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independent certified public accountants to be sufficient to pay in full all principal of, interest, a nd premium, if any , due a nd to become due on t he munic ipal obligations (“Verification Report”);
(d) the cash or United States Treasury Obligations serving as security for the munic ipal obligations are held by a n escrow agent or t rustee in trust for owners of the municipal obligations;
(e) no sub stitution of a United States Treasury Obli gation shall be permitted except with anot her Unite d States Trea sury Obligation an d up on delivery of a new Verification Report; and
(f) the cash or the United States Treasury Obligations are not available to satisf y an y other claims, including those by or against the trustee or e scrow agent.
(10) Repurchase agreements:
A. With (i) any domestic bank, or domestic branch of a forei gn bank, the long term debt of which is rated at least “A-” by S&P and “Aa3” by Moody’s; (ii) any b roker-dealer with “retail customers” or a related affiliate thereof which broker-dealer has, o r t he pa rent company ( which guara ntees the provide r) of which has, long-term debt rated at least “A-” by S&P and “Aa3” Moody’s, which broker-dealer fa lls under th e jurisdiction of the Securities Investors Protection Corporation; or (i ii) any o ther entity r ated at least “A-” by S&P and “A3 ” by Moody’s (each, an “Eligible Provider”), provided that:
a. The (i) perm itted co llateral s hall in clude U.S. Treasu ry Obligations, or senior deb t obligations of GNMA, FNMA or FHLMC (no collateralized mortgage obligations shall be permitted for these providers), and (ii) collateral levels must be at lea st 102% of the total principal when the collateral type is U.S. Trea sury Obligations, 103% of the total principal when t he collateral type is GNMAs and 104% of t he total principal wh en th e col lateral type is FNMA and FHLMC ( “Eligible Collateral”);
b. The Trustee or a third party acting solely as agent therefor or for the C ommunity Facilities District (the “Custodian”) has possession of the collateral or t he collateral has been transferred to the Custodian in accordance with applicable state and federal laws (other than by means of entries on the transferor’s books);
c. The collateral shall be marked t o ma rket on a daily basis and the pro vider or Custodian shall se nd monthly re ports to the Trustee and the Community Facilities District setting forth the type of collateral, the collateral percentage required for that collateral type, the market value of t he c ollateral on the valuation date a nd the name of the Custodian holding the collateral;
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d. The re purchase ag reement shall sta te, and an op inion of counsel shall be rendered at the tim e such collateral is delivered that the Custodian has a perfected first priority sec urity interest in the collateral, any substituted collateral and all proceeds thereof; and e. The repurchase agree ment shall pr ovide that if durin g its term the provider’s rating b y either M oody’s or S& P is withdra wn o r suspended or falls belo w “A -” by S&P or “A3” b y Moody’s, as appropriate, the p rovider m ust, notify t he Trustee an d the Community Facilities District within five da ys of receipt of su ch notice. Within ten days of rec eipt of su ch notice, t he provider shall either (i) p ost Eligibl e Collateral, or (ii) a ssign the agreement to an Eligib le Provid er. If the provider does not perform a remedy within ten business days, the provider shall, at the direction of the Trustee or the Community Facilities District repurchase all collateral and t erminate the repurchase agreement, with no penalty or premium to the Trustee or the Community Facilities District. (11) Investment agreements with a domestic or foreign bank or corporation the long-term debt of which, or, in t he case of a guaranteed corporation the long-term debt, or, in the case of a monoline financial guaranty insurance company, claims paying ability, of the guarantor is rated at least “AA” by S&P and “Aa3” by Moody’s (each, an “Eligible Provider”); provided, that, by the terms of the investment agreement:
(a) interest payments are to be mad e to the Trustee at ti mes and in amounts as necessary to pay debt service on the Bonds;
(b) the invested funds are available for w ithdrawal without penalty or premium, at a ny time upon not more than se ven days’ prior notice; the Trustee and the Community Facilities District hereby agree to give or cause to be given notice in a ccordance with the terms of the investment agreement so as to receive funds thereunder with no penalty or premium paid;
(c) the provider shal l send monthly reports to the Trustee and the Community Facilities District setting forth the bal ance the Community Facilities District or the Trustee has invested with the provider and the amounts and dates of interest accrued and paid by the provider;
(d) the investment agreement shall state that it is an unconditional and general obligation of the provider, and is not subordinated to any other ob ligation of, the provider thereof or, if the provider is a bank, the agreement or the opinion of counsel shall state that the obligation of the provider to make payments thereunder r anks pari passu with the obligations of th e provider to its other depositors and its other unsecured and unsubordinated creditors; (e) the Trustee and the Community Facilities District shall receive an opinion of domestic coun sel to th e provider th at such investment agreement is 481
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legal, valid and b inding and en forceable against t he provider in accordance with its terms;
(f) the Trustee and the Community Facilities District shall receive an opinion of foreign counsel to the provider (if applicable) that (i) the investment agreement has been duly aut horized, executed and delivered by the provider and constitutes th e legal, v alid an d bin ding obligat ion of the p rovider, enforcea ble against the provider in accordance with its terms, (ii) the choice of law of the state set forth in the in vestment agreemen t is valid un der that country’s laws and a court in such c ountry w ould uphold such choice of law, an d (i ii) any judgment rendered by a court in the United States would be recognized and enforceable in such country;
(g) the investment agre ement shall provi de that if du ring its term (i) the pr ovider’s rating by ei ther S&P or Moody’s falls below “AA-” or “ Aa3”, respectively, the provi der shall, at its option, within ten days of receipt of publication of such d owngrade, eit her ( A) p ost Eligibl e Collateral with the Trustee, the Community Faci lities District or a third party acting solely as agent therefor (the “Custodian”) free and clear of any third party liens or claims, (B) assign the agr eement to an Eligible Provider, or (C) r epay the princi pal of and accrued but unpaid interest on the inv estment, and ( ii) the prov ider’s r ating by either S&P or Moody’s falls below “A-” or “A3”, respectively, the provider must, at the dir ection of the Trus tee or th e Community F acilities Dis trict, wi thin ten days of receipt of such direction, repay the princi pal of and accrued but unp aid interest on th e investment, in either case with no penalty or premi um t o the Trustee or the Community Facilities District;
(h) in t he event the provider is r equired t o collatera lize, permitted collateral sha ll include U.S. Tre asury Obligations, or seni or debt obligations of GNMA, F NMA or FHLMC (no collateralized mortgage obligations s hall be permitted for th ese providers) and collateral levels mus t b e 102% of the t otal principal when the collateral type is U. S. Treasury Obligations, 103% of the total principal when the c ollateral ty pe is GNMA s and 104% of the total princip al when the c ollateral type is FNMA a nd FHLMC (“Eligible Collate ral”). In addition, the collateral shall be marked to market on a daily basis and the provider or C ustodian shall send monthly r eports to the Tru stee and the Comm unity Facilities District set ting forth th e type of collateral, th e collateral perce ntage required for that collateral type, the market value of the collateral on the valuation date and the name of the Custodian holding the collateral; (i) the investment a greement sha ll state, and an opinion of co unsel shall be rendered, in the event collateral is required to be pledged by the provider under the te rms of the investment ag reement, at the tim e such collateral is delivered, that the Custodian has a perfected first priority security interest in the collateral, any substituted collateral and all proceeds thereof; and 482
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(j) the inv estment a greement mu st pro vide that i f during its term (i) the provid er sh all default in its pa yment ob ligations, the pr ovider’s obligati ons under th e investment agre ement shall, at the direction of the Trustee or the Community Facilities District, be accelerated and amounts invested and accr ued but unpai d interest thereon shall be repaid t o the Tru stee or the Community Facilities District, as appropriate, and (ii) the provider shall become insolvent, not pay its debts as they become due, be declared or petition to be declared bankrupt, etc. ( “event of ins olvency”), the prov ider’s obligations shall a utomatically be accelerated and amounts invested and accrued but unpaid interest thereon shall be repaid to the Trustee or the Community Facilities District, as appropriate.
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EXHIBIT B
FORM OF SERIES 2023 BOND
No. _____ $____________
CITY OF ONTARIO
COMMUNITY FACILITIES DISTRICT NO. 56
(PARKSIDE/LA AVENIDA)
SPECIAL TAX BOND, SERIES 2023
INTEREST RATE MATURITY DATE DATED DATE CUSIP
_____% September 1, 20__ ___________, 2023 __________
REGISTERED OWNER:
PRINCIPAL AMOUNT:
City o f O ntario Community Facilities District No. 56 (Parkside/ La Avenida) (the “Community Facilities District”), fo r v alue received, hereby promises to pay, solely from the sources hereinafter described, to the Registered Owner identified above or registered assigns (the “Registered Owner”), on the Maturity Date identified above or on any earlier redemption date, the Principal Amount identified above in lawful money of the United States of America; and to pay interest thereon at the Interest Rate identified above i n l ike lawful money from the date her eof payable semiannually on March 1 and September 1 in each year, commencing ________ 1, 20__ (the “Interest Payment Dates”), until payment of such Principal Amount in full.
This Bond is one of a se ries of a duly authorized issue of bonds approved by the qualified electors of the Community Facilities District, pursuant to the Mello-Roos Community Facilities Act of 1982, constituting Sections 53311 et seq. of the California Government Code (the “Act”), and issued for the purpose of financing certain public facilities, an d i s one of the s eries of bonds designated “City of Ontario Community Facilities District No. 56 (Parkside/La Avenida) Special Tax Bond s, Series 2023 ” (the “ Series 2023 Bonds”) in the aggr egate principal a mount of $_________. T he Series 2023 Bonds are iss ued pursuant to the Indenture, dated as o f __________ 1, 2023 (the “Indenture”), by and between the Community Facilities District and Zions Bancorporation, National Association, as truste e (said e ntity or any successor thereto as trustee under the Indenture, the “Trustee”), and this r eference incorporates the Indenture herein, and by acceptance hereof the owner of this Bond assents to said terms and conditions. Pursuant to and as more particularly provided in the Indenture, additional bonds (“Additional Bonds”) may be issued by the Com munity Facilities District on a parity with t he Series 2023 Bonds. The Series 2023 Bonds and any Additional Bonds are c ollectively referred to as the “Bonds.” The Indenture is 484
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entered into, an d t his Bo nd is is sued under, the Ac t an d t he laws of t he State o f California.
Capitalized undefined terms used herein shall have the meanings ascribed thereto in the Indenture.
Interest on the Series 2023 Bonds shall be pa yable from the Int erest Payment Date next preceding the date of authe ntication thereof unless (a) a Series 2023 Bond is authenticated on or before an Interest Payment Date and after the close of business on the preceding Record Date, in which event interest thereon shall be payable from such Interest Payment Date, (b) a Series 2023 Bond is authenticated on o r before the first Record Date, in which event interest thereon shall be payable from the Closing Date, or (c) interest on any Series 2023 Bond is in default as of the date of authentication thereof, in which event int erest thereon shall be payable from the date to w hich interest has previously been paid or duly provided for. Interest shall be paid in lawful money of the United States on each Interest Payment Date. Interest shall be paid by check of the Trustee mailed by first-class mail, postage prepaid, on each Interest Payment Date to the Owners of the Series 2023 Bonds at their respective addresses shown on the Registration Books as of the close of business on the preceding Record Date. Notwithstanding the foregoing, interest on any Series 2023 Bond that is not punctually paid or duly provided for on any Interest Payment Date shall, if and to the extent that amounts subsequently become available ther efor, be paid on a payment date established by the Trustee to the Person in whose name the ownership of such Series 2023 Bond is registered on the Registration Books at the close of business on a special record date to be established by the Trustee for the payment of such defaulted interest, notice of which shall be given to such Owner not less than ten days prior to such special record date. The principal of the Series 2023 Bonds shall be payable in lawful money of the United States of America upon presentation and surrender thereof upon maturity or earlier redemption at the Office of the Trustee.
The Bonds are special, limited obligations of the Community Facilities District, payable, as provided in the Indenture, solely from Net Sp ecial Tax Revenues and t he other assets pledged therefor thereunder. Neither the faith and credit nor the taxing power of the Community Facilities District (except to the limited extent set forth in the Indenture), the City of Ontario or the State of California, or any political subdivision thereof, is pledged to the payment of the Bonds.
Pursuant to and as more particularly provided in the Indenture, subject only to the provisions of the Indenture permitting the application thereof for the purposes and on the terms and conditions set forth therein, in order to secure the payment of the principal of, premium, if any, and interest on the Bonds in accordance with their terms, the p rovisions of the Indent ure and th e Act, the Community Facilities District pledges to the Owners, and gra nts thereto a lien on and a security interest in, all of the Net Special Tax Revenues and any other amounts held in the Special Tax Fund, the Bond Fund and the Reserve Fund. Said pledge constitutes a first lien on and security interest in such assets, which shall immediately attach to such assets and be effective, binding and enforceable against the Community Facilities District, its successors, purchasers of any of such assets, creditors and all othe rs asse rting rights therein, to t he extent set forth in, and in ac cordance wit h, t he Indenture, irrespective of whether those parties have notice of the pledge of, lien on and security interest in such assets and without the need for any physical delivery, recordation, filing or further act.
The Series 2023 Bonds are subject to redemption on the dates, at the Redemption Prices and pursuant to the terms set forth in the Indenture. Notice of redemption of any Series 2023 Bond or any portion thereof shall be given as provided in the Indenture. 485
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The Series 2023 Bonds are issua ble a s fully registered B onds with out coup ons in Authorized Denominations ($5,000 and any integral multiple thereof).
Any Series 2023 Bond may be transferred upon the Registration Books by t he Person in whose name it is registered, in person or by such Person’s duly authorized attorney, upon surrender of such Series 2023 Bond to the Trustee for cancellation, accompanied by delivery of a written instrument of transfer, duly executed in a form acceptable to the Trustee. Whenever any Series 2023 Bond or Series 2023 Bonds shall be so surrendered for transfer, the Community Facilities District shall execute and the Trustee shall authenticate and shall deliver a new Series 2023 Bond or Series 2023 Bonds of the same m aturity in a li ke aggregate principal a mount, in any Authorized Denomination. The Trustee shall require the Owner requesting such transfer to pay any tax or other governmental charge required to be paid with respect to such transfer. The Series 2023 Bonds may be exchanged at the Office of the T rustee for a like aggregate principal amount of Series 2023 Bonds of the same m aturity o f other Authorized Denominations. The Trustee shall require the payment by the Owner requesting such exchange of any tax or other governmental charge required to be paid with respect to such exchange.
The Indenture and the right s and obl igations o f the Community Facilities D istrict, the Owners and the Trustee may be modified or amended in the manner, to the extent, and upon the terms provided in the Indenture.
The Indenture contains p rovisions p ermitting the Community Facilities District to make provision for the payment of t he principal of and the interest and premium, if any, on any of the Bonds so that such Bonds shall no longer b e deemed to be Outstanding under the te rms of th e Indenture.
Unless this Bond is p resented by an au thorized representative of T he Depository Trust Company to the Trustee for registration of transfer, exchange or payment, and any Bond issued is registered i n the name of C ede & Co. or such other name as r equested by an a uthorized representative of The Depository Trust Company and any payment is made to Cede & Co., ANY
TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL since the registered owner hereof, Cede & Co., h as an interest herein.
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IN WITNESS WHEREOF, the Community Facilities District has caused this Bond to be signed in its name and on its behalf by the manual or facsimile signature of the Mayor of the City of Ontario, attested by the manual or facsimile signature of the City Clerk of the City of Ontario, all as of the Dated Date identified above.
CITY OF ONTARIO COMMUNITY
FACILITIES DISTRICT NO. 56
(PARKSIDE/LA AVENIDA)
By:
Mayor of the City of Ontario
ATTEST:
City Clerk
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CERTIFICATE OF AUTHENTICATION
This is o ne of the Series 2023 Bonds des cribed in the within-mentioned Indenture and registered on the Registration Books.
Date: __________, 2023
ZIONS BANCORPORATION,
NATIONAL ASSOCIATION, AS
TRUSTEE
By:
Authorized Officer
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ASSIGNMENT
For value rec eived, the undersigned h ereby sells, assigns and transfers unto __________________________________, whose address and social security or other ta x identifying number is ____________________, the within-mentioned Bond and hereby irrevocably constitute(s) and appoint(s) ______________________________ attorney, to transfer the same on the registration books of the Trustee with full power of substitution in the premises.
Dated:
Signature Guaranteed:
Note: Signature guarantee shall be made by a guarantor
institution participating in the Securities Tra nsfer
Agents Medallion Program or in such o ther guarantee
program acceptable to the Trustee.
Note: The si gnature(s) on this As signment mus t
correspond w ith the name(s) as wr itten on the face of t he within Bo nd in e very particular w ithout alteration or enlargement or any change whatsoever.
489
Norton Rose Fulbright US LLP draft of 10/27/23
136903846.5
$________
CITY OF ONTARIO
COMMUNITY FACILITIES DISTRICT NO. 56
(PARKSIDE/LA AVENIDA)
SPECIAL TAX BONDS, SERIES 2023
BOND PURCHASE AGREEMENT
____________, 2023
City of Ontario
Community Facilities District No. 56
(Parkside/La Avenida)
303 East “B” Street
Ontario, California 91764
Ladies and Gentlemen:
Samuel A. Ramirez & Co., Inc. , 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 City of Ontario Community Facilities District No. 56 (Parkside/La Avenida) (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 Communi ty 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 Unde rwriter 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 Indenture, dated as of December 1, 2023 (the “Indenture”), by and between the Community Facilities District an d Zions Bancorporation, 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, 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 City of Ontario Community Facilities District No. 56 (Parkside/La Avenida) 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. T he purchase price for the Bonds shall be 490
2 $__________ (being 100% of the aggregate principal amount thereof, [plus/less] [net] original issue [premium/discount] 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 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 4 hereof, provided that the Underwriter shall not change the interest rates set forth in Exhibit A. The Bonds will 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 Special Tax Revenues 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 Ontario (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) provide financing for certain public facilities and costs with respect thereto related to the development within the Community Facili ties District, (ii) fund a reserve fund with respect to the Bonds, and (iii) pay the costs of issuance with respect to the Bonds.
A. The Community Facilities District hereby acknowledges that the Underwriter is entering into this Purchase Agreement in relianc e 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 lead ing up to the consummation of such transaction, the Underwriter is and has been acting solely as principal and is not acting as the agent or fiduciary of, or a municipal or financial advisor of, the Community Facilities District and has not assumed any advisory or fiduciary responsibility to the Community Facilities District with respect to the transaction contemplated hereby and the discussions, undertakings and procedures leading thereto (irrespective of whether the Underwriter has provided or is currentl y providing other services to the Community Facilities District on other matters ), (iv) the Underwriter has financial interests that differ from those of the Community Facilities District , (v) the only obligations the Underwriter has to the Community Facilities District with respect to the transaction contemplated hereby are expressly set forth in this Purchase Agreement, except as otherwise provided by applicable rules and regulations of the Securities and Exchange Commission or the rules of the MSRB (as d efined below) or other law, and (vi) the Community Facilities District has consulted its own legal, financial, accounting, tax, and other advisors to the extent they have deemed appropriate in connection with this transaction. The Community Facilities Dist rict acknowledges that it has previously provided the Underwriter with an 491
3 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 CSG Advisors Incorporated as its municipal advisor (as defined in Securities and Exchange Commission Rule 15Ba1) and will rely solely on the financial advice of CSG Advisors 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 t hereto 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 (the “Official Statement”) which will consist of the Preliminary Official Statement with such changes as may be made thereto, with the approval of Orrick Herrington & Sutcliffe LLP, 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 Agreement executed by the Community Facilities District in connection with the Bonds (the “Continuing Disclosure Agreement”), 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, as amended (the “Rule”), the Community Facilities District will undertake pursuant to the Continuing Disclosure Agreement, in the form attached as an appendix to the Official Statement, 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 deliv er to the Underwriter, at the offices of Bond Counsel in Los Angeles, 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 Tru stee in the manner provided for in the Indenture and the Community Facilities District Act at [8:30] 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 typ ewritten) and shall be registered in the name of Cede & Co., as nominee of DTC.
2. 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:
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4 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 and the incurring of bonded indebtedness thereby pursuant to resolutions duly adopted by the City Council (collectively, the “Community Facilities District Formation Resolutions” and, together with the Community Facilities District Resolution of Issuance, t he “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 Resolutions and an ordinance of the City Council levying the Special Tax within the Community Facilities District (the “Ordinance”), and has caused to be recorded in the real property records of the County of San Bernardino, a notice of special tax lien, and any required amendments thereof (collectively, the “Notice of Special Tax Lien” and, together with the Community Facilities District Formation Resolutions and the Ordinance, 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 or rescinded. 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, th e Continuing Disclosure Agreement and the Indenture, and to carry out all transactions contemplated by each of such agreements; (ii) to issue, sell and 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 Agreement, this Purchase Agreement, the Acquisition and Funding Agreement , dated as of December 1, 202 1, as amended by the First Amendment to Acquisition and Funding Agreement, dated as of [November 1, 2023] (as so amended, the “SC Ontario Acquisition Agreement”), each by and between the City and SC Ontario Development Company, LLC (“SC Ontario”) , a limited liability company organized and existing under the laws of the State of Delaware, the Amended and Restated Acquisition and Funding Agreement, dated as of November 1, 2022, by and between the City and NMC Builders, LLC (the “NMC Builders Acquisition Agreement” and together with the SC Ontario Acquisition Ag reement, the “Acquisition Agreements”), and the Official Statement.
This Purchase Agreement, the Indenture, the Bonds , the Continuing Disclosure Agreement , and the Acquisition Agreement s 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 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; 493
5 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 sta tements 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 Unde rwriter promptly of any proposal to amend or supplement the Official Statement and will not affect or consent to any such amendment or supplement without the consent of the Underwriter, which consent will not be unreasonably withheld.
The Community Facilit ies 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 deli vered 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, the Community F acilities 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 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 Comm unity 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. 494
6 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 Net Special Tax Revenues 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 Special Tax within the Community Facilities District will be fixed and levied 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. The Community Facilities District has covenanted to cause the Special Tax to be levied and collected at the same time and in the same manner as ordinary ad valorem property taxes or in such other manner as the City Council shall determine.
I. The Indenture creates a valid pledge of, first lien upon and security interest in, the Net Special Tax Revenues of the Community Facilities District, and in the moneys in the Special Tax Fund, the Bond Fund, and the Reserve Fund 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 Tax of the Community Facilities District referred to in paragraph (G) hereof.
K. The information contained in the Preliminary Official Statement and in the Official Statement (other than statements therein pertaining to the DTC and its book-entry system, as to which no view is expressed) is true and correct in all material respects and such information does not and shall not contain any untrue or misleading statement of a material fact or omit to state any material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading.
L. 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 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 MSRB.
M. 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 s erved on the City or 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 title s 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 Tax 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 495
7 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.
N. 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.
O. At or prior to the Closing, the Community Facilities District will have duly authorized, executed and delivered the Continuing Disclosure Agreement in substantially the form attached as an appendix to the Official Statement. Based upon a review of its previous undertakings, and except as disclosed in the Preliminary Official Statement, the City and the City Entities (as defined in the Preliminary Official Statement) have not failed to comply in all mater ial respects with any previous undertakings with regard to the Rule to provide annual reports or notices of enumerated events in the last five years. The Community Facilities District has not previously entered into any undertaking pursuant to the Rule.
P. The Community Facilities District will apply the proceeds of the Bonds in accordance with the Indenture and as described in the Preliminary Official Statement and Official Statement.
Q. Until such time as moneys have been set aside in an amount sufficient to p ay 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.
R. 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.
S. The City, on behalf of the Community Facilities District , has adopted local debt policies in accordance with Section 8855(i) of the California Government Code.
The C ommunity 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 Community Facilities District hereby ratifies any prior use of and authorizes the future use by the Underwriter, in connection with the offering and sale of the Bonds, of the Preliminary Official 496
8 Statement, the Official Statement, this Purchase Agreement and all information contained herein, and all other documents, certificates and written statements furnished by the Community Facilities District to the Underwriter in connection with the transactions contemplated by this Purchase Agreement.
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 t hat the representations and warranties contained in this Section 2 with respect to the Community Facilities District are true as of the date hereof.
3. 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 t he 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 their obligations to be performed hereunder at or prior to the Closing Date, and in reliance upon the representations and covenants of SC Ontario Development Company, LLC, the master developer within the District (the “Master Developer” ), Woodside 05S, LP (“Woodside”), The New Home Company Southern California LLC (“New Home Company”) , and Lennar Homes of California, LLC (“Lennar”) and contained in the certificate (s) delivered as of the Closing Date, and to the following additional conditions:
A. At the Closing Date, the Community Facilities District Resolutions, 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 Preliminary Official Statement, the City shall not be, in any respect material to the transactions referred to herein or contemplated hereby, in breach of or i n 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 a pplicable 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 adv ersely affect the performance of the conditions precedent to be performed by the City hereunder.
C. At the Closing Date, except as described in the Preliminary 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 regulation of the State of California, the United States of America, or of any department, division, agency or instrumentality of ei ther thereof, or under any applicable court or administrative decree or order, or 497
9 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 o r 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 Uni ted 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 inst rument 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, 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 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 reasonable 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 i ndirectly, 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;
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 (“SEC”), or any other governmental agency having jurisdiction of the subject matter, to the effect that obligations of the general character of the Bonds, including any or all underlying arrangements, are not exempt from registration u nder 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 o f the general character of the Bonds, including any or all 498
10 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;
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;
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 en forceability of the Special Tax, or the ability of the Community Facilities District to construct or acquire the improvements as contemplated by the Formation Documents, the Community Facilities District Documents or the Official Statement or the right of any owner of the property within the Community Facilities District to develop such property in the manner described in the Official Statement , or the ability of the Community Facilities District to issue the Bonds as contemplated by the Indenture and the Official Statement;
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;
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;
7. There shall have occurred (1) an outbreak or escalation of ho stilities or the declaration by the United States of a national emergency or war, (2) any other calamity or crisis in the financial markets of the United States or elsewhere, or (3) the sovereign debt rating of the United States is downgraded by any major credit rating agency or a payment default occurs on United States Treasury obligations;
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;
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 or marketability of the Bonds or the ability of the Underwriter to enforce contracts for the sale of the Bonds; 499
11 10. A general banking moratorium shall have been declared by federal or State authorities having jurisdiction and be in force;
11. A material disruption in securities settlement, payment or clearance services affecting the Bonds shall have occurred;
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 require ments 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;
13. A decision by a court of the United States shall be rendered, or a st op 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 Securities, 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 Securities, is or would be in violation of any provision of the federal securities laws at the Closing Date, including the Securities Act, the Exchange Act and the Trust Indenture Act;
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 Resolutions and the ot her Formation Documents, and the Community Facilities District Documents, together with a certificate dated as of the Closing Date of the City Clerk to the effect that the Community Facilities District Resolutions and the Ordinance are true, correct and complete copies of the ones duly adopted by the City Council;
4. The Continuing Disclosure Agreement executed and delivered by the Community Facilities District and the Trustee, as dissemination agent , the Continuing Disclosure Certificate dated the Closing Dat e of the Master Developer (the “ Master Developer Continuing Disclosure Certificate ”) and the Continuing Disclosure Certificate dated the Closing Date of New Home Company (the “ New Home Company Continuing Disclosure Certificate”) , in each case substantially in the respective forms attached as appendixes to the Official Statement;
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 Bonds are the valid, legal and binding obligations of the Community Facilities District and t hat the interest thereon 500
12 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 an appendix to the Official Statement, together with a letter of Bond Counsel, dated the Closing Date and addressed to the Underwriter and the Trustee, to the effect that such opinion addressed to the Community Facilities District may be relied upon by the Underwriter and the Trustee to the same extent as if such opinion was addressed to it;
6. A supplemental opinion or opinions of Bond Counsel dated the Closing Date and addressed to the Underwriter to the effect that:
(i) this Purchase Agreement and the Continuing Disclosure Agreement have been duly executed and delivered by t he Community Facilities District and, assuming due authorization, execution and delivery by the other parties thereto, constitute the valid and binding obligations of the Community Facilities District, 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 statements contained in the Official Statement under the captions “THE SERIES 2023 BONDS” (except information relating to DTC and its book-entry system and information under the caption “Debt Service Schedule,” as to which no opinion is expressed), “SECURITY AND SOURCES OF PAYMENT FOR THE SERIES 2023 BONDS,” (except information under the captions “Special Tax” and “Rate and Method of Apportionment” as to which no opinion is expressed), “TAX MATTERS,” and Appendix F - “SUMMARY OF CERTAIN PROVISIONS OF THE INDENTURE,” excluding any material that may be treated as included under such captions by cross-reference or reference to other documents or sources, insofar as such statements expressly summarize certain provisions of the Indenture and certain matters addressed in Bond Counsel’s final approving opinion, are accurate in all material respects.
7. A letter, dated the Closing Date and addressed to the Underwriter, of Disclosure Counsel, to the effect that such counsel is not passing upon and has not undertaken to determine independently or to verify the accuracy or completeness of the statements contained in the Preliminary Official Statement or in the Official Statement, and is, therefore, unable to make any representation to the Underwriter in that regard, but on the basis of its participation in conferences with representatives of the City, Best Best & Krieger LLP, as issuer’s counsel (“Issuer’s Counsel”) , Bond Counsel, Kitty Siino & Associates, Inc. (the “Appraiser”), Empire Economics, Inc, Goodwin Consulting Group, Inc. (“Goodwin Consulting Group”), CSG Advisors Incorporated, representatives of the Underwriter and others, during which conferences the content of the Preliminary Official Statement and the Official Statement and related matters we re discussed, and its examination of certain documents, and, in reliance thereon and based on the information made available to it in its role as Disclosure Counsel and its understanding of applicable law, Disclosure Counsel advises the Underwriter as a ma tter of fact, but not opinion, that no information has come to the attention of the attorneys in the firm working on such matter which has led them to believe that the Preliminary Official Statement as of its date and the date hereof and the Official State ment as of its date and as of the Closing Date ( in each case excluding therefrom the financial and statistical data, forecasts, charts, numbers, estimates, projections, assumptions and expressions of opinion included in the Preliminary Official Statement and the Official 501
13 Statement, information regarding DTC and its book entry system and the information set forth in Appendices A, B, C, D, E, F, G, H and I, as to all of which no opinion is expressed) contained any untrue statement of a material fact or omitte d 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;
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 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 State ment 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; (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, the Community Facilities District Documents and the Official Statement at or prior to the Closing Date; and (iv) all information in the Official Statement relating to the Community Facilities District (other than information therein provided by the Special Tax Consultant) is true and correct in all material respects as of the date of the Official Statement and as of the Closing Date;
9. An opinion of Issuer’s Counsel dated the date of Closing and addressed to the Underwriter, the Trustee and the City, substantially in the form attached hereto as Exhibit D;
10. A certificate dated the Closing Date from the Appraiser addressed to the Community Facilities District and the Underwriter substantially to the effect that (i) the assumptions made in the appraisal of the taxable properties within the Community Facilities District, dated __October 4, 2023 (the “Appraisal Report”), prepared by the Appraiser are reasonable; the Appraisal Report fairly and accurately described, as of the stated date of value, the market values of the properties in the Community Facilities District that are subject to the Special Tax, (ii) the Appraiser is not aware of any event or act which occurred since the date of value of the Appraisal Report which, in its opinion, would materially and adversely affect the conclusions as to the market value of the appraised property in the Community Facilities District, (iii) the Appraiser consents to the reproduction of the Appraisal Report as an appendix to the Preliminary Official Statement and the final Official Statement, each with respect to the Bonds, and to the references to the Appraiser and the Appraisal Report made in the Preliminary Official Statement and the Official Statement, (iv) the Appraisal Report complies with the Appraisal Standards for Land -Secured Financings issued by the California Deb t and Investment Advisory Commission dated July 2004, (v) a true and correct copy of the Appraisal Report is attached as an appendix to the Preliminary Official Statement and the Official Statement ; and (vi) neither the Appraisal Report nor the information in the Preliminary Official Statement or the Official Statement referring to it contains any untrue statement of a material fact or omits 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;
11. A certificate dated the Closing Date from Goodwin Consulting Group addressed to the Community Facilities District and the Underwriter to the effect that: (i) the Special Tax, if levied and collected in the maximum amounts p ermitted pursuant to the Rate and Method of Apportionment of Special Tax 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 related issue of Bonds , 502
14 net of estima ted Administrative Expenses , based on such assumptions and qualifications as shall be acceptable to the Underwriter; (ii) the statements in the Preliminary Official Statement and the Official Statement provided by Goodwin Consulting Group concerning the Special Tax in the Community Facilities District and all information supplied by it for use in the Official Statement were as of the date of the Preliminary Official Statement, the date of the Official Statement and are as of the Closing Date true and correc t, 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; (iii) all information supplied by Goodwin Consulting Group to the Appraiser is true and correct as of the date of the Preliminary Official Statement and the date of the Official Statement and as of the Closing Date, based on such assumptions as may have been supplied by it; and (iv) the info rmation contained in the Appraisal Report with respect to taxes and tax rates applicable, and projected to be applicable, to the property in the Community Facilities District is consistent with such information provided by Goodwin Consulting Group to the A ppraiser, which information so provided was based on information obtained by Goodwin Consulting Group from the Community Facilities District, the Master Developer, Woodside, New Home Company and Lennar , and the City;
12. Certified copies of the general resolut ion 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, addressed to the Underwriter, and the Community Facilities District 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 and the Continuing Disclosure Agreement; (ii) the Trustee is duly authorized to execute and deliver the Indenture and the Continuing Disclosure Agreement, to accept the obligations created by the Indenture and the Continuing Disclosure Agreement and to authenticate the Bon ds 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 material agreement or material instrument to which the Trustee is a party or by whic h 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, address ed to the Underwriter, and the Community Facilities District to the effect that (i) the Trustee is a national banking association duly organized and validly existing under the laws of the jurisdiction of its organization and has the corporate power to exec ute and deliver the Indenture, the Continuing Disclosure Agreement, and any other documentation relating to the Indenture, (ii) the execution and delivery by the Trustee of the Indenture, the Continuing Disclosure Agreement, and any other documentation relating to the Indenture, and its performance of its obligations under the Indenture, have been and are as of the date hereof duly authorized by all necessary corporate action, (i ii) the Indenture and the Continuing Disclosure Agreement have been duly execut ed and delivered and constitute the valid and legally binding obligations of the Trustee enforceable against it in accordance with their terms except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors' rights generally and 503
15 by general principles of equity (regardless of whether enforcement is sought as a proceeding in equity or at law), and (iv) the Bonds have been duly authenticated and delivered by the Trustee;
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. (a) From counsel to the Master Developer, (i) a negative assurance letter of such counsel, dated the date of the Closing, in form and substance acceptable to the Underwriter and Bond Counsel, and (ii) an opinion letter of such counsel, dated the date of the Cl osing, in form and substance acceptable to the Underwriter and Bond Counsel, to the effect that the Master Developer Continuing Disclosure Certificate has been duly authorized, executed and delivered by the Master Developer; (b) From counsel to Woodside, a negative assurance letter of such counsel, dated the date of the Closing, in form and substance acceptable to the Underwriter and Bond Counsel; (c) From counsel to New Home Company, (i) a negative assurance letter of such counsel, dated the date of the Closing, in form and substance acceptable to the Underwriter and Bond Counsel, and (ii) an opinion letter of such counsel, dated the date of the Closing, in form and substance acceptable to the Underwriter and Bond Counsel, to the effect that the New Home Co mpany Continuing Disclosure Certificate has been duly authorized, executed and delivered by New Home Company; (d) From counsel to Lennar, a negative assurance letter of such counsel, dated the date of the Closing, in form and substance acceptable to the Underwriter and Bond Counsel;
17. A Letter of Representations from each of the Master Developer, Woodside, New Home Company and Lennar dated the date of printing the Preliminary Official Statement, substantially in the respective form attached hereto as Exhibit B-1, Exhibit B-2, Exhibit B-3 and Exhibit B-4;
18. A Closing Certificate from each of the Master Developer, Woodside, New Home Company and Lennar dated the Closing Date, substantially in the respective form attached hereto as Exhibit C-1, Exhibit C-2, Exhibit C-3 and Exhibit C-4, or as such Closing Certificate s may be modified with the approval of the Underwriter and Disclosure Counsel;
19. A certificate dated the date of printing the Preliminary Official Statement of Arroyo Cap II-1, LLC, certifying that the information under the caption “PROPERTY OWNERSHIP AND THE DEVELOPMENT - New Home Company - New Home Company Landbank,” 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 , and a certificate dated the Closing Date of Arroyo Cap II-1, LLC, certifying that the information under the c aption “PROPERTY OWNERSHIP AND THE DEVELOPMENT - New Home Company - New Home Company Landbank ,” was as of the date of the final Official Statement and is as of the Closing Date 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.
20. A certificate dated the Closing Date from Empire Economics, Inc. addressed to the Community Facilities District and the Underwriter to the effect that the statements in the Official Statement provided by Empire Economics, Inc. 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 504
16 order to make the statements therein, in light of the circumstances under which they were made, not misleading;
21. An opinion of Norton Rose Fulbright US LLP , counsel to the Underwriter, dated the date of Closing and addressed to the Underwriter in form and substance acceptable to the Underwriter;
22. A certificate of CSG Advisors Incorporated, the City’s municipal advisor (the “Municipal Advisor”) to the effect that the Municipal Advisor has participated in the preparation of the Preliminary Official Statement and the Official Statement and nothing has come to the attention of the Municipal Advisor which woul d lead it to believe that the Preliminary Official Statement or the Official Statement contain any untrue statement of a material fact or omits to state a fact necessary to make the statements made therein, in the light of the circumstances under which the y were made, not misleading; and
23. 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 an d 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 t hat the respective obligations of the Underwriter and the Community Facilities District set forth in Section 5 hereof shall continue in full force and effect.
4. 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 E, with such modifications as may be appropriate or necessary, in the reasonable judgment of the Underwriter, the Community Facilities District and Bond Counsel (as defined herein), to accurately reflect, as applicable, the sales price or prices or the initial offering price or prices to the public of the Bonds. All actions to be taken by the Community Facilities District under this section to establish the issue price of the Bonds may be taken on behalf of the Community Facilities District by the Municipal Advisor and any notice or report to be provided to the Community Facilities District may be provided to the Community Facilities District’s Municipal Advisor.
B. Except as otherwise set f orth 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. At or promptly after the execution of thi s Purchase 505
17 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 (as defined herein) has occur red, 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 , provided that the Underwriter’s reporting obligation after the date of the Closing may be at reasonable periodic intervals or otherwise upon request of the Community Facilities District or Bond Counsel. For purposes of this Section, if Bonds mature on the same date but have different interest rates, each separate CUSIP number within that maturity will be treated as a separate maturity of the Bonds. For clarity, and notwithstanding any other condition to Closing set forth in this Purchase Agreement, the sale of 10% of each maturity of the Bonds to the public prior to the Closing Date shall not be a condition to Closing.
C. The Underwriter confirms that it has offered the Bonds to the public on or before the date of this Purchase Agreement at the offering price or prices (the “ initial offering price”), or at the corresponding yield or yields, set forth in Exhibit A attached hereto, except as otherwise set forth therein. Exhibit A also sets forth, as of the date of this Purchase Agreement, the maturities, if any, of the Bonds for which the 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 will advise the Community Facilities District promptly after the close of the fifth (5th) business day after the sale date whether 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.
D. The Underwriter confirms that:
(1) 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 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 506
18 maturity, provided that the reporting obligation after the date of the Closing 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, in each case 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.
(2) 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 la nguage 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 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 date of the Closing 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 represen tations set forth in this subsection, 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 . The C ommunity Facilities District further acknowledges that the Underwriter shall not be liable for the failure of any dealer who is a member of a selling group, or of any broker -dealer that is a party to a third -party distribution agreement, to comply with its corresponding 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.
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 term being used as defined below) shall not constitute sales to the public for purposes of this section. Further, for purposes of this section:
507
19 (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 u nderwriter 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 ini tial 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 (i) 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), (ii) 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 (iii) 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.
5. Expenses. Whether or not the Bonds are delivered to the Underwriter as set forth herein:
A. The Underwriter shall be under no obligation to pay, and the Community Facilities District shall pay or cause to be paid (out of any legally available funds of the Community Facilities District) all expenses incident to the performance of the Community Facilities District’s obligations hereunder, including, but not limited to, the cost of printing, engraving and delivering the Bonds to DTC, the cost of preparation, printing, distributin g and delivering of the Indenture, the Preliminary Official Statement, the Official Statement, any amendment or supplement to the Preliminary Official Statement or the Official Statement and this Purchase Agreement, and all other agreements and documents contemplated hereby (and drafts of any thereof) in such reasonable quantities as requested by the Underwriter; and the fees and disbursements of the Trustee, Bond Counsel, Disclosure Counsel and any financial advisors, special tax consultants, appraisers, a ccountants, engineers or any other experts or consultants the City or the Community Facilities District may have retained in connection with the Bonds; and
B. The Community Facilities District shall be under no obligation to pay, and the Underwriter shall pay, any fees of the California Debt and Investment Advisory Commission, the cost of preparation of any “blue sky” or legal investment memoranda and this Purchase Agreement; expenses to qualify the Bonds for sale under any “blue sky” or other state securities laws; and all other expenses incurred by the Underwriter in connection with its public offering and distribution of the Bonds (except those specifically enumerated in paragraph (a) of this section), including the fees and disbursements of its counsel, meals, transportation and lodging (but not entertainment expenses), and any advertising expenses in connection with the public offering of the Bonds. 508
20 6. Notices. Any notice or other communication to be given to the Community Facilities District or the Community Facilities District under this Purchase Agreement may be given by delivering the same in writing to the City of Ontario, 303 East “B” Street, Ontario, California 91764, 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 Samuel A. Ramirez & Co., Inc., 633 West Fifth Street, Suite 2693, Los Angeles, California 90071, Attention: Eric McKean.
7. Parties In Interest . This Purchase Agreement is ma de 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. Effective. 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.
11. No Pr ior 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.
12. Governing Law. This Purchase Agreemen t shall be governed by , and construed in accordance with, the laws of the State of California.
[Remainder of page intentionally left blank.]
509
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13. 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,
SAMUEL A. RAMIREZ & CO., INC.
By:
Its: Managing Director
The foregoing is hereby agreed to and
accepted as of the date first above written:
CITY OF ONTARIO COMMUNITY
FACILITIES DISTRICT NO. 56
(PARKSIDE/LA AVENIDA)
By:
Authorized Officer
Time of Execution: ____:____ California time
510
A-1
EXHIBIT A
CITY OF ONTARIO
COMMUNITY FACILITIES DISTRICT NO. 56
(PARKSIDE/LA AVENIDA)
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
___________________________________
T: Term Bond.
C: Priced to optional redemption date of September 1, 20___, at par. * At the time of execution of this Purchase Agreement and assuming orders are confirmed immediately after the execution of this Purchase Agreement.
511
A-2
REDEMPTION PROVISIONS
Optional Redemption. The Bonds maturing on and after September 1, 20__, shall be subject to optional redemption, in whole, or in part in Authorized Denominations, on any Interest Payment Date on or after September 1, 20__, from any source of available funds, at the following respective Redemption Prices (expressed as percentages of the principal amount of the Bonds to be redeemed), plus accrued interest thereon to the date of redemption:
Redemption Dates 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
Mandatory Redemption from Special Tax Prepayments. The Bonds shall be subject to mandatory redemption, in whole, or in part in Authorized Denominations, on any Interest Payment Date, from and to the extent of Special Tax prepayments required to be applied thereto pursuant to the Indenture and any amount required to be applied thereto pursuant to the Indenture, at the following respective Redemption Prices (expressed as percentages of the principal amount of the Bonds to be redeemed), plus accrued interest thereon to the date of redemption:
Redemption Dates Redemption Price
March 1, 20__ 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
Mandatory Sinking Fund Redemption. The Bonds maturing September 1, 20__ shall be subject to mandatory sinking fund redemption, in part, on September 1 in each year, commencing September 1, 20__ at a Redemption Price equal to the principal amount of the Bonds maturing September 1, 20__ to be redeemed, without premium, plus accrued interest thereon to the date of redemption, in the aggregate respective principal amounts in the respective years as follows:
Sinking Fund
Redemption Date
(September 1)
Principal Amount
to be
Redeemed
(Maturity)
[add additional as necessary]
512
B-1-1
EXHIBIT B-1
CITY OF ONTARIO
COMMUNITY FACILITIES DISTRICT NO. 56
(PARKSIDE/LA AVENIDA)
SPECIAL TAX BONDS, SERIES 2023
LETTER OF REPRESENTATIONS OF
SC ONTARIO DEVELOPMENT COMPANY, LLC
____________, 2023
City of Ontario Community Facilities District
No. 56 (Parkside/La Avenida)
303 East B Street
Ontario, California 91764
Samuel A. Ramirez & Co., Inc.
633 West Fifth Street, Suite 2693
Los Angeles, California 90071
Ladies and Gentlemen:
Reference is made to the City of Ontario Community Facilities District No. 56 (Parkside/La Avenida) 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 of SC Ontario Development Company, LLC (the “Letter of Representations ”) is delivered pursuant to and in satisfaction of Section 3(F)(17) of the Bond Purchase Agreement.
Capitalized terms used herein and not otherwise define d 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 SC Ontario Development Company, LLC , a Delaware limited liability company (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 Delaware and has all requisite right, power and authority (i) to execute and deliver this Letter of Representations, and (ii) to own its property in the City of Ontario Community Facilities District No. 56 (Parkside/La Avenida ) (the “ Community Facilities Distr ict”) as 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 is held in the name of the Developer (herein, the “Property”). The undersigned, on behalf of the Developer, makes the representations herein with 513
B-1-2
respect to all such Property. Except as otherwise described in the Preliminary Official Statement, the Developer’s current expectation is that the Developer sha ll remain the party responsible for the construction and sale of homes within the Property.
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, 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 ,1 is pending against any current Affiliate2 (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 the special tax levied on the Property by the Community Facilities District (the “Special Tax”) or other sums pledged or to be pledged to pay the principal of and interest on the Bonds (e.g., the reserve fund established under the Indenture (herein, the “ Reserve Fund”)), (b) to restrain or enjoi n the development of the Property as described in the Preliminary Official Statement, (c) to materially adversely affect the ability of the Developer to perform its obligations under the Continuing Disclosure Certificate (as hereinafter defined), (d) in an y way contesting or affecting the validity of the Special Tax, or ( e) which is reasonably likely to materially and adversely affect the Developer’s ability to own and sell the Property as described in the Preliminary Official Statement or to pay the Special Tax due with respect to the Property (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 and the Developer’s plan for marketing the Property as set forth under the sections of the Preliminary Official Statement captioned “PROPERTY OWNERSHIP AND THE DEVELOPMENT - The Master Dev eloper” and “CONTINUING DISCLOSURE – The Master Developer” (but in all cases under all captions excluding therefrom (i) information regarding the Appraisal Report (as defined herein), market value ratios and annual special tax ratios, and (ii) 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
1 “Actual Knowledge of the Undersigned ” means, as of the date of this Letter of Representations, the actual (as opposed to constructive) knowledge that the individual signing on behalf of the Developer currently has or has obtained through (i) interviews with such current officers and responsible employees o f the Developer and its Affiliates as the undersigned has determined are reasonably likely, in the ordinary course of their respective duties, to have knowledge of the matters set forth in this Lett er of Representations, and/or (ii) review of documents that were reasonably available to the undersigned and which the undersigned has reasonably deemed necessary for the undersigned to obtain knowledge of the matters set forth in this Letter of Representation s.
The undersigned has not conducted any extraordinary inspection or inquiry other than such inspections or inquiries as are prudent and customary in connection with the ordinary course of the Developer’s current business and operations. Individuals who are no longer employees of the Developer and its Affiliates have not been contacted.
2 “Affiliate” means, with respect to the Developer, any other Person (i) who directly, or indirectly through one or more intermediaries, is currently controlling, controlled by or under common control with the Developer, and (ii) for whom information, including financial information or operating data, concerning such Person is material to potential investors in their evaluat ion of the Community Facilities District and investment decision regarding the Bonds (i.e ., information relevant to (a) the Developer’s development plans with respect to the Property and ability to pay its Special Taxes on the Property (to the extent the responsibility of the Developer) prior to delinquency, or (b) such Person’s assets or funds that would materially affect the Developer’s ability to develop the Property as described in the Preliminary Official Statement or to pay its Special Taxes on the Property (to the extent the responsibility of the Developer) prior to delinquency. “Person” means an individual, a corporation, a partnership, a limited liability company, an association, a joint stock company, a trust, any unincorporated organization or a government or politic al subdivision thereof. For purposes hereof, the term “ control” (including the terms “ controlling,” “controlled by ” or “ under common control with”) means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise. 514
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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 related to the ownership of the Property or any other project which default is reasonably likely to materially and adversely affect the Developer’s ability to own the Property as described in the Preliminary Official Statement or to pay the Special Tax due with respect to the Property (to the extent the responsibility of the Developer) prior to delinquency.
