Redemption notices shall be sent to DTC. If less than all of the Bonds within a maturity are being redeemed, DTC’s practice is to determine by lot the amount of the interest of each Direct Participant in such maturity to be redeemed.
Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect to Bonds unless authorized by a Direct Participant in accordance with DTC’s MMI Procedures. Under its usual procedures, DTC mails an Omnibus Proxy to the District as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co.’s consenting or voting rights to those Direct Participants to whose accounts Bonds are credited on the record date (identified in a listing attached to the Omnibus Proxy).
Redemption proceeds, distributions, and dividend payments on the Bonds will be made to Cede & Co., or such other nominee as may be requested by an authorized representative of DTC. DTC’s practice is to credit Direct Participants’ accounts upon DTC’s receipt of funds and corresponding detail information from the District or the Trustee, on payable date in accordance with their respective holdings shown on DTC’s records. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered in “street name,” and will be the responsibility of such Participant and not of DTC, the Trustee, or the District, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of redemption proceeds, distributions, and dividend payments to Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC) is the responsibility of the District or the Trustee, disbursement of such payments to Direct Participants will be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners will be the responsibility of Direct and Indirect Participants.
A Bond Owner shall give notice to elect to have its Bonds purchased or tendered, through its Participant, to the Trustee, and shall effect delivery of such Bonds by causing the Direct Participant to transfer the Participant’s interest in the Bonds, on DTC’s records, to the Trustee. The requirement for physical delivery of Bonds in connection with an optional tender or a mandatory purchase will be deemed satisfied when the ownership rights in the Bonds are transferred by Direct Participants on DTC’s records and followed by a book-entry credit of tendered Bonds to the Trustee’s DTC account.
DTC may discontinue providing its services as depository with respect to the Bonds at any time by giving reasonable notice to the District or the Trustee. Under such circumstances, in the event that a successor depository is not obtained, physical certificates are required to be printed and delivered.
The District may decide to discontinue use of the system of book-entry only transfers through DTC (or a successor securities depository). In that event, bonds will be printed and delivered to DTC.
THE TRUSTEE, AS LONG AS A BOOK-ENTRY ONLY SYSTEM IS USED FOR THE BONDS, WILL SEND ANY NOTICE OF REDEMPTION OR OTHER NOTICES TO OWNERS ONLY TO DTC. ANY
FAILURE OF DTC TO ADVISE ANY DTC PARTICIPANT, OR OF ANY DTC PARTICIPANT TO NOTIFY
ANY BENEFICIAL OWNER, OF ANY NOTICE AND ITS CONTENT OR EFFECT WILL NOT AFFECT THE
VALIDITY OF SUFFICIENCY OF THE PROCEEDINGS RELATING TO THE REDEMPTION OF THE BONDS CALLED FOR REDEMPTION OR OF ANY OTHER ACTION PREMISED ON SUCH NOTICE.
Item Title: 12.2
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BOND INDENTURE
Between
COMMUNITY FACILITIES DISTRICT NO. 2021-1
(BANNER PARK) OF THE CITY OF MENIFEE
and
WILMINGTON TRUST, NATIONAL ASSOCIATION,
as Trustee
Relating to
$__________
COMMUNITY FACILITIES DISTRICT NO. 2021-1
(BANNER PARK) OF THE CITY OF MENIFEE
SPECIAL TAX BONDS, SERIES 2022A
Dated as of __________ 1, 2022
Item Title: 12.2
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Table of Contents
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ARTICLE I
DEFINITIONS
Section 1.1. Definitions ..................................................................................................................... 1
ARTICLE II
GENERAL AUTHORIZATION AND BOND TERMS
Section 2.1. Amount, Issuance, Purpose and Nature of Bonds and Parity Bonds........................... 10 Section 2.2. Type and Nature of Bonds and Parity Bonds .............................................................. 11 Section 2.3. Equality of Bonds and Parity Bonds and Pledge of Net Taxes ................................... 11 Section 2.4. Description of Bonds; Interest Rates ........................................................................... 12 Section 2.5. Place and Form of Payment......................................................................................... 13 Section 2.6. Form of Bonds and Parity Bonds ................................................................................ 13 Section 2.7. Execution and Authentication ..................................................................................... 14 Section 2.8. Bond Register .............................................................................................................. 14 Section 2.9. Registration of Exchange or Transfer.......................................................................... 14 Section 2.10. Mutilated, Lost, Destroyed or Stolen Bonds or Parity Bonds ..................................... 15 Section 2.11. Validity of Bonds and Parity Bonds ............................................................................ 15 Section 2.12. Book-Entry System...................................................................................................... 15 Section 2.13. Representation Letter................................................................................................... 16 Section 2.14. Transfers Outside Book-Entry System ........................................................................ 16 Section 2.15. Payments to the Nominee ............................................................................................ 16 Section 2.16. Initial Depository and Nominee .................................................................................. 17
ARTICLE III
CREATION OF FUNDS AND APPLICATION OF PROCEEDS
Section 3.1. Creation of Funds; Application of Proceeds................................................................ 17 Section 3.2. Deposits to and Disbursements from Special Tax Fund.............................................. 18 Section 3.3. Administrative Expense Fund ..................................................................................... 18 Section 3.4. Interest Account and Principal Account of the Special Tax Fund .............................. 19 Section 3.5. Redemption Account of the Special Tax Fund............................................................ 19 Section 3.6. Reserve Account of the Special Tax Fund .................................................................. 20 Section 3.7. Rebate Fund................................................................................................................. 21 Section 3.8. Surplus Fund................................................................................................................ 24 Section 3.9. Acquisition and Construction Fund............................................................................. 25 Section 3.10. Investments.................................................................................................................. 25
ARTICLE IV
REDEMPTION OF BONDS AND PARITY BONDS
Section 4.1. Redemption of Bonds .................................................................................................. 27 Item Title: 12.2
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Section 4.2. Selection of Bonds and Parity Bonds for Redemption ................................................ 30 Section 4.3. Notice of Redemption.................................................................................................. 30 Section 4.4. Partial Redemption of Bonds or Parity Bonds............................................................. 31 Section 4.5. Effect of Notice and Availability of Redemption Money ........................................... 31
ARTICLE V
COVENANTS AND WARRANTY
Section 5.1. Warranty ...................................................................................................................... 32 Section 5.2. Covenants .................................................................................................................... 32
ARTICLE VI
AMENDMENTS TO INDENTURE
Section 6.1. Supplemental Indentures or Orders Not Requiring Owner Consent ........................... 36 Section 6.2. Supplemental Indentures or Orders Requiring Owner Consent .................................. 36 Section 6.3. Notation of Bonds or Parity Bonds; Delivery of Amended Bonds or Parity Bonds ...........................................................................................................................37
ARTICLE VII
TRUSTEE
Section 7.1. Trustee ......................................................................................................................... 38 Section 7.2. Removal of Trustee ..................................................................................................... 39 Section 7.3. Resignation of Trustee................................................................................................. 39 Section 7.4. Liability of Trustee ...................................................................................................... 39 Section 7.5. Merger or Consolidation.............................................................................................. 43
ARTICLE VIII
EVENTS OF DEFAULT; REMEDIES
Section 8.1. Events of Default ......................................................................................................... 43 Section 8.2. Remedies of Owners.................................................................................................... 44 Section 8.3. Application of Revenues and Other Funds After Default ........................................... 44 Section 8.4. Power of Trustee to Control Proceedings.................................................................... 45 Section 8.5. Appointment of Receivers ........................................................................................... 45 Section 8.6. Non-Waiver ................................................................................................................. 45 Section 8.7. Limitations on Rights and Remedies of Owners ......................................................... 46 Section 8.8. Termination of Proceedings......................................................................................... 46 Item Title: 12.2
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ARTICLE IX
DEFEASANCE AND PARITY BONDS
Section 9.1. Defeasance................................................................................................................... 47 Section 9.2. Conditions for the Issuance of Parity Bonds and Other Additional Indebtedness ................................................................................................................48
ARTICLE X
MISCELLANEOUS
Section 10.1. Cancellation of Bonds and Parity Bonds..................................................................... 50 Section 10.2. Execution of Documents and Proof of Ownership...................................................... 50 Section 10.3. Unclaimed Moneys...................................................................................................... 51 Section 10.4. Provisions Constitute Contract; Governing Law; Venue ............................................ 51 Section 10.5. Future Contracts .......................................................................................................... 52 Section 10.6. Further Assurances ...................................................................................................... 52 Section 10.7. Entire Agreement; Severability ................................................................................... 52 Section 10.8. Notices ......................................................................................................................... 52 Signatures ....................................................................................................................................S-1 EXHIBIT A FORM OF SPECIAL TAX BOND...........................................................................A-1 EXHIBIT B REQUISITION FOR DISBURSEMENT OF PROJECT COSTS ............................B-1 Item Title: 12.2
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BOND INDENTURE
THIS BOND INDENTURE dated as of __________ 1, 2022, by and between COMMUNITY FACILITIES DISTRICT NO. 2021-1 (BANNER PARK) OF THE CITY OF MENIFEE (the “District”) and WILMINGTON TRUST, NATIONAL ASSOCIATION, as trustee (the “Trustee”), governs the terms of the Community Facilities District No. 2021-1 (Banner Park) of the City of Menifee Special Tax Bonds, Series 2022A and any Parity Bonds issued in accordance herewith from time to time.
RECITALS :
A. The City Council of the City of Menifee, located in the County of Riverside, California (the “City Council”), has undertaken proceedings 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 (the “Act”).
B. Based upon Resolution Nos. 21-1030 and 21-1031 adopted by the City Council on June 2, 2021 and an election held on June 2, 2021, authorizing the levy of a special tax and the issuance of bonds, the District is authorized to issue bonds in one or more series pursuant to the Act, in an aggregate principal amount not to exceed $17,000,000.
C. The District intends to finance various Project Costs (as defined herein) through the issuance of bonds in an aggregate principal amount of $__________ designated as the “Community Facilities District No. 2021-1 (Banner Park) of the City of Menifee Special Tax Bonds, Series 2022A” (the “Bonds”); and
D. The District has determined that all requirements of the Act for the issuance of the Bonds have been satisfied.
NOW, THEREFORE, in order to establish the terms and conditions upon and subject to which the Bonds are to be issued, and in consideration of the premises and of the mutual covenants contained herein and of the purchase and acceptance of the Bonds by the Owners thereof, and for other valuable consideration, the receipt of which is hereby acknowledged, the District does hereby covenant and agree, for the benefit of the Owners of the Bonds and any Parity Bonds (as defined herein) which may be issued hereunder from time to time, as follows:
ARTICLE I
DEFINITIONS
Section 1.1. Definitions. Unless the context otherwise requires, the following terms shall have the following meanings:
Account. The term “Account” means any account created pursuant to this Indenture.
Act. The term “Act” means the Mello-Roos Community Facilities Act of 1982, as amended, being Section 53311 et seq. of the California Government Code.
Item Title: 12.2
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Acquisition and Construction Fund. The term “Acquisition and Construction Fund” means the fund by that name established pursuant to Section 3.1 hereof.
Administrative Expense Fund. The term “Administrative Expense Fund” means the account by that name created and established pursuant to Section 3.1 hereof.
Administrative Expenses. The term “Administrative Expenses” means the administrative costs with respect to the calculation and collection of the Special Taxes, including all attorneys’ fees and other costs related thereto, the fees and expenses of the Trustee, any fees and related costs for credit enhancement for the Bonds or any Parity Bonds which are not otherwise paid as Costs of Issuance, any costs related to the District’s compliance with state and federal laws requiring continuing disclosure of information concerning the Bonds and the District, and any other costs otherwise incurred by City staff on behalf of the District in order to carry out the purposes of the District as set forth in the Resolution of Formation and any obligation of the District hereunder.
Administrative Expenses Cap. The term “Administrative Expenses Cap” means $30,600, which amount shall escalate at 2.00% per Fiscal Year (all as calculated by the District), commencing July 1, 2023.
Alternate Penalty Account. The term “Alternate Penalty Account” means the account by that name created and established in the Rebate Fund pursuant to Section 3.1 hereof.
Annual Debt Service. The term “Annual Debt Service” means the principal amount of any Outstanding Bonds or Parity Bonds payable in a Bond Year either at maturity or pursuant to a Sinking Fund Payment and any interest payable on any Outstanding Bonds or Parity Bonds in such Bond Year, if the Bonds and any Parity Bonds are retired as scheduled.
Authorized Investments. The term “Authorized Investments” means any of the following which at the time of investment are legal investments under the laws of the State for the moneys proposed to be invested therein:
(1) For all purposes, including defeasance investments in refunding escrow accounts:
(a) cash; or
(b) obligations of, or obligations guaranteed as to principal and interest by, the U.S. or any agency or instrumentality thereof, when such obligations are backed by the full faith and credit of the U.S., including U.S. treasury obligations, all direct or fully guaranteed obligations, Farmers Home Administration, General Services Administration, guaranteed Title XI financing, Government National Mortgage Association (GNMA) and State and Local Government Series; or (c) obligations of government-sponsored agencies that are not backed by the full faith and credit of the U.S. Government: Federal Home Loan Mortgage Corporation (FHLMC) debt obligations, Farm Credit System (formerly: Federal Land Banks, Federal Intermediate Credit Banks and Banks for Cooperatives), Federal Home Loan Banks (FHL Banks), Federal National Mortgage Association (FNMA) debt obligations, Financing Corp. (FICO) debt obligations, Resolution Funding Corp. (REFCORP) debt obligations and U.S. Agency for International Development (U.S.A.I.D.) guaranteed notes.
Item Title: 12.2
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(2) For all purposes other than defeasance investments in refunding escrow accounts:
(a) obligations of any of the following federal agencies, which obligations represent the full faith and credit of the United States of America: Export-Import Bank, Rural Economic Community Development Administration, U.S. Maritime Administration, Small Business Administration, U.S. Department of Housing & Urban Development (PHAs), Federal Housing Administration and Federal Financing Bank;
(b) direct obligations of any of the following federal agencies, which obligations are not fully guaranteed by the full faith and credit of the United States of America: senior debt obligations issued by the Federal National Mortgage Association (FNMA) or Federal Home Loan Mortgage Corporation (FHLMC), obligations of the Resolution Funding Corporation (REFCORP) and senior debt obligations of the Federal Home Loan Bank System; (c) U.S. dollar denominated deposit accounts, federal funds and bankers’ acceptances with domestic commercial banks (including those of the Trustee and its affiliates) which have a rating on their short term certificates of deposit on the date of purchase of “A-1” or “A-1+” by S&P and “P-1” by Moody’s and maturing no more than 360 days after the date of purchase (ratings on holding companies are not considered as the rating of the bank); (d) commercial paper which is rated at the time of purchase in the single highest classification “A-1+” by S&P and “P-1” by Moody’s and which matures not more than 270 days after the date of purchase;
(e) investments in a money market fund rated “AAm,” “AAm-G” or better by S&P, including funds for which the Trustee or its affiliates provide investment advisory or other management services;
(f) pre-refunded municipal obligations defined as follows: any bonds or other obligations of any state of the United States of America, or any agency, instrumentality or local governmental unit of any such state, which are not callable at the option of the obligor prior to maturity or as to which irrevocable instructions have been given by the obligor to call on the date specified in the notice, and
(i) which are rated, based on irrevocable escrow account or fund (the “escrow”), in the highest rating category of S&P and Moody’s or any successors thereto; or (ii) (1) which are fully secured as to principal and interest and redemption premium, if any, by an escrow consisting only of cash or obligations described in paragraph (1)(b) above, which escrow may be applied only to the payment of such principal of and interest and redemption premium, if any, on such bonds or other obligations on the maturity date or dates thereof or the specified redemption date or dates pursuant to such irrevocable instructions, as appropriate; and (2) which escrow is sufficient, as verified by a nationally recognized independent certified public accountant, to pay principal of and interest and redemption premium, if any, on the bonds or other obligations described in this paragraph on the maturity date or dates specified in the irrevocable instructions referred to above, as appropriate;
(g) municipal obligations rated “Aaa/AAA” or general obligations of states with a rating of at least “Aa2/AA” or higher by both Moody’s and S&P; Item Title: 12.2
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(h) Investment Agreements (supported by appropriate opinions of counsel); and (i) the Local Agency Investment Fund of the State, created pursuant to Section 16429.1 of the California Government Code, to the extent the Trustee is authorized to register such investment in its name.
The value of the above investments shall be determined as follows:
(a) for the purpose of determining the amount in any fund, all Authorized Investments credited to such fund shall be valued at market value. The Trustee shall determine the market value based on accepted industry standards, including the Trustee’s internal systems, and from accepted industry providers. Accepted industry providers shall include, but are not limited to, pricing services provided by Financial Times Interactive Data Corporation, Bank of America Merrill Lynch or Salomon Smith Barney. Notwithstanding anything to the contrary herein, in making any valuation of investments hereunder, the Trustee may utilize computerized securities pricing services that may be available to it, including those available through its regular accounting system, and rely thereon; (b) as to certificates of deposit and bankers acceptances: the face amount thereof, plus accrued interest thereon; and
(c) as to any investment not specified above: the value thereof established by prior agreement between the City and the Trustee.
Authorized Representative of the District. The term “Authorized Representative of the District” means the Mayor, City Manager, Assistant City Manager or City Clerk of the City, or any other officer or employee authorized by the City Council of the City or by an Authorized Representative of the District to undertake the action referenced in this Indenture as required to be undertaken by an Authorized Representative of the District.
Bond Counsel. The term “Bond Counsel” means Stradling Yocca Carlson & Rauth, a Professional Corporation, or another attorney at law or a firm of attorneys selected by the District of nationally recognized standing in matters pertaining to the tax-exempt nature of interest on bonds issued by states and their political subdivisions duly admitted to the practice of law before the highest court of any state of the United States of America or the District of Columbia.
Bond Register. The term “Bond Register” means the books which the Trustee shall keep or cause to be kept on which the registration and transfer of the Bonds and any Parity Bonds shall be recorded.
Bonds. The term “Bonds” means the District’s Special Tax Bonds, Series 2022A issued on __________, 2022 in the aggregate principal amount of $__________.
Bond Year. The term “Bond Year” means the twelve month period commencing on September 2 of each year and ending on September 1 of the following year, except that the first Bond Year for the Bonds or an issue of Parity Bonds shall begin on the Delivery Date and end on the first September 1 which is not more than 12 months after the Delivery Date.
Business Day. The term “Business Day” means a day which is not a Saturday or Sunday or a day of the year on which banks or trust companies in New York, New York, Los Angeles, California, Item Title: 12.2
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or the city where the corporate trust office of the Trustee is located, are not required or authorized by law, regulation or executive order, to close or to remain closed.
Certificate of an Authorized Representative. The term “Certificate of an Authorized Representative” means a written certificate or warrant request executed by an Authorized Representative of the District.
City. The term “City” means the City of Menifee, County of Riverside, State of California.
City Council. The term “City Council” means the City Council of the City.
City Facilities Account. The term “City Facilities Account” means the account by that name created and established in the Acquisition and Construction Fund pursuant to Section 3.1 hereof.
Code. The term “Code” means the Internal Revenue Code of 1986, as amended, and any Regulations, rulings, judicial decisions, and notices, announcements, and other releases of the United States Treasury Department or Internal Revenue Service interpreting and construing it.
Continuing Disclosure Certificate. The term “Continuing Disclosure Certificate” means that certain Continuing Disclosure Certificate dated as of __________ 1, 2022, as originally executed by the District and as it may be from time to time amended or supplemented in accordance with its terms.
Costs of Issuance. The term “Costs of Issuance” means the costs and expenses incurred in connection with the formation of the District and the issuance and sale of the Bonds or any Parity Bonds, including the acceptance and initial annual fees and expenses of the Trustee and its counsel, legal fees and expenses, costs of printing the Bonds and Parity Bonds and the preliminary and final official statements for the Bonds and Parity Bonds, fees of financial consultants, costs of the appraisal and all other related fees and expenses, including reimbursement to property owners within the District for design, engineering and legal costs, as set forth in a Certificate of an Authorized Representative of the District.
Costs of Issuance Account. The term “Costs of Issuance Account” means the account by that name created and established in the Acquisition and Construction Fund pursuant to Section 3.1 hereof.
Delivery Date. The term “Delivery Date” means, with respect to the Bonds and each issue of Parity Bonds, the date on which the bonds of such issue were issued and delivered to the initial purchasers thereof.
Depository. The term “Depository” means The Depository Trust Company, New York, New York, and its successors and assigns as securities depository for the Bonds, or any other securities depository acting as Depository under Article II hereof.
Direct Debt for District Property. The term “Direct Debt for District Property” means that portion of the aggregate principal amount of the Outstanding Bonds and Parity Bonds which is allocable to the property in the District.
District. The term “District” means Community Facilities District No. 2021-1 (Banner Park) of the City of Menifee established pursuant to the Act and Resolution No. 21-1030 adopted by the City Council of the City on June 2, 2021.
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Event of Default. The term “Event of Default” means an event described in Section 8.1 hereof.
Fiscal Year. The term “Fiscal Year” means the period beginning on July 1 of each year and ending on the next following June 30.
Gross Taxes. The term “Gross Taxes” means the amount of all Special Taxes received by the District together with the proceeds collected from the sale of property pursuant to foreclosure for the delinquency of such Special Taxes remaining after the payment of all costs related to such foreclosure actions.
Indenture. The term “Indenture” means this Bond Indenture, together with any Supplemental Indenture approved pursuant to Article VI hereof.
Independent Financial Consultant. The term “Independent Financial Consultant” means a financial consultant or firm of such consultants generally recognized to be well qualified in the financial consulting field, appointed and paid by the District, who, or each of whom: (1) is in fact independent and not under the domination of the District or the City; (2) does not have any substantial interest, direct or indirect, in the District or the City; and (3) is not connected with the District or the City as a member, officer or employee of the District or the City, but who may be regularly retained to make annual or other reports to the District or the City.
Interest Account. The term “Interest Account” means the account by that name created and established in the Special Tax Fund pursuant to Section 3.1 hereof.
Interest Payment Date. The term “Interest Payment Date” means each March 1 and September 1 commencing March 1, 2023; provided, however, that, if any such day is not a Business Day, interest up to the Interest Payment Date will be paid on the Business Day next succeeding such date.
Investment Agreement. The term “Investment Agreement” means one or more agreements for the investment of funds of the District complying with the criteria therefor as set forth in subsection (2)(h) of the definition of Authorized Investments herein.
Maximum Annual Debt Service. The term “Maximum Annual Debt Service” means the maximum sum obtained for any Bond Year prior to the final maturity of the Bonds and any Parity Bonds by adding the following for each Bond Year: (1) the principal amount of all Outstanding Bonds and Parity Bonds payable in such Bond Year either at maturity or pursuant to a Sinking Fund Payment; and (2) the interest payable on the aggregate principal amount of all Bonds and Parity Bonds Outstanding in such Bond Year if the Bonds and Parity Bonds are retired as scheduled.
Moody’s. The term “Moody’s” means Moody’s Investors Service, Inc., its successors and assigns.
Net Taxes. The term “Net Taxes” means Gross Taxes minus amounts set aside to pay Administrative Expenses.
Nominee. The term “Nominee” means the nominee of the Depository, which may be the Depository, as determined from time to time pursuant to Section 2.16 hereof.
Item Title: 12.2
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Ordinance. The term “Ordinance” means Ordinance No. 2021-319 adopted by the City Council on June 16, 2021 providing for the levying of the Special Tax.
Outstanding. The terms “Outstanding” or “Outstanding Bonds and Parity Bonds” means all Bonds and Parity Bonds theretofore issued by the District, except: (i) Bonds and Parity Bonds theretofore cancelled or surrendered for cancellation in accordance with Section 10.1 hereof; (ii) Bonds and Parity Bonds for payment or redemption of which monies shall have been theretofore deposited in trust (whether upon or prior to the maturity or the redemption date of such Bonds or Parity Bonds), provided that, if such Bonds or Parity Bonds are to be redeemed prior to the maturity thereof, notice of such redemption shall have been given as provided in this Indenture or any applicable Supplemental Indenture for Parity Bonds; and (iii) Bonds and Parity Bonds which have been surrendered to the Trustee for transfer or exchange pursuant to Section 2.9 hereof or for which a replacement has been issued pursuant to Section 2.10 hereof.
Overlapping Debt. The term “Overlapping Debt” means with respect to any property within the District, the sum of (a) the aggregate amount of all unpaid assessments which are a lien on such property and which are pledged to secure the repayment of bonds, plus (b) a portion of the principal amount of any outstanding bonds of other community facilities districts which are payable at least partially from special taxes to be levied on such property (the “Other CFD Bonds”) determined by multiplying the aggregate principal amount of the Other CFD Bonds by a fraction, the numerator of which is the amount of special taxes levied for the Other CFD Bonds on such property and the denominator of which is the total amount of special taxes levied for the Other CFD Bonds on all parcels of property which are subject to the levy of such special taxes, based upon information which is available for the then current Fiscal Year.
Owner. The term “Owner” means the person or persons in whose name or names any Bond or Parity Bond is registered.
Parity Bonds. The term “Parity Bonds” means all bonds, notes or other similar evidences of indebtedness hereafter issued, payable out of the Net Taxes and which, as provided in this Indenture or any Supplemental Indenture, rank on a parity with the Bonds.
Participants. The term “Participants” means those broker-dealers, banks and other financial institutions from time to time for which the Depository holds Bonds or Parity Bonds as securities depository.
Person. The term “Person” means natural persons, firms, corporations, partnerships, associations, trusts, public bodies and other entities.
Prepayments. The term “Prepayments” means 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 RMA.
Principal Account. The term “Principal Account” means the account by that name created and established in the Special Tax Fund pursuant to Section 3.1 hereof.
Principal Office of the Trustee. The term “Principal Office of the Trustee” means the office of the Trustee located in Costa Mesa, California, or such other office or offices as the Trustee may designate from time to time, or the office of any successor Trustee where it principally conducts its Item Title: 12.2
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business of serving as trustee under indentures pursuant to which municipal or governmental obligations are issued.
Project. The term “Project” means those public facilities described in the Resolution of Formation which are to be acquired or constructed within and outside of the District, including all engineering, planning and design services and other incidental expenses related to such facilities and other facilities, if any, authorized by the qualified electors within the District from time to time.
Project Costs. The term “Project Costs” means the amounts necessary to finance the Project, to create and replenish any necessary reserve funds, to pay the initial and annual costs associated with the Bonds or any Parity Bonds, including, but not limited to, remarketing, credit enhancement, Trustee and other fees and expenses relating to the issuance of the Bonds or any Parity Bonds and the formation of the District, and to pay any other “incidental expenses” of the District, as such term is defined in the Act.
Rating Agency. The term “Rating Agency” means Moody’s or S&P, or both, as the context requires.
Rebate Account. The term “Rebate Account” means the account by that name created and established in the Rebate Fund pursuant to Section 3.1 hereof.
Rebate Fund. The term “Rebate Fund” means the fund by that name established pursuant to Section 3.1 hereof in which there are established the Accounts described in Section 3.1 hereof.
Rebate Regulations. The term “Rebate Regulations” means any final, temporary or proposed Regulations promulgated under Section 148(f) of the Code.
Record Date. The term “Record Date” means the fifteenth day of the month preceding an Interest Payment Date, regardless of whether such day is a Business Day.
Redemption Account. The term “Redemption Account” means the account by that name created and established in the Special Tax Fund pursuant to Section 3.1 hereof.
Regulations. The term “Regulations” means the regulations adopted or proposed by the Department of Treasury from time to time with respect to obligations issued pursuant to Section 103 of the Code.
Representation Letter. The term “Representation Letter” means the Blanket Letter of Representations from the District to the Depository as described in Section 2.13 hereof.
Reserve Account. The term “Reserve Account” means the account by that name created and established in the Special Tax Fund pursuant to Section 3.1 hereof. “Reserve Policy” means a letter of credit, insurance policy, surety bond or other such funding instrument issued by a municipal bond insurance company rated least “Aa2” or higher by Moody’s or “AA” or higher by S&P, delivered to the Trustee for the purpose of providing all or a portion of the Reserve Requirement for Bonds and Parity Bonds.
Reserve Requirement. The term “Reserve Requirement” means 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, Item Title: 12.2
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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.
Resolution of Formation. The term “Resolution of Formation” means Resolution No. 21-1030 adopted by the City Council on June 2, 2021, pursuant to which the City Council established the District.
RMA. The term “RMA” means the Rate and Method of Apportionment of Special Tax for the District approved by the qualified electors of the District at the June 2, 2021 election.
School Facilities Account. The term “School Facilities Account” means the account by that name created and established in the Acquisition and Construction Fund pursuant to Section 3.1 hereof.
Sinking Fund Payment. The term “Sinking Fund Payment” means the annual payment to be deposited in the Redemption Account to redeem a portion of the Term Bonds in accordance with the schedules set forth in Section 4.1(b) hereof and any annual sinking fund payment schedule to retire any Parity Bonds which are designated as Term Bonds.
Six-Month Period. The term “Six-Month Period” means the period of time beginning on the Delivery Date of each issue of Bonds or Parity Bonds, as applicable, and ending six consecutive months thereafter, and each six-month period thereafter until the latest maturity date of the Bonds and the Parity Bonds (and any obligations that refund an issue of the Bonds or Parity Bonds).
Special Tax Administrator. The term “Special Tax Administrator” means the individual or entity appointed by the City to administer the calculation and collection of the Special Taxes.
Special Tax Fund. The term “Special Tax Fund” means the fund by that name created and established pursuant to Section 3.1 hereof.
Special Taxes. The term “Special Taxes” means the taxes authorized to be levied by the District on property within the District in accordance with the Ordinance, the Resolution of Formation, the Act and the voter approval obtained at the June 2, 2021 election in the District, including any scheduled payments and any Prepayments thereof, the net proceeds of the redemption or sale of property sold as a result of foreclosure of the lien of the 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 shall no longer be pledged hereunder to the payment of the Bonds or Parity Bonds.
S&P. The term “S&P” means S&P Global Ratings, a Standard & Poor’s Financial Services LLC business, its successors and assigns.
Subaccount. The term “Subaccount” means any subaccount created pursuant to this Indenture.
Supplemental Indenture. The term “Supplemental Indenture” means any supplemental indenture amending or supplementing this Indenture.
Surplus Fund. The term “Surplus Fund” means the fund by that name created and established pursuant to Section 3.1 hereof.
Item Title: 12.2
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Tax Certificate. The term “Tax Certificate” means the certificate by that name to be executed by the District on a Delivery Date to establish certain facts and expectations and which contains certain covenants relevant to compliance with the Code.
Tax-Exempt. The term “Tax-Exempt” means, with reference to an Authorized Investment, an Authorized Investment the interest earnings on which are excludable from gross income for federal income tax purposes pursuant to Section 103(a) of the Code, other than one described in Section 57(a)(5)(C) of the Code.
Taxable Property. The term “Taxable Property” has the meaning ascribed to it in the RMA.
Term Bonds. The term “Term Bonds” means the Bonds maturing on September 1, ____, September 1, ____ and September 1, ____ and any term maturities of an issue of Parity Bonds as specified in a Supplemental Indenture.
Trustee. The term “Trustee” means Wilmington Trust, National Association, a national banking association duly organized and existing under the laws of the United States, at its principal corporate trust office in Costa Mesa, California, and its successors or assigns, or any other bank or trust company which may at any time be substituted in its place as provided in Sections 7.2 or 7.3, and any successor thereto.
Underwriter. The term “Underwriter” means, with respect to the Bonds, Stifel, Nicolaus & Company, Incorporated, and with respect to each issue of Parity Bonds, the institution or institutions, if any, with whom the District enters into a purchase contract for the sale of such issue.
Value of District Property. The term “Value of District Property” means for all parcels of property in the District which are subject to the levy of the Special Taxes and not delinquent in the payment of any Special Taxes then due and owing, either (i) the fair market value, as of the date of the appraisal provided for below of such parcels, including with respect to such parcels the value of the then existing improvements thereon, as estimated by an appraiser, who shall be a State of California certified general real estate appraiser selected and employed by the District, in an appraisal performed within ninety (90) days preceding the date of such determination based upon a methodology of valuation consistent with the City’s policy for appraisals, provided that a mass appraisal methodology may be applied when valuing Developed Property (as defined in the RMA); or (ii) the full cash value of any or all of such parcels, including with respect to such parcels the value of the improvements thereon, as set forth on the last equalized assessment roll of the County Assessor of the County of Riverside.
Water Facilities Account. The term “Water Facilities Account” means the account by that name created and established in the Acquisition and Construction Fund pursuant to Section 3.1 hereof.
ARTICLE II
GENERAL AUTHORIZATION AND BOND TERMS
Section 2.1. Amount, Issuance, Purpose and Nature of Bonds and Parity Bonds. Under and pursuant to the Act, the Bonds in the aggregate principal amount of $__________, together with any Parity Bonds authorized by the City Council in accordance with Section 9.2 hereof, shall be issued for the purposes of financing and/or refinancing the Project, paying Costs of Issuance and funding the Item Title: 12.2
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Reserve Account; provided that the aggregate principal amount of the Bonds and any Parity Bonds shall not exceed the total indebtedness presently authorized or subsequently authorized by the qualified electors within the District in accordance with the Act. The Bonds and any Parity Bonds shall be and are limited obligations of the District and shall be payable as to the principal thereof and interest thereon and any premiums upon the redemption thereof solely from the Net Taxes and the other amounts in the Special Tax Fund.
Section 2.2. Type and Nature of Bonds and Parity Bonds. Neither the faith and credit nor the taxing power of the City, the State of California, or any political subdivision thereof other than the District is pledged to the payment of the Bonds or any Parity Bonds. Except for the Net Taxes, no other taxes are pledged to the payment of the Bonds or any Parity Bonds. The Bonds and any Parity Bonds are not general or special obligations of the City nor general obligations of the District, but are limited obligations of the District payable solely from certain amounts deposited by the District in the Special Tax Fund, as more fully described herein. The District’s limited obligation to pay the principal of, premium, if any, and interest on the Bonds and any Parity Bonds from amounts in the Special Tax Fund is absolute and unconditional, free of deductions and without any abatement, offset, recoupment, diminution or set-off whatsoever. No Owner of the Bonds or any Parity Bonds may compel the exercise of the taxing power by the District (except as pertains to the Special Taxes) or the City or the forfeiture of any of their property. The principal of and interest on the Bonds and any Parity Bonds and premiums upon the redemption thereof, if any, are not a debt of the City, the State of California or any of its political subdivisions within the meaning of any constitutional or statutory limitation or restriction. The Bonds and any Parity Bonds are not a legal or equitable pledge, charge, lien, or encumbrance upon any of the District’s property, or upon any of its income, receipts or revenues, except the Net Taxes and other amounts in the Special Tax Fund which are, under the terms of this Indenture and the Act, set aside for the payment of the Bonds, any Parity Bonds and interest thereon, and neither the members of the legislative body of the District or the members of the City Council nor any persons executing the Bonds or any Parity Bonds are liable personally on the Bonds or any Parity Bonds, by reason of their issuance.
