I. The Indenture creates a valid pledge of, first lien upon and security interest in, the Net Taxes, and in the moneys in the Special Tax Fund (other than the Administrative Expense Fund) established pursuant to the Indenture, on the terms and conditions set forth in the Indenture.
J. Except as disclosed in the Preliminary Official Statement and Official Statement, there are, to the best of the Community Facilities District's knowledge, no entities with outstanding assessment liens against any of the properties within the Improvement Area or which are senior to or on a parity with the pledge of the Special Taxes of the Improvement Area referred to in paragraph (H) hereof.
K. The Official Statement as of the date hereof, does not, and as of the Closing Date, will not contain any untrue or misleading statement of a material fact or omit to state any material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading (excluding statements therein pertaining to the DTC and its book -entry system and any information provided by the Special Tax Consultant (as such term is defined below) and the Underwriter, as to which no view is expressed).
L. The Preliminary Official Statement was deemed final by a duly authorized officer of the Community Facilities District 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 Community Facilities District 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 Community Facilities District shall cause a final printed form of the Official Statement to be delivered to the Underwriter in sufficient quantity to comply with paragraph (b)(4) of the Rule and Rules G-12, G-15, G-32 and G-36 of the Municipal Securities Rulemaking Board.
M. 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 Community Facilities District) or to the best knowledge of the Community Facilities District or the City threatened, in which any such Action: (i) in any way questions the existence of the Community Facilities District or the titles of the officers of the Community Facilities District 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 Community Facilities District Documents or the consummation of the transactions on the part of the Community Facilities District contemplated thereby; (iii) contests the exemption of interest on the Bonds from federal income taxation or contests the exemption of interest on the Bonds from State income taxation or contests the powers of the Community Facilities District which may result in any material adverse change relating to the financial condition of the Community Facilities District; or (iv) 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; and as of the time of acceptance hereof there is and, as of the Closing Date, there will be no basis for any action, suit, proceeding, inquiry or investigation of the nature described in clauses (i) through (iv) of this sentence. 6
N. Any certificate signed on behalf of the Community Facilities District by any officer or employee of the Community Facilities District authorized to do so shall be deemed a representation and warranty by the Community Facilities District to the Underwriter on behalf of itself and the Community Facilities District as to the statements made therein.
O. At or prior to the Closing, the Community Facilities District will have duly authorized, executed and delivered the Continuing Disclosure Certificate in substantially the form attached as an appendix to the Official Statement. Based upon a review of its previous undertakings, and except as disclosed in the Preliminary Official Statement, the Community Facilities District has not failed to comply in all respects with any previous undertakings with regard to the Rule to provide annual reports or notices of enumerated events in the last five years.
P. The Community Facilities District will apply the proceeds of the Bonds in accordance with the Indenture and as described in the Preliminary Official Statement and Official Statement.
Q. Until such time as moneys have been set aside in an amount sufficient to pay 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 Community Facilities District will faithfully perform and abide by all of the covenants, undertakings and provisions contained in the Indenture.
R. Between the date of this Purchase Agreement and the date of Closing, the Community Facilities District will not offer or issue any bonds, notes or other obligations for borrowed money not previously disclosed to the Underwriter.
The Community Facilities District 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, Disclosure Counsel and the Underwriter, from time to time prior to the Closing Date.
The Community Facilities District 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 Community Facilities District to the Underwriter in connection with the transactions contemplated by this Purchase Agreement.
The execution and delivery of this Purchase Agreement by the Community Facilities District shall constitute a representation by the Community Facilities District to the Underwriter that the representations and warranties contained in this Section 2 with respect to 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 Community Facilities District contained herein, to the accuracy in all material respects of the statements of the officers and other officials of the Community Facilities District made in any certificates or other documents furnished pursuant to the provisions hereof, to the performance by the 7
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 and the Community Facilities District 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, all such actions as, in the opinion of Bond Counsel, shall be necessary and appropriate.
B. At the Closing Date, except as described in the Preliminary Official Statement, the City shall not 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 is a party or is otherwise subject or bound, and the performance of the conditions precedent to be performed hereunder 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 of the conditions precedent to be performed by the City hereunder.
C. At the Closing Date, except as described in the Preliminary Official Statement, the Community Facilities District shall not 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 Community Facilities District is a party or is otherwise subject or bound, and the performance by the Community Facilities District of its obligations under the Bonds, the Community Facilities District Resolutions, the Indenture, and any other instruments contemplated by any of such documents, and compliance with the provisions of each thereof, or the performance of the conditions precedent to be performed hereunder, 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 Community Facilities District is a party or is otherwise subject or bound, in any manner which would materially and adversely affect the performance by the Community Facilities District of its obligations under the Indenture, the Bonds or the performance of the conditions precedent to be performed by the Community Facilities District hereunder.
D. The information contained in the Official Statement 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 8
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.
E. Between the date hereof and the Closing Date, the market price or marketability, at the initial offering prices set forth on the cover page of the Official Statement, of the Bonds or the ability of the Underwriter to enforce contracts for the sale of the Bonds, shall not have been materially adversely affected, in the judgment of the Underwriter (evidenced by a written notice to the Community Facilities District terminating the obligation of the Underwriter to accept delivery of and pay for the Bonds), by reason of any of the following:
1. 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
2. Legislation introduced in or enacted (or resolution passed) by the Congress or an order, decree or injunction issued by any court of competent jurisdiction, or an order, ruling, regulation (final, temporary or proposed), press release or other form of notice issued or made by or on behalf of the Securities and Exchange Commission (the "SEC"), or any other governmental agency having jurisdiction of the subject matter, to the effect that obligations of the general character of the Bonds, including any or all underlying arrangements, are not exempt from registration under or other requirements of the Securities Act of 1933, as amended (the "Securities Act"), or that the Indenture is not exempt from qualification under or other requirements of the Trust Indenture Act of 1939, as amended (the "Trust Indenture Act"), or that the issuance, offering or sale of obligations of the general character of the Bonds, including any or all underlying arrangements, as contemplated hereby or by the Official Statement or otherwise is or would be in violation of the federal securities laws as amended and then in effect; or
3. A general suspension of trading 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 SEC or any other governmental authority having jurisdiction; or
4. The introduction, proposal or enactment of any amendment to the federal or State 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 Community Facilities District, its property, income, securities (or interest thereon), the validity or enforceability of Special Taxes, or the ability of the Community Facilities District to issue the Bonds as contemplated by the Indenture and the Official Statement; or
9
5. Any event occurring, or information becoming known which, in the judgment of the Underwriter, makes untrue 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; or
6. Any national securities exchange, the Comptroller of the Currency, or any other governmental authority, shall impose as to the Bonds, or obligations of the general character of the Bonds, any material restrictions not now in force, or increase materially those now in force, with respect to the extension of credit by, or the charge to the net capital requirements of, the Underwriter; or
7. 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; or
8. Except as disclosed in or contemplated by the Official Statement, any material adverse change in the affairs of the City or Community Facilities District shall have occurred; or
9. Any event or circumstance shall exist that either makes untrue or incorrect in any material respect any statement or information in the Official Statement (other than any statement provided by the Underwriter) or is not reflected in the Official Statement but should be reflected therein in order to make the statements therein, in the light of the circumstances under which they were made, not misleading and, in either such event, the Community Facilities District refuses to permit the Official Statement to be supplemented to supply such statement or information, or the effect of the Official Statement as so supplemented is to materially adversely affect the market price or marketability of the Bonds or the ability of the Underwriters to enforce contracts for the sale of the Bonds; or
10. A general banking moratorium shall have been declared by federal or State authorities having jurisdiction and be in force; or
11. A material disruption in securities settlement, payment or clearance services affecting the Bonds shall have occurred; or
12. Any new restriction on transactions in securities materially affecting the market for securities (including the imposition of any limitation on interest rates) or the extension of credit by, or a charge to the net capital requirements of, underwriters shall have been established by the New York Stock Exchange, the SEC, any other federal or State agency or the Congress of the United States, or by Executive Order; or
13. A decision by a court of the United States shall be rendered, or a stop order, release, regulation or no -action letter by or on behalf of the SEC or any other governmental agency having jurisdiction of the subject matter shall have been issued or made, to the effect that the issuance, offering or sale of the Bonds, including the underlying obligations as contemplated by this Purchase Agreement or by the Official Statement, or any document relating to the issuance, offering 10
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, the Securities Exchange Act of 1934, as amended and the Trust Indenture Act; or
14. Any proceeding shall have been commenced or be threatened in writing by the SEC against the City or the Community Facilities District; or
15. The commencement of any Action as described in items (i) through (iv) of Section 2(M) hereof.
F. At or prior to the Closing Date, the Underwriter shall have received a counterpart original or certified copy of the following documents, in each case satisfactory in form and substance to the Underwriter:
1. The Official Statement, executed on behalf of the Community Facilities District by an authorized officer;
2. The Indenture, duly executed and delivered by the Community Facilities District and the Trustee;
3. The Community Facilities District Resolutions and the Community Facilities District Documents and the Formation Documents, together with a certificate dated as of the Closing Date of the City Clerk to the effect that the Community Facilities District Resolutions are true, correct and complete copies of the ones duly adopted by the City Council;
4. The Continuing Disclosure Certificate executed and delivered by the Community Facilities District;
5. A final approving opinion of Bond Counsel dated the Closing Date in the form attached as an appendix 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 Community Facilities District may be relied upon by the Underwriter to the same extent as if such opinion was addressed to it;
6. A supplemental opinion or opinions of Bond Counsel, dated the Closing Date and addressed to the Underwriter, to the effect that:
(i) this Purchase Agreement and the Continuing Disclosure Certificate have been duly authorized, executed and delivered by the Community Facilities District and, assuming due authorization, execution and delivery by the other parties thereto, as applicable, constitute the legal, valid and binding agreement of the Community Facilities District and are enforceable in accordance with their 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, and the Indenture is exempt from qualification under the Trust Indenture Act; 11
(iii) the information contained in the Official Statement on the cover and under the captions "THE BONDS" (other than the caption "Debt Service Schedule"), "SOURCES OF PAYMENT FOR THE BONDS," "TAX EXEMPTION" and "LEGAL OPINION" and in Appendix C and Appendix E to the Official Statement, are accurate insofar as such statements purport to summarize certain provisions of the Bonds, the Indenture and Bond Counsel's final approving opinions.
7. The letter of Disclosure Counsel, dated the Closing Date and addressed to the Community Facilities District and to the Underwriter, to the effect that, without having undertaken to determine independently the accuracy or completeness of the statements contained in the Official Statement, but on the basis of their participation in conferences with representatives of the Community Facilities District, the Special Tax Consultant and others, and their examination of certain documents, nothing has come to their attention which has led 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 and as of the Closing Date contained or 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 light of the circumstances under which they were made, not misleading (except that no opinion or belief need be expressed as to any financial statements or other financial, statistical or engineering data or forecasts, numbers, charts, estimates, projections, assumptions, or expressions of opinion, any information about valuation, appraisals, absorption, archeological or environmental matters, or any information with respect to the City, or about DTC or the book -entry -only system);
8. A certificate dated the Closing Date and signed by an authorized representative of the Community Facilities District or an authorized designee, on behalf of the Community Facilities District to the effect that: (i) the representations and warranties made by the Community Facilities District contained herein are true and correct in all material respects on and as of the Closing Date with the same effect as if made on the Closing Date; (ii) to the best knowledge of such officer, no event has occurred since the date of the Official Statement which should be disclosed in the Official Statement for the purpose for which it is to be used or which it is necessary to disclose therein in order to make the statements and information therein not misleading in any material respect; and (iii) the Community Facilities District has complied with all the agreements and satisfied all the conditions on its part to be satisfied under this Purchase Agreement, the Community Facilities District Resolutions, the Community Facilities District Documents and the Official Statement at or prior to the Closing Date;
9. An opinion of the City Attorney of the City, dated the date of Closing and addressed to the Underwriter and the City, to the effect that:
(i) The City is a municipal corporation and general law city, duly organized and existing under the Constitution and laws of the State of California; (ii) The Community Facilities District Resolutions have been duly adopted at meetings of the City Council, which were called and held pursuant to law and with all public notice required by law and at which a quorum was present and acting throughout, and the Community Facilities District Resolutions are in full force and effect and have not been modified, amended, rescinded or repealed since the respective dates of their adoption; 12
(iii) The Community Facilities District Documents and the Official Statement have been duly authorized, executed and delivered by the City and the Community Facilities District Documents constitute the legal, valid and binding obligations of the Community Facilities District enforceable against the Community Facilities District in accordance with their terms, subject to bankruptcy, insolvency, reorganization, moratorium and other similar laws affecting creditors' rights, to the application of equitable principles where equitable remedies are sought and to the exercise of judicial discretion in appropriate cases; (iv) Except as may be stated in the Official Statement, there is no action, suit, proceeding or investigation before or by any court, public board or body pending (notice of which has been served on the City or the Community Facilities District) or, to such counsel's knowledge, threatened wherein an unfavorable decision, ruling or finding would: (a) affect the creation, organization, existence or powers of the City, or the titles of its members and officers to their respective offices; or (b) affect the validity of the Community Facilities District Documents or restrain or enjoin the repayment of the Bonds or in any way contest or affect the validity of the Community Facilities District Documents or contest the authority of the Community Facilities District or the City to enter into or perform its obligations under any of the Community Facilities District Documents, questions the right of the Community Facilities District to use Special Taxes levied within the Improvement Area for the repayment of the Bonds or affects in any manner the right or ability of the Community Facilities District to collect or pledge the Special Taxes levied within the Improvement Area for the repayment of the Bonds;
10. A certificate dated the Closing Date from Spicer Consulting Group, LLC (the "Special Tax Consultant") addressed to the Community Facilities District and the Underwriter to the effect that: (i) the Special Tax if collected in the maximum amounts permitted pursuant to the Rate and Method of Apportionment of Special Taxes of the Improvement Area as of the Closing Date would generate at least 110% of the annual debt service payable with respect to the Bonds plus budgeted administrative expenses in each year, based on such assumptions and qualifications as shall be acceptable to the Underwriter; and (ii) the statements in the Official Statement provided by the Special Tax Consultant concerning Special Taxes in the Improvement Area and all information supplied by it for use in the Official Statement were as of the date of the Official Statement and are as of the Closing Date true and correct, and do not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading;
11. Certified copies of the general resolution of the Trustee authorizing the execution and delivery of certain documents by certain officers of the Trustee, which resolution authorizes the execution of the Indenture and the authentication of the Bonds;
12. A certificate of the Trustee, addressed to the Underwriter, and the Community Facilities District dated the Closing Date, to the effect that: (i) the Trustee is authorized to carry out corporate trust powers, and have full power and authority to perform its duties under the Indenture; (ii) the Trustee is duly authorized to execute and deliver the Indenture, to accept the obligations created by the Indenture and to authenticate the Bonds pursuant to the terms of the Indenture; (iii) no consent, approval, authorization or other action by any governmental or regulatory authority having jurisdiction over the Trustee that has not been obtained is or will be required for the authentication of the Bonds or the consummation by the Trustee of the other transactions contemplated to be performed by the Trustee in connection with the authentication of the Bonds and the acceptance and performance of the obligations created by the Indenture; and (iv) to the best of its 13
knowledge, compliance with the terms of the Indenture will not conflict with, or result in a violation or breach of, or constitute a default under, any loan agreement, indenture, bond, note, resolution or any other agreement or instrument to which the Trustee is a party or by which it is bound, or any law or any rule, regulation, order or decree of any court or governmental agency or body having jurisdiction over the Trustee or any of its activities or properties;
13. An opinion of counsel to the Trustee dated the Closing Date, addressed to the Underwriter, and the Community Facilities District to the effect that the Trustee is a national banking association duly organized and validly existing under the laws of the United States having full power and being qualified to enter into, accept and agree to the provisions of the Indenture, and that such documents have been duly authorized, executed and delivered by the Trustee, and, assuming due execution and delivery by the other parties thereto, constitutes the legal, valid and binding obligation of the Trustee, enforceable in accordance with its terms, subject to bankruptcy, insolvency, reorganization, moratorium and other laws affecting the enforcement of creditors' rights in general and except as such enforceability may be limited by the application of equitable principles if equitable remedies are sought;
14. A certificate of the Community Facilities District 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;
15. A Letter of Representations of Tri Pointe Homes Holdings, Inc. (the "Developer") in connection with the printing of the Preliminary Official Statement dated the date of the Preliminary Official Statement, substantially in the form attached as part of Exhibit D hereto or as such Letter of Representations may be modified with the approval of the Underwriter and Bond Counsel, and a Closing Certificate of the Developer dated the Closing Date, substantially in the form attached as part of Exhibit D hereto;
16. An opinion or opinions of counsel to the Developer, dated the date of the Closing addressed to the Community Facilities and the Underwriter, in form and substance acceptable to the Underwriter and Bond Counsel.
17. An opinion of Kutak Rock LLP, counsel to the Underwriter ("Underwriter's Counsel"), dated the date of Closing and addressed to the Underwriter in form and substance acceptable to the Underwriter; and
18. A certificate in form and substance as set forth in Exhibit C hereto of Integra Realty Resources, Rocklin, California, the appraiser of the property within the Community Facilities District, dated as of the Closing Date.
19. 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 Community Facilities District contained herein, and of the statements and information contained in the Official Statement and the due performance or satisfaction by the Community Facilities District at or prior to the Closing of all agreements then to be performed and all conditions then to be satisfied by the Community Facilities District in connection with the transactions contemplated hereby and by the Indenture and the Official Statement. 14
If the Community Facilities District 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 Community Facilities District nor the Underwriter shall be under any further obligation hereunder, except that the respective obligations of the Underwriter and the Community Facilities District set forth in Section 5 hereof shall continue in full force and effect.
4. Establishment of Issue Price.
A. The Underwriter agrees to assist the Community Facilities District in establishing the issue price of the Bonds and shall execute and deliver to the Community Facilities District at Closing an "issue price" or similar certificate, together with the supporting pricing wires or equivalent communications, substantially in the form attached hereto as Exhibit F, with such modifications as may be appropriate or necessary, in the reasonable judgment of the Underwriter, the Community Facilities District 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. Except as otherwise set forth in Exhibit A attached hereto, the Community Facilities District will treat the first price at which 10% of each maturity of the Bonds (the "10% test") is sold to the public as the issue price of that maturity. At or promptly after the execution of this Purchase Agreement, the Underwriter shall report to the Community Facilities District the price or prices at which it has sold to the public each maturity of Bonds. If at that time the 10% test has not been satisfied as to any maturity of the Bonds, the Underwriter agrees to promptly report to the Community Facilities District the prices at which it sells the unsold Bonds of that maturity to the public. That reporting obligation shall continue, whether or not the Closing Date has occurred, until either (i) the Underwriter has sold all Bonds of that maturity or (ii) the 10% test has been satisfied as to the Bonds of that maturity, provided that, the Underwriter's reporting obligation after the Closing Date may be at reasonable periodic intervals or otherwise upon request of the Community Facilities District or Bond Counsel. For purposes of this Section, if Bonds mature on the same date but have different interest rates, each separate CUSIP number within that maturity will be treated as a separate maturity of the Bonds.
C. The Underwriter confirms that it has offered the Bonds to the public on or before the date of this Purchase Agreement at the offering price or prices (the "initial offering price"), or at the corresponding yield or yields, set forth in Exhibit A attached hereto, except as otherwise set forth therein. Exhibit A also sets forth, as of the date of this Purchase Agreement, the maturities, if any, of the Bonds for which the Underwriter represents that (i) the 10% test has been satisfied (assuming orders are confirmed by the close of the business day immediately following the date of this Purchase Agreement) and (ii) the 10% test has not been satisfied and for which the Community Facilities District and the Underwriter agree that the restrictions set forth in the next sentence shall apply, which will allow the Community Facilities District 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 15
(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 will advise the Community Facilities District promptly after the close of the fifth (5th) business day after the sale date whether it has sold 10% of that maturity of the Bonds to the public at a price that is no higher than the initial offering price to the public.
D. The Underwriter confirms that:
(i) any selling group agreement and any 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 third -party distribution agreement, as applicable:
(A)(i) to report the prices at which it sells to the public the unsold Bonds of each maturity allocated to it, whether or not the Closing Date has occurred, until either all Bonds of that maturity allocated to it have been sold or it is notified by the Underwriter that the 10% test has been satisfied as to the Bonds of that maturity, provided that, the reporting obligation after the Closing Date may be at reasonable periodic intervals or otherwise upon request of the Underwriter and (ii) 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 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 third -party distribution agreement to (A) report the prices at which it sells to the public the unsold Bonds of each maturity allocated to it, whether or not the Closing Date has occurred, until either all Bonds of that maturity allocated to it have been sold or it is notified by the Underwriter or the dealer that the 10% test has been satisfied as to the Bonds of that maturity, provided that, the reporting obligation after the Closing Date may be at reasonable periodic intervals or otherwise upon request of the Underwriter or the dealer, and (B) comply with the hold -the -offering -price 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 Community Facilities District 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 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 16
wires, and (ii) in the event that a 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 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 third -party distribution agreement and the related pricing wires. The Community Facilities District further acknowledges that the Underwriter shall not be liable for the failure of any dealer who is a member of a selling group, or of any broker -dealer that is a party to a third -party distribution agreement, to comply with its corresponding agreement to comply with the requirements for establishing 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.
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 Community Facilities District (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 third -party distribution agreement participating in the initial sale of the Bonds to the public);
a. (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.
5. Expenses. Whether or not the transactions contemplated by this Purchase Agreement are consummated, the Underwriter shall be under no obligation to pay, and the Community Facilities District shall pay only from the proceeds of the Bonds, or any other legally available funds of the City, or the Community Facilities District, but only as the Community Facilities District and such other party providing such services may agree, all expenses and costs of the Community Facilities District incident to the performance of its obligations in connection with the authorization, execution, sale and delivery of the Bonds to the Underwriter, including, without limitation, printing costs, initial fees of the Trustee, including fees and disbursements of their counsel, if any, fees and disbursements of Bond Counsel, Disclosure Counsel and other professional advisors employed by the City, costs of 17
preparation, printing, signing, transportation, delivery and safekeeping of the Bonds and for expenses (included in the expense component of the spread) incurred by the Underwriter on behalf of the City's employees which are incidental to implementing this Purchase Agreement, including, but not limited to, meals, transportation, lodging, and entertainment of those employees. The Underwriter shall pay all out-of-pocket expenses of the Underwriter, including, without limitation, advertising expenses, the California Debt and Investment Advisory Commission fee, CUSIP Services Bureau charges, regulatory fees imposed on new securities issuers and any and all other expenses incurred by the Underwriter in connection with the public offering and distribution of the Bonds, including fees and disbursements of Underwriter's Counsel. Any meals in connection with or adjacent to meetings, rating agency presentations, pricing activities or other transaction -related activities shall be considered an expense of the transaction and included in the expense component of the Underwriter's discount.
6. Notices. Any notice of other communication to be given to the Community Facilities District under this Purchase Agreement may be given by delivering the same in writing to the City of Beaumont, 550 East 6th Street, Beaumont, California 92223, Attention: City Manager; any notice or other communication to be given to the Underwriter under this Purchase Agreement may be given by delivering the same in writing to Stifel, Nicolaus & Company, Incorporated, 2121 Avenue of the Stars, Suite 2150, Los Angeles, California 90067, Attention: Public Finance.
7. Parties In Interest. This Purchase Agreement is made solely for the benefit of the Community Facilities District and Underwriter (including any successors or assignees of the Underwriter) and no other person shall acquire or have any right hereunder or by virtue hereof.
8. Survival of Representations and Warranties. The representations and warranties of the Community Facilities District under this Purchase Agreement shall remain operative and in full force and effect, regardless of any investigations made by or on behalf of the Underwriter, and shall survive the delivery and payment for the Bonds and the termination of this Purchase Agreement.
9. 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.
10. Effective. This Purchase Agreement shall become effective and binding upon the respective parties hereto upon the execution of the acceptance hereof by the Community Facilities District and shall be valid and enforceable as of the time of such acceptance.
11. No Prior Agreements. This Purchase Agreement supersedes and replaces all prior negotiations, agreements and understanding among the parties hereto in relation to the sale of the Bonds by the Community Facilities District.
12. Governing Law. This Purchase Agreement shall be governed by the laws of the State of California.
18
13. Effective Date. This Purchase Agreement shall become effective and binding upon the respective parties hereto upon the execution of the acceptance hereof by the Community Facilities District and shall be valid and enforceable as of the time of such acceptance.
Very truly yours,
STIFEL, NICOLAUS & COMPANY,
INCORPORATED, as Underwriter
By:
Director
The foregoing is hereby agreed to and
accepted as of the date first above written:
CITY OF BEAUMONT COMMUNITY
FACILITIES DISTRICT NO. 93-1
By:
Authorized Officer
Time of Execution: p.m. California time
[EXECUTION PAGE OF BOND PURCHASE AGREEMENT]
s-1
EXHIBIT A
CITY OF BEAUMONT
COMMUNITY FACILITIES DISTRICT NO. 93-1
(IMPROVEMENT AREA NO. 17D)
SPECIAL TAX BONDS, SERIES 2024
Subject to
Hold -The -
10% Test Offering -
Maturity Principal Interest 10% Test Not Price Rule
(September 1) Amount Rate Yield Price Satisfied* Satisfied 2025
2026
2027
2028
2029
2030
2031
2032
2033
2034
2035
2036
20 (T)
20 (T)
(T) Term Bond.
(C) Priced to optional call at [par] on September 1, 20 . *At the time of execution of this Purchase Agreement and assuming orders are confirmed by the close of the business day immediately following the date of this Purchase Agreement.
A-1
EXHIBIT B
FORM OF ISSUE PRICE CERTIFICATE
CITY OF BEAUMONT
COMMUNITY FACILITIES DISTRICT NO. 93-1
(IMPROVEMENT AREA NO. 17D)
SPECIAL TAX BONDS, SERIES 2024
The undersigned, on behalf of Stifel, Nicolaus & Company, Incorporated ("Stifel") hereby certifies as set forth below with respect to the sale and issuance of the above -captioned bonds (the "Bonds").
1. Sale of the General Rule Maturities. As of the date of this certificate, for each Maturity of the General Rule Maturities, the first price at which at least 10% of such Maturity was sold to the Public is the respective price listed in Schedule A.
2. Defined Terms.
(a) General Rule Maturities means those Maturities of the Bonds listed in Schedule A hereto as the "General Rule Maturities."
(b) Issuer means the City of Beaumont Community Facilities District No. 93-1. (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. (e) 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 Stifel'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 the Tax Certificate and with respect to compliance with the federal income tax rules affecting the Bonds, and by Stradling Yocca Carlson & B-1
Rauth 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.
STIFEL, NICOLAUS & COMPANY,
INCORPORATED
By:
Name:
By:
Name:
Dated: [Closing Date]
B-2
SCHEDULE A
SALE PRICES OF THE GENERAL RULE MATURITIES
(To be attached)
B-3
EXHIBIT C
CITY OF BEAUMONT
COMMUNITY FACILITIES DISTRICT NO. 93-1
(IMPROVEMENT AREA NO. 17D)
SPECIAL TAX BONDS, SERIES 2024
CERTIFICATE OF APPRAISER
The undersigned hereby states and certifies:
1. That he or she is an authorized principal of Integra Realty Resources, Rocklin, California (the "Appraiser") and as such is familiar with the facts herein certified and is authorized and qualified to certify the same.