6. To t he Actual Knowledge of the Undersigned, other than as disclosed in the Preliminary Official Statement, 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 the Special Tax 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 in any way from bringing any other action, suit, proceeding, inquiry or investigation at law or in equity, before any court, reg ulatory 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 Tax pursuant to which Special Tax is levied, (b) an action or suit with respect to the application or use of the Special Tax 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 F acilities District Resolutions, the Ordinance, the Indenture, or any other agreements among the Developer, an Affiliate, the City and/or the Community Facilities District or to which the Developer or an Affiliate is a party or beneficiary.
8. The Developer consents to the issuance of the Bonds. The Developer acknowledges that the proceeds of the Bonds are expected to be used as described in the Preliminary Official Statement.
9. The Developer intends to comply with the provision of the Mello -Roos Community Facilities 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 515
B-1-4
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. The Developer agrees to execute at Closing the Continuing Disclosure Certificate, substantially in the form attached as Appendix H-1 to the Preliminary Official Statement (the “Continuing Disclosure Certificate ”), with such additional chang es as may be agreed to by the Developer and the Underwriter. Except as disclosed in the Preliminary Official Statement, to the Actual Knowledge of the Undersigned, the Developer is not aware of any material failures by it or any entity under managerial co ntrol of the Developer to comply in all material respects with previous continuing disclosure undertakings in a written certificate or agreement executed by it or an entity under the managerial control of the Developer to provide periodic continuing disclo sure reports or notices of material events respecting securities offerings in California within the past five years.
12. To the Actual Knowledge of the Undersigned, execution and delivery of the Continuing Disclosure Certificate, and the performance by the Dev eloper of its obligations under the Continuing Disclosure Certificate, will not conflict with or constitute a breach of or default under any loans, lines of credit, agreements, or other contractual or financial obligations of the Developer, or any applicable law, regulation, judgment or decree.
13. To the Actual Knowledge of the Undersigned, Affiliates of the Developer are able to pay their bills as they become due and no legal proceedings are pending against any Affiliate of the Developer (with proper service of process having been accomplished) or to the Actual Knowledge of the Undersigned, threatened in writing in which the Affiliates of the Developer may be adjudicated as bankrupt or discharged from any or all of their debts or obligations, or granted an extension of time to pay their debt or obligations, or be allowed to reorganize or readjust their debts or obligations, or be subject to control or supervision of the Federal Deposit Insurance Corporation which is reasonably likely to have a materially advers e impact on the ability of the Developer to own the Property as described in the Preliminary Official Statement, to perform its obligations under the Continuing Disclosure Certificate, or to pay the Special Tax or ad valorem tax obligations with respect to the portion of the Property then owned by the Developer (to the extent the responsibility of the Developer) prior to delinquency.
14. The Developer has been developing or has been involved in the development of numerous projects over an extended period of tim e. It is likely that the Developer and its Affiliates have been delinquent at one time or another in the payment of ad valorem property taxes, special assessments or special taxes. 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 included within the boundari es 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 such Affiliate in a court of law.
15. The Developer has not filed for the reassessment of the assessed value of any portions of the Property.
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16. 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 ownership of the Property which is reasonably likely to materially and adversely affect the Developer’s development of the Property as described in the Preliminary Official Statement , the performance of its obligations under the Continuing Disclosure Certificate , or the payment of the Special Tax due with respect to the Property (to the extent the responsibility of the Developer) prior to delinquency.
17. [Reserved.]
18. An appraisal of the taxable properties within the Community Facilities District, dated October 4, 2023 (the “ Appraisal Report ”), was prepared by Kitty Siino & Associates, Inc. (the “Appraiser”). The Appraisal Report estimates the market value of the taxable properties within the Community Facilities District as of August 7, 2023 (the “Date of Value”). To the 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 A attached hereto, was true and correct in all material respects as of the Date of Value.
19. Solely as to the limited information described in the section of the Preliminary Official Statement indicated in Paragraph 4 herein (and subject to the limitations and exclusions set forth in Paragraph 4), the Developer agrees to indemnify and hold harmless, to the extent permitted by law, the City, the Community Facilities District, and their officials and employees, and each Person, if any, who controls any of the foregoing within the meaning of Section 15 of the Securities Act of 1933, as amended, or of Section 20 of the Securities Exchange Act of 1934, as amended (each, an “Indemnified Party” and, collectively, the “ Indemnified Parties”), against any and all losses, claims, damages or liabilities, joint or several, to which such Indemnified Party may become subject under any statute or at law or in equity and shall reimburse any such Indemnified Party for any reasonable legal or other expense incurred by it in connection with investigating any such claim against it and defending any such action, insofar as and solely to the e xtent such losses, claims, damages, liabilities or actions, or legal or other expenses, arise out of or are based upon any untrue statement or alleged untrue statement of a material fact or the omission or alleged omission of a material fact by the Developer in the above- referenced information in the Preliminary Official Statement, as of its date, necessary to make the statements made by the Developer contained therein, in light of the circumstances under which they were made not misleading. This indemnity provision shall not be construed as a limitation on any other liability which the Developer may otherwise have to any Indemnified Party, provided that in no event shall the Developer be obligated for double indemnification, or for the negligence or willful misconduct of an Indemnified Party.
If any suit, action, proceeding (including any governmental or regulatory investigation), claim or demand shall be brought or asserted against any Indemnified Party in respect of which indemnification may be sought pursuant to the above paragraph, such Indemnified Party shall promptly notify the Developer in writing; provided that the failure to notify the Developer shall not relieve it from any liability that it may have hereunder except to the extent that it has been materially prejudiced by such failure; and provided, further, that the failure to notify the Developer shall not relieve it from any liability that it may have to an Indemnified Party otherwise than under the above paragraph unless such liability was also conditioned upon such notice. If any such proceeding shall be brought or asserted against an Indemnified Party and it shall have notified the Developer thereof, the Developer shall retain counsel reasonably satisfactory to the Indemnified Party and approv ed thereby to represent the Indemnified Party in such proceeding and shall pay the fees and expenses of such counsel related to 517
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such proceeding, as incurred. In any such proceeding, any Indemnified Party shall have the right to retain its own counsel, but the fees and expenses of such counsel shall be at the expense of such Indemnified Party unless (i) the Developer and the Indemnified Party shall have mutually agreed to the contrary; (ii) the Developer has failed within a reasonable time to retain counsel reasonably satisfactory to the Indemnified Party; (iii) the Indemnified Party shall have reasonably concluded that there may be legal defenses available to it that are different from or in addition to those available to the Developer such that a material conflict of interest exists for such counsel; or (iv) the named parties in any such proceeding (including any impleaded parties) include the Developer and the Indemnified Party and representation of both parties by the same counsel would be inappropriate d ue to actual or potential differing interest between them. It is understood and agreed that the Developer shall not, in connection with any proceeding or related proceedings in the same jurisdiction, be liable for the fees and expenses of more than one se parate firm (in addition to any local counsel) for all Indemnified Parties, and that all such fees and expenses, to the extent reasonable, shall be paid or reimbursed as they are incurred. Any such separate firm shall be designated in writing by such Indemnified Parties.
The Developer shall not be liable for any settlement of any proceeding effected without its written consent, but if settled with such consent or if there be a final judgment for the plaintiff, the Developer agrees to indemnify each Indemn ified Party from and against any loss or liability by reason of such settlement or judgment as set forth above. If the Developer shall, after receiving notice of the indemnification obligation of the Developer and within a period of time necessary to preserve any and all defenses to any claim asserted, fails to assume the defense or to retain counsel for that purpose satisfactory to the Indemnified Party, the Indemnified Party shall have the right, but not the obligation, to undertake the defense of, and to compromise or settle the claim or other matter on behalf of, for the account of and at the risk of, the Developer. The Developer shall not, without the written consent of the Indemnified Party, effect any settlement of any pending or threatened proceedin g in respect of which any Indemnified Party is a party and indemnification could have been sought hereunder by such Indemnified Party, unless such settlement (x) includes an unconditional release of such Indemnified Party, in form and substance reasonably satisfactory to such Indemnified Party, from all liability on claims that are the subject matter of such proceeding and (y) does not include any statement as to or any admission of fault, culpability or a failure to act by or on behalf of any Indemnified Party.
20. If between the date hereof and the Closing Date any event relating to or affecting the Developer, its Affiliates, ownership of the Property and the Developer’s development plan, the Developer’s plan for marketing the property shall occur of which the undersigned has actual knowledge which would cause the information under the section of the Preliminary Official Statement indicated in Paragraph 4 hereof (and subject to the limitations and exclusions contained 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 Preliminary Official Statement, 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.
21. 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 C-1 to the Bond Purchase Agreement. If any event related to or affecting the Develo per, its Affiliates, or its 518
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ownership of the Property occurs, as a result of which it is necessary to modify the Closing Certificate, the Developer agrees to deliver a new Closing Certificate revised to reflect such event.
22. On behalf of the Developer, I hav e reviewed the contents of this Letter of Representations and have had the opportunity to discuss with counsel to the Developer the meaning of the contents of this Letter of Representations. The Developer acknowledges and understands that a variety of state and federal securities laws, including, but not limited to the Securities Act of 1933, as amended, and Rule 10b-5 promulgated under the Securities Exchange Act of 1934, as amended, may apply to the Developer and that under some circumstances, certificat ion 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.
[Remainder of Page Intentionally Left Blank; Signature Page Follows]
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The undersigned has executed this Letter of Representations 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 Letter of Representations. Any liability arising from or relating to this Letter of Representations may only be asserted against the Developer.
SC ONTARIO DEVELOPMENT
COMPANY, LLC, a Delaware limited
liability company
By: LEWIS MANAGEMENT CORP.,
a Delaware corporation
Its: Sole Manager
By: ______________________________
Bryan Goodman
Authorized Agent
[Execution Page of Letter of Representations of SC Ontario Development Company, LLC]
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EXHIBIT A
To
LETTER OF REPRESENTATIONS
OF SC ONTARIO DEVELOPMENT COMPANY, LLC
DEVELOPER PROVIDED INFORMATION IN APPRAISAL REPORT
See attached.
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EXHIBIT B-2
CITY OF ONTARIO
COMMUNITY FACILITIES DISTRICT NO. 56
(PARKSIDE/LA AVENIDA)
SPECIAL TAX BONDS, SERIES 2023
LETTER OF REPRESENTATIONS OF
WOODSIDE 05S, LP
____________, 2023
City of Ontario Community Facilities District
No. 56 (Parkside/La Avenida)
303 East B Street
Ontario, California 91764
Samuel A. Ramirez & Co., Inc.
633 West Fifth Street, Suite 2693
Los Angeles, California 90071
Ladies and Gentlemen:
Reference is made to the City of Ontario Community Facilities District No. 56 (Parkside/La Avenida) 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 of Woodside 05S, LP (the “Letter of Representations”) is delivered pursuant to and in satisfaction of Section 3(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 Woodside 05S, LP, a California limited partnership (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 has all r equisite right, power and authority (i) to execute and deliver this Letter of Representations, and (ii) to develop its property in the City of Ontario Community Facilities District No. 56 (Parkside/La Avenida) (the “Community Facilities District”) as 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 is held in the name of the Developer (herein, the “Property”). The undersign ed, 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 522
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Developer’s current expectation is that the Developer shall remain the party respo nsible for the construction and sale of homes within the Property. Except as disclosed in the Preliminary Official Statement, the Developer has not entered into an 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, 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 ,3 is pending against any current Affiliate4 (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 the special tax levied on the Property by the Community Facilities District (the “Special Tax”) or other sums pledged or to be pledged to pay the principal of and interest on the Bonds (e.g., the reserve fund established under the Indenture (herein, the “ Reserve Fund”)), (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 Ta x, or ( d) which is reasonably likely to materially and adversely affect the Developer’s ability to develop and sell the Property as described in the Preliminary Official Statement or to pay the Special Tax due with respect to the Property (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, 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 Develo per’s development plan or the Developer’s financing plan, loans of such Affiliates) as set forth under the section of the Preliminary Official Statement captioned “PROPERTY OWNERSHIP AND THE DEVELOPMENT - Woodside” (but in all cases under all captions excluding therefrom (i) information regarding the Appraisal Report
3 “Actual Knowledge of the Undersigned ” means, as of the date of this Letter of Representations, the actual (as opposed to constructive) knowledge that the individual signing on behalf of the Developer currently has or has obtained through (i) interviews with such current officers and responsible employees of the Developer and its Affiliates as the undersigned has determined ar e reasonably likely, in the ordinary course of their respective duties, to have knowledge of the matters set forth in this Letter of Representations, and/or (ii) review of documents that were reasonably available to the undersigned and which the undersigned has reasonably deemed necessary for the undersigned to obtain knowledge of the matters set for th in this Letter of Representations.
The undersigned has not conducted any extraordinary inspection or inquiry other than such inspections or inquiries as are pru dent and customary in connection with the ordinary course of the Developer’s current business and operations. Individuals who are no longer employees of the Developer and its Affiliates have not been contacted.
4 “Affiliate” means, with respect to the Developer, any other Person (i) who directly, or indirectly through one or more intermediaries, is currently controlling, controlled by or under common control with the Developer, and (ii) for whom information, including financial information or operating data, concerning such Person is material to potential investors in their evaluation of the Community Facilities District and investment decision regarding the Bonds (i.e., information relevant to (a) the Develope r’s development plans with respect to the Property and ability to pay its Special Taxes on the Property (to the extent the responsibility of the Developer) prior to delinquency, or (b) such Person’s assets or funds that would materially affect the Developer’s abi lity to develop the Property as described in the Preliminary Official Statement or to pay its Special Taxes on the Property (to the e xtent the responsibility of the Developer) prior to delinquency. “ Person” means an individual, a corporation, a partnership, a lim ited liability company, an association, a joint stock company, a trust, any unincorporated organization or a government or politic al subdivision thereof. For purposes hereof, the term “ control” (including the terms “ controlling,” “controlled by ” or “ under common control with”) means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise. 523
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(as defined herein), market value ratios and annual special tax ratios, and (ii) information which is identified as having been provided by a source other than the Developer), is true and corre ct 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 related to the development of the Property or any other project which default is reasonably likely to materially and advers ely affect the Developer’s ability to develop the Property as described in the Preliminary Official Statement or to pay the Special Tax due with respect to the Property (to the extent the responsibility of the Developer) prior to delinquency.
6. To the Actual Knowledge of the Undersigned, other than as disclosed in the Preliminary Official Statement, the Developer is not aware that any of th e 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 the Special Tax 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 in any way from bringing any other action, suit, proceeding, inquiry or investigation at law or in equity, before any court, regulat ory 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 Tax pursuant to which Special Tax is levied, (b) an action or suit with respect to the application or use of the Special Tax 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 Facil ities District Resolutions, the Ordinance, the Indenture, or any other agreements among the Developer, an Affiliate, the City and/or the Community Facilities District or to which the Developer or an Affiliate is a party or beneficiary.
8. The Developer consents to the issuance of the Bonds. The Developer acknowledges that the proceeds of the Bonds are expected to be used as described in the Preliminary Official Statement.
9. The Developer intends to comply with the provision of the Mello -Roos Community Facilities 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. 524
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10. To the Actual Knowledge of the Undersigned, the Developer is able to pay its bill s 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 ban krupt 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. [Reserved]
12. [Reserved.]
13. To the Actual Knowledge of the Undersigned, Affiliates of the Developer are able to pay their bills as they become due and no legal proceedings are pending against any Affiliate of the Developer (with proper service of process having been accomplished) or to the Actual Knowledge of the Undersigned, threatened in writing in which the Affiliates of the Developer may be adjudicated as bankrupt or discharged from any or all of their debts or obligations, or granted an extension of time to pay their debt or obligations, or be allowed to reorganize or readjust their debts or obligations, or be subject to control or supervision of the Federal Deposit Insurance Corporation which is reasonably likely to have a materially adverse imp act on the ability of the Developer to develop the Property as described in the Preliminary Official Statement, or to pay the Special Tax or ad valorem tax obligations with respect to the portion of the Property then owned by the Developer (to the extent the responsibility of the Developer) prior to delinquency.
14. 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 and its Affiliates have been delinque nt at one time or another in the payment of ad valorem property taxes, special assessments or special taxes. 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 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 such Affiliate in a court of law.
15. The Developer has not filed for the reassessment of the assessed value of any portions of the Property, other than in connection with the sale of homes to individual homebuyers.
16. 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 development of the Property as describ ed in the Preliminary Official Statement , or the payment of the Special Tax due with respect to the Property (to the extent the responsibility of the Developer) prior to delinquency.
17. 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 525
B-2-5
sufficient funds to develop the Property as described in the Preliminary Official Statement and to pay Special Tax levied against the Property (to the extent the responsibility of the Developer) pri or 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 Fund for payment of principal of or interest on the Bonds due to the Developer’s nonpayment of Special Tax. However, neither the Developer nor any of its Affiliates are obligated to make any additional capital contribution or loan to the Developer at any time, and the Developer reserves the right to change its development plans and financing plans for the Property at any time without notice.
18. An appraisal of the taxable properties within the Community Facilities District, dated October 4, 2023 (the “ Appraisal Report ”), was prepared by Kitty Siino & Associates, Inc. (the “Appraiser”). The Appraisal Report estimates t he market value of the taxable properties within the Community Facilities District as of August 7, 2023 (the “Date of Value”). To the 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 A attached hereto, was true and correct in all material respects as of the Date of Value.
19. Solely as to the limited information described in the section of the Preliminary Official Statement indicated in Paragraph 4 herein (and subject to the limitations and exclusions set forth in Paragraph 4), the Developer agrees to indemnify and hold harmless, to the extent permitted by law, the City, the Community Facilities District, and their officials and employees, and each Person, if any, who controls any of the foregoing within the meaning of Section 15 of the Securities Act of 1933, as amended, or of Section 20 of the Securities Exchange Act of 1934, as amended (each, an “Indemnified Party” and, collectively, the “ Indemnified Parties”), against any and all losses, claims, damages or liabilities, joint or several, to which such Indemnified Party may become subject under any statute or at law or in equ ity and shall reimburse any such Indemnified Party for any reasonable legal or other expense incurred by it in connection with investigating any such claim against it and defending any such action, insofar as and solely to the extent such losses, claims, d amages, liabilities or actions, or legal or other expenses, arise out of or are based upon any untrue statement or alleged untrue statement of a material fact or the omission or alleged omission of a material fact by the Developer in the above- referenced information in the Preliminary Official Statement, as of its date, necessary to make the statements made by the Developer contained therein, in light of the circumstances under which they were made not misleading. This indemnity provision shall not be construed as a limitation on any other liability which the Developer may otherwise have to any Indemnified Party, provided that in no event shall the Developer be obligated for double indemnification, or for the negligence or willful misconduct of an Indemnified Party.
If any suit, action, proceeding (including any governmental or regulatory investigation), claim or demand shall be brought or asserted against any Indemnified Party in respect of which indemnification may be sought pursuant to the above paragraph, such Indemnified Party shall promptly notify the Developer in writing; provided that the failure to notify the Developer shall not relieve it from any liability that it may have hereunder except to the extent that it has been materially prejudiced by such failure; and provided, further, that the failure to notify the Developer shall not relieve it from any liability that it may have to an Indemnified Party otherwise than under the above paragraph unless such liability was also conditioned upon such notice. If any such proceeding shall be brought or asserted against an Indemnified Party and it shall have notified the Developer thereof, the Developer shall retain counsel reasonably satisfactory to the Indemnified Party and approved thereby to represent the Indemnified Party in such proceeding and shall pay the fees and expenses of such counsel related to such proceeding, as incurred. In any such proceeding, any Indemnified Party shall have the right to 526
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retain its own counsel, but the fees and expenses of su ch counsel shall be at the expense of such Indemnified Party unless (i) the Developer and the Indemnified Party shall have mutually agreed to the contrary; (ii) the Developer has failed within a reasonable time to retain counsel reasonably satisfactory to the Indemnified Party; (iii) the Indemnified Party shall have reasonably concluded that there may be legal defenses available to it that are different from or in addition to those available to the Developer such that a material conflict of interest exists for such counsel; or (iv) the named parties in any such proceeding (including any impleaded parties) include the Developer and the Indemnified Party and representation of both parties by the same counsel would be inappropriate due to actual or potential differing interest between them. It is understood and agreed that the Developer shall not, in connection with any proceeding or related proceedings in the same jurisdiction, be liable for the fees and expenses of more than one separate firm (in addition to any local counsel) for all Indemnified Parties, and that all such fees and expenses, to the extent reasonable, shall be paid or reimbursed as they are incurred. Any such separate firm shall be designated in writing by such Indemnified Parties.
The Developer shall not be liable for any settlement of any proceeding effected without its written consent, but if settled with such consent or if there be a final judgment for the plaintiff, the Developer agrees to indemnify each Indemnified Party from and against any loss or liability by reason of such settlement or judgment as set forth above. If the Developer shall, after receiving notice of the indemnification obligation of the Developer and within a period of time necessary to preserve any and all defenses to any claim asserted, fails to assume the defense or to retain counsel for that purpose satisfactory to the Indemnified Party, the Indemnified Party shall have the right, but not the obligation, to undertake the defense of, and to compromise or settle the claim or other matter on behalf of, for the account of and at the risk of, the Developer. The Developer shall not, without the written consent of the Indemnified Party, effect any settlement of any pending or threatened proceeding in respect of which any Indemnified Party is a party and indemnification could have been sought hereunder by such Indemnified Party, unless such settlement (x) includes an unconditional release of such Indemnified Party, in form and substance reasonably satisfactory to such Indemni fied Party, from all liability on claims that are the subject matter of such proceeding and (y) does not include any statement as to or any admission of fault, culpability or a failure to act by or on behalf of any Indemnified Party.
20. If between the date hereof and the Closing Date 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, loans of such Affiliates) shall occur of which the undersigned has actual knowledge which would cause the information under the section of the Preliminary Official Statement indicated in Paragraph 4 hereof (and subject to the limitations and exclusions contained 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 Preliminary Official Statement, 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.
21. 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 C-2 to the 527
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Bond Purchase Agreement. If any event related to or affecting the Developer, its Affiliates, or the ownership, development, or sale of the Property occurs, as a result of which it is necessary to modify the Closing Certificate, the Developer agrees to deliver a new Closing Certificate revised to reflect such event.
22. On behalf of the Developer, I have reviewed the contents of this Letter of Representations and have had the opportunity to discuss with counsel to the Developer the meaning of the contents of this Letter of Representations. The Developer acknowledges and understands that a variety of state and federal securities laws, including, but not limited to the Securities Act of 1933, as amended, and Rule 10b-5 promulgated under the Securities Exchange Act of 1934, as amended, may apply to the Developer and that under some circumstances, certification as to the matters se t 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.
[Remainder of Page Intentionally Left Blank; Signature Page Follows]
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The undersigned has executed this Letter of Representations 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 Letter of Representations. Any liability arising from or relating to this Letter of Representations may only be asserted against the Developer.
WOODSIDE 05S, LP, a California limited
partnership
By: WDS GP, Inc., a California corporation
Its: General Parner
By: ______________________________
______________________________
Authorized Agent
[Execution Page of Letter of Representations of Woodside 05S, LP]
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EXHIBIT A
To
LETTER OF REPRESENTATIONS
OF WOODSIDE 05S, LP
DEVELOPER PROVIDED INFORMATION IN APPRAISAL REPORT
See attached.
530
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EXHIBIT B-3
CITY OF ONTARIO
COMMUNITY FACILITIES DISTRICT NO. 56
(PARKSIDE/LA AVENIDA)
SPECIAL TAX BONDS, SERIES 2023
LETTER OF REPRESENTATIONS OF
THE NEW HOME COMPANY SOUTHERN CALIFORNIA LLC
____________, 2023
City of Ontario Community Facilities District
No. 56 (Parkside/La Avenida)
303 East B Street
Ontario, California 91764
Samuel A. Ramirez & Co., Inc.
633 West Fifth Street, Suite 2693
Los Angeles, California 90071
Ladies and Gentlemen:
Reference is made to the City of Ontario Community Facilities District No. 56 (Parkside/La Avenida) 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 of The New Home Company Southern California LLC (the “ Letter of Representations”) is delivered pursuant to and in satisfaction of Section 3(F)(17) of the Bond Purchase Agreement. Capitalized terms used herein an d 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 The New Home Company Southern California LLC , a Delaware limited liability company (the “Developer”), and the undersigned, on behalf of the Developer, further certifies as follows:
1. The Developer is a limited liability company duly organized and validly existing under the laws of the State of Delaware, registered to transact business as a foreign limited liability company in the State of California and has all requisite right, power and authority (i) to execute and deliver this Letter of Representations, and (ii) to develop its property in the City of Ontario Community Facilities District No. 56 (Parkside/La Avenida ) (the “ Community Facilities District ”) as described in the Preliminary Official Statement.
2. As set forth in the Preliminary Offi cial Statement, title to a certain portion of the property within the Community Facilities District is held in the name of the Developer (herein, the 531
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“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’s current expectation is that the Developer shall remain the party responsible for the construction and sale of homes within the Property. Except as di sclosed in the Preliminary Official Statement, the Developer has not entered into an 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, 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 ,5 is pending against any current Affiliate6 (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 the special tax levied on the Property by the Community Facilities District (the “Special Tax”) or other sums pledged or to be pledged to pay the principal of and interest on the Bonds (e.g., the reserve fund established under the Indenture (herein, the “ Reserve Fund”)), (b) to restrain or enjoin the development of the Property as described in the Preliminary Official Statement, (c) to materially adversely affect the ability of the Developer to perform its obligations under the Continuing Disclosure Certificate (as hereina fter defined), (d) in any way contesting or affecting the validity of the Special Tax, or ( e) which is reasonably likely to materially and adversely affect the Developer’s ability to develop and sell the Property as described in the Preliminary Official Statement or to pay the Special Tax due with respect to the Property (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, 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 a rrangements of the
5 “Actual Knowledge of the Undersigned” means, as of the date of this Letter of Representations, the actual (as opposed to constructive) knowledge that the individual signing on behalf of the Developer currently has or has obtained through (i) interviews with such current offic ers and responsible employees of the Developer and its Affiliates as the undersigned has determined are reasonably likely, in the ordinary course of their respective duties, to have knowledge of the matters set forth in this Lett er of Representations, and/or (ii) review of documents that were reasonably available to the undersigned and which the undersigned has reasonably deemed necessary for the undersigned to obtain knowledge of the matters set forth in this Letter of Representation s.
The undersigned has not conducted any extraordinary inspection or inquiry other than such inspections or inquiries as are prudent and customary in connection with the ordinary course of the Developer’s current business and operations. Individuals who are no longer employees of the Developer and its Affiliates have not been contacted.
6 “Affiliate” means, with respect to the Developer, any other Person (i) who directly, or indirectly through one or more intermediaries, is currently controlling, controlled by or under common control with the Developer, and (ii) for whom information, including financial information or operating data, concerning such Person is material to potential investors in their evaluat ion of the Community Facilities District and investment decision regard ing the Bonds (i.e., information relevant to (a) the Developer’s development plans with respect to the Property and ability to pay its Special Taxes on the Property (to the extent the responsibility of the Developer) prior to delinquency, or (b) such Person’s assets or funds that would materially affect the Developer’s ability to develop the Property as described in the Preliminary Official Statement or to pay its Special Taxes on the Property (to the e xtent the responsibility of the Developer) prior to delinquency. “Person” means an individual, a corporation, a partnership, a limited liability company, an association, a joint stock company, a trust, any unincorporated organization or a government or politic al subdivision thereof. For purposes hereof, the term “ control” (including the terms “ controlling,” “controlled by ” or “ under common control with”) means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise. 532
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Developer or any Affiliates (including, if material to the Developer’s development plan or the Developer’s financing plan, loans of such Affiliates) as set forth under the sections of the Preliminary Official Statement captioned “PROPERTY OWNERSHIP AND THE DEVELOPMENT - New Home Company” (excluding the information under subcaption “ - New Home Company Landbank ”) and “CONTINUING DISCLOSURE – New Home Company” (but in all cases under all captions excluding therefrom (i) information regarding the Appraisal Report (as defined herein), market value ratios and annual special tax ratios, and (ii) 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 Stateme nt, 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 A ffiliates is currently in material default on any loans, lines of credit or other obligation 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 de velop the Property as described in the Preliminary Official Statement or to pay the Special Tax due with respect to the Property (to the extent the responsibility of the Developer) prior to delinquency.
6. To the Actual Knowledge of the Undersigned, other tha n as disclosed in the Preliminary Official Statement, 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 Re sponse, 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 r efunding 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 the Special Tax within the Community Facilities District, to invalidat e 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 rel ating thereto. The foregoing covenant shall not prevent the Developer in any way from bringing any other action, suit, proceeding, inquiry or investigation at law or in equity, before any court, regulatory agency, public board or body including, without li mitation, (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 Tax pursuant to which Special Tax is levied, (b) an action or suit with respect to the application or use of the Special Tax 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 Ordinance, the Indentu re, or any other agreements among the Developer, an Affiliate, the City and/or the Community Facilities District or to which the Developer or an Affiliate is a party or beneficiary.
8. The Developer consents to the issuance of the Bonds. The Developer acknowledges that the proceeds of the Bonds are expected to be used as described in the Preliminary Official Statement.
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9. The Developer intends to comply with the provision of the Mello -Roos Community Facilities 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 pend ing 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. The Developer agrees to execute at Closing the Continuing Disclosure Certificate, substantially in the form attached as Appendix H-2 to the Preliminary Official Statement (the “Continuing Disclosure Certificate ”), with such additional changes as may be agreed to by the Developer and the Underwrite r. Except as disclosed in the Preliminary Official Statement, to the Actual Knowledge of the Undersigned, the Developer is not aware of any material failures by it or any entity under managerial control of the Developer to comply in all material respects with previous continuing disclosure undertakings in a written certificate or agreement executed by it or an entity under the managerial control of the Developer to provide periodic continuing disclosure reports or notices of material events respecting secu rities offerings in southern California within the past five years.
12. To the Actual Knowledge of the Undersigned, execution and delivery of the Continuing Disclosure Certificate, and the performance by the Developer of its obligations under the Continuing Disclosure Certificate, will not conflict with or constitute a breach of or default under any loans, lines of credit, agreements, or other contractual or financial obligations of the Developer, or any applicable law, regulation, judgment or decree.
13. To the Actual Knowledge of the Undersigned, Affiliates of the Developer are able to pay their bills as they become due and no legal proceedings are pending against any Affiliate of the Developer (with proper service of process having been accomplished) or to the Actual Knowledge of the Undersigned, threatened in writing in which the Affiliates of the Developer may be adjudicated as bankrupt or discharged from any or all of their debts or obligations, or granted an extension of time to pay their debt or obligations, or be allowed to reorganize or readjust their debts or obligations, or be subject to control or supervision of the Federal Deposit Insurance Corporation which is reasonably likely to have a materially adverse impact on the ability of the Devel oper to develop the Property as described in the Preliminary Official Statement, to perform its obligations under the Continuing Disclosure Certificate, or to pay the Special Tax or ad valorem tax obligations with respect to the portion of the Property then owned by the Developer (to the extent the responsibility of the Developer) prior to delinquency.
14. 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 and its Affiliates have been delinquent at one time or another in the payment of ad valorem property taxes, special assessments or special taxes. 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 included within the boundaries of a community faciliti es district or an 534
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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 such Affiliate in a court of law.
15. The Developer has not filed for the reassessment of the assessed value of any portions of the Property, other than in connection with the sale of homes to individual homebuyers.
16. To the Actual Knowledge of the Und ersigned, 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 development of the Property as described in the Preliminary Official Statement , the performance of its obligations under the Continuing Disclosure Certificate , or the payment of the Special Tax due with respect to the Property (to the extent the responsibility of the Developer) prior to delinquency.
17. 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 develop the Property as described in the Preliminary Official Statement and to pay Special Tax levied against the Property (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 Fund for payment of principal of or interest on the Bonds due to the Developer’s nonpayment of Special Tax. However, neither the Developer nor any of its Affiliates are obligated to make any additional capital contribution or loan to the D eveloper at any time, and the Developer reserves the right to change its development plans and financing plans for the Property at any time without notice.
18. An appraisal of the taxable properties within the Community Facilities District, dated October 4, 20 23 (the “ Appraisal Report ”), was prepared by Kitty Siino & Associates, Inc. (the “Appraiser”). The Appraisal Report estimates the market value of the taxable properties within the Community Facilities District as of August 7, 2023 (the “Date of Value”). To the 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 A attached hereto, was true and correct in all material respects as of the Date of Value.
19. Solely as to the limited information described in the sections of the Preliminary Official Statement indicated in Paragraph 4 herein (and subject to the limitations and exclusions set forth in Paragraph 4), the Developer agrees to indemnify and hold harmless, to the extent permitted by law, the City, the Community Facilities District, and their officials and employees, and each Person, if any, who controls any of the foregoing within the meaning of Section 15 of the Securities Act of 1933, as amended, or of Section 20 of the Securities Exchange Act of 1934, as amended (each, an “Indemnified Party” and, collectively, the “ Indemnified Parties”), against any and all losses, claims, damages or liabilities, joint or several, to which such Indemnified Party may become subject under any statute or at law or in equity and shall reimburse any such Indemnified Party for any reasonable legal or other expense incurred by it in connection with investiga ting any such claim against it and defending any such action, insofar as and solely to the extent such losses, claims, damages, liabilities or actions, or legal or other expenses, arise out of or are based upon any untrue statement or alleged untrue statement of a material fact or the omission or alleged omission of a material fact by the Developer in the above- 535
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referenced information in the Preliminary Official Statement, as of its date, necessary to make the statements made by the Developer contained there in, in light of the circumstances under which they were made not misleading. This indemnity provision shall not be construed as a limitation on any other liability which the Developer may otherwise have to any Indemnified Party, provided that in no event shall the Developer be obligated for double indemnification, or for the negligence or willful misconduct of an Indemnified Party.
If any suit, action, proceeding (including any governmental or regulatory investigation), claim or demand shall be brought or asserted against any Indemnified Party in respect of which indemnification may be sought pursuant to the above paragraph, such Indemnified Party shall promptly notify the Developer in writing; provided that the failure to notify the Developer shall not relieve it from any liability that it may have hereunder except to the extent that it has been materially prejudiced by such failure; and provided, further, that the failure to notify the Developer shall not relieve it from any liability that it may have to an Indemnified Party otherwise than under the above paragraph unless such liability was also conditioned upon such notice. If any such proceeding shall be brought or asserted against an Indemnified Party and it shall have notified the Developer thereof, the Developer shall retain counsel reasonably satisfactory to the Indemnified Party and approved thereby to represent the Indemnified Party in such proceeding and shall pay the fees and expenses of such counsel related to such proceeding, as inc urred. In any such proceeding, any Indemnified Party shall have the right to retain its own counsel, but the fees and expenses of such counsel shall be at the expense of such Indemnified Party unless (i) the Developer and the Indemnified Party shall have mutually agreed to the contrary; (ii) the Developer has failed within a reasonable time to retain counsel reasonably satisfactory to the Indemnified Party; (iii) the Indemnified Party shall have reasonably concluded that there may be legal defenses availab le to it that are different from or in addition to those available to the Developer such that a material conflict of interest exists for such counsel; or (iv) the named parties in any such proceeding (including any impleaded parties) include the Developer and the Indemnified Party and representation of both parties by the same counsel would be inappropriate due to actual or potential differing interest between them. It is understood and agreed that the Developer shall not, in connection with any proceeding or related proceedings in the same jurisdiction, be liable for the fees and expenses of more than one separate firm (in addition to any local counsel) for all Indemnified Parties, and that all such fees and expenses, to the extent reasonable, shall be pai d or reimbursed as they are incurred. Any such separate firm shall be designated in writing by such Indemnified Parties.
The Developer shall not be liable for any settlement of any proceeding effected without its written consent, but if settled with such consent or if there be a final judgment for the plaintiff, the Developer agrees to indemnify each Indemnified Party from and against any loss or liability by reason of such settlement or judgment as set forth above. If the Developer shall, after receiving notice of the indemnification obligation of the Developer and within a period of time necessary to preserve any and all defenses to any claim asserted, fails to assume the defense or to retain counsel for that purpose satisfactory to the Indemnified Party, the Indemnified Party shall have the right, but not the obligation, to undertake the defense of, and to compromise or settle the claim or other matter on behalf of, for the account of and at the risk of, the Developer. The Developer shall not, without t he written consent of the Indemnified Party, effect any settlement of any pending or threatened proceeding in respect of which any Indemnified Party is a party and indemnification could have been sought hereunder by such Indemnified Party, unless such sett lement (x) includes an unconditional release of such Indemnified Party, in form and substance reasonably satisfactory to such Indemnified Party, from all liability on claims that are the subject matter of such proceeding and (y) does not include any statem ent as to or any admission of fault, culpability or a failure to act by or on behalf of any Indemnified Party. 536
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20. If between the date hereof and the Closing Date any event relating to or affecting the Developer, its Affiliates, the proposed development of t he 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, loans of such Affiliates) shall occur of which the undersigned has actual knowledge which would cause the information under the section of the Preliminary Official Statement indicated in Paragraph 4 hereof (and sub ject to the limitations and exclusions contained 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 amendme nt to the Preliminary Official Statement, 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.
21. 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 Exhi bit C-3 to the Bond Purchase Agreement. If any event related to or affecting the Developer, its Affiliates, or the ownership, development, or sale of the Property occurs, as a result of which it is necessary to modify the Closing Certificate, the Developer agrees to deliver a new Closing Certificate revised to reflect such event.
22. On behalf of the Developer, I have reviewed the contents of this Letter of Representations and have had the opportunity to discuss with counsel to the Developer the meaning of the contents of this Letter of Representations. The Developer acknowledges and understands that a variety of state and federal securities laws, including, but not limited to the Securities Act of 1933, as amended, and Rule 10b-5 promulgated under the Securities Exchange Act of 1934, as amended, 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.
[Remainder of Page Intentionally Left Blank; Signature Page Follows]
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The undersigned has executed this Letter of Representations 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 Letter of Representations. Any liability arising from or relating to this Letter of Representations may only be asserted against the Developer.
THE NEW HOME COMPANY SOUTHERN
CALIFORNIA LLC, a Delaware limited
liability company
By: ________________________________
Name: ______________________________
Title: _______________________________
[Execution Page of Letter of Representations of The New Home Company Southern California LLC]
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EXHIBIT A
To
LETTER OF REPRESENTATIONS
OF THE NEW HOME COMPANY SOUTHERN CALIFORNIA LLC
DEVELOPER PROVIDED INFORMATION IN APPRAISAL REPORT
See attached.
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EXHIBIT B-4
CITY OF ONTARIO
COMMUNITY FACILITIES DISTRICT NO. 56
(PARKSIDE/LA AVENIDA)
SPECIAL TAX BONDS, SERIES 2023
LETTER OF REPRESENTATIONS OF
LENNAR HOMES OF CALIFORNIA, LLC
____________, 2023
City of Ontario Community Facilities District
No. 56 (Parkside/La Avenida)
303 East B Street
Ontario, California 91764
Samuel A. Ramirez & Co., Inc.
633 West Fifth Street, Suite 2693
Los Angeles, California 90071
Ladies and Gentlemen:
Reference is made to the City of Ontario Community Facilities District No. 56 (Parkside/La Avenida) 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 of Lennar Homes of California, LLC (the “Letter of Representations”) is delivered pursuant to and in satisfaction of Section 3(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 Lennar Homes of California, LLC, a California limited liability company (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 has all requisite right, power and authority (i) to execute and deliver this Letter of Representations, and (ii) to develop its property in the City of Ontario Community Fa cilities District No. 56 (Parkside/La Avenida) (the “Community Facilities District”) as 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 is held in the name of the Developer (herein, the “Property”). The undersigned, on behalf of the Developer, makes the representations herein with 540
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respect to all such Property. Except as otherwise described in the Preliminary Official Statement, the Developer’s current expectation is that the Developer shall remain the party responsible for the construction and sale of homes within the Property. Except as disclosed in the Preliminary Official Statement, the Developer has not e ntered into an 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 enter ed 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, 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 ,7 is pending against any current Affiliate8 (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 the special tax levied on the Property by the Community Facilities District (the “Special Tax”) or other sums pledged or to be pledged to pay the principal of and interest on the Bonds (e.g., the reserve fund established under the Indenture (herein, the “ Reserve Fund”)), (b) to restrain or enjoin the development of the Property as described in the Preliminary Official Statement, (c) to materially adversely affect the ability of the Developer to perform its obligations under the Continuing Disclosure Certificate (as hereinafter defined), (d) in any way contesting or affecting the validity of the Special Tax, or (e) which is reasonably likely to materially and adversely affect the Developer’s ability to develop and sell the Property as described in the Preliminary Official Statement or to pay the Special Tax due with respect to the Property (to the extent the responsibility of the Developer) prior to delinquency.
7 “Actual Knowledge of the Undersigned ” means, as of the date of this Letter of Representations, the actual (as opposed to constructive) knowledge that the individual signing on behalf of the Developer currently has or has obtained through (i) interviews with such current officers and responsible employees of the Developer and its Affiliates as the undersigned has determined ar e reasonably likely, in the ordinary course of their respective duties, to hav e knowledge of the matters set forth in this Letter of Representations, and/or (ii) review of documents that were reasonably available to the undersigned and which the undersigned has reasonably deemed necessary for the undersigned to obtain knowledge of t he matters set forth in this Letter of Representations.
The undersigned has not conducted any extraordinary inspection or inquiry other than such inspections or inquiries as are pru dent and customary in connection with the ordinary course of the Developer’s current business and operations. Individuals who are no longer employees of the Developer and its Affiliates have not been contacted. The Developer further notes that Lennar Corporation, a Delaware corporation (“Lennar Corporation”), completed a merger with CalAtlantic Group, Inc., a Delaware corporation (now CalAtlantic Group, LLC, herein “CalAtlantic”) in February, 2018, pursuant to which CalAtlantic merged with and into Lennar Corporation, with Lennar Corporation being the surviving entity. Separate and apart from Lennar Corporation’s due diligence efforts for purposes of completing the acquisition of CalAtlantic, individuals who were employees and officers of CalAtlantic and its subsidiaries prior to the merger have not been consulted or contacted an d documents entered into by CalAtlantic and its subsidiaries or related to their properties and projects have not been reviewed.
8 “Affiliate” means, with respect to the Developer, any other Person (i) who directly, or indirectly through one or more intermediaries, is currently controlling, controlled by or under common control with the Developer, and (ii) for whom information, including financial information or operating data, concerning such Person is material to potential investors in their evaluat ion of the Community Facilities District and investment decision regarding the Bonds (i.e., information relevant to (a) the Develope r’s development plans with respect to the Property and ability to pay its Special Taxes on the Property (to the extent the responsibility of the Developer) prior to delinquency, or (b) such Person’s assets or funds that would materially affect the Developer’s abi lity to develop the Property as described in the Preliminary Official Statement or to pay its Special Taxes on the Propert y (to the extent the responsibility of the Developer) prior to delinquency. “ Person” means an individual, a corporation, a partnership, a limited liability company, an association, a joint stock company, a trust, any unincorporated organization or a gover nment or political subdivision thereof. For purposes hereof, the term “ control” (including the terms “ controlling,” “controlled by ” or “ under common control with”) means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise. Due to the merger, an d for purposes hereof, the term Affiliate shall exclude CalAtlantic and its direct and indirect subsidiaries. [In addition, for purposes hereof, neither SC Ontario Development Company, LLC nor NMC Builders, LLC is an Affiliate of the Developer.] 541
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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, 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, loans of such Affiliates) as set forth under the section of the Preliminary Official Statement captioned “PROPERTY OWNERSHIP AND THE DEVELOPMENT - Lennar” (but in all cases under all captions excluding therefrom (i) information regarding the Appraisal Report (as defined herein), market value ratios and annual special tax ratios, and (ii) 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 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 Tax due with respect to the Property (to the extent the responsibility of the Developer) prior to delinquency.
6. To t he Actual Knowledge of the Undersigned, other than as disclosed in the Preliminary Official Statement, 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 the Special Tax 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 in any way from bringing any other action, suit, proceeding, inquiry or investigation at law or in equity, before any court, regula tory 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 Tax pursuant to which Special Tax is levied, (b) an action or suit with respect to the application or use of the Special Tax 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 Faci lities District Resolutions, the Ordinance, the Indenture, or any other agreements among the Developer, an Affiliate, the City and/or the Community Facilities District or to which the Developer or an Affiliate is a party or beneficiary.
542
B-4-4
8. The Developer consents to the issuance of the Bonds. The Developer acknowledges that the proceeds of the Bonds are expected to be used as described in the Preliminary Official Statement.
9. The Developer intends to comply with the provision of the Mello -Roos Community Facilities 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 bil ls 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 ba nkrupt 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. [Reserved.]
12. [Reserved.]
13. To the Actual Knowledge of the Undersigned, Affiliates of the Developer are able to pay their bills as they become due and no legal proceedings are pending against any Affiliate of the Developer (with proper service of process having been accomplished) or to the Actual Knowledge of the Undersigned, threatened in writing in which the Affiliates of the Developer may be adjudicated as bankrupt or discharged from any or all of their debts or obligations, or granted an extension of time to pay their debt or obligations, or be allowed to reorganize or readjust their debts or obligations, or be subject to control or supervision of the Federal Deposit Insurance Corporation which is reasonably likely to have a materially adverse i mpact on the ability of the Developer to develop the Property as described in the Preliminary Official Statement, or to pay the Special Tax or ad valorem tax obligations with respect to the portion of the Property then owned by the Developer (to the extent the responsibility of the Developer) prior to delinquency.
14. 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 and its Affiliates have been delinq uent at one time or another in the payment of ad valorem property taxes, special assessments or special taxes. 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 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 such Affiliate in a court of law.
15. The Developer has not filed for the reassessment of the assessed value of any portions of the Property, other than in connection with the sale of homes to individual homebuyers.
16. To the Actual Knowledge of the Undersigned, there are no claims, disputes, suit s, 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 543
B-4-5
Developer’s development of the Property as descr ibed in the Preliminary Official Statement , or the payment of the Special Tax due with respect to the Property (to the extent the responsibility of the Developer) prior to delinquency.
17. 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 develop the Property as described in the Preliminary Official Statement and to pay Special Tax levied against the Property (to the extent the responsibility of the Developer) p rior 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 Fund for payment of principal of or interest on the Bonds due to the Developer’s nonpayment of Special Tax. However, neither the Developer nor any of its Affiliates are obligated to make any additional capital contribution or loan to the Developer at any time, and the Developer reserves the right to change its development plans and financing plans for the Proper ty at any time without notice.
18. An appraisal of the taxable properties within the Community Facilities District, dated October 4, 2023 (the “ Appraisal Report ”), was prepared by Kitty Siino & Associates, Inc. (the “Appraiser”). The Appraisal Report estimates the market value of the taxable properties within the Community Facilities District as of August 7, 2023 (the “Date of Value”). To the 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 A attached hereto, was true and correct in all material respects as of the Date of Value.
19. Solely as to the limited information described in the section of the Preliminary Official Statement indicated in Paragraph 4 herein (and subject to the limitations and exclusions set forth in Paragraph 4), the Developer agrees to indemnify and hold harmless, to the extent permitted by law, the City, the Commun ity Facilities District, and their officials and employees, and each Person, if any, who controls any of the foregoing within the meaning of Section 15 of the Securities Act of 1933, as amended, or of Section 20 of the Securities Exchange Act of 1934, as amended (each, an “Indemnified Party” and, collectively, the “ Indemnified Parties”), against any and all losses, claims, damages or liabilities, joint or several, to which such Indemnified Party may become subject under any statute or at law or in equity and shall reimburse any such Indemnified Party for any reasonable legal or other expense incurred by it in connection with investigating any such claim against it and defending any such action, insofar as and solely to the extent such losses, claims, damages, liabilities or actions, or legal or other expenses, arise out of or are based upon any untrue statement or alleged untrue statement of a material fact or the omission or alleged omission of a material fact by the Developer in the above- referenced information in the Preliminary Official Statement, as of its date, necessary to make th e statements made by the Developer contained therein, in light of the circumstances under which they were made not misleading. This indemnity provision shall not be construed as a limitation on any other liability which the Developer may otherwise have to any Indemnified Party, provided that in no event shall the Developer be obligated for double indemnification, or for the negligence or willful misconduct of an Indemnified Party.
