11/08/2022 Item No.12.
The Special Tax is to be levied and collected against all Taxable Property within the Community Facilities District in accordance with the Rate and Method of Apportionment approved by the landowner elector of the Community Facilities District. The total annual levy of the Special Tax is calculated to satisSr the annual debt service during the ensuing Fiscal Year, to replenish the reserve account for the Local Obligations, the allocable portion of administrative expenses, the amount necessary to cure any delinquencies or to fund any deficiency of the amount to be available for the payment of principal or interest on bonds which are expected to occur in the ensuing fiscal year, authorized facilities funded on a pay-as-you-go basis, less any available capitalized interest and earnings on the funds that may be used to fund the aforementioned costs.
Assignment to Land Use Categories
Each Fiscal Year, all Assessor's Parcels within the Community Facilities District will be classified by the CFD Administrator as either Taxable Property or Tax-Exempt Properly. Taxable Property will be fuither classified as Developed Property, Small Lot Final Map Property, Large Lot Property, or Undeveloped Property and shall be subject to the levy of the annual Special Tax. "Developed Propefty" means, for each Fiscal Year, all Taxable Property for which a building permit for new construction was issued prior to June 30 of the previous Fiscal Year. "Small Lot Final Map Property" means, for each Fiscal Year, all Taxable Property for which a Small Lot Final Subdivision Map was recorded prior to June 30 of the previous Fiscal Year. *Large Lot Property" means, for each Fiscal Year, all Taxable Property for which a Large Lot Map was recorded prior to June 30 of the previous Fiscal Year, excluding any portion(s) thereof classified as Developed Property or Small Lot Final Map Property . Large Lot Property also means, for each Fiscal Year, all Taxable Property classified as Small Lot Final Map Remainder Property as of June 30 of the previous Fiscal Year.
"Undeveloped Property" means, for each Fiscal Year, all Taxable Property not classified as Developed Property, Small Lot Final Map Property, or Large Lot Property. "single Family Property" means larger executive-style housing, large lot residential estates, and conventional single family neighborhoods with a permitted density range of 1-4 Residential Units per Acre.
"single Family High Density Property" means detached, attached, clustered, zero lot line, and attached two-residences with a permitted density range of 4-7 Residential Units per Acre. "Multi Family Low Density Property" means small-lot single family Residential Units, such as single family patio homes, single family zero lot line courtyard residential units, and attached Residential Units, attached or detached row homes and townhouse with a permitted density range of 7-12 Residential Units per Acre.
"Other Taxable Property" means all other land uses of Taxable Property, for which a building permit for new construction can be issued. Other Taxable Property does not include Single Family Property, Single Family High Density Property, and Multi Family Low Density Property land use categories.
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11/08/2022 Item No.12.
Maximum Special Tax.
The Rate and Method of Apportionment is used to allocate the amount of the Special Tax required among the Taxable Property, based upon land use categories, subject to the Maximum Special Tax that may be levied against each land use category.
The following table shows the Maximum Special Tax Rates within the Community Facilities District for all anticipated allocable land use categories in Fiscal Year 2023-24.
Table 3
City of X'olsom
Communities Facilities District No.20 (Russell Ranch)
Maximum Special Tax Rate Categories
Fiscal Year 2023-24
Tax Category
Maximum Special
Tax Rate* Taxed Per
Developed Property
Single Family Property
Single Family - High Density Property
Multifamily - Low Density Property
Other Taxable Property
Small Lot Final Map Property
Single Family Property
Single Family - High Density Property
Multifamily - Low Density Property
Other Taxable Property
Large Lot Property
Undeveloped Property
$ 1,9 14
1,577
1,351
8,108
$1,914
1,577
1,35 I
8,1 08
Residential Unit
Residential Unit
Residential Unit
Acre
Residential Lot
Residential Lot
Residential Lot
Acre
Acre
Acre
$8,108
$8,108
* Increases by 2% each Fiscal Year.
Source: NBS and the City of Folsom.
The total special tax generated by the Community Facilities District may change from time to time if there are amendments or modifications to the development plan. The City covenants in the Local Obligations Indenture to not approve any amendments, changes or modifications relating to development of the property within the Community Facilities District that would reduce the amount of the Maximum Special Tax less Priority Administrative Expenses to equal less than one hundred ten percent (110%) of the sum of the Annual Debt Service on the Local Obligations, the 2018 CFD Obligations and any Additional Local Obligations in any year until the maturity date for the Local Obligations, the 2018 CFD Obligations and any Additional Local Obligations. In no event will the Maximum Special Tax for each Phase be reduced as a result of such amendments, changes or modifications below the CFD No. 20 Minimum Revenues.
Future Assessor's Parcel Changes
The Maximum Special Tax shall be assigned to all future Assessor's Parcel(s) created from a subdivision, lot line adjustment, or merger of one or more Assessor's Parcels so that the revised total Maximum Special Tax revenue is not less than the total CFD No. 20 Minimum Revenue amount assigned 4166-0679-1203.8
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11/08/2022 Item No.12.
to each Phase of development within the Community Facilities District in the manner described in the Rate and Method of Apportionment.
Metho d of App ortionment
The CFD No. 20 Administrator shall determine the Special Tax Requirement and levy the Special Tax until the amount of Special Taxes equals the Special Tax Requirement. The Special Tax shall be levied each Fiscal Year as follows:
First: The Special Tax shall be levied Proportionately on all Developed Property at a rate up to 100% of the Maximum Special Tax in order to satisflu the Special Tax Requirement' Second: If additional monies are needed to satisflz the Special Tax Requirement after the first step has been completed, the Special Tax shall be levied Proportionately on all Small Lot Final Map Property atarate up to 100% of the Maximum Special Tax. The Special Tax shall be levied on Small Lot Final Map Property for the entire portion of the Special Tax Requirement excluding only Pay As You Go Costs.
Third: If additional monies are needed to satisff the Special Tax Requirement after the first two steps have been completed, the Special Tax shall be levied Proportionately on all Large Lot Property at a rate up to 100% of the Maximum Special Tax. The Special Tax shall be levied on Large Lot Property for the entire portion of the Special Tax Requirement excluding only Pay As You Go Costs.
Fourth: If additional monies are needed to satisfr the Special Tax Requirement after the first three steps have been completed, the Special Tax shall be levied Proportionately on all Undeveloped Property at a rate up to 100% of the Maximum Special Tax. The Special Tax shall be levied on Undeveloped Property for the entire portion of the Special Tax Requirement that excludes Pay As You Go Costs.
Re s identi al Pr op er ty L imitatio n
Under no circumstances will the special tax levied in any fiscal year against residential property be increased as a consequence of delinquency or default by the owner or owners of any other parcel or parcels within the Community Facilities District by more than 70%o above the amount that would have been levied in that fiscal year had there never been any such delinquencies or defaults. See "CERTAIN RISKS TO BONDHOLDERS-Maximum Special Tax."
Special Tax Calculation
Table 4 below reflects the projected Maximum Special Tax for Fiscal Year 2023-24 based on the development status as of September 15,2022,for Developed Property, Small Lot Final Map Properfy, and Large Lot Property (each as defined above) and the estimated Fiscal Year 2023-24 Maximum Special Tax assuming these properties were at full buildout. Table 5 below reflects the projected Maximum Special Tax for Fiscal Year 2023-24 based on the development status as of September 15,2022, for the three main development phases within the Community Facilities District (Phase 1, Phase 2, and Phase 3) and the estimated Fiscal Year 2023-24 Maximum Special Tax assuming these properties were at full buildout. Table 6 below reflects the estimated total Special Tax levy for Fiscal Year 2023-24 based on the development status and ownership as of September 15,2022. The following tables do not necessarily reflect the Special Tax that will be actually levied in any year. See "PROPOSED PROPERTY DEVELOPMENT-Development Entitlements" for a discussion of the anticipated timing of the remaining final map approval.
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11/08/2022 Item No.12.
Table 4
City of Folsom
Community Facilities District No. 20 (Russell Ranch)
Estimated Fiscal Year 2023-24 Maximum Special Tax Revenue Development Status as of September 15, 2022 (Unless Otherwise Noted) Property
Planned
Units
Appraised/Assessed
Value(1)
Bst.2023-24
Maximum
Special Tax
Revenue at
gu16su1e)P)
Bst.2023-24
Maximum
Special Tax
Revenue(2X3)
Percentage of
Bst.2023-24
Maximum
Special Tax
Revenue
Developed Property:
Single Family Property
Single Family High Density Property
Multi Family Low Density Properfy
Developed Property Total:
112
274
tt4
$76,920,114
163,137,577
68,456,297
$214,412
431,994
154,058
$214,421
431,994
154,058
t4%
28 l0
500 $308,513,988 $800,473
$120,612
542,357
$800,473
s120,612
542.357
SlVo
8%
35 Small Lot Final Map Property:
Single Family Property
Single Family High Density Property
Small Lot Final Map Property Total:
63 344
$14,937,090
38,883,430
Large Lot Property:
Phase 2, Village 5
(Multi Family Low Density Property)
Large Lot Property Total:
407 $53,820,519
ll8 5
s662,969
$159,464
s662,969
$100,463
42Vo
6%
118 $3,336,855
$365,671,363
s159,464
$1,6220906
$100,463
$1,563,904
6Vo
l00VoTotal Maximum Special Tax Revenue: 1,025
Totals may not foot due to independent rounding.
(r) Appraised and assessed value amounts provided by the Appraiser (2) Increases by 2Yo each Fiscal Year.
(3) The 2023-24 Minimum Facilities Revenue amount is $1,480,790.
Source: Except as otherwise noted, NBS.
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11/08/2022 Item No.12.
Table 5
City of Folsom
Community Facilities District No. 20 (Russell Ranch)
Estimated Fiscal Year 2023-24 Maximum Special Tax Revenue Development Status as of September 15, 2022 (Unless Otherwise Noted) Phase
Planned
Units
Appraised/Assessed
Value(1)
Bst.2023-24
Maximum
Special Tax
Revenue at
Buildout(2x3)
Est.2023-24
Maximum
Special Tax
paysnus(2)(3)
Percentage of
Est 2023-24
Maximum
Special Tax
Revenue
Phase 1:
Developed Property
Phase I Total:
394 $2',78,431,363 $621,527 $621,s27 40%
394 $278,431,363 $621,527
$427,264
159,464
$621,527
$42t,264
100,463
40Vo
27%
Phase 2:
Small Lot Final Map Property
Large Lot Property
Phase 2 Total:
271
il8
$23,701,320
3,336,955 6
389 s27,038,176 $586,728
$178,946
235,705
$527,727
$178,946
235,705
34Vo
11%
l5
Phase 3:
Developed Property
Small Lot Final Map Property
Phase 3 Total:
106
136
$30,082,625
30,1 19,199
Total Maximum Special Tax Revenue:
242
1,025
Totals may not foot due to independent rounding.
(1) Appraised and assessed value amounts provided by the Appraiser (2) Increases by 2o/o each Fiscal Year.
(3) The 2023-24 Minimum Facilities Revenue amount is $1,480,790.
Source: Except as otherwise noted, NBS.
$60,201,824
$365,671,363
$414,651
s1,622,906
$414,651
$1,563,904
27Vo
1000h
If changes are made to development plans for the Community Facilities District, the total Maximum Special Tax may decrease from the amounts shown in the above tables, but in no event will the Maximum Special Tax by Phase decrease below the CFD No. 20 Minimum Revenue. See "-Special Tax Analysis" above.
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11/08/2022 Item No.12.
Table 6
City of Folsom
Community Facilities District No. 20 (Russell Ranch)
Estimated Fiscal Year 2023-24 Special Tax Levy
Development Status as of September L5o 2022 (Unless Otherwise Noted) Property and Owner Development Status
Estimated
Facilities Special
Tax LevY(l)
Percent of
Estimated Total
Special Tax Levy
Planned
Units
Lennar Homes
Lennar Homes
Lennar Homes
TNHC Northem Californra
Developed Property
Small Lot Final Map Property
Large Lot Properly
Total for Lennar Homes:
Developed Property
106
407
118
$178,946
622,040
0 l3%
44%
0%
Developed Property
Developed Property
631
53 7
334
$800,986
$90,318
$11,036
s520,172
s60h
6Vo
lo
37Vo
Anthem United
Individual Homeowners
Totals: 1,025 $1,422,513 1000h
(r) Based on the debt service requirements for the 2018 CFD Obligations and the Local Obligations plus Priority Administrative Expenses of $22,082.
Source: NBS.
The Teeter Plan
In 1949, the State Legislature enacted an alternative method for the distribution of secured property taxes to local agencies. This method, known as the Teeter Plan, is now set forth in Sections 4701-4717 of the California Revenue and Taxation Code. Upon adoption and implementation of the Teeter Plan by a county board of supervisors, local agencies for which the county acts as "bank" and certain other public agencies and taxing areas located in the county receive annually the full amount of their share of property taxes on the secured roll, including delinquent property taxes which have yet to be collected. While a county benefits from the penalties associated with these delinquent taxes when they are paid, the Teeter Plan provides participating local agencies with stable cash flow and the elimination of collection risk.
To implement a Teeter Plan, the board of supervisors of a county generally must elect to do so by July 15 of the fiscal year in which it is to apply. The Sacramento County Board of Supervisors has adopted the Teeter Plan. Once adopted, a county's Teeter Plan will remain in effect in perpetuity unless the board of supervisors orders its discontinuance or unless prior to the commencement of a fiscal year a petition for discontinuance is received and joined in by resolutions of the governing bodies of not less than two-thirds of the participating districts in the county. An electing county may, however, opt to discontinue the Teeter Plan with respect to any levying agency in the county if the board of supervisors, by action taken not later than July 15 of a fiscal year, elects to discontinue the procedure with respect to such levying agency and the rate of secured tax delinquencies in that agency in any year exceeds 3%o of the total of all taxes and assessments levied on the secured roll by that agency. See "CERTAIN RISKS TO BONDHOLDERS-Teeter Plan Termination."
Upon making a Teeter Plan election, a county must initially provide a participating local agency with 95Yo of the estimated amount of the then accumulated tax delinquencies (excluding penalties) for 4166-0679-1203.8
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11/08/2022 Item No.12.
that agency. In the case of the initial year distribution of special taxes and assessments (if a county has elected to include assessments), 100yo of the special tax delinquencies (excluding penalties) are to be apportioned to the participating local agency which levied the special tax. After the initial dishibution, each participating local agency receives annually 100% of the secured property tax levies to which it is otherwise entitled, regardless of whether the county has actually collected the levies.
If any tax or assessment which was distributed to a Teeter Plan participant is subsequently changed by correction, cancellation or refund, a pro rata adjustment for the amount of the change is made on the records of the treasurer and auditor of the county. Such adjustment for a decrease in the tax or assessment is treated by the County as an interest-free offset against future advances of tax levies under the Teeter Plan.
The Special Tax for the City will be submitted to the County for direct levy. By submitting the Special Tax to the County, the City has agreed to allow the Community Facilities District to participate in the County's Teeter Plan. The County annually determines whether to include a particular direct levy and may make that determination on a district by district basis or a parcel by parcel basis. In addition, the County may not decide to include a particular parcel or district that had been included in its Teeter Plan in the previous year. The City can provide no assurance that the County will continue to include the Community Facilities District in the Teeter Plan.
To the extent that the County's Teeter Plan continues in existence and is carried out as adopted, the County's Teeter Plan may help protect the Owners of the Bonds from the risk of delinquencies in Special Taxes.
THE AUTHORITY
The Authority was created by a Joint Exercise of Powers Agreement, effective April20,2015 (the "JPA Agreement"), between the City and the City of Folsom South of 50 Parking Authority. The JPA Agreement was entered into pursuant to the Joint Exercise of Powers Act, Chapter 5 of Division 7 of Title 1 of the Government Code of the State. The Authority was created for the purpose of facilitating financing of public improvement facilities within the City south of US Route 50.
THE CITY
The Community Facilities District is located in the City, which is located in the easterly section of the Sacramento metropolitan area approximately 22 miles east of the central business district of the City of Sacramento.
Certain economic and demographic information with respect to the City is contained in APPENDIX B. This information is presented solely as background information. The Local Obligations are not general obligations of the City but, rather, are special tax obligations secured solely by the Special Taxes to be paid by the owners of property in the City and funds held pursuant to the Local Obligations Indenture.
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11/08/2022 Item No.12.
THE COMMUNITY FACILITIES DISTRICT
General Description and Location
The Community Facilities District is a community facilities district organized by the City Council as the legislative body of the City under the Mello-Roos Act for the purpose of providing for the acquisition and construction of certain public improvements to serve properly within the Community Facilities District. The City established the Community Facilities District on November 14,2017, authorizing the issuance of up to $70,000,000 in bonded indebtedness. Following the issuance of the Local Obligations, the City does not anticipate financing any additional improvements through the issuance of Additional Local Obligations. Further, for so long as the Local Obligations are Outstanding, Additional Local Obligations may be issued on parity with the Local Obligations and the 2018 CFD Obligations only for refunding purposes. Any such bonds will be issued only in accordance with the provisions of the Local Obligations Indenture. The total bonded indebtedness authorized in the Community Facilities District will be limited by the requirements of the Local Obligations Indenture, including a 3:1 overlapping value to lien ratio on all land projected to be subject to the levy of the Special Tax and l10o/o annual coverage from the Maximum Special Tax less Priority Administrative Expenses.
See "SECURITY AND SOURCES OF PAYMENT FOR TI{E BONDS-Terms of the Local Obligations-Additional Local Obligations."
The Community Facilities District consists of a gross area of approximately 436 acres, of which approximately 179.9 acres constitute Taxable Property subject to the Special Tax. The remainder is property set aside for an approximately 5.25-acre neighborhood park (with a portion of the park spanning across neighboring property outside of the Community Facilities District), an approximately l0-acre school site, additional open space, and public rights of way and infrastructure. Development within the Community Facilities District is entitled for a total of 1,027 units but is planned to include a total of 1,025 single family homes at full buildout. The Community Facilities District is located east of Placerville Road between Highway 50 and White Rock Road. The maps appearing on the inside cover pages show the general location of the Community Facilities District.
Construction of public improvements and backbone infrastructure in the Community Facilities District is currently underway, as more particularly described "PROPOSED PROPERTY DEVELOPMENT-Property Ownership and Plans for Development-Development Plan." Property Values
An appraisal the Taxable Property in the Community Facilities District has been prepared by the Appraiser in connection with the issuance of the Bonds. The appraisal estimates the property value as of September 15, 2022 (the "Appraisal"). The Appraisal is attached to this Official Statement as APPENDIX G.
As of the date of inspection, the Appraiser notes that development of the property is underway.
The subject property was valued based on the hypothetical condition that certain public improvements to be reimbursed by proceeds of the Bonds are complete. The Appraisal is based on property values at the time of inspection.
Subject to the assumptions and hypothetical condition, the Appraiser estimated that the value of the Taxable Property within the Community Facilities District, as of September 15, 2022, in aggregate, is $365,671,363. This estimated aggregate value includes $141,168,363 in assessed value for 193 homes owned by individual homeowners and $224,503,000 in appraised value for the remainder of the Taxable Property in the Community Facilities District. See "PROPOSED PROPERTY DEVELOPMENT- 4166-0679-1203.8
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11/08/2022 Item No.12.
Status of Development and Development Plan of Finance for Lennar Homes" below and APPENDIX G -*APPRAISAL." Value-to-Lien Analysis
The following tables set forth the ratios of the appraised/assessed bulk value of the property to the total liens on the property in the Community Facilities District based on the development status as of September 15,2022. Table 7 shows the value-to-lien ratios for the Community Facilities District based on the development status of the Taxable Property; Table 8 shows the value-to-lien ratios for the Community Facilities District based on the development status as of September 15, 2022, for the three main development phases within the Community Facilities District (Phase l, Phase 2, and Phase 3); and Table 9 shows the value-to-lien ratios for the Community Faci'lities District based on the owner of the property (which in some cases reflects the expected future owner). See "PROPOSED PROPERTY DEVELOPMENT-Development Entitlements." The value-to-lien ratio for the Community Facilities District based solely on the Local Obligations, the 2018 CFD Obligations and the appraised/assessed aggregate value of the Taxable Property within the Community Facilities District is 15.2-:1.0. The overall value to overlapping debt ratio including direct and overlapping assessment and special tax debt is
8.8-:1.0 (see "-Overlapping Debt"). Any bonds secured by special assessments or special taxes issued from time to time, whether by the City or another governmental entity, may have the effect of reducing the value to lien ratio on property within the Community Facilities District.
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* Preliminary, subject to change
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11/08/2022 Item No.12.
Table 7
City of Folsom
Community Facilities District No.20 (Russell Ranch)
Appraised/Assessed Value-to-Lien Ratios
Development Status as of September 15, 2022 (Unless Otherwise Noted) Development Status
Developed Property
Small Lot Final Map Property
Large Lot Property(o)
Planned
Units
Bst.2023-24
Maximum
Special Tax
Revenue(r)
$800,473
662,969
r00,463
E;st.2023-24
Special Tax
Levv(2)
$800,473
622,040
0 Appraised/
Assessed
Value(3)
$308,5 13,988
53,820,519
3,336,855
Share ofLocal
Obligations(a)-
$6,189,893
4,81 0, I 07
0 Share of
2018 CFD
Obligations(a)
$7,320,956
s,689,044
0 Overlapping
Debt
Appraised/
Assessed
Value
To Lien(s)*
Appraised/
Assessed
Overlapping
Debt Value to
Lien Ratio(s)*
500
407
ll8
$r4,735,r25
2,349,358
256,290
22.8 5.1
N/A
10.9 4.2
13.0 1,025 $1,563,904 $1,422,513 $365,671,363 $11,000,000 $13,010,000 s17,340,773 8.8 Preliminary, subject to change.
(2) Based on estimated debt service requirements for the Bonds plus Priority Administrative Expenses of $22,082. (3) Amounts are allocated based on the appraised values provided by the Appraiser. (a) Allocated based on the projected Fiscal Year 2023-24 Special Tax levy. (s) Value to lien ratio is for the Local Obligations. Local Obligations are issued in the same principal amount of the Bonds. (6) Based on the number of units planned for all remaining Large Lot Prope(y, the estimated 2023-24 Maximum Special Tax Revenue at buildout is S159,464.
Source: Except as otherwise noted, NBS.
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11/08/2022 Item No.12.
Table 8
City of Folsom
Community Facilities District No.20 (Russell Ranch)
Appraised/Assessed Value-to-Lien Ratios
Development Status as of September L5,2022 (Unless Otherwise Noted) Phase
Planned
Units
394
389
242
Bst.202324
Maximum
Special Tax
Revenue(1)
s621,s27
527,727
414,651
Bst.2023-24
Special Tax
Lew(2)
$62r,s27
400,886
400,100
Appraised/
Assessed
Value(3)
$278,431,363
27,038,176
60,201,824
Share ofLocal
Obligationsta).
$4,806,137
3,099,973
3.093,890
Share of
2018 CFD
Oblisations(a)
$5,684,349
3,666,422
3,659,228
Overlapping
Debt
Appraised/
Assessed
Value
To Lien(s)*
Appraised/
Assessed
Overlapping
Debt Value to
Lien Ratio(s)*
Phase I
Phase 2
Phase 3
$r3,423,90s
1,229,861
2,687,007
26.5 4.0
8.9 11.6
3.4 6.4
1,025 $1,563,904 51,422,513 $365,671,363 $11,000,000 $13,010,000 $17,340,773 15.2 *
Preliminary, subject to change.
(2) Based on estimated debt service requirements for the Bonds plus Priority Administrative Expenses of $22,082. (3) Amounts are allocated based on the appraised values provided by the Appraiser. (a) Allocated based on the projected Fiscal Year 2023-24 Special Tax lely. (5) Value to lien ratio is for the Local Obligations. Local Obligations are issued in the same principal amount of the Bonds.
Source: Except as otherwise noted, NBS.
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11/08/2022 Item No.12.
Table 9
City of F'olsom
Community Facilities District No. 20 @ussell Ranch)
Appraised/Assessed Value-to-Lien Ratios
Development Status as of September 15r 2022 (Unless Otherwise Noted) Ownership Group
Lennar Homes
TNHC Northern Califomia
Anthem United
Individual Homeowners
Planned
Units
Est.2023-24
Maximum
Special Tax
Revenue(1)
$942,378
90,318
11,036
520,172
E,st.2023-24
Special Tax
Lew(2)
$800,986
90,318
l1,036
520,772
Appraised/
Assessed
Value(3)
$87,240,000
I 9,108,000
4,655,000
254,668,363
Share ofLocal
Obligations(a)*
s6, l 93,863
698,409
8s,342
4,022,386
Share of
2OI8 CFD
Obligations(a)
$7,325,651
826,028
100,936
4,757,385
Overlapping
Debt
Appraised/
Assessed
Value
To Lien(5)-
Appraised/
Assessed
Overlapping
Debt Value to
Lien Ratio(s) -
63t
53 7
334
6.5 12.5
25.0 29.0
5.0 7.7
l6.l
t2.t
$3,916,868
970,127
103,332
12,350,445
1,025 $1,563,904 $1,422,513 $365,671,363 $11,000,000 $13,010,000 $17,340,773 15.2 8.8 Preliminary, subject to change.
(2) Based on estimated debt service requirements for the Bonds plus Priority Administrative Expenses of $22,082.(3) 46sry15 are allocated based on the appraised values provided by the Appraiser. (a) Allocated based on the projected Fiscal Year 2023-24 Special Tax lely.(s) Value to lien ratio is for the Local Obligations. Local Obligations are issued in the same principal amount of the Bonds.
Source: Except as otherwise noted, NBS.
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11/08/2022 Item No.12.
Estimated Tax Burden on Single Family Home
The following table sets forth the estimated total tax burden on a single family residential property, a single family high density residential property and a multifamily low density residential property within the Community Facilities District, presented as an estimate of the proposed homes to be constructed in the Community Facilities District, based on estimated tax rates for Fiscal Year 2022-23.
Table 10
City of Folsom
Community Facilities District No:20 (Russell Ranch)
Residential Property Sample Property Tax Bill
Estimated Charges for Fiscal Year 2022-23
SF SF'HD MLD
Assessed Value(l)
Less: Homeowner Exemption
Net Assessed Value
Ad Valorem(2)
General Purpose Ad Valorem Tax (Proposition 13)
Los Rios College General Obligation
Folsom-Cordova Unified School District Improvement Dist. 2 Folsom-Cordova Unified School District Improvement Dist. 3 Total Ad Valorem Taxes
Special/Direct Assessments and Taxes
Folsom Community Facilities District No. 20 (Russell Ranch)(r) Folsom Community Facilities District No. 17 (Willow Hill Pipeline)ta) Folsom Community Facilities District No. 18 (Folsom Plan Area)(a) Sacramento Area Flood Control(s)
Total SpeciaUDirect Assessments and Taxes
Total Estimated Annual Property Taxes
Effective Tax Rate(6)
$1,088,214 5776,043 $595,200
$1,095,214
($7,ooo)
$783,043
($7,ooo)
$602,200
(s7,ooo)
Tax Rate
1.0000%
0.0226%
0.0217%
0.2758o/o
$10,882.14
245.94
236.14
3,001.29
$7,760.43
175.39
168.40
2,140.33
$5,952.00
134.s2
129.16
1,641.56
t.320toA $14,365.51 $10,244.54 $7,857.24
$1,876.94
139.30
1,131.45
1.78 $1,324.90
47.12 774.80
1.s0
$ I ,545.7 I
106.20
1,046.99
1.50 $3,149.47 $2,700.40 $2,148.91
$17,514.98
1.59920h
$12,944.95
1.65320/0
$10,006.15
1.66160
(1) Estimated based upon Sacramento County Assessor's secured roll value, as of January 1,2022, for a sample residential unit. (2) Based upon 2022-23 Sacramento County ad valorem propeffy tax rates for TRA 04-036. (3) 2021-22 Effective Tax Rate Evaluation Maximum Annual Facilities Special Tax for a single family, single family high density unit and a multi family low density unit with less than 2,000 square feet. The Effective Tax Rate Evaluation Maximum Annual Facilities Special Tax escalates annually at2%i
(4) 2022-23 Maximum Annual Special Tax. The Maximum Annual Special Tax excludes the Willow Hill Pipeline Special Tax, which is currently reflected under Folsom Community Facilities District No. l7 (Willow Hill Pipeline). The Area-Wide Special Tax escalates annually at 2'r/o and the Maintenance Special Tax and TDM Services Special Tax escalate annually based upon the annual June CPI Change, for the San Francisco-Oakland-San Jose area, not to exceed 47o. o) Approximate assessment for residential lots. Based upon lot size. (6) Estimate of annual property taxes does not include any new special financing district fees, assessments, and/or special taxes imposed by the state, county, or local agencies that are yet to be established or any fufure annexation into existing special financing districts required by conditions for approval of development or any other imposed requirement. Information contained within is based upon records and official documents provided by various govemmental agencies and third-party sources.
