Resolution No. 2024-
313
-
_____________________________________
City Attorney
I, Germaine McClellan Key, City Clerk of the City of Fontana, do hereby certify that the foregoing resolution is the actual resolution duly and regularly adopted by the City Council at a regular meeting on the 24th day of September, 2024 by the following vote to-wit:
AYES:
NOES:
ABSENT:
_____________________________________
City Clerk of the City of Fontana
_____________________________________
Mayor of the City of Fontana
ATTEST:
_____________________________________
City Clerk
314
City of Fontana
Action Report
City Council Meeting
8353 Sierra Avenue
Fontana, CA 92335
File #: 21-3198 Agenda Date: 9/24/2024
Agenda #: B. Category: Public Hearing
FROM:
Housing
SUBJECT:
Public Hearing for Consolidated Annual Performance Evaluation Report (CAPER) Fiscal Year 2023- 2024
RECOMMENDATION:
1. Conduct a public hearing for the Consolidated Annual Performance and Evaluation Report prepared for the U.S. Department of Housing & Urban Development to report on specific Federal housing assistance and community development activities undertaken by the City of Fontana during Fiscal Year 2023-2024; and
2. Authorize the City Manager to enter into and/or transmit any documents necessary to submit the Consolidated Annual Performance, along with any comments received during the public hearing and public comment period, to the Department of Housing & Urban Development.
COUNCIL GOALS:
· Increase citizen involvement by informing the public about issues, program, and accomplishments.
· Concentrate on Inter-governmental relations by pursuing financial participation from county, state and federal governments.
DISCUSSION:
As an entitlement jurisdiction of the U.S. Department of Housing and Urban Development (HUD), the City of Fontana is required to annually prepare and submit the Consolidated Annual Performance and Evaluation Report (CAPER) to HUD. The CAPER document summarizes the City’s use of federal entitlements in a given fiscal year.
In fiscal year 2023-2024, the City of Fontana received $1,978,958 in Community Development Block Grant (CDBG) Program funds, $738,533 in HOME Investment Partnerships (HOME) Program funds, and $175,340 in Emergency Solutions Grant (ESG) Program funds. The 2023-2024 CAPER evaluates the City’s achievement of goals established in the One-Year Action Plan for FY 2023-2024 and assesses the City’s overall performance during fiscal year 2023-2024 in meeting priorities identified in the first year of the City’s adopted Five-Year Consolidated Plan (2020-2024).
This is the final year the CAPER will provide a summary of outcomes associated with HUD funding allocated through the Coronavirus Aid, Relief, and Economic Security (CARES) Act. Through this Act, the City received $2,467,484 in additional CDBG funds and $3,514,507.50 in ESG funds City of Fontana Printed on 9/17/2024Page 1 of 2
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File #: 21-3198 Agenda Date: 9/24/2024
Agenda #: B. Category: Public Hearing
specifically earmarked to respond to the effects of the COVID-19 pandemic. All program funds for both COVID funding sources have been fully expended.
In fiscal year 2023-2024, the City of Fontana successfully carried out the actions outlined in both the One-Year Action Plan and the Consolidated Plan.
As required by HUD, a preliminary draft of the CAPER has been made available for public review for a minimum of 15 days. From September 6th through September 24th, 2024, copies of the draft CAPER were available to residents of the City of Fontana and other interested parties on the City’s webpage and various City buildings.
Notice of availability of the CAPER and invitation to comment was published in the Press Enterprise, the San Bernardino Sun and El Chicano newspapers.
FISCAL IMPACT:
No fiscal impact. Funds were appropriated and allocated in prior fiscal years in CDBG & ESG Fund #362 and HOME Fund #363.
MOTION:
Approve staff recommendation.
City of Fontana Printed on 9/17/2024Page 2 of 2
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316
2023-2024 CONSOLI
DATED ANNUAL PERFORMANCE
AND EVALUATION REPORT
JULY 1, 2023 THROUGH JUNE 30, 2024
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City of Fontana 2023-2024 CAPER i
Table of Contents
CR-05 - Goals and Outcomes ................................................................................................... 1 CR-10 - Racial and Ethnic composition of families assisted ..................................................... 9 CR-15 - Resources and Investments 91.520(a) ........................................................................ 9 CR-20 - Affordable Housing 91.520(b) .................................................................................... 16 CR-25 - Homeless and Other Special Needs 91.220(d, e); 91.320(d, e); 91.520(c) ............... 18 CR-30 - Public Housing 91.220(h); 91.320(j) .......................................................................... 21 CR-35 - Other Actions 91.220(j)-(k); 91.320(i)-(j) .................................................................... 22 CR-40 - Monitoring 91.220 and 91.230 ................................................................................... 27 CR-45 - CDBG 91.520(c) ........................................................................................................ 29 CR-50 - HOME 91.520(d) ........................................................................................................ 30 CR-60 - ESG 91.520(g) (ESG Recipients only) ...................................................................... 32 CR-65 - Persons Assisted ....................................................................................................... 34 CR-70 – ESG 91.520(g) - Assistance Provided and Outcomes .............................................. 37 CR-75 – Expenditures ............................................................................................................. 38
Appendices
Appendix A – Public Notices ......................................................................................................... A Appendix B – Summary of Citizen Participation Comments ......................................................... B Appendix C – IDIS Reports .......................................................................................................... C
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City of Fontana 2023-2024 CAPER 1
OMB Control No: 2506-0117 (exp. 07/31/2015)
CR-05 - Goals and Outcomes
Progress the jurisdiction has made in carrying out its strategic plan and its action plan.
91.520(a)
The 2023-2024 Consolidated Annual Performance and Evaluation Report (CAPER) is the City of Fontana’s report to the U.S. Department of Housing and Urban Development (HUD) describing the use of federal Community Development Block Grant (CDBG), HOME Investment Partnerships (HOME) and Emergency Solutions Grant (ESG) funds. The CAPER reports on the fourth program year of the 2020-2024 Consolidated Plan period, covering July 1, 2023 to June 30, 2024.
The City receives CDBG, HOME and ESG funds from HUD on a formula basis each year, and in turn, implements projects and awards grants and loans to individual households and nonprofit, for-profit or public organizations for projects in furtherance of the adopted Consolidated Plan. The activities reported in this CAPER were determined and planned in the City’s 2023-2024 Annual Action Plan. The Annual Action Plan was approved at a Public Hearing on April 11, 2023. In addition to the formula grants, this CAPER includes data related to special allocations awarded through the Coronavirus Aid, Relief and Economic Security (CARES) Act for the CDBG and ESG programs. These programs are respectively titled CDBG-CV and ESG-CV.
For the 2023-2024 program year, the City received $1,978,958 of CDBG funds; $738,533 of HOME funds; and $175,340 in ESG funds for a total investment of $2,892,831. In FY2020 The City received $2,467,484 in CDBG-CV Funds and $3,514,507 in ESG-CV funds. As of June 30, 2024, the City of Fontana had disbursed 98 percent of CDBG-CV and 100 percent of ESG-CV1, 2 and 3. In FY2021 the City received $2,633,568 of HOME ARP funds.
The investment of CDBG, CDBG-CV, HOME, ESG, and ESG-CV funds was a catalyst for positive change in the community. Together with other federal, state, and local investments, HUD resources allowed the City and its partners to provide low- and moderate-income households with the services which follow:
Fair Housing services to 86 individuals,
Public Safety services to 59,140 individuals,
Recreational scholarships to 215 seniors and 11 youth, Acquisition and rehab of 3 single family homes
Rehab of 14 homeowner housing units,
Assistance to 102 people experiencing homelessness;
Hotel/ motel vouchers (CDBG-CV) to 65 households;
Emergency shelter services to 29 people; and,
Street Outreach services to 236 people.
In FY2023 the City continued to work to develop procedures and identify next steps for HOME ARP implementation.
321
City of Fontana 2023-2024 CAPER 2
OMB Control No: 2506-0117 (exp. 07/31/2015)
Tables 1a – 1d provide a summary of the five-year and one-year accomplishments for the period ending June 30, 2024, arranged by each of the Strategic Plan Goals included in the 2020-2024 Strategic Plan of the Consolidated Plan.
322
City of Fontana 2023-2024 CAPER 3
OMB Control No: 2506-0117 (exp. 07/31/2015)
Comparison of the proposed versus actual outcomes for each outcome measure submitted with the consolidated plan and explain, if applicable, why progress was not made toward meeting goals and objectives. 91.520(g)
Table 1.a - 5-Year 2020-2024 Forecasted Budget
Goal Description Category 2020-2024 Source/
Amount
Affordable Housing Preservation Owner o ccupied rehabilitation Affordable Housing CDBG: $2,818,250 Affordable Rental Housing
Development
Single family acquisition rental
rehabilitation and multi-family
rental development
Affordable Housing
CDBG: $3,213,800
HOME: $3,935,685
CDBG and HOME Program
Administration Program administration Administration
CDBG: $1,924,496
HOME: $357,289
Public Facilities Improvements TBD Non-Housing Community Development CDBG: $1,000,000
COVID-19 Response
Mortgage and rental
assistance and homelessness
prevention and rapid
rehousing
Non-Housing Community
Development
Prevent, prepare, and respond to
COVID-19
CDBG-CV: $2,467,484
ESG-CV: $3,514,507
Fair Housing Services Fair housing and tenant and
landlord mediation services Other CDBG: $175,000
Homeless Assistance Homelessness prevention and
rapid rehousing
Non-Housing Community
Development
Prevent, prepare, and respond to
COVID-19
ESG: $898,375
Public Services for low-income
families
Senior and youth scholarships
and public safety services
Non-Housing Community
Development CDBG: $1,578,886
323
City of Fontana 2023-2024 CAPER 4
OMB Control No: 2506-0117 (exp. 07/31/2015)
Table 2.b - 1-Year 2023 Budget
Goal Description Category 2023 Source/ Amount
Affordable Rental Housing
Development
Single family acquisition rental
rehabilitation and multi-family
rental development
Affordable Housing
HOME: $3,475,505
CDBG: $1,286,324
CDBG and HOME
Program Administration
Program administration Administration CDBG: $358,291
HOME: $73,853
Fair Housing Services Fair housing and tenant and
landlord mediation services Affordable Housing CDBG: $37,500 Homeless Assistance
Homelessness prevention and
rapid rehousing
Non-Housing Community
Development
Prevent, prepare, and respond to
COVID-19
ESG: $175,340
Public Services for low-
income families
Senior and youth scholarships
and public safety services
Non-Housing Community
Development
CDBG: $296,843
324
City of Fontana 2023-2024 CAPER 5
OMB Control No: 2506-0117 (exp. 07/31/2015)
Table 3.c - Cumulative and 1-Year Accomplishments
Goal Indicator Unit of
Measure
Strategic Plan: 2020-2024 Annual Outcomes: 2023
Expected
(2020-
2024)
Actual (2020-
2023)
Percent
Complete
Expected Actual Percent
Complete
Affordable
Housing
Preservation
Homeowner
Housing
Rehabbed
Household
Housing
Unit
100 44 44% 0 14 No solution
Affordable
Rental
Housing
Development
Rental units
constructed
Household
Housing
Unit
22 8 36% 11 0 Null
Rental units
rehabbed
Household
Housing
Unit
7 12 171% 2 3 150%
City of
Fontana
CDBG and
HOME
Program
Admin
Other Other
5 4 80% 1 1 100%
Fair Housing
Services Other Other 450 950 211% 90 86 95%
Homeless
Assistance
TBRA / Rapid
Rehousing
Households
Assisted 250 17 7% 50 3 6%
325
City of Fontana 2023-2024 CAPER 6
OMB Control No: 2506-0117 (exp. 07/31/2015)
Goal Indicator Unit of
Measure
Strategic Plan: 2020-2024 Annual Outcomes: 2023
Expected
(2020-
2024)
Actual (2020-
2023)
Percent
Complete
Expected Actual Percent
Complete
Homelessness
Prevention
Persons
Assisted 500 400 80% 100 92 92%
Public
Services for
low-income
families
Public service
activities other
than LMI
Housing
Benefit
Persons
Assisted
100,000 229,001 229% 20,250 51,140 250%
Table 4.d – CDBG-CV and ESG-CV Goals and Accomplishments Goal Indicator Unit of
Measure
Strategic Plan: 2020
Expected Actual (2020-2023) Percent Complete
COVID-19
Response
Public service
activities other than
LMI Housing Benefit
Persons
Assisted 200 352 176%
Homeless Person
Overnight Shelter
Persons
Assisted 1,175 575 49%
326
City of Fontana 2023-2024 CAPER 7
OMB Control No: 2506-0117 (exp. 07/31/2015)
Assess how the jurisdiction’s use of funds, particularly CDBG, addresses the priorities and specific objectives identified in the plan, giving special attention to the highest priority activities identified.
The 2020-2024 Consolidated Plan identified seven high priority goals of the city. During the 2023- 2024 program year the city made progress toward meeting these goals. The pandemic drove down performance early in the Consolidated Planning cycle, since then annual performance has rebounded.
Preservation of the supply of affordable housing, specifically existing affordable housing stock occupied by low- and moderate-income households, was achieved through the city’s housing rehabilitation programs. In program year 2023-2024, the housing rehabilitation programs rehabilitated 14 housing units.
The city worked to expand the supply of affordable housing in partnership with housing developers. CDBG and HOME funds may be leveraged in support of the development of new rental housing units affordable to households earning less than 30, 60, or 80 percent of Area Median Income (AMI), including units reserved for residents with special needs. In addition, the City may use CDBG and HOME funds to acquire and rehabilitate existing single family and multi- family housing units to increase the supply of affordable rental housing for its lower-income households. The Courtplace Apartment Project continues to make progress. It is anticipated this project will bring 11 new units of affordable housing to market 2025-2026.
Ensuring equal access to housing opportunities by affirmatively furthering fair housing choice through the provision of fair housing education, counseling, anti-discrimination, and landlord- tenant mediation services is a high priority goal for the city. In program year 2023-2024 Inland Fair Housing & Mediation Board served 86 low- and moderate-income residents of Fontana.
Prevention and elimination of homelessness is a high priority goal for the city. Fontana supports a continuum of services to prevent and eliminate homelessness. In program year 2023- 2024 homeless prevention services were provided to 102 people.
Providing public services to low-income residents to prevent homelessness and ameliorate the effects of poverty is a high priority of the city. Through the 2023 public safety program CDBG funds supported the City's Multiple Enforcement Team (MET), which provided a balanced approach in traditional law enforcement services, along with conducting outreach, education and providing resources to the homeless population. The MET worked directly with the homeless to reduce crime relating to homelessness, calls for service, resources to medical professionals and city staff. There were seven 7 sworn officers assigned to the MET Unit (1 sergeant, 1 corporal and 5 officers). The City also provided funding for the recreational scholarship program which benefitted 216 low-income seniors and 11 youth.
Improving city public facilities and infrastructure to benefit low- and moderate-income residents or those presumed under HUD regulations to be low- and moderate-income such as the elderly and disabled adults is a high priority goal. Infrastructure projects have a long ramp up period. Funds were not allocated in the 2023-2024 program year. 327
City of Fontana 2023-2024 CAPER 8
OMB Control No: 2506-0117 (exp. 07/31/2015)
In program year 2023-2024 the city continued efforts to prevent, prepare and respond to COVID-19 through on-going CDBG-CV and ESG-CV funded programs.
CDBG-CV funded the Hotel/ Motel Voucher homeless services operations program in FY2023.
During the program year 83 individuals were assisted by the Hotel/ Motel Voucher program.
ESG-CV funded programming included street outreach and emergency shelter, and administration in FY2023. During the program year,
Emergency shelter to 15 people and
Street outreach which served 256 people.
328
City of Fontana 2023-2024 CAPER 9
OMB Control No: 2506-0117 (exp. 07/31/2015)
CR-10 - Racial and Ethnic composition of families assisted Describe the families assisted (including the racial and ethnic status of families assisted).
91.520(a)
Table 5 – Table of assistance to racial and ethnic populations by source of funds Race CDBG HOME ESG
White 242 0 11
Black or African American 73 0 27
Asian 28 0 0
American Indian or American Native 2 0 0
Native Hawaiian or Other Pacific Islander 0 0 7
Total 345 0 45
Hispanic 188 0 10
Not Hispanic 157 0 0
Total 345 0 10
Narrative
Table 2 provides an aggregate of race and ethnicity data for the combined number of people, families, households or housing units reported as complete during the program year based on accomplishment data from all CDBG, HOME, and ESG activities reported in HUD’s Integrated Disbursement and Information System (IDIS). Based on this information, an array of persons, families, households or housing unit occupants benefitted from CDBG, HOME, or ESG funded housing, and public service projects during the program year. It should be noted that CDBG participants identified racially in ways not included in Table 2. Those ways were as follows: 71 as Other multi-racial, 62 of whom also identified as ethnically Hispanic, 2 as Black/ African American and White, 2 as American Indian/ Alaskan Native and White and ethnically Hispanic, one as Asian and White, 14 as Black/ African American and White 5 of whom also identified as ethnically Hispanic, 4 as American Indian/ Alsakan Native and Black/ African American. It should be noted that the table above does not include racial or ethnic groups with which most ESG participants identify, those are as follows: 4 as White and Black, African American, African, 4 as Native Hawaiian or Pacific Islander and Hispanic/ Latina/e/o, and 39 as White and Hispanic/Latinia/e/o.
CR-15 - Resources and Investments 91.520(a)
Identify the resources made available
Table 3 - Resources Made Available
Source of Funds Resources
Made
Available
Amount
Expended During
Program Year
CDBG $1,978,958 $2,151,817
HOME $3,549,357 0
ESG $175,340 $175,882
CDBG-CV $313,210 $313,210
329
City of Fontana 2023-2024 CAPER 10
OMB Control No: 2506-0117 (exp. 07/31/2015)
ESG-CV $1,333,988 $1,333,988
Narrative
The federal, state, local and private resources available for the implementation of projects during the 2023-2024 program year are identified in Table 3. The CDBG resources included $1,978,958 in formula grant funds and $172,859 in previously allocated resources. The HOME resources included $738,533 formula funds and $2,713,268 in prior year resources, and $97,538 in program income for a total of $3,549,357. The ESG resources included $175,340 in formula funds and $542 in previously allocated resources.
The City is prioritizing the investment of HOME funds in support of the Courtplace Apartment project that it is anticipated will expand the supply of affordable housing by 11 units available to 30%, 60%, and 80% AMI households. Significant HOME funds are available to finance this project, which is anticipated to be completed in fiscal year 2025-2026.
In FY2023 all ESG funds were allocated to homelessness prevention, rapid rehousing, and administration. The 60 percent threshold for street outreach and emergency shelter was not crossed.
To prevent, prepare for and respond to the coronavirus, the City received a total of $2,467,484 in CDBG-CV funds and $3,514,507.50 in ESG-CV f unds. A total of $313,210 in CDBG-CV funds and $1,333,988 in ESG-CV funds were expended in program year 2023. A total of $2,327,699 of CDBG, HOME, ESG, funds was available for projects in the 2023-2024 Program Year.
330
City of Fontana 2023-2024 CAPER 11
OMB Control No: 2506-0117 (exp. 07/31/2015)
Identify the geographic distribution and location of investments
Table 4 – Identify the geographic distribution and location of investments Target Area
Planned
Percentage of
Allocation
Actual
Percentage of
Allocation
Narrative Description
Citywide 100% 84% Public services mostly serve low- and moderate-income areas.
Low- and
Moderate-Income
Areas
0% 13%
There were no capital projects in the
program year. Only the public safety
program was restricted to low- and
moderate-income areas.
Narrative
The actual percentages of allocation in the table above reflect the City’s CDBG formula allocation excluding the City’s planned administrative costs. For Program Year 2023-2024, the City identified one activity to exclusively benefit its low- and moderate-income areas. That was its public safety program to which $250,000 was allocated. This amounted to 13 percent of the City’s CDBG allocation not including program administration or CV funds. 331
City of Fontana 2023-2024 CAPER 12
OMB Control No: 2506-0117 (exp. 07/31/2015)
Leveraging
Explain how federal funds leveraged additional resources (private, state and local funds), including a description of how matching requirements were satisfied, as well as how any publicly owned land or property located within the jurisdiction that were used to address the needs identified in the plan.
In planning and implementing all HUD funded activities, the City regularly works to identify and leverage other funding streams to maximize the impact of the CDBG, HOME, and ESG activities.
Cities receiving HOME Program funds are generally required to provide a HOME match of 25% of their annual allocation. During FY2023 Fontana met the criteria of a financial distressed jurisdiction and received a 50 percent reduction in match to 12.5 percent. The ESG program requires a dollar-for-dollar match requirement. The City of Fontana requires its ESG subrecipients to meet the match requirement and the City provides match for administrative funds it expends. This is done through a mix of cash and in-kind match as allowed under 24 CFR Part 576. In accordance with State law and local priority, the City consistently looks to leverage state and locally owned property to achieve its annual goals.
Table 5 – Fiscal Year Summary - HOME Match Report
Fiscal Year Summary – HOME Match
1. Excess match from prior Federal fiscal year $19,176,050
2. Match contributed during current Federal fiscal year $250,024
3. Total match available for current Federal fiscal year (Line 1 plus Line 2) $19,426,074
4. Match liability for current Federal fiscal year $0
5. Excess match carried over to next Federal fiscal year (Line 3 minus Line 4) $19,426,074
332
City of Fontana 2023-2024 CAPER 13
OMB Control No: 2506-0117 (exp. 07/31/2015)
Table 6 – Match Contribution for the Federal Fiscal Year Match Contribution for the Federal Fiscal Year
Project
No. or
Other ID
Date of
Contrib
.
Cash
(non-
Federal
sources)
Forego
ne
Taxes,
Fees,
Charge
s
Apprais
ed
Land/R
eal
Propert
y
Requir
ed
Infra-
structu
re
Site
Prep.,
Const.
Material
s,
Donate
d labor
Bond
Financi
ng
Total Match
None N/A $0 $0 $0 $0 $0 $0 $0
Table 7 – Program Income
Program Income – Enter the program amounts for the reporting period Balance on hand
at beginning of
reporting period
Amount received
during reporting
period
Total amount
expended during
reporting period
Amount
expended for
TBRA
Balance on hand
at end of
reporting period
$97,538 $1,741 $0 $0 $99,279
HOME MBE/WBE report
The City has a policy that requires formal outreach to minority and women-owned businesses as part of the City’s HOME Program. It is an integral part of the City’s contracting practices. All developers funded by the City make a good faith effort to outreach to minority- and women-owned businesses, when soliciting goods and services to support CDBG-funded projects or activities.
No HOME funds were expended during Program Year 2023-2024, therefore, there were no MBE/WBEs beneficiaries during the Program Year.
333
City of Fontana 2023-2024 CAPER 14
OMB Control No: 2506-0117 (exp. 07/31/2015)
Minority Business Enterprises and Women Business Enterprises – Indicate the number and dollar value of contracts for HOME projects completed during the reporting period Table 8 – Minority Business and Women Business Enterprises Total
Minority Business Enterprises
White
Non-
Hispanic
Alaskan
Native
or
America
n Indian
Asian or
Pacific
Islander
Black
Non-
Hispanic
Hispanic
Contracts
Number 0 0 0 0 0 0
Dollar Amount $0 $0 $0 $0 $0 $0
Sub-Contracts
Number 0 0 0 0 0 0
Dollar Amount $0 $0 N/A $0 $0 $0
Total Women Business
Enterprises Male
Contracts
Number 0 0 0
Dollar Amount $0 $0 $0
Sub-Contracts
Number 0 0 0
Dollar Amount $0 $0 $0
334
City of Fontana 2023-2024 CAPER 15
OMB Control No: 2506-0117 (exp. 07/31/2015)
Minority Owners of Rental Property – Indi cate the number of HOME assisted rental property owners and the total amount of HOME funds in these rental properties assisted Table 9 – Minority Owners of Rental Property
Total
Minority Property Owners
White
Non-
Hispanic
Alaskan
Native or
America
n Indian
Asian or
Pacific
Islander
Black
Non-
Hispani
c
Hispanic
Number 0 0 0 0 0 0
Dollar Amount $0 $0 $0 $0 $0 $0
Relocation and Real Property Acquisition – Indicate the number of persons displaced, the cost of relocation payments, the number of parcels acquired, and the cost of acquisition
Table 10 – Relocation and Real Property Acquisition
Parcels Acquired 0 $0
Businesses Displaced 0 $0
Nonprofit Organizations Displaced 0 $0
Households Temporarily Relocated, not
Displaced 0 $0
Househol
ds
Displaced
Total
Minority Property Enterprises
White
Non-
Hispanic
Alaskan
Native or
American
Indian
Asian or
Pacific
Islander
Black Non-
Hispanic Hispanic
Number 0 0 0 0 0 0
Cost $0 $0 $0 $0 $0 $0
335
City of Fontana 2023-2024 CAPER 16
OMB Control No: 2506-0117 (exp. 07/31/2015)
CR-20 - Affordable Housing 91.520(b)
Evaluation of the jurisdiction's progress in providing affordable housing, including the number and types of families served, the number of extremely low-income, low-income, moderate-income, and middle-income persons served.
Table 11 – Number of Households
One-Year Goal Actual
Number of homeless households to be provided
affordable housing units 0 0
Number of non-homeless households to be
provided affordable housing units 13 16
Number of special-needs households to be
provided affordable housing units 0 0
Total 13 16
Table 12 Number of Households Supported
One-Year Goal Actual
Number of households supported through rental
assistance 0 0
Number of households supported through the
production of new units 11 0
Number of households supported through the
rehab of existing units 0 13
Number of households supported through the
acquisition of existing units 2 3
Total 13 16
Discuss the difference between goals and outcomes and problems encountered in meeting these goals.
Workflows and access to clientele normalized since the pandemic. Labor and material costs are higher than before the pandemic. According to the one-year goals in the 2023 Action Plan the City forecasted providing affordable housing to 13 low- and moderate-income households. The city exceed this goal three households, assisting a total of 16 low- and moderate income households.
In the 2023-2024 Annual Action Plan the City forecast ESG would provide homelessness prevention assistance to 100 households and rapid rehousing assistance to 50 households. In the program year the subcontract provided homelessness prevention assistance to 96 households and rapid rehousing assistance to 3 households.
Discuss how these outcomes will impact future annual action plans. 336
City of Fontana 2023-2024 CAPER 17
OMB Control No: 2506-0117 (exp. 07/31/2015)
The City will continue to work to make affordable housing and programming resources available to low- and moderate-income households and those at-risk of and experiencing homelessness.
Progress will continue to be made on the Courtpla ce project which will bring on 11 new units of affordable housing.
Include the number of extremely low-income, low-income, and moderate-income persons served by each activity where information on income by family size is required to determine the eligibility of the activity.
Table 13 – Number of Families or Households Served
Number of Households Served CDBG Actual HOME Actual
Extremely Low-income 6 0
Low-income 221 0
Moderate-income 10 0
Total 237 0
Narrative Information
The table above (Table 13) includes the CDBG funded owner-occupied rehab, acquisition rehab and scholarship programs. To address what HUD defines as “worst case housing need” – low- income residents who pay more than 50 percent of their income for housing costs the city added 14 units of affordable housing. The City provided funds in the 2023-2024 Action Plan through the ESG program to provide assistance to 102 households at risk of homelessness and households experiencing homelessness. Further, the City continues to pursue the development of additional low- and moderate-income housing opportunities through the CDBG, HOME and other federal and state programs.
Through all programs, the City ensures that assistance is targeted and made available to individuals experiencing disabilities to ensure they have equal access to affordable housing programs. Where possible, homeless service providers leverage County programs for supportive housing activities and refers clients to such programs.
337
City of Fontana 2023-2024 CAPER
18 OMB Control No: 2506-0117 (exp. 07/31/2015)
CR-25 - Homeless and Other Special Needs 91.220(d, e); 91.320(d, e); 91.520(c) Evaluate the jurisdiction’s progress in meeting its specific objectives for reducing and ending homelessness through:
Reaching out to homeless persons (especially unsheltered persons) and assessing their individual needs
To address incidences of homelessness in Fontana and to prevent extremely low-income Fontana families from becoming homeless, the City places a high priority on programs that work to prevent homelessness or rapidly connect homeless individuals with housing and supportive services. To address this need, the City has supported a continuum of services in Fontana and though the San Bernardino County Continuum of Care (CoC) utilizing its ESG funds, to prevent and eliminate homelessness; including, but not limited to , Homelessness Prevention programs, Emergency Shelter programs and transitional housing.
The 2024 Point-in-Time Count (PIT) for San Bernardino County found1,200 people experiencing homelessness were sheltered and 4,255 were unsheltered. Over 70 percent of people experiencing homelessness in San Bernardino Count y live in seven cities, one of which is Fontana. The 2024 PIT count found 13 sheltered, 28 transitionally housed, and 260 unsheltered people experiencing homelessness in Fontana.
Addressing the emergency shelter and transitional housing needs of homeless persons The ultimate solution to ending homelessness is transitional and permanent housing closely aligned with supportive services that ensure housing stability can be maintained. However, because the demand for affordable housing far outpaces the region’s supply, the CoC continues to rely on its emergency and transitional housing system to address the immediate needs of San Bernardino County’s homeless population.
The City of Fontana, through its ESG, ESG-CV, and CDBG-CV allocation, funded the Water of Life Homelessness Prevention Programs, the City’s Hotel/ Motel Voucher Program, and the acquisition of a property that serves as a temporary emergency shelter operated by Water of Life. In addition, the City supported the efforts of the San Bernardino County Continuum of Care (CoC) and its member organizations that address homelessness.
Helping low-income individuals and families avoid becoming homeless, especially extremely low-income individuals and families and those who are: likely to become homeless after being discharged from publicly funded institutions and systems of care (such as health care facilities, mental health facilities, foster care and other youth facilities, and corrections programs and institutions); and, receiving assistance from public or private agencies that address housing, health, social services, employment, education, or youth needs
During Program Year 2023-2024 the City connected chronically homeless individuals and families, families with children, veterans and their families, and unaccompanied youth with available resources through the San Bernardino County CoC, which is comprised of a network of 338
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public, private, faith-based, for-profit, and non-profit service providers who utilize several federal, state and local resources to provide services for homeless people. The goal was to help unsheltered homeless persons make the transition to permanent housing and independent living, including shortening the period that individuals and families experience homelessness, facilitating access for homeless individuals and families to affordable housing units.
The City provided ESG funds to Water of Life to rapidly rehouse families experiencing homelessness and to prevent individuals and families who are at risk of homelessness from experiencing it. This assistance helped extremely low -income individuals and families who were currently housed but faced circumstances beyond their control that made it infeasible to stay current on their rent. The Fontana Police Department’s Multiple Enforcement Team’s (MET) mission is to provide a balanced approach in traditional law enforcement services, along with conducting outreach, education and providing resources to the homeless population. The goals of the MET Unit are to reduce crime relating to homelessness, calls for service, resources to medical professionals and city staff. MET also has a collaborative team between the City and County which includes a County Department of Behavioral Health social worker, a County Department of Probation Officer, and City Police Department Officer as part of the Homeless Outreach Support Team (HOST). The City supported the work of the Homeless Outreach and Support Team (HOST) to connect those exper iencing homelessness with housing and needed services to enable them to exit their life on the street. In program year 2023 the cost of these programs was funded by the city’s CDBG-CV and ESG-CV allocations.
To augment homelessness services the city secured competitively awarded State Family Homelessness Challenge and Homekey grants and spends State Permeant Local Housing Allocation (PLHA) funds. These sources fund rehab, operation, and services, including case management for emergency shelter, transitional, and permanent housing. Additionally, the City has formed the Community Outreach and Support Team (COAST) in partnership with the San Bernardino County’s Department of Behavioral Health and the San Bernardino Fire Department.
This unit provides mental health services to the homeless population out in the field through crisis intervention, community activities, and providing resources to those in need. This partnership expedites the process and services in providing much-needed mental health to the homeless population.
The City of Fontana funds the Inland Fair Housing and Mediation Board to provide fair housing, tenant/landlord mediation and legal services for residents through attorney consultations and preparation of legal documents for the residents to represent themselves in family law and landlord/tenant actions. Some of these services are provided to prevent undue evictions that could lead to homelessness.
The Housing Authority of the County of San Bernardino provides Section 8 rental assistance to extremely low- and very low-income households lo cated within the City limits. The Section 8 program gives priority to households that are at risk of becoming homeless or currently residing in inadequate housing.
Helping homeless persons (especially chronically homeless individuals and families, 339
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families with children, veterans and their families, and unaccompanied youth) make the transition to permanent housing and independent living, including shortening the period of time that individuals and families experience homelessness, facilitating access for homeless individuals and families to affordable housing units, and preventing individuals and families who were recently homeless from becoming homeless again The San Bernardino County CoC Ten-Year Plan to End Homelessness included a goal to more rapidly identify and assess people experiencing homelessness. The CoC is working with 2-1-1 to create a Coordinated Entry System (CES) for persons at risk or experiencing homelessness within the CoC. The activities include street outreach, a universal assessment, intake, referrals and transportation to resources. The CES will include a database, housed in the Homeless Management Information System (HMIS), using r eal time data entry to match clients to appropriate service providers. Collectively these strategies minimize duplication of effort and better connect the most vulnerable individuals and families, chronically homeless, and people at risk of becoming homeless to appropriate resources.
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CR-30 - Public Housing 91.220(h); 91.320(j)
Actions taken to address the needs of public housing
The City of Fontana Housing Authority was formed in 1994 under State of California Housing Authority Law to actively improve existing neighborhoods and develop affordable housing opportunities using local, state and federal resources. The Fontana Housing Authority does not administer a Section 8 Program and does not own HUD Public Housing; however, the City is within the service area of the Housing Authority of the County of San Bernardino (HACSB) for the purposes of Section 8 and Public Housing.
The HACSB manages an active portfolio of 8,689 tenant-based and project-based Section 8 Moving to Work Housing Choice vouchers serving 20,106 individuals. Of the 20,106 individuals, 12,603 are adults (including 3,643 seniors) and 7,503 are children. There is still a great need in Fontana for additional subsidized housing with nearly 1,140 applications from Fontana families on the waiting list. There are 681 families Countywide receiving tenant-based rental assistance, while 98 families are receiving project-based rental assistance.
Actions taken to encourage public housing residents to become more involved in management and participate in homeownership
HACSB has continued to encourage residents to be actively involved in the community and in the management of public housing developments through resident councils and numerous opportunities for feedback such as community meetings and surveys. HACSB and the City of Fontana also continue to actively encourage a nd promote public housing residents to explore homeownership opportunities and programs through HACSB’s Homeownership Assistance Program targeted at current Public Housing Authority (PHA) residents. HACSB also encourages and supports residents in participating in homebuyer counseling programs and recommends residents use the family self-sufficiency escrow account to save money towards homeownership.
Actions taken to provide assistance to troubled PHAs
Not applicable. HACSB is considered a High Performing PHA. 341
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CR-35 - Other Actions 91.220(j)-(k); 91.320(i)-(j)
Actions taken to remove or ameliorate the negative effects of public policies that serve as barriers to affordable housing such as land use controls, tax policies affecting land, zoning ordinances, building codes, fees and charges, growth limitations, and policies affecting the return on residential investment. 91.220 (j); 91.320 (i) A barrier to affordable housing is a public policy or nongovernmental condition that constrains the development or rehabilitation of affordable housing, such as land use controls, property taxes, state prevailing wage requirements, environmental protection, cost of land and availability of monetary resources. Barriers to affordable housi ng are distinguished from impediments to fair housing choice in the sense that barriers are lawful and impediments to fair housing choice are usually unlawful.
The primary barriers to affordable housing in Fontana continue to be housing affordability and the lack of monetary resources necessary to develop and sustain affordable housing. The two barriers are related in the sense that demand for affordable housing exceeds the supply and insufficient resources are available to increase the supply of affordable housing to meet demand. Fontana continues to deal with the ramifications of the State of California’s elimination of local Redevelopment Agencies which were a crucial resource for the development and preservation of affordable housing. This was the most significant public policy change impacting affordable housing and residential investment. While there are mechanisms whereby certain affordable housing assets tied to the former Redevelopment Agencies may be utilized today, these resources are finite and scarce. Although the City no longer has access to Redevelopment Housing Set-Aside funds, the City will continue to leverage its CDBG and HOME funds to attract private and other available public resources, including land conveyed to the City for the purpose of affordable housing, to facilitate affordable housing development. This strategy will increase the supply of affordable housing and preserve existing affordable housing in the City.
To address housing affordability and the lack of monetary resources for affordable housing, the Strategic Plan of the 2020-2024 Consolidated Plan called for the investment of a significant portion of CDBG and HOME funds for the construction of 22 new affordable rental housing units, seven rental units acquired and rehabbed and the preservation of 100 existing affordable housing units. From fiscal year 2020 through 2023 eight units have been constructed, 12 units have been acquired and rehabilitated, and 44 affordable housing units have been preserved.
