foregoing information. The annual reporting
shall be made using such form or forms as may be prescribed by CDIAC.
(B) Other Reporting. If at any time the Fiscal Agent fails to pay principal and interest
due on any scheduled payment date for the Bonds, or if funds are withdrawn from the Reserve
Fund to pay principal and interest on the Bonds, the Fiscal Agent shall notify the City of such
failure or withdrawal in writing. The City shall notify CDIAC and the Original Purchaser of such
failure or withdrawal within 10 days of such failure or withdrawal, and the City shall provide
notice under the Continuing Disclosure Agreement of such event as required thereunder.
(C) Special Tax Reporting. The Finance Director shall file, or cause to be filed, a report
with the City no later than January 1, 2014, and at least once a year thereafter, which annual
report shall contain: (i) the amount of Special Taxes collected and expended with respect to the
District, (ii) the amount of Bond proceeds collected and expended with respect to the District, and
(iii) the status of the Project. It is acknowledged that the Special Tax Fund and the Special Tax
Prepayments Account are the accounts into which Special Taxes collected on the District will be
deposited for purposes of Section 50075.1(c) of the California Government Code, and the funds
and accounts listed in the Fiscal Agent Agreement are the funds and accounts into which Bond
proceeds will be deposited for purposes of Section 53410(c) of the California Government Code,
and the annual report described in the preceding sentence is intended to satisfy the requirements
of Sections 50075.1(4), 50075.3(d) and 53411 of the California Government Code.
(D) Amendment. The reporting requirements of the Fiscal Agent Agreement shall be
amended from time to time, without action by the City or the Fiscal Agent (i) with respect to
subparagraphs (A) and (B) above, to reflect any amendments to Section 53359.5(b) or Section
53359.5(c) of the Act, and (ii) with respect to subparagraph (C) above, to reflect any amendments
to Section 50075.1, 50075.3, 53410 or 53411 of the California Government Code. Notwithstanding
the foregoing, any such amendment shall not, in itself, affect the City's obligations under the
Continuing Disclosure Agreement. The City shall notify the Fiscal Agent in writing of any such
amendments which affect the reporting obligations of the Fiscal Agent under the Fiscal Agent
Agreement.
(E) No Liability. None of the City and its officers, agents and employees (including but
not limited to the Finance Director), or the Fiscal Agent, shall be liable for any inadvertent error
in reporting the information required by the Fiscal Agent Agreement.
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The Finance Director shall provide, or cause to be provided, copies of any reports prepared
pursuant to the above described provisions to any Bondowner upon the written request of a Bondowner
and payment by the person requesting the information of the cost of the City to produce such information
and pay any postage or other delivery cost to provide the same, as determined by the Finance Director.
The term "Bondowner" for purposes of the foregoing shall include any beneficial owner of the Bonds.
The City covenants not to exercise its rights under the Act to waive delinquency and redemption
penalties related to the Special Taxes or to declare Special Tax penalties amnesty program if to do so
would materially and adversely affect the interests of the owners of the Bonds. The City further
covenants not to permit the tender of Bonds in payment of any Special Taxes except upon receipt of a
certificate of an Independent Financial Consultant that to accept such tender will not result in the City
having insufficient Special Tax Revenues to pay the principal of and interest on the Bonds that will
remain Outstanding following such tender.
The City will not bid at a foreclosure sale of property in respect of delinquent Special Taxes
unless it expressly agrees to take the property subject to the lien for Special Taxes imposed by the District
and that the Special Taxes levied on the property are payable while the City owns the property.
Deposit and Investment of Moneys in Funds
Moneys in any fund or account created or established by the Fiscal Agent Agreement and held by
the Fiscal Agent shall be invested by the Fiscal Agent in Permitted Investments, as directed pursuant to
an Officer's Certificate filed with the Fiscal Agent at least two (2) Business Days in advance of the making
of such investments. The Officer's Certificate shall contain a certification to the Fiscal Agent that the
investments being directed are Permitted Investments as required under the Fiscal Agent Agreement. In
the absence of any such Officer's Certificate, the Fiscal Agent shall invest any such moneys in Permitted
Investments described in clause (h) of the definition thereof; provided, however, that any such
investment shall be made by the Fiscal Agent only if, prior to the date on which such investment is to be
made, the Fiscal Agent shall have received an Officer's Certificate specifying a specific money market
fund into which the funds shall be invested and, if no such Officer's Certificate is so received, the Fiscal
Agent shall hold such moneys uninvested.
Moneys in any fund or account created or established by the Fiscal Agent Agreement and held by
the City shall be invested by the City in any lawful investments that the City may make or in any
Permitted Investment, which in any event by their terms mature prior to the date on which such moneys
are required to be paid out under the Fiscal Agent Agreement. Obligations purchased as an investment
of moneys in any fund shall be deemed to be part of such fund or account, subject, however, to the
requirements of the Fiscal Agent Agreement for transfer of interest earnings and profits resulting from
investment of amounts in funds and accounts. Whenever in the Fiscal Agent Agreement any moneys are
required to be transferred by the City to the Fiscal Agent, such transfer may be accomplished by
transferring a like amount of Permitted Investments.
The Fiscal Agent or the City's Finance Director may act as principal or agent in the acquisition or
disposition of any investment, and all investments may be made through the Fiscal Agent's investment
department or that of its affiliates. The Fiscal Agent or its affiliates may act as sponsor, agent manager or
depository with regard to any Permitted Investment. Neither the Fiscal Agent nor the Finance Director
shall incur any liability for losses arising from any investments made pursuant to the applicable
provisions of the Fiscal Agent Agreement.
Except as otherwise provided in the next sentence, the City shall direct or make investments
under the Fiscal Agent Agreement such that all investments of amounts deposited in any fund or account
created by or pursuant to the Fiscal Agent Agreement, or otherwise containing gross proceeds of the
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Bonds (within the meaning of section 148 of the Code) shall be acquired, disposed of, and valued (as of
the date that valuation is required by the Fiscal Agent Agreement or the Code) at Fair Market Value. The
City shall direct or make investments under the Fiscal Agent Agreement such that investments in funds
or accounts (or portions thereof) that are subject to a yield restriction under applicable provisions of the
Code and (unless valuation is undertaken at least annually) investments in the Reserve Fund shall be
valued at their present value (within the meaning of section 148 of the Code). The Fiscal Agent shall have
no duty in connection with the determination of the Fair Market Value of any investment other than to
follow: (A) its normal practices in the purchase, sale and determining the value of Permitted Investments;
and (B) the investment directions of the City.
Investments in any and all funds and accounts may be commingled in a separate fund or funds
for purposes of making, holding and disposing of investments, notwithstanding provisions in the Fiscal
Agent Agreement for transfer to or holding in or to the credit of particular funds or accounts of amounts
received or held by the Fiscal Agent or the Finance Director under the Fiscal Agent Agreement, provided
that the Fiscal Agent or the Finance Director, as applicable, shall at all times account for such investments
strictly in accordance with the funds and accounts to which they are credited and otherwise as provided
in the Fiscal Agent Agreement.
The Fiscal Agent shall sell in a commercially reasonably manner, or present for redemption, any
investment security whenever it shall be necessary to provide moneys to meet any required payment,
transfer, withdrawal or disbursement from the fund or account to which such investment security is
credited and neither the Fiscal Agent nor the Finance Director shall be liable or responsible for any loss
resulting from the acquisition or disposition of such investment security in accordance with the Fiscal
Agent Agreement.
Rebate of Excess Investment Earnings to the United States
The City will take any and all actions necessary to assure compliance with section 148(0 of the
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 2013 Bonds.
The City will direct the Fiscal Agent to withdraw such amounts from the Reserve Fund as
necessary to make any required rebate payments, and pay such amounts to the federal government as
required by the Code and the Regulations. In the event of any shortfall in amounts available to make
such payments, the City shall make such payment from any amounts available in the Administrative
Expense Fund or from any other lawfully available funds of the District. Any fees or expenses incurred
by the City under or pursuant to the foregoing provisions of the Fiscal Agent Agreement are
Administrative Expenses.
In order to provide for the administration of the actions described in the preceding paragraph,
the Finance Director may provide for the employment of independent attorneys, accountants and
consultants compensated on such reasonable basis as the Finance Director may deem appropriate and in
addition, and the Finance Director may rely conclusively upon and be fully protected from all liability in
relying upon the opinions, determinations, calculations and advice of such agents, attorneys and
consultants employed under the Fiscal Agent Agreement. The Fiscal Agent may rely conclusively upon
the City's determinations, calculations and certifications described In the preceding paragraph. The Fiscal
Agent shall have no responsibility to independently make any calculation or determination or to review
the City's calculations.