If any suit, action, proceeding (including any governmental or regulatory investigation), claim or demand shall be brought or asserted against any Indemnified Party in respect of which indemnification may be sought pursuant to the above paragraph, such Indemnified Party shall promptly notify the Developer in writing; provided that the failure to notify the Developer shall not 544
B-4-6
relieve it from any liability that it may have hereunder except to the extent that it has been materially prejudiced by such failure; and provided, further, that the failure to notify the Developer shall not relieve it from any liability that it may have to an Indemnified Party otherwise than under the above paragraph unless such liability was also conditioned upon such notice. If any such proceeding shall be brought or asserted against an Indemnified Party and it shall have notified the Developer thereof, the Developer shall retain counsel reasonably satisfactory to the Indemnified Party and approved thereby to represent the Indemnified Party in such proceeding and shall pay the fees and expenses of such counsel related to such proceeding, as incurred. In any such proceeding, any Indemnified Party shall have the right to retain its own counsel, but the fees and expenses of such counsel shall be at the expense of such Indemnified Party unless (i) the Developer and the Indemnified Party shall have mutually agreed to the contrary; (ii) the Developer has failed within a reasonable time to retain counsel reasonably satisfactory to the Indemnified Party; (iii) the Indemnified Party shall have reasonably concluded that there may be legal defenses available to it that are different from or in addition to those available to the Developer such that a material conflict of interest exists for such counsel; or (iv) the named parties in any such proceeding (including any impleaded parties) include the Developer and the Indemnified Party and representation of both parties by the same counsel would be inappropriate due to actual or potential differing interest between them. It is understood and agreed that the Developer shall not, in connection with any proceeding or related proceedings in the same jurisdiction, be liable for the fees and expenses of more than one separate firm (in addition to any local counsel) for all Indemnified Parties, and that all such fees and expenses, to the extent reasonable, shall be paid or reimbursed as they are incurred. Any such separate firm shall be designated in writing by such Indemnified Parties.
The Developer shall not be liable for any settlement of any proceeding effected without its written consent, but if settled with such consent or if there be a final judgment for the plaintiff, the Developer agrees to indemnify each Indemnified Party from and against any loss or liability by reason of such settlement or judgment as set forth above. If the Developer shall, after receiving notice of the indemnification obligation of the Developer and within a period of time necessary to preserve any and all defenses to any claim asserted, fails to assume the defense or to retain counsel for that purpose satisfactory to the Indemnified Party, the Indemnified Party shall have the right, but not the obligation, to undertake the defense of, and to compromise or settle the claim or other matter on behalf of, for the account of and at the risk of, the Developer. The Developer shall not, without the written consent of the Indemnified Party, effect any settlement of any pending or threatened proceeding in respect of which any Indemnified Party is a party and indemnification could have been sought hereunder by such Indemnified Party, unless such settlement (x) includes an unconditional release of such Indemnified Party, in form and substance reasonably satisfactory to such Indemnified Party , from all liability on claims that are the subject matter of such proceeding and (y) does not include any statement as to or any admission of fault, culpability or a failure to act by or on behalf of any Indemnified Party.
20. If between the date hereof and the Closing Date 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, loans of such Affiliates) shall occur of which the undersigned has actual knowledge which would cause the information under the section of the Preliminary Official Statement indicated in Paragraph 4 hereof (and subject to the limitations and exclusions contained 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 545
B-4-7
requires the preparation and publication of a supplement or amendment to the Preliminary Official Statement, the Developer shall reasonably cooperate with the City and the Community Facilities District in the p reparation 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.
21. 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 C-4 to the Bond Purchase Agreement. If any event related to or affecting the Developer, its Affiliates, or the ownership, development, or sale of the Property occurs, as a result of which it is necessary to modify the Closing Certificate, the Developer agrees to deliver a new Closing Certificate revised to reflect such event.
22. On behalf of the Developer, I have reviewed the contents of this Le tter of Representations and have had the opportunity to discuss with counsel to the Developer the meaning of the contents of this Letter of Representations. The Developer acknowledges and understands that a variety of state and federal securities laws, including, but not limited to the Securities Act of 1933, as amended, and Rule 10b-5 promulgated under the Securities Exchange Act of 1934, as amended, 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.
[Remainder of Page Intentionally Left Blank; Signature Page Follows]
546
B-4-8
The undersigned has executed this Letter of Representations 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 Letter of Representations. Any liability arising from or relating to this Letter of Representations may only be asserted against the Developer.
LENNAR HOMES OF CALIFORNIA, LLC,
a California limited liability company
By: ________________________________
Name: ______________________________
Title: _______________________________
[Execution Page of Letter of Representations of Lennar Homes of California, LLC]
547
B-4-9
EXHIBIT A
To
LETTER OF REPRESENTATIONS
OF LENNAR HOMES OF CALIFORNIA, LLC
DEVELOPER PROVIDED INFORMATION IN APPRAISAL REPORT
See attached.
548
C-1-1
EXHIBIT C-1
FORM OF CLOSING CERTIFICATE
$_________
CITY OF ONTARIO
COMMUNITY FACILITIES DISTRICT NO. 56
(PARKSIDE/LA AVENIDA)
SPECIAL TAX BONDS, SERIES 2023
CLOSING CERTIFICATE OF
SC ONTARIO DEVELOPMENT COMPANY, LLC
__________, 2023
City of Ontario Community Facilities District
No. 56 (Parkside/La Avenida)
303 East B Street
Ontario, California 91764
Attn: City Manager
Samuel A. Ramirez & Co., Inc.
633 West Fifth Street, Suite 2693
Los Angeles, California 90071
Ladies and Gentlemen:
Reference is made to the above -captioned bonds (the “ Bonds”) and to the Bond Purchase Agreement, dated __________, 2023 (the “Bond Purchase Agreement”), entered into in connection therewith. This Closing Certificate of SC Ontario Development Company, LLC (the “ Closing Certificate”) is delivered pursuant to Section 3(F)(18) of the Bond Purchase Agreement. Capitalized terms used herein and not otherwis e defined have the meanings ascribed to them in the Letter of Representations of SC Ontario Development Company, LLC (the “Letter of Representations”), dated __________, 2023, delivered by SC Ontario Development Company, LLC, a Delaware limited liability company (the “Developer”).
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 dated __________, 2023 relating to the Bonds (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 549
C-1-2
Official Statement and all references to the Continuing Disclosure Certificate herein shall be deemed to be references to the Continuing Disclosure Certificate as executed by the Developer in connection with the sale of the Bonds.
2. To the Actual Knowledge of the Undersigned, no event has occurred since the date of the Preliminary Official Statement affecting the statements and information described in Paragraph 4 of the Letter of Representations (and subject to the limitations and exclusions contained in Paragraph 4 of the Letter of Representations) with respect to the Developer, its Affiliates, ownership of the Property, or the Developer’s plan for marketing the property which should be disclosed in the Official Statement for the purposes for which it is to be used in order to make such statements and information contained in the Official Statement not misleading in any material respect.
3. For the period through 25 days after the “End of the Underwriting Period” as defined in the Bond Purchase Agreement (provided the Developer may assume the End of the Underwriting Period is the Closing Date (as defined in the Bond Purchase Agreement), unless it receives written notice from the Underwriter that the End of the Underwriting Period is later than the Closing Date), if any event relating to or affecting the Developer, its Affiliates, ownership of the Property, or the Developer’s plan for marketing the property shall occur as a result of which it is necessary, in the opinion of the Underwrit er or counsel to the City or the Community Facilities District, to amend or supplement the Official Statement in order to make the information under the section of the Official Statement indicated in Paragraph 4 of the Letter of Representations (and subject to the limitations and exclusions contained in Paragraph 4 of the Letter of Representations) not misleading in the light of the circumstances under which they were made, the Developer shall reasonably cooperate with the City, the Community Facilities Dis trict and the Underwriter in the preparation and publication of a supplement or amendment to the information under the section of the Official Statement indicated in Paragraph 4 of the Letter of Representations (and subject to the limitations and exclusion s contained 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 cont ain 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 under which they were made, not misleading.
4. The Developer has duly authorized the execution and delivery of the Continuing Disclosure Certificate and is duly authorized to perform the obligation on its part to be performed thereunder, and the Continuing Disclosure Certificate constitutes the legal, valid and binding obligation of the Developer, enforceable against it in accordance with its terms, subject to bankruptcy, insolvency, reorganization, arrangement, moratorium, fraudulent conveyance and other similar laws affecting the rights of creditors and certain equitable, legal or statutory princip les affecting enforcement of contractual rights generally, regardless of whether such enforcement is considered in a proceeding of law or equity.
[Remainder of Page Intentionally Left Blank; Signature Page Follows]
550
C-1-3
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.
SC ONTARIO DEVELOPMENT
COMPANY, LLC, a Delaware limited
liability company
By: LEWIS MANAGEMENT CORP.,
a Delaware corporation
Its: Sole Manager
By: ______________________________
Bryan Goodman
Authorized Agent
551
C-2-1
EXHIBIT C-2
FORM OF CLOSING CERTIFICATE
$_________
CITY OF ONTARIO
COMMUNITY FACILITIES DISTRICT NO. 56
(PARKSIDE/LA AVENIDA)
SPECIAL TAX BONDS, SERIES 2023
CLOSING CERTIFICATE OF
WOODSIDE 05S, LP
__________, 2023
City of Ontario Community Facilities District
No. 56 (Parkside/La Avenida)
303 East B Street
Ontario, California 91764
Attn: City Manager
Samuel A. Ramirez & Co., Inc.
633 West Fifth Street, Suite 2693
Los Angeles, California 90071
Ladies and Gentlemen:
Reference is made to the above -captioned bonds (the “ Bonds”) and to the Bond Purchase Agreement, dated __________, 2023 (the “Bond Purchase Agreement”), entered into in connection therewith. This Closing Certificate of Woodside 05S, LP (the “ Closing Certificate”) is delivered pursuant to Section 3(F)(18) of the Bond Purchase Agreement. Capitalized terms used herein and not otherwise defined have the meanings ascribed to them in the Letter of Representations of Woodside 05S, LP (the “Letter of Representations ”), dated __________, 2023, delivered by Woodside 05S, LP, a California limited partnership (the “Developer”).
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 dated __________, 2023 relating to the Bonds (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 Official Statement in connection with the sale of the Bonds. 552
C-2-2
2. To the Actual Knowledge of the Undersigned, no event has occurred since the date of the Preliminary Official Statement affecting the statements and information described in Paragraph 4 of the Letter of Representations (and subject to the limitations and exclusions contained in Paragraph 4 of the Letter of Representations) relating to 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, loans of its Affiliates), which should be disclosed in the Official Statement for the purposes for which it is to be used in order to make such st atements and information contained in the Official Statement not misleading in any material respect.
3. For the period through 25 days after the “End of the Underwriting Period” as defined in the Bond Purchase Agreement (provided the Developer may assume t he End of the Underwriting Period is the Closing Date (as defined in the Bond Purchase Agreement), unless it receives written notice from the Underwriter that the End of the Underwriting Period is later than the Closing Date), if any event relating to or a ffecting 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, loans of its 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 information under the section of the Official Statement indicated in Paragraph 4 of the Letter of Representations (and subject to the limitations and exclusions contained in Paragraph 4 of the Letter of Representations) not misleading in the light of the circumstances under which they were made, the Developer shall reasonably cooperate with the City, the Community Facilities District and the Underwriter in the prepar ation and publication of a supplement or amendment to the information under the section of the Official Statement indicated in Paragraph 4 of the Letter of Representations (and subject to the limitations and exclusions contained in Paragraph 4 of the Lette r 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 under which they were made, not misleading.
[Remainder of Page Intentionally Left Blank; Signature Page Follows]
553
C-2-3
The undersigned h as 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.
WOODSIDE 05S, LP, a California limited
partnership
By: WDS GP, Inc., a California corporation
Its: General Parner
By: ______________________________
______________________________
Authorized Agent
554
C-3-1
EXHIBIT C-3
FORM OF CLOSING CERTIFICATE
$_________
CITY OF ONTARIO
COMMUNITY FACILITIES DISTRICT NO. 56
(PARKSIDE/LA AVENIDA)
SPECIAL TAX BONDS, SERIES 2023
CLOSING CERTIFICATE OF
THE NEW HOME COMPANY SOUTHERN CALIFORNIA LLC
__________, 2023
City of Ontario Community Facilities District
No. 56 (Parkside/La Avenida)
303 East B Street
Ontario, California 91764
Attn: City Manager
Samuel A. Ramirez & Co., Inc.
633 West Fifth Street, Suite 2693
Los Angeles, California 90071
Ladies and Gentlemen:
Reference is made to the above -captioned bonds (the “ Bonds”) and to the Bond Purchase Agreement, dated __________, 2023 (the “Bond Purchase Agreement”), entered into in connection therewith. This Closing Certificate of The New Home Company Southern California LLC (the “Closing Certificate”) is delivered pursuant to Section 3(F)(18) of the Bond Purchase Agreement.
Capitalized terms used herein and not otherwise defined have the meanings ascribed to them in the Letter of Representations of The New Home Company Southern California LLC (the “ Letter of Representations”), dated __________, 2023, delivered by The New Home Company Southern California LLC, a Delaware limited liability company (the “Developer”).
The undersigned certifies that he or she is familiar with the facts herein certified an d 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 dated _ _________, 2023 relating to the Bonds (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 555
C-3-2
Official Statement and all references to the Continuing Disclosure Certificate h erein shall be deemed to be references to the Continuing Disclosure Certificate as executed by the Developer in connection with the sale of the Bonds.
2. To the Actual Knowledge of the Undersigned, no event has occurred since the date of the Preliminary Official Statement affecting the statements and information described in Paragraph 4 of the Letter of Representations (and subject to the limitations and exclusions contained in Paragraph 4 of the Letter of Representations) relating to 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, loans of its Affiliates), which should be disclosed in the Official Statement for the purposes for which it is to be used in order to make such statements and information conta ined in the Official Statement not misleading in any material respect.
3. For the period through 25 days after the “End of the Underwriting Period” as defined in the Bond Purchase Agreement (provided the Developer may assume the End of the Underwriting Period is the Closing Date (as defined in the Bond Purchase Agreement), unless it receives written notice from the Underwriter that the End of the Underwriting Period is later than the Closing Date), if any event relating to or affecting the Developer, its Af filiates, 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, loans of its 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 information under the sections of the Official Statement indicated in Paragraph 4 of the Letter of Representations (and subject to the limitations and exclusions contained in Paragraph 4 of the Letter of Representations) not misleading in the light of the circumstances under which they were made, the Developer shall reasonably cooperate with the City, the Community Facilities District and the Underwriter in the preparation and publication of a su pplement or amendment to the information under the section s of the Official Statement indicated in Paragraph 4 of the Letter of Representations (and subject to the limitations and exclusions contained 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 under which they were made, not misleading.
4. The Developer has duly authorized the execution and delivery of the Continuing Disclosure Certificate and is duly a uthorized to perform the obligation on its part to be performed thereunder, and the Continuing Disclosure Certificate constitutes the legal, valid and binding obligation of the Developer, enforceable against it in accordance with its terms, subject to bankruptcy, insolvency, reorganization, arrangement, moratorium, fraudulent conveyance and other similar laws affecting the rights of creditors and certain equitable, legal or statutory principles affecting enforcement of contractual rights generally, regardless of whether such enforcement is considered in a proceeding of law or equity.
[Remainder of Page Intentionally Left Blank; Signature Page Follows]
556
C-3-3
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.
THE NEW HOME COMPANY SOUTHERN
CALIFORNIA LLC, a Delaware limited
liability company
By: ________________________________
Name: ______________________________
Title: _______________________________
557
C-3-1
EXHIBIT C-4
FORM OF CLOSING CERTIFICATE
$_________
CITY OF ONTARIO
COMMUNITY FACILITIES DISTRICT NO. 56
(PARKSIDE/LA AVENIDA)
SPECIAL TAX BONDS, SERIES 2023
CLOSING CERTIFICATE OF
LENNAR HOMES OF CALIFORNIA, LLC
__________, 2023
City of Ontario Community Facilities District
No. 56 (Parkside/La Avenida)
303 East B Street
Ontario, California 91764
Attn: City Manager
Samuel A. Ramirez & Co., Inc.
633 West Fifth Street, Suite 2693
Los Angeles, California 90071
Ladies and Gentlemen:
Reference is made to the above -captioned bonds (the “ Bonds”) and to the Bond Purchase Agreement, dated __________, 2023 (the “Bond Purchase Agreement”), entered into in connection therewith. This Closing Certificate of Lennar Homes of California, LLC (the “Closing Certificate”) is delivered pursuant to Section 3(F)(18) of the Bond Purchase Agreement. Capitalized terms used herein and not otherwise defined have the meanings ascribed to them in the Letter of Representations of Lennar Homes of California, LLC (the “Letter of Representations ”), dated __________, 2023, delivered by Lennar Homes of California, LLC, a California limited liability company (the “Developer”).
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 dated __________, 2023 relating to the Bonds (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 558
C-3-2
Official Statement and all references to the Continuing Disclosure Certificate herein shall be deemed to be references to the Continuing Disclosure Certificate as executed by the Developer in connection with the sale of the Bonds.
2. To the Actual Knowledge of the Undersigned, no event has occurred since the date of the Preliminary Official Statement affecting the statements and information described in Paragraph 4 of the Letter of Representations (and subject to the limitations and exclusions contained in Paragraph 4 of the Letter of Representations) relating to 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, loans of its Affiliates), which should be disclosed in the Official S tatement for the purposes for which it is to be used in order to make such statements and information contained in the Official Statement not misleading in any material respect.
3. For the period through 25 days after the “End of the Underwriting Period” as defined in the Bond Purchase Agreement (provided the Developer may assume the End of the Underwriting Period is the Closing Date (as defined in the Bond Purchase Agreement), unless it receives written notice from the Underwriter that the End of the Underwriting Period is later than the Closing Date), 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, loans of its Affiliates) shall occur as a result of which it is nece ssary, 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 information under the section of the Official Statement indicated in Paragraph 4 of the Letter of Representations (and subject to the limitations and exclusions contained in Paragraph 4 of the Letter of Representations) not misleading in the light of the circumstances under which they were made, 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 under the section of the Official Statement indicated in Paragraph 4 of the Letter of Representations (and subject to the limitations and exclusions contained 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 Offic ial 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 under which they were made, not misleading.
4. The Develo per has duly authorized the execution and delivery of the Continuing Disclosure Certificate and is duly authorized to perform the obligation on its part to be performed thereunder, and the Continuing Disclosure Certificate constitutes the legal, valid and binding obligation of the Developer, enforceable against it in accordance with its terms, subject to bankruptcy, insolvency, reorganization, arrangement, moratorium, fraudulent conveyance and other similar laws affecting the rights of creditors and certain equitable, legal or statutory principles affecting enforcement of contractual rights generally, regardless of whether such enforcement is considered in a proceeding of law or equity.
[Remainder of Page Intentionally Left Blank; Signature Page Follows]
559
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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.
LENNAR HOMES OF CALIFORNIA, LLC,
a California limited liability company
By: ________________________________
Name: ______________________________
Title: _______________________________
560
D-1
EXHIBIT D
FORM OF ISSUER’S COUNSEL OPINION
_________, 2023
City of Ontario
Community Facilities District No. 56
(Parkside/La Avenida)
Ontario, California
Samuel A. Ramirez & Co., Inc.
Los Angeles, California
Zions Bancorporation, National Association, as Trustee
Los Angeles, California
ISSUER’S COUNSEL OPINION
Re: $___________ City of Ontario Community Facilities District No. 56 (Parkside/La Avenida) Special Tax Bonds, Series 2023
Ladies and Gentlemen:
We have acted as issuer’s counsel (“Issuer’s Counsel”) to the City of Ontario (the “City”) and the City of Ontario Community Facilities District No. 56 (Parkside/La Avenida) (the “Community Facilities District”) in connection with the issuance of the above -referenced bonds (the “Bonds”). In such capacity, we have been asked to render this opinion in connection with Section 3(F)(9) of that certain Bond Purchase Agreement, dated __________, 2023 (the “Bond Purchase Agreement”), by and between Samuel A. Ramirez & Co., Inc. , as underwriter , and the Community Facilities District , relating to the Bonds . All capitalized terms used herein but not otherwise defined shall have the meanings ascribed to them in the Bond Purchase Agreement.
In rendering this opinion, we have examined and relied upon originals or copies of the following upon which, with your permission, we are relying, without fu rther inquiry or investigation (although we advise you that we have no actual knowledge to the contrary of any matters related thereto): (i) the Community Facilities District Resolution of Issuance, (ii) Resolution No. 2021 -171 (the “Resolution of Intention”), (iii) Resolution No. 2021-172 (the “Resolution to Incur Indebtedness”), (iv) Resolution No. 2021 -188 (the “Resolution of Formation”), (v) Resolution No. 2021 -189 (the “Resolution Deeming it Necessary to Incur Indebtedness”), (vi) Resolution No. 2021 -190 (the “Resolution Calling Election”), (vii) Resolution No. 2021 -191 (the “Resolution Declaring Results”), (viii) Ordinance No. 3199 (the “Ordinance” and, together with the Resolution of Intention, the Resolution to Incur Indebtedness, the Resolution of Formation, the Resolution Deeming it Necessary to Incur Indebtedness, the Resolution Calling Election, and the Resolution Declaring Results, the “Formation Resolutions and Ordinance”), (ix) the Community Facilities District Documents, and (x) the Official Statement, relating to the Bonds, and we have made such other investigations of law and facts as we have deemed necessary to render the following opinions. 561
D-2
The opinions expressed herein are based on an analysis of existing statutes, regulations, rulings and court decisions and cover certain matters not directly addressed by such authorities. Such opinions may be affected by actions taken or omitted or events occurring after the date hereof. We have not undertaken to determine, or to inform any person, whether any such actions or events are taken or do occur.
In our examination, we have assumed, without independent investigation, the authenticity of all documents submitted to us as originals, of all documents submitted to us as certified or photostatic copies and the authenticity of the originals of such latter documents and the accuracy of the statements and representations contained in such documents. In addition, we have assumed the authority of and due execution by each of the parties to the documents other than the City and the Community Facilities District.
As used in this opinion, the phrase “current actual knowledge” means knowledge as we have obtained from (i) the incumbency and signature certificate of the Community Facilities District, (ii) the representations and warranties contained in each closing certificate of the Community Facilities District, and (iii) knowledge of facts or other information currently known to lawyers in our firm who have performed legal services for the City or the Community Facilities District.
Based on the foregoing, we hereby advise you that, as of the date hereof, we are of the opinion that:
(i) the City is a municipal c orporation and general law city, duly organized and existing under the Constitution and the laws of the State of California; (ii) the Community Facilities District is duly organized and validly existing as a community facilities district under and by virtue of the Constitution and laws of the State of California (including the Community Facilities District Act);
(iii) the Community Facilities District Resolution of Issuance and the Formation Resolutions and Ordinance have been duly adopted at meetings of the City Council of the City, 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 Resolution of Issuance and the Formation Resolu tions and Ordinance are in full force and effect and have not been modified, amended, rescinded or repealed since the respective dates of their adoption; (iv) the Community Facilities District Documents and the Official Statement have been duly authorized, executed and delivered by the Community Facilities District and 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 bankr uptcy, 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 case s or seeks to restrain or to enjoin the development of property within the Community Facilities District; (v) except as may be stated in the Official Statement, to our current actual knowledge, 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 threatened wherein an unfavorable decision, ruling or finding would: (a) affect the creation, organization, existence or powers of the City or the Community Facilities District, or the titles of their members and 562
D-3
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 or under which a determination adverse to the City or Community Facilities District would have a material adverse effect upon the financial condition or the revenues of the City or Community Facilities District, questions the right of the Community Facilities District to use Special Tax 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 or pledge the Special Tax levied within the Community Facilities District for the repayment of the Bonds; (vi) to our current actual knowledge, the execution and delivery of the Bonds and the Community Facilities District Documents, and compliance with the provisions of each, will not conflict with or constitute a breach of or default under any loan agreement, note, ordinance, resolution, indenture, contract, agreement or other instrument of which the Community Facilities District is a party or is otherwise subject or bound, a consequence of which could be to materially and adversely affect the ability of the Community Facilities District to perform its obligations under the Bonds or the Community Facilities District Documents; and
(vii) all approvals, consents, authorization, 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 ability of the Community Facilities District, to perform its obligations under the Bonds or the Community Facilities District Documents, have been obtained or made, as the case may be, and are in full force and effect.
Our opinion is further qualified by the following:
(a) We express no opinion with respect to the laws of any state or jurisdiction other than California and the United States regarding the enforceability of any transaction mentioned herein or the interpretation, authorization, execution, validity, enforceability or effect of any of the documents mentioned herein; provided further that we express no opinion with respect to California or federal tax and securities law.
(b) As Issuer’s Counsel in this matter, we have not rendered financial advice to the City or to the Community Facilities District and do not represent by this opinion, or otherwise, that we reviewed or made any assessment about, nor do we express any opinion about, the ability of the Community Facilities District to pay debt service or amounts due under the Indenture, and accordingly, we offer no opinion whatsoever regarding such financial feasibility or ability to repay the Bonds.
(c) We express no opinion with respect to any indemnification, contribution, lien priority or choice of law provisions contained in the foregoing documents.
This letter is furnished by us as Issuer’s Counsel. Other than the City and the Community Facilities District, no attorney -client relationship has existed or exists between our firm and you in connection with the Bonds or by virtue of this letter. Our engagement with respect to the Bonds has terminated as of the date hereof, and we disclaim any obligation to update this letter. This letter is delivered to you, is solely for your benefit and is not to be used, circulated, quoted or otherwise referred 563
D-4
to or relied upon for any other purpose or by any other person; provided, however, a copy may be included in the transcript of the proceedings for the Bonds. This letter is not intended to, and may not, be relied upon by owners of the Bonds.
We bring to your attention the fact that our conclusions are an expression of professional judgment and are not a guarantee of a result.
Best Best & Krieger LLP
City Attorney
564
E-1
EXHIBIT E
$_________
CITY OF ONTARIO
COMMUNITY FACILITIES DISTRICT NO. 56
(PARKSIDE/LA AVENIDA)
SPECIAL TAX BONDS, SERIES 2023
FORM OF ISSUE PRICE CERTIFICATE
The undersigned, Samuel A. Ramirez & Co., Inc. (“Ramirez”), hereby certifies as set forth below with respect to the sale and issuance of the above-captioned obligations (the “Bonds”).
1. Bond Purchase Agreement. On [Pricing Date] (the “Sale Date”) , Ramirez and the Issuer executed a Bond Purchase Agreement (the “Purchase Agreement”) in connection with the sale of the Bonds. Ramirez has not modified the Purchase Agreement since its execution on the Sale Date.
2. Price.
(a) As of the date of this Certificate, for each [Maturity] [[of the General Rule Maturities] of the Bonds, the first price at which at least 10% of each such Maturity of the Bonds was sold to the Public (the “10% Test”) was the respective price for such Maturity listed in Schedule A attached hereto.
(b) [Ramirez offered the Hold-the-Offering-Price Maturities to the Public for purchase at the respective initial offering prices listed in Schedule A (the “Initial Offering Prices”) on or before the Sale Date. A copy of the pricing wire or equivalent communication for the Bonds is attached to this certificate as Schedule B.
(c) As set forth in the Bond Purchase Agreement, Ramirez has agreed in writing that, (i) for each Maturity of the Hold-the-Offering-Price Maturities, it would neither offer nor sell any of the Bonds of such Maturity to any person at a price that is higher than the Initial Offering Price for such Maturity during the Holding Period for such Maturity (the “hold-the-offering- price rule”), and (ii) any selling group agreement shall contain the agreement of each dealer who is a member of the selli ng group, and any retail distribution agreement shall contain the agreement of each broker -dealer who is a party to the retail distribution agreement, to comply with the hold-the-offering-price rule. Pursuant to such agreement, no Underwriter (as defined below) has offered or sold any Maturity of the Hold -the-Offering-Price Maturities at a price that is higher than the respective Initial Offering Price for that Maturity of the Bonds during the Holding Period.]
(d) [** With respect to each of the General Rule Maturities of the Bonds:
(1) As of the date of this Certificate, Ramirez has not sold at least 10% of the Bonds of these Maturities at any single price.
565
E-2
(2) As of the date of this Certificate, Ramirez reasonably expects that the first sale to the Public of Bonds of these Maturities will be at or below the respective price or prices listed on the attached Schedule A as the “Reasonably Expected Sale Prices for Undersold Maturities.”
(3) Ramirez will provide actual sales information (substantially similar to the information contained on Schedule B) as to the price at which the first 10% of each such Maturity (i.e., the Undersold Maturity or Maturities) is sold to the Public. (4) On the date the 10% Test is satisfied with respect to all Maturities of the Bonds, Ramirez will execute a supplemental certificate substantially in the form attached hereto as Schedule C with respect to any remaining Maturities for which the 10% Test has not been satisfied as of the Closing Date.**]
2. Defined Terms.
(a) “General Rule Maturities” means those Maturities of the Bonds listed in Schedule A hereto as the “General Rule Maturities.”
(b) “Hold-the-Offering-Price Maturities” means those Maturities of the Bonds listed in Schedule A hereto as the “Hold-the-Offering-Price Maturities.” (c) “Holding Period” means, with respect to a Hold -the-Offering-Price Maturity, the period starting on the Sale Date and ending on the earlier of (i) the close of the fifth business day after the Sale Date, or (ii) the date on which Ramirez has sold at least 10% of such Hold- the-Offering-Price Maturity to the Public at prices that are no higher than the Initial Offering Price for such Hold-the-Offering-Price Maturity.
(d) “Issuer” means the City of Ontario Community Facilities District No. 56 (Parkside/La Avienda).
(e) “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.
(f) “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. (g) “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 t he 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).
3. Reserve Fund. The funding of the Reserve Fund under the Indenture, and as provided in the Tax Certificate, is reasonably required, was a vital facto r in marketing the Bonds, facilitated the 566
E-3
marketing of the Bonds at an interest rate comparable to that of bonds and other tax -exempt obligations of a similar type, and is not in excess of the amount necessary for such purpose.
4. The representations set forth in this certificate are limited to factual matters only. Nothing in this certificate represents Ramirez’s interpretation of any laws, including specifically Sections 103 and 148 of the Internal Revenue Code of 1986, as amended, and the Treasury Regulat ions 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 of the Issuer dated [Closing Date] and with respect to compliance with the federal income tax rules affecting the Bonds, and by Bond Counsel, 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 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.
SAMUEL A. RAMIREZ & CO., INC.
By:
Managing Director
By:
Director
Dated: [Closing Date]
567
E-4
SCHEDULE A
TO
ISSUE PRICE CERTIFICATE
[Schedules to be updated at pricing in the event there are Hold-the-Offering-Price-Maturities]
Actual Sales Information as of Closing Date
Maturity/CUSIP Coupon Date Sold Time Sold Par Amount Sale Price
[**Reasonably Expected Sales Prices for Undersold Maturities as of Closing Date
Maturity/CUSIP Coupon Par Amount Offering Prices
**]
568
E-5
[**SCHEDULE B
TO
ISSUE PRICE CERTIFICATE
Actual Sales for Undersold Maturities as of the Closing Date
Maturity/CUSIP Date Sold Time Sold Par Amount Sale Price
**]
569
E-6
[**SCHEDULE C
TO
ISSUE PRICE CERTIFICATE
SUPPLEMENTAL ISSUE PRICE CERTIFICATE OF UNDERWRITER
$[PAR]
CITY OF ONTARIO
COMMUNITY FACILITIES DISTRICT NO. 56
(PARKSIDE/LA AVIENDA)
SPECIAL TAX BONDS, SERIES 2023
The undersigned, Samuel A. Ramirez & Co., Inc. (“Ramirez”), hereby certifies as set forth below with respect to the sale and issuance of the above-captioned obligations (the “Bonds”).
1. Issue Price.
(a) Ramirez sold at least 10% of the _______ Maturities of the Bonds to the Public at the price or prices shown on the Issue Price Certificate dated as of the Closing Date (the “10% Test”).
With respect to each of the ______ Maturities of the Bonds, Ramirez had not satisfied the 10% Test as of the Closing Date (the “Undersold Maturities”). (b) As of the date of this Supplemental Certificate, Ramirez has satisfied the 10% Test with respect to the Undersold Maturities. The first price or prices at which at least 10% of each such Undersold Maturity was sold to the Public are the respective prices listed on Exhibit A attached hereto.
2. Defined Terms.
(a) “Issuer” means the City of Ontario Community Facilities District No. 56 (Parkside/La Avienda).
(b) “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 inte rest rates, are treated as separate Maturities.
(c) “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. (d) “Underwriter” means (1) 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 (2) any person that agrees pursuant to a written contract directly or indirectly with a person described in clause (1) of this paragraph t o 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).
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E-7
3. The representations set forth in this certificate are limited to factual matters only. Nothing in this certificate represents Ramirez’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 of the Issuer dated [Closing Date] and with respect to compliance with the federal in come tax rules affecting the Bonds, and by Bond Counsel, 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 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.
SAMUEL A. RAMIREZ & CO., INC.
By:
[Title]
By:
[Title]
Dated:
571
4146-2702-3179.1
FIRST AMENDMENT TO
ACQUISITION AND FUNDING AGREEMENT
by and between
CITY OF ONTARIO
and
SC ONTARIO DEVELOPMENT COMPANY, LLC
Dated as of __________ 1, 2023
City of Ontario
Community Facilities District No. 56
(Parkside/La Avenida)
572
4146-2702-3179.1
FIRST AMENDMENT TO
ACQUISITION AND FUNDING AGREEMENT
THIS FIRST AMENDMENT TO ACQUISITION AND FUNDING AGR EEMENT (this “First Amendment”), dated as of __________ 1, 2023 , is by and between the CITY OF ONTARIO, a general law city organized and existi ng under the laws of the S tate of California (the “City”), and SC ONTARIO DEVELOPMENT COMPANY, LLC , a limited liability company organized and existing under the laws of the State of Delaware (the “Developer”).
WITNESSETH:
WHEREAS, the City and the Develope r previously entered into the Acquisition and Funding Agreement, dated as of December 1, 2021 (the “Original Acquisition Agreement ”), pursuant to which, in accordance with the terms set forth therein, the Developer is to constr uct or cause to be constructe d c ertain public facilities (the “Facilities”) that, upon satisfaction of the conditions specified therein, the City is to acquire and t ake title to, and the Developer is to be paid the purchase price of, determined as set forth therein; WHEREAS, pursuant to the Original Acquisition Agreement, such pur chase price with respect to each segment of th e Facilities is to be paid from the proceeds of the special tax or bonds of City of Ontario Community Facilities Dist rict No. 56 (Parkside/La Avenida ) (the “Community Fac ilities District ”) established by the City Council of the City pursuant to the provisions of the Mello-Roos Community Facilities Act of 1982; WHEREAS, the Original Acquisition Agreement provides that the Original Acquisition Agreement may be amended by an instrument in w riting executed and delivered by the City and the Developer; and
WHEREAS, the City and the Developer desire to enter into this First Amendment in order t o amend the Acquisition Cost (as defined in the Original Acquis ition Agreement) of certain of the segments of the Facilities set forth in the Original Acquisition Agreement; NOW, THEREFORE , for and in consideration of the mutual promises and covenan ts contained here in, the recei pt of which is hereby acknowledged, the parti es hereto agr ee as follows:
Section 1.1. Definitions. Capitalized undefined terms used herein shall have the meanings ascribed thereto in the Original Acquisition Agreement.
Section 1.2. Amendment to Exhibit A. Exhibit A of the Original Acquisition Agreement is hereby amended to read in full as set forth in Exhibit A hereto.
Section 1.3. Effect of First Amendment. This First Amendment and all of the terms and provisions herein cont ained shall form part of the Original Acquisition Agreement as fully and with the same effect as if all such terms an d provisions had been set forth in the Original Acquisition Agreement. The Original Acquisition Agreement is hereby ratified and confirmed and shall continue in full force and effect in accordance with the terms and provisions thereof, as 573
2 4146-2702-3179.1
amended hereby. If there sh all be any conflict between the terms of this First Amendment and the terms of the Original Acquisition Agreement (as in effe ct on the day prior to the effective date of this First Amendment), the terms of this First Amendment shall prevail.
Section 1.4. Counterparts. This First Amendment may be executed in counterparts, each of which shall be deemed an original.
Section 1.5. Effective Date . Upon the execution and delivery hereof by the par ties hereto, this First Amendment shall be effective as of __________, 2023.
574
3 4146-2702-3179.1
IN WITNESS WHEREOF, the parties hereto have executed this First Amendment as of the day and year first hereinabove written.
CITY OF ONTARIO
By:
Scott Ochoa, City Manager
SC ONTARIO DEVELOPMENT COMPANY,
LLC, a Delaware limited liability company
By: LEWIS MANAGEMENT CORP.,
a Delaware corporation - Its Sole Manager
By:
Bryan Goodman,
Authorized Agent
575
A-1
4146-2702-3179.1
EXHIBIT A
FACILITIES
Community Facilities District Facilities
The Facilities consist of the follo wing Components and Segments; provide d, however, that each such S egment described below shall constitute a Segment for purposes of this Acq uisition Agreement only if such Segment was constructed by or on behalf of the D eveloper singly and not jointly or in conjunction with another Member or N MC Builders (except as provi ded in this Exhibit with respect to Segment Nos. ST-2, ST-3 and ST-4 and with respect to certai n design costs to be paid to NMC Builders):
Storm Drain System Facilities
No.
DIF Program
Project No. Component Segment
Acquisition
Cost
SD-1
SD-045
Eucalyptus
Avenue,
Cucamonga
Channel to west of
Archibald Avenue
Construct approximately 1,300
linear feet of 36-inch and 60-inch
storm drain along Eucalyptus
Avenue connecting to
Cucamonga Channel.
Design Cost of Segment of $86,562
to be paid to NMC Builders.
$865,620
Fiber Optic System Facilities
No.
DIF Program
Project No. Component Segment
Acquisition
Cost
FO-1 FO-004
Fiber Optic
System
Distribution
Network
Installation of approximately
1,750 linear feet of Fiber conduit
in Eucalyptus Avenue from
Archibald Avenue to the
Cucamonga Channel.
Design Cost of Segment of $7,523
to be paid to NMC Builders.
$75,227
576
A-2
4146-2702-3179.1
Streets and Traffic Circulation System Facilities
No.
DIF Program
Project No. Component Segment
Acquisition
Cost
ST-1 ST-011
Eucalyptus Avenue
from Euclid to
Milliken
Construct approximately 1,100 of
full half street improvements on
Eucalyptus Avenue from Archibald
Avenue to Parkhouse Privado.
Design Cost of Segment of $37,420
to be paid to NMC Builders.
$374,200
ST-2 N/A Last Lane
Improvements
Construction of approximately
1,600 linear feet of curb adjacent
lane with curb, gutter, sidewalk, and
street lighting improvements on the
north side of Eucalyptus Avenue,
from Archibald Avenue to the
Cucamonga Channel, and the traffic
signal at Eucalyptus Avenue and
Parkhouse Privado.
$1,253,330
ST-3 N/A
Neighborhood
Edge
Improvements
Construction of approximately
1,420 linear feet of neighborhood
edge, landscaping, and public
improvements in the right-of-way,
on the north side of Eucalyptus
Avenue, from Archibald Avenue to
the Cucamonga Channel.
$408,676
ST-4 N/A
Neighborhood
Edge
Improvements
Construction of approximately 775
linear feet of neighborhood edge,
landscaping, and public
improvements in the right-of-way,
on the west side of Archibald
Avenue, from Eucalyptus Avenue
to Parkside Drive.
$302,700
Total Acquisition Costs of Facilities:
$3,279,753
577
4144-9914-6825.1
CONTINUING DISCLOSURE AGREEMENT
by and between
CITY OF ONTARIO
COMMUNITY FACILITIES DISTRICT NO. 56
(PARKSIDE/LA AVENIDA)
and
ZIONS BANCORPORATION, NATIONAL ASSOCIATION,
AS TRUSTEE
Dated as of __________ 1, 2023
City of Ontario
Community Facilities District No. 56
(Parkside/La Avenida)
Special Tax Bonds, Series 2023
578
4144-9914-6825.1
CONTINUING DISCLOSURE AGREEMENT
THIS CONTINUING DISCLOSURE AGREEMENT (this “Disclosure Agreement”), dated as of __________ 1, 2023 , is by and between CITY OF O NTARIO COMMUNITY FACILITIES DISTRICT NO. 56 (PARKSIDE/LA AVENIDA) , a community facilities district organized and existing under the laws of the State of California (the “Community Facilities District”), and ZIONS BANCORPORATION, NATIONAL ASSOCIATION, a national banking association organized and existing under the laws of the United States of America, as Trustee (the “Trustee”).
W I T N E S S E T H :
WHEREAS, the Community Facilities District has issued its City of Ontario Community Facilities District No. 56 ( Parkside/La Avenida) Special Tax B onds, Series 2023 (the “ Series 2023 Bonds”), in the aggregate principal amount of $_________, pursuant to the Indenture, dated as of __________ 1, 2023 (the “Indenture”), by and between the Communi ty Faci lities District and the Trustee; and
WHEREAS, this Disclosure Ag reement is being executed and delivered by the Community Facilities District and the Trustee for the benefit of the owners and beneficial owners of the Series 2023 Bonds and in order t o assist the und erwriter of the Series 2023 Bonds in complying with Securities and Exchange Commission Rule 15c2-12(b)(5); NOW, THEREFORE, for and in consideration of the mutual promises and covenants herein contained, the receipt where of is hereby ackno wledged, the part ies hereto agree as follows:
Section 1. Definitions. Unless the context otherwise requires, the terms defined in this Section shall for all purposes of this Disclosure Agreement have the meanings herein specified.
Capitalized undefi ned terms used her ein shal l have th e meanings ascribed thereto in the Indenture.
“Annual Report” means any Annual Report provided by the Community Facilities District pursuant to, and as described in, Sections 2 and 3 hereof. “Annual Report Date” means th e date in each yea r that i s the first day of t he month following the ninth month after the end of the Community Facilities District’s fiscal year, which date, as of the date of this Disclosure Agreement, is April 1. “Community Facilities District” means City of Ontario Community Facilities District No. 56 (Parkside/La Avenida) , a community facilities district organized and existing under the laws of the State, and its successors.
“Disclosure Representative” means the Deputy City Treasurer of the City , or his or her designee, or such other person as the Community Facilities District shall des ignate in writing to the Trustee from time to time.
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“Dissemination Agent” means the Trustee, acting in its capacity as Dissemination Agent hereunder, or any successor Disseminati on Agent de signated in writing b y the Commu nity Facilities District and which has filed with the Trustee a written acceptance of such designation. “Financial Obligation” means (a) a debt obligation of the Community Facilities District, (b) a derivative instrument entered into in connection with, or pledged as security or a source o f payment for, an existing or planned debt obligation of the Community Facilities District, or (c) a guarantee of (i) a debt obligation of the Com munity Facilities District, or (i i) a de rivative instrument d escribed in cla use (b), above; provided, however, that th e term “Financial Obligation” shall not include “municipal securities” (as such term is defined in the Securities Exchange Act of 1934, as amended) as to which a “final of ficial statement” (a s such t erm is defined in the Rule) has been provided to the MSRB consistent with the Rule. “Indenture” means the Indenture, dated as of __________ 1, 2023 , by and between the Community Facilities Distri ct and Zions Bancorporation, Nati onal Asso ciation, as T rustee, as originally executed and as it may be modified or amended from time to time in accordance with its terms.
“Listed Events” means any of the events listed in subsection (a) or subsection (b) of Section 4 hereof.
“MSRB” means 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 Excha nge Commission, filings with the MSRB are to be made through the Ele ctronic Municipal Market Access (EMMA) website of the MSRB, currently located at http://emma.msrb.org. “Participating Underwriter” means the original underwriter of the Series 2023 Bonds required to comply with the Rule in connection with the offering of the Series 2023 Bonds. “Rule” means 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. “Trustee” means Zion s Bancorporation, Na tional Ass ociation, as Trustee under the Indenture, or any suc cessor thereto as Trustee thereunder substituted in its place as provide d therein.
Section 2. Provision of Annual Reports. (a) The Community Facilities District shall, or shall cause the Dissemination Agent to, provide to the MSRB an Annual Report that is consistent with the requirements of Section 3 hereof, not later than th e Annual Report Date, commencing with the report for the 2022-23 Fiscal Year. The Annual Report may i nclude by reference other information as p rovided in Section 3 h ereof; p rovided, h owever, that the audited financial statements of the Community Facilities District, if any, may be submitted separately from the balance of the Annual Report, and later than the date required above for the filing of the Annual Report if t hey are not available by that date. If the Community Facilities District’s fiscal year changes, it shall, or it shall instruct the Dissemination Agent to, give notice of such change in a filing with the MSRB.
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(b) Not later than 15 business days prior to the date specified in subsection (a) of this Section for the providing of the An nual Report to the MSRB, the Community Facilities District shall provide the Annual Report to the Dissemination Agent and the Trustee (if the Trustee is not the Dissemination Agent). If by such date, the Trustee has not received a copy of the Annual Report, the Trustee shall contact the Community Facilities District and th e Dissemination Agent to determine if the Community Facilities District is in compliance with the first sentence of this subsection (b).
(c) If the Trustee is unable to verify that an Annual Report has been provided to the MSRB by the date req uired in subsection (a) of this S ection, t he Trustee shall, in a tim ely manner, send a notice to the MSRB in substantially the form attached as Exhibit A. (d) The Dissemination Agent shall:
(i) provide each Annual Report received by it to the MS RB, as provided herein; and
(ii) file a report with the C ommunity F acilities Di strict and (if the Dissemination Agent is not the Trustee) the Trustee certifying that such Annual Report has bee n provided pursuant to this Disclosure Agreement and stating the dat e it was provided to the MSRB.
Section 3. Content of Annual Reports. The C ommunity Facilities District’s Ann ual Report shall contain or incorporate by reference the following:
(a) The Community Faciliti es District’s audited financial statements, if any, prepared in acco rdance with generally accepted ac counting principles as promulgated to apply to g overnmental enti ties fro m time to time by the Governmental Accounting Standards Board. If the Community Fac ilities District’s audited financial statements, if any, are not ava ilable by the time the Annual Rep ort is required to be filed pursuant to subsection (a) of Sectio n 2 hereof, the An nual Report shall contain unaudited financial statements, in a format similar to that used for the Community Facilities District’s audited financial statements, and the audit ed financial statements, if an y, sh all be filed in the same manner as the Annual Report when they become available. (b) The following information:
(i) The principal amount of Series 2023 Bonds Outstanding as of the December 31 next preceding the Annual Report Date;
(ii) The principal amount of A dditional Bonds, if any, Outstanding as of the December 31 next preceding the Annual Report Date; (iii) The balance in (A) the SC Ontario Acquisition Account, and (B) the NMC Acquisition Account, as of the De cember 31 next prece ding t he Annual Report Date;
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(iv) The balance in the Reserve Fund, and a stat ement of the Res erve Requirement, as of the December 31 next preceding the Annual Report Date; (v) The total assessed value of all parcels within the Commun ity Facilities District on which the Special Tax is levied, as shown on the assessment roll of the S an Bernardino County Assessor last equalized prior to the December 31 next preceding the Annual Report Date, and a statement of assessed value -to- Bonded debt ratio s therefor, either b y indi vidual parcel or by c ategories (e.g., “below 3:1,” “3:1 to 4:1,” etc.);
(vi) The Special T ax delinquency rate for all parcels within the Community Facilitie s District, as shown on the assessment roll of the San Bernardino Co unty Asses sor last equalized p rior t o the December 31 nex t preceding the Annual Report Date, the number of parcels within the Community Facilities District delinquent in payment of the Special Tax as of the December 31 next preceding the Annual Report Date, the amount of each delinquency , the length of time delinquent and the date on which foreclosure was com menced, or similar information pertaining to delinquencies deemed appropriate by the Community Facilities District; provided, however, that parcels with aggregate delinquencies of $2,000 or less (excluding penalties and interest) may be grouped together and such information may be provided by category; (vii) The status of foreclosure proceedings and a summary of the results of any foreclosure sales as of the De cember 31 next preceding the Annual Report Date;
(viii) The identity of any property owner representing more than 5% of the Sp ecial Tax levy delinquent in payment of the Special Tax as of the December 31 next preceding the Annual Report Date;
(ix) A land ownership summary listing property owners responsible for more than 5% of the annual Special Tax, as shown on the a ssessment roll o f the San Bernardino County Assessor last equalized prior to the Decem ber 31 next preceding the Annual Report Date; and
(x) A description of any changes to the Rate and Method approved by, or su bmitted f or approval t o, the qualified electors of the Community Facilities District during the period from the date of filing the prior year’s Annual Report to the date of filing such Annual Report.
Any or all of the items listed ab ove ma y be included by specific reference to other documents, including official statements of debt issues of the Community Facilities Dist rict or related public entities that have been made available to the public on the MSRB ’s website. The Community Faci lities District shall c learly identify each s uch ot her document so inclu ded by reference.
Section 4. Reporting of Significant Events . (a) Pursuant to the pr ovisions of this Section, the Community Facilities District shall gi ve, or cau se to be given, noti ce of the 582
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occurrence of any of t he fol lowing events with respect to the Series 2023 Bonds in a timely manner not later than ten business days after the occurrence of the event:
(i) Principal and interest payment delinquencies.
(ii) Unscheduled draws on debt servi ce res erves reflecting financial difficulties.
