If the value of a taxable parcel is not sufficient, taking into account other liens imposed by public agencies, to fully secure the Special Taxes, the District has no recourse against the owner.
See “SECURITY FOR THE BONDS – Reserve Fund” and “- Covenant for Superior Court Foreclosure,” for a discussion of the obligations of the District in the event of delinquency in the payment of Special Tax installments.
The ability of the District to increase the amount of Special Taxes which may be levied and to pay costs of foreclosure proceedings may be limited by voter initiative. See “Constitutional Amendment” and “Limitations on Remedies” below.
Bankruptcy
Bankruptcy, insolvency, and other laws generally affecting creditors’ rights could adversely impact the interests of owners of the Bonds. The payment of property owners’ taxes and the ability of the District to foreclose the lien of delinquent unpaid Special Taxes pursuant to the foreclosure covenant, may be limited by bankruptcy, insolvency, or other laws generally affecting creditors’ rights or by the laws of the State relating to judicial foreclosure. See “Limitations on Remedies” below and “SECURITY FOR THE BONDS - Covenant for Superior Court Foreclosure.” The various legal opinions to be delivered concurrently with the delivery of the Bonds (including Bond Counsel’s approving legal opinion) will be qualified, as to the enforceability of the various legal documents, by bankruptcy, reorganization, insolvency or other similar laws affecting the rights of creditors generally.
Although bankruptcy proceedings would not cause the Special Taxes to become extinguished, the amount of any lien on property securing the payment of delinquent Special Taxes could be reduced or modified if the value of the property were determined by the bankruptcy court to have become less than the amount of the lien.
The amount of the delinquent Special Taxes in excess of the reduced lien would then be treated as an unsecured claim by the court. Further, bankruptcy of a property owner could result in a delay in prosecuting superior court foreclosure proceedings. Such a delay would increase the likelihood of a delay or default in payment of the principal of, and interest on, the Bonds and the possibility of delinquent tax installments not being paid in full.
The prosecution of foreclosure proceedings could also be delayed for other reasons, including crowded court calendars and procedural delaying tactics. See “Limitations on Remedies” below.
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 taxes. Pursuant to the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, enacted by Congress on April 14, 2005, the lien for special taxes established after the filing of a petition in bankruptcy will be treated thereafter as a lien for ad valorem taxes.
Payments by FDIC and Other Federal Agencies
The ability of the City to collect interest and penalties allowed by State law and to foreclose on property with delinquent Special Taxes may be limited if the Federal Deposit Insurance Corporation (the “FDIC”) has or obtains an interest in the property. The FDIC would obtain such an interest by taking over a financial institution which has made a loan which is secured by real property within the District. 282
33 The FDIC has issued a policy statement (the “Policy Statement”) which provides that real property owned by the FDIC is subject to state and local 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 affairs of the institution for which the FDIC is acting, 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 or 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 the taxes. 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 its consent.
The Policy Statement provides 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 Act and any 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. Additionally, the Ninth Circuit issued a ruling on August 28, 2001, in which it determined that the FDIC, as a federal agency, is exempt from special taxes under the Act.
The City is unable to predict what effect the FDIC’s application of the Policy Statement would have if there were a delinquency in Special Taxes levied on a parcel in the District in which the FDIC had an interest.
However, it should be assumed that there would not be a buyer at a foreclosure sale if the FDIC’s lien could not be foreclosed. It should also be assumed that the City will be unable to foreclose on any parcel owned by the FDIC. In either event, there would be a draw on the Reserve Account and, if the delinquency continued, there could be a default in payment of principal of and interest on the Bonds.
Furthermore, if a parcel of taxable property in the District was owned by a federal government entity or federal government sponsored entity, such as the Federal National Mortgage Association or Fannie Mae or the Federal National Home Loan Corporation or Freddie Mac, or if a private mortgage secured by a parcel of taxable property was owned by a federal government entity or federal government sponsored entity, such as Fannie Mae or Freddie Mac, the ability of the City to foreclose on the parcel or to collect delinquent Special Taxes would be limited. 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. Therefore, if a federal government entity, such as Fannie Mae or Freddie Mac, owned a parcel of taxable property in the District and did not pay the taxes and assessments levied on the parcel (including the Special Taxes), the City would not be able to foreclose on the parcel to collect the delinquent Special Taxes.
Also, if a federal government entity, such as Fannie Mae or Freddie Mac, had a mortgage interest in a parcel in the District and the City wished to foreclose on the parcel to collect delinquent Special Taxes, the property could not be sold at a foreclosure sale unless it could be sold for an amount sufficient to pay the delinquent Special Taxes and the other taxes and assessments on a parity with those Special Taxes and preserve the federal government entity’s mortgage interest.
In Rust v. Johnson (9th Circuit; 1979) 597 F. 2d 174, the United States Court of Appeal for the Ninth Circuit, held that, with respect to applicability of the supremacy clause, the Federal National Mortgage Association
* The supremacy clause of the United States Constitution provides “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.” 283
34 is a federal instrumentality and not a private entity, and that an exercise of state power over a mortgage interest of Fannie Mae constitutes an exercise of state power over property of the United States.
The City has not undertaken to determine whether any federal government entity has, or is likely to acquire, any interest (including any mortgage interest) in any property in the District, and therefore expresses no view concerning the likelihood that the risks discussed above will materialize while the Bonds are outstanding.
Natural Disasters
The District, like all California communities, may be subject to unpredictable seismic activity, fires, flood, or other natural disasters. Southern California is a seismically active area. Seismic activity represents a potential risk for damage to buildings, roads, bridges and property within the District. The District is not located in a fault zone, but is proximate to the Newport-Inglewood Fault Zone and 5 other fault zones. All undocumented fill, compressible alluvial soils, and weathered bedrock considered unsuitable for engineered structures has been over- excavated and removed from the site. The Geotechnical Report prepared by Pacific Soils Engineering, Inc., states that the potential for liquefaction is considered as “very low.” Land susceptible to seismic activity, however, may be subject to liquefaction and/or landslides during the occurrence of such an event.
In recent years portions of Southern California have experienced outbreaks of wildfires that have burned thousands of acres at a time and destroyed thousands of homes and structures. In June 2018, the Aliso Fire burned approximately 175 acres in the City and neighboring Laguna Beach. In May 2022, the Coastal Fire, which started in the Aliso and Woods Canyon Wilderness Park, burned approximately 200 acres, and 31 homes and structures were damaged or lost; none of the lost or damaged structures or homes, however, were located within the City.
Portions of the City are located within Orange County Fire Authority’s Very High Fire Hazard Severity Zone; no portions of the District are located within such zone. The area also experiences high winds known as Santa Ana winds which frequently accompany and magnify the intensity of wildfires. There is a risk of property within the District being destroyed by wildfires or other natural disasters and no assurance can be given as to the severity or frequency of wildfires or other such occurrences. Additionally, a portion of the City is within established Special Flood Hazard Areas corresponding to the 100-year floodplain; no portion of the District is within such area or floodplain.
In the event of a severe earthquake, fire, flood or other natural disaster, there may be significant damage to both property and infrastructure in the District. As a result, a substantial portion of the property owners may be unable or unwilling to pay the Special Taxes when due. In addition, the value of land in the District could be diminished in the aftermath of such a natural disaster, reducing the resulting proceeds of foreclosure sales in the event of delinquencies in the payment of the Special Taxes.
Availability of Property and Casualty Insurance . On May 26, 2023, State Farm General Insurance Company (“State Farm”) announced that it would cease accepting certain new applications, including all business and personal lines property and casualty insurance, effective May 27, 2023. State Farm indicated in its release that the decision was due to historic increases in construction costs outpacing inflation, rapidly growing catastrophe exposure, and a challenging reinsurance market. State Farm indicated it would work constructively with the California Department of Insurance and State policy makers to help build market capacity in California, however, it was taking this action to improve the company’s financial strength and would continue to evaluate its approach based on changing market conditions. State Farm independent contractor agents licensed and authorized in California would continue to serve existing customers for these products and new customers for products not impacted by the decision. Any adverse impact of the foregoing on property values in the District and the real estate market in general cannot be predicted.
Hazardous Substances
The presence of a hazardous substance on a parcel may result in a reduction in its value. 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 284
35 are also stringent and similar. Under many of these laws, the owner or operator is obligated to remedy a hazardous substance condition of property whether or not the owner or operator has anything to do with creating or handling the hazardous substance. The effect, therefore, should any of the taxed parcels be affected by a hazardous substance, is to reduce the marketability and value of the parcel by the costs of remedying the condition, because the purchaser, upon becoming owner, will become obligated to remedy the condition just as is the seller.
Further, it is possible that liabilities may arise in the future with respect to any of the parcels resulting from the existence, currently, on the parcel of a substance presently classified as hazardous but which has not been released or the release of which is not presently threatened, or may arise in the future resulting from the existence, currently on the parcel of a substance not presently classified as hazardous but which may in the future be so classified. Further, such liabilities may arise not simply from the existence of a hazardous substance but from the method of handling it. All of these possibilities could significantly affect the value of a parcel that is realizable upon a delinquency.
The City has no knowledge of any hazardous substances being located on property within the District.
Parity Taxes and Special Assessments
Property within the District is subject to the lien of taxes and assessments imposed by public agencies and several overlapping districts also having jurisdiction over the land within the District. See “THE DISTRICT– Estimated Direct and Overlapping Indebtedness.” The City’s policy respecting the formation of community facilities districts provides that the total tax burden (i.e., the anticipated maximum annual community facilities district special tax, together with ad valorem property taxes, special assessments, special taxes for any overlapping community facilities district, and any other taxes, fees and charges payable from and secured by the property) on any residential owner-occupied parcel in the community facilities district shall not exceed two percent (2.0%) of the estimated base sales price of such parcel upon completion of the public and private improvements relating thereto. See “THE DISTRICT – Estimated Direct and Overlapping Debt, Table 4” for estimated current effective tax rates within the District.
The Special Taxes and any penalties thereon will constitute a lien against the lots and parcels of land on which they will be annually imposed until they are paid. Such lien is on a parity with all special taxes and special assessments levied by the City and other agencies and is co-equal to and independent of the lien for general property taxes regardless of when they are imposed. The Special Taxes have priority over all existing and future private liens imposed on the property except, possibly, for liens or security interests held by the Federal Deposit Insurance Corporation. See “– Bankruptcy and Foreclosure” below.
Neither the City nor the District has control over the ability of other entities and districts to issue indebtedness secured by special taxes, ad valorem property taxes, or assessments payable from all or a portion of the property within the District. 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, ad valorem property taxes, or assessments. Any such taxes or assessments may have a lien on such property on a parity with the Special Taxes and could reduce the estimated value-to-lien ratios for property within the District described herein.
Disclosures to Future Purchasers
The willingness or ability of an owner of a parcel to pay the Special Tax may be affected by whether or not the owner was given due notice of the Special Tax authorization at the time the owner purchased the parcel, was informed of the amount of the Special Tax on the parcel should the Special Tax be levied at the maximum tax rate, and the risk of such a levy at the maximum rate. The City has caused a notice of the Special Tax Lien to be recorded in the Office of the Recorder for the County of Orange on November 13, 2006, against each parcel within the District. While title companies normally refer to such notices in title reports, there can be no guarantee that such reference will be made or, if made, that a prospective purchaser or lender will consider such Special Tax obligation in the purchase of a property within the District or lending or money thereon. 285
36 The Act requires the subdivider (or its agent or representative) of a subdivision to notify a prospective purchaser or long-term lessor of any lot, parcel, or unit subject to a Mello-Roos special tax of the existence and maximum amount of such special tax using a statutorily prescribed form. California Civil Code section 1102.6b requires that in the case of transfers other than those covered by the above requirement, the seller must at least make a good faith effort to notify the prospective purchaser of the special tax lien in a format prescribed by statute.
Failure by an owner of the property to comply with the above requirements, or failure by a purchaser or lessor to consider or understand the nature and existence of the Special Tax, could adversely affect the willingness and ability of the purchaser or lessor to pay the Special Tax when due.
Non-Cash Payments of Special Taxes
Under the Act, the City Council as the legislative body of the District may reserve to itself the right and authority to allow the owner of any taxable parcel to tender a Bond in full or partial payment of any installment of the Special Taxes or the interest or penalties thereon. A Bond so tendered is to be accepted at par and credit is to be given for any interest accrued thereon to the date of the tender. Thus, if Bonds can be purchased in the secondary market at a discount, it may be to the advantage of an owner of a taxable parcel to pay the Special Taxes applicable thereto by tendering a Bond. Such a practice would decrease the cash flow available to the City to make payments with respect to other Bonds then outstanding; and, unless the practice was limited by the City, the Special Taxes paid in cash could be insufficient to pay the debt service due with respect to such other Bonds. In order to provide some protection against the potential adverse impact on cash flows which might be caused by the tender of Bonds in full or partial payment of any Special Taxes, the Agreement includes a covenant pursuant to which the City will not authorize owners of taxable parcels to satisfy Special Tax obligations by the tender of Bonds unless the City shall have first obtained a certificate of an Independent Financial consultant that to accept such tender will not result in the city having insufficient Special Tax Revenues in any Bond year to pay the principal and interest on the Bonds remaining outstanding following such tender.
Payment of the Special Tax is not a Personal Obligation of the Owners A property owner of a taxable parcel within the District is not personally obligated to pay the Special Tax.
Rather, the Special Tax is an obligation which is secured only by a lien against the taxable parcel. If the value of a taxable parcel is not sufficient, taking into account other liens imposed by public agencies, to secure fully the Special Tax, the District has no recourse against the owner.
No Acceleration Provision
The Bonds do not contain a provision allowing for the acceleration of the Bonds in the event of a payment default or other default under the Bonds or the Agreement.
No Teeter Plan
The County has not implemented its Teeter Plan as an alternate procedure for the distribution of the Special Taxes on the secured roll. Accordingly, the collections of Special Taxes will reflect actual delinquencies.
Limitations on Remedies
Remedies available to the owners of the Bonds may be limited by a variety of factors and may be inadequate to assure the timely payment of principal of and interest on the Bonds or to preserve the tax-exempt status of interest on the Bonds.
Bond Counsel has limited its opinion as to the enforceability of the Bonds and of the Agreement to the extent that enforceability may be limited by bankruptcy, insolvency, moratorium, or other similar laws affecting generally the enforcement of creditors’ rights and by the exercise of judicial discretion in accordance with general principles of equity. The lack of availability of certain remedies or the limitation of remedies may entail risks of delay, limitation or modification of the rights of the owners of the Bonds. 286
37 Limited Secondary Market
There can be no guarantee that there will be a secondary market for the Bonds or, if a secondary market exists, that the Bonds can be sold for any particular price. The Underwriter will not be obligated to repurchase any of the Bonds. Although the City has committed to provide certain financial and operating information on an annual basis, there can be no assurance that such information will be available to Bondowners on a timely basis.
See “LEGAL MATTERS – Continuing Disclosure.” The failure to provide the required annual financial information does not give rise to monetary damages but merely an action for specific performance. Occasionally, because of general market conditions, lack of current information, or because of adverse history or economic prospects connected with a particular issue, secondary marketing practices in connection with a particular issue are suspended or terminated. Additionally, prices of issues for which a market is being made will depend upon then prevailing circumstances. Such prices could be substantially different from the original purchase price.
Constitutional Amendment
An initiative measure commonly referred to as the “Right to Vote on Taxes Act” (the “Initiative”), Proposition 218, was approved by the voters of the State of California at the November 5, 1996 general election.
The Initiative added Article XIII C (“Article XIII C”) and Article XIII D 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.” Among other things, Section 3 of Article XIII C states that “... the initiative power will not be prohibited or otherwise limited in matters of reducing or repealing any local tax, assessment, fee or charge.” The City believes, however, that Article XIII C confers on the voters no greater power as to the reduction or repeal of the Special Taxes than the power reserved to the legislative body of the District (i.e., the City Council).
The Act imposes on the City Council a statutory duty to levy that amount of Special Taxes which is required for the payment of the principal of and interest on the Bonds, including any necessary replenishment of bond reserve funds and any amount required by federal law to be rebated to the United States for the Bonds (the “Minimum Levy”). In addition, the Act prohibits the City Council from adopting any resolution to reduce the rates of the Special Taxes or terminate the levy of the Special Taxes pledged to repay the Bonds unless it determines that the reduction or termination of the Special Taxes would not interfere with the timely retirement of the Bonds. Accordingly, the City believes that the Initiative has not conferred on the voters the power to repeal or reduce the Special Taxes below the amounts required for the Minimum Levy. The application of the Initiative, however, will ultimately be determined by the courts. It is not possible to predict, with certainty, how the courts will interpret the initiative or the nature of any remedy that may be granted by the courts. See “Limitations on Remedies.”
Further, no assurance can be given regarding the future levy of the Special Taxes in amounts greater than the level required for the Minimum Levy.
Future Initiatives
The Initiative was submitted to and approved by the voters of the State pursuant to the State’s constitutional initiative process. The Supreme Court of the State has held that an initiative can repeal a tax ordinance and prohibit the imposition of further such taxes and that the exemption of taxes from the referendum requirements does not apply to initiatives. From time to time, other initiative measures could be adopted by the voters of the State. The adoption of any such initiative might place limitations on the ability of the State, the District and other local districts to increase revenues or increase appropriations or on the ability of the property owners to complete the remaining proposed development of the land in the District.
Loss of Tax Exemption
As discussed in “TAX MATTERS” below, interest on the Bonds could become includable in gross income for purposes of federal income taxation retroactive to the date the Bonds were issued, as a result of future acts or omissions of the District in violation of its covenants in the Agreement. Should such an event of taxability occur, 287
38 the Bonds are not subject to a special redemption and will remain outstanding until maturity or until redeemed under the mandatory redemption section of the Agreement. See “Limitations on Remedies” below.
Additionally future legislative proposals, if enacted into law, clarification of the Code or court decisions may cause interest on the Bonds to be subject, directly or indirectly, to federal income taxation or to be subject to or exempted from state income taxation, or otherwise prevent Bond Owners from realizing the full current benefit of the tax status of such interest. The introduction or enactment of any such legislative proposals, clarification of the Code or court decisions may also affect, perhaps significantly, the market price for, or marketability of, the Bonds. Prospective purchasers of the Bonds should consult their own tax advisors regarding any pending or proposed federal or state tax legislation, regulations or litigation, and regarding the impact of future legislation, regulations or litigation, as to which Bond Counsel expresses no opinion.
Redemption Risk
The optional redemption of the Bonds may occur, in whole or in part, on any Business Day if the District exercises its right to redeem the Bonds pursuant to the provisions of the Agreement. In addition, early redemption of the Bonds may occur in whole or in part on any Interest Payment Date from prepayments of Special Taxes.
See “THE BONDS - Redemption - Optional Redemption ” and “- Mandatory Redemption from Special Tax Prepayments.” The resulting redemption of Bonds that were purchased at a price greater than the applicable redemption price could reduce the otherwise expected yield on such Bonds.
Ballot Initiatives
Articles XIII A, XIII B, XIII C and XIII D 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 County, or local districts to increase revenues or to increase appropriations.
Cybersecurity
The City, like other public and private entities, relies on a large and complex technology environment to conduct its operations, and consequently faces the threat of cybersecurity incidents. Such incidents can result from unintentional events, or from deliberate attacks by unauthorized entities or individuals attempting to gain access to the City’s information technology systems to misappropriate assets or information or to cause operational disruption and damage. The City and its departments face cyber threats from time to time, including but not limited to hacking, viruses, malware, phishing, distributed denial-of-service, and other attacks on computers, networks, and systems. The City has not experienced a major cyberattack that resulted in a material compromise of the system, data loss, or financial loss.
The City has comprehensive security provisions to protect the City’s digital assets and networks, to include multi-factor authentication for any access. The City also uses anti-phishing software and conducts mandatory cybersecurity training for its staff, which includes topics such as risk mitigation and best practices.
No assurances can be given that the City’s security and operational control measures will ensure against any and all cybersecurity threats and attacks. A cybersecurity incident or breach could damage the City’s information technology systems and cause disruption to City services and operations. Although the City carries cyber liability insurance, the cost of any such disruption or remedying damage caused by future attacks could be substantial. The City will continue to assess cyber threats and protect its data and systems. 288
39 The City is also reliant on other entities and service providers in connection with the administration of the Bonds, including without limitation, the Fiscal Agent. No assurance can be given that the City and these other entities will not be affected by cyber threats and attacks in a manner that may affect the Owners of the Bonds.
