The Bonds maturing on September 1, 20__ (the “20__ 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, 20__. and on each September 1 thereafter prior to maturity, in accordance with the schedule of Sinking Fund Payments set forth below. The 20__ Term Bonds so called for redemption shall be selected by the Trustee by lot and shall be redeemed at a redemption price for each redeemed 20__ Term Bond equal to the principal amount thereof, plus accrued interest to the redemption date, without premium, as follows:
Term Bonds Maturing September 1, 20__
Sinking Fund Redemption Date
(September 1) Sinking Fund Payments
$
_____________
* Maturity.
If the District purchases Term Bonds during the Fiscal Year immediately preceding one of the sinking fund redemption dates specified above, the District 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 Item Title: 12.1
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any Interest Payment Date on or after March 1, 2024 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 from March 1, 2024 through March 1, 20__ 103% September 1, 20__ and March 1, 20__ 102
September 1, 20__ and March 1, 20__ 101
September 1, 20__ and any Interest Payment Date thereafter 100 Prepayments and amounts released from the Reserve Account in connection with Prepayments will be allocated to the payment at maturity and redemption of Bonds and any Parity Bonds as nearly as practicable on a proportionate basis based on the outstanding principal amount of the Bonds and any Parity Bonds and such amounts shall be applied to redeem Bonds and Parity Bonds as nearly as practicable on a pro rata basis among maturities in increments of $5,000; provided, however, that, for Prepayments of less than $50,000, the District may specify in a Certificate of an Authorized Representative that Prepayments be applied to one or more maturities of the Bonds or Parity Bonds so long as there is delivered to the Trustee a Certificate of the Independent Financial Consultant that, following such application of the Prepayments, the maximum Special Taxes that may be levied in each Fiscal Year on Taxable Property is not less than 110% of Annual Debt Service in the Bond Year that begins in such Fiscal Year. (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 Item Title: 12.1
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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.
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 Item Title: 12.1
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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; (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:
Item Title: 12.1
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(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.
(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.
Item Title: 12.1
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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 (other than the Administrative Expense Account therein), 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 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 Item Title: 12.1
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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 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.
Item Title: 12.1
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(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.
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;
Item Title: 12.1
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(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 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 Item Title: 12.1
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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 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 Item Title: 12.1
Community Facilities District 2021-2, Sumac Ridge, Issuance of Special Tax Bonds Item Page Number: 144
Menifee Mayor and City Council
August 16, 2023
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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.
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.
Item Title: 12.1
Community Facilities District 2021-2, Sumac Ridge, Issuance of Special Tax Bonds Item Page Number: 145
Menifee Mayor and City Council
August 16, 2023
Page
583 of 759
40 4885-4897-6232v2/200299-0019
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 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.
Item Title: 12.1
Community Facilities District 2021-2, Sumac Ridge, Issuance of Special Tax Bonds Item Page Number: 146
Menifee Mayor and City Council
August 16, 2023
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584 of 759
41 4885-4897-6232v2/200299-0019
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.
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.
Item Title: 12.1
Community Facilities District 2021-2, Sumac Ridge, Issuance of Special Tax Bonds Item Page Number: 147
Menifee Mayor and City Council
August 16, 2023
Page
585 of 759
42 4885-4897-6232v2/200299-0019
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 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.
Item Title: 12.1
Community Facilities District 2021-2, Sumac Ridge, Issuance of Special Tax Bonds Item Page Number: 148
Menifee Mayor and City Council
August 16, 2023
Page
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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 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.
Item Title: 12.1
Community Facilities District 2021-2, Sumac Ridge, Issuance of Special Tax Bonds Item Page Number: 149
Menifee Mayor and City Council
August 16, 2023
Page
587 of 759
44 4885-4897-6232v2/200299-0019
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.
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 Item Title: 12.1
Community Facilities District 2021-2, Sumac Ridge, Issuance of Special Tax Bonds Item Page Number: 150
Menifee Mayor and City Council
August 16, 2023
Page
588 of 759
45 4885-4897-6232v2/200299-0019
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 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, Item Title: 12.1
Community Facilities District 2021-2, Sumac Ridge, Issuance of Special Tax Bonds Item Page Number: 151
Menifee Mayor and City Council
August 16, 2023
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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.
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.
Item Title: 12.1
Community Facilities District 2021-2, Sumac Ridge, Issuance of Special Tax Bonds Item Page Number: 152
Menifee Mayor and City Council
August 16, 2023
Page
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47 4885-4897-6232v2/200299-0019
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.
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; Item Title: 12.1
Community Facilities District 2021-2, Sumac Ridge, Issuance of Special Tax Bonds Item Page Number: 153
Menifee Mayor and City Council
August 16, 2023
Page
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(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 (exclusive of the Administrative Expense Account) 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 (exclusive of the Administrative Expense Account) 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 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 (other than in the Administrative Expense Account therein) 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 Item Title: 12.1
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Bonds then Outstanding. 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) 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; Item Title: 12.1
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(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 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) 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; and (6) 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 Item Title: 12.1
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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 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 Item Title: 12.1
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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.
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: 12.1
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IN WITNESS WHEREOF, COMMUNITY FACILITIES DISTRICT NO. 2021-2 OF THE CITY OF MENIFEE (SUMAC RIDGE) 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. 2021-2
OF THE CITY OF MENIFEE (SUMAC RIDGE)
By:
Mayor of the City of Menifee, acting as the
legislative body of Community Facilities
District No. 2021-2 of the City of Menifee
(Sumac Ridge)
ATTEST:
Acting City Clerk of the City of Menifee,
acting as the legislative body of
Community Facilities District No. 2021-2
of the City of Menifee (Sumac Ridge)
WILMINGTON TRUST, NATIONAL
ASSOCIATION, as Trustee
By:
Authorized Signatory
Item Title: 12.1
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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. 2021-2
OF THE CITY OF MENIFEE (SUMAC RIDGE)
SPECIAL TAX BOND, SERIES 2023
INTEREST RATE: MATURITY DATE: DATED DATE: CUSIP:
_____% September 1, 20__ September __, 2023 ___
REGISTERED OWNER: CEDE & CO.
PRINCIPAL AMOUNT: __________________ DOLLARS
COMMUNITY FACILITIES DISTRICT NO. 2021-2 OF THE CITY OF MENIFEE (SUMAC RIDGE) (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 Item Title: 12.1
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forth above. Notwithstanding the foregoing, if at the time of 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 March 1, 2024 and each March 1 and September 1 thereafter (each an “Interest Payment Date”), 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. 2021-2 of the City of Menifee (Sumac Ridge) Special Tax Bonds, Series 2023” (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, funding capitalized interest on the Bonds 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 August 16, 2023, and a Bond Indenture executed in connection therewith dated as of September 1, 2023 (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 (other than the Administrative Expense Account therein) 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, 20__, in whole or in part, from such maturities as are selected by the District and by lot within a maturity, at the following redemption prices, expressed as Item Title: 12.1
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a percentage of the principal amount to be redeemed, together with accrued interest to the date of redemption:
Redemption Date Redemption Price
September 1, 20__ and March 1, 20__ 103%
September 1, 20__ and March 1, 20__ 102
September 1, 20__ and March 1, 20__ 101
September 1, 20__ and any Interest Payment Date thereafter 100 The Bonds maturing on September 1, 20__ (the “20__ 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, 20__, and on each September 1 thereafter prior to maturity, in accordance with the schedule of Sinking Fund Payments set forth below. The 20__ Term Bonds so called for redemption shall be selected by the Trustee by lot and shall be redeemed at a redemption price for each redeemed 20__ Term Bond equal to the principal amount thereof, plus accrued interest to the redemption date, without premium, as follows:
Term Bonds Maturing September 1, 20__
Sinking Fund Redemption Date
(September 1) Sinking Fund Payments
$
_____________
* Maturity.
The Bonds maturing on September 1, 20__ (the “20__ 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, 20__, and on each September 1 thereafter prior to maturity, in accordance with the schedule of Sinking Fund Payments set forth below. The 20__ Term Bonds so called for redemption shall be selected by the Trustee by lot and shall be redeemed at a redemption price for each redeemed 20__ Term Bond equal to the principal amount thereof, plus accrued interest to the redemption date, without premium, as follows:
Term Bonds Maturing September 1, 20__
Sinking Fund Redemption Date
(September 1) Sinking Fund Payments
$
_____________
* Maturity.
Item Title: 12.1
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The Bonds maturing on September 1, 20__ (the “20__ 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, 20__, and on each September 1 thereafter prior to maturity, in accordance with the schedule of Sinking Fund Payments set forth below. The 20__ Term Bonds so called for redemption shall be selected by the Trustee by lot and shall be redeemed at a redemption price for each redeemed 20__ Term Bond equal to the principal amount thereof, plus accrued interest to the redemption date, without premium, as follows:
Term Bonds Maturing September 1, 20__
Sinking Fund Redemption Date
(September 1) Sinking Fund Payments
$
_____________
* Maturity.
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, 2024, 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 from March 1, 2024 through March 1, 20__ 103% September 1, 20__ and March 1, 20__ 102
September 1, 20__ and March 1, 20__ 101
September 1, 20__ and any Interest Payment Date thereafter 100 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: 12.1
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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. 2021-2 of the City of Menifee (Sumac Ridge) 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 Acting City Clerk of the City.
Item Title: 12.1
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4885-4897-6232v2/200299-0019
Mayor of the City of Menifee, acting as the legislative body of Community Facilities District No. 2021-2 of
the City of Menifee (Sumac Ridge)
ATTEST:
Acting City Clerk of the City of Menifee,
acting as the legislative body of Community
Facilities District No. 2021-2 of the City of
Menifee (Sumac Ridge)
[FORM OF TRUSTEE’S CERTIFICATE
OF AUTHENTICATION AND REGISTRATION]
This is one of the Bonds described in the within-defined Indenture.
Dated: September __, 2023 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.
Acting City Clerk of the City
Item Title: 12.1
Community Facilities District 2021-2, Sumac Ridge, Issuance of Special Tax Bonds Item Page Number: 165
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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: 12.1
Community Facilities District 2021-2, Sumac Ridge, Issuance of Special Tax Bonds Item Page Number: 166
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EXHIBIT B-1
FORM OF REQUISITION FOR DISBURSEMENT OF PROJECT COSTS
$_____
COMMUNITY FACILITIES DISTRICT NO. 2021-2
OF THE CITY OF MENIFEE (SUMAC RIDGE)
SPECIAL TAX BONDS, SERIES 2023
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. 2021-2 of the City of Menifee (Sumac Ridge) Acquisition and Construction Fund, established by the Bond Indenture, dated as of September 1, 2023, by and between the Trustee and Community Facilities District No. 2021-2 of the City of Menifee (Sumac Ridge) (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. 2021-2
OF THE CITY OF MENIFEE (SUMAC RIDGE)
By:
Name:
Title: _____________________________________
Item Title: 12.1
Community Facilities District 2021-2, Sumac Ridge, Issuance of Special Tax Bonds Item Page Number: 167
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Stradling Yocca Carlson & Rauth
Draft 07/13/23
1 4859-5512-7144v1/200299-0019
DISTRICT CONTINUING DISCLOSURE CERTIFICATE
THIS CONTINUING DISCLOSURE CERTIFICATE (this “Disclosure Certificate”) dated as of September 1, 2023 is executed and delivered by Community Facilities District No. 2021-2 of the City of Menifee (Sumac Ridge) (the “District”) in connection with the issuance and delivery by the District of its $_____ Special Tax Bonds, Series 2023 (the “Bonds”). The Bonds are being issued pursuant to a Resolution of Issuance adopted on August 2, 2023, by the City Council of the City of Menifee, acting as the legislative body of the District, and the Bond Indenture, dated as of September 1, 2023 (the “Indenture”), by and between the District and Wilmington Trust, National Association, as trustee. The District covenants as follows:
Section 1. Purpose of the Disclosure Certificate. This Disclosure Certificate is being executed and delivered by the District for the benefit of the Owners and Beneficial Owners of the Bonds and in order to assist the Participating Underwriter in complying with the Rule.
Section 2. Definitions. In addition to the definitions set forth in the Indenture and the Rate and Method of Apportionment, which apply to any capitalized term used in this Disclosure Certificate unless otherwise defined in this Section, the following capitalized terms shall have the following meanings:
“Annual Report” shall mean any Annual Report provided by the District pursuant to, and as described in, Sections 3 and 4 of this Disclosure Certificate. “Beneficial Owner” shall mean any person which (a) has the power, directly or indirectly, to vote or consent with respect to, or to dispose of ownership of, any Bonds (including persons holding Bonds through nominees, depositories or other intermediaries), or (b) is treated as the owner of any Bonds for federal income purposes.
“City” shall mean the City of Menifee, County of Riverside, California. “Disclosure Representative” shall mean the Assistant City Manager of the City, or his or her designee, or such other officer or employee as the District shall designate in writing to the Dissemination Agent from time to time.
“Dissemination Agent” shall mean, initially, Spicer Consulting Group, LLC, or any successor Dissemination Agent designated in writing by the District and which has filed with the then current Dissemination Agent a written acceptance of such designation. “District” shall mean Community Facilities District No. 2021-2 of the City of Menifee (Sumac Ridge).
“EMMA” shall mean the Electronic Municipal Market Access System of the Municipal Securities Rulemaking Board, which can be found at www.emma.msrb.org, or any other repository of disclosure information that may be designated by the Securities and Exchange Commission in the future system of the MSRB.
“Financial Obligation” means a (i) debt obligation; (ii) derivative instrument entered into in connection with, or pledged as security or a source of payment for, an existing or planned debt Item Title: 12.1
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obligation; or (iii) guarantee of (i) or (ii). The term Financial Obligation shall not include municipal securities as to which a final official statement has been provided to the MSRB consistent with the Rule.
“Listed Events” shall mean any of the events listed in Section 5 of this Disclosure Certificate. “MSRB” shall mean the Municipal Securities Rulemaking Board or any other entity designated or authorized by the Securities and Exchange Commission to receive reports pursuant to the Rule. Until otherwise designated by the MSRB or the Securities and Exchange Commission, filings with the MSRB are to be made through the Electronic Municipal Market Access (EMMA) website of the MSRB, currently located at http://emma.msrb.org. “Official Statement” shall mean that certain Official Statement for the Bonds dated _______ __, 2023.
“Owners” shall mean the registered owners of the Bonds as set forth in the registration books maintained by the Trustee.
“Participating Underwriter” shall mean Stifel, Nicolaus & Company, Incorporated. “Rate and Method of Apportionment” shall mean that certain Rate and Method of Apportionment of Special Tax approved pursuant to the Resolution of Formation. “Resolution of Formation” shall mean the resolutions adopted by the City Council pursuant to which the City Council formed the District.
“Rule” shall mean Rule 15c2-12(b)(5) adopted by the Securities and Exchange Commission under the Securities Exchange Act of 1934, as the same may be amended from time to time. “State” shall mean the State of California.
“Trustee” shall mean Wilmington Trust, National Association or such other entity appointed by the District pursuant to the Indenture to act as the trustee under the Indenture.
Section 3. Provision of Annual Reports.
(a) Not later than March 1 of each year commencing March 1, 2024, the District shall, or shall cause the Dissemination Agent to provide to EMMA an Annual Report which is consistent with the requirements of Section 4 of this Disclosure Certificate. If the Dissemination Agent is other than the District, then not later than 15 business days prior to the date referred to in the prior sentence hereof, the District shall provide the Annual Report (in a form suitable for filing with EMMA) to the Dissemination Agent. The Annual Report may be submitted as a single document or as separate documents comprising a package, and may include by reference other information as provided in Section 4 of this Disclosure Certificate; provided that the audited financial statements of the District, if any exist, may be submitted separately from and later than the balance of the Annual Report if they are not available by the date required above for the filing of the Annual Report. (b) In the event that the Dissemination Agent is an entity other than the District, then the provisions of this Section 3(b) shall apply. Not later than fifteen (15) Business Days prior to the date specified in subsection (a) for providing the Annual Report, the District shall provide the Annual Item Title: 12.1
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Report to the Dissemination Agent. If by fifteen (15) Business Days prior to the due date for an Annual Report the Dissemination Agent has not received a copy of the Annual Report, the Dissemination Agent shall contact the District to determine if the District will be filing the Annual Report in compliance with subsection (a). The District shall provide a written certification with each Annual Report furnished to the Dissemination Agent to the effect that such Annual Report constitutes the Annual Report required to be furnished by it hereunder. The Dissemination Agent may conclusively rely upon such certification of the District and shall have no duty or obligation to review such Annual Report.
(c) If the Dissemination Agent is other than the District and if the Dissemination Agent is unable to verify that an Annual Report has been provided to EMMA by the date required in subsection (a), the Dissemination Agent shall send, in a timely manner, a notice to EMMA of the failure to file the Annual Report in the form required by EMMA. If the District acts as its own Dissemination Agent, it shall file a notice with EMMA no later than the date specified in subsection (a) for filing an Annual Report if the District fails to file the Annual Report by that date. (d) If the Dissemination Agent is other than the District, the Dissemination Agent shall:
(i) determine each year prior to the date for providing the Annual Report the name and address of the repository if other than the MSRB through EMMA; and (ii) promptly after receipt of the Annual Report, file a report with the District certifying that the Annual Report has been provided to EMMA and the date it was provided. (e) Notwithstanding any other provision of this Disclosure Certificate, all filings shall be made in accordance with the MSRB’s EMMA system or in another manner approved under the Rule.
Section 4. Content of Annual Reports. The District’s Annual Report shall contain or include by reference the following:
(a) Financial Statements. The audited financial statements of the District for the prior fiscal year, if any have been prepared and which, if prepared, shall be prepared in accordance with generally accepted accounting principles as promulgated to apply to governmental entities from time to time by the Governmental Accounting Standards Board. If the District’s audited financial statements, if any are prepared, are not available by the time the Annual Report is required to be filed pursuant to Section 3(a), the Annual Report shall contain unaudited financial statements, and the audited financial statements shall be filed in the same manner as the Annual Report when they become available.
(b) Financial and Operating Data. The Annual Report shall contain or incorporate by reference the following information:
(i) the principal amount of the Bonds outstanding as of the September 2 preceding the filing of the Annual Report;
(ii) the balance in each fund under the Indenture as of the September 2 preceding the filing of the Annual Report;
(iii) the aggregate assessed valuation of the Taxable Property within the District; Item Title: 12.1
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(iv) any changes to the Rate and Method of Apportionment of Special Tax for the District approved or submitted to the qualified electors for approval prior to the filing of the Annual Report;
(v) a table setting forth the annual Special Tax delinquency rate within the District at June 30 of each fiscal year for which a delinquency exists, listing for each fiscal year, the total Special Tax levy, the amount delinquent and the percent delinquent; (vi) an update of the value-to-lien of the property within the District based on the assessed value and the Special Tax levy for the then current fiscal year, which update may be provided in a form similar to Table 2A in the Official Statement; provided that such update need not include overlapping special tax, assessment or general obligation indebtedness; and (vii) the status of any foreclosure actions being pursued by the District with respect to delinquent Special Taxes within the District. (c) Any or all of the items listed in (a) or (b) above may be included by specific reference to other documents, including official statements of debt issues of the District or related public entities, which have been submitted to EMMA or the Securities and Exchange Commission. If the document included by reference is a final official statement, it must be available from the MSRB through EMMA. The District shall clearly identify each such other document so included by reference.
Section 5. Reporting of Significant Events.