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Liability of City
The City shall not incur any responsibility in respect of the Bonds or the Fiscal Agent Agreement
other than in connection with the duties or obligations explicitly in the Fiscal Agent Agreement or in the
Bonds assigned to or imposed upon it. The City shall not be liable in connection with the performance of
its duties under the Fiscal Agent Agreement, except for its own negligence or willful default. The City
shall not be bound to ascertain or inquire as to the performance or observance of any of the terms,
conditions covenants or agreements of the Fiscal Agent in the Fiscal Agent Agreement or of any of the
documents executed by the Fiscal Agent in connection with the Bonds, or as to the existence of a default
or event of default thereunder.
In the absence of bad faith, the City, including the Finance Director, may conclusively rely, as to
the truth of the statements and the correctness of the opinions expressed therein, upon certificates or
opinions furnished to the City and conforming to the requirements of the Fiscal Agent Agreement. The
City, including the Finance Director, shall not be liable for any error of judgment made in good faith
unless it shall be proved that it was negligent in ascertaining the pertinent facts.
No provision of the Fiscal Agent Agreement shall require the City to expend or risk its own
general funds or otherwise incur any financial liability (other than with respect to the Special Tax
Revenues) in the performance of any of its obligations under the Fiscal Agent Agreement, or in the
exercise of any of its rights or powers, if it shall have reasonable grounds for believing that repayment of
such funds or adequate indemnity against such risk or liability is not reasonably assured to it.
The City may rely and shall be protected in acting or refraining from acting upon any notice,
resolution, request, consent, order, certificate, report, warrant, bond or other paper or document believed
by it to be genuine and to have been signed or presented by the proper party or proper parties. The City
may consult with counsel, who may be the City Attorney, with regard to legal questions, and the opinion
of such counsel shall be full and complete authorization and protection in respect of any action taken or
suffered by it under the Fiscal Agent Agreement in good faith and in accordance therewith.
The City shall not be bound to recognize any person as the Owner of a Bond unless and until
such Bond is submitted for inspection, if required, and his title thereto satisfactory established, if
disputed.
Whenever in the administration of its duties under the Fiscal Agent Agreement the City shall
deem it necessary or desirable that a matter be proved or established prior to taking or suffering any
action under the Fiscal Agent Agreement, such matter (unless other evidence in respect thereof be
specifically prescribed in the Fiscal Agent Agreement) may, in the absence of willful misconduct on the
part of the City, be deemed to be conclusively proved and established by a certificate of the Fiscal Agent
or other appropriate agent or consultant, and such certificate shall be full warrant to the City for any
action taken or suffered under the provisions of the Fiscal Agent Agreement or any Supplemental
Agreement upon the faith thereof, but in its discretion the City may, in lieu thereof, accept other evidence
of such matter or may require such additional evidence as to it may seem reasonable.
In order to perform its duties and obligations under the Fiscal Agent Agreement, the City and /or
the City's Finance Director may employ such persons or entities as it deems necessary or advisable. The
City shall not be liable for any of the acts or omissions of such persons or entities employed by it in good
faith under the Fiscal Agent Agreement, and shall be entitled to rely, and shall be fully protected in doing
so, upon the opinions, calculations, determinations and directions of such persons or entities.
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Fiscal Agent
The Fiscal Agent undertakes to perform such duties, and only such duties, as are specifically set
forth in the Fiscal Agent Agreement, and no implied covenants or obligations shall be read into the Fiscal
Agent Agreement against the Fiscal Agent.
Any company or association into which the Fiscal Agent may be merged or converted or with
which it may be consolidated or any company or association resulting from any merger, conversion or
consolidation to which it shall be a party or any company or association to which the Fiscal Agent may
sell or transfer all or substantially all of its corporate trust business, provided such company or
association shall be eligible under the following paragraph of this Section, shall be the successor to such
Fiscal Agent without the execution or filing of any paper or any further act, anything in the Fiscal Agent
Agreement to the contrary notwithstanding. The Fiscal Agent shall give the Finance Director written
notice of any such succession under the Fiscal Agent Agreement.
The City may remove the Fiscal Agent initially appointed, and any successor thereto, and may
appoint a successor or successors thereto, but any such successor shall be a bank, association or trust
company having a combined capital (exclusive of borrowed capital) and surplus of at least Fifty Million
Dollars ($50,000,000), and subject to supervision or examination by federal or state authority. If such
bank, association or trust company publishes a report of condition at least annually, pursuant to law or to
the requirements of any supervising or examining authority above referred to, then for the purposes of
the Fiscal Agent Agreement, combined capital and surplus of such bank, association or trust company
shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition
so published.
The Fiscal Agent may at any time resign by giving written notice to the City and by giving to the
Owners notice by mail of such resignation. Upon receiving notice of such resignation, the City shall
promptly appoint a successor Fiscal Agent by an instrument in writing. Any resignation or removal of
the Fiscal Agent shall become effective only upon acceptance of appointment by the successor Fiscal
Agent. Upon such acceptance, the successor Fiscal Agent shall be vested with all rights and powers of its
predecessor under the Fiscal Agent Agreement without any further act.
If no appointment of a successor Fiscal Agent shall be made pursuant to the foregoing provisions
of the Fiscal Agent Agreement within forty-five (45) days after the Fiscal Agent shall have given to the
City written notice or after a vacancy in the office of the Fiscal Agent shall have occurred by reason of its
inability to act, the Fiscal Agent or any Bondowner may apply to any court of competent jurisdiction to
appoint a successor Fiscal Agent. Said court may thereupon, after such notice, if any, as such court may
deem proper, appoint a successor Fiscal Agent.
If, by reason of the judgment of any court, or reasonable agency, the Fiscal Agent is rendered
unable to perform its duties under the Fiscal Agent Agreement, all such duties and all of the rights and
powers of the Fiscal Agent under the Fiscal Agent Agreement shall be assumed by and vest in the
Finance Director for the benefit of the Owners. The City covenants for the direct benefit of the Owners
that its Finance Director in such case shall be vested with all of the rights and powers of the Fiscal Agent
under the Fiscal Agent Agreement, and shall assume all of the responsibilities and perform all of the
duties of the Fiscal Agent under the Fiscal Agent Agreement, in trust for the benefit of the Owners of the
Bonds. In such event, the Finance Director may designate a successor Fiscal Agent qualified to act as
Fiscal Agent under the Fiscal Agent Agreement.
The recitals of facts, covenants and agreements in the Fiscal Agent Agreement and in the Bonds
contained shall be taken as statements, covenants and agreements of the City, and the Fiscal Agent
assumes no responsibility for the correctness of the same, or makes any representations as to the validity
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or sufficiency of the Fiscal Agent Agreement or of the Bonds, or shall incur any responsibility in respect
thereof, other than in connection with the duties or obligations in the Fiscal Agent Agreement or in the
Bonds assigned to or imposed upon it. The Fiscal Agent shall not be liable in connection with the
performance of its duties under the Fiscal Agent Agreement, except for its own negligence or willful
default. The Fiscal Agent assumes no responsibility or liability for any information, statement or recital
in any offering memorandum or other disclosure material prepared or distributed with respect to the
issuance of the Bonds.
In the absence of bad faith, the Fiscal Agent may conclusively rely, as to the truth of the
statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished
to the Fiscal Agent and conforming to the requirements of the Fiscal Agent Agreement; but in the case of
any such certificates or opinions by which any provisions of the Fiscal Agent Agreement are specifically
required to be furnished to the Fiscal Agent, the Fiscal Agent shall be under a duty to examine the same
to determine whether or not they conform to the requirements of the Fiscal Agent Agreement. Except as
provided above in this paragraph, Fiscal Agent shall be protected and shall incur no liability in acting or
proceeding, or in not acting or not proceeding, in good faith, reasonably and in accordance with the terms
of the Fiscal Agent Agreement, upon any resolution, order, notice, request, requisition, Officer's
Certificate, consent or waiver, certificate, statement, affidavit, or other paper or document which it shall
in good faith reasonably believe to be genuine and to have been adopted or signed by the proper person
or to have been prepared and furnished pursuant to any provision of the Fiscal Agent Agreement, and
the Fiscal Agent shall not be under any duty to make any investigation or inquiry as to any statements
contained or matters referred to in any such instrument.
The Fiscal Agent shall not be liable for any error of judgment made in good faith by a responsible
officer unless it shall be proved that the Fiscal Agent was negligent in ascertaining the pertinent facts.
No provision of the Fiscal Agent Agreement shall require the Fiscal Agent to expend or risk its
own funds or otherwise incur any financial liability in the performance of any of its duties under the
Fiscal Agent Agreement, or in the exercise of any of its rights or powers.