2. That the Appraiser has prepared an appraisal report dated , 2024, with an appraisal date of value of July 31, 2024 (the "Appraisal Report"), on behalf of Improvement Area No. 17D (the "Improvement Area") of the City of Beaumont Community Facilities District No. 93-1 (the "Community Facilities District") and in connection with the Official Statement dated [BPA Date] ("Official Statement"), concerning the above -captioned bonds (the "Bonds").
3. That the Appraiser hereby consents to the reproduction and use of the Appraisal Report appended to the Preliminary Official Statement and the Official Statement. The Appraiser also consents to the references to the Appraiser and the Appraisal made in the Preliminary Official Statement and the Official Statement.
4. In the opinion of the Appraiser the assumptions made in the Appraisal Report are reasonable.
5. That the Official Statement has been reviewed on behalf of the Appraiser and to the best knowledge of the Appraiser the statements concerning the Appraisal Report and the value of the property contained under the captions "INTRODUCTION — Appraisal Report," "THE IMPROVEMENT AREA —Appraisal Report," and "APPENDIX D — APPRAISAL REPORT" are true, correct and complete in all material respects and do not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading.
6. Each of the parcels appraised by the Appraiser is encompassed within the Improvement Area of the Community Facilities District as set forth in the boundary map of the Improvement Area of the Community Facilities District.
7. That, as of the date of the Official Statement and as of the date hereof, the Appraisal Report appended to the Official Statement, to the best of my knowledge and belief, and subject to all of the Limiting Conditions and Major Assumptions set forth in the Appraisal Report, does not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements contained therein, in the light of the circumstances under which they were made, not misleading, and no events or occurrences have been ascertained by us or have come to our attention that would substantially change the estimated values stated in the Appraisal Report.
However, we have not performed any procedures since the date of the Appraisal Report to obtain knowledge of such events or occurrences nor are we obligated to do so in the future.
8. The Community Facilities District and Stifel, Nicolaus & Company, Incorporated, as underwriter, are entitled to rely on the Certificate.
Dated: [Closing Date]
INTEGRA REALTY RESOURCES
By:
EXHIBIT D
CITY OF BEAUMONT
COMMUNITY FACILITIES DISTRICT NO. 93-1
(IMPROVEMENT AREA NO. 17D)
SPECIAL TAX BONDS, SERIES 2024
FORM OF DEVELOPER LETTER OF REPRESENTATIONS AND CLOSING
CERTIFICATE
LETTER OF REPRESENTATIONS OF TRI POINTE HOMES HOLDINGS, INC. [POS Date]
City of Beaumont Community Facilities District No. 93-1 Beaumont, California
Stifel, Nicolaus & Company, Incorporated
Los Angeles, California
Ladies and Gentlemen:
Reference is made to the City of Beaumont Community Facilities District No. 93-1 (Improvement Area No. 17D) Special Tax Bonds, Series 2024 (the "2024 Bonds") and to the Bond Purchase Agreement to be entered into by and between the City of Beaumont Community Facilities District No. 93-1 (the "Community Facilities District"), and Stifel, Nicolaus & Company, Incorporated, as Underwriter (the "Purchase Agreement"). This Letter of Representations of Tri Pointe Homes Holdings, Inc. (the "Letter of Representations") is delivered pursuant to and in satisfaction of the Purchase Agreement. Capitalized terms used herein and not otherwise defined have the meanings ascribed to them in the Purchase Agreement.
The undersigned certifies that he is familiar with the facts herein certified and is authorized and qualified to certify the same as an authorized officer or representative of Tri Pointe Homes Holdings, Inc. (the "Developer"), and the undersigned, on behalf of the Developer, further certifies as follows:
1. The Developer is duly organized and validly existing under the laws of the State of California, is in good standing under the laws of the State of California, and has all requisite corporate right, power and authority: (i) to execute and deliver this Letter of Representations; (ii) to perform all the duties contemplated to be performed by the Acquisition Agreement dated as of , 2024, by and between the Community Facilities District and the Developer (the "Acquisition Agreement"); and (iii) to undertake all of the transactions on its part described in the Preliminary Official Statement.
2. As set forth in the Preliminary Official Statement, title to a certain portion of the property within Improvement Area No. 17D of the Community Facilities District is held
in the name of the Developer. The undersigned, on behalf of the Developer, makes the representations herein with respect to all such property to which it holds title in Improvement Area No. 17D of the Community Facilities District as of the date hereof (the "Property").
Except as otherwise described in the Preliminary Official Statement, the Developer is, and the Developer's current expectations are that the Developer shall remain, the party responsible for the development of the Property. The Developer has not entered into an agreement for development or management of the Property by any other entity, except such subcontracts, consultant agreements, and similar agreements for land development activities associated with the Developer's development plan as are entered into in the ordinary course of business.
3. Except as disclosed in the Preliminary Official Statement, to the Actual Knowledge of the Undersigned,' the Developer and its Relevant Entities2 have not violated any applicable law or administrative regulation of the State of California or the United States of America, or any agency or instrumentality of either, which violation could reasonably be expected to materially and adversely affect the Developer's ability to perform its obligations under the Acquisition Agreement or to pay Special Taxes due at any time with respect to the portion of the Property then owned by the Developer (to the extent the responsibility of the Developer) prior to delinquency.
4. Except as disclosed in the Preliminary Official Statement, to the Actual Knowledge of the Undersigned, (a) the Developer and its Relevant Entities are not in breach of or in default under any applicable judgment or decree or any loan agreement, line of credit, option agreement, development agreement (including mitigation agreements or joint community facilities agreements), indenture, fiscal agent agreement, bond, or note (collectively, the "Material Agreements") to which the Developer or its Relevant Entities are a party or otherwise subject, which breach or default could reasonably be expected to materially and adversely affect the ability of the Developer to develop the Property as described in the Preliminary Official Statement or to pay the Special Taxes due at any time with respect to the portion of the Property then owned by the Developer (to the extent the responsibility of the Developer) prior to delinquency and (b) no event has occurred and is 1 "Actual Knowledge of the Undersigned" means the knowledge that the individual signing on behalf of the Developer currently has as of the date of this Letter of Representations or has obtained through (i) interviews with such current officers and responsible employees of the Developer and its Relevant Entities as the undersigned has determined are reasonably likely, in the ordinary course of their respective duties, to have knowledge of the matters set forth in this Letter of Representations, and/or (ii) review of documents that were reasonably available to the undersigned and which the undersigned has reasonably deemed necessary for the undersigned to obtain knowledge of the matters set forth in this Letter of Representations. The undersigned has not conducted any extraordinary inspection or inquiry other than such inspections or inquiries as are prudent and customary in connection with the ordinary course of the Developer's current business and operations. Individuals who are no longer employees of the Developer or its Relevant Entities have not been contacted. 2 "Relevant Entity" means, with respect to the Developer, any other Person: (i) who directly, or indirectly through one or more intermediaries, is currently controlling, controlled by or under common control with the Developer, and (ii) for whom information, including financial information or operating data, concerning such Person is material to an evaluation of the Community Facilities District and the 2024 Bonds (i.e., such Person's assets or funds would materially affect the Developer's ability to develop the Property as described in the Preliminary Official Statement or to pay the Special Taxes due at any time with respect to the portion of the Property then owned by the Developer (to the extent the responsibility of the Developer) prior to delinquency. "Person" means an individual, a corporation, a partnership, a limited liability company, an association, a joint stock company, a trust, any unincorporated organization or a government or political subdivision thereof. For purposes hereof, the term "control" (including the terms "controlling," "controlled by" or "under common control with") means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise.
continuing that with the passage of time or giving of notice, or both, would constitute such a breach or default under any Material Agreement which could reasonably be expected to materially and adversely affect the ability of the Developer to develop the Property as described in the Preliminary Official Statement, or to pay the Special Taxes due at any time with respect to the portion of the Property then owned by the Developer (to the extent the responsibility of the Developer) prior to delinquency.
5. Except as described in the Preliminary Official Statement, there are no material loans outstanding and unpaid and no material lines of credit of the Developer or its Relevant Entities that are secured by an interest in the Property.
6. Except as set forth in the Preliminary Official Statement, no action, suit, proceeding, inquiry or investigation at law or in equity, before or by any court, regulatory agency, public board or body is pending against the Developer (with proper service of process to the Developer having been accomplished) or, to the Actual Knowledge of the Undersigned, is pending against any current Relevant Entity (with proper service of process to such Relevant Entity having been accomplished) or, to the Actual Knowledge of the Undersigned, is threatened in writing against the Developer or any such Relevant Entity (a) to restrain or enjoin the collection of Special Taxes or other sums pledged or to be pledged to pay the principal of and interest on the 2024 Bonds (e.g., the Reserve Fund established under the Indenture), (b) to restrain or enjoin the execution of and performance by the Developer of its obligations under the Acquisition Agreement, (c) to restrain or enjoin the development of the Property as described in the Preliminary Official Statement, (d) in any way contesting or affecting the validity of the Special Taxes or the Acquisition Agreement, or (e) which if successful, is reasonably likely to materially and adversely affect the Developer's ability to complete the development and sale of the Property as described in the Preliminary Official Statement or to pay Special Taxes due at any time with respect to the portion of the Property then owned by the Developer (to the extent the responsibility of the Developer) prior to delinquency.
7. As of the date of the Preliminary Official Statement, the information contained therein solely with respect to the Developer, its Relevant Entities, the proposed development of the Property, ownership of the Property, the Developer's development plan, the Developer's financing plan, the Developer's lenders (if any), and contractual arrangements of the Developer or any Relevant Entities (including, if material to the Developer's development plan or the Developer's financing plan, other loans of the Developer or such Relevant Entities) as set forth under the section of the Preliminary Official Statement captioned "PROPERTY OWNERSHIP AND THE DEVELOPMENT" (excluding therefrom in all cases information regarding the Appraisal, market value ratio and annual special tax ratio, and information which is identified as having been provided by a source other than the Developer), is true and correct in all material respects and did not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading.
8. The Developer covenants that, while the 2024 Bonds or any refunding obligations related thereto are outstanding, the Developer and its Relevant Entities which it controls will not bring any action, suit, proceeding, inquiry, or investigation at law or in equity, before any court, regulatory agency, public board or body, that in any way seeks to
challenge or overturn the formation of the Community Facilities District, to challenge the adoption of the ordinance related to Improvement Area No. 17D of the Community Facilities District, levying Special Taxes within Improvement Area No. 17D of the Community Facilities District, to invalidate the Community Facilities District, or any of the 2024 Bonds or any refunding bonds, or to invalidate the special tax liens imposed under Section 3115.5 of the Streets and Highways Code based on recordation of the notices of special tax lien relating thereto. The foregoing covenant shall not prevent the Developer or any Relevant Entity in any way from bringing any other action, suit, proceeding, inquiry, or investigation at law or in equity, before any court, regulatory agency, public board or body including, without limitation, (a) an action or suit contending that the Special Tax has not been levied in accordance with the methodologies contained in the Rate and Method of Apportionment of Special Taxes for the Community Facilities District pursuant to which the Special Taxes are levied, (b) an action or suit with respect to the application or use of the Special Taxes levied and collected, or (c) an action or suit to enforce the obligations of the City of Beaumont and/or the Community Facilities District under resolutions which established Improvement Area No. 17D, authorized the levy of a special tax within Improvement Area No. 17D, determined the necessity to incur bonded indebtedness within Improvement Area No. 17D, and called an election within Improvement Area No. 17D on the proposition of incurring bonded indebtedness, levying a special tax and setting an appropriations limit within Improvement Area No. 17D, the Resolution, the Indenture, the Acquisition Agreement, or any other agreements among the Developer, a Relevant Entity, the City, and/or the Community Facilities District or to which the Developer or a Relevant Entity is a party or beneficiary.
9. Except as disclosed in the Preliminary Official Statement, to the Actual Knowledge of the Undersigned, the Developer is not aware that any other public debt secured by a tax or assessment on the Property exists or is in the process of being authorized or any assessment districts or community facilities districts have been or are in the process of being formed that include any portion of the Property.
10. The Developer has been developing or has been involved in the development of numerous projects over an extended period of time. It is likely that the Developer and some of its Relevant Entities have been delinquent at one time or another in the payment of ad valorem property taxes, special assessments or special taxes. However, to the Actual Knowledge of the Undersigned, neither the Developer nor any Relevant Entity has been delinquent in any material extent in the last five years in the payment of special assessments or special taxes on property in California owned by the Developer or by any such Relevant Entity during the period of its ownership included within the boundaries of a community facilities district or an assessment district within California that (a) caused a draw on a reserve fund relating to such assessment district or community facilities district financing or (b) resulted in a foreclosure action being filed against the delinquent Developer or Relevant Entity in a court of law.
11. The Developer consents to the issuance of the 2024 Bonds. The Developer acknowledges and agrees that the proceeds of the 2024 Bonds will be used as described in the Preliminary Official Statement.
12. The Developer is aware of the requirement to comply with the provision of the Mello -Roos Community Facilities Act of 1982, as amended relating to the Notice of
Special Tax described in Government Code Section 53341.5 in connection with the sale of the Property, or portions thereof.
13. To the Actual Knowledge of the Undersigned, the Developer is able to pay its bills as they become due and no legal proceedings are pending against the Developer (with proper service of process to the Developer having been accomplished) or, to the Actual Knowledge of the Undersigned, threatened in writing in which the Developer may be adjudicated as bankrupt or discharged from any and all of its debts or obligations, or granted an extension of time to pay its debts or obligations, or be allowed to reorganize or readjust its debts or obligations, or be subject to control or supervision of the Federal Deposit Insurance Corporation.
14. To the Actual Knowledge of the Undersigned, Relevant Entities of the Developer are able to pay their bills as they become due and no legal proceedings are pending against any Relevant Entity of the Developer (with proper service of process to the applicable Relevant Entity having been accomplished) or, to the Actual Knowledge of the Undersigned, threatened in writing in which the Relevant Entities of the Developer may be adjudicated as bankrupt or discharged from any or all of their debts or obligations, or granted an extension of time to pay their debts or obligations, or be allowed to reorganize or readjust their debts or obligations, or be subject to control or supervision of the Federal Deposit Insurance Corporation.
15. The Developer has not filed for, nor is the Developer aware of, current proceedings for the reassessment of the assessed value of portions of the Property, other than in connection with the sale of homes to individual homebuyers.
16. Based upon its current development plans, including, without limitation, its current budget and subject to economic conditions and risks generally inherent in the development of real property, including, but not limited to, the risks described in the Preliminary Official Statement under the sections "SPECIAL RISK FACTORS" and "PROPERTY OWNERSHIP AND THE DEVELOPMENT," the Developer anticipates that it will have sufficient funds to complete the development of the Property as described in the Preliminary Official Statement, and to pay Special Taxes due at any time with respect to the portion of the Property then owned by the Developer (to the extent the responsibility of the Developer) prior to delinquency, and the Developer does not anticipate that the City or the Community Facilities District will be required to resort to a draw on the Reserve Fund for payment of principal of or interest on the 2024 Bonds due to the Developer's nonpayment of Special Taxes. However, neither the Developer nor its Relevant Entities are obligated to make any additional capital contribution or loan to the Developer at any time, and the Developer reserves the right to change its development plan and financing plan for the Property at any time without notice, and there is no recourse against the Developer for failure to pay Special Taxes other than the filing of a foreclosure action against the delinquent Property.
17. To the Actual Knowledge of the Undersigned, there are no claims, disputes, suits, actions, or contingent liabilities by and among the Developer, its Relevant Entities, or any contractors working on the development of the Property which are reasonably likely to materially and adversely affect the development of the Property as described in the Preliminary Official Statement or the payment of the Special Taxes due at any time with
respect to the portion of the Property then owned by the Developer (to the extent the responsibility of the Developer) prior to delinquency.
18. An appraisal of the taxable properties within the Improvement Area No. 17D of the Community Facilities District, dated , 2024 (the "Appraisal Report"), was prepared by Integra Realty Resources (the "Appraiser"). The Appraisal Report estimates the market value of the taxable properties within the Community Facilities District as of July 31, 2024 (the "Date of Value"). To Actual Knowledge of the Undersigned, all information submitted by, or on behalf of and authorized by, the Developer to the Appraiser and contained in the sections of the Appraisal Report highlighted in yellow or circled in Exhibit B attached hereto, was true and correct in all material respects as of the Date of Value.
19. Solely as to the limited information described in the sections of the Preliminary Official Statement indicated in Paragraph 7 above, the Developer agrees to indemnify and hold harmless, to the extent permitted by law, the City, the Community Facilities District, and their officials and employees, and each Person, if any, who controls any of the foregoing within the meaning of Section 15 of the Securities Act of 1933, as amended, or of Section 20 of the Securities Exchange Act of 1934, as amended, against any and all losses, claims, damages or liabilities, joint or several, to which such indemnified party may become subject under any statute or at law or in equity or otherwise and shall reimburse any such indemnified party for any reasonable legal or other expense incurred by it in connection with investigating any such claim against it and defending any such action, insofar and to the extent such losses, claims, damages, liabilities or actions arise out of or are based upon any untrue statement by the Developer of a material fact or the omission or alleged omission of a material fact in the above -referenced information in the Preliminary Official Statement as of its date, necessary to make the statements made by the Developer contained therein, in light of the circumstances under which they were made not misleading.
This indemnity provision shall not be construed as a limitation on any other liability which the Developer may otherwise have to any indemnified party, provided that in no event shall the Developer be obligated for double indemnification, or for the negligence or willful misconduct of an indemnified party.
20. If between the date hereof and the Closing Date any event relating to or affecting the Developer, its Relevant Entities, the proposed development of the Property, ownership of the Property, the Developer's development plan, the Developer's financing plan, the Developer's lenders, if any, and contractual arrangements of the Developer or any Relevant Entities (including, if material to the Developer's development plan or the Developer's financing plan, other loans of such Relevant Entities) shall occur of which the undersigned has actual knowledge and which the undersigned believes would cause the information under the sections of the Preliminary Official Statement indicated in Paragraph 7 hereof, to contain an untrue statement of a material fact or to omit to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, the Developer shall notify the City, the Community Facilities District and the Underwriter and if in the opinion of counsel to the City, the Community Facilities District or the Underwriter such event requires the preparation and publication of a supplement or amendment to the Preliminary Official Statement, the Developer shall reasonably cooperate with the City and the Community Facilities District in the preparation of an amendment or supplement to the Preliminary Official Statement in form and substance satisfactory to counsel to the City and to the Underwriter.
21. The Developer agrees to deliver a Closing Certificate dated the date of issuance of the 2024 Bonds at the time of issuance of the 2024 Bonds in substantially the form attached as Exhibit A. If any event related to or affecting the Developer, its Relevant Entities, or the ownership, development, or sale of the Property occurs, as a result of which it is necessary to modify the Closing Certificate, the Developer agrees to deliver a new Closing Certificate revised to reflect such event.
22. The Developer acknowledges and agrees that: (i) in connection with the purchase and sale of the 2024 Bonds under the Purchase Agreement, and with the discussions, undertakings and procedures leading up to the consummation of the purchase and sale of the 2024 Bonds under the Purchase Agreement, the Underwriter is and has been acting solely as principal and is not acting as the agent or fiduciary of the Developer; (ii) the Underwriter has not assumed a fiduciary responsibility in favor of the Developer with respect to (a) the offering of the 2024 Bonds or the process leading thereto (whether or not the Underwriter, or any affiliate of the Underwriter, has advised or is currently advising the Developer on other matters), or (b) any other obligation to the Developer with respect to the offering contemplated by the Purchase Agreement; and (iii) the Developer has consulted its own legal, financial and other advisors to the extent it has deemed appropriate in connection with the offering contemplated by the Purchase Agreement.
23. On behalf of the Developer, the undersigned has reviewed the contents of this Letter of Representations and has met with counsel to the Developer for the purpose of discussing the meaning of its contents. The undersigned acknowledges and understands that a variety of state and federal securities 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 Developer and that under some circumstances certification as to the matters set forth in this Letter of Representations, without additional disclosures or other action, may not fully discharge all duties and obligations of the Developer under such securities laws. [Signature Page Follows]
The undersigned has executed this Letter of Representations solely in his or her capacity as an authorized representative of Developer and he or she will have no personal liability arising from or relating to this Letter of Representations. Any liability arising from or relating to this Letter of Representations may only be asserted against the Developer.
TRI POINTE HOMES HOLDINGS, INC.
By:
EXHIBIT A
CITY OF BEAUMONT
COMMUNITY FACILITIES DISTRICT NO. 93-1
(IMPROVEMENT AREA NO. 17D)
SPECIAL TAX BONDS, SERIES 2024
FORM OF CLOSING CERTIFICATE OF
TRI POINTE HOMES HOLDINGS, INC.
[Closing Date]
City of Beaumont Community Facilities District No. 93-1 Beaumont, California
Stifel, Nicolaus & Company, Incorporated
Los Angeles, California
Ladies and Gentlemen:
Reference is made to the City of Beaumont Community Facilities District No. 93-1 (the "Community Facilities District") and the City of Beaumont Community Facilities District No. 93-1 (Improvement Area No. 17D) Special Tax Bonds, Series 2024 (the "2024 Bonds") and to the Bond Purchase Agreement, dated [BPA Date] (the "Purchase Agreement"), entered into in connection therewith. This Closing Certificate of Tri Pointe Homes Holdings, Inc. (the "Closing Certificate") is delivered by Tri Pointe Homes Holdings, Inc. (the "Developer") pursuant to the Purchase Agreement. Capitalized terms used herein and not otherwise defined have the meanings ascribed to them in the Letter of Representations of Tri Pointe Homes Holdings, Inc. (the "Letter of Representations"), dated [POS Date] delivered by the Developer, a copy of which is attached hereto as Exhibit A.
The undersigned certifies that he is familiar with the facts herein certified and is authorized and qualified to certify the same as an authorized officer or representative of the Developer, and the undersigned, on behalf of the Developer, further certifies as follows:
1. The Developer has received the final Official Statement relating to the 2024 Bonds (the "Official Statement"). Each statement, representation and warranty made in the Letter of Representations is true and correct in all material respects on and as of the date hereof with the same effect as if made on the date hereof, except that all references therein to the Preliminary Official Statement shall be deemed to be references to the final Official Statement.
2. To the Actual Knowledge of the Undersigned, no event has occurred since the date of the Preliminary Official Statement affecting the statements and information described in Paragraph 7 of the Letter of Representations relating to the Developer, and its Relevant Entities, the proposed development of the Property, ownership of the Property, the Developer's development plan, the Developer's financing plan, the Developer's lenders, if any, and contractual arrangements of the Developer or any Relevant Entities (including, if material to the Developer's development plan or the Developer's financing plan other loans of such Relevant Entities) which should be disclosed in the Official Statement for the purposes for which it is to be used in order to make such statements and information contained in the Official Statement not misleading in any material respect.
D-9
3. For the period through 25 days after the "End of the Underwriting Period" as defined in the Purchase Agreement (provided the Developer may assume the End of the Underwriting Period is the Closing Date (as defined in the Purchase Agreement), unless it receives written notice from the Underwriter that the End of the Underwriting Period is later than the Closing Date), if any event relating to or affecting the Developer, its Relevant Entities or the development of the Property shall occur as a result of which the information referred to in Paragraph 7 of the Letter of Representations contains an untrue statement of a material fact or omits to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, the Developer shall notify the City, the Community Facilities District and the Underwriter, and if, in the opinion of counsel to the City, the Community Facilities District or the Underwriter, such event requires the preparation and publication of a supplement or amendment to the information described in the sections of the Official Statement referenced in Paragraph 7 of the Letter of Representations, the Developer shall reasonably cooperate with the City, the Community Facilities District and the Underwriter in the preparation of an amendment or supplement by the Community Facilities District to the Official Statement in form and substance satisfactory to counsel to the City, the Community Facilities District and the Underwriter which will amend or supplement the Official Statement so that it will not contain an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in light of the circumstances existing as of the date of the amendment or supplement to the Official Statement, not misleading. [Signature Page Follows]
D-10
The undersigned has executed this Closing Certificate solely in his or her capacity as an authorized representative of Developer and he or she will have no personal liability arising from or relating to this Closing Certificate. Any liability arising from or relating to this Closing Certificate may only be asserted against the Developer.
TRI POINTE HOMES HOLDINGS, INC.
By:
Name:
Title:
D-1 1
EXHIBIT B
CITY OF BEAUMONT
COMMUNITY FACILITIES DISTRICT NO. 93-1
(IMPROVEMENT AREA NO. 17D)
SPECIAL TAX BONDS, SERIES 2024
DEVELOPER PROVIDED INFORMATION IN APPRAISAL REPORT
See attached.
D-12
DISTRICT CONTINUING DISCLOSURE CERTIFICATE
THIS CONTINUING DISCLOSURE CERTIFICATE (this "Disclosure Certificate"), dated 2024, is executed and delivered by the City of Beaumont Community Facilities District No. 93-1 (the "District") in connection with the issuance of the City of Beaumont Community Facilities District No. 93-1 (Improvement Area No. 17D) Special Tax Bonds, Series 2024 (the "Bonds"). The Bonds are being issued pursuant to a Resolution of Issuance adopted by the City Council of the City of Beaumont, acting as the legislative body of the District on , 2024 and a Bond Indenture by and between the District and Zions Bancorporation, National Association, as Trustee, dated as of 1, 2024 (the "Indenture").
The District covenants as follows:
SECTION 1. Purpose of the Disclosure Certificate. This Disclosure Certificate is being executed and delivered, for the benefit of the Owners and Beneficial Owners of the Bonds and in order to assist the Participating Underwriter in complying with the Rule.
SECTION 2. Definitions. In addition to the definitions set forth in the Indenture and the Rate and Method of Apportionment, which apply to any capitalized term used in this Disclosure Certificate unless otherwise defined in this Section, the following capitalized terms shall have the following meanings:
"Annual Report" shall mean any Annual Report provided by the District pursuant to, and as described in, Sections 3 and 4 of this Disclosure Certificate.
"Beneficial Owner" shall mean any person who (a) has the power, directly or indirectly, to vote or consent with respect to, or to dispose of ownership of, any Bond (including a person holding Bond through a nominee, depository or other intermediary), or (b) is treated as the owner of any Bond for federal income purposes.
"City" shall mean the City of Beaumont, County of Riverside, California. "Disclosure Representative" shall mean the City Manager of the City, or such other officer or employee as the District shall designate in writing to the Dissemination Agent from time to time. "Dissemination Agent" shall mean, initially, Spicer Consulting Group, LLC, or any successor Dissemination Agent designed in writing by the District. "EMMA" shall mean the Electronic Municipal Market Access System of the Municipal Securities Rulemaking Board, which can be found at www.emma.msrb.org , or any other repository of disclosure information that may be designated by the Securities and Exchange Commission m the future. "Financial Obligation" shall mean a (i) debt obligation; (ii) derivative instrument entered into in connection with, or pledged as security or a source of payment for, an existing or planned debt obligation; or (iii) guarantee of (i) or (ii). The term financial obligation shall not include municipal securities as to which a final official statement has been provided to the MSRB consistent with the Rule. "Improvement Area No. 17D" shall mean Improvement Area No. 17D of the District. "Listed Events" shall mean any of the events listed in Section 5 of this Disclosure Certificate. "MSRB" shall mean the Municipal Securities Rulemaking Board or any other entity designated or authorized by the Securities and Exchange Commission to receive reports pursuant to the Rule. Until otherwise designated by the MSRB or the Securities and Exchange Commission, filings with the MSRB are to be made 4887-8421-8603v1/022599-0035
through the Electronic Municipal Market Access (EMMA) website of the MSRB, currently located at http://emma.msrb.org .