(iii) Unscheduled dr aws on cre dit en hancements reflecting financial difficulties.
(iv) Substitution of credit or liquidity providers, or their failure to perform. (v) Adverse tax opinions or issuance b y the Internal Reven ue Ser vice of proposed or final determination of taxability or of a Noti ce of Proposed Issue (IRS Form 5701 TEB).
(vi) Tender offers.
(vii) Defeasances.
(viii) Rating changes.
(ix) Bankruptcy, insolvency, receivership or similar event of the Com munity Facilities District.
(x) Default, event of acceleration, termination event, modification of terms or other similar events under the terms of a Financial Obligation, any of which reflect financial difficulties.
For purposes of the event identified in p aragraph ( ix) of this subsection, th e event i s considered to occur when any of the following occur: the appointment of a receiver, fiscal agent or similar officer for the Community Facilit ies District in a proceeding under the U.S.
Bankruptcy Code or in an y other pro ceeding under state or fe deral law in which a court or governmental authority has assumed jurisdiction over substantially all of the assets or business of the Community Faciliti es District, 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 cou rt or governmental authority, or the entry of an order confirming a pl an of reorganization, arrangement or liquidation by a court or gover nmental aut hority having supervision or jurisdiction over substantially all of th e as sets or business of the Community Facilities District.
(b) Pursuant to the provisions of t his Section, the Community Facilities District shall give, or cause to be given, notice of the occurrence of any of the following events with respect to the Series 2023 Bonds, if material, in a timely manner not later than ten business days after the occurrence of the event:
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(i) Unless described in paragraph (v) of subsection (a) o f thi s Section, material notices or determinations by the Internal Re venue Service wit h respect to the tax status of the Series 2023 Bonds or other material events affecting the tax status of the Series 2023 Bonds.
(ii) Modifications to rights of holders of the Series 2023 Bonds. (iii) Series 2023 Bond calls.
(iv) Release, substitution, or sale of property securing repayment of the Series 2023 Bonds.
(v) Non-payment related defaults.
(vi) The consummation of a merger, consolidation, or acquisition involving the Community Facilities District or the s ale of all or substantially all of the assets of th e Co mmunity Facilities District other than in the ordinary course of business, the entry into a definitive agreement to undertake such an action or the termination of a defini tive agreement relating to any such actions, other than pursuant to its terms.
(vii) Appointment of a successor or additional Trustee or the change of name of a Trustee.
(viii) Incurrence of a Financial Obligation, or agreement to covenants, events of default, remedi es, pr iority rights or other s imilar terms of a F inancial Obligation, any of which affect holders of the Series 2023 Bonds. (c) The Trustee shall, within one business day of obtaining actual knowledge of the occurrence of any of the Listed Ev ents, contact the Disclosure R epresentative and inform such person of the event. The Trustee shall have no responsibility for determining the materiality of any such event, or whether any such event reflects financial difficulties. (d) Whenever the Community Facilities District obtains knowledge of the occurrence of a Listed Event described in subsection (b) of this Section, the Community Facilities District shall determine if such event would be material under applicable Federal securities law. (e) Whenever the Community Facilities District obtains knowledge of the occurrence of a Listed Event d escribed in subsection (a) of this Section, or determines that knowled ge of a Listed Event described in subsection (b) of this Section wou ld be m aterial under applicabl e Federal securities law, the Community Facilities District shall, or sh all cause the Di ssemination Agent to, file a notice of the occurrence of such Listed E vent with the MSRB, within ten business days of such occurrence.
(f) Notwithstanding the fo regoing, notice o f Li sted Events described in paragraph (iii) of subsection (b) of this Section need not be given any earlier than the notice (if any) o f the underlying event is given to holders of affected Series 2023 Bonds pursuant to the Indenture. 584
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Section 5. Format for Filings wi th M SRB. Any re port or filing wi th the MSRB pursuant to this Disclosure Agreement must be submitted in electronic format, accompanied b y such identifying information as is prescribed by the MSRB.
Section 6. Termination of Reporting Obligation. The Community Facilities District’s obligations und er t his Dis closure Ag reement shall te rminate upon the legal defeasance, prior redemption or payment in full of all of the Series 2023 Bonds. If such termination occurs prior to the f inal maturity of the Series 2023 Bonds, th e Co mmunity F acilities District shall give, or cause to be given, notice of such termination in a filing with the MSRB.
Section 7. Dissemination Agent. The Community Facilities District may, from time to time, appoint or engage a Dissemination Agent to a ssist it in carrying out its obligations under this Disclosure Agreement, and may discharge any such Dissemination Agent, with or without appointing a successor Dissemination Agent. The Dissemination Agent may resign by providing 30 days’ written notice to the Community Facilities District. If at any time there is not any other designated Dissemination Agent, the Trustee shall be the Dissemination Agent.
Section 8. Amendment; Waiver . Notwithstanding any other provision of this Disclosure A greement, the Community Facilities District an d th e Trustee m ay amend this Disclosure Agreement (and the Truste e shall agree to any amendment so requested by the Community Facilities District, so long as such amendment does not adversely affect the rights or materially increase the ob ligations of the Trustee), and a ny provision of t his Dis closure Agreement may be waived, provided that the following conditions are satisfied:
(a) if the a mendment or waiver relates to the provisions of subsection (a) of Section 2 hereof, Section 3 hereof or subsection (a) or (b) of Section 4 hereof, it may only be made in connection with a change in circumstances that arises from a change in legal requirements, change in law, or change in the identity, nature or status of a n obligated person with respect to the Series 2023 Bonds, or the type of business conducted; (b) the undertakings herein, as proposed to be amended or waived, would, in the opinion of nationa lly recognized bond counsel, have complied with the requirements of the Rule at the time of the primary offering of the Series 2023 Bonds, after taking into account any a mendments or int erpretations of the Rule, as well as any change in circumstances; and
(c) the proposed amendment or waiver (i) is approved by Owners of the Series 2023 Bonds in the manner provided in the In denture for a mendments to the Indenture wit h the cons ent of Owners, o r (ii) does not, in the opinion of nationally recognized bond counsel, materially impair the interests of Owners or Beneficial Owners of the Series 2023 Bonds.
In the event of any amendment or waiver of a provision of this Disclosure Agreement, the Community Facilities District shall describe such amendment or waiver in the next Annual Report, and shall include, as applicable, a narrative ex planation of the reason for th e amendment or waiver and its impact on the type (or in the case of a ch ange of accounting principles, on the presentation) of financial information or operat ing data being presented by the Community 585
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Facilities District. In ad dition, if the amendment relat es to the accounting pr inciples to be followed in preparing financial statements (i) notice of such change shall be given in a filing with the MSRB, and (ii) the Annual Report for the year in which the change is made shall pre sent a comparison (in narrativ e form and also, if feasible, in quantitative form) between the financial statements as prepared on the basis of the new accounting principles and those prepa red on the basis of the former accounting principles.
Section 9. Additional Inf ormation. Nothing in this Disc losure Agreement s hall be deemed to pr event the Community Facilities District from disseminating any other information, using the means of dissemination set f orth in this Disclosure Agreement or any other means of communication, or i ncluding any other info rmation in any Annual Report or notice required to be f iled p ursuant to this Disclosure Agreement, in addition to that which is required by this Disclosure Agreement. If the Community Facilities District chooses to include any information in any Annual Rep ort o r notice i n a ddition to that whic h is sp ecifically required by thi s Disclosure Agr eement, the Community Facilities District shall have no obligation unde r this Disclosure Agreement to update such information or include it in any future Annual Report o r notice of occurrence of a Listed Event or any other event required to be reported.
Section 10. Default. In the event of a failure of the Community Facilities District, the Trustee or the Dissemination Agent to comply with any provision of this Disclosure Agreement, the Trustee may (and, at the written direction of any Participating Underwriter or the Owners of at least 25% of the aggregate principal amount of Outstanding Series 2023 Bonds, shall, upon receipt of indemnification reasonabl y satisfactory to the Trustee) , or any Owner or Beneficial Owner of the Series 2023 Bonds may, take s uch actions as m ay be necessary and appropriate, including seeking mandate or specific performance by court order, to cause the Community Facilities District, the Trustee or the Dissemination Agent, as the case may be, to comply with its obligations under this Disclosure Agreement. A default under this Disclosure Agreement shall not be deeme d an Event of Default under the Indenture, and the sole remedy under this Disclosure Agreement in the e vent of an y f ailure o f the Community Facilities Di strict, the Trustee or the Dissemination Agent to comply with this Disclosure Agreement shall be an act ion to compel performance.
Section 11. Duties, Immunities and Liabilities of Tru stee and Dissemination Agent.
Article VIII of the Indenture is hereby made applicable to this Disclosure Agreement as if this Disclosure Agreement were (solely for this purpose) contained in the Indenture. The Dissemination Agent shall be entitled to the p rotections and limitations from liability afforded to the Trustee thereunder. Neither the Trustee nor the Dissemination Agent shall be responsible for the form or content of any Annual Rep ort or notice of Listed Event. The Dissemination Agent shall receive reasonable compensation for its services provided under this Disclosure Agreement and shall be reim bursed for its r easonable expenses (including attorneys’ fees and expenses) incurred by it in the exercise or performance of its powers and duties hereunder . The Dissemination Agent (if other than the Trustee or the Trustee in its capacity as Dissemination Agent) shall have only such duties as are specifically set forth in this Disclosure Agr eement. To the extent permitted by law, the Community Facilities Dis trict agrees to indemnify and save the Dissemination Ag ent, its offi cers, d irectors, employees and a gents, harmless against any loss, expense and liabilities that any such Person may incur in the exercise or performance of the Dissemination Agent’s powers and duties hereunder, including the costs and expenses (including 586
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attorneys’ fees and expenses) of defending against any claim of liability, and that are not due to such Person’s negligence or its willful misconduct. The obligations of the Community Facilities District under this Section shall survive resignation or removal of the Dissemination Agent and the termination of this Disclosure Agreement.
Section 12. Beneficiaries. This Disclosure Agreement shall inure solely to the benefit of the Commun ity Facilities District, the Trustee, the Dissemination Agent, the P articipating Underwriter and the Owners and Beneficial Owners from time to time of the Series 2023 Bonds, and shall create no rights in any other person or entity.
Section 13. Governing Laws . This Di sclosure Agreement shall be governed by and construed in accordance with the laws of the State of California.
Section 14. Electronic Signature. Each of the parties heret o agrees that the transaction consisting of this Disclosure Agreement may be conducted by electronic means. Each party agrees, and acknowledges that it is such party’s intent, t hat if such party signs this Disclosure Agreement using a n electronic signature , it is si gning, adopting and accepting this Disclosure Agreement and that signing this Disclosure Agreement using an electronic signature is the legal equivalent of having plac ed its handwritten sign ature on this Disclosure Agreement on paper.
Each party acknowledges that it is be ing provided with an electronic or paper copy of this Disclosure Agreement in a usable format.
Section 15. Counterparts. This Disclosure Agreement may be executed in several counterparts, each of which shall be an original and all of which shall constitute but one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have executed this Disclosure Agreement as of the date first above written.
CITY OF ONTARIO COMMUNITY
FACILITIES DISTRICT NO. 56
(PARKSIDE/LA AVENIDA)
By:
ZIONS BANCORPORATION,
NATIONAL ASSOCIATION, AS
TRUSTEE
By:
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EXHIBIT A
NOTICE OF FAILURE TO FILE ANNUAL REPORT
Name of Issuer: City of Ontario Community Facilities District No. 56 (Parkside/La Avenida)
Name of Issue: City of Ontario Community Facilities Distri ct No. 56 (Parks ide/La Avenida) Special Tax Bonds, Series 2023
Date of Issuance: ____________, 2023
NOTICE IS HEREBY GIVEN that City of Ontario Community Facilities District No. 56 (Parkside/La Avenida) (the “Community Facilities District”) has not provided an Annual Report with r espect to the above -named Bonds as required by th e Conti nuing Di sclosure Agreement, dated as of __________ 1, 2023, by and between the Community Faci lities District and Zions Bancorporation, National Association, as Trustee. [The Community Facilities District anticipates that such Annual Report will be filed by ____________.]
Dated: ____________
Zions Bancorporation, National
Association, as Trustee, on behalf of
City of Ontario Community
Facilities District No. 56
(Parkside/La Avenida)
cc: City of Ontario
Community Facilities District
No. 56 (Parkside/La Avenida)
588
Stradling Yocca Carlson & Rauth
Draft of October 15, 2023
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This Preliminary Official Statement and the information contained herein are subject to completion or amendment. These securities may not be sold, nor may offers to buy them be accepted, prior to the time the Official Statement is delivered in final form. Under no circumstances shall this Preliminary Official Statement constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of, these securities in any jurisdiction in which such offer, solicitation or sale would be unlawful.
PRELIMINARY OFFICIAL STATEMENT DATED __________, 2023
NEW ISSUE — BOOK-ENTRY-ONLY NO RATING
In the opinion of Orrick, Herrington & Sutcliffe LLP, Bond Counsel to the District, based upon an analysis of existing laws, regulations, rulings and cou rt decisions, and assuming, among other matters, the accuracy of certain representations and compliance with certain covenants, interest on the Series 2023 Bonds is excluded from gross income for federal income tax purposes under Section 103 of the Interna l Revenue Code of 1986 and is exempt from State of California personal income taxes. In the further opinion of Bond Counsel, interest on the Series 2023 Bonds is not a specific preference item for purposes of the federal individual alternative minimum tax. Bond Counsel observes that, for tax years beginning after December 31, 2022, interest on the Series 2023 Bonds included in adjusted financial statement income of certain corporations is not excluded from the federal corporate alternative minimum ta x. B ond Counsel expresses no opinion regarding any other tax consequences related to the ownership or disposition of, or the amount, accrual or receipt of interest on, the Series 2023 Bonds. See “TAX MATTERS” herein. $19,435,000*
CITY OF ONTARIO
COMMUNITY FACILITIES DISTRICT NO. 56
(PARKSIDE/LA AVENIDA)
SPECIAL TAX BONDS, SERIES 2023
Dated: Date of Delivery Due: September 1, as shown on the inside cover page The City of Ontario Community Facilities District No. 56 (Parkside/La Avenida) Special Tax Bonds, Series 2023 (the “Series 2023 Bonds”) are being issued and delivered by the City of Ontario Community Facilities District No. 56 (Parkside/La Avenida ) (the “District”) to (i) provide financing for certain authorized facilities and costs with resp ect thereto related to the development within the District, (ii) fund a reserve fund with respect to the Series 2023 Bonds, and (iii) pay the costs of issuance with respect to the Series 2023 Bonds. See “ESTIMATED SOURCES AND USES OF FUNDS” herein. The D istrict has been formed by and is located in the City of Ontario, California (the “City”).
The Series 2023 Bonds are authorized to be issued pursuant to the Mello -Roos Community Facilities Act of 1982, as amended (Section 53311 et seq. of the Government C ode of the State of California), and pursuant to an Indenture, dated as of December 1, 2023, by and between the District and Zions Bancorporation, National Association, as trustee (the “Trustee”). The Series 2023 Bonds are special, limited obligations of the District and are payable solely from Net Special Tax Revenues (as defined herein), and the other assets pledged therefor under the Indenture, all as further described herein. A Special Tax (as defined herein) is to be levied according to the rate and method of apportionment approved by the City Council of the City and the qualified electors within the District. Th e City Council is the legislative body of the District.
The Series 2023 Bonds are issuable in fully registered form and when issued will be registered in the name of Cede & Co., as nominee of The Depository Trust Company, New York, New York (“DTC”). Individual purchases of Series 2023 Bonds may be made in principal amounts of $5,000 and integral multipl es thereof. Purchasers of Series 2023 Bonds will not receive certificates representing their beneficial ownership of the Series 2023 Bonds but will receive credit balances on the books of their respective nominees. Interest on the Series 2023 Bonds will be payable on each March 1 and September 1, commencing March 1, 2024 . Principal of and interest on the Series 2023 Bonds will be paid by the Trustee to DTC for subsequent disbursement to DTC Participants who are expected to remit such payments to the bene ficial owners of the Series 2023 Bonds . See “THE SERIES 2023 BONDS — General Provisions” and APPENDIX I — “INFORMATION CONCERNING THE DEPOSITORY TRUST COMPANY AND ITS BOOK -ENTRY SYSTEM” herein.
The Series 2023 Bonds are subject to optional and mandatory r edemption as described under the caption “THE SERIES 2023 BONDS — Redemption.”
NEITHER THE FAITH AND CREDIT NOR THE TAXING POWER OF THE DISTRICT (EXCEPT TO THE LIMITED
EXTENT SET FORTH IN THE INDENTURE), THE CITY OR THE STATE OF CALIFORNIA, OR ANY POLITICA L SUBDIVISION THEREOF, IS PLEDGED TO THE PAYMENT OF THE SERIES 2023 BONDS . EXCEPT FOR NET SPECIAL TAX REVENUES, NO OTHER TAXES ARE PLEDGED TO THE PAYMENT OF THE SERIES 2023 BONDS .
THE SERIES 2023 BONDS ARE NOT GENERAL OR SPECIAL OBLIGATIONS OF THE CITY B UT ARE SPECIAL,
LIMITED OBLIGATIONS OF THE DISTRICT PAYABLE SOLELY FROM NET SPECIAL TAX REVENUES AND THE OTHER ASSETS PLEDGED THEREFOR UNDER THE INDENTURE AS MORE FULLY DESCRIBED HEREIN.
The purchase of the Series 2023 Bonds involves certain risks. See th e section of this Official Statement entitled “SPECIAL RISK FACTORS” for a discussion of certain risk factors that should be considered, in addition to the other matters set forth herein, in evaluating the investment quality of the Series 2023 Bonds.
This cover page contains certain information for general reference only. It is not a summary of this issue. Investors are advise d to read the entire Official Statement to obtain information essential to the making of an informed investment decision.
The Series 2023 Bonds are offered when, as and if issued and accepted by the Underwriter, subject to approval as to their legality by Orrick, Herrington & Sutcliffe LLP, Los Angeles, California, as Bond Counsel, and subject to certain other conditions. Certa in legal matters will be passed on for the City and the District by Best Best & Krieger LLP, Ontario, California, as Issuer’s Counsel, and by Stradling Yocca Carlson & Rauth, a Professional Corporation, Newport Beach, California, as Disclosure Counsel. Certain legal matters will be passed upon for the Underwriter by its counsel, Norton Rose Fulbright US LLP, San Francisco, California. It is anticipated that the Series 2023 Bonds will be available for delivery to DTC or its agent in book-entry form on or about _____, 2023. [Ramirez & Co., Inc.]
Dated: _____, 2023
* Preliminary, subject to change. 589
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CITY OF ONTARIO
COMMUNITY FACILITIES DISTRICT NO. 56
(PARKSIDE/LA AVENIDA)
SPECIAL TAX BONDS, SERIES 2023
MATURITY SCHEDULE
BASE CUSIP†: 68304N
Maturity Date
(September 1)
Principal
Amount
Interest
Rate Yield Price CUSIP† No.
$__________ _____% Term Bonds due September 1, 20__ Yield: _____% Price: _____ CUSIP† No. ___ $__________ _____% Term Bonds due September 1, 20__ Yield: _____% Price: _____ CUSIP† No. ___
† CUSIP® is a registered trademark of the American Bankers Association. CUSIP Global Services (CGS) is managed on behalf of the American Bankers Association by FactSet Research Systems Inc. Copyright© 2023 CUSIP Global Services.
All rights reserved. CUSIP® data herein is provided by CUSIP Global Services. This data is not intended to create a database and does not serve in any way as a substitute for the CGS database. CUSIP® numbers are provided for convenience of reference only. None of the Underwrite r, the City or the District or their agents or counsel assume responsibility for the accuracy of such numbers.
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CITY OF ONTARIO
CITY COUNCIL
Paul S. Leon, Mayor
Debra Dorst-Porada, Mayor Pro Tem
Jim W. Bowman, Council Member
Alan D. Wapner, Council Member
Ruben Valencia, Council Member
STAFF
Scott Ochoa, City Manager
Darlene Sanchez, Assistant City Manager
Armen Harkalyan, Executive Director of Finance
James R. Milhiser, City Treasurer
Sheila Mautz, City Clerk
Best Best & Krieger LLP, City Attorney
BOND COUNSEL
Orrick, Herrington & Sutcliffe LLP
Los Angeles, California
MUNICIPAL ADVISOR
CSG Advisors Incorporated
San Francisco, California
DISCLOSURE COUNSEL
Stradling Yocca Carlson & Rauth, a Professional Corporation Newport Beach, California
TRUSTEE
Zions Bancorporation, National Association
Los Angeles, California
SPECIAL TAX CONSULTANT
Goodwin Consulting Group, Inc.
Sacramento, California
APPRAISER
Kitty Siino & Associates, Inc.
Tustin, California
PRICE POINT CONSULTANT
Empire Economics, Inc.
Capistrano Beach, California
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Except where otherwise indicated, all information contained in this Official Statement has been provided by the City and the District. No dealer, broker, salesperson or other person has been authorized by the City, the District, the Trustee or the Underwr iter to give any information or to make any representations in connection with the offer or sale of the Series 2023 Bonds other than those contained herein and, if given or made, such other information or representations must not be relied upon as having b een authorized by the City, the District, the Trustee or the Underwriter. This Official Statement does not constitute an offer to sell or the solicitation of an offer to buy nor shall there be any sale of the Series 2023 Bonds by a person in any jurisdict ion in which it is unlawful for such person to make such an offer, solicitation or sale.
This Official Statement is not to be construed as a contract with the purchasers or owners of the Series 2023 Bonds. Statements contained in this Official Statement w hich involve estimates, forecasts or matters of opinion, whether or not expressly so described herein, are intended solely as such and are not to be construed as representations of fact.
The Underwriter has provided the following sentence for inclusion in this Official Statement:
The Underwriter has reviewed the information in this Official Statement in accordance with, and as a part of, its responsibilities to investors under the federal securities laws as applied to the facts and circumstances of this transaction, but the Underwriter does not guarantee the accuracy or completeness of such information.
The information and expressions of opinion herein are subject to change without notice and neither the delivery of this Official Statement nor any sale made hereunder shall, under any circumstances, create any implication that there has been no change in the affairs of the District or any other parties described herein since the date hereof.
All summaries of the Indenture or other documents are made subject t o the provisions of such documents respectively and do not purport to be complete statements of any or all of such provisions. Reference is hereby made to such documents on file with the District for further information in connection therewith.
Certain statements included or incorporated by reference in this Official Statement constitute “forward -looking statements” within the meaning of the United States Private Securities Litigation Reform Act of 1995, Section 21E of the United States Securities Exchange Act of 1934, as amended, and Section 27A of the United States Securities Act of 1933, as amended. Such statements are generally identifiable by the terminology used such as a “plan,” “expect,” “estimate,” “project,” “budget” or similar words. Such forwa rd-looking statements include, but are not limited to certain statements contained in the information under the captions “THE COMMUNITY FACILITIES DISTRICT” and “PROPERTY OWNERSHIP AND THE DEVELOPMENT.”
The achievement of certain results or other expectati ons contained in such forward -looking statements involve known and unknown risks, uncertainties and other factors which may cause actual results, performance or achievements described to be materially different from any future results, performance or achie vements expressed or implied by such forward-looking statements. Except as set forth in the District’s Continuing Disclosure Agreement, a form of which is attached hereto as APPENDIX G, neither the District nor the City plans to issue any updates or revisions to the forward- looking statements set forth in this Official Statement. The New Home Company Southern C alifornia, LLC and SC Ontario Development Company, LLC will also covenant in a separate Continuing Disclosure Agreement, the form of which is set forth in Appendix H, for the benefit of the Owners, to provide semi -annual reports containing updates of certain development information in this Official Statement regarding the development of its respective property within the District and notices of certain significant events. The specific nature of the information to be contained in the semi - annual reports or notices of significant events and certain other terms of the continuing disclosure obligations of The New Home Company Southern C alifornia, LLC and SC Ontario Development Company, LLC are contained in Appendix H — “FORM OF DEVELOPER CONTINUING DISCLOSURE AGREEMENT.” See “CONTINUING DISCLOSURE.”
A wide variety of other information, including financial information concernin g the City, is available from publications and websites of the City and others. No such information is a part of or incorporated into this Official Statement.
IN CONNECTION WITH THE OFFERING OF THE SERIES 2023 BONDS , THE UNDERWRITER
MAY OVERALLOT OR EFFEC T TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF SUCH SERIES 2023 BONDS AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
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THE SERIES 2023 BONDS HAVE NOT B EEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, IN RELIANCE UPON AN EXEMPTION CONTAINED IN SUCH ACT. THE SERIES 2023 BONDS HAVE NOT BEEN REGISTERED OR QUALIFIED UNDER THE SECURITIES LAWS OF ANY STATE.
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TABLE OF CONTENTS
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INTRODUCTION ................................................................................................................................................ 1 The District .................................................................................................................................................... 1 Security and Sources of Payment for the Series 2023 Bonds ........................................................................ 4 Description of the Series 2023 Bonds ............................................................................................................ 5 Appraisal Report ............................................................................................................................................ 5 Price Point Studies ......................................................................................................................................... 5 Professionals Involved in the Offering .......................................................................................................... 6 Continuing Disclosure.................................................................................................................................... 6 Series 2023 Bond Owners’ Risks ................................................................................................................... 7 Other Information .......................................................................................................................................... 7 ESTIMATED SOURCES AND USES OF FUNDS ............................................................................................ 7 THE SERIES 2023 BONDS ................................................................................................................................. 8 General Provisions ......................................................................................................................................... 8 Redemption .................................................................................................................................................... 9 Debt Service Schedule ................................................................................................................................. 12 SECURITY AND SOURCES OF PAYMENT FOR THE SERIES 2023 BONDS ........................................... 12 General ......................................................................................................................................................... 12 Special Tax ................................................................................................................................................... 13 Rate and Method of Apportionment ............................................................................................................ 14 Collection and Application of the Special Tax ............................................................................................ 22 Covenant for Superior Court Foreclosure .................................................................................................... 22 Special Tax Fund ......................................................................................................................................... 23 Reserve Fund ............................................................................................................................................... 24 Investment of Moneys .................................................................................................................................. 24 Additional Bonds ......................................................................................................................................... 25 THE COMMUNITY FACILITIES DISTRICT ................................................................................................. 26 General Information Regarding the District ................................................................................................ 26 The Facilities ................................................................................................................................................ 28 Direct and Overlapping Debt ....................................................................................................................... 29 Property Values ............................................................................................................................................ 32 Value-to-Lien Ratios .................................................................................................................................... 32 Delinquency History .................................................................................................................................... 35 PROPERTY OWNERSHIP AND THE DEVELOPMENT ............................................................................... 36 The Master Developer .................................................................................................................................. 36 Woodside ..................................................................................................................................................... 36 New Home Company ................................................................................................................................... 38 Lennar .......................................................................................................................................................... 41 SPECIAL RISK FACTORS ............................................................................................................................... 43 Risks of Real Estate Secured Investments Generally – Declines in Value .................................................. 44 Levy of the Special Tax ............................................................................................................................... 44 Collection of the Special Tax ....................................................................................................................... 45 Failure to Develop Properties ...................................................................................................................... 45 Concentration of Property Ownership ......................................................................................................... 46 Effect of Additional Bonds on Credit Quality ............................................................................................. 47 Exempt Properties ........................................................................................................................................ 47 Constitutional Limitations on Taxation and Appropriations ........................................................................ 48 Maximum Special Tax ................................................................................................................................. 51 Payment of the Special Tax is Not a Personal Obligation of the Owners .................................................... 51 Disclosures to Future Purchasers ................................................................................................................. 51 Parity Taxes and Special Assessments ......................................................................................................... 52 594
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Depletion of Reserve Fund .......................................................................................................................... 52 Bankruptcy and Legal Delays ...................................................................................................................... 52 FDIC/Federal Government Interests In Properties ....................................................................................... 53 Geologic, Topographic and Climatic Conditions ......................................................................................... 54 Methane Gas ................................................................................................................................................ 54 Hazardous Substances .................................................................................................................................. 55 No Acceleration Provision ........................................................................................................................... 55 Bonds Are Limited Obligations ................................................................................................................... 55 Loss of Tax Exemption ................................................................................................................................ 56 Potential Early Redemption of Bonds from Special Tax Prepayments ........................................................ 56 No Teeter Plan ............................................................................................................................................. 56 Impact of Economic Conditions on the Development in the District .......................................................... 56 Increasing Mortgage Interest Rates .............................................................................................................. 56 CONTINUING DISCLOSURE .......................................................................................................................... 57 The District .................................................................................................................................................. 57 New Home Company ................................................................................................................................... 57 The Master Developer .................................................................................................................................. 58 TAX MATTERS................................................................................................................................................. 58 ABSENCE OF LITIGATION ............................................................................................................................ 60 ABSENCE OF RATINGS .................................................................................................................................. 60 CERTAIN LEGAL MATTERS ......................................................................................................................... 60 UNDERWRITING ............................................................................................................................................. 61 FINANCIAL INTERESTS ................................................................................................................................. 61 MUNICIPAL ADVISOR ................................................................................................................................... 61 ADDITIONAL INFORMATION ....................................................................................................................... 61
APPENDIX A RATE AND METHOD OF APPORTIONMENT OF SPECIAL TAX ................................ A-1 APPENDIX B APPRAISAL REPORT ......................................................................................................... B-1 APPENDIX C PRICE POINT STUDIES ...................................................................................................... C-1 APPENDIX D FORM OF OPINION OF BOND COUNSEL ....................................................................... D-1 APPENDIX E GENERAL INFORMATION CONCERNING THE CITY OF ONTARIO ........................ E-1 APPENDIX F SUMMARY OF CERTAIN PROVISIONS OF THE INDENTURE ....................................F-1 APPENDIX G FORM OF DISTRICT CONTINUING DISCLOSURE AGREEMENT .............................. G-1 APPENDIX H FORM OF DEVELOPER CONTINUING DISCLOSURE AGREEMENT ........................ H-1
APPENDIX I INFORMATION CONCERNING THE DEPOSITORY TRUST COMPANY AND ITS BOOK-ENTRY SYSTEM .............................................................................................. I-1
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$19,435,000*
CITY OF ONTARIO
COMMUNITY FACILITIES DISTRICT NO. 56
(PARKSIDE/LA AVENIDA)
SPECIAL TAX BONDS, SERIES 2023
INTRODUCTION
This introduction is not a summary of this Official Statement. It is only a brief description of and guide to, and is qualified by, more complete and detailed information contained in the entire Official Statement, including the cover page and appendices hereto, and the documents summarized or described herein. A full review should be made of the entire Official Statement. The offering of the Series 2023 Bonds to potential investors is made only by means of the entire Official Statement.
The purpose of t his Official Statement, which includes the cover page, the table of contents and the attached appendices, is to provide certain information concerning the issuance of the City of Ontario Community Facilities District No. 56 (Parkside/La Avenida) Special Tax Bonds, Series 2023 in the aggregate principal amount set forth on the front cover page (the “Series 2023 Bonds”). The proceeds of the Series 2023 Bonds will be used to finance certain public facilities and costs with respect thereto related to the development within the City of Ontario Community Facilities District No. 56 (Parkside/La Avenida) (the “District”), to fund a reserve fund for the Series 2023 Bonds (the “Reserve Fund”), and to pay costs of issuance of the Series 2023 Bonds.
The Series 2023 Bon ds are being issued pursuant to the Mello -Roos Community Facilities Act of 1982, as amended (Section 53311 et seq. of the Government Code of the State of California) (the “Act”), and pursuant to the Indenture, dated as of December 1, 2023 (the “Indenture”), by and between the District and Zions Bancorporation, National Association, as trustee (the “Trustee”). The Series 2023 Bonds are secured under the Indenture by a pledge of, constituting a lien on and security interest in, the Net Special Tax Revenues (as defined herein) and any other amounts held in the Special Tax Fund, the Bond Fund and the Reserve Fund established pursuant to the Indenture.
All capitalized terms used in this Official Statement and not defined shall have the meaning set forth in APPEN DIX F — “SUMMARY OF CERTAIN PROVISIONS OF THE INDENTURE ⎯ Definitions” herein.
The District
The District is located in the southwestern portion of San Bernardino County (the “County”), in the southern portion of the City of Ontario (the “City”) within an area known as “Ontario Ranch .” More specifically, the District is generally located north of the San Bernardino/Riverside County line, west of Haven Avenue, east of the Cucamonga Channel, and south of Shaefer Avenue (and south of State Route 60) . The development within the District is part of a multiple phase, multiple master -planned community development known as “Ontario Ranch.” Ontario Ranch is planned to contain over 3,500 acres. At full buildout, Ontario Ranch is expected to include appro ximately 18,000 dwelling units, approximately 2.9 million square feet of industrial space, approximately 1.5 million square feet of commercial and retail space and over 500,000 square feet of business park space. While much of Ontario Ranch is raw vacant land, many planned communities within the east side of Ontario Ranch have been completed or are currently under construction. The City estimates that approximately 4,000 dwelling units have been built within Ontario Ranch to date.
* Preliminary, subject to change.
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The District consists of three non -contiguous tract maps, with each tract map also comprising a separate tax zone. Tax Zone 1 consists of Tract Map No. 20298, Tax Zone 2 consists of Tract Map No. 20316 and Tax Zone 3 consists of Tract Map No. 20389. The District is currently being developed by three separate merchant builders (collectively, the “Merchant Builders”) with a total of 482 single -family homes. The District also includes a remainder vacant parcel within Tax Zone 2 owned by SC Ontario Development Company, LLC, the master developer within the District (the “Master Developer”). As of August 7, 2023, of the 482 homes under active development across all three communities within the District, 224 had been conveyed to individual homeowners and the Merchant Builders collecti vely owned (or were responsible for paying the Special Tax for) 15 model homes, 53 homes over 95% complete, 128 homes in various stages of construction and 62 finished lots. In addition to NUVO Parkside being developed by New Home Company (as described be low), the vacant parcel within Tax Zone 2 (the “Vacant Parcel”) is currently generally in a superpad condition and has entitlements per the Parkside Specific Plan for 236 units. The Master Developer is in the process of entitling the Vacant Parcel and intends to market the sale of the Vacant Parcel to one or more merchant builders in the next 24 months; however, there can be no assurance that all or any portion of the Vacant Parcel will be marketed and sold to merchant builders. See “PROPERTY OWNERSHIP AN D THE DEVELOPMENT — The Master Developer.”
Tax Zone 1 is being developed by Woodside 05S LP (“Woodside”) into a neighborhood known as “Cambridge Court.” Cambridge Court is being developed with 106 single-family detached homes arranged in a conventional s ingle-family detached style with some motor courts. As of August 7 , 2023 and within Cambridge Court, 62 single-family homes had been conveyed to individual homeowners and Woodside owned three model homes, 12 homes over 95% complete, 22 homes in various st ages of construction and seven finished lots. As of October 1, 2023, _____ single family homes within Cambridge Court had been conveyed to individual homeowners and Woodside owned _____ completed homes, _____ homes in various stages of construction and _____ finished lots.
A portion of Tax Zone 2 is being developed by The New Home Company Southern California, LLC (“New Home Company”) into a neighborhood known as “NUVO Parkside.” NUVO Parkside is being developed with 303 single-family homes, all of which are detached but range in style from motor court clusters to alley load. As of August 7, 2023 and within NUVO Parkside, 161 single -family homes had been conveyed to individual homeowners and New Home Company owned eight model homes, 22 homes over 95% complete and 61 homes in various stages of construction. As of August 7, 2023, the remaining 51 lots within NUVO Parkside were owned by Arroyo Cap II-1, LLC (“Arroyo” or the “New Home Company Landbank”), which is a land -banking entity from which New Home Compa ny is purchasing the lots within NUVO Parkside in phased takedowns. As of August 7, 2023, 19 of the lots owned by Arroyo were in various stages of construction and 32 lots were in a finished lot condition. While Arroyo owns lots within NUVO Parkside, New Home Company is contractually obligated under an Option Agreement (as defined under the caption “PROPERTY OWNERSHIP AND THE DEVELOPMENT—New Home Company”) for paying all taxes and fees associated with the property owned by Arroyo, including the Special Ta x (as defined herein). For more information regarding Arroyo and the land -banking arrangement between Arroyo and New Home Company, see the caption “PROPERTY OWNERSHIP AND THE DEVELOPMENT —New Home Company.” As of October 1, 2023, 176 single family homes w ithin NUVO Parkside had been conveyed to individual homeowners and New Home Company owned _____ completed homes, _____ homes in various stages of construction and _____ finished lots.
Tax Zone 3 is being developed by Lennar Homes of California, LLC (“Lenna r”) into a neighborhood known as “Fairhaven at Park Place.” Fairhaven at Park Place is being developed with 73 single -family detached homes arranged in motor courts. As of August 7, 2023, one home within Fairhaven at Park Place had been conveyed to an in dividual homeowner and Lennar owned four model homes, 19 homes over 95% complete, 26 homes in various stages of construction and 23 finished lots. As of October 1, 2023, 19 homes within Fairhaven at Park Place have been conveyed to individual homeowners a nd Lennar owned five completed model homes, 34 homes in various stages of construction, and 15 finished lots. 599
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The District was formed to finance certain services, facilities and costs with respect thereto related to the development within the District. Th e Act was enacted by the California legislature to provide an alternative method of financing certain capital facilities and services, especially in developing areas of the State of California (the “State”). Any local agency (as defined in the Act) may establish a community facilities district to provide for and finance the cost of eligible facilities and services. The legislative body of the local agency which forms a community facilities district acts on behalf of such district as its legislative body.
Subject to approval by two -thirds of the votes cast at an election and compliance with the other provisions of the Act, a legislative body of a local agency may issue bonds for a community facilities district and may levy and collect a special tax within such district to repay such indebtedness.
Pursuant to the Act, on November 16, 2021 the City Council of the City (the “City Council”) adopted the necessary resolutions stating its intent to establish the District, to authorize the levy of a special tax on taxable property within the boundaries of the District based on a rate and method of apportionment, and to have the District incur bonded indebtedness.
Following public hearings conducted pursuant to the provisions of the Act, the City Council adopted resolutions establishing the District and calling a special election to submit the levy of a special tax and the incurring of bonded indebtedness to the qualified voters of the District. On December 21, 2021, at an election held pursuant to the Act, the M aster Developer, Woodside, Arroyo, Lennar and New Home Company, the qualified voter s within the District at the time of the election, authorized the District to incur bonded indebtedness in the aggregate principal amount of not to exceed $ 75,000,000 and approved a rate and method of apportionment of the special tax for the District to pay, among other things, the principal of and interest on the bonds of the District (the “Rate and Method”).
A Notice of Special Tax Lien was recorded in the office of the Ass essor-Recorder-County Clerk’s office of the County of San Bernardino on December 22, 2021 as Doc# 2021-0571002. On January 18, 2022, the City Council adopted an ordinance authorizing the levy of the special tax in accordance with the Rate and Method.
The Rate and Method provides for a special tax (the “Special Tax”) to be levied for the Special Tax A Requirement. Under the Rate and Method , “Special Tax A Requirement” is defined to mean for any Fiscal Year that amount required, after taking into account av ailable amounts held in the funds and accounts established under the Indenture, for the District to: (i) pay debt service on all Outstanding Bonds (as defined herein) which is due in the calendar year that commences in such Fiscal Year; (ii) pay periodic costs on the Bonds, including, but not limited to, credit enhancement and rebate payments on the Bonds; (iii) pay a pro rata share of Administrative Expenses (as defined in the Rate and Method ); (iv) provide any amounts required to establish or replenish a ny reserve fund for the Bonds; (v) pay directly for acquisition or construction of Facilities (as defined in the Rate and Method), or the cost of Services (as defined in the Rate and Method), to the extent that the inclusion of such amounts does not increa se the Special Tax A l evy on Final Mapped Property (as defined in the Rate and Method) or Undeveloped Property (as defined in the Rate and Method ); (vi) provide an amount equal to Special Tax A delinquencies based on the historical delinquency rate for the Special Tax A as determined by the CFD Administrator (as defined in the Rate and Method). The Special Tax A will be levied against certain property within the District pursuant to the Act, the Ordinance approving the levy of the Special Tax and the Indenture and in accordance with the Rate and Method. Under the Indenture, the portion of the Special Tax levied under the Rate and Method to pay for Services is not pledged to the payment of the Series 2023 Bonds or any Additional Bonds.
Upon the issuance of the Series 2023 Bonds , a principal amount of $ 55,565,000* will remain authorized but unissued. Pursuant to the Indenture, the District may issue additional indebtedness secured by the Net Special Tax Revenue s (as such term is defined herein) on a parity with the Series 2023 Bonds (“Additional Bonds” and, together with the Series 2023 Bonds, the “Bonds”), subject to certain conditions, for
* Preliminary, subject to change.
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the purposes of providing funds to pay costs of the Facilities, providi ng funds to refund any Bonds previously issued, providing funds to pay Costs of Issuance incurred in connection with the issuance of such Additional Bonds and providing funds to make any deposit to the Reserve Fund required by the Indenture. See the caption “SECURITY AND SOURCES OF PAYMENT FOR THE SERIES 2023 BONDS —Additional Bonds.” Other taxes and/or special assessments with liens equal in priority to the continuing lien of the Special Tax may be levied on the property within the District. See “SPECIAL RISK FACTORS ⎯ Parity Taxes and Special Assessments.”
Security and Sources of Payment for the Series 2023 Bonds Under the Indenture, the District has pledged to repay the Series 2023 Bonds from Net Special Tax Revenues and any other amounts held in the Sp ecial Tax Fund, the Bond Fund and the Reserve Fund. The Indenture defines “Net Special Tax Revenues” to mean Special Tax Revenues less amounts required to pay Administrative Expenses. The term “Special Tax Revenues” is defined in the Indenture to mean th e proceeds of the Special Tax received by or on behalf of the District, other than proceeds of the Special Tax levied to pay the costs of Services received by or on behalf of the District, including any prepayments thereof, interest and penalties thereon and proceeds of the redemption or sale of property sold as a result of foreclosure of the lien of the Special Tax, which will be limited to the amount of said lien and interest and penalties thereon. “Services” has the meaning set forth in the Rate and Method. See APPENDIX A — “RATE AND METHOD OF APPORTIONMENT OF SPECIAL TAX.” “Administrative Expenses” is defined in the Indenture to mean any reasonably necessary or appropriate expenses incurred in the administration of the District and the Bonds, including, but not limited to (a) the administrative and legal costs of levying and collecting the Special Tax (including costs incurred in connection with any appeals relating thereto and litigation expenses incurred in connection with the collection of such Spec ial Tax), (b) the fees, costs and indemnification due the Trustee, (c) the costs incurred with on -going disclosure in connection with the Bonds, (d) the costs incurred in connection with the disclosure of the Special Tax to property owners and potential pu rchasers of property, (e) the amounts required to calculate and pay arbitrage rebate payments to the federal government, and (f) an allocable share of the salaries of the City staff providing services on behalf of the District directly related to the foregoing and an allocable share of City general administrative overhead related thereto. “Special Tax” is defined in the Indenture to mean the special tax described and defined in the Rate and Method as “Special Tax A” approved by the qualified electors to be levied within the District pursuant to the Act and the Rate and Method.
The Series 2023 Bonds have been structured so that Assigned Special Tax A rates set forth in the Rate and Method that may be levied within the District, based on the 482 parcels of Dev eloped Property shown in the projected Fiscal Year 2024-25 Special Tax levy, are at least 110% of debt service on the Series 2023 Bonds in each Bond Year, net of estimated Administrative Expenses.
Net Special Tax Revenues are the primary security for the repayment of the Series 2023 Bonds. In the event that Net Special Tax Revenues are not paid when due, the only sources of funds available to pay the debt service on the Series 2023 Bonds are the amounts held by the Trustee for such purpose in the Special T ax Fund, the Bond Fund and the Reserve Fund. See “SECURITY AND SOURCES OF PAYMENT FOR THE SERIES 2023 BONDS” herein.
NEITHER THE FAITH AND CREDIT NOR THE TAXING POWER OF THE DISTRICT (EXCEPT TO THE LIMITED EXTENT SET FORTH IN THE INDENTURE), THE CITY OR THE
STATE, OR ANY POLITICAL SUBDIVISION THEREOF, IS PLEDGED TO THE PAYMENT OF THE SERIES 2023 BONDS . EXCEPT FOR THE NE T SPECIAL TAX REVENUES, NO OTHER TAXES ARE PLEDGED TO THE PAYMENT OF THE SERIES 2023 BONDS . THE SERIES 2023
BONDS ARE NOT GENERAL OR SPECIAL OBLIGATIONS OF THE CITY BUT ARE SPECIAL,
LIMITED OBLIGATIONS OF THE DISTRICT PAYABLE SOLELY FROM NET SPECIAL TAX 601
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REVENUES AND THE OTHER ASSETS PLEDGED THEREFOR UNDER THE INDENTURE AS MORE FULLY DESCRIBED HEREIN.
Description of the Series 2023 Bonds
The Series 2023 Bonds will be issued and delivered as fully registered bonds, registered in the name of Cede & Co. as nom inee of The Depository Trust Company, New York, New York (“DTC”), and will be available to actual purchasers of the Series 2023 Bonds (the “Beneficial Owners”) in the denominations of $5,000 and any integral multiple thereof under the book -entry system mai ntained by DTC, only through brokers and dealers who are or act through DTC Participants as described herein. Beneficial Owners will not be entitled to receive physical delivery of the Series 2023 Bonds. In the event that the book-entry only system described herein is no longer used with respect to the Series 2023 Bonds , the Series 2023 Bonds will be registered and transferred in accordance with the Indenture. See APPENDIX I — “INFORMATION CONCERNING THE DEPOSITORY TRUST COMPANY AND ITS BOOK-ENTRY SYSTEM” herein.
Principal of, premium, if any, and interest on the Series 2023 Bonds is payable by the Trustee to DTC.
Disbursement of such payments to DTC Participants is the responsibility of DTC and disbursement of such payments to the Beneficial Owners is t he responsibility of DTC Participants. In the event that the book -entry only system is no longer used with respect to the Series 2023 Bonds, the Beneficial Owners will become the registered owners of the Series 2023 Bonds and will be paid principal and in terest by the Trustee, all as described herein. See APPENDIX I — “INFORMATION CONCERNING THE DEPOSITORY TRUST COMPANY AND ITS BOOK-ENTRY SYSTEM” herein.
The Series 2023 Bonds are subject to optional redemption, mandatory redemption from Special Tax prepayments and mandatory sinking fund redemption as described herein. For a more complete description of the Series 2023 Bonds and the basic documentation pursuant to which they are being sold and delivered, see “THE SERIES 2023 BONDS ” and APPENDIX F — “SUMMARY OF CERTAIN PROVISIONS OF THE INDENTURE” herein.
Appraisal Report
The District has obtained an appraisal of the Taxable Property (as defined herein) included in the District with a date of value as of August 7, 2023 (the “Appraisal” or “Appraisal Report”). The Appraisal was prepared for the District by Kitty Siino & Associates, Inc., Tustin, California (the “Appraiser”). Subject to the limitations set forth in the Appraisal, the Appraiser is of the opinion that, as of August 7, 2023, the minimum market value of the property within the District was not less than $ 226,550,046 (the “Appraised Value”). See “THE COMMUNITY FACILITIES DISTRICT — Property Values” and “ THE COMMUNITY FACILITIES DISTRICT — Value-to-Lien Ratios.” A copy of the Appraisal is included as APPENDIX B to this Official Statement. It is a condition precede nt to the issuance of the Series 2023 Bonds that the Appraiser deliver a certificate stating that nothing has come to the attention of the Appraiser subsequent to the date of value of the Appraisal that would lead the Appraiser to believe that the value of the Taxable Property in the District is less than the minimum market value of such property reported in the Appraisal.
Price Point Studies
In connection with the approval of the Rate and Method , the City hired Empire Economics, Inc., Capistrano Beach, California (the “Price Point Consultant”), to prepare a price point study of the prices of the homes planned within each of the Tax Zones within the District (each an “Original Price Point Study” a nd, collectively, the “Original Price Point Studies”). The Special Tax rates set forth in the Rate and Method were based in part on the prices set forth in the Original Price Point Studies. In connection with and in preparation for the issuance of the Series 2023 Bonds , the City hired the Price Point Consultant to conduct an update to each of the Original Price Point Studies (each an “Updated Price Point Study” and, collectively, the “Updated Price Point Studies”). Pursuant to Section C of the Rate and Method, upon the issuance of Bonds, the City is 602
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required to amend the Assigned Special Tax (as defined in the Rate and Method ) to the extent necessary to cause the total effective tax burden for residential property to not exceed 1.95% of the minimum sales prices for Tax Zones 1 and 2 and, for Tax Zone 3, to not exceed 2.34% of the minimum sales price for Single Family Detached Property and 2.64% of the minimum sales price for Single Family Attached Property (as such terms are defined in the Rate and Method) , set forth in the applicable Updated Price Point Study. Based on the Updated Price Point Stud ies provided by the Price Point Consultant, the City will reduce certain of the Assigned Special Tax rates set forth in Section C of the Rate and Method for certain of the Tax Zones, as the total effective tax burden applicable to each land use class of residential property to be constructed within the District will not exceed 1.95% , 2.34% or 2.64%, as applicable, of the minimum sales prices set forth in the Updated Price Point Studies. Copies of the Updated Price Point Studies are included as APPENDIX C to this Official Statement. See “SECURITY AND SOURCES FOR THE SERIES 2023 BONDS — Rate and Method of Apportionment.” The Fiscal Year 2024 -25 Special Tax rates s hown in this Official Statement reflect such reductions.
