Medicare Contribution Tax. Pursuant to Section 1411 of the Code, as enacted by the Health Care and Education Reconciliation Act of 2010, an additional tax is imposed on individuals beginning January 1, 2013. The additional tax is 3.8% of the lesser of (i) net investment income (defined as gross income from interest, dividends, net gain from disposition of property not used in a trade or business, and certain other listed items of gross income), or (ii) the excess of “modified adjusted gross income” of the individual over $200,000 for unmarried individuals ($250,000 for married couples filing a joint return and a surviving spouse). Holders of the 2022A Bonds should consult with their own tax advisors concerning this additional tax, as it may apply to interest earned on the 2022A Bonds as well as gain on the sale of a 2022A Bond.
Disposition of 2022A Bonds and Treatment of Market Discount. A beneficial owner of 2022A Bonds will generally recognize gain or loss on the redemption, sale or exchange of 2022A Bonds equal to the difference between the redemption or sales price (exclusive of the amount paid for accrued interest) and the beneficial owner’s adjusted tax basis in the 2022A Bonds. Generally, the beneficial owner’s adjusted tax basis in the 2022A Bonds will be the beneficial owner’s initial cost, increased by the original issue discount (if any) previously included in the beneficial owner’s income to the date of disposition. Any gain or loss generally will be capital gain or loss and will be long-term or short-term, depending on the beneficial owner’s holding period for the 2022A Bonds.
Under current law, a purchaser of a 2022A Bond who did not purchase that 2022A Bond in the initial public offering (a “subsequent purchas er”) generally will be required, on the disposition (or earlier partial principal payment) of such 2022A Bond, to recognize as ordinary income a portion of the gain (or partial principal payment), if any, to the extent of the accrued “market discount.” In general, market discount is the amount by which the price paid for such 2022A Bond by a subsequent purchaser is less than the sum of the Issue Price and the amount of original issue discount previously accrued on the 2022A Bonds. The Code also limits the deductibility of interest incurred by a subsequent purchaser on funds borrowed to acquire 2022A Bonds with market discount. As an alternative to the inclusion of market discount in income upon disposition, a subsequent purchaser may elect to include market discount in income currently as it accrues on all market discount instruments acquired by the subsequent purchaser in that taxable year or thereafter, in which case the interest deferral rule will not apply. The recharacterization of gain as ordinary income on a subsequent disposition of such 2022A Bonds could have a material effect on the market value of such 2022A Bonds.
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44 Legal Defeasance. If the Authority elects to defease the 2022A Bonds by depositing in escrow sufficient cash and/or obligations to pay when due outstanding 2022A Bonds (a “legal defeasance”), under current tax law, a beneficial owner of 2022A Bonds may be deemed to have sold or exchanged its 2022A Bonds. In the event of such a legal defeasance, a beneficial owner of 2022A Bonds generall y would recognize gain or loss in the manner described above. Ownership of the 2022A Bonds after a deemed sale or exchange as a result of a legal defeasance may have tax consequences different from those described above, and each beneficial owner should co nsult its own tax advisor regarding the consequences to such beneficial owner of a legal defeasance of the 2022A Bonds.
Backup Withholding. Under section 3406 of the Code, a beneficial owner of the 2022A Bonds who is a United States person may, under cert ain circumstances, be subject to “backup withholding” on payments of current or accrued interest on the 2022A Bonds or with respect to proceeds received from a disposition of the 2022A Bonds. This withholding applies if such beneficial owner of 2022A Bonds: (i) fails to furnish to the payor such beneficial owner’s social security number or other taxpayer identification number (“TIN”); (ii) furnishes the payor an incorrect TIN; (iii) fails to properly report interest, dividends, or other “reportable payments” as defined in the Code; or (iv) under certain circumstances, fails to provide the payor with a certified statement, signed under penalty of perjury, that the TIN provided to the payor is correct and that such beneficial owner is not subject to backup withholding.
Backup withholding will not apply, however, with respect to payments made to certain beneficial owners of the 2022A Bonds. Beneficial owners of the 2022A Bonds should consult their own tax advisors regarding their qualification for exemption from backup withholding and the procedures for obtaining such exemption.
Withholding on Payments to Nonresident Alien Individuals and Foreign Corporations. Under sections 1441 and 1442 of the Code, nonresident alien individuals and foreign corporations are generally subject to withholding at the rate of 30% on periodic income items arising from sources within the United States, provided such income is not effectively c onnected with the conduct of a United States trade or business. Assuming the interest received by the beneficial owners of the 2022A Bonds is not treated as effectively connected income within the meaning of section 864 of the Code, such interest will be subject to 30% withholding, or any lower rate specified in an income tax treaty, unless such income is treated as “portfolio interest.” Interest will be treated as portfolio interest if: (i) the beneficial owner provides a statement to the payor certifyin g, under penalties of perjury, that such beneficial owner is not a United States person and providing the name and address of such beneficial owner; (ii) such interest is treated as not effectively connected with the beneficial owner’s United States trade or business; (iii) interest payments are not made to a person within a foreign country that the IRS has included on a list of countries having provisions inadequate to prevent United States tax evasion; (iv) interest payable with respect to the 2022A Bonds is not deemed contingent interest within the meaning of the portfolio debt provision; (v) such beneficial owner is not a controlled foreign corporation, within the meaning of section 957 of the Code; and (vi) such beneficial owner is not a bank receiving interest on the 2022A Bonds pursuant to a loan agreement entered into in the ordinary course of the bank’s trade or business.