"Official Statement" shall mean the District's official statement with respect to the Bonds. "Participating Underwriter" shall mean Stifel, Nicolaus & Company, Incorporated. "Rate and Method of Apportionment" means that certain Rate and Method of Apportionment of Special Tax approved pursuant to the Resolution of Formation.
"Resolution of Formation" means the resolutions adopted by the City Council pursuant to which the City Council formed the District and Improvement Area No. 17D therein and undertook certain change proceedings with respect to the District and Improvement Area No. 17D. "Rule" shall mean Rule 15c2 -12(b)(5) adopted by the Securities and Exchange Commission under the Securities Exchange Act of 1934, as the same may be amended from time to time.
SECTION 3. Provision of Annual Reports.
(a) Not later than February 10 of each year, commencing February 10, 2025, the District shall, or shall cause the Dissemination Agent to, provide to EMMA and the Participating Underwriter an Annual Report which is consistent with the requirements of Section 4 of this Disclosure Certificate. If the Dissemination Agent is other than the District, then not later than 15 business days prior to the date referred to in the prior sentence hereof, the District shall provide the Annual Report (in a form suitable for filing with EMMA) to the Dissemination Agent. The Annual Report may be submitted as a single document or as separate documents comprising a package and may include by reference other information as provided in Section 4 of this Disclosure Certificate; provided that the audited financial statements of the District may be submitted separately from and later than the balance of the Annual Report if they are not available by the date required above for the filing of the Annual Report.
(b) In the event that the Dissemination Agent is an entity other than the District, then the provisions of this Section 3(b) shall apply. Not later than fifteen (15) Business Days prior to the date specified in subsection (a) for providing the Annual Report, the District shall provide the Annual Report to the Dissemination Agent. If by fifteen (15) Business Days prior to the due date for an Annual Report the Dissemination Agent has not received a copy of the Annual Report, the Dissemination Agent shall contact the District to determine if the District will be filing the Annual Report in compliance with subsection (a). The District shall provide a written certification with each Annual Report furnished to the Dissemination Agent to the effect that such Annual Report constitutes the Annual Report required to be furnished by it hereunder. The Dissemination Agent may conclusively rely upon such certification of the District and shall have no duty or obligation to review such Annual Report.
(c) If the Dissemination Agent is other than the District and if the Dissemination Agent is unable to verify that an Annual Report has been provided to EMMA by the date required in subsection (a), the Dissemination Agent shall send a notice in a timely manner to EMMA, in the form required by EMMA. If the District acts as its own Dissemination Agent, it shall file a notice with EMMA no later than the date specified in subsection (a) for filing an Annual Report if the District fails to file the Annual Report by that date. (d) If the Dissemination Agent is other than the District, the Dissemination Agent shall:
(i) determine each year prior to the date for providing the Annual Report the name and address of the repository if other than the MSRB through EMMA; and 4887-8421-8603v1/022599-0035
(ii) promptly after receipt of the Annual Report, file a report with the District certifying that the Annual Report has been provided to EMMA and the date it was provided. (e) Notwithstanding any other provision of this Disclosure Certificate, all filings shall be made in accordance with the MSRB's EMMA system or in another manner approved under the Rule.
SECTION 4. Content of Annual Reports. The Annual Report shall contain or include by reference:
(a) Financial Statements. The audited financial statements of the District, if any, for the prior fiscal year, prepared in accordance with generally accepted accounting principles as promulgated to apply to governmental entities from time to time by the Governmental Accounting Standards Board. If the District's audited financial statements, if any are prepared, are not available by the time the Annual Report is required to be filed pursuant to Section 3, the Annual Report shall contain unaudited financial statements, and the audited financial statements shall be filed in the same manner as the Annual Report when they come available. (b) Financial and Operating Data. The Annual Report shall contain or incorporate by reference the following information:
(i)
of the Annual Report;
the principal amount of Bonds outstanding as of the September 2 preceding the filing (ii) the balance in each fund under the Indenture as of the September 2 preceding the filing of the Annual Report;
(iii) the aggregate assessed valuation of the Taxable Property within Improvement Area No. 17D;
(iv) any changes to the Rate and Method of Apportionment of the Special Tax approved or submitted to the qualified electors for approval prior to the filing of the Annual Report; (v) a table setting forth the annual Special Tax delinquency rate within Improvement Area No. 17D at June 30 for each fiscal year on which a delinquency exists, listing for each fiscal year the total Special Tax levy, the amount delinquent and the percent delinquent; (vi) the status of any foreclosure actions being pursued by the District with respect to delinquent Special Taxes within Improvement Area No. 17D; and (vii) an update of the value -to -lien of the property within Improvement Area No. 17D based on the assessed value and the Special Tax levy for then current fiscal year, which update may be provided in a form similar to Table 2 in the Official Statement; provided that such update need not include overlapping special tax, assessment or general obligation indebtedness.
(c) Any or all of the items listed in (a) or (b) above may be included by specific reference to other documents, including official statements of debt issues of the District or related public entities, which have been submitted to EMMA or the Securities and Exchange Commission. If the document included by reference is a final official statement, it must be available from the MSRB through EMMA. The District shall clearly identify each such other document so included by reference.
SECTION 5. Reporting of Significant Events.
(a) Pursuant to the provisions of this Section 5, the District shall give, or cause the Dissemination Agent to give, notice to EMMA in a timely manner not in excess of ten (10) business days after the occurrence of any of the following events with respect to the Bonds:
4887-8421-8603v1/022599-0035
1. principal and interest payment delinquencies;
2. unscheduled draws on debt service reserves reflecting financial difficulties;
3. unscheduled draws on credit enhancements reflecting financial difficulties;
4. substitution of credit or liquidity providers, or their failure to perform;
5. adverse tax opinions or the issuance by the Internal Revenue Service of proposed or final determinations of taxability, Notices of Proposed Issue (IRS Form 5701-TEB) or other material notices or determinations with respect to the tax status of the Bonds;
6. defeasances;
7. tender offers;
8. bankruptcy, insolvency, receivership or similar proceedings;
9. ratings changes; and
10. default, event of acceleration, termination event, modification of terms, or other similar events under the terms of a Financial Obligation of the obligated person, any of which reflect financial difficulties.
(b) Additionally, the District shall give or cause the Dissemination Agent to give notice to EMMA in a timely manner not in excess of ten (10) business days after the occurrence of any of the following events with respect to the Bonds, if material:
1. mergers, consolidations, acquisitions, the sale of all or substantially all of the assets of the obligated persons or their termination;
2. appointment of a successor or additional fiscal agent or the change of the name of a fiscal agent;
3. nonpayment related defaults;
4. modifications to the rights of Bondholders;
5. bond calls;
6. release, substitution or sale of property securing repayment of the Bonds; and
7. incurrence of a Financial Obligation of the obligated person, or agreement to covenants, events of default, remedies, priority rights, or other similar terms of a Financial Obligation of the obligated person, any of which affect security holders. (c) In the event that the District's fiscal year changes, the District shall report or shall instruct the Dissemination Agent to report such change in the same manner and to the same parties as Listed Events would be reported pursuant to this Section.
(d) The District hereby agrees that the undertaking set forth in this Disclosure Certificate is the responsibility of the District, and the Dissemination Agent, if other than the District, shall not be responsible for 4887-8421-8603v1/022599-0035
determining whether the District's instructions to the Dissemination Agent under this Section comply with the requirements of the Rule.
SECTION 6. Termination of Reporting Obligation. The obligations of the District and the Dissemination Agent under this Disclosure Certificate shall terminate upon the legal defeasance, prior redemption or payment in full of all of the Bonds. If such termination occurs prior to the final maturity of the Bonds, the District shall give notice of such termination in the same manner as for a Listed Event under Section
5. SECTION 7. Dissemination Agent. The District may, from time to time, appoint or engage a Dissemination Agent to assist it in carrying out its obligations under the Disclosure Certificate, and may discharge any such Dissemination Agent, with or without appointing a successor Dissemination Agent. The initial Dissemination Agent shall be Spicer Consulting Group, LLC. The Dissemination Agent may resign by providing (i) thirty days written notice to the District, and (ii) upon appointment of a new Dissemination Agent hereunder.
SECTION 8. Amendment.
(a) This Disclosure Certificate may be amended, by written agreement of the parties, without the consent of the Owners, and any provision of this Disclosure Certificate may be waived, if all of the following conditions are satisfied: (1) such amendment or waiver is made in connection with a change in circumstances that arises from a change in legal (including regulatory) requirements, a change in law, or a change in the identity, nature or status of the District or the type of business conducted thereby, (2) the undertakings in this Disclosure Certificate as so amended or waived would, in the opinion of a nationally recognized bond counsel, have complied with the requirements of the Rule as of the date of this Disclosure Certificate, after taking into account any amendments or interpretations of the Rule, as well as any change in circumstances, and (3) the amendment or waiver either (i) is approved by the Owners of the Bonds in the same manner as provided in the Indenture for amendments to the Indenture with the consent of Owners or (ii) does not, in the determination of the District, materially impair the interests of the Owners or Beneficial Owners of the Bonds. (b) To the extent any amendment to this Disclosure Certificate results in a change in the type of financial information or operating data provided pursuant to this Disclosure Certificate, the first Annual Report provided thereafter shall include a narrative explanation of the reasons for the amendment and the impact of the change in the type of operating data or financial information being provided. (c) If an amendment is made to the basis on which financial statements are prepared, the Annual Report for the year in which the change is made shall present a comparison between the financial statements or information prepared on the basis of the new accounting principles and those prepared on the basis of the former accounting principles. Such comparison shall include a quantitative and, to the extent reasonably feasible, qualitative discussion of the differences in the accounting principles and the impact of the change in the accounting principles on the presentation of the financial information.
SECTION 9. Additional Information. Nothing in this Disclosure Certificate shall be deemed to prevent the District from disseminating any other information, using the means of dissemination set forth in this Disclosure Certificate or any other means of communication, or including any other information in any Annual Report or notice of occurrence of a Listed Event, in addition to that which is required by this Disclosure Certificate. If the District chooses to include any information in any Annual Report or notice of occurrence of a Listed Event in addition to that which is specifically required by this Disclosure Certificate, the District shall have no obligation under this Agreement to update such information or include it in any future Annual Report or notice of occurrence of a Listed Event.
SECTION 10. Default. In the event of a failure of the District or the Dissemination Agent to comply with any provision of this Disclosure Certificate, any Owner or Beneficial Owner of the Bonds may take such 4887-8421-8603v1/022599-0035
actions as may be necessary and appropriate, including seeking mandate or specific performance by court order, to cause the District and/or the Dissemination Agent to comply with their respective obligations under this Disclosure Certificate. A default under this Disclosure Certificate shall not be deemed an Event of Default under the Indenture, and the sole remedy under this Disclosure Certificate in the event of any failure of the District or the Dissemination Agent to comply with this Disclosure Certificate shall be an action to compel performance.
SECTION 11. Duties, Immunities and Liabilities of Dissemination Agent. Where an entity other than the District is acting as the Dissemination Agent, the Dissemination Agent shall have only such duties as are specifically set forth in this Disclosure Certificate, and the District agrees to indemnify and save the Dissemination Agent and its officers, directors, employees and agents, harmless against any loss, expense and liabilities which they may incur arising out of or in the exercise or performance of their powers and duties hereunder, including the costs and expenses (including attorney's fees) of defending against any claim of liability, but excluding liabilities due to the Dissemination Agent's negligence or willful misconduct. Any Dissemination Agent shall be paid (i) compensation by the District for its services provided hereunder in accordance with a schedule of fees to be mutually agreed to; and (ii) all expenses, legal fees and advances made or incurred by the Dissemination Agent in the performance of its duties hereunder. The Dissemination Agent shall have no duty or obligation to review any information provided to it by the District pursuant to this Disclosure Certificate. The obligations of the District under this Section shall survive resignation or removal of the Dissemination Agent and payment of the Bonds. No person shall have any right to commence any action against the Dissemination Agent seeking any remedy other than to compel specific performance of this Disclosure Certificate. The Dissemination Agent shall not be liable under any circumstances for monetary damages to any person for any breach under this Disclosure Certificate.
SECTION 12. Beneficiaries. This Disclosure Certificate shall inure solely to the benefit of the District, the Dissemination Agent, the Participating Underwriter and Owners and Beneficial Owners from time to time of the Bonds; and it shall create no rights in any other person or entity.
SECTION 13. Merger. Any person succeeding to all or substantially all of the Dissemination Agent's corporate trust business shall be the successor Dissemination Agent without the filing of any paper or any further act.
This Disclosure Certificate is executed as of the date and year first set forth above.
CITY OF BEAUMONT COMMUNITY
FACILITIES DISTRICT NO. 93-1
By:
Disclosure Representative
4887-8421-8603v1/022599-0035
o $. Stradling Yocca Carlson & Rauth
1) Draft of 10/2/24
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-c o PRELIMINARY OFFICIAL STATEMENT DATED 2024
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o NEW ISSUE —BOOK -ENTRY ONLY NO RATING
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• o In the opinion of Stradling Yocca Carlson & Rauth LLP, Bond Counsel, under existing statutes, regulations, rulings and judicial decisions, and a�
assuming the accuracy of certain representations and compliance with certain covenants and requirements described herein, interest (and original issue discount) E o on the Bonds described herein is excluded from gross income for federal income tax purposes and is not an item of tax preference for purposes of calculating the federal alternative minimum tax imposed on individuals. In the further opinion of Bond Counsel, interest (and original issue discount) on the Bonds is exempt • from State of California personal income tax. See the caption "TAX EXEMPTION" with respect to tax consequences relating to the Bonds, including with respect o to the alternative minimum tax imposed on certain large corporations. 0 CA o
C1) ct $9,400,000*
o .2 CITY OF BEAUMONT
cd v, COMMUNITY FACILITIES DISTRICT NO. 93-1
o •4 (IMPROVEMENT AREA NO. 17D)
= o SPECIAL TAX BONDS, SERIES 2024
o Dated: Delivery Date Due: September 1, as shown on inside cover page ar ° The City of Beaumont Community Facilities District No. 93-1 (Improvement Area No. 17D) Special Tax Bonds, Series 2024 (the "Bonds") are being c 4 issued by the City of Beaumont Community Facilities District No. 93-1 (Improvement Area No. 17D) (the "District") to: (i) finance certain public improvements 0, o needed with respect to the development of property located within Improvement Area No. 17D (the "Improvement Area") of the District; (ii) fund a reserve account o
cc: cat for the Bonds; and (iii) pay costs of issuance for the Bonds. The Bonds are authorized to be issued pursuant to the Mello -Roos Community Facilities Act of 1982, a as amended (Section 53311 et seq. of the Government Code of the State of California) (the "Act"), and pursuant to that certain Bond Indenture, dated as of .° •.N 1, 2024 (the "Indenture"), by and between the District and Zions Bancorporation, National Association, as trustee (the "Trustee"). g o The Bonds are payable from Net Taxes (as defined herein) derived from a certain annual Special Tax (as defined herein) to be levied on taxable parcels i within the Improvement Area and from certain other funds pledged under the Indenture, all as further described herein. The Special Tax is to be levied according a.) the rate and method of apportionment approved by the City Council of the City and the qualified electors within the Improvement Area. See the caption Haa) "SOURCES OF PAYMENT FOR THE BONDS — Special Taxes" and Appendix A — "RATE AND METHOD OF APPORTIONMENT OF SPECIAL TAX." 74 u) The Bonds will be issued in fully registered form and when issued will be registered in the name of Cede & Co., as nominee of The Depository Trust o E Company, New York, New York ("DTC"). Individual purchases of the Bonds may be made in principal amounts of $5,000 and integral multiples thereof and will -o 'F)" • be in book -entry form only. Purchasers of the Bonds will not receive certificates representing their beneficial ownership of the Bonds but will receive credit a) 0O ,4 balances on the books of their respective nominees. The Bonds will not be transferable or exchangeable except for transfer to another nominee of DTC or as a 3 otherwise described herein. Interest on the Bonds will be payable on each March 1 and September 1, commencing March 1, 2025. Principal of and interest on the ca
o g Bonds will be paid by the Trustee to DTC for subsequent disbursement to DTC Participants, who will remit such payments to the Beneficial Owners of the Bonds. •o •o NEITHER THE FAITH AND CREDIT NOR THE TAXING POWER OF THE CITY, THE COUNTY OF RIVERSIDE, THE STATE OF CALIFORNIA OR ANY POLITICAL SUBDIVISION THEREOF IS PLEDGED TO THE PAYMENT OF THE BONDS. EXCEPT FOR THE NET TAXES, E a o NO OTHER REVENUES OR TAXES ARE PLEDGED TO THE PAYMENT OF THE BONDS. THE BONDS ARE NOT GENERAL OR SPECIAL o • OBLIGATIONS OF THE CITY OR GENERAL OBLIGATIONS OF THE DISTRICT BUT ARE LIMITED OBLIGATIONS OF THE DISTRICT PAYABLE o SOLELY FROM NET TAXES AND OTHER AMOUNTS HELD UNDER THE INDENTURE AS MORE FULLY DESCRIBED HEREIN. r
• o The Bonds are subject to optional redemption, special mandatory redemption and mandatory sinking fund redemption prior to maturity as set forth Eo ar •
o herein. See the caption "THE BONDS — Redemption."
6: :. Investment in the Bonds involves risks that are not appropriate for certain investors. Certain events could affect the ability of the District to •• ,z pay the principal of and interest on the Bonds when due. See the caption "SPECIAL RISK FACTORS" for a discussion of certain risk factors that E5 u ° should be considered, in addition to the other matters set forth herein, in evaluating the investment quality of the Bonds.
N U ;..i
b o w THIS COVER PAGE CONTAINS CERTAIN INFORMATION FOR GENERAL REFERENCE ONLY. IT IS NOT INTENDED TO BE A SUMMARY OF THE SECURITY OR TERMS OF THIS ISSUE. INVESTORS ARE ADVISED TO READ THE ENTIRE OFFICIAL STATEMENT TO cz:;� 'o o OBTAIN INFORMATION ESSENTIAL TO THE MAKING OF AN INFORMED INVESTMENT DECISION. o
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3 MATURITY SCHEDULE
z • •
G • w (See Inside Cover Page)
o
I' 72, •
The Bonds are offered when, as and if issued and accepted by the Underwriter, subject to approval as to their legality by Stradling Yocca Carlson & Rauth LLP, Newport Beach, California, Bond Counsel, and subject to certain other conditions. Certain legal matters will be passed on for the City and the District O > . ^ by Slovak Baron Empey Murphy & Pinkney LLP, Palm Springs, California, City Attorney, and for the District by Stradling Yocca Carlson & Rauth LLP, Disclosure g Counsel, for the Underwriter by Kutak Rock LLP, Irvine, California, and for the Trustee by its counsel. It is anticipated that the Bonds in book -entry form will be a�i a� available for delivery on or about , 2024.
cz • E :74 [STIFEL LOGO]
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$9,400,000*
CITY OF BEAUMONT
COMMUNITY FACILITIES DISTRICT NO. 93-1
(IMPROVEMENT AREA NO. 17D)
SPECIAL TAX BONDS, SERIES 2024
MATURITY SCHEDULE
BASE CUSIP®?
$ Serial Bonds
Maturity Date Principal
(September 1) Amount Interest Rate Yield Price CUSIP No.t % Term Bonds due September 1, 20_ Yield: % Price: CUSIP No.t % Term Bonds due September 1, 20 Yield: % Price: CUSIP No.t Preliminary, subject to change.
t CUSIP® is a registered trademark of the American Bankers Association. CUSIP Global Services (CGS) is managed on behalf of the American Bankers Association by FactSet Research Systems Inc. Copyright© 2024 CUSIP Global Services. All rights reserved. CUSIP® data herein is provided by CUSIP Global Services. This data is not intended to create a database and does not serve in any way as a substitute for the CGS database. CUSIP® numbers are provided for convenience of reference only.
None of the District, the City, the Underwriter or their agents or counsel assume responsibility for the accuracy of such numbers.
Preliminary, subject to change.
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CITY OF BEAUMONT
COUNTY OF RIVERSIDE, CALIFORNIA
CITY COUNCIL
David Fenn, Mayor
Mike Lara, Mayor Pro Tem
Jessica Voigt, Councilmember
Lloyd White, Councilmember
Julio Martinez III, Councilmember
CITY ADMINISTRATORS
Elizabeth Gibbs, City Manager
Jennifer Ustation, Finance Director
CITY ATTORNEY
Slovak Baron Empey Murphy & Pinkney LLP
Palm Springs, California
BOND AND DISCLOSURE COUNSEL
Stradling Yocca Carlson & Rauth LLP
Newport Beach, California
MUNICIPAL ADVISOR
Urban Futures, Inc.
Walnut Creek, California
SPECIAL TAX CONSULTANT
Spicer Consulting Group, LLC
Murrieta, California
APPRAISER
Integra Realty Resources
Rocklin, California
TRUSTEE
Zions Bancorporation, National Association
Los Angeles, California
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Except where otherwise indicated, all information contained in this Official Statement has been provided by the City and the District. No dealer, broker, salesperson or other person has been authorized by the City, the District, the Trustee or the Underwriter to give any information or to make any representations in connection with the offer or sale of the B onds other than those contained herein and, if given or made, such other information or representations must not be relied upon as having been authorized by the City, the District, the Trustee or the Underwriter. This Official Statement does not constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of the Bonds by a person in any jurisdiction in which it is unlawful for such person to make such an offer, solicitation or sale.
This Official Statement is not to be construed as a contract with the purchasers or Owners of the Bonds. Statements contained in this Official Statement which involve estimates, forecasts or matters of opinion, whether or not expressly so described herein, are intended solely as such and are not to be construed as representations of fact.
The Underwriter has provided the following sentence for inclusion in this Official Statement:
The Underwriter has reviewed the information in this Official Statement in accordance with, and as a part of, its responsibilities to investors under the federal securities laws as applied to the facts and circumstances of this transaction, but the Underwriter does not guarantee the accuracy or completeness of such information.
The information and expressions of opinion herein are subject to change without notice and neither the delivery of this Official Statement nor any sale made hereunder shall, under any circumstances, create any implication that there has been no change in the affairs of the City, the District or any other parties described herein since the date hereof. All summaries of the Indenture or other documents are made subject to the provisions of such documents respectively and do not purport to be complete statements of any or all of such provisions. Reference is hereby made to such documents on file with the City for further information in connection therewith.
THE BONDS HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, IN RELIANCE UPON AN EXEMPTION CONTAINED IN SUCH ACT. THE BONDS HAVE NOT BEEN REGISTERED OR QUALIFIED UNDER THE SECURITIES LAWS OF ANY STATE.
Certain statements included or incorporated by reference in this Official Statement constitute "forward -looking statements" within the meaning of the United States Private Securities Litigation Reform Act of 1995, Section 21E of the United States Securities Exchange Act of 1934, as amended, and Section 27A of the United States Securities Act of 1933, as amended. Such statements are generally identifiable by the terminology used such as a "plan," "expect," "estimate," "project," "budget," or similar words. Such forward -looking statements include, but are not limited to certain statements contained in the information under the captions "THE DISTRICT" and "PROPERTY OWNERSHIP AND THE DEVELOPMENT."
THE ACHIEVEMENT OF CERTAIN RESULTS OR OTHER EXPECTATIONS CONTAINED IN SUCH
FORWARD -LOOKING STATEMENTS INVOLVE KNOWN AND UNKNOWN RISKS, UNCERTAINTIES AND
OTHER FACTORS WHICH MAY CAUSE ACTUAL RESULTS, PERFORMANCE OR ACHIEVEMENTS
DESCRIBED TO BE MATERIALLY DIFFERENT FROM ANY FUTURE RESULTS, PERFORMANCE OR ACHIEVEMENTS EXPRESSED OR IMPLIED BY SUCH FORWARD -LOOKING STATEMENTS. THE
DISTRICT DOES NOT PLAN TO ISSUE ANY UPDATES OR REVISIONS TO THE FORWARD -LOOKING STATEMENTS SET FORTH IN THIS OFFICIAL STATEMENT. IN EVALUATING SUCH STATEMENTS,
POTENTIAL INVESTORS SHOULD SPECIFICALLY CONSIDER THE VARIOUS FACTORS WHICH COULD
CAUSE ACTUAL EVENTS OR RESULTS TO DIFFER MATERIALLY FROM THOSE INDICATED BY SUCH FORWARD -LOOKING STATEMENTS.
The City maintains a website. However, the information presented on such website is not part of this Official Statement and should not be relied upon in making an investment decision with respect to the Bonds. 4887-9868-3354v10/022599-0035
TABLE OF CONTENTS
Page
INTRODUCTION 1
The District and the Improvement Area 1
Sources of Payment for the Bonds 2
Appraisal Report 4
Description of the Bonds 4
Tax Exemption 4
Professionals Involved in the Offering 5
Continuing Disclosure 5
Parity Bonds for Refunding Purposes Only 5
SEC Order 5
Bond Owners' Risks 6
Other Information 6
FINANCING PLAN 6
Estimated Sources and Uses of Funds 6
THE BONDS 6
General Provisions 6
Debt Service Schedule 8
Redemption 8
Registration, Transfer and Exchange 12
SOURCES OF PAYMENT FOR THE BONDS 12
Limited Obligations 12
Special Taxes 13
Reserve Account of the Special Tax Fund 21
No Teeter Plan 22
Parity Bonds for Refunding Purposes Only 22
THE IMPROVEMENT AREA 22
General Description of the District and the Improvement Area 22 Tournament Hills Master Planned Community 23
Authorized Uses of Bond Proceeds 23
Appraisal Report 23
Estimated Value -to -Lien Ratios 24
Direct and Overlapping Debt 27
Delinquency History 29
PROPERTY OWNERSHIP AND THE DEVELOPMENT 29
General 30
Planned Development Within the Improvement Area 30
TriPointe 31
SPECIAL RISK FACTORS 33
Risks of Real Estate Secured Investments Generally 33
Insufficiency of Special Tax Revenues 33
Impact of Economic Conditions on the Development in the Improvement Area 35 Increase in Mortgage Interest Rates 35
Concentration of Ownership 35
Property Values 35
Natural Disasters 36
Hazardous Substances 37
Enforcement Delays — Bankruptcy 37
Special Tax Delinquencies 37
FDIC/Federal Government Interests in Parcels 38
Direct and Overlapping Indebtedness 39
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Payment of Special Taxes is not a Personal Obligation of the Property Owners 39 No Acceleration Provision 39
Limited Obligations 39
Ballot Initiatives 40
Proposition 218 40
Litigation with Respect to Community Facilities Districts 41 Loss of Tax Exemption 42
No Ratings — Limited Secondary Market 42
Limitations on Remedies 42
Potential Early Redemption of Bonds from Prepayments or Community Facilities District Bond Proceeds 42
Cybersecurity 43
CONTINUING DISCLOSURE 43
TAX EXEMPTION 44
LEGAL OPINION 45
ABSENCE OF LITIGATION 45
NO RATING 46
UNDERWRITING 46
FINANCIAL INTERESTS 46
MUNICIPAL ADVISOR 46
MISCELLANEOUS 46
APPENDIX A RATE AND METHOD OF APPORTIONMENT OF SPECIAL TAX A-1 APPENDIX B CERTAIN ECONOMIC AND DEMOGRAPHIC INFORMATION B-1 APPENDIX C FORM OF OPINION OF BOND COUNSEL C-1
APPENDIX D APPRAISAL REPORT D-1
APPENDIX E SUMMARY OF THE INDENTURE E-1
APPENDIX F FORM OF DISTRICT CONTINUING DISCLOSURE CERTIFICATE F-1 APPENDIX G BOOK -ENTRY ONLY SYSTEM G-1
APPENDIX H SECURITIES AND EXCHANGE COMMISSION ORDER H-1 ii
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4887-9868-3354v10/022599-0035
$9,400,000*
CITY OF BEAUMONT
COMMUNITY FACILITIES DISTRICT NO. 93-1
(IMPROVEMENT AREA NO. 17D)
SPECIAL TAX BONDS, SERIES 2024
INTRODUCTION
The purpose of this Official Statement, which includes the cover page, the table of contents and the attached appendices (collectively, the "Official Statement"), is to provide certain information concerning the issuance by the City of Beaumont Community Facilities District No. 93-1 (Improvement Area No. 17D) (the "District") of its Special Tax Bonds, Series 2024 in the aggregate principal amount of $9,400,000* (the "Bonds").