(a) Pursuant to the provisions of this Section 5, the District shall give, or cause the Dissemination Agent to give, notice to EMMA in a timely manner not in excess of ten (10) business days after the occurrence of any of the following events with respect to the Bonds:
1. principal and interest payment delinquencies;
2. unscheduled draws on debt service reserves reflecting financial difficulties;
3. unscheduled draws on credit enhancements reflecting financial difficulties;
4. substitution of credit or liquidity providers, or their failure to perform;
5. adverse tax opinions or the issuance by the Internal Revenue Service of proposed or final determinations of taxability, Notices of Proposed Issue (IRS Form 5701-TEB) or other material notices or determinations with respect to the tax status of the Bonds;
6. defeasances;
7. tender offers;
8. ratings changes; and
9. bankruptcy, insolvency, receivership or similar proceedings.
Item Title: 12.1
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Note: for the purposes of the event identified in subparagraph (9), the event is considered to occur when any of the following occur: the appointment of a receiver, fiscal agent or similar officer for an obligated person in a proceeding under the U.S.
Bankruptcy Code or in any other proceeding under state or federal law in which a court or governmental authority has assumed jurisdiction over substantially all of the assets or business of the obligated person, or if such jurisdiction has been assumed by leaving the existing governmental body and officials or officers in possession but subject to the supervision and orders of a court or governmental authority, or the entry of an order confirming a plan of reorganization, arrangement or liquidation by a court or governmental authority having supervision or jurisdiction over substantially all of the assets or business of the obligated person.
10. default, event of acceleration, termination event, modification of terms, or other similar events under the terms of a Financial Obligation of the obligated person, any of which reflect financial difficulties.
(b) Additionally, the District shall give or cause the Dissemination Agent to give notice to EMMA in a timely manner not in excess of ten (10) business days after the occurrence of any of the following events with respect to the Bonds, if material:
1. mergers, consolidations, acquisitions, the sale of all or substantially all of the assets of the obligated persons or their termination;
2. appointment of a successor or additional fiscal agent or the change of the name of a fiscal agent;
3. nonpayment related defaults;
4. modifications to the rights of Bondholders;
5. bond calls;
6. release, substitution or sale of property securing repayment of the Bonds; and
7. incurrence of a Financial Obligation of the obligated person, or agreement to covenants, events of default, remedies, priority rights, or other similar terms of a Financial Obligation of the obligated person, any of which affect security holders.
(c) In the event that the District’s fiscal year changes, the District shall report or shall instruct the Dissemination Agent to report such change in the same manner and to the same parties as Listed Events would be reported pursuant to this Section. (d) The District hereby agrees that the undertaking set forth in this Disclosure Certificate is the responsibility of the District, and the Dissemination Agent, if other than the District, shall not be responsible for determining whether the District’s instructions to the Dissemination Agent under this Section comply with the requirements of the Rule.
Item Title: 12.1
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Section 6. Termination of Reporting Obligation. The obligations of the District and the Dissemination Agent under this Disclosure Certificate shall terminate upon the legal defeasance, prior redemption or payment in full of all of the Bonds. If such termination occurs prior to the final maturity of the Bonds, the District shall give notice of such termination in the same manner as for a Listed Event under Section 5.
Section 7. Dissemination Agent. The District may, from time to time, appoint or engage a Dissemination Agent to assist it in carrying out its obligations under this Disclosure Certificate, and may discharge any such Dissemination Agent, with or without appointing a successor Dissemination Agent. The Dissemination Agent, if other than the District, shall not be responsible in any manner for the content of any notice or report prepared by the District pursuant to this Disclosure Certificate.
The initial Dissemination Agent shall be Spicer Consulting Group, LLC. The Dissemination Agent may resign by providing (i) thirty (30) days written notice to the District and the Trustee and (ii) upon appointment of a new Dissemination Agent hereunder.
Section 8. Amendment; Waiver.
(a) This Disclosure Certificate may be amended, by written agreement of the parties, without the consent of the Owners, and any provision of this Disclosure Certificate may be waived, if all of the following conditions are satisfied: (1) such amendment or waiver is made in connection with a change in circumstances that arises from a change in legal (including regulatory) requirements, a change in law, or a change in the identity, nature or status of the District or the type of business conducted thereby, (2) the undertakings in this Disclosure Certificate as so amended or waived would, in the opinion of a nationally recognized bond counsel, have complied with the requirements of the Rule as of the date of this Disclosure Certificate, after taking into account any amendments or interpretations of the Rule, as well as any change in circumstances, and (3) the amendment or waiver either (i) is approved by the Owners of the Bonds in the same manner as provided in the Indenture for amendments to the Indenture with the consent of Owners or (ii) does not, in the determination of the District, materially impair the interests of the Owners or Beneficial Owners of the Bonds.
(b) To the extent any amendment to this Disclosure Certificate results in a change in the type of financial information or operating data provided pursuant to this Disclosure Certificate, the first Annual Report provided thereafter shall include a narrative explanation of the reasons for the amendment and the impact of the change in the type of operating data or financial information being provided.
(c) If an amendment is made to the basis on which financial statements are prepared, the Annual Report for the year in which the change is made shall present a comparison between the financial statements or information prepared on the basis of the new accounting principles and those prepared on the basis of the former accounting principles. Such comparison shall include a quantitative and, to the extent reasonably feasible, qualitative discussion of the differences in the accounting principles and the impact of the change in the accounting principles on the presentation of the financial information.
Section 9. Additional Information. Nothing in this Disclosure Certificate shall be deemed to prevent the District from disseminating any other information, using the means of dissemination set forth in this Disclosure Certificate or any other means of communication, or including any other information in any Annual Report or notice of occurrence of a Listed Event, in Item Title: 12.1
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addition to that which is required by this Disclosure Certificate. If the District chooses to include any information in any Annual Report or notice of occurrence of a Listed Event in addition to that which is specifically required by this Disclosure Certificate, the District shall have no obligation under this Disclosure Certificate to update such information or include it in any future Annual Report or notice of occurrence of a Listed Event.
Section 10. Default. In the event of a failure of the District or the Dissemination Agent to comply with any provision of this Disclosure Certificate, any Owner or Beneficial Owner of the Bonds may take such actions as may be necessary and appropriate, including seeking mandate or specific performance by court order, to cause the District and/or the Dissemination Agent to comply with their respective obligations under this Disclosure Certificate. A default under this Disclosure Certificate shall not be deemed an Event of Default under the Indenture, and the sole remedy under this Disclosure Certificate in the event of any failure of the District or the Dissemination Agent to comply with this Disclosure Certificate shall be an action to compel performance.
Section 11. Duties, Immunities and Liabilities of Dissemination Agent. Where an entity other than the District is acting as the Dissemination Agent, the Dissemination Agent shall have only such duties as are specifically set forth in this Disclosure Certificate, and the District agrees to indemnify and save the Dissemination Agent and its officers, directors, employees and agents, harmless against any loss, expense and liabilities which they may incur arising out of or in the exercise or performance of their powers and duties hereunder, including the costs and expenses (including attorneys’ fees) of defending against any claim of liability, but excluding liabilities due to the Dissemination Agent’s negligence or willful misconduct. Any Dissemination Agent shall be paid (i) compensation by the District for its services provided hereunder in accordance with a schedule of fees to be mutually agreed to; and (ii) all expenses, legal fees and advances made or incurred by the Dissemination Agent in the performance of its duties hereunder. The Dissemination Agent shall have no duty or obligation to review any information provided to it by the District pursuant to this Disclosure Certificate. The obligations of the District under this Section shall survive resignation or removal of the Dissemination Agent and payment of the Bonds. No person shall have any right to commence any action against the Dissemination Agent seeking any remedy other than to compel specific performance of this Disclosure Certificate. The Dissemination Agent shall not be liable under any circumstances for monetary damages to any person for any breach under this Disclosure Certificate.
Section 12. Notices. Any notices or communications to or among any of the parties to this Disclosure Certificate may be given as follows:
District: Community Facilities District No. 2021-2 of the City of Menifee (Sumac Ridge)
City of Menifee
29844 Haun Road
Menifee, CA 92586
Attn: City Manager
Underwriter: Stifel, Nicolaus & Company, Incorporated
2121 Avenue of the Stars, Suite 2150
Los Angeles, CA 90067
Attn: Public Finance Department
Item Title: 12.1
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Any person may, by written notice to the other persons listed above, designate a different address or telephone number(s) to which subsequent notice or communications should be sent.
Section 13. Beneficiaries. This Disclosure Certificate shall inure solely to the benefit of the District, the Trustee, the Dissemination Agent, the Participating Underwriter and Owners and Beneficial Owners from time to time of the Bonds, and shall create no rights in any other person or entity.
Section 14. Merger. Any person succeeding to all or substantially all of the Dissemination Agent’s business shall be the successor Dissemination Agent without the filing of any paper or any further act.
This Disclosure Certificate is executed as of the date and year first set forth above.
COMMUNITY FACILITIES DISTRICT NO. 2021-2
OF THE CITY OF MENIFEE (SUMAC RIDGE)
By:
Rochelle Clayton
Disclosure Representative
Item Title: 12.1
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1 $_______
COMMUNITY FACILITIES DISTRICT NO. 2021-2
OF THE CITY OF MENIFEE (SUMAC RIDGE)
SPECIAL TAX BONDS, SERIES 2023
BOND PURCHASE AGREEMENT
_________, 2023
City of Menifee
Community Facilities District No. 2021-2
(Sumac Ridge)
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. 2021-2 of the City of Menifee (Sumac Ridge) (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 September 1, 2023 (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. 2021-2 of the City of Menifee (Sumac Ridge) Special Tax Bonds, Series 2023 (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: 12.1
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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 _________, 2023.
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; (iii) fund capitalized interest on a portion of the Bonds through September 1, 2024 and (iv) 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 Item Title: 12.1
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3 Underwriter with an acknowledgement of receipt of the required Underwriter disclosure under Rule G-17 of the Municipal Securities Rulemaking Board (“MSRB”). The Community Facilities District acknowledges and represents that it has engaged Urban Futures Incorporated 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 Incorporated 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 _______, 2023, 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 ________, 2023 (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.
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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. 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: 12.1
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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: 12.1
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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: 12.1
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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 Meritage Homes of California, Inc. (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: 12.1
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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: 12.1
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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: 12.1
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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: 12.1
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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: 12.1
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12 Bonds, including any or all underlying arrangements, are not exempt from registration under or other requirements of the Securities Act of 1933, as amended, or that the Indenture is not exempt from qualification under or other requirements of the Trust Indenture Act of 1939, as amended, or that the issuance, offering or sale of obligations of the general character of the Bonds, including any or all underlying arrangements, as contemplated hereby or by the Official Statement or otherwise is or would be in violation of the federal securities laws as amended and then in effect; or
3. A general suspension of trading on the New York Stock Exchange or other major exchange shall be in force, or minimum or maximum prices for trading shall have been fixed and be in force, or maximum ranges for prices for securities shall have been required and be in force on any such exchange, whether by virtue of determination by that exchange or by order of the SEC or any other governmental authority having jurisdiction; or
4. The introduction, proposal or enactment of any amendment to the Federal or California Constitution or any action by any Federal or California court, legislative body, regulatory body or other authority materially adversely affecting the tax status of the Community Facilities District, its property, income, securities (or interest thereon), the validity or enforceability of Special Taxes, or the ability of the Community Facilities District to issue the Bonds as contemplated by the Indenture and the Official Statement; or
5. Any event occurring, or information becoming known which, in the judgment of the Underwriter, makes untrue in any material respect any statement or information contained in the Preliminary Official Statement or in the Official Statement, or has the effect that the Preliminary Official Statement or the Official Statement contains any untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; or
6. Any national securities exchange, the Comptroller of the Currency, or any other governmental authority, shall impose as to the Bonds, or obligations of the general character of the Bonds, any material restrictions not now in force, or increase materially those now in force, with respect to the extension of credit by, or the charge to the net capital requirements of, the Underwriter; or
7. There shall have occurred (1) an outbreak or escalation of hostilities or the declaration by the United States of a national emergency or war or (2) any other calamity or crisis in the financial markets of the United States or elsewhere or the escalation of such calamity or crisis; or
8. Except as disclosed in or contemplated by the Official Statement, any material adverse change in the affairs of the City or Community Facilities District shall have occurred; or
9. Any event or circumstance shall exist that either makes untrue or incorrect in any material respect any statement or information in the Official Statement (other than any statement provided by the Underwriter) or is not reflected in the Official Statement but should be reflected therein in order to make the statements therein, in the light of the circumstances under which they were made, not misleading and, in either such event, the Community Facilities District refuses to permit the Official Statement to be supplemented to supply such statement or information, or the effect of the Official Statement as so supplemented is to materially adversely affect the market price Item Title: 12.1
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13 or marketability of the Bonds or the ability of the Underwriter to enforce contracts for the sale of the Bonds; or
10. A general banking moratorium shall have been declared by federal or State authorities having jurisdiction and be in force; or
11. A material disruption in securities settlement, payment or clearance services affecting the Bonds shall have occurred; or
12. Any new restriction on transactions in securities materially affecting the market for securities (including the imposition of any limitation on interest rates) or the extension of credit by, or a charge to the net capital requirements of, underwriters shall have been established by the New York Stock Exchange, the SEC, any other federal or State agency or the Congress of the United States, or by Executive Order; or
13. A decision by a court of the United States shall be rendered, or a stop order, release, regulation or no-action letter by or on behalf of the SEC or any other governmental agency having jurisdiction of the subject matter shall have been issued or made, to the effect that the issuance, offering or sale of the Bonds, including the underlying obligations as contemplated by this Purchase Agreement or by the Official Statement, or any document relating to the issuance, offering or sale of the Bonds, is or would be in violation of any provision of the federal securities laws at the Closing Date, including the Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as amended, and the Trust Indenture Act of 1939, as amended; or
14. Any proceeding shall have been commenced or be threatened in writing by the Securities and Exchange Commission against the City or the Community Facilities District; or
15. The commencement of any Action.
F. At or prior to the Closing Date, the Underwriter shall have received a counterpart original or certified copy of the following documents, in each case satisfactory in form and substance to the Underwriter:
1. The Official Statement, executed on behalf of the Community Facilities District by an authorized officer;
2. The Indenture, duly executed and delivered by the Community Facilities District and the Trustee;
3. The Community Facilities District Resolution, the Community Facilities District Documents and the Formation Documents, together with a certificate dated as of the Closing Date of the City Clerk to the effect that the Community Facilities District Resolutions are true, correct and complete copies of the ones duly adopted by the City Council;
4. The Continuing Disclosure Certificate executed and delivered by an authorized officer the Community Facilities District;
5. An unqualified approving opinion for the Bonds, dated the Closing Date and addressed to the Community Facilities District, of Bond Counsel, to the effect that the Item Title: 12.1
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14 Bonds are the valid, legal and binding obligations of the Community Facilities District and that the interest thereon is excluded from gross income for federal income tax purposes and exempt from personal income taxes of the State of California, in substantially the form included as Appendix C to the Official Statement, together with a letter of Bond Counsel, dated the Closing Date and addressed to the Underwriter, to the effect that such opinion addressed to the Community Facilities District may be relied upon by the Underwriter to the same extent as if such opinion was addressed to it;
6. A supplemental opinion or opinions, dated the Closing Date and addressed to the Underwriter, of Bond Counsel, to the effect that:
(i) this Purchase Agreement and the Continuing Disclosure Certificate have been duly authorized, executed and delivered by the Community Facilities District and, assuming due authorization, execution and delivery by the other parties thereto, as applicable, constitutes the legal, valid and binding obligations of the Community Facilities District and are enforceable in accordance with their terms, except to the extent that enforceability may be limited by moratorium, bankruptcy, reorganization, insolvency or other similar laws affecting creditors’ rights generally or by the exercise of judicial discretion in accordance with general principles of equity or otherwise in appropriate cases and by limitations on legal remedies against public agencies in the State;
(ii) the Bonds are not subject to the registration requirements of the Securities Act of 1933, as amended, and the Indenture is exempt from qualification under the Trust Indenture Act of 1939, as amended;
(iii) the information contained in the Official Statement on the cover and under the captions “THE BONDS” (other than the caption “Debt Service Schedule”), “SOURCES OF PAYMENT FOR THE BONDS,” “TAX EXEMPTION” and “LEGAL OPINION” and in Appendices C and E to the Official Statement, are accurate insofar as such statements purport to summarize certain provisions of the Bonds, the Indenture, Bond Counsel’s final approving opinion, and the Community Facilities District Act.
