MEMORANDUM
ANZEL GALVAN LLP | 595 Pacific Avenue, 4th Floor, San Francisco, CA 94133 | +1.415.848.9165 | ANZELGALVAN.COM From: Anzel Galvan LLP
To: Members of the City Council,
City of Laguna Beach, California
Date: April 14, 2026
Subject: Official Statement for City of Laguna Beach Underground Utility Assessment District No. 2021-3 (Fairview/La Brea) Limited Obligation Improvement Bonds The Preliminary Official Statement (the “POS”) for the above‑referenced bonds (the “Bonds”) is the primary disclosure document for the Bonds and provides information regarding the City, Underground Utility Assessment District No. 2021‑3 (Fairview/La Brea), City of Laguna Beach, Orange County, State of California, and the terms and conditions of the Bonds. A copy of the POS is included in the staff report for this item as Attachment 3.
The City must exercise reasonable care to avoid material misstatements or omissions in public statements, including the POS, that are used to offer or sell securities. The City also may not knowingly or recklessly include material misstatements or misleading statements in other public statements that are reasonably expected to reach investors or the securities markets while its securities are outstanding (for example, certain budget documents, financial reports and official press releases). The distribution of the POS by the City is subject to federal securities laws, including the Securities Act of 1933 and the Securities Exchange Act of 1934, and the related anti‑fraud provisions. These laws require that the POS not omit or misstate facts that would be material to an investor in the Bonds. “Material” information is information for which there is a substantial likelihood that a reasonable investor would consider it important in deciding whether to buy, sell or hold the Bonds.
If the City Council concludes that the POS includes all material facts relating to the Bonds, the security for their repayment and other matters that a reasonable investor would consider important, it will be asked to adopt a resolution authorizing staff to assist the underwriter in complying with SEC Rule 15c2‑12 by executing a certificate to the effect that the POS is “deemed final” as of its date, except for certain permitted omissions such as offering prices, interest rates and other terms to be determined at pricing. This “deemed final” requirement arises under SEC Rule 15c2‑12 and technically applies to the underwriter, but the City customarily provides this certificate so the underwriter can satisfy its obligations; it does not mean the POS is perfect in every respect, but that the City has exercised reasonable care so that it does not contain any material misstatements or omissions.
The Securities and Exchange Commission (the “SEC”), which has regulatory authority over the City’s compliance with the federal securities laws, has issued guidance regarding the duties of governing body members in connection with their approval of disclosure documents such as the POS.
In its “Report of Investigation in the Matter of County of Orange, California as it Relates to the Conduct of the Members of the Board of Supervisors” (Release No. 36761 / January 24, 1996) (the “Release”), the SEC stated that if a member of a governing body has knowledge of any facts or circumstances that Attachment 4
152
| ANZELGALVAN.COM
an investor would want to know about prior to investing in municipal securities—whether relating to repayment of the securities, their tax‑exempt status, undisclosed conflicts of interest with interested parties, or otherwise—the official should endeavor to determine whether such facts are adequately disclosed in the official statement. The Release explains that appropriate steps may include becoming familiar with the official statement and questioning staff and the City’s financing team (including bond counsel, disclosure counsel, the municipal advisor and the underwriter) about the disclosure of such facts.
As elected officials of the City, Councilmembers are part of the governing body of the issuer of the Bonds. Any potential federal securities law liability arising out of the POS or other public statements would generally arise under these anti‑fraud provisions and would primarily relate to the City as issuer, but individual officials can, in some circumstances, be named in SEC enforcement actions where they were personally involved in making or approving materially misleading statements or were reckless in discharging their responsibilities. The purpose of the procedures described in this memorandum is to help the City and each Councilmember satisfy their responsibilities and reduce the risk of any such claims.
In reviewing the POS, each Councilmember should: (a) read at least the cover, the sections describing the Bonds and the security for their repayment, the description of the City and the Assessment District, and any risk factors; (b) consider whether you are aware of any financial, operational, legal, political or other issues (for example, significant litigation, financial stress, major policy changes or conflicts of interest) that might be important to an investor; and (c) if you are aware of such issues, raise them with City staff and the City’s financing team so they can determine whether and how they should be disclosed in the POS. Councilmembers are entitled to rely in good faith on the professional judgment of City staff and the City’s financing team, but should exercise reasonable care by reviewing the POS and asking questions about any language they do not understand or that appears incomplete or potentially misleading.
In connection with the Bonds, a Continuing Disclosure Certificate will be executed and delivered by the City for the benefit of the holders and beneficial owners of the Bonds and to assist Oppenheimer & Co. Inc., the underwriter of the Bonds, in complying with SEC Rule 15c2‑12(b)(5).
Under this certificate, the City will agree to provide specified annual financial information and notices of certain listed events (such as payment defaults, rating changes and certain amendments to bond documents) to the municipal securities market for so long as the Bonds are outstanding, and failure to comply may be required to be disclosed in future bond offerings and can be the subject of SEC scrutiny.
The form of the Continuing Disclosure Certificate is included as Appendix D to the POS. 153