Assuming payments on the 2022A Bonds are treated as portfolio interest within the meaning of sections 871 and 881 of the Code, the n no withholding under section 1441 and 1442 of the Code and no backup withholding under section 3406 of the Code is required with respect to beneficial owners or intermediaries who have furnished Form W-8BEN, Form W-8BEN-E, Form W-8EXP or Form W-8IMY, as applicable, provided the payor does not have actual knowledge or reason to know that such person is a United States person.
Foreign Account Tax Compliance Act. Sections 1471 through 1474 of the Code impose a 30% withholding tax on certain types of payments made to a foreign financial institution, unless the foreign financial institution enters into an agreement with the U.S. Treasury to, among other things, under take to identify accounts held by certain United States persons or U.S. -owned entities, annually report certain
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45 information about such accounts, and withhold 30% on payments to account holders whose actions prevent it from complying with these and other reporting requirements, or unless the foreign financial institution is otherwise e xempt from those requirements. In addition, the Foreign Account Tax Compliance Act (“FATCA”) imposes a 30% withholding tax on the same types of payments to a non-financial foreign entity unless the entity certifies that it does not have any substantial U.S. owners or the entity furnishes identifying information regarding each s ubstantial United States owner. Failure to comply with the additional certification, information reporting and other specified requirements imposed under FATCA could result in the 30% withholding tax being imposed on payments of interest and principal under the 2022A Bonds and sales proceeds of 2022A Bonds held by or through a foreign entity. Prospective i nvestors should consult their own tax advisors regarding FATCA and its effect on them.
Reporting of Interest Payments. Subject to certain exceptions, the stated interest on the 2022A Bonds will be reported to the IRS. Such information will be filed each year with the IRS on Form 1099 - INT (or other appropriate reporting form) which will reflect the name, address, and taxpayer identification number of the owner. A copy of such Form 1099 -INT will be sent to each beneficial owner of a 2022A Bond for federal income tax purposes.
The preceding discussion of certain United States federal income tax consequences is for general information only and is not tax advice. Accordingly, each investor should consult its own tax advisor as to particular tax consequences to it of purchasing, owning, and disposing of the 2022A Bonds, including the applicability and effect of any state, local, or foreign tax law, and of any proposed change of applicable law.
ERISA CONSIDERATIONS
The Employee Retirement Income Security Act of 1974, as amended (“ERISA”), imposes certain restrictions on employee pension and welfare benefit plans subject to ERISA (“ERISA Plans”) regarding prohibited transactions, and also imposes certain obligations on those persons who are fiduciaries with respect to ERISA Plans. Section 4975 of the Code imposes similar prohibited transaction restrictions on (i) tax-qualified retirement plans described in Section 401(a) and 403(a) of the Code, which are exempt from tax under section 501(a) of the Code and which a re not governmental and church plans as defined herein (“Qualified Retirement Plans”), and (ii) Individual Retirement Accounts described in Section 408(b) of the Code (“Tax-Favored Plans”). Certain employee benefit plans, such as governmental plans (as defined in Section 3(32) of ERISA), and, if no election has been made under Section 410(d) of the Code, church plans (as defined in Section 3(33) of ERISA), are not subject to ERISA requirements. Additionally, such governmental and non -electing church plans are not subject to the requirements of Section 4975 of the Code. Although assets of such governmental or non -electing church plans may be invested in the 2022A Bonds without regard to the ERISA and Code considerations described below, any such investment may be subject to provisions of applicable federal and state law that are, to a material extent, similar to the requirements of ERISA and Section 4975 of the Code (“Similar Law”).
In addition to the imposition of general fiduciary obligations, including t hose of investment prudence and diversification and the requirement that a plan’s investment be made in accordance with the documents governing the plan, Section 406 of ERISA and Section 4975 of the Code prohibit a broad range of transactions involving ass ets of ERISA Plans and Tax -Favored Plans and entities whose underlying assets include plan assets by reason of ERISA Plans or Tax -Favored Plans investing in such entities (collectively, “Benefit Plans”) and persons who have certain specified relationships to the Benefit Plans (such persons are referred to as “Parties in Interest” or “Disqualified Persons”), unless a statutory or administrative exemption is available. Certain Parties in Interest (or Disqualified Persons) that participate in a prohibited transaction may be subject to a penalty (or an excise tax) imposed pursuant to Section 502(i) of ERISA (or Section 4975 of the Code) unless a statutory or administrative class exemption is available.
