EXHIBIT A
2387
Department: Investments & Revenue Resources
Prepared By: Christina C Aguirre
Staff Member Presenting:
Armen Harkalyan, Executive Director of Finance
Reviewed By: Cecilia House, Armen Harkalyan
Approved By:
Submitted To: Council/OHA
Approved: _______________________________
Continued To: ___________________________
Denied: __________________________________
Item No: 19
SUBJECT: A RESOLUTION AUTHORIZING THE ISSUANCE OF CITY OF ONTARIO COMMUNITY FACILITIES DISTRICT NO. 41 (CANVAS PARK FACILITIES) SPECIAL TAX BONDS, SERIES 2022, IN AN AGGREGATE PRINCIPAL AMOUNT NOT TO EXCEED $15,000,000.00 AND RELATED MATTERS
CITY OF ONTARIO
Agenda Report
January 18, 2022
SECTION:
 
ADMINISTRATIVE
REPORTS/DISCUSSION/ACTION
RECOMMENDATION: That the City Council consider and adopt a Resolution authorizing the issuance of City of Ontario Community Facilities District No. 41 (Canvas Park Facilities) Special Tax Bonds, Series 2022.
A. Authorize the issuance of special tax bonds for public improvements required to facilitate the development of the Canvas Park Facilities project and the Ontario Ranch development; B. Approve the forms of the Indenture, the Bond Purchase Agreement, the Continuing Disclosure Agreement, and the Preliminary Official Statement; C. Authorize a negotiated sale of the special tax bonds to Stifel, Nicolaus & Company, Incorporated (the "Underwriter") in accordance with the terms of the Bond Purchase Agreement; and
D. Authorize the execution of the Indenture, the Bond Purchase Agreement, the Continuing Disclosure Agreement, the First Amendment to Acquisition and Funding Agreement, a deemed final certification in connection with the Preliminary Official Statement, a final Official Statement and other documents in connection with the issuance of the bonds by the City Manager or the other specified authorized officers.
THE FOLLOWING COUNCIL GOALS ARE BEING ACHIEVED:
Operate in a Businesslike Manner
Focus Resources in Ontario's Commercial and Residential Neighborhoods Ensure the Development of a Well Planned, Balanced, and Self-Sustaining Community in Ontario Ranch
FISCAL IMPACT: The use of Mello-Roos financing for public facilities in the residential development of the Canvas Park Facilities project in the Ontario Ranch development is estimated to generate approximately $15 million, based on current market interest rates, which will be used to help fund a 2388
portion of the public infrastructure improvements that will serve the project. The Resolution authorizing the issuance of City of Ontario Community Facilities District No. 41 (Canvas Park Facilities) Special Tax Bonds, Series 2022, and related matters, limits the principal amount of the bonds to $15 million. The City currently expects the bonds to be sold no later than February 2022; however, such schedule could change based on market volatility and market conditions. Since Mello-Roos bonds are not a direct obligation of the City and are paid from special taxes levied on each taxable parcel in the applicable community facilities district, there is no General Fund impact from the issuance of Mello-Roos bonds. Annual approval by the City Council will be required to process the special tax levies necessary to fund the ongoing debt service obligations of Ontario Community Facilities District No. 41 (Canvas Park Facilities).
BACKGROUND & ANALYSIS: The Mello-Roos Community Facilities Act of 1982 provides local government, with the requisite consent and approval from the property owners, the authority to establish community facilities districts for the purpose of levying special taxes to fund governmental services and to finance various kinds of public infrastructure facilities. Under the Mello-Roos Act, the initial steps in the formation of a community facilities district to finance public improvements are adopting a resolution declaring the City's intention to establish a community facilities district and levy special taxes, and a resolution to issue bonds. On April 7, 2020 the City Council, in accordance with the Mello-Roos Act, took the initial steps in the formation of the District with the adoption of Resolution No. 2020-032, declaring the City's intention to establish the District and to authorize the levy of special taxes. On May 19, 2020, the City Council adopted Resolution No. 2020-047 forming the District, and Resolution No. 2020-048 deeming it necessary for the District to incur bonded indebtedness. Based on a successful property owner election held on May 19, 2020, the City Council adopted Ordinance No. 3161 on June 2, 2020, authorizing the levy of special taxes within the District to finance public improvements related to the Canvas Park Facilities project. The public improvements to be financed by the District are as follows:
Fiber Optic System Distribution Network;
Water and Recycled Water System Facilities
Street and Traffic Circulation System Facilities
Storm Drain System Facilities
Ontario Ranch Road & Parkway Improvements; and
Other Regional Backbone Infrastructure.