Source: NBS.
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11/08/2022 Item No.12.
Overlapping Debt
Set forth below is an overlapping debt table showing the existing authorized indebtedness payable with respect to property within the Community Facilities District. Additional indebtedness could be authorized by other public agencies at any time. Further, a portion of the overlapping debt shown in the table below is based on the assessed value of the underlying property, which can be expected to increase over time as development occurs and the assessed value grows. This table has been prepared by California Municipal Statistics, Inc. as of October 7, 2022, and is included for general information purposes only. Otherthan with respectto CFD l7,the table below allocates overlapping debt based on the assessed value of properly and not on taxes paid. The City and the Authority have not reviewed the data for completeness or accuracy and make no representations in connection therewith.
The City authorized the issuance of up to $8,000,000 of bonds for CFD 77, of which $6,475,000 has been issued. Further, the City authorized the issuance of up to $200,000,000 in bonds for CFD 18.
The timing of issuance of bonds for CFD 18 is dependent upon market conditions and development within the Folsom Plan Area. The City currently anticipates thatan initial series of CFD l8 bonds will be issued to finance a portion of the Phase 2 Water Facilities (as defined herein), although the timing and amount of any CFD i8 bond issuance is not yet known. A portion of any bonds issued for CFD 18 will constitute overlapping debt. Other community facilities districts formed in the Folsom Ranch area will overlap CFD 18 and potentially CFD 17 but are not expected to overlap the Community Facilities District. The lien of the Special Taxes for the Community Facilities District is on parity with the lien of the Special Taxes for CFD 17 and CFD 18.
Direct assessments and levies payable with respect to property within the Community Facilities District could potentially include up to $750 million of general obligation bonds for the School Facilities Improvement District No. 3 of the Folsom Cordova Unified School District ("SFID 3"), approved by voters on March 27,2007. SFID 3 encompasses approximately 52.6 square miles of land including the Community Facilities District and additional territory outside of the Community Facilities District, including territory in the City of Rancho Cordova and unincorporated Sacramento County. As of October 24,2022, general obligation bonds in the aggregate principal amount of approximately $195.6 million had been issued and approximately $185.4 million were outstanding for SFID 3. Atthe time of the election approving the SFID 3 general obligation bonds, the ballot summary indicated the average tax rate per $100,000 assessed valuation would be $73.61. For2022-23, the actual SFID 3 tax rate per $100,000 was approximately $275.80. The following table sets forth the ad valorem tax rates for SFID 3 over the past five years. The future tax levy per property owner in SFID 3 may vary depending on future bond issuance andlor changes in assessedvalue.
Table 11
City of Folsom
Community Facilities District No. 20 (Russell Ranch)
SFID 3 Ad Valorem Rates
Year Rate(l)
2022-23
2021-22
2020-21
2019-20
2018-19
2017-18
0.2158%
0.3881%
0.206s%
0.1366%
0.14s1%
0.1878%
(r) TRAs 04-035 and 04-036
Source: NBS.
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11/08/2022 Item No.12.
"'.Jx?f"13"'Community Facilities District No. 20 (Russell Ranch) Overlapping Debt
2022-23 Local Secured Assessed Valuation: $305,255,699 (Land and Improvements) DIRECT AND OVERLAPPING TAX AND ASSESSMENT DEBT:
Los Rios Community College District
Folsom-Cordova Unified School District School Facilities Improvement District No. 2 Folsom-Cordova Unified School District School Facilities Improvement District No. 3 City of Folsom Community Facilities District No. l7
City of Folsom Community Facilities District No. 20
TOTAL DIRECT AND OVERLAPPING TAX AND ASSESSMENT DEBT
OVERLAPPING GENERAL FUND DEBT:
Sacramento County General Fund Obligations
Sacramento County Pension Obligation Bonds
Sacramento County Board of Education Certificates of Participation City of Folsom General Fund Obligations
TOTAL OVERLAPPING GENERAL FUND DEBT
4.26Vo
9.94o/o
% Applicable
0.123o/o
1.758
8.474
15.197
100.
0.148%
0.148
0.148
1.703
Debt l0l1l22
$ 550,s88
211,606
15,708,525
870,055
_11010@(')
$30,3s0,774
s176,063
795,68r
3,889
13.873
$989,506
COMBINED TOTAL DEBT $3 1,340,280(2)
(1) Excludes Mello-Roos Bonds to be sold.
(2) Excludes tax and revenue anticipation notes, enterprise revenue, mortgage revenue and non-bonded capital lease obligations.
Ratios to 2022-23 Local Secured Assessed Valuation:
Direct Debt ($13,010,000)
Total Direct and Overlapping Tax and Assessment Debt.
Combined Total Debt 10.27o/o
Source: Califomia Municipal Statistics, Inc.
Historic Special Tax Levy
The Special Tax was first levied in the Community Facilities District for Fiscal Year 2019-20.
The following table is a summary of Special Tax levies, collections and delinquencies through the second installment payment for Fiscal Year 2021-22. As of September 30,2022, no parcels in the Community Facilities District were delinquent.
Table 13
City of Folsom
Community Facilities District No. 20 (Russell Ranch)
Historical Special Tax Collection and Delinquencies
As of September30,2022
At tr'iscal Year End As of September 30.2022
Fiscal Year
Total Special
Tax Levied
Historical
Parcels
Delinquent
Historical
Amount
Delinquent
Percent
Delinquent
Current
Parcels
Delinouent
Current
Amount
Delinouent
Percent
Delinquent
2019-20
2o2o-21()
2021-22
$746,312
759,781
778,727
$o
87,053
0 0.00%
ll.460/o
0.00o/o
0 9
0 $0
0 0
0 0
0 0.00o/o
0.00Vo
0.lOVo
(i) Delinquent special tax amounts were paid on October 1,2021 Source: NBS.
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11/08/2022 Item No.12.
PROPOSED PROPERTY DEVELOPMENT
Development Entitlements
Specific Plan On June 28, 2011, the City Council approved the Specific Plan for the development of 10,210 residential homes along with commercial, industrial/office park, open space, public schools, parks, infrastructure and other land uses on the 3,513.4 acre site of the Folsom Plan Area.
At build out, projected to occur over a 2}-year time frame, the Folsom Plan Area is projected to have a population of approximately 24,362 persons. Along with the 1,455.6 acres of residential development, the adopted Specific Plan called for 511.3 acres of commercial, office/industrial and mixed-use,309.5 acres of public and quasi-public use (public and private schools, parks and infrastructure);173.6 acres of major roads and 1,063 acres of open space.
Various property owners have submitted and received approvals of Specific Plan Amendments ("SPA's") since the 2011 City Council adoption. These approved SPA's have resulted in various land use changes compared to the Specific Plan that was originally approved in2011, including an increase in the total entitled unit count to 11,461dwelling units and reduction to approximately 2.8 million square feet of commercial, office/industrial and mixed use.
Tentative and Final Mapping. On May 26, 2015, the Folsom City Council approved the entitlements for the Community Facilities District, including the Large Lot and Small Lot Tentative Maps. Revised Large and Small Lot Vesting Tentative Subdivision Maps were approved by the City Council on June 28,2016. Further, aLarge Lot Final Map was approved by the City Council and was recorded on September 27,2017. Pursuant to an amendment to the Large and Small Lot Vesting Tentative Maps approved by the City Council on March 13, 2018, the total number of approved dwelling units is 1,027. Development within the Community Facilities District is entitled for a total of i,027 units but is planned to include a total of 1,025 single family homes at full buildout. To date, final maps have been approved and recorded for all Taxable Property within the Community Facilities District, except for I 18 townhome lots owned by Lennar Homes. The only remaining approvals needed for Lennar Homes in the Community Facilities Dishictwill be the small lot final map forthe 1i8 townhome lots and design review approval forthese 118 units, which provides for City review of the home plans, architecture and conformance to certain development standards.
Site Access. External access to the project site is provided via Placerville Road to the west and White Rock Road to the south. Internal vehicular circulation is accessed from Alder Creek Parkway and Grand Prairie Road for the neighborhoods in Phases I and 3, and the future Empire Ranch Road for the neighborhood in Phase 2. Pedestrian circulation is provided by a combination of street separated sidewalks, open space trails, park trails and pathway connections. Proposed on-site improvements include: underground utilities, drainage improvements, retaining walls, driveways, on-street parking, curbs/gutters, sidewalks, pathways, trails, fencing, site lighting, site landscaping, and park enhancements.
Design Guidelines. The Russell Ranch Planned Development Design Guidelines were approved by the City on June 23, 2015, and amended on March 13, 2018. The design guidelines provide for the orderly development of the proposed single family residential subdivision. The primary purpose of these design guidelines is to articulate the general architectural and design expectations for the proposed residential neighborhood, the landscapes, hardscapes, open spaces, fencing, entry features and site lighting. The goal of the design guidelines is to establish a regulatory framework for the design of individual homes on the residential lots. The final design details of the homes are subject to review and approval by the Crty's Planning Commission as part of a future Design Review application. 4166-0679-1203.8
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11/08/2022 Item No.12.
Development Conditions/Building Permit Limitations. Certain provisions of the PFFP for the Folsom Plan Area, as implemented through the tentative subdivision map conditions, place limits on the number of building permits that can be issued before certain facilities and/or backbone infrastructure is in place. These provisions/conditions could, but are not expected to, affect build-out of the Community Facilities District.
For example, tentative map conditions require a fire station to be operational prior to the occupancy of the 1,500'h home in the Folsom Plan Area. See "FOLSOM PLAN AREA-Public Facilities Financing Plan-Public Facilities-the Folsom Plan Area" for details on the City's plans for construction of the fire station. The City is responsible for building and operating this fire station and would expect to waive or modify this condition as it deems necessary to balance development within the Folsom Plan Area and the increasing fire service needs of the Folsom Plan Area as development progresses.
Phase 2 Water Infrastructure. The City estimates the Phase I Water Facilities (as defined herein) have a sustained maximum day demand of up to 2 million gallons. A study prepared by Peterson Brustad, Inc. in April 20i9 then estimated that water usage would equal or exceed a sustained maximum day demand of up to 2 million gallons when approximately 2,800 to 3,300 dwelling units within the Folsom Plan Area had been occupied. As described more below, the City has engaged Peterson Brustad, Inc. to conduct a further analysis, which could result in the City revising the estimated number of occupied dwelling units in the Folsom Plan Area that would likely exceed the Phase 1 Water Facility capacity. Additionally, certain developers within the Folsom Plan Area are evaluating alternatives for the phasing and timing of the Phase 2 Water Facilities, which could also affect the Phase I Water Facility capacity and the corresponding number of occupied dwelling units that would likely exceed that capacity.
Certain water backbone facilities, which include a water pipeline, booster pump and storage tank (collectively, the "Phase 2 Water Facilities"), are required to be constructed to provide expanded water transmission conveyance capabilities to deliver water from the water treatment plant to the Folsom Plan Area. The City continues to evaluate water usage and needs within the Folsom Plan Area. See "PROPOSED PROPERTY DEVELOPMENT-Development Entitlements-Water Supply Infrastructure" below for details on the status of the Phase 2 Water Facilities and the current plan for their construction and financing.
As of September 30,2022, final maps had been approved and recorded for 3,851 dwelling units.
As of October 26,2022, two additional final maps had been approved by the City and recorded for234 additional dwelling units. As of that same date, there were also three additional final maps submitted to the City for review with approximately 311 dwelling units. It is anticipated that two of these final maps will be recorded by December 15,2022, with the remaining final map expected to be recorded by the first quafter of 2023. Also as of September 30,2022, building permits for 2,561units and 1,819 certificates of occupancy had been issued in the Folsom Plan Area for projects underway, which include, but are not limited to, the City of Folsom Community Facilities District No. 19 (Mangini Ranch) ("CFD 19"), the Community Facilities District, the City of Folsom Community Facilities District No. 21 (White Rock Springs Ranch) ("CFD 27") and the City of Folsom Community Facilities District No. 23 (Folsom Ranch) Improvement Area No. I ("CFD 23 IAl") and Improvement Area No. 3 ("CFD 23 lA3").
Collectively, CFD 19, the Community Facilities District, CFD 21, CFD 23 IAI and CFD 23 IA3 are expected to include 4,269 dwelling units, approximately 2,449 of which had been issued building permits and approximately 2,769 of which had received final map approval as of September 30,2022.
Lennar Homes and the City do not believe that these conditions will materially impede development of the Community Facilities District. However, multiple other development projects are underway in the Folsom Plan Area, and if there were an unforeseen and significant delay in construction in the Community Facilities District it is possible that other development within the Folsom Plan Area will overtake development of the Community Facilities District, resulting in the need for construction of 4166-0679-1203.8
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11/08/2022 Item No.12.
the fire station and Phase 2 Water Facilities before all development could be completed within the Community Facilities District.
Arm)t Corps of Engineers Wetland Permitting. Biological Opinion. Streambed Alteration Agreements and Section 106 Compliance. On May 22, 2074, the U.S. Army Corps of Engineers (the "USACOE") issued a Record of Decision ("ROD") for the Folsom South of U.S. Highway 50 Specific Plan Project - City of Folsom Backbone Infrastructure. This wetland permit covered the wetland permitting requirements for the entire backbone infrastructure necessary to serve the Folsom Plan Area.
To the extent backbone infrastructure was required within a property owner's land, the backbone wetland permit authorized the filling of waters of the U.S. necessary for such construction. Each landowner thereafter is required to obtain their own wetland permit for the fill ofjurisdictional wetlands not included in the footprint of the backbone wetland permit. As discussed in greater detail below, the Folsom Plan Area has received all required environmental permits.
Development Agreement Through City Ordinance No. 1149, the City approved a Tier 1 Development Agreement between the City and the property owners within the Folsom Plan Area on July12,201l. The effective date of the ordinance was Augustll,201l. The Tier l Development Agreement vests certain rights of the property owners and of the City and commits each party to the agreements to subsequent actions before development may proceed within the Folsom Plan Area.
Separate First Amended and Restated Tier 1 Development Agreements (the "ARDAs") were entered into among certain property owners and the City for their applicable properties, as approved by the City through City Ordinance No. 1211. The ARDAs for the property owners comprising the property within the Community Facilities District were recorded in the official records of the County of Sacramento in July 2014. The City entered into Amendment No. 1 to the ARDA with the Original Master Developer, which was recorded in the official records of the County of Sacramento in July 2015. In addition, the Original Master Developer submitted an application to the City for amendments to a portion of the overall property in the Community Facilities District with respect to eight of the lots, which the City Council approved on March 73, 2018, including an approval of Amendment No. 2 to the First Amended and Restated Tier 1 Development Agreement. $ss "-plsperty Ownership and Plans for Development- Development Plan."
Article 2.5 (commencing with Section 65864), of Chapter 4, Division 1, Title 7 of the State Government Code, pertaining to development agreements, has the general effect of authorizing development to continue in accordance with then existing General Plan, Specific Plan, zoning and subdivision regulations notwithstanding any subsequently enacted conflicting regulations, except for regulations the failure of which to enact would place the residents in a condition which is dangerous to their health or safety or both.
Environmental Permits and Approvals. The California Environmental Quality Act ("CEQA"), constituting Division 13 of the State Public Resources Code (commencingwith Section 21000) requires that an Environmental Impact Report (an "EIR"), detailing the significant environmental effects of the project and proposed mitigation measures, be prepared, considered and certified as complete by a public agency prior to its taking discretionary action on any project which may have a significant effect on the environment.
In June 2011, after statutorily required public notice, hearing and comment, the City Council certified as adequate and complete a final EIWEIS for the Folsom South of US 50 Specific Plan for the development of the Folsom Plan Area. The EIR/EIS satisfied both CEQA and the National Environmental Policy Act for the entirety of the Folsom Plan Area. In February 2015, the Folsom City Council adopted the South of Highway 50 Backbone Infrastructure Project Initial Study/Mitigated Negative Declaration (Backbone Infrastructure MND), dated December 9,2014. This CEQA project 4166-0679-1203.8
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11/08/2022 Item No.12.
level document satisfied the required environmental review for the construction of Backbone Infrastructure forthe entire Folsom Plan Area. In May 2015, the City Council certified as adequate and complete a final EIR and a CEQA Findings of Fact and Statement of Overriding Considerations, and a Mitigation Monitoring and Report Program for the Russell Ranch Project for the development of the property within the Community Facilities District, in satisfaction of CEQA for the Community Facilities District.
The Folsom Plan Area has received all required environmental permits, including a Section 404 Permit for the entire Folsom Plan Area pursuant to Section 404 of the federal Clean Water Act. This permit allows for any necessary fill of jurisdictional wetlands and streambed alterations for the construction of backbone infrastructure to serye the entire Folsom Plan Area at buildout. In addition, a Biological Opinion has been obtained from the US Fish and Wildlife Service for the entire Folsom Plan Area, together with a California Department of Fish and Wildlife Master Streambed Alteration Permit with conditions for the whole of the Folsom Plan Area.
Entitlement approvals for Russell Ranch were approved by the City of Folsom in May 2015, and amended in June 2016 and March 2018 for the development of a 1,027-unit single family residential community within the Community Facilities District, pursuant to which are expected to be developed to 1,025 total dwelling units within the Community Facilities District. Specifically, the Folsom City Council approved general and specific plan amendments, vesting large lot and small lot tentative subdivision maps with conditions of approval, an affordable housing agreement and affordable housing plan, planned development permit and design guidelines, conditions of approval, and an amended and restated development agreement in May 2015. The City Council later approved amended vesting large lot and small lot tentative subdivision maps in June 2016 and March 2018. For status of final maps, sss '<- Tentative and Final Mapping" above.
All state and federal regulatory permits have been obtained for backbone and Russell Ranch project development, including but not limited to a 404 permit from the U.S. Army Corps of Engineers, 401 Certification from the Regional Water Quality Control Board, and Streambed Alteration Agreement from the CA State Fish & Wildlife Agency, which require certain mitigation purchases and satisfaction of other permit conditions. Russell Ranch contains protected habitat and species, including but not limited to Swainson's hawk foraging habitat and wetlands regulated by state and federal agencies. To date, wetland mitigation credits have been satisfied for all backbone projects, Phase 1, Phase 2, and Phase 3.
Swainson's hawk foraging habitat mitigation credits have been satisfied for all backbone projects and all Russell Ranch project phases.
Water Supplv. The City entered into an agreement (the "Water Supply Agreement") with the property owners in the Folsom Plan Area providing for a water supply for new development south of US Route 50. The Water Supply Agreement was supported by an addendum to the EIR. The Water Supply Agreement provides adequate water supply for full build out of the Community Facilities District and the rest of the Folsom Plan Area (except the portion of the Folsom Plan Area seri'iced by the El Dorado Irrigation District). The amount of water provided in the Water Supply Agreement to meet the build-out demands of the Folsom Plan Area project is projected to be 5,600 acre-feet annually.
Water Suppbt in Folsom Generalht The primary water supply source for the City of Folsom is Folsom Reservoir, which provides the water supply for all of the City south of the American River. The City has water rights and contracts for up to 34,000 acre-feet annually ("afa") through three different contracts with the United States Bureau of Reclamation ("Reclamation"). The surface water supplies were developed through different circumstances and, as such, are subject to unique conditions and limitations. These attributes and issues affect the volume of water available under certain conditions.
Surface water supply for the portions of the City north of the American River is obtained through a 4166-0679-1203.8
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11/08/2022 Item No.12.
contract with the San Juan Water District, and therefore is not a directly owned City supply. The surface water supplies for the City's water service area are listed below. r I pre-l914 appropriative water right for 22,000)cre-feet per year (Agreement with Reclamation)
A pre-1914 appropriative water right for 5,000 acre-feet per year (Co-Tenancy agreement with Golden State Water Company)
A Central Valley Project ("CVP") repayment contract for 7,000 acre-feet per year The City's 22,000 acre-foot entitlement is based on a pre-1914 appropriative right from the South Fork of the American River established by the Natoma Water Company ("Natoma") in 1851. Natoma's original pre-1914 water right established a maximum diversion rate "to fill a Canal Eight feet wide and Four feet deep with a current running Ten miles per hour." This correlates to a diversion rate of 60 cubic feet per second and a maximum allocation of 32,000 afa. This right is held with Golden State Water Company pursuant to a co-tenancy agreement. The City's 5,000 acre-foot entitlement is also based on Natoma's pre-1914 appropriative right from the South Fork of the American River. In November 1994, the City executed a contract with Southern California Water Company-Folsom Division ("SCWC") under which the City acquired the right to lease 5,000 afa (of SCWC's remaining 10,000 afa under the original Natoma purchase) for an indefinite period. This right is held with Golden State Water Company pursuant to a co-tenancy agreement. This water right was also formally recognized in the settlement agreement between Reclamation and the City. As authorized by Public Law No. 101-514, the City was a subcontractor under Sacramento County Water Agency's (SCWA) CVP water-service contract for 7,000 afa. In 2016,the United States, the City and SCWA completed an assignment of this portion of SCWA's CVP water-service contract from SCWA to the City. In February 2020, the City and Reclamation executed a contract that converted the CVP water-service contract into a CVP repayment contract as authorized under the Water Infrastructure Improvements for the Nation Act.
Under the agreements with Reclamation for 22,000 afa and 5,000 afa, Reclamation delivers this entire water supply without reduction on a permanent basis. Under the agreement with Reclamation for 7,000 afa of CVP water, this water supply faces possible reductions pursuant to Reclamation's Municipal and Industrial Water Shortage Policy. In 1994, the City entered into an agreement with Golden State Water Company (f/Va Southern California Water Company, herein "GSWC") to acquire the right to divert up to 5,000 acre feet of pre-1914 water rights annually (the "GSWC Agreement"), subject to the terms and conditions of that agreement. Under the GSWC Agreement, the City is required to pay for the entire 5,000 acre-feet annual water supply regardless of whether the City is able to divert and use that quantity of water. The City uses the supplies provided in the GSWC Agreement to serve the Folsom Plan Area. The cost of water under the GSWC Agreement is paid for by Folsom Plan Area landowners and water customers.
Folsom Plan The City has determined that its Water Systems Optimization Review Program and implementation of metered rates will provide additional water supplies in an estimated amount of 6,450 acre-feet per year, which is in addition to the present and forecasted demands of the City's existing water users. The City intends to use a portion of this 6,450 acre-feet per year of available water to meet present and future water demand in the East Area in order to make the 5,000 acre-feet per year of GSWC Agreement water supply available for use in the Folsom Plan Area, on the terms and conditions of that Agreement. To meet this intent, the City converted the East Area water supply from the GSWC Agreement to the less expensive CVP repayment contract. The City would meet the additional build-out water demand of the Folsom Plan Area with approximately 600 acre-feet per year of water produced by the Water Systems Optimization Review Program that is in excess of the water a
a
4166-06'.79-1203.8
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11/08/2022 Item No.12.
demand in the East Area. The water made available under the GSWC Agreement and Water Systems Optimization Review Program will be sufficient to supply the projected water demand in the Folsom Plan Area. Pursuant to the provisions of Sections 860 et seq. of the State Code of Civil Procedure and Government Code Sections 53511 and 53589.5, the City filed a complaint in the Superior Court of the State for the County of Sacramento to validate the agreement. The Superior Court determined that the agreement: (a) is lawful, valid, enforceable and in the best interests of the City and all persons in any way interested therein and (b) is consistent with all applicable laws and obligations, including the Measure W water supply requirement.
The City's Community Facilities District No. 2013-l (Water Facilities and Supply) (the "Water CFD"), was formed by the City in 2014. The cost of the GSWC Agreement water will initially be paid for by the Folsom Plan Area through special taxes collected for the Water CFD on certain property in the Folsom Plan Area, including the Community Facilities District. When a building permit has been issued and a customer billing account has been established, the developed parcel is no longer subject to the levy of the special tax for the Water CFD and thereafter pays for water through water rates.
Water Conservation The City adopted Ordinance 1 I 18, Chapter 13.26 of the Folsom Municipal Code ("FMC"), Water Conservation. Chapter 13.26 establishes a five stage water conservation program with conservation goals and water use restrictions. The City Manager is authorized to implement and enforce whatever conservation measures are deemed necessary to achieve the water reduction requirements of the declared conservation stage.
Water Suppl\t Infrastructure. Existing water infrastructure and pipelines run to the north side of US Route 50. For the first phase of infrastructure, the developers of the Folsom Plan Area constructed improvements to connect this water supply and extend water infrastructure pipelines to serve the initial phases of development in the Folsom Plan Area (the "Phase I Water Facilities"). In the next phase, the Folsom Plan Area developers will be required to construct improvements at the existing City water treatment plant to include a water booster pump station and construct a new water pipeline transmission main from the water treatment plant site into the Folsom Plan Area along with two storage tanks and a pump station improvement to serve the area-wide development with potable water. In order for each individual parcel to access that water supply, the developers of those parcels will need to extend infrastructure to their sites.
The Phase I Water Facilities were completed in August 2018. The City estimates the Phase 1 Water Facilities (as defined herein) have a sustained maximum day demand of up to 2 million gallons. A study prepared by Peterson Brustad, Inc. in April2019 then estimated that water usage would equal or exceed a sustained maximum day demand of up to 2 million gallons when approximately 2,800 to 3,300 dwelling units within the Folsom Plan Area had been occupied. As described more below, the City has engaged Peterson Brustad, Inc. to conduct a further analysis, which could result in the City revising the estimated number of occupied dwelling units in the Folsom Plan Area that would likely exceed the Phase I Water Facility capacity. Additionally, certain developers within the Folsom Plan Area are evaluating alternatives for the phasing and timing of the Phase 2 Water Facilities, which could also affect the Phase 1 Water Facility capacity and the corresponding number of occupied dwelling units that would likely exceed that capacity.
As of September 30,2022, for the Folsom Plan Area, final maps had been approved and recorded for approximately 3,851 dwelling units, building permits for 2,567 units had been issued, and 1,819 certificates of occupancy had been issued. As of October 26,2022, two additional final maps had been approved by the City and recorded for 234 additional dwelling units. As of that same date, there were also three additional final maps submitted to the City for review with approximately 3l I dwelling units. It is anticipated that two of these final maps will be recorded by December 15, 2022,with the remaining 4166-0679-1203.8
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11/08/2022 Item No.12.
final map expected to be recorded by the first quarter of 2023. During summer 2021 as a result of high levels of construction activity, the maximum day water demand exceeded 2 million gallons for several days with no service interruption to the water system. Developers within the Folsom Plan Area have made various alrangements for alternative water sources during the next two years to alleviate usage of the Phase I Water Facilities and in response to drought concerns. See "PROPOSED PROPERTY DEVELOPMENT-Development Entitlements-Drought Conditions and Construction Water Usage" for more information. Based on current development plans and discussions with the developers within the Folsom Plan Area, and subject to variations due to water usage for construction within the Folsom Plan Area, the City estimates that the Phase 1 Water Facilities will reach their maximum day capacity in the summer of 2024. An increase in residential water demand, an event impacting the capacity of the Phase I Water Facilities, or other factors that increase water demand or decrease capacity could cause the City to reevaluate this estimated date and could adversely impact the development of property within the Folsom Plan Area if water demand is expected to exceed capacity before the Phase 2 Water Facilities are complete.