The Fiscal Agent shall be under no obligation to exercise any of the rights or powers vested in it
by the Fiscal Agent Agreement at the request or direction of any of the Owners pursuant to the Fiscal
Agent Agreement unless such Owners shall have offered to the Fiscal Agent security or indemnity
satisfactory to it against the fees, expenses and liabilities (including reasonable attorney's fees) which
might be incurred by it in compliance with such request or direction.
The Fiscal Agent may become the owner of the Bonds with the same rights it would have if it
were not the Fiscal Agent.
The Fiscal Agent shall have no duty or obligation whatsoever to enforce the collection of Special
Taxes or other funds to be deposited with it under the Fiscal Agent Agreement, or as to the correctness of
any amounts received, and its liability shall be limited to the proper accounting for such funds as it shall
actually receive.
The Fiscal Agent may consult with counsel, who may be counsel of or to the City, with regard to
legal questions, and the opinion of such counsel shall be full and complete authorization and protection
in respect of any action taken or suffered by it under the Fiscal Agent Agreement in good faith and in
accordance therewith.
In order to perform its duties and obligations under the Fiscal Agent Agreement, the Fiscal Agent
may employ such persons or entities as it deems necessary or advisable. The Fiscal Agent shall not be
liable for any of the acts or omissions of such persons or entities employed by it in good faith under the
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Fiscal Agent Agreement, and shall be entitled to rely, and shall be fully protected in doing so, upon the
opinions, calculations, determinations and directions of such persons or entities.
The Fiscal Agent agrees to accept and act upon instructions or directions pursuant to the Fiscal
Agent Agreement sent by unsecured e-mail, facsimile transmission or other similar unsecured electronic
methods; provided, however, that the Fiscal Agent shall have received an incumbency certificate listing
persons designated to give such instructions or directions and containing specimen signatures of such
designated persons, which such incumbency certificate shall be amended and replaced whenever a
person is to be added or deleted from the listing. If the City elects to give the Fiscal Agent e-mail or
facsimile instructions (or instructions by a similar electronic method) and the Fiscal Agent in its discretion
elects to act upon such instructions, the Fiscal Agent's reasonable understanding of such instructions
shall be deemed controlling. The Fiscal Agent shall not be liable for any losses, costs or expenses arising
directly or indirectly from the Fiscal Agent's reliance upon and compliance with such instructions
notwithstanding such instructions conflict or are inconsistent with a subsequent written instruction. The
City agrees to assume all risks arising out of the use of such electronic methods to submit instructions and
directions to the Fiscal Agent, including without limitation the risk of interception and misuse by third
parties.
The Fiscal Agent shall not be considered in breach of or in default in its obligations under the
Fiscal Agent Agreement 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, 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,
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 Fiscal Agent.
The Fiscal Agent shall provide to the City such information relating to the Bonds and the funds
and accounts maintained by the Fiscal Agent under the Fiscal Agent Agreement as the City shall
reasonably request, including but not limited to quarterly statements reporting funds held and
transactions by the Fiscal Agent.
The Fiscal Agent will keep, or cause to be kept, proper books of record and accounts, separate
from all other records and accounts of the Fiscal Agent, in which complete and correct entries shall be
made of all transactions relating to the expenditure of amounts disbursed from the Special Tax Fund, the
Bond Fund, the Special Tax Prepayments Account, the Reserve Fund, the Administrative Expense Fund
and the Costs of Issuance Fund. Such books of record and accounts shall upon reasonable prior notice at
all times during business hours be subject to the inspection of the City and the Owners of not less than
ten percent (10 %) of the principal amount of the Bonds then Outstanding, or their representatives duly
authorized in writing.
The Fiscal Agent may rely and shall be protected in acting or refraining from acting upon any
notice, resolution, request, requisition, Officer's Certificate, consent, order, certificate, report, warrant,
Bond or other paper or document believed by it to be genuine and to have been signed or presented by
the proper party or proper parties.
The Fiscal Agent shall not be bound to recognize any person as the Owner of a Bond unless and
until such Bond is submitted for inspection, if required, and his title thereto satisfactorily established, if
disputed.
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Whenever in the administration of its duties under the Fiscal Agent Agreement the Fiscal Agent
shall deem it necessary or desirable that a matter be proved or established prior to taking or suffering any
action under the Fiscal Agent Agreement, such matter (unless other evidence in respect thereof be
specifically prescribed in the Fiscal Agent Agreement) may, in the absence of willful misconduct on the
part of the Fiscal Agent, be deemed to be conclusively proved and established by a certificate of the City,
and such certificate shall be full warrant to the Fiscal Agent for any action taken or suffered under the
provisions of the Fiscal Agent Agreement or any Supplemental Agreement upon the faith thereof, but in
its discretion the Fiscal Agent may, in lieu thereof, accept other evidence of such matter or may require
such additional evidence as to it may seem reasonable.
Amendment of the Fiscal Agent Agreement
The Fiscal Agent Agreement and the rights and obligations of the City and of the Owners of the
Bonds may be modified or amended at any time by a Supplemental Agreement pursuant to the
affirmative vote at a meeting of Owners, or with the written consent without a meeting, of the Owners of
at least sixty percent (60 %) in aggregate principal amount of the Bonds then Outstanding, exclusive of
Bonds disqualified as provided in the Fiscal Agent Agreement. No such modification or amendment
shall (i) extend the maturity of any Bond or reduce the interest rate thereon, or otherwise alter or impair
the obligation of the City to pay the principal of, and the interest and any premium on, any Bond, without
the express consent of the Owner of such Bond, or (ii) permit the creation by the City of any pledge or
lien upon the Special Taxes superior to or on a parity with the pledge and lien created for the benefit of
the Bonds (except as otherwise permitted by the Act, the laws of the State of California or the Fiscal Agent
Agreement), or reduce the percentage of Bonds required for the amendment of the Fiscal Agent
Agreement. Any such amendment may not modify any of the rights or obligations of the Fiscal Agent
without its written consent.
The Fiscal Agent Agreement and the rights and obligations of the City and of the Owners may
also be modified or amended at any time by a Supplemental Agreement, without the consent of any
Owners, only to the extent permitted by law and only for any one or more of the following purposes:
(A) to add to the covenants and agreements of the City in the Fiscal Agent Agreement
contained, other covenants and agreements thereafter to be observed, or to limit or surrender any
right or power reserved to or conferred upon the City in the Fiscal Agent Agreement;
(B) to make modifications not adversely affecting any outstanding series of Bonds of the
City in any material respect;
(C) to make such provisions for the purpose of curing any ambiguity, or of curing,
correcting or supplementing any defective provision contained in the Fiscal Agent Agreement, or
in regard to questions arising under the Fiscal Agent Agreement, as the City may deem necessary
or desirable and not inconsistent with the Fiscal Agent Agreement, and which shall not adversely
affect the rights of the Owners of the Bonds;
(D) to make such additions, deletions or modifications as may be necessary or desirable
to assure the exclusion from gross income, for purposes of federal income taxation, of interest on
the 2013 Bonds; and
(E) in connection with the issuance of Parity Bonds under and pursuant to the Fiscal
Agent Agreement.
The Fiscal Agent may in its discretion, but shall not be obligated to, enter into any such
Supplemental Agreement authorized by the Fiscal Agent Agreement which materially adversely affects
C -23
the Fiscal Agent's own rights, duties or immunities under the Fiscal Agent Agreement or otherwise with
respect to the Bonds or any agreements related thereto. The Fiscal Agent may request and shall be fully
protected in relying upon, an opinion of Bond Counsel that any proposed Supplemental Agreement
complies with the applicable requirements of the Fiscal Agent Agreement.
Discharge of Agreement
The City shall have the option to pay and discharge the entire indebtedness on all or any portion
of the Bonds Outstanding in any one or more of the following ways:
(A) by well and truly paying or causing to be paid the principal of, and interest and any
premium on, such Bonds Outstanding, as and when the same become due and payable;
(B) by depositing with the Fiscal Agent, in trust, at or before maturity, money which,
together with the amounts then on deposit in the Bond Fund and the Reserve Fund is fully
sufficient to pay such Bonds Outstanding, including all principal, interest and redemption
premiums; or
(C) by irrevocably depositing with the Fiscal Agent, in trust, cash and Federal Securities
in such amount as the City shall determine as confirmed by Bond Counsel, an Independent
Financial Consultant or an independent certified public accountant will, together with the
interest to accrue thereon and moneys then on deposit in the Bond Fund and the Reserve Fund,
be fully sufficient to pay and discharge the indebtedness on such Bonds (including all principal,
interest and redemption premiums) at or before their respective maturity dates.