The Canvas Park Facilities project addresses the residential development of approximately 45 gross acres located generally east of Haven Avenue, generally west of Hamner Avenue, and north of Ontario Ranch Road. At build out, the development is projected to include 532 attached units and 62 detached units.
The proposed Resolution references several bond documents and other matters related to the proposed issuance of bonds by City of Ontario Community Facilities District No. 41 (Canvas Park Facilities). The proposed Resolution also includes the execution and delivery of the First Amendment to Acquisition and Funding Agreement. The Acquisition Agreement has been amended to make particular segments eligible sooner to the Developer than they were in the original Agreement; the particular segments (SD-1, SD-2 and SD-3) were moved from the Third Community Facilities District Facilities list to the Second Community Facilities District list. The documents are 2389
listed below and are on file with the Records Management Department:
Indenture;
Bond Purchase Agreement;
Continuing Disclosure Agreement;
Preliminary Official Statement; and
First Amendment to Acquisition and Funding Agreement
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RESOLUTION NO. ________
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF ONTARIO,
CALIFORNIA, AUTHORIZING THE ISSUANCE OF CITY OF ONTARIO COMMUNITY FACILITIES DISTRICT NO. 41 (CANVAS PARK
FACILITIES) SPECIAL TAX BONDS, SERIES 2022, IN AN AGGREGATE PRINCIPAL AMOUNT OF NOT TO EXCEED $15,000,000, AUTHORIZING
THE EXECUTION AND DELIVERY OF AN INDENTURE, A BOND
PURCHASE AGREEMENT, A CONTINUING DISCLOSURE
AGREEMENT AND A FIRST AMENDMENT TO ACQUISITION AND
FUNDING AGREEMENT, AUTHORIZING THE DISTRIBUTION OF AN
OFFICIAL STATEMENT IN CONNECTION THEREWITH AND
AUTHORIZING THE EXECUTION OF NECESSARY DOCUMENTS AND
CERTIFICATES AND RELATED ACTIONS.
WHEREAS, the City Council (the “City Council”) of the City of Ontario (the “City”) has formed City of Ontario Community Facilities District No. 41 (Canvas Park Facilities) (the “Community Facilities District”) under the provisions of the Mello-Roos Community Facilities Act of 1982 (the “Act”); and
WHEREAS, the Community Facilities District is authorized under the Act to levy special taxes (the “Special Taxes”) to pay for the costs of certain public facilities (the “Facilities”) and to issue bonds payable from the Special Taxes; and WHEREAS, in order to provide funds to finance certain of the Facilities, the Community Facilities District proposes to issue its City of Ontario Community Facilities District No. 41 (Canvas Park Facilities) Special Tax Bonds, Series 2022 (the “Series 2022 Bonds”), in the aggregate principal amount of not to exceed $15,000,000; and WHEREAS, in order to provide for the authentication and delivery of the Series 2022 Bonds, to establish and declare the terms and conditions upon which the Series 2022 Bonds are to be issued and secured and to secure the payment of the principal thereof, premium, if any, and interest thereon, the Community Facilities District proposes to enter into an Indenture with Zions Bancorporation, National Association, as trustee (the “Trustee”) (such Indenture, in the form presented to this meeting, with such changes, insertions and omissions as are made pursuant to this Resolution, being referred to herein as the “Indenture”); and
WHEREAS, Stifel, Nicolaus & Company, Incorporated (the “Underwriter”), has presented the Community Facilities District with a proposal, in the form of a Bond Purchase Agreement, to purchase the Series 2022 Bonds from the Community Facilities District (such Bond Purchase Agreement, in the form presented to this meeting, with such changes, insertions and omissions as are made pursuant to this Resolution, being referred to herein as the “Purchase Agreement”); and
WHEREAS, Rule 15c2-12 promulgated under the Securities Exchange Act of 1934 (“Rule 15c2-12”) requires that, in order to be able to purchase or sell the Series 2022 Bonds, the underwriter thereof must have reasonably determined that the Community Facilities 2391
