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APPENDIX H
INFORMATION CONCERNING THE DEPOSITORY TRUST COMPANY
AND ITS BOOK-ENTRY SYSTEM
The information in this section concerning DTC and DTC’s book-entry only system has been obtained from sources that the District believes to be reliable, but the District takes no responsibility for the completeness or accuracy thereof. The following description of the procedures and record keeping with respect to beneficial ownership interests in the Bonds, payment of principal, premium, if any, accreted value and interest on the Bonds to DTC Participants or Beneficial Owners, confirmation and transfers of beneficial ownership interests in the Bonds and other related transactions by and between DTC, the DTC Participants and the Beneficial Owners is based solely on information provided by DTC to the District which the District believes to be reliable, but the District and the Underwriter do not and cannot make any independent representations concerning these matters and do not take responsibility for the accuracy or completeness thereof. Neither the DTC, Direct Participants, Indirect Participants nor the Beneficial Owners should rely on the foregoing information with respect to such matters but should instead confirm the same with DTC or the DTC Participants, as the case may be.
The Depository Trust Company (“DTC”), New York, New York, will act as securities depository for the Bonds. The Bonds will be issued as fully-registered securities registered in the name of Cede & Co. (DTC’s partnership nominee) or such other name as may be requested by an authorized representative of DTC. One fully-registered Bond will be issued for each annual maturity of the Bonds, each in the aggregate principal amount of such maturity, and will be deposited through the facilities of DTC.
DTC, the world’s largest securities depository, is a limited-purpose trust company organized under the New York Banking Law, a “banking organization” within the meaning of the New York Banking Law, a member of the Federal Reserve System, a “clearing corporation” within the meaning of the New York Uniform Commercial Code, and a “clearing agency” registered pursuant to the provisions of Section 17A of the Securities Exchange Act of 1934. DTC holds and provides asset servicing for over 3.6 million issues of U.S. and non-U.S. equity issues, corporate and municipal debt issues, and money market instruments (from over 100 countries) that DTC’s participants (“Direct Participants”) deposit with DTC. DTC also fac ilitates the post trade settlement among Direct Participants of sales and other securities transactions in deposited securities, through electronic computerized book-entry transfers and pledges between Direct Participants’ accounts. This eliminates the need for physical movement of securities certificates. Direct Participants include both U.S. and non -U.S. securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations. DTC is a wholly-owned subsidiary of Th e Depository Trust & Clearing Corporation (“DTCC”). DTCC is the holding company for DTC, National Securities Clearing Corporation and Fixed Income Clearing Corporation, all of which are registered clearing agencies. DTCC is owned by the users of its regulated subsidiaries. Access to the DTC system is also available to others such as both U.S. and non -U.S. securities brokers and dealers, banks, trust companies, and clearing corporations that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly (“Indirect Participants”). DTC has a Standard & Poor’s rating of “AA+.” The DTC Rules applicable to its Participants are on file with the Securities and Exchange Commission. More information about DTC can be found at www.dtcc.com.
Purchases of Bonds under the DTC system must be made by or through Direct Participants, which will receive a credit for the Bonds on DTC’s records. The ownership interest of each actual purchaser of each Bond (“Beneficial Owner”) is in turn to be recorded on the Direct and Indirect Participants’ records. Beneficial Owners will not receive written confirmation from DTC of their purchase. Beneficial Owners are, however, expected to receive written confirmations providing details of the transaction, as well as periodic statements of their holdings, from the Direct or Indirect Participant through which the Beneficial Owner entered into the transaction. Transfers of ownership interests in the Bonds are to be accomplished by entries made on the books of Direct and Indirect Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive Bonds representing their ownership interests in Bonds, except in the event that use of the book-entry system for the Bonds is discontinued.
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To facilitate subsequent transfers, all Bonds deposited by Direct Participants with DTC are registered in the name of DTC’s partnership nominee, Cede & Co., or such other name as may be requested by an authorized representative of DTC. The deposit of Bonds with DTC and their registration in the name of Cede & Co. or such other DTC nominee do not effect any change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the Bonds; DTC’s records reflect only the identity of the Direct Participants to whose accounts such Bonds are credited, which may or may not be the Beneficial Owners. The Direct and Indirect Participants will remain responsible for keeping account of their holdings on behalf of their customers.
Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. Beneficial Owners of Bonds may wish to take certain steps to augment the transmission to them of notices of significant events with respect to the Bonds, such as prepayments, tenders, def aults, 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, B eneficial Owners may wish to provide their names and addresses to the registrar and request that copies of notices be provided directly to them.
Redemption notices shall be sent to DTC. If less than all of the Bonds within a maturity are being prepaid, DTC’s practice is to determine by lot the amount of the interest of each Direct Participant in such maturity to be redeemed.
Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect to Bonds unless authorized by a Direct Parti cipant in accordance with DTC’s MMI Procedures. Under its usual procedures, DTC mails an Omnibus Proxy to the District as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co.’s consenting or voting rights to those Direct Participa nts to whose accounts Bonds are credited on the record date (identified in a listing attached to the Omnibus Proxy).
Redemption proceeds, distributions, and dividend payments on the Bonds will be made to Cede & Co., or such other nominee as may be requested by an authorized representative of DTC. DTC’s practice is to credit Direct Participants’ accounts upon DTC’s receipt of funds and corresponding detail information from the District or the Trustee, on payable date in accordance with their respective holdings shown on DTC’s records. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered in “street name,” and will be the responsibility of such Participant and not of DTC, the Trustee, or the District, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of redemption proceeds, distributions, and dividend payment s to Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC) is the responsibility of the District or the Trustee, disbursement of such payments to Direct Participants will be the responsibility of DTC, and disbursemen t of such payments to the Beneficial Owners will be the responsibility of Direct and Indirect Participants.
A Bond Owner shall give notice to elect to have its Bonds purchased or tendered, through its Participant, to the Trustee, and shall effect delivery of such Bonds by causing the Direct Participant to transfer the Participant’s interest in the Bonds, on DTC’s records, to the Trustee. The requirement for physical delivery of Bonds in connection with an optional tender or a mandatory purchase will be dee med satisfied when the ownership rights in the Bonds are transferred by Direct Participants on DTC’s records and followed by a book- entry credit of tendered Bonds to the Trustee’s DTC account.
DTC may discontinue providing its services as depository with r espect to the Bonds at any time by giving reasonable notice to the District or the Trustee. Under such circumstances, in the event that a successor depository is not obtained, physical certificates are required to be printed and delivered.
The District may decide to discontinue use of the system of book-entry only transfers through DTC (or a successor securities depository). In that event, Bonds will be printed and delivered to DTC. 420
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THE TRUSTEE, AS LONG AS A BOOK -ENTRY ONLY SYSTEM IS USED FOR THE BONDS, WILL SEND ANY NOTICE OF REDEMPTION OR OTHER NOTICES TO OWNERS ONLY TO DTC. ANY
FAILURE OF DTC TO ADVISE ANY DTC PARTICIPANT, OR OF ANY DTC PARTICIPANT TO NOTIFY
ANY BENEFICIAL OWNER, OF ANY NOTICE AND ITS CONTENT OR EFFECT WILL NOT AFFECT
THE VALIDITY OF S UFFICIENCY OF THE PROCEEDINGS RELATING TO THE REDEMPTION OF
THE BONDS CALLED FOR REDEMPTION OR OF ANY OTHER ACTION PREMISED ON SUCH NOTICE.
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INDENTURE
by and between
CITY OF FONTANA
COMMUNITY FACILITIES DISTRICT NO. 111
(MONTERADO)
and
U.S. BANK TRUST COMPANY, NATIONAL ASSOCIATION,
AS TRUSTEE
Dated as of ________ 1, 2024
Relating to
City of Fontana
Community Facilities District No. 111
(Monterado)
Special Tax Bonds
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ARTICLE I DEFINITIONS; EQUAL SECURITY ................................................................ 3 Section 1.01. Definitions.................................................................................................... 3 Section 1.02. Rules of Construction ................................................................................ 10 Section 1.03. Equal Security ............................................................................................ 11 ARTICLE II THE BONDS ..................................................................................................... 12 Section 2.01. Authorization of Bonds; Special, Limited Obligations .............................. 12 Section 2.02. Terms of Series 2024 Bonds ...................................................................... 12 Section 2.03. Execution of Bonds .................................................................................... 13 Section 2.04. Authentication of Bonds ............................................................................ 13 Section 2.05. Registration Books ..................................................................................... 14 Section 2.06. Transfer and Exchange of Bonds ............................................................... 14 Section 2.07. Book-Entry System .................................................................................... 14 Section 2.08. Bonds Mutilated, Lost, Destroyed or Stolen .............................................. 16 Section 2.09. Temporary Bonds....................................................................................... 17 ARTICLE III ISSUANCE OF SERIES 2024 BONDS; APPLICATION OF PROCEEDS; ADDITIONAL BONDS ............................................................. 18 Section 3.01. Issuance of Series 2024 Bonds .................................................................. 18 Section 3.02. Application of Proceeds ............................................................................. 18 Section 3.03. Costs of Issuance Fund .............................................................................. 18 Section 3.04. Improvement Fund ..................................................................................... 19 Section 3.05. Conditions for the Issuance of Additional Bonds ...................................... 21 Section 3.06. Procedure for the Issuance of Additional Bonds ....................................... 22 Section 3.07. Additional Bonds ....................................................................................... 23 ARTICLE IV REDEMPTION OF BONDS ............................................................................. 24 Section 4.01. Redemption of Series 2024 Bonds ............................................................. 24 Section 4.02. Notice of Redemption ................................................................................ 26 Section 4.03. Selection of Bonds for Redemption ........................................................... 26 Section 4.04. Partial Redemption of Bonds ..................................................................... 27 Section 4.05. Effect of Notice of Redemption ................................................................. 27 ARTICLE V SECURITY FOR BONDS; FLOW OF FUNDS; INVESTMENTS ................. 28 Section 5.01. Pledge ......................................................................................................... 28 Section 5.02. Special Tax Fund ....................................................................................... 28 423
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Section 5.03. Bond Fund .................................................................................................. 29 Section 5.04. Reserve Fund ............................................................................................. 29 Section 5.05. Redemption Fund ....................................................................................... 30 Section 5.06. Rebate Fund ............................................................................................... 31 Section 5.07. Administrative Expense Fund .................................................................... 31 Section 5.08. Investment of Moneys................................................................................ 32 ARTICLE VI COVENANTS ................................................................................................... 34 Section 6.01. Collection of Special Tax Revenues .......................................................... 34 Section 6.02. Foreclosure ................................................................................................. 34 Section 6.03. Compliance with Act ................................................................................. 35 Section 6.04. Punctual Payment....................................................................................... 35 Section 6.05. Extension of Payment of Bonds ................................................................. 35 Section 6.06. Against Encumbrances; Defense of Pledge ............................................... 35 Section 6.07. Tax Covenants ........................................................................................... 35 Section 6.08. Non-Cash Payments of Special Tax .......................................................... 36 Section 6.09. Reduction in Special Tax ........................................................................... 36 Section 6.10. Continuing Disclosure ............................................................................... 36 Section 6.11. Accounting Records ................................................................................... 36 Section 6.12. State Reporting........................................................................................... 37 Section 6.13. Annual Reports to the California Debt and Investment Advisory Commission ......................................................................................................... 37 Section 6.14. Further Assurances ..................................................................................... 37 ARTICLE VII EVENTS OF DEFAULT AND REMEDIES .................................................... 38 Section 7.01. Events of Default ....................................................................................... 38 Section 7.02. Foreclosure ................................................................................................. 38 Section 7.03. Other Remedies .......................................................................................... 38 Section 7.04. Remedies Not Exclusive ............................................................................ 39 Section 7.05. Application of Net Special Tax Revenues After Default ........................... 39 Section 7.06. Power of Trustee to Enforce ...................................................................... 39 Section 7.07. Owners’ Direction of Proceedings ............................................................. 40 Section 7.08. Limitation on Owners’ Right to Sue .......................................................... 40 Section 7.09. Absolute Obligation ................................................................................... 40 424
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Section 7.10. Termination of Proceedings ....................................................................... 40 Section 7.11. No Waiver of Default ................................................................................. 41 ARTICLE VIII TRUSTEE;SECURITIES INTERMEDIARY .................................................. 42 Section 8.01. Duties and Liabilities of Trustee ................................................................ 42 Section 8.02. Qualifications; Removal and Resignation; Successors .............................. 42 Section 8.03. Liability of Trustee .................................................................................... 43 Section 8.04. Right to Rely on Documents and Opinions ............................................... 45 Section 8.05. Accounting Records and Financial Statements.......................................... 45 Section 8.06. Preservation and Inspection of Documents................................................ 45 Section 8.07. Compensation and Indemnification ........................................................... 45 Section 8.08. Securities Intermediary .............................................................................. 46 ARTICLE IX SUPPLEMENTAL INDENTURES .................................................................. 48 Section 9.01. Supplemental Indentures ............................................................................ 48 Section 9.02. Effect of Supplemental Indenture .............................................................. 49 Section 9.03. Endorsement of Bonds; Preparation of New Bonds .................................. 49 Section 9.04. Amendment of Particular Bonds ................................................................ 49 ARTICLE X DEFEASANCE ................................................................................................. 50 Section 10.01. Discharge of Indenture ............................................................................. 50 Section 10.02. Bonds Deemed To Have Been Paid ......................................................... 50 Section 10.03. Unclaimed Moneys .................................................................................. 51 ARTICLE XI MISCELLANEOUS .......................................................................................... 52 Section 11.01. Notices ..................................................................................................... 52 Section 11.02. Successor Is Deemed Included in All References to Predecessor ........... 52 Section 11.03. Limitation of Rights ................................................................................. 52 Section 11.04. Destruction of Bonds ............................................................................... 53 Section 11.05. Severability of Invalid Provisions ............................................................ 53 Section 11.06. Evidence of Rights of Owners ................................................................. 53 Section 11.07. Disqualified Bonds................................................................................... 53 Section 11.08. Money Held for Particular Bonds ............................................................ 54 Section 11.09. Funds and Accounts ................................................................................. 54 Section 11.10. Business Days .......................................................................................... 54 Section 11.11. Waiver of Personal Liability .................................................................... 54 425
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Section 11.12. Conflict with Act...................................................................................... 54 Section 11.13. Conclusive Evidence of Regularity ......................................................... 54 Section 11.14. Governing Laws ....................................................................................... 55 Section 11.15. Electronic Signature ................................................................................. 55 Section 11.16. Execution in Several Counterparts ........................................................... 55 EXHIBIT A PERMITTED INVESTMENTS .......................................................................... A-1 EXHIBIT B FORM OF SERIES 2024 BOND ......................................................................... B-1 426
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INDENTURE
THIS INDENTURE (this “Indenture”), dated as of ________ 1, 2024, is by and between CITY OF FONTANA COMMUNITY FACILITIES DISTRICT NO. 111 (MONTERADO), a community facilities district organized and existing under the laws of the State of California (the “Community Facilities District”), and U.S. BANK TRUST COMPANY, NATIONAL ASSOCIATION, a national banking association organized and existing under the laws of the United States of America, as trustee (the “Trustee”).
W I T N E S E T H:
WHEREAS, the City Council of the City of Fontana has formed the Community Facilities District under the provisions of the Mello-Roos Community Facilities Act of 1982 (the “Act”); WHEREAS, the Community Facilities District is authorized under the Act to levy a special tax (the “Special Tax”) to pay for the costs of certain public facilities (the “Facilities”) and to issue bonds payable from the Special Tax;
WHEREAS, in order to provide funds to finance certain of the Facilities, the Community Facilities District desires to provide for th e issuance of City of Fontana Community Facilities District No. 111 (Monterado) Special Tax Bonds, Series 2024 (the “Series 2024 Bonds”), in the aggregate principal amount of not to exceed $__________; WHEREAS, the Community Facilities District desires to provide for the issuance of additional bonds (the “Additional Bonds”) for refunding purposes payable from the Special Tax on a parity with the Series 2024 Bonds, provided that said issuance is in accordance with the Act and this Indenture (the Series 2024 Bonds and any such Additional Bonds being collectively referred to as the “Bonds”);
WHEREAS, in order to provide for the authentication and delivery of the Bonds, to establish and declare the terms and conditions upon which the Bonds are to be issued and secured and to secure the payment of the principal thereof, premium, if any, and interest thereon, the Community Facilities District has authorized the execution and delivery of this Indenture; and WHEREAS, the Community Facilities District has determined that all acts and proceedings required by law necessary to make the Bonds, when executed by the Community Facilities District, authenticated and delivered by the Trustee and duly issued, the valid, binding and legal special, limited obligations of the Comm unity Facilities District, and to constitute this Indenture a valid and binding agreement for the uses and purposes herein set forth in accordance with its terms, have been done and taken, and the execution and delivery of this Indenture has been in all respects duly authorized;
NOW, THEREFORE, THIS INDENTURE WITNESSETH, that in order to secure the payment of the principal of, premium, if any, and the interest on all Bonds at any time issued and outstanding under this Indenture, according to their tenor, an d to secure the performance and observance of all the covenants and conditions therein and herein set forth, and to declare the terms and conditions upon and subject to which the Bonds are to be issued, and in consideration of the premises and of the mutual covenants herein contained and of the purchase and acceptance of the 427
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Bonds by the owners thereof, and for other valuable consideration, the receipt whereof is hereby acknowledged, the Community Facilities District does hereby covenant and agree with the Trustee, for the benefit of the respective owners from time to time of the Bonds, as follows:
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ARTICLE I
DEFINITIONS; EQUAL SECURITY
Section 1.01. Definitions. Unless the context otherwise requires, the terms defined in this Section shall for all purposes of this Indenture and of any certificate, opinion or other document herein mentioned, have the meanings herein specified.
“Accounts” means the accounts from time to time established pursuant hereto in any of the Funds established and maintained by the Trustee pursuant hereto. “Act” means the Mello -Roos Community Facilities Act of 1982, constituting Sections 53311 et seq. of the California Government Code.
“Acquisition Account” means the account by that name within the Improvement Fund established and held by the Trustee pursuant to Section 3.04. “Acquisition Agreement” means the Acquisition and Funding Agreement, dated as of September 1, 2022, by and among the Community Facilities District, the City and the Developer, as originally executed and as it may be amended from time to time in accordance with the terms thereof.
“Acquisition Facilities” has the meaning ascribed thereto in the Acquisition Agreement. “Additional Bonds” means Bonds other than Series 2024 Bonds issued hereunder in accordance with the provisions of Sections 3.05 and 3.06. “Administrative Expense Fund” means the fund by that name established and held by the Trustee pursuant to Section 5.07.
“Administrative Expenses” means costs directly related to the administration of the Community Facilities District, including: the costs of computing the Special Tax and preparing the annual Special Tax collection schedules and the co sts of collecting the Special Tax, the costs of remitting the Special Tax to the Trustee, the fees and costs of the Trustee (including its legal counsel) in the discharge of the duties required of it under this Indenture, the costs incurred by the Community Facilities District in complying with the disclosure provisions of any continuing disclosure undertaking and this Indenture, including those related to public inquiries regarding the Special Tax and disclosures to Owners, the costs of the Community Facil ities District related to an appeal of the Special Ta x, any amounts required to be rebated to the federal government in order for the Community Facilities District to comply with Section 6.07, an allocable share of the salaries of the City staff providing services on behalf of the Community Facilities District directly related to the foregoing and a proportionate amount of City general administrative overhead related thereto, and the costs of foreclosure of any delinquent Special Tax. “Annual Debt Service” means, for each Bond Year, the sum of (a) the interest due on the Outstanding Bonds in such Bond Year, assuming that the Outstanding Bonds are retired as scheduled (including by reason of mandatory sinking fund redemptions), and (b) the principal of 429
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the Outstanding Bonds due in such Bond Year (including by reason of mandatory sinking fund redemptions).
“Authorized Denominations” means (a) with respect to the Series 2024 Bonds, $5,000 and any integral multiple thereof, and (b) with respect to each Series of Additional Bonds, the authorized denominations for such Series of Additional Bonds specified in the Supplemental Indenture pursuant to which such Additional Bonds are issued. “Authorized Representative” means, with respect to the Community Facilities District, the City Manager of the City and the Chief Financial Officer, Finance Department, of the City, and any other Person designated as an Authorized Representative of the Community Facilities District in a Written Certificate of the Community Facilities District submitted to the Trustee. “Average Annual Debt Service” means the average of the Annual Debt Service for all Bond Years, including the Bond Year in which the calculation is made. “Beneficial Owners” means those Persons for which the Participants have caused the Depository to hold Book-Entry Bonds.
“Bond Counsel” means a firm of nationally recognized bond counsel selected by the Community Facilities District.
“Bond Fund” means the fund by that name established and held by the Trustee pursuant to Section 5.03.
“Bond Year” means the twelve-month period beginning on September 2 in each year and extending to the next succeeding September 1, both dates inclusive, except that the first Bond Year shall begin on the Closing Date and end on September 1, 2024. “Bonds” means the City of Fontana Community Facilities District No. 111 (Monterado) Special Tax Bonds issued hereunder, and includes the Series 2024 Bonds and any Addit ional Bonds.
“Book-Entry Bonds” means the Bonds of a Series registered in the name of the Depository, or the Nominee thereof, as the registered owner thereof pursuant to the terms and provisions of Section 2.07.
“Business Day” means a day that is not (a) a Saturday, Sunday or legal holiday in the State, (b) a day on which banking institutions in the State, or in any state in which the Office of the Trustee is located, are required or authorized by law (including executive order) to close, or (c) a day on which the New York Stock Exchange is closed. “Cede & Co.” means Cede & Co., the nominee of DTC, and any successor nominee of DTC with respect to a Series of Book-Entry Bonds.
“City” means the City of Fontana, a general law city organized and existing under the laws of the State, and its successors.
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“City Council” means the City Council of the City.
“Closing Date” means the date upon which the Series 2024 Bonds are delivered to the Original Purchaser, being __________, 2024.
“Code” means the Internal Revenue Code of 1986.
“Community Benefit Facilities Account” means the account by that name within the Improvement Fund established and held by the Trustee pursuant to Section 3.04. “Community Benefit Facilities” means Construction Facilities, the costs of which are paid from the Community Benefit Facilities Account.
“Community Facilities District” means City of Fontana Community Facilities District No. 111 (Monterado), a community facilities district organized and existing under the laws of the State, and its successors.
“Construction Account” means the account by that name within the Improvement Fund established and held by the Trustee pursuant to Section 3.04. “Construction Facilities” means the Facilities other than the Acquisition Facilities. “Corresponding Bond Year” means, with respect to any Fiscal Year, the Bond Year that commences in such Fiscal Year.
“Costs of Issuance” means all items of expense directly or indirectly payable by or reimbursable to the Community Facilities District relating to the authorization, issuance, sale and delivery of the Bonds, including printing expenses, rating agency fees, filing and recording fees, initial fees, expenses and charges of the Trustee and its counsel, including the Trustee’s first annual administrative fee, fees, charges and disbursements of attorneys, municipal advisors, accounting firms, consultants and other professionals, fees and charges for preparation, execution and safekeeping of the Bonds, any premium for bond insurance securing payment of the B onds and any other cost, charge or fee in connection with the original issuance of the Bonds. “Costs of Issuance Fund” means the fund by that name established and held by the Trustee pursuant to Section 3.03.
“County” means the County of San Bernardino, a county and political subdivision of the State organized and existing under the laws of the State, and any successor thereto. “County Assessor” means the Assessor of the County.
“County Auditor” means the Auditor-Controller of the County. “Defeasance Securities” means (a) non-callable direct obligations of the United States of America (“United States Treasury Obligations”), and (b) evidences of ownership of proportionate interests in future interest and principal payments on United States Treasury Obligatio ns held by a bank or trust company as custodian, under which the owner of the investment is the real party in 431
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interest and has the right to proceed directly and individually against the obligor and the underlying United States Treasury Obligations are not available to any person claiming through the custodian or to whom the custodian may be obligated.
“Depository” means DTC, and its successors as securities depository for any Series of Book-Entry Bonds, including any such successor appointed pursuant to Section 2.07. “Developer” means Lennar Homes of California, LLC , a limited liability company organized and existing under the laws of the State of California, and any successor thereto. “Developer Continuing Disclosure Certificate” means the Continuing Disclosure Certificate, dated as of ________ 1, 2024, executed by the Developer, as originally executed and as it may be amended from time to time in accordance with the terms thereof. “District Continuing Disclosure Agreement” means the Continuing Disclosure Agreement, dated as of ________ 1, 2024, by and between the Community Facilities District and U.S. Bank Trust Company, National Association, in its capacity as Trustee and in its capacity as dissemination agent thereunder, as originally executed and as it may be amended , supplemented or otherwise modified from time to time in accordance with the terms thereof. “DTC” means The Depository Trust Company, a limited-purpose trust company organized under the laws of the State of New York.
“Event of Default” means any event specified in Section 7.01. “Facilities” means the public facilities authorized to be financed by the Community Facilities District, as described in the Resolution of Formation. “Fiscal Year” means the period beginning on July 1 of each year and ending on the next succeeding June 30, or any othe r twelve-month period hereafter selected and designated as the official fiscal year period of the Community Facilities District. “Funds” means the separate funds from time to time established and maintained by the Trustee pursuant hereto.
“Improvement Fund” means the fund by that name established and held by the Trustee pursuant to Section 3.04.
“Indenture” means this Indenture, dated as of ________ 1, 2024 , by and between the Community Facilities District and U.S. Bank Trust Company, National Association, as Trustee, as originally executed and as it may be modified or amended from time to time by any Supplemental Indenture.
“Independent Consultant” means any consultant or firm of such consultants selected by the Community Facilities District and who, or eac h of whom (a) is generally recognized to be qualified in the financial consulting field, (b) is in fact independent and not under the control of the Community Facilities District or the City, (c) does not have any substantial interest, direct or indirect, with or in the Community Facilities District or the City, with or in any owner of real 432
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property in the Community Facilities District or in any real property in the Community Facilities District, and (d) is not connected with the Community Facilities Distri ct or the City as an officer or employee thereof, but who may be regularly retained to make reports to the Community Facilities District or the City.
“Interest Account” means the account by that name within the Bond Fund established and held by the Trustee pursuant to Section 5.03.
“Interest Payment Dates” means March 1 and September 1 of each year, commencing [September 1, 2024].
“Letter of Representations” means the Letter of Representations from the Community Facilities District to the Depository, in whi ch the Community Facilities District makes certain representations with respect to issues of its securities for deposit by the Depository. “Maximum Annual Debt Service” means the largest Annual Debt Service for any Bond Year, including the Bond Year in which the calculation is made. “Moody’s” means Moody’s Investors Service, Inc., a corporation duly organized and existing under the laws of the State of Delaware, and its successors and assigns, except that if such entity shall be dissolved or liquidated or shall no longer perform the functions of a securities rating agency, then the term “Moody’s” shall be deemed to refer to any other nationally recognized securities rating agency selected by the Community Facilities District. “Net Special Tax Revenues” means Special Tax Revenues, less amounts required to pay Administrative Expenses.
“Nominee” means the nominee of the Depository, which may be the Depository, as determined from time to time pursuant to Section 2.07.
“Office of the Trustee” means the principal corporate trust office of the Trustee in Los Angeles, California or such other office as may be specified to the Community Facilities District by the Trustee in writing; provided, however, that with respect to presentation of Bonds for payment or for registration of transfer and exchange, such term shall mean the office or agency of the Trustee at which, at any particular time, its corporate trust agency business shall be conducted, which other office or agency shall be specified to the Community Facilities District by the Trustee in writing.
“Ordinance” means any ordinance adopted by the City Council levying the Special Tax. “Original Purchaser” means the original purchaser of the Series 2024 Bonds from the Community Facilities District.
“Outstanding” means, when used as of any particular time with reference to Bonds, subject to the provisions of Section 11.07, all Bonds theretofore, or thereupon being, authenticated and delivered by the Trustee under this Indenture except (a) Bonds theretofore canceled by the Trustee or surrendered to the Trustee for cancellation, (b) Bonds with respect to which all liability of the Community Facilities District shall have been discharged in accordance with Section 10.01, 433
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and (c) Bonds in lieu of which other Bonds shall have been authenticated and delivered by t he Trustee, or that have been paid without surrender thereof, pursuant to Section 2.08. “Owner” means, with respect to a Bond, the Person in whose name such Bond is registered on the Registration Books.
“Participant” means any entity that is recognized as a participant by DTC in the book - entry system of maintaining records with respect to Book-Entry Bonds. “Participating Underwriter” has the meaning ascribed to such term in the District Continuing Disclosure Agreement and the Developer Continuing Disclosure Certificate. “Payment Request” has the meaning ascribed to such term in the Acquisition Agreement. “Permitted Investments” is defined in Exhibit A hereto. “Person” means an individual, corporation, limited liability company, firm, associatio n, partnership, trust or other legal entity or group of entities, including a governmental entity or any agency or political subdivision thereof.
“Principal Account” means the account by that name within the Bond Fund established and held by the Trustee pursuant to Section 5.03.
“Rate and Method” means the rate and method of apportionment of the Special Tax approved by the qualified electors of the Community Facilities District. “Rebate Fund” means the fund by that name established and held by the Trustee pursuant to Section 5.06.
“Rebate Requirement” has the meaning ascribed to such term in the Tax Certificate. “Record Date” means, with respect to interest payable on any Interest Payment Date, the 15th calendar day of the month preceding such Interest Payment Date, whether or not such day is a Business Day.
“Redemption Fund” means the fund by that name established and held by the Trustee pursuant to Section 5.05.
“Redemption Price” means the aggregate amount of principal of and premium, if any, on the Bonds upon the redemption thereof pursuant hereto.
“Registration Books” means the records maintained by the Trustee for the registration of ownership and registration of transfer of the Bonds pursuant to Section 2.05. “Reserve Fund” means the fund by that name established and held by the Trustee pursuant to Section 5.04.
“Reserve Requirement” means, as of the date of any calculation, the least of (a) “10% of the proceeds of the issue,” within the meaning of Section 148 of the Code (excluding Bonds 434
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refunded with the proceeds of subsequently issued Bonds), (b) Maximum Annual Debt Service, and (c) 125% of Average Annual Debt Service.
“Resolution of Formation” means Resolution No. 2022-117, adopted by the City Council on September 13, 2022 , as originally adopted and as it may be amended , supplemented or otherwise modified from time to time.
“S&P” means S&P Global Ratings , a business unit of Standard and Poor’s Financial Services, LLC, and its successors and assigns, except that if such entity shall be dissolved or liquidated or shall no longer perform the functions of a securities rating agency, then the term “S&P” shall be deemed to refer to any other nationally recognized securities rating agency selected by the Community Facilities District.
“Securities Intermediary” means U.S. Bank National Association, as securities intermediary under the Indenture, or any successor thereto as Securities Intermediary under the Indenture substituted in its place as provided herein.
“Series” means the initial series of Bonds executed, authenticated and delivered on the date of initial issuance of the Bonds and designated pursuant to this Indenture as the Series 2024 Bonds, and any Additional Bonds issued pursuant to a Supplemental Indenture and identified as a separate Series of Bonds.
“Series 2024 Bonds” means the City of Fontana Community Facilities District No. 111 (Monterado) Special Tax Bonds, Series 2024, issued hereunder. “Special Tax” means the special tax described and defined in the Rate and Method as the “Facilities Special Tax” approved by the qualified electors of the Community Facilities District. “Special Tax Fund” means the fund by that name established and held by the Trustee pursuant to Section 5.02.
“Special Tax Revenues” means the proceeds of the Special Tax received by or on behalf of the Community Facilities District, including any prepayments thereof, interest and penalties thereon and proceeds of the redemption or sale of property sold as a result of foreclosure of the lien of the Special Tax, which shall be limited to the amount of said lien and interest and penalties thereon.
“State” means the State of California.
“Supplemental Indenture” means any supplemental indenture modifying or amending this Indenture, but only if and to the extent that such Supplemental Indenture is specifically authorized hereunder.
“Tax Certificate” means the Tax Certificate executed by the Community Facilities District at the time of issuance of the Series 2024 Bonds relating to the requirements of Section 148 of the Code, as originally executed and as it may be amended , supplemented or otherwise modified from time to time in accordance with the terms thereof. 435
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“Trustee” means U.S. Bank Trust Company, National Association , a national banking association organized and existing under the laws of the United States of America, or any successor thereto as Trustee hereunder substituted in its place as provided herein. “Verification Report” means, with respect to the deemed payment of Bonds pursuant to clause (ii) of Section 10.02(a), a report of a nationally recognized certified public accountant, or firm of such accountants, verifying that the Defeasance Securities and cash, if any, deposited in connection with such deemed payment satisfy the requirements of clause (ii) of Section 10.02(a). “Written Certificate” and “Written Request” of the Community Facilities District mean, respectively, a written certificate or written request signed in the name of the Community Facilities District by an Authorized Representative. Any such certificate or request may, but need not, be combined in a single instrument with any other instrument, opinion or representation, and the two or more so combined shall be read and construed as a single instrument.
Section 1.02. Rules of Construction. (a) The terms defined herein expressed in the singular shall, unless the context otherwise indicates, include the plural and vice versa. (b) The use herein of the masculine, feminine or neuter gender is for convenience only and shall be deemed and construed to include correlative words of the masculine, feminine or neuter gender, as appropriate.
(c) References herein to a document shall include all amendments, supplements or other modifications to such document, and any replace ments, substitutions or novation of, that document.
(d) Any term defined herein by reference to another document shall continue to have the meaning ascribed thereto whether or not such other document remains in effect. (e) The use herein of the words “incl uding” and “includes,” and words of similar import, shall be deemed to be followed by the phrase “without limitation.” (f) Headings of Articles and Sections herein and the table of contents hereof are solely for convenience of reference, do not constitute a part hereof and shall not affect the meaning, construction or effect hereof.
(g) All references herein to designated “Articles,” “Sections,” “Exhibits,” “subsections,” “paragraphs,” “clauses,” and other subdivisions are to the designated Articles, Sections, Exhibits, subsections, paragraphs, clauses, and other subdivisions of this Indenture. (h) The words “hereof” (except when preceded by a specific Section or Article reference) “herein,” “hereby,” “hereunder,” “hereinabove,” “hereinafter,” and other equivalent words and phrases used herein refer to this Indenture and not solely to the particular portion hereof in which any such word is used.
(i) Any reference to a Person, or a Person in a specified capacity, shall be construed to include such Person’s successors or such Person’s successors in such capacity, as the case may be. 436
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Section 1.03. Equal Security. In consideration of the acceptance of the Bonds by the Owners thereof, this Indenture shall be deemed to be and shall constitute a contract among the Community Facilities District, the Trustee and the Owners from time to time of all Bonds authorized, executed, issued and delivered hereunder and then Outstanding to secure the full and final payment of the principal of, premium, if any, and interest on all Bonds that may from time to time be authorized, executed, issued and delivered hereunder, subject to the agreements, conditions, covenants and provisions contained herein; and all agreements and covenants set forth herein to be performed by or on behalf of the Community Facilities District shall be for the equal and proportionate benefit, protection and security of all Owners of the Bonds without distinction, preference or priority as to security or otherwise of any Bonds over any other Bonds by reason of the number or date thereof or the time of authorization, sale, execution, issuance or delivery thereof or for any cause whatsoever, except as expressly provided herein or therein. 437
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ARTICLE II
THE BONDS
Section 2.01. Authorization of Bonds ; Special , Limited Obligations. (a) The Community Facilities District hereby authorizes the issuance of the Bonds under and subject to the terms of this Indenture, the Act and other applicable laws of the State. The Bonds may consist of one or more Series of Bonds of varying denominations, dates, maturities, interest rates and other provisions, subject to the provisions and conditions contained herein. The Bonds shall be designated generally as the “City of Fontana Community Facilities District No. 111 (Monterado) Special Tax Bonds,” each Series thereof to bear such additional designation as may be necessary or appropriate to distinguish such Series from every other Series of Bonds. (b) The Bonds shall be special , limited obligations of the Community Facilities District, payable, as provided herein, solely from Net Special Tax Revenues and the other assets pledged therefor hereunder. Neither the faith and credit nor the taxing power of the Community Facilities District (except to the limited extent set forth herein), the City or t he State, or any political subdivision thereof, is pledged to the payment of the Bonds.
Section 2.02. Terms of Series 2024 Bonds. (a) The Series 2024 Bonds shall be designated “City of Fontana Community Facilities District No. 111 (Monterado) Special T ax Bonds, Series 2024.” The aggregate principal amount of Series 2024 Bonds that may be issued and Outstanding under this Indenture shall not exceed $__________, except as may be otherwise provided in Section 2.08.
(b) The Series 2024 Bonds shall be issued in fully-registered form without coupons in Authorized Denominations, so long as no Series 2024 Bond shall have more than one maturity date. The Series 2024 Bonds shall be dated as of the Closing Date, shall be in the aggregate principal amount of $__________, shall mature on September 1 of each year, shall bear interest at the rates per annum (calculated on the basis of a 360-day year comprised of twelve 30-day months) and shall be in the principal amounts as follows:
Maturity Date
(September 1)
Principal
Amount
Interest
Rate
$ %
438
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(c) Interest on the Series 2024 Bonds shall be payable from the Interest Payment Date next preceding the date of authentication thereof unless (i) a Series 2024 Bond is authenticated on or before an Interest Payment Date and after the close of business on the preceding Record Date, in which event interest thereon shall be payable from such Interest Payment Date, (ii) a Series 2024 Bond is authenticated on or before the first Record Date, in which event interest thereon shall be payable from the Closing Date, or (iii) interest on any Series 2024 Bond is in default as of the date of authentication thereof, in which event interest thereon shall be payable from the date to which interest has previously been paid or duly provided for. Interest shall be paid in lawful money of the United States on each Interest Payment Date. Interest shall be paid by check of the Trustee mailed by first-class mail, postage prepaid, on each Interest Payment Date to the Owners of the Series 2024 Bonds at their respective addresses shown on the Registration Books a s of the close of business on the preceding Record Date. Notwithstanding the foregoing, interest on any Series 2024 Bond that is not punctually paid or duly provided for on any Interest Payment Date shall, if and to the extent that amounts subsequently become available therefor, be paid on a payment date established by the Trustee to the Person in whose name the ownership of such Series 2024 Bond is registered on the Registration Books at the close of business on a special record date to be established by the Trustee for the payment of such defaulted interest, notice of which shall be given to such Owner not less than ten days prior to such special record date. (d) The principal of the Series 2024 Bonds shall be payable in lawful money of the United States of Am erica upon presentation and surrender thereof upon maturity or earlier redemption at the Office of the Trustee.
(e) The Series 2024 Bonds shall be subject to redemption as provided in Article IV. (f) The Series 2024 Bonds shall be in substantially the form set forth in Exhibit B hereto, with appropriate or necessary insertions, omissions and variations as permitted or required hereby.
Section 2.03. Execution of Bonds . The Bonds shall be executed in the name and on behalf of the Community Facilities District with the manual or facsimile signature of the Mayor of the City attested by the manual or facsimile signature of the City Clerk of the City. The Bonds shall then be delivered to the Trustee for authentication by it. In case any of such officers who shall have signed or attested any of the Bonds shall cease to be such officers before the Bonds so signed or attested shall have been authenticated or delivered by the Trustee, or issued by the Community Facilities District, such Bonds may nevertheless be authenticated, delivered and issued and, upon such authentication, delivery and issue, shall be as binding upon the Community Facilities District as though those who signed and attested the same had continued to be such officers, and also any Bonds may be signed and attested on behalf of the Community Facilities District by such Persons as at the actual date of execution of such Bonds shall be the proper officers of the City although at the nominal date of such Bonds any such Person shall not have been such officer of the City.
Section 2.04. Authentication of Bonds. Only such of the Bonds as shall bear thereon a certificate of authentication substantially in the form as that set forth in Exhibit B hereto for the Series 2024 Bonds, manually executed by the Trustee, shall be valid or obligatory for any purpose or entitled to the benefits of this Indenture, and such certificate of the Trustee shall be conclusive 439
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evidence that the Bonds so authenticated have been duly executed, authenticated and delivered hereunder and are entitled to the benefits of this Indenture.
Section 2.05. Registration Books . The Trustee shall keep or cause to be kept, at the Office of the Trustee, sufficient records for the registration and transfer of ownership of the Bonds, which shall be open to inspection during regular business hours and upon reasonable notice by the Community Facilities District. Upon presentation for such purpose, the Trustee shall, under such reasonable regulations as it may prescribe, register or transfer or cause to be registered or transferred, on such records, the ownership of the Bonds.
Section 2.06. Transfer and Exchange of Bonds. (a) Any Bond may be transferred upon the Registration Books by the Person in whose name it is registered, in person or by such Person’s duly authorized attorney, upon surrender of such Bond to the Trustee for cancellation, accompanied by delivery of a written instrument of transfer, duly executed in a form acceptable to the Trustee. Whenever any Bond or Bonds shall be so surrendered for transfer, the Community Facilities District shall execute and the Trustee shall authenticate and shall deliver a new Bond or Bonds of the same Series and maturity in a like aggregate principal amount, in any Authorized Denomination. The Trustee shall require the Owner requesting such transfer to pay any tax or other governmental charge required to be paid with respect to such transfer. (b) The Bonds may be exchanged at the Office of the Trustee for a like aggregate principal amount of Bonds of the same Series and maturity of other Authorized Denominations.
The Trustee shall require the payment by the Owner requesting such exchange of any tax or other governmental charge required to be paid with respect to such exchange. (c) The Trustee shall not be obligated to make any transfer or exchange of Bonds of a Series pursuant to this Section during the period established by the Trustee for the selection of Bonds of such Series for redemption, or with respect to any Bonds of such Series selected for redemption.
Section 2.07. Book-Entry System. (a) Prior to the issuance of a Series of Bonds, the Community Facilities District may provide that such Series of Bonds shall initially be issued as Book-Entry Bonds, and in such event, the Bonds of such Series for each maturity date shall be in the form of a separate single fully -registered B ond (which may be typewritten). Upon initial issuance, the ownership of each such Bond of such Series shall be registered in the Registration Books in the name of the Nominee, as nominee of the Depository. The Series 2024 Bonds shall initially be issued as Book-Entry Bonds.
Payment of principal of, and interest and premium, if any, on, any Book -Entry Bond registered in the name of the Nominee shall be made on the applicable payment date by wire transfer of New York clearing house or equivalent next day funds or by wire transfer of same day funds to the account of the Nominee. Such payments shall be made to the Nominee at the address that is, on the Record Date, shown for the Nominee in the Registration Books. (b) With respect to Book -Entry Bonds, the Community F acilities District and the Trustee shall have no responsibility or obligation to any Participant or to any Person on behalf of which such a Participant holds an interest in such Book -Entry Bonds. Without limiting the 440
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immediately preceding sentence, the Community Facilities District and the Trustee shall have no responsibility or obligation with respect to (i) the accuracy of the records of the Depository, the Nominee or any Participant with respect to any ownership interest in Book -Entry Bonds, (ii) the delivery to any Participant or any other Person, other than an Owner as shown in the Registration Books, of any notice with respect to Book -Entry Bonds, including any notice of redemption, (iii) the selection by the Depository and its Participants of the beneficial interests in Book-Entry Bonds of a maturity to be redeemed in the event such Book -Entry Bonds are redeemed in part, (iv) the payment to any Participant or any other Person, other than an Owner as shown in the Registration Books, of any amount with respect to principal of, or premium, if any, or interest on Book -Entry Bonds, or (v) any consent given or other action taken by the Depository as Owner. (c) The Community Facilities District and the Trustee may treat and consider the Person in whose name each B ook-Entry Bond is registered in the Registration Books as the absolute Owner of such Book -Entry Bond for the purpose of payment of principal of, and premium, if any, and interest on such Bond, for the purpose of selecting any Bonds, or portions thereof, to be redeemed, for the purpose of giving notices of redemption and other matters with respect to such Book -Entry Bond, for the purpose of registering transfers with respect to such Book-Entry Bond, for the purpose of obtaining any consent or other action to be taken by Owners and for all other purposes whatsoever, and the Community Facilities District and the Trustee shall not be affected by any notice to the contrary.
(d) In the event of a redemption of all or a portion of a Book -Entry Bond, the Depository, in its discretion (i) may request the Trustee to authenticate and deliver a new Book - Entry Bond, or (ii) if the Depository is the sole Owner of such Book -Entry Bond, shall make an appropriate notation on the Book-Entry Bond indicating the date and amounts of the reduction in principal thereof resulting from such redemption, except in the case of final payment, in which case such Book-Entry Bond must be presented to the Trustee prior to payment. (e) The Trustee shall pay all principal of, and premium, if any, and i nterest on the Book-Entry Bonds only to or “upon the order of” (as that term is used in the Uniform Commercial Code as adopted in the State) the respective Owner, as shown in the Registration Books, or such Owner’s respective attorney duly authorized in wr iting, and all such payments shall be valid and effective to fully satisfy and discharge the obligations with respect to payment of principal of, and premium, if any, and interest on the Book -Entry Bonds to the extent of the sum or sums so paid.
No Person other than an Owner, as shown in the Registration Books, shall receive an authenticated Book-Entry Bond. Upon delivery by the Depository to the Owners, the Community Facilities District and the Trustee of written notice to the effect that the Depository ha s determined to substitute a new nominee in place of the Nominee, and subject to the provisions herein with respect to Record Dates, the word Nominee in this Indenture shall refer to such nominee of the Depository. (f) In order to qualify the Book-Entry Bonds for the Depository’s book-entry system, the Community Facilities District shall execute and deliver to the Depository a Letter of Representations. The execution and delivery of a Letter of Representations shall not in any way impose upon the Community Faci lities District or the Trustee any obligation whatsoever with respect to Persons having interests in such Book-Entry Bonds other than the Owners, as shown on the Registration Books. Such Letter of Representations may provide the time, form, content and manner of transmission, of notices to the Depository. In addition to the execution and delivery of 441
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a Letter of Representations by the Community Facilities District, the Community Facilities District and the Trustee shall take such other actions, not inconsistent with this Indenture, as are reasonably necessary to qualify Book-Entry Bonds for the Depository’s book-entry program. (g) In the event the Community Facilities District determines that it is in the best interests of the Beneficial Owners that they be able to obtain certificated Bonds and that such Bonds should therefore be made available, and notifies the Depository and the Trustee of such determination, the Depository will notify the Participants of the availability through the Depository of certificated Bonds. In such event, the Trustee shall transfer and exchange certificated Bonds as requested by the Depository and any other Owners in appropriate amounts. In the event (i) the Depository determines not to continue to act as securities depository for Book-Entry Bonds, or (ii) the Depository shall no longer so act and gives notice to the Trustee of such determination, then the Community Facilities District shall discontinue the Book-Entry system with the Depository. If the Community Facilities District deter mines to replace the Depository with another qualified securities depository, the Community Facilities District shall prepare or direct the preparation of a new single, separate, fully-registered Bond of the appropriate Series for each maturity date of such Book-Entry Bonds, registered in the name of such successor or substitute qualified securities depository or its nominee. If the Community Facilities District fails to identify another qualified securities depository to replace the Depository, then the Bo ok-Entry Bonds shall no longer be restricted to being registered in the Registration Books in the name of the Nominee, but shall be registered in whatever name or names the Owners transferring or exchanging such Bonds shall designate, in accordance with th e provisions of Sections 2.06, 2.08 and 2.09. Whenever the Depository requests the Community Facilities District to do so, the Community Facilities District shall cooperate with the Depository in taking appropriate action after reasonable notice (i) to make available one or more separate certificates evidencing the Book -Entry Bonds to any Participant having Book -Entry Bonds credited to its account with the Depository, and (ii) to arrange for another securities depository to maintain custody of certificates evidencing the Book-Entry Bonds. (h) Notwithstanding any other provision of this Indenture to the contrary, if the Depository is the sole Owner of the Bonds of a Series, so long as any Book -Entry Bond of such Series is registered in the name of the Nominee, all payments of principal of, and premium, if any, and interest on such Book-Entry Bond and all notices with respect to such Book-Entry Bond shall be made and given, respectively, as provided in the Letter of Representations or as otherwise instructed by the Depository.
(i) In connection with any notice or other communication to be provided to Owners pursuant to this Indenture by the Community Facilities District or the Trustee, with respect to any consent or other action to be taken by Owners of Book -Entry Bonds, the Trustee shall establish a record date for such consent or other action and give the Depository notice of such record date not less than 15 calendar days in advance of such record date to the extent possible.
Section 2.08. Bonds Mutilated, Lost, Destroyed or Stol en. If any Bond shall become mutilated, the Community Facilities District, at the expense of the Owner of said Bond, shall execute, and the Trustee shall thereupon authenticate and deliver, a new Bond of the same Series and maturity in a like principal amount in exchange and substitution for the Bond so mutilated, but only upon surrender to the Trustee of the Bond so mutilated. Every mutilated Bond so surrendered to the Trustee shall be canceled by it and delivered to, or upon the order of, the Community 442
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Facilities District. If any Bond shall be lost, destroyed or stolen, evidence of such loss, destruction or theft may be submitted to the Trustee and, if such evidence and indemnity reasonably satisfactory to the Trustee shall be given, the Community Facilities District, at the expense of the Owner, shall execute, and the Trustee shall thereupon authenticate and deliver, a new Bond of the same Series and maturity in a like aggregate principal amount in lieu of and in replacement for the Bond so lost, destroy ed or stolen (or if any such Bond shall have matured or shall have been selected for redemption, instead of issuing a replacement Bond, the Trustee may pay the same without surrender thereof). The Community Facilities District may require payment by the Owner of a sum not exceeding the actual cost of preparing the replacement Bond delivered thereto under this Section and the expenses incurred by the Community Facilities District and the Trustee in connection therewith. Any Bond of a Series issued under the provisions of this Section in lieu of any Bond of such Series alleged to be lost, destroyed or stolen shall constitute an original additional contractual obligation on the part of the Community Facilities District whether or not the Bond so alleged to be lost, destroyed or stolen be at any time enforceable by anyone, and shall be entitled to the benefits of this Indenture with all other Bonds of such Series secured by this Indenture.
Section 2.09. Temporary Bonds. The Bonds of a Series may be issued in temporary form exchangeable for definitive Bonds of such Series when ready for delivery. Any temporary Bonds may be printed, lithographed or typewritten, shall be of such Authorized Denominations as may be determined by the Community Facilities District, shall be in ful ly-registered form without coupons and may contain such reference to any of the provisions of this Indenture as may be appropriate. Every temporary Bond shall be executed by the Community Facilities District and authenticated by the Trustee upon the same conditions and in substantially the same manner as the definitive Bonds. If the Community Facilities District issues temporary Bonds of a Series it shall execute and deliver definitive Bonds of such Series as promptly thereafter as practicable, and thereupon the temporary Bonds of such Series may be surrendered, for cancellation, at the Office of the Trustee and the Trustee shall authenticate and deliver, in exchange for such temporary Bonds, an equal aggregate principal amount of definitive Bonds of such Se ries and maturities in Authorized Denominations. Until so exchanged, the temporary Bonds of such Series shall be entitled to the same benefits under this Indenture as definitive Bonds of such Series authenticated and delivered hereunder.
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ARTICLE III
ISSUANCE OF SERIES 2024 BONDS; APPLICATION OF PROCEEDS;
ADDITIONAL BONDS
Section 3.01. Issuance of Series 2024 Bonds. The Community Facilities District may, at any time, execute the Series 2024 Bonds and deliver the same to the Trustee. The Trustee shall authenticate the Series 2024 Bonds and deliver the Series 2024 Bonds to the Original Purchaser upon receipt of a Written Request of the Community Facilities District and upon receipt of the purchase price therefor.
Section 3.02. Application of Proceeds. (a) On the Closing Date, the proceeds of the sale of the Series 2024 Bonds received by the Trustee, $__________, shall be deposited by the Trustee as follows:
(i) the Trustee shall deposit the amount of $__________ in the Costs of Issuance Fund;
(ii) the Trustee shall deposit the amount of $__________ in the Reserve Fund, which is equal to the Reserve Requirement;
(iii) the Trustee shall deposit the amount of $__________ in the Acquisition Account; and
(iv) the Trustee shall deposit the amount of $__________ in the Community Benefit Facilities Account.
(b) On the Closing Date, the amount transferred by the Community Facilities District to the Trustee , $__________, which consists of amounts of the Special Tax coll ected by the Community Facilities District, shall be deposited by the Trustee as follows:
(i) the Trustee shall deposit the amount of $__________ in the Community Benefit Facilities Account; and
(ii) the Trustee shall deposit the amount of $__________ in the Administrative Expense Fund.
Section 3.03. Costs of Issuance Fund . (a) The Trustee shall establish and maintain in trust in the name of the Trustee a separate fund designated the “Costs of Issuance Fund.” On the Closing Date, the Trustee shall deposit in the Costs of Issuance Fund the amount required to be deposited therein pursuant to Section 3.02. There shall additionally be deposited in the Cost of Issuance Fund the portion, if any, of the proceeds of the sale of any Additional Bonds required to be deposited therein under the Supplemental Indenture pursuant to which such Additional Bonds are issued.
(b) The moneys in the Costs of Issuance Fund shall be used and withdrawn by the Trustee from time to time to pay the C osts of Issuance upon submission of a Written Request of the Community Facilities District stating (i) the Person to whom payment is to be made, (ii) the 444
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amount to be paid, (iii) the purpose for which the obligation was incurred, (iv) that such payment is a proper charge against the Costs of Issuance Fund, and (v) that such amount has not been the subject of a prior disbursement from the Costs of Issuance Fund, in each case together with a statement or invoice for each amount requested thereunder. On the la st Business Day that is no later than six months after the Closing Date, the Trustee shall transfer any amount remaining in the Costs of Issuance Fund to the Construction Account and, upon making such transfer, the Costs of Issuance Fund shall be closed.
(c) If the Costs of Issuance Fund has been closed in accordance with the provisions hereof, the Costs of Issuance Fund shall be reopened and reestablished by the Trustee in connection with the issuance of any Additional Bonds, if so provided in the Supplemental Indenture pursuant to which such Additional Bonds are issued.
Section 3.04. Improvement Fund. (a) The Trustee shall establish and maintain in trust in the name of the Trustee a separate fund designated the “Improvement Fund.” Within the Improvement Fund, the Trustee shall establish and maintain in trust in the name of the Trustee a separate account designated the “Acquisition Account ,” a separate account designated the “Construction Account” and a separate account designated th e “C ommunity Benefit Facilities Account.” On the Closing Date, the Trustee shall deposit in the Acquisition Account and the Community Benefit Facilities Account the respective amounts required to be deposited therein pursuant to Section 3.02.
The moneys in the Acquisition Account shall be used and withdrawn by the Trustee from time to time to pay the costs of the Acquisition Facilities upon submission of a Written Request of the Community Facilities District stating (i) the Person to whom payment is to be m ade, (ii) the amount to be paid, (iii) the purpose for which the obligation was incurred, (iv) that such payment is for costs of the Acquisition Facilities and is a proper charge against the Acquisition Account, (v) that payment of such costs has not been the subject of a prior disbursement from the Acquisition Account, the Construction Account or the Community Benefit Facilities Account, and (vi) whether or not such costs of the Acquisition Facilities are to be paid pursuant to a Payment Request submitted in accordance with the Acquisition Agreement, in each case together with a statement or invoice for each amount requested thereunder. If costs of the Acquisition Facilities are to be paid pursuant to a Payment Request submitted in accordance with the Acqui sition Agreement, a duplicate original of the signed and approved Payment Request relating to such costs of the Acquisition Facilities, together with all exhibits and attachments thereto, must accompany such Written Request of the Community Facilities District.
Upon the submission of a Written Certificate of the Community Facilities District stating (i) that the portion of the Acquisition Facilities to be financed from the Acquisition Account has been completed and that all costs of such Acquisition Facilities have been paid, or (ii) that such portion of the Acquisition Facilities has been substantially completed and that all remaining costs of such portion of the Acquisition Facilities have been determined and specifying the amount to be retained therefor, the Trustee shall transfer all of the amount remaining in the Acquisition Account (less any such retention) to the Construction Account or the Community Benefit Facilities Account, as directed in a Written Certificate of the Community Facilities District submitted to the Trustee.
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(b) The moneys in the Construction Account shall be used and withdrawn by the Trustee from time to time to pay the costs of the Construction Facilities upon submission of a Written Request of the Community Facilities District stating (i) the Person to whom payment is to be made, (ii) the amount to be paid, (iii) the purpose for which the obligation was incurred, (iv) that such payment is for costs of the Construction Facilities and is a proper charge against the Construction Account, and (v) that payment of such costs has not been the subject of a prior disbursement from the Acquisition Account, the Construction Account or the Community Benefit Facilities Account, in each case together with a statement or invoice for each amount requested thereunder. Additionally, upon submission of a Written Request of the Community Facilities District stating (i) that a portion of the amount on deposit in the Constructio n Account is to be transferred to the Community Benefit Facilities Account, and (ii) the amount to be so transferred, the Trustee shall transfer such amount from the Construction Account to the Community Benefit Facilities Account.