In February 2018, developers within the Folsom Plan Area began conducting alignment studies for the Phase 2 Water Facilities. Based on a preliminary analysis prepared by certain of such developers, the Phase 2Water Facilities were initially projected, as of April 2022,to cost approximately $29 million.
Due to price increases in the required materials and anticipated supply chain delays, the Phase 2 Water Facilities were projected by ECIC and its consultants, as of July 26,2022, to cost approximately $45 million. The actual cost of construction of the Phase 2 Water Facilities may cost more or less depending on the cost of supplies, the cost of labor and other factors as construction proceeds. As a result of the increase in cost, the developers requested that the City consider alternative timelines for phasing construction of the Phase 2 Water Facilities. The City has engaged Peterson Brustad, Inc. to evaluate the most efficient timing and phasing of construction of the Phase 2 Water Facilities and the Zone 4 Water Facilities (as defined herein) to allow development to continue while maintaining the City's standards for delivery of water to its customers. The City continues to evaluate water usage and needs within the Folsom Plan Area but there can be no assurance that the construction of the Phase 2 Water Facilities will be completed in time to prevent delays to residential and commercial development in the Folsom Plan Area. Additionally, increased residential or construction water usage approaching the maximum capacity of the current water facilities, or a reduction in the capacity of the current water facilities, could cause the City to consider restricting the continued development of the Folsom Plan Area, including within the Community Facilities District. See "CERTAIN RISKS TO BONDHOLDERS-Failure to Develop." Developers within the Folsom Plan Area have requested that the Phase 2 Water Facilities be funded in whole or in part through bonds issued for CFD 18 and certain pay-go proceeds from CFD 17 and CFD 18 special taxes. See "FOLSOM PLAN AREA-Folsom Plan Area Development" for a discussion of certain development and investment that has already occurred within the Folsom Plan Area and additional future development and investment that is anticipated as the Folsom Plan Area continues to be developed. The timing of issuance of bonds for CFD 18 is dependent upon market conditions and development within the Folsom Plan Area and there can be no assurance that bond proceeds will be available when needed to construct the Phase 2Water Facilities or to reimburse the developers for costs expended therefor.
In addition to the Phase 2 Water Facilities, the City anticipates that an additional water tank and pump station improvement will be needed to accommodate the increased development once there are approximately 1,600 occupied dwelling units in zones 4,5 and 6 of the Folsom Plan Area (the"Zone 4 Water Facilities"). These zones are east of Placerville Road and generally constitute the areas covered by the Community Facilities District and CFD 21. Accordingly, homes within the Community Facilities District would be included within the estimated number of dwelling units that would require completion of the Zone 4 Water Facilities to accommodate the increased development. As of September 30,2022, 4166-0679-1203.8
48
11/08/2022 Item No.12.
for the area to be served by the Zone 4 Water Facilities (including the Community Facilities District), final maps had been approved and recorded for [,031] dwelling units and [8a8] building permits and [571] certificates of occupancy had been issued. The Zone 4 Water Facilities and the Phase 2 Water Facilities are separate water improvements, and, if needed, the Phase 2 Water Facilities can be constructed and completed separately from the Zone 4 Water Facilities, thereby allowing development to continue in the Folsom Plan Area generally, including within the Community Facilities District. As described above, the City has engaged Peterson Brustad, Inc. to evaluate the most efficient timing and phasing of construction of the Phase 2 Water Facilities and the Zone 4 Water Facilities to allow development to continue while maintaining the City's standards for delivery of water to its customers.
The City continues to evaluate water usage and needs within the Folsom Plan Area but there can be no assurance that the construction of the Phase 2 Water Facilities or the Zone 4 Water Facilities will be completed in time to prevent delays to residential and commercial development in the Folsom Plan Area.
Wastewater Treatment The Sacramento Regional County Sanitation District has an existing wastewater treatment plant with its ongoing and permitted improvement projects projected to accommodate all wastewater from development in the Folsom Plan Area. Existing sewer transmission mains are capable of conveying wastewater from the Folsom Plan Area and initial development sites (including the Community Facilities District) to the existing treatment plant.
Flood Zones. According to the Federal Emergency Management Agency flood map, the Community Facilities District is in Zone X, which consists of areas determined to be outside of the 500- year flood plain.
Fire Zones. The Community Facilities District is located within an area identified as a moderate firehazard severity zone. More information regarding Fire Hazard Severity Zones can be found at the California Department of Forestry and Fire Protection website at https:llfrap.fire.ca.gov, though such website is not incorporated herein by reference. The development within the Community Facilities District is subject to mitigation measures set forth in a fuel modification plan approved by the City Fire Department. The mitigation measures include, among others, limitations on the type of vegetation that may be planted within fuel modification zones established in open space areas along certain portions of the perimeter of the Community Facilities District, minimum setback of structures and inigation requirements of the fuel modification zones. Maintenance of such zones is expected to initially be the responsibility of the property owners but upon build-out of the Community Facilities District and dedication of the open space to the City will be maintained by the City from funds provided through CFD
18. Homeowner's insurance is expected to be available to property owners within the Community Facilities District, and the coverage provided by such insurance typically insures against fire damage, although there is no assurance that homeowners within the Community Facilities District will purchase or maintain such insurance.
Drouqht Conditions and Construction Water Usage. In response to drought conditions in 2021, the City imposed a mandatory 20%o red:uction in water use on its water customers. In addition, use of City water for construction purposes required City approval. At the time, the City allowed construction within the Folsom Plan Area to proceed, including the use of City water. However, prolonged drought conditions in2022 or 2023 could result in mandatory reductions in water usage that may adversely impact the ability of the Homebuilders within the Community Facilities District to develop the Community Facilities District in the timeline described in this Official Statement.
To help alleviate the demand on the current water facilities, certain developers within the Folsom Plan Area have made arangements to obtain construction water from the El Dorado Inigation District ("EID"), an alternative water provider that has existing facilities adjacent to the Folsom Plan Area. For instance, Lennar Homes has previously received construction water from EID for its development in the 4166-0679-t203.8
49
11/08/2022 Item No.12.
Community Facilities District. Such arrangements augment, but do not replace, the need for and the use of City water, which is currently provided through the Phase I Water Facilities. Due to such alternative alrangements for construction water and the amount of development that has already occurred in the Folsom Plan Area, the City anticipates that the demand for construction water will likely be lower in summer 2023 than it has been in some of the recent past years.
Affordable Housing. The City and the Original Master Developer entered into an Inclusionary Housing Agreement for the Community Facilities District, which is recorded in the official records of the County of Sacramento, and provides for the Original Master Developer's compliance with the City's inclusionary housing requirement by payment of an in-lieu fee to the City. Lennar Homes is satisfuing the City's inclusionary housing requirement for its properties within the Community Facilities District by payment of an in-lieu fee to the City concurrent with its pulling of building permits.
Utilities. All typical urban utility services for finished lots will be extended to the lots. These utilities include electric power, natural gas, telephone, cable television, water, refuse, and sanitary sewer and storm water facilities. The City provides water, sewer, refuse and storm water facilities, and police and fire services. Pacific Gas & Electric provides natural gas and the Sacramento Municipal Utility District (SMUD) provides electric service. Comcast provides cable service. tSpectfi.c ptn tnfrastruc . The SPIF is administered by the City for the purposes of collecting impact fees for plan area wide improvements for the construction of roadways, water, sewer, drainage, dry utilities, recycled water and habitat mitigation in the Folsom Plan Area. The purpose of the SPIF is to require each landowner to pay its fair share of Folsom Plan Area area-wide improvements and to be reimbursed for any amount expended in excess of a landowner's fair share requirement. Under the terms of the SPIF Ordinance adopted by the City, property owners in the Folsom Plan Area will be eligible to enter into an agreement with the City and receive future reimbursements (that are convertible to fee credits for use within the owner's property) in exchange for the construction of eligible SPIF improvements. Based on the amount of improvements eligible for SPIF reimbursement, all of the properties within the Community Facilities District are anticipated to fully cover their SPIF obligations through the conversion of these SPIF reimbursements to SPIF fee credits. After applying the SPIF reimbursements as SPIF fee credits to all properties in the Community Facilities District, all amounts expended in excess of the project's SPIF obligation are expected to be reimbursed from the City as other SPIF fees are collected in the Folsom Plan Area.
Within the Folsom Plan Area, initial development will be required to pay a "SPIF Set-Aside" component to address initial water and sewer facility costs. This is a loan of SPIF collections to help the cash flow for the initial water and sewer costs. It will be repaid or equalized to all properties through the SPIF program as well as through CFD 18. The SPIF Set-Aside will apply to the first 2,500 Folsom Plan Area dwelling units that would be subject to the SPIF. A portion of the SPIF will be required to be paid regardless of whether a developer/property owner has advance-funded eligible SPIF infrastructure and has executed a Fee Reimbursement Agreement through the City. An exception to this rule is that a property owner who constructs certain water or sewer infrastructure for which the SPIF Set-Aside is being collected may take a credit against the SPIF Set-Aside.
In addition, in August 2020, the City approved an ordinance amending certain provisions of the SPIF ordinance to include a new SPIF - Offsite Water Set-Aside. This new SPIF - Offsite Water Set- Aside will be payable at the building permit stage and will not be eligible to be offset by fee credits.l 4r66-0679-1203.8
50
11/08/2022 Item No.12.
Property Ownership
The information in this section has been provided by Lennar Homes, the Appraisal or other sources that the City believes to be reliable. No information has been provided directly by TNHC Northern California and Anthem United. The City and the Underwriter believe this information to be reliableo but can give no assurances that it is accurate or complete. There may be material adverse changes in this information after the date of this Official Statement.
Information in this section is included because it may be considered relevant to some investors to an informed evaluation and analysis of the taxable property within the Community Facilities District and any existing or future improvements thereon as security for the Bonds. The information contained in this section does not guarantee that property ownership will not change or that the current or any subsequent property owners will pay the Special Tax when due. In facto as described herein, ownership of much of the Taxable Property in the Community X'acilities District will change prior to, or in connection with, development thereof. The Special Tax will constitute a lien on parcels subject to taxation within the Community Facilities District and not a personal indebtedness of the owners of property within the Community Facilities District. There is no assurance that the present propefi owners or any subsequent owners will have the abitity to pay the Special Taxes or that, even if they have the ability, they will choose to pay the Special Taxes. An owner may elect to not pay the Special Taxes when due and cannot be legally compelled to do so.
Neither the City nor any Bond Owner will have the ability at any time to seek payment directly from the owners of property within the Community Facilities District of the Special Tax or the principal or interest on the Local Obligationso or the ability to control who becomes a subsequent owner of any property within the Community Facilities District.
As of September 15,2022, the Taxable Property within the Community Facilities District was owned by Lennar Homes, the Landbank, Anthem United, TNHC Northern California, and individual homeowners. At full buildout, the Community Facilities District is expected to include 1,025 single family homes. Lennar Homes is utilizing a land bank for a portion of its properties within the Community Facilities District, as discussed below.
As of October 15,2022, the Landbank owned 437lots within the Community Facilities District, and Lennar Homes has an option to acquire these lots over time pursuant to a takedown schedule.
Table l4
City of Folsom
Communities Facilities District No.20 (Russell Ranch)
Lennar Homes - Status of Ownership as of October 15,2022 Categorv
Completed Homes - Conveyed to Individual Homeowners
Completed Homes - Sold But Not Yet Conveyed to Individual Homeowners Completed Model Homes Owned by Lennar Homes
Production Homes Under Construction - Owned by Lennar Homes Production Homes Under Construction - Owned by the Landbank Vacant Finished Lots - Owned by Lennar Homes
Vacant Finished Lots - Owned by the Landbank
Vacant Partially Improved Lots - Owned by Lennar Homes
Vacant Partially Improved Lots - Owned by the Landbank
Total:
Source: Lennar Homes.
Number
0 0
I2
44 58
20 379
118
0 631
4166-0679-1203.8
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11/08/2022 Item No.12.
Lennar Homes.
General. Lennar Homes is based in Irvine, California and has been in the business of developing residential real estate communities in California since 1996. Lennar Homes is wholly-owned by U.S. Home, LLC, a Delaware limited liability company ("U.S. Home"). U.S. Home is wholly-owned by Lennar Corporation, which is based in Miami, Florida ("Lennar Corporation"). Founded in 7954, Lennar Corporation completed its initial public offering in l97l and listed its common stock on the New York Stock Exchange in 1972. Lennar Corporation's Class A and Class B common stock are listed on the New York Stock Exchange under the symbols .'LEN" and "LEN.B." respectively. Lennar Corporation is one of the largest homebuilders in the United States based on home sales revenues and net earnings, and operates under a number of brand names, including Lennar Homes and U.S. Home. Lennar Homes primarily develops residential communities both within the Lennar Corporation family of builders and through consolidated and unconsolidated partnerships in which Lennar Homes maintains an interest.
Lennar Corporation is subject to the informational requirements of the Securities Exchange Act of 1934, as amended, and, in accordance therewith, files reports, proxy statements, and other information, including financial statements, with the Securities and Exchange Commission (the "SEC"). Such filings, particularly the Annual Report on Form 10-K and its most recent Quarterly Report on Form l0-Q, set forth, among other things, certain data relative to the consolidated results of operations and financial position of Lennar Corporation and its consolidated subsidiaries, including Lennar Homes, as of such dates.
The SEC maintains a website that contains reports, proxy and other information statements and other information regarding registrants that file electronically with the SEC, including Lennar Corporation. The address of such website is www.sec.gov. All documents filed by Lennar Corporation 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 Lennar Corporation's Annual Report and related financial statements, prepared in accordance with generally accepted accounting standards, are available from Lennar Corporation's website at www.lennar.com.
The foregoing website addresses and references to filings with the SEC are given for reference and convenience only, and the information on suchwebsites and onfile with the SEC does notform a part of this Official Statement and is not incorporated by reference herein. No representation is made in this Official Statement as to the accuracy or adequacy of the information contained on suchwebsites. Lennar Corporation and Lennar Homes are not 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 websites in evaluating whether to buy, hold or sell the Bonds.
The Landbank Structure. In connection with a land banking transaction, Lennar Homes transferred 513 of its 631 lots within the Community Facilities District to the Landbank in February 2021 (the "Landbank Lots"). Lennar Homes retained ownership of the 118 townhome lots within the Community Facilities District. In connection therewith, Lennar Homes and the Landbank entered into that certain Option Agreement, dated February 25, 2021 (he "Lennar Option Agreement") whereby Lennar Homes has the option, but not the obligation, to purchase the Landbank Lots from the Landbank pursuant to a takedown schedule agreed upon between Lennar Homes and the Landbank.
Under the terms of the Lennar Option Agreement, the Landbank agreed to provide Lennar Homes the exclusive right and option to purchase the Landbank Lots in consideration for (a) an initial option payment, which payment has been made to the Landbank; (b) the covenants of Lennar Homes to timely 4166-0679-1203.8
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11/08/2022 Item No.12.
pay the additional payments under the Lennar Option Agreement on a monthly basis in arrears; and (c) upon exercise ofthe option, the payment ofthe purchase price for each set oflots acquired.
Lennar Homes' option to acquire the Landbank Lots is memorialized by that certain Memorandum of Option Agreement in the Official Records of Sacramento County on February 26,2021 as Instrument No. 202102262013.
In addition to the Lennar Option Agreement, Lennar Homes and the Landbank entered into a Construction Agreement (the "Lennar Construction Agreement") requiring Lennar Homes to cause the completion and satisfaction of certain on-site and offsite improvements to the Landbank Lots (to the extent not previously completed). The Lennar Option Agreement and Lennar Construction Agreement also grant Lennar Homes the right and license to entet upon the Landbank Lots for the purpose of, among other things, constructing model homes and production dwelling units on the Landbank Lots before Lennar Homes acquires the Landbank Lots from the Landbank.
Lennar Homes' planned development of the Landbank Lots includes the construction of 513 single family residential homes and the sale of such homes to individual homebuyers. During the term of the Lennar Option Agreement, Lennar Homes is obligated to pay all taxes on the Landbank Lots, including the Special Taxes.
The Landbank Lots must, in certain circumstances, be purchased in certain groups and in a specified order, although Lennar Homes may acquire more lots than scheduled and at earlier times so long as the minimum number of required lots are acquired by the applicable takedown date.
IREMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
4166-0679-1203.8
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11/08/2022 Item No.12.
Under the Lennar Option Agreement, the Landbank Lots must be acquired pursuant to the following schedule, although the Lennar Option Agreement contains provision allowing for one-month extensions on acquisition of lots subject to the payment of an extension fee and other conditions:
Takedown Schedule
Under Lennar Option Agreement - For Landbank Lots
Acquisition Date
03110/2022
04110/2022
05/10/2022
06/1012022
07110/2022
08110/2022
09/10/2022
10/1012022
1111012022
r211012022
0Ut0/2023
02/1012023
03/10/2023
0411012023
05110/2023
06/10/2023
07/10/2023
08/10/2023
0911012023
10110/2023
111t012023
121r012023
01/10/2024
02/10/2024
0311012024
0411012024
05/t0/2024
06/t0/2024
Total
Number
of Lots
t2
0 0
0 16
l6
l6
t6
t6
16 16
16 22
t6
l5
l2
l7
l6
t4
t2
12 12
t2
12 t2
l2
t2
165
s13
Cumulative Number
of Lots Acquired
12 12
12 l2
28 44
60 76
92 108
r24
140
162
178
193
205
222
238
252
264
276
288
300
312
324
336
348
513
Status as of
October 15.2022
Acquired
N/A
N/A
N/A
Acquired
Acquired
Acquired
Acquired
Source: Lennar Homes.
The option under the Lennar Option Agreement expires on the earlier of (i) the last date permitted for the final takedown specified on the takedown schedule and the expiration of any applicable cure period, or (ii) the date Lennar Homes has acquired all of the Landbank Lots in accordance with the Lennar Option Agreement. The failure to timely acquire lots could result in the termination of the option and Lennar Homes will no longer have a right to purchase any of the remaining units under the Lennar Option Agreement.
In the event that Lennar Homes does not exercise its option on the Landbank Lots or the right to purchase the Landbank Lots expires or is terminated, the Landbank, being an investor only and not a homebuilder, would likely attempt to sell such Landbank Lots to another merchant builder.
TNHC Northern California. TNHC Northern California owned 53 lots within the Community Facilities District as of September 15, 2022, which included 5 completed homes, 47 lots with homes 4166-0679-1203.8
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11/08/2022 Item No.12.
under construction and 1 vacant finished lot. TNHC Northern Califomia operates as a subsidiary of The New Home Company Inc., a privately held homebuilding company focused on the design, construction and sale of homes in major metropolitan areas within select growth markets in Califomia, Arizona, and Colorado (including coastal Southern California, the San Francisco Bay area, metro Sacramento, Phoenix and Denver). TNHC Northern California had obtained 294 total building permits as of September 15, 2022 for its properties in the Community Facilities District. TNHC Northern California's two product lines within the Community Facilities District are expected to range in size from 2,626 to 4,164 square feet and be priced from $1,269,990 to $1,471,080. Base home prices are subject to change and are exclusive of lot premiums, options and extras and any incentives or price reductions that may be offered.
Anthem United. Anthem United owned 7 completed homes within the Community Facilities District as of September 15, 2022. Anthem United is a real estate development company focused on the investment, development and management of commercial and residential properties. Anthem United has a portfolio of approximately 17,500 homes in various stages of development, 8.5 million square feet of commercial property and over 7,400 acres of land and has offices in California (Roseville) and Canada (Calgary, Edmonton and Vancouver). Anthem United's product line within the Community Facilities District is expected to range in size from 1,779 to 2,953 square feet and be priced from $718,500 to $801,500. Base home prices are subject to change and are exclusive of lot premiums, options and extras and any incentives or price reductions that may be offered.
Development Plan
Unless otherwise indicated, the information provided in this section has been provided by Lennar Homes and has been included because it may be considered relevant to an informed evaluation and analysis of the Bonds and the Community Facilities District. No assurance can be given, howevero that the proposed development of the property within the Community Facilities District will occur in a timely manner or in the configuration or to the density described hereino or that Lennar Homes, TNHC Northern California, and Anthem Unitedo any owners or affiliates thereofo or any other current or subsequent property owners, will or will not retain ownership of its respective property within the Community Facilities District. The City, the Authority and the Underwriter can provide no assurances as to the accuracy of the information in this section.
Development within the Community Facilities District is entitled for a total of 1,027 units but is planned to include a total of 1,025 single family homes at full buildout. Earlier development plans for the Community Facilities District had anticipated a portion of the lots being developed for age-restricted homes. However, Lennar Homes currently has no plans to develop and sell age-restricted homes within the Community Facilities District and Lennar Homes is in the process of actively constructing and selling homes to individual homeowners.
Property within the Community Facilities District is in varying stages of development, including partially-improved lots, improved lots, homes under construction and completed homes, and it is anticipated that development will be completed in three main phases: Phase l, Phase 2 and Phase 3.
Phase 1 of the Community Facilities District includes the lots owned and being sold by TNHC Northern California and Anthem United and is planned to include 394 homes at the time of full buildout. Phase 2 and Phase 3 include the lots owned by Lennar Homes and the Landbank and are expected to include 389 homesand242homes,respectively,atthetimeoffullbuildout. AsofSeptember15,2022,334homesin total had sold and closed escrow to individual homebuyers within the Community Facilities District.
Accordingly, additional home development projects within the Community Facilities District have sold out and are no longer active. The following table is a summary of product types within the active projects being developed by the Homebuilders.
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11/08/2022 Item No.12.
Phase Proiect
Iron Ridge
(Anthem United)
Silver Crest
(TNHC Northem
Califomia)
Gold Hill
(TNHC Northem
Califomia)
Brass Pointe
(Lennar Homes)
Gold Cliff
(Lennar Homes)
Platinum Peak
(Lennar Homes)
Table 15
City of Folsom
Communities Facilities District No. 20 (Russell Ranch)
Summary of Active Projects by Product Type
Living Area
(Sq. Ft.) Stories Bedrooms Bathrooms
1,779 1 3 2.0
2,407 2 4 3.0
2,729 2 4 3.0
2,9s3 2 5 4.0
2,626
3,000
3,s03
3,502
Garage Base Price
$7 1 8,500
765,500
784,500
80 1,500
$1,269,990
1.449,990
1,424,990
1,471,080
$1,300,000
I,400,000
1,400,000
$774,990
842,990
871,990
906,990
$903,990
t,022,990
1,094,990
1,161,990
2 J
3 3
3 3
3 3
1 2
2 2
2 2
2 2
3 3
2 2
2 3
3 3
3 4
5 5
4 4
5 4
4 5
4 4
5 4
5 4
5 5
5 6
2 2
2 2
1 1
2 1
2 2
2 I
2 2
)
I
I
2 2
2 3
2,966
3,468
4,r64
3.5 3.5
4.5 4.5
3.5 4.5
4.5 3.0
3.0 3.0
3.5 3.0
4.0 3.5
4.5 3.5
5.5 4.5
4.5 5.5
3 2,150
1 111
3,046
3,1 59
2,713
3,391
3,624
3,940
3,467
3,5s4
4,042
4,216
4,242
$ r,151,990
1,1 85,990
1,201,990
1,223,990
1,280,990
Source: The Appraisal and Lennar Homes.
Public project amenities include a future 10-acre neighborhood park (of which 5.2 acres are located within the Community Facilities District), situated next to a future elementary school site (which is located primarily within the Community Facilities District). The community will also feature a network of nearly 10 miles of on- and off-street bicycle and pedestrian trails. While the open space, trails and common area landscaping have been developed by the Original Master Developer and being developed currently by Lennar Homes, the park and school sites will be transferred to the City of Folsom and the Folsom-Cordova Unified School District, respectively, for future development. Additionally, undisturbed natural preserve areas have been set aside to protect sensitive biological habitat and provide passive open spaces throughout the community.
Private amenities within the Community Facilities District will include an approximately 7-aue private clubhouse site situated on a part of the property that will allow residents to enjoy spectacular views of the valley and to the south, and will feature a swimming pool, BBQ areas, and other outdoor amenities, as well as interior meeting, fitness, dining and entertainment amenities. The private amenities and private gated areas will be owned and maintained by a homeowners' association.
The map on the following page reflects the lot mix and the phases of development within the Community Facilities District reflecting planned development of 1,025 total units. 4166-0679-t203.8
56
11/08/2022 Item No.12.
City of Folsom
Community Facilities District No.20 (Russell Ranch)
Master Plan
* ,.i, l
t.!rl fr{!r r\tflBrt
Russell Rarr{rh
llttrlEr
Status of Development and Development Plan of X'inance for Lennar Homes To date, final maps have been approved and recorded for all Taxable Property within the Community Facilities District, except for 1 18 townhome lots owned by Lennar Homes. The only remaining discretionary entitlements within the Community Facilities District are design review approval and the recordation of a small lot final map for the I 18 townhome lots.
A significant amount of onsite and offsite infrastructure improvements have been completed in the Community Facilities District. The onsite and offsite infrastructure improvements for the 394 homes expected in Phase I of the Community Facilities District have been completed and are substantially complete for the 242 homes expected in Phase 3 of the Community Facilities District. Lennar Homes is in the process of completing the remaining onsite and offsite infrastructure improvements for the 389 homes expected in Phase 2 of the Community Facilities District and anticipates completion by the first quarter of2023.
As of September 15, 2022 (the date of value of the Appraisal), as summarized in the table immediately below, the Community Facilities District included 334 completed homes that had closed escrow to individual homeowners, an additional25 completed homes that had not yet closed escrow to individual homeowners, 136 homes under construction, 141 vacant finished lots, and 389 vacant and partially improved lots.
---*- '- l'
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11/08/2022 Item No.12.
Table 16
City of Folsom
Communities Facilities District No.20 (Russell Ranch)
Development Status as of September 15,2022
Completed
Homes
Building Permits
Pulled for
Developer Properties(r)
Homes Under
Construction
Vacant
Finished Lots
Vacant Partially
Improved Lots
Individual Homeowners
Anthem United
TNHC Northern California
Lennar Homes(2)
TOTALS
334 N/A
7 53
106
166
N/A
0 47
89 136
N/A
0 I
140
l4l
N/A
0 0
389
389
7 5
t3
359
(l) Does not include building permits pulled for the 334 homes that have closed to individual homeowners (2) Includes lots owned by the Landbank.
Source: Lennar Homes, NBS and the Appraisal.
Lennar Homes. As of October 15,2022, Lennar Homes owned 12 completed model homes, 44 homes that were under construction, 20 vacant finished lots, and 1 18 vacant and partially improved lots within the Community Facilities District. Lennar Homes had obtained I14 building permits as of that same date. The remainder of the 631 lots that Lennar Homes acquired within the Community Facilities District (which totals 437 lots) were owned by the Landbank, and Lennar Homes has the option, but not the obligation, to purchase these lots from the Landbank pursuant to the takedown schedule summarized above. See "PROPOSED PROPERTY DEVELOPMENT - Property Ownership - Lennar Homes - The Landbank Structure." The Taxable Property owned by Lennar Homes and the Landbank comprises the aforementioned Phase 2 and Phase 3 developments within the Community Facilities District.
At full buildout, the properly being developed by Lennar Homes within the Community Facilities District is expected to include 631 homes, consisting of 513 single family detached homes and 118 townhomes. Of these 631 homes, 389 homes are located within the portion of the Community Facilities District known as Phase 2, and 242 homes are located within the portion of the Community Facilities District known as Phase 3. Despite the nomenclature, Lennar Homes expects the Phase 3 Taxable Property to be fully developed before the Phase 2Taxable Property is fully developed.