If the City shall have taken any of the actions specified in (A), (B) or (C) above, and if such Bonds
are to be redeemed prior to the maturity thereof notice of such redemption shall have been given as in the
Fiscal Agent Agreement provided or provision satisfactory to the Fiscal Agent shall have been made for
the giving of such notice, then, at the election of the City, and notwithstanding that any Bonds shall not
have been surrendered for payment, the pledge of the Special Taxes and other funds provided for in the
Fiscal Agent Agreement and all other obligations of the City under the Fiscal Agent Agreement with
respect to such Bonds Outstanding shall cease and terminate. Notice of such election shall be filed with
the Fiscal Agent. Notwithstanding the foregoing, the obligations of the City to pay or cause to be paid to
the Owners of the Bonds not so surrendered and paid all sums due thereon, to pay all amounts owing to
the Fiscal Agent pursuant to the Fiscal Agent Agreement, and otherwise to assure that no action is taken
or failed to be taken if such action or failure adversely affects the exclusion of interest on the Bonds from
gross income for federal income tax purposes, shall continue in any event.
Upon compliance by the City with the foregoing with respect to all Bonds Outstanding, any
funds held by the Fiscal Agent after payment of all fees and expenses of the Fiscal Agent, which are not
required for the purposes of the preceding paragraph, shall be paid over to the City and any Special
Taxes thereafter received by the City shall not be remitted to the Fiscal Agent but shall be retained by the
City to be used for any purpose permitted under the Act.
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APPENDIX D
FORM OF OPINION OF BOND COUNSEL
June — 2013
City Council
City of Tustin, California
300 Centennial Way
Tustin, California 92780
OPINION: $ City of Tustin Community Facilities District No. 04 -1 (Tustin
Legacy /John Laing Homes) 2013 Special Tax Refunding Bonds
Members of the City Council:
We have acted as bond counsel to the City of Tustin, California (the "City") in connection with
the issuance by the City, for and on behalf of the City of Tustin Community Facilities District No. 04 -1
(Tustin Legacy /John Laing Homes) (the "District "), of its $ City of Tustin Community Facilities
District No. 04 -1 (Tustin Legacy /John Laing Homes) 2013 Special Tax Refunding Bonds (the 'Bonds "),
pursuant to the Mello -Roos Community Facilities Act of 1982, as amended, constituting Sections 53311 et
seq. of the California Government Code (the "Act "), a Fiscal Agent Agreement, dated as of June 1, 2013
(the "Fiscal Agent Agreement'), by and between the City, for and on behalf of the District, and U.S. Bank
National Association, as fiscal agent, and Resolution No. 13 -_ adopted by the City Council of the City on
May 21, 2013 (the "Resolution ").
In connection with this opinion, we have examined the law and such certified proceedings and
other documents as we deem necessary to render this opinion. As to questions of fact material to our
opinion, we have relied upon representations of the City contained in the Resolution and in the Fiscal
Agent Agreement, 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, as follows:
1. The City is a municipal corporation and general law city organized and existing under the laws
of the State of California, with the power to enter into the Fiscal Agent Agreement and perform the
agreements on its part contained therein and issue the Bonds.
2. The Fiscal Agent Agreement has been duly entered into by the City and constitutes a valid and
binding obligation of the City enforceable upon the City in accordance with its terms.
3. Pursuant to the Act, the Fiscal Agent Agreement creates a valid lien on the funds pledged by
the Fiscal Agent Agreement for the security of the Bonds, on a parity with the pledge thereof with respect
to any Parity Bonds that may be issued under, and as such term is defined in, the Fiscal Agent
Agreement.
D -1
4. The Bonds have been duly authorized, executed and delivered by the City and are valid
and binding limited obligations of the City for the District, payable solely from the sources provided
therefor in the Fiscal Agent Agreement.
5. Subject to the City's compliance with certain covenants, interest on the Bonds (i) is
excludable from gross income of the owners thereof for federal income tax purposes, and (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, but is taken into account in
computing an adjustment used in determining the federal alternative minimum tax for certain
corporations. Failure by the City to comply with certain 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, the Resolution and the
Fiscal Agent Agreement may be 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 City and others with respect
to certain material facts. Our opinion represents our legal judgment based upon such review of the law
and 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,
D -2
APPENDIX E
FORM OF CONTINUING DISCLOSURE AGREEMENT
THIS CONTINUING DISCLOSURE AGREEMENT (the "Disclosure Agreement "), dated as of
June 1, 2013, is by and between WILLDAN FINANCIAL SERVICES, as dissemination agent (the
"Dissemination Agent "), and the CITY OF TUSTIN, CALIFORNIA, a municipal corporation and general
law city duly organized and existing under the laws of the State of California (the "City ").
RECITALS:
WHEREAS, the City has issued, for and on behalf of the City of Tustin Community Facilities
District No. 04 -1 (Tustin Legacy /John Laing Homes) (the "District "), its City of Tustin Community
Facilities District No. 04 -1 (Tustin Legacy /John Laing Homes), 2013 Special Tax Refunding Bonds (the
"Bonds ") in the initial principal amount of $ and
WHEREAS, the Bonds are being issued pursuant to a Fiscal Agent Agreement, dated as of June 1,
2013 (the "Fiscal Agent Agreement "), by and between U.S. Bank National Association, as fiscal agent (the
"Fiscal Agent ") and the City, for and on behalf of the District, and
WHEREAS, this Disclosure Agreement is being executed and delivered by the City and the
Dissemination Agent for the benefit of the holders and beneficial owners of the Bonds and in order to
assist the underwriter of the Bonds in complying with S.E.C. Rule 15c2- 12(b)(5).
AGREEMENT:
NOW, THEREFORE, for and in consideration of the premises and mutual covenants herein
contained, and for other consideration the receipt and sufficiency of which is hereby acknowledged, the
parties hereto agree as follows:
Section 1. Definitions. In addition to the definitions of capitalized terms set forth in Section 1.03 of
the Fiscal Agent Agreement, which apply to any capitalized term used in this Disclosure Agreement
unless otherwise defined in this Section or in the Recitals above, the following capitalized terms shall
have the following meanings when used in this Disclosure Agreement:
"Annual Report" means any Annual Report provided by the City pursuant to, and as described in,
Sections 3 and 4 of this Disclosure Agreement.
"Beneficial Owner" shall mean any person who (a) has the power, directly or indirectly, to vote or
consent with respect to, or to dispose of ownership of, any Bond (including persons holding any Bonds
through nominees, depositories or other intermediaries), or (b) is treated as the owner of any Bond for
federal income tax purposes.
"Disclosure Representative" means the Finance Director or her designee, or such other officer or
employee as the City shall designate as the Disclosure Representative hereunder in writing to the
Dissemination Agent from time to time.
"Dissemination Agent" means Willdan Financial Services, acting in its capacity as Dissemination
Agent hereunder, or any successor Dissemination Agent designated in writing by the City and which has
filed with the City a written acceptance of such designation.
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"EMMA" or "Electronic Municipal Market Access' means the centralized on -line repository for
documents to be 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" means any of the events listed in Section 5(a) or 5(b) of this Disclosure Agreement.
"MSRB" means the Municipal Securities Rulemaking Board, which has been designated by the
Securities and Exchange Commission as the sole repository of disclosure information for purposes of the
Rule, or any other repository of disclosure information which may be designated by the Securities and
Exchange Commission as such for purposes of the Rule in the future.
"Official Statement" means the Official Statement, dated 2013, relating to the Bonds.
"Participating Undenariter" means the original underwriter of the Bonds required to comply with
the Rule in connection with offering of the Bonds.
"Rule" means Rule 15c2- 12(b)(5) adopted by the Securities and Exchange Commission under the
Securities Exchange Act of 1934, as the same may be amended from time to time.
Section 2. Purpose of the Disclosure Agreement. This Disclosure Agreement is being executed
and delivered by the City and the Dissemination Agent for the benefit of the owners and Beneficial
Owners of the Bonds and in order to assist the Participating Underwriter in complying with the Rule.
Section 3. Provision of Annual Reports.
(a) Delivenj of Annual Report. The City shall, or shall cause the Dissemination Agent to, not later
than nine months after the end of the City's fiscal year (which currently ends on June 30), commencing
with the report for the 2012 -13 Fiscal Year, which is due not later than March 31, 2014, 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 Disclosure Agreement. The Annual Report may be 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 Agreement; provided that the audited financial
statements of the City may be 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 City's fiscal year changes, it shall give notice of such change in the
same manner as for a Listed Event under Section 5(c), and subsequent Annual Report filings shall be
made no later than six months after the end of such new fiscal year end.
(c) Delivery of Annual Report to Dissemination Agent. Not later than fifteen (15) Business Days prior
to the date specified in subsection (a) (or, if applicable, subsection (b) of this Section 3 for providing the
Annual Report to EMMA), the City shall provide the Annual Report to the Dissemination Agent (if other
than the City). If by such date, the Dissemination Agent has not received a copy of the Annual Report, the
Dissemination Agent shall notify the City.