Upon the submission of a Written Certificate of the Community Facilities District stating (i) that the portion of the Construction Facilities to be financed from the Construction Account has been completed and that all costs of such Construction Facilities have been paid, or (ii) that such portion of the Construction Facilities has been substantially completed and that all remaining costs of such portion of the Construction Facilities have been determined and specifying the amount to be retained therefor, the Trustee shall (A) if the amount remaining in the Construction Account (less any such retention) is equal to or greater than $25,000, transfer the portion of such amount equal to the largest integral multiple of $5,000 that is not greater than such amount to the Redemption Fund, to be applied to the redemption of Bonds, and (B) after making the transfer, if any, required to be made pursuant to the preceding clause (A), transfer all of the amount remaining in the Construction Account (less any such retention) to the Bond Fund, to be applied to the payment of interest on the Bonds.
(c) The moneys in the Community Benefit Facilities Account shall be used and withdrawn by the Trustee from time to time to pay the costs of Construction Facilities that constitute Community Benefit Facilities upon submission of a Written Request of the Community Facilities District stating (i) the Person to whom payment is to be made, (ii) the amount to be paid, (iii) the purpose for which the obligation was incurred, (iv) that the Construction Facilities, th e costs of which are to be paid, constitute Community Benefit Facilities and such payment is for costs of the Community Benefit Facilities and is a proper charge against the Community Benefit Facilities Account , and (v) that payment of such costs has not b een the subject of a prior disbursement from the Acquisition Account, the Construction Account or the Community Benefit Facilities Account, in each case together with a statement or invoice for each amount requested thereunder. Additionally, upon submissi on of a Written Request of the Community Facilities District stating (i) that a portion of the amount on deposit in the Community Benefit Facilities Account is to be transferred to the Construction Account, and (ii) the amount to be so transferred, the Tru stee shall transfer such amount from the Community Benefit Facilities Account to the Construction Account.
Upon the submission of a Written Certificate of the Community Facilities District stating (i) that the portion of the Community Benefit Facilities to be financed from the Community Benefit Facilities Account has been completed and that all costs of such Community Benefit Facilities have been paid, or (ii) that such portion of the Community Benefit Facilities has been substantially 446
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completed and that all remaining costs of such portion of the Community Benefit Facilities have been determined and specifying the amount to be retained therefor, the Trustee shall (A) if the amount remaining in the Community Benefit Facilities Account (less any such retention) is equal to or greater than $25,000, transfer the portion of such amount equal to the largest integral multiple of $5,000 that is not greater than such amount to the Redemption Fund, to be applied to the redemption of Bonds, and ( B) after making the transfer, if any, required to be made pursuant to the preceding clause (A), transfer all of the amount remaining in the Community Benefit Facilities Account (less any such retention) to the Bond Fund, to be applied to the payment of interest on the Bonds.
Section 3.05. Conditions for the Issuance of Additional Bonds . The Community Facilities District may at any time issue one or more Series of Additional Bonds payable from Net Special Tax Revenues as provided herein on a parity with all other Bonds theretofore issued hereunder, but only subject to the following condi tions, which are hereby made conditions precedent to the issuance of such Additional Bonds:
(a) upon the issuance of such Additional Bonds, no Event of Default shall have occurred and be continuing hereunder;
(b) the issuance of such Additional Bonds shall have been authorized under and pursuant to this Indenture and the Act and shall have been provided for by a Supplemental Indenture, which shall specify the following:
(i) the purposes for which the proceeds of such Additional Bonds are to be applied, which purposes m ay only include one or more of (A) providing funds to refund any Bonds previously issued hereunder, (B) providing funds to pay Costs of Issuance incurred in connection with the issuance of such Additional Bonds, and (C) providing funds to make any deposit to the Reserve Fund required pursuant to paragraph (viii) below;
(ii) the designation of such Series of Additional Bonds, the aggregate principal amount of the Additional Bonds of such Series, and the principal amount of, and the interest rate to be borne by, each maturity of such Additional Bonds; (iii) that such Additional Bonds shall be payable as to interest on the Interest Payment Dates, except that the first installment of interest may be payable on either March 1 or September 1 and shall be for a period of not longer than twelve months;
(iv) the date, the maturity date or dates and the dates on which mandatory sinking fund redemptions, if any, are to be made for such Additional Bonds; provided, however, that each such maturity date and date on which a mandatory sink ing fund redemption is to be made shall be a September 1 and, provided, further, that serial maturities of serial Bonds or mandatory sinking fund redemptions for term Bonds, or any combination thereof, shall be established to provide for the redemption or payment of such Additional Bonds on or before their respective maturity dates;
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(v) the Authorized Denominations of such Additional Bonds; (vi) the redemption premiums and terms, if any, for such Additional Bonds;
(vii) the form of such Additional Bonds;
(viii) the amount, if any, to be deposited from the proceeds of sale of such Additional Bonds in the Reserve Fund; provided, however, that the amount on deposit in the Reserve Fund at the time that such Additional Bonds become Outstanding shall be at least equal to the Reserve Requirement; and (ix) such other provisions that are appropriate or necessary and are not inconsistent with the provisions hereof;
(c) Annual Debt Service in each Bond Year, calculated for all Bonds that will be Outstanding after the issuance of such Additional Bonds , will be less than or equal to Annual Debt Service in such Bond Year, calculated for all Bonds that are Outstanding immediately prior to the issuance of such Additional Bonds.
Nothing contained herein shall limit the issuance of any special tax bonds payable from the Special Tax if, after the issuance and delivery of such special tax bonds, none of the Bonds theretofore issued hereunder will be Outstanding.
Section 3.06. Procedure for the Issuance of Additional Bonds . At any time after the sale of any Additional Bonds in accordance with the Act, such Additional Bonds shall be executed by the Community Facilities District for issuance hereunder and shall be delivered to the Trustee and thereupon shall be authenticated and delivered by the Trustee, but only upon receip t by the Trustee of the following:
(a) a certified copy of the Supplemental Indenture authorizing the issuance of such Additional Bonds;
(b) a Written Request of the Community Facilities District as to the delivery of such Additional Bonds;
(c) a Written Certificate o f the Community Facilities District stating that the conditions precedent to the issuance of such Additional Bonds specified in Section 3.05 have been satisfied;
(d) an opinion of Bond Counsel substantially to the effect that (i) this Indenture, as modified and amended by all Supplemental Indentures theretofore, or thereupon being, entered into, has been duly authorized, executed and delivered by, and constitutes the valid and binding obligation of, the Community Facilities District, (ii) such Additional Bonds constitute valid and binding special , limited obligations of the Community Facilities District, and (iii) the issuance of such Additional Bonds, in and of itself, will not adversely affect the exclusion of interest on the Bonds Outstanding prior to the iss uance of such Additional Bonds from gross income for federal income tax purposes; 448
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(e) the proceeds of the sale of such Additional Bonds; and (f) such further documents or money as are required by the provisions hereof or by the provisions of the Supplemental Inden ture pursuant to which such Additional Bonds are issued.
Section 3.07. Additional Bonds. So long as any of the Bonds remain Outstanding, the Community Facilities District shall not issue any Additional Bonds or obligations payable from Net Special Tax Revenues on a parity with the Bonds, except pursuant to Sections 3.05 and 3.06.
So long as any of the Bonds remain Outstanding, the Community Facilities District shall not issue any obligations payable from Net Special Tax Revenues on a basis senior to the Bonds. The Community Facilities District may issue obligations payable from Net Special Tax Revenues on a basis subordinate to the Bonds, without complying with Sections 3.05 and 3.06. 449
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ARTICLE IV
REDEMPTION OF BONDS
Section 4.01. Redemption of Series 2024 Bonds. (a) Optional Redemption. The Series 2024 Bonds maturing on and after September 1, 20__, shall be subject to optional redemption, in whole, or in part in Authorized Denominations, on any date on or after September 1, 20__, from any source of available funds, at the following respective Redemption Prices (expressed as percentages of the principal amount of the Series 2024 Bonds to be redeemed), plus accrued interest thereon to the date of redemption:
Redemption Dates Redemption Price
September 1, 20__ through August 31, 20__ 103%
September 1, 20__ through August 31, 20__ 102
September 1, 20__ through August 31, 20__ 101
September 1, 20__ and thereafter 100
The Community Facilities District shall give the Trustee written notice of its intention to redeem Series 2024 Bonds pursuant to this subsection not less than 45 days prior to the applicable redemption date, unless a later date is agreed to by the Trustee. (b) Mandatory Redemption from Special Tax Prepayments. The Series 2024 Bonds shall be subject to mandatory redemption, in whole, or in part in Authorized Denominations, on any Interest Payment Date, from and to the extent of Special Tax prepayments required to be applied thereto pursuant to Section 5.02(a) and any amount required to be applied thereto pursuant to Section 5.04(c), at the following respective Redemption Prices (expressed as percentages of the principal amount of the Series 2024 Bonds to be rede emed), plus accrued interest thereon to the date of redemption:
Redemption Dates Redemption Price
Any Interest Payment Date through
March 1, 20__ 103%
September 1, 20__ and March 1, 20__ 102
September 1, 20__ and March 1, 20__ 101
September 1, 20__ and thereafter 100
(c) Mandatory Sinking Fund Redemption. The Series 2024 Bonds maturing September 1, 20__ shall be subject to mandatory sinking fund redemption, in part, on September 1 in each year, commencing September 1, 20__, at a Redemption Price equal to the principal amount of the Series 2024 Bonds maturing September 1, 20__ to be redeemed, without premium, plus accrued interest thereon to the date of redemption, in the aggregate respective principal amounts in the respective years as follows:
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Sinking Fund
Redemption Date
(September 1)
Principal Amount
to be
Redeemed
$
(Maturity)
If some but not all of the Series 2024 Bonds maturing on September 1, 20__ are redeemed pursuant to Section 4.01(a), the principal amount of the Series 2024 Bonds maturing on September 1, 20__ to be redeemed pursuant to Section 4.01(c) on any subsequent September 1 shall be reduced, by $5,000 or an integral multiple thereof, as d esignated by the Community Facilities District in a Written Certificate of the Community Facilities District submitted to the Trustee; provided, however, that the aggregate amount of such reductions shall not exceed the aggregate amount of the Series 2024 Bonds maturing on September 1, 20__ redeemed pursuant to Section 4.01(a). If some but not all of the Series 2024 Bonds maturing on September 1, 20__ are redeemed pursuant to Section 4.01(b), the principal amount of the Series 2024 Bonds maturing on September 1, 20__ to be redeemed pursuant to Section 4.01(c) on any subsequent September 1 shall be reduced by the aggregate principal amount of the Series 2024 Bonds maturing on September 1, 20__ so redeemed pursuant to Section 4.01(b), such reduction to be allocated among redemption dates as nearly as practicable on a pro rata basis in amounts of $5,000 or integral multiples thereof, as determined by the Trustee, notice of which determination shall be given by the Trustee to the Community Facilities District.
The Series 2024 Bonds maturing September 1, 20__ shall be subject to mandatory sinking fund redemption, in part, on September 1 in each year, commencing September 1, 20 __, at a Redemption Price equal to the principal amount of the Series 2024 Bonds maturing September 1, 20__ to be redeemed, without premium, plus accrued interest thereon to the date of redemption, in the aggregate respective principal amounts in the respective years as follows:
Sinking Fund
Redemption Date
(September 1)
Principal Amount
to be
Redeemed
$
(Maturity)
If some but not all of the Series 2024 Bonds maturing on September 1, 20__ are redeemed pursuant to Section 4.01(a), the principal amount of the Series 2024 Bonds maturing on September 1, 20__ to be redeemed pursuant to Section 4.01(c) on any subsequent September 1 shall be reduced, by $5,000 or an integral multiple thereof, as d esignated by the Community Facilities District in a Written Certificate of the Community Facilities District submitted to the Trustee; provided, however, that the aggregate amount of such reductions shall not exceed the aggregate amount of the Series 2024 Bonds maturing on September 1, 20__ redeemed pursuant to 451
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Section 4.01(a). If some but not all of the Series 2024 Bonds maturing on September 1, 20__ are redeemed pursuant to Section 4.01(b), the principal amount of the Series 2024 Bonds maturing on September 1, 20__ to be redeemed pursuant to Section 4.01(c) on any subsequent September 1 shall be reduced by the aggregate principal amount of the Series 2024 Bonds maturing on September 1, 20__ so redeemed pursuant to Section 4.01(b), such reduction to be allocated among redemption dates as nearly as practicable on a pro rata basis in amounts of $5,000 or integral multiples thereof, as determined by the Trustee, notice of which determination shall be given by the Trustee to the Community Facilities District.
Section 4.02. Notice of Redemption . The Trustee on behalf and at the expense of the Community Facilities District shall mail by first class mail notice of any redemption to the respective Owners of any Bonds designated for redemption at their respective addresses appearing on the Registration Books and to the Original Purchaser , at least 30 but not more than 60 days prior to the date fixed for redemption. Such notice shall state the date of the notice, the redemption date, the redemption place and the Redemption Price and shall designate the CUSIP numbers, if any, the Bond numbers and the maturity or maturities of the Bonds to be redeemed (except in the event of redemption of all of the Bonds of such maturity or maturities in whole), and shall require that such Bonds be then surrendered at the Office of the Trustee for redemption at the Redemption Price, giving notice also that further interest on such Bonds will not accrue from and after the date fixed for redemption. Neither the failure to receive any notice so mailed, nor any defect in such notice, shall affect the validity of the proceedings for the redemption of the Bonds or the cessation of accrual of interest thereon from and after the date fixed for redemption. With respect to any notice of any optional redemption of Bonds, unless at the time such notice is given the Bonds to be redeemed shall be deemed to have been paid within the meaning of Section 10.02, such notice shall state that such redemption is conditional upon receipt by the Trustee, on or prior to the d ate fixed for such redemption, of moneys that, together with other available amounts held by the Trustee, are sufficient to pay the Redemption Price of, and accrued interest on, the Bonds to be redeemed, and that if such moneys shall not have been so received said notice shall be of no force and effect and the Community Facilities District shall not be required to redeem such Bonds. In the event a notice of redemption of Bonds contains such a condition and such moneys are not so received, the redemption of Bonds as described in the conditional notice of redemption shall not be made and the Trustee shall, within a reasonable time after the date on which such redemption was to occur, give notice to the Persons and in the manner in which the notice of redemptio n was given, that such moneys were not so received and that there shall be no redemption of Bonds pursuant to such notice of redemption.
Section 4.03. Selection of Bonds for Redemption . Whenever provision is made in this Indenture for the redemption of less than all of the Bonds, the Trustee shall select the Bonds to be redeemed from all Bonds not previously called for redemption (a) with respect to any optional redemption of Bonds of a Series, among maturities of Bonds of such Series as directed in a Written Request of the Community Facilities District, (b) with respect to any redemption pursuant to Section 4.01(b) and the corresponding provisions of any Supplemental Indenture pursuant to which Additional Bonds are issued, among maturities of all Series of Bonds on a pro rata basis as nearly as practicable, and (c) with respect to any other redemption of Additional Bonds, among maturities as provided in the Supplemental Indenture pursuan t to which such Additional Bonds are issued, and by lot among Bonds of the same Series with the same maturity in any manner that the Trustee in its sole discretion shall deem appropriate. For purposes of such selection, all Bonds shall be 452
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deemed to be comp rised of the greatest number of separate denominations that would result in each such denomination being an Authorized Denomination and each such separate denomination shall be treated as a separate Bond that may be separately redeemed.
Section 4.04. Partial Redemption of Bonds. Upon surrender of any Bonds redeemed in part only, the Community Facilities District shall execute and the Trustee shall authenticate and deliver to the Owner thereof, at the expense of the Community Facilities District, a new Bond or Bonds of the same Series in Authorized Denominations in an aggregate principal amount equal to the unredeemed portion of the Bonds surrendered.
Section 4.05. Effect of Notice of Redemption . (a) Notice of redemption of the Bonds subject to redemption having been mailed as aforesaid, and moneys for the Redemption Price thereof, and the interest thereon to the applicable date fixed for redemption, having been set aside with the Trustee, such Bonds shall become due and payable on said date, and, upon presentation and surrender thereof at the Office of the Trustee, said Bonds shall be paid at the Redemption Price thereof, together with interest accrued and unpaid to said date. (b) If, on said date fixed for redemption, moneys for the Redemption Price of all the Bonds to be redeemed, together with interest to said date, shall be held by the Trustee so as to be available therefor on such date, and, if notice of redemption thereof shall have been mailed as aforesaid and not canceled, then, from and after said date, interest on said Bonds shall cease to accrue and become payable. All moneys held by or on behalf of the Trustee for the redemption of Bonds shall be held in trust for the account of the Owners of the Bonds so to be redeemed without liability to such Owners for interest thereon.
(c) All Bonds paid at maturity or redeemed prior to maturity pursuant to the provisions hereof shall be canceled upon surrender thereof and destroyed. 453
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ARTICLE V
SECURITY FOR BONDS; FLOW OF FUNDS; INVESTMENTS
Section 5.01. Pledge. Subject only to the provisions of thi s Indenture permitting the application thereof for the purposes and on the terms and conditions set forth herein, in order to secure the payment of the principal of, premium, if any, and interest on the Bonds in accordance with their terms, the provisions of this Indenture and the Act, the Community Facilities District hereby pledges to the Owners, and grants thereto a lien on and a security interest in, all of the Net Special Tax Revenues and any other amounts held in the Special Tax Fund, the Bond Fund an d the Reserve Fund. Said pledge shall constitute a first lien on and security interest in such assets, which shall immediately attach to such assets and be effective, binding and enforceable against the Community Facilities District, its successors, purcha sers of any of such assets, creditors and all others asserting rights therein, to the extent set forth in, and in accordance with, this Indenture, irrespective of whether those parties have notice of the pledge of, lien on and security interest in such assets and without the need for any physical delivery, recordation, filing or further act.
Section 5.02. Special Tax Fund. (a) The Trustee shall establish and maintain in trust in the name of the Trustee a separate fund designated the “Special Tax Fund.” As soon as practicable after the receipt by the Community Facilities District of any Special Tax Revenues, but in any event no later than the date ten Business Days prior to the Interest Payment Date after such receipt, the Communit y Facilities District shall transfer such Special Tax Revenues to the Trustee for deposit in the Special Tax Fund; provided, however, that with respect to any such Special Tax Revenues that represent a Special Tax prepayment (i) said Special Tax prepayment shall be identified as such in a Written Certificate of the Community Facilities District submitted to the Trustee at the time such Special Tax prepayment is transferred to the Trustee, (ii) the portion of such Special Tax prepayment that is to be applied to the Redemption Price of the Bonds shall be identified in such Written Certificate of the Community Facilities District, shall be deposited by the Trustee in the Redemption Fund and shall be applied to the redemption of Bonds pursuant to Section 4.01(b) and the corresponding provisions of any Supplemental Indenture pursuant to which Additional Bonds are issued, and (iii) the portion of such Special Tax prepayment that is to be applied to the payment of interest on the Bonds to be so redeemed shall be ide ntified in such Written Certificate of the Community Facilities District, shall be deposited by the Trustee in the Interest Account and shall be applied to the payment of such interest. (b) Upon receipt of a Written Request of the Community Facilities District, the Trustee shall withdraw from the Special Tax Fund and transfer to the Administrative Expense Fund the amount specified in such Written Request of the Community Facilities District as the amount necessary to be transferred thereto in order to have suff icient amounts available therein to pay Administrative Expenses.
(c) No later than the Business Day immediately preceding each Interest Payment Date, after having made any requested transfer to the Administrative Expense Fund, the Trustee shall withdraw from the Special Tax Fund Net Special Tax Revenues in an amount sufficient to enable the Trustee to make the following transfers in the following order of priority:
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(i) Interest Account. To the Interest Account, the amount, if any, necessary to cause the amount on deposit in the Interest Account to be equal to the interest due on the Bonds on such Interest Payment Date;
(ii) Principal Account. To the Principal Account, the amount, if any, necessary to cause the amount on deposit in the Principal Account to be equal to the principal, if any, due on the Bonds on such Interest Payment Date, including principal due and payable by reason of mandatory sinking fund redemption of such Bonds; and (iii) Reserve Fund. To the Reserve Fund, the amount, if any, necessary to cause the amount on deposit in the Reserve Fund to be equal to the Reserve Requirement.
Upon the receipt of such amounts from the Community Facilities District, the Trustee shall make such transfers in said order of priority.
Section 5.03. Bond Fund. (a) The Trustee sha ll establish and maintain in trust in the name of the Trustee a separate fund designated “Bond Fund.” Within the Bond Fund, the Trustee shall establish and maintain in trust in the name of the Trustee a separate fund designated the “Principal Account” and a separate account designated the “Interest Account. ” The Trustee shall deposit in the Interest Account and the Principal Account from time to time the amounts required to be deposited therein pursuant to Section 5.02.
(b) In the event that, on the Business D ay prior to an Interest Payment Date , after the deposit in the Interest Account of the amounts required to be deposited therein pursuant to Section
5.02, amounts in the Interest Account are insufficient to pay the interest on the Bonds due and payable on such Interest Payment Date, the Trustee shall withdraw from the Reserve Fund, to the extent of any funds therein, the amount of such insufficiency, and shall transfer any amounts so withdrawn to the Interest Account.
(c) On each Interest Payment Date, the Trustee shall withdraw from the Interest Account for payment to the Owners of the Bonds the interest on the Bonds then due and payable. (d) In the event that, on the Business Day prior to a September 1 on which principal of the Bonds is due and payable , after the deposit in the Principal Account of th e amounts required to be deposited therein pursuant to Section 5.02, including principal due and payable by reason of mandatory sinking fund redemption of the Bonds, amounts in the Principal Account are insufficient to pay such principal, after having with drawn any amounts from the Reserve Fund required to be withdrawn therefrom on such date pursuant to subsection (b) of this Section, the Trustee shall withdraw from the Reserve Fund, to the extent of any funds therein, the amount of such insufficiency, and shall transfer any amounts so withdrawn to the Principal Account. (e) On each September 1 on which principal of the Bonds is due and payable, including principal due and payable by reason of mandatory sinking fund redemption of the Bonds, the Trustee shall withdraw from the Principal Account for payment to the Owners of the Bonds such principal then due and payable.
Section 5.04. Reserve Fund. (a) The Trustee shall establish and maintain in trust in the name of the Trustee a separate fund designated the “Reserve Fund.” On the Closing Date, the 455
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Trustee shall deposit in the Reserve Fund the amount specified in Section 3.02. The Trustee shall deposit in the Reserve Fund from time to time the amounts required to be deposited therein pursuant to Section 5.02(c). There shall additionally be deposited in the Reserve Fund, in connection with the issuance of Additional Bonds, the amount required to be deposited therein under the Supplemental Indenture pursuant to which such Additional Bonds are issued. (b) Except as otherwise provided in this Section, amounts in the Reserve Fund shall be used and withdrawn by the Trustee solely for the purpose of (i) making transfers to the Interest Account in accordance with Section 5.03(b) in the event of any deficiency in the Interest Account of the amount then required for payment of the interest on the Bonds, (ii) making transfers to the Principal Account in accordance with Section 5.03(d) in the event of any deficiency in the Principal Account of the amount then required for payment of the principal of the Bonds, and (iii) redeeming Bonds in accordance with the provisions of this Section. (c) Whenever Bonds are to be optionally redeemed or redeemed from Special Tax prepayments, a proportionate share, determined as provided below, of t he amount on deposit in the Reserve Fund shall, on the date on which amounts to redeem such Bonds are deposited in the Redemption Fund or otherwise deposited with the Trustee pursuant to Section 10.02, be transferred by the Trustee from the Reserve Fund to the Redemption Fund or to such deposit held by the Trustee and shall be applied to the redemption of said Bonds; provided, however, that such amount shall be so transferred only if and to the extent that the amount remaining on deposit in the Reserve Fund will be at least equal to the Reserve Requirement (excluding from the calculation thereof said Bonds to be redeemed). Such proportionate share shall be equal to the largest integral multiple of the minimum Authorized Denomination for said Bonds that is not larger than the amount equal to the product of (i) the amount on deposit in the Reserve Fund on the date of such transfer, times (ii) a fraction, the numerator of which is the principal amount of Bonds to be so redeemed and the denominator of which is the principal amount of Bonds to be Outstanding on the day prior to the date on which such Bonds are to be so redeemed.
(d) Whenever the balance in the Reserve Fund exceeds the amount required to redeem or pay Outstanding Bonds, including interest accrued to the date of payment or redemption and premium, if any, due upon redemption, the Trustee shall, upon receipt of a Written Request of the Community Facilities District, transfer the amount in the Reserve Fund to the Interest Account, Principal Account and/or Redemption Fund, as applicable, to be applied, on the next succeeding Interest Payment Date to the payment and redemption of all of the Outstanding Bonds. (e) If, as a result of the scheduled payment of principal of or interest on the Bonds, the Reserve Requirement is reduced, the Trustee shall transfer an amount equal to the amount of such reduction to the Interest Account.
Section 5.05. Redemption Fund. (a) The Trustee shall establish and maintain in trust in the name of the Trustee a separate fund designat ed the “Redemption Fund.” The Trustee shall deposit in the Redemption Fund (i) amounts received from the Community Facilities District in connection with the Community Facilities District’s exercise of its rights to optionally redeem Bonds, (ii) the portio n of Special Tax prepayments required to be deposited therein pursuant to Section 5.02(a), (iii) amounts required to be transferred to the Redemption Fund from the Improvement Fund (or accounts therein) pursuant to Section 3.04, (iv) amounts required to be 456
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transferred to the Redemption Fund from the Reserve Fund pursuant to Section 5.04(c) or Section
5.04(d), and (v) amounts required to be deposited therein pursuant to any Supplemental Indenture. (b) Amounts in the Redemption Fund shall be disbursed therefrom for the payment of the Redemption Price of Series 2024 Bonds redeemed pursuant to Section 4.01(a) or Section
4.01(b) and for the payment of the Redemption Price of Additional Bonds redeemed under the Supplemental Indenture pursuant to which such Additional Bonds are issued (other than mandatory sinking fund redemptions thereof).
Section 5.06. Rebate Fund. (a) The Trustee shall establish and maintain in the name of the Trustee a special fund designated the “Rebate Fund.” There shall be deposited in the Re bate Fund such amounts as are required to be deposited therein pursuant to the Tax Certificate, as specified in a Written Request of the Community Facilities District. All money at any time deposited in the Rebate Fund shall be held by the Trustee in trust, to the extent required to satisfy the Rebate Requirement, for payment to the United States of America. Notwithstanding defeasance of the Bonds pursuant to Article X or anything to the contrary contained herein, all amounts required to be deposited into o r on deposit in the Rebate Fund shall be governed exclusively by this Section and by the Tax Certificate , which is hereby incorporated herein as if fully set forth herein. The Trustee shall be deemed conclusively to have complied with such provisions if it follows the written directions of the Community Facilities District, and shall have no liability or responsibility to enforce compliance by the Community Facilities District with the terms of the Tax Certificate. The Trustee may conclusively rely upon the Community Facilities District’s determinations, calculations and certifications required by the Tax Certificate. The Trustee shall have no responsibility to independently make any calculation or determination or to review the Community Facilities District’s calculations.
(b) Any funds remaining in the Rebate Fund after payment in full of all of the Bonds and after payment of any amounts described in this Section, shall, upon receipt by the Trustee of a Written Request of the Community Facilities District, be withdrawn by the Trustee and remitted to the Community Facilities District.
Section 5.07. Administrative Expense Fund . (a) The Trustee shall establish and maintain in trust in the name of the Trustee a separate fund designated the “Administrative Expense Fund.” On the Closing Date, the Trustee shall deposit in the Administrative Expense Fund the amount required to be deposited therein pursuant to Section 3.02. The Trustee shall deposit in the Administrative Expense Fund the amounts transferred from the Special Tax Fund and required to be deposited therein pursuant to Section 5.02.
(b) The moneys in the Administrative Expense Fund shall be used and withdrawn by the Trustee from time to time to pay the Administrative Expenses upon submission of a Written Request of the Community Facilities District stating (i) the Person to whom payment is to be made, (ii) the amount to be paid, (iii) the purpose for which the obligation was incurred and that such purpose constitutes an Administrative Expense, (iv) that such payment is a proper charge against the Administrative Expense Fund, and (v) that such amount has not been the subject of a prior disbursement from the Administrative Expense Fund , in each case together with a statement or invoice for each amount requested thereunder.
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Section 5.08. Investment of Moneys . (a) Except as otherwise provided herein, all moneys in any of the funds or accounts established pursuant to this Indenture held by the Trustee shall be invested by the Trustee solely in Permitted Investments, as directed in a Written Request of the Community Facilities District received by the Trustee no later than two Business Days prior to the making of such investment. Moneys in all such funds and accounts shall be invested in Permitted Investments maturing not later than the date on which it is estimated that such moneys will be required for the purposes specified in this Indenture; provided, however, that Permitted Investments in which moneys in the Reserve Fund are so invest ed shall mature no later than the earlier of five years from the date of investment or the final maturity date of the Bonds and, provided, further, that if such Permitted Investments may be redeemed at par so as to be available on each Interest Payment Dat e, any amount in the Reserve Fund may be invested in such redeemable Permitted Investments maturing on any date on or prior to the final maturity date of the Bonds. Absent a timely Written Request of the Community Facilities District with respect to the investment of moneys in any of the funds or accounts established pursuant to this Indenture held by the Trustee, the Trustee shall invest such moneys in Permitted Investments described in paragraph (6) of the definition thereof.
(b) Subject to the provisions of Section 5.06, all interest, profits and other income received from the investment of moneys in any Fund or Account (other than the Reserve Fund) shall be retained therein. Subject to the provisions of Section 5.06, all interest, profits or other income received from the investment of moneys in the Reserve Fund shall (i) prior to the date on which a Written Certificate of the Community Facilities District is submitted to the Trustee pursuant to subsection ( b) of Section 3.04, be transferred to the Construction Account, and (ii) unless a Written Certificate of the Community Facilities District has been previously submitted to the Trustee pursuant to subsection (c) of Section 3.04, on and after the date such Written Certificate of the Community Facili ties District is submitted to the Trustee pursuant to subsection ( b) of Section 3.04 and prior to the date on which the Written Certificate of the Community Facilities District is submitted to the Trustee pursuant to subsection ( c) of Section 3.04, be tra nsferred to the Community Benefit Facilities Account and, thereafter, shall be transferred to the Interest Account; provided, however, that, notwithstanding the foregoing, any such transfer shall be made from the Reserve Fund only if and to the extent that, after such transfer, the amount on deposit in the Reserve Fund is at least equal to the Reserve Requirement. (c) Permitted Investments acquired as an investment of moneys in any Fund or Account shall be credited to such Fund or Account. For the purpose of determining the amount in any Fund or Account, all Permitted Investments credited to such Fund or Account shall be valued by the Trustee at the market value thereof (without regard to costs incurred in the acquisition or disposition thereof, including breaka ge, unwind or other similar fees), such valuation to be performed not less frequently than semiannually on or before each February 15 and August 15. To the extent of any valuations to be made by the Trustee hereunder, the Trustee may utilize computerized s ecurities pricing services that may be available to it, including those available through its regular accounting system. Any Permitted Investment that is a registrable security shall be registered in the name of the Trustee.
(d) The Trustee may act as principa l or agent in the making or disposing of any investment. Upon the Written Request of the Community Facilities District, the Trustee shall sell or present for redemption any Permitted Investments so purchased whenever it shall be necessary 458
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to provide moneys to meet any required payment, transfer, withdrawal or disbursement from the Fund or Account to which such Permitted Investments are credited, and the Trustee shall not be liable or responsible for any loss resulting from any investment made or sold pursua nt to this Section. For purposes of investment, the Trustee may commingle moneys in any of the funds and accounts established hereunder. The Trustee, in making or disposing of any investment permitted by this Section, may deal with itself (in its individua l capacity) or with any one or more of its affiliates, whether it or such affiliate is acting as an agent of the Trustee or for any third person or dealing as a principal for its own account.
(e) The Community Facilities District acknowledges that to the exten t regulations of the Comptroller of the Currency or other applicable regulatory entity grant the Community Facilities District the right to receive brokerage confirmations of security transactions as they occur, the Community Facilities District specifical ly waives receipt of such confirmations to the extent permitted by law. The Trustee shall furnish the Community Facilities District periodic cash transaction statements, which shall include detail for all investment transactions made by the Trustee hereunder.
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ARTICLE VI
COVENANTS
Section 6.01. Collection of Special Tax Revenues . (a) The Community Facilities District shall comply with all requirements of the Act so as to assure the timely collection of Special Tax Revenues, including the enforcement of delinquent Special Tax payments. (b) Prior to August 1 of each year, the Community Facilities District shall ascertain from the County Assessor the relevant parcels on which the Special Tax is to be levied, taking into account any parcel splits during the preceding and then current year. The Community Facilities District shall effect the levy of the Special Tax each Fiscal Year in accordance with the Ordinance by each August 10, or otherwise such that the computation of the levy is complete before the final date on which the County Auditor will accept the transmission of the Special Tax amounts for the parcels within the Community Facilities District for inclusion on the next real property tax roll.
Upon the completion of the computation of the amounts of the levy, the Co mmunity Facilities District shall prepare or cause to be prepared, and shall transmit to the County Auditor, such data as the County Auditor requires in order to include the levy of the Special Tax on the next real property tax roll.
(c) The Community Faciliti es District shall fix and levy the Special Tax within the Community Facilities District in each Fiscal Year in accordance with the Rate and Method and, subject to the limitations in the Rate and Method as to the maximum Special Tax that may be levied on each parcel, in an amount sufficient to yield Special Tax Revenues in the amount required for (i) the payment of principal of and interest on any Outstanding Bonds becoming due and payable during the Corresponding Bond Year, (ii) any necessary replenis hment of the Reserve Fund, and (iii) the payment of Administrative Expenses estimated to be paid from such Special Tax Revenues, taking into account the balances in the funds and accounts established hereunder. (d) The Special Tax shall be payable and be colle cted in the same manner and at the same time and in the same installment as the general taxes on real property are payable (or in such other manner as the City Council shall determine, including direct billing of the affected property owners), and have the same priority, become delinquent at the same time and in the same proportionate amounts and bear the same proportionate penalties and interest after delinquency as do the ad valorem taxes on real property.
Section 6.02. Foreclosure. Pursuant to Section 53356.1 of t he Act, the Community Facilities District hereby covenants with and for the benefit of the Owners that it will determine or cause to be determined, no later than September 15 of each year, whether or not any owners of property within the Community Facilities District are delinquent in the payment of the Special Tax levied thereon and, if such delinquencies exist, the Community Facilities District will order and cause to be commenced no later than November 1, and thereafter diligently prosecute, an action in the superior court to foreclose the lien of the Special Tax or installment thereof not paid when due; provided, however, that the Community Facilities District shall not be required to order the commencement of foreclosure proceedings if (a) the total Spe cial Tax delinquency in the Community Facilities District for such Fiscal Year is less than 5% of the total amount of the Special Tax levied in such Fiscal Year, and (b) the amount then on deposit in the Reserve Fund is 460
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equal to the Reserve Requirement. No twithstanding the foregoing, if the Community Facilities District determines that any single parcel in the Community Facilities District is delinquent in excess of $5,000 in the payment of the Special Tax, then the Community Facilities District shall diligently institute, prosecute and pursue foreclosure proceedings against such parcel.
Section 6.03. Compliance with Act . The Community Facilities District shall comply with all applicable provisions of the Act.
Section 6.04. Punctual Payment. The Community Facilities District shall punctually pay or cause to be paid the principal, premium, if any, and interest to become due in respect of all the Bonds, in strict conformity with the terms of the Bonds and of this Indenture, according to the true intent and meaning thereof, but only out of Net Special Tax Revenues and other assets pledged for such payment as provided in this Indenture and received by the Community Facilities District or the Trustee.
Section 6.05. Extension of Payment of Bonds. The Community Facilities District shall not directly or indirectly extend or assent to the extension of the maturity of any of the Bonds or the time of payment of any claims for interest by the purchase of such Bonds or by any other arrangement, and in case the matur ity of any of the Bonds or the time of payment of any such claims for interest shall be extended, such Bonds or claims for interest shall not be entitled, in case of any default hereunder, to the benefits of this Indenture, except subject to the prior paym ent in full of the principal of all of the Bonds then Outstanding and of all claims for interest thereon that shall not have been so extended. Nothing in this Section shall be deemed to limit the right of the Community Facilities District to issue Bonds for the purpose of refunding any Outstanding Bonds in accordance with the provisions hereof , and such issuance shall not be deemed to constitute an extension of maturity of the Bonds.
Section 6.06. Against Encumbrances; Defense of Pledge . The Community Facilities District shall not create, or permit the creation of, any pledge of, lien on, security interest in or charge or other encumbrance upon the assets pledged under this Indenture, except as permitted hereby. The Community Facilities District shall at all times, to the extent permitted by law, defend, preserve and protect said pledge of such assets, and the lien thereon and security interest therein created hereby, against all claims and demands of all Persons whomsoever.
Section 6.07. Tax Covenants. (a) The Community Facilities District shall not take any action, or fail to take any action, if such action or failure to take such action would adversely affect the exclusion from gross income of interest on the Series 2024 Bonds under Section 103 of the Code. Without limiting the generality of the foregoing, the Community Facilities District shall comply with the requirements of the Tax Certificate, which is incorporated herein as if fully set forth herein. This covenant shall survive payment in full or defeasance of the Series 2024 Bonds. (b) In the event that at any time the Community Facilities District is of the opinion that for purposes of this Section it is necessary or helpful to restrict or limit the yield on the investment of any moneys held by the Trus tee in any of the funds or accounts established hereunder, the Community Facilities District shall so instruct the Trustee in writing, and the Trustee shall take such action as may be necessary in accordance with such instructions. 461
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(c) Notwithstanding any provisions of this Section, if the Community Facilities District shall provide to the Trustee an opinion of Bond Counsel to the effect that any specified action required under this Section is no longer required or that some further or different action is required to maintain the exclusion from federal income tax of interest on the Series 2024 Bonds, the Trustee may conclusively rely on such opinion in complying with the requirements of this Section and of the Tax Certificate, and the covenants hereunder shall be deemed to be modified to that extent.
Section 6.08. Non-Cash Payments of Special Tax. The Community Facilities District shall not authorize owners of taxable parcels within the Community Facilities District to satisfy Special Tax obligations by the tender of Bonds unless the Community Facilities District shall have first obtained a report of an Independent Consultant certifying that doing so would not result in the Community Facilities District having insufficient Special Tax Revenues to pay the principal of and interest on all Outstanding Bonds when due.
Section 6.09. Reduction in Special Tax. The Community Facilities District shall not initiate proceedings under the Act to modify the Rate and Method if such modification would adversely affect the security for the Bonds. If an initiative is adopted that purports to modify the Rate and Method in a manner that would adversely affect the security for the Bonds, the Community Facilities District shall, to the extent permitted by law, commence and pursue reasonable legal actions to prevent the modification of the Rate and Method in a manner that would adversely affect the security for the Bonds.
Section 6.10. Continuing Disclosure. (a) Each of the Community Facilities District and the Trustee shall comply with and carry out all of the provis ions of the District Continuing Disclosure Agreement applicable to it. Notwithstanding any other provision of this Indenture, failure of the Community Facilities District or the Trustee to comply with the District Continuing Disclosure Agreement shall not be considered an Event of Default; provided, however, that the Trustee may (and, at the written direction of any Participating Underwriter or the Owners of at least 25% aggregate principal amount of Outstanding Series 2024 Bonds, and upon receipt of indemnification reasonably satisfactory to the Trustee, shall) or any Owner or Beneficial Owner of the Series 2024 Bonds may, take such actions as may be necessary and appropriate to compel performance, including seeking mandate or specific performance by court order. (b) The Developer has executed the Developer Continuing Disclosure Certificate.
Notwithstanding any other provision of this Indenture, failure of the Developer to comply with the Developer Continuing Disclosure Certificate shall not be considered an Event of Default; provided, however, that the Trustee may (and, at the written direction of any Participating Underwriter or the Owners of at least 25% aggregate principal amount of Outstanding Series 2024 Bonds, and upon receipt of indemnification reason ably satisfactory to the Trustee, shall) or any Owner or Beneficial Owner of the Series 2024 Bonds may, take such actions as may be necessary and appropriate to compel performance, including seeking mandate or specific performance by court order.
Section 6.11. Accounting Records . The Community Facilities District shall keep or cause to be kept appropriate accounting records in which complete and correct entries shall be made of all transactions relating to the Special Tax, which records shall be available for inspection by the Trustee at reasonable hours and under reasonable conditions. 462
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Section 6.12. State Reporting. If at any time principal or interest due on any scheduled payment date for the Bonds is not paid, or if funds are withdrawn from the Reserve Fund to pay principal of or interest on the Bonds, the Trustee shall notify the Community Facilities District in writing of such failure or withdrawal, and the Community Facilities District shall notify the California Debt and Investment Advisory Commission of such failu re or withdrawal within ten days of the failure to make such payment or the date of such withdrawal.
Section 6.13. Annual Reports to the California Debt and Investment Advisory Commission. Not later than October 30 of each year, commencing October 30, 202 5 and continuing until the October 30 following the final maturity of the Bonds, the Community Facilities District shall supply to the California Debt and Investment Advisory Commission the information required to be provided thereto pursuant to Section 53359.5(b) of the Act. Such information shall be made available to any Owner upon written request to the Community Facilities District accompanied by a fee determined by the Community Facilities District to pay the costs of the Community Facilities District in connection therewith. The Community Facilities District shall in no event be liable to any Owner or any other person or entity in connection with any error in any such information.
Section 6.14. Further Assurances . The Community Facilities District shall make, execute and deliver any and all such further agreements, instruments and assurances as may be reasonably necessary or proper to carry out the intention or to facilitate the performance of this Indenture and f or the better assuring and confirming unto the Owners of the rights and benefits provided in this Indenture.
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ARTICLE VII
EVENTS OF DEFAULT AND REMEDIES
Section 7.01. Events of Default. The following events shall be Events of Default:
(a) failure to pay any installment of principa l of any Bonds when and as the same shall become due and payable, whether at maturity as therein expressed, by proceedings for redemption or otherwise;
(b) failure to pay any installment of interest on any Bonds when and as the same shall become due and payable;
(c) failure by the Community Facilities District to observe and perform any of the other covenants, agreements or conditions on its part in this Indenture or in the Bonds contained, if such failure shall have continued for a period of 30 days after written notice thereof, specifying such failure and requiring the same to be remedied, shall have been given to the Community Facilities District by the Trustee, or to the Community Facilities District and the Trustee by the Owners of not less than 5% in aggregate principal amount of the Bonds at the time Outstanding; provided, however, that, if in the reasonable opinion of the Community Facilities District the failure stated in the notice can be corrected, but not within such 30 day period, such failure shall not constitute an Event of Default if corrective action is instituted by the Community Facilities District within such 30 day period and the Community Facilities District shall thereafter diligently and in good faith cure such failure in a reasonable period of time; or
(d) the commencement by the Community Facilities District or the City of a voluntary case under Title 11 of the United States Code or any substitute or successor statute.
Section 7.02. Foreclosure. If an Event of Default shall occur under Section 7.01(a) or Section 7.01(b) then, and in each and every such case during the continuance of such Event of Default, the Trustee may, or at the written direction of the Owners of not less than a majority in aggregate principal amount of the Bonds at the time Outstanding, and upon being indemnified to its satisfaction therefor, shall, commence foreclosure against any parcels of land in the Community Facilities District delinquent in the payment of the Special Tax, as provided in Section 53356.1 of the Act.
Section 7.03. Other Remedies . If an Event of Default shall have occurred and be continuing, the Trustee shall have the right:
(a) by mandamus, suit, action or proceeding, to compel the Community Facilities District and its officers, agents or employees to perform each and every term, provision and covenant contained in this Indenture and in the Bonds, and to require the carrying out of any or all such covenants and agreements of the Community Facilities District and the fulfillment of all duties imposed upon it by this Indenture and the Act; 464
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(b) by suit, action or proceeding in equity, to enjoin any acts or things that are unlawful, or the violation of any of the rights of the Trustee or the Owners; or (c) by suit, action or proceeding in any court of competent jurisdiction, to require the Community Facilities District and its officers and employees to account as if it and they were the trustees of an express trust.
Section 7.04. Remedies Not Exclusive. No remedy herein conferred upon or reserved to the Trustee or to the Owners is intended to be exclusive of any other remedy or remedies, and each and every such remedy, to the extent permitted by law, shall be cumulative and in addition to any other remedy given hereunder or now or hereafter existing at law or in equity or otherwise.
Section 7.05. Application of Net Spe cial Tax Revenues After Default . If an Event of Default shall occur and be continuing, all Net Special Tax Revenues and any other funds thereafter received by the Trustee under any of the provisions of this Indenture shall be applied by the Trustee as follows and in the following order:
(a) to the payment of any expenses necessary in the opinion of the Trustee to protect the interests of the Owners and payment of reasonable fees, charges and expenses of the Trustee (including reasonable fees and disbursements of its counsel) incurred in and about the performance of its powers and duties under this Indenture; (b) to the payment of the principal and interest then due with respect to the Bonds (upon presentation of the Bonds to be paid, and stamping thereon of the payment if only partially paid, or surrender thereof if fully paid) subject to the provisions of this Indenture, as follows:
First: to the payment to the Persons entitled thereto of all installments of interest on the Bonds then due in the order of the maturity of such installments and, if the amount available shall not be sufficient to pay in full any installment or installments maturing on the same date, then to the payment thereof ratably, according to the amounts due thereon, to the Persons entitled there to, without any discrimination or preference; and
Second: to the payment to the Persons entitled thereto of all installments of principal of the Bonds then due, whether at maturity or by call for redemption, with interest on the overdue principal at the ra te borne by the respective Bonds on the date of maturity or redemption, and, if the amount available shall not be sufficient to pay in full all the Bonds, together with such interest, then to the payment thereof ratably, according to the amounts of princip al due on such date to the Persons entitled thereto, without any discrimination or preference; (c) any remaining funds shall be transferred by the Trustee to the Special Tax Fund.
Section 7.06. Power of Trustee to Enforce. All rights of action under this Indenture or the Bonds or otherwise may be prosecuted and enforced by the Trustee without the possession of any of the Bonds or the production thereof in any proceeding relating thereto, and any such suit, 465
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action or proceeding instituted by the Trustee shall be brought in the name of the Trustee for the benefit and protection of the Owners of such Bonds, subject to the provisions of this Indenture.
Section 7.07. Owners’ Direction of Proceedings . Anything in this Indenture to the contrary notwithstanding, the Owners of a majority in aggregate principal amount of the Bonds then Outstanding shall have the right, by an instrument or concurrent instruments in writing executed and delivered to the Tru stee, and upon indemnification of the Trustee to its reasonable satisfaction, to direct the method of conducting all remedial proceedings taken by the Trustee; provided, however, that such direction shall not be otherwise than in accordance with the provisions of this Indenture, the Act and other applicable law and, provided, further, that the Trustee shall have the right to decline to follow any such direction that in the opinion of the Trustee would be unjustly prejudicial to Owners not parties to such direction.
Section 7.08. Limitation on Owners’ Right to Sue . No Owner of any Bond shall have the right to institute any suit, action or proceeding at law or in equity, for the protection or enforcement of any right or remedy under this Indenture, the Act or any other applicable law with respect to such Bond, unless (a) such Owner shall have given to the Trustee written notice of the occurrence of an Event of Default, (b) the Owners of a majority in aggregate principal amount of the Bonds then Outstanding shall have mad e written request upon the Trustee to exercise the powers hereinbefore granted or to institute such suit, action or proceeding in its own name, (c) such Owner or said Owners shall have tendered to the Trustee indemnity reasonably satisfactory to the Truste e against the costs, expenses and liabilities to be incurred in compliance with such request, and (d) the Trustee shall have refused or omitted to comply with such request for a period of 60 days after such written request shall have been received by, and said tender of indemnity shall have been made to, the Trustee.
Such notification, request, tender of indemnity and refusal or omission are hereby declared, in every case, to be conditions precedent to the exercise by any Owner of any remedy hereunder or under law; it being understood and intended that no one or more Owners shall have any right in any manner whatever by such Owner’s or Owners’ action to affect, disturb or prejudice the security of this Indenture or the rights of any other Owners, or to enfor ce any right under the Bonds, this Indenture, the Act or other applicable law with respect to the Bonds, except in the manner herein provided, and that all proceedings at law or in equity to enforce any such right shall be instituted, had and maintained in the manner herein provided and for the benefit and protection of all Owners, subject to the provisions of this Indenture.
Section 7.09. Absolute Obligation . Nothing in this Indenture or the Bonds contained shall affect or impair the obligation of the Community Faci lities District, which is absolute and unconditional, to pay the principal of and interest on the Bonds to the respective Owners as the same become due , as herein provided, but only out of the Net Special Tax Revenues and other assets pledged therefor hereunder, or affect or impair the right of such Owners, which is also absolute and unconditional, to enforce such payment by virtue of the contract embodied in the Bonds.
Section 7.10. Termination of Proceedings. In case any proceedings taken by the Trustee or any one or more Owners on account of any Event of Default shall have been discontinued or abandoned for any reason or shall have been determined adversely to the Trustee or the Owners, 466
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then in every such case the Community Facilities District, the Trustee and the Owners, subject to any determination in such proceedings, shall be restored to their former positions and rights hereunder, severally and respectively, and all rights, remedies, powers and duties of the Community Facilities District, the Trustee and the Ow ners shall continue as though no such proceedings had been taken.
Section 7.11. No Waiver of Default. No delay or omission of the Trustee or of any Owner to exercise any right or power arising upon the occurrence of any default or Event of Default shall impair any such right or power or shall be construed to be a waiver of any such default or Event of Default or an acquiescence therein, and every power and remedy given by this Indenture to the Trustee or to the Owners may be exercised from time to time and as often a s may be deemed expedient.
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ARTICLE VIII
TRUSTEE;SECURITIES INTERMEDIARY
Section 8.01. Duties and Liabilities of Trustee. The Trustee shall, prior to an Event of Default, and after the curing or waiver of all Events of Default that may have occurred, perform such duties and only such duties as are expressly and specifically set forth in this Indenture. The Trustee shall, during the existence of any Event of Default that has not been cured or waived, exercise such of the rights and powers vested in it by this Indenture, and use t he same degree of care and skill in their exercise, as a prudent person would exercise or use under the circumstances in the conduct of such person’s own affairs.
Section 8.02. Qualifications; Removal and Resignation; Successors . (a) The Trustee initially a party hereto and any successor thereto shall at all times be a trust company, national banking association or bank having trust powers in good standing in or incorporated under the laws of the United States or any state thereof, having (or if such tru st company, national banking association or bank is a member of a bank holding company system, its parent bank holding company shall have) a combined capital and surplus of at least $ 250,000,000, and subject to supervision or examination by a federal or state agency. If such trust company, national banking association or bank publishes a report of condition at least annually, pursuant to law or to the requirements of any supervising or examining agency above referred to, then for the purpose of this subsection the combined capital and surplus of such trust company, national banking association or bank shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published.
(b) The Community Facilities District may, by an instrument in writing, upon at least 30 days’ notice to the Trustee, remove the Trustee initially a party hereto and any successor thereto unless an Event of Default shall have occurred and then be continuing, and shall remove the Trustee initially a party hereto and any successor thereto if (i) at any time requested to do so by an instrument or concurrent instruments in writing signed by the Owners of not less than a majority in aggregate principal amount of the Bonds then Outstanding ( or their attorneys duly authorized in writing), or (ii) the Trustee shall cease to be eligible in accordance with subsection (a) of this Section, or shall become incapable of acting, or shall be adjudged a bankrupt or insolvent, or a receiver of the Trustee or its property shall be appointed, or any public officer shall take control or charge of the Trustee or of its property or affairs for the purpose of rehabilitation, conservation or liquidation, in each case by giving written notice of such removal to the Trustee. (c) The Trustee may at any time resign by giving written notice of such resignation by first class mail, postage prepaid, to the Community Facilities District, and to the Owners at the respective addresses shown on the Registration Books. In case at any time the Trustee shall cease to be eligible in accordance with the provisions of subsection (a) of this Section, the Trustee shall resign immediately in the manner and with the effect specified in this Section. (d) Upon removal or resignation of the Trustee, the Community Facilities District shall promptly appoint a successor Trustee by an instrument in writing. Any removal or resignation of the Trustee and appointment of a successor Trustee shall become effective upon acceptance of appointment by the suc cessor Trustee; provided, however, that any successor Trustee shall be 468
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qualified as provided in subsection (a) of this Section. If no qualified successor Trustee shall have been appointed and have accepted appointment within 45 days following notice of rem oval or notice of resignation as aforesaid, the removed or resigning Trustee or any Owner (on behalf of such Owner and all other Owners) may petition any court of competent jurisdiction for the appointment of a successor Trustee, and such court may thereup on, after such notice, if any, as it may deem proper, appoint such successor Trustee. Any successor Trustee appointed under this Indenture shall signify its acceptance of such appointment by executing and delivering to the Community Facilities District and to its predecessor Trustee a written acceptance thereof, and thereupon such successor Trustee, without any further act, deed or conveyance, shall become vested with all the moneys, estates, properties, rights, powers, trusts, duties and obligations of such predecessor Trustee, with like effect as if originally named Trustee herein; but, nevertheless at the Written Request of the Community Facilities District or the request of the successor Trustee, such predecessor Trustee shall execute and deliver any and all instruments of conveyance or further assurance and do such other things as may reasonably be required for more fully and certainly vesting in and confirming to such successor Trustee all the right, title and interest of such predecessor Trustee in and to any property held by it under this Indenture and shall pay over, transfer, assign and deliver to the successor Trustee any money or other property subject to the trusts and conditions herein set forth. Upon acceptance of appointment by a successor Trus tee as provided in this subsection, the successor Trustee shall, within 15 days after such acceptance, mail, by first class mail postage prepaid, a notice of the succession of such Trustee to the trusts hereunder to the Owners at the addresses shown on the Registration Books. (e) Any trust company, national banking association or bank into which the Trustee may be merged or converted or with which it may be consolidated or any trust company, national banking association or bank resulting from any merger, conver sion or consolidation to which it shall be a party or any trust company, national banking association or bank to which the Trustee may sell or transfer all or substantially all of its corporate trust business, provided such trust company, national banking association or bank shall be eligible under subsection (a) of this Section, shall be the successor to such Trustee, without the execution or filing of any paper or any further act, anything herein to the contrary notwithstanding.
Section 8.03. Liability of Trustee . (a) The recitals of facts herein and in the Bonds contained shall be taken as statements of the Community Facilities District, and the Trustee shall not assume responsibility for the correctness of the same or incur any responsibility in resp ect thereof, other than as expressly stated herein in connection with the respective duties or obligations herein or in the Bonds assigned to or imposed upon it. The Trustee shall, however, be responsible for its representations contained in its certificate of authentication on the Bonds. (b) The Trustee makes no representations as to the validity or sufficiency of this Indenture or of any Bonds, or in respect of the security afforded by this Indenture and the Trustee shall incur no responsibility in respect thereof. The Trustee shall be under no responsibility or duty with respect to the issuance of the Bonds for value, the application of the proceeds thereof except to the extent that such proceeds are received by it in its capacity as Trustee, or the applicat ion of any moneys paid to the Community Facilities District or others in accordance with this Indenture. (c) The Trustee shall not be liable in connection with the performance of its duties hereunder, except for its own negligence or willful misconduct. 469
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(d) No provision of this Indenture or any other document related hereto shall require the Trustee to risk or advance its own funds.
(e) The Trustee may execute any of its powers or duties hereunder through attorneys, agents or receivers and shall not be answerable for the actions of such attorneys, agents or receivers if selected by it with reasonable care.
(f) The Trustee shall not be liable for any error of judgment made in good faith by a responsible officer, unless it shall be proved that the Trustee was negligent in a scertaining the pertinent facts.
(g) The immunities and protections extended to the Trustee also extend to its directors, officers, employees and agents.
(h) Before taking action under Article VII, under this Article or upon the direction of the Owners, the Trustee may require indemnity reasonably satisfactory to the Trustee be furnished to it to protect it against all fees and expenses, including those of its attorneys and advisors, and protect it against all liability it may incur.