Phase 2. The anticipated product mix for the 389 homes expected to be constructed within Phase 2 consists of 271 single family detached homes and I 1 8 townhomes . The 27 I single family homes are expected to include 3 product types: (i) 63 Brass Point units ranging in size from 2,150 square feet to 3,159 square feet and with estimated base home prices ranging from $775,000 to $907,000; (ii) 96 Silver Knoll units ranging in size from 2,307 square feet to 2,968 square feet and with estimated base home prices ranging from $770,000 to $855,000; and (ii1) 112 Sterling Hills units ranging in size from 1,991 square feet to 3,312 square feet and with estimated base home prices ranging from $754,000 to $950,000. Base home prices are subject to change and are exclusive of lot premiums, options and extras and any incentives or price reductions that may be offered. Lennar Homes is in the process of designing the 1 18 townhomes. Lennar Homes anticipates commencing home construction within Phase 2 by December 2022 and closing escrow on the first homes in Phase 2 by June 2023 .
Phase 3. The anticipated product mix for the 242 single family homes expected to be constructed within Phase 3 consists of 3 product types: (i) 83 Brass Point units ranging in size from 2,150 square feet to 3,159 square feet and with estimated base home prices ranging from $775,000 to $907,000; 4166-0679-1203.8
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(ii) 6l Gold Cliff units ranging in size from2,713 square feet to 3,940 square feet and with estimated base home prices ranging from $904,000 to $1,162,000; and (iii) 98 Platinum units ranging in size from3,467 square feet to 4,242 sqtare feet and with estimated base home prices ranging from $1,152,000 to $1,281,000. Base home prices are subject to change and are exclusive of lot premiums, options and extras and any incentives or price reductions that may be offered. Lennar Homes has commenced home construction and sales within Phase 3 and anticipates closing escrow on its final home in Phase 3 by November 2026.
No assurance can be given that home construction and sales will be carried out on the schedule and according to the plans outlined herein, or that the home construction and sale plans or base prices set forth above will not change after the date of this Official Statement. Additionally, homes sold may not result in closed escrows as sales contracts are subject to cancellation. See "CERTAIN PJSKS TO BONDHOLDERS - Failure to Develop," "- Current Challenges to the Homebuilding Industry" and "- Increasing Mortgage Interest Rate s. "
Iryfrastructure and Intract Development.
Lennar Homes is responsible for completing the infrastructure and intract development required to fully develop the Taxable Property in Phase 2 and Phase 3. As of October 1,2022, the Phase 3 intract development was substantially complete, and Lennar Homes had made significant progress on the Phase 2 intract development. Lennar Homes has finished intract development on all 242 Phase 3 lots and expects to complete the intract development on all 389 Phase 2 lots in November 2022.
Lennar Homes is also in the process of completing the remaining infrastructure required for full development of the Community Facilities District. As of October 1,2022, Lennar Homes had completed construction of a hydro-modification basin for water runoff and a joint trench for, and grading of, the planned Empire Ranch Road. As of that same date, Lennar Homes was in the process of completing construction of Empire Ranch Road, which is expected to have completed by The other remaining required infrastructure for the Phase 2 and Phase 3 Taxable Property includes a sewer lift station, landscaping and which Lennar Homes anticipates having completed by the first quarter of 2023. As of October 1,2022, Lennar Homes had spent approximately $43.7 million on the infrastructure for Phase 2 and Phase 3 (excluding intract development costs) and expected to spend an additional approximately $13.1 million on infrastructure costs.
Development Plan of Finance.
To date, Lennar Homes has financed its land acquisition and various site development and homebuilding costs related to its property in the Community District through internally generated funds.
As of October 7,2022, Lennar Homes estimated the total cost of the Phase 2 and Phase 3 infrastructure and intract development to be approximately $99.7 million, of which approximately $80.7 million had been completed. As of that date, Lennar Homes expected to incur approximately $Ll million on remaining land development and land acquisition costs for its development project within the Community Facilities District. [Lennar Homes expects to use home sales revenues and internal funding to complete its development within the Community Facilities District and believes that it will have sufficient funds available to complete its planned development as described in this Official Statementl.
Although Lennar Homes expects to have sfficientfunds available to complete its development in the Community Facililies District as described in this Official Statement, there can be no assurance that amounts necessaly to finance the development costs will be available from Lennar Homes, Lennar Corporation or any other source when needed. Neither Lennar Corporation, nor any of its subsidiaries or related entities are under any legal obligation of any kind to expend funds for the development of and 4166-0679-1203.8
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construction of homes on its property in the Community Facilities District. Any contributions by Lennar Homes or Lennar Corporation to fund the costs of such development are entirely voluntary.
If and to the extent that internal funding, including but not limited to home sales revenues, are inadequate to pay the costs to complete the planned development by Lennar Homes within the Community Facilities District and other financing is not put into place, there could be a shortfall in the frndt required to complete the planned development by Lennar Homes in the Community Facilities District.
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, Lennar Homes has no actual lcnowledge of any impediment to construction or obtaining land use entitlements which could be reasonably expected to have a material adverse ffict on its ability to complete the planned development of its property within the Community Facilities District as described in the Official Statement. Although the information in this Official Statement reflects the current development expectations of Lennar Homes, 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. Lennar Homes 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 subiect to cancellation. See "CERTAIN RISKS TO BONDHOLDERS-Concentration of Ownership." COVID-19Impact
The planned development within the Community Facilities District is subject to disruption due to the COVID-I9 pandemic and related public health and governmental authorities' orders and actions, which could have a material adverse effect on the Homebuilders' ability to complete their proposed development within the Community Facilities District and sell completed homes in the time frames and budgets, and at the sales prices, described in this Official Statement.
Lennar Homes has not experienced any material increases in costs, or any development or home sale delays resulting from decisions to reduce financing for the projects in the Community Facilities District, inability to obtain financing, work stoppages, reduced attendance of workers, lack of or delays in the delivery of building materials or the ability to obtain necessary inspections and approvals, which Lennar Homes attributes to the COVID-19 pandemic; however, Lennar Homes, like all homebuilders has experienced significant increases in material costs as well as supply chain issues. To date, Lennar Homes has continued to fund and implement its projects as described in this Official Statement and intends to do so to complete such projects.
However, the development of Lennar Homes' projects (and the development of the projects of the other Homebuilders) within the Community Facilities District is subject to delays caused by the COVID- 19 pandemic. As the impacts caused by the outbreak evolve, there could be an adverse impact on the timing and costs of Lennar Homes' development (and the other Homebuilders' development as well) within the Community Facilities District. Lennar Homes cannot predict the ultimate effects of the COVID-I9 outbreak or whether any such effects would have a material adverse effect on the ability to develop its projects as planned.
The COVID-l9 outbreak is ongoing and, among other things, the ultimate geographic spread of the virus, the emergence and spread of new strains or variants of COVID-19, the duration and severity of the outbreak, the availability and acceptance ofeffective vaccines, adequate testing and treatments and the prevalence of widespread immunity to COVID- 1 9, and the economic and other actions that may be taken by governmental authorities to contain the outbreak or to address its impact remain uncertain. The 4166-0679-1203.8
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ultimate effects of COVID-I9 on the Community Facilities District, the Homebuilders' operations and financial condition, homebuyers' willingness and ability to pay the Special Tax when due, and the real estate market and United States economy in general are unknown. Such effects, if and as they arise, could have a material adverse effect on the ability to complete the development within the Community Facilities District and/or sell homes or lots as planned, and no assurance can be provided that the Homebuilders will be able to (a) complete in whole or in any part, or within any particular time, their construction of homes within the Community Facilities District; (b) avoid additional material increases in development costs or delays resulting from work stoppages, reduced attendance of workers, shortages or delays in the delivery of building materials, andlor delays in obtaining necessary inspections and approvals; or (c) sell homes, and close home sales or not experience purchase contract cancellations, due in each case to public health or governmental restrictions, further spread of COVID-I9, an economic downturn driven by the pandemic, or otherwise. See "CERTAIN RISKS TO BONDHOLDERS-Potential Impact of Global Health Crises or Concerns" herein.
CERTAIN RISKS TO BONDHOLDERS
This section provides a general overview of certain risk factors which should be considered, in addition to the other matters set forth in this Official Statement, in evaluating an investment in the Bonds.
This section is not meant to be a comprehensive or definitive discussion of the risks associated with an investment in the Bonds, and the order in which this information is presented does not necessarily reflect the relative importance of various risks. Potential investors in the Bonds are advised to consider the following factors, among others, and to review this entire Official Statement to obtain information essential to the making of an informed investment decision. Any one or more of the risk factors discussed below, among others, could lead to a decrease in the market value and/or in the marketability of the Bonds. There can be no assurance that other risk factors not discussed herein will not become material in the future.
Levy of the Special Tax
The principal source of payment of debt service on the Local Obligations, from which funds for the payment of the Bonds are derived, is the proceeds of the annual levy and collection of the Special Tax against property in the Community Facilities District. The annual levy of the Special Tax is subject to the Maximum Special Tax rates authorized within the Community Facilities District. The levies cannot be made at higher rates even if the failure to do so means that the estimated proceeds of the levy and collection of the Special Tax, together with other available moneys, will not be sufficient to pay debt service on the Local Obligations. Other funds which might be available include funds derived from the payment of delinquent Special Tax and funds derived from the tax sale or foreclosure and sale of related Taxable Property on which levies of the Special Tax are delinquent.
The levy of the Special Tax will rarely, if ever, result in a uniform relationship between the value of particular Taxable Property and the amount of the levy of the Special Tax against such parcels. Thus, there will rarely, if ever, be a uniform relationship between the value of such parcels and the proportionate share of debt service on the Local Obligations, and certainly not a direct relationship.
The Special Tax levied in any particular tax year on a Taxable Property is based upon the revenue needs and application of the Rate and Method of Apportionment. Application of the Rate and Method of Apportionment will, in turn, be dependent upon certain development factors with respect to each Taxable Property by comparison with similar development factors with respect to the other Taxable Property in the Community Facilities District. Thus, in addition to annual variations of the revenue needs from the Special Tax, the following are some of the factors which might cause the levy of the Special Tax on any particular Taxable Property to vary from the Special Tax that might otherwise be expected:
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a
a
Reduction in the number of Taxable Property for such reasons as acquisition of Taxable Property by the federal government or an agency thereof, asserting immunity (however, see "Exempt Properties" below) from taxation, thereby resulting in an increased tax burden on the remaining Taxable Property.
Failure of the related owners of Taxable Property to pay the Special Tax and delays in the collection of or inability to collect the Special Tax by tax sale or foreclosure and sale of the delinquent parcels, thereby resulting in an increased tax burden on the remaining parcels, subject to the related Maximum Special Tax.
Collection of Special Tax
In order for the City to pay debt service on the Local Obligations, from which funds for the payment of the Bonds are derived, it is necessary that the Special Tax levied against land in the Community Facilities District be paid in a timely manner. The City has established the Local Obligations Reserve Account under the Local Obligations Indenture in the amount of the Required Bond Reserve to pay debt service on the Local Obligations, in the event that a portion of the Special Taxes for the Local Obligations are not paid on time.
The Local Obligations Indenture provides that the Special Tax is to be collected in the same manner as ordinary ad valorem property taxes are collected and, except as provided in the special covenant for foreclosure described below and in the Mello-Roos Act, is to be 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. Pursuant to these procedures, if taxes are unpaid for a period of five years or more, the property is deeded to the State and then is subject to sale by the County.
Pursuant to the Mello-Roos Act, in the event of any delinquency in the payment of the Special Tax, the City may order the institution of a Superior Court action to foreclose the lien therefor within specified time limits. In such an action, the real property subject to the unpaid amount may be sold at judicial foreclosure sale. Such judicial foreclosure action is not mandatory. However, the City has covenanted that it will annually on or before September I of each year review the public records of the County of Sacramento relating to the collection of the Special Tax in order to determine the amount of the Special Tax collected in the prior Fiscal Year, and if it determines on the basis of such review that the amount so collected is deficient by more than 5Yo of the total amount of the Special Tax levied in such Fiscal Year, it will within 60 days thereafter institute foreclosure proceedings as authorized by the Mello- Roos Act in order to enforce the lien of the delinquent installments of the Special Tax against each lot or parcel of land in the Community Facilities District, and will diligently prosecute and pursue such foreclosure proceedings to judgment and sale; prcyidgd, that irrespective of the foregoing if the City determines on the basis of such review that property owned by any single property owner in the Community Facilities District is delinquent by more than $4,000 with respect to the Special Tax due and payable by such properly owner by such delinquency date, then the Community Facilities District will institute, prosecute and pursue such foreclosure proceedings in the time and manner provided herein against such property owner; and pfsvidgd further, that any actions taken to enforce delinquent Special Tax liens shall be taken only consistent with Sections 53356.1 through 53356.7, both inclusive, of the Mello-Roos Act; and provided further, that the City is not obligated under the Local Obligations Indenture to enforce the lien of any delinquent installment of the Special Tax for any Fiscal Year in which the City has received one hundred percent (100%) of the amount of such installment from the County pursuant to the Teeter Plan.
In the event that sales or foreclosures of properly are necessary, there could be a delay in payments to Owners of the Bonds pending such sales or the prosecution of foreclosure proceedings and 4166-0679-1203.8
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receipt by the City of the proceeds of sale if the Local Obligations Reserve Account with respect to the Local Obligations is depleted. See "SECURITY AND SOURCES OF PAYMENT FOR THE BONDS- Covenant for Foreclosure."
The City may be unable to make full or timely payment of debt service on the Local Obligations if property owners in the Community Facilities District fail to pay installments of the Special Tax when due, if the Local Obligations Reserve Account is depleted, or if the City is unable to sell related foreclosed parcels for amounts sufficient to cover the delinquent installments of the Special Tax.
Concentration of Ownership
Currently, a large portion of the Taxable Properly in the Community Facilities District is owned by the Homebuilders (including the Landbank), and consequently, a large portion of the Special Tax within the Community Facilities District will be paid by the Homebuilders until the homes are completed and sold. The Homebuilders are each in the process of building and selling completed homes to individual homeowners. No assurance can be given that the property sales will close when anticipated.
See "PROPOSED PROPERTY DEVELOPMENT-Property Ownership." Generally, the risk of delinquency or nonpayment of Special Taxes at levels which do not permit the timely payment of principal of and interest on the Bonds is inversely correlated to the diversity of ownership of Taxable Property within the Community Facilities District. The fact that a substantial portion of the property providing the ultimate security for the payment of Local Obligations is controlled by only a few owners means that timely payment of the respective Special Tax and, therefore, the Bonds, will depend initially upon the willingness and ability of these few owners to pay the Special Tax when due. The only assets of the Homebuilders that constitutes security for the Local Obligations are their real property holdings located within the Community Facilities District.
There can be no assurance that the remaining partially developed property within the Community Facilities District will be fully developed and that property ownership will be further diversified as a result. See "CERTAIN RISKS TO BONDHOLDERS-Failure to Develop." Payment of the Special Tax is Not a Personal Obligation of a Property Owner A PROPERTY OWNER IS NOT PERSONALLY OBLIGATED TO PAY THE SPECIAL TAX.
RATHER, THE SPECIAL TAXES ARE OBLIGATIONS ONLY AGAINST THE PROPERTY. IF THE
VALUE OF THE PARCELS OF PROPERTY IS NOT SUFFICIENT, TAKING INTO ACCOTINT
OTHER OBLIGATIONS ALSO PAYABLE THEREBY, TO FULLY DISCHARGE THE SPECIAL TAX, THE CITY WILL HAVE NO RECOURSE AGAINST THE PROPERTY OWNER.
Potential Early Redemption of Bonds from Prepaid Special Taxes Property owners within the Community Facilities District 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 special assessment district or community facilities district. Such payments will result in a redemption of the Bonds on the Interest Payment Date for which timely notice may be given under the Trust Agreement following the receipt of the prepayment. The resulting redemption of Bonds purchased at a price greater than par could reduce the otherwise expected yield on such Bonds. See "TFIE BONDS-Redemption Provisions-Extraordinary Redemptionfrom Prepayment of Special Taxes." 4166-06'79-1203 8
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Special Tax Delinquencies
The Special Taxes are billed to the properties within the Community Facilities District on the ad valorem property tax bills sent to owners of such properties. 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. In each year the County includes the Community Facilities District in the Teeter Plan, the County will be obligated to pay the City 100% of the amount of the Special Taxes actually levied in the Community Facilities District, regardless of any delinquencies. However, the County is required to terminate the Teeter Plan if two-thirds of the participants so petition the Board of Supervisors and may discontinue the Teeter Plan as to the Community Facilities District if the delinquency rate in the Community Facilities District exceeds 3o%. Moreover, the County determines annually whether to include a particular district in the Teeter Plan. $ss 6(-fsster Plan Termination" and "SECURITY AND SOURCES OF PAYMENT FOR THE BONDS-The Teeter Plan." Significant delinquencies in the payment of annual Special Tax installments, or delays in the prosecution of foreclosure proceedings to collect such Special Taxes, could result in a default in the payment of the debt service on the Bonds. See "-Bankruptcy" and "-FDIC/Federal Government Interests in Properties" below, for a discussion of the limitations on the City's ability to foreclose on the lien of the Special Taxes in certain circumstances and the policy of the Federal Deposit Insurance Corporation regarding the payment of special taxes.
Teeter Plan Termination
The County has implemented its Teeter Plan as an alternate procedure for the distribution of certain property tax and assessment levies on the secured roll. The County determines annually which special taxes and assessment levies to include in the Teeter Plan. Pursuant to its Teeter Plan, once the County determines to include special taxes and assessment levies in the Teeter Plan, the County provides the local agency and taxing area with full tax and assessment levies instead of actual tax and assessment collections. In return, the County is entitled to retain all delinquent tax and assessment payments, penalties and interest. Thus, the County's Teeter Plan may help protect Owners from the risk of delinquencies in the payment of Special Taxes. However, the County is entitled, and under certain circumstances could be required, to terminate its Teeter Plan with respect to all or part of the local agencies and taxing areas covered thereby. In addition, the County may decide not to include certain special taxes and assessment levies, including the Community Facilities District, in the Teeter Plan in any fiscal year. Any termination of the Teeter Plan with respect to the Community Facilities District would eliminate such protection from delinquent Special Taxes. See "SECURITY AND SOURCES OF PAYMENT FOR THE BONDS-The Teeter Plan."
Land Values
If a property owner defaults in the payment of the Special Tax, from which funds for the payment of the Bonds are derived, the City's only remedy is to foreclose on the delinquent properly in an attempt to obtain funds with which to pay the delinquent Special Tax. The value of taxable property in the Community Facilities District is therefore an important consideration in evaluating the security for the Bonds. Land values could be adversely affected by economic factors beyond the City's control, such as relocation of employers out of the area, stricter land use regulations, the absence of water, or destruction of properly caused by, among other eventualities, earthquake, flood or other natural disaster, or by environmental pollution or contamination.
Appraisal Risks
The Appraiser has estimated the market value of certain property in the Community Facilities District on the basis of certain assumptions which the Appraiser believes to be reasonable under the 4166-0679-t203.8
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circumstances. See the Appraisal included in APPENDIX G hereto. However, certain of the assumptions made by the Appraiser may prove to be untrue.
Although the City believes that the Appraiser's methodology and assumptions are reasonable under the circumstances, the Appraiser's aggregate value conclusions are expressions of professional opinion only. No assurance can be given that the aggregate values of property in the Community Facilities District are equal to or greater than the Appraiser's estimated values, nor can any assurance be given that such aggregate values will not decline during the period of time the Bonds are Outstanding.
The values of the property in the Community Facilities District can be adversely affected by a variety of factors, including, but not limited to, the occuffence of one or more of the special risk events discussed herein. A decline in the value of a parcel in the Community Facilities District could lower the ability or willingness of the owner of such parcel to pay Special Taxes when due and would decrease the amount recoverable at a foreclosure sale of such parcel.
See "THE COMMUNITY FACILITIES DISTRICT-Property Values" for a further discussion of estimated property values in the Community Facilities District.
Exempt Properties
Certain properties within the Community Facilities District are or may become exempt from the Special Tax in accordance with the Rate and Method of Apportionment. In addition, the Mello-Roos Act provides that properties or entities of the state, federal or local government are exempt from Special Tax; provided, however, that property acquired by a public entity through a negotiated transaction or by gift or devise, which is not otherwise exempt from the Special Tax, will continue to be subject to the Special Tax. In addition, the Mello-Roos Act provides that if property subject to Special Tax is acquired by a public entity through eminent domain proceedings, the obligation to pay Special Tax with respect to that property is to be treated as if it were a special assessment. Further, properties receiving a welfare exemption under subsection (g) of Section 214 of the California Revenue and Taxation Code are exempt from the Special Tax unless debt is outstanding and the property was subject to the Special Tax prior to receiving the exemption. Neither the City or Lennar Homes are aware of any property within the Community Facilities District currently receiving a welfare exemption. The constitutionality and operation of these provisions of the Mello-Roos Act have not been tested.
In particular, insofar as the Mello-Roos Act requires payment of a special tax by a federal entity acquiring property within the community facilities district, it may be unconstitutional. If for any reason property within the Community Facilities Dishict becomes exempt from taxation, then, subject to the Rate and Method of Apportionment, including the limitation on the maximum special tax rates set out in the Rate and Method of Apportionment, the special tax will be reallocated to the remaining taxable properties within the Community Facilities District. This would result in the owners of such property paying a greater amount of the Special Tax and could have an adverse impact upon the timely payment of the Special Tax. Moreover, if a substantial portion of land within the Community Facilities District becomes exempt from the Special Tax because of public ownership, or otherwise, the maximum rate that could be levied upon the remaining properly might not be sufficient to pay principal of and interest on the related Local Obligations and could adversely affect the ability of the City to pay principal of and interest on the. Bonds when due.
Maximum Special Tax
Within the limits of the Special Tax, the City may adjust the Special Tax on all property in the Community Facilities District to provide an amount required to pay interest on, principal of, Minimum Sinking Fund Payments for and redemption premiums, if any, on the Local Obligations, and the amount, 4166-0679-1203.8
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if any, necessary to cure delinquencies and replenish the Local Obligations Reserve Account to an amount equal to the Required Bond Reserve, and to pay all current Expenses for the Community Facilities District.
Although the Maximum Special Tax is designed to provide Special Tax revenues on an annual basis, there is no assurance that the Maximum Special Tax on the property in the Community Facilities District will be sufficient to pay the amounts required to be paid by the Local Obligations Indenture at all times, from which funds for the payment of the Bonds are derived. See "SECURITY AND SOURCES OF PAYMENT FOR TI{E BONDS-Special Tax Authorization" and APPENDIX A-('IL{TE, METHOD OF APPORTIONMENT AND MANNER OF COLLECTION OF SPECIAL TAX." Under the Rate and Method of Apportionment, the Facilities Special Tax levied in any fiscal year against any Assessor's Parcel (as defined in the Rate and Method of Apportionment) of Developed Property classified as Residential Property may not be increased as a consequence of delinquency or default by the owner or owners of any other parcel or parcels within the Community Facilities District by more than 10Yo above the amount that would have been levied against such Assessor's Parcel in that fiscal year had there never been any such delinquencies or defaults. Pursuant to the Rate and Method of Apportionment, property is considered "Residential Property" once a building permit could be issued for the purposes of constructing one or more Residential Units, including either single family detached homes or multi-family attached properties, such as apartments, and properly is considered "Developed Propefty" if a building permit for new construction was issued prior to June 30 of the previous fiscal year.
No Acceleration Provision
The Local Obligations Indenture does not contain a provision allowing for the acceleration of the Bonds in the event of a payment default or other default under the terms thereof.
Loss of Tax Exemption
As discussed under "TAX MATTERS," interest on the Bonds could become includable in gross income for purposes of federal income taxation retroactive to the date of issuance, as a result of acts or omissions of the City subsequent to the issuance of the Bonds in violation of the City's covenants with respect to the Bonds. Should interest become includable in gross income, the Bonds are not subject to redemption by reason thereof and will remain outstanding until maturity or unless earlier redeemed pursuant to optional or mandatory redemption.
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Parity Taxes and Special Assessments
The ability or willingness of a property owner in the Community Facilities District to pay the Special Tax, from which funds for the payment of the Bonds are derived, could be affected by the existence of other taxes and assessments imposed upon the property either currently existing or imposed in the future. The assessments and any penalties thereon constitute a lien against the lots and parcels of land on which they have been levied until they are paid. Such lien is on parity with all special taxes and special assessments levied by other agencies and is co-equal to and independent of the lien for general property taxes and other special assessments regardless of when they are imposed upon the same properly. The Special Tax has priority over all existing and future private liens imposed on the property.
In addition, other public agencies whose boundaries overlap those of the Community Facilities District could, with or in some circumstances without the consent of the owners of the land in the Community Facilities District, impose additional taxes or assessment liens on the property in the Community Facilities District in order to finance public improvements to be located inside or outside of the Community Facilities District.
Although the City has covenanted not to impose additional special taxes or assessments on property within the Community Facilities District except in accordance with the Local Obligations Indenture, the Authority and the Community Facilities District have no control over the ability of other entities and districts to issue indebtedness secured by special taxes or assessments payable from all or a portion of the property in the Community Facilities District. The imposition of additional liens on parity with the assessments could reduce the ability or willingness of the owners of parcels in the Community Facilities District to pay the Special Tax and increases the possibility that foreclosure proceeds will not be adequate to pay delinquent Special Taxes or the principal of and interest on the Local Obligations when due. As described under "FOLSOM PLAN AREA-Public Facilities Financing Plan," and "THE COMMTINITY FACILITIES DISTRICT-Overlapping Debt" the City plans to issue additional obligations secured by special taxes from time to time to finance backbone infrastructure and public improvements within the Folsom Plan Area and the boundaries of the Community Facilities District. For example, CFD 18 authorized the issuance of up to $200,000,000 in obligations. The special taxes securing such additional obligations would be payable on parity with the Special Taxes, and the City currently anticipates that an initial series of CFD 18 bonds will be issued to finance a portion of the Phase 2Water Facilities, although the timing and amount of any CFD 18 bons issuance is not yet known. In addition, property owners may choose to participate in a residential PACE program (a mechanism for financing energy efficiency and renewable energy improvements on private property), consenting to assessments on their parcels that would be on a parity with the Special Taxes.
Future Private Indebtedness
At the present time, the Community Facilities District includes properties that are undergoing development or are developed. In order to develop any improvements on that undeveloped land, the property owners will need to construct private improvements, the cost of which may increase the private debt for which the land in the Community Facilities District or other land or collateral owned by the property owners is security over that contemplated by the Local Obligations, and such increased debt could reduce the ability or desire of the propertz owners to pay the Special Tax secured by the land in the Community Facilities District. It should be noted however, that the lien of any private financing secured by the land within the Community Facilities District would be subordinate to the lien of the Special Tax.
Disclosures to Future Purchasers
The City has recorded notice of the Special Tax Lien in the Office of the County Recorder of the County of Sacramento. While title companies normally refer to such notices in title reports, there can be 4166-06'/9-1203.8
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no guarantee that such reference will be made or, if made, that a prospective purchaser or lender will consider such Special Tax obligation in the purchase of a parcel of land, a home or a commercial or industrial facility in the Community Facilities District or the lending of money thereon. The Mello-Roos Act requires the subdivider (or its agent or representative) of a subdivision to notifz a prospective purchaser or long-term lessor of any lot, parcel, or unit subject to a Mello-Roos special tax of the existence and maximum amount of such special tax using a statutorily prescribed form. State Civil Code Section 1102.6b requires that in the case of transfers other than those covered by the above requirement, the seller must at least make a good faith effort to notifli the prospective purchaser of the special tax lien in a format prescribed by statute. Failure by an owner of the property to comply with the above requirements, or failure by a purchaser or lessor to consider or understand the nature and existence ofthe Special Tax, could adversely affect the willingness and ability of the purchaser or lessor to pay the Special Tax, from which funds for the payment of the Bonds are derived, when due.