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46 Certain transactions involving the purchase, holding or tr ansfer of the 2022A Bonds might be deemed to constitute prohibited transactions under ERISA and the Code if assets of the City were deemed to be assets of a Benefit Plan. Under final regulations issued by the United States Department of Labor (the “Plan Assets Regulation”), the assets of the City would be treated as plan assets of a Benefit Plan for the purposes of ERISA and the Code if the Benefit Plan acquires an “equity interest” in the City and none of the exceptions contained in the Plan Assets Regula tion is applicable. An equity interest is defined under the Plan Assets Regulation as an interest in an entity other than an instrument which is treated as indebtedness under applicable local law and which has no substantial equity features. Although the re can be no assurances in this regard, it appears that the 2022A Bonds should be treated as debt without substantial equity features for purposes of the Plan Assets Regulation. However, without regard to whether the 2022A Bonds are treated as an equity interest for such purposes, the acquisition or holding of the 2022A Bonds by or on behalf of a Benefit Plan could be considered to give rise to a prohibited transaction if the City, any Underwriter, or any of their respective affiliates, is or becomes a Party in Interest or a Disqualified Person with respect to such Benefit Plan. The fiduciary of a Benefit Plan that proposes to purchase and hold any 2022A Bonds should consider, among other things, whether such purchase and holding may involve (i) the direct or indirect extension of credit to a Party in Interest, (ii) the sale or exchange of any property between a Benefit Plan and a Party in Interest, and (iii) the transfer to, or use by or for the benefit of, a Party in Interest, of any Benefit Plan assets.
Certain exemptions from the prohibited transaction rules could be applicable depending on the type and circumstances of the plan fiduciary making the decision to acquire a 2022A Bond. Included among these exemptions are: Prohibited Transaction Class Exemption (“PTCE”) 75-1, relating to certain broker- dealer transactions, PTCE 96-23, regarding transactions effected by “in-house asset managers;” PTCE 90- 1, regarding investments by insurance company pooled separate accounts; PTCE 95 -60, regarding transactions effected by “insurance company general accounts;” PTCE 91 -38, regarding investments by bank collective investment funds; and PTCE 84 -14, regarding transactions effected by “qualifie d professional asset managers.” In addition, Section 408(b)(17) of ERISA and Section 4975(d)(20) of the Code generally provide for a statutory exemption from the prohibitions of Section 406(a) of ERISA and Section 4975 of the Code for certain transactions between Benefit Plans and persons who are Parties in Interest solely by reason of providing services to such Benefit Plans or who are persons affiliated with such service providers, provided generally that such persons are not fiduciaries with respect to “plan assets” of any Benefit Plan involved in the transaction and that certain other conditions are satisfied.
By its acceptance of a 2022A Bond, each purchaser will be deemed to have represented and warranted that either (i) the purchase and holding of such 2022A Bond does not constitute a prohibited transaction under ERISA, Secti on 4975 of the Code or Similar Law, or (ii) the purchase and holding of such 2022A Bonds is exempt from the prohibited transaction restrictions of ERISA, Section 4975 of the Code or Similar Law pursuant to a statutory or administrative class exemption.
Any Benefit Plan fiduciary considering whether to purchase 2022A Bonds on behalf of an ERISA Plan should consult with its counsel regarding the applicability of the fiduciary responsibility and prohibited transaction provisions of ERISA and the Code to such i nvestment and the availability of any of the exemptions referred to above. In addition, persons responsible for considering the purchase of the 2022A Bonds by a governmental plan or non -electing church plan should consult with its counsel regarding the applicability of any Similar Law to such an investment.
LITIGATION
There is no controversy of any nature now pending against the City or the Authority or, to the knowledge of their respective officers threatened, seeking to restrain or enjoin the sale, execution, issuance or delivery of the 2022A Bonds or in any way contesting or affecting the validity of the 2022A Bonds or any proceedings of the City or the Authority taken with respect to the sale, execution, issuance or delivery thereof or the pledge or application of any moneys or security provided for the payment of the 2022A Bonds
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47 or the use of the 2022A Bond proceeds or contesting the corporate existence of the City or the Authority, or the title of the officers thereof to their respective offices. [There are a number of lawsuits and claims pending against the City for which the City is either self-insured or insured in varying degrees by commercial insurance, or which in the aggregate, if determined adversely to the City, could have a material adverse impact on the City’s finances in the future. However, the City does not expect any such suits or claims to have a material adverse effect on the City’s ability to make 2022A Base Rental Payments under the Lease.]