TAX MATTERS
In the opinion of Best Best & Krieger LLP, Riverside, California, Bond Counsel, under existing statutes, regulations, rulings and judicial decisions, interest on the Bonds is excluded from gross income for federal income tax purposes. In the further opinion of Bond Counsel, interest on the Bonds is exempt from State of California personal income tax. Interest on the Bonds is not an item of tax preference for purposes of calculating the federal alternative minimum tax imposed on individuals and corporations; however, for tax years beginning after December 31, 2022, interest on the Bonds is taken into account in determining the annual adjusted financial statement income of certain corporations for the purpose of computing the alternative minimum tax imposed on certain corporations. Bond Counsel notes that interest on the Bonds is not an item of tax preference for purposes of calculating the federal alternative minimum tax imposed on individuals.
Bond Counsel’s opinion as to the exclusion from gross income for federal income tax purposes of interest on the Bonds is based upon certain representations of fact and certifications made by the City, the Underwriter and others and is subject to the condition that the City complies with all requirements of the Internal Revenue Code of 1986, as amended (the “Code”) that must be satisfied subsequent to the issuance of the Bonds to assure that interest on the Bonds will not become includable in gross income for federal income tax purposes. Failure to comply with such requirements of the Code might cause interest on the Bonds to be included in gross income for federal income tax purposes retroactive to the date of issuance of the Bonds. The City has covenanted to comply with all such requirements.
Should the interest on the Bonds become includable in gross income for federal income tax purposes, the Bonds are not subject to early redemption as a result of such occurrence and will remain outstanding until maturity or until otherwise redeemed in accordance with the Indenture.
Current and future legislative proposals, if enacted into law, clarification of the Code or court decisions may cause interest on the Bonds to be subject, directly or indirectly, to federal income taxation or to be subject to or exempted from state income taxation, or otherwise prevent Bond Owners from realizing the full current benefit of the tax status of such interest. Legislative proposals are announced from time to time which generally would limit the exclusion from gross income of interest on obligations like the Bonds to some extent for taxpayers who are individuals and whose income is subject to higher marginal income tax rates. Other proposals have been made that could significantly reduce the benefit of, or otherwise affect, the exclusion from gross income of interest on obligations like the Bonds. The introduction or enactment of any such legislative proposals, clarification of the Code or court decisions may also affect, perhaps significantly, the market price for, or marketability of, the Bonds.
Prospective purchasers of the Bonds should consult their own tax advisors regarding any pending or proposed federal or state tax legislation, regulations or litigation, and regarding the impact of future legislation, regulations or litigation, as to which Bond Counsel expresses no opinion.
Bond Counsel’s opinion may be affected by action taken (or not taken) or events occurring (or not occurring) after the date of issuance of the Bonds. Bond Counsel has not undertaken to determine, or to inform any person, whether any such action or events are taken or do occur, or whether such actions or events may adversely affect the value or tax treatment of a Bond, and Bond Counsel expresses no opinion with respect thereto.
The Internal Revenue Service (the “IRS”) has initiated an expanded program for auditing tax-exempt bond issues, including both random and targeted audits. It is possible that the Bonds will be selected for audit by the IRS. It is also possible that the market value of the Bonds might be affected as a result of such an audit (or by an audit of similar bonds).
Although Bond Counsel has rendered an opinion that interest on the Bonds is excluded from gross income for federal income tax purposes provided the City continues to comply with certain requirements of the Code, the accrual or receipt of interest on the Bonds may otherwise affect the tax liability of the recipient. The extent of these other tax consequences will depend upon the recipient’s particular tax status and other items of income or 289
40 deductions. Bond Counsel expresses no opinion regarding any such consequences. Accordingly, all potential purchasers should consult their tax advisors before purchasing any of the Bonds.
A copy of the proposed form of opinion of Bond Counsel is attached hereto as Appendix B.
LEGAL MATTERS
Continuing Disclosure
The City has covenanted in a Continuing Disclosure Agreement for the benefit of the Bondowners to provide annually certain financial information and operating data, and to provide notices of the occurrence of certain enumerated events, if material. The City has agreed in the Continuing Disclosure Agreement to file, or cause to be filed, to the Electronic Municipal Market Access System of the Municipal Securities Rulemaking Board, which can be found at www.emma.msrb.org, an annual report and notices of certain material events. See “APPENDIX E – FORM OF CONTINUING DISCLOSURE AGREEMENT.” The covenants of the City have been made in order to assist the Underwriter in complying with S.E.C. Rule 15c2-12(b)(5) (the “Rule”).
In the five years before the date of this Official Statement, the City timely filed all of its required annual reports and notices of listed events.
A default by the City under its Continuing Disclosure Agreement will not, in itself, constitute a default under the Agreement. Koppel & Gruber Public Finance will act as the initial dissemination agent under the Continuing Disclosure Agreement. See “APPENDIX E – FORM OF CONTINUING DISCLOSURE AGREEMENT.”
Absence of Litigation
At the time of delivery of and payment for the Bonds, the City will deliver a certificate to the effect that there is no known action, suit, proceeding, inquiry or investigation at law or in equity before or by any court or regulatory agency against the City or the District affecting the existence of the City or the District or the title of their respective officers to office or seeking to restrain or to enjoin the issuance, sale, or delivery of the Bonds, the application of the proceeds thereof in accordance with the Agreement, or the collection or application of the Special Taxes to pay the principal of and interest on the Bonds, or in any way contesting or affecting the validity or enforceability of the Bonds, the Resolution of Issuance, the Agreement, or any other applicable agreements or any action of the City or the District or contemplated by any of said documents.
Municipal Advisor
The City has retained Fieldman, Rolapp & Associates, Inc. as municipal advisor (the “Municipal Advisor”) in connection with the sale of the Bonds. The Municipal Advisor is not obligated to undertake, and has not undertaken to make, an independent verification or to assume any responsibility for the accuracy, completeness or fairness of the information that is contained in this Official Statement.
The Municipal Advisor is an independent advisory firm and is not engaged in the business of underwriting, trading or distributing municipal or other public securities.
Legal Matters Incident to the Issuance of the Bonds
Certain legal matters incident to the authorization and issuance of the Bonds are subject to the approving opinion of Best Best & Krieger LLP, acting in its capacity as Bond Counsel. Certain legal matters related to the Bonds and the District will be passed upon for the City by Best Best & Krieger LLP, acting in its capacity as City Attorney to the City. Certain legal matters related to disclosure will be passed upon for the City by Best Best & Krieger LLP, acting in its capacity as Disclosure Counsel to the City. Kutak Rock LLP is acting as counsel for the Underwriter. Payment of Bond Counsel’s, Disclosure Counsel’s, and Underwriter Counsel’s fees and expenses is contingent upon the sale and issuance of the Bonds. The various legal opinions to be delivered concurrently with the delivery of the Bonds will be qualified as to enforceability of the various legal instruments 290
41 by limitations imposed by bankruptcy, reorganization, insolvency or other similar laws affecting the rights of creditors generally and by equitable remedies and proceedings generally.
Rating
S&P Global Ratings (“S&P”) has assigned its municipal bond rating of “[__]” to the Bonds.
Such rating reflects only the views of S&P and an explanation of the significance of such rating may be obtained from S&P. 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 such organization, if in its judgment circumstances so warrant. Any such downward revision or withdrawal of such ratings may have an adverse effect on the market price of the Bonds.
Verification of Mathematical Accuracy
Robert Thomas, CPA, LLC, independent accountants, upon delivery of the Bonds, will deliver a report on the mathematical accuracy of certain computations contained in schedules provided to them which were prepared by the Underwriter, relating to the sufficiency of moneys and securities deposited with The Bank of New York Mellon Trust Company, N.A. to pay, when due, the principal of and interest requirements on the Bonds for redemption thereof.
The report of Robert Thomas, CPA, LLC will include the statement that the scope of its engagement is limited to verifying the mathematical accuracy of the computations contained in such schedules provided to it, and that it has no obligation to update its report because of events occurring, or data or information coming to its attention, subsequent to the date of its report.
Underwriting
The Bonds are being purchased by the Underwriter for a price of $______________ being equal to the initial principal amount of the Bonds of $_____________, plus an original issue premium of $_____________and less an Underwriter’s discount of $______________. The Underwriter has committed to purchase all of the Bonds if any of such Bonds are purchased. The Bonds are being offered for sale to the public at the price set forth on the cover page of this Official Statement, which price may be changed by the Underwriter from time to time without notice. The Bonds may be offered and sold to dealers, including the Underwriter and dealers acquiring Bonds for their own account or an account managed by them, at prices lower than the public offering price.
Piper Sandler & Co., the Underwriter of the Bonds, has entered into a distribution agreement (“Distribution Agreement”) with Charles Schwab & Co., Inc. (“CS&Co”) for the retail distribution of certain securities offerings at the original issue prices. Pursuant to the Distribution Agreement, CS&Co. will purchase Bonds from the Underwriter at the original issue price less a negotiated portion of the selling concession applicable to any Bonds that CS&Co. sells.
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42 Miscellaneous
Any statements made in this Official Statement involving matters of opinion or of estimates, whether or not expressly stated, are intended as such and not as representations of fact. No representation is made that any of such statements made will be realized. Neither this Official Statement nor any statement which may have been made verbally or in writing is to be construed as a contract or agreement between any of the City, the District or the Underwriter and the purchasers or the owners of the Bonds.
The execution and delivery of this Official Statement has been duly authorized by the City Council.
CITY OF ALISO VIEJO, for and on behalf of
COMMUNITY FACILITIES DISTRICT NO.
2005-01 (GLENWOOD AT ALISO VIEJO) OF
THE CITY ALISO VIEJO
By:
Director of Financial Services/City Treasurer
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APPENDIX A
SUMMARY OF THE AGREEMENT
The following is a summary of certain provisions of the Agreement not otherwise summarized in the text of this Official Statement. This summary is not intended to be definitive, and reference is made to the complete text of each of such documents for the complete terms thereof. [TO COME]
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APPENDIX B
PROPOSED FORM OF OPINION OF BOND COUNSEL
[Closing Date]
City of Aliso Viejo
12 Journey
Aliso Viejo, CA 92656-5335
Re: $___________ Community Facilities District No. 2005-01 (Glenwood at Aliso Viejo) of the City of Aliso Viejo 2023 Special Tax Refunding Bonds
Ladies and Gentlemen:
We have acted as bond counsel in connection with the issuance by Community Facilities District No. 2005-01 (Glenwood at Aliso Viejo) of the City of Aliso Viejo, County of Orange, State of California (the “District”), of $_______ aggregate principal amount of the Community Facilities District No. 2005-01 (Glenwood at Aliso Viejo) of the City of Aliso Viejo 2023 Special Tax Refunding Bonds (the “Bonds”). The Bonds are issued pursuant to the provisions of the Mello-Roos Community Facilities Act of 1982, as amended, being Chapter 2.5 (commencing with Section 53311) of Part 1 of Division 2 of Title 5 of the Government Code of the State of California (the “Act”), a resolution adopted by the City Council of the City of Aliso Viejo (the “City”) on October 4, 2023 (the “Resolution”), and a Fiscal Agent Agreement, dated as of December 1, 2023 (the “Agreement”), by and between the City and The Bank of New York Mellon Trust Company, N.A., as fiscal agent (the “Fiscal Agent”).
In such connection, we have examined the Act, the Resolution, the Agreement, the Tax Certificate related to the Bonds, and certified copies of the proceedings taken for the issuance and sale of the Bonds. As to questions of fact which are material to our opinions, we have relied upon the representations of the City contained in the Agreement, and in certificates of its authorized officers which have been delivered to us for the purpose of supplying such facts, without having undertaken to verify the accuracy of any such representations by independent investigation.
The opinions expressed herein are based on an analysis of existing laws, regulations, rulings and court decisions and cover certain matters not directly addressed by such authorities. Such opinions may be affected by actions taken or omitted or events occurring after the date hereof. We have not undertaken to determine, or to inform any person, whether any such actions are taken or omitted or events do occur or any other events come to our attention after the date hereof. Accordingly, this opinion speaks only as of its date and is not intended to, and may not, be relied upon in connection with any such actions, events or matters. Our engagement with respect to the Bonds has concluded with their issuance, and we disclaim any obligation to update this letter.
We have assumed the genuineness of all documents and signatures presented to us (whether as originals or as copies) and the due and legal execution and delivery thereof by, and validity against, any parties other than the City and District. We have assumed, without undertaking to verify, the accuracy of the factual matters represented, warranted or certified in the documents, and of the legal conclusions contained in the opinions, referred to in the second paragraph hereof. Furthermore, we have assumed compliance with all covenants and agreements contained in the Agreement and the Tax Certificate, including (without limitation) covenants and agreements compliance with which is necessary to ensure that future actions, omissions or events will not cause interest on the Bonds to be included in gross income for federal income tax purposes. We call attention to the fact that the rights and obligations under the Bonds, the Resolution, the Agreement and the Tax Certificate and their enforceability may be subject to bankruptcy, insolvency, reorganization, arrangement, fraudulent conveyance, moratorium and other laws relating to or affecting creditors’ rights, to the application of equitable principles, to the exercise of judicial discretion in appropriate cases, and to the limitations on legal remedies against cities and their subordinate entities in the State of California. We express no opinion with respect to any indemnification, contribution, penalty, choice of law, choice of forum, choice of venue, waiver or severability provisions contained 294
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in the documents mentioned in the preceding sentence. Finally, we undertake no responsibility for the accuracy, completeness or fairness of the Official Statement or other offering materials relating to the Bonds and express no opinion with respect thereto.
Based upon the foregoing, we are of the opinion, under existing law, that:
1. The Bonds have been duly and validly authorized by the City, on behalf of the District, and are legal, valid, and binding special obligations of the District. The Bonds are secured and payable solely from sources provided therefor in the Agreement.
2. The Agreement has been duly authorized by the City, on behalf of the District, and constitutes the valid and legally binding obligation of the District enforceable against the District in accordance with its terms, as such enforcement may be limited by bankruptcy, insolvency, moratorium, transfer or conveyance or other laws affecting creditors’ rights generally, or by the exercise of judicial discretion in accordance with general principles of equity or otherwise in appropriate cases; provided, however, that we express no opinion with respect to any indemnification, contribution, choice of law or waiver provisions contained therein.
3. The Agreement creates a valid pledge of that which the Agreement purports to pledge, subject to the provisions of the Agreement, except to the extent that the enforceability of the Agreement may be limited by moratorium, bankruptcy, reorganization, fraudulent conveyance or transfer, insolvency or other laws affecting creditors’ rights generally, or by the exercise of judicial discretion in accordance with general principles of equity or otherwise in appropriate cases.
4. Under existing statutes, regulations, rulings and court decisions, the interest on the Bonds is excluded from gross income for purposes of federal income taxation. Interest on the Bonds is not a specific preference item for purposes of the federal alternative minimum tax imposed on individuals and corporations, however, interest on the Bonds is taken into account in determining the annual adjusted financial statement income of certain corporations for the purpose of computing the alternative minimum tax imposed on certain corporations.
Although the interest on the Bonds is excluded from gross income for purposes of federal income taxation, the accrual or receipt of interest on the Bonds, or any portion thereof, may otherwise affect the federal income tax liability of the recipient. The extent of these other tax consequences will depend on the recipient’s particular tax status or other items of income or deduction. We express no opinion regarding any such consequences.
5. Interest on the Bonds is exempt from State of California personal income tax.
Respectfully submitted,
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APPENDIX C
RATE AND METHOD OF APPORTIONMENT
OF SPECIAL TAX
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APPENDIX D
THE ECONOMY OF THE CITY OF ALISO VIEJO
The following information relating to the City of Aliso Viejo and the County of Orange, California is supplied solely for informational purposes. Neither the City nor the County is obligated in any manner to pay principal of or interest on the Bonds or to cure any delinquency or default on the Bonds. The Bonds are payable solely from the sources described in the Official Statement.
THE CITY OF ALISO VIEJO
General and Economic Information on the City
The City of Aliso Viejo, which has a population of approximately 50,000 and is approximately 7 square miles, is located in South Orange County. The City is located in Southern California, approximately 45 miles from downtown Los Angeles, 70 miles north of downtown San Diego, and 4 miles northeast of the Pacific Ocean.
Neighboring communities include Laguna Hills, Laguna Niguel, Laguna Beach, and Laguna Woods.
The City of Aliso Viejo is a general law city and was incorporated on July 1, 2001. The City has a Council-Manager form of government. The City Council appoints the City Manager, who is responsible for the day-to-day administration of City business and the coordination of all City departments. The City Council is comprised of five members elected bi-annually to four-year alternating terms, with a maximum of two consecutive terms. In June 2023, the City Council approved and implemented by-district elections, which split the City into five districts. The City Council annually elects a Mayor from its members. The City employs a staff of 29 full- time employees.
City Management
The administration of the City is under the direction of David Doyle, the City Manager and Ann Eifert, the Director of Financial Services/City Treasurer.
The following is a brief biography of certain City department heads.
David Doyle, City Manager. Mr. Doyle has been the City Manager since 2013. He has over twenty years of municipal experience, previously serving as the Assistant City Manager for the City of Diamond Bar and Deputy City Manager for the City of Manhattan Beach. Mr. Doyle holds a B.A. in Social Ecology from the University of California-Irvine, and a Master’s Degree in Public Administration from California State University, Long Beach.
Ann Eifert, Director of Financial Services/City Treasurer. Ms. Eifert started with the City as the Director of Financial Services/City Treasurer in 2022. She previously worked for the City of Garden Grove for over sixteen years in various positions, including Budget, Risk Management and Public Works. Ms. Eifert holds a B.A. in Business Administration from California State University, Fullerton and a MBA from California State University, Fullerton.
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General Demographic Information
Table D-1 provides population, income levels and employment information for Fiscal Years 2013 through 2021.
Table D-1
CITY OF ALISO VIEJO
Demographic and Economic Statistics
Last Ten Fiscal Years
as of June 30, 2022
Fiscal
Year Population Total Income
Per Capita
Income
Total
Employment1
Employment
Growth Rate1
Unemployment
Rate1
2013 49,951 2,100,839,000 42,058 27,400 0.74% 4.50%
2014 49,939 2,181,535,000 43,684 27,900 1.82 3.60
2015 50,509 2,223,991,000 44,032 28,200 1.08 3.10
2016 50,312 2,274,460,000 45,207 29,100 3.19 3.30
2017 51,950 2,311,366,000 44,492 29,400 1.03 2.70
2018 51,372 2,385,153,000 46,429 29,700 1.02 2.60
2019 50,044 2,447,088,000 48,899 29,300 -1.35 2.30
2020 49,813 2,559,352,000 51,379 26,200 -10.58 6.60
2021 50,782 2,566,572,000 50,541 28,000 6.87 3.40
____________________
(1) Calendar year unemployment data uses December year-over-year figures.
Sources: City of Aliso Viejo Annual Comprehensive Financial Report for Fiscal Year Ended June 30, 2022 (sourcing to California Department of Finance, California Employment Development Department, The HDL Companies).
The following table lists the principal sales tax producers within the City for 2017-2021.
Table D-2
CITY OF ALISO VIEJO
Principal Sales Tax Producers by Category(1)
2017 2018 2019 2020 2021
Food Stores $ 22,453 $ 22,417 $ 21,367 $ 23,954 $ 22,567 Eating and Drinking Places 70,005 69,414 69,100 57,032 69,754 Auto Dealers and Supplies 5,545 5,421 6,521 5,329 5,281 Services Stations 57,190 65,193 64,494 42,939 71,162
Other Retail Stores 163,600 162,082 128,486 102,006 123,125 All Other Outlets 306,885 258,170 233,582 177,317 243,052 Total $625,678 $582,697 $523,550 $408,577 $534,941
__________________________
(1) In thousands.
Source: City of Aliso Viejo Annual Comprehensive Financial Report for Fiscal Year Ended June 30, 2022 (sourcing to The HDL Companies, State Board of Equalization, California Department of Taxes and Fees Administration, and State Controller’s Office).
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The following table lists the principal property taxpayers in the City.
Table D-3
CITY OF ALISO VIEJO
Principal Property Taxpayers
Taxpayer Primary Use
Assessed
Valuation
Percentage of
Total Assessed
Valuation
Moritz Associates LLC Residential $ 214,440,422 1.89% Barcelona LLC Residential 188,707,570 1.66
Enterprise Office Owner Commercial 165,035,028 1.45
Vantis Multifamily LLC Residential 157,841,890 1.39
Microventon, Inc. Commercial 146,609,699 1.29
City Lights-Aliso Viejo LLC Residential 125,888,928 1.11 Summit Office LLC Commercial 120,568,003 1.06
Sequoia Equities Residential 89,728,852 0.79
PLC 3 LP Residential 87,876,110 0.77
20 30 Enterprise JV LLC Commercial 86,890,960 0.77
Top Ten Totals $1,383,587,462 12.18%
__________________________
Source: City of Aliso Viejo Annual Comprehensive Financial Report for Fiscal Year Ended June 30, 2022 (sourcing to The HDL Companies and the Orange County Assessor).