Professionals Involved in the Offering
Zions Bancorporation, National Association, Los Angeles, California, will act as Trustee under the Indenture. Samuel A. Ramirez & Co., Inc. is the Underwriter of the Series 2023 Bonds. The validity of the Series 2023 Bonds and certain other legal matters are subject to the approving opinion of Orrick, Herrington & Sutcliffe LLP, Bond Counsel to the District. CSG Advisors Incorporated, San Francisco, California, is acting as Municipal Advisor for the District in connection with the Series 2023 Bonds . Kitty Siino & Associates, Inc., Tustin, California, is acting as the Appraiser to the District. Goodwin Consul ting Group, Inc. is acting as the Special Tax Consultant to the District. Empire Economics, Inc. is acting as the Price Point Consultant to the District. Certain legal matters will be passed on for the City and the District by Best Best & Krieger LLP, Ontario, California, in its capacity as Issuer’s Counsel, and Stradling Yocca Carlson & Rauth, a Professional Corporation, Newport Beach, California, as Disclosure Counsel. Certain legal matters will be passed upon for the Underwriter by its counsel, Norton Rose Fulbright US LLP, San Francisco, California.
For information concerning respects in which certain of the above -mentioned professionals, advisors, counsel and agents may have a financial or other interest in the offering of the Series 2023 Bonds , see “FINANCIAL INTERESTS” herein.
Continuing Disclosure
The District will agree to provide, or cause to be provided, to the Municipal Securities Rulemaking Board’s Electronic Municipal Market Access system available on the Internet at http://emma.msrb.org (“EMMA”) certain annual financial information and operating data. The District will further agree to provide notice of certain listed events. These covenants will be made in order to assist the Underwriter in complying with Securities and Exchange Commission Rule 15c2 -12(b)(5) (the “Rule”). See “CONTINUING DISCLOSURE — The District” herein. See the form of District Continuing Disclosure Agreement attached as APPENDIX G hereto (the “District Continuing Disclosure Agreement”) for a description of the specific nature of the annual reports to be filed by the District and notices of listed events to be provided by the District.
In addition, New Home Company and the Master Developer will each agree to provide or cause to be provided to EMMA certain information on a semi -annual basis with respect to their respective property ownership and development within the District and notice of certain listed events until satisfaction of certain conditions set forth in a Developer Continuing Disclosure Agreement (the “ Developer Continuing Disclosure Agreement”). See “CONTINUING DISCLOSURE — New Home Company” and “ —The Master Developer” herein. See the form of the Developer Continuing Disclosure Agreement attached as APPENDIX H hereto for a description of the specific nature of the semi -annual reports to be filed by New Home Company and the Master Developer , and notices of listed events to be provided by New Home Company and the Master Developer.
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Series 2023 Bond Owners’ Risks
Certain events could affect the ability of the District to pay the principal of and interest on the Series 2023 Bonds when due. See the section of this Official Statement entitled “SPECIAL RISK FACTORS” for a discussion of certain factors which should be considered, in addition to other matters set forth herein, in evaluating an investment in the Series 2023 Bonds.
Other Information
This Official Statement speaks only as of its date, and the information contained herein is subject to change.
Brief descriptions of the Series 2023 Bonds and the Indenture are included in this Official Statement.
Such descriptions and information do not purport to be comprehensive or definitive. All references herein to the Indenture, the Series 2023 Bonds and the constitution and laws of the State as well as the proceedings of the City Council, acting as the legislative body of the District, are qualified in their entirety by references to such documents, laws and proceedings, and with respect to the Series 2023 Bonds , by ref erence to the Indenture.
Copies of the Indenture, the District Continuing Disclosure Agreement and other documents and information referred to herein are available for inspection and (upon request and payment to the City of a charge for copying, mailing an d handling) for delivery from the City at 303 East “B” Street, Ontario, California 91764, Attention: City Manager.
ESTIMATED SOURCES AND USES OF FUNDS
The following table sets forth the expected sources and uses of Series 2023 Bond proceeds and certain other amounts.
Sources:
Principal Amount of the Series 2023 Bonds $
Less: Net Original Issue Discount
Less: Underwriter’s Discount
Plus: Funds on Hand(1)
Total $
Uses:
SC Ontario Acquisition Account of the Improvement Fund(2) $ NMC Acquisition Account of the Improvement Fund(3)
Administrative Expense Fund
City Facilities Account of the Improvement Fund
City Park Account of the Improvement Fund
Reserve Fund(4)
Costs of Issuance Fund(5)
Total $
(1) Includes a portion of the Special Tax collected for Fiscal Year 2022-23. (2) Reflects amounts owed or to be owed to the Master Developer, for the construction of eligible facilities under the Act. (3) Reflects amounts owed or to be owed to NMC Builders, LLC for the construction of eligible facilities under the Act. (4) Equal to the initial Reserve Requirement.
(5) Includes fees of Bond Counsel and Disclosure Counsel, printing costs, municipal advisor fees, Trustee fees, Appraiser fees, Price Point Consultant fees and other costs of issuance of the Series 2023 Bonds. 604
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THE SERIES 2023 BONDS
General Provisions
The Series 2023 Bonds will be issued in fully registered form without coupons in denominations of $5,000 and any integral multiple thereof (“Authorized Denominations”). The Series 2023 Bonds will be dated the date of issuance thereof. The Series 2023 Bonds are scheduled to mature on September 1, in the years and in the principal amounts, and will bear interest at the rates per annum, shown on the inside front cover page of this Official Statement. Interest on the Series 2023 Bonds will be computed on the basis of a 360 -day year comprised of twelve 30 -day months and will be payable on March 1 and September 1 of each year, commencing March 1, 20 24 (each an “Interest Payment Date”). Interest on each Series 2023 Bond will be payable from the Interest Payment Date next preceding the date of authentication thereof unless (i) such Series 2023 Bond is authenticated on or before an Interest Payment Dat e and after the close of business on the fifteenth calendar day of the month preceding such Interest Payment Date, whether or not such day is a Business Day (the “Record Date”) in which event interest thereon will be payable from such Interest Payment Date, (ii) such Series 2023 Bond is authenticated on or before the first Record Date, in which event interest thereon will be payable from the Closing Date or (iii) interest on such Series 2023 Bond is in default as of the date of authentication thereof, in wh ich event interest thereon will be payable from the date to which interest has been previously paid or duly provided for.
The interest on, and principal of and redemption premiums, if any, on the Series 2023 Bonds are payable in lawful money of the United States of America. Interest is payable by check of the Trustee mailed by first-class mail, postage prepaid, on each Interest Payment Date to the Owners of the Series 2023 Bonds at their respective addresses shown on the Registration Books as of the close of business on the preceding Record Date (except that interest on any Series 2023 Bond which is not punctually paid or duly provided for on any Interest Payment Date will, if and to the extent that amounts subsequently become available therefor, be payable on a payment date established by the Trustee to the Person in whose name the own ership of such Series 2023 Bond is registered on the Registration Books at the close of business on a special record date to be established by the Trustee pursuant to the Indenture). Payment of principal of any Series 2023 Bond will be made only upon presentation and surrender thereof at maturity or upon earlier redemption at the Office of the Trustee.
The Series 2023 Bonds will initially be issued in book -entry form, and DTC will act as securities depository. So long as the Series 2023 Bonds are held in book-entry form, principal of, premium, if any, and interest on the Series 2023 Bonds will be paid by the Trustee directly to DTC for distribution to the Beneficial Owners of the Series 2023 Bonds in accordance with procedures adopted by DTC. See APPENDIX I — “INFORMATION CONCERNING THE DEPOSITORY TRUST COMPANY AND ITS BOOK -ENTRY SYSTEM.”
The Series 2023 Bonds are not general or special obligations of the City but are special, limited obligations of the District payable solely from Net Special Tax Revenues and the other amounts held under the Indenture in the Special Tax Fund, the Bond Fund and the Reserve Fund. Neither the faith and credit nor the taxing power of the District (except to the limited extent set forth in the Indenture), the City, the State o r any political subdivision thereof, is pledged to the payment of the Series 2023 Bonds . See “SPECIAL RISK FACTORS — Bonds Are Limited Obligations.”
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Redemption*
Optional Redemption. The Series 2023 Bonds maturing on and after September 1, 20 __, shall be subject to optional redemption, in whole, or in part in Authorized Denominations, on any Interest Payment Date on or after September 1, 20__ from any source of available funds, at the following respective Redemption Prices (expressed as percentages of the principal amount of the Series 2023 Bonds to be redeemed), plus accrued interest thereon to the date of redemption:
Redemption Dates 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
Mandatory Redemption from Special Tax Prepayments . The Series 2023 Bonds are subject to mandatory redemption, in whole, or in part in Authorized Deno minations, on any Interest Payment Date, from and to the extent of Special Tax prepayments required to be applied thereto and any related proportional amounts in the Reserve Fund required to be applied thereto pursuant to the Indenture (see “SECURITY AND SOURCES OF PAYMENT FOR THE SERIES 2023 BONDS — Reserve Fund”) at the following respective Redemption Prices (expressed as percentages of the principal amount of the Series 2023 Bonds to be redeemed), plus accrued interest thereon to the date of redemption:
Redemption Dates Redemption Price
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
See the caption “SPECIAL RISK FACTORS — Potential Early Redemption of Bonds from Special Tax Prepayments” for a discussion of the potential for a lower than expected yield on the Series 2023 Bonds as a result of a special mandatory redemption from Special Tax prepayments.
Mandatory Sinking Fund Redemption. The Series 2023 Bonds maturing September 1, 20__ shall be subject to mandatory sinking fund redemption, in part, on September 1 in each year, commencing September 1, 20__, at a Redemption Price equal to the principal amount of the Series 2023 Bonds maturing September 1, 20__ to be redeemed, without premium, plus accrued interest thereon to the date of redemption, in the aggregate respective principal amounts in the respective years as follows:
Sinking Fund Redemption Date
(September 1)
Principal Amount
to be Redeemed
$
(Maturity)
If some but not all of the Series 2023 Bonds maturing September 1, 20__ are redeemed pursuant to the optional redemption provisions of the Indenture described above, the principal amount of the Series 2023 Bonds maturing September 1, 20__ to be redeemed pursuant to mandatory sinking fund redemption as described above on any subsequent September 1 shall be reduced, by $5,000 or an integral multiple thereof, as
* Preliminary, subject to change.
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designated by the District in a Written Certificate of the District submitted to the Trustee; provided, however, that the aggregate amount of such reductions shall not ex ceed the aggregate amount of the Series 2023 Bonds maturing September 1, 20__ so optionally redeemed. If some but not all of the Series 2023 Bonds maturing September 1, 20__ are redeemed pursuant to the mandatory redemption from Special Tax prepayments provisions of the Indenture described above, the principal amount of the Series 2023 Bonds maturing September 1, 20__ to be redeemed pursuant to mandatory sinking fund redemption as described above on any subsequent September 1 shall be reduced by the aggregate principal amount of the Series 2023 Bonds maturing September 1, 20__ so redeemed, such reduction to be allocated among redemption dates as nearly as practicable on a pro rata basis in amounts of $5,000 or integral multiples thereof, as determined by the Trustee, notice of which determination shall be given by the Trustee to the District.
The Series 2023 Bonds maturing September 1, 20 __ shall be subject to mandatory sinking fund redemption, in part, on September 1 in each year, commencing September 1, 20 __, at a Redemption Price equal to the principal amount of the Series 2023 Bonds maturing September 1, 20__ to be redeemed, without premium, plus accrued interest thereon to the date of redemption, in the aggregate respective principal amounts in the respective years as follows:
Sinking Fund Redemption Date
(September 1)
Principal Amount
to be Redeemed
$
(Maturity)
If some but not all of the Series 2023 Bonds maturing September 1, 20__ are redeemed pursuant to the optional redemption provisions of the Indenture described above, the principal amount of the Series 2023 Bonds maturing September 1, 20__ to be redeemed pursuant to mandatory sinking fund redemption as described above on any subsequent September 1 shall be reduced, by $5,000 or an integral multiple thereof, as designated by the District in a Written Certificate of the District submitted to the Trustee; provided, however, that the aggregate amount of such reductions shall not ex ceed the aggregate amount of the Series 2023 Bonds maturing September 1, 20__ so optionally redeemed. If some but not all of the Series 2023 Bonds maturing September 1, 20__ are redeemed pursuant to the mandatory redemption from Special Tax prepayments provisions of the Indenture described above, the principal amount of the Series 2023 Bonds maturing September 1, 20__ to be redeemed pursuant to mandatory sinking fund redempti on as described above on any subsequent September 1 shall be reduced by the aggregate principal amount of the Series 2023 Bonds maturing September 1, 20__ so redeemed, such reduction to be allocated among redemption dates as nearly as practicable on a pro rata basis in amounts of $5,000 or integral multiples thereof, as determined by the Trustee, notice of which determination shall be given by the Trustee to the District.
Selection of Bonds for Redemption. Whenever provision is made in the Indenture for the redemption of less than all of the Bonds, the Trustee will select the Bonds to be redeemed from all Bonds not previously called for redemption (i) with respect to any optional redemption of Bonds of a Series, among maturities of the Bonds of such Series as directed in a Written Request of the District, and (ii) with respect to any mandatory redemption of Bonds from Special Tax prepayments , among maturities of all Series of Bonds on a pro rata basis as nearly as practicable. The Trustee shall select for redemption the Bonds of the same Series with the same maturity by lot in any manner that the Trustee, in its sole discretion, shall deem appropriate. For purposes of such selection, all Bonds shall be deemed to be comprised of the greatest number of separ ate denominations that would result in each such denomination being an Authorized Denomination and each such separate denomination shall be treated as a separate Bond that may be separately redeemed.
Notice of Redemption. If the Bonds are held in book-entry form, notice of redemption will be mailed to DTC and not to the Beneficial Owners of the Bonds under the DTC book-entry system. Neither the District 607
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nor the Trustee is responsible for giving notice of redemption to the Beneficial Owners. See APPENDIX I — “INFORMATION CONCERNING THE DEPOSITORY TRUST COMPANY AND ITS BOOK -ENTRY SYSTEM” herein.
The Indenture provides that the Trustee on behalf and at the expense of the District will give notice of any redemption by first -class mail to the respective Owners of any Bonds designated for redemption at their respective addresses appearing on the Registration Books , at least 30 but not more than 60 days prior to the date fixed for redemption. Such notice of redemption will state the date of the notice, the redemption date, the redemption place and the Redemption Price and shall designate the CUSIP numbers, if any, the Bond numbers and the maturity or maturities of the Bonds to be redeemed (except in the event of redemption of all of the Bonds of such maturity or maturities in whole). The notice of redemption will require that the Bonds to be redeemed be surrendered at the Office of the Trustee for redemption at the Redemption Price, and give notice that further interest on such Bonds will not accrue from and afte r the date fixed for redemption. Neither the failure to receive any notice so mailed, nor any defect in such notice, will affect the validity of the proceedings for the redemption of the Bonds or the cessation of accrual of interest thereon from and after the date fixed for redemption.
If, on said date fixed for redemption, moneys for the Redemption Price of all the Bonds to be redeemed, together with interest to said date, is held by the Trustee so as to be available therefor on such date, and, if notice of redemption thereof will have been mailed as aforesaid and not canceled, then, from and after said date, interest on said Bonds will cease to accrue and become payable. All moneys held by or on behalf of the Trustee for the redemption of Bonds will be h eld in trust for the account of the Owners of the Bonds so to be redeemed without liability to such Owners for interest thereon. With respect to any notice of any optional redemption of Bonds, unless at the time such notice is given the Bonds to be redeem ed shall be deemed to have been paid within the meaning of the Indenture, such notice will state that such redemption is conditional upon receipt by the Trustee, on or prior to the date fixed for such redemption, of moneys that, together with other available amounts held by the Trustee, are sufficient to pay the Redemption Price of, and accrued interest on, the Bonds to be redeemed, and that if such moneys shall not have been so received said notice shall be of no force and effect and the District will not be required to redeem such Bonds. In the event a notice of redemption of Bonds contains such a condition and such moneys are not so received, the redemption of Bonds as described in the conditional notice of redemption will not be made and the Trustee will, within a reasonable time after the date on which such redemption was to occur, give notice to the Persons and in the manner in which the notice of redemption was given, that such moneys were not so received and that there shall be no redemption of Bonds pursuant to such notice of redemption. 608
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Debt Service Schedule
Year Ending
September 1 Principal Interest Total
2024 $ $ $
2025
2026
2027
2028
2029
2030
2031
2032
2033
2034
2035
2036
2037
2038
2039
2040
2041
2042
2043
2044
2045
2046
2047
2048
2049
2050
2051
2052
2053
2054
Total $ $ $
SECURITY AND SOURCES OF PAYMENT FOR THE SERIES 2023 BONDS General
The Series 2023 Bonds are special, limited obligations of the District payable solely from Net Special Tax Revenues and the other assets pledged therefor under the Indenture. The Indenture defines “Net Special Tax Revenues” to mean Special Tax Revenues less amounts requi red to pay Administrative Expenses. Under the Indenture, the portion of the Special Tax levied under the Rate and Method to pay for Services (as defined in the Rate and Method ) is not pledged to the payment of the Series 2023 Bonds or any Additional Bonds .
Accordingly, the term “Special Tax Revenues” is defined in the Indenture to mean the proceeds of the Special Tax received by or on behalf of the District, other than proceeds of the Special Tax levied to pay the costs of Services received by or on behal f of the District, including any prepayments thereof, interest and penalties thereon and proceeds of the redemption or sale of property sold as a result of foreclosure of the lien of the Special Tax (which shall be limited to the amount of said lien and in terest and penalties thereon). The Indenture defines the term “Special Tax” as the special tax described and defined in the Rate and Method as “Special Tax A” approved by the qualified electors to be levied within the District pursuant to the Act and the 609
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Rate and Method . “Services” has the meaning set forth in the Rate and Method . See APPENDIX A — “RATE AND METHOD OF APPORTIONMENT OF SPECIAL TAX .” “Administrative Expenses” is defined in the Indenture to mean any reasonably necessary or appropriate expen ses incurred in the administration of the District and the Bonds, including, but not limited to (a) the administrative and legal costs of levying and collecting the Special Tax (including costs incurred in connection with any appeals relating thereto and l itigation expenses incurred in connection with the collection of such Special Tax), (b) the fees, costs and indemnification due the Trustee, (c) the costs incurred with on -going disclosure in connection with the Bonds, (d) the costs incurred in connection with the disclosure of the Special Tax to property owners and potential purchasers of property, (e) the amounts required to calculate and pay arbitrage rebate payments to the federal government, and (f) an allocable share of the salaries of the City staff providing services on behalf of the District directly related to the foregoing and an allocable share of City general administrative overhead related thereto.
Under the Rate and Method, parcels of Taxable Property are classified as Developed Property (each as defined in the Rate and Method) if a building permit has been obtained for such parcel by May 1 of the fiscal year preceding the Special Tax levy. In Fiscal Year 2022-23, the first year the Special Tax was levied in the District, the Special Tax was l evied in the amount of $651,782 on 210 units classified as Developed Property.
As of May 1, 2023, 386 parcels of Taxable Property were classified as Developed Property for Fiscal Year 2023-24. Accordingly, in Fiscal Year 2023 -24, the Special Tax was levi ed in the amount of $1,213,550 on such 386 parcels of Developed Property. Between May 1, 2023 and August 7, 2023, the remaining building permits were issued for all 482 residential units under active construction within the District. Accordingly, based on the development status within the District as of August 7, 2023, 482 parcels of Taxable Property will be classified as Developed Property for purposes of the projected Fiscal Year 2024 -25 Special Tax levy and each fiscal year thereafter . See “THE COMMUN ITY FACILITIES DISTRICT — Delinquency History.” Under no circumstances may the amount of Special Tax levied by the District in any year exceed the maximum rates approved by the qualified electors within the District, as set forth in the Rate and Method. A copy of the Rate and Method is attached to this Official Statement as APPENDIX A.
In addition to the Net Special Tax Revenues, any other amounts held by the Trustee in the Special Tax Fund, the Bond Fund and the Reserve Fund are pledged pursuant to the Indenture to secure the payment of the principal of, premium, if any, and interest on the Series 2023 Bonds and any Additional Bonds in accordance with their respective terms, the Indenture and the Act. However, those amounts are pledged subject to the provisions of the Indenture permitting the application thereof for the purposes set forth in the Indenture.
Amounts on deposit in the Improvement Fund, the Costs of Issuance Fund, the Redemption Fund, the Administrative Expense Fund and the Rebate Fund ar e not pledged to the payment of any of the Series 2023 Bonds or any Additional Bonds.
NEITHER THE FAITH AND CREDIT NOR THE TAXING POWER OF THE DISTRICT (EXCEPT TO THE LIMITED EXTENT SET FORTH IN THE INDENTURE), THE CITY OR THE
STATE, OR ANY POLITICAL SUBDI VISION THEREOF, IS PLEDGED TO THE PAYMENT OF THE SERIES 2023 BONDS . EXCEPT FOR THE NET SPECIAL TAX REVENUES, NO OTHER TAXES ARE PLEDGED TO THE PAYMENT OF THE SERIES 2023 BONDS . THE SERIES 2023
BONDS ARE NOT GENERAL OR SPECIAL OBLIGATIONS OF THE CITY BUT ARE SPECIAL,
LIMITED OBLIGATIONS OF THE DISTRICT PAYABLE SOLELY FROM NET SPECIAL TAX
REVENUES AND THE OTHER ASSETS PLEDGED THEREFOR UNDER THE INDENTURE AS MORE FULLY DESCRIBED HEREIN.
Special Tax
Pursuant to the Act, on November 16, 2021 the City Council adopted the necessary resolutions stating its intent to establish the District, to authorize the levy of the special tax on taxable property within the boundaries of the District based on a rate and method of apportionment, and to have the District incur bo nded indebtedness. On December 21, 2021 , at an election held pursuant to the Act, the Master Developer , 610
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Woodside, Arroyo, Lennar Homes and New Home Company, the qualified voters within the District at the time of the election, authorized the District to i ncur bonded indebtedness in the aggregate principal amount of not to exceed $75,000,000 and approved the Rate and Method.
Pursuant to Section C of the Rate and Method, prior to the issuance of the Series 2023 Bonds, the City is required to determine if the Assigned Special Tax A (as defined in the Rate and Method) is required to be reduced to the extent necessary to cause the total effective tax burden for residential property to not exceed
1.95% of the minimum sales prices for Tax Zones 1 and 2 and, for Ta x Zone 3, to not exceed 2.34% of the minimum sales price for Single Family Detached Property and 2.6 4% of the minimum sales price for Single Family Attached Property (as such terms are defined in the Rate and Method), in each case as set forth in the applicable Updated Price Point Study, all as further described in Section C of the Rate and Method. Copies of the Updated Price Point Stud ies are included as APPENDIX C to this Official Statement. Based on the conclusions of the Updated Price Point Stud ies, the City will amend the Rate and Method in connection with the issuance of the Series 2023 Bonds to reduce the Assigned Special Tax A within certain of the Tax Zones .
See “— Rate and Method of Apportionment” below. The Fiscal Year 2024-25 Special Tax rates shown in this Official Statement reflect such reductions.
Pursuant to the Indenture, the District has covenanted that it will fix and lev y the Special Tax in each Fiscal Year in accordance with the Rate and Method in an amount sufficient (subject to t he limitations contained in the Rate and Method as to the maximum Special Tax that may be levied on each parcel) to yield Special Tax Revenues in the amount required for (i) the payment of principal of and interest on any Outstanding Bonds becoming due and payable during the Corresponding Bond Year, (ii) any necessary replenishment of the Reserve Fund, and (iii) the payment of Administrative Expenses estimated to be paid from such Special Tax Revenues, taking into account the balances in the Funds and Accounts established under the Indenture. See APPENDIX F — “SUMMARY OF CERTAIN PROVISIONS OF THE INDENTURE — Certain Covenants Under the Indenture.” Notwithstanding this covenant, the amount of Special Tax actually collected each year may be less than the amo unt described for a variety of different reasons. See “SPECIAL RISK FACTORS — Levy of the Special Tax.” The Series 2023 Bonds have been structured so that Assigned Special Tax A rates set forth in the Rate and Method that may be levied within the District , based on the 482 parcels of Developed Property shown in the projected Fiscal Year 2024-25 Special Tax levy, are at least 110% of debt service on the Series 2023 Bonds in each Bond Year, net of estimated Administrative Expenses . The Special Tax levied in any fiscal year may not exceed the maximum rates authorized pursuant to the Rate and Method . See APPENDIX A ⎯ “RATE AND METHOD OF APPORTIONMENT OF SPECIAL TAX .” There is no assurance that the Net Special Tax Revenues will, in all circumstances, be adequ ate to pay the principal of and interest on the Series 2023 Bonds when due. Pursuant to the Act, the Special Tax levied in any fiscal year against any parcel of residential property in the District may not be increased as a consequence of delinquency or d efault by the owners of any other parcels within the District by more than 10% above the amount that would have been levied in that fiscal year had there never been any such delinquencies or default. See “SPECIAL RISK FACTORS ⎯ Levy of the Special Tax” and “SPECIAL RISK FACTORS ⎯ Exempt Properties.” Rate and Method of Apportionment
General. The Rate and Method is to be applied by the District each Fiscal Year for the purpose of determining the amount of the Special Tax A to be levied against each Assessor ’s Parcel of Taxable Property within the District. For purposes of the discussion of the Rate and Method only, terms with initial capital letters that are not otherwise defined in this Official Statement shall have the respective meanings assigned to them in the Rate and Method, a copy of which appears in APPENDIX A.
Under the terms of the Indenture, prior t o August 1 of each year, the District will ascertain from the County Assessor the relevant parcels on which the Special Tax is to be levied, taking into account any parcel splits during the preceding and then current year. The District will levy the Speci al Tax by August 10 of each 611
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Fiscal Year that the Series 2023 Bonds are Outstanding, or otherwise such that the computation of the levy is complete before the final date on which the auditor of the County (the “Auditor”) will accept the transmission of the Special Tax amounts for the parcels within the District for inclusion on the next real property tax roll.
Upon the completion of the computation of the amounts of the levy, the District will prepare, or cause to be prepared, and shall transmit to the Auditor, such data as the Auditor requires to include the levy of the Special Tax on the next real property tax roll.
The Special Tax levied in any Fiscal Year may not exceed the maximum rates authorized pursuant to the Rate and Method. See APPENDIX A — “RATE AND METHOD OF APPORTIONMENT OF SPECIAL TAX” hereto. There is no assurance that the proceeds of the Special Tax w ill, in all circumstances, be adequate to pay the principal of and interest on the Series 2023 Bonds when due. See “SPECIAL RISK FACTORS — Levy of the Special Tax” herein.
Rate and Method of Apportionment of Special Tax . The District is legally authorize d and has covenanted to cause the levy of the Special Tax in an amount determined according to a methodology, i.e., the Rate and Method , which the City Council and the qualified elector within the District have approved. The Rate and Method apportions the total amount of the Special Tax to be collected among the Taxable Property in the District as more particularly described below.
The following is a synopsis of the provisions of the Rate and Method , which should be read in conjunction with the complete text of the Rate and Method which is attached as APPENDIX A — “RATE AND METHOD OF APPORTIONMENT OF SPECIAL TAX .” The meanings of the capitalized but undefined terms used in this section are as set forth in APPENDIX A — “RATE AND METHOD OF APPORTIONMENT OF SPECIAL TAX ” hereto. This section provides only a summary of the Rate and Method, and is qualified by more complete and detailed information contained in the Rate and Method attached as APPENDIX A.
“CFD Administrator” means an official of the City respon sible for determining the Special Tax A Requirement and the Special Tax B Requirement, providing for the levy and collection of the Special Tax, and performing other duties provided for in the Rate and Method. “Developed Property” means, for each Fiscal Ye ar, all Taxable Property, exclusive of Final Mapped Property, Taxable Property Owner Association Property, and Taxable Public Property, for which a building permit or other applicable permit for new construction was issued after January 1, 20 21, and before May 1 of the prior Fiscal Year.
“Final Mapped Property” means, for each Fiscal Year, all Taxable Property, exclusive of Developed Property, Taxable Property Owner Association Property, and Taxable Public Property, which as of January 1 of the previous Fis cal Year was located within a Final Subdivision Map. The term Final Mapped Property shall include any parcel map or Final Subdivision Map, or portion thereof, that creates individual lots for which a building permit may be issued, including Parcels that a re designated as a remainder Parcel (i.e., one where the size, location, etc., precludes any further subdivision or taxable use). “Lower Income Household Welfare Exemption Property ” means, for each Fiscal Year, an Assessor’s Parcel within the boundaries of the District that is subject to a welfare exemption under subdivision (g) of Section 214 of the California Revenue and Taxation Code (or any successor statute), as indicated in the most recent County assessor’s roll finalized prior to such Fiscal Year. “Residential Floor Area ” means all of the Square Footage of living area within the perimeter of a Unit, not including any carport, walkway, garage, overhang, patio, enclosed patio, or similar area. The determination of Residential Floor Area shall be as set forth in the building permit(s) issued for such Assessor’s Parcel, or as set forth in other official records maintained by the City’s Building Department or other appropriate means selected by the District. The actual Square Footage shall be rounded up to the next 612
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whole square foot. Once such determination has been made for an Assessor’s Parcel, it shall remain fixed in all future Fiscal Years unless an appeal pursuant to Section F of the Rate and Method is approved that results in a change in the actual Square Footage.
“Special Taxes” means, collectively, Special Tax A and Special Tax B. “Special Tax A” means the special tax authorized by the qualified electors of the District to be levied within the boundaries of the District to pay for Facilities and Services. “Special Tax A Requirement” means, for any Fiscal Year that amount required, after taking into account available amounts held in the funds and accounts established under the Indenture, for the District to:
(i) pay debt service on all Outstanding Bonds which is due in the calendar year that commences in such Fiscal Year; (ii) pay periodic costs on the Bonds, including, but not limited to, credit enhancement and rebate payments on the Bonds; (iii) pay a pro rata share of Administrative Expenses; (iv) provide any amounts required to establish or replenish any reserve fund for the Bonds; (v) pay directly for acquisition or construction of Facilities, or the cost of Services, to the extent that the inclusion of such amounts does not increase the Special Tax levy on Final Mapped Property or Undeveloped Property; (vi) provide an amount equal to Special Tax delinquencies based on the historical delinquency rate for the Special Tax A as determined by the CFD Administrator.
“Special Tax B” means the special tax authorized by the qualified electors of the District to be levied within the boundaries of the District to pay for Services. “Special Tax B Requirement” means, for any Fiscal Year that amount required, after taking into account available amounts held in the funds and accounts established to pay for Services , to pay the costs of Services, a pro rata share of Administrative Expenses, and an amount equal to Special B delinquencies based on the historical delinquency rate for Special Tax B as determined by the CFD Administrator. “Taxable Property” means, for each Fiscal Year, all of the Assessor’s Parcels within the boundaries of the District which are not exempt from the Special Tax pursuant to law or described below under the subheading “— Exempt Property.”
“Taxable Property Owner Association Property ” means, for each Fiscal Year, all Assessor’s Parcels of Property Owner Association Property that are not exempt from the Special Tax pursuant to Section E of the Rate and Method.
“Taxable Public Property” means, for each Fiscal Year, all Assessor’s Parcels of Public Property that are not exempt from the Special Tax pursuant to Section E of the Rate and Method. “Tax Zone” means a mutually exclusive geographic area, within which particular Special Taxes may be levied pursuant to the Rate and Method. Attachment 1 to the Rate and Method identifies the three Tax Zones in the District.
“Undeveloped Property ” means, for each Fi scal Year, all Taxable Property not classified as Developed Property, Final Mapped Property, Taxable Public Property, or Taxable Property Owner Association Property.
Exempt Property. In Tax Zone 1, n o Special Tax will be levied on up to 3.18 Acres of Property Owner Association Property. In Tax Zone 2, no Special Tax will be levied on up to 19.08 Acres of Public Property and up to 1.32 Acres of Property Owner Association Property. In Tax Zone 3, no Special Tax shall be levied on up to 0.52 Acres of Public Property and up to 3.20 acres of Property Owner Association Property.
Tax-exempt status in each Tax Zone will be assigned by the CFD Administrator in the chronological order in which property becomes Public Property or Property Owner Association Property . Property Owner 613
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Association Property or Public Property that is not exempt from the Special Tax A under Section E of the Rate and Method, will be subject to the levy of Special Tax A and will be taxed Proportionately as part of the fifth or sixth step, respectively, in Section D of the Rate and Method and described under the caption “—Method of Apportionment of Special Tax ” below, up to 100% of the applicable Maximum Special Tax A for Taxable Property Owner Association Property and Taxable Public Property . No Special Tax A will be levied in any Fiscal Year on Assessor’s Parcels that have fully prepaid the Special Tax A obligation pursuant to the formula set forth in Section H of the Rate and Method.
Under the Rate and Method, no Special Tax shall be levi ed on Lower Income Household Welfare Exemption Property; provided, however, that if, in any Fiscal Year, applicable law does not require that Lower Income Household Welfare Exemption Property be exempt from some portion, or all, of the Special Tax, such portion, or all, of the Special Tax shall be levied on such property in accordance with the Rate and Method based on the Land Use Class to which the Assessor’s Parcel is assigned. Senate Bill 1473, the “Local Government Omnibus Act of 2020,” amended Governm ent Code Section 53340(c) to provide that in a community facilities district in which the levy of a special tax is authorized by an ordinance adopted on or after January 1, 2020, a property receiving a welfare exemption under subdivision (g) of Section 214 of the California Revenue and Taxation Code shall be exempt from the special tax unless debt is outstanding and the property was subject to the special tax prior to receiving the exemption, in which case the property shall remain subject to the special ta x and the special tax shall be enforceable against the property. Therefore, pursuant to the Rate and Method and California law, and given that no property is subject to the welfare exemption as of the date hereof, the Special Tax shall be applicable to Lo wer Income Household Welfare Exemption Property so long as the Bonds are outstanding.
Maximum Special Tax, Assigned Special Tax and Backup Special Tax . The Maximum Special Tax A, Assigned Special Tax A and Backup Special Tax A for the Special Tax A provided for in the Rate and Method is as follows:
Special Tax A.
Developed Property. The Maximum Special Tax A that may be levied in any Fiscal Year for each Assessor’s Parcel classified as Developed Property will be the greater of (i) the amount derived by application of the Assigned Special Tax A or (ii) the amount derived by application of the Backup Special Tax A.
Assigned Special Tax . Pursuant to the Rate and Method of Apportionment, the Assigned Annual Special Tax A for Developed Property in the District will be calculated using the rates shown in Table 1 below. As described above under the captions “INTRODUCTION —Price Point Studies” and “ —Special Tax,” certain of the rates set for in the Rate and Method will be reduced in connection with the issuance of the Series 2023 Bonds based on the Updated Price Point Studies and pursuant to Section C of the Rate and Method. Table 1 below reflects such reduced rates.
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TABLE 1
CITY OF ONTARIO
COMMUNITY FACILITIES DISTRICT NO. 56
(PARKSIDE/LA AVENIDA)
ASSIGNED SPECIAL TAX A RATES
DEVELOPED PROPERTY(1)
Residential Floor Area (Sq. Ft.) Assigned Special Tax A(2)* Tax Zone 1
Single Family Property
<1,801 $ 2,758 per Unit
1,801-1,900 2,845 per Unit
1,901-2,000 2,868 per Unit
2,001-2,100 2,935 per Unit
2,101-2,200 3,066 per Unit
2,201-2,300 3,102 per Unit
2,301-2,400 3,169 per Unit
2,401-2,500 3,255 per Unit
>2,500 3,349 per Unit
Other Residential Property 48,482 per Acre
Non-Residential Property 48,482 per Acre
Tax Zone 2
Single Family Property
<901 $ 2,184 per Unit
901-1,000 2,371 per Unit
1,001-1,100 2,542 per Unit
1,101-1,200 2,693 per Unit
1,201-1,300 2,924 per Unit
1,301-1,400 3,175 per Unit
1,401-1,500 3,283 per Unit
1,501-1,600 3,340 per Unit
1,601-1,700 3,436 per Unit
1,701-1,800 3,561 per Unit
1,801-1,900 3,778 per Unit
1,901-2,000 4,055 per Unit
>2,000 4,192 per Unit
Other Residential Property 76,571 per Acre
Non-Residential Property 76,571 per Acre
Tax Zone 3
Single Family Detached Property
<1,101 $ 2,508 per Unit
1,101-1,300 2,694 per Unit
1,301-1,500 3,301 per Unit
1,501-1,700 3,306 per Unit
1,701-1,900 3,620 per Unit
1,900-2,100 4,013 per Unit
>2,100 4,357 per Unit
Single Family Attached Property
<1,301 $ 2,716 per Unit
1,301-1,500 2,880 per Unit
1,501-1,700 3,452 per Unit
1,701-1,900 3,554 per Unit
>1,900 3,885 per Unit
Other Residential Property 125,970 per Acre
Non-Residential Property 125,970 per Acre
* Preliminary; subject to change.
(1) Reflects the reduced Assigned Special Tax A rates calculated pursuant to Section C.1 of the Rate and Method. (2) Pursuant to the Rate and Method, the Maximum Special Tax A that may be levied in any fiscal year for each parcel of Developed Property shall be the greater of the Assigned Special Tax A or the Backup Special Tax A.
Source: Goodwin Consulting Group, Inc.
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Backup Special Tax A. The Backup Special Tax for an Assessor’s Parcel of Developed Property is $3,009* per Unit for Single Family Property in Tax Zone 1, $3,171* in Tax Zone 2 and $3,478* in Tax Zone 3, although subject to adjustment as set forth in Section C.1.a.(3) of the Rate and Method.
Final Mapped Property, Taxable Public Property, Taxable Property Owner Association Property and Undeveloped Property . The Maximum Special Tax for Final Mapped Property, Taxable Public Property, Taxable Property Owner Association Property, and Undeveloped Property is $48,482* per Acre in Tax Zone 1, $76,571* per Acre in Tax Zone 2 and $125,970* in Tax Zone 3, and is not subject to increase or reduction and, therefore, will remain the same in every Fiscal Year.
Method of Apportionment of Special Tax. Each Fiscal Year, beginning with Fiscal Year 2022-23, the CFD Administrator will determine the Special Tax A Requirement and, subject to the Maximum Special Tax A rates described above, the Special Tax will then be levied as follows:
First: If needed to satisfy the Special Tax A Requirement, the Special Tax A shall be levied Proportionately on each Assessor’s Parcel of Developed Property up to 100% of the applicable Assigned Special Tax A;
Second: If additional monies a re needed to satisfy the Special Tax A Requirement after the first step has been completed, then the Special Tax A shall be levied Proportionately on each Assessor’s Parcel of Final Mapped Property up to 100% of the Maximum Special Tax A for Final Mapped Property; Third: If additional monies are needed to satisfy the Special Tax A Requirement after the first two steps have been completed, then the Special Tax A shall be levied Proportionately on each Assessor’s Parcel of Undeveloped Property up to 100% of the Maximum Special Tax A for Undeveloped Property; Fourth: If additional monies are needed to satisfy the Special Tax A Requirement after the first three steps have been completed, then the levy of the Special Tax A on each Assessor’s Parcel of Developed Property whose Maximum Special Tax A is determined through the application of the Backup Special Tax shall be increased Proportionately from the Assigned Special Tax A up to the Maximum Special Tax A for each such Assessor’s Parcel;
Fifth: If additional monies are needed to satisfy the Special Tax A Requirement after the first four steps have been completed, then the Special Tax shall be levied Proportionately on each Assessor’s Parcel of Taxable Property Owner Association Property up to the Maximum Special Tax A for Taxable Property Owner Association Property; and
Sixth: If additional monies are needed to satisfy the Special Tax A Requirement after the first five steps have been completed, then the Special Tax A shall be levied Proportionately on each Assessor’s Parcel of Taxable Public Property up to the Maximum Special Tax A for Taxable Public Property.
Notwithstanding the above, under no circumstances shall the Special Tax A levied in any Fiscal Year on any Assessor’s Parcel of Single Family Property or Other Residential Property for which an occupancy permit for private residential use has been issued be increased as a result of delinquency or default by the owner or owners of any other Assessor’s Parcel or Assessor’s Parcels within th e District by more than ten percent above the amount that would have been levied in that Fiscal Year had there never been any such delinquencies or defaults.
Under the Indenture, neither the portion of the Special Tax A levied under the Rate and Method to pay for Services (as defined in the Rate and Method ) nor Special Tax B levied under the Rate and Method are pledged to the payment of the Series 2023 Bonds or any Additional Bonds. Accordingly, as used in this
* Preliminary, subject to change.
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Official Statement, including the description of the apportionment of the Special Tax A, the term “Special Tax Revenues” means the proceeds of the Special Tax received by or on behalf of the District, other than proceeds of the Special Tax levied to pay the costs of Services received by or on behalf of the District, including any prepayments thereof, interest and penalties thereon and proceeds of the redemption or sale of property sold as a result of foreclosure of the lien of the Special Tax, which will be limited to the amount of said lien and interest and penalties thereon.
Prepayment of Special Tax . The Special Tax A obligation for an Assessor’s Parcel of Taxable Property for which a building permit has been issued, may be prepaid in full, or in part, and only if there are no delinquent Special Ta x with respect to such Assessor’s Parcel at the time of prepayment, provided that the terms set forth under Section H of the Rate and Method are satisfied. The Prepayment Amount is calculated based on the Bond Redemption Amount plus Redemption Premium plus the Future Facilities Amount plus the Defeasance Amount plus the Administrative Fees and Expenses, less a credit for the resulting reduction in the Reserve Requirement for the Bonds (if any), all as specified in APPENDIX A — “RATE AND METHOD OF APPORTIONMENT OF SPECIAL TAX — Section H.”
Mandatory redemption of Series 2023 Bonds from Special Tax prepayments may result in the reduction in the otherwise expected yield on such Series 2023 Bonds if the Series 2023 Bonds were purchased at a price greater than p ar. See “SPECIAL RISK FACTORS — Potential Early Redemption of Bonds from Special Tax Prepayments.”
Estimated Debt Service Coverage . The principal amount of the Series 2023 Bonds has been established to produce debt service coverage on the Series 2023 Bonds from Net Special Tax Revenues from the 482 parcels expected to be classified as Developed Property for purposes of the Fiscal Year 2024 -25 Special Tax levy of at least 110%. The District may levy up to the Maximum Special Tax rates on Taxable Property within the District. See “— Rate and Method of Apportionment — Maximum Special Tax, Assigned Special Tax and Backup Special Tax” and “— Rate and Method of Apportionment — Exempt Property.” Pursuant to the Rate and Method, the status of Developed Property is based on building permits issued as of May 1 of the Fiscal Year preceding the Fiscal Year for which the Special Tax is levied. Based on the development status within the District as of May 1, 2023, 386 parcels of Taxable Property were classified as Developed Property for Fiscal Year 202 3-24. Between May 1, 2023 and August 7, 2023 , the remaining building permits were issued for all 482 residential units under active construction within the District.
Accordingly, 482 p arcels of Taxable Property will be classified as Developed Property for purposes of the projected Fiscal Year 2024 -25 Special Tax levy . See “PROPERTY OWNERSHIP AND THE DEVELOPMENT” and “SPECIAL RISK FACTORS — Failure to Develop Properties.” In Fiscal Year 2022-23, the first year Special Tax was levied in the District, Special Tax in the amount of $ 651,782 was levied on 210 units classified as Developed Property. As of May 1, 2023, 386 building permits had been issued for units within the District . Accord ingly, Special Tax in the amount of $1,213,550 was levied on 386 parcels within the District classified as Developed Property for Fiscal Year 202 3-24. See “THE COMMUNITY FACILITIES DISTRICT — Delinquency History.” The following Table 2 sets forth the proj ected Special Tax levy for Fiscal Year 2024-25 by property classification as of August 7, 2023 and as expected at build out. 617
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TABLE 2
CITY OF ONTARIO
COMMUNITY FACILITIES DISTRICT NO. 56
(PARKSIDE/LA AVENIDA)
SUMMARY OF PROJECTED FISCAL YEAR 2024-25
SPECIAL TAX A LEVY AND EXPECTED LAND USES
Projected Fiscal Year 2024-25 Special Tax A Levy(1) Buildout of Expected Land Uses(1) Special Tax Category
Residential
Floor Area
(Sq. Ft.)
No. of
Units or
Acres
Special
Tax A
Rate(2)*
Per Unit
or Acre
Annual
Special
Tax A
Revenues*
No. of
Units or
Acres(3)
Maximum
or
Assigned
Special
Tax A(2)(4)*
Per Unit
or Acre
Annual
Special
Tax A
Revenues(5)*
Developed Property(6)
Tax Zone 1 Units Units
Single Family Property <1,801 0 $ 2,517 per Unit $ 0 0 $ 2,758 per Unit $ 0 1,801-1,900 0 2,596 per Unit 0 0 2,845 per Unit 0
1,901-2,000 33 2,617 per Unit 86,373 33 2,868 per Unit 94,644 2,001-2,100 30 2,679 per Unit 80,355 30 2,935 per Unit 88,050 2,101-2,200 0 2,798 per Unit 0 0 3,066 per Unit 0
2,201-2,300 0 2,831 per Unit 0 0 3,102 per Unit 0
2,301-2,400 43 2,892 per Unit 124,359 43 3,169 per Unit 136,267 2,401-2,500 0 2,971 per Unit 0 0 3,255 per Unit 0
>2,500 0 3,056 per Unit 0 0 3,349 per Unit 0
Tax Zone 2
Single Family Property <901 0 $ 1,993 per Unit $ 0 0 $ 2,184 per Unit $ 0 901-1,000 0 2,164 per Unit 0 0 2,371 per Unit 0
1,001-1,100 50 2,320 per Unit 115,993 50 2,542 per Unit 127,100 1,101-1,200 30 2,458 per Unit 73,730 30 2,693 per Unit 80,790 1,201-1,300 0 2,668 per Unit 0 0 2,924 per Unit 0
1,301-1,400 42 2,898 per Unit 121,697 42 3,175 per Unit 133,350 1,401-1,500 28 2,996 per Unit 83,891 28 3,283 per Unit 91,924 1,501-1,600 61 3,048 per Unit 185,935 61 3,340 per Unit 203,740 1,601-1,700 53 3,136 per Unit 166,194 53 3,436 per Unit 181,108 1,701-1,800 26 3,250 per Unit 84,495 26 3,561 per Unit 92,586 1,801-1,900 13 3,448 per Unit 44,822 13 3,778 per Unit 49,114 1,901-2,000 0 3,701 per Unit 0 0 4,055 per Unit 0
>2,000 0 3,826 per Unit 0 0 4,192 per Unit 0
Tax Zone 3
Single Family Detached Property <1,101 0 $ 2,289 per Unit $ 0 0 $ 2,508 per Unit $ 0 1,101-1,300 0 2,459 per Unit 0 0 2,694 per Unit 0
1,301-1,500 20 3,013 per Unit 60,251 20 3,301 per Unit 66,020 1,501-1,700 3 3,017 per Unit 9,051 3 3,306 per Unit 9,918 1,701-1,900 32 3,304 per Unit 105,717 32 3,620 per Unit 115,840 1,900-2,100 0 3,662 per Unit 0 0 4,013 per Unit 0
>2,100 0 3,976 per Unit 0 0 4,357 per Unit 0
Single Family Attached Property <1,301 0 $ 2,479 per Unit $ 0 0 $ 2,716 per Unit $ 0 1,301-1,500 0 2,628 per Unit 0 0 2,880 per Unit 0
1,501-1,700 18 3,150 per Unit 56,706 18 3,452 per Unit 62,136 1,701-1,900 0 3,243 per Unit 0 0 3,554 per Unit 0
>1,900 0 3,546 per Unit 0 0 3,885 per Unit 0 Subtotal - Developed Property 482 $ 1,399,569 482 $ 1,533,587
Final Mapped Property(7) Acres Acres
Tax Zone 1 0.00 $ 0 per Acre $ 0 0.00 $ 48,482 per Acre $ 0 Tax Zone 2 0.00 0 per Acre 0 0.00 76,571 per Acre 0
Tax Zone 3 0.00 0 per Acre 0 0.00 125,970 per Acre 0
Undeveloped Property(8)
Tax Zone 1 0.00 $ 0 per Acre $ 0 0.00 $ 48,482 per Acre $ 0 Tax Zone 2 14.60 0 per Acre 0 0.00 76,571 per Acre 0
Tax Zone 3 0.00 0 per Acre 0 0.00 125,970 per Acre 0
Grand Total $ 1,399,569 $ 1,533,587
* Preliminary; subject to change.