FINANCIAL STATEMENTS
The City’s financial statements for the Fiscal Year ended June 30, 2021, included in APPENDIX B hereto, have been audited by Lance, Soll & Lunghard , LLP (the “Auditor”) . The Auditor was not requested to consent to the inclusion of its report in APPENDIX B and it has not undertaken to update its report or to take any action intended or likely to elicit information concerning the accuracy, completeness or fairness of the statements made in the Official Statement, and no opinion is expressed by the Auditor with respect to any event subsequent to the date of its report.
APPROVAL OF LEGAL PROCEEDINGS
The issuance of the 2022A Bonds is subject to the approving opinion of Norton Rose Fulbright US LLP, Los Angeles, California, Bond Counsel to the Authority, to be delivered in substantially the form set forth in APPENDIX E. Norton Rose Fulbright US LLP in its role as Bond Counsel has undertaken no responsibility to the owners of the 2022A Bonds or any other party for the accuracy, completeness or fairness of this Official Statement or any other offering material related to the 2022A Bonds, and expresses no opinion to the Owners with respect thereto. Certain legal matters also will be passed upon for the City and the Authority by the City Attorney and for the Underwriter by its counsel Stradling Yocca Carlson & Rauth, Newport Beach, California.
EXECUTION AND DELIVERY
The execution and delivery of this Official Statement has been authorized by the Authority and the City.
CITY OF CATHEDRAL CITY PUBLIC
FINANCING AUTHORITY
By:
Chief Financial Officer
CITY OF CATHEDRAL CITY, CALIFORNIA
By:
Administrative Services Director
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APPENDIX A
SELECTED DEMOGRAPHIC AND FINANCIAL INFORMATION RELATING TO THE CITY
OF CATHEDRAL CITY AND RIVERSIDE COUNTY
The following information relating to the City of Cathedral City, California (the “City”) is provided for informational purposes only. The 2022A Bonds (as defined in the front part of this Official Statement) are payable solely as described in this Official Statement and are not payable or secured by a pledge of the faith and credit or taxing power of the City.
COVID 19 Pandemic
The economic and demographic data contained in this appendix are the latest available, but are as of dates and for periods before the economic impact of the COVID 19 pandemic and measures instituted to slow it. Accordingly, they are not indicative of the c urrent financial condition or future prospects of the City, the County or the region or of expected revenues to the General Fund . See “RISK FACTORS – COVID 19 Pandemic” in the forepart of this Official Statement.
General
The City. The City is located in Riverside County (the “County”) in the Coachella Valley 115 miles southeast of downtown Los Angeles. The City was incorporated in 1981 and covers approximately 22 square miles and had an estimated population of 53,580 as of January 2020. The City is bordered by the City of Palm Springs to the west, the City of Rancho Mirage to the south and east, and an unincorporated area of the County to the north and northeast.
The County. The County was organized in 1893 from territory in San Bernardino and San Diego Counties and encompasses 7,177 square miles. The County is bordered on the north by San Bernardino County, on the east by the State of Arizona, on the south by San Diego and Imperial Counties and on the west by Orange and San Bernardino Counties. The County is the fourth largest county (by area) in the state and stretches 185 miles from the Arizona border to within 20 miles of the Pacific Ocean. There are 28 incorporated cities in the County.
Population
The following table shows population estimates for the City, the County and the State of California for the past five years.
CITY OF CATHEDRAL CITY, RIVERSIDE COUNTY
POPULATION ESTIMATES
Year
(January 1)
City of
Cathedral City
Riverside
County
State of
California
2016 52,576 2,343,785 39,131,307
2017 52,868 2,376,580 39,398,702
2018 53,104 2,400,762 39,586,646
2019 53,320 2,422,146 39,695,376
2020 53,580 2,442,304 39,782,870
2021
____________________
Source: State of California Department of Finance, Demographic Research Unit.
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Principal Employers
The table below lists the principal employers for the City for 2021.
CITY OF CATHEDRAL CITY
PRINCIPAL EMPLOYERS
Employer Employee Range(1)
Percentage of Total City
Employment
1. Desert Princess Homeowners 250 - 499 1.08% - 2.15%
2. Doubletree-Golf Resort 250 - 499 1.08% - 2.15
3. Target 250 - 499 1.08% - 2.15
4. Cathedral City High School 100 - 249 0.43% - 1.07
5. City of Cathedral City 100 - 249 0.43% - 1.07
6. CA Developmental Services 100 - 249 0.43% - 1.07
7. Honda of the Desert 100 - 249 0.43% - 1.07
8. Jessup Auto Plaza 100 - 249 0.43% - 1.07
9. Nellie N. Coffman Middle School 100 - 249 0.43% - 1.07
10. Stater Bros. Markets (Ramon) 100 - 249 0.43% - 1.07
11. Stater Bros. Markets (Vista Chino) 100 - 249 0.43% - 1.07
12. Toyota of the Desert 100 - 249 0.43% - 1.07
Totals 1,650 - 5,988 6.73% - 15.26%
____________________
(1) Total employees by employer are presented as a range as specific employer totals are not available. In addition, the percentage of total city employment is also presented as a range.