Bankruptcy
The payment of the Special Tax and the ability of the City to foreclose the lien of a delinquent unpaid tax, as discussed in "SECURITY AND SOURCES OF PAYMENT FOR THE BONDS," may be limited by bankruptcy, insolvency or other laws generally affecting creditors' rights or by the laws of the State relating tojudicial foreclosure. In addition, the prosecution ofa foreclosure action could be delayed due to crowded local court calendars or delays in the legal process. The various legal opinions to be delivered concurrently with the delivery of the Bonds (including Bond Counsel's approving legal opinion) will be qualified as to the enforceability of the various legal instruments by bankruptcy, insolvency, reorganization, moratorium and other similar laws affecting creditors' rights, by the application of equitable principles and by the exercise ofjudicial discretion in appropriate cases.
Although bankruptcy proceedings would not cause the lien of the Special Tax to become extinguished, bankruptcy of a property owner could result in a delay in prosecuting superior court foreclosure proceedings. The federal bankruptcy laws provide for an automatic stay of foreclosure and sale oftax sale proceedings, thereby delaying such proceedings perhaps for an extended period. Any such delays would increase the likelihood of a delay or default in payment of the principal of and interest on the Bonds and the possibility of delinquent tax installments not being paid in full. To the extent that property in the Community Facilities District continues to be owned by a limited number of property owners, the chances are increased that the Local Obligations Reserve Fund could be fully depleted during any such delay in obtaining payment of delinquent Special Taxes. As a result, sufficient moneys would not be available in the Local Obligations Reserve Account to make up shortfalls resulting from delinquent payments of the Special Tax and thereby to pay principal of and interest on the Local Obligations on a timely basis. The payment of the Special Tax and the ability of the City to foreclose the lien of a delinquent unpaid tax could be delayed by bankruptcy, reorganization, insolvency, moratorium or other similar laws affecting rights of creditors generally or by the laws of the State relating to judicial foreclosure. Further, should remedies be exercised under the federal bankruptcy laws against parcels in the Community Facilities District, payment of the Special Tax may be subordinated to bankruptcy law priorities. Thus, certain claims may have priority over the Special Tax in a bankruptcy proceeding even though they would not outside of a bankruptcy proceeding.
FDIC/Federal Government Interests in Properties
The ability of the City to foreclose the lien of delinquent unpaid Special Tax installments may be limited with regard to properties in which the Federal Deposit Insurance Corporation (the "FDIC"), the Drug Enforcement Agency, the Intemal Revenue Service, or other federal agency has or obtains an interest.
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Under the Supremacy Clause of the United States Constitution, unless Congress has otherwise provided, if a federal governmental entity owns a parcel that is subject to Special Taxes within the Community Facilities District but does not pay taxes and assessments levied on the parcel (including Special Taxes), the applicable state and local governments cannot foreclose on the parcel to collect the delinquent taxes and assessments. Moreover, unless Congress has otherwise provided, if the federal government has a mortgage interest in the parcel and the City wishes to foreclose on the parcel as a result of delinquent Special Taxes, the property cannot be sold at a foreclosure sale unless it can be sold for an amount sufficient to pay delinquent taxes and assessments on parity with the Special Taxes and preserve the federal government's mortgage interest. ln Rust v. Johnson, 597 F .2d 17 4 (1979), the United States Court of Appeal, Ninth Circuit held that the Federal National Mortgage Association ("FNMA") is a federal instrumentality for purposes of this doctrine, and not a private entity, and that, as a result, an exercise of state power over a mortgage interest held by FNMA constitutes an exercise of state power over property of the United States.
Neither the Authority nor the City have undertaken to determine whether any federal governmental entity currently has, or is likely to acquire, any interest (including a mortgage interest) in any of the parcels subject to the Special Taxes within the Community Facilities District, and therefore expresses no view concerning the likelihood that the risks described above will materialize while the Bonds are outstanding.
In the event that any financial institution making any loan which is secured by real property within the Community Facilities District is taken over by the FDIC, and prior thereto or thereafter the loan or loans go into default, then the ability of the Authority to collect interest and penalties specified by State law and to foreclose the lien of delinquent unpaid Special Taxes may be limited.
The FDIC's policy statement regarding the payment of state and local real properly taxes (the "Policy Statement") provides that properly owned by the FDIC is subject to state and local real property taxes only if those taxes are assessed according to the proper[z's value, and that the FDIC is immune from real property taxes assessed on any basis other than property value. According to the Policy Statement, the FDIC will pay its property tax obligations when they become due and payable and will pay claims for delinquent property taxes as promptly as is consistent with sound business practice and the orderly administration of the institution's affairs, unless abandonment of the FDIC's interest in the property is appropriate. The FDIC will pay claims for interest on delinquent property taxes owed at the rate provided under state law, to the extent the interest payment obligation is secured by a valid lien. The FDIC will not pay any amounts in the nature of fines or penalties and will not pay nor recognize liens for such amounts.
If any property taxes (including interest) on FDIC-owned property are secured by a valid lien (in effect before the property became owned by the FDIC), the FDIC will pay those claims. The Policy Statement further provides that no property of the FDIC is subject to levy, attachment, garnishment, foreclosure or sale without the FDIC's consent. In addition, the FDIC will not permit a lien or security interest held by the FDIC to be eliminated by foreclosure without the FDIC's consent.
The Policy Statement states that the FDIC generally will not pay non-ad valorem taxes, including special assessments, on property in which it has a fee interest unless the amount of tax is fixed at the time that the FDIC acquires its fee interest in the property, nor will it recognize the validity of any lien to the extent it purports to secure the payment of any such amounts. Special taxes imposed under the Mello- Roos Act and a special tax formula which determines the special tax due each year are specifically identified in the Policy Statement as being imposed each year and therefore covered by the FDIC's federal immunity. The Ninth Circuit has issued a ruling on August 28,2001, in which it determined that the FDIC, as a federal agency, is exempt from Mello-Roos special taxes. According to information available from the Sacramento County assessment roll, the FDIC does not currently own any of the property in the Community Facilities District.
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The Authority and the City are unable to predict what effect the application of the Policy Statement would have in the event of a delinquency in the payment of Special Taxes on a parcel within the Community Facilities District 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 could reduce or eliminate the number of persons willing to purchase a parcel at foreclosure sale. Such an outcome could cause a draw on the reserve account for the Local Obligations and perhaps, ultimately, if enough property were to become owned by the FDIC, a default in payment on the Local Obligations and the Bonds.
Zoningand Land Use Decisions
The Special Taxes, from which funds for the payment of the Bonds are derived, are to be levied annually based upon the land use categories in effect for the property. Decisions made by the City Council, which has control over zoning and land use decisions for property in the City, will affect the prospective use of the property and, therefore, the tax base for the Special Tax. The Rate and Method of Apportionment does not permit land use changes to reduce the tax base to below the Special Tax Requirement.
Ballot Initiatives and Measures
From time to time constitutional initiatives or other initiative measures may be adopted by State voters or voters of the City. For example, Measure W, adopted by City residents in November 2004, required, among other things, that residents north of State Highway 50 not bear the cost for infrastructure and public facilities serving the Folsom Plan Area. The adoption of any such initiative in the future might place limitations on the ability of the State or any political subdivisions thereof, including the Authority or the City, to increase revenues or to increase appropriations, the ability of the landowners to complete their developments, or the ability of the City to collect the Special Tax.
Shapiro v. San Diego
On August 1, 2014, the California Court of Appeal, Fourth Appellate District, Division One, issued its opini,on in Shapiro v. San Diego City Council, ll7 Cal. Rptr. 2d 631,96 Cal. App. 4ft 90+ (2002). The case involved a Convention Center Facilities District (the "CCFD") established by the City of San Diego, much like a community facilities district established under the provisions of the Mello- Roos Act. The CCFD is comprised of all of the real property in all of the City of San Diego. However, the special tax to be levied within the CCFD was to be levied only on hotel properties.
At the election to authorize such special tax, the electorate was limited to owners of hotel properties and lessees of certain of such hotel properties. Thus, the election was a landowner election limited to owners and lessees of properties on which the special tax would be levied, and not a registered voter election. Such approach to determining who would constitute the qualified electors of the CCFD was based on Section 53326(c) of the Mello-Roos 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 XIII A, Section 4 thereof and Article XIII C, Section 2 thereof require that the electors in such an election be the registered voters within the district.
In the case of the CCFD, at the time of the election there were many, many registered voters within the CCFD (viz, all of the registered voters in the City of San Diego). There were no registered voters within the Community Facilities District at the time of the election to authorize the Special Tax. In City of San Diego, the Court expressly stated that it was not addressing the validity of landowner voting 4166-0679-1203.8
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to impose special taxes pursuant to the Mello-Roos Act in situations where there are fewer than 12 registered voters. Thus, by its terms, the Court's holding does not apply to the Special Tax election in the Community Facilities District. Moreover, Section 53341of the Mello-Roos Act provides that any'oaction or proceeding to attack, review, set aside, void or annul the levy of a special tax...shall be commenced within 30 days after the special tax is approved by the voters." The Special Tax with respect to the Community Facilities District was approved by the voters on November 14, 2077. Based on Section 53341 of the Mello-Roos Act and its analysis of existing laws, regulations, rulings and court decisions, the City does not believe that a challenge to the Special Tax may now be brought.
Recent Changes to Federal Income Tax Law
H.R. I of the I15thU.S.CongresswasenactedintolawonDecember22,2017 (the"TaxAct").
The Tax Act makes significant changes to many aspects of the Code. The Community Facilities District, the City, the Authority and Lennar Homes cannot predict the effect that the Tax Act may have on the cost of home ownership, the price of homes in the Community Facilities District, the rate at which homes in the Community Facilities District are sold to individual homeowners by the Homebuilders, the ability or willingness of homeowners to pay Special Tax or property taxes on Taxable Property within the Community Facilities District, or the values contained in this Official Statement or in the Appraisal.
Risks of Real Estate Secured Investments Generally
The owners of the Bonds 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 Community Facilities 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, including as a result of tax reform; (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) increased construction costs, workforce shortages, supply chain disruptions or other similar factors affecting the development, financing or marketing capabilities of the Developer; (iv) federal, state and local regulations, including environmental, land use, zoning and building requirements; and (v) natural disasters (including, without limitation, earthquakes, fires and floods), which may result in uninsured losses. There can be no assurance that land development operations within the Community Facilities District will not be adversely affected by these risks.
No assurance can be given that the Homebuilders or any other current or future homeowners within the Community Facilities District will pay the Special Tax in the future or that they will be able to pay such Special Tax on a timely basis. $se ('-B4nkruptcy" below, for a discussion of certain limitations on the Community Facilities District's ability to pursue judicial proceedings with respect to delinquent parcels. Further, many homes within the Community Facilities District will have a higher- than-average price point as compared to other homes in the region, which may impact the absorption of the residential units within the Community Facilities District.
Current Challenges to the Homebuilding Industry
The pace of homebuilding in the Community Facilities District may be adversely affected by a variety of factors, including changes in economic conditions, interest rates, water shortages, and other similar factors, and recently including workforce shortages and supply chain disruptions. For example, obtaining garage doors and window shortages have recently been challenging for home builders generally. Additionally, some California municipalities have been experiencing supply chain disruptions for the electrical transformers and water meters needed for new development, having been advised in 4166-0679-1203.8
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some cases of up to a 2-year delay for new electrical transformer orders. Lennar Homes is not currently aware of any anticipated electrical transformer supply chain disruptions for the development within the Community Facilities District. Additionally, the City has taken steps to prevent a water meter supply chain disruption. The City has made arrangements with a supplier to have approximately 1,000 new water meters set aside for its future use. Also, City staff have obtained authorization from the City's City Council to purchase additional new water meters as needed for new development in the City so that such purchases can be made expeditiously and without the need for fuither City Council action. However, no assurance can be given that supply chain disruptions for the materials needed to complete development within the Community Facilities District will not occur.
Increasing Mortgage Interest Rates
Most of the purchasers of Homebuilders' homes finance their acquisitions with mortgage financing. As such, rising interest rates, decreased availability of mortgage financing or of certain mortgage programs, higher down payment requirements or increased monthly mortgage costs could have a negative impact on the estimated absorption rates of each Homebuilder's planned for-sale homes in the Community Facilities District. Further, a combination of higher mortgage rates, delays in construction stemming from delays in the supply chain, homebuyers' inability to sell their existing homes and adverse changes in local, regional or national economic conditions, among other factors, could contribute to an increase in each Homebuilder's rate of home order cancellations. An increase in the level of such cancellations could similarly have a negative impact on the estimated absorption rates of the Homebuilders' planned for-sale homes in the Community Facilities District.
Failure to Develop
Land development operations are subject to comprehensive federal, State and local regulations.
Approval is required from various agencies in connection with the layout and design of developments, the nature and extent of improvements, construction activity, land use, zoning, school and health requirements, as well as numerous other matters. It is possible that the approvals necessary to complete development of all taxable property within the Community Facilities District are not obtained on a timely basis or that litigation could be filed regarding approvals. Failure to obtain any such agency approval or satisSr any such government requirement or any litigation concerning such agency approval or government requirement could adversely affect land development operations. In addition, current and future governmental restrictions, including, but not limited to, governmental policies restricting or controlling development within the Community Facilities District, could be enacted, and future land use initiatives approved by the voters in the City could add more restrictions and requirements on development within the Community Facilities District, which restrictions may increase the cost to develop the Community Facilities District. One such governmental restriction is the requirement to install rooftop photovoltaic solar systems for residential buildings under three stories constructed starting in 2020. Costs associated with the installation of solar to the homebuilders may reduce the willingness of homebuilders to construct homes and increased costs of those homes may decrease the willingness of homeowners to buy such homes.
Moreover, there can be no assurance that the means and incentive to conduct land development operations within the Community Facilities District will not be adversely affected by a deterioration of the real estate market or economic conditions generally, future local, State and federal governmental policies relating to real estate development, the income tax treatment of real property ownership, acts of war or terrorism, or other factors.
A portion of the Taxable Property in the Community Facilities District is presently being developed. Undeveloped property is less valuable per acre than developed property, especially if there 4166-0679-1203.8
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are no plans to develop such property or if there are severe restrictions on the development of such properfy, and therefore provides less security to the owners of the Bonds should it be necessary for the City to foreclose due to the nonpayment of the Special Taxes. Delays in any property owner's ability to obtain discretionary approvals (including any delays caused by litigation) would in turn delay the construction of improvements and development of the Taxable Property within the Community Facilities District. Furthermore, an inability to develop the land within the Community Facilities District as curently proposed would result in slower rates of diversification of property ownership within the Community Facilities District. Concentration of ownership increases the risk of a failure to collect sufficient Special Taxes to pay debt service on the Bonds, all other things being equal. The timely payment of Special Taxes levied on undeveloped property depends primarily upon the ability and willingness of owners of such property to pay such taxes when due. Certain infrastructure improvements are required before development in the Community Facilities District is complete. Also, the Phase 2 Water Facilities described under the heading "PROPOSED PROPERTY DEVELOPMENT- Development Entitlements-Water Supply" are expected to be needed before the full development of the Folsom Plan Area, and the City estimates the Phase I Water Facilities have a sustained maximum day demand capacity of up to 2 million gallons. The City has engaged Peterson Brustad, Inc. to conduct an analysis, which could result in the City revising the estimated number of occupied dwelling units in the Folsom Plan Area that would likely exceed the Phase 1 Water Facility capacity. A slowdown in or cessation of the development of land within the Community Facilities District could reduce the ability and willingness of such owners to make Special Tax payments, and could greatly reduce the value of such property in the event it has to be foreclosed upon to collect delinquent special taxes. See 6(-Bsnft1up1"t:r above for a discussion of certain limitations on the ability of the City to pursue judicial foreclosure proceedings with respect to taxpayers with delinquent Special Taxes.
No Independent Review of Valuation or Viability of Completed Projects Property within the Community Facilities District is comprised of separate and distinct projects as described above. Payment of Special Taxes are inherently dependent upon the development within the Communify Facilities District, and, with respect to residential properties, the ability of the buyers of completed homes to pay. The Authority, the City, and the Underwriter have not reviewed any business plan for continued ownership, development andlor operation of the property within the Community Facilities District. Similarly, the Authority, the City and the Underwriter have not conducted any independent evaluation of the existing or projected economic viability or profitability of any of the plans for development, including review and/or evaluation of financial statements of any owner or developer of any parcel subject to the Special Tax. The information contained herein regarding the proposed development and the owners of the parcels within the Community Facilities District has been supplied by such owners and the Underwriter has not independently verified, makes no representation regarding, and does not accept any responsibility for the accuracy or completeness of such information.
In the event an owner or developer experiences financial difficulties, including difficulties resulting from construction or operation of the development within the Community Facilities District, the value of the affected parcel within the Community Facilities District may decline andlor such owner or developer may elect to refrain from payment of future Special Taxes for such parcel. See also "-Failure to Develop."
Potential Impact of Global Health Crises or Concerns
The ability or willingness of properbr owners to develop property in the Community Facilities District, the speed at which property owners develop properly in the Community Facilities District, the ability or willingness of property owners to sell property in the Community Facilities District, the speed at which property owners are able sell property in the Community Facilities District, the ability or 4166-0679-1203.8
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willingness of property owners to pay the Special Tax on property in the Community Facilities District when due, the value of the property in the Community Facilities District, or the ability of the City to collect delinquent Special Taxes through judicial foreclosure could be adversely affected by a global, national or localized outbreak of an infectious disease, such as COVID-19, a new strain of coronavirus, or by the fear of such an outbreak. The construction industry in the United States relies heavily on international trade for myriad construction materials. A global, national or localized outbreak could impact the availability of workers in countries producing construction materials, potentially resulting in supply chain shutdowns, which may result in substantial construction delays and project cost overruns.
The spread of COVID-I9 and the response to its spread has altered the behavior of businesses and people in a manner that has had and is continuing to have a negative impact on global and local economies, and which has resulted in a volatile stock market response and a general disruption of financial markets in the United States and globally. In response to COVID-19, Califomia instituted a statewide stay-at-home order and many California counties issued similar orders. While many COVID l9 restrictions in California and its various counties have ceased or been eased, the same or additional restrictions could be reinstituted if the outbreakagain worsens, due to the currently increasing spread of any variant of COVID-I9, or otherwise, or another similar event occurs. Essential services, including housing construction, were generally exempt from the orders and continued during the pandemic.
However, the economic and financial impacts of the stay-at-home orders and the economic downturn related to COVID-l9 are predicted to last for multiple years. Executive and legislative efforts have also been made during the COVID-I9 pandemic and may be made again in the future that either require or allow county tax collectors to cancel or waive penalties, costs and other charges associated with the delinquent payment of property taxes and the Special Tax upon a showing of property owner hardship caused by the COVID-I9 pandemic or related or similar stay-at-home orders. These efforts may affect a property owner's willingness to pay the Special Taxes before they are delinquent.
These events and other factors resulting from such an outbreak, particularly if prolonged, could result in, or increase the likelihood of, the occurrence of certain of the other potential adverse effects described in this Official Statement, including those relating to declines in the value of property, the failure to complete the development of property; the inability to sell, lease and/or operate property, the inability or unwillingness to pay the Special Tax, and delays in (or insufficient funds received from) the collection of delinquent Special Taxes through judicial foreclosure. A future outbreak of COVID-19 or another infectious disease or the threat of any such outbreak could have similar or additional adverse effects. The Authority cannot predict the ultimate effects of the COVID-I9 outbreak or any future outbreak or potential future outbreak of an infectious disease, or whether any such effects would have a material adverse effect on the ability to develop the Community Facilities District as planned, the ability or willingness of property owners to pay Special Taxes when due, or the ability of the Authority to pay debt service on the Bonds when due.
Cybersecurity
The City, like other public and private entities, relies on a large and complex technology environment to conduct its operations, and consequently faces the threat of cybersecurity incidents. The City and its departments could face cybersecurity threats including, but not limited to, hacking, viruses, malware and other attacks on computers and other sensitive digital networks and systems. Such cybersecurity incidents could result from unintentional events, or from deliberate attacks by unauthorized entities or individuals attempting to gain access to the City's information technology systems to misappropriate assets andlor information or to cause operational disruption and damage. The City maintains insurance to cover cybersecurity incidents, has cybersecurity risk management policies and procedures and periodically trains its employees on cybersecurity risks. The City, in addition to 4166-0679-1203.8
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conducting regular internal reviews, also hires external auditors to perform quarterly and annual reviews of its cybersecurity program.
While the City conducts periodic tests and reviews of its networks, no assurances can be given that such security and operational control measures will be successful in guarding against all cyber threats and attacks. New technical cyber vulnerabilities are frequently discovered in the United States. In addition, cyber attacks have become more sophisticated and increasingly are capable of impacting municipal control systems and components. The techniques used to obtain unauthorized access to, or to disable or degrade, electronic networks, computers, systems and solutions are rapidly evolving and have become increasingly complex and sophisticated. The results of any affack on the computer and information technology systems could have a material adverse impact on the operations of the City and damage the digital networks and systems. The City cannot predict the outcome of any such attack, nor the effect on the operations and finances of the City.
Geologic, Topographic and Climatic Conditions
The value of the property in the Community Facilities District in the future can be adversely affected by a variety of additional factors, particularly those which may affect infrastructure and other public improvements and private improvements on property and the continued habitability and enjoyment of such private improvements. Such additional factors include, without limitation, geologic conditions such as earthquakes, topographic conditions such as earth movements, landslides and floods and climatic conditions such as droughts and wildfire.
The occurrence of seismic activity in the Community Facilities District could result in substantial damage to properties in the Community Facilities District which, in turn, could substantially reduce the value of such properties and could affect the ability or willingness of the property owners to pay the Special Tax on their property. The Community Facilities District is not located in any existing special study zone delineated by the Chief of the Division of Mines and Geology of the State of California as an area of known active faults and is not otherwise known to be located within an area of any significant seismic activity. However, it may be expected that one or more of such conditions may occur and may result in damage to improvements of varying seriousness, that the damage may entail significant repair or replacement costs and that repair or replacement may never occur either because of the cost or because repair or replacement will not facilitate habitability or other use, or because other considerations preclude such repair or replacement. Under any of these circumstances, the value of the properly may decline.
In recent years, wildfires have caused extensive damage throughout the State. In some instances, entire neighborhoods have been destroyed. Several ofthe fires that occurred in recent years damaged or destroyed property in areas that were not previously considered to be at risk from such events. Some commentators believe that climate change will lead to even more frequent and more damaging wildfires in the future. In general, property damage due to wildfire could result in a significant decrease in the market value of property in the Community Facilities District and in the ability or willingness of property owners to pay Special Taxes.
The Community Facilities District is located within an area identified as a moderate fire hazard severity zone. More information regarding Fire Hazard Severity Zones can be found at the California Department of Forestry and Fire Protection website athltps:llfrap.fire.ca.gov, though such website is not incorporated herein by reference. The development within the Community Facilities District is subject to mitigation measures set forth in a fuel modification plan approved by the City Fire Department. The mitigation measures include, among others, limitations on the type of vegetation that may be planted within fuel modification zones established in open space areas along certain portions of the perimeter of the Community Facilities District, minimum setback of structures and irigation requirements of the fuel 4166-0679-1203.8
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modification zones. Maintenance of such zones is expected to initially be the responsibility of the property owners but upon build-out of the Community Facilities District and dedication of the open space to the City will be maintained by the City from funds provided through CFD 18. Homeowner's insurance is expected to be available to property owners within the Community Facilities District, and the coverage provided by such insurance typically insures against fire damage, although there is no assurance that homeowners within the Community Facilities District will purchase or maintain such insurance.
In the event of a wildfire, flood or other natural disaster, there may be significant damage to both property and infrastructure in the Community Facilities District. As a result, a substantial portion of the property owners may be unable or unwilling to pay the Special Taxes when due. In addition, the value of land in the Community Facilities District could be diminished in the aftermath of such a natural disaster, reducing the resulting proceeds of foreclosure sales in the event of delinquencies in the payment of the Special Taxes.
Folsom Dam, located on the American River within the jurisdictional boundaries of the City, was built in 1955 by the United States Army Corps of Engineers and is owned by the United States Bureau of Reclamation. An auxiliary spillway to enable the dam to more easily release water as it nears capacity was completed by the Army Corps of Engineers in October 2017. The City, together with the County and other local agencies, have established a hazard mitigation plan in the event of a dam failure. Geologic, topographic and climatic conditions, if severe, could result in damage to the dam which could further cause damage to the surrounding region and may limit water supply for the City and the Community Facilities District.
Endangered Species
During recent years, there has been an increase in activity at the State of California and federal level related to the possible listing of certain plant and animal species found in California as endangered species. An increase in the number of endangered species is expected to curtail development in a number of areas. The property within the Community Facilities District contains protected habitat and species, including but not limited to Swainson's hawk and tri-colored blackbird foraging habitats and wetlands regulated by state and federal agencies. Foraging habitat mitigation credits have been satisfied by the Original Master Developer for all backbone projects and all Russell Ranch project phases. At present, the property within the Community Facilities District is not known to be inhabited by any other plant or animal species listed as threatened or endangered under either the State or federal endangered species acts or which either the California Fish and Game Commission or the United States Fish and Wildlife Service has proposed for addition to the respective endangered species list. Notwithstanding this fact, new species are proposed to be added to the State and federal protected lists on a regular basis. Any action by the State or federal governments to protect species located on or adjacent to undeveloped property could negatively affect the developer's ability to complete development as planned. This, in turn, could reduce the likelihood of timely payment of the Special Tax, from which funds for the payment of the Bonds is derived, and would likely reduce the value of the land and the potential revenues available at a foreclosure sale for delinquent Special Taxes. See "CERTAIN RISKS TO BONDHOLDERS-Land Values." Ilazardous Substances
While governmental taxes, assessments, and charges are a common claim against the value of a parcel, other less common claims may be relevant. One of the most serious in terms of the potential reduction in the value of a parcel in the Community Facilities District 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 of the parcel relating to releases or threatened releases of hazardous substances. The federal Comprehensive Environmental Response, Compensation and Liability Act of 1980, sometimes referred to 4166-0679-1203.8
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as "CERCLA" or the "superfund Act," is the most well-known and widely applicable of these laws, but laws with regard to hazardous substances are also stringent and similar. Under many of these laws, the owner (or operator) is obligated to remedy a hazardous substance condition of property whether or not the owner (or operator) has anything to do with creating or handlingthehazardous substance. The effect, therefore, should any of the parcels in the Community Facilities District be affected by a hazardous substance is to reduce the marketability and value of the parcel by the costs of remedying the condition, because the purchaser, upon becoming owner, will become obligated to remedy the condition just as is the seller. Further, such liabilities may arise not simply from the existence of ahazardous substance but from the method of handling it. All of these possibilities could significantly affect the financial and legal liability of a properly owner to develop the affected parcel or other parcels, as well as the value of the property that is realizable upon a delinquency and foreclosure.
The appraised value of property in the Community Facilities District does not take into account the possible reduction in marketability and value of any of the parcels by reason of the possible liability of the owner (or operator) for the remedy of ahazardous substance condition of the parcel. While the City is not aware that the owner (or operator) of any of parcels has such a current liability with respect to any of the parcels, it is possible that such liabilities do currently exist and that the City is not aware of them.
Further, it is possible that liabilities may arise in the future with respect to any of the parcels resulting from the existence, currently, on the parcel of a substance presently classified as hazardous but which has not been released or the release of which is not presently threatened, or may arise in the future resulting from the existence, currently, on the parcel of a substance not presently classified as hazardous but which may in the future be so classified. Further, such liabilities may arise not simply from the existence of a hazardous substance but from the method of handling it. All of these possibilities could significantly affect the value of a parcel within the Community Facilities District that is realizable upon a delinquency.