7. The letter of Disclosure Counsel, dated the Closing Date and addressed to the Community Facilities District and to the Underwriter, to the effect that, without having undertaken to determine independently the accuracy or completeness of the statements contained in the Official Statement, but on the basis of their participation in conferences with representatives of the Community Facilities District, the Special Tax Consultant and others, and their examination of certain documents, nothing has come to their attention which has led them to believe that the Preliminary Official Statement as of its date and the Official Statement as of its date and as of the Closing Date contained or contains any untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading (except that no opinion or belief need be expressed as to any financial statements or other financial, statistical or engineering data or forecasts, numbers, charts, estimates, projections, assumptions, or expressions of opinion, any information about valuation, appraisals, absorption, archeological or environmental matters, or any information with respect to the City, or any information with respect to prior compliance by the Developer with continuing disclosure undertakings under the Rule or about DTC or the book-entry-only system);
8. A certificate dated the Closing Date and signed by an authorized representative of the Community Facilities District or an authorized designee, on behalf of the Item Title: 12.1
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15 Community Facilities District to the effect that: (i) the representations and warranties made by the Community Facilities District contained herein are true and correct in all material respects on and as of the Closing Date with the same effect as if made on the Closing Date; (ii) to the best knowledge of such officer, no event has occurred since the date of the Official Statement which should be disclosed in the Official Statement for the purpose for which it is to be used or which it is necessary to disclose therein in order to make the statements and information therein not misleading in any material respect; and (iii) the Community Facilities District has complied with all the agreements and satisfied all the conditions on its part to be satisfied under this Purchase Agreement, the Community Facilities District Resolutions, and the Community Facilities District Documents at or prior to the Closing Date;
9. An opinion of the City Attorney dated the date of Closing and addressed to the Underwriter and the City, to the effect that:
(i) The City is a municipal corporation and general law city, duly organized and existing under the Constitution and laws of the State of California; (ii) The Community Facilities District Resolutions have been duly adopted at meetings of the City Council, which were called and held pursuant to law and with all public notice required by law and at which a quorum was present and acting throughout, and the Community Facilities District Resolutions are in full force and effect and have not been modified, amended, rescinded or repealed since the respective dates of their adoption; (iii) The Community Facilities District Documents and the Official Statement have been duly authorized, executed and delivered by the City and the Community Facilities District Documents constitute the legal, valid and binding obligations of the Community Facilities District enforceable against the Community Facilities District in accordance with their terms, subject to bankruptcy, insolvency, reorganization, moratorium and other similar laws affecting creditors’ rights, to the application of equitable principles where equitable remedies are sought and to the exercise of judicial discretion in appropriate cases; (iv) Except as may be stated in the Official Statement, there is no action, suit, proceeding or investigation before or by any court, public board or body pending (notice of which has been served on the City or the Community Facilities District) or, to such counsel’s knowledge, threatened wherein an unfavorable decision, ruling or finding would: (a) affect the creation, organization, existence or powers of the City, or the titles of its members and officers to their respective offices; or (b) affect the validity of the Community Facilities District Documents or restrain or enjoin the repayment of the Bonds or in any way contest or affect the validity of the Community Facilities District Documents or contest the authority of the Community Facilities District to enter into or perform its obligations under any of the Community Facilities District Documents, questions the right of the Community Facilities District to use Special Taxes levied within the Community Facilities District for the repayment of the Bonds or affects in any manner the right or ability of the Community Facilities District to collect the Special Taxes or pledge the Net Taxes levied within the Community Facilities District for the repayment of the Bonds;
10. A certificate dated the Closing Date from Kitty Siino & Associates, Inc. (the “Appraiser”) to the effect that: (i) the statements in the Official Statement provided by the Appraiser and all information supplied by it for use in the Official Statement were as of the date of the Official Statement and are as of the Closing Date true and correct, and do not contain any untrue Item Title: 12.1
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16 statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading and (ii) no events or occurrences have been ascertained by the Appraiser or have come to the Appraiser’s attention that would materially change the opinion set forth in the Appraisal Report;
11. A certificate dated the Closing Date from Spicer Consulting Group, LLC 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 Spicer Consulting Group, LLC concerning Special Taxes in the Community Facilities District and all information supplied by it for use in the Official Statement were as of the date of the Official Statement and are as of the Closing Date true and correct, and do not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading;
12. Certified copies of the general resolution of the Trustee authorizing the execution and delivery of certain documents by certain officers of the Trustee, which resolution authorizes the execution of the Indenture and the authentication of the Bonds;
13. A certificate of the Trustee, dated the Closing Date, to the effect that:
(i) the Trustee is authorized to carry out corporate trust powers, and has full power and authority to perform its duties under the Indenture; (ii) the Trustee is duly authorized to execute and deliver the Indenture, to accept the obligations created by the Indenture and to authenticate the Bonds pursuant to the terms of the Indenture; (iii) no consent, approval, authorization or other action by any governmental or regulatory authority having jurisdiction over the Trustee that has not been obtained is or will be required for the authentication of the Bonds or the consummation by the Trustee of the other transactions contemplated to be performed by the Trustee in connection with the authentication of the Bonds and the acceptance and performance of the obligations created by the Indenture; and (iv) to the best of its knowledge, compliance with the terms of the Indenture will not conflict with, or result in a violation or breach of, or constitute a default under, any loan agreement, indenture, bond, note, resolution or any other agreement or instrument to which the Trustee is a party or by which it is bound, or any law or any rule, regulation, order or decree of any court or governmental agency or body having jurisdiction over the Trustee or any of its activities or properties;
14. An opinion of counsel to the Trustee dated the Closing Date, addressed to the Underwriter, and the Community Facilities District to the effect that the Trustee is a national banking association duly organized and validly existing under the laws of the United States having full power and being qualified to enter into, accept and agree to the provisions of the Indenture, and that such documents has been duly authorized, executed and delivered by the Trustee, and, assuming due execution and delivery by the other parties thereto, constitutes the legal, valid and binding obligation of the Trustee, enforceable in accordance with its terms, subject to bankruptcy, insolvency, reorganization, moratorium and other laws affecting the enforcement of creditors’ rights in general and except as such enforceability may be limited by the application of equitable principles if equitable remedies are sought;
Item Title: 12.1
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17 15. A certificate of the Community Facilities District dated the Closing Date, in a form acceptable to Bond Counsel and the Underwriter, that the Bonds are not arbitrage bonds within the meaning of Section 148 of the Internal Revenue Code of 1986, as amended;
16. An opinion of counsel to the Developer, dated the date of the Closing, addressed to the Underwriter and the Community Facilities District, in form and substance acceptable to the Underwriter and Bond Counsel;
17. A Letter of Representations from the Developer, dated the date of the Preliminary Official Statement, substantially in the form attached hereto as Exhibit B;
18. A Closing Certificate of the Developer, dated the date of the Closing, substantially in the form attached hereto as Exhibit C or as such Closing Certificate may be modified with the approval of the Underwriter and Disclosure Counsel;
19. 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: 12.1
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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: 12.1
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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. 2021-2 OF THE CITY OF MENIFEE
(SUMAC RIDGE)
By:
Authorized Officer
Time of Execution: _____________ p.m. California time
Item Title: 12.1
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EXHIBIT A
COMMUNITY FACILITIES DISTRICT NO. 2021-2 OF
THE CITY OF MENIFEE (SUMAC RIDGE)
SPECIAL TAX BONDS, SERIES 2023
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)
2024
2025
2026
2027
2028
2029
2030
2031
2032
20__(T)
20__(T)
20__(T)
_________________
(T) Term Bond.
(C) Priced to optional call at [par] on September 1, 20___. * At the time of execution of this Purchase Agreement and assuming orders are confirmed by the close of the business day immediately following the date of this Purchase Agreement.
Item Title: 12.1
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EXHIBIT B
COMMUNITY FACILITIES DISTRICT NO. 2021-2 OF
THE CITY OF MENIFEE (SUMAC RIDGE)
SPECIAL TAX BONDS, SERIES 2023
LETTER OF REPRESENTATIONS – MERITAGE HOMES OF CALIFORNIA, INC. [POS Date]
City of Menifee
Community Facilities District No. 2021-2
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. 2021-2 of the City of Menifee (Sumac Ridge) Special Tax Bonds, Series 2023 (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 Meritage Homes of California, Inc. (the “Developer”), and the undersigned, on behalf of the Developer, further certifies as follows:
1. The Developer is duly organized and validly existing under the laws of the State of California and in good standing under the laws of the State of California, and has all requisite corporate right, power and authority: (i) to execute and deliver this Letter of Representations; (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 the Community Facilities District No. 2021-2 of the City of Menifee (Sumac Ridge) (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: 12.1
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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, to the Actual Knowledge of the Undersigned, 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, Supplement to 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.
Item Title: 12.1
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6. To the Actual Knowledge of the Undersigned, the Developer is not aware that any of the Property has a current liability with respect to the presence of a substance presently classified as hazardous under the federal Comprehensive Environmental Response, Compensation and Liability Act of 1980 or applicable California law or is adversely affected by the presence of endangered or threatened species or habitat for endangered or threatened species.
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 Item Title: 12.1
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readjust their debts or obligations, or be subject to control or supervision of the Federal Deposit Insurance Corporation.
12. The Developer has been developing or has been involved in the development of numerous projects over an extended period of time. It is likely that the Developer has been delinquent at one time or another in the payment of ad valorem property taxes, special taxes or special assessments. However, to the Actual Knowledge of the Undersigned, during the last five 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 _______, 2023 (the “Appraisal Report”), with a date of value of June 19, 2023 (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, Item Title: 12.1
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was true and correct in all material respects as of the Date of Value and Updated Date of Value, as applicable.
17. If between the date hereof and the Closing Date any event relating to or affecting the Developer, its Affiliates, ownership of the Property, the Developer’s development plan, the Developer’s financing plan, the Developer’s lenders, if any, and contractual arrangements of the Developer or any Affiliates (including, if material to the Developer’s development plan or the Developer’s financing plan, other loans of such Affiliates) shall occur of which the Developer has actual knowledge which would cause the information under the sections of the Preliminary 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 of 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.
MERITAGE HOMES OF CALIFORNIA, INC.
By:
Name:
Title:
Item Title: 12.1
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[EXECUTION PAGE OF LETTER OF REPRESENTATIONS –
MERITAGE HOMES OF CALIFORNIA, INC.]
Item Title: 12.1
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EXHIBIT C
COMMUNITY FACILITIES DISTRICT NO. 2021-2 OF
THE CITY OF MENIFEE (SUMAC RIDGE)
SPECIAL TAX BONDS, SERIES 2023
CLOSING CERTIFICATE – MERITAGE HOMES OF CALIFORNIA, INC. [Closing Date]
City of Menifee
Community Facilities District No. 2021-2
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 Meritage Homes of California, Inc. (the “Developer”), which is attached hereto as Exhibit A.
The undersigned certifies that he or she is familiar with the facts herein certified and is authorized and qualified to certify the same as an authorized officer or representative of the Developer, and the undersigned, on behalf of the Developer, further certifies as follows:
1. The Developer has received the final Official Statement relating to the Bonds, dated [BPA Date] (the “Official Statement”). To the Actual Knowledge of the Undersigned, each statement, representation and warranty made in the Letter of Representations is true and correct in all material respects on and as of the date hereof with the same effect as if made on the date hereof, except that all references therein to the Preliminary Official Statement shall be deemed to be references to the final Official Statement.
2. To the Actual Knowledge of the Undersigned (as defined in the Letter of Representations), no event has occurred since the date of the Preliminary Official Statement that has, in any material way, adversely affected:
(i) the ability of the Developer to carry on its business as described in the Preliminary Official Statement;
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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.
MERITAGE HOMES OF CALIFORNIA, INC.
By:
Name:
Title:
[EXECUTION PAGE OF CLOSING CERTIFICATE – MERITAGE HOMES OF CALIFORNIA, INC.]
Item Title: 12.1
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EXHIBIT B
COMMUNITY FACILITIES DISTRICT NO. 2021-2 OF
THE CITY OF MENIFEE (SUMAC RIDGE)
SPECIAL TAX BONDS, SERIES 2023
DEVELOPER PROVIDED INFORMATION IN APPRAISAL REPORT
See attached.
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EXHIBIT D
$_________
COMMUNITY FACILITIES DISTRICT NO. 2021-2 OF
THE CITY OF MENIFEE (SUMAC RIDGE)
SPECIAL TAX BONDS, SERIES 2023
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. 2021-2 of the City of Menifee (Sumac Ridge).
(c)Maturity means Bonds with the same credit and payment terms. Bonds with different maturity dates, or Bonds with the same maturity date but different stated interest rates, are treated as separate maturities.
(d)Public means any person (including an individual, trust, estate, partnership, association, company, or corporation) other than an Underwriter or a related party to an Underwriter.
The term “related party” for purposes of this certificate generally means any two or more persons who have greater than 50 percent common ownership, directly or indirectly. (e)Underwriter means (i) any person that agrees pursuant to a written contract with the Issuer (or with the lead underwriter to form an underwriting syndicate) to participate in the initial sale of the Bonds to the Public, and (ii) any person that agrees pursuant to a written contract directly or indirectly with a person described in clause (i) of this paragraph to participate in the initial sale of the Bonds to the Public (including a member of a selling group or a party to a retail distribution agreement participating in the initial sale of the Bonds to the Public).
The representations set forth in this certificate are limited to factual matters only. Nothing in this certificate represents Stifel’s interpretation of any laws, including specifically Sections 103 and 148 of the Internal Revenue Code of 1986, as amended, and the Treasury Regulations thereunder.
The undersigned understands that the foregoing information will be relied upon by the Issuer with respect to certain of the representations set forth in the Tax Certificate and with respect to compliance with the federal income tax rules affecting the Bonds, and by Stradling Yocca Carlson & Rauth, a Professional Corporation in connection with rendering its opinion that the interest on the Bonds is excluded from gross income for federal income tax purposes, the preparation of the Internal Item Title: 12.1
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Revenue Service Form 8038-G, and other federal income tax advice that it may give to the Issuer from time to time relating to the Bonds.
STIFEL, NICOLAUS & COMPANY,
INCORPORATED
By:
Name:
By:
Name:
Dated: [Closing Date]
Item Title: 12.1
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SCHEDULE A
SALE PRICES OF THE GENERAL RULE MATURITIES
(To be attached)
Item Title: 12.1
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APPRAISAL REPORT
CITY OF MENIFEE
COMMUNITY FACILITIES DISTRICT NO. 2021-2
SUMAC RIDGE BY MERITAGE HOMES
City of Menifee, Riverside County, California
(Appraiser’s File No. 2022-1282)
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
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KITTY SIINO & ASSOCIATES, INC.
REAL ESTATE APPRAISERS & CONSULTANTS
July 26, 2023
Margarita Cornejo, Acting Chief Financial Officer
CITY OF MENIFEE
29844 Haun Road
Menifee, California 92586
Reference: Appraisal Report – City of Menifee
Community Facilities District No. 2021-2
Sumac Ridge by Meritage Homes, Menifee, California
Dear Ms. Cornejo:
At the request and authorization of the City of Menifee, we have completed an Appraisal Report for Community Facilities District No. 2021-2 of the City of Menifee (“Menifee CFD No. 2021-2”). Menifee CFD No. 2021-2 encompasses a new home community known as Sumac Ridge by Meritage Homes. Sumac Ridge consists of two product lines known as Cedar and Sage.
The two product lines are spread throughout Sumac Ridge, which is covered by Tract Map 37668, with generally Cedar in the northern half of the tract and Sage in the southern half. Sumac Ridge consists of a total of 175 detached homes, with the Sage product line situated on minimum 5,000 square foot lots and the Cedar product line situated on minimum 7,000 square foot lots . The subject 175 lots include 78 completed homes closed to individuals and seven builder owned homes over 95 percent complete , including four models (none in escrow) and three production homes (all in escrow and due to close upon completion). There are an additional 22 homes under construction (10 in escrow) and 68 remaining lots (none 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. 2021-2 special tax lien. This report is written with the hypothetical condition that the subject property is enhanced by the improvements and/or fee credits to be funded by bonds issued by Menifee CFD No. 2021 -2. As a result of our investigation, the concluded market value for the subject property is:
Sumac Ridge by Meritage Homes
Meritage Homes Ownership (7 houses & 90 lots) $ 21,155,860 Individual Owners (78 houses) $ 45,236,813
Total Aggregate Value $ 66,392,673
The above values are stated subject to the Assumptions and Limiting Conditions of this report, the Appraiser’s Certification and as of June 19, 2023.
115 East Second Street, Suite 100, Tustin, California 92780 (714) 544-9978 - Phone, (714) 544-9985 – Fax, E-Mail: [email protected] Item Title: 12.1
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Margarita Cornejo
CITY OF MENIFEE
July 26, 2023
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. 2021-2.
This letter of transmittal is part of the attached report, which sets forth the data and analyses upon which our opinion of value is, in part, predicated.
Respectfully submitted,
KITTY SIINO & ASSOCIATES, INC.
Kitty S. Siino, MAI
California State Certified General
Real Estate Appraiser (AG004793)
Item Title: 12.1
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TABLE OF CONTENTS
Assumptions and Limiting Conditions............................................................................... i Hypothetical Condition .................................................................................................... iii Extraordinary Assumption ............................................................................................... iii Aerial Photo of Menifee CFD No. 2021-2 ........................................................................ iv Purpose of the Appraisal ................................................................................................ 1 The Subject Property ...................................................................................................... 1 Intended Use of the Report ............................................................................................ 1 Definitions ...................................................................................................................... 2 Property Rights Appraised ............................................................................................. 4 Effective Date of Value ................................................................................................... 4 Date of Report ................................................................................................................ 4 Scope of Appraisal ........................................................................................................ 4 Regional Area Map.......................................................................................................... 7 County of Riverside Area Description ............................................................................. 8 Menifee Area Map ......................................................................................................... 17 City of Menifee Description ........................................................................................... 18 Immediate Surroundings ............................................................................................... 21 Community Facilities District No. 2021-2 ....................................................................... 23 Subject Property Description ......................................................................................... 26 Riverside County Housing Market ................................................................................. 32 Highest and Best Use Analysis ..................................................................................... 42 Valuation Analyses and Conclusions ............................................................................ 46 Appraisal Report Summary ........................................................................................... 64 Appraiser’s Certification ............................................................................................... 65
ADDENDA
CFD No. 2021-2 Boundary Map
Tract Maps No. 37668
Discounted Cash Flow Analyses
Residential Land Sales Map and Summary Chart
Improved Residential Sales Map and Summary Chart
Appraiser’s Qualifications
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ASSUMPTIONS AND LIMITING CONDITIONS
1. This report might not include full discussions of the data, reasoning and analyses that were used in the appraisal process to develop the appraiser’s opinion of value. Some supporting documentation concerning the data, reasoning and analyses may be retained in the appraiser’s files. The information contained in this report is specific to the needs of the client and for the intended use stated in this report. The appraiser is not responsible for unauthorized use of this report.
2. No responsibility is assumed for legal or title considerations. Title to the property is assumed to be good and marketable unless otherwise stated in this report.
3. The property is appraised subject to the special tax lien of Menifee CFD No. 2021-
2. 4. Responsible ownership and competent property management are assumed unless otherwise stated in this report.
5. The information furnished by others is believed to be reliable, however, no warranty is given for its accuracy.
6. All engineering is assumed to be correct. Any plot plans and illustrative material used in this report are included only to assist the reader in visualizing the property and may not be to scale.
7. It is assumed that there are no hidden or unapparent conditions of the property, subsoil or structures that would render it more or less valuable. No responsibility is assumed for such conditions or for arranging for engineering studies that may be required to discover them.
8. It is assumed that there is full compliance with all applicable federal, state, and local environmental regulations and laws unless otherwise stated in this report.
9. It is assumed that all applicable zoning and use regulations and restrictions have been complied with, unless nonconformity has been stated, defined, and considered in this appraisal report.
10. It is assumed that all required licenses, certificates of occupancy or other legislative or administrative authority from any local, state, or national governmental or private entity or organization have been or can be obtained or renewed for any use on which the value estimates contained in this report are based.
11. Any sketch included in this report may show approximate dimensions and is included only to assist the reader in visualizing the properties. Maps and exhibits found in this report are provided 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.
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12. It is assumed that the utilization of the land a nd 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 uti lization. The separate allocations for land and buildings , if any, must not be used in conjunction with any other appraisal and are invalid if so used.
16. The Americans with Disabilities Act (“ADA”) became effective on January 26, 1992.
The appraiser has made no specific compliance survey and analysis of the property to determine whether they conform to the various detailed requirements of the ADA, nor is the appraiser a qualified expert regarding the requirements of the ADA. It is possible that a compliance survey of the property, together with a detailed analysis of the requirements of the ADA, could reveal that the property is not in compliance with one or more of the requirements of the ADA. If so, this fact could have a negative effect upon the value of the property. Since the appraiser has no direct evidence relating to this issue, a possible noncompliance with requirements of the ADA in estimating the value has not been considered.
17. It is assumed there are no environmental concerns that would slow or thwart development of the subject property and that the soils are adequate to support the highest and best use conclusion.
18. Possession of this report, or a copy thereof, does not carry with it the right of publication. It may not be used for any purpose by any person other than the party to whom it is addressed without the written consent of the appraiser, and in any event, only with proper qualification and only in its entirety. Permission is given for this appraisal to be published as a part of the Official Statement or similar document in association with the Menifee CFD No. 2021-2 Special Tax Bonds.
Item Title: 12.1
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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. 2021-2 Special Tax Bond proceeds, are completed and in place or have accrued to the property.
EXTRAORDINARY ASSUMPTION
1. It is an extraordinary assumption that the reported sales information 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 there are no remaining conditions which could slow or thwart building permits or certificates of occupancy on the subject property.
Per Meritage representatives, they do not believe that Condition No. 90 (Landscaping and Recreation Amenities Installation) or Condition No. 174 (completion of primary and alternate access roads, interior roads, storm drains, water systems, sewer systems and landscaping irrigation) will slow or hinder any certificates of occupancy. They believe they are on time to complete the improvements in a timely manner.
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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. 2021-2 Special Tax Bonds.
THE SUBJECT PROPERTY
The subject property consists of 175 proposed single-family homes which are encompassed within Tract Map No. 37668. The tract is being developed into a community known as Sumac Ridge, which is divided into two product lines that are spread throughout the tract: Cedar at Sumac Ridge and Sage at Sumac Ridge. Both product lines are being built and sold by Meritage Homes. Of the total 175 proposed homes, 91 have been sold and 78 of those have closed to individuals. Each lot’s physical status and ownership are detailed as follows:
Tract and Lot Numbers
No.