Actions taken to address obstacles to meeting underserved needs. 91.220(k); 91.320(j) The primary obstacles to meeting the underserved needs of low- and moderate-income people include lack of funding from federal, state and other local sources, the high cost of housing that is not affordable to low-income people and the lack of availability of home improvement financing in the private lending industry. To address these obstacles, the City invested CDBG and ESG funds in Program Year 2023-2024 in projects that provide loans to low- and moderate-income homeowners for home repair projects and projects that prevent and shorten periods of homelessness. To address underserved needs, the City allocated 100 percent of its non- administrative CDBG and 100 percent of its HO ME investments in Program Year 2023-2024 to projects and activities that benefit low- and moderate-income people.
Actions taken to reduce lead-based paint hazards. 91.220(k); 91.320(j) 342
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The Residential Lead-Based Paint Hazard Reduction Act of 1992 (Title X) emphasizes prevention of childhood lead poisoning through housing-based approaches. To reduce lead-based paint hazards, the rehabilitation of housing units built prior to January 1, 1978 included a lead-based paint testing and risk assessment process. When lead-based paint was identified, the City ensured that developers and contractors incorporate safe-work practices and depending on the level of assistance, abate the lead-based paint as part of the scope of work to effectively reduce lead-based paint hazards to children in accordance with 24 CFR Part 35.
Actions taken to reduce the number of poverty-level families. 91.220(k); 91.320(j) The City’s CDBG and ESG funds were used to maintain safe and adequate housing for many residents in program year 2023. In addition to these resources, mainstream state and federal resources also contributed to reducing the number of individuals and families in poverty. Federal programs, such as the Earned Income Tax Credit and Head Start, provide pathways out of poverty for families who are ready to pursue employment and educational opportunities. Additionally, in California, the primary programs that assist families in poverty are CalWORKS, CalFresh (formerly food stamps) and Medi-Cal. Together, these programs provided individuals and families with employment assistance, subsidy for food, medical care, child-care and cash payments to meet basic needs such as housing, nutrition and tr ansportation. Other services are available to assist persons suffering from substance abuse, domestic violence and mental illness.
Actions taken to develop institutional structure. 91.220(k); 91.320(j) The institutional delivery system in Fontana is high-functioning and collaborative—particularly the relationship between local government and the nonprofit sector comprised of a network of capable nonprofit organizations that are delivering a full range of services to residents. Strong City departments anchor the administration of HUD grant programs and the housing, community and economic development activities that are implemented by the City.
To support and enhance the existing institutional structure, the City of Fontana continued to collaborate with affordable housing developers and nonprofit agencies receiving CDBG and ESG funds through the 2023-2024 Action Plan to ensure that the needs of low- and moderate-income residents were met as envisioned within the 2020-2024 Consolidated Plan - Strategic Plan.
Actions taken to enhance coordination between public and private housing and social service agencies. 91.220(k); 91.320(j)
To enhance coordination between public and private housing and social service agencies, the City continued consulting with and inviting the participation of a wide variety of agencies and organizations involved in the delivery of housing and supportive services to low- and moderate- income residents in Fontana—particularly in the low-and moderate-income areas.
Identify actions taken to overcome the effects of any impediments identified in the jurisdiction’s analysis of impediments to fair housing choice. 91.520(a) During Program Year 2023-2024, the City of Fontana Housing Department and the Inland Fair Housing and Mediation Board affirmatively furthered fair housing choice. The City is following the recommendations laid out in the prior Analysis of Impediments to Fair Housing (AI). As explained in the most recent AI conducted in 2020, the will City continue to address the previous 343
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impediments even though progress has been made. No new impediments were identified in the 2023-2024 Program Year.
Impediment: Lending Practices: Discrimination by Race
The previous AI revealed that loan approval rates were generally higher in 2009 for Asians (55%) and Whites (55%) than for Hispanics (48%) and African Americans (40%) in the City. According to the 2020-2024 Analysis, the approval rate in 2017 has increased substantially for all groups to include 65% for African Americans, 79% for Whites, 74% for Asians and 76% for Hispanics, although showing a decline for all group since 2015.
Action: The City is working with Inland Fair Housing and Mediation Board (IFHMB) to provide written outreach to lending institutions regarding the City commitment to eliminate racial discrimination in lending patterns; to encourage attendance of all staff at IFHMB workshops; and to provide flyers regarding FTHB education, including IFHMB FAQ on the City website. IFHMB is continuing to offer Fair Housing education as part of the FTHB courses; as well as provide outreach regarding IFHMB programs targeted to census blocks identified by City staff.
IFHMB staffed a fair housing workshop at the Fontana Senior Center in October 2019 that provided information about fair housing laws and the duty to affirmatively further faith housing.
As a result of continuing education efforts, the City did not identify any neighborhoods where it believes disparate lending patterns exist. There were no reports of any significant HMDA data findings for IFHMB to further investigate and enforce. However, IFHMB and the City will continue to work together to ensure that the City continues to meet their obligations to affirmatively further fair housing under the Fair Housing Act.
Impediment: Discrimination against Persons with Disabilities Based on an increase in complaints to the fair housing service provider, the previous AI noted that there was a lack of understanding and sensitivity of the fair housing rights of the disabled by the housing industry. Half of the fair housing complaints were from those with disabilities.
Action: The City is working with IFHMB to provide recommendations of properties believed to be discriminatory in their practices as information is received; facilitate accessibility reviews of multi- family properties; and distribute design and construction information to all who inquire about building permits. IFHMB is continuing to focus investigation efforts on tips and complaints regarding disability; review properties built within the last five years for accessibility compliance; and provide the City with literature regarding the Fair Housing Act seven design and construction requirements.
Over 4,000 Fair Housing and Accessibility Brochures were distributed within the City of Fontana during the program year. IFHMB has received federal funding to do accessibility testing for the seven design and construction requirements of the Fair Housing Act. IFHMB will continue to seek and identify properties to conduct such design and construction testing and will follow-up with developers and the City as appropriate.
Impediment: Lack of Awareness of Fair Housing Laws
There was a general lack of knowledge in the community of fair housing rights and responsibilities. 344
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Action: The City is continuing to work with IF HMB to provide opportunities for conducting Fair Housing workshops in the City and providing IFHMB outreach materials as a part the City newsletter and utility bill mailings. IFHMB is continuing to collaborate with local realtors; providing recurring education to members of the Inland Valleys Association of Realtors; offering no-cost Fair Housing workshops; and developing a fair housing FAQ for the City website.
The City has a fair housing link to the Services page of the City of Fontana website, as well as on the Housing Authority page. IFHMB participated in providing fair housing material at several community events including a City meeting with local community-based organizations, Citrus Head Start Resources Fair, a Housing Rights and Responsibilities workshop and Health Resources Fair at the Fontana Senior Center. IFHMB released cable bulletins via the City Community Channel for recruiting testers, familial status, general housing discrimination and domestic violence at various times during the program year. Over 4,000 brochures on fair housing were distributed during the period between July 1, 2019 and June 30, 2020 in various apartments, nonprofit organizations, public offices, and local stores in the City of Fontana. IFHMB will continue its efforts to work with the City on addressing awareness of fair housing laws and affirmatively further fair housing.
Impediment: Transit Access
The elderly and low-income are dependent upon public transportation. The AI identified two underserved areas of the City: 1) Falcon Ridge/Summit Avenue Job Center; 2) Southwest Industrial Job Centers.
Action: The City has worked with Omni Trans to provide a bus route with new stops in the Northern areas of the City (Route 82: Rancho Cucamonga-Fontana-Sierra Lakes). The City of Fontana continues to work with Omni Trans on bus routes throughout Fontana. That process includes evaluating current and potentially future lines (based upon anticipated development).
The current priorities include identifying locations for the installation of bus turnouts and bus shelters. Future Omni Trans services will be dictated by both demand (ridership) and by new single-family development (in both Central and North Fontana).
Impediment: Reasonable Accommodations
The AI noted that much of the housing stock in Fontana was built before accessibility standards were enacted. Modifications to these units may be needed to allow access by a person with disabilities. The City requires a variance to install features to accommodate persons with disabilities that may be prohibitive to many lower income persons.
Action: A request for a fee deferral or cost reduction for securing a minor variance for projects that include reasonable accommodation improvements is under consideration by the City. Until a revision can be made to the City Development Code, an internal memo has been distributed to all Housing and Planning staff regarding the City process for waiving minor variance fees for applications that include reasonable accommodation improvements. A statement on the City reasonable accommodation policy has been made available to the public.
Impediment: Multi-Family Civil Rights Compliance
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According to the City Section 109 Voluntary Compliance Agreement, the City must examine Federal and contractual civil rights compliance requirements on all City-owned multi-family residential properties.
Action: The City is working with IFHMB to revi ew all civil rights compliance requirements and current affirmative marketing plans; and to show what efforts have been undertaken to accomplish the identified impediments, including any updates to the civil rights compliance requirements to date. The City provided IFHMB with an update on City-owned housing in Fall 2019 as part of updating its Analysis of Impediment to Fair Housing during the 2020-2024 Consolidated Plan.
Impediment: North Fontana Affordable Multi-Family Development According to the Voluntary Compliance Agreement, the City must examine opportunities for the creation of new affordable multi-family housing to be distributed equitably throughout the City, particularly in North Fontana.
Action: The City continues to actively seek developers for areas zoned multifamily housing and continues to preserve the zoning designation of such areas in Northern Fontana. The City adopted the Westgate Master Plan in North Fontana, which included several key properties to be set aside for multifamily housing developments. The City’s Courtplace Apartment project has been delayed, but is still anticipated to be completed in the following 2025-2026 Program Year.
Impediment: Lack of Awareness of Housing Services and Facilities in the City According to the Voluntary Compliance Agreement, the City must publish and distribute a brochure written in Spanish which describes housing services and facilities within the City.
Action: The City has information regarding discrimination and fair housing laws available on their website, along with contact information and office hours for IFHMB Ontario office and all the IFHMB services are available in both English and Spanish during all office hours.
Impediment: Transitional and Supportive Housing
State law requires cities to identify adequate sites, appropriate zoning, development standards and a permitting process to facilitate and encourage development of transitional and permanent supportive housing. The City Zoning Ordinance does not currently provide such zoning and development standards.
Action: On October 28, 2014, the City enacted Ordinance 1708, which established an Emergency Shelter Overlay District in Light Industrial land use designations.
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CR-40 - Monitoring 91.220 and 91.230
Describe the standards and procedures used to monitor activities carried out in furtherance of the plan and used to ensure long-term compliance with requirements of the programs involved, including minority business outreach and the comprehensive planning requirements
To ensure CDBG, ESG, HOME, CDBG-CV, and ESG -CV funds were used efficiently and in compliance with applicable regulations, the City provided technical assistance to all subrecipients throughout the program year and monitored the progress of its subrecipients throughout the program year.
Technical Assistance
Technical assistance is provided to city departments and agencies and subrecipient(s) which receive CDBG and ESG funding. Subsequent to approval of the Annual Action Plan, City staff reviews program regulations in detail with subrecipients and City Departments to provide useful forms and resources for documenting compliance and to review the City’s compliance procedures and requirements. Additionally, individualized technical assistance is provided on an as-needed basis throughout the program year.
Activity Monitoring
All activities are monitored, beginning with a detailed review upon receipt of an application to determine eligibility, conformance with a National Objective and conformance with a Plan goal.
This review also examines the proposed use of funds, eligibility of the service area, eligibility of the intended beneficiaries and likelihood of compliance with other federal requirements such as the National Environmental Policy Act, the System for Award Management (SAM) debarment list, prevailing wage, Minority and Women Business Enterprise, Section 3 and federal acquisition and relocation regulations, as applicable.
Subrecipients are required to submit an audit and other documentation to establish their capacity, and any findings noted in the audit are reviewed with the applicant. Eligible applications are then considered for funding. Once funded, desk monitoring includes ongoing review of required quarterly performance reports. For CDBG public service and ESG activities, an on-site monitoring is conducted once every two (2) years, or more frequently as needed to ensure compliance. These reviews include both a fiscal and programmatic review of the subrecipient’s activities. The reviews determine if the subrecipient is complying with the program regulations and City contract. Areas routinely reviewed include overall administration, financial systems, appropriateness of program expenditures, program delivery, client eligib ility determination and documentation, reporting systems, and achievement toward achieving contractual goals. Following the monitoring visit, a written report is provided delineating the results of the review and any findings of non-compliance and the required corrective action. Subrecipients and City departments normally have 30 days to provide the City with corrective actions taken to address any noted findings. Individualized technical assistance is provided, as noted above, as soon as compliance concerns are identified. For CDBG capital projects, monitoring also includes compliance with regulatory 347
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agreement requirements. For HOME funded activities, annual monitoring is undertaken to ensure that for renter occupied units, household income, rents and utility allowances are in compliance with applicable limits pursuant to the affordability covenant. For ownership units, annual monitoring of occupancy is conducted throughout the affordability period.
For the HOME-funded activities, annual monitoring is undertaken to ensure that for renter- occupied units, household income, rents and utility allowances are in compliance with applicable limits pursuant to the affordability covenant. For ownership units, annual monitoring of occupancy is conducted throughout the affordability period.
The following is a list of the rental units that were monitored in calendar year 2024. All properties were found to be in compliance. Field audits were conducted seven properties shown below.
Property Name Inspection/
Audit Date
Sierra Fountains 4/2024
Hillcrest 4/2024
Toscana 5/2024
Siena 5/2024
Reed Street Properties 7/2024
Ceres Ave Phases I & III 6/2026
Citizen Participation Plan 91.105(d); 91.115(d)
Describe the efforts to provide citizens with reasonable notice and an opportunity to comment on performance reports.
In accordance with the City adopted Citizen Participation Plan, a public notice was published in the San Bernardino Sun, Press Enterprise, and El Chicano in English and in Spanish on September 5, 2024, notifying the public of the availability of the Consolidated Annual Performance and Evaluation Report for a 15-day public review and comment period. A copy of the public notices is included in Appendix A. The draft CAPER is made available on the City website and posted publicly.
A public hearing before the City Council was held on Tuesday, September 24, 2024, to solicit comments from residents and interested parties. No written or oral comments were received. 348
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CR-45 - CDBG 91.520(c)
Specify the nature of, and reasons for, any changes in the jurisdiction’s program objectives and indications of how the jurisdiction would change its programs as a result of its experiences.
In the 2023-2024 program year, the City provided CDBG-funded public services. The City’s CDBG Fair Housing program served 86 unduplicated individuals. The City’s Public Safety Program served 59,140 individuals. The housing programs supported 16 low- and moderate-income households to secure affordable housing. The city’s ESG program helped 102 households to avoid and shorten periods of homelessness. Program year 2023-2024 is the fourth year of the five-year 2020-2024 Consolidated Planning cycle. High priority needs identified in the Consolidated Plan – Strategic Plan reflect Fontana’s community. Future expenditures will impact these strategies.
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CR-50 - HOME 91.520(d)
Include the results of on-site inspections of affordable rental housing assisted under the program to determine compliance with housing codes and other applicable regulations Maintaining HOME-assisted affordable housing is a high priority. During the 2023-2024 Program Year, the City inspected the HOME-assisted properties listed below to determine compliance with the housing codes and other applicable regulations. Where any deficiencies existed, the property owner and property management were notified to make repairs and City staff followed up to ensure completion.
The following is a list of the rental properties that were monitored in calendar year 2023-2024. All units were found to be in compliance. The City conduct field audits for the seven complexes listed below.
Property Name Inspection/
Audit Date
Sierra Fountains 4/2024
Hillcrest 4/2024
Toscana 5/2024
Siena 5/2024
Reed Street Properties 7/2024
Ceres Ave Phases I & III 6/2026
Provide an assessment of the jurisdiction's affirmative marketing actions for HOME units.
92.351(b)
The City certified it made effort to affirmatively further fair housing as a participating jurisdiction that received HOME Program funds. The City used CDBG funds to promote fair housing by contracting with the Inland Fair Housing and Mediation Board to provide a variety of fair housing services.
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Refer to IDIS reports to describe the amount and use of program income for projects, including the number of projects and owner and tenant characteristics According to the PR-09 report for the HOME program, $1,741 of HOME program income was receipted during Program Year 2023-2024 and will be committed for the next City HOME project in the next Program Year.
Describe other actions taken to foster and maintain affordable housing. 91.220(k) The City of Fontana funds the Inland Fair Housing and Mediation Board to provide fair housing, tenant/landlord mediation and legal services for residents through attorney consultations and preparation of legal documents for the residents to represent themselves in family law and landlord/tenant actions. Some of these services are provided to prevent undue evictions that could lead to homelessness.
The Housing Authority of the County of San Bernardino provides Section 8 rental assistance to extremely low- and very low-income households located within the City limits. The Section 8 program gives priority to households that are at risk of becoming homeless or currently residing in inadequate housing.
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CR-60 - ESG 91.520(g) (ESG Recipients only)
ESG Supplement to the CAPER in e-snaps
For Paperwork Reduction Act
1. Recipient Information—All Recipients Complete
Basic Grant Information
Recipient Name FONTANA
Organizational DUNS Number 058728630
EIN/TIN Number 956004770
Identify the Field Office LOS ANGELES
Identify CoC(s) in which the recipient
or subrecipient(s) will provide ESG
assistance
San Bernardino City & County CoC
ESG Contact Name
Prefix Mrs.
First Name Valerie
Middle Name
Last Name Gonzales
Suffix N/A
Title Housing Manager
ESG Contact Address
Street Address 1 8353 Sierra Ave.
Street Address 2 N/A
City Fontana
State CA
ZIP Code 92335
Phone Number (909) 350-6625
Extension N/A
Fax Number
Email Address [email protected]
ESG Secondary Contact
Prefix N/A
First Name N/A
Last Name N/A
Suffix N/A
Title N/A
Phone Number N/A
Extension N/A
Email Address N/A
2. Reporting Period—All Recipients Complete
Program Year Start Date 07/01/2023
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Program Year End Date 06/30/2024
3a. Subrecipient Form – Complete one form for each subrecipient Subrecipient or Contractor Name: Water of Life
City: Fontana
State: CA
Zip Code: 92336
DUNS Number: 793842550
Is subrecipient a victim services provider: No
Subrecipient Organization Type: Faith-Based Organization ESG Subgrant or Contract Award Amount: $162,190
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CR-65 - Persons Assisted
4. Persons Served
4a. Complete for Homelessness Prevention Activities
Number of Persons in
Households
Total
Adults 41
Children 55
Don't Know/Refused/Other 0
Missing Information 0
Total 96
Table 6 – Household Information for Homeless Prevention Activities
4b. Complete for Rapid Re-Housing Activities
Number of Persons in
Households
Total
Adults 3
Children 3
Don't Know/Refused/Other 0
Missing Information 0
Total 6
Table 7 – Household Information for Rapid Re-Housing Activities
4c. Complete for Shelter
Number of Persons in
Households
Total
Adults 0
Children 0
Don't Know/Refused/Other 0
Missing Information 0
Total 0
Table 8 – Shelter Information
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4d. Street Outreach
Table 9 – Household Information for Street Outreach
4e. Totals for all Persons Served with ESG
Number of Persons in
Households
Total
Adults 44
Children 58
Don't Know/Refused/Other 0
Missing Information 0
Total 102
Table 10 – Household Information for Persons Served with ESG
5. Gender—Complete for All Activities
Total
Male 50
Female 52
Transgender 0
Don't Know/Refused/Other 0
Missing Information 0
Total 102
Table 11 – Gender Information
Number of Persons in
Households
Total
Adults 0
Children 0
Don't Know/Refused/Other 0
Missing Information 0
Total 0
355
City of Fontana 2023-2024 CAPER 36
OMB Control No: 2506-0117 (exp. 07/31/2015)
6. Age—Complete for All Activities
Table 12 – Age Information
7. Special Populations Served—Complete for All Activities Number of Persons in Households ESG
Subpopulation Total Total
Persons
Served –
Prevention
Total
Persons
Served –
RRH
Total
Persons
Served in
Emergency
Shelters
Veterans 1 0 1 0
Victims of
Domestic Violence 3 3 0 0
Elderly 2 1 1 0
HIV/AIDS 0 0 0 0
Chronically
Homeless 1 0 1 0
Persons with Disabilities:
Severely
Mentally Ill 10 4 6 0
Chronic
Substance Abuse 0 0 0 0
Other Disability 7 6 1 0
Total
(Unduplicated if
possible) 17 10 7 0
Table 13 – Special Population Served
Total
Under 18 58
18-24 3
25 and over 41
Don't Know/Refused/Other 0
Missing Information 0
Total 102
356
City of Fontana 2023-2024 CAPER 37
OMB Control No: 2506-0117 (exp. 07/31/2015)
CR-70 – ESG 91.520(g) - Assistance Provided and Outcomes
8. Shelter Utilization
Number of New Units – Rehabbed N/A
Number of New Units – Conversion N/A
Total Number of bed - nights available N/A
Total Number of bed - nights provided N/A
Capacity Utilization N/A
Table 14 – Shelter Capacity
9. Project Outcomes Data measured under the performance standards developed in consultation with the CoC(s)
In FY2021, the City acquired a property to serve as an emergency shelter. It began operating in FY2023.
357
City of Fontana 2023-2024 CAPER 38
OMB Control No: 2506-0117 (exp. 07/31/2015)
CR-75 – Expenditures
11. Expenditures
11a. ESG Expenditures for Homelessness Prevention*
Dollar Amount of Expenditures in Program
Year
2021 2022 2023
Expenditures for Rental Assistance 131,237 59,442 110,192 Expenditures for Housing Relocation and
Stabilization Services - Financial
Assistance
23,337 0 1,841
Expenditures for Housing Relocation &
Stabilization Services - Services 0 57,190 34,195
Expenditures for Homeless Prevention
under Emergency Shelter Grants Program 0 0 0
Subtotal Homelessness Prevention $154,574 $116,632 146,228 Table 15 – ESG Expenditures for Homelessness Prevention
11b. ESG Expenditures for Rapid Re-Housing*
Dollar Amount of Expenditures in Program
Year
2021 2022 2023
Expenditures for Rental Assistance 3,328 7,095 7,104
Expenditures for Housing Relocation and
Stabilization Services - Financial
Assistance
7,725 0 2,600
Expenditures for Housing Relocation &
Stabilization Services - Services 0 41,965 6,277
Expenditures for Homeless Assistance
under Emergency Shelter Grants Program 0 0 0
Subtotal Rapid Re-Housing $11,053 $49,060 15,981
Table 16 – ESG Expenditures for Rapid Re-Housing
358
City of Fontana 2023-2024 CAPER
39 OMB Control No: 2506-0117 (exp. 07/31/2015)
11c. ESG Expenditures for Emergency Shelter
Dollar Amount of Expenditures in Program
Year
2021 2022 2023
Essential Services 0 0 0
Operations 0 0 0
Renovation 0 0 0
Major Rehab 0 0 0
Conversion 0 0 0
Subtotal $0 $0 $0
T
able 17 – ESG Expenditures for Emergency Shelter
11d. Other Grant Expenditures
Dollar Amount of Expenditures in Program
Year
2021 2022 2023
Street Outreach 0 0 0
HMIS 0 0 0
Administration $13,429 $7,770 $13,671
Table 18 - Other Grant Expenditures
11e. Total ESG Grant Funds
Table 19 - Total ESG Funds Expended
11f. Match Source
2021 2022 2023
Other Non-ESG HUD Funds 0 0 0
Other Federal Funds 0 0 0
State Government 13,430 6,424 13,690
Local Government 0 0 0
Private Funds 165,627 167,038 162,189
Other: Employee Salaries/Volunteer
Hours
0 0 0
Fees 0 0 0
Program Income 0 0 0
Total Match Amount $179,056 $173,462 $175,880
Table 20 - Other Funds Expended on Eligible ESG Activities Total ESG Funds
Expended
2021 2022 2023
$179,056 $173,462 $175,880
359
City of Fontana 2023-2024 CAPER 40
OMB Control No: 2506-0117 (exp. 07/31/2015)
11g. Total
Total Amount of
Funds Expended on
ESG Activities
2021 2022 2023
Total $294,023 $340,500 $351,760
Table 21 - Total Amount of Funds Expended on ESG Activities
360
City of Fontana 2023-2024 CAPER 41
OMB Control No: 2506-0117 (exp. 07/31/2015)
City of Fontana
2023-2024
CONSOLIDATED ANNUAL PERFORMANCE AND EVALUATION REPORT
JULY 1, 2023 THROUGH JUNE 30, 2024
361
City of Fontana 2023-2024 CAPER 42
OMB Control No: 2506-0117 (exp. 07/31/2015)
City of Fontana
2023-2024
CONSOLIDATED ANNUAL PERFORMANCE AND EVALUATION REPORT
JULY 1, 2023 THROUGH JUNE 30, 2024
APPENDIX A
IDIS Reports
CDBG Financial Summary – PR26
362
Plan
Year
IDIS
Project
IDIS
Activity
Voucher
Number2022 3 399 6786820 Expended in PY22
2023 3 409 6856552
2023 3 409 6872701
2023 3 409 6883608
2023 3 409 6898425
2023 3 409 6902717
2023 3 409 6933799
Missing Voucher 6914883 for $23,817.93
2022 3 400 6786820 Expended in PY22
2023 3 408 6856552
2023 3 408 6872701
2023 3 408 6898425
2023 3 408 6902717
2023 3 408 6933799
Missing Voucher 6914883 for $96
2019 1 352 6786820 Expended in PY22
2020 3 368 6786820 Expended in PY22
2020 3 368 6856552
2020 3 368 6872701
2020 3 368 6883608
Housing Rehabilitation Program 2020-21 14A LMH $56,869.50 Housing Rehabilitation Program 2020-21 14A LMH $40,785.55 Housing Rehabilitation Program 2020-21 14A LMH $812.00
05Z Matrix Code
0 $40,379.56
Housing Rehabilitation Program 2019-20 14A LMH $2,014.50 Housing Rehabilitation Program 2020-21 14A LMH $9,975.75 Recreation Scholarship Program 2023 05Z LMC $24,875.04
Recreation Scholarship Program 2023 05Z LMC $4,855.37
Recreation Scholarship Program 2023 05Z LMC $1,526.50
Recreation Scholarship Program 2022 05Z LMC $5,361.40
Recreation Scholarship Program 2023 05Z LMC $243.75
Recreation Scholarship Program 2023 05Z LMC $3,517.50
Public Safety 2023 05I LMA $30,555.34
Public Safety 2023 05I LMA $2,354.23
05I Matrix Code 0 $281,606.78
Public Safety 2023 05I LMA $23,808.96
Public Safety 2023 05I LMA $23,219.58
Public Safety 2023 05I LMA $23,546.71
Activity Name Matrix
Code
National
Objective Drawn Amount
Public Safety 2022 05I LMA $55,424.71
Public Safety 2023 05I LMA $122,697.25
45 TOTAL SUBJECT TO PA CAP (SUM, LINES 42-44) 2,019,237.00 46 PERCENT FUNDS OBLIGATED FOR PA ACTIVITIES (LINE 41/LINE 45) 17.30% LINE 17 DETAIL: ACTIVITIES TO CONSIDER IN DETERMINING THE AMOUNT TO ENTER ON LINE 17 No data returned for this view. This might be because the applied filter excludes all data.
LINE 18 DETAIL: ACTIVITIES TO CONSIDER IN DETERMINING THE AMOUNT TO ENTER ON LINE 18 No data returned for this view. This might be because the applied filter excludes all data.
LINE 19 DETAIL: ACTIVITIES INCLUDED IN THE COMPUTATION OF LINE 19 40 ADJUSTMENT TO COMPUTE TOTAL PA OBLIGATIONS 76,353.83 41 TOTAL PA OBLIGATIONS (LINE 37 + LINE 38 - LINE 39 +LINE 40) 349,324.00 42 ENTITLEMENT GRANT 1,978,958.00
43 CURRENT YEAR PROGRAM INCOME 40,279.00
44 ADJUSTMENT TO COMPUTE TOTAL SUBJECT TO PA CAP 0.00
36 PERCENT FUNDS OBLIGATED FOR PS ACTIVITIES (LINE 31/LINE 35) 13.81% PART V: PLANNING AND ADMINISTRATION (PA) CAP
37 DISBURSED IN IDIS FOR PLANNING/ADMINISTRATION 425,677.83 38 PA UNLIQUIDATED OBLIGATIONS AT END OF CURRENT PROGRAM YEAR 0.00 39 PA UNLIQUIDATED OBLIGATIONS AT END OF PREVIOUS PROGRAM YEAR 0.00 31 TOTAL PS OBLIGATIONS (LINE 27 + LINE 28 - LINE 29 + LINE 30) 285,114.16 32 ENTITLEMENT GRANT 1,978,958.00
33 PRIOR YEAR PROGRAM INCOME 84,940.00
34 ADJUSTMENT TO COMPUTE TOTAL SUBJECT TO PS CAP 0.00
35 TOTAL SUBJECT TO PS CAP (SUM, LINES 32-34) 2,063,898.00 PART IV: PUBLIC SERVICE (PS) CAP CALCULATIONS
27 DISBURSED IN IDIS FOR PUBLIC SERVICES 321,986.34
28 PS UNLIQUIDATED OBLIGATIONS AT END OF CURRENT PROGRAM YEAR 0.00 29 PS UNLIQUIDATED OBLIGATIONS AT END OF PREVIOUS PROGRAM YEAR 0.00 30 ADJUSTMENT TO COMPUTE TOTAL PS OBLIGATIONS 36,872.18
LOW/MOD BENEFIT FOR MULTI-YEAR CERTIFICATIONS
23 PROGRAM YEARS(PY) COVERED IN CERTIFICATION PY: 2021 PY: 2022 PY:2023 24 CUMULATIVE NET EXPENDITURES SUBJECT TO LOW/MOD BENEFIT CALCULATION 1,953,134.81 25 CUMULATIVE EXPENDITURES BENEFITING LOW/MOD PERSONS 1,953,134.81 26 PERCENT BENEFIT TO LOW/MOD PERSONS (LINE 25/LINE 24) 0.00% 18 EXPENDED FOR LOW/MOD MULTI-UNIT HOUSING 0.00
19 DISBURSED FOR OTHER LOW/MOD ACTIVITIES 1,953,134.81 20 ADJUSTMENT TO COMPUTE TOTAL LOW/MOD CREDIT (150,641.58) 21 TOTAL LOW/MOD CREDIT (SUM, LINES 17-20) 1,802,493.23 22 PERCENT LOW/MOD CREDIT (LINE 21/LINE 11) 100.00%
14 ADJUSTMENT TO COMPUTE TOTAL EXPENDITURES (226,995.45) 15 TOTAL EXPENDITURES (SUM, LINES 11-14) 2,151,817.19
16 UNEXPENDED BALANCE (LINE 08 - LINE 15) 1,791,626.53 PART III: LOWMOD BENEFIT THIS REPORTING PERIOD
17 EXPENDED FOR LOW/MOD HOUSING IN SPECIAL AREAS 0.00
09 DISBURSEMENTS OTHER THAN SECTION 108 REPAYMENTS AND PLANNING/ADMINISTRATION 1,953,134.81 10 ADJUSTMENT TO COMPUTE TOTAL AMOUNT SUBJECT TO LOW/MOD BENEFIT 0.00 11 AMOUNT SUBJECT TO LOW/MOD BENEFIT (LINE 09 + LINE 10) 1,953,134.81 12 DISBURSED IN IDIS FOR PLANNING/ADMINISTRATION 425,677.83 13 DISBURSED IN IDIS FOR SECTION 108 REPAYMENTS 0.00
06 FUNDS RETURNED TO THE LINE-OF-CREDIT 0.00
06a FUNDS RETURNED TO THE LOCAL CDBG ACCOUNT 0.00
07 ADJUSTMENT TO COMPUTE TOTAL AVAILABLE 1,924,206.72
08 TOTAL AVAILABLE (SUM, LINES 01-07) 3,943,443.72
PART II: SUMMARY OF CDBG EXPENDITURES
02 ENTITLEMENT GRANT 1,978,958.00
03 SURPLUS URBAN RENEWAL 0.00
04 SECTION 108 GUARANTEED LOAN FUNDS 0.00
05 CURRENT YEAR PROGRAM INCOME 40,279.00
05a CURRENT YEAR SECTION 108 PROGRAM INCOME (FOR SI TYPE) 0.00
FONTANA , CA
Metrics
Grantee FONTANA , CA
Program Year 2,023.00
PART I: SUMMARY OF CDBG RESOURCES
01 UNEXPENDED CDBG FUNDS AT END OF PREVIOUS PROGRAM YEAR 0.00 Office of Community Planning and Development DATE: 08-30-24 U.S. Department of Housing and Urban Development TIME: 11:35 Integrated Disbursement and Information System PAGE: 1 PR26 - CDBG Financial Summary Report
Program Year 2023
363
2020 3 368 6898425
2020 3 368 6902717
2020 3 368 6933799 Missing Voucher 6914883 for $1,008
2021 3 387 6786820 Expended in PY22
2021 3 387 6856552
2021 3 387 6883608
2021 3 387 6898425
2021 3 387 6902717
2021 3 387 6933799
Missing Voucher 6914883 for $13,621.50
2021 2 388 6786820 Expended in PY22
2021 2 388 6902717
2021 2 388 6933799
2023 2 410 6856552
2023 2 410 6872701
Total
Plan
Year
IDIS
Project
IDIS
Activity
Voucher
Number
Activity to
prevent Activity Name Grant Number Fund
Type
2022 3 399 6786820 No Public Safety 2022 B22MC060565 EN 2023 3 409 6856552 No Public Safety 2023 B23MC060565 EN 2023 3 409 6872701 No Public Safety 2023 B23MC060565 EN 2023 3 409 6883608 No Public Safety 2023 B23MC060565 EN 2023 3 409 6898425 No Public Safety 2023 B23MC060565 EN 2023 3 409 6902717 No Public Safety 2023 B23MC060565 EN 2023 3 409 6933799 No Public Safety 2023 B23MC060565 EN
2022 3 400 6786820 No Recreation Scholarship Program 2022 B22MC060565 EN 2023 3 408 6856552 No Recreation Scholarship Program 2023 B23MC060565 EN 2023 3 408 6872701 No Recreation Scholarship Program 2023 B23MC060565 EN 2023 3 408 6898425 No Recreation Scholarship Program 2023 B23MC060565 EN 2023 3 408 6902717 No Recreation Scholarship Program 2023 B23MC060565 EN 2023 3 408 6933799 No Recreation Scholarship Program 2023 B23MC060565 EN
No Activity to prevent, prepare for, and respond to Coronavirus Total
Plan
Year
IDIS
Project
IDIS
Activity
Voucher
Number2022 5 393 6786820 Expended in PY22
2023 4 406 6856552
2023 4 406 6872701
2023 4 406 6883608
2023 4 406 6898425
Missing Voucher 6914883 for $17,807.10
2023 4 406 6902717
2023 4 406 6933799
2022 1 398 6786820
Expended in PY22
2023 1 407 6856552
2023 1 407 6883608
2023 1 407 6898425
Missing Voucher 6914883 for $7,175.60
2023 1 407 6933799
Total
21D Matrix Code $38,482.41
$425,677.83
Inland Fair Housing & Mediation Board: Fair Housing Services 2023 21D $5,081.21 Inland Fair Housing & Mediation Board: Fair Housing Services 2023 21D $4,105.65 Inland Fair Housing & Mediation Board: Fair Housing Services 2023 21D $9,429.31 21A Matrix Code $387,195.42
Inland Fair Housing & Mediation Board: Fair Housing Services 2022 21D $8,158.01 Inland Fair Housing & Mediation Board: Fair Housing Services 2023 21D $11,708.23 CDBG Administration 2023 21A $22,428.48
CDBG Administration 2023 21A $21,856.99
CDBG Administration 2023 21A $164,874.48
CDBG Administration 2023 21A $61,800.22
CDBG Administration 2023 21A $43,698.71
CDBG Administration 2023 21A $16,857.98
LINE 37 DETAIL: ACTIVITIES INCLUDED IN THE COMPUTATION OF LINE 37 Activity Name Matrix
Code
National
Objective Drawn Amount
CDBG Administration FY 2022 21A $55,678.56
05Z Matrix Code 0 $40,379.56
$321,986.34
$321,986.34
05Z LMC $24,875.04
05Z LMC $4,855.37
05Z LMC $1,526.50
05Z LMC $5,361.40
05Z LMC $243.75
05Z LMC $3,517.50
05I LMA $30,555.34
05I LMA $2,354.23
05I Matrix Code 0 $281,606.78
05I LMA $23,808.96
05I LMA $23,219.58
05I LMA $23,546.71
Matrix
Code
National
Objective Drawn Amount
05I LMA $55,424.71
05I LMA $122,697.25
14G Matrix Code $1,307,189.12
$1,953,134.81
LINE 27 DETAIL: ACTIVITIES INCLUDED IN THE COMPUTATION OF LINE 27 Rental Housing Acquisition/Rehabilitation Program 2021-22 14G LMH $1,555.00 Rental Housing Acquisition/Rehabilitation Program 2023-24 14G LMH $25,000.00 Rental Housing Acquisition/Rehabilitation Program 2023-24 14G LMH $1,157,577.37 14A Matrix Code $323,959.35
Rental Housing Acquisition/Rehabilitation Program 2021-22 14G LMH $123,009.25 Rental Housing Acquisition/Rehabilitation Program 2021-22 14G LMH $47.50 Housing Rehabilitation Program 2021-22 14A LMH $25,609.75 Housing Rehabilitation Program 2021-22 14A LMH $18,894.00 Housing Rehabilitation Program 2021-22 14A LMH $30,533.00 Housing Rehabilitation Program 2021-22 14A LMH $30,899.40 Housing Rehabilitation Program 2021-22 14A LMH $2,503.25 Housing Rehabilitation Program 2021-22 14A LMH $4,412.00 Housing Rehabilitation Program 2020-21 14A LMH $23,129.65 Housing Rehabilitation Program 2020-21 14A LMH $1,295.00 Housing Rehabilitation Program 2020-21 14A LMH $76,226.00 364
City of Fontana
2023-2024
CONSOLIDATED ANNUAL PERFORMANCE AND EVALUATION REPORT
JULY 1, 2023 THROUGH JUNE 30, 2024
APPENDIX B
IDIS Reports
CDBG Financial Summary – PR26 CV
365
08-30-24
11:40
1 Plan Year Voucher
Number Activity Name
6477031 Emergency Housing Assistance
6513232 Emergency Housing Assistance
6534385 Emergency Housing Assistance
6547247 Emergency Housing Assistance
6547250 Emergency Housing Assistance
6575173 Emergency Housing Assistance
6594715 Emergency Housing Assistance
6671293 Emergency Housing Assistance
6733679 Emergency Housing Assistance
6733921 Emergency Housing Assistance
6786823 Emergency Housing Assistance
6786823 CDBG-CV Motel Voucher Program
6807545 CDBG-CV Motel Voucher Program
Office of Community Planning and Development DATE:
U.S. Department of Housing and Urban Development TIME:
Integrated Disbursement and Information System PAGE:
PR26 - CDBG-CV Financial Summary Report
FONTANA , CA
Metrics
New Grantee (CV) FONTANA , CA
PART I: SUMMARY OF CDBG-CV RESOURCES
01 CDBG-CV GRANT 2,467,484.00
02 FUNDS RETURNED TO THE LINE-OF-CREDIT 0.00
03 FUNDS RETURNED TO THE LOCAL CDBG ACCOUNT 0.00
04 TOTAL CDBG-CV FUNDS AWARDED 2,467,484.00
PART II: SUMMARY OF CDBG-CV EXPENDITURES
05 DISBURSEMENTS OTHER THAN SECTION 108 REPAYMENTS AND PLANNING/ADMINISTRATION 1,975,436.48 06 DISBURSED IN IDIS FOR PLANNING/ADMINISTRATION 464,236.32 07 DISBURSED IN IDIS FOR SECTION 108 REPAYMENTS 0.00
08 TOTAL EXPENDITURES (SUM, LINES 05 - 07) 2,439,672.80 09 UNEXPENDED BALANCE (LINE 04 - LINE8 ) 27,811.20
PART III: LOWMOD BENEFIT FOR THE CDBG-CV GRANT
10 EXPENDED FOR LOW/MOD HOUSING IN SPECIAL AREAS 0.00
11 EXPENDED FOR LOW/MOD MULTI-UNIT HOUSING 0.00
12 DISBURSED FOR OTHER LOW/MOD ACTIVITIES 1,975,436.48 13 TOTAL LOW/MOD CREDIT (SUM, LINES 10 - 12) 1,975,436.48 14 AMOUNT SUBJECT TO LOW/MOD BENEFIT (LINE 05) 1,975,436.48 15 PERCENT LOW/MOD CREDIT (LINE 13/LINE 14) 100.00%
PART IV: PUBLIC SERVICE (PS) CALCULATIONS
16 DISBURSED IN IDIS FOR PUBLIC SERVICES 1,975,436.48
17 CDBG-CV GRANT 2,467,484.00
18 PERCENT OF FUNDS DISBURSED FOR PS ACTIVITIES (LINE 16/LINE 17) 80.06% PART V: PLANNING AND ADMINISTRATION (PA) CAP
19 DISBURSED IN IDIS FOR PLANNING/ADMINISTRATION 464,236.32 20 CDBG-CV GRANT 2,467,484.00
21 PERCENT OF FUNDS DISBURSED FOR PA ACTIVITIES (LINE 19/LINE 20) 18.81% LINE 10 DETAIL: ACTIVITIES TO CONSIDER IN DETERMINING THE AMOUNT TO ENTER ON LINE 10 No data returned for this view. This might be because the applied filter excludes all data.