Naturally Occurring Asbestos
California Air Resource Board ("CARB") adopted the Airborne Toxic Control Measure ("ATCM") for Construction, Grading, Quarrying and Surface Mining Operations. This statewide regulation is applicable to grading or any other projects disturbing soil in areas of California where asbestos may exist, as determined by the Califomia Geological Survey ("CGS"). The ATCM applies to any size construction project although there are additional notification requirements for projects that exceed one acre. Areas and parcels moderately likely to contain naturally occurring asbestos are located in the eastern parts of Sacramento County, including in the City.
Natural weathering or human disturbance can break the asbestiform minerals down to microscopic fibers, which are easily suspended in air. There is no health threat if asbestos fibers in soil remain undisturbed and do not become airborne. When inhaled, these thin fibers initate tissues and resist the body's natural defenses. Asbestos causes cancers of the lung (such as mesothelioma) and the lining of internal organs, asbestosis, and other diseases that inhibit lung function. Scientists consider certain types of asbestos fibers (i.e., tremolite fibers and similarly structured amphibole asbestos particles) that are frequently identified in the City to be more potent than other types in causing mesothelioma.
The EIR for the Folsom Plan Area required all new development to undertake a site investigation to determine the presence of naturally occurring asbestos and, if necessary, prepare and implement an asbestos dust control plan. The Original Master Developer has undertaken an asbestos dust control plan with respect to development within the Community Facilities District. 4t66-0679-1203.8
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The health concerns associated with the presence of naturally occurring asbestos in the Community Facilities District may adversely affect the marketability of property in the area.
LEGAL MATTERS
The validity of the Bonds, the Local Obligations and certain other legal matters are subject to the approving legal opinion of Orick, Herrington & Sutcliffe LLP, Bond Counsel to the Authority ("Bond Counsel"). Bond Counsel has not undertaken any responsibility for the accuracy, completeness or fairness of this Official Statement and expresses no opinion as to the matters set forth herein. Certain legal matters will be passed upon for the City and the Authority by the City Attorney. Certain legal matters relating to the Local Obligations will be passed upon by Orrick, Herrington & Sutcliffe LLP, as bond counsel to the City. The fees of Bond Counsel and Disclosure Counsel are contingent upon the issuance of the Bonds.
TAX MATTERS
In the opinion of Bond Counsel, based upon an analysis of existing laws, regulations, rulings and court decisions, and assuming, among other matters, the accuracy of certain representations and compliance with certain covenants, interest on the Bonds is excluded from gross income for federal income tax purposes under Section 103 of the Internal Revenue Code of i986 (the "Code") and is exempt from State of California personal income taxes. Bond Counsel is of the further opinion that interest on the Bonds is not a specific preference item for purposes of the federal individual alternative minimum tax.
Bond Counsel observes that, for tax years beginning after December 31, 2022, interest on the Bonds included in adjusted financial statement income of certain corporations is not excluded from the federal corporate alternative minimum tax. Bond Counsel expresses no opinion regarding any other tax consequences related to the ownership or disposition of, or the amount, accrual, or receipt of interest on, the Bonds. A complete copy of the proposed form of opinion of Bond Counsel is set forth as APPENDIX E hereto.
To the extent the issue price of any maturity of the Bonds is less than the amount to be paid at maturity of such Bonds (excluding amounts stated to be interest and payable at least annually over the term of such Bonds), the difference constitutes "original issue discount," the accrual of which, to the extent properly allocable to each Beneficial Owner thereof, is treated as interest on the Bonds which is excluded from gross income for federal income tax purposes and exempt from State of California personal income taxes. For this purpose, the issue price of a particular maturity of the Bonds is the first price at which a substantial amount of such maturity of the Bonds is sold to the public (excluding bond houses, brokers, or similar persons or organizations acting in the capacity of underwriters, placement agents or wholesalers). The original issue discount with respect to any maturity of the Bonds accrues daily over the term to maturity of such Bonds on the basis of a constant interest rate compounded semiannually (with straight-line interpolations between compounding dates). The accruing original issue discount is added to the adjusted basis of such Bonds to determine taxable gain or loss upon disposition (including sale, redemption, or payment on maturity) of such Bonds. Beneficial Owners of the Bonds should consult their own tax advisors with respect to the tax consequences of ownership of Bonds with original issue discount, including the treatment of Beneficial Owners who do not purchase such Bonds in the original offering to the public at the first price at which a substantial amount of such Bonds is sold to the public.
Bonds purchased, whether at original issuance or otherwise, for an amount higher than their principal amount payable at maturity (or, in some cases, at their earlier call date) ("Premium Bonds") will be treated as having amortizable bond premium. No deduction is allowable for the amortizable bond premium in the case of bonds, like the Premium Bonds, the interest on which is excluded from gross 4166-0679-1203.8
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income for federal income tax purposes. However, the amount of tax-exempt interest received, and a Beneficial Owner's basis in a Premium Bond, will be reduced by the amount of amortizable bond premium properly allocable to such Beneficial Owner. Beneficial Owners of Premium Bonds should consult their own tax advisors with respect to the proper treatment of amortizable bond premium in their particular circumstances.
The Code imposes various restrictions, conditions and requirements relating to the exclusion from gross income for federal income tax purposes of interest on obligations such as the Bonds. The Authority and the City have made certain representations and covenanted to comply with certain restrictions, conditions and requirements designed to ensure that interest on the Bonds will not be included in federal gross income. Inaccuracy of these representations or failure to comply with these covenants may result in interest on the Bonds being included in gross income for federal income tax purposes, possibly from the date of original issuance of the Bonds. The opinion of Bond Counsel assumes the accuracy of these representations and compliance with these covenants. Bond Counsel has not undertaken to determine (or to inform any person) whether any actions taken (or not taken), or events occurring (or not occurring), or any other matters coming to Bond Counsel's attention after the date of issuance of the Bonds may adversely affect the value of, or the tax status of interest on, the Bonds. Accordingly, the opinion of Bond Counsel is not intended to, and may not, be relied upon in connection with any such actions, events or matters.
Although Bond Counsel is of the opinion that interest on the Bonds is excluded from gross income for federal income tax purposes and is exempt from State of California personal income taxes, the ownership or disposition of, or the accrual or receipt of amounts treated as interest on, the Bonds may otherwise affecta Beneficial Owner's federal, state or local tax liability. The nature and extent of these other tax consequences depends upon the particular tax status of the Beneficial Owner or the Beneficial Owner's other items of income or deduction. Bond Counsel expresses no opinion regarding any such other tax consequences.
Current and future legislative proposals, if enacted into law, clarification of the Code or court decisions may cause interest on the Bonds to be subject, directly or indirectly, in whole or in part, to federal income taxation or to be subject to or exempted from state income taxation, or otherwise prevent Beneficial Owners from realizing the full current benefit of the tax status of such interest. The introduction or enactment of any such legislative proposals or clarification of the Code or court decisions may also affect, perhaps significantly, the market price for, or marketability of, the Bonds. Prospective purchasers of the Bonds should consult their own tax advisors regarding the potential impact of any pending or proposed federal or state tax legislation, regulations or litigation, as to which Bond Counsel expresses no opinion.
The opinion of Bond Counsel is based on current legal authority, covers certain matters not directly addressed by such authorities, and represents Bond Counsel's judgment as to the proper treatment of the Bonds for federal income tax purposes. It is not binding on the Internal Revenue Service ("IRS") or the courts. Furthermore, Bond Counsel cannot give and has not given any opinion or assurance about the future activities of the Authority or the City, or about the effect of future changes in the Code, the applicable regulations, the interpretation thereof or the enforcement thereof by the IRS. The Authority and the City have covenanted, however, to comply with the requirements of the Code.
Bond Counsel's engagement with respect to the Bonds ends with the issuance of the Bonds, and, unless separately engaged, Bond Counsel is not obligated to defend the Authority, the City or the Beneficial Owners regarding the tax-exempt status of the Bonds in the event of an audit examination by the IRS. Under current procedures, Beneficial Owners would have little, if any, right to participate in the audit examination process. Moreover, because achieving judicial review in connection with an audit 4166-0679-1203.8
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examination of tax-exempt bonds is difficult, obtaining an independent review of IRS positions with which the Authority or the City legitimately disagrees, may not be practicable. Any action of the IRS, including but not limited to selection of the Bonds for audit, or the course or result of such audit, or an audit of bonds presenting similar tax issues may affect the market price for, or the marketability of, the Bonds, and may cause the Authority, the City or the Beneficial Owners to incur significant expense.
Payments on the Bonds generally will be subject to U.S. information reporting and possibly to "backup withholding." Under Section 3406 of the Code and applicable U.S. Treasury Regulations issued thereunder, a non-corporate Beneficial Owner of Bonds may be subject to backup withholding with respect to "reportable payments," which include interest paid on the Bonds and the gross proceeds of a sale, exchange, redemption, retirement or other disposition of the Bonds. The payor will be required to deduct and withhold the prescribed amounts if (i) the payee fails to furnish a U.S. taxpayer identification number ("TIN") to the payor in the manner required, (ii) the IRS notifies the payor that the TIN furnished by the payee is incorrect, (iii) there has been a "notified payee underreporting" described in Section 3a06(c) of the Code or (iv) the payee fails to certifu under penalty of perjury that the payee is not subject to withholding under Section 3a06(aXl)(C) of the Code. Amounts withheld under the backup withholding rules may be refunded or credited against a Beneficial Owner's federal income tax liability, if any, provided that the required information is timely furnished to the IRS. Certain Beneficial Owners (including among others, corporations and certain tax-exempt organizations) are not subject to backup withholding. The failure to comply with the backup withholding rules may result in the imposition of penalties by the IRS.
NO LITIGATION
At the time of delivery of and payment for the Bonds and the Local Obligations, the Authority andlor the City, as applicable, will certiff that there is no action, suit, proceeding, inquiry or investigation, at law or in equity, before or by any court or regulatory agency, public board or body pending or threatened against the Authority or the City affecting their existence, or the titles of their respective officers, or seeking to restrain or to enjoin the issuance, sale or delivery of the Bonds or the Local Obligations, the application of the proceeds thereof in accordance with the Trust Agreement, or the collection or levy of the Special Taxes to pay the principal of and interest on the Local Obligations, or in any way contesting or affecting the validity or enforceability of the Local Obligations and the Bonds, the Trust Agreement, the Local Obligations Indenture, the Bond Purchase Contract entered into among the Authority, the City and the Underwriter or any other applicable agreements or any action of the Authority or the City contemplated by any of said documents, or in any way contesting the completeness or accuracy of this Official Statement or any amendment or supplement thereto, or contesting the powers of the Authority or the City or their authority with respect to the Bonds or the Local Obligations or any action of the Authority or the City contemplated by any of said documents, nor, to the knowledge of the Authority, is there any basis therefor.
NO RATING
The Authority has not made, and does not contemplate making, application to any rating agency for the assignment of a rating to the Bonds. The absence of a rating may significantly adversely affect the ability of the owner of Bonds to sell such Bonds.
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MUNICIPAL ADVISOR
The City has retained Fieldman, Rolapp & Associates, Inc. as municipal advisor (the "Municipal Advisor") with respect to the issuance of the Bonds. The Municipal Advisor is not obligated to undertake, and has not undertaken to make, an independent verification or assume responsibility for the accuracy, completeness, or fairness of the information contained in this Official Statement.
Compensation of the Municipal Advisor relating to the issuance of the Bonds is contingent upon the issuance of the Bonds.
UNDERWRITING
The Bonds are being purchased by Piper Sandler & Co. (the "Underwriter") pursuant to a Bond Purchase Contract (the "Purchase Contract"), by and among the Authority, the City and the Underwriter.
Pursuant to the Purchase Contract, the Underwriter has agreed to purchase all of the Bonds from the Authority at a purchase price of $ being the aggregate principal amount of the Bonds of $ , [plus/less] [net] original issue fpremium/discount] of and less an Underwriter's discount of $ The Underwriter may offer and sell the Bonds to certain dealers and others at prices lower than the public offering prices set forth on the inside front cover page hereof.
CONTINUING DISCLOSURE
The City
The City has covenanted for the benefit of the Owners to provide certain financial information and operating data relating to the Bonds by not later than nine months following the end of the City's fiscal year (which fiscal year currently ends June 30) commencing with the report for the 2021-22 Fiscal Year (the "Annual Report"), which is due April l, 2023, and to provide notices of the occurrence of certain enumerated events. The Annual Report and the notices of enumerated events will be filed with EMMA, and the first Annual Report may include the filing of or reference to this Official Statement. The specific nature of the information to be contained in the Annual Report or the notices of enumerated events is contained within APPENDIX D-"FORMS OF CONTINUING DISCLOSURE LTNDERTAKINGS." These covenants have been made in order to assist the Underwriter in complying with S.E.C. Rule 15c2-12(bX5).
The City is committed to complete and accurate continuing disclosure in accordance with its continuing disclosure obligations under the federal securities laws, including rules and regulations promulgated by the SEC and the MSRB, as those rules may be amended from time to time. However, during the past five years, there was a specific instance where complete and accurate disclosure was not achieved by the City or its related agencies when a notice of listed event for a ratings upgrade on October 72, 2018, was not timely filed for certain of the Folsom Public Financing Authority's water revenue bonds. The description of this instance of non-compliance in this Official Statement is not an acknowledgement that any such non-compliance was material. Further, the City made a remedial filing to address this instance of non-compliance and has policies and procedures in place in order to achieve compliance with its continuing disclosure undertakings.
Lennar Homes
Lennar Homes has covenanted for the benefit of the Bondholders to provide certain information relating to it, its development plan and its financing plan (the "Developer Disclosure Reports"), and to 4166-0679-1203.8
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provide notices of the occurrence of certain enumerated events until the obligation to so provide such information, data and notices is otherwise terminated in accordance with the provisions of such certificate. A form of the Continuing Disclosure Certificate for Lennar Homes is included in APPENDIX D-"FORMS OF CONTINUING DISCLOSURE LINDERTAKINGS." Such information is to be provided semiannually not later than March 31 and September 30 of each year, commencing with the Developer Disclosure Report due March 31,2023. The Developer Disclosure Reports are to be filed with EMMA.
The Authority and the City have not considered, or reached any conclusion as to, whether or not Lennar Homes is an obligated person under the Rule. The Authority takes no responsibility for the form or content or for the adequacy of Lennar Homes' Continuing Disclosure Certificate for its intended purpose.
The obligations of Lennar Homes under its Continuing Disclosure Certificate will terminate upon the occurrence of certain events set forth therein, including when Lennar Homes owns, or has the option to purchase, Taxable Property that represents 20Yo or more of the Special Tax levy on all of the Taxable Property for the then current Fiscal Year.
Lennar Homes Prior C Disclosure Comnliance: To the actual knowledge of Lennar Homes, other than as disclosed in this paragraph, in the last five years, Lennar Homes has not failed to comply in any material respects with its previous continuing disclosure undertakings, specifically regarding its requirement to provide developer periodic reports or to provide notice of occurrence of enumerated events with respect to community facilities districts or assessment districts in California.
However, (i) in connection with a continuing disclosure obligation entered into with respect to the $12,850,000 County of El Dorado DistrictNo.2014-l (Carson Creek) Special Tax Bonds Series 2016, Lennar Homes was late in filing the periodic reports due on April l, 2017 and October l, 2017; the oversight was discovered in late January, 2018, and Lennar Homes promptly filed a curative report on February 1, 2018; (ii) in connection with the $16,780,000 California Municipal Finance Authority Special Tax Revenue Bonds BOLD Program Series 20208, Lennar Homes inadvertently failed to file the initial Semi-Annual Report by the due date of May 1,2021, but filed a curative report on May 2I,2021; and (iii) in connection with the $5,795,000 City of Rancho Cordova Grantline 208 Community Facilities District No. 20i8-1 Special Tax Bonds, Series 20218, Lennar Homes inadvertently failed to file the initial annual report by the due date of April 1,2022, but filed a curative report on September 21,2022.
MISCELLANEOUS
This Official Statement is not to be construed as a contract or agreement among the Authority, the City and the purchasers of the Bonds. Any statements made in this Official Statement involving matters of opinion or of estimates, whether or not so expressly stated, are set forth as such and not as representations of fact, and no representation is made that any of the estimates will be realized. The information and expressions of opinion herein are subject to change without notice and neither the delivery of the 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 Authority, the City or the Community Facilities District since the date hereof.
References are made herein to certain documents and reports which are brief summaries thereof which do not purport to be complete or definitive and reference is made to such documents and reports for full and complete statements of the contents thereof. Copies of such documents and reports are available for inspection at the office of the Finance Director, City of Folsom, City Hall, 50 Natoma Street, Folsom, California 95630.
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The execution and delivery of the Official Statement by the Authority and the City has been duly authorized by the Board of Directors of the Authority and the City Council, respectively.
F'OLSOM RANCII FINAI\CING AUTHORITY
Treasurer
CITY OF FOLSOM
By:
City of Folsom Finance Director
By
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APPENDIX A
RATB, METHOD OF'APPORTIONMENT AND MANNER OF
COLLECTION OF' SPECIAL TAX
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APPENDIX B
ECONOMIC AND DEMOGRAPHIC INFORMATION RELATING TO THE CITY OF F'OLSOM 4166-0679-1203.8
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APPENDIX C
SUMMARY OF PRINCIPAL DOCUMENTS
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APPENDIX D
FORMS OF' CONTINUING DISCLOSURE UNDERTAKINGS
CITY CONTINUING DISCLOSURE CERTIF'ICATE
THIS CONTINUING DISCLOSURE CERTIFICATE (this "Disclosure Certificate"), dated as of 2022, is executed and delivered by the City of Folsom (the "City") relative to the Folsom Ranch Financing Authority (the "Authority") in connection with the issuance by the Authority of the Folsom Ranch Financing Authority City of Folsom Community Facilities District No. 20 (Russell Ranch) Special Tax Revenue Bonds, Series 2022 (the "Bonds"). The Bonds are being issued pursuant to a Trust Agreement (the "Trust Agreement"), among the City, the Authority and U.S. Bank Trust Company, National Association (the "Trustee"). The City covenants and agrees as follows.
SECTION 1. Purpose of the Disclosure Certificate. The Disclosure Certificate is being executed and delivered by the City for the benefit of the Holders and Beneficial Owners of the Bonds and in order to assist the Participating Underwriter in complying with S.E.C. Rule l5c2-12(bX5).
SECTION 2. Definitions. In addition to the definitions set forth in the Trust Agreement, which apply to any capitalizedterm used in this Disclosure Certificate unless otherwise defined in this Section, the followin g capitalized terms shall have the following meanings:
"Annual Report" means any Annual Report provided by the City pursuant to, and as described in, Sections 3 and4 hereof.
'oAnnual Report Date" means the date in each year that is nine months after the end of the City's fiscal year, which date, as of the date of this Disclosure Certificate, is April l. "Community Facilities District" means the City of Folsom Community Facilities District No. 20 (Russell Ranch).
"Dissemination Agent" shall mean NBS, or any successor Dissemination Agent designated in writing by the City and which has filed with the City awritten acceptance of such designation. "EMMA System" means the MSRB's Electronic Municipal Market Access system, or such other electronic system designated by the MSRB.
"Financial Obligation" means, for purposes of the Listed Events set out in Section 5(a)(10) and Section 5(bX7), 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 defined in the Securities Exchange Act of 1934, as amended) as to which a final official statement (as defined in the Rule) has been provided to the MSRB consistent with the Rule.
"Listed Events" means any of the events listed in subsection (a) of Section 5 hereof. "MSRB" means the Municipal Securities Rulemaking Board, or any successor thereto. "Official Statement" means the Official Statement, dated Bonds
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"Participating Underwriter" means the original underwriter of the Bonds required to comply with the Rule in connection with the offering of the Bonds.
"Rule" means Rule 15c2-12(bX5) 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) The City shall, or shall cause the Dissemination Agent to, provide to the MSRB through the EMMA System, in an electronic format and accompanied by identiffing information all as prescribed by the MSRB, an Annual Report which is consistent with the requirements of Section 4 hereof, not later than the Annual Report Date, commencing with the report for the 2021-22 Fiscal Year. 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 hereof; provided, however, that the audited financial statements of the City may be submitted separately from the balance of the Annual Report, and later than the date required above for the filing of the Annual Report if not available by that date. If the City's fiscal year changes, it shall, or shall instruct the Dissemination Agent to, give notice of such change in the same manner as for a Listed Event under subsection (e) of Section 5 hereof. The first Annual Report may include the filing of or reference to the Official Statement. (b) Not later than 15 business days prior to the date specified in subsection (a) of this Section for the providing of the Annual Report to the MSRB, the City shall provide the Annual Report to the Dissemination Agent.
(c) If the Dissemination Agent is other than the City, then not later than fifteen (15) Business Days prior to said date, the City shall provide the Annual Report to the Dissemination Agent. If the City is unable to provide the Annual Report to the MSRB by the Annual Report Date, the City shall send a notice to the MSRB in substantially the form attached as Exhibit A to the Disclosure Certificate. (d) The Dissemination Agent shall
(i) provide any Annual Report received by it to the MSRB, as provided herein; and (ii) file a report with the City certifuing that the Annual Report has been provided pursuant to this Disclosure Certificate and stating the date it was so provided.
SECTION 4. Content of Annual Reports. The City's Annual Report shall contain or incorporate by reference the following:
(a) The City's audited financial statements, if any, 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 City's audited financial statements, if any, are not available by the time the Annual Report is required to be filed pursuant to subsection (a) of Section 3 hereof, the Annual Report shall contain unaudited financial statements, and the audited financial statements, if any, shall be filed in the same manner as the Annual Report when they become available. (b) The following information:
(i) The principal amount of Bonds and any bonds secured by Additional Local Obligations (as defined in the Official Statement) Outstanding as of the December 31 next preceding the Annual Report Date along with debt service schedules for the Bonds and any bonds D-1-2Page 350
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secured by Additional Local Obligations (as defined in the Official Statement) Outstanding as of such date;
(ii) The balance in each reserve account for the Local Obligations, and a statement of the required bond reserve amount, as of the December 3l next preceding the Annual Report Date; (iii) The total assessed value of all parcels within the Community Facilities District on which the Special Taxes are levied, as shown on the assessment roll of the Sacramento County Assessor last equalized prior to the December 31 next preceding the Annual Report Date, and a statement of assessed value-to-lien ratios therefor based on special tax and assessment debt, either by individual parcel or by categories (e.g., "below 3:7," "3:7 to 4:1" etc.); (iv) The Special Tax delinquency rate for the Community Facilities District as of the December 31 next preceding the Annual Report Date; the number of parcels within the Community Facilities District delinquent in payment of special taxes as of the December 31 next preceding the Annual Report Date; the amount of each delinquency; the length of time delinquent and the date on which foreclosure was commenced, or similar information pertaining to delinquencies deemed appropriate by the City; provided, however, that parcels with aggregate delinquencies of $1,000 or less (excluding penalties and interest) may be grouped together and such information may be provided by category;
(v) The status of foreclosure proceedings and a summary of the results of any foreclosure sales in the Community Facilities District as of the December 31 next preceding the Annual Report Date;
(vi) The identity of any property owner, representing more than 5%o of the Special Tax levy, delinquent in payment of special taxes as of the December 3l next preceding the Annual Report Date;
(vii) All tentative and final maps approved and/or recorded within the Community Facilities District, describing the gross acres, the planned commercial acres and the number and type of planned residential dwelling units;
(viii) The number of new building permits issued and a description of the purpose of such permits (e.g., new single-family, new multi-family, new commercial, new industrial); (ix) A land ownership summary listing the top ten Special Tax payers for the Community Facilities District, as shown on the assessment roll of the Sacramento County Assessor last equalized prior to the December 3l next preceding the Annual Report Date; and (x) For the current Fiscal Year, the amount of the Maximum Special Tax and the actual Special Tax levied within the Community Facilities District, with such amounts reported separately for Developed Properly, Small Lot Final Map Properfy and Large Lot Property; provided, however, that once all Taxable Property within the Community Facilities District is Developed Property, the Maximum Special Tax and the actual Special Tax levied may each be shown on an aggregate basis in the Annual Report. For the purposes of this subparagraph (x), all capitalized terms used but not otherwise defined herein shall have the meanings ascribed thereto in the Rate and Method of Apportionment for the Community Facilities District.
In addition to any of the information expressly required to be provided under this Section, as set forth above, the City shall provide such further information, if any, as may be necessary to make the D-1-3 Page 351
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specifically required statements, in the light of the circumstances under which they are made, not misleading.
Any or all of the items listed above may be included by specific reference to other documents, including official statements of debt issues of the City or related public entities, which have been submitted to the MSRB through the EMMA System. The City shall clearly identiff each such other document so included by reference.
SECTION 5. Reportine of Sisnificant Events.
(a) Pursuant to the provisions of this Section, the City shall give notice, or cause notice to be given, not less than ten Business Days after the occurrence of any of the following events with respect to the Bonds:
(i) Principal and interest payment delinquencies.
(ii) Unscheduled draws on debt service reserves reflecting financial difficulties. (iii) Unscheduled draws on credit enhancements reflecting financial difficulties. (iv) Substitution of credit or liquidity providers, or their failure to perform. (v) Adverse tax opinions, the issuance by the Internal Revenue Service of proposed or final determinations of taxability, Notices of Proposed Issue IRS Form 5701 TEB) or other material notices or determinations with respect to the tax stafus of the Bonds, or other material events affecting the tax-exempt status of the security. (vi) Defeasances.
(vii) Tender offers.
(viii) Bankruptcy, insolvency, receivership or similar event of the obligated person.
Note: For the purposes of the event identified in subparagraph (ix), the event is considered to occur when any of the following occur: the appointment of a receiver, trustee or similar officer for an obligated person in a proceeding under the U.S. Bankruptcy Code or in any other proceeding under state or federal law in which a court or governmental authority has assumed jurisdiction over substantially all of the assets or business of the obligated person, or if such jurisdiction has been assumed by leaving the existing governmental body and officials or officers in possession but subject to the supervision and orders of a court or governmental authority, or the entry of an order confirming a plan of reorganization, arrangement or liquidation by a court or governmental authority having supervision orjurisdiction over substantially all ofthe assets or business of the obligated person.
(ix) Rating changes.
(x) Default, event of acceleration, termination event, modification of terms or other similar events under the terms of a financial Obligation of the City, any of which reflect financial difficulties.
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(b) The City shall give notice, or cause notice to be given, not less than ten Business Days after the occurrence of any of the following events with respect to the Bonds, if material:
(i) Modifications to rights of Bond holders.
(ii) Bond calls.
(iii) Release, substitution or sale of property securing repayment of the Bonds. (iv) Non-paymentrelateddefaults.
(v) The consummation of a merger, consolidation, or acquisition involving an obligated person or the sale of all or substantially all of the assets of the obligated person, other than in the ordinary course of business, the entry into a definitive agreement to undertake such an action or the termination of a definitive agreement relating to any such actions, other than pursuant to its terms.
(vi) Appointment of a successor or additional trustee or the change of name of a trustee.
(vii) Incurrence of a Financial Obligation of the City, or agreement to covenants, events of default, remedies, priority rights, or similar terms of a Financial Obligation of the City, any of which affect Bondholders.
(c) Whenever the City obtains knowledge of the occuffence of a Listed Event described in subsection (b) above, the City shall determine if such event would be material under applicable federal securities laws.