(d) Report of Non - Compliance. If the City is the Dissemination Agent and is unable to file an
Annual Report by the date required in subsection (a) (or, if applicable, subsection (b)) of this Section 3, the
City shall send a notice to EMMA substantially in the form attached hereto as Exhibit A. If the City is not
the Dissemination Agent and is unable to provide an Annual Report to the Dissemination Agent by the
date required in subsection (c) of this Section 3, the Dissemination Agent shall send a notice to EMMA in
substantially the form attached hereto as Exhibit A.
E -2
(e) Annual Compliance Certification. The Dissemination Agent shall, if the Dissemination Agent is
other than the City, file a report with the City certifying that the Annual Report has been filed with
EMMA pursuant to Section 3 of this Disclosure Agreement, stating the date it was so provided and filed.
Section 4. Content of Annual Reports. The Annual Report shall contain or incorporate by
reference the following:
(a) Financial Statements. Audited financial statements of the City for the most recently completed
fiscal year, prepared in accordance generally accepted accounting principles as promulgated to apply to
governmental entities from time to time by the Governmental Accounting Standards Board, together with
the following statement:
THE CITY'S ANNUAL FINANCIAL STATEMENT IS PROVIDED SOLELY TO
COMPLY WITH THE SECURITIES EXCHANGE COMMISSION STAFF'S INTERPRETATION
OF RULE 15C2 -12 UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. NO
FUNDS OR ASSETS OF THE CITY ARE REQUIRED TO BE USED TO PAY DEBT SERVICE ON
THE BONDS. INVESTORS SHOULD NOT RELY ON THE FINANCIAL CONDITION OF THE
CITY IN EVALUATING WHETHER TO BUY, HOLD OR SELL THE BONDS.
If the City's audited financial statements are not available by the time the Annual Report is
required to be filed pursuant to Section 3(a), the audited financial statements shall be filed in the same
manner as the Annual Report when they become available.
(b) Other Annual Information. To the extent not included in the audited final statements of the
City, the Annual Report shall also include the following information:
(i) The most recent annual information required to be provided to the California Debt
and Investment Advisory Commission pursuant to Section 5.19 of the Fiscal Agent Agreement.
(ii) The aggregate levy of the Special Taxes (as defined in the Fiscal Agent Agreement),
for the most recent fiscal year.
(iii) Any amendments or changes to the Rate and Method of Apportionment of the
Special Taxes since the last Annual Report.
(iv) The status of foreclosure proceedings in respect of delinquent Special Taxes, and a
summary of the results of any foreclosure, since the last Annual Report.
(v) A land ownership summary table substantially in the form of Table 1 in the Official
Statement.
(c) Cross References. 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 City or related public entities, which
are available to the public on EMMA. The City shall clearly identify each such other document so
included by reference.
If the document included by reference is a final official statement, it must be available from
EMMA.
(d) Further Information. In addition to any of the information expressly required to be provided
under paragraph (b) of this Section 4, the City shall provide such further information, if any, as may be
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necessary to make the specifically required statements, in the light of the circumstances under which they
are made, not misleading.
Section 5. Reporting of Listed Events.
(a) Reportable Events. The City shall, or shall cause the Dissemination (if not the City) to, give
notice of the occurrence of any of the following events with respect to the Bonds:
(1) Principal and interest payment delinquencies.
(2) Unscheduled draws on debt service reserves reflecting financial difficulties.
(3) Unscheduled draws on credit enhancements reflecting financial difficulties.
(4) Substitution of credit or liquidity providers, or their failure to perform.
(5) Defeasances.
(6) Rating changes.
(7) Tender offers.
(8) Bankruptcy, insolvency, receivership or similar event of the obligated person.
(9) Adverse tax opinions, the issuance by the Internal Revenue Service of proposed
or final determinations of taxability, Notices of Proposed Issue (IRS Form 5701 -TEB) or other
material notices or determinations with respect to the tax status of the security, or other material
events affecting the tax status of the security.
Note: For the purposes of the event identified in subparagraph (8), the event is considered to
occur when any of the following occur: the appointment of a receiver, fiscal agent or similar
officer for an obligated person in a proceeding under the U.S. Bankruptcy Code or in any other
proceeding under state or federal law in which a court or governmental authority has assumed
jurisdiction over substantially all of the assets or business of the obligated person, or if such
jurisdiction has been assumed by leaving the existing governmental body and officials or officers
in possession but subject to the supervision and orders of a court or governmental authority, or
the entry of an order confirming a plan of reorganization, arrangement or liquidation by a court
or governmental authority having supervision or jurisdiction over substantially all of the assets
or business of the obligated person.
(b) Material Reportable Events. The City shall give, or cause to be given, notice of the occurrence of
any of the following events with respect to the Bonds, if material:
(1) Non - payment related defaults.
(2) Modifications to rights of security holders.
(3) Bond calls.
(4) The release, substitution, or sale of property securing repayment of the securities.
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(5) The consummation of a merger, consolidation, or acquisition involving an
obligated person or the sale of all or substantially all of the assets of the obligated person, other
than in the ordinary course of business, the entry into a definitive agreement to undertake such
an action or the termination of a definitive agreement relating to any such actions, other than
pursuant to its terms.
(6) Appointment of a successor or additional trustee, or the change of name of a
trustee.
(c) Tine to Disclose. The City shall, or shall cause the Dissemination Agent (if not the City) to, file a
notice of such occurrence with EMMA, in an electronic format as prescribed by the MSRB, in a timely
manner not in excess of 10 business days after the occurrence of any Listed Event. Notwithstanding the
foregoing, notice of Listed Events described in subsections (a)(5) and (b)(3) above need not be given
under this subsection any earlier than the notice (if any) of the underlying event is given to owners of
affected Bonds under the Fiscal Agent Agreement.
Section 6. Identifying hrformation for Filings with EMMA. All documents provided to EMMA
under this Disclosure Agreement shall be accompanied by identifying information as prescribed by the
MSRB.
Section 7. Termination of Reporting Obligation. The City's obligations under this Disclosure
Agreement 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 City shall give notice of such
termination in the same manner as for a Listed Event under Section 5(c).
Section S. Dissemination Agent.
(a) Appointment of Dissemination Agent. The City may, from time to time, appoint or engage a
Dissemination Agent to assist it in carrying out its obligations under this Disclosure Agreement and may
discharge any such agent, with or without appointing a successor Dissemination Agent. The initial
Dissemination Agent shall be Willdan Financial Services.
If the Dissemination Agent is not the City, the Dissemination Agent shall not be responsible in
any manner for the content of any notice or report prepared by the City pursuant to this Disclosure
Agreement. It is understood and agreed that any information that the Dissemination Agent may be
instructed to file with EMMA shall be prepared and provided to it by the City. The Dissemination Agent
has undertaken no responsibility with respect to the content of any reports, notices or disclosures
provided to it under this Disclosure Agreement and has no liability to any person, including any Bond
owner, with respect to any such reports, notices or disclosures. The fact that the Dissemination Agent or
any affiliate thereof may have any fiduciary or banking relationship with the City shall not be construed
to mean that the Dissemination Agent has actual knowledge of any event or condition, except as may be
provided by written notice from the City .
(b) Compensation of Dissemination Agent. The Dissemination Agent shall be paid compensation by
the City for its services provided hereunder as agreed to between the Dissemination Agent and the City
from time to time and all expenses, legal fees and expenses 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 City, owners of the Bonds or Beneficial Owners, or
any other party. The Dissemination Agent may rely, and shall be protected in acting or refraining from
acting, upon any direction from the City or an opinion of nationally recognized bond counsel. The
Dissemination Agent may at any time resign by giving written notice of such resignation to the City. The
Dissemination Agent shall not be liable hereunder except for its negligence or willful misconduct.
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(c) Responsibilities of Dissemination Agent. In addition of the filing obligations of the Dissemination
Agent set forth in Sections 3(e) and 5, the Dissemination Agent shall be obligated, and hereby agrees, to
provide a request to the City to compile the information required for its Annual Report at least 30 days
prior to the date such information is to be provided to the Dissemination Agent pursuant to subsection (c)
of Section 3. The failure to provide or receive any such request shall not affect the obligations of the City
under Section 3.
Section 9. Amendment; Waiver. Notwithstanding any other provision of this Disclosure
Agreement, the City may amend this Disclosure Agreement (and the Dissemination Agent shall agree to
any amendment so requested by the City that does not impose any greater duties or risk of liability on the
Dissemination Agent), and any provision of this Disclosure Agreement may be waived, provided that all
of 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) or (b), 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.