Employment
The following table summarizes employment figures by industry for the Anaheim-Santa Ana-Irvine Metropolitan Division, which is located entirely within the County.
TABLE D-4
INDUSTRY EMPLOYMENT & LABOR FORCE ANNUAL AVERAGES
Anaheim-Santa Ana-Irvine Metropolitan Division
(Orange County)
2017-2021(1)
2017 2018 2019 2020 2021
Farming 2,100 2,000 1,900 1,900 1,900
Mining and Logging 500 500 500 400 400
Construction 101,800 106,300 106,400 101,300 101,500
Manufacturing 160,700 160,700 159,800 149,100 147,100
Wholesale Trade 79,000 79,800 79,400 79,400 75,300
Retail Trade 153,500 152,600 150,500 137,800 143,600
Transportation, Warehousing and Utilities 28,000 29,200 29,500 29,600 30,800 Information 26,800 26,700 26,100 24,100 23,800
Financial Activities 119,600 118,700 117,400 115,900 116,100 Professional and Business Services 304,400 317,000 328,200 310,100 322,200 Education and Health Services 215,900 224,700 231,800 225,800 236,400 Leisure and Hospitality 218,100 222,600 228,000 161,800 179,000 Other Services 50,300 51,400 52,000 44,100 47,000
Government 160,200 161,200 162,900 156,100 155,200 Total: 1,620,800 1,653,200 1,674,400 1,537,400 1,553,900 Note: The “Total” data is not directly comparable to the employment data found herein. (1) Employment is reported by place of work; it does not include persons involved in labor-management disputes. Figures are rounded to the nearest hundred. Columns may not add to totals due to rounding.
Source: State of California, Employment Development Department, Industry Employment & Labor Force by Annual Average, March 2021 Benchmark.
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The following table shows certain employment information with respect to the City, County of Orange, the State of California, and the United States for Calendar Years 2017 through 2022.
Table D-5
ORANGE COUNTY
LABOR FORCE, EMPLOYMENT AND UNEMPLOYMENT(1)
Area Labor Force Employment(2) Unemployment(3)
Unemployment
Rate(4)
2017 Aliso Viejo 30,100 29,100 1,000 3.2%
Orange County 1,605,800 1,549,000 56,800 3.5
State of California 19,185,400 18,258,100 927,300 4.8
United States 160,320,000 153,337,000 2,454,000 4.4
2018 Aliso Viejo 30,400 29,600 800 2.6%
Orange County 1,616,100 1,568,300 47,900 3.0
State of California 19,289,500 18,469,900 819,600 4.2
United States 162,075,000 155,761,000 153,336,000 3.9
2019 Aliso Viejo 30,000 29,200 800 2.6%
Orange County 1,616,800 1,571,300 45,500 2.8
State of California 19,413,200 18,617,900 795,300 4.1
United States 163,539,000 157,538,000 6,001,000 3.7
2020 Aliso Viejo 28,600 26,400 2,200 7.6%
Orange County 1,566,900 1,427,000 139,900 8.9
State of California 18,971,600 17,047,600 1,924,000 10.1 United States 160,742,000 147,795,000 12,947,000 8.1
2021 Aliso Viejo 28,600 27,100 1,500 5.1%
Orange County 1,560,700 1,467,300 93,400 6.0
State of California 18,973,400 17,586,300 1,387,100 7.3 United States 161,204,000 152,581,000 8,623,000 5.3
2022 Aliso Viejo 29,400 28,500 900 3.0%
Orange County 1,590,900 1,540,600 50,300 3.2
State of California 19,252,000 18,440,900 811,100 4.2
United States 164,287,000 158,291,000 5,996,000 3.6
________________________
(1) Data is based on annual averages, unless otherwise specified, and is not seasonally adjusted. (2) Includes persons involved in labor-management trade disputes. (3) Includes all persons without jobs who are actively seeking work. (4) The unemployment rate is computed from un-rounded data; therefore, it may differ from rates computed from rounded figures in this table.
Source: U.S. Department of Labor – Bureau of Labor Statistics; California Employment Development Department.
Education
The City is included within the boundaries of the Capistrano Unified School District, Saddleback Valley Unified School District, and Laguna Beach Unified School District, which also serves the surrounding cities of Dana Point, Laguna Niguel, Mission Viejo, Rancho Santa Margarita, San Juan Capistrano and San Clemente, as well as portions of the unincorporated county. The City has in its boundaries four elementary schools, two middle schools, one high school, and one K-8 charter school. There are also three private schools. Higher education is available within the City at SOKA University of America. 300
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APPENDIX E
FORM OF CONTINUING DISCLOSURE AGREEMENT
CITY OF ALISO VIEJO CONTINUING DISCLOSURE AGREEMENT
$___________
COMMUNITY FACILITIES DISTRICT NO. 2005-01
(GLENWOOD AT ALISO VIEJO) OF THE CITY OF ALISO VIEJO
2023 SPECIAL TAX BONDS
This Continuing Disclosure Agreement (the “Disclosure Agreement”), dated as of [_____], 2023, is executed and delivered by the City of Aliso Viejo (the “Issuer”) for and on behalf of Community Facilities District No. 2005-01 (Glenwood at Aliso Viejo) of the City of Aliso Viejo (the “District”) and Koppel & Gruber Public Finance, as Disclosure Dissemination Agent (the “Disclosure Dissemination Agent”) for the benefit of the Holders (hereinafter defined) of the Bonds (hereinafter defined) and in order to provide certain continuing disclosure with respect to the Bonds in accordance with Rule 15c2-12 of the United States Securities and Exchange Commission under the Securities Exchange Act of 1934, as the same may be amended from time to time (the “Rule”).
SECTION 1. Definitions.
Capitalized terms not otherwise defined in this Disclosure Agreement shall have the meaning assigned in the Rule or, to the extent not in conflict with the Rule, in the Official Statement (hereinafter defined). The capitalized terms shall have the following meanings:
“Annual Report” means an Annual Report described in and consistent with Section 3 of this Disclosure Agreement.
“Annual Filing Date” means the date, set in Sections 2(a) and 2(f), by which the Annual Report is to be filed with EMMA.
“Annual Financial Information” means annual financial information as such term is used in paragraph (b)(5)(i) of the Rule and specified in Section 3(a) of this Disclosure Agreement. “Audited Financial Statements” means the financial statements (if any) of the Issuer for the prior Fiscal Year, certified by an independent auditor as prepared in accordance with generally accepted accounting principles or otherwise, as such term is used in paragraph (b)(5)(i) of the Rule and specified in Section 3(b) of this Disclosure Agreement.
“Bonds” means the bonds as listed on the attached Exhibit A, with the 9-digit CUSIP numbers relating thereto.
“Certification” means a written certification of compliance signed by the Disclosure Representative stating that the Annual Report, Audited Financial Statements, Voluntary Report or Notice Event notice delivered to the Disclosure Dissemination Agent is the Annual Report, Audited Financial Statements, Voluntary Report or Notice Event notice required to be submitted to EMMA under this Disclosure Agreement. A Certification shall accompany each such document submitted to the Disclosure Dissemination Agent by the Issuer and include the full name of the Bonds and the 9-digit CUSIP numbers for all Bonds to which the document applies. “Disclosure Representative” means the City Manager, the senior member of the Issuer or his or her designee, or such other person as the Issuer shall designate in writing to the Disclosure Dissemination Agent from time to time as the person responsible for providing Information to the Disclosure Dissemination Agent. 301
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“Disclosure Dissemination Agent” means Koppel & Gruber Public Finance, acting in its capacity as Disclosure Dissemination Agent hereunder, or any successor Disclosure Dissemination Agent designated in writing by the Issuer pursuant to Section 9 hereof.
“EMMA” shall mean the Electronic Municipal Market Access System of the Municipal Securities Rulemaking Board, which can be found at www.emma.msrb.org, or any other repository of disclosure information that may be designated by the Securities and Exchange Commission in the future. “Failure to File Event” means the Issuer’s failure to file the Annual Report on or before the Annual Filing Date, respectively.
“Fiscal Agent” means the institution identified as such in the document under which the Bonds were issued.
“Holder” means any person (a) having the power, directly or indirectly, to vote or consent with respect to, or to dispose of ownership of, any Bonds (including persons holding Bonds through nominees, depositories or other intermediaries) or (b) treated as the owner of any Bonds for federal income tax purposes. “Information” means the Annual Financial Information, the Audited Financial Statements (if any) the Notice Event notices, and the Voluntary Reports.
“Notice Event” means an event listed in Sections 4(a) of this Disclosure Agreement. “MSRB” means the Municipal Securities Rulemaking Board established pursuant to Section 15B(b)(1) of the Securities Exchange Act of 1934.
“Official Statement” means that Official Statement prepared by the Issuer in connection with the Bonds, as listed on Appendix A.
“Voluntary Report” means the information provided to the Disclosure Dissemination Agent by the Issuer pursuant to Section 7.
SECTION 2. Provision of Annual Reports.
(a) The Issuer shall provide, annually, an electronic copy of the Annual Report and Certification to the Disclosure Dissemination Agent, together with a copy for the Fiscal Agent, not later than 30 days prior to the Annual Filing Date. Promptly upon receipt of an electronic copy of the Annual Report and the Certification, the Disclosure Dissemination Agent shall provide an Annual Report to EMMA not later than nine (9) months after the end of each Fiscal Year of the Issuer, commencing with the Fiscal Year ending June 30, 2023. Such date and each anniversary thereof is the Annual Filing Date. 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 3 of this Disclosure Agreement. The first Annual Report shall be satisfied with the posting of the Official Statement for the Bonds.
(b) If on the fifteenth (15th) day prior to the Annual Filing Date, the Disclosure Dissemination Agent has not received a copy of the Annual Report and Certification, the Disclosure Dissemination Agent shall contact the Disclosure Representative by telephone and in writing (which may be by e-mail) to remind the Issuer of its undertaking to provide the Annual Report pursuant to Section 2(a). Upon such reminder, the Disclosure Representative shall either (i) provide the Disclosure Dissemination Agent with an electronic copy of the Annual Report and the Certification) no later than two (2) business days prior to the Annual Filing Date, or (ii) instruct the Disclosure Dissemination Agent in writing that the Issuer will not be able to file the Annual Report within the time required under this Disclosure Agreement, state the date by which the Annual Report for such year will be provided and instruct the Disclosure Dissemination Agent that a Notice Event as described in Section 4(a)(12) has occurred and to immediately send a notice to EMMA.
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(c) If the Disclosure Dissemination Agent has not received an Annual Report and Certification by 6:00 p.m. Eastern time on Annual Filing Date (or, if such Annual Filing Date falls on a Saturday, Sunday or holiday, then the first business day thereafter) for the Annual Report, a Failure to File Event shall have occurred and the Issuer irrevocably directs the Disclosure Dissemination Agent to immediately send a notice to EMMA. (d) If Audited Financial Statements of the Issuer are prepared but not available prior to the Annual Filing Date, the Issuer shall, when the Audited Financial Statements are available, provide in a timely manner an electronic copy to the Disclosure Dissemination Agent, accompanied by a Certificate, together with a copy for the Fiscal Agent, for filing with EMMA.
(e) The Disclosure Dissemination Agent shall:
(i) upon receipt, promptly file each Annual Report received under Section 2(a) with EMMA; (ii) upon receipt, promptly file each Audited Financial Statement received under Section 2(d) with EMMA; and
(iii) provide the Issuer evidence of the filings of each of the above when made. (f) The Issuer may adjust the Annual Filing Date upon change of its fiscal year by providing written notice of such change and the new Annual Filing Date to the Disclosure Dissemination Agent, Fiscal Agent (if any) and EMMA, provided that the period between the existing Annual Filing Date and new Annual Filing Date shall not exceed one year.
SECTION 3. Content and Form of Annual Reports.
(a) Each Annual Report shall contain Annual Financial Information with respect to the Issuer, including the following:
(i) the principal amount of the Bonds outstanding as of September 2 of each year; (ii) the balance in each fund under the Fiscal Agent Agreement as of the September 2 preceding the filing of the Annual Report, including the Reserve Fund and a statement of the Reserve Requirement;
(iii) updates to Tables 1 and 6 of the Official Statement using the current year’s assessed value for Taxable Property in the District and the current year’s actual Special Tax levy; (iv) any changes to the Rates and Method of Apportionment of Special Tax approved or submitted to the electors for approval prior to the filing of the Annual Report; (v) the status of any foreclosure actions being pursued by the Issuer with respect to delinquent Special Taxes;
(vi) information regarding the percentage of delinquency, if any, in the collection of Special Taxes levied on property in the District for the Fiscal Year preceding the Annual Filing Date in the form of Table 2 to the Official Statement;
(vii) any information not already included under (i) through (vi) above that the Issuer is required to file in its annual report to the California Debt and Investment Advisory Commission pursuant to the provisions of the Mello-Roos Community Facilities Act of 1982, as amended; and (viii) (A) the total amount of the Special Taxes levied in the District in the current Fiscal Year to pay debt service on the Outstanding Bonds; (B) the total amount of such Special Taxes that was 303
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collected for the first installment of the current fiscal year; and (C) the total amount of interest due on the Outstanding Bonds on the succeeding September 1 Interest Payment Date.
In addition to any of the information expressly required to be provided under paragraph (a) of this Section, the Issuer shall provide such further information, if any, as may be necessary to make the specifically required statements set forth in clauses (i) to (vi), in the light of the circumstances under which they were made, not misleading.
(b) Audited Financial Statements prepared in accordance with GAAP or alternate accounting principles as described in the Official Statement will be included in the Annual Report. Unaudited financial statements, prepared in accordance with generally accepted accounting principles (“GAAP”) or alternate accounting principles as described in the Official Statement will be included in the Annual Report. Audited Financial Statements (if any) will be provided pursuant to Section 2(d). If the audited financial statements are not available by the time the Annual Report is required to be filed, the Annual Report shall contain any unaudited financial statements of the Issuer in a format similar to the audited financial statements, and the audited financial statements shall be filed in the same manner as the Annual Report when they become available.
Any or all of the items listed above may be included by specific reference from other documents, including official statements of debt issues with respect to which the Issuer is an “obligated person” (as defined by the Rule), which have been previously filed with each of EMMA or the Securities and Exchange Commission. If the document incorporated by reference is a final official statement, it must be available from the MSRB. The Issuer will clearly identify each such document so incorporated by reference.
SECTION 4. Reporting of Notice Events.
(a) Pursuant to the provisions of this Section 4, the Issuer shall give, or cause to be given, notice of the occurrence of any of the following events with respect to the Bonds:
(i) principal and interest payment delinquencies;
(ii) non-payment related defaults, if material;
(iii) unscheduled draws on debt service reserves reflecting financial difficulties; (iv) unscheduled draws on credit enhancements reflecting financial difficulties; (v) substitution of any credit or liquidity providers, or their failure to perform; (vi) 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 Bonds, or other material events affecting the tax status of the Bonds; (vii) modifications to the rights of owners of the Bonds, if material; (viii) Bond calls, if material, and tender offers;
(ix) defeasances;
(x) any release, substitution, or sale of property securing repayment of the Bonds, if material;
(xi) rating changes;
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(xii) any bankruptcy, insolvency, receivership, or similar event of the Issuer. This Listed Event is considered to occur when any of the following occur: the appointment of a receiver, fiscal agent, or similar officer for the Issuer in a proceeding under the 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 Issuer, or if such jurisdiction has been assumed by leaving the existing governing body and officials or officers in possession but subject to the supervision and orders of a court or governmental authority, or the entry of an order confirming a plan of reorganization, arrangement, or liquidation by a court or governmental authority having supervision or jurisdiction over substantially all of the assets or business of the Issuer;
(xiii) the consummation of a merger, consolidation, or acquisition involving the Issuer or the sale of all or substantially all of the assets of the Issuer, other than in the ordinary course of business, the entry into a definitive agreement to undertake such an action or the termination of a definitive agreement relating to any such actions, other than pursuant to its terms, if material; (xiv) appointment of a successor or additional trustee or the change of name of a trustee, if material;
(xv) the incurrence of a financial obligation of the Issuer, if material, or agreement to covenants, events of default, remedies, priority rights, or other similar terms of a financial obligation of the Issuer, any of which affect security holders, if material; and
(xvi) default, event of acceleration, termination event, modification of terms, or other similar events under the terms of a financial obligation of the Issuer, any of which reflect financial difficulties.
(b) Upon and after the occurrence of a Listed Event listed under subsection (a)(ii), (a)(vii), (a)(viii), (a)(x), (a)(xiii), (a)(xiv), or (a)(xv) above, the Issuer shall as soon as possible determine if such event would be material under applicable federal securities laws. If the Issuer determines that knowledge of the occurrence of such Listed Event would be material under applicable federal securities laws, the Issuer shall promptly notify the Disclosure Dissemination Agent in writing. Such notice shall instruct the Disclosure Dissemination Agent to report the occurrence pursuant to subsection (d) below. (c) Upon and after the occurrence of any Listed Event (other than a Listed Event listed under subsection (a)(ii), (a)(vii), (a)(viii), (a)(x), (a)(xiii), (a)(xiv), or (a)(xv) above), the Issuer shall promptly notify the Disclosure Dissemination Agent in writing. Such notice shall instruct the Disclosure Dissemination Agent to report the occurrence pursuant to subsection (d) below. (d) If the Disclosure Dissemination Agent has been instructed by the Issuer to report the occurrence of a Listed Event, the Disclosure Dissemination Agent shall file a notice of such occurrence with MSRB not in excess of ten (10) business days after the occurrence of such Listed Event. Such notice must be submitted in an electronic format as prescribed by MSRB, accompanied by such identifying information as prescribed by MSRB. Notwithstanding the foregoing, notice of a Listed Event described in subsection (a)(viii) 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 pursuant to the Fiscal Agent Agreement. The Issuer hereby agrees that the undertaking set forth in this Disclosure Agreement is the responsibility of the Issuer and that the Fiscal Agent or the Disclosure Dissemination Agent shall not be responsible for determining whether the Issuer’s instructions to the Disclosure Dissemination Agent under this Section 4 comply with the requirements of the Rule. 305
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SECTION 5. CUSIP Numbers.
Whenever providing information to the Disclosure Dissemination Agent, including but not limited to Annual Reports, documents incorporated by reference to the Annual Reports, Audited Financial Statements, notices of Notice Events, and Voluntary Reports filed pursuant to Section 4(a), the Issuer shall indicate the full name of the Bonds and the 9-digit CUSIP numbers for the Bonds as to which the provided information relates.
SECTION 6. Additional Disclosure Obligations.
The Issuer acknowledges and understands that other state and federal laws, including but not limited to the Securities Act of 1933 and Rule 10b-5 promulgated under the Securities Exchange Act of 1934, may apply to the Issuer, and that the failure of the Disclosure Dissemination Agent to so advise the Issuer shall not constitute a breach by the Disclosure Dissemination Agent of any of its duties and responsibilities under this Disclosure Agreement. The Issuer acknowledges and understands that the duties of the Disclosure Dissemination Agent relate exclusively to execution of the mechanical tasks of disseminating information as described in this Disclosure Agreement.
SECTION 7. Voluntary Reports.
(a) The Issuer may instruct the Disclosure Dissemination Agent to file information with EMMA, from time to time pursuant to a Certification of the Disclosure Representative accompanying such information (a “Voluntary Report”).
(b) Nothing in this Disclosure Agreement shall be deemed to prevent the Issuer from disseminating any other information through the Disclosure Dissemination Agent using the means of dissemination set forth in this Disclosure Agreement or including any other information in any Annual Report, Annual Financial Statement, Voluntary Report or Notice Event notice, in addition to that required by this Disclosure Agreement. If the Issuer chooses to include any information in any Annual Report, Annual Financial Statement, Voluntary Report or Notice Event notice in addition to that which is specifically required by this Disclosure Agreement, the Issuer shall have no obligation under this Disclosure Agreement to update such information or include it in any future Annual Report, Annual Financial Statement, Voluntary Report or Notice Event notice.
SECTION 8. Termination of Reporting Obligation.
The obligations of the Issuer and the Disclosure Dissemination Agent under this Disclosure Agreement shall terminate with respect to the Bonds upon the legal defeasance, prior redemption or payment in full of all of the Bonds, when the Issuer is no longer an obligated person with respect to the Bonds, or upon delivery by the Disclosure Representative to the Disclosure Dissemination Agent of an opinion of nationally recognized bond counsel to the effect that continuing disclosure is no longer required.
SECTION 9. Disclosure Dissemination Agent.