(i) The Trustee shall not be liable with respect to any action taken or omitted to be taken by it in good faith in accordance with the direction of the Owners of not less than a majority in aggregate principal amount of the Bonds at the time Outstanding relating to the time, method and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred upon the Trustee under this Indenture. (j) The Trustee may become the Owner of Bonds with the same rights it would have if it were not Trustee and, to the extent permitted by law, may act as depository for and permit any of its officers or directors to act as a member of, or in any other capacity with respect to, any committee formed to protect the rights of Owners, whether or not such commit tee shall represent the Owners of a majority in aggregate principal amount of the Bonds then Outstanding. (k) The Trustee shall have no responsibility with respect to any information, statement, or recital in any official statement, offering memorandum or any other disclosure material prepared or distributed with respect to the Bonds.
(l) The Trustee shall not be liable for the failure to take any action required to be taken by it hereunder if and to the extent that the Trustee’s taking such action is prevented by reason of an act of God, terrorism, war, riot, strike, fire, flood, earthquake, epidemic or other, similar occurrence that is beyond the control of the Trustee and could not have been avoided by exercising due care.
(m) The Trustee shall not be deemed to have knowledge of an Event of Default hereunder unless it has actual knowledge thereof.
(n) The permissive right of the Trustee to do things enumerated in this Indenture shall not be construed as a duty and it shall not be answerable for other than its negligence o r willful misconduct.
470
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(o) The Trustee shall not be responsible for or accountable to anyone for the subsequent use or application of any moneys that shall be released or withdrawn in accordance with the provisions hereof.
Section 8.04. Right to Rely on Documents and Opini ons. (a) The Trustee shall be protected in acting upon any notice, resolution, request, consent, order, certificate, report, opinion, bonds or other paper or document believed by it to be genuine and to have been signed or presented by the proper party or parties.
(b) Whenever in the administration of the duties imposed upon it by this Indenture the Trustee shall deem it necessary or desirable that a matter be proved or established prior to taking or suffering any action hereunder, such matter (unless other evidence in respect thereof be herein specifically prescribed) may be deemed to be conclusively proved and established by a Written Certificate of the Community Facilities District, and such Written Certificate shall be full warrant to the Trustee for any action taken or suffered in good faith under the provisions of this Indenture in reliance upon such Written Certificate, but in its discretion the Trustee may, in lieu thereof, accept other evidence of such matter or may require such addition al evidence as it may deem reasonable.
(c) The Trustee may consult with counsel, who may be counsel to the Community Facilities District, with regard to legal questions, and the opinion of such counsel shall be full and complete authorization and protection in respect of any action taken or suffered by it hereunder in good faith and in accordance therewith.
Section 8.05. Accounting Records and Financial Statements . The Trustee shall at all times keep, or cause to be kept, proper books of record and account, prepared in a ccordance with prudent corporate trust industry standards, in which accurate entries shall be made of all transactions made by it relating to the proceeds of the Bonds, the Special Tax Revenues received by it and all funds and accounts established by it pursuant to this Indenture. Such books of record and account shall be available for inspection by the Community Facilities District during regular business hours and upon reasonable notice and under reasonable circumstances as agreed to by the Trustee. The Trustee shall deliver to the Community Facilities District a monthly accounting of the funds and accounts it holds under this Indenture; provided, however, that the Trustee shall not be obligated to deliver an accounting for any Fund or Account that (a) has a balance of zero, and (b) has not had any activity since the last reporting date.
Section 8.06. Preservation and Inspection of Documents . All documents received by the Trustee under the provisions of this Indenture shall be retained in its possession and shall be subject during business hours and upon reasonable notice to the inspection of the Community Facilities District, the Owners and their agents and representatives duly authorized in writing.
Section 8.07. Compensation and Indemnification . The Community Facilities Dist rict shall pay to the Trustee from time to time from Special Tax Revenues all reasonable compensation pursuant to a pre -approved fee letter for all services rendered under this Indenture, and also all reasonable expenses, charges, legal and consulting fees pursuant to a pre-approved fee letter and other disbursements pursuant to a pre -approved fee letter and those of its attorneys, agents and employees, incurred in and about the performance of their powers and duties under this Indenture. 471
46 4155-0144-7245.2
The Community Faci lities District shall, to the extent permitted by law, from Special Tax Revenues, indemnify and save the Trustee harmless against any costs, claims, expenses (including fees and expenses of its counsel) and liabilities that it may incur in the exercise and performance of its powers and duties hereunder, including the enforcement of any remedies and the defense of any suit, and that are not due to its negligence or its willful misconduct. The duty of the Community Facilities District to indemnify the Trustee shall survive the resignation or removal of the Trustee and the termination and discharge of this Indenture.
Section 8.08. Securities Intermediary. (a) At all times during which the Trustee does not maintain hereunder securities accounts to which financial assets may be credited , there shall be a Securities Intermediary acting as such pursuant hereto. (a) U.S. Bank National Association is hereby appointed as the initial Securities Intermediary and U.S. Bank National Association hereby accepts such appointment. (b) The initial Securities Intermediary and any successor thereto (i) shall at all times be a trust company, national banking association or bank in good standing in or incorporated under the laws of the United States or any state thereof having (or if such trust company, national banking association or bank is a member of a bank holding company system, its parent bank holding company shall have) a combined capital and surplus of at least $250,000,000, and subject to supervision or examination by a federal or state agency , (ii) shall not be an affiliate of the Community Facilities District or the City , and (iii) shall, in the ordinary course of its business, maintain securities accounts for others and be so maintaining accounts hereunder; (c) Each Fund and Account shall be a securities account maintained with the Securities Intermediary to which financial assets may be credited and the Securities Intermediary shall treat the Trustee as entitled to exercise the rights that comprise such financial assets; (d) The Securities Intermediary shall not change the name or the account number of any Fund or Account without the prior written consent of the Trustee; (e) Each item of property credited to each Fund or Account shall be treated as a financial asset;
(f) The Securities Intermediary shall comply with entitlement orders originated by the Trustee, without the need for consent by the Community Facilities District or any other Person; (g) The Securities Intermediary shall not agree with any Person, other than the Trustee, that it will comply with entitlement orders originated by any Person other than the Trustee; (h) The Securities Intermediary shall not take any action inconsistent with this Section or any other provision of this Indenture applicable to it. The Securities Intermediary shall not be a party to any agreement that is inconsistent with this Section or any other provision of this Indenture or that limits or conditions any of its obligations under this Section or any other provision of this Indenture;
(i) Each item of property credited to each Fund or Account shall not be subject to, and the Securities Intermediary hereby waives, any security interest, lien, claim, encumbrance or right 472
47 4155-0144-7245.2
of setoff in favor of the Securities Intermediary or any Person claiming through the Securities Intermediary, other than the Trustee;
(j) For purposes of Article 8 of the Uniform Comme rcial Code, the securities intermediary’s jurisdiction of the Securities Intermediary with respect to the Funds and Accounts shall be the State.
(k) It is the intent of the Community Facilities District, the Trustee and the Securities Intermediary that each Fu nd and Account shall be a securities account of the Trustee and not an account of the Community Facilities District.
(l) The Securities Intermediary shall be entitled to all of the immunities, protections, limitations of liability and indemnities afforded to the Trustee pursuant to Article VIII hereof. (m) The Securities Intermediary may at any time resign by providing no less than 30 days’ written notice of such resignation to the Trustee and the Community Facilities District. The Trustee may remove the Securities Intermediary by providing no less than 20 days’ written notice of such removal to the Securities Intermediary. In case at any time the Securities Intermediary shall cease to be eligible in accordance with the provisions of subsection (b) of this Section, the Securities Intermediary shall resign immediately. The Trustee shall promptly remove the Securities Intermediary if at any time the Securities Intermediary shall cease to be eligible in accordance with the provisions of subsection (b) of this Section . The Trustee shall appoint a successor Securities Intermediary that satisfies the provisions of subsection (b) of this Section. The Trustee shall cause (i) each F und and Account to be established and maintained with such successor Securities Intermediary in accordance with the terms hereof, and (ii) the successor Securities Intermediary to execute and deliver a written agreement between the Trustee and such successor Securities Intermediary, pursuant to which such successor Securities Intermediary agrees to be the Securities Intermediary hereunder and to be bound by the provisions of this Indenture applicable to the Securities Intermediary. The duties and obligations of the resigning or removed Securities Intermediary hereunder shall remain in effect until the successor Securities Intermediary has accepted its appointment and each Fund and Account and all property credited thereto have been transferred to the successor Securities Intermediary. 473
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ARTICLE IX
SUPPLEMENTAL INDENTURES
Section 9.01. Supplemental Indentures . (a) This Indenture and the rights and obligations of the Community Facilities District, the Trustee and the Owners hereunder may be modified or amended from ti me to time and at any time by a Supplemental Indenture, which the Community Facilities District and the Trustee may enter into when there are submitted to the Trustee the written consents of the Owners of a majority of the aggregate principal amount of the Bonds then Outstanding, exclusive of Bonds disqualified as provided in Section 11.07. No such modification or amendment shall (i) extend the fixed maturity of any Bond, reduce the amount of principal thereof or the rate of interest thereon, extend the tim e of payment thereof or alter the redemption provisions thereof, without the prior written consent of the Owner of each Bond so affected, (ii) permit any pledge of, or the creation of any lien on, security interest in or charge or other encumbrance upon th e assets pledged under this Indenture prior to or on a parity with the pledge contained in, and the lien and security interest created by, this Indenture or deprive the Owners of the pledge contained in, and the lien and security interest created by, this Indenture, except as expressly provided in this Indenture, without the prior written consents of the Owners of all Bonds then Outstanding, or (iii) modify or amend this Section without the prior written consents of the Owners of all Bonds then Outstanding.
(b) This Indenture and the rights and obligations of the Community Facilities District, the Trustee and the Owners hereunder may also be modified or amended from time to time and at any time by a Supplemental Indenture, which the Community Facilities District and the Trustee may enter into without the consent of any Owners for any one or more of the following purposes:
(i) to add to the covenants and agreements of the Community Facilities District in this Indenture contained , other covenants and agreements thereaf ter to be observed, to pledge or assign additional security for the Bonds (or any portion thereof), or to surrender any right or power herein reserved to or conferred upon the Community Facilities District; (ii) to make such provisions for the purpose of curing any ambiguity, inconsistency or omission, or of curing or correcting any defective provision contained in this Indenture, provided that such modification or amendment does not materially adversely affect the rights or interests of the Owners hereunder; (iii) to provide for the issuance of one or more Series of Additional Bonds, and to provide the terms and conditions under which such Series of Additional Bonds may be issued, subject to and in accordance with the provisions of Article III; (iv) to permit the qualifica tion of this Indenture under the Trust Indenture Act of 1939, as amended, or any similar federal statute hereafter in effect; (v) to cause interest on the Bonds to be excludable from gross income for purposes of federal income taxation by the United States of America; and 474
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(vi) in any other respect whatsoever as the Community Facilities District may deem necessary or desirable, provided that such modification or amendment does not materially adversely affect the rights or interests of the Owners hereunder. (c) Promptly after the execution by the Community Facilities District and the Trustee of any Supplemental Indenture, the Trustee shall mail a notice (the form of which shall be furnished to the Trustee by the Community Facilities District), by first-class mail, postage prepaid, setting forth in general terms the substance of such Supplemental Indenture, to the Owners at the respective addresses shown on the Registration Books. Any failure to give such notice, or any defect therein, shall not, however, in any way impair or affect the validity of any such Supplemental Indenture.
Section 9.02. Effect of Supplemental Indenture . Upon the execution of any Supplemental Indenture pursuant to this Article, this Indenture shall be deemed to be modified and amended in accordance therewith, a nd the respective rights, duties and obligations under this Indenture of the Community Facilities District, the Trustee and the Owners shall thereafter be determined, exercised and enforced hereunder subject in all respects to such modification and amendment, and all the terms and conditions of any such Supplemental Indenture shall be deemed to be part of the terms and conditions of this Indenture for any and all purposes.
Section 9.03. Endorsement of Bonds; Preparation of New Bonds . Bonds delivered after the effecti ve date of any Supplemental Indenture pursuant to this Article may and, if the Community Facilities District so determines, shall bear a notation by endorsement or otherwise in form approved by the Community Facilities District and the Trustee as to any mo dification or amendment provided for in such Supplemental Indenture, and, in that case, upon demand of the Owner of any Bond Outstanding at the time of such effective date and presentation of such Bond for such purpose at the Office of the Trustee a suitab le notation shall be made on such Bonds. If the Supplemental Indenture shall so provide, new Bonds so modified as to conform, in the opinion of the Community Facilities District and the Trustee, to any modification or amendment contained in such Supplement al Indenture, shall be prepared and executed by the Community Facilities District and authenticated by the Trustee and, in that case, upon demand of the Owner of any Bond Outstanding at the time of such effective date, and presentation of such Bond for suc h purpose at the Office of the Trustee, such a new Bond in equal principal amount of the same Series, interest rate and maturity shall be exchanged for such Owner’s Bond so surrendered.
Section 9.04. Amendment of Particular Bonds. The provisions of this Article shall not prevent any Owner from accepting any amendment or modification as to any particular Bond owned by it, provided that due notation thereof is made on such Bond. 475
50 4155-0144-7245.2
ARTICLE X
DEFEASANCE
Section 10.01. Discharge of Indenture . (a) If the Community Facilities District shall pay or cause to be paid or there shall otherwise be paid to the Owners of all Outstanding Bonds the principal thereof and the interest and premium, if any, thereon at the times and in the manner stipulated herein and therein, then the Owners shall cease to be entitled to the pledge of the Net Special Tax Revenues and the other assets pledged therefor hereunder , and all agreements, covenants and other obligations of the Community Facilities District hereunder shal l thereupon cease, terminate and become void and this Indenture shall be discharged and satisfied. In such event, the Trustee shall execute and deliver to the Community Facilities District all such instruments as may be necessary or desirable to evidence such discharge and satisfaction, and the Trustee shall pay over or deliver to the Community Facilities District all money or securities held by it pursuant hereto that are not required for the payment of the principal of and interest and premium, if any, on the Bonds.
(b) Subject to the provisions of subsection (a) of this Section, if the Community Facilities District shall pay or cause to be paid to the Owner of an Outstanding Bond the principal thereof and the interest and premium, if any, thereon at the times and in the manner stipulated herein and therein, such Owner shall cease to be entitled to the pledge of the Net Special Tax Revenues and the other assets pledged therefor hereunder and all agreements, covenants and other obligations of the Community Facilities District hereunder shall thereupon cease, terminate and become void and this Indenture shall be discharged and satisfied as to such Bond. (c) Notwithstanding the discharge and satisfaction of this Indenture or the discharge and satisfaction of this Indenture in respect of any Bond, those provisions of this Indenture relating to the maturity of the Bonds, interest payments and dates thereof, exchange and transfer of Bonds, replacement of mutilated, destroyed, lost or stolen Bonds, the safekeeping and cancellation of Bonds, non -presentment of Bonds, and the duties of the Trustee in connection with all of the foregoing, shall remain in effect and shall be binding upon the Trustee and the Owner of such Bond, and the Trustee shall continue to be obligated to hold in trust any moneys or investments then held by the Trustee for the pa yment of the principal of and interest and premium, if any, on such Bond, and to pay to the Owner of such Bond the funds so held by the Trustee as and when such payment becomes due.
Section 10.02. Bonds Deemed To Have Been Paid . (a) If moneys shall have been set aside and held by the Trustee for the payment or redemption of any Bond and the payment of the interest thereon to the maturity or redemption date thereof, such Bond shall be deemed to have been paid within the meaning and with the effect provide d in Section 10.01. Any Outstanding Bond shall prior to the maturity date or redemption date thereof be deemed to have been paid within the meaning of and with the effect expressed in Section 10.01 if (i) in case such Bond is to be redeemed on any date pri or to its maturity date, the Community Facilities District shall have given to the Trustee in form satisfactory to it irrevocable instructions to mail, on a date in accordance with the provisions of Section 4.02 , notice of redemption of such Bond on said redemption date, said notice to be given in accordance with Section 4.02, (ii) there shall have been deposited with the Trustee either (A) money in an amount that shall be sufficient, or 476
51 4155-0144-7245.2
(B) Defeasance Securities, the principal of and the interest on which when due, and without any reinvestment thereof, together with the money, if any, deposited therewith, will provide moneys that shall be sufficient to pay when due the interest to become due on such Bond on and prior to the maturity date or redemption date thereof, as the case may be, and the principal of and premium, if any, on such Bond, and (iii) in the event such Bond is not by its terms subject to redemption within the next succeeding 60 days, the Community Facilities District shall have given the Trustee, in form satisfactory to it, irrevocable instructions to mail as soon as practicable, a notice to the Owner of such Bond that the deposit required by clause (ii) above has been made with the Trustee and that such Bond is deemed to have been paid in acco rdance with this Section and stating the maturity date or redemption date upon which money is to be available for the payment of the principal of and premium, if any, on such Bond.
(b) No Bond shall be deemed to have been paid pursuant to clause (ii) of subsection (a) of this Section unless the Community Facilities District shall have caused to be delivered to the Community Facilities District and the Trustee (i) an executed copy of a Verification Report with respect to such deemed payment, addressed to the Com munity Facilities District and the Trustee, in form and in substance acceptable to the Community Facilities District, (ii) a copy of the escrow agreement entered into in connection with the deposit pursuant to clause (ii)(B) of subsection (a) of this Section resulting in such deemed payment, which escrow agreement shall be in form and in substance acceptable to the Community Facilities District and which escrow agreement shall provide that no substitution of Defeasance Securities shall be permitted except w ith other Defeasance Securities and upon delivery of a new Verification Report, and no reinvestment of Defeasance Securities shall be permitted except as contemplated by the original Verification Report or upon delivery of a new Verification Report, and (i ii) a copy of an opinion of Bond Counsel, dated the date of such deemed payment and addressed to the Community Facilities District and the Trustee, in form and in substance acceptable to the Community Facilities District, to the effect that such Bond has been paid within the meaning and with the effect expressed in this Indenture, all agreements, covenants and other obligations of the Community Facilities District hereunder have ceased, terminated and become void and the Indenture has been completely discharged and satisfied as to such Bonds.
Section 10.03. Unclaimed Moneys . Any moneys held by the Trustee in trust for the payment of the principal of, or premium or interest on, any Bond that remain unclaimed for two years after the date when such principal, premium or interest has become payable, if such moneys were held by the Trustee at such date, or for two years after the date of deposit of such moneys if deposited with the Trustee after the date when such principal, premium or interest become payable, shall be repaid by the Trustee to the Community Facilities District as its absolute property free from trust, and the Trustee shall thereupon be released and discharged with respect thereto and the Owner of such Bond shall look only to the Community Facilities District for the payment of such principal, premium or interest. The Trustee shall hold any such moneys uninvested. 477
52 4155-0144-7245.2
ARTICLE XI
MISCELLANEOUS
Section 11.01. Notices. Any written notice, statement, demand, consent, approval, authorization, offer, designation, request or other communication to be given hereunder shall be given to the party ent itled thereto at its address set forth below, or at such other address as such party may provide to the other parties in writing from time to time, namely:
If to the Community Facilities District:
City of Fontana Community Facilities
District No. 111 (Monterado)
c/o City of Fontana
8353 Sierra Avenue
Fontana, California 92335
Attention: Chief Financial Officer, Finance Department
If to the Trustee:
U.S. Bank Trust Company, National Association
633 West Fifth Street, 24th Floor
Los Angeles, California 90071
Attention: Global Corporate Trust
Each such notice, statement, demand, consent, approval, authorization, offer, designation, request or other communication hereunder shall be deemed delivered to the party to whom it is addressed (a) if given by courier or delivery service or if personally served or delivered, upon delivery, (b) if given by telecopier, upon the sender’s receipt of an appropriate answerback or other written acknowledgment, (c) if given by electronic mail, on the date sent, but only if confirmation of the receipt of such electronic mail is received or if notice is concurrently sent by another means specified herein, (d) if given by registered or certified mail, return receipt requested, deposited with the United States mail postage prepaid, 72 hours after such notice is deposited with the United States mail, or ( e) if given by any other means, upon delivery at the address specified in this Section.
Section 11.02. Successor Is Deemed Included in All References to Predecessor .
Whenever in this Indenture either the Community Facilities District or the Trustee is named or referred to, such reference shall be deemed to include the successors or assigns thereof, and all the covenants and agreements in this Indenture contained required hereby to be performed b y or on behalf of the Community Facilities District or the Trustee shall bind and inure to the benefit of the respective successors and assigns thereof whether so expressed or not.
Section 11.03. Limitation of Rights. Nothing in this Indenture or in the Bonds expressed or implied is intended or shall be construed to give to any Person other than the Trustee, the Community Facilities District and the Owners any legal or equitable right, remedy or claim under or in respect of this Indenture or any covenant, condition or provision therein or herein contained, 478
53 4155-0144-7245.2
and all such covenants, conditions and provisions are and shall be held to be for the sole and exclusive benefit of the Trustee, the Community Facilities District and the Owners.
Section 11.04. Destruction of Bonds. Whenever in this Indenture provision is made for the cancellation by the Trustee and the delivery to the Community Facilities District of any Bonds, the Trustee shall, in lieu of such cancellation and delivery, destroy such Bonds.
Section 11.05. Severability of Inva lid Provisions . If any term or provision of this Indenture or the Bonds, or the application of the term or provision to any Person or circumstance is, to any extent, held to be invalid or unenforceable in any jurisdiction, but the extent of such invalidity or unenforceability does not destroy the basis of the bargain between the parties as contained herein, the remainder of this Indenture or the Bonds, as applicable, or the application of the term or provision to Persons or circumstances other than those as to which the term or provision is held invalid or unenforceable, shall not be affected by such invalidity or unenforceability, and each remaining term or provision of this Indenture and the Bonds shall be valid and will be enforced to the fullest extent permitted by law.
Section 11.06. Evidence of Rights of Owners . (a) Any request, consent or other instrument required or permitted by this Indenture to be signed and executed by Owners may be in any number of concurrent instruments of substantially similar tenor an d shall be signed or executed by such Owners in person or by an agent or agents duly appointed in writing. Proof of the execution of any such request, consent or other instrument or of a writing appointing any such agent, shall be sufficient for any purpose of this Indenture and shall be conclusive in favor of the Trustee and the Community Facilities District if made in the manner provided in this Section. (b) The fact and date of the execution by any Person of any such request, consent or other instrument or writing may be proved by the certificate of any notary public or other officer of any jurisdiction, authorized by the laws thereof to take acknowledgments of deeds, certifying that the Person signing such request, consent or other instrument acknowledge d to such notary public or such officer the execution thereof, or by an affidavit of a witness of such execution duly sworn to before such notary public or other officer.
(c) The ownership of Bonds shall be proved by the Registration Books. (d) Any request, consent or other instrument or writing of the Owner of any Bond shall bind every future Owner of the same Bond and the Owner of every Bond issued in exchange therefor or in lieu thereof, in respect of anything done or suffered to be done by the Trustee or the Community Facilities District in accordance therewith or reliance thereon.
Section 11.07. Disqualified Bonds. In determining whether the Owners of the requisite aggregate principal amount of Bonds have concurred in any demand, request, direction, consent or waiver under this Indenture, Bonds that are known by the Trustee to be owned or held by or for the account of the Community Facilities District, or by any other obligor on the Bonds, or by any Person directly or indirectly controlling or controlled by, or und er direct or indirect common control with, the Community Facilities District or any other obligor on the Bonds, shall be disregarded and deemed not to be Outstanding for the purpose of any such determination. Bonds so owned that have been pledged in good f aith may be regarded as Outstanding for the purposes 479
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of this Section if the pledgee shall establish to the satisfaction of the Trustee the pledgee’s right to vote such Bonds and that the pledgee is not a Person directly or indirectly controlling or controlled by, or under direct or indirect common control with, the Community Facilities District or any other obligor on the Bonds. In case of a dispute as to such right, any decision by the Trustee taken upon the advice of counsel shall be full protection to th e Trustee. Upon request of the Trustee, the Community Facilities District shall specify in a Written Certificate of the Community Facilities District submitted to the Trustee those Bonds disqualified pursuant to this Section and the Trustee may conclusively rely on such Written Certificate.
Section 11.08. Money Held for Particular Bonds . The money held by the Trustee for the payment of the interest, principal or premium due on any date with respect to particular Bonds (or portions of Bonds in the case of Bonds redeemed in part only) shall, on and after such date and pending such payment, be set aside on its books and held in trust by it for the Owner entitled thereto, subject, however, to the provisions of Section 10.03, but without any liability for interest thereon.
Section 11.09. Funds and Accounts. Any Fund or Account required by this Indenture to be established and maintained by the Trustee may be established and maintained in the accounting records of the Trustee, either as a Fund or an Account, and may, for the purposes of such records, any audits thereof and any reports or statements with respect thereto, be treated either as a Fund or as an Account, but all such records with respect to all such Funds and Accounts shall at all times be maintained in accordance with prudent corporate trust industry standards, and with due regard for the requirements hereof and for the protection of the security of the Bonds and the rights of every Owner thereof. The Trustee may establish any such additional Funds or Accounts as it deems necessary to perform its obligations hereunder.
Section 11.10. Business Days. If the da te for making any payment or the last date for performance of any act or the exercising of any right, as provided in this Indenture , shall not be a Business Day, such payment may be made or act performed or right exercised on the next succeeding Business Day, with the same force and effect as if done on the nominal date provided in this Indenture and, unless otherwise specifically provided in this Indenture, no interest shall accrue for the period from and after such nominal date.
Section 11.11. Waiver of Personal Liability. No member, officer, agent or employee of the Community Facilities District or the City shall be individually or personally liable for the payment of the principal of or premium or interest on the Bonds or be subject to any personal liability or acc ountability by reason of the issuance thereof , but nothing herein contained shall relieve any such member, officer, agent or employee from the performance of any official duty provided by any applicable provision of law or by this Indenture.
Section 11.12. Conflict with Act. In the event of any conflict between any provision of this Indenture and any provision of the Act, the provision of the Act shall prevail over the provision of this Indenture.
Section 11.13. Conclusive Evidence of Regularity . Bonds issued pursuant to this Indenture shall constitute evidence of the regularity of all proceedings under the Act relative to their issuance and to the levy of the Special Tax.
480
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Section 11.14. Governing Laws. This Indenture shall be governed by and construed in accordance with the laws of the State.
Section 11.15. Electronic Signature. Each of the parties hereto agrees that the transaction consisting of this Indenture may be conducted by electronic means. Each party agrees, and acknowledges that it is such party’s intent, that if such party signs this Indenture using an electronic signature, it is signing, adopting and accepting this Indenture and that signing this Indenture using an electronic signature is the legal equivalent of having placed its handwritten signature on this Indenture on paper. Each party acknowledges that it is being provided with an electronic or paper copy of this Indenture in a usable format.
Section 11.16. Execution in Several Counterparts. This Indenture may be executed in any number of counterparts and each of such counterparts shall for all purposes be deemed to be an original, and all such counterparts shall together constitute but one and the same instrument.
481
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IN WITNESS WHEREOF, the Community Facilities District has caused this Indenture to be signed in its name by its representative thereunto duly authorized, and the Trustee, in token of its acceptance of the trusts created hereunder, has caused this Indenture to be signed in its corporate name by its officer thereunto duly authorized, all as of the day and year first above written.
CITY OF FONTANA
COMMUNITY FACILITIES DISTRICT
NO. 111 (MONTERADO)
By:
___________________,
_________________
of the City of Fontana
U.S. BANK TRUST COMPANY,
NATIONAL ASSOCIATION, AS
TRUSTEE
By:
Authorized Officer
U.S. BANK NATIONAL ASSOCIATION HEREBY ACCEPTS APPOINTMENT AS
SECURITIES INTERMEDIARY UNDER THIS INDENTURE AND AGREES TO BE BOUND
BY THE PROVISIONS OF THIS INDENTURE APPLICABLE TO THE SECURITIES INTERMEDIARY.
U.S. BANK NATIONAL ASSOCIATION
By:
Authorized Officer
482
A-1
4155-0144-7245.2
EXHIBIT A
PERMITTED INVESTMENTS
“Permitted Investments” means the following:
(1) Direct general obligations of the United States of America (including obligations issued or held in book -entry form on the books of the Department of the Treasury of the United States of America);
(2) Obligations of any of the following federal agencies which obligations represent the full faith and credit of the United States of America, including:
-Export-Import Bank
-Rural Economic Community Development Administration
-U.S. Maritime Administration
-Small Business Administration
-U.S. Department of Housing & Urban Development (PHAs)
-Federal Housing Administration
-Federal Financing Bank;
(3) Direct obligations of any of the following federal agencies which obligations are not fully guaranteed by the full faith and credit of the United States of America:
-Senior debt obligations issued by the Federal National Mortgage Association (FNMA) or Federal Home Loan Mortgage Corporation (FHLMC)
-Obligations of the Resolution Funding Corporation (REFCORP) -Senior debt obligations of the Federal Home Loan Bank System; (4) U.S. dollar denominated deposit accounts, federal funds and bankers’ acceptances with domestic commercial banks which have a rating on their short term certificates of deposit on the date of purchase of “P -1” by Moody’s and “A -1” or “A-1+” by S&P and maturing not more than 360 calendar days after the date of purchase (ratings on holding companies are not considered as the rating of the bank);
(5) Commercial paper which is rated at the time of purchase in the single highest classification, “P -1” by Moody’s and “A -1+” by S&P and which matures not more than 2 70 calendar days after the date of purchase;
(6) Investments in a money market fund rated “AAAm” or “AAAm -G” or better by S&P, including a fund for which the Trustee, its parent holding company, if any, or any affiliates or subsidiaries of the Trustee provide investment advisory or other management services; (7) Pre-refunded Municipal Obligations defined as follows: any bonds or other obligations of any state of the United States of America or of any agency, instrumentality or local governmental unit of any such state which are not callable at the option of the obligor prior to maturity or as to which irrevocable instructions have been given by the obligor to call on the date specified in the notice; and
483
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(a) which are rated, based on an irrevocable escrow ac count or fund (the “escrow”), in the highest rating category of Moody’s or S&P or any successors thereto; or (b) (i) which are fully secured as to principal and interest and redemption premium, if any, by an escrow consisting only of cash or obligations d escribed in paragraph (2) above, which escrow may be applied only to the payment of such principal of and interest and redemption premium, if any, on such bonds or other obligations on the maturity date or dates thereof or the specified redemption date or dates pursuant to such irrevocable instructions, as appropriate, and (ii) which escrow is sufficient, as verified by a nationally recognized independent certified public accountant, to pay principal of and interest and redemption premium, if any, on the bonds or other obligations described in this paragraph on the maturity date or dates specified in the irrevocable instructions referred to above, as appropriate;
(8) Municipal obligations rated “Aaa/AAA” or general obligations of states with a rating of “A2/A” or higher by both Moody’s and S&P;
(9) Investment agreements with a domestic or foreign bank or corporation (other than a life or property casualty insurance company) the long -term debt of which, or, in the case of a guaranteed corporation the long -term debt, or, in the case of a monoline financial guaranty insurance company, claims paying ability, of the guarantor is rated at least “Aa3” by Moody’s and “AA-” by S&P; provided, that, by the terms of the investment agreement:
(a) the invested funds are available for withdrawal without penalty or premium, at any time upon not more than seven days’ prior notice; (b) the investment agreement shall state that it is the unconditional and general obligation of, and is not subordinated to any other obligation of, the provider thereof or, if the provider is a bank, the agreement or the opinion of counsel shall state that the obligation of the provider to make payments thereunder ranks pari passu with the obligations of the provider to its other depositors and its other unsecured and unsubordinated creditors; (c) the Trustee or the Community Facilities District receive the opinion of domestic counsel that such investment agreement is legal, valid and binding and enforceable against the provider in accordance with it s terms and of foreign counsel (if applicable);
(d) the investment agreement shall provide that if during its term (i) the provider’s rating by either Moody’s or S&P falls below “Aa3” or “AA-,” respectively, the provider shall, at its option, within 10 da ys of receipt of publication of such downgrade, either (A) collateralize the investment agreement by delivering or transferring in accordance with applicable state and federal laws (other than by means of entries on the provider’s books) to the Trustee or a holder of the collateral, collateral free and clear of any third-party liens or claims the market value of which collateral is maintained at levels and upon such conditions as would be acceptable to Moody’s and S&P to maintain an “A” rating in an “A” rat ed structured financing (with a market value approach); or (B) repay the principal of and accrued but unpaid interest, on the investment, and (ii) the provider’s 484
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rating by either Moody’s or S&P is withdrawn or suspended or falls below “A3” or “A -,” respectively, the provider must, at the direction of the Community Facilities District or the Trustee, within 10 days of receipt of such direction, repay the principal of and accrued but unpaid interest on the investment, in either case with no penalty or premium to the Trustee; (e) the investment agreement shall state, and an opinion of counsel shall be rendered, in the event collateral is required to be pledged by the provider under the terms of the investment agreement, at the time such collateral is delivered, that the holder of collateral has a perfected first priority security interest in the collateral, any substituted collateral and all proceeds thereof (in the case of bearer securities, this means the holder of collateral is in possession); and
(f) the inv estment agreement must provide that if during its term (i) the provider shall default in its payment obligations, the provider’s obligations under the investment agreement shall, at the direction of the Community Facilities District or the Trustee, be accelerated and amounts invested and accrued but unpaid interest thereon shall be repaid to the Trustee, and (ii) the provider shall become insolvent, not pay its debts as they become due, be declared or petition to be declared bankrupt, etc., the provider’s obligations shall automatically be accelerated and amounts invested and accrued but unpaid interest thereon shall be repaid to the Trustee.
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EXHIBIT B
FORM OF SERIES 2024 BOND
No. ___ $____________
CITY OF FONTANA
COMMUNITY FACILITIES DISTRICT NO. 111
(MONTERADO)
SPECIAL TAX BOND, SERIES 2024
INTEREST RATE MATURITY DATE DATED DATE CUSIP
% September 1, 20__ __________, 2024
REGISTERED OWNER:
PRINCIPAL AMOUNT:
City of Fontana Community Facilities District No. 111 (Monterado) (the “Community Facilities District”), for value received, hereby promises to pay, solely from the sources hereinafter described, to the Registered Owner identified above o r registered assigns (the “Registered Owner”), on the Maturity Date identified above or on any earlier redemption date, the Principal Amount identified above in lawful money of the United States of America; and to pay interest thereon at the Interest Rate identified above in like lawful money from the date hereof payable semiannually on March 1 and September 1 in each year, commencing [September 1, 2024] (the “Interest Payment Dates”), until payment of such Principal Amount in full.
This Bond is one of a series of a duly authorized issue of bonds approved by the qualified electors of the Community Facilities District, pursuant to the Mello -Roos Community Facilities Act of 1982, constituting Sections 53311 et seq. of the California Government Code (the “Act” ), and issued for the purpose of financing certain public facilities, and is one of the series of bonds designated “City of Fontana Community Facilities District No. 111 (Monterado) Special Tax Bonds, Series 2024” (the “Series 2024 Bonds”) in the aggregate principal amount of $__________.
The Series 2024 Bonds are issued pursuant to the Indenture, dated as of ________ 1, 2024 (the “Indenture”), by and between the Community Facilities District and U.S. Bank Trust Company, National Association, as trustee (said entity or any successor thereto as trustee under the Indenture, the “Trustee”), and this reference incorporates the Indenture herein, and by acceptance hereof the owner of this Bond assents to said terms and conditions. Pursuant to and as more particularly provided in the Indenture, additional bonds (“Additional Bonds”) may be issued by the Community Facilities District on a parity with the Series 2024 Bonds. The Series 2024 Bonds and any Additional Bonds are collectively referred to as the “Bonds.” The Indenture is entered into, and this Bond is issued under, the Act and the laws of the State of California. Capitalized undefined terms used herein shall have the meanings ascribed thereto in the Indenture. 486
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Interest on the Series 2024 Bonds shall be payable from the Interest Payment Date next preceding the date of authentication thereof unless (a) a Series 2024 Bond is authenticated on or before an Interest Payment Date and after the close of business on the preceding Record Date, in which event interest thereon shall be payable from such Interest Payment Date, (b) a Series 2024 Bond is authenticated on or before the first Reco rd Date, in which event interest thereon shall be payable from the Closing Date, or (c) interest on any Series 2024 Bond is in default as of the date of authentication thereof, in which event interest thereon shall be payable from the date to which interest has previously been paid or duly provided for. Interest shall be paid in lawful money of the United States on each Interest Payment Date. Interest shall be paid by check of the Trustee mailed by first-class mail, postage prepaid, on each Interest Payment Date to the Owners of the Series 2024 Bonds at their respective addresses shown on the Registration Books as of the close of business on the preceding Record Date. Notwithstanding the foregoing, interest on any Series 2024 Bond which is not punctually paid or duly provided for on any Interest Payment Date shall, if and to the extent that amounts subsequently become available therefor, be paid on a payment date established by the Trustee to the Person in whose name the ownership of such Series 2024 Bond is registered on the Registration Books at the close of business on a special record date to be established by the Trustee for the payment of such defaulted interest, notice of which shall be given to such Owner not less than ten days prior to such special re cord date. The principal of the Series 2024 Bonds shall be payable in lawful money of the United States of America upon presentation and surrender thereof upon maturity or earlier redemption at the Office of the Trustee.
The Bonds are special , limited obligations of the Community Facilities District, payable, as provided in the Indenture, solely from Net Special Tax Revenues and the other assets pledged therefor thereunder. Neither the faith and credit nor the taxing power of the Community Facilities District (except to the limited extent set forth in the Indenture), the City of Fontana or the State of California, or any political subdivision thereof, is pledged to the payment of the Bonds.
Pursuant to and as more particularly provided in the Indenture, subj ect only to the provisions of the Indenture permitting the application thereof for the purposes and on the terms and conditions set forth therein, in order to secure the payment of the principal of, premium, if any, and interest on the Bonds in accordance with their terms, the provisions of the Indenture and the Act, the Community Facilities District pledges to the Owners, and grants thereto a lien on and a security interest in, all of the Net Special Tax Revenues and any other amounts held in the Special Tax Fund, the Bond Fund and the Reserve Fund. Said pledge constitutes a first lien on and security interest in such assets, which shall immediately attach to such assets and be effective, binding and enforceable against the Community Facilities District, it s successors, purchasers of any of such assets, creditors and all others asserting rights therein, to the extent set forth in, and in accordance with, the Indenture, irrespective of whether those parties have notice of the pledge of, lien on and security interest in such assets and without the need for any physical delivery, recordation, filing or further act.
The Series 2024 Bonds are subject to redemption on the dates, at the Redemption Prices and pursuant to the terms set forth in the Indenture. Notice of redemption of any Series 2024 Bond or any portion thereof shall be given as provided in the Indenture.
The Series 2024 Bonds are issuable as fully -registered Bonds without coupons in Authorized Denominations ($5,000 and any integral multiple thereof). 487
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Any Series 2024 Bond may be transferred upon the Registration Books by the Person in whose name it is registered, in person or by such Person’s duly authorized attorney, upon surrender of such Series 2024 Bond to the Trustee for cancellation, accompanied by delivery of a written instrument of transfer, duly executed in a form acceptable to the Trustee. Whenever any Series 2024 Bond or Series 2024 Bonds shall be so surrendered for transfer, the Community Facilities District shall execute and the Trustee shall authenticate and shall deliver a new Series 2024 Bond or Series 2024 Bonds of the same maturity in a like aggregate principal amount, in any Authorized Denomination. The Trustee shall require the Owner requesting such transfer to pay any tax or other governmental charge required to be paid with respect to such transfer. The Series 2024 Bonds may be exchanged at the Office of the Trustee for a like aggregate principal amount of Series 2024 Bonds of the same maturity of other Authorized Denominations. The Tru stee shall require the payment by the Owner requesting such exchange of any tax or other governmental charge required to be paid with respect to such exchange.
The Indenture and the rights and obligations of the Community Facilities District, the Trustee and the Owners may be modified or amended in the manner, to the extent, and upon the terms provided in the Indenture.
The Indenture contains provisions permitting the Community Facilities District to make provision for the payment of the principal of and the interest and premium, if any, on any of the Bonds so that such Bonds shall no longer be deemed to be Outstanding under the terms of the Indenture.
Unless this Bond is presented by an authorized representative of The Depository Trust Company to the Trustee for registration of transfer, exchange or payment, and any Bond issued is registered in the name of Cede & Co. or such other name as requested by an authorized representative of The Depository Trust Company and any payment is made to Cede & Co., ANY
TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL since the registered owner hereof, Cede & Co., has an interest herein.
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IN WITNESS WHEREOF, the Community Facilities District has caused this Bond to be signed in its name and on its behalf by the manual or facsimile signature of the Mayor of the City of Fontana attested by the manual or facsimile signature of the City Clerk of the City of Fontana, all as of the Dated Date identified above.
CITY OF FONTANA COMMUNITY
FACILITIES DISTRICT NO. 111
(MONTERADO)
By:
Mayor of the City of Fontana
Attest:
By:
City Clerk of the City of Fontana
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CERTIFICATE OF AUTHENTICATION
This is one of the Series 2024 Bonds described in the within -mentioned Indenture and registered on the Registration Books.
Date: ___________
U.S. BANK TRUST COMPANY,
NATIONAL ASSOCIATION, AS
TRUSTEE
By:
Authorized Officer
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ASSIGNMENT
For value received the undersigned hereby sells, assigns and transfers unto __________________________________, whose address and social security or other tax identifying number is ____________________, the within -mentioned Bond and hereby irrevocably constitute(s) and appoint(s) ______________________________, attorney, to transfer the same on the registration books of the Trustee with full power of substitution in the premises.
Dated:
Signature Guaranteed:
Note: Signature guarantee shall be made by a guarantor
institution participating in the Securities Transfer
Agents Medallion Program or in such other guarantee
program acceptable to the Trustee.
Note: The signature(s) on this Assignment must correspond with the name(s) as written on the face of the within Bond in every particular without alteration or enlargement or any change whatsoever.
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CONTINUING DISCLOSURE AGREEMENT
by and among
CITY OF FONTANA
COMMUNITY FACILITIES DISTRICT NO. 111
(MONTERADO)
U.S. BANK TRUST COMPANY, NATIONAL ASSOCIATION,
AS TRUSTEE
and
U.S. BANK TRUST COMPANY, NATIONAL ASSOCIATION,
AS DISSEMINATION AGENT
Dated as of ________ 1, 2024
City of Fontana
Community Facilities District No. 111
(Monterado)
Special Tax Bonds, Series 2024
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CONTINUING DISCLOSURE AGREEMENT
THIS CONTINUING DISCLOSURE AGREEMENT (this “Disclosure Agreement”), dated as of ________ 1, 2024 , is by and among CITY OF FONTANA COMMUNITY FACILITIES DISTRICT NO. 111 (MONTERADO), a community facilities district organized and existing under the laws of the State of California (the “Community Facilities District”), U.S.
BANK TRUST COMPANY, NATIONAL ASSOCIATION , a national banking association organized and existing under the laws of the United States of America, in its capacity as Trustee (the “Trustee”), and U.S. BANK TRUST COMPANY, NATIONAL ASSOCIATION , a national banking association organized and existing under the laws of the United States of America, in its capacity as Dissemination Agent (the “Dissemination Agent”).
W I T N E S S E T H :
WHEREAS, the Community Facilities District has issued its City of Fontana Community Facilities District No. 111 (Monterado) Special Tax Bonds, Series 2024 (the “Series 2024 Bonds”), in the aggregate principal amount of $__________, pursuant to the Indenture, dated as of ________ 1, 2024 (the “Indenture”), by and between the Community Facilities District and the Trustee; and
WHEREAS, this Disclosure Agreement is being execute d and delivered by the Community Facilities District , the Trustee and the Dissemination Agent for the benefit of the owners and beneficial owners of the Series 2024 Bonds and in order to assist the underwriter of the Series 2024 Bonds in complying with Sec urities and Exchange Commission Rule 15c2 - 12(b)(5);
NOW, THEREFORE, for and in consideration of the mutual promises and covenants herein contained, the receipt whereof is hereby acknowledged, the parties hereto agree as follows:
Section 1. Definitions. Unless the con text otherwise requires, the terms defined in this Section shall for all purposes of this Disclosure Agreement have the meanings herein specified.
Capitalized undefined terms used herein shall have the meanings ascribed thereto in the Indenture. “Annual R eport” means any Annual Report provided by the Community Facilities District pursuant to, and as described in, Sections 2 and 3 hereof. “Annual Report Date” means the date in each year that is the first day of the month following the eighth month after the end of the Community Facilities District’s fiscal year, which date, as of the date of this Disclosure Agreement, is March 1. “Community Facilities District” means City of Fontana Community Facilities District No. 111 (Monterado), a community facilities district organized and existing under the laws of the State, and its successors.
“Disclosure Representative” means the Chief Financial Officer, Finance Department, of the City, or his or her designee, or such other person as the Community Facili ties District shall designate in writing to the Trustee and the Dissemination Agent from time to time. 493
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“Dissemination Agent” means U.S. Bank Trust Company, National Association , acting in its capacity as Dissemination Agent hereunder, or any successor Diss emination Agent designated in writing by the Community Facilities District and that has filed with the Trustee and the then existing Dissemination Agent a written acceptance of such designation. “Financial Obligation” means (a) a debt obligation of the Community Facilities District, (b) a derivative instrument entered into in connection with, or pledged as security or a source of payment for, an existing or planned debt obligation of the Community Facilities District, or (c) a guarantee of (i) a debt obliga tion of the Community Facilities District, or (ii) a derivative instrument described in clause (b), above; provided, however, that the term “Financial Obligation” shall not include “municipal securities” (as such term is defined in the Securities Exchange Act of 1934, as amended) as to which a “final official statement” (as such term is defined in the Rule) has been provided to the MSRB consistent with the Rule.
“Indenture” means the Indenture, dated as of ________ 1, 2024 , by and between the Community Facilities District and U.S. Bank Trust Company, National Association, as Trustee, as originally executed and as it may be modified or amended from time to time in accordance with its terms.
“Listed Events” means any of the events listed in subsection (a) or subsection (b) of Section 4 hereof.
“MSRB” means the Municipal Securities Rulemaking Board or any other entity designated or authorized by the Securities and Exchange Commission to receive reports pursuant to the Rule.
Until otherwise designated by the MSRB or the Securities and Exchange Commission, filings with the MSRB are to be made through the Electronic Municipal Market Access (EMMA) website of the MSRB, currently located at http://emma.msrb.org.
“Participating Underwriter” means the original underwriter of the Series 2024 Bonds required to comply with the Rule in connection with the offering of the Series 2024 Bonds. “Rule” means Rule 15c2 -12(b)(5) adopted by the Securities and Exchange Commission under the Securities Exchange Act of 1934, as the same may be amended from time to time. “Trustee” means U.S. Bank Trust Company, National Association , as Trustee under the Indenture, or any successor thereto as Trustee thereunder substituted in its place as provided therein.
Section 2. Provision of Annual Reports. (a) The Community Facilities District shall, or shall cause the Dissemination Agent to, provide to the MSRB an Annual Report that is consistent with the requirements of Section 3 hereof, not late r than the Annual Report Date, commencing with the report for the 2023-24 Fiscal Year. The Annual Report may include by reference other information as provided in Section 3 hereof; provided, however, that the audited financial statements of the Community F acilities District, if any, may be submitted separately from the balance of the Annual Report, and later than the date required above for the filing of the Annual Report if they are not available by that date. If the Community Facilities District’s fiscal year changes, it shall, or it shall instruct the Dissemination Agent to, give notice of such change in a filing with the MSRB.
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(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 Community Facilities District shall provide the Annual Report to the Dissemination Agent. If by such date, the Dissemination Agent has not received a copy of the Annual Report, the Dissemination Agent shall contact the Community Facilities District to determine if the Community Facilities District is in compliance with the first sentence of this subsection (b).
(c) If the Dissemination Agent has not received a copy of the Annual Report from the Community Fa cilities District by the date specified in subsection (a) of this Section, the Dissemination Agent shall, in a timely manner, send a notice to the MSRB in substantially the form attached as Exhibit A.
(d) The Dissemination Agent shall:
(i) provide each Annual Report received by it to the MSRB, as provided herein; and
(ii) file a report with the Community Facilities District and the Trustee certifying that such Annual Report has been provided pursuant to this Disclosure Agreement and stating the date it was provided to the MSRB.
Section 3. Content of Annual Reports . The Community Facilities District’s Annual Report shall contain or incorporate by reference the following:
(a) The Community Facilities District’s audited financial statements, if any, prepared in accorda nce with generally accepted accounting principles as promulgated to apply to governmental entities from time to time by the Governmental Accounting Standards Board. If the Community Facilities District’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 2 hereof, the Annual Report shall contain unaudited financial statements, in a format similar to that used for the Community Facilities District’s audited finan cial 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 Series 2024 Bonds Outstanding as of the December 31 next preceding the Annual Report Date;
(ii) The principal amount of Additional Bonds, if any, Outstanding as of the December 31 next preceding the Annual Report Date;
(iii) The balance in the Reserve Fund, and a statement of the Reserve Requirement, as of the December 31 next preceding the Annual Report Date; (iv) The balance in (A) the Acquisition Account, (B) the Construction Account, and (C) the Community Benefit Facilities Account, as of the December 31 next preceding the Annual Report Date;
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(v) The total assessed value of all parcels within the Community Facilities District on which the Special Tax is levied, as shown on the assessment roll of the San Bernardino County Assessor last equalized prior to the Decemb er 31 next preceding the Annual Report Date, and a statement of assessed value -to- bonded debt ratios therefor, either by individual parcel or by categories (e.g., “below 3:1,” “3:1 to 4.99:1,” etc.);
(vi) Value-to-bonded debt information, based on the assessed values in the assessment roll of the San Bernardino County Assessor last equalized prior to the December 31 next preceding the Annual Report Date, for (A) each property owner that owns four or more taxable parcels within the Community Facilities District, and (B) all other property owners, grouped together, owning taxable parcels within the Community Facilities District;
(vii) The Special Tax delinquency rate for all parcels within the Community Facilities District, as shown on the assessment roll of the San Bernardino County Assessor last equalized prior to the December 31 next preceding the Annual Report Date, the number of parcels within the Community Facilities District delinquent in payment of the Special Tax 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 Community Facilities District; provided, however, that parcels with aggregate delinquencies of $5,000 or less (excluding penalties and interest) may be grouped together and such information may be provided by category;
(viii) The status of foreclosure proceedings and a summary of the results of any foreclosure sales as of the December 31 next preceding the Annual Report Date;
(ix) The identity of any property owner representing more than 5% of the Special Tax levy delinquent in payment of the Special Tax as of the December 31 next preceding the Annual Report Date;
(x) A land ownership summary listing property owners responsible for more than 5% of the annual Special Tax, as shown on the assessment roll of the San Bernardino County Assessor last equalized prior to the December 31 next preceding the Annual Report Date; and
(xi) A description of any changes to the Rate and Method approved by, or submitted for approval to, the qualified electors of the Community Facilities District during the period from the date of filing the prior year’s Annual Report to the date of filing such Annual Report.
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 Community Facilities Dist rict or related public entities that have been made available to the public on the MSRB’s website . The 496
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Community Facilities District shall clearly identify each such other document so included by reference.
Section 4. Reporting of Significant Events. (a) Pursuant to the provisions of this Section, the Community Facilities District shall give, or cause to be given, notice of the occurrence of any of the following events with respect to the Series 2024 Bonds in a timely manner not later than ten business days after the occurrence of the event:
(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 or issuance by the Internal Revenue Service of proposed or final determination of taxability or of a Notice of Proposed Issue (IRS Form 5701 TEB).
(vi) Tender offers.
(vii) Defeasances.
(viii) Rating changes.
(ix) Bankruptcy, insolvency, receivership or similar event of the Community Facilities District.
(x) Default, event of acceleration, termination event, modification of terms or other similar events under the terms of a Financial Obligation, any of which reflect financial difficulties.
For purposes of the event identified in paragraph (ix) of this subsection , the event is considered to occur when any of the following occur: the appointment of a receiver, fiscal agent or similar officer for the Community Facilities District 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 Community Facilities District, or if such jurisdiction has been assumed by leaving the existing governmental body and officials or officers in possession but subject to the supervision and orders of a court or governmental authority, or the entry of an order confirming a plan of reorganization, arrangement or liquidation by a court or governmental authority having supervision or jurisdiction over substantially all of the assets or business of the Community Facilities District. (b) Pursuant to the provisions of this Section, the Community Facilities District shall give, or cause to be given, notice of the occurrence of any of the following events with respect to the Series 2024 Bonds, if material, in a timely manner not later than ten business days after the occurrence of the event:
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(i) Unless described in paragraph (v) of subsection (a) of this Section, material notices or determinations by the Internal Revenue Service with respect to the tax status of the Series 2024 Bonds or other mate rial events affecting the tax status of the Series 2024 Bonds.
(ii) Modifications to rights of holders of the Series 2024 Bonds. (iii) Series 2024 Bond calls.
(iv) Release, substitution, or sale of property securing repayment of the Series 2024 Bonds.
(v) Non-payment related defaults.
(vi) The consummation of a merger, consolidation, or acquisition involving the Community Facilities District or the sale of all or substantially all of the assets of the Community Facilities District 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.
(vii) Appointment of a successor or additional Trustee or the change of name of a Trustee.
(viii) Incurrence of a Financial Obligation, or agreement to covenants, events of default, remedies, priority rights or other similar terms of a Financial Obligation, any of which affect holders of the Series 2024 Bonds. (c) The Trustee shall , within one business day of obtaining actual knowledge of the occurrence of any of the Listed Events, contact the Disclosure Representative and inform such person of the event.
(d) Whenever the Community Facilities District obtains knowledge of the occurrence of a Listed Event described in subsection (b) of this Section, the Community Facilities District shall determine if such event would be material under applicable Federal securities law. (e) Whenever the Community Facilities District obtains knowledge 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 law, the Community Facilities District shall, or shall cause the Dissemination Agent to, file a notice of the occurrence of such Listed Event with the MSRB, within ten business days of such occurrence.
(f) Notwithstanding the foregoing, notice of Listed Events described in paragraph (iii) of subsection ( b) of this Section need not be given any earlier than the notice (if any) of the underlying event is given to holders of affected Series 2024 Bonds pursuant to the Indenture. 498
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Section 5. Format for Filings with MSRB. Any report or filing with the MSRB pursuant to this Disclosure Agreement must be submitted in electronic format, accompanied by such identifying information as is prescribed by the MSRB.
Section 6. Termination of Reporting Obligation . The Community Facilitie s District’s obligations under this Disclosure Agreement shall terminate upon the legal defeasance, prior redemption or payment in full of all of the Series 2024 Bonds. If such termination occurs prior to the final maturity of the Series 2024 Bonds, the Community Facilities District shall give, or cause to be given, notice of such termination in a filing with the MSRB.
Section 7. Dissemination Agent. The Community Facilities District may, from time to time, appoint or engage a Dissemination Agent to assist it in carrying out its obligations under this Disclosure Agreement, and may discharge any such Dissemination Agent, with or without appointing a successor Dissemination Agent. The Dissemination Agent may resign by providing 30 days’ written notice to the Community Facilities District and the Trustee.
Section 8. Amendment; Waiver. Notwithstanding any other provision of this Disclosure Agreement, th e Community Fa cilities District, the Trustee and the Dissemination Agent may amend this Disclosure Agreement (and the Trustee and the Dissemination Agent shall agree to any amendment so requested by the Community Facilities District, so long as such amendment does not a dversely affect the rights or materially increase the obligations of the Trustee or the Dissemination Agent), and any provision of this Disclosure Agreement may be waived, provided that the following conditions are satisfied:
(a) if the amendment or waiver re lates to the provisions of subsection (a) of Section 2 hereof, Section 3 hereof or subsection (a) or (b) of Section 4 hereof, it may only be made in connection with a change in circumstances that arises from a change in legal requirements, change in law, o r change in the identity, nature or status of an obligated person with respect to the Series 2024 Bonds, or the type of business conducted; (b) the undertakings herein, as proposed to be amended or waived, would, in the opinion of nationally recognized bond c ounsel, have complied with the requirements of the Rule at the time of the primary offering of the Series 2024 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 Series 2024 Bonds in the manner provided in the Indenture for amendments to the Indenture 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 Series 2024 Bonds.