Source: U.S. Department of Labor, Bureau of Labor Statistics; State of California, Employment Development Department, Labor Market Info (information provided by Infogroup).
Commercial Activity
A summary of the significant categories of historic taxable sales within the City during the past five available years is sho wn in the following table. 2021 taxable transaction figures for the City are not yet available.
CITY OF CATHEDRAL CITY
Taxable Transactions
(dollars in thousands)
Category 2016 2017 2018 2019 2020
Motor Vehicle and Parts Dealers $411,220 $419,757 $431,381 $438,361 Home Furnishings and Appliance Stores 12,580 11,680 9,489 6,504 Bldg. Materials and Gardening Equipment 13,608 13,158 13,372 11,670 Food and Beverage Stores 36,793 38,275 38,864 40,359
Gasoline Stations 70,616 70,486 81,609 81,826
Clothing and Accessories Stores 10,404 8,519 4,090 2,192 General Merchandise Stores 29,300 31,240 33,103 31,795
Food Services and Drinking Places 70,015 75,103 79,833 86,679 Other Retail 27,973 32,873 42,596 43,610
All Other Outlets 107,692 108,481 114,593 124,519
Total(1) $790,202 $809,572 $848,930 $867,514
____________________
Source: State of California, Board of Equalization.
(1) Totals may not add-up due to rounding.
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Construction Trends
Provided below are the building permits and valuations for the County for calendar years 2016 through 2020. 2021 figures not yet available.
COUNTY OF RIVERSIDE
New Construction
(dollars in thousands) (1) (2)
2016 2017 2018 2019 2020
Permit Valuation
New Single-family $1,526,768 $1,670,541 $2,200,021 $1,834,822 New Multi-family 106,292 109,309 232,707 282,465
Res. Alternations/Additions 126,475 123,567 125,354 158,118 Total Residential $1,759,535 $1,903,417 $2,558,081 $2,275,405
New Commercial $ 540,447 $ 522,769 $ 703,977 $ 312,035 New Industrial 59,439 410,275 529,326 493,872
New Other 374,917 136,935 410,606 179,861
Com. Alterations/Additions 371,216 363,711 315,771 300,087 Total Nonresidential $1,346,020 $1,433,691 $1,959,680 $1,285,856
TOTAL $3,105,554 $3,337,108 $4,517,761 $3,561,261
New Dwelling Units
Single Family 5,662 6,265 7,540 6,563
Multiple Family 1,039 1,070 1,628 1,798
TOTAL 6,701 7,335 9,168 8,361
____________________
(1) Includes churches and religious buildings, hospitals and institutional buildings, schools and educational buildings, resident ial garages, public works and utilities buildings and other non-residential buildings and structures. (2) Totals may not add-up due to rounding.
Source: Construction Industry Research Board.
Transportation
The City is located along Interstate 10 and parallels State Route 111. Interstate 10 is the principal transportation artery for the County. Local public transit within t he City and the County of Riverside is provided by Sunline Transit. Greyhound service is available from Palm Springs. Air passenger and cargo service is available at Palm Springs Regional Airport which is two miles west of the City. This airport affords travelers the services of all major airlines. Bermuda Dunes, a private airport, is located eight miles northeast of the City.
Rail service is available on the Union Pacific main line and Amtrak passenger rail service is available in Indio and Palm Spri ngs, California. There is truck transportation and shipping services from the City to Los Angeles, San Francisco, San Diego and Phoenix. Other transportation services include rail and truck shipping services and passenger rail service to Indio and Palm Springs.
Utilities
Natural gas, electricity and telephone service in the City are provided by Southern California Gas Company, Southern California Edison and Verizon Incorporated. Coachella Valley Water District and Desert Water Agency provide water and sewer service to the City.
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Community Information
Public Safety. The City provides police services to its residents through its Police Department.
The Cathedral City Fire Department provides residents and visitors with emergency response, disaster preparedness, fire prevention, code enforcement and paramedic ambulance services as well as public education on relevant safety topics.
Education. The City currently has seven primary/middle schools (six public and one private) and two high schools (one public and one private). Secondary education is available to students at seven colleges and universities offering bachelors, masters and doctoral programs, including the University of California-Riverside and the University of California-San Diego, and their branch campuses located within a 10 mile radius of the City. The closest college, the College of the Desert, is a fully accredited community college bestowing various associate degrees. The college works with local business providing contract education and a comprehensive array of training and management programs for students.
Healthcare. The Coachella Valley offers a variety of health centers and services ranging from pediatric to geriatric medicine. Health care is available through the Eisenhower Medical Ce nter located five miles away in Rancho Mirage, the Desert Regional Medical Center, a 393 -bed acute care facility and trauma center, located 6 miles away in Palm Springs and the John F. Kennedy Memorial Hospital located approximately 18 miles away in Indio, California. The Desert Regional Medical Center offers an array of specialty services to residents, including the International Heart Institute of Palm Springs, the Comprehensive Cancer Centers of the Desert, Women and Infant Center, home health and hospice services, the Arthritis Institute, the Health Key Plus senior program and others programs. Also available is the Betty Ford Center for the treatment of chemical dependency, the Barbara Sinatra Children's Center and the Annenberg Center for Health Sciences.