Notwithstanding anything to the contrary contained in this Indenture, the District shall not be required to advance any money derived from any source of income other than the Net Taxes for the payment of the interest on or the principal of the Bonds or any Parity Bonds, or for the performance of any covenants contained herein. The District may, however, advance funds for any such purpose, provided that such funds are derived from a source legally available for such purpose.
Section 2.3. Equality of Bonds and Parity Bonds and Pledge of Net Taxes. Pursuant to the Act and this Indenture, the Bonds and any Parity Bonds shall be equally payable from and secured by a first pledge of and lien on the Net Taxes and other amounts in the Special Tax Fund, without priority for number, date of the Bonds or Parity Bonds, date of sale, date of execution, or date of delivery, and the payment of the interest on and principal of the Bonds and any Parity Bonds and any premiums upon the redemption thereof, shall be exclusively paid from the Net Taxes and other amounts in the Special Tax Fund which are hereby set aside for the payment of the Bonds and any Parity Bonds; provided that any delinquent Special Tax sold to an independent third-party or to the City for 100% of the delinquent amount shall no longer be pledged hereunder to the payment of the Bonds or Parity Bonds. Amounts in the Special Tax Fund shall constitute a trust fund held for the benefit of the Owners to be applied to the payment of the interest on and principal of the Bonds and any Parity Bonds and, so long as any of the Bonds and any Parity Bonds or interest thereon remain Outstanding, shall not be used for any other purpose, except as permitted by this Indenture or any Supplemental Indenture.
Notwithstanding any provision contained in this Indenture to the contrary, Net Taxes deposited in the Item Title: 12.2
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Rebate Fund and the Surplus Fund shall no longer be considered to be pledged to the Bonds or any Parity Bonds, and none of the Rebate Fund, the Surplus Fund, the Acquisition and Construction Fund or the Administrative Expense Fund shall be construed as a trust fund held for the benefit of the Owners.
Nothing in this Indenture or any Supplemental Indenture shall preclude: (i) subject to the limitations contained hereunder, the redemption prior to maturity of any Bonds or Parity Bonds subject to call and redemption and payment of said Bonds or Parity Bonds from proceeds of refunding bonds issued under the Act as the same now exists or as hereafter amended, or under any other law of the State of California; or (ii) the issuance, subject to the limitations contained herein, of Parity Bonds which shall be payable from Net Taxes.
Section 2.4. Description of Bonds; Interest Rates. The Bonds and any Parity Bonds shall be issued in fully registered form in denominations of $5,000 or any integral multiple thereof. The Bonds and any Parity Bonds of each issue shall be numbered as desired by the Trustee.
The Bonds shall be designated “Community Facilities District No. 2021-1 (Banner Park) of the City of Menifee Special Tax Bonds, Series 2022A.” The Bonds shall be dated as of their Delivery Date and shall mature and be payable on September 1 in the years and in the aggregate principal amounts and shall be subject to and shall bear interest at the rates set forth in the table below payable on March 1, 2023 and each Interest Payment Date thereafter:
Maturity Date
September 1
Principal
Amount
Interest
Rate
$ %
*
*
*
*Term Bond
Interest shall be payable on each Bond and Parity Bond from the date established in accordance with Section 2.5 below on each Interest Payment Date thereafter until the principal sum of such Bond or Parity Bond has been paid; provided, however, that if at the maturity date of any Bond or Parity Bond (or if the same is redeemable and shall be duly called for redemption, then at the date fixed for redemption) funds are available for the payment or redemption thereof in full, in accordance with the terms of this Indenture, such Bonds and Parity Bonds shall then cease to bear interest. Interest due on the Bonds and Parity Bonds shall be calculated on the basis of a 360-day year comprised of twelve 30-day months.
Item Title: 12.2
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Section 2.5. Place and Form of Payment. The Bonds and Parity Bonds shall be payable both as to principal and interest, and as to any premiums upon the redemption thereof, in lawful money of the United States of America. The principal of the Bonds and Parity Bonds and any premiums due upon the redemption thereof shall be payable upon presentation and surrender thereof at the Principal Office of the Trustee, or at the designated office of any successor Trustee. If the Nominee of the Bonds or Parity Bonds is registered to Cede & Co., payment of principal and any premiums shall be made without presentment. Interest on any Bond or Parity Bond shall be payable from the Interest Payment Date next preceding the date of authentication of such Bond or Parity Bond, unless: (i) such date of authentication is an Interest Payment Date, in which event interest shall be payable from such date of authentication; (ii) the date of authentication is after a Record Date but prior to the immediately succeeding Interest Payment Date, in which event interest shall 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 or Parity Bond, in which event interest shall be payable from the dated date of such Bond or Parity Bond, as applicable; provided, however, that if at the time of authentication of such Bond or Parity Bond, interest is in default, interest on such Bond or Parity Bond shall 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 or Parity Bond, interest on such Bond or Parity Bond shall be payable from its dated date. Interest on any Bond or Parity Bond shall be paid to the person whose name shall appear in the Bond Register as the Owner of such Bond or Parity Bond as of the close of business on the Record Date. Such interest shall be paid by check of the Trustee mailed by first class mail, postage prepaid, to such Owner at his or her address as it appears on the Bond Register. In addition, upon a request in writing received by the Trustee on or before the applicable Record Date from an Owner of $1,000,000 or more in principal amount of the Bonds or of any issue of Parity Bonds, payment shall be made on the Interest Payment Date by wire transfer in immediately available funds to an account within the United States of America designated by such Owner.
Section 2.6. Form of Bonds and Parity Bonds. The definitive Bonds may be printed from steel engraved or lithographic plates or may be typewritten. The Bonds and the certificate of authentication shall be substantially in the form attached hereto as Exhibit A, which form is hereby approved and adopted as the form of such Bonds and of the certificate of authentication. Each issue of Parity Bonds and the certificate of authentication therefor shall be in the form provided in the Supplemental Indenture for such issue of Parity Bonds.
Until definitive Bonds or Parity Bonds, as applicable, shall be prepared, the District may cause to be executed and delivered in lieu of such definitive Bonds or Parity Bonds temporary bonds in typed, printed, lithographed or engraved form and in fully registered form, subject to the same provisions, limitations and conditions as are applicable in the case of definitive Bonds or Parity Bonds, except that they may be in any denominations authorized by the District. Until exchanged for definitive Bonds or Parity Bonds, as applicable, any temporary bond shall be entitled and subject to the same benefits and provisions of this Indenture as definitive Bonds and Parity Bonds. If the District issues temporary Bonds or Parity Bonds, it shall execute and furnish definitive Bonds or Parity Bonds, as applicable, without unnecessary delay and thereupon any temporary Bond or Parity Bond may be surrendered to the Trustee at its office, without expense to the Owner, in exchange for a definitive Bond or Parity Bond of the same issue, maturity, interest rate and principal amount in any authorized denomination.
All temporary Bonds or Parity Bonds so surrendered shall be cancelled by the Trustee and shall not be reissued.
Item Title: 12.2
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Section 2.7. Execution and Authentication. The Bonds and Parity Bonds shall be signed on behalf of the District by the manual or facsimile signature of the Mayor of the City and countersigned by the manual or facsimile signature of the City Clerk of the City, or any duly appointed Deputy Clerk, in their capacity as officers of the District, and the seal of the City or the District (or a facsimile thereof) may be impressed, imprinted, engraved or otherwise reproduced thereon, and attested by the signature of the City Clerk of the City. In case any one or more of the officers who shall have signed or sealed any of the Bonds or Parity Bonds shall cease to be such officer before the Bonds or Parity Bonds so signed and sealed have been authenticated and delivered by the Trustee (including new Bonds or Parity Bonds delivered pursuant to the provisions hereof with reference to the transfer and exchange of Bonds or Parity Bonds or lost, stolen, destroyed or mutilated Bonds or Parity Bonds), such Bonds and Parity Bonds shall nevertheless be valid and may be authenticated and delivered as herein provided, and may be issued as if the person who signed or sealed such Bonds or Parity Bonds had not ceased to hold such office.
Only the Bonds as shall bear thereon such certificate of authentication in the form set forth in Exhibit A attached hereto shall be entitled to any right or benefit under this Indenture, and no Bond shall be valid or obligatory for any purpose until such certificate of authentication shall have been duly executed by the Trustee.
Section 2.8. Bond Register. The Trustee will keep or cause to be kept, at its office, sufficient books for the registration and transfer of the Bonds and any Parity Bonds which shall upon reasonable prior notice be open to inspection by the District during all regular business hours, and, subject to the limitations set forth in Section 2.9 below, upon presentation for such purpose, the Trustee shall, under such reasonable regulations as it may prescribe, register or transfer or cause to be transferred on said Bond Register, Bonds and any Parity Bonds as herein provided.
The District and the Trustee may treat the Owner of any Bond or Parity Bond whose name appears on the Bond Register as the absolute Owner of that Bond or Parity Bond for any and all purposes and the District and the Trustee shall not be affected by any notice to the contrary. The District and the Trustee may rely on the address of the Owner as it appears in the Bond Register for any and all purposes. It shall be the duty of the Owner to give written notice to the Trustee of any change in the Owner’s address so that the Bond Register may be revised accordingly.
Section 2.9. Registration of Exchange or Transfer. Subject to the limitations set forth in the following paragraph, the registration of any Bond or Parity Bond may, in accordance with its terms, be transferred upon the Bond Register by the person in whose name it is registered, in person or by his or her duly authorized attorney, upon surrender of such Bond or Parity Bond for cancellation at the office of the Trustee, accompanied by delivery of written instrument of transfer in a form acceptable to the Trustee and duly executed by the Owner or his or her duly authorized attorney.
Bonds or Parity Bonds may be exchanged at the office of the Trustee for a like aggregate principal amount of Bonds or Parity Bonds for other authorized denominations of the same maturity and issue. The Trustee shall not collect from the Owner any charge for any new Bond or Parity Bond issued upon any exchange or transfer, but shall require the Owner requesting such exchange or transfer to pay any tax or other governmental charge required to be paid with respect to such exchange or transfer. Whenever any Bonds or Parity Bonds shall be surrendered for registration of transfer or exchange, the District shall execute and the Trustee shall authenticate and deliver a new Bond or Bonds or a new Parity Bond or Parity Bonds, as applicable, of the same issue and maturity, for a like aggregate principal amount; provided that the Trustee shall not be required to register transfers or make Item Title: 12.2
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exchanges of: (i) Bonds or Parity Bonds for a period of 15 days next preceding any selection of the Bonds or Parity Bonds to be redeemed; or (ii) any Bonds or Parity Bonds chosen for redemption.
Section 2.10. Mutilated, Lost, Destroyed or Stolen Bonds or Parity Bonds. If any Bond or Parity Bond shall become mutilated, the District shall execute, and the Trustee shall authenticate and deliver, a new Bond or Parity Bond of like tenor, date, issue and maturity in exchange and substitution for the Bond or Parity Bond so mutilated, but only upon surrender to the Trustee of the Bond or Parity Bond so mutilated. Every mutilated Bond or Parity Bond so surrendered to the Trustee shall be cancelled by the Trustee pursuant to Section 10.1 hereof. If any Bond or Parity Bond shall be lost, destroyed or stolen, evidence of such loss, destruction or theft may be submitted to the Trustee and, if such evidence is satisfactory to the Trustee and, if any indemnity satisfactory to the Trustee shall be given, the District shall execute and the Trustee shall authenticate and deliver a new Bond or Parity Bond, as applicable, of like tenor, maturity and issue, numbered and dated as the Trustee shall determine in lieu of and in substitution for the Bond or Parity Bond so lost, destroyed or stolen. Any Bond or Parity Bond issued in lieu of any Bond or Parity Bond alleged to be mutilated, lost, destroyed or stolen shall be equally and proportionately entitled to the benefits hereof with all other Bonds and Parity Bonds issued hereunder. The Trustee shall not treat both the original Bond or Parity Bond and any replacement Bond or Parity Bond as being Outstanding for the purpose of determining the principal amount of Bonds or Parity Bonds which may be executed, authenticated and delivered hereunder or for the purpose of determining any percentage of Bonds or Parity Bonds Outstanding hereunder, but both the original and replacement Bond or Parity Bond shall be treated as one and the same.
Notwithstanding any other provision of this Section, in lieu of delivering a new Bond or Parity Bond which has been mutilated, lost, destroyed or stolen, and which has matured, the Trustee may make payment with respect to such Bonds or Parity Bonds.
Section 2.11. Validity of Bonds and Parity Bonds. The validity of the authorization and issuance of the Bonds and any Parity Bonds shall not be affected in any way by any defect in any proceedings taken by the District for the financing of the Project, or by the invalidity, in whole or in part, of any contracts made by the District in connection therewith, and shall not be dependent upon the completion of the financing of the Project or upon the performance by any Person of his obligation with respect to the Project, and the recital contained in the Bonds or any Parity Bonds that the same are issued pursuant to the Act and other applicable laws of the State shall be conclusive evidence of their validity and of the regularity of their issuance.
Section 2.12. Book-Entry System. The Bonds shall be initially delivered in the form of a separate single fully registered Bond (which may be typewritten) for each maturity of the Bonds. Upon initial delivery, the ownership of each such Bond shall be registered in the registration books kept by the Trustee in the name of the Nominee as nominee of the Depository. Except as provided in Section 2.14 hereof, all of the Outstanding Bonds shall be registered in the registration books kept by the Trustee in the name of the Nominee. At the election of the District, any Parity Bonds may also be issued as book-entry bonds registered in the name of the Nominee as provided herein, in which case the references in Sections 2.12 through 2.15 to “Bonds” shall be applicable to such Parity Bonds.
With respect to Bonds registered in the registration books kept by the Trustee in the name of the Nominee, the District and the Trustee shall have no responsibility or obligation to any such Participant or to any Person on behalf of which such a Participant holds an interest in the Bonds.
Without limiting the immediately preceding sentence, the District and the Trustee shall have no responsibility or obligation with respect to: (i) the accuracy of the records of the Depository, the Nominee, or any Participant with respect to any ownership interest in the Bonds; (ii) the delivery to Item Title: 12.2
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any Participant or any other Person, other than an Owner as shown in the registration books kept by the Trustee, of any notice with respect to the Bonds, including any notice of redemption; (iii) the selection by the Depository and its Participants of the beneficial interests in the Bonds to be redeemed in the event that the Bonds are redeemed in part; or (iv) the payment to any Participant or any other Person, other than an Owner as shown in the registration books kept by the Trustee, of any amount with respect to principal of, premium, if any, or interest due with respect to the Bonds. The District and the Trustee may treat and consider the Person in whose name each Bond is registered in the registration books kept by the Trustee as the holder and absolute owner of such Bond for the purpose of payment of the principal of, premium, if any, and interest on such Bond, for the purpose of giving notices of redemption and other matters with respect to such Bond, for the purpose of registering transfers with respect to such Bond and for all other purposes whatsoever. The Trustee shall pay all principal of, premium, if any, and interest due on the Bonds only to or upon the order of the respective Owner, as shown in the registration books kept by the Trustee, or their respective attorneys duly authorized in writing, and all such payments shall be valid and effective to satisfy and discharge fully the District’s obligations with respect to payment of the principal, premium, if any, and interest due on the Bonds to the extent of the sum or sums so paid. No Person other than an Owner, as shown in the registration books kept by the Trustee, shall receive a Bond evidencing the obligation of the District to make payments of principal, premium, if any, and interest pursuant to this Indenture. Upon delivery by the Depository to the Trustee and the District of written notice to the effect that the Depository has determined to substitute a new nominee in place of the Nominee, and subject to the provisions herein with respect to Record Dates, the word Nominee in this Indenture shall refer to such new nominee of the Depository.
Section 2.13. Representation Letter. In order to qualify the Bonds and any Parity Bonds which the District elects to register in the name of the Nominee for the Depository’s book-entry system, an Authorized Representative of the District is hereby authorized to execute from time to time and deliver to such Depository the Representation Letter. The execution and delivery of the Representation Letter shall not in any way limit the provisions of Section 2.12 or in any other way impose upon the District or the Trustee any obligation whatsoever with respect to persons having interests in the Bonds other than the Owners, as shown on the registration books kept by the Trustee. The District agrees to take all action necessary to continuously comply with all representations made by it in the Representation Letter. In addition to the execution and delivery of the Representation Letter, the Authorized Representatives of the District are hereby authorized to take any other actions, not inconsistent with this Indenture, to qualify the Bonds for the Depository’s book-entry program.
Section 2.14. Transfers Outside Book-Entry System. In the event that: (i) the Depository determines not to continue to act as securities depository for the Bonds; or (ii) the District determines that the Depository shall no longer so act, then the District will discontinue the book-entry system with the Depository. If the District fails to identify another qualified securities depository to replace the Depository then the Bonds so designated shall no longer be restricted to being registered in the registration books kept by the Trustee in the name of the Nominee, but shall be registered in whatever name or names Persons transferring or exchanging Bonds shall designate, in accordance with the provisions of Section 2.9 hereof.
Section 2.15. Payments to the Nominee. Notwithstanding any other provisions of this Indenture to the contrary, so long as any Bond is registered in the name of the Nominee, all payments with respect to principal, premium, if any, and interest due with respect to such Bond and all notices with respect to such Bond shall be made and given, respectively, as provided in the Representation Letter or as otherwise instructed by the Depository.
Item Title: 12.2
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Section 2.16. Initial Depository and Nominee. The initial Depository under this Indenture shall be The Depository Trust Company, New York, New York. The initial Nominee shall be Cede & Co., as Nominee of The Depository Trust Company, New York, New York.
ARTICLE III
CREATION OF FUNDS AND APPLICATION OF PROCEEDS
Section 3.1. Creation of Funds; Application of Proceeds. (a) There are hereby created and established and shall be maintained by the Trustee the following funds and accounts:
(1) The Community Facilities District No. 2021-1 (Banner Park) of the City of Menifee Special Tax Fund (the “Special Tax Fund”) (in which there shall be established and created an Interest Account, a Principal Account, a Redemption Account and a Reserve Account). (2) The Community Facilities District No. 2021-1 (Banner Park) of the City of Menifee Rebate Fund (the “Rebate Fund”) (in which there shall be established a Rebate Account and an Alternate Penalty Account).
(3) The Community Facilities District No. 2021-1 (Banner Park) of the City of Menifee Acquisition and Construction Fund (the “Acquisition and Construction Fund”) (in which there shall be established a City Facilities Account, a Water Facilities Account, a School Facilities Account and a Costs of Issuance Account).
(4) The Community Facilities District No. 2021-1 (Banner Park) of the City of Menifee Surplus Fund (the “Surplus Fund”).
The amounts on deposit in the foregoing funds, accounts and subaccounts shall be held by the Trustee. The Trustee shall invest and disburse the amounts in such funds, accounts and subaccounts in accordance with the provisions of this Article III and shall disburse investment earnings thereon in accordance with the provisions of Section 3.10 hereof.
In connection with the issuance of any Parity Bonds as described in Section 9.2, the Trustee, at the direction of an Authorized Representative of the District, may create new funds, accounts or subaccounts, or may create additional accounts and subaccounts within any of the foregoing funds and accounts for the purpose of separately accounting for the proceeds of the Bonds and any Parity Bonds. (b) There is hereby created and established the Community Facilities District No. 2021-1 (Banner Park) of the City of Menifee Administrative Expense Fund (the “Administrative Expense Fund”), which Administrative Expense Fund shall be held by the District (c) The proceeds of the sale of the Bonds shall be received by the Trustee on behalf of the District and deposited and transferred as follows:
(1) $__________ shall be transferred to the Costs of Issuance Account of the Acquisition and Construction Fund to pay the Costs of Issuance of the Bonds; Item Title: 12.2
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(2) $__________ shall be transferred to the Reserve Account of the Special Tax Fund to fund the Reserve Requirement;
(3) $__________ shall be transferred to the Acquisition and Construction Fund of which $__________ shall be deposited in the City Facilities Account, $__________ shall be deposited in the Water Facilities Account and $__________ shall be deposited in the School Facilities Account.
The Trustee may, in its discretion, establish temporary funds or accounts in its books and records to facilitate such transfers.
Section 3.2. Deposits to and Disbursements from Special Tax Fund. (a) In each Fiscal Year, upon the receipt of Special Taxes, the District shall deposit to the Administrative Expense Fund an amount up to the Administrative Expenses Cap for such Fiscal Year, and shall transfer the remainder of the Special Taxes to the Trustee for the purposes set forth in Section (b) below
(b) Except for Prepayments, which shall be deposited to the Redemption Account of the Special Tax Fund, the Trustee shall, 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 shall transfer the Special Taxes on deposit in the Special Tax Fund on the dates and in the amounts set forth in the following Sections, in the following order of priority, to:
(1) the Interest Account of the Special Tax Fund;
(2) the Principal Account of the Special Tax Fund;
(3) the Redemption Account of the Special Tax Fund;
(4) the Reserve Account of the Special Tax Fund;
(5) the District for deposit to the Administrative Expense Fund an amount as set forth in a Certificate of an Authorized Representative, which amount shall equal the extent to which Administrative Expenses exceed or are expected to exceed the Administrative Expense Cap; (6) the Rebate Fund; and
(7) the Surplus Fund.
(c) At maturity of all of the Bonds and Parity Bonds and, after all principal and interest then due on the Bonds and Parity Bonds then Outstanding have been paid or provided for and any amounts owed to the Trustee have been paid in full, moneys in the Special Tax Fund and any accounts therein may be used by the District for any lawful purpose.
Section 3.3. Administrative Expense Fund. Prior to transferring Special Taxes to the Trustee, the District shall not retain and deposit in the Administrative Expense Fund in a Bond Year an amount in excess of the Administrative Expenses Cap until such time as there has been deposited to the Interest Account and the Principal Account an amount, together with any amounts already on deposit therein, that is sufficient to pay the interest and principal on all Bonds and Parity Bonds due in such Bond Year and to restore the Reserve Account to the Reserve Requirement. Notwithstanding the Item Title: 12.2
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foregoing, amounts in excess of the Administrative Expenses Cap may be transferred by the Trustee to the District for deposit to the Administrative Expense Fund to the extent necessary to collect delinquent Special Taxes as set forth in a Certificate of an Authorized Representative of the District.
Section 3.4. Interest Account and Principal Account of the Special Tax Fund. The principal of and interest due on the Bonds and any Parity Bonds until maturity, other than principal due upon redemption, shall be paid by the Trustee from the Principal Account and the Interest Account of the Special Tax Fund, respectively.
For the purpose of assuring that the payment of principal of and interest on the Bonds and any Parity Bonds will be made when due, after making the transfer required by Section 3.3, at least one Business Day prior to each March 1 and September 1, the Trustee shall make the following transfers from the Special Tax Fund first to the Interest Account and then to the Principal Account; provided, however, that to the extent that deposits have been made in the Interest Account or the Principal Account from the proceeds of the sale of an issue of the Bonds or any Parity Bonds, or otherwise, the transfer from the Special Tax Fund need not be made; and provided, further, that, if amounts in the Special Tax Fund are inadequate to make the foregoing transfers, then any deficiency shall be made up by transfers from the Reserve Account:
(a) To the Interest Account, an amount such that the balance in the Interest Account one Business Day prior to each Interest Payment Date shall be 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 shall be used for the payment of interest on the Bonds and any Parity Bonds as the same become due. (b) 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, shall 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.
Section 3.5. Redemption Account of the Special Tax Fund. (a) With respect to each September 1 on which a Sinking Fund Payment is due, after the deposits have been made to the Administrative Expense Fund, the Interest Account of the Special Tax Fund and the Principal Account of the Special Tax Fund as required by Sections 3.3 and 3.4 hereof, the Trustee shall next transfer into the Redemption Account of the Special Tax Fund from the Special Tax Fund 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 shall be made up by an immediate transfer from the Reserve Account, if funded, pursuant to Section 3.6 below.
Moneys so deposited in the Redemption Account shall be used and applied by the Trustee to call and redeem Term Bonds in accordance with the Sinking Fund Payment schedules set forth in Section 4.1(b) hereof, and to redeem Parity Bonds in accordance with any Sinking Fund Payment schedule in the Supplemental Indenture for such Parity Bonds.
Item Title: 12.2
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(b) After making the deposits to the Administrative Expense Fund, the Interest Account of the Special Tax Fund and the Principal Account of the Special Tax Fund pursuant to Sections 3.3 and
3.4 above and to the Redemption Account for Sinking Fund Payments then due pursuant to subparagraph (a) of this Section, and in accordance with the District’s election to call Bonds for optional redemption as set forth in Section 4.1(a) hereof, or to call Parity Bonds for optional redemption as set forth in any Supplemental Indenture for Parity Bonds, the Trustee shall transfer from the Special Tax Fund and deposit in the Redemption Account moneys available for the purpose and sufficient to pay the principal and the premiums, if any, payable on the Bonds or Parity Bonds called for optional redemption; provided, however, that amounts in the Special Tax Fund may be applied to optionally redeem Bonds and Parity Bonds only if immediately following such redemption the amount in the Reserve Account will equal the Reserve Requirement. (c) Prepayments deposited to the Redemption Account shall be applied on the redemption date established pursuant to Section 4.1(c) hereof to the payment of the principal of, premium, if any, and interest on the Bonds and Parity Bonds to be redeemed with such Prepayments. (d) Moneys set aside in the Redemption Account shall be used solely for the purpose of redeeming Bonds and Parity Bonds and shall be applied on or after the redemption date to the payment of principal of and premium, if any, on the Bonds or Parity Bonds to be redeemed upon presentation and surrender of such Bonds or Parity Bonds, and, in the case of an optional redemption or a special mandatory redemption from Prepayments, to pay the interest thereon; provided, however, that in lieu or partially in lieu of such call and redemption, moneys deposited in the Redemption Account may be used to purchase Outstanding Bonds or Parity Bonds in the manner hereinafter provided. Purchases of Outstanding Bonds or Parity Bonds may be made by the District at public or private sale as and when and at such prices as the District may in its discretion determine but only at prices (including brokerage or other expenses) not more than par plus accrued interest, plus, in the case of moneys set aside for an optional redemption or a special mandatory redemption, the premium applicable at the next following call date according to the premium schedule established pursuant to Section 4.1(a) or
4.1(c) hereof, as applicable, or in the case of Parity Bonds the premium established in any Supplemental Indenture. Any accrued interest payable upon the purchase of Bonds or Parity Bonds may be paid from the amount reserved in the Interest Account of the Special Tax Fund for the payment of interest on the next following Interest Payment Date.
Section 3.6. Reserve Account of the Special Tax Fund. There shall be maintained in the Reserve Account of the Special Tax Fund an amount equal to the Reserve Requirement. The Reserve Requirement may be satisfied in whole or in part by cash, a Reserve Policy, or a combination thereof.
The amounts in the Reserve Account shall be applied as follows:
(a) Moneys in the Reserve Account shall be used solely for the purpose of paying the principal of, including Sinking Fund Payments, and interest on the Bonds and any Parity Bonds when due in the event that the moneys in the Interest Account and the Principal Account of the Special Tax Fund are insufficient therefor or moneys in the Redemption Account of the Special Tax Fund are insufficient to make a Sinking Fund Payment when due and for the purpose of making any required transfer to the Rebate Fund pursuant to Section 3.7 hereof upon written direction from the District. If the amounts in the Interest Account, the Principal Account or the Redemption Account of the Special Tax Fund are insufficient to pay the principal of, including Sinking Fund Payments, or interest on any Parity Bonds when due, or amounts in the Special Tax Fund are insufficient to make transfers to the Rebate Fund when required, the Trustee shall withdraw from the Reserve Account, first from the cash on deposit therein, and second from a draw on the Reserve Policy, if any, for deposit in the Interest Item Title: 12.2
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Account, the Principal Account or the Redemption Account of the Special Tax Fund or the Rebate Fund, as applicable, moneys necessary for such purposes. (b) Whenever moneys are withdrawn from the Reserve Account, after making the required transfers referred to in Sections 3.3, 3.4 and 3.5 above, the Trustee shall transfer to the Reserve Account from available moneys in the Special Tax Fund, or from any other legally available funds which the District elects to apply to such purpose, the amount needed to restore the amount of such Reserve Account to the Reserve Requirement by first, repaying any amounts due under the Reserve Policy, and second to fund the Reserve Account to the Reserve Requirement. Moneys in the Special Tax Fund shall be deemed available for transfer to the Reserve Account only if the Trustee determines that such amounts will not be needed to make the deposits required to be made to the Administrative Expense Fund, or the Interest Account, the Principal Account or the Redemption Account of the Special Tax Fund on or before the next September 1. If amounts in the Special Tax Fund together with any other amounts transferred to replenish the Reserve Account are inadequate to restore the Reserve Account to the Reserve Requirement, including any amounts necessary to pay costs related to the Reserve Policy, if any, then the District shall include the amount necessary to restore the Reserve Account to the Reserve Requirement, in the next annual Special Tax levy to the extent of the maximum permitted Special Tax rates.
(c) In connection with a redemption of Bonds pursuant to Section 4.1(a) or 4.1(c) or Parity Bonds in accordance with any Supplemental Indenture, or a partial defeasance of Bonds or Parity Bonds in accordance with Section 9.1 hereof, amounts in the Reserve Account may be applied to such redemption or partial defeasance so long as the amount on deposit in the Reserve Account following such redemption or partial defeasance equals the Reserve Requirement. The District shall set forth in a Certificate of an Authorized Representative the amount in the Reserve Account to be transferred to the Redemption Account on a redemption date or to be transferred pursuant to the Indenture to partially defease Bonds or Parity Bonds, and the Trustee shall make such transfer on the applicable redemption or defeasance date, subject to the limitation in the preceding sentence. (d) To the extent that the Reserve Account is at the Reserve Requirement as of the first day of the final Bond Year for the Bonds or an issue of Parity Bonds, amounts in the Reserve Account may be applied to pay the principal of and interest due on the Bonds and Parity Bonds, as applicable, in the final Bond Year for such issue. Moneys in the Reserve Account in excess of the Reserve Requirement not transferred in accordance with the preceding provisions of this Section shall be withdrawn from the Reserve Account on the Business Day before each March 1 and September 1 and shall be transferred to the Acquisition and Construction Fund or an Account therein, as directed by an Authorized Representative of the District, until all amounts have been disbursed from the Acquisition and Construction Fund (or such fund is closed) and thereafter to the Interest Account of the Special Tax Fund.
Section 3.7. Rebate Fund.
(a) The Trustee shall establish and maintain a fund separate from any other fund established and maintained hereunder designated as the Rebate Fund and shall establish a separate Rebate Account and Alternate Penalty Account therein. All money at any time deposited in the Rebate Account or the Alternate Penalty Account of the Rebate Fund shall be held by the Trustee in trust, for payment to the United States Treasury. A separate subaccount of the Rebate Account and the Alternate Penalty Account shall be established for the Bonds and each issue of Parity Bonds the interest on which is excluded from gross income for federal income tax purposes. All amounts on deposit in the Rebate Item Title: 12.2
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Fund with respect to the Bonds or an issue of Parity Bonds shall be governed by this Section 3.7 and the Tax Certificate for such issue, unless the District obtains an opinion of Bond Counsel that the exclusion from gross income for federal income tax purposes of interest payments on the Bonds and Parity Bonds will not be adversely affected if such requirements are not satisfied. (1) Rebate Account. The following requirements shall be satisfied with respect to each subaccount of the Rebate Account:
(i) Annual Computation. Within 55 days of the end of each Bond Year, the District shall calculate or cause to be calculated the amount of rebatable arbitrage for the Bonds and each issue of Parity Bonds to which this Section 3.7 is applicable, in accordance with Section 148(f)(2) of the Code and Section 1.148-3 of the Rebate Regulations (taking into account any applicable exceptions with respect to the computation of the rebatable arbitrage described in the Tax Certificate for each issue (e.g., the temporary investments exceptions of Section 148(f)(4)(B) and (C) of the Code), and taking into account whether the election pursuant to Section 148(f)(4)(C)(vii) of the Code (the “1½% Penalty”) has been made), for this purpose treating the last day of the applicable Bond Year as a computation date, within the meaning of Section 1.148-1(b) of the Rebate Regulations (the “Rebatable Arbitrage”). The District shall obtain expert advice as to the amount of the Rebatable Arbitrage to comply with this Section.
(ii) Annual Transfer. Within 55 days of the end of each Bond Year for which Rebatable Arbitrage must be calculated as required by the Tax Certificate for each issue, upon the written direction of an Authorized Representative of the District, an amount shall be deposited to each subaccount of the Rebate Account by the Trustee from any funds so designated by the District if and to the extent required, so that the balance in the Rebate Account shall equal the amount of Rebatable Arbitrage so calculated by or on behalf of the District in accordance with clause (i) of this subsection (a)(1) with respect to the Bonds and each issue of Parity Bonds to which this Section 3.7 is applicable. In the event that immediately following any transfer required by the previous sentence, or the date on which the District determines that no transfer is required for such Bond Year, the amount then on deposit to the credit of the applicable subaccount of the Rebate Account exceeds the amount required to be on deposit therein, upon written instructions from an Authorized Representative of the District, the Trustee shall withdraw the excess from the appropriate subaccount of the Rebate Account and then credit the excess to the Special Tax Fund.
(iii) Payment to the Treasury. The Trustee shall pay, as directed in writing by an Authorized Representative of the District, to the United States Treasury, out of amounts in each subaccount of the Rebate Account:
(X) not later than 60 days after the end of: (A) the fifth Bond Year for the Bonds and each issue of Parity Bonds to which this Section 3.7 is applicable; and (B) each applicable fifth Bond Year thereafter, an amount equal to at least 90% of the Rebatable Arbitrage calculated as of the end of such Bond Year for the Bonds and each issue of Parity Bonds, as applicable; and
(Y) not later than 60 days after the payment or redemption of all of the Bonds or an issue of Parity Bonds, as applicable, an amount equal to 100% of the Rebatable Arbitrage calculated as of the end of such applicable Bond Year, and any income attributable to the Rebatable Arbitrage, computed in accordance with Section 148(f) of the Code.