(1) Based on the building permits issued as of August 7, 2023 and assumes no further development, including any development of the Vacant Parcel . Includes the debt service due in 2025 on the Series 2023 Bonds, and estimated Administrative Expenses in the amount of $89,244. (2) Reflects the reduced Assigned Special Tax A rates calculated pursuant to Section C.1 of the Rate and Method. (3) Expected land uses are subject to change as development occurs. Does not include projected units or Special Tax A revenues from Lot 1 of Tract 20316 , which is the Vacant Parcel.
(4) For Developed Property, the Assigned Special Tax A rates are shown. For Final Mapped Property, the Maximum Special Tax A rate is shown. (5) Does not include potential revenues from a Backup Special Tax A Levy on Developed Property. (6) For the projected Fiscal Year 2024-25 Special Tax A levy, includes all taxable parcels which have had a building permit issued by the City prior to August 7, 2023 and assumes no further development.
(7) For the projected Fiscal Year 2024-25 Special Tax A levy, includes all taxable parcels which were located within a final subdivision map as of August 7, 2023 and assumes no new final maps will be recorded.
(8) For the projected Fiscal Year 2024-25 Special Tax A levy, no Special Tax is anticipated to be levied on Taxable Public Property, Taxable Property Owner Association Property, or Undeveloped Property.
Sources: City of Ontario; Goodwin Consulting Group, Inc. 618
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Collection and Application of the Special Tax
The Special Tax is levied and collected by the Treasurer -Tax Collector o f the County in the same manner and at the same time as ad valorem property taxes; provided, however, that the District may directly bill the Special Tax, may collect the Special Tax at a different time or in a different manner if necessary to meet its fin ancial obligations, and may covenant to foreclose and may actually foreclose on delinquent Assessor’s Parcels as permitted by the Act.
The District has made certain covenants in the Indenture for the purpose of ensuring that the current maximum rates and method of collection of the Special Tax are not altered in a manner that would impair the District’s ability to collect sufficient Special Tax to pay debt service on the Bonds and Administrative Expenses when due. First, the District has covenanted that it will not initiate proceedings under the Act to modify the Rate and Method if such modification would adversely affect the security for the Bonds and if an initiative is adopted that purports to modify the Rate and Method in a manner that would adversely a ffect the security for the Bonds, the District shall, to the extent permitted by law, commence and pursue reasonable legal actions to prevent the modification of the Rate and Method in a manner that would adversely affect the security for the Bonds. See “ SPECIAL RISK FACTORS — Constitutional Limitations on Taxation and Appropriations.” Second, the District has covenanted not to authorize owners of taxable parcels within the District to satisfy Special Tax obligations by the tender of Bonds unless the Dist rict shall have first obtained a report of an Independent Consultant certifying that doing so would not result in the District having insufficient Special Tax Revenues to pay the principal of and interest on all Outstanding Bonds when due.
Although the Spe cial Tax constitute s a lien on Taxable Property within the District, it does not constitute a personal indebtedness of the owners of such property within the District. Moreover, other overlapping general obligation debt already exists on the property loca ted within the District and other future special tax and assessment liens and overlapping general obligation debt could come into existence in the future in certain situations without the consent or knowledge of the City or the landowners therein. See “SPECIAL RISK FACTORS — Parity Taxes and Special Assessments” herein. There is no assurance that property owners will be financially able to pay the annual Special Tax or that they will pay such taxes even if financially able to do so, all as more fully desc ribed in the section of this Official Statement entitled “SPECIAL RISK FACTORS.”
Under the terms of the Indenture, the Trustee shall establish and maintain a separate fund designated the “Special Tax Fund.” As soon as practicable after the receipt by the District of any Special Tax Revenues, but in any event no later than the date ten Business Days after such receipt, the District shall transfer such Special Tax Revenues to the Trustee for deposit in the Special Tax Fund; provided, however, that any portio n of any such Special Tax Revenues that represent a Special Tax prepayment that is to be applied to the payment of the redemption price of Bonds in accordance with the provisions of the Indenture shall be identified to the Trustee as such by the District a nd shall be deposited in the Redemption Fund. See “ — Special Tax Fund” below, “THE SERIES 2023 BONDS — Redemption — Mandatory Redemption from Special Tax Prepayments” and APPENDIX F — “SUMMARY OF CERTAIN PROVISIONS OF THE INDENTURE.” Covenant for Superior Court Foreclosure
Pursuant to Section 53356.1 of the Act, the District has covenanted in the Indenture that it will determine or cause to be determined, no later than August 15 of each year, whether or not any owners of property within the District are de linquent in the payment of the Special Tax levied thereon and that, if such delinquencies exist, the District will order and cause to be commenced no later than October 1, and thereafter diligently prosecute, an action in the superior court to foreclose th e lien of the Special Tax or installment thereof not paid when due. Notwithstanding the foregoing, the District is not required under the Indenture to order the commencement of foreclosure proceedings if (a) the total Special Tax delinquency in the District for such Fiscal Year is less than 5% of the total amount of the Special Tax levied in such Fiscal Year, and (b) the amount then on deposit in the Reserve Fund is equal to the Reserve Requirement. Notwithstanding the 619
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foregoing, if the District determines that any single parcel is delinquent in excess of $7,500 in the payment of the Special Tax, then the District will diligently institute, prosecute and pursue foreclosure proceedings against such parcel.
The mere commencement of foreclosure proceedings wi ll not assure a prompt and favorable resolution of Special Tax delinquencies. The ability of the District to foreclose the lien of delinquent unpaid Special Tax may be limited. See “SPECIAL RISK FACTORS — Bankruptcy and Legal Delays” and “— FDIC/Federal Government Interests in Properties.” Moreover, even if a judgment of foreclosure and order of sale is obtained, the District must cause a notice of levy to be issued. Under current law, the property owner has 120 days from the date of service of the noti ce of levy in which to redeem the subject property. If the property owner fails to redeem the property and it is sold, the property owner’s only remedy is an action to set aside the sale, which action must be brought within 90 days of the date of sale. I f such an action results in the setting aside of the foreclosure sale, the judgment is revived, and the District would be entitled to receive interest on the revived judgment as if the sale had not been made. Under former law a property owner had a period of one year within which to redeem property to be sold, and the constitutionality of the legislation that eliminated the one year redemption period has not been tested.
There can be no assurance that, even if the subject property is sold, the proceeds fro m such sale will be sufficient to pay the delinquent installments of the Special Tax. The Act does not require the District or any other governmental agency to purchase or otherwise acquire any Assessor’s Parcel being sold if there is no other purchaser at such sale. The Act does require that property being sold pursuant to foreclosure under the Act must be sold for not less than the judgment amount (which must include reasonable attorneys’ fees, together with interest, penalties, and other authorized cha rges and costs) plus post judgment interest and authorized costs, unless a lower bid price is authorized by the Owners of not less than 75% by value of the Series 2023 Bonds Outstanding.
Special Tax Fund
The Indenture provides that the Trustee will establi sh and maintain a separate fund designated the “Special Tax Fund.” The Indenture requires that the District transfer Special Tax Revenues (other than Special Tax prepayments ) to the Trustee for deposit into the Special Tax Fund as soon as practicable afte r the District’s receipt thereof, but in any event no later than ten Business Days after such receipt. No later than the Business Day immediately preceding each Interest Payment Date, after having made any requested transfers to the Administrative Expense Fund, as requested by the District, to have sufficient amounts available therein to pay Administrative Expenses, the Trustee is required by the Indenture to make transfers from the Special Tax Fund to the Interest Account in the Bond Fund, the Principal A ccount in the Bond Fund and the Reserve Fund in the amounts and in the priority specified in the Indenture. See APPENDIX F — “SUMMARY OF CERTAIN PROVISIONS OF THE INDENTURE.”
As soon as practicable after the District’s receipt of Special Tax prepayments, but in any event no later than ten Business Days after such receipt, the District is required to transfer any Special Tax prepayments to the Trustee and, in connection therewith, submit to the Trustee a Written Certificate identifying such amounts as Special Tax prepayments, identifying the portion of such Special Tax prepayments so transferred that is to be applied to the Redemption Price of the Bonds and identifying the portion of such Special Tax prepayments that is to be applied to the payment of i nterest on the Bonds to be so redeemed. The portion of such Special Tax prepayments that is to be applied to the Redemption Price will be deposited by the Trustee in the Redemption Fund and will be applied to the redemption of the Bonds pursuant to the Indenture. The portion of such Special Tax prepayments that is to be applied to the payment of interest on the Bonds to be so redeemed will be deposited by the Trustee in the Interest Account and will be applied to the payment of such interest. 620
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Reserve Fund
The Indenture provides that the Trustee will establish and maintain a special fund designated the “Reserve Fund.” On the Closing Date, the Trustee will deposit in the Reserve Fund the amount specified under the caption “ESTIMATED SOURCES AND USES OF FUNDS.” The Trustee is also required, no later than the Business Day immediately preceding each Interest Payment Date, to transfer from the Special Tax Fund (after the requisite transfers to the Administrative Expense Fund, the Interest Account and the Princi pal Account) the amount, if any, necessary to cause the amount on deposit in the Reserve Fund to be equal to the Reserve Requirement. The Indenture defines “Reserve Requirement” to mean, as of the date of any calculation, the least of (i) “10% of the proceeds of the issue,” within the meaning of Section 148 of the Code, with respect to the Bonds (excluding from such calculation Bonds refunded with the proceeds of subsequently issued Bonds), (ii) Maximum Annual Debt Service and (iii) 125% of Average Annual Debt Service.
Except as otherwise provided in the Indenture, all amounts in the Reserve Fund are to be used and withdrawn by the Trustee solely for the purpose of (i) making transfers to the Interest Account in accordance with the Indenture in the event of any deficiency in the Interest Account of the amount then required for payment of the interest on the Bonds, (ii) making transfers to the Principal Account in accordance with the Indenture in the event of any deficiency in the Principal Account of the amo unt then required for payment of the principal of the Bonds, and (iii) redeeming Bonds in accordance with the Indenture as described in the following paragraph.
Whenever Bonds are to be optionally redeemed or redeemed from Special Tax prepayments, a proportionate share (determined as provided below) of the amount on deposit in the Reserve Fund will, on the date on which amounts to redeem such Bonds are deposited in the Redemption Fund or otherwise deposited with the Trustee, be transferred by the Trustee fr om the Reserve Fund to the Redemption Fund or to such deposit held by the Trustee and will be applied to the redemption of said Bonds; provided that, such amount will be so transferred only if and to the extent that the amount remaining on deposit in the R eserve Fund will be at least equal to the Reserve Requirement (excluding from the calculation thereof said Bonds to be redeemed). Such proportionate share will be equal to the largest integral multiple of the minimum Authorized Denomination for said Bonds that is not larger than the amount equal to the product of (i) the amount on deposit in the Reserve Fund on the date of such transfer, times (ii) a fraction, the numerator of which is the principal amount of Bonds to be so redeemed and the denominator of which is the principal amount of Bonds to be Outstanding on the day prior to the date on which such Bonds are to be so redeemed.
Whenever the balance in the Reserve Fund exceeds the amount required to redeem or pay the Outstanding Bonds, including interest accrued to the date of payment or redemption and premium, if any, due upon redemption, the Trustee will, upon receipt of a Written Request of the District, transfer the amount in the Reserve Fund to the Interest Account, Principal Account and/or Redemption Fund, as applicable, to be applied, on the next succeeding Interest Payment Date to the payment and redemption of all of the Outstanding Bonds.
If, as a result of the scheduled payment of principal of or interest on the Bonds, the Reserve Requirement is reduced, the Trustee will transfer an amount equal to the amount of such reduction to the Interest Account.
Investment of Moneys
All moneys held by the Trustee in any of the Funds or Accounts established pursuant to the Indenture are required to be invest ed by the Trustee solely in Permitted Investments, as directed in writing by the District. As used in the Indenture, the phrase “Permitted Investments” includes a variety of investments, some of which may not be rated by a national rating service. See AP PENDIX F — “SUMMARY OF CERTAIN PROVISIONS OF THE INDENTURE — Definitions.”
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Additional Bonds
The District may at any time after the issuance and delivery of the Series 2023 Bonds issue Additional Bonds for the purpose of financing additional Facilities in a n aggregate amount not to exceed $55,565,000 * payable from Net Special Tax Revenues on a parity with the Outstanding Series 2023 Bonds. Additional Bonds may also be issued for the purpose of refunding all or a portion of the Series 2023 Bonds or any Additional Bonds then Outstanding, for providing funds to pay costs of issuance incurred in connection with the issuance of such Additional Bonds, and providing funds to make any deposit to the Reserve Fund required under the Indenture in connection with the i ssuance of such Additional Bonds. The issuance of Additional Bonds to fund additional Facilities costs will require an increase in the amount of Special Taxes levied annually, which could result in the need to levy Special Taxes on Final Mapped Property a nd Undeveloped Property and would reduce the coverage ratio between the Maximum Special Taxes that could be levied annually and the annual levy required to pay debt service on the Series 2023 Bonds and any Additional Bonds plus Administrative Expenses. Se e “SECURITY AND SOURCES OF PAYMENT FOR THE BONDS — Special Taxes — Estimated Debt Service Coverage” and “SPECIAL RISK FACTORS — Effect of Additional Bonds on Credit Quality.”
The Indenture provides that Additional Bonds may only be issued subject to certain conditions precedent, including but not limited to the District having received a certificate of one or more Independent Consultants that, when taken together, certify that:
(i) on the basis of the parcels of land and improvements existing in the Dis trict as of the January 1 preceding the proposed issuance of such Additional Bonds, from and after the date of issuance of such Additional Bonds, for each Fiscal Year that Bonds will be Outstanding the amount of the Available Special Tax that may be levied on all Taxable Property in such Fiscal Year is at least equal to 110% of Annual Debt Service for the Corresponding Bond Year on all Outstanding Bonds; provided, however, that there shall be excluded from such calculation any Available Special Tax levied o r that may be levied on any parcel of Taxable Property that, as of the date of such certificate, is in default in the payment of any Special Tax levied thereon;
(ii) the sum of (A) the Assessed Value of parcels of Taxable Property for which a Qualified Appraisal Report has not been provided, plus (B) the Appraised Value of parcels of Taxable Property for which a Qualified Appraisal Report has been provided, as such Appraised Value is shown in such Qualified Appraisal Report, is at least seven times the sum of (I ) the aggregate principal amount of all Bonds that will be Outstanding after the issuance of such Additional Bonds , plus (II) the aggregate principal amount of all fixed lien special assessments levied on parcels of Taxable Property, based upon information from the most recent Fiscal Year for which such information is available, plus (III) the sum of a portion of the aggregate principal amount of Other CFD Bonds, which portion shall be equal to the aggregate principal amount of such Other CFD Bonds multiplied by a fraction, the numerator of which is the amount of special taxes levied for such Other CFD Bonds on parcels of Taxable Property, and the denominator of which is the total amount of special taxes levied for such Other CFD Bonds on all parcels of land (such fraction to be determined based upon the maximum special taxes that could be levied in the year in which maximum annual debt service on such Other CFD Bonds occurs), based upon information from the most recent Fiscal Year for which such information is available; and (iii) the sum of (A) the Assessed Value of parcels of Final Mapped/Undeveloped Property for which a Qualified Appraisal Report has not been provided, plus (B) the Appraised Value of parcels of Final Mapped/Undeveloped Property for which a Qual ified Appraisal Report has
* Preliminary, subject to change.
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been provided, as such Appraised Value is shown in such Qualified Appraisal Report, is at least four times the sum of (I) a portion of the aggregate principal amount of all Bonds that will be Outstanding after the issuance of such Additional Bonds, which portion shall be equal to the aggregate principal amount of such Outstanding Bonds multiplied by a fraction, the numerator of which is the amount of the Special Tax levied for such Outstanding Bonds on parcels of Final Mapped/Unde veloped Property, and the denominator of which is the total amount of the Special Tax levied for such Outstanding Bonds on all parcels of land (such fraction to be determined based upon the Maximum Special Tax that could be levied in the year in which Maxi mum Annual Debt Service on such Outstanding Bonds occurs), plus (II) the aggregate principal amount of all fixed lien special assessments levied on parcels of Final Mapped/Undeveloped Property, based upon information from the most recent Fiscal Year for which such information is available, plus (III) the sum of a portion of the aggregate principal amount of Other CFD Bonds, which portion shall be equal to the aggregate principal amount of such Other CFD Bonds multiplied by a fraction, the numerator of which is the amount of special taxes levied for such Other CFD Bonds on parcels of Final Mapped/Undeveloped Property, and the denominator of which is the total amount of special taxes levied for such Other CFD Bonds on all parcels of land (such fraction to be d etermined based upon the maximum special taxes that could be levied in the year in which maximum annual debt service on such Other CFD Bonds occurs), based upon information from the most recent Fiscal Year for which such information is available.
Notwithstanding the foregoing, the receipt of a certificate described above will not be a condition precedent to the issuance of Additional Bonds if (i) such Additional Bonds are being issued to refund previously issued Bonds, and (ii) the District shall have received a certificate from an Independent Consultant certifying that Annual Debt Service in each Bond Year, calculated for all Bonds that will be Outstanding after the issuance of such Additional Bonds, will be less than or equal to Annual Debt Service in such Bond Year, calculated for all Bonds that are Outstanding immediately prior to the issuance of such Additional Bonds.
For a complete description of all conditions that must be satisfied prior to the issuance of Additional Bonds, see APPENDIX F — “SUMMARY OF CERTAIN PROVISIONS OF THE INDENTURE.”
THE COMMUNITY FACILITIES DISTRICT
General Information Regarding the District
The District was formed to finance certain services, facilities and costs with respect thereto related to the development within the District. The qualified electors within the boundaries of the District, being the then owners of property in the District, authorized the District to incur bonded indebtedness to finance certain facilities to meet the needs of new development within the District and approved the Rate and Method for, and authorized the levy of, the Special Tax.
The District is located in the southwestern portion of the County, in the southern portion of the City within an area known as “Ontario Ranch.” More specifically, the District is generally located north of the San Bernardino/Riverside County line, west of Haven Avenue, east of the Cucamonga Channel, and south of Shaefer Avenue (and south of State Route 60). The development within the District is part of a multiple phase, multiple master-planned community development known as “Ontario Ranch.” Ontario Ranch is planned to contain over 3,500 acres. At full buildout, Ontario Ranch is expected to include approximately 18,000 dwelling units, approximately 2.9 million square feet of industrial space, approximately 1.5 million square feet of commercial and retail space and over 500,000 square feet of business park space. While much of Ontario Ranch is raw vacant land, many planned communities within the east side of Ontario Ranch have been completed or are currently under construction. The City estimates that approximately 4,000 dwelling units have been built within Ontario Ranch to date.
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The District consists of three non -contiguous tract maps, with each tra ct map also comprising a separate tax zone. Tax Zone 1 consists of Tract Map No. 20298, Tax Zone 2 consists of Tract Map No. 20316 and Tax Zone 3 consists of Tract Map No. 20389. The District is currently being developed by three separate Merchant Builders with a total of 482 single -family homes, and also includes the Vacant Parcel within Tax Zone 2 that is owned by the Master Developer . As of August 7, 2023, of the 482 homes under active development across all three communities within the District, 224 had been conveyed to individual homeowners and the Merchant Builders collectively owned (or were responsible for paying the Special Tax for) 15 model homes, 53 homes over 95% complete, 128 homes in various stages of construction and 62 finished lots. A detailed description of the status of the construction as of the date of value of the Appraisal is included in APPENDIX B — “APPRAISAL REPORT.” The Series 2023 Bonds have been structured so that Assigned Special Tax A rates set forth in the Rate and Method that may be levied within the District, based on the 482 parcels of Developed Property (which excludes the Vacant Parcel) shown in the projected Fiscal Year 2024-25 Special Tax levy, are at least 110% of debt service on the Series 2023 Bonds in each Bond Year, net of estimated Administrative Expenses. The District does not currently expect to levy the Special Tax in Fiscal Year 2024-25 against the Vacant Parcel while the Vacant Parcel is still classified as Undeveloped Property.
Tax Zone 1 is being develop ed by Woodside into a neighborhood known as “Cambridge Court.” Cambridge Court is being developed with 106 single -family detached homes arranged in a conventional single-family detached style with some motor courts. As of August 7, 2023 and within Cambr idge Court, 62 single-family homes had been conveyed to individual homeowners and Woodside owned three model homes, 12 homes over 95% complete, 22 homes in various stages of construction and seven finished lots. As of October 1, 2023, _____ single family homes within Cambridge Court had been conveyed to individual homeowners and Woodside owned _____ completed homes, _____ homes in various stages of construction and _____ finished lots. Under the City’s General Plan (Land Use Plan LU-01) land within Tax Zone 1 of the District is designated as “Low Medium Density Residential”, which allows for 5.1 -11.0 dwelling units per acre. As built and proposed, development within Tax Zone 1 of the District legally conforms to these requirements.
A portion of Tax Zone 2 is being developed by New Home Company into a neighborhood known as “NUVO Parkside.” NUVO Parkside is being developed with 303 single -family detached homes, all of which are detached but range in style from motor court clusters to all ey load.. As of Aug ust 7, 2023 and within NUVO Parkside, 161 single -family homes had been conveyed to individual homeowners and New Home Company owned eight model homes, 22 homes over 95% complete, 61 homes in various stages of construction and four finished lots. As of Aug ust 7, 2023, the remaining 47 lots within NUVO Parkside were owned by Arroyo, which is a land -banking entity from which New Home Company is purchasing the lots within NUVO Parkside in phased takedowns. As of August 7, 2023, 19 of such lots were in various stages of construction and 28 of such lots were in a finished lot condition. While Arroyo owns lots within NUVO Parkside, New Home Company is contractually obligated under an Option Agreement (as defined under the caption “PROPERTY OWNERSHIP AND THE DEVE LOPMENT—New Home Company”) for paying all taxes and fees associated with the property owned by Arroyo, including the Special Tax (as defined herein).
As of October 1, 2023, 176 single family homes within NUVO Parkside had been conveyed to individual homeowners and New Home Company owned _____ completed homes, _____ homes in various stages of construction and _____ finished lots. Under the City’s General Plan (Land Use Plan LU -01) land within Tax Zone 2 the District is designated as “Medium Density Residen tial”, which allows for 5.1 -25.0 dwelling units per acre. As built and proposed, development within the portion of Tax Zone 2 of the District currently under active development legally conforms to these requirements Tax Zone 3 is being developed by Lennar into a neighborhood known as “Fairhaven at Park Place.” Fairhaven at Park Place is being developed with 73 single -family detached homes arranged in motor courts.
As of August 7, 2023, one home within Fairhaven at Park Place had been conveyed to an indiv idual homeowner and Lennar owned four model homes, 19 homes over 95% complete, 26 homes in various stages of construction and 23 finished lots. As of October 1, 2023, 19 homes within Fairhaven at Park Place have been conveyed to individual homeowners and Lennar owned five completed model homes, 34 homes in 624
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various stages of construction, and 15 finished lots. Under the City’s General Plan (Land Use Plan LU -01) land within Tax Zone 3 of the District is designated as “Low Density Residential”, which allows for 2.1 -5.0 dwelling units per acre. As built and proposed, development within Tax Zone 3 of the District legally conforms to these requirements
For more detailed information regarding the ongoing and proposed development within the Distrct, see “PROPERTY OWNERSHIP AND THE DEVELOPMENT.”
Water and sewer service to the property within the District will be supplied by the City. Electricity will be supplied by Southern California Edison, gas by Southern California Gas Company and schools by Mountain View District and Chaffey Joint Union High School District.
Like all of Southern California, the land within the District is subject to seismic activity. The District is not located in a designated Earthquake Study Zone and there are no known active fault s crossing the site .
However, the Chino Fault is located approximately 6.6 miles southwest of the District and the Cucamonga Fault Zone is located approximately 12.6 miles north of the District. See “SPECIAL RISK FACTORS — Geologic, Topographic and Climatic Conditions.”
[Like much of the property within the City and surrounding areas, the property within the District has previously been utilized as dairy pastures and agricultural fields. A Methane Gas Investigation report dated ______, 20__ (the “MGI”) was prepared by __________ for __________. The MGI concluded that based on the results of field sampling and lab testing, it was determined that methane gas was either not detected or below the level that would require any type of remediation or further st udies. See “SPECIAL RISK FACTORS — Methane Gas.”]
The Federal Emergency Management Agency has determined that the District is located in a Zone “X” flood area (an area of minimal flooding, within the 500 -year flood plain), and flood insurance will not be required. See “SPECIAL RISK FACTORS — Geologic, Topographic and Climatic Conditions.” An aerial photo showing the property within the District and a map showing the general location of the District and the surrounding area appears on the pages before Page 1 of this Official Statement. More detailed information about the property therein is contained in APPENDIX B — “APPRAISAL REPORT,” and information about the ownership of such property is set forth under the caption “PROPERTY OWNERSHIP AND THE DEVELOPMEN T.” General information about the City is set forth in APPENDIX E.
The Facilities
The City and the Master Developer entered into an Acquisition and Funding Agreement, dated as of December 1, 2021, as amended by that certain First Amendment to Acquisition and Funding Agreement, dated as of [November 1, 2023], between the City and the Master Developer (collectively, the “Acquisition Agreement”), which provides, among other things, the means by which certain facilities will be financed in connection with the development within the District, including street and traffic circulation system improvements (the “Facilities”).
Pursuant to the Acquisition Agreement, the Master Developer agreed to construct, and the City agreed to accept, certain Fa cilities to be acquired with the proceeds of the Series 2023 Bond s and available Special Tax proceeds deposited into the SC Ontario Acquisition Account of the Improvement Fund under the Indenture pursuant to certain requirements contained in the Acquisitio n Agreement and the Indenture. The Acquisition Agreement also provides guidelines pursuant to which the City may acquire completed segments of the Facilities with the proceeds of the Series 2023 Bonds and available Special Tax proceeds deposited into the SC Ontario Acquisition Account of the Improvement Fund. The Acquisition Agreement may be amended from time to time by the parties thereto.
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Pursuant to the Acquisition Agreement, the Master Developer has agreed to pay all costs of the Facilities that it constructs pursuant to the Acquisition Agreement in excess of the moneys available therefor in the SC Ontario Acquisition Account of the Improvement Fund. Further, any lack of availability of amounts in the SC Ontario Acquisition Account of the Improvement Fund to pay the acquisition costs of the Facilities shall in no way diminish any obligation of the Master Developer with respect to the construction of or contributions for public facilities and mitigation measures required by the conditions of approval or any subdivision, development, or other agreement to which the Master Developer is a party, or any governmental approval to which the Master Developer or any land within the District is subject, except to the extent expressly set forth in such agreement or approval.
[As of October 1 , 2023, all of the Facilities to be constructed by the Master Developer that are required to serve the development within the District have been substantially completed, pending final approval and acceptance by the City.]
Certain facilities (the “NMC Facilities”) were constructed pursuant to an Acquisition and Funding Agreement, dated as of July 21, 2015 (the “Original NMC Acquisition Agreement”), by and between the City and NMC Builders, LLC, a California limited liability compan y (“NMC Builders”). The City and NMC Builders recently amended and restated the Original NMC Acquisition Agreement pursuant to the Amended and Restated Acquisition and Funding Agreement, dated as of November 1, 2022 (the “NMC Acquisition Agreement”). The NMC Acquisition Agreement, among other things, modifies the purchase prices of the Facilities purchased thereto. In addition to the Facilities constructed by the Master Developer under the Acquisition Agreement, bond proceeds may be deposited into an NMC Acquisition Account of the Improvement Fund under the Indenture to finance the costs of certain NMC Facilities constructed by NMC Builders and acquired by the City pursuant to the NMC Acquisition Agreement. NMC Builders is an entity established by certain current and previous landowners within Ontario Ranch for the purpose of jointly funding and managing the construction of much of the major public infrastructure required for the development of the eastern portion of Ontario Ranch, including some of the f acilities being financed through the issuance of the Series 2023 Bonds.
Direct and Overlapping Debt
The District is included within the boundaries of numerous overlapping local agencies providing governmental services. Some of these local agencies have ou tstanding bonds, and/or the authority to issue bonds, payable from taxes or assessments. The existing and authorized indebtedness payable from taxes and assessments that may be levied upon the property within the District is shown in Table 3 below. In addition to current debt, new community facilities districts and/or special assessment districts could be formed in the future encompassing all or a portion of the property within the District; and such districts or the agencies that formed them could issue more bonds and levy additional special taxes or assessments. 626
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TABLE 3
CITY OF ONTARIO
COMMUNITY FACILITIES DISTRICT NO. 56
(PARKSIDE/LA AVENIDA)
DIRECT AND OVERLAPPING DEBT
2023-24 Assessed Valuation: $143,003,436
DIRECT AND OVERLAPPING TAX AND ASSESSMENT DEBT: % Applicable Debt 9/1/23 Metropolitan Water District General Obligation Bonds 0.004% $ 756 Chaffey Community College District General Obligation Bonds 0.088 256,066 Chaffey Union High School District General Obligation Bonds 0.169 997,427 Mountain View School District SFID No. 1 General Obligation Bonds 1.256 73,202 Mountain View School District SFID No. 2 General Obligation Bonds 2.459 454,584 City of Ontario Community Facilities District No. 56 100. 0 (1) TOTAL DIRECT AND OVERLAPPING TAX AND ASSESSMENT DEBT $1,782,035
OVERLAPPING GENERAL FUND DEBT:
San Bernardino County General Fund Obligations 0.049% $ 79,182 =San Bernardino County Flood Control District General Fund Obligations 0.049 18,358 Chaffey Community College District Certificates of Participation 0.088 22,792 City of Ontario General Fund Obligations 0.357 531,090
City of Ontario Pension Obligation Bonds 0.357 797,411
West Valley Vector Control District Certificates of Participation 0.045 667 TOTAL OVERLAPPING GENERAL FUND DEBT $1,449,500
COMBINED TOTAL DEBT $3,231,535 (2)
Ratios to 2023-24 Local Secured Assessed Valuation:
Direct Debt ($0) .................................................................................. 0.00% Total Direct and Overlapping Tax and Assessment Debt .................... 1.25% Combined Total Debt ........................................................................... 2.26%
(1) Excludes Series 2023 Bonds to be sold.
(2) Excludes tax and revenue anticipation notes, enterprise revenue, mortgage revenue and non-bonded capital lease obligations.
Source: California Municipal Statistics, Inc.
As shown in Table 4, the projected Fiscal Year 2024-25 average total effective tax rate for completed single family homes conveyed to individual homeowners as of August 7, 2023 in the District range from approximately 1.71% to 1.97% of the base sales price of sample lots within the Cambridge Court, NUVO Parkside and Fairhaven at Park Place neighborhoods. The following table sets forth sample tax bills for selected completed homes owned by individual homeowners within the Cambridge Court, NUVO Parkside and Fairhaven at Park Place neighborhoods of the District for Fiscal Year 2023-24. 627
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TABLE 4
CITY OF ONTARIO
COMMUNITY FACILITIES DISTRICT NO. 56
(PARKSIDE/LA AVENIDA)
SAMPLE TAX BILLS
Tax Zone 1 2 3 3
Residential Floor Area (Sq. Ft.): 2,043 1,536 1,805 1,638 Type of Property: Detached Detached Detached Attached
Community Name: Cambridge Court NUVO Parkside Fairhaven Fairhaven Net Taxable Value
Sales Price / Estimated Price(1) $ 663,975.00 $ 568,320.00 $ 550,525.00 $ 540,540.00 Less: Homeowner’s Exemption (7,000.00) (7,000.00) (7,000.00) (7,000.00) Net Taxable Value $ 656,975.00 $ 561,320.00 $ 543,525.00 $ 533,540.00
Ad Valorem Property Taxes Rate
Base Property Tax 1.0000% $ 6,569.75 $ 5,613.20 $ 5,435.25 $ 5,335.40 Chaffey College Bond 0.0137% 90.01 76.90 74.46 73.09
Chaffey High Bond 0.0294% 193.15 165.03 159.80 156.86
Mountain View Elementary SFID #1 0.0134% 88.03 75.22 72.83 71.49 Metro Water Mid-Valley Debt 0.0035% 22.99 19.65 19.02 18.67 Total Ad Valorem Property Taxes 1.0600% $ 6,963.94 $ 5,949.99 $ 5,761.37 $ 5,655.52
Parcel Charges, Assessments, and Special Taxes
Vector Control Assessment #1 $ 22.16 $ 22.16 $ 22.16 $ 22.16 Metro Water - Water Standby 7.59 7.59 7.59 7.59
City of Ontario CFD No. 32 (Archibald/Schaefer - Services)(2) 1,443.71 0.00 0.00 0.00 City of Ontario CFD No. 56 (Parkside/La Avenida) Special Tax B(2) 0.00 1,443.71 0.00 0.00 City of Ontario CFD No. 23 (Park Place Services)(2) 0.00 0.00 1,443.71 1,251.14 City of Ontario CFD No. 56 (Parkside/La Avenida)(3)* 2,935.00 3,340.00 3,620.00 3,452.00 Total Parcel Charges, Assessments, and Special Taxes $ 4,408.46 $ 4,813.46 $ 5,093.46 $ 4,732.89
Total Taxes $ 11,372.40 $ 10,763.45 $ 10,854.83 $ 10,388.41
Total Effective Tax Rate 1.71% 1.89% 1.97% 1.92%
* Preliminary; subject to change.
(1) Represents base market values for sample lots as reported in the Appraisal Report. (2) Equal to the Special Tax levied for Fiscal Year 2023-24. The Maximum Special Tax for each Tax Zone increases by up to 4% per year. (3) Equal to the applicable Assigned Special Tax rate for the District. Reflects the reduced Assigned Special Tax A rates calculated pursuant to Section C.1 of the Rate and Method.
Sources: San Bernardino County Tax Collector’s Office; Kitty Siino & Associates, Inc.; Goodwin Consulting Group, Inc.
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Property Values
Appraisal. In order to provide information with respect to the value of the land within the District, the District engaged the Appraiser to prepare the Appraisal. The principal of the Appraiser, who was actively involved in the preparation of the Appraisal, has an “MAI” designation from the Appraisal Institute and has prepared numerous appraisals for the sale of land secured municipal bonds. The Appraiser was selected by the District and has no material relationships with the City, the District or the owners of the land within the District other than the relationship represented by the engagement to prepare the Appraisal and other similar engagements for the City. The City instructed the Appraiser to prepare its analysis and report in conformity with City-approved guidelines and the Appraisal Standards for Land Secured Financings published in 1994 and revised in 2004 by the commission now known as Califo rnia Debt and Investment Advisory Commission.
A copy of the Appraisal is included as APPENDIX B to this Official Statement.
The purpose of the Appraisal was to estimate the minimum market value of the fee simple estate, subject to special tax and special assessment liens, of the property within the District in its current condition.
Subject to the contingencies, assumptions and limiting conditions set forth in the Appraisal, the Appraiser concluded that, as of August 7, 2023 , the minimum market value of t he property within the District was not less than $ 226,550,046, including $ 128,798,000 for the 224 completed units conveyed to individual homeowners, $73,595,386 for the homes and lots owned by the Merchant Builders (or for which a Merchant Builder is resp onsible for paying the Special Tax) and $24,156,660 for the vacant lot owned by the Master Developer as of such date. See APPENDIX B — “APPRAISAL REPORT.” Reference is made to APPENDIX B for a complete list and full discussion of the applicable contingencies, assumptions and limiting conditions and the methodology employed by the Appraiser. In the event that any of the contingencies, assumptions and limiting conditions are not actually realized, the value of the property within the District may be less th an the amount reported in the Appraisal. In any case, there can be no assurance that any portion of the property within the District would actually sell for the amount indicated by the Appraisal.
The Appraisal merely indicates the Appraiser’s opinion as t o the minimum market value of the property referred to therein as of the date and under the conditions specified therein. The Appraiser’s opinion reflects conditions prevailing in the applicable market as of the date of value. The Appraiser’s opinion doe s not predict the future value of the subject property, and there can be no assurance that market conditions will not further adversely change in the future. See “SPECIAL RISK FACTORS — Impact of Economic Conditions on the Development in the District.”
It is a condition precedent to the issuance of the Series 2023 Bonds that the Appraiser deliver to the District a certification to the effect that nothing has come to the attention of the Appraiser subsequent to the date of value of the Appraisal that would cause the Appraiser to believe that the value of property in the District is less than the minimum value reported in the Appraisal.
Value-to-Lien Ratios
The value of the property within the District is significant because, in the event of a delinquency in the payment of the Special Tax, the District may foreclose only against delinquent parcels. Likewise, the ratio of the value of a parcel to its “share” of the Series 2023 Bonds is important because it provides an indication of the extent of the relative b urden imposed on each parcel by the applicable Special Tax. As indicated above, the minimum appraised value of the property within the District is not less than $ 226,550,046, including $24,156,660 for the Vacant Parcel. The ratio of the total appraised v alue of Taxable Property within the District to the $19,435,000* total principal amount of the Series 2023 Bonds is approximately 11.66*-to-1.
Excluding the appraised value attributable to the Vacant Parcel, which is not being taken in to account for the
* Preliminary, subject to change.
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purpose of structuring debt service on the Series 2023 Bonds, such ratio is approximately 10.41 *-to-1. Taking other overlapping tax and assessment debt within the District into account, the ratio of t he minimum appraised value of all Taxable Property in the District to the total amount of existing tax and assessment debt for the District plus the Series 2023 Bonds of $ 22,666,535* is approximately 9.99*-to-1. See “ — Direct and Overlapping Debt.” Tabl e 5 sets forth the appraised value -to-lien ratios of all the taxable property within the District by ownership and development status as of August 7, 2023.
Additionally, Table 6 below sets forth the stratification of value -to-liens of the parcels within th e District, based on the appraised value of such parcels set forth in the Appraisal and such parcels’ respective shares of the principal amount of the Series 2023 Bonds (allocated to each parcel based upon its respective share of the total projected Fiscal Year 2024-25 Special Tax levy) and the ratio of the appraised value to its share of the Series 2023 Bonds.
* Preliminary, subject to change.
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TABLE 5
CITY OF ONTARIO
COMMUNITY FACILITIES DISTRICT NO. 56
(PARKSIDE/LA AVENIDA)
APPRAISED VALUE-TO-LIEN RATIOS BY OWNERSHIP AND STATUS OF DEVELOPMENT Owner Community Name
Status of
Development(1)
No. of
Planned
Units
Fiscal Year
2024-25
Assigned /
Maximum
Special Tax A
Projected
Fiscal Year
2024-25
Special Tax A
Levy(2)*
Percent of
Projected
Fiscal Year
2024-25 Special
Tax A Levy*
Appraised
Value(3) CFD Debt(4)*
Average
Appraised
Value-to-
Lien*
Individual Homeowners Cambridge Court Completed and Sold 62 $ 187,617 $ 171,221 12.23% $ 42,310,045 $ 2,377,654 17.79 NUVO Parkside Completed and Sold 161 495,098 451,832 32.28 85,937,430 6,274,330 13.70 Fairhaven Completed and Sold 1 3,620 3,304 0.24 550,525 45,876 12.00 Subtotal - Individual Homeowners 224 $ 686,335 $ 626,357 44.75% $128,798,000 $ 8,697,860 14.81
Woodside 05S LP Cambridge Court Model Homes 3 $ 8,972 $ 8,188 0.59% $ 1,678,789 $ 113,701 14.76 Completed Homes 12 35,420 32,325 2.31 6,268,651 448,874 13.97 Under Construction 22 66,374 60,574 4.33 6,085,000 841,152 7.23 Finished Lots 7 20,578 18,780 1.34 1,936,136 260,783 7.42 Subtotal - Woodside 05S LP 44 $ 131,344 $ 119,866 8.56% $ 15,968,576 $ 1,664,510 9.59
The New Home Company Southern California, LLC NUVO Parkside Model Homes 8 $ 26,389 $ 24,083 1.72% $ 3,559,283 $ 334,425 10.64 Completed Homes 22 73,798 67,349 4.81 9,374,140 935,235 10.02 Under Construction 61 199,624 182,179 13.02 14,657,183 2,529,815 5.79 Subtotal – The New Home Company Southern
California, LLC
91 $ 299,811 $ 273,611 19.55% $ 27,590,606 $ 3,799,475 7.26
Arroyo Cap II-1, LLC(5) NUVO Parkside Under Construction 19 $ 61,270 $ 55,916 4.00% $ 4,565,352 $ 776,469 5.88 Finished Lots 32 104,533 95,398 6.82 7,689,014 1,324,736 5.80 Subtotal - Arroyo Cap II-1, LLC 51 $ 165,803 $ 151,314 10.81% $ 12,254,366 $ 2,101,205 5.83
Lennar Homes of California, LLC Fairhaven Model Homes 4 $ 13,993 $ 12,770 0.91% $ 1,642,220 $ 177,332 9.26 Completed Homes 19 66,014 60,245 4.30 7,275,188 836,588 8.70 Under Construction 26 90,268 82,380 5.89 4,703,575 1,143,957 4.11 Finished Lots 23 80,019 73,026 5.82 4,160,855 1,014,073 4.10 Subtotal - Lennar Homes of California, LLC 72 $ 250,294 $ 228,421 16.32% $ 17,781,838 $ 3,171,950 5.61
SC Ontario Development Company, LLC (6) N/A N/A N/A $ 1,118,166 $ 0 0.00% $ 24,156,660 $ 0 N/A
Grand Total 482 $ 2,651,753 $ 1,399,569 100.00% $226,550,046 $19,435,000 11.66
* Preliminary; subject to change.
(1) Construction status as provided in the Appraisal Report. May not reflect classification of properties for purposes of the Sp ecial Tax levy. (2) Based on the building permits issued as of August 7, 2023 and assumes no further development. Includes the debt service due in 2025 on the Series 2023 Bonds, and estimated Administrative Expenses in the amount of $89,244. (3) Represents an allocation of the bulk market values reported in the Appraisal Report. The allocated values are not indicative of the market values of the groupings or the individual lots. (4) Equal to the principal amount of the Series 2023 Bonds. Does not include overlapping debt se cured by ad valorem taxes on the property. Allocated based on the proportionate share of the Projected Fiscal Year 2024 -25 Special Tax Levy.
(5) Pursuant to the Option Agreement (as defined under the caption “PROPERTY OWNERSHIP AND THE DEVELOPMENT —New Home Company”), while Arroyo owns certain lots within the District, New Home Company is contractually responsible for paying all taxes and fees associated with such property, including the Special Tax. (6) Includes Lot 1 of Tract 20316, which is a 14.6-acre parcel classified as Undeveloped Property in the Projected Fiscal Year 2024 -25 Special Tax levy. Based on the anticipated debt service requirements of the Series 2023 Bonds, the City does not expect to levy Special Tax A on Undeveloped Property in Fiscal Year 2024-25.
Sources: Kitty Siino & Associates, Inc.; Ramirez & Co., Inc.; Goodwin Consulting Group, Inc. 631
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TABLE 6
CITY OF ONTARIO
COMMUNITY FACILITIES DISTRICT NO. 56
(PARKSIDE/LA AVENIDA)
APPRAISED VALUE-TO-LIEN RATIOS
Appraised Value-to-
Lien Category
No. of
Planned
Units
Projected
Fiscal Year
2024-25 Special
Tax A Levy(1)*
Percent of
Projected
Fiscal Year
2024-25 Special
Tax A Levy*
Appraised
Value(2) CFD Debt(3)*
Average
Appraised
Value-to-Lien*
15:1 to 20:1 76 $ 203,700 14.55% $ 49,192,725 $ 2,828,658 17.39 10:1 to 15:1 181 516,300 36.89 95,244,121 7,169,556 13.28 5:1 to 10:1 176 524,164 37.45 49,092,111 7,278,757 6.74 3:1 to 5:1 49 155,406 11.10 8,864,430 2,158,030 4.11 Subtotal 482 $ 1,399,569 100.00% $ 202,393,386 $ 19,435,000 10.41 Undeveloped Property(4) N/A 0 0.00 24,156,660 0 N/A Total 482 $ 1,399,569 100.00% $ 226,550,046 $ 19,435,000 11.66
* Preliminary; subject to change.
(1) Based on the building permits issued as of August 7, 2023 and assumes no further development . Includes the debt service due in 2025 on the Series 2023 Bonds, and estimated Administrative Expenses in the amount of $89,244. (2) Represents an allocation of t he bulk market values reported in the Appraisal Report . The allocated values are not indicative of the market values of the groupings or the individual lots.
(3) Equal to the principal amount of the Series 2023 Bonds . Does not include overlapping debt se cured by ad valorem taxes on the property.
Allocated based on the proportionate share of the Projected Fiscal Year 2024-25 Special Tax levy. (4) Includes Lot 1 of Tract 20316, which is a 14.6-acre parcel classified as Undeveloped Property in the Projected Fiscal Year 2024-25 Special Tax levy. The type and number of units to be developed on this property have not been finalized yet. Based on the anticipated debt service requirements of the Series 2023 Bonds, the District does not expect to levy Special Tax A on Undeveloped Property in Fiscal Year 2024-25.
Sources: Kitty Siino & Associates, Inc.; Ramirez & Co., Inc.; Goodwin Consulting Group, Inc.
Delinquency History
The following table is a summary of Special Tax levies, collections and delinquency rates in the District in Fiscal Year 2022-23, the first year of the Special Tax levy , as well as a summary of the Fiscal Year 2023-24 Special Tax levy.
TABLE 7
CITY OF ONTARIO
COMMUNITY FACILITIES DISTRICT NO. 56
(PARKSIDE/LA AVENIDA)
SPECIAL TAX LEVIES, DELINQUENCIES AND DELINQUENCY RATES As of the end of each Fiscal Year
Fiscal Year Amount Levied Parcels Levied
Parcels
Delinquent
Amount
Delinquent
Percent
Delinquent
2022-23 $651,782 113 1 $3,169.00 0.49%
2023-24 1,213,550 386 N/A N/A N/A
Sources: San Bernardino County Tax Collector’s Office; Special Tax Consultant. 632
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PROPERTY OWNERSHIP AND THE DEVELOPMENT
The information provided in this section has been included because it may be considered relevant to an informed evaluation and analysis of the Series 2023 Bonds and the District. No assurance can be given, however, that the proposed development of the property within the District will occur in a timely manner or in the configuration or to the density described herein, or that the Master De veloper and Merchant Builders, any owners or affiliates thereof, or any other property owner described herein will or will not retain ownership of its respective property within the District. There may be material adverse changes in this information after the date of this Official Statement. Neither the Series 2023 Bond s nor the Special Tax are personal obligations of any property owner within the District and, in the event that any property owner defaults in the payment of its Special Tax, the District m ay proceed with judicial foreclosure but has no direct recourse to the assets of any property owner or any affiliate thereof. The Series 2023 Bonds are secured solely by the Net Special Tax Revenues and amounts on deposit in certain of the funds and accounts maintained by the Trustee under the Indenture. See “SPECIAL RISK FACTORS” for a discussion of certain of the risk factors that should be considered in evaluating the investment quality of the Series 2023 Bond s. The following information regarding own ership and planned development of the District has been provided by the Master Developer and Merchant Builders. No representation is made by either the District or the Underwriter as to the accuracy or adequacy of such information so provided.
The Master Developer
General. SC Ontario Development Company, LLC (previously defined as the “Master Developer”) is a subsidiary of the Lewis Group of Companies. The Lewis Group of Companies originated in 1955 in Claremont, California. Since 1955, The Lewis Group of Companies has developed over 57,000 homes, 19.5 million square feet of retail, office and industrial developments, and has developed and sold 21,000 lots to other builders in California, Nevada, Arizona and Utah.
Vacant Parcel . As of August 7, 2023, the Master Developer owned an approximately 20.0 acre vacant parcel within Tax Zone 2 of the District (previously defined in this Official Statement as the “Vacant Parcel”). The Vacant Parcel is identified as Lot 1 located within Tract Map No. 20316 , which also includes, among other things, the NUVO Parkside neighborhood being developed by New Home Company. The Vacant Parcel is currently generally in a superpad condition and has entitlements per the Parkside Specific Plan for 236 units. The Master Developer is in the process of entitling the Vacant Parcel and intends to market the sale of the Vacant Parcel to one or more merchant builders in the next 24 months; however, there can be no assurance that all or any portion of the Vacant Parcel will be marketed and sold to merchant builders.
The Series 2023 Bonds have been structured so that Assigned Special Tax A rates set forth in the Rate and Method that may be levied within the District, based on the 482 parcels of Developed Property (which excludes the Vacant Parcel) shown in the projected Fiscal Year 2024-25 Special Tax levy, are at least 110% of debt service on the Series 2023 Bonds in each Bond Year , net of estimated Administrative Expenses . The District does not currently expect to levy the Speci al Tax in Fiscal Year 2024 -25 against the Vacant Parcel.