Lots
Ownership
Condition
Sumac Ridge by Meritage Homes (Tract No. 37668)
Lots 13-14, 16-18, 20-22, 24-33, 44-
53, 62-97, 100-106, and 169-175 of
Tract 37668
78 Individuals Completed Homes
Lots 37-38 and 41-42 of Tract 37668 4 Meritage Model Homes (none in escrow) Lots 15, 19, and 23 of Tract 37668 3 Meritage Over 95% Complete (3 in escrow)
Lots 7-12, 107-109, 118-129, and 161
of Tract 37668
22 Meritage Under Construction (10 in
escrow)
Lots 1-6, 34-36, 39-40, 43, 54-61, 98-
99, 110-117, 130-160, and 162-168 of
Tract 37668
68 Meritage Finished Lots (none in escrow)
TOTAL 175
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. 2021-2 and that this report is to be included in the Official Statement or similar document to be 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.
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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 Is for the base value of the plan only, not taking into consideration any upgrades, options, or premiums.”
1 The Appraisal of Real Estate, 13th Edition
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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 is utilized in the valuation process.
Hypothetical Condition
The term “Hypothetical Condition” is defined by USPAP as:
“That which is contrary to what exists but is supposed for the purpose of the analysis”
The Hypothetical Condition within this report is that subject property is enhanced by the improvements and/or fee credits to be funded by bonds issued by Menifee CFD No. 2021-
2. Extraordinary Assumption
The term “extraordinary assumption” is defined by USPAP as:
“An assumption, directly related to a specific assignment, which, if found to be false, could alter the appraiser’s opinions or conclusion”
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 verified 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 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.
2 USPAP 2020-2021 Edition
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The second extraordinary assumption that there are no remaining conditions which could slow or thwart building permits or certificates of occupancy on the subject property. Per Meritage representatives, they do not believe that Condition No. 90 (Landscaping and Recreation Amenities Installation) or Condition No. 174 (completion of primary and alternate access roads, interior roads, storm drains, water systems, sewer sys tems and landscaping irrigation) will slow or hinder any certificates of occupancy. They believe they are on time to complete the improvements 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- 2. The definition of “fee simple estate” is defined by USPAP as:
“absolute ownership unencumbered by any other interest or estate, subject only to the limitations imposed by the governmental powers of taxation, eminent domain, police power, and escheat.”
EFFECTIVE DATE OF VALUE
The subject property is valued as of June 19, 2023.
DATE OF REPORT
The date of this report is July 26, 2023.
SCOPE OF APPRAISAL
As previously stated, the purpose of this appraisal is to report the appraiser ’s best estimate of the market value for the subject properties. This appraisal will be presented in the following format:
• County of Riverside Description
• City of Menifee Description
• Immediate Surroundings
• Brief Description of Menifee CFD No. 2021-2
• Subject Property Description
• Riverside County Housing Market Discussion
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• Highest and Best Use Analysis
• Valuation Procedures, Analyses and Conclusions
• Appraisal Report Summary
The subject property consists of 175 proposed single-family houses. There are 78 homes completed and closed to individuals, four models (none in escrow), three homes over 95 percent complete (all three in escrow), 22 homes under construction (10 in escrow) and 68 remaining finished lots (none 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 v aluation 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 1, 2023 and June 25, 2023.
4. Had the property flown for an aerial photograph on June 17, 2023.
5. Interviewed r epresentatives from the builder to obtain available information on the subject property.
3Dictionary of Real Estate Appraisal, 4th Edition, 2002 Item Title: 12.1
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6. Reviewed a Preliminary Title Report on the subject property.
7. Searched the area for residential land sales and interviewed buyers, sellers or brokers knowledgeable on the transactions.
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 neighborhoods.
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. 2021-2.
12. Inspected the subject propert y for any for-sale or property listing signs that may not be listed on the MLS yet.
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REGIONAL AREA MAP
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COUNTY OF RIVERSIDE AREA DESCRIPTION
Location
The subject property is located in the southwestern portion of Riverside County (the “County”), northeast of the merging of Interstate 15 (“I-15”) and Interstate 215 (“I-215”), and southwest of Diamond Valley Lake, to the east of I-215 and on the north side of Scott Road. The area is located near the southeastern 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, Riversi de 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 east of I-15 and east of I-215, on the north side of Scott Road at Lindenberger Road. The I -15 is approximately eight miles west 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 1.3 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 43 miles northwest of the subject in San Bernardino County. Highway 74 is approximately seven 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 21 miles north of the subject providing access into Los Item Title: 12.1
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Angeles County to the west and merges with Interstate 10 to the east , which provides access across California and into Arizona.
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 38 miles northwest of the subject property, while the Orange County Airport is located approximately 41 miles west, and the San Diego International Airport is located about 63 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 July 1, 2022 County population was 2.438 million, representing a one- year increase of
0.28 percent. This compares to an average annual growth rate over the past thirteen years of about 0.8 percent, and an average annual growth rate of approximately 2.5 percent for the previous eighteen- year period. It should be noted however, California’s overall population decreased 0.54 percent during the past year. 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 1.6 percent over the next seven years. The current growth of 0.28 percent is lower than the pr evious twelve-year annual average of about 0.8 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 st able market than was seen prior to the Great Recession.
Economy
The U.S. economy is experiencing challenging times due to reactions from the COVID recession. These economic challenges include: significant inflation, increasing interest rates, banks’ instability, and turmoil prior to reaching an agreement on the debt ceiling.
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in order to slow the spread of the virus. This created a strain on small and large businesses alike. Restaurants and hotels were hit hard and travel reduced drastically as citizens were urged to stay home. Layoffs occurred with reports of 40 million people filing for unemployment the first few months of the pandemic. The Governments attempted to curtail the job losses and hardships with the approval of over 5.6 trillion in COVID relief to our nation. In addition, the Federal Reserve Board (“Board”) reduced interest rates and started quantitative easing by buying bonds. This legislation helped shore up the U.S. economy; however, due to the significant amount of new money introduced into the economy, inflation began occurring at a rate not seen for 40 years. As of May 2023, the national inflation rate was 4.0 percent, down from 4.9 percent in April and down from the peak in June 2022 of 9.1 percent. This compares to a 1.24 annual percent rate for 2020 and an average of 1.74 percent annual rate for the previous ten years. Whether i t is a result of the Russian/Ukraine war, supply chain issues due to COVID , or from the additional money entering the economy; inflation is hitting Americans hard.
In an effort to curb inflation, the Federal Reserve Board began raising interest rates. Since March 2022, there have been ten interest rate increases, raising the Federal Funds Rate (“FFR”) from 0.25 – 0.50 percent to 5.0 – 5.25 percent. While these increases appeared to help slow inflation, the quick, significant increases have strained bank balance sheets.
Three major banks have failed in the past four months with the government taking unprecedented action to help shore them up. At the most recent Board meeting (June 14, 2023) they paused the rate increases; however, additional minimal increases are expected later in the year. In addition to causing bank instability, the FFR increases over the past 15 months increased a typical 30-year fixed mortgage rate from 2.98 percent as of November 10, 2021, to 7.08 percent as of November 10, 2022; howev er, the rate has dropped to 6. 69 percent as of June 15 , 2023 (per Federal Reserve Economic Data- St.
Louis). This steep increase of mortgage interest rates has significantly affected the real estate market.
The COVID disruption to the economy also caused extreme volatility in the stock market with the Dow Jones Industrial Average (“DJIA”) dropping from 29,398 in February 2020 to 19,174 in March, 2020, a drop of 37 percent. The Government interventions resulted Item Title: 12.1
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in a bounce back in the DJIA to 27,111 by June 2020 with the stock market then climbing up to an all-time high of 36,799 in January 2022. In February 2022, Russia began invading Ukraine which caused volatility in world economics followed by U.S. inflation, interest rate increases and instability in the U.S. due to the debt ceiling being reached. All of these factors caused a drop in the DJIA of nearly eight percent from January 2022 to June 21, 2023 ( 33,952). The nation’s debt limit can only be increased through government approvals. The current partisanship in our government caused a stand- off in increasing the debit limit which was in danger of being reached, and the stock market’s volatility throughout May due to this stand-off was evident. However, a deal was reached in early June (before the deadline), and the stock market should start showing less volatility.
The significant increase in mortgage rates over the past year is just one piece of the puzzle affecting the impact of new housing on the broader economy. Additional risks include homebuilders trying to find balanced inventory levels, supply chain issues, both wage and price increases, and persistent inflation. Over 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 pri ces 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 housing market seeing an improvement beginning in mid-2012. Contrary to homebuilder’s original thoughts of a slowdown due to the pandemic, new home buyers stepped up in the spring of 2020 with new home sales being significantly higher during the second half of 2020 versus the previous year and continued extremely strong throughout 2021. This exceptional activity in new home sales was the one bright spot in the COVID recession and is thought to be due to several factors, including: a tight supply of re- sale homes; historically low interest rates; millennials finally buying homes; and, the work from home factor which began during the pandemic and allowed residents to live in more suburban areas without long commutes. As rates began increasing in early 2022, there was a significant slowdown in sales and softening of prices within the Inland Empire, with year-over-year decreases in sales as of June 2023 of more than 15 percent. The high mortgage rates have significantly slowed existing homeowners from moving. The limited availability of existing homes on Item Title: 12.1
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the market has resulted in new homes capturing a much larger share of the total home sales; however, new home sales are also down year-over-year.
While most jobs have come back, job losses were significant during the COVID recession as the Nation’s unemployment rate went from 3.5 percent in February 2020 to 14.4 percent in April 2020, with the May 2023 National unemployment rate at 3. 4 percent (Employment Development Department, not seasonally adjusted). The Congressional Budget Office (“CBO”) Forecast for the U.S. Economy (published February 2023) predicted real GDP growth will come to a halt in 2023 then will average 2.4 percent from 2024 to 2027 and then 1.8 percent between 2028 to 2033. The CBO states they expect unemployment rates to rise through early 2024 reflecting the slowdown in economic growth. In summation, the CBO projects for 2023: stagnant output, rising unemployment, gradually slowing inflation , and interest rates to remain at or above their current levels.
They believe that in 2023, non-interest spending will substantially exceed revenues with rising interest rates driving up the cost of borrowing which results in the government debt steadily increasing. Over the long term, they suggest changes in fiscal policy to address the rising costs of interest and mitigate other adverse consequences of high and rising debt.
The unemployment rate for the MSA was estimated at 4.4 percent (as of M ay 2023 per the Employment Development Department). This reflects a decrease from the peak during the Great Recession of 15.1 percent in 2010 and a decrease from the peak during COVID of 14.9 percent. As of May 2023, Riverside County’s unemployment rate was 4.4 and San Bernardino County had a 4.3 percent unemployment rate. The current unemployment rate for the MSA of 4.4 percent is slightly lower than the California rate at
4.5 percent and higher than the May 2023 National rate of 3.4 percent. Below is a table comparing Riverside County’s unemployment rate to the unemployment rates of the surrounding counties as of May 2023.
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Jurisdiction As of Unemployment Rate*
Los Angeles County May-2023 4.8%
Riverside County May -2023 4.4%
San Bernardino County May -2023 4.3%
Orange County May -2023 3.2%
San Diego County May -2023 3.5%
Source: State of California E.D.D.; *Not Seasonally Adjusted
The latest UCLA Anderson Forecast (“Forecast”) was issued March 15, 2023 and stated that the potential action by the Federal Reserve will determine whether the nation continues to grow or experiences a mild, short-lived recession in 2023. They believe the economy is at a recession- related fork in the road , with one path leading to continued economic growth and the other would lead to a mild short -lived recession. Whether the economy slips into recession or not will depend largely on inflation stickiness and the additional action the Federal Reserve takes to bring down inflation. The Forecast states that if the Federal Reserve moderates its aggressive tightening, economic growth is expected to slow to 2.3 percent growth in first quarter 2023; 1.8 percent in 2 nd quarter and
1.0 percent growth for the second half of 2023. If the Federal Reserve keeps aggressively tightening, a mild recession will occur with the economy contracting beginning in the third quarter 2023 and deepening in the fourth quarter 2023 and the first quarter 2024 followed by the beginning of a rebound. The Forecast states under both scenarios, inflation will still be elevated but will be more persistent in the recession scenario requiring tighter monetary policy. They believe both outcomes will include persistent inflation with the no- recession scenario resulting in lower inflation and thus, more moderate monetary policy.
The UCLA Forecast for California is more positive than the overall Nation due to a strong demand for defense goods, labor saving equipment and software. In the no- recession scenario, unemployment rate averages by year are estimated at 4.0 percent for 2023, 3.9 percent for 2024, and 3.6 percent for 2025. In the recession scenario, unemployment rate averages are expected to be 4.3 percent for 2023, 4.8 percent for 2024, and 3.7 percent for 2025. Under both scenarios the California Forecast projects housing permits to grow to 150,000 in 2025 in spite of the higher interest rates. The fact that the California housing market is not overbuilt will offset the decrease in the housing market. Overall, the Forecast Item Title: 12.1
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believes that California will have a more moderate slowing or, in the case of a recession, a milder downturn than the U.S. overall.
As a final indicator of overall economic activity for the region, we have reviewed the rise and fall of TEUs (Twenty-foot Equivalent Units – i.e., containers) being processed in the local ports. This is especially important for the Inland communities, as it represents much of the growth in development of west coast distribution centers and warehouses in the Inland Empire linked to supply -chain nodes in the Pacific Rim. The chart below shows TEU activity at the Port of Long Beach. Generally, there 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. The 2022 calendar year saw a decrease of 2.6 percent from the previous year.
May 2023 was nearly 15 percent below May of 2022 ( 758,225 versus 890,989 total TEUs). It should be noted that Spring 2022 was a time when the back-up at the ports was still occurring due to s upply chain issues. Per the Orange County Register (“Lack of product demand hurts drivers,” October 31, 2022), consumer demand cooled in mid-2022 leaving fewer TEUs needing to be driven from the ports. They are stating shipments have slowed due to American demand finally waning after the pandemic coupled with some major retailers bypassing the California ports for East Coast ports to avoid a possible upheaval by West Coast dockworkers as they negotiate a new contract. It appears that the slowdown in work for the dray operators (drivers who ship containers in and out of the ports) may be resulting from a slowdown in overall TEU demand.
4.0 5.0
6.0 7.0
8.0 9.0
10.0 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20 '21 '22 TEU's (millions)
Year
Port of Long Beach TEUs
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Government
A Board of Supervisors oversees the County as the governing body of the County, certain County special dis tricts, 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 B ernardino, 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, even though the State is reported to be losing population.
The Nation’s economy has been slowing after the Board increased the FFR five percent to fight historical inflation which began during COVID. One bright spot during COVID was housing; the region’s relative affordability and low interest rates, coupled with the rising prices in the coastal market and the demand for housing, set up a new housing boom.
This was followed by a significant drop in sales due to existing homeowners being unwilling to give up their low -rate mortgages. Current concerns for the Inland Empire economy include : stubborn inflation, the high prices of homes, higher interest rates, supply chain issues, recent bank failures along with the Russian invasion of Ukraine, which are all creating volatility in both local and global financial markets. A possible light recession is forecast for later this year. What effect the recent bank failures will have on Item Title: 12.1
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the economy is unknown at this time. In conclusion, the County is expected to continue to grow in population due to its Southern California location, the availability of land, and the relatively lower land and housing prices in comparison to adjacent Orange, Los Angeles, and San Diego Counties.
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MENIFEE AREA MAP
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CITY OF MENIFEE DESCRIPTION
The subject property is located near the southeastern 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, area of Winchester and unincorporated lands to the north and unincorporated lands (portion known as the French Valley) to the east.
In the 1960s, early development of the Menifee Valley began when the concept of an active retirement community was envisioned for Sun City. Since that time, the Menifee Valley has grown substantially. At incorporation in 2008, the City of Menifee had a total population of 60,000 residents. The Menifee Valley includes some portions of Romoland that are not included within the city limits. Although this area currently serves as a bedroom community for the 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, the Menifee Town Center west of the off ramp , and an additional shopping center at Clinton Keith Road. Per the City of Menifee Economic Development website, there are 28 commercial projects under active construction and an additional 17 commercial projects either under review or in the plan review process.
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 (most recent available), representing a growth of 2.9 percent year-over-year. This compares to the Riverside County past year’s growth of 0.28 percent from July 2021 to July 2022. The City’s higher growth rate than the County is due to the wide expanses of land available for development within the City, and because of the Item Title: 12.1
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planned communities such as Audie Murphy Ranch (recently built -out), Banner Park, Quartz Ran ch, Shadow Mountain, the future development of Legado (near I -215 and McCall) and Remington Place (recently sold out), as well as single new-home tracts (such as the subject, Sumac Ridge).
In the past 15 years Menifee has had exceptional growth in the c ommercial 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, PetSmart 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 pl anned adjacent to the theaters. However, the shutdown of the economy stopped construction. The theater has been caught in litigation for three years with contractor lawsuits. Aside from the Krikorian theater, other new commercial development is back underw ay with both Center Pointe (retail northwest of the theaters) and Menifee Plaza (retail northeast of theaters), which front Newport Road, opening. Along the north side of Newport Road at Haun Road is a newer commercial area that houses the Menifee Union Sc hool District’s administration building, the existing City Hall, a 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 filled by the end of 2002. Diamond Valley Lake is located approximately five miles 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. Access to Item Title: 12.1
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Diamond Valley Lake is via Newport Road, which becomes Domenigoni Parkway east of 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 neighboring Murrieta and Temecula areas. As housing prices increased in the early 2000s, the price difference narrowed between Menifee and Murrieta/Temecula, however, there is still a variance. The price difference appears to be due to the Murrieta/Temecula area’s location 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.
As discussed under the economy section under County of Riverside Area Description, new home sales had prospered during the COVID pandemic and Menifee is no exception.
Per the June 18 , 2023 Ryness Report (a new home sales tracking and research company), there are 50 new home projects currently selling in the South Riverside submarket with 26 of the 50 new home projects located in Menifee. The average year to date sales rate per project for the week ending June 18, 2023, in the South Riverside submarket was 4.4 homes per month, which is slightly higher than but similar to the average 2021 sales rate of 4.3 sales per month per project.
In summary, the future growth of Menifee is expected to continue. There are a significant number of new residential projects in Menifee, both currently selling and planned in the area. Housing is less expensive than the Murrieta/Temecula neighboring communities which is attractive to homebuyers, as price points are important in today’s Inland Empire housing market. Diamond Valley Lake is another asset to the Menifee Valley area. The lower land prices and the availability of land for development combine to make Menifee an excellent candidate for future growth.
Item Title: 12.1
Community Facilities District 2021-2, Sumac Ridge, Issuance of Special Tax Bonds Item Page Number: 235
Menifee Mayor and City Council
August 16, 2023
Page
673 of 759
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IMMEDIATE SURROUNDINGS
The subject property is located in the south eastern portion of the C ity of Menifee, specifically on the north side of Scott Road at Lindenberger Road. Access into the community is considered to be very good via I -215 (nearest highway, exit Scott Road ), and is also possible via I -15. Sumac Ridge is surrounded by vacant lands to the north, existing residential homes to the immediate east, northwest, and south. There are rural lands to the southeast, and a church (Revival Christian Fellowship) immediately adjacent to the southern half of the site to the west. Rural residential lands continue past the vacant lands to the north as well as to the southeast. The residential tract adjacent south of the subject is known as the Berkshire community, and was built in the early 2000s. This community surrounds Woodbine Park, a public park with lots of greenspace located less than one half mile from the subject, on the west side of Lindenberger Road. The housing tract adjacent east of the subject was also built in the early 2000s and abuts Mira Park, another public park with a baseball diamond, situated less than one quarter mile north of the subject on Mira Street. The tract of homes adjacent west to the northern portion of the subject was also built in the early 2000s. Past the existing residential and rural lands to the northeast (less than one mile from the subject) is the actively selling new home master planned community of Braverde, being built, and sold by Richmond American Homes.
