D. 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, will be 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.
E. Between the date hereof and the Closing Date, the market price or marketability, at the initial offering prices set forth on the inside cover page of the Official Statement, of the Bonds or the ability of the Underwriter to enforce contracts for the sale of the Bonds, shall not have been materially adversely affected, in the 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 of 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 made 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, or any other governmental agency having jurisdiction of the subject matter, to the effect that obligations of the general character of the Item Title: 12.1
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12 Bonds, including any or all underlying arrangements, are not exempt from registration under or other requirements of the Securities Act of 1933, as amended, or that the Indenture is not exempt from qualification under or other requirements of the Trust Indenture Act of 1939, as amended, or that the issuance, offering or sale of obligations of the general character of the Bonds, including any or all underlying arrangements, as contemplated 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 on the New York Stock Exchange or other major exchange shall be in force, or minimum or maximum prices for trading shall have been fixed and be in force, or maximum ranges for prices for securities shall have been required and be in force on any such exchange, whether by virtue of determination by that exchange or by order of the SEC or any other governmental authority having jurisdiction; or
4. The introduction, proposal or enactment of any amendment to the Federal or California Constitution or any action by any Federal or California 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 judgment of the Underwriter, makes untrue 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 credit 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; or
8. Except as disclosed in or contemplated by the Official Statement, any material adverse change in the affairs of the City or Community Facilities District shall have occurred; or
9. 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 Facilities 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 Item Title: 12.1
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13 or marketability of the Bonds or the ability of the Underwriter to enforce contracts for the sale of the Bonds; or
10. A general banking moratorium shall have been declared by federal or State authorities having jurisdiction and be in force; or
11. A material disruption in securities settlement, payment or clearance services affecting the Bonds shall have occurred; or
12. 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
13. 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 the 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 of any provision of the federal securities laws at the Closing Date, including the Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as amended, and the Trust Indenture Act of 1939, as amended; or
14. Any proceeding shall have been commenced or be threatened in writing by the Securities and Exchange Commission against the City or the Community Facilities District; or
15. The commencement of any Action.
F. 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 Community Facilities District Resolution, the Community Facilities District Documents and the Formation Documents, together 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 Certificate executed and delivered by an authorized officer the Community Facilities District;
5. An unqualified approving opinion for the Bonds, dated the Closing Date and addressed to the Community Facilities District, of Bond Counsel, to the effect that the Item Title: 12.1
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14 Bonds are the valid, legal and binding obligations of the Community Facilities District and that the interest thereon is excluded from gross income for federal income tax purposes and exempt from personal income taxes of the State of California, in substantially the form included as Appendix C to the Official Statement, together with a letter of Bond Counsel, dated the Closing Date and addressed to the Underwriter, to the effect that such opinion addressed to the Community Facilities District may be relied upon by the Underwriter to the same extent as if such opinion was addressed to it;
6. A supplemental opinion or opinions, dated the Closing Date and addressed to the Underwriter, of Bond Counsel, to the effect that:
(i) this Purchase Agreement and the Continuing Disclosure Certificate have been duly authorized, executed and delivered by the Community Facilities District and, assuming due authorization, execution and delivery by the other parties thereto, as applicable, constitutes the legal, valid and binding obligations of the Community Facilities District and are enforceable in accordance with their terms, except to the extent that enforceability may be limited by moratorium, bankruptcy, reorganization, insolvency or other similar laws affecting creditors’ rights generally or by the exercise of judicial discretion in accordance with general principles of equity or otherwise in appropriate cases and by limitations on legal remedies against public agencies in the State;
(ii) the Bonds are not subject to the registration requirements of the Securities Act of 1933, as amended, and the Indenture is exempt from qualification under the Trust Indenture Act of 1939, as amended;
(iii) the information contained in the Official Statement on the cover and under the captions “THE BONDS” (other than the caption “Debt Service Schedule”), “SOURCES OF PAYMENT FOR THE BONDS,” “TAX EXEMPTION” and “LEGAL OPINION” and in Appendices C and E to the Official Statement, are accurate insofar as such statements purport to summarize certain provisions of the Bonds, the Indenture, Bond Counsel’s final approving opinion, and the Community Facilities District Act.
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 their attention which has led them to believe that the Preliminary Official Statement as of its date 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 any information with respect to prior compliance by the Developer with continuing disclosure undertakings under the Rule 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 Item Title: 12.1
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15 Community Facilities District to the effect that: (i) the representations and warranties made by the Community Facilities District contained herein are true and correct in all material respects on and as of the Closing Date with the same effect as if made on the Closing Date; (ii) to the best knowledge of such officer, no event has occurred since the date of the Official Statement which should be disclosed in the Official Statement for the purpose for which it is to be used or which it is necessary to disclose therein in order to make the statements and information therein not misleading in any material respect; and (iii) the Community Facilities District has complied with all the agreements and satisfied all the conditions on its part to be satisfied under this Purchase Agreement, the Community Facilities District Resolutions, and the Community Facilities District Documents at or prior to the Closing Date;
9. An opinion of the City Attorney dated the date of Closing and addressed to the Underwriter and the City, to the effect that:
(i) The City is a municipal corporation and general law city, duly organized and existing under the Constitution and laws of the State of California; (ii) The Community Facilities District Resolutions have been duly adopted at meetings of the City Council, which were called and held pursuant to law and with all public notice required by law and at which a quorum was present and acting throughout, and the Community Facilities District Resolutions are in full force and effect and have not been modified, amended, rescinded or repealed since the respective dates of their adoption; (iii) The Community Facilities District Documents and the Official Statement have been duly authorized, executed and delivered by the City and the Community Facilities District Documents constitute the legal, valid and binding obligations of the Community Facilities District enforceable against the Community Facilities District in accordance with their terms, subject to bankruptcy, insolvency, reorganization, moratorium and other similar laws affecting creditors’ rights, to the application of equitable principles where equitable remedies are sought and to the exercise of judicial discretion in appropriate cases; (iv) Except as may be stated in the Official Statement, there is no action, suit, proceeding or investigation before or by any court, public board or body pending (notice of which has been served on the City or the Community Facilities District) or, to such counsel’s knowledge, threatened wherein an unfavorable decision, ruling or finding would: (a) affect the creation, organization, existence or powers of the City, or the titles of its members and officers to their respective offices; or (b) affect the validity of the Community Facilities District Documents or restrain or enjoin the repayment of the Bonds or in any way contest or affect the validity of the Community Facilities District Documents or contest the authority of the Community Facilities District to enter into or perform its obligations under any of the Community Facilities District Documents, questions the right of the Community Facilities District to use Special Taxes levied within the Community Facilities District for the repayment of the Bonds or affects in any manner the right or ability of the Community Facilities District to collect the Special Taxes or pledge the Net Taxes levied within the Community Facilities District for the repayment of the Bonds;
10. A certificate dated the Closing Date from Kitty Siino & Associates, Inc. (the “Appraiser”) to the effect that: (i) the statements in the Official Statement provided by the Appraiser 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 Item Title: 12.1
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16 statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading and (ii) no events or occurrences have been ascertained by the Appraiser or have come to the Appraiser’s attention that would materially change the opinion set forth in the Appraisal Report;
11. A certificate dated the Closing Date from Spicer Consulting Group, LLC (the “Special Tax Consultant”) 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 would generate at least 110% of the annual debt service payable with respect to the Bonds plus the Administrative Expenses Cap 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 concerning 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 statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading;
12. 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;
13. A certificate of the Trustee, dated the Closing Date, to the effect that:
(i) the Trustee is authorized to carry out corporate trust powers, and has full power and authority to perform its duties under the Indenture; (ii) the Trustee is duly authorized to execute and deliver the Indenture, to accept the obligations created by the Indenture and to authenticate the Bonds pursuant to the terms of the 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 consummation 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 (iv) to the best of its knowledge, compliance with the terms of the Indenture will not conflict with, or result in a violation or breach of, or constitute a default under, any loan agreement, indenture, bond, note, resolution 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 activities or properties;
14. 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 that such documents has 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, subject 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;
Item Title: 12.1
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17 15. A certificate of the Community Facilities District dated the Closing Date, in a form acceptable to Bond Counsel and the Underwriter, that the Bonds are not arbitrage bonds within the meaning of Section 148 of the Internal Revenue Code of 1986, as amended;
16. An opinion of counsel to the Developer, dated the date of the Closing, addressed to the Underwriter and the Community Facilities District, in form and substance acceptable to the Underwriter and Bond Counsel;
17. A Letter of Representations from the Developer, dated the date of the Preliminary Official Statement, substantially in the form attached hereto as Exhibit B;
18. A Closing Certificate of the Developer, dated the date of the Closing, substantially in the form attached hereto as Exhibit C or as such Closing Certificate may be modified with the approval of the Underwriter and Disclosure Counsel;
19. 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
20. Such additional legal opinions, certificates, instruments and other documents as the Underwriter 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 Community 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 performed 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 Underwriter and the Community Facilities District set forth in Section 5 hereof shall continue in full force and effect.
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 only from the proceeds of the Bonds, or any other legally available funds of the City, or the Community Facilities District, but only as the Community Facilities District and such other party providing such services may agree, all expenses and costs of the Community Facilities District incident to the performance of its obligations in connection with the authorization, execution, sale and delivery of the Bonds to the Underwriter, including, without limitation, printing costs, rating agency fees and charges, initial fees of the Trustee, including fees and disbursements of its 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 and for expenses (included in the expense component of the Underwriter’s discount) incurred by the Underwriter on behalf of the City’s employees which are incidental to implementing this Purchase Agreement, including, but not limited to, meals, transportation, lodging, and Item Title: 12.1
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18 entertainment of those employees. 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 meals 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 or the City under this Purchase Agreement may be given by delivering the same in writing to the City of Menifee, 29844 Haun Road, Menifee, California 92586, Attention: City Manager; 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 Stifel, Nicolaus & Company, Incorporated, 2121 Avenue of the Stars, Suite 2050, Los Angeles, California 90067, Attention: Public Finance Department.
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 not be deemed to have been discharged, satisfied or otherwise rendered void by reason of the Closing and regardless of any investigations made by or on behalf of the Underwriter (or statements as to the results of such investigations) concerning such representations and statements of the Community Facilities District and regardless of delivery of and payment for the Bonds.
9. Execution in Counterparts. This Purchase Agreement may be executed by the parties hereto in separate counterparts, each of which when so executed and delivered shall be an original, but all such counterparts shall together constitute but one and the same instrument.
10. No Prior Agreements. This Purchase Agreement supersedes and replaces all prior negotiations, agreements and understanding among the parties hereto in relation to the sale of the Bonds by the Community Facilities District.
11. Governing Law. This Purchase Agreement shall be governed by the laws of the State of California.
Item Title: 12.1
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S-1
12. 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,
STIFEL, NICOLAUS & COMPANY,
INCORPORATED
By:
Its: Authorized Officer
The foregoing is hereby agreed to and accepted as of the date first above written:
COMMUNITY FACILITIES DISTRICT
NO. 2020-2 (DEL ORO) OF THE CITY OF
MENIFEE
By:
Authorized Officer
Time of Execution: _____________ p.m. California time
Item Title: 12.1
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A-1
EXHIBIT A
COMMUNITY FACILITIES DISTRICT NO. 2020-2 (DEL ORO)
OF THE CITY OF MENIFEE
SPECIAL TAX BONDS, SERIES 2022A
MATURITY SCHEDULE
Maturity
(September 1)
Principal
Amount
Interest
Rate Yield Price
10% Test
Satisfied*
10% Test
Not
Satisfied
Subject to
Hold-The-
Offering-
Price Rule
(marked if
used)
2023
2024
2025
2026
2027
2028
2029
2030
2031
2032
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.
Item Title: 12.1
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EXHIBIT B
COMMUNITY FACILITIES DISTRICT NO. 2020-2 (DEL ORO)
OF THE CITY OF MENIFEE
SPECIAL TAX BONDS, SERIES 2022A
LETTER OF REPRESENTATIONS – D.R. HORTON LOS ANGELES HOLDING COMPANY, INC.
[POS Date]
City of Menifee
Community Facilities District No. 2020-2 (Del Oro)
29844 Haun Road
Menifee, California 92586
Stifel, Nicolaus & Company, Incorporated
2121 Avenue of the Stars, Suite 2050
Los Angeles, California 90067
Ladies and Gentlemen:
Reference is made to Community Facilities District No. 2020-2 (Del Oro) of the City of Menifee Special Tax Bonds, Series 2022A (the “Bonds”) and to the Bond Purchase Agreement to be entered into in connection therewith (the “Bond Purchase Agreement”). This Letter of Representations (the “Letter of Representations”) is delivered pursuant to and in satisfaction of Section 4(F)(17) of the Bond Purchase Agreement. Capitalized terms used herein and not otherwise defined have the meanings ascribed to them in the Bond Purchase Agreement.
The undersigned certifies that he or she is familiar with the facts herein certified and is authorized and qualified to certify the same as an authorized officer or representative of D.R. Horton Los Angeles Holding Company, Inc. (the “Developer”), and the undersigned, on behalf of the Developer, further certifies as follows:
1. The Developer is duly organized and validly existing under the laws of the State of California and in good standing under the laws of the State of California, and has all requisite corporate right, power and authority: (i) to execute and deliver this Letter of Representations and (ii) to undertake all of the transactions on its part described in the Preliminary Official Statement.
2. As set forth in the Preliminary Official Statement, title to a certain portion of the property within Community Facilities District No. 2020-2 (Del Oro) of the City of Menifee (the “Community Facilities District”) is held in the name of the Developer (herein, the “Property”).
The undersigned, on behalf of the Developer, makes the representations herein with respect to all such Property. Except as otherwise described in the Preliminary Official Statement, the Developer is and the Developer’s current expectations are that the Developer shall remain the party responsible for the development of the Property. The Developer has not entered into an agreement for development or management of the Property by any other entity, except such Item Title: 12.1
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subcontracts, consultant agreements and similar agreements for land development activities associated with the Developer’s development plan as are entered into in the ordinary course of business.
3. Except as set forth in the Preliminary Official Statement, no action, suit, proceeding, inquiry or investigation at law or in equity, before or by any court, regulatory agency, or public board or body is pending against the Developer (with proper service of process to the Developer having been accomplished) or, to the Actual Knowledge of the Undersigned, is pending against any current Affiliate (with proper service of process to such Affiliate having been accomplished) or to the Actual Knowledge of the Undersigned is threatened in writing against the Developer or any such Affiliate (a) to restrain or enjoin the collection of Special Taxes or other sums pledged or to be pledged to pay the principal of and interest on the Bonds (e.g., the Reserve Account of the Special Tax Fund established under the Indenture), (b) to restrain or enjoin the development of the Property as described in the Preliminary Official Statement, (c) in any way contesting or affecting the validity of the Special Taxes, or (d) which, if successful, is reasonably likely to materially and adversely affect the Developer’s ability to complete the development and sale of the Property as described in the Preliminary Official Statement or to pay the Special Taxes levied against the portion of the Property then owned by the Developer (to the extent the responsibility of the Developer) prior to delinquency.
4. As of the date of the Preliminary Official Statement, the information contained therein solely with respect to the Developer, its Affiliates, ownership of the Property, the Developer’s development plan, the Developer’s financing plan, the Developer’s lenders, if any, and contractual arrangements of the Developer or any Affiliates (including, if material to the Developer’s development plan or the Developer’s financing plan, other loans of such Affiliates) as set forth under the section of the Preliminary Official Statement captioned “PROPERTY OWNERSHIP AND THE DEVELOPMENT” (excluding therefrom in all cases information regarding the Appraisal Report, market value ratios and annual special tax ratios, and information which is identified as having been provided by a source other than the Developer), is true and correct in all material respects and did not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading.
5. Except as described in the Preliminary Official Statement, there are no material loans outstanding and unpaid and no material lines of credit of the Developer or its Affiliates, that are secured by an interest in the Property. Neither the Developer nor, to the Actual Knowledge of the Undersigned, any of its Affiliates is currently in material default on any loans, lines of credit or other obligation to repay borrowed money related to the development of the Property or any other project which default is reasonably likely to materially and adversely affect the Developer’s ability to develop the Property as described in the Preliminary Official Statement or to pay the Special Taxes levied against the portion of the Property then owned by the Developer (to the extent the responsibility of the Developer) prior to delinquency.
6. To the Actual Knowledge of the Undersigned, the Developer is not aware that any of the Property has a current liability with respect to the presence of a substance presently classified as hazardous under the federal Comprehensive Environmental Response, Compensation and Liability Act of 1980 or applicable California law or is adversely affected by the presence of endangered or threatened species or habitat for endangered or threatened species.
Item Title: 12.1
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7. The Developer covenants that, while the Bonds or any refunding obligations related thereto are outstanding, the Developer and its Affiliates which it controls will not bring any action, suit, proceeding, inquiry or investigation at law or in equity, before any court, regulatory agency, public board or body, that in any way seeks to challenge or overturn the formation of the Community Facilities District, to challenge the adoption of the ordinance of the Community Facilities District levying Special Taxes within the Community Facilities District, to invalidate the Community Facilities District or any of the Bonds or any refunding bonds related thereto, or to invalidate the special tax liens imposed under Section 3115.5 of the Streets and Highways Code based on recordation of the notices of special tax lien relating thereto. The foregoing covenant shall not prevent the Developer and its Affiliates in any way from bringing any other action, proceeding, inquiry or investigation at law or in equity, before any court, regulatory agency, public board or body including, without limitation, (a) an action or suit contending that the Special Tax has not been levied in accordance with the methodologies contained in the Rate and Method of Apportionment of Special Taxes pursuant to which Special Taxes are levied, (b) an action or suit with respect to the application or use of the Special Taxes levied and collected or (c) an action or suit to enforce the obligations of the City and/or the Community Facilities District under the Community Facilities District Resolutions, the Indenture, or any other agreements among the Developer, the City and/or the Community Facilities District or to which the Developer is a beneficiary.
8. The Developer consents to the issuance of the Bonds. The Developer expects that the proceeds of the Bonds will be used as described in the Preliminary Official Statement.
9. The Developer intends to comply with the provision of the Mello-Roos Community Facilities District Act of 1982, as amended relating to the Notice of Special Tax described in Government Code Section 53341.5 in connection with the sale of the Property, or portions thereof.
10. To the Actual Knowledge of the Undersigned, the Developer is able to pay its bills as they become due and no legal proceedings are pending against the Developer (with proper service of process having been accomplished) or, to the Actual Knowledge of the Undersigned, threatened in writing in which the Developer may be adjudicated as bankrupt or discharged from any and all of its debts or obligations, or granted an extension of time to pay its debts or obligations, or be allowed to reorganize or readjust its debts, or be subject to control or supervision of the Federal Deposit Insurance Corporation.
11. To the Actual Knowledge of the Undersigned, Affiliates of the Developer are able to pay their bills as they become due and no legal proceedings are pending against any Affiliate of the Developer (with proper service of process having been accomplished) or to the Actual Knowledge of the Undersigned, threatened in writing in which the Affiliates of the Developer may be adjudicated as bankrupt or discharged from any or all of their debts or obligations, or granted an extension of time to pay their debt or obligations, or be allowed to reorganize or readjust their debts or obligations, or be subject to control or supervision of the Federal Deposit Insurance Corporation.
12. The Developer has been developing or has been involved in the development of numerous projects over an extended period of time. It is likely that the Developer has been delinquent at one time or another in the payment of ad valorem property taxes, special taxes or special assessments. However, to the Actual Knowledge of the Undersigned, during the last five Item Title: 12.1
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years, neither the Developer nor any current Affiliate has, during the period of its ownership, been delinquent to any material extent in the payment of any ad valorem property tax, special assessment or special tax on property in California owned by the Developer or any such Affiliate (during the period of their ownership) included within the boundaries of a community facilities district or an assessment district in California that (a) caused a draw on a reserve fund relating to such assessment district or community facilities district financing or (b) resulted in a foreclosure action being commenced against the delinquent Developer or Affiliate by a court filing.
13. The Developer has not filed for the reassessment of the assessed value of portions of the Property, other than in connection with the sale of homes to individual homebuyers.
14. To the Actual Knowledge of the Undersigned, there are no claims, disputes, suits, actions or contingent liabilities by and among the Developer, its Affiliates or any contractors working on the development of the Property which is reasonably likely to materially and adversely affect the Developer’s ability to develop the Property as described in the Preliminary Official Statement or to pay the Special Taxes levied against the portion of the Property then owned by the Developer (to the extent the responsibility of the Developer) prior to delinquency.
15. Based upon the current development plans, including, without limitation, the current budget and subject to economic conditions and risks generally inherent in the development of real property, including, but not limited to, the risks described in the Preliminary Official Statement under the section entitled “SPECIAL RISK FACTORS,” the Developer presently anticipates that it will have sufficient funds to complete the development of the Property as described in the Preliminary Official Statement and to pay the Special Taxes levied against the portion of the Property then owned by the Developer (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 Account of the Special Tax Fund for payment of principal of or interest on the Bonds due to the Developer’s nonpayment of Special Taxes. However, neither the Developer nor any of its Affiliates are obligated to pay the Special Taxes or to make any additional capital contribution or loan to the Developer at any time, and the Developer reserves the right to change its respective development plan and financing plan for the Property at any time without notice, and there is no recourse against the Developer for the failure to pay the Special Taxes other than the filing of a foreclosure action.
16. An appraisal of the taxable properties within the Community Facilities District, dated August 26, 2022 (the “Appraisal Report”), with a date of value of August 1, 2022 (the “Date of Value”), was prepared by Kitty Siino & Associates, Inc. (the “Appraiser”). The Appraisal Report estimates the market value of the appraised taxable properties within the Community Facilities District as of the Date of Value. To Actual Knowledge of the Undersigned, all information submitted by, or on behalf of and authorized by, the Developer to the Appraiser and contained in the sections of the Appraisal Report highlighted in yellow or circled in Exhibit B attached hereto, was true and correct in all material respects as of the Date of Value.
17. If between the date hereof and the Closing Date any event relating to or affecting the Developer, its Affiliates, ownership of the Property, the Developer’s development plan, the Developer’s financing plan, the Developer’s lenders, if any, and contractual arrangements of the Developer or any Affiliates (including, if material to the Developer’s development plan or the Developer’s financing plan, other loans of such Affiliates) shall occur of which the Developer has actual knowledge which would cause the information under the sections of the Preliminary Item Title: 12.1
Community Facilities District 2020-2, Del Oro, Issuance of Special Tax Bonds Item Page Number: 182
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Official Statement indicated in Paragraph 4 hereof, 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 information described in the section of the Preliminary Official Statement referenced in Paragraph 4 hereof, the Developer shall reasonably cooperate with the City and the Community Facilities District in the preparation of an amendment or supplement to the Preliminary Official Statement in form and substance satisfactory to counsel to the City, the Community Facilities District and to the Underwriter.
18. The Developer agrees to deliver a Closing Certificate dated the date of issuance of the Bonds at the time of issuance of the Bonds in substantially the form attached as Exhibit A.
19. On behalf of the Developer, the undersigned has reviewed the contents of this Letter of Representations and has consulted with counsel to the Developer regarding the meaning of its contents. The undersigned acknowledges and understands that a variety of state and federal securities laws, including but not limited to the Securities Act of 1933 and Rule 10b-5 promulgated under the Securities Exchange Act of 1934, may apply to the Developer and that under some circumstances certification as to the matters set forth in this Letter of Representations, without additional disclosures or other action, may not fully discharge all duties and obligations of the Developer under such securities laws.
The undersigned has executed this Letter of Representations solely in his or her capacity as an officer of the Developer and he or she will have no personal liability arising from or relating to this Letter of Representations. Any liability arising from or relating to this Letter of Representations may only be asserted against the Developer subject to the limitations and procedures set forth above.
D.R. HORTON LOS ANGELES HOLDING
COMPANY, INC.
By:
Name:
Title:
[EXECUTION PAGE OF LETTER OF REPRESENTATIONS –
D.R. HORTON LOS ANGELES HOLDING COMPANY, INC.]
Item Title: 12.1
Community Facilities District 2020-2, Del Oro, Issuance of Special Tax Bonds Item Page Number: 183
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EXHIBIT C
COMMUNITY FACILITIES DISTRICT NO. 2020-2 (DEL ORO)
OF THE CITY OF MENIFEE
SPECIAL TAX BONDS, SERIES 2022A
CLOSING CERTIFICATE – D.R. HORTON LOS ANGELES HOLDING COMPANY, INC. [Closing Date]
City of Menifee
Community Facilities District No. 2020-2 (Del Oro)
29844 Haun Road
Menifee, California 92586
Stifel, Nicolaus & Company, Incorporated
2121 Avenue of the Stars, Suite 2050
Los Angeles, California 90067
Ladies and Gentlemen:
Reference is made to the above-captioned bonds (the “Bonds”) and to the Bond Purchase Agreement, dated [BPA Date] (the “Bond Purchase Agreement”), entered into in connection therewith. This certificate is delivered pursuant to the Bond Purchase Agreement. Capitalized terms used herein and not otherwise defined have the meanings ascribed to them in the Letter of Representations (the “Letter of Representations”), dated [POS Date], delivered by D.R. Horton Los Angeles Holding Company, Inc. (the “Developer”), which is attached hereto as Exhibit A.
The undersigned certifies that he or she is familiar with the facts herein certified and is authorized and qualified to certify the same as an authorized officer or representative of the Developer, and the undersigned, on behalf of the Developer, further certifies as follows:
1. The Developer has received the final Official Statement relating to the Bonds, dated [BPA Date] (the “Official Statement”). To the Actual Knowledge of the Undersigned, each statement, representation and warranty made in the Letter of Representations is true and correct in all material respects on and as of the date hereof with the same effect as if made on the date hereof, except that all references therein to the Preliminary Official Statement shall be deemed to be references to the final Official Statement.
2. To the Actual Knowledge of the Undersigned (as defined in the Letter of Representations), no event has occurred since the date of the Preliminary Official Statement that has, in any material way, adversely affected:
(i) the ability of the Developer to carry on its business as described in the Preliminary Official Statement;
Item Title: 12.1
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(ii) the ability of the Developer to own, develop and sell the Property, as described in the Preliminary Official Statement; or
(iii) the ability of the Developer to pay Special Taxes on the Property (to the extent the responsibility of the Developer) prior to delinquency.
3. For the period through 25 days after the “end of the underwriting period” as defined in the Bond Purchase Agreement to mean the Closing Date unless the Underwriter gives notice to the contrary, if any event relating to or affecting the Developer, its Affiliates, the proposed development of the Property, ownership of the Property, the Developer’s development plan, the Developer’s financing plan, the Developer’s lenders, if any, and contractual arrangements of the Developer or any Affiliates (including, if material to the Developer’s development plan or the Developer’s financing plan, other loans of such Affiliates) shall occur as a result of which it is necessary, in the opinion of the Underwriter or counsel to the City or the Community Facilities District, to amend or supplement the Official Statement in order to make the Official Statement not misleading in the light of the circumstances existing at the time it was delivered to a purchaser, the Developer shall reasonably cooperate with the City, the Community Facilities District and the Underwriter in the preparation and publication of a supplement or amendment to the information described in the section of the Official Statement referenced in Paragraph 4 of the Letter of Representations, in form and substance satisfactory to the Underwriter and counsel to the City and the Community Facilities District which will amend or supplement the Official Statement so that it will not contain an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances existing at the time the Official Statement is delivered to a purchaser, not misleading.
The undersigned has executed this Closing Certificate solely in his or her capacity as an authorized officer or representative of the Developer and he or she will have no personal liability arising from or relating to this Closing Certificate. Any liability arising from or relating to this Closing Certificate may only be asserted against the Developer.
D.R. HORTON LOS ANGELES HOLDING
COMPANY, INC.
By:
Name:
Title:
[EXECUTION PAGE OF CLOSING CERTIFICATE – D.R. HORTON LOS ANGELES HOLDING COMPANY, INC.]
Item Title: 12.1
Community Facilities District 2020-2, Del Oro, Issuance of Special Tax Bonds Item Page Number: 185
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EXHIBIT B
COMMUNITY FACILITIES DISTRICT NO. 2020-2 (DEL ORO)
OF THE CITY OF MENIFEE
SPECIAL TAX BONDS, SERIES 2022A
DEVELOPER PROVIDED INFORMATION IN APPRAISAL REPORT
See attached.
Item Title: 12.1
Community Facilities District 2020-2, Del Oro, Issuance of Special Tax Bonds Item Page Number: 186
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EXHIBIT D
$_______
COMMUNITY FACILITIES DISTRICT NO. 2020-2 (DEL ORO)
OF THE CITY OF MENIFEE
SPECIAL TAX BONDS, SERIES 2022A
FORM OF ISSUE PRICE CERTIFICATE
The undersigned, on behalf of Stifel, Nicolaus & Company, Incorporated (“Stifel”) hereby certifies as set forth below with respect to the sale and issuance of the above-captioned bonds (the “Bonds”).
1.Sale of the General Rule Maturities. As of the date of this certificate, for each Maturity of the General Rule Maturities, the first price at which at least 10% of such Maturity was sold to the Public is the respective price listed in Schedule A.
2.Defined Terms.
(a)General Rule Maturities means those Maturities of the Bonds listed in Schedule A hereto as the “General Rule Maturities.”
(b)Issuer means the Community Facilities District No. 2020-2 (Del Oro) of the City of Menifee.
(c)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.
(d)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. (e)Underwriter means (i) any person that agrees pursuant to a written contract with the Issuer (or with the lead underwriter to form an underwriting syndicate) to participate in the initial sale of the Bonds to the Public, and (ii) any person that agrees pursuant to a written contract 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).
The representations set forth in this certificate are limited to factual matters only. Nothing in this certificate represents Stifel’s interpretation of any laws, including specifically Sections 103 and 148 of the Internal Revenue Code of 1986, as amended, and the Treasury Regulations thereunder.
The undersigned understands that the foregoing information will be relied upon by the Issuer with respect to certain of the representations set forth in the Tax Certificate and with respect to compliance with the federal income tax rules affecting the Bonds, and by Stradling Yocca Carlson & Rauth, a Professional Corporation in connection with rendering its opinion that the interest on the Bonds is excluded from gross income for federal income tax purposes, the preparation of the Internal Item Title: 12.1
Community Facilities District 2020-2, Del Oro, Issuance of Special Tax Bonds Item Page Number: 187
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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.
STIFEL, NICOLAUS & COMPANY,
INCORPORATED
By:
Name:
By:
Name:
Dated: [Closing Date]
Item Title: 12.1
Community Facilities District 2020-2, Del Oro, Issuance of Special Tax Bonds Item Page Number: 188
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SCHEDULE A
SALE PRICES OF THE GENERAL RULE MATURITIES
(To be attached)
Item Title: 12.1
Community Facilities District 2020-2, Del Oro, Issuance of Special Tax Bonds Item Page Number: 189
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APPRAISAL REPORT
CITY OF MENIFEE
COMMUNITY FACILITIES DISTRICT NO. 2020-2
DEL ORO BY D.R. HORTON
City of Menifee, Riverside County, California
(Appraiser’s File No. 2022-1265)
Prepared For
City of Menifee
29844 Haun Road
Menifee, California 92586
Prepared By
Kitty Siino & Associates, Inc.
115 East Second Street, Suite 100
Tustin, California 92780
Item Title: 12.1
Community Facilities District 2020-2, Del Oro, Issuance of Special Tax Bonds Item Page Number: 190
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KITTY SIINO & ASSOCIATES, INC.
REAL ESTATE APPRAISERS & CONSULTANTS
August 26, 2022
Regina Funderbunk, Chief Financial Officer
CITY OF MENIFEE
29844 Haun Road
Menifee, California 92586
Reference: Appraisal Report – City of Menifee
Community Facilities District No. 2020-2
Del Oro by D.R. Horton, Menifee, California
Dear Ms. Funderbunk:
At the request and authorization of the City of Menifee, we have completed an Appraisal Report for Community Facilities District No. 2020-2 of the City of Menifee (“Menifee CFD No. 2020-2”). Menifee CFD No. 2020-2 encompasses a new home project known as Del Oro by D.R. Horton. Del Oro has a total of 68 proposed homes. Del Oro offers single and two-story detached homes situated on 7,200 minimum square foot lots with 49 completed homes closed to individuals. The remai nder of the lots are owned by D.R. Horton and range from completed models to homes under construction.
The valuation method used in this report is the Sales Comparison Approach along with a Discounted Cash Flow Analysis and a Mass Appraisal Technique as defined within this report. The fee simple estate of the subject property has been valued subject to the Menifee CFD No. 2020- 2 special tax lien. This report is written with the hypothetical condition that the subject property is enhanced by the improvements and/or fee credits to be funded by bonds issued by Menifee CFD No. 2020-2. As a result of our investigation, the concluded market value for the subject property is:
Del Oro by D.R. Horton
D.R. Horton Owned (17 homes & 2 lots) $ 7,465,823
Individual Owned (49 homes) $ 30,264,825
Aggregate Value of Menifee CFD No. 2020-2 $ 37,730,648
The above values are stated subject to the Assumptions and Limiting Conditions of this report, the Appraiser’s Certification and as of August 1, 2022.
115 East Second Street, Suite 100, Tustin, California 92780 (714) 544-9978 - Phone, (714) 544-9985 – Fax, E-Mail: [email protected] Item Title: 12.1
Community Facilities District 2020-2, Del Oro, Issuance of Special Tax Bonds Item Page Number: 191
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Regina Funderbunk
CITY OF MENIFEE
August 26, 2022
Page Two
Some supporting documentation concerning the data, reasoning and analyses may be retained in the appraiser’s files. The information contained in this report is specific to the needs of the client and for the intended use stated in this report. This Appraisal Report is intended to comply with both the Uniform Standards of Professional Appraisal Practice (“USPAP” January 2020) and with the Appraisal Standards of the California Debt and Investment Advisory Commission (“CDIAC”). The appraiser is not responsible for unauthorized use of this report.
This letter of transmittal is part of the attached report, which sets forth the data and analyses upon which our opinion of value is, in part, predicated.
Respectfully submitted,
KITTY SIINO & ASSOCIATES, INC.
Kitty S. Siino, MAI
California State Certified General
Real Estate Appraiser (AG004793)
Item Title: 12.1
Community Facilities District 2020-2, Del Oro, Issuance of Special Tax Bonds Item Page Number: 192
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TABLE OF CONTENTS
Assumptions and Limiting Conditions............................................................................... i Hypothetical Condition .................................................................................................... iii Extraordinary Assumption ............................................................................................... iii Aerial Photo of Menifee CFD No. 2020-2 ........................................................................ iv Purpose of the Appraisal ................................................................................................ 1 The Subject Property ...................................................................................................... 1 Intended Use of the Report ............................................................................................. 1 Definitions ...................................................................................................................... 2 Property Rights Appraised ............................................................................................. 4 Effective Date of Value ................................................................................................... 4 Date of Report ................................................................................................................ 4 Scope of Appraisal ........................................................................................................ 4 Regional Area Map.......................................................................................................... 7 County of Riverside Area Description ............................................................................. 8 Menifee Area Map ......................................................................................................... 18 City of Menifee Description ........................................................................................... 19 Immediate Surroundings .............................................................................................. 22 Community Facilities District No. 2020-2 ....................................................................... 24 Subject Property Description ......................................................................................... 26 Riverside County Housing Market ................................................................................. 32 Highest and Best Use Analysis ..................................................................................... 41 Valuation Analyses and Conclusions ............................................................................ 45 Appraisal Report Summary ........................................................................................... 59 Appraiser’s Certification ............................................................................................... 60
ADDENDA
CFD No. 2020-2 Boundary Map
Tract Map No. 36852
Discounted Cash Flow Analysis
Residential Land Sales Map and Summary Chart
Improved Residential Sales Map and Summary Chart
Appraiser’s Qualifications
Item Title: 12.1
Community Facilities District 2020-2, Del Oro, Issuance of Special Tax Bonds Item Page Number: 193
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_________________________________________________________________________________________________________ Menifee CFD No. 2020-2 – Del Oro by D.R. Horton
Kitty Siino & Associates, Inc. Page i
ASSUMPTIONS AND LIMITING CONDITIONS
1. This report is an Appraisal Report that is intended to comply with the reporting requirements set forth under Standard Rule 2 of the Uniform Standards of Professional Appraisal Practice. The information contained in this report is specific to the needs of the client and for the intended use stated in this report. The appraiser is not responsible for unauthorized use of this report.
2. No responsibility is assumed for le gal or title considerations. Title to the property is assumed to be good and marketable unless otherwise stated in this report.
3. The property is appraised subject to the special tax lien of Menifee CFD No. 2020-
2. 4. Responsible ownership and competent property management are assumed unless otherwise stated in this report.
5. The information furnished by others is believed to be reliable, however, no warranty is given for its accuracy.
6. All engineering is assumed to be correct. Any plot plans and illustrative material used in this report are included only to assist the reader in visualizing the property and may not be to scale.
7. It is assumed that there are no hidden or unapparent conditions of the property, subsoil or structures that would render it more or less valuable. No responsibility is assumed for such conditions or for arranging for engineering studies that may be required to discover them.
8. It is assumed that there is full compliance with all applicable federal, state and local environmental regulations and laws unless otherwise stated in this report.
9. It is assumed that all applicable zoning and use regulations and restrictions have been complied with, unless nonconformity has been stated, defined and considered in this appraisal report.
10. It is assumed that all required licenses, certificates of occupancy or other legislative or administrative authority from any local, state or national governmental or private entity or organization have been or can be obtained or renewed for any use on which the value estimates contained in this report are based.
11. Any sketch included in this report may show approximate dimensions and is included only to assist the reader in visualizing the properties. Maps and exhibits found in this report are provided f or reader reference purposes only. No guarantee regarding accuracy is expressed or implied unless otherwise stated in this report. No survey has been made for the purpose of this report.
Item Title: 12.1
Community Facilities District 2020-2, Del Oro, Issuance of Special Tax Bonds Item Page Number: 194
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_________________________________________________________________________________________________________ Menifee CFD No. 2020-2 – Del Oro by D.R. Horton
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12. It is assumed that the utilization of the land and improvements are within the boundaries or property lines of the property described and that there is no encroachment or trespass unless otherwise stated in this report.
13. The appraiser is not qualified to detect hazardous waste and/or toxic materials. Any comment by the appraiser that might suggest the possibility of the presence of such substances should not be taken as confirmation of the presence of hazardous waste and/or toxic materials. Such determination would require investigation by a qualified expert relating to asb estos, urea-formaldehyde foam insulation or other potentially hazardous materials that may affect the value of the property. The appraiser’s value estimate is predicated on the assumption that there is no such material on or in the property that would cause a loss in value unless otherwise stated in this report. No responsibility is assumed for any environmental conditions or for any expertise or engineering knowledge required to discover them. The appraiser’s descriptions and resulting comments are the res ult of the routine observations made during the appraisal process.
14. Proposed improvements , if any, are assumed to be completed in a good workmanlike manner in accordance with the submitted plans and specifications.
15. The distribution, if any, of the total v aluation in this report between land and improvements applies only under the stated program of utilization. The separate allocations for land and buildings , if any, must not be used in conjunction with any other appraisal and are invalid if so used.
16. The Americans with Disabilities Act (“ADA”) became effective on January 26, 1992.
The appraiser has made no specific compliance survey and analysis of the property to determine whether they conform to the various detailed requirements of the ADA, nor is the appraiser a qualified expert regarding the requirements of the ADA. It is possible that a compliance survey of the property, together with a detailed analysis of the requirements of the ADA, could reveal that the property is not in compliance with one or more of the requirements of the ADA. If so, this fact could have a negative effect upon the value of the property. Since the appraiser has no direct evidence relating to this issue, a possible noncompliance with requirements of the ADA in estimating the value has not been considered.
17. It is assumed there are no environmental concerns that would slow or thwart development of the subject property and that the soils are adequate to support the highest and best use conclusion.
18. Possession of this report, or a copy thereof, does not carry with it the right of publication. It may not be used for any purpose by any person other than the party to whom it is addressed without the written consent of the appraiser, and in any event, only with proper qualification and only in its entirety. Permission is given for this appraisal to be published as a part of the Official Statement or similar document in association with the Menifee CFD No. 2020-2 Special Tax Bonds.
Item Title: 12.1
Community Facilities District 2020-2, Del Oro, Issuance of Special Tax Bonds Item Page Number: 195
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_________________________________________________________________________________________________________ Menifee CFD No. 2020-2 – Del Oro by D.R. Horton
Kitty Siino & Associates, Inc. Page iii
HYPOTHETICAL CONDITION
1. It is assumed that all improvements and/or benefits to the subject properties, which are to be funded by the Menifee CFD No. 2020-2 Special Tax Bond proceeds, are completed and in place or have accrued to the property.
EXTRAORDINARY ASSUMPTION
1. It is an extraordinary assumption that the reported sales and remaining land development costs as received from the builders are true and accurate. We have reviewed both the sales and cost information and they appear reasonable. However, we have not reviewed escrow documents on each sale and we are not experts in cost estimating. If the cost estimates change, it may change the value conclusions.
Item Title: 12.1
Community Facilities District 2020-2, Del Oro, Issuance of Special Tax Bonds Item Page Number: 196
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_________________________________________________________________________________________________________ Menifee CFD No. 2020-2 – Del Oro by D.R. Horton
Kitty Siino & Associates, Inc. Page iv
Item Title: 12.1
Community Facilities District 2020-2, Del Oro, Issuance of Special Tax Bonds Item Page Number: 197
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_________________________________________________________________________________________________________ Menifee CFD No. 2020-2 – Del Oro by D.R. Horton
Kitty Siino & Associates, Inc. Page 1
PURPOSE OF THE APPRAISAL
The purpose of this appraisal report is to estimate the value of the fee simple interest of the subject property, subject to the special tax lien of the Menifee CFD No. 2020-2 Special Tax Bonds.
THE SUBJECT PROPERTY
The subject property is encompassed by Menifee CFD No. 2020- 2 and is proposed for 68 single-family detached homes being built out into a community known as Del Oro by D.R. Horton. The subject property is located in Menifee, Riverside County. Del Oro is located at the southwest corner of Palomar and Holland Roads in the central portion of Menifee just east of I-215. Del Oro is covered by Tract Map No. 36852 which subdivides the lands into 68 single-family detached lots with a minimum lot size of 7,200 square feet.
As of the date of value of this report, Del Oro has a total of 49 homes complete and closed to individuals, with the builder owning two model homes (both in escrow), 15 homes that are over 95 percent complete ( 11 in escrow) and two homes under construction (both available for sale). The status of each of the lots is detailed below.
Del Oro
No.
Lots
Ownership
Condition
Tract No. 36852
Lots 6-23, 31 – 37, 39-43, 50-68 49 Individuals Completed Homes Lots 3-4 2 DR Horton Model Homes (2 in escrow)
Lots 1, 24-30, 38, 44-49 15 DR Horton Over 95% complete (11 in escrow)
Lots 2 and 5 2 DR Horton Under Construction (none in
escrow)
TOTAL 68
INTENDED USE OF THE REPORT
It is the appraiser’s understanding that the client, the City of Menifee will utilize this report in disclosure documents associated with selling bonds for Menifee CFD No. 2020-2 and that this report is to be included in the Official Statement or similar document to be Item Title: 12.1
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distributed in connection with the offering of the bonds. It is the appraiser’s understanding that there are no other intended uses of this report.
DEFINITIONS
Market Value
The term “Market Value” as used in this report is defined as:
"The most probable price which a property should bring in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller each acting prudently, knowledgeably and assuming the price is not affected by undue stimulus. Implicit in this definition is the consummation of a sale as of a specified date and the passing of title from seller to buyer under conditions whereby:
1. buyer and seller are typically motivated;
2. both parties are well informed or well advised, and each acting in what he or she considers his or her own best interest;
3. a reasonable time is allowed for exposure in the open market;
4. payment is made in terms of cash in U.S. dollars or in terms of financial arrangements comparable thereto; and
5. the price represents the normal consideration for the property sold unaffected by special or creative financing or sales concessions granted by anyone associated with the sale.”
1 Inherent in the Market Value definition is exposure time or the time the property would have had to have been exposed on the open market prior to the appraisal in order to sell at the concluded values. In the case at hand and considering current market conditions the exposure time for the bulk builder-owned lots/houses or for an individually owned home is under one year.
Minimum Market Value
The term “Minimum Market Value” as used in this report is defined as:
“The base market value of a home. That is, most buyers purchase some upgrades, options and/or lot premiums when purchasing a new home. The sales price for the new home typically includes the base price for the plan, plus any upgrades, options or lot premiums, less concessions, if any, which were given or paid for by the builder. The concluded minimum market value
1 The Appraisal of Real Estate, 13th Edition
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is for the base value of the plan only, not taking into consideration any upgrades, options or premiums.”
Mass Appraisal
The term “Mass Appraisal” as used in this report is defined as:
“The process of valuing a universe of properties as of a given date using standard methodology employing common data and allowing for statistical testing”2
In the case at hand, the statistical testing included reviewing all original builder sales , reviewing the Multiple Listing Service for resales and current resale escrows (if any) and determining the actual range of sales and escrow prices for each plan type which is utilized in the valuation process.
Hypothetical Condition
The Term “Hypothetical Condition” is defined by USPAP as:
“That which is contrary to what exists but is supposed for the purpose of the analysis”
The Hypothetical Condition within this report is that subject property is enhanced by the improvements and/or fee credits to be funded by bonds issued by Menifee CFD No. 2020-
2. Extraordinary Assumption
The term “extraordinary assumption” is defined by USPAP as:
“An assumption, directly related to a specific assignment, which, if found to be false, could alter the appraiser’s opinions or conclusion”
The extraordinary assumption in this report is that the reported sales information and remaining land development cost information, as received from the builder, are true and accurate. We have reviewed the sales information and verified samples against public record information; however, all sales have not been verified through public record. In addition, we have reviewed the costs and they appear reasonable; however, we are not
2 USPAP 2016-2017 Edition
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experts in the field of cost estimating. It should be noted that these costs were relied upon in the valuation of the subject propert ies and if the actual costs differ, it could alter the value conclusions.
PROPERTY RIGHTS APPRAISED
The property rights being appraised are of a fee simple interest, subject to easements of record and Menifee CFD No. 2020- 2. The definition of “fee simple estate” is defined by USPAP as:
“absolute ownership unencumbered by any other interest or estate, subject only to the limitations imposed by the governmental powers of taxation, eminent domain, police power, and escheat.”
EFFECTIVE DATE OF VALUE
The subject property is valued as of August 1, 2022.
DATE OF REPORT
The date of this report is August 26, 2022.
SCOPE OF APPRAISAL
As previously stated, the purpose of this appraisal is to report the appraiser ’s best estimate of the market value for the subject properties. This appraisal will be presented in the following format:
• County of Riverside Description
• City of Menifee Description
• Immediate Surroundings
• Brief Description of Menifee CFD No. 2020-2
• Subject Property Description
• Riverside County Housing Market Discussion
• Highest and Best Use Analysis
• Valuation Procedure, Analysis and Conclusions
• Appraisal Report Summary
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The subject property consists of 68 proposed single-family houses. There are 49 homes completed and closed to individuals, two models (both in escrow ), 15 homes over 95 percent complete ( 11 in escrow) and two final homes under construction (available for sale). In valuing the subject property, the value estimates will be based upon the highest and best use conclusion using the Sales Comparison Approach. The Sales Comparison Approach to value is defined as:
“…a set of procedures in which a value indication is derived by comparing the property being appraised to similar properties that have been sold recently, then applying appropriate units of comparison and making adjustments to the sale prices of the comparables based on the elements of comparison. The sales comparison approach may be used to value improved properties, vacant land, or land being considered as though vacant; it is the most common and preferred method of land valuation when an adequate supply of comparable sales is available.”
3 In the Sales Comparison Approach, market value is estimated by comparing properties similar to the subject property that have recently been sold, are listed for sale or are under contract. Neither a cost or income approach was utilized as they were not considered necessary to arrive at credible results.
The due diligence of this appraisal assignment included the following:
1. Compiled demographic information and related that data to the subject propert ies to perform a feasibility/demand analysis.
2. Gathered and analyzed information on the subject marketplace, reviewed several real estate brokerage publications on historical and projected growth in the subject market and researched the micro and macroeconomics within Riverside County and the Menifee area.
3. Inspected the subject property between June 15, 2022 and August 1, 2022.
4. Had the property flown for an aerial photograph on July 12, 2022.
5. Interviewed r epresentatives from the builder to obtain available information on the subject property.
6. Reviewed a Preliminary Title Report on the subject property.
7. Reviewed a Soils Report on the subject property.
3Dictionary of Real Estate Appraisal, 4th Edition, 2002 Item Title: 12.1
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8. Searched the area for relevant comparable new home residential projects, including sales prices and concessions and interviewed representatives from each comparable neighborhood.
9. Reviewed sales brochures and sales information on the subject neighborhood.
10. Reviewed actual builder sales information on all closed homes and current escrows for the subject neighborhood.
11. Reviewed Multiple Listing Service (“MLS”) information on resales and current resale listings of existing homes within Menifee CFD No. 2020-2.
12. Inspected the subject propert y for any for-sale or property listing signs that may not be listed on the MLS yet.
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REGIONAL AREA MAP
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COUNTY OF RIVERSIDE AREA DESCRIPTION
Location
The subject property is located in the southern portion of Riverside County (the “County”) east of Interstate 215 (“I-215”) between Newport and Scott Roads . The area is located in the central portion of the City of Menifee (the “City”).
The County encompasses approximately 7,300 square miles, and i ncludes large expanses of undeveloped deserts, valleys, canyons and mountains. The County is a major beneficiary of outward urban pressure from Orange and Los Angeles Counties as well as growth from San Diego County to the south. Although located at the periphery of most urban activity in Southern California, Riverside County, particularly the western area, has been a major growth area and is perceived by most observers as an area expected to continue to grow. Riverside and San Bernardino Counties are considered distinct from Los Angeles and Orange Counties and belong to the same Metropolitan Statistical Area (“MSA”). This area, consisting of San Bernardino and Riverside Counties, is commonly referred to as the Inland Empire.
Transportation
The subject property is situated northeast of I-15 and east of I-215, south of Newport Road and north of Scott Road, specifically at the southwest corner of Holland and Palomar Roads . I-15 (approximately eight miles west of the subject) travels in a northerly/southerly direction and provides access to Barstow and Nevada to the north and San Diego to the south. Highway 74 is approximately ten miles northwest and provides access to the west into Orange County on what is als o known as Ortega Highway.
Interstate 215 is 0.25 miles west of the subject , and travels in a northerly/southerly direction within the County, branching off from I-15 and heading generally north where it parallels I-15 to the east and merges back into I -15 approximately 40 miles northwest of the subject in San Bernardino County. In addition, the 60 Freeway runs in an east -west direction approximately 18 miles north of the subject providing access into Los Angeles County to the west and merges with Interstat e 10 to the east which provides access across California and into Arizona.
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The County is served by Amtrak and Metrolink as well as several rail freight lines. The Ontario International Airport provides regional air service and is located approximately 35 miles northwest of the subject property while the Orange County Airport is located about 40 miles west and the San Diego International Airport i s located approximately 65 miles south. In addition, the County has extensive trucking corridors along the previously referred to interstates, highways and state freeways.
Population
The County has experienced population growth for several decades and is anticipated to continue to do so in the foreseeable future. Per the California Department of Finance, the January 1, 2022 County population was 2.436 million, representing a one- year increase of 0.5 percent. This compares to an average annual growth rate over the past twelve years of about 0.9 percent, and an average annual growth rate of approximately 2.5 percent for the previous eighteen- year period. Current State projections for Riverside County suggest the population is anticipated to reach approximately 2.728 million by 2030, indicating an average annual increase of approximately 1.49 percent over the next eight years. The current growth of 0.5 percent is lower than the previous twelve- year annual average of about 0.9 percent likely due to the COVID pandemic disruption, and significantly lower than the previous 18-year average (2.5 percent) likely due to the Great Recession. The future growth is predicted assuming a more stable market than was seen prior to the Great Recession.
Economy
Both the global and U.S. economies have been volatile recently due to high inflation, increasing interest rates, the Russia/Ukraine war and falling consumer confidence.
Beginning February 20, 2020, the U.S. began experiencing an unprecedented economic disruption due to the COVID-19 pandemic. Original predictions were for deaths from the virus to overwhelm hospitals and staff. While the U.S. has lost over 1,000,000 lives due to COVID-19, aside from a few exceptions, hospitals have, thus far, had the capacity to treat the patients. January 2021 was the deadliest month in the U.S.; however, cases then declined rapidly as vaccination rates rose. The summer of 2021 saw the beginning of new variants of the disease which increased infection and hospitalization rates once Item Title: 12.1
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again; but not to the extent of the previous winter with hospitalizations of vaccinated people significantly lower. By summer of 2022, most mandates have been rescinded and the COVID pandemic appears to be transitioning to an endemic. The fall out has been the supply chain disruption along with the prevalent inflation.
The Federal, State, County and City Governments (“Governments”) originally shut down non-essential businesses and areas where social gatherings occur in March 2020 in order to slow the spread of the virus. This created a strain on small and large businesses alike.
Restaurants and hotels were hit hard as travel reduced drastically when citizens were urged to stay home. Layoffs occurred with reports of 40 million people filing for unemployment the first few months of the pandemic. This disruption originally caused extreme instability in the stock market. However, in early January 2022, the Dow Jones Industrial Average (“DJIA”) hit an all-time high of 36,799. On February 24, 2022 , Russia began invading Ukraine which caused volatility in world economics and, more recently, U.S. inflation is hitting historical highs , resulting in the Federal Reserve Board raising interest rates. Both these factors have caused the DJIA to drop nearly 11 percent year to date to 32,784 as of August 1, 2022.