The Issuer has appointed Koppel & Gruber Public Finance as Disclosure Dissemination Agent under this Disclosure Agreement. The Issuer may, upon thirty days written notice to the Disclosure Dissemination Agent and the Fiscal Agent, replace or appoint a successor Disclosure Dissemination Agent. Upon termination of Koppel & Gruber Public Finance’s services as Disclosure Dissemination Agent, whether by notice of the Issuer or Koppel & Gruber Public Finance, the Issuer agrees to appoint a successor Disclosure Dissemination Agent or, alternately, agrees to assume all responsibilities of Disclosure Dissemination Agent under this Disclosure Agreement for the benefit of the Holders of the Bonds. Notwithstanding any replacement or appointment of a successor, the Issuer shall remain liable until payment in full for any and all sums owed and payable to the Disclosure Dissemination Agent. The Disclosure Dissemination Agent may resign at any time by providing thirty days’ prior written notice to the Issuer.
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SECTION 10. Remedies in Event of Default.
In the event of a failure of the Issuer or the Disclosure Dissemination Agent to comply with any provision of this Disclosure Agreement, the Holders’ rights to enforce the provisions of this Agreement shall be limited solely to a right, by action in mandamus or for specific performance, to compel performance of the parties’ obligation under this Disclosure Agreement. Any failure by a party to perform in accordance with this Disclosure Agreement shall not constitute a default on the Bonds or under any other document relating to the Bonds, and all rights and remedies shall be limited to those expressly stated herein.
SECTION 11. Duties, Immunities and Liabilities of Disclosure Dissemination Agent. (a) The Disclosure Dissemination Agent shall have only such duties as are specifically set forth in this Disclosure Agreement. The Disclosure Dissemination Agent’s obligation to deliver the information at the times and with the contents described herein shall be limited to the extent the Issuer has provided such information to the Disclosure Dissemination Agent as required by this Disclosure Agreement. The Disclosure Dissemination Agent shall have no duty with respect to the content of any disclosures or notice made pursuant to the terms hereof.
The Disclosure Dissemination Agent shall have no duty or obligation to review or verify any Information or any other information, disclosures or notices provided to it by the Issuer and shall not be deemed to be acting in any fiduciary capacity for the Issuer, the Holders of the Bonds or any other party. The Disclosure Dissemination Agent shall have no responsibility for the Issuer’s failure to report to the Disclosure Dissemination Agent a Notice Event or a duty to determine the materiality thereof. The Disclosure Dissemination Agent shall have no duty to determine, or liability for failing to determine, whether the Issuer has complied with this Disclosure Agreement.
The Disclosure Dissemination Agent may conclusively rely upon certifications of the Issuer at all times.
THE ISSUER AGREES TO INDEMNIFY AND SAVE THE DISCLOSURE DISSEMINATION
AGENT AND ITS RESPECTIVE OFFICERS, DIRECTORS, EMPLOYEES AND AGENTS,
HARMLESS AGAINST ANY LOSS, EXPENSE AND LIABILITIES WHICH THEY MAY INCUR
ARISING OUT OF OR IN THE EXERCISE OR PERFORMANCE OF THEIR POWERS AND DUTIES
HEREUNDER, INCLUDING THE COSTS AND EXPENSES (INCLUDING ATTORNEYS FEES) OF
DEFENDING AGAINST ANY CLAIM OF LIABILITY, BUT EXCLUDING LIABILITIES DUE TO THE DISCLOSURE DISSEMINATION AGENT’S NEGLIGENCE OR WILLFUL MISCONDUCT.
The obligations of the Issuer under this Section shall survive resignation or removal of the Disclosure Dissemination Agent and defeasance, redemption or payment of the Bonds. (b) The Disclosure Dissemination Agent may, from time to time, with prior written notice to the Issuer, consult with legal counsel (either in-house or external) of its own choosing in the event of any disagreement or controversy, or question or doubt as to the construction of any of the provisions hereof or its respective duties hereunder, and neither of them shall incur any liability and shall be fully protected in acting in good faith upon the advice of such legal counsel. The fees and expenses of such counsel shall be payable by the Issuer. (c) All documents, reports, notices, statements, information and other materials provided to the MSRB under this Agreement shall be provided in an electronic format and accompanied by identifying information as prescribed by the MSRB.
SECTION 12. Amendment; Waiver.
Notwithstanding any other provision of this Disclosure Agreement, the Issuer and the Disclosure Dissemination Agent may amend this Disclosure Agreement and any provision of this Disclosure Agreement may be waived, if such amendment or waiver is supported by an opinion of counsel qualified in federal securities laws acceptable to both the Issuer and the Disclosure Dissemination Agent to the effect that such amendment or waiver does not materially impair the interests of Holders of the Bonds and would not, in and of itself, cause the undertakings herein to violate the Rule if such amendment or waiver had been effective on the date hereof but taking into account any subsequent change in or official interpretation of the Rule; provided neither the Issuer nor 307
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the Disclosure Dissemination Agent shall be obligated to agree to any amendment modifying their respective duties or obligations without their consent thereto.
Notwithstanding the preceding paragraph, the Disclosure Dissemination Agent shall have the right to adopt amendments to this Disclosure Agreement necessary to comply with modifications to and interpretations of the provisions of the Rule as announced by the Securities and Exchange Commission from time to time by giving not less than 20 days written notice of the intent to do so together with a copy of the proposed amendment to the Issuer. No such amendment shall become effective if the Issuer shall, within 10 days following the giving of such notice, send a notice to the Disclosure Dissemination Agent in writing that it objects to such amendment.
SECTION 13. Beneficiaries.
This Disclosure Agreement shall inure solely to the benefit of the Issuer, the Fiscal Agent of the Bonds, the Disclosure Dissemination Agent, the underwriter, and the Holders from time to time of the Bonds, and shall create no rights in any other person or entity.
SECTION 14. Governing Law.
This Disclosure Agreement shall be governed by the laws of the State of California.
SECTION 15. Counterparts.
This Disclosure Agreement may be executed in several counterparts, each of which shall be an original and all of which shall constitute but one and the same instrument.
The Disclosure Dissemination Agent and the Issuer have caused this Continuing Disclosure Agreement to be executed, on the date first written above, by their respective officers duly authorized.
KOPPEL & GRUBER PUBLIC FINANCE, as Disclosure
Dissemination Agent
By:
Name:
Title:
CITY OF ALISO VIEJO, ON BEHALF OF AND FOR
COMMUNITY FACILITIES DISTRICT NO. 2005-01
(GLENWOOD AT ALISO VIEJO), as Issuer
By:
Name:
Its:
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EXHIBIT A
NAME AND CUSIP NUMBERS OF BONDS
Name of Issuer Community Facilities District No. 2005-01 (Glenwood at Aliso Viejo) of the City of Aliso Viejo
Obligated Person(s) Community Facilities District No. 2005-01 (Glenwood at Aliso Viejo) of the City of Aliso Viejo
Name of Bond Issue: $________ Community Facilities District No. 2005-01 (Glenwood at Aliso Viejo) of the City of Aliso Viejo 2023 Special Tax Refunding Bonds Date of Issuance:
Date of Official Statement:
CUSIP Number: CUSIP Number:
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APPENDIX F
DTC AND THE BOOK ENTRY SYSTEM
The information in this section concerning DTC and DTC’s book-entry only system has been obtained from sources that the District believes to be reliable, but the District takes no responsibility for the completeness or accuracy thereof. The following description of the procedures and record keeping with respect to beneficial ownership interests in the Bonds, payment of principal, premium, if any, accreted value and interest on the Bonds to DTC Participants or Beneficial Owners, confirmation and transfers of beneficial ownership interests in the Bonds and other related transactions by and between DTC, the DTC Participants and the Beneficial Owners is based solely on information provided by DTC to the District which the District believes to be reliable, but the District and the Underwriter do not and cannot make any independent representations concerning these matters and do not take responsibility for the accuracy or completeness thereof. Neither the DTC, Direct Participants, Indirect Participants nor the Beneficial Owners should rely on the foregoing information with respect to such matters, but should instead confirm the same with DTC or the DTC Participants, as the case may be.
The Depository Trust Company (“DTC”), New York, New York, will act as securities depository for the Bonds. The Bonds will be issued as fully-registered securities registered in the name of Cede & Co. (DTC’s partnership nominee) or such other name as may be requested by an authorized representative of DTC. One fully-registered Bond will be issued for each annual maturity of the Bonds, each in the aggregate principal amount of such maturity, and will be deposited through the facilities of DTC.
DTC, the world’s largest securities depository, is a limited-purpose trust company organized under the New York Banking Law, a “banking organization” within the meaning of the New York Banking Law, a member of the Federal Reserve System, a “clearing corporation” within the meaning of the New York Uniform Commercial Code, and a “clearing agency” registered pursuant to the provisions of Section 17A of the Securities Exchange Act of 1934. DTC holds and provides asset servicing for over 3.6 million issues of U.S. and non-U.S. equity issues, corporate and municipal debt issues, and money market instruments (from over 100 countries) that DTC’s participants (“Direct Participants”) deposit with DTC. DTC also facilitates the post trade settlement among Direct Participants of sales and other securities transactions in deposited securities, through electronic computerized book-entry transfers and pledges between Direct Participants’ accounts. This eliminates the need for physical movement of securities certificates. Direct Participants include both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations. DTC is a wholly-owned subsidiary of The Depository Trust & Clearing Corporation (“DTCC”). DTCC is the holding company for DTC, National Securities Clearing Corporation and Fixed Income Clearing Corporation, all of which are registered clearing agencies. DTCC is owned by the users of its regulated subsidiaries. Access to the DTC system is also available to others such as both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, and clearing corporations that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly (“Indirect Participants”). DTC has a Standard & Poor’s rating of “AA+.” The DTC Rules applicable to its Participants are on file with the Securities and Exchange Commission. More information about DTC can be found at www.dtcc.com.
Purchases of Bonds under the DTC system must be made by or through Direct Participants, which will receive a credit for the Bonds on DTC’s records. The ownership interest of each actual purchaser of each Bond (“Beneficial Owner”) is in turn to be recorded on the Direct and Indirect Participants’ records. Beneficial Owners will not receive written confirmation from DTC of their purchase. Beneficial Owners are, however, expected to receive written confirmations providing details of the transaction, as well as periodic statements of their holdings, from the Direct or Indirect Participant through which the Beneficial Owner entered into the transaction. Transfers of ownership interests in the Bonds are to be accomplished by entries made on the books of Direct and Indirect Participants acting on behalf of Beneficial Owners.
Beneficial Owners will not receive Bonds representing their ownership interests in Bonds, except in the event that use of the book-entry system for the Bonds is discontinued.
To facilitate subsequent transfers, all Bonds deposited by Direct Participants with DTC are registered in the name of DTC’s partnership nominee, Cede & Co., or such other name as may be requested by an authorized representative of DTC.
The deposit of Bonds with DTC and their registration in the name of Cede & Co. or such other DTC nominee do not effect any change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the Bonds; DTC’s records reflect only the identity of the Direct Participants to whose accounts such Bonds are credited, which may or may not be the Beneficial Owners. The Direct and Indirect Participants will remain responsible for keeping account of their holdings on behalf of their customers.
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Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. Beneficial Owners of Bonds may wish to take certain steps to augment the transmission to them of notices of significant events with respect to the Bonds, such as prepayments, tenders, defaults, and proposed amendments to the Bond documents. For example, Beneficial Owners of Bonds may wish to ascertain that the nominee holding the Bonds for their benefit has agreed to obtain and transmit notices to Beneficial Owners. In the alternative, Beneficial Owners may wish to provide their names and addresses to the registrar and request that copies of notices be provided directly to them.
Redemption notices shall be sent to DTC. If less than all of the Bonds within a maturity are being prepaid, DTC’s practice is to determine by lot the amount of the interest of each Direct Participant in such maturity to be redeemed.
Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect to Bonds unless authorized by a Direct Participant in accordance with DTC’s MMI Procedures. Under its usual procedures, DTC mails an Omnibus Proxy to the District as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co.’s consenting or voting rights to those Direct Participants to whose accounts Bonds are credited on the record date (identified in a listing attached to the Omnibus Proxy).
Redemption proceeds, distributions, and dividend payments on the Bonds will be made to Cede & Co., or such other nominee as may be requested by an authorized representative of DTC. DTC’s practice is to credit Direct Participants’ accounts upon DTC’s receipt of funds and corresponding detail information from the District or the Fiscal 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, the Fiscal Agent, or the District, subject to any statutory or regulatory requirements as may be in effect from time to time.
Payment of redemption proceeds, distributions, and dividend payments to Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC) is the responsibility of the District or the Fiscal 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.
A Bond Owner shall give notice to elect to have its Bonds purchased or tendered, through its Participant, to the Fiscal Agent, and shall effect delivery of such Bonds by causing the Direct Participant to transfer the Participant’s interest in the Bonds, on DTC’s records, to the Fiscal Agent. The requirement for physical delivery of Bonds in connection with an optional tender or a mandatory purchase will be deemed satisfied when the ownership rights in the Bonds are transferred by Direct Participants on DTC’s records and followed by a book-entry credit of tendered Bonds to the Fiscal Agent’s DTC account.
DTC may discontinue providing its services as depository with respect to the Bonds at any time by giving reasonable notice to the District or the Fiscal Agent. Under such circumstances, in the event that a successor depository is not obtained, physical certificates are required to be printed and delivered.
The District may decide to discontinue use of the system of book-entry only transfers through DTC (or a successor securities depository). In that event, Bonds will be printed and delivered to DTC.
THE FISCAL AGENT, AS LONG AS A BOOK-ENTRY ONLY SYSTEM IS USED FOR THE BONDS, WILL SEND ANY NOTICE OF REDEMPTION OR OTHER NOTICES TO OWNERS ONLY TO DTC. ANY FAILURE OF
DTC TO ADVISE ANY DTC PARTICIPANT, OR OF ANY DTC PARTICIPANT TO NOTIFY ANY BENEFICIAL
OWNER, OF ANY NOTICE AND ITS CONTENT OR EFFECT WILL NOT AFFECT THE VALIDITY OF
SUFFICIENCY OF THE PROCEEDINGS RELATING TO THE REDEMPTION OF THE BONDS CALLED FOR REDEMPTION OR OF ANY OTHER ACTION PREMISED ON SUCH NOTICE. 311
1 $________
COMMUNITY FACILITIES DISTRICT NO. 2005-01
(GLENWOOD AT ALISO VIEJO)
OF THE CITY OF ALISO VIEJO
2023 SPECIAL TAX REFUNDING BONDS
BOND PURCHASE AGREEMENT
________, 2023
City of Aliso Viejo
Community Facilities District No. 2005-01
12 Journey, Suite 100
Aliso Viejo, CA 92656
Ladies and Gentlemen:
The undersigned, Piper Sandler & Co., as underwriter (the “ Underwriter”), acting not as a fiduciary or agent for you, but on behalf of itself, offers to enter into this Bond Purchase Agreement (this “Purchase Agreement”) with the City of Aliso Viejo (the “City”) for its Community Facilities District No. 2005-01 (Glenwood at Aliso Viejo) of the City of Aliso Viejo (the “ Community Facilities District”), which upon acceptance will be binding upon the Underwriter and the City. The agreement of the Underwriter to purchase the Bonds (as hereinafter defined) is contingent upon the City satisfying all of the obligations imposed upon it under this Purchase Agreement. This offer is made subject to the City’s acceptance by the execution of this Purchase Agreement and its delivery to the Underwriter at or before 11:59 p.m., California time, on the date hereof, and, if not so accepted, will be subject to withdrawal by the Underwriter upon notice delivered to the City at any time prior to the acceptance hereof by the City. All capitalized terms used herein, which are not otherwise defined herein, shall have the respective meanings provided for such terms in a Fiscal Agent Agreement, dated as of December 1, 2023 (the “Fiscal Agent Agreement”) between the City, for and on behalf of the Community Facilities District, and The Bank of New York Mellon Trust Company, N.A., as fiscal agent (the “Fiscal Agent”).
1. Purchase, Sale and Delivery of the Bonds.
Subject to the terms and conditions and in reliance upon the representations, warranties and agreements set forth herein, the Underwriter hereby agrees to purchase from the City and the City hereby agrees to sell to the Underwriter all (but not less than all) of the $______ aggregate principal amount of the Community Facilities District No. 2005-01 (Glenwood at Aliso Viejo) of the City of Aliso Viejo 2023 Special Tax Refunding Bonds (the “ Bonds”), dated the Closing Date (as hereinafter defined), bearing interest at the rates and maturing on the dates and in the principal amounts set forth in Exhibit A hereto. The Bonds shall be subject to redemption as set forth in the Fiscal Agent Agreement. The purchase price for the Bonds shall be $______ (being 100% of the aggregate principal amount thereof, [less][plus] an original issue [discount] [premium] of $______ and less an Underwriter’s discount of $_____).
The Underwriter agrees to make a bona fide initial public offering of all of the Bonds in compliance with federal and state securities laws, at a price not in excess of the initial offering prices (or yields) set forth in Exhibit A attached hereto and incorporated herein by reference. Subsequent to 312
2 the initial public offering, the Underwriter reserves the right to change the public offering prices (or yields) as it deems necessary in connection with the offering of the Bonds, without any requirement of prior notice, provided that the Underwriter shall not change the interest rates set forth in Exhibit A.
The Bonds may be offered and sold to certain dealers at prices lower than such initial offering prices.
The Bonds shall be substantially in the form described in, shall be issued and secured under the provisions of, and shall be payable from the Special Tax Revenues and certain other amounts as provided in the Fiscal Agent Agreement and the Mello-Roos Community Facilities Act of 1982, as amended, being Chapter 2.5, Part 1, Division 2, Title 5 of the Government Code of the State of California (the “ Community Facilities District Act ”). The issuance of the Bonds has been duly authorized by the City pursuant to Resolution No. _____ (the “ Resolution”), adopted by its City Council of the City (the “City Council”), on ______, 2023.
The proceeds of the Bonds shall be used to (i) refund the outstanding Community Facilities District No. 2005-01 (Glenwood at Aliso Viejo) of the City of Aliso Viejo 2014 Special Tax Refunding Bonds (the “ Prior Bonds ”), (ii) provide for a debt service reserve fund policy (the “Reserve Policy ”) issued by _______ (the “ Insurer”) to fund 50% of the initial Reserve Requirement and fund a cash deposit for the remaining 50% of the initial Reserve Requirement, and (iii) pay costs of issuing the Bonds.
A. The City hereby acknowledges that the Underwriter is entering into this Purchase Agreement in reliance on the representations, warranties and agreements made by the City and the City shall take all action necessary to enforce its rights hereunder for the benefit of the Underwriter and shall immediately notify the Underwriter if it becomes aware that any representation, warranty or agreement made by the City herein is incorrect in any material respect.
The City acknowledges and agrees that: (i) the primary role of the Underwriter, as an underwriter, is to purchase securities for resale to investors in an arm’s-length commercial transaction between the City and the Underwriter and that the Underwriter has financial and other interests that differ from those of the City and the Community Facilities District; (ii) the Underwriter is not acting as a municipal advisor, financial advisor or fiduciary to the City, or any other person or entity and has not assumed any advisory or fiduciary responsibility to the City with respect to the transaction contemplated hereby and the discussions, undertakings and proceedings leading thereto (irrespective of whether the Underwriter has provided other services or is currently providing other services to the City on other matters); (iii) the only obligations the Underwriter has to the City with respect to the transaction contemplated hereby expressly are set forth in this Purchase Agreement, except as otherwise provided by applicable rules and regulations of the Securities and Exchange Commission or the rules of the Municipal Securities Rulemaking Board (the “ MSRB”); and (iv) the City has consulted its own legal, accounting, tax, financial and other advisors, as applicable, to the extent it has deemed appropriate in connection with the transaction contemplated herein. The City acknowledges that it has previously provided the Underwriter with an acknowledgement of receipt of the required Underwriter disclosure under Rule G-17 of the MSRB.