District has, or one or more appropriate obligated persons have, undertaken in a written agreement or contract for the benefit of the holders of the Series 2022 Bonds to provide disclosure of certain financial information and certain listed events on an ongoing basis; and WHEREAS, in order to cause such requirement to be satisfied, the Community Facilities District desires to enter into a Continuing Disclosure Agreement with the Trustee (such Continuing Disclosure Agreement, in the form presented to this meeting, with such changes, insertions and omissions as are made pursuant to this Resolution, being referred to herein as the “Continuing Disclosure Agreement”); and WHEREAS, a form of the Preliminary Official Statement to be distributed in connection with the public offering of the Series 2022 Bonds has been prepared (such Preliminary Official Statement, in the form presented to this meeting, with such changes, insertions and omissions as are made pursuant to this Resolution, being referred to herein as the “Preliminary Official Statement”); and
WHEREAS, the City and BrookCal Ontario, LLC (the “Developer”) previously entered into the Acquisition and Funding Agreement, dated as of May 7, 2019 (the “Original Acquisition Agreement”), pursuant to which, in accordance with the terms set forth therein, the Developer is to construct or cause to be constructed certain of the Facilities that, upon satisfaction of the conditions specified therein, the City is to acquire and take title thereto, and the Developer is to be paid the purchase price thereof, determined as set forth therein, which purchase price is to be paid from the proceeds of special taxes or bonds of one of three community facilities districts established by the City Council of the City pursuant to the Act, one of which community facilities districts is the Community Facilities District; and
WHEREAS, the Original Acquisition Agreement provides that the Original Acquisition Agreement may be amended by an instrument in writing executed and delivered by the City and the Developer; and
WHEREAS, the City and the Developer desire to amend the Original Acquisition Agreement in order to amend the Acquisition Cost (as defined in the Original Acquisition Agreement) of certain of the segments of the Facilities set forth in the Original Acquisition Agreement; and
WHEREAS, there has been presented to this meeting a form of a First Amendment to Acquisition and Funding Agreement that so amends the Original Acquisition Agreement (such First Amendment to Acquisition and Funding Agreement, in the form presented to this meeting, with such changes, insertions and omissions as are made pursuant to this Resolution, being referred to herein as the “First Amendment”); and WHEREAS, there have been prepared and submitted to this meeting forms of:
(a) the Indenture;
(b) the Purchase Agreement;
(c) the Continuing Disclosure Agreement;
(d) the Preliminary Official Statement; and
(e) the First Amendment;
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WHEREAS, Kitty Siino & Associates, Inc. has prepared and provided to the Community Facilities District an appraisal report, dated January 3, 2022 (the “Appraisal”), providing an opinion of value of the property in the Community Facilities District, which has been submitted to this meeting; and
WHEREAS, Section 5852.1 of the California Government Code requires that the City Council obtain from an underwriter, financial advisor or private lender and disclose, in a meeting open to the public, prior to authorization of the issuance of the Series 2022 Bonds, good faith estimates of (a) the true interest cost of the Series 2022 Bonds, (b) the sum of all fees and charges paid to third parties with respect to the Series 2022 Bonds, (c) the amount of proceeds of the Series 2022 Bonds expected to be received net of the fees and charges paid to third parties and any reserves or capitalized interest paid or funded with proceeds of the Series 2022 Bonds, and (d) the sum total of all debt service payments on the Series 2022 Bonds calculated to the final maturity of the Series 2022 Bonds plus the fees and charges paid to third parties not paid with the proceeds of the Series 2022 Bonds; and
WHEREAS, in compliance with Section 5852.1 of the California Government Code, the City Council has obtained from CSG Advisors Incorporated, as the Community Facilities District’s Municipal Advisor, the required good faith estimates, which the Municipal Advisor has prepared in consultation with the Underwriter, and such estimates are disclosed and set forth in Exhibit A attached hereto; and WHEREAS, the Community Facilities District desires to proceed to issue and sell the Series 2022 Bonds and to authorize the execution of such documents and the performance of such acts as may be necessary or desirable to effect the offering, sale and issuance of the Series 2022 Bonds; and
WHEREAS, the City Council is the legislative body of the Community Facilities District.
NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of Ontario as follows:
SECTION 1. The foregoing recitals are true and correct.
SECTION 2. Subject to the provisions of Section 3 hereof, the issuance of the Series 2022 Bonds, in an aggregate principal amount of not to exceed $15,000,000, on the terms and conditions set forth in, and subject to the limitations specified in, the Indenture, be and the same is hereby authorized and approved. The Series 2022 Bonds shall be dated, shall bear interest at the rates, shall mature on the dates, shall be subject to call and redemption, shall be issued in the form and shall be as otherwise provided in the Indenture, as the same shall be completed as provided in this Resolution.
SECTION 3. The Indenture, in substantially the form submitted to this meeting and made a part hereof as though set forth herein, be and the same is hereby approved.
Each of the Mayor of the City, and such other member of the City Council as the Mayor 2393
may designate, the City Manager of the City, the Assistant City Manager of the City, the Executive Director of Finance of the City, the Deputy City Treasurer of the City, and such other officer or employee of the City as the City Manager may designate (the “Authorized Officers”) is hereby authorized, and any one of the Authorized Officers is hereby directed, for and in the name of the Community Facilities District, to execute and deliver the Indenture in the form submitted to this meeting, with such changes, insertions and omissions as the Authorized Officer executing the same may require or approve, such requirement or approval to be conclusively evidenced by the execution of the Indenture by such Authorized Officer; provided, however, that such changes, insertions and omissions shall not authorize an aggregate principal amount of Series 2022 Bonds in excess of $15,000,000, shall not result in a final maturity date of the Series 2022 Bonds later than September 1, 2053, and shall not result in a true interest cost for the Series 2022 Bonds in excess of 6.50%.
SECTION 4. The Purchase Agreement, in substantially the form submitted to this meeting and made a part hereof as though set forth in full herein, be and the same is hereby approved. Each of the Authorized Officers is hereby authorized, and any one of the Authorized Officers is hereby directed, for and in the name of the Community Facilities District, to execute and deliver the Purchase Agreement in the form presented to this meeting, with such changes, insertions and omissions as the Authorized Officer executing the same may require or approve, such requirement or approval to be conclusively evidenced by the execution of the Purchase Agreement by such Authorized Officer; provided, however, that such changes, insertions and omissions shall not result in an aggregate underwriter’s discount (not including any original issue discount) from the principal amount of the Series 2022 Bonds in excess of 2.00% of the aggregate principal amount of the Series 2022 Bonds. The City Council hereby finds and determines that the sale of the Series 2022 Bonds at negotiated sale as contemplated by the Purchase Agreement will result in a lower overall cost.
SECTION 5. The Continuing Disclosure Agreement, in substantially the form submitted to this meeting and made a part hereof as though set forth in full herein, be and the same is hereby approved. Each of the Authorized Officers is hereby authorized, and any one of the Authorized Officers is hereby directed, for and in the name of the Community Facilities District, to execute and deliver the Continuing Disclosure Agreement in the form presented to this meeting, with such changes, insertions and omissions as the Authorized Officer executing the same may require or approve, such requirement or approval to be conclusively evidenced by the execution of the Continuing Disclosure Agreement by such Authorized Officer.
SECTION 6. The Preliminary Official Statement, in substantially the form presented to this meeting and made a part hereof as though set forth in full herein, with such changes, insertions and omissions therein as may be approved by an Authorized Officer, be and the same is hereby approved, and the use of the Preliminary Official Statement in connection with the offering and sale of the Series 2022 Bonds is hereby authorized and approved. Each of the Authorized Officers is hereby authorized, and any one of the Authorized Officers is hereby directed, to certify on behalf of the Community Facilities District that the Preliminary Official Statement is deemed final as of its date, within the meaning of Rule 15c2-12 (except for the omission of certain final pricing, rating and related information as permitted by Rule 15c2-12).
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SECTION 7. The preparation and delivery of a final Official Statement (the “Official Statement”), and its use in connection with the offering and sale of the Series 2022 Bonds, be and the same is hereby authorized and approved. The Official Statement shall be in substantially the form of the Preliminary Official Statement, with such changes, insertions and omissions as may be approved by an Authorized Officer, such approval to be conclusively evidenced by the execution and delivery thereof. Each of the Authorized Officers is hereby authorized, and any one of the Authorized Officers is hereby directed, for and in the name of the Community Facilities District, to execute the final Official Statement and any amendment or supplement thereto.