LINE 11 DETAIL: ACTIVITIES TO CONSIDER IN DETERMINING THE AMOUNT TO ENTER ON LINE 11 No data returned for this view. This might be because the applied filter excludes all data.
LINE 12 DETAIL: ACTIVITIES INCLUDED IN THE COMPUTATION OF LINE 12 IDIS Project IDIS
Activity
Matrix
Code
National
Objective Drawn Amount
2020 8 380 05Q LMC $534,904.84
05Q LMC $70,601.04
05Q LMC $109,191.35
05Q LMC $14,257.37
05Q LMC $157,584.86
05Q LMC $106,739.84
05Q LMC $110,182.58
05Q LMC $353,444.41
05Q LMC $1,829.76
05Q LMC $173,809.37
05Q LMC $2,891.06
10 404 05Z LMC $4,519.10
05Z LMC $24,665.26
366
6856552 CDBG-CV Motel Voucher Program
6883608 CDBG-CV Motel Voucher Program
6898425 CDBG-CV Motel Voucher Program
6902717 CDBG-CV Motel Voucher Program
Total
Plan Year
Voucher
Number Activity Name
6477031 Emergency Housing Assistance
6513232 Emergency Housing Assistance
6534385 Emergency Housing Assistance
6547247 Emergency Housing Assistance
6547250 Emergency Housing Assistance
6575173 Emergency Housing Assistance
6594715 Emergency Housing Assistance
6671293 Emergency Housing Assistance
6733679 Emergency Housing Assistance
6733921 Emergency Housing Assistance
6786823 Emergency Housing Assistance
6786823 CDBG-CV Motel Voucher Program
6807545 CDBG-CV Motel Voucher Program
6856552 CDBG-CV Motel Voucher Program
6883608 CDBG-CV Motel Voucher Program
6898425 CDBG-CV Motel Voucher Program
6902717 CDBG-CV Motel Voucher Program
Total
Plan Year
Voucher
Number Activity Name
6477031 CDBG-CV Administration
6513232 CDBG-CV Administration
6534385 CDBG-CV Administration
6547250 CDBG-CV Administration
6575173 CDBG-CV Administration
6594715 CDBG-CV Administration
6671293 CDBG-CV Administration
6733679 CDBG-CV Administration
6733921 CDBG-CV Administration
6786823 CDBG-CV Administration
6807545 CDBG-CV Administration
6872701 CDBG-CV Administration
6914883 CDBG-CV Administration
6933799 CDBG-CV Administration
Total
05Z LMC $197,821.48
05Z LMC $80,363.51
05Z LMC $14,272.20
05Z LMC $18,358.45
$1,975,436.48
LINE 16 DETAIL: ACTIVITIES INCLUDED IN THE COMPUTATION OF LINE 16 IDIS Project
IDIS
Activity
Matrix
Code
National
Objective Drawn Amount
2020 8 380 05Q LMC $534,904.84
05Q LMC $70,601.04
05Q LMC $109,191.35
05Q LMC $14,257.37
05Q LMC $157,584.86
05Q LMC $106,739.84
05Q LMC $110,182.58
05Q LMC $353,444.41
05Q LMC $1,829.76
05Q LMC $173,809.37
05Q LMC $2,891.06
10 404 05Z LMC $4,519.10
05Z LMC $24,665.26
05Z LMC $197,821.48
05Z LMC $80,363.51
05Z LMC $14,272.20
05Z LMC $18,358.45
$1,975,436.48
LINE 19 DETAIL: ACTIVITIES INCLUDED IN THE COMPUTATION OF LINE 19 IDIS Project IDIS
Activity
Matrix
Code
National
Objective Drawn Amount
2020 9 381 21A $71,338.53
21A $100,017.45
21A $9,068.94
21A $25,045.79
21A $38,802.57
21A $12,185.24
21A $65,409.48
21A $2,147.88
21A $7,131.85
21A $8,476.09
21A $902.45
$464,236.32
21A $122,217.35
21A $1,320.17
21A $172.53
367
City of Fontana
2023-2024
CONSOLIDATED ANNUAL PERFORMANCE AND EVALUATION REPORT
JULY 1, 2023 THROUGH JUNE 30, 2024
APPENDIX C
ESG SAGE Report
368
/0/1/2/1/3/4/3/5/i255/7/8/i255/9/1/5/4/1/3/4/3/10
/11/12/13/14/7/i255/15/16/17/18
/19/12/20/20/21/18/i255/15/16/17/18
/22/16/14/7/i255/15/16/17/18
/23/24/25/26
/27/12/7/21/18
/23/7/13/18/18/7/i255/28/20/20/13/18/14/14/i255/2
/23/7/13/18/18/7/i255/28/20/20/13/18/14/14/i255/3
/29/12/7/30
/23/7/16/7/18
/31/32/33/i255/29/8/20/18
/34/35/17/16/12/21/i255/28/20/20/13/18/14/14
/33/36/8/37/18/i255/15/24/17/38/18/13
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Action Report
City Council Meeting
8353 Sierra Avenue
Fontana, CA 92335
File #: 21-3222 Agenda Date: 9/24/2024
Agenda #: C. Category: Public Hearing
FROM:
Housing
SUBJECT:
First Public Hearing for the Five-Year Consolidated Plan (2025-2029) RECOMMENDATION:
Conduct a first public hearing to receive comments from members of the public concerning housing and community development needs, program performance, and strategies for affirmatively furthering fair housing.
COUNCIL GOALS:
· Increase citizen involvement by seeking community input. · Increase citizen involvement by informing the public about issues, program, and accomplishments.
· Concentrate on Inter-governmental relations by pursuing financial participation from county, state and federal governments.
DISCUSSION:
As an entitlement jurisdiction, the City of Fontana receives annual allocations of federal funds from the U.S. Department of Housing and Urban Development (HUD) through the Community Development Block Grant (CDBG), HOME Investment Partnerships (HOME), and Emergency Solutions Grant (ESG) programs. These funds are essential for developing local programs that benefit low- and moderate-income residents by addressing affordable housing, public service, and infrastructure improvement needs.
To continue receiving these funds, the City must prepare and submit a Consolidated Plan, Annual Action Plan, and Consolidated Annual Performance Evaluation Report (CAPER). These documents serve as the City’s strategic framework for allocating federal resources and setting priorities for housing and community development over the next five years.
The purpose of this public hearing is to gather input from residents and stakeholders on what they consider to be the highest priority housing and community development needs, to evaluate program performance, and to discuss strategies for affirmatively furthering fair housing choice. This hearing will help to ensure that the City’s plans reflect the community’s needs and priorities.
In accordance with HUD regulations, the City is required to conduct at least one public hearing before publishing the draft Consolidated Plan and Annual Action Plan for public review. This public hearing is a vital component of the City’s commitment to transparency, inclusivity, and community engagement.
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Agenda #: C. Category: Public Hearing
The Consolidated Plan outlines the City’s housing and community development needs and proposes strategies for using HUD funds to address these needs over a five-year period. The Annual Action Plan details the specific activities that will be undertaken each year to achieve the goals set forth in the Consolidated Plan. Together, these documents form the basis of the City’s efforts to enhance the quality of life for its residents, particularly those that are low- and moderate-income persons and families.
As part of the public participation process, the City is conducting this first public hearing and two community meetings to gather feedback from residents on how federal funds may be used to address the community’s high priority needs.
The first community meeting is scheduled for September 19, 2024 at 3:00pm at the City Hall Executive Conference Room, 8353 Sierra Avenue, Fontana, CA 92335. The second community meeting will be held on October 2, 2024 at 9:00 am at the City Hall Executive Conference Room.
Notice of invitation to comment and participate in the community meetings was published in the Press Enterprise, the San Bernardino Sun and El Chicano newspapers on September 5, 2024.
In addition, the City is distributing a survey to gather input on the community’s short- and long-term needs. The survey is available online at <https://www.fontanaca.gov/622/Federal-Grant-Programs> and in paper format, upon request, at Fontana City Hall, Housing Department 8353 Sierra Ave., Fontana, CA 92335. The survey will remain open until September 30, 2024, allowing residents ample time to share their views.
The input received during this public hearing, the community meetings, and from the survey will be used to refine the draft plans before they are finalized and made available for public review.
FISCAL IMPACT:
No fiscal impact. Future funds will be appropriated and allocated in the appropriate fiscal years in CDBG & ESG Fund #362 and HOME Fund #363.
MOTION:
Approve staff recommendation.
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City of Fontana
Action Report
City Council Meeting
8353 Sierra Avenue
Fontana, CA 92335
File #: 21-3299 Agenda Date: 9/24/2024
Agenda #: A. Category: New Business
FROM:
Finance
SUBJECT:
Issuance of Special Tax Bonds for CFD #109 (Narra Hills) RECOMMENDATION:
Adopt Resolution No. 2024-112 of the City Council of the City of Fontana authorizing the issuance of City of Fontana Community Facilities District No. 109 (Narra Hills) Special Tax Bonds, Series 2024, in an aggregate principal amount of not to exceed $37,000,000, authorizing the execution and delivery of an Indenture, a Bond Purchase Agreement and a Continuing Disclosure Agreement, authorizing the distribution of an Official Statement in connection therewith and authorizing the execution of necessary documents and certificates and related actions.
COUNCIL GOALS:
· Practice sound fiscal management by developing long-term funding and debt management plans.
DISCUSSION:
On June 24, 2022, the City Council authorized the formation of Community Facilities District No. 109 (Narra Hills) and conducted a special election to levy taxes within the District. This project consists of 489 residential lots located on the west side of Citrus Avenue north of Duncan Canyon Road. Bond proceeds will be used to fund public infrastructure including sewer, storm drain, street improvements, landscaping, public facilities and park facilities.
In order to issue the special tax bonds, it is necessary to execute bond documents and agreements relating to this District. The recommended action complies with the City’s debt management strategy.
The following documents, in their materially correct form, are attached hereto:
1. Indenture;
2. District Continuing Disclosure Agreement;
3. Bond Purchase Agreement;
4. Preliminary Official Statement; and
5. Appraisal Report.
FISCAL IMPACT:
The fiscal impact associated with the approval of this item is $34.8 million in bond proceeds resulting from the issuance of the bonds to be made available for the approved infrastructure projects which also includes $5.2 million in community benefit fees (20% of bond proceeds) to fund a defined community benefit project. Costs of issuance will be paid from gross bond proceeds. Debt service City of Fontana Printed on 9/19/2024Page 1 of 2
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Agenda #: A. Category: New Business
community benefit project. Costs of issuance will be paid from gross bond proceeds. Debt service payments will be made from special taxes levied on the property owners within the district.
MOTION:
Approve staff recommendation.
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4144-5598-4209.3
RESOLUTION NO. _______
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF
FONTANA AUTHORIZING THE ISSUANCE OF CITY OF
FONTANA COMMUNITY FACILITIES DISTRICT NO. 109
(NARRA HILLS) SPECIAL TAX BONDS, SERIES 2024, IN AN
AGGREGATE PRINCIPAL AMOUNT OF NOT TO EXCEED
$40,000,000, AUTHORIZING THE EXECUTION AND
DELIVERY OF AN INDENTURE, A BOND PURCHASE
AGREEMENT AND A CONTINUING DISCLOSURE
AGREEMENT, AUTHORIZING THE DISTRIBUTION OF
AN OFFICIAL STATEMENT IN CONNECTION
THEREWITH AND AUTHORIZING THE EXECUTION OF
NECESSARY DOCUMENTS AND CERTIFICATES AND
RELATED ACTIONS
WHEREAS, the City Council (the “City Council”) of the City of Fontana (the “City”) has formed City of Fontana Community Facilities District No. 109 (Narra Hills) (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 proposes to issue its City of Fontana Commu nity Facilities District No. 109 (Narra Hills) Special Tax Bonds, Series 2024 (the “Series 2024 Bonds”), in the aggregate principal amount of not to exceed $40,000,000;
WHEREAS, in order to provide for the authentication and delivery of the Series 2024 Bonds, to establish and declare the terms and conditions upon which the Series 2024 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 proposes to ent er into an Indenture with U.S.
Bank Trust Company, National Association, as trustee (the “Trustee”) (such Indenture, in the form presented to this meeting, with such changes, insertions and omissions as are made pursuant to this Resolution, being referred to herein as the “Indenture”); WHEREAS, Piper Sandler & Co. (the “Underwriter”), has presented the Community Facilities District with a proposal, in the form of a Bond Purchase Agreement, to purchase the Series 2024 Bonds from the Community Facilities District (such Bond Purchase Agreement, in the form presented to this meeting, with such changes, insertions and omissions as are made pursuant to this Resolution, being referred to herein as the “Purchase Agreement”); WHEREAS, Rule 15c2-12 promulgated under the Securities Exchange Act of 1934 (“Rule 15c2-12”) requires that, in order to be able to purchase or sell the Series 2024 Bonds, the underwriter thereof must have reasonably determined that the Community Facilities District , as the issuer of the Series 2024 Bonds, has undertaken in a written agreement or contract for the 378
2 4144-5598-4209.3
benefit of the holders of the Series 2024 Bonds to provide disclosure of certain financial information and certain listed events on an ongoing basis; WHEREAS, in order to cause such requirement to be satisfied, the Community Facilities District desires to enter into a Continuing Disclosure Agreement with U.S. Bank Trust Company, National Association , in its capacity as Trustee and in its capacity as dissemination agent thereunder (such Continuing Disclosure Agreement, in the form presented to this meeting, with such changes, insertions and omissions as are made pursuant to this Resolution, being referred to herein as the “Continuing Disclosure Agreement”);
WHEREAS, a form of the Preliminary Official Statement to be distributed in connection with the public offering of the Series 2024 Bonds has been prepared (such Preliminary Official Statement, in the form presented to this meeting, with such changes, insertions and omissions as are made pursuant to this Resolution, being referred to herein as the “Preliminary Official Statement”);
WHEREAS, there have been prepared and submitted to this meeting forms of:
(a) the Indenture;
(b) the Purchase Agreement;
(c) the Continuing Disclosure Agreement; and
(d) the Preliminary Official Statement;
WHEREAS, Kitty Siino & Associates, Inc. has prepared and provided to the Community Facilities District an appraisal report, dated August 28 , 2024 (the “Appraisal”), providing an opinion of value of the property in the Community Facilities District, which has been submitted to this meeting;
WHEREAS, Section 5852.1 of the California Government Code requires that the City Council obtain from an underwriter, financial advisor or private lender and disclose, in a meeting open to the public, prior to authorization of the issuance of the Series 2024 Bonds, good faith estimates of (a) the true interest cost of the Series 2024 Bonds, (b) the sum of all fees and charges paid to third parties with respect to the Series 2024 Bonds, (c) the amount of proceeds of the Series 2024 Bonds expected to be received net of the fees and charges paid to third parties and any reserves or capitalized interest paid or funded with proceeds of the Series 2024 Bonds, and (d) the sum total of all debt service payments on the Series 2024 Bonds calculated to the final maturity of the Series 2024 Bonds plus the fees and charges paid to third parties not paid with the proceeds of the Series 2024 Bonds;
WHEREAS, in compliance with Section 5852.1 of the California Government Code, the City Council has obtained from CSG Advisors Incorporated, as the Community Facilities District’s municipal advisor (the “ Municipal Advisor”), the required good faith estimates , which the Municipal Advis or has prepared in consultation with the Underwriter, and such estimates are disclosed and set forth in Exhibit A attached hereto;
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WHEREAS, the Community Facilities District desires to proceed to issue and sell the Series 2024 Bonds and to authorize the execution of such documents and the performance of such acts as may be necessary or desirable to effect the offering, sale and issuance of the Series 2024 Bonds; and
WHEREAS, the City Council is the legislative body of the Community Facilities District; NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of Fontana, as follows:
Section 1. The foregoing recitals are true and correct, and the City Council so finds and determines.
Section 2. Subject to the provisions of Section 3 hereof, the issuance of the Series 2024 Bonds, in an aggregate principal amount of not to exceed $40,000,000, on the terms and conditions set forth in, and subject to the limitations specified in, the Indenture, be and the same is hereby authorized and approved. The Series 2024 Bonds shall be d ated, shall bear interest at the rates, shall mature on the dates, shall be subject to call and redemption, shall be issued in the form and shall be as otherwise provided in the Indenture, as the same shall be completed as provided in this Resolution.
Section 3. The Indenture, in substantially the form submitted to this meeting and made a part hereof as though set forth herein, be and the same is hereby approved. Each of the Mayor of the City, and such other member of the City Council as the Mayor may designate, the City Manager of the City, the Chief Financial Officer, Finance Department, of the City and such other officer or employee of the City as the City Manager may designate (the “Authorized Officers”) is hereby authorized, and any one of the Authorized Office rs is hereby directed, for and in the name of the Community Facilities District, to execute and deliver the Indenture in the form submitted to this meeting, with such changes, insertions and omissions as the Authorized Officer executing the same may requir e or approve, such requirement or approval to be conclusively evidenced by the execution of the Indenture by such Authorized Officer; provided, however, that such changes, insertions and omissions shall not authorize an aggregate principal amount of Series 2024 Bonds in excess of $40,000,000, shall not result in a final maturity date of the Series 2024 Bonds later than September 1, 2055, and shall not result in a true interest cost for the Series 2024 Bonds in excess of 6.50%.
Section 4. The Purchase Agreement, in substantially the form submitted to this meeting and made a part hereof as though set forth in full herein, be and the same is hereby approved. Each of the Authorized Officers is hereby authorized, and any one of the Authorized Officers is hereby directed, for and in the name of the Community Facilities District, to execute and deliver the Purchase Agreement in the form presented to this meeting, with such changes, insertions and omissions as the Authorized Officer executing the same may require or approve, such requirement or approval to be conclusively evidenced by the execution of the Purchase Agreement by such Authorized Officer; provided, however, that such changes, insertions and omissions shall not result in an aggregate u nderwriter’s discount (not including any original issue discount) from the principal amount of the Series 2024 Bonds in excess of 1.00% of the aggregate principal amount of the Series 2024 Bonds. The City Council hereby finds and determines that the sale of the Series 380
4 4144-5598-4209.3
2024 Bonds at negotiated sale as contemplated by the Purchase Agreement will result in a lower overall cost.
Section 5. The Continuing Disclosure Agreement, in substantially the form submitted to this meeting and made a part hereof as though set forth in full herein, be and the same is hereby approved. Each of the Authorized Officers is hereby authorized, and any one of the Authorized Officers is hereby directed, for and in the name of the Community Facilities District, to execute and deliver the Continuing Disclosure Agreement in the form presented to this meeting, with such changes, insertions and omissions as the Authorized Officer executing the same may require or approve, such requirement or approval to be conclusively evidenced by the execution of the Continuing Disclosure Agreement by such Authorized Officer.
Section 6. The Preliminary Official Statement, in substantially the form presented to this meeting and made a part hereof as though set forth in full herein, with such changes, insertions and omissions therein as may be approved by an Authorized Officer, be and the same is hereby approved, and the use of the Preliminary Official Statement in connection with the offering and sale of the Series 2024 Bonds is hereby authorized and approved. Each of the Authorized Officers is hereby authorized, and any one of the Authorized Officers is hereby directed, to certify on behalf of the Community Facilities District that the Preliminary Official Statement is deemed final as of its date, within the meaning of Rule 15c2-12 (except for the omission of certain final pricing, rating and related information as permitted by Rule 15c2-12).
Section 7. The preparation and delivery of a final Official Statement (the “Official Statement”), and its use in connection with the offering and sale of the Series 2024 Bonds, be and the same is hereby authorized and approved. The Official Statement shall be in substantially the form of the Preliminary Official Statement, with such changes, insertions and omissions as may be approved by an Authori zed Officer, such approval to be conclusively evidenced by the execution and delivery thereof. Each of the Authorized Officers is hereby authorized, and any one of the Authorized Officers is hereby directed, for and in the name of the Community Facilities District, to execute the final Official Statement and any amendment or supplement thereto.
Section 8. Based upon the value of the property within the Community Facilities District reported in the Appraisal and the value -to-lien information for such property set for th in the Preliminary Official Statement, the City Council, for purposes of Section 53345.8 of the Act, hereby finds and determines that the value of the real property that would be subject to the Special Tax to pay debt service on the Series 2024 Bonds will be at least three times the principal amount of the Series 2024 Bonds to be sold and the principal amount of all other bonds outstanding that are secured by a special tax levied pursuant to the Act on property within the Community Facilities District or a special assessment levied on property within the Community Facilities District.
Section 9. The City Council hereby waives the provisions of the City of Fontana Community Facilities and Assessment District Policy for the Provision of Public Facilities and Services (Operation and Maintenance) and Fee Deferrals in Proposed Development Projects that are inconsistent or in conflict with the offering, issuance and sale of the Series 2024 Bonds and the financing of the Facilities as approved and authorized hereby. In the judgment of the City Council, additional benefit inures to the ultimate property owners, the Community Facilities District and/or the City as a result of such waiver.
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Section 10. The City Council hereby approves the execution and delivery of all agreements, documents, certificates and instruments referred to herein with electronic signatures as may be permitted under the California Uniform Electronic Transactions Act and digital signatures as may be permitted under Section 16.5 of the California Government Code using DocuSign.
Section 11. All actions heretofore taken by the officers, employees and agents of the City with respect to the issuance and sale of the Series 2024 Bonds, or in connection with or related to any of the agreements , documents, certificates or instruments referred to herein, are hereby approved, confirmed and ratified.
Section 12. The Authorized Officers and the officers , employees and agents of the City are, and each of them is, hereby authorized and directed, for and in the name of the Community Facilities District to take all actions and do any and all things and to execute and deliver any and all agreements, documents, certificates or instruments that they, or any of them , may deem necessary or advisable in order to consummate the transactions contempl ated by this Resolution and otherwise to carry out, give effect to and comply with the terms and intent of this Resolution not inconsistent with the provisions hereof.
Section 13. This Resolution shall take effect immediately upon its adoption.
PASSED AND ADOPTED the 24th day of September, 2024.
__________________________________
Mayor
ATTEST:
_________________________________
City Clerk
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EXHIBIT A
GOOD FAITH ESTIMATES
The good faith estimates set forth herein are provided with respect to the Series 2024 Bonds in accordance with Section 5852.1 of the California Government Code. Such good faith estimates have been provided to the Community Facilities District by the Municipa l Advisor, which the Municipal Advisor has prepared in consultation with the Underwriter.
Principal Amount. The Municipal Advisor has informed the Community Facilities District that, based on the Community Facilities District’s financing plan and current m arket conditions, its good faith estimate of the aggregate principal amount of the Series 2024 Bonds to be issued and sold is $ 36,215,000 (the “Estimated Principal Amount”), which does not include approximately $1,584,000 of net premium estimated to be generated based on current market conditions. Net premium is generated when, on a net aggregate basis for a single issuance of bonds, the price paid for such bonds is higher than the face value of such bonds. Such Estimated Principal Amount and such estimated net premium amount would produce approximately $37,798,000 of gross proceeds.
True Interest Cost of the Series 2024 Bonds. The Municipal Advisor has informed the Community Facilities District that, a ssuming that the Estimated Principal Amount of the Series 2024 Bonds is issued and sold, and based on market interest rates prevailing at the time of preparation of such estimate, its good faith estimate of the true interest cost of the Series 2024 Bonds, which means the rate necessary to discount the amounts payable on the respective principal and interest payment dates to the purchase price received for the Series 2024 Bonds, is 4.70%.
Finance Charge of the Series 2024 Bonds. The Municipal Advisor has informed the Community Facilities Distr ict that, a ssuming that the Estimated Principal Amount of the Series 2024 Bonds is issued and sold, and based on market interest rates prevailing at the time of preparation of such estimate , its good faith estimate of the finance charge for the Series 2024 Bonds, which means the sum of all fees and charges paid to third parties (or costs associated with the Series 2024 Bonds), is $610,000.
Amount of Proceeds to be Received. The Municipal Advisor has informed the Community Facilities District that, assuming that the Estimated Principal Amount of the Series 2024 Bonds is issued and sold, and based on market interest rates prevailing at the time of preparation of such estimate, its good faith estimate of the amount of proceeds expected to be received by the Community Facilities District for sale of the Series 2024 Bonds, less the finance charge of the Series 2024 Bonds, as estimated above, and any reserves or capitalized interest paid or funded with proceeds of the Series 2024 Bonds, is $34,810,000.
Total Payment Amount . The Municipal Advisor has informed the Community Facilities District that, assuming that the Estimated Principal Amount of the Series 2024 Bonds is issued and sold, and based on market interest rates prevailing at the time of preparat ion of such estimate, its good faith estimate of the total payment amount, which means the sum total of all payments the Community Facilities District will make to pay debt service on the Series 2024 Bonds, plus the finance charge for the Series 2024 Bonds, as described above, not paid with the proceeds of the Series 2024 Bonds, calculated to the final maturity of the Series 2024 Bonds, is $70,504,000, 383
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which excludes any reserves (or interest accrued thereon) or capitalized interest funded or paid with proceeds of the Series 2024 Bonds (which may offset such total payment amount).
The foregoing estimates constitute good faith estimates only and are based on market conditions prevailing at the time of preparation of such estimates . The actual principal amount of the Series 2024 Bonds issued and sold, the true interest cost thereof, the finance charges thereof, the amount of proceeds received therefrom and total payment amount with respect thereto may differ from such good faith estimates due to (a) the actual date of the sale of the Series 2024 Bonds being different than the date assumed for purposes of such estimates , (b) the actual principal amount of Series 2024 Bonds issued and sold being different from the Estimated Principal Amount, (c) the actual amortization of the Series 2024 Bonds being different than the amortization assumed for purposes of such estimates, (d) the actual market interest rates at the time of sale of the Series 2024 Bonds being different than those estimated for purposes of such estimates, (e) other market conditions, or (f) alterations in the Community Facilities District’s financing plan, or a combination of such fact ors. The actual date of sale of the Series 2024 Bonds and the actual principal amount of Series 2024 Bonds issued and sold will be determined by the Community Facilities District based on the timing of the need for proceeds of the Series 2024 Bonds and other factors. The actual interest rates borne by the Series 2024 Bonds will depend on market interest rates at the time of sale thereof. The actual amortization of the Series 2024 Bonds will also depend, in part, on market interest rates at the time of sale thereof. Market interest rates are affected by economic and other factors beyond the control of the Community Facilities District. 384
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CITY OF FONTANA )
COUNTY OF SAN BERNARDINO )
STATE OF CALIFORNIA )
I, Germaine Key, City Clerk of the City of Fontana, California, and Ex-Officio Clerk of the City Council, do hereby certify that the foregoing Resolution is the actual Resolution duly and regularly adopted by the City Council of said City at a regular meeting thereof, held on September 24, 2024, by the following vote to-wit:
AYES:
NOES:
ABSENT:
City Clerk
Mayor
ATTEST:
City Clerk
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INDENTURE
by and between
CITY OF FONTANA
COMMUNITY FACILITIES DISTRICT NO. 109
(NARRA HILLS)
and
U.S. BANK TRUST COMPANY, NATIONAL ASSOCIATION,
AS TRUSTEE
Dated as of _________ 1, 2024
Relating to
City of Fontana
Community Facilities District No. 109
(Narra Hills)
Special Tax Bonds
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ARTICLE I DEFINITIONS; EQUAL SECURITY ................................................................ 3 Section 1.01. Definitions.................................................................................................... 3 Section 1.02. Rules of Construction ................................................................................ 11 Section 1.03. Equal Security ............................................................................................ 12 ARTICLE II THE BONDS ..................................................................................................... 13 Section 2.01. Authorization of Bonds; Special, Limited Obligations .............................. 13 Section 2.02. Terms of Series 2024 Bonds ...................................................................... 13 Section 2.03. Execution of Bonds .................................................................................... 14 Section 2.04. Authentication of Bonds ............................................................................ 14 Section 2.05. Registration Books ..................................................................................... 15 Section 2.06. Transfer and Exchange of Bonds ............................................................... 15 Section 2.07. Book-Entry System .................................................................................... 15 Section 2.08. Bonds Mutilated, Lost, Destroyed or Stolen .............................................. 17 Section 2.09. Temporary Bonds....................................................................................... 18 ARTICLE III ISSUANCE OF SERIES 2024 BONDS; APPLICATION OF PROCEEDS; ADDITIONAL BONDS ............................................................. 19 Section 3.01. Issuance of Series 2024 Bonds .................................................................. 19 Section 3.02. Application of Proceeds ............................................................................. 19 Section 3.03. Costs of Issuance Fund .............................................................................. 19 Section 3.04. Improvement Fund ..................................................................................... 20 Section 3.05. Conditions for the Issuance of Additional Bonds ...................................... 23 Section 3.06. Procedure for the Issuance of Additional Bonds ....................................... 24 Section 3.07. Additional Bonds ....................................................................................... 25 ARTICLE IV REDEMPTION OF BONDS ............................................................................. 26 Section 4.01. Redemption of Series 2024 Bonds ............................................................. 26 Section 4.02. Notice of Redemption ................................................................................ 28 Section 4.03. Selection of Bonds for Redemption ........................................................... 28 Section 4.04. Partial Redemption of Bonds ..................................................................... 29 Section 4.05. Effect of Notice of Redemption ................................................................. 29 ARTICLE V SECURITY FOR BONDS; FLOW OF FUNDS; INVESTMENTS ................. 30 Section 5.01. Pledge ......................................................................................................... 30 Section 5.02. Special Tax Fund ....................................................................................... 30 387
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Section 5.03. Bond Fund .................................................................................................. 31 Section 5.04. Reserve Fund ............................................................................................. 31 Section 5.05. Redemption Fund ....................................................................................... 32 Section 5.06. Rebate Fund ............................................................................................... 33 Section 5.07. Administrative Expense Fund .................................................................... 33 Section 5.08. Investment of Moneys................................................................................ 34 ARTICLE VI COVENANTS ................................................................................................... 36 Section 6.01. Collection of Special Tax Revenues .......................................................... 36 Section 6.02. Foreclosure ................................................................................................. 36 Section 6.03. Compliance with Act ................................................................................. 37 Section 6.04. Punctual Payment....................................................................................... 37 Section 6.05. Extension of Payment of Bonds ................................................................. 37 Section 6.06. Against Encumbrances; Defense of Pledge ............................................... 37 Section 6.07. Tax Covenants ........................................................................................... 37 Section 6.08. Non-Cash Payments of Special Tax .......................................................... 38 Section 6.09. Reduction in Special Tax ........................................................................... 38 Section 6.10. Continuing Disclosure ............................................................................... 38 Section 6.11. Accounting Records ................................................................................... 38 Section 6.12. State Reporting........................................................................................... 38 Section 6.13. Annual Reports to the California Debt and Investment Advisory Commission ......................................................................................................... 38 Section 6.14. Further Assurances ..................................................................................... 39 ARTICLE VII EVENTS OF DEFAULT AND REMEDIES .................................................... 40 Section 7.01. Events of Default ....................................................................................... 40 Section 7.02. Foreclosure ................................................................................................. 40 Section 7.03. Other Remedies .......................................................................................... 40 Section 7.04. Remedies Not Exclusive ............................................................................ 41 Section 7.05. Application of Net Special Tax Revenues After Default ........................... 41 Section 7.06. Power of Trustee to Enforce ...................................................................... 41 Section 7.07. Owners’ Direction of Proceedings ............................................................. 42 Section 7.08. Limitation on Owners’ Right to Sue .......................................................... 42 Section 7.09. Absolute Obligation ................................................................................... 42 388
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Section 7.10. Termination of Proceedings ....................................................................... 42 Section 7.11. No Waiver of Default ................................................................................. 43 ARTICLE VIII TRUSTEE; SECURITIES INTERMEDIARY ................................................. 44 Section 8.01. Duties and Liabilities of Trustee ................................................................ 44 Section 8.02. Qualifications; Removal and Resignation; Successors .............................. 44 Section 8.03. Liability of Trustee .................................................................................... 45 Section 8.04. Right to Rely on Documents and Opinions ............................................... 47 Section 8.05. Accounting Records and Financial Statements.......................................... 47 Section 8.06. Preservation and Inspection of Documents................................................ 47 Section 8.07. Compensation and Indemnification ........................................................... 47 Section 8.08. Securities Intermediary .............................................................................. 48 ARTICLE IX SUPPLEMENTAL INDENTURES .................................................................. 50 Section 9.01. Supplemental Indentures ............................................................................ 50 Section 9.02. Effect of Supplemental Indenture .............................................................. 51 Section 9.03. Endorsement of Bonds; Preparation of New Bonds .................................. 51 Section 9.04. Amendment of Particular Bonds ................................................................ 51 ARTICLE X DEFEASANCE ................................................................................................. 52 Section 10.01. Discharge of Indenture ............................................................................. 52 Section 10.02. Bonds Deemed To Have Been Paid ......................................................... 52 Section 10.03. Unclaimed Moneys .................................................................................. 53 ARTICLE XI MISCELLANEOUS .......................................................................................... 54 Section 11.01. Notices ..................................................................................................... 54 Section 11.02. Successor Is Deemed Included in All References to Predecessor ........... 54 Section 11.03. Limitation of Rights ................................................................................. 54 Section 11.04. Destruction of Bonds ............................................................................... 55 Section 11.05. Severability of Invalid Provisions ............................................................ 55 Section 11.06. Evidence of Rights of Owners ................................................................. 55 Section 11.07. Disqualified Bonds................................................................................... 55 Section 11.08. Money Held for Particular Bonds ............................................................ 56 Section 11.09. Funds and Accounts ................................................................................. 56 Section 11.10. Business Days .......................................................................................... 56 Section 11.11. Waiver of Personal Liability .................................................................... 56 389
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Section 11.12. Conflict with Act...................................................................................... 56 Section 11.13. Conclusive Evidence of Regularity ......................................................... 56 Section 11.14. Governing Laws ....................................................................................... 57 Section 11.15. Electronic Signature ................................................................................. 57 Section 11.16. Execution in Several Counterparts ........................................................... 57 EXHIBIT A PERMITTED INVESTMENTS .......................................................................... A-1 EXHIBIT B FORM OF SERIES 2024 BOND ......................................................................... B-1 390
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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. 109 (NARRA HILLS), 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, NA TIONAL 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 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 a portion of the Facilities, the Community Facilities District desires to provide for the issuance of its City of Fontana Community Facilities District No. 109 (Narra Hills) Special Tax Bonds, Series 2024 (the “Series 2024 Bonds”), in the aggregate principal amount of not to exceed $_________; WHEREAS, the Communi ty 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 F acilities 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 Community 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 Inden ture, according to their tenor, and 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 consideratio n of the premises and of the mutual covenants herein contained and of the purchase and acceptance of the 391
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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 or therein mentioned, have the meanings herein specified. “Accounts” means the accounts from time to time established pursuant to this Indenture 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 maintained by the Trustee pursuant to Section 3.04. “Acquisition Agreement” means the Acquisition and Funding Agreement, dated as of June 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 to such term 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 maintained 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 Speci al Tax and preparing the annual Special Tax collection schedules and the costs 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 Facilities 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. “Affiliate” of another Person means (a) each Person that, directly or indirectly, owns or controls, whether beneficially or as trustee, guardian, or other fiduciary, 50% or more of any class of equity securities of such other Person, and (b) each Person that controls, is controlled by or is 393
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under common control with or by such Person or any Affiliate of such Person. For the purpose of this definition, “control” of a Person shall mean the possession, directly or indirectly, of the power to direct or cause the direction of its management or policies, whether through the ownership of voting securities, by contract or otherwise.