In the event of any amendment or waiver of a provision of this Disclosure Agreement, the Community Facilities District shall describe such amendment or waiver in the next Annual Report, and shall include, as applicable, a narrative explanation of the reason for the amendment or waiver and its impact on the type (or in the case of a change of accounting principles, on the presentation) of financial information or operating data being presented by the Community Facilities District. In 499
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addition, if the amendment relates to the accounting principles to be followed in preparing financial statements (i) notice of such change shall be given in a filing with the MSRB, and (ii) the Annual Report for the year in which the change is made shall present a comparison (in narrative form and also, if feasible, in quantitative form) between the financial statements as prepared on the basis of the new accounting principles and those prepared on the basis of the former accounting principles.
Section 9. Additional Information . Nothing in t his Disclosure Agreement shall be deemed to prevent the Community Facilities District from disseminating any other information, using the means of dissemination set forth in this Disclosure Agreement or any other means of communication, or including any other information in any Annual Report or notice required to be filed pursuant to this Disclosure Agreement, in addition to that which is required by this Disclosure Agreement. If the Community Facilities District chooses to include any information in any Annual Report or notice in addition to that which is specifically required by this Disclosure Agreement, the Community Facilities District shall have no obligation under this Disclosure Agreement to update such information or include it in any future Annual Report or notice of occurrence of a Listed Event or any other event required to be reported.
Section 10. Default. In the event of a failure of the Community Facilities District, the Trustee or the Dissemination Agent to comply with any provision of this Disclosure Agr eement, the Trustee may (and, at the written direction of any Participating Underwriter or the Owners of at least 25% of the aggregate principal amount of Outstanding Series 2024 Bonds, shall, upon receipt of indemnification reasonably satisfactory to the Trustee), or any Owner or Beneficial Owner of the Series 2024 Bonds may, take such actions as may be necessary and appropriate, including seeking mandate or specific performance by court order, to cause the Community Facilities District, the Trustee or the Dissemination Agent, as the case may be, to comply with its obligations under this Disclosure Agreement. A default under this Disclosure Agreement shall not be deemed an Event of Default under the Indenture, and the sole remedy under this Disclosure Agreement in the event of any failure of the Community Facilities District, the Trustee or the Dissemination Agent to comply with this Disclosure Agreement shall be an action to compel performance.
Section 11. Duties, Immunities and Liabilities of Trustee and Dissemination Agent.
Article VIII of the Indenture is hereby made applicable to this Disclosure Agreement as if this Disclosure Agreement were (solely for this purpose) contained in the Indenture. The Dissemination Agent shall be entitled to the protections and limitat ions from liability afforded to the Trustee thereunder. Neither the Trustee nor the Dissemination Agent shall 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 Agreement. The Dissemination Agent shall have only such duties as are specifically set forth in this Disclosure Agreement. To the extent permitted by law, the Community Facilities District agrees to indemnify and save the Dissemination Agent, its officers, directors, employees and agents, harmless against any loss, expense and liabilities that any such Person may incur in the exercise or performance of the Dissemination Agent’s powers and duties hereunder, including the costs and expenses (including attorneys’ fees) of defending against any claim of liability, and that are not due to such Person’s negligence or its willful misconduct. The obligations of the Community Facilities District under this Section sh all survive resignation or removal of the Dissemination Agent and the termination of this Disclosure Agreement.
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9 4129-6815-3165.1
The Dissemination Agent has no power to enforce performance on the part of the Community Facilities District. The Dissemination Agent shall not be responsible for the content of any notice or report prepared by the Community Facilities District pursuant to this Disclosure Agreement.
Section 12. Beneficiaries. This Disclosure Agreement shall inure solely to the benefit of the Community Facilities District, the Trustee, the Dissemination Agent, the Participating Underwriter and the Owners and Beneficial Owners from time to time of the Series 2024 Bonds, and shall create no rights in any other person or entity.
Section 13. Governing Laws . This Disclosure Agreement shall b e governed by and construed in accordance with the laws of the State of California.
Section 14. Electronic Signature. Each of the parties hereto agrees that the transaction consisting of this Disclosure Agreement may be conducted by electronic means. Each party agrees, and acknowledges that it is such party’s intent, that if such party signs this Disclosure Agreement using an electronic signature, it is signing, adopting and accepting this Disclosure Agreement and that signing this Disclosure Agreement using an electronic signature is the legal equivalent of having placed its handwritten signature on this Disclosure Agreement on paper. Each party acknowledges that it is being provided with an electronic or paper co py of this Disclosure Agreement in a usable format.
Section 15. Counterparts. This Disclosure Agreement may be executed in several counterparts, each of which shall be an original and all of which shall constitute but one and the same instrument.
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10 4129-6815-3165.1
IN WITNESS WHEREOF, the parties hereto have executed this Disclosure Agreement as of the date first above written.
CITY OF FONTANA
COMMUNITY FACILITIES DISTRICT
NO. 111 (MONTERADO)
By:
___________________,
_________________
of the City of Fontana
U.S. BANK TRUST COMPANY,
NATIONAL ASSOCIATION, AS
TRUSTEE
By:
Authorized Signatory
U.S. BANK TRUST COMPANY,
NATIONAL ASSOCIATION, AS
DISSEMINATION AGENT
By:
Authorized Signatory
502
A-1
4129-6815-3165.1
EXHIBIT A
NOTICE OF FAILURE TO FILE ANNUAL REPORT
Name of Issuer: City of Fontana Community Facilities District No. 111 (Monterado) Name of Issue: City of Fontana Community Facilities District No. 111 (Monterado) Special Tax Bonds, Series 2024
Date of Issuance: ___________, 2024
NOTICE IS HEREBY GIVEN that City of Fontana Community Facilities District No. 111 (Monterado) (the “Community Facilities District”) has not provided an Annual Report with respect to the above -named Bonds as required by the Continuing Disclosure Agreement, dated as of ________ 1, 2024, by and among the Community Facilities District , U.S. Bank Trust Company, National Association , in its capacity as Trustee , and U.S. Bank Trust Company, National Association, in its capacity as Dissemination Agent. [The Community Facilities District anticipates that such Annual Report will be filed by ____________.]
Dated: ____________
U.S. Bank Trust Company, National
Association, as Dissemination
Agent, on behalf of City of Fontana
Community Facilities District
No. 111 (Monterado)
cc: City of Fontana
Community Facilities District
No. 111 (Monterado)
503
Anzel Galvan Draft of 4/5/2024
BOND PURCHASE AGREEMENT
$[PAR]
CITY OF FONTANA
COMMUNITY FACILITIES DISTRICT NO. 111 (MONTERADO)
SPECIAL TAX BONDS, SERIES 2024
[Pricing Date]
City of Fontana Community Facilities
District No. 111 (Monterado)
c/o City of Fontana
8353 Sierra Avenue
Fontana, California 92335
Attention: Chief Financial Officer, Finance Department
Ladies and Gentlemen:
Stifel, Nicolaus & Company, Incorporated, as underwriter (the “ Underwriter”) offers to enter into this Bond Purchase Agreement (this “ Agreement”) with City of Fontana Community Facilities District No. 111 (Monterado) (the “Issuer” or the “District”), which, upon your acceptance of this offer, will be binding upon the Issuer and the Underwriter. This offer is made subject to the acceptance by the Issuer of this Agreement on or before 11:59 p.m. on the date set forth above.
Terms not otherwise defined herein have the meanings given them in the Indenture described below.
1. Upon the terms and conditions and in relian ce upon the respective representations, warranties and covenants herein, the Underwriter hereby agrees to purchase from the Issuer, and the Issuer hereby agrees to sell to the Underwriter, all (but not less than all) of the above -captioned bonds (the “Bonds”) at a purchase price (the “ Purchase Price”) of $___________ (equal to the par amount of the Bonds ($ [PAR].00), [plus/less] [net] original issue [premium/discount] of $___________, and less an Underwriter’s discount of $___________).
The Bonds will be i ssued by the Issuer under the Mello -Roos Community Facilities Act of 1982 (constituting Section 53311 et seq. of the California Government Code) (the “ Act”) and a resolution adopted on ___________, 2024 (the “Bond Resolution”) by the City Council (the “ City Council”) of the City of Fontana (the “City”) acting as the legislative body of the Issuer.
The special tax that provides a source of payment for the Bonds (the “ Special Tax”) will be levied under Ordinance No. 1904 adopted by the City Council on September 27, 2022 (the “Ordinance”). In addition to the Ordinance, the City Council adopted the following in connection with initial formation of the District and the levy of the Special Tax: (i) Resolution No. 2022-086 (the “ Resolution of Intention to Form the District ”), (ii) Resolution No. 2022-087 (the “Resolution of Intention to Incur Bonded Indebtedness ”), (i ii) Resolution No. 202 2-117 (the “Resolution of Formation ”), (i v) Resolution No. 2022-118 (“Resolution Declaring Necessity to Incur Bonded Indebte dness”), (v) Resolution No. 2022-119 (the “Resolution Calling Election ”), 504
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and (vi) Resolution No. 2022-120 (the “ Resolution Declaring Election Results ”; together, the “Formation Resolutions and Ordinance ”). Together, the Bond Resolution and the Formation Resolutions and Ordinance are referred to as the “Resolutions and Ordinance.”
The Bonds will be issued under the terms of an Indenture (the “ Indenture”), dated as of [Month] 1, 2024, by and between the Issuer and U.S. Bank Trust Company, National Associat ion, as trustee (the “ Trustee”). The proceeds of the sale of the Bonds will be used by the Issuer to (i) provide financing for certain public facilities and costs related to development within the District, (ii) fund a reserve fund with respect to the Bon ds, and (iii) pay the costs of issuing the Bonds. Proceeds of the Bonds will be applied in accordance with the Indenture.
The Issuer acknowledges and agrees that: (i) the primary role of the Underwriter is to purchase securities for resale to investors in an arms -length commercial transaction between the Issuer and the Underwriter and that the Underwriter has financial and other interests that differ from those of the Issuer, and in connection therewith and with the discussions, undertakings and procedures leading up to the consummation of such transaction, the Underwriter is and has been acting solely as a principal and is not acting as the agent or fiduciary of the District, (ii) the Underwriter is not acting as a municipal advisor (within the meaning of Section 15B of the Securities Exchange Act of 1934, as amended), financial advisor or fiduciary to the Issuer or any other person or entity and has not assumed any advisory or fiduciary responsibility to the Issuer with respect to the transaction contemplated hereby and the discussions, undertakings and proceedings leading thereto (irrespective of whether the Underwriter has provided other services or is currently providing other services to the Issuer on other matters), (iii) the only obligations the Und erwriter has to the Issuer with respect to the transaction contemplated hereby expressly are set forth in this Agreement, except as otherwise provided by applicable rules and regulations of the U.S. Securities and Exchange Commission (the “SEC”) or the rules of the MSRB or other law, and (iv) the Issuer has consulted its own legal, accounting, tax, municipal, financial and other advisors, as applicable, to the extent it has deemed appropriate in connection with the transaction contemplated herein. The Issue r acknowledges that it has previously provided the Underwriter with an acknowledgement of receipt of the required Underwriter disclosure under Rule G-17 of the MSRB.
2. The Bonds will mature on the dates and in the principal amounts and will bear interest at the rates (and have the redemption terms) as set forth in Exhibit A hereto. The Underwriter agrees to make a bona fide public offering of all of the Bonds at the off ering prices set forth on the cover of the Final Official Statement described below. Additional details related to the establishment of the issue price of the Bonds is set forth in Section 14.
3. The Issuer agrees to deliver to the Underwriter as many co pies of the Final Official Statement dated the date hereof, relating to the Bonds to each of its customers purchasing Bonds no later than the settlement date of the transaction.
In addition, the Issuer has authorized and approved the Preliminary Official Statement dated [POS Date] (the “Preliminary Official Statement ”) and the final Official Statement dated the date hereof (the “Final Official Statement”) and consents to their distribution and use by the Underwriter and the execution and approval of the Final Official Statement by a duly authorized officer of the Issuer. The Issuer deems such Preliminary Official Statement final as of its date for purposes of Rule 15c2-12 of the SEC (“Rule 15c2 -12”), except for information allowed by Rule 15c2 -12 to be omitted, and has executed a certificate to that effect in the form of Exhibit D.
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In connection with issuance of the Bonds, and in order to assist the Underwriter in complying with Rule 15c2-12, the Issuer will execute a Continuing Disclosure Agreement, dated as of [Month] 1, 2024 (the “ District Continuing Disclosure Agreement ”), substantially in the form of the Appendix G to the Preliminary Official Statement.
4. The Issuer represents and warrants to the Underwriter that:
(a) The Issuer is duly organized and validly existing as a community facilities district under the laws of the State of California (the “ State”), and has the full legal right, power and authority, among other things, (i) upon satisfaction of the conditions in this Agreement and the Indenture, to issue the Bonds as provided herein, and (ii) to secure the Bonds in the manner set forth in the Indenture.
(b) The City Council has the full legal right, power and author ity to adopt the Resolutions and Ordinance, and the Issuer has the full legal right, power and authority (i) to enter into this Agreement, the Indenture, and the District Continuing Disclosure Agreement (collectively, the “ Issuer Documents”), (ii) to issue, sell and deliver the Bonds to the Underwriter as provided herein, and (iii) to carry out and consummate all other transactions on its part contemplated by the Final Official Statement and each of the Issuer Documents, and the Issuer and the City Council have complied with all provisions of applicable law, including the Act, in all matters relating to such transactions.
(c) The Issuer has duly authorized (i) the execution and delivery by the Issuer of the Bonds and the execution, delivery and due performa nce by the Issuer of its obligations under the Issuer Documents, (ii) the distribution and use of the Preliminary Official Statement and execution, delivery and distribution of the Final Official Statement, and (iii) the taking of any and all such action a s may be required on the part of the Issuer to carry out, give effect to and consummate the transactions on its part contemplated by such instruments. All consents or approvals necessary to be obtained by the Issuer in connection with the foregoing have b een received, and the consents or approvals so received are still in full force and effect.
(d) The Resolutions and Ordinance have been duly adopted by the City Council and are in full force and effect; and the Issuer Documents, when executed and delivered by the Issuer and the other party thereto, will constitute a legal, valid and binding obligation of the Issuer enforceable against the Issuer in accordance with their terms, except as enforceability thereof may be limited by bankruptcy, insolvency or other laws affecting creditors’ rights generally.
(e) When delivered to the Underwriter, the Bonds will have been duly authorized by the City Council and duly executed, issued and delivered by the Issuer and will constitute legal, valid and binding special o bligations of the Issuer enforceable against the Issuer in accordance with their respective terms, except as enforceability thereof may be limited by bankruptcy, insolvency or other laws affecting creditors’ rights generally, and will be entitled to the be nefit and security of the Indenture.
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(f) The information (excluding information under first three paragraphs of the caption “INTRODUCTION – The District”, information under the caption “PROPERTY OWNERSHIP AND THE DEVELOPMENT,” and information relating to The Depository Trust Company (“DTC”) and its book-entry system) contained in the Preliminary Official Statement is, and as of the Closing Date such information in the Final Official Statement will be true and correct in all material respects, and the Prel iminary Official Statement does not as of its date and the Final Official Statement will not as of the Closing Date contain any untrue or misleading statement of a material fact (excluding information under the first three paragraphs of the caption “INTROD UCTION – The District”, information under the caption “PROPERTY OWNERSHIP AND THE DEVELOPMENT,” and information relating to DTC and its book -entry system) or omit to state any material fact (excluding information under the first three paragraphs of the ca ption “INTRODUCTION – The District,” information under the caption “PROPERTY OWNERSHIP AND THE DEVELOPMENT,” and information relating to DTC and its book -entry system) necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading.
(g) If, at any time up to and including 25 days after the End of the Underwriting Period (as defined below), any event known to the officers of the Issuer participating in the issuance of the Bonds occurs with respect to th e Issuer or the City as a result of which the Final Official Statement as then amended or supplemented might include an untrue statement of a material fact, or omit to state any material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, the Issuer shall promptly notify the Underwriter in writing of such event. Any information supplied by the Issuer for inclusion in any amendments or supplements to the Final Official Statement will not co ntain any untrue or misleading statement of a material fact relating to the Issuer or the City or omit to state any material fact relating to the Issuer or the City necessary to make the statements therein, in the light of the circumstances under which the y were made, not misleading. As used herein, the term “End of the Underwriting Period” means the later of such time as: (i) the Bonds are delivered to the Underwriter; or (ii) the Underwriter does not retain, directly or as a member of an underwriting syndicate, an unsold balance of the Bonds for sale to the public. Unless the Underwriter gives notice to the contrary, the End of the Underwriting Period shall be deemed to be the Closing Date (as described in Section 6 below). Any notice delivered pursuant to this provision shall be written notice delivered to the District at or prior to the Closing Date, and shall specify a date (other than the Closing Date) to be deemed the “End of the Underwriting Period.”
(h) Neither the adoption of the Resolutions and Or dinance, the execution and delivery of the Issuer Documents, nor the consummation of the transactions on the part of the Issuer contemplated herein or therein or the compliance by the Issuer with the provisions hereof or thereof will conflict with, or cons titute on the part of the Issuer, a violation of, or a breach of or default under, (i) any material indenture, mortgage, commitment, note or other agreement or instrument to which the Issuer is a party or by which it is bound, (ii) any 507
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provision of the Sta te Constitution or (iii) any existing law, rule, regulation, ordinance, judgment, order or decree to which the Issuer or the City (or the members of the City Council or any of its officers in their respective capacities as such) is subject, that would have a material adverse effect on the ability of the Issuer to perform its obligations under the Issuer Documents.
(i) The Issuer has never been in default at any time, as to principal of or interest on any obligation which it has issued, including those whic h it has issued as a conduit for another entity, which default may have an adverse effect on the ability of the Issuer to consummate the transactions on its part under the Issuer Documents, except as specifically disclosed in the Final Official Statement; and the Issuer has not entered into any contract or arrangement of any kind which might give rise to any lien or encumbrance on the Special Tax.
(j) Except as is specifically disclosed in the Final Official Statement, to the best knowledge of the Issuer, there is no action, suit, proceeding, inquiry or investigation, at law or in equity, before or by any court, public board or body, pending with respect to which the Issuer has been served with process or threatened, which in any way questions the powers of the City Council, the City or the Issuer referred to in paragraph (b) above, or the validity of any proceeding taken by the City Council in connection with the issuance of the Bonds, or wherein an unfavorable decision, ruling or finding could mate rially adversely affect the transactions contemplated by the Issuer Documents, or which, in any way, could adversely affect the validity or enforceability of the Resolutions and Ordinance, the Bonds or the Issuer Documents or, to the knowledge of the Issue r, which in any way questions the exclusion from gross income of the recipients thereof of the interest on the Bonds for federal income tax purposes or in any other way questions the status of the Bonds under State tax laws or regulations.
(k) Any certifi cate signed by an official of the Issuer authorized to execute such certificate and delivered to the Underwriter in connection with the transactions contemplated by the Issuer Documents shall be deemed a representation and warranty by the Issuer to the Und erwriter as to the truth of the statements therein contained.
(l) The Issuer has not been notified of any listing or proposed listing by the Internal Revenue Service to the effect that it is a bond issuer whose arbitrage certifications may not be relied upon.
(m) The Bonds will be paid from Net Special Tax Revenues (as defined in the Indenture) received by the Issuer and amounts held in certain funds and accounts established and pledged under the Indenture.
(n) The Special Tax may lawfully be levied in accordance with the rate and method of apportionment of the Special Tax relating to the District (the “ Rate and Method”), the Resolutions and Ordinance as described in the Preliminary Official Statement and the Final Official Statement, and, when levied, w ill be secured by a lien on the property on which they are levied. 508
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(o) The Indenture creates a valid pledge of, and first lien upon the Net Special Tax Revenues deposited thereunder, and the amounts held in certain funds and accounts established and pledged under the Indenture, subject in all cases to the provisions of the Indenture permitting the application thereof for the purposes and on the terms and conditions set forth therein.
(p) Except as disclosed in the Final Official Statement, in the last five years, neither the City, nor the District, nor any other entity for which the City Council is the legislative body, has failed to comply with any undertaking under Rule 15c2-12 in any material respect.
5. The Issuer covenants with the Underwriter that t he Issuer will cooperate with the Underwriter (at the cost of the Underwriter), in qualifying the Bonds for offer and sale under the securities or Blue Sky laws of such jurisdictions of the United States as the Underwriter may reasonably request; provided, however, that the Issuer shall not be required to consent to suit or to service of process, or to qualify to do business, in any jurisdiction. The Issuer consents to the use by the Underwriter of the Issuer Documents in the course of its compliance with the securities or Blue Sky laws of the various jurisdictions.
6. At 9:00 a.m. on [Closing Date] (the “Closing Date”) or at such other time and/or date as shall have been mutually agreed upon by the Issuer and the Underwriter, the Issuer will deliver or cause to be delivered to the Underwriter the Bonds in definitive form duly executed and authenticated by the Trustee together with the other documents mentioned in Section 8 hereof; and the Underwriter will accept such delivery and pay the Purchase Price of the Bonds by delivering to the Trustee for the account of the Issuer a check payable in federal funds or making a wire transfer in federal funds payable to the order of the Trustee.
The activities relating to the final execution and delivery of the Bonds and the Indenture and the payment therefor and the delivery of the certificates, opinions and other instruments as described in Section 8 of this Agreement shall occur at the offices of Orrick, Herrington & Sutcliffe, Los Angeles, California, as bond couns el to the Issuer (“ Bond Counsel”). The payment for the Bonds and simultaneous delivery of the Bonds to the Underwriter is herein referred to as the “ Closing.” The Bonds will be delivered as fully registered Bonds initially in denominations of $5,000 each and any integral multiple thereof. The Bonds will be registered in the name of Cede & Co., as nominee of DTC, and will be made available for checking by the Underwriter at such place as the Underwriter and the Trustee shall agree not less than 24 hours prior to the Closing.
7. The Underwriter has the right to cancel its obligations to purchase the Bonds if between the date hereof and the time of Closing:
(a) the House of Representatives or the Senate of the Congress of the United States, or a committee of either, shall have pending before it, or shall have passed or recommended favorably, legislation introduced previous to the date hereof, which legislation, if enacted in its form as introduced or as amended, would have the purpose or effect of imposing federal income taxation upon revenues or other income of the general character to be derived by the Issuer or by any similar body under the Indenture or upon interest received on obligations of the general character of the Bonds, or of causing interest on obligations of the general character of the Bonds, to be includable in gross 509
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income for purposes of federal income taxation, and such legislation, in the Underwriter’s reasonable judgment, materially adversely affects the market price of the Bonds; or
(b) a tentative decision with respect to legislation shall be reached by a committee of the House of Representatives or the Senate of the Congress of the United States, or legislation shall be favorably reported or re -reported by such a committee or be introduced, by amendment or otherwise, in or be passed by the House of Representatives or the Senate, or recommended to the Congress of the United States for passage by the President of the United States, or be enacted or a decision by a federal court of the United States or the United States Tax Court shall have been rendered, or a ruling, release, order, circular, regulation or official statement by or on behalf of the United States Treasury Department, the Internal Revenue Service or other governmental agency shall have been made or proposed to be made having the purpose or effect, or any other action or event shall have occurred which has the purpose or effect, directly or indirectly, of adversely affecting the federal income tax consequences of owning the Bonds, including causing interest on the Bonds to be included in gross income for purposes of federal income taxation, or imposing federal income taxation upon revenues or other income of the general character to be derived by the Issuer under the Indenture o r upon interest received on obligations of the general character of the Bonds, or the Bonds and also including adversely affecting the tax -exempt status of the Issuer under the Code, which, in the reasonable judgment of the Underwriter, materially adversely affects the market price of or market for the Bonds; or
(c) legislation shall have been enacted, or actively considered for enactment with an effective date prior to the Closing, or a decision by a court of the United States shall have been rendered, the effect of which is that the Bonds, including any underlying obligations, or the Indenture, as the case may be, is not exempt from the registration, qualification or other requirements of the Securities Act of 1933, as amended and as then in effect, the Securities Exchange Act of 1934, as amended and as then in effect, or the Trust Indenture Act of 1939, as amended and as then in effect; or
(d) a stop order, ruling, regulation , no-action letter , or official statement by the SEC or any other governmental agency having jurisdiction of the subject matter shall have been issued or made or any other event occurs, the effect of which is that the issuance, offering or sale of the Bonds, including any underlying obligations, or the exec ution and delivery of the Indenture as contemplated hereby or by the Final Official Statement, is or would be in violation of any provision of the federal securities laws, including the Securities Act of 1933, as amended and as then in effect, the Securiti es Exchange Act of 1934, as amended and as then in effect, or the Trust Indenture Act of 1939, as amended and as then in effect; or
(e) any event shall have occurred or any information shall have become known to the Underwriter which causes the Underwrite r to reasonably believe that the Final Official Statement as then amended or supplemented includes an untrue 510
-8-
statement of a material fact, or omits to state any material fact necessary to make the statements therein, in light of the circumstances under whi ch they were made, not misleading, and the Issuer fails to amend or supplement such Final Official Statement to cure such omission or misstatement under Section 4(g); or
(f) there shall have occurred any outbreak of hostilities or any national or international calamity or crisis, including a financial crisis, or the sovereign debt rating of the United States is downgraded by any major credit rating agency or a payment default occurs on United States Treasury obligations, the effect of which on the financi al markets of the United States is such as, in the reasonable judgment of the Underwriter, would materially adversely affect the market for or market price of the Bonds; or
(g) there shall be in force a general suspension of trading on the New York Stock Exchange or other major exchange shall be in force, or minimum or maximum prices for trading shall have been fixed and be in force, or maximum ranges for prices for securities shall have been required and be in force on any such exchange, whether by virtue of determination by that exchange or by order of the SEC or any other governmental authority having jurisdiction, the effect of which on the financial markets of the United States is such as, in the reasonable judgment of the Underwriter, would materially adversely affect the market for or market price of the Bonds; or
(h) a general banking moratorium shall have been declared by federal, New York or State authorities; or
(i) any proceeding shall be pending or threatened by the SEC against the Issuer; or
(j) additional material restrictions not in force as of the date hereof shall have been imposed upon trading in securities generally by any governmental authority or by any national securities exchange which adversely affects the Underwriter’s ability to sell the Bonds; or
(k) the New York Stock Exchange or other national securities exchange, the SEC, any other federal or State agency or the Congress of the United States, or Executive Order , shall impose, as to the Bonds or obligations of the general character of the Bonds, any restrictions on transactions in securities materially affecting the market for securities (including the imposition of any limitation on interest rates) not now in force, or increase materially those now in force, with respect to th e extension of credit by, or the charge to the net capital requirements of, the Underwriter; or
(l) an amendment to the federal or State constitution shall be enacted or action taken by any federal or State court, legislative body, regulatory body or othe r authority materially adversely affecting the tax status of the Issuer, its property, income or securities (or interest thereon), the validity or enforceability of the Special Tax or the ability of the Issuer to issue the Bonds and levy the Special 511
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Tax as contemplated by the Indenture, the Rate and Method, the Resolution of Formation, the Ordinance and the Final Official Statement; or
(m) the entry of any order by a court of competent jurisdiction which enjoins or restrains the Issuer from issuing permits , licenses or entitlements within the District or which order, in the reasonable judgment of the Underwriter, otherwise materially and adversely affects development of the real property located in the District.
8. The obligation of the Underwriter to purc hase the Bonds is subject (a) to the performance by the Issuer of its obligations to be performed by it hereunder at and prior to the Closing, (b) to the accuracy as of the date hereof and as of the time of the Closing of the representations and warranties of the Issuer herein, and (c) to the following conditions, including the delivery by the Issuer of such documents as are enumerated herein in form and substance satisfactory to the Underwriter:
(a) At the time of Closing, (i) the Final Official Statement an d the Issuer Documents shall be in full force and effect and shall not have been amended, modified or supplemented except as may have been agreed to by the Underwriter, and (ii) the Issuer shall have duly adopted and there shall be in full force and effect such resolutions and ordinances (including, but not limited to, the Resolutions and Ordinance) as, in the opinion of Bond Counsel, shall be necessary in connection with the transactions contemplated hereby.
(b) Receipt of the Bonds, executed by the Issuer and authenticated by the Trustee, at or prior to the Closing. The terms of the Bonds, when delivered, shall in all instances be as described in Final Official Statement.
(c) At or prior to the Closing, the Un derwriter shall receive the following documents in such number of counterparts as shall be mutually agreeable to the Underwriter and the Issuer:
(i) A final approving opinion of Bond Counsel dated the Closing Date in the form attached as Appendix D to the Final Official Statement.
(ii) A letter or letters of Bond Counsel addressed to the Underwriter, which includes a statement to the effect that Bond Counsel’s final approving opinion may be relied upon by the Underwriter to the same extent as if such opinion were addressed to the Underwriter, and further provides:
(A) the statements contained in the Final Official Statement under the captions “INTRODUCTION – Security and Sources of Payment for the Bonds,” “INTRODUCTION – Description of the Bonds,” “THE BONDS” (other than information relating to DTC and its book - entry only system and information in the section entitled “ – Debt Service Schedule”, as to which no opinion is expressed), “SECURITY AND SOURCES OF PAYMENT FOR THE
BONDS” (except information in the sections entitled “ – Special Tax” and “ – Rate and Method of Apportionment” as to which no 512
-10-
opinion need be expressed),” “TAX MATTERS,” and in Appendix F thereto, excluding any material that may be treated as included under such captions by reference to oth er documents, insofar as such statements expressly summarize certain provisions of the Indenture and Bond Counsel’s final opinion are accurate in all material respects;
(B) this Agreement and the District Continuing Disclosure Agreement have been duly ex ecuted and delivered by, and constitute valid and binding obligations of, the Issuer, subject to bankruptcy, insolvency, reorganization, moratorium and other laws affecting enforcement of creditors’ rights in general and to the application of equitable principles if equitable remedies are sought; and
(C) the Bonds are not subject to the registration requirements of the Securities Act of 1933, as amended, and the Indenture is exempt from qualification under the Trust Indenture Act of 1939, as amended.
(iii) An opinion of Stradling Yocca Carlson & Rauth LLP, Newport Beach, California, addressed to the Issuer and the Underwriter (“ Disclosure Counsel”), to the effect that during the course of serving as Disclosure Counsel in connection with the issuance of the Bonds and without having undertaken to determine independently or assuming any responsibility for the accuracy, completeness or fairness of the statements contained in the Preliminary Official Statement and the Final Official Statement, no information came to the attention of the attorneys in such firm rendering legal services in connection with the issuance of the Bonds that would lead them to believe that the Preliminary Official Statement as of its date and the date hereof and the Final Official Stateme nt as of its date and the Closing Date, (excluding therefrom the financial statements, any financial or statistical data, or forecasts, charts, numbers, estimates, projections, assumptions or expressions of opinion included in the Preliminary Official Stat ement and the Final Official Statement, information regarding DTC, and the appendices to the Preliminary Official Statement and the Final Official Statement, as to which no opinion need be expressed), contains any untrue statement of a material fact or omi ts to state a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading.
(iv) A letter of Anzel Galvan LLP, San Francisco, California (“Underwriter’s Counsel ”), dated the Closing Date, addressed to the Underwriter and in form and substance acceptable to the Underwriter.
(v) The Final Official Statement executed on behalf of the Issuer by a duly authorized officer.
(vi) Certified copies of the Resolutions and Ordinance. 513
-11-
(vii) Evidence of recordation in the real property records of the County of San Bernardino of the Notice of Special Tax Lien, in the form required by the Act.
(viii) A certificate of DTA, Inc., Newport Beach, California (“ Special Tax Consultant”), in form and substance as set forth in Exhibit B hereto, dated as of the Closing Date.
(ix) A certificate of the Issuer, in form and substance as set forth in Exhibit C hereto, dated as of the Closing Date.
(x) Evidence that Federal Form 8038 has been executed by the Issuer and will be filed with the Internal Revenue Service.
(xi) Executed copies of the Issuer Documents.
(xii) A non-arbitrage certificate executed by the Issuer in form and substance satisfactory to Bond Counsel.
(xiii) An opinion, dated the Closing Date and addressed to the Underwriter, of the City Attorney, as counsel to the Issuer, to the effect that:
(A) the Issuer is duly organized and validly existing as a community facilities district under and by virtue of the Constitution and laws of the State (including the Act);
(B) the City Council of the City, acting as legislative body of the Issuer, has the full legal right, power and authority to adopt the Resolutions and Ordinance;
(C) the Resolutions and Ordinance were duly adopted at meetings of the City Council, acting as legislative body of the Issuer which were called and held under law and with all public notice required by law and at which a quorum was present and acting throughout, and the Resolutions and Ordinance are in full force and effect and have not been amended or repealed;
(D) to their best knowledge, based on reasonable due diligence, no action, suit, proceeding, inquiry or investigation, at law or in equity, before or by any court, regulato ry agency, public board or body is pending with respect to which the Issuer has been served with process or threatened, in any way affecting the existence of the City, the Issuer or the titles of the Issuer’s officials to their respective offices, or seek ing to restrain or to enjoin the issuance, sale or delivery of the Bonds or the application of the proceeds thereof in accordance with the Indenture, or the collection or application of the Special Tax to pay the principal of and interest on the Bonds, or in any way contesting or affecting the validity or enforceability of the Bonds, the Issuer Documents or any action of 514
-12-
the Issuer contemplated by any of said documents, or in any way contesting the completeness or accuracy of the Preliminary Official Statement or of the Final Official Statement or the powers of the Issuer or its authority with respect to the Bonds, the Issuer Documents or any action on the part of the Issuer contemplated by any of said documents, wherein an unfavorable decision, ruling, or finding could materially adversely affect the validity or enforceability of the Bonds or the Issuer Documents;
(E) the execution and delivery of the Bonds and the Issuer Documents, and compliance with the provisions of each, will not conflict with or constitute a breach of or default under any loan agreement, note, ordinance, resolution, indenture, contract, agreement or other instrument of which the Issuer is a party or is otherwise subject or bound, a consequence of which could be to materially and adversely affect the ability of the Issuer to perform its obligations under the Bonds or the Issuer Documents; and
(F) all approvals, consents, authorization, elections and orders of or filings or registrations with any governmental authority, board, agency or commission having jurisdiction which would constitute a condition precedent to, or the absence of which would materially adversely affect, the ability of the Issuer, to perform its obligations under the Bonds or the Issuer Documents, have been obtained or made, as the case may be, and are in full force and effect.
(xiv) In connection with printing and distribution of the Preliminary Official Statement, an executed certificate of the Issuer in the form attached hereto as Exhibit D.
(xv) A certificate of th e Trustee in the form and substance attached hereto as Exhibit E, together with certifications as to other matters that Bond Counsel may reasonably require, and an opinion of its counsel in form and substance satisfactory to the Underwriter and Bond Counsel.
(xvi) A certificate of CSG Advisors, Inc., the City’s municipal advisor (the “Municipal Advisor ”), in the form and substance attached hereto as Exhibit F.
(xvii) A Letter of Representations from Lennar Homes of California, LLC, a California limited liability company (the “ Developer”) addressed to the District and the Underwriter in connection with the printing of the Preliminary Official Statement dated the date of the Preliminary Official Statement, in the form attached hereto as Exhibit G.
(xviii) A Closing Certificate from the Developer, dated the Closing Date, in the form attached hereto as Exhibit H.
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-13-
(xix) (i) A negative assurance letter of counsel to the Developer addressed to the Underwriter and the District, dated the date of the Closing, in form and substance acceptable to the Underwriter and Bond Counsel;
(xx) A certificate dated the Closing Date from Kitty Siino & Associates, Inc. (the “ Appraiser”) addressed to the District and the Underwriter substantially to the effect that (i) the assumptions made in the appraisal of the taxable properties within the District prepared by the Appraiser (the “Appraisal Report”) are reasonable; (ii) the Appraisal Report fairly and accurately described, as of the stated date of value (the “Date of Value”), the market values of the properties in the District that are subject to the Special Tax ; (iii) the Appraiser is not aware of any event or act which occurred since the Date of Value which, in its opinion, would materially and adversely af fect the conclusions as to the market value of the appraised property in the Community Facilities District ; (iv) the Appraiser consents to the reproduction of the Appraisal Report as an appendix to the Preliminary Official Statement and the final Official Statement, each with respect to the Bonds, and to the references to the Appraiser and the Appraisal Report made in the Preliminary Official Statement and the Official Statement ; (v) the Appraisal Report complies with the Appraisal Standards for Land -Secured Financings issued by the California Debt and Investment Advisory Commission dated July, 2004 ; (vi) a true and correct copy of the Appraisal Report is attached as an appendix to the Preliminary Official Statement and the Official Statement; and (vii) neit her the Appraisal Report nor the information in the Preliminary Official Statement or the Official Statement referring to it contains any untrue statement of a material fact or omits to state a material fact necessary in order to make the statements therei n, in light of the circumstances under which they were made, not misleading;
(xxi) A certificate dated the Closing Date from Empire Economics, Inc. addressed to the District and the Underwriter to the effect that the statements in the Preliminary Official Statement and the Official Statement provided by Empire Economics, Inc. and all information supplied by it for use in the Preliminary Official Statement and the Official Statement were as of their respective dates and are as of the Closing Date true and correct, and do not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading;
(xxii) Such additional legal o pinions, certificates, proceedings, instruments and other documents as the Underwriter, Disclosure Counsel or Bond Counsel may reasonably request to evidence compliance by the Issuer with legal requirements, the truth and accuracy, as of the time of Closin g, of the respective representations of the Issuer herein contained and the due performance or satisfaction by the Issuer at or prior to such time of all agreements then to be performed and all conditions then to be satisfied.
516
-14-
If the Issuer is unable to satisfy the conditions to the obligations of the Underwriter contained in this Agreement, or if the obligations of the Underwriter to purchase and accept delivery of the Bonds shall be terminated for any reason permitted by this Agreement, this Agreement sh all terminate and neither the Underwriter nor the Issuer shall be under further obligation hereunder; except that the respective obligations to pay expenses, as provided in Section 11 shall continue in full force and effect.
9. The obligations of the Iss uer to issue and deliver the Bonds on the Closing Date is subject, at the option of the Issuer, to the performance by the Underwriter of its obligations to be performed hereunder at or prior to the Closing Date.
10. All representations, warranties and agr eements of the Issuer hereunder shall remain operative and in full force and effect, regardless of any investigations made by or on behalf of the Underwriter or the Issuer and shall survive the Closing.
11. The Issuer shall pay or cause to be paid all rea sonable expenses incident to the performance of its obligations under this Agreement, including, but not limited to, delivery of the Bonds, costs of printing the Bonds, the Preliminary Official Statement and the Final Official Statement, any amendment or s upplement to the Preliminary Official Statement or Final Official Statement and this Agreement, fees and disbursements of Bond Counsel and Disclosure Counsel, any financial advisor and other consultants engaged by the Issuer, including the fees and expense s of the special tax consultant and fees of the Trustee.
The Underwriter shall pay the California Debt Investment and Advisory Commission fee, all advertising expenses in connection with the public offering of the Bonds, and all other expenses incurred by it in connection with its public offering and distribution of the Bonds, including fees and expenses of its counsel, meals, transportation, and lodging (but not entertainment expenses), and fees and disbursements in connection with the qualification of t he Bonds for sale under the securities or “Blue Sky” laws of the various jurisdictions and the preparation of “Blue Sky” memoranda.
12. Any notice or other communication to be given to the Issuer under this Agreement may be given by delivering the same in writing at its address set forth above, and any notice or other communication to be given to the Underwriter under this Agreement may be given by delivering the same in writing to the following: Stifel, Nicolaus & Company, Incorporated, 2121 Avenue of the Stars, Suite 2150, Los Angeles, California 90067, Attention: Sara Oberlies Brown.
13. This Agreement is made solely for the benefit of the Issuer and the Underwriter (including the successors or assigns of the Underwriter) and no other person, including any purchaser of the Bonds, shall acquire or have any right hereunder or by virtue hereof. This Agreement supersedes and replaces all prior negotiations, agreements and understanding among the parties hereto in relation to the sale of the Bonds by the Issuer.
14. Establishment of Issue Price.
(a) The Underwriter agrees to assist the Issuer in establishing the issue price of the Bonds and shall execute and deliver to the Issuer at Closing an “issue price” or similar certificate, together with the supporting pricing wires or equivalent communications , substantially in the form attached hereto as Exhibit I, with such modifications as may be appropriate or necessary, in the reasonable judgment of the Underwriter, the Issuer and Bond Counsel, to accurately reflect, as 517
-15-
applicable, the sales price or price s or the initial offering price or prices to the public of the Bonds.
All actions to be taken by Issuer under this section to establish the issue price of the Bonds may be taken on behalf of the District by the Municipal Advisor and any notice or report to be provided to the District may be provided to the District’s Municipal Advisor. (b) Except as otherwise set forth in Exhibit A attached hereto, the Issuer will treat the first price at which 10% of each maturity of the Bonds (the “ 10% test”). identified under the column “10% Test Used” in Exhibit A , is sold to the public as the issue price of that maturity. At or promptly after the execution of this Agreement, the Underwriter shall report to the Issuer the price or prices at which it has sold to the public each maturity of Bonds. If at that time the 10% test has not been satisfied as to any maturity of the Bonds, the Underwriter agrees to promptly report to the Issuer the prices at which it sells the unsold Bonds of that maturity to the public. That reporting obligation shall continue, whether or not the Closing Date has occurred, until the 10% test has been satisfied as to the Bonds of that maturit y or until all Bonds of that maturity have been sold to the public , provided that the Underwriter’s reporting obligation after the date of the Closing may be at reasonable periodic intervals or otherwise upon request of the Issuer or Bond Counsel. For purp oses of this Section, if Bonds mature on the same date but have different interest rates, each separate CUSIP number within that maturity will be treated as a separate maturity of the Bonds. For clarity, and notwithstanding any other condition to Closing s et forth in this Agreement, the sale of 10% of each maturity of the Bonds to the public prior to the Closing Date shall not be a condition to Closing. (c) The Underwriter confirms that it has offered the Bonds to the public on or before the date of this Agreem ent at the offering price or prices (the “ initial offering price ”), or at the corresponding yield or yields, set forth in Exhibit A attached hereto, except as otherwise set forth therein. Exhibit A also sets forth, identified under the column “Hold the Of fering Price Rule Used,” as of the date of this Agreement, the maturities, if any, of the Bonds for which the 10% test has not been satisfied and for which the Issuer and the Underwriter agree that the restrictions set forth in the next sentence shall apply, which will allow the Issuer to treat the initial offering price to the public of each such maturity as of the sale date as the issue price of that maturity (the “ hold-the-offering- price rule”). So long as the hold -the-offering-price rule remains applic able to any maturity of the Bonds, the Underwriter will neither offer nor sell unsold Bonds of that maturity to any person at a price that is higher than the initial offering price to the public during the period starting on the sale date and ending on the earlier of the following:
(1) the close of the fifth (5th) business day after the sale date; or (2) the date on which the Underwriter has sold at least 10% of that maturity of the Bonds to the public at a price that is no higher than the initial offering price t o the public.
The Underwriter will advise the Issuer promptly after the close of the fifth (5th) business day after the sale date whether it has sold 10% of that maturity of the Bonds to the public at a price that is no higher than the initial offering price to the public. (d) The Underwriter confirms that:
(i) any selling group agreement and any third -party distribution agreement relating to the initial sale of the Bonds to the public, together with the related pricing wires, contains or 518
-16-
will contain language obligating each dealer who is a member of the selling group and each broker-dealer that is a party to such third-party distribution agreement, as applicable:
(A)(i) to report the prices at which it sells to the public the unsold Bonds of each maturity allocated to it, whether or not the Closing has occurred, until either all Bonds of that maturity allocated to it have been sold or it is notified by the Underwriter that the 10% test has been satisfied as to the Bonds of that maturity, provided that the r eporting obligation after the date of the Closing may be at reasonable periodic intervals or otherwise upon request of the Underwriter, and (ii) to comply with the hold -the-offering-price rule, if applicable, in each case if and for so long as directed by the Underwriter,
(B) to promptly notify the Underwriter of any sales of Bonds that, to its knowledge, are made to a purchaser who is a related party to an underwriter participating in the initial sale of the Bonds to the public (each such term being used as defined below), and
(C) to acknowledge that, unless otherwise advised by the dealer or broker -dealer, the Underwriter shall assume that each order submitted by the dealer or broker-dealer is a sale to the public.
(ii) any selling group agreement relatin g to the initial sale of the Bonds to the public, together with the related pricing wires, contains or will contain language obligating each dealer that is a party to a third -party distribution agreement to be employed in connection with the initial sale o f the Bonds to the public to require each broker -dealer that is a party to such third-party distribution agreement to (A) report the prices at which it sells to the public the unsold Bonds of each maturity allocated to it, whether or not the Closing has oc curred, until either all Bonds of that maturity allocated to it have been sold or it is notified by the Underwriter or the dealer that the 10% test has been satisfied as to the Bonds of that maturity, provided that the reporting obligation after the date o f the Closing may be at reasonable periodic intervals or otherwise upon request of the Underwriter or the dealer, and (B) comply with the hold -the-offering-price rule, if applicable, if and for so long as directed by the Underwriter or the dealer and as set forth in the related pricing wires. (e) The Issuer acknowledges that, in making the representation s set forth in this subsection, the Underwriter will rely on (i) in the event a selling group has been created in connection with the initial sale of the Bonds to the public, the agreement of each dealer who is a member of the selling group to comply with the requirements for establishing issue price of the Bonds, including, but not limited to, its agreement to comply with the hold -the-offering-price rule, if applicable to the Bonds , as set forth in a selling group agreement and the related pricing wires, and (ii) in the event that a third-party distribution agreement was employed in connection with the initial sale of the Bonds to the public, the agreement of each broker-dealer that is a party to such agreement to comply with the requirements for establishing issue price of the Bonds, including, but not limited to, its agreement to comply with the hold -the-offering-price rule, if applicable to the Bonds , as set forth in the third-party distribution agreement and the related pricing wires. The Issuer further acknowledges that the Underwriter shall not be liable for the failure of any dealer who is a member of a selling group, or of any broker -dealer that is a party to a third-party distribution agreement, to comply with its corresponding agreement to comply with the requirements for establishing issue 519
-17-
price of the Bonds, including, but not limited to, its agreement to comply with the hold -the-offering- price rule if applicable to the Bonds.
(f) The Underwriter acknowledges that sales of any Bonds to any person that is a related party to an underwriter participating in the initial sale of the Bonds to the public (each such term being used as defined below) shall not constitute sales to the public for purposes of this section.
Further, for purposes of this section:
(i) “public” means any person other than an underwriter or a related party, (ii) “underwriter” means (A) any person that agrees pursuant to a written contract with the Issuer (or with the lead underwriter to form an underwriting syndicate) to participate in the initial sale of the Bonds to the public and (B) any person that agrees pursuant to a wr itten contract directly or indirectly with a person described in clause (A) to participate in the initial sale of the Bonds to the public (including a member of a selling group or a party to a third-party distribution agreement participating in the initial sale of the Bonds to the public),
(iii) a purchaser of any of the Bonds is a “ related party” to an underwriter if the underwriter and the purchaser are subject, directly or indirectly, to (A) more than 50% common ownership of the voting power or the tota l value of their stock, if both entities are corporations (including direct ownership by one corporation of another), (B) more than 50% common ownership of their capital interests or profits interests, if both entities are partnerships (including direct ow nership by one partnership of another), or (C) more than 50% common ownership of the value of the outstanding stock of the corporation or the capital interests or profit interests of the partnership, as applicable, if one entity is a corporation and the ot her entity is a partnership (including direct ownership of the applicable stock or interests by one entity of the other), and
(iv) “sale date” means the date of execution of this Agreement by all parties.
15. This Agreement shall become effective and binding upon the respective parties hereto upon the execution of the acceptance hereof by the District and shall be valid and enforceable as of the time of such acceptance. In the event that any provision of this A greement is held invalid or unenforceable by any court of competent jurisdiction, such holding will not invalidate or render unenforceable any other provision of this Agreement.
16. This Agreement may be executed in any number of counterparts, all of whi ch taken together will constitute one agreement, and any of the parties hereto may execute the Agreement by signing any such counterpart. Each of the parties hereto agrees that the transaction consisting of this Agreement may be conducted by electronic mea ns. Each party agrees, and acknowledges that it is such party’s intent, that if such party signs this Agreement using an electronic signature, it is signing, adopting, and accepting this Agreement and that signing this Agreement using an electronic signature is the legal equivalent of having placed its handwritten signature on this agreement on paper. Each party acknowledges that it is being provided with an electronic or paper copy of this Agreement in a usable format.
520
S-1
17. This Agreement shall be governed by and construed in accordance with the laws of the State of California.
Very truly yours,
STIFEL, NICOLAUS & COMPANY,
INCORPORATED, as Underwriter
By:
Authorized Officer
Accepted:
CITY OF FONTANA COMMUNITY
FACILITIES DISTRICT NO. 111
(MONTERADO)
By:
Authorized Officer
Time of Execution: _____ a.m./p.m. California Time
521
A-1
EXHIBIT A
Maturity
(September 1)
Principal
Amount
Interest
Rate Yield Price
10% Test
Used
Hold-The-
Offering-
Price Used
_________________
T: Term Bond.
C: Priced to optional redemption date of September 1, 20__, at par. * At the time of execution of this Agreement and assuming orders are confirmed immediately after the execution of this Agreement.
522
A-2
REDEMPTION TERMS
Optional Redemption. The Bonds maturing on and after September 1, 20__ shall be subject to optional redemption, in whole, or in part in Authorized Denominations, on any date on or after September 1, 20 __, from any source of available funds, at the following respective Redemption Prices (expressed as percentages of the princi pal amount of the Bonds to be redeemed), plus accrued interest thereon to the date of redemption:
Redemption Dates Redemption Price
September 1, 20__ through August 31, 20__ 103%
September 1, 20__ through August 31, 20__ 102
September 1, 20__ through August 31, 20__ 101
September 1, 20__ and thereafter 100
Mandatory Redemption from Special Tax Prepayments . The Bonds shall be subject to mandatory redemption, in whole, or in part in Authorized Denominations, on any Interest Payment Date, from and to the extent of Special Tax prepayments required to be applied thereto pursuant to the Indenture and any amount required to be applied thereto pursuant to the Indenture , at the following respective Redemption Prices (expressed as percentages of the principal amount of the Bonds to be redeemed), plus accrued interest thereon to the date of redemption:
Redemption Dates Redemption Price
Any Interest Payment Date through March 1, 20__ 103%
September 1, 20__ and March 1, 20__ 102
September 1, 20__ and March 1, 20__ 101
September 1, 20__ and thereafter 100
Mandatory Sinking Fund Redemption . The Bonds maturing September 1, 20 __ shall be subject to mandatory sinking fund redemption, in part, on September 1 in each year, commencing September 1, 20 __, at a Redemption Price equal to the principal amount of the Bonds maturing September 1, 20 __ to be redeemed, without premium, plus accrued interest thereon to the date of redemption, in the aggregate respective principal amounts in the respective years as follows:
Term Bond maturing on September 1, 20__
Sinking Fund
Redemption Date
(September 1)
Principal Amount
to be
Redeemed
(Maturity)
The Bonds maturing September 1, 20 __ shall be subject to mandatory sinking fund redemption, in part, on September 1 in each year, commencing September 1, 20__, at a Redemption Price equal to the principal amount of the Bonds maturing September 1, 20 __ to be redeemed, 523
A-3
without premium, plus accrued interest thereon to the date of redemption, in the aggregate respective principal amounts in the respective years as follows:
Term Bond maturing on September 1, 20__
Sinking Fund
Redemption Date
(September 1)
Principal Amount
to be
Redeemed
(Maturity)
524
B-1
EXHIBIT B
$[PAR]
CITY OF FONTANA
COMMUNITY FACILITIES DISTRICT NO. 111 (MONTERADO)
SPECIAL TAX BONDS, SERIES 2024
CERTIFICATE OF SPECIAL TAX CONSULTANT
DTA, Inc. (“Special Tax Consultant”), Newport Beach, California, was retained as Special Tax Consultant and assisted in the preparation of and has reviewed the Rate and Method of Apportionment of Special Tax (the “ Rate and Method”) set forth in Appendix A to the Preliminary Official Statement dated [POS Date] (the “ Preliminary Official Statement ”) and the Official Statement dated [Pricing Date] (the “ Official Statement ”) relating to the above -referenced bonds (the “Bonds”) being issued by City of Fontana Community Facilities District No. 111 (M onterado) (the “ Issuer”). Based upon the Special Tax Consultant’s review of the Preliminary Official Statement, the Official Statement and such other documents as it deems relevant in the circumstances, the Special Tax Consultant hereby certifies that the Special Tax, if collected in the maximum amounts permitted under the Rate and Method, would generate at least 110% of the gross annual debt service on the Bonds plus estimated Administrative Expenses, provided that the annual debt service figures on the a ttached debt service schedule, which were relied upon by Special Tax Consultant, are substantially true and correct.
Although the Special Tax if collected in the maximum amounts under the Rate and Method will generate at least 110% of the gross annual d ebt service payable with respect to the Bonds each year (net of estimated Administrative Expenses), no representation is made herein as to actual amounts that will be collected in future years.
All information with respect to the Rate and Method and all o ther information sourced to the Special Tax Consultant in the Preliminary Official Statement as of its date and [Pricing Date], and the Official Statement as of its date and the date hereof is true and correct, and a true and correct copy of the Rate and M ethod is attached to the Preliminary Official Statement and the Official Statement as Appendix A.
Dated: [Closing Date]
DTA, INC.
By:
525
C-1
EXHIBIT C
$[PAR]
CITY OF FONTANA
COMMUNITY FACILITIES DISTRICT NO. 111 (MONTERADO)
SPECIAL TAX BONDS, SERIES 2024
ISSUER CLOSING CERTIFICATE
I, the undersigned, hereby certify that I am the ____________ of the City of Fontana (the “ City”), the City Council of which is the legislative body for City of Fontana Community Facilities District No. 111 (Monterado) (the “ Issuer”), a community facilities district duly organized and existing under the laws of the State of California (the “State”) and that as such, I am authorized to execute this Certificate on behalf of the Issuer in connection with the issuance of the above-referenced bonds (the “Bonds”).
I hereby further certify on behalf of the Issuer that:
(A) to my best knowledge, after rea sonable inquiry, no litigation is pending with respect to which the Issuer has been served with process or threatened (1) to restrain or enjoin the issuance of any of the Bonds or the collection of Net Special Tax Revenues pledged under the Indenture; (2) in any way contesting or affecting the authority for the issuance of the Bonds or the validity or enforceability of the Bonds or the Issuer Documents; or (3) in any way contesting the existence or powers of the Issuer;
(B) the representations and warranti es made by the Issuer in the Bond Purchase Agreement dated [Pricing Date] , between the Issuer and Stifel, Nicolaus & Company, Incorporated (the “ Agreement”) are true and correct in all material respects on the Closing Date, with the same effect as if made on the Closing Date;
(C) no event affecting the Issuer has occurred since the date of the Final Official Statement that, as of the Closing Date, would cause any statement or information contained in the Final Official Statement under the caption “ABSENCE OF LITIGATION” to be incorrect or incomplete in any material respect or would cause the information contained under such caption in the Final Official Statement to contain an untrue statement of a material fact or omit to state a material fact necessary in order to make such statements therein, in the light of the circumstances under which they were made, not misleading;
(D) as of the date hereof, the Issuer Documents are in full force and effect in accordance with their terms and have not been amended, m odified or supplemented except in such case as may have been agreed to by the Underwriter; and
526
C-2
(E) the Issuer has complied with all the agreements and satisfied all the conditions on its part to be performed or satisfied under the Issuer Documents prior to issuance of the Bonds.
Capitalized terms not defined herein shall have the same meaning set forth in the Agreement.
IN WITNESS WHEREOF, the undersigned has executed this certificate as of the date herein below set forth.
Dated: [Closing Date]
CITY OF FONTANA COMMUNITY
FACILITIES DISTRICT NO. 111
(MONTERADO)
By:
Name:
Title:
527
D-1
EXHIBIT D
CITY OF FONTANA
COMMUNITY FACILITIES DISTRICT NO. 111 (MONTERADO)
SPECIAL TAX BONDS, SERIES 2024
I, the undersigned, hereby certify that I am the _____________ of the City of Fontana (the “ City”), the City Council of which is the legislative body for City of Fontana Community Facilities District No. 111 (Monterado) (the “ Issuer”), a community facilities district duly organized and existing under the laws of the State of California (the “State”) and that as such, I am authorized to execute this Certificate on behalf of the Issuer in connection with the issuance of the above-referenced bonds (the “Bonds”).