The subject’s vicinity is home to several actively selling new housing developments, further east on Scott Road (just past Winchester Road) as it turns into Washington Street, is Pulte’s Eagle Vista community, as well as Taylor Morrison’s Siena community, which features three product lines. While both these communities fall outside the Menifee city boundary, they were included as comparables due to their close proximity to the subject (within four miles). North of the subject along Domenigoni Parkway is another stretch of actively selling communities, including Lennar’s Rockport Ranch, Pulte’s Banner Park, KB Home’s Olivebrook, TriPointe’s Outlook, and Lennar’s Prairie Crossing.
The subject is served by Menifee Union School District and Perris Union High School District. Sumac Ridge residents will attend: Harvest Hill STEAM Academy for kindergarten through eighth grade (2.7 miles southeast of the subject) and Liberty High School (1.5 miles northeast of the subject).
Item Title: 12.1
Community Facilities District 2021-2, Sumac Ridge, Issuance of Special Tax Bonds Item Page Number: 236
Menifee Mayor and City Council
August 16, 2023
Page
674 of 759
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Shopping is easily accessible to the community. Approximately one and one-quarter mile west on Scott Road at the I -215 intersection are two neighborhood shopping centers known as Heritage Market Place (anchored by an Alberton’s grocery store, with a Wells Fargo, Seven Eleven, Del Taco, Carl’s Junior, UPS Store and more) and Antelope Square (featuring a Walgreens, Chevron gas station, Jack in the Box, and several dining options).
Three miles northwest at the I -215 and Newport Road intersection is an abundance of shopping options featuring 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 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. Just over three miles southeast of the subject in Murrieta at Clinton Keith Road and the I-215 are several more shopping centers which include a Target, Starbucks, Dollar Tree, Del Taco, and a new center anchored by a Costco. Approximately eight miles south of the subject is Promenade Temecula, a major shopping mall anchored by Macy’s 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 2.5 miles northeast of the Loma Linda University Medical Center.
Item Title: 12.1
Community Facilities District 2021-2, Sumac Ridge, Issuance of Special Tax Bonds Item Page Number: 237
Menifee Mayor and City Council
August 16, 2023
Page
675 of 759
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CITY OF MENIFEE CFD NO. 2021-2
We have reviewed the Community Facilities District Report for the City of Menifee CFD No. 2021-2 (Sumac Ridge) prepared by Spicer Consulting Group dated November 3 , 2021 (“Report”). Per the Report, the subject property is identified as Menifee CFD No. 2021-2 and includes 56.35 gross acres proposed for 175 single family detached homes.
The acreage differs slightly from the engineered tract map acreage of 59.042 gross acres which is used in this report. 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 incr eased demands placed upon local agencies as a result of development and/or rehabilitation occurring within Menifee CFD No. 2021-2.
The types of facilities to be financed with the proceeds of special taxes and bonds issued by CFD No. 2021- 2 consist of : the construction, purchase, modification, expansion, rehabilitation and/or improvement of ( i) drainage, library, park, landscaping, roadway, traffic, administration and general government facilities, animal shelter facilities, fire and safety, law enforceme nt, and other public facilities of the City including the foregoing public facilities which are included in the City’s fee programs with respect to such facilities and authorized to be financed under the Mello- Roos Community Facilities Act of 1982, as amended (the “City Facilities”); (ii) water and sewer facilities including the acquisition of capacity in the sewer system and/or water system of Eastern Municipal Water District (“EMWD”) and facilities including EMWD water and sewer capacity and connection f ee 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 facilities, athletic fields, playgro unds 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) Item Title: 12.1
Community Facilities District 2021-2, Sumac Ridge, Issuance of Special Tax Bonds Item Page Number: 238
Menifee Mayor and City Council
August 16, 2023
Page
676 of 759
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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 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. 2021 -2 Bonds is estimated to be $9,302,057 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 $40,425 $40,425
Fire Facilities $107,450 $107,450
Circulation $817,250 $817,250
Storm Drainage $400,050 $400,050
General Government $178,675 $178,675
Public Use Facilities $26,950 $26,950
Quimby $404,950 $404,950
Parks – Improvements $115,675 $115,675
City Facilities $337,295 $337,295
Subtotal – City of Menifee Fees $2,428,720 $2,428,720
City of Menifee Facilities
Offsite Landscaping (Scott & Lindenberger) $524,482 $524,482 Offsite Streets (Scott Road) $1,100,940 $1,100,940
Public Park $977,027 $977,027
Subtotal City of Menifee Facilities $2,602,449 $2,602,449 Eastern Municipal Water District
Sewer Financial Participation Charge $517,650 $517,650
Sewer Treatment Plant Capacity Fee $1,054,725 $1,054,725 Water Financial Participation Fee $977,200 $977,200
Water Supply Development Fee $52,500 $52,500
1” Meter Drop-In Fee $65,975 $65,975
Irrigation Meter Drop-In Fee $1,461 $1,461
Total Eastern Municipal Water District $2,744,421 $2,744,421 Menifee Union School District
School Fees $1,632,723 $1,526,467
Total Eligible Fees/Improvements $9,408,313 $9,302,057
Incidental Financing Costs $1,522,943
Total Funded by Bond Proceeds $10,825,000
Total Fees/Improvements Funded by Developer $106,256
The difference between the eligible costs and the bond proceeds will be paid by the developer.
Item Title: 12.1
Community Facilities District 2021-2, Sumac Ridge, Issuance of Special Tax Bonds Item Page Number: 239
Menifee Mayor and City Council
August 16, 2023
Page
677 of 759
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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.
Per the current sources and uses of funds (dated July 19, 2023 ), the bond par amount is estimated at $9,825,000 and a net premium of $60,652 with $8,580,546 in project fund deposits, $878,747 in debt service reserve fund, $98,634 in capitalized interest and $327,725 in cost of issuance and underwriter’s discount (all amounts subject to change).
A copy of the Menifee CFD No. 2021-2 boundary map is located in the Addenda for your review.
Item Title: 12.1
Community Facilities District 2021-2, Sumac Ridge, Issuance of Special Tax Bonds Item Page Number: 240
Menifee Mayor and City Council
August 16, 2023
Page
678 of 759
_________________________________________________________________________________________________________ Menifee CFD No. 2021-2 – Sumac Ridge by Meritage Homes (Menifee, CA) Kitty Siino & Associates, Inc. Page 26
SUBJECT PROPERTY DESCRIPTION
The subject property consists of 175 proposed single-family homes being developed into the community known as Sumac Ridge. There are two product lines within Sumac Ridge:
Sage and Cedar, with Cedar generally on the northern half of the community and Sage generally on the southern portion. Sumac Ridge in its entirety is described below, and the site plan below depicts Cedar in purple and Sage in blue, while the models and model parking are depicted in gold.
Location: North side of Scott Road at Lindenberger Road, City of Menifee, California.
Legal Description: Lots 1- 175 of Tract 37668 located in City of Menifee, County of Riverside, California. Cedar as to Lots 1-40, 57-72, 161 and 175; and Sage as to Lots 41-56, 73-160, and 162-174.
Owner of Record: Individual owners as to
13-14, 16-18, 20-22, 24-33, 44-53, 62-97, 100-
106, and 169- 175 of Tract 37668 , and Meritage Homes as to all remaining lots.
Item Title: 12.1
Community Facilities District 2021-2, Sumac Ridge, Issuance of Special Tax Bonds Item Page Number: 241
Menifee Mayor and City Council
August 16, 2023
Page
679 of 759
_________________________________________________________________________________________________________ Menifee CFD No. 2021-2 – Sumac Ridge by Meritage Homes (Menifee, CA) Kitty Siino & Associates, Inc. Page 27
Three-Year
Sales History: Meritage Homes of California, Inc. (a related entity to Meritage ) purchased the subject property from KGK Riverside Properties LLC for $7,200,000 on March 22, 2021 per public record. The site was undeveloped with an approved tentative tract map at the time of sale.
Out of the total 175 homes, 78 have closed escrow to individual homeowners with closing dates between November 8, 2022 and June 16, 2023.
Assessor’s Parcel
Numbers: The new APN map with parceled out lots is not yet available , however the original APNs for the subject were: 372-160-06 through -08, -13 and 372-190-03.
Property Taxes: We were unable to review a sample tax bill for the subject property .
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 2070H 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 rectangular in shaped and contains
59.042 gross acres and 58.805 net acres per Tract Map 37668. The tract map includes 213 numbered lots and 17 lettered lots, but only 175 of the 213 numbered lots include proposed houses. The remaining 38 numbered lots range from drainage basins, to a community park, to open space. The lettered lots make up the internal streets. It should be noted that the open space, drainage basin, and park acreage, while located within Menifee CFD No. 2021-2, will not be taxed, and thus are not included in this valuation.
Zoning: Per the City of Menifee General Plan Land Use Map, the subject i s shown as Residential with 2.1 – 5.0 dwelling units per acre. Per the City’s Zoning Map, the subject property is shown as LDR-2 which refers to Low Density Residential -2, or minimum lot sizes of 7,200 square feet.
Entitlements: The subject property is covered Tract Map No. 37668, which was recorded April 5, 2022 and subdivides 59.042 acres into 175 single family detached lots with a minimum lot size of 5,000 square feet, as well as drainage basins, open space lots, and a park site. The density of the recorded map is 2.96 dwelling units per acre, which is within the General Plan Land Use range. Per Meritage Homes
representatives, the average lot size within Tract Map No. 37668 is over 7,200 square feet which the City approved. A copy of the Tract Map is located within the Addenda of this report.
Item Title: 12.1
Community Facilities District 2021-2, Sumac Ridge, Issuance of Special Tax Bonds Item Page Number: 242
Menifee Mayor and City Council
August 16, 2023
Page
680 of 759
_________________________________________________________________________________________________________ Menifee CFD No. 2021-2 – Sumac Ridge by Meritage Homes (Menifee, CA) Kitty Siino & Associates, Inc. Page 28
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 drainage basin lots within the Tract Map.
Soils Condition: We have reviewed a Geotechnical Report of Rough Grading for Tract 37668 prepared by Petra Geosciences, Inc, and dated October 19, 2021. 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 an assumption that the property is not located within an Alquist Priolo Earthquake Study Zone.
Environmental
Review: We have reviewed a Phase I Environmental Assessment dated July 23, 2018 (“ESA”), as well as a Limited Phase II Environmental Soil Residue Survey, dated August 15, 2018 (“Soil Residue Survey”), both covering the subject property and prepared by Petra Geosciences, Inc. The ESA concluded that no recognized environmental conditions of any kind were identified, but recommend that the site owner pursues a Limited Phase II Soil Residue Survey due to the historical use of crops on the site and potential for previous pesticide use. The Soil Residue Survey revealed no elevated pesticide or arsenic concentrations above the applicable regulatory levels, and therefore no further assessment was recommended.
It is an assumption of this appraisal report that there are no environmental issues which would thwart or slow development of the subject property or create any adverse reactions to the houses. This is evidenced by City inspectors on-site throughout construction.
Cal Fire Hazard
Designation: Per the Cal Fire California Fire Hazard Map, the subject is not in a high fire hazard zone.
Easements/
Encumbrances: We have reviewed a Preliminary Title Report prepared by First American Title Company as Order No. NHSC-6490642 dated February 17, 2022, which covers a portion of Tract 37668. The report is summarized below and had the following exceptions.
Item No. 1 refers to property taxes and assessments. Item Nos. 2 and 6 have been intentionally deleted. Item No. 3 refers to the lien of Item Title: 12.1
Community Facilities District 2021-2, Sumac Ridge, Issuance of Special Tax Bonds Item Page Number: 243
Menifee Mayor and City Council
August 16, 2023
Page
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supplemental taxes, if any. Item No. 3A refers to CFD No. 2017 -1 (City Maintenance Services) while Item 3B refers to the subject CFD.
Item No. 4 pertai ns to the terms and provisions of a document entitled resolution No. 2002-239 recorded July 12, 2002. Item No. 5 pertains to an easement for road, utility slope, drainage, and incidental purposes. Item No. 7 was for a temporary access easement. Item No. 8 is in regard to the rights of the public in and to that portion of the land lying within any Road, Street, Alley, or Highway.
It is an assumption in this report that the subject property is free and clear of any liens and/or encumbrances with the exception of Menifee CFD No. 2021-2 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: Access to the subject is via I-15 to I-215 to Scott Road, east 1.5 miles to Lindenberger Road, and north on Lindenberger Road into the subject. The subject is located on the north side of Scott Road on both sides of Lindenberger Road. The models are located on the east side of Lindenberger Road, just north of Scott Road, on Fleets Road (via Eagle Road).
I-15 is a major north/south freeway, which provides access to both international borders with Mexico and Canada.
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.
Scott Road is an arterial through the southern portion of the City of Menifee with on/off ramps to I -215. Scott Road turns into Bundy Canyon Road at the Murrieta Road intersection, between the I -15 and I-215. West of I-215 at SR 79, Scott Road turns into Washington Street, where it turns south into the French Valley area.
Internal streets within Sumac Ridge include: Lindenberger Road, Eagle Road, Hayforth Circle, Linecroft Court, Lanesbridge Street, Eastbourne Court, Gelder Circle, Earlsburn Circle, Waylon Court, Baron Banks Street, Forgecroft Street, Eldertree Street, Fleets Road, and Norbury Road.
Item Title: 12.1
Community Facilities District 2021-2, Sumac Ridge, Issuance of Special Tax Bonds Item Page Number: 244
Menifee Mayor and City Council
August 16, 2023
Page
682 of 759
_________________________________________________________________________________________________________ Menifee CFD No. 2021-2 – Sumac Ridge by Meritage Homes (Menifee, CA) Kitty Siino & Associates, Inc. Page 30
Current Condition: The subject property has been developed into 175 single-family lots with a minimum lot size of 5 ,000 square feet generally on the southern half of the site (Sage) and a minimum lot size of 7,000 square feet generally on the northern half of the site (Cedar) . The overall average lot size is over 7,200 square feet per the builder. The lots are in a finished condition with street s complete and utilities stubbed to each lot. There are 78 completed homes owned by individuals, seven homes over 95 percent complete (including the four models), 22 homes under construction (less than 95 percent complete), and 68 finished lots.
Costs: Per Meritage representatives, there are $4,478,044 in remaining land development costs and fees; however, this includes some fees that will be reimbursed by the subject CFD. These include a portion of the school fees, DIF fees, Water and Sewer Connection Fees, Fire, Library and Police Fees, storm drain fees and open space fees which total $1,895,334 of the remaining land development costs/fees, leaving $2,582,710 in remaining costs and fees for the builder to pay. These are associated with the Meritage owned property only which equates to $ 26,625.88 per lot ($ 2,582,710 divided by 97 builder-owned homes and lots).
HOA Amounts: Per Meritage representatives, the monthly HOA is $110 per month.
Improvement
Description: Tract 37668 is being marketed as Sumac Ridge by Meritage Homes.
Sumac Ridge features two product lines, Cedar (which is generally on the northern half of the tract with the larger lots) and Sage (which is generally on the southern half of the site and houses the smaller lots). Both product lines at Sumac Ridge grand opened May of 2022 and the two product lines feature a total of eight floorplans (three at Cedar and five at Sage). The eight floorplans range in size from 1,910 to 3,247 square feet, and feature one to two stories and two- to three-car garages. The home exteriors feature 8-foot Therma-Tru insulated fiberglass entry doors with Kwikset front hardware, lighted address plaques, and two-bay garage doors with LiftMaster openers.
Interiors include five panel hollow core doors, open floorplan designs, ASHRAE 62.2 Ventilation system, indoor airPLUS certification, PEX plumbing, LED lighting, tankless water heaters, and Low -E windows. Gourmet kitchens at Sumac Ridge include large eat-in islands, hard wood cabinets, stainless steel single- bowl sinks with Moen chrome one- handle pull down faucets, stainless steel Whirlpool appliances and solid stone countertops with 6- inch granite backsplash. Primary suites feature walk-in closets, fiberglass showers with clear glass enclosures, and dual sinks. Meritage advertises their included M.Connected Home automation system which includes an advanced thermostat, door sensors, motion Item Title: 12.1
Community Facilities District 2021-2, Sumac Ridge, Issuance of Special Tax Bonds Item Page Number: 245
Menifee Mayor and City Council
August 16, 2023
Page
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detector, smart door lock, smart garage door, Smart Home hub and app, USB outlets, and video doorbells. All homes appear to be in excellent condition with no visible depreciation.
We have reviewed sales information from the builder which included 91 sales, with 78 home closings from November 8, 2022 through June 16 , 2023 . Actual closed sales prices have ranged from $520,000 to $711,245. Per our review of the local Multiple Listing Service, there have not been any resales within Sumac Ridge and per our inspection there were no homes listed for resale. Original base pricing at grand opening in May of 2022 ranged from $546,000 to $643,000, while the latest base sales prices range from $553,000 to $ 648,000 (as of July 1, 2023) . The houses which are over 95 percent complete are detailed below.
Sumac Ridge by Meritage Homes
Plan
Bd/Ba
Floors/
Parking
Sq.
Ft.
Ind.
Owned
Bldr.
Owned
Sage Plan 1 (S1) 4 / 2.5 1 / 2 1,910 8 0
Sage Plan 2 (S2) 4 / 3 2 / 2 2,320 9 1*
Sage Plan 3 (S3) 4 / 3 2 / 2 2,541 10 0
Sage Plan 4 (S4) 4 / 3 2 / 2 2,771 10 1*
Sage Plan 5 (S5) 5 / 3 2 / 2 2,948 11 0
Cedar Plan 1 (C1) 4 / 3 1 / 2 2,527 12 1*
Cedar Plan 2 (C2) 4 / 3 2 / 3 2,992 9 2
Cedar Plan 3 (C3) 5 / 3.5 2 / 3 3,247 9 2*
Total 78 7
*One of each plan is a model home. In addition to the above there are 22 homes under construction (less than 95 percent complete) and 68 additional finished lots.
Item Title: 12.1
Community Facilities District 2021-2, Sumac Ridge, Issuance of Special Tax Bonds Item Page Number: 246
Menifee Mayor and City Council
August 16, 2023
Page
684 of 759
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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 0.28 percent increase between July 2021 and July 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 1.5 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 impact of COVID is still unknown on the County’s population growth. New home sales in most cities in the County in 2020 through 2022 were higher than the coastal communities due to affordability, the work from home factor, and the fact that millennials are finally enter ing the housing market. These factors may increase actual County population growth in 2023.
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 Empir e 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 were 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 economy entered what is now known as the COVID Recession. The housing market slowed down significantly early on, but by May 2020, new homes were going under contract and selling at well above average absorption rates from May 202 0 through Spring of 2022 in the Item Title: 12.1
Community Facilities District 2021-2, Sumac Ridge, Issuance of Special Tax Bonds Item Page Number: 247
Menifee Mayor and City Council
August 16, 2023
Page
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region. Since May 2022, the new home market has seen a slowdown in absorption rates 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 2015 (after the Great Recession), and until the economic shutdown due to COVID. The second half of 2020 and all of 2021 saw economic growth, however the first two quarters of 2022 saw GDP shrinking while the third and fourth quarters saw minimal growth, with 2022’s growth at 2.6 percent. The most recent unemployment rate for the County is 4.4 percent (per the May 2023 EDD report). The end of 2022 saw lower unemployment rates than the County’s pre-COVID unemployment rate in February 2020 of 4.0 percent, however the first five months of 2023 has shown unemployment rising. While unemployment rates are near historical lows, the inflation factor is significantly affecting the economy.