During the pandemic, the Federal Government attempted to curtail the job losses and hardships with the approval of legislation. These included the Coronavirus Aid, Relief and Economic Security (CARES) Act (March 27, 2020), the Federal Reserve providing $2.3 trillion in loans (April 9, 2020) and the American Rescue Plan Act (March 2021) , along with several smaller acts to provide relief during the pandemic. It appears these stimuli totaling $5.6 trillion in COVID relief helped shore up the U.S. economy; however, due to the significant amount of new money introduced into the economy, inflation increased.
Inflation is occurring in the United States at a rate not seen for 40 years. As of the end of June 2022, inflation was running at over nine percent from the previous year. Whether it’s a result of the supply chain issues or from the addition of money entering the economy, inflation is hitting Americans hard. The Russian invasion of Ukraine created significant volatility in gas prices which, along with seasonal gas fluctuations, has further increased the rate of inflation. The Federal Reserve Board announced the beginning of several Item Title: 12.1
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increases in the Federal Reserve Rate (“Rate”). Thus far there have been four increases:
the first March 17, 2022 for one- quarter percent, the second May 4, 2022 for one- half percent, the third June 16, 2022 for three- quarters percent and the fourth July 27, 2022 for an additional three- quarters percent . The Board has stated there will be further increases in order to slow down inflation. These Rate increases are creating further volatility in the stock market.
While many jobs have come back since the onset of the pandemic, job losses were huge with the Nation’s unemployment rate going from 3.5 percent in February 2020 to 14.4 percent in April 2020 . The most recent June 2022 National preliminary unemployment rate is at 3.8 percent (not seasonally adjusted, per the State of California’s Employment Development Department “EDD” June 2022 Release), close to the pre- pandemic rate.
The Nation’s gross domestic product (GDP) rate of growth was 5.7 percent in 2021, which is the largest annual increase since 1984. It should be noted the rate is compared to the 2020 year, which included the stopped economy due to the introduction of COVID. The current growth rate for the US Economy has been negative for the first and second quarter of 2022, with current forecasts in the 1.7 percent range of GDP growth for all of 2022.
This compares to a national GDP growth of 2.3 percent in 2019, prior to the pandemic.
The unemploy ment rate for the Riverside -San Bernardino MSA was estimated at 4.0 percent (as of June 2022 per the EDD). This reflects a decrease from the peak during the Great Recession of 15.1 percent in 2010 and a decrease from the peak during the COVID pandemic of 14.9 percent. The MSA unemployment rate is the same as February 2020’s
4.0 percent, prior to the pandemic outbreak. The unemployment rate recently dropped below pre-pandemic levels for the first time in the second quarter of 2022, but increased from 3.4 per cent to 4.0 percent between May and June of 2022. The current unemployment rate for the MSA of 4.0 percent is similar to the California rate of 4.0 percent and the National unemployment rate, which is at 3. 8 percent as of June 2022.
Below is a table comparing Riverside County’s unemployment rate to the unemployment rates of the surrounding counties as of June 2022.
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Jurisdiction As of Unemployment Rate*
Los Angeles County June 2022 5.2%
Riverside County June 2022 4.0%
San Bernardino County June 2022 4.0%
Orange County June 2022 2.9%
San Diego County June 2022 3.2%
Source: State of California E.D.D.; *Not Seasonally Adjusted
It’s important to note that June 2022 is the first month to show an increase in unemployment since the bottom of the COVID unemployment recession. While unemployment rates have generally been decreasing overall, there is an anomaly where, in the overall nation, unemployment is at 3. 8 percent, but there are an estimated 2.1 million workers that never came back to work after the pandemic. These jobs were typically lower paying jobs and it is now believed these workers chose not to return to their jobs, rather than a lack of jobs available. Employers are having trouble filling lower paying jobs throughout the Nation, resulting in pay increases in order to entice employees to these jobs.
Over the past 25 years, the Inland Empire economy has had significant cycles with home prices almost doubling from 1995 to 2005, then falling by over 50 percent during the Great Recession, taking prices back to 2002 levels. Home values appeared to hit bottom in 2009 then remained essentially flat for two to three years with the majority of the Inland Empire’s housing market seeing an improvement beginning in mid-2012. While coastal Southern California housing enjoyed significant increases between 2012 and 2015, the Inland Empire bounced back slower with Riverside County finally passing the previous median home price peak in early 2020 (prior to the pandemic). Contrary to homebuilder’s original thoughts of a slowdown due to the pandemic, new home buyers stepped up in the spring of 2020 and new home sales were significantly higher during the pandemic. In addition, since May 2020 there has been a significant increase in residential builder land purchases in the Inland Empire. Homebuilder l and purchases essentially stopped in February, March, and April 2020 as the effects of the pandemic onset on the housing market were unknown. However, beginning in May 2020 builders began looking for land and entering escrow on land purchases with residential land moving at a brisk pace from mid-2020 through mid- 2022. Most recently , builders are atte mpting to renegotiate residential land escrows , as mortgage rates have risen substantially in the past five Item Title: 12.1
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months which is now slowing new home sales. The exceptional activity in new home sales between May 2020 and early 2022 is thought to be due to several factors, including: a tight resale supply of homes; historically low interest rates (especially in 2020 and 2021); millennials finally buying homes; and, the work from home factor which began during the pandemic and is allowing residents to live in more suburban areas without long commutes.
Along with dropping the interest rate to 0 - 0.25 percent at the beginning of the pandemic, the Federal Reserve Board (“Board”) began quantitative easing by buying $80 billion in Treasury Bonds and $40 billion in Mortgage- Backed Securities each month. These measures helped shore up the national economy during the pandemic. In November 2021, the Board began tapering off the quantitative easing due to inflation increasing, and has now begun raising rates in an attempt to curb inflation. The interest rate increases will affect new home buyers in the Inland Empire, where buyers tend to be more monthly payment sensitive than buyers in coastal areas. The Federal Interest Rate (“Rate”) in the US averaged 5.69 percent from 1971 to 2019, reaching an all-time high of 20 percent in March 1980, and the previous low of 0.25 percent in December 2008 along with the early 2021 low of 0.25 percent. The historically low rates in 2020 and 2021 had spurred home sales within the Inland Empire, which was identified as one of the tightest housing markets in the nation in October 2020.
The latest UCLA Anderson Forecast (“Forecast”) was issued June 1, 2022 and while they were not forecasting a recession, they predict that economic slowdowns both in California and the Nation are expected. The national forecast states that what had seemed like transitory inflation has become persistent , which makes it more challenging for the Federal Reserve Board to rein in. The For ecast expects the Board will significantly increase interest rates this year which will slow consumer demand, especially for housing and related consumer durables, along with business investments. The slowdown in both consumer spending and business investm ent should bring demand back in line with supply, and help alleviate some of the current supply chain constraints and shortages.
The Forecast discloses that they do not expect the Federal Reserve Board to be able to bring core inflation down to its two percent target until 2024. They predict the depth of the Item Title: 12.1
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economic slowdown and the highest risk of a recession to occur in the middle of 2023; and while they do not expect a recession, they note that it is a possibility. The national forecast for inflation is for 7.4 percent increase year-over-year by the end of 2022, and falling to 2.2 percent by the end of 2023. They do anticipate unemployment to rise in 2023 as interest rates increase and the economy slows.
The Forecast for California says that while the pandemic continues to be a major factor influencing the economy, it is no longer the sole influence. Inflation and higher energy prices as well as uncertainty both on Wall Street and in consumer confidence, in addition to continuing pandemic -related suppl y chain interruptions, are all contributing to the slowdown. Based on these factors, the June California forecast has shifted downward from the March forecast and while they are not forecasting a recession, they are showing a shallower growth trend than what was projected in March 2022. They are predicting real personal income to decline by 4.5 percent in 2022, and then grow by 2.4 percent in 2023 (as a function of the transfers from the stimulus packages expiring), and to grow by 2.9 percent in 2024.
The positives for California include: the record surplus general fund; anticipated solid gains in employment based on broad based hiring in retail, healthcare, social services and technology; and increases in defense spending along with the continued demand for tech. Both the tech and the logistics industries have been growing disproportionately due to the increased demand during the pandemic. The California Forecast concludes that in spite of the slowing economy, the continued demand for limited housing stock leads to a forecast of relatively rapid return of homebuilding. They anticipate 124,000 new housing units in 2022, and growing to 143,000 by 2024.
As mentioned in the UCLA California Forecast, one bright spot in the COVID economy has been sales of new homes. While existing homeowners were reluctant to put their houses on the market during COVID, new home sales in the Inland Empire soared.
Among other fac tors, historically low interest rates appear to have finally brought the millennial generation to the new home market. In addition, the work -from-home factor made non-homeowners realize they can afford a house further outside of the economic Item Title: 12.1
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areas while they work, and that buying a home in a more affordable, suburban area made sense if they didn’t have to drive to the office each day. The need for home offices combined with the overall stress on social distancing incentivized city dwellers to move out of denser urban areas into more suburban neighborhoods with more space. The minimal existing home inventory, coupled with the work from home factor and low rates put pressure on pricing with new homes prices in the Inland Empire increasing well over 10 percent year -over-year for the past two years. This will be discussed further in the Riverside County Housing Market section later within this report.
As a final indicator of overall economic activity for the region, we have reviewed the rise and fall of TEUs (Twenty-foot Equivalent Units – i.e., containers) being processed in the local ports. This is especially important for the Inland communities, as it represents much of the growth in development of w est coast distribution centers and warehouses in the Inland Empire linked to supply -chain nodes in the Pacific Rim. The chart below shows TEU activity at the Port of Long Beach. Generally, there has been increases since 2009 with the exception of a slight dip in 2016 and again in 2019 which ended with a 5.6 percent downturn. As of June 2022, the port is running 1.8 percent below the previous year. The ports are a big part of the recovery with both the Port of Long Beach and the Port of Los Angeles backed up significantly due to the economic disruption of COVID and subsequent supply-chain issues. While the back-up has been improving, there is still ample evidence of supply chain challenges.
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Government
A Board of Supervisors oversees the County as the governing body of the County, certain County special districts , and the County Housing Authority. The Supervisors enact ordinances and resolutions, adopt the annual budget, approve contracts and appropriate funds, determine land use zoning for unincorporated areas , and appoint certain County officers and members of various boards and commissions. The Board of Supervisors is elected from five different districts within the County.
Education
Menifee Union School District (TK through 8th) and the Perris Union High School District (9th through 12th) serve the subject area. The Menifee Union School District operates one preschool, eleven elementary schools and three middle schools. Perris Union High School District covers a larger area than Menifee and operates six high schools, three alternative high schools and one alternative middle school to serve the greater Perris area including Menifee. Higher education is available within an hour’s drive at the University of California campuses at Riverside and Irvine or California State University campuses in San Bernardino, San Marcos, Fullerton and Pomona along with several additional private colleges. The closest community college is Mt. San Jacinto College.
Conclusion
Population in the County has increased over the past 30 years with predictions for continued population growth. The nation’s economy stalled during the Great Recession due to the housing downturn, unemployment and the credit crisis. The housing market saw a resurgence beginning the second half of 2012 with sales and prices rising since then. While the economy was slowing slightly in late 2019, the COVID pandemic brought the economy to a halt in March 2020. The one bright spot over the past two years has been the new home market, which has been extremely strong in the Inland Empire until recently. The region’s affordability, coupled with the rising prices in the coastal market and the need for new housing set up a potential boom in the Inland Empire. Late 2020, 2021 and the first three months of 2022 Inland Empire new home sales skyrocketed in part due to residents leaving urban areas for more suburban areas due to COVID factors, coupled with historically low interest rates. Current concerns in the Inland Empire housing Item Title: 12.1
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market include inflation, the high prices of homes, rising interest rates, s upply chain issues, and the Russian invasion of Ukraine, which are all creating volatility in both local and global financial markets. In conclusion, the County is expected to continue to grow in population due to its Southern California location, the availability of land and the relatively lower land and housing prices in comparison to adjacent Orange, Los Angeles and San Diego Counties. However, due to inflation, rising interest rates, and other factors, there are some anticipated bumpy roads ahead.
Item Title: 12.1
Community Facilities District 2020-2, Del Oro, Issuance of Special Tax Bonds Item Page Number: 214
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MENIFEE AREA MAP
Item Title: 12.1
Community Facilities District 2020-2, Del Oro, Issuance of Special Tax Bonds Item Page Number: 215
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_________________________________________________________________________________________________________ Menifee CFD No. 2020-2 – Del Oro by D.R. Horton
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CITY OF MENIFEE DESCRIPTION
The subject property is in the central portion of the City, which is located in the southwestern portion of Riverside County. Menifee became a city in October 2008 after voting to incorporate. Menifee w as the 26 th city within the County of Riverside and is located along both sides of I -215 between Murrieta and Perris. The City includes the diverse lifestyle communities of Menifee, Sun City, Quail Valley and portions of Romoland. The City is bordered by unincorporated lands and the City of Murrieta to the south, the cities of Lake Elsinore and Canyon Lake to the west, the City of Perris and unincorporated lands to the north and unincorporated lands to the east.
In the 1960s, early development of the Menifee Valley began when the concept of an active retirement community was envisioned for Sun City. Since that time the Menifee Valley has grown substantially. At incorporation in 2008, the City of Menifee had a total population of 60,000 residents. The Menifee Valley includes some portions of Romoland that are not included within the city limits. Although this area currently serves as a bedroom community for the workforce of North San Diego County, Temecula, Riverside, Corona and Orange County, econo mic development groups are in the process of recruiting future quality employers to relocate in the Menifee Valley. There have been several new commercial developments on the I -215 corridor south of McCall Boulevard including major shopping center s at the Newport Road off ramp, a new entertainment center west of the off ramp and an additional shopping center at Clinton Keith Road. As of July 2022, there were 19 new and coming soon commercial developments per Menifee’s Economic Development website.
Between 1990 and 2003 there was an extraordinary growth rate of 48 percent in the community of Menifee. The population is estimated at 106,627 as of January 2022 per the Department of Finance, representing a growth of 2.9 percent year -over-year. This compares to the Riverside County past year’s growth of 0.5 percent from January 2021 to January 2022. The City’s higher growth rate than the County is due to the wide expanses of land available for development within the City , and because of the master planned communities such as Audie Murphy Ranch (southwest of the subject) and single new home tracts such as the subject.
Item Title: 12.1
Community Facilities District 2020-2, Del Oro, Issuance of Special Tax Bonds Item Page Number: 216
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In the past 15 years Menifee has had exceptional growth in the commercial and retail sector. Prior to the Great Recession several shopping centers were either constructed or planned. Included are the Town Center Marketplace which is anchored by Aldi Market, Pet Smart and several national restaurants (located at the southwest corner of Haun and Newport Roads), and the popular Menifee Countryside Marketplace which is anchored by Target, Lowe’s, Kohls, Ulta, TJ Maxx, Best Buy and Home Goods along with numerous restaurants (located at the southeast corner of Haun and Newport Roads ). The Town Center Specific Plan (“TCSP”) includes 170-acres of mixed use with a proposed City Hall, a Fairfield Inn & Suites by Marriott on Town Center Drive, along with several recently closed out new home neighborhoods including Camden Place by Taylor Morrison, The Townes, Union Place and The Village by Lennar and Artesa, a large upscale apartment project. Prior to the COVID pandemic shutdowns, the Krikorian theaters were under construction within TCSP along with a Krikorian retail center planned adjacent to the theaters. However, the shutdown of the economy stopped construction. The theater has been caught in litigation for two years with contractor lawsuits. Aside from the Krikorian theater, other new commercial development is back underway with both Center Pointe (retail northwest of the theaters) and Menifee Plaza (retail northeast of theaters) , which front Newport Road, resuming construction and signing new leases. Along the north side of Newport at Haun Road is a new er commercial area that houses new Menifee Union School District’s administration building, the existing City Hall, a new Post Office and several national chain restaurants.
The Menifee community also benefits from its proximity to Diamond Valley Lake, which was dedicated on March 18, 2000 and initially filled by the end of 2002. Diamond Valley Lake is located approximately five miles to the east of the City and is a 13,000- acre site with a 4,500-acre reservoir for boating and fishing. There is no swimming, water skiing or personal watercraft allowed in Diamond Valley Lak e. The reservoir contains 800,000 acre-feet (260 billion gallons) of water and is owned by the Metropolitan Water District.
Access to Diamond Valley Lake is via Newport Road between I-215 and State Route 79, which was completed in 2008.
Item Title: 12.1
Community Facilities District 2020-2, Del Oro, Issuance of Special Tax Bonds Item Page Number: 217
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_________________________________________________________________________________________________________ Menifee CFD No. 2020-2 – Del Oro by D.R. Horton
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Land prices in the Menifee area have been historically lower than prices in the Murrieta and Temecula areas. As housing prices increased in the early 2000s, the price difference narrowed between Murrieta and Temecula, however, there is still a variance. The price difference appears to be due to the Murrieta/Temecula area being along the I-15 corridor, which commands a premium due to easier commuting to adjacent counties. Menifee is located along the I-215 corridor, which creates a slightly longer commute to employment centers. The subject location has good access to the I-215.
As discussed under the economy section under Riverside County, new home sales have prospered during the COVID pandemic and Menifee is no exception. Per the July 31, 2022 Ryness Report (a new home sales and marketing company), there are 52 new home projects currently selling in the South Riverside submarket with 29 of the 52 new home projects located in Menifee. The average sales rate per project for the week ending July 31, 2022 in the South Riverside submarket was 1.95 homes per month which is lower than the past few months, and a significant drop from 2021 sales rates . This appears to be due to the rising mortgage rates and the high price of homes.
In summary, the future growth of Menifee should continue. There are several commercial and residential developments either under construction or planned in the area. Housing is less expensive than the Murrieta/Temecula neighboring communities which is attractive to homebuyers as price points are important in today’s Inland Empire housing market.
Diamond Valley Lake is another asset to the Menifee Valley area. The lower land prices and the availability of land for development combine to make Menifee an excellent candidate for future growth.
Item Title: 12.1
Community Facilities District 2020-2, Del Oro, Issuance of Special Tax Bonds Item Page Number: 218
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_________________________________________________________________________________________________________ Menifee CFD No. 2020-2 – Del Oro by D.R. Horton
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IMMEDIATE SURROUNDINGS
The subject property is located in the eastern portion of the City on the east side of I-215, specifically along the northwest side of Newport Road (changes to Domenigoni Parkway near the subject) at Linden berger Road. Access into the community is considered to be good via I-215 (nearest highway) or I -15. Del Oro is surrounded by existing residential homes to the immediate east, south and west, and vacant lands to the north. The vacant land to the north is proposed for future apartments, and there is a large existing apartment complex (Cantabria Apartment Homes) northwest of the subject. Past the vacant lands to the north is Mt. San Jacinto College, with a large new stadium and facility currently under construction. Northeast of the subject past the future apartment site is Bell Mountain Middle School and Wheatfield Park, which features a multitude of sports fields.
Del Oro has two entrance points: the main entrance (near the models) is on the south side of Holland Road via Del Oro Way, directly across from the future apartment site. The other is from Palomar Road which composes the eastern boundary of the subject, via Heather Green Way. Heather Green Way connects the subject to the surrounding existing residential neighborhood to the east.
The surrounding existing residential homes were built in the 1990s to the mid-2000s, with the subject offering the only new homes within an approximate two -mile radius. The subject is served by Menifee Union School District and Perris Union School District. Callie Kirkpatrick Elementary (approximately one mile northeast of the subject) serves the subject for elementary school (K -5), Bell Mountain ( one-half mile northeast adjacent to Mt. San Jacinto College) for middle school (6- 8), and t he new Liberty High School (approximately four miles southeast of the subject) for grades 9-12.
Further north of the subject past the Mt. San Jacinto College Campus is Menifee Lakes:
a master planned community and golf course surrounding several large manmade lakes.
The Menifee Lakes golf course is open to the public, but does include a private country club. Past the existing residential to the east, west and south of the subject is vacant lands. The surrounding lands are generally flat in grade.
Item Title: 12.1
Community Facilities District 2020-2, Del Oro, Issuance of Special Tax Bonds Item Page Number: 219
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_________________________________________________________________________________________________________ Menifee CFD No. 2020-2 – Del Oro by D.R. Horton
Kitty Siino & Associates, Inc. Page 23
Shopping is easily accessible to the community within one mile at the I-215 and Newport Road intersection which houses the Menifee Countryside Marketplace, Menifee Town Center and Menifee Lakes Plaza. Menifee Town Center (closest to the subject at the southeast corner of Newport Road and I -215) includes a Ralphs Grocery Store, Dollar Tree, Living Spaces, Ross Dress for Less, Shell Gas Station and a multitude of dining options. Menifee Lakes Plaza (northeast corner of Newport Road and I-215) is anchored by a LA Fitness and includes a smaller neighborhood market (Barons Market Menifee), a salon, Raising Cane’s Chicken Fingers, The Coffee Bean and Tea Leaf, Blaze Pizza and more. On the other side of the I-215 at the southwest corner of Newport Road and I-215 is Menifee Countryside Marketplace which includes a Target, Lowes Home Improvement, Kohl’s Best Buy, Boot Barn and a wide selection of dining options. Approximately ten miles south of the subject is Promenade Temecula, a major shopping mall anchored by Macy’s, Sears and JC Penney. The mall is located off the I -15 near the intersection of where the I -15 and the I -215 merge. In addition to shopping and entertainment, the subject is approximately seven miles northeast from the Loma Linda University Medical Center.
Item Title: 12.1
Community Facilities District 2020-2, Del Oro, Issuance of Special Tax Bonds Item Page Number: 220
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_________________________________________________________________________________________________________ Menifee CFD No. 2020-2 – Del Oro by D.R. Horton
Kitty Siino & Associates, Inc. Page 24
CITY OF MENIFEE CFD No. 2020-2
We have reviewed the Community Facilities District Report for the City of Menifee CFD No. 2020- 2 (Del Oro ) prepared by Spicer Consulting Group dated July 15, 2020 (“Report”). Per the Report the subject property is identified as Menifee CFD No. 2020- 2 and includes 17.3 gross acres proposed for 68 single family detached homes. Per the Report t he Community Facilities District may pay for facilities which may include all amounts necessary to eliminate any fixed special assessment liens or to pay, repay, or defease any obligation to pay or any indebtedness secured by any tax, fee, charge or assessment levied, provide for the purchase, construction, expansion or rehabilitation for any real or other tangi ble property with an estimated useful life of five years or longer, which is necessary to meet increased demands placed upon local agencies as a result of development and/or rehabilitation occurring within Menifee CFD No. 2020-2. The types of facilities to be financed with the proceeds of special taxes and bonds issued by CFD No. 2020-2 consist of the construction, purchase, modification, expansion, rehabilitation and/or improvement of (1) park, roadway, traffic, administration and general government facilities, fire and safety, law enforcement and other public facilities of the City , including the foregoing public facilities which are included in the City’s fee programs with respect to such facilities and authorized to be financed under the Mello- Roos Community Facilities Act of 1982, as amended (the “City Facilities”); (ii) water and sewer facilities of Eastern Municipal Water District including, without limitation , the acquisition of capacity in the sewer system and/or water system of Eastern Municipal Water District and facilities including EMWD water and sewer capacity and connection fee programs (the “Water District Facilities”), and all appurtenances and appurtenant work in connection with the foregoing Facilities, including the cost of engineering, planning, designing, materials testing, coordination, construction staking, construction management and supervision for such facilities. In addition, Incidental Expenses to be paid from bond proceeds and/or special taxes include (a) the cost of engineering, planning and designing the Facilit ies; and (b) all costs to form the District, issuance of the bonds , the determination of the amount of special taxes to be levied and costs otherwise incurred in order to carry out the authorized purposes of the District; and (c) any ot her expenses incidental to the construction acquisition, modification, rehabilitation, completion and inspection of the Facilities. The cost estimate of facilities including incidental expenses, to be financed Item Title: 12.1
Community Facilities District 2020-2, Del Oro, Issuance of Special Tax Bonds Item Page Number: 221
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_________________________________________________________________________________________________________ Menifee CFD No. 2020-2 – Del Oro by D.R. Horton
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through the issuance of CFD No. 2020-2 Bonds is estimated to be $2,555,000 based on 2019-20 current year dollars. The costs are estimated as follows:
Description Est. Eligible Costs Bond Allocation
City of Menifee
Law Enforcement $15,708 $15,708
Fire Facilities $41,752 $41,752
Circulation $317,560 $317,560
General Government $69,428 $69,428
Public Use Facilities $10,472 $10,472
Parks – Land $81,872 $81,872
Parks – Improvements $44,948 $44,948
City Facilities $116,348 $116,348
Subtotal – City of Menifee $698,088 $698,088
Eastern Municipal Water District
Sewer Financial Participation Charge $198,152 $198,152
Sewer Treatment Plant Capacity Fee $403,784 $403,784
Water Financial Participation Fee $374,068 $374,068
Water Supply Development Fee $20,400 $20,400
1” Meter Drop-In Fee $25,636 $25,636
EMWD Facilities $403,480 $317,341
Total Eastern Municipal Water District $1,425,520 $1,339,381 Total Eligible Fees/Improvements $2,123,608 $2,037,469
Incidentals and Financing Costs $517,531
Total Funded by Bond Proceeds $2,555,000
The difference between the eligible costs and the bond proceeds will be paid by the developer.
It should be noted that the above cost estimate was per the CFD Report and based on 2019/2020 current dollars and amounts were allocated based upon estimated bond sizing and may change based upon market conditions at the time of bond issuance.
Per the current sources and uses of funds (dated July 19, 2022), the bond par amount is estimated at $ 2,695,000 and a net premium of $ 2,600 with $2,211,735 in project fund deposits, $231,965 i n debt service reserve fund, and $253,900 in cost of issuance and underwriter’s discount (all amounts subject to change).
A copy of the Menifee CFD No. 2020-2 boundary map is located in the Addenda for your review.
Item Title: 12.1
Community Facilities District 2020-2, Del Oro, Issuance of Special Tax Bonds Item Page Number: 222
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_________________________________________________________________________________________________________ Menifee CFD No. 2020-2 – Del Oro by D.R. Horton
Kitty Siino & Associates, Inc. Page 26
SUBJECT PROPERTY DESCRIPTION
The subject property consists of 68 proposed single-family detached homes in Menifee which make up the community known as Del Oro by D.R. Horton. The neighborhood is shown on the site plan below with the description following.
Location: Southwest corner of Palomar and Holland Roads, City of Menifee, County of Riverside, California.
Legal Property
Description: Lots 1-68 of Tract 36852 located in City of Menifee, County of Riverside, California
Property Owner: Individual owners as to Lots 6-23, 31-27, 39-43 and 50- 68 of Tract 36852, and D.R. Horton Los Angeles Holding Co., Inc as to Lots 1- 5, 24-30, 38 and 44-49 of Tract 36852.
Assessors
Parcel Nos.: 372-041-001 through 041 and 372-042-001 through 027.
Property Taxes: We attempted to review sample tax bills on several APNs for closed homes however the Office of the Treasurer -Tax Collector does not have sample tax bills available, likely because of how recently the homes closed.
Three-Year
Sales History: D.R. Horton Los Angeles Holding Co., Inc purchased the property in seven take- downs from Forestar (USA) Real Estate Group Inc. (“Forestar”) with closing dates between 10/21/21 and 4/8/22. The Item Title: 12.1
Community Facilities District 2020-2, Del Oro, Issuance of Special Tax Bonds Item Page Number: 223
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_________________________________________________________________________________________________________ Menifee CFD No. 2020-2 – Del Oro by D.R. Horton
Kitty Siino & Associates, Inc. Page 27
purchase price has been retained in our files for confidentiality purposes. The lots were purchased in a finished condition. In addition, on 11/23/2020 Forestar purchased the lands in a raw land condition from Strata Holland for $2,300,000. D.R. Horton began closing homes to individual homebuyers in April 2022 and has closed 49 homes to individuals between April 8, 2022 and August 1, 2022.
Size and Shape: Tract 36852 is rectangular in shape and contains 19.994 gross acres and 15.151 net acres per the recorded Tract Map.
Zoning: Per the City of Menifee’s Zoning Map, the site is designated as LDR- 2 – Low Density Residential, which allows for a minimum size of 7,200 square feet. This is consistent with the City of Menifee’s General Plan, which calls out the subject land use as 2.1- 5 du/acre Residential.
Entitlements: The subject property is covered by Tract Map 36852 which was recorded on August 18, 2021. The tract map divides the subject property into 68 residential lots with a minimum lot size of 7,200 square feet and one detention basin lot which contains 0.891 acre.
The tract also includes setback areas on the surrounding streets and internal access streets. Based on the gross acreage the overall density is 3.4 dwelling units per acre. The approved tract map is within the allowed zoning and general plan land use. A copy of the tract map is in the Addenda.
Soils Review: We have reviewed Geo Tek, Inc ’s Geotechnical Testing and Observation Services During Earthwork Construction for Tract 36852 dated August 5, 2021. The report concluded that the site grading was completed in general accordance with the approved geotechnical reports for the site, applicable to the California Building Code and the City of Menifee guidelines. The report includes a summary of geologic and soils conditions and makes recommendations for foundation, post grading, drainage, and foundation observation. The appraiser is not an exper t in soils technology and refers the reader to the report for additional information. I t is an assumption of this report that the soils are adequate to support the highest and best use.
Environmental
Review: We have not received an environmental report on the subject property.
It is an assumption of this appraisal report that there are no environmental issues which would thwart or slow development of the subject property or create any adverse reactions to the houses. This is evidenced by City inspectors on-site throughout construction.
Item Title: 12.1
Community Facilities District 2020-2, Del Oro, Issuance of Special Tax Bonds Item Page Number: 224
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_________________________________________________________________________________________________________ Menifee CFD No. 2020-2 – Del Oro by D.R. Horton
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Easements/
Encumbrances: We have reviewed a Preliminary Title Report prepared by Fidelity National Title Builder Services dated June 17, 2021 covering Tract Map 36852.
Item’s A, B, C, D, E and F refer to property taxes and special assessments including CFD 92-1 (Perris Union High School District); CFD 05 -8 (Scott Road CFD); CFD No. 2017 -1 (Maintenance Services CFD) and CFD 2020-1 (the subject CFD). Item No. 1 refers to water rights. Item Nos. 2 and 14 refer to easements for public utilities and landscape maintenance and drainage. Item Nos. 3 through 8 were all intentionally deleted. Item No. 9 pertains to the School Facilities Mitigation Agreement. Item No. 10 states the property is within the Scott Road and Bridge Benefit District. Item No. 11 is in regards to a drainage maintenance and temporary construction easement agreement. Item No. 11 refers to the purchase and sale agreement while Item No. 13 pertains to a deed of trust recorded on the property. Item No. 15 states the ownership of land does not include rights of access to or from certain streets.
Item No. 16 refers to the water quality management plan and stormwater best management practices agreement. Item No. 17 refers to an Agreement for permanent residential water service to the property while Item No. 16 pertains to CC & Rs recorded on the property.
It is an assumption of this report that the subject property is free and clear of any liens and/or encumbrances with the exception of Menifee CFD No. 2020 -2 and the other aforementioned C FDs. It should be noted that the appraiser is not a title expert and refers to the reader to the title report or an expert if questions arise.
Utilities: All normal utilities serve the subject site by the following companies:
• Electrical: Southern California Edison Company
• Natural Gas: The Gas Company
• Sewer/Water: Eastern Municipal Water District
• Schools: Menifee Union School District /
Perris Union High School District
Streets/Access: There are various access routes to the subject property via I -215 or via I-15, although I-215 is much closer to the subject. From I-215 go east on Newport Road to Menifee Road (approximately one mile).
Head south one mile to Holland Road, and turn west onto Holland and the subject is less than one- half mile west of Menifee Road on the south side of Holland Road. Alternatively, access is also possible from the Newport Road exit to Antelope Road (immediately east of the freeway, first light from the off ramp), paralleling the freeway on Antelope Road for one mile, then east onto Holland Road for 0.3 miles to the subject. Coming from farther south, access from the I - Item Title: 12.1
Community Facilities District 2020-2, Del Oro, Issuance of Special Tax Bonds Item Page Number: 225
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_________________________________________________________________________________________________________ Menifee CFD No. 2020-2 – Del Oro by D.R. Horton
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215 is also possible from the Scott Road exit to Antelope Road, north for two miles and then east onto Holland Road. The subject sits on the south side of Holland Road with access from Del Oro Way, with the models on the west side of the Del Oro Way entrance. From I- 15, head east on Railroad Canyon Road (turns into Newport Road at City limits) to Antelope Road (approximately eight and a half miles), and Antelope Road to Holland Road.
I-215 is a major Southern California Freeway beginning at the I-15 in Murrieta in Southern Riverside County and providing access north through Riverside and into San Bernardino where it combines with I- 15 once again.
I-15 is a major north/south freeway, whi ch provides access to both international borders with Mexico and Canada.
Newport Road is a major commercial arterial through the City of Menifee with on/off ramps to I-215. West of the Freeway at the City limits Newport Road becomes Railroad Canyon Road providing access into the Cit ies of Canyon Lake and Lake Elsinore. East of the Freeway Newport Road becomes Domenigoni Parkway and provides access into the area of Hemet and to Diamond Valley Lake, a large reservoir in Riverside County.
Antelope Road is generally a frontage street along I -215 in the City of Menifee that runs along the east side of the Freeway providing access into the various neighborhoods.
Scott Road is a main east west arterial through the City of Menifee which begins as Bundy Canyon Road near Lake Elsinore (west of the subject) bec omes Scott Road in Menifee and turns into Washington Street east of the subject. Scott Road has on/off ramps at I-215 while Bundy Canyon Road has on/off ramps to the I-15.
Menifee Road is a north/south arterial through the City of Menifee into Romoland and Nuevo with no highway on/off ramps. It begins at Nuevo Road (approximately nine miles north of the subject), and changes names to Whitewood Road at Scott Road, leads into Murrieta then ends in a residential neighborhood south of Murrieta Hot Springs Road (approximately eight miles south of the subject) at the I-15/I-215 split in the city of Murrieta.
Holland Road is a small east/west road the provides access to residential neighborhoods in the western region of the city of Menifee. Holland Road begins just west of the subject less than one- half mile at Antelope Road and ends approximately 3.75 miles west past Holcomb Road. Holland Road stops and starts several times on the west side of I-215 and picks up again east of Holcomb Road.
Item Title: 12.1
Community Facilities District 2020-2, Del Oro, Issuance of Special Tax Bonds Item Page Number: 226
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Internal streets within Del Oro include: Del Oro Way, Harvest Gold Court and Heather Green Way.
Current Condition: The subject property has been developed into 68 single family detached residential lots with a minimum lot size of 7,200 square feet. There are two models for the project which are builder -owned and located on Harvest Gold Court off Holland Road and Del Or o Way. There are 49 completed homes owned by individuals , 17 homes over 95 percent complete (including the two models) and the two final homes under construction.
Home Owner
Association: There is no homeowners association for Del Oro.
Costs to Complete: We have received estimated remaining development costs and fees provided by the homebuilder. The subject lots are in a near physically finished condition however there are some remaining development costs (final cap paving, concrete repairs, landscaping, utilities, and contingency) which are estimated by D.R. Horton at $ 1,431,686.
These are associated with the builder -owned lots or 19 lots ( two models, 15 production homes over 95 percent complete and two houses under construction). This results in remaining costs of $75,351.89 (say $75,352) per lot ($1,431,686 divided by 19). All development fees have been paid. These remaining costs will be taken into consideration in the final valuations later within this report.
Improvement
Description: Del Oro includes 68 proposed homes being built by D.R. Horton. The model homes are located near the entrance of the community on Harvest Gold Court near Del Oro Way. The homes feature open floorplans and three architectural styles: Spanish, Craftsman, and Italian. D.R. Horton offers four different floorplans. The smallest plan has an option to add a third car garage. For purposes of this analysis, we will assume the two-car garage for the Plan 1. Plan 3 with 2,929 square feet is a multi-generation home with a separate entrance and living area. The homes feature one and two-stories and two to three- car garages (per plan). The homes are situated on lots with a minimum size of 7,200 square feet. Homes at Del Oro include Kwikset entry front door hardware and video doorbells , insulated garage doors, Low E Glass windows, tankless water heaters, HVAC systems with Honeywell programmable thermostats, and whole house ventilation attic fans . Interiors includ e Mohawk Vinyl and carpet throughout with four color options, interior laundry with gas dryer hookups, USB outlets, prewiring for light fixtures over the dining room and kitchen islands, and recessed lights throughout including in primary bedroom and loft. Del Oro’s kitchens feature eat-in islands, pantries, a choice of maple or thermofoil shaker style cabinets, White Ice Quartz countertops with 6” backsplash, dual bowl stainless steel sinks, Whirlpool stainless steel appliances and Moen pulldown faucets. Primary bedrooms include walk in closets, dual sinks, and Item Title: 12.1
Community Facilities District 2020-2, Del Oro, Issuance of Special Tax Bonds Item Page Number: 227
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separate tubs and showers. All homes appear to be in excellent condition with no visible depreciation.
We have reviewed sales information from the builder which included 68 sales with 49 home closings from April 8, 2022 through August 1, 2022. Actual closed sales prices have ranged from $ 589,930 to $711,095. Per our review of the local Multiple Listing Service, there have not been any resales within Del Oro and per our inspection there were no homes listed for resale. Original base pricing at grand opening November 30, 2021 were from $569,990 to $607,990 while the latest base sales prices are from $633,990 to $678 ,990. The houses which are over 95 percent complete are detailed below.
*One of each of these plans is a model home. In addition to the above, there are two final homes under construction.
Del Oro by D.R. Horton
Plan
Bed/Bath
Floors/
Parking
Sq. Ft.
Ind.
Owned
Bldr.
Owned
1 4+ / 3 1 / 2 2,319 9 6
2 4+ / 3 2 / 3 2,722 11 2
3 5+ / 4 2 / 2 2,929 15 5*
4 5+ / 3 2 / 3 3,015 14 4*
Total 49 17
Item Title: 12.1
Community Facilities District 2020-2, Del Oro, Issuance of Special Tax Bonds Item Page Number: 228
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RIVERSIDE COUNTY HOUSING MARKET
In analyzing the County’s housing market, population growth and economic conditions need to first be considered.
Population
The County population grew at a 0.5 percent increase between January 2021 and January 2022 (per the Department of Finance). This compares to an average annual growth rate over the past ten years of about 0.9 percent, and an average annual growth rate of approximately 2.5 percent for the previous eighteen-year period. The slowdown in population growth is similar to other Southern California counties during this time period, and is thought to be due to the Great Recession and the disruption from CO VID.
Predictions are for the County to grow at an average annual rate of 1.49 percent over the next eight years. This equates to an increase of approximately 36,000 residents per year, suggesting the need for about 10,000 homes per year within the County. The COVID influence is still unknown on the County’s population growth. New home sales in most cities in the County in 2020 and 2021 were higher than the coastal communities due to affordability, the work from home factor, and the fact that millennials are finally entering the housing market. These factors may increase actual County population growth in 2022.
Economic Conditions
Over the past twenty-five years the Inland Empire has seen various cycles in the housing market. The Great Recession impacted the Inland Empire significantly and resulted in a longer recovery period than that of other Southern California regions. The rise and then fall of housing prices in the Inland Empire between 2004 and 2009 was considerably steeper than almost anywhere in the State. Unfortunately, this meant that the people who bought near the peak of the market likely faced significant negative equity. After essentially remaining flat for a few years, housing prices began to increase in late 2012 through January 2020. Once the COVID pandemic hit in March 2020, the housing market seemed to slow down significantly early on, but by May 2020, new homes were going under contract and selling at above average absorption rates from May 2020 through May 2022 in the region. Recently, the new home market has begun to see a slowdown in Item Title: 12.1
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absorption rates in the region due to the increasing interest rates , the high prices of homes, and the high rate of inflation which is shaking consumer confidence.
Economic growth in the Inland Empire was strong generally between 20 15 (after the Great Recession), and until the economic shutdown due to COVID. The second half of 2020 and all of 2021 saw economic growth, however the first two quarters of 2022 have seen GDP shrinking, which is one sign of a recession beginning. The most recent unemployment rate for the County is 4.0 percent (per the June 2022 Employment Development Department “EDD” report), similar to the County’s pre -COVID unemployment rate in February 2020 of 4.0 percent. There are currently many mixed messages with low unemployment and good job growth; however, offsetting these are high inflation, increasing mortgage rates and decreasing consumer confidence. I t was originally thought that once the COVID pandemic ended, the Nation would get back to the previous highs; however, it is now looking like there may be some more permanent changes in the post -COVID economy. These changes include: many companies switching to a modified work -from-home schedule for their employees; on-line shopping composing a larger factor of retail; people moving out of urban areas to suburban areas; and on-line academia rising. The closing of businesses during COVID appears to have had a ripple effect on trade, as many materials and consumer goods continue to be hard to obtain which is creating long lead times for many orders , all while inflation is creating significantly higher costs for all.
The housing market played a large role in the past two recessions , and stood as a paramount factor in strengthening the impact of the Great Recession. Due to increased interest rates and rising home prices between June 2004 and mid- 2006, the market reaction was to create non- conventional financing alternatives , such as sub- prime and non-conventional mortgages, to artificially maintain the boom housing market of 2004 and 2005. By 2007, the housing market saw a shake-up due to the problems in the sub-prime and non- conventional mortgage markets. In March 2007, the Federal Government initiated efforts to stop or limit sub- prime mortgages. Unfortunately, the damage had already been done with sub-prime mortgages playing a role in the 2008 upheaval of Wall Street and contributing significantly to the U.S. economic downturn. Due to stricter income Item Title: 12.1
Community Facilities District 2020-2, Del Oro, Issuance of Special Tax Bonds Item Page Number: 230
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verification on new loans and the lack of available credit, coupled with job losses and declining home prices, sales of new homes slowed for the next few years and essentially remained flat until mid-2012 when home prices began a steady climb.
During the COVID recession, new home sales were one of the brightest spots in both the local and national economies. While new home sales slowed in March and April 2020 due to the COVID pandemic, prices did not appear to change in the County. Some builders increased concessions in March 2020, but by May 2020 concessions were back to where they were prior to COVID, and prices increased significantly until recently. Per the Zonda National Economic and Housing Market Update (July 27, 2022) during their most recent survey of over 300 homebuilders nationwide, 87 percent stated they plan to slow housing starts or at least watch this month to asses future starts. The rising interest rates alone did not seem to slow sales in March 2022. However, a combination of increasing ho me prices and falling consumer confidence added to the interest rate increases appears to be slowing sales on a national basis. With the recent higher interest rates and increased home prices, the average monthly mortgage payment is up 40 percent year -over-year.
The rate of new home sale cancellations has increased with several builders reporting more cancellations than sales over the past month, but this varies widely by market with the Inland Empire not yet reporting significant cancellations. It should be noted that current sales rates are being compared to 2021, which was a hugely successful year for the housing market. To put this in perspective, when comparing year to date average new home sales from July 2021 to July 2022, average sales numbers in the Inland Empire are down 12 percent; however, when comparing year to date average new home sales from July 2019 to July 2022 sales are up 28 percent.
Per the Zonda survey, as of mid-July 2022, over 50 percent of the 300 new home builders in the Nation su rveyed were stating demand is slower and causing concern. Over 70 percent of builders are increasing incentives; typically closing costs and rate buy-downs, however some option/upgrades. The builders’ largest concerns relate to: (1) increasing interest rat es, (2) consumer confidence, (3) inflation, (4) affordability, (5) economic uncertainty, (6) land prices, (7) materials cost, and (8) materials availability. The last few Item Title: 12.1
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weeks have seen a slowdown in both traffic and absorption due to the high inflation rates and resulting interest rate hikes.
Home loan mortgage rates have been and are still playing a large part in the robust housing market. The Board held mortgage rates at all-time lows after the Great Recession in an attempt to assist the housing marke t’s recovery. Low rates appeared to help for quite a while. However, first-time buyers are now having a hard time entering the housing market due to rising prices and rising interest rates. The Board had kept interest rates below historical averages, dropping rates to zero in December 2008. Subsequently, there had been eight one- quarter point increases with the December 2018 increase bringing the Federal Rate to 2.25-2.5 percent which appeared to have a negative impact on home sales. In 2019, the Board reduced the rate one-quarter percent three times in an effort to spur the economy. This appeared to help as housing sales began to increase in early 2020, prior to COVID. On March 3, 2020, due to the COVID pandemic economic disruption, the Board reduced the Federal Rate one-half percent. Then on March 16, 2020 they reduced the rate an additional one percent to the Federal Rate of 0.00 – 0.25 percent, the lowest rate in history. The quoted average U.S. rate for a 30-year fixed mortgage per FRED (Federal Reserve Economic Data) as of August 4 , 2022 was 4.99 percent, which is significantly higher than the low of 2.65 percent on January 7, 2021. Mortgage applications had been spiking in late 2020 and 2021 due to these low rates, and the fear that they were going to start ticking up, which we are now seeing occur in real time. In March 2022 the Federal Reserve Board increased the rate 0.25 percent, followed by a
0.50 percent increase in May 2022 and a historical 0.75 percent increase in both June and Jul y 2022. The Board has stated they anticipate more increases this year. The Federal Reserve Rate increases are supposed to help slow the high inflation rate in the Nation.
Residential Land Development
While there had been little land development going on in most of the Inland Empire during the years 2008- 2011, the second half of 2012 saw a resurgence in the more coveted areas such Corona, Eastvale, Ontario Ranch, Riverside and Jurupa Valley in West Riverside County and Murrieta, Lake Elsinore, Menifee and T emecula in Southern Item Title: 12.1
Community Facilities District 2020-2, Del Oro, Issuance of Special Tax Bonds Item Page Number: 232
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Riverside County. The increase in housing prices since 2012 combined with the limited availability of supply made land development feasible once again for homebuilders. It is thought that the increase in regulations, which has significantly increased the timeline for processing entitlements, limited the master developers’ further entitlement of developable land in California. While prior to the recession it was not unusual to see numerous large master-planned communities selling lots to builders, there are fewer currently available in the subject area. The majority of land sales over the past few years include individual tracts sold by a master developer within a master plan, single tracts of land with maps ready to record (such as the subject), or a public builder buying a larger piece of land, but develops the land for its own use (such as Banner Park by Pulte or Quartz Ranch by Lennar). Land sales slowly grew from 2012 up to a peak in 2017, with 2018 and 2019 showing lower land transactions. Since then, residential land sales exploded as builders tried to keep up with the demand for new homes. With new housing one of the strongest sectors in the COVID economy, there was a rebound in new -home starts. T he rush to build by the home builders in the Inland Empire between May 2020 and March 2022 may have created a slower second half 2022 and possibly 2023 for residential land sales. That is, residential land sold exceptionally well in 2021 and was continuing to sell well in early 2022, but that may have pulled future demand forward creating a softening in the land market. According to Zonda’s July 2022 survey of new home builders, about five percent are continuing “full steam ahead” while around 55 percent stated they are “cautiously moving forward” and 39 percent stated they are “bidding lower” or are “pausing land transactions.”
New Home Sales and Pricing
We have researched new single- family homes within the subject real estate market in order to reflect residential trends. It should be noted these sales numbers and prices pertain to new home sales while later in this section we discuss existing home sales. In reviewing new home sales in the Inland Empire market area, per the July 31, 2022 Ryness Report, the year -to-date average sales rate ( 4.3 sales per month) is slightly lower from the same time period of the previous year (4.9 sales per month). Previously, the average year to date sales rates for 2022 were higher than those of 2021, however it appears new home sales rates started to level off in late spring 2022, likely due to the increase in mortgage interest rates. As rates go down, purchasing power becomes larger, which Item Title: 12.1
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gives new -home buying a boost. However, the flip side is that as interest rates rise, purchasing power becomes lower and therefore fewer people purchase new homes .
Along with home sales comes a demand for appliances, furniture, building materials and services such as insurance, mortgage services, inspections, interior designers , and landscapers, all contributing to the area economy.
When comparing the July 31, 2022 Inland Empire Ryness Report to one year prior, there are 19 additional projects (195 in August 2021 and 214 in July 2022) and sales are slightly lower year-to-date than the previous year . However, when reviewing the current week average sales rate compared to the average weekly sales rate of one year ago, sales are down 52 percent (from 4.0 sales per month average during the final week in July last year to 1.95 average sales rate for the week ending July 31, 2022). This does not appear to be due to limited inventory as there are additional projects, but rather because of an actual slowdown in sales activity likely due to the increase in interest rates.
New single -family home prices (combines both attached and detached) in the Inland Empire has also seen changes. The median new home price in the Inland Empire changed from the peak value of $437,200 in the third quarter of 2006 to $268,155 in early 2009 (decrease of 39 percent) while the current new home median price is a record high of $5 92,500 per Zonda’s latest market report. This reflects an increase of over 120 percent from the bottom of the cycle and an increase of 35 percent over its previous peak.
New home sale prices fluctuate based on the land value and competition more than the cost of building the home. While finishes and sizes of homes can change, the basic costs on a per square foot basis typically do not fluctuate as much as land values, however there have been inflationary increases in construction costs adding to this increase.
Within our search for the most comparable actively selling new home communities, we searched the subject’s city of Menifee. Because Menifee is currently home to so many actively selling new home communities, we specifically focused on those with the most similar product and those that were nearest in proximity to the subject. Our search for similar new home projects to the subject communities resulted in ten new home projects (including the subject Del Oro) with base pricing ranging from $553,990 to $813,760. The subject pricing generally spans the width of the range, with the subject’s most recent base pricing ranging from $633,990 to $678,990.
Item Title: 12.1
Community Facilities District 2020-2, Del Oro, Issuance of Special Tax Bonds Item Page Number: 234
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Existing Homes Sales and Pricing
While the previous section looked at new home sales and pricing, this section refers to existing homes in Riverside County. According to the California Association of Realtors’ most recent data, within overall Southern California, the median price paid for an existing single-family home in June 2022 ($830,000) reflects a decrease of 1.8 percent from the previous month, but up 8.4 percent year-over-year from $766,000 in June 2021. Existing home sales in Southern California overall were down 27.1 percent year-over-year as of June 2022. The overall Southern California numbers compare to Riverside County with $645,000 as the median price paid for an existing home in the County in June 2022, down
0.8 percent since May 2022, and up 12.2 percent on a year-over-year basis ($575,000).
Sales of existing homes in the County were down 27.4 percent year-over-year. While this decrease had been due mainly to lack of supply, now rising interest rates are also affecting sales. Below is a table showing the sales and prices for the Southern California area by County per the California Association of Realtors.
Southern California Existing Home Sales
County June 2022 May 2022 June 2021
Price
MTM %
Change
Price YTY
% Change
Sales YTY
% Change
Los Angeles $860,230 $798,720 $796,120 7.7% 8.1% -20.6% Orange $1,265,000 $1,295,000 $1,138,000 -2.3% 11.2% -36.1% Riverside $645,000 $650,000 $575,000 -0.8% 12.2% -27.4% San Bernardino $490,000 $491,000 $435,000 0.0% 12.6% -27.5% San Diego $950,000 $970,000 $865,000 -2.1% 9.8% -30.5%
Ventura $930,000 $915,000 $840,000 1.6% 10.7% -22.6%
Southern Calif. $830,000 $845,000 $766,000 -1.8% 8.4% -27.1% Source: California Association of Realtors
Based on June 2022 median existing homes prices, in comparison to the majority of the surrounding counties, Riverside County has a definite price advantage. The “Riverside County Advantage” (price difference between Riverside and surrounding counties) is $215,230 as co mpared to Los Angeles County, $285 ,000 as compared to Ventura County, $ 305,000 as compared to San Diego County and $620 ,000 as compared to Orange County. That is, in June 2022, the median priced home in Riverside County was $620,000 less, or about one-half the median priced home in Orange County ($1,265,000).
However, San Bernardino County has a $155 ,000 price advantage over Riverside County. Typically, as the price advantage widens, homebuyers are more open to Item Title: 12.1
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commuting to further out areas. With the current work-from-home concept, the suburban areas are seeing more growth which is putting pressure on home prices in the Inland Empire. It’s important to note that June of 2022 was the first month where the majority of Southern California counties showed median price decreases from the previous month.
Most counties were seeing substantial month -to-month median price increases over the past two years, and the widespread decrease could be a sign that the market is starting to turn and the pricing run up is coming to end.
In a separate attempt to capture the neighborhood specific price changes , the resale activity of existing homes in the subject area (per CoreLogic) has been reviewed. The number of sales and sale prices of existing homes within market areas in the immediate area of the subject are shown in the table below.
Community
Name
Zip
Code
Border
To
Subject
Sales of
SFD
Homes
June 2022
June 2022
Price
Median
SFR
June 2022
PSF
Median
SFR
Price %
Change
from June
2021
Menifee 92584 Subject 90 $613,000 $292 14.8%
Winchester 92596 East 39 $658,000 $284 12.9%
Hemet 92545 Northeast 67 $450,000 $259 15.5%
Sun City 92585 North 36 $590,000 $274 18.0%
Lake Elsinore 92532 West 34 $633,000 $245 14.5%
Wildomar 92595 West/Southwest 41 $636,000 $288 10.5%
Murrieta 92563 South 109 $698,000 $292 16.4%
Murrieta 92562 Southwest 106 $695,000 $320 12.9%
Source: CoreLogic Southern California Home Resale Activity June 2022
The median home price of a detached resale home in the subject’s zip code is $613,000, which is mid-way in the range of average resale detached home prices in the subject ’s surrounding area. The above price fluctuations from year-to-year relate to the California Association of Realtors overall Riverside County detached home resale price increase of
12.2 percent year-over-year from June 2021 to June 2022.