I further hereby certify on behalf of the Issuer as follows:
(1) This Certificate is deliv ered in connection with the offering and sale of the Bonds in order to enable the underwriter of the Bonds to comply with Rule 15c2 -12 of the Securities Exchange Commission (“ Rule 15c2-12”).
(2) In connection with the offering and sale of the Bonds, there has been prepared a Preliminary Official Statement, setting forth information concerning the Bonds, the City and the Issuer (the “ Preliminary Official Statement”).
(3) As used herein, “Permitted Omissions” shall mean the offering price(s), interest rate( s), selling compensation, aggregate principal amount, principal amount per maturity, delivery dates, ratings and other terms of the Bonds depending on such matters, all with respect to the Bonds.
(4) The Preliminary Official Statement is, except for the P ermitted Omissions, deemed final within the meaning of Rule 15c2-12.
IN WITNESS WHEREOF, I have hereunto set my hand as of [POS Date].
CITY OF FONTANA COMMUNITY
FACILITIES DISTRICT NO. 111
(MONTERADO)
By:
Name:
Title:
528
E-1
EXHIBIT E
$[PAR]
CITY OF FONTANA
COMMUNITY FACILITIES DISTRICT NO. 111 (MONTERADO)
SPECIAL TAX BONDS, SERIES 2024
CERTIFICATE OF U.S. BANK TRUST COMPANY, NATIONAL ASSOCIATION
The undersigned hereby states and certifies that the undersigned is an authorized officer of U.S. Bank Trust Company, National Association, as trustee (the “ Trustee”) under that certain Indenture, dated as of [Month] 1, 2024 (the “ Indenture”), between City of Fontana Community Facilities District No. 111 (Monterado) (the “Issuer”) and the Trustee, relating to the captioned bonds (the “Bonds”) and as such, is familiar with the following facts and is authorized and qualified to certify the following facts on behalf of the Trustee:
(1) The Trustee is dul y organized and existing as a national banking association under the laws of the United States of America, having the full power and authority to enter into and perform its duties under the Indenture and the District Continuing Disclosure Agreement.
(2) The Indenture and the District Continuing Disclosure Agreement have been duly authorized, executed and delivered by the Trustee and the Bonds have been authenticated by a duly authorized representative of the Trustee in accordance with the Indenture.
(3) There is no action, suit, proceeding or investigation, at law or in equity, before or by any court or governmental agency, public board or body pending against the Trustee or threatened against the Trustee which in the reasonable judgment of the Trustee wou ld affect the existence of the Trustee or in any way contesting or affecting the validity or enforceability of the Indenture or the District Continuing Disclosure Agreement or contesting the powers of the Trustee or its authority to enter into and perform its obligation under the Indenture or the District Continuing Disclosure Agreement.
Capitalized terms not defined herein have the same meaning as is set forth in the Bond Purchase Agreement relating to the Bonds.
Dated: [Closing Date] U.S. BANK TRUST COMPANY,
NATIONAL ASSOCIATION,
as Trustee
By
Authorized Officer
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EXHIBIT F
$[PAR]
CITY OF FONTANA
COMMUNITY FACILITIES DISTRICT NO. 111 (MONTERADO)
SPECIAL TAX BONDS, SERIES 2024
CERTIFICATE OF MUNICIPAL ADVISOR
The undersigned hereby states and certifies as follows:
(1) The undersigned is an authorized officer of CSG Advisors, Inc., which has acted as municipal advisor (the “Municipal Advisor”) to City of Fontana Community Facilities District No. 111 (Monterado) (the “Issuer”) in connection with the issuance of the above -referenced bonds (the “Bonds”), and as such, is familiar with the facts herein certified and is authorized and qualified to certify the same.
(2) The Municipal Advisor has p articipated in the preparation of the Preliminary Official Statement dated [POS Date] (the “Preliminary Official Statement”) and the final Official Statement dated [Pricing Date] (the “Official Statement”) relating to the Bonds.
(3) Nothing has come to th e attention of the Municipal Advisor which would lead it to believe that the Preliminary Official Statement or the Official Statement contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made the rein, in light of the circumstances under which they were made, not misleading.
Dated: [Closing Date] CSG ADVISORS, INC.,
as Municipal Advisor
By:
Authorized Officer
530
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EXHIBIT G
CITY OF FONTANA
COMMUNITY FACILITIES DISTRICT NO. 111 (MONTERADO)
SPECIAL TAX BONDS, SERIES 2024
LETTER OF REPRESENTATIONS
(Lennar Homes of California, LLC)
[POS Date]
City of Fontana Community Facilities
District No. 111 (Monterado)
8353 Sierra Avenue
Fontana, California 92335
Stifel, Nicolaus & Company, Incorporated
2121 Avenue of the Stars, Suite 2150
Los Angeles, California 90067
Reference is made to the City of Fontana Community Facilities District No. 111 (Monterado) Special Tax Bonds, Series 2024 (the “Bonds”) and to the Bond Purchase Agreement to be entered into in connection therewith (the “ Bond Purchase Agreement ”). This Lett er of Representations (Lennar Homes of California, LLC ) (the “ Letter of Representations ”) is delivered pursuant to and in satisfaction of Section 8(c)(xvii) of the Bond Purchase Agreement. Capitalized terms used herein and not otherwise defined have the meanings ascribed to them in the Bond Purchase Agreement.
The undersigned certifies that he or she is familiar with the facts herein certified and is authorized and qualified to certify the same as an authorized officer or representative of Lennar Homes of C alifornia, LLC , a California limited liability company (the “ Developer”), and the undersigned, on behalf of the Developer, further certifies as follows:
1. The Developer is a limited liability company duly formed, validly existing and in good standing under t he laws of the State of California and has all requisite right, power and authority (i) to execute and deliver this Letter of Representations, and (ii) to develop its property in the City of Fontana Community Facilities District No. 111 (Monterado) (the “Community Facilities District”) as described in the Preliminary Official Statement.
2. As set forth in the Preliminary Official Statement, title to a certain portion of the property within the Community Facilities District is held, or has from time to time be en held, in the name of the Developer (collectively, herein, the “ Property”). The undersigned, on behalf of the Developer, makes the representations herein with respect to all such Property. Except as otherwise described in the Preliminary Official Stateme nt, the Developer’s current expectation is that the Developer shall remain the party responsible for the construction and sale of homes within the Property. The Developer has not entered into an agreement for development or management of the Property by any other entity, except such subcontracts, consultant agreements and similar agreements for land development activities associated with the Developer’s development plan as are entered into in the ordinary course of business.
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3. Except as set forth in the Prel iminary Official Statement, no action, suit, proceeding, inquiry or investigation at law or in equity, before or by any court, regulatory agency, public board or body is pending against the Developer (with proper service of process to the Developer having been accomplished) or, to the Actual Knowledge of the Undersigned, 1 is pending against any current Affiliate2 (with proper service of process to such Affiliate having been accomplished) or to the Actual Knowledge of the Undersigned is threatened in writing against the Developer, or any such Affiliate (a) to restrain or enjoin the collection of the special tax lev ied on the Property by the Community Facilities District (the “Special Tax”) or other sums pledged or to be pledged to pay the principal of and interest on the Bonds (e.g., the reserve fund established under the Indenture (herein, the “Reserve Fund”)), (b) to restrain or enjoin the development of the Property as described in the Preliminary Official Statement, (c) in any way contesting or affecting the validity of the Special Tax, or (d) which is reasonably likely to materially and adversely affect the Developer’s ability to acquire, develop, and sell the Property as described in the Preliminary Official Statement or to pay the Special Tax due with respect to the Property (to the extent the responsibility of the Developer) prior to delinquency.
4. As of the dat e of the Preliminary Official Statement, to the Actual Knowledge of the Undersigned, the information contained therein solely with respect to the Developer, its Affiliates, the proposed development of the Property, ownership of the Property, the Developer’ s development plan, the Developer’s financing plan, the Developer’s lenders, if any, and contractual arrangements of the Developer or any Affiliates (including, if material to the Developer’s development plan or the Developer’s financing plan, other loans of such Affiliates) as set forth under the sections of the Preliminary Official Statement captioned “INTRODUCTION – The District” (the first three paragraphs only), and “PROPERTY OWNERSHIP AND THE DEVELOPMENT” (but in all cases under all captions excludi ng therefrom (i) information regarding the Appraisal Report (as defined
1 “Actual Knowledge of the Undersigned ” means, as of the date of this Letter of Representations , the actual (as opposed to constructive) knowledge that the individual signing on behalf of the Developer currently has or has obtained through (i) interviews with such current officers and responsible employees of the Developer and its Affiliates as the undersigned has determined are reasonably likely, in the ordinary course of their respective duties, to have knowledge of th e matters set forth in this Letter of Representations, and/or (ii) review of documents that were reasonably available to the undersigned and which the undersigned has reasonably deemed necessary for the undersigned to obtain knowledge of the matters set fo rth in this Letter of Representations. The undersigned has not conducted any extraordinary inspection or inquiry other than such inspections or inquiries as are prudent and customary in connection with the ordinary course of the Developer’s current busines s and operations. Individuals who are no longer employees of the Developer and its Affiliates have not been contacted.
2 “Affiliate” means, with respect to the Developer, any other Person (i) who directly, or indirectly through one or more intermediaries, is currently controlling, controlled by or under common control with the Developer, and (ii) for whom information, including financial information or operating data, concerning such Person is material to potential investors in their evaluation of the Com munity Facilities District and investment decision regarding the Bonds (i.e., information relevant to (a) the Developer’s development plans with respect to the Property and ability to pay its Special Tax on the Property (to the extent the responsibility of the Developer) prior to delinquency, or (b) such Person’s assets or funds that would materially affect the Developer’s ability to develop the Property as described in the Preliminary Official Statement or to pay its Special Tax on the Property (to the ext ent the responsibility of the Developer). “Person” means an individual, a corporation, a partnership, a limited liability company, an association, a joint stock company, a trust, any unincorporated organization or a government or political subdivision ther eof. For purposes hereof, the term “ control” (including the terms “ controlling,” “ controlled by ” or “ under common control with ”) means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a Per son, whether through the ownership of voting securities, by contract or otherwise.
The Land Bank is not an Affiliate of the Developer.
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herein), market value ratios and annual special tax ratios, and (ii) information which is identified as having been provided by a source other than the Developer), is true and correct in all material respects and did not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading.
5. Except as described in the Preliminary Official Statement, there are no material loans outstanding and unpaid and no material lines of credit of the Developer or its Affiliates, that are secured by an interest in the Property. Neither the Developer nor, to the Actual Knowle dge of the Undersigned, any of its Affiliates is currently in material default on any loans, lines of credit or other obligation related to the development of the Property or any other project which default is reasonably likely to materially and adversely affect the Developer’s ability to develop the Property as described in the Preliminary Official Statement or to pay the Special Tax due with respect to the Property (to the extent the responsibility of the Developer) prior to delinquency.
6. To the Actual Kno wledge of the Undersigned, other than as disclosed in the Preliminary Official Statement, the Developer is not aware that any of the Property has a current liability with respect to the presence of a substance presently classified as hazardous under the federal Comprehensive Environmental Response, Compensation and Liability Act of 1980 or applicable California law or is adversely affected by the presence of endangered or threatened species or habitat for endangered or threatened species.
7. The Developer cove nants that, while the Bonds or any refunding obligations related thereto are outstanding, the Developer and its Affiliates which it controls will not bring any action, suit, proceeding, inquiry or investigation at law or in equity, before any court, regula tory agency, public board or body, that in any way seeks to challenge or overturn the formation of the Community Facilities District, to challenge the adoption of the ordinance of the Community Facilities District levying Special Tax within the Community F acilities District, to invalidate the Community Facilities District or any of the Bonds or any refunding bonds related thereto, or to invalidate the special tax liens imposed under Section 3115.5 of the Streets and Highways Code based on recordation of the notices of special tax lien relating thereto. The foregoing covenant shall not prevent the Developer in any way from bringing any other action, suit, proceeding, inquiry or investigation at law or in equity, before any court, regulatory agency, public boa rd or body including, without limitation, (a) an action or suit contending that the Special Tax has not been levied in accordance with the methodologies contained in the Rate and Method of Apportionment of Special Tax pursuant to which Special Tax is levied, (b) an action or suit with respect to the application or use of the Special Tax levied and collected or (c) an action or suit to enforce the obligations of the City and/or the Community Facilities District under the Resolutions and Ordinance, the Indent ure, or any other agreements among the Developer, an Affiliate, the City and/or the Community Facilities District or to which the Developer or an Affiliate is a party or beneficiary.
8. The Developer consents to the issuance of the Bonds. The Developer acknow ledges and agrees that the proceeds of the Bonds will be used as described in the Preliminary Official Statement.
9. The Developer intends to comply with the provision of the Mello -Roos Community Facilities Act of 1982, as amended, relating to the Notice of Special Tax described in Government Code Section 53341.5 in connection with the sale of the Property to homeowners, or portions thereof. 533
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10. To the Actual Knowledge of the Undersigned, the Developer is able to pay its bills as they become due and no legal proceedings are pending against the Developer (with proper service of process having been accomplished) or, to the Actual Knowledge of the Undersigned, threatened in writing in which the Developer may be adjudicated as bankrupt or discharged from any and all of its debts or obligations, or granted an extension of time to pay its debts or obligations, or be allowed to reorganize or readjust its debts, or be subject to control or supervision of the Federal Deposit Insurance Corporation.
11. To the Actual Knowledge of the Undersigned, Affiliates of the Developer are able to pay their bills as they become due and no legal proceedings are pending against any Affiliate of the Developer (with proper service of process having been accomplished) or to the Actual Knowledge of the Undersigned, threatened in writing in which the Affiliates of the Developer may be adjudicated as bankrupt or discharged from any or all of their debts or obligations, or granted an extension of time to pay their debt or obligations, or be allowed to reorganize or readjust their debts or obligations, or be subject to control or supervision of the Federal Deposit Insurance Corporation which is reasonably likely to have a materially adverse impact on the ability of the Developer to develop the Property as described in the Preliminary Official Statement, or to pay the Special Tax or ad valorem tax obligations with respect to the portion of the Property then owned by the Developer (to the extent the responsibility of the Developer) prior to delinquency.
12. The Developer has been developing or has been involved in the development of numerous projects over an extended period of time. It is likely that the Developer and its Affiliates have be en delinquent at one time or another in the payment of ad valorem property taxes, special assessments or special taxes. However, to the Actual Knowledge of the Undersigned, during the last five years, neither the Developer nor any current Affiliate has, du ring the period of its ownership, been delinquent to any material extent in the payment of any ad valorem property tax, special assessment or special tax on property included within the boundaries of a community facilities district or an assessment distric t in California that (a) caused a draw on a reserve fund relating to such assessment district or community facilities district financing or (b) resulted in a foreclosure action being commenced against the delinquent Developer or such Affiliate in a court of law.
13. The Developer has not filed for the reassessment of the assessed value of any portions of the Property, other than in connection with the sale of homes to individual homebuyers.
14. To the Actual Knowledge of the Undersigned, there are no claims, dispu tes, suits, actions or contingent liabilities by and among the Developer, its Affiliates or any contractors working on the development of the Property which is reasonably likely to materially and adversely affect the Developer’s development of the Property as described in the Preliminary Official Statement, or the payment of the Special Tax due with respect to the Property (to the extent the responsibility of the Developer) prior to delinquency.
15. Based upon the current development plans, including, without l imitation, the current budget and subject to economic conditions and risks generally inherent in the development of real property, including, but not limited to, the risks described in the Preliminary Official Statement under the section entitled “SPECIAL RISK FACTORS,” the Developer presently anticipates that it will have sufficient funds to develop the Property as described in the Preliminary Official Statement and to pay Special Tax levied against the Property (to the extent the responsibility of the Developer) prior to delinquency and does not anticipate that the City or the Community Facilities District will be required to resort to a draw on the Reserve Fund for payment of principal of or interest on the Bonds 534
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due to the Developer’s nonpayment of Speci al Tax. However, neither the Developer nor any of its Affiliates are obligated to make any additional capital contribution or loan to the Developer at any time, and the Developer reserves the right to change its development plans and financing plans for the Property at any time without notice.
16. An appraisal of the taxable properties within the Community Facilities District, dated March 28 , 2024 (the “ Appraisal Report ”), was prepared by Kitty Siino & Associates, Inc. (the “Appraiser”). The Appraisal Report es timates the market value of the taxable properties within the Community Facilities District as of February 15, 2024 (the “ Date of Value ”). To the Actual Knowledge of the Undersigned, all information submitted by, or on behalf of and authorized by, the Developer to the Appraiser and contained in the sections of the Appraisal Report highlighted in yellow or circled in Exhibit A attached hereto, was true and correct in all material respects as of the Date of Value.
17. Solely as to the limited information describ ed in the sections of the Preliminary Official Statement indicated in Paragraph 4 herein (and subject to the limitations and exclusions set forth in Paragraph 4), the Developer agrees to indemnify and hold harmless, to the extent permitted by law, the City , the Community Facilities District, and their officials and employees, and each Person, if any, who controls any of the foregoing within the meaning of Section 15 of the Securities Act of 1933, as amended, or of Section 20 of the Securities Exchange Act o f 1934, as amended (each, an “ Indemnified Party ” and, collectively, the “ Indemnified Parties ”), against any and all losses, claims, damages or liabilities, joint or several, to which such Indemnified Party may become subject under any statute or at law or in equity and shall reimburse any such Indemnified Party for any reasonable legal or other expense incurred by it in connection with investigating any such claim against it and defending any such action, insofar as and solely to the extent such losses, cla ims, damages, liabilities or actions, or legal or other expenses, arise out of or are based upon any untrue statement or alleged untrue statement of a material fact or the omission or alleged omission of a material fact by the Developer in the above -referenced information in the Preliminary Official Statement, as of its date, necessary to make the statements made by the Developer contained therein, in light of the circumstances under which they were made not misleading. This indemnity provision shall not be construed as a limitation on any other liability which the Developer may otherwise have to any Indemnified Party, provided that in no event shall the Developer be obligated for double indemnification, or for the negligence or willful misconduct of an Indemnified Party.
If any suit, action, proceeding (including any governmental or regulatory investigation), claim or demand shall be brought or asserted against any Indemnified Party in respect of which indemnification may be sought pursuant to the above par agraph, such Indemnified Party shall promptly notify the Developer in writing; provided that the failure to notify the Developer shall not relieve it from any liability that it may have hereunder except to the extent that it has been materially prejudiced by such failure; and provided, further, that the failure to notify the Developer shall not relieve it from any liability that it may have to an Indemnified Party otherwise than under the above paragraph unless such liability was also conditioned upon such notice. If any such proceeding shall be brought or asserted against an Indemnified Party and it shall have notified the Developer thereof, the Developer shall retain counsel reasonably satisfactory to the Indemnified Party and approved thereby to represent the Indemnified Party in such proceeding and shall pay the fees and expenses of such counsel related to such proceeding, as incurred. In any such proceeding, any Indemnified Party shall have the right to retain its own counsel, but the fees and expenses of such counsel shall be at the expense of such Indemnified Party unless (i) the Developer and the Indemnified Party shall have mutually agreed to the contrary; (ii) the Developer has failed within a 535
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reasonable time to retain counsel reasonably satisfactory to the Indemnified Party; (iii) the Indemnified Party shall have reasonably concluded that there may be legal defenses available to it that are different from or in addition to those available to the Developer such that a material conflict of interest exi sts for such counsel; or (iv) the named parties in any such proceeding (including any impleaded parties) include the Developer and the Indemnified Party and representation of both parties by the same counsel would be inappropriate due to actual or potentia l differing interest between them. It is understood and agreed that the Developer shall not, in connection with any proceeding or related proceedings in the same jurisdiction, be liable for the fees and expenses of more than one separate firm (in addition to any local counsel) for all Indemnified Parties, and that all such fees and expenses, to the extent reasonable, shall be paid or reimbursed as they are incurred.
Any such separate firm shall be designated in writing by such Indemnified Parties. The Devel oper shall not be liable for any settlement of any proceeding effected without its written consent, but if settled with such consent or if there be a final judgment for the plaintiff, the Developer agrees to indemnify each Indemnified Party from and agains t any loss or liability by reason of such settlement or judgment to the extent set forth above. If the Developer shall, after receiving notice of the indemnification obligation of the Developer and within a period of time necessary to preserve any and all defenses to any claim asserted, fails to assume the defense or to retain counsel for that purpose satisfactory to the Indemnified Party, the Indemnified Party shall have the right, but not the obligation, to undertake the defense of, and to compromise or s ettle the claim or other matter on behalf of, for the account of and at the risk of, the Developer. The Developer shall not, without the written consent of the Indemnified Party, effect any settlement of any pending or threatened proceeding in respect of which any Indemnified Party is a party and indemnification could have been sought hereunder by such Indemnified Party, unless such settlement (x) includes an unconditional release of such Indemnified Party, in form and substance reasonably satisfactory to s uch Indemnified Party, from all liability on claims that are the subject matter of such proceeding , and (y) does not include any statement as to or any admission of fault, culpability or a failure to act by or on behalf of any Indemnified Party.
18. If between the date hereof and the Closing Date any event relating to or affecting the Developer, its Affiliates, ownership of the Property, the proposed development of the Property, the Developer’s development plan, the Developer’s financing plan, the Developer’s lenders, if any, and contractual arrangements of the Developer or any Affiliates (including, if material to the Developer’s development plan or the Developer’s financing plan, other loans of such Affiliates) shall occur of which the undersigned has actual knowledge which would cause the information under the sections of the Preliminary Official Statement indicated in Paragraph 4 hereof (and subject to the limitations and exclusions contained in Paragraph 4 hereof), to contain an untrue statement of a mater ial fact or to omit to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, the Developer shall notify the City, the Community Facilities District and the Underwriter and if in the opinion of counsel to the City or the Underwriter such event requires the preparation and publication of a supplement or amendment to the Preliminary Official Statement, the Developer shall reasonably cooperate with the City and the Community Facilities District in the preparation of an amendment or supplement to the Preliminary Official Statement in form and substance satisfactory to counsel to the City, the Community Facilities District and to the Underwriter.
19. The Developer agrees to deliver a Closing Certificate dated the date of issuance of the Bonds at the time of issuance of the Bonds in substantially the form attached as Exhibit H to the Bond Purchase Agreement. If any event related to or affecting the Developer, its Affiliates, or the ownership, development, or sale of the Property occurs, as a result of which it is necessary to modify 536
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the Closing Certificate, the Developer agrees to deliver a new Closing Certificate revised to reflect such event.
20. On behalf of the Developer, I have revi ewed the contents of this Letter of Representations and have had the opportunity to discuss with counsel to the Developer the meaning of the contents of this Letter of Representations. The Developer acknowledges and understands that a variety of state and federal securities laws, including, but not limited to the Securities Act of 1933, as amended, and Rule 10b-5 promulgated under the Securities Exchange Act of 1934, as amended, may apply to the Developer and that under some circumstances, certification as to the matters set forth in this Letter of Representations, without additional disclosures or other action, may not fully discharge all duties and obligations of the Developer under such securities laws.
The undersigned has executed this Letter of Representations solely in his or her capacity as an authorized officer or representative of the Developer and he or she will have no personal liability arising from or relating to this Letter of Representations. Any liability arising from or relating to th is Letter of Representations may only be asserted against the Developer.
LENNAR HOMES OF CALIFORNIA, LLC,
a California limited liability company
By:
Name:
Title:
[SIGNATURE PAGE TO LETTER OF REPRESENTATIONS OF
LENNAR HOMES OF CALIFORNIA, LLC]
537
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EXHIBIT A
TO
LETTER OF REPRESENTATIONS
(Lennar Homes of California, LLC)
DEVELOPER PROVIDED INFORMATION IN APPRAISAL REPORT
See attached.
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EXHIBIT H
$[PAR]
CITY OF FONTANA
COMMUNITY FACILITIES DISTRICT NO. 111 (MONTERADO)
SPECIAL TAX BONDS, SERIES 2024
CLOSING CERTIFICATE
(Lennar Homes of California, LLC)
[Closing Date]
City of Fontana Community Facilities
District No. 111 (Monterado)
8353 Sierra Avenue
Fontana, California 92335
Stifel, Nicolaus & Company, Incorporated
2121 Avenue of the Stars, Suite 2150
Los Angeles, California 90067
Ladies and Gentlemen:
Reference is made to the above -captioned bonds (the “ Bonds”) and to the Bond Purchase Agreement, da ted [Pricing Date] (the “ Bond Purchase Agreement ”), entered into in connection therewith. This Closing Certificate ( Lennar Homes of California, LLC ) (the “ Closing Certificate”) is delivered pursuant to Section 8(c)(xviii) of the Bond Purchase Agreement. Capitalized terms used herein and not otherwise defined have the meanings ascribed to them in the Letter of Representations (Lennar Homes of California, LLC), dated [POS Date] (the “Letter of Representations”), delivered by Lennar Homes of California, LLC, a California limited liability company (the “Developer”).
The undersigned certifies that he or she is familiar with the facts herein certified and is authorized and qualified to certify the same as an authorized officer or representative of the Developer, and the undersigned, on behalf of the Developer, further certifies as follows:
1. The Developer has received the final Official Statement dated [Pricing Date] relating to the Bonds (the “ Official Statement ”). T o the Actual Knowledge of the Undersigned, each statement, representation and warranty made in the Letter of Representations is true and correct in all material respects on and as of the date hereof with the same effect as if made on the date hereof, except that all references therein to the Preliminary Official Statement shall be deemed to be references to the Official Statement.
2. To the Actual Knowledge of the Undersigned, no event has occurred since the date of the Preliminary Official Statement affecting the statements and information described in Paragraph 4 of the Letter of Representations (and subject to the limitations and exclusions contained in Paragraph 4 of the Letter of Representations) relating to the Developer, its Affiliates, the proposed development of the Property, ownership of the Property, the Developer’s development plan, the Developer’s financing plan, the Developer’s lenders, if any, and contractual arrangements of the Developer or any Affiliates (including, if material to the Devel oper’s development plan or the Developer’s financing 539
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plan, other loans of its Affiliates), which should be disclosed in the Official Statement for the purposes for which it is to be used in order to make such statements and information contained in the Official Statement not misleading in any material respect.
3. For the period through 25 days after the “ End of the Underwriting Period ” as defined in the Bond Purchase Agreement (provided the Developer may assume the End of the Underwriting Period is the Clos ing Date (as defined in the Bond Purchase Agreement), unless it receives written notice from the Underwriter that the End of the Underwriting Period is later than the Closing Date), if any event relating to or affecting the Developer, its Affiliates, the p roposed development of the Property, ownership of the Property, the Developer’s development plan, the Developer’s financing plan, the Developer’s lenders, if any, and contractual arrangements of the Developer or any Affiliates (including, if material to th e Developer’s development plan or the Developer’s financing plan, other loans of its Affiliates) shall occur as a result of which it is necessary, in the opinion of the Underwriter or counsel to the City or the Community Facilities District, to amend or su pplement the Official Statement in order to make the information under the sections of the Official Statement indicated in Paragraph 4 of the Letter of Representations (and subject to the limitations and exclusions contained in Paragraph 4 of the Letter of Representations) not misleading in the light of the circumstances under which they were made, the Developer shall reasonably cooperate with the City, the Community Facilities District and the Underwriter in the preparation and publication of a supplement or amendment to the information under the sections of the Official Statement indicated in Paragraph 4 of the Letter of Representations (and subject to the limitations and exclusions contained in Paragraph 4 of the Letter of Representations) , in form and substance satisfactory to the Underwriter and counsel to the City and the Community Facilities District which will amend or supplement the Official Statement so that it will not contain an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading.
[Remainder of Page Intentionally Left Blank; Signature Page Follows] 540
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The undersigned has executed this Closing Certificate solely in his or her capacity as an authorized officer or representative of the Developer and he or she will have no personal liability arising from or relating to this Closing Certificate. Any liability arising from or relating to this Closing Certificate may only be asserted against the Developer.
LENNAR HOMES OF CALIFORNIA, LLC,
a California limited liability company
By:
Name:
Title:
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EXHIBIT I
FORM OF ISSUE PRICE CERTIFICATION
$[PAR]
CITY OF FONTANA
COMMUNITY FACILITIES DISTRICT NO. 111 (MONTERADO)
SPECIAL TAX BONDS, SERIES 2024
ISSUE PRICE CERTIFICATE
The undersigned, Stifel, Nicolaus & Company, Incorporated (“Stifel”), hereby certifies as set forth below with respect to the sale and issuance of the above-captioned obligations (the “Bonds”).
1. Sale of the General Rule Maturities . As of the date of this certificate, for each Maturity of the General Rule Maturities, the first price at which at least 10% of such Maturity was sold to the Public is the respective price listed in Schedule A.
2. Initial Offering Price of the Hold-the-Offering-Price Maturities. (a) Stifel offered the Hold-the-Offering-Price Maturities to the Public for purchase at the respective initial offering prices list ed in Schedule A (the “Initial Offering Prices”) on or before the Sale Date. A copy of the pricing wire or equivalent communication for the Bonds is attached to this certificate as Schedule B.
(b) As set forth in the Bond Purchase Agreement, dated [Pricin g Date], by and among Stifel, as the Underwriter (as defined below), the City of Garden Grove and the Issuer (as defined below), Stifel has agreed in writing that: (i) for each Maturity of the Hold -the-Offering-Price Maturities, it would neither offer nor sell any of the Bonds of such Maturity to any person at a price that is higher than the Initial Offering Price for such Maturity during the Holding Period for such Maturity (the “hold -the-offering-price rule”); and (ii) any selling group agreement shall co ntain the agreement of each dealer who is a member of the selling group, and any third -party distribution agreement shall contain the agreement of each broker -dealer who is a party to the third -party distribution agreement, to comply with the hold -the-offering-price rule. Pursuant to such agreement, no Underwriter has offered or sold any Maturity of the Hold -the-Offering-Price Maturities at a price that is higher than the respective Initial Offering Price for that Maturity of the Bonds during the Holding Period.
3. Defined Terms.
(a) General Rule Maturities means those Maturities of the Bonds listed in Schedule A hereto as the “General Rule Maturities.”
(b) Hold-the-Offering-Price Maturities means those Maturities of the Bonds listed in Schedule A hereto as the “Hold-the-Offering-Price Maturities.” (c) Holding Period means, with respect to a Hold-the-Offering-Price Maturity, the period starting on the Sale Date and ending on the earlier of (i ) the close of the fifth business day after the 542
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Sale Date (which Sale Date is [Pricing Date]), or (ii) the date on which Stifel has sold at least 10% of such Hold -the-Offering-Price Maturity to the Public at prices that are no higher than the Initial Offering Price for such Hold-the-Offering-Price Maturity. (d) Issuer means the City of Fontana Community Facilities District No. 111 (Monterado).
(e) Maturity means Bonds with the same credit and payment terms. Bonds with different maturity dates, or Bonds with the same maturity date but different stated interest rates, are treated as separate maturities.
(f) Public means any person (including an individual, t rust, estate, partnership, association, company, or corporation) other than an Underwriter or a related party to an Underwriter.
The term “related party” for purposes of this certificate generally means any two or more persons who have greater than 50 percent common ownership, directly or indirectly. (g) Sale Date means the first day on which there is a binding contract in writing for the sale of a Maturity of the Bonds. The Sale Date of the Bonds is [Pricing Date]. (h) Underwriter means: (i) any person that agrees pursuant to a written contract with the Issuer (or with the lead underwriter to form an underwriting syndicate) to participate in the initial sale of the Bonds to the Public; and (ii) any person that agrees pursuant to a written contract directl y or indirectly with a person described in clause (i) of this paragraph to participate in the initial sale of the Bonds to the Public (including a member of a selling group or a party to a third -party distribution agreement participating in the initial sale of the Bonds to the Public).
4. Reserve Fund. The funding of the Reserve Fund under the Indenture, and as provided in the Tax Certificate, is reasonably required, was a vital factor in marketing the Bonds, facilitated the marketing of the Bonds at an in terest rate comparable to that of bonds and other tax - exempt obligations of a similar type, and is not in excess of the amount necessary for such purpose.
The representations set forth in this certificate are limited to factual matters only. Nothing in this certificate represents Stifel’s interpretation of any laws, including specifically Sections 103 and 148 of the Internal Revenue Code of 1986, as amended, and the Treasury Regulations thereunder.
The undersigned understands that the foregoing information will be relied upon by the Issuer with respect to certain of the representations set forth in the Tax Certificate of the Issuer dated [Closing Date] and with respect to com pliance with the federal income tax rules affecting the Bonds, and by Bond Counsel, in connection with rendering its opinion that the interest on the Bonds is excluded from gross income for federal income tax purposes, the preparation of the Internal Reven ue Service Form 8038-G, and other federal income tax advice that it may give to the Issuer from time to time relating to the Bonds.
STIFEL, NICOLAUS & COMPANY,
INCORPORATED
By:
Managing Director
Dated: [Closing Date]
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SCHEDULE A
SALE PRICES OF THE GENERAL RULE MATURITIES AND INITIAL OFFERING PRICES
OF THE HOLD-THE-OFFERING-PRICE MATURITIES
(Attached)
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SCHEDULE B
PRICING WIRE OR EQUIVALENT COMMUNICATION
(Attached)
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APPRAISAL REPORT
CITY OF FONTANA
COMMUNITY FACILITIES DISTRICT NO. 111
(Monterado)
City of Fontana, San Bernardino County, California
(Appraisers’ File No. 2024-1288)
Prepared For
City of Fontana
8353 Sierra Avenue
Fontana, California 92335
Prepared By
Kitty Siino & Associates, Inc.
115 East Second Street, Suite 100
Tustin, California 92780
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KITTY SIINO & ASSOCIATES, IC.
REAL ESTATE APPRAISERS & CONSULTANTS
April 15, 2024
Jessica Brown, Chief Financial Officer
City of Fontana
8353 Sierra Avenue
Fontana, CA 92335
Reference: Appraisal Report
City of Fontana Community Facilities District No. 111 (Monterado) Rivello and Salerno at Monterado by Lennar
East Side of Citrus Avenue; North of Duncan Danyon Road, Fontana, California
Dear Ms. Brown:
At the request and authorization of the City of Fontana, we have completed an Appraisal Report for The City of Fontana Community Facilities District No. 111 (Monterado) (“Fontana CFD No. 111”) which consists of a gated residential community known as Monterado, in the City of Fontana. Monterado includes a total of 198 residential units split between two product lines , Rivello at Monterado (“Rivello”) and Salerno at Monterado (“Salerno”). Rivello is proposed for 89 detached alley load units and Salerno is proposed for 109 detached cluster units; all homes are detached condominiums . Lennar Homes of California, LLC (“Lennar”) is developing and marketing the property. Monterado offers two-story floorplans ranging in size from 1,795 to 2,007 square feet for Rivello (ally load product), and 1,822 to 2,207 square feet for Salerno (cluster product). Out of the 198 proposed units within Monterado, 149 have closed to individual homeowners to date with an additional 23 in escrow which are due to close upon completion. The Lennar-owned property ranges from completed model homes to houses under construction to physically finished pads.
The valuation method s used in this report are the Sales Comparison Approach, a Discounted Cash Flow Analysis and a Mass Appraisal Technique as defined within this report. The fee simple estate of the subject property has been valued, subject to the Fontana CFD No. 111 special tax lien. This report is written with the hypothetical condition that the subject propert y is enhanced by the improvements and/or fee credits to be funded by the Special Tax Bonds of Fontana CFD No. 111. As a result of our investigation, the concluded minimum market value for the subject property is shown below.
Monterado:
Lennar Ownership (34 lots/pads & 15 houses) $ 12,154,994 Individual Owners (149 houses) $ 78,139,585
Total Aggregate Value CFD No. 111 $ 90,294,579
The values are stated subject to the Assumptions and Limiting Conditions of this report, the Appraiser’s Certification and as of February 15, 2024.
115 East Second Street, Suite 100, Tustin, California 92780 (714) 544-9978 - Phone, (714) 544-9985 – Fax, E-Mail: [email protected] 547
Jessica Brown
City of Fontana
April 15, 2024
Page Two
Some supporting documentation concerning the data, reasoning and analyses may be retained in the appraiser’s files. The information contained in this report is specific to the needs of the client and for the intended use stated in this report. This Appraisal Report is intended to comply with both the Uniform Standards of Professional Appraisal Practice (“USPAP” January 2020/2022) and with the Appraisal Standards of the California Debt and Investment Advisory Commission (“CDIAC”). The appraiser is not responsible for unauthorized use of this report.
This letter of transmittal is part of the attached report, which sets forth the data and analyses upon which our opinion of value is, in part, predicated.
Respectfully submitted,
KITTY SIINO & ASSOCIATES, INC.
Kitty S. Siino, MAI
California State Certified General
Real Estate Appraiser (AG004793)
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TABLE OF CONTENTS
Assumptions and Limiting Conditions............................................................................... i Hypothetical Condition .................................................................................................... iii Extraordinary Assumption ............................................................................................... iii Aerial Photo of Fontana CFD No. 111 (Monterado) ........................................................ iv Purpose of the Appraisal ................................................................................................ 1 The Subject Property ...................................................................................................... 1 Intended Use of the Report ............................................................................................. 2 Definitions ...................................................................................................................... 2 Property Rights Appraised ............................................................................................. 4 Effective Date of Value ................................................................................................... 4 Date of Report ................................................................................................................ 5 Scope of Appraisal ........................................................................................................ 5 Regional Area Map.......................................................................................................... 7 County of San Bernardino Area Description ................................................................... 8 City of Fontana Area Map & Description ....................................................................... 17 Immediate Surroundings ............................................................................................... 22 Community Facilities District No. 111 ........................................................................... 24 Subject Property Description ......................................................................................... 28 Inland Empire Housing Market ...................................................................................... 35 Highest and Best Use Analysis ..................................................................................... 46 Valuation Analysis and Conclusions ............................................................................. 51 Appraisal Report Summary ........................................................................................... 68 Appraiser’s Certification ............................................................................................... 69
ADDENDA
Fontana CFD No. 111 Boundary Map
Tract Map No. 20224 and Site Plan
Discounted Cash Flow Analysis
Finished Lot Land Sales Map and Summary Chart
Improved Residential Sales Map and Summary Chart
Appraiser’s Qualifications
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ASSUMPTIONS AND LIMITING CONDITIONS
1. This report might not include full discussions of the data, reasoning and analyses that were used in the appraisal process to develop the appraiser’s opinion of value. Some supporting documentation concerning the data, reasoning and analyses may be retained in the appraiser’s files. The information contained in this report is specific to the needs of the client and for the intended use stated in this report. The appraiser is not responsible for unauthorized use of this report.
2. No responsibility is assumed for legal or title considerations. Title to the property is assumed to be good and marketable unless otherwise stated in this report.
3. It is assumed that the subject property is subject to the special tax lien of Fontana CFD No. 111.
4. Responsible ownership and competent property management are assumed unless otherwise stated in this report.
5. The information furnished by others is believed to be reliable; however, no warranty is given for its accuracy.
6. All engineering is assumed to be correct. Any plot plans and illustrative material used in this report are included only to assist the reader in visualizing the property and may not be to scale.
7. It is assumed that there are no hidden or unapparent conditions of either property, subsoil or structures that would render them more or less valuable. No responsibility is assumed for such conditions or for arranging for engineering studies that may be required to discover them.
8. It is assumed that there is full compliance with all applicable federal, state and local environmental regulations and laws unless otherwise stated in this report.
9. It is assumed that all applicable zoning and use regulations and restrictions have been complied with, unless nonconformity has been stated, defined and considered in this appraisal report.
10. It is assumed that all required licenses, certificates of occupancy or other legislative or administrative authority from any local, state or national governmental or private entity or organization have been or can be obtained or renewed for any use on which the value estimates contained in this report are based.
11. Any sketch or photograph included in this report may show approximate dimensions and is included only to assist the reader in visualizing the properties. Maps , photographs and exhibits found in this report are provided for reader reference purposes only. No guarantee regarding accuracy is expressed or implied unless 550
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otherwise stated in this report. No survey has been made for the purpose of this report.
12. It is assumed that the utilization of the land and improvements (if any) are within the boundaries or property lines of the property described and that there is no encroachment or trespass unless otherwise stated in this report.
13. The appraiser is not qualified to detect hazardous waste and/or toxic materials. Any comment by the appraiser that might suggest the possibility of the presence of such substances should not be taken as confirmation of the presence of hazardous waste and/or toxic materials. Such determination would require investigation by a qualified expert relating to asbestos, urea- formaldehyde foam insulation or other potentially hazardous materials that may affect the value of the property. The appraiser’s value estimate is predicated on the assumption that there is no such material on or in the property that would cause a loss in value unless otherwise stated in this report. No responsibility is assumed for any environmental conditions or for any expertise or engineering knowledge required to discover them. The appraiser’s descriptions and resulting comments are the result of the routine observations made during the appraisal process.
14. Proposed improvements, if any, are assumed to be completed in a good workmanlike manner in accordance with the submitted plans and specifications.
15. The distribution, if any, of the total valuation in this report between land and improvements applies only under the stated program of utilization. The separate allocations for land and buildings , if any, must not be used in conjunction with any other appraisal and are invalid if so used.
16. The Americans with Disabilities Act (“ADA”) became effective on January 26, 1992 and have been updated several times since then. The appraiser has made no specific compliance survey and analysis of the property to determine whether they conform to the various detailed requirements of the ADA, nor is the appraiser a qualified expert regarding the requirements of the ADA. It is possible that a compliance survey of the property, together with a detailed analysis of the requirements of the ADA, could reveal that the property is not in compliance with one or more of the requirements of the ADA. If so, this fact could have a negative effect upon the value of the property.
Since the appraiser has no direct evidence relating to this issue, a possible noncompliance with requirements of the ADA in estimating the value has not been considered.
17. It is assumed there are no environmental concerns that would slow or thwart development of the subject propert ies and that the soils are adequate to support the highest and best use conclusions.
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18. Possession of this report, or a copy thereof, does not carry with it the right of publication. It may not be used for any purpose by any person other than the party to whom it is addressed without the written consent of the appraiser, and in any event, only with proper qualification and only in its entirety. Permission is given for this appraisal to be published as a part of the Official Statement or similar document for the Fontana CFD No. 111 special tax bonds.
HYPOTHETICAL CONDITION
1. It is assumed that all improvements and benefits to the subject properties, which are to be funded by the City of Fontana CFD No. 111 Special Tax Bond Proceeds are completed and in place.
EXTRAORDINARY ASSUMPTION
1. It is assumed that the sales information and remaining development costs as reported by the builder and summarized in the report are correct. Regarding sales ; we have reviewed samples of closed sales against public record when available; however, we have not reviewed escrow documents on sales . Regarding costs; we have received a summarized remaining cost total and are relying on these costs in the valuation analysis.
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PURPOSE OF THE APPRAISAL
The purpose of this appraisal report is to estimate the value of the fee simple interest of the subject property, subject to the special tax lien of Fontana CFD No. 111.
THE SUBJECT PROPERTY
The subject property consists of 198 proposed single-family detached homes being developed into a gated community known as Monterado in the City of Fontana (“City”).
Monterado is located along the east side of Citrus Avenue at Fontus Way , just north of Duncan Canyon Road . Monterado is being built and sold by Lennar and features two product lines: Rivello which includes 89 detached alley load units sized 1,795 to 2,007 square feet, and Salerno which includes 109 detached cluster units sized from 1,822 to 2,207 square feet. The subject community is encompassed by Tract Map 20224 and subsequent condominium maps , which subdivide the property into 89 pads for alley- loaded detached condominiums, and 109 pads for cluster detached condominiums. The lots vary in status from completed models, to homes under construction to finished lots.
The description, ownership and condition of the lands are detailed in the chart below.
Description # Lots Owner Product / Condition / Status
Rivello at Monterado (Ally Load Small Lot Detached) Lot 1 of Tract 20224 – Units1-66 and 97-119 Units 1-12, 21-66, 97-106 and 108-
119
80 Individuals Completed Homes
Units 17-19 3 Lennar Model Homes (0 in Escrow)
Units 107 1 Lennar Over 95% Complete (1 in Escrow)
Units 13-16 and 20 5 Lennar Under Construction (3 in Escrow) Rivello Subtotal: 89
Salerno at Monterado (Cluster Small Lot Detached) Lot 1 of Tract 20224–Units 67-96 and 120-198 Units 67-96, 128-159 and 176-182 69 Individuals Completed Homes Units 195-197 3 Lennar Model Homes (0 in Escrow)
Units 160-167 8 Lennar Over 95% Complete (8 in escrow)
Units 120 – 127 and 168-175 16 Lennar Under Construction (11 in Escrow) Units 183-194 and 198 13 Lennar Finished Lots (0 in Escrow) Salerno Subtotal: 109
TOTAL CFD No. 111 198
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INTENDED USE OF THE REPORT
It is the appraiser’s understanding that the client, the City of Fontana, will utilize this report in disclosure documents related to the sale of the Fontana CFD No. 111 Special Tax Bonds. This report may be included in the Official Statement or similar document to be distributed in connection with the marketing and offering of the bonds. It is the appraiser’s understanding that there are no other intended uses of this report.
DEFINITIONS
Market Value
The term “Market Value” as used in this report is defined as:
"The most probable price which a property should bring in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller each acting prudently, knowledgeably and assuming the price is not affected by undue stimulus. Implicit in this definition is the co nsummation of a sale as of a specified date and the passing of title from seller to buyer under conditions whereby:
1. buyer and seller are typically motivated;
2. both parties are well informed or well advised, and each acting in what he or she considers his or her own best interest;
3. a reasonable time is allowed for exposure in the open market;
4. payment is made in terms of cash in U.S. dollars or in terms of financial arrangements comparable thereto; and
5. the price represents the normal consideration for the property sold unaffected by special or creative financing or sales concessions granted by anyone associated with the sale.”
0F
1 Inherent in the Market Value definition is exposure time or the time the subject property would have been exposed on the open market prior to the appraisal in order to sell at the concluded values. In the case at hand and considering current market conditions , the exposure time for each individually owned property or the entire Lennar owned properties, each in a bulk sale, is less than one year.
1 The Appraisal of Real Estate, 13th Edition
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Finished Lot/Pad
The term “Finished Lot/Pad” is defined as:
“A parcel which has legal entitlements created by a recorded subdivision or condominium map, whose physical characteristics are a fine graded level pad per lot /pad with infrastructure contiguous to each individual lot /pad, asphalt paved roads and the necessary utilities. This term assumes the payment of all applicable development fees with the exception of building permit and plan check fees.”
Minimum Market Value
The term “Minimum Market Value” as used in this report is defined as:
“The base market value of a new home. That is, most buyers purchase some upgrades, options and/or lot premiums when purchasing a new home.
The sales price for the new home typically includes the base price for the plan, plus any upgrades, options or lot premiums, less concessions, if any, which were given or paid for by the builder. The concluded minimum market value is for the base value of the plan only, not taking into consideration any upgrades, options or premiums.”
Mass Appraisal Technique
The term “Mass Appraisal” as used in this report is defined as:
“The process of valuing a universe of properties as of a given date using standard methodology employing common data and allowing for statistical testing”
1F
2 In the case at hand, the statistical testing included reviewing all original builder sales and reviewing the Multiple Listing Service (“MLS”) for any resales and/or current listings of each plan type. In addition, we have determined the actual range of sales prices for each plan type which will be utilized in the valuation process . The search of the MLS resulted in no resales and one current resale listing within the subject property.
Hypothetical Condition
The term “Hypothetical Condition” is defined by USPAP as:
“A condition, directly related to a specific assignment, which is contrary to what is known by the appraiser to exist on the effective date of the assignment results, but is used for the purpose of analysis”
2 USPAP 2018-2019 Edition
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The Hypothetical Condition within this report is that subject property is enhanced by the improvements and/or fee credits to be funded by bonds issued by Fontana CFD No. 111.
Extraordinary Assumptions
The term “Extraordinary Assumption” is defined by USPAP as:
“An assignment specific assumption as of the effective date regarding uncertain information used in an analysis which, if found to be false, could alter the appraiser’s opinions or conclusions”
There is one Extraordinary Assumption within this report which is that the sales information and the cost information as received from Lennar are true and accurate.
Regarding the sales information, we have reviewed sample closings against public record and the information appears reasonable. Regarding costs, w e have received a summarized remaining cost total and are relying on these costs in the valuation analysis.
It should be noted that, if the remaining costs differ, it may change the value conclusion.
PROPERTY RIGHTS APPRAISED
The property rights being appraised are of a fee simple estate interest, subject to easements of record and the special tax lien of Fontana CFD No. 111. The definition of “fee simple estate” is defined as:
“absolute ownership unencumbered by any other interest or estate, subject only to the limitations imposed by the governmental powers of taxation, eminent domain, police power, and escheat.”
2F
3 EFFECTIVE DATE OF VALUE
The subject property is valued as of February 15, 2024.
DATE OF REPORT
The date of this report is April 15, 2024.
3 The Appraisal of Real Estate, 13th Edition
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SCOPE OF APPRAISAL
As previously stated, the purpose of this appraisal is to report the appraiser ’s best estimate of the market value for the subject property, Fontana CFD No. 111 , which is known as the community of Monterado. Lennar is the builder and is actively marketing the homes. Monterado offers two-story floorplans ranging in size from 1, 795 to 2,007 square feet as marketed for Rivello (alley-loaded small lot detached product), and 1,822 to 2, 207 square feet for Salerno (detached cluster product) . There are a total of 198 proposed homes within the subject. This appraisal will be presented in the following format:
• County of San Bernardino Description
• City of Fontana Description
• Immediate Surroundings Description
• Brief Description of Fontana CFD No. 111
• Subject Property Description
• Inland Empire Residential Market Analysis
• Highest and Best Use Analysis
• Valuation Procedure, Analysis and Conclusions
• Appraisal Report Summary
In valuing the subject propert y, the value estimates will be based upon the highest and best use conclusion using the Sales Comparison Approach. The Sales Comparison Approach to value is defined as:
“…a set of procedures in which a value indication is derived by comparing the property being appraised to similar properties that have been sold recently, then applying appropriate units of comparison and making adjustments to the sales prices of the comparables based on the elements of comparison. The Sales Comparison Approach may be used to value improved properties, vacant land or land being considered as though vacant; it is the most common and preferred method of land valuation when an adequate supply of comparables is available.” 3F
4 In the Sales Comparison Approach, market value is estimated by comparing properties similar to the subject that have recently been sold, are listed for sale or are under contract.
Neither a cost or income approach was utilized as they were not considered necessary to arrive at credible results. In addition, we have utilized a mass appraisal technique
4 Dictionary of Real Estate Appraisal, Fourth Edition, 2002 558
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which included reviewing all builder sales and searching the MLS for any resales and/or resale listings.
The due diligence of this appraisal report included the following:
1. Compiled demographic information and related that data to the subject propert y to perform a feasibility/demand analysis.
2. Gathered and analyzed information on the subject marketplace, reviewed several real estate brokerage publications on historical and projected growth in the subject market and researched the micro- and macro- economic outlook within San Bernardino County and the Fontana area.
3. Inspected the subject property between December 1, 2023, and February 15, 2024.
4. Had the site flown by an aerial photographer on January 2, 2024.
5. Interviewed representatives from Lennar and/or their consultants in order to obtain project information.
6. Reviewed a preliminary title report on the subject property.
7. Searched the area for relevant comparable residential land sales , inspected and verified each sale with a buyer or seller or broker familiar with the transaction.
8. Searched the area for relevant comparable new home residential projects, including sales prices and concessions and interviewed representatives from each comparable project.
9. Reviewed the sales brochure and website for the subject community.
10. Reviewed developer sales information on each home within each neighborhood in the community along with reviewing public record on sample lots in each community.
11. Reviewed Multiple Listing Service information to determine if there are any resales, pending resales or listings of resale homes.
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REGIONAL AREA MAP
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COUNTY OF SAN BERNARDINO AREA DESCRIPTION
Location
The subject property is located in the southwestern portion of San Bernardino County, in the northwestern portion of the City of Fontana , about a quarter mile east of I -15. More specifically, Monterado is located along the east side of Citrus Avenue about 450 feet north of Duncan Canyon Road.
San Bernardino County (the “County”) is the largest county in the United States by area containing over 20,100 square miles, and includes large expanses of undeveloped deserts, valleys, canyons and mountains with deserts comprising about 90 percent of the acreage. The County is a major beneficiary of outward urban pressure from Los Angeles, Orange and Riverside Counties. Although located at the periphery of most urban activity in Southern California, the southwestern portion of San Bernardino County has b een a major growth area and is perceived by most observers as an area expected to continue to grow. Riverside and San Bernardino Counties are considered distinct from Los Angeles and Orange Counties, and belong to the same Metropolitan Statistical Area (“MSA”). This area, consisting of San Bernardino and Riverside Counties, is commonly referred to as the Inland Empire.
Transportation
The subject property is situated one-quarter mile east of I- 15, approximately five miles south of its intersection with Interstate 215, about two miles north of Interstate 210 (“I- 210”), and about seven miles north of Interstate 10 (“I-10”). The I-15 and I-210 are the nearest interstates providing access to the subject . From I-15 there is excellent access from Duncan Canyon Road (both heading north and south) and head east a quarter mile to Citrus Avenue. From I-210, access is also very good with on/off ramps at Citrus Avenue and north about two miles. There are also on/off ramps to Citrus Avenue from I -10. I-15 travels in a northerly/southerly direction and provides access to Barstow and Nevada to the north and San Diego to the south. I-10 begins from the west in Los Angeles and provides access into Arizona to the east. In the vicinity of the subject, I -210 provides additional east/west access about two miles north of I -10 beginning in Santa Clarita in 561
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Los Angeles County and provides access near the City of San Bernardino. The subject is located about four miles north of the historical Route 66, the original Los Angeles to Chicago cross country route.
The County is served by Amtrak and Metrolink as well as several rail -freight lines. The Ontario International Airport provides regional international air service and is located approximately 11 miles southwest of the subject property. San Bernardino International Airport is located approximately 12 miles southeast of the subject. In addition, the County has extensive trucking corridors along the previously referred to interstates, highways and state freeways.
Population
The County has experienced population growth for several decades and is anticipated to continue to do so in the foreseeable future. Per the California Department of Finance, the January 1, 2023 (latest available) County population was 2.182 million. This represents a one-year increase of 0. 1 percent. This compares to an average annual growth rate over the past 20 years of 2.1 percent. Current projections for San Bernardino County per the California Department of Finance suggest the population is anticipated to reach approximately 2.32 million by 2030, indicating an average annual increase of approximately 0.9 percent over the next seven years. The current near zero growth rate is lower than the previous 20- year annual average of 2.1 percent, likely due to the disruption of the COVID pandemic. The future growth of 0. 9 percent annually was predicted assuming a more stable market than was seen prior to the Great Recession, however doesn’t take into effect the COVID pandemic.
Economy
The U.S. economy in the past few years has experienc ed challenging times due to reactions from the COVID disruption. These economic challenges include significant inflation, increasing interest rates, banks’ instability and reaching an agreement on the debt ceiling. During COVID, the Federal, State, County and City Governments (“Governments”) originally shut down non-essential businesses and areas where social 562
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gatherings occur in order to slow the spread of the virus. This created a strain on small and large businesses alike. Restaurants and hotels were hit hard and travel reduced drastically as citizens were urged to stay home. Layoffs occurred with reports of 40 million people filing for unemployment the first few months of the pandemic. The Governments attempted to curtail the job losses and hardships with the approval of over 5.6 trillion in COVID relief to our nation. In addition, the Federal Reserve Board ( “Board”) reduced interest rates and started quantitative easing by buying bonds. This legislation helped shore up the U.S. economy; however, due to the significant amount of new money introduced into the economy, inflation began occurring at a rate not seen for 40 years. As of January 2024, the national inflation rate was at 3. 1 percent; up from a low of 2.97 in July 2023, and down from the peak in June 2022 of 9.1 percent. This compares to a 1.24 annual percent rate for 2020 and an average of 1.74 percent annual rate for the previous ten years. Whether it is a result of world turmoil , supply chain issues due to COVID or from the additional money entering the economy, inflation has been hitting Americans hard.
In an effort to curb inflation, the Federal Reserve Board (“Board”) began raising interest rates. Between March 2022 and August 2023, there were eleven interest rate increases rising the Federal Funds Rate (“FFR”) from 0.25 – 0.50 percent to 5.25 – 5.50 percent.