The housing market played a large role in the past two recessions. In the Great Recession, due to increased interest rates and rising home prices between June 2004 and mid-2006, the market reaction was to create non-conventional financing alternatives, such as sub- prime and non-conventional mortgages, to artificially maintain the boom housing market of 2004 and 2005. By 2007, the housing market saw a shake-up because of the problems in the sub-prime and non-conventional mortgage markets, which played a role in the 2008 upheaval of Wall Street and contributed significantly to the U.S. economic downturn of the Great Recession. Due to stricter income verification on new loans and the lack of available credit, coupled with job losses and declining home prices, sales of new homes slowed for the next few years and essentially remained flat until mid- 2012 when home prices began a steady climb.
During the COVID 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 onset of the COVID pandemic, both sales and prices increased significantly throughout COVID until spring 2022 when interest rate increases began affecting the home-buying market. The rising interest rates alone did not seem to slow sales in Spring 2022. However, a combination of increasing home prices and falling consumer Item Title: 12.1
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confidence, added to the significant interest rate increases slowed new home sales significantly in late 2022 and the beginning of 2023.
Per the Zonda National Economic and Housing Market Update in May 2023, the rate of growth of new home sales is off from recent highs but up from pre- pandemic numbers, suggesting a healthy market. Per their survey of over 300 new-home builders nationally, the builders are stating sales are continuing but report they had to adjust pricing and incentives to “find the market .” In the January 2023 survey, 50 percent of builders surveyed were lowering their prices and the remaining 50 percent stated their pricing was flat. In May, the survey resulted in 40 percent of the builders stating their pricing was flat and 60 percent of builders stating they were increasing pricing. This is a very different dynamic which is partly due to seasonality, partly due to builder’s readjusting concessions (interest rate buy -downs), and partly due to price changes. The larger public homebuilders are typically offering significant interest rate buy-downs in order to keep absorption rates steady, which is reportedly costing between $3 0,000 and $100,000 in incentives. The builders are attempting to find the “sweet spot” in incentives. Per Zonda a combination of price cuts of between 10- 15 percent combined with a rate buy down is obtaining the best results in the marketplace.
Home loan mortgage rates have been and are still playing a huge part in the housing market. The Board held mortgage rates at all -time lows after the Great Recession and again after the COVID Recession in an attempt to assist the housing market’s recovery.
Low rates helped home sales during this time. However, first-time buyers are now having a hard time entering the housing market due to rising prices and rising interest rates. Per FRED, the average 30-year fixed mortgage has gone from 2.65 percent in January 2021 to 7.08 percent as in October 2022, with a decrease since then with current rates at 6.67 percent as of June 22 , 2023. Mortgage applications had been spiking in late 2020 and 2021 due to the low rates and the fear rates were going to start ticking up, which began happening in March 2022. The Board has increased the rate ten times in the past 15 months, which increased the FFR from 0-0.25 percent to 5.00-5.25 percent. At the latest Board meeting in mid-June, they paused the increases for the month and suggested there may be additional increases later this year. The FFR increases are supposed to help slow Item Title: 12.1
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the high inflation rate in the Nation, which appears to be occurring as the latest reports are showing inflation in May 2023 at 4.0 percent, down from a high of 9.1 percent in June 2022.
While new home builders slowed production as sales slowed in 2022, the spring of 2023 has brought optimism to builders once again. Sales were up month over month as buyers adjusted to higher mortgage rates and existing home inventory is at all-time lows. Existing homeowners that are locked into a 3 percent mortgage are not moving up due to the current 6+ percent rates. This is creating a supply issue for existing homes. New home sales are benefiting from this supply is sue as in some cases, the only option for homebuyers are ne w homes. Per Zonda, historically , new homes capture 10 to 13 percent of all home sales; however, due to the limited supply of existing homes currently on the market, new homes are capturing well over 30 percent of all home sales in the Inland Empire.
Residential Land Development
While there had been little land development going on in most of the Inland Empire during the Great Recession years 2008-2011, the second half of 2012 saw a resurgence in the more coveted areas of the Inland Empire. The increase in housing prices since 2012 combined with the limited availability of supply made land development feasible once again for homebuilders. It is thought that the increase in regulations, which has significantly increased the timeline for processing entitlements, has limited the master developers’ further entitlement of developable land in California. While prior to the recession it was not unusual to see numerous large master-planned communities selling lots to various builders, there are few currently available in the subject area. The majority of land sales over the past few years include single tracts of land with maps ready to record or a public builder buying a larger piece of land but develops the land for its own use, such as Banner Park by Pulte, Cimarron Ridge by Pulte, Quartz Ranch by Lennar , or Rockport Ranch by Lennar, all located in Menifee.
Land sales in the Inland Empire slowly grew from 2012 up to a peak in 2017, with 2018 and 2019 showing lower land transactions. Once home sales exploded in May 2020, land Item Title: 12.1
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sales followed with a significant number of residential land sales to builders in the Inland Empire during the second half of 2020 and throughout 2021. In late 2021 and early 2022, prior to the FFR increases, builders were paying significantly more for residenti al land that was ready to develop as demand was up and supply was shrinking. The beginning of 2022 continued with strong residential land sales until May , when sales began to fall sharply. According to Zonda’s survey of builders regarding residential land purchases, as of January 2023 only 2 percent of builders surveyed were “full steam ahead,” and almost 40 percent were pausing transactions or bidding lower on land transactions. As of March 2023, these percentages have changed drastically with 13 percent stating they are going “full steam ahead” and 62 percent moving “cautiously forward.” The increase in optimism from new home builders outlook since January is partially due to the extreme slowdown of existing home inventory.
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 report we discuss existing home sales. In reviewing new home sales in the Inland Empire market area, per the June 18, 2023, Ryness Report, the year-to-date average sales rate (4.1 sales per month) is approximately 1 6 percent lower than the same time period of the previous year ( 4.9 sales per month). New ho me 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 is that as interest rates rise, p urchasing power becomes lower and therefore fewer people are able to purchase new homes. Along with home sales comes a demand for appliances, furniture, building materials and services such as insurance, mortgage services, inspections, interior designers, and landscapers, all contributing to the area economy.
When comparing the June 18, 2023, Inland Empire Ryness Report to one year prior, there are 53 additional projects (197 in June 2022 and 250 in June 2023) and sales are 16 percent lower year -to-date than the previous year. This does not appear to be due to limited inventory as there are additional projects, but rather because of an actual Item Title: 12.1
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slowdown in sales activity. It should be noted that current sales rates are being compared to early 2022, which was a hugely successful time for the housing market, prior to the shifting market of Spring of 2022. To put this in perspective, when comparing year to date average new home sales from June 2022 to June 2023, average sales numbers in the Inland Empire are down 16 percent (per the Ryness Report dated June 18, 2023); however, when comparing average new home sales from 2019 (prior to the pandemic) to June 2023, sales are a little stronger (3.5 sales per month per project average in 2019 versus 4.1 sales per month year-to-date average in June 2023). This increase over 2019 suggests new home buyers can weather the higher mortgage rates.
New single -family home pricing (combines both attached and detached) in the Inland Empire has also seen changes. The median new hom e price in the Inland Empire changed from the peak value of $437,200 in the third quarter of 2006 to $268,155 in early 2009 (decrease of 39 percent) while the current Inland Empire median new home price is $525,000 which is down from a record high of $646,000 in July 2022 per Zonda’s latest market report (Riverside-San Bernardino-Ontario, CA CBSA April 2023). This reflects an increase of over 95 percent from the bottom of the cycle and an increase of more than 20 percent over its peak during the Great Reces sion, however a decrease from the 2022 peak of 18.7 percent. In reality , this decrease is actually larger as builders are buying down interest rates which costs the builder at times, up to $100,000, however, the amount is not reflected in the recorded sales price. New home sale prices fluctuate based on the land value and competiti on 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 communities, we searched the subject’s city of Menifee as well as neighboring region of Winchester and French Valley. Because Sumac Ridge is located so close to the southeastern boundary of the City of Menifee, some of the new home communities in Winchester and French Valley are more comparable to the subject than others located within the city limits. The Menifee/Winchester/French Valley area is currently home to many actively selling new home communities, thus, we focused on those with the most similar product and that were Item Title: 12.1
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nearest in proximity to the subject. Our search for similar new home projects to the subject area resulted in seventeen new home projects (including the subject’s two product lines) with base pricing ranging from $ 479,990 to $793,990. The subject’s most recent base pricing falls within the range, spanning from $553,000 to $648,000.
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 May 2023 ($800,000) reflects an increase of 1.9 percent from the previous month, but a decrease of 5.9 percent year -over-year from $845 ,000 in May 2022. Existing home sales in Southern California overall were down 22.3 percent year- over-year as of May 2023. The overall Southern California numbers compare to Riverside County with $629,000 as the median price paid for an existing home in the County in May 2023, up 2.3 percent since April 2023, but down 3.2 percent on a year -over-year basis ($650,000). Sales of existing homes in the County were down 22.9 percent year-over- year due to the limited supply of existing homes along with higher mortgage rates and higher home prices. 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
May
2023
April
2023
May
2022
Price
MTM %
Change
Price YTY
% Change
Sales YTY
% Change
Los Angeles $744,770 $738,520 $798,720 0.8% -6.8% -20.9% Orange $1,256,500 $1,225,000 $1,295,000 2.6% -3.0% -21.9% Riverside $629,000 $615,000 $650,000 2.3% -3.2% -22.9%
San Bernardino $455,000 $450,000 $490,000 1.1% -7.1% -22.8% San Diego $935,000 $930,000 $970,000 0.5% -3.6% -24.1%
Ventura $925,500 $885,500 $915,000 4.5% 1.1% -21.9%
Southern Calif. $800,000 $785,000 $845,000 1.9% -5.9% -22.3% Source: California Association of Realtors
Based on May 2023 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 $115,770 as compared to Los Angeles County, $296,500 as compared to Ventura Item Title: 12.1
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County, $ 306,000 as compared to San Diego County and $627,500 as compared to Orange County. That is, in May 2023, the median priced home in Riverside County was $627,500 less, or almost one- half of the median priced home in Orange County ($1,256,500). However, San Bernardino County has a $174 ,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 have seen more growth which put pressure on home prices in the Inland Empire. It is 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.
And more recently, March 2023 was the first month since summer of 2022 where the majority of Southern California counties are showing median pric e increases month to month. Most counties were seeing substantial month- to-month median price increases from 2020 to 2022, and the widespread decrease from mid- 2022 to early-2023 appears to have been a sign that the market turned, and the pricing run up had come to an end.
The increase in pricing beginning in March is thought to be due to limited supply coupled with buyers’ acceptance of higher rates along, with builders including rate buy downs along with other concessions.
In a separate attempt to captur e the neighborhood specific price changes, the resale activity of existing homes in the subject area 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.
ZIP Code/Community
Name
Border
To
Subject
Sales of
Homes
May 2023
Sales %
Change
from
May 2022
May 2023
Price
Median
Price %
Change
from May
2022
May
2023
PSF
Median
92584 (Subject ZIP) Subject 220 -26.9% $590,000 -4.8% $273 92586 (Sun City) Northwest 126 -23.6% $366,500 -10.5% $301 92585 (North Menifee) North 104 -36.2% $560,495 -5.4% $250 92587 (Canyon Lake) Northwest 68 -34.0% $643,000 -1.1% $303 92532 (Lake Elsinore) West 75 -40.0% $580,000 -4.6% $217 92596 (Winchester) East 142 3.6% $600,128 -7.7% $252
92563 (Murrieta Hot Springs) Southeast 215 -37.1% $640,000 -4.5% $290 92595 (Wildomar) Southwest 69 -40.0% $610,000 -6.4% $264 92562 (Murrieta/La Cresta) South 207 -43.4% $642,500 -1.6% $304 Source: Redfin.com Housing Market Trends May 2023
The median home price of a detached resale home in the subject’s immediate market area is $590,000, 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 Item Title: 12.1
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the California Association of Realtors overall Riverside County detached home resale price decrease of 3.2 percent year-over-year and 22.9 percent sales decrease from May 2022 to 2023.
Sumac Ridge Sales, Pricing and Competition
Sumac Ridge opened for sale in May 2022 with opening base pricing ranging from $546,000 to $643,000 . The most recent base pricing at Sumac Ridge ranged from $553,000 to $6 48,000 which suggests appreciation from 0.3 to 2.3 percent over the majority of the floorplans over the past 13 months. Actual closed prices, including options, upgrades, premiums, and concessions, have ranged from $520,000 to $711,245. Total incentives within the project have generally ranged from $20,000 to $70,000. Within the subject, Meritage has closed 78 homes to individuals between November 8, 2022, through June 16, 2023, with an additional 13 homes in escrow. The total of 91 sales equates to an overall absorption rate of 7.0 sales per month. When looking at each product line individually, the absorption has been 4.2 sales per month at Sage, and 2.8 sales per month at Cedar. These are considered to be average absorption rates for the subject marketplace, but Cedar’s is slightly weaker than the Inland Empire’s overall average sales rate. According to the Ryness Report dated June 18, 2023, there are currently 50 new home projects in the South Riverside submarket which includes the communities of Winchester, Menifee, Lake Elsinore, and the French Valley. The 50 projects include 26 projects within Menifee, which includes the subject community. The average absorption rate within the 50 South Riverside communities’ year to date per the June 18, 2023, Ryness Report is 4.4 sales per month. The subject sales rates in the 2.8 to 4.2 sales per month range compares slightly lower than 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 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. In mid -2022 a slowdown in sales occurred as interest rates climbed to upwards of seven percent. Current rates in the mid- Item Title: 12.1
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six percent range seem to be becoming accepted as builders work through various incentives to keep sales going. The South Riverside new-home submarket is performing slightly stronger than the Inland Empire market as a whole. The subject market area saw an increase in pricing consistent with most of Southern California throughout 2020 and 2021 and appeared to be continuing in the beginning of 2022. The past year has seen sales slow and prices lowering; however, the past couple months have seen new home builders’ optimism return as new home absorption is generally increasing. 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 expected to occur in the area. It is believed that as the population continues to increase, housing growth will also continue, despite a slowdown.
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HIGHEST AND BEST USE ANALYSIS
The highest and best use is a basic concept in real estate valuation due to the fact that it represents the underlying premise (i.e., land use) upon which the estimate of value is based. In this report, the highest and best use is defined as:
"the reasonably probable and legal use of vacant land or an impr oved property, which is physically possible, appropriately supported, financially feasible, and that results in the highest value”4
Proper application of this analysis requires the subject 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 site’ s probable uses, or those uses which are physically possible; the legality of use, or those uses which are allowed by zoning or deed restrictions; the financially feasible uses, or those uses which generate a positive return on investment; and the maximally productive uses, or those probable permissible uses which combine to give the owner of the land the highest net return on value in the foreseeable future.
Physically Possible Uses
The subject property consists of 59.042 gross acres within Tract Map 37668, located on the north side of Scott Road at Lindenberger Road in the City of Menifee. Scott Road is known as Bundy Canyon Road at the Murrieta Road intersection, west of the subject, and is a heavily traveled east/west arterial road through southern Menifee and into Wildomar, with access from both I -15 ( Bundy Canyon Road) and I -215 (Scott Road, with on/off ramps just west of the subject) . The site has been graded with the subject propert y developed into 175 single-family detached lots. The site is surrounded by existing residential homes to the east, south, and northwest, with vacant lands to the north and a
4 The Appraisal of Real Estate, 11th Edition
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church (Revival Christian Fellowship) to the southwest . Soils and environmental reports covering the property were reviewed. It is an assumption of this report that the soils are adequate to support the highest and best use conclusion and that there are no environmental issues which would slow or thwart development of the site. This is evidenced by City approvals along with Ci ty 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-215 to Scott Road. There are regional shopping centers within three miles of the subject sit e, and neighborhood shopping centers within 1.5 miles.
Based on the physical analysis, the size, access, and topography make the subject property physically suited for numerous types of development; however, the grading and development that has occurred on the site along with the surrounding uses, suggests single-family residential use.
Legality of Use
The subject property is located within the City of Menifee, the entity responsible for land use and zoning regulation. Per the general plan, the site is designated for residential use with a density of 2.1 to 5.0 dwelling units per acre. Per the current Zoning Map, the subject properties are shown as LDR-2, or Low Density Residential with a minimum lot size of 7,200 square feet . Per the approved tract map, the subject properties have an allowed 175 residential dwelling units. Recorded Tract Map No. 37668 covers the subject 175 single-family lots with a minimum lot size of 5 ,000 square feet, but the average lot size is 7,200 square feet. Per the builder, this satisfies the LDR -2 zoning. Based on the legality of use analysis, the type of development for which the subject properti es can be utilized is narrowed to residential use. This is consistent with the findings of the physically possible uses.
Feasibility of Development
The third and fourth considerations in the highest and best use analysis are economic in nature, i.e., the use that can be expected to be most profitable. As discussed under the Inland Empire Housing Market section earlier within this report, the residential land market Item Title: 12.1
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showed strong increases in both sales and pricing in 2020 and 2021, while the second half of 2022 and thus far into 2023 has shown a slowdown in sales, as interest rates have risen substantially.
Within Menifee CFD No. 2021-2, out of 175 proposed houses, there have been 91 home sales including 78 home closings. All structures appear to be in excellent condition with no physical depreciation apparent. Within the new home market in Menifee, Winchester, and French Valley, we found 17 projects (including the subject’s two 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 has slowed sales in the area. The low supply of existing homes for sale has boosted the new home market. 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 resi dential 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.
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Highest and Best Use – “As Improved”
The subject property consists of the neighborhood of Sumac Ridge being built out by Meritage Homes in the City of Menifee. Sumac Ridge consists of 175 proposed detached homes situated on lots with an average size of 7,200 square feet and spread across two product lines (or a total of eight floorplans). Sumac Ridge began selling in May of 2022 and features homes ranging in size from 1,910 to 3,247 square feet, with most recent base pricing ranging from $553,000 to $ 648,000. Base pricing has increased slightly (from 0.3 to 2.3 percent) for seven of the eight floorplans since grand opening; however, one floor plan’s pricing has decreased by -0.2 percent since opening. There have been 91 sales within Sumac Ridge resulting in an average sales rate of 7.0 sales per month.
It’s important to note that this absorption rate is for both product lines, and when looking at each product line specifically, the subject’s absorption rate ranged between 2.8 sales per month (Cedar) to 4.2 sales per month (Sage), which is in line with the average sales rates in the market area. Our search within the subject area found fifteen 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 2 .5 to 9.1 sales per month. While there are two outlying projects performing far above the market, Cheyenne at Olivebrook and South Shore at Rockport Ranch, both projects recently opened, and therefore don’t reflect an accurate absorption history. The remainder of the market data are selling well with sales rates in the 2. 5 and 6.0 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.
The sales rates are within the market’s range, suggesting they are selling at the correct price points. 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.
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VALUATION ANALYSIS AND CONCLUSIONS
The Sales Comparison Approach will be used to value the subject property. This approach compares similar properties that have recently sold or are in escrow. In determining the value for the property, a unit of comparison needs to be addressed. For single-family detached lots, the lots are typically sold on a finished lot basis. That is, the sales price is determined by a finished lot value and then the remaining costs to develop the property to a finished lot condition are taken into account in the sales price. Therefore, in determining a current market value for the residential lands, the current condition of the lots will be considered. In the case of the existing home valuations, a single home sale is the unit of comparison. In determining the value for each existing house, a base value will be concluded for each plan which will be considered a minimum market value as most buyers typically purchase some premiums, upgrades or options which increase the price of the home.
The valuation will be presented as follows. First, a discussion of the single- family detached lot market data will be given. Each of the comparable market data (on a finished lot basis) will be detailed along with a comparison discussion of their relationship to the subject property. 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 utilize the Sales Comparison Approach 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 and a mass appraisal technique Item Title: 12.1
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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 t he value conclusions will take into consideration improvements funded by the Menifee CFD No. 2021-2 Special Tax Bonds and their lien. A summary of the final value conclusions will be reported at the end of this valuation section.