Item Title: 12.2
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In the event that, prior to the time of any payment required to be made from the Rebate Account, the amount in the Rebate Account is not sufficient to make such payment when such payment is due, the District shall calculate or cause to be calculated the amount of such deficiency and deposit an amount received from any legally available source equal to such deficiency prior to the time such payment is due. Each payment required to be made pursuant to this subsection (a)(1) shall be made to the Internal Revenue Service Center, Ogden, Utah 84201 on or before the date on which such payment is due, and shall be accompanied by Internal Revenue Service Form 8038-T, or shall be made in such other manner as provided under the Code.
(2) Alternate Penalty Account.
(i) Six-Month Computation. If the 1½% Penalty has been elected for the Bonds or an issue of Parity Bonds, within 85 days of each particular Six-Month Period, the District shall determine or cause to be determined whether the 1½% Penalty is payable (and the amount of such penalty) as of the close of the applicable Six-Month Period. The District shall obtain expert advice in making such determinations.
(ii) Six-Month Transfer. Within 85 days of the close of each Six-Month Period, the Trustee, at the written direction of an Authorized Representative of the District, shall deposit an amount in the appropriate subaccounts of the Alternate Penalty Account from any source of funds held by the Trustee pursuant to this Indenture and designated by the District in such written directions or provided to it by the District, if and to the extent required, so that the balance in each subaccount of the Alternate Penalty Account equals the amount of 1½% Penalty due and payable to the United States Treasury determined as provided in subsection (a)(2)(i) above. In the event that immediately following any transfer provided for in the previous sentence, or the date on which the District determines that no transfer is required for such Bond Year, the amount then on deposit in a subaccount of the Alternate Penalty Account exceeds the amount required to be on deposit therein to make the payments required by subsection (iii) below, the Trustee, at the written direction of an Authorized Representative of the District, may withdraw the excess from the applicable subaccount of the Alternate Penalty Account and credit the excess to the Special Tax Fund. (iii) Payment to the Treasury. The Trustee shall pay, as directed in writing by an Authorized Representative of the District, to the United States Treasury, out of amounts in a subaccount of the Alternate Penalty Account, not later than 90 days after the close of each Six-Month Period the 1½% Penalty, if applicable and payable, computed with respect to the Bonds and any issue of Parity Bonds in accordance with Section 148(f)(4) of the Code. In the event that, prior to the time of any payment required to be made from a subaccount of the Alternate Penalty Account, the amount in such subaccount is not sufficient to make such payment when such payment is due, the District shall calculate the amount of such deficiency and direct the Trustee, in writing, to deposit an amount equal to such deficiency into such subaccount of the Alternate Penalty Account from any funds held by the Trustee pursuant to this Indenture and designated by the District in such written directions prior to the time such payment is due. Each payment required to be made pursuant to this subsection (a)(2) shall be made to the Internal Revenue Service, Ogden, Utah 84201 on or before the date on which such payment is due, and shall be accompanied by Internal Revenue Service Form 8038-T or shall be made in such other manner as provided under the Code.
(b) Disposition of Unexpended Funds. Any funds remaining in the Accounts of the Rebate Fund with respect to the Bonds or an issue of Parity Bonds after redemption and payment of such issue and after making the payments described in subsections (a)(1)(iii) or (a)(2)(iii) (whichever is Item Title: 12.2
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applicable), may be withdrawn by the Trustee at the written direction of the District and utilized in any manner by the District.
(c) Survival of Defeasance and Final Payment. Notwithstanding anything in this Section or this Indenture to the contrary, the obligation to comply with the requirements of this Section shall survive the defeasance and final payment of the Bonds and any Parity Bonds with respect to which an Account has been created in the Rebate Fund.
(d) Amendment Without Consent of Owners. This Section 3.7 may be deleted or amended in any manner without the consent of the Owners, provided that prior to such event there is delivered to the District an opinion of Bond Counsel to the effect that such deletion or amendment will not adversely affect the exclusion from gross income for federal income tax purposes of interest on the Bonds and any issue of Parity Bonds issued on a tax-exempt basis. (e) Trustee. The Trustee shall have no responsibility to monitor or calculate any amounts payable to the U.S. Treasury pursuant to this Section and shall be deemed constructively to have complied with its obligations hereunder if it follows the written instructions of the District given pursuant to this Section.
Section 3.8. Surplus Fund. After making the transfers required by Sections 3.3, 3.4, 3.5,
3.6 and 3.7 hereof, as soon as practicable after each September 1, the Trustee shall transfer all remaining amounts in the Special Tax Fund to the Surplus Fund, unless on or prior to such date, it has received a Certificate of an Authorized Representative directing that certain amounts be retained in the Special Tax Fund because the District has included such amounts as being available in the Special Tax Fund in calculating the amount of the levy of Special Taxes for such Fiscal Year pursuant to Section 5.2(b) hereof. Moneys deposited in the Surplus Fund will be transferred by the Trustee at the direction of an Authorized Representative of the District: (i) to the Interest Account, the Principal Account or the Redemption Account of the Special Tax Fund to pay the principal of, including Sinking Fund Payments, premium, if any, and interest on the Bonds and any Parity Bonds when due in the event that moneys in the Special Tax Fund and the Reserve Account of the Special Tax Fund are insufficient therefor; (ii) to the Reserve Account in order to replenish the Reserve Account to the Reserve Requirement; (iii) to the District for deposit to the Administrative Expense Fund to pay Administrative Expenses to the extent that the amounts on deposit in the Administrative Expense Fund are insufficient to pay Administrative Expenses; (iv) to the Acquisition and Construction Fund to pay Project Costs; or (v) after all Project Costs have been paid, to the District, for any other lawful purpose of the District.
The amounts in the Surplus Fund are not pledged to the repayment of the Bonds or the Parity Bonds and may be used by the District for any lawful purpose. In the event that the District reasonably expects to use any portion of the moneys in the Surplus Fund to pay debt service on any Outstanding Bonds or Parity Bonds, the District shall notify the Trustee in a Certificate of an Authorized Representative and the Trustee shall segregate such amount into a separate subaccount and the moneys on deposit in such subaccount of the Surplus Fund shall be invested at the written direction of the District in Authorized Investments the interest on which is excludable from gross income under Section 103 of the Code (other than bonds the interest on which is a tax preference item for purposes of computing the alternative minimum tax of individuals under the Code) or in Authorized Investments at a yield not in excess of the yield on the issue of Bonds or Parity Bonds to which such amounts are to be applied, unless, in the opinion of Bond Counsel, investment at a higher yield will not adversely affect the exclusion from gross income for federal income tax purposes of interest on the Bonds or any Item Title: 12.2
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Parity Bonds which were issued on a tax-exempt basis for federal income tax purposes. Such amounts shall be disbursed as directed by an Authorized Representative of the District.
Section 3.9. Acquisition and Construction Fund.
(a) The moneys in the Costs of Issuance Account shall be disbursed by the Trustee pursuant to a Certificate of an Authorized Representative of the District, and any balance remaining therein after 180 days shall be transferred by the Trustee to an Account within the Acquisition and Construction Fund as directed in writing by an Authorized Representative of the District. Following such transfer to the Acquisition and Construction Fund, the Costs of Issuance Account shall be closed. (b) The moneys in the Acquisition and Construction Fund and the Accounts therein (other than the Costs of Issuance Account) shall be applied exclusively to pay the Project Costs. Amounts for Project Costs shall be disbursed by the Trustee from the Acquisition and Construction Fund or the Accounts therein (other than the Costs of Issuance Account), as specified in a Request for Disbursement of Project Costs, substantially in the form of Exhibit B-1 attached hereto. A properly executed Request for Disbursement of Project Costs must be submitted in connection with each requested disbursement and the Trustee may rely thereon without investigating the accuracy thereof.
Amounts in an Account of the Acquisition and Construction Fund may be transferred to another Account or Accounts therein pursuant to a Certificate of an Authorized Representative of the District. (c) Upon receipt of a Certificate of an Authorized Representative of the District stating that all or a specified portion of the amount remaining in the Acquisition and Construction Fund or the Accounts therein (other than the Costs of Issuance Account) is no longer needed to pay Project Costs, the Trustee shall: (i) transfer all or such specified portion, as applicable, of the moneys remaining on deposit in the Acquisition and Construction Fund or the Accounts therein (other than the Costs of Issuance Account) to the Interest Account, the Principal Account or Redemption Account of the Special Tax Fund, to the Costs of Issuance Account or to the Surplus Fund, as directed in such certificate, provided that in connection with any direction to transfer amounts to the Surplus Fund there shall have been delivered to the Trustee with such certificate an opinion of Bond Counsel to the effect that such transfer to the Surplus Fund will not adversely affect the exclusion from gross income for federal income tax purposes of interest on the Bonds or any Parity Bonds which were issued on a tax-exempt basis for federal income tax purposes; and (ii) thereafter, close the Acquisition and Construction Fund (including all Accounts and Subaccounts therein).
Section 3.10. Investments. Moneys held in any of the Funds, Accounts and Subaccounts under this Indenture shall be invested at the written direction of the District upon at least two (2) Business Days’ notice in accordance with the limitations set forth below only in Authorized Investments which shall be deemed at all times to be a part of such Funds, Accounts and Subaccounts.
Any loss resulting from such Authorized Investments shall be credited or charged to the Fund, Account or Subaccount from which such investment was made, and any investment earnings on a Fund, Account or Subaccount shall be applied as follows: (i) investment earnings on all amounts deposited in the Acquisition and Construction Fund (including the Accounts therein), the Special Tax Fund, the Surplus Fund and the Rebate Fund and each Account therein (other than the Reserve Account of the Special Tax Fund) shall be deposited in those respective Funds, Accounts and Subaccounts; and (ii) investment earnings on all amounts deposited in the Reserve Account shall be deposited therein to be applied as set forth in Section 3.6. Moneys in the Funds, Accounts and Subaccounts held under this Indenture may be invested by the Trustee as directed in writing by the District, from time to time, in Authorized Investments subject to the following restrictions (provided that the Trustee is not required to verify Item Title: 12.2
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compliance with such restrictions and may rely on the District’s written instructions as evidence of such compliance). If no such written instruction from the District is received, the funds shall be held uninvested:
(a) Moneys in the Acquisition and Construction Fund and the Accounts therein shall be invested in Authorized Investments which will by their terms mature, or in the case of an Investment Agreement are available without penalty, as close as practicable to the date the District estimates the moneys represented by the particular investment will be needed for withdrawal from the Acquisition and Construction Fund or the Accounts therein. Notwithstanding anything herein to the contrary, amounts in the Acquisition and Construction Fund or the Accounts therein three years after the Delivery Date for the Bonds and the proceeds of each issue of Parity Bonds issued on a tax-exempt basis which are remaining on deposit in the Acquisition and Construction Fund on the date which is three years following the date of issuance of such issue of Parity Bonds shall be invested by the District only in Authorized Investments the interest on which is excluded from gross income under Section 103 of the Code (other than bonds the interest on which is a tax preference item for purposes of computing the alternative minimum tax of individuals under the Code) or in Authorized Investments at a yield not in excess of the yield on the issue of Bonds or Parity Bonds from which such proceeds were derived, unless in the opinion of Bond Counsel such restriction is not necessary to prevent interest on the Bonds or any Parity Bonds which were issued on a tax-exempt basis for federal income tax purposes from being included in gross income for federal income tax purposes. (b) Moneys in the Interest Account, the Principal Account, and the Redemption Account of the Special Tax Fund shall be invested only in Authorized Investments which will by their terms mature, or in the case of an Investment Agreement are available for withdrawal without penalty, on such dates so as to ensure the payment of principal of, premium, if any, and interest on the Bonds and any Parity Bonds as the same become due.
(c) Moneys in the Reserve Account of the Special Tax Fund may be invested only in Authorized Investments (other than the Authorized Investment described in clause (2)(i) of the definition thereof) which, taken together, have a weighted average maturity not in excess of five years; provided that such amounts may be invested in an Investment Agreement to the later of the final maturity of the Bonds or any Parity Bonds so long as such amounts may be withdrawn at any time, without penalty, for application in accordance with Section 3.6 hereof; and provided that no such Authorized Investment of amounts in the Reserve Account allocable to the Bonds or an issue of Parity Bonds shall mature later than the respective final maturity date of the Bonds or the issue of Parity Bonds, as applicable.
(d) Moneys in the Rebate Fund shall be invested only in Authorized Investments of the type described in clause (1) of the definition thereof which by their terms will mature, as nearly as practicable, on the dates such amounts are needed to be paid to the United States Government pursuant to Section 3.7 hereof or in Authorized Investments of the type described in clause (2)(e) of the definition thereof.
(e) [Reserved]
The Trustee shall sell, or present for redemption, any Authorized Investment whenever it may be necessary to do so in order to provide moneys to meet any payment or transfer to such funds and accounts or from such funds and accounts. Notwithstanding anything in this Indenture to the contrary, the Trustee shall not be responsible for any loss from investments, sales or transfers undertaken in Item Title: 12.2
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accordance with the provisions of this Indenture. Any Authorized Investments that are registrable securities shall be registered in the name of the Trustee.
The Trustee may act as principal or agent in the making or disposing of any investment and shall be entitled to its customary fee for making such investment. The Trustee may sell at the best market price obtainable, or present for redemption, any Authorized Investment so purchased whenever it shall be necessary to provide moneys to meet any required payment, transfer, withdrawal or disbursement from the fund or account to which such Authorized Investment is credited, and, subject to the provisions of Section 7.4, the Trustee shall not be liable or responsible for any loss resulting from such investment. For investment purposes, the Trustee may commingle the funds and accounts established hereunder, but shall account for each separately. The Trustee is hereby authorized, in making or disposing of any investment permitted by this Section, to deal with itself (in its individual capacity) or which any one or more of its affiliates, whether it or such affiliate is acting as an agent of the Trustee or for any third person or dealing as principal for its own account. The parties acknowledge that the Trustee is not providing investment supervision, recommendations, or advice.
The District acknowledges that, to the extent that regulations of the Comptroller of the Currency or other applicable regulatory entity grant the District the right to receive brokerage confirmations of security transactions as they occur, the District specifically waives receipt of such confirmations to the extent permitted by law. The Trustee will furnish the District periodic cash transaction statements which include detail for all investment transactions made by the Trustee hereunder.
ARTICLE IV
REDEMPTION OF BONDS AND PARITY BONDS
Section 4.1. Redemption of Bonds.
(a) 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, ____, 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:
Redemption Date Redemption Price
September 1, ____ and March 1, ____ 103%
September 1, ____ and March 1, ____ 102
September 1, ____ and March 1, ____ 101
September 1, ____ and any Interest Payment Date thereafter 100 In the event that the District elects to redeem Bonds as provided above, the District shall 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 shall be given at least 45 but no more than 60 days prior to the redemption date, or by such later date as is acceptable to the Trustee. (b) Mandatory Sinking Fund Redemption. The Bonds maturing on September 1, ____ (the “____ Term Bonds”) shall be called before maturity and redeemed, from the Sinking Fund Payments that have been deposited into the Redemption Account established hereunder, on September 1, ____, Item Title: 12.2
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and on each September 1 thereafter prior to maturity, in accordance with the schedule of Sinking Fund Payments set forth below. The ____ Term Bonds so called for redemption shall be selected by the Trustee by lot and shall be redeemed at a redemption price for each redeemed ____ Term Bond equal to the principal amount thereof, plus accrued interest to the redemption date, without premium, as follows:
Term Bonds Maturing September 1, ____
Sinking Fund Redemption Date
(September 1) Sinking Fund Payments
$
*
* Maturity.
The Bonds maturing on September 1, ____ (the “____ Term Bonds”) shall be called before maturity and redeemed, from the Sinking Fund Payments that have been deposited into the Redemption Account established hereunder, on September 1, ____, and on each September 1 thereafter prior to maturity, in accordance with the schedule of Sinking Fund Payments set forth below. The ____ Term Bonds so called for redemption shall be selected by the Trustee by lot and shall be redeemed at a redemption price for each redeemed ____ Term Bond equal to the principal amount thereof, plus accrued interest to the redemption date, without premium, as follows:
Term Bonds Maturing September 1, ____
Sinking Fund Redemption Date
(September 1) Sinking Fund Payments
$
*
* Maturity.
The Bonds maturing on September 1, ____ (the “____ Term Bonds”) shall be called before maturity and redeemed, from the Sinking Fund Payments that have been deposited into the Redemption Account established hereunder, on September 1, ____, and on each September 1 thereafter prior to maturity, in accordance with the schedule of Sinking Fund Payments set forth below. The ____ Term Bonds so called for redemption shall be selected by the Trustee by lot and shall be redeemed at a redemption price for each redeemed ____ Term Bond equal to the principal amount thereof, plus accrued interest to the redemption date, without premium, as follows:
Item Title: 12.2
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Term Bonds Maturing September 1, ____
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 shall notify the Trustee at least 45 days prior to the redemption date as to the principal amount purchased, and the amount purchased shall 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 Bonds purchased pursuant to this subsection shall be cancelled pursuant to Section 10.1 hereof.
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 shall be reduced, as nearly as practicable, on a pro rata basis.
(c) Special Mandatory Redemption. 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, ____ and shall be redeemed by the Trustee, from Prepayments deposited to the Redemption Account pursuant to Section 3.2, plus amounts transferred from the Reserve Account pursuant to Section 3.6(c), at the following redemption prices, expressed as a percentage of the principal amount to be redeemed, together with accrued interest to the redemption date:
Redemption Date Redemption Price
Any Interest Payment Date through March 1, ____ 103%
September 1, ____ and March 1, ____ 102
September 1, ____ and March 1, ____ 101
September 1, ____ 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 Item Title: 12.2
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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.
(d) The redemption provisions for Parity Bonds shall be set forth in a Supplemental Indenture.
Section 4.2. Selection of Bonds and Parity Bonds for Redemption. If less than all of the Bonds or Parity Bonds Outstanding are to be redeemed, the portion of any Bond or Parity Bond of a denomination of more than $5,000 to be redeemed shall be in the principal amount of $5,000 or an integral multiple thereof. In selecting portions of such Bonds or Parity Bonds for redemption, the Trustee shall treat such Bonds or Parity Bonds, as applicable, as representing that number of Bonds or Parity Bonds of $5,000 denominations which is obtained by dividing the principal amount of such Bonds or Parity 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 shall promptly notify the District in writing of the Bonds or Parity Bonds, or portions thereof, selected for redemption.
Section 4.3. Notice of Redemption. When Bonds or Parity Bonds are due for redemption under Section 4.1 above or under another redemption provision set forth in a Supplemental Indenture relating to any Parity Bonds, the Trustee shall give notice, in the name of the District, of the redemption of such Bonds or Parity Bonds. Such notice of redemption shall: (i) specify the CUSIP numbers (if any), the bond numbers and the maturity date or dates of the Bonds or Parity Bonds selected for redemption, except that where all of the Bonds or all of an issue of Parity Bonds are subject to redemption, or all of the Bonds or Parity 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 or Parity Bonds to be redeemed; (iii) state the redemption price; (iv) state the place or places where the Bonds or Parity Bonds are to be redeemed; (v) in the case of Bonds or Parity Bonds to be redeemed only in part, state the portion of such Bond or Parity Bond which is to be redeemed; (vi) state the date of issue of the Bonds or Parity Bonds as originally issued; (vii) state the rate of interest borne by each Bond or Parity Bond being redeemed; and (viii) state any other descriptive information needed to identify accurately the Bonds or Parity Bonds being redeemed as shall be specified by the Trustee.
Such notice shall further state that on the date fixed for redemption, there shall become due and payable on each Bond, Parity 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 shall cease to accrue and be payable. At least 30 days but no more than 45 days prior to the redemption date, the Trustee shall 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 or Parity Bonds; provided, however, so long as the Bonds and Parity 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 or Parity Bond of notice of such redemption shall not be a condition precedent to redemption, and neither the failure to receive nor any defect in such notice shall affect the validity of the proceedings for the redemption of such Bonds or Parity Bonds, or the cessation of interest on the redemption date. A certificate by the Trustee that notice of such redemption has been given as herein provided shall be conclusive as against all parties and the Owner shall not be entitled to show that he or she failed to receive notice of such redemption.
Item Title: 12.2
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In addition to the foregoing notice, further notice shall 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 shall in any manner defeat the effectiveness of a call for redemption if notice thereof is given as above prescribed.
Each further notice of redemption shall be sent not later than the date that notice of redemption is given to the Owners pursuant to the first paragraph of this Section 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 and Parity 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 and Parity Bonds.
Upon the payment of the redemption price of any Bonds and Parity Bonds being redeemed, each check or other transfer of funds issued for such purpose shall to the extent practicable bear the CUSIP number identifying, by issue and maturity, the Bonds and Parity Bonds being redeemed with the proceeds of such check or other transfer.
With respect to any notice of optional redemption of Bonds or Parity Bonds, such notice may state that such redemption shall be 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 or Parity 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 or Parity 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 or Parity 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.
Section 4.4. Partial Redemption of Bonds or Parity Bonds. Upon surrender of any Bond or Parity Bond to be redeemed in part only, the District shall execute and the Trustee shall authenticate and deliver to the Owner, at the expense of the District, a new Bond or Bonds or a new Parity Bond or Parity 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 or, in the case of surrender of a Parity Bond, a new Parity Bond or Parity Bonds subject to the foregoing limitations.
Section 4.5. Effect of Notice and Availability of Redemption Money. Notice of redemption having been duly given, as provided in Section 4.3 hereof, 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:
(a) the Bonds and Parity Bonds, or portions thereof, designated for redemption shall, on the date fixed for redemption, become due and payable at the redemption price thereof as provided in this Indenture or in any Supplemental Indenture with respect to any Parity Bonds, anything in this Indenture or in the Bonds or the Parity Bonds to the contrary notwithstanding; (b) upon presentation and surrender thereof at the office of the Trustee, the redemption price of such Bonds and Parity Bonds shall be paid to the Owners thereof; Item Title: 12.2
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(c) as of the redemption date the Bonds or the Parity Bonds, or portions thereof so designated for redemption shall be deemed to be no longer Outstanding and such Bonds or Parity Bonds, or portions thereof, shall cease to bear further interest; and (d) as of the date fixed for redemption no Owner of any of the Bonds, Parity Bonds or portions thereof so designated for redemption shall be entitled to any of the benefits of this Indenture or any Supplemental 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.
ARTICLE V
COVENANTS AND WARRANTY
Section 5.1. Warranty. The District shall preserve and protect the security pledged hereunder to the Bonds and any Parity Bonds against all claims and demands of all persons.
Section 5.2. Covenants. So long as any of the Bonds or Parity Bonds issued hereunder are Outstanding and unpaid, the District makes the following covenants with the Owners under the provisions of the Act and this Indenture (to be performed by the District or its proper officers, agents or employees), which covenants are necessary and desirable to secure the Bonds and Parity Bonds and tend to make them more marketable; provided, however, that said covenants do not require the District to expend any funds or moneys other than the Special Taxes and other amounts deposited to the Special Tax Fund:
(a) Punctual Payment; Against Encumbrances. The District covenants that it will receive all Special Taxes in trust for the Owners and will deposit all Special Taxes with the Trustee immediately upon their apportionment to the District, and the District shall have no beneficial right or interest in the amounts so deposited except as provided by this Indenture. All such Special Taxes shall be disbursed, allocated and applied solely to the uses and purposes set forth herein, and shall be accounted for separately and apart from all other money, funds, accounts or other resources of the District.
The District covenants that it will duly and punctually pay or cause to be paid the principal of and interest on every Bond and Parity Bond issued hereunder, together with the premium, if any, thereon on the date, at the place and in the manner set forth in the Bonds and the Parity Bonds and in accordance with this Indenture to the extent that Net Taxes and other amounts pledged hereunder are available therefor, and that the payments into the Funds and Accounts created hereunder will be made, all in strict conformity with the terms of the Bonds, any Parity Bonds, and this Indenture, and that it will faithfully observe and perform all of the conditions, covenants and requirements of this Indenture and all Supplemental Indentures and of the Bonds and any Parity Bonds issued hereunder.
The District will not mortgage or otherwise encumber, pledge or place any charge upon any of the Net Taxes except as provided in this Indenture, and will not issue any obligation or security having a lien or charge upon the Net Taxes superior to or on a parity with the Bonds, other than Parity Bonds.
Nothing herein shall prevent the District from issuing or incurring indebtedness which is payable from a pledge of Net Taxes which is subordinate in all respects to the pledge of Net Taxes to repay the Bonds and the Parity Bonds, subject to compliance with the District’s bonded indebtedness limit.
Item Title: 12.2
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(b) Levy of Special Tax. Beginning in Fiscal Year 2023-24 and so long as any Bonds or Parity Bonds issued under this Indenture are Outstanding, the District covenants to levy the Special Tax in an amount sufficient, together with other amounts on deposit in the Special Tax Fund, to pay:
(1) the principal of and interest on the Bonds and any Parity Bonds when due; (2) the Administrative Expenses; and (3) any amounts required to replenish the Reserve Account of the Special Tax Fund to the Reserve Requirement, including any amounts to pay costs related to the Reserve Policy, if any.
The District further covenants 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.
(c) Commence Foreclosure Proceedings. The District covenants 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 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 may, but shall not be obligated to, advance funds from any source of legally available funds in order to maintain the Reserve Account. The District may treat any delinquent Special Tax sold to an independent third-party or to the City for at least 100% of the delinquent amount as having been paid. Proceeds of any such sale up to 100% of the delinquent amount will be deposited in the Special Tax Fund.
The District covenants 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. (d) Payment of Claims. The District will pay and discharge any and all lawful claims for labor, materials or supplies which, if unpaid, might become a lien or charge upon the Net Taxes or other funds in the Special Tax Fund, or which might impair the security of the Bonds or any Parity Bonds then Outstanding; provided, however, that nothing herein contained shall require the District to make any such payments so long as the District in good faith shall contest the validity of any such claims.
(e) Books and Accounts. The District will keep proper books of records and accounts, separate from all other records and accounts of the District, in which complete and correct entries shall be made of all transactions relating to the Project, the levy of the Special Tax and the deposits to the Special Tax Fund. Such books of records and accounts shall at all times during business hours be subject to the inspection of the Trustee or of the Owners or the Owners of any issue of Parity Bonds then Outstanding or their representatives authorized in writing. (f) Federal Tax Covenants. Notwithstanding any other provision of this Indenture, absent an opinion of Bond Counsel that the exclusion from gross income of interest on the Bonds and any Parity Bonds issued on a tax-exempt basis for federal income tax purposes will not be adversely affected for federal income tax purposes, the District covenants to comply with all applicable Item Title: 12.2
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requirements of the Code necessary to preserve such exclusion from gross income and specifically covenants, without limiting the generality of the foregoing, as follows:
(1) Private Activity. The District will take no action or refrain from taking any action or make any use of the proceeds of the Bonds or any Parity Bonds or of any other monies or property which would cause the Bonds or any Parity Bonds issued on a tax-exempt basis for federal income tax purposes to be “private activity bonds” within the meaning of Section 141 of the Code. (2) Arbitrage. The District will make no use of the proceeds of the Bonds or any Parity Bonds or of any other amounts or property, regardless of the source, or take any action or refrain from taking any action which will cause the Bonds or any Parity Bonds issued on a tax-exempt basis for federal income tax purposes to be “arbitrage bonds” within the meaning of Section 148 of the Code. (3) Federal Guaranty. The District will make no use of the proceeds of the Bonds or any Parity Bonds or take or omit to take any action that would cause the Bonds or any Parity Bonds issued on a tax-exempt basis for federal income tax purposes to be “federally guaranteed” within the meaning of Section 149(b) of the Code.
(4) Information Reporting. The District will take or cause to be taken all necessary action to comply with the informational reporting requirement of Section 149(e) of the Code. (5) Hedge Bonds. The District will make no use of the proceeds of the Bonds or any Parity Bonds or any other amounts or property, regardless of the source, or take any action or refrain from taking any action that would cause the Bonds or any Parity Bonds issued on a tax-exempt basis for federal income tax purposes to be considered “hedge bonds” within the meaning of Section 149(g) of the Code unless the District takes all necessary action to assure compliance with the requirements of Section 149(g) of the Code to maintain the exclusion from gross income for federal income tax purposes of interest on the Bonds and any applicable Parity Bonds. (6) Miscellaneous. The District will take no action or refrain from taking any action inconsistent with its expectations stated in the Tax Certificate executed on the Delivery Date by the District in connection with the Bonds and any issue of Parity Bonds and will comply with the covenants and requirements stated therein and incorporated by reference herein. (7) Other Tax-Exempt Issues. The District will not use proceeds of other tax-exempt securities to redeem any Bonds or Parity Bonds without first obtaining the written opinion of Bond Counsel that doing so will not impair the exclusion from gross income for federal income tax purposes of interest on the Bonds and any Parity Bonds issued on a tax-exempt basis. (8) Subsequent Opinions. If the District obtains a subsequent opinion of Bond Counsel other than Stradling Yocca Carlson & Rauth, a Professional Corporation, where such opinion is required in connection with a change or amendment to this Indenture or the procedures set forth in the Tax Certificate, it will obtain an opinion substantially to the effect originally delivered by Stradling Yocca Carlson & Rauth, a Professional Corporation, that interest on the Bonds is excluded from gross income for federal income tax purposes.
(g) Reduction of Maximum Special Taxes. The District hereby finds and determines that, historically, delinquencies in the payment of special taxes authorized pursuant to the Act in community facilities districts in Southern California have from time to time been at levels requiring the levy of Item Title: 12.2
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special taxes at the maximum authorized rates in order to make timely payment of principal of and interest on the outstanding indebtedness of such community facilities districts. For this reason, the District hereby determines that a reduction in the maximum Special Tax rates authorized to be levied on parcels in the District below the levels provided in this Section 5.2(g) would interfere with the timely retirement of the Bonds and Parity Bonds. The District determines it to be necessary in order to preserve the security for the Bonds and Parity Bonds to covenant, and, to the maximum extent that the law permits it to do so, the District hereby does covenant, that it shall not 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. (h) Covenants to Defend. The District covenants that, in the event that any initiative is adopted by the qualified electors in the District which purports to reduce the maximum Special Tax below the levels specified in Section 5.2(g) above or to limit the power of the District to levy the Special Taxes for the purposes set forth in Section 5.2(b) above, it will commence and pursue legal action in order to preserve its ability to comply with such covenants. (i) Limitation on Right to Tender Bonds. The District hereby covenants that it will not adopt any policy pursuant to Section 53344.1 of the Act permitting the tender of Bonds or Parity Bonds in full payment or partial payment of any Special Taxes unless the District shall have 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.
(j) Continuing Disclosure. The District covenants to comply with the terms of the Continuing Disclosure Certificate and with the terms of any agreement executed by the District with respect to any Parity Bonds to assist the Underwriter in complying with Rule 15c2-12 adopted by the Securities and Exchange Commission; provided, however, that a failure to comply shall not be considered an event of default hereunder and the Owners shall be limited to enforcing the terms thereof in accordance with the terms of the Continuing Disclosure Certificate. (k) Further Assurances. The District shall make, execute and deliver any and all such further agreements, instruments and assurances as may be reasonably necessary or proper to carry out the intention or to facilitate the performance of this Indenture and for the better assuring and confirming unto the Owners of the Bonds and any Parity Bonds of the rights and benefits provided in this Indenture.
Item Title: 12.2
Community Facilities District 2021-1, Banner Park, Issuance of Special Tax Bonds Item Page Number: 146
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ARTICLE VI
AMENDMENTS TO INDENTURE
Section 6.1. Supplemental Indentures or Orders Not Requiring Owner Consent. The District may from time to time, and at any time, without notice to or consent of any of the Owners, adopt Supplemental Indentures for any of the following purposes:
(a) to cure any ambiguity, to correct or supplement any provisions herein which may be inconsistent with any other provision herein, or to make any other provision with respect to matters or questions arising under this Indenture or in any additional resolution or order, provided that such action is not materially adverse to the interests of the Owners; (b) to add to the covenants and agreements of and the limitations and the restrictions upon the District contained in this Indenture other covenants, agreements, limitations and restrictions to be observed by the District which are not contrary to or inconsistent with this Indenture as theretofore in effect or which further secure Bond or Parity Bond payments; (c) to provide for the issuance of any Parity Bonds, and to provide the terms and conditions under which such Parity Bonds may be issued, subject to and in accordance with the provisions of this Indenture;
(d) to modify, amend or supplement this Indenture in such manner as to permit the qualification hereof under the Trust Indenture Act of 1939, as amended, or any similar federal statute hereafter in effect, or to comply with the Code or regulations issued thereunder, and to add such other terms, conditions and provisions as may be permitted by said act or similar federal statute, and which shall not materially adversely affect the interests of the Owners of the Bonds or any Parity Bonds then Outstanding;
(e) to modify, alter or amend the RMA in any manner, so long as the Trustee receives a certificate of an Independent Financial Consultant stating 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 amendment and (ii) based on the current development plan for parcels within the District, do not reduce the maximum Special Taxes which could be levied upon Taxable 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 amendment;
(f) to modify, alter, amend or supplement this Indenture in any other respect which is not materially adverse to the Owners; or
(g) to modify, alter, amend or supplement this Indenture in any other respect, as may be required to fund all or a portion of the Reserve Requirement with a Reserve Policy.
Section 6.2. Supplemental Indentures or Orders Requiring Owner Consent. Exclusive of the Supplemental Indentures described in Section 6.1, the Owners of not less than a majority in aggregate principal amount of the Bonds and Parity Bonds Outstanding shall have the right to consent Item Title: 12.2
Community Facilities District 2021-1, Banner Park, Issuance of Special Tax Bonds Item Page Number: 147
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to and approve the adoption by the District of such Supplemental Indentures as shall be deemed necessary or desirable by the District for the purpose of waiving, modifying, altering, amending, adding to or rescinding, in any particular, any of the terms or provisions contained in this Indenture; provided, however, that nothing herein shall permit, or be construed as permitting: (a) an extension of the maturity date of the principal, or the payment date of interest on, any Bond or Parity Bond; (b) a reduction in the principal amount of, or redemption premium on, any Bond or Parity Bond or the rate of interest thereon; (c) a preference or priority of any Bond or Parity Bond over any other Bond or Parity Bond; or (d) a reduction in the aggregate principal amount of the Bonds and Parity Bonds the Owners of which are required to consent to such Supplemental Indenture, without the consent of the Owners of all Bonds and Parity Bonds then Outstanding.