The proceeds of the Bonds will be used to: (i) finance certain public improvements of the City of Beaumont (the "City") needed with respect to the development of property located within Improvement Area No. 17D (the "Improvement Area") of the District; (ii) fund a reserve account for the Bonds; and (iii) pay costs of issuance for the Bonds.
The Bonds are authorized to be issued pursuant to the Mello -Roos Community Facilities Act of 1982, as amended (Section 53311 et seq. of the Government Code of the State of California) (the "Act"), a resolution adopted on , 2024, by the City Council of the City, acting as the legislative body of the District, and a Bond Indenture, dated as of 1, 2024 (the "Indenture"), by and between the District and Zions Bancorporation, National Association, as trustee (the "Trustee"). The Bonds are secured under the Indenture by a pledge of and lien upon Net Taxes (as such term is defined herein) and all moneys in the Special Tax Fund (other than the Administrative Expense Account therein) as described in the Indenture.
This Introduction is not a summary of this Official Statement. It is only a brief description of and guide to, and is qualified by, more complete and detailed information contained in the entire Official Statement and the documents summarized or described herein. A full review should be made of the entire Official Statement.
The sale and delivery of Bonds to potential investors is made only by means of the entire Official Statement.
All capitalized terms used in this Official Statement and not defined have the meanings set forth in Appendix E.
The District and the Improvement Area
General. The City is located in the western portion of the County of Riverside (the "County"), California (the "State"). The District is located throughout the City and the Improvement Area is located therein.
The Improvement Area consists of 268 residential lots comprising a portion of the Tournament Hills master planned community, and is specifically located north of West Oak Valley Parkway and east of Omera Way.
The property within the Improvement Area is being developed by TriPointe Homes IE-SD, Inc., a California corporation ("TriPointe") into 268 single-family detached homes, and consists of the final subdivision of the Tournament Hills master planned community. Tournament Hills is a gated community that will consist of approximately 1,362 single family homes at buildout. As of July 31, 2024, TriPointe had completed and conveyed 202 homes within the Improvement Area to individual homeowners. As of such date, TriPointe owned 1 model home (which was not in escrow), 63 homes under construction (49 of which were in escrow) and 2 fmished lots (none of which were in escrow). Development has progressed since July 31, 2024. As of September 22, 2024, TriPointe had completed and conveyed 229 homes in the Improvement Area to individual homeowners. TriPointe expects to complete and convey all remaining homes to be constructed in the Improvement Area to individual homeowners by the end of the second quarter of 2025. * Preliminary, subject to change.
1 4887-9868-3354v10/022599-0035
The major infrastructure (sewer, water, storm drains, utilities, and arterial roads) necessary to develop the property within the Improvement Area is substantially complete. The in -tract infrastructure within the Improvement Area is also substantially complete with finishing of certain streets and landscaping remaining.
There are no conditions of development still outstanding to prevent complete buildout of the Improvement Area as planned. See the captions "THE IMPROVEMENT AREA" and "PROPERTY OWNERSHIP AND THE DEVELOPMENT" for further information with respect to the Improvement Area, TriPointe and development within the Improvement Area.
Formation Proceedings. The District was formed by the City pursuant to the Act and constitutes a governmental entity separate and apart from the City.
The Act was enacted by the California legislature to provide an alternative method of financing certain public capital facilities and services, especially in developing areas of the State. Any local agency (as defined in the Act) may establish a community facilities district to provide for and finance the cost of eligible public facilities and services. Generally, the legislative body of the local agency which forms a community facilities district acts on behalf of such district as its legislative body. Subject to approval by two-thirds of the votes cast at an election and compliance with the other provisions of the Act, a legislative body of a local agency may issue bonds for a community facilities district and may levy and collect a special tax within such district to repay such indebtedness.
Pursuant to the Act, the City formed the District on August 11, 1993. Subsequent to a noticed public hearing on May 19, 2015, the City Council adopted resolutions which established the Improvement Area, authorized the levy of special taxes within the Improvement Area, determined the necessity to incur bonded indebtedness within the Improvement Area, and called an election within the Improvement Area on the proposition of incurring bonded indebtedness, levying special taxes and setting an appropriations limit within the Improvement Area.
On May 19, 2015, an election was held within the Improvement Area at which the landowners eligible to vote approved the issuance of bonds for the Improvement Area in an amount not to exceed $25,000,000 and approved a rate and method of apportionment of special tax for the Improvement Area (the "Rate and Method").
A copy of the Rate and Method is attached hereto as Appendix A.
On June 2, 2015 the City Council adopted an Ordinance (the "Ordinance") which authorizes the levy of a special tax within the Improvement Area pursuant to the Rate and Method approved at the May 19, 2015 election.
Sources of Payment for the Bonds
General. The Bonds and any Parity Bonds are limited obligations of the District, and the interest on and principal of and redemption premiums, if any, on the Bonds and any Parity Bonds are payable solely from the Special Taxes to be levied annually against the property in the Improvement Area, or, to the extent necessary, from the moneys on deposit in the Reserve Account. As described herein, the Special Taxes are collected along with ad valorem property taxes on the tax bills mailed by the Treasurer -Tax Collector of the County. Although the Special Taxes will constitute a lien on the property subject to taxation in the Improvement Area, they will not constitute a personal indebtedness of the owners of such property. There is no assurance that such owners will be fmancially able to pay the annual Special Taxes or that they will pay such taxes even if they are fmancially able to do so.
Limited Obligations. Except for the Special Taxes, no other taxes are pledged to the payment of the Bonds and any Parity Bonds. The Bonds and any Parity Bonds are not general or special obligations of the City nor general obligations of the District, but are special obligations of the District payable solely from Special Taxes collected in the Improvement Area and amounts held under the Indenture as more fully described herein. 2 4887-9868-3354v10/022599-0035
Special Taxes. As used in this Official Statement, the term "Special Tax" means the annual Special Tax which has been authorized pursuant to the Act and the Rate and Method to be levied upon taxable property within the Improvement Area. See the caption "SOURCES OF PAYMENT FOR THE BONDS — Special Taxes" and Appendix A — "RATE AND METHOD OF APPORTIONMENT OF SPECIAL TAX." See the caption "THE IMPROVEMENT AREA."
Under the Indenture, the District has pledged to repay the Bonds and any Parity Bonds (as defined herein) from the Special Tax revenues remaining after the payment of certain annual Administrative Expenses of the District (the "Net Taxes") and from other amounts in the Special Tax Fund (other than the Administrative Expense Account therein) established under the Indenture. The Special Taxes are the primary source of security for the repayment of the Bonds and any Parity Bonds. In the event that the Special Taxes are not paid when due, the only sources of funds available to pay the debt service on the Bonds and any Parity Bonds are amounts held by the Trustee in the Special Tax Fund, including amounts held in the Reserve Account therein, to the limited extent described in the Indenture. See the caption "SOURCES OF PAYMENT FOR THE BONDS — Reserve Account of the Special Tax Fund."
Special Taxes within the Improvement Area were first levied in Fiscal Year 2023-24.
Reserve Account. The Indenture creates a Reserve Account for the Bonds. In order to secure further the payment of principal of and interest on the Bonds, the District is required, upon delivery of the Bonds, to deposit in the Reserve Account an amount equal to the Reserve Requirement for the Bonds and thereafter to maintain in the Reserve Account an amount equal to the Reserve Requirement for the Bonds. The initial Reserve Requirement for the Bonds shall be $ , and the Reserve Requirement shall never exceed this amount. See "SOURCES OF PAYMENT FOR THE BONDS —Reserve Account of the Special Tax Fund." Foreclosure Proceeds. The District will covenant for the benefit of the Owners of the Bonds and the landowners of the Improvement Area securing such Bonds that it will review the public records of the County of Riverside, California, in connection with the collection of the Special Tax not later than July 1 of each year to determine the amount of Special Tax collected in the prior Fiscal Year; and with respect to individual delinquencies within the Improvement Area, if the District determines that any single property owner subject to the Special Tax is delinquent in the payment of Special Taxes in the aggregate of $2,500 or more or as to any single parcel the delinquent Special Taxes represent more than 5% of the aggregate Special Taxes within the Improvement Area, then the District will send or cause to be sent a notice of delinquency (and a demand for immediate payment thereof) to the property owner within 45 days of such determination, and (if the delinquency remains uncured) the District will cause judicial foreclosure proceedings to be filed in the Superior Court within ninety (90) days of such determination against all properties for which the Special Taxes remain delinquent.
The District will further covenant that it will deposit any Gross Taxes received in connection with a foreclosure in the Special Tax Fund and will apply such proceeds remaining after the payment of Administrative Expenses to make current payments of principal and interest on the Bonds and any Parity Bonds, to bring the amount on deposit in the Reserve Account up to the Reserve Requirement and to pay any delinquent installments of principal or interest due on the Bonds and any Parity Bonds.
The District does not participate in the County's Alternative Method of Distribution of Tax Levies and Collections and of Tax Sale Proceeds (the "Teeter Plan"); accordingly, the collection of Special Taxes are subject to delinquency. See "SOURCES OF PAYMENT FOR THE BONDS —No Teeter Plan."
EXCEPT FOR THE NET TAXES, NO OTHER TAXES ARE PLEDGED TO THE PAYMENT OF THE BONDS. THE BONDS ARE NOT GENERAL OR SPECIAL OBLIGATIONS OF THE CITY
OR GENERAL OBLIGATIONS OF THE DISTRICT, BUT ARE LIMITED OBLIGATIONS OF THE
DISTRICT PAYABLE SOLELY FROM NET TAXES AND AMOUNTS HELD UNDER THE INDENTURE, AS MORE FULLY DESCRIBED HEREIN.
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Liens. Other taxes and/or special assessments with liens equal in priority to the continuing lien of the Special Taxes have been levied and may also be levied in the future on the property within the Improvement Area which could adversely affect the willingness of the landowners to pay the Special Taxes when due. See "SPECIAL RISK FACTORS —Parity Taxes and Special Assessments" herein. See Table 4 for a description of the direct and overlapping debt applicable to the parcels within the Improvement Area.
Appraisal Report
Integra Realty Resources (the "Appraiser") has conducted an Appraisal (the "Appraisal Report") with a date of value of July 31, 2024 (the "Date of Value") of certain land and existing improvements within the Improvement Area to provide an estimate of the approximate market value of certain of the property in the Improvement Area, assuming development of the property as currently planned, and assessed value of the remainder of the taxable property in the Improvement Area. As currently planned, development in the Improvement Area will consist of 268 residential units. Based on the contingencies, assumptions and limiting conditions in the Appraisal Report, the Appraiser concluded that the market value of all of the parcels within the Improvement Area subject to the Special Tax was $113,430,327 as of the Date of Value.
The Appraisal Report is based upon a variety of assumptions and limiting conditions that are described in APPENDIX D. The District makes no representation as to the accuracy of the Appraisal Report. See "THE IMPROVEMENT AREA — Appraisal Report" and "— Estimated Appraised Value -to -Lien Ratios." There is no assurance that property within the Improvement Area can be sold for the prices set forth in the Appraisal Report or that any parcel can be sold for a price sufficient to pay the Special Tax for that parcel in the event of a default in payment of Special Taxes by a property owner. See "THE IMPROVEMENT AREA," "SPECIAL RISK FACTORS — Property Values" herein and APPENDIX D.
Description of the Bonds
The Bonds will be issued and delivered as fully registered Bonds, registered in the name of Cede & Co., as nominee of The Depository Trust Company, New York, New York ("DTC"), and will be available to actual purchasers of the Bonds (the "Beneficial Owners") in the denominations of $5,000 or any integral multiple thereof, under the book -entry system maintained by DTC, only through brokers and dealers who are or act through DTC Participants as described herein. Beneficial Owners will not be entitled to receive physical delivery of the Bonds. In the event that the book -entry only system described herein is no longer used with respect to the Bonds, the Bonds will be registered and transferred in accordance with the Indenture. See Appendix H — "BOOK -ENTRY ONLY SYSTEM."
Principal of, premium, if any, and interest on the Bonds is payable by the Trustee to DTC. Disbursement of such payments to DTC Participants is the responsibility of DTC and disbursement of such payments to the Beneficial Owners is the responsibility of DTC Participants. See Appendix H — "BOOK -ENTRY ONLY SYSTEM."
The Bonds are subject to optional redemption, special mandatory redemption and mandatory sinking fund redemption prior to maturity as described herein. See the caption "THE BONDS — Redemption." For a more complete description of the Bonds and the basic documentation pursuant to which they are being sold and delivered, see the caption "THE BONDS" and Appendix E — "SUMMARY OF THE INDENTURE." Tax Exemption
In the opinion of Stradling Yocca Carlson & Rauth LLP, Bond Counsel, under existing statutes, regulations, rulings and judicial decisions, and assuming the accuracy of certain representations and compliance with certain covenants and requirements described herein, interest (and original issue discount) on the Bonds described herein is excluded from gross income for federal income tax purposes and is not an item of tax preference for purposes of calculating the federal alternative minimum tax imposed on individuals. In the further 4 4887-9868-3354v10/022599-0035
opinion of Bond Counsel, interest (and original issue discount) on the Bonds is exempt from State of California personal income tax. See the caption "TAX EXEMPTION" with respect to tax consequences relating to the Bonds, including with respect to the alternative minimum tax imposed on certain large corporations.
Set forth in Appendix C is the form of opinion of Bond Counsel expected to be delivered in connection with the issuance of the Bonds. For a more complete discussion of such opinion and certain tax consequences incident to the ownership of the Bonds, see the caption "TAX EXEMPTION." Professionals Involved in the Offering
Zions Bancorporation, National Association, Los Angeles, California, will act as Trustee under the Indenture. Stifel, Nicolaus & Company, Incorporated (the "Underwriter") is the Underwriter of the Bonds.
Certain proceedings in connection with the issuance and delivery of the Bonds are subject to the approval of Stradling Yocca Carlson & Rauth LLP, Newport Beach, California, Bond Counsel and Disclosure Counsel to the District in connection with the issuance of the Bonds. Certain legal matters will be passed on for the City and the District by Slovak Baron Empey Murphy & Pinkney LLP, Palm Springs, California, City Attorney, for the Underwriter by Kutak Rock LLP, Irvine, California, and for the Trustee by its counsel. Other professional services have been performed by Spicer Consulting Group, LLC, Murrieta, California, as Special Tax Consultant (the "Special Tax Consultant"), Urban Futures, Inc., Walnut Creek, California, as Municipal Advisor, and by Integra Realty Resources, Rocklin, California, as Appraiser.
For information concerning circumstances in which certain of the above -mentioned professionals, advisors, counsel and consultants may have a financial or other interest in the offering of the Bonds, see the caption "FINANCIAL INTERESTS."
Continuing Disclosure
Pursuant to a Continuing Disclosure Certificate to be executed by the District (the "District Continuing Disclosure Certificate"), the District will agree to provide, or cause to be provided, to the Municipal Securities Rulemaking Board's Electronic Municipal Market Access system ("EMMA"), maintained on the Internet at http://emma.msrb.org , certain annual financial information and operating data and notices of certain enumerated events. These covenants are being made in order to assist the Underwriter in complying with subsection (b)(5) of Rule 15c2-12 adopted by the Securities and Exchange Commission ("Rule 15c2-12").
See "CONTINUING DISCLOSURE," Appendix F — "FORM OF DISTRICT CONTINUING DISCLOSURE CERTIFICATE."
Parity Bonds for Refunding Purposes Only
The District will covenant in the Indenture not to issue additional indebtedness secured by the Net Taxes on a parity with the Bonds ("Parity Bonds") other than for refunding all or a portion of the Bonds or Parity Bonds. See the caption "SOURCES OF PAYMENT FOR THE BONDS — Parity Bonds for Refunding Purposes Only." Other taxes and/or special assessments with liens equal in priority to the continuing lien of the Special Taxes may also be levied in the future on the property within Improvement Area, which could adversely affect the willingness of the landowners to pay the Special Taxes when due. See the captions "THE DISTRICT — Direct and Overlapping Debt" and "SPECIAL RISK FACTORS — Direct and Overlapping Indebtedness." SEC Order
On August 23, 2017, following an offer of settlement by the Beaumont Financing Authority (the "BFA"), the U.S. Securities and Exchange Commission ("SEC") entered a Cease -and -Desist Order and imposed certain undertakings on the BFA (the "SEC Order"). The BFA neither admits nor denies the findings in the SEC 5 4887-9868-3354v10/022599-0035
Order. The members of the City Council of the City act as the Board of Directors of the BFA and City staff acts as the staff of the BFA. A copy of the SEC Order is attached hereto as Appendix H.
Bond Owners' Risks
Certain events could affect the ability of the District to pay the principal of and interest on the Bonds when due. See the caption "SPECIAL RISK FACTORS" for a discussion of certain factors which should be considered, in addition to other matters set forth herein, in evaluating an investment in the Bonds. The purchase of the Bonds involves risks, and the Bonds may not be appropriate investments for some types of investors.
Other Information
This Official Statement speaks only as of its date, and the information contained herein is subject to change.
Brief descriptions of the Bonds and the Indenture are included in this Official Statement. Such descriptions and information do not purport to be comprehensive or definitive. All references herein to the Indenture, the Bonds and the Constitution and laws of the State, as well as the proceedings of the City Council, acting as the legislative body of the District, are qualified in their entirety by references to such documents, laws and proceedings, and with respect to the Bonds, by reference to the Indenture. Capitalized terms not otherwise defined in this Official Statement have the meanings set forth in Appendix E.
Copies of the Indenture and other documents and information are available for inspection and copies may be obtained from the City, 550 East 6th Street, Beaumont, California 92223, Attention: City Clerk.
FINANCING PLAN
Estimated Sources and Uses of Funds
The following table sets forth the expected sources and uses of Bond proceeds.
Sources of Funds
Principal Amount of Bonds
Plus Net Original Issue Premium
Total Sources
Uses of Funds:
Acquisition and Construction Fund
Reserve Account
Cost of Issuance)
Total Uses
(1) To pay costs of issuance of the Bonds, including legal fees, underwriter's discount, printing costs, Appraiser, Special Tax Consultant and Trustee fees.
THE BONDS
General Provisions
The Bonds will be dated their date of delivery and will bear interest at the rates per annum set forth on the inside cover page hereof, payable semiannually on each March 1 and September 1, commencing March 1, 2025 (each, an "Interest Payment Date"), and will mature in the amounts and on the dates set forth on the inside cover page of this Official Statement. Interest will be calculated on the basis of a 360 -day year comprised of 6 4887-9868-3354v10/022599-0035
twelve 30 -day months. The Bonds will be issued in fully registered form in denominations of $5,000 or any integral multiple thereof.
Interest on any Bond will be payable from the Interest Payment Date next preceding the date of authentication of such Bond, unless: (i) such date of authentication is an Interest Payment Date, in which event interest will be payable from such date of authentication; (ii) the date of authentication is after the fifteenth day of the month preceding an Interest Payment Date, regardless of whether such day is a Business Day (each, a "Record Date") but prior to the immediately succeeding Interest Payment Date, in which event interest will be payable from the Interest Payment Date immediately succeeding the date of authentication; or (iii) the date of authentication is prior to the close of business on the first Record Date occurring after the issuance of such Bond, in which event interest will be payable from the dated date of such Bond, as applicable; provided, however, that if at the time of authentication of such Bond, interest is in default, interest on such Bond will be payable from the last Interest Payment Date to which the interest has been paid or made available for payment or, if no interest has been paid or made available for payment on such Bond, interest on such Bond will be payable from its dated date.
Interest on any Bond will be paid to the person whose name appears as its owner in the registration books held by the Trustee on the close of business on the Record Date. Principal of, premium, if any, due upon redemption is payable upon presentation and surrender of the Bonds at the principal corporate trust office of the Trustee in Costa Mesa, California.
The Bonds will be issued as fully registered bonds and will be registered in the name of Cede & Co., as nominee of DTC. DTC will act as securities depository of the Bonds. Ownership interests in the Bonds may be purchased in book -entry form only in denominations of $5,000 and any integral multiple thereof. So long as DTC is the securities depository all payments of principal and interest on the Bonds will be made to DTC and will be paid to the Beneficial Owners in accordance with DTC's procedures and the procedures of DTC's Participants. See APPENDIX G — "BOOK -ENTRY -ONLY SYSTEM." In the event the Bonds are not held in book -entry form, interest will be paid by check of the Trustee mailed by first class mail, postage prepaid, to the Bondowner at its address on the registration books kept by the Trustee. Pursuant to a written request prior to the Record Date of a Bondowner of at least $1,000,000 in aggregate principal amount of Bonds or of any issue of Parity Bonds, payment will be made by wire transfer in immediately available funds to a designated account in the United States. [Remainder of Page Intentionally Left Blank]
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Debt Service Schedule
The following table presents the annual debt service on the Bonds (including sinking fund redemptions), assuming that there are no optional or special mandatory redemptions. See the caption "—Redemption" below.
Year Ending
September 1 Principal Interest
Total
Redemption*
Total Debt Service
Optional Redemption. The Bonds may be redeemed at the option of the District from any source of funds on any Interest Payment Date on or after September 1, 20_, in whole or in part, from such maturities as are selected by the District and by lot within a maturity, at the following redemption prices, expressed as a percentage of the principal amount to be redeemed, together with accrued interest to the date of redemption:
Redemption Date
Preliminary, subject to change.
Redemption Price
103%
102
101
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8
100
In the event that the District elects to redeem Bonds as provided above, the District will give written notice to the Trustee of its election to so redeem, the redemption date and the principal amount of the Bonds of each maturity to be redeemed. The notice to the Trustee will be given at least 45 but no more than 60 calendar days prior to the redemption date, or by such later date as is acceptable to the Trustee.
Mandatory Sinking Fund Redemption. The Bonds maturing on September 1, 20 (the "20 Term Bonds") will be called before maturity and redeemed, from the Sinking Fund Payments that have been deposited into the Redemption Account established under the Indenture, on September 1, 20 , and on each September 1 thereafter prior to maturity, in accordance with the schedule of Sinking Fund Payments set forth below. The 20 Term Bonds so called for redemption will be selected by the Trustee by lot and will be redeemed at a redemption price for each redeemed 20 Term Bond equal to the principal amount thereof, plus accrued interest to the redemption date, without premium, as follows:
Term Bonds Maturing September 1, 20_
Sinking Fund Redemption Date
(September 1)
Maturity.
Sinking Fund Payments
The Bonds maturing on September 1, 20 (the "20 Term Bonds") will be called before maturity and redeemed, from the Sinking Fund Payments that have been deposited into the Redemption Account established under the Indenture, on September 1, 20_, and on each September 1 thereafter prior to maturity, in accordance with the schedule of Sinking Fund Payments set forth below. The 20 Term Bonds so called for redemption will be selected by the Trustee by lot and will be redeemed at a redemption price for each redeemed 20 Term Bond equal to the principal amount thereof, plus accrued interest to the redemption date, without premium, as follows:
Term Bonds Maturing September 1, 20_
Sinking Fund Redemption Date
(September 1)
*
Maturity.
Sinking Fund Payments
If the District purchases Term Bonds during the Fiscal Year immediately preceding one of the sinking fund redemption dates specified above, the District will notify the Trustee at least 45 days prior to the redemption date as to the principal amount purchased, and the amount purchased will be credited at the time of purchase to the next Sinking Fund Payment for the Term Bond so purchased, to the extent of the full principal amount of the purchase. All Term Bonds purchased will be cancelled pursuant to the Indenture. 4887-9868-3354v10/022599-0035
9
In the event of a partial optional redemption or special mandatory redemption of the Term Bonds, each of the remaining Sinking Fund Payments for such Term Bonds will be reduced, as nearly as practicable, on a pro rata basis.
Special Mandatory Redemption from Special Tax Prepayments. The Bonds are subject to special mandatory redemption as a whole or in part on a pro rata basis among maturities and by lot within a maturity, on any Interest Payment Date on or after March 1, 2025, and will be redeemed by the Trustee, from any amounts paid by the District to the Trustee and designated by the District as a prepayment of Special Taxes for one or more parcels in the Improvement Area made in accordance with the Rate and Method (the "Prepayments") deposited to the Redemption Account pursuant to the Indenture, plus amounts transferred from the Reserve Account pursuant to the Indenture, at the following redemption prices, expressed as a percentage of the principal amount to be redeemed, together with accrued interest to the redemption date:
Redemption Date Redemption Price
103%
102
101
100
Prepayments and amounts released from the Reserve Account in connection with Prepayments will be allocated to the payment at maturity and redemption of Bonds and any Parity Bonds as nearly as practicable on a proportionate basis based on the outstanding principal amount of the Bonds and any Parity Bonds and such amounts shall be applied to redeem Bonds and Parity Bonds as nearly as practicable on a pro rata basis among maturities in increments of $5,000; provided, however, that, for Prepayments of less than $50,000, the District may specify in a Certificate of an Authorized Representative that Prepayments be applied to one or more maturities of the Bonds or Parity Bonds so long as there is delivered to the Trustee a Certificate of the Independent Financial Consultant that, following such application of the Prepayments, the maximum Special Taxes that may be levied in each Fiscal Year on Taxable Property is not less than 110% of Annual Debt Service in the Bond Year that begins in such Fiscal Yer.
See the caption "SPECIAL RISK FACTORS — Potential Early Redemption of Bonds from Prepayments or Community Facilities District Bond Proceeds" for a discussion of the potential for a lower than expected yield on the Bonds as a result of a special mandatory redemption from prepayment of Special Taxes or proceeds of bonds of other community facilities districts.
Notice of Redemption. So long as the Bonds are held in book -entry form, notice of redemption will be sent by the Trustee to DTC and not to the Beneficial Owners of the Bonds under the DTC book -entry only system. Neither the District nor the Trustee is responsible for notifying the Beneficial Owners, who are to be notified in accordance with the procedures in effect for the DTC book -entry system. See Appendix G — "BOOK -ENTRY ONLY SYSTEM."