Del Oro Sales and Pricing and Competition
Del Oro’s grand opening occurred November 30,2021 with opening base pricing ranging from $ 569,990 to $607 ,990. The m ost recent base pricing at Del Oro ranged from $633,990 to $678,990 which suggests appreciation from 11.2 to 11.6 percent in total over the past eight months, depending on floorplan. Actual closed prices, including options, upgrades and premiums, have ranged from $ 589,930 to $711,095. Within the subject, Item Title: 12.1
Community Facilities District 2020-2, Del Oro, Issuance of Special Tax Bonds Item Page Number: 236
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D.R. Horton has closed 49 homes to individuals between April 2022 and August 1, 2022, with an additional 1 3 homes in escrow. The total of 6 2 sales equates to an overall absorption rate of 7.7 sales per month. This is considered to be a very strong absorption rate for the subject marketplace, and above the Inland Empire’s overall average sales rate. According to the Ryness Report dated July 31, 2022, there are currently 52 new home projects in the South Riverside submarket which includes the communities of Winchester, Menifee, Lake Elsinore and the French Valley. The 52 projects include 29 projects within Menifee, which includes the subject communit y. The average absorption rate within the 52 South Riverside communities’ year to date per the July 31, 2022 Ryness Report is 3.7 sales per month. This is considered to be a good absorption rate.
Summary
Riverside County had seen substantial increases in pricing since 2012 with most areas, including the subject, showing astronomical increases from mid-2020 through early 2022.
While existing home sales were originally down when COVID began in spring/early summer 2020, new home sales subsequently shot up due to the existing home market supply being constrained and interest rates hitting all -time lows. The latest statistics are suggesting a slowdown in sales may be occurring as interest rates have risen substantially. The subject community has been performing above the Inland Empire average, resulting in strong sales rates and price increases . This is due to demand still being greater than supply of new homes offered in the subject area, along with the subject’s pricing being in- line with the actively selling comparable communities. The South Riverside su bmarket is generally performing above market, resulting in strong sales rates within the comparable projects in the area. The subject’s pricing and historical average absorption rate are in-line these comparable communities. The Menifee area saw an increase in pricing consistent with most of Southern California throughout 2020, 2021 and appeared to be continuing in the beginning of 2022. The past few months have seen sales slow and pricing beginning to soften. Despite uncertainty hitting the market due to rising interest rates and inflation, most observers agree that the Riverside County housing market is healthy and population growth is still estimated to occur in the County.
It is believed that as the population continues to increase, housing growth will also continue, despite a slowdown starting in the near term.
Item Title: 12.1
Community Facilities District 2020-2, Del Oro, Issuance of Special Tax Bonds Item Page Number: 237
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HIGHEST AND BEST USE ANALYSIS
The highest and best use is a basic concept in real estate valuation due to the fact that it represents the underlying premise (i.e., land use) upon which the esti mate of value is based. In this report, the highest and best use is defined as:
"the reasonably probable and legal use of vacant land or an improved property, which is physically possible, appropriately supported, financially feasible, and that results in the highest value”4
Proper application of this analysis requires the subject pro perties to first be considered “As If Vacant” in order to identify the “ideal” improvements in terms of use, size and timing of development. The existing improvements (if any) are then compared to the “ideal” improvements to determine if the use should be continued, altered or demolished preparatory to redevelopment of the site with a more productive or ideal use.
“As If Vacant”
In the following analysis, we have considered the sites probable uses, or those uses which are physically possible; the legality of use, or those uses which are allowed by zoning or deed restrictions; the financially feasible uses, or those uses which generate a positive return on investment; and the maximally productive uses, or those probable permissible uses which combine to give the owner of the land the highest net return on value in the foreseeable future.
Physically Possible Uses
The subject property consists of 19.994 gross acres within Tract Map 36852, generally located south of Holland Road and west of Menifee Road (specifically on the south side of Holland Road at Del Oro Way ) in Menifee. The subject has good access to I -215 via Menifee Road to Newport Road. Newport Road is a heavily traveled east/west arterial road through Menifee with good access from both I -15 (via Railroad Canyon Road) and I-215 (via Newport Road). The site has been graded with the subject property developed into single-family detached lots. The site is surrounded by existing residential to the east, west and south, and vacant lands to the north which is proposed for future apartments .
4 The Appraisal of Real Estate, 11th Edition
Item Title: 12.1
Community Facilities District 2020-2, Del Oro, Issuance of Special Tax Bonds Item Page Number: 238
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Soils reports covering the subject propert y were reviewed. It is an assumption of this report that the soils are adequate to support the highest and best use conclusion and that there are no environmental issues which would slow or thwart development of the site.
This is evidenced by City approvals along with City inspectors on site during construction.
An engineered drainage system appears to have been designed to alleviate any potential flooding problems and to control project water runoff with a water quality detention basin at the northwest corner of the site . All standard utilities serve the subject property. The site has access via I-215 to Newport Road or to Scott Road via Menifee Road. There are several large shopping centers within one mile of the subject site at the intersection of Newport Road and I-215.
Based on the physical analysis, the size, access and topography make the subject property physically suited for numerous types of development; however, the grading and development that has occurred on the site along with the surrounding uses, suggests single-family residential use.
Legality of Use
The subject property is located within the City of Menifee, the entity responsible for land use and zoning regulation. Per the City’s Zoning Map, the subject property is designated as LDR-2, or Low Density Residential which allows for a minimum lot size of 7,200 square feet. Per the approved tract map, the subject propert y h as an allowed 68 residential dwelling units. Tract Map No. 36852 covers the subject 68 single-family lots with a minimum lot size of 7,200 square feet. The approved mapping is consistent with the current zoning on the property. Based on the legality of us e analysis, the type of development for which the subject properties can be utilized is narrowed to residential use. This is consistent with the findings of the physically possible uses.
Feasibility of Development
The third and fourth considerations in the highest and best use analysis are economic in nature, i.e., the use that can be expected to be most profitable. As discussed under the Riverside County Housing Market section earlier within this report, the market has shown strong increases in both sales and pricing in the past two years. Within Menifee CFD No. 2020-2, out of 68 proposed houses, there have been 62 home sales including 49 home Item Title: 12.1
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closings. All structures appear to be in excellent condition with no physical depreciation apparent. Within the new home market in Menifee, we found nine projects to be comparable to the subject property. Until recently, h omebuilding had not been abl e to keep up with the demand during COVID due to the low interest rates, millennials joining the home buying market and the work from home factor all adding to the demand.
However, the recent rise in mortgage rates in an attempt to rein in inflation is slowing sales in the area. T he Menifee housing market is priced slightly higher when compared to the nearby cities of Wildomar and Lake Elsinore, however lower than Murrieta and Temecula. Population growth is still occurring in the area and will continue to create the need for housing.
Based on the above analysis, the highest and best use for the subject property appears to be for single-family detached residential development at the right price points.
Maximum Productivity
Based on the market activity of residential lands in the immediate area, we have concluded there is a need/demand for residential lands.
Highest and Best Use Conclusion – “As If Vacant”
The final determinant of highest and best use, as vacant, is the interaction of the previously discu ssed factors (i.e., physical, legal, financial feasibility and maximum productivity considerations). Based upon the foregoing analysis, it is our opinion that the highest and best use for the subject property “As if Vacant” is for residential development.
Highest and Best Use – “As Improved”
The subject property consists of the neighborhood of Del Oro being built out by D.R.
Horton in the City of Menifee. Del Oro consists of 68 proposed detached homes situated on lots with a minimum size of 7,200 square feet. Del Oro began selling November 30, 2021 and features homes ranging in size from 2,319 to 3,015 square feet with most recent base pricing ranging from $633,990 to $678,990. The increase from opening base prices have ranged from 11.2 to 11.6 percent depending on plan- type. There have been 62 sales within Del Oro resulting in an average sales rate of 7.7 sales per month, which is Item Title: 12.1
Community Facilities District 2020-2, Del Oro, Issuance of Special Tax Bonds Item Page Number: 240
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above the average sales rates in the market area. Our search within the subject area found nine projects considered to be comparable to the subject with similar sized homes and similar product types. The average sales rates within these projects range from 1.7 to 7.1 sales per month. The one at the low -end of the range recently opened, thus the absorption rate may be skewed. Our search of the Multiple Listing Service and on- site inspection revealed no current resale listings and no closed resales within the subject neighborhood.
The sales rate within the subject and the competitive projects in the immediate area suggest there is demand for new homes in the current market at the right price points.
All of the homes are of good design and appear to be of good quality workmanship.
Based on the subject neighborhood’s sales rates, it is our conclusion that the highest and best use for the subject property is for the continued use, as improved.
Item Title: 12.1
Community Facilities District 2020-2, Del Oro, Issuance of Special Tax Bonds Item Page Number: 241
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VALUATION ANALYSIS AND CONCLUSIONS
The Sales Comparison Approach will be used to value the subject property. This approach compares similar properties that have recently sold or are in escrow. In determining the value for the property, a unit of comparison needs to be addressed. For single-family detached lots, the lots are typically sold on a finished lot basis. That is, the sales price is determined by a finished lot value and then the remaining costs to develop the property to a finished lot condition are taken into account in the sales price. Therefore, in determining a current market value for the residential lands, the current condition of the lots will be considered. In the case of the existing home valuations, a single home sale is the unit of comparison. In determining the value for each existing house, a base value will be concluded for each plan which will be considered a minimum market value as most buyers typically purchase some premiums, upgrades or options which increase the price of the home.
The valuation will be presented as follows. First, a discussion of the single- family detached lot market data will be given. Each of the comparable market data (on a finished lot basis) will be detailed along with a comparison discussion of their relationship to the subject property. T he remaining construction costs and development fees will be taken into consideration. This analysis will be followed by a finished lot value conclusion for the subject property. Houses which are under construction (under 95 percent complete) will be valued on the basis of a finished lot rather than attribute value to a partially complete improvement. In the case of the completed (over 95 percent complete) builder -owned models and production homes, the homes will be valued using the Sales Comparison Approach to value to conclude on a retail base value for each plan, followed by a Discounted Cash Flow (“DCF”) Analysis due to the “bulk” or single ownership. The DCF will take into account the fair market value of the completed homes (utilizing the Sales Comparison Approach), any remaining land development costs and fees, the marketing and carrying costs associated with selling off the homes, a profit due to the developer of the homes, and a discount rate reflecting both the risk associated with selling off the homes along with the time value of money during the estimated absorption period. In the case of the individually owned homes, a concluded base value will be used for each plan Item Title: 12.1
Community Facilities District 2020-2, Del Oro, Issuance of Special Tax Bonds Item Page Number: 242
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and a mass appraisal technique will be addressed. In determining the concluded base value, new home sales in the area will be reviewed and compared with sales of the subject completed homes using standard methodology and statistical testing. In addition, any resales will be taken into consideration. All of the value conclusions will t ake into consideration improvements funded by the Menifee CFD No. 2020-2 Special Tax Bonds and their lien. A summary of the final value conclusions will be reported at the end of this valuation section.
Market Data Discussion – Detached Residential Lots
Within Del Oro there are a total of 49 individually owned homes, 17 homes over 95 percent complete (including two model homes), two homes under construction, and no remaining finished lots. The homes under construction (under 95 percent complete) will be valued on the basis of a finished lot rather than attribute value to a partially completed house; therefore, 2 lots will be valued. The lots within Del Oro are minimum 7,200 square feet.
We have searched the area and found the seven transactions summarized in the Addenda to be most comparable to the subject property. Five of the comparable transactions are located in the C ity of Menifee and two are located in the near-by Winchester region of Unincorporated Riverside County. The transactions are reported both on a purchase price basis and a “finished lot” basis when available. The actual purchase price is typically less, depending on the condition of the land (lots) at the time the property was acquired. Although some of the transactions refer to the land being in a finished or nearly finished condition, these transactions consist of land with physically finished lots with development impact and other fees remaining to be paid in order to be considered a true “finished lot.” Below are the details of each of the comparable land sales along with a discussion of each transaction in relationship to the subject lands.
Land Sale No. 1 refers to the purchase of 220 single family detached lots with a minimum lot size of 6,000 square feet located about 3.5 miles north of the subject site at the southeast corner of La Ventana Road and Simpson Road in the Winchester area of unincorporated Riverside County. Forestar (in a related purchase to D.R. Horton) Item Title: 12.1
Community Facilities District 2020-2, Del Oro, Issuance of Special Tax Bonds Item Page Number: 243
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purchased the 220 lots from Rancon in April 2022 for $8,000,000 or for $36,364 per lot based on a reported finished lot cost of $213,000. The lands were essentially level, in an unimproved condition with an approved final map at time of sale. In comparison to the subject property this locat ion is considered to be inferior (Winchester is fu rther out for commuters and from shopping) and the lot size is considered to be slightly inferior (6,000 versus the subject’s 7,200 square feet).
Land Sale No. 2 pertains to the purchase of 126 lots known as McLaughlin Village, located at the southwest corner of McLaughlin Road and I-215 in Menifee about 5.0 miles northwest of the subject site in Menifee. This parcel fronts the I -215 freeway . This property is mapped for 126 small detached lots and was purchased by Century Communities for $7,800,000 or for $61,905 per lot based on an estimated finished lot of $133,679 assuming a CFD in the $30,000 per lot range. The average lot size is estimated to be 2,700 square feet. In comparison to the subject property this lot size is considered to be significantly inferior to the subject in lot size (2,700 versus the subject’s m inimum 7,200 square feet) and inferior in location due to the fact it fronts the freeway.
Land Sale No. 3 refers to the sale of the property known as Rockport Ranch which is located at the southwest corner of Old Newport and Briggs Road about 1.75 miles northeast of the subject site within the City of Menifee. Lennar purchased the 79- acre property which is entitled for 305 lots including a mix of cluster lots and conventional single-family lots ranging from 5,000 to 6,500 square foot. The new community will be gated and include amenities of two lakes, a pool, park, social club and open space areas and will include a CFD similar to the subject property. Lennar purchased the site from the Abacherli Family for $5,500,000 which equates to $18,033 per lot based on reported finished lot prices ranging from $181,000 for the cluster lots, $205,000 for the 5,000 square foot lots, $208,000 for the 6,000 square foot lots and $213,000 for the 6,500 square foot lots. The high development costs are due to the requirement of the lakes and amenities within the project. The property sold in an unimproved condition with an approved tentative tract map. The community will have a similar CFD as the subject with similar overall tax rates. In comparison to the subject property this transaction is considered to be similar in location however inferior in both lot size and due to the raw Item Title: 12.1
Community Facilities District 2020-2, Del Oro, Issuance of Special Tax Bonds Item Page Number: 244
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land nature of this site. While costs of land development are taken into account in our analysis, the risk associated with the development of the site is not.
Land Sale No. 4 refers to the purchase of the north and final phase of the Braverde master planned community in Winchester. Global Investment Pool entitled and sold the property located along the north side of Wickert Road, just west of Leon about 2.5 miles southeast of the subject. The 261 lots have a minimum lot size of 5,000 square feet and were in a partially finished condition at time of sale. Richmond American Homes purchased the first phase in November 2020 for $33,334,000 or $133,336 per lot based on a reported finished lot of $185,000. They then purchased the second phase in November 2021 (Land Sale No. 4) for $41,685,876 or $159,716 per lot based on a reported finished lot price of $215,000. It is believed the increase is due to the appreciation in the subject market between November 2020 and November 2021. In comparison to the subject property, these lots are considered to be slightly inferior due to the lot size (5,000 square feet minimum lots versus the subject’s 7,200 minimum square feet).
Land Sale No. 5 refers to the sale of 129 single family detached lots located southwest of Domenigoni Parkway and Rice Road in Winchester about 4.75 miles east of the subject property. D.R. Horton purchased the 6,000 square foot lots in an unimproved condition with approved mapping from SR Conestoga LLC for $5,600,000 or $43,411 per lot based on a reported finished lot price of $202,000. The property is located within a planned CFD with similar overall proposed tax rates to the subject property. D.R. Horton is planning their community known as North Sky on the site. In comparison to the subject property this location is considered to be inferior as it is further out for commuters and in condition as it is unimproved land, along with being inferior in lot size. While the development costs are taken into account, there is risk associated with the grading of a site.
Land Sale No. 6 refers to the purchase of 756 lots known as Cimarron Ridge, located about 4.5 miles northwest of the subject property at the northwest corner of Valley Boulevard and Chambers Avenue in Menifee. The site was entitled and mass graded prior to the Great Recession then sat for many years due to both the economy and the Item Title: 12.1
Community Facilities District 2020-2, Del Oro, Issuance of Special Tax Bonds Item Page Number: 245
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hilly nature of the site which increased the cost of land development on the site. The recent appreciation in the marketplace made the property once again feasible to develop.
Pulte Homes has purchased the 756 lots, ranging in size from 5,000 to 10,000 square feet, from Van Daele Homes. Van Daele rough graded the property prior to sale along with mapping the site. Pulte purchased the site in July 2021 for $47,000,000 or $62,169 per lot based on a reported finished lot price of $185,000, assuming a similar CFD to the subject. In comparison to the subject property this site is inferior in number of lots (this would be considered a bulk sale which would suggest a discount) and location (further out from shopping areas). This transaction is also considered to be inferior in condition.
While finishing costs are taken into account, there is risk associated with developing raw land.
Land Sale No. 7 pertains to the May 2021 closing of 175 single family detached lots with a minimum lot size of 6,000 square feet known as Parkside, located northwest of Scott Road and Lindenberger Road in Menifee, about two miles southeast of the subject property. Meritage Homes purchased th e site in an unimproved condition with an approved tentative tract map for $7,200,000 or $41,143 per lot based on an estimated finished lot amount of $170,000 assuming a similar CFD on the property. The site is generally level at surrounding streets; however, Lindenberger Road is an unpaved road at the site increasing the land development costs. While this transaction closed in May 2021, it was negotiated approximately two years prior. In comparison to the subject property this site is considered inferior in date of sale (negotiation) , inferior in lot size, inferior due to the unpaved access and the raw land condition of the site (risk associated with the development) while the location is considered to be similar to the subject.
The chart on the following page summarizes the considerations used in adjusting the market data to the Subject Property.
Item Title: 12.1
Community Facilities District 2020-2, Del Oro, Issuance of Special Tax Bonds Item Page Number: 246
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Data
No.
Location
Date of
Sale
Minimum
Lot Size
Finished
Lot Price Comparison to Subject
1 Winchester 4/22 6,000 $213,000 Inferior – Location & Lot size
2 Menifee 4/22 2,700 $134,000 Inferior – Location (adjacent to freeway) & Lot Size
3 Menifee 12/21 Cluster –
5,000
$181,000
-
$213,000
Inferior – Lot Size & Condition
4 Menifee 10/21 5,000 $215,000 Inferior – Lot Size
5 Winchester 8/21 6,000 $202,000 Inferior – Lot Size, Location, Condition of Land
6 Menifee 7/21 5,000 $185,000 Inferior – No. of Lots and Condition
7 Menifee 5/21 6,000 $170,000 Inferior – Condition, Date of Neg. and Lot Size
The market data has an overall finished lot range from $1 34,000 to $215,000. Data No. 2, which is at the low-end of the range refers to significantly smaller sized lots with freeway frontage which are considered to be significantly inferior to the subject property . The remaining market data ranges from $170,000 to $215,000 with the more recent sales at the higher-end of the range. Data No. 1 pertains to the most recent closing with a price of $213,000 for the single family lots with a minimum size of 6,000 square feet in an inferior location. Data Nos. 3’s 5,000 square foot lots and Data No. 4 have similar locations to the subject with slightly smaller lots and sold for $213,000 and $215,000 respectively on a finished lot basis.
The above market data is considered to be good and plentiful. We have concluded that the subject lots have a finished lot value of $225 ,000. As discussed under the Property Description Section, there are remaining costs associated with developing the subject property into true finished lots. These costs are estimated at $75,352 per lot for the 19 builder-owned lots. The value conclusion for the lots is calculated below:
Lot Value Conclusion
Based on the above analysis the value conclusion for the subject builder -owned lots are as follows:
2 Lots x $225,000 $ 450,000
Less: Remaining Costs (2 x $75,352) ( 150,704)
Current Value for Remaining 2 Lots $ 299,296
Item Title: 12.1
Community Facilities District 2020-2, Del Oro, Issuance of Special Tax Bonds Item Page Number: 247
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Retail House Valuations
Due to the single ownership of multiple houses by the various builders within the subject property including model homes and production homes over 95 percent complete, a Discounted Cash Flow (“DCF”) analysis is needed in order to arrive at a bulk value for the homes within the subject neighborhood that are builder -owned. First, a retail value for each plan will be concluded followed by a DCF for the builder -owned homes, which will take into account the absorption time to sell off the houses, the costs assoc iated with selling off the homes and any remaining land development costs owed by the builder. The resulting revenue will be discounted using an appropriate rate to determine the builder - owned bulk value. This DCF analysis will be followed by a reporting of the concluded values for the individually owned homes using the concluded base retail value for each plan with a separate check of the analysis utilizing a mass appraisal technique based on actual sales prices of the homes and considering any re-sale market data.
Del Oro consists of 49 individually owned homes, two model homes (both in escrow), 15 production homes over 95 complete ( 11 in escrow), and two homes under construction (both available for sale). The homes under construction have been valued above. The 17 builder-owned homes over 95 percent complete (including two model homes) are being addressed in this section with a separate valuation for each plan.
Below is a summary of the floor plans within Del Oro. A listing of the improved residential comparable properties is located in the Addenda of this report. All of the improved residential properties are located within Menifee. Our search of the subject property and the local Multiple Listing Service (MLS) has resulted in no resales and no current resale listings within Del Oro.
Del Oro by D.R. Horton
Plan
Bed/Bath
Floors/
Parking
Sq. Ft.
Ind.
Owned
Bldr.
Owned
1 4+ / 3 1 / 2 2,319 9 6
2 4+ / 3 2 / 3 2,722 11 2
3 5+ / 4 2 / 2 2,929 15 5*
4 5+ / 3 2 / 3 3,015 14 4*
Total 49 17
Item Title: 12.1
Community Facilities District 2020-2, Del Oro, Issuance of Special Tax Bonds Item Page Number: 248
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The most appropriate new home comparable data for Plan 1 are shown below.
Data Model Rm. Ct. Flrs/Pkg. Sq. Ft. Price/SF
Subj. 1 4 / 3 1 / 2 2,319 --
1 2 4 / 3 2 / 3 2,722 $239.53
3 2 3 / 2.5 1 / 2 2,311 $254.86
6 2 3 / 2 1 / 2 2,287 $269.69
6 3 3 / 2 1 / 3 2,434 $256.46
7 1 4 / 3 1 / 2 2,527 $237.83
8 1 4 / 2.5 1 / 2 1,910 $289.53
10 1 4 / 2 1 / 2 1,910 $293.71
All new home comparables are located within Menifee. All are of similar quality, design and appeal. Adjustments were considered (when applicable) for location, master plan amenities, lot size, stories, sales concessions, CFD taxes, common area benefits, total square footage, room count, garage space and other amenities. The new homes comparables have a base price range from $237.83 to $293.71 per square foot with generally the smaller sized homes at the high-end of the price per square foot range and the larger sized homes at the lower- end of the price per square foot range. This is typical due to the economies of scale which are obtained during construction. Plan 1 is the only single-story floorplan at Del Oro and has a current base asking price of $273.39 per square foot. There have been nine closings of Plan 1 with sa les prices ranging from $254.39 to $ 288.34 per square foot. There are currently three escrows of Plan 1 with a sales price range of $263.04 to $268.22 per square foot. It should be noted that the reported sales prices include upgrades, premiums and options along with any concessions given by the builder, while the concluded value relates to a base price for the plan. All of the homes appear to be in excellent condition with no depreciation visible. It has been concluded that Plan 1 has a base current market value of $250.00 per square foot. This calculates as follows:
2,319 sf x $250.00 = $579,750
The most appropriate new home comparable data for Plan 2 are shown below.
Item Title: 12.1
Community Facilities District 2020-2, Del Oro, Issuance of Special Tax Bonds Item Page Number: 249
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Data Model Rm. Ct. Flrs/Pkg. Sq. Ft. Price/SF
Subj. 2 4 / 3 2 / 3 2,722 --
1 3 5 / 4 2 / 2 2,929 $233.18
2 1 4 / 2.5 2 / 3 2,845 $226.71
4 2 4 / 2.5 2 / 2 2,654 $229.08
4 3 5 / 3 2 / 2 2,824 $220.61
5 1 4 / 3.5 2 / 3 2,649 $228.91
5 3 4 / 3.5 2 / 2 2,809 $223.01
7 2 4 / 3 2 / 3 2,992 $209.22
8 4 4 / 3 2 / 2 2,771 $211.48
10 4 4 / 3 2 / 2 2,771 $221.58
All new home comparables are located within Menifee. All are of similar quality, design and appeal. Adjustments were considered (when applicable) for location, master plan amenities, lot size, stories, sales concessions, CFD taxes, common area benefits, total square footage, room count, garage space and other amenities. The new homes comparables have a base price range from $209.22 to $233.18 per square foot. Del Oro Plan 2 has a current base asking price of $239.53 per square foot. There have been 11 closings of Plan 2 with sales prices ranging from $213.99 to $244.83 per square foot. There is currently one escrow of a Plan 2 with a sales price of $243.41 per square foot. It should be noted that the reported sales prices include upgrades, premiums and options along with any concessions given by the builder, while the concluded value relates to a base price for the plan. All of the homes appear to be in excellent condition with no depreciation visible. It has been concluded that Plan 2 has a base current market value of $ 225.00 per square foot. This calculates as follows:
2,722 sf x $225.00 = $612,450
The most appropriate new home comparable data for Plan 3 are shown below.
Data Model Rm. Ct. Flrs/Pkg. Sq. Ft. Price/SF
Subj. 3 5 / 4 2 / 2 2,929 --
1 4 5 / 3 2 / 3 3,015 $225.04
2 2 5 / 3.5 2 / 3 3,047 $217.92
5 3 4 / 3.5 2 / 2 2,809 $223.01
7 2 4 / 3 2 / 3 2,992 $209.22
8 5 5 / 3 2 / 2 2,948 $202.85
9 5 5 / 4 2 / 2 2,929 $249.23
10 5 5 / 3 2 / 2 2,948 $216.41
Item Title: 12.1
Community Facilities District 2020-2, Del Oro, Issuance of Special Tax Bonds Item Page Number: 250
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All new home comparables are located within Menifee. All are of similar quality, design and appeal. Adjustments were considered (when applicable) for location, master plan amenities, lot size, stories, sales concessions, CFD taxes, common area benefits, total square footage, room count, garage space and other amenities. The new homes comparables have a base price range from $202.85 to $249.23 per square foot. Del Oro Plan 3 is a multi-generational plan and has a current base asking price of $233.18 per square foot. There have been 15 closings of Plan 3 with sales prices ranging from $216.35 to $242.78 per square foot. There are currently five escrows of Plan 3 with a sales p rice range of $235 .49 to $258.60 per square foot. It should be noted that the reported sales prices include upgrades, premiums and options along with any concessions given by the builder , while the concluded value relates to a base price for the plan. All of the homes appear to be in excellent condition with no depreciation visible. It has been concluded that Plan 3 has a base current market value of $215.00 per square foot. This calculates as follows:
2,929 sf x $215.00 = $629,735
The most appropriate new home comparable data for Plan 4 are shown below.
Data Model Rm. Ct. Flrs/Pkg. Sq. Ft. Price/SF
Subj. 4 5 / 3 2 / 3 3,015 --
1 3 5 / 4 2 / 2 2,929 $233.18
2 2 5 / 3.5 2 / 3 3,047 $217.92
2 3 5 / 3.5 2 / 3 3,237 $208.52
7 2 4 / 3 2 / 3 2,992 $209.22
7 3 5 / 3.5 2 / 3 3,247 $198.03
8 5 5 / 3 2 / 2 2,948 $202.85
9 5 5 / 4 2 / 2 2,929 $249.23
10 5 5 / 3 2 / 2 2,948 $216.41
All new home comparables are located within Menifee. All are of similar quality, design and appeal. Adjustments were considered (when applicable) for location, master plan amenities, lot size, stories, sales concessions, CFD taxes, common area benefits, total square footage, room count, garage space and other amenities. The new homes comparables have a base price range from $198.03 to $249.23 per square foot. Del Oro Plan 4 has a current base asking price of $225.04 per square foot. There have been 14 closings of Plan 4 with sales prices ranging from $207.79 to $231.65 per square foot. There are four current escrows of Plan 4 with a sales price range of $227.03 to $254.35 per square foot. It should be noted that the reported sales prices include upgrades, premiums and options along with any Item Title: 12.1
Community Facilities District 2020-2, Del Oro, Issuance of Special Tax Bonds Item Page Number: 251
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concessions given by the builder, while the concluded value relates to a base price for the plan. All of the homes appear to be in excellent condition with no depreciation visible. It has been concluded that Plan 4 has a base current market value of $210.00 per square foot.
This calculates as follows:
3,015 sf x $210.00 = $633,150
Builder-Owned Retail Values – Del Oro
Within Del Oro there are 17 builder-owned homes over 95 percent complete which includes two model homes. Thirteen of the homes are in escrow, including the two model homes. Per interviews with builders, upgrades and landscape/hardscape of up to $100,000 are installed in the model homes, however, the builders generally consider this a marketing cost and do not anticipate recovering this investment on a dollar-for-dollar basis. Based on historical information, home sizes and fixtures, actual model home sales within the subject area and the current real estate market, a consideration of a $5 0,000 premium has been included with each of the model homes. As concluded above, the retail base value conclusions for the builder -owned homes within Del Oro are calculated as follows:
Plan 1 (6 x $579,750) $ 3,478,500
Plan 2 (2 x $612,450) 1,224,900
Plan 3 (5 x $629,735) 3,148,675
Plan 4 (4 x $633,150) 2,532,600
Model Upgrades (2 x $50,000) 100,000
Retail Value $10,484,675
Absorption Period
In order to arrive at an absorption period for the 15 builder owned production homes and two builder owned model homes, the absorption rate for the subject neighborhood along with the surrounding developments has been reviewed. Del Oro opened for sale November 30, 2021. There have been 62 sales since then, suggesting an average absorption of 7.7 sales per month which is considered to be very good., however the market has changed due to the interest rate increases and sales are slowing. Thirteen of the 17 builder-owned homes are in escrow. Taking into consideration the product , current escrows, current Item Title: 12.1
Community Facilities District 2020-2, Del Oro, Issuance of Special Tax Bonds Item Page Number: 252
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market conditions and the concluded sales prices, it is the appraiser’s opinion that the 17 builder-owned homes will be absorbed within a four-month period at the concluded values.
Remaining Costs
As discussed under the property description section for Del Oro , there are $75,352 per lot remaining for land development costs associated with the builder-owned property. For the 17 builder-owned homes, this equates to $1 ,280,984 ($75,352 x 17) in remaining costs. For purposes of this analysis, we are assuming the remaining costs will be spread evenly over the four-month absorption period.
Expenses
In determining an expense rate, several builders in the subject area have been interviewed as to their expenses on selling existing inventory. Expenses include marketing and general administrative costs. These costs typically range from six to ten percent depending on varying factors such as absorption period, intensity of marketing, etc. Six percent has been estimated for marketing expenses and two percent for general and administrative costs for a total of eight percent in expenses for this analysis.
Profit
Several interviews with merchant builders in the area were conducted in order to determine an appropriate profit percentage for the subject properties. In the early 2000s, developers typically attempted to achieve a 10 to 12 percent profit based on gross s ales proceeds. During the early 1990s recession, this range was lowered considerably to six to 10 percent with some builders drastically lowering their profit potential in order to maintain their work force. As the market improved, so did the profits. This appears to be occurring once again as prices have been increasing. A ten percent profit is considered appropriate in the analysis for this project.
Discount Rate
In selecting a discount rate, the following was completed:
1. Interviews with merchant builders in the Menifee area
2. Review of current market conditions including current market rates as well as yields reflected in other markets (i.e., municipal bonds, corporate bonds, etc.)
3. The quality, construction, historical sales and product on the subject property Item Title: 12.1
Community Facilities District 2020-2, Del Oro, Issuance of Special Tax Bonds Item Page Number: 253
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The homes within Del Oro began selling November 30, 2021 with the product being well received in the marketplace. Based on the sales rate within the subject project, the competition, the product and location, a ten percent discount rate is considered appropriate for this analysis.
Discounted Cash Flow Summary
The discounted revenue (see DCF Analyses in addenda) for the builder -owned homes within Del Oro is $7,166,527.
Del Oro – Builder Ownership Valuation
The builder-owned homes within Del Oro consists of two models along with 15 production homes over 95 percent complete and two homes under construction (valued based on a finished lot) owned by D. R. Horton. The final valuation of the builder- owned property is:
2 Lots $ 299,296
17 Houses 7,166,527
Total D.R. Horton Ownership $ 7,465,823
Del Oro – Individual Owned Homes Valuation Conclusion
There are 49 individually owned homes within Del Oro . Based on the concluded value for each plan, the individually owned homes within Del Oro are:
Plan 1 (9 x $579,750) $ 5,217,750
Plan 2 (11 x $612,450) 6,736,950
Plan 3 (15 x $629,735) 9,446,025
Plan 4 (14 x $633,150) 8,864,100
Total Individual Owned $ 30,264,825
In an additional review, we have reviewed the original builder sales prices for the homes within the neighborhood of Del Oro. Sales for the 49 homes occurred between December 2021 and July 31, 2022 . The reported closing prices by the builder for the individually owned homes total $31,672,680 which is 4.4 percent above the concluded values . The builder’s reported prices include premiums, upgrades and purchased options as well as took into consideration the concessions given by the builder. The above valuation is for Item Title: 12.1
Community Facilities District 2020-2, Del Oro, Issuance of Special Tax Bonds Item Page Number: 254
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_________________________________________________________________________________________________________ Menifee CFD No. 2020-2 – Del Oro by D.R. Horton
Kitty Siino & Associates, Inc. Page 58
the minimum market value as it takes into consideration the base plan price only and does not take into account any options, premiums or upgrades which were purchased by the buyers. Typically, this would result in the actual sales prices being significantly higher than the concluded prices, however there has been significant appreciation within the subject neighborhood since the project began selling. The current base prices equate to increases ranging from 11.2 to 11.6 percent higher (depending on the plan) than the original base pricing. The price appreciation offsets the options, upgrades and premiums along with the incentives and concessions included in the actual sales pr ices. It is our conclusion that the original builder sales prices further substantiate the concluded minimum market value for the individually owned homes.
Item Title: 12.1
Community Facilities District 2020-2, Del Oro, Issuance of Special Tax Bonds Item Page Number: 255
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_________________________________________________________________________________________________________ Menifee CFD No. 2020-2 – Del Oro by D.R. Horton
Kitty Siino & Associates, Inc. Page 59
APPRAISAL REPORT SUMMARY
The appraisal assignment was to value the subject property which consists of lands within Menifee CFD No. 2020- 2 proposed for 68 single-family detached homes on 7,200 minimum square foot lots being built out into the community known as Del Oro in the City of Menifee, Riverside County. The neighborhood is being built and sold by D.R. Horton .
Del Oro opened for sale November 30, 2021 and is currently selling. Out of the total 68 proposed homes, 49 are completed and have closed to individuals with an addi tional 13 homes in escrow. The remainder of the lots range from completed model homes to production homes over 95 percent complete to homes under construction. We have reviewed the builder sales and reviewed the areas Multiple Listing Service along with a physical inspection with no resales and no re-sale listings found.
The subject property was valued using the Sales Comparison Approach to value and a mass appraisal technique. A minimum value was determined for the existing homes by concluding at a base value for each plan. The valuation took into account the improvements/benefits to be funded by Menifee CFD No. 2020-2 bond proceeds along with the Menifee CFD No. 2020- 2 special tax lien . As a result of our investigation, the concluded market value for the subject property is shown below.
Del Oro by D.R. Horton
D.R. Horton Owned (17 homes & 2 lots) $ 7,465,823
Individual Owned (49 homes) $ 30,264,825
Aggregate Value of Menifee CFD No. 2020-2 $ 37,730,648
The above values are stated subject to the Assumptions and Limiting Conditions of this report, the Appraiser’s Certification and as of August 1, 2022.
Item Title: 12.1
Community Facilities District 2020-2, Del Oro, Issuance of Special Tax Bonds Item Page Number: 256
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_________________________________________________________________________________________________________ Menifee CFD No. 2020-2 – Del Oro by D.R. Horton
Kitty Siino & Associates, Inc. Page 60
APPRAISER’S CERTIFICATION
The appraiser certifies that to the best of his knowledge and belief:
1. The statements of fact contained in this report are true and correct.
2. The reported analyses, opinions and conclusions are limited only by the reported assumptions and limiting conditions, and are my personal, unbiased, professional analyses, opinions and conclusions.
3. The appraiser has no present or prospective interest in the property that is the subject of this report, and no personal interest or bias with respect to the parties involved.
4. The appraiser’s compensation is not contingent upon the reporting of a predetermined value or direction in value that favors the cause of the client, the amount of the value estimate, the attainment of a stipulated result or the occurrence of a subsequent event.
5. This appraisal was not based on a requested minimum valuation, a specific valuation or the approval of a loan.
6. The analyses, opinions and conclusions were developed, and this report was prepared, in conformity with the Uniform Standards of Professional Appraisal Practice.
7. Kitty Siino has made a personal inspection of the property that is the subject of this report.
8. Kitty Siino has not performed any apprais al services on the subject property in the past three years.
9. No other appraisers have provided significant professional assistance to the persons signing this report.
10. The reported analyses, opinions and conclusions were developed, and this report was prepared, in conformity with the requirements of the Appraisal Institute’s Code of Professional Ethics and Standards of Professional Appraisal Practice, which include the Uniform Standards of Professional Appraisal Practice.
11. The use of this report is subject to the requirements of the Appraisal Institute relating to review by its duly authorized representatives.
12. As of the date of this report, Kitty Siino has completed the requirements of the continuing education program of the Appraisal Institute.
Kitty S. Siino, MAI
State Certified General
Real Estate Appraiser (AG004793)
Item Title: 12.1
Community Facilities District 2020-2, Del Oro, Issuance of Special Tax Bonds Item Page Number: 257
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ADDENDA
Item Title: 12.1
Community Facilities District 2020-2, Del Oro, Issuance of Special Tax Bonds Item Page Number: 258
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MENIFEE CFD NO. 2020-2
BOUNDARY MAP
Item Title: 12.1
Community Facilities District 2020-2, Del Oro, Issuance of Special Tax Bonds Item Page Number: 259
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Item Title: 12.1
Community Facilities District 2020-2, Del Oro, Issuance of Special Tax Bonds Item Page Number: 260
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TRACT MAP NO. 36852
Item Title: 12.1
Community Facilities District 2020-2, Del Oro, Issuance of Special Tax Bonds Item Page Number: 261
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Item Title: 12.1
Community Facilities District 2020-2, Del Oro, Issuance of Special Tax Bonds Item Page Number: 262
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DISCOUNTED CASH FLOW ANALYSIS
Item Title: 12.1
Community Facilities District 2020-2, Del Oro, Issuance of Special Tax Bonds Item Page Number: 263
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Del Oro Builder-Owned Houses Disc. Cash Flow Analysis
MONTH Months MONTH 1 MONTH 2 MONTH 3 MONTH 4 TOTAL
4 INCOME:
Retail Sales 10,484,675 $2,621,169 $2,621,169 $2,621,169 $2,621,169 $10,484,675
TOTAL INCOME $2,621,169 $2,621,169 $2,621,169 $2,621,169 $10,484,675
EXPENSES:
Remaining Costs ($320,246) ($320,246) ($320,246) ($320,246) ($1,280,984) Marketing & Carrying Expenses 8% ($209,694) ($209,694) ($209,694) ($209,694) ($838,774) Profit 10% ($262,117) ($262,117) ($262,117) ($262,117) ($1,048,468)
TOTAL EXPENSES ($792,056) ($792,056) ($792,056) ($792,056) ($3,168,226)
NET CASH FLOW $1,829,112 $1,829,112 $1,829,112 $1,829,112 $7,316,450 Discount Factor 10% 0.9917 0.9835 0.9754 0.9673
DISCOUNTED CASH FLOW $1,813,996 $1,799,004 $1,784,136 $1,769,391 $7,166,527
CUMULATIVE DISCOUNTED $1,813,996 $3,613,000 $5,397,136 $7,166,527 $7,166,527
CASH FLOW
Item Title: 12.1
Community Facilities District 2020-2, Del Oro, Issuance of Special Tax Bonds Item Page Number: 264
Menifee Mayor and City Council
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RESIDENTIAL LAND SALES MAP
& SUMMARY CHART
Item Title: 12.1
Community Facilities District 2020-2, Del Oro, Issuance of Special Tax Bonds Item Page Number: 265
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FINISHED LOT LAND SALES SUMMARY MAP
Item Title: 12.1
Community Facilities District 2020-2, Del Oro, Issuance of Special Tax Bonds Item Page Number: 266
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FINISHED LOT LAND SALES SUMMARY CHART
Data
No. Location / APN / Buyer / Seller Sales #
Lots Lot Size Sales Price /
Est.
Finished Comments
Date Price per Lot Lot Price
1 La Ventana, N. of Olive Avenue and La
Ventana Road, Winchester / 461-460-
008 / Forestar (D.R Horton OBS partner)
/ Rancon
4 / 22 220 6,000
$8,000,000
$213,000
Closed with a recorded Final
Map in an unimproved
condition.
$36,364
2 McLaughlin Villages, SEC of McLaughlin
Road and Barnett Road, Menifee / 331-
090-008 / Century Communities /
Mclaughlin Apartments LLC
4 / 22 126
2,700
Small Lot
Detached
$7,800,000
$134,000
Closed with an approved TTM
with approved Final
Engineering plans in an
unimproved condition.
$61,905
3 Rockport Ranch, SWC of Briggs Road
and Old Newport Road, Menifee / 364-
190-004 / Lennar / Abacherli Family
12 / 21 305 Cluster –
6,500
$5,500,000 / $181,000 -
$213,000
Closed in an unimproved
condition with an approved
tentative tract map. $18,033
4 Braverde North, S of Garbani Road and
La Ventana Lane, Menifee / 466-210-029
/ Richmond American / IHP
10 / 21 261 5,000 –
7,000
$41,685,876 / $215,000
Closed with an approved
Final Map in a Finished Lot
Condition
$159,716
5 Domenigoni/Rice / SW of Domenigoni
Parkway and Rice Road, Winchester /
461-383-023 / D.R. Horton / SR
Conestoga LLC
8 / 21 129 6,000
$5,600,000 / $202,000
Closed in unimproved
condition with a Recorded
final map.
$43,411
6 Cimarron Ridge, NWC of Valley
Boulevard & Chambers Avenue, Menifee
/ 330-220-016 / Pulte Homes / Van Daele
Homes
7 / 21 756 5,000 -
10,000
$47,000,000 / $185,000
Closed in rough graded
condition with an approved
final map. $62,169
7 Parkside, NW of Scott Road &
Lindenberger Road, Menifee / 372-160-
006 / Meritage Homes / KGK Riverside
Properties
5 / 21 175 6,000 -
10,000
$7,200,000 / $170,000
Closed in unimproved
condition with an approved
tentative tract map. $41,143
Item Title: 12.1
Community Facilities District 2020-2, Del Oro, Issuance of Special Tax Bonds Item Page Number: 267
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IMPROVED RESIDENTIAL SALES MAP
& SUMMARY CHART
Item Title: 12.1
Community Facilities District 2020-2, Del Oro, Issuance of Special Tax Bonds Item Page Number: 268
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IMPROVED RESIDENTIAL SALES MAP
Item Title: 12.1
Community Facilities District 2020-2, Del Oro, Issuance of Special Tax Bonds Item Page Number: 269
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IMPROVED RESIDENTIAL SALES SUMMARY CHART
Data
No.
Project Name
Location/Developer Plan Room
Count
Floors/
Parking Size (SF) Price/SF
Lot Size or
Density /
Absorption
Base
Sales
Price
Price/SF
1 Del Oro / Holland Road and
Hanover Lane, Menifee / D.R.
Horton
1 4 / 3 1 / 2 2,319 $273.39 $633,990 $273.39
2 4 / 3 2 / 3 2,722 $239.53 7,200 sf lots $651,990 $239.53 3 5 / 4 2 / 2 2,929 $233.18 7.7 sales/mo $682,990 $233.18 4 5 / 3 2 / 3 3,015 $225.04 $678,490 $225.04
2 Crest at Banner Park /
Domenigoni Pkwy and
Lindenberger Road, Menifee /
Pulte Homes
1 (Preston) 4 / 2.5 2 / 3 2,845 $226.71 6,500 sf lots $644,990 $226.71 2 (Stafford) 5 / 3.5 2 / 3 3,047 $217.92 5.0 sales/mo $663,990 $217.92 3 (Rosemount) 5 / 3.5 2 / 3 3,237 $208.52 $674,990 $208.52 3 Heritage at Banner Park /
Domenigoni Pkwy and
Lindenberger Road, Menifee /
Pulte Homes
1 (Stella) 3 / 2 1 / 2 2,191 $262.89 7,900 sf lots $575,990 $262.89 2 (Verona) 3 / 2.5 1 / 2 2,311 $254.86 5.6 sales/mo $588,990 $254.86 3 (Parklane) 3 / 2.5 1 / 3 2,462 $246.95 $607,990 $246.95 4 Merit at Banner Park /
Domenigoni Pkwy and
Lindenberger Road, Menifee /
Pulte Homes
1 (Pathmaker) 4 / 2.5 2 / 2 2,391 $248.01 7,900 sf lots $592,990 $248.01 2 (Brinnon) 4 / 2.5 2 / 2 2,654 $229.08 4.1 sales/mo $607,990 $229.08 3 (Visionary) 5 / 3 2 / 2 2,824 $220.61 $622,990 $220.61 5 Canyon View at Quartz Ranch,
Evans and Cherry Birch Avenue,
Menifee / Lennar
1 4 / 3.5 2 / 3
2,649 $228.91 $606,375 $228.91
2 4 / 3.5 1 / 2 2,767 $224.37 9,000 sf lots $620,825 $224.37 3 4 / 3.5 2 / 2 2,809 $223.01 7.1 sales/mo $626,445 $223.01 4 5 / 3.5 2 / 3 4,134 $196.85 $813,760 $196.85
6 Ridgeline at Quartz Ranch,
Evans and Cherry Birch Avenue,
Menifee / Lennar
1 3 / 2 1 / 2 1,950 $297.11 $579,355 $297.11
2 3 / 2 1 / 2 2,287 $269.69 7,200 sf lots $616,775 $269.69 3 3 / 2 1 / 3 2,434 $256.46 4.3 sales/mo $624,225 $256.46 4 4 / 3.5 1 / 2 2,767 $221.95 $614,145 $221.95
7 Cedar at Sumac Ridge / NE of
Scott Road and Menifee Road,
Menifee / Meritage Homes
1 4 / 3 1 / 2 2,527 $237.83 7,000 sf lots $601,000 $237.83 2 4 / 3 2 / 3 2,992 $209.22 1.7 sales/mo $626,000 $209.22 3 5 / 3.5 2 / 3 3,247 $198.03 $643,000 $198.03
Item Title: 12.1
Community Facilities District 2020-2, Del Oro, Issuance of Special Tax Bonds Item Page Number: 270
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8 Sage at Sumac Ridge / NE of
Scott Road and Menifee Road,
Menifee / Meritage Homes
1 4 / 2.5 1 / 2 1,910 $289.53 $553,000 $289.53
2 4 / 3 2 / 2 2,320 $241.81 6,000 sf lots $561,000 $241.81 3 4 / 3 2 / 2 2,541 $225.50 5.4 sales/mo $573,000 $225.50 4 4 / 3 2 / 2 2,771 $211.48 $586,000 $211.48
5 5 / 3 2 / 2 2,948 $202.85 $598,000 $202.85
9 Saddlewood at Audie Murphy
Ranch / Goetz Road and Audie
Murphy Road, Menifee / D.R.
Horton
1 4 / 3 1 / 2 1,898 $304.79 $578,490 $304.79
2 4 / 3 2 / 2 2,239 $257.92 5,000 sf lots $577,490 $257.92 3 4 / 3.5 2 / 2 2,435 $247.43 6.8 sales/mo $602,490 $247.43 4 5 / 3 2 / 2 2,537 $268.03 $679,990 $268.03
5 5 / 4 2 / 2 2,929 $249.23 $729,990 $249.23
10 Jasper at Audie Murphy Ranch /
Goetz Road and Audie Murphy
Road, Menifee / Meritage Homes
1 4 / 2 1 / 2 1,910 $293.71 $560,990 $293.71
2 4 / 3 2 / 2 2,320 $254.74 6,600 sf lots $590,990 $254.74 3 4 / 3 2 / 2 2,541 $238.88 7.1 sales/mo $606,990 $238.88 4 4 / 3 2 / 2 2,771 $221.58 $613,990 $221.58
5 5 / 3 2 / 2 2,948 $216.41 $637,990 $216.41
Item Title: 12.1
Community Facilities District 2020-2, Del Oro, Issuance of Special Tax Bonds Item Page Number: 271
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APPRAISER’S QUALIFICATIONS
Item Title: 12.1
Community Facilities District 2020-2, Del Oro, Issuance of Special Tax Bonds Item Page Number: 272
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QUALIFICATIONS OF KITTY S. SIINO, MAI
Education
Bachelor of Arts in Business Administration, Financial Investments, California State University, Long Beach, California (1980)
Post-Graduate Study, Real Estate Development, University of California, Irvine, California
Appraisal Institute Classes: Uniform Standards of Professional Appraisal Practice, A & B; Appraisal Principles; Appraisal Procedures; Basic Income Capitalization; Advanced Income Capitalization; Narrative Report Writing; Advanced Applications, Case Studies.
Successfully completed all classes in addition to successfully completing the writing of a Demonstration Report and taking the Comprehensive Exam. Became a Member of the Appraisal Institute in December 1996. Have completed over 100 hours of continuing education through the Appraisal Institute every five years.
Employment
1988 - Present:
Self-Employed Real Estate Appraiser. Duties include the appraisal of various types of properties such as commercial, retail, industrial and vacant land. More complex assignments include easements, right-of-ways and special assessment districts. From 1996 to present, specialized in special assessment districts and community facilities districts appraisals for public entities, including Jurupa Community Services District, Corona Norco Unified School District, City of Corona, City of Chula Vista, City of San Marcos and City of Moreno Valley.
1986-1988:
Project Manager of Development for Ferguson Partners, Irvine, California. Duties included land acquisitions; review of fee appraisals and valuations; analysis of proposed development; planning and design; and management of development, construction and lease-up. The types of properties developed were commercial and industrial. Duties ranged from raw, vacant site development through property management of recently developed projects.
1981 - 1986
Manager of Finance, Construction for Community Development Division, The Irvine Company, Irvine, California. Duties included originating and managing a newly formed division of finance to bridge between the accounting functions and project management functions. Worked with analysis and budgets for Community Development Division. Coordinated with cities in forming new Assessment Districts and Community Facilities Districts to finance m ajor infrastructure improvements.
Types of properties were apartments and single- family residential lots on a for sale basis to apartment and homebuilders.
1980 - 1981
Investment Counselor, Newport Equity Funds, Newport Beach, California. Duties included obtaining private financing for residential properties, working with appraisals of properties and analyzing the investments.
Item Title: 12.1
Community Facilities District 2020-2, Del Oro, Issuance of Special Tax Bonds Item Page Number: 273
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Licenses
Real Estate Sales Person, State of California, 1980
Certified General Appraiser, State of California (#AG004793)
Organizations
MAI #11145 - The Appraisal Institute
Public Financing
CASTOFF Meetings, 2006, 2007, 2008, 2009, 2010, 2011, 2013, 2014, 2015, 2016, 2017, 2018, 2019 and 2022
Speaker, Mello- Roos & Special Assessment Financing, UCLA Extension P ublic Policy Program, February 2009 and March 2011
Item Title: 12.1
Community Facilities District 2020-2, Del Oro, Issuance of Special Tax Bonds Item Page Number: 274
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CITY OF MENIFEE
SUBJECT: Community Facilities District 2021-1, Banner Park, Issuance of Special Tax Bonds
MEETING DATE: September 21, 2022
TO: Mayor and City Council
PREPARED BY: Jizelle Sandoval, Financial Analyst
REVIEWED BY: Margarita Cornejo, Deputy Finance Director APPROVED BY: Armando G. Villa, City Manager
-------------------------------------------------------------------------------------------------------------------------------
RECOMMENDED ACTION
1. Adopt a resolution authorizing the issuance of special tax bonds and bond documents in connection with Community Facilities District 2021-1, Banner Park, located in the eastern portion of the City, to the northwest of Domenigoni Parkway; and
2. Authorize the City Manager to appropriate funds for debt service and related expenditures and revenues within the Banner Park custodial fund.
DISCUSSION
Background
The City Council has previously completed the necessary proceedings to establish Community Facilities District No. 2021-1 (Banner Park) of the City of Menifee (the “District”). As part of those proceedings, the City Council declared the necessity to issue bonds on behalf of the District pursuant to the terms and provisions of the Mello-Roos Community Facilities Act of 1982, as amended, being Chapter 2.5, Part 1, Division 2, Title 5 of the Government Code of the State of California (Act).
Pursuant to the Act, on April 21, 2021 the City Council adopted Resolution No. 21-1013 (the “Resolution of Intention”), stating its intention to form the District and to authorize the levy of a special tax on the taxable property within the District, and Resolution No. 21-1014, stating its intention to incur bonded indebtedness in an aggregate principal amount not to exceed $17,000,000 for the purpose of financing the purchase, construction, expansion or rehabilitation of certain public facilities to serve the area within the District.