If at any time the District shall desire to adopt a Supplemental Indenture, which pursuant to the terms of this Section shall require the consent of the Owners, the District shall so notify the Trustee and shall deliver to the Trustee a copy of the proposed Supplemental Indenture. The Trustee shall, at the expense of the District, cause notice of the proposed Supplemental Indenture to be mailed, by first class mail, postage prepaid, to all Owners at their addresses as they appear in the Bond Register. Such notice shall briefly set forth the nature of the proposed Supplemental Indenture and shall state that a copy thereof is on file at the office of the Trustee for inspection by all Owners. The failure of any Owners to receive such notice shall not affect the validity of such Supplemental Indenture when consented to and approved by the Owners of not less than a majority in aggregate principal amount of the Bonds and Parity Bonds Outstanding as required by this Section. Whenever at any time within one year after the date of the first mailing of such notice, the Trustee shall receive an instrument or instruments purporting to be executed by the Owners of not less than a majority in aggregate principal amount of the Bonds and Parity Bonds Outstanding, which instrument or instruments shall refer to the proposed Supplemental Indenture described in such notice, and shall specifically consent to and approve the adoption thereof by the District substantially in the form of the copy referred to in such notice as on file with the Trustee, such proposed Supplemental Indenture, when duly adopted by the District, shall thereafter become a part of the proceedings for the issuance of the Bonds and any Parity Bonds. In determining whether the Owners of a majority of the aggregate principal amount of the Bonds and Parity Bonds have consented to the adoption of any Supplemental Indenture, Bonds or Parity Bonds which are owned by the District or by any person directly or indirectly controlling or controlled by or under the direct or indirect common control with the District, shall be disregarded and shall be treated as though they were not Outstanding for the purpose of any such determination.
Upon the adoption of any Supplemental Indenture and the receipt of consent to any such Supplemental Indenture from the Owners of not less than a majority in aggregate principal amount of the Outstanding Bonds and Parity Bonds in instances where such consent is required pursuant to the provisions of this Section, this Indenture shall be, and shall be deemed to be, modified and amended in accordance therewith, and the respective rights, duties and obligations under this Indenture of the District and all Owners of Outstanding Bonds and Parity Bonds shall thereafter be determined, exercised and enforced hereunder, subject in all respects to such modifications and amendments.
Section 6.3. Notation of Bonds or Parity Bonds; Delivery of Amended Bonds or Parity Bonds. After the effective date of any action taken as hereinabove provided, the District may determine that the Bonds or any Parity Bonds may bear a notation, by endorsement in form approved by the District, as to such action, and in that case upon demand of the Owner of any Outstanding Bond or Parity Bond at such effective date and presentation of such Owner’s Bond or Parity Bond for the purpose at the office of the Trustee or at such additional offices as the Trustee may select and designate for that purpose, a suitable notation as to such action shall be made on such Bonds or Parity Bonds. If Item Title: 12.2
Community Facilities District 2021-1, Banner Park, Issuance of Special Tax Bonds Item Page Number: 148
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the District shall so determine, new Bonds or Parity Bonds so modified as, in the opinion of the District, shall be necessary to conform to such action shall be prepared and executed, and in that case upon demand of the Owner of any Outstanding Bond or Parity Bond at such effective date such new Bonds or Parity Bonds shall be exchanged at the office of the Trustee or at such additional offices as the Trustee may select and designate for that purpose, without cost to each Owner of Outstanding Bonds or Parity Bonds, upon surrender of such Outstanding Bonds or Parity Bonds.
The Trustee shall have the right to require such opinions of counsel as it deems necessary concerning: (i) the lack of material adverse effect of the amendment on Owners; and (ii) the fact that the amendment will not affect the tax status of interest with respect to the Bonds.
ARTICLE VII
TRUSTEE
Section 7.1. Trustee. Wilmington Trust, National Association shall be the Trustee for the Bonds and any Parity Bonds unless and until another Trustee is appointed by the District hereunder.
The Trustee represents that it has (or is a member of a bank holding company system whose bank holding company has) a combined capital (exclusive of borrowed capital) and surplus of at least $100,000,000. The District may, at any time, appoint a successor Trustee satisfying the requirements of Section 7.2 below for the purpose of receiving all money which the District is required to deposit with the Trustee hereunder and to allocate, use and apply the same as provided in this Indenture.
The Trustee is hereby authorized to and shall mail by first class mail, postage prepaid, or wire transfer in accordance with Section 2.5 above, interest payments to the Owners, to select Bonds and Parity Bonds for redemption, and to maintain the Bond Register. The Trustee is hereby authorized to pay the principal of and premium, if any, on the Bonds and Parity Bonds when the same are duly presented to it for payment at maturity or on call and redemption, to provide for the registration of transfer and exchange of Bonds and Parity Bonds presented to it for such purposes, to provide for the cancellation of Bonds and Parity Bonds all as provided in this Indenture, and to provide for the authentication of Bonds and Parity Bonds, and shall perform all other duties assigned to or imposed on it as provided in this Indenture. The Trustee shall keep accurate records of all funds administered by it and all Bonds and Parity Bonds paid, discharged and cancelled by it.
The Trustee is hereby authorized to pay and redeem the Bonds and Parity Bonds when duly presented for payment at maturity, or on redemption prior to maturity. The Trustee shall cancel all Bonds and Parity Bonds upon payment thereof in accordance with the provisions of Section 10.1 hereof.
The District shall from time to time, subject to any agreement between the District and the Trustee then in force, timely pay to the Trustee following demand therefor compensation for its services, reimburse the Trustee for all its advances and expenditures, including, but not limited to, advances to and fees, costs and expenses of independent accountants or counsel employed by it in the exercise and performance of its powers and duties hereunder, and indemnify and save the Trustee, its officers, directors, employees and agents, harmless against costs, claims, expenses and liabilities, including, without limitation, fees, costs and expenses of its attorneys (not arising from its own gross negligence or willful misconduct) which it may incur in the exercise and performance of its powers and duties hereunder. The foregoing obligation of the District to indemnify the Trustee shall survive the removal or resignation of the Trustee or the discharge of the Bonds and Parity Bonds.
Item Title: 12.2
Community Facilities District 2021-1, Banner Park, Issuance of Special Tax Bonds Item Page Number: 149
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Section 7.2. Removal of Trustee. The District may at any time at its sole discretion, upon 30 days’ notice, remove the Trustee initially appointed, and any successor thereto, by delivering to the Trustee a written notice of its decision to remove the Trustee and may appoint a successor or successors thereto; provided that any such successor shall be a bank or trust company having (or whose parent bank holding company has) a combined capital (exclusive of borrowed capital) and surplus of at least $100,000,000, and subject to supervision or examination by federal or state authority. Any removal shall become effective only upon acceptance of appointment by the successor Trustee. If any bank or trust company appointed as a successor publishes a report of condition at least annually, pursuant to law or to the requirements of any supervising or examining authority above referred to, then for the purposes of this Section the combined capital and surplus of such bank or trust company shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. Any removal of the Trustee and appointment of a successor Trustee shall become effective only upon acceptance of appointment by the successor Trustee and notice of the successor Trustee’s identity and address being sent by the successor Trustee to the Owners.
Section 7.3. Resignation of Trustee. The Trustee may at any time resign and be discharged from its duties and obligations hereunder by giving written notice to the District. Upon receiving such notice of resignation, the District shall promptly appoint a successor Trustee satisfying the criteria in Section 7.2 above by an instrument in writing. Any resignation or removal of the Trustee and appointment of a successor Trustee shall become effective only upon acceptance of appointment by the successor Trustee. If no successor Trustee shall have been appointed by the District within thirty (30) days of giving such notice or removal or resignation, then the Trustee, or any Owner may petition, at the sole expense of the District, a court of competent jurisdiction for the appointment of a successor Trustee and other appropriate relief, and such court may thereupon, after such notice (if any) as it may deem proper, appoint a successor Trustee under the Indenture.
Section 7.4. Liability of Trustee. The recitals of fact and all promises, covenants and agreements contained herein and in the Bonds and any Parity Bonds shall be taken as statements, promises, covenants and agreements of the District, and the Trustee assumes no responsibility or liability for the correctness of the same and makes no representations whatsoever as to the validity or sufficiency of this Indenture, the Bonds or any Parity Bonds, and shall incur no responsibility or liability in respect thereof, other than in connection with its express duties or obligations specifically set forth herein, in the Bonds and any Parity Bonds, or in the certificate of authentication assigned to or imposed upon the Trustee. The Trustee shall not have nor be under any responsibility or duty with respect to the issuance of the Bonds or any Parity Bonds for value. The Trustee shall not be liable in connection with the performance of its duties hereunder, except for its own gross negligence or willful misconduct. The Trustee shall not be liable for any action taken or omitted by it or any of its officers, employees or agents in good faith and believed by it to be authorized or within the discretion or rights or powers conferred upon it by this Indenture. The Trustee shall not be liable for any actions taken or omitted to be taken, or any error of judgment made in good faith by a responsible officer, unless it shall be proved that the Trustee was grossly negligent in ascertaining the pertinent facts.
The Trustee shall be entitled to request and receive written instructions from the District and/or Owners and shall have no responsibility or liability for any losses or damages of any nature that may arise from any action taken or not taken by the Trustee in accordance with the written direction of any such party. The Trustee shall not be liable with respect to any action taken or omitted to be taken by it in accordance with the written direction of the Owners of not less than a majority in aggregate principal amount of the Bonds and Parity Bonds at the time Outstanding relating to the time, method and place Item Title: 12.2
Community Facilities District 2021-1, Banner Park, Issuance of Special Tax Bonds Item Page Number: 150
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of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred upon the Trustee under this Indenture.
The Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Indenture at the request or direction of an Owner and/or the District, pursuant to the provisions of this Indenture, unless such party shall have offered to the Trustee security or indemnity (satisfactory to the Trustee in its sole and absolute discretion) against the costs, expenses and liabilities which may be incurred by it in compliance with such request or direction.
Neither the Trustee nor any of its directors, officers, employees, agents or affiliates shall be responsible for nor have any duty to monitor the performance or any action of the District or any of its directors, members, officers, agents, affiliates or employees, nor shall it have any liability in connection with the malfeasance or nonfeasance by such party. The Trustee may assume performance by all such persons of their respective obligations. The Trustee shall have no enforcement or notification obligations relating to breaches of representations or warranties of any other person. The Trustee shall be conclusively protected in acting upon any notice, resolution, request, consent, order, judgement, decree, certificate, report, Bond, Parity Bond or other paper or document signed or presented by the proper party or parties as provided hereunder, not only as to due execution, validity and effectiveness, but also as to the truth and accuracy of any information contained therein. The Trustee may, at the expense of the District, request, rely on and act in accordance with officer’s certificates and/or opinions of counsel, and shall incur no liability and shall be fully protected in acting or refraining from acting in accordance with such officer’s certificates and opinions of counsel.
The Trustee shall not be bound to recognize any person as the Owner of a Bond or Parity Bond unless and until such Bond or Parity Bond is submitted for inspection, if required, and his title thereto is satisfactorily established to the Trustee, if disputed.
Whenever in the administration of its express obligations under this Indenture the Trustee shall deem it necessary or desirable that a matter be proved or established prior to taking or suffering any action hereunder, the Trustee may, at the expense of the District, request, rely on and act in accordance with officer’s certificates and/or opinions of counsel (unless other evidence in respect thereof be herein specifically prescribed), and shall incur no liability and shall be fully protected in acting or refraining from acting in accordance with such officer’s certificates and opinions of counsel, but in its discretion the Trustee may but shall not be obligated to accept other evidence of such matter or may require such additional evidence as to it may seem reasonable. It is understood and agreed that no such act shall broaden or imply the Trustee’s acceptance of a broadening of the scope of the Trustee’s duties and obligations hereunder unless the Trustee shall provide written acceptance thereof.
The Trustee shall have no duty or obligation whatsoever to enforce the collection of Special Taxes or other funds to be deposited with it hereunder, or as to the correctness of any amounts received, but its liability shall be limited to the proper accounting for such funds as it actually receives. No provision in this Indenture shall require the Trustee to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder, or in the exercise of its rights or powers.
The Trustee shall not be deemed to have knowledge of any default or event of default under this Indenture until an officer at the Trustee’s corporate trust office responsible for the administration of its duties hereunder shall have actual knowledge thereof or the Trustee shall have received written notice thereof at its corporate trust office.
Item Title: 12.2
Community Facilities District 2021-1, Banner Park, Issuance of Special Tax Bonds Item Page Number: 151
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The Trustee shall have no responsibility with respect to any information, statement, or recital in any official statement, offering memorandum or any other disclosure material prepared or distributed with respect to the Bonds and any Parity Bonds.
Before taking any action under Article VIII hereof the Trustee may require that indemnity and security satisfactory to the Trustee in its sole and exclusive discretion be furnished to it for and from any expenses and liabilities and to protect it against any liability it may incur hereunder.
The immunities extended to the Trustee also extend to its directors, officers, employees and agents (including its counsel).
The Trustee shall not be liable for any action taken or not taken by it in accordance with the direction of the Owners of 25% (or other percentage provided for herein) in aggregate principal amount of Bonds and Parity Bonds Outstanding relating to the exercise of any right, power or remedy available to the Trustee. In the event of conflicting instructions hereunder, the Trustee shall have the right to decide the appropriate course of action and will be protected in so doing.
The permissive right of the Trustee to do things enumerated in this Indenture shall not be construed as a duty or in any way expand or impliedly expand the scope of the Trustee’s duties hereunder, and, with respect to such permissive rights, the Trustee shall not be answerable for other than its gross negligence or willful misconduct.
The Trustee may execute any of the trusts or powers hereof and perform any of its duties through attorneys, agents and receivers and shall not be answerable for the conduct of the same if appointed by it with reasonable care. The Trustee shall be entitled to rely on and shall not be liable for any action taken or omitted to be taken by the Trustee in accordance with the advice of counsel or other professionals retained or consulted by the Trustee.
The Trustee may become the Owner or pledgee of the Bonds and Parity Bonds with the same rights it would have if it were not Trustee.
The Trustee shall perform such duties and only such duties as are specifically set forth in this Indenture and no implied duties or obligations shall be read into this Indenture against the Trustee.
These duties shall be deemed purely ministerial in nature, and the Trustee shall not be liable except for the performance of such duties.
If an Event of Default has occurred and is continuing, the Trustee shall exercise such of the rights and powers vested in it by this Indenture, and use the same degree of care and skill in their exercise, as a prudent person.
The District shall, to the extent permitted by law, indemnify and save the Trustee and its officers, directors, agents, and employees harmless from and against (whether or not litigated) all claims, losses, costs, expenses, liability and damages, including legal fees and expenses, arising out of:
(i) the use, maintenance, condition or management of, or from any work or thing done on, the Project; (ii) any breach or default on the part of the District in the performance of any of its obligations under this Indenture and any other agreement made and entered into for purposes of the Bonds and Parity Bonds; (iii) any act of the City, the District or of any of its agents, contractors, servants, employees or licensees with respect to the Project; (iv) any act of any assignee of, or purchaser from, the City, the District or of any of its or their agents, contractors, servants, employees or licensees with respect to the Item Title: 12.2
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Project; (v) the construction or acquisition of the Project or the expenditure of Project Costs; (vi) the exercise and performance by the Trustee of its powers and duties hereunder or any related document; (vii) the sale of the Bonds and Parity Bonds and the carrying out of any of the transactions contemplated by the Bonds and Parity Bonds or this Indenture; or (viii) any untrue statement or alleged untrue statement of any material fact or omission or alleged omission to state a material fact necessary to make the statements made in light of the circumstances in which they were made, not misleading in any official statement or other disclosure document utilized in connection with the sale or marketing of the Bonds and Parity Bonds. The indemnification set forth in this Section shall extend to the Trustee’s officers, agents, employees, successors and assigns. No indemnification will be made under this Section or elsewhere in this Indenture or other agreements for willful misconduct or negligence by the Trustee, its officers, agents, employees, successors or assigns. The District’s obligations hereunder shall remain valid and binding notwithstanding maturity and payment of the Bonds and Parity Bonds, or the resignation or removal of the Trustee.
In accepting the trust hereby created, the Trustee acts solely as Trustee for the Owners and not in its individual capacity, and all persons, including, without limitation, the Owners, the District and the City, having any claim against the Trustee arising from this Indenture shall look only to the funds and accounts held by the Trustee hereunder for payment, except as otherwise provided herein. Under no circumstances shall the Trustee be liable in its individual capacity for the obligations evidenced by the Bonds and any Parity Bonds.
THE TRUSTEE MAKES NO WARRANTY OR REPRESENTATION, EITHER EXPRESS
OR IMPLIED, AS TO THE VALUE, DESIGN, CONDITION, MERCHANTABILITY OR FITNESS
FOR ANY PARTICULAR PURPOSE OR FITNESS FOR THE USE CONTEMPLATED BY THE DISTRICT OF THE PROJECT, OR ANY PORTION THEREOF. In no event shall the Trustee be liable for incidental, indirect, punitive, special or consequential loss or damage of any kind whatsoever (including, but not limited to, loss of profit), in connection with or arising out of the Project or this Indenture for the existence, furnishing, functioning or use and possession of the Project, irrespective of whether the Trustee has been advised of the likelihood of such loss or damage and regardless of the form of action.
The Trustee shall not be liable to the parties hereto or deemed in breach or default hereunder if and to the extent its performance hereunder is prevented by reason of force majeure. The term “force majeure” means an occurrence that is beyond the control of the Trustee and could not have been avoided by exercising due care. Force majeure shall include, but not limited to, any act or provision of any present or future law or regulation or governmental authority; acts of God; earthquakes; fires; floods; wars; terrorism; civil or military disturbances; sabotage; epidemics; quarantine restrictions; riots; interruptions, loss or malfunctions of utilities, computer (hardware or software) or communications service; accidents; labor disputes; acts of civil or military authority or governmental actions; or the unavailability of the Federal Reserve Bank wire or telex or other wire or communication facility, or other similar occurrences.
The Trustee shall be entitled to request and receive written instructions from the District or other parties and shall have no responsibility or liability for any losses or damages of any nature that may arise from any action taken or not taken by the Trustee in accordance with the written direction of the District or such other parties. The Trustee shall have the right to accept and act upon directions given pursuant to this Indenture and delivered using electronic notice; provided, however, that the District shall provide to the Trustee an incumbency certificate listing each Authorized Representative of the District with the authority to provide such directions and containing specimen signatures of such Item Title: 12.2
Community Facilities District 2021-1, Banner Park, Issuance of Special Tax Bonds Item Page Number: 153
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authorized officers, which incumbency certificate shall be amended whenever a person is to be added or deleted from the listing. If the District elects to give the Trustee directions using electronic notice and the Trustee in its discretion elects to act upon such directions, the Trustee’s understanding of such directions shall be deemed controlling. The District understands and agrees that the Trustee cannot determine the identity of the actual sender of such directions and that the Trustee shall conclusively presume that directions that purport to have been sent by an authorized officer listed on the incumbency certificate provided to the Trustee have been sent by such Authorized Representative of the District.
The District shall be responsible for ensuring that only an Authorized Representative of the District shall transmit such directions to the Trustee and that each Authorized Representative of the District treat applicable user and authorization codes, passwords and/or authentication keys with extreme care.
The Trustee shall not be liable for any losses, costs or expenses arising directly or indirectly from the Trustee’s reliance upon and a compliance with such directions, notwithstanding such directions conflict or are inconsistent with a subsequent written direction. The District agrees (i) to assume all risks arising out of the use of electronic notice to submit directions to the Trustee, including, without limitation, the risk of the Trustee acting on unauthorized directions, and the risk of interception and misuse by third parties; (ii) that it is fully informed of the protections and risks associated with the various methods of transmitting directions to the Trustee and that there may be more secure methods of transmitting directions than the method(s) selected by the District; and (iii) that the security procedures (if any) to be followed in connection with its transmission of directions provide to it a commercially reasonable degree of protection in light of its particular needs and circumstances.
Section 7.5. Merger or Consolidation. Any company into which the Trustee may be merged or converted or with which it may be consolidated or any company resulting from any merger, conversion or consolidation to which it shall be a party or any company to which the Trustee may sell or transfer all or substantially all of its corporate trust business, shall be the successor to the Trustee without the execution or filing of any paper or further act, anything herein to the contrary notwithstanding.
ARTICLE VIII
EVENTS OF DEFAULT; REMEDIES
Section 8.1. Events of Default. Any one or more of the following events shall constitute an “Event of Default”:
(a) default in the due and punctual payment of the principal of or redemption premium, if any, on any Bond or Parity Bond when and as the same shall become due and payable, whether at maturity as therein expressed, by declaration or otherwise; (b) default in the due and punctual payment of the interest on any Bond or Parity Bond when and as the same shall become due and payable; or
(c) except as described in subsections (a) or (b), default by the District in the observance of any of the agreements, conditions or covenants on its part contained in this Indenture, the Bonds or any Parity Bonds, which default continues for a period of 30 days after the District has been given notice in writing of such default by the Trustee or the Owners of twenty-five percent (25%) in aggregate principal amount of the Outstanding Bonds and Parity Bonds.
Item Title: 12.2
Community Facilities District 2021-1, Banner Park, Issuance of Special Tax Bonds Item Page Number: 154
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The Trustee agrees to give notice to the Owners as soon as practicable upon the occurrence of an Event of Default under subsections (a) or (b) above and within 30 days of the Trustee’s actual knowledge of an Event of Default under subsection (c) above.
Section 8.2. Remedies of Owners. Upon the occurrence of an Event of Default, any Owner may pursue any available remedy at law or in equity to enforce the payment of the principal of, premium, if any, and interest on the Outstanding Bonds and Parity Bonds, and to enforce any rights of the Trustee under or with respect to this Indenture, including:
(a) by mandamus or other suit or proceeding at law or in equity to enforce his rights against the District and any of the members, officers and employees of the District, and to compel the District or any such members, officers or employees to perform and carry out their duties under the Act and their agreements with the Owners as provided in this Indenture; (b) by suit in equity to enjoin any actions or things which are unlawful or violate the rights of the Owners; or
(c) by a suit in equity to require the District and its members, officers and employees to account as the trustee of an express trust.
If an Event of Default shall have occurred and be continuing and if requested and directed so to do by the Owners of at least twenty-five percent (25%) in aggregate principal amount of Outstanding Bonds and Parity Bonds and if indemnified to its satisfaction, the Trustee shall be obligated to exercise such one or more of the rights and powers conferred by this Article VIII, as the Trustee, being advised by counsel, shall deem most expedient in the interests of the Owners of the Bonds and Parity Bonds.
No remedy herein conferred upon or reserved to the Owners is intended to be exclusive of any other remedy. Every such remedy shall be cumulative and shall be in addition to every other remedy given hereunder or now or hereafter existing, at law or in equity or by statute or otherwise, and may be exercised without exhausting and without regard to any other remedy conferred by the Act or any other law.
Section 8.3. Application of Revenues and Other Funds After Default. All amounts received by the Trustee pursuant to any right given or action taken by the Owners under the provisions of this Indenture relating to the Bonds and Parity Bonds shall be applied by the Trustee in the following order upon presentation of the several Bonds and Parity Bonds:
First, to the payment of the costs, fees and expenses of the Trustee in declaring such Event of Default and in performing its duties and obligations hereunder, including reasonable compensation to its agents, attorneys and counsel;
Second, to the payment of the fees, costs and expenses of the Owners in declaring such Event of Default and in carrying out the provisions of this Article VIII, including reasonable compensation to its agents, attorneys and counsel, and to the payment of all other outstanding fees and expenses of the Trustee; and
Third, to the payment of the whole amount of interest on and principal of the Bonds and Parity Bonds then due and unpaid, with interest on overdue installments of principal and interest to the extent permitted by law at the net effective rate of interest then borne by the Outstanding Bonds and Parity Item Title: 12.2
Community Facilities District 2021-1, Banner Park, Issuance of Special Tax Bonds Item Page Number: 155
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Bonds; provided, however, that in the event that such amounts shall be insufficient to pay the full amount of such interest and principal, then such amounts shall be applied in the following order of priority:
(a) first to the payment of all installments of interest on the Bonds and Parity Bonds then due and unpaid on a pro rata basis based on the total amount then due and owing; (b) second, to the payment of all installments of principal, including Sinking Fund Payments, of the Bonds and Parity Bonds then due and unpaid on a pro rata basis based on the total amount then due and owing; and
(c) third, to the payment of interest on overdue installments of principal and interest on the Bonds and Parity Bonds on a pro rata basis based on the total amount then due and owing.
Section 8.4. Power of Trustee to Control Proceedings. In the event that the Trustee, upon the happening of an Event of Default, shall have taken any action, by judicial proceedings or otherwise, pursuant to its obligations hereunder, whether upon its own discretion or upon the request of the Owners of twenty-five percent (25%) in aggregate principal amount of the Bonds and Parity Bonds then Outstanding, it shall have full power, in the exercise of its discretion for the best interests of the Owners of the Bonds and Parity Bonds, with respect to the continuance, discontinuance, withdrawal, compromise, settlement or other disposal of such action; provided, however, that the Trustee shall not, unless there no longer continues an Event of Default, discontinue, withdraw, compromise or settle, or otherwise dispose of any litigation pending at law or in equity, if at the time there has been filed with it a written request signed by the Owners of a majority in aggregate principal amount of the Outstanding Bonds and Parity Bonds hereunder opposing such discontinuance, withdrawal, compromise, settlement or other such litigation. Any suit, action or proceeding which any Owner of Bonds or Parity Bonds shall have the right to bring to enforce any right or remedy hereunder may be brought by the Trustee for the equal benefit and protection of all Owners of Bonds and Parity Bonds similarly situated and the Trustee is hereby appointed (and the successive respective Owners of the Bonds and Parity Bonds issued hereunder, by taking and holding the same, shall be conclusively deemed so to have appointed it) the true and lawful attorney in fact of the respective Owners of the Bonds and Parity Bonds for the purposes of bringing any such suit, action or proceeding and to do and perform any and all acts and things for and on behalf of the respective Owners of the Bonds and Parity Bonds as a class or classes, as may be necessary or advisable in the opinion of the Trustee as such attorney-in-fact.
Section 8.5. Appointment of Receivers. Upon the occurrence of an Event of Default hereunder, and upon the filing of a suit or other commencement of judicial proceedings to enforce the rights and of the Owners of the Bonds and Parity Bonds under this Indenture, the Trustee shall be entitled, as a matter of right to which the District expressly agrees, to the appointment of a receiver or receivers of the Net Taxes and other amounts pledged hereunder, pending such proceedings, with such powers as the court making such appointment shall confer.
Section 8.6. Non-Waiver. Nothing in this Article VIII or in any other provision of this Indenture, or in the Bonds or the Parity Bonds, shall affect or impair the obligation of the District, which is absolute and unconditional, to pay the interest on and principal of the Bonds and Parity Bonds to the respective Owners of the Bonds and Parity Bonds at the respective dates of maturity, as herein provided, or to pay the Trustee its fees and expenses as provided in Section 8.3 hereof, out of the Net Taxes and other moneys herein pledged for such payment.
Item Title: 12.2
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A waiver of any default or breach of duty or contract by the Trustee or any Owners shall not affect any subsequent default or breach of duty or contract, or impair any rights or remedies on any such subsequent default or breach. No delay or omission of the Trustee or any Owner of any of the Bonds or Parity Bonds to exercise any right or power accruing upon any default shall impair any such right or power or shall be construed to be a waiver of any such default or an acquiescence therein; and every power and remedy conferred upon the Trustee or the Owners by the Act or by this Article VIII may be enforced and exercised from time to time and as often as shall be deemed expedient by the Trustee or the Owners, as the case may be.
Section 8.7. Limitations on Rights and Remedies of Owners. No Owner of any Bond or Parity Bond issued hereunder shall have the right to institute any suit, action or proceeding at law or in equity, for any remedy under or upon this Indenture, unless: (a) such Owner shall have previously given to the Trustee written notice of the occurrence of an Event of Default; (b) the Owners of a majority in aggregate principal amount of all the Bonds and Parity Bonds then Outstanding shall have made written request upon the Trustee to exercise the powers hereinbefore granted or to institute such action, suit or proceeding in its own name; (c) said Owners shall have tendered to the Trustee indemnity and security reasonably acceptable to the Trustee against the costs, expenses and liabilities to be incurred in compliance with such request; and (d) the Trustee shall have refused or omitted to comply with such request for a period of sixty (60) days after such written request shall have been received by, and said tender of indemnity and security shall have been made to, the Trustee.
Such notification, request, tender of indemnity and security and refusal or omission are hereby declared, in every case, to be conditions precedent to the exercise by any Owner of Bonds and Parity Bonds of any remedy hereunder; it being understood and intended that no one or more Owners of Bonds and Parity Bonds shall have any right in any manner whatever by his or their action to enforce any right under this Indenture, except in the manner herein provided, and that all proceedings at law or in equity to enforce any provision of this Indenture shall be instituted, had and maintained in the manner herein provided and for the equal benefit of all Owners of the Outstanding Bonds and Parity Bonds.
The right of any Owner of any Bond and Parity Bond to receive payment of the principal of and interest and premium (if any) on such Bond and Parity Bond as herein provided or to institute suit for the enforcement of any such payment, shall not be impaired or affected without the written consent of such Owner, notwithstanding the foregoing provisions of this Section or any other provision of this Indenture.
Section 8.8. Termination of Proceedings. In case any Owner shall have proceeded to enforce any right under this Indenture by the appointment of a receiver or otherwise, and such proceedings shall have been discontinued or abandoned for any reason, or shall have been determined adversely, then and in every such case, the District, the Trustee and the Owners shall be restored to their former positions and rights hereunder, respectively, with regard to the property subject to this Indenture, and all rights, remedies and powers of the Owners shall continue as if no such proceedings had been taken.
Item Title: 12.2
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ARTICLE IX
DEFEASANCE AND PARITY BONDS
Section 9.1. Defeasance. If the District shall pay or cause to be paid, or there shall otherwise be paid, to the Owner of an Outstanding Bond or Parity Bond the interest due thereon and the principal thereof, at the times and in the manner stipulated in this Indenture or any Supplemental Indenture, then the Owner of such Bond or Parity Bond shall cease to be entitled to the pledge of Net Taxes, and, other than as set forth below, all covenants, agreements and other obligations of the District to the Owner of such Bond or Parity Bond under this Indenture and any Supplemental Indenture relating to such Parity Bond shall thereupon cease, terminate and become void and be discharged and satisfied. In the event of a defeasance of all Outstanding Bonds and Parity Bonds pursuant to this Section, the Trustee shall execute and deliver to the District all such instruments as may be desirable to evidence such discharge and satisfaction, and the Trustee shall pay over or deliver to the District’s general fund all money or securities held by it pursuant to this Indenture which are not required for the payment of the principal of, premium, if any, and interest due on such Bonds and Parity Bonds.
Any Outstanding Bond or Parity Bond shall be deemed to have been paid within the meaning expressed in the first paragraph of this Section if such Bond or Parity Bond is paid in any one or more of the following ways:
(a) by paying or causing to be paid the principal of, premium, if any, and interest on such Bond or Parity Bond, as and when the same become due and payable; (b) by depositing with the Trustee, in trust, at or before maturity, money which, together with the amounts then on deposit in the Special Tax Fund and available for such purpose, is fully sufficient to pay the principal of, premium, if any, and interest on such Bond or Parity Bond, as and when the same shall become due and payable; or
(c) by depositing with the Trustee or another escrow bank appointed by the District, in trust, federal securities described in subparagraph (1) of the definition of Authorized Investments, in which the District may lawfully invest its money, in such amount as will be sufficient, together with the interest to accrue thereon and moneys then on deposit in the Special Tax Fund and available for such purpose, together with the interest to accrue thereon, to pay and discharge the principal of, premium, if any, and interest on such Bond or Parity Bond, as and when the same shall become due and payable.
If paid as provided above, then, at the election of the District, and notwithstanding that any Outstanding Bonds and Parity Bonds shall not have been surrendered for payment, all obligations of the District under this Indenture and any Supplemental Indenture with respect to such Bond or Parity Bond shall cease and terminate, except for the obligation of the Trustee to pay or cause to be paid to the Owners of any such Bond or Parity Bond not so surrendered and paid all sums due thereon, and except for the covenants of the District contained in Section 5.2(f) or any covenants in a Supplemental Indenture relating to compliance with the Code. Notice of such election shall be filed with the Trustee not less than ten days prior to the proposed defeasance date, or such shorter period of time as may be acceptable to the Trustee. In connection with a defeasance under (c) above, there shall be provided to the District a verification report from an independent nationally recognized certified public accountant stating its opinion as to the sufficiency of the moneys or securities deposited with the Trustee or the escrow bank to pay and discharge the principal of, premium, if any, and interest on all Outstanding Item Title: 12.2
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Bonds and Parity Bonds to be defeased in accordance with this Section, as and when the same shall become due and payable, and an opinion of Bond Counsel (which may rely upon the opinion of the certified public accountant) to the effect that the Bonds or Parity Bonds being defeased have been legally defeased in accordance with this Indenture and any applicable Supplemental Indenture.
Upon a defeasance, the Trustee, upon request of the District, shall release the rights of the Owners of such Bonds and Parity Bonds which have been defeased under this Indenture and any Supplemental Indenture and execute and deliver to the District all such instruments as may be desirable to evidence such release, discharge and satisfaction. In the case of a defeasance hereunder of all Outstanding Bonds and Parity Bonds, the Trustee shall pay over or deliver to the District any funds held by the Trustee at the time of a defeasance, which are not required for the purpose of paying and discharging the principal of or interest on the Bonds and Parity Bonds when due. The Trustee shall, at the written direction of the District, mail, first class, postage prepaid, a notice to the Owners whose Bonds or Parity Bonds have been defeased, in the form directed by the District, stating that the defeasance has occurred.