The Trustee will give notice, in the name of the District, of the redemption of Bonds. Such notice of redemption will: (i) specify the CUSIP numbers (if any), the bond numbers and the maturity date or dates of the Bonds selected for redemption, except that where all of the Bonds are subject to redemption, or all of the Bonds of one maturity are to be redeemed, the bond numbers of such issue need not be specified; (ii) state the date fixed for redemption and surrender of the Bonds to be redeemed; (iii) state the redemption price; (iv) state the place or places where the Bonds are to be redeemed; (v) in the case of Bonds to be redeemed only in part, state the portion of such Bond which is to be redeemed; (vi) state the date of issue of the Bonds as originally issued; (vii) state the rate of interest borne by each Bond being redeemed; and (viii) state any other descriptive information needed to identify accurately the Bonds being redeemed as specified by the Trustee. Such notice will further state that on the date fixed for redemption, there will become due and payable on each Bond, or portion thereof called for redemption, the principal thereof, together with any premium, and interest accrued to the redemption date, and that from and after such date, interest thereon will cease to accrue and be payable. At 10 4887-9868-3354v10/022599-0035
least 30 days but no more than 45 days prior to the redemption date, the Trustee will mail a copy of such notice of redemption, by first class mail, postage prepaid, to the respective Owners thereof at their addresses appearing on the Bond Register, and to the original purchaser of any Bonds; provided, however, so long as the Bonds are registered in the name of the Nominee, such notice shall be given in such manner as complies with the requirements of the Depository. The actual receipt by the Owner of any Bond of notice of such redemption is not a condition precedent to redemption, and neither the failure to receive nor any defect in such notice will affect the validity of the proceedings for the redemption of such Bonds, or the cessation of interest on the redemption date. A certificate by the Trustee that notice of such redemption has been given as provided in the Indenture will be conclusive as against all parties and the Owner is not entitled to show that he or she failed to receive notice of such redemption.
In addition to the foregoing notice, further notice will be given by the Trustee as set out below, but no defect in said further notice nor any failure to give all or any portion of such further notice will in any manner defeat the effectiveness of a call for redemption if notice thereof is given as above prescribed.
Each further notice of redemption will be sent not later than the date that notice of redemption is given to the Owners pursuant to the Indenture by first class mail or facsimile to the Depository and to any other registered securities depositories then in the business of holding substantial amounts of obligations of types comprising the Bonds as determined by the Trustee and to one or more of the national information services that the Trustee determines are in the business of disseminating notice of redemption of obligations such as the Bonds.
Upon the payment of the redemption price of any Bonds being redeemed, each check or other transfer of funds issued for such purpose will to the extent practicable bear the CUSIP number identifying, by issue and maturity, the Bonds being redeemed with the proceeds of such check or other transfer.
With respect to any notice of optional redemption of Bonds, such notice may state that such redemption is conditional upon the receipt by the Trustee on or prior to the date fixed for such redemption of moneys sufficient to pay the principal of, premium, if any, and interest on such Bonds to be redeemed and that, if the District determines that such moneys will not be received on the redemption date, said notice will be of no force and effect and the Trustee will not be required to redeem such Bonds. In the event that such notice of redemption contains such a condition and the District determines that such moneys are not so received, the redemption will not be made, and the Trustee will within a reasonable time thereafter give notice, in the manner in which the notice of redemption was given, that such moneys were not so received.
Selection of Bonds for Redemption. If less than all of the Bonds Outstanding are to be redeemed, the portion of any Bond of a denomination of more than $5,000 to be redeemed will be in the principal amount of $5,000 or an integral multiple thereof. In selecting portions of such Bonds for redemption, the Trustee will treat such Bonds, as applicable, as representing that number of Bonds of $5,000 denominations which is obtained by dividing the principal amount of such Bonds to be redeemed in part by $5,000. The procedure for the selection of Parity Bonds for redemption may be modified as set forth in the Supplemental Indenture for such Parity Bonds. The Trustee will promptly notify the District in writing of the Bonds, or portions thereof, selected for redemption.
Partial Redemption of Bonds. Upon surrender of any Bond to be redeemed in part only, the District will execute and the Trustee will authenticate and deliver to the Owner, at the expense of the District, a new Bond or Bonds of authorized denominations equal in aggregate principal amount to the unredeemed portion of the Bonds surrendered, with the same interest rate and the same maturity.
Effect of Notice and Availability of Redemption Money. Notice of redemption having been duly given, as provided in the Indenture, and the amount necessary for the redemption having been made available for that purpose and being available therefor on the date fixed for such redemption: (i) the Bonds, or portions thereof, designated for redemption will, on the date fixed for redemption, become due and payable at the redemption 11 4887-9868-3354v10/022599-0035
price thereof as provided in the Indenture, anything in the Indenture or in the Bonds to the contrary notwithstanding; (ii) upon presentation and surrender thereof at the office of the Trustee, the redemption price of such Bonds will be paid to the Owners thereof; (iii) as of the redemption date the Bonds, or portions thereof so designated for redemption will be deemed to be no longer Outstanding and such Bonds, or portions thereof, will cease to bear further interest; and (iv) as of the date fixed for redemption no Owner of any of the Bonds, or portions thereof so designated for redemption will be entitled to any of the benefits of the Indenture, or to any other rights, except with respect to payment of the redemption price and interest accrued to the redemption date from the amounts so made available.
Registration, Transfer and Exchange
Registration. The Trustee will keep sufficient books for the registration and transfer of the Bonds. The ownership of the Bonds will be established by the Bond registration books held by the Trustee.
Transfer or Exchange. Subject to the limitations set forth in the following paragraph, the registration of any Bond may, in accordance with its terms, be transferred upon the Bond Register by the person in whose name it is registered, in person or by his or her duly authorized attorney, upon surrender of such Bond for cancellation at the office of the Trustee, accompanied by delivery of written instrument of transfer in a form acceptable to the Trustee and duly executed by the Owner or his or her duly authorized attorney.
Bonds may be exchanged at the office of the Trustee for a like aggregate principal amount of Bonds for other authorized denominations of the same maturity and issue. The Trustee may not collect from the Owner any charge for any new Bond issued upon any exchange or transfer, but will require the Owner requesting such exchange or transfer to pay any tax or other governmental charge required to be paid with respect to such exchange or transfer. Whenever any Bonds are surrendered for registration of transfer or exchange, the District will execute and the Trustee will authenticate and deliver a new Bond or Bonds, as applicable, of the same issue and maturity, for a like aggregate principal amount; provided that the Trustee is not required to register transfers or make exchanges of: (i) Bonds for a period of 15 days next preceding any selection of the Bonds to be redeemed; or (ii) any Bonds chosen for redemption.
SOURCES OF PAYMENT FOR THE BONDS
Limited Obligations
The Bonds are special, limited obligations of the District payable only from amounts pledged under the Indenture and from no other sources.
The Special Taxes are the primary source of security for the repayment of the Bonds. Under the Indenture, the District has pledged to repay the Bonds from the Net Taxes (which are Special Tax revenues remaining after the payment of the annual Administrative Expenses in an amount not to exceed the Administrative Expenses Cap (as defined in the Indenture)) and from amounts held in the Special Tax Fund (other than amounts held in the Administrative Expense Account therein). Special Tax revenues include the proceeds of the annual Special Tax levy received by the District, including any scheduled payments and Prepayments thereof, and the net proceeds of the redemption of delinquent Special Taxes or sale of property sold as a result of foreclosure of the lien of delinquent Special Taxes to the amount of said lien, and penalties and interest thereon; provided that any delinquent Special Tax sold to an independent third -party or to the City for 100% of the delinquent amount will no longer be pledged under the Indenture to the payment of the Bonds or Parity Bonds.
In the event that the Special Tax revenues are not received when due, the only sources of funds available to pay the debt service on the Bonds are amounts held by the Trustee in the Special Tax Fund (other than the Administrative Expense Account therein), including amounts held in the Reserve Account therein, for the exclusive benefit of the Owners of the Bonds.
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NEITHER THE FAITH AND CREDIT NOR THE TAXING POWER OF THE CITY, THE COUNTY,
THE STATE OR ANY POLITICAL SUBDIVISION THEREOF IS PLEDGED TO THE PAYMENT OF THE BONDS. EXCEPT FOR THE NET TAXES, NO OTHER TAXES ARE PLEDGED TO THE PAYMENT OF THE BONDS. THE BONDS ARE NOT GENERAL OR SPECIAL OBLIGATIONS OF THE CITY BUT ARE
LIMITED OBLIGATIONS OF THE DISTRICT PAYABLE SOLELY FROM THE NET TAXES AND OTHER AMOUNTS PLEDGED UNDER THE INDENTURE AS MORE FULLY DESCRIBED HEREIN.
Special Taxes
Authorization and Pledge. In accordance with the provisions of the Act, the City established the District on August 11, 1993 and the Improvement Area therein on May 19, 2015 for the purpose of financing the various public improvements and services required in connection with the proposed development within the Improvement Area. On May 19, 2015, an election was held within the Improvement Area at which the landowners eligible to vote approved the issuance of bonds for the Improvement Area in an amount not to exceed $25,000,000, secured by special taxes levied on property within the Improvement Area to finance Facilities. The landowners within the Improvement Area also voted to approve the Rate and Method which authorized the Special Tax to be levied to repay indebtedness issued for the benefit of the Improvement Area, including the Bonds. There are two types of special taxes levied by the District within the Improvement Area: a special tax for facilities and a special tax for services. Throughout this Official Statement, all references to the Special Tax shall refer to the special tax for facilities. The special tax for services is not pledged to, and shall not be available to make payments on, the Bonds.
The District will covenant in the Indenture that it will levy Special Taxes up to the maximum rates permitted under the Rate and Method in an amount sufficient, together with other amounts on deposit in the Special Tax Fund, to pay the principal of and interest on any Outstanding Bonds and any Parity Bonds, to maintain the Reserve Account at the Reserve Requirement and to pay the estimated Administrative Expenses.
The "Special Taxes" are the special taxes for facilities authorized to be levied and collected by the District in accordance with the Rate and Method and the Act. The Special Taxes are collected in the manner and at the same time as ad valorem property taxes are collected and are subject to the same penalties and the same procedure, sale, and lien priority in case of delinquency as is provided for ad valorem property taxes. See APPENDIX A —"RATE AND METHOD OF APPORTIONMENT OF SPECIAL TAX." The Bonds will be repaid only from annual Net Taxes derived from the levy and collection of Special Taxes pursuant to the Rate and Method. The Rate and Method permits the prepayment of Special Taxes for an Assessor's Parcel (as defined in the Rate and Method), and any such Prepayments will be applied to redeem Bonds and Parity Bonds, if any. The Net Taxes collected from the annual Special Tax levy and the proceeds of any Prepayment have been pledged under the Indenture to the repayment of the Bonds and Parity Bonds.
The "Net Taxes" pledged by the District to the Bonds (and any Parity Bonds) is defined in the Indenture as the "Gross Taxes" minus amounts set aside to pay Administrative Expenses. "Gross Taxes" is defined in the Indenture as the amount of all Special Taxes levied in the Improvement Area and received by the District, together with the proceeds collected from the sale of property pursuant to foreclosure for the delinquency of such Special Taxes remaining after the payment of all costs related to such foreclosure actions.
The Special Taxes levied in any Fiscal Year may not exceed the maximum rates authorized pursuant to the Rate and Method. See "— Rate and Method of Apportionment of Special Tax" and Appendix A — "RATE AND METHOD OF APPORTIONMENT OF SPECIAL TAX." There is no assurance that the Net Taxes will, in all circumstances, be adequate to pay the principal of and interest on the Bonds when due. See the caption "Limitation on Special Tax Levy and Potential Impact on Coverage" below and "SPECIAL RISK FACTORS — Insufficiency of Special Taxes" herein.
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Rate and Method of Apportionment of Special Tax. The Rate and Method applicable to the Improvement Area is contained in Appendix A — "RATE AND METHOD OF APPORTIONMENT OF SPECIAL TAX." The meaning of the defined terms used in this section are as set forth in Appendix A.
The District is legally authorized and will covenant to cause the levy of the Special Taxes in an amount determined according to a methodology, i.e., the Rate and Method which the City Council and the electors within the Improvement Area have approved. The Rate and Method apportions the total amount of Special Taxes to be collected among the taxable parcels in the Improvement Area as more particularly described below. There are two types of special taxes levied by the District within the Improvement Area: a special tax for facilities and a special tax for services. See "—Special Taxes Authorization and Pledge." The following is a synopsis of the provisions of the Rate and Method for the Improvement Area, which should be read in conjunction with the complete text of the Rate and Method which is attached as APPENDIX A —"RATE AND METHOD OF APPORTIONMENT OF SPECIAL TAX." The meaning of the defined terms used in this section are as set forth in Appendix A. This section provides only a summary of the Rate and Method, and is qualified by more complete and detailed information contained in the entire Rate and Method attached as Appendix A.
"Building Permit" means a permit for new construction for a residential or non-residential structure.
For purposes of this definition, "Building Permit" shall not include permits for construction or installation of retaining walls, utility improvements, or other such improvements not intended for human habitation. "Developed Property" means all Assessor's Parcels that: (i) were issued Building Permits on or before June 1 st preceding the Fiscal Year in which the Special Tax is being levied, and (ii) were created on or before the January 1 st preceding the Fiscal Year in which the Special Tax is being levied, and that each such Assessor's Parcel is associated with a Lot, as reasonably determined by the City. "Exempt Property" means all Assessor's Parcels designated as being exempt from Special Tax as more fully set forth below.
"Final Map Property" means all Assessor's Parcels: (i) that are included in a Final Map that was recorded prior to the January 1 st preceding the Fiscal Year in which the Special Tax is being levied, and (ii) for which a Building Permit was not issued prior to the June 1 st preceding the Fiscal Year in which the Special Tax is being levied.
"Special Tax for Facilities" means any of the special taxes authorized to be levied by the District in the Improvement Area pursuant to the Act to fund the Special Tax Requirement for Facilities. "Special Tax Requirement for Facilities" means the amount required in any Fiscal Year for the Improvement Area to pay (i) the debt service or the periodic costs on all outstanding Bonds due in the Calendar Year that commences in such Fiscal Year, (ii) Administrative Expenses, (iii) the costs associated with the release of funds from an escrow account, (iv) any amount required to establish or replenish any reserve funds established in association with the Bonds, (v) the amount for reasonably anticipated Special Tax for Facilities delinquencies based on the delinquency rate for the Special Tax Levy in the previous Fiscal Year, and (vi) the collection or accumulation of funds for the acquisition or construction of facilities authorized for the Improvement Area provided that the inclusion of such amount does not cause an increase in the levy of Special Tax for Facilities on Final Map Property or Undeveloped Property.
"Taxable Property" means all Assessor's Parcels within the Improvement Area which are not Exempt Property.
"Undeveloped Property" means all Assessor's Parcels of Taxable Property which are not Developed Property or Final Map Property.
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Exempt Property. The City shall classify as Exempt Property: (i) Assessor's Parcels owned by the State of California, Federal or other local governments, (ii) Assessor's Parcels which are used as places of worship and are exempt from ad valorem property taxes because they are owned by a religious organization, (iii) Assessor's Parcels used exclusively by a homeowner's association, or (iv) Assessor's Parcels with public or utility easements making impractical their utilization for other than the purposes set forth in the easement, provided that no such classification would reduce the sum of all Taxable Property to less than 32.84 Acres.
Notwithstanding the above, the City Council shall not classify an Assessor's Parcel as Exempt Property pursuant to this paragraph if such classification would reduce the sum of all Taxable Property to less than 32.84 Acres.
Assessor's Parcels which cannot be classified as Exempt Property because such classification would reduce the Acreage of all Taxable Property to less than 32.84 Acres will continue to be classified as Undeveloped Property, and will continue to be subject to Special Taxes accordingly.
Maximum Special Tax. The Maximum Special Tax provided for in the Rate and Method is as follows:
Developed Property
The Maximum Special Tax for each Assessor's Parcel of Residential Property that is classified as Developed Property in any Fiscal Year shall be the amount determined by the greater of (i) the application of the Assigned Special Tax or (ii) the application of the Backup Special Tax. The Maximum Special Tax for each Assessor's Parcel of Non -Residential Property that is classified as Developed Property in any Fiscal Year shall be the Assigned Special Tax. On July 1 of each year, the Assigned Special Tax rates for Developed Property escalate by 2.0%.
Undeveloped Property and Final Map Property
The Maximum Special Tax for each Assessor's Parcel classified as Undeveloped Property and Final Map Property in any Fiscal Year shall be the Assigned Special Tax. On July 1 of each year, the Assigned Special Tax rates for Undeveloped Property and Final Map escalate by 2.0%.
Assigned Special Tax. Each Fiscal Year, each Assessor's Parcel of Developed Property and Final Map Property shall be subject to an Assigned Special Tax.
Table 1 below sets forth the Assigned Special Tax for Developed Property, the Maximum Special Tax rate for Final Map Property, the Fiscal Year 2024-25 Special Tax levy and the percent of such levy based on land use class.
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TABLE 1
CITY OF BEAUMONT
COMMUNITY FACILITIES DISTRICT NO. 93-1
IMPROVEMENT AREA NO. 17D
ASSIGNED SPECIAL TAX RATES FOR FISCAL YEAR 2024-25
Maximum/ Aggregate
Assigned Estimated
Special Tax Special Tax Special
Land Rates Levy Rates Percent of Taxes
Use Residential Floor Fiscal Year Fiscal Year Assigned No. of Fiscal Year Percent of Class Land Use Type Area (sq. ft) 2024-25w 2024-25 Rate Units 2024-25rr) Total 1 Residential Property 2,600 sq ft 2,437.99 0.00 0.0 0 0.00 0.0 9 Final Map Property N/A 18,121.57 0.00 0.0 2 0.00 0.0
Total 268 $ 550,849.22 100.0%
(t) Maximum Rate for Land Use Type Final Property.
(2) Includes estimated Administrative Expenses of $30,000.
Backup Special Tax Rates. The Backup Special Tax shall be determined as follows:
Each Fiscal Year, each Assessor's Parcel of Developed Property classified as Residential Property shall be subject to a Backup Special Tax. In each Fiscal Year, the Backup Special Tax rate for Developed Property classified as Residential Property within a Final Map shall be the maximum Special Tax rate per acre for Undeveloped Property for the applicable Fiscal Year multiplied by the acreage of Developed Property classified or to be classified as Residential Property in such Final Map, divided by the number of Lots in the Final Map which are classified or to be classified as Residential Property. Each July 1, the Backup Special Tax for each Assessor's Parcel shall be increased by two percent (2.0%) of the amount in effect in the prior Fiscal Year.
Notwithstanding the foregoing, if all or any portion of the Final Map(s) described in the preceding paragraph is subsequently changed or modified, then the Backup Special Tax for each changed Assessor's Parcel of Developed Property classified or to be classified as Residential Property in such Final Map area that is changed or modified shall be a rate per square foot of Acreage calculated as follows:
1. Determine the total Backup Special Tax anticipated to apply to the changed or modified Final Map area prior to the change or modification.
2. The result of paragraph 1 above shall be divided by the Acreage of Developed Property classified or to be classified as Residential Property which is ultimately expected to exist in such changed or modified Final Map area, as reasonably determined by the City.
3. The result of paragraph 2 above shall be divided by 43,560. The result is the Backup Special Tax per square foot of Acreage which shall be applicable to Assessor's Parcels of Developed Property classified as Residential Property in such changed or modified Final Map area for all remaining Fiscal Years in which the Special Tax may be levied.
Method of Apportionment of Special Tax. Commencing in Fiscal Year 2014-15 and for each subsequent Fiscal Year until terminated, the City Council shall levy Special Taxes on all Taxable Property until the total amount of Special Taxes levied equals the Special Tax Requirement in accordance with the following steps:
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First: The Special Tax shall be levied Proportionately on each Assessor's Parcel of Developed Property at up to 100% of the applicable Assigned Special Tax rate as needed to satisfy the Special Tax Requirement for Facilities;
Second: If additional moneys are needed to satisfy the Special Tax Requirement for Facilities after the first step has been completed, the Special Tax for Facilities shall be levied Proportionately on each Assessor's Parcel of Final Map Property, at up to 100% of the Assigned Special Tax for Facilities applicable to each such Assessor's Parcel as needed to satisfy the Special Tax Requirement for Facilities;
Third: If additional monies are needed to satisfy the Special Tax Requirement for Facilities after the first two steps have been completed, the Special Tax shall be levied Proportionately on each Assessor's Parcel of Undeveloped Property, excluding any Undeveloped Property pursuant to Section J of the Rate and Method, at up to 100% of the Assigned Special Tax applicable to each such Assessor's Parcel as needed to satisfy the Special Tax Requirement for Facilities; Fourth: If additional moneys are needed to satisfy the Special Tax Requirement for Facilities after the first three steps have been completed, then for each Assessor's Parcel of Developed Property whose Maximum Special Tax for Facilities is the Backup Special Tax for Facilities shall be increased Proportionately from the Assigned Special Tax for Facilities up to 100% of the Backup Special Tax for Facilities as needed to satisfy the Special Tax Requirement for Facilities; and Fifth: If additional moneys are needed to satisfy the Special Tax Requirement for Facilities after the first four steps have been completed, the Special Tax for Facilities shall be levied Proportionately on each Assessor's Parcel of Undeveloped Property classified as Undeveloped Property pursuant to Section J of the Rate and Method at up to 100% of the Assigned Special Tax for Facilities applicable to each such Assessor's Parcel as needed to satisfy the Special Tax Requirement for Facilities.
Prepayment of Special Taxes. The Special Tax obligation of an Assessor's Parcel of Developed Property, an Assessor's Parcel of Final Map Property, or an Assessor's Parcel of Undeveloped Property for which a Building Permit has been issued or an Assessor's Parcel of Undeveloped Property that is classified as Undeveloped Property pursuant to Section J of the Rate and Method may be prepaid in full, provided that there are no delinquent Special Taxes, penalties, or interest charges outstanding with respect to such Assessor's Parcel at the time that the Special Tax obligation would be prepaid. The Prepayment Amount is calculated based on the Bond Redemption Amount plus Redemption Premium plus Future Facilities Amount plus the Defeasance Amount plus the Administrative Fee, and less a credit for the resulting reduction in the Reserve Requirement for the Bonds (if any), all as specified in Section G of the Rate and Method attached as Appendix A. Prepayments of Special Taxes will be applied to effect an extraordinary redemption of Bonds and Parity Bonds. See "THE BONDS — Redemption — Special Mandatory Redemption from Special Tax Prepayments." The Special Tax obligation of an Assessor's Parcel of Developed Property or an Assessor's Parcel of Undeveloped Property for which a Building Permit has been issued may be prepaid in part, provided that there are no delinquent Special Taxes, penalties, or interest charges outstanding with respect to such Assessor's Parcel at the time that the Special Tax obligation would be prepaid. The Prepayment Amount is calculated based on:
(i) the sum or the Bond Redemption Amount plus Redemption Premium plus Future Facilities Amount plus the Defeasance Amount plus the Administrative Fee, and less a credit for the resulting reduction in the Reserve Requirement for the Bonds (if any), (ii) multiplied by the percent by which the Special Tax allocable to the Assessor's Parcel is being prepaid, all as specified in Section H of the Rate and Method attached as Appendix A.
Prepayments of Special Taxes will be applied to effect an extraordinary redemption of Bonds and Parity Bonds.
See "THE BONDS — Redemption — Special Mandatory Redemption from Special Tax Prepayments." Estimated Debt Service Coverage. Based on the number of building permits issued within the Improvement Area as of May 1, 2024 (the date pursuant to the Rate and Method for determining the number of 17 4887-9868-3354v10/022599-0035
parcels of Developed Property within Improvement Area for the following Fiscal Year), 266 parcels within the Improvement Area are classified as Developed Property and the remaining 2 taxable parcels within the Improvement Area are classified as Final Map Property for the Fiscal Year 2024-25 Special Tax levy. Annual Debt Service for the Bonds in each future Fiscal Year has been structured so that Special Taxes levied on Developed Property at buildout (268 parcels) at the Assigned Special Tax for Facilities rates, assuming no delinquencies, will generate in each Fiscal Year not less than 110% of debt service payable with respect to the Bonds in the calendar year that begins in that Fiscal Year, plus the Administrative Expenses Cap. Actual collections of the Special Tax will depend on the amount of Special Tax delinquencies. The Assigned Special Tax for Facilities rates for Developed Property and for Approved Property shall be increased by two percent (2.00%) of the amount in effect in the prior Fiscal Year.
In connection with the issuance of the Bonds, the Special Tax Consultant will certify that the Maximum Special Tax that may be levied in each Fiscal Year on Assessor's Parcels within Improvement Area classified as Taxable Property will be at least equal to the sum of: (i) 110% of Maximum Annual Debt Service on the Bonds; plus (ii) the Administrative Expenses Cap. Actual collections of the Special Tax will depend on the amount of Special Tax delinquencies.
Limitation on Special Tax Levy and Potential Impact on Coverage. Pursuant to Section 53321(d) of the Government Code, the special tax levied against any Assessor's Parcel for which an occupancy permit for private residential use has been issued will not be increased as a consequence of delinquency or default by the owner of any other Assessor's parcel within the Improvement Area by more than 10% above the amount that would have been levied in that fiscal year had there never been any such delinquencies or defaults. As a result, in the event the Special Tax is levied at less than the Assigned Special Tax rate, it is possible that the District may not be able to increase the tax levy to the Assigned Special Tax in all years.
Levy, Collection and Application of Special Taxes. The Special Taxes are levied and collected by the Treasurer -Tax Collector of the County in the same manner and at the same time as ad valorem property taxes, although it is possible that the District could elect to provide handbills to property owners within the Improvement Area.
The County assesses and collects secured and unsecured property taxes for the cities, school districts, and special districts within the County, including the Special Taxes for the Improvement Area. The delinquency dates for property tax payments are December 10 for the first installment and April 10 for the second installment.
Once the property taxes are collected, the County conducts its internal reconciliation for accounting purposes and distributes the City's share of such taxes (including the Special Taxes) to the City, periodically and typically pursuant to a published schedule. Prior to distribution, the moneys are deposited in an account established on behalf of the County in the Riverside County Investment Pool (the "Pool") which is invested by the County Treasurer. If the County or the Pool were at any time to become subject to bankruptcy proceedings, it is possible that District property taxes held in the Pool (including the Special Taxes), if any, could be temporarily unavailable to the County. The District does not participate in the County's Teeter Plan, which is an alternate method for allocating property taxes by counties. Accordingly, the collection of Special Taxes is subject to delinquencies.
The Special Tax levy in Fiscal Year 2023-24 was for $245,918. As of July 31, 2024, $988, or 0.20%, of the Fiscal Year 2023-24 levy was delinquent and remained outstanding. See "THE IMPROVEMENT AREA —Delinquency History."
The District will covenant in the Indenture that each year it will levy Special Taxes up to the maximum rates permitted under the Rate and Method in an amount sufficient, together with other amounts on deposit in the Special Tax Fund, to pay the principal of and interest on any Outstanding Bonds and Parity Bonds, to replenish the Reserve Account to the Reserve Requirement and to pay Administrative Expenses. 18 4887-9868-3354v10/022599-0035
The District will make certain covenants in the Indenture which are intended to ensure that the current maximum Special Tax rates and method of collection of the Special Taxes are not altered in a manner that would impair the District's ability to collect sufficient Special Taxes to pay debt service on the Bonds, Parity Bonds and Administrative Expenses when due.
First, the District will covenant in the Indenture that it will take no actions that would discontinue or cause the discontinuance of the Special Tax levy or the District's authority to levy the Special Tax for so long as the Bonds and any Parity Bonds are Outstanding.
Second, the District will covenant in the Indenture, to the maximum extent that the law permits it to do so, not to initiate proceedings to reduce the maximum Special Tax rates for the Improvement Area, unless, in connection therewith, the District receives a certificate from one or more Independent Financial Consultants which, when taken together, certify that: (i) such changes do not reduce the maximum Special Taxes that may be levied in each year on property within the Improvement Area to an amount which is less than the Administrative Expenses Cap plus 110% of the Annual Debt Service due in each corresponding future Bond Year with respect to the Bonds and Parity Bonds Outstanding as of the date of such proposed reduction; and (ii) the District is not delinquent in the payment of the principal of or interest on the Bonds or any Parity Bonds.