On June 2, 2021, the City Council adopted Resolution Nos. 21-1030 and 21-1031 (collectively the “Resolution of Formation”). The Resolution of Formation established the District, authorized the levy of a special tax (the “Special Tax”) within the District, determined the necessity to incur Item Title: 12.2
Community Facilities District 2021-1, Banner Park, Issuance of Special Tax Bonds Item Page Number: 1
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CFD 2021-1, Banner Park, Issuance of Special Tax Bonds
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bonded indebtedness in an amount not to exceed $17,000,000 within the District, and called an election within the District on the proposition of incurring bonded indebtedness, levying the Special Tax and setting an appropriations limit.
On June 2, 2021, an election was held within the District in which the property owner within the District approved the proposition authorizing the issuance of bonds in an amount not to exceed $17,000,000. A Notice of Special Tax Lien for the District was recorded in the office of the County Recorder on June 10, 2021.
On June 16, 2021, the City Council adopted Ordinance No. 2021-319, which authorizes the levy of a special tax pursuant to the Rate and Method of Apportionment approved at the June 2, 2021 election.
The District contains approximately 76 gross acres and approximately 41 net taxable acres and is located in the eastern portion of the City, to the northwest of Domenigoni Parkway. The property within the District was acquired by Pulte Home Company, LLC, a Michigan limited liability company (“Pulte Homes”) in three phases, the last of which occurred on July 1, 2022. The District consists of a new residential community known as “Banner Park” being marketed by Pulte Homes.
The property within the District is planned for 256 residential units. As of August 5, 2022, Pulte Homes had completed and conveyed 103 homes within the District to individual homeowners, and as of such date, Pulte Homes owned six model homes (none of which were in escrow), 12 completed homes (10 of which were in escrow), 57 homes in various stages of construction (48 of which were in escrow) and 78 finished lots (16 of which were in escrow). Pulte Homes currently expects to complete and convey all homes planned within the District to individual homeowners by September 30, 2024.
Annual debt service on the proposed Special Tax Bonds, Series 2022A (the “2022A Bonds”) will be sized based on the expected Special Tax revenues to be received from 121 homes classified as Developed Property for fiscal year 2022/23, and 130 parcels to be classified as Developed Property beginning in fiscal year 2023/24, which is based on development status as of August 15, 2022. The bond documents allow for the issuance of additional bonds payable from Special Tax revenues on parity with the 2022A Bonds. It is currently anticipated that parity bonds will be issued in year 2023/24, when an additional 100 homes (80% of total remaining units) are projected to be conveyed to individual homeowners. The development and ownership status of the planned homes within the District as of August 5, 2022 is shown in Table 1 below.
Table 1 – Ownership and Development Summary (August 5, 2022) Parcels In Escrow
Individually Owned
Completed 103 --
Developer Owned
Completed 12 10
Modeled 6 0
Under Construction 57 48
Finished Lots 78 16
Subtotal 153 74
TOTAL 256 74
Item Title: 12.2
Community Facilities District 2021-1, Banner Park, Issuance of Special Tax Bonds Item Page Number: 2
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CFD 2021-1, Banner Park, Issuance of Special Tax Bonds
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The resolution before the City Council authorizes the issuance of special tax bonds and the execution and delivery of certain documents in connection therewith as further described in the following paragraphs.
The proposed 2022A Bonds are estimated to have a par amount of approximately $5.52 million with a final maturity of 9/1/2052 (30-year financing term). Proceeds from the 2022A Bonds will primarily finance public improvements benefitting the development within the District. The final par amount and interest rate structure will be determined when the 2022A Bonds are priced and sold. The pricing date is targeted for October 2022, with the bond closing expected to occur later in the month. Table 2 below highlights financing statistics based on current market conditions.
Table 2
Summary of Financing Statistics*
2022A Bonds
Par Amount $5,520,000
Average Bond Yield 5.38%
Estimated Cost to Homeowners
FY 2022-23 Assessment** $2,501 to $3,112
*Preliminary; Subject to Change; Based on Current Market Conditions **Annual Assigned Special Tax will increase at approximately 2% per year.
As required under Section 5852.1 of the California Government Code (Code), below are the good faith estimates as provided by the Municipal Advisor and Underwriter:
1. As illustrated above, the true interest cost of the 2022A Bonds is estimated at 5.38%, calculated as provided in Section 5852.1(a)(1)(A) of the Code.
2. The finance charge of the 2022A Bonds, including underwriter’s discount and all other fees and charges paid to third parties, is estimated at $293,840.
3. Proceeds of the 2022A Bonds received by the District for the sale of the 2022A Bonds, less the finance charges set forth in (2) above and the reserve fund funded with proceeds of the 2022A Bonds, is equal to $4,658,928 which will be available to finance the project.
4. The total payment amount calculated as provided in Section 5852.1(a)(1)(D) of the Code is estimated at $11,700,546.
The foregoing are estimates and the final costs will depend on market conditions and can be expected to vary from the estimated amounts set forth above.
Item Title: 12.2
Community Facilities District 2021-1, Banner Park, Issuance of Special Tax Bonds Item Page Number: 3
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CFD 2021-1, Banner Park, Issuance of Special Tax Bonds
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Documents to be Approved
Approval of the resolution, authorizing and directing execution of certain bond documents, authorizing and directing the sale of the proposed 2022A Bonds and authorizing and directing certain actions with respect thereto will authorize the execution of the following documents attached to this staff report:
✓Preliminary Official Statement
✓Bond Indenture
✓Continuing Disclosure Certificate
✓Bond Purchase Agreement
Bond Counsel and the City Attorney have reviewed the attached financing documents on behalf of the District. If this resolution is approved, City staff would continue to work with the financing team to finalize all the aforementioned documents. As previously mentioned, the pricing date would be targeted for late September 2022, with bond closing anticipated in October 2022.
STRATEGIC PLAN OBJECTIVE
Responsive and Transparent Community Government
FISCAL IMPACT
The 2022A Bonds are paid from special taxes levied in the District. There is no fiscal impact to the City’s General Fund. The City will, however, be required to provide administration for the District, which will be funded as part of the annual special tax levy.
By action of this staff report the City Manager would be authorized to appropriate funds for debt service and related expenditures and revenues within the Banner Park custodial fund.
Debt service would be paid through special tax assessments. The property owners would be expected to pay special taxes of approximately $2,501 to $3,112 per parcel starting in fiscal year 2022/23, depending on the size of the home. Such Special Taxes will increase at 2% per year.
ATTACHMENTS
1. Project Map
2. Good Faith Estimate
3. Resolution
4. Preliminary Official Statement and Continuing Disclosure Certificate
5. Bond Indenture
6. Bond Purchase Agreement
7. Appraisal Report
Item Title: 12.2
Community Facilities District 2021-1, Banner Park, Issuance of Special Tax Bonds Item Page Number: 4
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PROJECT LOCATION MAP
CFD NO. 2021-1 (BANNER PARK)
16 Item Title: 12.2 Community Facilities District 2021-1, Banner Park, Issuance of Special Tax Bonds Item Page Number: 5
Menifee Mayor and City Council September 21, 2022 Page 2492 of 2787
EXHIBIT A
GOOD FAITH ESTIMATES
The good faith estimates set forth herein are provided with respect to the Bonds in accordance with California Government Code Section 5852.1. Such good faith estimates have been provided to the City by Urban Futures, Inc. as municipal advisor to the City (the “Municipal Advisor”), each with respect to the Bonds.
Principal Amount. The Municipal Advisor has informed the City that, based on the City’s financing plan and current market conditions, its good faith estimate of the aggregate principal amount of the Bonds to be sold is $5,520,000 (the “Estimated Principal Amount”).
True Interest Cost of the Bonds. The Municipal Advisor has informed the City that, assuming that the Estimated Principal Amount of the Bonds is 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 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 Bonds, is 5.38%.
Finance Charge of the Bonds. The Municipal Advisor has informed the City that, assuming that the Estimated Principal Amount of the Bonds is 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 Bonds, which means the sum of all fees and charges paid to third parties (or costs associated with the Bonds), is $293,840.
Amount of Proceeds to be Received. The Municipal Advisor has informed the City that, assuming that the Estimated Principal Amount of the Bonds is 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 City for sale of the Bonds, less the finance charge of the Bonds, as estimated above, and any reserve fund funded with proceeds of the Bonds, is $4,658,928.
Total Payment Amount. The Municipal Advisor has informed the City that, assuming that the Estimated Principal Amount of the Bonds is sold, and based on market interest rates prevailing at the time of preparation of such estimate, its good faith estimate of the total payment amount, which means the sum total of all payments the City will make to pay debt service on the Bonds, plus the finance charge for the Bonds, as described above, not paid with the proceeds of the Bonds, calculated to the final maturity of the Bonds, is $11,700,546.
The foregoing estimates constitute good faith estimates only. The actual principal amount of the 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 Bonds being different than the date assumed for purposes of such estimates, (b) the actual principal amount of Bonds sold being different from the Estimated Principal Item Title: 12.2
Community Facilities District 2021-1, Banner Park, Issuance of Special Tax Bonds Item Page Number: 6
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Amount, (c) the actual amortization of the 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 Bonds being different than those estimated for purposes of such estimates, (e) other market conditions, or (f) alterations in the City’s financing plan, or a combination of such factors. The actual date of sale of the Bonds and the actual principal amount of Bonds sold will be determined by the City based on the timing of the need for proceeds of the Bonds and other factors. The actual interest rates borne by the Bonds will depend on market interest rates at the time of sale thereof. The actual amortization of the 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 City.
Item Title: 12.2
Community Facilities District 2021-1, Banner Park, Issuance of Special Tax Bonds Item Page Number: 7
Menifee
Mayor
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City
Council
September
21,
2022
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RESOLUTION NO. 22-___
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF MENIFEE, CALIFORNIA,
ACTING AS THE LEGISLATIVE BODY OF COMMUNITY FACILITIES DISTRICT NO. 2021-1 (BANNER PARK) OF THE CITY OF MENIFEE AUTHORIZING THE ISSUANCE OF ITS SPECIAL TAX BONDS, SERIES 2022A IN A PRINCIPAL AMOUNT NOT TO EXCEED SEVEN MILLION DOLLARS ($7,000,000) AND APPROVING
CERTAIN DOCUMENTS AND TAKING CERTAIN OTHER ACTIONS IN CONNECTION
THEREWITH
WHEREAS, the City Council (the “City Council”) of the City of Menifee (the “City”), has heretofore undertaken proceedings to establish Community Facilities District No. 2021-1 (Banner Park) of the City of Menifee (the “District”) and declared the necessity to issue bonds on behalf of the District pursuant to the terms and provisions of the Mello-Roos Community Facilities Act of 1982, as amended, being Chapter 2.5, Part 1, Division 2, Title 5 of the Government Code of the State of California (Act); and
WHEREAS, pursuant to Resolution Nos. 21-1030 and 21-1031 adopted by the legislative body of the District on June 2, 2021, certain bond propositions were submitted to the qualified electors within the District, and were approved by more than two-thirds of the votes cast at the election held on June 2, 2021; and
WHEREAS, the legislative body of the District desires to issue a first series of bonds for the District at this time under the Act to finance certain public facilities which the District is authorized to finance (the “Facilities”); and
WHEREAS, the District desires to finance certain Facilities through the issuance of bonds in an aggregate principal amount not to exceed $17,000,000 designated as the “Community Facilities District No. 2021-1 (Banner Park) of the City of Menifee Special Tax Bonds, Series 2022A” (the “Bonds”); and
WHEREAS, in order to effect the issuance of the Bonds, the District desires to enter into various agreements and approve certain documents in substantially the forms presented herein; and
WHEREAS, based on the appraisal of real property prepared by Kitty Siino & Associates, Inc. (the “Appraisal”) of property within the District, the value of the real property in the District subject to the special tax to pay debt service on the Bonds is more than three times the sum of the principal amount of the Bonds and the principal amount of all other bonds outstanding that are secured by a special tax levied pursuant to the Act or a special assessment levied on property within the District as calculated in the manner set forth in Section 53345.8(a) of the Act; and WHEREAS, the City Council has determined in accordance with Section 53360.4 of the Act that a negotiated sale of the Bonds to Stifel, Nicolaus & Company, Incorporated (the “Underwriter”) in accordance with the terms of the Bond Purchase Agreement for the Bonds to be entered into by the District and the Underwriter (the “Bond Purchase Agreement”) approved as to form by this City Council herein will result in a lower overall cost to the District than a public sale; and
WHEREAS, the District has determined to adopt the City’s Debt Management Policy as the debt management policy of the District; and
Item Title: 12.2
Community Facilities District 2021-1, Banner Park, Issuance of Special Tax Bonds Item Page Number: 8
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September
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NOW, THEREFORE, BE IT RESOLVED that the City Council of Menifee, California, acting as legislative body of Community Facilities District No. 2021-1 Banner Park of the City of Menifee, does hereby resolve, determine and order as follows:
Section 1. Each of the above recitals is true and correct.
Section 2. The issuance of the Bonds is hereby authorized in an aggregate principal amount not to exceed $7,000,000, with the exact principal amount to be determined by the official signing the Bond Purchase Agreement in accordance with Section 5 below. The City Council hereby determines that it is prudent in the management of the District’s fiscal affairs to issue the Bonds.
The Bonds shall mature on the dates and pay interest at the rates set forth in the Bond Purchase Agreement to be executed on behalf of the District in accordance with Section 5 hereof. All other provisions of the Bonds shall be governed by the terms and conditions of the Bond Indenture (the “Indenture”), which Indenture is hereby approved in substantially the form on file with the City Clerk, with such additions thereto and changes therein (including, but not limited to, changes in the amount to be maintained in the Reserve Account (as defined in the Indenture)) as the officer or officers executing the same deem necessary to enhance the security for the Bonds, to cure any ambiguity or defect therein, to insert the offering price(s), interest rate(s), selling compensation, principal amount per maturity, redemption dates and prices and such other related terms and provisions as limited by Section 5 hereof or to conform any provisions therein to the Bond Purchase Agreement or the Official Statement delivered to the Underwriter of the Bonds.
Approval of such changes shall be conclusively evidenced by the execution and delivery of the Indenture by one of the following: the Mayor, the City Manager, the Deputy City Manager, the Assistant City Manager, the Chief Financial Officer, or their written designees (each, an “Authorized Officer” and collectively, the “Authorized Officers”), each of whom is authorized to execute the Indenture. Capitalized terms used in this Resolution which are not defined herein have the meanings ascribed to them in the Indenture.
Section 3. The Bonds shall be executed on behalf of the District by the manual or facsimile signature of the Mayor of the City or his or her written designee and be attested by the manual or facsimile signature of the City Clerk. Wilmington Trust, National Association is hereby appointed to act as trustee, registrar and transfer agent for the Bonds.
Section 4. The covenants set forth in the Indenture to be executed in accordance with Section 2 above are hereby approved, shall be deemed to be covenants of the City Council and shall be complied with by the District and its officers. The Indenture shall constitute a contract between the District and the Owners of the Bonds.
Section 5. The form of the Bond Purchase Agreement presented at this meeting is hereby approved and each of the Authorized Officers is hereby authorized to execute the Bond Purchase Agreement, with such additions thereto and changes therein relating to dates and numbers as are necessary to conform the Bond Purchase Agreement to the dates, amounts and interest rates applicable to the Bonds as of the sale date. Approval of such additions and changes shall be conclusively evidenced by the execution and delivery of the Bond Purchase Agreement by one or more of such Authorized Officers; provided, however, that the Bond Purchase Agreement shall be signed only if the Underwriter’s discount does not exceed 1.50% of the principal amount of the Bonds and only if the true interest cost on the Bonds does not exceed 6.0%. Each of the Authorized Officers is authorized to determine the day on which the Bonds are to be priced in order to attempt to produce the lowest borrowing cost for the District and may reject any terms presented by the Underwriter if determined not to be in the best interest of the District.
Item Title: 12.2
Community Facilities District 2021-1, Banner Park, Issuance of Special Tax Bonds Item Page Number: 9
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Section 6. The form of the Continuing Disclosure Certificate presented at this meeting is hereby approved and each of the Authorized Officers is hereby authorized and directed to execute the Continuing Disclosure Certificate in the form hereby approved, with such additions therein and changes thereto as the officer or officers executing the same deem necessary to cure any defect or ambiguity therein, with such approval to be conclusively evidenced by the execution and delivery of such certificate.
Section 7. The form of the Preliminary Official Statement presented at this meeting is hereby approved and the Underwriter is hereby authorized to distribute the Preliminary Official Statement to prospective purchasers of the Bonds in the form hereby approved, together with such additions thereto and changes therein as are determined necessary by the Authorized Officers to make such Preliminary Official Statement final as of its date for purposes of Rule 15c2-12 of the Securities and Exchange Commission. Each of the Authorized Officers is hereby authorized to execute a final Official Statement in the form of the Preliminary Official Statement, together with such changes as are determined necessary by the Authorized Officers, to make such Official Statement complete and accurate as of its date. The Underwriter is further authorized to distribute the final Official Statement for the Bonds and any supplement thereto to the purchasers of the Bonds upon the execution of the final Official Statement as described above.
Section 8. In accordance with the requirements of Section 53345.8 of the Act, based on the Appraisal, the legislative body of the District hereby determines that the value of the real property in the District subject to the special tax to pay debt service on the Bonds is more than three times the principal amount of the Bonds and the principal amount of all other bonds outstanding that are secured by a special tax levied pursuant to the Act or a special assessment levied on property within the District, all as calculated in the manner provided in Section 53345.8(a) of the Act.
Section 9. Each Authorized Officer is authorized to provide for all services necessary to effect the issuance of the Bonds. Such services shall include, but not be limited to, printing the Bonds, obtaining legal services, trustee and paying agent services, and any other services deemed appropriate as set forth in a certificate of such Authorized Officer. Each Authorized Officer is authorized to pay for the cost of such services, together with other costs of issuance, from Bond proceeds deposited pursuant to the Indenture.
Section 10. The Authorized Officers, the City Clerk and the other officers and staff of the City and the District responsible for the fiscal affairs of the District are hereby authorized and directed to take any actions and execute and deliver any and all documents as are necessary to accomplish the issuance, sale and delivery of the Bonds in accordance with the provisions of this Resolution and the fulfillment of the purposes of the Bonds as described in the Indenture, including, in the discretion of any of the Authorized Officers, the execution and delivery of a letter of credit or cash depository agreement with respect to the special taxes to be levied on property owned by the developer within the District, and providing certificates to the Underwriter as to the accuracy of any information relating to the District which is included within the Official Statement.
Any document authorized herein to be signed by the City Clerk may be signed by a duly appointed deputy clerk.
Section 11. The District hereby adopts the City’s Debt Management Policy, as amended, supplemented and restated from time to time, as the debt management policy of the District pursuant to California Government Code Section 8855.
Item Title: 12.2
Community Facilities District 2021-1, Banner Park, Issuance of Special Tax Bonds Item Page Number: 10
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Section 12. The City Council acknowledges that the good faith estimates required by Section 5852.1 of the California Government Code are disclosed in the staff report and are available to the public at the meeting at which this Resolution is approved.
Section 13.This Resolution shall be effective upon its adoption.
PASSED, APPROVED AND ADOPTED this 21st day of September, 2022.
ATTEST: APPROVED:
Stephanie Roseen, Acting City Clerk Bill Zimmerman, Mayor APPROVED AS TO FORM:
Jeffrey T. Melching, City Attorney
Item Title: 12.2
Community Facilities District 2021-1, Banner Park, Issuance of Special Tax Bonds Item Page Number: 11
Menifee
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City
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September
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2022
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Stradling Yocca Carlson & Rauth
Draft of 8/29/22
4892-5385-7582v7/200299-0013
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.
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.
PRELIMINARY OFFICIAL STATEMENT DATED _________, 2022
NEW ISSUE—BOOK-ENTRY ONLY NO RATING
In the opinion of Stradling Yocca Carlson & Rauth, a Professional Corporation, Bond Counsel, under existing statutes, regulations, rulings and judicial decisions, and assuming the accuracy of certain representations and compliance with certain covenants and requirements described herein, interest (and original issue discount) on the Bonds described herein is excluded from gross income for federal income tax purposes and is not an item of tax preference for purposes of calculating the federal alternative minimum tax imposed on individuals. In the further opinion of Bond Counsel, interest (and original issue discount) on the Bonds is exempt from State of California personal income tax. See the caption “TAX EXEMPTION” with respect to tax consequences relating to the Bonds, including with respect to the alternative minimum tax imposed on certain large corporations for tax years beginning after December 31, 2022. $5,520,000*
COMMUNITY FACILITIES DISTRICT NO. 2021-1 (BANNER PARK)
OF THE CITY OF MENIFEE
SPECIAL TAX BONDS, SERIES 2022A
Dated: Delivery Date Due: September 1, as shown on inside cover page The Community Facilities District No. 2021-1 (Banner Park) of the City of Menifee Special Tax Bonds, Series 2022A (the “Bonds”) are being issued by Community Facilities District No. 2021-1 (Banner Park) of the City of Menifee (the “District”) to: (i) finance certain public improvements needed with respect to the development of property located within the District, including public improvements to be owned by the City of Menifee (the “City”), water and sewer facilities to be owned and operated by the Eastern Municipal Water District and school facilities to be owned and operated by the Menifee Union School District; (ii) fund a reserve account for the Bonds; and (iii) pay costs of issuance for the Bonds. 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) (the “Act”), and pursuant to that certain Bond Indenture, dated as of October 1, 2022 (the “Indenture”), by and between the District and Wilmington Trust, National Association, as trustee (the “Trustee”).
The Bonds are payable from Net Taxes (as defined herein) derived from a certain annual Special Tax (as defined herein) to be levied on taxable parcels within the District and from certain other funds pledged under the Indenture, all as further described herein. The Special Tax is to be levied according to the rate and method of apportionment approved by the City Council of the City and the qualified electors within the District. See the caption “SOURCES OF PAYMENT FOR THE BONDS — Special Taxes” and Appendix A — “RATE AND METHOD OF APPORTIONMENT OF SPECIAL TAX.” The Bonds will be issued 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 the Bonds may be made in principal amounts of $5,000 and integral multiples thereof and will be in book-entry form only. Purchasers of the Bonds will not receive certificates representing their beneficial ownership of the Bonds but will receive credit balances on the books of their respective nominees. The Bonds will not be transferable or exchangeable except for transfer to another nominee of DTC or as otherwise described herein. Interest on the Bonds will be payable on each March 1 and September 1, commencing March 1, 2023. Principal of and interest on the Bonds will be paid by the Trustee to DTC for subsequent disbursement to DTC Participants, who will remit such payments to the Beneficial Owners of the Bonds.
NEITHER THE FAITH AND CREDIT NOR THE TAXING POWER OF THE CITY, THE COUNTY OF RIVERSIDE, THE STATE OF CALIFORNIA OR ANY POLITICAL SUBDIVISION THEREOF IS PLEDGED TO THE PAYMENT OF THE BONDS. EXCEPT FOR THE NET TAXES, NO OTHER REVENUES OR TAXES ARE PLEDGED TO THE PAYMENT OF THE BONDS. THE BONDS ARE NOT GENERAL OR SPECIAL
OBLIGATIONS OF THE CITY OR GENERAL OBLIGATIONS OF THE DISTRICT BUT ARE LIMITED OBLIGATIONS OF THE DISTRICT PAYABLE SOLELY FROM NET TAXES AND OTHER AMOUNTS HELD UNDER THE INDENTURE AS MORE FULLY DESCRIBED HEREIN.
The Bonds are subject to optional redemption, special mandatory redemption and mandatory sinking fund redemption prior to maturity as set forth herein. See the caption “THE BONDS — Redemption.”
Investment in the Bonds involves risks that are not appropriate for certain investors. Certain events could affect the ability of the District to pay the principal of and interest on the Bonds when due. See the caption “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 INTENDED TO BE A SUMMARY OF THE SECURITY OR TERMS OF THIS ISSUE. INVESTORS ARE ADVISED TO READ THE ENTIRE OFFICIAL STATEMENT TO OBTAIN INFORMATION ESSENTIAL TO THE MAKING OF AN INFORMED INVESTMENT DECISION.
MATURITY SCHEDULE
(See Inside Cover Page)
The Bonds are offered when, as and if issued and accepted by the Underwriter, subject to approval as to their legality by Stradling Yocca Carlson & Rauth, a Professional Corporation, Newport Beach, California, Bond Counsel, and subject to certain other conditions. Certain legal matters will be passed on for the City and the District by Rutan & Tucker, LLP, Irvine, California, City Attorney, and for the District by Stradling Yocca Carlson & Rauth, a Professional Corporation, Disclosure Counsel, for the Underwriter by Kutak Rock LLP, Irvine, California, and for the Trustee by its counsel. It is anticipated that the Bonds in book-entry form will be available for delivery on or about __________, 2022. [STIFEL LOGO]
Dated: __________, 2022
* Preliminary, subject to change.
Item Title: 12.2
Community Facilities District 2021-1, Banner Park, Issuance of Special Tax Bonds Item Page Number: 12
Menifee
Mayor
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City
Council
September
21,
2022
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2499 of 2787
4892-5385-7582v7/200299-0013
$__________
COMMUNITY FACILITIES DISTRICT NO. 2021-1 (BANNER PARK)
OF THE CITY OF MENIFEE
SPECIAL TAX BONDS, SERIES 2022A
MATURITY SCHEDULE
BASE CUSIP®† __________
$__________ Serial Bonds
Maturity Date
(September 1)
Principal
Amount Interest Rate Yield Price CUSIP No.†
$ % %
$__________ _____% Term Bonds due September 1, 20__ Yield: _____% Price: _____ CUSIP No.† _____ † CUSIP® is a registered trademark of the American Bankers Association. CUSIP Global Services (CGS) is managed on behalf of the American Bankers Association by S&P Global Market Intelligence. Copyright(c) 2022 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.
Item Title: 12.2
Community Facilities District 2021-1, Banner Park, Issuance of Special Tax Bonds Item Page Number: 13
Menifee
Mayor
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City
Council
September
21,
2022
Page
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4892-5385-7582v7/200299-0013
CITY OF MENIFEE
COUNTY OF RIVERSIDE, CALIFORNIA
CITY COUNCIL
Bill Zimmerman, Mayor
Bob Karwin, District 1
Matthew Liesemeyer, District 2
Lesa Sobek, District 3
Dean Deines, District 4
CITY ADMINISTRATORS
Armando G. Villa, City Manager
Rochelle Clayton, Assistant City Manager
CITY ATTORNEY
Rutan & Tucker, LLP
Irvine, California
BOND AND DISCLOSURE COUNSEL
Stradling Yocca Carlson & Rauth, a Professional Corporation Newport Beach, California
MUNICIPAL ADVISOR
Urban Futures, Inc.
Tustin, California
SPECIAL TAX CONSULTANT
Spicer Consulting Group, LLC
Temecula, California
APPRAISER
Kitty Siino & Associates, Inc.
Tustin, California
TRUSTEE
Wilmington Trust, National Association
Costa Mesa, California
Item Title: 12.2
Community Facilities District 2021-1, Banner Park, Issuance of Special Tax Bonds Item Page Number: 14
Menifee
Mayor
and
City
Council
September
21,
2022
Page
2501 of 2787
4892-5385-7582v7/200299-0013
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 person 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 information 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 City, 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 City for further information in connection therewith.
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 LEVEL 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.
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 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 DIFFERENT FROM ANY FUTURE RESULTS,
PERFORMANCE OR ACHIEVEMENTS EXPRESSED OR IMPLIED BY SUCH FORWARD-LOOKING STATEMENTS. THE DISTRICT DOES NOT PLAN TO ISSUE ANY UPDATES OR REVISIONS TO THE FORWARD-LOOKING STATEMENTS SET FORTH IN THIS OFFICIAL STATEMENT. IN EVALUATING
SUCH STATEMENTS, POTENTIAL INVESTORS SHOULD SPECIFICALLY CONSIDER THE VARIOUS
FACTORS WHICH COULD CAUSE ACTUAL EVENTS OR RESULTS TO DIFFER MATERIALLY FROM THOSE INDICATED BY SUCH FORWARD-LOOKING STATEMENTS.
The City maintains a website. However, the information presented on such website is not part of this Official Statement and should not be relied upon in making an investment decision with respect to the Bonds.
Item Title: 12.2
Community Facilities District 2021-1, Banner Park, Issuance of Special Tax Bonds Item Page Number: 15
Menifee
Mayor
and
City
Council
September
21,
2022
Page
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i
4892-5385-7582v7/200299-0013
TABLE OF CONTENTS
Page
INTRODUCTION .................................................................................................................................................1 The District ........................................................................................................................................................1 Sources of Payment for the Bonds.....................................................................................................................3 Appraisal Report ................................................................................................................................................3 Description of the Bonds ...................................................................................................................................4 Tax Exemption...................................................................................................................................................4 Professionals Involved in the Offering ..............................................................................................................4 Continuing Disclosure .......................................................................................................................................5 Parity Bonds.......................................................................................................................................................5 Bond Owners’ Risks ..........................................................................................................................................5 Other Information ..............................................................................................................................................5 FINANCING PLAN ..............................................................................................................................................6 Estimated Sources and Uses of Funds ...............................................................................................................6 THE BONDS .........................................................................................................................................................6 General Provisions.............................................................................................................................................6 Debt Service Schedule .......................................................................................................................................8 Redemption........................................................................................................................................................8 SOURCES OF PAYMENT FOR THE BONDS .................................................................................................12 Limited Obligations .........................................................................................................................................12 Special Taxes ...................................................................................................................................................12 Reserve Account of the Special Tax Fund.......................................................................................................18 No Teeter Plan .................................................................................................................................................18 Parity Bonds.....................................................................................................................................................19 THE DISTRICT...................................................................................................................................................19 General Description of the District..................................................................................................................19 Authorized Uses of Bond Proceeds .................................................................................................................20 Appraisal Report ..............................................................................................................................................20 Fiscal Year 2022-23 Special Tax Levy............................................................................................................21 Estimated Appraised Value-to-Lien Ratios .....................................................................................................22 Direct and Overlapping Debt...........................................................................................................................25 Delinquency History ........................................................................................................................................29 PROPERTY OWNERSHIP AND THE DEVELOPMENT................................................................................29 General.............................................................................................................................................................29 Planned Development Within the District .......................................................................................................30 Pulte Homes.....................................................................................................................................................31 Impacts of COVID-19 Pandemic.....................................................................................................................33 SPECIAL RISK FACTORS ................................................................................................................................33 Risks of Real Estate Secured Investments Generally ......................................................................................33 Insufficiency of Special Tax Revenues............................................................................................................34 Increasing Mortgage Interest Rates .................................................................................................................35 COVID-19 (Coronavirus) Pandemic ...............................................................................................................35 Concentration of Ownership............................................................................................................................36 Property Values................................................................................................................................................36 Natural Disasters..............................................................................................................................................37 Hazardous Substances......................................................................................................................................37 Enforcement Delays – Bankruptcy ..................................................................................................................38 Special Tax Delinquencies...............................................................................................................................38 Item Title: 12.2
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FDIC/Federal Government Interests in Parcels ...............................................................................................38 Direct and Overlapping Indebtedness..............................................................................................................39 Payment of Special Taxes is not a Personal Obligation of the Property Owners............................................40 No Acceleration Provision...............................................................................................................................40 Limited Obligations .........................................................................................................................................40 Ballot Initiatives...............................................................................................................................................40 Proposition 218 ................................................................................................................................................41 Litigation with Respect to Community Facilities Districts .............................................................................41 Loss of Tax Exemption....................................................................................................................................42 No Ratings – Limited Secondary Market ........................................................................................................43 Limitations on Remedies .................................................................................................................................43 Potential Early Redemption of Bonds from Prepayments or Community Facilities District Bond Proceeds ....................................................................................................................................................43 Cybersecurity ...................................................................................................................................................43 CONTINUING DISCLOSURE...........................................................................................................................44 District Continuing Disclosure ........................................................................................................................44 Developer Continuing Disclosure....................................................................................................................44 TAX EXEMPTION .............................................................................................................................................44 LEGAL OPINION ...............................................................................................................................................46 ABSENCE OF LITIGATION .............................................................................................................................46 NO RATING........................................................................................................................................................46 UNDERWRITING ..............................................................................................................................................47 FINANCIAL INTERESTS..................................................................................................................................47 MUNICIPAL ADVISOR.....................................................................................................................................47 MISCELLANEOUS ............................................................................................................................................47 APPENDIX A RATE AND METHOD OF APPORTIONMENT OF SPECIAL TAX..........................A-1 APPENDIX B CERTAIN ECONOMIC AND DEMOGRAPHIC INFORMATION.............................B-1 APPENDIX C FORM OF OPINION OF BOND COUNSEL.................................................................C-1 APPENDIX D APPRAISAL REPORT ...................................................................................................D-1 APPENDIX E SUMMARY OF THE INDENTURE ..............................................................................E-1 APPENDIX F FORM OF DISTRICT CONTINUING DISCLOSURE CERTIFICATE .......................F-1 APPENDIX G FORM OF DEVELOPER CONTINUING DISCLOSURE CERTIFICATE .................G-1 APPENDIX H BOOK-ENTRY ONLY SYSTEM ..................................................................................H-1 Item Title: 12.2
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Item Title: 12.2
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$5,520,000*
COMMUNITY FACILITIES DISTRICT NO. 2021-1 (BANNER PARK)
OF THE CITY OF MENIFEE
SPECIAL TAX BONDS, SERIES 2022A
INTRODUCTION
The purpose of this Official Statement, which includes the cover page, the table of contents and the attached appendices (collectively, the “Official Statement”), is to provide certain information concerning the issuance by Community Facilities District No. 2021-1 (Banner Park) of the City of Menifee (the “District”) of its Special Tax Bonds, Series 2022A in the aggregate principal amount of $5,520,000 * (the “Bonds”). The proceeds of the Bonds will be used to: (i) finance certain public improvements needed with respect to the development of property located within the District, including public improvements to be owned by the City of Menifee (the “City”), water and sewer facilities to be owned and operated by the Eastern Municipal Water District and school facilities to be owned and operated by the Menifee Union School District; (ii) fund a reserve account for the Bonds; and (iii) pay costs of issuance for the Bonds.
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) (the “Act”), a resolution adopted on September 21, 2022, by the City Council of the City, acting as the legislative body of the District, and a Bond Indenture, dated as of October 1, 2022 (the “Indenture”), by and between the District and Wilmington Trust, National Association, as trustee (the “Trustee”). The Bonds are secured under the Indenture by a pledge of and lien upon Net Taxes (as such term is defined herein) and all moneys in the Special Tax Fund as described in 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 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 have the meanings set forth in Appendix E.
The District
General. The City is located in the western portion of the County of Riverside (the “County”), California (the “State”). The District contains approximately 76 gross acres and approximately 41 net taxable acres, and is located in the eastern portion of the City, to the northwest of Domenigoni Parkway. The property within the District was acquired by Pulte Home Company, LLC, a Michigan limited liability company (“Pulte Homes”), in three phases, the last of which occurred on July 1, 2022. The project within the District is being marketed by Pulte Homes as “Banner Park.”
The property within the District is planned for 256 residential units within three product lines – Crest at Banner Park (92 homes), Heritage at Banner Park (90 homes) and Merit at Banner Park (74 homes). As of August 5, 2022, Pulte Homes had completed and conveyed 103 homes within the District to individual homeowners. As of such date, Pulte Homes owned six model homes (none of which were in escrow), twelve completed homes (ten of which were in escrow), fifty-seven homes in various stages of construction (forty- eight of which were in escrow) and seventy-eight finished lots (sixteen of which were in escrow). As of September 15, 2022, Pule Homes had transferred a total of ___ homes to individual homeowners. Pulte Homes currently expects to complete and convey all homes planned within the District to individual homeowners by September 30, 2024. However, see “SPECIAL RISK FACTORS—Increasing Mortgage * Preliminary, subject to change.
Item Title: 12.2
Community Facilities District 2021-1, Banner Park, Issuance of Special Tax Bonds Item Page Number: 20
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Interest Rates” for a discussion of how rising mortgage interest rates may impact Pulte Homes’ ability to complete development within the District as planned.
Other than a neighborhood park, the majority of major infrastructure (sewer, water, storm drains, utilities, and arterial roads) necessary to develop the property within the District has been completed. The in- tract infrastructure within the District is substantially complete with landscaping, final capping of certain streets, and dry utilities for certain lots remaining. All necessary discretionary permits have been obtained for Pulte Homes’ development within the District.
Pulte Homes is constructing a neighborhood park of approximately 5 acres. As of August 5, 2022, the grading of the park was complete, but park construction had not yet commenced. Condition of Approval No. 271 requires the park to be completed prior to the issuance of the 200th building permit (“Park Condition”).
The Park Condition allows Pulte Homes to provide a performance security to ensure completion of the park, which is currently being prepared with City Staff and will allow additional building permits to be issued. Pulte Homes expects to complete the park by the end of April 2023.
See the captions “THE DISTRICT” and “PROPERTY OWNERSHIP AND THE DEVELOPMENT” for further information with respect to the District, Pulte Homes and development within the District.
Formation Proceedings. The District was formed on June 2, 2021 pursuant to the Act. The Act was enacted to provide an alternative method of financing certain public capital facilities and services, especially in developing areas of 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. Generally, 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, on April 21, 2021 the City Council adopted Resolution No. 21-1013 (the “Resolution of Intention”), stating its intention to form the District and to authorize the levy of a special tax on the taxable property within the District, and Resolution No. 21-1014, stating its intention to incur bonded indebtedness in an aggregate principal amount not to exceed $17,000,000 for the purpose of financing the purchase, construction, expansion or rehabilitation of certain public facilities to serve the area within the District.
Subsequent to a noticed public hearing on June 2, 2021, the City Council adopted Resolution Nos. 21-1030 and 21-1032 (collectively the “Resolution of Formation”). The Resolution of Formation:
(i) established the District; (ii) authorized the levy of a special tax (the “Special Tax”) within the District; (iii) determined the necessity to incur bonded indebtedness in an amount not to exceed $17,000,000 within the District; and (iv) called an election within the District on the proposition of incurring bonded indebtedness, levying the Special Tax and setting an appropriations limit.
On June 2, 2021, an election was held within the District in which the property owner within the District approved the proposition authorizing the issuance of bonds in an amount not to exceed $17,000,000.
A Notice of Special Tax Lien for the District was recorded in the office of the County Recorder on June 10, 2021, as Document No. 2021-0351954. On June 16, 2021, the City Council adopted Ordinance No. 2021-319 (the “Ordinance”) which authorizes the levy of a special tax pursuant to the Rate and Method of Apportionment approved at the June 2, 2021 election (the “Rate and Method”), a copy of which is attached hereto as Appendix A.
Item Title: 12.2
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Sources of Payment for the Bonds
Special Taxes. As used in this Official Statement, the term “Special Tax” means the annual Special Tax which has been authorized pursuant to the Act and the Rate and Method to be levied upon taxable property within the District. See the caption “SOURCES OF PAYMENT FOR THE BONDS — Special Taxes” and Appendix A — “RATE AND METHOD OF APPORTIONMENT OF SPECIAL TAX.” See the caption “THE DISTRICT.”
Under the Indenture, the District has pledged to repay the Bonds and any Parity Bonds (as defined herein) from the Special Tax revenues remaining after the payment of certain annual Administrative Expenses of the District (the “Net Taxes”) and from other amounts in the Special Tax Fund established under the Indenture. The Special Taxes are the primary source of security for the repayment of the Bonds and any Parity Bonds. In the event that the Special Taxes are not paid when due, the only sources of funds available to pay the debt service on the Bonds and any Parity Bonds are amounts held by the Trustee in the Special Tax Fund, including amounts held in the Reserve Account therein, to the limited extent described in the Indenture. See the caption “SOURCES OF PAYMENT FOR THE BONDS — Reserve Account of the Special Tax Fund.” Foreclosure Proceeds. The District will covenant in the Indenture for the benefit of the owners of the Bonds and Parity Bonds that it will: (i) commence judicial foreclosure proceedings against parcels with delinquent Special Taxes in excess of $5,000 by the October 1 following the close of each Fiscal Year in which such Special Taxes were due; and (ii) commence judicial foreclosure proceedings against all parcels with delinquent Special Taxes by the October 1 following the close of each Fiscal Year in which it receives Special Taxes in an amount which is less than 95% of the total Special Tax levied; and (iii) diligently pursue such foreclosure proceedings until the delinquent Special Taxes are paid; provided that, notwithstanding the foregoing, the District may elect to defer foreclosure proceedings on any parcel so long as the amount in the Reserve Account is at least equal to the Reserve Requirement. See the caption “SOURCES OF PAYMENT FOR THE BONDS — Special Taxes — Proceeds of Foreclosure Sales.” There is no assurance that the property within the District can be sold for the appraised or assessed values described herein, or for a price sufficient to pay the principal of and interest on the Bonds in the event of a default in payment of Special Taxes by the current or future landowners within the District. See the caption “SPECIAL RISK FACTORS — Property Values.”
EXCEPT FOR THE NET TAXES, NO OTHER TAXES ARE PLEDGED TO THE PAYMENT OF THE BONDS. THE BONDS ARE NOT GENERAL OR SPECIAL OBLIGATIONS OF THE CITY
OR GENERAL OBLIGATIONS OF THE DISTRICT, BUT ARE LIMITED OBLIGATIONS OF THE
DISTRICT PAYABLE SOLELY FROM NET TAXES AND AMOUNTS HELD UNDER THE INDENTURE, AS MORE FULLY DESCRIBED HEREIN.
Appraisal Report
Kitty Siino & Associates, Inc. (the “Appraiser”) has conducted an Appraisal dated August 26, 2022 (the “Appraisal Report”) of certain land and existing improvements within the District to provide an estimate of the market value of the fee simple interest of such land and improvements. The Appraisal Report provides an estimate of the approximate market value of the property in the District subject to the levy of Special Taxes, assuming that development of the property as currently planned will consist of 256 residential units. Based on the contingencies, assumptions and limiting conditions in the Appraisal Report, the Appraiser concluded that the minimum market value of all of the parcels within the District subject to the Special Tax was $91,314,737 as of August 5, 2022 (the “Date of Value”). A copy of the Appraisal Report is attached hereto as Appendix D.
The Appraisal Report is based upon a variety of assumptions and limiting conditions that are described in Appendix D. The District makes no representation as to the accuracy of the Appraisal Report.
See “THE DISTRICT — Appraisal Report” and “— Estimated Appraised Value-to-Lien Ratios.” There is no assurance that property within the District can be sold for the prices set forth in the Appraisal Report or that Item Title: 12.2
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any parcel can be sold for a price sufficient to pay the Special Tax for that parcel in the event of a default in payment of Special Taxes by a property owner. See “THE DISTRICT,” “SPECIAL RISK FACTORS — Property Values” herein and Appendix D.
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 or any integral multiple 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 H — “BOOK-ENTRY ONLY SYSTEM.”
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 disbursement of such payments to the Beneficial Owners is the responsibility of DTC Participants. See Appendix H — “BOOK-ENTRY ONLY SYSTEM.”
The Bonds are subject to optional redemption, special mandatory redemption and mandatory sinking fund redemption prior to maturity as described herein. See the caption “THE BONDS — Redemption.” For a more complete description of the Bonds and the basic documentation pursuant to which they are being sold and delivered, see the caption “THE BONDS” and Appendix E — “SUMMARY OF THE INDENTURE.” Tax Exemption
In the opinion of Stradling Yocca Carlson & Rauth, a Professional Corporation, Newport Beach, California (“Bond Counsel”), under existing statutes, regulations, rulings and judicial decisions, and assuming certain representations and compliance with certain covenants and requirements described herein, interest (and original issue discount) on the Bonds is excluded from gross income for federal income tax purposes and is not an item of tax preference for purposes of calculating the federal alternative minimum tax imposed on individuals. In the further opinion of Bond Counsel, interest (and original issue discount) on the Bonds is exempt from State of California personal income tax. See the caption “TAX EXEMPTION.” Set forth in Appendix C is the form of opinion of Bond Counsel expected to be delivered in connection with the issuance of the Bonds. For a more complete discussion of such opinion and certain tax consequences incident to the ownership of the Bonds, see the caption “TAX EXEMPTION.” Professionals Involved in the Offering
Wilmington Trust, National Association, Costa Mesa, California, will act as Trustee under the Indenture. Stifel, Nicolaus & Company, Incorporated (the “Underwriter”) is the Underwriter of the Bonds.
Certain proceedings in connection with the issuance and delivery of the Bonds are subject to the approval of Stradling Yocca Carlson & Rauth, a Professional Corporation, Newport Beach, California, Bond Counsel and Disclosure Counsel to the District in connection with the issuance of the Bonds. Certain legal matters will be passed on for the City and the District by Rutan & Tucker, LLP, Irvine, California, City Attorney, for the Underwriter by Kutak Rock LLP, Irvine, California, and for the Trustee by its counsel. Other professional services have been performed by Spicer Consulting Group, LLC, Temecula, California, as Special Tax Consultant (the “Special Tax Consultant”) and by Kitty Siino & Associates, Inc., Tustin, California, as Appraiser.
Item Title: 12.2
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For information concerning circumstances in which certain of the above-mentioned professionals, advisors, counsel and consultants may have a financial or other interest in the offering of the Bonds, see the caption “FINANCIAL INTERESTS.”
Continuing Disclosure
Pursuant to a Continuing Disclosure Certificate to be executed by the District (the “District Continuing Disclosure Certificate”), the District will agree to provide, or cause to be provided, to the Municipal Securities Rulemaking Board’s Electronic Municipal Market Access system (“EMMA”), maintained on the Internet at http://emma.msrb.org, certain annual financial information and operating data and notices of certain enumerated events. These covenants are being made in order to assist the Underwriter in complying with subsection (b)(5) of Rule 15c2-12 adopted by the Securities and Exchange Commission (“Rule 15c2-12”).
The Underwriter does not consider Pulte Homes to be an “obligated person” with respect to the Bonds for purposes of Rule 15c2-12. Notwithstanding the foregoing, to assist in the marketing of the Bonds, Pulte Homes will agree to provide, or cause to be provided to EMMA, certain updates with respect to the development within the District and notices of certain enumerated events. See Appendix G for a description of the specific nature of the semiannual reports and enumerated event notices to be filed by Pulte Homes.
See “CONTINUING DISCLOSURE,” Appendix F — “FORM OF DISTRICT CONTINUING DISCLOSURE CERTIFICATE” and Appendix G — “FORM OF DEVELOPER CONTINUING DISCLOSURE CERTIFICATE.”
Parity Bonds
Under the Indenture, the District may issue additional indebtedness secured by the Net Taxes on a parity with the Bonds (“Parity Bonds”) to finance additional Project Costs or for refunding all or a portion of the Bonds or Parity Bonds. See the caption “SOURCES OF PAYMENT FOR THE BONDS — Parity Bonds.” Other taxes and/or special assessments with liens equal in priority to the continuing lien of the Special Taxes may also be levied in the future on the property within the District, which could adversely affect the willingness of the landowners to pay the Special Taxes when due. See the captions “THE DISTRICT — Direct and Overlapping Debt” and “SPECIAL RISK FACTORS — Direct and Overlapping Indebtedness.” The District expects to issue Parity Bonds for the purpose of financing additional facilities in fiscal year 2023-
24. 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 caption “SPECIAL RISK FACTORS” for a discussion of certain factors which should be considered, in addition to other matters set forth herein, in evaluating an investment in the Bonds. The purchase of the Bonds involves risks, and the Bonds may not be appropriate investments for some types of investors.
Other Information
This Official Statement speaks only as of its date, and the information contained herein is subject to change.
Brief descriptions 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 State, 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, Item Title: 12.2
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laws and proceedings, and with respect to the Bonds, by reference to the Indenture. Capitalized terms not otherwise defined in this Official Statement have the meanings set forth in Appendix E.
Copies of the Indenture and other documents and information are available for inspection and copies may be obtained from the City, 29844 Haun Road, Menifee, California, 92586, Attention: Assistant City Manager.
FINANCING PLAN
Estimated Sources and Uses of Funds
The following table sets forth the expected sources and uses of Bond proceeds.
Sources of Funds
Principal Amount of Bonds $
[Plus] [Net] Original Issue [Premium]
Total Sources $
Uses of Funds:
Acquisition and Construction Fund $
Costs of Issuance(1)
Reserve Account of the Special Tax Fund
Total Uses $
(1) To pay costs of issuance of the Bonds, including legal fees, underwriter’s discount, printing costs, Appraiser, Special Tax Consultant and Trustee fees.
THE BONDS
General Provisions
The Bonds will be dated their date of delivery and will bear interest at the rates per annum set forth on the inside cover page hereof, payable semiannually on each March 1 and September 1, commencing March 1, 2023 (each, an “Interest Payment Date”), and will mature in the amounts and on the dates set forth on the inside cover page of this Official Statement. Interest will be calculated on the basis of a 360-day year comprised of twelve 30-day months. The Bonds will be issued in fully registered form in denominations of $5,000 or any integral multiple thereof.
Interest on any Bond will be payable from the Interest Payment Date next preceding the date of authentication of such Bond, unless: (i) such date of authentication is an Interest Payment Date, in which event interest will be payable from such date of authentication; (ii) the date of authentication is after the fifteenth day of the month preceding an Interest Payment Date, regardless of whether such day is a Business Day (each, a “Record Date”) but prior to the immediately succeeding Interest Payment Date, in which event interest will be payable from the Interest Payment Date immediately succeeding the date of authentication; or (iii) the date of authentication is prior to the close of business on the first Record Date occurring after the issuance of such Bond, in which event interest will be payable from the dated date of such Bond, as applicable; provided, however, that if at the time of authentication of such Bond, interest is in default, interest on such Bond will be payable from the last Interest Payment Date to which the interest has been paid or made available for payment or, if no interest has been paid or made available for payment on such Bond, interest on such Bond will be payable from its dated date.
Interest on any Bond will be paid to the person whose name appears as its owner in the registration books held by the Trustee on the close of business on the Record Date. Principal of, premium, if any, due Item Title: 12.2
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upon redemption is payable upon presentation and surrender of the Bonds at the principal corporate trust office of the Trustee in Costa Mesa, California.
The Bonds will be issued as fully registered bonds and will be registered in the name of Cede & Co., as nominee of DTC. DTC will act as securities depository of the Bonds. Ownership interests in the Bonds may be purchased in book-entry form only in denominations of $5,000 and any integral multiple thereof. So long as DTC is the securities depository all payments of principal and interest on the Bonds will be made to DTC and will be paid to the Beneficial Owners in accordance with DTC’s procedures and the procedures of DTC’s Participants. See APPENDIX H — “BOOK-ENTRY-ONLY SYSTEM.” In the event the Bonds are not held in book-entry form, interest will be paid by check of the Trustee mailed by first class mail, postage prepaid, to the Bondowner at its address on the registration books kept by the Trustee. Pursuant to a written request prior to the Record Date of a Bondowner of at least $1,000,000 in aggregate principal amount of Bonds or of any issue of Parity Bonds, payment will be made by wire transfer in immediately available funds to a designated account in the United States.
Item Title: 12.2
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Debt Service Schedule
The following table presents the annual debt service on the Bonds (including sinking fund redemptions), assuming that there are no optional or special mandatory redemptions. See the caption “— Redemption” below.
Year Ending
September 1 Principal Interest Total Debt Service
Total
Redemption*
Optional Redemption. The Bonds may be redeemed at the option of the District from any source of funds on any Interest Payment Date on or after September 1, 20__, in whole or in part, from such maturities as are selected by the District and by lot within a maturity, at the following redemption prices, expressed as a percentage of the principal amount to be redeemed, together with accrued interest to the date of redemption:
* Preliminary, subject to change.
Item Title: 12.2
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Redemption Date Redemption Price
September 1, 20__ and March 1, 20__ 103%
September 1, 20__ and March 1, 20__ 102
September 1, 20__ and March 1, 20__ 101
September 1, 20__ and any Interest Payment Date thereafter 100 In the event that the District elects to redeem Bonds as provided above, the District will give written notice to the Trustee of its election to so redeem, the redemption date and the principal amount of the Bonds of each maturity to be redeemed. The notice to the Trustee will be given at least 30 but no more than 60 days prior to the redemption date, or by such later date as is acceptable to the Trustee.
Mandatory Sinking Fund Redemption. The Bonds maturing on September 1, 20__ (the “20__ Term Bonds”) will be called before maturity and redeemed, from the Sinking Fund Payments that have been deposited into the Redemption Account established under the Indenture, on September 1, 20__, and on each September 1 thereafter prior to maturity, in accordance with the schedule of Sinking Fund Payments set forth below. The 20__ Term Bonds so called for redemption will be selected by the Trustee by lot and will be redeemed at a redemption price for each redeemed 20__ Term Bond equal to the principal amount thereof, plus accrued interest to the redemption date, without premium, as follows:
Term Bonds Maturing September 1, 20__
Sinking Fund Redemption Date
(September 1) Sinking Fund Payments
$
*
* Maturity.
If the District purchases Term Bonds during the Fiscal Year immediately preceding one of the sinking fund redemption dates specified above, the District will notify the Trustee at least 45 days prior to the redemption date as to the principal amount purchased, and the amount purchased will be credited at the time of purchase to the next Sinking Fund Payment for the Term Bond so purchased, to the extent of the full principal amount of the purchase. All Term Bonds purchased will be cancelled pursuant to the Indenture.
In the event of a partial optional redemption or special mandatory redemption of the Term Bonds, each of the remaining Sinking Fund Payments for such Term Bonds will be reduced, as nearly as practicable, on a pro rata basis.