B. Pursuant to the authorization of the City, the Underwriter has distributed copies of the Preliminary Official Statement dated _______, 2023, relating to the Bonds, which, together with the cover page, inside cover page and appendices thereto is herein called the “ Preliminary Official Statement.” By its acceptance of this Purchase Agreement, the City hereby consents to and ratifies the use and distribution by the Underwriter of the Preliminary Official Statement, and the City agrees to execute a final official statement relating to the Bonds (the “ Official Statement ”) which will consist of the Preliminary Official Statement with such changes as may be made thereto, with the 313
3 approval of Best Best & Krieger LLP, Bond Counsel and Disclosure Counsel (herein called “ Bond Counsel”), and the Underwriter, and to provide copies thereof to the Underwriter as set forth in Section 2(T) hereof. The City hereby authorizes and requires the Underwriter to use and promptly distribute, in connection with the offer and sale of the Bonds, the Preliminary Official Statement, the Official Statement and any supplement or amendment thereto. The City further authorizes the Underwriter to use and distribute, in connection with the offer and sale of the Bonds, the Fiscal Agent Agreement, this Purchase Agreement and all information contained herein, and all other documents, certificates and statements furnished by or on behalf of the City to the Underwriter in connection with the transactions contemplated by this Purchase Agreement. The Preliminary Official Statement and/or the Official Statement may be delivered and printed in a “designated electronic format” as defined in the MSRB’s Rule G-32 and as may be agreed to by the City and the Underwriter. The City confirms that it does not object to distribution of the Preliminary Official Statement or the Official Statement in electronic form. A copy of the most recent Preliminary Official Statement sent to a potential purchaser shall be sent by first class mail or electronically (or other equally prompt means) not later than the first business day following the day upon which each such request is received.
C. To assist the Underwriter in complying with Securities and Exchange Commission Rule 15c2-12(b)(5) (the “ Rule”), the City will undertake pursuant to the Continuing Disclosure Agreement, in the form attached to the Official Statement (the “ Continuing Disclosure Agreement”), to provide annual reports and notices of certain enumerated events. A description of this undertaking is set forth in the Preliminary Official Statement and will also be set forth in the Official Statement.
D. Except as the Underwriter and the City may otherwise agree, the City will deliver to the Underwriter, at the offices of Bond Counsel in Riverside, California, or at such other location as may be mutually agreed upon by the Underwriter and the City, the documents hereinafter mentioned on the Closing Date (defined below); and the City will deliver to the Underwriter through The Depository Trust Company’s (“ DTC”) FAST delivery system, the Bonds, in definitive form (all Bonds bearing CUSIP® numbers printed thereon), duly executed by the City and authenticated by the Fiscal Agent in the manner provided for in the Fiscal Agent Agreement and the Community Facilities District Act at 8:00 a.m. California time, on December ____, 2023 (the “ Closing Date”), and the Underwriter will accept such delivery and pay the purchase price of the Bonds as set forth in paragraph (A) of this Section by wire transfer, payable in federal or other immediately available funds (such delivery and payment being herein referred to as the “ Closing”). The Bonds shall be in fully registered book-entry form (which may be typewritten) and shall be registered in the name of Cede & Co., as nominee of DTC, which will act as securities depository for the Bonds, and the specimen Bonds will be made available for checking by the Underwriter not less than 2 days prior to the Closing.
2. Representations, Warranties and Covenants of the City. The City represents, warrants and covenants to the Underwriter that:
A. The City is a public body, corporate and politic, duly organized and validly existing pursuant to the Constitution and laws of the State of California (the “State”), and has duly authorized the formation of the Community Facilities District pursuant to resolutions duly adopted by the City Council (the “ Community Facilities District Formation Resolutions ” and, together with the Resolution, the “ Community Facilities District Resolutions ”) and the Act. The City Council, as the legislative body of the Community Facilities District, has duly adopted the Community Facilities 314
4 District Formation Resolutions, has duly adopted the Resolution and an ordinance levying the Special Taxes within the Community Facilities District (the “ Ordinance”), and has caused to be recorded in the real property records of Orange County, a notice of special tax lien (the “ Notice of Special Tax Lien ”) (the Community Facilities District Formation Resolutions, the Ordinance, and the Notice of Special Tax Lien being collectively referred to herein as the “ Formation Documents”), and the City Council has duly adopted the Resolution. Each of the Formation Documents remains in full force and effect as of the date hereof and has not been amended. The Community Facilities District is duly organized and validly existing as a community facilities district under the laws of the State. The City has, and at the Closing Date will have, as the case may be, full legal right, power and authority: (i) to execute, deliver and perform its obligations under this Purchase Agreement and the Fiscal Agent Agreement and to carry out all transactions on its part contemplated by each of such agreements; (ii) to enter into the Continuing Disclosure Agreement; and (iii) to carry out, give effect to and consummate the transactions contemplated by the Formation Documents, the Fiscal Agent Agreement, this Purchase Agreement and the Official Statement.
This Purchase Agreement, the Fiscal Agent Agreement and the Continuing Disclosure Agreement are collectively referred to herein as the “City Documents.” B. By all necessary official action of the City, the City has duly authorized and approved the execution and delivery by the City of, and the performance by the City of, the obligations on its part contained in, the City Documents and has approved the use and distribution by the Underwriter of the Preliminary Official Statement and the execution, use and distribution by the Underwriter of the Official Statement, and, as of the date hereof, such authorizations and approvals are in full force and effect and have not been amended, modified or rescinded. When executed and delivered by the parties thereto, the City Documents will constitute the legally valid and binding obligations of the City, on its own behalf and on behalf of the Communities Facilities District, enforceable upon the City and the Community Facilities District in accordance with their respective terms, except as enforcement may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws or equitable principles relating to or affecting creditors’ rights generally. To the City’s knowledge, the City has complied, and will at the Closing Date be in compliance in all respects, with the terms of the City Documents.
C. The information in the Preliminary Official Statement (other than statements pertaining to the book-entry system, as to which no view is expressed) as of its date was and as of the date hereof is, and in the Official Statement (other than statements pertaining to the book-entry system as to which no view is expressed) as of its date is, true and correct in all material respects and does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading; and, upon delivery and up to and including 25 days after the End of the Underwriting Period (as defined in paragraph (D) below), the Official Statement will be amended and supplemented so as to contain no misstatement of any material fact or material omission of any statement necessary to make the statements contained therein, in the light of the circumstances in which such statements were made, not misleading.
D. Up to and including 25 days after the End of the Underwriting Period (as defined below), the City will advise the Underwriter promptly of any proposal to amend or supplement the Official Statement and will not effect or consent to any such amendment or supplement without the consent of the Underwriter, which consent will not be unreasonably withheld. The City will advise the Underwriter promptly of the institution of any proceedings known to it by any governmental 315
5 agency prohibiting or otherwise materially affecting the use of the Official Statement in connection with the offering, sale or distribution of the Bonds. As used herein, the term “End of the Underwriting Period” means the later of such time as: (i) the Bonds are delivered to the Underwriter; or (ii) the Underwriter does not retain, directly or as a member of an underwriting syndicate, an unsold balance of the Bonds for sale to the public. Unless the Underwriter gives written notice to the contrary to the City, the End of the Underwriting Period shall be deemed to be the Closing Date.
Any notice delivered pursuant to this provision shall be delivered to the City at or prior to the Closing Date and shall specify a date (other than the Closing Date) to be deemed the “End of the Underwriting Period.” If in the opinion of the Underwriter any such event or proceedings requires the preparation and distribution of a supplement or amendment to the Official Statement, the City shall prepare and furnish to the Underwriter, at the Community Facilities District’s expense, such number of copies of the supplement or amendment to the Official Statement, in (i) a “designated electronic format” consistent with the requirements of the MSRB’s Rule G-32 and (ii) a printed format form in substance mutually agreed upon by the City and the Underwriter as the Underwriter may reasonably request. If such amendment or supplement to the Official Statement shall be made subsequent to the Closing Date, the City also shall furnish, or cause to be furnished, such additional legal opinions, certificates, instruments and other documents as the Underwriter may reasonably deem necessary to evidence the truth and accuracy of any such supplement or amendment to the Official Statement.
E. As of the time of acceptance hereof and as of the Closing Date, the City and the Community Facilities District, as applicable, have each complied, and will at the Closing Date be in compliance in all material respects, with the Formation Documents and the City Documents, and any immaterial noncompliance by the City or the Community Facilities District, if any, will not impair the ability of the City or the Community Facilities District, as applicable, to carry out, give effect to or consummate the transactions on their part contemplated by the foregoing. From and after the date of issuance of its Bonds, the City will continue to comply with the covenants of the City contained in the City Documents and it shall cause the Community Facilities District to continue to comply with the covenants of the Community Facilities District contained in the City Documents.
F. Except as described in the Preliminary Official Statement, neither the City nor the Community Facilities District is, and as of the Closing Date, neither will be, in any respect material to the transactions referred to herein or contemplated hereby, in breach of or in default under, any law or administrative rule or regulation of the State, the United States of America, or of any department, division, agency or instrumentality of either thereof, or under any applicable court or administrative decree or order, or under any loan agreement, note, resolution, indenture, contract, agreement or other instrument to which the City or the Community Facilities District, as the case may be, is a party or is otherwise subject or bound; and, to the City’s knowledge, no event has occurred and is continuing which, with the passage of time or the giving of notice, or both, would constitute a default or event of default under any such instrument which breach, default or event could have a materially adverse effect on the City’s ability to perform its obligations under the City Documents; and as of such times, except as disclosed in the Official Statement, the authorization, execution and delivery of the City Documents and compliance with the provisions of each thereof, or the performance of the conditions precedent to be performed by the City pursuant to this Purchase Agreement, will not conflict with or constitute a breach of or default under any applicable law or administrative rule or regulation of the State, the United States of America, or of any department, division, agency or instrumentality of either thereof, or under any applicable court or administrative decree or order, or under any loan agreement, note, resolution, indenture, contract, agreement or other instrument to which the City is a party or is otherwise subject or bound, in any manner which 316
6 would materially and adversely affect the performance by the City of its obligations under the City Documents or the performance of the conditions precedent to be performed by the City pursuant to this Purchase Agreement. The City has received all licenses, permits or other regulatory approvals required, if any, for the pledge, collection and/or application by the Community Facilities District of the Special Taxes (as defined in the Fiscal Agent Agreement) and other moneys pledged to the payment of the principal of and interest on the Bonds under the Fiscal Agent Agreement.
G. Except as may be required under the “blue sky” or other securities laws of any jurisdiction, all approvals, consents, authorizations, elections and orders of, or filings or registrations with, any governmental authority, board, agency or commission having jurisdiction which would constitute a condition precedent to, or the absence of which would materially adversely affect, the performance by the City of its obligations under the City Documents, and the performance of the conditions precedent to be performed by the City pursuant to this Purchase Agreement, have been or will be obtained at the Closing Date and are or will be in full force and effect at the Closing Date.
H. At the time of acceptance hereof there is and as of the Closing there will be no action, suit, proceeding, inquiry or investigation, at law or in equity, before or by any court, government agency, public board or body (collectively and individually, an “ Action”) pending (notice of which has been served on the City) or to the knowledge of the City threatened, in which any such Action:
(i) in any way questions the powers of the City Council or the existence of the Community Facilities District or the titles of the officers of the City to their respective offices; (ii) affects, contests or seeks to prohibit, restrain or enjoin the issuance or delivery of the Bonds or the payment or collection of Special Taxes or any amounts pledged or to be pledged to pay the principal of and interest on the Bonds, or in any way contests or affects the validity of the City Documents or the consummation of the transactions on the part of the City contemplated thereby; (iii) contests the exclusion of interest on the Bonds from State income taxation or contests the powers of the City that result in any material adverse change relating to the financial condition of the City or the Community Facilities District; (iv) except as disclosed in the Official Statement, wherein an unfavorable decision, ruling or finding would materially adversely affect the financial position or condition of the City or the Community Facilities District or would result in any material adverse change in the ability of the City to pledge or apply the Special Tax Revenues or to pay debt service on the Bonds; (v) contests the completeness or accuracy of the Preliminary Official Statement or the Official Statement or any supplement or amendment thereto or asserts that the Preliminary Official Statement or the Official Statement contained any untrue statement of a material fact or omitted to state any material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading or (vi) 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 State tax laws or regulations; and as of the time of acceptance hereof there is and, as of the Closing Date, there will be no known basis for any Action of the nature described in clauses (i) through (vi) of this sentence.
I. The City will furnish such information, execute such instruments and take such other action in cooperation with the Underwriter and at the expense of the Underwriter as the Underwriter may reasonably request in order: (i) to qualify the Bonds for offer and sale under the “blue sky” or other securities laws and regulations of such states and other jurisdictions of the United States of America as the Underwriter may designate; and (ii) to determine the eligibility of the Bonds for investment under the laws of such states and other jurisdictions and will use its best efforts to continue such qualifications in effect so long as required for the distribution of the Bonds; provided, however, that the City will not be required to execute a special or general consent to service of 317
7 process or qualify as a foreign corporation in connection with any such qualification in any jurisdiction.
J. The City Documents conform as to form and tenor to the descriptions thereof contained in the Preliminary Official Statement. The City represents that the Bonds, when issued, executed and delivered in accordance with the Fiscal Agent Agreement and sold to the Underwriter as provided herein, will be validly issued and outstanding obligations of the City, for and on behalf of the Community Facilities District, entitled to the benefits of the Fiscal Agent Agreement. The Fiscal Agent Agreement creates a valid pledge of, first lien upon and security interest in, the Special Tax Revenues, and in the moneys in the Special Tax Fund established pursuant to the Fiscal Agent Agreement, on the terms and conditions set forth in the Fiscal Agent Agreement. The Fiscal Agent Agreement creates a valid pledge of the moneys in certain funds and accounts established pursuant to the Fiscal Agent Agreement, subject in all cases to the provisions of the Fiscal Agent Agreement permitting the application thereof for the purposes and on the terms and conditions set forth therein.
K. Except as disclosed in the Preliminary Official Statement, there are, to the City’s knowledge, no entities with outstanding assessment liens against any of the properties within the Community Facilities District which are senior to or on a parity with the lien of the Special Taxes.
L. The City or the Community Facilities District have not been notified of any listing or proposed listing by the Internal Revenue Service to the effect that it is a City or Community Facilities District whose arbitrage certifications may not be relied upon.
M. The issuance and sale of the Bonds is not subject to any transfer or other documentary stamp taxes of the State or any political subdivision thereof.
N. Any certificate signed by an authorized officer or employee of the City and delivered to the Underwriter in connection with the issuance of the Bonds shall be deemed a representation and covenant of the City to the Underwriter as to the statements made therein.
O. The City will apply the proceeds of the Bonds in accordance with the Fiscal Agent Agreement and as described in the Official Statement.
P. The total interest cost to maturity on the Bonds plus the principal amount of the Bonds is less than the total remaining interest cost to maturity on the Prior Bonds plus the outstanding principal amount of the Prior Bonds.
Q. At or prior to the Closing, the City will have duly authorized, executed and delivered the Continuing Disclosure Agreement in substantially the form under Appendix E to the Official Statement. Based on a review of its prior undertakings with respect to Rule 15c2-12, and except as disclosed in the Preliminary Official Statement and Official Statement, the City has not failed to comply in any material respect with a continuing disclosure undertaking under Rule 15c2-12 during the previous five years.
R. Between the date of this Purchase Agreement and the date of Closing, the City will not offer or issue any bonds, notes or other obligations for borrowed money not previously disclosed to the Underwriter and the City shall not create, assume or guarantee any indebtedness payable from, or pledge or otherwise encumber, the Special Taxes or other assets, properties, funds or interests that will be pledged as security for the Bonds pursuant to the City Documents.
S. Until such time as moneys have been set aside in an amount sufficient to pay or 318
8 defease all then outstanding Bonds at maturity or to the date of redemption if redeemed prior to maturity, plus unpaid interest thereon and premium, if any, to maturity or to the date of redemption if redeemed prior to maturity, the City will faithfully perform and abide by all of the covenants, undertakings and provisions on its part contained in the Fiscal Agent Agreement.
T. The Preliminary Official Statement was deemed final by a duly authorized officer of the City prior to its delivery to the Underwriter, except for the omission of such information as is permitted to be omitted in accordance with paragraph (b)(1) of the Rule. The City hereby covenants and agrees that, within seven (7) business days from the date hereof, or upon reasonable written notice from the Underwriter within sufficient time to accompany any confirmation requesting payment from any customers of the Underwriter, the City shall cause a final electronic and/or printed form of the Official Statement as set forth in Section 1 above to be delivered to the Underwriter in sufficient quantity to comply with paragraph (b)(4) of the Rule and Rules G-12, G-15, G-32 and G-36 of the Municipal Securities Rulemaking Board.
U. The City hereby approves the preparation and distribution of the Official Statement, consisting of the Preliminary Official Statement with such changes as are noted thereon and as may be made thereto, with the approval of Bond Counsel and the Underwriter from time to time prior to the Closing Date.
V. The City hereby ratifies any prior use of and authorizes the future use by the Underwriter, in connection with the offering and sale of the Bonds, of the Preliminary Official Statement, the Official Statement, this Purchase Agreement and all information contained herein, and all other documents, certificates and written statements furnished by the City to the Underwriter in connection with the transactions contemplated by this Purchase Agreement.
W. The execution and delivery of this Purchase Agreement by the City shall constitute a representation by the City to the Underwriter that the representations and warranties contained in this Section 2 with respect to the City and the Community Facilities District are true as of the date hereof.
3. Conditions to the Obligations of the Underwriter. The obligation of the Underwriter to accept delivery of and pay for the Bonds on the Closing Date shall be subject, at the option of the Underwriter, to the accuracy in all material respects of the representations and warranties on the part of the City contained herein, to the accuracy in all material respects of the statements of the officers and other officials of the City and the Community Facilities District made in any certificates or other documents furnished pursuant to the provisions hereof, to the performance by the City and the Community Facilities District of their obligations to be performed hereunder at or prior to the Closing Date and, to the following additional conditions:
A. At the Closing Date, the Community Facilities District Resolutions, the Formation Documents, and the City Documents shall be in full force and effect, and shall not have been amended, modified or supplemented, except as may have been agreed to in writing by the Underwriter, and there shall have been taken in connection therewith, with the issuance of the Bonds, and with the transactions contemplated thereby, and by this Purchase Agreement, all such actions as, in the opinion of Bond Counsel, shall be necessary and appropriate.
B. At the Closing Date, except as was described in the Preliminary Official Statement, the City shall not be, in any respect material to the Bonds, the City Documents or the transactions referred to herein or contemplated hereby, in breach of or in default under, any law or administrative rule or regulation of the State, the United States of America, or of any department, division, agency 319
9 or instrumentality of either thereof, or under any applicable court or administrative decree or order, or under any loan agreement, note, resolution, indenture, contract, agreement or other instrument to which the City is a party or is otherwise subject or bound, and the performance by the City of its obligations under the Bonds, the City Documents, the Community Facilities District Resolutions, this Purchase Agreement and any other instruments contemplated by any of such documents, and compliance with the provisions of each thereof, will not conflict with or constitute a breach of or default under any applicable law or administrative rule or regulation of the State, the United States of America or of any department, division, agency or instrumentality of either thereof or under any applicable court or administrative decree or order or under any loan agreement, note, resolution, indenture, contract, agreement or other instrument to which the City is a party or is otherwise subject or bound, in any manner which would materially and adversely affect the performance by the City of its obligations under the City Documents, the Bonds or the Community Facilities District Resolutions.
C. The information contained in the Official Statement (other than statements pertaining to the book-entry system, as to which no view is expressed) is, as of the Closing Date and as of the date of any supplement or amendment thereto pursuant hereto, true and correct in all material respects and does not, as of the Closing Date or as of the date of any supplement or amendment thereto, contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading.