(c) Consent of Holders; Non - impairment Opinion. The amendment or waiver either (i) is
approved by the Bond owners in the same manner as provided in the Fiscal Agent Agreement for
amendments to the Fiscal Agent Agreement with the consent of Bond owners, or (ii) does not, in
the opinion of nationally recognized bond counsel, materially impair the interests of the Bond
owners or Beneficial Owners.
If this Disclosure Agreement is amended or any provision of this Disclosure Agreement is
waived, the City 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 City. 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(c), 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 Agreement shall be deemed to
prevent the City from disseminating any other information, using the means of dissemination set forth in
this Disclosure Agreement or any other means of communication, or including any other information in
any Annual Report or notice of occurrence of a Listed Event, in addition to that which is required by this
Disclosure Agreement. If the City chooses to include any information in any Annual Report or notice of
occurrence of a Listed Event in addition to that which is specifically required by this Disclosure
Agreement, the City shall have no obligation under this Disclosure Agreement to update such
information or include it in any future Annual Report or notice of occurrence of a Listed Event.
Section 11. Default. In the event of a failure of the City to comply with any provision of this
Disclosure Agreement, any Bond owner or Beneficial Owner, or the Fiscal Agent or the Participating
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Underwriter, may take such actions as may be necessary and appropriate, including seeking mandate or
specific performance by court order, to cause the City to comply with its obligations under this Disclosure
Agreement. The sole remedy under this Disclosure Agreement in the event of any failure of the City to
comply with this Disclosure Agreement shall be an action to compel performance.
Section 12. Beneficiaries. This Disclosure Agreement shall inure solely to the benefit of the City,
the Fiscal Agent, the Dissemination Agent, the Participating Underwriter and holders and Beneficial
Owners from time to time of the Bonds, and shall create no rights in any other person or entity.
Section 13. Counterparts. This Disclosure Agreement may be executed in several counterparts,
each of which shall be an original and all of which shall constitute but one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have executed this Disclosure Agreement as of the
date first above written.
CITY OF TUSTIN, CALIFORNIA
M
Jeffrey C. Parker,
City Manager
WILLDAN FINANCIAL SERVICES, as
Dissemination Agent
By
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Authorized Officer
EXHIBIT A
NOTICE OF FAILURE TO FILE ANNUAL REPORT
Name of Obligor: City of Tustin, California
Name of Bond Issue: $ City of Tustin Community Facilities District No. 04 -1 (Tustin
Legacy /John Laing Homes), 2013 Special Tax Refunding Bonds
Date of Issuance: June . 2013
NOTICE IS HEREBY GIVEN that the Obligor has not provided an Annual Report with respect to
the above -named Bonds as required by Section 5.17 of the Fiscal Agent Agreement, dated as of June 1,
2013, between the Obligor and U.S. Bank National Association, as Fiscal Agent. The Obligor anticipates
that the Annual Report will be filed by
Date:
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WILLDAN FINANCIAL SERVICES, as
Dissemination Agent on behalf of the City of
Tustin, California
APPENDIX F
DTC AND THE BOOK -ENTRY ONLY SYSTEM
The information in this Appendix F has been provided by The Depository Trust Company ( "DTC "), New
York, NY, for use in securities offering documents, and the City does not take responsibilihill for the accuracy or
completeness thereof. The City cannot and does not give any assurances that DTC, DTC Participants or Indirect
Participants will distribute the Beneficial Owners either (a) payments of interest, principal or premium, if any, with
respect to the 2013 Bonds or (b) certificates representing ownership interest in or other confirnmtion of ownership
interest in the 2013 Bonds, or that they will so do on a timely basis or that DTC, DTC Direct Participants or DTC
Indirect Participants mill act in the manner described in this Official Statement.
The following description of DTC, the procedures and record keeping with respect to beneficial ownership
interests in the 2013 Bonds, payment of principal, interest and other payments on the 2013 Bonds to DTC
Participants or Beneficial Owners, cotfirnmtion and transfer of beneficial ownership interest in the 2013 Bonds and
other related transactions by and between DTC, the DTC Participants and the Beneficial Owners is based solely on
information provided by DTC. Accordingly, no representations can be made concerning these matters and neither
the DTC Participants nor the Beneficial Owners should rely oil the foregoing information with respect to such
matters, but should instead confirm the same with DTC or the DTC Participants, as the case nay be.
Neither the issuer of the 2013 Bonds (the "Issuer ") nor the trustee, fiscal agent or paying agent appointed
with respect to the 2013 Bonds (the "Agent ") take any responsibility for the information contained in this
Appendix.
No assurances cart be given that DTC, DTC Participants or Indirect Participants will distribute to the
Beneficial Owners (a) payments of interest, principal or premium, if any, with respect to the 2013 Bonds,
(b) certificates representing ownership interest in or other confirnation or ownership interest in the 2013 Bonds, or
(c) redemption or other notices sent to DTC or Cede & Co., its nominee, as the registered owner of the 2013 Bonds,
or that they will so do on a timely basis, or that DTC, DTC Participants or DTC Indirect Participants will act in
the nnanner described in this Appendix. 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.
1. The Depository Trust Company ( "DTC "), New York, NY, will act as securities depository for
the 2013 Bonds (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 issue of
the Securities, each 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 a limited- purpose trust company organized
under the New York Banking Law, a "banking organization" within the meaning of the New York
Banking Law, a member of the Federal Reserve System, a "clearing corporation" within the meaning of
the New York Uniform Commercial Code, and a "clearing agency" registered pursuant to the provisions
of Section 17A of the Securities Exchange Act of 1934. DTC holds and provides asset servicing for over 3.5
million issues of U.S. and non -U.S. equity issues, corporate and municipal debt issues, and money market
instruments (from over 100 countries) that DTC's participants ( "Direct Participants ") deposit with DTC.
DTC also facilitates the post -trade settlement among Direct Participants of sales and other securities
transactions in deposited securities, through electronic computerized book -entry transfers and pledges
F -1
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 "). On August 8, 2011, Standard &
Poor's downgraded its rating of DTC from AAA to AA +. The DTC Rules applicable to its Participants
are on file with the Securities and Exchange Commission. More information about DTC can be found at
www.dtcc.com and www.dtc.org. The information contained on this Internet site is not incorporated herein by
reference.
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.
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 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 to be redeemed.
THE FISCAL AGENT, AS LONG AS A BOOK - ENTRY -ONLY SYSTEM IS USED FOR THE 2013
BONDS, WILL SEND ANY NOTICE OF REDEMPTION OR OTHER NOTICES ONLY TO CEDE & CO.,
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OR ITS SUCCESSOR AS DTC'S PARTNERSHIP NOMINEE. ANY FAILURE OF CEDE & CO., OR ITS
SUCCESSOR AS DTC'S PARTNERSHIP NOMINEE TO ADVISE ANY PARTICIPANT, OR OF ANY
PARTICIPANT TO NOTIFY ANY BENEFICIAL OWNER OF ANY NOTICE AND ITS CONTENT OR
EFFECT WILL NOT AFFECT THE VALIDITY OR SUFFICIENCY OF THE PROCEEDINGS RELATING
TO THE REDEMPTION OF THE 2013 BONDS CALLED FOR REDEMPTION OR OF ANY OTHER
ACTION PREMISED ON SUCH NOTICE.
7. Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect to
Securities unless authorized by a Direct Participant in accordance with DTC's MMI Procedures. Under its
usual procedures, DTC mails an Omnibus Proxy to Issuer as soon as possible after the record date. The
Omnibus Proxy assigns Cede & Co.'s consenting or voting rights to those Direct Participants to whose
accounts 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 Issuer or Agent, 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, Agent, or
Issuer, 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 Issuer or Agent,
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 Issuer or Agent. Under such circumstances, in the event that a
successor depository is not obtained, Security certificates are required to be printed and delivered.
10. The Issuer may decide to discontinue use of the system of book -entry -only transfers through
DTC (or a successor securities depository). In that event, Security certificates will be printed and
delivered to DTC.
11. The information in this section concerning DTC and DTC's book -entry system has been
obtained from sources that Issuer believes to be reliable, but Issuer takes no responsibility for the
accuracy thereof.
12. THE DISTRICT, THE CITY AND THE UNDERWRITER CANNOT AND DO NOT GIVE ANY
ASSURANCES THAT DTC, THE PARTICIPANTS OR OTHERS WILL DISTRIBUTE PAYMENTS OF
PRINCIPAL, INTEREST OR PREMIUM, IF ANY, WITH RESPECT TO THE 2013 BONDS PAID TO DTC
OR ITS NOMINEE AS THE REGISTERED OWNER, OR WILL DISTRIBUTE ANY REDEMPTION
NOTICES OR OTHER NOTICES, TO THE BENEFICIAL OWNERS, OR THAT THEY WILL DO SO ON A
TIMELY BASIS OR WILL SERVE AND ACT IN THE MANNER DESCRIBED IN THIS OFFICIAL
STATEMENT. THE DISTRICT, THE CITY AND THE UNDERWRITER ARE NOT RESPONSIBLE OR
LIABLE FOR THE FAILURE OF DTC OR ANY PARTICIPANT TO MAKE ANY PAYMENT OR GIVE
ANY NOTICE TO A BENEFICIAL OWNER WITH RESPECT TO THE 2013 BONDS OR AN ERROR OR
DELAY RELATING THERETO.