Special Mandatory Redemption from Special Tax Prepayments. The Bonds are subject to special mandatory redemption as a whole or in part on a pro rata basis among maturities and by lot within a maturity, on any Interest Payment Date on or after March 1, 2023, and will be redeemed by the Trustee, from any amounts paid by the District to the Trustee and designated by the District as a prepayment of Special Taxes for one or more parcels in the District made in accordance with the Rate and Method (the “Prepayments”) deposited to the Redemption Account pursuant to the Indenture, plus amounts transferred from the Reserve Account pursuant to the Indenture, at the following redemption prices, expressed as a percentage of the principal amount to be redeemed, together with accrued interest to the redemption date:
Item Title: 12.2
Community Facilities District 2021-1, Banner Park, Issuance of Special Tax Bonds Item Page Number: 28
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City
Council
September
21,
2022
Page
2515 of 2787
10 4892-5385-7582v7/200299-0013
Redemption Date 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 any Interest Payment Date thereafter 100 Prepayments and amounts released from the Reserve Account in connection with Prepayments will be allocated to the payment at maturity and redemption of Bonds and any Parity Bonds as nearly as practicable on a proportionate basis based on the outstanding principal amount of the Bonds and any Parity Bonds and such amounts shall be applied to redeem Bonds and Parity Bonds as nearly as practicable on a pro rata basis among maturities in increments of $5,000; provided, however, that, for Prepayments of less than $50,000, the District may specify in a Certificate of an Authorized Representative that Prepayments be applied to one or more maturities of the Bonds or Parity Bonds so long as there is delivered to the Trustee a Certificate of the Independent Financial Consultant that, following such application of the Prepayments, the maximum Special Taxes that may be levied in each Fiscal Year on Taxable Property is not less than 110% of Annual Debt Service in the Bond Year that begins in such Fiscal Year.
See the caption “SPECIAL RISK FACTORS — Potential Early Redemption of Bonds from Prepayments or Community Facilities District Bond Proceeds” for a discussion of the potential for a lower than expected yield on the Bonds as a result of a special mandatory redemption from prepayment of Special Taxes or proceeds of bonds of other community facilities districts.
Notice of Redemption. So long as the Bonds are held in book-entry form, notice of redemption will be sent by the Trustee to DTC and not to the Beneficial Owners of the Bonds under the DTC book-entry only system. Neither the District nor the Trustee is responsible for notifying the Beneficial Owners, who are to be notified in accordance with the procedures in effect for the DTC book-entry system. See Appendix H — “BOOK-ENTRY ONLY SYSTEM.”
The Trustee will give notice, in the name of the District, of the redemption of Bonds. Such notice of redemption will: (i) specify the CUSIP numbers (if any), the bond numbers and the maturity date or dates of the Bonds selected for redemption, except that where all of the Bonds are subject to redemption, or all of the Bonds of one maturity are to be redeemed, the bond numbers of such issue need not be specified; (ii) state the date fixed for redemption and surrender of the Bonds to be redeemed; (iii) state the redemption price; (iv) state the place or places where the Bonds are to be redeemed; (v) in the case of Bonds to be redeemed only in part, state the portion of such Bond which is to be redeemed; (vi) state the date of issue of the Bonds as originally issued; (vii) state the rate of interest borne by each Bond being redeemed; and (viii) state any other descriptive information needed to identify accurately the Bonds being redeemed as specified by the Trustee. Such notice will further state that on the date fixed for redemption, there will become due and payable on each Bond, or portion thereof called for redemption, the principal thereof, together with any premium, and interest accrued to the redemption date, and that from and after such date, interest thereon will cease to accrue and be payable. At least 30 days but no more than 45 days prior to the redemption date, the Trustee will mail a copy of such notice of redemption, by first class mail, postage prepaid, to the respective Owners thereof at their addresses appearing on the Bond Register, and to the original purchaser of any Bonds; provided, however, so long as the Bonds are registered in the name of the Nominee, such notice shall be given in such manner as complies with the requirements of the Depository. The actual receipt by the Owner of any Bond of notice of such redemption is not a condition precedent to redemption, and neither the failure to receive nor any defect in such notice will affect the validity of the proceedings for the redemption of such Bonds, or the cessation of interest on the redemption date. A certificate by the Trustee that notice of such redemption has been given as provided in the Indenture will be conclusive as against all parties and the Owner is not entitled to show that he or she failed to receive notice of such redemption.
Item Title: 12.2
Community Facilities District 2021-1, Banner Park, Issuance of Special Tax Bonds Item Page Number: 29
Menifee
Mayor
and
City
Council
September
21,
2022
Page
2516 of 2787
11 4892-5385-7582v7/200299-0013
In addition to the foregoing notice, further notice will be given by the Trustee as set out below, but no defect in said further notice nor any failure to give all or any portion of such further notice will in any manner defeat the effectiveness of a call for redemption if notice thereof is given as above prescribed.
Each further notice of redemption will be sent not later than the date that notice of redemption is given to the Owners pursuant to the Indenture by first class mail or facsimile to the Depository and to any other registered securities depositories then in the business of holding substantial amounts of obligations of types comprising the Bonds as determined by the Trustee and to one or more of the national information services that the Trustee determines are in the business of disseminating notice of redemption of obligations such as the Bonds.
Upon the payment of the redemption price of any Bonds being redeemed, each check or other transfer of funds issued for such purpose will to the extent practicable bear the CUSIP number identifying, by issue and maturity, the Bonds being redeemed with the proceeds of such check or other transfer.
With respect to any notice of optional redemption of Bonds, such notice may state that such redemption is conditional upon the receipt by the Trustee on or prior to the date fixed for such redemption of moneys sufficient to pay the principal of, premium, if any, and interest on such Bonds to be redeemed and that, if the District determines that such moneys will not be so received on or prior to the redemption date, said notice shall be of no force and effect and the Trustee shall not be required to redeem such Bonds. If any condition stated in the redemption notice for an optional redemption shall not have been satisfied on or prior to the redemption date: (i) the redemption notice shall be of no force and effect, (ii) the District shall not be required to redeem such Bonds, (iii) the redemption shall not be made, and (iv) the Trustee shall within a reasonable time thereafter give notice to the persons in the manner in which the conditional redemption notice was given that such condition or conditions were not met and that the redemption was canceled.
Selection of Bonds for Redemption. If less than all of the Bonds Outstanding are to be redeemed, the portion of any Bond of a denomination of more than $5,000 to be redeemed will be in the principal amount of $5,000 or an integral multiple thereof. In selecting portions of such Bonds for redemption, the Trustee will treat such Bonds, as applicable, as representing that number of Bonds of $5,000 denominations which is obtained by dividing the principal amount of such Bonds to be redeemed in part by $5,000. The procedure for the selection of Parity Bonds for redemption may be modified as set forth in the Supplemental Indenture for such Parity Bonds. The Trustee will promptly notify the District in writing of the Bonds, or portions thereof, selected for redemption.
Partial Redemption of Bonds. Upon surrender of any Bond to be redeemed in part only, the District will execute and the Trustee will authenticate and deliver to the Owner, at the expense of the District, a new Bond or Bonds of authorized denominations equal in aggregate principal amount to the unredeemed portion of the Bonds surrendered, with the same interest rate and the same maturity.
Effect of Notice and Availability of Redemption Money. Notice of redemption having been duly given, as provided in the Indenture, and the amount necessary for the redemption having been made available for that purpose and being available therefor on the date fixed for such redemption: (i) the Bonds, or portions thereof, designated for redemption will, on the date fixed for redemption, become due and payable at the redemption price thereof as provided in the Indenture, anything in the Indenture or in the Bonds to the contrary notwithstanding; (ii) upon presentation and surrender thereof at the office of the Trustee, the redemption price of such Bonds will be paid to the Owners thereof; (iii) as of the redemption date the Bonds, or portions thereof so designated for redemption will be deemed to be no longer Outstanding and such Bonds, or portions thereof, will cease to bear further interest; and (iv) as of the date fixed for redemption no Owner of any of the Bonds, or portions thereof so designated for redemption will be entitled to any of the benefits of the Indenture, or to any other rights, except with respect to payment of the redemption price and interest accrued to the redemption date from the amounts so made available.
Item Title: 12.2
Community Facilities District 2021-1, Banner Park, Issuance of Special Tax Bonds Item Page Number: 30
Menifee
Mayor
and
City
Council
September
21,
2022
Page
2517 of 2787
12 4892-5385-7582v7/200299-0013
SOURCES OF PAYMENT FOR THE BONDS
Limited Obligations
The Bonds are special, limited obligations of the District payable only from amounts pledged under the Indenture and from no other sources.
The Special Taxes are the primary source of security for the repayment of the Bonds. Under the Indenture, the District has pledged to repay the Bonds from the Net Taxes (which are Special Tax revenues remaining after the payment of the annual Administrative Expenses in an amount not to exceed the Administrative Expenses Cap (as defined in the Indenture)) and from amounts held in the Special Tax Fund.
Special Tax revenues include the proceeds of the annual Special Tax levy received by the District, including any scheduled payments and Prepayments thereof, and the net proceeds of the redemption of delinquent Special Taxes or sale of property sold as a result of foreclosure of the lien of delinquent Special Taxes to the amount of said lien, and penalties and interest thereon; provided that any delinquent Special Tax sold to an independent third-party or to the City for 100% of the delinquent amount will no longer be pledged under the Indenture to the payment of the Bonds or Parity Bonds.
In the event that the Special Tax revenues are not received when due, the only sources of funds available to pay the debt service on the Bonds are amounts held by the Trustee in the Special Tax Fund, including amounts held in the Reserve Account therein, for the exclusive benefit of the Owners of the Bonds, and proceeds of foreclosure sales of delinquent property.
NEITHER THE FAITH AND CREDIT NOR THE TAXING POWER OF THE CITY, THE
COUNTY, THE STATE OR ANY POLITICAL SUBDIVISION THEREOF IS PLEDGED TO THE PAYMENT OF THE BONDS. EXCEPT FOR THE NET TAXES, NO OTHER TAXES ARE PLEDGED TO THE PAYMENT OF THE BONDS. THE BONDS ARE NOT GENERAL OR SPECIAL OBLIGATIONS
OF THE CITY BUT ARE LIMITED OBLIGATIONS OF THE DISTRICT PAYABLE SOLELY FROM
THE NET TAXES AND OTHER AMOUNTS PLEDGED UNDER THE INDENTURE AS MORE FULLY DESCRIBED HEREIN.
Special Taxes
Authorization and Pledge. In accordance with the provisions of the Act, the City established the District on June 2, 2021 for the purpose of financing of various public improvements required in connection with the proposed development within the District. At a special election held on June 2, 2021, the qualified elector within the District authorized the District to incur indebtedness in an amount not to exceed $17,000,000 for the District and the levy of the Special Taxes on property within the District to repay such bonds and to finance the Facilities (as defined below). The qualified elector within the District also voted to approve the Rate and Method which authorized the Special Tax to be levied to repay indebtedness of the District, including the Bonds.
The Bonds will be repaid only from annual Net Taxes derived from the levy and collection of Special Taxes pursuant to the Rate and Method. The Rate and Method permits the prepayment of Special Taxes for an Assessor’s Parcel, and any such Prepayments will be applied to redeem Bonds and Parity Bonds, if any. The Net Taxes collected from the annual Special Tax levy and the proceeds of any Prepayment have been pledged under the Indenture to the repayment of the Bonds and Parity Bonds.
The Special Taxes levied in any Fiscal Year may not exceed the maximum rates authorized pursuant to the Rate and Method. See “— Rate and Method of Apportionment of Special Tax” and Appendix A — “RATE AND METHOD OF APPORTIONMENT OF SPECIAL TAX.” There is no assurance that the Net Taxes will, in all circumstances, be adequate to pay the principal of and interest on the Bonds when due. See the caption “SPECIAL RISK FACTORS — Insufficiency of Special Tax Revenues.” Item Title: 12.2
Community Facilities District 2021-1, Banner Park, Issuance of Special Tax Bonds Item Page Number: 31
Menifee
Mayor
and
City
Council
September
21,
2022
Page
2518 of 2787
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Rate and Method of Apportionment of Special Tax. The Rate and Method applicable to the District is contained in 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.
In general, the Rate and Method imposes a different Maximum Special Tax on Taxable Property within the District depending upon whether such Taxable Property is classified as: (i) “Developed Property” (in general, Taxable Property not classified as Approved Property, Undeveloped Property, Provisional Undeveloped Property that are not Exempt Property pursuant to the provisions of the Rate and Method and which is included in a Final Map recorded prior to the January 1 preceding the Fiscal Year in which the Special Tax is being levied and a building permit for new construction has been issued before May 1 preceding such Fiscal Year), (ii) “Approved Property” (in general, parcels of Taxable Property included in a Final Map recorded prior to the January 1 preceding the Fiscal Year in which the Special Tax is being levied, that have an assigned Assessor’s Parcel Number from the County shown on an Assessor’s Parcel Map for the individual lot included on the Final Map, but for which no building permit was issued before May 1 preceding such Fiscal Year), (iii) “Undeveloped Property” (in general, Taxable Property that is not “Developed Property,” “Approved Property” or “Provisional Undeveloped Property”) or (iv) “Provisional Undeveloped Property” (in general, Taxable Property that would otherwise be classified as Exempt Property but cannot be classified as Exempt Property because to do so would reduce the Acreage of all Taxable Property below the required minimum Acreage set forth in the Rate and Method). Different Maximum Special Taxes are also applicable to Developed Property depending upon: (a) its status as either “Residential Property” or “Non-Residential Property,” (b) in the case of Residential Property, its status as “Single Family Residential Property” or “Multifamily Property” or (c) in the case of Single Family Residential Property, the Building Square Footage of the structure.
Pursuant to the Rate and Method the District is required to determine the “Special Tax Requirement” for each Fiscal Year. The Special Tax Requirement for the District is the amount required in any Fiscal Year to pay: (i) the debt service or the periodic costs on all outstanding Bonds and Parity Bonds due in the calendar year that commences in such Fiscal Year, (ii) Administrative Expenses, (iii) the costs associated with the release of funds from an escrow account, (iv) any amount equal to establish or replenish any reserve funds established in association with the Bonds and Parity Bonds, (v) an amount to cure any delinquencies in the amount of principal or interest on the Bonds that occurred in a previous Fiscal Year, (vi) for the collection or accumulation of funds for the acquisition or construction of facilities authorized by the District or the payment of debt service on Bonds or Parity Bonds anticipated to be issued, provided that the inclusion of such amount does not cause an increase in the levy of Special Tax on Approved Property or Undeveloped Property, and, less (vii) any amounts available to pay debt service or other periodic costs on the Bonds and Parity Bonds pursuant to the Indenture.
The Special Tax Requirement for the District is to be satisfied first by levying the Special Tax Proportionately on each Assessor’s Parcel of Developed Property at up to 100% of the applicable Assigned Special Tax. If additional moneys are needed to satisfy the Special Tax Requirement, the Special Tax will be levied Proportionately on each Assessor’s Parcel of Approved Property at up to 100% of the Maximum Special Tax applicable to each such Assessor’s Parcel. If additional moneys are still needed to satisfy the Special Tax Requirement, the Special Tax will be levied Proportionately on each Assessor’s Parcel of Undeveloped Property up to 100% of the Maximum Special Tax applicable to each such Assessor’s Parcel. If additional moneys are needed to satisfy the Special Tax Requirement, the Special Tax on each Assessor’s Parcel of Developed Property for which the Maximum Special Tax is the Backup Special Tax will be increased Proportionately from the Assigned Special Tax up to 100% of the Backup Special Tax. Finally, if additional moneys are needed to satisfy the Special Tax Requirement, the Special Tax will be levied Proportionately on each Assessor’s Parcel of Provisional Undeveloped Property at up to 100% of the Maximum Special Tax applicable to each such Assessor’s Parcel. Notwithstanding the above, under no circumstances will the Special Tax levied against any Assessor’s Parcel of Residential Property as a result of a delinquency in the payment of the Special Tax applicable to any other Assessor’s Parcel be increased by more than 10% above the amount that would have been levied in that Fiscal Year had there never been any such delinquency or default Item Title: 12.2
Community Facilities District 2021-1, Banner Park, Issuance of Special Tax Bonds Item Page Number: 32
Menifee
Mayor
and
City
Council
September
21,
2022
Page
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For Fiscal Year 2023-24, the Assigned Special Tax for Developed Property within the District that is classified as Single Family Residential Property ranges from $2,551.06 per taxable unit with a Building Square Footage of less than 2,100 square feet to $3,174.26 per taxable unit with a Building Square Footage of greater than 3,100 square feet. On each July 1 the Assigned Special Tax rates for Developed Property shall be increased by two percent (2.00%) of the amount in effect in the prior Fiscal Year.
The Maximum Special Tax for each Assessor’s Parcel of Approved Property expected to be classified as Single Family Residential Property shall be the Backup Special Tax computed pursuant to the Rate and Method. For Fiscal Year 2023-24, the Maximum Special Tax on Approved Property not expected to be classified as Single Family Residential Property ranges from $2,823.75 to $2,973.47 per unit.
Table 1 below sets forth the Assigned Special Tax for Developed Property, the Maximum Special Tax for Approved Property, the projected Fiscal Year 2023-24 Special Tax levy and the percent of such levy based on land use type.
Based on development status as of August 15, 2022, and assuming no further development, 200 parcels within the District were classified as Developed Property and 56 parcels will be classified as Approved Property for the Fiscal Year 2023-24 Special Tax levy. Assuming no delinquencies, the Special Tax levy on 200 parcels of Developed Property within the District will generate in each Fiscal Year not less than the Administrative Expenses Cap plus 110% of debt service payable with respect to the Bonds in the calendar year that begins in that Fiscal Year, assuming that Special Taxes are levied and collected on such Developed Property pursuant to the Rate and Method.
TABLE 1
CITY OF MENIFEE
COMMUNITY FACILITIES DISTRICT NO. 2021-1 (BANNER PARK)
ASSIGNED SPECIAL TAX RATES FOR FISCAL YEAR 2023-24
Land Use Type
Residential
Floor Area
(sq. ft.)
Maximum/
Assigned
Special Tax
Rates
Fiscal Year
2023-24(1)
Special Tax
Levy Rates
Fiscal Year
2023-24
Percent of
Maximum/
Assigned
Rate
No. of
Units
Aggregate
Estimated
Special Taxes
Fiscal Year
2023-24(2)
Percent
of Total
Residential Property < 2,100 $ 2,551.06 $2,551.06 100.0% 0 $ 0.00 0.0% Residential Property 2,100-2,300 2,616.61 2,616.61 100.0 28 73,265.08 13.1 Residential Property 2,301 – 2,500 2,641.58 2,641.58 100.0 61 161,136.38 28.8 Residential Property 2,501 – 2,700 2,665.50 2,665.50 100.0 15 39,982.50 7.1 Residential Property 2,701 – 2,900 2,797.64 2,797.64 100.0 45 125,893.80 22.5 Residential Property 2,901 – 3,100 3,059.82 3,059.82 100.0 23 70,375.86 12.6 Residential Property > 3,100 3,174.26 3,174.26 100.0 28 88,879.28 15.9 Approved Property –
Tract 32102
N/A 2,923.75 0.00 0.0 45
Approved Property –
Tract 32102-1
N/A 2,973.47 0.00 0.0 11 0.00 0.0
Multifamily Property N/A 18,264.22 0.00 0.0 0 0.00 0.0
Non-Residential Property N/A 18,264.22 0.00 0.0 0 0.00 0.0 Total 256 $ 559,532.90 100.0%
(1) Reflects the Assigned Special Tax rate for Developed Property and the Maximum Special Tax for Approved Property, Multifamily Property and Non-Residential Property.
(2) Includes the Fiscal Year 2023-24 Administrative Expenses Cap of $31,212. The Administrative Expenses Cap escalates at 2% per Fiscal Year.
Source: Spicer Consulting Group, LLC.
Backup Special Tax Rates. The Backup Special Tax for an Assessor’s Parcel within a Final Map classified or to be classified as Single Family Property is calculated by multiplying the Maximum Special Tax per acre of Undeveloped Property by the acreage of Single Family Residential Property expected to exist in Item Title: 12.2
Community Facilities District 2021-1, Banner Park, Issuance of Special Tax Bonds Item Page Number: 33
Menifee
Mayor
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City
Council
September
21,
2022
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such Final Map at the time of calculation and dividing such product by the number of residential units expected to exist in such Final Map at the time of calculation.
In the event any portion of the Final Map is changed or modified, the Backup Special Tax for all Assessor’s Parcels within such changed or modified area shall be $18,264.22 per acre for Fiscal Year 2023-24.
Notwithstanding the foregoing, the Backup Special Tax for an Assessor’s Parcel of Developed Property for which a certificate of occupancy has been granted may not be revised. In the event any superseding Final Map is recorded as a Final Map within the boundaries of the District, the Backup Special Tax for all Assessor’s Parcels within such Final Map shall be $18,264.22 per acre for Fiscal Year 2023-24. The Backup Special Tax shall not apply to Multifamily Residential Property or Non-Residential Property. On each July 1 the Backup Special Tax rate will increase by two percent (2.00%) of the amount in effect in the prior Fiscal Year.
Prepayment of Special Taxes. The Maximum Special Tax obligation may be prepaid and permanently satisfied for (i) Assessor’s Parcels of Developed Property, (ii) Assessor’s Parcels of Approved Property or Undeveloped Property for which a building permit has been issued, (iii) Approved Property or Undeveloped Property for which a building permit has not been issued, and (iv) Assessor’s Parcels of Provisional Undeveloped Property that are not Exempt Property. In addition, the Maximum Special Tax obligation for an Assessor’s Parcel of Developed Property, Approved Property, Undeveloped Property or Provisional Undeveloped Property may be partially prepaid. The Prepayment amount is calculated based on the sum of the Bond Redemption Amount, the Redemption Premium, the Future Facilities Amount, the Defeasance Amount, Administrative Fees and Expenses and less a credit for the resulting reduction in the Reserve Requirement for the Bonds (if any), all as specified in Section G of the Rate and Method attached as Appendix A. Prepayments of Special Taxes will be applied to effect an extraordinary redemption of Bonds and Parity Bonds. See “THE BONDS — Redemption — Special Mandatory Redemption from Special Tax Prepayments.”
Estimated Debt Service Coverage. In connection with the issuance of the Bonds, the Special Tax Consultant will certify that the Maximum Special Tax that may be levied in each Fiscal Year on Assessor’s Parcels which are Developed Property as of August 15, 2022 (200 parcels) within the District classified as Taxable Property will be at least equal to the sum of: (i) 110% of Maximum Annual Debt Service on the Bonds; plus (ii) the Administrative Expenses Cap. Actual collections of the Special Tax will depend on the amount of Special Tax delinquencies.
Limitation on Special Tax Levy and Potential Impact on Coverage. Pursuant to Section 53321(d) of the Government Code, the special tax levied against any assessor’s parcel for which an occupancy permit for private residential use has been issued will not 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. As a result, it is possible that the District may not be able to increase the tax levy to the Assigned Special Tax in all years.
Levy, Collection and Application of Special Taxes. The Special Taxes are 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, although it is possible that the District could elect to provide handbills to property owners within the District.
The District will covenant in the Indenture that each year it will levy Special Taxes up to the maximum rates permitted under the Rate and Method in an amount sufficient, together with other amounts on deposit in the Special Tax Fund, to pay the principal of and interest on any Outstanding Bonds and Parity Bonds, to replenish the Reserve Account to the Reserve Requirement and to pay Administrative Expenses.
The District will make certain covenants in the Indenture which are intended to ensure that the current maximum Special Tax rates and method of collection of the Special Taxes are not altered in a manner that would impair the District’s ability to collect sufficient Special Taxes to pay debt service on the Bonds, Parity Bonds and Administrative Expenses when due.
Item Title: 12.2
Community Facilities District 2021-1, Banner Park, Issuance of Special Tax Bonds Item Page Number: 34
Menifee
Mayor
and
City
Council
September
21,
2022
Page
2521 of 2787
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First, the District will covenant in the Indenture that it will take no actions that would discontinue or cause the discontinuance of the Special Tax levy or the District’s authority to levy the Special Tax for so long as the Bonds and any Parity Bonds are Outstanding.
Second, the District will covenant in the Indenture, to the maximum extent that the law permits it to do so, not to initiate proceedings to reduce the maximum Special Tax rates for the District, unless, in connection therewith, the District receives a certificate from one or more Independent Financial Consultants which, when taken together, certify that: (i) such changes do not reduce the maximum Special Taxes that may be levied in each year on property within the District to an amount which is less than the Administrative Expense Cap plus 110% of the Annual Debt Service due in each corresponding future Bond Year with respect to the Bonds and Parity Bonds Outstanding as of the date of such proposed reduction; and (ii) the District is not delinquent in the payment of the principal of or interest on the Bonds or any Parity Bonds.
Third, the District will covenant in the Indenture that, in the event that any initiative is adopted by the qualified electors within the District which purports to reduce the maximum Special Tax below the levels specified in the preceding paragraph or to limit the power of the District to levy the Special Taxes for the purposes set forth in the Indenture, it will commence and pursue legal action in order to preserve its ability to comply with such covenants. The District can provide no assurance that any such legal action will be successful. See the caption “SPECIAL RISK FACTORS — Proposition 218.” Fourth, the District will covenant in the Indenture that it will not adopt any policy pursuant to the Act permitting the tender of Bonds or Parity Bonds in full payment or partial payment of any Special Taxes unless the District has first received a certificate from an Independent Financial Consultant that the acceptance of such a tender will not result in the District having insufficient Net Taxes to pay the principal of and interest on the Bonds and Parity Bonds when due.
See Appendix E under the caption “COVENANTS AND WARRANTY.” Although the Special Taxes constitute liens on taxed parcels within the District, they do not constitute a personal indebtedness of the owners of property within the District. Moreover, other liens for taxes and assessments already exist on the property located within the District and others could come into existence in the future in certain situations without the consent or knowledge of the City or the landowners in the District.
See the captions “THE DISTRICT — Direct and Overlapping Debt” and “SPECIAL RISK FACTORS — Direct and Overlapping Indebtedness.” There is no assurance that property owners will be financially able to pay the annual Special Taxes or that they will pay such taxes even if financially able to do so, all as more fully described under the caption “SPECIAL RISK FACTORS.”
Proceeds of Foreclosure Sales. The net proceeds received following a judicial foreclosure sale of property within the District resulting from a property owner’s failure to pay the Special Taxes when due are included within the Net Taxes pledged to the payment of principal of and interest on the Bonds and any Parity Bonds under the Indenture.
Pursuant to Section 53356.1 of the Act, in the event of any delinquency in the payment of any Special Tax or receipt by the District of Special Taxes in an amount which is less than the Special Taxes levied, the City Council, as the legislative body of the District, may order that Special Taxes be collected by a Superior Court action to foreclose the lien within specified time limits. In such an action, the real property subject to the unpaid amount may be sold at a judicial foreclosure sale. Under the Act, the commencement of judicial foreclosure following the nonpayment of a Special Tax is not mandatory. However, the District will covenant in the Indenture for the benefit of the owners of the Bonds and any Parity Bonds that it will: (i) commence judicial foreclosure proceedings against parcels with delinquent Special Taxes in excess of $5,000 by the October 1 following the close of each Fiscal Year in which such Special Taxes were due; and (ii) commence judicial foreclosure proceedings against all parcels with delinquent Special Taxes by the October 1 following the close of each Fiscal Year in which it receives Special Taxes in an amount which is less than 95% of the Item Title: 12.2
Community Facilities District 2021-1, Banner Park, Issuance of Special Tax Bonds Item Page Number: 35
Menifee
Mayor
and
City
Council
September
21,
2022
Page
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total Special Tax levied; and (iii) diligently pursue such foreclosure proceedings until the delinquent Special Taxes are paid; provided that, notwithstanding the foregoing, the District may elect to defer foreclosure proceedings on any parcel so long as the amount in the Reserve Account is at least equal to the Reserve Requirement.
The District will covenant in the Indenture that it will deposit the net proceeds of any foreclosure in the Special Tax Fund and will apply such proceeds remaining after the payment of Administrative Expenses to make current payments of principal and interest on the Bonds and any Parity Bonds, to bring the amount on deposit in the Reserve Account up to the Reserve Requirement and to pay any delinquent installments of principal or interest due on the Bonds and any Parity Bonds. See APPENDIX E — “SUMMARY OF THE INDENTURE — COVENANTS AND WARRANTY — Covenants” herein.
If foreclosure is necessary and other funds (including amounts in the Reserve Account) have been exhausted, debt service payments on the Bonds could be delayed unless the foreclosure proceedings produce sufficient net foreclosure sale proceeds. Judicial foreclosure actions are subject to the normal delays associated with court cases and may be further slowed by bankruptcy actions, involvement by agencies of the federal government and other factors beyond the control of the City and the District. See the caption “SPECIAL RISK FACTORS — Enforcement Delays – Bankruptcy.” Moreover, no assurances can be given that the real property subject to foreclosure and sale at a judicial foreclosure sale will be sold or, if sold, that the net proceeds of such sale will be sufficient to pay any delinquent Special Tax installment. See the caption “SPECIAL RISK FACTORS — Property Values.” Although the Act authorizes the District to cause such an action to be commenced and diligently pursued to completion, the Act does not impose on the District or the City any obligation to purchase or acquire any lot or parcel of property sold at a foreclosure sale if there is no other purchaser at such sale. The Act provides that, in the case of a delinquency, the Special Tax will have the same lien priority as is provided for ad valorem taxes.
Collection of Special Taxes and Flow of Funds. The Special Taxes will be 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, although it is possible that the District could elect to provide handbills to property owners within the District. When the County apportions Special Taxes to the District, the District will deposit to the Administrative Expense Fund, held by the District, an amount up to the Administrative Expenses Cap for such Fiscal Year, and transmit the remainder of the Special Taxes to the Trustee for deposit in the Special Tax Fund established by the Indenture.
Except for Prepayments, which will be deposited to the Redemption Account of the Special Tax Fund, the Trustee will, on each date on which the Special Taxes are received from the District, deposit the Special Taxes in the Special Tax Fund to be held in trust for the Owners. The Trustee will transfer the Special Taxes on deposit in the Special Tax Fund on the dates, in the amounts and in the following order of priority, to:
First: To the Interest Account, an amount such that the balance in the Interest Account one Business Day prior to each Interest Payment Date is equal to the installment of interest due on the Bonds and any Parity Bonds on said Interest Payment Date and any installment of interest due on a previous Interest Payment Date which remains unpaid.
Moneys in the Interest Account will be used for the payment of interest on the Bonds and any Parity Bonds as the same become due.
Second: To the Principal Account, an amount such that the balance in the Principal Account one Business Day prior to September 1 of each year, commencing September 1, 2023, is equal the principal payment due on the Bonds and any Parity Bonds maturing on such September 1 and any principal payment due on a previous September 1 which remains unpaid. Moneys in the Principal Account shall be used for the payment of the principal of such Bonds and any Parity Bonds as the same become due at maturity.
Item Title: 12.2
Community Facilities District 2021-1, Banner Park, Issuance of Special Tax Bonds Item Page Number: 36
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City
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Third: To the Redemption Account, the amount needed to make the balance in the Redemption Account one Business Day prior to each September 1 on which a Sinking Fund Payment is due equal to the Sinking Fund Payment due on any Outstanding Bonds and Parity Bonds on such September 1; provided, however, that, if amounts in the Special Tax Fund are inadequate to make the foregoing transfers, then any deficiency will be made up by an immediate transfer from the Reserve Account, if funded, pursuant to the Indenture; and thereafter, to pay the principal and premium, if any, due in connection with an optional redemption of Bonds or Parity Bonds.
Fourth: To the Reserve Account of the Special Tax Fund to the extent necessary to replenish the Reserve Account to the Reserve Requirement.
Fifth: To the District for deposit to the Administrative Expense Fund an amount as set forth in a Certificate of an Authorized Representative of the District, which amount shall equal the extent to which Administrative Expenses exceed or are expected to exceed the Administrative Expense Cap.
Sixth: To the Rebate Fund established by the Indenture to the extent directed by the City pursuant to the Indenture.
Seventh: To the Surplus Fund established by the Indenture such remaining amounts in the Special Tax Fund after making the foregoing transfers on September 1.
Reserve Account of the Special Tax Fund
In order to secure further the payment of principal of and interest on the Bonds, the District is required, upon delivery of the Bonds, to deposit in the Reserve Account and thereafter to maintain in the Reserve Account an amount equal to the Reserve Requirement. The term “Reserve Requirement” is defined in the Indenture to mean, that amount as of any date of calculation, equal to the lesser of: (i) 10% of the initial principal amount of the Bonds and Parity Bonds, if any; (ii) Maximum Annual Debt Service on the then Outstanding Bonds and Parity Bonds, if any; (iii) 125% of average Annual Debt Service on the then Outstanding Bonds and Parity Bonds, if any; provided, however, that the Reserve Requirement shall not exceed $__________ except in connection with the issuance of Parity Bonds. The Reserve Requirement may be satisfied in whole or in part by cash, a Reserve Policy (as defined in the Indenture), or a combination thereof. On the date of issuance of the Bonds, the District will deposit $__________ from proceeds of the Bonds into the Reserve Account to satisfy the Reserve Requirement.
Subject to the limits on the maximum annual Special Tax levy set forth in the Rate and Method and in the Indenture, the District will covenant in the Indenture to levy Special Taxes in an amount sufficient, in light of the other intended uses of the Special Tax proceeds, to maintain the balance in the Reserve Account at the Reserve Requirement. Amounts in the Reserve Account are to be applied: (i) to pay debt service on the Bonds, or any Parity Bonds, including Sinking Fund Payments, to the extent that other monies are not available therefor; (ii) to redeem Bonds or Parity Bonds in the event of prepayment of Special Taxes, to optionally redeem Bonds or Parity Bonds or in connection with a partial defeasance of Bonds or Parity Bonds, in accordance with the Indenture; and (iii) to pay any rebate requirements. See Appendix E under the caption “CREATION OF FUNDS AND APPLICATION OF PROCEEDS — Reserve Account of the Special Tax Fund.”
No Teeter Plan
Although the Riverside County Board of Supervisors has adopted the Alternative Method of Distribution of Tax Levies and Collections and of Tax Sale Proceeds (the “Teeter Plan”) which allows each entity levying secured property taxes in the County to draw on the amount of property taxes levied rather than Item Title: 12.2
Community Facilities District 2021-1, Banner Park, Issuance of Special Tax Bonds Item Page Number: 37
Menifee
Mayor
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City
Council
September
21,
2022
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the amount actually collected, as provided for in Section 4701 et seq. of the California Revenue and Taxation Code, the District is not included in the County Teeter Plan. Consequently, the District may not draw on the County Tax Loss Reserve Fund in the event of delinquencies in Special Tax payments within the District.
Parity Bonds
The Indenture provides that, upon satisfaction of certain conditions, the District may issue Parity Bonds payable from the Net Taxes and other amounts deposited in the Special Tax Fund and secured by a lien and charge upon such amounts equal to the lien and charge securing the Outstanding Bonds and any other Parity Bonds theretofore issued; provided, however, Parity Bonds may only be issued: (i) for the purpose of refunding all or a portion of the Bonds or any Parity Bonds then Outstanding, or (ii) for other purposes of the District in a principal amount not to exceed $__________. Among other conditions, in order to issue Parity Bonds for other than refunding purposes, the District shall have received a Certificate of the Special Tax Administrator certifying that (i) the maximum Special Taxes that may be levied in each Fiscal Year is not less than 110% of the Annual Debt Service in the Bond Year that begins in such Fiscal Year, plus the applicable Administrative Expenses Cap; and (ii) the Value of District Property is not less than four (4) times the sum of Direct Debt for District Property plus Overlapping Debt allocable to all property in the District subject to the Special Tax. For purposes of the foregoing Certificate of the Special Tax Administrator, all calculations shall consider the Parity Bonds proposed to be issued to be Outstanding.
Among other conditions, in order to issue Parity Bonds to refund all or a portion of the Bonds or any Parity Bonds, the District shall have received a Certificate of the Special Tax Administrator certifying that in each Bond Year the Annual Debt Service on the Bonds and Parity Bonds to remain Outstanding following the issuance of the Parity Bonds proposed to be issued is less than the Annual Debt Service on the Bonds and Parity Bonds Outstanding prior to the issuance of such Parity Bonds. See Appendix E under the caption “DEFEASANCE AND PARITY BONDS.”
The District currently expects to issue Parity Bonds to finance additional Project Costs in Fiscal Year 2023-24.
THE DISTRICT
General Description of the District
The District contains approximately 76. gross acres and approximately 41 net taxable acres, and is located in the eastern portion of the City, to the northwest of Domenigoni Parkway. The property within the District was acquired by Pulte Home Company, LLC, a Michigan limited liability company (“Pulte Homes”), in three phases, the last of which occurred on July 1, 2022. The project within the District is being marketed by Pulte Homes as “Banner Park.”
The property within the District is planned for 256 residential units within three product lines – Crest at Banner Park (92 homes), Heritage at Banner Park (90 homes) and Merit at Banner Park (74 homes). As of August 5, 2022, Pulte Homes had completed and conveyed 103 homes within the District to individual homeowners. As of such date, Pulte Homes owned six model homes (none of which were in escrow), twelve completed homes (ten of which were in escrow), fifty-seven homes in various stages of construction (forty- eight of which were in escrow) and seventy-eight finished lots (sixteen of which were in escrow). As of September 15, 2022, Pule Homes had transferred a total of ___ homes to individual homeowners. Pulte Homes currently expects to complete and convey all homes planned within the District to individual homeowners by September 30, 2024. However, see “SPECIAL RISK FACTORS—Increasing Mortgage Interest Rates” for a discussion of how rising mortgage interest rates may impact Pulte Homes’ ability to complete development within the District as planned.
Item Title: 12.2
Community Facilities District 2021-1, Banner Park, Issuance of Special Tax Bonds Item Page Number: 38
Menifee
Mayor
and
City
Council
September
21,
2022
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Other than a neighborhood park, the majority of major infrastructure (sewer, water, storm drains, utilities, and arterial roads) necessary to develop the property within the District has been completed. The in- tract infrastructure within the District is substantially complete with landscaping, final capping of certain streets, and dry utilities for certain lots remaining. All necessary permits have been obtained for Pulte Homes’ development within the District.
Pulte Homes is constructing a neighborhood park of approximately 5 acres. As of August 5, 2022, the grading of the park was complete, but park construction had not yet commenced. Condition of Approval No. 271 requires the park to be completed prior to the issuance of the 200th building permit (“Park Condition”).
The Park Condition allows Pulte Homes to provide a performance security to ensure completion of the park, which is currently being prepared with City Staff and will allow additional building permits to be issued. Pulte Homes expects to complete the park by the end of April 2023.
Water and sewer service to the property within the District is currently supplied by the Eastern Municipal Water District. Electricity is currently supplied by Southern California Edison and gas by Southern California Gas Company. Public education instruction is provided by the Menifee Union School District and the Perris Union High School District.
The property within the District is not located in an Alquist-Priolo Earthquake Study Zone and is not located within one-half mile of an active earthquake fault. Additionally, the District is not located in a flood plain area, although approximately 50% of the lots within the District are located in an area which the Department of Forestry and Fire Protection of the State of California has designated as a high fire hazard severity zone. The property in the District may be subject to unpredictable seismic activity, fires, flood, or other natural disasters. See “SPECIAL RISK FACTORS — Natural Disasters.” A map showing the location of the District and an aerial photograph thereof appear following the Table of Contents.
Authorized Uses of Bond Proceeds
Proceeds of the Bonds are authorized to be used to pay for the costs of construction of City facilities, including certain storm drain and street improvements, the costs of certain water and sewer system improvements to be owned and operated by the Eastern Municipal Water District and the costs of school facilities to be owned and operated by the Menifee Union School District. See the caption “FINANCING PLAN.”
Appraisal Report
The estimated assessed value of the property within the District, as shown on the County’s assessment roll for Fiscal Year 2022-23 is approximately $28,371,188, which as a result of timing of the County’s determination of the assessed values for Fiscal Year 2022-23, does not reflect the substantial development activity that has taken place since such value was determined.
A property’s assessed value is not necessarily indicative of its market value. In order to provide information with respect to the value of the taxable property within the District, the City engaged the Appraiser to prepare the Appraisal Report. The Appraiser has an “MAI” designation from the Appraisal Institute and has prepared numerous appraisals for the sale of land-secured municipal bonds. The Appraiser was selected by the City and has no material relationships with the City or the owners of the land within the District other than the relationship represented by the engagement to prepare the Appraisal Report. The City instructed the Appraiser to prepare its analysis and report in conformity with City-approved guidelines and the Appraisal Standards for Land Secured Financings published in 1994 and revised in 2004 by the California Debt and Investment Advisory Commission. A copy of the Appraisal Report is included as Appendix D — “APPRAISAL REPORT” to this Official Statement.
Item Title: 12.2
Community Facilities District 2021-1, Banner Park, Issuance of Special Tax Bonds Item Page Number: 39
Menifee
Mayor
and
City
Council
September
21,
2022
Page
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The purpose of the Appraisal Report was to estimate the market value of the property within the District subject to the lien of the Special Taxes. The estimate of market value takes into consideration and assumes the improvements to be funded with the proceeds of the Bonds have been installed and that the remaining costs to develop the project within the District provided to the Appraiser by Pulte Homes are correct. As a result, the value conclusions are based upon a hypothetical condition that all improvements and benefits to the District, which are to be funded with the proceeds of the Bonds, are completed and in place or have accrued to the property.
Subject to the assumptions and limiting conditions set forth in the Appraisal Report, the Appraiser concluded that, as of August 5, 2022, the market value of the Taxable Property within the District was $91,314,737. In valuing the property within the District, the Appraiser used a sales comparison approach for the property to be developed and, with respect to the Pulte Homes-owned models and production units more than 95% complete, a discounted cash flow analysis was applied. The discounted cash flow analysis accounts for remaining development costs, marketing and carrying costs and a discount rate through the estimated absorption period for such models and production units.
The Appraisal Report is based upon a variety of assumptions and limiting conditions that are described in Appendix D. The City, the Underwriter and the District make no representation as to the accuracy of the Appraisal Report. There is no assurance that the property within the District can be sold for the prices set forth in the Appraisal Report or that any parcel can be sold for a price sufficient to pay the Special Tax for that parcel in the event of a default in payment of Special Taxes by the landowner. See “SPECIAL RISK FACTORS — Property Values” and Appendix D — “APPRAISAL REPORT.” Fiscal Year 2022-23 Special Tax Levy
Special Taxes for Fiscal Year 2022-23 in the amount of $332,335 have been levied against the 121 parcels that were classified as Developed Property as of May 1, 2022. Special Taxes were not levied against Approved Property in Fiscal Year 2022-23. Table 2 below shows the Fiscal Year 2022-23 Special Tax levy by owner and development status.
TABLE 2
CITY OF MENIFEE
COMMUNITY FACILITIES DISTRICT NO. 2021-1 (BANNER PARK)
FISCAL YEAR 2022-23 SPECIAL TAX LEVY
Property Owner(1) No. of Parcels
Fiscal Year 2022-23
Special Tax Levy(2)
Percent of Fiscal
Year 2022-23
Special Tax Levy
Developed Property
Individually Owned 103 $ 282,714 85.07%
Pulte Homes Owned 18 49,621 14.93
Subtotal of Developed Property 121 $ 332,335 100.00%
Approved Property
Pulte Homes Owned 135 $ 0 0.00%
Total 256 $ 332,335 100.00%
(1) Property ownership status as of August 5, 2022 and development status as of May 1, 2022. (2) Fiscal Year 2022-23 Special Tax Levy based upon development status as of May 1, 2022 and an Administrative Expense Cap for Fiscal Year 2022-23 of $30,600. The levy on Developed Property shown is equal to 100% of the Assigned Special Tax rates on Developed Property. The District did not levy the Special Tax on Approved Property.
Source: Spicer Consulting Group, LLC.
Item Title: 12.2
Community Facilities District 2021-1, Banner Park, Issuance of Special Tax Bonds Item Page Number: 40
Menifee
Mayor
and
City
Council
September
21,
2022
Page
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Estimated Appraised Value-to-Lien Ratios
The aggregate appraised value of property within the District is $91,314,737. Dividing the aggregate estimate of value by the principal amount of the Bonds, together with the overlapping debt (totaling $12,121,378), results in a value to lien ratio of 5.18*-to-1 for the District. See “SPECIAL RISK FACTORS — Direct and Overlapping Indebtedness.” The assessed value of the property within the District is $28,371,188 for Fiscal Year 2022-23, which as a result of timing of the County’s determination of the assessed values for Fiscal Year 2022-23, does not reflect the substantial development activity that has taken place since such value was determined. Dividing the assessed value by the principal amount of the Bonds and all overlapping debt results in an estimated assessed value-to-lien ratio of 1.61*-to-1 for the District.
Based on ownership status as of August 15, 2022 and assuming no further development activity, individual homeowners and Pulte Homes are expected to be responsible for approximately 51.54% and
48.46%, respectively, of the projected Fiscal Year 2023-24 Special Tax levy.
Table 3 below sets forth the appraised value-to-lien ratio of the Taxable Property within the District based on the appraised values set forth in the Appraisal Report, the principal amount of the Bonds and all overlapping debt. Table 4 below sets forth the estimated appraised value-to-lien ratios for Developed Property within the District by various ranges based upon the principal amount of the Bonds and all overlapping debt.
The District currently does not expect to levy the Special Tax on Approved Property, however, the District has the ability to do so under the Rate and Method if necessary to meet the Special Tax Requirement. * Preliminary, subject to change.
Item Title: 12.2
Community Facilities District 2021-1, Banner Park, Issuance of Special Tax Bonds Item Page Number: 41
Menifee
Mayor
and
City
Council
September
21,
2022
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TABLE 3
CITY OF MENIFEE
COMMUNITY FACILITIES DISTRICT NO. 2021-1 (BANNER PARK)
ESTIMATED APPRAISED VALUE-TO-LIEN RATIOS
Property Owner(1)
No. of
Parcels
Appraised
Property
Value(2)
Percent of
Appraised
Value
Maximum
Special Tax (3)
Percentage of
Maximum
Special Tax
Estimated
Fiscal Year
2023-24
Special Tax
Levy(4)
Percent of
Estimated
Fiscal
Year
2023-24
Special
Tax Levy
CFD 2021-
1 2022
Bonds(5)*
All Other
Overlapping
Debt
Issued(6)
Appraised
Value-to-
Lien
Ratio*
Developed Property
Individually Owned 103 $ 61,037,705 66.84 % $ 310,229 40.63% $ 288,369 51.54% $2,844,868 $ 6,247,050 6.71:1 Pulte Homes Owned 97 21,015,803 23.01 289,090 37.86 271,164 48.46 2,675,132 5,874,328 2.46:1 Subtotal of Developed Property 200 $ 82,053,508 89.86% $ 599,319 78.49% $ 559,533 100.00% $ 5,520,000 $12,121,378 4.65:1 Approved Property
Pulte Homes Owned 56 $ 9,261,229 10.14% $ 164,277 21.51% $ 0 0.00% $ 0 $ 0 N/A Total 256 $ 91,314,737 100.00% $ 763,596 100.00% $ 559,533 100.00% $ 5,520,000 $12,121,378 5.18:1 * Preliminary, subject to change.
(1) Property ownership status as of August 5, 2022 and development status as of August 15, 2022. (2) Based on the appraised value set forth in the Appraisal Report as of August 5, 2022, the Date of Value. (3) Based on 100% of the Assigned Special Tax rate on Developed Property. See “SOURCES OF PAYMENT FOR THE BONDS — Special Taxes — Rate and Method of Apportionment of Special Tax.”
(4) Estimated Fiscal Year 2023-24 Special Tax Levy based upon development status as of August 15, 2022 and an Administrative Expense Cap for Fiscal Year 2023-24 of $31,212. The estimated levy on Developed Property shown is equal to 100% of the Assigned Special Tax rates on Developed Property. The District currently does not expect to levy the Special Tax on Approved Property.
(5) Allocated based on estimated Fiscal Year 2023-24 Special Tax levy. (6) See Table 5 for other Overlapping Debt.
Source: County of Riverside Assessor’s Office; Spicer Consulting Group, LLC.
Item Title: 12.2
Community Facilities District 2021-1, Banner Park, Issuance of Special Tax Bonds Item Page Number: 42
Menifee Mayor and City Council
September 21, 2022
Page
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TABLE 4
CITY OF MENIFEE
COMMUNITY FACILITIES DISTRICT NO. 2021-1 (BANNER PARK)
VALUE-TO-LIEN STRATIFICATION FOR DEVELOPED PROPERTY*
Value-to-Lien Category
No. of
Parcels of
Developed
Property(1)
Percent of
Developed
Property
Appraised
Value(2)
Percent of
Appraised
Value
CFD 2021-1
Estimated
Fiscal Year
2022-23
Special Tax
Levy
Percent
Share of
Estimated
Fiscal Year
2022-23
Special
Tax Levy
CFD 2021-1
2022 Bonds(3)
Percent
Share of
CFD 2021-
1 2022
Bonds
All Other
Overlapping
Debt(5)
Aggregate
Value-to-
Lien
Less than 3.00:1(4) 79 39.50% $ 13,064,948 15.92% $ 220,550 39.42% $ 2,175,812 39.42% $ 4,777,870 1.88:1 Between 3.01:1 to 6.00:1 18 9.00 7,950,855 9.69 50,613 9.05 499,320 9.05 1,096,459 4.98:1 Greater than 6.01:1(4) 103 51.50 61,037,705 74.39 288,369 51.54 2,844,868 51.54 6,247,050 6.71:1 Total 200 100.00% $ 82,053,508 100.00% $ 559,533 100.00% $ 5,520,000 100.00% $12,121,378 4.65:1 * Preliminary, subject to change.
(1) Based on development status as of August 15, 2022.
(2) Based on the appraised value set forth in the Appraisal Report as of August 5, 2022, the Date of Value. (3) Allocated based on the estimated Fiscal Year 2022-23 Special Tax levy and reflects 121 building permits issued as of May 1, 2022 and an Administrative Expense Cap for Fiscal Year 2022-23 of $30,600.
(4) The minimum value to lien in the less than 3.00:1 category is 1.53:1*. The maximum value to lien in the greater than 6.01:1 category is 6.44:1*. (5) See Table 5 for other Overlapping Debt.
Source: County of Riverside Assessor’s Office; Spicer Consulting Group, LLC.
Item Title: 12.2
Community Facilities District 2021-1, Banner Park, Issuance of Special Tax Bonds Item Page Number: 43
Menifee Mayor and City Council
September 21, 2022
Page
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Direct and Overlapping Debt
The District is included within the boundaries of overlapping local agencies providing governmental services. Some of these local agencies have outstanding bonds, and/or the authority to issue bonds, payable from taxes or assessments. The existing and authorized indebtedness payable from taxes and assessments that may be levied upon the property within the District is shown in Table 5 below. In addition to current debt, new community facilities districts and/or special assessment districts could be formed in the future encompassing all or a portion of the property within the District; and such districts or the agencies that formed them could issue more bonds and levy additional special taxes or assessments.
Item Title: 12.2
Community Facilities District 2021-1, Banner Park, Issuance of Special Tax Bonds Item Page Number: 44
Menifee
Mayor
and
City
Council
September
21,
2022
Page
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TABLE 5
CITY OF MENIFEE
COMMUNITY FACILITIES DISTRICT NO. 2021-1 (BANNER PARK)
DIRECT AND OVERLAPPING DEBT
AS OF AUGUST 5, 2022
I. Appraised Value(1) $ 91,314,737
II. Land Secured Bond Indebtedness
Outstanding Direct and
Overlapping Bonded Debt Type Issued Outstanding
%
Applicable
Amount
Applicable
CITY OF MENIFEE CFD NO. 2021-1, SERIES 2022A CFD $ 5,520,000 * $ 5,520,000 * 100.000% $ 5,520,000 *
PERRIS UNION HIGH SCHOOL DISTRICT FINANCING
AUTHORITY, 2015 REVENUE BONDS
CFD 46,150,000 31,910,000 6.071 $ 1,937,343
TOTAL LAND SECURED BONDED DEBT $ 7,457,343 *
Authorized but Unissued Direct and
Overlapping Indebtedness Type Authorized Unissued
%
Applicable
Amount
Applicable
CITY OF MENIFEE CFD NO. 2021-1, SERIES 2022A CFD $ 17,000,000 $ 11,480,000 100.000% $ 11,480,000
PERRIS UNION HIGH SCHOOL DISTRICT FINANCING
AUTHORITY, 2015 REVENUE BONDS
CFD 140,000,000 93,850,000 6.071 $ 5,697,890
TOTAL UNISSUED LAND SECURED INDEBTEDNESS(2) $ 17,177,890 TOTAL OUTSTANDING AND UNISSUED LAND SECURED INDEBTEDNESS $ 24,635,233 * III. General Obligation Bond Indebtedness
Outstanding Direct and
Overlapping Bonded Debt Type Issued Outstanding
%
Applicable
Amount
Applicable
METROPOLITAN WATER DEBT SERVICE GO $ 850,000,000 $ 50,105,000 0.077% $ 38,734 MT. SAN JACINTO JR. COLLEGE DEBT SERVICE GO 190,000,000 157,750,000 0.090 142,270 MENIFEE UNION HIGH SCHOOL DEBT SERVICE GO 144,463,923 124,944,720 0.757 945,375 PERRIS UNION HIGH SCHOOL DEBT SERVICE GO 347,415,402 299,532,812 3.024 9,057,655 TOTAL OUTSTANDING GENERAL OBLIGATION BONDED DEBT $ 10,184,035 Authorized but Unissued Direct and
Overlapping Indebtedness Type Authorized Unissued
%
Applicable
Amount
Applicable
METROPOLITAN WATER DEBT SERVICE GO $ 850,000,000 $ 0 0.077% $ 0 MT. SAN JACINTO JR. COLLEGE DEBT SERVICE GO 295,000,000 105,000,000 0.090 94,696 MENIFEE UNION HIGH SCHOOL DEBT SERVICE GO 180,960,000 36,496,077 0.757 276,142 PERRIS UNION HIGH SCHOOL DEBT SERVICE GO 347,420,000 4,598 3.024 139 TOTAL UNISSUED GENERAL OBLIGATION INDEBTEDNESS(2) $ 370,977 TOTAL OUTSTANDING AND UNISSUED GENERAL OBLIGATION INDEBTEDNESS $ 10,555,013 TOTAL OF ALL OUTSTANDING DIRECT AND OVERLAPPING BONDED DEBT $ 17,641,378 * TOTAL OF ALL OUTSTANDING DIRECT AND UNISSUED DIRECT OVERLAPPING INDEBTEDNESS $ 35,190,246 * IV. Ratios to Appraisal Value
Outstanding Land Secured Bonded Debt 12.24:1*
Total Outstanding Bonded Debt 5.18:1*
* Preliminary, subject to change.