Third, the District will covenant in the Indenture that, in the event that any initiative is adopted by the qualified electors within the Improvement Area which purports to reduce the maximum Special Tax below the levels specified in the preceding paragraph or to limit the power of the District to levy the Special Taxes for the purposes set forth in the Indenture, it will commence and pursue legal action in order to preserve its ability to comply with such covenants. The District can provide no assurance that any such legal action will be successful.
See the caption "SPECIAL RISK FACTORS — Proposition 218." Fourth, the District will covenant in the Indenture that it will not adopt any policy pursuant to the Act permitting the tender of Bonds or Parity Bonds in full payment or partial payment of any Special Taxes unless the District has first received a certificate from an Independent Financial Consultant that the acceptance of such a tender will not result in the District having insufficient Net Taxes to pay the principal of and interest on the Bonds and Parity Bonds when due.
See Appendix E under the caption "COVENANTS AND WARRANTY." Although the Special Taxes constitute liens on taxed parcels within the Improvement Area, they do not constitute a personal indebtedness of the owners of property within the Improvement Area. Moreover, other liens for taxes and assessments already exist on the property located within the Improvement Area and others could come into existence in the future in certain situations without the consent or knowledge of the City or the landowners in the Improvement Area. See the captions "THE DISTRICT — Direct and Overlapping Debt" and "SPECIAL RISK FACTORS — Direct and Overlapping Indebtedness." There is no assurance that property owners will be financially able to pay the annual Special Taxes or that they will pay such taxes even if financially able to do so, all as more fully described under the caption "SPECIAL RISK FACTORS." Proceeds of Foreclosure Sales. The net proceeds received following a judicial foreclosure sale of property within the Improvement Area resulting from a property owner's failure to pay the Special Taxes when due are included within the Net Taxes pledged to the payment of principal of and interest on the Bonds and any Parity Bonds under the Indenture.
Pursuant to Section 53356.1 of the Act, in the event of any delinquency in the payment of any Special Tax or receipt by the District of Special Taxes in an amount which is less than the Special Taxes levied, the City Council, as the legislative body of the District, may order that Special Taxes be collected by a Superior Court action to foreclose the lien within specified time limits. In such an action, the real property subject to the unpaid amount may be sold at a judicial foreclosure sale. Under the Act, the commencement of judicial foreclosure following the nonpayment of a Special Tax is not mandatory. However, the District will covenant for the benefit 19 4887-9868-3354v10/022599-0035
of the Owners of the Bonds and the landowners within the Improvement Area securing such Bonds that it will review the public records of the County in connection with the collection of the Special Tax not later than July 1 of each year to determine the amount of Special Tax collected in the prior Fiscal Year; and with respect to individual delinquencies within the Improvement Area, if the District determines that any single property owner subject to the Special Tax is delinquent in the payment of Special Taxes in the aggregate of $2,500 or more or as to any single parcel the delinquent Special Taxes represent more than 5% of the aggregate Special Taxes within the Improvement Area, then the District will send or cause to be sent a notice of delinquency (and a demand for immediate payment thereof) to the property owner within 45 days of such determination, and (if the delinquency remains uncured) the District will cause judicial foreclosure proceedings to be filed in the Superior Court within ninety (90) days of such determination against all properties for which the Special Taxes remain delinquent.
The District will covenant in the Indenture that it will deposit the net proceeds of any foreclosure in the Special Tax Fund and will apply such proceeds remaining after the payment of Administrative Expenses to make current payments of principal and interest on the Bonds and any Parity Bonds, to bring the amount on deposit in the Reserve Account up to the Reserve Requirement and to pay any delinquent installments of principal or interest due on the Bonds and any Parity Bonds. See APPENDIX E — "SUMMARY OF THE INDENTURE — COVENANTS AND WARRANTY — Covenants" herein.
If foreclosure is necessary and other funds (including amounts in the Reserve Account) have been exhausted, debt service payments on the Bonds could be delayed unless the foreclosure proceedings produce sufficient net foreclosure sale proceeds. Judicial foreclosure actions are subject to the normal delays associated with court cases and may be further slowed by bankruptcy actions, involvement by agencies of the federal government and other factors beyond the control of the City and the District. See the caption "SPECIAL RISK FACTORS — Enforcement Delays — Bankruptcy." Moreover, no assurances can be given that the real property subject to foreclosure and sale at a judicial foreclosure sale will be sold or, if sold, that the net proceeds of such sale will be sufficient to pay any delinquent Special Tax installment. See the caption "SPECIAL RISK FACTORS — Property Values." Although the Act authorizes the District to cause such an action to be commenced and diligently pursued to completion, the Act does not impose on the District or the City any obligation to purchase or acquire any lot or parcel of property sold at a foreclosure sale if there is no other purchaser at such sale. The Act provides that, in the case of a delinquency, the Special Tax will have the same lien priority as is provided for ad valorem taxes.
Collection of Special Taxes and Flow of Funds. The Special Taxes will be levied and collected by the Treasurer -Tax Collector of the County in the same manner and at the same time as ad valorem property taxes, although it is possible that the District could elect to provide handbills to property owners within the Improvement Area. When the County apportions Special Taxes to the District, the District will transmit the Special Taxes to the Trustee for deposit in the Special Tax Fund established by the Indenture.
Except for Prepayments, which will be deposited to the Redemption Account of the Special Tax Fund, the Trustee will, on each date on which the Special Taxes are received from the District, deposit the Special Taxes in the Special Tax Fund to be held in trust for the Owners. The Trustee will transfer the Special Taxes on deposit in the Special Tax Fund on the dates, in the amounts and in the following order of priority, to:
First: To the Administrative Expense Account in an amount up to the Administrative Expenses Cap.
Second: To the Interest Account, an amount such that the balance in the Interest Account one Business Day prior to each Interest Payment Date is equal to the installment of interest due on the Bonds and any Parity Bonds on said Interest Payment Date and any installment of interest due on a previous Interest Payment Date which remains unpaid. Moneys in the Interest Account will be used for the payment of interest on the Bonds and any Parity Bonds as the same become due.
20 4887-9868-3354v10/022599-0035
Third: To the Principal Account, an amount such that the balance in the Principal Account one Business Day prior to September 1 of each year, commencing September 1, 2025, is equal the principal payment due on the Bonds and any Parity Bonds maturing on such September 1 and any principal payment due on a previous September 1 which remains unpaid. Moneys in the Principal Account shall be used for the payment of the principal of such Bonds and any Parity Bonds as the same become due at maturity.
Fourth: To the Redemption Account, the amount needed to make the balance in the Redemption Account one Business Day prior to each September 1 on which a Sinking Fund Payment is due equal to the Sinking Fund Payment due on any Outstanding Bonds and Parity Bonds on such September 1; provided, however, that, if amounts in the Special Tax Fund are inadequate to make the foregoing transfers, then any deficiency will be made up by an immediate transfer from the Reserve Account, if funded, pursuant to the Indenture; and thereafter, to pay the principal and premium, if any, due in connection with an optional redemption of Bonds or Parity Bonds.
Fifth: To the Reserve Account of the Special Tax Fund to the extent necessary to replenish the Reserve Account to the Reserve Requirement.
Sixth: To the Administrative Expense Account of the Special Tax Fund the amount of any Administrative Expenses for the current Bond Year in excess of the Administrative Expenses Cap as directed by the City.
Seventh: To the Rebate Fund established by the Indenture to the extent directed by the City pursuant to the Indenture.
Eighth: To the Surplus Fund established by the Indenture such remaining amounts in the Special Tax Fund after making the foregoing transfers on September 1.
Reserve Account of the Special Tax Fund
In order to secure further the payment of principal of and interest on the Bonds, the District is required, upon delivery of the Bonds, to deposit in the Reserve Account and thereafter to maintain in the Reserve Account an amount equal to the Reserve Requirement. The term "Reserve Requirement" is defined in the Indenture to mean, that amount as of any date of calculation, equal to the lesser of: (i) 10% of the initial principal amount of the Bonds and Parity Bonds, if any; (ii) Maximum Annual Debt Service on the then Outstanding Bonds and Parity Bonds, if any; (iii) 125% of average Annual Debt Service on the then Outstanding Bonds and Parity Bonds, if any; provided, however, that the Reserve Requirement shall not exceed $ except in connection with the issuance of Parity Bonds. The Reserve Requirement may be satisfied in whole or in part by cash, a Reserve Policy (as defined in the Indenture), or a combination thereof. On the date of issuance of the Bonds, the Reserve Requirement will be satisfied from a deposit of $ into the Reserve Account from proceeds of the Bonds.
Subject to the limits on the maximum annual Special Tax levy set forth in the Rate and Method and in the Indenture, the District will covenant in the Indenture to levy Special Taxes in an amount sufficient, in light of the other intended uses of the Special Tax proceeds, to maintain the balance in the Reserve Account at the Reserve Requirement. Amounts in the Reserve Account are to be applied: (i) to pay debt service on the Bonds, or any Parity Bonds, including Sinking Fund Payments, to the extent that other monies are not available therefor; (ii) to redeem Bonds or Parity Bonds in the event of prepayment of Special Taxes, to optionally redeem Bonds or Parity Bonds or in connection with a partial defeasance of Bonds or Parity Bonds, in accordance with the Indenture; and (iii) to pay any rebate requirements. See Appendix E under the caption "CREATION OF FUNDS AND APPLICATION OF PROCEEDS — Reserve Account of the Special Tax Fund." 21 4887-9868-3354v10/022599-0035
No Teeter Plan
Although the Riverside County Board of Supervisors has adopted the Alternative Method of Distribution of Tax Levies and Collections and of Tax Sale Proceeds (the "Teeter Plan") which allows each entity levying secured property taxes in the County to draw on the amount of property taxes levied rather than the amount actually collected, as provided for in Section 4701 et seq. of the California Revenue and Taxation Code, the District is not included in the County Teeter Plan. Consequently, the District may not draw on the County Tax Loss Reserve Fund in the event of delinquencies in Special Tax payments within the Improvement Area.
Parity Bonds for Refunding Purposes Only
The District will covenant in the Indenture not to issue Parity Bonds except as provided in the Indenture and only for the purposes of refunding all or a portion of the Bonds and any Parity Bonds. See Appendix E under the caption "DEFEASANCE AND PARITY BONDS."
THE IMPROVEMENT AREA
General Description of the District and the Improvement Area The City is located in the western portion of the County. The Improvement Area contains approximately
63.56 gross acres and is located in the City north of West Oak Valley Parkway and east of Omera Way.
The property within the Improvement Area is being developed by TriPointe into 268 single-family detached homes as a portion (Planning Areas 15 and 16) of the Tournament Hills master planned community.
As of July 31, 2024, TriPointe had completed and conveyed 202 homes within the Improvement Area to individual homeowners. As of such date, TriPointe owned 1 model home (which was not in escrow), 63 homes under construction (49 of which were in escrow) and 2 finished lots (none of which were in escrow). TriPointe expects to complete and convey all remaining homes to be constructed in the Improvement Area to individual homeowners by the end of the second quarter of 2025.
The major infrastructure (sewer, water, storm drains, utilities, and arterial roads) necessary to develop the property within the Improvement Area is substantially complete. The in -tract infrastructure within the Improvement Area is also substantially complete with finishing of certain streets and landscaping remaining.
There are no conditions of development still outstanding to prevent complete buildout of the Improvement Area as planned.
For the property within the Improvement Area, water service is provided by the Beaumont -Cherry Valley Water District, sewer service is supplied by the City, electricity is currently supplied by Southern California Edison and gas by Southern California Gas Company. Public education instruction is provided by the Beaumont Unified School District.
According to the Seismic Safety Commission, the area within the Improvement Area is located within Zone 4, which is considered to be the highest risk zone in California. There are only two zone in California:
Zone 4, which is assigned to areas near major earthquake faults, and Zone 3, which is assigned to all other areas of more moderate seismic activity. In addition, the property within the Improvement Area is located in a Fault - Rupture Hazard Zone (formerly referred to as an Alquist-Priolo Study Zone).
The Improvement Area is not located in an area which the Department of Forestry and Fire Protection of the State of California has designated as a very high fire hazard severity zone; however, it is nearby an area that is designated at a very high fire hazard severity zone. In addition, the Improvement Area is not located within a 500 -year floodplain. Notwithstanding the foregoing, property in the Improvement Area may be subject 22 4887-9868-3354v10/022599-0035
to unpredictable seismic activity, fires, flood, or other natural disasters. See "SPECIAL RISK FACTORS — Natural Disasters."
A map showing the location of the Improvement Area and an aerial photograph thereof appear following the Table of Contents.
Tournament Hills Master Planned Community
The Tournament Hills master planned community is a gated community of approximately 1,362 residential dwelling units developed by TriPointe. The community includes an elementary school, parks a community pool and spa, and shaded picnic areas. Tournament Hills consists of 12 residential planning areas, 4 open space/park planning areas and 1 public school planning area. The development within the Improvement Area will constitute the last planning area within the Tournament Hills master planned community.
Authorized Uses of Bond Proceeds
Proceeds of the Bonds are authorized to be used to pay for the costs of the design, engineering, acquisition and construction of certain City facilities. See the caption "FINANCING PLAN." Appraisal Report
The estimated assessed value of the property within the Improvement Area, as shown on the County's assessment roll for Fiscal Year 2023-24 is approximately $65,980,727, which as a result of timing of the County's determination of the assessed values for Fiscal Year 2023-24, does not reflect the substantial development activity that has taken place since such value was determined.
A property's assessed value is not necessarily indicative of its market value. In order to provide information with respect to the value of the taxable property within the Improvement Area, the City engaged the Appraiser to prepare the Appraisal Report. The Appraiser has an "MAI" designation from the Appraisal Institute and has prepared numerous appraisals for the sale of land -secured municipal bonds. The Appraiser was selected by the City and has no material relationships with the City or the owners of the land within the Improvement Area other than the relationship represented by the engagement to prepare the Appraisal Report. The City instructed the Appraiser to prepare its analysis and report in conformity with City -approved guidelines and the Appraisal Standards for Land Secured Financings published in 1994 and revised in 2004 by the California Debt and Investment Advisory Commission. A copy of the Appraisal Report is included as APPENDIX D — "APPRAISAL REPORT" to this Official Statement.
The purpose of the Appraisal Report was to estimate the aggregate market value of the "as is" condition of certain of the property within the Improvement Area subject to the Special Taxes that did not have an improved value on the Fiscal Year 2023-24 County Assessor's roll. The remainder of the taxable property is valued in the Appraisal based on its assessed value. The estimate of market value takes into consideration and assumes the improvements to be funded with the proceeds of the Bonds have been installed and that the development costs provided to the Appraiser by TriPointe include all of the costs necessary to bring the subject properties to a fmished lot condition. Subject to the contingencies, assumptions and limiting conditions set forth in the Appraisal Report, the Appraiser concluded that, as of July 31, 2024 the value of the parcels in the Improvement Area subject to the Special Taxes (based on market and assessed values) was $113,430,327.
In estimating the market value, the Appraiser utilized a direct comparison approach and static residual analysis for all of the property owned by the merchant builders to derive a value indication for the finalized lots within each tract adjusted by any costs to complete such finished lots.
Reference is made to Appendix D for a complete list of the assumptions and limiting conditions and a full discussion of the appraisal methodology and the basis for the Appraiser's opinions. In the event that any of 23 4887-9868-3354v10/022599-0035
the contingencies, assumptions and limiting conditions are not actually realized, the value of the property within the Improvement Area may be less than the amount reported in the Appraisal Report. In any case, there can be no assurance that any portion of the property within the Improvement Area would actually sell for the amount indicated by the Appraisal Report.
The Appraisal Report merely indicates the Appraiser's opinion as to the market value of the property referred to therein as of the date and under the conditions specified therein. The Appraiser's opinion reflects conditions prevailing in the applicable market as of the date of the Appraisal Report. The Appraiser's opinion does not predict the future value of the subject property, and there can be no assurance that market conditions will not change adversely in the future. See "SPECIAL RISK FACTORS — Property Values," Appendix D — "APPRAISAL REPORT."
It is a condition precedent to the issuance of the Bonds that the Appraiser deliver to the District a certification to the effect that, while the Appraiser has not updated the Appraisal Report since its date and has not undertaken any obligation to do so, nothing has come to the attention of the Appraiser subsequent to the date of the Appraisal Report that would cause the Appraiser to believe that the value of the property that it appraised in the Improvement Area is less than the value reported in the Appraisal Report. However, the Appraiser notes that acts and events may have occurred since the date of the Appraisal Report which could result in both positive and negative effects on market value within the Improvement Area.
Estimated Value -to -Lien Ratios
The aggregate assessed and appraised value of property within the Improvement Area is $113,430,327.
Dividing the aggregate estimate of value by the principal amount of the Bonds results in value to lien ratio of
12.06 -to -1* for the Improvement Area. There is currently no other direct or overlapping special tax or assessment debt on the property within the Improvement Area. Including the overlapping general obligation debt in the Improvement Area and the Bonds, the estimated appraised value to lien ratio for the District is approximately 10.59 -to -1*. See "SPECIAL RISK FACTORS — Direct and Overlapping Indebtedness." The assessed value of the property within the Improvement Area is $65,980,727 for Fiscal Year 2023-24, which, as a result of timing of the County's determination of the assessed values for Fiscal Year 2023-24, does not reflect the substantial development activity that has taken place since such value was determined.
Based on ownership status as of July 31, 2024 (and assuming none of the 49 homes in escrow close to individual homeowners), individual homeowners and TriPointe are expected to be responsible for approximately
76.03% and 23.97%, respectively, of the Fiscal Year 2024-25 Special Tax levy.
Table 2 below sets forth the appraised value -to -lien ratio of the Taxable Property within the Improvement Area based on the appraised values set forth in the Appraisal Report, the principal amount of the Bonds and overlapping general obligation debt. Table 3 below sets forth the estimated appraised value -to -lien ratios for Developed Property within the Improvement Area by various ranges based upon the principal amount of the Bonds and overlapping general obligation debt. Other than the Bonds, there is currently no overlapping land -secured special tax and assessment debt on the property within the Improvement Area. * Preliminary, subject to change.
24 4887-9868-3354v10/022599-0035
TABLE 2
CITY OF BEAUMONT
COMMUNITY FACILITIES DISTRICT NO. 93-1
IMPROVEMENT AREA NO. 17D
ESTIMATED VALUE -TO -LIEN RATIOS
FISCAL YEAR 2024-25 PROJECTED LEVY ON ALL TAXABLE PROPERTIES Fiscal Year
2024-25 % of
Fiscal Year Percentage Projected Estimated
of 2024-25 of Fiscal Year Fiscal Year All other Value -to - No. of Property Prperty Maximum Maximum 2024-25 2024-25 overlapping Lien Property Owner Parcels Value) Value Tax Tax Levy (5) Levy Bonds (6)' Debt Issued Ratio* Developed Property
Developed Individually Owned(1) 202 $ 98,801,327 87.10% $ 509,486 74.87% $ 418,793 76.03% $7,146,519 $ 994,621 12.14:1 Developed - TriPointe Homes Ownee 64 14,279,000 12_59 165.668 24_35 132,056 23.97 2,253,481 313,629 5.56:1 Total Developed 266 $113,080,327 99.69% $ 675,154 99.22% $ 550,849 100.00% $9,400,000 $1,308,250 10.56:1 Final Mapped Property
Final Mapped - TriPointe Homes Owned(3) 2 $ 350,000 0.31% $ 5,311 038% $ 0 0.00% $ 0 $ 0 N/A Total Final Mapped 2 $ 350,000 0.31% $ 5,311 0.78% $ 0 0.00% $ 0 $ 0 N/A Total
268 $113,430,327 100.00% $ 680,465 100.00% $ 550,849 100.00% $9,400,000 $1,308,250 10.59:1 Preliminary, subject to change.
(1) Ownership status based on ownership information provided by TriPointe as of July 31, 2024. (2) Reflects Appraised Value for 1 Completed Home and 63 Under Construction for TriPointe which have building permits issued by June 1, 2024 and therefore are considered Developed Property per the Rate and Method.
(3) Reflects Appraised Value for 2 Under Construction parcels owned by TriPointe which do not have building permits issued by June 1, 2024 and therefore are considered Final Map Property per the Rate and Method.
(4) Reflects the Assessed/Appraised Value based as of July 31, 2024 the Date of Value of the Appraisal. (5) Estimated Fiscal Year 2024-25 Special Tax Levy based upon assumed development status as of June 1, 2024 and preliminary debt service of the Bonds with Priority Administrative Expenses of $30,000.
(6) Includes the principal amount of the Bonds. Responsibility of the principal amount of the Bonds has been allocated based on the projected Fiscal Year 2024-25 Special Tax levy based on development status in the Improvement Area as of June 1, 2024.
Source: County of Riverside Assessor's Office; Spicer Consulting Group, LLC. 4887-9868-3354v10/022599-0035
25
TABLE 3
CITY OF BEAUMONT
COMMUNITY FACILITIES DISTRICT NO. 93-1
IMPROVEMENT AREA NO. 17D
FISCAL YEAR 2024-25 PROJECTED VALUE -TO -LIEN STRATA FOR DEVELOPED PROPERTY AS OF JULY 31, 2024* No. of Percent Share
Parcels of % of % of Projected of Projected All Other
Developed Developed Property Property Fiscal Year Fiscal Year Amount of Percent Share Overlapping Aggregate Value -to -Lien Category Property Property Value (1) Value 204-25 Levy 2024-25 Levy Bonds (2) of Bonds Debt Value -to -Lien Less than 4.00:1 0 0.00% $ 0 0.00% $ 0 0.00% $ 0 0.00% $ 0 N/A Between 4.01:1 to 8.00:1(3) 63 23.68 13,799,000 12.20 130,041 23.61 2,219,097 23.61 308,844 5.46:1 Between 8.01:1 to 12.00:1 82 30.83 38,699,055 34.22 172,485 31.31 2,943,382 31.31 409,647 11.54:1 Greater than 12.00:1(3) 121 45.49 60,582,272 53.57 248,323 45.08 4,237,522 45.08 589,759 12.55:1 Totals 266 100.00% $113,080,327 100.00% $550,849 100.00% $ 9,400,000 100.00% $1,308,250 10.56:1 Preliminary, subject to change.
(1) Reflects the Assessed/Appraised Value as of July 31, 2024, the Date of Value of the Appraisal. (2) Responsibility of the par amount of the Bonds has been allocated based on the estimated Fiscal Year 2024-25 Special Tax levy, with development status as of June 1, 2024, and preliminary bond sizing as provided by the Underwriter.
(3) The minimum value to lien in the Between 4.01:1 to 8.00:1 category is 4.96:1*. The maximum value to lien in the Greater than 12.00:1 category is 14.63:1*.
Source: County of Riverside Assessor's Office; Spicer Consulting Group, LLC. 26 4887-9868-3354v10/022599-0035
Direct and Overlapping Debt
The District is included within the boundaries of overlapping local agencies providing governmental services. Some of these local agencies have outstanding bonds, and/or the authority to issue bonds, payable from taxes or assessments. The existing and authorized indebtedness payable from taxes and assessments that may be levied upon the property within the Improvement Area is shown in Table 4 below. In addition to current debt, new community facilities districts and/or special assessment districts could be formed in the future encompassing all or a portion of the property within the Improvement Area; and such districts or the agencies that formed them could issue more bonds and levy additional special taxes or assessments. 27 4887-9868-3354v10/022599-0035
TABLE 4
CITY OF BEAUMONT
COMMUNITY FACILITIES DISTRICT NO. 93-1
IMPROVEMENT AREA NO. 17D
DIRECT AND OVERLAPPING DEBT
AS OF JULY 31, 2024
I. Assessed/Appraisal Value (1) $113,430,327
II. Land Secured Bond Indebtedness
Parcels in
CFD No.
Outstanding Direct and % 93-1 IA Amount
Overlapping Bonded Debt Type Issued Outstanding Applicable 17D (3) Applicable City of Beaumont CFD No. 93-1 IA 17D CFD $9,400,000* $ 9,400,000* 100.000% 268 $ 9,400,000* Total Land Secured Bonded Debt (2) $ 9,400,000*
Parcels in
CFD No.
Authorized but Unissued Direct and % 93-1 IA Amount
Overlapping Indebtedness Type Authorized Unissued Applicable 17D (3) Applicable City of Beaumont CFD No. 93-1 IA 17D CFD $25,000,000 $ 0 100.000% 268 $ 0 Total Unissued Land Secured Indebtedness (2) $ 0
TOTAL OUTSTANDING AND UNISSUED LAND SECURED INDEBTEDNESS $ 9,400,000* III. General Obligation Bond Indebtedness
Parcels in
CFD No.
Outstanding Direct and % 93-1 L4 Amount
Overlapping Bonded Debt Type Issued Outstanding Applicable 17D (3) Applicable Beaumont Unified School District GO $140,998,583 $110,484,350 0.657% 268 $ 725,854 San Gorgonio Pass Mem Hospital GO 108,000,000 94,135,000 0.484 268 455,706 Mt San Jacinto Jr College GO 295,000,000 242,210,000 0.052 268 126,691 Total Outstanding General Obligation Bonded Debt (2) $ 1,308,250 Parcels in
CFD No.
Authorized but Unissued Direct % 93-1 L4 Amount
and Overlapping Indebtedness Type Authorized Unissued Applicable 17D (33 Applicable Beaumont Unified School District GO $141,000,000 $ 1,417 0.657% 268 $ 9 San Gorgonio Pass Mem Hospital GO 108,000,000 0 0.484 268 0 Mt San Jacinto Jr College GO 295,000,000 0 0.052 268 0
Total Unissued General Obligation Indebtedness (2) $ 9
TOTAL OUTSTANDING AND UNISSUED GENERAL OBLIGATION INDEBTEDNESS $ 1,308,259
TOTAL OF ALL OUTSTANDING DIRECT AND OVERLAPPING BONDED DEBT
TOTAL OF ALL OUTSTANDING DIRECT AND UNISSUED DIRECT OVERLAPPING INDEBTEDNESS $ 10,708,250*
$ 10,708,259*
IV. Ratios to Appraisal Value
Outstanding Land Secured Bonded Debt 12.07:1*
Total Outstanding Bonded Debt 10.59:1*
(1)
(2)
(3)
Based on the Assessed/Appraisal Value per the Appraisal Report as of July 31, 2024 Date of Value.
Parity Bonds may only be issued for refunding purposes.
All parcels have subdivided into 268 individual parcels. Based on development status as of June 1, 2024, and assuming no further development, 266 parcels will be classified as Developed Property and 2 parcels are classified as Final Mapped Property under the Rate and Method for Fiscal Year 2024-25.
Source: County of Riverside Assessor's Office; Spicer Consulting Group, LLC. 4887-9868-3354v10/022599-0035
28
Table 5 below describes the estimated Fiscal Year 2024-25 effective tax burden for a property within the Improvement Area based on the average value of a home within the Improvement Area as of the Date of Value, the actual Fiscal Year 2024-25 Special Tax levy and Fiscal Year 2024-25 actual levies for all other overlapping taxing jurisdictions. Based on the foregoing and the projected debt service on the Bonds, the Administrative Expenses Cap of $30,000 (which amount shall escalate at 2.00% per Fiscal Year), in Fiscal Year 2024-25, the projected effective tax rate to be levied on Developed Property in the Improvement Area will average 1.85%.