See the caption “SECURITY AND SOURCES OF PAYMENT FOR THE SERIES 2023 BONDS —Special Tax.”
Woodside
General. Woodside 05S LP (previously defined as “Woodside”) is wholly owned by Woodside Group, LLC, a Nevada limited liability company (“Woodside Group”), directly or through its wholly owned subsidiaries. Woodside is owned 99% directly by Woodside Group, as a limited partner. The remaining 1% interest is owned by WDS GP, Inc., a California corporatio n, as its general partner, which is wholly owned by Woodside Homes of California, Inc., a California corporation, which in turn is wholly owned by Woodside Group. The parent of Woodside Group is Woodside Homes Company, LLC, a Delaware limited liability company (“Woodside Homes Company”). Since February 28, 2017, the ultimate parent of Woodside Homes 633
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Company has been Sekisui House Ltd., a Japanese public company based in Osaka, Japan, whose stock is listed on the Tokyo and Nagoya Stock Exchanges. Sekisui House, Ltd. Is one of Japan’s largest homebuilders and was founded in 1960.
Woodside Group’s subsidiaries engage in the design, construction, and sale of single -family homes under the brand name of “Woodside Homes.” Woodside Homes is one of America’s top 30 homebuilders having built more than 40,000 homes across the United States, with current operations in Arizona, California, Nevada and Utah.
Development Plan. Woodside is developing Tax Zone 1 into a neighborhood known as “Cambridge Court.” Tax Zone 1 within the District is generally located at the northeast corner of La Avenida Drive and Manitoba Place within the City and consists of approximately 10.5 gross acres on Tract Map. No. 20298.
Tract Map. No. 20298 was recorded on July 15, 2021 and divides Tax Zone 1 into 106 numbered lots.
Cambridge Court is being developed with 106 single-family detached homes in a conventional single- family detached style with some homes arranged around shared motor courts. The homes within Cambridge Court include three two-story floorplans ranging in size from 1,951 to 2,356 square feet and from three to five bedrooms.
Woodside purchased the land for Cambridge Court on December 23, 2020 from Ontario Schaefer Holdings, LLC for $13,611,196. Woodside began selling homes in October 2021 and as of August 7, 2023, 62 homes within Cambridge Court had been conveyed to individual homeowner s and Woodside owned three model homes, 12 homes over 95% complete ( all of which were in escrow), 22 homes in various stages of construction (19 of which were in escrow) and seven finished lots (none of which were in escrow). Woodside currently expects full buildout of the Cambridge Court neighborhood by _____ 20__.
The table below sets forth the estimated number of lots, home sizes and b ases sales prices for the Cambridge Court neighborhood as of October 1, 2023.
Floor Plan
Approx.
Square
Footage
Total
Planned
Units
Closed to
Individuals
Completed
But Not
Closed(1)
Under
Construction(2)
Finished
Lots
Base Sales
Price(3)
Plan 1 1,951
Plan 2 2,043
Plan 3 2,365
Totals 106
(1) Includes three completed model units ( one for each plan ) owned by Woodside and _____ homes in escrow to individual homeowners.
(2) Includes _____ homes in escrow to individual homeowners. (3) Base sale prices are estimated as of October 1, 2023. Base sales prices are subject to change and exclude any lot premiums, options, upgrades, incentives and any selling concessions or price reductions which may be offered.
Source: Woodside.
Financing Plan. To date, Woodside has financed its land acquisition and various site development and home construction costs related to its property in the District through internally generated funds (including funds from Woodside’s parent e ntities) and home sales revenues. As of October 1, 2023, Woodside had expended approximately $__________ on land acquisition, land development, homebuilding, marketing and sales costs. As of such date, Woodside expected to incur approximately $__________ on remaining land development costs and approximately $__________ on remaining homebuilding, marketing, and sales costs for its property in the District.
Woodside expects to use home sales revenues and internal funding (including funds from Woodside’s parent entities) to complete its development in the District. Woodside believes that it will have sufficient 634
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funds available to complete its planned development in the District in accordance with the development schedule described in this Official Statement.
Notwithstanding the belief of Woodside that it will have sufficient funds to complete its planned development in the District, no assurance can be given that sources of financing available to Woodside will be sufficient to complete its property developme nt and home construction as currently anticipated. While Woodside has made such internal financing available in the past, there can be no assurance whatsoever of its willingness or ability to do so in the future. Neither Woodside nor any of its affiliates has any legal obligation of any kind to make any such funds available or to obtain loans. Other than pointing out the willingness of Woodside to provide internal financing in the past, Woodside has not represented in any way that it will do so in the fu ture. If and to the extent that internal financing and home sales revenues are inadequate to pay the costs to complete Woodside’s planned development in the District and other financing by Woodside is not put into place, there could be a shortfall in the funds required to complete the proposed development by Woodside and portions of the project may not be developed.
New Home Company
General. The New Home Company Southern California, LLC (previously defined as “New Home Company”) is an affiliated entity of The New Home Company, Inc. The New Home Company, Inc. designs, constructs and sells homes in major metropolitan areas in California and Arizona, including coastal Southern California, the San Francisco Bay area, metro Sacramento and the greater Phoenix area. The New Home Company, Inc. is publicly traded on the New York Stock Exchange and its SEC filings are available to the public at the SEC’s website at www.sec.gov. This internet ad dress is included for reference only and the information on the internet site is not a part of this Official Statement and is not incorporated by reference into this Official Statement. No representation is made in this Official Statement as to the accuracy or adequacy of the information contained on the internet site.
Development Plan. New Home Company is developing a portion of Tax Zone 2 into a neighborhood known as “ NUVO Parkside.” Tax Zone 2 within the District is generally located at the northwest corner of Archibald Avenue and Eucalyptus Place within the City and is encompassed by Tract Map No. 20316, recorded on March 11, 2021. Tract Map No. 20316 consists of approximately 55.8 gross acres, which includes the NUVO Parkside neighborhood, the Vacant Parcel and two park sites that are located outside of the District.
NUVO Parkside consists of the areas described in Tract Map No. 20316 as Lots 2, 3 and 4 and encompasses approximately 24.0 gross acres. Tract Map No. 20316 and the subsequent condominium maps with respect to Lots 2, 3 and 4 allow for 303 single-family detached condominium units.
NUVO Parkside is being developed with 303 single -family detached condominium homes, all of which are detached but range in style from clusters of homes arranged around shared motor courts to alley load units with garages in the rear of the home . The homes within NUVO Parkside include four product lines ranging from 1,044 to 1,820 square feet and from two to three stories.
As described further under the caption s “—Option Agreement and Construction Agreement ” and “— New Home Company Landbank ,” New Home Company is purchasing the property for NUVO Parkside in phases takedowns from Arroyo. New Home Company beg an taking down lots from Arroyo in November 2021 and, as of August 7, 2023, had completed eight takedowns for an aggregate total of 252 units as of such date. New Home Company began selling homes in April 2022 and as of August 7, 2023, 161 homes within NUVO Parkside had been conveyed to individual homeowner s and New Home Company owned eight model homes, 22 homes over 95% complete (21 of which were in escrow) and 61 homes in various stages of construction (32 of which were in escrow). In certain cases, New Home Company has begun vertical construction on lots owned by Arroyo prior to New Home Company taking down such lots and, a s of August 7, 2023, Arroyo owned 19 lots in various stages of construction and 32 finished lots. New Home Company currently expects complete buildout of the NUVO Parkside neighborhood by _____ 20__. 635
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The table below sets forth the estimated number of lots, home sizes and bases sales prices for the NUVO Parkside neighborhood as of October 1, 2023.
Floor Plan
Approx.
Square
Footage
Total
Planned
Units
Closed to
Individuals
Completed
But Not
Closed(1)
Under
Construction(2)
Finished
Lots
Base Sales
Price(3)
Lincoln Plan 1 1,082
Lincoln Plan 2 1,044
Lincoln Plan 2G 1,046
Hyde Plan 1 1,197
Hyde Plan 2 1,550
Hyde Plan 3 1,727
Hyde Plan 4 1,809
Bryant Plan 1/1X 1,370
Bryant Plan 2 1,536
Bryant Plan 3 1,475
Bryant Plan 4 1,675
Bryant Plan 4X 1,754
Grant Plan 1 1,596
Grant Plan 2 1,648
Grant Plan 3 1,820
Totals 303 176
(1) Includes eight completed model units owned by New Home Company and _____ homes in escrow to individual homeowners. (2) Includes _____ homes in escrow to individual homeowners. (3) Base sale prices are estimated as of October 1, 2023. Base sales prices are subject to change and exclude any lot premiums, options, upgrades, incentives and any selling concessions or price reductions which may be offered.
Source: New Home Company.
Option Agreement and Construction Agreement . On June 16, 2021, Arroyo purchased the property on which NUVO Parkside is being developed (the “Property”) from the Master Developer. Concurrent with the purchase of the Property by Arroyo, Arroyo and New Home Company entered into an Option Agreement regarding the Property, as amended (herein, the “Option Agreement”), whereby New Home Company has the option but not the obligation to purchase finished lots in the Property from Arroyo pursuant to a takedown schedule. To New Home Company’s knowledge, New Home Company is not in default under the Option Agreement, nor has Arroyo asserted such a default.
In addition to and concurrent with the Option Agreement, TNHC Realty and Construction Inc. (the “Contractor”), an affiliate of New Home Company, entered into the Construction Agreement regarding the Property (the “Construction Agreement”), whereby Arroyo engaged the Contractor to construct improvements on and for the benefit of the Property necessary to bring the lots into finished lot condition and reimburse the Contractor for such development costs up to a guaranteed maximum aggregate contract amount.
Under the terms of the Option Agreement, Arroyo agreed to provide New Home Company the exclusive right and option to purchase all 303 lots comprising the Property in consideration for (a) an initial option payment, which payment has been made to Arroyo; (b) the covenants of New Home Company to timely pay the option payments under the Option Agreement on a monthly basis in arrears; and (c) upon exercise of the option, the payment of the purchase price for each set of lots acquired.
As of October 1, 2023, New Home Company had acquired a total of 252 lots. [The remaining 51 lots are expected to be acquired by New Home Company in two scheduled takedowns expected to occur on October 15, 2023 (15 lots) and January 15, 2024 (36 lots),] although New Home Company may accelerate such acquisitions so long as the required cumulative number of lots are acquired by the applicable takedown date. The failure to acquire the cumulative number of lots by the date required will result in the payment of a premium in addition to the purchase price.
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In addition, pursuant to the Option Agreement and with some limitations, Arroyo has granted New Home Company a license to enter upon the property to construct homes before it acquires the lots from Arroyo. To date, New Home Company has obtained building permits for and commenced construction of homes on lots owned by Arroyo and New Home Company’s plan is to continue to obtain building permits for and commence home construction on some or all of the remaining lots prior to acquiring them from Arroyo.
The option under the Option Agreement expires on the earlier of (i) the last date permitted for the final takedown specified on the takedown schedule ( January 15, 2024 ) and the expiration of any applicable cure period, or (ii) the date N ew Home Company has acquired all of the lots in accordance with the Option Agreement. The failure to timely acquire lots could result in the termination of the option and New Home Company will no longer have a right to purchase any of the remaining units under the Option Agreement. The Option Agreement does provide New Home Company a one -time option to acquire all of the lots at once. In the event that New Home Company does not exercise its option, Arroyo , being an investor only and not a homebuilder, would likely attempt to sell such lots to another merchant builder.
Under the Construction Agreement, the Contractor has agreed to use commercially reasonable efforts to construct all of the on -site and off -site improvements and obtain the requisite governme ntal permits and approvals necessary to create finished lots on the Property pursuant to a construction schedule and Arroyo has agreed to reimburse the Contractor for such development costs up to a guaranteed maximum aggregate contract amount. As of _____ , 2023, other than bond exoneration work and final paving, which is to be completed at build out of the Property, all of the work required by the Construction Agreement is substantially complete.
During the term of the Option Agreement and the Construction Agreement, New Home Company is obligated to pay all property taxes and carry -costs related to the Property owned by Arroyo, including but not limited to the Special Tax.
New Home Company Landbank . Arroyo Cap II -1, LLC (previously defined as “Arroyo” or “New Home Company Landbank”) is serving as a land bank for New Home Company and is not a homebuilder.
Arroyo’s sole member is Arroyo Capital, LLC, a Delaware limited liability company (“Arroyo Capital, LLC”).
Arroyo Capital, LLC was formed in 2016 by Oaktree Capital Management, L.P. and its strategic partners to service the land and lot development needs of U.S. homebuilders through structured lot option arrangements, also known as “land banking.” Arroyo Capital, LLC, through its subsidiary funds, has committed approximately $1.4 billion to date to projects located in California, with a total of approximately 67 projects located in Arizona, California, Colorado, Florida, Georgia, Idaho, Nevada, Ne w Jersey, North Carolina, Oregon, South Carolina, Virginia, Washington and Texas. Arroyo Capital, LLC’s customers include both publicly-traded builders and larger, well -capitalized privately-held builders. In California, as of October 1, 2023, Arroyo Capital, LLC, through its subsidiary funds, has acquired approximately 5,226 lots in 20 projects, 13 of which have sold out.
The principals of Arroyo Capital, LLC include (i) Dan McCann, a former investment banker covering residential real estate for FBR Capi tal Markets who has advised or led the acquisition of over a dozen U.S. homebuilders worth several billion dollars, (ii) Leigh Austin who has 30 years of experience in the for -sale residential sector as a business owner, investor, equity provider, banker a nd broker and who previously held senior positions at Saybrook Community Capital, KB Home, Community Bank, a Canadian based private equity firm, and Citicorp Real Estate, and (iii) Jeff Brouelette, a licensed CPA in the state of California, who founded Strategic Financial Group, LLC, specializing in residential real estate consulting to homebuilders and private equity firms, and previously spent 11 years at Standard Pacific Homes (then CalAtlantic Group, Inc.), serving as Division Controller and then Director of Mergers and Acquisitions.
Through its subsidiary funds, Arroyo Capital, LLC provides capital to public and private homebuilders for residential land acquisition and development. Arroyo Capital, LLC is not a developer or a merchant builder.
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Financing Plan. To date, New Home Company has financed its land acquisition and various site development and home construction costs related to its property in the District through internally generated funds and homes sales revenues. As of October 1, 2023, New Home Company had expended approximately $__________ on land acquisition, land development, homebuilding, marketing and sales costs. As of such date, New Home Company expected to incur approximately $__________ on remaining land development costs and approximately $__________ on remaining homebuilding, marketing, and sales costs for its property in the District.
New Home Company expects to use home sales revenues and internal funding to complete its development in the District. New Home Company believes that it will have sufficient funds available to complete its planned development in the District in accordance with the development schedule described in this Official Statement.
Notwithstanding the belief of New Home Company that it will have sufficient funds to complete its planned development in the District, no assurance can be given that sources of financing available to New Home Company will be sufficient to complete the property development and home construction as currently anticipated. While New Home Company has made such internal financing available in the past, there can be no assurance whatsoever of its willingness or ability to do so in the future. Neither New Home Company nor any of its affiliates has any legal obligation of any kind to make any such funds available or to obtain loans.
Other than pointing out the willingness of New Home Company to provide internal financing in the past, New Home Company has not represented in any way that it will do so in the future. If and to the extent that internal financing and home sales revenues are inadequate to pay the costs to complete New Home Company’s planned development in the District and other financing by New Home Company is not put into place, there could be a shortfall in the funds required to c omplete the proposed development by New Home Company and portions of the project may not be developed.
Lennar
General. Lennar Homes of California, LLC, a California limited liability company (previously defined as “Lennar”) is based in Irvine, California, and has been in the business of developing residential real estate communities in California since 1996. Lennar is wholly -owned by U.S. Home, LLC, a Delaware limited liability company (“U.S. Home”). U.S. Home is wholly-owned by Lennar Corporation, which is based in Miami, Florida (“Lennar Corporation”). Founded in 1954, Lennar Corporation completed its initial public offering in 1971 and listed its common stock on the New York Stock Exchange in 1972. Lennar Corporation’s Class A and Class B common stock are listed on the New York Stock Exchange under the symbols “LEN” and “LEN.B.” respectively. Lennar Corporation is one of the largest homebuilders in the United States based on home sales revenues and net earnings, and operates under a number of brand names, including Lennar and U.S.
Home. Lennar Corporation primarily develops residential communities both within the Lennar Corporation family of builders and through consolidated and unconsolidated partnerships in which Lennar Corporation maintains an interest.
Lennar Corporation is subject to the informational requirements of the Securities Exchange Act of 1934, as amended, and, in accordance therewith, files reports, proxy statements, and other information, including financial statements, with the Securities and Exchange Commission (the “SEC”). Such filings, particularly Lennar Corporation’s annual report on Form 10 -K and its most recent quarterly report on Form 10-Q, may be inspected and copied at the public reference facilities maintained by the SEC at 450 Fifth Street, N.W., Washington, D.C. 20549 at prescribed rates. Such filings can also be accessed over the internet at the SEC’s website at www.sec.gov. This internet address is included for reference only and the information on the internet site is not a part of this Official Statement and is not incorporated by reference into this Official Statement. No representation is made in this Official Statement as to the accuracy or adequacy of the information contained on the internet site.
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Copies of Lennar Corporation’s annual report and related financial statements are available from Lennar Corporation’s website at www.Lennar.com. This internet address is included for reference only and the information on the internet site is not a part of th is Official Statement and is not incorporated by reference into this Official Statement.
Development Plan. Lennar is developing Tax Zone 3 into a neighborhood known as “Fairhaven at Park Place.” Tax Zone 3 within the District is generally located at the southwest corner of Merrill Avenue and Remington Avenue within the City and consists of approximately 6.5 gross acres on Tract Map. No. 20389.
Tract Map. No. 20389 was recorded on October 11, 2022 and divides Zone 3 into one numbered lot. A Condominium Plan recorded April 3, 2023 divides the one numbered lot into eight numbered modules, which are further divided into 73 residential units.
Fairhaven at Park Place is being developed with 73 single -family homes arranged around shared motor courts. The homes within Fairhaven at Park Place include four two and three-story floorplans ranging in size from 1,450 to 1,805 square feet and from three to four bedrooms. The majority of the homes within Fairhaven at Park Place are detached; however, certain Plan 2 homes are configured at the end of shared motor courts where they share a garage wall in a duplex formation.
Lennar purchased the land for Fair Haven at Park Place on August 12, 2021 from SL Ontario Development Company, LLC (an affiliate of the Master Devel oper) for $7,076,287. Lennar began selling homes in January 2023 and as of October 1, 2023, 19 homes within Fairhaven at Park Place have been conveyed to individual homeowners and Lennar owned 5 completed model homes, 34 homes in various stages of construction (21 of which were in escrow), and 15 finished lots (none of which were in escrow). Lennar currently expects full buildout of the Fair Haven at Park Place neighborhood by June 2024.
The table below sets forth the estimated number of lots, home sizes and bases sales prices for the Fairhaven at Park Place neighborhood as of October 1, 2023.
Floor Plan
Approx.
Square
Footage
Total
Planned
Units
Closed to
Individuals
Completed
But Not
Closed(1)
Under
Construction(2)
Finished
Lots
Base Sales
Price(3)
Plan 1 1,450 20 4 1 10 5 $619,935
Plan 2 1,638 21 7 2 8 4 $646,990
Plan 3 1,785 17 3 1 9 4 $629,990
Plan 4 1,805 15 5 1 7 2 $652,990
Totals 73 19 5 34 15
(1) Includes five completed model units owned by Lennar, none of which are in escrow to individual homeowners. (2) Includes 21 homes in escrow to individual homeowners. (3) Base sale prices are estimated as of October 1, 2023. Base sales prices are subject to change and exclude any lot premiums, options, upgrades, incentives and any selling concessions or price reductions which may be offered.
Source: Lennar.
Financing Plan. To date, Lennar has financed its land acquisition and various site development and home construction costs related to its property in the District through internally generated funds and homes sales revenues. As of October 1, 2023, Lennar had expended a pproximately $37,923,950 on land acquisition, land development, homebuilding, marketing and sales costs. As of such date, Lennar expected to incur approximately $1,521,986 on remaining land development costs and approximately $9,211,289 on remaining homebuilding, marketing, and sales costs for its property in the District.
Lennar expects to use home sales revenues and internal funding to complete its development in the District. Lennar believes that it will have sufficient funds available to complete its planned development in the District in accordance with the development schedule described in this Official Statement. 639
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Notwithstanding the belief of Lennar that it will have sufficient funds to complete its planned development in the District, no assurance can be given that sources of financing available to Lennar will be sufficient to complete the property development and home construction as currently anticipated. While Lennar has made such internal financing available in the past, there can be no assurance whatsoever of its willingness or ability to do so in the future. Neither Lennar nor any of its affiliates has any legal obligation of any kind to make any such funds available or to obtain loans. Other than pointing out the willingness of Lennar to provide internal financing in the past, Lennar has not represented in any way that it will do so in the future. If and to the extent that internal financing and home sales revenues are inadequate to pay the costs to complete Lennar’s planned development in the District and other financing by Lennar is not put into place, there could be a shortfall in the funds required to complete the proposed development by Lennar and portions of the project may not be developed.
SPECIAL RISK FACTORS
The principal source o f payment of debt service on the Series 2023 Bonds will be payments of the Special Tax made with respect to the Taxable Property. As discussed under “SECURITY AND SOURCES OF PAYMENT FOR THE SERIES 2023 BONDS — Special Tax,” the Special Tax is to be levied annually against all such Taxable Property either at the maximum rate authorized by the Rate and Method or at such lower rates as are determined by the District Administrator to raise sufficient funds to comply with the agreements, conditions, covenants and terms contained in the Indenture, and in accordance with the Act. The Special Tax is to be collected on the tax roll of the District at the same time and in the same manner as general ad valorem real property taxes are collected. The Special Tax canno t be levied at a tax rate higher than the maximum tax rate even if the maximum tax rate will not produce sufficient Net Special Tax Revenues to pay the principal and interest then payable with respect to the Series 2023 Bonds. See discussions below under “— Levy of the Special Tax” and “— Collection of the Special Tax.” Payment of the Special Tax levied on a parcel is secured by a continuing lien against such parcel. In the event an installment of the Special Tax included in the tax bill for a parcel of T axable Property is not paid when due, the District has covenanted to institute foreclosure proceedings in court to cause the parcel to be sold in order to attempt to recover the delinquent amount from the sale proceeds. Foreclosure and sale may not always result in the recovery of the full amount of delinquent installments of the Special Tax.
See “ — Collection of the Special Tax.” The sufficiency of the foreclosure sale proceeds to cover the delinquent amount depends in part upon the market for and the v alue of the parcel at the time of the sale.
Sufficiency of the foreclosure sale proceeds to cover a delinquency may also depend upon the value of prior or parity liens and similar claims. Further, other governmental claims, such as hazardous substance cl aims, may affect the realizable value even though such claims may not rise to the status of liens. See “ — Hazardous Substances.”
Timely foreclosure and sale proceedings with respect to a parcel of Taxable Property may be forestalled or delayed by a stay i n the event the owner of the parcel becomes the subject of bankruptcy proceedings. Not only may foreclosure and sale proceedings be forestalled or delayed, but the sale of a parcel may also be similarly affected by a bankruptcy stay. Further, should the stay not be lifted, payment of the Special Tax may be subordinated to bankruptcy law priorities. See “— Bankruptcy and Legal Delays.” Although bankruptcy proceedings may forestall or delay a foreclosure and sale or a tax sale of a delinquent parcel of Taxable Property, the Special Tax is secured by a lien which, assuming proper procedures are followed, may be enforced against the parcel. There may not be any recourse against a bankrupt property owner since the owner is not personally obligated to pay the Special Tax. Further, if proper disclosure of the authorization of the Special Tax is not made to the owner, the willingness or ability of an owner to pay the Special Tax may be adversely affected. See “ — Payment of the Special Tax is Not a Personal Obli gation of the Owners.”
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The District is not obligated to advance funds to pay such debt service except from moneys on deposit in the Reserve Fund. See “— Bonds Are Limited Obligations.” Even if debt service is timely paid, interest on the Series 2023 Bonds may have to be included in the gross income of the owner of the Series 2023 Bonds by reason of some circumstance occurring subsequent to issuance of the Series 2023 Bonds, thereby reducing the after-tax yield. See “— Loss of Tax Exemption.” Risks of Real Estate Secured Investments Generally – Declines in Value Purchasers of the Series 2023 Bonds will be subject to the risks generally incident to an investment secured by real estate, including, without limitation, (i) adverse changes in local market condit ions, such as changes in the market value of real property in the vicinity of the District, the supply of or demand for competitive properties in such area, and the market value of property in the event of sale or foreclosure; (ii) changes in real estate t ax rates and other operating expenses, governmental rules and fiscal policies; and (iii) natural disasters (including, without limitation, earthquakes, wildfires and floods), which may result in uninsured losses. See the caption “— Increasing Mortgage Interest Rates” below.
No assurance can be given that the individual property owners within the District will pay the Special Tax in the future or that they will be able to pay the Special Tax on a timely basis. See the caption “-Bankruptcy and Legal Delays” for a discussion of certain limitations on the District’s ability to pursue judicial proceedings with respect to delinquent parcels within the District.
Levy of the Special Tax
The principal source of money with which to pay debt service on the Series 20 23 Bonds is the proceeds derived from the annual levy and collection of the Special Tax applicable to the Taxable Property in the District. The amount of the Special Tax that can be levied is limited to the maximum tax rates authorized pursuant to the Rate and Method . Additionally, pursuant to Section 53321(d) of the Act, the Special Tax levied against any Assessor’s parcel for which an occupancy permit for private residential use has been issued shall not be increased as a consequence of delinquency or d efault by the owner of any other Assessor’s parcel within the District by more than ten percent above the amount that would have been levied in that fiscal year had there never been any such delinquencies or defaults. As a result, it is possible that the District may not be able to increase the tax levy to the Assigned Special Tax on residential parcels in all years. The levies cannot be made at higher rates even if the failure to do so would result in insufficient Net Special Tax Revenues to pay the principal of and interest on the Series 2023 Bonds as the same become due and payable.
The levy of the Special Tax will rarely, if ever, result in a uniform relationship between the value of a particular parcel and the amount of the levy of the Special Tax aga inst such parcel. Thus, there will rarely, if ever, be a uniform relationship between the value of a parcel and its proportionate share of the debt service on the Series 2023 Bonds . The Special Tax levied in any particular Fiscal Year on a parcel is based upon the revenue needs of the District and the application of the Rate and Method . The application of the Rate and Method will, in turn, be dependent upon certain development factors with respect to each parcel by comparison with similar development factors with respect to the other parcels in the District. Thus, in addition to annual variations in the revenue needs of the District that must be met from the Special Tax, the following are some of the factors which might cause the levy of the Special Tax on any particular parcel to vary from the Special Tax that might otherwise be expected:
Reduction in the number of parcels of Taxable Property, for reasons such as acquisition of su ch parcels by a governmental entity and failure of the governmental entity to pay the Special Tax based upon a claim of exemption or, in the case of the federal government or an agency thereof, immunity from taxation, thereby resulting in an increased tax burden on the remaining parcels of Taxable Property; and 641
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Failure of the owners of certain parcels of Taxable Property to pay the applicable Special Tax and delays in the collection of or inability to collect such Special Tax by tax sale or foreclosure and sale of the delinquent parcels, thereby resulting in an increased tax burden on the remaining parcels of Taxable Property.
Collection of the Special Tax
The timely payment of the principal of and interest on the Series 2023 Bonds is ultimately dependent upon the timely payment of the Special Tax. Any money on deposit in the Reserve Fund can be used to make such payment in the event of delinquencies, but the replenishment of the Reserve Fund will be dependent on the recovery of such delinquencies. The Inde nture provides that the Special Tax is to be collected in the same manner and at the same time and in the same installment as the general taxes on real property are payable (or in such other manner as the City Council shall determine, including direct bill ing of the affected property owners) and, except as provided in the special covenant for foreclosure described under the caption “SECURITY AND SOURCES OF PAYMENT FOR THE SERIES 2023 BONDS — Covenant for Superior Court Foreclosure” and in the Act, is to be subject to the same proportionate penalties and the same procedure, sale and lien priority in case of delinquency as is provided for ad valorem taxes on real property.
Pursuant to the Act, in the event of any delinquency in the payment of the Special Tax, the District may order the institution of a superior court action to foreclose the lien therefor within specified time limits. In such an action, the real property subject to the unpaid amount may be sold at judicial foreclosure sale. Such judicial forec losure action is not mandatory. However, the District has covenanted for the benefit of the owners of the Series 2023 Bonds that it will institute foreclosure proceedings as authorized by the Act in order to enforce the lien of the delinquent installments of the Special Tax under certain circumstances. See “SECURITY AND SOURCES OF PAYMENT FOR THE SERIES 2023 BONDS — Covenant for Superior Court Foreclosure.” In the event that foreclosure proceedings are commenced, such foreclosure proceedings could be sta yed by the commencement of bankruptcy proceedings by or against the owner of the property being foreclosed. In the event that sales or foreclosures of property are necessary, there could be a delay in payments to Owners of the Series 2023 Bonds pending su ch sales or the prosecution of foreclosure proceedings and receipt by the District of the proceeds of sale if the Reserve Fund is depleted.
The District may be unable to make full or timely payment of debt service on the Series 2023 Bonds if property owners in the District fail to pay installments of the Special Tax when due, if the Reserve Fund is depleted, or if the District is unable to sell foreclosed parcels for amounts sufficient to cover the delinquent installments of the Special Tax.
Failure to Develop Properties
Development of property within the District may be subject to unexpected delays, disruptions and changes which may affect the willingness and ability of the Developer or any other property owner to pay the Special Tax prior to delinquency. Land development is subject to comprehensive federal, State and local regulations. Approval is required from various agencies in connection with the layout and design of developments, the nature and extent of improvements, construction activity, land use, zoning, school and health requirements, as well as numerous other matters. There is always the possibility that such approvals will not be obtained or, if obtained, will not be obtained on a timely basis. Failure to obtain any such agency approval or sa tisfy such governmental requirements would adversely affect planned land development.
Development of land in the District is also subject to the availability of water. Finally, development of land is subject to economic considerations.
As of August 7, 2023, of the 482 homes under active development across all three communities within the District, 224 had been conveyed to individual homeowners and the Merchant Builders collectively owned (or were responsible for paying the Special Tax fo r) 15 model homes, 53 homes over 95% complete (51 of which were in escrow), 128 homes in various stages of construction (65 of which were in escrow) and 62 finished lots (none of which were in escrow). As of August 7, 2023, Arroyo owned 51 of such lots, a nd the 642
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failure of New Home Company to acquire lots as scheduled under the Option Agreement could negatively impact New Home Company’s ability to develop its property within the District. As of such date, the Master Developer also owned the approximately 1 4.6-acre Vacant Parcel within Tax Zone 2 of the District . See “PROPERTY OWNERSHIP AND THE DEVELOPMENT.” A detailed description of the status of the construction as of the date of value of the Appraisal is included in APPENDIX B — “APPRAISAL REPORT.”
As of August 7, 2023, all of the property within the District under active development had been rough- graded and all sewer, water, storm drains, streets, curbs and gutters were complete to serve all 482 homes under active development within the District. See “THE COMMUNITY FACILITIES DISTRICT” and “PROPERTY OWNERSHIP AND THE DEVELOPMENT.” However, no assurance can be given that the remaining planned residential development will be partially or fully completed; and for purposes of evaluating the investment qua lity of the Series 2023 Bonds , prospective purchasers should consider the possibility that such parcels will remain vacant and unimproved.
Undeveloped or partially developed land is inherently less valuable than developed land and provides less security t o the Series 2023 Bond Owners should it be necessary for the District to foreclose on the property due to the nonpayment of the Special Tax. The failure to complete development in the District as planned, or substantial delays in the completion of the dev elopment may reduce the value of the property within the District and increase the length of time during which the Special Tax will be payable from undeveloped property, and may affect the willingness and ability of the owners of property within the Distri ct to pay the Special Tax prior to delinquency.
There can be no assurance that land development operations within the District will not be adversely affected by a future deterioration of the real estate market and economic conditions or future local, State and federal governmental policies relating to real estate development, an increase in mortgage interest rates, the income tax treatment of real property ownership, or the national economy. A slowdown of the development process and the absorption rate cou ld adversely affect land values and reduce the ability or desire of the property owners to pay the annual Special Tax. In that event, there could be a default in the payment of principal of, and interest on, the Series 2023 Bonds when due.
Series 2023 Bond Owners should assume that any event that significantly impacts the ability to develop land in the District would cause the property values within the District to decrease substantially from those estimated by the Appraiser and could affect the willingnes s and ability of the owners of land within the District to pay the Special Tax prior to delinquency.
The payment of principal of and interest on the Series 2023 Bonds is dependent upon the receipt of the Special Tax levied on Developed Property, which incl udes lots in a finished lot condition. Lots in a finished lot condition also provide less security to the Series 2023 Bond Owners should it be necessary for the District to foreclose on such lot due to the nonpayment of the Special Tax. Furthermore, an i nability to develop the land within the District as currently planned will make the Series 2023 Bond Owners dependent upon timely payment of the Special Tax levied on Developed Property, which includes lots in a finished lot condition. A slowdown or stoppage in the continued development of the District could reduce the willingness and ability of the Developer to make Special Tax payments on lots in a finished lot condition and could greatly reduce the value of such property in the event it has to be foreclosed upon.
Concentration of Property Ownership
Based on the ownership status as of August 7, 2023 , the Merchant Builders are projected to be responsible for approximately 55.25% of the total projected Fiscal Year 2024-25 Special Tax to be levied within the District. Based on ownership status as of October 1, 2023, the Special Tax Consultant estimates that the Merchant Builders will be responsible for approximately ____% of the projected Fiscal Year 2024-25 Special Tax levy . While the District includes completed homes owned by individual homeowners as of 643
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October 1, 2023, the inability or refusal of the Merchant Builders to pay the Special Tax applicable to their respective property when due could result in the depletion of th e Reserve Fund prior to replenishment thereof from sale or foreclosure proceedings, and/or insufficient money with which to pay the principal of and interest on the Series 2023 Bonds as the same became due.
As described under “PROPERTY OWNERSHIP AND THE DE VELOPMENT—New Home Company,” during the term of the Option Agreement, New Home Company is contractually obligated to pay the Special Tax levied on the property subject to such agreement. However, in the event the Option Agreement is terminated prior to Ne w Home Company having acquired all of the lots thereunder, the Special Tax would continue to be levied on the property in the District owned by Arroyo. Arroyo is not a homebuilder; rather, Arroyo is a real estate investment manager that was established for the primary purpose of owning property within the District. No assurances can be made of the willingness and the ability of Arroyo, or its affiliates, to pay such Special Tax.
Additionally, pursuant to the Act, the Special Tax levied in any fiscal year against any parcel of residential property in the District may not be increased as a consequence of delinquency or default by the owners of any other parcels within the District by more than 10% above the amount that would have been levied in that fiscal y ear had there never been any such delinquencies or default. As a result, while the Maximum Special Tax pursuant to the Rate and Method may be higher, the Maximum Special Tax on parcels of residential parcels cannot be greater than 110% of the projected actual Special Tax levy on such parcels.
Effect of Additional Bonds on Credit Quality
The District may at any time after the issuance and delivery of the Bonds issue $55,565,000* payable from the Net Special Tax Revenues on a parity with the Outstanding Series 2023 Bonds and any other Additional Bonds theretofore issued under the Indenture or under any Supplemental Indenture for the purpose of funding additional Facilities costs or for the purpose of refunding all or a portion of the Series 2023 Bonds or any Additional Bonds then Outstanding. Additional Bonds may only be issued subject to specific conditions, which are set forth in the Indenture and with which the District must be in compliance. See “SECURITY AND SOURCES OF PAYMENT FOR THE BONDS — Additional Bonds” and APPENDIX F — “SUMMARY OF CERTAIN PROVISIONS OF THE INDENTURE.”
It is likely that, if Additional Bonds are issued to finance additional Facilities costs, the value -to-lien ratio for certain parcels subject to the Special Tax will be lower th an the ratios shown in this Official Statement. If Additional Bonds are issued, the owners of the Series 2023 Bonds will not have any prior claim on the Special Tax levied on the property within the District, but will have an equal claim with the owners o f any Additional Bonds on the Net Special Tax Revenues collected within the District. Additional Bonds could also be issued at a time where certain of the property upon which Special Taxes will be levied is undeveloped.
This could result in Owners of the Series 2023 Bonds having to rely upon the payment of Special Taxes from Final Mapped Property and/or Undeveloped Property.
Exempt Properties
Certain properties are exempt from the Special Tax in accordance with the Rate and Method . In addition, the Act provides that properties or entities of the State, federal or local government are exempt from the Special Tax; provided, however, that property in the District acquired by a public entity through a negotiated transaction or by gift or devise, which is not otherwise exempt from the Special Tax, will continue to be subject to the Special Tax. In addition, the Act provides that if property subject to the Special Tax is acquired by a public entity through eminent domain proceedings, the obligation to pay the S pecial Tax with respect to that property is to be treated as if it were a special assessment. The constitutionality and operation of these provisions of the Act have not been tested.
* Preliminary, subject to change.
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In particular, insofar as the Act requires payment of the Special Tax by a federal entity acquiring property in the District, it may be unconstitutional. If for any reason property in the District becomes exempt from taxation by reason of ownership by a nontaxable entity such as the federal government or another public agency, subject to the limitation of the maximum authorized rates, the Special Tax will be reallocated to the remaining Taxable Properties in the District. This would result in the owners of such property paying a greater amount of the Special Tax and could hav e an adverse impact upon the timely payment of the Special Tax.
Moreover, if a substantial portion of property in the District becomes exempt from the Special Tax because of public ownership, or otherwise, the Maximum Annual Special Tax which could be lev ied upon the remaining acreage might not be sufficient to pay principal of and interest on the Series 2023 Bonds when due and a default would occur with respect to the payment of such principal and interest.
Constitutional Limitations on Taxation and Appropriations Articles XIIIA and XIIIB of the California Constitution . On June 6, 1978, California voters approved an amendment to the California Constitution, commonly known as Proposition 13 (the Jarvis/Gann Initiative), which added Article XIIIA to the Cal ifornia Constitution. The effect of Article XIIIA is to significantly limit the imposition of new ad valorem taxes, special taxes, transaction taxes, and sales taxes. On November 7, 1978, California voters approved Proposition 8, which made certain clari fications to Article XIIIA.
Article XIIIA of the California Constitution limits the amount of ad valorem taxes on real property to 1% of “full cash value” as determined by the county assessor. Article XIIIA defines “full cash value” to mean “the county assessor’s valuation of real property as shown on the 1975 -76 tax bill under ‘full cash value’ or, thereafter, the appraised value of real property when purchased, newly constructed, or a change in ownership has occurred after the 1975 assessment.” The “ful l cash value” is subject to annual adjustment to reflect increases, not to exceed 2% per year, or decreases in the consumer price index or comparable local data, or to reflect reductions in property value caused by damage, destruction or other factors.
Article XIIIA exempts from the 1% tax limitation any taxes to repay indebtedness approved by the voters prior to July 1, 1978, and allows local governments to raise their property tax rates above the constitutionally mandated 1% ceiling for the purpose of pay ing off certain new general obligation debt issued for the acquisition or improvement of real property and approved by two -thirds of the votes cast by the qualified electorate. Article XIIIA requires a vote of two -thirds of the qualified electorate to imp ose special taxes on real property, while otherwise generally precluding the imposition of any additional ad valorem taxes, special taxes, transaction taxes, and sales taxes. In addition, Article XIIIA requires the approval of two -thirds of all members of the California Legislature to change any State laws resulting in increased tax revenues.
Enactment of Article XIIIA has reduced the amount of general property tax revenues received by the City. This reduction in such revenues makes it less likely that th e City or the District will have surplus funds, other than the Reserve Fund for the Series 2023 Bonds, with which to advance funds to make any payments or to cure any deficiency in the Interest Account or Principal Account of the Special Tax Fund, should the City or the District, as applicable, in the exercise of its discretion, choose to do so. If there are additional delinquencies after exhaustion of funds in the Reserve Fund for the Series 2023 Bonds, none of the City or the District has any obligation to transfer into the Interest Account or Principal Account of the Special Tax Fund the amount of any such delinquencies out of any surplus moneys of the City.
On July 2, 1979, the Fifth District Court of Appeal rendered a 3 -0 decision in the case of County of Fresno v. Malmstrom (94 Cal.App.3d 974), that determined that special assessments are not subject to the limitations of Article XIIIA (Proposition 13). The Court held the one percent tax limitation imposed by California Constitution Article XIIIA on ad valorem taxes does not apply to special assessments levied pursuant to the Improvement Act of 1911 (Streets and Highways Code, Section 5000 et seq ., the relevant portions of which are incorporated in the 1915 Act) and the 1913 Act. The Court further hel d that because special assessments pursuant to such acts are not within the definition of “special taxes” in Article XIIIA, the 645
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Constitution does not require the levy of assessments and the issuance of bonds to be approved by a two-thirds vote of the qualified electors in an assessment district. On September 12, 1979, the California Supreme Court refused to hear an appeal of the lower court’s decision.
At the November 6, 1979, general election, Proposition 4 (the Gann Initiative) was approved by the voters of California. Such proposition added Article XIIIB to the California Constitution.
Article XIIIB of the California Constitution limits the annual appropriations of the State and of any city, county, school district, authority, or other political subdivi sion of the State to the level of appropriations of the particular governmental entity for the prior fiscal year, as adjusted for changes in the cost of living, population and services rendered by the governmental entity. The “base year” for establishing such appropriation limit is the Fiscal Year 1978 -79 and the limit is to be adjusted annually to reflect changes in population, consumer prices and certain increases in the cost of services provided by these public agencies.
Appropriations subject to Article XIIIB generally include the proceeds of taxes levied by the State or other entity of local government, exclusive of certain State subventions, refunds of taxes, benefit payments from retirement, unemployment insurance, and disability insurance funds. “Proceeds of taxes” include, but are not limited to, all tax revenues and the proceeds to an entity of government from (i) regulatory licenses, user charges, and user fees (but only to the extent such proceeds exceed the cost of providing the service or regulation), and (ii) the investment of tax revenues. Article XIIIB includes a requirement that if an entity’s revenues in any year exceed the amounts permitted to be spent, the excess would have to be allocated to fund schools or be returned by revising tax rates or fee schedules over the subsequent two years.
On December 17, 1980, the Third District Court of Appeal rendered a 3 -0 decision in the case County of Placer v. Corin (113 Cal. App. 3d 443) that determined that special assessments are not subject to the limitation of Article XIIIB (Proposition 4). The Court held that the definition of “proceeds of taxes” imposed by California Constitution Article XIIIB does not apply to special assessments and improvement bonds issued pursuant to the 1915 Act and the 1913 Act. The decision of the Court was not appealed.
The enactment of Article XIIIA of the California Constitution (Proposition 13) and subsequent legislative enactments effectively repeal the otherwise mandatory duty on the part of the City, under the 1915 Act, to levy and collect a special tax (in an amount necessary to meet delinquencies, but not to exceed ten cents on each $100 of assessable property within the City i n any one year) if other funds are not available to cover delinquencies.
In early 1990, the U.S. Supreme Court struck down as a violation of equal protection certain property tax assessment practices in West Virginia, which had resulted in vastly different assessments of similar properties. Since Article XIIIA provides that property may only be assessed up to 2%, per year, except upon change of ownership or new construction, recent purchasers may pay substantially higher property taxes than long-time owner s of comparable property in a community. The Supreme Court in the West Virginia case expressly declined to comment in any way on the constitutionality of Article XIIIA.
Based on this decision, however, property owners in California brought three suits cha llenging the acquisition value assessment provisions of Article XIIIA. Two cases involve residential property and one case involves commercial property. In all three cases, State trial and appellate courts have upheld the constitutionality of Article XII IA’s assessment rules and concluded that the West Virginia case did not apply to California’s laws. On June 3, 1991, the U.S. Supreme Court agreed to hear the appeal in the challenge relating to commercial property, but the plaintiff subsequently decided to drop the case.
On October 7, 1991, the U.S. Supreme Court granted the plaintiff’s petition for a writ of certiorari and agreed to hear the Nordlinger v. Lynch case. On June 18, 1992, the U.S. Supreme Court affirmed the Nordlinger decision (112 U.S. 232 6) of the California Court of Appeal, Second Appellate District, which previously held that Article XIIIA does not violate the U.S. Constitution. 646
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The City cannot predict whether any other pending or future challenges to the State’s present system of property tax assessment will be successful, when the ultimate resolution of any challenge will occur, or the ultimate effect any decision regarding the State’s present system of property tax assessment will have on the City’s revenues or on the State’s financial obligations to local governments.
Articles XIIIC and XIIID of the California Constitution . Proposition 218, a state ballot initiative known as the “Right to Vote on Taxes Act,” was approved by California voters on November 6, 1996.
Proposition 218 added Articles XIIIC and XIIID to the State Constitution, and, with the exception of certain provisions, Articles XIIIC and XIIID became effective on November 6, 1996.
Among other things, Proposition 218 imposed certain voting requirements and other limitations on the imposition of new or increased taxes, assessments, and property -related fees and charges. Under Proposition 218 (i) all taxes imposed by local governments are deemed to be either general taxes, or special taxes, (ii) no local government may impose , extend, or increase any general tax unless and until such tax is submitted to the electorate and approved by a majority vote, and (iii) no local government may impose, extend, or increase any special tax unless and until such tax is submitted to the electorate and approved by a two-thirds vote. Special purpose districts, including community facilities districts and assessment districts, have no power to levy general taxes. The City believes that the issuance of the Series 2023 Bonds does not require the conduct of further proceedings under the Mello -Roos Act, or Proposition 218, as applicable, other than as described herein.
Proposition 218 provides that the initiative power shall “not be prohibited or otherwise limited in matters reducing or repealing a ny local tax, assessment, fee or charge...” Thus, Proposition 218 removes limitations on the initiative power in matters of, among other things, the Special Tax. Consequently, it is conceivable that the voters of the City or the District could, by future initiative, repeal, reduce, or prohibit the future imposition or increase of any Special Tax, subject to overriding federal constitutional principles relating to impairment of contracts.
Although the provisions of Article XIIIC have not been interpreted b y the courts, the City believes that the initiative power cannot be used to reduce or repeal the unpaid Special Tax that are pledged as security for payment of the Series 2023 Bonds or to otherwise interfere with the mandatory, statutory duty of the City and the County Auditor with respect to the unpaid Special Tax that are pledged as security for payment of the Series 2023 Bonds.
The Appellate District, Division One, issued its opinion in 2014 in City of San Diego v. Melvin Shapiro, et al. (228 Cal. App. 4th 756) (the “San Diego Decision”). The case involved a Convention Center Facilities District (the “CCFD”) established by the City of San Diego. The CCFD is a financing district much like a community facilities district established under the provisions of the Act. The CCFD is comprised of all of the real property in the entire City of San Diego. However, the special tax to be l evied within the CCFD was to be levied only on hotel properties located within the CCFD.
The election authorizing the special tax was limited to owners of hotel properties and lessees of real property owned by a governmental entity on which a hotel is loca ted. Thus, the election was not a registered voter election. Such approach to determining who would constitute the qualified electors of the CCFD was modeled after Section 53326(c) of the Act, which generally provides that, if a special tax will not be apportioned in any tax year on residential property, the legislative body may provide that the vote shall be by the landowners of the proposed district whose property would be subject to the special tax. The Court held that the CCFD special tax election wa s invalid under the California Constitution because Article XIIIA, Section 4 thereof and Article XIIIC, Section 2 thereof require that the electors in such an election be the registered voters within the district.
The facts of the San Diego Decision show t hat there were hundreds of thousands of registered voters within the CCFD (viz., all of the registered voters in the City of San Diego). There were no registered voters 647
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in the District at the time of formation. In the San Diego Decision, the Court expres sly stated that it was not addressing the validity of landowner voting to impose special taxes pursuant to the Act in situations where there are fewer than 12 registered voters. Thus, by its terms, the Court’s holding does not apply to the Special Tax elections in the District. Moreover, Section 53341 of the Act provides that any “action or proceeding to attack, review, set aside, void or annul the levy of a special tax…shall be commenced within 30 days after the special tax is approved by the voters.” S imilarly, Section 53359 of the Act provides that any action to determine the validity of bonds issued pursuant to the Act be brought within 30 days of the voters approving the issuance of such bonds. On December 21, 2021 , the Master Developer , Woodside, A rroyo, Lennar and New Home Company, the qualified voters within the District at the time of the election, approved the Special Tax and the issuance of bonds. Based on Sections 53341 and 53359 of the Act and analysis of existing laws, regulations, rulings and court decisions, the City believes the Special Tax is being levied in accordance with the Rate and Method.
The interpretation and application of Proposition 218 will ultimately be determined by the courts with respect to a number of the matters discuss ed above, and it is not possible at this time to predict with certainty the outcome of such determination.