(1) Based on the Appraisal Report as of August 5, 2022 date of value. (2) Parity Bonds may be issued to finance additional public improvements and for refunding purposes. The District currently expects to issue Parity Bonds to finance additional public improvements in Fiscal Year 2023-24. (3) All parcels have subdivided into 256 individual parcels. Based on development status as of August 15, 2022, and assuming no further development, 200 parcels will be classified as Developed Property under the Rate and Method for Fiscal Year 2023-24.
Source: County of Riverside Assessor’s Office; Spicer Consulting Group, LLC.
Item Title: 12.2
Community Facilities District 2021-1, Banner Park, Issuance of Special Tax Bonds Item Page Number: 45
Menifee
Mayor
and
City
Council
September
21,
2022
Page
2532 of 2787
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Table 6 below describes the estimated Fiscal Year 2022-23 effective tax burden for Pulte Homes’ development in the District based on the average appraised value of homes within each plan type as of the Date of Value, the Fiscal Year 2022-23 Special Tax levy and Fiscal Year 2022-23 actual levies for all other overlapping taxing jurisdictions. Based on the foregoing, the projected debt service on the Bonds and the Administrative Expenses Cap of $30,600 (which amount shall escalate at 2% per Fiscal Year), in Fiscal Year 2022-23, the projected effective tax rates to be levied on Developed Property in the District ranges from approximately 1.80% to 1.84%.
Item Title: 12.2
Community Facilities District 2021-1, Banner Park, Issuance of Special Tax Bonds Item Page Number: 46
Menifee
Mayor
and
City
Council
September
21,
2022
Page
2533 of 2787
28 4892-5385-7582v7/200299-0013
TABLE 5
CITY OF MENIFEE
COMMUNITY FACILITIES DISTRICT NO. 2021-1 (BANNER PARK)
ESTIMATED FISCAL YEAR 2022-23 TAX OBLIGATION
FOR A SAMPLE OF DEVELOPED PROPERTY
Heritage Crest Merit
Stella Verona Parklane Preston Stafford Rosemount Pathmaker Brinnon Visionary Pulte Homes
Plan Type 1 2 3 1 2 3 1 2 3
CFD Tax Category 2,101 to
2,300 S.F.
2,301 to
2,500 S.F.
2,301 to
2,500 S.F.
2,701 to
2,900 S.F.
2,901 to
3,100 S.F.
Greater than
3,101 S.F.
2,301 to
2,500 S.F.
2,501 to
2,700 S.F.
2,701 to
2,900 S.F.
Home Size 2,191 2,311 2,462 2,845 3,047 3,237 2,391 2,654 2,824 Appraisal Value(1) $ 547,750 $ 566,195 $ 578,570 $ 611,675 $ 624,635 $ 647,400 $ 561,885 $ 578,572 $ 598,688 Ad Valorem Property Taxes:
General Purpose $ 5,478 $ 5,662 $ 5,786 $ 6,117 $ 6,246 $ 6,474 $ 5,619 $ 5,786 $ 5,987 Metro Water West (0.00350%) 19 20 20 21 22 23 20 20 21
Mt. San Jacinto Jr College (0.01320%) 72 75 76 81 82 85 74 76 79 Menifee Union High School (0.06319%) 346 358 366 387 395 409 355 366 378 Perris Union High School District
(0.088590%)
485 502 513 542 553 574 498 513 530
Total General Property Taxes $ 6,400 $ ,6616 $ 6,760 $ 7,147 $ 7,299 $ 7,565 $ 6,566 $ 6,760 $ 6,996 Assessment, Special Taxes & Parcel
Charges:
Flood Control Stormwater / Cleanwater /
Santa Ana
$ 4 $ 4 $ 4 $ 4 $ 4 $ 4 $ 4 $ 4 $ 4
Valley-Wide Regional Facilities LMD 88-1 6 6 6 6 6 6 6 6 6 Valley-Wide LMD 88-1 Parks 311 311 311 311 311 311 311 311 311 MWD Standby East charge 7 7 7 7 7 7 7 7 7
EMWD Infrastructure Availability Charge 21 21 21 21 21 21 21 21 21 City of Menifee CFD 2017-1, Zone 4
Maintenance Services
742 742 742 742 742 742 742 742 742
City of Menifee CFD 2021-1 (Banner Park)(2) 2,565 2,590 2,590 2,743 3,000 3,112 2,590 2,613 2,743 Total Assessments & Special Taxes $ 3,655 $ 3,680 $ 3,680 $ 3,833 $ 4,090 $ 4,202 $ 3,680 $ 3,703 $ 3,833 Projected Total Property Tax $ 10,056 $ 10,296 $ 10,440 $ 10,980 $ 11,388 $ 11,767 $ 10,245 $ 10,464 $ 10.828 Projected Effective Tax Rate(3) 1.84% 1.82% 1.80% 1.80% 1.82% 1.82% 1.82% 1.81% 1.81% (1) Based on the average appraised value for homes in each plan type as set forth in the Appraisal Report as of the Date of Value (August 5, 2022). (2) Reflects the Fiscal Year 2022-23 Special Tax levy for Developed Property and includes an amount for the Administrative Expenses Cap of $30,600. (3) Includes the full Assigned Tax Rate for each category Source: County of Riverside Assessor’s Office; Spicer Consulting Group, LLC.
Item Title: 12.2
Community Facilities District 2021-1, Banner Park, Issuance of Special Tax Bonds Item Page Number: 47
Menifee Mayor and City Council
September 21, 2022
Page
2534 of 2787
29 4892-5385-7582v7/200299-0013
Delinquency History
Special taxes within the District will be levied for the first time in Fiscal Year 2022-23 in the amount of $332,335.38. The first installment of the Fiscal Year 2022-23 Special Tax levy will become delinquent after December 10, 2022 and the second installment will become delinquent on April 10, 2023.
PROPERTY OWNERSHIP AND THE DEVELOPMENT
The information about the property in the District contained in this Official Statement has been provided by representatives of Pulte Homes and has not been independently confirmed or verified by the Underwriter, the City or the District. The Underwriter, the City, and the District make no representation as to the accuracy or adequacy of the information contained in this caption. There may be material adverse changes in this information after the date of this Official Statement. Neither the Bonds nor the Net Taxes securing the Bonds and any Parity Bonds are personal obligations of Pulte Homes or any affiliate thereof or any other property owner and, in the event that any property owner defaults in the payment of its Special Taxes, the District may proceed with judicial foreclosure but has no direct recourse to the assets of any property owner or any affiliate thereof. See the caption “SPECIAL RISK FACTORS.” Notwithstanding the belief of Pulte Homes that it will have sufficient funds to complete its planned development in the District, no assurance can be given that amounts necessary to fund the remaining planned development by Pulte Homes in the District will be available when needed. None of Pulte Homes, or any other entity or person, is under any legal obligation of any kind to expend funds for the development of the property as planned by Pulte Homes in the District. Any contributions by Pulte Homes or any other entity or person to fund the costs of its development are entirely voluntary. If and to the extent the aforementioned sources are inadequate to pay the costs to complete the planned development by Pulte Homes within the District, the remaining portions of such development may not be completed. Pulte Homes has no legal obligation to Bondholders to make any such funds available for construction or development, or the payment of ad valorem property taxes or the Special Taxes. See the caption “SPECIAL RISK FACTORS.” General
The District contains approximately 76 gross acres and approximately 41 net taxable acres, and is located in the eastern portion of the City, to the northwest of Domenigoni Parkway. The property within the District was acquired by Pulte Home Company, LLC, a Michigan limited liability company (“Pulte Homes”), in three phases, the last of which occurred on July 1, 2022. The project within the District is being marketed by Pulte Homes as “Banner Park.”
Other than a neighborhood park, the majority of major infrastructure (sewer, water, storm drains, utilities, and arterial roads) necessary to develop the property within the District has been completed. The in- tract infrastructure within the District is substantially complete with landscaping, final capping of certain streets, and dry utilities for certain lots remaining. All necessary permits have been obtained for Pulte Homes’ development within the District.
Pulte Homes is constructing a neighborhood park of approximately 5 acres. As of August 5, 2022, the grading of the park was complete, but park construction had not yet commenced. Condition of Approval No. 271 requires the park to be completed prior to the 200 th building permit (“Park Condition”). The Park Condition allows Pulte Homes to provide a performance security to ensure completion of the park, which is currently being prepared with City Staff and will allow additional building permits to be issued. Pulte Homes expects to complete the park by the end of April 2023.
Item Title: 12.2
Community Facilities District 2021-1, Banner Park, Issuance of Special Tax Bonds Item Page Number: 48
Menifee
Mayor
and
City
Council
September
21,
2022
Page
2535 of 2787
30 4892-5385-7582v7/200299-0013
Planned Development Within the District
The property within the District is planned for 256 residential units within three product lines – Crest at Banner Park (92 homes), Heritage at Banner Park (90 homes) and Merit at Banner Park (74 homes). As of August 5, 2022, Pulte Homes had completed and conveyed 103 homes within the District to individual homeowners. As of such date, Pulte Homes owned six model homes (none of which were in escrow), twelve completed homes (ten of which were in escrow), fifty-seven homes in various stages of construction (forty- eight of which were in escrow) and seventy-eight finished lots (sixteen of which were in escrow). As of September 15, 2022, Pule Homes had transferred a total of ___ homes to individual homeowners. Pulte Homes currently expects to complete and convey all homes planned within the District to individual homeowners by September 30, 2024.
COMMUNITY FACILITIES DISTRICT NO. 2021-1 (BANNER PARK)
CREST AT BANNER PARK
(As of August 5, 2022)
Owned by Pulte Homes
Plan
Total
Units
Planned
Estimated
Home
Square
Footage
Closings as of
August 5, 2022
Completed
Homes/Homes
Under
Construction(1) Finished Lots
Base Home
Prices(2)
1 23 2,846 9 6 8 $644,990
2 30 3,047 11 9 10 $663,990
3 39 3,237 15 8 16 $674,990
TOTAL 92 35 23 34
(1) Includes 2 model homes, 1 completed home, and 20 homes under construction. (2) Base home prices shown exclude lot premiums, options and extras and any incentives or price reductions. Base sales prices are subject to change.
Source: Pulte Homes.
COMMUNITY FACILITIES DISTRICT NO. 2021-1 (BANNER PARK)
HERITAGE AT BANNER PARK
(As of August 5, 2022)
Owned by Pulte Homes
Plan
Total
Units
Planned
Estimated
Home
Square
Footage
Closings as of
August 5, 2022
Completed
Homes/Homes
Under
Construction(1) Finished Lots
Base Home
Prices(2)
1 41 2,191 14 11 16 $575,990
2 25 2,311 8 12 5 $588,990
3 24 2,462 13 9 2 $607,990
TOTAL 90 35 32 23
(1) Includes 2 model homes, 3 completed homes, and 27 homes under construction. (2) Base home prices shown exclude lot premiums, options and extras and any incentives or price reductions. Base sales prices are subject to change.
Source: Pulte Homes.
Item Title: 12.2
Community Facilities District 2021-1, Banner Park, Issuance of Special Tax Bonds Item Page Number: 49
Menifee
Mayor
and
City
Council
September
21,
2022
Page
2536 of 2787
31 4892-5385-7582v7/200299-0013
COMMUNITY FACILITIES DISTRICT NO. 2021-1 (BANNER PARK)
MERIT AT BANNER PARK
(As of August 5, 2022)
Owned by Pulte Homes
Plan
Total
Units
Planned
Estimated
Home
Square
Footage
Closings as of
August 5, 2022
Completed
Homes/Homes
Under
Construction(1) Finished Lots
Base Home
Prices(2)
1 22 2,391 11 5 6 $592,990
2 20 2,655 6 7 7 $607,990
3 32 2,824 16 9 7 $622,990
TOTAL 74 33 21 20
(1) Includes 2 model homes, 0 completed homes, and 19 homes under construction. (2) Base home prices shown exclude lot premiums, options and extras and any incentives or price reductions. Base sales prices are subject to change.
Source: Pulte Homes.
No assurance can be given that home construction and sales will be carried out on the schedule and according to the plans outlined herein, or that the home construction and sale plans or base prices set forth above will not change after the date of this Official Statement. Additionally, homes sold may not result in closed escrows as sales contracts are subject to cancellation. In changing market conditions, builders will often revise the product lines and prices and the rate of sales can fluctuate. Pulte Homes continuously evaluates its product lines and prices in light of the then current market conditions. See “SPECIAL RISK FACTORS” herein for a discussion of risk factors.
Pulte Homes
General. As previously defined in this Official Statement, “Pulte Homes” refers to Pulte Home Company, LLC, a Michigan limited liability company. Pulte Homes is an indirect wholly-owned subsidiary of PulteGroup, Inc., a Michigan corporation (the “Parent Entity”). The Parent Entity is a publicly-held holding company based in Atlanta, Georgia, whose subsidiaries engage primarily in the homebuilding business. The Parent Entity also has mortgage banking operations, conducted principally through Pulte Mortgage LLC and title operations. The Parent Entity is a Michigan corporation organized in 1956 whose common stock trades on the NYSE under the symbol “PHM.” Pulte Homes’ Southern California division based in Mission Viejo, California, is responsible for the development of Pulte Homes’ project in the District Through its brands, which include Centex, Pulte Homes, Del Webb, DiVosta Homes, John Weiland Homes and Neighborhoods and American West, the Parent Entity and its subsidiaries offer a wide variety of home designs, including single-family detached, townhouses, condominiums, and duplexes at different prices and with varying levels of options and amenities to the company’s major customer groups: first-time, move- up, and active adult. Over its history, the Parent Entity and its subsidiaries have delivered nearly 750,000 homes.
The Parent Entity is subject to the informational requirements of the Securities Exchange Act of 1934, as amended, and, in accordance therewith, files reports, proxy statements, and other information, including financial statements, with the Securities and Exchange Commission (the “SEC”). Such filings, particularly the Annual Report on Form 10-K and its most recent Quarterly Report on Form 10-Q, set forth, among other things, certain data relative to the consolidated results of operations and financial position of the Parent Entity and its consolidated subsidiaries, including Pulte Homes, as of such dates.
Item Title: 12.2
Community Facilities District 2021-1, Banner Park, Issuance of Special Tax Bonds Item Page Number: 50
Menifee
Mayor
and
City
Council
September
21,
2022
Page
2537 of 2787
32 4892-5385-7582v7/200299-0013
The SEC maintains a website that contains reports, proxy and other information statements and other information regarding registrants that file electronically with the SEC, including the Parent Entity. The address of such website is www.sec.gov. All documents filed by the Parent Entity pursuant to the requirements of the Exchange Act after the date of this Official Statement will be available for inspection in such manner as the SEC prescribes.
Copies of the Parent Entity’s Annual Report and related financial statements, prepared in accordance with generally accepted accounting standards, are available from the Parent Entity’s website at www.pultegroupinc.com.
The foregoing website addresses and references to filings with the SEC are given for reference and convenience only, and the information on such websites and on file with the SEC does not form a part of this Official Statement and is not incorporated by reference herein. No representation is made in this Official Statement as to the accuracy or adequacy of the information contained on such websites. The Parent Entity and Pulte Homes are not obligated to advance funds for construction or development or to pay ad valorem property taxes or the Special Taxes and investors should not rely on the information and financial statements contained on such websites in evaluating whether to buy, hold or sell the Bonds.
Financing Plan. To date, Pulte Homes has financed its land acquisition and various site development costs related to its property in the District through internally generated funds. As of August 5, 2022, Pulte Homes has expended approximately $84.2 million on land acquisition and development and homebuilding costs in the District. Pulte Homes expects to incur approximately $12.1 million on remaining land development costs and approximately $19.1 million on remaining homebuilding, marketing, and sales costs for its project in the District. Pulte Homes expects to use home sales revenues and internal funding to complete its development within the District, and believes that it will have sufficient funds available to complete its planned development as described in this Official Statement.
Although Pulte Homes expects to have sufficient funds available to complete its development in the District as described in this Official Statement, there can be no assurance that amounts necessary to finance the development costs will be available from Pulte Homes, the Parent Entity or any other source when needed.
Neither the Parent Entity nor any of its subsidiaries or related entities are under any legal obligation of any kind to expend funds for the development of and construction of homes on its property in the District. Any contributions by Pulte Homes or the Parent Entity to fund the costs of such development are entirely voluntary.
If and to the extent that internal funding, including but not limited to home sales revenues, are inadequate to pay the costs to complete the planned development by Pulte Homes within the District and other financing is not put into place, there could be a shortfall in the funds required to complete the planned development by Pulte Homes in the District.
Except as described in this Official Statement and except for those consents, permits, authorizations, certifications and approvals of governmental entities required in the ordinary course of development, Pulte Homes has no actual knowledge of any impediment to construction or obtaining land use entitlements which could be reasonably expected to have a material adverse effect on its ability to complete the planned development of its property within the District as described in the Official Statement. Although the information in this Official Statement reflects the current development expectations of Pulte Homes, no assurance can be given that home construction and sales will be carried out on the schedule and according to the plans described herein, or that the home construction and sale plans or base prices set forth herein will not change after the date of this Official Statement. Pulte Homes reserves the right to change its development at any time without notice. Additionally, homes under contract to be sold may not result in closed escrows as sales contracts are subject to cancellation. See “SPECIAL RISK FACTORS – Concentration of Property Ownership.”
Item Title: 12.2
Community Facilities District 2021-1, Banner Park, Issuance of Special Tax Bonds Item Page Number: 51
Menifee
Mayor
and
City
Council
September
21,
2022
Page
2538 of 2787
33 4892-5385-7582v7/200299-0013
Impacts of COVID-19 Pandemic
The development of Pulte Homes’ planned development within the District is subject to disruption due to the COVID-19 pandemic and related public health and governmental authorities’ orders and actions.
With housing construction considered an essential function in the City, Pulte Homes’ has largely continued, with certain modifications, its home construction and sales activities in the District to date. That is, Pulte Homes has been able to sell, complete, obtain inspections for and close homes during such period, as applicable, and intend to continue its operations to the extent permitted. However, as of August 5, 2022, Pulte Homes has experienced increases in certain construction costs, supply chain delays, work stoppages, reduced attendance of workers/labor shortages, delays in obtaining necessary inspections and approvals for homes, and increased cycle time for home deliveries, which may be attributed, directly or indirectly, to the COVID-19 pandemic. See “SPECIAL RISK FACTORS—COVID-19 (Coronavirus) Pandemic” herein.
Pulte Homes cannot predict the ultimate effects of the COVID-19 outbreak and related public health and governmental authorities’ orders and actions, on its ability to sell and close units within the District. Such effects, if and as they arise, could have a material adverse effect on the ability to develop the District as planned, and no assurance can be provided that Pulte Homes will be able to (a) complete in whole or in any part, or within any particular time, its planned development within the District; (b) avoid material increases in development costs or delays resulting from work stoppages, reduced attendance of workers, shortages or delays in the delivery of building materials, and/or delays in obtaining necessary inspections and approvals; or (c) close any additional homes or not experience purchase contract cancellations, due to in each case public health or governmental restrictions, further spread of COVID-19, an economic downturn driven by the pandemic, or otherwise.
SPECIAL RISK FACTORS
The Bonds have not been rated by any rating agency, and the purchase of the Bonds involves significant risks that are not appropriate for certain investors. The following is a discussion of certain risk factors which should be considered, in addition to other matters set forth herein, in evaluating the investment quality of the Bonds. This discussion does not purport to be comprehensive or definitive and does not purport to be a complete statement of all factors which may be considered as risks in evaluating the credit quality of the Bonds. The occurrence of one or more of the events discussed herein could adversely affect the ability or willingness of property owners in the District to pay their Special Taxes when due. Such failures to pay Special Taxes could result in the inability of the District to make full and punctual payments of debt service on the Bonds. In addition, the occurrence of one or more of the events discussed herein could adversely affect the value of the property in the District. See “— Property Values” below.
Risks of Real Estate Secured Investments Generally
The Bond Owners will be subject to the risks generally incident to an investment secured by real estate, including, without limitation: (i) adverse changes in local market conditions, such as changes in the market value of real property in the vicinity of the District, the supply of or demand for competitive properties in such area, and the market value of residential property or buildings and/or sites in the event of sale or foreclosure; (ii) changes in real estate tax rates and other operating expenses, governmental rules (including, without limitation, zoning laws and laws relating to endangered species and hazardous materials) and fiscal policies; (iii) natural disasters (including, without limitation, earthquakes, wildfires and floods), which may result in uninsured losses; (iv) adverse changes in local market conditions; and (v) increased delinquencies due to rising mortgage costs and other factors.
No assurance can be given that the property owners within the District will pay Special Taxes in the future or that they will be able to pay such Special Taxes on a timely basis. See the caption “— Enforcement Delays — Bankruptcy” for a discussion of certain limitations on the District’s ability to pursue judicial proceedings with respect to delinquent parcels.
Item Title: 12.2
Community Facilities District 2021-1, Banner Park, Issuance of Special Tax Bonds Item Page Number: 52
Menifee
Mayor
and
City
Council
September
21,
2022
Page
2539 of 2787
34 4892-5385-7582v7/200299-0013
Insufficiency of Special Tax Revenues
As discussed below, the Special Taxes may not produce revenues sufficient to pay the debt service on the Bonds due to nonpayment of the amounts levied.
In order to pay debt service on the Bonds, it is generally necessary that the Special Taxes be paid in a timely manner. Should the Special Taxes not be paid on time, the District has established a Reserve Account under the Indenture to be maintained in an amount equal to the Reserve Requirement to pay debt service on the Bonds to the extent other funds are not available. See “SOURCES OF PAYMENT FOR THE BONDS — Reserve Account of the Special Tax Fund.” The District will covenant in the Indenture to maintain in the Reserve Account an amount equal to the Reserve Requirement, subject, however, to the availability of Net Taxes in amounts sufficient to do so and to the limitation that the District may not levy the Special Tax in any Fiscal Year at a rate in excess of the maximum amounts permitted under the Rate and Method. See Appendix A and Appendix E hereto. As a result, if a significant number of Special Tax delinquencies occurs within the District, the District could be unable to replenish the Reserve Account to the Reserve Requirement due to the limitations on the amount of the Special Tax that may be levied. If such defaults were to continue in successive years, the Reserve Account could be depleted and a default on the Bonds could occur.
The Act provides that, if any property within the District not otherwise exempt from the Special Tax is acquired by a public entity through a negotiated transaction, or by gift or devise, the Special Tax will continue to be levied on and enforceable against the public entity that acquired the property. In addition, the Act provides that, if property subject to the Special Tax is acquired by a public entity through eminent domain proceedings, the obligation to pay the Special Tax with respect to that property is to be treated as if it were a special assessment and be paid from the eminent domain award. The constitutionality and operation of these provisions of the Act have not been tested in the courts, but it is doubtful that they would be upheld as to, for example, property owned by the federal government. If for any reason property within the District becomes exempt from taxation by reason of ownership by a non-taxable entity such as the federal government or another public agency, subject to the limitation of the Maximum Special Tax, the Special Tax will be reallocated to the remaining taxable parcels within the District. This would result in the owners of such property paying a greater amount of the Special Tax and could have an adverse impact upon their willingness and/or ability to pay the Special Tax. Moreover, if a substantial portion of additional land within the District became exempt from the Special Tax because of public ownership, or otherwise, the Maximum Special Tax which could be levied upon the remaining acreage might not be sufficient to pay principal of and interest on the Bonds when due and a default will occur with respect to the payment of such principal and interest.
The District will covenant in the Indenture that, under certain circumstances, it will institute foreclosure proceedings to sell any property with delinquent Special Taxes in order to obtain funds to pay debt service on the Bonds. If foreclosure proceedings were ever instituted, any mortgage or deed of trust holder could, but would not be required to, advance the amount of the delinquent Special Tax to protect its security interest. See “SOURCES OF PAYMENT FOR THE BONDS — Special Taxes — Proceeds of Foreclosure Sales” for provisions which apply in the event of such foreclosure and which the District is required to follow in the event of delinquencies in the payment of the Special Tax.
In the event that sales or foreclosures of property are necessary, there could be a delay in payments to Owners of the Bonds (if the Reserve Account has been depleted) pending such sales or the prosecution of such foreclosure proceedings and receipt by the City on behalf of the District of the proceeds of sale. The District may adjust the future Special Tax levied on taxable parcels in the District, subject to limitations described above under the caption “THE DISTRICT — Rate and Method of Apportionment,” to provide an amount required to pay interest on and principal of the Bonds, and the amount, if any, necessary to replenish the Reserve Account to an amount equal to the Reserve Requirement, and to pay all current expenses. There is, however, no assurance that the total amount of the Special Tax that could be levied and collected against taxable parcels in the District will be at all times sufficient to pay the amounts required to be paid by the Item Title: 12.2
Community Facilities District 2021-1, Banner Park, Issuance of Special Tax Bonds Item Page Number: 53
Menifee
Mayor
and
City
Council
September
21,
2022
Page
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Indenture, even if the Special Tax is levied at the Maximum Special Tax rates. See “— Enforcement Delays — Bankruptcy.”
No assurance can be given that the real property subject to sale or foreclosure will be sold, or if sold, that the proceeds of sale will be sufficient to pay any delinquent installments of the Special Tax. The Act does not require the City to purchase or otherwise acquire any lot or parcel of property to be sold at foreclosure if there is no other purchaser at such sale. The Act and the Indenture do specify that the Special Tax will have the same lien priority as for ad valorem property taxes in the case of delinquency. Section 53356.6 of the Act requires that property sold pursuant to foreclosure under the Act be sold for not less than the amount of judgment in the foreclosure action, plus post judgment interest and authorized costs, unless the consent of the owners of 75% of the Outstanding Bonds and any Parity Bonds is obtained.
Prior to July 1, 1983, the right of redemption from foreclosure sales was limited to a period of one year from the date of sale. Under legislation effective July 1, 1983, the statutory right of redemption from such foreclosure sales has been repealed. However, a period of 20 days must elapse after the date on which the notice of levy of the interest in real property was served on the judgment debtor before the sale of such lot or parcel can be made. Furthermore, if the purchaser at the sale is the judgment creditor (e.g., the District), an action may be commenced by the delinquent property owner within 90 days after the date of sale to set aside such sale. The constitutionality of the aforementioned legislation, which repeals the one year redemption period, has not been tested and there can be no assurance that, if tested, such legislation will be upheld. (Section 701.680 of the Code of Civil Procedure of the State.) Increasing Mortgage Interest Rates
Between approximately November 2021 and August 2022, mortgage interest rates for 30-year mortgage loans have increased from approximately 3.1% to 5.5%. Increases in mortgage interest rates could have a negative impact on the estimated absorption rates of the planned for-sale residential units in the District described herein. With respect to entry-level households, increased mortgage interest rates may adversely impact the affordability of homes and may increase mortgage payment levels for owning a lower-priced home relative to renting a residence, thereby making purchasing less attractive. With respect to move-up households, higher mortgage interest rates may impact the desire of current homeowners to move from their present home due to the fact that their present home likely has a relatively low mortgage interest rate. In addition, in such instances, a new home would likely have a higher interest rate on a new mortgage loan as well as a higher purchase price and property taxes. Such considerations may decrease the desire for move-up households to purchase a new home. The foregoing factors could reduce demand for and/or the ability to achieve the sales prices of the planned for-sale homes within the District as described herein.
COVID-19 (Coronavirus) Pandemic
The spread of the novel strains of coronavirus that cause a disease commonly referred to as COVID-19 (“COVID-19”) has had significant negative impacts throughout the world, including in the City.
Since mid-March 2020, based on guidance and directives from the State and public health agencies, the County and other public agencies within the County have undergone varying degrees of closure and limited reopening of public buildings and businesses.
The COVID-19 pandemic is ongoing, and the ultimate duration and severity of the outbreak, and the additional actions that may be taken by governmental authorities to contain the outbreak or to treat its impacts are uncertain. While development activity and home sales within the District has continued without material delays since the onset of the COVID-19 outbreak, the impact of the COVID-19 outbreak could adversely impact development within the District in the future, including, but not limited to, one or more of the following ways: (i) potential supply chain slowdowns or shutdowns resulting from the unavailability of workers in locations producing construction materials; (ii) slowdowns or shutdowns by local governmental agencies in providing governmental permits, inspections, title and document recordation, and other services and activities Item Title: 12.2
Community Facilities District 2021-1, Banner Park, Issuance of Special Tax Bonds Item Page Number: 54
Menifee
Mayor
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City
Council
September
21,
2022
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associated with real estate development; (iii) delays in construction where one or more members of the workforce becomes infected with COVID-19; (iv) extreme fluctuations in financial markets and contraction in available liquidity; (v) extensive job losses and declines in business activity across important sectors of the economy; (vi) declines in business and consumer confidence that negatively impact economic conditions; (vii) the failure of government measures to counteract the economic impact of the pandemic; (viii) delays in sales or fewer sales due to lower traffic at model home complexes and real estate offices; and (ix) delays in sales, or cancellations, due to mortgage lending issues. Any adverse impact of COVID-19 on the District, and the operations, finances and ability of Pulte Homes to complete its development within the District as planned, homebuyers’ willingness and ability to pay Special Taxes when due, and the real estate market in general cannot be predicted.
Concentration of Ownership
Based on development status as of August 15, 2022 and ownership status as of August 5, 2022 (and assuming none of the homes in escrow close to individual homeowners and no future development), individual homeowners and Pulte Homes are expected to be responsible for approximately 51.54% and 48.46%, respectively, of the projected Fiscal Year 2023-24 Special Tax levy.
The timely payment of principal of and interest on the Bonds depends upon the willingness and ability of the current and future property owners in the District to pay the Special Taxes prior to delinquency. General and local economic conditions and governmental requirements or restrictions may affect the willingness of the current property owners, or any successor property owners, to pay the Special Taxes, and there is no assurance that the current property owners, or any successor property owners, will pay such Special Taxes even if financially able to do so. Due to the concentration of ownership of the property within the District, a failure by Pulte Homes or any successor property owner thereto to pay the Special Taxes may result in a default in the payment of debt service on the Bonds. See “PROPERTY OWNERSHIP AND THE DEVELOPMENT.” Property Values
The value of the property within the District is a critical factor in determining the investment quality of the Bonds. If a property owner is delinquent in the payment of Special Taxes, the District’s only remedy is to commence foreclosure proceedings against the delinquent parcel in an attempt to obtain funds to pay the Special Taxes. Reductions in property values due to a downturn in the economy, physical events such as earthquakes, fires or floods, stricter land use regulations, delays in development or other events will adversely impact the security underlying the Special Taxes. See “THE DISTRICT — Appraisal Report” and Appendix D — “APPRAISAL REPORT.”
The Appraiser has estimated, on the basis of certain assumptions and limiting conditions contained in the Appraisal Report, that as of the Date of Value, the market value of the land and improvements within the District was approximately $91,314,737. See “THE DISTRICT — Appraisal Report” The Appraisal Report indicates the Appraiser’s opinion as to the market value of the properties referred to therein as of the date and under the conditions specified therein. The Appraiser’s opinion reflects conditions prevailing in the applicable market as of the Date of Value. The Appraiser’s opinion does not predict the future value of the subject property, and there can be no assurance that market conditions will not change adversely in the future.
Prospective purchasers of the Bonds should not assume that the taxable land within the District could be sold for the appraised amount or for the assessed values at a foreclosure sale for delinquent Special Taxes.
In arriving at the estimate of market value of the property in the District, the Appraiser assumes that any sale will be unaffected by undue stimulus and will occur following a reasonable marketing period, which is not always present in a foreclosure sale. See Appendix D for a description of other assumptions made by the Appraiser and for the definitions and limiting conditions used by the Appraiser. Any event which causes one of the Appraiser’s assumptions to be untrue could result in a reduction of the value of the taxable land and improvements within the District from the market value estimated by the Appraiser.
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No assurance can be given that any bid will be received for a parcel with delinquent Special Taxes offered for sale at foreclosure or, if a bid is received, that such bid will be sufficient to pay all delinquent Special Taxes. See “SOURCES OF PAYMENT FOR THE BONDS — Special Taxes — Proceeds of Foreclosure Sales.”
Natural Disasters
The District, like all California communities, may be subject to unpredictable seismic activity, fires, flood, or other natural disasters. Southern California is a seismically active area. Seismic activity represents a potential risk for damage to buildings, roads, bridges and property within the District. In addition, land susceptible to seismic activity may be subject to liquefaction during the occurrence of such event. The property within the District is not located in an Alquist-Priolo Earthquake Study Zone and is not located within one-half mile of an active earthquake fault. Additionally, the District is not located in a flood plain area.
In recent years, wildfires have caused extensive damage throughout the State, including within the County. Certain of these fires have burned thousands of acres and destroyed hundreds and in some cases thousands of homes. In some instances entire neighborhoods have been destroyed. Several fires in recent years damaged or destroyed property in areas that were not previously considered to be at risk from such events.
Approximately fifty percent of the District is located in an area which the Department of Forestry and Fire Protection of the State of California has designated as a high fire hazard severity zone. There is a risk of residential property within the District being destroyed by wildfires and no assurance can be given as to the severity or frequency of wildfires within the vicinity of the District. Additionally, property located adjacent to burn areas can be subject to mudslides and flooding, which can cause significant damage and destruction to property.
In the event of a severe earthquake, fire, flood or other natural disaster, there may be significant damage to both property and infrastructure in the District. As a result, a substantial portion of the property owners may be unable or unwilling to pay the Special Taxes when due. In addition, the value of land in the District could be diminished in the aftermath of such a natural disaster, reducing the resulting proceeds of foreclosure sales in the event of delinquencies in the payment of the Special Taxes.
Hazardous Substances
While government taxes, assessments and charges are a common claim against the value of a parcel, other less common claims may also be relevant. One of the most serious in terms of the potential reduction in the value of a parcel is a claim with regard to a hazardous substance. In general, the owners and operators of a parcel may be required by law to remedy conditions relating to releases or threatened releases of hazardous substances. The federal Comprehensive Environmental Response, Compensation and Liability Act of 1980, sometimes referred to as “CERCLA” or the “Super Fund Act,” is the most well-known and widely applicable of these laws, but California laws with regard to hazardous substances are also stringent and similar in effect.
Under many of these laws, the owner (or operator) is obligated to remedy a hazardous substance condition of a parcel whether or not the owner (or operator) had anything to do with creating or handling the hazardous substance. The effect, therefore, should any of the parcels within the District be affected by a hazardous substance, is to reduce the marketability and value by the costs of remedying the condition.
The District is not aware of the presence of any federally or state classified hazardous substances in violation of any environmental laws, located on the property within the District. However, it is possible that such materials do currently exist and that the District is not aware of them.
It is possible that property in the District may be liable for hazardous substances in the future as a result of the existence, currently, of a substance presently classified as hazardous but which has not been Item Title: 12.2
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released or the release of which is not presently threatened, or the existence, currently, on the property of a substance not presently classified as hazardous but which may in the future be so classified. Additionally, such liabilities may arise not simply from the existence of a hazardous substance but from the method of handling such substance. All of these possibilities could have the effect of reducing the value of the applicable property.
Enforcement Delays – Bankruptcy
In the event of a delinquency in the payment of the Special Taxes, the District is required to commence enforcement proceedings under the circumstances described under the caption “SOURCES OF PAYMENT FOR THE BONDS — Special Taxes — Proceeds of Foreclosure Sales.” However, prosecution of such proceedings could be delayed due to crowded local court calendars or by bankruptcy, insolvency and other laws generally affecting creditors’ rights (such as the Soldiers’ and Sailors’ Relief Act of 1940) and by the laws of the State relating to judicial and non-judicial foreclosure. Although bankruptcy proceedings would not cause the liens of the Special Taxes to become extinguished, bankruptcy of a person or entity with an interest in the applicable property could result in a delay in the enforcement proceedings because federal bankruptcy laws provide for an automatic stay of foreclosure and tax sale proceedings. Any such delay could increase the likelihood of delay or default in payment of the principal of and interest on the applicable Bonds.
The various legal opinions to be delivered in connection with the issuance of the Bonds, including Bond Counsel’s approving legal opinion, are qualified as to the enforceability of the Bonds and the Indenture by reference to bankruptcy, reorganization, moratorium, insolvency and other laws affecting the rights of creditors generally or against public entities such as the District.
Special Tax Delinquencies
Under provisions of the Act, the Special Taxes, from which funds necessary for the payment of principal of, and interest on, the Bonds are derived, will be billed to the properties within the District on the regular ad valorem property tax bills sent to owners of such properties by the County Tax Collector. The Act currently provides that such Special Tax installments are due and payable, and bear the same penalties and interest for non-payment, as do ad valorem property tax installments.
See APPENDIX E — “SUMMARY OF THE INDENTURE — COVENANTS AND WARRANTY — Covenants” for a discussion of the provisions which apply, and procedures which the District is obligated to follow under the Indenture, in the event of delinquencies in the payment of Special Taxes. See “— FDIC/Federal Government Interests in Parcels” for a discussion of the policy of the Federal Deposit Insurance Corporation regarding the payment of special taxes and assessment and limitations on the District’s ability to foreclose on the lien of the Special Taxes in certain circumstances.
FDIC/Federal Government Interests in Parcels
The ability of the District to collect interest and penalties specified by the Act and to foreclose the lien of delinquent Special Taxes may be limited in certain respects with regard to parcels in which the Federal Deposit Insurance Corporation (the “FDIC”), or other federal government entities such as Fannie Mae or Freddie Mac, has or obtains an interest.
In the case of the FDIC, in the event that any financial institution making a loan which is secured by parcels is taken over by the FDIC and the applicable Special Tax is not paid, the remedies available to the District may be constrained. The FDIC’s policy statement regarding the payment of state and local real property taxes (the “Policy Statement”) provides that taxes other than ad valorem taxes which are secured by a valid lien in effect before the FDIC acquired an interest in a property will be paid unless the FDIC determines that abandonment of its interests is appropriate. The Policy Statement provides that the FDIC generally will not pay installments of non-ad valorem taxes which are levied after the time the FDIC acquires its fee interest, nor will the FDIC recognize the validity of any lien to secure payment except in certain cases where the Item Title: 12.2
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Resolution Trust Corporation had an interest in property on or prior to December 31, 1995. Moreover, the Policy Statement provides that, with respect to parcels on which the FDIC holds a mortgage lien, the FDIC will not permit its lien to be foreclosed out by a taxing authority without its specific consent, nor will the FDIC pay or recognize liens for any penalties, fines or similar claims imposed for the nonpayment of taxes.
The FDIC has taken a position similar to that expressed in the Policy Statement in legal proceedings brought against Orange County in United States Bankruptcy Court and in Federal District Court. The Bankruptcy Court issued a ruling in favor of the FDIC on certain of such claims. Orange County appealed that ruling, and the FDIC cross-appealed. On August 28, 2001, the Ninth Circuit Court of Appeals issued a ruling favorable to the FDIC except with respect to the payment of pre-receivership liens based upon delinquent property tax.
The District is unable to predict what effect the application of the Policy Statement would have in the event of a delinquency with respect to parcels in which the FDIC has or obtains an interest, although prohibiting the lien of the FDIC to be foreclosed out at a judicial foreclosure sale would prevent or delay the foreclosure sale.
In the case of Fannie Mae and Freddie Mac, in the event a parcel of taxable property is owned by a federal government entity or federal government sponsored entity, such as Fannie Mae or Freddie Mac, or a private deed of trust secured by a parcel of taxable property is owned by a federal government entity or federal government sponsored entity, such as Fannie Mae or Freddie Mac, the ability to foreclose on the parcel or to collect delinquent Special Taxes may be limited. Federal courts have held that, based on the supremacy clause of the United States Constitution “this Constitution, and the Laws of the United States which shall be made in Pursuance thereof; and all Treaties made, or which shall be made, under the Authority of the United States, shall be the supreme Law of the Land; and the Judges in every State shall be bound thereby, anything in the Constitution or Laws of any State to the contrary notwithstanding.” In the absence of Congressional intent to the contrary, a state or local agency cannot foreclose to collect delinquent taxes or assessments if foreclosure would impair the federal government interest. This means that, unless Congress has otherwise provided, if a federal government entity owns a parcel of taxable property but does not pay taxes and assessments levied on the parcel (including Special Taxes), the applicable state and local governments cannot foreclose on the parcel to collect the delinquent taxes and assessments.
Moreover, unless Congress has otherwise provided, if the federal government has a mortgage interest in the parcel and the District wishes to foreclose on the parcel as a result of delinquent Special Taxes, the property cannot be sold at a foreclosure sale unless it can be sold for an amount sufficient to pay delinquent taxes and assessments on a parity with the Special Taxes and preserve the federal government’s mortgage interest. For a discussion of risks associated with taxable parcels within the District becoming owned by the federal government, federal government entities or federal government sponsored entities, see “—Insufficiency of Special Tax Revenues.”
The District’s remedies may also be limited in the case of delinquent Special Taxes with respect to parcels in which other federal agencies (such as the Internal Revenue Service and the Drug Enforcement Administration) have or obtain an interest.
Direct and Overlapping Indebtedness
The ability of an owner of property within the District to pay the applicable Special Taxes could be affected by the existence of other taxes and assessments imposed upon taxable parcels. See “THE DISTRICT — Direct and Overlapping Debt” herein. The City and other public agencies whose boundaries overlap those of the District could impose additional taxes or assessment liens on the property within the District in order to finance public improvements or services to be located or provided inside of or outside of such area. The lien created on the property within the District through the levy of such additional taxes may be on a parity with the lien of the Special Taxes applicable to the property within the District.
Item Title: 12.2
Community Facilities District 2021-1, Banner Park, Issuance of Special Tax Bonds Item Page Number: 58
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The imposition of additional liens on a parity with the Special Taxes may reduce the ability or willingness of property owners to pay the Special Taxes and increase the possibility that foreclosure proceeds will not be adequate to pay delinquent Special Taxes. The District expects to issue Parity Bonds to finance additional Project Costs in Fiscal Year 2023-24.
Payment of Special Taxes is not a Personal Obligation of the Property Owners An owner of a taxable parcel is not personally obligated to pay Special Taxes. Rather, Special Taxes are an obligation which is secured only by a lien against the taxable parcel. If the value of a taxable parcel is not sufficient, taking into account other liens imposed by public agencies, to secure fully Special Taxes, the District has no recourse against the property owner.
No Acceleration Provision
The Bonds do not contain a provision allowing for the acceleration of the Bonds in the event of a payment default or other default under the terms of the Bonds or the Indenture.
Limited Obligations
The Bonds and interest thereon are not payable from the general funds of the City. Except with respect to the Net Taxes, neither the credit nor the taxing power of the District or the City is pledged for the payment of the Bonds or the interest thereon, and, except as provided in the Indenture, no Owner of the Bonds may compel the exercise of any taxing power by the District or the City or force the forfeiture of any City or District property. The principal of, premium, if any, and interest on the Bonds are not a debt of the City or a legal or equitable pledge, charge, lien or encumbrance upon any of the City’s or the District’s property or upon any of the City’s or the District’s income, receipts or revenues, except the Net Taxes and other amounts pledged under the Indenture.
The District’s legal obligations with respect to any delinquent Special Taxes are limited to:
(i) payments from the Reserve Account to the extent of funds on deposit therein; and (ii) the institution of judicial foreclosure proceedings under certain circumstances with respect to any parcels for which Special Taxes are delinquent. See the caption “SOURCES OF PAYMENT FOR THE BONDS — Special Taxes — Proceeds of Foreclosure Sales.” The Bonds cannot be accelerated in the event of any default.
The obligation to pay Special Taxes does not constitute a personal obligation of the current or subsequent owners of the respective parcels which are subject to such liens. See the caption “— Payment of the Special Tax is Not a Personal Obligation of the Property Owners.” Enforcement of Special Tax payment obligations by the District is limited to judicial foreclosure in the Superior Court of California, County of Riverside. There is no assurance that any current or subsequent owner of a parcel subject to a Special Tax lien will be able to pay the amounts due or that such owner will choose to pay such amounts even though financially able to do so.
Failure by owners of the parcels to pay Special Tax installments when due, delay in foreclosure proceedings, or the inability of the District to sell parcels that have been subject to foreclosure proceedings for amounts sufficient to cover the delinquent installments of Special Taxes levied against such parcels may result in the inability of the District to make full or timely payments of debt service on the Bonds, which may in turn result in the depletion of the Reserve Account. See the caption “— Enforcement Delays — Bankruptcy.” Ballot Initiatives
Articles XIII A, XIII B, XIII C, and XIII D of the California Constitution were adopted pursuant to measures qualified for the ballot pursuant to the State’s constitutional initiative process. From time to time, other initiative measures could be adopted by California voters. The adoption of any such initiative might Item Title: 12.2
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place limitations on the ability of the State, the City, or other local agencies to increase revenues or to increase appropriations.
Proposition 218
An initiative measure entitled “The Right to Vote on Taxes Act” (“Proposition 218”) was approved by the voters at the November 5, 1996 statewide general election. Among other things, Proposition 218 added a new Article XIII C to the California Constitution which states that “. . . the initiative power shall not be prohibited or otherwise limited in matters of reducing or repealing any local tax, assessment, fee or charge.” The Act provides for a procedure which includes notice, hearing, protest and voting requirements to alter the rate and method of apportionment of an existing special tax. However, the Act prohibits a legislative body from adopting any resolution to reduce the rate of any special tax or terminate the levy of any special tax pledged to repay any debt incurred pursuant to the Act unless such legislative body determines that the reduction or termination of the special tax would not interfere with the timely retirement of that debt. While the application of Proposition 218 in this context has not yet been interpreted by the courts and the matter is not completely free from doubt, it is not likely that Proposition 218 has conferred on the voters the power to effect a repeal or reduction of the Special Tax if the result thereof would be to impair the security of the Bonds.
It may be possible, however, for voters or the City Council, acting as the legislative body of the District, to reduce the Special Taxes in a manner which does not interfere with the timely repayment of the Bonds, but which does reduce the maximum amount of Special Taxes that may be levied in any year below the existing levels. Therefore, no assurance can be given with respect to the future levy of Special Taxes in amounts greater than the amount necessary for the timely retirement of the Bonds. Nevertheless, to the maximum extent that the law permits it to do so, the District will covenant that it will not initiate proceedings under the Act to reduce the maximum Special Tax rates for the District, unless, in connection therewith, the District receives a certificate from one or more Independent Financial Consultants which, when taken together, certify that: (i) such changes do not reduce the maximum Special Taxes that may be levied in each year on property within the District to an amount which is less than the Administrative Expense Cap plus 110% of the Annual Debt Service due in each corresponding future Bond Year with respect to the Bonds and Parity Bonds Outstanding as of the date of such proposed reduction; and (ii) the District is not delinquent in the payment of the principal of or interest on the Bonds or any Parity Bonds. The District also will covenant that, in the event an initiative is adopted which purports to reduce or otherwise alter the Rate and Method, it will commence and pursue legal action in order to preserve its ability to comply with the foregoing covenant. However, no assurance can be given as to the enforceability of the foregoing covenants.
Litigation with Respect to Community Facilities Districts Shapiro. The California Court of Appeal, Fourth Appellate District, Division One, issued its opinion in City of San Diego v. Melvin Shapiro (2014) 228 Cal.App.4th 756 (the “San Diego Decision”). The case involved a Convention Center Facilities District (the “CCFD”) established by the City of San Diego (“San Diego”). The CCFD is a financing district much like a community facilities district established under the provisions of the Act. The CCFD is comprised of all of the real property in San Diego. However, the special tax to be levied within the CCFD was to be levied only on hotel properties located within the CCFD.
The election authorizing the special tax was limited to owners of hotel properties and lessees of real property owned by a governmental entity on which a hotel is located. Thus, the election was not a registered voter election. Such approach to determining who would constitute the qualified electors of the CCFD was modeled after Section 53326(c) of the Act, which generally provides that, if a special tax will not be apportioned in any tax year on residential property, the legislative body may provide that the vote shall be by the landowners of the proposed district whose property would be subject to the special tax. The Court held that the CCFD special tax election was invalid under the California Constitution because Article XIIIA, Section 4 thereof and Article XIIIC, Section 2 thereof require that the electors in such an election be the registered voters within the district.
Item Title: 12.2
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Horizon. The Sacramento County Superior Court had issued a tentative ruling in Horizon Capital Investments, LLC v. City of Sacramento et al. (Case No. 34-2017-80002661). That ruling subsequently became the court’s final order. As described below, this case involved an election to approve the levy of a special tax within a community facilities district (“CFD”) formed under the Act.
In 2017, the City of Sacramento initiated proceedings to form a CFD to finance certain costs to operate and maintain a streetcar line. As permitted by the Act, the proposed district included non-contiguous parcels of non-residential property. Because there were fewer than 12 registered voters residing within the territory of the proposed CFD, the City Council submitted the special tax proposed to be levied within the proposed CFD to the owners of land within the proposed CFD, as required by the Act. The proposed special tax received the requisite two-thirds vote in the landowner election.
Petitioners Horizon Capital Investments, LLC et al. filed a writ of mandate and complaint for reverse validation and declaratory relief. Petitioners argued, and the superior court agreed in its final ruling, that under section 4(a) of article XIII A of the California Constitution (which provides that “Cities, Counties and special districts, by a two-thirds vote of the qualified electors of such district [sic], may impose special taxes on such district…”) the phrase “qualified electors” means the registered voters of the entire City of Sacramento and not just the owners of the property within the boundaries of the proposed CFD. Citing the San Diego Decision, the tentative ruling states that the phrase “qualified electors of the district” refers to the registered voters of the entity imposing the special tax, which in this case was the City of Sacramento. Because the vote within the proposed CFD was by landowners only and not by all registered voters in the City of Sacramento, the final ruling states that the special tax is invalid.
The superior court’s final ruling is not binding upon other courts within the State and does not directly apply to the District, the Special Taxes, or the Bonds. The City of Sacramento did not appeal the superior court’s ruling.
The Special Tax Election in the District. With respect to the San Diego Decision, the facts of such case show that there were thousands of registered voters within the CCFD (viz., all of the registered voters in San Diego). The elections held in the District had less than 12 registered voters at the time of the election to authorize the Special Taxes. In the San Diego Decision, the court expressly stated that it was not addressing the validity of landowner voting to impose special taxes pursuant to the Act in situations where there are fewer than 12 registered voters. Thus, by its terms, the court’s holding in the San Diego Decision does not apply to the Special Tax election in the District. Moreover, Section 53341 of the Act provides that any “action or proceeding to attack, review, set aside, void or annul the levy of a special tax…shall be commenced within 30 days after the special tax is approved by the voters.” Similarly, Section 53359 of the Act provides that any action to determine the validity of bonds issued pursuant to the Act be brought within 30 days of the voters approving the issuance of such bonds. The petitioners in Horizon filed the writ of mandate within 30 days of the landowner election. Voters in the District approved Special Tax on June 2, 2021. Based on Sections 53341 and 53359 of the Act and analysis of existing laws, regulations, rulings and court decisions, the District believes that no successful challenge to the Special Tax being levied in accordance with the Rate and Method may now be brought. In connection with the issuance of the Bonds, Bond Counsel expects to deliver its opinion in the proposed form attached hereto as Appendix C.
Loss of Tax Exemption
As discussed under the heading “TAX MATTERS,” interest on the Bonds could cease to be excluded from gross income for purposes of federal income taxation, retroactive to the date the Bonds were issued, as a result of future acts or omissions of the District or the City. In addition, it is possible that future changes in applicable federal tax laws could cause interest on the Bonds to be included in gross income for federal income taxation or could otherwise reduce the equivalent taxable yield of such interest and thereby reduce the value of the Bonds.
Item Title: 12.2
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No Ratings – Limited Secondary Market
The District has not applied to have the Bonds rated by any nationally recognized bond rating company, and it does not expect to do so in the future.
There can be no guarantee that there will be a secondary market for the Bonds or, if a secondary market exists, that such Bonds can be sold for any particular price. Although the District has committed to provide certain financial and operating information, there can be no assurance that such information will be available to Bond owners on a timely basis. The failure to provide the required annual financial information does not give rise to monetary damages but merely an action for specific performance. Occasionally, because of general market conditions, lack of current information, the absence of a credit rating for the Bonds or because of adverse history or economic prospects connected with a particular issue, secondary marketing practices in connection with a particular issue are suspended or terminated. Additionally, prices of issues for which a market is being made will depend upon then prevailing circumstances. Such prices could be substantially different from the original purchase price.
Limitations on Remedies
Remedies available to the Owners of the Bonds may be limited by a variety of factors and may be inadequate to assure the timely payment of principal of and interest on the Bonds or to preserve the tax-exempt status of interest on the Bonds.
Bond Counsel has limited its opinion as to the enforceability of the Bonds and of the Indenture to the extent that enforceability may be limited by bankruptcy, insolvency, reorganization, fraudulent conveyance or transfer, moratorium or other similar laws affecting generally the enforcement of creditor’s rights, by equitable principles and by the exercise of judicial discretion and by limitations on remedies against public agencies in the State of California. The lack of availability of certain remedies or the limitation of remedies may entail risks of delay, limitation or modification of the rights of the Owners.