Section 9.2. Conditions for the Issuance of Parity Bonds and Other Additional Indebtedness. The District may at any time after the issuance and delivery of the Bonds hereunder 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 hereunder or under any Supplemental Indenture; provided, however, Parity Bonds may only be issued for the purpose of refunding all or a portion of the Bonds or any Parity Bonds then Outstanding, or for other purposes of the District in a principal amount not to exceed $_____. Parity Bonds may be issued subject to the following additional specific conditions, which are hereby made conditions precedent to the issuance of any such Parity Bonds:
(a) The District shall be in compliance with all covenants set forth in this Indenture and any Supplemental Indenture then in effect and a certificate of the District to that effect shall have been filed with the Trustee; provided, however, that Parity Bonds may be issued notwithstanding that the District is not in compliance with all such covenants so long as immediately following the issuance of such Parity Bonds the District will be in compliance with all such covenants. (b) The issuance of such Parity Bonds shall have been duly authorized pursuant to the Act and all applicable laws, and the issuance of such Parity Bonds shall have been provided for by a Supplemental Indenture duly authorized, executed and delivered by the District which shall specify the following:
(1) the purpose for which such Parity Bonds are to be issued and the fund or funds into which the proceeds thereof are to be deposited;
(2) the authorized principal amount of such Parity Bonds; (3) the date and the maturity date or dates of such Parity Bonds; provided that:
(i) each maturity date shall fall on a September 1; (ii) all such Parity Bonds of like maturity shall be identical in all respects, except as to number; (iii) fixed serial maturities or Sinking Fund Payments, or any combination thereof, shall be established to provide for the retirement of all such Parity Bonds on or before their respective maturity dates; and (iv) if issued for the purpose of refunding Bonds and/or Item Title: 12.2
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Parity Bonds, the maturity of the Parity Bonds to be issued shall not exceed the maturity of the Bonds and Parity being refunded;
(4) the description of the Parity Bonds, the place of payment thereof and the procedure for execution and authentication;
(5) the denominations and method of numbering of such Parity Bonds; (6) the amount and due date of each mandatory Sinking Fund Payment, if any, for such Parity Bonds;
(7) the amount, if any, to be deposited from the proceeds of such Parity Bonds in the Reserve Account of the Special Tax Fund to increase the amount therein to the Reserve Requirement;
(8) the form of such Parity Bonds; and
(9) such other provisions as are necessary or appropriate and not inconsistent with this Indenture.
(c) The District shall have received the following documents or money or securities, all of such documents dated or certified, as the case may be, as of the date of delivery of such Parity Bonds by the Trustee (unless the Trustee shall be directed by the District to accept any of such documents bearing a prior date):
(1) a certified resolution of the City Council, acting as the legislative body of the District, authorizing the issuance of such Parity Bonds; (2) a written request of the District as to the delivery of such Parity Bonds; (3) an opinion of Bond Counsel and/or general counsel to the District to the effect that: (i) the District has the right and power under the Act to execute and deliver the Supplemental Indenture relating to such Parity Bonds, and such Supplemental Indenture has been duly and lawfully executed by the District, and this Indenture and such Supplemental Indenture are in full force and effect and are valid and binding upon the District and enforceable in accordance with their terms (except as enforcement may be limited by bankruptcy, insolvency, reorganization and other similar laws relating to the enforcement of creditors’ rights); (ii) this Indenture creates the valid pledge which it purports to create of the Net Taxes and other amounts as provided in this Indenture, subject to the application thereof to the purposes and on the conditions permitted by this Indenture; and (iii) such Parity Bonds are valid and binding limited obligations of the District, enforceable in accordance with their terms (except as enforcement may be limited by bankruptcy, insolvency, reorganization and other similar laws relating to the enforcement of creditors’ rights) and the terms of this Indenture and the Supplemental Indenture executed and delivered in connection with such Parity Bonds and are entitled to the benefits of this Indenture and such Supplemental Indenture, and such Parity Bonds have been duly and validly authorized and issued in accordance with the Act (or other applicable laws) and this Indenture and such Supplemental Indenture; and a further opinion of Bond Counsel to the effect that, assuming compliance by the District with certain tax covenants, the issuance of the Parity Bonds will not adversely affect the exclusion from gross income for federal income tax purposes of interest on the Bonds and any Parity Bonds theretofore issued on a tax-exempt basis, or the exemption from State of Item Title: 12.2
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California personal income taxation of interest on any Outstanding Bonds and Parity Bonds theretofore issued;
(4) a certificate of the District containing such statements as may be reasonably necessary to show compliance with the requirements of this Indenture; (5) where the Parity Bonds are issued to refund the Bonds or other Parity Bonds, a certificate of an Independent Financial Consultant 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; (6) where the Parity Bonds are being issued other than to refund the Bonds or other Parity Bonds, 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; 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; and
(7) such further documents, money and securities as are required by the provisions of this Indenture and the Supplemental Indenture providing for the issuance of such Parity Bonds.
ARTICLE X
MISCELLANEOUS
Section 10.1. Cancellation of Bonds and Parity Bonds. All Bonds and Parity Bonds surrendered to the Trustee for payment upon maturity or for redemption shall be upon payment therefor, and any Bond or Parity Bond purchased by the District as authorized herein and delivered to the Trustee for such purpose shall be, cancelled forthwith and shall not be reissued. The Trustee shall destroy such Bonds and Parity Bonds, as provided by law, and, upon request of the District, furnish to the District a certificate of such destruction.
Section 10.2. Execution of Documents and Proof of Ownership. Any request, direction, consent, revocation of consent, or other instrument in writing required or permitted by this Indenture to be signed or executed by Owners may be in any number of concurrent instruments of similar tenor and may be signed or executed by such Owners in person or by their attorneys appointed by an instrument in writing for that purpose, or by the bank, trust company or other depository for such Bonds. Proof of the execution of any such instrument, or of any instrument appointing any such attorney, and of the ownership of Bonds or Parity Bonds shall be sufficient for the purposes of this Indenture (except as otherwise herein provided), if made in the following manner:
(a) The fact and date of the execution by any Owner or his or her attorney of any such instrument, and of any instrument appointing any such attorney, may be proved by a signature guarantee of any bank or trust company located within the United States of America. Where any such instrument is executed by an officer of a corporation or association or a member of a partnership on Item Title: 12.2
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behalf of such corporation, association or partnership, such signature guarantee shall also constitute sufficient proof of his authority.
(b) As to any Bond or Parity Bond, the person in whose name the same shall be registered in the Bond Register shall be deemed and regarded as the absolute owner thereof for all purposes, and payment of or on account of the principal of any such Bond or Parity Bond, and the interest thereon, shall be made only to or upon the order of the registered Owner thereof or his or her legal representative. All such payments shall be valid and effectual to satisfy and discharge the liability upon such Bond or Parity Bond and the interest thereon to the extent of the sum or sums to be paid.
Neither the District nor the Trustee shall be affected by any notice to the contrary.
Nothing contained in this Indenture shall be construed as limiting the Trustee or the District to such proof, it being intended that the Trustee or the District may accept any other evidence of the matters herein stated which the Trustee or the District may deem sufficient. Any request or consent of the Owner of any Bond or Parity Bond shall bind every future Owner of the same Bond or Parity Bond in respect of anything done or suffered to be done by the Trustee or the District in pursuance of such request or consent.
Section 10.3. Unclaimed Moneys. Anything in this Indenture to the contrary notwithstanding, any money held by the Trustee in trust for the payment and discharge of any of the Outstanding Bonds and Parity Bonds which remain unclaimed for two years after the date when such Outstanding Bonds or Parity Bonds have become due and payable, if such money was held by the Trustee at such date, or for two years after the date of deposit of such money if deposited with the Trustee after the date when such Outstanding Bonds or Parity Bonds become due and payable, shall be repaid by the Trustee to the District, as its absolute property and free from trust, and the Trustee shall thereupon be released and discharged with respect thereto and the Owners shall look only to the District for the payment of such Outstanding Bonds or Parity Bonds; provided, however, that, before being required to make any such payment to the District, the Trustee, at the expense of the District, shall cause to be mailed by first-class mail, postage prepaid, to the registered Owners of such Outstanding Bonds or Parity Bonds at their addresses as they appear on the registration books of the Trustee a notice that said money remains unclaimed and that, after a date named in said notice, which date shall not be less than 30 days after the date of the mailing of such notice, the balance of such money then unclaimed will be returned to the District.
Section 10.4. Provisions Constitute Contract; Governing Law; Venue. The provisions of this Indenture shall constitute a contract between the District and the Owners and the provisions hereof shall be governed by and construed in accordance with the laws of the State of California. The parties hereby (i) irrevocably submit to the exclusive jurisdiction of any federal or state court sitting in the State of California, (ii) waive any objection to laying of venue in any such action or proceeding in such courts, and (iii) waive any objection that such courts are in inconvenient forum or do not have jurisdiction over any party.
In case any suit, action or proceeding to enforce any right or exercise any remedy shall be brought or taken and, should said suit, action or proceeding be abandoned, or be determined adversely to the Owners or the Trustee, then the District, the Trustee and the Owners shall be restored to their former positions, rights and remedies as if such suit, action or proceeding had not been brought or taken.
Item Title: 12.2
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After the issuance and delivery of the Bonds, this Indenture shall be irrepealable, but shall be subject to modifications to the extent and in the manner provided in this Indenture, but to no greater extent and in no other manner.
Section 10.5. Future Contracts. Nothing herein contained shall be deemed to restrict or prohibit the District from making contracts or creating bonded or other indebtedness payable from a pledge of the Net Taxes which is subordinate to the pledge hereunder, or which is payable from the general fund of the District or from taxes or any source other than the Net Taxes and other amounts pledged hereunder.
Section 10.6. Further Assurances. The District will adopt, make, execute and deliver any and all such further resolutions, instruments and assurances as may be reasonably necessary or proper to carry out the intention or to facilitate the performance of this Indenture, and for the better assuring and confirming unto the Owners of the Bonds or any Parity Bonds the rights and benefits provided in this Indenture.
Section 10.7. Entire Agreement; Severability. This Indenture and the exhibits hereto set forth the entire agreement and understanding of the parties related to this transaction and supersedes all prior agreements and understandings, oral or written. If any covenant, agreement or provision, or any portion thereof, contained in this Indenture, or the application thereof to any person or circumstance, is held to be unconstitutional, invalid or unenforceable, the remainder of this Indenture and the application of any such covenant, agreement or provision, or portion thereof, to other persons or circumstances, shall be deemed severable and shall not be affected thereby, and this Indenture, the Bonds and any Parity Bonds issued pursuant hereto shall remain valid and the Owners shall retain all valid rights and benefits accorded to them under the laws of the State of California.
Section 10.8. Notices. Any notices required to be given to the District with respect to the Bonds or this Indenture shall be mailed, first class, postage prepaid, or personally delivered to the City Manager of the City of Menifee, 29844 Haun Road, Menifee, California 92586, all notices to the Trustee in its capacity as Trustee shall be mailed, first class, postage prepaid, or personally delivered to the Trustee, Wilmington Trust, National Association, 650 Town Center Drive, Suite 800 Costa Mesa, California 92626.
Item Title: 12.2
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IN WITNESS WHEREOF, COMMUNITY FACILITIES DISTRICT NO. 2021-1 (BANNER PARK) OF THE CITY OF MENIFEE has caused this Indenture to be signed by an Authorized Representative of the District and Wilmington Trust, National Association in token of its acceptance of the trust created hereunder, has caused this Indenture to be signed in its corporate name by its officers identified below, all as of the day and year first above written.
COMMUNITY FACILITIES DISTRICT NO. 2021-1
(BANNER PARK) OF THE CITY OF MENIFEE
By:
Mayor of the City of Menifee, acting as the
legislative body of Community Facilities District
No. 2021-1 (Banner Park) of the City of Menifee
ATTEST:
City Clerk of the City of Menifee, acting as
the legislative body of Community
Facilities District No. 2021-1 (Banner
Park) of the City of Menifee
WILMINGTON TRUST, NATIONAL
ASSOCIATION, as Trustee
By:
Authorized Signatory
Item Title: 12.2
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EXHIBIT A
FORM OF SPECIAL TAX BOND
UNLESS THIS BOND IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION (“DTC”), TO THE DISTRICT OR TRUSTEE FOR
REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY BOND ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER
ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER,
PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
R-____ $___________
UNITED STATES OF AMERICA
STATE OF CALIFORNIA
COUNTY OF RIVERSIDE
COMMUNITY FACILITIES DISTRICT NO. 2021-1
(BANNER PARK) OF THE CITY OF MENIFEE
SPECIAL TAX BOND, SERIES 2022A
INTEREST RATE: MATURITY DATE: DATED DATE: CUSIP:
_____% September 1, 20__ __________, 2022 ___
REGISTERED OWNER: CEDE & CO.
PRINCIPAL AMOUNT: __________________ DOLLARS
COMMUNITY FACILITIES DISTRICT NO. 2021-1 (BANNER PARK) OF THE CITY OF MENIFEE (the “District”) which was formed by the City of Menifee (the “City”) and is situated in the County of Riverside, State of California, FOR VALUE RECEIVED, hereby promises to pay, solely from certain amounts held under the Indenture (as hereinafter defined), to the Owner named above, or registered assigns, on the Maturity Date set forth above, unless redeemed prior thereto as hereinafter provided, the Principal Amount set forth above, and to pay interest on such Principal Amount from the Interest Payment Date (as hereinafter defined) next preceding the date of authentication hereof, unless:
(i) the date of authentication is an Interest Payment Date, in which event interest shall be payable from such date of authentication; (ii) the date of authentication is after a Record Date (as hereinafter defined) but prior to the immediately succeeding Interest Payment Date, in which event interest shall 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, in which event interest shall be payable from the Dated Date set forth above. Notwithstanding the foregoing, if at the time of Item Title: 12.2
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authentication of this Bond interest is in default, interest on this Bond shall 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, interest on this Bond shall be payable from the Dated Date set forth above. Interest will be paid semiannually on each March 1 and September 1 (each an “Interest Payment Date”), commencing March 1, 2023, at the Interest Rate set forth above, until the Principal Amount hereof is paid or made available for payment.
The principal of and premium, if any, on this Bond are payable to the Owner hereof in lawful money of the United States of America upon presentation and surrender of this Bond at the Principal Office of the Trustee (as such term is defined in the Indenture), initially Wilmington Trust, National Association, (the “Trustee”). Interest on this Bond shall be paid by check of the Trustee mailed, by first class mail, postage prepaid, or in certain circumstances described in the Indenture by wire transfer to an account within the United States of America, to the Owner hereof as of the close of business on the fifteenth day of the month preceding the month in which the Interest Payment Date occurs (the “Record Date”) at such Owner’s address as it appears on the registration books maintained by the Trustee.
This Bond is one of a duly authorized issue of “Community Facilities District No. 2021-1 (Banner Park) of the City of Menifee Special Tax Bonds, Series 2022A” (the “Bonds”) issued in the aggregate principal amount of $__________ pursuant to the Mello-Roos Community Facilities Act of 1982, as amended, being Section 53311 et seq. of the California Government Code (the “Act”) for the purpose of financing public improvements, funding a reserve account and paying certain costs related to the issuance of the Bonds. The issuance of the Bonds and the terms and conditions thereof are provided for by a resolution adopted by the City Council of the City, acting in its capacity as the legislative body of the District (the “Legislative Body”), on __________, 2022, and a Bond Indenture executed in connection therewith dated as of __________ 1, 2022 (the “Indenture”), by and between the District and the Trustee, and this reference incorporates the Indenture herein, and by acceptance hereof the Owner of this Bond assents to said terms and conditions. The Indenture is adopted under and this Bond is issued under, and both are to be construed in accordance with, the laws of the State of California.
Pursuant to the Act and the Indenture, the principal of, premium, if any, and interest on this Bond are payable solely from the portion of the annual special taxes authorized under the Act to be levied and collected within the District (the “Special Taxes”) and certain other amounts pledged to the repayment of the Bonds as set forth in the Indenture. Any amounts for the payment hereof shall be limited to the Net Taxes pledged and collected or foreclosure proceeds received following a default in payment of the Special Taxes and other amounts deposited to the Special Tax Fund established under the Indenture, except to the extent that other provision for payment has been made by the Legislative Body, as may be permitted by law. The District has covenanted for the benefit of the owners of the Bonds that under certain circumstances described in the Indenture it will commence and diligently pursue to completion appropriate foreclosure proceedings in the event of delinquencies of Special Tax installments levied for payment of principal and interest on the Bonds.
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, ____, 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:
Item Title: 12.2
Community Facilities District 2021-1, Banner Park, Issuance of Special Tax Bonds Item Page Number: 166
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Redemption Date Redemption Price
September 1, ____ and March 1, ____ 103%
September 1, ____ and March 1, ____ 102
September 1, ____ and March 1, ____ 101
September 1, ____ and any Interest Payment Date thereafter 100 The Bonds maturing on September 1, ____ (the “____ Term Bonds”) shall 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, ____, and on each September 1 thereafter prior to maturity, in accordance with the schedule of Sinking Fund Payments set forth below. The ____ Term Bonds so called for redemption shall be selected by the Trustee by lot and shall be redeemed at a redemption price for each redeemed ____ Term Bond equal to the principal amount thereof, plus accrued interest to the redemption date, without premium, as follows:
Term Bonds Maturing September 1, ____
Sinking Fund Redemption Date
(September 1) Sinking Fund Payments
$
*
* Maturity.
The Bonds maturing on September 1, ____ (the “____ Term Bonds”) shall 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, ____, and on each September 1 thereafter prior to maturity, in accordance with the schedule of Sinking Fund Payments set forth below. The ____ Term Bonds so called for redemption shall be selected by the Trustee by lot and shall be redeemed at a redemption price for each redeemed ____ Term Bond equal to the principal amount thereof, plus accrued interest to the redemption date, without premium, as follows:
Term Bonds Maturing September 1, ____
Sinking Fund Redemption Date
(September 1) Sinking Fund Payments
$
*
* Maturity.
The Bonds maturing on September 1, ____ (the “____ Term Bonds”) shall be called before maturity and redeemed, from the Sinking Fund Payments that have been deposited into the Redemption Item Title: 12.2
Community Facilities District 2021-1, Banner Park, Issuance of Special Tax Bonds Item Page Number: 167
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Account established under the Indenture, on September 1, ____, and on each September 1 thereafter prior to maturity, in accordance with the schedule of Sinking Fund Payments set forth below. The ____ Term Bonds so called for redemption shall be selected by the Trustee by lot and shall be redeemed at a redemption price for each redeemed ____ Term Bond equal to the principal amount thereof, plus accrued interest to the redemption date, without premium, as follows:
Term Bonds Maturing September 1, ____
Sinking Fund Redemption Date
(September 1) Sinking Fund Payments
$
*
* Maturity.
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, ____, and shall be redeemed by the Trustee, from Prepayments deposited to the Redemption Account plus amounts transferred from the Reserve Account in connection with such transfers, at the following redemption prices, expressed as a percentage of the principal amount to be redeemed, together with accrued interest to the redemption date:
Redemption Date Redemption Price
Any Interest Payment Date through March 1, ____ 103%
September 1, ____ and March 1, ____ 102
September 1, ____ and March 1, ____ 101
September 1, ____ and any Interest Payment Date thereafter 100 Notice of redemption with respect to the Bonds to be redeemed shall be mailed to the registered owners thereof not less than 30 nor more than 45 days prior to the redemption date by first class mail, postage prepaid, to the addresses set forth in the registration books; 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. Neither a failure of the Owner hereof to receive such notice nor any defect therein will affect the validity of the proceedings for redemption. All Bonds or portions thereof so called for redemption will cease to accrue interest on the specified redemption date, provided that funds for the redemption are on deposit with the Trustee on the redemption date. Thereafter, the registered owners of such Bonds shall have no rights except to receive payment of the redemption price upon the surrender of the Bonds.
Item Title: 12.2
Community Facilities District 2021-1, Banner Park, Issuance of Special Tax Bonds Item Page Number: 168
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This Bond shall be registered in the name of the Owner hereof, as to both principal and interest, and the District and the Trustee may treat the Owner hereof as the absolute owner for all purposes and shall not be affected by any notice to the contrary.
The Bonds are issuable only in fully registered form in the denomination of $5,000 or any integral multiple thereof and may be exchanged for a like aggregate principal amount of Bonds of other authorized denominations of the same issue and maturity, all as more fully set forth in the Indenture.
This Bond is transferable by the Owner hereof, in person or by his attorney duly authorized in writing, at the Principal Office of the Trustee, but only in the manner, subject to the limitations and upon payment of the charges provided in the Indenture, upon surrender and cancellation of this Bond. Upon such transfer, a new registered Bond of authorized denomination or denominations for the same aggregate principal amount of the same issue and maturity will be issued to the transferee in exchange therefor.
The Trustee shall not be required to register transfers or make exchanges of: (i) any Bonds for a period of 15 days next preceding any selection of the Bonds to be redeemed; or (ii) any Bonds chosen for redemption.
The rights and obligations of the District and of the registered owners of the Bonds may be amended at any time, and in certain cases without notice to or the consent of the registered owners, to the extent and upon the terms provided in the Indenture.
THE BONDS DO NOT CONSTITUTE GENERAL OBLIGATIONS OF THE CITY OR OF THE DISTRICT. NEITHER THE CITY NOR THE DISTRICT IS OBLIGATED TO LEVY OR
PLEDGE, OR HAS LEVIED OR PLEDGED, GENERAL OR SPECIAL TAXES, OTHER THAN THE SPECIAL TAXES REFERENCED HEREIN. THE BONDS ARE LIMITED OBLIGATIONS
OF THE DISTRICT PAYABLE FROM THE PORTION OF THE SPECIAL TAXES AND OTHER
AMOUNTS PLEDGED UNDER THE INDENTURE BUT ARE NOT A DEBT OF THE CITY, THE
STATE OF CALIFORNIA OR ANY OF ITS POLITICAL SUBDIVISIONS WITHIN THE MEANING OF ANY CONSTITUTIONAL OR STATUTORY LIMITATION OR RESTRICTION.
This Bond shall not become valid or obligatory for any purpose until the certificate of authentication and registration hereon endorsed shall have been dated and signed by the Trustee.
IT IS HEREBY CERTIFIED, RECITED AND DECLARED that all acts, conditions and things required by law to exist, happen and be performed precedent to and in the issuance of this Bond do exist, have happened and have been performed in due time, form and manner as required by law, and that the amount of this Bond, together with all other indebtedness of the District, does not exceed any debt limit prescribed by the laws or Constitution of the State of California.
IN WITNESS WHEREOF, Community Facilities District No. 2021-1 (Banner Park) of the City of Menifee has caused this Bond to be dated the Dated Date, to be signed on behalf of the District by the Mayor of the City by his facsimile signature and attested by the facsimile signature of the City Clerk of the City.
Item Title: 12.2
Community Facilities District 2021-1, Banner Park, Issuance of Special Tax Bonds Item Page Number: 169
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Mayor of the City of Menifee, acting as the legislative body of Community Facilities District No. 2021-1
(Banner Park) of the City of Menifee
ATTEST:
City Clerk of the City of Menifee, acting as the
legislative body of Community Facilities
District No. 2021-1 (Banner Park) of the City
of Menifee
[FORM OF TRUSTEE’S CERTIFICATE
OF AUTHENTICATION AND REGISTRATION]
This is one of the Bonds described in the within-defined Indenture.
Dated: __________, 2022 WILMINGTON TRUST, NATIONAL
ASSOCIATION, as Trustee
By:
Authorized Signatory
[FORM OF LEGAL OPINION]
The following is a true copy of the opinion rendered by Stradling Yocca Carlson & Rauth, a Professional Corporation, in connection with the issuance of, and dated as of the date of the original delivery of, the Bonds. A signed copy is on file in my office.
City Clerk of the City
Item Title: 12.2
Community Facilities District 2021-1, Banner Park, Issuance of Special Tax Bonds Item Page Number: 170
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[FORM OF ASSIGNMENT]
For value received the undersigned do(es) hereby sell, assign and transfer unto whose tax identification number is ,
the within-mentioned registered Bond and hereby irrevocably constitute(s) and appoint(s) attorney to transfer the same on the books of the Trustee with full power of substitution in the premises.
Dated:
Signature guaranteed:
NOTE: Signature(s) must be guaranteed by an
eligible guarantor institution.
NOTE: The signatures(s) on this Assignment
must correspond with the name(s) as written on
the face of the within Bond in every particular
without alteration or enlargement or any change
whatsoever.
Item Title: 12.2
Community Facilities District 2021-1, Banner Park, Issuance of Special Tax Bonds Item Page Number: 171
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B-1
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EXHIBIT B-1
FORM OF REQUISITION FOR DISBURSEMENT OF PROJECT COSTS
$__________
COMMUNITY FACILITIES DISTRICT NO. 2021-1
(BANNER PARK) OF THE CITY OF MENIFEE
SPECIAL TAX BONDS, SERIES 2022A
Wilmington Trust, National Association (the “Trustee”), is hereby requested to pay from the [City Facilities][Water Facilities][School Facilities] Account of the Community Facilities District No. 2021-1 (Banner Park) of the City of Menifee Acquisition and Construction Fund, established by the Bond Indenture, dated as of __________ 1, 2022, by and between the Trustee and Community Facilities District No. 2021-1 (Banner Park) of the City of Menifee (the “District”), the amount specified to the payee named below for payment of the Project Costs set forth in Attachment No. 1 hereto.
Payee:
Address:
Purpose:
Amount: $
The amount is due and payable under purchase order, contract or other authorization and has not formed the basis of any prior request for payment. The conditions for the release of this amount from the [City Facilities][Water Facilities][School Facilities] Account, including those conditions in Section 3.9(b) of the Indenture have been satisfied.
There has not been filed with nor served upon the District notice of any lien, right to lien or attachment upon, or stop notice or claim affecting the right to receive payment of the amount specified above which has not been released or will not be released simultaneously with the payment of such amount, other than materialmen’s or mechanic’s liens accruing by mere operation of law.
Dated: COMMUNITY FACILITIES DISTRICT NO. 2021-1
(BANNER PARK) OF THE CITY OF MENIFEE
By:
Name:
Title: _____________________________________
Item Title: 12.2
Community Facilities District 2021-1, Banner Park, Issuance of Special Tax Bonds Item Page Number: 172
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1 $_______
COMMUNITY FACILITIES DISTRICT NO. 2021-1 (BANNER PARK)
OF THE CITY OF MENIFEE
SPECIAL TAX BONDS, SERIES 2022A
BOND PURCHASE AGREEMENT
__________, 2022
City of Menifee
Community Facilities District No. 2021-1
(Banner Park)
29844 Haun Road
Menifee, California 92586
Ladies and Gentlemen:
Stifel, Nicolaus & Company, Incorporated, as underwriter (the “Underwriter”), acting not as a fiduciary or agent for you, but on behalf of itself, offers to enter into this Bond Purchase Agreement (this “Purchase Agreement”) with Community Facilities District No. 2021-1 (Banner Park) of the City of Menifee (the “Community Facilities District”), which upon acceptance will be binding upon the Underwriter and the Community Facilities District. The agreement of the Underwriter to purchase the Bonds (as hereinafter defined) is contingent upon the Community Facilities District satisfying all of the obligations imposed upon them under this Purchase Agreement. This offer is made subject to the Community Facilities District’s acceptance by the execution of this Purchase Agreement and its delivery to the Underwriter at or before 11:59 P.M., local time, on the date hereof, and, if not so accepted, will be subject to withdrawal by the Underwriter upon notice delivered to the Community Facilities District at any time prior to the acceptance hereof by the Community Facilities District. All capitalized terms used herein, which are not otherwise defined, shall have the meaning provided for such terms in the Bond Indenture, dated as of _______ 1, 2022 (the “Indenture”), by and between the Community Facilities District and Wilmington Trust, National Association, as trustee (the “Trustee”).
1. Purchase, Sale and Delivery of the Bonds.
Subject to the terms and conditions and in reliance upon the representations, warranties and agreements set forth herein: (i) the Underwriter hereby agrees to purchase from the Community Facilities District and the Community Facilities District hereby agrees to sell to the Underwriter all (but not less than all) of the $_______ aggregate principal amount of the Community Facilities District No. 2021-1 (Banner Park) of the City of Menifee Special Tax Bonds, Series 2022A (the “Bonds”), dated the Closing Date (as hereinafter defined), bearing interest at the rates and maturing on the dates and in the principal amounts set forth in Exhibit A hereto. The purchase price for the Bonds shall be $_______ (being 100% of the aggregate principal amount thereof, plus an original issue premium of $______ and less an Underwriter’s discount of $_______).
The Underwriter agrees to make a bona fide public offering of all of the Bonds initially at the public offering prices (or yields) set forth in Exhibit A attached hereto and incorporated herein by Item Title: 12.2
Community Facilities District 2021-1, Banner Park, Issuance of Special Tax Bonds Item Page Number: 173
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2 reference. Subsequent to the initial public offering, the Underwriter reserves the right to change the public offering prices (or yields) as it deems necessary in connection with the marketing of the Bonds subject to Section 2 hereof, provided that the Underwriter shall not change the interest rates set forth in Exhibit A. The Bonds may be offered and sold to certain dealers at prices lower than such initial offering prices.
The Bonds shall be substantially in the form described in, shall be issued and secured under the provisions of, and shall be payable from the Net Taxes as provided in the Indenture, the Preliminary Official Statement (as hereinafter defined), and the Mello-Roos Community Facilities Act of 1982, as amended (Section 53311 et seq. of the Government Code of the State of California) (the “Community Facilities District Act”). The issuance of the Bonds has been duly authorized by the City Council of the City of Menifee (the “City”), as the legislative body for the Community Facilities District, pursuant to a resolution (the “Community Facilities District Resolution of Issuance”) adopted on __________, 2022.
The net proceeds of the Bonds will be used to (i) finance certain public improvements needed with respect to the development of property located within the Community Facilities District, including public improvements to be owned by 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 shall be substantially in the form described in, shall be issued and secured under the provisions of, and shall be payable from special taxes as provided in the Indenture (the “Special Taxes”).
A. The Community Facilities District hereby acknowledges that the Underwriter is entering into this Purchase Agreement in reliance on the representations, warranties and agreements made by the Community Facilities District herein, and the Community Facilities District shall take all action necessary to enforce its rights hereunder for the benefit of the Underwriter and shall immediately notify the Underwriter if it becomes aware that any representation, warranty or agreement made by the Community Facilities District herein is incorrect in any material respect.
The Community Facilities District acknowledges and agrees that (i) the purchase and sale of the Bonds pursuant to this Purchase Agreement is an arm’s-length commercial transaction between the Community Facilities District and the Underwriter, (ii) in connection therewith and with the discussions, undertakings and procedures leading up to the consummation of such transaction, the Underwriter is and has been acting solely as principal and not as the agent or fiduciary of the Community Facilities District, (iii) the Underwriter has not assumed an advisory or fiduciary responsibility in favor of the Community Facilities District with respect to (a) the offering of the Bonds or the process leading thereto (whether or not the Underwriter, or any affiliate of the Underwriter, has advised or is currently advising the Community Facilities District on other matters) or (b) any other obligations to the Community Facilities District with respect to the offering contemplated hereby, except the obligations expressly set forth in this Purchase Agreement or otherwise imposed by law, (iv) the Underwriter has financial interests that differ from those of the Community Facilities District and (v) the Community Facilities District has consulted with their own legal, financial and other advisors to the extent they have deemed appropriate in connection with this transaction. The Community Facilities District acknowledges that it has previously provided the Underwriter with an acknowledgement of receipt of the required Underwriter disclosure under Rule Item Title: 12.2
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3 G-17 of the Municipal Securities Rulemaking Board (“MSRB”). The Community Facilities District acknowledges and represents that it has engaged Urban Futures, Inc. as its municipal advisor (the “Municipal Advisor”) (as defined in Securities and Exchange Commission Rule 15Ba1) and will rely solely on the financial advice of Urban Futures, Inc. with respect to the Bonds.
B. Pursuant to the authorization of the Community Facilities District, the Underwriter has distributed copies of the Preliminary Official Statement dated _______, 2022, relating to the Bonds, which, together with the cover page, inside cover page and appendices thereto is herein called the “Preliminary Official Statement.” By its acceptance of this Purchase Agreement, the Community Facilities District hereby ratifies the use by the Underwriter of the Preliminary Official Statement, and the Community Facilities District agrees to execute a final official statement relating to the Bonds (including any supplements and/or amendments thereto, the “Official Statement”) which will consist of the Preliminary Official Statement with such changes as may be made thereto, with the approval of Stradling Yocca Carlson & Rauth, a Professional Corporation, Bond Counsel (“Bond Counsel”), Stradling Yocca Carlson & Rauth, a Professional Corporation, Disclosure Counsel (“Disclosure Counsel”), and the Underwriter, and to provide copies thereof to the Underwriter as set forth herein. The Community Facilities District hereby authorizes and requires the Underwriter to use and promptly distribute, in connection with the offer and sale of the Bonds, the Preliminary Official Statement, the Official Statement and any supplement or amendment thereto. The Community Facilities District further authorizes the Underwriter to use and distribute, in connection with the offer and sale of the Bonds, the Indenture, the Continuing Disclosure Certificate executed by the Community Facilities District in connection with the Bonds (the “Continuing Disclosure Certificate”), this Purchase Agreement and all information contained herein, and all other documents, certificates and statements furnished by or on behalf of the Community Facilities District to the Underwriter in connection with the transactions contemplated by this Purchase Agreement.
C. To assist the Underwriter in complying with Securities and Exchange Commission Rule 15c2-12(b)(5) (the “Rule”), the Community Facilities District will undertake pursuant to the Continuing Disclosure Certificate, in the form attached to the Official Statement as Appendix F, to provide annual reports and notices of certain enumerated events. A description of this undertaking is set forth in the Preliminary Official Statement and will also be set forth in the Official Statement.
D. Except as the Underwriter and the Community Facilities District may otherwise agree, the Community Facilities District will deliver to the Underwriter, at the offices of Bond Counsel in Newport Beach, California, or at such other location as may be mutually agreed upon by the Underwriter and the Community Facilities District, the documents hereinafter mentioned; and the Community Facilities District will deliver to the Underwriter through the facilities of The Depository Trust Company (“DTC”), the Bonds, in definitive form (all Bonds bearing CUSIP numbers), duly executed by the Community Facilities District and authenticated by the Trustee in the manner provided for in the Indenture and the Community Facilities District Act at 8:00 a.m. California time, on ________, 2022 (the “Closing Date”), and the Underwriter will accept such delivery and pay the purchase price of the Bonds as set forth in paragraph (A) of this Section by wire transfer, payable in federal or other immediately available funds (such delivery and payment being herein referred to as the “Closing”). The Bonds shall be in fully registered book-entry form (which may be typewritten) and shall be registered in the name of Cede & Co., as nominee of DTC.
Item Title: 12.2
Community Facilities District 2021-1, Banner Park, Issuance of Special Tax Bonds Item Page Number: 175
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4 2. Establishment of Issue Price.
A. The Underwriter agrees to assist the Community Facilities District in establishing the issue price of the Bonds and shall execute and deliver to the Community Facilities District at Closing an “issue price” or similar certificate, together with the supporting pricing wires or equivalent communications, substantially in the form attached hereto as Exhibit D, with such modifications as may be appropriate or necessary, in the reasonable judgment of the Underwriter, the Community Facilities District and Bond Counsel, to accurately reflect, as applicable, the sales price or prices or the initial offering price or prices to the public of the Bonds.