“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 the Outstanding Bonds due in such Bond Year (including by reason o f 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 (a) 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, (b) with respect to the Flood Control District, the Chief Flood Control Engineer of the Flood Control District, and any other Perso n designated as an Authorized Representative of the Flood Control District in a Written Certificate of the Flood Control District submitted to the Trustee, and (c) with respect to the Water District, the General Manager of the Water District, and any other Person designated as an Authorized Representative of the Water District in a Written Certificate of the Water 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 maintained 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, 2025. “Bonds” means the City of Fontana Community Facilities District No. 109 (Narra Hills) Special Tax Bonds issued hereunder, and includes the Series 2024 Bonds and any Additional Bonds.
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“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 t he 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 r equired 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.
“City Council” means the City Council of the City.
“Closing Date” means the date upon which the Series 2024 Bonds are delivered t o the Original Purchaser, being __________, 2024.
“Code” means the Internal Revenue Code of 1986.
“Community Benefit Account” means the Account by that name within the Improvement Fund established and maintained by the Trustee pursuant to Section 3.04. “Community Benefit Facilities” means Construction Facilities, the costs of which are paid from the Community Benefit Account.
“Community Facilities District” means City of Fontana Community Facilities District No. 109 (Narra Hills), 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 maintained by the Trustee pursuant to Section 3.04. “Construction Facilities” means the Facilities other than the Acquisition Facilities. “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. “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 395
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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 a bond insurance policy securing payment of the Bonds 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 maintained 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 Treasur y Obligations held by a bank or trust company as custodian, under which the owner of the investment is the real party in 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 LS-FONTANA LLC , a limited liability company organized and existing under the laws of the State of Delaware, and any successor thereto. “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 other twelve -month period hereafter selected and designated as th e official fiscal year period of the Community Facilities District. “Flood Control District” means the San Bernardino County Flood Control District , a flood control district organized and existing under the laws of the State of California. “Flood Control D istrict Account ” means the Account by that name within the Improvement Fund established and maintained by the Trustee pursuant to Section 3.04. 396
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“Flood Control District Acquisition Agreement” means the Acquisition and Funding Agreement, dated as of June 14 , 2022, by and between the Flood Control District and the Developer, as originally executed and as it may be amended, supplemented or otherwise modified from time to time in accordance with the terms thereof. “Flood Control District Facilities” means flood control facilities that are to be owned and operated by the Flood Control District, consisting of the relocation and construction of the Hawker Crawford flood control channel in the vicinity of the Community Facilities District in accordance with plans and specifications approved by the Flood Control District under the Flood Control District’s File 1-806/2.04 and Permit No. P-12019118.
“Flood Control District Joint Community Facilities Agreement” means the Joint Community Facilities Ag reement, dated as of June 14, 2022, b y and among the City, the Community Facilities District and the Flood Control District, as originally executed and as it may be amended, supplemented or otherwise modified from time to time in accordance with the terms thereof.
“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 maintained 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 amended, supplemented or otherwise modified 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 each 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 , the City, the Developer or any Affiliate thereof , (c) does not have any substantial interest, direct or indirect (i) with or in the Community Facilities District, the City, the Developer or any Affiliate thereof , (ii) with or in any owner of real property in the Community Facilities District , or (iii) in any real property in the Community Facilities D istrict, and (d) is not connected with the Community Facilities District , the City, the Developer or any Affiliate thereof 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 maintained by the Trustee pursuant to Section 5.03. “Interest Payment Dates” means March 1 and September 1 of each year, commencing [March] 1, 2025.
“Letter of Represe ntations” means the Letter of Representations from the Community Facilities District to the Depository, in which the Community Facilities District makes certain representations with respect to issues of its securities for deposit by the Depository. 397
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“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, and (c) Bonds in lieu of which other Bonds shall have been authenticated and delivered by the 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 Continuing Disclosure Agreement.
“Payment Request” has the meaning ascribed to such term in the Acquisition Agreement. “Permitted Investments” is defined in Exhibit A hereto. 398
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“Person” means an individual, corporation, limited liability company, firm, association, partnership, trust or other legal entity or group of entities, includin g a governmental entity or any agency or political subdivision thereof.
“Principal Account” means the Account by that name within the Bond Fund established and maintained 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 maintained 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 maintained 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 maintained 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, with respect to the Bonds (excluding from such calculation Bonds 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. 2022-047, adopted by the City Council on June 14, 2022 , as originally adopted and as it may be ame nded, 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.
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“Securities Intermediary” means U.S. Ban k 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. 109 (Narra Hills) 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 to be levied within the Community Facilities District pursuant to the Act and the Rate and Method. “Special Tax Fund” means the Fund by that name established and maintained 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, inte rest 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 exec uted 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. “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 th at 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). “Water District” means the West Valley Water District , a municipal water district organized and existing under the laws of the State of California. 400
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“Water District Account” means the Account by that name within the Improvement Fund established and maintained by the Trustee pursuant to Section 3.04. “Water District Acquisition Agreement” means the Acquisition and Funding Agreement, entered into as of May 19, 2022, by and between the Water District and the Developer, as originally executed and as it may be amended, supplemented or otherwise modified from time to time in accordance with the terms thereof.
“Water District Facilities” means water distribution facilities, together with appurtenances and appurtenant work, that are to be owned and operated by the Water District. “Water District Joint Community Facilities Agreement” means the Join t Community Facilities Agreement, dated as of June 1, 2022, by and among the City, the Community Facilities District and the Water District, as originally executed and as it may be amended, supplemented or otherwise modified from time to time in accordance with the terms thereof. “Written Certificate” and “Written Request” (a) 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 of the Community Facilities District, (b) of the Flood Control District mean, respectively, a written certificate or written request signed in the name of the Flood Control District by an Authorized Representative of the Flood Control District, and (c) of the Water District mean, respectively, a written certificate or written request signed in the name of the Water District by an Authorized Representative of the Water District . 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 replacements, 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 “including” 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 affe ct the meaning, construction or effect hereof.
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(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.
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 Distric t, 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. 402
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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. 109 (Narra Hills) Special Tax Bonds,” each Series thereof t o 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 fro m 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 the 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. 109 (Narra Hills ) Special Tax 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
$ %
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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 for th 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 404
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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 Bond (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 Facilities 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 405
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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 Book -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, i f any, and interest 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 writing, 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 D epository has 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 Co mmunity Facilities 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, con tent and manner of transmission, of notices to the Depository. In addition to the execution and delivery of 406
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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 t hey 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 deposito ry 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 determines 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 Book-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 accord ance with the 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, Destr oyed or Stolen. 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 407
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to the Trustee shall be canceled by it and delivered to, or upon the order of, th e Community 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 l ost, destroyed 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 issue d 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, sha ll be in fully 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 Bond s of such Series 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;
(iv) the Trustee shall deposit the amount of $__________ in the Community Benefit Account;
(v) the Trustee shall deposit the amount of $__________ in the Construction Account;
(vi) the Trustee shall deposit the amount of $__________ in the Flood Control District Account; and
(vii) the Trustee shall deposit the amount of $__________ in the Water District 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 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 409
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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 Costs 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 amount to be paid and instructions for such payment , (iii) the purpose for which such costs were incurred, (iv) that such payment is a proper charge against the Costs of Issuance Fund, and (v) that payment of 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 last 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 (i) a separate Account designated the “Acquisition Account,” (ii) a separate Account designated the “Community Benefit Account,” (iii) a separate Account designated the “Construction Account,” (iv) a separate Account designated the “ Flood Control District Account ,” and (v) a separate Account designated the “Water District Account.” On the Closing Date, the Trustee shall deposit in the Acquisition Account, the Community Benefit Account, the Construction Account, the Flood Control District Account and the Water District Account the respective amounts required to be deposited therein pursuant to Section 3.02.
(b) 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 made, (ii) the amount to be paid and instructions for such payment, (iii) the purpose for which such costs were 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 Construct ion Account or the Community Benefit 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 in voice 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 Acquisition 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. 410
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Upon the submission of a Written Certificate of the Community Facilities District s tating (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 Account, as directed in a Written Certificate of the Community Facilities District submitted to the Trustee. (c) The moneys in the Community Benefit 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 and instructions for such payment, (iii) the purpose for which such costs were incurred, (iv) that the Construction Facilities, the 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 Account, and (v) that payment of such costs has not been the subject of a prior disbursement from the Community Benefit Account, the Construction Account or the Acquisition 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 Community Benefit Account is to be transferred to the Construction Account, and (ii) the amount to be so transferred, the Trustee shall transfer such amount from the Community Benefit 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 Account has been completed and that all costs of such Community Benefit Facilities hav e been paid, or (ii) that such portion of the Community Benefit Facilities has been substantially completed and that all remaining costs of such portion of the Community Benefit Facilities have been determined and specifying the amount to be retained there for, the Trustee shall transfer all of the amount remaining in the Community Benefit Account (less any such retention) to the Construction Account.
(d) The moneys in the Construction Account shall be used and withdrawn by the Trustee from time to time to pay t he 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 and instructions for such payment, (iii) the purpose for which such costs were 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 Constructio n Account, the Community Benefit Account or the Acquisition Account, in each case together with a statement or invoice for each amount requested thereunder.
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 411
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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 transf er, 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.
(e) The moneys in the Flood Control District Account shall be used and withdrawn by the Trustee from time to time to pay the costs of the Flood Control District Facilities upon submission of a Written Request of the Flood Control District stating (i) the Person to whom payment is t o be made, (ii) the amount to be paid and instructions for such payment , (iii) the purpose for which such costs were incurred, (iv) that such payment is for costs of the Flood Control District Facilities, (v) that payment of such costs has not been the subject of a prior disbursement from the Flood Control District Account , (vi) that each portion of the Flood Control District Facilities for which payment of such costs is requested was constructed under the direction and supervision, or under the authority o f, the Flood Control District or was constructed as if it had been constructed under the direction and supervision, or under the authority of, the Flood Control District, and (vii) that each portion of the Flood Control District Facilities for which paymen t of such costs is requested is being acquired and purchased in accordance with the provisions of the Act and the Flood Control District Acquisition Agreement.
Upon the submission of a Written Certificate of the Flood Control District stating (i) that the portion of the Flood Control District Facilities to be financed from the Flood Control District Account has been completed and that all costs of such Flood Control District Facilities have been paid, the Trustee shall transfer all of the amount remaining in the Flood Control District Account to the Construction Account [or, if the Construction Account has been closed, to the Bond Fund , to be applied to the payment of interest on the Bonds]. (f) The moneys in the Water District Acc ount shall be used and withdrawn by the Trustee from time to time to pay the costs of the Water District Facilities upon submission of a Written Request of the Water District stating (i) the Person to whom payment is to be made, (ii) the amount to be paid and instructions for such payment , (iii) the purpose for which such costs were incurred, (iv) that such payment is for costs of the Water District Facilities, (v) that payment of such costs has not been the subject of a prior disbursement from the Water Di strict Account , (vi) that each portion of the Water District Facilities for which payment of such costs is requested was constructed under the direction and supervision, or under the authority of, the Water District or was constructed as if it had been con structed under the direction and supervision, or under the authority of, the Water District, and (vii) that each portion of the Water District Facilities for which payment of such costs is requested is being acquired and purchased in accordance with the provisions of the Act and the Water District Acquisition Agreement.
Upon the submission of a Written Certificate of the Water District stating (i) that the portion of the Water District Facilities to be financed from the Water District Account has been completed and that all costs of such Water District Facilities have been paid, the Trustee shall transfer all of the amount remaining in the Water District Account to the Construction Account 412
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[or, if the Construction Account has been closed, 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;
(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;
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(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) The Community Facilities District shall have received a certificate from an Independent Consultant certifying that 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 receipt 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 of 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 i nterest on the Bonds Outstanding prior to the issuance of such Additional Bonds from gross income for federal income tax purposes; (e) the proceeds of the sale of such Additional Bonds; and (f) such further documents or money as are required by the provisions here of or by the provisions of the Supplemental Indenture pursuant to which such Additional Bonds are issued.
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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. 415
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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 princi pal 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 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
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(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 prem ium, 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 designated 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 Sept ember 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)
417
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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 designated 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.
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 i n 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 date 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 t he date on which such redemption was to occur, give notice to the Persons and in the manner in which the notice of redemption 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 418
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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 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. 419
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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.” [On the Closing Date, the Trustee shall deposit in the Special Tax Fund the amount required to be deposited therein pursuant to Section 3.02.] As soon as practicable after the receipt by the Community Facilities District of any Spec ial Tax Revenues, but in any event no later than the date ten Business Days after such receipt, the Community Facilities District shall transfer such Special Tax Revenues to the Trustee for deposit in the Special Tax Fund; provided, however, that with resp ect 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 identified 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 sufficient 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 shall establish and maintain in trust in the name of the Trustee a separate Fund designated the “Bond Fund.” Within the Bond Fund, the Trustee shall establish and maintain in trust in the name of the Trustee a separate Account 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 Day 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 the 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 withdrawn 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 t he 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 421
32 4148-2468-9745.4
Trustee shall deposit in the Reserve Fund the amount required to be deposited therein pursuant to 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 addit ionally 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 the 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 Redem ption 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 a t 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 all 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 designated 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 portion 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 422
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Improvement Fund (or Accounts therein) pursuant to Section 3.04, (iv) amounts required to be 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 separate Fund designated the “Rebate Fund.” There shall be deposited in the Rebate 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 dep osited into or 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 pro visions 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 “Administ rative 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 and instructions for such payment, (iii) the purpose for which such costs were 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 payment of such amount 423
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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.
Section 5.08. Investment of Moneys . (a) Except as otherwise provided herein, all moneys in any of the Funds or Accounts shall be invested by the Trustee solely in Permitt ed 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 Inves tments 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 invested 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 Date, 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 mone ys in any of the Funds or Accounts, 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 inve stment 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 Facilities District is submitted to the Trustee pursuant to subsection (b) of Sec tion 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 transferred to the Community Benefit 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 breakage, 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 securities 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.
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(d) The Trustee may act as principal 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 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 pursuant to this Section. For purposes of investment, the Trustee may commingle moneys in any of the Funds and Accounts. The Trustee, in making or disposing of any investment permitted by this Section, may deal with itself (in its individual 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 extent 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 specifically 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 Fac ilities 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 Community 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 Facilities 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 replenishment of the Reserve Fund, and (iii) the payment of Administrative Expenses es timated to be paid from such Special Tax Revenues, taking into account the balances in the Funds and Accounts. (d) The Special Tax shall be payable and be collected 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 the Act, the Community Facilities District hereby covenants with and for the benefit of the Owners th at 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 delinquenci es 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 Special Tax delinquency in the Community Facilities District for such Fiscal Year is less than 5% of th e total amount of the Special Tax levied in such Fiscal Year, and (b) the amount then on deposit in the Reserve Fund is 426
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equal to the Reserve Requirement. Notwithstanding the foregoing, if the Community Facilities District determines that any single parcel in the Community Facilities District is delinquent in the payment of four installments of the Special Tax levied on such parcel, 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 in any of the Funds or Accounts, 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.
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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 ado pted 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. Each of the Community Facilities District and the Trustee shall comply with and carry out all of the provisions of the Continuing D isclosure Agreement applicable to it. Notwithstanding any other provision of this Indenture, failure of the Community Facilities District or the Trustee to comply with the Continuing Disclosure Agreement shall not be considered an Event of Default; provide d, 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.
Section 6.11. Accounting Records . The Communi ty 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.
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 failure 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 428
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continuing until the October 30 fo llowing 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 sh all 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 furt her 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 for 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 principal 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 Comm unity 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 o f 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 re quire 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; 430
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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 Special 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 incurred by the Trustee 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 performanc e 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 thereto, 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 rate 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 principal 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 431
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any of the Bonds or the production thereof in any proceeding relating thereto, and any such suit, 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 Trustee, and upon indemnification of the Trustee to its reasonable satisfaction, to direct the method of conducting all remedial procee dings taken by the Trustee hereunder; 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 o r 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 made written request upon the Trustee to exercise the powers hereinbefore granted or to institute such suit, action or procee ding in its own name, (c) such Owner or said Owners shall have tendered to the Trustee indemnity reasonably satisfactory to the Trustee 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 enforce 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 Facilities District, which is absolute and unconditional, to pay the principal of and interest on the Bonds to the resp ective 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 paym ent 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 432
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abandoned for any reason or shall have been determined adversely to the Trustee or the Owners, 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 Owners 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 as 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 existen ce 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 the 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 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 . 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 purp ose 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 Outstan ding (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 t he successor Trustee; provided, however, that any successor Trustee shall be 434
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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 removal 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 t hereupon, 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 Distri ct 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 a ny 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 successo r Trustee 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, conversion 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 ba nking 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 Trust ee. (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 i n respect 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 ap plication 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. 435
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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 negligen t in ascertaining 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 de emed 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 or willful misconduct.
436
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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 Docume nts and Opinions . (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 additional 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 accordance 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; 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 District 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. 437
48 4148-2468-9745.4
The Community Facilities Distric t 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 discharge and satisfaction 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. (b) U.S. Bank National Association is hereby appointed as the initial Securities Intermediary and U.S. Bank National Association hereby accepts such appointment. (c) 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 age ncy, (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. (d) 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. (e) 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. (f) Each item of property credited to each Fund or Account shall be treated as a financial asset.
(g) 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. (h) 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. (i) 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.
(j) 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 438
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of setoff in favor of the Securities Intermediary or any Person claiming through the Securities Intermediary, other than the Trustee.
(k) For purposes of Article 8 of the Uniform Commercial Code, the securities intermediary’s jurisdiction of the Securities Intermediary with respect to the Funds and Accounts shall be the State.
(l) It is the intent of the Community Facilities District, the Trustee and the Securities Intermediary that each Fund and Account shall be a securities account of the Trustee and not an account of the Community Facilities District.
(m) 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. (n) 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 c ause (i) each Fund 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 a nd 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. 439
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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 amended, supplemented or otherwise modified from time 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 time 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 the assets pledged under this Indenture prior to or on a parity with the pled ge 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 amended, supplemented or otherwise modified 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 thereafter 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 qualification of this Indenture under the Trust Indenture Ac t 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 440
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(vi) in any other respect whatsoever as th e 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 Dis trict 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, and the respective rights, duties and obligations und er 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 effective date of any Supplemental Indenture pursuant to th is 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 modification or amendment provided for in such Supplem ental 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 suitable 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 Supplemental 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 such purpose at the Office of the Trustee, such a new B ond 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 , supplement or other modification as to any particular Bond owned by it, provided that due notation thereof is made on such Bond. 441
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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 Facil ities 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 cance llation 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 ho ld in trust any moneys or investments then held by the Trustee for the payment 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 w ith the effect provided 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 prior 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 442
53 4148-2468-9745.4
(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 accordance 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 Community 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 subsec tion (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 with 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 Verif ication Report, and (iii) 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 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. 443
54 4148-2468-9745.4
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 entitled 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. 109 (Narra Hills)
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 hereund er 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 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, (c) 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 (d) 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 requ ired hereby to be performed by 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, 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. 444
55 4148-2468-9745.4
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 Invalid 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 ext ent 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 substantia lly similar tenor and 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 in strument acknowledged 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, direc tion, 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 c ontrolled by, or under 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 ; provided, however, that if 100% of the Bonds are so owned or held, such Bonds shall be deemed to be Outstanding . Bonds so owned that have been pledged in good faith may be regarded as Outstanding for the purposes 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 445
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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 sh all be full protection to the 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 date 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 accountability 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.
446
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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 th is 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.
447
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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 it s 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. 109 (NARRA HILLS)
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
448
A-1
4148-2468-9745.4
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 270 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 stat e 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
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(a) which are rated, based on an irrevocable escrow account or f und (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 described i n 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 purs uant 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 its terms an d 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 days of rece ipt 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 o f 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” rated structu red 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 450
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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 investment ag reement 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. 109
(NARRA HILLS)
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. 109 (Narra Hills) (the “Community Facilities District”), for value received, hereby promises to pay, solely from the sources hereinafter described, to the Registered Owner identified above or regist ered 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 identifi ed above in like lawful money from the date hereof payable semiannually on March 1 and September 1 in each year, commencing [March] 1, 2025 (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. 109 (Narra Hills ) 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. 452
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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 Record 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. Inte rest 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 pr eceding 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. 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 pl edged 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, subject 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, its 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 r edemption 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). 453
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Any Series 2024 Bond may be trans ferred 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 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.
The Indenture and the rights and obligations of the Community Facilities District, the Owners and the Trustee 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. 109
(NARRA HILLS)
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. 109
(NARRA HILLS)
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. 109
(Narra Hills)
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. 109 (NARRA HILLS), 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. 109 (Narra Hills) Special Tax Bonds, Series 2024 (the “Series 2024 Bonds”), in the ag gregate 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 executed and delivered by the Community Facilities District , the Trustee and the Dissemination Agent for the benefit of th e owners and beneficial owners of the Series 2024 Bonds and in order to assist the underwriter of the Series 2024 Bonds in complying with Securities 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 context 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 Report” 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. 109 (Narra Hills), 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 Facilities District shall designate in writing to the Trustee and the Dissemination Agent from time to time. 459
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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 Dissemination 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 obligation 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 later than the Annual Report Date, comm encing 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 Facilities 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, t he 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 d etermine 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 Facilities 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 accordance with generally accepted accounting principles as promulgated to apply to governmental entities from time to time by the Governmental Accounting Standards Board. If the 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 financial statements, and the audited financial statements, if any, shall be filed in the same manner as the Annual Report when they become available.
(b) The following information:
(i) The principal amount of 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 parce ls 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 December 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 Communi ty 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 asse ssment 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 n ext 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;
(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;
(xii) A statement as to whether the County includes the Special Taxes in its Teeter Plan; and
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(xiii) A description of the number of building permits issued for initial construction of units on property within the Community Faciliti es District during the one-year period ending on the December 31 next preceding the Annual Report Date.
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 Commu nity Facilities Dist rict or related public entities that have been made available to the public on the MSRB’s website . The 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 463
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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 la ter than ten business days after the occurrence of the event:
(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 material 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 464
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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.
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 Facilities 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 Facilities 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 adversely affect the rights or materially increase the oblig ations 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 relates 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, or 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 counsel, 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 465
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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 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 Informati on. Nothing in this 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 an y 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 thi s Disclosure Agreement, 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 sati sfactory 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 a nd 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 protect ions and limitations 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 466
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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 du ties 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 shall survive resignation or removal of the Dissemination Agent and the termination of this Disclosure Agreement.
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 Facil ities 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 A greement shall be 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 copy 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 origi nal and all of which shall constitute but one and the same instrument.
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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. 109 (NARRA HILLS)
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
468
A-1
4153-7807-5729.1
EXHIBIT A
NOTICE OF FAILURE TO FILE ANNUAL REPORT
Name of Issuer: City of Fontana Community Facilities District No. 109 (Narra Hills) Name of Issue: City of Fontana Community Facilities District No. 109 (Narra Hills) Special Tax Bonds, Series 2024
Date of Issuance: _________, 2024
NOTICE IS HEREBY GIVEN that City of Fontana Community Facilities District No. 109 (Narra Hills) (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 Com munity 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. 109 (Narra Hills)
cc: City of Fontana
Community Facilities District
No. 109 (Narra Hills)
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$_______
CITY OF FONTANA
COMMUNITY FACILITIES DISTRICT NO. 109 (NARRA HILLS)
SPECIAL TAX BONDS, SERIES 2024
BOND PURCHASE AGREEMENT
__________, 2024
City of Fontana
Community Facilities District No. 109 (Narra Hills)
8353 Sierra Avenue
Fontana, CA 92335
Ladies and Gentlemen:
Piper Sandler & Co., as underwriter (the “ Underwriter”), acting not as a fiduciary or agent for you, but on behalf of itself, offers to enter into this Bond Purchase Agreement (this “ Purchase Agreement”) with the City of Fontana Community Facilities District No. 109 (Narra Hills ) (the “Community Facilities District”), which upon acceptance will be binding upon the Underwriter and the Community Facilities District. The agreement of the Underwrit er to purchase the Bonds (as hereinafter defined) is contingent upon the Community Facilities District satisfying all of the obligations imposed upon them under this Purchase Agreement. This offer is made subject to the Community Facilities District’s acce ptance by the execution of this Purchase Agreement and its delivery to the Underwriter at or before 11:59 P.M., local time, on the date hereof, and, if not so accepted, will be subject to withdrawal by the Underwriter upon notice delivered to the Community Facilities District at any time prior to the acceptance hereof by the Community Facilities District. All capitalized terms used herein, which are not otherwise defined, shall have the meaning provided for such terms in the Indenture, dated as of _______ 1, 2024 (the “Indenture”), between the Community Facilities District and U.S. Bank Trust Company, National Association, as trustee (the “Trustee”).
1. Purchase, Sale and Delivery of the Bonds.
Subject to the terms and conditions and in reliance upon the representations, warranties and agreements set forth herein: the Underwriter hereby agrees to purchase from the Community Facilities District and the Community Facilities District hereby agrees to sell to the Underwriter all (but not less than all) of the $_______ aggregate principal amount of the City of Fontana Community Facilities District No. 109 (Narra Hills) Special Tax Bonds, Series 2024 (the “Bonds”), dated the Closing Date (as hereinafter defined), bearing interest at the rates and maturing on the dates and in the principal amounts and having the redemption terms set forth in Exhibit A hereto.
The purchase price for the Bonds shall be $ ______ (being 100% of the aggregate principal amount thereof, plus an original issue premium of $ ________ and less an Underwriter’s discount of $__________).
The Underwriter agrees to make a bona fide public offering of all of the Bonds initially at the public offering prices (or yields) set forth in Exhibit A attached hereto and incorporated herein by reference. Subsequent to the initial public offering, the Underwriter reserves the right to change the 470
2 public offering prices (or yields) as it deems necessary in connection with the marketing of the Bonds, provided that the Underwriter shall not change the interest r ates set forth in Exhibit A. The Bonds may be offered and sold to certain dealers at prices lower than such initial offering prices.
The Bonds shall be substantially in the form described in, shall be issued and secured under the provisions of, and shall be payable from the Net Special Tax Revenues as provided in the Indenture, the Preliminary Official Statement (as hereinafter defined), and the Mello -Roos Community Facilities Act of 1982, as amended (Section 53311 et seq. of the Government Code of the State of California) (the “ Community Facilities District Act ”). The issuance of the Bonds has been duly authorized by the City Council of the City of Fontana (the “ City”), as the legislative body for the Community Facilities District pursuant to a resolution (the “Community Facilities District Resolution of Issuance”) adopted on _______, 2024.
The proceeds of the Bonds will be used to: (i) provide financing for certain public facilities and costs with respect thereto related to the development within the Community Facilities District, (ii) fund a reserve fund with respect to the Bonds, and (iii) pay the costs of issuance with respect to the Bonds.
The Bonds shall be substantially in the form described in, shall be issued and secured under the provisions of, and shall be payable from special taxes pledged thereto as provided in the Indenture.
(a) The Community Facilities District hereby acknowledges that the Underwriter is entering into this Purchase Agreement in reliance on the representations, warranties and agreements made by the Community Facilities District herein.
The Community Facilities District acknowledges and agrees that (i) the purchase and sale of the Bonds pursuant to this Purchase Agreement is an arm’s -length commercial transaction between the Comm unity Facilities District and the Underwriter, (ii) 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 principal and not as the agent or fiduciary of the Community Facilities District, (iii) the Underwriter has not assumed an advisory or fiduciary responsibility in favor of the Community Facilities District with respect to (a) the offering of the Bonds or the process leading theret o (whether or not the Underwriter, or any affiliate of the Underwriter, has advised or is currently advising the Community Facilities District on other matters) or (b) any other obligations to the Community Facilities District with respect to the offering contemplated hereby, except the obligations expressly set forth in this Purchase Agreement or otherwise imposed by law, (iv) the Underwriter has financial interests that differ from those of the Community Facilities District and (v) the Community Facilitie s District has consulted their own legal, financial and other advisors to the extent they have deemed appropriate in connection with this transaction. The Community Facilities District acknowledges that it has previously provided the Underwriter with an a cknowledgement of receipt of the required Underwriter disclosure under Rule G-17 of the Municipal Securities Rulemaking Board (“ MSRB”). The Community Facilities District acknowledges and represents that it has engaged CSG Advisors Incorporated (the “ Municipal Advisor”) as its municipal advisor (as defined in Securities and Exchange Commission Rule 15Ba1) and will rely solely on the financial advice of the Municipal Advisor with respect to the Bonds. 471
3 (b) Pursuant to the authorization of the Community Facilities District, the Underwriter has distributed copies of the Preliminary Official Statement dated [POS Date], relating to the Bonds, which, together with the cover page, inside cover page and appendices thereto is herein called the “ Preliminary Official Stateme nt.” By its acceptance of this Purchase Agreement, the Community Facilities District hereby consents to the use by the Underwriter of the Preliminary Official Statement, and the Community Facilities District agrees to execute a final official statement relating to the Bonds (the “Official Statement”) which will consist of the Preliminary Official Statement with such changes as may be made thereto, with the approval of Orrick Herrington & Sutcliffe LLP, Bond Counsel (“ Bond Counsel”), Stradling Yocca Carlson & Rauth, a Professional Corporation, Disclosure Counsel (“ Disclosure Counsel ”), and the Underwriter, and to provide copies thereof to the Underwriter as set forth herein. The Community Facilities District hereby authorizes and requires the Underwriter to use and promptly distribute, in connection with the offer and sale of the Bonds, the Preliminary Official Statement, the Official Statement and any supplement or amendment thereto. The Community Facilities District further authorizes the Underwriter to use and distribute, in connection with the offer and sale of the Bonds, the Indenture, the Continuing Disclosure Agreement executed by the Community Facilities District in connection with the Bonds (the “Continuing Disclosure Agreement”), this Purchase Agreem ent and all information contained herein, and all other documents, certificates and statements furnished by or on behalf of the Community Facilities District to the Underwriter in connection with the transactions contemplated by this Purchase Agreement.
(c) To assist the Underwriter in complying with Securities and Exchange Commission Rule 15c2 -12(b)(5) (the “ Rule”), the Community Facilities District will undertake pursuant to the Continuing Disclosure Agreement, in the form attached to the Official Statement a s an appendix, to provide annual reports and notices of certain enumerated events. A description of this undertaking is set forth in the Preliminary Official Statement and will also be set forth in the Official Statement.
(d) Except as the Underwriter and the Community Facilities District may otherwise agree, the Community Facilities District will deliver to the Underwriter, at the offices of Bond Counsel in Los Angeles, California, or at such other location as may be mutually agreed upon by the Underwriter and the Community Facilities District, the documents hereinafter mentioned; and the Community Facilities District will deliver to the Underwriter through the facilities of The Depository Trust Company (“ DTC”), the Bonds, in definitive form (all Bonds bearing CUSIP numbers), duly executed by the Community Facilities District and authenticated by the Trustee in the manner provided for in the Indenture and the Community Facilities District Act at 8:00 a.m.
California time, on [Closing Date] (the “ Closing Date ”), and the Underwriter will accept such delivery and pay the purchase price of the Bonds as set forth in the second paragraph of this Section by wire transfer, payable in federal or other immediately available funds (such delivery and payment being herein re ferred to as the “ Closing”). The Bonds shall be in fully registered book -entry form (which may be typewritten) and shall be registered in the name of Cede & Co., as nominee of DTC.
2. Representations, Warranties and Covenants of the Community Facilities District. The Community Facilities District represents, warrants and covenants to the Underwriter:
(a) The Community Facilities District is duly organized and validly existing as a community facilities district under the laws of the State of Califo rnia (the “State”), and has the full legal right, power and authority, among other things, (i) upon satisfaction of the conditions in this 472
4 Purchase 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 authority to adopt the resolutions in connection with the initial formation of the Community Facilities District and the levy of the Special Taxes (the “ Community Facilitie s District Resolutions ”) and has caused to be recorded in the real property of records of the County of San Bernardino, a notice of special tax lien (the “Notice of Special Tax Lien” and together, with the Community Facilities District Resolutions, and the Community Facilities District Resolution of Issuance, the “ Resolutions and Formation Documents”), and the Community Facilities District has the full legal right, power and authority (i) to enter into this Purchase Agreement, the Indenture, and the Continu ing Disclosure Agreement, the Acquisition and Funding Agreement dated as of June 1, 2022 (the “Acquisition Agreement”), by and among the City, the Community Facilities District and LS-Fontana, LLC (collectively, the “Community Facilities District 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 Official Statement and each of the Community Facilities District Documents, an d the Community Facilities District and the City Council have complied with all provisions of applicable law, including the Community Facilities District Act, in all matters relating to such transactions.