Potential Early Redemption of Bonds from Prepayments or Community Facilities District Bond Proceeds
Property owners within the District are permitted to prepay their Special Taxes at any time. Such prepayments could also be made from the proceeds of bonds issued by or on behalf of an overlapping community facilities district. Such prepayments will result in a redemption of the Bonds on the Interest Payment Date for which timely notice may be given under the Indenture following the receipt of the prepayment. The resulting redemption of Bonds that were purchased at a price greater than par could reduce the otherwise expected yield on such Bonds. See the caption “THE BONDS — Redemption — Special Mandatory Redemption from Special Tax Prepayments.”
Cybersecurity
The City, like many other public and private entities, rely on computer and other digital networks and systems to conduct their operations. The City is potentially subject to multiple cyber threats, including without limitation hacking, viruses, ransomware, malware and other attacks. No assurance can be given that the efforts of the City to manage cyber threats and attacks will be successful in all cases, or that any such attack will not materially impact the operations or finances of the City, or the administration of the Bonds. The City is also reliant on other entities and service providers in connection with the administration of the Bonds, including without limitation, the County tax collector for the levy and collection of Special Taxes and the Trustee. No assurance can be given that the City and these other entities will not be affected by cyber threats and attacks in a manner that may affect the levy and collection of Special Taxes or the payment of debt service on the Bonds.
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CONTINUING DISCLOSURE
District Continuing Disclosure
Pursuant to a Continuing Disclosure Certificate, dated as of October 1, 2022 (the “Disclosure Certificate”), to be executed and delivered by the District at the time of issuance of the Bonds, the District will covenant for the benefit of the holders and Beneficial Owners of the Bonds to provide certain financial information and operating data relating to the District by March 1 following the end of the District’s Fiscal Year (currently its Fiscal Year ends on June 30) (the “Annual Report”), commencing with the Annual Report for the Fiscal Year ending June 30, 2022, and to provide notices of the occurrence of certain enumerated events. The Annual Report and the notices of enumerated events will be filed by the District with EMMA.
The specific nature of the information to be contained in the Annual Report and the notice of enumerated events is set forth in Appendix F — “FORM OF DISTRICT CONTINUING DISCLOSURE CERTIFICATE.” These covenants have been made in order to assist the Underwriter in complying with subsection (b)(5) of Rule 15c2-12.
The District has not had any continuing disclosure undertakings outstanding during the previous five- year period. The City has retained Spicer Consulting Group, LLC to serve as Dissemination Agent for the continuing disclosure undertaking related to the Bonds, and has adopted policies and procedures with respect to its continuing disclosure practices.
Developer Continuing Disclosure
The Underwriter does not consider Pulte Homes to be an “obligated person” with respect to the Bonds for purposes of the Rule. Notwithstanding the foregoing, to provide updated information with respect to the development within the District, Pulte Homes will execute a continuing disclosure certificate (the “Developer Continuing Disclosure Certificate”) pursuant to which it will covenant to provide semiannual reports until satisfaction of certain conditions set forth in the Developer Continuing Disclosure Certificate. The semiannual reports to be provided by Pulte Homes will contain updates regarding the development within the District as outlined in Section 4 of the Developer Continuing Disclosure Certificate attached hereto as APPENDIX G. In addition to its semiannual reports, Pulte Homes will agree to provide notices of certain events set forth in the Developer Continuing Disclosure Certificate.
Pulte Homes’ obligations under the Developer Continuing Disclosure Certificate will terminate upon the earliest to occur of: (a) the legal defeasance, prior redemption or payment in full of all the Bonds; or (b) at such time as Pulte Homes has conveyed ___ residential units in the District to individual homeowners.
Pulte Homes has represented to the Community Facilities District that, based on a review of prior continuing disclosure undertakings, Pulte Homes has not failed to comply in any material respect with any previous undertaking by it to provide periodic continuing disclosure reports or notices of listed events with respect to community facilities districts or assessment districts in southern California within the past five years. However, the Northern California Division of Pulte Homes failed to file its first periodic report due December 15, 2021 with respect to the $21,920,000 City of Alameda Community Facilities District No. 13-1 (Alameda Landing Public Improvements, 2021 Special Tax Subordinate Bonds, which Pulte Homes subsequently filed on June 15, 2022.
TAX EXEMPTION
In the opinion of Stradling Yocca Carlson & Rauth, a Professional Corporation, Newport Beach, California, Bond Counsel, under existing statutes, regulations, rulings and judicial decisions, and assuming the accuracy of certain representations and compliance with certain covenants and requirements described herein, interest (and original issue discount) on the Bonds is excluded from gross income for federal income tax purposes and is not an item of tax preference for purposes of calculating the federal alternative minimum tax Item Title: 12.2
Community Facilities District 2021-1, Banner Park, Issuance of Special Tax Bonds Item Page Number: 63
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imposed on individuals. However, it should be noted that for tax years beginning after December 31, 2022, with respect to applicable corporations as defined in Section 59(k) of the Internal Revenue Code of 1986, as amended (the “Code”), generally certain corporations with more than $1,000,000,000 of average annual adjusted financial statement income, interest (and original issue discount) with respect to the Bonds might be taken into account in determining adjusted financial statement income for purposes of computing the alternative minimum tax imposed by Section 55 of the Code on such corporations. In the further opinion of Bond Counsel, interest on the Bonds is exempt from State of California personal income tax.
The excess of the stated redemption price at maturity of a Bond over the issue price of a Bond (the first price at which a substantial amount of the Bonds of a maturity is to be sold to the public) constitutes original issue discount. Original issue discount accrues under a constant yield method, and original issue discount will accrue to a Beneficial Owner before receipt of cash attributable to such excludable income. The amount of original issue discount deemed received by the Beneficial Owner will increase the Beneficial Owner’s basis in the applicable Bond.
Bond Counsel’s opinion as to the exclusion from gross income of interest (and original issue discount) on the Bonds is based upon certain representations of fact and certifications made by the District, the City and others and is subject to the condition that the District, the City and others making such representations comply with all requirements of the Code that must be satisfied subsequent to the issuance of the Bonds to assure that interest (and original issue discount) on the Bonds will not become includable in gross income for federal income tax purposes. Failure to comply with such requirements of the Code might cause the interest (and original issue discount) on the Bonds to be included in gross income for federal income tax purposes retroactive to the date of issuance of the Bonds. The District and the City will covenant to comply with all such requirements.
The amount by which a Beneficial Owner’s original basis for determining loss on sale or exchange in the applicable Bond (generally, the purchase price) exceeds the amount payable on maturity (or on an earlier call date) constitutes amortizable Bond premium, which must be amortized under Section 171 of the Code; such amortizable Bond premium reduces the Beneficial Owner’s basis in the applicable Bond (and the amount of tax-exempt interest received), and is not deductible for federal income tax purposes. The basis reduction as a result of the amortization of Bond premium may result in a Beneficial Owner realizing a taxable gain when a Bond is sold by the Beneficial Owner for an amount equal to or less (under certain circumstances) than the original cost of the Bond to the Beneficial Owner. Purchasers of the Bonds should consult their own tax advisors as to the treatment, computation and collateral consequences of amortizable Bond premium.
The Internal Revenue Service (the “IRS”) has initiated an expanded program for the auditing of tax- exempt bond issues, including both random and targeted audits. It is possible that the Bonds will be selected for audit by the IRS. It is also possible that the market value of the Bonds might be affected as a result of such an audit of the Bonds (or by an audit of other similar bonds). No assurance can be given that in the course of an audit, as a result of an audit, or otherwise, Congress or the IRS might not change the Code (or interpretation thereof) subsequent to the issuance of the Bonds to the extent that it adversely affects the exclusion from gross income of interest (and original issue discount) on the Bonds or their market value.
SUBSEQUENT TO THE ISSUANCE OF THE BONDS THERE MIGHT BE FEDERAL, STATE,
OR LOCAL STATUTORY CHANGES (OR JUDICIAL OR REGULATORY CHANGES TO OR
INTERPRETATIONS OF FEDERAL, STATE, OR LOCAL LAW) THAT AFFECT THE FEDERAL,
STATE, OR LOCAL TAX TREATMENT OF THE BONDS INCLUDING THE IMPOSITION OF
ADDITIONAL FEDERAL INCOME OR STATE TAXES BEING IMPOSED ON OWNERS OF TAX- EXEMPT STATE OR LOCAL OBLIGATIONS, SUCH AS THE BONDS. THESE CHANGES COULD ADVERSELY AFFECT THE MARKET VALUE OR LIQUIDITY OF THE BONDS. NO ASSURANCE
CAN BE GIVEN THAT SUBSEQUENT TO THE ISSUANCE OF THE BONDS STATUTORY CHANGES
WILL NOT BE INTRODUCED OR ENACTED OR JUDICIAL OR REGULATORY INTERPRETATIONS WILL NOT OCCUR HAVING THE EFFECTS DESCRIBED ABOVE. BEFORE PURCHASING ANY OF Item Title: 12.2
Community Facilities District 2021-1, Banner Park, Issuance of Special Tax Bonds Item Page Number: 64
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THE BONDS, ALL POTENTIAL PURCHASERS SHOULD CONSULT THEIR TAX ADVISORS
REGARDING POSSIBLE STATUTORY CHANGES OR JUDICIAL OR REGULATORY CHANGES OR
INTERPRETATIONS, AND THEIR COLLATERAL TAX CONSEQUENCES RELATING TO THE BONDS.
Bond Counsel’s opinions may be affected by actions taken (or not taken) or events occurring (or not occurring) after the date of issuance of the Bonds. Bond Counsel has not undertaken to determine, or to inform any person, whether any such actions or events are taken or do occur. The Indenture and the Tax Certificate relating to the Bonds permit certain actions to be taken or to be omitted if a favorable opinion of Bond Counsel is provided with respect thereto. Bond Counsel expresses no opinion as to the effect on the exclusion from gross income of interest (and original issue discount) on the Bonds for federal income tax purposes with respect to any Bond if any such action is taken or omitted based upon the advice of counsel other than Stradling Yocca Carlson & Rauth, a Professional Corporation.
Although Bond Counsel will render an opinion that interest (and original issue discount) on the Bonds is excluded from gross income for federal income tax purposes provided that the District and the City continue to comply with certain requirements of the Code, the ownership of the Bonds and the accrual or receipt of interest (and original issue discount) with respect to the Bonds may otherwise affect the tax liability of certain persons. Bond Counsel expresses no opinion regarding any such tax consequences. Accordingly, before purchasing any of the Bonds, all potential purchasers should consult their tax advisors with respect to collateral tax consequences relating to the Bonds.
Should interest on the Bonds (including any original issue discount) become includable in gross income for federal income tax purposes, the Bonds are not subject to early redemption and will remain outstanding until maturity or until redeemed in accordance with the Indenture.
A copy of the proposed form of opinion of Bond Counsel is attached hereto as Appendix C.
LEGAL OPINION
The legal opinion of Bond Counsel approving the validity of the Bonds, in substantially the form set forth as Appendix C hereto, will be made available to purchasers of the Bonds at the time of original delivery of the Bonds. Certain legal matters will be passed upon for the City and the District by Rutan & Tucker, LLP, Irvine, California, City Attorney, and for the District by Stradling Yocca Carlson & Rauth, a Professional Corporation, Disclosure Counsel, for the Underwriter by Kutak Rock LLP, Irvine, California, and for the Trustee by its counsel. Bond Counsel undertakes no responsibility to the purchasers of the Bonds for the accuracy, completeness or fairness of this Official Statement.
ABSENCE OF LITIGATION
In connection with the issuance of the Bonds, the City Attorney will deliver an opinion to the effect that, to their actual knowledge, after due inquiry and investigation, there is no action, suit, proceeding or investigation at law or in equity before or by any court, public board or body, pending or threatened, or any unfavorable decision, ruling or finding, against or affecting the District, which would adversely impact the District’s ability to complete the transactions described in, or contemplated by, the Indenture or this Official Statement, restrain or enjoin the collection of the Special Taxes, or in any way contest or affect the validity of the Bonds, the Indenture, the Special Taxes, or the transactions described herein.
NO RATING
The District has not made, and does not contemplate making, an application to any rating organization for the assignment of a rating on the Bonds.
Item Title: 12.2
Community Facilities District 2021-1, Banner Park, Issuance of Special Tax Bonds Item Page Number: 65
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UNDERWRITING
The Bonds are being purchased by Stifel, Nicolaus & Company, Incorporated (the “Underwriter”).
The Underwriter has agreed to purchase the Bonds at a price of $__________ (being the $__________ aggregate principal amount of the Bonds, less an Underwriter’s discount of $__________, [plus] [net] original issue [premium] of $__________). The Bond Purchase Agreement relating to the Bonds provides that the Underwriter will purchase all of the Bonds if any are purchased, the obligation to make such purchase being subject to certain terms and conditions set forth in the Bond Purchase Agreement, the approval of certain legal matters by counsel and certain other conditions. The Underwriter’s compensation is contingent upon the successful issuance of the Bonds.
Under certain circumstances, the Underwriter may offer and sell the Bonds to certain dealers and others at prices lower or yields higher than those stated on the page immediately following the cover page of this Official Statement. The offering prices may be changed from time to time by the Underwriter.
FINANCIAL INTERESTS
The fees being paid to the Underwriter and its counsel, Bond Counsel, Disclosure Counsel and the Trustee are contingent upon the issuance and delivery of the Bonds. From time to time, Stradling Yocca Carlson & Rauth, a Professional Corporation, represents the Underwriter on matters unrelated to the Bonds.
MUNICIPAL ADVISOR
The District has retained Urban Futures, Inc., Tustin, California, as Municipal Advisor for the sale of the Bonds. The Municipal Advisor is not obligated to undertake, and has not undertaken to make, an independent verification or to assume any responsibility for the accuracy, completeness or fairness of the information contained in this Official Statement.
Urban Futures, Inc., is an independent advisory firm and is not engaged in the business of underwriting, trading or distributing municipal or other public securities.
MISCELLANEOUS
So far as any statements made in this Official Statement involve matters of opinion, assumptions, projections, anticipated events or estimates, whether or not expressly stated, they are set forth as such and not as presentations of fact, and actual results may differ substantially from those set forth therein. Neither this Official Statement nor any statement that may have been made verbally or in writing is to be construed as a contract with the Owners of the Bonds.
The summaries of certain provisions of the Bonds, statutes and other documents or agreements referred to in this Official Statement do not purport to be complete, and reference is made to each of them for a complete statement of their provisions. Copies are available for review by making requests to the City.
The execution and delivery of this Official Statement by the City Manager of the City has been duly authorized by the City Council of the City acting in its capacity as the legislative body of the District.
COMMUNITY FACILITIES DISTRICT NO. 2021-1
(BANNER PARK) OF THE CITY OF MENIFEE
By:
Armando G. Villa
Item Title: 12.2
Community Facilities District 2021-1, Banner Park, Issuance of Special Tax Bonds Item Page Number: 66
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City Manager of the City of Menifee
Item Title: 12.2
Community Facilities District 2021-1, Banner Park, Issuance of Special Tax Bonds Item Page Number: 67
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APPENDIX A
RATE AND METHOD OF APPORTIONMENT OF SPECIAL TAX
COMMUNITY FACILITIES DISTRICT NO. 2021-1
(BANNER PARK) OF THE CITY OF MENIFEE
A Special Tax (all capitalized terms not otherwise defined herein are defined in Section A, “Definitions”, below) shall be applicable to each Assessor’s Parcel of Taxable Property located within the boundaries of the City of Menifee Community Facilities District No. 2021-1 (Banner Park) (“CFD No. 2021- 1”). The amount of Special Tax to be levied in each Fiscal Year on an Assessor’s Parcel shall be determined by the City Council of the City of Menifee, acting in its capacity as the legislative body of CFD No. 2021-1, by applying the appropriate Special Tax for Developed Property, Approved Property, Undeveloped Property, and Provisional Undeveloped Property that is not Exempt Property as set forth below. All of the real property, unless exempted by law or by the provisions hereof in Section F, shall be taxed for the purposes, to the extent and in the manner herein provided.
A. DEFINITIONS
The terms hereinafter set forth have the following meanings:
“Acre” or “Acreage” means the land area of an Assessor’s Parcel as shown on an Assessor’s Parcel Map, or if the land area is not shown on an Assessor’s Parcel Map, the land area shown on the applicable final map, parcel map, condominium plan, or other recorded parcel map or instrument. The square footage of an Assessor’s Parcel is equal to the Acreage multiplied by 43,560. “Act” means the Mello-Roos Community Facilities Act of 1982, as amended, being Chapter 2.5 (commencing with Section 53311) of Part 1 of Division 2 of Title 5 of the Government Code of the State of California. “Administrative Expenses” means the following actual or reasonably estimated costs directly related to the administration of CFD No. 2021-1: the costs of computing the Special Taxes and preparing the Special Tax collection schedules (whether by the City or designee thereof or both); the costs of collecting the Special Taxes (whether by the City or otherwise); the costs of remitting Special Taxes to the Trustee; the costs of the Trustee (including legal counsel) in the discharge of the duties required of it under the Indenture; the costs to the City, CFD No. 2021-1 or any designee thereof of complying with arbitrage rebate requirements; the costs to the City, CFD No. 2021-1 or any designee thereof of complying with continuing disclosure requirements of the City, CFD No. 2021-1 and any major property owner associated with applicable federal and state securities laws and the Act; the costs associated with preparing Special Tax disclosure statements and responding to public inquiries regarding the Special Taxes; the costs of the City, CFD No. 2021-1 or any designee thereof related to an appeal of the Special Tax; the costs associated with the release of funds from an escrow account; and the City’s annual administration fees and third party expenses. Administration Expenses shall also include amounts estimated by the CFD Administrator or advanced by the City or CFD No. 2021-1 for any other administrative purposes of CFD No. 2021-1, including attorney’s fees and other costs related to commencing and pursuing to completion any foreclosure of delinquent Special Taxes. “Approved Property” means all Assessor’s Parcels of Taxable Property: (i) that are included in a Final Map that was recorded prior to the January 1 st preceding the Fiscal Year in which the Special Tax is being levied, (ii) that have an assigned Assessor’s Parcel Number from the County shown on an Assessor’s Parcel Map for the individual lot included on the Final Map, and (iii) that have not been issued a building permit on or before May 1st preceding the Fiscal Year in which the Special Tax is being levied. “Assessor’s Parcel” means a lot or parcel of land designated on an Assessor’s Parcel Map with an assigned Assessor’s Parcel Number.
Item Title: 12.2
Community Facilities District 2021-1, Banner Park, Issuance of Special Tax Bonds Item Page Number: 68
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“Assessor’s Parcel Map” means an official map of the Assessor of the County designating parcels by Assessor’s Parcel Number.
“Assessor’s Parcel Number” means that number assigned to an Assessor’s Parcel by the County for purposes of identification.
“Assigned Special Tax” means the Special Tax of that name described in Section D below. “Backup Special Tax” means the Special Tax of that name described in Section D below. “Bonds” means any obligation to repay a sum of money, including obligations in the form of bonds, certificates of participation, long-term leases, loans from government agencies, or loans from banks, other financial institutions, private businesses, or individuals, or long-term contracts, or any refunding thereof, to which Special Tax of CFD No. 2021-1 have been pledged.
“Boundary Map” means a recorded map of the CFD which indicates the boundaries of the CFD. “Building Permit” means the first legal document issued by a local agency giving official permission for new construction. For purposes of this definition, “Building Permit” may or may not include expired or cancelled building permits, or any subsequent building permit document(s) authorizing new construction on an Assessor’s Parcel that are issued or changed by the City after the first original issuance, as determined by the CFD Administrator, provided that following such determination the Maximum Special Tax that may be levied on all Assessor’s Parcels of Taxable Property will be at least 1.1 times annual debt service on all outstanding Bonds plus the estimated annual Administrative Expenses. “Building Square Footage” or “BSF” means the square footage of assessable internal living space, exclusive of garages or other structures not used as living space, as determined by reference to the Building Permit for such Assessor’s Parcel.
“Calendar Year” means the period commencing January 1 of any year and ending the following December
31. “CFD Administrator” means an official of the City, or designee thereof, responsible for determining the Special Tax Requirement, and providing for the levy and collection of the Special Taxes. “CFD” or “CFD No. 2021-1” means Community Facilities District No. 2021-1 (Banner Park) established by the City under the Act.
“City” means the City of Menifee, State of California.
“City Council” means the City Council of the City of Menifee, acting as the legislative body of CFD No. 2021-1.
“Condominium Plan” means a condominium plan pursuant to California Civil Code, Section 1352. “County” means the County of Riverside, State of California. “Developed Property” means all Assessor’s Parcels that: (i) are included in a Final Map that was recorded prior to the January 1 st preceding the Fiscal Year in which the Special Tax is being levied, and (ii) have an Assessor’s Parcel Number from the County shown on an Assessor’s Parcel Map for the individual lot included on the Final Map, and (iii) a Building Permit for new construction was issued on or before May 1 st preceding the Fiscal Year in which the Special Tax is being levied.
Item Title: 12.2
Community Facilities District 2021-1, Banner Park, Issuance of Special Tax Bonds Item Page Number: 69
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“Exempt Property” means all Assessor’s Parcels designated as being exempt from Special Taxes as provided for in Section F.
“Final Map” means a subdivision of property by recordation of a final map, parcel map, or lot line adjustment, pursuant to the Subdivision Map Act (California Government Code Section 66410 et seq.) or recordation of a Condominium Plan that creates individual lots for which Building Permits may be issued without further subdivision.
“Fiscal Year” means the period commencing on July 1st of any year and ending the following June 30th. “Indenture” means the indenture, fiscal agent agreement, resolution or other instrument pursuant to which Bonds are issued, as modified, amended and/or supplemented from time to time, and any instrument replacing or supplementing the same.
“Land Use Category” means any of the categories listed in Table 1 of Section D. “Maximum Special Tax” means for each Assessor’s Parcel, the maximum Special Tax, determined in accordance with Section D below, that can be levied by CFD No. 2021-1 on such Assessor’s Parcel. “Multifamily Property” means all Assessor’s Parcels of Developed Property for which a Building Permit has been issued for the purpose of constructing a building or buildings comprised of attached Residential Units available for rental by the general public, not for sale to an end user, and under common management, as determined by the CFD Administrator.
“Non-Residential Property” means all Assessor’s Parcels of Developed Property for which a Building Permit(s) was issued for a non-residential use. The CFD Administrator shall make the determination if an Assessor’s Parcel is Non-Residential Property.
“Partial Prepayment Amount” means the amount required to prepay a portion of the Special Tax obligation for an Assessor’s Parcel, as described in Section G.2.
“Prepayment Amount” means the amount required to prepay the Special Tax obligation in full for an Assessor’s Parcel, as described in Section G.1.
“Proportionately” means for Taxable Property that is (i) Developed Property, that the ratio of the actual Special Tax levy to the Assigned Special Tax is the same for all Assessor’s Parcels of Developed Property, (ii) Approved Property, that the ratio of the actual Special Tax levy to the Maximum Special Tax is the same for all Assessor’s Parcels of Approved Property, and (iii) Undeveloped Property or Provisional Undeveloped Property, that the ratio of the actual Special Tax levy per Acre to the Maximum Special Tax per Acre is the same for all Assessor’s Parcels of Undeveloped Property or Provisional Undeveloped Property, as applicable. “Provisional Undeveloped Property” means all Assessor’s Parcels of Taxable Property that would otherwise be classified as Exempt Property pursuant to the provisions of Section F, but cannot be classified as Exempt Property because to do so would reduce the Acreage of all Taxable Property below the required minimum Acreage set forth in Section F.
“Residential Property” means all Assessor’s Parcels of Developed Property for which a Building Permit has been issued for purposes of constructing one or more Residential Units. “Residential Unit” or “RU” means a residential unit that is used or intended to be used as a domicile by one or more persons, as determined by the CFD Administrator. “Single Family Residential Property” means all Assessor’s Parcels of Residential Property other than Multifamily Property.
Item Title: 12.2
Community Facilities District 2021-1, Banner Park, Issuance of Special Tax Bonds Item Page Number: 70
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“Special Tax” or “Special Taxes” means any of the special taxes authorized to be levied within CFD No. 2021-1 pursuant to the Act to fund the Special Tax Requirement. “Special Tax Requirement “ means the amount required in any Fiscal Year to pay: (i) the debt service or the periodic costs on all outstanding Bonds due in the Calendar Year that commences in such Fiscal Year, (ii) Administrative Expenses, (iii) the costs associated with the release of funds from an escrow account, (iv) any amount required to replenish any reserve funds established in association with the Bonds, (v) an amount up to any anticipated shortfall due to Special Tax delinquencies and (vi) for the collection or accumulation of funds for the acquisition or construction of facilities authorized by CFD No. 2021-1 or the payment of debt services on Bonds anticipated to be issued, provided that the inclusion of such amount does not cause an increase in the levy of Special Tax on Approved Property or Undeveloped Property as set forth in Steps Two or Three of Section E., less (vii) any amounts available to pay debt service or other periodic costs on the Bonds pursuant to the Indenture.
“Taxable Property” means all Assessor’s Parcels within CFD No. 2021-1, which are not Exempt Property. “Taxable Unit” means either a Residential Unit or an Acre. “Trustee” means the trustee, fiscal agent, or paying agent under the Indenture. “Undeveloped Property” means all Assessor’s Parcels of Taxable Property which are not Developed Property, Approved Property, or Provisional Undeveloped Property.
B. SPECIAL TAX
Commencing Fiscal Year 2021-2022 and for each subsequent Fiscal Year, the City Council shall levy Special Taxes on all Taxable Property, up to the applicable Maximum Special Tax, to fund the Special Tax Requirement.
C. ASSIGNMENT TO LAND USE CATEGORY FOR SPECIAL TAX
Each Fiscal Year, beginning with Fiscal Year 2021-2022, each Assessor’s Parcel within CFD No. 2021-1 shall be classified as Taxable Property or Exempt Property. In addition, each Assessor’s Parcel of Taxable Property shall be further classified as Developed Property, Approved Property, Undeveloped Property or Provisional Undeveloped Property.
Assessor’s Parcels of Developed Property shall further be classified as Residential Property or Non-Residential Property. Each Assessor’s Parcel of Residential Property shall further be classified as a Single Family Residential Property or Multifamily Property. Each Assessor’s Parcel of Single Family Residential Property shall be further assigned to a Land Use Category based on its Building Square Footage.
In the event that there are Assessor’s Parcel(s) for which one or more Building Permits for Residential Units have been issued and the County has not yet assigned final Assessor’s Parcel Number(s) to such Assessor’s Parcel(s) (in accordance with the Final Map or Condominium Plan), the amount of the Special Tax levy on such Assessor’s Parcel for each Fiscal Year shall be determined as follows: (1) the CFD Administrator shall first determine an amount of the Maximum Special Tax for such Assessor’s Parcel, based on the classification of such Assessor’s Parcel as Undeveloped Property; (2) the amount of the Special Tax for the Residential Units on such Assessor’s Parcel for which Building Permits have been issued shall be determined based on the Developed Property Special Tax rates and such amount shall be levied as Developed Property in accordance with Step 1 of Section E below; and (3) the amount of the Special Tax on the Taxable Property in such Assessor’s Parcel not subject to the Special Tax levy in clause (2) shall be equal to: (A) the percentage of the Maximum Special Tax rate levied on Undeveloped Property pursuant to Step 3 of Section E below, multiplied by the total of the amount determined in clause (1), less (B) the amount determined in clause (2).
Item Title: 12.2
Community Facilities District 2021-1, Banner Park, Issuance of Special Tax Bonds Item Page Number: 71
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D. MAXIMUM SPECIAL TAX
1. Developed Property
The Maximum Special Tax for each Assessor’s Parcel of Developed Property classified as Single Family Residential Property in any Fiscal Year shall be the greater of (i) the Assigned Special Tax for such Assessor’s Parcel or (ii) the Backup Special Tax as described below.
The Maximum Special Tax for each Assessor’s Parcel of Developed Property classified as Multifamily Property or Non-Residential Property shall be the applicable Assigned Special Tax described in Table 1 of Section D.
a. Assigned Special Tax
Each Fiscal Year, each Assessor’s Parcel of Single Family Residential Property, Multifamily Property or Non-Residential Property shall be subject to an Assigned Special Tax. The Assigned Special Tax for Fiscal Year 2021-2022 applicable to an Assessor’s Parcel of Developed Property shall be determined pursuant to Table 1 below.
TABLE 1
ASSIGNED SPECIAL TAX FOR DEVELOPED PROPERTY
FISCAL YEAR 2021-2022
LAND USE CATEGORY
TAXABLE
UNIT
BUILDING SQUARE
FOOTAGE
ASSIGNED
SPECIAL TAX
PER
TAXABLE
UNIT
1. Single Family Residential Property RU Less than 2,100 sq. ft $2,452.00
2. Single Family Residential Property RU 2,100 sq. ft to 2,300 sq. ft $2,515.00
3. Single Family Residential Property RU 2,301 sq. ft to 2,500 sq. ft $2,539.00
4. Single Family Residential Property RU 2,501 sq. ft to 2,700 sq. ft $2,562.00
5. Single Family Residential Property RU 2,701 sq. ft to 2,900 sq. ft $2,689.00
6. Single Family Residential Property RU 2,901 sq. ft to 3,100 sq. ft $2,941.00
7. Single Family Residential Property RU Greater than 3,100 sq. ft $3,051.00
8. Multifamily Property Acre N/A $17,555.00
9. Non-Residential Property Acre N/A $17,555.00
On each July 1, commencing July 1, 2022, the Assigned Special Tax for Developed Property shall be increased by two percent (2.00%) of the amount in effect in the prior Fiscal Year. b. Multiple Land Use Categories
In some instances an Assessor’s Parcel of Developed Property may contain more than one Land Use Category. The Maximum Special Tax levied on an Assessor’s Parcel shall be the sum of the Maximum Special Tax for each Taxable Unit for all Land Use Categories located on the Assessor’s Parcel. The CFD Administrator’s allocation to each type of property shall be final. c. Backup Special Tax
The Backup Special Tax for an Assessor’s Parcel within a Final Map classified as Single Family Residential Property or Approved Property expected to be classified as Single Family Residential Property shall calculated according to the following formula.
Item Title: 12.2
Community Facilities District 2021-1, Banner Park, Issuance of Special Tax Bonds Item Page Number: 72
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B = (U x A) / L
The terms above have the following meanings:
B = Backup Special Tax per Assessor’s Parcel classified as Single Family Residential Property or Approved Property expected to be classified as Single Family Residential Property within the Final Map.
U = Maximum Special Tax per Acre of Undeveloped Property per Section D.3 below.
A = Acreage of Single Family Residential Property expected to exist after build out in such Final Map at the time of calculation, as determined by the Administrator L = Number of Assessor’s Parcels of Single Family Residential Property expected to exist after build out in such Final Map at the time of calculation, as determined by the Administrator.
In the event any portion of the Final Map is changed or modified, the Backup Special Tax for all Assessor’s Parcels within such changed or modified area shall be $17,555 per Acre.
Notwithstanding the foregoing, the Backup Special Tax for an Assessor’s Parcel of Developed Property for which a certificate of occupancy has been granted may not be revised.
In the event any superseding Final Map is recorded as a Final Map within the boundaries of the CFD, the Backup Special Tax for all Assessor’s Parcels within such Final Map shall be $17,555 per Acre. The Backup Special Tax shall not apply to Multifamily Residential Property or Non-Residential Property.
On each July 1, commencing July 1, 2022, the Backup Special Tax shall be increased by two percent (2.00%) of the amount in effect in the prior Fiscal Year.
2. Approved Property
The Maximum Special Tax for each Assessor’s Parcel of Approved Property expected to be classified as Single Family Residential Property shall be the Backup Special Tax computed pursuant to Section D.1.c above.
The Maximum Special Tax for each Assessor’s Parcel of Approved Property not expected to be classified as Single Family Residential Property shall be $17,555 per Acre.
On each July 1, commencing July 1, 2022, the Maximum Special Tax rate for Approved Property shall be increased by two percent (2.00%) of the amount in effect in the prior Fiscal Year.
3. Undeveloped Property and Provisional Undeveloped Property The Maximum Special Tax for each Assessor’s Parcel of Undeveloped Property and Provisional Undeveloped Property shall be $17,555 per Acre.
On each July 1, commencing July 1, 2022, the Maximum Special Tax rate for Undeveloped Property and Provisional Undeveloped Property shall be increased by two percent (2.00%) of the amount in effect in the prior Fiscal Year.
Item Title: 12.2
Community Facilities District 2021-1, Banner Park, Issuance of Special Tax Bonds Item Page Number: 73
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E. METHOD OF APPORTIONMENT OF THE SPECIAL TAX
Commencing Fiscal Year 2021-2022 and for each subsequent Fiscal Year, the City Council shall levy Special Taxes on all Taxable Property in accordance with the following steps:
Step One: The Special Tax shall be levied Proportionately on each Assessor’s Parcel of Developed Property at up to 100% of the applicable Assigned Special Tax in Table 1 to satisfy the Special Tax Requirement.
Step Two: If additional moneys are needed to satisfy the Special Tax Requirement after the first step has been completed, the Special Tax shall be levied Proportionately on each Assessor’s Parcel of Approved Property at up to 100% of the Maximum Special Tax applicable to each such Assessor’s Parcel as needed to satisfy the Special Tax Requirement.
Step Three: If additional moneys are needed to satisfy the Special Tax Requirement after the first two steps have been completed, the Special Tax shall be levied Proportionately on each Assessor’s Parcel of Undeveloped Property up to 100% of the Maximum Special Tax applicable to each such Assessor’s Parcel as needed to satisfy the Special Tax Requirement.
Step Four: If additional moneys are needed to satisfy the Special Tax Requirement after the first three steps have been completed, then the Special Tax levy on each Assessor’s Parcel of Developed Property for which the Maximum Special Tax is the Backup Special Tax shall be increased in equal percentages from the Assigned Special Tax up to 100% of the Backup Special Tax as needed to satisfy the Special Tax Requirement.
Step Five: If additional moneys are needed to satisfy the Special Tax Requirement after the first four steps have been completed, the Special Tax shall be levied Proportionately on each Assessor’s Parcel of Provisional Undeveloped Property up to 100% of the Maximum Special Tax applicable to each such Assessor’s Parcel as needed to satisfy the Special Tax Requirement.
Notwithstanding the above, under no circumstances will the Special Taxes levied in any Fiscal Year against any Assessor’s Parcel of Residential Property as a result of a delinquency in the payment of the Special Tax applicable to any other Assessor’s Parcel be increased by more than ten percent (10%) above the amount that would have been levied in that Fiscal Year had there never been any such delinquency or default.
F. EXEMPTIONS
The CFD Administrator shall classify as Exempt Property, in the following order of priority, (i) Assessor’s Parcels which are owned by, irrevocably offered for dedication, encumbered by or restricted in use by the State of California, Federal or other local governments, including school districts, (ii) Assessor’s Parcels which are used as places of worship and are exempt from ad valorem property taxes because they are owned by a religious organization, (iii) Assessor’s Parcels which are owned by, irrevocably offered for dedication, encumbered by or restricted in use by a homeowners’ association, (iv) Assessor’s Parcels with public or utility easements making impractical their utilization for anything other than the purposes set forth in the easement, (v) Assessor’s Parcels which are privately owned and are encumbered by or restricted solely for public uses, (vi) Assessor’s Parcels which are classified as Non-Residential Property or (vii) Assessor’s Parcels restricted to other types of public uses determined by the City Council, provided that no such classification would reduce the sum of all Taxable Property to less than 39.1 Acres.
Notwithstanding the above, the CFD Administrator shall not classify an Assessor’s Parcel as Exempt Property if such classification would reduce the sum of all Taxable Property to less than 39.1 Acres. Assessor’s Parcels which cannot be classified as Exempt Property because such classification would reduce the Acreage of all Item Title: 12.2
Community Facilities District 2021-1, Banner Park, Issuance of Special Tax Bonds Item Page Number: 74
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Taxable Property to less than 39.1 Acres will be classified as Provisional Undeveloped Property, and will be subject to Special Taxes pursuant to Step Five in Section E.
G. PREPAYMENT OF SPECIAL TAX
The following additional definitions apply to this Section G:
“CFD Facilities” means $13,500,000 expressed in 2021 dollars, which shall increase by the Construction Inflation Index on July 1, 2022, and on each July 1 thereafter, or such lower amount (i) determined by the City Council as sufficient to provide the facilities under the authorized bonding program for CFD No. 2021-1, or (ii) determined by the City Council concurrently with a covenant that it will not issue any more Bonds to be supported by Special Tax levied under this Rate and Method of Apportionment. “Construction Fund” means an account specifically identified in the Indenture or functionally equivalent to hold funds, which are available for expenditure to acquire or construct facilities eligible to be financed by CFD No. 2021-1.
“Construction Inflation Index” means the greater of (i) 2% and (ii) the annual percentage change in the Engineering News-Record Building Cost Index for the city of Los Angeles, measured as of the Calendar Year which ends in the previous Fiscal Year. In the event this index ceases to be published, the Construction Inflation Index shall be another index as determined by the City that is reasonably comparable to the Engineering News-Record Building Cost Index for the city of Los Angeles. “Future Facilities Costs” means the CFD Facilities minus (i) amounts deposited in the Construction Fund, (ii) amounts deposited in any escrow accounts funded by the Outstanding Bonds and anticipated to fund public facilities costs, and (iii) public facility costs funded by interest earnings on the Construction Fund actually earned prior to the date of prepayment.
“Outstanding Bonds” means all previously issued Bonds issued and secured by the levy of Special Tax which will remain outstanding after the first interest and/or principal payment date following the current Fiscal Year, excluding Bonds to be redeemed at a later date with the proceeds of prior prepayments of Special Tax.
1. Prepayment in Full
The Special Tax obligation may be prepaid and permanently satisfied for (i) Assessor’s Parcels of Developed Property, (ii) Assessor’s Parcels of Approved Property or Undeveloped Property for which a Building Permit has been issued, (iii) Assessor’s Parcels of Approved Property or Undeveloped Property for which a Building Permit has not been issued and (iv) Assessor’s Parcels of Provisional Undeveloped Property.
The Special Tax obligation applicable to an Assessor’s Parcel may be fully prepaid and the obligation to pay the Special Tax for such Assessor’s Parcel permanently satisfied as described herein; provided that a prepayment may be made only if there are no delinquent Special Taxes with respect to such Assessor’s Parcel at the time of prepayment. An owner of an Assessor’s Parcel intending to prepay the Special Tax obligation for such Assessor’s Parcel shall provide the CFD Administrator with written notice of intent to prepay, and within 5 business days of receipt of such notice, the CFD Administrator shall notify such owner of the amount of the non-refundable deposit determined to cover the cost to be incurred by the CFD in calculating the Prepayment Amount (as defined below) for the Assessor’s Parcel. Within 15 days of receipt of such non- refundable deposit, the CFD Administrator shall notify such owner of the Prepayment Amount for the Assessor’s Parcel. Prepayment must be made not less than 60 days prior to the redemption date for any Bonds to be redeemed with the proceeds of such prepaid Special Taxes.
The Prepayment Amount shall be calculated as follows (some capitalized terms are defined below):
Item Title: 12.2
Community Facilities District 2021-1, Banner Park, Issuance of Special Tax Bonds Item Page Number: 75
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Bond Redemption Amount
plus Redemption Premium
plus Future Facilities Amount
plus Defeasance Amount
plus Administrative Fees and Expenses
less Reserve Fund Credit
Equals: Prepayment Amount
The Prepayment Amount shall be determined as of the proposed prepayment date as follows:
1. Confirm that no Special Tax delinquencies apply to such Assessor’s Parcel.
2. For an Assessor’s Parcel of Developed Property, compute the Maximum Special Tax for the Assessor’s Parcel. For an Assessor’s Parcel of Approved Property or Undeveloped Property for which a Building Permit has been issued, compute the Maximum Special Tax for the Assessor’s Parcel as though it was already designated as Developed Property, based upon the Building Permit which has been issued for the Assessor’s Parcel. For an Assessor’s Parcel of Approved Property or Undeveloped Property for which a Building Permit has not been issued, or Provisional Undeveloped Property, compute the Maximum Special Tax for the Assessor’s Parcel.
3. Divide the Maximum Special Tax derived pursuant to paragraph 2 by the total amount of Maximum Special Taxes that could be levied assuming build out of all Assessor’s Parcels of Taxable Property based on the applicable Maximum Special Tax for Assessor’s Parcels of Developed Property not including any Assessor’s Parcels for which the Special Tax obligation has been previously prepaid.
4. Multiply the quotient derived pursuant to paragraph 3 by the principal amount of the Outstanding Bonds to determine the amount of Outstanding Bonds to be redeemed with the Prepayment Amount (the “Bond Redemption Amount”).
5. Multiply the Bond Redemption Amount by the applicable redemption premium, if any, on the Outstanding Bonds to be redeemed (the “Redemption Premium”).
6. Determine the Future Facilities Costs.
7. Multiply the quotient derived pursuant to paragraph 3 by the amount determined pursuant to paragraph 6 to determine the amount of Future Facilities Costs for the Assessor’s Parcel (the “Future Facilities Amount”).
8. Determine the amount needed to pay interest on the Bond Redemption Amount from the first bond interest and/or principal payment date following the current Fiscal Year until the earliest redemption date for the Outstanding Bonds on which Bonds can be redeemed from Special Tax prepayments.
9. Determine the Special Taxes levied on the Assessor’s Parcel in the current Fiscal Year which have not yet been paid.
10. Determine the amount the CFD Administrator reasonably expects to derive from the investment of the Bond Redemption Amount and the Redemption Premium from the date of prepayment until the redemption date for the Outstanding Bonds to be redeemed with the Prepayment Amount.
11. Add the amounts derived pursuant to paragraphs 8 and 9 and subtract the amount derived pursuant to paragraph 10 (the “Defeasance Amount”).
Item Title: 12.2
Community Facilities District 2021-1, Banner Park, Issuance of Special Tax Bonds Item Page Number: 76
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12. Verify the administrative fees and expenses of the CFD, the cost to invest the Prepayment Amount, the cost of redeeming the Outstanding Bonds, and the cost of recording notices to evidence the prepayment of the Special Tax obligation for the Assessor’s Parcel and the redemption of Outstanding Bonds (the “Administrative Fees and Expenses”).
13. The reserve fund credit (the “Reserve Fund Credit”) shall equal the lesser of: (a) the expected reduction in the reserve requirement (as defined in the Indenture), if any, associated with the redemption of Outstanding Bonds as a result of the prepayment, or (b) the amount derived by subtracting the new reserve requirement (as defined in the Indenture) in effect after the redemption of Outstanding Bonds as a result of the prepayment from the balance in the reserve fund on the prepayment date, but in no event shall such amount be less than zero.
14. The Prepayment Amount is equal to the sum of the Bond Redemption Amount, the Redemption Premium, the Future Facilities Amount, the Defeasance Amount and the Administrative Fees and Expenses, less the Reserve Fund Credit.
15. From the Prepayment Amount, the Bond Redemption Amount, the Redemption Premium, and Defeasance Amount shall be deposited into the appropriate fund as established under the Indenture and be used to redeem Outstanding Bonds or make debt service payments. The Future Facilities Amount shall be deposited into the Construction Fund. The Administrative Fees and Expenses shall be retained by the CFD.
The Prepayment Amount may be sufficient to redeem other than a $5,000 increment of Bonds. In such event, the increment above $5,000 or an integral multiple thereof will be retained in the appropriate fund established under the Indenture to be used with the next redemption from other Special Tax prepayments of Outstanding Bonds or to make debt service payments.
As a result of the payment of the current Fiscal Year’s Special Tax levy as determined pursuant to paragraph 9 above, the CFD Administrator shall remove the current Fiscal Year’s Special Tax levy for the Assessor’s Parcel from the County tax roll. With respect to any Assessor’s Parcel for which the Special Tax obligation is prepaid, the City Council shall cause a suitable notice to be recorded in compliance with the Act, to indicate the prepayment of Special Tax obligation and the release of the Special Tax lien for the Assessor’s Parcel, and the obligation to pay the Special Tax for such Assessor’s Parcel shall cease.
Notwithstanding the foregoing, no Special Tax prepayment shall be allowed unless the amount of Maximum Special Tax that may be levied on all Assessor’s Parcels of Taxable Property after the proposed prepayment will be at least 1.1 times maximum annual debt service on the Bonds that will remain outstanding after the prepayment plus the estimated annual Administrative Expenses.
Tenders of Bonds in prepayment of the Special Tax obligation may be accepted upon the terms and conditions established by the City Council pursuant to the Act. However, the use of Bond tenders shall only be allowed on a case-by-case basis as specifically approved by the City Council.
Item Title: 12.2
Community Facilities District 2021-1, Banner Park, Issuance of Special Tax Bonds Item Page Number: 77
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2. Prepayment in Part
The Special Tax obligation for an Assessor’s Parcel of Developed Property, Approved Property, Undeveloped Property, or Provisional Undeveloped Property may be partially prepaid. For purposes of determining the Partial Prepayment Amount, the provisions of Section G.1 shall be modified as provided by the following formula:
PP = ((PE – A) x F) + A
These terms have the following meaning:
PP = Partial Prepayment Amount
PE = the Prepayment Amount calculated according to Section G.1 F = the percent by which the owner of the Assessor’s Parcel(s) is partially prepaying the Special Tax obligation
A = the Administrative Fees and Expenses determined pursuant to Section G.1 The owner of an Assessor’s Parcel who desires to partially prepay the Special Tax obligation for the Assessor’s Parcel shall notify the CFD Administrator of (i) such owner’s intent to partially prepay the Special Tax obligation, (ii) the percentage of the Special Tax obligation such owner wishes to prepay, and (iii) the company or agency that will be acting as the escrow agent, if any. Within 5 days of receipt of such notice, the CFD Administrator shall notify such property owner of the amount of the non-refundable deposit determined to cover the cost to be incurred by the CFD in calculating the Partial Prepayment Amount. Within 15 business days of receipt of such non-refundable deposit, the CFD Administrator shall notify such owner of the amount of the Partial Prepayment Amount for the Assessor’s Parcel. A Partial Prepayment Amount must be made not less than 60 days prior to the redemption date for the Outstanding Bonds to be redeemed with the proceeds of the Partial Prepayment Amount.
With respect to any Assessor’s Parcel for which the Special Tax obligation is partially prepaid, the CFD Administrator shall (i) distribute the Partial Prepayment Amount as provided in Paragraph 15 of Section G.1, and (ii) indicate in the records of the CFD that there has been a partial prepayment for the Assessor’s Parcel and that a portion of the Special Tax obligation equal to the remaining percentage (1.00 - F) of the applicable Special Tax will continue to be levied on the Assessor’s Parcel pursuant to Section E.
H. TERMINATION OF SPECIAL TAX
For each Fiscal Year that any Bonds are outstanding the Special Tax shall be levied on all Assessor’s Parcels subject to the Special Tax pursuant to Section E. The Special Tax shall cease not later than the 2064-2065 Fiscal Year, however, Special Taxes will cease to be levied in an earlier Fiscal Year if the CFD Administrator has determined (i) that all the required interest and principal payments on the CFD No. 2021-1 Bonds have been paid; (ii) all authorized facilities of CFD No. 2021-1 have been acquired and all reimbursements to the developer have been paid, (iii) no delinquent Special Taxes remain uncollected and (iv) all other obligations of CFD No. 2021-1 have been satisfied.
I. MANNER OF COLLECTION
The Special Tax shall be collected in the same manner and at the same time as ordinary ad valorem property taxes, provided, however, that CFD No. 2021-1 may collect Special Taxes 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.
Item Title: 12.2
Community Facilities District 2021-1, Banner Park, Issuance of Special Tax Bonds Item Page Number: 78
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J. APPEALS OF SPECIAL TAXES
Any taxpayer may file a written appeal of the Special Taxes levied on his/her Assessor’s Parcel(s) with the CFD Administrator, provided that the appellant is current in his/her payments of Special Taxes. During pendency of an appeal, all Special Taxes previously levied must be paid on or before the payment date established when the levy was made. The appeal must specify the reasons why the appellant claims the Special Tax is in error. The CFD Administrator shall review the appeal, meet with the appellant if the CFD Administrator deems necessary, and advise the appellant of its determination. If the CFD Administrator agrees with the appellant, the CFD Administrator shall grant a credit to eliminate or reduce future Special Taxes on the appellant’s Assessor’s Parcel(s). No refunds of previously paid Special Taxes shall be made unless approved by the CFD Administrator.
The CFD Administrator shall interpret this Rate and Method of Apportionment and make determinations relative to the annual levy and administration of the Special Taxes and any taxpayer who appeals, as herein specified.
Item Title: 12.2
Community Facilities District 2021-1, Banner Park, Issuance of Special Tax Bonds Item Page Number: 79
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APPENDIX B
CERTAIN ECONOMIC AND DEMOGRAPHIC INFORMATION REGARDING
The following information relating to the City of Menifee (the “City”) and the County of Riverside, California (the “County”), California (the “State”) is supplied solely for purposes of information. Neither the City nor the County is obligated in any manner to pay principal of or interest on the Bonds or to cure any delinquency or default on the Bonds. The Bonds are payable solely from the sources described in the Official Statement.
General
The City of Menifee is located approximately 80 miles southeast of Los Angeles in the southwestern portion of Riverside County. The City incorporated on October 1, 2008 as a general law City. The City has slightly more than 103,000 residents and covers an area of over 46 square miles.
Population
The following table offers population figures for the City, the County and the State for 2017 through 2021.
Area 2017 2018 2019 2020 2021
City of Menifee 90,157 92,110 94,710 97,094 103,617
County of Riverside 2,374,555 2,397,662 2,419,057 2,440,719 2,424,587 State of California 39,352,398 39,519,535 39,605,361 39,648,938 39,303,157 Source: California State Department of Finance, Demographic Research Unit. 2010 Census Benchmark.
Building Activity
The following tables provide summaries of the building permit valuations and the number of new dwelling units authorized in the City and County from 2017 through 2021.
BUILDING PERMIT VALUATIONS
City of Menifee
2017-2021
(Dollars in Thousands)
2017 2018 2019 2020 2021
Valuation ($000):
Residential $ 220,269 $ 296,414 $343,285 $448,581 $391,923 Non-residential 17,705 38,992 1,150 94,195 39,831
Total* $ 237,974 $ 335,406 $344,435 $542,776 $431,754
Residential Units:
Single family 714 967 922 1,457 1,256
Multiple family 0 0 330 0 0
Total 714 967 1,252 1,457 1,256
* Totals may not add to sums because of rounding.
Source: Construction Industry Research Board.
BUILDING PERMIT VALUATIONS
County of Riverside
Item Title: 12.2
Community Facilities District 2021-1, Banner Park, Issuance of Special Tax Bonds Item Page Number: 80
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2017-2021
(Dollars in Thousands)
2017 2018 2019 2020 2021
Residential $1,903,417 $2,558,081 $2,275,405 $3,071,183 $2,262,642 Non-residential 1,433,691 1,959,680 1,285,856 1,153,778 1,543,998 Total* $3,337,108 $4,517,761 $3,561,261 $4,224,961 3,806,640 Residential Units:
Single family 6,265 7,540 6,563 8,443 7,360
Multiple family 1,070 1,628 1,798 723 1,126
Total 7,335 9,168 8,361 9,166 8,486
* Totals may not add to sums because of rounding.
Source: Construction Industry Research Board.
Employment
The following tables show the largest employers located in the City and County as of June 30, 2021.
LARGEST EMPLOYERS
City of Menifee
(as of June 30, 2021)
Rank Name of Business Employees Type of Business
1. Menifee Union School District 1,665 School District
2. Mt. San Jacinto College District 1,100 School District
3. Romoland Elementary School District 595 School District
4. Target Corporation 380 Retail Stores
5. Menifee Valley Medical Center 365 Medical Center
6. Stater Brothers 290 Grocery Stores
7. City of Menifee 231 City Government
8. Southern California Edison 220 Community Services
9. Texas Roadhouse 200 Restaurant
10. United Parcel Services (UPS) 175 Package Delivery Company Source: City of Menifee Comprehensive Annual Financial Report for the year ending June 30, 2021.
LARGEST EMPLOYERS
County of Riverside
(as of June 30, 2021)
Rank Name of Business Employees Type of Business
1. County of Riverside 22,952 County Government
2. Amazon 10,500 Online Retail
3. March Air Reserve Base 9,600 Military Reserve Base
4. University of California, Riverside 8,909 University
5. Stater Brothers Markets 8,304 Supermarkets
6. Moreno Valley Unified School District 6,250 School District
7. Kaiser Permanente Riverside Medical Center 5,780 Medical Center
8. Corona-Norco Unified School District 5,478 School District
9. Hemet Unified School District 4,460 School District
10. Ross Dress for Less 4,313 Retail Stores
Source: County of Riverside Comprehensive Annual Financial Report for the year ending June 30, 2021.
Item Title: 12.2
Community Facilities District 2021-1, Banner Park, Issuance of Special Tax Bonds Item Page Number: 81
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Employment and Industry
Employment data by industry is not separately reported on an annual basis for the City but is compiled for the Riverside-San Bernardino-Ontario Metropolitan Statistical Area (the “MSA”), which includes all of Riverside and San Bernardino Counties. In addition to varied manufacturing employment, the MSA has large and growing commercial and service sector employment, as reflected in the table below.
The following table represents the Annual Average Labor Force and Industry Employment for the period from 2017 through 2021.