B. Except as otherwise set forth in Exhibit A attached hereto, the Community Facilities District will treat the first price at which 10% of each maturity of the Bonds (the “10% test”) is sold to the public as the issue price of that maturity (if different interest rates apply within a maturity, each separate CUSIP number within that maturity will be subject to the 10% test). At or promptly after the execution of this Purchase Agreement, the Underwriter shall report to the Community Facilities District the price or prices at which it has sold to the public each maturity of Bonds. If at that time the 10% test has not been satisfied as to any maturity of the Bonds, the Underwriter agrees to promptly report to the Community Facilities District the prices at which it sells the unsold Bonds of that maturity to the public. That reporting obligation shall continue, whether or not the Closing Date has occurred, until the 10% test has been satisfied as to the Bonds of that maturity or until all Bonds of that maturity have been sold to the public.
C. The Underwriter confirms that it has offered the Bonds to the public on or before the date of this Purchase Agreement at the offering price or prices (the “initial offering price”), or at the corresponding yield or yields, set forth in Exhibit A attached hereto, except as otherwise set forth therein. Exhibit A also sets forth, as of the date of this Purchase Agreement, the maturities, if any, of the Bonds for which the Underwriter represents that (i) the 10% test has been satisfied (assuming orders are confirmed by the close of the business day immediately following the date of this Purchase Agreement) and (ii) the 10% test has not been satisfied and for which the Community Facilities District and the Underwriter agree that the restrictions set forth in the next sentence shall apply, which will allow the Community Facilities District to treat the initial offering price to the public of each such maturity as of the sale date as the issue price of that maturity (the “hold-the-offering-price rule”). So long as the hold-the-offering-price rule remains applicable to any maturity of the Bonds, the Underwriter will neither offer nor sell unsold Bonds of that maturity to any person at a price that is higher than the initial offering price to the public during the period starting on the sale date and ending on the earlier of the following:
1. the close of the fifth (5th) business day after the sale date; or
2. the date on which the Underwriter has sold at least 10% of that maturity of the Bonds to the public at a price that is no higher than the initial offering price to the public.
The Underwriter shall promptly advise the Community Facilities District when it has sold 10% of that maturity of the Bonds to the public at a price that is no higher than the initial offering price to the public, if that occurs prior to the close of the fifth (5th) business day after the sale date.
D. The Underwriter confirms that:
Item Title: 12.2
Community Facilities District 2021-1, Banner Park, Issuance of Special Tax Bonds Item Page Number: 176
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5 (i) any selling group agreement and any third-party distribution agreement relating to the initial sale of the Bonds to the public, together with the related pricing wires, contains or will contain language obligating each dealer who is a member of the selling group and each broker-dealer that is a party to such third-party distribution agreement, as applicable:
(A)(i) to report the prices at which it sells to the public the unsold Bonds of each maturity allocated to it, whether or not the Closing Date has occurred, until either all Bonds of that maturity allocated to it have been sold or it is notified by the Underwriter that the 10% test has been satisfied as to the Bonds of that maturity, provided that, the reporting obligation after the Closing Date may be at reasonable periodic intervals or otherwise upon request of the Underwriter and (ii) to comply with the hold-the-offering-price rule, if applicable, if and for so long as directed by the Underwriter,
(B) to promptly notify the Underwriter of any sales of Bonds that, to its knowledge, are made to a purchaser who is a related party to an underwriter participating in the initial sale of the Bonds to the public (each such term being used as defined below), and (C) to acknowledge that, unless otherwise advised by the dealer or broker-dealer, the Underwriter shall assume that each order submitted by the dealer or broker-dealer is a sale to the public.
(ii) any selling group agreement relating to the initial sale of the Bonds to the public, together with the related pricing wires, contains or will contain language obligating each dealer that is a party to a third-party distribution agreement to be employed in connection with the initial sale of the Bonds to the public to require each broker-dealer that is a party to such third-party distribution agreement to (A) report the prices at which it sells to the public the unsold Bonds of each maturity allocated to it, whether or not the Closing Date has occurred, until either all Bonds of that maturity allocated to it have been sold or it is notified by the Underwriter or the dealer that the 10% test has been satisfied as to the Bonds of that maturity, provided that, the reporting obligation after the Closing Date may be at reasonable periodic intervals or otherwise upon request of the Underwriter or the dealer, and (B) comply with the hold-the-offering-price rule, if applicable, if and for so long as directed by the Underwriter or the dealer and as set forth in the related pricing wires.
E. The Community Facilities District acknowledges that, in making the representation set forth in this section, the Underwriter will rely on (i) in the event a selling group has been created in connection with the initial sale of the Bonds to the public, the agreement of each dealer who is a member of the selling group to comply with the requirements for establishing the issue price of the Bonds, including, but not limited to, its agreement to comply with the hold-the- offering-price rule, if applicable to the Bonds, as set forth in a selling group agreement and the related pricing wires, and (ii) in the event that a third-party distribution agreement was employed in connection with the initial sale of the Bonds to the public, the agreement of each broker-dealer that is a party to such agreement to comply with the requirements for establishing the issue price of the Bonds, including, but not limited to, its agreement to comply with the hold-the-offering-price rule, if applicable to the Bonds, as set forth in the third-party distribution agreement and the related pricing wires.
F. The Underwriter acknowledges that sales of any Bonds to any person that is a related party to an underwriter participating in the initial sale of the Bonds to the public (each such Item Title: 12.2
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6 term being used as defined below) shall not constitute sales to the public for purposes of this section.
Further, for purposes of this section:
1. “public” means any person other than an underwriter or a related party;
2. “underwriter” means (A) any person that agrees pursuant to a written contract with the Community Facilities District (or with the lead underwriter to form an underwriting syndicate) to participate in the initial sale of the Bonds to the public and (B) any person that agrees pursuant to a written contract directly or indirectly with a person described in clause (A) to participate in the initial sale of the Bonds to the public (including a member of a selling group or a party to a third-party distribution agreement participating in the initial sale of the Bonds to the public);
3. a purchaser of any of the Bonds is a “related party” to an underwriter if the underwriter and the purchaser are subject, directly or indirectly, to (A) more than 50% common ownership of the voting power or the total value of their stock, if both entities are corporations (including direct ownership by one corporation of another), (B) more than 50% common ownership of their capital interests or profits interests, if both entities are partnerships (including direct ownership by one partnership of another), or (C) more than 50% common ownership of the value of the outstanding stock of the corporation or the capital interests or profit interests of the partnership, as applicable, if one entity is a corporation and the other entity is a partnership (including direct ownership of the applicable stock or interests by one entity of the other); and
4. “sale date” means the date of execution of this Purchase Agreement by all parties.
3. Representations, Warranties and Covenants of the Community Facilities District.
The Community Facilities District represents, warrants and covenants to the Underwriter on behalf of itself and the City that:
A. The City is duly organized and validly existing as a general law city under the Constitution and laws of the State of California and has duly authorized the formation of the Community Facilities District pursuant to resolutions duly adopted by the City Council (the “Community Facilities District Formation Resolution” and, together with the Community Facilities District Resolution of Issuance, the “Community Facilities District Resolutions”) and the Community Facilities District Act. The City Council, as the legislative body of the City and the Community Facilities District, has duly adopted the Community Facilities District Formation Resolution, and has caused to be recorded in the real property records of the County of Riverside, notice of special tax lien, and any required amendments thereof (collectively, the “Notice of Special Tax Lien”) (the Community Facilities District Formation Resolution and Notice of Special Tax Lien being collectively referred to herein as the “Formation Documents”), and has duly adopted the Community Facilities District Resolution of Issuance. Each of its Formation Documents remains in full force and effect as of the date hereof and has not been amended. The Community Facilities District is duly organized and validly existing as a Community Facilities District under the laws of the State of California. The Community Facilities District has, and at the Closing Date will have, as the case may be, full legal right, power and authority: (i) to execute, deliver and perform its obligations under this Purchase Agreement, the Continuing Disclosure Certificate and the Indenture, and to carry out all transactions contemplated by each of such agreements; (ii) to issue, sell and Item Title: 12.2
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7 deliver the Bonds as provided herein; and (iii) to carry out, give effect to and consummate the transactions contemplated by the Formation Documents, the Indenture, the Bonds, the Continuing Disclosure Certificate, this Purchase Agreement and the Official Statement.
This Purchase Agreement, the Indenture, the Bonds and the Continuing Disclosure Certificate are collectively referred to herein as the “Community Facilities District Documents.” B. The Community Facilities District and the City, as applicable, have each complied, and will at the Closing Date be in compliance in all material respects, with the Formation Documents and the Community Facilities District Documents, and any immaterial noncompliance by the Community Facilities District and the City, if any, will not impair the ability of the Community Facilities District and the City, as applicable, to carry out, give effect to or consummate the transactions contemplated by the foregoing. From and after the date of issuance of the Bonds, the Community Facilities District will continue to comply with the covenants of the Community Facilities District contained in the Community Facilities District Documents.
C. The information in the Preliminary Official Statement and in the Official Statement relating to the Community Facilities District and the Bonds (other than information under the captions “PROPERTY OWNERSHIP AND THE DEVELOPMENT,” CONTINUING DISCLOSURE — Developer Continuing Disclosure and “UNDERWRITING,” Appendix D and Appendix H, information provided by Pulte Homes Home Company, LLC (the “Developer”), the Appraiser and the Special Tax Consultant (as such terms are defined herein) and statements pertaining to the book entry system, as to which no view is expressed), is true and correct in all material respects and does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading; and, upon delivery and up to and including 25 days after the End of the Underwriting Period (as defined in paragraph (D) below), the Official Statement will be amended and supplemented so as to contain no misstatement of any material fact or omission of any statement necessary to make the statements contained therein, in the light of the circumstances in which such statements were made, not misleading.
D. Up to and including 25 days after the End of the Underwriting Period (as defined below), the Community Facilities District will advise the Underwriter promptly of any proposal to amend or supplement the Official Statement and will not effect or consent to any such amendment or supplement without the consent of the Underwriter, which consent will not be unreasonably withheld. The Community Facilities District will advise the Underwriter promptly of the institution of any proceedings known to it by any governmental agency prohibiting or otherwise materially affecting the use of the Official Statement in connection with the offering, sale or distribution of the Bonds. As used herein, the term “End of the Underwriting Period” means the later of such time as: (i) the Bonds are delivered to the Underwriter; or (ii) the Underwriter does not retain, directly or as a member of an underwriting syndicate, an unsold balance of the Bonds for sale to the public. Unless the Underwriter gives notice to the contrary, the End of the Underwriting Period shall be deemed to be the Closing Date. Any notice delivered pursuant to this provision shall be written notice delivered to the Community Facilities District at or prior to the Closing Date and shall specify a date (other than the Closing Date) to be deemed the “End of the Underwriting Period.” E. Except as described in the Preliminary Official Statement and Official Statement, the Community Facilities District is not, in any respect material to the transactions referred to herein or contemplated hereby, in breach of or in default under, any law or administrative Item Title: 12.2
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8 rule or regulation of the State of California, the United States of America, or of any department, division, agency or instrumentality of either thereof, or under any applicable court or administrative decree or order, or under any loan agreement, note, resolution, indenture, contract, agreement or other instrument to which the Community Facilities District is a party or is otherwise subject or bound, and the performance of its obligations under the Community Facilities District Documents and compliance with the provisions of each thereof, or the performance of the conditions precedent to be performed by the Community Facilities District pursuant to this Purchase Agreement, will not conflict with or constitute a breach of or default under any applicable law or administrative rule or regulation of the State, the United States of America, or of any department, division, agency or instrumentality of either thereof, or under any applicable court or administrative decree or order, or under any loan agreement, note, resolution, indenture, contract, agreement or other instrument to which the Community Facilities District is a party or is otherwise subject or bound, in any manner which would materially and adversely affect the performance by the Community Facilities District of its obligations under the Community Facilities District Documents or the performance of the conditions precedent to be performed by the Community Facilities District pursuant to this Purchase Agreement.
F. Except as may be required under the “blue sky” or other securities laws of any jurisdiction, all approvals, consents, authorizations, elections and orders of, or filings or registrations with, any governmental authority, board, agency or commission having jurisdiction which would constitute a condition precedent to, or the absence of which would materially adversely affect, the performance by the Community Facilities District of its obligations under the Community Facilities District Documents, and the performance of the conditions precedent to be performed by the Community Facilities District pursuant to this Purchase Agreement, have been or will be obtained at the Closing Date and are or will be in full force and effect at the Closing Date.
G. The Community Facilities District Documents conform as to form and tenor to the descriptions thereof contained in the Official Statement.
H. The Bonds are payable from the Special Tax of the Community Facilities District, as set forth in the Indenture, the levy of which has been duly and validly authorized pursuant to the Community Facilities District Act and the Community Facilities District will covenant in the Indenture to levy the Special Taxes within the Community Facilities District in an amount which, together with other available funds, is required for the payment of the principal of, and interest on, the Bonds when due and payable, all as provided in the Indenture.
I. The Indenture creates a valid pledge of, first lien upon and security interest in, the Net Taxes, and in the moneys in the Special Tax Fund (other than the Administrative Expense Account) established pursuant to the Indenture, on the terms and conditions set forth in the Indenture.
J. Except as disclosed in the Preliminary Official Statement, there are, to the best of the Community Facilities District’s knowledge, no entities with outstanding assessment liens against any of the properties within the Community Facilities District or which are senior to or on a parity with the Special Taxes of the Community Facilities District referred to in paragraph (I) hereof.
K. The Preliminary Official Statement was deemed final by a duly authorized officer of the Community Facilities District prior to its delivery to the Underwriter, except for the omission of such information as is permitted to be omitted in accordance with paragraph (b)(1) of the Rule. The Community Facilities District hereby covenants and agrees that, within seven (7) business Item Title: 12.2
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9 days from the date hereof, or upon reasonable written notice from the Underwriter within sufficient time to accompany any confirmation requesting payment from any customers of the Underwriter, the Community Facilities District shall cause a final printed form of the Official Statement to be delivered to the Underwriter in sufficient quantity to comply with paragraph (b)(4) of the Rule and Rules G-12, G-15, G-32 and G-36 of the Municipal Securities Rulemaking Board.
L. At the time of acceptance hereof there is and as of the Closing there will be no action, suit, proceeding, inquiry or investigation, at law or in equity, before or by any court, government agency, public board or body (collectively and individually, an “Action”) pending (notice of which has been served on the Community Facilities District) or to the best knowledge of the Community Facilities District or the City threatened, in which any such Action: (i) in any way questions the existence of the Community Facilities District or the titles of the officers of the Community Facilities District to their respective offices; (ii) affects, contests or seeks to prohibit, restrain or enjoin the issuance or delivery of the Bonds or the payment or collection of Special Taxes or any amounts pledged or to be pledged to pay the principal of and interest on the Bonds, or in any way contests or affects the validity of the Community Facilities District Documents or the consummation of the transactions on the part of the Community Facilities District contemplated thereby; (iii) contests the exemption of interest on the Bonds from federal or State income taxation or contests the powers of the Community Facilities District which may result in any material adverse change relating to the financial condition of the Community Facilities District; or (iv) contests the completeness or accuracy of the Preliminary Official Statement or the Official Statement or any supplement or amendment thereto or asserts that the Preliminary Official Statement or the Official Statement contained any untrue statement of a material fact or omitted to state any 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; and as of the time of acceptance hereof there is and, as of the Closing Date, there will be no basis for any action, suit, proceeding, inquiry or investigation of the nature described in clauses (i) through (iv) of this sentence.
M. Any certificate signed on behalf of the Community Facilities District by any officer or employee of the Community Facilities District authorized to do so shall be deemed a representation and warranty by the Community Facilities District to the Underwriter on behalf of itself and the Community Facilities District as to the statements made therein.
N. At or prior to the Closing the Community Facilities District will have duly authorized, executed and delivered the Continuing Disclosure Certificate in substantially the form attached as Appendix F to the Official Statement. Based upon a review of its previous undertakings, and except as disclosed in the Preliminary Official Statement, the Community Facilities District has not failed to comply in all respects with any previous undertakings with regard to the Rule to provide annual reports or notices of enumerated events in the last five years.
O. The Community Facilities District will apply the proceeds of the Bonds in accordance with the Indenture and as described in the Official Statement.
P. Until such time as moneys have been set aside in an amount sufficient to pay all then outstanding Bonds at maturity or to the date of redemption if redeemed prior to maturity, plus unpaid interest thereon and premium, if any, to maturity or to the date of redemption if redeemed prior to maturity, the Community Facilities District will faithfully perform and abide by all of the covenants, undertakings and provisions contained in the Indenture.
Item Title: 12.2
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10 Q. Between the date of this Purchase Agreement and the date of Closing, the Community Facilities District will not offer or issue any bonds, notes or other obligations for borrowed money not previously disclosed to the Underwriter.
The Community Facilities District hereby approves the preparation and distribution of the Official Statement, consisting of the Preliminary Official Statement with such changes as are noted thereon and as may be made thereto, with the approval of Bond Counsel, Disclosure Counsel and the Underwriter, from time to time prior to the Closing Date.
The execution and delivery of this Purchase Agreement by the Community Facilities District shall constitute a representation by the Community Facilities District to the Underwriter that the representations and warranties contained in this Section 3 with respect to the Community Facilities District are true as of the date hereof.
4. Conditions to the Obligations of the Underwriter. The obligation of the Underwriter to accept delivery of and pay for the Bonds on the Closing Date shall be subject, at the option of the Underwriter, to the accuracy in all material respects of the representations and warranties on the part of the Community Facilities District contained herein, to the accuracy in all material respects of the statements of the officers and other officials of the Community Facilities District made in any certificates or other documents furnished pursuant to the provisions hereof, to the performance by the Community Facilities District of its obligations to be performed hereunder at or prior to the Closing Date, and in reliance upon the representations and covenants of the Developer contained in the certificates delivered as of the Closing Date, and to the following additional conditions:
A. At the Closing Date, the Community Facilities District Resolutions and the Community Facilities District Documents shall be in full force and effect, and shall not have been amended, modified or supplemented, except as may have been agreed to in writing by the Underwriter, and there shall have been taken in connection therewith, with the issuance of the Bonds and with the Bonds, and with the transactions contemplated thereby, and by this Purchase Agreement, all such actions as, in the opinion of Bond Counsel, shall be necessary and appropriate.
B. At the Closing Date, except as described in the Official Statement, the City shall not be, in any respect material to the transactions referred to herein or contemplated hereby, in breach of or in default under, any law or administrative rule or regulation of the State of California, the United States of America, or of any department, division, agency or instrumentality of either thereof, or under any applicable court or administrative decree or order, or under any loan agreement, note, resolution, indenture, contract, agreement or other instrument to which the City is a party or is otherwise subject or bound, and the performance of the conditions precedent to be performed hereunder will not conflict with or constitute a breach of or default under any applicable law or administrative rule or regulation of the State of California, the United States of America, or of any department, division, agency or instrumentality of either thereof, or under any applicable court or administrative decree or order, or under any loan agreement, note, resolution, indenture, contract, agreement or other instrument to which the City is a party or is otherwise subject or bound, in any manner which would materially and adversely affect the performance of the conditions precedent to be performed by the City hereunder.
C. At the Closing Date, except as described in the Official Statement, the Community Facilities District shall not be, in any respect material to the transactions referred to herein or contemplated hereby, in breach of or in default under, any law or administrative rule or Item Title: 12.2
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11 regulation of the State of California, the United States of America, or of any department, division, agency or instrumentality of either thereof, or under any applicable court or administrative decree or order, or under any loan agreement, note, resolution, indenture, contract, agreement or other instrument to which the Community Facilities District is a party or is otherwise subject or bound, and the performance by the Community Facilities District of its obligations under the Bonds, the Community Facilities District Resolutions, the Indenture, and any other instruments contemplated by any of such documents, and compliance with the provisions of each thereof, or the performance of the conditions precedent to be performed hereunder, will not conflict with or constitute a breach of or default under any applicable law or administrative rule or regulation of the State of California, the United States of America, or of any department, division, agency or instrumentality of either thereof, or under any applicable court or administrative decree or order, or under any loan agreement, note, resolution, indenture, contract, agreement or other instrument to which the Community Facilities District is a party or is otherwise subject or bound, in any manner which would materially and adversely affect the performance by the Community Facilities District of its obligations under the Indenture, the Bonds or the performance of the conditions precedent to be performed by the Community Facilities District hereunder.
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: 12.2
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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: 12.2
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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: 12.2
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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: 12.2
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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: 12.2
Community Facilities District 2021-1, Banner Park, Issuance of Special Tax Bonds Item Page Number: 187
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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: 12.2
Community Facilities District 2021-1, Banner Park, Issuance of Special Tax Bonds Item Page Number: 188
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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. The Continuing Disclosure Certificate executed and delivered by the Developer in substantially the form attached as Appendix G to the Official Statement;
20. 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
21. 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 Item Title: 12.2
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18 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 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: 12.2
Community Facilities District 2021-1, Banner Park, Issuance of Special Tax Bonds Item Page Number: 190
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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. 2021-1 (BANNER PARK) OF THE
CITY OF MENIFEE
By:
Authorized Officer
Time of Execution: _____________ p.m. California time
Item Title: 12.2
Community Facilities District 2021-1, Banner Park, Issuance of Special Tax Bonds Item Page Number: 191
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A-1
EXHIBIT A
COMMUNITY FACILITIES DISTRICT NO. 2021-1 (BANNER PARK)
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: 12.2
Community Facilities District 2021-1, Banner Park, Issuance of Special Tax Bonds Item Page Number: 192
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EXHIBIT B
COMMUNITY FACILITIES DISTRICT NO. 2021-1 (BANNER PARK)
OF THE CITY OF MENIFEE
SPECIAL TAX BONDS, SERIES 2022A
LETTER OF REPRESENTATIONS – PULTE HOMES HOME COMPANY, LLC [POS Date]
City of Menifee
Community Facilities District No. 2021-1 (Banner Park)
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. 2021-1 (Banner Park) 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 Pulte Homes Home Company, LLC (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 Michigan and in good standing under the laws of the State of California, and has all requisite limited liability company right, power and authority: (i) to execute and deliver this Letter of Representations; (ii) to execute and deliver the Developer Continuing Disclosure Certificate to be executed by the Developer (the “Continuing Disclosure Certificate”), and (iii) 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. 2021-1 (Banner Park) 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 Item Title: 12.2
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agreement for development or management of the Property by any other entity, except such subcontracts, consultant agreements and similar agreements for land development activities associated with the Developer’s development plan as are entered into in the ordinary course of business.
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 the Continuing Disclosure Certificate, (d) to restrain or enjoin the execution of and performance by the Developer of its obligations under the Continuing Disclosure Certificate or (e) 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 and “CONTINUING DISCLOSURE – Developer Continuing Disclosure” (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 Item Title: 12.2
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as hazardous under the federal Comprehensive Environmental Response, Compensation and Liability Act of 1980 or applicable California law or is adversely affected by the presence of endangered or threatened species or habitat for endangered or threatened species.
7. The Developer 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, the Continuing Disclosure Certificate 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.
Item Title: 12.2
Community Facilities District 2021-1, Banner Park, Issuance of Special Tax Bonds Item Page Number: 195
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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 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 ________, 2022 (the “Appraisal Report”), with a date of value of August 5, 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 Item Title: 12.2
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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 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.
PULTE HOMES HOME COMPANY, LLC
By:
Name:
Title:
Item Title: 12.2
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[EXECUTION PAGE OF LETTER OF REPRESENTATIONS –
PULTE HOMES HOME COMPANY, LLC]
Item Title: 12.2
Community Facilities District 2021-1, Banner Park, Issuance of Special Tax Bonds Item Page Number: 198
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EXHIBIT C
COMMUNITY FACILITIES DISTRICT NO. 2021-1 (BANNER PARK)
OF THE CITY OF MENIFEE
SPECIAL TAX BONDS, SERIES 2022A
CLOSING CERTIFICATE – PULTE HOMES HOME COMPANY, LLC
[Closing Date]
City of Menifee
Community Facilities District No. 2021-1 (Banner Park)
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 Pulte Homes Home Company, LLC (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: 12.2
Community Facilities District 2021-1, Banner Park, Issuance of Special Tax Bonds Item Page Number: 199
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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.
4. The Developer has duly executed and delivered the Continuing Disclosure Certificate.
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.
PULTE HOMES HOME COMPANY, LLC
By:
Name:
Title:
[EXECUTION PAGE OF CLOSING CERTIFICATE – PULTE HOMES HOME COMPANY, LLC] Item Title: 12.2
Community Facilities District 2021-1, Banner Park, Issuance of Special Tax Bonds Item Page Number: 200
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EXHIBIT B
COMMUNITY FACILITIES DISTRICT NO. 2021-1 (BANNER PARK)
OF THE CITY OF MENIFEE
SPECIAL TAX BONDS, SERIES 2022A
DEVELOPER PROVIDED INFORMATION IN APPRAISAL REPORT
See attached.
Item Title: 12.2
Community Facilities District 2021-1, Banner Park, Issuance of Special Tax Bonds Item Page Number: 201
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EXHIBIT D
$_______
COMMUNITY FACILITIES DISTRICT NO. 2021-1 (BANNER PARK)
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. 2021-1 (Banner Park) 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: 12.2
Community Facilities District 2021-1, Banner Park, Issuance of Special Tax Bonds Item Page Number: 202
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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: 12.2
Community Facilities District 2021-1, Banner Park, Issuance of Special Tax Bonds Item Page Number: 203
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SCHEDULE A
SALE PRICES OF THE GENERAL RULE MATURITIES
(To be attached)
Item Title: 12.2
Community Facilities District 2021-1, Banner Park, Issuance of Special Tax Bonds Item Page Number: 204
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APPRAISAL REPORT
CITY OF MENIFEE
COMMUNITY FACILITIES DISTRICT NO. 2021-1
BANNER PARK BY PULTE HOMES
City of Menifee, Riverside County, California
(Appraiser’s File No. 2022-1268)
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: 12.2
Community Facilities District 2021-1, Banner Park, Issuance of Special Tax Bonds Item Page Number: 205
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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. 2021-1
Banner Park by Pulte Homes, 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. 2021-1 of the City of Menifee (“Menifee CFD No. 2021-1”). Menifee CFD No. 2021-1 encompasses a new home community known as Banner Park by Pulte Homes. Banner Park consists of three product lines known as Heritage, Merit and Crest.
The three product lines are spread throughout all of Banner Park, which is covered by two tract maps (Tract Nos. 32102 and 32102 -1). Banner Park consists of a total of 256 detached homes situated on minimum 6,000 square foot lots. The subject 256 lots include 103 completed homes closed to individuals and 18 builder owned homes over 95 percent complete, including 6 models (not released for sale) and 12 production homes (10 in escrow and due to close upon completion).
There are an additional 57 homes under construction (48 in escrow) and 78 remaining lots (16 in escrow).
The valuation method used in this report is the Sales Comparison Approach along with 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. 2021-1 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. 2021 -1. As a result of our investigation, the concluded market value for the subject property is:
Banner Park by Pulte Homes
Pulte Homes Ownership (18 houses & 135 lots) $ 30,277,032 Individual Owners (103 houses) $ 61,037,705
Total Aggregate Value $ 91,314,737
The above values are stated subject to the Assumptions and Limiting Conditions of this report, the Appraiser’s Certification and as of August 5, 2022.
115 East Second Street, Suite 100, Tustin, California 92780 (714) 544-9978 - Phone, (714) 544-9985 – Fax, E-Mail: [email protected] Item Title: 12.2
Community Facilities District 2021-1, Banner Park, Issuance of Special Tax Bonds Item Page Number: 206
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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.
The appraised value contained within this report is being estimated with the hypothetical condition of the special tax lien of Menifee CFD No. 2021-1.
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: 12.2
Community Facilities District 2021-1, Banner Park, Issuance of Special Tax Bonds Item Page Number: 207
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TABLE OF CONTENTS
Assumptions and Limiting Conditions............................................................................... i Hypothetical Condition .................................................................................................... iii Extraordinary Assumption ............................................................................................... iii Aerial Photo of Menifee CFD No. 2021-1 ........................................................................ 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. 2021-1 ....................................................................... 24 Subject Property Descriptions ....................................................................................... 27 Riverside County Housing Market ................................................................................. 34 Highest and Best Use Analysis ..................................................................................... 44 Valuation Analyses and Conclusions ............................................................................ 48 Appraisal Report Summary ........................................................................................... 67 Appraiser’s Certification ............................................................................................... 68
ADDENDA
CFD No. 2021-1 Boundary Map
Tract Maps No. 32101 and 32102-1
Cal Fire Hazard Map
Discounted Cash Flow Analyses
Residential Land Sales Map and Summary Chart
Improved Residential Sales Map and Summary Chart
Appraiser’s Qualifications
Item Title: 12.2
Community Facilities District 2021-1, Banner Park, Issuance of Special Tax Bonds Item Page Number: 208
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_________________________________________________________________________________________________________ Menifee CFD No. 2021-1 – Banner Park by Pulte Homes (Menifee, CA) Kitty Siino & Associates, Inc. Page i
ASSUMPTIONS AND LIMITING CONDITIONS
1. This report might not include full discussions of the data, reasoning and analyses that were used in the appraisal process to develop the appraiser’s opinion of value. Some supporting documentation concerning the data, reasoning and analyses may be retained in the appraiser’s files. The information contained in this report is specific to the needs of the client and for the intended use stated in this report. The appraiser is not responsible for unauthorized use of this report.
2. No responsibility is assumed for legal or title considerations. Title to the property is assumed to be good and marketable unless otherwise stated in this report.
3. The property is appraised subject to the special tax lien of Menifee CFD No. 2021-
1. 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 for 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: 12.2
Community Facilities District 2021-1, Banner Park, Issuance of Special Tax Bonds Item Page Number: 209
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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 asbestos, urea -formaldehyde foam insulation or other potentially hazardous materials that may affect the value of the property. The appraiser’s value estimate is predicated on the assumption that there is no such material on or in the property that would cause a loss in value unless otherwise stated in this report. No responsibility is assumed for any environmental conditions or for any expertise or engineering knowledge required to discover them. The appraiser’s descriptions and resulting comments are the result of the routine observations made during the appraisal process.
14. Proposed improvements , if any, are assumed to be completed in a good workmanlike manner in accordance with the submitted plans and specifications.
15. The distribution, if any, of the total valuation in this report between land and improvements applies only under the stated program of utilization. The separate allocations for land and buildings , if any, must not be used in conjunction with any other appraisal and are invalid if so used.
16. The Americans with Disabilities Act (“ADA”) became effective on January 26, 1992.
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 a ppraiser 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 onl y 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. 2021-1 Special Tax Bonds.
Item Title: 12.2
Community Facilities District 2021-1, Banner Park, Issuance of Special Tax Bonds Item Page Number: 210
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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. 2021-1 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 are not experts in cost estimating and if the cost estimates change, it may change the value conclusions.
2. It is an extraordinary assumption that the City of Menifee does not stop development or closings of homes within the subject due to the delay in the development of the park within Menifee CFD No. 2021-1. The current condition states the park needs to be completed by the time the 200 th building permit is pulled. It is the appraiser’s understanding that the City of Menifee is in the process of modifying the condition.
Item Title: 12.2
Community Facilities District 2021-1, Banner Park, Issuance of Special Tax Bonds Item Page Number: 211
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Item Title: 12.2
Community Facilities District 2021-1, Banner Park, Issuance of Special Tax Bonds Item Page Number: 212
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PURPOSE OF THE APPRAISAL
The purpose of this appraisal report is to estimate the value of the fee simple interest of the subject property, subject to the special tax lien of the Menifee CFD No. 2021-1 Special Tax Bonds.
THE SUBJECT PROPERTY
The subject property consists of 256 proposed single-family homes which are encompassed within Tract Map Nos. 32102 an d 32102 -1. The two tracts are being developed into a community known as Banner Park, which is divided into three product lines that are spread throughout the two tracts: Heritage at Banner Park, Merit at Banner Park and Crest at Banner Park. All three product lines are being built and sold by Pulte Homes. Of the total 256 proposed homes, 177 have been sold and 103 of those have closed to individuals . Each tract’s lots, physical status and ownership are detailed as follows:
Tract and Lot Numbers
No.
Lots
Ownership
Condition
Banner Park by Pulte Homes (Tract Nos. 32102 and 32102-1) Lots 1-92, 94, 96-98, 106, 110-115 of
Tract 32102-1
103 Individuals Completed Homes
Lots 116-117, 119-120, 130-131 of
Tract 32102-1
6 Pulte Model Homes (0 in escrow)
Lots 93, 95, 99-105, 107-109 of Tract
32102-1
12 Pulte Over 95% Complete (10 in
escrow)
Lots 1-18, 23-27, 88-102, 106-124 of
Tract 32102
57 Pulte Under Construction (48 in
escrow)
Lots 19-22, 28-87, 103-105 of Tract
32102 and Lots 118, 121-129, 132 of
Tract 32102-1
78 Pulte Finished Lots (16 in escrow)
TOTAL 256
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. 2021-1 and that this report is to be included in the Official Statement or similar document to be Item Title: 12.2
Community Facilities District 2021-1, Banner Park, Issuance of Special Tax Bonds Item Page Number: 213
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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 each of the builder-owned lots and houses in bulk 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
Item Title: 12.2
Community Facilities District 2021-1, Banner Park, Issuance of Special Tax Bonds Item Page Number: 214
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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 re-sales and current escrows (if any) and determining the actual range of sales and escrow prices for each plan type which i s 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. 2021-
1. 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”
There are two extraordinary assumptions in this report. The first 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 verifie d through public record. In addition, w e have reviewed the costs and they appear reasonable; however, we are not experts in the field of cost estimating. It should be noted
2 USPAP 2020-2021 Edition
Item Title: 12.2
Community Facilities District 2021-1, Banner Park, Issuance of Special Tax Bonds Item Page Number: 215
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that these costs were relied upon in the valuation of the subject properties and if the actual costs differ, it could alter the value conclusions.
The second extraordinary assumption is that the City will not stop or slow development of the project due to the delay in the development of the park. There is a current condition of development that states the park needs to be completed by the time the 200th building permit is pulled. Currently 194 building permits have been pulled. It is the appraiser’s understanding that both the developer and the City are in the process of updating this condition and that the City will not slow or hinder development due to this as they have not been able to review/approve the park plans in a timely manner.
PROPERTY RIGHTS APPRAISED
The property rights being appraised are of a fee simple interest, subject to easements of record and Menifee CFD No. 2021- 1. 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 5, 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
Item Title: 12.2
Community Facilities District 2021-1, Banner Park, Issuance of Special Tax Bonds Item Page Number: 216
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• Immediate Surroundings
• Brief Description of Menifee CFD No. 2021-1
• Subject Property Descriptions
• Riverside County Housing Market Discussion
• Highest and Best Use Analysis
• Valuation Procedures, Analyses and Conclusions
• Appraisal Report Summary
The subject property consists of 256 proposed single- family ho uses. There are 103 homes completed and closed to individuals, six models (none in escrow), 12 homes over 95 percent complete (10 in escrow), 57 homes under construction (48 in escrow) and 78 remaining finished lots (16 in escrow). 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 15, 2022.