The Board has not increased rates since August 2023, due to the decrease in inflation coupled with other mostly positive signs in the economy. While the eleven increases appeared to help slow inflation, the quick, significant increases strained bank balance sheets. Three major banks failed in early 2023 with the government taking unprecedented action to help shore them up. At the most recent Board meeting (January 31, 2024) they continued to pause the increases for the fourth meeting in a row, however stated there would probably not be a cut in March, as was anticipated by the markets, which was shown in a decrease of over 300 points in the DJIA. After the December Board meeting, some analysts had predic ted the first Federal Funds Rate cut would be in March which created a boon to the economy as the stock market increased to an all -time highs and bond rates decreased the end of December and in January 2024 based on the news. In addition to causing bank instability, the F FR increases over the past couple years 563
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increased a typical 30 -year fixed mortgage rate from 2.98 percent as of November 10, 2021, to the high of 7.79 percent as of October 2023; however, the rate has dropped to
6.9 percent as of February 22, 2024 (per Federal Reserve Economic Data-St. Louis). This steep increase over the past two years has significantly affected the real estate market.
The COVID disruption to the economy also caused extreme volatility in the stock market with the Dow Jones Industrial Average (“DJIA”) dropping from 29,398 in February 2020 to 19,174 in March 2020, a drop of 37 percent. The Government interventions resulted in a bounce back in the DJIA to 27,111 by June 2020 with the stock market then climbing up to a peak of 36,799 in January 2022. In February 2022, Russia began invading Ukraine which caused volatility in world economics followed by U.S. inflation, interest rate increases and instability in the U.S. due to the debt ceiling being reached. In addition, Israel declared war on Hamas on October 7, 2023, which added to the strain. All of these factors caused a drop in the DJIA of over ten percent from January 2022 to the low on October 27, 2023 (32,418); however, the Federal Reserve Board’s notes from December coupled with strong economic news, brought the stock market to a new all -time high of 39,131 (February 23, 2024). It appears the Board’s decision not to increase rates further and their suggestion that a decrease may occur in the next year has been well received by investors. Current concerns on the U.S. economy include the nation’s debt limit which can only be increased through government approvals. The current partisanship in our government caused a stand-off in increasing the debit limit which has been in danger of being reached numerous times with several temporary deals being reached, however, no permanent agreements at this time.
The significant increase in mortgage rates over the past 20 months is just one part of the puzzle affecting the impact of new housing on the broader economy. Additional risks include homebuilders trying to find balanced inventory levels, supply chain issues, both wage and price increases, and persistent inflation. Over t he past 25 years, the Inland Empire economy has had significant cycles with home prices almost doubling from 1995 to 2005, then falling by over 50 percent during the Great Recession, taking prices back to 2002 levels. Home values appeared to hit bottom in 2009 then remained essentially 564
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flat for two to three years with the majority of the Inland Empire housing market seeing an improvement beginning in mid- 2012. Contrary to homebuilder’s original thoughts of a slowdown due to the pandemic, new home buyers stepped up in the spring of 2020 a nd new home sales were significantly higher during the second half of 2020 versus the previous year and continued extremely strong throughout 2021. This exceptional activity in new home sales was the one bright spot in the COVID disruption and is thought to be due to several factors, including: a tight supply of resale homes; historically low interest rates; millennials finally buying homes; and the work from home factor which began during the pandemic and allowed residents to live in more suburban areas without long commutes. As rates began increasing in early 2022, there was a significant slowdown in sales within the Inland Empire. The high mortgage rates have significantly slowed existing homeowners from moving. The limited availability of existing homes on the market has resulted in new homes capturing a much larger share of the total home sales; however, new home sales are also down year-over-year.
While most jobs have come back, job losses were significant during the COVID recession as the Nation’s unemployment rate went from 3.5 percent in February 2020 to 14.4 percent in April 2020, with the December 2023 National unemployment rate at 3.7 percent (Employment Development Department, not seasonally adjusted). The unemployment rate for the MSA was estimated at 5.1 percent (as of December 2023 per the Employment Development Department). This reflects a decrease from the peak during the Great Recession of 15.1 percent in 2010 and a decrease from the peak during COVID of 14.9 percent. As of December 2023, Riverside County’s unemployment rate was 5.2 and San Bernardino County had a 5.0 percent unemployment rate. The current unemployment rate for the MSA of 5.1 percent is similar to the California rate at 5.1 percent and higher than the December 2023 National rate of 3.7 percent. On the following page is a table comparing Riverside County’s unemployment rate to the unemployment rates of the surrounding counties as of December 2023.
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Jurisdiction As of Unemployment Rate*
Los Angeles County Dec-2023 5.3%
Riverside County Dec-2023 5.2%
San Bernardino County Dec-2023 5.0%
Orange County Dec-2023 3.8%
San Diego County Dec-2023 4.3%
Source: State of California E.D.D.; *Not Seasonally Adjusted
The latest UCLA Anderson Forecast (“Forecast”) was issued December 6, 2023, and stated they predict no recession but a weak U.S. Economy in 2024. They believe with retail sales continuing to have robust growth and the backlog of durable goods orders growing along with factory construction soaring, that core inflation will continue to come down. As of December, they expected the Fed to continue to pause increases and are forecasting that that Board will hold the rate until the sufficient weakness in the economy which they forecast will be in mid- to-late 2024. They opine that while monetary policy tightened, fiscal policy eased with the combination of the CHIPS Act, the Infrastructure Act and the Inflation Reduction Act which all added significant demand to t he economy and increased investment. They do state that the impact of higher interest rates will be felt in restraining growth in 2024. The Forecast mentions risks to their current forecast include a possible shutdown of government, geopolitical events and the possibility of a different national economic policy in 2025 due to the election.
The UCLA Forecast for California is typically more positive than the overall Nation due to job growth in California; however, this Forecast suggests a slower -growing California economy. They do believe that employment numbers for the fourth quarter of 2023 and beginning of 2024 will see small but positive growth. The unemployment rate for the fourth quarter of 2023 is expected to average 4.7 percent while the average for 2024 and 2025 is forecast to be 4.5 percent and 3.8 percent respectively. Total employment growth rates are forecast to be 0.3 percent in 2024 and 0.9 percent in 2025 while real personal income is forecast to grow by 1.7 percent in 2024 and 2.7 percent in 2025. Despite the higher interest rates, the continued demand for limited housing stock, coupled with state policies promoting new homebuilding, should induce new homebuilding. They are estimating 127,000 net new units to be permitted in California in 2024 and grow to 155,000 in 2025. 566
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One bright spot in the current economy is sales of new homes. While existing homeowners are reluctant to put their houses on the market due to their under -four percent mortgages, new home sales continue. Even with rates in the seven percent range, new homes are still selling. This is partially due to the extremely limited availability of existing homes on the market, coupled with homebuilders offering to buy-down interest rates to help new home buyers. While new homes historically captured 10 – 13 percent of total home sales; over the past year new homes are capturing over 30 percent of total home sales. This rush to new home purchases has put pressure on pricing, even while interest rates have soared. During the Great Recession median housing prices (existing) in San Bernardino County dropped from a high of $350,288 in March 2006 to a low of $120,406 in May 2009. Median prices surpassed the pre- recession high in September 2020, hit a peak in April 2022 of $495,000 with the median home price bouncing generally between $475,000 and $500,000 over the past six months (all statistics per the California Association of Realtors). T he median home price in San Bernardino County is up 6. 8 percent year over year , which will be discussed further in the Inland Empire Housing Market section later within this report.
As a final indicator of overall economic activity for the region, we have reviewed the rise and fall of TEUs (Twenty-foot Equivalent Units – i.e., containers) being processed in the local ports. This is especially important for the Inland communities, as it represents much of the growth in development of west coast distribution centers and warehouses in the Inland Empire linked to supply -chain nodes in the Pacific Rim. The chart below shows TEU activity at the Port of Long Beach. Generally, there had been increases since 2009 with the exception of a slight dip in 2016 and again in 2019 which ended with a 5.6 percent downturn. The 2022 calendar year saw a decrease of 2.6 percent from the previous year; however, 2023 saw the largest percentage decrease of 12. 2 percent year over year (8,018,668 versus 9,133,657 total TEUs). It should be noted that consumer demand cooled in mid-2022 leaving fewer TEUs needed. Shipments have slowed due to American demand finally waning after the pandemic.
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Government
A Board of Supervisors oversees the County as the governing body of the County, certain County special districts, and the County Housing Authority. The Supervisors enact ordinances and resolutions, adopt the annual budget, approve contracts, and appropriate funds, determine land use zoning for unincorporated areas, and appoint certain County officers and members of various boards and commissions. The Board of Supervisors is elected from five different districts within the County.
Education
The subject area is served by the Fontana Unified School District (“FUSD”). FUSD serves students with five high schools, seven middle schools and 30 elementary schools along with three alternative schools and one adult school . The subject is assigned to Sierra Lakes Elementary School , Ruble Middle School and Summit High School . Community Colleges are available near the subject at Chaffey College in Rancho Cucamonga (seven miles west), at Chaffey College’s Fontana campus, (five miles south), and San Bernardino Valley College (10 miles southeast). Higher education is available approximately seven miles east of the subject at California State University San Bernardino, about 15 miles southeast is University of California at Riverside , 1 5 miles southwest in the private Claremont Colleges (which include Claremont McKenna College, Pitzer College, Harvey Mudd College, Pomona College, and Scripps College) and 22 miles to the southwest at Cal Poly Pomona.
4.0 5.0
6.0 7.0
8.0 9.0
10.0 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20 '21 '22 '23 TEU's (millions)
Year
Port of Long Beach TEUs
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Conclusion
Population in the County has increased over the past 2 0 years with predictions for continued population growth. The Nation’s economy has been slowing after the Board increased the FFR over five percent to fight historical inflation which began during COVID.
One bright spot during COVID was housing; the region’s relative affordability and low interest rates, coupled with the rising prices in the coastal market and the demand for housing, set up a new housing boom. This was followed by a significant drop in sales due to existing homeowners being unwilling to give up their low -rate mortgages. Current concerns for the Inland Empire economy include stubborn inflation, the high prices of homes, higher interest rates, supply chain issues, possible government shutdowns along with the Russian/Ukraine and Israel/Palestine conflicts, which are all creating volatility in both local and global financial markets. A slowdown in the economy is forecast for later this year. In conclusion, the County is expected to continue to grow in population due to its Southern California location, the availability of land, and the relatively lower land and housing prices in comparison to adjacent Orange, Los Angeles, and San Diego Counties.
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CITY OF FONTANA DESCRIPTION
General Area
The subject property is located in the northernmost portion of the City of Fontana (“City”) in southwestern San Bernardino County. The City is situated at the base of the San Gabriel Foothills, east of the cities of Rancho Cucamonga and Ontario, north of Jurupa Valley, west of the City of Rialto and the community of Bloomington, and south of the San Bernardino Mountains. The City encompasses an estimated 43 square miles with generally the northern border the San Gabriel Mountains and the southern border the Jurupa Mountains. The black star on the below map shows the approximate location of Fontana CFD No. 111 within the City limits.
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History
Fontana was founded in 1913 and is the second largest city in San Bernardino County and the 20th largest city in the State of California. The area was a rural farming community with citrus orchards, vineyards and chicken ranches that ran along U.S. Route 66 which is now known as Foothill Boulevard. The historic Route 66, which was built in 1926 to connect Los Angeles to Chicago, is a commercial corridor that runs east/west through the City. During World War II, Henry J. Kaiser opened the Kaiser Steel Mill near Fontana, the only steel mill west of the Mississippi River , which brought industrial employment to the area during the war. To provide for the worker’s health needs, Kaiser constructed the Fontana Kaiser Permanente Medical Facility which now employs more than 5,000 people.
In 1994 the San Bernardino Freeway, whic h later became Interstate 10, was completed connecting Los Angeles to San Bernardino and making accessibility to Fontana relatively easy. This led to substantial growth as Fontana became an industrial hub for the County.
In the 1950s and 1960s the area of Fontana was home to a drag racing strip which served as a significant venue in the National Hot Rod Association (“NHRA”) circuit. In 1997, Roger Penske built the Fontana Speedway, now known as the Auto Club Speedway, which became a major NASCAR sanctioned tract. In 2006, the Auto Club Speedway opened a new NHRA sanctioned drag strip on site to resurrect Fontana’s drag racing heritage. The Auto Club Speedway was purchased by NASCAR in 2019 and hosts at least one major NASCAR race each year. It was recently announced the existing raceway will close due to the redevelopment of the lands; however, a smaller short -track will be developed on a portion of the lands keeping car racing in the area of Fontana.
Population
The January 2023 population of Fontana (per the California Department of Finance) is 213,851, which represents an increase of 0.6 percent over the previous year. The 2000 population of Fontana was 128,928, suggesting the population has increased 66 percent over the past 23 years or an average rate of 2.2 percent per year. The City population represents 9.8 percent of the County population. The 0.6 percent growth compares to an increase of 0.1 percent in the County year-over-year and a negative growth of 0.4 percent 571
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in the State year -over-year. Fontana was one of seven cities within the County with positive population growth in the past year compared to 18 cities with negative growth.
The City has several new home communities currently under construction, especially i n the northern portion of the City. Per the U.S. Census Bureau, the average household size in Fontana is 3.75 persons while in overall San Bernardino County the average household size is 3.26 persons. Over 78 percent of the population of the City are high school graduates and over 28 percent of the population of the City are under 18 years old.
Housing
According to the Southern California Association of Governments (“SCAG”), the City of Fontana has an estimated 55,632 housing units as of 2021 (latest data available), with a growth rate of 56 percent since the year 2000. This compares to the County’s housing growth rate of 22.2 percent during this time. This further illustrates Fontana’s growth spurt due to land available for development over the past 20 years. Fontana hosts over eight percent of the total number of households in the County. Below is a graph showing residential units permitted in Fontana between 2002 and 2022 (2023 not yet available).
While the current numbers are not at pre-Great Recession numbers, they are the highest in the past 15 years. Per SCAG, 68 percent of the housing stock is owner occupied and 32 percent are renters. Only 22 percent of the housing stock in the City was built before 1970 and 78 percent was built since that time. There are several residential projects currently under construction including a 489-unit community known as Nara Hills with five new home communities currently selling; Ventana at Duncan Canyon a mixed- use 1,908
1,545
1,025
209 306 270 261 419 498 865
1,182 1,029
2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2021 2022 Fontana Residential Building Permits
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neighborhood proposed for 842 residential units (257 apartments currently under development) along with retail, office and hotel uses; the Summit at Rosena Specific Plan is ongoing; the Arboretum Specific Plan is also ongoing; Monterado, the subject 198 homes; Mountain View Homes proposed for 156 residential units ; Lennar’s Citrus West proposed for 86 attached units; Stratham Homes 107 condos at Victoria and Et iwanda Creek; Cypress multi-family housing project and two senior living communities. There are additional planned projects according to the City. Per the 2023 annual report, there were 709 new single-family residential permits and 42 multi-family residential permits issued.
According to Redfin Market Trends, the January 2024 median home price in overall Fontana was $642,000 (median of 70 homes) which is 8.8 percent higher than one year prior while the median home price in North Fontana was $697,000 (median of 40 homes) which was 9.0 percent higher than one year prior.
Current new homes communities selling within Fontana include: Aurora Park by Tri Pointe with two neighborhoods, Highland Park by Richmond American with two neighborhoods, Shady Trails with one remaining neighborhood by Tri Pointe, The Arboretum by Lennar with five neighborhoods, Monterado (the subject) with two neighborhoods by Lennar and Nara Hills with five neighborhoods currently being marketed by LandSea Homes.
Access
Fontana has good access with I-15 generally forming the northwest border of the City.
The 210 Freeway provides east-west access through the upper third of the City; Route 66 (also known as Foothill Boulevard) provides east-west access through the approximate middle of the City and the I-10 provides east-west access through the bottom third of the City. Major on/off ramps to the City from I-15 include Foothill Boulevard, Baseline Avenue, the 210 Freeway, Summit Avenue, Duncan Canyon Road and Sierra Avenue. On/off ramps from the 210 Freeway within the City include Cherry Avenue, Citrus Avenue and Sierra Avenue. Route 66/Foothill Boulevard has stop lights at major intersections while the major on/off ramps from I-10 in the City include Etiwanda Avenue, Cherry Avenue, Citrus Avenue and Sierra Avenue. Access to the subject is via I-15 to Duncan Canyon Road to Citrus Avenue or exit Citrus Avenue from either I-210 or I-10 directly to the subject property.
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Economy
Existing commercial property within the City of Fontana is generally along the major thoroughfares including I -10, Route 66/Foothill Boulevard, Sierra Avenue and the 210 Freeway. There are several large shopping centers including Sierra Lakes Marketplace and Falcon Ridge Town Center, both which serve the subject property. There is planned retail across Citrus Avenue from the subject in the Ventana Specific Plan. The City is home to an Amazon Distribution Center, a Target Distribution Center and a FedEx transfer station. The intersection of the I -10 and I -15 is a major industrial hub which extends into the City of Fontana with generally industrial use south of I -10. The Fontana Speedway is located along Cherry Avenue north of I -10 and the Metrolink station is located along Sierra Avenue. The top- ten employers in the City (from 2018 – latest available per City’s website) include the following:
Employer No. of
Employees
Kaiser Hospital 5,430
Fontana Unified School District 5,000
City of Fontana 1,030
Target Distribution Center 621
Costco Wholesale 333
U S F Reddaway 320
Estes West 317
Sierra Aluminum Company 312
Crown Technical systems 297
Walmart Store (Foothill Blvd) 290
Summary
Fontana is located at the base of the San Gabriel Mountains and was incorporated over 100 years ago as a rural farming community. Kaiser Steel brought jobs to the area during World War II and the opening of the I-10 Freeway in the 1950s made it an easy commute to Los Angeles and Orange Counties. Almost 80 percent of the housing stock within the City was built since 1970. Between April 2020 and March 2022 residential building permits grew significantly after a lull in the first 10 years since the Great Reces sion. In the past year permits slowed as sales decreased due to increasing rates. The area has excellent access via three major freeways and the historic Route 66. The area’s central location, reasonable land prices and the availability of land for development combine to make the area a prime area for future growth.
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IMMEDIATE SURROUNDINGS
The subject property is located east of I-15, along the east side of Citrus Avenue north of Duncan Canyon Road , in the northern portion of the City of Fontana. The subject has convenient freeway access to the I-15 via the Duncan Canyon Road, or I-210 or I-10 via the Citrus Avenue exit.
The subject lands are immediately surrounded by vacant land to the north, east and south and Citrus Avenue to the west. To the north beyond a vacant parcel is I -15 (about one- tenth mile north) while immediately to the southeast is a high- wire easement for Edison transmission lines, beyond which are vacant lands. About one- tenth of a mile south (beyond one vacant parcel) is Duncan Canyo n Road, beyond which are recently developed new homes. East, beyond the Edison easement are vacant lands for about three-quarters of a mile to Sierra Avenue, beyond which are existing homes. Beyond Citrus Avenue to the west is the new mixed-use center known as Ventana with Vasari, a luxury apartment complex currently under construction. Ventana is proposed for over 800 homes, retail, office and a hotel.
There are two schools that serve the subject within two miles: Sierra Lakes Elementary School and Summit High School. In addition, the Fontana Park Aquatic Center is about one mile southwest . The middle school that serves the subject is Wayne Ruble Middle School about 2.5 miles south. The closest park is Oak Grove P ark, about one-quarter of a mile south while the regional Coyote Canyon Park is located across I-15 about one-half of a mile west . The subject has its own pool and clubhouse along with a tot -lot for residents’ use.
The closest shopping is about 1.5 miles southwest at the Falcon Ridge Towne Center anchored by Target, Stater Bros Market and Michaels with additional shopping across Beech Avenue anchored by Kohl’s and PetSmart. More regional shopping is located about two mi les south on Citrus Avenue at the I -210 intersection with a Home Depot anchored center and a Costco, Ralph’s Supermarket and a Lowe’s Home Improvement Center. The nearest shopping mall is approximately five miles southwest of the subject 575
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on the west side of I-15, where Victoria Gardens is anchored by a Macys and JC Penney department store in addition to a plethora of restaurant and shopping options, all located across the street from a regional Bass Pro Shop.
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FONTANA CFD NO. 111 – MONTERADO
We have reviewed the City of Fontana CFD Report for Community Facilities District No. 111 (Monterado) dated August 24, 2022, as prepared by David Taussig & Associates, Inc. The CFD Report provides a brief description of Fontana CFD No. 111, a brief description of the facilities to be funded along with an estimate, a description of the boundaries and an estimate of the cost of financing the bonds used to pay for the facilities.
The City Council of the City of Fontana adopted a resolution of intention for Fontana CFD No. 111 (Monterado) on July 26, 2022.
The exterior boundaries of Fontana CFD No. 111 per the Proposed Boundary map are shown below.
Per the CFD Report, at time of formation, Fontana CFD No. 111 encompassed approximately 11.55 taxable acres (per tract map Lot 1 of Tract Map 20224 is 20.37 gross acres - the difference being setback areas, internal streets alleys and driveways , and common areas) proposed for 198 single family detached residential units with 89 alley- loaded detached units ranging in size from 1,795 to 2,007 square feet and 109 detached cluster units ranging in size from 1,822 to 2,207 square feet. 577
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Per the CFD Report, the types of facilities to be eligible for funding are streets, including grading, paving, curbs and gutters, sidewalks, street signalization and signage, streetlights and parkway and landscaping related thereto, sewers, storm drains, fire protection facilities, police facilities, public facilities, landscaping, library facilities, park and recreational facilities and land, rights -of-way, and easements necessary for any of such facilities. The types of public facilities proposed to be purchased as completed facilities by CFD No. 1 11 are streets, including grading, paving, curbs and gutters, sidewalks, street signalization and signage, streetlights and parkway and landscaping related thereto, sewers, storm drains, park and recreational facilities and land, rights-of-way, and easements necessary for any of such facilities. The types of public services to be financed by CFD No. 111 are fire protection and suppression services, maintenance and lighting of parks, parkways, streets, roads and open space, flood and storm protection services and maintenance and operation of any real property or other tangible property with an estimated useful life of five or more years that is owned by the City. Incidental expenses also included are the cost of planning and designing public facilities to be financed, including the cost of environmental evaluations of those facilities; the costs associated with the creation of CFD No. 111 , issuance of bonds, determination of the amount of taxes, collection of taxes, payment of taxes, or costs otherwise incurred in order to carry out the authorized purposes of CFD No. 111; and, any other expenses incidental to the construction, completion, and inspection of the authorized work.
Per the Rate and Method, the Assigned Facilities Special Tax for Developed Property for Fontana CFD No. 111 (Monterado) are estimated as follows:
Land Use
Class
Description
Residential Floor Area
Special Tax
1 Residential Property 2,250 or Greater $3,258 per unit 2 Residential Property 2,050 to < 2,250 $3,218 per unit 3 Residential Property 1,850 to < 2,050 $3,031 per unit 4 Residential Property 1,650 to < 1,850 $2,940 per unit 5 Residential Property < 1,650 $2,907 per unit
6 Non-Residential Property N/A $51,640 per acre
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The estimated cost of public facilities at the time the Fontana CFD No. 111 Report was created were estimated as:
PUBLIC FACILITIES AMOUNT AMOUNT
Acquisition Facilities: $1,896,704(1)
Street Improvements $534,987
Sewer Improvements $399,278
Storm Drain Improvements $391,337
Landscape Improvements $316,071
Street Pole Removal & Relocation $7,635
Construction Costs Contingency $247,396
Other Public Facilities: $4,177,987(2) $2,885,373(3)
Park Facility Improvements $1,350,162 $1,350,162
Traffic Circulation Facility Improvements $1,167,210 $175,079 Storm Drain Facility Improvements $486,249 $364,362
Housing Facility Improvements $274,824 $274,824
Sewer Facility Improvements $178,596 $0
Active Transportation Plan Improvements $161,370 $161,370 Flood Control Facility Improvements $102,196 $102,196
Police Facility Improvements $96,228 $96,228
Public Facility Improvements $90,684 $90,684
Local Arterials Improvements $90,288 $90,288
Fire Facility Improvements $75,240 $75,240
Landscape Facility Improvements $56,826 $56,826
Traffic Signal Facility Improvements $27,918 $27,918
Library Facility Improvements $20,196 $20,196
Additional Capital Facilities Infrastructure Improvements $1,195,519 TOTAL ESTIMATED COSTS $5,977,596
(1) Estimates provided by project developer and inclusive of a 15% contingency. (2) Estimated amount of Permit Fees PRIOR to the application of anticipated City fee credits (3) Estimated among of Permit Fees AFTER the application of anticipated City fee credits.
In addition, CFD No. 111 is expected to finance annual costs to provide fire protection and suppression services, maintenance and lighting of parks, parkways, streets, roads and open space, flood and storm protection services and maintenance and operation of any real property or other tangible property with an estimated useful life of five or more years owned by the City. The Services Special Tax within CFD No. 111 has been established to pay for these public services at approximately $366 per unit per year. This amount is subject to change based on the actual need that arises as development progresses within CFD No. 111 and shall be subject to an annual increase as specified in the Rate and Method of Apportionment. The maximum bonded indebtedness for CFD No. 111 is $8,000,000.
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Per the latest sources and uses of funds (dated March 1, 2024) for the proposed bond issuance, there will be an estimated $7,665,000 in Bond Par Amount and a Net Premium of $131,278 along with $152,614 in Special Tax Collection Funds on Hand for a total bond fund deposit of $7,948,892 with $7,063,067 going to the Project Fund, $504,750 in Debt Service Reserve Fund and $ 381,075 in Underwriter’s Discount and C ost of Issuance (all amounts subject to change). A larger copy of the Fontana CFD No. 111 boundary map is located in the Addenda for your review.
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SUBJECT PROPERTY DESCRIPTION
The subject propert y consists of 198 proposed units being developed as Rivello at Monterado and Salerno at Monterado, both being built and marketed by Lennar. The subject site is shown on the below site plan and described as follows.
Location: East side of Citrus Avenue north of Duncan Canyon Road, Fontana, California
Legal Property
Description: Lot 1 of Tract No. 2022 4 in the City of Fontana, County of San Bernardino, State of California.
Property Owner: Rivello:
Individual Owners as Units 1-12, 21-66, 97-106 and 108-119 of Lot 1 of Tract 20224. Lennar Homes of California, LLC as to Units 13-20 and 107 of Lot 1 of Tract 20224.
Salerno:
Individual Owners as Units 67-96, 128-159 and 176-182 of Lot 1 of Tract 20224. Lennar Homes of California LLC as to Units 120- 127, 160-175 and 183-198 of Lot 1 of Tract 20224.
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Assessors
Parcel Nos.: The subject covers the following APNs: 0239 -142-04 thru 011; 13 thru 20; 22 thru 29; 31 thru 38; 40 thru 47; 49 thru 56; 58 thru 65; and 67 thru 74; 0239-143-01 thru 16; 18 thru 28; 30 thru 36; 38 thru 53; 0239-144-01 thru 12; 14 thru 21; 23 thru 32; 34 thru 41; 43 thru 50; 0239-145-01 thru 12; 14 thru 25; 27 thru 34; 36 thru 41
Property Taxes: We have reviewed the property tax invoice for sample parcel 0239- 144-09-0000. The parcel has an assessed value of $91,954 for land only. The property taxes include $919.54 for the general levy, $32.55 for the Fontana Unified School District bond; $ 9.19 for the Chaffey College Bond; $110.34 for the San Bernardino Valley Municipal Water Debt Service; $10.26 for Fontana Vector Control; $3,031.30 for Fontana CFD No. 111 (Subject CFD) and $366.30 for Fontana CFD No. 111 Tax B (Services). The invoice (as of December 27, 2023, per the County of San Bernardino Tax Collector) shows the first installment paid . It appears there will be a supplemental tax invoice once the improvements are included in the assessed value.
It is an assumption of this report that the overall property taxes and special assessments are not over two percent.
Three-Year
Sales History: Per Lennar, Lennar Homes of California LLC purchased the subject property for $17,500,000 on June 27, 2022. Lennar began closing homes within the subject property to individual owners in November 2022, and has closed 149 houses between November 18, 2022, and February 15, 2024.
Size and Shape: Lot 1 of Tract Map 20224 is irregular in shape and contains 24.44 gross acres and 20.57 net acres per the recorded map which subdivides the subject into one numbered lot and two lettered lots.
Per the site plan provided by Lennar, the lot was further subdivided into 198 units which results in an overall density of 9.62 dwelling units per acre based on the tract map acreage for Lot 1.
Zoning: Per the current City of Fontana General Plan Land Use Map dated July 2023, the site is designated as R MU for Regional Mixed Use which allows for 12-24 dwelling units per acre. The subject lands are not within a specific plan. On April 22, 2020, the Monterado Planned Unit Development for 198 condominium detached units was approved by the Fontana City Council.
Entitlements: The subject is entitled by Tract Map No. 20224, which was recorded on March 24, 2022, and divides the subject into one numbered lot.
Subsequent condominium maps further divide the subject into 198 detached condominium units with 89 alley loaded units and 109 cluster detached units. A copy of Tract Map No. 20224 along with the site plan are located in the Addenda for your review.
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Home Owner’s
Association: Monterado’s monthly HOA fee is estimated per Lennar representatives at $218.75 per month at build-out. The HOA covers maintenance of the community gate, swimming pool, spa,
barbeques, clubhouse and restrooms, community park s, as well as all walkways and community landscaping. The pool, spa, clubhouse and park areas are all under construction.
Topography: The subject lands are generally flat and at grade with streets on the west (Citrus Avenue). The southeast border i s a high tower Edison easement which a lso has generally flat topography. The northern and southern borders are vacant parcels which are generally flat at similar grade to the subject. The subject has been fully graded with the lots and pads generally level with the internal streets which are generally complete.
Soils Condition: We have reviewed a “Supplemental Geotechnical Evaluation” for the subject site dated August 6, 2020, prepared by Petra Geosciences of Riverside. Th e Report is supposed to be viewed in conjunction with their Preliminary Geotechnical Evaluation reports dated September 19, 2018, which we did not receive. The report concludes that, from a geotechnical engineering and engineering geologic point of view, the property is considered suitable for the proposed development, provided the conclusions and grading
recommendations are incorporated into the design of the project.
It is an assumption of this appraisal that the soils are adequate to support the highest and best use conclusion and that all recommendations made within any and all reports were adhered to during construction. The appraiser is not a soils expert and it is recommended that any concerns relating to soils should be addressed to the appropriate experts.
Seismic
Information: Per San Bernardino County’s Geological Hazard Overlay map, the subject property is not located within a County Designated Fault Zone or an Earthquake Fault Zone Boundary and appears to be within two kilometers of the Cucamonga Fault.
Environmental
Concerns: We have not received any environmental reports to review.
It is an assumption of this report that there are no environmental issues which would slow or thwart development of the subject property. This is evidenced by construction of homes on the site and City inspectors on site during construction.
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Flood Information: Per FEMA Map No. 06071C7915H dated August 28, 2008, the property is shown as being located in Zone X which states ar eas determined to be outside of the 0.2 percent annual chance floodplain.
Fire Hazard
Information: Per the City’s General Plan and Zoning Map, the site is within a fire overlay zone. Per the State of California’s Fire Hazard Map, the site appears to be within a LRA (Local Responsibility Area), however is contiguous to a very high fire hazard area per the Map.
Easements and
Encumbrances: We have r eviewed a Preliminary Title Report prepared by Lennar Title as order No. 192002-001275 dated April 2, 2021, which covers Tract Map 20224. The exceptions are as follows.
Item Nos. 1-3 refers to property taxes. Item No. 4 is in regard to the public highway adjacent to the property as stated in a resolution dated April 7, 1892. Item Nos. 5, 6, 7 and 10 refer to easements for public utilities, streets and right-of-way. Item No. 8 refers to the right of the public regarding Citrus Avenue. Item No. 9 pertains to water rights. Item No. 12 states what the title company will need from TAT Sunshine, LLC (previous owner) prior to closing. Item No. 13 states no known matters otherwise appropriate were deleted from the report.
It is an assumption of this appraisal report that the subject lands are free and clear of any liens and/or encumbrances other than Fontana CFD No. 111 , the above referenced CFD Nos. 111 a nd the easements noted above. The appraiser is not a title expert and it is recommended that any concerns relating to title should be addressed to the appropriate experts.
Utilities: All normal utilities are available to serve the subject site by the following companies:
Electrical: Southern California Edison Company
Natural Gas: SoCal Gas
Sewer: Inland Empire Utilities Agency
Water: Fontana Water Company
Schools: Fontana Unified School District
Streets/Access: Access to the subject property is convenient via I -15 to Duncan Canyon Road, east 0.3 miles to Citrus Avenue and north 0.10 miles to the subject site . For access via the I-210 exit Citrus Avenue and travel two miles north to the entrance.
I-15 is a major north/south freeway, which provides access to both international borders with Mexico and Canada.
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I-210 (approximately two miles south of the subject) is an east/west freeway. It begins in Santa Clarita in Los Angeles County and ends near downtown San Bernardino. I -210 provides additional access parallel to I-10 which gets congested at commuting times.
I-10 (4.5 miles south of the subject) is a major east/west freeway in San Bernardino across Los Angeles and San Bernardino Counties.
I-10 provides access to Los Angeles to the west and through San Bernardino County and Riverside County to Arizona to the east. I-10 is an interstate providing a southern route across the U.S. to Florida
Citrus Avenue is a major north/south arterial providing access through all Fontana, beginning near the subject to the north and terminating at the City limits in the Jurupa Hills. Citrus Avenue has on/off ramps from both the I-210 and the I-10.
Internal streets within the subject include: Fontus Way, Via Fonti Lane, Castello Lane and Lozano Street along with many cluster driveway and alley streets.
Current Condition: The subject is being developed into 198 single-family homes consisting of motorcourt cluster pads for 109 detached condominiums and alley load pads for 89 detached condominiums.
Upon our inspection , 164 of the homes were over 95 percent complete including 149 individually owned homes, six model homes, and nine additional production homes owned by the builder ( all in escrow). In addition, there were 21 homes under construction (less than 95 percent complete, 14 in escrow) and 13 additional finished lots/pads (none in escrow).
Costs to Complete: The subject property has been developed into 198 finished lots/pads with internal streets complete and utilities stubbed to each lot. Per Lennar representatives the remaining site development costs and fees include $514,257 in remaining land development fees and $3,005,346 in remaining lan d development costs. This appraisal assumes the bonds are in place. The bonds are anticipated to fund $236,092 of the DIF and Park fees , thus there are $278,165 in remaining Sewer, DIF, Park and School fees to be paid by the builder suggesting total remaining land development costs and fees of $3,283,511. It is our understanding that these costs are the builder’s responsibility and will be spread between the Lennar owned lots as the individual owners are not responsible. Out of the total 19 8 lots/pads, 149 are individually owned leaving 49 lots, pads or homes owned by Lennar. Dividing the $3,283,511 by the 49 lots/pads results in remaining land development costs of $67,010.43 per lot/pad.
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Improvement
Description: Monterado is a gated community with two detached product lines.
Rivello are alley loaded detached condominiums and feature three floorplans sized 1,811 to 2,007 square feet. The floorplans all are two stories with three to four bedrooms and two- car garages. Salerno features detached condominiums arranged in motor courts and has three floorplans sized 1,822 to 2,207 square feet, with three to five bedrooms, two floors and two- car garages . The models for both communities are located just north of the entrance off Fonti Lane .
There are three models for each community. Monterado features two story floorplans with three exterior architectural styles: Traditional, Spanish, and Craftsman. Home exteriors feature dual glazed low -E windows, insulated roll-up sectional garage doors , Boral cool -roof tiles and drought tolerant front yard landscaping. Monterado homes include tankless water heaters, media enclosures and a Honeywell smart thermostat. Interiors include bullnose corners, panel interior doors, LED downlights, white- rocker light switches and ceramic tile at entry. Kitchens include granite slab countertops and thermofoil flat panel cabinets, stainless teel sink and GE stainless steel appliances.
Master suites include undermount sinks with Moen faucets, semi - frameless clad enclosures and walk -in closets. One hundred and forty-nine of the proposed 19 8 homes in the subject property have closed to individuals with closing dates between November 18, 2022, and February 15, 2024. Per Lennar, actual closed sales prices (including premium, upgrades, options, and net all incentives) have ranged from $462,457 to $ 594,182. Current reported base asking prices range from $577,900 to $621,990 while grand opening base asking prices in June 2022 ranged from $585,900 to $634,990. Our search of the MLS revealed no resales and one current resale listing.
Our physical search noted all homes appear to be in excellent condition. It should be noted that the seller is offering varying concessions including some rate buy downs, on a case- by-case basis. The total incentives including closing cost/rate buy downs have ranged from $2,500 to $109,300 with an average amount of almost $46,000 per home to date. The houses which are over 95 percent complete are detailed on the following page.
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*Each asterisk designates one model home per that plan. In addition to the above, there are 21 homes under construction (five at Rivello and 16 at Salerno) and an additional 13 finished lots/pads (all at Salerno).
Monterado by Lennar
Plan
Bed/Bath
Floors/
Parking Sq. Ft. Ind.
Owned
Bldr.
Owned
Rivello at Monterado (Alley Load)
1 3 / 2.5 2 / 2 1,795 27 1*
2 4 / 2.5 2 / 2 1,832 33 2*
3 4 / 2.5 2 / 2 2,007 20 1*
Rivello Subtotals: 80 4
Salerno at Monterado (Cluster)
1 3 / 2.5 2 / 2 1,822 19 3*
2 4 / 2.5 2 / 2 1,932 33 5*
3 5 / 2.5 2 / 2 2,207 17 3*
Salerno Subtotals: 69 11
Monterado Total: 149 15
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THE INLAND EMPIRE HOUSING MARKET
In analyzing the area’s housing market, population growth and economic conditions need to first be considered.
Population
The San Bernardino County population showed minimal 0. 1 percent growth between January 2022 and January 2023, and an average of about two percent the previous 20 years. The stagnant growth during this time is thought to be due to the disruption during COVID. Prior to the COVID pandemic, predictions were for the County to grow at an average annual rate of 0.75 percent over the next eight years. This equates to an increase of approximately 20,000 residents per year suggesting the need for about 7,000 homes per year within the County. The after-COVID influence is still unknown on the County’s population growth. New home sales in most cities in the County from 2020 were higher than the coastal communities due to affordability, the work from home factor, and the fact that millennials are finally entering the housing market. These factors may increase actual County population growth in 2023 . This has been offset by minimal existing home sales resulting in less overall home sales over the past year as compared to one year ago and also as compared to 2019, before COVID.
Economic Conditions
Over the past twenty years the County has seen various cycles in the housing market as with most of Southern California. The Great Recession impacted the Inland Empire significantly and resulted in a longer recovery period than that of other Southern California regions. Median housing prices (all types) in the County increased over 100 percent from $120,406 at the lowest point in 2009 to the current $477,500 per the California Association of Realtors which is slightly lower than the recent December 2023 pe ak of $506,000 median home price in San Bernardino County.
Economic growth in the Inland Empire was strong generally between 2015 (after the Great Recession), and until the economic shutdown due to COVID. The second half of 2020 and all of 2021 saw economic growth, however the first two quarters of 2022 saw 588
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GDP shrinking. The end of 2022 saw lower unemployment rates (December rate of 3.6%) than the Inland Empire’s pre-COVID unemployment rate in February 2020 of 4.0 percent, however 2023 has shown unemployment rising slightly with the December 2023 rate for the Inland Empire at 5.1% . While unemployment rates are near historical lows, the inflation factor has significantly affected the economy.
The housing market played a large role in the past two recessions. In the Great Recession, due to increased interest rates and rising home prices between June 2004 and mid-2006, the market reaction was to create non-conventional financing alternatives, such as sub- prime and non- conventional mortgages, to artificially maintain the boom housing market of 2004 and 2005. By 2007, the housing market saw a shake-up because of the problems in the sub-prime and non-conventional mortgage markets, which played a role in the 2008 upheaval of Wall Str eet and contributed significantly to the U.S. economic downturn of the Great Recession. Due to stricter income verification on new loans and the lack of available credit, coupled with job losses and declining home prices, sales of new homes slowed for the next few years and essentially remained flat until mid- 2012 when home prices began a steady climb.
During the COVID disruption, new home sales were one of the brightest spots in both the local and national economies. While new home sales slowed in March and April 2020 due to the onset of the COVID pandemic, both sales and prices increased significantly due to strong demand from May 2020 throughout COVID until spring 2022 when interest rate increases began affecting the home-buying market. The rising interest rates alone did not seem to slow sales in Spring 2022. However, a combination of increasing home prices and falling consumer confidence, added to the significant interest rate increases, slowed new home sales significantly beginning in mid- 2022. Due to the significantly higher mortgage interest rates, existing homeowners are not moving which has stifl ed the existing home market, making the new home market the only option for some. In the Inland Empire there were 44,796 existing homes closings in the past 12 months (down
26.9 percent from one year ago) and 8,195 new home closings in the past 12 months (down 24.1 percent from the previous year), all information as of March 1, 2024 per Zonda 589
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Research, a new home market research company. In January 2022 mortgage rates were
3.22 percent (for a typical 30-year fixed conventional mortgage) while as of February 22, 2024, the rate for the same loan is 6. 9 percent. On a $500,000 mortgage, the monthly payment for this loan has increased from $2,162 to $3,274 or over 51 percent which has hit homebuyers hard.
Per the Zonda National Economic and Housing Market Update in January 2024, the rate of growth of new home sales is off from COVID highs but up from 2022 sales numbers, suggesting a healthy market. Per their survey of over 300 new-home builders nationally, the builders are stating sales are continuing but report they had to adjust pricing and incentives to “find the market.” In the January 2023 survey, 50 percent of builders surveyed were lowering their prices and the remaining 50 percent stated their pricing was flat. In January 2024, the survey resulted in 54 percent of the builders stating their pricing was flat and 42 percent of builders stating they were increasing pricing with three percent dropping prices. This is a very different dynamic than in January 2023 which was partly due to builder’s readjusting concessions (interest rate buy-downs), and partly due to the market accepting the mortgage rate increases. In today’s market over 60 percent of new- home builders in the U.S. are offering either full-term or temporary interest rate buy-downs (John Burns Research and Consulting) which is helping to sustain new home sales.
The larger public homebuilders began offering significant interest rate buy-downs in early 2023 in order to keep absorption rates steady, which reportedly cost between $30,000 and $100,000 in incentives. The builders are attempting to find the “sweet spot” in incentives. In their September survey of 300 builders nationwide, Zonda asked builders to check all that they were offering and found 70 percent of builders surveyed were offering rate buydowns, 60 percent were offering funds towards closing costs, 33 percent were offering flex dollars, 22 percent were offering lower home prices and 20 percent were offering funds toward options and upgrades. The question is, how long can builders continue to offer these significant incentives. As rates go higher, the extent that builders can buy-down the mortgage rates goes down. In the January 2024 Zonda survey, 56 590
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percent of builders surveyed anticipate a 1-5 percent increase in pricing in 2024 while 25 percent anticipate prices to flatten.
Home loan mortgage rates have been and are still playing a huge part in the housing market. The Board held mortgage rates at all -time lows after the Great Recession and again after the COVID Recession in an attempt to assist the housing market’s recovery.
Low rates helped home sales during these times. However, first -time buyers are now having a hard time entering the housing market due to rising prices and rising interest rates. Mortgage applications had been spiking in late 2020 and 2021 due to the low rates and the fear rates were going to start ticking up, which began happening in March 2022.
The Board has increased the rate eleven times between March 2022 and August 2023, which increased the FFR from 0- 0.25 percent to 5.25- 5.50 percent. At the latest Board meeting in January 2024, they paused the FFR increases for the fourth time and suggested decreases in 2024 will begin sometime after March. The financial markets had been anticipating a possible March decrease which caused volatility in the financi al markets in the past month or so. The FFR increases are supposed to help slow the high inflation rate in the Nation, which appears to be occurring as the latest reports are showing inflation in January 2024 at 3.1 percent, significantly down from a high of 9.1 percent in June 2022.
While new home builders slowed production as sales slowed in 2022, the spring of 2023 brought optimism to builders once again. Sales were up month over month as buyers adjusted to higher mortgage rates and the existing home inventory is at all -time lows.
Existing homeowners that are locked into a 3 percent mortgage are not moving up due to the current almost seven percent rates. This is creating a supply issue for existing homes.
New home sales are benefiting from this supply issue as in some cases, the only option for homebuyers are new homes. Per Zonda, historically, new homes captured 10 to 13 percent of all home sales; however, due to the limited supply of existing homes currently on the market, new homes have captured between 12 and 24 percent of all home sales in the Inland Empire over the past year.
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Residential Land Development
While there had been little land development going on in most of the Inland Empire during the Great Recession years 2008-2011, the second half of 2012 saw a resurgence in the more coveted areas of the Inland Empire. The increase in housing prices since 2012 combined with the limited availability of supply made land development feasible once again for homebuilders. It is thought that the increase in regulations, which has significantly increased the timeline for processing entitlements, has limited the master developers’ further entitlement of developable land in California. While prior to the recession it was not unusual to see numerous large master-planned communities selling lots to various builders, there are few currently available in the subject area. The majority of land sales over the past few years include single tracts of land with maps ready to record or a public builder buying a larger piece of land but develops the land for its own use, such as Aurora by TriPointe Homes ( nearing closeout ), Highland by Richmond American, The Arboretum by Lennar , Monterado by Lennar and Nara Hills by Landsea Homes, all located in Fontana.
Land sales in the Inland Empire slowly grew from 2012 up to a peak in 2017, with 2018 and 2019 showing lower land transactions. Once home sales exploded in May 2020, land sales followed with a significant number of residential land sales to builders in the Inland Empire during the second half of 2020 and throughout 2021. In late 2021 and early 2022, prior to the F FR increases, builders were paying significantly more for residential land that was ready to develop as demand was up and supply was shrinking. The beginning of 2022 continued wi th strong residential land sales until May, when sales began to fall sharply. According to Zonda’s survey of builders regarding residential land purchases, as of January 2023 only 2 percent of builders surveyed were “full steam ahead,” and almost 40 percen t were pausing transactions or bidding lower on land transactions. As of September 2023, these percentages had changed drastically with 46 percent stating they are going “full steam ahead” and 47 percent moving “cautiously forward.” The increase in optimism from new home builders outlook is partially due to the extreme slowdown of existing home inventory which is fueling new home sales. Per Zonda there are currently 592
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about 11,245 vacant developed lots in the Inland Empire which is down 21 percent from the previous year.
New Home Sales and Pricing
We have researched new single- family homes within the subject’s market in order to reflect residential trends. It should be noted these sales numbers and prices pertain to new home sales while later in this section we discuss existing home sales. In review ing new home sales in the Inland Empire market area, per the February 25, 2024, Ryness Report, the year-to-date average sales rate (4.1 sales per month) is above the same time period of the previous year ( 3.7 sales per month). The month of February is typically a slower time due to seasonality in home-buying; however, February 2023 was in the midst of the Federal Reserve rate increases which stalled sales. Surprisingly, even with the increases in pricing and mortgage rates, sales of new homes are occurring at a very good pace; however, this is partially due to the extremely limited supply of existing homes which is creating more demand for new homes. As interest rates rise, purchasing power becomes lower and therefore fewer people purchase new homes. Along with home sales comes a demand for appliances, furniture, building materials and services such as insurance, mortgage services, inspections, interior designers, and landscapers, all contributing to the area economy.
When comparing the February 25, 2024, Inland Empire Ryness Report to one year prior, there are two less projects (244 in February 2023 and 240 in February 2024) and sales are about 10 percent higher year-to-date than the previous year (4. 1 sales per month in February 2024 versus 3.7 sales per month in January 2023). Looking back, in February 2022 the Inland Empire average sales rate was 5. 4 homes per month; in February 2021 the average sales rate was 5.2 homes per month and in January 2020, prior to the pandemic, the average sales rate in the Inland Empire was 4.1 sales per month, similar to the current absorption rate. This similar sales rate to 2020 suggests new home buyers can weather the higher mortgage rates. However, the reader should note existing ho me listings are over 30 percent lower than in 2020 which increases the amount of new home buyers.
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New single -family home pricing (combines both attached and detached) in the Inland Empire has also seen changes. The median new home price in the Inland Empire changed from the peak value of $437,200 in the third quarter of 2006 to $268,155 in early 2009 (decrease of 39 percent) while the current Inland Empire median new home price is $559,280 which is down from a record high of $650,000 in May 2022 per the California Association of Realtors’ latest market report. The current median price reflects an increase of over 100 percent from the bottom of the cycle and an increase of more than 30 percent over its peak prior to the Great Recession, however a decrease from the 2022 peak of 14 percent. In reality, this decrease is actually larger as builders are buying down interest rates which costs the builder at times, up to $100,000, however, the amount is not reflected in the recorded sales price. New home sale prices fluctuate based on the land value and competition more than on the cost of building the home. While finishes and sizes of homes can change, the basic costs on a per square foot basis typically do not fluctuate as much as land values; however, there have been inflationary increases in construction costs adding to this increase. Construction materials have increased an estimated 40 percent since 2019.
We have reviewed Empire Economics’ Price Point Review Study on Fontana CFD No. 111 (Monterado) dated March 4, 2024. Empire Economics did an original Price Point Study on the project in June 2022 in order to determine their market value for the various plans within Monterado. The “Review Study” is to ascertain if the prices have increased or decreased since the original Study. The Empire Economics Price Point Review Study concluded that, in all cases, the current market value conclusions of the homes was between 9 – 10.5 percent lower than the original market value conclusions in 2022 .
Separately, Rivello homes were on average nine percent lower while Salerno homes were on average 10.5 percent lower. The Review Study took into account the concessions which are included in their net prices. This compares with the California Association of Realtor’s reports which suggest prices have decreased 14 percent since the peak in May 2022.
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Within our search for the most comparable actively selling new home communities, we searched the subject’s city of Fontana , which currently features a multitude of actively selling new home communities. We found seven communities comparable to Rivello and Salerno at Monterado. The comparables have base prices ranging from $ 481,390 to $771,200. Both Rivello’s and Salerno’s base prices range from $577,900 to $621,990, which falls well within the range of comparable new homes in the area.
Existing Homes Sales and Pricing
While the previous section looked at new home sales and pricing, this section refers to existing homes in the Inland Empire. According to the California Association of Realtors’ most recent data, within overall Southern California, the median price paid for an existing single-family detached home in January 2024 ($790,000) is the same as the month prior median home price, howev er up 7.0 percent year -over-year from $738,250 in January 2023. These overall Southern California numbers compare to San Bernardino County with $477,500 as the median price paid for an existing detached home in the County in January 2024, down 5.6 percent from December 2023 ($506,000), however up 6.8 percent on a year -over-year basis ($446,900 ). Below is a table showing the sales and prices for the Southern California area by County per the California Association of Realtors.
Southern California Existing Home Sales
County Jan. 2024 Dec. 2023 Jan. 2023
Price MTM
% Change
Price YTY
% Change
Sales YTY
% Change
Los Angeles $833,000 $853,340 $778,540 -2.4% 7.0% 0.8%
Orange $1,320,000 $1,300,000 $1,194,500 1.5% 10.5% -1.0% Riverside $610,000 $607,500 $585,000 0.4% 4.3% -0.1%
San Bernardino $477,500 $506,000 $446,900 -5.6% 6.8% 15.6% San Diego $925,000 $911,500 $824,900 1.5% 12.1% 0.00%
Ventura $870,000 $882,500 $815,000 -1.4% 6.7% 15.8%
Southern Calif. $790,000 $790,000 $738,250 0.0% 7.0% 2.2% Source: California Association of Realtors
Based on January 2024 median existing homes prices, in comparison to the majority of the surrounding counties, San Bernardino has a definite price advantage. The “San Bernardino County Advantage” (price difference between San Bernardino and surrounding counties) is $132,5 00 as compared to Riverside County, $355,500 as 595
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compared to Los Angeles County, $392,500 as compared to Ventura County, $4 47,500 as compared to San Diego County and $825,000 as compared to Orange County. That is, in November 2023, the median priced home in San Bernardino County was $842,500 less than the median priced home in Orange County ($1,320,000). Typically, as the price advantage widens, homebuyers are more open to commuting to further out areas. With the current work-from-home concept, the suburban areas have seen more growth which put pressure on home prices in the Inland Empire.
In a separate attempt to capture the amount of increase in home prices, the resale activity of existing homes in the subject’s immediate area (per Redfin.com) has been reviewed.
The number of sales and sale prices of existing homes within market areas sur rounding the subject are shown in the table below.
Source: Redfin Housing Market Trends November 2023
The median home price of a detached resale home in the subject’s vicinity of North Fontana in January 2024 was $719,000, which is at the high end of the range of the resale detached home prices in the subject area. The low end of the range relates to the Rialto area which has older homes. The above price fluctuations from year-to-year relate to the California Department of Real Estate’s overall San Bernardino County detached home resale price increase of 6.8% percent year-over-year from January 2023 to January 2024.
This suggests that the subject’s immediate marketplace over the past month has largely outperformed the County as a whole.
According to the Ryness Report dated February 25, 2024 , there are currently 26 new home projects in the subject’s Central and East San Bernardino submarkets, with the City of Fontana housing 18 of them (including the subject’s two).
Community
Name
Location
To Subject
No. of
Sales
Jan. ‘24
Jan. ‘24
Median
Sale Price
Price %
Change
Y-O-Y
North Fontana Larger Subject Vicinity 36 $719,000 11.5% All of Fontana Subject and South 71 $642,000 8.7%
Rialto East 35 $545,000 1.5%
Rancho Cucamonga West 50 $684,000 2.1%
Jurupa Valley South 53 $685,000 19.1%
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Monterado - Sales and Pricing
Monterado is comprised of 19 8 single family homes with marketed sizes from 1,811 to 2,207 square feet. Monterado began sales in both Rivello and Salerno in June 2022, with early base pricing ranging from $ 587,900 to $601,990 for Rivello and from $601,900 to $618,990 for Salerno. The latest base pricing at Rivello ranges from $5 77,900 to $583,990 which is 1.7 to 3.1 percent lower than opening base prices, however the largest decreases occurred in late 2022 to early 2023 with decreases of base pricing in the 8.8 –
9.8 percent range. The latest base pricing at Salerno ranges from $582,900 to $621,990 which ranges from 3.1 percent lower to 0.4 percent higher than original base pricing. In early 2023 base pricing had the largest decreases ranging from 5.1 to 11.5 percent off the earliest base pricing. Actual closed prices, including options, upgrades, premiums, and taking into consideration all concessions, have ranged from $ 462,467 to $562,280 for Rivello and $485,558 to $594,182 for Salerno. The significant difference between the base pricing and the actual pricing is options, upgrades and premiums paid by the buyer offset by concessions given by the builder and mortgage companies . The total concessions given by the builder ranges from zero (on one sale) up to $109,300 with an average the sales to date of almost $46,000. A portion of these concessions are not considered in the reported sales prices and are decided on a case -by-case basis and have increased and decreased over the past 18 months due to fluctuating mortgage rates.
Within the subject, Lennar has sold and closed 149 homes to individuals, with an additional 23 homes in escrow which are due to close at completion. The total of 172 sales since June 2022 equates to an absorption rate of 8.2 sales per month spread across the two product types ( 4.2 sales per month for Salerno and 4.0 sales per month for Rivello). These sales rates are considered to be good for the subject marketplace. Per the Ryness Report, a new home tracking service, as of February 25, 2024, year -to-date average sales per project per month in the Inland Empire is 4 .1 homes: similar to the averages sales paces of Salerno and Rivello. This suggests that Monterado has found the correct price points for the subject market.
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Summary
The Inland Empire had seen substantial increases in pricing since 2012 with most areas, including the subject, showing astronomical increases from mid-2020 through early 2022.
While existing home sales were originally down when COVID began in spring/early summer 2020, new home sales subsequently shot up due to the existing home market supply being constrained and interest rates hitting all -time lows. The latest statistics indicate a possible slowdown in sales as interest rates have risen substantially; however, buyers appear to be resilient to the increases . The Fontana new -home submarket is performing in line with the Inland Empire market as a whole. The subject market area saw an increase in pricing consistent with most of Southern California throughout 2020 and 2021 and appeared to be continuing in the beginning of 2022. The past year has seen sales slow and prices lowering; followed by price increases as builders offered additional incentives. Builders’ optimism appears to have returned with builders generally believing prices will increase slightly in 2024 or remain flat. Despite uncertainty hitting the market due to interest rates and inflation, most observers agree that the Inland Empire housing market is healthy and population growth is still estimated to occur in the area. It is believed that as the population continues to increase, housing growth will also continue, despite a possible economic slowdown.