TABLE 5
CITY OF BEAUMONT
COMMUNITY FACILITIES DISTRICT NO. 93-1
IMPROVEMENT AREA NO. 17D
ESTIMATED AVERAGE FISCAL YEAR 2024-25 TAX OBLIGATION')
Average Home Value(2) $ 501,146
Ad Valorem Property Taxes:
General Purpose $ 5,011
Beaumont Unified School (0.07777%) 389
Mt San Jacinto Jr College (0.01320%) 66
San Gogonio Pass Mem Hospital (0.06200%) 311
San Gorgonio Pass Water Debt Svc (0.17500%) 877
Total General Property Taxes $ 6,655
Assessment, Special Taxes & Parcel Charges:
San Gorgoio Hospital Measure D $ 61
Flood Control Stormwater / Cleanwater / Santa Ana 4
CFD No. 93-1 IA 17D - Maintenance Services Special Tax 453 CFD No. 93-1 IA 17D - Facilities Special Tax 2.121
Total Assessments & Special Taxes $ 2,639
Projected Total Property Tax
Projected Effective Tax Rate (3)
$ 9,294
1.85%
(1) Average Fiscal Year 2024-25 tax rates based upon Fiscal Year 2024-25 Overlapping Taxes and Assessment Rates reflects the average assessed value based as of July 31, 2024, the Date of Value in the Appraisal Report. (2) Average Home Value is based upon average assessed values for developed parcels with improvement value for Fiscal Year 2024-25 per Riverside County Equalized Roll data.
(3) Reflects the District's Average Fiscal Year 2024-25 Special Tax levy for facilities for developed parcels with an assessed value for improvements.
Source: County of Riverside Assessor's Office; Spicer Consulting Group, LLC.
Delinquency History
Fiscal Year 2023-24 was the first year of the Special Tax levy. The District levied Special Taxes in Fiscal Year 2023-24 in the amount of $245,918. As of July 31, 2024, one parcel within the Improvement Area, representing approximately 0.20% of the Special Tax levy, remained delinquent in the payment of its Special Taxes. In each Fiscal Year, the first installment of the Special Tax levy will become delinquent if not paid on or prior to December 10 and the second installment will become delinquent if not paid on or before April 10.
PROPERTY OWNERSHIP AND THE DEVELOPMENT
The information about the property in the Improvement Area under this caption has been provided by representatives of TriPointe, and has not been independently confirmed or verified by the Underwriter, the City 4887-9868-3354v10/022599-0035
29
or the District. The Underwriter, the City, and the District make no representation as to the accuracy or adequacy of the information contained in this caption. There may be material adverse changes in this information after the date of this Official Statement. Neither the Bonds nor the Net Taxes securing the Bonds and any Parity Bonds are personal obligations of TriPointe or any affiliate thereof or any other property owner and, in the event that any property owner defaults in the payment of its Special Taxes, the District may proceed with judicial foreclosure but has no direct recourse to the assets of any property owner or any affiliate thereof See the caption "SPECIAL RISK FACTORS."
Notwithstanding the belief of TriPointe that it will have sufficient funds to complete its planned development in the Improvement Area, no assurance can be given that amounts necessary to fund the remaining planned development by TriPointe in the Improvement Area will be available when needed. None of TriPointe, or any other entity or person is under any legal obligation of any kind to expend funds for the development of the property as planned by TriPointe in the Improvement Area. Any contributions by TriPointe or any other entity or person to fund the costs of its development are entirely voluntary. If and to the extent the aforementioned sources are inadequate to pay the costs to complete the planned development by TriPointe within the Improvement Area, the remaining portions of such development may not be completed. TriPointe has no legal obligation to Bondholders to make any such funds available for construction or development, or the payment of ad valorem property taxes or the Special Taxes. See the caption "SPECIAL RISK FACTORS." General
The Improvement Area contains approximately 63.56 gross acres and is located in the City north of West Oak Valley Parkway and east of Omera Way.
The major infrastructure (sewer, water, storm drains, utilities, and arterial roads) necessary to develop the property within the Improvement Area is substantially complete. The in -tract infrastructure within the Improvement Area is also substantially complete with finishing of certain streets and landscaping remaining.
There are no conditions of development still outstanding to prevent complete buildout of the Improvement Area as planned.
Planned Development Within the Improvement Area
General. The property within the Improvement Area is being developed by TriPointe into 268 single- family detached homes as part of a master planned community called Tournament Hills. As of July 31, 2024, TriPointe had completed and conveyed 202 homes within the Improvement Area to individual homeowners. As of such date TriPointe owned 1 model home (which was not in escrow), 63 homes under construction (49 of which were in escrow) and 2 finished lots (none of which were in escrow).
As of September 22, 2024, TriPointe had completed and conveyed 229 homes in the Improvement Area to individual homeowners. TriPointe expects to complete and convey all remaining homes to be constructed in the Improvement Area to individual homeowners by the end of the second quarter of 2025. TriPointe's project in the Improvement Area includes two product lines — Crown and Virtue. The tables below show certain information with respect to the homes in each product line as of September 22, 2024. 30 4887-9868-3354v10/022599-0035
CITY OF BEAUMONT
COMMUNITY FACILITIES DISTRICT NO. 93-1
IMPROVEMENT AREA NO. 17D
CROWN PRODUCT LINE
(As of September 22, 2024)
Owned by TriPointe
Estimated Completed
Total Home Homes/Homes
Units Square Under Finished Base Home
Plan Planned Footage Closings Construction Lots Prices0 1 47 1,541 37 8 2 $465,000
2 47 1,908 34 13 0 486,000
3 44 2,049 34 10 0 489,000
Total 144 111 31 2
Completed Homes/Homes Under Construction consist of 30 production homes under construction.
Base home prices shown exclude lot premiums, options and extras and any incentives or price reductions. Base sales prices are subject to change.
CITY OF BEAUMONT
COMMUNITY FACILITIES DISTRICT NO. 93-1
IMPROVEMENT AREA NO. 17D
VIRTUE PRODUCT LINE
(As of September 22, 2024)
Owned by TriPointe
Estimated Completed
Total Home Homes/Homes
Units Square Under Finished Base Home
Plan Planned Footage Closings Construction0 Lots Prices0 1 26 1,741 24 2 0 $448,000
2 49 1,957 47 2 0 457,000
3 49 2,195 47 2 0 480,000
Total 124 118 6 0
Completed Homes/Homes Under Construction consist of 0 production homes under construction.
Base home prices shown exclude lot premiums, options and extras and any incentives or price reductions. Base sales prices are subject to change.
TriPointe
General. As previously defined in this Official Statement, "TriPointe" is TriPointe Homes IE-SD, Inc., a California corporation, which is a wholly -owned subsidiary of TriPointe Homes, Inc., a Delaware corporation ("TriPointe Homes"), a publicly traded company whose common stock is listed on the New York Stock Exchange under the ticker symbol "TPH." TriPointe Homes is engaged in the design, construction and sale of innovative single-family attached and detached homes across ten states, including Arizona, California, Colorado, Maryland, Nevada, North Carolina, South Carolina, Texas, Virginia and Washington, and the District of Columbia. In September 2023, TriPointe Homes announced the expansion into the greater Salt Lake City region with the launch of a new division in Utah. In April 2024, TriPointe Homes announced further expansion into Orlando, Florida and the Coastal Carolinas area, which includes parts of Georgia and South Carolina. As of June 30, 2024, the company had not yet commenced significant homebuilding operations in these new markets. 31 4887-9868-3354v10/022599-0035
TriPointe Homes is subject to the informational requirements of the Exchange Act and, in accordance therewith, files reports, proxy statements, and other information, including financial statements, with the SEC.
Such filings, set forth, among other things, certain data relative to the consolidated results of operations and financial position of TriPointe Homes and its consolidated subsidiaries, including TriPointe, as of such dates (e.g., see TriPointe Homes' Annual Report on Form 10-K for the fiscal year ended December 31, 2023, as filed with the SEC on February 22, 2024 and TriPointe Homes' Quarterly Report on form 10-Q for the quarterly period ended June 30, 2024, as filed with the SEC on July 25, 2024).
The SEC maintains an Internet website that contains reports, proxy and information statements and other information regarding registrants that file electronically with the SEC, including TriPointe Homes. The address of such website is www.sec.gov . All documents filed by TriPointe Homes pursuant to the requirements of the Exchange Act after the date of this Official Statement will be available for inspection in such manner as the SEC prescribes. Copies of TriPointe Homes' most recent Annual Report on Form 10-K and each of its other quarterly and current reports, including any amendments, are available in the "investors" portion of its website at www.tripointehomes.com .
The foregoing internet websites are included for reference only and the information on these internet sites is not a part of this Official Statement and is not incorporated by reference into this Official Statement. No representation is made in this Official Statement as to the accuracy or adequacy of the information contained on such internet websites. Neither TriPointe nor TriPointe Homes is obligated to advance funds for construction or development or to pay ad valorem property taxes or the Special Taxes and investors should not rely on the information and financial statements contained on such internet sites in evaluating whether to buy, hold or sell the Bonds.
Financing Plan. Through September 22, 2024, TriPointe had spent approximately $4,635,000 in acquiring its land in the Improvement Area and approximately $82,000,000 in site development costs, permits and impact fees, home construction costs, and other development, marketing and sales costs (exclusive of internal fmancing repayment, corporate overhead and other carry costs) related to its development within the Improvement Area. TriPointe expects to spend approximately $1,000,000 in additional site development costs, permit and impact fees, home construction costs, and other development, marketing and sales costs (exclusive of corporate overhead and other carry costs) between September 22, 2024 and full build -out of the homes proposed to be constructed in the Improvement Area.
To date, TriPointe has financed its land acquisition, site development and home construction costs related to its property within the Improvement Area through internally generated funds. TriPointe expects to use internal funding (which may include home sales revenues from its project within the Improvement Area) to complete its development activities within the Improvement Area. However, home sales revenues from TriPointe's activities in the Improvement Area are not segregated and set aside for completing the homes in the Improvement Area. Notwithstanding the foregoing, TriPointe believes that it will have sufficient funds to complete its construction and sale of homes in the Improvement Area.
Except as described in this Official Statement and except for those consents, permits, authorizations, certifications and approvals of governmental entities required in the ordinary course of development, TriPointe has no actual knowledge of any impediment to construction or obtaining land use entitlements which could be reasonably expected to have a material adverse effect on its ability to complete the planned development of its property within the Improvement Area as described in the Official Statement. Although the information in this Official Statement reflects the current development expectations of TriPointe, no assurance can be given that home construction and sales will be carried out on the schedule and according to the plans described herein, or that the home construction and sale plans or base prices set forth herein will not change after the date of this Official Statement. TriPointe reserves the right to change its development at any time without notice.
Additionally, homes under contract to be sold may not result in closed escrows as sales contracts are subject to cancellation. See "SPECIAL RISK FACTORS — Concentration of Property Ownership." 32 4887-9868-3354v10/022599-0035
SPECIAL RISK FACTORS
The Bonds have not been rated by any rating agency, and the purchase of the Bonds involves significant risks that are not appropriate for certain investors. The following is a discussion of certain risk factors which should be considered, in addition to other matters set forth herein, in evaluating the investment quality of the Bonds. This discussion does not purport to be comprehensive or definitive and does not purport to be a complete statement of all factors which may be considered as risks in evaluating the credit quality of the Bonds. The occurrence of one or more of the events discussed herein could adversely affect the ability or willingness of property owners in the Improvement Area to pay their Special Taxes when due. Such failures to pay Special Taxes could result in the inability of the District to make full and punctual payments of debt service on the Bonds. In addition, the occurrence of one or more of the events discussed herein could adversely affect the value of the property in the Improvement Area. See "— Property Values" below.
Risks of Real Estate Secured Investments Generally
The Bond Owners will be subject to the risks generally incident to an investment secured by real estate, including, without limitation: (i) adverse changes in local market conditions, such as changes in the market value of real property in the vicinity of the District, the supply of or demand for competitive properties in such area, and the market value of residential property or buildings and/or sites in the event of sale or foreclosure; (ii) changes in real estate tax rates and other operating expenses, governmental rules (including, without limitation, zoning laws and laws relating to endangered species and hazardous materials) and fiscal policies; (iii) natural disasters (including, without limitation, earthquakes, wildfires and floods), which may result in uninsured losses; (iv) adverse changes in local market conditions; and (v) increased delinquencies due to rising mortgage costs and other factors.
No assurance can be given that the property owners within the Improvement Area will pay Special Taxes in the future or that they will be able to pay such Special Taxes on a timely basis. See the caption "— Enforcement Delays — Bankruptcy" for a discussion of certain limitations on the District's ability to pursue judicial proceedings with respect to delinquent parcels.
Insufficiency of Special Tax Revenues
As discussed below, the Special Taxes may not produce revenues sufficient to pay the debt service on the Bonds either due to nonpayment of the amounts levied or because acreage within the Improvement Area becomes exempt from taxation due to the transfer of title to a public agency.
In order to pay debt service on the Bonds, it is generally necessary that the Special Taxes be paid in a timely manner. Should the Special Taxes not be paid on time, the District has established a Reserve Account under the Indenture to be maintained in an amount equal to the Reserve Requirement to pay debt service on the Bonds to the extent other funds are not available. See "SOURCES OF PAYMENT FOR THE BONDS — Reserve Account of the Special Tax Fund." The District will covenant in the Indenture to maintain in the Reserve Account an amount equal to the Reserve Requirement, subject, however, to the availability of Net Taxes in amounts sufficient to do so and to the limitation that the District may not levy the Special Tax in any Fiscal Year at a rate in excess of the maximum amounts permitted under the Rate and Method. See Appendix A and Appendix E hereto. As a result, if a significant number of Special Tax delinquencies occurs within the Improvement Area, the District could be unable to replenish the Reserve Account to the Reserve Requirement due to the limitations on the amount of the Special Tax that may be levied. If such defaults were to continue in successive years, the Reserve Account could be depleted and a default on the Bonds could occur.
The Act provides that, if any property within the Improvement Area not otherwise exempt from the Special Tax is acquired by a public entity through a negotiated transaction, or by gift or devise, the Special Tax will continue to be levied on and enforceable against the public entity that acquired the property. In addition, the Act provides that, if property subject to the Special Tax is acquired by a public entity through eminent domain 33 4887-9868-3354v10/022599-0035
proceedings, the obligation to pay the Special Tax with respect to that property is to be treated as if it were a special assessment and be paid from the eminent domain award. The constitutionality and operation of these provisions of the Act have not been tested in the courts, but it is doubtful that they would be upheld as to, for example, property owned by the federal government. If for any reason property within the Improvement Area becomes exempt from taxation by reason of ownership by a non-taxable entity such as the federal government or another public agency, subject to the limitation of the Maximum Special Tax, the Special Tax will be reallocated to the remaining taxable parcels within the Improvement Area. This would result in the owners of such property paying a greater amount of the Special Tax and could have an adverse impact upon their willingness and/or ability to pay the Special Tax. Moreover, if a substantial portion of additional land within the Improvement Area became exempt from the Special Tax because of public ownership, or otherwise, the Maximum Special Tax which could be levied upon the remaining acreage might not be sufficient to pay principal of and interest on the Bonds when due and a default will occur with respect to the payment of such principal and interest.
The District will covenant in the Indenture that, under certain circumstances, it will institute foreclosure proceedings to sell any property with delinquent Special Taxes in order to obtain funds to pay debt service on the Bonds. If foreclosure proceedings were ever instituted, any mortgage or deed of trust holder could, but would not be required to, advance the amount of the delinquent Special Tax to protect its security interest. See "SOURCES OF PAYMENT FOR THE BONDS — Special Taxes — Proceeds of Foreclosure Sales" for provisions which apply in the event of such foreclosure and which the District is required to follow in the event of delinquencies in the payment of the Special Tax.
In the event that sales or foreclosures of property are necessary, there could be a delay in payments to Owners of the Bonds (if the Reserve Account has been depleted) pending such sales or the prosecution of such foreclosure proceedings and receipt by the City on behalf of the District of the proceeds of sale. The District may adjust the future Special Tax levied on taxable parcels in the Improvement Area, subject to limitations described above under the caption "THE IMPROVEMENT AREA — Rate and Method of Apportionment," to provide an amount required to pay interest on and principal of the Bonds, and the amount, if any, necessary to replenish the Reserve Account to an amount equal to the Reserve Requirement, and to pay all current expenses.
There is, however, no assurance that the total amount of the Special Tax that could be levied and collected against taxable parcels in the Improvement Area will be at all times sufficient to pay the amounts required to be paid by the Indenture, even if the Special Tax is levied at the Maximum Special Tax rates. See "— Enforcement Delays — Bankruptcy."
No assurance can be given that the real property subject to sale or foreclosure will be sold, or if sold, that the proceeds of sale will be sufficient to pay any delinquent installments of the Special Tax. The Act does not require the City to purchase or otherwise acquire any lot or parcel of property to be sold at foreclosure if there is no other purchaser at such sale. The Act and the Indenture do specify that the Special Tax will have the same lien priority as for ad valorem property taxes in the case of delinquency. Section 53356.6 of the Act requires that property sold pursuant to foreclosure under the Act be sold for not less than the amount of judgment in the foreclosure action, plus post judgment interest and authorized costs, unless the consent of the owners of 75% of the Outstanding Bonds is obtained.
Prior to July 1, 1983, the right of redemption from foreclosure sales was limited to a period of one year from the date of sale. Under legislation effective July 1, 1983, the statutory right of redemption from such foreclosure sales has been repealed. However, a period of 20 days must elapse after the date on which the notice of levy of the interest in real property was served on the judgment debtor before the sale of such lot or parcel can be made. Furthermore, if the purchaser at the sale is the judgment creditor (e.g., the District), an action may be commenced by the delinquent property owner within 90 days after the date of sale to set aside such sale. The constitutionality of the aforementioned legislation, which repeals the one year redemption period, has not been tested and there can be no assurance that, if tested, such legislation will be upheld. (Section 701.680 of the Code of Civil Procedure of the State.)
34 4887-9868-3354v10/022599-0035
Impact of Economic Conditions on the Development in the Improvement Area Certain events and factors which negatively affect the regional, State and national economies could have an adverse effect on the pace at which the current or any future developers in the Improvement Area can complete the remaining infrastructure and future homes, and demand by, and the ability of individuals to purchase homes within the Improvement Area. Such events and factors could include rising inflation and interest rates, persistent supply chain issues and global market instability caused by geopolitical events. Any adverse impact of the foregoing and other economic factors on the project in the Improvement Area and the real estate market in general cannot be predicted.
Increase in Mortgage Interest Rates
30 -year fixed mortgage interest rates increased substantially between 2022 and 2024. Increases in mortgage interest rates could have a negative impact on the estimated absorption rates of the planned for -sale residential units within the Improvement Area described herein. With respect to entry-level households, increased mortgage interest rates may adversely impact the affordability of homes and may increase mortgage payment levels for owning a lower -priced home relative to renting a residence, thereby making purchasing less attractive. With respect to move -up households, higher mortgage interest rates may impact the desire of current homeowners to move from their present home due to the fact that their present home likely has a relatively low mortgage interest rate. In addition, the new home would likely have a higher interest rate on a new mortgage loan as well as higher purchase price and property taxes. Such considerations may decrease the desire for move - up households to purchase a new home.
Concentration of Ownership
Based on ownership status as of July 31, 2024 (and assuming none of the homes or lots under construction and then in escrow close to individual homeowners), individual homeowners and TriPointe are expected to be responsible for approximately 76.03% and 23.97%, respectively, of the Fiscal Year 2024-25 Special Tax levy.
The timely payment of principal of and interest on the Bonds depends upon the willingness and ability of the current and future property owners in the Improvement Area to pay the Special Taxes prior to delinquency.
General and local economic conditions and governmental requirements or restrictions may affect the willingness of the current property owners, or any successor property owners, to pay the Special Taxes, and there is no assurance that the current property owners, or any successor property owners, will pay such Special Taxes even if financially able to do so. Due to the concentration of ownership of the property within the Improvement Area, a failure by TriPointe or any successor property owner thereto to pay the Special Taxes may result in a default in the payment of debt service on the Bonds. See "PROPERTY OWNERSHIP AND THE DEVELOPMENT." Property Values
The value of the property within the Improvement Area is a critical factor in determining the investment quality of the Bonds. If a property owner is delinquent in the payment of Special Taxes, the District's only remedy is to commence foreclosure proceedings against the delinquent parcel in an attempt to obtain funds to pay the Special Taxes. Reductions in property values due to a downturn in the economy, physical events such as earthquakes, fires or floods, stricter land use regulations, delays in development or other events will adversely impact the security underlying the Special Taxes. See "THE IMPROVEMENT AREA — Appraisal Report" and APPENDIX D — "APPRAISAL REPORT."
The Appraiser has estimated, on the basis of certain assumptions and limiting conditions contained in the Appraisal Report, that as of the Date of Value, the market value of the land and improvements within the Improvement Area was approximately $113,430,327. See "THE IMPROVEMENT AREA — Appraisal Report." The Appraisal Report indicates the Appraiser's opinion as to the market value of the properties referred 35 4887-9868-3354v10/022599-0035
to therein as of the date and under the conditions specified therein. The Appraiser's opinion reflects conditions prevailing in the applicable market as of the Date of Value. The Appraiser's opinion does not predict the future value of the subject property, and there can be no assurance that market conditions will not change adversely in the future.
Prospective purchasers of the Bonds should not assume that the taxable land within the Improvement Area could be sold for the appraised amount or for the assessed values at a foreclosure sale for delinquent Special Taxes. In arriving at the estimate of market value of the property in the Improvement Area, the Appraiser assumes that any sale will be unaffected by undue stimulus and will occur following a reasonable marketing period, which is not always present in a foreclosure sale. See Appendix D for a description of other assumptions made by the Appraiser and for the definitions and limiting conditions used by the Appraiser. Any event which causes one of the Appraiser's assumptions to be untrue could result in a reduction of the value of the taxable land and improvements within the Improvement Area from the market value estimated by the Appraiser.
No assurance can be given that any bid will be received for a parcel with delinquent Special Taxes offered for sale at foreclosure or, if a bid is received, that such bid will be sufficient to pay all delinquent Special Taxes. See "SOURCES OF PAYMENT FOR THE BONDS — Special Taxes — Proceeds of Foreclosure Sales."
Natural Disasters
The Improvement Area, 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 Improvement Area.
In addition, land susceptible to seismic activity may be subject to liquefaction during the occurrence of such event. According to the Seismic Safety Commission, the area within the Improvement Area is located within Zone 4, which is considered to be the highest risk zone in California. There are only two zone in California:
Zone 4, which is assigned to areas near major earthquake faults, and Zone 3, which is assigned to all other areas of more moderate seismic activity. In addition, the property within the Improvement Area is located in a Fault - Rupture Hazard Zone (formerly referred to as an Alquist-Priolo Study Zone).
The Improvement Area no not located within a 500 -year floodplain. Notwithstanding the foregoing, property in the Improvement Area may be subject to unpredictable seismic activity, fires, flood, or other natural disasters.
In recent years, wildfires have caused extensive damage throughout the State, including within the County. Certain of these fires have burned thousands of acres and destroyed hundreds and in some cases thousands of homes. In some instances entire neighborhoods have been destroyed. Several fires m recent years damaged or destroyed property in areas that were not previously considered to be at risk from such events.
The Improvement Area is not located in an area which the Department of Forestry and Fire Protection of the State of California has designated as a very high fire hazard severity zone; however, it is nearby an area that is designated at a very high fire hazard severity zone. There is a risk of residential property within the Improvement Area being destroyed by wildfires and no assurance can be given as to the severity or frequency of wildfires within the vicinity of the Improvement Area. Additionally, property located adjacent to burn areas can be subject to mudslides and flooding, which can cause significant damage and destruction to property.
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 Improvement Area. 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 Improvement Area 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. 36 4887-9868-3354v10/022599-0035
Hazardous Substances
While government taxes, assessments and charges are a common claim against the value of a parcel, other less common claims may also be relevant. One of the most serious in terms of the potential reduction in the value of a parcel is a claim with regard to a hazardous substance. In general, the owners and operators of a parcel may be required by law to remedy conditions relating to releases or threatened releases of hazardous substances. The federal Comprehensive Environmental Response, Compensation and Liability Act of 1980, sometimes referred to as "CERCLA" or the "Super Fund Act," is the most well-known and widely applicable of these laws, but California laws with regard to hazardous substances are also stringent and similar in effect. Under many of these laws, the owner (or operator) is obligated to remedy a hazardous substance condition of a parcel whether or not the owner (or operator) had anything to do with creating or handling the hazardous substance.
The effect, therefore, should any of the parcels within the Improvement Area be affected by a hazardous substance, is to reduce the marketability and value by the costs of remedying the condition.
The District is not aware of the presence of any federally or state classified hazardous substances in violation of any environmental laws, located on the property within the Improvement Area. However, it is possible that such materials do currently exist and that the District is not aware of them.
It is possible that property in the Improvement Area may be liable for hazardous substances in the future as a result of the existence, currently, of a substance presently classified as hazardous but which has not been released or the release of which is not presently threatened, or the existence, currently, on the property of a substance not presently classified as hazardous but which may in the future be so classified. Additionally, such liabilities may arise not simply from the existence of a hazardous substance but from the method of handling such substance. All of these possibilities could have the effect of reducing the value of the applicable property.
Enforcement Delays — Bankruptcy
In the event of a delinquency in the payment of the Special Taxes, the District is required to commence enforcement proceedings under the circumstances described under the caption "SOURCES OF PAYMENT FOR THE BONDS — Special Taxes — Proceeds of Foreclosure Sales." However, prosecution of such proceedings could be delayed due to crowded local court calendars or by bankruptcy, insolvency and other laws generally affecting creditors' rights (such as the Soldiers' and Sailors' Relief Act of 1940) and by the laws of the State relating to judicial and non judicial foreclosure. Although bankruptcy proceedings would not cause the liens of the Special Taxes to become extinguished, bankruptcy of a person or entity with an interest in the applicable property could result in a delay in the enforcement proceedings because federal bankruptcy laws provide for an automatic stay of foreclosure and tax sale proceedings. Any such delay could increase the likelihood of delay or default in payment of the principal of and interest on the Bonds. The various legal opinions to be delivered in connection with the issuance of the Bonds, including Bond Counsel's approving legal opinion, are qualified as to the enforceability of the Bonds and the Indenture by reference to bankruptcy, reorganization, moratorium, insolvency and other laws affecting the rights of creditors generally or against public entities such as the District.
Special Tax Delinquencies
Under provisions of the Act, the Special Taxes, from which funds necessary for the payment of principal of, and interest on, the Bonds are derived, will be billed to the properties within the Improvement Area on the regular ad valorem property tax bills sent to owners of such properties by the County Tax Collector. The Act currently provides that such Special Tax installments are due and payable, and bear the same penalties and interest for non-payment, as do ad valorem property tax installments.
See APPENDIX E — "SUMMARY OF THE INDENTURE — COVENANTS AND WARRANTY — Covenants" for a discussion of the provisions which apply, and procedures which the District is obligated to follow under the Indenture, in the event of delinquencies in the payment of Special Taxes. See "— FDIC/Federal Government Interests in Parcels" for a discussion of the policy of the Federal Deposit Insurance Corporation 37 4887-9868-3354v10/022599-0035
regarding the payment of special taxes and assessment and limitations on the District's ability to foreclosure on the lien of the Special Taxes in certain circumstances.