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Quint & Thimmig LLP 3 /27/13
4/5/13
CONTINUING DISCLOSURE AGREEMENT
THIS CONTINUING DISCLOSURE AGREEMENT (the "Disclosure Agreement "), dated
as of June 1, 2013, is by and between WILLDAN FINANCIAL SERVICES, as dissemination
agent (the "Dissemination Agent'), and the CITY OF TUSTIN, CALIFORNIA, a municipal
corporation and general law city duly organized and existing under the laws of the State of
California (the "City").
RECITALS:
WHEREAS, the City has issued, for and on behalf of the City of Tustin Community
Facilities District No. 04-1 (Tustin Legacy /John Laing Homes) (the "District'), its City of Tustin
Community Facilities District No. 04-1 (Tustin Legacy /John Laing Homes), 2013 Special Tax
Refunding Bonds (the 'Bonds ") in the initial principal amount of $ ; and
WHEREAS, the Bonds are being issued pursuant to a Fiscal Agent Agreement, dated as
of June 1, 2013 (the "Fiscal Agent Agreement'), by and between U.S. Bank National Association,
as fiscal agent (the "Fiscal Agent') and the City, for and on behalf of the District; and
WHEREAS, this Disclosure Agreement is being executed and delivered by the City and
the Dissemination Agent for the benefit of the holders and beneficial owners of the Bonds and
in order to assist the underwriter of the Bonds in complying with S.E.C. Rule 15c2- 12(b)(5).
AGREEMENT:
NOW, THEREFORE, for and in consideration of the premises and mutual covenants
herein contained, and for other consideration the receipt and sufficiency of which is hereby
acknowledged, the parties hereto agree as follows:
Section 1. Definitions. In addition to the definitions of capitalized terms set forth in
Section 1.03 of the Fiscal Agent Agreement, which apply to any capitalized term used in this
Disclosure Agreement unless otherwise defined in this Section or in the Recitals above, the
following capitalized terms shall have the following meanings when used in this Disclosure
Agreement:
"Annual Report" means any Annual Report provided by the City pursuant to, and as
described in, Sections 3 and 4 of this Disclosure Agreement.
"Beneficial Omne✓" shall mean any person who (a) has the power, directly or indirectly,
to vote or consent with respect to, or to dispose of ownership of, any Bond (including persons
holding any Bonds through nominees, depositories or other intermediaries), or (b) is treated as
the owner of any Bond for federal income tax purposes.
20015.04:112072
"Disclosure Representative" means the Finance Director or her designee, or such other
officer or employee as the City shall designate as the Disclosure Representative hereunder in
writing to the Dissemination Agent from time to time.
"Dissemination Agent" means Willdan Financial Services, acting in its capacity as
Dissemination Agent hereunder, or any successor Dissemination Agent designated in writing
by the City and which has filed with the City a written acceptance of such designation.
"EMMA" or "Electronic Municipal Market Access" means the centralized on -line
repository for documents to be 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" means any of the events listed in Section 5(a) or 5(b) of this Disclosure
Agreement.
"MSRB" means the Municipal Securities Rulemaking Board, which has been designated
by the Securities and Exchange Commission as the sole repository of disclosure information for
purposes of the Rule, or any other repository of disclosure information which may be
designated by the Securities and Exchange Commission as such for purposes of the Rule in the
future.
"Official Statement" means the Official Statement, dated 2013, relating to the
Bonds.
"Participating Undettoriter" means the original underwriter of the Bonds required to
comply with the Rule in connection with offering of the Bonds.
"Rule" means Rule 15c2- 12(b)(5) adopted by the Securities and Exchange Commission
under the Securities Exchange Act of 1934, as the same may be amended from time to time.
Section 2. Purpose of the Disclosure Agreement. This Disclosure Agreement is being
executed and delivered by the City and the Dissemination Agent for the benefit of the owners
and Beneficial Owners of the Bonds and in order to assist the Participating Underwriter in
complying with the Rule.
Section 3. Provision of Annual Reports.
(a) Delivenj of Annual Report. The City shall, or shall cause the Dissemination Agent to,
not later than nine months after the end of the City's fiscal year (which currently ends on June
30), commencing with the report for the 2012 -13 Fiscal Year, which is due not later than March
31, 2014, 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 Disclosure
Agreement. The Annual Report may be 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 Agreement, provided that the audited financial statements of the
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City may be 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 fear. If the City's fiscal year changes, it shall give notice of such
change in the same manner as for a Listed Event under Section 5(c), and subsequent Annual
Report filings shall be made no later than six months after the end of such new fiscal year end.
(c) Delivenj of Annual Report to Dissemination Agent. Not later than fifteen (15) Business
Days prior to the date specified in subsection (a) (or, if applicable, subsection (b) of this Section
3 for providing the Annual Report to EMMA), the City shall provide the Annual Report to the
Dissemination Agent (if other than the City). If by such date, the Dissemination Agent has not
received a copy of the Annual Report, the Dissemination Agent shall notify the City.
(d) Report of Non - Compliance. If the City is the Dissemination Agent and is unable to file
an Annual Report by the date required in subsection (a) (or, if applicable, subsection (b)) of this
Section 3, the City shall send a notice to EMMA substantially in the form attached hereto as
Exhibit A. If the City is not the Dissemination Agent and is unable to provide an Annual Report
to the Dissemination Agent by the date required in subsection (c) of this Section 3, the
Dissemination Agent shall send a notice to EMMA in substantially the form attached hereto as
Exhibit A.
(e) Anmml Cmupliance Certification. The Dissemination Agent shall, if the Dissemination
Agent is other than the City, file a report with the City certifying that the Annual Report has
been filed with EMMA pursuant to Section 3 of this Disclosure Agreement, stating the date it
was so provided and filed.
Section 4. Content of Annual Reports. The Annual Report shall contain or incorporate by
reference the following:
(a) Financial Statements. Audited financial statements of the City for the most recently
completed fiscal year, prepared in accordance generally accepted accounting principles as
promulgated to apply to governmental entities from time to time by the Governmental
Accounting Standards Board, together with the following statement:
THE CITY'S ANNUAL FINANCIAL STATEMENT IS PROVIDED SOLELY TO
COMPLY WITH THE SECURITIES EXCHANGE COMMISSION STAFF'S
INTERPRETATION OF RULE 15C2 -12 UNDER THE SECURITIES EXCHANGE ACT
OF 1934, AS AMENDED. NO FUNDS OR ASSETS OF THE CITY ARE REQUIRED TO
BE USED TO PAY DEBT SERVICE ON THE BONDS. INVESTORS SHOULD NOT
RELY ON THE FINANCIAL CONDITION OF THE CITY IN EVALUATING
WHETHER TO BUY, HOLD OR SELL THE BONDS.
If the City'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.
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(b) Other Annual In forneation. To the extent not included in the audited final statements of
the City, the Annual Report shall also include the following information:
(i) The most recent annual information required to be provided to the California
Debt and Investment Advisory Commission pursuant to Section 5.19 of the Fiscal Agent
Agreement.
(ii) The aggregate levy of the Special Taxes (as defined in the Fiscal Agent
Agreement), for the most recent fiscal year.
(iii) Any amendments or changes to the Rate and Method of Apportionment of
the Special Taxes since the last Annual Report.
(iv) The status of foreclosure proceedings in respect of delinquent Special Taxes,
and a summary of the results of any foreclosure, since the last Annual Report.
(v) A land ownership summary table of all of the owners of property subject to
the levy of Special Taxes as of the date of the Annual Report, including the number of
parcels in the District, the most recent Orange County Assessor's assessed value for all
of the parcels in the District, the outstanding principal amount of the Bonds, and the
most recent aggregate annual Special Tax A levied on property in the District.
(c) Cross References. 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 City or related
public entities, which are available to the public on EMMA. The City shall clearly identify each
such other document so included by reference.
If the document included by reference is a final official statement, it must be available
from EMMA.
(d) Further Information. In addition to any of the information expressly required to be
provided under paragraph (b) of this Section 4, the City shall provide such further information,
if any, as may be necessary to make the specifically required statements, in the light of the
circumstances under which they are made, not misleading.
Section 5. Reporting of Listed Events.