D. The Underwriter shall have the right to cancel its obligation to purchase the Bonds and to terminate this Purchase Agreement by written notice to the City if, between the date of this Purchase Agreement and the Closing Date, in the Underwriter’s sole and reasonable judgment any of the following events shall occur (each a “Termination Event”):
1. Between the date hereof and the Closing Date, the market price or marketability, at the initial offering prices set forth on the cover page of the Official Statement, of the Bonds, or the ability of the Underwriter to enforce contracts for the sale of the Bonds, shall have been materially adversely affected, in the reasonable judgment of the Underwriter (evidenced by a written notice to the City terminating the obligation of the Underwriter to accept delivery of and pay for the Bonds), by reason of any of the following:
a. Legislation introduced in or enacted (or resolution passed) by the Congress of the United States of America or recommended to the Congress by the President of the United States, the Department of the Treasury, the Internal Revenue Service, or any member of Congress, or favorably reported for passage to either House of Congress by any committee of such House to which such legislation had been referred for consideration, or a decision rendered by a court established under Article III of the Constitution of the United States of America or by the Tax Court of the United States of America, or an order, ruling, regulation (final, temporary or proposed), press release or other form of notice issued or made by or on behalf of the Treasury Department of the United States of America or the Internal Revenue Service, with the purpose or effect, directly or indirectly, of imposing federal income taxation upon such interest as would be received by any owners of the Bonds beyond the extent to which such interest is subject to taxation as of the date hereof; or
b. Legislation introduced in or enacted (or resolution passed) by the Congress, or shall have been favorably reported out of committee or be pending in committee, or shall have been recommended to the Congress for passage by the President of the United States of 320
10 America or a member of the President’s Cabinet, or an order, decree, injunction or decision issued by any court of competent jurisdiction, or an order, ruling, regulation (final, temporary or proposed), press release, statement or other form of notice issued or made by or on behalf of the Securities and Exchange Commission, or any other governmental agency having jurisdiction of the subject matter, to the effect that obligations of the general character of the Bonds or the Fiscal Agent Agreement, are not exempt from registration under or other requirements of the Securities Act of 1933, as amended, or that the Fiscal Agent Agreement is not exempt from qualification under or other requirements of the Trust Indenture Act of 1939, as amended, or that the issuance, offering or sale of obligations of the general character of the Bonds, as contemplated hereby or by the Official Statement or otherwise is or would be in violation of the federal securities laws as amended and then in effect; c. A general suspension of trading in securities on the New York Stock Exchange or other major exchange shall be in force, or minimum or maximum prices for trading shall have been fixed and be in force, or maximum ranges for prices for securities shall have been required and be in force on any such exchange, whether by virtue of determination by that exchange or by order of the Securities and Exchange Commission or any other governmental authority having jurisdiction;
d. There shall have occurred (1) an outbreak or escalation of hostilities or the declaration by the United States of a national emergency or war or (2) any other calamity or crisis in the financial markets of the United States or elsewhere or the escalation of such calamity or crisis;
e. Except as disclosed in or contemplated by the Official Statement, any material adverse change in the affairs of the City or the Community Facilities District shall have occurred;
2. The introduction, proposal or enactment of any amendment to the federal or California Constitution or any action by any federal or State court, legislative body, regulatory body or other authority materially adversely affecting the tax status of the City or the Community Facilities District, their property, income, securities (or interest thereon), or the validity or enforceability of Special Taxes;
3. Any event occurring or information becoming known which, in the reasonable judgment of the Underwriter, makes untrue or incorrect in any material respect any statement or information contained in the Preliminary Official Statement or in the Official Statement or has the effect that the Preliminary Official Statement or the Official Statement contains any untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading;
4. A general banking moratorium shall have been declared by federal, State of New York or State of California officials authorized to do so or a material disruption in securities settlement, payment or clearance services affecting the Bonds shall have occurred;
5. Any new restriction on transactions in securities materially affecting the market for securities (including the imposition of any limitation in interest rates) or the extension of credit by, or a charge to the net capital requirements of, underwriters shall have been established by the New York Stock Exchange, the Comptroller of the Currency, the Securities and Exchange Commission or any other federal or State agency or the Congress of the United States of America, or 321
11 by Executive Order;
6. A decision by a court of the United States of America shall be rendered, or a stop order, release, regulation or no-action letter by or on behalf of the Securities and Exchange Commission or any other governmental agency having jurisdiction of the subject matter shall have been issued or made, to the effect that the issuance, offering or sale of the Bonds as contemplated by this Purchase Agreement or by the Official Statement, or any document relating to the issuance, offering or sale of the Bonds is or would be in violation of any provision of the federal securities laws at the Closing Date, including the Securities Act of 1933, the Securities Exchange Act of 1934 and the Trust Indenture Act of 1939;
7. Any proceeding shall have been commenced or be threatened in writing by the Securities and Exchange Commission against the City or the Community Facilities District;
8. Any rating of the City or the Community Facilities District is reduced or withdrawn or placed on credit watch with negative outlook by any major credit rating agency;
9. The commencement of an Action described in Section 2(H); Upon the occurrence of a Termination Event and the termination of this Purchase Agreement by the Underwriter, all obligations of the City, the Community Facilities District, and the Underwriter under this Agreement shall terminate, without further liability, except that the City and the Underwriter shall pay their respective expenses as set forth in Section 5 below.
E. At or prior to the Closing Date, the Underwriter shall have received a counterpart original or certified copy of the following documents, in each case satisfactory in form and substance to the Underwriter:
1. Official Statement. The Official Statement and each supplement or amendment, if any thereto, executed by an authorized officer of the City;
2. Fiscal Agent Agreement. The Fiscal Agent Agreement, duly executed and delivered by the City and the Fiscal Agent;
3. Resolutions. Certifications by the City Clerk with respect to each resolution and ordinance of the City Council, for the City or as the legislative body of the Community Facilities District, relating to the City Documents, the transactions contemplated thereby, formation of the Community Facilities District and issuance of the Bonds;
4. Continuing Disclosure Agreement. The Continuing Disclosure Agreement executed by the City;
5. Bond Counsel Opinion. An unqualified approving opinion for the Bonds, dated the Closing Date and addressed to the City, of Bond Counsel in substantially the form included as Appendix B to the Official Statement; together with a letter of Bond Counsel, dated the Closing Date and addressed to the Underwriter, to the effect that such opinion addressed to the City may be relied upon by the Underwriter to the same extent as if such opinion was addressed to it;;
6. Supplemental Opinion. A supplemental opinion or opinions, dated the Closing Date and addressed to the Underwriter, of Bond Counsel, to the effect that:
(i) this Purchase Agreement has been duly authorized, executed 322
12 and delivered by the City and, assuming due authorization, execution and delivery by the other parties thereto, constitutes the legal, valid and binding agreement of the City and is enforceable in accordance with its terms, except to the extent that enforceability may be limited by moratorium, bankruptcy, reorganization, insolvency or other similar laws affecting creditors’ rights generally or by the exercise of judicial discretion in accordance with general principles of equity or otherwise in appropriate cases and by limitations on legal remedies against public agencies in the State; (ii) the Bonds are not subject to the registration requirements of the Securities Act of 1933, as amended, and the Fiscal Agent Agreement is exempt from qualification under the Trust Indenture Act of 1939, as amended;
(iii) the information contained in the Official Statement on the cover and under the captions “REFUNDING PLAN,” “THE BONDS,” “SECURITY FOR THE BONDS,” “TAX MATTERS” and in Appendices A and B to the Official Statement (excluding any financial, statistical and economic data, forecasts, numbers, charts, graphs, estimates, projections, and assumptions and any information regarding the Insurer, the Reserve Policy, DTC and the book-entry system as to which Bond Counsel need express no opinion or view, and further, excluding any material that may be treated as included under such captions by cross-reference), are accurate insofar as such statements purport to summarize certain provisions of the Bonds, the Fiscal Agent Agreement, Bond Counsel’s final approving opinion and the Community Facilities District Act; and (iv) the Community Facilities District has been duly formed, and the Special Taxes have been duly and validly levied in accordance with the provisions of the Community Facilities District Act and, except to the extent prohibited by moratorium, bankruptcy, reorganization, fraudulent conveyance or transfer, insolvency or other similar laws affecting creditors’ rights generally, a lien to secure payment of the Special Taxes has been imposed on taxable property in the Community Facilities District;
7. Letter of Disclosure Counsel. A letter, dated the Closing Date and addressed to the Underwriter and the City, of Best Best & Krieger LLP, acting as Disclosure Counsel, to the effect that no facts have come to the attention of the attorneys in such firm rending legal services in connection with the Bonds that cause them to believe that the Preliminary Official Statement as of its date and as of the date of this Purchase Agreement and the Official Statement, as of its date or as of the Closing Date, contained or contains any untrue statement of a material fact or omitted or omits to state any material fact necessary to make the statement made therein, in light of the circumstances under which they were made, not misleading (except that no opinion or belief need be expressed as to any appendices, CUSIP numbers, financial, accounting, statistical, economic, engineering or demographic data or forecasts, numbers, charts, tables, graphs, estimates, projections, assumptions or expressions of opinion, any determinations regarding valuation, real estate, and environmental matters, or any basis therefor; information about the Underwriter, underwriting; statements relating to the treatment of the Bonds or the interest, discount or premium related thereto for tax purposes under the laws of any jurisdiction and statements contained in the Official Statement under the caption “TAX MATTERS,” any information about the Insurer, the Reserve Policy, DTC or the book- entry system).
8. City Attorney Opinion. An opinion, dated the Closing Date and addressed to the Underwriter, of the City Attorney, in substantially the form attached hereto as Exhibit B;
9. Defeasance Opinion. An opinion of Bond Counsel, addressed to the Underwriter, dated the date of Closing, as to the effective defeasance of the Prior Bonds in form and 323
13 substance acceptable to the Underwriter;
10. Closing Certificate of the City. A certificate, dated the Closing Date, and signed by an authorized officer of the City substantially in the form of Exhibit C hereto, together with such additional certifications as Bond Counsel may require;
11. Fiscal Agent Incumbency Certificate. Certified copies of the general resolution of the Fiscal Agent authorizing the execution and delivery of certain documents by certain officers of the Fiscal Agent which resolution authorizes the execution of the Fiscal Agent Agreement and the authentication of the Bonds;
12. Fiscal Agent ’s Certificate. A certificate or certificates of the Fiscal Agent, dated the Closing Date, in form and substance acceptable to the Underwriter and Bond Counsel;
13. Fiscal Agent ’s Counsel Opinion. An opinion or opinions of counsel to the Fiscal Agent dated the Closing Date and addressed to the City and the Underwriter to the effect that the Fiscal Agent has duly authorized the execution and delivery of the Fiscal Agent Agreement and is a valid and binding obligation of the Fiscal Agent enforceable in accordance with its terms;
14. Opinion of Underwriter’s Counsel. An opinion of Kutak Rock LLP, counsel to the Underwriter, dated the date of the Closing, addressed to the Underwriter, in form and substance acceptable to the Underwriter;
15. Special Tax Consultant Certificate. A certificate, dated the Closing Date from Koppel & Gruber Public Finance (the “ Special Tax Consultant ”) substantially in the form attached as Exhibit D hereto;
16. Specimen Bonds. Copies of the Specimen Bonds;
17. Nonarbitrage Certificate. A certificate of the City, dated the Closing Date, in a form acceptable to Bond Counsel and the Underwriter, that the Bonds are not arbitrage bonds within the meaning of Section 148 of the Internal Revenue Code of 1986, as amended;
18. Form 8038-G. An Information Return for Tax- Exempt Bond Issues (Internal Revenue Service Form 8038-G), in a form satisfactory to Bond Counsel for filing, executed by a duly authorized officer of the City, together with evidence that such Form 8038-G has been mailed;
19. Rating. Evidence satisfactory to the Underwriter that the Bonds have been rated the rating set forth in the Official Statement and evidence that such rating has not been revoked or downgraded;
20. Verification Agent Report. The report of Robert Thomas, CPA, LLC, as verification agent (the “Verification Agent”), on the mathematical accuracy of certain computations, contained in schedules provided to them which were prepared for the City, relating to the sufficiency of moneys and/or securities deposited with The Bank of New York Mellon Trust Company, N.A. to pay, when due, the principal of and interest and premium, if any, on the Prior Bonds on the redemption date;
21. CDIAC Statements. Copies of filings with the California Debt and Investment Advisory Commission relating to the issuance of the Bonds;
22. Letter of Representations. A copy of the Blanket Letter of Representations to 324
14 DTC relating to the Bonds signed by the City; and
23. Reserve Policy. Copy of the Reserve Policy issued by the Insurer
24. Additional Documents. Such additional legal opinions, certificates, instruments and other documents as the Underwriter may reasonably request to evidence the truth and accuracy, as of the date hereof and as of the Closing Date, of the material representations and warranties of the City contained herein, and of the statements and information contained in the Official Statement and the due performance or satisfaction by the City at or prior to the Closing of all agreements then to be performed and all conditions then to be satisfied by the City and the Community Facilities District in connection with the transactions contemplated hereby and by the Fiscal Agent Agreement and the Official Statement.
If the City shall be unable to satisfy the conditions to the obligations of the Underwriter to purchase, accept delivery of and pay for the Bonds contained in this Purchase Agreement, or if the obligations of the Underwriter to purchase, accept delivery of and pay for the Bonds shall be terminated for any reason permitted by this Purchase Agreement, this Purchase Agreement shall terminate and neither the City nor the Underwriter shall be under any further obligation hereunder, except that the respective obligations of the Underwriter and the City set forth in Section 5 hereof shall continue in full force and effect.
4. Representations and Agreements of the Underwriter. The Underwriter represents to and agrees with the City that:
A. The Underwriter is duly authorized to execute and deliver this Purchase Agreement and to take any action under the Purchase Agreement required to be taken by it.
B. The Underwriter is in compliance with MSRB Rule G-37 with respect to the City and the Community Facilities District, and is not prohibited thereby from acting as underwriter with respect to securities of the City and the Community Facilities District. The Underwriter is in compliance with MSRB Rule G-17 with respect to the City and the Community Facilities District.
C. The Underwriter has, and has had, no financial advisory relationship with the City or the Community Facilities District with respect to the Bonds, and no investment firm controlling, controlled by or under common control with the Underwriter has or has had any such financial advisory relationship, within the meaning of California Government Code Section 53590, or otherwise.
D. The Underwriter has not paid or agreed to pay, nor will it pay or agree to pay, any entity, company, firm or person (including, but not limited to, the City’s financial consultants, or any officer, agent or employee thereof), other than a bona fide officer, agent or employee working for the Underwriter, any compensation, fee, gift or other consideration contingent upon or resulting from the award of or entering into this Purchase Agreement.
E. The Underwriter has reasonably determined that the City’s undertaking in the Continuing Disclosure Agreement to provide continuing disclosure with respect to the Bonds is sufficient to effect compliance with the Rule.
5. Expenses.
A. Whether or not the Underwriter accepts delivery of and pays for the Bonds as set 325
15 forth herein, it shall be under no obligation to pay, and the City shall pay out of the proceeds of the Bonds or any other legally available funds of the City, all expenses incidental to the performance of the City’s obligations hereunder, including but not limited to the cost of printing and delivering the Bonds to the Underwriter; the costs of printing and shipping the Preliminary Official Statement and the Official Statement; the fees and disbursements of the City, the Community Facilities District, the Fiscal Agent, Verification Agent, Bond Counsel, Disclosure Counsel, accountants and any other experts or consultants retained by the City or the Community Facilities District in connection with the issuance and sale of the Bonds; and any other expenses not specifically enumerated in paragraph (B) of this Section incurred in connection with the issuance and sale of the Bonds.
B. Whether or not the Bonds are delivered to the Underwriter as set forth herein, the City shall be under no obligation to pay, and the Underwriter shall be responsible for and pay, CUSIP® and CDIAC fees and expenses to qualify the Bonds for sale under any “blue sky” laws; and all other expenses incurred by the Underwriter in connection with its public offering and distribution of the Bonds not specifically enumerated in paragraph (A) of this Section, including the fees and disbursements of its counsel.
6. Undertakings of the City. The City agrees: (a) to inform the Underwriter, from time to time, upon the reasonable request of the Underwriter, of the amount then on deposit in the Reserve Fund; and (b) to make available to the Underwriter, upon reasonable request of the Underwriter, at the expense of the City, sufficient copies of its audited financial statements, if any, and any resolutions of the City Council with respect to the Community Facilities District Resolutions, the Bonds, the Fiscal Agent Agreement, the Official Statement, any amendments or supplements thereto, and other documents relating to the Bonds and pertaining to the City or the Community Facilities District adopted or executed, as the case may be, after the Closing Date, to the extent that such documents are publicly available.
7. Establishment of Issue Price.
A. The Underwriter agrees to assist the City in establishing the issue price of the Bonds and shall execute and deliver to the City at or before the Closing Date an “issue price” or similar certificate, together with the supporting pricing wires or equivalent communications, substantially in the form attached hereto as Exhibit E, with such modifications as may be appropriate or necessary, in the reasonable judgment of the Underwriter, the City and Bond Counsel, to accurately reflect, as applicable, the sales price or prices or the initial offering price or prices to the public of the Bonds.
B. With respect to Bonds of those maturities as to which at least 10% of the Bonds of the maturity has been sold to the public (defined in paragraph (f) below) at a single price (the “ 10% test”), based on reporting by the Underwriter to the City on the date hereof and prior to the execution of this Purchase Agreement, which maturities are indicated in Exhibit A attached hereto as having satisfied the 10% test (the “10% Test Maturities”), the City will treat the first price at which 10% of each such maturity of the Bonds was sold to the public as the issue price of that maturity. With respect to Bonds of those maturities as to which the 10% test has not been satisfied, based on reporting by the Underwriter to the City on the date hereof and prior to the execution of this Purchase Agreement, which maturities are indicated in Exhibit A attached hereto as being subject to the “hold- the-offering-price rule,” defined below (the “ Hold-the-Offering-Price Maturities ”), the Underwriter and the City agree that the rules in paragraph (c) below shall apply. For purposes of this section, for Bonds maturing on the same date but having different interest rates, each separate group of Bonds having a different interest rate is subject to the 10% test or paragraph (c) below, as the case may be, as if such separate group of Bonds was a separate maturity. 326
16 C. The Underwriter confirms that it has offered the Bonds to the public on or before the date of this Purchase Agreement at the offering price or prices (each an “ initial offering price”), or at the corresponding yield or yields, set forth in Exhibit A attached hereto. Exhibit A also sets forth, identified under the columns (X) “10% Test Satisfied,” (Y) “10% Test Not Satisfied,” and (Z) “Subject to Hold-the-Offering-Price-Rule Used,” as of the date of this Purchase Agreement, the maturities, if any, of the Bonds for which the Underwriter represents that (i) the 10% test has been satisfied (based on the assumption that the orders aggregating more than 10% of a maturity will be confirmed by the close of the business day immediately following the date of this Purchase Agreement) (see clause (X) above, which will be checked), or (ii) the 10% test has not been satisfied and for which the City and the Underwriter agree that the restrictions set forth in the next sentence shall apply (see clauses (Y) and (Z) above, both of which will be checked) , which will allow the City to treat the initial offering price to the public of each such maturity as of the sale date as the issue price of that maturity (the “ hold-the-offering-price rule”). So long as the hold-the-offering-price rule remains applicable to any maturity of the Bonds, the Underwriter will neither offer nor sell unsold Bonds of that maturity to any person at a price that is higher than the initial offering price to the public during the period starting on the sale date and ending on the earlier of the following:
1. the close of the fifth (5th) business day after the sale date; or
2. the date on which the Underwriter has sold at least 10% of that maturity of the Bonds to the public at a price that is no higher than the initial offering price to the public.
The Underwriter shall promptly advise the City, after the close of the fifth (5 th) business day, whether it has sold at least 10% of each Hold-the-Offering-Price maturity to the public at a price that is no higher than the initial offering price to the public of that maturity, if such sale has occurred prior to the close of the fifth (5th) business day after the sale date.
D. The Underwriter confirms that:
(i) any selling group agreement and any retail or other third-party distribution agreement relating to the initial sale of the Bonds to the public, together with the related pricing wires, contains or will contain language obligating each dealer who is a member of the selling group and each broker-dealer that is a party to such retail or other third-party distribution agreement, as applicable:
(A) to comply with the hold-the-offering-price rule, if applicable, if and for so long as directed by the Underwriter,
(B) to promptly notify the Underwriter of any sales of Bonds that, to its knowledge, are made to a purchaser who is a related party to an underwriter participating in the initial sale of the Bonds to the public (each such term being used as defined below), and (C) to acknowledge that, unless otherwise advised by the dealer or broker-dealer, the Underwriter shall assume that each order submitted by the dealer or broker-dealer is a sale to the public.
(ii) any selling group agreement relating to the initial sale of the Bonds to the public, together with the related pricing wires, contains or will contain language obligating each dealer that is a party to a retail or other third-party distribution agreement to be employed in connection with the initial sale of the Bonds to the public to require each broker-dealer that is a party to such retail or other third-party distribution agreement to comply with the hold-the-offering-price 327
17 rule, if applicable, if and for so long as directed by the Underwriter or the dealer and as set forth in the related pricing wires.
E. The City acknowledges that, in making the representation set forth in this section, the Underwriter will rely on (i) in the event a selling group has been created in connection with the initial sale of the Bonds to the public, the agreement of each dealer who is a member of the selling group to comply with the requirements for establishing the issue price of the Bonds, including, but not limited to, its agreement to comply with the hold-the-offering-price rule, if applicable to the Bonds, as set forth in a selling group agreement and the related pricing wires, and (ii) in the event that a retail or other third-party distribution agreement was employed in connection with the initial sale of the Bonds to the public, the agreement of each broker-dealer that is a party to such agreement to comply with the requirements for establishing the issue price of the Bonds, including, but not limited to, its agreement to comply with the hold-the-offering-price rule, if applicable to the Bonds, as set forth in the retail or other third-party distribution agreement and the related pricing wires.
F. The Underwriter acknowledges that sales of any Bonds to any person that is a related party to an underwriter participating in the initial sale of the Bonds to the public (each such term being used as defined below) shall not constitute sales to the public for purposes of this section.