(c) The Community Facilities District has duly authorized (i) the execution and delivery by the Community Facilities District of the Bonds and the execution, delivery and due performance by the Community Facilities District of its obligations under the Community Facilities District Documents, (ii) the distribution and use of the Preliminary Official Statement and execution, delivery and distribution of the Official Statement, and (iii) the taking of any and all such action as may be required on the part of the Community Facilities District 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 Community Facilities District in connection with the foregoing have been received, and the consents or approvals so received are still in full force and effect. (d) The Resolutions and Formation Documents have been duly adopted by the City Council and are in full force and effect; and the Community Facilities District Documents, when executed and delivered by th e Community Facilities District and the other party thereto, will constitute a legal, valid and binding obligation of the Community Facilities District enforceable against the Community Facilities District in accordance with their terms, except as enforcea bility 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 Community Facilities District and will constitute legal, valid and binding special obligations of the Community Facilities District enforceable against the Community Facilities District in accordance with their respective terms, except as enforceability thereo f may be limited by bankruptcy, insolvency or other laws affecting creditors’ rights generally, and will be entitled to the benefit and security of the Indenture. (f) The information (excluding information under the captions “INTRODUCTION – The District” (the first three paragraphs only), “THE COMMUNITY FACILITIES DISTRICT – General Information Regarding the District” (the second, third, and fourth paragraphs only), “PROPERTY OWNERSHIP AND THE DEVELOPMENT,” “CONTINUING DISCLOSURE – The Developer,” and information relating to The Depository Trust 473
5 Company (“ DTC”) and its book -entry system) contained in the Preliminary Official Statement is, and as of the Closing Date such information (excluding information under the captions “INTRODUCTION – The District” (the firs t three paragraphs only), “THE COMMUNITY FACILITIES DISTRICT – General Information Regarding the District” (the second, third, and fourth paragraphs only), “PROPERTY OWNERSHIP AND THE DEVELOPMENT,” “CONTINUING DISCLOSURE – The Developer,” and information r elating to DTC and its book - entry system)” in the Official Statement will be true and correct in all material respects, and the Preliminary Official Statement does not as of its date and the Official Statement will not as of the Closing Date contain any un true or misleading statement of a material fact or omit to state any material fact (excluding in each case information under the captions “INTRODUCTION – The District” (the first three paragraphs only), “THE COMMUNITY FACILITIES DISTRICT – General Information Regarding the District” (the second, third, and fourth paragraphs only), “PROPERTY OWNERSHIP AND THE DEVELOPMENT,” “CONTINUING DISCLOSURE – The Developer,” 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 prior to the earlier of (i) receipt of notice from the Underwriter that the Official Statement is no longer required to be delivered under Rule 15c2 -12 or (i i) the Closing (as described in Section 1(d) above), any event known to the officers of the Community Facilities District participating in the issuance of the Bonds occurs with respect to the Community Facilities District or the City as a result of which t he 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 Community Facilities District shall promptly notify the Underwriter in writing of such event. Any information supplied by the Community Facilities District for inclusion in any amendments or supplements to the Official Statement will not contain any untrue or misleading statement of a material fact relating to the Community Facilities District or the City or omit to state any material fact relating to the Community Facilities District or the City necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading. (h) Neither the adoption of the Resolutions and Formation Documents, the execution and delivery of the Community Facilities District Documents, nor the consummation of the transactions on the pa rt of the Community Facilities District contemplated herein or therein or the compliance by the Community Facilities District with the provisions hereof or thereof will conflict with, or constitute on the part of the Community Facilities District, a violat ion of, or a breach of or default under, (i) any material indenture, mortgage, commitment, note or other agreement or instrument to which the Community Facilities District is a party or by which it is bound, (ii) any provision of the State Constitution or (iii) any existing law, rule, regulation, ordinance, judgment, order or decree to which the Community Facilities District 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 Community Facilities District to perform its obligations under the Community Facilities District Documents.
(i) The Community Facilities District has never been in default at any time, as to principal of or interest on any obligation which it has issued, including those which it has issued as a conduit for another entity, which default may have an adverse effect on the ability of the Community Facilities District to consummate the transactions on its part und er the Community Facilities District Documents, except as specifically disclosed in the Official Statement; and the Community Facilities 474
6 District has not entered into any contract or arrangement of any kind which might give rise to any lien or encumbrance on the Special Taxes.
(j) Except as is specifically disclosed in the Preliminary Official Statement and the Official Statement, to the best knowledge of the Community Facilities District, there is no action, suit, proceeding, inquiry or investigation, at law o r in equity, before or by any court, public board or body, pending with respect to which the Community Facilities District has been served with process or threatened, which in any way questions the powers of the City Council, the City or the Community Facilities District 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 materially adversely affect the transa ctions contemplated by the Community Facilities District Documents, or which, in any way, could adversely affect the validity or enforceability of the Resolutions and Formation Documents, the Bonds or the Community Facilities District Documents or, to the knowledge of the Community Facilities District, 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 St ate tax laws or regulations.
(k) Any certificate signed by an official of the Community Facilities District authorized to execute such certificate and delivered to the Underwriter in connection with the transactions contemplated by the Community Facilities Dis trict Documents shall be deemed a representation and warranty by the Community Facilities District to the Underwriter as to the truth of the statements therein contained.
(l) The Community Facilities District has not been notified of any listing or proposed listing by the Internal Revenue Service to the effect that it is a bond Community Facilities District 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 Co mmunity Facilities District and amounts held in certain funds and accounts established and pledged under the Indenture.
(n) The Special Taxes may lawfully be levied in accordance with the rate and method of apportionment of the Special Tax relating to the Community Facilities District (the “Rate and Method”), the Resolutions and Formation Documents as described in the Preliminary Official Statement and the Official Statement, and, when levied, will be secured by a lien on the property on which they are levied.
(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 In denture permitting the application thereof for the purposes and on the terms and conditions set forth therein. (p) Except as disclosed in the Preliminary Official Statement and the Official Statement, in the last five years, neither the City, nor the Community Facilities 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.
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7 The Community Facilities District hereby consents to the preparation and di stribution of the Official Statement, consisting of the Preliminary Official Statement with such changes as are noted thereon and as may be made thereto, with the approval of Bond Counsel, Disclosure Counsel and the Underwriter, from time to time prior to the Closing Date.
The Community Facilities District hereby consents to any prior use of and authorizes the future use by the Underwriter, in connection with the offering and sale of the Bonds, of the Preliminary Official Statement, the Official Statement, this Purchase Agreement and all information contained herein, and all other documents, certificates and written statements furnished by the Community Facilities District to the Underwriter in connection with the transactions contemplated by this Purchase Agreement.
The Community Facilities District covenants with the Underwriter that the Community Facilities District 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 Community Facilities District shall not be required to consent to suit or to service of process, or to qualify to do business, in any jurisdiction. The Community Facilities District consents to the use by the Underwriter of the Community Facilities District Documents in the course of its compliance with the securities or Blue Sky laws of the various jurisdictions.
The execution and delivery of this Purchase Agreement by the Community Facilities District shall constitute a representation by the Community Facilities District to the Underwriter that the representations and warranties contained in this Section 2 with respect to the Community Facilities District are true as of the date hereof.
3. Conditions to the Obligations of the Underwriter . The obligation of the Underwriter to accept delivery of and pay for the Bonds on the Closing Date shall be subject, at the option of the Underwriter, to the accuracy in all material respects of the representations and warranties on the part of the Community Facilities District contained herein, to the accuracy in all material respects of the statements of the officers and other officials of the Community Facilities District made in any certificates or other documents furnished pursuant to the provisions hereof, to the performance by the Community Facilities District of their obligations to be performed hereunder at or prior to the Closing Date and to the following additional conditions:
(a) At the Closing Date, the Community Facilities District Resolutions and the Community Facilities District Documents shall be in full force and effect, and shall not have been amended, modified or supplemented, except as may h ave been agreed to in writing by the Underwriter, and there shall have been taken in connection therewith, with the issuance of the Bonds, and with the transactions contemplated thereby, all such actions as, in the opinion of Bond Counsel, shall be necessary and appropriate.
(b) At the Closing Date, except as described in the Preliminary Official Statement, the Community Facilities District shall not be, in any respect material to the transactions referred to herein or contemplated hereby, in breach of or in de fault under, any law or administrative rule or regulation of the State, the United States of America, or of any department, division, agency or instrumentality of either thereof, or under any applicable court or administrative decree or order, or under any loan agreement, note, resolution, indenture, contract, agreement or other instrument to which the Community Facilities District is a party or is otherwise subject or bound, and the 476
8 performance by the Community Facilities District of its obligations under the Bonds, the Community Facilities District Resolutions, the Indenture, and any other instruments contemplated by any of such documents, and compliance with the provisions of each thereof, or the performance of the conditions precedent to be performed hereunder, will not conflict with or constitute a breach of or default under any applicable law or administrative rule or regulation of the State, the United States of America, or of any department, division, agency or instrumentality of either thereof, or under any applicable court or administrative decree or order, or under any loan agreement, note, resolution, indenture, contract, agreement or other instrument to which the Community Facilities District is a party or is otherwise subject or bound, in any manner which would materially and adversely affect the performance by the Community Facilities District of its obligations under the Indenture, the Bonds or the performance of the conditions precedent to be performed by the Community Facilities District hereunder. (c) The information contained in the Official Statement is, as of the Closing Date and as of the date of any supplement or amendment thereto pursuant hereto, true and correct in all material respects and does not, as of the Closing Date or as of the date of any supplement or amendment thereto, contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading. (d) Between the date hereof and the Closing Date, the market price or marketability, at the initial offering prices set forth on the cover page of the Official Statement, of the Bonds or the ability of the Underwriter to enforce contracts f or the sale of the Bonds, shall not have been materially adversely affected, in the reasonable judgment of the Underwriter (evidenced by a written notice to the Community Facilities District terminating the obligation of the Underwriter to accept delivery of and pay for the Bonds), by reason of any of the following:
1. Legislation introduced in or enacted (or resolution passed) by the Congress of the United States of America or recommended to the Congress by the President of the United States, the Department o f the Treasury, the Internal Revenue Service, or any member of Congress, or favorably reported for passage to either House of Congress by any committee of such House to which such legislation had been referred for consideration, or a decision rendered by a court established under Article III of the Constitution of the United States of America or by the Tax Court of the United States of America, or an order, ruling, regulation (final, temporary or proposed), press release or other form of notice issued or ma de by or on behalf of the Treasury Department of the United States of America or the Internal Revenue Service, with the purpose or effect, directly or indirectly, of imposing federal income taxation upon such interest as would be received by any owners of the Bonds beyond the extent to which such interest is subject to taxation as of the date hereof; or
2. Legislation introduced in or enacted (or resolution passed) by the Congress or an order, decree or injunction issued by any court of competent jurisdiction, or an order, ruling, regulation (final, temporary or proposed), press release or other form of notice issued or made by or on behalf of the Securities and Exchange Commission (the “ SEC”), or any other governmental agency having jurisdiction of the subject matter, to the effect that obligations of the general character of the Bonds, including any or all underlying arrangements, are not exempt from registration under or other requirements of the Securities Act of 1933, as amended ( the “ Securities Act ”), or that the Indenture is not exempt from qualification under or other requirements of the Trust Indenture Act of 1939, as amended (the “ Trust Indenture Act”), or that the issuance, offering or sale of obligations of the general character of the Bonds, including any or all underlying arrangements, as contemplated 477
9 hereby or by the Official Statement or otherwise is or would be in violation of the federal securities laws as amended and then in effect; or
3. A general suspension of trading o n 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 exchan ge, whether by virtue of determination by that exchange or by order of the SEC or any other governmental authority having jurisdiction; or
4. The introduction, proposal or enactment of any amendment to the federal or State Constitution or any action by any fe deral or State court, legislative body, regulatory body or other authority materially adversely affecting the tax status of the Community Facilities District, its property, income, securities (or interest thereon), the validity or enforceability of Special Taxes, or the ability of the Community Facilities District to issue the Bonds as contemplated by the Indenture and the Official Statement; or
5. Any event occurring, or information becoming known which, in the reasonable judgment of the Underwriter, makes un true in any material respect any statement or information contained in the Preliminary Official Statement or in the Official Statement, or has the effect that the Preliminary Official Statement or the Official Statement contains any untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; or
6. Any national securities exchange, the Comptroller of the Currency, or any other governmental authority, shall impose as to the Bonds, or obligations of the general character of the Bonds, any material restrictions not now in force, or increase materially those now in force, with respect to the extension of c redit by, or the charge to the net capital requirements of, the Underwriter; or
7. There shall have occurred (1) an outbreak or escalation of hostilities or the declaration by the United States of a national emergency or war or (2) any other calamity or crisis in the financial markets of the United States or elsewhere or the escalation of such calamity or crisis, the effect of which on the financial markets of the United States is such as, in the reasonable judgment of the Underwriter, would materially adverse ly affect the market for or market price of the Bonds; or
8. Any event or circumstance shall exist that either makes untrue or incorrect in any material respect any statement or information in the Official Statement (other than any statement provided by the Underwriter) or is not reflected in the Official Statement but should be reflected therein in order to make the statements therein, in the light of the circumstances under which they were made, not misleading and, in either such event, the Community Facilit ies District refuses to permit the Official Statement to be supplemented to supply such statement or information, or the effect of the Official Statement as so supplemented is to materially adversely affect the market price or marketability of the Bonds or the ability of the Underwriters to enforce contracts for the sale of the Bonds; or
9. A general banking moratorium shall have been declared by federal or State authorities having jurisdiction and be in force; or 478
10 10. A material disruption in securities settlement , payment or clearance services affecting the Bonds shall have occurred; or
11. Any new restriction on transactions in securities materially affecting the market for securities (including the imposition of any limitation on interest rates) or the extension of credit by, or a charge to the net capital requirements of, underwriters shall have been established by the New York Stock Exchange, the SEC, any other federal or State agency or the Congress of the United States, or by Executive Order; or
12. A decision by a court of the United States shall be rendered, or a stop order, release, regulation or no -action letter by or on behalf of the SEC or any other governmental agency having jurisdiction of the subject matter shall have been issued or made, to the effect that t he issuance, offering or sale of the Bonds, including the underlying obligations as contemplated by this Purchase Agreement or by the Official Statement, or any document relating to the issuance, offering or sale of the Bonds, is or would be in violation o f any provision of the federal securities laws at the Closing Date, including the Securities Act, the Securities Exchange Act of 1934, as amended and the Trust Indenture Act; or
13. Any proceeding shall have been commenced or be threatened in writing by the SEC against the City or the Community Facilities District; or (e) At or prior to the Closing Date, the Underwriter shall have received a counterpart original or certified copy of the following documents, in each case satisfactory in form and substance to the Underwriter:
1. The Official Statement, executed on behalf of the Community Facilities District by an authorized officer;
2. The Indenture, duly executed and delivered by the Community Facilities District and the Trustee;
3. The Resolutions and Formation Documents , to gether with a certificate dated as of the Closing Date of the City Clerk to the effect that the Community Facilities District Resolutions are true, correct and complete copies of the ones duly adopted by the City Council;
4. The Continuing Disclosure Agreemen t executed and delivered by the Community Facilities District and the Trustee;
5. An unqualified approving opinion of Bond Counsel for the Bonds in the form attached to the Official Statement;
6. A supplemental opinion or opinions of Bond Counsel, dated the Closing Date and addressed to the Underwriter, to the effect that:
(i) the statements contained in the Official Statement under the captions “INTRODUCTION – Security and Sources of Payment for the Bonds,” “INTRODUCTION – Description of the Bonds,” “THE BONDS” (oth er 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 479
11 information mentioned in the s ections entitled “Special Tax”, and “Rate and Method of Apportionment” as to which no 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 other documents, insofar as such statements expressly summarize certain provisions of the Indenture and Bond Counsel’s final opinion are accurate in all material respects; (ii) this Purchase Agreement and the Continuing Disclosure Agreement have been duly executed and delivered by, and constitute valid and binding agreements of, the Community Facilities District, 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
(iii) 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.
7. The letter of Disclosure Counsel, dated the Closing Date and addressed to the Community Facilities District and to the Underwriter, to the effect that, without having undertaken to determine independently the accuracy or completeness of the statements contained in the Official Statement, but on the basis of their participation in conferences with representatives of the Community Facilities District, the Special Tax Consultant and others, and their examination of certain documents, nothing has come to the ir attention which has led them to believe that the Preliminary Official Statement as of its date and the date of this Purchase Agreement and the Official Statement as of its date and as of the Closing Date contained or contains any untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading (except that no opinion or belief need be expressed as to any financial statements or other financial, statistical or engineering data or forecasts, numbers, charts, estimates, projections, assumptions, or expressions of opinion, any information about valuation, appraisals, absorption, archeological or environmental matters, or any information with respect to the City, or about DTC or the book-entry-only system);
8. A certificate dated the Closing Date and signed by an authorized representative of the Community Facilities District or an authorized designee, on behalf of the Community Facilities District substantially in the form attached hereto as Exhibit F;
9. An opinion of the City Attorney of the City, dated the date of Closing and addressed to the Underwriter and the City, to the effect that:
(i) The Community Facilities District 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);
(ii) The City Council of the City, acting as legislative body of the Community Facilities District, has the full legal right, power and authority to adopt the Resolutions and Formation Documents;
(iii) The Resolutions and Formation Documents were duly adopted at meetings of the City Council, acting as legislative body of the Community Facilitie s 480
12 District 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 Formation Documents are in full force and effect and have not been amended or repealed; (iv) 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, regulatory agency, public board or body is pending with respect to which the Community Faci lities District has been served with process or threatened, in any way affecting the existence of the City, the Community Facilities District or the titles of the Community Facilities District’s officials to their respective offices, or seeking 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 Taxes to pay the principal of and interest on the Bonds, or in any way co ntesting or affecting the validity or enforceability of the Bonds, the Community Facilities District Documents or any action of the Community Facilities District contemplated by any of said documents, or in any way contesting the completeness or accuracy o f the Preliminary Official Statement or of the Official Statement or the powers of the Community Facilities District or its authority with respect to the Bonds, the Community Facilities District Documents or any action on the part of the Community Facilities District 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 Community Facilities District Documents;
(v) The execution and delivery of the Bonds and the Community Facilities District 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 o ther instrument of which the Community Facilities District is a party or is otherwise subject or bound, a consequence of which could be to materially and adversely affect the ability of the Community Facilities District to perform its obligations under the Bonds or the Community Facilities District Documents; and
(vi) 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 Community Facilities District, to perform its obligations under the Bonds or the Community Facilities District Documents, have been obtained or made, as the case may be, and are in full force and effect.
10. A certificate dated the Closing Date from David Taussig and Associates, Inc. dba DTA (the “ Special Tax Consultant ”) addressed to the Community Facilities District and the Underwriter to the effect that: (i ) the Special Tax if collected in the maximum amounts permitted pursuant to the Rate and Method of Apportionment of Special Taxes of the Community Facilities District as of the Closing Date net of budgeted administrative expenses would generate at least 11 0% of the annual debt service payable with respect to the Bonds in each year, based on such assumptions and qualifications as shall be acceptable to the Underwriter ; and (ii) the statements in the Official Statement provided by the Special Tax Consultant c oncerning Special Taxes in the Community Facilities District and all information supplied by it for use in the Official Statement were as of the date of the Official Statement and are as of the Closing Date true and correct, and do not contain any untrue s tatement 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;
481
13 11. Certified copies of the general resolution of the Trustee authorizing the execution and delivery of certain documents by certain officers of the Trustee, which resolution authorizes the execution of the Indenture and the authentication of the Bonds;
12. A certificate of the Trustee, addressed to the Underwriter, and the Community Facilities District dated the Closing Date, to the effect that: (i) the Trustee is authorized to carry out corporate trust powers, and have full power and authority to perform its duties under the Indenture and the Continuing Disclosure Agreement; (ii) the Trustee is duly authorized to execute and deliver the Indenture and the Continuing Disclosure Agreement, to accept the obligations created by the Indenture and the Continuing Disclosure Agreement and to authenticate the Bonds pursuant to the terms of th e Indenture; (iii) no consent, approval, authorization or other action by any governmental or regulatory authority having jurisdiction over the Trustee that has not been obtained is or will be required for the authentication of the Bonds or the consummatio n by the Trustee of the other transactions contemplated to be performed by the Trustee in connection with the authentication of the Bonds and the acceptance and performance of the obligations created by the Indenture and the Continuing Disclosure Agreement; (iv) to the best of its knowledge, compliance with the terms of the Indenture and Continuing Disclosure Agreement will not conflict with, or result in a violation or breach of, or constitute a default under, any loan agreement, indenture, bond, note, res olution or any other agreement or instrument to which the Trustee is a party or by which it is bound, or any law or any rule, regulation, order or decree of any court or governmental agency or body having jurisdiction over the Trustee or any of its activit ies or properties; and (v) 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 would affect the existence of the Trustee or in any way contest the validity or enforceability of the Indenture and the Continuing Disclosure Agreement or contesting the powers of the Trustee or its authority to enter into and perf orm its obligations under the Indenture and the Continuing Disclosure Agreement;
13. An opinion of counsel to the Trustee dated the Closing Date, addressed to the Underwriter, and the Community Facilities District to the effect that the Trustee is a national banking association duly organized and validly existing under the laws of the United States having full power and being qualified to enter into, accept and agree to the provisions of the Indenture and the Continuing Disclosure Agreement, and that such docum ents have been duly authorized, executed and delivered by the Trustee, and, assuming due execution and delivery by the other parties thereto, constitutes the legal, valid and binding obligation of the Trustee, enforceable in accordance with its terms, subj ect to bankruptcy, insolvency, reorganization, moratorium and other laws affecting the enforcement of creditors’ rights in general and except as such enforceability may be limited by the application of equitable principles if equitable remedies are sought;
14. A certificate of the Community Facilities District dated the Closing Date, in a form acceptable to Bond Counsel, that the Bonds are not arbitrage bonds within the meaning of Section 148 of the Internal Revenue Code of 1986, as amended;
15. A Letter of Representations of LS-Fontana, LLC (the “Developer”) in connection with the printing of the Preliminary Official Statement dated the date of the Preliminary Official Statement, substantially in the form attached as part of Exhibit D hereto or as such Letter of Representations may be modified with the approval of the Underwriter and Bond Counsel, and a Bring-Down Certificate of the Developer dated the Closing Date, substantially in the form attached as part of Exhibit E hereto;
482
14 16. The Continuing Disclosure Certificate of the Developer, substantially in the form attached as an appendix to the Official Statement;
17. An opinion or opinions of counsel to the Developer, dated the date of the Closing addressed to the Community Facilities District and the Underwriter, in form an d substance acceptable to the Underwriter and Bond Counsel.
18. An opinion of Kutak Rock LLP, counsel to the Underwriter (“Underwriter’s Counsel”), dated the date of Closing and addressed to the Underwriter in form and substance acceptable to the Underwriter; and
19. A certificate in form and substance as set forth in Exhibit C hereto of Kitty Siino &Associates, Inc., Tustin, California, the appraiser of the property within the Community Facilities District, dated as of the Closing Date.
20. Such additional legal opini ons, certificates, instruments and other documents as the Underwriter and Bond Counsel may reasonably request to evidence the truth and accuracy, as of the date hereof and as of the Closing Date, of the material representations and warranties of the Commun ity Facilities District contained herein, and of the statements and information contained in the Official Statement and the due performance or satisfaction by the Community Facilities District at or prior to the Closing of all agreements then to be perform ed and all conditions then to be satisfied by the Community Facilities District in connection with the transactions contemplated hereby and by the Indenture and the Official Statement.
If the Community Facilities District shall be unable to satisfy the conditions to the obligations of the Underwriter to purchase, accept delivery of and pay for the Bonds contained in this Purchase Agreement, or if the obligations of the Underwriter to purchase, accept delivery of and pay for the Bonds shall be terminated for any reason permitted by this Purchase Agreement, this Purchase Agreement shall terminate and neither the Community Facilities District nor the Underwriter shall be under any further obligation hereunder, except that the respective obligations of the Under writer and the Community Facilities District set forth in Section 5 hereof shall continue in full force and effect.
4. Establishment of Issue Price.
(a) The Underwriter agrees to assist the Community Facilities District in establishing the issue price of the Bond s and shall execute and deliver to the Community Facilities District at Closing an “issue price” or similar certificate, together with the supporting pricing wires or equivalent communications, substantially in the form attached hereto as Exhibit B, with s uch modifications as may be appropriate or necessary, in the reasonable judgment of the Underwriter, the Community Facilities District and Bond Counsel, to accurately reflect, as applicable, the sales price or prices or the initial offering price or prices to the public of the Bonds. (b) Except as otherwise set forth in Exhibit A attached hereto, the Community Facilities District will treat the first price at which 10% of each maturity of the Bonds (the “ 10% test”), identified under the column “10% Test Satisf ied” in Exhibit A, is sold to the public as the issue price of that maturity (if different interest rates apply within a maturity, each separate CUSIP number within that maturity will be subject to the 10% test). At or promptly after the execution of this Purchase Agreement, the Underwriter shall report to the Community Facilities District the price or prices at which it has sold to the public each maturity of Bonds. If at that time the 10% test has 483
15 not been satisfied as to any maturity of the Bonds, the Underwriter agrees to promptly report to the Community Facilities District the prices at which it sells the unsold Bonds of that maturity to the public. That reporting obligation shall continue, whether or not the Closing Date has occurred, until the 10% test has been satisfied as to the Bonds of that maturity or until all Bonds of that maturity have been sold to the public.
(c) The Underwriter confirms that it has offered the Bonds to the public on or before the date of this Purchase Agreement at the offerin g price or prices (the “ initial offering price”), or at the corresponding yield or yields, set forth in Exhibit A attached hereto. Exhibit A also sets forth, identified under the column “Hold the Offering Price Rule Used,” as of the date of this Purchase Agreement, the maturities, if any, of the Bonds for which the Underwriter represents that (i) the 10% test has been satisfied (assuming orders are confirmed by the close of the business day immediately following the date of this Purchase Agreement) and (ii ) the 10% test has not been satisfied and for which the Community Facilities District and the Underwriter agree that the restrictions set forth in the next sentence shall apply, which will allow the Community Facilities District to treat the initial offeri ng price to the public of each such maturity as of the sale date as the issue price of that maturity (the “ hold-the-offering-price rule”). So long as the hold -the-offering- price rule remains applicable to any maturity of the Bonds, the Underwriter will ne ither offer nor sell unsold Bonds of that maturity to any person at a price that is higher than the initial offering price to the public during the period starting on the sale date and ending on the earlier of the following:
1. the close of the fifth (5th) business day after the sale date; or
2. the date on which the Underwriter has sold at least 10% of that maturity of the Bonds to the public at a price that is no higher than the initial offering price to the public.
The Underwriter shall promptly advise the Community Facilities District when 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, if that occurs prior to the close of the fifth (5th) business day after the sale date. (d) The Underwriter confirms that:
(i.) any selling group agreement and any third -party distribution agreement relating to the initial sale of the Bonds to the public, together with the related pricing wires, contains or will contain language obligating each de aler 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, wheth er or not the Closing Date has occurred, until either all Bonds of that maturity allocated to it have been sold or it is notified by the Underwriter that the 10% test has been satisfied as to the Bonds of that maturity, provided that, the reporting obligat ion after the Closing Date may be reasonable periodic intervals or otherwise upon request of the Underwriter and (ii) to comply with the hold-the-offering-price rule, if applicable, if and for so long as directed by the Underwriter,
(B) to promptly notify the Underwriter of any sales of Bonds that, to its knowledge, are made to a purchaser who is a related party to an underwriter participating in the initial sale of the Bonds to the public (each such term being used as defined below), and 484
16 (C) to acknowled ge that, unless otherwise advised by the dealer or broker - dealer, the Underwriter shall assume that each order submitted by the dealer or broker-dealer is a sale to the public.
(ii.) any selling group agreement relating to the initial sale of the Bonds to the public, together with the related pricing wires, contains or will contain language obligating each dealer that is a party to a third -party distribution agreement to be employed in connection with the initial sale of the Bonds to the public to require each broker-dealer that is a party to such third -party distribution agreement to (A) report the prices at which it sells to the public the unsold Bonds of each maturity allocated to it, whether or not the Closing Date has occurred, until either all Bonds of tha t maturity allocated to it have been sold or it is notified by the Underwriter or the dealer that the 10% test has been satisfied as to the Bonds of that maturity, provided that, the reporting obligation after the Closing Date may be at reasonable periodic intervals or otherwise upon request of the Underwriter or the dealer, and (B) comply with the hold -the-offering-price rule, if applicable, if and for so long as directed by the Underwriter or the dealer and as set forth in the related pricing wires. (e) The Community Facilities District acknowledges that, in making the representation set forth in this section, the Underwriter will rely on (i) in the event a selling group has been created in connection with the initial sale of the Bonds to the public, the a greement 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. (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 purs uant to a written contract with the Community Facilities District (or with the lead underwriter to form an underwriting syndicate) to participate in the initial sale of the Bonds to the public and (B) any person that agrees pursuant to a written contract d irectly 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 Bon ds to the public);
(iii.) a purchaser of any of the Bonds is a “related party” to an underwriter if the underwriter and the purchaser are subject, directly or indirectly, to (A) more than 50% common ownership of the voting power or the total value of their stock , if both entities are corporations (including direct ownership by one corporation of another), (B) more than 50% common ownership of their capital interests or profits interests, if both entities are partnerships (including direct 485
17 ownership by one partnership of another), or (C) more than 50% common ownership of the value of the outstanding stock of the corporation or the capital interests or profit interests of the partnership, as applicable, if one entity is a corporation and the other entity is a partne rship (including direct ownership of the applicable stock or interests by one entity of the other); and (iv.) “sale date” means the date of execution of this Purchase Agreement by all parties.
5. Expenses. Whether or not the transactions contemplated by this Purchase Agreement are consummated, the Underwriter shall be under no obligation to pay, and the Community Facilities District shall pay all expenses and costs of the Community Facilities District incident to the performance of its obligations in connection wit h the authorization, execution, sale and delivery of the Bonds to the Underwriter, including, without limitation, printing costs, initial fees of the Trustee, including fees and disbursements of their counsel, if any, fees and disbursements of Bond Counsel , Disclosure Counsel and other professional advisors employed by the City, costs of preparation, printing, signing, transportation, delivery and safekeeping of the Bonds. The Underwriter shall pay all out -of-pocket expenses of the Underwriter, including, without limitation, advertising expenses, the California Debt and Investment Advisory Commission fee, CUSIP Services Bureau charges, regulatory fees imposed on new securities issuers and any and all other expenses incurred by the Underwriter in connection with the public offering and distribution of the Bonds, including fees and disbursements of Underwriter’s Counsel. Any m eals in connection with or adjacent to meetings, rating agency presentations, pricing activities or other transaction -related activities shall be considered an expense of the transaction and included in the expense component of the Underwriter’s discount.
6. Notices. Any notice of other communication to be given to the Community Facilities District under this Purchase Agreement may be given by delivering the same in writing to the City of Fontana, 8353 Sierra Avenue, Fontana, California 92335, Attention: City Manage r; any notice or other communication to be given to the Underwriter under this Purchase Agreement may be given by delivering the same in writing to Piper Sandler & Co., 2321 Rosecrans Avenue, Suite 3200 , El Segundo, California 90245, Attention: Public Finance.
7. Parties In Interest . This Purchase Agreement is made solely for the benefit of the Community Facilities District and Underwriter (including any successors or assignees of the Underwriter) and no other person shall acquire or have any right hereunder or by virtue hereof.
8. Survival of Representations and Warranties . The representations and warranties of the Community Facilities District under this Purchase Agreement shall remain operative and in full force and effect, regardless of any investigations ma de by or on behalf of the Underwriter and shall survive the delivery and payment for the Bonds and the Closing.
9. Execution in Counterparts . This Purchase Agreement may be executed by the parties hereto in separate counterparts, each of which when so execut ed and delivered shall be an original, but all such counterparts shall together constitute but one and the same instrument.
10. Effective. This Purchase Agreement shall become effective and binding upon the respective parties hereto upon the execution of the acceptance hereof by the Community Facilities District and shall be valid and enforceable as of the time of such acceptance. 486
18 11. No Prior Agreements . This Purchase Agreement supersedes and replaces all prior negotiations, agreements and understanding among th e parties hereto in relation to the sale of the Bonds by the Community Facilities District.
12. Governing Law . This Purchase Agreement shall be governed by the laws of the State of California.
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S-1
13. Effective Date . This Purchase Agreement shall become effective and binding upon the respective parties hereto upon the execution of the acceptance hereof by the Community Facilities District and shall be valid and enforceable as of the time of such acceptance.
Very truly yours,
PIPER SANDLER & CO., as Underwriter
By:
Managing Director
The foregoing is hereby agreed to and
accepted as of the date first above written:
CITY OF FONTANA COMMUNITY
FACILITIES DISTRICT NO. 109
(NARRA HILLS)
By:
Authorized Officer
Time of Execution: _____________ p.m. California time
[EXECUTION PAGE OF BOND PURCHASE AGREEMENT]
488
A-1
EXHIBIT A
$__________
CITY OF FONTANA
COMMUNITY FACILITIES DISTRICT NO. 109 (NARRA HILLS)
SPECIAL TAX BONDS, SERIES 2024
Maturity
(September 1)
Principal
Amount
Interest
Rate Yield Price
10% Test
Satisfied*
10% Test
Not
Satisfied
Subject to
Hold-The-
Offering-
Price Rule
2025
2026
2027
2028
2029
2030
2031
2032
2033
2034
2035
20__(T)
20__(T)
20__(T)
_________________
(T) Term Bond.
(C) Priced to optional call at [par] on September 1, 20__. *At the time of execution of this Purchase Agreement and assuming orders are confirmed by the close of the business day immediately following the date of this Purchase Agreement.
489
A-2
Redemption Provisions
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 principal 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 are subject to mandatory redemption, in whole, or in part in Authorized Denominations, on any Interest Payment Date, from and to the extent of prepaid Special Taxes required to be applied thereto and any related proportional amounts in the Reserve Fund required to be applied there to 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 ac crued 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)
490
A-3
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 ac crued 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)
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 matur ing 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)
491
B-1
EXHIBIT B
$_______
CITY OF FONTANA
COMMUNITY FACILITIES DISTRICT NO. 109 (NARRA HILLS)
SPECIAL TAX BONDS, SERIES 2024
FORM OF ISSUE PRICE CERTIFICATE
The undersigned, Piper Sandler & Co. (the “Underwriter”), hereby certifies as set forth below with respect to the sale and issuance of the above-captioned obligations (the “Bonds”).
1. Bond Purchase Agreement. On [BPA Date] (the “Sale Date”), the Underwriter and the Issuer executed a Bond Purchase Agreement (the “Purchase Agreement”) in connection with the sale of the Bonds. The Underwriter has not modified the Purchase Agreement since its execution on the Sale Date.
2. Price.
(a) As of the date of this Certificate, for each Maturity of the Bonds, the first price at which at least 10% of such Maturity of the Bonds was sold to the Public (the “10% Test”) was the respective price for such Maturity listed in Schedule A attached hereto.
3. Defined Terms.
(a) “Issuer” means the City of Fontana Community Facilities District No. 109 (Narra Hills).
(b) “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.
(c) “Public” means any person (including an individual, trust, estate, partnership, association, company, or corporation) other than an Underwriter or a related party to an Underwriter.
The term “related party” for purposes of this certificate generally means any two or more persons who have greater than 50 percent common ownership, directly or indirectly. (d) “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 t he Public, and (ii) any person that agrees pursuant to a written contract directly or indirectly with a person described in clause (i) of this paragraph to participate in the initial sale of the Bonds to the Public (including a member of a selling group or a party to a retail distribution agreement participating in the initial sale of the Bonds to the Public).
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 interest rate comparable to that of bonds and oth er tax- exempt obligations of a similar type, and is not in excess of the amount necessary for such purpose. 492
B-2
The representations set forth in this certificate are limited to factual matters only.
Nothing in this certificate represents the Underwriter’s int erpretation 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 wi th respect to certain of the representations set forth in the Tax Certificate of the Issuer dated [Closing Date] and with respect to compliance with the federal income tax rules affecting the Bonds, and by Bond Counsel, in connection with rendering its opi nion that the interest on the Bonds is excluded from gross income for federal income tax purposes, the preparation of the Internal Revenue Service Form 8038 -G, and other federal income tax advice that it may give to the Issuer from time to time relating to the Bonds.
PIPER SANDLER & CO.
By:
Dated: [Closing Date]
493
B-3
SCHEDULE A
TO
ISSUE PRICE CERTIFICATE
[TO BE ATTACHED]
494
C-1
EXHIBIT C
CITY OF FONTANA
COMMUNITY FACILITIES DISTRICT NO. 109 (NARRA HILLS)
SPECIAL TAX BONDS, SERIES 2024
CERTIFICATE OF APPRAISER
The undersigned hereby states and certifies:
1. That he or she is an authorized principal of Kitty Siino &Associates, Inc. , Tustin, California (the “Appraiser”) and as such is familiar with the facts herein certified and is authorized and qualified to certify the same.
2. That the Appraiser has prepared an appraisal report dated ______, 2024, with a date of value as of July 26, 2024 (the “Appr aisal Report”), on behalf the City of Fontana Community Facilities District No. 109 (Narra Hills) (the “Community Facilities District”) and in connection with the Official Statement dated [BPA Date] (“Official Statement”), concerning the City of Fontana Community Facilities District No. 109 (Narra Hills) Special Tax Bonds, Series 2024 (the “Bonds”).
3. That the Appraiser hereby consents to the reproduction and use of the Appraisal Report appended to the Preliminary Official Statement and the Official Statem ent. The Appraiser also consents to the references to the Appraiser and the Appraisal made in the Preliminary Official Statement and the Official Statement.
4. In the opinion of the Appraiser the assumptions made in the Appraisal Report are reasonable.
5. That the Official Statement has been reviewed on behalf of the Appraiser and to the best knowledge of the Appraiser the statements concerning the Appraisal Report and the value of the property contained under the captions “INTRODUCTION – Appraisal Report, ” “THE COMMUNITY FACILITIES DISTRICT – Property Values - Appraisal,” and “APPENDIX B – APPRAISAL REPORT” are true, correct and complete in all material respects and do not contain any untrue statement of a material fact or omit to state a material fact nec essary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading.
6. Each of the parcels appraised by the Appraiser is encompassed within the Community Facilities District as set forth in the boun dary map of the Community Facilities District and the Appraisal Report fairly and accurately described, as of the stated date of value, the market values of the properties in the Community Facilities District that are subject to the special taxes.