3Dictionary of Real Estate Appraisal, 4th Edition, 2002 Item Title: 12.2
Community Facilities District 2021-1, Banner Park, Issuance of Special Tax Bonds Item Page Number: 217
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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 Preliminary Title Reports on the majority of the subject properties.
7. Reviewed the Menifee Village Specific Plan regarding entitlements and allowances on the subject site.
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 each of 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 re-sales and current listings of existing homes within Menifee CFD No. 2021-1.
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”) northwest of the merging of Interstate 15 (“I-15”) and Interstate 215 (“I-215”) and east of the community of Menifee Lakes, on the east side of I-215. The area is located near the eastern boundary of the City of Menifee (the “City”).
The County encompasses approximately 7,300 square miles, and includes 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, on the north side of Domenigoni Parkway (Newport Road) at Lindenberger Road. The I-15 is approximately
8.5 miles southwest of the subject and travels in a northerly/southerly direction, providing access to Barstow and Nevada to the north and San Diego to the south. Interstate 215 is approximately two miles west of the subject, 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. Highway 74 is approximately 3.5 miles north and provides access to the west into Orange County on what is also known as Ortega Highway. In addition, the 60 Freeway runs in an east -west direction approximately 1 7 miles north of the subject providing access into Los Angeles County to the west and merges with Interstate 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 36 miles northwest of the subject property , while the Orange County Airport is located approximately 42 miles west, and the San Diego International Airport is located about 66 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 r ecently 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: 12.2
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again; but not to the extent of the previous winter with hospitalizations of vaccinated people significantly rarer. 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: 12.2
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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 on July 27, 2022 an additional three-quarters percent hike. 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 U .S. 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 unemployment 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 percent 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.
Item Title: 12.2
Community Facilities District 2021-1, Banner Park, Issuance of Special Tax Bonds Item Page Number: 223
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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 t hese 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 up significantly 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 attempting to renegotiate residential land escrows , as mortgage rates have substantially risen in the past five Item Title: 12.2
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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 allows 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 sh ore 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 U.S. 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 Forecast exp ects that 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 investment 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 Board to be able to bring core inflation down to its two percent target until 2024. They predict the depth of the economic slowdown and the highest risk of a recession to occur in the middle of 2023; and while Item Title: 12.2
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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 t o be a major factor influencing the economy, it is no longer the sole influence. Inflation and higher energy prices, uncertainty both on Wall Street and in consumer confidence, as well as continued pandemic-related supply 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 new home sales. While existing homeowners were reluctant to put their houses on the market during COVID, new home sales in the Inland Empire soared. Among other factors, 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 areas while they work, and that buying a home in a more affordable, suburban area made sense if Item Title: 12.2
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they didn’t have to commute 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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Community Facilities District 2021-1, Banner Park, Issuance of Special Tax Bonds Item Page Number: 227
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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 four 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 ha d been extremely strong in the Inland Empire until recently. The region’s relative affordability, coupled with the rising prices in the coastal market and the need for new housing , set up a boom in the Inland Empire. La te 2020, throughout 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 Item Title: 12.2
Community Facilities District 2021-1, Banner Park, Issuance of Special Tax Bonds Item Page Number: 228
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Empire housing market include inflation, the high prices of homes, rising interest rates, supply 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.
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Community Facilities District 2021-1, Banner Park, Issuance of Special Tax Bonds Item Page Number: 229
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MENIFEE AREA MAP
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CITY OF MENIFEE DESCRIPTION
The subject property is located near the eastern border of the City, which is located in the southwestern portion of the County. Menifee became a city in October 2008 after voting to incorporate. Menifee was 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 , including the census designated area of Winchester.
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 workforces of North San Diego County, Temecula, Riverside, Corona and Orange County, economic 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 centers 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 Cit y, and because of the master Item Title: 12.2
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planned communities such as Audie Murphy Ranch, Banner Park (subject), Quartz Ranch, as well as single new home tracts.
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 newer commercial area that houses the 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 Lake. The reservoir contains 800,000 acre-feet (260 billion gallons) of water and is owned by the Metropolitan Water District.
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Community Facilities District 2021-1, Banner Park, Issuance of Special Tax Bonds Item Page Number: 232
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Access to Diamond Valley Lake is via Newport Road between I-215 and State Route 79, which was completed in 2008.
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. Th e 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 at the easternmost portion of the City suggests a longer commute than the more western areas of Menifee as it has good access to the I-215, but not to the I-15.
As discussed under the economy section under County of Riverside Area Description , 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 tracking and research 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.
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Community Facilities District 2021-1, Banner Park, Issuance of Special Tax Bonds Item Page Number: 233
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IMMEDIATE SURROUNDINGS
The subject property is located in the eastern portion of the City of Menifee, specifically on the north side of Domenigoni Parkway at Lindenberger Road. Access into the community is considered to be very good via I-215 (nearest highway), and is also possible via I-15. Banner Park is surrounded by existing residential homes to the immediate north, west, and south, and vacant lands to the east, northeast, and southeast. Past the existing residential lands to the west is Menifee Lakes Country Club and Golf Course while to the southwest is the newer area of Menifee Lakes which was built out in the 2000s . To the south and southeast past the vacant lands adjacent to the subject is the Tierra Shores residential community, which is centered around a small lake. Past the vacant lands to the east is another acti vely selling new home community known as Winchester Ridge being built and sold by D.R. Horton. The subject’s vicinity is home to several actively selling new housing developments, as further east up Domenigoni Parkway is Lennar at Prairie Crossing. Southwest of the subject , past some vacant lands and existing residential, is the Menifee Lakes with surrounding residential community. Banner Park’s main entrance is off of Domenigoni Parkway via Lindenberger Road, and the secondary future entrance will be via Falcon Hill Drive from Olive Avenue, on the northern portion of the subject.
The immediate surrounding existing residential homes to the north and west of the subject were built in the early-2000s, and some of them with golf course frontage. The subject is served by Menifee Union School District and Perris Union School District. Banner Park residents will attend: Heritage High School (about three miles north of the property), Hans Christensen Middle School (three miles northwest of subject) and Southshore Elementary School (1.5 miles south of the subject).
Shopping is easily accessible to the community. Approximately one-quarter mile west on Newport Road is The Shoppes at the Lakes, a neighborhood center anchored by Stater Brothers. Within two miles at the I-215 and Newport Road intersection, which houses the Menifee Countryside Marketplace, Menifee Town Center and Menifee Lakes Plaza.
Menifee Town Center (at the southeast corner of Newport Road and I -215) includes a Item Title: 12.2
Community Facilities District 2021-1, Banner Park, Issuance of Special Tax Bonds Item Page Number: 234
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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 an LA Fitness and includes a smaller neighborhood market (Barons Market), a salon, Raising Cane’s Chicken Fingers, The Coffee Bean and Tea Leaf, Blaze Pizza and more. On the west 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 11 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 six miles northeast from the Loma Linda University Medical Center.
Item Title: 12.2
Community Facilities District 2021-1, Banner Park, Issuance of Special Tax Bonds Item Page Number: 235
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CITY OF MENIFEE CFD NO. 2021-1
We have reviewed the Community Facilities District Report for the City of Menifee CFD No. 2021- 1 (Banner Park) prepared by Spicer Consulting Group dated June 2, 2021 (“Report”). Per the Report the subject property is identified as Menifee CFD No. 202 1-1 and includes 80.58 gross acres proposed for 256 single family detached homes. Per the Report the 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 tangible 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. 2021-1.
The types of facilities to be financed with the proceeds of special taxes and bonds issued by CFD No. 202 1-1 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 publ ic 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”); (iii) interim and permanent school facilities of Menifee Union School District, including classrooms, multi -purpose facilities, administration and auxiliary space at school facil ities, athletic fields, playgrounds and recreational facilities and improvements thereto, landscaping, access roadways, drainage, sidewalks and gutters and utility lines, furniture, equipment and technology, including technology upgrades and mobile devices and infrastructure therefore, with a useful life of at least five years at such school facilities (the “School Facilities”); and (iv) electrical utility undergrounding and dry utilities (the “Utilities”) (and together, with the City Facilities, Water Facilities and School Facilities, the “Facilities”), and all appurtenances and Item Title: 12.2
Community Facilities District 2021-1, Banner Park, Issuance of Special Tax Bonds Item Page Number: 236
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appurtenant work in connection with the foregoing Facilities , including the cost of engineering, planning, desi gning, 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 Facilities; 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 other 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 through the issuance of CFD No. 202 1-1 Bonds is estimated to be $10,748,819 based on 2021-22 current year dollars. The costs are estimated as follows:
Description Est. Eligible
Costs
Bond Allocation
City of Menifee Fees
Law Enforcement $59,136 $59,136
Fire Facilities $157,184 $157,184
Circulation $1,195,520 $1,195,520
General Government $261,376 $261,376
Public Use Facilities $39,424 $39,424
Parks – Land $55,040 $55,040
Parks – Improvements $169,216 $169,216
City Facilities $387,379 $387,379
Subtotal – City of Menifee Fees $2,324,275 $2,324,275
City of Menifee Facilities
Backbone Street Improvements $699,324 $699,324
Intract Street Improvements $1,584,539 $1584,539
Tract/Intract Storm Drain Improvements $1,640,205 $1,246,527 City 5-Acre Park $1,500,000 $0
Dry Utilities $653,154 $0
Subtotal City of Menifee Facilities $6,077,222 $3,531,044 Eastern Municipal Water District
Sewer Financial Participation Charge $745,984 $745,984
Sewer Treatment Plant Capacity Fee $1,520,128 $1,520,128 Water Financial Participation Fee $1,408,256 $1,408,256 Water Supply Development Fee $76,800 $76,800
1” Meter Drop-In Fee $96,512 $96,512
Irrigation Meter Drop-In Fee $149,820 $149,820
Total Eastern Municipal Water District $3,997,500 $3,997,500 Menifee Union School District
School Fees $896,000 $896,000
Total Eligible Fees/Improvements $13,294,997 $10,748,819 Incidental Financing Costs $1,776,181
Total Funded by Bond Proceeds $12,525,000
Total Fees/Improvements Funded by Developer $2,546,178 The difference between the eligible costs and the bond proceeds w ill be paid by the developer.
Item Title: 12.2
Community Facilities District 2021-1, Banner Park, Issuance of Special Tax Bonds Item Page Number: 237
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It should be noted that the above cost estimate was per the CFD Report and based on 2021/2022 current dollars and amounts were allocated based upon estimated bond sizing and may change based upon market conditions at the time of bond issuance.
The Menifee CFD No. 2021-1 bonds are anticipated to be sold in two series with the first being the 2022 series of bonds. Per the current sources and uses of funds (dated July 19, 2022), the bond par amount is estimated at $6,905,000 and a net premium of $34,147 with $5,965,898 in project fund deposits, $607,218 in debt service reserve fund, $27,931 in capitalized interest and $338,100 in cost of issuance and underwriter’s discount (all amounts subject to change).
A copy of the Menifee CFD No. 2021-1 boundary map is located in the Addenda for your review.
Item Title: 12.2
Community Facilities District 2021-1, Banner Park, Issuance of Special Tax Bonds Item Page Number: 238
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SUBJECT PROPERTY DESCRIPTIONS
The subject property consists of 256 proposed single-family homes being developed into the community known as Banner Park. There are three product lines within Banner Park:
Merit, Heritage and Crest. Each product line is mixed throughout the entire community, which spans two tract maps. Banner Park in its entirety is des cribed below, and the site plan below shows each product line distinguished by various colors.
Location: Northwest side of Domenigoni Parkway at Lindenberger Road, City of Menifee, California.
Legal Description: Lots 1-124 of Tract 32102 and Lots 1-132 of Tract 32102-1 located in City of Menifee, County of Riverside, California.
Owner of Record: Individual owners as to Lots 1- 92, 94, 96-98, 106, 110-115 of Tract 32102-1, and Pulte Homes as to all remaining lots.
Three-Year
Sales History: Pulte Home Company, LLC (a related entity to Pulte) purchased the subject property from Diamond Brothers Five Partnership, LP for $9,200,000 per public record. The site was undeveloped with a final map recorded at the time of sale. The sale closed in three takedowns: November 19 , 2020 for the first 86 lots, November 17 , 2021 for the second takedown of 85 lots, and July 1, 2022 for the Item Title: 12.2
Community Facilities District 2021-1, Banner Park, Issuance of Special Tax Bonds Item Page Number: 239
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third takedown of 85 lots. Out of the total 256 homes, 103 have closed escrow to individual homeowners with closing dates between December 27, 2021 and August 5, 2022.
Assessor’s Parcel
Numbers: 340-630-001 through-009; 340-631-001 through -034; 340-640-001 through -028; 340-641-001 through -019; 340-650-001 through -034; 340-651-001 through -008; 340-660-001 through -040; 340-661-001 through -034; 340-670-001 through -006; 340-671-001 through -044.
Property Taxes: We have reviewed 2021 property taxes on a sample property within Banner Park (APN 340-631-029). The property has an assessed value of $26,359 and the total property taxes are $ 445.88. Included in the total tax amount is the basic levy of $ 368.58, MUSD Debt Service of $22.98, Perris Union High School Debt Service of $32.21, MWD East Debt Service of $1.27, San Jacinto Jr College Debt Service of $4.80, plus miscellaneous charges of $21.04. The subject City of Menifee CFD 2021- 1 does not appear to be included in the taxes yet. The Assessed Value appears to be for an unimproved lot and there will be a supplemental tax invoice. The 2022 property taxes are not yet available. It is an assumption of this appraisal report that the overall property taxes on the subject property are under two percent.
Flood Zone: Per the County of Riverside a flood plain review is not required . Per FEMA the subject is located on Map Number 06065C 2060H dated August 18, 2014 and is within Zone X – outside of the 0.2 percent annual chance floodplain.
Size and Shape: The subject property is roughly triangular in shaped and contains
76.44 gross acres and 56.119 net acres per Tract Maps 32102 and 32102-1. The differences in gross versus net acres is due to a community park site (Lot 136 32102- 1 which encompasses 4.859 acres) and several large open space sites which include natural drainage (Lots 133, 137, 138 and 141 of Tract 32102-1 totaling 5.53 acres) along with smaller open space areas, set -back areas, and internal streets within both tract maps. It should be noted that the open space and park acreage, while located within Menifee CFD No. 2101-1, will not be taxed, and thus are not included in this valuation.
Zoning: Per the City of Menifee Zoning Map, the subject property is shown as SP Zone which refers to the Menifee Village Specific Plan. Per the Menifee Specific Plan No. 158 Amendment No. 5, which was adopted January 11, 2005, the subject is known as Planning Areas 4-1 and 4-2 which are both designated for medium density residential (allows for 2-5 dwelling units per acre) and a maximum of 269 units.
Entitlements: The subject property is covered by two tract maps: 32101 and 32102-
1. Tract No. 32102 was recorded September 30, 2020 and
Item Title: 12.2
Community Facilities District 2021-1, Banner Park, Issuance of Special Tax Bonds Item Page Number: 240
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subdivides 32.81 acres into 124 single family detached lots with a minimum lot size of 6,000 square feet. Tract No. 32102- 1 was also recorded on September 30, 2020 and subdivides 43.63 gross acres into 132 single family detached lots with a minimum lot size of 6,000 square feet, as well as open space lots and a park site. Copies of the Tract Maps are located within the Addenda of this report.
The recorded tract maps allow for 256 single family detached lots on the 76.44 gross acres which equates to 3.3 dwelling units per acre, within the allowed zoning requirement.
Topography: The topography is generally flat, and currently the subject property is at street level of the surrounding streets. The lands have been developed into single-family detached lots. Drainage appears to be within an engineered street drainage system with additional drainage throughout the open space and park site within the Tract Map.
Soils Condition: We have reviewed an Update Geotechnical Report for Tract 32102 prepared by Leighton and Associates, Inc. and dated April 29, 2020.
The report concludes that, in their opinion, the overall site appears suitable for the intended use provided their recommendations are properly incorporated during the design and construction phases of development. It is an assumption of this report that the soils are adequate to support the highest and best use conclusion and that all recommendations made within the soil’s reports were adhered to during construction. This is supported by existing development on the subject lands.
Seismic
Conditions: It is our assumption that the property is not located within an Alquist Priolo Earthquake Study Zone.
Environmental
Concerns: We have not received any environmental reports on the subject property. This appraisal assumes that there are no environmental issues that would slow or thwart development of the site. This is supported by existing development on the subject lands which were overseen by City inspectors.
Cal Fire Hazard
Designation: Per the Cal Fire California Fire Hazard Map, the northeast portion of the subject property is within a very high fire hazard area. A portion of the map showing the subject area is shown in the Addenda.
Easements/
Encumbrances: We have reviewed a Preliminary Title Report prepared by First American Title Company as Order No. 5049088-A dated July 8, 2022 which covers Tract 32102- 1. The report is summarized below and had the following exceptions.
Item Nos. 1 thru 5 pertain to property taxes and special assessments on the property including CFD 2017- 1 (City maintenance CFD) and Item Title: 12.2
Community Facilities District 2021-1, Banner Park, Issuance of Special Tax Bonds Item Page Number: 241
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CFD 2021-1 (subject CFD). Item Nos. 6, 7, 14 thru 19, 25 thru 27 and 30, 31 and 33 refer to easements on the site. Item No. 8 st ates the property is within the Santa Ana Watershed Benefit Assessment Area. Item No. 9 refers to the School Mitigation Agreement. Item No. 10 is in regards to a Memorandum of Agreement and two
substitutions. Item No. 11 refers to the Water Quality Managem ent Plan on the site. Item No. 12 pertains to matters shown or disclosed by Tract Map 32102-1 stating Lot 136 is a park, lots 133-135 and 137 – 145 are open space and an easement on Lot 65 for maintenance purposes. Item No. 13 refers to abutters rights to surrounding streets.
Item Nos. 20 and 21 refer to the environmental constraint notes on the Tract Map. Item No. 22 is in regards to the Agreement for water service. Item No s. 23 and 24 refer to the effect of two documents (Resolution No. 2021- 064 and 065) which annexed two parcels of land within Improvement District No. U -35 of EMWD (not shown on title report). Item No. 28. Pertains to the CC & Rs recorded on the property. Item No. 29 refers to the Master Dispute Resolution Declaration recorded on the property. Item Nos. 32 and 34 refer to Easements, Covenants and Conditions contained in the deed from Pulte Home Company to Banner Park Community Association. Item No. 35 refers to the rights of the public in any portion of land lying within a road street, alley or highway Item No. 36 refers to water rights.
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. 2021-1 and the other aforementioned special assessments.
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, head east on Newport Road approximately two miles to
Lindenberger Road. Newport Road turns into Domenigoni Parkway west of the subject . Banner Park is accessible from Domenigoni Parkway via Lindenberger Road. The subject sits on the north side of Domenigoni Parkway and on both sides of Lindenberger Road.
The models are located near the Lindenberger Road entrance to the community on Laurel Court (north of Falcon Hill Drive). From I -15, head east on Railroad Canyon Road (turns into Newport Road at City limits, and then into Domenigoni Parkway east of I -215) to Lindenberger Road (approximately ten miles).
Item Title: 12.2
Community Facilities District 2021-1, Banner Park, Issuance of Special Tax Bonds Item Page Number: 242
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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, which 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 Newpo rt Road becomes Railroad Canyon Road providing access into the Cities 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.
Lindenberger Road is a small north/south road that starts at Domenigoni Parkway (at the subject) and goes north, providing access through residential neighborhoods and into the Heritage Lake neighborhood.
Internal streets within Banner Park include: Lindenberger Road, Bayberry Street, Bolivian Circle, Blueridge Court, Falcon Hill Drive, Laurel Court, Juniper Court, Canary Wood Court, Purpleheart Court, Pumpwood Court, Incense Court, Mangrove Circle , Whitewood Street, Chestnut Street, Twinberry Circle, Crape Myrtle Street and Tulipwood Street.
Current Condition: The subject property has been developed into 256 single-family lots with a minimum lot size of 6 ,000 square feet . The lots are in a finished condition with streets complete and utilities stubbed to each lot. There are 103 completed homes owned by individuals, 18 homes over 95 percent complete (including the six models), 57 homes under construction (less than 95 percent complete) and 78 finished lots.
Costs: Per Pulte representatives, there are $ 7,592,000 in remaining land development costs and fees which are net of CFD reimbursements.
These costs including remaining planning & e ngineering, grading, sewer/water/storm drain, streets/sidewalks, landscaping/walls - /common areas, utilities and remaining fees. These are associated with the Pulte owned property only which equates to $49,620.91 per lot ($7,592,000 divided by 153 builder-owned homes and lots).
HOA Amounts: Per Pulte representatives, the current monthly HOA is $72, but the HOA is expected to be $79 per month at build out.
Improvement
Description: Tracts 32102 and 32102 -1 are being marketed as Banner Park by Pulte Homes. Banner Park features three product lines, which are Item Title: 12.2
Community Facilities District 2021-1, Banner Park, Issuance of Special Tax Bonds Item Page Number: 243
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dispersed throughout the two tracts: Crest, Heritage and Merit. All three product lines at Banner Park grand opened July of 2021 and each product line includes three floorplans for a total of nine floor plans within the subject. The nine floorplans range in size from 2,191 to 3,237 square feet, and feature one to two stories and two- to three- car garages. The home exteriors feature front yard landscaping with sprinkler timer, Schlage front door hardware with a 6 -panel front entry door, two hose bibs and a rain diverter at the entry. Interiors include vinyl and carpet flooring throughout, bullnose corners, two- panel interior doors, prewiring for ceiling fans at owner’s suite, loft (per plan), family r oom and patios. Programmable wifi -enabled thermostats, tankless water heaters, high performance windows, and energy efficient gas furnaces are also included, with solar system prewiring (panel size per plan, standard lease with option to purchase). Gourmet kitchens include maple style cabinetry in two stain color choices, slab granite countertops with 6-inch backsplash, Whirlpool stainless steel appliances , undermount stainless steel sinks, eat in-islands and walk in pantries (per plan). Owner’s suites include walk in closets, dual sinks and separate soaking tubs and showers. Pulte advertises their Smart Home Technology which includes two port outlets with one CAT6 and one RG6 outlet in family rooms, prewiring for future wireless access points, and USB outlets in the kitchen.
All homes appear to be in excellent condition with no
visible depreciation.
We have reviewed sales information from the builder which included 177 sales, with 103 home closings from December 2, 2021 through August 5, 2022. Actual closed sales prices have ranged from $536,665 to $797,760 . Per our review of the local Multiple Listing Service, there have not been any resales within Banner Park and per our inspection there were no homes listed for resale. Original base pricing at grand opening in July of 2021 ranged from $535,990 to $619,990, while the latest base sales prices range from $575,990 to $674,990. The houses which are over 95 percent complete are detailed on the following page.
Item Title: 12.2
Community Facilities District 2021-1, Banner Park, Issuance of Special Tax Bonds Item Page Number: 244
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Banner Park by Pulte Homes
Plan
Bd/Ba
Floors/
Parking
Sq.
Ft.
Ind.
Owned
Bldr.
Owned
Heritage Plan 1 (H1) 3 / 2 1 / 2 2,191 14 4*
Heritage Plan 2 (H2) 3 / 2.5 1 / 2 2,311 8 2
Heritage Plan 3 (H3) 3 / 2.5 1 / 3 2,462 13 3*
Merit Plan 1 (M1) 4 / 2.5 2 / 2 2,391 11 1*
Merit Plan 2 (M2) 4 / 2.5 2 / 2 2,654 6 0
Merit Plan 3 (M3) 5 / 3 2 / 2 2,824 16 1*
Crest Plan 1 (C1) 4 / 2.5 2 / 3 2,845 9 1
Crest Plan 2 (C2) 5 / 3.5 2 / 3 3,047 11 3*
Crest Plan 3 (C3) 5 / 3.5 2 / 3 3,237 15 3*
Total 103 18
*One of each plan is a model home. In addition to the above there are 57 homes under construction (less than 95 percent complete) and 78 additional finished lots.
Item Title: 12.2
Community Facilities District 2021-1, Banner Park, Issuance of Special Tax Bonds Item Page Number: 245
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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 COVID.
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: 12.2
Community Facilities District 2021-1, Banner Park, Issuance of Special Tax Bonds Item Page Number: 246
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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 typically a sign of a recession beginning. The most recent unemployment rate for the County is 4.0 percent (per the June 2022 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 the rise of online academia. The closing of businesses during COVID appears to have had a ripple effect on trade, as many materials and consumer goods continue to be difficult 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 verification on new loans and the lack of available credit, coupled with job losses and Item Title: 12.2
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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 Spring 2022. However, a combination of increasing home prices and falling consumer confidence added to the interest rate increases appears to be slowing sales. 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 mont h, 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 surveyed were stating demand has slowed and is causing concern. Over 70 percent of builders are increasing incentives (typically closing costs and rate buy-downs, however some incentives tied to options and upgrades). The builders’ largest concerns relate to : (1) increasing interest rates, (2) consumer confidence, (3) inflation, (4) affordability, (5) economic uncertainty, (6) land prices, (7) materials cost, and (8) materials availability. The last few weeks have seen a slowdown in both traffic and absorption due to the high inflation rates and resulting interest rate hikes.
Item Title: 12.2
Community Facilities District 2021-1, Banner Park, Issuance of Special Tax Bonds Item Page Number: 248
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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 market ’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 increas es 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 July 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 c oveted areas such Corona, Eastvale, Ontario Ranch, Riverside and Jurupa Valley in West Riverside County and Murrieta, Lake Elsinore, Menifee and Temecula in Southern 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 Item Title: 12.2
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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 Inland Empire. 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, or a public builder buying a larger piece of land, but developing the land for its own use (such as Banner Park by Pulte, subject, 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. The 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 as recently residential land purchases have slowed . 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 ’s market in order to reflect residential trends. It should be noted these sales numbers and prices pertain to new home sales while later in this section we discuss existing home sales. In 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 gives new - home buying a boost. However, the flip side i s that as interest rates rise, purchasing power becomes lower and therefore fewer people purchase new homes. Along with home Item Title: 12.2
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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 on the cost of building the home. While finishes and sizes of homes can change, the basic costs on a per square foot basis typically do not fluctuate as much as land values, however there have been inflationary increases in construction costs adding to this increase.
Within our search for the most comparable actively selling new home c ommunities, we searched the subject’s city of Menifee as well as neighboring region of Winchester .
Because Banner Park is located so close to the eastern boundary of the City of Menifee, some of the new home communities in Winchester are more comparable to the subject than others located within the city limits. The Menifee/Winchester area is currently home to many actively selling new home communities, thus, we focused on those with the most similar product and that were nearest in proximity to the subject . Our search for similar new home projects to the subject area resulted in thirteen new home projects (including the subject’s three product lines) with base pricing ranging from $485,000 to $852,310, Item Title: 12.2
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but the majority of base pricing falling between $508,990 and $689,990 . The subject’s most recent base pricing falls within the range, spanning from $575,990 to $674,990.
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 t he 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 w ith $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 compared 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 Item Title: 12.2
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$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 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 has come to an end.
In a separate attempt to capture the neighborhood speci fic 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
May 2022
May 2022
Price
Median
SFR
May 2022
PSF
Median
SFR
Price %
Change
from May
2021
Menifee 92584 Subject 100 $620,000 $280 21.6%
Sun City 92585 North/Northeast 52 $598,000 $263 22.0%
Sun City 92586 North 49 $415,000 $312 23.5%
Canyon Lake 92587 West/Northwest 33 $605,000 $334 -0.3% Lake Elsinore 92532 South/Southwest 33 $649,000 $256 19.9% Wildomar 92595 South 38 $615,000 $301 10.2%
Murrieta 92563 Southeast 101 $685,000 $292 17.1%
Murrieta 92562 South 103 $660,000 $325 12.8%
Source: CoreLogic Southern California Home Resale Activity May 2022
The median home price of a detached resale home in the subject’s zip code is $620,000, 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.
Item Title: 12.2
Community Facilities District 2021-1, Banner Park, Issuance of Special Tax Bonds Item Page Number: 253
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Banner Park Sales, Pricing and Competition
Banner Park opened for sale in July 2021 with opening base pricing ranging from $535,990 to $ 619,990. The most recent base pricing at Banner Park ranged from $575,990 to $674,990 which suggests appreciation from 7.3 to 9.8 percent in total over the past 13 months, depending on floorplan. Actual closed prices, including options, upgrades and premiums, have ranged from $536,665 to $797,760. Within the subject, Pulte has closed 103 homes to individuals between December 27, 2021 and August 5, 2022, with an additional 74 homes in escrow. The total of 177 sales equates to an overall absorption rate of 13.6 sales per month. When looking at each product line individually, the absorption has been as follows: 5.0 sales per month at Heritage, 4.0 sales per month at Merit, and 4.6 sales per month at Crest. These are considered to be good absorption rates for the subject marketplace, and slightly stronger than 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 W inchester, Menifee, Lake Elsinore and the French Valley. The 52 projects include 29 projects within Menifee, which includes the subject community. 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. The subject sales rates in the 4.0 to
5.0 sales per month range compares favorably to the overall average in the area.
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 at or 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 submarket is generally performing above market, resulting in strong Item Title: 12.2
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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 and 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: 12.2
Community Facilities District 2021-1, Banner Park, Issuance of Special Tax Bonds Item Page Number: 255
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HIGHEST AND BEST USE ANALYSIS
The highest and best use is a basic concept in real estate valuation due to the fact that it represents the underlying premise (i.e., land use) upon which the estimate of value is based. In this report, the highest and best use is defined as:
"the reasonably probable and legal use of vacant land or an improved property, which is physically possible, appro priately supported, financially feasible, and that results in the highest value”4
Proper application of this analysis requires the subject properties to first be considered “As If Vacant” in order to identify the “ideal” improvements in terms of use, size and timing of development. The existing improvements (if any) are then compared to the “ideal” improvements to determine if the use should be continued, altered or demolished preparatory to redevelopment of the site with a more productive or ideal use.
“As If Vacant”
In the following analysis, we have considered the sites probable uses, or those uses which are physically possible; the legality of use, or those uses which are allowed by zoning or deed restrictions; the financially feasible uses, or those uses which generate a positive return on investment; and the maximally productive us es, 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 76.44 gross acres within two tract maps, located on the north side of Domenigoni Parkway at Lindenberger Road. Domenigoni Parkway is known as Newport Road to the west of the subject, and is a heavily traveled east/west arterial road through Menifee with access from both I-15 (Railroad Canyon Road) and I-215. The site has been graded with the subject property developed into 256 single-family detached lots. The site is surrounded by existing residential homes to the north, west and south and vacant lands to the east, northeast and southeast. We have not received soils reports or environmental reports covering the subject propert y to review. It is an assumption of
4 The Appraisal of Real Estate, 11th Edition
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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. All standard utilities serve the subject property. The site has good access via I-15 to Railroad Canyon Road which turns into Newport Road in the City of Menifee and then into Domenigoni Parkway closer to the subject, and very good access via I-215 to Newport Road/Domenigoni Parkway and east to the subject. There are regional shopping centers within two miles of the subject site.
Based o n 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 current Zoning Map the subject properties are shown as SP (Specific Plan). The property is entitled under SP 158 (Menifee Village Specific Plan, Amendment No. 5). Per the current Specific Plan and approved tract maps, the subject properties have an allowed 256 residential dwelling units. Recorded Tract Map Nos. 32102 and 32102-1 cover the subject 256 single-family lots with a minimum lot size of 6,000 square feet. The approved mapping is consistent with the current zoning on the property. Based on the legality of use analysis, the type of development for which th e 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, even with the COVID Item Title: 12.2
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pandemic ongoing, while more recently increasing interest rates are slowing sales. Within Menifee CFD No. 2021-1, out of 256 proposed houses, there have been 177 home sales including 103 home closings. All structures appear to be in excellent condition with no physical depreciation apparent. Within the new home market in Menifee and Winchester, we found 13 projects (including the subject’s three product lines) to be comparable to the subject property. Until recently , homebuilding had not been able to keep up with the demand during COVID due to the low interest rates, millennials entering 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. The Menifee housing market is priced slightly higher when compared to the nearby cities of Wildomar and Lake Elsinore, however lower than neighboring 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 discussed factors (i.e., physical, legal, financial feasibility and maximum productivity considerations). Based upon the foregoing analysis, it is our opinion that the highest and best use for the subject property “As if Vacant” is for residential development.
Highest and Best Use – “As Improved”
The subject property consists of the neighborhood of Banner Park being built out by Pulte Homes in the City of Menifee. Banner Park consists of 256 proposed detached homes situated on lots with a minimum size of 6,000 square feet, and spread across three product line (or a total of nine floorplans). Banner Park began selling in July of 2021 and features homes ranging in size from 2,191 to 3,237 square feet with most recent base Item Title: 12.2
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pricing ranging from $575,990 to $674,990. The increase from opening base prices have ranged from 7.3 to 9. 8 percent per floorplan. There have been 177 sales within Banner Park resulting in an average sales rate of 13.6 sales per month. It’s important to note that this absorption rate is for all three product lines, and when looking at each product line specifically, the subject’s absorption rate ranged between 4.0 sales per month (Merit) to
5.0 sales per month (Heritage), which is above the average sales rates in the market area. Our search within the subject area found ten 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 0.8 to 14.3 sales per month . While there are three outlying projects performing below the market (all at the Outlook masterplan by TriPointe:
Aurora, Solstice and Opal Sky which recently opened, thus doesn’t reflect an absorption history), the vast majority are selling well with sales rates in the 4.5 to 8.3 sales per month range. 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 majority of 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: 12.2
Community Facilities District 2021-1, Banner Park, Issuance of Special Tax Bonds Item Page Number: 259
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VALUATION ANALYSIS AND CONCLUSIONS
The Sales Comparison Approach will be used to value the subject property. This approach compares s imilar 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 mini mum 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. The 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. 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 units, 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: 12.2
Community Facilities District 2021-1, Banner Park, Issuance of Special Tax Bonds Item Page Number: 260
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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 take into consideration improvements funded by the Menifee CFD No. 2021-1 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 Banner Park there are a total of 103 individually owned homes, 18 homes over 95 percent complete (including six model homes), 57 homes under construction, and 78 remaining finished lots. The 57 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, 135 lots will be valued. The lots within Banner Park contain a minimum of 6,000 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 City of Menifee and two are located in the near -by Winchester area 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 one mile northeast 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: 12.2
Community Facilities District 2021-1, Banner Park, Issuance of Special Tax Bonds Item Page Number: 261
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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. The reported finished lot price reflects a proposed CFD on the property similar to the subject’s CFD. In comparison to the subject property this location is considered to be slightly inferior due to accessibility. The location is further out for commuters and current shopping.