Further, for purposes of this section:
(i) “public” means any person other than an underwriter or a related party;
(ii) “underwriter” means (A) any person that agrees pursuant to a written contract with the City (or with the lead underwriter to form an underwriting syndicate) to participate in the initial sale of the Bonds to the public and (B) any person that agrees pursuant to a written contract directly or indirectly with a person described in clause (A) to participate in the initial sale of the Bonds to the public (including a member of a selling group or a party to a retail or other third- party distribution agreement participating in the initial sale of the Bonds to the public); (iii) a purchaser of any of the Bonds is a “related party” to an underwriter if the underwriter and the purchaser are subject, directly or indirectly, to (A) more than 50% common ownership of the voting power or the total value of their stock, if both entities are corporations (including direct ownership by one corporation of another), (B) more than 50% common ownership of their capital interests or profits interests, if both entities are partnerships (including direct ownership by one partnership of another), or (C) more than 50% common ownership of the value of the outstanding stock of the corporation or the capital interests or profit interests of the partnership, as applicable, if one entity is a corporation and the other entity is a partnership (including direct ownership of the applicable stock or interests by one entity of the other); and (iv) “sale date” means the date of execution of this Purchase Agreement by all parties.
8. Notices. Any notice or other communication to be given to the City pursuant to this Bond Purchase Agreement may be given by delivering the same in writing to such entity, at the addresses set forth on the cover page hereof. Any notice or other communication to be given to the Underwriter under this Purchase Agreement may be given by delivering the same in writing to Piper Sandler & Co., 2321 Rosecrans Ave., Suite 3200, El Segundo, California 90245, Attention: Public Finance. All such notices, requests or other communications may be made by telephone, personal or courier delivery, registered or certified mail, facsimile transmission or electronic communication, 328
18 provided that delivery by facsimile transmission or electronic communication must be confirmed by the sender. The City and the Underwriter may, by notice given as aforesaid, specify a different address for any such notices, requests or other communications.
9. Parties In Interest. This Purchase Agreement is made solely for the benefit of the City and the Underwriter (including any successors or assignees of the Underwriter) and no other person shall acquire or have any right hereunder or by virtue hereof. The City and the Underwriter may not assign this Agreement. The term “successor” shall not include any holder of any Bonds merely by virtue of such holding.
10. Survival of Representations and Warranties. The representations and warranties of the City under this Purchase Agreement shall not be deemed to have been discharged, satisfied or otherwise rendered void by reason of the Closing and regardless of any investigations made by or on behalf of the Underwriter (or statements as to the results of such investigations) concerning such representations and statements of the City or the Community Facilities District and regardless of delivery of and payment for the Bonds.
11. Severability. If any provision of this Purchase Agreement is, or is held or deemed to be, invalid, inoperative or unenforceable as applied in any particular case in any jurisdiction or jurisdictions, because it conflicts with any provisions of any constitution, statute, rule of public policy or for any other reason, such circumstances shall not make the provision in question invalid, inoperative or unenforceable in any other case or circumstance, or make any other provision or provisions of this Agreement invalid, inoperative or unenforceable to any extent whatsoever.
12. Execution in Counterparts. This Purchase Agreement may be executed by the parties hereto in separate counterparts, each of which when so executed and delivered shall be an original, but all such counterparts shall together constitute but one and the same instrument.
13. No Prior Agreements. This Purchase Agreement supersedes and replaces all prior negotiations, agreements and understanding between the parties hereto in relation to the sale of the Bonds by the City.
14. Governing Law. This Purchase Agreement shall be governed by the laws of the State applicable to contracts made and performed in the State. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK; SIGNATURE PAGE FOLLOWS]
329
19 15. Effective Date. This Purchase Agreement shall become effective and binding upon the respective parties hereto upon the execution of the acceptance hereof by the City and shall be valid and enforceable as of the time of such acceptance.
Very truly yours,
PIPER SANDLER & CO.
By:
Its: Managing Director
The foregoing is hereby agreed to and
accepted as of the date first above written:
CITY OF ALISO VIEJO, for and on behalf
of COMMUNITY FACILITIES
DISTRICT NO. 2005-01 (GLENWOOD AT
ALISO VIEJO) OF THE CITY OF ALISO
VIEJO
By:
Authorized Representative
Time of Execution: _____________ p.m. California time
[EXECUTION PAGE OF BOND PURCHASE AGREEMENT – COMMUNITY FACILITIES DISTRICT NO. 2005-01 (GLENWOOD AT ALISO VIEJO) OF THE CITY OF ALISO VIEJO 2023 SPECIAL TAX REFUNDING BONDS]
330
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EXHIBIT A
$________
COMMUNITY FACILITIES DISTRICT NO. 2005-01
(GLENWOOD AT ALISO VIEJO)
OF THE CITY OF ALISO VIEJO
2023 SPECIAL TAX REFUNDING BONDS
MATURITY SCHEDULE
Maturity
(September 1)
Principal
Amount
Interest
Rate Yield Price
10% Test
Satisfied*
10% Test
Not
Satisfied
Subject to
Hold-The-
Offering-Price
Rule (marked
if used)
2024
2025
2026
2027
2028
2029
2030
2031
2032
2033
2034
2035
2036
2037
2038
20__(T)
20__
_________________
(T) Term Bond.
(C) Priced to optional call at [par] on September 1, 20___. * At the time of execution of this Bond Purchase Agreement and assuming orders are confirmed immediately after the execution of this Bond Purchase Agreement.
331
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EXHIBIT B
FORM OF CITY ATTORNEY OPINION
[Closing Date]
Piper Sandler & Co.
El Segundo, CA
City of Aliso Viejo
Aliso Viejo, CA
Re: Community Facilities District No. 2005-01 (Glenwood at Aliso Viejo) of the City of Aliso Viejo 2023 Special Tax Refunding Bonds
Ladies and Gentlemen:
I serve as City Attorney to the City of Aliso Viejo (the “City”). This opinion is addressed to you in connection with the issuance by the City of its Community Facilities District No. 2005-01 (Glenwood at Aliso Viejo) of the City of Aliso Viejo 2023 Special Tax Refunding Bonds (the “Bonds”) in the principal amount of $_____. The Bonds are being issued pursuant to a Fiscal Agent Agreement, dated as of December 1, 2023 (the “Fiscal Agent Agreement”), between the City and The Bank of New York Mellon Trust Company, N.A., as fiscal agent (the “Fiscal Agent ”) and sold pursuant to the Bond Purchase Agreement dated [BPA Date] (the “Purchase Agreement”), between the City and Piper Sandler & Co., as underwriter (the “Underwriter”). Capitalized terms not otherwise defined herein shall have the meanings ascribed thereto in the Fiscal Agent Agreement or, if not defined in the Fiscal Agent Agreement, in the Purchase Agreement.
In rendering this opinion, I have made the assumption that all documents submitted to or reviewed by me are accurate and complete and, if not originals, are true and correct copies of originals. As to questions of fact material to this opinion letter, I have relied upon representations and information supplied to me by the City and its officers, employees, and representatives and upon representations and certificates of various public officials. In the course of my representation, nothing has come to my attention that caused me to believe that any of the factual representations upon which I have relied are not true, but I have made no other factual investigations.
When used herein, the phrase “to my current actual knowledge” means that, during the course of my representation of the City, no information that would give me current actual knowledge of the inaccuracy of such statements has come to my attention. However, I have not undertaken any independent investigation or inquiry to determine the accuracy of such statements other than inquiries of officers of the City. Any limited inquiry undertaken by me during the preparation of this opinion letter should not be regarded as such an investigation. No inference as to my knowledge of any matters bearing on the accuracy of any such statement should be drawn from the fact of my representation of the City, either past or present.
For the purpose of rendering the opinions set forth below, I have assumed that the Bonds have been issued in compliance with the provisions of the Mello-Roos Community Facilities Act of 1982 of the State of California (being §§53311 et seq., of the California Government Code), that the Bonds have been issued in accordance with the requirements of the Fiscal Agent Agreement, and that 332
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such issuance does not result in the violation of any constitutional, statutory, or other limitation relating to the amount of indebtedness that may be incurred by the City.
Based on and subject to the foregoing, and in reliance thereon, as of the date hereof, I am of the opinion that:
1. The City is a public body, corporate and politic, duly organized and existing under and by virtue of the laws of the State of California.
2. The meetings of the City relating to the proceedings taken in connection with the issuance of the Bonds were duly called and held and the Resolution was duly adopted or enacted and is in full force and effect and has not been amended, modified or supplemented in any way.
3. The Purchase Agreement, the Fiscal Agent Agreement, the Continuing Disclosure Agreement and the Bonds have been duly authorized and executed by the City and, assuming the due authorization, execution, and delivery of the Purchase Agreement, Continuing Disclosure Agreement and the Fiscal Agent Agreement by and their enforceability against the other parties thereto, the Purchase Agreement, Continuing Disclosure Agreement, the Fiscal Agent Agreement and the Bonds are legal, valid, binding agreements of the City for the District enforceable against the City in accordance with their respective terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization, arrangement, fraudulent conveyance, moratorium, or other laws relating to or affecting the enforcement of creditors’ rights generally; by the application of general principles of equity, including without limitation concepts of materiality, reasonableness, good faith, and fair dealing, regardless of whether considered in a proceeding in equity or at law; the possible unavailability of specific performance or injunctive relief; and by the limitations imposed on actions against governmental entities in the State of California.
4. The adoption of the Resolution and the execution and delivery by the City of the Purchase Agreement, the Fiscal Agent Agreement, Continuing Disclosure Agreement, and the Bonds and compliance with the provisions thereof by the City do not violate any applicable law, regulation or, to the best of my current actual knowledge, judgment, order or decree of any court or any public or governmental agency or authority of the State of California or the federal government of the United States of America and, to the best of my current actual knowledge, do not result in the breach of any of the provisions of, or constitute a default under, any indenture, mortgage, deed of trust or other agreement or instrument to which the City is a party or by which it is otherwise subject.
5. To my current actual knowledge, the City is not violating any applicable law or administrative regulation of the State of California or the United States, is not violating or in breach of any applicable judgment or decree, and is not in breach of or default under any loan agreement, note, resolution, agreement or other instrument to which the City is a party or is otherwise subject, which violation, breach, or default would materially adversely affect the transactions contemplated by the Purchase Agreement, the Fiscal Agent Agreement, or the Bonds.
The opinions set forth above are further qualified as follows:
(a) My opinions are limited to the matters expressly set forth herein and no opinion is to be implied or may be inferred beyond the matters expressly so stated; 333
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(b) I am licensed to practice law in the State of California; accordingly, the foregoing opinions only apply insofar as the laws of the State of California and the United States may be concerned, and I express no opinion with respect to the laws of any other jurisdiction; (c) I express no opinion as to the enforceability under certain circumstances of contractual provisions respecting various summary remedies without notice or opportunity for hearing or correction, especially if their operation would work a substantial forfeiture or impose a substantial penalty upon the burdened party;
(d) I express no opinion as to the effect or availability of any specific remedy provided for in the Fiscal Agent Agreement under particular circumstances, except that I believe such remedies are, in general, sufficient for the practical realization of the rights intended thereby; (e) I express no opinion as to the enforceability of any indemnification, contribution, choice of law, choice of forum, or waiver provisions contained in the Fiscal Agent Agreement or the Purchase Agreement;
(f) I express no opinion concerning the application to or compliance with federal securities law, including but not limited to the Securities Act of 1933, as amended, and the Trust Indenture Act of 1939, as amended, any state securities or “Blue Sky” law, or any federal, state or local tax law, of the Bonds or the issuance and sale thereof; (g) I disclaim any obligation to update this opinion for events occurring after the date hereof or any new facts or information that may become known to me after the date of this opinion; (h) I express no opinion concerning the defeasance of the Prior Bonds.
I hereby confirm to you that, to my current actual knowledge, there are no actions, suits, proceedings, inquiries or investigations, at law or in equity, before or by any court, governmental agency, public board or body that are pending and have been served, or overtly threatened in writing against the City, contesting the titles of its officers to their respective offices, or seeking to restrain or to enjoin the issuance, sale or delivery of the Bonds, the application of the proceeds thereof in accordance with the Resolution, or the Fiscal Agent Agreement, or the collection or application of the Special Taxes and the interest thereon to pay the principal of and interest on the Bonds, or in any way contesting or affecting the validity or enforceability of the Bonds, the Resolution, the Fiscal Agent Agreement, the Continuing Disclosure Agreement, or the powers of the City or its authority with respect to the Bonds, the Resolutions, the Fiscal Agent Agreement, the Continuing Disclosure Agreement, the Purchase Agreement or any action on the part of the City contemplated by any of said documents.
As counsel to the City in this matter, I have not rendered financial advice to the City and do not represent, by this opinion or otherwise, that I have reviewed or made any assessment about, nor do I offer any opinion about, the financial condition of the City, past, present or future, including any financial information contained in the documents; nor have I reviewed the financial feasibility of this transaction or those projects that the proceeds of the Bonds will fund or any of their components, and, accordingly, I offer no opinion whatsoever regarding such financial feasibility.
This letter is furnished by me as City Attorney. No attorney-client relationship has existed or exists between me and the Underwriter in connection with the Bonds or by virtue of this letter. This letter is delivered to the Underwriter solely for their benefit in connection with the transactions 334
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covered by the first paragraph of this letter and may not be relied upon or used by, circulated, quoted or referred to, nor may copies hereof be delivered to, any other person or for any other purpose without my prior written approval; provided, however, that copies of this opinion may be included in the closing transcripts for the transactions covered by the first paragraph of this letter. This letter is not intended to be relied upon by owners of Bonds.
Very truly yours,
335
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EXHIBIT C
COMMUNITY FACILITIES DISTRICT NO. 2005-01
(GLENWOOD AT ALISO VIEJO)
OF THE CITY OF ALISO VIEJO
2023 SPECIAL TAX REFUNDING BONDS
CLOSING CERTIFICATE OF THE CITY
I, the undersigned, hereby certify that I am the ________ of the City of Aliso Viejo (the “City”), the City Council of the City (the “City Council”) of which is the legislative body for Community Facilities District No. 2005-01 (Glenwood at Aliso Viejo) of the City of Aliso Viejo (the “Community Facilities District”), a community facilities district duly organized and existing under the laws of the State of California (the “State”) and I am authorized to execute this Certificate on behalf of the City in connection with the issuance of the above-captioned bonds (the “Bonds”). All capitalized terms used and not otherwise defined herein shall have the meanings given such terms in the Bond Purchase Agreement (the “Bond Purchase Agreement”), dated [BPA Date], by and between the City and Piper Sandler & Co.
I further certify on behalf of the City that:
(i) The representations, warranties and covenants of the City contained in the Bond Purchase Agreement are true and correct in all material respects on and as of the date hereof as if made on the date hereof;
(ii) The Community Facilities District Resolutions, Formation Documents and the City Documents are in full force and effect and have not been amended, modified or supplemented; (iii) Except as disclosed in the Official Statement, there is no action, suit, proceeding, inquiry or investigation at law or in equity, or by any court or regulatory agency, public board or body pending, with respect to which the City or the Community Facilities District has been served with process, or to the knowledge of the City, threatened wherein an unfavorable decision, ruling or finding would: (a) affect the creation, organization, existence or powers of the City or the Community Facilities District, or the titles of their officers to their respective offices, (b) enjoin or restrain the issuance, sale and delivery of the Bonds, the levy or collection of the Special Taxes or any other moneys or property pledged or to be pledged under the Fiscal Agent Agreement, or the pledge thereof, (c) in any way question or affect any of the rights, powers, duties or obligations of the City or the Community Facilities District with respect to the Special Taxes or moneys and assets pledged or to be pledged to pay the principal of, premium, if any, or interest on the Bonds, (d) in any way question or affect any authority for the issuance of the Bonds, or the validity or enforceability of the Bonds or the proceedings relating to the issuance of the Bonds, or (e) in any way question or affect the Bond Purchase Agreement or the transactions contemplated thereby, the Official Statement or the City Documents;
(iv) The information in the Preliminary Official Statement (other than statements pertaining to the book-entry system, as to which no view is expressed) as of its date was and as of the date hereof is, and in the Official Statement (other than statements pertaining to the book-entry system, as to which no view is expressed) as of its date was and as of the date hereof is, true and correct in all material respects and does not contain any untrue statement of a material fact or omit to 336
C-2
state a material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading;
(v) The City has complied with all agreements and covenants, and satisfied all conditions, on its part to be complied with or satisfied under the Bond Purchase Agreement and under the Community Facilities District Resolutions, the Formation Documents, the City Documents and the Official Statement at or prior to the date hereof; (vi) No event has occurred since the date of the Official Statement which either makes untrue or incorrect in any material respect as of the date hereof any statement or information contained in the Preliminary Official Statement or the Official Statement (other than statements pertaining to the book-entry system as to which no view is expressed) or is not reflected in the Official Statement but should be reflected therein in order to make the statements and information therein not misleading in any material respect; and
(vii) The use of and distribution by the Underwriter of the Preliminary Official Statement and the Official Statement in connection with the offer and sale of the Bonds is hereby ratified.
IN WITNESS WHEREOF, the undersigned has executed this certificate as of the date set forth below.
Dated: [Closing Date] CITY OF ALISO VIEJO
By:
Its:
337
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EXHIBIT D
COMMUNITY FACILITIES DISTRICT NO. 2005-01
(GLENWOOD AT ALISO VIEJO)
OF THE CITY OF ALISO VIEJO
2023 SPECIAL TAX REFUNDING BONDS
CERTIFICATE OF SPECIAL TAX CONSULTANT
The undersigned hereby states and certifies:
1. That the undersigned is an authorized officer of Koppel & Gruber Public Finance (the “Special Tax Consultant”) and as such is familiar with the facts herein certified and is authorized and qualified to certify the same.
2. That the Special Tax Consultant has reviewed and is familiar with the Rate and Method of Apportionment of Special Tax (the “Rate and Method”) as set forth in Appendix C to the Official Statement dated [BPA Date], for Community Facilities District No. 2005-01 (Glenwood at Aliso Viejo) of the City of Aliso Viejo (the “Community Facilities District”) 2023 Special Tax Refunding Bonds. Capitalized terms not otherwise defined herein shall be defined as provided in the Rate and Method or the Fiscal Agent Agreement, dated as of December 1, 2023, between the City of Aliso Viejo (the “City”) and The Bank of New York Mellon Trust Company, N.A., as Fiscal Agent .
3. That the Special Taxes, if levied in accordance with the Rate and Method and collected will annually yield sufficient revenue to make timely payments of the Annual Debt Service on the Bonds, and annual Administrative Expenses related to the levy and collection of the Special Taxes and the expenses of the Fiscal Agent for the Bonds (no representation is made as to the actual amounts that will be collected in future years).
4. That the Special Tax, if collected in the maximum amounts permitted pursuant to the Rate and Method on the Closing Date, after payment of annual Administrative Expenses related to the levy and collection of the Special Taxes and the expenses of the Fiscal Agent for the Bonds, would annually generate at least 110% of the Annual Debt Service payable with respect to the Bonds payable from such Special Taxes assuming the debt service schedule shown in the Official Statement is true and correct.
5. That all information supplied by the Special Tax Consultant for use in the Official Statement is true and correct, as of the date of the Official Statement and as of the date hereof.
6. That, as of the dates of the Preliminary Official Statement and the Official Statement and as of the date hereof, the information contained in those portions of the Official Statement entitled “THE DISTRICT,” and “APPENDIX C,” including the tables sourced to the Special Tax Consultant, and the other data provided by the Special Tax Consultant and included in the Official Statement, do not, to our knowledge, contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made therein, in light of the circumstances under which they were made, not misleading.
7. The City, Piper Sandler & Co., Best Best & Krieger LLP and all the professionals involved in the financing are entitled to rely on this Certificate. 338
D-2
Dated: [Closing Date] KOPPEL & GRUBER PUBLIC FINANCE
By:
339
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EXHIBIT E
$_______
COMMUNITY FACILITIES DISTRICT NO. 2005-01
(GLENWOOD AT ALISO VIEJO)
OF THE CITY OF ALISO VIEJO
2023 SPECIAL TAX REFUNDING BONDS
FORM OF ISSUE PRICE CERTIFICATE
The undersigned, on behalf of Piper Sandler & Co. (“Piper Sandler”) hereby certifies as set forth below with respect to the sale and issuance of the above-captioned bonds (the “Bonds”).
1. Sale of the Bonds.
(a) Piper Sandler offered each Maturity of the Bonds to the Public for purchase at the respective initial offering prices listed in Schedule A (the “Initial Offering Prices”) on or before the Sale Date. A copy of the pricing wire or equivalent communication for the Bonds is attached to this certificate as Schedule B.