(a) Reportable Events. The City shall, or shall cause the Dissemination (if not the City) to,
give notice of the occurrence of any of the following events with respect to the Bonds:
(1) Principal and interest payment delinquencies.
(2) Unscheduled draws on debt service reserves reflecting financial
difficulties.
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(3) Unscheduled draws on credit enhancements reflecting financial
difficulties.
(4) Substitution of credit or liquidity providers, or their failure to perform.
(5) Defeasances.
(6) Rating changes.
(7) Tender offers.
(8) Bankruptcy, insolvency, receivership or similar event of the obligated
person.
(9) Adverse tax opinions, the issuance by the Internal Revenue Service of
proposed or final determinations of taxability, Notices of Proposed Issue (IRS Form
5701 -TEB) or other material notices or determinations with respect to the tax status of
the security, or other material events affecting the tax status of the security.
Note: For the purposes of the event identified in subparagraph (8), the event is
considered to occur when any of the following occur: the appointment of a receiver,
fiscal agent or similar officer for an obligated person in a proceeding under the U.S.
Bankruptcy Code or in any other proceeding under state or federal law in which a court
or governmental authority has assumed jurisdiction over substantially all of the assets or
business of the obligated person, or if such jurisdiction has been assumed by leaving the
existing governmental body and officials or officers in possession but subject to the
supervision and orders of a court or governmental authority, or the entry of an order
confirming a plan of reorganization, arrangement or liquidation by a court or
governmental authority having supervision or jurisdiction over substantially all of the
assets or business of the obligated person.
(b) Material Reportable Events. The City shall give, or cause to be given, notice of the
occurrence of any of the following events with respect to the Bonds, if material:
(1) Non - payment related defaults.
(2) Modifications to rights of security holders.
(3) Bond calls.
(4) The release, substitution, or sale of property securing repayment of the
securities.
(5) The consummation of a merger, consolidation, or acquisition involving
an obligated person or the sale of all or substantially all of the assets of the obligated
person, other than in the ordinary course of business, the entry into a definitive
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agreement to undertake such an action or the termination of a definitive agreement
relating to any such actions, other than pursuant to its terms.
(6) Appointment of a successor or additional trustee, or the change of name
of a trustee.
(c) Time to Disclose. The City shall, or shall cause the Dissemination Agent (if not the
City) to, file a notice of such occurrence with EMMA, in an electronic format as prescribed by
the MSRB, in a timely manner not in excess of 10 business days after the occurrence of any
Listed Event. Notwithstanding the foregoing, notice of Listed Events described in subsections
(a)(5) and (b)(3) above need not be given under this subsection any earlier than the notice (if
any) of the underlying event is given to owners of affected Bonds under the Fiscal Agent
Agreement.
Section 6. Identifing Information for Filings with EMMA. All documents provided to
EMMA under this Disclosure Agreement shall be accompanied by identifying information as
prescribed by the MSRB.
Section 7. Termination of Reporting Obligation. The City's obligations under this
Disclosure Agreement 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 City
shall give notice of such termination in the same manner as for a Listed Event under Section
5(c).
Section 8. Dissemination Agent.
(a) Appointment of Dissemination Agent. The City may, from time to time, appoint or
engage a Dissemination Agent to assist it in carrying out its obligations under this Disclosure
Agreement and may discharge any such agent, with or without appointing a successor
Dissemination Agent. The initial Dissemination Agent shall be Willdan Financial Services.
If the Dissemination Agent is not the City, the Dissemination Agent shall not be
responsible in any manner for the content of any notice or report prepared by the City pursuant
to this Disclosure Agreement. It is understood and agreed that any information that the
Dissemination Agent may be instructed to file with EMMA shall be prepared and provided to it
by the City. The Dissemination Agent has undertaken no responsibility with respect to the
content of any reports, notices or disclosures provided to it under this Disclosure Agreement
and has no liability to any person, including any Bond owner, with respect to any such reports,
notices or disclosures. The fact that the Dissemination Agent or any affiliate thereof may have
any fiduciary or banking relationship with the City shall not be construed to mean that the
Dissemination Agent has actual knowledge of any event or condition, except as may be
provided by written notice from the City.
(b) Compensation of Dissemination Agent. The Dissemination Agent shall be paid
compensation by the City for its services provided hereunder as agreed to between the
Dissemination Agent and the City from time to time and all expenses, legal fees and expenses
and advances made or incurred by the Dissemination Agent in the performance of its duties
M
hereunder. The Dissemination Agent shall not be deemed to be acting in any fiduciary capacity
for the City, owners of the Bonds or Beneficial Owners, or any other party. The Dissemination
Agent may rely, and shall be protected in acting or refraining from acting, upon any direction
from the City or an opinion of nationally recognized bond counsel. The Dissemination Agent
may at any time resign by giving written notice of such resignation to the City. The
Dissemination Agent shall not be liable hereunder except for its negligence or willful
misconduct.
(c) Responsibilities of Dissemination Agent. In addition of the filing obligations of the
Dissemination Agent set forth in Sections 3(e) and 5, the Dissemination Agent shall be
obligated, and hereby agrees, to provide a request to the City to compile the information
required for its Annual Report at least 30 days prior to the date such information is to be
provided to the Dissemination Agent pursuant to subsection (c) of Section 3. The failure to
provide or receive any such request shall not affect the obligations of the City under Section 3.
Section 9. Amendment; Waiver. Notwithstanding any other provision of this Disclosure
Agreement, the City may amend this Disclosure Agreement (and the Dissemination Agent shall
agree to any amendment so requested by the City that does not impose any greater duties or
risk of liability on the Dissemination Agent), and any provision of this Disclosure Agreement
may be waived, provided that all of 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) or (b), 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.
(c) Consent of Holders; Non- impairneent Opinion. The amendment or waiver either
(i) is approved by the Bond owners in the same manner as provided in the Fiscal Agent
Agreement for amendments to the Fiscal Agent Agreement with the consent of Bond
owners, or (ii) does not, in the opinion of nationally recognized bond counsel, materially
impair the interests of the Bond owners or Beneficial Owners.
If this Disclosure Agreement is amended or any provision of this Disclosure Agreement
is waived, the City 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 City. 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(c), and (ii) the Annual Report for the year in which the change is made
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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 Agreement shall be
deemed to prevent the City from disseminating any other information, using the means of
dissemination set forth in this Disclosure Agreement or any other means of communication, or
including any other information in any Annual Report or notice of occurrence of a Listed Event,
in addition to that which is required by this Disclosure Agreement. If the City chooses to
include any information in any Annual Report or notice of occurrence of a Listed Event in
addition to that which is specifically required by this Disclosure Agreement, the City shall have
no obligation under this Disclosure Agreement to update such information or include it in any
future Annual Report or notice of occurrence of a Listed Event.
Section 11. Default. In the event of a failure of the City to comply with any provision of
this Disclosure Agreement, any Bond owner or Beneficial Owner, or the Fiscal Agent or the
Participating Underwriter, may take such actions as may be necessary and appropriate,
including seeking mandate or specific performance by court order, to cause the City to comply
with its obligations under this Disclosure Agreement. The sole remedy under this Disclosure
Agreement in the event of any failure of the City to comply with this Disclosure Agreement
shall be an action to compel performance.
Section 12. Beneficiaries. This Disclosure Agreement shall inure solely to the benefit of
the City, the Fiscal Agent, the Dissemination Agent, the Participating Underwriter and holders
and Beneficial Owners from time to time of the Bonds, and shall create no rights in any other
person or entity.
Section 13. Counterparts. This Disclosure Agreement may be executed in several
counterparts, each of which shall be an original and all of which shall constitute but one and the
same instrument.
go
IN WITNESS WHEREOF, the parties hereto have executed this Disclosure Agreement as
of the date first above written.
20015.04:J12072
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CITY OF TUSTIN, CALIFORNIA
Jeffrey C. Parker,
City Manager
WILLDAN FINANCIAL SERVICES, as
Dissemination Agent
0
Authorized Officer
EXHIBIT A
NOTICE OF FAILURE TO FILE ANNUAL REPORT
Name of Obligor: City of Tustin, California
Name of Bond Issue: $ City of Tustin Community Facilities District No. 04 -1
(Tustin Legacy /John Laing Homes), 2013 Special Tax Refunding
Bonds
Date of Issuance: June J 2013
NOTICE IS HEREBY GIVEN that the Obligor has not provided an Annual Report with
respect to the above -named Bonds as required by Section 5.17 of the Fiscal Agent Agreement,
dated as of June 1, 2013, between the Obligor and U.S. Bank National Association, as Fiscal
Agent. The Obligor anticipates that the Annual Report will be filed by
Date:
A -1
WILLDAN FINANCIAL SERVICES, as
Dissemination Agent on behalf of the City
of Tustin, California