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 four miles northwest of the subject site. This site has frontage along the I-215 Freeway. The site is mapped for 126 small detached lots (minimum lot size of 2,700 square feet) 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. 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 minimum 6,000 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 0.5 miles south 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 slightly inferior in lot size and inferior due to the raw land nature of this Item Title: 12.2
Community Facilities District 2021-1, Banner Park, Issuance of Special Tax Bonds Item Page Number: 262
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site. While costs 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 2.75 miles south of the subject. The lots were in a partially finished condition at time of sale.
Richmond American Homes purchased the first phase of Braverde 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. Brevarde has a similar CFD to the subject property. In comparison to the subject property, these lots are considered to be slightly inferior due to the lot size (5,000 minimum square feet versus the subject’s 6,000 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 three 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 $42,411 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 slightly inferior as it is further out for commuters and in condition as it is unimproved land. While 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 Menif ee. The site was entitled and mass graded prior to the Great Recession then sat for many years due to both the economy and the hilly nature of the site which increased the cost of land development on the site. The Item Title: 12.2
Community Facilities District 2021-1, Banner Park, Issuance of Special Tax Bonds Item Page Number: 263
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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 3.5 miles south of the subject property.
Meritage Homes purchased the 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 si te is considered inferior in date of sale (negotiation), 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 following chart summarizes the considerations used in adjusting the market data to the Subject Properties.
Item Title: 12.2
Community Facilities District 2021-1, Banner Park, Issuance of Special Tax Bonds Item Page Number: 264
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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 Slightly Inferior – Location
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 - 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 and Date of Negotiation
The market data has an overall finished lot range from $134,000 to $215,000. Data No. 2, at the low -end of the range refers to significantly smaller sized lots which are significantly inferior. The remaining market data ranges from $170,000 to $215,000 with the more recent sales at the higher-end of the range, however our search did not uncover any sales since April 2022. 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 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 $215,000. As discussed under the Property Description Section, there are remaining costs which will be considered below. The value conclusions for the lots are detailed below.
Value Conclusion – Residential Lots
Based on the above analysis the value conclusion for the subject builder -owned lots are as follows:
Item Title: 12.2
Community Facilities District 2021-1, Banner Park, Issuance of Special Tax Bonds Item Page Number: 265
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135 Lots x $215,000 $ 29,025,000
Less: Remaining Costs (135 x $49,620.91) ( 6,698,823) Current Value for Remaining 135 Lots $ 22,326,177
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 associated 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 deter mine 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.
Banner Park consists of 103 individually owned homes, six model homes ( none i n escrow), 12 production homes over 95 complete ( 10 in escrow), 57 homes under construction (48 in escrow), and 78 additional finished lots (16 in escrow) . The finished lots along with the homes under construction have been valued above. The 18 builder- owned homes over 95 percent complete (including six model homes) are being addressed in this section with a separate valuation for each plan.
Below is a summary of the floor plans within Banner Park . 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 the Menifee and Winchester marketplace. Our search of the subject property and the local Multiple Listing Service (MLS) has resulted in no resales and no current resale listings within Banner Park.
Item Title: 12.2
Community Facilities District 2021-1, Banner Park, Issuance of Special Tax Bonds Item Page Number: 266
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Banner Park by Pulte Homes
Plan Bd/Ba Floors/
Parking
Sq.
Ft.
Ind.
Owned
Bldr.
Owned
Heritage Plan 1 (H1) 3 / 2 1 / 2 2,191 14 4*
Heritage Plan 2 (H2) 3 / 2.5 1 / 2 2,311 8 2
Heritage Plan 3 (H3) 3 / 2.5 1 / 3 2,462 13 3*
Merit Plan 1 (M1) 4 / 2.5 2 / 2 2,391 11 1*
Merit Plan 2 (M2) 4 / 2.5 2 / 2 2,654 6 0
Merit Plan 3 (M3) 5 / 3 2 / 2 2,824 16 1*
Crest Plan 1 (C1) 4 / 2.5 2 / 3 2,845 9 1
Crest Plan 2 (C2) 5 / 3.5 2 / 3 3,047 11 3*
Crest Plan 3 (C3) 5 / 3.5 2 / 3 3,237 15 3*
Total 103 18
*One of each plan is a model home. In addition to the above there are 57 homes under construction (less than 95 percent complete) and 78 additional finished lots.
The most appropriate new home comparable data for Heritage Plan H1 (Stella) are shown below.
Data Model Rm. Ct. Flrs/Pkg. Sq. Ft. Price/SF
Subj. H1 3 / 2 1 / 2 2,191 --
1 H2 3 / 2.5 1 / 2 2,311 $254.86
4 1 3 / 2 1 / 2 2,052 $274.85
6 3 4 / 2 1 / 2 2,201 $258.33
6 4 3 / 2 1 / 2 2,287 $259.84
7 3 4 / 2 1 / 2 2,035 $267.81
7 4 4 / 2 1 / 2 2,387 $240.88
9 1 3 / 2 1 / 2 2,142 $252.57
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 home comparables have a base price range from $240.88 to $274.85 per square foot, with generally the smallest sized home at the high end of the price per square foot range and the largest sized home at the low end of the price per square foot range. This is typical due to the economies of scale which are obtained during construction. Heritage Plan H1 has a current base asking price of $262.89 per square foot. There have been 14 closings of Plan H1 with sales prices ranging from $244.94 to $293.32 per square foot. There are currently 11 escrows of Plan H1 with a price Item Title: 12.2
Community Facilities District 2021-1, Banner Park, Issuance of Special Tax Bonds Item Page Number: 267
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range of $266.54 to $299.16 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 Heritage Plan H1 has a base current market value of $25 0.00 per square foot. This calculates as follows:
2,191 sf x $250.00 = $547,750
The most appropriate new home comparable data for Heritage Plan H2 (Verona) are shown below.
Data Model Rm. Ct. Flrs/Pkg. Sq. Ft. Price/SF
Subj. H2 3 / 2.5 1 / 2 2,311 --
1 H1 3 / 2 1 / 2 2,191 $262.89
1 H3 3 / 2.5 1 / 3 2,462 $246.95
6 3 4 / 2 1 / 2 2,201 $258.33
6 4 3 / 2 1 / 2 2,287 $259.84
7 4 4 / 2 1 / 2 2,387 $240.88
9 1 3 / 2 1 / 2 2,142 $252.57
12 1 4 / 3 1 / 2 2,319 $263.04
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 home comparables have a base price range from $240.88 to $263.04 per square foot. Generally, the smaller sized homes are at the high-end of the price per square foot range and the l arger 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. Heritage Plan H2 has a current base asking price of $254.86 per square foot. There have been eight closings of Plan H2 with a sales price range of $243.12 to $282.86 per square foot. There are 10 escrows of Plan H2 with a sales price range of $254.86 to $301.92 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 Heritage Item Title: 12.2
Community Facilities District 2021-1, Banner Park, Issuance of Special Tax Bonds Item Page Number: 268
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Plan H2 has a base current market value of $245 .00 per square foot. This calculates as follows:
2,311 sf x $245.00 = $566,195
The most appropriate new home comparable data for Heritage Plan H3 (Parklane) are shown below.
Data Model Rm. Ct. Flrs/Pkg. Sq. Ft. Price/SF
Subj. H3 3 / 2.5 1 / 3 2,462 --
1 H2 3 / 2.5 1 / 2 2,311 $254.86
6 4 3 / 2 1 / 2 2,287 $259.84
7 4 4 / 2 1 / 2 2,387 $240.88
11 1 3 / 2 1 / 3 2,432 $233.96
12 1 4 / 3 1 / 2 2,319 $263.04
13 2 4 / 3.5 1 / 2 2,767 $229.54
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 home comparables have a base price range from $229.54 to $263.04 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. Heritage Plan H3 has a current base asking price of $246.95 per square foot. There have been 13 closings of Plan H3 with sales prices ranging from $231.59 to $287.05 per square foot. There are nine current escrows of Plan H3 with prices ranging from $258.63 to $296.36 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 Heritage Plan H3 has a base current market value of $2 30.00 per square foot. Thi s calculates as follows:
2,462 sf x $230.00 = $578,570
Item Title: 12.2
Community Facilities District 2021-1, Banner Park, Issuance of Special Tax Bonds Item Page Number: 269
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The most appropriate new home comparable data for Merit Plan M1 (Pathmaker) are shown below.
Data Model Rm. Ct. Flrs/Pkg. Sq. Ft. Price/SF
Subj. M1 4 / 2.5 2 / 2 2,391 --
2 M2 4 / 2.5 2 / 2 2,654 $229.08
4 2 4 / 3 2 / 2 2,239 $257.70
4 3 4 / 3.5 2 / 2 2,435 $253.79
4 4 5 / 3 2 / 2 2,537 $271.97
5 3 4 / 3 2 / 2 2,419 $233.36
8 2 4 / 3.5 2 / 2 2,239 $253.68
8 3 4 / 3.5 2 / 2 2,435 $245.17
9 2 3 / 2 2 / 2 2,285 $240.26
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 home comparables have a base price range from $229.08 to $271.97 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. Merit Plan M1 has a current base asking price of $248.01 per square foot. There have been 11 closings of Plan M1 with sales prices ranging from $236.65 to $269.46 per square foot. There are four current escrows of Plan M1 with prices ranging from $259.79 to $272.74 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 Merit Plan M1 has a base current market value of $235 per square foot. This calculates as follows:
2,391 sf x $235.00 = $561,885
The most appropriate new home comparable data for Merit Plan M2 (Brinnon) are shown below.
Item Title: 12.2
Community Facilities District 2021-1, Banner Park, Issuance of Special Tax Bonds Item Page Number: 270
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Data Model Rm. Ct. Flrs/Pkg. Sq. Ft. Price/SF
Subj. M2 4 / 2.5 2 / 2 2,654 --
2 M3 5 / 3 2 / 2 2,824 $220.61
4 4 5 / 3 2 / 2 2,537 $271.97
5 4 4 / 3 2 / 2 2,590 $229.22
8 4 5 / 3 2 / 2 2,537 $235.31
8 5 4 / 3.5 2 / 2 2,617 $233.47
9 3 4 / 3 2 / 3 2,624 $216.84
12 2 4 / 3 2 / 3 2,722 $242.47
13 1 4 / 3 2 / 2 2,590 $227.03
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 $216.84 to $271.97 per square foot. Merit Plan M2 has a current base asking price of $229.08 per square foot. There have been six closings of Plan M2 with a sales price range of $209.80 to $246.84 per square foot. There are six escrows of Plan M2 with a sales price range of $239.48 to $254.61 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 Merit Plan M2 has a base current market value of $218 per square foot. This calculates as follows:
2,654 sf x $218 = $578,572
The most appropriate new home comparable data for Merit Plan M3 (Visionary) are shown below.
Data Model Rm. Ct. Flrs/Pkg. Sq. Ft. Price/SF
Subj. M3 5 / 3 2 / 2 2,824 --
2 M2 4 / 2.5 2 / 2 2,654 $229.08
3 C1 4 / 2.5 2 / 3 2,845 $226.71
3 C2 5 / 3.5 2 / 3 3,047 $217.92
8 5 4 / 3.5 2 / 2 2,617 $233.47
9 3 4 / 3 2 / 3 2,624 $216.84
11 2 4 / 3 2 / 3 2,843 $207.18
12 2 4 / 3 2 / 3 2,722 $242.47
12 3 5 / 4 2 / 2 2,929 $233.18
Item Title: 12.2
Community Facilities District 2021-1, Banner Park, Issuance of Special Tax Bonds Item Page Number: 271
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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 home comparables have a base price range from $207.18 to $242.47 per square foot. Generally, the smaller sized homes are at the high-end of the price per square foot range and the l arger 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. Merit Plan M3 has a current base asking price of $220.61 per square foot. There have been 16 closings of Plan M3 with a sales price range of $210.79 to $246.34 per square foot. There are nine escrows of Plan M3 with a sales price range of $234.07 to $268.32 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 Merit Plan M3 has a base current market value of $212.00 per square foot. This calculates as follows:
2,824sf x $212.00 = $598,688
The most appropriate new home comparable data for Crest Plan C1 (Preston) are shown below.
Data Model Rm. Ct. Flrs/Pkg. Sq. Ft. Price/SF
Subj. C1 4 / 2.5 2 / 3 2,845 --
3 C2 5 / 3.5 2 / 3 3,047 $217.92
2 M3 5 / 3 2 / 2 2,824 $220.61
8 5 4 / 3.5 2 / 2 2,617 $233.47
9 3 4 / 3 2 / 3 2,624 $216.84
11 2 4 / 3 2 / 3 2,843 $207.18
12 2 4 / 3 2 / 3 2,722 $242.47
12 3 5 / 4 2 / 2 2,929 $233.18
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 home comparables have a base price range from $207.18 to $242.47 per square foot. Generally, the smaller sized homes Item Title: 12.2
Community Facilities District 2021-1, Banner Park, Issuance of Special Tax Bonds Item Page Number: 272
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are 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. Crest Plan C1 has a current base asking price of $226.71 per square foot. There have been nine closings of Plan C1 with a sales price range of $220.49 to $253.82 per square foot. There are five escrows of Plan C1 with a sales price range of $231.13 to $259.64 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 Crest Plan C1 has a base current market value of $215 .00 per square foot. This calculates as follows:
2,845 sf x $215.00 = $611,675
The most appropriate new home comparable data for Crest Plan C2 (Stafford) are shown below.
Data Model Rm. Ct. Flrs/Pkg. Sq. Ft. Price/SF
Subj. C2 5 / 3.5 2 / 3 3,047 --
3 C1 4 / 2.5 2 / 3 2,845 $226.71
3 C3 5 / 3.5 2 / 3 3,237 $208.52
2 M3 5 / 3 2 / 2 2,824 $220.61
11 2 4 / 3 2 / 3 2,843 $207.18
11 3 5 / 3 2 / 3 3,291 $185.35
12 3 5 / 4 2 / 2 2,929 $233.18
12 4 5 / 3 2 / 3 3,015 $225.04
13 3 5 / 3 2 / 3 3,423 $202.57
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 home comparables have a base price range from $185.35 to $233.18 per square foot. Generally, the smaller sized homes are 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. Crest Plan C2 has a current base asking price of $217.92 per square foot. There have been 11 closings of Plan C2 with a sales price range of $208.92 to $252.19 per square foot. There are 10 escrows of Plan C2 with a sales price Item Title: 12.2
Community Facilities District 2021-1, Banner Park, Issuance of Special Tax Bonds Item Page Number: 273
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range of $217.92 to $265.04 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 Crest Plan C2 has a base current market value of $205 .00 per square foot. This calculates as follows:
3,047 sf x $205.00 = $624,635
The most appropriate new home comparable data for Crest Plan C3 (Rosemount) are shown below.
Data Model Rm. Ct. Flrs/Pkg. Sq. Ft. Price/SF
Subj. C3 5 / 3.5 2 / 3 3,237 --
3 C1 4 / 2.5 2 / 3 2,845 $226.71
3 C2 5 / 3.5 2 / 3 3,047 $217.92
2 M3 5 / 3 2 / 2 2,824 $220.61
11 2 4 / 3 2 / 3 2,843 $207.18
11 3 5 / 3 2 / 3 3,291 $185.35
12 3 5 / 4 2 / 2 2,929 $233.18
12 4 5 / 3 2 / 3 3,015 $225.04
13 3 5 / 3 2 / 3 3,423 $202.57
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 home comparables have a base price range from $185.35 to $233.18 per square foot. Generally, the smaller sized homes are 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. Crest Plan C3 has a current base asking price of $208.52 per square foot. There have been 15 closings of Plan C3 with a sales price range of $208.18 to $246.45 per square foot. There are 10 escrows of Plan 3C with a sales price range of $217.37 to $248.20 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 Crest Item Title: 12.2
Community Facilities District 2021-1, Banner Park, Issuance of Special Tax Bonds Item Page Number: 274
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Plan C3 has a base current market value of $20 0.00 per square foot. This calculates as follows:
3,237 sf x $200.00 = $647,400
Builder-Owned Retail Values – Banner Park by Pulte Homes
Within Banner Park there are 12 remaining builder-owned home over 95 percent complete (10 of which are in escrow), and six build-owned model homes (none of which are in escrow). 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 $50,000 premium has been included with each of the model homes. As concluded above, the retail base value conclusions for the builder -owned homes within Banner Park are calculated as follows:
Plan H1 (4 x $547,750) $ 2,191,000
Plan H2 (2 x $566,195) 1,132,390
Plan H3 (3 x $578,570) 1,735,710
Plan M1 (1 x $561,885) 561,885
Plan M2 (0 x $578,572) 0
Plan M3 (1 x $598,688) 598,688
Plan C1 (1 x $611,675) 611,675
Plan C2 (3 x $624,635) 1,873,905
Plan C3 (3 x $647,400) 1,942,200
Model Upgrades (6x 50,000) 300,000
Retail Value $10,947,453
Absorption Period
In order to arrive at an absorption period for the builder-owned homes in the subject, the absorption rate for each product line along with the surrounding developments have been reviewed. Banner Park opened for sale in July of 2021. There have been 177 sales since then, suggesting an average absorption of 13.6 sales per month (or from 4.0 to 5.0 sales per month per product line) which is considered to be very good. Ten of the 18 builder- owned homes are in escrow. Taking into consideration the product, current escrows, current Item Title: 12.2
Community Facilities District 2021-1, Banner Park, Issuance of Special Tax Bonds Item Page Number: 275
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market conditions and the concluded sales prices, it is the appraiser’s opinion that the 18 builder-owned homes will be absorbed within a three-month period at the concluded values.
Remaining Costs
As discussed under the property description section there are $49,620.91 in remaining land development costs and fees per lot associated with the builder-owned property. For the 18 builder -owned homes, this equates to $893,1 76 ($49,620.91 x 18) in remaining costs. For purposes of this analysis, we are assuming the remaining costs will be spread evenly over the three-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 for the home and two percent for general and administrative costs for a total of eight percent.
Profit
Several inter views 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 sales 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: 12.2
Community Facilities District 2021-1, Banner Park, Issuance of Special Tax Bonds Item Page Number: 276
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The homes within Banner Park began selling in July 2021 with the product being well received in the marketplace. Based on the sales rate within the subject project, the competition, current market conditions, the product and location, a 10 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 Banner Park is $7,950,855.
Banner Park – Total Builder-Owned Property Value
The builder-owned lands within Banner Park consists of six models along with 12 production homes over 95 percent complete and 135 lots, 57 which are under construction (under 95 percent complete) owned by Pulte. The final valuation of the builder- owned property is:
135 Lots $ 22,326,177
18 Houses 7,950,855
Total Pulte Ownership $ 30,277,032
Banner Park – Individual Owned Homes Valuation Conclusion There are 103 individually owned homes within the subject. Based on the concluded value for each plan, the individually owned homes within the subject portion of Banner Park are:
Plan H1 (14 x $547,750) $ 7,668,500
Plan H2 (8 x $566,195) 4,529,560
Plan H3 (13 x $578,570) 7,521,410
Plan M1 (11 x $561,885) 6,180,735
Plan M2 (6 x $578,572) 3,471,432
Plan M3 (16 x $598,688) 9,579,008
Plan C1 (9 x $611,675) 5,505,075
Plan C2 (11 x $624,635) 6,870,985
Plan C3 (15 x $647,400) 9,711,000
Total Individual Owned $61,037,705
In an additional review, we have reviewed the original builder sales prices for the homes within the subject . Closings for the 103 homes occurred between December 2021 and Item Title: 12.2
Community Facilities District 2021-1, Banner Park, Issuance of Special Tax Bonds Item Page Number: 277
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August 2022. The reported closing prices by the builder for the individually owned homes total $ 66,799,479. 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 the minimum m arket 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, the actual sales prices are higher than the base pricing due to the purchas e of options and upgrades. I t is our conclusion that the original builder sales prices further substantiate the concluded minimum market value for the individually owned homes.
Item Title: 12.2
Community Facilities District 2021-1, Banner Park, Issuance of Special Tax Bonds Item Page Number: 278
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APPRAISAL REPORT SUMMARY
The appraisal assignment was to value the subject property which consists of lands within Menifee CFD No. 2021- 1 proposed for 256 single-family detached homes on minimum 6,000 square foot lots, being built out into the community known as Banner Park in the City of Menifee , Riverside County. The neighborhood is being built and sold by Pulte Homes, and includes three different product lines (Heritage, Merit and Crest) distributed throughout two tracts. Banner Park opened for sale in July of 2021 and is currently selling.
Out of the total 256 proposed homes, 103 are completed and have closed to individuals with an additional 74 homes in escrow. The remainder of the lots range from completed model homes to production homes over 95 percent complete to homes under construction to finished lots . 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 A pproach 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. 2021- 1 bond proceeds along with the Menifee CFD No. 2021- 1 special tax lien. As a result of our investigation, the concluded market value for the subject property is shown below.
Banner Park by Pulte Homes
Pulte Homes Ownership (18 houses & 135 lots) $ 30,277,032 Individual Owners (103 houses) $ 61,037,705
Total Aggregate Value $ 91,314,737
The above values are stated subject to the Assumptions and Limiting Conditions of this report, the Appraiser’s Certification and as of August 5, 2022.
Item Title: 12.2
Community Facilities District 2021-1, Banner Park, Issuance of Special Tax Bonds Item Page Number: 279
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APPRAISER’S CERTIFICATION
The appraiser certifies that to the best of his knowledge and belief:
1. The statements of fact contained in this report are true and correct.
2. The reported analyses, opinions and conclusions are limited only by the reported assumptions and limiting conditions, and are my personal, unbiased, professional analyses, opinions and conclusions.
3. The appraiser has no present or prospective interest in the property that is the subject of this report, and no personal interest or bias with respect to the parties involved.
4. The appraiser’s compensation is not contingent upon the reporting of a predetermined value or direction in value that favors the cause of the client, the amount of the value estimate, the attainment of a stipulated result or the occurrence of a subsequent event.
5. This appraisal was not based on a requested minimum valuation, a specific valuation or the approval of a loan.
6. The analyses, opinions and conclusions were developed, and this report was prepared, in conformity with the Uniform Standards of Professional Appraisal Practice.
7. Kitty Siino has made a personal inspection of the property that is the subject of this report.
8. Kitty Siino has not performed any appraisal services on the subject property in the past three years.
9. No other appraisers have provided significant professional assistance to the persons signing this report.
10. The reported analyses, opinions and conclusions were developed, and this report was prepared, in conformity with the requirements of the Appraisal Institute’s Code of Professional Ethics and Standards of Professional Appraisal Practice, which include the Uniform Standards of Professional Appraisal Practice.
11. The use of this report is subject to the requirements of the Appraisal Institute relating to review by its duly authorized representatives.
12. As of the date of this report, Kitty Siino has completed the requirements of the continuing education program of the Appraisal Institute.
Kitty S. Siino, MAI
State Certified General
Real Estate Appraiser (AG004793)
Item Title: 12.2
Community Facilities District 2021-1, Banner Park, Issuance of Special Tax Bonds Item Page Number: 280
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ADDENDA
Item Title: 12.2
Community Facilities District 2021-1, Banner Park, Issuance of Special Tax Bonds Item Page Number: 281
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MENIFEE CFD NO. 2021-1
BOUNDARY MAP
Item Title: 12.2
Community Facilities District 2021-1, Banner Park, Issuance of Special Tax Bonds Item Page Number: 282
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Item Title: 12.2
Community Facilities District 2021-1, Banner Park, Issuance of Special Tax Bonds Item Page Number: 283
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TRACT MAP NOS. 32102 & 32101-1
Item Title: 12.2
Community Facilities District 2021-1, Banner Park, Issuance of Special Tax Bonds Item Page Number: 284
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Item Title: 12.2
Community Facilities District 2021-1, Banner Park, Issuance of Special Tax Bonds Item Page Number: 285
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Item Title: 12.2
Community Facilities District 2021-1, Banner Park, Issuance of Special Tax Bonds Item Page Number: 286
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CAL FIRE - FIRE HAZARD MAP
Item Title: 12.2
Community Facilities District 2021-1, Banner Park, Issuance of Special Tax Bonds Item Page Number: 287
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Item Title: 12.2
Community Facilities District 2021-1, Banner Park, Issuance of Special Tax Bonds Item Page Number: 288
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DISCOUNTED CASH FLOW ANALYSIS
Item Title: 12.2
Community Facilities District 2021-1, Banner Park, Issuance of Special Tax Bonds Item Page Number: 289
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Banner Park Builder-Owned Houses Disc. Cash Flow Analysis
MONTH Months MONTH 1 MONTH 2 MONTH 3 TOTAL
3 INCOME:
Retail Sales 10,947,453 $3,649,151 $3,649,151 $3,649,151 $10,947,453
TOTAL INCOME $3,649,151 $3,649,151 $3,649,151 $10,947,453
EXPENSES:
Remaining Costs ($297,725) ($297,725) ($297,726) ($893,176) Marketing & Carrying Expenses 8% ($291,932) ($291,932) ($291,932) ($875,796) Profit 10% ($364,915) ($364,915) ($364,915) ($1,094,745)
TOTAL EXPENSES ($954,572) ($954,572) ($954,573) ($2,863,718)
NET CASH FLOW $2,694,579 $2,694,579 $2,694,578 $8,083,735 Discount Factor 10% 0.9917 0.9835 0.9754
DISCOUNTED CASH FLOW $2,672,310 $2,650,224 $2,628,321 $7,950,855
CUMULATIVE DISCOUNTED $2,672,310 $5,322,534 $7,950,855 $7,950,855
CASH FLOW
Item Title: 12.2
Community Facilities District 2021-1, Banner Park, Issuance of Special Tax Bonds Item Page Number: 290
Menifee Mayor and City Council
September 21, 2022
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RESIDENTIAL LAND SALES MAP
& SUMMARY CHART
Item Title: 12.2
Community Facilities District 2021-1, Banner Park, Issuance of Special Tax Bonds Item Page Number: 291
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FINISHED LOT LAND SALES SUMMARY MAP
Item Title: 12.2
Community Facilities District 2021-1, Banner Park, Issuance of Special Tax Bonds Item Page Number: 292
Menifee Mayor and City Council
September 21, 2022
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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: 12.2
Community Facilities District 2021-1, Banner Park, Issuance of Special Tax Bonds Item Page Number: 293
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September 21, 2022
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IMPROVED RESIDENTIAL SALES MAP
& SUMMARY CHART
Item Title: 12.2
Community Facilities District 2021-1, Banner Park, Issuance of Special Tax Bonds Item Page Number: 294
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IMPROVED RESIDENTIAL SALES MAP
Item Title: 12.2
Community Facilities District 2021-1, Banner Park, Issuance of Special Tax Bonds Item Page Number: 295
Menifee Mayor and City Council
September 21, 2022
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I
MPROVED RESIDENTIAL SALES SUMMARY CHART
Data
No.
Project Name
Location/Developer Plan Room
Count
Floors/
Parking
Size
(SF)
Lot Size or
Density /
Absorption
Base
Sales
Price
Price/SF
1 Heritage at Banner Park /
Domenigoni Pkwy and Lindenberger
Road, Menifee / Pulte Homes
H1 (Stella) 3 / 2 1 / 2 2,191 6,000 sf lots $575,990 $262.89 H2 (Verona) 3 / 2.5 1 / 2 2,311 5.0 sales/mo $588,990 $254.86 H3 (Parklane) 3 / 2.5 1 / 3 2,462 $607,990 $246.95
2 Merit at Banner Park / Domenigoni
Pkwy and Lindenberger Road,
Menifee / Pulte Homes
M1 (Pathmaker) 4 / 2.5 2 / 2 2,391 6,000 sf lots $592,990 $248.01 M2 (Brinnon) 4 / 2.5 2 / 2 2,654 4.0 sales/mo $607,990 $229.08 M3 (Visionary) 5 / 3 2 / 2 2,824 $622,990 $220.61
3 Crest at Banner Park / Domenigoni
Pkwy and Lindenberger Road,
Menifee / Pulte Homes
C1 (Preston) 4 / 2.5 2 / 3 2,845 6,000 sf lots $644,990 $226.71 C2 (Stafford) 5 / 3.5 2 / 3 3,047 4.6 sales/mo $663,990 $217.92 C3 (Rosemount) 5 / 3.5 2 / 3 3,237 $674,990 $208.52
4 Winchester Ridge / SWC
Domenigoni Pkwy and Leon Road,
Winchester / D.R. Horton
1 3 / 2 1 / 2 2,052 $563,990 $274.85
2 4 / 3 2 / 2 2,239 7,200 sf lots $576,990 $257.70
3 4 / 3.5 2 / 2 2,435 14.3 sales/mo $617,990 $253.79
4 5 / 3 2 / 2 2,537 $689,990 $271.97
5 Prarie Crossing Meadow View /
Domenigoni Pkwy and Prarie
Crossing Dr, Winchester / Lennar
1 3 / 2.5 2 / 2 1,823 $525,075 $288.03
2 4 / 3 2 / 2 2,203 5,500 sf lots $553,960 $251.46
3 4 / 3 2 / 2 2,419 4.5 sales/mo $564,490 $233.36
4 4 / 3 2 / 2 2,590 $593,685 $229.22
6 Prarie Crossing Night Sky /
Domenigoni Pkwy and Prarie
Crossing Dr, Winchester / Lennar
1 3 / 2 1 / 2 1,678 $524,855 $312.79
2 3 / 2 1 / 2 1,950 5,500 sf lots $551,760 $282.95
3 4 / 2 1 / 2 2,201 5.5 sales/mo $568,590 $258.33
4 3 / 2 1 / 2 2,287 $594,250 $259.84
7 Autumn Creek / SW of Olive Avenue
and Winchester Road, Winchester /
KB Home
1 3 / 2 1 / 2 1,479 $508,990 $344.14
2 3 / 2 1 / 2 1,751 7,000 sf lots $524,990 $299.82
3 4 / 2 1 / 2 2,035 7.1 sales/mo $544,990 $267.81
4 4 / 2 1 / 2 2,387 $574,990 $240.88
Item Title: 12.2
Community Facilities District 2021-1, Banner Park, Issuance of Special Tax Bonds Item Page Number: 296
Menifee Mayor and City Council
September 21, 2022
Page
2783 of 2787
8 Pleasant Valley Ranch / NEC
Simpson Road and Leon Road,
Winchester / D.R. Horton
1 4 / 3 1 / 2 1,898 $548,990 $289.25
2 4 / 3.5 2 / 2 2,239 9,000 sf lots $567,990 $253.68
3 4 / 3.5 2 / 2 2,435 8.3 sales/mo $596,990 $245.17
4 5 / 3 2 / 2 2,537 $596,990 $235.31
5 4 / 3.5 2 / 2 2,617 $610,990 $233.47
9 Aurora at Outlook / SE of
Domenigoni & Leon Road,
Winchester / TriPointe Homes
1 3 / 2 1 / 2 2,142 7,200 sf lots $541,000 $252.57
2 3 / 2 2 / 2 2,285 0.8 sales/mo $549,000 $240.26
3 4 / 3 2 / 3 2,624 $569,000 $216.84
10 Opal Skye at Outlook / SE of
Domenigoni & Leon Road,
Winchester / TriPointe Homes
5 3 / 2 2 / 2 1,882 8,500 sf lots $485,000 $257.70
6 3 / 2 2 / 2 2,054 2.9 sales/mo $490,000 $238.56
7 4 / 3 2 / 2 2,193 $498,000 $227.09
11 Solstice at Outlook / SE of
Domenigoni & Leon Road,
Winchester / TriPointe Homes
1 3 / 2 1 / 3 2,432 7,200 sf lots $569,000 $233.96
2 4 / 3 2 / 3 2,843 1.6 sales/mo $589,000 $207.18
3 5 / 3 2 / 3 3,291 $610,000 $185.35
12 Del Oro / Holland Road and Hanover
Lane, Menifee / D.R. Horton
1 4 / 3 1 / 2 2,319 $609,990 $263.04
2 4 / 3 2 / 3 2,722 7,200 sf lots $659,990 $242.47
3 5 / 4 2 / 2 2,929 7.7 sales/mo $682,990 $233.18
4 5 / 3 2 / 3 3,015 $678,490 $225.04
13 Westward at Remington Place /
Menifee Road and Rouse Road,
Menifee / Lennar
1 4 / 3 2 / 2 2,590 $588,010 $227.03
2 4 / 3.5 1 / 2 2,767 7,200 sf lots $635,146 $229.54
3 5 / 3 2 / 3 3,423 4.9 sales/mo $693,400 $202.57
4 6 / 4.5 2 / 3 4,134 $852,310 $206.17
Item Title: 12.2
Community Facilities District 2021-1, Banner Park, Issuance of Special Tax Bonds Item Page Number: 297
Menifee Mayor and City Council
September 21, 2022
Page
2784 of 2787
APPRAISER’S QUALIFICATIONS
Item Title: 12.2
Community Facilities District 2021-1, Banner Park, Issuance of Special Tax Bonds Item Page Number: 298
Menifee
Mayor
and
City
Council
September
21,
2022
Page
2785 of 2787
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 major infrastructure improvements.
Types of properties were apartments and single- family residential lots on a for sale basis to apartment and homebuilders.
1980 - 1981
Investment Counselor, Newport Equity Funds, Newport Beach, California. Duties included obtaining private financing for residential properties, working with appraisals of properties and analyzing the investments.
Item Title: 12.2
Community Facilities District 2021-1, Banner Park, Issuance of Special Tax Bonds Item Page Number: 299
Menifee
Mayor
and
City
Council
September
21,
2022
Page
2786 of 2787
Licenses
Real Estate Sales Person, State of California, 1980
Certified General Appraiser, State of California (#AG004793)
Organizations
MAI #11145 - The Appraisal Institute
Public Financing
CASTOFF Meetings, 2006, 2007, 2008, 2009, 2010, 2011, 2013, 2014, 2015, 2016, 2017, 2018, 2019 and 2022
Speaker, Mello- Roos & Special Assessment Financing, UCLA Extension Publi c Policy Program, February 2009 and March 2011
Item Title: 12.2
Community Facilities District 2021-1, Banner Park, Issuance of Special Tax Bonds Item Page Number: 300
Menifee
Mayor
and
City
Council
September
21,
2022
Page
2787 of 2787