(d) If the City learns of the occurrence of a Listed Event described in subsection (a) of this Section, or determines that knowledge of a Listed Event described in subsection (b) of this Section would be material under applicable federal securities laws, the City shall notiff the Dissemination Agent thereof in writing and instruct the Dissemination Agent to repoft the occurrence pursuant to subsection (e) of this Section. If in response to a request under subsection (b) of this Section, the City determines that the Listed Event would not be material under applicable Federal securities law, the City shall so notifu the Dissemination Agent in writing and instruct the Dissemination Agent not to report the occurrence pursuantto subsection (e) ofthis Section.
(e) If the Dissemination Agent has been instructed by the City to report the occurrence of a Listed Event, the Dissemination Agent shall file a notice of such occuffence with the MSRB through the EMMA System. Notwithstanding the foregoing, notice of Listed Events described in paragraph (vii) of subsection (a) ofthis Section andparagraph (ii) ofsubsection (b) ofthis Section need not be given under this subsection any earlier than the notice (ifany) ofthe underlying event is given to holders ofaffected Bonds pursuant to the Trust Agreement.
SECTION 6. Termination of Reporting Obligation. The City's obligations 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 City shall give notice of such termination in the same manner as for a Listed Event under subsection (e) of Section 5 hereof.
SECTION 7. Dissemination Agent. The City may, from time to time, appoint or engage a Dissemination Agent to assist it in carrying out its obligations under this Disclosure Certificate, and may D-1-5 Page 353
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discharge any such Dissemination Agent, with or without appointing a successor Dissemination Agent.
The Dissemination Agent shall not be responsible in any manner for the content of any notice or report prepared by the City pursuant to the Disclosure Certificate.
SECTION 8. Amendment: Waiver. Notwithstanding any other provision of this Disclosure Certificate, the City may amend this Disclosure Certificate, and any provision of this Disclosure Certificate may be waived, provided that the following conditions are satisfied:
(a) if the amendment or waiver relates to the provisions of subsection (a) of Section 3 hereof, Section 4 hereof or subsections (a) and (b) of Section 5 hereof, it may only be made in connection with a change in circumstances that arises from a change in legal requirements, change in law, or change in the identity, nature or status of an obligated person with respect to the Bonds, or type of business conducted; (b) the undertakings herein, as proposed to be amended or waived, would, in the opinion of nationally recognized bond counsel, have complied with the requirements of the Rule at the time of the primary offering of the Bonds, after taking into account any amendments or interpretations of the Rule, as well as any change in circumstances; and
(c) the proposed amendment or waiver (i) is approved by Owners of the Bonds in the manner provided in the Trust Agreement for amendments to the Trust Agreement with the consent of Owners, or (ii) does not, in the opinion of nationally recognized bond counsel, materially impair the interests of Owners or Beneficial Owners of the Bonds.
If the annual financial information or operating data to be provided in the Annual Report is amended pursuant to the provisions hereof the annual financial information containing the amended operating data or financial information shall explain, in narrative form, the reasons for the amendment and the impact of the change in the type of operating data or financial information being provided.
If an amendment is made to the undertaking specifuing the accounting principles to be followed in preparing financial statements, the annual financial information 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. The comparison shall include a 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 statements or information, in order to provide information to investors to enable them to evaluate the ability of the City to meet its obligations. To the extent reasonably feasible, the comparison shall be quantitative. A notice of the change in the accounting principles shall be given in the same manner as for a Listed Event under subsection (e) ofSection 5 hereof.
SECTION 9. Additional Information. Nothing in this Disclosure Certificate shall be deemed to prevent the City 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 City chooses to include any information in any Annual Report or notice of occuffence of a Listed Event in addition to that which is specifically required by this Disclosure Certificate, the City shall have no obligation under this Disclosure Certificate to update such information or include it in any future Annual Report or notice of occurrence of a Listed Event.
SECTION 10. Default. In the event of a failure of the City or the Dissemination Agent to comply with any provision of this Disclosure Certificate, any Holder or Beneficial Owner of outstanding Bonds may take such actions as may be necessary and appropriate, including seeking mandate or specific D-1-6 Page 354
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perfonnance by court order, to cause the City to comply with its obligations under the Disclosure Certificate. A default under the Disclosure Certificate shall not be deemed an Event of Default under the Trust Agreement, and the sole remedy under the Disclosure Certificate in the event of any failure of the City to comply with the Disclosure Certificate shall be an action to compel performance.
SECTION 11. Duties. Immunities and Liabilities of Dissemination Agent. The Dissemination Agent shall be entitled to the protections and limitations from liability afforded to the Trustee under the Trust Agreement. The Dissemination Agent shall not be responsible for the form or content of any Annual Report or notice of Listed Event. The Dissemination Agent shall receive reasonable compensation for its services provided under this Disclosure Certificate. The Dissemination Agent shall have only such duties as are specifically set forth in this Disclosure Certificate, and the City agrees to indemniff and save the Dissemination Agent, its officers, directors, employees and agents, harmless against any loss, expense and liabilities which it may incur arising out of or in the exercise or performance of its powers and duties hereunder, including the costs and expenses (including attorneys' fees) of defending against any claim of liability, but excluding liabilities due to the Dissemination Agent's negligence or willful misconduct. The obligations of the City under this Section shall survive resignation or removal of the Dissemination Agent and payment of the Bonds.
SECTION 12. Beneficiaries. This Disclosure Certificate shall inure solely to the benefit of the City, the Dissemination Agent, the Participating Underwriter and Owners and Beneficial Owners from time to time of the Bonds, and shall create no rights in any other person or entity.
SECTION 13. Counterparts. This Disclosure Certificate may be executed in several counterparts, each of which shall be an original and all of which shall constitute but one and the same instrument.
IN WITNESS WHEREOF, the City of Folsom has executed this Disclosure Certificate as of the date first above written.
CITY OF F'OLSOM
By:
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EXHIBIT A
NOTICE OF F'AILURE TO FILE ANNUAL REPORT
Name of Issuer: Folsom Ranch Financing Authority
Name of Issue: Folsom Ranch Financing Authority City of Folsom Community Facilities District No. 20 (Russell Ranch) Special Tax Revenue Bonds, Series 2022 Date of Issuance: 2022
NOTICE IS HEREBY GIVEN that the City of Folsom (the "City") has not provided an Annual Report with respect to the above-named Bonds as required by Section 3 of the Continuing Disclosure Certificate, dated 2022, executed by the City for the benefit of the Holders and Beneficial Owners of the above-referenced bonds. [The City anticipates that the Annual Report will be filed by l
Dated
CITY OF'X'OLSOM
By:
Finance Director of the City of Folsom
4166-0679-1203.8
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CONTINUING DISCLOSURE CERTIF'ICATE - HOME BUILDER
This Continuing Disclosure Certificate - Home Builder (the "Disclosure Certificate") dated as of 2022, is executed and delivered by Lennar Homes of California,LLC, a California limited liabilitycompany(the..Developer,,)inconnectionwiththeissuanceof$-aggregateprincipal amount of Folsom Ranch Financing Authority City of Folsom Community Facilities District No. 20 (Russell Ranch) Special Tax Revenue Bonds, Series 2022 (the "Bonds"). The Bonds are being issued pursuant to a Trust Agreement, dated as of December l, 2022 (the "Trust Agreement"), among the Folsom Ranch Financing Authority (the "Issuer"), the City of Folsom (the "City") and U.S. Bank Trust Company, National Association, as trustee (the "Trustee").
SECTION 1. Purpose of the Disclosure Certificate. This Disclosure Certificate is being executed and delivered by the Developer for the benefit of the holders and beneficial owners of the Bonds. The Developer acknowledges that the Issuer and the City have undertaken no responsibility with respect to any reports, notices or disclosures provided or required under this Disclosure Certificate, and has no liability to any person, including any holder or beneficial owner of the Bonds, with respect to this Disclosure Certifi cate.
SECTION 2. Definitions. In addition to the definitions set forth in the Trust Agreement, which apply to any capitalized term used in this Disclosure Certificate unless otherwise defined herein, the following capitalizedterms shall have the following meanings:
"Affiliate" of another Person means (a) any Person directly or indirectly owning, controlling, or holding with power to vote, 50Yo or more of the outstanding voting securities of such other Person, (b) any Person 50o/o or more of whose outstanding voting securities are directly or indirectly owned, controlled, or held with power to vote, by such other Person, and (c) any Person directly or indirectly controlling, controlled by, or under common control with, such other Person; for purposes hereof, control means the power to exercise a controlling influence over the management or policies of a Person, unless such power is solely the result of an official position with such Person. "Assumption Agreement" means an agreement containing terms substantially similar to this Disclosure Certificate, whereby a Major Developer agrees to provide Semi-Annual Reports and notices of significant events with respect to the portion of the Property owned by such Major Developer and its Affiliates, and with respect to the improvements or payments necessary to cause the Planned Development Stage to be reached that such Major Developer, or an Affiliate thereof, intends or is obligated (contractually or otherwise) to make or cause to be made. "Bonds" means the $ Folsom Ranch Financing Authority City of Folsom Community Facilities District No. 20 (Russell Ranch) Special Tax Revenue Bonds, Seies 2022. "Developer" means Lennar Homes of California,LLC.
"Development Plan" means with respect to a Major Developer, the specific improvements such Major Developer intends to make, or cause to be made, in order for the Planned Development Stage to be reached, and the time frame in which such improvements are intended to be made; the Developer's Development Plan, as of the date hereof, is described in the Official Statement under the caption "PROPOSED PROPERTY DEVELOPMENT-status of Development and Development Plan of Finance for Lennar Homes-Zennar Homes".
"Disclosure Certificate" means this Disclosure Certificate as the same may be amended from time to time.
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"Dissemination Agent" means initially, the Developer, and any successor Dissemination Agent designated in writing by the Developer and which has filed with the City a written acceptance of such designation.
"Districf'means the City of Folsom Community Facilities District No. 20 (Russell Ranch), as the same may be modified by the City Council of the City from time to time. 'oEvent of Bankruptcy" means, with respect to a Person, that such Person files a petition or institutes a proceeding under any act or acts, state or federal, dealing with or relating to the subject or subjects ofbankruptcy or insolvency, or under any amendment ofsuch act or acts, either as a bankrupt or as an insolvent, or as a debtor, or in any similar capacity, wherein or whereby such Person asks or seeks or prays to be adjudicated a bankrupt, or is to be discharged from any or all of such Person's debts or obligations, or offers to such Person's creditors to effect a composition or extension of time to pay such Person's debts or asks, seeks or prays for reorganization or to effect a plan of reorganization, or for a readjustment of such Person's debts, or for any other similar relief, or if any such petition or any such proceedings of the same or similar kind or character is filed or instituted or taken against such Person, or if a receiver of the business or of the property or assets of such Person is appointed by any court, or if such Person makes a general assignment for the benefit of such Person's creditors. "Financing Plan" means, with respect to a Major Developer, the method by which such Major Developer intends to finance its Development Plan, including specific sources of funding for such Development Plan; the Developer's Financing Plan, as of the date hereof, is described in the Official Statement under the caption "PROPOSED PROPERTY DEVELOPMENT - Development Plans of Finance - Lennar Homes".
"Fiscal Year" means the twelve-month period terminating on June 30 of each year. "Listed Event" means any of the events listed in Section 5 hereof. "Major Developer" means any property owner, which owns (itself or through Affiliates) or has the option to purchase Taxable Property that represents 20%o or more of the Special Tax levy on all of the Taxable Properly for the then current Fiscal Year.
"MSRB" shall mean the Municipal Securities Rulemaking Board or any other entity designated or authorized by the Securities and Exchange Commission as a repository of disclosure information.
Until otherwise designated by the MSRB or the Securities and Exchange Commission, filings with the MSRB are to be made through the Electronic Municipal Market Access (EMMA) website of the MSRB, currently located at http: I I emma.msrb.org.
"Official Statement" means the final, executed Offrcial Statement relating to the Bonds. "Participating Underwriter" shall mean Piper Sandler & Co., the original underwriter of the Bonds.
"Person" means an individual, a corporation, a partnership, an association, a joint stock company, a trust, any unincorporated organization or a government or political subdivision thereof. "Planned Development Stage" means, with respect to any portion of the Property, the stage of development at which such portion of the Property is ready to be presented to the marketplace as a finished residential unit.
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o'Rule" means Rule 15c2-12(bX5) adopted by the Securities and Exchange Commission under the Securities Exchange Act of 1934, as the same may be amended from time to time. "Semiannual Report" shall mean any Semiannual Report provided by the Developer on or prior to March 31 and September 30 of each year, commencing with the Semiannual Report due March 31,2023, pursuant to, and as described in, Sections 3 and 4 of this Disclosure Certificate. "Special Taxes" means the special taxes levied on the Taxable Properly within District. o'State" shall mean the State of California.
"Taxable Property" means the real property within the boundaries of the District that is not exempt from the Special Taxes authorized to be levied in the District. 'oTrust Agreement" means the Trust Agreement, dated as of December 1,2022, among the Issuer, the City and the Trustee, and as further amended and supplemented from time to time. "Trustee" means U.S. Bank Trust Company, National Association, as trustee under the Trust Agreement, or any successor as trustee.
SECTION 3. Provision of Semiannual Reports. So long as the Developer's obligations hereunder have not been terminated pursuant to Section 7, the Developer shall provide to the MSRB and the City a Semiannual Report which is consistent with the requirements of Section 4, not later than March3l and September 30 of each year, commencing March 31,2023. If, in any year, March 3l or September 30 falls on a Saturday, Sunday or holiday, such deadline shall be extended to the next following business day. The Semiannual Report must be submitted in electronic format, accompanied by such identifuing information as is prescribed by the MSRB, and may be submitted as a single document or as separate documents comprising a package, and may include by reference other information as provided in Sections 4 or 5 hereof.
SECTION 4. Content of Semiannual Reports. The Developer's Semiannual Report shall contain or incorporate by reference the following information:
(a) If information regarding such Major Developer has not previously been included in a Semiannual Report or in the Official Statement, the Development Plan and Financing Plan of such Major Developer or, if information regarding such Major Developer has previously been included in a Semiannual Report or in the Official Statement, a description of the progress made in the Development Plan of such Major Developer since the date of such information and a description of any significant changes in such Development Plan and the Financing Plan and the causes or rationale for such changes. (b) Identification of the conveyance by the Developer of any portion of its Taxable Property that is responsible in the aggregate for 20Yo or more of the Special Taxes levied on all of the Taxable Property within the District to an entity that is not an Affiliate since the Official Statement or a more recent Semiannual Report.
(c) The number of building permits issued with respect to such Major Developer's Taxable Property during the six-month period ending on December 31 and June 30 for the respective Semiannual Report date.
(d) The number of lots that have not reached the Planned Development Stage sold within the Taxable Property owned by the Developer since the date of the Official Statement or a more recent D-2-3 Page 359
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Semiannual Report, and, if any such lots were sold to a Major Developer, the identity of the Major Developer.
(e) The number of finished homes sold and conveyed to individual homeowners by the Developer in the District during the six-month period ending on December 3l and June 30 for the respective Semiannual Report date.
(f) Any material amendments to land use entitlements for Taxable Property of the Developer, if such amendments would prevent or significantly delay the implementation of the Developer's Development Plan as described in the Official Statement or in any previous Semiannual Report.
The Developer's Semiannual Reports required to be provided under Section 4 hereof must be filed in accordance with Section 3.
SECTION 5. Reportine of S Events. Pursuant to the provisions of this Section 5, the Developer shall promptly give, or cause to be given, notice of the occuffence of any of the following events with respect to the Developer:
(a) Any failure of the Developer, or any Affiliate of the Developer, to pay by the date due general property taxes or assessments due with respect to its Taxable Property, to the extent such failure is not promptly cured by the Developer upon discovery thereof. (b) Any denial or termination of credit, any denial or termination of or default under, any line of credit or loan or any other loss of a source of funds that could have a material adverse effect on the Developer's most recently disclosed Financing Plan or Development Plan or on the ability of the Developer, or any Affiliate of the Developer owning any Taxable Property, to pay any Special Taxes with respect to its Taxable Property when due.
(c) The occurrence of an Event of Bankruptcy with respect to the Developer, or any Affiliate, that could have a material adverse effect on the Developer's most recently disclosed Financing Plan or Development Plan or on the ability of the Developer, or any Affiliate of the Developer owning any Taxable Property, to pay Special Taxes with respect to its Taxable Property when due. (d) Any previously undisclosed governmentally-imposed preconditions to commencement or continuation of development on the Developer's Taxable Property, if such preconditions would prevent or significantly delay the Developer's Development Plan as described in the Official Statement or in any previous Semiannual Report.
(e) Any previously undisclosed legislative, administrative or judicial challenges to development on the Developer's Taxable Property, if such challenges would prevent or significantly delay the Developer's Development Plan as described in the Official Statement or in any previous Semiannual Report.
Whenever the Developer obtains knowledge of the occuffence of a Listed Event, the Developer shall promptly report the occurrence of the Listed Event by filing a notice of such occuffence with the MSRB in electronic format, accompanied by such identiSing information as is prescribed by the MSRB.
SECTION 6. Assumption of Obligations. If any portion of the Taxable Property owned by the Developer, or any Affiliate of the Developer, is conveyed such that, upon such conveyance, such new owner will be a Major Developer, the obligations of the Developer under this Disclosure Certificate with D-2-4 Page 360
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respect to the Taxable Property transferred by the Developer shall be assumed by such Major Developer pursuant to an Assumption Agreement.
SECTION 7. Termination of Reporting Obligation. All of the Developer's obligations under this Disclosure Certificate shall terminate upon the legal defeasance, prior redemption or payment in full of all the Bonds. The Developer's obligations under this Disclosure Certificate shall terminate upon the earliest to occur of (a) the date on which the Developer is no longer a Major Developer, as defined herein, or (b)the date on which all of the Developer's obligations are assumed under one or more Assumption Agreements entered into pursuant to Section 6 hereof, or (c) the date on which all Special Taxes levied on the Taxable Property owned by the Developer and its Affiliates are paid or prepaid in full. Upon the occuffence of any such termination prior to the final maturity of the Bonds, the Developer shall give notice of such termination in the same manner as for a Listed Event under Section 5 hereof.
SECTION 8. Amendment: Waiver. Notwithstanding any other provision hereof, the Developer may amend provisions of this Disclosure Certificate and any provision hereof may be waived, provided that the following conditions are satisfied:
(a) If the amendment or waiver relates to the provisions of Sections 3, 4 or 5 hereof, it may be made in connection with a change in circumstances that arises from a change in legal requirements, change in law; and
(b) The proposed amendment or waiver either (i) is approved by holders of the Bonds in the manner provided in the Trust Agreement for amendments to the Trust Agreement with the consent of holders, or (ii) does not, in the opinion of bond counsel approved by the City, materially impair the interests of the holders or beneficial owners of the Bonds.
SECTION 9. Additional Information. Nothing in this Disclosure Certificate shall be deemed to prevent the Developer 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 Semiannual Report or notice of occurrence of a Listed Event, in addition to that which is required by this Disclosure Certificate. If the Developer chooses to include any information in any Semiannual Report or notice of occurrence of a Listed Event in addition to that which is specifically required by this Disclosure Certificate, the Developer shall have no obligation under this Disclosure Certificate to update such information or include it in any future Semiannual Report or notice of occurrence of a Listed Event.
SECTION 10. Dissemination Agent. The Developer may, from time to time, appoint or engage a Dissemination Agent to assist it in carrying out its obligations under this Disclosure Certificate, and may discharge any such Dissemination Agent, with or without appointing a successor Dissemination Agent. The Dissemination Agent may resign by providing 30 days' written notice to the Developer. The Developer shall be responsible for paying the fees and expenses of the Dissemination Agent.
SECTION I 1. Default. In the event of a failure of the Developer to comply with any provision of this Disclosure Certificate, any holder or beneficial owner of the Bonds may take such actions as may be necessary and appropriate, including seeking mandate or specific performance by court order, to cause the Developer to comply with its obligations under this Disclosure Certificate. A default under this Disclosure Certificate shall not be deemed an Event of Default under the Trust Agreement, and the sole remedy under this Disclosure Certificate in the event of any failure of the Developer to comply with this Disclosure Certificate shall be an action to compel performance.
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SECTION 12. Beneficiaries. This Disclosure Certificate shall inure solely to the benefit of the Developer, the Participating Underwriter, the City and holders and beneficial owners from time to time of the Bonds, and shall create no rights in any other Person.
SECTION 13. Notices. Any notices or communications to the Developer and the other parties described herein may be given as set forth in Exhibit A hereto or such other address that shall be specified by the Developer or the other parties described herein from time to time.
SECTION 14. Governing Law. This Disclosure Certificate and any dispute arising hereunder shall be governed by and interpreted in accordance with the laws of the State of California.
IN WITNESS WHEREOF, the undersigned has executed this Disclosure Certificate as of the day and year written above.
LENNAR HOMES OF CALTFORNIA, LLC,
A California limited tiability company
By:
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EXIIIBIT A TO CONTINUING DISCLOSURE CERTIFICATE - HOME BUILDER Any notices or communications to the Developer or the other parties described in the Continuing Disclosure Certificate - Home Builder may be given as follows:
To the Developer: Lennar Homes of California,LLC
To the Issuer:
Attention:
Email:
Phone:
To the Dissemination
Agent:
Attention:
Email:
Phone:
To the Participating
Underwriter:
Attention:
Email:
Phone
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APPENDIX E
PROPOSED F'ORM OF'OPINION OF BOND COIINSEL
Folsom Ranch Financing Authority
Folsom, California
Folsom Ranch Financing Authority
City of Folsom Community Facilities District No. 20 (Russell Ranch) Special Tax Revenue Bonds. Series 2022
(Final Opinion)
Ladies and Gentlemen:
We have acted as bond counsel to the Folsom Ranch Financing Authority (the "Issuer") in connection with the issuance of $l ] aggregate principal amount of Folsom Ranch Financing Authority City of Folsom Community Facilities District No. 20 (Russell Ranch) Special Tax Revenue Bonds, Series 2022 (the "Bonds"), issued pursuant to a trust agreement, dated as of December 1,2022 (the "Trust Agreement"), among the Issuer, the City of Folsom (the "Local Agency") and U.S. Bank Trust Company, National Association, as trustee (the "Trustee"). The Trust Agreement provides that the Bonds are issued for the stated purpose ofenabling the Issuer to acquire certain special tax bonds to be issued by the Local Agency. Capitalized terms not otherwise defined herein shall have the meanings ascribed thereto in the Trust Agreement.
In such connection, we have reviewed the Trust Agreement; the Tax Certificate, dated the date hereof (the "Tax Certificate"), executed and delivered by the Issuer and the Local Agency; opinions of counsel to the Issuer, the Local Agency and the Trustee; certificates of the Issuer, the Local Agency, the Trustee and others; and such other documents, opinions and matters to the extent we deemed necessary to render the opinions set forth herein.
The opinions expressed herein are based on an analysis of existing laws, regulations, rulings and court decisions and cover certain matters not directly addressed by such authorities. Such opinions may be affected by actions taken or omitted or events occurring after original delivery of the Bonds on the date hereof. We have not undertaken to determine, or to inform any person, whether any such actions are taken or omitted or events do occur or any other matters come to our attention after original delivery of the Bonds on the date hereof. Accordingly, this letter speaks only as of its date and is not intended to, and may not, be relied upon or otherwise used in connection with any such actions, events or matters. We disclaim any obligation to update this letter. We have assumed the genuineness of all documents and signatures provided to us and the due and legal execution and delivery thereof by, and validity against, any parties other than the Issuer. We have assumed, without undertaking to verifir, the accuracy of the factual matters represented, warranted or certified in the documents, and of the legal conclusions contained in the opinions, refened to in the second paragraph hereof. Furthermore, we have assumed compliance with all covenants and agreements contained in the Trust Agreement and the Tax Certificate, including (without limitation) covenants and agreements compliance with which is necessary to assure that future actions, omissions or events will not cause interest on the Bonds to be included in gross income for federal income tax purposes.
We call attention to the fact that the rights and obligations under the Bonds, the Trust Agreement and the Tax Certificate and their enforceability may be subject to bankruptcy, insolvency, receivership, reotganization, alrangement, fraudulent conveyance, moratorium and other laws relating to or affecting creditors' rights, to the application of equitable principles, to the exercise of judicial discretion in 4166-0679-1203.8
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appropriate cases and to the limitations on legal remedies against governmental entities such as the Issuer and the Local Agency in the State of California. We express no opinion with respect to any indemnification, contribution, liquidated damages, penalty (including any remedy deemed to constitute or to have the effect of a penalty), right of set-off, arbitration, judicial reference, choice of law, choice of forum, choice of venue, non-exclusivity of remedies, waiver or severability provisions contained in the foregoing documents, nor do we express any opinion with respect to the state or quality of title to or interest in any of the assets described in or as subject to the lien of the Trust Agreement or the accuracy or sufficiency of the description contained therein of, or the remedies available to enforce liens on, any such assets. We also express no opinion regarding the plans, specifications, maps, financial reports or other engineering or financial details of the proceedings, or upon the Rate and Method of Apportionment for the City of Folsom Community Facilities District No. 20 (Russell Ranch) or the validity of the Special Tax levied upon any individual parcel. Our services did not include financial or other non-legal advice.
Finally, we undertake no responsibility for the accuracy, completeness or fairness of the Official Statement, dated 2022, or other offering material relating to the Bonds and express no opinion or conclusion with respect thereto.
Based on and subject to the fbregoing, and in reliance thereon, as of the date hereof, we are of the following opinions:
1. The Bonds constitute the valid and binding special, limited obligations of the Issuer
2. The Trust Agreement has been duly executed and delivered by, and constitutes the valid and binding obligation of, the Issuer. The Trust Agreement creates a valid pledge, to secure the payment of the principal of and interest on the Bonds, of the Trust Estate, including the Revenues and any other amounts (including proceeds of the sale of the Bonds) held by the Trustee in the Funds established pursuant to the Trust Agreement (except the Rebate Fund), subject to the provisions of the Trust Agreement permitting the application thereof for the purposes and on the terms and conditions set forth in the Trust Agreement.
3. Interest on the Bonds is excluded from gross income for federal income tax purposes under Section 103 of the Internal Revenue Code of 1986 and is exempt from State of California personal income taxes. Interest on the Bonds is not a specific preference item for purposes of the federal individual alternative minimum tax. We observe that, for tax years beginning after December 31,2022, interest on the Bonds included in adjusted financial statement income of certain corporations is not excluded from the federal corporate alternative minimum tax. We express no opinion regarding other tax consequences related to the ownership or disposition of, or the amount, accrual or receipt of interest on, the Bonds.
Faithfully yours,
ORRICK, HERRINGTON & SUTCLIFFE LLP
per
4166-0679-1203.8
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APPENDIX F
DTC AND THE BOOK-ENTRY ONLY SYSTEM
The description that follows of the procedures and recordkeeping with respect to beneficial ownership interests in the Bonds, payment of principal of, premium, tf any, and interest on the Bonds to Participants or Beneficial Owners, confirmation and transfer of beneficial ownership interests in the Bonds, and other related transactions by and between DTC, Participants and Beneficial Owners, is based on information furnished by DTC which the Authority believes to be reliable, but the Authority does not take responsibility for the completeness or accuracy thereof, The Authority cannot and does not give any assurances that DTC, DTC Participants or Indirect Participants will distribute to the Beneficial Owners either (a) payments of principal, premium, tf any, and interest with respect to the Bonds or (b) certificates representing ownership interests in or other confirmation of ownership interests in the Bonds, or that they will so do on a timely basis or that DTC, DTC Participants or DTC Indirect Participants will act in the manner described in this Official Statement. The current "Rules" applicable to DTC are onfile with the Securities and Exchange Commission and the cwrent "Procedures" of DTC to be followed in dealing tryith DTC Participants are onfile with DTC.