Market Data Discussion – Detached Residential Lots
Within Sumac Ridge there are a total of 78 individually owned homes, seven homes over 95 percent complete (including four model homes), 22 homes under construction, and 68 remaining finished lots. The 22 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, 90 lots will be valued. The lots within Sumac Ridge contain an average of 7,200 square feet.
We have searched the area and found the seven transactions summarized in the Addenda to be most comparable to the subject property. 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 phy sically 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 most recent residential land transaction in the area. Pulte Homes purchased the site within the master plan of Stratford Ranch in Perris, about 1 4 miles north of the subject property in the City of Perris. T he lands were unimproved with an approved final map for 90 lots with a minimum lot size of 6,000 square feet. Stratford Ranch includes 400+ acres of mixed-use land being developed by Mission Pacific who is selling off tracts to builders with Richmond Ameri can and Pulte Homes purchasing land in the master plan along with IDI purchasing an industrial site for a logistics center. Pulte Item Title: 12.1
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Homes purchased the 90 lots for $4,906,130 or $54,513 per lot based on a reported estimated finished lot price of $225,000 ass uming a similar CFD. In comparison to the subject site, this site is considered to be inferior in location (Perris median price home - $488,000 - is over seven percent less than Menifee median price home - $525,000), inferior in lot size (6,000 minimum lot s versus the subject’s average 7,200 square foot) and, slightly inferior in condition. The subject lots are nearly finished while this land was unimproved at time of sale. While finishing costs are taken into consideration, there is additional risk associated with the grading and development of the raw land.
Land Sale No. 2 refers to the most recent sale within Menifee with D.R. Horton purchasing 446 lots known as Canterwood Phase 1 located at the southeast corner of Holland Road and Leon Road, about 2.5 miles northeast of the subject site. D.R. Horton purchased the 446 lots from Ambient with the closing occurring in April 2022. They paid $6,000,000 or $13,453 per lot based on an estimated finished lot price of $175,000 per brokers familiar with the transaction. The significant development costs include street improvements to the site along with drainage and significant grading, which will include importing dirt on the property. D.R. Horton is advertising their Sycamore and Juniper communities on the site along with Willow Pointe at Canterwood, all stating “coming soon” on their websites. The finished lot price assumes a similar CFD on this transaction. In comparison to the subject property, this site is considered to be inferior in condition. While the finishing costs are anticipated, the raw nature of the site along with the drainage and import needed creates a significant amount of risk in the development of the site. This transaction is also considered to be inferior in lot size. Canterwood has lot sizes ranging from 4,700 to 6,500 square feet, the subject lot sizes average 7,200 square feet.
Land Sale No. 3 refers to the purchase of 220 single family detached lots with a minimum lot size of 6,000 square feet located about four miles 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 purc hase to D.R. Horton) 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 Item Title: 12.1
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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 inferior due to condition and lot size. The site was sold in an unimprove d condition, thus there is risk associated with the development of the site. In addition, the lots are minimum 6,000 square feet compared to the subject’s 7,200 average square feet.
Land Sale No. 4 refers to the sale of the property known as Rockport Ranc h which is located 2.5 miles south of the subject at the southwest corner of Old Newport and Briggs Road in 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 Abacherl i Family for $5,500,000 which equates to $18,033 per lot based on reported finished lot prices ranging from $181,000 for the cluster lots, $205,000 for the 5,000 square foot lots, $208,000 for the 6,000 square foot lots and $213,000 for the 6,500 square foot lots. The high development costs are due to the requirement of the lakes and amenities within the project. The property sold in an unimproved condition with an approved tentative tract map. The community will have a similar CFD as the subject with similar overall tax rates. In comparison to the subject property, this transaction is considered to be similar in location however inferior in lot size and inferior due to the raw land nature of this site. While costs are taken into account in our analysis, the risk associated with the development of the site is not.
Land Sale No. 5 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 Wickerd Road, just west of Leon about 1.25 miles northeast 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 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 Item Title: 12.1
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the appreciation in the subject market between November 2020 and November 2021.
Braverde has a similar CFD to the subject property. In comparison to the subject property, these lots are considered to be inferior due to the lot size (5,000 minimum square feet versus the subject’s 7,200 average square feet).
Land Sale No. 6 refers to the sale of 129 single family detached lots located southwest of Domenigoni Parkway and Rice Road in Winchester about five miles northeast of the subject property. D.R. Horton purchased the 6,0 00 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 inferior (further out for commuters), the lots are smaller (6,000 square foot com pared to the subject’s 7,200 square foot average size) which is inferior, and the condition of the lands was inferior at time of sale as it was unimproved land at time of sale. While costs are considered, there is risk associated with the grading of a site.
Land Sale No. 7 refers to the purchase of 756 lots known as Cimarron Ridge, located about seven miles northwest of the subject property at the northwest corner of Valley Boulevard and Chambers Avenue in Menifee. The site was entitled and mass graded prior to the Great Recession then sat for many years due to both the economy and the hilly nature of the site, which increased the cost of land development on the site. The recent appreciation in the marketplace made the property once again feasible to develop.
Pulte Homes has purchased the 756 lots, ranging in size from 5,000 to 10,000 square feet, from Van Daele Homes. Van Daele rough graded the property prior to sale along with mapping the site. Pulte Homes 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 in condition. While finishing costs are considered, there is risk associated with developing raw land.
Item Title: 12.1
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The chart below summarizes the considerations used in adjusting the market data to the subject lot.
Data
No.
Location
Date of
Sale Lot Size Finished
Lot Price Comparison to Subject
1 Perris 11/22 6,000 $225,000 Inferior – Condition, Location & Lot Size
2 Menifee 4/22 5,000-
7,000 $175,000 Inferior – Condition & Lot Size
3 Winchester 4/22 6,000 $213,000 Inferior – Condition & Lot Size 4 Menifee 12/21 Cluster –
5,500
$181,000 -
$213,000 Inferior – Condition & Lot Size
5 Winchester 10/21 5,000 –
7,000 $215,000 Inferior – Lot Size
6 Winchester 8/21 6,000 $202,000 Inferior – Condition & Lot Size 7 Menifee 7/21 5,000 –
10,000 $185,000 Inferior – No. of Lots & Condition
The market data has an overall finished lot range from $170,000 to $225,000. Data No. 1, at the high end of the range refers to the most recent sale in an inferior location with inferior lot sizes. When reviewing the sales, there is a clear appreciation shown between May 2021 and November 2022. When pairing Data Numbers 3 and 6 it suggests there was a 5 percent increase between August 2021 and April 2022. The largest lots within Data No. 4, which sold for $213,000 finished, are considered to be the most similar to the subject property, however this transaction closed in December 2021. The decrease in housing prices in the past few months due to the significant increase in interest rates suggests that residential land prices would also decrease, however we have not seen that in the market data yet. While residential land transactions in the Menifee area have slowed and some stopped, we do not have evidence of a decrease in pricing at this time.
In contrast, homebuilders are showing more optimism and home prices have risen the past couple months. The latest sale occurred in November 2022 for a property with smaller lots (6,000 square feet versus the subject’s 7,200 average square feet) and in an inferior location in Perris. The above market data is considered to be good.
Item Title: 12.1
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Value Conclusion – Residential Lots
Based on the above analysis the value conclusion for the subject builder -owned lots are as follows:
90 Lots x $225,000 $ 20,250,000
Less: Remaining Costs (90 x $26,625.88) ( 2,396,329) Current Value for Remaining 90 Lots $ 17,853,671
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 D CF 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 determine the builder - owned bulk value. This DCF analysis will be followed by a reporting of the concluded values for the individually owned homes using the concluded base retail value for each plan with a separate check of the analysis utilizing a mass appraisal technique based on actual sales prices of the homes and considering any re-sale market data.
Sumac Ridge consists of 78 individually owned homes, four model homes ( none in escrow), three production homes over 95 complete ( all in escrow), 22 homes under construction (10 in escrow), and 68 additional finished lots (none in escrow). The finished lots along with the homes under construction have been valued above. The seven builder- owned homes over 95 percent complete (including four model homes) are being addressed in this section with a separate valuation for each plan.
Below is a summary of the floor plans within Sumac Ridge. A listing of the improved residential comparable properties is l ocated in the Addenda of this report. All of the improved residential properties are located within the Menifee/Winchester/French Valley Item Title: 12.1
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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 Sumac Ridge.
Sumac Ridge by Meritage Homes
Plan Bd/Ba Floors/
Parking
Sq.
Ft.
Ind.
Owned
Bldr.
Owned
Sage Plan 1 (S1) 4 / 2.5 1 / 2 1,910 8 0
Sage Plan 2 (S2) 4 / 3 2 / 2 2,320 9 1*
Sage Plan 3 (S3) 4 / 3 2 / 2 2,541 10 0
Sage Plan 4 (S4) 4 / 3 2 / 2 2,771 10 1*
Sage Plan 5 (S5) 5 / 3 2 / 2 2,948 11 0
Cedar Plan 1 (C1) 4 / 3 1 / 2 2,527 12 1*
Cedar Plan 2 (C2) 4 / 3 2 / 3 2,992 9 2
Cedar Plan 3 (C3) 5 / 3.5 2 / 3 3,247 9 2*
Total 78 7
*One of each plan is a model home. In addition to the above there are 22 homes under construction (less than 95 percent complete) and 68 additional finished lots.
The most appropriate new home comparable data for Sage Plan S1 are shown below.
Data Model Rm. Ct. Flrs/Pkg. Sq. Ft. Price/SF
Subj. S1 4 / 2.5 1 / 2 1,910 --
1 S2 4 / 3 2 / 2 2,320 $241.81
3 2 3 / 2 1 / 2 1,740 $309.19
3 3 3 / 2 1 / 2 2,080 $266.82
8 1 3 / 2 1 / 2 1,939 $267.31
9 1 3 / 2 1 / 2 1,764 $274.26
10 1 3 / 2 1 / 2 2,191 $252.85
13 4 3 / 2 1 / 2 1,927 $259.98
14 2 3 / 2 1 / 2 1,751 $280.98
14 3 4 / 2 1 / 2 2,026 $261.59
16 1 4 / 2 1 / 2 2,028 $285.99
All new home comparables are located within Menifee, Winchester, and French Valley. 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 $241.81 to $309.19 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. Sage Plan S1 has a current Item Title: 12.1
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base asking price of $289.53 per square foot. There have been eight closings of Plan S1 with sales prices ranging from $272.25 to $311.84 per square foot. There are currently no escrows of Plan S 1. 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 Sage Plan S1 has a base current market value of $270.00 per square foot. This calculates as follows:
1,910 sf x $270.00 = $515,700
The most appropriate new home comparable data for Sage Plan S2 are shown below.
Data Model Rm. Ct. Flrs/Pkg. Sq. Ft. Price/SF
Subj. S2 4 / 3 2 / 2 2,320 --
1 S3 4 / 3 2 / 2 2,541 $225.50
4 1 4 / 3 2 / 2 2,480 $237.50
6 1 3 / 2.5 2 / 2 2,370 $235.86
9 2 4 / 3 2 / 2 2,443 $227.04
11 1 4 / 2.5 2 / 2 2,391 $233.79
13 5 4 / 2.5 2 / 2 2,519 $220.72
17 2 4 / 3 2 / 2 2,203 $240.53
17 3 4 / 3 2 / 2 2,419 $224.94
All new home comparables are located within Menifee, Winchester, and French Valley. 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 $220.72 to $240.53 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. Sage Plan S2 has a current base asking price of $241.81 per square foot. There have been nine closings of Plan S2 with sales prices ranging from $235.00 to $260.95 per square foot. There are currently two escrows of Plan S2 with a price range of $249.65 to $257.20 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 Item Title: 12.1
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has been concluded that Sage Plan S2 has a base current market value of $2 36.00 per square foot. This calculates as follows:
2,320 sf x $236.00 = $547,520
The most appropriate new home comparable data for Sage Plan S3 are shown below.
Data Model Rm. Ct. Flrs/Pkg. Sq. Ft. Price/SF
Subj. S3 4 / 3 2 / 2 2,541 --
1 S2 4 / 3 2 / 2 2,320 $241.81
1 S4 4 / 3 2 / 2 2,771 $211.48
4 1 4 / 3 2 / 2 2,480 $237.50
6 2 3 / 2.5 2 / 2 2,680 $215.67
9 2 4 / 3 2 / 2 2,443 $227.04
9 3 4 / 3 2 / 2 2,612 $221.44
11 2 4 / 2.5 2 / 2 2,654 $221.93
13 6 4 / 2.5 2 / 2 2,537 $211.27
16 2 4 / 3 2 / 2 2,429 $261.42
17 4 4 / 3 2 / 2 2,590 $231.32
All new home comparables are located within Menifee, Winchester, and French Valley. 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 $211.27 to $261.42 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. Sage Plan S3 has a current base asking price of $225.50 per square foot. There have been ten closings of Plan S3 with sales prices ranging from $ 217.63 to $244.47 per square foot. There are currently two escrows of Plan S3 with a price range of $226.56 to $235.61 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 Sage Plan S3 has a base current market value of $2 20.00 per square foot. This calculates as follows:
2,541 sf x $220.00 = $559,020
Item Title: 12.1
Community Facilities District 2021-2, Sumac Ridge, Issuance of Special Tax Bonds Item Page Number: 270
Menifee Mayor and City Council
August 16, 2023
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The most appropriate new home comparable data for Sage Plan S4 are shown below.
Data Model Rm. Ct. Flrs/Pkg. Sq. Ft. Price/SF
Subj. S4 4 / 3 2 / 2 2,771 --
1 S3 4 / 3 2 / 2 2,541 $225.50
1 S5 5 / 3 2 / 2 2,948 $203.87
4 2 4 / 3 2 / 2 2,730 $228.57
6 2 3 / 2.5 2 / 2 2,680 $215.67
7 1 3 / 2.5 2 / 2 2,780 $219.78
8 3 4 / 2.5 2 / 2 2,835 $216.22
11 2 4 / 2.5 2 / 2 2,654 $221.93
11 3 5 / 3 2 / 2 2,824 $208.57
12 1 4 / 2.5 2 / 3 2,845 $213.00
13 7 5 / 3 2 / 2 2,874 $202.15
16 3 5 / 3 2 / 2 2,716 $240.42
All new home comparables are located within Menifee, Winchester, and French Valley. 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 $202.15 to $240.42 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. Sage Plan S4 has a current base asking price of $211.48 per square foot. There have been ten closings of Plan S4 with sales prices ranging from $ 206.42 to $228.16 per square foot. There are currently two escrows of Plan S4 with a price range of $211.76 to $217.79 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 Sage Plan S4 has a base current market value of $2 08.00 per square foot. This calculates as follows:
2,771 sf x $208.00 = $576,368
The most appropriate new home comparable data for Sage Plan S5 are shown below.
Item Title: 12.1
Community Facilities District 2021-2, Sumac Ridge, Issuance of Special Tax Bonds Item Page Number: 271
Menifee Mayor and City Council
August 16, 2023
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Data Model Rm. Ct. Flrs/Pkg. Sq. Ft. Price/SF
Subj. S5 5 / 3 2 / 2 2,948 --
1 S4 4 / 3 2 / 2 2,771 $211.48
2 C2 4 / 3 2 / 3 2,992 $208.89
4 3 5 / 3.5 2 / 2 2,940 $216.32
7 2 3 / 2.5 2 / 2 2,910 $220.96
8 3 4 / 2.5 2 / 2 2,835 $216.22
11 3 5 / 3 2 / 2 2,824 $208.57
12 1 4 / 2.5 2 / 3 2,845 $213.00
12 2 (NG) 5 / 3.5 2 / 3 3,047 $208.40
13 8 5 / 3 2 / 2 2,882 $193.27
16 4 5 / 3 2 / 2 3,016 $212.20
All new home comparables are located within Menifee, Winchester, and French Valley. 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 $193.27 to $220.96 per square foot. Sage Plan S5 has a current base asking price of $203.87 per square foot. There have been 11 closings of Plan S5 with sales prices ranging from $201.27 to $219.62 per square foot. There is currently one escrow of Plan S5 with a price of $209.06 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 Sage Plan S5 has a base current market value of $198.00 per square foot. This calculates as follows:
2,948 sf x $198.00 = $583,704
The most appropriate new home comparable data for Cedar Plan C1 is shown below.
Data Model Rm. Ct. Flrs/Pkg. Sq. Ft. Price/SF
Subj. C1 4 / 3 1 / 2 2,527 --
1 S3 4 / 3 2 / 2 2,541 $225.50
5 2 3 / 2.5 1 / 2 2,490 $246.18
5 3 3 / 2.5 1 / 2 2,610 $229.11
8 2 5 / 3.5 1 / 2 2,752 $222.94
10 3 3 / 2.5 1 / 3 2,462 $238.01
14 6 4 / 2 1 / 2 2,387 $225.38
15 1 5 / 3 1 / 2 2,641 $258.99
Item Title: 12.1
Community Facilities District 2021-2, Sumac Ridge, Issuance of Special Tax Bonds Item Page Number: 272
Menifee Mayor and City Council
August 16, 2023
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All new home comparables are located within Menifee, Winchester, and French Valley. 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 $222.94 to $258.99 per square foot. Cedar Plan C1 has a current base asking price of $243.37 per square foot. There have been 12 closings of Plan C1 with sales prices ranging from $235.46 to $257.90 per square foot.
There is currently one escrow of Plan C1 with a price of $250.22 per square foot. It should be noted that the reported sales prices include upgrades, premiums, and options along with any concessions given by the builder, while the concluded value relates to a base price for the plan. All of the homes appear to be in excellent condition with no depreciation visible. It has been concluded that Cedar Plan C1 has a base current market value of $238.00 per square foot. This calculates as follows:
2,527 sf x $238.00 = $601,426
The most appropriate new home comparable data for Cedar Plan C2 are shown below.
Data Model Rm. Ct. Flrs/Pkg. Sq. Ft. Price/SF
Subj. C2 4 / 3 2 / 3 2,992 --
1 S5 5 / 3 2 / 2 2,948 $203.87
4 3 5 / 3.5 2 / 2 2,940 $216.32
6 3 4 / 2.5 2 / 2 3,040 $197.04
7 2 3 / 2.5 2 / 2 2,910 $220.96
7 3 3 / 2.5 2 / 3 3,020 $217.88
8 3 4 / 2.5 2 / 2 2,835 $216.22
12 1 4 / 2.5 2 / 3 2,845 $213.00
12 2 (NG) 5 / 3.5 2 / 3 3,047 $208.40
13 8 5 / 3 2 / 2 2,882 $193.27
16 4 5 / 3 2 / 2 3,016 $212.20
All new home comparables are located within Menifee, Winchester, and French Valley. 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 $193.27 to $220.96 per square foot. Cedar Item Title: 12.1
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Plan C2 has a current base asking price of $208.89 per square foot. There have been nine closings of Plan C2 with sales prices ranging from $ 198.90 to $212.76 per square foot.
There are currently two escrows of Plan C2 with a price range of $207.22 to $215.57 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 Cedar Plan C2 has a base current market value of $204.00 per square foot. This calculates as follows:
2,992 sf x $204.00 = $610,368
The most appropriate new home comparable data for Cedar Plan C3 are shown below.