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HIGHEST AND BEST USE ANALYSIS
The highest and best use is a basic concept in real estate valuation due to the fact that it represents the underlying premise (i.e., land use) upon which the estimate of value is based. In this report, the highest and best use is defined as:
"the reasonably probable and legal use of vacant land or an improved property, which is physically possible, appropriately supported, financially feasible, and that results in the highest value”4F
5 Proper application of this analysis requires the subject properties to first be considered “As If Vacant” in order to identify the “ideal” improvements in terms of use, size and timing of development. The existing improvements (if any) are then compared to the “ideal” improvements to determine if the use should be continued, altered or demolished preparatory to redevelopment of the site with a more productive or ideal use.
“As If Vacant”
In the following analysis, we have considered the sites probable uses, or those uses which are physically possible; the legality of use, or those uses which are allowed by zoning or deed restrictions; the financially feasible uses, or those uses which generate a positive return on investment; and the maximally productive uses, or those probable permissible uses which combine to give the owner of the land the highest net return on value in the foreseeable future.
Physically Possible Uses
The subject property is irregular in shape, consisting of 24.44 gross acres and 20.57 net acres per recorded Tract Map No. 20224. The site is in the northern portion of the City of Fontana, along the east side of Citrus Avenue one parcel north of Duncan Canyon Road, east of I-15. The lands are generally at street grade of surrounding streets and I-15, with existing vacant lands to the north and immediately east, existing residential homes to the south (beyond Duncan Canyon Road), and lands under development to the west (beyond Citrus Avenue). There is an Edison easement which houses high- tower wires along the
5 The Appraisal of Real Estate, 11th Edition
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southeast side of the property. Across Citrus Avenue, a new luxury apartment complex (Asari) is currently under construction (now leasing up) within a mixed- use development known as Ventana which is slated for over 800 residences, commercial, retail and hotel uses.
The subject site has been graded for 198 single family homes: 89 pads for detached alley load homes and 109 pads for detached cluster homes. The homes area all detached but are technically condominiums, sitting on HOA owned parcels containing approximately 2,000 square feet. We have reviewed a Soils Report on the subject site which concluded that the development of the site into single-family residential use is feasible; however, all mitigation measures recommended within the report should be adhered to during construction. We did not receive any environmental reports to review. It is an assumption of this report that the soil is adequate to support the highest and best use, and that there are no environmental issues which would slow or thwart development of the property.
This is evidenced by existing homes on the site which were recently built with City inspectors on site during construction.
An engineered drainage system appears to have been designed into a street drainage system for the entire tract. All standard utilities are available to serve the subject property.
The site has good access via I-15, exit Duncan Canyon Road to Citrus Avenue; or from I-210 or I-10 exit Citrus and travel north to the property. There is neighborhood shopping within two miles of the subject at Summit Avenue and I-15.
Based on the physical analysis, the size and access make the subject property physically suited for numerous types of development; however, the grading that has occurred on the site suggests residential development.
Legality of Use
The subject property is located within the City of Fontana in the County of San Bernardino.
Per the City’s General Plan Land Use Map and their current zoning map, the subject site is shown as R MU, or Regional Mixed Use which allows for residential land use with a density of 12- 24 dwelling units per acre. On April 22, 2020, the Fontana City Council 600
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approved the Monterado Planned Unit Development for 198 condominium detached units on the site which equates to a density of 9.62 units per acre. In addition, condominium maps have been approved allowing for 89 detached alley -loaded units and 1 09 cluster detached condominiums, along with a community center and pool /spa, tot lot, gazebo area, outdoor exercise area, covered eating areas, setback areas and internal streets.
Based on the legality of use analysis, the type of development for which the subject properties can be utilized is narrowed to residential use. This is consistent with the findings of the physically possible uses.
Feasibility of Development
The third and fourth considerations in the highest and best use analysis are economic in nature, i.e., the use that can be expected to be most profitable. As discussed under the Inland Empire Housing Market section earlier within this report, the market had shown strong increases in both sales and pricing since COVID until late 2022 when high home prices and increasing interest rates began to slow sales. Overall home sales have slowed down significantly, partially due to existing homeowners not moving due to the higher interest rates, which is stifling the existing home market, at times leaving new homes the only option for homebuyers. Within Monterado there have been 172 sales to date with the first sale occurring in June 2022, suggesting an overall sales rate of 8.2 sales per month (4.2 and 4.0 per project) which is considered to be good and similar to the average year to date sales per project in the area which was 4.1 sales per month. All structures appear to be in excellent condition with no physical depreciation apparent. Within the new home market in Fontana, we found nine projects (including the two subject communities) to be most comparable to the subject property. The subject area in Fontana is priced higher than the homes in the older area of Fontana and Rialto (adjacent to the east). While the market softened in the second half of 2022, the Inland Empire is still seeing demand and new homes are still selling. Our search for land sales found six land sales within the past 18 months that we consider to be comparable. Population growth is still occurring in the area and will continue to create the need for housing. Based on the above analysis, the highest and best use for the subject property appears to be for single- family detached residential development at the right price points.
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Maximum Productivity
Based on the market activity of residential lands in the immediate area, we have concluded there is a need/demand for residential lands.
Highest and Best Use Conclusion – “As If Vacant”
The final determinant of highest and best use, as if vacant, is the interaction of the previously discussed factors (i.e., physical, legal, financial feasibility and maximum productivity considerations). Based upon the foregoing analysis, it is our opinion that the highest and best use for the subject property is for residential land use.
Highest and Best Use – “As Improved”
The subject property consists of Rivello at Monterado and Salerno at Monterado, with 198 total proposed homes which are currently being marketed by Lennar. Monterado began selling in June 2022 and has sold 172 homes, reflecting a sales rate of 8. 2 sales per month spread across the two product lines . Independently, Rivello has an average absorption rate of 4. 0 sales per month while Salerno has an average absorption rate of
4.2 homes per month. Base prices at Monterado have decreased since grand opening, with base price decreases of 1.7 – 3.1 percent at Rivello (with most recent base pricing ranging from $577,900 to $583,990) and an increase of 0.4 percent for the largest plan and decreases of 3.1 percent for the smaller plans at Salerno (with most recent base pricing ranging from $ 582,900 to $621,990). It is interesting to note that base pricing at grand opening in June 2022 dropped between 5 -11 percent across all plans, hitting a low at the end of 2022 and beginning of 2023, however has increased since that time. In marketing the homes, the builder is offering concessions , including rate buy-downs and help with closing costs, on a case-by-case basis. These concessions have ranged from $0 to $ 109,300 with an average of about $46,000 per sale. While the incentives are showing a softening market per Empire Economics’ Price Point Review Study, the plan pricing (including incentives being offered) has decreased between 9.0 and 10.5 percent between proposed pricing in 2022 and current pricing. The sales absorption rate within Monterado is considered to be at or near the average in the market area. As discussed under the Inland Empire Housing Market section, within the Inland Empire, the monthly average sales per project year -to-date is 4.1 homes per month, which is similar to the 602
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subject. All of the homes are of good design and appear to be of good quality workmanship. It appears that Monterado is being well received and the neighborhood is selling at the correct price points for the area. Based on the above information, it is concluded that the highest and best use for the subject property, is for the continued use, as improved.
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VALUATION ANALYSIS AND CONCLUSIONS
The Sales Comparison Approach will be used to value the subject property. This approach compares similar properties that have recently sold or are in escrow. In determining the value for the property, a unit of comparison needs to be addressed. For small lot alley-loan and cluster residential lands, they are typically sold on the basis of a finished pad/lot for a detached unit. That is, the sales price is determined by a finished pad or lot value and then the remaining costs to develop the property to a finished condition are taken into account in the sales price. Therefore, in determining a current market value for the lands, the current condition of the lots will be considered. Our search revealed several projects similar to the subject in that they have some small detached alley and cluster lots. These transactions are typically looked at on a blended price per unit, taking into consideration the overall density of the project.
In the case of the completed home valuations , a single new -home is the unit of comparison. Our search will include all new home projects within the subject’s immediate and surrounding market area to find comparable new homes for sale. In determining the value for each house, a base value will be concluded for each plan which will be considered a minimum market value as most buyers typically purchase some premiums, upgrades or options which increase the price of the home . The minimum market value also includes all concessions given by the builder including mortgage closing costs and buy-downs, if applicable.
For the completed (over 95 percent complete) builder -owned models and production houses, the homes will be valued using the Sales Comparison Approach to conclude on a retail value for each plan, followed by a Discounted Cash Flow (“DCF”) Analysis due to the s ingle ownership. The DCF will take into account the fair market value of the completed homes (utilizing the Sales Comparison Approach), remaining development costs (if any), the marketing and carrying costs associated with selling off the homes, a profit due to the developer of the homes, and a discount rate reflecting both the risk associated with selling off the homes along with the time value of money during the 604
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estimated absorption period. A home under construction (under 95 percent complete) will be valued as a finished lot /pad rather than attribute value to a partially complete improvement. In the case of the individually owned homes, the concluded minimum market value will be used for each plan and a mass appraisal technique will be addressed.
In determining the concluded base value, new home sales in the area will be reviewed and compared with sales of the subject completed homes using standard methodology and statistical testing. All of the value conclusions will take into consideration improvements and/or benefits to be funded by the Fontana CFD No. 111 Special Tax Bonds and their lien. A summary of the final value conclusions will be reported at the end of this valuation section.
Market Data Discussion – Residential Lots
Within Monterado there are 198 pads in a generally physically finished condition, with 149 completed homes individually owned, 15 Lennar-owned homes that are complete or nearly complete (including six model homes and nine homes over 95 percent complete – all in escrow), 21 Lennar-owned homes that are under construction (under 95 percent complete with 14 in escrow ), and 13 additional finished lots/pads owned by Lennar. As we are valuing a home under construction (under 95 percent complete) on the basis of a finished lot/pad, we will be valuing 34 lots/pads in our analysis.
We have searched the area and found the six transactions summarized in the Addenda to be most comparable to the subject property. The sales are reported both on a purchase price basis and on a finished lot basis. The actual purchase price is typically less, depending on the condition of the land (lots or pads) at the time the property was acquired.
Although some sales refer to “finished lots/pads,” they are typically physically finished lots/pads with some fees remaining to be paid to be considered true finished lots/pads.
Below are the details of each of the comparable land sales along with a discussion of each transaction in relationship to the subject property.
Land Sale No. 1 pertains to the sale of a residential site located in Fontana at Lytle Creek Road and Sierra Lakes Parkway, about two miles south of the subject site. D.R. Horton 605
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purchased the property in September 2023 for $9,850,000 or for $68,881 per unit based on an estimated finished lot price of $225,000. The site is mapped for 143 units which includes 96 attached units and 47 detached cluster units. Final engineering was underway at time of sale. This property rears to I -210 and has an overall density of 13.9 dwelling units per acre. When compared to the subject property, this site is considered to be inferior in density (compared to the subject property’s density of about 10 dwelling units per acre) and inferior due to the proximity of the I-210 Freeway.
Land Sale No. 2 refers to the August 2023 sale in the City of Ontario, however not within the master planned community of Ontario Ranch. The property is located along the north side of Concourse Street at Duesenberg Drive. Shea Homes purchased the site in August 2023 for $8,245,000. The site contains an estimated 3.3 acres with entitlements for 84 units which equates to 25.45 dwelling units per acre. The sales price related to $98,155 per unit based on an estimated finished pad price of $198,651. In comparison to the subject properties, this sale has a much higher density which suggests that the per unit or finished lot/pad price is inferior to the subject property with a density in the 10 units per acre range. Due to the extremely higher density , less emphasis is placed on this transaction, however it has been included to show activity in the market and set the lower limit for a parcel with a higher density than the subject.
Land Sale No. 3 refers to another D.R. Horton land purchase in Fontana about 2.5 miles south of the subject property . This site is located along the east side of Citrus Avenue, south of Highland Avenue, and is mapped for 68 attached townhome units. The overall density of the site allows for 15.7 dwelling units per acre which is higher than the subject’s approximate 10 dwelling units per acre density. D.R. Horton purchased the property from 6997 Citrus LLC in August 2023 for $6,300,000 or $92,647 per unit based on an estimated finished pad price of $215,000. The site was sold in an unimproved condition with tentative mapping in place. In comparison to the subject property this site is considered to be inferior due to the higher density and the product being attached versus detached.
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Land Sale No. 4 is in regard to the purchase of another residential site by D. R. Horton.
This property is located at the northwest corner of Citrus and Summit Avenues, about one mile south of the subject property. The site has approved mapping for 85 detached cluster units and sold for $9,850,000 or $115,882 per unit based on an estimated finished lot value of $265,000. The overall density of this property is 9.4 dwelling units per acre, which is similar to the subject’s density. D.R. Horton purchased the site in July 2023 from AKY LLC. In comparison to the subject property, this sale is considered to be the most similar.
Land Sale No. 5 pertains to the latest closing in Ontario Ranch, about ten miles southwest of the subject site. Ontario Ranch is a newer area in the city of Ontario which is being built out, similar to North Fontana. The site is located east of Twinkle Avenue northwest of Haven Avenue. Land Sea purchased the site mapped for 144 lots in June 2023 from a related entity to Richland. The parcel had mapping complete, however was in an unimproved condition at time of sale. The site totals 9.19 acres per brokers familiar with the transaction which suggests a density of 15.6 dwelling units per acre. The proposed product is for 12 unit attached condominiums in a courthouse courtyard configuration.
The property sold for $16,924,000 or $117,528 per unit based on a reported $235,000 finished lot/pad price. In comparison to the subject pro perties, this site has a higher density than the existing products which makes it inferior, however the location of Ontario Ranch is considered to be slightly superior as it is closer in to the employment centers in Riverside, Los Angeles and Orange Counties.
Land Sale No. 6 refers to the purchase of a 6.79-acre site located in Fontana about three miles south of the subject site. RC Homes is planning a new product which includes homes on approximately 6,000 square foot lots, however each home will have an ADU for separate living. Based on the sales price and cost estimates from brokers familiar with the transaction, the site was purchased for $3,525,000 which relates to $76,630 per lot based on the detached 6,000 square foot lots with an estimated finished lot value of $315,000. When looking at the site on the basis of 92 units (total number of units including the ADUs) the cost is $38,315 per unit or $165,000 per finished pad. In comparison to the subject property this product is considered to be slightly inferior when comparing the 92 607
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units (overall density of 13.5 dwelling units per acre versus the subject’s approximate 10 dwelling units per acre ). When comparing the 46 unit s to the subject, this transaction is considered superior in overall density (6.7 dwelling units per acre versus the subject’s approximate 10 dwelling units per acre).
The chart below summarizes the considerations used in adjusting the market data to the subject property.
Data
No. Location Date of
Sale
Lot Size /
Density
Finished
Lot Price Comparison to Subject
1 Fontana 9/23 13.9 du/ac
Some Att. $225,000 Inferior – Density / some attached & rears to Freeway
2 Ontario (Proper) 8/23 25 du/ac
Attached $198,651 Inferior - Density
3 Fontana 8/23 15.7 du/ac
Attached $215,000 Inferior – Density / Attached
4 Fontana 7/23 9.4 du/ac $265,000 Similar
5 Ontario Ranch 6/23 14.5 du/ac $235,000 Inferior – Density / Attached 6 Fontana 10/22
6.7 du/ac
(13.5 du/ac)
$315,000
($165,000)
Superior – Density
(Inferior – Density)
As discussed under the Inland Empire County Housing Market section earlier within this report the Inland Empire real estate market rose significantly between January 2020 and June 2022, softened in mid-2022 and appears to have found its bottom and stabilized in mid-2023. Median home pricing rose over 30 percent between January 2020 and January 2022, however a decrease was seen for about a year, with pricing appearing to rise, once again the second half of 2023. While builders halted land purchases in late 2022 and early 2023, late 2023 saw a flurry of closings as builders were running out of lots. The increases in pricing for existing single-family homes in San Bernardino were 11.9 percent in 2020; 19.1 percent in 2021, a decrease of about one percent in 2022 and an approximate 6.0 percent increase since then. While the new home price fluctuations do affect the quality of the home ( lower finishes with lower prices), most of the price fluctuations fall to the land value.
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The above market data depicts a wide range of overall finished lot/pad price range from $165,000 to $315,000 with both the low and the high end being for a new product type consisting of a home with an ADU on the same lot with the low based on two units per lot and the high end being based on only the single home on the lot. The remainder of the market data ranges from $198,651 to $265,000. The market data at the low end of the range (Data Nos. 1, 2, 3 and 5) all relate to some attached product resulting in a higher density per acre which suggests a lower price per unit. The most similar to the subject in density (Data No. 4) is also located in the subject area and is considered to be a n excellent comparable to the subject property.
Based on the market data, we have concluded that the subject lots/pads have a finished lot/pad price of $2 65,000. There are 2 1 homes under construction (under 95 percent complete), and thirteen generally finished pads/lots, all of which are owned by Lennar .
Based on the above and considering the remaining costs as discussed in the Property Description section, the land value is calculated as follows:
Lennar Ownership of Lots/Pads:
34 Lots/Pads x $265,000 $ 9,010,000
Less: Remaining Costs ($67,010.43 x 34) (2,278,355) Current Value of 34 Lots/Pads $ 6,731,645
Retail House Valuation – Monterado
Within Monterado, there are 149 individually owned homes and 15 homes over 95 percent complete, owned by Lennar. The builder-owned homes over 95 percent complete include nine production homes (all in escrow) and six model homes.
Due to the single ownership of multiple houses ( seven homes) by the builder within the subject property, a Discounted Cash Flow (“DCF”) analysis is needed in order to arrive at a bulk value for the homes within each neighborhood. First, a retail value for each plan within Monterado will be concluded followed by a DCF for the builder owned homes which will take into account the absorption time to sell off the homes, the costs associated with selling off the homes and any remaining costs owed by the builder, if any. The resulting 609
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revenue will be discounted using an appropriate rate to determine the builder-owned bulk value for the builder -owned homes. The DCF builder -owned final value will be followed by a reporting of the concluded values for the individually owned homes within each neighborhood using the concluded base retail value for each plan with a separate check of the analysis utilizing a mass appraisal technique based on actual sales prices of the homes.
Below is a summary of the floor plans within Monterado, within both the Rivello and Salerno product lines . A listing of the improved residential comparable properties is located in the Addenda of this report. All new home comparables are located within the City of Fontana, which currently houses a multitude of actively selling new home communities. Our search of the subject property and the local Multiple Listing Service (MLS) has resulted in no resales and one current resale listing within Rivello which will be considered. The floor plans are detailed below.
*Each asterisk designates one model home per that plan. In addition to the above, there are 21 homes under construction (five at Rivello and 16 at Salerno) and an additional 13 finished lots/pads (all at Salerno).
Below we will address the valuation for each plan. The most appropriate new home comparable data for Rivello at Monterado Plan 1 are shown on the following page.
Monterado by Lennar
Plan
Bed/Bath
Floors/
Parking Sq. Ft. Ind.
Owned
Bldr.
Owned
Rivello at Monterado (Alley Load)
1 3 / 2.5 2 / 2 1,795 27 1*
2 4 / 2.5 2 / 2 1,832 33 2*
3 4 / 2.5 2 / 2 2,007 20 1*
Rivello Subtotals: 80 4
Salerno at Monterado (Cluster)
1 3 / 2.5 2 / 2 1,822 19 3*
2 4 / 2.5 2 / 2 1,932 33 5*
3 5 / 2.5 2 / 2 2,207 17 3*
Salerno Subtotals: 69 11
Monterado Total: 149 15
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Data Model Rm. Ct. Flrs/Pkg. Sq. Ft. Price/SF
Subj. 1 3 / 2.5 2 / 2 1,795 --
1 2 4 / 2.5 2 / 2 1,832 $315.45
2 1 3 / 2.5 2 / 2 1,822 $319.92
3 1 3 / 2.5 2 / 2 1,867 $326.86
5 1 3 / 2.5 2 / 2 1,860 $315.59
7 1 3 / 2.5 2 / 2 1,651 $347.42
7 2 4 / 2.5 2 / 2 1,761 $335.20
8 3 4 / 3 2 / 2 1,669 $304.91
9 3 4 / 2.5 2 / 2 1,661 $367.19
The comparable communities are all located in Fontana. All are of similar quality, design, and appeal however it should be noted that Data Nos. 7, 8 and 9 are either zero lot line, duplex or a new product with Plan 1 over neighboring garages (Data No. 8). Adjustments were considered (when applicable) for location, school districts, lot size, master plan amenities, stories, sales concessions, CFD taxes, common area benefits, total square footage, room count, garage space and other amenities. The new home comparables have a base price range from $304.91 to $367.19 per square foot, with generally the larger homes at the lower end of the range and the smaller homes at the higher end of the range. This is typical due to the economies of scale obtained during construction of the homes .
Monterado’s Rivello Plan 1 has a current base asking price of $ 324.18 per square foot, which is within the range of the comparables. It should be noted that the base prices do not take into consideration the mortgage concessions (either rate buy-downs or closing cost assistance) which average about $46,000 per home which equates to over $25 per square foot on the subject plan. There have been 27 closings of Rivello Plan 1 with sales prices ranging from $257.64 to $300.83 per square foot. There are two current escrows of Rivello Plan 1 with a sales price range of $284.43 to $295.76 per square foot. It should be noted that the reported sales prices include upgrades, premiums , and options along with all concessions given by the builder, while the concluded value relates to a base price for the plan including closing cost concessions. Closing cost concessions do not show up in the reported sales price of the home, however, are a cost of selling the home. It has been concluded that Rivello Plan 1 has a base current market value of $285.00 per square foot.
This calculates as follows:
1,795 sf x $285.00 = $511,575
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The most appropriate new home comparable data for Rivello at Monterado Plan 2 are shown as follows.
Data Model Rm. Ct. Flrs/Pkg. Sq. Ft. Price/SF
Subj. 2 4 / 2.5 2 / 2 1,832 --
1 1 3 / 2.5 2 / 2 1,795 $324.18
1 3 4 / 2.5 2 / 2 2,007 $290.97
2 1 3 / 2.5 2 / 2 1,822 $319.92
2 2 4 / 2.5 2 / 2 1,932 $306.88
3 1 3 / 2.5 2 / 2 1,867 $326.86
5 1 3 / 2.5 2 / 2 1,860 $315.59
6 3 3 / 2.5 2 / 2 1,710 $323.39
The comparable communities are all located in Fontana. All are of similar quality, design, and appeal. Adjustments were considered (when applicable) for location, school districts, lot size, master plan amenities, stories, sales concessions, CFD taxes, common area benefits, total square footage, room count, garage space and other amenities. The new home comparables have a base price range from $290.97 to $326.86 per square foot, with generally the larger homes at the lower end of the range and the smaller homes at the higher end of the range. This is typical due to the economies of scale obtained during construction of the homes. Monterado’s Rivello Plan 2 has a current base asking price of $315.45 per square foot, which is within the range of the comparables. It should be noted that the base prices do not take into consideration the mortgage concessions (either rate buy-downs or closing cost assistance) which average about $46,000 per home which equates to over $25 per square foot on the subject plan. There have been 33 closings of Rivello Plan 2 with sales prices ranging from $257.24 to $306.92 per square foot. There is one current escrow of Rivello Plan 2 with a sales price of $ 284.53 per square foot. It should be noted that the reported sales prices include upgrades, premiums, and options along with all concessions given by the builder, while the concluded value relates to a base price for the plan including closing cost concessions. Closing cost concessions do not show up in the reported sales price of the home, however, are a cost of selling the home. It has been concluded that Rivello Plan 2 has a base current market value of $28 5.00 per square foot. This calculates as follows:
1,832 sf x $285.00 = $522,120
612
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The most appropriate new home comparable data for Rivello at Monterado Plan 3 are shown as follows.
Data Model Rm. Ct. Flrs/Pkg. Sq. Ft. Price/SF
Subj. 3 4 / 2.5 2 / 2 2,007 --
1 2 4 / 2.5 2 / 2 1,832 $315.45
2 2 4 / 2.5 2 / 2 1,932 $306.88
2 3 5 / 2.5 2 / 2 2,207 $281.82
3 2 3 / 2.5 2 / 3 2,090 $308.23
3 3 4 / 3 2 / 3 2,264 $302.12
4 1 3 / 2.5 2 / 2 2,006 $340.03
5 3 4 / 3 2 / 2 2,065 $311.38
6 4 4 / 3 2 / 2 1,950 $306.15
7 4 4 / 2.5 2 / 2 1,970 $306.85
The comparable communities are all located in Fontana. All are of similar quality, design, and appeal. Adjustments were considered (when applicable) for location, school districts, lot size, master plan amenities, stories, sales concessions, CFD taxes, com mon area benefits, total square footage, room count, garage space and other amenities. The new home comparables have a base price range from $281.82 to $340.03 per square foot, with generally the larger homes at the lower end of the range and the smaller homes at the higher end of the range. This is typical due to the economies of scale obtained during construction of the homes. Monterado’s Rivello Plan 3 has a current base asking price of $290.97 per square foot, which is within the range of the comparables. It should be noted that the base prices do not take into consideration the mortgage concessions (either rate buy-downs or closing cost assistance) which average about $46,000 per home which equates to almost $23 per square foot on the subject plan. There have been 20 closings of Rivello Plan 3 with sales prices ranging from $237.79 to $271.58 per square foot. There is one current escrow of Rivello Plan 3 with a sales price of $278.17 per square foot. It should be noted that the reported sales prices include upgrades, premiums, and options along with all concessions given by the builder, while the concluded value relates to a base price for the plan including closing cost concessions. Closing cost concessions do not show up in the reported sales price of the home, however, are a cost of selling the home. There is one Plan 3 Rivello relsale which is currently listed for sale. The home sold in June 2022 for $521,494 ($259.84 per square foot) and is currently listed for $680,000 ($338.81 per square foot). The home 613
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recently came on the market and has not had any offers to date. It has been concluded that Rivello Plan 3 has a base current market value of $265.00 per square foot. This calculates as follows:
2,007 sf x $265.00 = $531,855
The most appropriate new home comparable data for Salerno at Monterado Plan 1 are shown as follows.
Data Model Rm. Ct. Flrs/Pkg. Sq. Ft. Price/SF
Subj. 1 3 / 2.5 2 / 2 1,822 --
1 2 4 / 2.5 2 / 2 1,832 $315.45
1 3 4 / 2.5 2 / 2 2,007 $290.97
2 2 4 / 2.5 2 / 2 1,932 $306.88
3 1 3 / 2.5 2 / 2 1,867 $326.86
5 1 3 / 2.5 2 / 2 1,860 $315.59
6 3 3 / 2.5 2 / 2 1,710 $323.39
The comparable communities are all located in Fontana. All are of similar quality, design, and appeal. Adjustments were considered (when applicable) for location, school districts, lot size, master plan amenities, stories, sales concessions, CFD taxes, common area benefits, total square footage, room count, garage space and other amenities. The new home comparables have a base price range from $290.97 to $326.86 per square foot, with generally the larger homes at the lower end of the range and the smaller homes at the higher end of the range. This is typical due to the economies of scale obtained during construction of the homes. Monterado’s Salerno Plan 1 has a current base asking price of $319.92 per square foot, which is within the range of the comparables. It should be noted that the base prices do not take into consideration the mortgage concessions (either rate buy-downs or closing cost assistance) which average about $46,000 per home which equates to over $25 per square foot on the subject plan. There have been 19 closings of Salerno Plan 1 with sales prices ranging from $266.50 to $ 304.28 per square foot. There are four current escrows of Salerno Plan 1 with a sales price range of $285.68 to $293.96 per square foot.
It should be noted that the reported sales prices include upgrades, premiums, and options along with all concessions given by the builder, while the concluded value relates to a base price for the plan including closing cost concessions. Closing cost concessions do not show up in the reported sales price of the home, however, are a cost of selling the home. It has 614
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been concluded that Salerno Plan 1 has a base current market value of $285.00 per square foot. This calculates as follows:
1,822 sf x $285.00 = $519,270
The most appropriate new home comparable data for Salerno at Monterado Plan 2 are shown as follows.
Data Model Rm. Ct. Flrs/Pkg. Sq. Ft. Price/SF
Subj. 2 4 / 2.5 2 / 2 1,932 --
1 2 4 / 2.5 2 / 2 1,832 $315.45
1 3 4 / 2.5 2 / 2 2,007 $290.97
2 1 3 / 2.5 2 / 2 1,822 $319.92
2 3 5 / 2.5 2 / 2 2,207 $281.82
3 2 3 / 2.5 2 / 2 2,090 $308.23
5 3 4 / 3 2 / 3 2,065 $311.38
6 4 4 / 3 2 / 2 1,950 $306.15
The comparable communities are all located in Fontana. All are of similar quality, design, and appeal. Adjustments were considered (when applicable) for location, school districts, lot size, master plan amenities, stories, sales concessions, CFD taxes, common area benefits, total square footage, room count, garage space and other amenities. The new home comparables have a base price range from $281.82 to $319.92 per square foot, with generally the larger homes at the lower end of the range and the smaller homes at the higher end of the range. This is typical due to the economies of scale obtained during construction of the homes. Monterado’s Salerno Plan 2 has a current base asking price of $306.88 per square foot, which is within the range of the comparables. It should be noted that the base prices do not take into consideration the mortgage concessions (either rate buy-downs or closing cost assistance) which average about $46,000 per home and equates to almost $24 per square foot on the subject plan. There have been 33 closings of Salerno Plan 2 with sales prices ranging from $ 253.17 to $ 307.55 per square foot. There are nine current escrows of Salerno Plan 2 with a sales price range of $272.52 to $293.60 per square foot.
It should be noted that the reported sales prices include upgrades, premiums, and options along with all concessions given by the builder, while the concluded value relates to a base price for the plan including closing cost concessions. Closing cost concessions do not show 615
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up in the reported sales price of the home, however, are a cost of selling the home. It has been concluded that Salerno Plan 2 has a base current market value of $270.00 per square foot. This calculates as follows:
1,932 sf x $270.00 = $521,640
The most appropriate new home comparable data for Salerno at Monterado Plan 3 are shown as follows.
Data Model Rm. Ct. Flrs/Pkg. Sq. Ft. Price/SF
Subj. 3 5 / 2.5 2 / 2 2,207 --
1 2 4 / 2.5 2 / 2 1,832 $315.45
1 3 4 / 2.5 2 / 2 2,007 $290.97
2 2 4 / 2.5 2 / 2 1,932 $306.88
3 3 4 / 3 2 / 3 2,264 $302.12
4 2 4 / 3 2 / 2 2,312 $317.91
4 3 5 / 4 2 / 3 2,777 $277.71
5 3 4 / 3 2 / 3 2,065 $311.38
6 4 4 / 3 2 / 2 1,950 $306.15
The comparable communities are all located in Fontana. All are of similar quality, design, and appeal. Adjustments were considered (when applicable) for location, school districts, lot size, master plan amenities, stories, sales concessions, CFD taxes, common area benefits, total square footage, room count, garage space and other amenities. The new home comparables have a base price range from $ 277.71 to $317.91 per square, with generally the larger homes at the lower end of the range and the smaller homes at the higher end of the range. This is typical due to the economies of scale obtained during construction of the homes. Monterado’s Salerno Plan 3 has a current base asking price of $281.82 per square foot, which is within the range of the comparables. It should be noted that the base prices do not take into consideration the mortgage concessions (either rate buy-downs or closing cost assistance) which average about $46,000 per home and equates to almost $21 per square foot on the subject plan. There have been 17 closings of Salerno Plan 3 with sales prices ranging from $246.20 to $265.89 per square foot. There are six current escrows of Salerno Plan 3 with a sales price range of $255.66 to $270.69 per square foot. It should be noted that the reported sales prices include upgrades, premiums, and options along with all concessions given by the builder, while the concluded value relates to a base price for the plan including closing cost concessions. Closing cost concessions at times do not show 616
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up in the reported sales price of the home, however, are a cost of selling the home and are included in our actual sales price amounts. It has been concluded that Salerno Plan 3 has a base current market value of $250.00 per square foot. This calculates as follows:
2,207 sf x $250.00 = $551,750
Builder Owned Retail Value – Monterado
Within the subject property, there are 15 builder-owned houses over 95 percent complete, six of which are decorated models. Per interviews with builders, upgrades and landscape/hardscape of up to $100,000 are installed in the model homes, however, the builders generally consider this a marketing cost and do not anticipate recovering this investment on a dollar -for-dollar basis. Based on historical information, home sizes and fixtures, actual model home sales within the subject area and the current real estate market, a consideration of a $40,000 premium has been included with each of the model homes. As concluded above, the retail base value conclusions for the builder -owned homes within Monterado are calculated as follows:
Rivello Plan 1 (1 x $511,575) $ 511,575
Rivello Plan 2 (2 x $522,120) 1,044,240
Rivello Plan 3 (1 x $531,855) 531,855
Salerno Plan 1 (3 x $519,270) 1,557,810
Salerno Plan 2 (5 x $521,640) 2,608,200
Salerno Plan 3 (3 x $551,750) 1,655,250
Model Upgrades (6 x $40,000) 240,000
Total Retail Value $ 8,148,930
Absorption Period
In order to arrive at an absorption period for the seven builder-owned homes, the absorption rate for the subject neighborhood along with the surrounding developments has been reviewed. Monterado grand opened in June 2022 and consists of 198 homes. There have been 172 sales since June 2022 suggesting an average absorption of 8.2 homes per month across the two product lines, which is considered to be good for the subject area within the subject’s price points. When looking at each product line individually, Rivello has averaged a sales pace of 4.0 sales per month while Salerno has averaged a sales pace of 4.2 sales per month. Taking into consideration the product, concluded sales prices and current 617
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escrows, along with the current interest rates, it has been concluded that the 15 builder- owned homes will be absorbed within a three-month period at the concluded values.
Remaining Costs
As discussed under the remaining costs section earlier within this report, there is $67,010.43 per lot in remaining land development costs associated with the builder - owned homes, which equates to a total of $ 1,005,156 for the subject 15 homes. It is an assumption of this analysis that the remaining costs will be spread evenly over the three- month absorption time period.
Expenses
In determining an expense rate, several builders in the subject area have been interviewed as to their expenses on selling existing inventory. Expenses include marketing and general administrative costs. These costs typically range from six to ten percent depending on varying factors such as absorption period, intensity of marketing, etc. Due to the volatile market, we are considering e ight percent for marketing expenses and two percent for general and administrative costs for a total of ten percent in expenses for this analysis.
Profit
Several interviews with merchant builders in the area were conducted in order to determine an appropriate profit percentage for the subject properties. In the early 2000s, developers typically attempted to achieve a 10 to 12 percent profit based on gross s ales proceeds. During the early great recession, this range was lowered considerably to six to 10 percent with some builders drastically lowering their profit potential in order to maintain their work force. A ten percent profit is considered appropriate i n the analysis for this project.
Discount Rate
In selecting a discount rate, the following was completed:
1. Interviews with merchant builders in the San Bernardino area
2. Review of current market conditions including current market rates as well as yields reflected in other markets (i.e., municipal bonds, corporate bonds, etc.)
3. The quality, construction, historical sales and product on the subject property 618
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The homes within Monterado began selling in June 2022 with the product being well received in the marketplace with a 8.2 sales per month average across the two product lines with the averages per community at 4. 0 and 4.2 sales per month. This compares to the overall Inland Empire average sales rate per community of 4.1 sales per month (year to date as of February 25, 2024). The subject is performing similarly to the overall market. Based on the sales rate within both communities in the subject project, the competition, the product and location, and current market conditions, a ten percent discount rate is considered appropriate for this analysis.
Discounted Cash Flow Summary
The discounted revenue (see DCF Analyses in addenda) for the builder -owned homes within Monterado is $5,423,349.
Monterado – Lennar Ownership
34 Lots/Pads owned by Lennar $ 6,731,645
15 Houses (including 6 models) Lennar-owned 5,423,349 Total Lennar Ownership $12,154,994
Individual Owners Value Conclusion – Monterado
There are 149 individually owned homes within the subject property. Based on the concluded value for each plan, the individually owned homes within the subject property have a minimum market value of:
Rivello Plan 1 (27 x $511,575) $ 13,812,525
Rivello Plan 2 (33 x $522,120) 17,229,960
Rivello Plan 3 (20 x $531,855) 10,637,100
Salerno Plan 1 (19 x $519,270) 9,866,130
Salerno Plan 2 (33 x $521,640) 17,214,120
Salerno Plan 3 (17 x $551,750) 9,379,750
Total Individual Owned $78,139,585
In an additional review, we have reviewed the original builder sales prices for the homes within the subject property. Closings for the 149 homes occurred between November 18, 2022, and February 15, 2024. The reported closing prices by the builder for the 149 619
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individually owned homes total $78,273,974, which is similar to the concluded value. The builder’s reported prices include premiums, upgrades and purchased options as well as took into consideration all concessions given by the builder , including closing costs and mortgage buydowns. Base pricing decreased since the project opened with a low point in early 2023 and has increased pricing since then. However, in the past 18 months, public builders have increased concessions with rate buy -downs occurring which have totaled up to $100,000 in concessions with an average of about $46,000 per sale within Monterado. Opening base prices in June 2022 ranged from $ 587,900 to $601,990 for Rivello, while Salerno’s opening base prices were from $6 01,900 to $ 634,990. Base pricing hit a low in late 2022/early 2023 with Rivello’s from $535,900 to $542,990 and Salerno’s from $546,900 to $586,990. Current base prices are from $565,900 to $583,990 for Rivello and from $ 573,900 to $626,990 for Salerno. This shows that prices have fluctuated and demonstrates the adjusting of prices to meet the market. The decreasing market and the increasing incentives have been taken into account in our analysis . The above valuation is for the minimum market value, as it takes into consideration the base plan price only and does not take into account any options, premiums or upgrades which were purchased by the buyers; however, it does take all concessions into consideration.
It is our conclusion that the original builder sales prices further substantiate the concluded minimum market value for the individually owned homes.
620
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APPRAISAL REPORT SUMMARY
The appraisal assignment was to value the subject property within Fontana CFD No. 111 which consists of 198 proposed residential units. The 198 units are known as Monterado, being marketed, and sold by Lennar, and are located in the northwestern portion of the City of Fontana. The subject includes two product lines: Rivello , 89 alley load detached condominiums; and Salerno, 109 cluster detached condominiums. As of February 15 , 2024, individuals have purchased and closed 149 of the total 198 proposed houses, with an additional 23 homes in escrow which are due to close upon completion. The community has enjoyed a good sales pace. All structures appear to be in excellent condition with no visible depreciation. We have reviewed builder sales and reviewed the local MLS for current listings or resales and found one current listing which is considered in the report.
The subject properties were valued utilizing the Sales Comparison Approach to value, a Discounted Cash Flow Analysis, and a Mass Appraisal Technique for the individually owned homes. A minimum value was determined by concluding at a base value for the individually owned homes. The valuation took into account the improvements/benefits to be funded by the special tax Fontana CFD No. 111 bond proceeds along with the Fontana CFD No. 111 special tax lien. The concluded aggregate value for the subject properties, subject to their respective special tax lien, is:
Monterado:
Lennar Ownership (34 lots/pads & 15 houses) $ 12,154,994 Individual Owners (149 houses) $ 78,139,585
Total Aggregate Value CFD No. 111 $ 90,294,579
The above values are stated as of said date of value and subject to the attached Assumptions and Limiting Conditions and Appraiser’s Certification. 621
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APPRAISER’S CERTIFICATION
The appraiser certifies that to the best of his knowledge and belief:
1. The statements of fact contained in this report are true and correct.
2. The reported analyses, opinions and conclusions are limited only by the reported assumptions and limiting conditions, and are my personal, unbiased, professional analyses, opinions and conclusions.
3. The appraiser has no present or prospective interest in the property that is the subject of this report, and no personal interest or bias with respect to the parties involved.
4. The appraiser’s compensation is not contingent upon the reporting of a predetermined value or direction in value that favors the cause of the client, the amount of the value estimate, the attainment of a stipulated result or the occurrence of a subsequent event.
5. This appraisal was not based on a requested minimum valuation, a specific valuation or the approval of a loan.
6. The analyses, opinions and conclusions were developed, and this report was prepared, in conformity with the Uniform Standards of Professional Appraisal Practice.
7. Kitty Siino has made a personal inspection of the property that is the subject of this report.
8. Kitty Siino has not performed any appraisal services on the subject property in the past three years.
9. No other appraisers have provided significant professional assistance to the persons signing this report.
10. The reported analyses, opinions and conclusions were developed, and this report was prepared, in conformity with the requirements of the Appraisal Institute’s Code of Professional Ethics and Standards of Professional Appraisal Practice, which include the Uniform Standards of Professional Appraisal Practice.
11. The use of this report is subject to the requirements of the Appraisal Institute relating to review by its duly authorized representatives.
12. As of the date of this report, Kitty Siino has completed the requirements of the continuing education program of the Appraisal Institute.
Kitty S. Siino, MAI
State Certified General
Real Estate Appraiser (AG004793)
622
ADDENDA
623
FONTANA CFD NO. 111
BOUNDARY MAP
624
625
TRACT MAP No. 20224 & SITE PLAN
626
627
628
DISCOUNTED CASH FLOW ANALYSIS
629
Fontana CFD 111 Monterado - Lennar-Owned Houses DCF
MONTH Months MONTH 1 MONTH 2 MONTH 3 TOTAL
3 INCOME:
Retail Sales 8,148,930 $2,716,310 $2,716,310 $2,716,310 $8,148,930
TOTAL INCOME $2,716,310 $2,716,310 $2,716,310 $8,148,930
EXPENSES:
Remaining Costs ($335,052) ($335,052) ($335,052) ($1,005,156) Marketing & Carrying Expenses 10% ($271,631) ($271,631) ($271,631) ($814,893) Profit 10% ($271,631) ($271,631) ($271,631) ($814,893)
TOTAL EXPENSES ($878,314) ($878,314) ($878,314) ($2,634,942)
NET CASH FLOW $1,837,996 $1,837,996 $1,837,996 $5,513,988 Discount Factor 10% 0.9917 0.9835 0.9754
DISCOUNTED CASH FLOW $1,822,806 $1,807,741 $1,792,801 $5,423,349
CUMULATIVE DISCOUNTED $1,822,806 $3,630,547 $5,423,349 $5,423,349
CASH FLOW
630
FINISHED LOT LAND SALES MAP
& SUMMARY CHART
631
FINISHED LOT LAND SALES MAP
632
FINISHED LOT LAND SALES SUMMARY CHART
Data
No. Location / APN / Buyer / Seller Sales
Date
#
Lots Lot Size Sales Price /
Price per Lot
Est.
Finished
Lot Price
Comments
1 SEC Lytle Creek Road and Sierra
Lakes Parkway, Fontana / 1108-052-
various / DR Horton / Sobrato
Foundation
Sept-23 143 13.9 du/ac
$9,850,000 /
$68,881 $225,000
Sold with mapping in place and final
engineering underway. Will have 96 attached
units and 47 detached cluster units. This site
rears to the I-210 freeway.
2 N/S Concours Street at Duessenberg
Drive, Ontario Proper / 0210-531-16 &
30 / Shea / Lewis Group of Companies
Aug-23 84 25 du/ac $8,245,000 /
$98,154 $198,651
Site is 3.3 acres in Ontario proper (not within
Ontario Ranch). Proposed for attached
product.
3 Citrus Lane, SE of Citrus and Highland
Avenues, Fontana / 0240-011-17 / DR
Horton / 6997 Citrus LLC
Aug-23 68 15.7 du/ac
$6,300,000 /
$92,647 $215,000 Sold with tentative mapping in an unimproved condition.
4 NWC Citrus and Summit Avenues,
Fontana / 1107-262-37 / DR Horton /
Aky LLC
July-23 85 9.4 du/ac
$9,850,000 /
$115,882 $265,000 Sold with mapping in place and final
engineering underway.
5 S/E Haven Avenue and Chino Avenue;
east of Twinkle Avenue, Ontario
Ranch / 0218-203-03+ / Land Sea /
Haven Ontario NMC 2 LLC (Richland)
June-23 144 14.5 du/ac $16,924,000/
$117,528 $235,000 12-unit attached courtyard product. Closed in unimproved condition with mapping in place.
6 Glen at Fontana, N/S Chase Road,
W/O Citrus Avenue, Fontana / 0228-
151-17, 18 & 19 / RC Homes / Masjedi
Family
Oct- 22 46
(92)
6.7 du/ac
(13.5 du/ac)
$3,525,000 /
$76,630
($38,315)
$315,000
($165,000)
Product is for a house on small lot with a
separate ADU which creates the 92 units
rather than 46. The information is reported for
both first, just the main houses and secondly
for both the main house and the ADU.
633
IMPROVED RESIDENTIAL
SALES MAP & SUMMARY CHART
634
IMPROVED RESIDENTIAL SALES SUMMARY MAP
635
IMPROVED RESIDENTIAL SALES SUMMARY CHART
Data
No.
Project Name
Location/Developer
Plan Room
Count
Floors/
Parking
Size
(SF)
Lot Size /
Absorption
Base
Sales
Price
Price/SF
1 Rivello at Monterado, Citrus Avenue and Duncan
Canyon Road, Fontana / Lennar
1 2
3 3 / 2.5
4 / 2.5
4 / 2.5
2 / 2
2 / 2
2 / 2
1,795
1,832
2,007
2,000+- sf
(Alley-load)
4.5 sales/mo
$581,990
$577,900
$583,990
$324.18
$315.45
$290.97
2 Salerno at Monterado, Citrus Avenue and Duncan
Canyon Road, Fontana / Lennar
1 2
3 3 / 2.5
4 / 2.5
5 / 2.5
2 / 2
2 / 2
2 / 2
1,822
1,932
2,207
2,000+- sf
(Det.Cluster)
4.1 sales/mo
$582,900
$592,900
$621,990
$319.92
$306.88
$281.82
3 Sienna at Aurora Park, Victoria Street and Kestral
Drive, Fontana / TRI Pointe Homes (final base prices
– nearing sell-out)
1 2
3 3 / 2.5
3 / 2.5
4 / 3
2 / 2
2 / 3
2 / 3
1,867
2,090
2,264
2,000 sf lots
(Alley-load)
2.5 sales/mo
$610,250
$644,200
$684,000
$326.86
$308.23
$302.12
4 Goldenrod at Aurora Park, Victoria Street and
Kestral Drive, Fontana / TRI Pointe Homes
1 2
3 3 / 2.5
4 / 3
5 / 4
2 / 2
2 / 2
2 / 3
2,006
2,312
2,777
2,000 sf lots
(Det. Cluster)
2.2 sales/mo
$682,100
$735,000
$771,200
$340.03
$317.91
$277.71
5 Cascade at Highland Park, South Highland Avenue
and San Servaine Road, Fontana / Richmond
American
1 2
3 3 / 2.5
3 / 2.5
4 / 3
2 / 2
2 / 3
2 / 3
1,860
1,930
2,065
5,000 sf lot
2.0 sales/mo
$586,990
$604,990
$642,990
$315.59
$313.47
$311.38
6 Talise at Highland Park, South Highland Avenue and
San Servaine Road, Fontana / Richmond American
1 2
3 4
3 / 2.5
3 / 2.5
3 / 2.5
4 / 3
2 / 2
2 / 2
2 / 2
2 / 2
1,410
1,650
1,710
1,950
5,000 sf lots
2.9 sales/mo
$527,990
$545,990
$552,990
$596,990
$374.46
$331.51
$323.39
$306.15
7 Blue Sage at Arboretum, Sierra Avenue and Casa
Grande Avenue, Fontana / Lennar
1 2
3 4
3 / 2.5
4 / 2.5
4 / 2.5
4 / 2.5
2 / 2
2 / 2
2 / 2
2 / 2
1,651
1,761
1,862
1,970
2,000 sf lots
(Zero lot line)
3.4 sales/mo
$573,590
$590,290
$596,990
$604,490
$347.42
$335.20
$320.62
$306.85
8 Dayflower at the Arboretum, Cassava Road and
Fieldcress Drive, Fontana / Lennar
1 2
3 3 / 2
4 / 3
4 / 3
2 / 2
2 / 2
2 / 2
1,582
1,563
1,669
Cluster with
Plan 1 Att.
3.1 sales/mo
$481,390
$499,900
$508,900
$304.29
$319.83
$304.91
9 Clementine at Nara Hills, Lytle Creek Road and
Duncan Canyon Road, Fontana, LandSea
1 2
3 3 / 2.5
3 / 2.5
4 / 2.5
2 / 2
2 / 2
2 / 2
1,372
1,450
1,661
Duplex
3.3 sales/mo
N/A
$578,300
$609,900
N/A
$398.83
$367.19
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APPRAISER’S QUALIFICATIONS
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QUALIFICATIONS OF KITTY S. SIINO, MAI
Education
Bachelor of Arts in Business Administration, Financial Investments, California State University, Long Beach, California (1980)
Post-Graduate Study, Real Estate Development, University of California, Irvine, California
Appraisal Institute Classes: Uniform Standards of Professional Appraisal Practice, A & B; Appraisal Principles; Appraisal Procedures; Basic Income Capitalization; Advanced Income Capitalization; Narrative Report Writing; Advanced Applications, Case Studies.
Successfully completed all classes in addition to successfully completing the writing of a Demonstration Report and taking the Comprehensive Exam. Became a Member of the Appraisal Institute in December 1996. Have completed over 100 hours of continuing education through the Appraisal Institute every five years.
Employment
1988 - Present:
Self-Employed Real Estate Appraiser. Duties include the appraisal of various types of properties such as commercial, retail, industrial and vacant land. More complex assignments include easements, right-of-ways and special assessment districts. From 1996 to present, specialized in special assessment districts and community facilities districts appraisals for public entities, including Jurupa Community Services District, Corona Norco Unified School District, City of Corona, City of Chula Vista, City of Sa n Marcos and City of Moreno Valley.
1986-1988:
Project Manager of Development for Ferguson Partners, Irvine, California. Duties included land acquisitions; review of fee appraisals and valuations; analysis of proposed development; planning and design; and management of development, construction and lease-up. The types of properties developed were commercial and industrial. Duties ranged from raw, vacant site development through property management of recently developed projects.
1981 - 1986
Manager of Finance, Construction for Community Development Division, The Irvine Company, Irvine, California. Duties included originating and managing a newly formed division of finance to bridge between the accounting functions and project management functions. Worked with analysis and budgets for Community Development Division. Coordinated with cities in form ing new Assessment Districts and Community Facilities Districts to finance major infrastructure improvements.
Types of properties were apartments and single- family residential lots on a for sale basis to apartment and homebuilders.
1980 - 1981
Investment Counselor, Newport Equity Funds, Newport Beach, California. Duties included obtaining private financing for residential properties, working with appraisals of properties and analyzing the investments.
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Licenses
Real Estate Sales Person, State of California, 1980
Certified General Appraiser, State of California (#AG004793)
Organizations
MAI #11145 - The Appraisal Institute
Public Financing
CASTOFF Meetings, 2006, 2007, 2008, 2009, 2010, 2011, 2013, 2014, 2015, 2016, 2017, 2018, 2019 and 2022
Speaker, Mello- Roos & Special Assessment Financing, UCLA Extension Publi c Policy Program, February 2009 and March 2011
639
City of Fontana
Action Report
City Council Meeting
8353 Sierra Avenue
Fontana, CA 92335
File #: 21-2949 Agenda Date: 4/23/2024
Agenda #: P. Category: Consent Calendar
FROM:
Community Services
SUBJECT:
Fontana Expanded Learning Program Services Agreement
RECOMMENDATION:
Approve the Fontana Expanded Learning Program Services Agreement.
COUNCIL GOALS:
· Improve public safety by emphasizing community-oriented policing, community involvement, and youth programs.
· Increase citizen involvement by Developing future leaders. · Practice sound fiscal management by pursing grant opportunities. · Concentrate on Inter-governmental relations by establishing partnerships and positive working relationships with other public agencies providing services to residents and local businesses.
DISCUSSION:
The Fontana Unified School District (FUSD) has awarded the City of Fontana, the Fontana Expanded Learning Program Agreement as the ASES and ELO-P contracted provider of the Fontana Expanded Learning Program, an after-school enrichment program for the effective term of July 1, 2024, through June 30, 2027. The Agreement provides for a three-year term between FUSD and the City to operate grant funded after-school programs at twenty-eight (28) elementary schools and five (5) middle schools.
The City of Fontana, Community Services Department has provided after-school program service delivery for FUSD for seventeen (17) consecutive operation years of which the current Agreement expires as of June 30, 2024. The Fontana Expanded Learning Program provides a safe place after- school for students in kindergarten through eighth grade with the goal of promoting social, physical, intellectual, and emotional development.
The proposed Agreement is anticipated to be considered by the FUSD Board at their Wednesday, May 1, 2024, Board of Education Meeting
FISCAL IMPACT:
The City of Fontana will be 100% reimbursed for all costs per the Agreement not to exceed a total amount of $19,288,265.00 per year. Operating budgets will be tracked in ORGs 38524101 in the amount of $4,407,402 per year and 38624101 in the amount of $14,880,863 per year respectfully and is included in the FY 2024-2025 Adopted Operating Budget and will be included in subsequent City of Fontana Printed on 4/17/2024Page 1 of 2
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640
File #: 21-2949 Agenda Date: 4/23/2024
Agenda #: P. Category: Consent Calendar
Proposed Annual Operating Budgets thereafter.
MOTION:
Approve the Fontana Expanded Learning Program Services Agreement.
City of Fontana Printed on 4/17/2024Page 2 of 2
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641
1 AGREEMENT
RFP No. 23/24-1667 Expanded Learning Programs
This AGREEMENT is hereby entered into between Fontana Unified School District, hereinafter referred to as "DISTRICT", and City of Fontana hereinafter referred to as "CONSULTANT."
WHEREAS, DISTRICT is authorized by Section 53060 of the California Government Code to contract with and employ any persons for the furnishing of special services and advice in financial, economic, accounting, engineering, legal or administrative matters, if such persons are specially trained, experienced and competent to perform the special services required; and WHEREAS, CONSULTANT is specially trained, experienced and competent to perform the special services required by the DISTRICT, and such services are needed by DISTRICT on a limited basis; CONSULTANT has reviewed the entirety of the AGREEMENT, including Exhibit "A" as to the Services to be provided, and represents and warrants that the CONSULTANT is qualified, has sufficient staff and expertise, licensed and certified where required, and availability to timely and fully perform the special services for the DISTRICT.
NOW THEREFORE, the parties agree as follows:
1. Incorporation of Recitals: The parties adopt and incorporate by reference the foregoing recitals as a term of the AGREEMENT.
2. Services to be Provided by CONSULTANT: SEE EXHIBIT "A" ATTACHED for detailed description of services.
3. Precedence of AGREEMENT Over Exhibits: Should there be any ambiguity or inconsistency between any exhibits to this AGREEMENT and the terms of this AGREEMENT, the terms of this AGREEMENT take precedence.
4. Term: The effective time period of this Agreement is July 1, 2024, through June 30, 2027, and subject to all provisions of the primary CDE Grant, as well as any subsequent contract modification or additional requirements by the CDE. If this Agreement differs from the primary Grant, then this Agreement governs the understanding between the DISTRICT and CONSULTANT, so long as this AGREEMENT does not abrogate any provision of the Grant. Pricing shall be held firm for the duration of the contract.
DISTRICT shall pay CONSULTANT in Net 30 Payment Terms, unless otherwise stated.
5. Compensation:
A. DISTRICT agrees to pay the CONSULTANT for services, SEE EXHIBIT "B", satisfactory rendered pursuant to this AGREEMENT, a total NOT TO EXCEED AMOUNT of:
Nineteen Million Two Hundred Eighty-Eight Thousand Two Hundred Sixty-Six Dollars and 0/100 Cents ($19,288,266.00.)
DISTRICT shall pay CONSULTANT in Net 30
Payment Terms, unless otherwise stated.
B. [NOT USED.]
C. CONSULTANT shall submit a monthly invoice for all Services rendered in accordance with this AGREEMENT within 30 days of providing such Services and shall include a reasonably descriptive invoice as to the services rendered, costs or sums billed over the time frame being billed. All invoices are to be sent to the school site/department that requested services to be signed by Principal/Department Head. Payment cannot be processed until signature of Principal/Department Head is on either Request for Payment Form or Invoice.
D. Upon early termination pursuant to the early termination provisions of this AGREEMENT, the DISTRICT shall pay CONSULTANT for all approved Services performed in accordance with 642
2 this AGREEMENT prior to the date of termination. Any amounts disputed and unpaid by the DISTRICT shall be withheld pending the outcome of the dispute resolution procedures set forth herein.
6. Expenses: DISTRICT shall not be liable to CONSULTANT for any cost or expenses paid for or incurred by CONSULTANT in performing services for DISTRICT, unless indicated in Paragraph 5 above, absent a prior signed written consent by an authorized DISTRICT representative as to the proposed expense absent which no costs or expenses of CONSULTANT shall be the responsibility or obligation of the DISTRICT to pay or reimburse. CONSULTANT shall oversee staff and service delivery per costs indicated in Paragraph 5.