Library. The City’s 20,000 square foot library opened in 1996. The library serves the community as a reference center providing basic business, legal and medical information as well as general reference materials. The library provides a Spanish language collection and a host of exhibits, historical collections, art, and computer services (including free access to the Internet and word processing). In addition to these resources, the library provides study rooms, a community room, an adult literacy program and a story room.
Recreation. The City, through its Community Partnerships, assists in offering a variety of programs to adults and children. There are over 22 acres of parks for leisure and recreational use. The City has several golf courses, including the Cimarron Golf Resort, the Cathedral Canyon Golf and Tennis Club, The Desert Princess Country Club and Date Palm Country Club. The City’s Town Square is the venue for numerous outdoor festivals, concerts and arts and crafts show. Other entertainment activities are available at the old Hollywood style Mary Pickford Theater, host of the annual Festival of Festivals, the Civic Center and the six-story IMAX Theater complex.
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APPENDIX B
AUDITED FINANCIAL STATEMENTS OF THE CITY OF CATHEDRAL CITY FOR THE FISCAL YEAR ENDED JUNE 30, 2021
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[insert Appendix C]
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[insert Appendix D]
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APPENDIX E
FORM OF OPINION OF BOND COUNSEL
___________, 2022
Cathedral City Pubic Financing Authority
Cathedral City, California
City of Cathedral City
Cathedral City, California
$[Par Amount]
Cathedral City Public Financing Authority
Lease Revenue Bonds, 2022 Series A
(Federally Taxable)
Ladies and Gentlemen:
We have acted as Bond Counsel to the Cathedral City Public Financing Authority (the “Authority”) in connection with the issuance by the Authority of its $[Par Amount] Lease Revenue Bonds, 2022 Series A (Federally Taxable) (the “Bonds”). The Bond s are being issued under the provisions of the Marks-Roos Local Bond Pooling Act of 1985, constituting Article 4 of Chapter 5 of Division 7 of Title 1 (commencing with Section 6584) and Sections 53570 et seq. and 53580 et seq. of the California Government Code (collectively, the “Bond Law”), and pursuant to an Indenture, dated as of April 1, 2022 (the “Indenture”), by and between the Authority and The Bank of New York Mellon Trust Company, N.A. , as trustee (the “Trustee”).
The Bonds are limited obligations of the Authority secured under the Indenture by a pledge of Revenues and certain other moneys held under the Indenture. The Revenues consist of (i) all 2022A Base Rental Payments payable by the City pursuant to the Lease Agreement, dated as of April 1, 2022 (the “Lease”), by and between the Authority, as lessor, and the City, as lessee (including prepayments), (ii) any proceeds of Bonds deposited with the Trustee and all moneys on de posit in the funds and accounts established under the Indenture, (iii) inve stment income with respect to such moneys held by the Trustee and (iv) any insurance proceeds or condemnation awards received by or payable to the Trustee relating to the 2022A Base Rental Payments.
The City has leased certain real property and improvement s (the “Leased Property”) to the Authority pursuant to the Site Lease, dated as of April 1, 2022 (the “Site Lease”), by and betw een the City and the Authority. Pursuant to the Assignment Agreement, dated as of April 1, 2022 (the “Assignment Agreement”), by and between the Authority and the Trustee, the Authority has assigned to the Trustee, for the benefit of the Owners, certain of the Authority’s rights under the Site Lease and the Lease, including the right to receive 2022A Base Rental Payments under the Lease.
As Bond Counsel, we have reviewed relevant portions of the Bond Law, the Indenture, the Site Lease, the Lease, the Assignment Agreement and certifications of the Authority, the City, the Trustee and others, opinions of counsel to the Authority, the City and the Trustee, and such other documents, opinions and
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instruments as we deemed necessary to render the opinions set forth herein. Capitalized terms used and not otherwise defined herein shall have the meanings ascribed thereto in the Indenture.
Based upon the foregoing, we are of the opinion that:
1. The Bonds constitute valid and binding limited obligations of the Authority as provided in the Indenture, and are entitled to the benefits of the Indenture.
2. The Indenture has been duly and validly authorized, executed and delivered by the Authority and, assuming the enforceability thereof against the Trustee, constitutes the legally valid and binding obligation of the Authority, enforceable against the Authority in acco rdance with its terms. The Indenture creates a valid pledge, to secure the payment of principal of and interest on the Bonds, of the Revenues and certain other amounts held by the Trustee in certain funds and accounts established pursuant to the Indenture , subject to the provisions of the Indenture permitting the application thereof for other purposes and on the terms and conditions set forth therein.