RIVERSIDE-SAN BERNARDINO-ONTARIO MSA
INDUSTRY EMPLOYMENT & LABOR FORCE - BY ANNUAL AVERAGE
2017 2018 2019 2020 2021
Civilian Labor Force 2,012,900 2,045,000 2,074,500 2,088,600 2,118,200 Civilian Employment 1,909,500 1,956,800 1,989,700 1,880,500 1,961,800 Civilian Unemployment 103,400 88,200 84,800 208,100 156,400 Civilian Unemployment Rate 5.1% 4.3% 4.1% 10.0% 7.4%
Total Farm 14,500 14,500 15,400 14,100 13,900
Total Nonfarm 1,453,300 1,506,600 1,552,800 1,495,200 1,569,100 Total Private 1,202,300 1,249,400 1,291,600 1,247,200 1,325,400 Goods Producing 196,400 206,100 208,900 201,300 205,400 Mining and Logging 1,000 1,200 1,200 1,300 1,400
Construction 97,400 105,200 107,200 104,900 109,200
Manufacturing 98,000 99,800 100,600 95,100 94,800
Service Providing 1,256,900 1,300,500 1,343,800 1,293,900 1,363,700 Trade, Transportation and Utilities 363,900 379,400 395,100 406,900 443,100 Wholesale Trade 63,100 66,100 67,700 65,600 67,000
Retail Trade 180,900 181,200 180,700 168,800 177,600
Transportation, Warehousing and Utilities 119,900 132,100 146,600 172,500 198,600 Information 11,600 11,400 11,500 9,400 9,600
Financial Activities 44,700 44,600 45,000 44,100 44,900 Professional and Business Services 147,300 152,000 158,700 154,000 167,300 Educational and Health Services 226,700 239,500 250,300 248,700 253,300 Leisure and Hospitality 166,300 170,600 175,900 141,300 158,900 Other Services 45,400 45,800 46,200 40,200 43,000
Government 251,000 257,200 261,200 248,000 243,600 Total, All Industries 1,467,800 1,521,100 1,568,100 1,509,300 1,583,000 Note: Does not include proprietors, self-employed, unpaid volunteers or family workers, domestic workers in households and persons involved in labor-management trade disputes. Employment reported by place of work. Items may not add to total due to independent rounding. The “Total, All Industries” data is not directly comparable to the employment data found in this Appendix B.
Source: State of California, Employment Development Department, March 2021 Benchmark.
Item Title: 12.2
Community Facilities District 2021-1, Banner Park, Issuance of Special Tax Bonds Item Page Number: 82
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The following table summarizes the labor force, employment and unemployment figures for the period from 2017 through 2021 for the City, the County, the State and the nation as a whole.
CITY OF MENIFEE,
COUNTY OF RIVERSIDE,
STATE OF CALIFORNIA AND UNITED STATES
Average Annual Civilian Labor Force, Employment and Unemployment Year and Area Labor Force Employment(1) Unemployment(2) Unemployment
Rate (%)(3)
2017
City of Menifee 38,000 36,100 1,900 5.0%
County of Riverside 1,072,200 1,015,800 56,300 5.3
State of California 19,173,800 18,246,800 927,000 4.8
United States 160,320,000 153,337,000 6,982,000 4.4
2018
City of Menifee 39,100 37,400 1,700 4.3%
County of Riverside 1,091,400 1,042,700 48,700 4.5
State of California 19,263,900 18,442,400 821,500 4.3
United States 162,075,000 155,761,000 6,314,000 3.9
2019
City of Menifee 39,600 38,000 1,600 4.0%
County of Riverside 1,104,000 1,057,900 46,100 4.2
State of California 19,353,700 18,550,500 803,200 4.2
United States 163,539,000 157,538,000 6,001,000 3.7
2020
City of Menifee 40,400 36,400 4,100 10.1%
County of Riverside 1,107,700 997,700 110,000 9.9
State of California 18,821,200 16,913,100 1,908,100 10.1 United States 160,472,000 147,795,000 12,947,000 8.1
2021
City of Menifee 42,200 39,000 3,200 7.5%
County of Riverside 1,129,600 1,046,700 82,800 7.4
State of California 18,923,200 17,541,900 1,381,200 7.3 United States 162,294,000 155,975,000 6,319,000 3.9
Note: Data is not seasonally adjusted.
(1) Annual averages, unless otherwise specified.
(2) Includes persons involved in labor-management trade disputes. (3) The unemployment rate is computed from unrounded data; therefore, it may differ from rates computed from rounded figures in this table.
Source: U.S. Department of Labor – Bureau of Labor Statistics, California Employment Development Department. 2021 Benchmark.
Item Title: 12.2
Community Facilities District 2021-1, Banner Park, Issuance of Special Tax Bonds Item Page Number: 83
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Personal Income
Personal Income is the income that is received by all persons from all sources. It is calculated as the sum of wage and salary disbursements, supplements to wages and salaries, proprietors’ income with inventory valuation and capital consumption adjustments, rental income of persons with capital consumption adjustment, personal dividend income, personal interest income, and personal current transfer receipts, less contributions for government social insurance.
The personal income of an area is the income that is received by, or on behalf of, all the individuals who live in the area; therefore, the estimates of personal income are presented by the place of residence of the income recipients.
Total personal income in Riverside County increased by 71% between 2008 and 2020. The following tables summarize personal income for Riverside County for 2008 through 2020.
PERSONAL INCOME
Riverside County
2008-2020
(Dollars in Thousands)
Year Riverside County
Annual
Percent Change
2008 $66,862,826 --%
2009 65,663,326 (1.7)
2010 68,084,905 3.6
2011 72,170,010 6.0
2012 74,093,810 2.7
2013 76,470,084 3.2
2014 80,268,670 5.0
2015 85,386,347 6.4
2016 89,644,299 5.0
2017 93,156,635 3.9
2018 97,619,217 4.8
2019 102,037,774 4.5
2020 114,090,413 11.8
Source: U.S. Department of Commerce, Bureau of Economic Analysis.
Item Title: 12.2
Community Facilities District 2021-1, Banner Park, Issuance of Special Tax Bonds Item Page Number: 84
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The following table summarizes per capita personal income for Riverside County, California and the United States for 2008-2020. This measure of income is calculated as the personal income of the residents of the area divided by the resident population of the area.
PER CAPITA PERSONAL INCOME
Riverside County, State of California and the United States 2008-2020
Year Riverside County California United States
2008 $31,624 $43,890 $40,904
2009 30,448 42,044 39,284
2010 30,699 43,636 40,547
2011 32,200 46,175 42,739
2012 32,748 48,813 44,605
2013 33,462 49,303 44,860
2014 34,875 52,363 47,071
2015 36,745 55,833 49,019
2016 38,114 58,048 50,015
2017 39,148 60,549 52,118
2018 40,587 63,720 54,606
2019 42,418 66,619 56,490
2020 45,834 70,192 59,510
Source: U.S. Department of Commerce, Bureau of Economic Analysis.
Taxable Sales
The table below presents taxable sales for the years 2016 through 2021 for the City.
TAXABLE SALES
City of Menifee
2016-2021
(Dollars in Thousands)
Year Permits Taxable Transactions
2016 1,342 628,923
2017 1,426 683,385
2018 1,484 742,128
2019 1,568 776,545
2020 1,726 752,610
2021 1,756 974,142
Source: Taxable Sales in California, California Department of Tax and Fee Administration for 2016-2021.
Item Title: 12.2
Community Facilities District 2021-1, Banner Park, Issuance of Special Tax Bonds Item Page Number: 85
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The table below presents taxable sales for the years 2016 through 2021 for the County.
TAXABLE SALES
County of Riverside
2016-2021
(Dollars in Thousands)
Year Permits Taxable Transactions
2016 57,742 34,483,693
2017 58,969 36,407,460
2018 61,433 38,919,498
2019 64,063 40,626,998
2020 69,284 42,313,474
2021 64,335 55,535,196
Source: Taxable Sales in California, California Department of Tax and Fee Administration for 2016-2021.
Item Title: 12.2
Community Facilities District 2021-1, Banner Park, Issuance of Special Tax Bonds Item Page Number: 86
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APPENDIX C
FORM OF OPINION OF BOND COUNSEL
Upon issuance of the Bonds, Stradling Yocca Carlson & Rauth, a Professional Corporation, Bond Counsel, proposes to render its final approving opinion in substantially the following form:
[Closing Date]
City of Menifee
Community Facilities District No. 2021-1 (Banner Park)
Menifee, California
Re:$__________ Community Facilities District No. 2021-1 (Banner Park) of the City of Menifee Special Tax Bonds, Series 2022A
Ladies and Gentlemen:
We have examined the Constitution and the laws of the State of California, a certified record of the proceedings of the City of Menifee (the “City”) taken in connection with the formation of Community Facilities District No. 2021-1 (Banner Park) of the City of Menifee (the “District”) and the authorization and issuance of the District’s Special Tax Bonds, Series 2022A in the aggregate principal amount of $__________ (the “Bonds”) and such other information and documents as we consider necessary to render this opinion. In rendering this opinion, we have relied upon certain representations of fact and certifications made by the District, the City, the initial purchasers of the Bonds and others. We have not undertaken to verify through independent investigation the accuracy of the representations and certifications relied upon by us.
The Bonds have been issued pursuant to the Mello-Roos Community Facilities Act of 1982, as amended (comprising Chapter 2.5 of Part 1 of Division 2 of Title 5 of the Government Code of the State of California), a resolution adopted by the City Council of the City, acting in its capacity as the legislative body of the District (the “City Council”) on September 21, 2022 (the “Resolution”), and a Bond Indenture (the “Indenture”) dated as of October 1, 2022, by and between the District and Wilmington Trust, National Association, as trustee (the “Trustee”). All capitalized terms not defined herein shall have the meaning set forth in the Indenture.
Based upon our examination of the foregoing, and in reliance thereon and on all matters of fact as we deem relevant under the circumstances, and upon consideration of applicable laws, we are of the opinion that:
(1) The Bonds have been duly and validly authorized by the District and are legal, valid and binding limited obligations of the District, enforceable in accordance with their terms and the terms of the Indenture. The Bonds are limited obligations of the District but are not a debt of the City, the State of California or any other political subdivision thereof within the meaning of any constitutional or statutory limitation, and, except for the Net Taxes, neither the faith and credit nor the taxing power of the City, the State of California, or any of its political subdivisions is pledged for the payment thereof. (2) The Indenture has been duly executed and delivered by the District. The Indenture creates a valid pledge of, and the Bonds are secured by, the Net Taxes and the amounts on deposit in certain funds and accounts established under the Indenture, as and to the extent provided in the Indenture. The Indenture is enforceable in accordance with its terms; provided, however, we express no opinion as to the enforceability of the covenant of the District contained in the Indenture to levy Special Taxes for the payment of Administrative Item Title: 12.2
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Expenses or as to indemnification, penalty, contribution, choice of law, choice of forum or waiver provisions contained therein.
(3) Under existing statutes, regulations, rulings and judicial decisions, interest (and original issue discount) on the Bonds is excluded from gross income for federal income tax purposes and is not an item of tax preference for purposes of calculating the federal alternative minimum tax imposed on individuals; however, it should be noted that for tax years beginning after December 31, 2022, with respect to applicable corporations as defined in Section 59(k) of the Internal Revenue Code of 1986, as amended (the “Code”), interest (and original issue discount) with respect to the Bonds might be taken into account in determining adjusted financial statement income for purposes of computing the alternative minimum tax imposed on such corporations.
(4) Interest (and original issue discount) on the Bonds is exempt from State of California personal income tax.
(5) The difference between the issue price of a Bond (the first price at which a substantial amount of the Bonds of a maturity are to be sold to the public) and the stated redemption price at maturity with respect to such Bond constitutes original issue discount. Original issue discount accrues under a constant yield method, and original issue discount will accrue to a Bond Owner before receipt of cash attributable to such excludable income. The amount of original issue discount deemed received by a Bond Owner will increase the Bond Owner’s basis in the applicable Bond.
(6) The amount by which a Bond Owner’s original basis for determining loss on sale or exchange in the applicable Bond (generally the purchase price) exceeds the amount payable on maturity (or on an earlier call date) constitutes amortizable Bond premium which must be amortized under Section 171 of the Code; such amortizable Bond premium reduces the Bond Owner’s basis in the applicable Bond (and the amount of tax-exempt interest received), and is not deductible for federal income tax purposes. The basis reduction as a result of the amortization of Bond premium may result in a Bond Owner realizing a taxable gain when a Bond is sold by the Owner for an amount equal to or less (under certain circumstances) than the original cost of the Bond to the Owner.
The opinions expressed in paragraphs (3) and (5) above as to the exclusion from gross income for federal income tax purposes of interest (and original issue discount) on the Bonds is subject to the condition that the District and the City comply with all requirements of the Code, that must be satisfied subsequent to the issuance of the Bonds to assure that such interest (and original issue discount) will not become includable in gross income for federal income tax purposes. Failure to comply with such requirements of the Code might cause interest (and original issue discount) on the Bonds to be included in gross income for federal income tax purposes retroactive to the date of issuance of the Bonds. The District and the City have covenanted to comply with all such requirements. Except as set forth in paragraphs (3), (4), (5) and (6) above, we express no opinion as to any tax consequences related to the Bonds.
Certain agreements, requirements and procedures contained or referred to in the Indenture, the Tax Certificate executed by the District and the City and other documents related to the Bonds may be changed and certain actions may be taken or omitted, under the circumstances and subject to the terms and conditions set forth in such documents. We express no opinion as to the effect on the exclusion from gross income for federal income tax purposes of interest (and original issue discount) on any Bond if any such change occurs or action is taken or omitted upon advice or approval of bond counsel other than Stradling Yocca Carlson & Rauth, a Professional Corporation.
Our opinion is limited to matters governed by the laws of the State of California and federal law. We assume no responsibility with respect to the applicability or the effect of the laws of any other jurisdiction. We call attention to the fact that the rights and obligations under the Bonds, the Indenture and the Tax Certificate may be limited by bankruptcy, insolvency, reorganization, arrangement, fraudulent conveyance, moratorium Item Title: 12.2
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and other laws relating to or affecting creditors’ rights, by the application of equitable principles and the exercise of judicial discretion in appropriate cases and by the limitations on legal remedies against public agencies in the State of California.
We express no opinion herein as to the accuracy, completeness or sufficiency of the Official Statement or other offering material relating to the Bonds and expressly disclaim any duty to advise the Owners of the Bonds with respect to matters contained in the Official Statement or other offering material.
The opinions expressed herein are based upon an analysis of existing statutes, regulations, rulings and judicial decisions and cover certain matters not directly addressed by such authorities. Such opinions may be affected by actions taken (or not taken) or events occurring (or not occurring) after the date hereof. We have not undertaken to determine, or to inform any person, whether such actions or events are taken (or not taken) or do occur (or do not occur).
Respectfully submitted,
Item Title: 12.2
Community Facilities District 2021-1, Banner Park, Issuance of Special Tax Bonds Item Page Number: 89
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APPENDIX D
APPRAISAL REPORT
Item Title: 12.2
Community Facilities District 2021-1, Banner Park, Issuance of Special Tax Bonds Item Page Number: 90
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APPENDIX E
SUMMARY OF THE INDENTURE
The following is a summary of certain provisions of the Indenture which are not described elsewhere.
This summary does not purport to be comprehensive and reference should be made to the Indenture for a full and complete statement of the provisions thereof.
[TO COME]
Item Title: 12.2
Community Facilities District 2021-1, Banner Park, Issuance of Special Tax Bonds Item Page Number: 91
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APPENDIX F
FORM OF DISTRICT CONTINUING DISCLOSURE CERTIFICATE
THIS CONTINUING DISCLOSURE CERTIFICATE (this “Disclosure Certificate”) dated as of October 1, 2022 is executed and delivered by Community Facilities District No. 2021-1 (Banner Park) of the City of Menifee (the “District”) in connection with the issuance and delivery by the District of its $__________ Special Tax Bonds, Series 2022A (the “Bonds”). The Bonds are being issued pursuant to a Resolution of Issuance adopted on September 21, 2022, by the City Council of the City of Menifee, acting as the legislative body of the District, and the Bond Indenture, dated as of October 1, 2022 (the “Indenture”), by and between the District and Wilmington Trust, National Association, as trustee. The District covenants as follows:
Section 1. Purpose of the Disclosure Certificate. This Disclosure Certificate is being executed and delivered by the District for the benefit of the Owners and Beneficial Owners of the Bonds and in order to assist the Participating Underwriter in complying with the Rule.
Section 2. Definitions. In addition to the definitions set forth in the Indenture and the Rate and Method of Apportionment, which apply to any capitalized term used in this Disclosure Certificate unless otherwise defined in this Section, the following capitalized terms shall have the following meanings:
“Annual Report” shall mean any Annual Report provided by the District pursuant to, and as described in, Sections 3 and 4 of this Disclosure Certificate.
“Beneficial Owner” shall mean any person which (a) has the power, directly or indirectly, to vote or consent with respect to, or to dispose of ownership of, any Bonds (including persons holding Bonds through nominees, depositories or other intermediaries), or (b) is treated as the owner of any Bonds for federal income purposes.
“City” shall mean the City of Menifee, County of Riverside, California. “Disclosure Representative” shall mean the Assistant City Manager of the City, or his or her designee, or such other officer or employee as the District shall designate in writing to the Dissemination Agent from time to time.
“Dissemination Agent” shall mean, initially, Spicer Consulting Group, LLC, or any successor Dissemination Agent designated in writing by the District and which has filed with the then current Dissemination Agent a written acceptance of such designation. “District” shall mean Community Facilities District No. 2021-1 (Banner Park) of the City of Menifee. “EMMA” shall mean the Electronic Municipal Market Access System of the Municipal Securities Rulemaking Board, which can be found at www.emma.msrb.org, or any other repository of disclosure information that may be designated by the Securities and Exchange Commission in the future system of the MSRB.
“Financial Obligation” means a (i) debt obligation; (ii) derivative instrument entered into in connection with, or pledged as security or a source of payment for, an existing or planned debt obligation; or (iii) guarantee of (i) or (ii). The term Financial Obligation shall not include municipal securities as to which a final official statement has been provided to the MSRB consistent with the Rule. “Listed Events” shall mean any of the events listed in Section 5 of this Disclosure Certificate.
Item Title: 12.2
Community Facilities District 2021-1, Banner Park, Issuance of Special Tax Bonds Item Page Number: 92
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“MSRB” shall mean 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.
“Official Statement” shall mean that certain Official Statement for the Bonds dated __________, 2022.
“Owners” shall mean the registered owners of the Bonds as set forth in the registration books maintained by the Trustee.
“Participating Underwriter” shall mean Stifel, Nicolaus & Company, Incorporated. “Rate and Method of Apportionment” shall mean that certain Rate and Method of Apportionment of Special Tax approved pursuant to the Resolution of Formation. “Resolution of Formation” shall mean the resolutions adopted by the City Council pursuant to which the City Council formed the District.
“Rule” shall mean 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. “State” shall mean the State of California.
“Trustee” shall mean Wilmington Trust, National Association or such other entity appointed by the District pursuant to the Indenture to act as the trustee under the Indenture.
Section 3. Provision of Annual Reports.
(a) Not later than March 1 of each year commencing March 1, 2023, the District shall, or shall cause the Dissemination Agent to provide to EMMA an Annual Report which is consistent with the requirements of Section 4 of this Disclosure Certificate. If the Dissemination Agent is other than the District, then not later than 15 business days prior to the date referred to in the prior sentence hereof, the District shall provide the Annual Report (in a form suitable for filing with EMMA) to the Dissemination Agent. The Annual Report may be submitted as a single document or as separate documents comprising a package, and may include by reference other information as provided in Section 4 of this Disclosure Certificate; provided that the audited financial statements of the District, if any exist, may be submitted separately from and later than the balance of the Annual Report if they are not available by the date required above for the filing of the Annual Report.
(b) In the event that the Dissemination Agent is an entity other than the District, then the provisions of this Section 3(b) shall apply. Not later than fifteen (15) Business Days prior to the date specified in subsection (a) for providing the Annual Report, the District shall provide the Annual Report to the Dissemination Agent. If by fifteen (15) Business Days prior to the due date for an Annual Report the Dissemination Agent has not received a copy of the Annual Report, the Dissemination Agent shall contact the District to determine if the District will be filing the Annual Report in compliance with subsection (a). The District shall provide a written certification with each Annual Report furnished to the Dissemination Agent to the effect that such Annual Report constitutes the Annual Report required to be furnished by it hereunder. The Dissemination Agent may conclusively rely upon such certification of the District and shall have no duty or obligation to review such Annual Report.
Item Title: 12.2
Community Facilities District 2021-1, Banner Park, Issuance of Special Tax Bonds Item Page Number: 93
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(c) If the Dissemination Agent is other than the District and if the Dissemination Agent is unable to verify that an Annual Report has been provided to EMMA by the date required in subsection (a), the Dissemination Agent shall send, in a timely manner, a notice to EMMA of the failure to file the Annual Report in the form required by EMMA. If the District acts as its own Dissemination Agent, it shall file a notice with EMMA no later than the date specified in subsection (a) for filing an Annual Report if the District fails to file the Annual Report by that date.
(d) If the Dissemination Agent is other than the District, the Dissemination Agent shall:
(i) determine each year prior to the date for providing the Annual Report the name and address of the repository if other than the MSRB through EMMA; and (ii) promptly after receipt of the Annual Report, file a report with the District certifying that the Annual Report has been provided to EMMA and the date it was provided. (e) Notwithstanding any other provision of this Disclosure Certificate, all filings shall be made in accordance with the MSRB’s EMMA system or in another manner approved under the Rule.
Section 4. Content of Annual Reports. The District’s Annual Report shall contain or include by reference the following:
(a) Financial Statements. The audited financial statements of the District for the prior fiscal year, if any have been prepared and which, if prepared, shall be 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 District’s audited financial statements, if any are prepared, are not available by the time the Annual Report is required to be filed pursuant to Section 3(a), the Annual Report shall contain unaudited financial statements, and the audited financial statements shall be filed in the same manner as the Annual Report when they become available. (b) Financial and Operating Data. The Annual Report shall contain or incorporate by reference the following information:
(i) the principal amount of the Bonds outstanding as of the September 2 preceding the filing of the Annual Report;
(ii) the balance in each fund under the Indenture as of the September 2 preceding the filing of the Annual Report;
(iii) the aggregate assessed valuation of the Taxable Property within the District; (iv) any changes to the Rate and Method of Apportionment of Special Tax for the District approved or submitted to the qualified electors for approval prior to the filing of the Annual Report; (v) a table setting forth the annual Special Tax delinquency rate within the District at June 30 of each fiscal year for which a delinquency exists, listing for each fiscal year, the total Special Tax levy, the amount delinquent and the percent delinquent; (vi) an update of the value-to-lien of the property within the District based on the assessed value and the Special Tax levy for the then current fiscal year, which update may be provided in a form similar to Table 3 in the Official Statement; provided that such update need not include overlapping special tax, assessment or general obligation indebtedness; and Item Title: 12.2
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(vii) the status of any foreclosure actions being pursued by the District with respect to delinquent Special Taxes within the District.
(c) Any or all of the items listed in (a) or (b) above may be included by specific reference to other documents, including official statements of debt issues of the District or related public entities, which have been submitted to EMMA or the Securities and Exchange Commission. If the document included by reference is a final official statement, it must be available from the MSRB through EMMA. The District shall clearly identify each such other document so included by reference.
Section 5. Reporting of Significant Events.
(a) Pursuant to the provisions of this Section 5, the District shall give, or cause the Dissemination Agent to give, notice to EMMA in a timely manner not in excess of ten (10) business days after the occurrence of any of the following events with respect to the Bonds:
1. principal and interest payment delinquencies;
2. unscheduled draws on debt service reserves reflecting financial difficulties;
3. unscheduled draws on credit enhancements reflecting financial difficulties;
4. substitution of credit or liquidity providers, or their failure to perform;
5. adverse tax opinions or the issuance by the Internal Revenue Service of proposed or final determinations of taxability, Notices of Proposed Issue (IRS Form 5701-TEB) or other material notices or determinations with respect to the tax status of the Bonds;
6. defeasances;
7. tender offers;
8. ratings changes; and
9. bankruptcy, insolvency, receivership or similar proceedings.
Note: for the purposes of the event identified in subparagraph (9), the event is considered to occur when any of the following occur: the appointment of a receiver, fiscal agent or similar officer for an obligated person in a proceeding under the U.S. Bankruptcy Code or in any other proceeding under state or federal law in which a court or governmental authority has assumed jurisdiction over substantially all of the assets or business of the obligated person, or if such jurisdiction has been assumed by leaving the existing governmental body and officials or officers in possession but subject to the supervision and orders of a court or governmental authority, or the entry of an order confirming a plan of reorganization, arrangement or liquidation by a court or governmental authority having supervision or jurisdiction over substantially all of the assets or business of the obligated person.
10. default, event of acceleration, termination event, modification of terms, or other similar events under the terms of a Financial Obligation of the obligated person, any of which reflect financial difficulties.
Item Title: 12.2
Community Facilities District 2021-1, Banner Park, Issuance of Special Tax Bonds Item Page Number: 95
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(b) Additionally, the District shall give or cause the Dissemination Agent to give notice to EMMA in a timely manner not in excess of ten (10) business days after the occurrence of any of the following events with respect to the Bonds, if material:
1. mergers, consolidations, acquisitions, the sale of all or substantially all of the assets of the obligated persons or their termination;
2. appointment of a successor or additional fiscal agent or the change of the name of a fiscal agent;
3. nonpayment related defaults;
4. modifications to the rights of Bondholders;
5. bond calls;
6. release, substitution or sale of property securing repayment of the Bonds; and
7. incurrence of a Financial Obligation of the obligated person, or agreement to covenants, events of default, remedies, priority rights, or other similar terms of a Financial Obligation of the obligated person, any of which affect security holders. (c) In the event that the District’s fiscal year changes, the District shall report or shall instruct the Dissemination Agent to report such change in the same manner and to the same parties as Listed Events would be reported pursuant to this Section.
(d) The District hereby agrees that the undertaking set forth in this Disclosure Certificate is the responsibility of the District, and the Dissemination Agent, if other than the District, shall not be responsible for determining whether the District’s instructions to the Dissemination Agent under this Section comply with the requirements of the Rule.
Section 6. Termination of Reporting Obligation. The obligations of the District and the Dissemination Agent under this Disclosure Certificate shall terminate upon the legal defeasance, prior redemption or payment in full of all of the Bonds. If such termination occurs prior to the final maturity of the Bonds, the District shall give notice of such termination in the same manner as for a Listed Event under Section 5.
Section 7. Dissemination Agent. The District may, from time to time, appoint or engage a Dissemination Agent to assist it in carrying out its obligations under this Disclosure Certificate, and may discharge any such Dissemination Agent, with or without appointing a successor Dissemination Agent. The Dissemination Agent, if other than the District, shall not be responsible in any manner for the content of any notice or report prepared by the District pursuant to this Disclosure Certificate. The initial Dissemination Agent shall be Spicer Consulting Group, LLC. The Dissemination Agent may resign by providing (i) thirty (30) days written notice to the District and the Trustee and (ii) upon appointment of a new Dissemination Agent hereunder.
Section 8. Amendment; Waiver.
(a) This Disclosure Certificate may be amended, by written agreement of the parties, without the consent of the Owners, and any provision of this Disclosure Certificate may be waived, if all of the following conditions are satisfied: (1) such amendment or waiver is made in connection with a change in circumstances that arises from a change in legal (including regulatory) requirements, a change in law, or a change in the identity, nature or status of the District or the type of business conducted thereby, (2) the undertakings in this Item Title: 12.2
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Disclosure Certificate as so amended or waived would, in the opinion of a nationally recognized bond counsel, have complied with the requirements of the Rule as of the date of this Disclosure Certificate, after taking into account any amendments or interpretations of the Rule, as well as any change in circumstances, and (3) the amendment or waiver either (i) is approved by the Owners of the Bonds in the same manner as provided in the Indenture for amendments to the Indenture with the consent of Owners or (ii) does not, in the determination of the District, materially impair the interests of the Owners or Beneficial Owners of the Bonds. (b) To the extent any amendment to this Disclosure Certificate results in a change in the type of financial information or operating data provided pursuant to this Disclosure Certificate, the first Annual Report provided thereafter shall include a narrative explanation of the reasons for the amendment and the impact of the change in the type of operating data or financial information being provided. (c) If an amendment is made to the basis on which financial statements are prepared, the Annual Report for the year in which the change is made shall present a comparison between the financial statements or information prepared on the basis of the new accounting principles and those prepared on the basis of the former accounting principles. Such comparison shall include a quantitative and, to the extent reasonably feasible, qualitative discussion of the differences in the accounting principles and the impact of the change in the accounting principles on the presentation of the financial information.
Section 9. Additional Information. Nothing in this Disclosure Certificate shall be deemed to prevent the District from disseminating any other information, using the means of dissemination set forth in this Disclosure Certificate or any other means of communication, or including any other information in any Annual Report or notice of occurrence of a Listed Event, in addition to that which is required by this Disclosure Certificate. If the District chooses to include any information in any Annual Report or notice of occurrence of a Listed Event in addition to that which is specifically required by this Disclosure Certificate, the District shall have no obligation under this Disclosure Certificate to update such information or include it in any future Annual Report or notice of occurrence of a Listed Event.
Section 10. Default. In the event of a failure of the District or the Dissemination Agent to comply with any provision of this Disclosure Certificate, any Owner or Beneficial Owner of the Bonds may take such actions as may be necessary and appropriate, including seeking mandate or specific performance by court order, to cause the District and/or the Dissemination Agent to comply with their respective obligations under this Disclosure Certificate. A default under this Disclosure Certificate shall not be deemed an Event of Default under the Indenture, and the sole remedy under this Disclosure Certificate in the event of any failure of the District or the Dissemination Agent to comply with this Disclosure Certificate shall be an action to compel performance.
Section 11. Duties, Immunities and Liabilities of Dissemination Agent. Where an entity other than the District is acting as the Dissemination Agent, the Dissemination Agent shall have only such duties as are specifically set forth in this Disclosure Certificate, and the District agrees to indemnify and save the Dissemination Agent and its officers, directors, employees and agents, harmless against any loss, expense and liabilities which they may incur arising out of or in the exercise or performance of their powers and duties hereunder, including the costs and expenses (including attorneys’ fees) of defending against any claim of liability, but excluding liabilities due to the Dissemination Agent’s negligence or willful misconduct. Any Dissemination Agent shall be paid (i) compensation by the District for its services provided hereunder in accordance with a schedule of fees to be mutually agreed to; and (ii) all expenses, legal fees and advances made or incurred by the Dissemination Agent in the performance of its duties hereunder. The Dissemination Agent shall have no duty or obligation to review any information provided to it by the District pursuant to this Disclosure Certificate. The obligations of the District under this Section shall survive resignation or removal of the Dissemination Agent and payment of the Bonds. No person shall have any right to commence any action against the Dissemination Agent seeking any remedy other than to compel specific performance of this Disclosure Certificate. The Dissemination Agent shall not be liable under any circumstances for monetary damages to any person for any breach under this Disclosure Certificate.
Item Title: 12.2
Community Facilities District 2021-1, Banner Park, Issuance of Special Tax Bonds Item Page Number: 97
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Section 12. Notices. Any notices or communications to or among any of the parties to this Disclosure Certificate may be given as follows:
District: Community Facilities District No. 2021-1 (Banner Park) of the City of Menifee
City of Menifee
29844 Haun Road
Menifee, CA 92586
Attn: City Manager
Underwriter: Stifel, Nicolaus & Company, Incorporated
2121 Avenue of the Stars, Suite 2150
Los Angeles, CA 90067
Attn: Public Finance Department
Any person may, by written notice to the other persons listed above, designate a different address or telephone number(s) to which subsequent notice or communications should be sent.
Section 13. Beneficiaries. This Disclosure Certificate shall inure solely to the benefit of the District, the Trustee, the Dissemination Agent, the Participating Underwriter and Owners and Beneficial Owners from time to time of the Bonds, and shall create no rights in any other person or entity.
Section 14. Merger. Any person succeeding to all or substantially all of the Dissemination Agent’s business shall be the successor Dissemination Agent without the filing of any paper or any further act.
This Disclosure Certificate is executed as of the date and year first set forth above.
COMMUNITY FACILITIES DISTRICT NO. 2021-1
(BANNER PARK) OF THE CITY OF MENIFEE
By:
Rochelle Clayton
Disclosure Representative
Item Title: 12.2
Community Facilities District 2021-1, Banner Park, Issuance of Special Tax Bonds Item Page Number: 98
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APPENDIX G
DEVELOPER CONTINUING DISCLOSURE CERTIFICATE
This Developer Continuing Disclosure Certificate (the “Disclosure Certificate”) dated as of October 1, 2022 is executed and delivered by Pulte Home Company, LLC, a Michigan limited liability company (the “Landowner”), in connection with the issuance by Community Facilities District No. 2021-1 (Banner Park) of the City of Menifee (the “District”) of the $__________ Community Facilities District No. 2021-1 (Banner Park) of the City of Menifee Special Tax Bonds, Series 2022A (the “Bonds”). The Bonds are being issued pursuant to the Bond Indenture dated as of October 1, 2022 (the “Indenture”) by and between the District and Wilmington Trust, National Association, as trustee. The Landowner covenants and agrees as follows:
SECTION 1. Purpose of the Disclosure Certificate. This Disclosure Certificate is being executed and delivered by the Landowner to assist the Underwriter in the marketing of the Bonds.
SECTION 2. Definitions. Unless defined herein, capitalized terms used herein shall have the meanings ascribed thereto in the Indenture.
“Affiliate” shall mean, with respect to the Landowner, any other Person (i) who directly, or indirectly through one or more intermediaries, is currently controlling, controlled by or under common control with the Landowner, and (ii) for whom information, including financial information or operating data, concerning such Person is material to potential investors in their evaluation of the District and investment decision regarding the Bonds (i.e. information regarding such Person’s assets or funds that would materially affect the Landowner’s ability to develop the Property as described in the Official Statement or to pay its Special Taxes on the portion of the Property then owned by the Landowner (to the extent the responsibility of the Landowner) prior to delinquency). For purposes hereof, the term “control” (including the terms “controlling,” “controlled by” or “under common control with”) means the present possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise.
“Beneficial Owner” shall mean any person which has or shares the power, directly or indirectly, to make investment decisions concerning ownership of the Bonds (including persons holding Bonds through nominees, depositories or other intermediaries).
“Dissemination Agent” shall mean the Landowner, or any successor Dissemination Agent designated in writing by the Landowner, with the written consent of the District, and which has filed with the Landowner, the District and the Underwriter a written acceptance of such designation, and which is experienced in providing dissemination agent services such as those required under this Disclosure Certificate. “District” shall mean Community Facilities District No. 2021-1 (Banner Park) of the City of Menifee. “EMMA” shall mean the Electronic Municipal Market Access system of the MSRB. “Listed Event” shall mean any of the events listed in Section 5(a) of this Disclosure Certificate. “MSRB” shall mean the Municipal Securities Rulemaking Board and any successor entity as the repository for filings.
“Official Statement” shall mean the Official Statement, dated __________, 2022, relating to the Bonds.
Item Title: 12.2
Community Facilities District 2021-1, Banner Park, Issuance of Special Tax Bonds Item Page Number: 99
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“Person” shall mean an individual, a corporation, a partnership, a limited liability company, an association, a joint stock company, a trust, an unincorporated organization or a government or political subdivision thereof.
“Property” means the real property within the boundaries of the District that is owned by the Landowner or any Affiliate.
“Repository” shall mean the MSRB or any other entity designated or authorized by the Securities and Exchange Commission as a repository of disclosure information. Unless 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. “Semiannual Report” shall mean any report to be provided by the Landowner on or prior to August 1 and February 1 of each year, commencing with the Semiannual Report due February 1, 2023, pursuant to, and as described in, Sections 3 and 4 of this Disclosure Certificate. “State” shall mean the State of California.
“Underwriter” shall mean the original underwriter of the Bonds, which is Stifel, Nicolaus & Company, Incorporated.
SECTION 3. Provision of Semiannual Reports.
(a) Until the obligations under this Disclosure Certificate are terminated pursuant to Section 6, the Landowner shall, or upon receipt of the Semiannual Report the Dissemination Agent shall, not later than February 1 and August 1 of each year, commencing February 1, 2023, provide to the Repository the Semiannual Report which is consistent with the requirements of Section 4 of this Disclosure Certificate. If, in any year, February 1 or August 1 falls on a Saturday, Sunday or a federal holiday, such deadline shall be extended to the next following day that is not a Saturday, Sunday or federal holiday. The Semiannual Report may be submitted as a single document or as separate documents comprising a package, and may include by reference other information as provided in Section 4 of this Disclosure Certificate. (b) If the Landowner utilizes the Dissemination Agent to file the Semiannual Report, then not later than 15 calendar days prior to the date specified in subsection (a) for providing the Semiannual Report to the Repository, the Landowner shall provide the Semiannual Report to the Dissemination Agent (if different from the Landowner), and shall provide a written certification with (or included as a part of) each Semiannual Report furnished to the Dissemination Agent, the Underwriter, and the District to the effect that such Semiannual Report constitutes the Semiannual Report required to be furnished by it under this Disclosure Certificate. If the Dissemination Agent (if different from the Landowner) does not receive a Semiannual Report from the Landowner and cannot verify that a Semiannual Report has been filed with the Repository by 15 calendar days prior to the date specified in subsection (a) for providing the Semiannual Report to the Repository, the Dissemination Agent shall send a reminder notice to the Landowner that the Semiannual Report has not been provided as required under Section 3(a) above. The reminder notice shall instruct the Landowner to determine whether its obligations under this Disclosure Certificate have terminated (pursuant to Section 6 below) and, if so, to provide the Dissemination Agent with a notice of such termination in the same manner as for a Listed Event (pursuant to Section 5 below). (c) If the Landowner does not provide, or cause the Dissemination Agent to provide, a Semiannual Report to the Repository on or prior to the date specified in subsection (a) for providing the Semiannual Report to the Repository, the Dissemination Agent shall send, in a timely manner, a notice to the Repository of the failure to file the Semiannual Report in the form required by the Repository.
Item Title: 12.2
Community Facilities District 2021-1, Banner Park, Issuance of Special Tax Bonds Item Page Number: 100
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(d) The Dissemination Agent shall:
(i) determine, prior to the date for providing the Semiannual Report, the name and address of the Repository; and
(ii) to the extent the Semiannual Report has been furnished to it, promptly after receipt of the Semiannual Report, file a report with the Landowner (if the Dissemination Agent is other than the Landowner), the Underwriter, and the District certifying that the Semiannual Report has been provided pursuant to this Disclosure Certificate, stating the date it was provided to the Repository. (e) Notwithstanding any other provision of this Disclosure Certificate, any of the required filings hereunder shall be made in accordance with the MSRB’s EMMA system or in another manner approved by the MSRB or the Securities and Exchange Commission.
SECTION 4. Content of Semiannual Reports.
(a) The Landowner’s Semiannual Report shall contain or include by reference the information which is updated through a date which shall not be more than 60 days prior to the date the applicable Semiannual Report is required to be filed, relating to the following:
1. To the extent not previously disclosed in a prior Semiannual Report, a discussion of any material change in the Landowner’s sources of funds to finance its development of the Property as disclosed under the caption “PROPERTY OWNERSHIP AND THE DEVELOPMENT” in the Official Statement, and, if applicable, whether any material defaults exist under any loan arrangement related to such financing.
2. A summary of development activity conducted by the Landowner or any Affiliate within the District, including the number of parcels for which sales to homebuyers have closed.
3. Any sale by the Landowner or any Affiliate of Property to another Person, other than to buyers of completed homes, including a description of the property sold (acreage, number of lots, etc.) and the identity of the Person that so purchased the property, all since the date of information set forth in the Official Statement or the most recent Semiannual Report.
4. Any major legislative, administrative and judicial challenges that the Landowner is currently involved in or has actual knowledge of, to or affecting the Landowner’s development of the Property, or the time for construction of any public or private improvements to be made to the Property by the Landowner or any Affiliate (the “Landowner Improvements”).
5. Any significant amendments to land use entitlements known to the Landowner with respect to the Property owned by the Landowner or its Affiliates.
6. Information regarding any failure by the Landowner or any of its Affiliates to pay any Special Taxes levied on any Property owned by the Landowner or any Affiliates. (b) Any and all of the items listed above may be included by specific reference to other documents, including official statements of debt issues which have been submitted to the Repository or the Securities and Exchange Commission. If the document included by reference is a final official statement, it must be available from the MSRB. The Landowner shall clearly identify each such other document so included by reference.
Item Title: 12.2
Community Facilities District 2021-1, Banner Park, Issuance of Special Tax Bonds Item Page Number: 101
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SECTION 5. Reporting of Significant Events.
(a) Until the obligations under this Disclosure Certificate are terminated pursuant to Section 6, pursuant to the provisions of this Section 5, the Landowner shall give, or cause to be given, notice of the occurrence of any of the following events with respect to the Bonds, if material under clauses (b) and (c) as soon as practicable after obtaining knowledge of the occurrence of any of the following events:
1. Failure to pay any real property taxes, special taxes or assessments levied within the District on a parcel owned by the Landowner or any Affiliate, to the extent such failure is not promptly cured by the Landowner or any Affiliate upon discovery thereof;
2. Material default by the Landowner or any Affiliate on any loan with respect to the construction or permanent financing of the Landowner Improvements to which the Landowner or any Affiliate has been provided a notice of default;
3. Material default by the Landowner or any Affiliate on any loan secured by property within the District owned by the Landowner or any Affiliate to which the Landowner or any Affiliate has been provided a notice of default;
4. Material payment default by the Landowner on any loan of the Landowner (whether or not such loan is secured by property within the District) which is beyond any applicable cure period in such loan if such default could materially adversely affect the completion of the Landowner Improvements or the development of the Property (including the payment of Special Taxes);
5. The filing of any proceedings with respect to the Landowner, in which the Landowner, may be adjudicated as bankrupt or discharged from any or all of its debts or obligations or granted an extension of time to pay debts or a reorganization or readjustment of debts;
6. The filing of any proceedings with respect to an Affiliate of the Landowner, in which such Affiliate of the Landowner may be adjudicated as bankrupt or discharged from any or all of its respective debts or obligations or granted an extension of time to pay debts or a reorganization or readjustment of debts if such adjudication could materially adversely affect the completion of the Landowner Improvements or the development of the Property (including the payment of Special Taxes); and
7. The filing of any lawsuit against the Landowner or any of its Affiliates (with service of process on the Landowner or its Affiliates having occurred) which, in the reasonable judgment of the Landowner, will materially adversely affect the completion of the development of the Property owned by the Landowner or its Affiliates within the District, or litigation which if decided against the Landowner, or any of its Affiliates, in the reasonable judgment of the Landowner, would materially adversely affect the financial condition of the Landowner or any Affiliate of the Landowner owning any Property within the District, or their respective ability to pay Special Taxes levied on their respective Property within the District prior to delinquency. (b) Whenever the Landowner obtains knowledge of the occurrence of a Listed Event, the Landowner shall as soon as possible determine if such event would be material under applicable federal securities laws. The Dissemination Agent shall have no responsibility to determine the materiality of any of the Listed Events.
(c) If the Landowner determines that knowledge of the occurrence of a Listed Event would be material under applicable federal securities laws, the Landowner shall promptly file or cause the Dissemination Agent to file a notice of such occurrence with the Repository, with a copy to the District.
Item Title: 12.2
Community Facilities District 2021-1, Banner Park, Issuance of Special Tax Bonds Item Page Number: 102
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SECTION 6. Termination of Reporting Obligation. The Landowner’s obligations under this Disclosure Certificate shall terminate upon the earlier to occur of the following events:
(a) the legal defeasance, prior redemption or payment in full of all of the Bonds, or (b) the date on which, the Landowner has conveyed ___ or more of its 256 planned residential units in the District to homebuyers.
If such termination occurs prior to the final maturity of the Bonds, the Landowner shall give notice of such termination in the same manner as for a Semiannual Report hereunder.
SECTION 7. Dissemination Agent. The Landowner may from time to time, appoint or engage a Dissemination Agent to assist it in carrying out its obligations under this Disclosure Certificate, and may discharge any such Dissemination Agent, with or without appointing a successor Dissemination Agent. If the Dissemination Agent is not the Landowner, the Dissemination Agent shall not be responsible in any manner for the form or content of any notice or report prepared by the Landowner pursuant to this Disclosure Certificate. The Dissemination Agent may resign by providing (i) thirty days written notice to the Landowner and the Dissemination Agent and (ii) upon appointment of a new Dissemination Agent hereunder.
SECTION 8. Amendment; Waiver. Notwithstanding any other provision of this Disclosure Certificate, the Landowner may amend this Disclosure Certificate, and any provision of this Disclosure Certificate may be waived, provided that the following conditions are satisfied:
(a) If the amendment or waiver relates to the provisions of Sections 3(a), 4 or 5, it may only be made in connection with a change in circumstances that arises from a change in legal requirements or change in law;
(b) The amendment or waiver either (i) is approved by the owners of the Bonds in the same manner as provided in the Indenture with the consent of owners of the Bonds, or (ii) does not, in the opinion of nationally recognized bond counsel addressed to the District and the Dissemination Agent (if different from the Landowner), materially impair the interests of the owners or Beneficial Owners of the Bonds; and (c) The Landowner, or the Dissemination Agent, shall have delivered copies of the amendment and any opinions delivered under (b) above to the District and the Trustee.
SECTION 9. Additional Information. Nothing in this Disclosure Certificate shall be deemed to prevent the Landowner from disseminating any other information, using the means of dissemination set forth in this Disclosure Certificate or any other means of communication, or including any other information in any Semiannual Report or notice of occurrence of a Listed Event, in addition to that which is required by this Disclosure Certificate. If the Landowner chooses to include any information in any Semiannual Report or notice of occurrence of a Listed Event in addition to that which is specifically required by this Disclosure Certificate, the Landowner shall have no obligation under this Disclosure Certificate to update such information or include it in any future Semiannual Report or notice of occurrence of a Listed Event.
The Landowner acknowledges and understands that other state and federal laws, including but not limited to the Securities Act of 1933 and Rule 10b-5 promulgated under the Securities Exchange Act of 1934, may apply to the Landowner, and that under some circumstances compliance with this Disclosure Certificate, without additional disclosures or other action, may not fully discharge all duties and obligations of the Landowner under such laws.
SECTION 10. Default. In the event of a failure of the Landowner or the Dissemination Agent to comply with any provision of this Disclosure Certificate, any Underwriter or any owner or Beneficial Owner of the Bonds may, take such actions as may be necessary and appropriate, including seeking mandate or Item Title: 12.2
Community Facilities District 2021-1, Banner Park, Issuance of Special Tax Bonds Item Page Number: 103
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specific performance by court order, to cause the Landowner or the Dissemination Agent to comply with its obligations under this Disclosure Certificate. The sole remedy under this Disclosure Certificate in the event of any failure of the Landowner or the Dissemination Agent to comply with this Disclosure Certificate shall be an action to compel performance.
SECTION 11. Duties, Immunities and Liabilities of Dissemination Agent. The Dissemination Agent shall not be deemed to be acting in any fiduciary capacity for the Landowner, the Underwriter, owners of the Bonds or Beneficial Owners or any other party. The Dissemination Agent may rely and shall be protected in acting or refraining from acting upon a direction from the Landowner or an opinion of nationally recognized bond counsel. No person shall have any right to commence any action against the Dissemination Agent seeking any remedy other than to compel specific performance of this Disclosure Certificate. The Dissemination Agent may conclusively rely upon the Semiannual Report provided to it by the Landowner as constituting the Semiannual Report required of the Landowner in accordance with this Disclosure Certificate and shall have no duty or obligation to review such Semiannual Report. The Dissemination Agent shall have no duty to prepare the Semiannual Report nor shall the Dissemination Agent be responsible for filing any Semiannual Report not provided to it by the Landowner in a timely manner in a form suitable for filing with the Repository. Any company succeeding to all or substantially all of the Dissemination Agent’s business shall be the successor to the Dissemination Agent hereunder without the execution or filing of any paper or any further act.
SECTION 12. Landowner as Independent Contractor. In performing under this Disclosure Certificate, it is understood that the Landowner is not an agent or contractor of the District.
SECTION 13. Notices. Notices should be sent in writing by electronic, regular, or overnight mail to the following addresses. The following information may be conclusively relied upon until changed in writing.
Landowner: Pulte Home Company, LLC
Attention:
Email:
District: City of Menifee
29844 Haun Road
Menifee, California 92586
Attention: Wendy Preece
[email protected]
[email protected]
Underwriter: Stifel, Nicolaus & Company, Incorporated
2121 Avenue of the Stars, Suite 2150
Los Angeles, CA 90067
Attn: Public Finance Department
Email: [email protected]
SECTION 14. Beneficiaries. This Disclosure Certificate shall inure solely to the benefit of the Landowner, the City, the District, the Dissemination Agent, the Underwriter and owners of the Bonds and Beneficial Owners from time to time of the Bonds, and shall create no rights in any other person or entity. [Remainder of Page Intentionally Left Blank]
Item Title: 12.2
Community Facilities District 2021-1, Banner Park, Issuance of Special Tax Bonds Item Page Number: 104
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SECTION 15. Counterparts. This Disclosure Certificate may be executed in several counterparts, each of which shall be an original and all of which shall constitute but one and the same instrument.
PULTE HOME COMPANY, LLC,
a Michigan limited liability company
By:
Name: __________________________________________
Title: ___________________________________________
Item Title: 12.2
Community Facilities District 2021-1, Banner Park, Issuance of Special Tax Bonds Item Page Number: 105
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APPENDIX H
BOOK-ENTRY ONLY SYSTEM
The information in this Appendix concerning DTC and DTC’s book-entry only system has been obtained from sources that the District and the Underwriter believe to be reliable, but neither the District nor the Underwriter takes any responsibility for the completeness or accuracy thereof. The following description of the procedures and record keeping with respect to beneficial ownership interests in the Bonds, payment of principal, premium, if any, accreted value and interest on the Bonds to DTC Participants or Beneficial Owners, confirmation and transfers of beneficial ownership interests in the Bonds and other related transactions by and between DTC, the DTC Participants and the Beneficial Owners is based solely on information provided by DTC.
The Depository Trust Company (“DTC”), New York, NY, will act as securities depository for the Bonds.
The Bonds will be issued as fully-registered securities registered in the name of Cede & Co. (DTC’s partnership nominee) or such other name as may be requested by an authorized representative of DTC. One fully registered bond will be issued for each annual maturity of the Bonds, each in the aggregate principal amount of such annual maturity, and will be deposited with DTC.
DTC, the world’s largest securities depository, is a limited-purpose trust company organized under the New York Banking Law, a “banking organization” within the meaning of the New York Banking Law, a member of the Federal Reserve System, a “clearing corporation” within the meaning of the New York Uniform Commercial Code, and a “clearing agency” registered pursuant to the provisions of Section 17A of the Securities Exchange Act of 1934. DTC holds and provides asset servicing for over 3.5 million issues of U.S. and non-U.S. equity issues, corporate and municipal debt issues, and money market instruments (from over 100 countries) that DTC’s participants (“Direct Participants”) deposit with DTC. DTC also facilitates the post-trade settlement among Direct Participants of sales and other securities transactions in deposited securities, through electronic computerized book-entry transfers and pledges between Direct Participants’ accounts. This eliminates the need for physical movement of securities certificates. Direct Participants include both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations. DTC is a wholly-owned subsidiary of The Depository Trust & Clearing Corporation (“DTCC”). DTCC is the holding company for DTC, National Securities Clearing Corporation and Fixed Income Clearing Corporation, all of which are registered clearing agencies. DTCC is owned by the users of its regulated subsidiaries. Access to the DTC system is also available to others such as both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, and clearing corporations that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly (“Indirect Participants”). DTC has a Standard & Poor’s rating of AA+. The DTC Rules applicable to its Participants are on file with the Securities and Exchange Commission. More information about DTC can be found at www.dtcc.com.
Purchases of Bonds under the DTC system must be made by or through Direct Participants, which will receive a credit for the Bonds on DTC’s records. The ownership interest of each actual purchaser of each Bond (“Beneficial Owner”) is in turn to be recorded on the Direct and Indirect Participants’ records. Beneficial Owners will not receive written confirmation from DTC of their purchase. Beneficial Owners are, however, expected to receive written confirmations providing details of the transaction, as well as periodic statements of their holdings, from the Direct or Indirect Participant through which the Beneficial Owner entered into the transaction. Transfers of ownership interests in the Bonds are to be accomplished by entries made on the books of Direct and Indirect Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interests in the Bonds, except in the event that use of the book-entry system for the Bonds is discontinued.
To facilitate subsequent transfers, all Bonds deposited by Direct Participants with DTC are registered in the name of DTC’s partnership nominee, Cede & Co., or such other name as may be requested by an authorized representative of DTC. The deposit of Bonds with DTC and their registration in the name of Cede & Co. or such other DTC nominee do not effect any change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the Bonds; DTC’s records reflect only the identity of the Direct Participants to whose accounts Item Title: 12.2
Community Facilities District 2021-1, Banner Park, Issuance of Special Tax Bonds Item Page Number: 106
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such Bonds are credited, which may or may not be the Beneficial Owners. The Direct and Indirect Participants will remain responsible for keeping account of their holdings on behalf of their customers.
Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time.
Beneficial Owners of Bonds may wish to take certain steps to augment the transmission to them of notices of significant events with respect to the Bonds, such as redemptions, tenders, defaults, and proposed amendments to the Bond documents. For example, Beneficial Owners of Bonds may wish to ascertain that the nominee holding the Bonds for their benefit has agreed to obtain and transmit notices to Beneficial Owners. In the alternative, Beneficial Owners may wish to provide their names and addresses to the registrar and request that copies of notices be provided directly to them.