The Depository Company ("DTC"), New York, New York, will act as securities depository for the Bonds. The Bonds will be issued as fully-registered securities registered in the name of Cede & Co. (DTC's partnership nominee) or such other name as may be requested by an authorized representative of DTC. One fully-registered bond certificate will be issued for each maturity of the Bonds in the aggregate principal amount of such maturity, and will be deposited with DTC. If, however, the aggregate principal amount of any maturity exceeds $500 million, one certificate will be issued with respect to each $500 million of principal amount, and an additional certificate will be issued with respect to any remaining principal amount of such maturity.
DTC, the world's largest securities depository, is a limited-purpose trust company organized under the New York Banking Law, a "banking organization" within the meaning of the New York Banking Law, a member of the Federal Reserve System, a "clearing corporation" within the meaning of the New York Uniform Commercial Code, and a "clearing agency" registered pursuant to the provisions of Section l7A of the Securities Exchange Act of 1934. DTC holds and provides asset servicing for over
3.5 million issues of U.S. and non-U.S. equity issues, corporate and municipal debt issues, and money market instruments (from over 100 countries) that DTC's participants ("Direct Participants") deposit with DTC. DTC also facilitates the post-trade sefflement among Direct Participants of sales and other securities transactions in deposited securities, through electronic computerized book-entry transfers and pledges between Direct Participants' accounts. This eliminates the need for physical movement of securities certificates. Direct Participants include both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations. DTC is a wholly-owned subsidiary of The Depository Trust & Clearing Corporation ("DTCC"). DTCC is the holding company for DTC, National Securities Clearing Corporation and Fixed Income Clearing Corporation, all of which are registered clearing agencies. DTCC is owned by the users of its regulated subsidiaries. Access to the DTC system is also available to others such as both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, and clearing corporations that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly ("Indirect Participants"). DTC has a Standard & Poor's rating of AA+. The DTC Rules applicable to its Participants are on file with the Securities and Exchange Commission. More information about DTC can be found at www.dtcc.com. 4166-0679-1203.8
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Purchases of the Bonds under the DTC system must be made by or through Direct Participants, which will receive a credit for the Bonds on DTC's records. The ownership interest of each actual purchaser of each Bond (the "Beneficial Owner") is in turn to be recorded on the Direct and Indirect Participants' records. Beneficial Owners will not receive written confirmation from DTC of their purchase. Beneficial Owners are, however, expected to receive written confirmations providing details of the transaction, as well as periodic statements of their holdings, from the Direct or Indirect Participant through which the Beneficial Owner entered into the transaction. Transfers of ownership interests in the Bonds are to be accomplished by entries made on the books of Direct and Indirect Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interests in Bonds, except in the event that use of the book-entry system for the Bonds is discontinued.
To facilitate subsequent transfers, all Bonds deposited by Direct Participants with DTC are registered in the name of DTC's partnership nominee, Cede & Co., or such other name as may be requested by an authorized representative of DTC. The deposit of the Bonds with DTC and their registration in the name of Cede & Co. (or such other DTC nominee) do not effect any change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the Bonds; DTC's records reflect only the identity of the Direct Participants to whose accounts such Bonds are credited, which may or may not be the Beneficial Owners. The Direct and Indirect Participants will remain responsible for keeping account of their holdings on behalf of their customers.
Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. Beneficial Owners of Bonds may wish to take certain steps to augment the transmission to them of notices of significant events with respect to the Bonds, such as redemptions, tenders, defaults and proposed amendments to the Bond documents. For example, Beneficial Owners of Bonds may wish to ascertain that the nominee holding the Bonds for their benefit has agreed to obtain and transmit notices to Beneficial Owners. In the alternative, Beneficial Owners may wish to provide their names and addresses to the registrar and request that copies of notices be provided directly to them.
Redemption notices shall be sent to DTC. If less than all of the Bonds within a maturity are being redeemed, 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 the 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 the Bonds are credited on the record date (identified in a listing attached to the Omnibus Proxy).
Principal, redemption price, and interest payments with respect to the Bonds will be made to Cede & Co., or such other nominee as may be requested by an authorized representative of DTC. DTC's practice is to credit Direct Participants' accounts upon DTC's receipt of funds and corresponding detail information from the Authority on a payable date in accordance with their respective holdings shown on DTC records. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered in "street name," and will be the responsibility of such Participant and not of DTC or its nominee, the Trustee, or the Authority, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of principal, redemption price and interest to Cede & Co. (or such 4166-0679-1203.8
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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 shall be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners shall be the responsibility of Direct and Indirect Participants.
DTC may discontinue providing its services as depository with respect to the 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, bond 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, bond certificates will be printed and delivered to DTC.
The information in this section concerning DTC and DTC's book'entry system has been obtained from sources that the Authority deems reliable, but the Authority takes no responsibility for the accuracy thereof.
THE TRUSTEE, AS LONG AS A BOOK-ENTRY ONLY SYSTEM IS USED FOR TIIE BONDS, WILL SEND ANY NOTICE OF REDEMPTION OR OTI{ER NOTICES ONLY TO CEDE & CO., OR ITS SUCCESSOR AS DTC'S PARTNERSHIP NOMINEE. ANY FAILURE OF CEDE & CO., OR ITS SUCCESSOR AS DTC'S PARTNERSHIP NOMINEE TO ADVISE ANY
PARTICIPANT, OR OF ANY PARTICIPANT TO NOTIFY ANY BENEFICIAL OWNER OF ANY
NOTICE AND ITS CONTENT OR EFFECT WILL NOT AFFECT THE VALIDITY OR
SUFFICIENCY OF THE PROCEEDINGS RELATING TO THE REDEMPTION OF THE BONDS CALLED FOR REDEMPTION OR OF ANY OTHER ACTION PREMISED ON SUCH NOTICE. 4166-06',19-1203.8
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APPENDIX G
APPRAISAL
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ATTACHMENT 6
11/08/2022 Item No.12.
OH&S DRAF'T
9128122
CITY OF FOLSOM
COMMUNITY F'ACILITIES DISTRICT NO.20 (RUSSELL RANCH)
SPECIAL TAX BONDS, SERTES 2022
LOCAL OBLIGATION PURCHASE CONTRACT
[SALE DATE]
City of Folsom
50 Natoma Street
Folsom, California 95630
Ladies and Gentlemen:
The undersigned Folsom Ranch Financing Authority (the "Authority"; offers to enter into this Local Obligation Purchase Contract (the "Local Obligation Purchase Contract") with you, the City of Folsom (the "City"), which, upon acceptance, will be binding upon the City and the Authority;.and except as otherwise provided herein, all capitalized terms used herein shall have the meanings attributed to them in the Indenture, dated as of June 1, 2018 (he "Original Indenture"), as supplemented by the First Supplemental Indenture, dated as of December 1,2022 (the "First Supplemental Indenture" and, together with the Original Indenture, the oolndenture"), each between the City and U.S. Bank Trust Company, National Association, as successor trustee (the "Trustee").
1. Purchase. Sale and Delivery of the Obligations.
(a) Subject to the terms and conditions and in reliance upon the representations and agreements set forth herein, the Authority hereby agrees to purchase from the City, and the City hereby agrees to sell to the Authority, all (but not less than all) of the $[PAR] aggregate principal amount of the City of Folsom Community Facilities District No. 20 (Russell Ranch) Special Tax Bonds, Series 2022 (the "Local Obligations") issued under the Indenture, dated the date of their initial delivery, bearing interest payable on the dates and at the interest rates, and maturing on the dates and in the amounts and subject to the optional, extraordinary and mandatory redemption provisions, as set forth in Exhibit A attached hereto and incorporated herein.
The purchase price for the Local Obligations shall be $ which purchase price shall be paid from the proceeds of sale of the Folsom Ranch Financing Authority City of Folsom Community Facilities District No. 20 (Russell Ranch) Special Tax Revenue Bonds, Series 2022, issued under the Trust Agreement, dated as of December 1, 2022, by and among the Authority, the City and U.S. Bank Trust Company, National Association, as trustee (the "Trust Agreement"), which bonds issued under the Trust Agreement are referred to herein as 4140-9479-8883.3 Page 371
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the "Authority Bonds."
The Local Obligations shall be substantially in the form desuibed in, shall be issued and secured under the provisions of, and shall be payable as provided in the Indenture. (b) At 8:30 a.m., California time, on [CLOSING DATE], or at such earlier or later time or date as shall be agreed by the City and the Authority (such time and date being herein referred to as the "Closing Date"), the City will deliver to the Authority at the offices of Orrick, Herrington & Sutcliffe LLP, Sacramento, Califomia (or such other location as may be designated by the Authority and approved by the City) the Local Obligations in definitive forms, duly executed by the City and authenticated by the Trustee, and will deliver to the Authority the other documents herein mentioned; and the Authority will accept such delivery and pay the total purchase price of the Local Obligations as set forth in paragraph (a) of this section as provided in the Indenture (such delivery and payment being herein referred to as the "Closing").
2. Representations and Agreements of the City. The City represents to and agrees with the Authority that:
(a) The City is and will be at the Closing Date duly organized and existing as a charter city and municipal corporation under its charter and the Constitution and laws of the State of California, with full power and authority to issue the Local Obligations and to carry out and consummate the transactions contemplated by the Local Obligations, this Local Obligation Purchase Contract, the First Supplemental Indenture and the Trust Agreement (collectively, the "Financing Documents"), and the Financing Documents are and will be at the Closing Date valid and binding obligations of the City;
(b) When delivered to and paid for by the Authority at the Closing in accordance with the provisions of this Local Obligation Purchase Contract, the Local Obligations will have been duly authorized, executed, issued and delivered and will constitute valid and binding obligations of the City in conformity with, and entitled to the benefit and security of, the Indenture;
(c) By official action of the City prior to or concurrently with the acceptance hereof, the City has authorized and approved the execution and delivery of the Financing Documents and the Original Indenture, and authorized and approved the performance by the City of the obligations on its part contained in the Financing Documents and the Original Indenture and has authorized and approved the consummation by the City of all other transactions contemplated by this Local Obligation Purchase Contract; (d) There is no action, suit, proceeding, inquiry or investigation, at law or in equity, before or by any court, govemmental agency, public board or body, pending or, tb the knowledge of the City, threatened against the City or its properties or operations (i) seeking to restrain or enjoin the issuance, sale, execution or delivery of the Local Obligations, (ii) in any way contesting or affecting the validity or enforceability of any of the Financing Documents or the Original Indenture, any proceedings of the City taken concerning the issuance or sale of the Local Obligations, the collection of the special tax securing the Local Obligations (the "Special Tax") or the existence or powers of the City relating to the issuance of the Local Obligations or 2 4140-9479-8883.3 Page 372
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(iii) which, if determined adversely to the City or its interests, would have a material and adverse effect on the consummation of the transactions contemplated by or the validity of the Financing Documents or the Original Indenture or on the operations of the City with respect to the Local Obligations;
(e) The execution and delivery of the Financing Documents and the delivery of the Original Indenture, and the consummation of the transactions therein and herein contemplated, and the fulfillment of or compliance with the terms and conditions thereof and hereof, will not conflict with or constitute a violation or breach of or default (with due notice or the passage of time or both) under any applicable law or administrative rule or regulation, or any applicable court or administrative decree or order, or any indenture, mortgage, deed of trust, loan agreement, lease, contract or other agreement or instrument to which the City is a parfy or by which it or its properties are otherwise subject or bound, or result in the creation or imposition of any prohibited lien, charge or encumbrance of any nature whatsoever upon any of the property or assets of the City, which conflict, violation, breach, default, lien, charge or encumbrance might have consequences that would materially and adversely affect the consummation of the transactions contemplated by the Financing Documents or the Original Indenture or the operations of the City with respect to the Local Obligations; (D The City is not in breach of or default under any applicable law or administrative regulation of the State of California or the United States or any applicable judgment or decree or any loan agreement, indenture, bond, note, resolution, agreement or other instrument to which the City is a party or is otherwise subject, which breach or default may have consequences that would materially and adversely affect the consummation of the transactions contemplated by the Financing Documents or the Original Indenture, and no event has occurred and is continuing which, with the passage of time or the giving of notice, or both, would constitute such a breach or default under any such instrument; (g) All approvals, consents, authorizations, certifications and other orders of any governmental authority, board, agency or commission having jurisdiction, and all filings with any such entities, which would constitute conditions precedent to or the failure to obtain which would materially adversely affect the performance by the City of its obligations under the Financing Documents or the Original Indenture have been duly obtained, and no further consent, approval, authorization or other action or filing with or by any governmental or regulatory authority having jurisdiction over the City is or will be required for the issue and sale of the Local Obligations or the consummation by the City of the other transactions desuibed in the Financing Documents or the Original Indenture;
(h) The Special Tax constituting the security for the Local Obligations has been duly and lawfully authorized under and pursuant to the Mello-Roos Community Facilities District Act of 1982 (the "Act") within the City of Folsom Community Facilities District No. 20 (Russell Ranch) (the "District") and such Special Tax is secured by a valid and legally binding continuing lien on the land subject to the Special Tax as provided in the Act; (i) The City has authorized and will annually levy and collect the Special Tax, in addition to amounts necessary to pay debt service on the Local Obligations, in an amount sufficient (subject to any maximum special tax permitted by law) to pay the Expenses (as defined J
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in the Indenture) arising directly from the administration or enforcement of the Local Obligations.
The execution and delivery of this Local Obligation Purchase Contract by the City shall constitute a representation by the City to the Authority that the representations and agreements contained in this Section 2 are true as of the date hereof; provided, that as to all matters of law the City is relying on the advice of counsel to the City; and provided further, that no member of the City Council shall be individually liable for the breach of any representation, warranty or agreement contained herein.
J flnnrlifinnc to the Drr'^hqcc nf thc T nnol Ohlioqfinlrc the A ttfllnrifrr The1r. t obligation of the Authority to accept delivery of and pay for the Local Obligations on the Closing Date shall be subject, at the option of the Authority, to (i) the accuracy in all material respects of the representations and agreements on the part of the City contained herein as of the date hereof and as of the Closing Date, (ii) the accuracy in all material respects of the statements of the officers and other officials of the City made in any certificates or other documents furnished pursuant to the provisions hereof, and (iii) the performance by the City of its obligations to be performed hereunder at or prior to the Closing Date and to the following additional conditions:
(a) At the Closing Date, the Financing Documents and the Original Indenture shall be in full force and effect in the form heretofore submitted to the Authorrty and there shall have been taken in connection with the issuance of the Local Obligations and with the transactions contemplated thereby and by this Local Obligation Purchase Contract, all such actions as, in the opinion of Orrick, Henington & Sutcliffe LLP ("Bond Counsel"), shall be necessary and appropriate;
(b) At the Closing Date, the Financing Documents and the Original Indenture shall not have been amended, modified or supplemented, except as may have been agreed to by the Authority;
(c) At or prior to the Closing Date, the Authority and the Trustee shall have received the following documents, in each case satisfactory in form and substance to the Authority:
(1) An executed copy of each of the Financing Documents and a copy of the Original Indenture;
(2) An unqualified approving opinion of Bond Counsel, dated the Closing Date and addressed to the City, as to the validity of the Local Obligations; (3) An opinion of the City Attomey, dated the Closing Date and addressed to the City and the Authority, in substantially the form attached hereto as Exhibit B; and
(4) Such additional legal opinions, certificates, proceedings, instruments and other documents as the Authority or Bond Counsel may reasonably request to evidence compliance by the City with legal requirements, the truth and accuracy, as of the Closing Date, of the representations of the City contained herein, and the due performance or 4r4o-g47g-Bg'3.t
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satisfaction by the City at or prior to such time of all agreements then to be performed and all conditions then to be satisfied by the City.
If the City shall be unable to satisfu the conditions to the Authority's obligations contained in this Local Obligation Purchase Contract, this Local Obligation Purchase Contract shall terminate and neither the Authority nor the City shall have any further obligation hereunder.
4. Expenses. All expenses and costs of the City and the Authority incident to the authorization, issuance and sale of the Local Obligations and the Authority Bonds, including fees and expenses of consultants, the Trustee, the appraiser, Bond Counsel and counsel for the City and the undemniting fees and expenses incurred by the Authority in connection with the sale of the Authority Bonds shall be paid by the City, and the City agrees that it will pay such expenses and costs from the proceeds of the Local Obligations.
5. Notices. Any notice or other communication to be given to the City under this Local Obligation Purchase Contract may be given by delivering the same in writing at the City's address set forth above, Attention: Finance Director, and any such notice or other communications required to be given to the Authority may be given by delivering the same in writing to the Authority at 50 Natoma Street, Folsom, California 95630, Attention: Treasurer.
The approval of the Authority when required hereunder or the determination of their satisfaction as to any document referred to herein shall be in writing signed by the Authority and delivered to the City.
6. Parties In Interest; Governing Law. This Local Obligation Purchase Contract is made solely for the benefit of the City, the Authority and the Trustee and no other persons, partnership, association or co{poration shall acquire or have any right hereunder or by virtue hereof. This Local Obligation Purchase Contract shall be governed by the laws of the State of Califomia.
7. Pledge: Assienment. The City hereby approves the pledge and assignment of all of the Authority's right, title and interest in the Local Obligations to the Trustee under the Indenture for the benefit of the owners of the Authority Bonds.
8. Limitation on Liability. The Authority shall incur no liability hereunder or by reason hereof or arising out of the transactions contemplated hereby, and shall be under no obligation to purchase the Local Obligations hereunder, except from proceeds of the Authority Bonds available therefor held by the Trustee under, and subject to the conditions set forth in, the Indenture. The City shall incur no liability hereunder or by reason hereof or arising out of the transactions contemplated hereunder, except as otherwise provided in Sections 4 and 5 hereof, or be obligated to make any payments with respect to the Local Obligations, except from amounts pledged to the payment of the Local Obligations (including the Special Tax levied and collected in the District) pursuant to the terms thereof.
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9. Countemarts. This Local Obligation Purchase Contract may be signed in two gr more counterparts; all such counterparts, when signed by all parties, shall constitute but one single agreement.
X'OLSOM RANCH FINANCING AUTHORITY
Stacey Tamagni
Treasurer
ACCEPTED AND AGREED TO:
CITY OF FOLSOM
Stacey Tamagni
Finance Director of the City of Folsom
By
By
6 4140-9479-8883.3 Page 376
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Exhibit A
Local Obligations Maturity Schedule and Redemption Provisions Maturitv Schedule
Maturity Date
September I Interest RatePrincipal Amount
* Term Bonds
Redemption Provisions
Extraordinar.v Redemption. The Local Obligations are subject to extraordinary iedemption by the City prior to their respective maturity dates, as a whole or in part on any interest payment date on or after September l, 201 1, from funds derived by the City from prepayments of the Special Tax, upon mailed notice as provided in the Indenture, at the following redemption prices (computed upon the principal amount of the Local Obligations or portions thereof called for redemption) together with accrued interest thereon to the date fixed for redemption, to wit:
103% if redeemed on an interest payment date on or after September 1,201 1 through March l,20ll;
I02% if redeemed on an interest payment date on September 1,201 1or March 1, 201 l;
l0I% if redeemed on an interest payment date on September 1,201 1or March 1, 20[ l; and
100% if redeemed on September 1, 20[ I or any interest payment date thereafter. 4t4t-0872-6328
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Optional Redemption. The Local Obligations are subject to optional redemption by the City prior to their respective maturity dates as a whole or in part on any date on or after September 1,201 l, from funds derived by the City from any source other than such Minimum Sinking Fund Account Payments deposited in the Sinking Fund Subaccount or such prepayments of the Special Tax, upon mailed notice as provided in the Indenture, at the following redemption prices (computed upon the principal amount of the Local Obligations or portions thereof called for redemption) together with accrued interest thereon to the date fixed for redemption:
103% if redeemed on any date on or after September 1,201 l through August 31,20[ ];
102% if redeemed on any date from September 1,201 I through August 31, 201 l;
l0l% if redeemed on any date from September 1,201 l through August 31, 20[ l; and
100% if redeemed on September 1, 20L) and any date thereafter.
Mandatory Sinking Fund Account Redemption of the Local Obligations. The Local Obligations maturing on September 1,201 ], are subject to mandatory redemption by the City prior to their maturity date in part on September 1 in each of the years 20Ll through 201 l, both years inclusive; and the Local Obligations maturing on September l, 20[ l, are subject to mandatory redemption by the City prior to their maturity date in part on September I in each of the years 201) through 201 l, both years inclusive, in each case solely from Minimum Sinking Fund Account Payments deposited in the Sinking Fund Subaccount, upon mailed notice as provided in the Indenture, at a redemption price equal to one hundred percent (100%) of the principal amount thereof called for redemption together with accrued interest thereon to the date fixed for redemption.
Minimum Sinking Fund Account Payments are established for the mandatory redemption and payment of the Local Obligations described in the paragraph above, which payments shall become due during the years ending on the dates and in the amounts as set forth in the following schedules (except that if any of the Local Obligations shall have been optionally redeemed or redeemed from property owner prepayments, the amounts of the Minimum Sinking Fund Account Payments shall be reduced proportionately by the principal amount of all such Local Obligations so redeemed), namely:
4t4l-08'72-6328
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Local Obligation Maturing September 1. 20[ I
Year Minimum
Ending Sinking Fund
September 1 Account Payment
D
* Maturity
Local Obligation Maturing September 1. 20[ I
Year Minimum
Ending Sinking Fund
September 1 Account Payment
D
* Maturity.
4r4r-0872-6328
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Exhibit B
[Form of City Attorney Opinion]
lcLosING DArEI
Folsom Ranch Financing Authority
Folsom, California
City of Folsom
Folsom, California
Piper Sandler & Co.
.
Sacramento, Califomia
U.S. Bank Trust Company, National Association
San Francisco, California
City of Folsom
Community Facilities District No. 20 (Russell Ranch)
Special Tax Series2022
Ladies and Gentlemen:
I have served as counsel to the City of Folsom (the "City") in connection with the issuance, sale and delivery of the above-referenced securities (collectively, the "Local Obligations"), and this letter is being delivered pursuant to the Local Obligation Purchase Contract dated as of _, 2022 (the "Local Obligation Purchase Contract") by and between the Folsom Ranch Financing Authority (the "Authorlty") and the City, and all capitalized terms not otherwise defined herein have the meanings ascribed thereto in the Local Obligation Purchase Contract.
As such counsel, I have examined and am familiar with (i) those documents relating to the existence, organization and operation of the City and the City of Folsom Community Facilities District No. 20 (Russell Ranch) (the "Community Facilities District"), including Resolution No. 10035, duly adopted by the City on November 14, 2017, establishing the Community Facilities District; (ii) Resolution No of the City Council approving the issuance of the Local Obligations, the issuance of the Authority Bonds, the Financing Documents and the Official Statement (such resolutions referenced in (i) and (ii), together the "Resolutions"); (iii) all necessary documentation of the City relating to the authorization, execution and delivery of the Local Obligations and all of the Financing Documents; (iv) the Preliminary Official Statement, dated , 2022 (the "Preliminary Official Statement") relating to the Authority Bonds; (v) the Official Statement, dated ,2022 (the "Official Statement") relating to the Authority Bonds; and (vi) the Continuing Disclosure Certificate of the City, dated the date hereof (the "Continuing Disclosure Certificate") relating to the Authority Bonds.
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Based on the foregoing, I am of the opinion that:
1. The City is a municipal corporation and charter city, corporate and politic, duly organized and existing under the Constitution and laws of the State of California and its Chaner.
2. The 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 Resolutions are in fulI force and effect and have not been modified, amended, rescinded or repealed since the date of their respective adoption.
3. The City has the full legal right, power and authority to execute, deliver and perform its obligations and duties under the Financing Documents, the Original Indenture and the Continuing Disclosure Certificate, including the right and power under the Act to execute the Indenture.
4. The City has complied with the provisions of applicable law in all matters relating to the transactions contemplated by the Financing Documents, the Original Indenture and the Continuing Disclosure Certificate, and the Original Indenture is in full force and effect.
5. The Financing Documents; the Original Indenture; the Continuing Disclosure Certificate; the Letter of Representations of the City, dated 2022 (the *CiW Letter of Representations" and, together with the Financing Documents, the Original Indenture and the Continuing Disclosure Certificate, the "City Documents") and the Official Statement have each been duly and lawfully authorized, executed and delivered by the City, are each in full force and effect and, assuming due authorization, execution and delivery by the other parties thereto, each constitutes a legal, valid and binding agreement of the City enforceable against the City in accordance with its terms, subject to laws relating to bankruptcy, insolvency, rcorgarization, arrangement, fraudulent conveyance, moratorium and other similar laws relating to or affecting the enforcement of creditors' rights generally and to the application of equitable principles if equitable remedies are sought, to the exercise of judicial discretion in appropriate cases and to the limitations on legal remedies against cities in the State of California.
6. The First Supplemental Indenture and the Local Obligations have been duly and validly authorized, sold, executed, authenticated and delivered, as applicable, in accordance with the Act and with the Indenture.
7. No approval, consent or authorization of any governmental or public agency, authority or person is required for the execution and delivery by the City of the Financing Documents or the Continuing Disclosure Certificate or the performance by the City of its respective obligations thereunder or under the Original Indenture.
8. The execution and delivery of the Financing Documents and the Continuing Disclosure Certificate by the City, and compliance with the provisions thereof and with the provisions of the Original Indenture, will not conflict with or constitute a breach of, or default under, any instrument relating to the organizalion, existence or operation of the City, or any commitment, agreement or other instrument to which the City is a party or by which it or its 4r4o-g47g-Bg,3., "'' Page 381
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property is bound or affected, or any ruling, regulation, ordinance, resolution, judgment, order or decree to which the City (or any of its officers in their respective capacities as such) is subject or any provision of the laws of the State of California relating to the City and its affairs.
9. The Local Obligations are valid and binding special tax obligations of the City payable from proceeds of the Special Tax and the other funds provided in the Indenture for such payment and are enforceable in accordance with their terms, subject to bankruptcy, insolvency, rcotganization, arrangement, fraudulent conveyance, moratorium and other similar laws relating to or affecting creditors' rights, to the application of equitable principles where equitable remedies are sought, to the exercise of judicial discretion in appropriate cases and to the limitations on legal remedies against cities in the State of California, and the terms of the Law and of the Original Indenture.
10. Based upon my review of the Preliminary Offrcial Statement, and without having undertaken to determine independently the accuracy, completeness or fairness of the statements contained in the Preliminary Official Statement, nothing has come to my attention which would lead me to believe that the Preliminary Official Statement (excluding therefrom the financial statements and the statistical data and the information concerning The Depository Trust Company, the book-entry system and the appendices thereto, as to which no opinion is expressed) as of its date and as of the date of the Local Obligation Purchase Contract contained any untrue statement of a material fact with respect to the City or omified or omits to state any material fact with respect to the City necessary to make the statements therein, in light of the circumstances under which they were made, not misleading.
11. Based upon my review of the Official Statement, and without having undertaken to determine independently the accuracy, completeness or fairness of the statements contained in the Official Statement, nothing has come to my attention which would lead me to believe that the Official Statement (excluding therefrom the financial statements and the statistical data and the information concerning The Depository Trust Company, the book-entry system and the appendices thereto, as to which no opinion is expressed) as of its date and the date hereof contained or contains any untrue statement of a material fact with respect to the City or omitted or omits to state any material fact with respect to the City necessary to make the statements therein, in light of the circumstances under which they were made, not misleading.
12. 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 my knowledge, threatened wherein an unfavorable decision, ruling or finding would: (a) affect the creation, organization, existence or powers of the City or the Community Facilities District, or the titles of their members and officers to their respective offices; or (b) affect the validity of the City Documents or restrain or enjoin the repayment of the Local Obligations or in any way contest or affect the validity of the City Documents or contest the authority of the City to enter into or perform its obligations under any of the City Documents or under which a determination adverse to the City or the Community Facilities District would have a material adverse effect upon the financial condition or the revenues of the City or the Community Facilities District, questions the right of the City to use the Special Tax levied within the Community Facilities District for the repayment of the Local Obligations or affects in any manner the right or ability of the City to 4140-9479-8883.3
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