3. The Lease and Site Lease have been duly and validly authorized, executed and delivered by the Authority and the City and constitute the legally valid and binding obligations of the Authority and the City, enforceable against the Authority and the City in accordance with their terms.
4. The Assignment Agreement has been duly and validly authorized, executed and delivered by the Authority and, assuming the enforceability thereof against the Trustee, constitutes the legally valid and binding obligation of the Authority, enforceable against the Authority in accordance with its terms.
5. Interest on the Bonds is exempt from personal income taxes of the State of California under present state law.
The opinions expressed in paragraphs 1, 2, 3 and 4 above are qualified to the extent the enforceability of the Bonds, the Indenture, the Lease, the Site Lease an d the Assignment Agreement may be limited by applicable bankruptcy, insolvency, debt adjustment, reorganization, moratorium or similar laws or equitable principles relating to or limiting creditors’ rights generally or as to the availability of any particular remedy. The enforceability of the Bonds, the Indenture, the Lease, the Site Lease and the Assignment Agreement is subject to the effect of general principles of equity, including, without limitation, concepts of materiality, reasonableness, good faith and fair dealing, to the possible unavailability of specific performance or injunctive relief, regardless of whether considered in a proceeding in equity or at law, and to the limitations on legal remedies against governmental entities in the State of California.
No opinion is expressed herein on the accuracy, completeness or fairness of the Official Statement or other offering material relating to the Bonds.
Our opinions are based on existing law of the State of California, which is subject to change. Such opinions are further based on our knowledge of facts as of the date hereof. We assume no duty to update or supplement our opinions to reflect any facts or circumstances that may thereafter come to our attention or to reflect any changes in any law that may thereafter occur or become effective. Moreover, our opinions are not a guarantee of result and are not binding on the State of California; rather, such opinions represent our legal judgment based upon our review of existing law that we deem relevant to such opinions and in reliance upon the representations and covenants referenced above.
Respectfully submitted,
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APPENDIX F
BOOK-ENTRY SYSTEM
The information in this section concerning DTC and DTC’s book -entry only system has been obtained from sources that each of the Authority and the City believes to be reliable, but the Authority and the City take no responsibility for the completeness or accuracy thereof. The following description of the procedures and record keeping with respect to beneficial ownership interests in the 2022A Bonds, payment of principal, premium, if any, and interest on the 2022A Bonds to DTC Participants or Beneficial Owners, confirmation and transfers of beneficial ownership interests in the 2022A Bonds and other related transactions by and between DTC, the DTC Participants and the Beneficial Owners is based solely on information provided by DTC.
The Depository Trust Company (“DTC”), New York, New York, will act as securities depository for the 2022A Bonds. The 2022A Bonds will be issued as fully-registered securities registered in the name of Cede & Co. (DTC’s partnership nomi nee) or such other name as may be requested by an authorized representative of DTC. One fully -registered 2022A Bond will be issued for each annual maturity of the 2022A Bonds, each in the aggregate principal amount of such maturity, and will be deposited through the facilities of DTC.
DTC, the world’s largest securities depository, is a limited-purpose trust company organized under the New York Banking Law, a “banking organization” within the meaning of the New York Banking Law, a member of the Federal Res erve System, a “clearing corporation” within the meaning of the New York Uniform Commercial Code, and a “clearing agency” registered pursuant to the provisions of Section 17A of the Securities Exchange Act of 1934. DTC holds and provides asset servicing for over 3.6 million issues of U.S. and non -U.S. equity issues, corporate and municipal debt issues, and money market instruments (from over 100 countries) that DTC’s participants (“Direct Participants”) deposit with DTC. DTC also facilitates the post trade settlement among Direct Participants of sales and other securities transactions in deposited securities, through electronic computerized book -entry transfers and pledges between Direct Participants’ accounts. This eliminates the need for physical movement of securities certificates. Direct Participants include both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations. DTC is a wholly-owned subsidiary of The Depository Trust & Clearing Corporation (“DTCC”). DTCC is the holding company for DTC, National Securities Clearing Corporation and Fixed Income Clearing Corporation, all of which are registered clearing agencies. DTCC is owned by the users of its regulated subsidiaries. Acc ess to the DTC system is also available to others such as both U.S. and non -U.S. securities brokers and dealers, banks, trust companies, and clearing corporations that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly (“Indirect Participants”). DTC has an S&P Global Ratings rating of “AA+.” The DTC Rules applicable to its Participants are on file with the Securities and Exchange Commission. More information about DTC can be found at www.dtcc.com. The information set forth on such website is not incorporated herein by reference.
Purchases of 2022A Bonds under the DTC system must be made by or through Direct Participants, which will receive a credit for the 2022A Bonds on DTC’s records. The ownership interest of each actual purchaser of each 2022A Bond (“Beneficial Owner”) is in turn to be recorded on the Direct and Indirect Participants’ records. Beneficial Owners will not receive written confirmation from DTC of their purchase.