(b) As set forth in the Bond Purchase Agreement, dated [BPA Date], between the Issuer and Piper Sandler, Piper Sandler agreed in writing that, (i) for each Maturity of the Bonds, it would neither offer nor sell any of the Bonds of such Maturity to any person at a price that is higher than the Initial Offering Price for such Maturity during the Holding Period for such Maturity (the “hold-the- offering-price rule”), and (ii) any selling group agreement shall contain the agreement of each dealer who is a member of the selling group, and any retail distribution agreement shall contain the agreement of each broker-dealer who is a party to the retail distribution agreement, to comply with the hold-the-offering-price rule. Pursuant to such agreement, no Underwriter (as defined below) has offered or sold any Maturity of the Bonds at a price that is higher than the respective Initial Offering Price for that Maturity of the Bonds during the Holding Period.
2. Defined Terms.
(a) Holding Period means, for each Maturity of the Bonds, the period starting on the Sale Date and ending on the earlier of (i) the close of the fifth business day after the Sale Date, or (ii) the date on which Piper Sandler has sold at least 10% of such Maturity of the Bonds to the Public at prices that are no higher than the Initial Offering Price for such Maturity. (b) Issuer means the City of Aliso Viejo.
(c) Maturity means Bonds with the same credit and payment terms. Bonds with different maturity dates, or Bonds with the same maturity date but different stated interest rates, are treated as separate Maturities.
(d) Public means any person (including an individual, trust, estate, partnership, association, company, or corporation) other than an Underwriter or a related party to an Underwriter.
The term “related party” for purposes of this certificate generally means any two or more persons who have greater than 50 percent common ownership, directly or indirectly. 340
E-2
(e) Sale Date means the first day on which there is a binding contract in writing for the sale of a Maturity of the Bonds. The Sale Date of the Bonds is [BPA Date]. (f) Underwriter means (i) any person that agrees pursuant to a written contract with the Issuer (or with the lead underwriter to form an underwriting syndicate) to participate in the initial sale of the Bonds to the Public, and (ii) any person that agrees pursuant to a written contract directly or indirectly with a person described in clause (i) of this paragraph to participate in the initial sale of the Bonds to the Public (including a member of a selling group or a party to a retail distribution agreement participating in the initial sale of the Bonds to the Public).
The representations set forth in this certificate are limited to factual matters only. Nothing in this certificate represents Piper Sandler’s interpretation of any laws, including specifically Sections 103 and 148 of the Internal Revenue Code of 1986, as amended, and the Treasury Regulations thereunder. The undersigned understands that the foregoing information will be relied upon by the Issuer with respect to certain of the representations set forth in a Certificate as to Arbitrage and Tax Compliance Procedures for the Bonds and with respect to compliance with the federal income tax rules affecting the Bonds, and by Best Best & Krieger LLP in connection with rendering its opinion that the interest on the Bonds is excluded from gross income for federal income tax purposes, the preparation of the Internal Revenue Service Form 8038-G, and other federal income tax advice that it may give to the Issuer from time to time relating to the Bonds. 341
E-3
Dated: [Closing Date] PIPER SANDLER & CO.
By:
Title:
-Signature Page-
Issue Price Certificate
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E-4
SCHEDULE A
SALE PRICES
(To be attached)
343
E-5
SCHEDULE B
PRICING WIRE OR EQUIVALENT COMMUNICATION
(Attached)
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60367.10008\41425215.2
IRREVOCABLE REFUNDING INSTRUCTIONS
These IRREVOCABLE REFUNDING INSTRUCTIONS (these “Instructions”), dated as of ___________, 2023, are given by the CITY OF ALISO VIEJO (the “City”), on behalf of its Community Facilities District No. 2005-01 (Glenwood at Aliso Viejo) (the “District”), to THE BANK OF NEW YORK MELLON TRUST COMPANY, N.A., a national banking association organized and existing under the laws of the United States of America, acting as fiscal agent (the “Fiscal Agent”) for the hereinafter defined 2014 Bonds.
W l T N E S S E T H :
WHEREAS, the City has previously issued, for and on behalf of the District, the Community Facilities District No. 2005-01 (Glenwood at Aliso Viejo) of the City of Aliso Viejo 2014 Special Tax Refunding Bonds in the aggregate principal amount of $32,270,000 (the “2014 Bonds”) for the purpose of refinancing certain public facilities, pursuant to that certain Fiscal Agent Agreement, dated as January 1, 2014, (the “2014 Agreement”), by and between the City, for and on behalf of the District, and the Fiscal Agent; and WHEREAS, the City has determined that it is in the best financial interests of the District to refund, at this time, the outstanding 2014 Bonds; and WHEREAS, in order to provide funds for such purpose, the City is issuing, for and on behalf of the District, the Community Facilities District No. 2005-01 (Glenwood at Aliso Viejo) of the City of Aliso Viejo 2023 Special Tax Refunding Bonds (the “2023 Bonds”) and applying a portion of the proceeds thereof to redeem all of the outstanding 2014 Bonds; and WHEREAS, the 2023 Bonds are being issued pursuant to that certain Fiscal Agent Agreement, dated as of December 1, 2023 (the “2023 Agreement”), by and between the City, for and on behalf of the District, and the Fiscal Agent; and WHEREAS, the City wishes to give these Instructions to the Fiscal Agent for the purpose of providing the terms and conditions relating to the deposit and application of moneys to provide for the payment and redemption of the outstanding 2014 Bonds.
NOW, THEREFORE, the City hereby irrevocably instructs the Fiscal Agent as follows:
Section 1. 2014 Bond Fund . The Fiscal Agent shall hold within the Bond Fund established pursuant to Section 4.02 of the 2014 Agreement, separate and apart from all other funds and accounts held by it, the proceeds of the 2023 Bonds, together with other funds of the District, which amounts are hereby irrevocably pledged as a special trust fund for the redemption of the outstanding 2014 Bonds, as identified in Schedule 1 attached hereto, on March 1, 2024. Neither the Fiscal Agent nor any other person shall have a lien upon or right of set off against the amounts at any time on deposit in the Bond Fund, and such amounts shall be applied only as provided herein.
Section 2. Deposit into the 2014 Bond Fund; Investment of Amounts . Concurrently with delivery of the 2023 Bonds, the City shall cause to be deposited in the Bond Fund the amount of $[________] in immediately available funds which represents $[_________] on hand in the 345
60367.10008\41425215.2
2 funds and accounts relating to the 2014 Bonds and $[_____________] of 2023 Bonds proceeds.
The City hereby directs the Fiscal Agent to invest $[___] in U.S. governmental obligations or other non-callable obligations and hold the amount of $[___] as uninvested cash.
The City signifies that by making the deposit described herein, it is discharging the outstanding 2014 Bonds pursuant to Sections 2.03(a) and 9.03 of the 2014 Agreement.
Section 3. Proceedings for Redemption of 2014 Bonds . The City hereby irrevocably elects, and directs the Fiscal Agent, to redeem, on March 1, 2024, from amounts on deposit in the Bond Fund, the outstanding 2014 Bonds pursuant to the provisions of the 2014 Agreement. The Fiscal Agent acknowledges it has given notice of such redemption in accordance with the 2014 Agreement in order to allow for the redemption of the 2014 Bonds on March 1, 2024.
Section 4. Application of Funds to Redeem 2014 Bonds. The Fiscal Agent shall apply the amounts on deposit in the Bond Fund to redeem the outstanding 2014 Bonds, as identified in Schedule 1 attached hereto, on March 1, 2024 at a price equal to 100% of the principal amount thereof plus accrued and unpaid interest, all in accordance with the 2014 Agreement.
Section 5. Transfer of Remaining Funds . Any amounts on deposit in the Bond Fund shall be used for the purpose of paying interest on and the principal of any outstanding 2014 Bonds pursuant to the 2014 Agreement. Any amounts on deposit in the Bond Fund or any other funds and accounts related to the 2014 Bonds following redemption of the outstanding 2014 Bonds shall be transferred to the Interest Account established under the 2023 Agreement to be used solely for the purpose of paying interest on the 2023 Bonds.
Section 6. Amendment . These Instructions shall be irrevocable by the Authority. These Instructions may be amended or supplemented by the Authority, but only if the City shall file with the Fiscal Agent (a) an opinion of nationally recognized bond counsel engaged by the City stating that such amendment or supplement will not, of itself, adversely affect the exclusion from gross income of interest on the 2014 Bonds or the 2023 Bonds under federal income tax law, and (b) a certification of an independent accountant or independent financial adviser engaged by the City stating that such amendment or supplement will not affect the sufficiency of funds invested and held hereunder to make the payments required by Section 4.
Section 7. Application of Certain Terms of the 2014 Agreement . All of the terms of the 2014 Agreement relating to the payment of principal of and interest and repayment premium, if any, on the 2014 Bonds and the redemption thereof, and the protections, immunities and limitations from liability afforded the Fiscal Agent, are incorporated in these Instructions as if set forth in full herein.
Section 8. Counterparts . These Instructions may be signed in several counterparts, each of which will constitute an original, but all of which will constitute one and the same instrument. (Signature page follows)
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60367.10008\41425215.2
S-1
Section 9. Governing Law. These Instructions shall be construed in accordance with and governed by the laws of the State of California.
CITY OF ALISO VIEJO
By:
City Manager
ACCEPTED:
to THE BANK OF NEW YORK MELLON TRUST COMPANY, N.A.,
as Fiscal Agent
By:
Authorized Officer
-Signature Page-
Irrevocable Refunding Instructions
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60367.10008\41425215.2
Schedule-1
Schedule 1
BONDS TO BE REDEEMED
Maturity Date
(September 1)
Outstanding
Principal Amount*
2024 $ 935,000
2025 1,025,000
2026 1,125,000
2027 1,220,000
2028 1,335,000
2029 1,450,000
2030 1,570,000
2031 1,700,000
2032 1,840,000
2033 1,985,000
2034 2,140,000
2038 10,280,000
________________
* Amounts reflect partial bond call on September 1, 2020. 348
City of Aliso Viejo
Community Facilities District No. 2005-01
(Glenwood at Aliso Viejo)
2023 Special Tax Refunding Bonds
October 4, 2023
Presented By: Department of Financial Services
349
Discussion of Tonight’s Actions
• City Council of the City of Aliso Viejo (“City”) is asked to adopt a resolution approving the issuance of the 2023 Special Tax Refunding Bonds (“2023 Bonds”) and all related documents and actions
• Special taxes levied on taxable property within the Community Facilities District No. 2005-01 (“CFD”) will pay debt service on the 2023 Bonds • Key financing parameters of City Council approval:
• $26 million maximum principal amount
• 3.00% minimum net present value savings*
• Last maturity date of the 2023 Bonds is not later than the last maturity date of the Prior Bonds
• Maximum Underwriter’s discount of 0.60%
*Per the City’s Debt Issuance and Management Policy, if net present value savings is less than 3%, the City will consider the refunding on a case-by-case basis. 350
Background
• In 2014, the CFD issued 2014 Special Tax Refunding Bonds (“2014 Bonds”) in the total principal amount of $32,270,000
• Optionally callable on any interest payment date beginning on 9/1/2023 without premium
• Currently outstanding par amount of $26,605,000
• Final maturity date is September 1, 2038
• Current underlying rating of AA- by S&P
• Debt Service on Bonds are paid from special taxes on the properties of CFD (no City financial obligations)
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Financing Overview
• Current interest rates present an opportunity to refinance the 2014 Bonds at lower interest rates, which would result in debt service savings for the taxpayers in the CFD
• Proposed 2023 Bond issuance:
• Public offering
• Estimated principal amount: $23,810,000*
• Estimated true interest cost: 4.07%*
• Estimated average annual debt service: $2,339,671*
• Financing term: 15 years, final payment due September 1, 2038 • All Debt Service paid from special taxes levied in CFD • All Costs of issuance will be paid from the proceeds of the Bonds *Preliminary, subject to change. The estimates above may differ from the actual amounts determined on the final pricing date. 352
Estimated Savings
• Estimated gross savings
• Total: $4.66 million*
• Total per parcel: $10.18 k*
• Average annual: $333 k*
• Average annual savings per homeowner: $727*
• Estimated net present value (“NPV”) savings
• Total: $1.65 million*
• % NPV Savings of Refunded Bonds: 6.22%*
• City’s Debt Policy strives to achieve a minimum NPV savings of 3% *Preliminary, subject to change. The estimates above may differ from the actual amounts determined on the final pricing date. Average annual savings calculated from 2025 to 2038. 353
CFD Credit Structure
• $23.81* million proposed par amount of 2023 Bonds
• Bond Proceeds will be used to refund all of the CFD’s outstanding 2014 Bonds, fund a debt service reserve fund, and pay costs of issuance
• 2023 Bonds to receive underlying credit rating from S&P • 2014 Bonds have a current underlying credit rating of AA- • Bonds will be secured by the special taxes levied on taxable property within the CFD • Debt service reserve fund sized with 50% surety and 50% cash • City deposits the collected special tax revenue with the trustee (BNY Mellon) who uses it to make the debt service payments on the Bonds
*Preliminary, subject to change. The estimates above may differ from the actual amounts determined on the final pricing date. 354
Finance Team
• Best Best & Krieger LLP – Bond Counsel and Disclosure Counsel • Fieldman, Rolapp & Associates, Inc. – Municipal Advisor • Piper Sandler & Co. – Underwriter
• BNY Mellon - Trustee
355
Summary
• Lower Interest Rates
• Estimated savings to homeowner is $727* per year
• Does not extend the term of the bonds
• Cost of issuance and debt service is paid by CFD
• No City General Fund Obligations
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Staff Recommendations
• Adopt a Resolution authorizing the 2023 special tax refunding bonds of the Community Facilities District 2005-01 (Glenwood at Aliso Viejo), approving the form Fiscal Agent Agreement, authorizing negotiation of terms of the sale of bonds, approving a Preliminary Official Statement, authorizing preparation of a Final Official Statement; and approving other related documents and actions; and
• Authorize the City Manager to execute necessary documents for the refinancing of the bonds.
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Preliminary Financing Schedule
Date Action
Today City Council Meeting
+/- October 5 Post Preliminary Official Statement
+/- November 7 Sell 2023 Bonds
December 5 Bond Closing
358
Questions
359
City of Aliso Viejo
AGENDA ITEM
DATE: October 4, 2023
TO: Mayor and City Council
FROM: Dave Doyle, City Manager
Patricia Cantonwine, HR Analyst
SUBJECT: EMPLOYEE HEALTH BENEFIT ALLOWANCE
Recommended Action:
Adopt a Resolution approving an increase to the employee health benefit allowance based on a tiered system determined by number of dependents, effective January 1, 2024.
Fiscal Impact:
The current cost for providing employee health benefits is $2,242.58 per month for each full-time employee. Beginning in 2024, it is recommended the health benefit allotment increase in a tiered manner based on the number of dependents the employee enrolls in their plan; an additional $125 for employee only, $150 for employee plus one, $225 for employee plus two or more (family).
If approved, the total budget impact for the remainder of this fiscal year is estimated at $18,600 and can be accommodated in the 2023-24 budget. Total annual costs are estimated at $37,200 and will be budgeted accordingly in future fiscal years.
Background:
In the last few years, public agencies including Aliso Viejo have experienced greater challenges attracting qualified job applicants and retaining quality employees. To retain existing employees and attract top candidates for future job vacancies, it is important to offer a competitive health benefit package.
The City offers a cafeteria plan to provide health, dental and vision insurance for employees and dependents. Currently, the City provides $2,242.58 per month for each full-time employee to pay for these benefits. Every year prior to “open enrollment” the City reviews changes to the upcoming calendar year’s benefit costs and presents Council with recommended changes to the employee benefit allowance. In 2023 there was no increase to the monthly health benefit allowance.
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Historically, the monthly benefit allowance was based on providing family coverage for health, dental, vision, and the CalPERS Retirement Survivor’s Benefit; however, since 2022, increases in the monthly benefit allowance has not kept pace with the previously approved benchmark plans which are as follows:
Health Insurance - PERS Platinum PPO
Dental Insurance - Delta Dental PPO (50% lowest tier) Vision insurance - VSP
CalPERS Retirement Survivors Benefit
Discussion:
Health Insurance
Effective January 1, 2024, the cost of the Council-approved benchmark health plan will increase from $2,638.48 to $2,993.90 or 13.47%. If we continue to use this benchmark health plan, the monthly benefit allowance would go from the current amount of $2,242.58 to $2,993.90 or an increase of 33.5%.
In an effort to mitigate the fiscal impact to the City yet remain competitive in the marketplace and because costs vary depending on the number of dependents, it is being recommended that a tiered system based on number of dependents be implemented.
Proposed increases will range from $125 to $225 depending on selection of coverage for employee only, employee plus one, and family. It is recommended that no increase be provided to employees that do not participate in the City-offered medical health insurance.
Dental and Vision Insurance
There were no increases in dental and vision premiums.
Retirement Survivors Benefit
The CalPERS Retirement Survivors’ Benefit has increased from $2.40 to $2.75.
If approved by Council, effective January 1, 2024, the health benefit amount would increase based on number of dependents as detailed below:
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Again, the monthly benefit allowance will not increase for employees not participating in the City-offered medical insurance plan. However, if that employee has a qualifying event during the year and elects to participate in one of the City -offered medical insurance plans, the employee will receive the monthly benefit as shown in the table above.
Attachment:
1. Resolution
362
RESOLUTION NO. 2023-___
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF ALISO
VIEJO, CALIFORNIA, ADOPTING A BENEFIT SCHEDULE FOR FULL-
TIME CITY EMPLOYEES
WHEREAS, the City of Aliso Viejo, provides benefits to full-time employees including a cafeteria plan that may be used for health, dental, vision, retirement survivor benefit and other optional benefits; and
WHEREAS, the City of Aliso Viejo, desires to promote employer-employee relations by increasing benefits of City employees for the 2024 plan year; and
NOW, THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF ALISO VIEJO AS FOLLOWS:
Section 1: The Benefits Schedule, attached hereto as Exhibit “A” is hereby adopted.
Section 2: The Mayor shall sign this Resolution and the City Clerk shall certify the adoption thereof.
PASSED, APPROVED AND ADOPTED this 4th day of October, 2023. __________________________
Richard W. Hurt
Mayor
APPROVED AS TO FORM: ATTEST:
__________________________ __________________________
Scott C. Smith, City Attorney Mitzi Ortiz, MMC, City Clerk 363
STATE OF CALIFORNIA )
COUNTY OF ORANGE ) ss.
CITY OF ALISO VIEJO )
I, MITZI ORTIZ, City Clerk of the City of Aliso Viejo, California, DO HEREBY CERTIFY that the foregoing is the original of Resolution No. 2023-__ duly passed and adopted by the City Council of the City of Aliso Viejo at their regular meeting held on the 4th day of October, 2023, by the following roll call vote, to wit:
AYES:
NOES:
ABSENT:
___________________________
MITZI ORTIZ, MMC
CITY CLERK
(SEAL)
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EXHIBIT A
Benefits
The City shall provide the following as options for employee and dependent insurance coverage, with noted exceptions:
Cafeteria Coverages:
Health Insurance
Effective the month following employment, employees may enroll in one of the health insurance plans offered by the City and will be provided the option to enroll eligible dependents.
Dental Insurance
Effective the month following the first full month after employment, employees may enroll in the provided dental insurance plans and will be provided the option to enroll eligible dependents.
Vision Insurance
Effective the month following the first full month after employment, employees may enroll in the provided vision insurance plans and will be provided the option to enroll eligible dependents.
Retirement Survivors Benefit
Upon employment, all eligible employees shall enroll in CalPERS and pay for the Survivors Benefit.
The City’s contribution toward the cafeteria plan shall not exceed the allowances shown below, per month, for benefits effective, January 1, 2024.
Employee Only Employee + 1
Employee and 2+ Opt Out
2024 Monthly
Cafeteria
Allowance $2,367.58 $2,392.58 $2,467.58 $2,242.58
The health, dental and vision insurance chosen by the employee will determine their premiums. Premiums in excess of the cafeteria plan benefit shall be deducted from the Council Member’s or employee’s compensation.
The City shall provide the following benefits to full-time employees in addition to the aforementioned cafeteria plan benefits. The benefit levels and costs have remained the same as the previous year.
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City-paid Coverages:
Life Insurance
Effective the month following employment or approval of the provider, the City shall provide full-time employees with a life insurance plan in the amount equal to a full year's base salary.
Disability Insurance
Effective the month following employment or approval of the provider, the City shall provide long-term disability coverage with benefits calculated on 60% of the employee’s pre-disability earnings, up to a maximum of $10,000 per month. This amount may be reduced by other income sources.
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