7. That, as of the date of the Official Statement and as of the date hereof, the Appraisal Report appended to the Official Statement, to the best of my knowledge and belief, and subject to all of the Limiting Conditions and Major Assumptions set forth in the Appra isal Report, does not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements contained therein, in the light of the circumstances under which they were made, not misleading, and no events or occurrences have been ascertained by us or have come to our attention that would materially and adversely affect the conclusions as to the market value of the 495
C-2
appraised property stated in the Appraisal Report. However, we have not performed any procedu res since the date of value of the Appraisal Report to obtain knowledge of such events or occurrences nor are we obligated to do so in the future.
8. The Appraisal Report complies with the Appraisal Standards for Land -Secured Financings issued by the California Debt and Investment Advisory Commission dated July, 2004.
The Community Facilities District and Piper Sandler & Co., as underwriter, are entitle d to rely on the Certificate.
Dated: [Closing Date]
KITTY SIINO &ASSOCIATES, INC.
By:
496
D-1
EXHIBIT D
FORM OF LETTER OF REPRESENTATIONS OF DEVELOPER
CITY OF FONTANA
COMMUNITY FACILITIES DISTRICT NO. 109 (NARRA HILLS)
SPECIAL TAX BONDS, SERIES 2024
LETTER OF REPRESENTATIONS OF LS-FONTANA, LLC
[POS Date]
City of Fontana
Community Facilities District No. 109 (Narra Hills)
8353 Sierra Avenue
Fontana, CA 92335
Piper Sandler & Co.
2321 Rosecrans Avenue, Suite 3200
El Segundo, California 90245
Ladies and Gentlemen:
Reference is made to the City of Fontana Community Facilities District No. 109 (Narra Hills) Special Tax Bonds, Series 2024 (the “Bonds”) and to the Bond Purchase Agreement to be entered into in connection therewith (the “ Purchase Agreement ”). This Letter of Representations of LS- Fontana, LLC (the “ Letter of Representations ”) is delivered pursuant to and in satisfaction of Section 3(E)(15) of the Purchase Agreement. Capitalized terms used herein and not otherwise defined have the meanings ascribed to them in the Purchase Agreement.
The undersigned certifies and represents that he is duly authorized on behalf of LS-Fontana, LLC, a Delaware limited liability company (the “Developer”), to execute and deliver this Letter of Representations in connection with the issuance, sale and delivery by the City of Fontana Community Facilities District No. 109 (Narra Hills) (the “ Community Facilities District ”) of the Bonds. The Bonds are described in the Preliminary Official Statement dated [POS Date] relating to the Bonds (the “Preliminary Official Statement”).
Except as otherwise described in the Preliminary Official Statement, the Developer’s current expectations are that the Developer shall remain the party responsible for the construction and sale of homes within the Property. Except as disclosed in the Preliminary Official Statement, the Developer has not entered into an agreement for development or managem ent of the Property by any other entity, except such subcontracts, consultant agreements and similar agreements for land development 497
D-2
activities associated with the Developer’s development plan as are entered into in the ordinary course of business.
As used in this Letter of Representations, the term “Actual Knowledge of the Undersigned” means the actual knowledge that the undersigned currently has as of the date of this Letter of Representations or has obtained through (i) interviews with such officers and responsible employees of the Developer as the undersigned has reasonably determined are likely, in the ordinary course of his or her respective duties, to have knowledge of the matters set forth in this Letter of Representations, and (ii) reviews of docume nts reasonably available to the undersigned and which the undersigned reasonably deemed necessary for the undersigned to execute this Letter of Representations. The undersigned has not conducted any extraordinary inspection or inquiry other than such inspe ctions or inquiries as are prudent and customary in connection with the ordinary course of the Developer’s current business and operations. The undersigned has not contacted any individuals who are no longer employed by, or associated with, the Developer.
As used in this Letter of Representations, the term “ Relevant Entity ” of the Developer means any person presently directly or indirectly through one or more intermediaries controlling, controlled by or under common control with the Developer, and about wh om information could be material to potential investors in their investment decision regarding the Bonds (including without limitation information relevant to the proposed development of the property owned by the Developer in the Community Facilities Distr ict, or to the Developer’s ability to pay the special taxes levied by the Community Facilities District on property owned by the Developer (“ Special Taxes”) prior to delinquency).
As used in this Letter of Representations, the term “ Property” means the pro perty currently owned by the Developer within the Community Facilities District as described in the Preliminary Official Statement.
The undersigned certifies that he or she is familiar with the facts set forth in this Letter of Representations, and further hereby certifies to the Actual Knowledge of the Undersigned as follows on behalf of the Developer:
(1) The Developer has been duly organized and validly exists in good standing under the laws of the State of Delaware with the power to transact business in t he State of California and has or will have prior to the Closing, as required, all requisite limited liability right, power and authority:
(i) to execute and deliver this Letter of Representations and to execute and deliver at Closing the Continuing Discl osure Certificate of the Developer substantially in the form attached as Appendix H to the Preliminary Official Statement, with such additional changes as may be agreed to by the Developer (the “Developer Continuing Disclosure Certificate”),
(ii) to own, develop and sell the Property, as described in the Preliminary Official Statement,
(iii) to carry on its business as described in the Preliminary Official Statement, and
498
D-3
(iv) to perform its obligations under the Developer Continuing Disclosure Certificate.
(2) The Developer agrees to execute at Closing the Developer Continuing Disclosure Certificate.
(3) Except as disclosed in the Preliminary Official Statement, to the Actual Knowledge of the Undersigned, the Developer is not aware of any material failures by it or any entity under managerial control of the Developer to comply in all material respects with previous continuing disclosure undertakings in a written certificate or agreement executed by it or an entity under the managerial control of the Developer to p rovide periodic continuing disclosure reports or notices of material events respecting securities offerings in California within the past five years.
(4) To the Actual Knowledge of the Undersigned, execution and delivery of the Developer Continuing Disclosure Certificate , and the performance by the Developer of its obligations under the Developer Continuing Disclosure Certificate , will not conflict with or constitute a breach of or default under any loans, lines of credit, agreements, or other contractual or financial obligations of the Developer, or any applicable law, regulation, judgment or decree.
(5) To the Actual Knowledge of the Undersigned, neither the Developer nor any of its Relevant Entities is currently in material default on any loans, lines of credit, agreements, or other contractual or financial obligations, or in breach of any applicable law, regulation, judgment or decree, and no event has occur red and is continuing that would constitute such a default or breach, the result of which could materially adversely affect the ability of the Developer:
(i) to own, develop and sell the Property, as described in the Preliminary Official Statement,
(ii) to pay Special Taxes on the Property (to the extent the responsibility of the Developer) prior to delinquency,
(iii) to carry on its business as described in the Preliminary Official Statement, or
(iv) to perform its obligations under the Developer Continu ing Disclosure Certificate.
(6) Except as disclosed in the Preliminary Official Statement, to the Actual Knowledge of the Undersigned, the Developer has not assumed any obligations under any loans, lines of credit, agreements, or other contractual or financia l arrangements, or any applicable judgment or decree, which could materially adversely affect the ability of the Developer:
(i) to own, develop and sell the Property, as described in the Preliminary Official Statement,
499
D-4
(ii) to pay Special Taxes on the Pro perty (to the extent the responsibility of the Developer) prior to delinquency,
(iii) to carry on its business as described in the Preliminary Official Statement, or
(iv) to perform its obligations under the Developer Continuing Disclosure Certificate.
(7) Except as described in the Preliminary Official Statement, to the Actual Knowledge of the Undersigned, the Developer has no loans outstanding and unpaid and no lines of credit that are secured by the Property.
(8) 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
(9) To the Actual Knowledge of the Undersigned, Relevant Entities of the Developer are able to pay their bills as they become due and no legal proceedings are pending against any Relevant Entity (with proper serv ice of process having been accomplished) or to the Actual Knowledge of the Undersigned, threatened in writing in which the Relevant Entity may be adjudicated as bankrupt or discharged from any or all of their debts or obligations, or granted an extension o f 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 could have a materially adverse impact on the ability of the Developer to develop its Property as described in the Preliminary Official Statement, or to pay the Special Taxes 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.
(10) The Developer has been developing or has been involved in the development of numerous projects over an extended period of time. It is likely that the Developer has been delinquent at one time or another in the paymen t of ad valorem property taxes, special assessments or special taxes. However, except as disclosed in the Preliminary Official Statement, to the Actual Knowledge of the Undersigned, neither the Developer nor any of its Relevant Entities is currently in default in, or, in the last five years, has ever defaulted to any material extent in, the payment of special taxes or assessments in connection with the Community Facilities District or any other community facilities districts or assessment districts in Calif ornia that was not cured prior to the institution of any enforcement action with a court of law.
(11) Except as disclosed in the Preliminary Official Statement, to the Actual Knowledge of the Undersigned, there is no litigation, inquiry, investigation or admi nistrative proceeding of any nature pending against the Developer (with service of process to the Developer having been accomplished), or to the Actual Knowledge of the Undersigned, 500
D-5
overtly threatened in writing against the Developer, or to the Actual Know ledge of the Undersigned, pending or overtly threatened in writing against any Relevant Entity of the Developer, in each case which, if successful, could:
(i) materially adversely affect the ability of the Developer to own, develop and sell the Property, as described in the Preliminary Official Statement, (ii) materially adversely affect the ability of the Developer to pay Special Taxes on the Property (to the extent the responsibility of the Developer) prior to delinquency,
(iii) materially adversely affect the ability of the Developer to carry on its business as described in the Preliminary Official Statement, (iv) materially adversely affect the ability of the Developer to perform its obligations under the Developer Continuing Disclosure Certificate, (v) challenge, question the validity or enforceabilit y of, or restrain or enjoin the performance of, the Special Taxes, the Bonds, the Community Facilities District Resolution of Issuance, the Indenture, the Developer Continuing Disclosure Certificate or the Bond Purchase Agreement, or
(vi) restrain or enjoin collection of Special Taxes or other sums to be pledged to pay the principal of and interest on the Bonds.
(12) Except as disclosed in the Preliminary Official Statement:
(i) to the Actual Knowledge of the Undersigned, the Developer an d its Relevant Entities are solvent;
(ii) except as set forth in this paragraph, neither the Developer nor, to the Actual Knowledge of the Undersigned, any of its Relevant Entities, has filed for bankruptcy or been declared bankrupt in the last 10 years; and (iii) to the Actual Knowledge of the Undersigned, there are no proceedings pending (with service of process to the Developer having been accomplished) or overtly threatened in writing in which the Developer or any of its Relevant Entities may be adjud icated as bankrupt, become the debtor in a bankruptcy proceeding, be discharged from any or all of its respective debts or obligations, be granted an extension of time to pay its respective debts or obligations, or be granted a reorganization or readjustment of its respective debts or obligations. (13) As of the date hereof, the information in the sections of the Preliminary Official Statement entitled “INTRODUCTION – The District (first three paragraphs only)”, “THE COMMUNITY FACILITIES DISTRICT – General Info rmation Regarding the District” (the second, third, and fourth paragraphs only), and “PROPERTY OWNERSHIP AND THE DEVELOPMENT” and “CONTINUING DISCLOSURE – The Developer” concerning the Developer and its Relevant Entities, the Property, the Developer’s development and financing plans, and the Developer’s contractual arrangements (but excluding any information cited as coming from a source other than the Developer) is true 501
D-6
and correct in all material respects, and contains no untrue statement of a material fa ct and does not omit any material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading.
(14) Except as disclosed in the Preliminary Official Statement, to the Actual Knowledge of t he Undersigned, the Developer has not submitted an application for, nor received actual notice of,
(i) the formation or authorization of any other assessment district or community facilities district that would include any portion of the property within the Community Facilities District, or
(ii) the authorization or issuance of any debt secured by an assessment or another special tax to be levied on any portion of the property within the Community Facilities District, other than the Special Tax.
(15) Except a s set forth in the Preliminary Official Statement, to the Actual Knowledge of the Undersigned, there are no claims, disputes, lawsuits, actions or contingent liabilities of or against the Developer or its Relevant Entities, or among, by or between the Developer and any contractors working on the development of the Property in the Community Facilities District, which may materially and adversely affect:
(i) the ability of the Developer to own, develop and sell the Property, as described in the Preliminary Official Statement,
(ii) the ability of the Developer to pay Special Taxes on the Property (to the extent the responsibility of the Developer) prior to delinquency, (iii) the ability of the Developer to carry on its business as described in the Preliminary Official Statement, or
(iv) the ability of the Developer to perform its obligations under the Developer Continuing Disclosure Certificate.
(16) The Developer covenants that, while the Bonds or any refunding obligations related thereto are outstanding, the Developer and the Relevant Entities which it controls will not bring any action, suit, proceeding, inquiry or investigation at law or in equity, before any court, regulatory agency, public board or body, that in any way:
(i) seeks to challenge or overturn t he formation of the Community Facilities District,
(ii) seeks to challenge the adoption of the ordinance levying Special Taxes within the Community Facilities District,
(iii) seeks to invalidate the Community Facilities District or any of the Bonds or any refunding obligations, or
502
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(iv) seeks 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 b ringing any other action, suit, proceeding, inquiry or investigation at law or in equity before any court, regulatory agency, public board or body relating to the following:
(a) a claim that the Special Tax has not been levied in accordance with the Rate and Method of Apportionment,
(b) the application or use of the Special Taxes levied and collected, or (c) the enforcement of the obligations of the Community Facilities District under the Indenture or any agreements between the Developer or a Relevant En tity and the City or the Community Facilities District or under which the Developer or Relevant Entity is a party or beneficiary.
(17) The Developer has received a copy of the Rate and Method of Apportionment containing the prepayment formula. The Developer acknowledges that any prepayment of the Special Taxes may only be made in accordance with the Rate and Method of Apportionment.
(18) The Developer shall comply with the provision of the Mello -Roos Community Facilities Act of 1982, as amended, relating to the Not ice of Special Tax described in California Government Code Section 53341.5 in connection with the sale of any part of the Property.
(19) Based upon its current development plans, including, without limitation, its current budget and subject to economic conditi ons and risks generally inherent in the development of real property, to the Actual Knowledge of the Undersigned, the Developer anticipates that it will have sufficient funds to (i) carry on its business as described in the Preliminary Official Statement, (ii) own, develop and sell the Property as described in the Preliminary Official Statement, and (iii) pay Special Taxes on 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 due to the Developer’s nonpayment of Special Taxes.
However, no assurance can be given that sources of financing ava ilable to the Developer will be sufficient to complete the property development and home construction as currently anticipated and as described in the Preliminary Official Statement. While the Developer has made such internal financing available in the pa st, there can be no assurance whatsoever of its willingness or ability to do so in the future. Neither the Developer nor any of its Relevant Entities has any legal obligation of any kind to make any such funds available or to obtain loans. Other than poi nting out the willingness of the Developer to provide internal financing in the past, the Developer has not represented in any way that it will do so in the future. If and to the extent that internal financing and home sales revenues are inadequate to pay the costs to complete the Developer’s planned development in the Community Facilities District and other financing by the Developer is not put into place, 503
D-8
there could be a shortfall in the funds required to complete the proposed development by the Developer and portions of the Property may not be developed. (20) The Developer consents to the issuance of the Bonds. The Developer acknowledges and agrees that the proceeds of such Bonds will be used for the acquisition and construction of the improvements describ ed in the Preliminary Official Statement. The Developer acknowledges that the costs to acquire and construct such improvements are estimates, and that any increase in costs in excess of the estimated costs relating to improvements will reduce the improveme nts which may be financed by the Community Facilities District, and neither the City nor the Community Facilities District has any obligation to provide moneys to pay for any such costs.
(21) During the period between the date of this Letter of Representations and the Closing Date, if the Developer has actual knowledge of any event relating to or affecting the Developer and its Relevant Entities, the Property, the Developer’s development and financing plans, and the Developer’s contractual arrangements (but exc luding any information cited as coming from a source other than the Developer) which could cause the information under the captions of the Preliminary Official Statement indicated in Paragraph 13 of this Letter of Representations (and subject to the limita tions and exclusions contained in Paragraph 13 of this Letter of Representations) to contain an untrue statement of a material fact or to omit to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, the Developer shall notify the City, the Community Facilities District and the Underwriter and if, in the opinion of counsel to the City 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 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.
(22) As a condition to the issuance of the Bonds, the Developer agrees to deliver a bring-down certificate, dated the Closing Date, in substantially the form attached as Exhibit E to the Purchase Agreement, to affirm and restate the Developer’s certifications, representations and covenants made in this Letter of Representations. If any event related to or affecting the Developer, its Relevant Entities or the ownership, development or sale of the Property occurs, as a result of which it is necessary to modify the bring -down certificate, the Developer agrees to deliver a new bring-down certificate revised to reflect such event.
(23) The Developer acknowledges and agrees that:
(i) in connection with the purchase and sale of the Bonds under the Purchase Agreement, and with the discussions, undertakings and procedures leading up to the consummation of the purchase and sale of the Bonds under the Purchase Agreement, the Underwriter is and ha s been acting solely as principal and is not acting as the agent or fiduciary of the Developer,
(ii) the Underwriter has not assumed a fiduciary responsibility in favor of the Developer with respect to (a) the offering of the Bonds contemplated hereby or the process leading thereto (whether or not the Underwriter, or any affiliate of the 504
D-9
Underwriter, has advised or is currently advising the Developer on other matters), or (b) any other obligation to the Developer with respect to the offering contemplated by the Purchase Agreement, and
(iii) the Developer has consulted its own legal, financial and oth er advisors to the extent it has deemed appropriate in connection with the offering contemplated by the Purchase Agreement.
On behalf of the Developer, the undersigned has reviewed the contents of this Letter of Representations and the Developer has consulted with counsel regarding the meaning of its contents.
The Developer acknowledges and understands that a variety of state and federal 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 duti es and obligations of the Developer under such laws.
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The undersigned has executed this Letter of Representations solely in his or her capacity as an authorized representative of Developer and he or she will have no personal liability arising from or relating to this Letter of Representations. Any liability arising from or relating to this Letter of Representations may only be asserted against the Developer.
LS-FONTANA, LLC,
a Delaware limited liability company
By:
Name:
Title:
[EXECUTION PAGE OF LETTER OF REPRESENTATIONS –
LS-FONTANA, LLC]
506
E-1
EXHIBIT E
FORM OF BRING-DOWN CERTIFICATE OF THE DEVELOPER
$________
CITY OF FONTANA
COMMUNITY FACILITIES DISTRICT NO. 109 (NARRA HILLS)
SPECIAL TAX BONDS, SERIES 2024
BRING-DOWN CERTIFICATE OF LS-FONTANA, LLC
The undersigned certifies and represents that he or she is duly authorized on behalf of LS- Fontana, LLC, a Delaware limited liability company (the “Developer”), to execute and deliver this Bring-Down Certificate of LS-Fontana, LLC (this “ Bring-Down Certifi cate”) in connection with the issuance, sale and delivery by the City of Fontana Community Facilities District No. 109 (Narra Hills) (the “Community Facilities District”) of the bonds captioned above (the “Bonds”).
This Bring -Down Certificate is delivered pursuant to the Bond Purchase Agreement with respect to the Bonds dated [BPA Date] , between Piper Sandler & Co., as underwriter, and the Community Facilities District (the “Purchase Agreement”).
In connection with the distribution of the Preliminary Offi cial Statement relating to the Bonds, the Developer executed a Letter of Representations of LS-Fontana, LLC, dated [POS Date] (the “Letter of Representations”).
Capitalized terms used but not defined in this Bring -Down Certificate have the same meanings as set forth in the Letter of Representations.
The undersigned, on behalf of the Developer, further certifies as follows:
(1) The undersigned is familiar with the facts certified in the Letter of Representations and this Bring-Down Certificate and is authorized and qualified to certify the same as an authorized representative of the Developer.
(2) Each statement made in the Letter of Representations is affirmed and restated as if made on the date hereof; provided that each statement made in the Letter of Representations referring to the Preliminary Official Statement is affirmed as it relates to the Official Statement dated [BPA Date] relating to the Bonds (the “Final Official Statement”). (3) To the Actual Knowledge of the Undersigned (as defined in th e Letter of Representations), no event has occurred since the date of the Preliminary Official Statement that has, in any material way, adversely affected the statements and information described in Paragraph 13 of the Letter of Representations (subject to the limitations and exclusions contained in Paragraph 13 of the Letter of Representations) relating to:
(i) the business, properties, operations, prospects or financial condition of the Developer, or any Relevant Entities,
(ii) the Developer’s ability to own, develop and sell the Property, or 507
E-2
(iii) the Developer’s ability to pay Special Taxes on the Property (to the extent the responsibility of the Developer) prior to delinquency,
which should be disclosed in the Final Official Statement for purposes f or which it is to be used in order to make such statements and information contained in the Final Official Statement not misleading in any material respect.
(4) The Developer has duly executed and delivered the Developer Continuing Disclosure Certificate.
(5) For a period of 90 days after the Closing Date, if the Developer has actual knowledge of any event relating to or affecting the Developer, its Relevant Entities, or the acquisition, ownership development or sale of the Property which could cause the i nformation under the captions of the Final Official Statement indicated in Paragraph 13 of the Letter of Representations (and subject to the limitations and exclusions contained in Paragraph 13 of the Letter of Representations) to contain an untrue stateme nt of a material fact or to omit to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, the Developer shall notify the Community Facilities District and the Underwrit er and if, in the opinion of counsel to the Community Facilities District or the Underwriter, such event requires the preparation and publication of a supplement or amendment to the Final Official Statement, the Developer shall reasonably cooperate with th e City and the Community Facilities District in the preparation of an amendment or supplement to the Final Official Statement in form and substance satisfactory to counsel to the City, the Community Facilities District and to the Underwriter.
The undersigned has executed this Bring-Down Certificate solely in his or her capacity as an authorized representative of Developer and he or she will have no personal liability arising from or relating to this Bring -Down Certificate. Any liability arising from or re lating to this Bring -Down Certificate may only be asserted against the Developer.
Dated: [Closing Date]
LS-FONTANA, LLC,
a Delaware limited liability company
By:
Name:
Title:
508
F-1
EXHIBIT F
CITY OF FONTANA
COMMUNITY FACILITIES DISTRICT NO. 109 (NARRA HILLS)
SPECIAL TAX BONDS, SERIES 2024
COMMUNITY FACILITIES DISTRICT 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. 109 (Narra Hills ) (the “ Community Facilities District ”), 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 Community Facilities District in connection with the issuance of the above-referenced bonds (the “Bonds”).
I hereby further certify on behalf of the Community Facilities District that:
(A) to my best knowledge, after reasonable inquiry, no litigation is pending with respect to which the Community Facilities District has be en 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 Community Facilities District Documents; or (3) in any way contesting the existence or powers of the Community Facilities District;
(B) the representations and warranties made by the Community Facilities District in the Bond Purchase Agreement dated [BPA Date], between the Community Facilities District and Piper Sandler & Co. (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 Community Facilities District 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 “A BSENCE 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 neces sary 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 Community Facilities District Documents are in full force and effect in accordance with their terms and have not been amended, modified or supplemented except in such case as may have been agreed to by the Underwriter; and (E) the Community Facilities District has complied with all the agreements and satisfied all the conditions on its part to be p erformed or satisfied under the Community Facilities District Documents prior to issuance of the Bonds.
Capitalized terms not defined herein shall have the same meaning set forth in the Agreement.
509
F-2
IN WITNESS WHEREOF, the undersigned has executed this certi ficate as of the date herein below set forth.
Dated: [Closing Date]
CITY OF FONTANA COMMUNITY
FACILITIES DISTRICT NO. 109
(NARRA HILLS)
By: __________________________________
Name:
Title:
510
Stradling Yocca Carlson & Rauth
Draft dated September 10, 2024
4885-1018-7226v3/022777-0043
PRELIMINARY OFFICIAL STATEMENT DATED _____, 2024
NEW ISSUE – BOOK-ENTRY-ONLY NO RATING
In the opinion of Orrick, Herrington & Sutcliffe LLP, Bond Counsel to the District, based upon an analysis of existing laws, regulations, rulings and court decisions, and assuming, among other matters, the accuracy of certain representations and compliance with certain covenants, interest on the Bonds is excluded from gross income for federal income tax purposes under Section 103 of the Internal Revenue Code of 1986 and is exempt from State of California personal income taxes. In the further opinion of Bond Counsel, interest on the Bonds is not a specific preference item for purposes of the federal individual alternative minimum tax. Bond Counsel observes that interest on the Bonds included in adjusted financial statement income of certain corporations is not excluded from the federal corporate alternative minimum tax. Bond Counsel expresses no opinion regarding any other tax consequences related to the owners hip or disposition of, or the amount, accrual or receipt of interest on, the Bonds. See “TAX MATTERS” herein.
$37,000,000
CITY OF FONTANA
COMMUNITY FACILITIES DISTRICT NO. 109 (NARRA HILLS)
SPECIAL TAX BONDS, SERIES 2024
Dated: Date of Delivery Due: September 1, as shown on the inside cover page The City of Fontana Community Facilities District No. 109 (Narra Hills) Special Tax Bonds, Series 2024 (the “Bonds”) are being issued and delivered by the City of Fontana Community Facilities District No. 109 (Narra Hills) (the “District”) to (i) provide financing for certain public facilities and costs with respect thereto r elated to the development within the District, (ii) fund a reserve fund with respect to the Bonds, and (i ii) pay the costs of issuance with respect to the Bonds. See “ESTIMATED SOURCES AND USES OF FUNDS” herein. The District has been formed by and is located in the City of Fontana, California (the “City”).
The Bonds are authorized to be issued pursuant to the Mello -Roos Community Facilities Act of 1982, as amended (Section 53311 et seq. of the Government Code of the State of California), and pursuant to an Indenture, dated as of _____ 1, 2024, by and between the District and U.S. Bank Trust Company, National Association, as Trustee. The Bonds are special, limited obligations of the District an d are payable solely from Net Special Tax Revenues (as defined herein), and the other assets pledged therefor under the Indenture, all as further described herein. The Special Tax (as defined herein) is to be levied according to the rate and method of apportionment approved by th e City Council of the City and the qualified electors within the District. The City Council is the legislative body of the District.
The Bonds are issuable in fully registered form and when issued will be registered in the name of Cede & Co., as nominee of The Depository Trust Company, New York, New York (“DTC”). Individual purchases of Bonds may be made in principal amounts of $5,000 and integral multiples thereof. Purchasers of Bonds will not receive certificates representing their beneficial ownership of the Bonds but will receive credit balances on the books of their respective nominees. Interest on the Bonds will be payable on each September 1 and March 1, commencing March 1, 2025. Principal of and interest on the Bonds will be paid by the Trustee to DTC for subsequent disbursement to DTC Participants who are expected to remit such payments to the beneficial owners of the Bonds. See “THE BONDS — General Provisions” and Appendix I — “INFORMATION CONCERNING THE DEPOSITORY TRUST COMPANY AND ITS BOOK-ENTRY SYSTEM” herein.
NEITHER THE FAITH AND CREDIT NOR THE TAXING POWER OF THE DISTRICT (EXCEPT TO THE LIMITED
EXTENT SET FORTH IN THE INDENTURE), THE CITY OR THE STATE OF CALIFORNIA, OR ANY POLITICAL SUBDIVISION THEREOF, IS PLEDGED TO THE PAYMENT OF THE BONDS OR ADDITIONAL BONDS. EXCEPT FOR T HE
NET SPECIAL TAX REVENUES, NO OTHER TAXES ARE PLEDGED TO THE PAYMENT OF THE BONDS OR ADDITIONAL BONDS. THE BONDS AND ANY ADDITIONAL BONDS ARE NOT GENERAL OR SPECIAL OBLIGATIONS OF THE CITY BUT
ARE SPECIAL, LIMITED OBLIGATIONS OF THE DISTRICT PAYABLE SOLELY FROM NET SPECIAL TAX REVENUES AND THE OTHER ASSETS PLEDGED THEREFOR UNDER THE INDENTURE AS MORE FULLY DESCRIBED HEREIN.
The purchase of the Bonds involves certain risks. See the section of this Official Statement entitled “SPECIAL RISK FACTORS” for a discussion of certain risk factors that should be considered, in addition to the other matters set forth herein, in evaluating the investment quality of the Bonds.
This cover page contains certain information for general reference only. It is not a summar y of this issue. Investors are advised to read the entire Official Statement to obtain information essential to the making of an informed investment decision.
The Bonds are offered when, as and if issued and accepted by the Underwriter, subject to approva l as to their legality by Orrick Herrington & Sutcliffe, LLP, Los Angeles, California, as Bond Counsel, and subject to certain other conditions. Certain legal matters w ill be passed on for the City and the District by Best Best & Krieger LLP, Riverside, C alifornia, in its capacity as City Attorney, and by Stradling Yocca Carlson & Rauth LLP, Newport Beach, California, as Disclosure Counsel. Certain legal matters will be passed upon for the Underwriter by its counsel, Kutak Rock LLP, Irvine, California. It is anticipated that the Bonds will be available for delivery to DTC or its agent in book - entry form on or about _____, 2024.
[PIPER LOGO]
Dated: _____, 2024
Preliminary, subject to change.
This Preliminary Official Statement and the information contained herein are subject to completion or amendment. These securities may not be sold, nor may offers to buy them be accepted, prior to the time the Official Statement is delivered in final form. Under no circumstances shall this Preliminary Official Statement constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of, these securities in any jurisdiction in which such offer, solicitation or sale would be unlawful. 511
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MATURITY SCHEDULE
BASE CUSIP†: __________
Maturity Date
(September 1)
Principal
Amount
Interest
Rate Yield Price CUSIP† No.
$___________ _____% Term Bonds due September 1, 20__, Yield: _____% Price: _____ CUSIP No. _____ $___________ _____% Term Bonds due September 1, 20__, Yield: _____% Price: _____ CUSIP No. _____ $___________ _____% Term Bonds due September 1, 20__, Yield: _____% Price: _____ CUSIP No. _____ $___________ _____% Term Bonds due September 1, 20__, Yield: _____% Price: _____ CUSIP No. _____
C Priced to the optional redemption date of September 1, 20__ at _____. † CUSIP® is a registered trademark of the American Bankers Association. CUSIP Global Services (CGS) is managed on behalf of the American Bankers Association by FactSet Research Systems Inc. Copyright© 2024 CUSIP Global Services. All rights reserved. CUSIP® data herein is provided by CUSIP Global Services. This data is not intended to create a database and does not serve in any way as a substitute for the CGS database. CUSIP® numbers are provided for convenience of reference only. None of the District, the City, the Underwriter or their agents or counsel assume responsibility for the accuracy of such numbers.
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CITY OF FONTANA
CITY COUNCIL
Acquanetta Warren, Mayor
Peter Garcia, Mayor Pro Tem
Phillip Cothran, Council Member
John Roberts, Council Member
Jesus “Jesse” Sandoval, Council Member
STAFF
Matthew C. Ballantyne, City Manager
Jessica Brown, Chief Financial Officer, Management Services Janet Koehler-Brooks, City Treasurer
Germaine Key, City Clerk
Best Best & Krieger LLP, City Attorney
BOND COUNSEL
Orrick Herrington & Sutcliffe LLP
Los Angeles, California
MUNICIPAL ADVISOR
CSG Advisors Incorporated
San Francisco, California
DISCLOSURE COUNSEL
Stradling Yocca Carlson & Rauth LLP
Newport Beach, California
TRUSTEE
U.S. Bank Trust Company, National Association
Los Angeles, California
SPECIAL TAX CONSULTANT
David Taussig and Associates, Inc. dba DTA
Irvine, California
APPRAISER
Kitty Siino & Associates, Inc.
Tustin, California
PRICE POINT CONSULTANT
Empire Economics, Inc.
Capistrano Beach, California
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Except where otherwise indicated, all information contained in this Official Statement has been provided by the City and the District. No dealer, broker, salesperson or other pers on has been authorized by the City, the District, the Trustee or the Underwriter to give any information or to make any representations in connection with the offer or sale of the Bonds other than those contained herein and, if given or made, such other in formation or representations must not be relied upon as having been authorized by the City, the District, the Trustee or the Underwriter. This Official Statement does not constitute an offer to sell or the solicitation of an offer to buy nor shall there be any sale of the Bonds by a person in any jurisdiction in which it is unlawful for such person to make such an offer, solicitation or sale.
This Official Statement is not to be construed as a contract with the purchasers or owners of the Bonds.
Statements contained in this Official Statement which involve estimates, forecasts or matters of opinion, whether or not expressly so described herein, are intended solely as such and are not to be construed as representations of fact.
The Underwriter has provided the following sentence for inclusion in this Official Statement:
The Underwriter has reviewed the information in this Official Statement in accordance with, and as a part of, its responsibilities to investors under the federal securities laws as applied to the facts and circumstances of this transaction, but the Underwriter does not guarantee the accuracy or completeness of such information.
The information and expressions of opinion herein are subject to change without notice and neither the delivery of this Official Statement nor any sale made hereunder shall, under any circumstances, create any implication that there has been no change in the affairs of the District, or any other parties described herein since the date hereof. All summaries of the Indenture or other documents are made subject to the provisions of such documents respectively and do not purport to be complete statements of any or all of such provisions. Reference is hereby made to such documents on file with the District for further information in connection therewith.
Certain statements included or incorporated by reference in this Official Statement constitute “forward -looking statements” within the meaning of the United States Private Securities Litigation Reform Act of 1995, Section 21E of the United States Securities Exchange Act of 1934, as amended, and Section 27A of the United States Securities Act of 1933, as amended. Such statements are generally identifiable by the terminology used such as a “plan,” “expect,” “estimate ,” “project,” “budget” or similar words. Such forward -looking statements include but are not limited to certain statements contained in the information under the captions “THE COMMUNITY FACILITIES DISTRICT” and “PROPERTY OWNERSHIP AND THE DEVELOPMENT.”
The achievement of certain results or other expectations contained in such forward -looking statements involve known and unknown risks, uncertainties and other factors which may cause actual results, performance or achievements described to be materially diff erent from any future results, performance or achievements expressed or implied by such forward-looking statements. Except as set forth in the District’s Continuing Disclosure Agreement, a form of which is attached hereto as Appendix G, neither the Distri ct nor the City plans to issue any updates or revisions to the forward-looking statements set forth in this Official Statement. The Developer (as defined herein) has agreed to provide certain continuing disclosure information concerning the Developer and its property within the District in the form attached hereto as Appendix H. See “CONTINUING DISCLOSURE.” A wide variety of other information, including financial information, concerning the City, is available from publications and websites of the City a nd others. No such information is a part of or incorporated into this Official Statement.