7. Independent Contractor: CONSULTANT, in the performance of this AGREEMENT, shall be and act as an independent contractor and as such, is subject to direction of DISTRICT as to the result to be accomplished and not as the means and manner by which such results is to be accomplished.
CONSULT ANT understand and agrees that CONSULTANT and all of CONSULTANT's employees shall not be considered officers, employees or agents of the DISTRICT, and are not entitled to benefits of any kind or nature normally provided to employees of the DISTRICT and/or to which DISTRICT'S employees are normally entitled, including, but not limited to, State Unemployment Compensation or Workers' Compensation. CONSULTANT assumes full responsibility for the acts and/or omissions of CONSULTANT'S employees or agents as they relate to the services to be provided under this AGREEMENT. CONSULTANT shall have no authority, express or implied, to bind DISTRICT in any manner, nor to incur any obligation, debt or liability of any kind or behalf of, or against, DISTRICT, whether by contractor or otherwise, unless such authority is expressly conferred to CONSULTANT under this AGREEMENT or is otherwise expressly conferred by DISTRICT in writing.
CONSULTANT shall assume full responsibility for payment of all federal, state, and local taxes or contributions, including unemployment insurance, Social Security, and income taxes with respect to CONSULTANT'S employees. CONSULTANT covenants and agrees to defend, indemnify, and hold harmless the DISTRICT from any loss, damage or sums claimed as against the DISTRICT by reason of CONSULTANT's breach or failure to perform as recited.
Removal of Employees or Agents: If any of CONSULTANT's officers, employees, agents, contractors, subcontractors or subconsultants is determined by the DISTRICT Representatives to be uncooperative, incompetent, a threat to the adequate or timely performance of the tasks assigned to CONSULTANT, a threat to persons or property, or if any of CONSULTANT' s officers, employees, agents, contractors, subcontractors or subconsultants fail or refuse to perform the Work in a manner acceptable to the DISTRICT in the DISTRICT's sole unfettered discretion, such officer, employee, agent, contractor, subcontractor or subconsultant shall be promptly removed by CONSULTANT and shall not be re-assigned to perform any of the Work.
8. Conflicts of Interest: CONSULTANT warrants and covenants that CONSULTANT presently has no interest in, nor shall any interest be hereinafter acquired in, any matter which will render this AGREEMENT a violation of any applicable state, local, or federal law, or District policy, regarding conflicts of interest, including, but not limited to, Government Code section 1090. CONSULTANT shall comply with all provisions of the Political Reform Act and implementing regulations, as applicable, and in accordance with the DISTRICT's Conflict of Interest Code. If any principal CONSULTANT of the Services is a "consultant" for the purposes of the Fair Political Practices Act (Gov. Code § 81000 et seq.), each such person shall comply with Form 721 Statement of Economic Interests filing requirements in accordance with state or local Conflict of Interest Code. If any conflict of interest should hereinafter arise, CONSULTANT shall promptly notify DISTRICT of the existence of such conflict of interest. The existence of a conflict of interest which violates any applicable state, local, or federal law, or DISTRICT policy shall be cause for immediate termination of this AGREEMENT.
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3 9. Non-Discrimination: In the performance of this AGREEMENT, CONSULTANT shall not discriminate against any employee, subcontractor, subconsultant, or applicant for employment because of race, color, creed, religion, sex, marital status, sexual orientation, national origin, ancestry, age, physical or mental disability or medical condition as well as any further protected classes or protections against discrimination not expressly recited.
10. Material: CONSULTANT shall furnish, at his/her own expense, all labor, materials, equipment, supplies and other items necessary to complete the services to be provided pursuant to this AGREEMENT, unless otherwise arranged with site. CONSULTANT's services will be performed, findings obtained, reports and recommendations prepared in accordance with generally and currently accepted principles and practices of his/her profession.
11. Originality of Services: CONSULTANT agrees that all technologies, formulas, procedures, processes, methods, writings, ideas, dialogue, compositions, recordings, teleplays, and video productions prepared for, written for, submitted to the DISTRICT and/or used in connection with this AGREEMENT, shall be original to CONSULTANT and shall not be copied in whole or in part from any other source, except that submitted to CONSULTANT by DISTRICT as a basis for such services.
12. Copyright/Trademark Patent: DISTRICT agrees that CONSULTANT shall use its previously developed and to-be-developed tools, surveys and other copyright and patent-protectable resources in fulfillment of this AGREEMENT. All such material shall remain the exclusive ownership of CONSULTANT with a limited right to use and reproduce those materials pr ovided to DISTRICT for its continued use and application of the training services which include workbook material and surveys. DISTRICT may not reproduce or in any way utilize these materials for competitive purposes or provide them to others including the use of the materials to provide substantially similar training outside of DISTRICT's own internal use.
13. Work Product Ownership: All reports, studies, information, data, statistics, forms, designs, plans, procedures, systems, work products, and other materials (collectively, the "Work Product") produced by CONSULTANT under this AGREEMENT shall be the property of DISTRICT and CONSULTANT. No Work Product produced, either in whole or in part, under this AGREEMENT shall be subject to private use, copyright, or patent by CONSULTANT in the United States or in any country without the prior written consent of the DISTRICT. The DISTRICT and CONSULTANT shall have unrestricted authority to publish, disclose, distribute, transfer, and use copyright or patent any Work Product produced by CONSULTANT under this AGREEMENT. No CONSULTANT, firm, or corporation may use the DISTRICT logo without pre-approval from the District's Superintendent or authorized designee.
14. Failure to Provide Satisfactory Service, Abandonment of Project. Cancellation of Agreement:
A. If, at any time during the performance of the AGREEMENT, DISTRICT determines, at DISTRICT'S reasonable discretion to suspend indefinitely or abandon the work under this AGREEMENT, DISTRICT shall have the right to cancel this AGREEMENT and terminate the performance of CONSULTANT's services hereunder. In the event of such cancellation, written notice shall be given at least one hundred eighty (180) days prior and in accordance with CDE Grant provisions. CONSULTANT may not terminate this AGREEMENT except for cause as provided under Section 14.B., below. If this AGREEMENT is terminated as provided herein, DISTRICT may require CONSULTANT to provide all finished or unfinished documents and data and other information of any kind prepared by CONSULTANT in connection with the performance of the professional services, and DISTRICT shall pay CONSULTANT for all approved services provided in accordance with this AGREEMENT up to the date of the notice of cancellation. CONSULTANT shall be required to provide such documents and data within fifteen (15) calendar days of DISTRICT's written request. No actual or asserted breach of this AGREEMENT on the part of DISTRICT pursuant to Section 14.B., below, shall operate to prohibit or otherwise restrict DISTRICT's ability to terminate this AGREEMENT for convenience as provided under this Section.
B. If CONSULTANT fails to perform after-school program service delivery as per grant/fundi ng provisions e stablished by the California Department of Education (CDE), After School Education and Safety Grant (ASES) and Expanded Learning Opportuniti es Program (ELO-P) 644
4 requirements, the DISTRICT may terminate this AGREEMENT, and DISTRICT shall be obligated to pay CONSULTANT only for those approv ed services performed by CONSULTANT in accordance with this AGREEMENT as of the effective date of such termination. If the cancellation is the result of DISTRICT’S decision to suspend indefinitely or abandon the work under this AGREEMENT, DISTRICT shall be obligated to pay CONSULTANT only for those services performed by CONSULTANT through the effective date of cancellation or termination. Within ten (10) business days of DISTRICT's issuance of a notice of te rmination for any failure of CONSULTANT to provide satisfactory performance, CONSULTANT is to provide DISTRICT or DISTRICT's employees or agents with any information and/or written reports, documentation, or work product which CONSULTANT is obligate d to provide to DISTRICT or DISTRICT's employees or agents under this AGREEMENT. CONSULTANT shall have ten (10) business days from the date of the notice of termination to fully cure all deficiencies stated in notice of termination to the reasonable satisfaction of the DISTRICT. Prior to the expiration of the 10-day cure period, CONTRACTOR may submit a written request for additional time to cure the unsatisfactory performance upon a showing that CONSULTANT has commenced efforts to cure the noted deficiencies and that the deficiencies cannot be reasonably cured within the 10-day cure period. The foregoing notwithstanding, DISTRICT shall be under no obligation to grant additional time for the cure of an Event of Default that exceeds fourteen (14) calendar days from the end of the initial 10- day cure period. The foregoing provisions are in addition to and not a limitation of any other rights or remedies available to the DISTRICT.
C. Early Termination: This AGREEMENT may be terminated as follows unless otherwise specified herein:
a. Mutual: The Parties may terminate this AGREEMENT at any time by mutual agreement in writing.
b. Breach: Either party may terminate this AGREEMENT in the event of a material breach by the other party. To be effective, the party seeking termination must give to the other party written notice of the breach and its intent to terminate. Said notice must describe the breach in sufficient detail to provide the other party with ten (10) business days’ notice and an opportunity to cure. Prior to the expiration of the 10-day cure period, the breaching party may submit a written request for additional time to cure the breach upon a showing that the breaching party has commenced efforts to cure the breach and that the breach cannot be reasonably cured within the 10-day cure period. The foregoing notwithstanding, the non-breaching party shall be under no obligation to grant additional time for the cure of a breach that exceeds fourteen (14) calendar days from the end of the initial 10-day cure period. c. CONSULTANT Licensing; Bankruptcy: Notwithstanding any other provision herein, DISTRICT may terminate this AGREEMENT immediately by written notice to CONSULTANT upon either of the following events: (1) denial, suspension, revocation, or non-renewal of any license, permit, insurance, or certificate that CONSULTANT must hold to perform the Services; or (2) in the event CONSULTANT files for bankruptcy.
d. Furlough: DISTRICT reserves the right to immediately terminate or otherwise suspend this AGREEMENT without notice if DISTRICT's Governing Board determines that funding for the Services (including If ASES and ELOP Grant funding) is insufficient to pay for all services required under this AGREEMENT.
15. Special Provisions:
A. If CONSULTANT is an individual, they shall complete the certification block on the "Request for Payment" form provided by DISTRICT stating whether or not CONSULTANT is a retired member of the State Teacher's Retirement System of the State of California .
B. This AGREEMENT may be amended by the mutual written consent of the parties hereto. Any amendment or modification of this AGREEMENT shall be effective only if it is in writing and signed by the parties.
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5 16. Indemnification: DISTRICT and CONSULTANT mutually agree to and does hereby indemnify, hold harmless and defend the DISTRICT and CONSULTANT, its officers, agents and employees from every claim or demand made and every liability, loss damage or expense, of any nature whatsoever, which may be incurred by reason of:
A. Liability for damages for: (1) death or bodily injury to person; (2) injury to, loss or theft of property; or (3) any other loss, damage or expense arising out of (1) or (2) above, sustained by any person, firm or corporation employed either directly or by independent contract, upon or in connection with the services called for in this AGREEMENT, however caused, except for liability for damages referred to above which result from the sole negligence or willful misconduct of its officers, employees or agents .
B. Any injury to or death of any persons, its officers, agents and employees, or damage to or loss of any property caused by any act, neglect, default, or omission of any person, firm or corporation employed by the consultant, either directly or by independent contract, arising out of, or in any way connected with, services covered by this AGREEMENT, whether said injury or damage occurs either on or off DISTRICT'S property, except for liability for damages which result from the sole negligence or willful misconduct of the DISTRICT, its officers, employees or agents.
C. Any liability for damages which may arise from the furnishing or use of any copyrighted or uncopyrighted matter or patented or unpatented invention under this AGREEMENT.
D. DISTRICT shall have the right to offset against the amount of any compensation due CONSULTANT under this AGREEMENT any amount due DISTRICT from CONSULTANT as a result of CONSULTANT's failure to pay DISTRICT promptly any indemnification arising under this Article and related to CONSULTANT's failure to either (i) pay taxes on amounts received pursuant to this AGREEMENT or (ii) comply with applicable workers' compensation laws.
17. Insurance: During the term of this AGREEMENT, at CONSULTANT's sole cost and expense, CONSULTANT agrees to procure and maintain the following insurance:
Comprehensive general liability insurance in an amount not less than $1,000,000 per occurrence and $2,000,000 aggregate per coverage year.
(Contract Services $1,000,000 or more: Per Occurrence $2,000,000 /Aggregate $4,000,000) If CONSULTANT's services, identified in paragraph 2 of the AGREEMENT, requires CONSULTANT to work directly with students or requires CONSULTANT to be in a site when students are present, Sexual Abuse/Molestation Coverage must be included under General Liability or obtained in separate policy in an amount of not less than $2,000,000 per occurrence and $4,000,000 aggregate. ____ Certificate of General Liability Insurance and Additional Insured Endorsement attached.
____ Certificate of Sexual Abuse and Molestation Coverage & Additional Insured Endorsement attached.
Automobile liability insurance in an amount not less than $1,000,000 per occurrence. ___ Certificate of Auto Liability attached.
Professional liability insurance (aka: errors and omissions or malpractice) in an amount not less than $1,000,000 per occurrence and $2,000,000 aggregate per coverage year.
____ Certificate of Professional Insurance is attached. Workers' Compensation insurance as required under California law with statutory limits an d Employers' Liability limits of $1,000,000 per disease or accident. The Workers' compensation policy shall be endorsed with a Waiver of Subrogation in favor of the DISTRICT for all work performed by the CONSULTANT, its employees, and agents.
______Workers' Compensation Insurance Certificate attached and Waiver of Subrogation endorsement, OR
______Sole Proprietor / No Workers' Compensation Insurance is required. CONSULTANT must attach District's certification stating CONSULTANT is an owner or a partner and is exempt from having to provide Workers' Compensation because of having no employees. 646
6 Cyber Liability Insurance with limits of not less than $2,000,000 for each occurrence and an annual aggregate of at least $2,000,000 covering claims involving privacy violations, information theft, damage to or destruction of electronic data, intentional and/or unintentional release of private data, alteration of electronic data, extortion and network s ecurity. Coverage is required only if (1) products or services related to information technology for hardware or software are provided to the District and (2) if Consultant has access to personally identifiable information of the District through the provision of such technology related products or services (required for web-based services or when CONSULTANT has access to DISTRICT's electronic data, personally identifiable information, and/or protected health information. _____ Certificate of Cyber Liability attached.
In addition, CONSULTANT agrees to provide an endorsement to its policy naming the DISTRICT as an additional insured and stating, "Such insurance as is afforded by this policy shall be primary, and any insurance carried by DISTRICT shall be excess and noncontributory." Prior to providing services under this AGREEMENT, CONSULTANT shall provide DISTRICT with certificates of insurance evidencing all coverages and endorsements required hereunder including a thirty (30) day written notice of cancellation or reduction in coverage. CONSULTANT agrees to name DISTRICT, its officers, agents, and employees as additional insured under said policy. Except for Errors and Omissions Liability and Professional Liability, CONSULTANT shall require the carriers of the above-required coverages to waive all rights of subrogation against DISTRICT, its officers, employees, agents, volunteers, contractors, and subcontractors. All varieties of insurance required under this AGREEMENT shall be procured from insurers admitted in the State of California and authorized to issue policies directly to California insureds. Except as otherwise provided elsewhere under this Article, all required insurance shall be procured from insurers, who according to the latest edition of the Best's Insurance Guide have an A.M. Best's rating of no less than A: VII. DISTRICT may also accept policies procured by insurance carriers with a Standard& Poor's rating of no less than BBB according to the latest published edition the Standard & Poor's rating guide. (This requirement can only be waived by the Director of Purchasing or Director of Risk Management).
18. Assignment: Neither party shall assign this AGREEMENT except as mutually agreed upon in writing by both parties.
19. Subcontracting: CONSU LTANT shall not subcontract any portion of the se rvices required by this AGREEMENT, except as expressly stated herein, without the prior written approval of DISTRICT.
Subcontracts (including without limitation subcontracts with subconsultants), if any, shall contain a provision making them subject to all provisions stipulated in this AGREEMENT, including provisions relating to insurance requirements and indemnification.
20. Confi dentiality: All data, documents, discussion, or other information developed or or provided fo r performance of this AGREEMENT are deemed confidential and shall not be disclosed to third parties without prior mutual written consent of both parties or unless legally required. Upon request, all DISTRICT data shall be returned to DISTRICT upon the termination or expiration of this AGREEMENT.
CONSULTANT shall not use DISTRICTs name or insignia, photographs, or any publicity relating to their service to DISTRICT in any magazine, trade paper, newspaper, television or radio production or other similar medium without the prior written consent of DISTRICT. As used herein, "Confidential Information" means all student data, pupil records, or other information that is privileged, confidential, not publicly available, which is covered federal or state privacy laws, rules, and regulations, or which is ot herwise considered confidential and protected from disclosure by the policies and procedures of DISTRICT.
CONSULTANT understands and agrees that all Confidential Information shall be preserved and protected as privileged or confidential, that Confidential Information shall be held strictly in accordance with applicable law and the DISTRICT' s policies and procedures, and that Confidential Information shall not be shared with any third party without the express written authorization of DISTRICT. All requirements under this paragraph shall be subject to any applicable laws, regulations, court orders, or other legal requirements which may require disclosure of any such information, documents, or Confidential Information. 647
7 21. Student Data Privacy: If CONSULTANT will provide technology services that involve the digital access, use, storage, or management of pupil records, then CONSULTANT must complete and attach a student data privacy certification for compliance with Education Code section 49073.1. The student data privacy certification is available through the DISTRICT. Pupil records includes any information directly related to a pupil that i s maintained by the DISTRICT or acquired directly from the pupil through the use of instructional software or applications assigned to the pupil by a DISTRICT employee.
22. Record Retention: The CONSULTANT shall maintain and preserve any and all written and electronic records relating to this Agreement, including without limitation, invoice support (e.g., hours and days worked and other detail) for a period of not less than three (3) years after final payment under this Agreement. The DISTRICT, its employees and agents and the Office of the State Auditor shall have the right to audit, examine, inspect, and copy any and all of CONSULTANT's records relating to th is Agreement at any time during normal business hours. Additionally, pursuant to Government Code Section 8546.7, the CONSULTANT is hereby advised that every contract involving the expenditure of public funds in excess of ten thousand dollars ($10,000.00) shall be subject to examination and audit of the State Auditor as specified in the Government Code.
23. Compliance with Applicable Laws: The services completed herein must meet the approval of the DISTRICT and shall be subject to the DISTRICT'S general right of inspection to confirm CONSULTANT is property performing after-school program service delivery as per grant/funding provision established by the California Department of Education (CDE), After School Education and Safety Grant (ASES), and Expanded Learning Opportunities Program (ELO-P) requirements in accordance with this AGREEMENT. CONSULTANT agrees to comply with all federal, state, and local laws, rules, regulations, and ordinances that are now or may in the future become applicable to CONSULTANT, CONSULTANT's business, equipment, and personnel engaged in operations covered by the AGREEMENT or accruing out of the performance of such operations.
24. Public Health Mandates and Orders — District Policies Compliance: CONSULTANT covenants and agrees to comply, directly and as to all employees, staff, contractors or others providing services under this agreement, with all California issued Public Health Mandates as to testing, vaccinations and other public health requirements, as well as to related laws and legal requirements as to school site and property access for reasons of the health and safety of students, staff and others.
25. Animals on Campus: Animals are not allowed on any school campus unless approved, in writing, from the DISTRICT.
26. Safety and Security: CONSULTANT shall perform all Services so as to avoid injury or dama ge to any person or property by exercising all necessary safety and security precautions as may be appropriate to the nature of the Services and the conditions under which the Services ar e to be performed. CONSULTANT further agrees to comply with all of the following:
a. Ide ntification: When performing Services on District property, CONSULTANT shall be in appropriate work attire (or uniform, if applicable) at all times. If CONSULTANT does not have a specific uniform, then CONSULTANT shall provide identification tags and/or any other mechanism the DISTRICT in its sole discretion determines is required to easily identify CONSULTANT, as opposed to faculty, staff, parents, students, or other members of the public. CONSULTANT and its employees shall (i) display on their clothes the above-mentioned identifying information and (ii) carry photo identification and present it to any DISTRICT personnel upon request. If CONSULTANT cannot produce such identification or if the identification is unacceptable to DISTRICT, DISTRICT may provide at its sole discretion, District-produced identification tags to CONSULTANT, costs to be borne by CONSULTANT.
b. Sign -in Required: As required by schools and other DISTRICT locations , CONSULTANT personnel must sign into the location's main office to receive an in- school identification/visitor tag. Such individuals must display this tag on their person at all times while on DISTRICT property.
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8 27. Fingerprinting: This AGREEMENT is subject to the provisions of Education Code Section 45125.1. Any CONSULTANT's employees who interact with pupils, outside the immediate supervision and control of the pupil's parent or guardian or a school employee, must have a valid criminal records summary, by submitting fingerprints to the Department of Justice. When CONSULTANT performs the criminal background check, CONSULTANT shall immediately provide any subsequent arrest and conviction information it receives to the DISTRICT. The Department of Justice will ascertain whether the employee, whose fingerprints were submitted, has been arrested or convicted of any crime insofar as that fact can be ascertained from information available to the Department of Justice. CONSULTANT shall not permit an employee to come in contact with students until the Department of Justice has ascertained that the employee has not been convicted of a felony as defined in E ducation Code Section 45122.1 CONSULTANT shall provide DISTRICT with a list of names of employees who may come in contact with students and must certify in writing to the DISTRICT that none of its employees who may come in contact with students have been convicted of a felony as defined in Education Code Section 45122.1.
DISTRICT may request the removal of an employee from a DISTRICT site at any time. Failure to comply with this provision may result in termination of the AGREEMENT. Certification Form is attached hereto.
28. False Claims Act: CONSULTANT warrants and represents that neither CONS ULTANT nor any person who is an officer of, in a managing position with, or has an ownership interest in CONSULTANT has been determined by a court or tribunal of competent jurisdiction to have violated the False Claims Act, 31 U.S.C. Section 3789 et seq. and the California False Claims Act, Government Code Section 12650 et seq.
29. Drug Free Workplace Certification: CONSULTANT shall apprise its officials and employees of the Drug- Free Workplace Act of 1990 (Govt. Code Section 8350 et seq.) (hereinafter, the "Act") which requires that every person or organization awarded a contract or grant for the procurement of property or services from any State agency must certify that it will provide a drug-free workplace by doing certain specified acts. In addition, the Act provides that each contract or grant awarded by a state agency may be subject to suspension of payments or termination of the contract or grant, and the contractor or grantee may be subj ect to debarment from future contracting, if the contracting agency determines that specified acts have occurred.
CONSULTANT shall comply with the requirements publication and notification requirements of Government Code Section 8355 as to all employees performing services and tasks under this AGREEMENT on DISTRICT property or from DISTRICT facilities.
30. Permit/Licenses: CONSULTANT and CONSULTANT'S employee(s) or agent(s) shall secure and maintain in force such permits and licenses as are required by law in connection with the furnishing of services pursuant to this AGREEMENT.
31. [NOT USED.]
32. Time is of the Essence: Time is of the essence for each an d every provision of this AGREEMENT.
33. Entire Agreement/Amendment: This AGREEMENT and any exhibits attached hereto constitute the entire AGREEMENT among the parties to it and supersedes any prior or contemporaneous understanding or AGREEMENT with respect to the services contemplated and may be amended only by a written amendmen t executed by both parties to the AGREEMENT.
34. Non-Waiver: The failure of DISTRICT or CONSULTANT to seek redress for violation of, or to insist upon the strict performance of any term or condition of the AGREEMENT, shall not be deemed a waiver by that party of such term or condition, or prevent a subsequent similar act from again constituting a violation of such term or condition.
35. Notice: All notices or demands to be given under this AGREEMENT by either party to the other, shall be in writing and given either by: (a) personal service or (b) by U.S. Mail, mailed either by registered or certified mail, return receipt requested, with postage prepaid. Service shall be considered given when received, if personally served, or if mailed on the third day after deposit in any U.S. Post Office. The address to which notices or demands may be given by either party may be changed by written notice given in accordance with the notice provisions or this section. At the date of this AGREEMENT, the addresses of the parties are as follows:
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9 DISTRICT:
FONTANA UNIFIED SCHOOL DISTRICT
9680 CITRUS AVENUE
FONTANA, CA 92335
CONSULTANT:
CITY OF FONTANA
COMMUNITY SERVICES DEPARTMENT
8353 SIERRA AVENUE
FONTANA, CA 92335
E-MAIL: [email protected]
36. Severability: If any term, condition, or provisions of this AGREEMENT is held by a court of competent jurisdiction to be invalid, void, or unenforceable, the remaining provisions will nevertheless continue in full force and effect, and shall not be affected, impaired or invalidated in any way.
37. Disputes:
a. Resolution Procedures: Any dispute that either Party may have regarding this AGREEMENT, including, but not limited to, disputes for additional compensation, shall be submitted to DISTRICT within 30 days of the occurrence which gave rise to the dispute. DISTRICT and CONSULTANT shall attempt to negotiate a resolution of such dispute and process an amendment to this AGREEMENT to implement the terms of such resolution. If the dispute cannot be resolved through direct discussions, the Parties agree to first endeavor to resolve th e dispute in an amicable manner by non-binding mediation under the applicable rules of th e Judicial Arbitration and Mediation Service (JAMS), or other similar organization mutually selected by the Parties. If any unresolved controversy or claim arising out of or relating to this AGREEMENT, or breach thereof, remains after mediation, the matter shall be determined in a court of law of proper jurisdiction which shall be in the state of California, County of San Bernardino.
b. Services Pen ding Outcome: Unless the AGREEMENT has been terminated pursuant to the early termination provisions of this AGREEMENT, CONSULTANT agrees to continue to perform all Services required under this AGREEMENT pending the outcome of any claim, dispute, or mediation and DISTRICT agrees to make payment for all undisputed costs provided in accordance with this AGREEMENT.
c. Claims Statute Requirement: This provision does not relieve CONSULTANT of its obligation to timely comply with all applicable provisions of the Government Claims Act before initiating any legal proceeding
against the DISTRICT.
d. Remedies: In case of breach by a party, and in addition to any other provision of this Agreement, the non-breaching party shall be entitled to any other available legal and equitable remedies.
38. Governing Law: The terms and conditions of this AGREEMENT shall be governed by the laws of the State of California. In the event of any dispute or litigation between the DISTRICT and CONSULTANT, the prevailing party shall be entitled to recover all reasonable legal fees, costs, and other expenses.
39. Warranty of Authority: The undersigned warrant that they are duly authorized representatives of the Parties and have been empowered to execute this AGREEMENT on behalf of the party indicated.
Please check one of the following:
I am a retiree who falls under CalSTRS
I am a retiree who falls under CalPERS
I am an active employee who falls under CalSTRS
I am an active employee who falls under CalPERS
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10 CONSULTANT
Signature Date
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FONTANA UNIFIED SCHOOL
DISTRICT
Leslie Barnes, Ed.D. Date
Associate Superintendent, Business Services
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City of Fontana
Action Report
City Council Meeting
8353 Sierra Avenue
Fontana, CA 92335
File #: 21-2954 Agenda Date: 4/23/2024
Agenda #: Q. Category: Consent Calendar
FROM:
Administrative Services
SUBJECT:
Approve the Sale of Real Property by the Successor Agency to the City of Fontana RECOMMENDATION:
Approve the Purchase of Real Property Identified as APN 0228-301-51 - Located at Citrus And South Highland Avenues - by The City of Fontana and Authorizing the City Manager To Negotiate and Execute a Purchase and Sale Agreement with the Successor Agency to the Fontana Redevelopment Agency
COUNCIL GOALS:
· To operate in a businesslike manner
· To promote economic development by pursuing business development, retention, expansion and attraction
DISCUSSION:
In 2008, prior to the dissolution of redevelopment agencies, the former Fontana Redevelopment Agency purchased from the State of California, Department of Transportation, certain real property then identified as parcel DD 015496-01-01 comprised of eight parcels, (also known as Lots 21-31 of Tract No. 3348, Highland Haven M.B. 47/14-16), now identified with APN 0228-301-51 (the “Property”), with a common location west of Citrus Avenue and north of South Highland Avenue. The Director’s Deed for the Property was recorded with the San Bernardino County Recorder’s Office in the Official Records of the County of San Bernardino. It was recently discovered that it was recorded mistakenly in the name of the City of Fontana and not the Fontana Redevelopment Agency.
In 2018 and 2019, the City, under the belief that it owned the Property, conducted a formal Request for Qualifications and Request for Proposal process to facilitate development of the parcels, which included the Property. Following this process in the same year, the City entered into an Exclusive Negotiating Agreement (“ENA”) with the selected party, the Ladhar Group. Per the terms of the ENA, the parties would negotiate and execute an agreement for the purchase, acquisition and development of the City owned properties. On January 26, 2021, the City approved the Purchase, Sale and Development Agreement (“PSDA”) between the City and Citrus Development LLC (formerly the Ladhar Group) for the commercial and retail development of the City owned properties located on the North West Corner of Citrus Avenue and South Highland Avenue. Recently, the mistake in how the title owner for this Property was recorded by the San Bernardino County Recorder’s Office was discovered.
Notwithstanding the mistake that occurred in 2008 when the Director’s Deed was recorded, the City of Fontana Printed on 4/18/2024Page 1 of 2
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File #: 21-2954 Agenda Date: 4/23/2024
Agenda #: Q. Category: Consent Calendar
former Fontana Redevelopment Agency is the property owner and thus technically it is now owned by the Successor Agency by operation of law when the redevelopment agencies were dissolved in 2012.
The City has submitted an offer to purchase the Property identified with APN 0228-301-51 for $623,505 from the Successor Agency. This Property is part of a larger (commercial zoned) development area located near the corner of South Highland and Citrus Avenue. The City is acquiring this Property to ensure its inclusion as part of the larger commercial development.
Following consideration by the Successor Agency and the Countywide Oversight Board, the recommended property sale “offer” will be submitted to the State Department of Finance for its review and consideration. The Department of Finance may elect to approve or deny the submitted offer.
Based upon the time-frames established for DOF’s review and consideration of the recommended offer, it is anticipated that the escrow would close on this Property in late Spring of 2024.
Adoption of this item and the approval of the attached Purchase and Sale Agreement with the Successor Agency will facilitate the sale and disposition of the Property.
FISCAL IMPACT:
The fiscal impact associated with the approval of this item is an increase in expenditures and decrease in unappropriated fund balance of $623,505 in Fund 101 and is not included in the 2023-24 current budget. Necessary budget adjustments will be included in the Third Quarter Budget Report.
MOTION:
Approve staff recommendation
City of Fontana Printed on 4/18/2024Page 2 of 2
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PURCHASE AND SALE AGREEMENT
(APN 0228-301-51)
This PURCHASE AND SALE AGREEMENT (“Agreement”) is dated as of the date of , 2024 (“Effective Date”), and is entered into by and between the SUCCESSOR AGENCY TO THE FONTANA REDEVELO PMENT AGENCY, a public agency created under California Health and Safety Codes (“Seller”), and CITY OF FONTANA, a municipal corporation (“Buyer”). Seller and Buyer enter into this Agreement with reference to the following recitals of fact (each, a “Recital”):
RECITALS
A. Seller owns certain real property located in the City of Fontana, California, as further described in Exhibit “A” attached to this Agreement (“ Premises”), which is adjacent to the Property;
B. The Premises was inadvertently not listed on Seller’ s originally prepared Long Range Property Management Plan (“LRPMP”), which would have provided that the Premises is to be sold, and the Successor Agency to the Fontana Redevelopment Agency , as the Seller, is now seeking approval by the Countywide Oversight Board and the Department of Finance; C. Buyer has made an offer to purchase the Premises from Seller for fair market value, and Seller desires to sell the Premises to Buyer pursuant to the terms and conditions of this Agreement.
NOW, THEREFORE , IN CONSIDERA TION OF THE PROMISES AND
COVENANTS OF SELLER AND BUYER SET FORTH IN THIS AGREEMENT AND
OTHER GOOD AND VALUABLE CONSIDERATION, SELLER AND BUYER AGREE, AS FOLLOWS:
TERMS AND CONDITIONS
1. DEFINITIONS
1.1 Definitions. The following words, terms and phrases are used in this Agreement with the following meanings, unless the particular context or usage of a word, term or phrase requires another interpretation:
1.1.1 Agreement. This Real Property Purchase and Sale Agreement and Joint Escrow Instructions by and between Seller and Buyer, including all of the attached exhibits.
1.1.2 Business Day . Monday through Friday, exclusive of Federal, State or City holidays.
1.1.3 Buyer. Defined in the initial paragraph of this Agreement.
1.1.4 Buyer Title Policy. A standard CLTA owners ’ policy of title insurance 678
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issued by the Title Company, with coverage in the amount of the Purchase Price, showing title to the Premises vested in Buyer, subject only to Permitted Exceptions.
1.1.5 City. The City of Fontana, a California municipal corporation.
1.1.6 Claim. Any clai m, loss, cost, damage, expense, liability, lien, action, cause of action (whether in tort, contract, under statute, at law, in equity or otherwise), charge, award, assessment, fine or penalty of any kind (including consultant and expert fees and expenses a nd investigation costs of whatever kind or nature and, if an Indemnitor improperly fails to provide a defense for an Indemnitee, then Legal Costs of the Indemnitee) and any judgment.
1.1.7 Close of Escrow . The first date on which the Escrow Agent files the Deed with the County for recording in the official records of the County.
1.1.8 County. The County of San Bernardino, California.
1.1.9 Default. An Escrow Default, a Monetary Default or a Non -Monetary Default.
1.1.10 Effective Date. Defined in the initial paragraph of this Agreement.
1.1.11 Escrow. An escrow, as defined in Civil Code Section 1057 and Financial Code Section 17003(a), that is conducted by the Escrow Agent with respect to the sale of the Premises from Seller to Buyer pursuant to this Agreement.
1.1.12 Escrow Agent . [INSERT E SCROW AGENT] , or such other Person mutually agreed upon in writing by both Seller and Buyer.
1.1.13 Escrow Closing Date . The earlier of: (a) on or before the thirtieth (30th) day after the Escrow Agent ’s receipt of written confirmation from both Seller and Buyer of the satisfaction or waiver of all other conditions precedent to the Close of Escrow; (b) _________________; or (c) another date mutually agreed upon in writing between the Parties for the Close of Escrow, in the Parties’ respective sole and absolute discretion.
1.1.14 Escrow Closing Statement. A statement prepared by the Escrow Agent indicating, among other things, the Escrow Agent ’s estimate of all funds to be deposited or received by Seller or Buyer, respectively, and all charges to be paid by Seller or Buy er, respectively, through the Escrow.
1.1.15 Escrow Default . The unexcused failure of a Party to submit any document or funds to the Escrow Agent as reasonably necessary to close the Escrow, pursuant to the terms and conditions of this Agreement.
1.1.16 Escrow Opening Date. The first date on which a copy of this Agreement signed by both Seller and Buyer is deposited with the Escrow Agent, as provided in Section 2.1.
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1.1.17 Event of Default. The occurrence of any one or more of the following:
(a) Monetary Default . A Monetary Default that continues for seven (7) calendar days after Notice to the Party in Default, specifying in reasonable detail the amount of money not paid or the bond or surety not provided;
(b) Escrow Default. An Escrow Default that cont inues for seven (7) calendar days after Notice to the Party in Default, specifying in reasonable detail the document or funds not submitted to the Escrow Agent;
(c) Non-Monetary Default . Any Non -Monetary Default that is not cured within thirty (30) days after Notice to the Party in Default describing the Non -Monetary Default in reasonable detail. In the case of such a Non -Monetary Default that cannot with reasonable diligence be cured within thirty (30) days after the effective date of Notice of such Default, an Event of Default shall occur, if the Party in Default does not do all of the following:
(a) within thirty (30) days after Notice of such Non -Monetary Default, advise the other Party of the intention of the Party in Default to take all reasonable steps to cure such Non -Monetary Default; (b) duly commence such cure within such thirty (30) day period; and (c) diligently prosecute such cure to completion within a reasonable time under the circumstances.
1.1.18 Federal. The federal government of the United States of America.
1.1.19 FIRPTA Affidavit. A certification that Seller is not a “foreign person” within the meaning of such term under Section 1445 of the United States Internal Revenue Code.
1.1.20 Form 593. A California Franchise Tax Board Form 593-C.
1.1.21 Government. Any an d all courts, boards, agencies, commissions, offices or authorities of any nature whatsoever of any governmental unit (Federal, State, County, district, municipal or otherwise) whether now or later in existence.
1.1.22 Quitclaim Deed. A deed conveying Seller ’s i nterest in the Premises from Seller to Buyer, at the Close of Escrow, substantially in the form of Exhibit “B” attached to this Agreement.
1.1.23 Hazardous Substance . Any flammable substance, explosive, radioactive material, asbestos, asbestos -containing material, polychlorinated biphenyl, chemical known to cause cancer or reproductive toxicity, pollutant, contaminant, hazardous waste, medical wastes, toxic substance or related material, explosive, petroleum, petroleum product or any “hazardous” or “toxic” material, substance or waste that is defined by those or similar terms or is regulated as such under any Law, including any material, substance or waste that is: (a) defined as a “hazardous substance” under Section 311 of the Water Pollution Control Act (33 U.S.C. § 1317), as amended; (b) designated as “hazardous substances” pursuant to 33 U.S.C. § 1321; (c) defined as a “hazardous waste” under Section 1004 of the Resource Conservation and Recovery Act of 1976, 42 U.S.C. § 6901, et seq., as amended; (d) defined as a “hazardous substance” or “hazardous waste ” under Section 101 of the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended by the Superfund Reauthorization Act of 1986, 42 U.S.C. § 9601, et seq., or any so -called “superfund” or 680
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“superlien” law; (e) defined as a “pollutant” or “contaminant” under 42 U.S.C. § 9601(33); (f) defined as “hazardous waste” under 40 C.F.R. Part 260; (g) defined as a “hazardous chemical” under 29 C.F.R. Part 1910; (h) any matter within the defi nition of “hazardous substance ” set forth in 15 U.S.C. § 1262; (i) any matter, waste or substance regulated under the Toxic Substances Control Act ( “TSCA”) [15 U.S.C. Sections 2601, et seq.]; (j) any matter, waste or substance regulated under the Hazardous Materials Transportation Act, 49 U.S.C. Sections 1801, et seq.; (k) those substances listed in the United States Department of Transportation (DOT) Table [49 C.F.R. 172.101]; (l) any matter, waste or substances designated by the EPA, or any successor authority, as a hazardous substance [40 C.F.R. Part 302]; (m) defined as “hazardous waste” in Section 25117 of the California Health and Safety Code; (n) defined as a “hazardous substance” in Section 25316 of the California Health and Safety Code; (o) that is subject to any other Law regulating, relating to or imposing obligations, liability or standards of conduct concerning protection of human health, plant life, animal life, natural resources, property or the enjoyment of life or property free from the prese nce in the environment of any solid, liquid, gas, odor or any form of energy from whatever source; or (p) that is or becomes regulated or classified as hazardous or toxic under Law or in the regulations adopted pursuant to Law.
1.1.24 Hazardous Substance Discharg e. Any deposit, discharge, generation, release or spill of a Hazardous Substance that occurs at, on, under, into or from the Premises or during transportation of any Hazardous Substance to or from the Premises, or that arises at any time from any construc tion, installation, use or operation or other activities conducted at, on, under or from the Premises, whether or not caused by a Party.
1.1.25 Indemnify. Where this Agreement states that any Indemnitor shall “indemnify” any Indemnitee from, against or for a pa rticular Claim, that the Indemnitor shall indemnify the Indemnitee and defend and hold the Indemnitee harmless from and against such Claim (alleged or otherwise). “Indemnified” shall have the correlative meaning.
1.1.26 Indemnitee. Any Person entitled to be Ind emnified under the terms of this Agreement.
1.1.27 Indemnitor. A Party that agrees to Indemnify any other Person under the terms of this Agreement.
1.1.28 Initial Deposit. The amount listed as the Initial Deposit , if any, which shall be deposited with the Escrow Agent by Buyer on the Escrow Opening Date.
1.1.29 Law. Every law, ordinance, requirement, order, proclamation, directive, rule or regulation of any Government applicable to the Premises, in any way, including relating to any development, construction, use, maintenanc e, taxation, operation, occupancy of or environmental conditions affecting the Premises, or relating to any taxes, or otherwise relating to this Agreement or any Party’s rights, obligations or remedies under this Agreement, or any transfer of any of the fo regoing, whether in force on the Effective Date or passed, enacted, modified, amended or imposed at some later time, subject in all cases, however, to any applicable waiver, variance or exemption.
1.1.30 Legal Costs . In reference to any Person, all reasonable co sts and 681
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expenses such Person incurs in any legal proceeding or other matter for which such Person is entitled to be reimbursed for its Legal Costs, including reasonable attorneys’ fees, court costs and expenses and consultant and expert witness fees and expenses.
1.1.31 LRPMP. In 2013, t he long range property management plan was prepared by Seller and subsequently approved by the Oversight Board and the California Department of Finance, in accordance with Health and Safety Code section 34191.5.
1.1.32 Monetary Default. Any failure by either Party to pay or deposit, when and as this Agreement requires, any amount of money, bond or surety required to be provided under this Agreement, whether to or with a Party or a Third Person.
1.1.33 Non-Monetary Default. The occurrence of any of the following, except to the extent constituting a Monetary Default or an Escrow Default: (a) any failure of a Party to perform any of such Party ’s obligations under this Agreement; (b) any failure of a Party to comply with any material restriction or prohibition in this Agreement; or (c) any other event or circumstance that, with passage of time or giving of Notice, or both, or neither, would constitute a breach of this Agreement by a Party.
1.1.34 Notice. Any consent, demand, designation, election, notice or request relating to this Agreement, including any Notice of Default. All Notices must be in writing.
1.1.35 Parties. Collectively, Seller and Buyer.
1.1.36 Party. Individually, either Seller or Buyer, as applicable.
1.1.37 Permitted Exception. All of the following: (a) all items shown in the Preliminary Report as exceptions to coverage under the proposed Buyer Title Policy; (b) any lien for non-delinquent property taxes or assessments; (c) any Laws applicable to the Premises; (d) this Agreement; (e) any existing improvem ents on the Premises, if any; (f) any other document or encumbrance expressly required or allowed to be recorded against the Premises pursuant to the terms of this Agreement.
1.1.38 Person. Any association, corporation, governmental entity or agency, individual, joint venture, joint -stock company, limited liability company, partnership, trust, unincorporated organization or other entity of any kind.
1.1.39 Preliminary Report. A preliminary report issued by the Title Company in contemplation of the issuance of the Buyer Title Policy, accompanied by copies of all documents listed in Schedule B of the report as exceptions to coverage under the proposed Buyer Title Policy.
1.1.40 Premises. That certain real property specifically described in Exhibit “A” attached to this Agreement.
1.1.41 Purchase Price . The Purchase Price is Six H undred Twenty T hree Thousand Five Hundred Five Even Dollars ($623,505).
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1.1.42 Real Estate Taxes . All general and special real estate taxes (including taxes on fixtures and equipment, sales taxes, use taxes and t he like), supplemental ta xes, possessory interest taxes, special taxes imposed pursuant to a special taxing district, assessments, municipal water and sewer rents, rates and charges, excises, levies, license and permit fees, fines, penalties and other gove rnmental charges and any interest or costs with respect thereto, general and special, ordinary and extraordinary, foreseen and unforeseen, of any kind or nature whatsoever regarding the Premises that may be assessed, levied, imposed upon, or become due and payable out of or in respect of, or charged with respect to or become a lien on, the Premises.
1.1.43 Seller. The Successor Agency to the Fontana Redevelopment Agency , a public corporation.
1.1.44 State. The State of California.
1.1.45 Third Person. Any Person that is not a Party, an Affiliate of a Party or an officer, director, manager, shareholder, member, principal, partner, employee or agent of a Party.
1.1.46 Title Company . [INSERT TITLE COMPANY] , or such other Person mutually agreed upon in writing by both Seller and Buyer.
1.1.47 Unavoidable Delay. A de lay in either Party performing any obligation under this Agreement arising from or on account of any cause whatsoever beyond the Party ’s reasonable control, including strikes, labor troubles or other union activities, casualty, war , acts of terrorism, riot s, li tigation, governmental action or inaction, regional natural disasters or inability to obtain required materials. Unavoidable Delay shall not include delay caused by a Party’s financial condition or insolvency.
2. PURCHASE AND SALE OF PREMISES
2.1 Escrow. Seller shall sell the Premises to Buyer and Buyer shall purchase the Premises from Seller, subject to the Permitted Exceptions, on the terms and conditions of this Agreement. For the purposes of exchanging funds and documents to c omplete the sale of the Premises from Seller to Buyer and the purchase of the Premises by Buyer from Seller, pursuant to the terms and conditions of this Agreement, Seller and Buyer agree to open the Escrow with the Escrow Agent. Buyer shall cause the Esc row to be opened within t wo bu siness (2) days following the Effective Date. Escrow Agent shall promptly confirm the Escrow Opening Date in writing to each of the Parties. The provisions of Section 3 are the joint escrow instructions of the Parties to the Escrow Agent for conducting the Escrow.
2.2 Payment of Purchase Price. Buyer shall purchase the Premises from Seller for the Purchase Price, subject to the terms and conditions of this Agreement. Buyer shall pay the Purchase Price to Seller at the Close of Escrow in immediately available funds.
2.3 Initial Deposit . Buyer shall deliver the Initial Deposit to Escrow Agent on the Escrow Opening Date.
2.4 Buyer’s Approval of Title to Premises . Buyer acknowledges and agrees that it 683
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has received the Preliminary Report for the Premises and has approved the status of title to the Premises.
2.5 “AS-IS” Acquisition. Except for the representations and warranties set forth herein that expressly survive the Close of Escrow, the Close of Escrow shal l evidence Buyer ’s unconditional and irrevocable acceptance of the Premises in the Premises’ AS IS, WHERE IS,
SUBJECT TO ALL FAULTS CONDITION, AS OF THE CLOSE OF ESCROW, WITHOUT WARRANTY as to character, quality, performance, condition, title, physical con dition, zoning, land use restrictions, the availability or location of utilities or services, the location of any public infrastructure on or off of the Premises (active, inactive or abandoned), the suitability of the Premises for Buyer ’s intended use or a ny other use or the exist ence or absence of Hazardous Substances affecting the Premises and with full knowledge of the physical condition of the Premises, the nature of Seller ’s interest in and use of the Premises, all laws applicable to the Premises and a ny and all conditions, co venants, restrictions, encumbrances and all matters of record relating to the Premises. The Close of Escrow shall further constitute Buyer ’s representation and warranty to Seller that: (a) Buyer has had ample opportunity to inspe ct and evaluate the Premises and the feasibility of the uses and activities Buyer is entitled to conduct on the Premises; (b) Buyer is experienced in real estate development; (c) Buyer is relying entirely on Buyer’s experience, expertise and Buyer ’s own in spection of the Premises in the Premises’ current state in proceeding with acquisition of the Premises; (d) Buyer accepts the Premises in the Premises’ condition as of the Close of Escrow; (e) to the extent that Buyer ’s own expertise with respect to any ma tter regarding the Premises is insufficient to enable Buyer to reach an informed conclusion regarding such matter, Buyer has engaged the services of Persons qualified to advise Buyer with respect to such matters; (f) Buyer has received assurances acceptabl e to Buyer by means indep endent of Seller or Seller ’s agents of the truth of all facts material to Buyer’s acquisition of the Premises; and (g) the Premises is being acquired by Buyer as a result of Buyer’s own knowledge, inspection and investigation of th e Premises and not as a r esult of any representation made by Seller or Seller ’s agents relating to the condition of the Premises, unless such statement or representation is expressly and specifically set forth in this Agreement.
Seller hereby expressly an d specifically disclaims any express or implied warranties regarding the Premises other than those expressly set forth herein.
3. JOINT ESCROW INSTRUCTIONS
3.1 Escrow Instructions. This Section 3 constitutes the joint escrow instructions of the Parties to Escrow Agent for conduct of the Escrow for the purchase and sale of the Premises, as contemplated by this Agreement. Buyer and Seller shall sign such further escrow instructions consistent with the provisions of this Agreement as may be reas onably requested by Escrow Agent. In the event of any conflict between the provisions of this Agreement and any further escrow instructions requested by Escrow Agent, the provisions of this Agreement shall control.
3.2 Escrow Agent Authority. Seller and Buyer authorize Escrow Agent to:
3.2.1 Charges. Pay and charge Seller and Buyer for their respective shares of the applicable fees, taxes, charges and costs payable by either Seller or Buyer regarding the Escrow;
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3.2.2 Settlement/Closing Statements. Release each Party ’s Escrow Closing Statement to the other Party;
3.2.3 Document Recording . File any documents delivered for recording through the Escrow with the office of the Recorder of the County for recordation in the official records of the County, pursuant to the joint instructions of the Parties; and
3.2.4 Counterpart Documents. Utilize documents signed by Seller or Buyer in counterparts, including attaching separate signature pages to one original of the same document.
3.3 Buyer’s Conditions Precedent to Close of Escrow . Provided that the failure of any such condition to be satisfied is not due to a Default under this Agreement by Buyer, Buyer’s obligation to purchase the Premises from Seller on the Escrow Closing Date shall be conditioned upon the satisfaction or waiver (waivers must be in writing and signed by Buyer) of each of the following conditions:
3.3.1 Approval of Purchase and Sale by Oversight Board and DOF . The purchase and sale of the Premises pursuant to this Agreement shall be submitted for approval by the Countywide Oversight Board (the “Oversight Board” ), and following such approval and notification of the State Department of Finance, the State Department of Finance either approves the purchase and sale of the Premises or does not object within t he timeframes set forth i n California Health & Safety Code Section 34181(f).
3.3.2 Title Policy . Title Company is committed to issue the Buyer Title Policy to Buyer upon payment of Title Company’s premium for such policy;
3.3.3 Seller Escrow Deposits . Seller deposi ts all of the items into Escrow required by Section 3.6;
3.3.4 Settlement/Closing Statement . Buyer reasonably approves Buyer ’s Escrow Closing Statement;
3.3.5 Seller Pre -Closing Obligations . Seller performs all of the ma terial obligations required to be performed by Seller pursuant to this Agreement prior to the Close of Escrow.
3.4 Seller’s Conditions Precedent to Close of Escrow. Provided that the failure of any such condition to be satisfied is not due to a Default under this Agreement by Seller, Seller’s obligation to sell the Premises to Buyer on the Escrow Closing Date shall be conditioned upon the satisfaction or waiver (waivers must be in writing and signed by Seller) of each of the following conditions precedent to such sale on or before the Escrow Closing Date:
3.4.1 Approval of Purchase and Sale by Oversight Board and DOF . The purchase and sale of the Premises pursuant to this Agreement shall be approved by the Oversight Board, and following such approval and notificatio n of the State Department of F inance, the State Department of Finance either approves the purchase and sale of the Premises or does not object within the timeframes set forth in California Health & Safety Code Section 34181(f). 685
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3.4.2 Buyer Escrow Deposits . Buy er deposits all of the it ems i nto Escrow required by Section 3.5;
3.4.3 Settlement/Closing Statement . Seller reasonably approves Seller ’s Escrow Closing Statement; and
3.4.4 Buyer Pre -Closing Obligations . Buyer performs a ll of the material obligations required to be performed by Buyer pursuant to this Agreement prior to Close of Escrow.
3.5 Buyer’s Escrow Deposits . Buyer shall deposit the following items into Escrow and, concurrently, provide a copy of each document submitted into Escrow to Seller, at least one (1) Business Day prior to the Escrow Closing Date:
3.5.1 Closing Funds . All monetary amounts required to be deposited into Escrow by Buyer under the terms of this Agreement to close the Escrow, all in immediately available funds;
3.5.2 Escrow Closing Stat ement. Buyer ’s Escrow Closing Statement signed by the authorized representative(s) of Buyer; and
3.5.3 Other Reasonable Items . Any other money or documents required to be delivered by Buyer under the terms of this Agreement or as other wise reasonably requested by Escrow Agent or Title Company in order to close the Escrow or comply with applicable Law that have not previously been delivered by Buyer.
3.6 Seller’s Escrow Deposits . Seller shall deposit the following items into Escrow and, concurrently, provide a copy of each document (excluding the Deed) deposited into Escrow to Buyer, at least one (1) Business Day prior to the Escrow Closing Date:
3.6.1 Quitclaim Deed. The Deed signed by the authorized representative(s) of Seller in recordable form;
3.6.2 Escrow Closing Stateme nt. Seller’s Escrow Closing Statement signed by the authorized representative(s) of Seller;
3.6.3 FIRPTA Affidavit . A FIRPTA affidavit signed by the authorized representative(s) of Seller, in the form used by the Escrow Agent;
3.6.4 Form 593 . A Form 593 signed by t he au thorized representative(s) of Seller; and
3.6.5 Other Reasonable Items . Any other money or documents required to be delivered by Seller under the terms of this Agreement or as otherwise reasonably requested by Escrow Agent or Title Company in order to close the Escrow or comply with applicable Law that have not been previously delivered by Seller.
3.7 Closing Procedure. Upon Escrow Agent ’s receipt of written confirmation from 686
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both Buyer and Seller that each of their respective conditi ons precedent to the Clos e of Escrow are satisfied or waived, Escrow Agent shall close the Escrow by doing all of the following:
3.7.1 Recording and Distribution of Documents . Escrow Agent shall cause the following documents to be filed with the Recorder of the County for recording in the official records of the County regarding the Premises in the following order of priority at Close of Escrow: (a) the Deed; and (b) any other documents to be recorded regarding the Premises through the Escrow upon the joint instructions of the Parties. At Close of Escrow, Escrow Agent shall deliver conformed copies of all documents filed with the Recorder of the County for recording in the official records of the County through the Escrow to Seller, Buyer and any other Person designated in the written j oint escrow instructions of the Parties to receive an original or conformed copy of each such document. Each conformed copy of a document filed for recording shall show all recording information. The Parties intend and agree that this Section
3.7.1 shall establish the relative priorities of the documents to be recorded in the official records of the County through the Escrow, by providing for recordation of senior interests prior to jun ior interests, in the order provided in this Section 3.7.1;
3.7.2 Funds. Distribute all funds held by the Escrow Agent pursuant to the Escrow Closing Statements approved in writing by Seller and Buyer, respectively;
3.7.3 FIRPTA Affidavit. File the FIRPTA Affidavit with the United States Internal Revenue Service;
3.7.4 Form 593. File the Form 593 with the California Franchise Tax Board; and
3.7.5 Title Policy. Obtain from the Title Company and deliver to Buyer the Buyer Title Policy issued by the Title Company.
3.8 Close of Escrow . The Close of Escrow shall occur on or before the Escrow Closing Date. If for any reason the Close of Escrow has not occurred on or before the Escrow Closing Date, then any Party not then in Default under t his Agreement may cancel the Escrow and terminate this Agreement, without liability to the other Party or any other Person for such cancellation and termination, by delivering Notice of termination to both the other Party and Escrow Agent. Following any s uch Notice of termination of this Agreement and cancellation of the Escrow, the Parties and Escrow Agent shall proceed pursuant to Section 3.12. Without limiting the right of either Party to cancel the Escrow a nd terminate this Agreeme nt, pursuant to this Section 3.8, if the Escrow does not close on or before the Escrow Closing Date and neither Party has exercised its contractual right to cancel the Escrow and terminate this Agreement under this Section 3.8 before the first date on which Escrow Agent Notifies both Parties that Escrow is in a position to close in accordance with the terms and conditions of this Agreement, the n the Escrow shall close as so on as reasonably possible following the first date on which Escrow Agent Notifies both Parties that Escrow is in a position to close in accordance with the terms and conditions of this Agreement.
3.9 Escrow Costs . Escrow Agent sh all Notify Buyer and Sell er of the costs to be borne by each of them at the Close of Escrow by delivering an Escrow Closing Statement to both 687
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Seller and Buyer at least four (4) Business Days prior to the Escrow Closing Date. Each party shall pay its own c osts and expenses arising in connection with the Closing (including, without limitation, its own attorneys ’ and advisors ’ fees, charges, and disbursements), except the following costs (the “Closing Costs”), which shall be allocated between the parties as follows:
(a) Escrow fees and costs shall be paid one-half by Seller and one-half by Buyer;
(b) The cost of the Title Policy attributable to the standard coverage portion shall be paid by Seller;
(c) The cost of the Title Policy attributable to the extended coverage portion shall be paid by Buyer; and
(d) Buyer shall pay the cost of any documentary transfer taxes in connection with the recording of the Deed;
(e) All other closing fees and costs shall be charged to and paid by Seller and Buyer in accordance with customary practices in the County.