FDIC/Federal Government Interests in Parcels
The ability of the District to collect interest and penalties specified by the Act and to foreclose the lien of delinquent Special Taxes may be limited in certain respects with regard to parcels in which the Federal Deposit Insurance Corporation (the "FDIC"), or other federal government entities such as Fannie Mae or Freddie Mac, has or obtains an interest.
In the case of the FDIC, in the event that any financial institution making a loan which is secured by parcels is taken over by the FDIC and the applicable Special Tax is not paid, the remedies available to the District may be constrained. The FDIC's policy statement regarding the payment of state and local real property taxes (the "Policy Statement") provides that taxes other than ad valorem taxes which are secured by a valid lien in effect before the FDIC acquired an interest in a property will be paid unless the FDIC determines that abandonment of its interests is appropriate. The Policy Statement provides that the FDIC generally will not pay installments of non -ad valorem taxes which are levied after the time the FDIC acquires its fee interest, nor will the FDIC recognize the validity of any lien to secure payment except in certain cases where the Resolution Trust Corporation had an interest in property on or prior to December 31, 1995. Moreover, the Policy Statement provides that, with respect to parcels on which the FDIC holds a mortgage lien, the FDIC will not permit its lien to be foreclosed out by a taxing authority without its specific consent, nor will the FDIC pay or recognize liens for any penalties, fines or similar claims imposed for the nonpayment of taxes.
The FDIC has taken a position similar to that expressed in the Policy Statement in legal proceedings brought against Orange County in United States Bankruptcy Court and in Federal District Court. The Bankruptcy Court issued a ruling in favor of the FDIC on certain of such claims. Orange County appealed that ruling, and the FDIC cross -appealed. On August 28, 2001, the Ninth Circuit Court of Appeals issued a ruling favorable to the FDIC except with respect to the payment of pre -receivership liens based upon delinquent property tax.
The District is unable to predict what effect the application of the Policy Statement would have in the event of a delinquency with respect to parcels in which the FDIC has or obtains an interest, although prohibiting the lien of the FDIC to be foreclosed out at a judicial foreclosure sale would prevent or delay the foreclosure sale.
In the case of Fannie Mae and Freddie Mac, in the event a parcel of taxable property is owned by a federal government entity or federal government sponsored entity, such as Fannie Mae or Freddie Mac, or a private deed of trust secured by a parcel of taxable property is owned by a federal government entity or federal government sponsored entity, such as Fannie Mae or Freddie Mac, the ability to foreclose on the parcel or to collect delinquent Special Taxes may be limited. Federal courts have held that, based on the supremacy clause of the United States Constitution "this Constitution, and the Laws of the United States which shall be made in Pursuance thereof; and all Treaties made, or which shall be made, under the Authority of the United States, shall be the supreme Law of the Land; and the Judges in every State shall be bound thereby, anything in the Constitution or Laws of any State to the contrary notwithstanding." In the absence of Congressional intent to the contrary, a state or local agency cannot foreclose to collect delinquent taxes or assessments if foreclosure would impair the federal government interest. This means that, unless Congress has otherwise provided, if a federal government entity owns a parcel of taxable property but does not pay taxes and assessments levied on the parcel (including Special Taxes), the applicable state and local governments cannot foreclose on the parcel to collect the delinquent taxes and assessments.
Moreover, unless Congress has otherwise provided, if the federal government has a mortgage interest in the parcel and the District wishes to foreclose on the parcel as a result of delinquent Special Taxes, the property cannot be sold at a foreclosure sale unless it can be sold for an amount sufficient to pay delinquent taxes and 38 4887-9868-3354v10/022599-0035
assessments on a parity with the Special Taxes and preserve the federal government's mortgage interest. For a discussion of risks associated with taxable parcels within the Improvement Area becoming owned by the federal government, federal government entities or federal government sponsored entities, see "—Insufficiency of Special Tax Revenues."
The District's remedies may also be limited in the case of delinquent Special Taxes with respect to parcels in which other federal agencies (such as the Internal Revenue Service and the Drug Enforcement Administration) have or obtain an interest.
Direct and Overlapping Indebtedness
The ability of an owner of property within the Improvement Area to pay the applicable Special Taxes could be affected by the existence of other taxes and assessments imposed upon taxable parcels. See "THE IMPROVEMENT AREA — Direct and Overlapping Debt" herein. The City and other public agencies whose boundaries overlap those of the Improvement Area could impose additional taxes or assessment liens on the property within the Improvement Area in order to finance public improvements or services to be located or provided inside of or outside of such area. The lien created on the property within the Improvement Area through the levy of such additional taxes may be on a parity with the lien of the Special Taxes applicable to the property within the Improvement Area.
The imposition of additional liens on a parity with the Special Taxes may reduce the ability or willingness of property owners to pay the Special Taxes and increase the possibility that foreclosure proceeds will not be adequate to pay delinquent Special Taxes. The District will covenant in the Indenture not to issue Parity Bonds other than for refunding all of a portion of the Bonds or Parity Bonds.
Payment of Special Taxes is not a Personal Obligation of the Property Owners An owner of a taxable parcel is not personally obligated to pay Special Taxes. Rather, Special Taxes are an obligation which is secured only by a lien against the taxable parcel. If the value of a taxable parcel is not sufficient, taking into account other liens imposed by public agencies, to secure fully Special Taxes, the District has no recourse against the property owner.
No Acceleration Provision
The Bonds do not contain a provision allowing for the acceleration of the Bonds in the event of a payment default or other default under the terms of the Bonds or the Indenture.
Limited Obligations
The Bonds and interest thereon are not payable from the general funds of the City. Except with respect to the Net Taxes, neither the credit nor the taxing power of the District or the City is pledged for the payment of the Bonds or the interest thereon, and, except as provided in the Indenture, no Owner of the Bonds may compel the exercise of any taxing power by the District or the City or force the forfeiture of any City or District property.
The principal of, premium, if any, and interest on the Bonds are not a debt of the City or a legal or equitable pledge, charge, lien or encumbrance upon any of the City's or the District's property or upon any of the City's or the District's income, receipts or revenues, except the Net Taxes and other amounts pledged under the Indenture.
The District's legal obligations with respect to any delinquent Special Taxes are limited to: (i) payments from the Reserve Account to the extent of funds on deposit therein; and (ii) the institution of judicial foreclosure proceedings under certain circumstances with respect to any parcels for which Special Taxes are delinquent. See the caption "SOURCES OF PAYMENT FOR THE BONDS — Special Taxes — Proceeds of Foreclosure Sales." The Bonds cannot be accelerated in the event of any default. 39 4887-9868-3354v10/022599-0035
The obligation to pay Special Taxes does not constitute a personal obligation of the current or subsequent owners of the respective parcels which are subject to such liens. See the caption "— Payment of the Special Tax is Not a Personal Obligation of the Property Owners." Enforcement of Special Tax payment obligations by the District is limited to judicial foreclosure in the Superior Court of California, County of Riverside. There is no assurance that any current or subsequent owner of a parcel subject to a Special Tax lien will be able to pay the amounts due or that such owner will choose to pay such amounts even though financially able to do so.
Failure by owners of the parcels to pay Special Tax installments when due, delay in foreclosure proceedings, or the inability of the District to sell parcels that have been subject to foreclosure proceedings for amounts sufficient to cover the delinquent installments of Special Taxes levied against such parcels may result in the inability of the District to make full or timely payments of debt service on the Bonds, which may in turn result in the depletion of the Reserve Account. See the caption "— Enforcement Delays — Bankruptcy." Ballot Initiatives
Articles XIII A, XIII B, XIII C, and XIII D of the California Constitution were adopted pursuant to measures qualified for the ballot pursuant to the State's constitutional initiative process. From time to time, other initiative measures could be adopted by California voters. The adoption of any such initiative might place limitations on the ability of the State, the City, or other local agencies to increase revenues or to increase appropriations.
Proposition 218
An initiative measure entitled "The Right to Vote on Taxes Act" ("Proposition 218") was approved by the voters at the November 5, 1996 statewide general election. Among other things, Proposition 218 added a new Article XIII C to the California Constitution which states that "... the initiative power shall not be prohibited or otherwise limited in matters of reducing or repealing any local tax, assessment, fee or charge." The Act provides for a procedure which includes notice, hearing, protest and voting requirements to alter the rate and method of apportionment of an existing special tax. However, the Act prohibits a legislative body from adopting any resolution to reduce the rate of any special tax or terminate the levy of any special tax pledged to repay any debt incurred pursuant to the Act unless such legislative body determines that the reduction or termination of the special tax would not interfere with the timely retirement of that debt. While the application of Proposition 218 in this context has not yet been interpreted by the courts and the matter is not completely free from doubt, it is not likely that Proposition 218 has conferred on the voters the power to effect a repeal or reduction of the Special Tax if the result thereof would be to impair the security of the Bonds.
It may be possible, however, for voters or the City Council, acting as the legislative body of the District, to reduce the Special Taxes in a manner which does not interfere with the timely repayment of the Bonds, but which does reduce the maximum amount of Special Taxes that may be levied in any year below the existing levels. Therefore, no assurance can be given with respect to the future levy of Special Taxes in amounts greater than the amount necessary for the timely retirement of the Bonds. Nevertheless, to the maximum extent that the law permits it to do so, the District will covenant that it will not initiate proceedings under the Act to reduce the maximum Special Tax rates for the Improvement Area, unless, in connection therewith, (i) such changes do not reduce the maximum Special Taxes that may be levied in each year on property within the Improvement Area to an amount which is less than the Administrative Expenses Cap plus 110% of the Annual Debt Service due in each corresponding future Bond Year with respect to the Bonds and Parity Bonds Outstanding as of the date of such proposed reduction; and (ii) the District is not delinquent in the payment of the principal of or interest on the Bonds or any Parity Bonds. The District also will covenant that, in the event an initiative is adopted which purports to reduce or otherwise alter the Rate and Method, it will commence and pursue legal action in order to preserve its ability to comply with the foregoing covenant. However, no assurance can be given as to the enforceability of the foregoing covenants.
40 4887-9868-3354v10/022599-0035
Litigation with Respect to Community Facilities Districts Shapiro. The California Court of Appeal, Fourth Appellate District, Division One, issued its opinion in City of San Diego v. Melvin Shapiro (2014) 228 Cal.App.4th 756 (the "San Diego Decision"). The case involved a Convention Center Facilities District (the "CCFD") established by the City of San Diego ("San Diego"). The CCFD is a financing district much like a community facilities district established under the provisions of the Act. The CCFD is comprised of all of the real property in San Diego. However, the special tax to be levied within the CCFD was to be levied only on hotel properties located within the CCFD.
The election authorizing the special tax was limited to owners of hotel properties and lessees of real property owned by a governmental entity on which a hotel is located. Thus, the election was not a registered voter election. Such approach to determining who would constitute the qualified electors of the CCFD was modeled after Section 53326(c) of the Act, which generally provides that, if a special tax will not be apportioned in any tax year on residential property, the legislative body may provide that the vote shall be by the landowners of the proposed district whose property would be subject to the special tax. The Court held that the CCFD special tax election was invalid under the California Constitution because Article XIIIA, Section 4 thereof and Article XIIIC, Section 2 thereof require that the electors in such an election be the registered voters within the district.
Horizon. The Sacramento County Superior Court issued a ruling in Horizon Capital Investments, LLC v. City of Sacramento et al. (Case No. 34-2017-80002661), which was a case involving an election to approve the levy of a special tax within a community facilities district ("CFD") formed under the Act.
In 2017, the City of Sacramento initiated proceedings to form a CFD to finance certain costs to operate and maintain a streetcar line. As permitted by the Act, the proposed district included non-contiguous parcels of non-residential property. Because there were fewer than 12 registered voters residing within the territory of the proposed CFD, the City Council submitted the special tax proposed to be levied within the proposed CFD to the owners of land within the proposed CFD, as required by the Act. The proposed special tax received the requisite two-thirds vote in the landowner election.
Petitioners Horizon Capital Investments, LLC et al. filed a writ of mandate and complaint for reverse validation and declaratory relief. Petitioners argued, and the superior court agreed in its final ruling, that under section 4(a) of article XIII A of the California Constitution (which provides that "Cities, Counties and special districts, by a two-thirds vote of the qualified electors of such district [sic], may impose special taxes on such district...") the phrase "qualified electors" means the registered voters of the entire City of Sacramento and not just the owners of the property within the boundaries of the proposed CFD. Citing the San Diego Decision, the tentative ruling states that the phrase "qualified electors of the district" refers to the registered voters of the entity imposing the special tax, which in this case was the City of Sacramento. Because the vote within the proposed CFD was by landowners only and not by all registered voters in the City of Sacramento, the final ruling states that the special tax is invalid.
The superior court's final ruling is not binding upon other courts within the State and does not directly apply to the District, the Special Taxes, or the Bonds. The City of Sacramento did not appeal the superior court's ruling.
The Special Tax Election in the Improvement Area. With respect to the San Diego Decision, the facts of such case show that there were thousands of registered voters within the CCFD (viz., all of the registered voters in San Diego). The elections held in the Improvement Area had less than 12 registered voters at the time of the election to authorize the Special Taxes. In the San Diego Decision, the court expressly stated that it was not addressing the validity of landowner voting to impose special taxes pursuant to the Act in situations where there are fewer than 12 registered voters. Thus, by its terms, the court's holding in the San Diego Decision does not apply to the Special Tax election in the Improvement Area. Moreover, Section 53341 of the Act provides that any "action or proceeding to attack, review, set aside, void or annul the levy of a special tax...shall be 41 4887-9868-3354v10/022599-0035
commenced within 30 days after the special tax is approved by the voters." Similarly, Section 53359 of the Act provides that any action to determine the validity of bonds issued pursuant to the Act be brought within 30 days of the voters approving the issuance of such bonds. The petitioners in Horizon filed the writ of mandate within 30 days of the landowner election. Voters in the Improvement Area approved the Special Tax on January 12, 2021. Based on Sections 53341 and 53359 of the Act and analysis of existing laws, regulations, rulings and court decisions, the District believes that no successful challenge to the Special Tax being levied in accordance with the Rate and Method may now be brought. In connection with the issuance of the Bonds, Bond Counsel expects to deliver its opinion in the proposed form attached hereto as Appendix C.
Loss of Tax Exemption
As discussed under the heading "TAX MATTERS," interest on the Bonds could cease to be excluded from gross income for purposes of federal income taxation, retroactive to the date the Bonds were issued, as a result of future acts or omissions of the District or the City. In addition, it is possible that future changes in applicable federal tax laws could cause interest on the Bonds to be included in gross income for federal income taxation or could otherwise reduce the equivalent taxable yield of such interest and thereby reduce the value of the Bonds.
No Ratings — Limited Secondary Market
The District has not applied to have the Bonds rated by any nationally recognized bond rating company, and it does not expect to do so in the future.
There can be no guarantee that there will be a secondary market for the Bonds or, if a secondary market exists, that such Bonds can be sold for any particular price. Although the District has committed to provide certain financial and operating information, there can be no assurance that such information will be available to Bond owners on a timely basis. The failure to provide the required annual fmancial information does not give rise to monetary damages but merely an action for specific performance. Occasionally, because of general market conditions, lack of current information, the absence of a credit rating for the Bonds or because of adverse history or economic prospects connected with a particular issue, secondary marketing practices in connection with a particular issue are suspended or terminated. Additionally, prices of issues for which a market is being made will depend upon then prevailing circumstances. Such prices could be substantially different from the original purchase price.
Limitations on Remedies
Remedies available to the Owners of the Bonds may be limited by a variety of factors and may be inadequate to assure the timely payment of principal of and interest on the Bonds or to preserve the tax-exempt status of interest on the Bonds.
Bond Counsel has limited its opinion as to the enforceability of the Bonds and of the Indenture to the extent that enforceability may be limited by bankruptcy, insolvency reorganization, fraudulent conveyance or transfer, moratorium or other similar laws affecting generally the enforcement of creditor's rights, by equitable principles and by the exercise of judicial discretion and by limitations on remedies against public agencies in the State of California. The lack of availability of certain remedies or the limitation of remedies may entail risks of delay, limitation or modification of the rights of the Owners.
Potential Early Redemption of Bonds from Prepayments or Community Facilities District Bond Proceeds Property owners within the Improvement Area are permitted to prepay their Special Taxes at any time.
Such prepayments could also be made from the proceeds of bonds issued by or on behalf of an overlapping community facilities district. Such prepayments will result in a redemption of the Bonds on the Interest Payment Date for which timely notice may be given under the Indenture following the receipt of the prepayment. The 42 4887-9868-3354v10/022599-0035
resulting redemption of Bonds that were purchased at a price greater than par could reduce the otherwise expected yield on such Bonds. See the caption "THE BONDS — Redemption — Special Mandatory Redemption from Special Tax Prepayments."
Cybersecurity
The City, like many other public and private entities, rely on computer and other digital networks and systems to conduct their operations. The City is potentially subject to multiple cyber threats, including without limitation hacking, viruses, ransomware, malware and other attacks. No assurance can be given that the efforts of the City to manage cyber threats and attacks will be successful in all cases, or that any such attack will not materially impact the operations or finances of the City, or the administration of the Bonds. The City is also reliant on other entities and service providers in connection with the administration of the Bonds, including without limitation the County tax collector for the levy and collection of Special Taxes and the Trustee. 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 Bond owners.
CONTINUING DISCLOSURE
Pursuant to a Continuing Disclosure Certificate, dated , 2024 (the "Disclosure Certificate"), to be executed and delivered by the District at the time of issuance of the Bonds, the District will covenant for the benefit of the holders and Beneficial Owners of the Bonds to provide certain financial information and operating data relating to the District by February 10 following the end of the District's Fiscal Year (currently its Fiscal Year ends on June 30) (the "Annual Report"), commencing with the report for the Fiscal Year ending June 30, 2024, and to provide notices of the occurrence of certain enumerated events. The Annual Report and the notices of enumerated events will be filed by the District with EMMA. The specific nature of the information to be contained in the Annual Report and the notice of enumerated events is set forth in Appendix F — "FORM OF DISTRICT CONTINUING DISCLOSURE CERTIFICATE." These covenants have been made in order to assist the Underwriter in complying with subsection (b)(5) of Rule 15c2-12.
In connection with the SEC Order, the Beaumont Financing Authority ("BFA") conducted a review of noncompliance with all existing continuing disclosure undertakings of the District with respect to bonds issued by the BFA. See the caption "INTRODUCTION —SEC Order." The BFA identified omissions and deficiencies in prior continuing disclosure filings for Fiscal Years 2003 through 2019. Such omissions and deficiencies included the late filing of annual reports, the late filing of or failure to file the City's audited and/or unaudited financial statements, the failure to file completed information on the status of facilities being constructed with bond proceeds, the failure to file one or more rating change notices and information concerning the certificates of occupancy and certificates of final inspection. Such omissions and deficiencies also included the failure to report certain information concerning the assessed valuation date, special tax delinquency data and reserve fund balances, cash flow management fund balances, rate stabilization fund balances, improvement fund balances, residual fund balances, special escrow fund balances, the aggregate number of building permits issued, statements of the reserve requirement, cash flow management fund requirement and rate stabilization fund requirement, and to link certain annual reports to all relevant CUSIPs. See Appendix H — "SECURITIES AND EXCHANGE COMMISSION ORDER."
The BFA has caused CFD 93-1 to make corrective filings for Fiscal Years 2013-14 through 2020-21 with EMMA, including the filing of audited and unaudited financial statements for Fiscal Years 2013-14 through 2020-21, supplements to certain prior continuing disclosure annual reports and notices of the failure to file certain continuing disclosure annual reports and audited financial statements.
The City will assist the District in preparing the Annual Reports. In order to ensure ongoing compliance by the District with its continuing disclosure undertaking, (i) City staff will take steps to ensure that the filing due date is correctly documented in policies and procedures and a single City staff member has been assigned primary responsibility to monitor compliance; and (ii) the City has contracted with Spicer Consulting Group, 43 4887-9868-3354v10/022599-0035
LLC to assist in filing accurate, complete and timely disclosure reports on behalf of the District. In addition, the City has adopted policies and procedures with respect to its continuing disclosure practices.
TAX EXEMPTION
In the opinion of Stradling Yocca Carlson & Rauth LLP, Newport Beach, California, Bond Counsel, under existing statutes, regulations, rulings and judicial decisions, and assuming the accuracy of certain representations and compliance with certain covenants and requirements described herein, interest (and original issue discount) on the Bonds is excluded from gross income for federal income tax purposes and is not an item of tax preference for purposes of calculating the federal alternative minimum tax imposed on individuals.
However, it should be noted that, with respect to applicable corporations as defined in Section 59(k) of the Internal Revenue Code of 1986, as amended (the "Code"), generally certain corporations with more than $1,000,000,000 of average annual adjusted financial statement income, interest (and original issue discount) with respect to the Bonds might be taken into account in determining adjusted financial statement income for purposes of computing the alternative minimum tax imposed by Section 55 of the Code on such corporations.
In the further opinion of Bond Counsel, interest (and original issue discount) on the Bonds is exempt from State of California personal income tax.
The excess of the stated redemption price at maturity of a Bond over the issue price of a Bond (the first price at which a substantial amount of the Bonds of a maturity is to be sold to the public) constitutes original issue discount. Original issue discount accrues under a constant yield method, and original issue discount will accrue to a Beneficial Owner before receipt of cash attributable to such excludable income. The amount of original issue discount deemed received by the Beneficial Owner will increase the Beneficial Owner's basis in the applicable Bond.
Bond Counsel's opinion as to the exclusion from gross income of interest (and original issue discount) on the Bonds is based upon certain representations of fact and certifications made by the District, the City and others and is subject to the condition that the District, the City and others making such representations comply with all requirements of the Code that must be satisfied subsequent to the issuance of the Bonds to assure that interest (and original issue discount) on the Bonds will not become includable in gross income for federal income tax purposes. Failure to comply with such requirements of the Code might cause the interest (and original issue discount) on the Bonds to be included in gross income for federal income tax purposes retroactive to the date of issuance of the Bonds. The District and the City will covenant to comply with all such requirements.
The amount by which a Beneficial Owner's original basis for determining loss on sale or exchange in the applicable Bond (generally, the purchase price) exceeds the amount payable on maturity (or on an earlier call date) constitutes amortizable Bond premium, which must be amortized under Section 171 of the Code; such amortizable Bond premium reduces the Beneficial Owner's basis in the applicable Bond (and the amount of tax-exempt interest received), and is not deductible for federal income tax purposes. The basis reduction as a result of the amortization of Bond premium may result in a Beneficial Owner realizing a taxable gain when a Bond is sold by the Beneficial Owner for an amount equal to or less (under certain circumstances) than the original cost of the Bond to the Beneficial Owner. Purchasers of the Bonds should consult their own tax advisors as to the treatment, computation and collateral consequences of amortizable Bond premium.
The Internal Revenue Service (the "IRS") has initiated an expanded program for the auditing of tax- exempt bond issues, including both random and targeted audits. It is possible that the Bonds will be selected for audit by the IRS. It is also possible that the market value of the Bonds might be affected as a result of such an audit of the Bonds (or by an audit of other similar bonds). No assurance can be given that in the course of an audit, as a result of an audit, or otherwise, Congress or the IRS might not change the Code (or interpretation thereof) subsequent to the issuance of the Bonds to the extent that it adversely affects the exclusion from gross income of interest (and original issue discount) on the Bonds or their market value. 44 4887-9868-3354v10/022599-0035
SUBSEQUENT TO THE ISSUANCE OF THE BONDS THERE MIGHT BE FEDERAL, STATE, OR
LOCAL STATUTORY CHANGES (OR JUDICIAL OR REGULATORY CHANGES TO OR
INTERPRETATIONS OF FEDERAL, STATE, OR LOCAL LAW) THAT AFFECT THE FEDERAL, STATE,
OR LOCAL TAX TREATMENT OF THE BONDS INCLUDING THE IMPOSITION OF ADDITIONAL
FEDERAL INCOME OR STATE TAXES BEING IMPOSED ON OWNERS OF TAX-EXEMPT STATE OR LOCAL OBLIGATIONS, SUCH AS THE BONDS. THESE CHANGES COULD ADVERSELY AFFECT THE MARKET VALUE OR LIQUIDITY OF THE BONDS. NO ASSURANCE CAN BE GIVEN THAT
SUBSEQUENT TO THE ISSUANCE OF THE BONDS STATUTORY CHANGES WILL NOT BE
INTRODUCED OR ENACTED OR JUDICIAL OR REGULATORY INTERPRETATIONS WILL NOT OCCUR HAVING THE EFFECTS DESCRIBED ABOVE. BEFORE PURCHASING ANY OF THE BONDS,
ALL POTENTIAL PURCHASERS SHOULD CONSULT THEIR TAX ADVISORS REGARDING
POSSIBLE STATUTORY CHANGES OR JUDICIAL OR REGULATORY CHANGES OR INTERPRETATIONS, AND THEIR COLLATERAL TAX CONSEQUENCES RELATING TO THE BONDS.
Bond Counsel's opinions may be affected by actions taken (or not taken) or events occurring (or not occurring) after the date of issuance of the Bonds. Bond Counsel has not undertaken to determine, or to inform any person, whether any such actions or events are taken or do occur. The Indenture and the Tax Certificate relating to the Bonds permit certain actions to be taken or to be omitted if a favorable opinion of Bond Counsel is provided with respect thereto. Bond Counsel expresses no opinion as to the effect on the exclusion from gross income of interest (and original issue discount) on the Bonds for federal income tax purposes with respect to any Bond if any such action is taken or omitted based upon the advice of counsel other than Stradling Yocca Carlson & Rauth LLP.
Although Bond Counsel will render an opinion that interest (and original issue discount) on the Bonds is excluded from gross income for federal income tax purposes provided that the District and the City continue to comply with certain requirements of the Code, the ownership of the Bonds and the accrual or receipt of interest (and original issue discount) with respect to the Bonds may otherwise affect the tax liability of certain persons.
Bond Counsel expresses no opinion regarding any such tax consequences. Accordingly, before purchasing any of the Bonds, all potential purchasers should consult their tax advisors with respect to collateral tax consequences relating to the Bonds.
Should interest on the Bonds (including any original issue discount) become includable in gross income for federal income tax purposes, the Bonds are not subject to early redemption and will remain outstanding until maturity or until redeemed in accordance with the Indenture.
A copy of the proposed form of opinion of Bond Counsel is attached hereto as Appendix C.
LEGAL OPINION
The legal opinion of Bond Counsel approving the validity of the Bonds, in substantially the form set forth as Appendix C hereto, will be made available to purchasers of the Bonds at the time of original delivery of the Bonds. Certain legal matters will be passed upon for the City and the District by Slovak Baron Empey Murphy & Pinkney LLP, Irvine, California, City Attorney, and for the District by Stradling Yocca Carlson & Rauth LLP, Disclosure Counsel, for the Underwriter by Kutak Rock LLP, Irvine, California, and for the Trustee by its counsel. Bond Counsel undertakes no responsibility to the purchasers of the Bonds for the accuracy, completeness or fairness of this Official Statement.
ABSENCE OF LITIGATION
In connection with the issuance of the Bonds, the City Attorney will deliver an opinion to the effect that, to their actual knowledge, after due inquiry and investigation, there is no action, suit, proceeding or investigation at law or in equity before or by any court, public board or body, pending or threatened, or any unfavorable decision, ruling or finding, against or affecting the District, which would adversely impact the District's ability 45 4887-9868-3354v10/022599-0035