IN CONNECTION WITH THE OFFERING OF THE BONDS, THE UNDERWRITER MAY
OVERALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE
OF SUCH BONDS AT A LE VEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
THE BONDS HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, IN RELIANCE UPON AN EXEMPTION CONTAINED IN SUCH ACT. THE BONDS HAVE NOT BEEN REGISTERED OR QUALIFIED UNDER THE SECURITIES LAWS OF ANY STATE. 514
TABLE OF CONTENTS
Page
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INTRODUCTION ................................................................................................................................................ 1 The District .................................................................................................................................................... 1 Security and Sources of Payment for the Bonds ............................................................................................ 3 Description of the Bonds ................................................................................................................................ 4 Appraisal Report ............................................................................................................................................ 4 Price Point Study ............................................................................................................................................ 4 Professionals Involved in the Offering .......................................................................................................... 5 Continuing Disclosure.................................................................................................................................... 5 Bond Owners’ Risks ...................................................................................................................................... 5 Other Information .......................................................................................................................................... 5 ESTIMATED SOURCES AND USES OF FUNDS ............................................................................................ 6 THE BONDS ........................................................................................................................................................ 6 General Provisions ......................................................................................................................................... 6 Redemption .................................................................................................................................................... 7 Debt Service Schedule ................................................................................................................................. 11 SECURITY AND SOURCES OF PAYMENT FOR THE BONDS .................................................................. 12 General ......................................................................................................................................................... 12 Special Tax ................................................................................................................................................... 13 Rate and Method of Apportionment ............................................................................................................ 13 Collection and Application of the Special Tax ............................................................................................ 19 Covenant for Superior Court Foreclosure .................................................................................................... 20 Special Tax Fund ......................................................................................................................................... 20 Reserve Fund ............................................................................................................................................... 21 Investment of Moneys .................................................................................................................................. 22 No Additional Bonds Except for Refunding Bonds ..................................................................................... 22 THE COMMUNITY FACILITIES DISTRICT ................................................................................................. 22 General Information Regarding the District ................................................................................................ 22 Assigned Special Tax and Development Summary ..................................................................................... 25 Direct and Overlapping Debt ....................................................................................................................... 26 Property Values ............................................................................................................................................ 28 Value-to-Lien Ratios .................................................................................................................................... 29 Delinquency History .................................................................................................................................... 32 PROPERTY OWNERSHIP AND THE DEVELOPMENT ............................................................................... 32 The Developer .............................................................................................................................................. 33 Development Plan ........................................................................................................................................ 34 Option Agreement and Construction Agreement ......................................................................................... 37 Financing Plan ............................................................................................................................................. 39 SPECIAL RISK FACTORS ............................................................................................................................... 40 Risks of Real Estate Secured Investments Generally – Declines in Value .................................................. 41 Levy of the Special Tax ............................................................................................................................... 41 Collection of the Special Tax ....................................................................................................................... 42 Failure to Develop Properties ...................................................................................................................... 42 Concentration of Property Ownership ......................................................................................................... 43 Exempt Properties ........................................................................................................................................ 44 Constitutional Limitations on Taxation and Appropriations ........................................................................ 44 Ballot Initiatives ........................................................................................................................................... 47 Maximum Special Tax ................................................................................................................................. 48 Payment of the Special Tax is Not a Personal Obligation of the Owners .................................................... 48 Disclosures to Future Purchasers ................................................................................................................. 48 Parity Taxes and Special Assessments ......................................................................................................... 48 515
TABLE OF CONTENTS
(continued)
Page
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Depletion of Reserve Fund .......................................................................................................................... 49 Bankruptcy and Legal Delays ...................................................................................................................... 49 FDIC/Federal Government Interests In Properties ....................................................................................... 50 Geologic, Topographic and Climatic Conditions ......................................................................................... 51 Hazardous Substances .................................................................................................................................. 52 No Acceleration Provision ........................................................................................................................... 52 Bonds Are Limited Obligations ................................................................................................................... 52 Loss of Tax Exemption ................................................................................................................................ 53 Potential Early Redemption of Bonds from Special Tax Prepayments ........................................................ 53 Cybersecurity ............................................................................................................................................... 53 Impact of Economic Conditions on the Development in the District .......................................................... 53 CONTINUING DISCLOSURE .......................................................................................................................... 54 Community Facilities District ...................................................................................................................... 54 The Developer .............................................................................................................................................. 55 TAX MATTERS................................................................................................................................................. 56 ABSENCE OF LITIGATION ............................................................................................................................ 57 ABSENCE OF RATINGS .................................................................................................................................. 58 CERTAIN LEGAL MATTERS ......................................................................................................................... 58 UNDERWRITING ............................................................................................................................................. 58 FINANCIAL INTERESTS ................................................................................................................................. 58 MUNICIPAL ADVISOR ................................................................................................................................... 58 ADDITIONAL INFORMATION ....................................................................................................................... 59
APPENDIX A RATE AND METHOD OF APPORTIONMENT OF SPECIAL TAX ............................ A-1 APPENDIX B APPRAISAL REPORT...................................................................................................... B-1 APPENDIX C UPDATED PRICE POINT STUDY .................................................................................. C-1 APPENDIX D FORM OF OPINION OF BOND COUNSEL ................................................................... D-1 APPENDIX E GENERAL INFORMATION CONCERNING THE CITY OF FONTANA .................... E-1 APPENDIX F SUMMARY OF CERTAIN PROVISIONS OF THE INDENTURE .................................F-1 APPENDIX G FORM OF DISTRICT CONTINUING DISCLOSURE AGREEMENT .......................... G-1 APPENDIX H FORM OF DEVELOPER CONTINUING DISCLOSURE CERTIFICATE .................... H-1
APPENDIX I INFORMATION CONCERNING THE DEPOSITORY TRUST COMPANY AND ITS BOOK-ENTRY SYSTEM ................................................................................. I-1
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[INSERT AREA MAP]
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[INSERT AERIAL PHOTO]
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$37,000,000
CITY OF FONTANA
COMMUNITY FACILITIES DISTRICT NO. 109 (NARRA HILLS)
SPECIAL TAX BONDS, SERIES 2024
INTRODUCTION
This introduction is not a summary of this Official Statement. It is only a brief description of and guide to, and is qualified by, more complete and detailed information contained in the entire Official Statement, including the cover page and appendices hereto, and the documents summarized or described herein. A full review should be made of the entire Official Statement. The offering of the Bonds to potential investors is made only by means of the entire Official Statement.
The purpose of this Official Statement, which includes the cover page, the table of contents and the attached appendices, is to provide certain information concerning the issuance of the City of Fontana Community Facilities District No. 109 (Narra Hills) Special Tax Bonds, Series 2024 (the “Bonds”) by the City of Fontana Community Facilities District No. 109 (Narra Hills) (the “District”), in the aggregate principal amount set forth on the front cover page. The proceeds of the Bonds will be used to finance certain public facilities and costs with respect thereto related to the development within the District, to fund a reserve fund for the Bonds (the “Reserve Fund”), and to pay costs of issuance of the Bonds.
The Bonds are being issued pursuant to the Mello-Roos Community Facilities Act of 1982, as amended (Section 53311 et seq. of the Government Code of the S tate of California) (the “Act”), and pursuant to the Indenture, dated as of _____ 1, 2024 (the “Indenture”), by and between the District and U.S. Bank Trust Company, National Association, as trustee (the “Trustee”). The Bonds are secured under the Indentu re by a pledge of, constituting a lien on and security interest in, the Net Special Tax Revenues (as defined herein) and any other amounts held in the Special Tax Fund, the Bond Fund and the Reserve Fund established pursuant to the Indenture.
This introduction is not a summary of this Official Statement. It is only a brief description of and guide to, and is qualified by, more complete and detailed information contained in the entire Official Statement and the documents summarized or described herein. A full review should be made of the entire Official Statement.
The sale and delivery of the Bonds to potential investors is made only by means of the entire Official Statement.
All capitalized terms used in this Official Statement and not defined shall have the meaning set forth in Appendix F — “SUMMARY OF CERTAIN PROVISIONS OF THE INDENTURE ⎯ Definitions” herein.
The District
The District includes approximately 137.33 gross acres and is located in the northwesternmost portion of the City of Fontana (the “City”), along the west side of Interstate 15 north of Duncan Canyon Road. The District is being developed into a gated residential community known as “Narra Hills” by LS-Fontana, LLC, a Delaware limited liability company (the “Developer”), and is expected to consist of a total of 484 homes across five neighborhoods known as “Clementine,” “Strata,” “Wildstar,” “Skyeland” and “Goldenpeak.” Clementine includes a mix of 112 proposed duplex homes alo ng with 12 small lot detached home s, ranging in size from 1,372 to 1,661 square feet. Strata includes 127 proposed single -family detached homes on cluster lots ranging in size from 2,099 to 2,552 square feet. Wildstar is proposed for 78 single family detached homes on minimum 5,000 square foot conventional lots with sizes ranging from 2,747 to 3,079 square feet. Skyeland is proposed for 84 single-family detached homes on minimum 10,000 square foot lots with home ranging in size from 2,375 to 3,604 square feet. Goldenpeak is proposed for 71 single family detached homes on 10,000 square foot minimum lots with homes ranging in size from 3,159 to 4,248 square feet. The Narra Hills development is
Preliminary, subject to change.
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encompassed by Tract Maps 20010, 20069 and 20070, and subsequent condominium maps on Tracts 20069 and 20070 which subdivide the property into 484 residences.
The Developer is acquiring the property within the District in phased takedowns from Arroyo Cap II-6, LLC, a Delaware limited liability company (the “Land Bank”) pursuant to the Option Agreement (as defined under the caption “PROPERTY OWNERSHIP AND THE DEVELOPMENT —Option Agreement and Construction Agreement”) under which the Developer acquires lots in a finished lot condition as development progresses. The Land Bank acquired the property within the District on September 10, 2021 for $80,000,000 and the Developer began taking down lots in June 2022. As of July 26, 2024, the date of value of the Appraisal (defined herein), the Developer had taken down 358 of the 484 residential lots in the District. Since July 26, 2024 and as of September 15, 2024, the Developer had acquired an additional 27 lots from the Land Bank. The Developer is scheduled to take down all of the remaining property to be developed as 99 residential units in the District by May 1, 2025. There is no guarantee that the Developer will acquire the remaining lots as planned.
During the term of the Option Agreement, the Developer is contractually obligated to pay the Special Tax levied on the property subject to such agreement. However, in the event the Option Agreement is terminated prior to the Developer having acquired all of the lots thereunder, the Special Tax would continue to be levied on the property in the District owned by the Land Bank. See “PROPERTY OWNERSHIP AND THE DEVELOPMENT.”
Closings to individual homeowners began within the District in November 2023 and, as of July 26, 2024, 169 residential units had been completed and conveyed to individual homeowners, the Developer owned 15 completed model units (none of which were in escrow), 25 homes over 95% complete (18 of which were in escrow), 76 homes under construction (21 of which were in escrow) and 73 finished pads (none of which were in escrow), and the Land Bank owned 126 finished pads (none of which were in escrow). As of September 15, 2024, within the District, _____ residential units had been completed and conveyed to individual homeowners, the Developer owned _____ completed model units (_____ of which were in escrow), _____ homes over 95% complete (_____ of which were in escrow), _____ residential units under construction (_____ of which were in escrow), and the Land Bank owned _____ finished pads (_____ of which were in escrow). Sales contracts are subject to cancelation and, therefore, homes currently in escrow may not result in closed escrows with the prospective homebuyers. Within the District, 444 building permits had been obtained as of July 26, 2024 .
Accordingly, assuming no additional building permits are obtained prior to May 1, 2025, 444 parcels will be classified as Developed Property and 40 parcels will be classified as Undeveloped Property for the Fiscal Year 2025-26 Special Tax levy. See “PROPERTY OWNERSHIP AND THE DEVELOPMENT.” The District was formed to finance certain public facilities and services and costs with respect thereto related to the development within the District. The Act was enacted by the California legislature to provide an alternative method of financing certain public capital facilities and services, especially in developing areas of the State of California (the “State”). Any local agency (as defined in the Act) may establish a community facilities district to provide for and finance the cost of eligible public facilities and services. The legislative body of the local agency which forms a community facilities district acts on behalf of such district as its legislative body. Subject to approval by two-thirds of the votes cast at an election and compliance with the other provisions of the Act, a legislative body of a local agency may issue bonds for a community facilities district and may levy and collect a special tax within such district to repay such indebtedness.
Pursuant to the Act, the City Council adopted the necessary resolutions stating its intent to establish the District, to authorize the levy of special taxes on taxable property within the boundaries of the District, and to have the District incur bonded indebtedness for the purpose of financing authorized facilities (the “Facilities”).
Following public hearings conducted pursuant to the provisions of the Act, the City Council adopted resolutions establishing the District and calling a special election to submit the levy of the special taxes and the incurring of bonded indebtedness to the qualified voters of the District. On June 14, 2022, at an election held pursuant to the Act, the then sole landowner who comprised the qualified voters of the District, the Land Bank, authorized the District to incur bonded indebtedness in the aggregate principal amount of not to exceed $ 50,000,000 to be secured by the levy of Special Taxes (as defined below) on taxable property within the District for the purpose 520
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of financing the Facilities, and approved the rate and method of apportionment of the special taxes for the District (the “Rate and Method”).
The Rate and Method provides for a Facilities Special Tax (as defined in the Rate and Method) (the “Facilities Special Tax”) to be levied for the Special Tax Requirement for Facilities (as defined in the Rate and Method) and a Services Special Tax (as defined in the Rate and Method) (the “Services Special Tax”) to be levied for services described in the Rate and Method. As used in this Official Statement, the terms “Special Tax” or “Special Taxes” refer only to the Facilities Special Tax and does not include the Services Special Tax.
The Services Special Tax is not pledged under the Indenture nor is the Services Special Tax available to pay debt service on the Bonds. The Special Tax will be levied against certain property within the District pursuant to the Act, the Ordinance approving the levy of the Special Tax and the Indenture and in accordance with the Rate and Method. The lien of the Special Tax will be co-equal with the lien of the Services Special Tax.
Security and Sources of Payment for the Bonds
Under the Indenture, the City has pledged to repay the Bonds and any additional bonds issued under the Indenture (the “Additional Bonds”) from Net Special Tax Revenues and any other amounts held in the Special Tax Fund, the Bond Fund and the Reserve Fund. Proceeds of any Additional Bonds may only be applied to refund the Bonds or any Additional Bonds previously issued under the Indenture. See “SECURITY AND SOURCES OF PAYMENT FOR THE BONDS — No Additional Bonds Except for Refunding Bonds.” The Indenture defines “Net Special Tax Revenues” to mean Special Tax Revenues less amounts required to pay Administrative Expenses. The term “Special Tax Revenues” is defined in the Indenture to mean the proceeds of the Special Tax received by or on behalf of the 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 will be limited to the amount of said lien and interest and penalties thereon. “Administrative Expenses” is defined in the Indenture to mean costs directly related to the administration of the District, including, but not limited to: the costs of computing the Special Tax and preparing the annual Special Tax collection schedules and the costs 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 the Indenture, the costs incurred by the District in complying with the disclosure provisions of any continuing disclosure undertaking and the I ndenture, including those related to public inquiries regarding the Special Tax and disclosures to Owners, the costs of the District related to an appeal of the Special Tax, any amounts required to be rebated to the federal government in order for the Dist rict to comply with the tax covenants in the Indenture, an allocable share of the salaries of the City staff providing services on behalf of the 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.
Net Special Tax Revenues are the primary security for the repayment of the Bonds and any Additional Bonds. In the event that Net Special Tax Revenues are not paid when due, the on ly sources of funds available to pay the debt service on the Bonds and any Additional Bonds will be the amounts held for such purpose in the Special Tax Fund, the Bond Fund and the Reserve Fund. See “SECURITY AND SOURCES OF PAYMENT FOR THE BONDS” herein.
NEITHER THE FAITH AND CREDIT NOR THE TAXING POWER OF THE DISTRICT (EXCEPT TO THE LIMITED EXTENT SET FORTH IN THE INDENTURE), THE CITY OR THE
STATE OF CALIFORNIA, OR ANY POLITICAL SUBDIVISION THEREOF, IS PLEDGED TO THE PAYMENT OF THE BONDS OR ADDITIONAL BON DS. EXCEPT FOR THE NET SPECIAL TAX
REVENUES, NO OTHER TAXES ARE PLEDGED TO THE PAYMENT OF THE BONDS OR ADDITIONAL BONDS. THE BONDS AND ANY ADDITIONAL BONDS ARE NOT GENERAL OR
SPECIAL OBLIGATIONS OF THE CITY BUT ARE SPECIAL, LIMITED OBLIGATIONS OF THE
DISTRICT PAYABLE SOLELY FROM NET SPECIAL TAX REVENUES AND THE OTHER ASSETS PLEDGED THEREFOR UNDER THE INDENTURE AS MORE FULLY DESCRIBED HEREIN. 521
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Description of the Bonds
The Bonds will be issued and delivered as fully registered bonds, registered in the name of Cede & Co. as nominee of The Depository Trust Company, New York, New York (“DTC”), and will be available to actual purchasers of the Bonds (the “Beneficial Owners”) in the denominations of $5,000 and any integral multiples thereof under the book -entry system maintained by DTC, only through brokers and dealers who are or act through DTC Participants as described herein. Beneficial Owners will not be entitled to receive physical delivery of the Bonds. In the event that the book-entry only system described herein is no longer used with respect to the Bonds, the Bonds will be registered and transferred in accordance with the Indenture. See Appendix I — “INFORMATION CON CERNING THE DEPOSITORY TRUST COMPANY AND ITS BOOK -ENTRY SYSTEM” herein.
Principal of, premium, if any, and interest on the Bonds is payable by the Trustee to DTC. Disbursement of such payments to DTC Participants is the responsibility of DTC and disbursem ent of such payments to the Beneficial Owners is the responsibility of DTC Participants. In the event that the book-entry only system is no longer used with respect to the Bonds, the Beneficial Owners will become the registered owners of the Bonds and wil l be paid principal and interest by the Trustee, all as described herein. See Appendix I — “INFORMATION CONCERNING THE DEPOSITORY TRUST COMPANY AND ITS BOOK -ENTRY SYSTEM” herein.
The Bonds are subject to optional redemption, mandatory redemption from Spec ial Tax prepayments and mandatory sinking fund redemption as described herein. For a more complete description of the Bonds and the basic documentation pursuant to which they are being sold and delivered, see “THE BONDS” and Appendix F — “SUMMARY OF CERTAIN PROVISIONS OF THE INDENTURE” herein.
Appraisal Report
The District has obtained an appraisal of the Taxable Property (as defined herein) included in the District dated August 15, 2024, with a date of value as of July 26, 2024 (the “Appraisal”). The Appraisal was prepared for the District by Kitty Siino & Associates, Inc., Tustin, California (the “Appraiser”). Subject to the limitations set forth in the Appraisal, the Appraiser is of the opinion that, as of July 26, 2024 the minimum market value of the Taxable Property within the District was not less than $ 251,201,979 (the “Appraised Value”). See “THE COMMUNITY FACILITIES DISTRICT — Property Values” and “THE COMMUNITY FACILITIES DISTRICT — Value-to-Lien Ratios.” A copy of the Appraisal is included as Appendix B to this Official Statement. It is a condition precedent to the issuance of the Bonds that the Appraiser deliver a certificate stating that nothing has come to the attention of the Appraiser subsequent to the date of the Appraisal that would lea d the Appraiser to believe that the value of the Taxable Property (as defined in the Rate and Method) in the District is less than the minimum market value of such property reported in the Appraisal. However, the Appraiser has not performed any procedures since the date of value to obtain knowledge of such events or occurrences nor is it obligated to do so in the future.
Price Point Study
In connection with the formation of the District, the City hired Empire Economics, Inc., Capistrano Beach, California (the “Price Point Consultant”) to prepare a price point study of the prices of the homes planned within the District, dated February 22, 2022 (the “Original Price Point Study”). The Special Tax rates set forth in the Rate and Method were based in part on the prices set forth in the Original Price Point Study. In connection with and in preparation for the issuance of the Bonds, the City hired the Price Point Consultant to conduct an update to the Original Price Point Study within the District, dated July 26, 2024 (the “Updated Price Point Study”). Pursuant to Section C of the Rate and Method, prior to the issuance of Bonds, the City is required to amend the Assigned Facilities Special Tax (as defined in the Rate and Method) to the extent necessary to cause the total effective tax burden for residential property in the District to not exceed 1.95% of the minimum sales prices set forth in the Updated Price Point Study. A copy of the Updated Price Point Study is included as 522
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Appendix C to this Official Statement. Based on the conclusions of the Updated Price Point Study, the Facilities Special Tax, the Services Special Tax and all direct and overlapping property taxes, special assessments and other special taxes, the City does not expect to amend the Assigned Facilities Special Tax because effective tax rates are not projected to exceed 1.95% for any parcel. See “THE COMMUNITY FACILITIES DISTRICT — Direct and Overlapping Debt.” See also “SECURITY AND SOURCES OF PAYMENT FOR THE BONDS — Rate and Method of Apportionment.”
Professionals Involved in the Offering
U.S. Bank Trust Company, National Association, Los Angeles, California, will act as Trustee under the Indenture and as the initial Dissemination Agent under the District Continuing Disclosure Agreement. Piper Sandler & Co. is the Underwriter of the Bonds. The validity of the Bonds and certain other legal matters are subject to the approving opinion of Orrick Herrington & Sutcliffe LLP, Bond Counsel to the District. CSG Advisors Incorporated, San Francisco, California, is acting as Municipal Advisor for the City in connection with the Bonds. Kitty Siino & Associates, Inc., Tustin, California, is acting as the Appraiser to the District. David Taussig and Associates, Inc. dba DTA is acting as the Special Tax Consultant to the District. Empire Economics, Inc. is acting as the Price Point Consultant to the District. Certain legal matters will be passed on for the City and the District by Best Best & Krieger LLP, Riverside, California, in its capacity as City Attorney, and Stradling Yocca Carlson & Rauth LLP, Newport Beach, California, as Disclosure Counsel. Certain legal matters will be passed upon for the Underwriter by its counsel, Kutak Rock LLP, Irvine, California.
For information concerning respects in which certain of the above -mentioned professionals, advisors, counsel and agents may have a financial or other interest in the offering of the Bonds, see “FINANCIAL INTERESTS” herein.
Continuing Disclosure
The District will agree to provide, or cause to be provided, to the Municipal Securities Rulemaking Board’s Electronic Municipal Market Access system available on the Internet at http://emma.msrb.org (“EMMA”) certain annual financial information and operating data. The District will further a gree to provide notice of certain listed events. These covenants will be made in order to assist the Underwriter in complying with Securities and Exchange Commission Rule 15c2-12(b)(5) (the “Rule”). See “CONTINUING DISCLOSURE” herein. Additionally, the Developer has agreed to provide, or cause to be provided, to EMMA, on a semi-annual basis, certain information and to provide notice of certain listed events. See the form of District Continuing Disclosure Agreement attached as Appendix G hereto (the “Dist rict Continuing Disclosure Agreement”) for a description of the specific nature of the annual reports to be filed by the District and notices of listed events to be provided by the District. See the form of Developer Disclosure Certificate attached as Appendix H hereto (the “Developer Continuing Disclosure Certificate”) for a description of the specific nature of the semi -annual reports to be filed by the Developer and notices of listed events to be provided by the Developer. See “CONTINUING DISCLOSURE” herein.
Bond Owners’ Risks
Certain events could affect the ability of the District to pay the principal of and interest on the Bonds when due. See the section of this Official Statement entitled “SPECIAL RISK FACTORS” for a discussion of certain factors wh ich should be considered, in addition to other matters set forth herein, in evaluating an investment in the Bonds.
Other Information
This Official Statement speaks only as of its date, and the information contained herein is subject to change.
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Brief descri ptions of the Bonds and the Indenture are included in this Official Statement. Such descriptions and information do not purport to be comprehensive or definitive. All references herein to the Indenture, the Bonds and the constitution and laws of the Stat e as well as the proceedings of the City Council, acting as the legislative body of the District, are qualified in their entirety by references to such documents, laws and proceedings, and with respect to the Bonds, by reference to the Indenture.
Copies of the Indenture, the District Continuing Disclosure Agreement and other documents and information referred to herein are available for inspection and (upon request and payment to the City of a charge for copying, mailing and handling) for delivery from the City at 8353 Sierra Avenue, Fontana, California 92335, Attention: Jessica Brown.
ESTIMATED SOURCES AND USES OF FUNDS
The following table sets forth the expected sources and uses of Bond proceeds and certain other amounts.
Sources:
Principal Amount of the Bonds
[Plus/Less] [Net] Original Issue [Premium/Discount]
Less Underwriter’s Discount
Plus Funds on Hand
Total
Uses:
Improvement Fund(1)
Reserve Fund(2)
Costs of Issuance Fund
Administrative Expense Fund
Total
(1) Consists of $__________ to be deposited into the Acquisition Account, $___________ to be deposited in the Community Benefit Account, $__________ to be deposited into the Construction Account , $__________ to be deposited in the Flood Control District Account and $__________ to be deposited into the Water District Account. (2) Equal to the initial Reserve Requirement.
THE BONDS
General Provisions
The Bonds will be issued in fully registered form without coupons in denominations of $5,000 and any integral multiple thereof (“Authorized Denominations”). The Bonds will be dated the date of issuance thereof.
The Bonds are scheduled to mature on Septem ber 1, in the years and in the principal amounts, and will bear interest at the rates per annum, shown on the inside front cover page of this Official Statement. Interest on the Bonds will be computed on the basis of a 360-day year consisting of twelve 30-day months and will be payable on March 1 and September 1 of each year, commencing March 1, 2025 (each an “Interest Payment Date”).
Interest on each Bond will be payable from the Interest Payment Date next preceding the date of authentication thereof unless (i) such Bond is authenticated on or before an Interest Payment Date and after the close of business on the fifteenth calendar day of the month preceding such Interest Payment Date, whether or not such day is a Business Day (the “Record Date”) in which event interest thereon will be payable from such Interest Payment Date, (ii) such Bond is authenticated on or before the first Record Date, in which event interest thereon will be payable from the Closing Date or (iii) interest on such Bond is in default as of the date of authentication thereof, in which event interest thereon will be payable from the date to which interest has been previously paid or duly provided for.
The interest on, and principal of and redemption premiums, if any, on the Bonds are payable in lawful money of the United States of America. Interest is payable by check of the Trustee mailed by first class mail, 524
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postage prepaid, on each Interest Payment Date to the Owners of the Bonds at their respective addresses shown on the Registration Books as of the close of business on the preceding Record Date (except that interest on any Bond which is not punctually paid or duly provided for on any Interest Payment Date will, if and to the extent that amounts subsequently become available therefor, be payable on a payment date established by the Trustee to the Person in whose name the ownership of such Bond is registered on the Registration Books at the close of business on a special record date to be established by the Trustee pursuant to the Indenture). Payment of principal of any Bond will be made only upon presentation and surrender thereof at maturity or upon earlier redemption at the Office of the Trustee.
The Bonds will initially be issued in book -entry form, and DTC will act as securities de pository. So long as the Bonds are held in book-entry form, principal of, premium, if any, and interest on the Bonds will be paid by the Trustee directly to DTC for distribution to the Beneficial Owners of the Bonds in accordance with procedures adopted b y DTC. See Appendix I — “INFORMATION CONCERNING THE DEPOSITORY TRUST COMPANY AND ITS BOOK-ENTRY SYSTEM.”
The Bonds are not general obligations of the District but are special, limited obligations of the District payable solely from Net Special Tax Revenue s and the other amounts held under the Indenture in the Special Tax Fund, the Bond Fund and the Reserve Fund. Neither the faith and credit nor the taxing power of the District (except to the limited extent set forth in the Indenture), the City, the State, or any political subdivision thereof, is pledged to the payment of the Bonds or Additional Bonds. See “SPECIAL RISK FACTORS — Bonds Are Limited Obligations.”
Redemption
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 principal 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 are 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 and any related proportional amounts in the Reserve Fund required to be applied thereto pursuant to the Indenture (see “SECURITY AND SOURCES OF PAYMENT FOR THE BONDS — Reserve Fund” and “SECURITY AND SOURCES OF PAYMENT FOR THE BONDS — Special Tax Fund”) 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
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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 re deemed, 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
If some but not all of the Bonds maturing on September 1, 20__ are redeemed pursuant to the optional redemption provisions of the Indenture described above, the principal amount of the Bonds maturing on September 1, 20__ to be redeemed by mandatory sinking fund redemption as described above on any subsequent September 1 shall be reduced, by $5,000 or an integral multiple thereof, as designated by the District in a Written Certificate of the District submitted to the Trustee; provided, however, that the aggr egate amount of such reductions shall not exceed the aggregate amount of the Bonds maturing on September 1, 20__ so optionally redeemed. If some but not all of the Bonds maturing on September 1, 20 __ are redeemed pursuant to the mandatory redemption from Special Tax prepayments provisions of the Indenture, the principal amount of the Bonds maturing on September 1, 20__ to be redeemed by mandatory sinking fund redemption as described above on any subsequent September 1 shall be reduced by the aggregate prin cipal amount of the Bonds maturing on September 1, 20 __ so mandatorily redeemed from Special Tax prepayments, 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 District.
The Bonds maturing September 1, 20__ shall be subject to mandatory sinking fund redemption, in part, on September 1 in each year, commencing Sep tember 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 respe ctive years as follows:
Sinking Fund
Redemption Date
(September 1)
Principal Amount
to be
Redeemed
If some but not all of the Bonds maturing on September 1, 20__ are redeemed pursuant to the optional redemption provisions of the Indenture described above, the principal amount of the Bonds maturing on September 1, 20__ to be redeemed by mandatory sinking fund redemption as described above on any subsequent September 1 shall be reduced, by $5,000 or an integral multiple thereof, as designated by the District in a Written Certificate of the District submitted to the Trustee; provided, however, that the aggregate amount of such reductions shall not exceed the aggregate amount of the Bonds maturing on September 1, 20__ so optionally redeemed. If some but not all of the Bonds maturing on September 1, 20__ are redeemed pursuant to the mandatory redemption from Special Tax prepayments provisions of the Indenture, the principal amount of the Bonds maturing on September 1, 20__ to be redeemed by mandatory sinking fund redemption as described above 526
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on any subsequent September 1 shall be reduced by the aggregate principal amount of the Bonds maturing on September 1, 20__ so mandatorily redeemed from Special Tax prepayments, 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 District.
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, withou t 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
If some but not all of the Bonds maturing on September 1, 20__ are redeemed pursuant to the optional redemption provisions of the Indenture described above, the principal amount of the Bonds maturing on September 1, 20__ to be redeemed by mandatory sinking fund redemption as described above on any subsequent September 1 shall be reduced, by $5,000 or an integral multiple thereof, as designated by the District in a Written Certificate of the District submitted to the Trustee; provided, however, that the aggregate amount of such reductions shall not exceed the aggregate amount of the Bonds maturing on September 1, 20__ so optionally redeemed. If some but not all of the Bonds maturing on September 1, 20__ are redeemed pursuant to the mandatory redemption from Special Tax prepayments provisions of the Indenture, the principal amount of the Bonds maturing on September 1, 20__ to be redeemed by mandatory sinking fund redemption as described above on any subsequent September 1 shall be reduced by the aggregate principal amount of the Bonds maturing on September 1, 20__ so mandatorily redeemed from Special Tax prepayments, 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 District.
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 ac crued 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
If some but not all of the Bonds maturing on September 1, 20__ are redeemed pursuant to the optional redemption provisions of the Indenture described above, the principal amount of the Bonds maturing on September 1, 20__ to be redeemed by mandatory sinking fund redemption as described above on any subsequent September 1 shall be reduced, by $5,000 or an integral multiple thereof, as designated by the District in a Written 527
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Certificate of the District submitted to the Trustee; provided, however, that the aggregate amount of such reductions shall not exceed the aggregate amount of the Bonds maturing on September 1, 20__ so optionally redeemed. If some but not all of the Bonds maturing on September 1, 20__ are redeemed pursuant to the mandatory redemption from Special Tax prepayments provisions of the Indenture, the principal amount of the Bonds maturing on September 1, 20__ to be redeemed by mandatory sinking fund redemption as described above on any subsequent September 1 shall be reduced by the aggregate principal amount of the Bonds m aturing on September 1, 20__ so mandatorily redeemed from Special Tax prepayments, 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 District.
Selection of Bonds for Redemption. Whenever provision is made in the Indenture for the redemption of less than all of the Bonds and Additional Bonds, the Trustee will sel ect the Bonds and Additional Bonds to be redeemed from all Bonds and Additional Bonds not previously called for redemption (a) with respect to any optional redemption of Bonds and Additional Bonds of a Series, among maturities of the Bonds and Additional Bonds of such Series as directed in a Written Request of the District (b) with respect to any mandatory redemption of Bonds or Additional Bonds from prepayments of the Special Tax, among maturities of all Series of Bonds and any Additional 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 pursuant to which such Additional Bonds are issued. The Trustee shall select for redemption the Bonds and any Additional Bonds of the same Series with the same maturity by lot in any manner that the Trustee, in its sole discretion, shall deem appropriate. For purposes of such selection, all Bonds and Additional Bonds shall be deemed to be comprised 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 or Additional Bond that may be separately redeemed.
Notice of Redemption. If the Bonds are held in book-entry form, notice of redemption will be mailed to DTC and not to the Beneficial Owners of the Bonds under the DTC book-entry system. Neither the District nor the Trustee is responsible for giving notice of redemption to the Beneficial Owners. See Appendix I — “INFORMATION CONCERNING THE DEPOSITORY TRUST COMPANY AND ITS BOOK -ENTRY SYSTEM” herein.
The Indenture provides that the Trustee on behalf and at the expense of the District will give notice of any redemption (by first-class mail) 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 of redemption will 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 r edeemed (except in the event of redemption of all of the Bonds of such maturity or maturities in whole). The notice of redemption will require that the Bonds to be redeemed be surrendered at the Office of the Trustee for redemption at the Redemption Price, and give notice 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, will 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 dee med to have been paid within the meaning of the Indenture, such notice will state that such redemption is conditional upon receipt by the Trustee, on or prior to the date 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 District will 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 will not be made and the Trustee will, within a reasonable time after the date on which such redemption was to occur, give notice to the 528
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Persons and in the manner in which the notice of redemption was given, that such moneys were not so received and that there shall be no redemption of Bonds pursuant to such notice of redemption.
Effect of Notice of Redemption. 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, is held by the Trustee so as to be available therefor on such date, and, if notice of redemption thereof will have been mailed as aforesaid and not canceled, then, from and after said date, interest on said Bonds will cease to accrue and become payable. All moneys held by or on behalf of the Trustee for the redemption of Bonds will 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.
Debt Service Schedule
Year Ending
September 1 Principal(1) Interest Total
2025
2026
2027
2028
2029
2030
2031
2032
2033
2034
2035
2036
2037
2038
2039
2040
2041
2042
2043
2044
2045
2046
2047
2048
2049
2050
2051
2052
2053
2054
TOTAL:
(1) Includes mandatory sinking fund redemption.
Source: The Underwriter.
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SECURITY AND SOURCES OF PAYMENT FOR THE BONDS
General
The Bonds are special, limited obligations of the District, and, except as otherwise provided in the Indenture, they are payable solely from Net Special Tax Revenues. The Indenture defines “Net Special Tax Revenues” to mean Special Tax Revenues less amoun ts required to pay Administrative Expenses. The term “Special Tax Revenues” is defined in the Indenture to mean the proceeds of the Special Tax received by or on behalf of the 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). The Indenture defines the term “Special Tax” as the special tax described and defined in the Rate and Method as the “Facilities Special Tax” approved by the qualified electors to be levied within the District pursuant to the Act and the Rate and Method. “Administrative Expenses” is defined in the Indenture to mean costs directly related to the administration of the District, including, but not limited to: the costs of computing the Special Tax and preparing the annual Special Tax collection schedules and the costs of collecting the Special Tax, the costs of re mitting 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 the Indenture, the costs incurred by the District in complying with the disclosure provisions of any continuing disclosure undertaking and the Indenture, including those related to public inquiries regarding the Special Tax and disclosures to Owners, the costs of the District related to an appeal of the Special Tax, any amounts required to be rebated to the federal government in order for the District to comply with the tax covenants in the Indenture, an allocable share of the salaries of the City staff providing services on behalf of the District directly related to the foregoing and a proportionate amou nt of City general administrative overhead related thereto, and the costs of foreclosure of any delinquent Special Tax.
Under the Rate and Method, parcels of Taxable Property, exclusive of Taxable Public Property and Taxable Property Owner Association Prop erty, are classified as Developed Property if a building permit has been obtained for such parcel by May 1 of the fiscal year preceding the Special Tax levy. For the projected Fiscal Year 2025-26 Special Tax levy, based on the development status within the District as of July 26, 2024, 444 parcels of Taxable Property within the District will be classified as Developed Property and 40 parcels of Taxable Property within the District will be classified as Undeveloped Property. As of September 15, 2024, the Developer has obtained an additional _____ building permits , and therefore, an additional _____ parcels of Taxable Property within the District will be classified as Developed Property for the Fiscal Year 2025-26 Special Tax levy, assuming no further develo pment within the District. See “PROPERTY OWNERSHIP AND THE DEVELOPMENT.” Under no circumstances may the amount of Special Tax levied by the District in any year exceed the maximum rates approved by the qualified electors within the District, as set forth in the Rate and Method. A copy of the Rate and Method is attached to this Official Statement as Appendix A.
In addition to the Net Special Tax Revenues, any other amounts held in the Special Tax Fund, the Bond Fund and the Reserve Fund are pledged pursua nt to the Indenture to secure the payment of the principal of, premium, if any, and interest on the Bonds and any Additional Bonds in accordance with their respective terms, the Indenture and the Act. However, those amounts are pledged subject to the prov isions of the Indenture permitting the application thereof for the purposes set forth in the Indenture. Amounts on deposit in the Improvement Fund, the Costs of Issuance Fund, the Redemption Fund, the Administrative Expense Fund and the Rebate Fund are not pledged to the payment of any of the Bonds or any Additional Bonds.
NEITHER THE FAITH AND CREDIT NOR THE TAXING POWER OF THE DISTRICT (EXCEPT TO THE LIMITED EXTENT SET FORTH IN THE INDENTURE), THE CITY OR THE
STATE OF CALIFORNIA, OR ANY POLITICAL SUBDIVISION THEREOF, IS PLEDGED TO THE PAYMENT OF THE BONDS OR ADDITIONAL BONDS. EXCEPT FOR THE NET SPECIAL TAX
REVENUES, NO OTHER TAXES ARE PLEDGED TO THE PAYMENT OF THE BONDS OR ADDITIONAL BONDS. THE BONDS AND ANY ADDITIONAL BONDS ARE NOT GENERAL OR
SPECIAL OBLIGATIONS OF THE CITY BUT ARE SPECIAL, LIMITED OBLIGATIONS OF THE 530
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DISTRICT PAYABLE SOLELY FROM NET SPECIAL TAX REVENUES AND THE OTHER ASSETS PLEDGED THEREFOR UNDER THE INDENTURE AS MORE FULLY DESCRIBED HEREIN.
Special Tax
Pursuant to the Act, the City Cou ncil adopted a resolution on April 12, 2022 stating its intention to establish the District and to levy a special tax within the District. In accordance with the provisions of the Act, the City Council established the District on June 14, 2022 for the pur pose of, among other things, financing certain public infrastructure improvements necessary for the proposed development within the District. At a special election held on June 14, 2022 , the then sole landowner of the property within the District, the Land Bank, authorized the District to incur indebtedness in an amount not to exceed $ 50,000,000 and approved the Rate and Method. The Rate and Method is set forth in Appendix A hereto.