SECTION 8. The First Amendment, in substantially the form submitted to this meeting and made a part hereof as though set forth in full herein, be and the same is hereby approved. Each of the Authorized Officers is hereby authorized, and any one of the Authorized Officers is hereby directed, for and in the name of the City, to execute and deliver the First Amendment in the form presented to this meeting, with such changes, insertions and omissions as the Authorized Officer executing the same may require or approve, such requirement or approval to be conclusively evidenced by the execution of the First Amendment by such Authorized Officer.
SECTION 9. Based upon the property values within the Community Facilities District reported in the Appraisal and the value-to-lien information set forth in the Preliminary Official Statement, the City Council, for purposes of Section 53345.8 of the Act, hereby finds and determines that the value of the real property that would be subject to the Special Tax to pay debt service on the Series 2022 Bonds will be at least three times the principal amount of the Series 2022 Bonds to be sold and the principal amount of all other bonds outstanding that are secured by a special tax levied pursuant to the Act on property within the Community Facilities District or a special assessment levied on property within the Community Facilities District.
SECTION 10. If and to the extent that any feature or aspect of the Series 2022 Bond structure, the rate and method of apportionment of the Special Taxes, the method of financing the Facilities, the appraisal, the absorption study or other components of the Series 2022 Bond issue approved and authorized hereby is inconsistent or in conflict with any requirement, standard, measure or procedure set forth in the City’s Mello-Roos Community Facilities Act of 1982 Local Goals and Policies, such requirement, standard, measure or procedure is, to the extent necessary to eliminate such inconsistency or conflict, hereby waived, and the City Council hereby finds and determines that benefit inures to the ultimate property owners, the Community Facilities District and the City as a result of such waiver.
SECTION 11. The City Council hereby approves the execution and delivery of all agreements, documents, certificates and instruments referred to herein with electronic signatures as may be permitted under the California Uniform Electronic Transactions Act and digital signatures as may be permitted under Section 16.5 of the California Government Code using DocuSign.
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SECTION 12. All actions heretofore taken by the officers, employees and agents of the City with respect to the issuance and sale of the Series 2022 Bonds, or in connection with or related to any of the agreements or documents referred to herein, are hereby approved, confirmed and ratified.
SECTION 13. The officers, employees and agents of the City are hereby authorized and directed to take all actions and do all things which they, or any of them, may deem necessary or desirable to accomplish the purposes of this Resolution and not inconsistent with the provisions hereof.
SECTION 14. This Resolution shall take effect immediately upon its adoption.
The City Clerk of the City of Ontario shall certify as to the adoption of this Resolution.
PASSED, APPROVED, AND ADOPTED this 18th day of January 2022. _____________________________________
PAUL S. LEON, MAYOR
ATTEST:
____________________________________
SHEILA MAUTZ, CITY CLERK
APPROVED AS TO FORM:
____________________________________
BEST BEST & KRIEGER, LLP
CITY ATTORNEY
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STATE OF CALIFORNIA )
COUNTY OF SAN BERNARDINO )
CITY OF ONTARIO )
I, SHEILA MAUTZ, City Clerk of the City of Ontario, DO HEREBY CERTIFY that foregoing Resolution No. 2022- was duly passed and adopted by the City Council of the City of Ontario at their regular meeting held January 18, 2022 by the following roll call vote, to wit:
AYES: COUNCIL MEMBERS:
NOES: COUNCIL MEMBERS:
ABSENT: COUNCIL MEMBERS:
____________________________________
SHEILA MAUTZ, CITY CLERK
(SEAL)
The foregoing is the original of Resolution No. 2022- duly passed and adopted by the Ontario City Council at their regular meeting held January 18, 2022. _____________________________________
SHEILA MAUTZ, CITY CLERK
(SEAL)
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EXHIBIT A
GOOD FAITH ESTIMATES
The good faith estimates set forth herein are provided with respect to the Series 2022 Bonds in accordance with Section 5852.1 of the California Government Code. Such good faith estimates have been provided to the Community Facilities District by CSG Advisors Incorporated, the Community Facilities District’s municipal advisor (the “Municipal Advisor”), which the Municipal Advisor has prepared in consultation with Stifel, Nicolaus & Company, Incorporated, the Underwriter.