Beneficial Owners are, however, expected to receive written confirmations providing details of the transaction, as well as periodic statements of their holdings, from the Direct or Indirect Participant through which the Beneficial Owne r entered into the transaction. Transfers of ownership interests in the 2022A Bonds are to be accomplished by entries made on the books of Direct and Indirect Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive 2022A Bonds representing the ir
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ownership interests in 2022A Bonds, except in the event that use of the book -entry system for the 2022A Bonds is discontinued.
To facilitate subsequent transfers, all 2022A Bonds deposited by Direct Participants with DTC are registered in the name of DTC’s partnership nominee, Cede & Co., or such other name as may be requested by an authorized representative of DTC. The deposit of 2022A Bonds with DTC and their registration in the name of Cede & Co. or such other DTC nominee do not affect any change in beneficial ownership.
DTC has no knowledge of the actual Beneficial Owners of the 2022A Bonds; DTC’s records reflect only the identity of the Direct Participants to whose accounts such 2022A Bonds are credited, which may or may not be the Beneficial Owner s. The Direct and Indirect Participants will remain responsible for keeping account of their holdings on behalf of their customers.
Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participant s, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. Beneficial Owners of 2022A Bonds may wish to take certain steps to augment the transmission to them of notices of significant events with respect to the 2022A Bonds, such as prepayments, tenders, defaults, and proposed amendments to the 2022A Bond documents. For example, Beneficial Owners of 2022A Bonds may wish to ascertain that the nominee holding the 2022A Bonds for their benefit has agreed to obtain and transmit notices to Beneficial Owners. In the alternative, Beneficial Owners may wish to provide their names and addresses to the registrar a nd request that copies of notices be provided directly to them.
Redemption notices shall be sent to DTC. If less than all of the 2022A Bonds within a maturity are being prepaid, DTC’s practice is to determine by lot the amount of the interest of each Direct Participant in such maturity to be redeemed.
Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect to 2022A Bonds unless authorized by a Direct Participant in accordance with DTC’s MMI Procedures. Under its usual procedures, DTC mails an Omnibus Proxy to the Authority as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co.’s consenting or voting rights to those Direct Participants to whose accounts 2022A Bonds are credited on the record date (identified in a listing attached to the Omnibus Proxy).
Redemption proceeds, distributions, and dividend payments on the 2022A Bonds will be made to Cede & Co., or such other nominee as may be requested by an authorized representative of DTC. DTC’s practice is to credit Direct Participants’ accounts upon DTC’s receipt of funds and corresponding detail information from the Authority, the City or the Trustee, on payable date in accordance with their respective holdings shown on DTC’s records. Payments by Parti cipants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered in “street name,” and will be the responsibility of such Particip ant and not of DTC, the Trustee, the Authority or the City, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of redemption proceeds, distributions, and dividend payments to Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC) is the responsibility of the Authority or the Trustee, disbursement of such payments to Direct Participants will be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners will be the responsibility of Direct and Indirect Participants.
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A 2022A Bond Owner shall give notice to elect to have its 2022A Bonds purchased or tendered, through its Participant, to the Trustee, and shall effect delivery of such 2022A Bonds by causing the Direct Participant to transfer the Participant’s interest in the 2022A Bonds, on DTC’s records, to the Trustee. The requirement for physical delivery of 2022A Bonds in connection with an optional tender or a mandatory purchase will be deemed satisfied when the ownership rights in the 2022A Bonds are transferred by Direct Participants on DTC’s records and followed by a book -entry credit of tendered 2022A Bonds to the Trustee’s DTC account.
DTC may discontinue providing its services as depository with respect to the 2022A Bonds at any time by giving reasonable notice to the Authority or the Trustee. Under such circumstances, in the event that a successor depository is not obtained, physical certificates are required to be printed and delivered.
The Authority may decide to discontinue use of the system of book -entry only transfers through DTC (or a successor securities depository). In that event, 2022A Bonds will be printed and delivered to DTC.
THE TRUSTEE, AS LONG AS A BOOK-ENTRY ONLY SYSTEM IS USED FOR THE 2022A
BONDS, WILL SEND ANY NOTICE OF REDEMPTION OR OTHER NOTICES TO OWNERS ONLY TO DTC. ANY FAILURE OF DTC TO ADVISE ANY DTC PARTICIPANT, OR OF ANY DTC
PARTICIPANT TO NOTIFY ANY BENEFICIAL OWNER, OF ANY NOTICE AND ITS CONTENT
OR EFFECT WILL NOT AFFECT THE VALIDITY OF SUFFICIENCY OF THE PROCEEDINGS RELATING TO THE REDEMPTION OF THE 2022A BONDS CALLED FOR REDEMPTION OR OF ANY OTHER ACTION PREMISED ON SUCH NOTICE.
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