Data Model Rm. Ct. Flrs/Pkg. Sq. Ft. Price/SF
Subj. C3 5 / 3.5 2 / 3 3,247 --
2 C2 4 / 3 2 / 3 2,992 $208.89
6 3 4 / 2.5 2 / 2 3,040 $197.04
7 4 4 / 2.5 2 / 2 3,040 $206.58
7 5 4 / 3.5 2 / 3 3,510 $192.30
8 4 (NG) 5 / 3.5 2 / 3 3,146 $211.70
12 2 (NG) 5 / 3.5 2 / 3 3,047 $208.40
12 3 (NG) 5 / 3.5 2 / 3 3,237 $199.56
15 2 5 / 4 2 / 2 3,336 $214.03
All new home comparables are located within Menifee, Winchester, and French Valley. 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 $192.30 to $214.03 per square foot. Cedar Plan C3 has a current base asking price of $199.57 per square foot. There have been nine closings of Plan C3 with sales prices ranging from $ 200.80 to $219.05 per square foot.
There are currently three escrows of Plan C3 with a price range of $204.28 to $210.44 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 Item Title: 12.1
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no depreciation visible. It has been concluded that Cedar Plan C3 has a base current market value of $195.00 per square foot. This calculates as follows:
3,247 sf x $195.00 = $633,165
Builder-Owned Retail Values – Sumac Ridge by Meritage Homes
Within Sumac Ridge there are three remaining builder-owned homes over 95 percent complete (all three of which are in escrow), and four builder-owned model homes (none of which are in escrow ). Per interviews with builders, upgrades, and landscape/hardscape of up to $100,000 are instal led 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 t he 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 Sumac Ridge are calculated as follows:
Plan S1 (0 x $515,700) $ 0
Plan S2 (1 x $547,520) 547,520
Plan S3 (0 x $559,020) 0
Plan S4 (1 x $576,368) 576,368
Plan S5 (0 x $583,704) 0
Plan C1 (1 x $601,426) 601,426
Plan C2 (2 x $610,368) 1,220,736
Plan C3 (2 x $633,165) 1,266,330
Model Upgrades (4 x 50,000) 200,000
Retail Value $ 4,412,380
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. Sumac Ridge opened for sale in May of 2022. There have been 91 sales since then, suggesting an average absorption of 7.0 sales per month across the two product lines (or approximately 2.8 sales per month at Cedar, and 4.2 sales per month at Sage) which is considered to be average. Three of the seven builder-owned homes are in escrow. Taking Item Title: 12.1
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into consideration the product, current escrows, current market conditions and the concluded sales prices, it is the appraiser’s opinion that the seven builder-owned homes will be absorbed within a two-month period at the concluded values.
Remaining Costs
As discussed under the property description section there are $26 ,625.88 in remaining land development costs and fees per lot associated with the builder-owned property. For the seven builder-owned homes, this equates to $186,381 ($26,625.88 x 7) in remaining costs. For purposes of this analysis, we are assuming the remaining costs will be spread evenly over the two-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. Eight percent has been estimated for marketing expenses for the home and two percent for general and administrative costs for a total of ten 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 Item Title: 12.1
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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
The homes within Sumac Ridge began selling in May of 2022 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 Sumac Ridge is $3,302,189.
Sumac Ridge – Total Builder-Owned Property Value
The builder-owned lands within Sumac Ridge consists of four models along with three production homes over 95 percent complete and 90 lots, 22 of which are under construction (under 95 percent complete), owned by Meritage. The final valuation of the builder- owned property is:
90 Lots $ 17,853,671
7 Houses 3,302,189
Total Meritage Ownership $ 21,155,860
Sumac Ridge – Individual Owned Homes Valuation Conclusion There are 78 individually owned homes within the subject. Based on the concluded value for each plan, the individually owned homes within the subject portion of Sumac Ridge are:
Plan S1 (8 x $515,700) $ 4,125,600
Plan S2 (9 x $547,520) 4,927,680
Plan S3 (10 x $559,020) 5,590,200
Plan S4 (10 x $576,368) 5,763,680
Plan S5 (11 x $583,704) 6,420,744
Plan C1 (12 x $601,426) 7,217,112
Plan C2 (9 x $610,368) 5,493,312
Plan C3 (9 x $633,165) 5,698,485
Total Individual Owned $45,236,813
Item Title: 12.1
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In an additional review, we have reviewed the original builder sales prices for the homes within the subject. Closings for the 78 homes occurred between November 2022 and June 2023. The reported closing prices by the builder for the individually owned homes total $47,209,737.08. 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 market value as it takes into considerat ion 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 purchase 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.
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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 -2 proposed for 175 single-family detached homes on minimum 5,000 square foot lots, being built out into the community known as Sumac Ridge in the City of Menifee, County of Riverside . The neighborhood is being built and sold by Meritage Homes and includes two different product lines with Cedar generally situated on the northern half of the tract and Sage generally situated on the southern half of the tract.
Sumac Ridge opened for sale in May of 2022 and is currently selling. Out of the total 175 proposed homes, 78 are completed and have closed to individuals with an additional 13 homes in escrow. The remainder of the lots range from completed model homes to production homes over 95 percent complete to homes under construction to finished lots.
We have reviewed the builder’s sales information and reviewed the areas Multiple Listing Service along with a physical inspection with no resales and no resale listings found.
The subject property was valued using the Sales Comparison Approach to value and a mass appraisal technique. A minimum value was determined for the existing homes by concluding at a base value for each plan. The valuation took into account the improvements/benefits to be funded by Menifee CFD No. 2021- 2 bond proceeds along with the Menifee CFD No. 2021- 2 special tax lien. As a result of our investigation, the concluded market value for the subject property is shown below.
Sumac Ridge by Meritage Homes
Meritage Homes Ownership (7 houses & 90 lots) $ 21,155,860 Individual Owners (78 houses) $ 45,236,813
Total Aggregate Value $ 66,392,673
The above values are stated subject to the Assumptions and Limiting Conditions of this report, the Appraiser’s Certification and as of June 19, 2023.
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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)
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ADDENDA
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MENIFEE CFD NO. 2021-2
BOUNDARY MAP
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TRACT MAP NO. 37668
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DISCOUNTED CASH FLOW ANALYSIS
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Sumac Ridge Builder-Owned Houses Discounted Cash Flow Analysis
MONTH Months MONTH 1 MONTH 2 TOTAL
2 INCOME:
Retail Sales 4,412,380 $2,206,190 $2,206,190 $4,412,380
TOTAL INCOME $2,206,190 $2,206,190 $4,412,380
EXPENSES:
Remaining Costs ($93,190) ($93,191) ($186,381)
Marketing & Carrying Expenses 10% ($220,619) ($220,619) ($441,238) Profit 10% ($220,619) ($220,619) ($441,238)
TOTAL EXPENSES ($534,428) ($534,429) ($1,068,857)
NET CASH FLOW $1,671,762 $1,671,761 $3,343,523
Discount Factor 10% 0.9917 0.9835
DISCOUNTED CASH FLOW $1,657,946 $1,644,243 $3,302,189
CUMULATIVE DISCOUNTED $1,657,946 $3,302,189 $3,302,189
CASH FLOW
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RESIDENTIAL LAND SALES MAP
& SUMMARY CHART
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FINISHED LOT LAND SALES SUMMARY MAP
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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 Stratford Ranch, Evans Road and
Ramona Expressway, Perris /
302-150-049 / Pulte Homes /
Mission Pacific
11 / 22 90 6,000
$4,906,130
$225,000
Closed with an approved
Final Map in an
unimproved condition. $54,513
2 Canterwood Phase 1, SEC
Holland Road and Leon Road,
Menifee / 466-310-026 / D.R.
Horton / Ambient
4 / 22 446 5,000-
7,000
$6,000,000
$175,000
Closed with an approved
Final Map in an
unimproved condition.
Extensive offsites needed
(increased risk).
$13,453
3 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
4 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
5 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
6 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
7 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
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IMPROVED RESIDENTIAL SALES MAP
& SUMMARY CHART
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IMPROVED RESIDENTIAL SALES MAP
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IMPROVED 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 Sage at Sumac Ridge / NE of
Scott Road and Menifee Road,
Menifee / Meritage Homes
S1 4 / 2.5 1 / 2 1,910 $553,000 $289.53
S2 4 / 3 2 / 2 2,320 5,000 sf lots $561,000 $241.81
S3 4 / 3 2 / 2 2,541 4.2 sales/mo $573,000 $225.50
S4 4 / 3 2 / 2 2,771 $586,000 $211.48
S5 5 / 3 2 / 2 2,948 $601,000 $203.87
2 Cedar at Sumac Ridge / NE of
Scott Road and Menifee Road,
Menifee / Meritage Homes
C1 4 / 3 1 / 2 2,527 7,000 sf lots $615,000 $243.37
C2 4 / 3 2 / 3 2,992 2.8 sales/mo $625,000 $208.89
C3 5 / 3.5 2 / 3 3,247 $648,000 $199.57
3 Seasons Ranch at Braverde /
Wickerd Road and El Centro
Lane, Menifee / Richmond
American
1 2 / 2 1 / 2 1,410 5,000 sf lots $511,990 $363.11
2 3 / 2 1 / 2 1,740 3.3 sales/mo $537,990 $309.19
3 3 / 2 1 / 2 2,080 $554,990 $266.82
4 Heritage at Braverde / Wickerd
Road and El Centro Lane,
Menifee / Richmond American
1 4 / 3 2 / 2 2,480 5,000 sf lots $588,990 $237.50
2 4 / 3 2 / 2 2,730 3.6 sales/mo $623,990 $228.57
3 5 / 3.5 2 / 2 2,940 $635,990 $216.32
5 Liberty at Braverde / Wickerd
Road and El Centro Lane,
Menifee / Richmond American
1 3 / 2.5 1 / 2 2,290 6,500 sf lots $583,990 $255.02
2 3 / 2.5 1 / 2 2,490 3.5 sales/mo $612,990 $246.18
3 3 / 2.5 1 / 2 2,610 $597,990 $229.11
6 Seasons Elevated at Braverde /
Wickerd Road and El Centro
Lane, Menifee / Richmond
American
1 3 / 2.5 2 / 2 2,370 5,500 sf lots $558,990 $235.86
2 3 / 2.5 2 / 2 2,680 3.6 sales/mo $577,990 $215.67
3 4 / 2.5 2 / 2 3,040 $598,990 $197.04
7 Legacy at Braverde / Wickerd
Road and El Centro Lane,
Menifee / Richmond American
1 3 / 2.5 2 / 2 2,780 $610,990 $219.78
2 3 / 2.5 2 / 2 2,910 7,200 sf lots $642,990 $220.96
3 3 / 2.5 2 / 3 3,020 2.9 sales/mo $657,990 $217.88
4 4 / 2.5 2 / 2 3,040 $627,990 $206.58
5 4 / 3.5 2 / 3 3,510 $674,990 $192.30
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8 South Shore at Rockport Ranch /
SWC of Old Newport Road and
Briggs Road Menifee / Lennar
1 3 / 2 1 / 2 1,939 $518,315 $267.31
2 5 / 3.5 1 / 2 2,752 6,000 sf lots $613,520 $222.94
3 4 / 2.5 2 / 2 2,835 8.0 sales/mo $612,995 $216.22
4 (NG) 5 / 3.5 2 / 3 3,146 $666,005 $211.70
5 (NG) 7 / 4.5 2 / 3 4,134 $786,740 $190.31
9 North Shore at Rockport Ranch /
SWC of Old Newport Road and
Briggs Road Menifee / Lennar
1 3 / 2 1 / 2 1,764 5,000 sf lots $483,795 $274.26
2 4 / 3 2 / 2 2,443 5.6 sales/mo $554,650 $227.04
3 4 / 3 2 / 2 2,612 $578,410 $221.44
10 Heritage at Banner Park /
Domenigoni Pkwy and
Lindenberger Road, Menifee /
Pulte Homes
1 3 / 2 1 / 2 2,191 7,900 sf lots $553,990 $252.85
2 3 / 2.5 1 / 2 2,311 3.7 sales/mo $566,990 $245.34
3 3 / 2.5 1 / 3 2,462 $585,990 $238.01
11 Merit at Banner Park /
Domenigoni Pkwy and
Lindenberger Road, Menifee /
Pulte Homes
1 4 / 2.5 2 / 2 2,391 6,000 sf lots $558,990 $233.79
2 4 / 2.5 2 / 2 2,654 3.5 sales/mo $588,990 $221.93
3 5 / 3 2 / 2 2,824 $588,990 $208.57
12 Crest at Banner Park /
Domenigoni Pkwy and
Lindenberger Road, Menifee /
Pulte Homes
1 4 / 2.5 2 / 3 2,845 6,500 sf lots $605,990 $213.00
2 (NG) 5 / 3.5 2 / 3 3,047 4.0 sales/mo $634,990 $208.40 3 (NG) 5 / 3.5 2 / 3 3,237 $645,990 $199.56
13 Cheyenne at Olivebrook / Leon
Road and Olive Avenue,
Winchester / KB Home
1 3 / 2 1 / 2 1,383 $484,990 $350.68
2 3 / 2 1 / 2 1,551 $479,990 $309.47
3 3 / 2 1 / 2 1,771 4,000 sf lots $490,990 $277.24
4 3 / 2 1 / 2 1,927 9.1 sales/mo $500,990 $259.98
5 4 / 2.5 2 / 2 2,519 $555,990 $220.72
6 4 / 2.5 2 / 2 2,537 $535,990 $211.27
7 5 / 3 2 / 2 2,874 $580,990 $202.15
8 5 / 3 2 / 2 2,882 $556,990 $193.27
14 Rock Meadows at Olivebrook /
Leon Road and Olive Avenue,
Winchester / KB Home
1 3 / 2 1 / 2 1,470 $494,990 $336.73
2 3 / 2 1 / 2 1,751 $491,990 $280.98
3 4 / 2 1 / 2 2,026 6,000 sf lots $529,990 $261.59
4 4 / 2 1 / 2 2,035 6.0 sales/mo $509,990 $250.61
5 4 / 2 1 / 2 2,378 $557,990 $234.65
6 4 / 2 1 / 2 2,387 $537,990 $225.38
Item Title: 12.1
Community Facilities District 2021-2, Sumac Ridge, Issuance of Special Tax Bonds Item Page Number: 294
Menifee Mayor and City Council
August 16, 2023
Page
732 of 759
15 Eagle Vista / SW of Washington
Street and Keller Road, French
Valley / Pulte Homes
1 5 / 3 1 / 2 2,641 $683,990 $258.99
2 5 / 4 2 / 2 3,336 7,000 sf lots $713,990 $214.03
3 6 / 4 2 / 2 3,699 3.2 sales/mo $773,990 $209.24
4 6 / 4.5 2 / 2 3,961 $793,990 $200.45
16 Rosa at Siena / SE of
Washington Street and Keller
Road, French Valley / Taylor
Morrison
1 4 / 2 1 / 2 2,028 $579,990 $285.99
2 4 / 3 2 / 2 2,429 6,000 sf lots $634,990 $261.42
3 5 / 3 2 / 2 2,716 2.5 sales/mo $652,990 $240.42
4 5 / 3 2 / 2 3,016 $639,990 $212.20
17 Prairie Crossing Meadow View /
Domenigoni Pkwy and Prairie
Crossing Dr, Winchester / Lennar
1 3 / 2.5 2 / 2 1,823 $496,810 $272.52
2 4 / 3 2 / 2 2,203 5,500 sf lots $529,880 $240.53
3 4 / 3 2 / 2 2,419 4.3 sales/mo $544,130 $224.94
4 4 / 3 2 / 2 2,590 $599,108 $231.32
Item Title: 12.1
Community Facilities District 2021-2, Sumac Ridge, Issuance of Special Tax Bonds Item Page Number: 295
Menifee Mayor and City Council
August 16, 2023
Page
733 of 759
APPRAISER’S QUALIFICATIONS
Item Title: 12.1
Community Facilities District 2021-2, Sumac Ridge, Issuance of Special Tax Bonds Item Page Number: 296
Menifee Mayor and City Council
August 16, 2023
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QUALIFICATIONS OF KITTY S. SIINO, MAI
Education
Bachelor of Arts in Business Administration, Financial Investments, California State University, Long Beach, California (1980)
Post-Graduate Study, Real Estate Development, University of California, Irvine, California
Appraisal Institute Classes: Uniform Standards of Professional Appraisal Practice, A & B; Appraisal Principles; Appraisal Procedures; Basic Income Capitalization; Advanced Income Capitalization; Narrative Report Writing; Advanced Applications, Case Studies.
Successfully completed all classes in addition to successfully completing the writing of a Demonstration Report and taking the Comprehensive Exam. Became a Member of the Appraisal Institute in December 1996. Have completed over 100 hours of continuing education through the Appraisal Institute every five years.
Employment
1988 - Present:
Self-Employed Real Estate Appraiser. Duties include the appraisal of various types of properties such as commercial, retail, industrial and vacant land. More complex assignments include easements, right-of-ways and special assessment districts. From 1996 to present, specialized in special assessment districts and community facilities districts appraisals for public entities, including Jurupa Community Services District, Corona Norco Unified School District, City of Corona, City of Chula Vista, City of Sa n Marcos and City of Moreno Valley.
1986-1988:
Project Manager of Development for Ferguson Partners, Irvine, California. Duties included land acquisitions; review of fee appraisals and valuations; analysis of proposed development; planning and design; and management of development, construction and lease-up. The types of properties developed were commercial and industrial. Duties ranged from raw, vacant site development through property management of recently developed projects.
1981 - 1986
Manager of Finance, Construction for Community Development Division, The Irvine Company, Irvine, California. Duties included originating and managing a newly formed division of finance to bridge between the accounting functions and project management functions. Wor ked 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: 12.1
Community Facilities District 2021-2, Sumac Ridge, Issuance of Special Tax Bonds Item Page Number: 297
Menifee Mayor and City Council
August 16, 2023
Page
735 of 759
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: 12.1
Community Facilities District 2021-2, Sumac Ridge, Issuance of Special Tax Bonds Item Page Number: 298
Menifee Mayor and City Council
August 16, 2023
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736 of 759
CITY OF MENIFEE
SUBJECT: League of California Cities Annual Conference, General Assembly Voting Delegate Appointments
MEETING DATE: August 16, 2023
TO: Mayor and City Council
PREPARED BY: Stephanie Roseen, Acting City Clerk
REVIEWED BY: Stephanie Roseen, Acting City Clerk
APPROVED BY: Armando G. Villa, City Manager
-------------------------------------------------------------------------------------------------------------------------------
RECOMMENDED ACTION
1. Appoint two Councilmembers as voting delegate and alternate at the League of California Cities Annual Conference, General Assembly scheduled for September 22, 2023, in Sacramento; and
2. Authorize the City Clerk to complete and return the voting delegate/alternate form to the League of California Cities.
DISCUSSION
The League of California Cities (Cal Cities) will be holding its Annual Conference and Expo in Sacramento on September 20-22, 2023. Every year Cal Cities convenes a member-driven General Assembly which provides city officials a chance to participate in the development of Cal Cities policy. For the City of Menifee to vote on matters during the General Assembly, a voting delegate and alternate must be appointed. To qualify as the voting delegate, the appointee(s) must be registered to attend the conference. The Councilmembers registered to attend the conference this year are Mayor Pro Tem Bob Karwin and Councilmember Lesa Sobek. Cal Cities must receive the voting delegate form no later than Monday, August 28, 2023.
New this year, Cal Cities will host a pre-conference information session to help explain the voting delegates roles.
At this time no resolutions have been received, however a petitioned resolution could still be submitted during the annual conference and would need to be considered and voted on during the annual business meeting.
Item Title: 12.2
League of California Cities Annual Conference, General Assembly Voting Delegate Appointments Item Page Number: 1
Menifee Mayor and City Council
August 16, 2023
Page
737 of 759
City of Menifee Staff Report
Cal Cities Annual Conference 2023 Voting Delegate
August 16, 2023