Principal Amount. The Municipal Advisor has informed the Community Facilities District that, based on the Community Facilities District’s financing plan and current market conditions, its good faith estimate of the aggregate principal amount of the Series 2022 Bonds to be issued and sold is $13,885,000 (the “Estimated Principal Amount”), which does not include approximately $1,495,000 of net premium estimated to be generated based on current market conditions. Net premium is generated when, on a net aggregate basis for a single issuance of bonds, the price paid for such bonds is higher than the face value of such bonds. Such Estimated Principal Amount and such estimated net premium amount would produce approximately $15,380,000 of gross proceeds.
True Interest Cost of the Series 2022 Bonds. The Municipal Advisor has informed the Community Facilities District that, assuming that the Estimated Principal Amount of the Series 2022 Bonds is issued and sold, and based on market interest rates prevailing at the time of preparation of such estimate, its good faith estimate of the true interest cost of the Series 2022 Bonds, which means the rate necessary to discount the amounts payable on the respective principal and interest payment dates to the purchase price received for the Series 2022 Bonds, is 3.27%.
Finance Charge of the Series 2022 Bonds. The Municipal Advisor has informed the Community Facilities District that, assuming that the Estimated Principal Amount of the Series 2022 Bonds is issued and sold, and based on market interest rates prevailing at the time of preparation of such estimate, its good faith estimate of the finance charge for the Series 2022 Bonds, which means the sum of all fees and charges paid to third parties (or costs associated with the Series 2022 Bonds), is $413,000.
Amount of Proceeds to be Received. The Municipal Advisor has informed the Community Facilities District that, assuming that the Estimated Principal Amount of the Series 2022 Bonds is issued and sold, and based on market interest rates prevailing at the time of preparation of such estimate, its good faith estimate of the amount of proceeds expected to be received by the Community Facilities District for sale of the Series 2022 Bonds, less the finance charge of the Series 2022 Bonds, as estimated above, and any reserves or capitalized interest paid or funded with proceeds of the Series 2022 Bonds, is $14,174,000.
Total Payment Amount. The Municipal Advisor has informed the Community Facilities District that, assuming that the Estimated Principal Amount of the Series 2022 Bonds is sold, and based on market interest rates prevailing at the time of preparation of such estimate, its good faith estimate of the total payment amount, which means the sum 2398
total of all payments the Community Facilities District will make to pay debt service on the Series 2022 Bonds, plus the finance charge for the Series 2022 Bonds, as described above, not paid with the proceeds of the Series 2022 Bonds, calculated to the final maturity of the Series 2022 Bonds, is $24,255,000, which excludes any reserves or capitalized interest funded or paid with proceeds of the Series 2022 Bonds (which may offset such total payment amount).
The foregoing estimates constitute good faith estimates only and are based on market conditions prevailing at the time of preparation of such estimates. The actual principal amount of the Series 2022 Bonds issued and sold, the true interest cost thereof, the finance charges thereof, the amount of proceeds received therefrom and total payment amount with respect thereto may differ from such good faith estimates due to (a) the actual date of the sale of the Series 2022 Bonds being different than the date assumed for purposes of such estimates, (b) the actual principal amount of Series 2022 Bonds issued and sold being different from the Estimated Principal Amount, (c) the actual amortization of the Series 2022 Bonds being different than the amortization assumed for purposes of such estimates, (d) the actual market interest rates at the time of sale of the Series 2022 Bonds being different than those estimated for purposes of such estimates, (e) other market conditions, or (f) alterations in the Community Facilities District’s financing plan, or a combination of such factors. The actual date of sale of the Series 2022 Bonds and the actual principal amount of Series 2022 Bonds issued and sold will be determined by the Community Facilities District based on the timing of the need for proceeds of the Series 2022 Bonds and other factors. The actual interest rates borne by the Series 2022 Bonds will depend on market interest rates at the time of sale thereof.
The actual amortization of the Series 2022 Bonds will also depend, in part, on market interest rates at the time of sale thereof. Market interest rates are affected by economic and other factors beyond the control of the Community Facilities District. 2399