Pursuant to Section C of the Rate and Method, prior to the issuance of Bonds, the City is required to amend the Assigned Facilities Special Tax (as defined in the Rate and Method) to the extent necessary to cause the Total Tax Burden (as defined in the Rate and Method) for residential property in the District to not exceed
1.95% of the Minimum Sale Prices (as defined in the Rate and Method) set forth in the Updated Price Point Study. A copy of the Updated Price Point Study is included as Appendix C to this Official Statement. Based on the conclusions of the Updated Price Point Study, the Facilities Special Tax, the Services Special Tax and all direct and overlapping property taxes, special assessments and other special taxes, the City does not expect to amend the Assigned Facilities Special Tax because effective tax rates are not projected to exceed 1.95% for any parcel. See “THE COMMUNITY FACILITIES DISTRICT — Direct and Overlapping Debt.” See also “ — Rate and Method of Apportionment.”
Pursuant to the Indenture, the District has covenanted that it will fix and levy the Special Tax within the District in each Fiscal Year in accordance with the Rate and Method in an amount sufficient (subject to the limitations contained in the Rate and Method as to the maximum Special Tax that may be levied on each parcel) to yield Special Tax Revenues in the amount required for (i) the payment of principal of and interest on any Outstanding Bonds and any Additional Bonds becoming due and payable during the Corresponding Bond Year, (ii) any necessary replenishment 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. See Appendix F — “SUMMARY OF CERTAIN PROVISIONS OF THE INDENTURE — Certain Covenants Under the Indenture.” Notwithstanding this covenant, the amount of Special Tax actually collected each year may be less than the amount described for a variety of different reasons. See “SPECIAL RI SK FACTORS — Levy of the Special Tax.”
The Bonds have been structured so that, beginning in Fiscal Year 2025 -26, the Assigned Facilities Special Tax rates set forth in the Rate and Method that may be levied within the District, based on the expected buildout of the District, are at least 110% of debt service on the Bonds in each Bond Year net of estimated Administrative Expenses of $___________ escalating 2% each Fiscal Year beginning July 1, 2025. The Special Tax levied in any Fiscal Year may not exceed the maximum rates authorized pursuant to the Rate and Method.
See Appendix A ⎯ “RATE AND METHOD OF APPORTIONMENT OF SPECIAL TAX.” There is no assurance that the Special Tax proceeds will, in all circumstances, be adequate to pay the principal of and interest on the Bonds when due. Pursuant to the Act, the Special Tax levied in any Fiscal Year against any parcel of residential property in the District may not be increased as a consequence of delinquency or default by the owners of any other parcels within the District by more than 10% above the amount that would have been levied in that Fiscal Year had there never been any such delinquencies or defaults. See “SPECIAL RISK FACTORS ⎯ Levy of the Special Tax” and “SPECIAL RISK FACTORS ⎯ Exempt Properties.” Rate and Method of Apportionment
General. The Rate and Method is to be applied by the District each year for the purpose of determining the amount of the Special Tax to be levied against each Assessor’s Parcel of Taxable Property within the District. 531
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For purposes of the discussion of the Rate and Method only, terms with initial capital letters that are not otherwise defined in this Official Statement shall have the respective meanings assigned to them in the Rate and Method, a copy of which appears in Appendix A to this Official Statement.
Under the terms of the Indenture, prior to August 1 of each year, the District will ascertain from the County of San Bernardino Assessor the relevant parcels on which the Special Tax are to be levied, taking into account any parcel splits during the preceding and then current year. The District will levy the Special Tax by August 10 of each Fiscal Year that the Bonds are Outstanding, or otherwise such that the computation of the levy is complete before the final date on which the auditor (the “Auditor”) of the County of San Bernardino (the “County”) will accept the transmission of the Special Tax amounts for the parcels within the District for inclusion on the next real property tax roll. Upon the completion of the computation of the amounts of the levy, the District will prepare, or cause to be prepared, and shall transmit to the Auditor, such data as the Auditor requires to include the levy of the Special Tax on the next real property tax roll.
The Special Tax levied in a ny Fiscal Year may not exceed the maximum rates authorized pursuant to the Rate and Method. See Appendix A — “RATE AND METHOD OF APPORTIONMENT OF SPECIAL TAX” hereto. Although the Bonds have been structured so that, beginning in Fiscal Year 2025-26, the Assigned Facilities Special Tax rates set forth in the Rate and Method that may be levied based on expected build out of the District are at least 110% of debt service on the Bonds net of estimated Administrative Expenses of $__________ escalating 2% each Fiscal Year beginning July 1, 2025, there is no assurance that the proceeds of the Special Tax will, in all circumstances, be adequate to pay the principal of and interest on the Bonds when due. See “SPECIAL RISK FACTORS — Levy of the Special Tax” herein.
Rate and Method of Apportionment of Special Tax . The District is legally authorized and has covenanted to cause the levy of the Special Taxes in an amount determined according to a methodology, i.e., the Rate and Method, which the City Council and the qualified electors within the District have approved. The Rate and Method apportions the total amount of the Facilities Special Tax and Services Special Tax to be collected among the Taxable Property in the District as more particularly described below. The Facilities Special Tax is referred to herein as the “Special Tax” or the “Special Taxes.” The Services Special Tax is not pledged to the repayment of the Bonds and is not available to pay debt service on the Bonds.
The following is a synopsis of the provisions of the R ate and Method, which should be read in conjunction with the complete text of the Rate and Method which is attached as Appendix A — “RATE AND METHOD OF APPORTIONMENT OF SPECIAL TAX.” The meaning of the defined terms used in this section are as set forth in Appendix A. This section provides only a summary of the Rate and Method, and is qualified by more complete and detailed information contained in the Rate and Method attached as Appendix A. As used in the Rate and Method, “Bonds” means the Bonds and any Additional Bonds. “CFD Administrator” means an official of the City, or designee thereof, responsible for determining the Special Tax Requirement for Facilities and the Special Tax Requirement for Services, providing for the levy and collection of the Special Taxes, and performing other duties as set forth in the Rate and Method of Apportionment of Special Tax.
“Developed Property” means, for each Fiscal Year, (i) with respect to the Facilities Special Tax, all Taxable Property, exclusive of Taxable Public Property and Taxable Property Owner Association Property, for which a building permit for new construction, other than the construction of a garage, parking lot, or parking structure, was issued after January 1, 2022 and on or before May 1 of the Fiscal Year preceding the Fiscal Year for which the Facilities Special Taxes are being levied, and (ii) with respect to the Services Special Tax, all Taxable Property, exclusive of Taxable Public Property and Taxable Property Owner Association Property, (a) for which the Final Residential Subdivision was recorded prior to the Fiscal Year for which the Services Special Taxes are being levied, or (b) for which a building permit has been issued with respect to Non-Residential Property on or before May 1 of the Fiscal Year preceding the Fiscal Year for which the Services Special Taxes are being levied.
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“Facilities Special Tax” means the special tax to be levied in each Fiscal Year on each Assessor’s Parcel of Taxable Property within the District to fund the Special Tax Requirement for Facilities as set forth in the Rate and Method of Apportionment of Special Tax.
“Lower Income Households Welfare Exemption Property” means, for each Fiscal Year, an Assessor’s Parcel within the boundaries of the District that is entitled to a welfare exemption under subdivision (g) of Section 214 of the California Revenue and Taxation Code (or any successor statute), as indicated in the County’s assessment roll finalized as of the last preceding January 1. “Planning Area” means an area designated with the letters “P.A.” as shown on Exhibit B to the Rate and Method.
“Residential Floor Area” means all of the square footage of living area within the perimeter of a residential structure, not including any carport, walkway, garage, overhang, patio, enclosed patio, or similar area.
The determination of Residential Floor Area for an Assessor’s Parcel shall be as set forth in the building permit(s) issued for such Assessor’s Parcel and/or as set forth in the appropriate records kept by the Building and Safety Department of the City, or other applicable City department, as determined by the CFD Administrator. “Residential Property” means all Ass essor’s Parcels of Developed Property for which a building permit(s) has been issued by the City permitting the construction thereon of one or more residential dwelling units.
“Services Special Tax” means the special tax to be levied in each Fiscal Year on each Assessor’s Parcel of Developed Property within the District to fund the Special Tax Requirement for Services as set forth in the Rate and Method of Apportionment of Special Tax. The Services Special Tax is not pledged to the repayment of the Bonds and is not available to pay debt service on the Bonds. “Special Tax Requirement for Facilities” means, for any Fiscal Year, that amount required, after taking into account available amounts held in the funds and accounts under the Indenture, for the followi ng items:
(i) debt service on all Outstanding Bonds due in the calendar year commencing in such Fiscal Year; (ii) periodic costs with respect to the Bonds, including but not limited to, costs of credit enhancement and federal rebate payments due in the calendar year commencing in such Fiscal Year; (iii) pay all or a portion of Administrative Expenses; (iv) any amounts required to establish or replenish any reserve funds for all Outstanding Bonds; (v) without duplicating any amounts described in clause (iv) above, reasonably anticipated Facilities Special Tax delinquencies based on the delinquency rate for the Facilities Special Tax in the previous Fiscal Year, as said levy for delinquencies shall be limited by the Act; and (vi) pay directly for the acquisit ion or construction of Authorized Facilities, provided that the inclusion of such amount does not cause an increase in the Facilities Special Tax levy on Undeveloped Property , Taxable Public Property, or taxable Property Owner Association Property.
“Taxable Property” means all of the Assessor’s Parcels within the boundaries of the District which are not exempt from the Special Tax pursuant to law or described below under the subheading “ — Exempt Property.” Each Fiscal Year, all Taxable Property within the District will be classified as Developed Property, Undeveloped Property, Taxable Property Owner Association Property, or Taxable Public Property, and will be subject to Special Taxes in accordance with the Rate and Method described below under the subheadi ng “Maximum Special Tax, Assigned Special Tax and Backup Special Tax.” “Taxable Property Owner Association Property ” means all Assessor’s Parcels of Property Owner Association Property that are not exempt from the Special Tax described below under the subh eading “— Exempt Property ,” and further described in Section E of the Rate and Method attached hereto as Appendix A.
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“Taxable Public Property” means all Assessor’s Parcels of Public Property that are not exempt from the Special Tax described below under the subheading “— Exempt Property,” and further described in Section E of the Rate and Method attached hereto as Appendix A.
“Undeveloped Property” means, for each Fiscal Year, all Taxable Property not classified as Developed Property, Taxable Public Property or Taxable Property Owner Association Property.
Exempt Property. No Facilities Special Tax will be levied on up to the applicable Acreage limit of Public Property and/or Property Owner Association Property established for each Planning Area. Tax-exempt status will be assigned by the CFD Administrator in chronological order in which property within a Planning Area becomes Public Property or Property Owner Association Property. However, should an Assessor’s Parcel no longer be classified as Public Proper ty or Property Owner Association Property, it will, from that point forward, be subject to the Facilities Special Tax. The Acreage limit is 64.08 Acres for Planning Area 1 and zero Acres for Planning Areas 2, 3 and 4.
Notwithstanding the above, an Assessor’s Parcel within a Planning Area that is transferred to a public agency or property owner’s association prior to the issuance of the first series of bonds that causes the Acreage of Public Property and Property Owner Association Property within such Planning Area to exceed the applicable Acreage limit that can be designated by the CFD Administrator under the Rate and Method will also be exempted from the Special Tax.
Public Property or Property Owner Association Property that is not exempt from the Facilities Special Tax as described above will be subject to the levy of the Facilities Special Tax and will be taxed Proportionately as part of the fourth step described under the heading “—Method of Apportionment of Special Tax” below. The District will not levy a Services Special Tax on Undeveloped Property, Taxable Public Property, Taxable Property Owner Association Property or Public Property and Property Owner Association Property described below under the subheading “— Exempt Property,” and further described in Section E of the Rate and Method attached hereto as Appendix A.
Under the Rate and Method, no Special Tax shall be levied on Lower Income Household Welfare Exemption Property; provided that if, in any Fiscal Year, ap plicable law does not require that an Assessor’s Parcel that is Lower Income Households Welfare Exemption Property be exempt from the Facilities Special Tax, then the Facilities Special Tax shall be levied on such Assessor’s Parcel in accordance with the Rate and Method as if such Assessor’s Parcel were not classified as Lower Income Households Welfare Exemption Property.
Senate Bill 1473, the “Local Government Omnibus Act of 2020,” amended Government Code Section 53340(c) to provide that in a community facilities district in which the levy of a special tax is authorized by an ordinance adopted on or after January 1, 2020, a property receiving a welfare exemption under subdivision (g) of Section 214 of the California Revenue and Taxation Code shall be exemp t from the special tax unless debt is outstanding and the property was subject to the special tax prior to receiving the exemption, in which case the property shall remain subject to the special tax and the special tax shall be enforceable against the prop erty.
Therefore, pursuant to the Rate and Method and California law, and given that no property is subject to the welfare exemption as of the date hereof, the Special Tax will be applicable to Lower Income Household Welfare Exemption Property so long as the Bonds are outstanding.
Maximum Special Tax, Assigned Special Tax and Backup Special Tax. The Maximum Special Tax, Assigned Special Tax and Backup Special Tax for the Facilities Special Tax provided for in the Rate and Method are as follows:
Facilities Special Tax.
Developed Property. The Maximum Facilities Special Tax for each Assessor’s Parcel classified as Developed Property will be the greater of (i) the amount derived by application of the Assigned Facilities Special Tax or (ii) the amount derived by application of the Backup Facilities Special Tax. 534
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Assigned Facilities Special Tax. Residential Property will be assigned to Land Use Classes 1 through 20, as identified in Table 1 in Section C of the Rate and Method based on the type of use and the Residential Floor Area for each residential dwelling unit. Non-Residential Property will be assigned to Land Use Class 21.
The Assigned Facilities Special Tax applicable to an Assessor’s Parcel classified as Residential Property ranges from $3,320 per unit with a Residential Floor Area of less than 1,200 square feet to $8,186 per unit with a Residential Floor Area of 4,400 square feet or greater. The Assigned Facilities Special Tax applicable to an Assessor’s Parcel classified as Non-Residential Property is $36,640 per acre. Based on the Updated Price Point Study provided by the Price Point Consultant, the City does not expect the Assigned Facilities Special Tax rates set forth in Section C of the Rate and Method to be reduced, as the total effective tax burden applicable to each land use class of residential property to be constructed within the District will not exceed 1.95% of the minimum sale prices set forth in the Updated Price Point Study. A copy of the Updated Price Point Study is included as Appendix C to this Official Statement.
Backup Facilities Special Tax. The Backup Facilities Special Tax for an Assessor’s Parcel of Developed Property within a Planning Area upon adoption of the Rate and Method equaled the lesser of (a) the Backup Facilities Special Tax applicable for such Planning Area, or (b) in connection with any reduction in the Assigned Facilities Special Tax as set forth in Section C.1 of the Rate and Method, the reduced amount per Acre calculated for each Planning Area pursuant to Section C.1.a.(3) of the Rate and Method. Pursuant to the Updated Price Point Study provided by the Price Point Consultant, no reduction of the Assigned Facilities Special Tax will be required under the Rate and Method; accordingly, no reduction of the Backup F acilities Special Tax will be required.
The Assigned Facilities Special Tax and Backup Facilities Special Tax are not subject to escalation.
Multiple Land Use Classes. In some instances an Assessor’s Parcel of Developed Property may contain both Developed and Undeveloped Property. In such cases, the Acreage of the Assessor’s Parcel will be allocated between Developed Property and Undeveloped Property based on the portion of the Assessor’s Parcel for which building permits had been issued prior to May 1 of the prior Fiscal Year and the portion of the Assessor’s Parcel for which building permits had not been issued prior to May 1 of the prior Fiscal Year. Furthermore, Developed Property may contain more than one Land Use Class. In such cases, the Acreage that is considered Developed Property will be allocated between Residential Property and Non -Residential Property based on the amount of Acreage designated for each land use as determined by reference to the site plan approved for such Assessor’s Parcel. The Maximum Facilities Special Tax that can be levied on such Assessor’s Parcel will be the sum of the Maximum Facilities Special Tax that can be levied on each type of property located on that Assessor’s Parcel.
The CFD Administrator’s allocation to each type of property will be final.
Undeveloped Property, Taxable Public Property and Taxable Property Owner Association Property .
The Maximum Facilities Special Tax for each Assessor’s Parcel of Undeveloped Property, Taxable Public Property and Taxable Property Owner Association Property is $28,860 per Acre for Planning Area 1, $52,010 per Acre for Planning Area 2, $70,530 per Acre for Planning Area 3 and $69,890 per Acre for Planning Area 3.
The Maximum Facilities Special Tax rates for Undeveloped Property, Taxable Public Property and Taxable Property Owner Association Property are not subject to escalation.
Method of Apportionment of Special Tax . Commencing with Fiscal Year 202 2-23, and for each following Fiscal Year, the CFD Administrator will determine t he Special Tax Requirement for Facilities and, subject to the Maximum Facilities Special Tax rates described above, will provide for the levy the Facilities Special Tax as follows:
First: The Facilities Special Tax shall be levied on each Assessor’s Parcel of Developed Property in an amount equal to 100% of the applicable Assigned Facilities Special Tax; Second: If additional monies are needed to satisfy the Special Tax Requirement for Facilities after the first step has been completed, the Facilities Special Tax shall be levied Proportionately on each 535
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Assessor’s Parcel of Undeveloped Property at up to 100% of the Maximum Facilities Special Tax for Undeveloped Property;
Third: If additional monies are needed to satisfy the Spe cial Tax Requirement for Facilities after the first two steps have been completed, then the levy of the Facilities Special Tax on each Assessor’s Parcel of Developed Property whose Maximum Facilities Special Tax is determined through the application of the Backup Facilities Special Tax shall be increased in equal percentages from the Assigned Facilities Special Tax up to the Maximum Facilities Special Tax for each such Assessor’s Parcel; Fourth: If additional monies are needed to satisfy the Special Tax Re quirement for Facilities after the first three steps have been completed, then the Facilities Special Tax shall be levied Proportionately on each Assessor’s Parcel of Taxable Public Property and Taxable Property Owner Association Property at up to 100% of the Maximum Facilities Special Tax for Taxable Public Property and Taxable Property Owner Association Property, as needed to satisfy the Special Tax Requirement for Facilities.
Notwithstanding the above, the CFD Administrator will, in any Fiscal Year, calc ulate a levy Proportionately less than 100% of the Assigned Facilities Special Tax in step one above, when (i) the CFD Administrator is no longer required to provide for the levy of the Facilities Special Tax pursuant to steps two through four above in order to meet the Special Tax Requirement for Facilities; and (ii) all authorized Bonds for the District have already been issued or the City Council has covenanted that it will not issue any additional District bonds (except refunding bonds) to be supported by the Facilities Special Tax. The District has covenanted in the Indenture not to issue any Additional Bonds except to refund the Bonds or outstanding Additional Bonds. See “— No Additional Bonds Except For Refunding Bonds” below.
Further, notwithstanding the above, under no circumstances shall the Facilities Special Tax levied in any Fiscal Year against any Assessor’s Parcel of Residential Property for which an occupancy permit for private residential use has been issued (in accordance with Section 53321(d)(3) of the California Government Code), be increased as a consequence of delinquency or default by the owner of any other Assessor’s Parcel within the District by more than 10% above the amount that would have been levied in that Fiscal Year had there never been any such delinquencies or defaults. To the extent that the levy of the Facilities Special Tax on Residential Property is limited by the provision in the previous sentence, the levy of the Facilities Special Tax on each Assessor’s Parcel of Non-Residential Property shall continue in equal percentages up to 100% of the applicable Maximum Facilities Special Tax.
Prepayment of Special Taxes . The Facilities Special Tax obligation for an Assessor’s Parcel of Developed Property or Undeveloped Property for which a building permit has been issued, may be prepaid in full, or in part, and only if there are no delinquent Special Taxes with respect to such Assessor’s Parcel at the time of prepayment, provided that the terms set forth under Section H of the Rate and Method are satisfied. The Prepayment Amount is calculated based on the Bond Redemption Amount plus Redemption Premium plus the Future Facilities Amount plus the Defeasance Amount plus the Administrative Fees and Expenses, less a credit for the res ulting reduction in the Reserve Requirement for the Bonds (if any) and less an allocable share of capitalized interest (if any), all as specified in Appendix A — “RATE AND METHOD OF APPORTIONMENT OF SPECIAL TAX — Section H.”
Mandatory redemption of Bonds f rom Special Tax prepayments may result in the reduction in the otherwise expected yield on such Bonds if the Bonds were purchased at a price greater than par. See “SPECIAL RISK FACTORS — Potential Early Redemption of Bonds from Special Tax Prepayments.” Term of Special Taxes. Pursuant to the Rate and Method, the Facilities Special Tax levy is authorized to be levied for a period not to exceed fifty years commencing with Fiscal Year 2022-23.
Estimated Debt Service Coverage . Based on the expected buildout of the District, Assigned Special Tax rates set forth in the Rate and Method are at least 110% of debt service on the Bonds in each Bond Year 536
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plus estimated Administrative Expenses of $__________ escalating 2% each Fiscal Year beginning July 1, 2025.
The District may levy up to the Maximum Special Tax rates on Taxable Property within the District. See “ — Rate and Method of Apportionment — Maximum Special Tax, Assigned Special Tax and Backup Special Tax” and “— Rate and Method of Apportionment — Exempt Property.” Pursuant to the Rate and Method, the status of Developed Property is based on building permits issued as of May 1 of the Fiscal Year preceding the Fiscal Year for which the Special Tax is levied. As of August 1, 2024, building permits had been iss ued for 444 residential parcels within the District. Accordingly, assuming no additional building permits are obtained prior to May 1, 2025, 444 parcels will be classified as Developed Property and 40 parcels will be classified as Undeveloped Property for the Fiscal Year 202 5-26 Special Tax levy. Since May 1, 2024, and as of September 15, 2024, the Developer has obtained an additional _____ building permits. See “PROPERTY OWNERSHIP AND THE DEVELOPMENT.” Collection and Application of the Special Tax
The Special Tax is levied and collected by the Treasurer-Tax Collector of the County in the same manner and at the same time as ad valorem property taxes; provided, however, that the District may dire ctly bill the Special Tax, may collect the Special Tax at a different time or in a different manner if necessary to meet its financial obligations, and may covenant to foreclose and may actually foreclose on delinquent Assessor’s Parcels as permitted by the Act.
The District has made certain covenants in the Indenture for the purpose of ensuring that the current maximum rates and method of collection of the Special Tax are not altered in a manner that would impair the District’s ability to collect a suffici ent amount of the Special Tax to pay debt service on the Bonds and Administrative Expenses when due. First, the District has covenanted that, to the extent it is legally permitted to do so, it will not initiate proceedings under the Act to modify the Rate and Method if such modification would adversely affect the security for the Bonds and any Additional Bonds and 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 and a ny Additional Bonds, the 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 and any Additional Bonds. Second, the District has covenanted not to authorize owners of taxable parcels within the District to satisfy Special Tax obligations by the tender of Bonds and any Additional Bonds unless the District shall have first obtained a report of an Independent Consultant certifying that doing so would not result in the District having insufficient Special Tax Revenues to pay the principal of and interest on all Outstanding Bonds and any Additional Bonds when due.
Although the Special Tax constitutes a lien on Taxable Property within the District, it does not constitute a personal indebtedness of the owners of such property within the District. Moreover, other overlapping general obligation debt already exists on the property located within the District and other future special tax and assessment liens and overlapping general obligation debt could come into existence in the future in certain situations without the consent or knowledge of the City or the landowners therein. See “SPECIAL RISK FACTORS — Parity Taxes and Special Assessments” herein. There is no assurance that property owners will be financially able to pay the annual Special Tax or that they will pay such taxes even if financially able to do so, all as more fully described in the section of this Official Statement entitled “SPECIAL RISK FACTORS.” Under the terms of the Indenture, the Trustee shall establish and maintain a separate Fund designated the “Special Tax Fund.” As soon as practicable after the receipt by the District of any Special Tax Revenues, but in any event no later than the date ten Business Days after such receipt, the District shall transfer such Special Tax Revenues to the Trustee for deposit in the Special Tax Fund; provided, however, that any portion of any such Special Tax Revenues that represents Special Tax prepayments that are to be applied to the payment of the redemption price of Bonds and any Additional Bonds in accordance with the provisions of the Indenture shall be identified to the Trustee as such by the District an d shall be deposited in the Redemption Fund. See “ — 537
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Special Tax Fund” below, “THE BONDS — Redemption — Mandatory Redemption from Special Tax Prepayments” and Appendix F — “SUMMARY OF CERTAIN PROVISIONS OF THE INDENTURE.” Covenant for Superior Court Foreclosure
Pursuant to Section 53356.1 of the Act, the District has covenanted in the Indenture 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 District are delinquent in the payment of the Special Tax levied thereon and that, if such delinquencies exist, the 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.
Notwithstanding the foregoing, the District is not required under the Indenture to order the commencement of foreclosure proceedings if (a) the total Special Tax delinquency in the 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 equal to the Reserve Requirement. Notwithstanding the foregoing, if the District determines that any single parcel is delinquent in the payment of four installments of the Special Tax levied on such parcel, then the District will diligently institute, prosecute and pursue foreclosure proceedings against such parcel.
The mere commencement of foreclosure proceedings will not assure a prompt and favorable resolution of Special Tax delinquencies. The ability of the District to foreclose the lien of delinquent unpaid Special Tax may be limited. See “SPECIAL RISK FACTORS — Bankruptcy and Legal Delays” and “S PECIAL RISK FACTORS — FDIC/Federal Government Interests in Properties.” Moreover, even if a judgment of foreclosure and order of sale is obtained, the District must cause a notice of levy to be issued. Under current law, the property owner has 120 days from the date of service of the notice of levy in which to redeem the subject property. If the property owner fails to redeem the property and it is sold, the property owner’s only remedy is an action to set aside the sale, which action must be brought within 90 days of the date of sale. If such an action results in the setting aside of the foreclosure sale, the judgment is revived, and the District would be entitled to receive interest on the revived judgment as if the sale had not been made. Under forme r law a property owner had a period of one year within which to redeem property to be sold, and the constitutionality of the legislation that eliminated the one year redemption period has not been tested.
There can be no assurance that, even if the subject property is sold, the proceeds from such sale will be sufficient to pay the delinquent installments of the Special Tax. The Act does not require the District or any other governmental agency to purchase or otherwise acquire any Assessor’s Parcel being sold if there is no other purchaser at such sale. The Act does require that property being sold pursuant to foreclosure under the Act must be sold for not less than the judgment amount (which must include reasonable attorneys’ fees, together with interest, penalties, and other authorized charges and costs) plus post judgment interest and authorized costs, unless a lower bid price is authorized by the Owners of not less than 75% by value of the Bonds and any Additional Bonds Outstanding.
Special Tax Fund
The Indenture provides that the Trustee will establish and maintain a separate Fund designated the “Special Tax Fund.” The Indenture requires that the District transfer Special Tax Revenues (other than Special Tax prepayments) to the Trustee for deposit into the Special Tax Fund as soon as practicable after the District’s receipt thereof, but in any event no later than ten Business Days after such receipt. No later than the Business Day immediately preceding each Interest Payment Date, after having made any r equested transfers to the Administrative Expense Fund, as requested by the District, to have sufficient amounts available therein to pay Administrative Expenses, the Trustee is required by the Indenture to make transfers from the Special Tax Fund to the Interest Account in the Bond Fund, the Principal Account in the Bond Fund and the Reserve Fund in the amounts and in the priority specified in the Indenture. See Appendix F — “SUMMARY OF CERTAIN PROVISIONS OF THE INDENTURE.”
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As soon as practicable after the District’s receipt of Special Tax prepayments, but in any event no later than ten Business Days after such receipt, the District is required to transfer any Special Tax prepayment to the Trustee and, in connection therewith, submit to the Trustee a Writte n Certificate identifying such amounts as Special Tax prepayment, identifying the portion of such Special Tax prepayments so transferred that is to be applied to the Redemption Price of the Bonds and any Additional Bonds and identifying the portion of such Special Tax prepayment that is to be applied to the payment of interest on the Bonds and any Additional Bonds to be so redeemed. The portion of such Special Tax prepayment that is to be applied to the Redemption Price will be deposited by the Trustee in the Redemption Fund and will be applied to the redemption of the Bonds and any Additional Bonds pursuant to the Indenture. The portion of such Special Tax prepayment that is to be applied to the payment of interest on the Bonds and any Additional Bonds to be so redeemed will be deposited by the Trustee in the Interest Account and will be applied to the payment of such interest.
Reserve Fund
The Indenture provides that the Trustee will establish and maintain a separate Fund designated the “Reserve Fund.” On the Closing Date, the Trustee will deposit in the Reserve Fund the amount specified under the Indenture. See “ESTIMATED SOURCES AND USES OF FUNDS.” The Trustee is also required, not later than the Business Day immediately preceding each Interest Payment Date, to transfer from the Special Tax Fund (after the requisite transfers to the Administrative Expense Fund, the Interest Account and the Principal Account) the amount, if any, necessary to cause the amount on deposit in the Reserve Fund to be equal to the Reserve Requirement. The Indenture defines “Reserve Requirement” to mean, as of the date of any calculation, the least of (i) “10% of the proceeds of the issue,” within the meaning of Section 148 of the Code, with respect to the Bonds (excluding from such calculation Bonds and any Additional Bonds refunded with the proceeds of subsequently issued Additional Bonds secured by the Special Tax on a parity with such Bonds and Additional Bonds), (ii) Maximum Annual Debt Service and (iii) 125% of Average Annual Debt Service.
Except as otherwise provided in the Indenture, all amounts deposited in the Reserve Fund are to be used and withdrawn by the Trustee solely for the purpose of (i) making transfers to the Interest Account in accordance with the Indenture i n the event that, on the Business Day prior to an Interest Payment Date, amounts in the Interest Account are insufficient to pay the interest on the Bonds and any Additional Bonds due and payable on such Interest Payment Date, (ii) making transfers to the Principal Account in accordance with the Indenture in the event that, on the Business Day prior to a September 1 on which principal of the Bonds and any Additional Bonds is due and payable (including principal due and payable by reason of mandatory sinking fund redemption of the Bonds and any Additional Bonds), amounts in the Principal Account are insufficient to pay such principal, and (iii) redeeming Bonds and any Additional Bonds in accordance with the Indenture as described in the following paragraph.
Whenever Bonds or any Additional Bonds are to be optionally redeemed or redeemed from Special Tax prepayments, a proportionate share (determined as provided below) of the amount on deposit in the Reserve Fund will, on the date on which amounts to redeem such Bonds and any Additional Bonds are deposited in the Redemption Fund or otherwise deposited with the Trustee, be transferred by the Trustee from the Reserve Fund to the Redemption Fund or to such deposit held by the Trustee and will be applied to the red emption of said Bonds and any Additional Bonds; provided that, such amount will 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 calcu lation thereof said Bonds and any Additional Bonds to be redeemed). Such proportionate share will be equal to the largest integral multiple of the minimum Authorized Denomination for said Bonds and any Additional Bonds that is not larger than the amount e qual 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 and any Additional Bonds to be so redeemed and the denominator of which is the principal amount of Bonds and any Additional Bonds to be Outstanding on the day prior to the date on which such Bonds and any Additional Bonds are to be so redeemed. 539
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Whenever the balance in the Reserve Fund exceeds the amount required to redeem or pay all Outstanding Bonds and any Additional Bonds, including interest accrued to the date of payment or redemption and premium, if any, due upon redemption, the Trustee will, upon receipt of a Written Request of the 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 and any Additional Bonds. If, as a result of th e scheduled payment of principal of or interest on the Bonds and any Additional Bonds, the Reserve Requirement is reduced, the Trustee will transfer an amount equal to the amount of such reduction to the Interest Account.
Investment of Moneys
All moneys in any of the Funds or Accounts are required to be invested by the Trustee solely in Permitted Investments, as directed in writing by the District. As used in the Indenture, the phrase “Permitted Investments” includes a variety of investments, some of which may not be rated by a national rating service.
See Appendix F — “SUMMARY OF CERTAIN PROVISIONS OF THE INDENTURE — Definitions.” No Additional Bonds Except for Refunding Bonds
So long as any of the Bonds and any Additional Bonds remain Outstanding, the Di strict will not issue any obligations payable from Net Special Tax Revenues senior to the Bonds. The District may issue Additional Bonds or obligations payable on a parity with the Bonds and any Additional Bonds, if, among other things:
(i) upon the issu ance of such Additional Bonds, no Event of Default will occur or be continuing under the Indenture; (ii) the proceeds of the Additional Bonds will be applied to refund the Bonds or any Additional Bonds previously issued under the Indenture, pay Costs of Is suance incurred in connection with the issuance of such Additional Bonds, and/or make any requisite deposit to the Reserve Fund; and (iii) the District shall have received a certificate from an Independent Consultant certifying that the Annual Debt Service in each Bond Year, calculated for all Bonds and any Additional 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 and any Additional Bonds that are Outstanding immediately prior to the issuance of such Additional Bonds.
The District may issue obligations payable from Net Special Tax Revenues on a basis subordinate to the Bonds and any Additional Bonds.
THE COMMUNITY FACILITIES DISTRICT
General Information Regarding the District
The District was organized by the City Council under the Act to provide for the financing of public improvements to meet the needs of new development related to the District. The qualified electors within the boundaries of the District, being the then owners of all property in the District, authorized the District to incur bonded indebtedness to finance certain public facilities to meet the needs of new development within the District and approved the Rate and Method for and authorized the levy of the Special Tax. See Appendix F — “SUMMARY OF CERTAIN PROVISIONS OF THE INDENTURE ⎯ Definitions” herein.
The District includes approximately 137.33 gross acres and is located in the northwesternmost portion of the City, along the west side of Interstate 15 north of Duncan Canyon Road. The District is being developed into a gated residential community known as “Narra Hills” by the Developer, and is expected to consist of a total of 484 homes across five neighborhoods known a s “Clementine,” “Strata,” “Wildstar,” “Skyeland” and “Goldenpeak.” Clementine includes a mix of 112 proposed duplex homes along with 12 small lot detached home, ranging in size from 1,372 to 1,661 square feet. Strata includes 127 proposed single -family detached homes on cluster lots ranging in size from 2,099 to 2,552 square feet. Wildstar is proposed for 78 single family detached homes on minimum 5,000 square foot conventional lots with sizes ranging from 2,747 to 3,079 square feet. Skyeland is proposed for 84 single-family detached homes on minimum 10,000 square foot lots with home 540
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ranging in size from 2,375 to 3,604 square feet. Goldenpeak is proposed for 71 single family detached homes on 10,000 square foot minimum lots with homes ranging in size fr om 3,159 to 4,248 square feet. The Narra Hills development is encompassed by Tract Maps 20010, 20069 and 20070 and subsequent condominium maps on Tracts 20069 and 20070 which subdivide d the property into 484 residences (each of which is a separate Assessor’s Parcel subject to the levy of the Special Tax pursuant to the Rate and Method).
The Developer is acquiring the property within the District in phased takedowns from the Land Bank pursuant to the Option Agreement (as defined under the caption “PROPERTY OWNERSHIP AND THE DEVELOPMENT—Option Agreement and Construction Agreement”) under which the Developer acquires lots in a finished lot condition as development progresses. The Land Bank acquired the property within the District on September 9, 2021 for $80,000,000 and the Developer began taking down lots in May 2022. As of July 26, 2024, the date of value of the Appraisal, the Developer had taken down 358 of the 484 residential lots in t he District. Since July 26, 2024 and as of September 15, 2024, the Developer had acquired an additional 27 lots from the Land Bank. The Developer is scheduled to take down all of the remaining property to be developed as 99 residential units in the Distr ict by May 1, 2025. There is no guarantee that the Developer will acquire the remaining lots as planned. During the term of the Option Agreement, the Developer is contractually obligated to pay the Special Tax levied on the property subject to such agree ment. However, in the event the Option Agreement is terminated prior to the Developer having acquired all of the lots thereunder, the Special Tax would continue to be levied on the property in the District owned by the Land Bank. See “PROPERTY OWNERSHIP AND THE DEVELOPMENT.”
Closings to individual homeowners began within the District in November 2023 and, as of July 26, 2024, 169 residential units had been completed and conveyed to individual homeowners, the Developer owned 15 completed model units (none of which were in escrow), 25 homes over 95% complete (18 of which were in escrow), 76 homes under construction (21 of which were in escrow) and 73 finished pads (none of which were in escrow), and the Land Bank owned 126 finished pads (none of which were in escrow). As of September 15, 2024, within the District, _____ residential units had been completed and conveyed to individual homeowners, the Developer owned _____ completed model units (_____ of which were in escrow), _____ homes over 95% complete (_____ of which were in escrow), _____ residential units under construction (_____ of which were in escrow), and the Land Bank owned _____ finished pads (_____ of which were in escrow). Sales contracts are subject to cancelation and, therefore, homes currentl y in escrow may not result in closed escrows with the prospective homebuyers. Within the District, 444 building permits had been obtained as of July 26, 2024.