Maximum Special Tax
Within the limits of the Special Tax, the District may adjust the Special Tax levied on all property in the District to provide a n amount required to pay interest on and principal of the Series 2023 Bonds, and the amount, if any, necessary to cure delinquencies and replenish the Reserve Fund to an amount equal to the Reserve Requirement for the respective Bonds and to pay Administra tive Expenses. However, the amount of the Special Tax that may be levied against any property in the District is subject to the Maximum Special Tax applicable to it. There is no assurance that the Maximum Special Tax on the property in the District will be sufficient to pay the amounts required to be paid by the Indenture at all times. Additionally, pursuant to the Act, the Special Tax levied in any fiscal year against any parcel of residential property in the District may not be increased as a consequence of delinquency or default by the owners of any other parcels within the District by more than 10% above the amount that would have been levied in that fiscal year had there never been any such delinquencies or defaults. See “SECURITY AND SOURCES OF PAY MENT FOR THE SERIES 2023 BONDS — Special Tax.”
Payment of the Special Tax is Not a Personal Obligation of the Owners An owner of a parcel of Taxable Property is not personally obligated to pay the Special Tax. Rather, the Special Tax is an obligation only against the parcel of Taxable Property. If the value of a parcel is not sufficient, taking into account other obligations also payable thereby, to fully secure the Special Tax, the District has no recourse against the owner.
Disclosures to Future Purchasers
The District has recorded a notice of the Special Tax lien in the Office of the County Recorder. While title companies normally refer to such notices in title reports, there can be no guarantee that such reference will be made or, if made, that a pros pective purchaser or lender will consider such Special Tax obligation in the purchase of a parcel of land, a home or a commercial or industrial facility in the District or the lending of money thereon. The Act requires the subdivider (or its agent or repr esentative) of a subdivision to notify a prospective purchaser or long-term lessor of any lot, parcel, or unit subject to a Mello –Roos special tax of the existence and maximum amount of such special tax using a statutorily prescribed form. California Civi l Code Section 1102.6b requires that in the case of transfers other than those covered by the above requirement, the seller must at least make a good faith effort to notify the prospective purchaser of the special tax lien in a format prescribed by statute . Failure by an owner of the property to comply with the above requirements, or failure by a purchaser or lessor to consider or understand the nature and existence of the Special Tax, could adversely affect the willingness and ability of the purchaser or lessor to pay the Special Tax when due. 648
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Parity Taxes and Special Assessments
The ability or willingness of a property owner in the District to pay the Special Tax could be affected by the existence of other taxes and assessments imposed upon the property. The Special Tax and any penalties thereon will constitute a lien against the lots and parcels of land on which they will be annually imposed until they are paid. Such lien is on a parity with all special tax and special assessments levied by other agencies and is co-equal to and independent of the lien for general property taxes, other special taxes, and certain special assessments regardless of when they are imposed upon the same property. The Special Tax has priority over all existing and future privat e liens imposed on the property. In addition, other public agencies whose boundaries overlap those of the District could, with or in some circumstances without the consent of the owners of the land in the District, impose additional taxes or assessment liens on the property in the District in order to finance public improvements to be located inside or outside of the District.
The District has no control over the ability of other entities and districts to issue indebtedness secured by special tax or assessments payable from all or a portion of the property in the District. In addition, the City is not prohibited itself from establishing assessment districts, community facilities districts or other districts which might impose assessments or taxes against p roperty in the District. In the event any additional improvements are financed pursuant to the establishment of an assessment district, community facilities district or other district, any taxes or assessments levied to finance such improvements will have a lien on a parity with the lien of the Special Tax. The imposition of additional liens on a parity with the Special Tax could reduce the ability or willingness of the property owners to pay the Special Tax and increase the possibility that foreclosure proceeds will not be adequate to pay delinquent Special Tax or the principal of and interest on the Series 2023 Bonds when due.
Depletion of Reserve Fund
The Reserve Fund is to be maintained at an amount equal to the Reserve Requirement. Money in said fund may be used to pay debt service on the Series 2023 Bonds in the event the proceeds of the levy and collection of the Special Tax against property in the District are insufficient. If funds in the Reserve Fund are used to pay debt service on the Series 2023 Bonds, the funds can be replenished from the proceeds of the levy and collection of the Special Tax that are in excess of the amount required to pay all amounts to be paid pursuant to the Indenture. However, no replenishment from the proceeds of a levy of the Special Tax can occur as long as the proceeds that are collected from the levy of the Special Tax at the maximum tax rates, together with other available funds, remain insufficient to pay all such amounts. Thus, it is possible that the Reserve Fund will be depleted by its use to pay such amounts and will not be replenished by the levy of the Special Tax. There is no assurance that the amount in the Reserve Fund will, at any particular time, be sufficient to pay all such amounts or that any amounts of the Reserve Requirement used for debt service on the Series 2023 Bonds will be fully replenished from the proceeds of the levy and collection of the Special Tax.
Bankruptcy and Legal Delays
The payment of the Special Tax and the ability of the District to foreclose the lien of a delinquent unpaid tax, as discussed in “SECURITY AND SOURCES OF PAYMENT FOR THE SERIES 2023 BONDS,” may be limited by bankruptcy, insolvency or other laws generally affecting creditors’ rights or by the laws of the State of Cali fornia relating to judicial foreclosure. In addition, the prosecution of a foreclosure action could be delayed due to crowded local court calendars or delays in the legal process. The various legal opinions to be delivered concurrently with the delivery of the Series 2023 Bonds (including Bond Counsel’s approving legal opinion) will be qualified as to the enforceability of the various legal instruments by bankruptcy, insolvency, reorganization, moratorium and other similar laws affecting creditors’ rights , by the application of equitable principles and by the exercise of judicial discretion in appropriate cases.
Although bankruptcy proceedings would not cause the obligation to pay the Special Tax to become extinguished, the bankruptcy of a property owner could result in a delay in prosecuting superior court 649
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foreclosure proceedings because federal bankruptcy laws may provide for an automatic stay of foreclosure and sale of tax sale proceedings. Any such delays could increase the likelihood of a delay or default in payment of the principal of and interest on the Series 2023 Bonds and the possibility of delinquent ta x installments not being paid in full. Moreover, if the value of the subject property is less than the lien of the Special Tax, such excess could be treated as an unsecured claim by the bankruptcy court. Further, should remedies be exercised under the federal bankruptcy laws against Taxable Property, payment of the Special Tax may be subordinated to bankruptcy law priorities. Thus, certain claims may have priority over the Special Tax in a bankruptcy proceeding even though they would not outside of a bankruptcy proceeding.
FDIC/Federal Government Interests In Properties
The ability of the District to collect interest and penalties specified by the Act and to foreclose the lien of delinquent Special Tax may be limited in certain respects with regard to par cels in which the Federal Deposit Insurance Corporation (the “FDIC”), or other federal government entities such as Fannie Mae or Freddie Mac, has or obtains an interest.
In the case of the FDIC, in the event that any financial institution making a loan whi ch is secured by parcels is taken over by the FDIC and the applicable Special Tax is not paid, the remedies available to the District may be constrained. The FDIC’s policy statement regarding the payment of state and local real property taxes (the “Policy Statement”) provides that taxes other than ad valorem taxes which are secured by a valid lien in effect before the FDIC acquired an interest in a property will be paid unless the FDIC determines that abandonment of its interests is appropriate. The Polic y Statement provides that the FDIC generally will not pay installments of non-ad valorem taxes which are levied after the time the FDIC acquires its fee interest, nor will the FDIC recognize the validity of any lien to secure payment except in certain case s where the Resolution Trust Corporation had an interest in property on or prior to December 31, 1995. Moreover, the Policy Statement provides that, with respect to parcels on which the FDIC holds a mortgage lien, the FDIC will not permit its lien to be foreclosed out by a taxing authority without its specific consent, nor will the FDIC pay or recognize liens for any penalties, fines or similar claims imposed for the nonpayment of taxes.
The FDIC has taken a position similar to that expressed in the Policy Statement in legal proceedings brought against Orange County, California, in United States Bankruptcy Court and in Federal District Court.
The Bankruptcy Court issued a ruling in favor of the FDIC on certain of such claims. Orange County appealed that ruling, and the FDIC cross -appealed. On August 28, 2001, the Ninth Circuit Court of Appeals issued a ruling favorable to the FDIC except with respect to the payment of pre -receivership liens based upon delinquent property tax.
The District is unable to predict what effect the application of the Policy Statement would have in the event of a delinquency with respect to parcels in which the FDIC has or obtains an interest, although prohibiting the lien of the FDIC to be foreclosed out at a judicial foreclosure sale would prevent or delay the foreclosure sale.
In the case of Fannie Mae and Freddie Mac, in the event a parcel of Taxable Property is owned by a federal government entity or federal government sponsored entity, such as Fannie Mae or Freddie Mac, or in the event a private deed of trust secured by a parcel of Taxable Property is owned by a federal government entity or federal government sponsored entity, such as Fannie Mae or Freddie Mac, the ability to foreclose on the parcel or to collect delinquent Sp ecial Tax may be limited. Federal courts have held that, based on the supremacy clause of the United States Constitution, in the absence of Congressional intent to the contrary, a state or local agency cannot foreclose to collect delinquent taxes or asses sments if foreclosure would impair the federal government interest. This means that, unless Congress has otherwise provided, if a federal government entity owns a parcel of Taxable Property but does not pay taxes and assessments levied on the parcel (including the Special Tax), the applicable state and local governments cannot foreclose on the parcel to collect the delinquent taxes and assessments.
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Moreover, unless Congress has otherwise provided, if the federal government has a mortgage interest in the pa rcel and the District wishes to foreclose on the parcel as a result of delinquent Special Tax, the property cannot be sold at a foreclosure sale unless it can be sold for an amount sufficient to pay delinquent taxes and assessments on a parity with the Spe cial Tax and preserve the federal government’s mortgage interest.
The District’s remedies may also be limited in the case of delinquent Special Tax with respect to parcels in which other federal agencies (such as the Internal Revenue Service and the Drug E nforcement Administration) have or obtain an interest.
Geologic, Topographic and Climatic Conditions
The District, like all California communities, may be subject to unpredictable seismic activity, fires, flood, or other natural disasters. Southern California is a seismically active area. Seismic activity represents a potential risk for damage to buildings, roads, bridges and property within the District. In addition, land susceptible to seismic activity may be subject to liquefaction during the occurrence of such event. The District is not located within an identified earthquake study zone.
Like all of Southern California, the land within the District is subject to seismic activity. The District is not located in a designated Earthquake Study Zone and there are no known active faults crossing the site .
However, the Chino Fault is located approximately 6.6 miles southwest of the District and the Cucamonga Fault Zone is located approximately 12.6 miles north of the District. Other known regional active faults that could affect the site include the Whittier, Elsinore-Glen Ivy, San Jose, Cucamonga, Sierra Madre, San Jacinto- San Bernardino segment, Puente Hills and San Andreas faults.
The Federal Emergency Management Agency has determined that the Di strict is located in a Zone “X” flood area (an area of minimal flooding, within the 500 -year flood plain), and flood insurance will not be required. The area is protected by a levee.
In recent years, portions of Southern California have experienced wildfires that have burned thousands of acres and destroyed thousands of homes and structures, even in areas not previously thought to be prone to wildfires. While the District is not aware of any particular risk of wildfire within the District, there can be no assurances that wildfires won’t occur within the District. Property damage due to wildfire could result in a significant decrease in the market value of property in District and in the ability or willingness of property owners to pay the Special Tax when due.
In the event of a severe earthquake, fire, flood or other natural disaster, there may be significant damage to both property and infrastructure in the District. As a result, a substantial portion of the property owners may be unable or unwilling t o pay the Special Tax when due. In addition, the value of land in the District could be diminished in the aftermath of such a natural disaster, reducing the resulting proceeds of foreclosure sales in the event of delinquencies in the payment of the Special Tax.
Methane Gas
[Like much of the property within the City and surrounding areas, the property within the District has previously been utilized as dairy pastures and agricultural fields. A Methane Gas Investigation report dated ______, 20__ (the “MGI”) was prepared by __________ for __________. The MGI concluded that based on the results of field sampling and lab testing, it was determined that methane gas was either not detected or below the level that would require any type of remediation or further studies.] 651
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Hazardous Substances
While governmental taxes, assessments, and charges are a common claim against the value of a parcel of Taxable Property, other less common claims may be relevant. One example is a claim with regard to a hazardous substance.
In general, the owners and operators of a parcel of Taxable Property may be required by law to remedy conditions of the parcel relating to releases or threatened releases of hazardous substances. The federal Comprehensive Environmental Response, Compensat ion and Liability Act of 1980, sometimes referred to as “CERCLA” or the “Superfund Act,” is the most well -known and widely applicable of these laws, but California laws with regard to hazardous substances are also stringent and similar. Under many of thes e laws, the owner (or operator) is obligated to remedy a hazardous substance condition of property whether or not the owner (or operator) has anything to do with creating or handling the hazardous substance. The effect, therefore, should any of the Taxabl e Property be affected by a hazardous substance is to reduce the marketability and value of the parcel by the costs of remedying the condition, because the purchaser, upon becoming owner, will become obligated to remedy the condition just as is the seller. Further, such liabilities may arise not simply from the existence of a hazardous substance but from the method of handling it. All of these possibilities could significantly affect the value of the property that is realizable upon a delinquency and foreclosure.
While the District is not aware that the owner (or operator) of any of Taxable Property has such a current liability with respect to any of the Taxable Property, it is possible that such liabilities do currently exist and that the District is not aware of them. The Merchant Builders and the Master Developer have also represented to the District that they are not aware of any federally or State classified hazardous substances located on its property within the District.
Further, it is possible that liabilities may arise in the future with respect to any of the Taxable Property resulting from the existence, currently, on the parcel of a substance presently classified as hazardous but which has not been released or the release of which is not present ly threatened, or may arise in the future resulting from the existence, currently, on the parcel of a substance not presently classified as hazardous but which may in the future be so classified. Further, such liabilities may arise not simply from the exi stence of a hazardous substance but from the method of handling it. All of these possibilities could significantly affect the value of a parcel of Taxable Property that is realizable upon a delinquency.
No Acceleration Provision
The Indenture does not con tain a provision allowing for the acceleration of the Series 2023 Bonds in the event of a payment default or other default under the terms of the Series 2023 Bonds or the Indenture.
Bonds Are Limited Obligations
Neither the faith and credit nor the taxing power of the District (except to the limited extent set forth in the Indenture), the City, the State, or any political subdivision thereof, is pledged to the payment of the Series 2023 Bonds. The Series 2023 Bonds are limited obligations of the District; and, except as provided in the Indenture, they are payable solely from Net Special Tax Revenues and the other assets pledged therefor under the Indenture. Net Special Tax Revenues could be insufficient to pay de bt service on the Series 2023 Bonds as a result of delinquencies in the payment of the Special Tax or the insufficiency of proceeds derived from the sale of land within the District following a delinquency in the payment of the applicable Special Tax.
Neither the City nor the District has any obligation to pay debt service on the Series 2023 Bonds in the event of insufficient Net Special Tax Revenues, except to the extent that money is available for such purpose in the Reserve Fund. The District’s only ob ligation with respect to delinquent Special Tax is to pursue judicial foreclosure proceedings under the circumstances described in the Indenture. See “SECURITY AND SOURCES OF PAYMENT FOR THE SERIES 2023 BONDS — Covenant for Superior Court Foreclosure.” 652
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Loss of Tax Exemption
As discussed under “TAX MATTERS,” interest on the Series 2023 Bonds could become includable in gross income for purposes of federal income taxation retroactive to the date of issuance, as a result of acts or omissions of the District su bsequent to the issuance of the Series 2023 Bonds in violation of the District’s covenants with respect to the Series 2023 Bonds . Should interest become includable in gross income, the Series 2023 Bonds are not subject to redemption by reason thereof and will remain outstanding until maturity or unless earlier redeemed pursuant to optional or mandatory redemption or redemption upon prepayment of the Special Tax.
Potential Early Redemption of Bonds from Special Tax Prepayments Property owners within the Dis trict are permitted to prepay their Special Tax at any time. Such payments will result in a mandatory redemption of Series 2023 Bonds from Special Tax prepayments on the Interest Payment Date for which timely notice may be given under the Indenture follow ing the receipt of such Special Tax prepayment. The resulting redemption of Series 2023 Bonds purchased at a price greater than par could reduce the otherwise expected yield on such Series 2023 Bonds. See “THE SERIES 2023 BONDS — Redemption — Mandatory Redemption from Special Tax Prepayments.” No Teeter Plan
Although the San Bernardino County Board of Supervisors has adopted the Alternative Method of Distribution of Tax Levies and Collections and of Tax Sale Proceeds (the “Teeter Plan”) which allows each entity levying secured property taxes in the County to draw on the amount of property taxes levied rather than the amount actually collected, as provided for in Section 4701 et seq. of the California Revenue and Taxation Code, the District is not included in the Teeter Plan. Consequently, the District may not draw on the County Tax Loss Reserve Fund in the event of delinquencies in Special Tax payments.
Impact of Economic Conditions on the Development in the District Certain events and factors which negati vely affect the regional, State and national economies could have an adverse effect on the pace at which the merchant builders are able to complete and sell homes and demand by and the ability of individuals to purchase homes within the District. Such events and factors could include rising inflation and interest rates, persistent supply chain issues, further impacts of the COVID -19 pandemic and global market instability caused by the war in Ukraine. Any adverse impact of the foregoing and other economic factors on the projects in the District and the real estate market in general cannot be predicted.
Increasing Mortgage Interest Rates
30-year fixed mortgage interest rates have increased substantially within the past year . Increases in mortgage interest rates could have a negative i mpact on the estimated absorption rates of the planned for -sale residential units in the District described herein. With respect to entry -level households, increased mortgage interest rates may adversely impact the affordability of homes and may increase mortgage payment levels for owning a lower-priced home relative to renting a residence, thereby making purchasing less attractive. With respect to move-up households, higher mortgage interest rates may impact the desire of current homeowners to move from their present home due to the fact that their present home likely has a relatively low mortgage interest rate. In addition, the new home would likely have a higher interest rate on a new mortgage loan as well as higher purchase price and property taxes. Such considerations may decrease the desire for move -up households to purchase a new home.
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CONTINUING DISCLOSURE
The District
Pursuant to the District Continuing Disclosure Agreement, the District has agreed to provide, or cause to be provided, to the El ectronic Municipal Market Access System of the Municipal Securities Rulemaking Board, which can be found on the Internet at www.emma.msrb.org (“EMMA”) on an annual basis, commencing April 1, 2024, certain financial information and operating data concerning the District. The District has further agreed to provide notice to EMMA of certain listed events. The District’s covenants have been made in order to assist the Underwriter in complying with Rule 15c2 -12 adopted by the Securities and Exchange Commission.
The District has not previously entered into any undertaking with respect to Rule 15c2 -12. However, the City and its related governmental entities (the “City Entities”) for whom City staff is responsible for undertaking compliance with continuing disclo sure undertakings have previously entered into numerous disclosure undertakings under the Rule 15c2-12 in connection with the issuance of long-term obligations.
In order to ensure ongoing compliance with its continuing disclosure undertakings, the City has designated staff members within the Investments & Revenue Resources Department with the responsibility of ensuring timely and complete filings. In addition, the City has retained an outside consultant to conduct periodic reviews of City compliance.
Within the last five years, the City and the City Entities have not failed to timely comply with their respective prior continuing disclosure obligations under Rule 15c2 -12 in all material respects except that certain information with respect to outstanding ind ebtedness of the City was not included in the Fiscal Year 2021 annual report for the Ontario Public Financing Authority 2017 Lease Revenue Refunding Bonds, the City of Ontario 2020 Taxable Pension Obligations Bonds and the Ontario Public Financing Authorit y 2021 Lease Revenue Refunding Bonds, Series A (Federally Taxable); the City’s Fiscal Year 2020 -21 audited financial statements were not available at the time of the 2021 annual reports but have since been posted and such information is included in the not es to the City’s Fiscal Year 2020 -21 audited financial statements. The full text of the form of the District Continuing Disclosure Agreement is set forth in APPENDIX G.
New Home Company
New Home Company will also covenant in a Developer Continuing Disclosure Agreement, the form of which is set forth in Appendix H, for the benefit of the Owners, to provide semi -annual reports containing updates of certain development information within the Official Statement regarding its propert y in the District and notices of certain significant events. The specific nature of the information to be contained in the semi - annual reports or notices of significant events and certain other terms of the continuing disclosure obligations of New Home Company is contained in Appendix H — “FORM OF DEVELOPER CONTINUING DISCLOSURE AGREEMENT.”
[To the actual knowledge of New Home Company, other than as disclosed below, New Home Company has not failed to comply in any material respects with its previous unde rtakings by it to provide periodic continuing disclosure reports or notices of listed events with respect to community facilities district or assessment district bond issues in southern California within the past five years.] The obligations of New Home Company under its Developer Continuing Disclosure Agreement will terminate upon the earliest to occur of: (i) the legal defeasance, prior redemption or payment in full of all of the Bonds; (ii) the date on which New Home Company and any affiliate of New Home Company, collectively, have conveyed to homebuyers at least __ of the __ residential units planned to be constructed by New Home in the District subject to the Special Tax; or (iii) the date on which __ or more of the __ residential units planned to be constructed in the District subject to the Special Tax have been conveyed to homebuyers. 654
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The Master Developer
The Master Developer will also covenant in a Developer Continuing Disclosure Agreement, the form of which is set forth in Appendix H, for the benefit of the Owners, to provide semi -annual reports containing updates of certain development information within the Official Statement regarding its property in the District and notices of certain significant events. The specific nature of the information to be contained in the semi - annual reports or notices of significant events and certain other terms of the continuing disclosure obligations of the Master Developer is contained in Appendix H — “FORM OF DEVELOPER CONTINUING DISCLOSURE AGREEMENT.”
[To the actual knowledge of the Master Developer , other than as disclosed below, the Master Developer has not failed to comply in any material respects with its previous undertakings by it to provide periodic continuing disclosure reports or notices of listed events with respect to community facilities district or assessment district bond issues in southern California within the past five years.
The obligations of the Master Developer under its Developer Continuing Disclosure Agreement will terminate upon the earliest to occur of: (i) the legal defeasance, prior redemption or payment in full of all of the Bonds; (ii) the date on which the Master Developer and any affiliate of the Master Developer, collectively, have conveyed to homebuyers at least __ of the __ residential units planned to be constructed by the Master Developer in the District subject to the Special Tax; or (iii) the date on which __ or more of the __ residential units planned to be constructed in the District subject to the Special Tax have been conveyed to homebuyers.]
TAX MATTERS
In the opinion of Orrick, Herrington & Sutcliffe LLP, Bond Counsel to the District (“Bond Counsel”), based upon an analys is of existing laws, regulations, rulings and court decisions, and assuming, among other matters, the accuracy of certain representations and compliance with certain covenants, interest on the Series 2023 Bonds is excluded from gross income for federal inc ome tax purposes under Section 103 of the Internal Revenue Code of 1986 (the “Code”) and is exempt from State of California personal income taxes. Bond Counsel is of the further opinion that interest on the Series 2023 Bonds is not a specific preference i tem for purposes of the federal individual alternative minimum tax. Bond Counsel observes that, for tax years beginning after December 31, 2022, interest on the Series 2023 Bonds included in adjusted financial statement income of certain corporations is n ot excluded from the federal corporate alternative minimum tax. Bond Counsel expresses no opinion regarding any other tax consequences related to the ownership or disposition of, or the amount, accrual or receipt of interest on, the Series 2023 Bonds. A complete copy of the proposed form of opinion of Bond Counsel is set forth in APPENDIX D hereto.
To the extent the issue price of any maturity of the Series 2023 Bonds is less than the amount to be paid at maturity of such Series 2023 Bonds (excluding amou nts stated to be interest and payable at least annually over the term of such Series 2023 Bonds ), the difference constitutes “original issue discount,” the accrual of which, to the extent properly allocable to each Beneficial Owner thereof, is treated as interest on the Series 2023 Bonds which is excluded from gross income for federal income tax purposes and exempt from State of California personal income taxes. For this purpose, the issue price of a particular maturity of the Series 2023 Bonds is the first price at which a substantial amount of such maturity of the Series 2023 Bonds is sold to the public (excluding bond houses, brokers, or similar persons or organizations acting in the capacity of underwriters, placement agents or wholesalers). The original issue discount with respect to any maturity of the Series 2023 Bonds accrues daily over the term to maturity of such Series 2023 Bonds on the basis of a constant interest rate compounded semiannually (with straight -line interpolations between compoundin g dates). The accruing original issue discount is added to the adjusted basis of such Series 2023 Bonds to determine taxable gain or loss upon disposition (including sale, redemption, or payment on maturity) of such Series 2023 Bonds.
Beneficial Owners o f the Series 2023 Bonds should consult their own tax advisors with respect to the tax consequences of ownership of Series 2023 Bonds with original issue discount, including the treatment of 655
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Beneficial Owners who do not purchase such Series 2023 Bonds in the original offering to the public at the first price at which a substantial amount of such Series 2023 Bonds is sold to the public.
Series 2023 Bonds purchased, whether at original issuance or otherwise, for an amount higher than their principal amount payable at maturity (or, in some cases, at their earlier call date) (“Premium Series 2023 Bonds”) will be treated as having amortizable bond premium. No deduction is allowable for the amortizable bond premium in the case of bonds, like the Premium Series 2023 Bonds, the interest on which is excluded from gross income for federal income tax purposes. However, the amount of tax-exempt interest received, and a Beneficial Owner’s basis in a Premium Series 2023 Bond, will be reduced by the amount of amortizable bond premium properly allocable to such Beneficial Owner. Beneficial Owners of Premium Series 2023 Bonds should consult their own tax advisors with respect to the proper treatment of amortizable bond premium in their particular circumstances.
The Code impo ses various restrictions, conditions and requirements relating to the exclusion from gross income for federal income tax purposes of interest on obligations such as the Series 2023 Bonds . The District has made certain representations and covenanted to com ply with certain restrictions, conditions and requirements designed to ensure that interest on the Series 2023 Bonds will not be included in federal gross income. Inaccuracy of these representations or failure to comply with these covenants may result in interest on the Series 2023 Bonds being included in gross income for federal income tax purposes, possibly from the date of original issuance of the Series 2023 Bonds . The opinion of Bond Counsel assumes the accuracy of these representations and compliance with these covenants. Bond Counsel has not undertaken to determine (or to inform any person) whether any actions taken (or not taken), or events occurring (or not occurring), or any other matters coming to Bond Counsel’s attention after the date of issu ance of the Series 2023 Bonds may adversely affect the value of, or the tax status of interest on, the Series 2023 Bonds. Accordingly, the opinion of Bond Counsel is not intended to, and may not, be relied upon in connection with any such actions, events or matters.
Although Bond Counsel is of the opinion that interest on the Series 2023 Bonds is excluded from gross income for federal income tax purposes and is exempt from State of California personal income taxes, the ownership or disposition of, or the a ccrual or receipt of amounts treated as interest on, the Series 2023 Bonds may otherwise affect a Beneficial Owner’s federal, state or local tax liability. The nature and extent of these other tax consequences depends upon the particular tax status of the Beneficial Owner or the Beneficial Owner’s other items of income or deduction. Bond Counsel expresses no opinion regarding any such other tax consequences.
Current and future legislative proposals, if enacted into law, clarification of the Code or court decisions may cause interest on the Series 2023 Bonds to be subject, directly or indirectly, in whole or in part, to federal income taxation or to be subject to or exempted from state income taxation, or otherwise prevent Beneficial Owners from realizing the full current benefit of the tax status of such int erest. The introduction or enactment of any such legislative proposals or clarification of the Code or court decisions may also affect, perhaps significantly, the market price for, or marketability of, the Series 2023 Bonds. Prospective purchasers of the Series 2023 Bonds should consult their own tax advisors regarding the potential impact of any pending or proposed federal or state tax legislation, regulations or litigation, as to which Bond Counsel expresses no opinion.
The opinion of Bond Counsel is ba sed on current legal authority, covers certain matters not directly addressed by such authorities, and represents Bond Counsel’s judgment as to the proper treatment of the Series 2023 Bonds for federal income tax purposes. It is not binding on the Interna l Revenue Service (“IRS”) or the courts. Furthermore, Bond Counsel cannot give and has not given any opinion or assurance about the future activities of the District, or about the effect of future changes in the Code, the applicable regulations, the interpretation thereof or the enforcement thereof by the IRS. The District has covenanted, however, to comply with the requirements of the Code.
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Bond Counsel’s engagement with respect to the Series 2023 Bonds ends with the issuance of the Series 2023 Bonds, and, unless separately engaged, Bond Counsel is not obligated to defend the District or the Beneficial Owners regarding the tax -exempt status of the Series 2023 Bonds in the event of an audit examination by the IRS. Under current procedures, Beneficial Owne rs would have little, if any, right to participate in the audit examination process. Moreover, because achieving judicial review in connection with an audit examination of tax -exempt bonds is difficult, obtaining an independent review of IRS positions wit h which the District legitimately disagrees, may not be practicable. Any action of the IRS, including but not limited to selection of the Series 2023 Bonds for audit, or the course or result of such audit, or an audit of bonds presenting similar tax issue s may affect the market price for, or the marketability of, the Series 2023 Bonds, and may cause the District or the Beneficial Owners to incur significant expense.
Payments on the Series 2023 Bonds generally will be subject to U.S. information reporting a nd possibly to “backup withholding.” Under Section 3406 of the Code and applicable U.S. Treasury Regulations issued thereunder, a non -corporate Beneficial Owner of Series 2023 Bonds may be subject to backup withholding with respect to “reportable payments ,” which include interest paid on the Series 2023 Bonds and the gross proceeds of a sale, exchange, redemption, retirement or other disposition of the Series 2023 Bonds.
The payor will be required to deduct and withhold the prescribed amounts if (i) the payee fails to furnish a U.S. taxpayer identification number (“TIN”) to the payor in the manner required, (ii) the IRS notifies the payor that the TIN furnished by the payee is incorrect, (iii) there has been a “notified payee underreporting” described in Section 3406(c) of the Code or (iv) the payee fails to certify under penalty of perjury that the payee is not subject to withholding under Section 3406(a)(1)(C) of the Code. Amounts withheld under the backup withholding rules may be refunded or credited against a Beneficial Owner’s federal income tax liability, if any, provided that the required information is timely furnished to the IRS. Certain Beneficial Owners (including among others, corporations and certain tax -exempt organizations) are not subject t o backup withholding. The failure to comply with the backup withholding rules may result in the imposition of penalties by the IRS.
ABSENCE OF LITIGATION
In connection with the issuance of the Series 2023 Bonds , Best Best & Krieger LLP (“Issuer’s Counsel”) will deliver an opinion to the effect that, to Issuer’s Counsel’s current actual knowledge, there is no action, suit, proceeding or investigation at law or in equity before or by any court, public board or body, pending (notice of which has been served on the City or the District) or to the Issuer’s Counsel’s current actual knowledge, threatened, wherein an unfavorable decision, ruling or finding, against or affecting the City or the District, would adversely impact the ability of the City or the District to complete the transactions described in, or contemplated by, the Indenture or this Official Statement, restrain or enjoin the collection of the Special Tax, or in any way contest or affect the validity of the Series 2023 Bonds, the Indenture, the Specia l Tax, or the transactions described herein.
ABSENCE OF RATINGS
The District has not made, and does not contemplate making, application to any rating organization for a rating on the Series 2023 Bonds.
CERTAIN LEGAL MATTERS
The validity of the Series 2023 Bonds and certain other legal matters are subject to the approving opinion of Orrick, Herrington & Sutcliffe LLP, Bond Counsel to the District. A copy of the form of such approving opinion is attached hereto as APPENDIX D. Copies of such approving opinio n will accompany each Series 2023 Bond. Bond Counsel has not undertaken any responsibility for the accuracy, completeness or fairness of the Official Statement or other offering materials relating to the Series 2023 Bonds and expresses no opinion relating thereto. Certain legal matters will be passed upon for the City and the District by the Issuer’s Counsel and by Stradling Yocca Carlson & Rauth, a Professional Corporation, Newport Beach, 657
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California, as Disclosure Counsel. Certain legal matters will be passed upon for the Underwriter by its counsel, Norton Rose Fulbright US LLP, San Francisco, California.
Although it is serving as Bond Counsel to the District in connection with the issuance and sale of the Series 2023 Bonds, Bond Counsel represents the U nderwriter in connection with other financings and matters unrelated to the Series 2023 Bonds . Disclosure Counsel and the Issuer’s Counsel also represent the Underwriter in connection with other financings and matters unrelated to the Series 2023 Bonds.
UNDERWRITING
The Series 2023 Bonds are being purchased by Samuel A. Ramirez & Co., Inc. (the “Underwriter”).
The Underwriter has agreed to purchase the Series 2023 Bonds at a price of $ __________ (being the $__________ aggregate principal amount thereof, [plus/less] [net] original issue [premium/discount] of $__________ and less Underwriter’s discount of $ __________). The purchase agreement relating to the Series 2023 Bonds provides that the Underwriter will purchase all of the Series 2023 Bonds if any are purchased. The obligation to make such purchase is subject to certain terms and conditions set forth in the purchase agreement, the approval of certain legal matters by counsel and certain other conditions.
The Underwriter may offer and sell the Series 2023 Bonds to certain dealers and others at prices lower than the offering price stated on the cover page thereof. The offering price may be changed from time to time by the Underwriter.
FINANCIAL INTERESTS
The fees being paid to the Municipal Advisor, Bond Counsel, Disclosure Counsel, Underwriter, and Underwriter’s Counsel are contingent upon the issuance and delivery of the Series 2023 Bonds.
MUNICIPAL ADVISOR
The District has retained CSG Advisors Incorporated, San Francisco, California, as municipal advisor (the “Municipal Advisor”) for the sale of the Series 2023 Bonds. The Municipal Advisor is not obligated to undertake, and has not undertaken to make, an independent verification or to assume any responsibility for the accuracy, completeness or fairness of the information contained in this Official Statement.
CSG Advisors Incorporated is an independent advisory firm and is not engaged in the business of underwriting, trading or distributing municipal or other public securities.
ADDITIONAL INFORMATION
The purpose of this Official Statement is to supply information to prospective buyers of the Series 2023 Bonds. Quotations and summaries and explanations of the Series 2023 Bonds and documents contained in this Official Statement do not purport to be complete, and reference is made to such documents for full and complete statements and their provisions.
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The execution and delivery of this Official Statement by the City Manager of the City has been duly authorized by the City Council of the City of Ontario acting in its capacity as the legislative body of the District.
CITY OF ONTARIO
COMMUNITY FACILITIES DISTRICT NO. 56
(PARKSIDE/LA AVENIDA)
By:
City Manager
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APPENDIX A
RATE AND METHOD OF APPORTIONMENT OF SPECIAL TAX
CITY OF ONTARIO
COMMUNITY FACILITIES DISTRICT NO. 56
(PARKSIDE/LA AVENIDA)
RATE AND METHOD OF APPORTIONMENT OF SPECIAL TAX
Special Taxes shall be levied on all Assessor’s Parcels in the City of Ontario Community Facilities District No. 56 (Parkside/La Avenida) (“CFD No. 56”) and collected each Fiscal Year, commencing in Fiscal Year 2022-23, in an amount determined by the City Council of the City of Ontario through the application of the Rate and Method of Apportionment, as described below. All of the real property in CFD No. 56, unless exempted by law or by the provisions hereof, shall be taxed for the purposes, to the extent, and in the manner herein provided.
A. DEFINITIONS
The terms hereinafter set forth have the following meanings:
“Acre” or “Acreage” means the land area of an Assessor’s Parcel as shown on an Assessor’s Parcel Map, or if the land area is not shown on an Assessor’s Parcel Map, the land area shown on the applicable Final Subdivision Map, parcel map, condominium plan, or other recorded County map. “Act” means the Mello -Roos Community Facilities Act of 1982, as amended, being Chapter 2.5 of Part 1 of Division 2 of Title 5 of the California Government Code. “Administrative Expenses” means the following actual or reasonably estimated costs directly related to the administration of CFD No. 56: the costs of computing the Special Taxes and preparing the annual Special Tax collection schedules (whether by the City or CFD No. 56 or both); the costs of collecting the Special Taxes (whether by the County or otherwise ); the costs of remitting the Special Taxes to the Trustee; the costs of the Trustee (including its legal counsel) in the discharge of the duties required of it under the Indenture; the costs to the City or CFD No. 56 of complying with arbitrage rebate requirements; the costs to the City or CFD No. 56 of complying with City, CFD No. 56, or obligated persons disclosure requirements associated with applicable federal and state securities laws and of the Act; the costs associated with preparing Special Tax dis closure statements and responding to public inquiries regarding the Special Taxes; the costs of the City or CFD No. 56 related to the analysis and reduction, if any, of the Special Tax A on Single Family Property in accordance with Section C.1 herein; the costs of the City or CFD No. 56 related to an appeal of the Special Tax; the costs associated with the release of funds from any escrow account; the City’s administration fees and third party expenses; the costs of City staff time and reasonable overhead r elating to CFD No. 56; and amounts estimated or advanced by the City or CFD No. 56 for any other administrative purposes of the CFD, including attorney’s fees and other costs related to commencing and pursuing to completion any foreclosure of delinquent Special Taxes.
“Assessor’s Parcel” means a lot or parcel shown in an Assessor’s Parcel Map with an assigned Assessor’s Parcel Number.
“Assessor’s Parcel Map” means an official map of the Assessor of the County designating parcels by Assessor’s Parcel Number.
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“Assessor’s Parcel Number” means, with respect to an Assessor’s Parcel, that number assigned to such Assessor’s Parcel by the County for purposes of identification. “Assigned Special Tax A” means the Special Tax A for each Land Use Class of Developed Property, as determined in accordance with Section C.1.a.2 below. “Backup Special Tax A” means the Special Tax A for each Land Use Class of Developed Property, as determined in accordance with Section C.1.a.3 below. “Bonds” means any bonds or other debt (as de fined in Section 53317(d) of the Act) issued by CFD No. 56 under the Act and payable from Special Tax A.
“Buildable Lot” means an individual lot, within a Final Subdivision Map or an area expected by CFD No. 56 to become Final Mapped Property, such as the area within a Tentative Tract Map, for which a building permit may be issued without further subdivision of such lot. “CFD Administrator” means an official of the City responsible for determining the Special Tax A Requirement and Special Tax B Requirement, providing for the levy and collection of the Special Taxes, and performing the other duties provided for herein. “CFD No. 23” means City of Ontario Community Facilities District No. 23 (Park Place Services). “CFD No. 32” means City of Ontario Community Fa cilities District No. 32 (Archibald/Schaefer – Services).
“CFD No. 56” means City of Ontario Community Facilities District No. 56 (Parkside/La Avenida). “City” means the City of Ontario, California.
“City Council” means the City Council of the City, acting as the legislative body of CFD No. 56. “Contractual Impositions” means (a) a voluntary contractual assessment established and levied on an Assessor’s Parcel pursuant to Chapter 29 of Part 3 of Division 7 of the C alifornia Streets and Highways Code (commencing with Section 5898.10 et seq. ), as amended from time to time, (b) a special tax established and levied on an Assessor’s Parcel pursuant to Section 53328.1 of the California Government Code and related provisions of the Act, as amended from time to time, and (c) any other fee, charge, tax, or assessment established and levied on an individual Assessor’s Parcel pursuant to a contractual agreement or other voluntary consent by the owner thereof (e.g., prop erty owner association assessments).
“County” means the County of San Bernardino.
“Designated Buildable Lot” means a Buildable Lot for which a building permit has not been issued by the City as of the date of calculation of the Backup Special Tax A. “Developed Property” means for each Fiscal Year, all Taxable Property, exclusive of Final Mapped Property, Taxable Property Owner Association Property, and Taxable Public Property, for which a building permit or other applicable permit for new construction was i ssued after January 1, 2021, and before May 1 of the prior Fiscal Year.
“Expected Residential Lot Count” means 106 Buildable Lots of Single Family Property in Tax Zone 1, 303 Buildable Lots of Single Family Property in Tax Zone 2, and 73 Buildable Lots of Single Family Property in Tax Zone 3, or, as determined by the CFD Administrator, the number of Buildable 661
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Lots of Single Family Property based on the most recent Tentative Tract Map(s) or most recently recorded Final Subdivision Map(s) or modified Final Subdivision Map(s). “Facilities” means the public facilities authorized to be financed, in whole or in part, by CFD No. 56. “Final Mapped Property” means, for each Fiscal Year, all Taxable Property, exclusive of Developed Property, Taxable Property Owner Ass ociation Property, and Taxable Public Property, which as of January 1 of the previous Fiscal Year was located within a Final Subdivision Map. The term Final Mapped Property shall include any parcel map or Final Subdivision Map, or portion thereof, that creates individual lots for which a building permit may be issued, including Parcels that are designated as a remainder Parcel (i.e., one where the size, location, etc., precludes any further subdivision or taxable use).
“Final Subdivision Map” means a final tract map, parcel map, or lot line adjustment approved by the City pursuant to the Subdivision Map Act (California Government Code Section 66410 et seq.) or a condominium plan recorded pursuant to California Civil Code Section 4285 that, in either case, creates individual lots for which building permits may be issued without further subdivision. “Fiscal Year” means the period starting July 1 and ending on the following June 30. “Gated Community Attached Dwelling Unit” means, with respect to Special Tax B, a Unit within any residential building containing two or more dwelling units (including attached condominiums, townhouses, duplexes, triplexes, and apartments) within a gated community that, within such community, is primarily served by private interior streets. “Indenture” means the indenture, fiscal agent agreement, resolution, or other instrument pursuant to which Bonds are issued, as modified, amended, and/or supplemented from time to time. “Land Use Class” means any of the classes listed in Tables 1, 2, 3, and 4 below. “Lower Income Household Welfare Exemption Property” means, for each Fiscal Year, an Assessor’s Parcel within the boundaries of CFD No. 56 that is subject to a welfare exemption under subdivision (g) of Section 214 of the California Revenu e and Taxation Code (or any successor statute), as indicated in the most recent County assessor’s roll finalized prior to such Fiscal Year. “Maximum Special Tax A” means, with respect to an Assessor’s Parcel of Taxable Property, the Maximum Special Tax A d etermined in accordance with Section C.1 below that can be levied in any Fiscal Year on such Assessor’s Parcel of Taxable Property. “Maximum Special Tax B” means, with respect to an Assessor’s Parcel of Taxable Property, the Maximum Special Tax B determine d in accordance with Section C.2 below that can be levied in any Fiscal Year on such Assessor’s Parcel of Taxable Property. “Minimum Sale Price” means the minimum price at which Units of a given Land Use Class have sold or are expected to be sold in a norm al marketing environment and shall not include prices for such Units that are sold at a discount to expected sales prices for the purpose of stimulating the initial sales activity with respect to such Land Use Class.
“Multiple Family Dwelling Unit” means, with respect to Special Tax B, a Unit within any residential building containing two or more dwelling units, including attached condominiums, townhomes, duplexes, triplexes, and apartments, but excluding Gated Community Attached Dwelling Units. 662
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“Non-Residential Property” means all Assessor’s Parcels of Developed Property for which a building permit was issued by the City permitting the construction of one or more non -residential structures or facilities.
“Other Residential Property” means, with respect to Special Tax A, all Assessor’s Parcels of Developed Property for which a building permit was issued by the City for purposes of constructing Units, excluding Single Family Attached Property and Single Family Detached Property. “Outstanding Bonds” means all Bonds which are outstanding under and in accordance with the provisions of the Indenture.
“Price Point Consultant” means any consultant or firm of such consultants selected by CFD No. 56 that (a) has substantial experience in perfor ming price point studies for residential units within community facilities districts established under the Act or otherwise estimating or confirming pricing for residential units in such community facilities districts, (b) has recognized expertise in analy zing economic and real estate data that relates to the pricing of residential units in such community facilities districts, (c) is in fact independent and not under the control of CFD No. 56 or the City, (d) does not have any substantial interest, direct o r indirect, with or in (i) CFD No. 56, (ii) the City, (iii) any owner of real property in CFD No. 56, or (iv) any real property in CFD No. 56, and (e) is not connected with CFD No. 56 or the City as an officer or employee thereof, but who may be regularly retained to make reports to CFD No. 56 or the City.
“Price Point Study” means a price point study or a letter updating a previous price point study prepared by the Price Point Consultant pursuant to Section C herein. “Property Owner Association Property” means, for each Fiscal Year, any property within the boundaries of CFD No. 56 that was owned by a property owner association, including any master or sub-association, as of January 1 of the prior Fiscal Year. “Proportionately” means (a) for Developed Property in the first step of Section D.1 below, that the ratio of the actual Special Tax A levy to the Maximum Special Tax A is equal for all Assessor’s Parcels of Developed Property; however, for Developed Property in the fourth step of Section D.1 below, Proportionately means that the amount of the increase above the Assigned Special Tax A, if necessary, is equal for all Assessor’s Parcels of Developed Property, except that if the Backup Special Tax A limits the increase on any Assessor’s Parcel(s), then the a mount of the increase shall be equal for the remaining Assessor’s Parcels; (b) with respect to Special Tax B, that the ratio of the actual Special Tax B levy to the Maximum Special Tax B is equal for all Assessor’s Parcels of Developed Property; (c) for Fi nal Mapped Property, that the ratio of the actual Special Tax A levy to the Maximum Special Tax A is equal for all Assessor’s Parcels of Final Mapped Property; (d) for Undeveloped Property, that the ratio of the actual Special Tax A levy to the Maximum Special Tax A is equal for all Assessor’s Parcels of Undeveloped Property; (e) for Taxable Property Owner Association Property, that the ratio of the actual Special Tax A levy to the Maximum Special Tax A is equal for all Assessor’s Parcels of Taxable Propert y Owner Association Property; and (f) for Taxable Public Property, that the ratio of the actual Special Tax A levy to the Maximum Special Tax A is equal for all Assessor’s Parcels of Taxable Public Property. “Public Property” means, for each Fiscal Year, property within the boundaries of CFD No. 56 that is (a) owned by, irrevocably offered to, or dedicated to the federal government, the State, the County, the City, or any local government or other public agency or (b) encumbered by an easement for purposes of public or utility right-of-way that makes impractical its use for any purpose other than that set forth in such easement; provided that any property leased by a public agency to a private entity and subject to taxation under Section 53340.1 of the Act shall be taxed and classified according to its use. 663
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“Rate and Method of Apportionment” means this Rate and Method of Apportionment of Special Tax.
“Residential Floor Area” means all of the Square Footage of living area within the perimeter of a Unit, not including any carport, walkway, garage, overhang, patio, enclosed patio, or similar area.
The determination of Residential Floor Area shall be as set forth in the building permit(s) issued for such Assessor’s Parcel, or as set forth in other official records maintained by the City’s Building Department or other appropriate means selected by CFD No. 56. The actual Square Footage shall be rounded up to the next whole square foot. Once such determination has been made for an Ass essor’s Parcel, it shall remain fixed in all future Fiscal Years unless an appeal pursuant to Section F below is approved that results in a change in the actual Square Footage. “Residential Property” means, for each Fiscal Year, an Assessor’s Parcel for wh ich a building permit for new construction of one or more Units was issued after January 1, 2021, and before May 1 of the prior Fiscal Year.
“Services” means the services authorized to be financed, in whole or in part, by CFD No. 56. “Single Family Attached Property” means all Assessor’s Parcels of Developed Property for which a building permit or use permit was issued for construction of a residential structure consisting of two or more Units that share common walls, have separate Assessor’s Parcel Numbers assigned to them (except for a duplex unit, which may share an Assessor’s Parcel with another duplex unit), and may be purchased by individual homebuyers (which shall still be the case even if the Units are purchased and subsequently offered for rent by t he owner of the Unit), including such residential structures within a condominium project as defined in Civil Code Section 4125. “Single Family Detached Property” means all Assessor’s Parcels of Developed Property for which a building permit was issued for construction of a Unit, on one legal lot, that does not share a common wall with another Unit.
“Single Family Detached Dwelling Unit” means a Unit of Single Family Detached Property. “Single Family Property” means all Assessor’s Parcels of Single Family A ttached Property and Single Family Detached Property.
“Special Taxes” means, collectively, Special Tax A and Special Tax B. “Special Tax A” means the special tax authorized by the qualified electors of CFD No. 56 to be levied within the boundaries of CFD No. 56 to pay for Facilities and Services. “Special Tax A Requirement” means for any Fiscal Year that amount required, after taking into account available amounts held in the funds and accounts established under the Indenture, for CFD No. 56 to: (i) pay de bt service on all Outstanding Bonds which is due in the calendar year that commences in such Fiscal Year; (ii) pay periodic costs on the Bonds, including, but not limited to, credit enhancement and rebate payments on the Bonds; (iii) pay a pro rata share o f Administrative Expenses; (iv) provide any amounts required to establish or replenish any reserve fund for the Bonds; (v) pay directly for acquisition or construction of Facilities, or the cost of Services, to the extent that the inclusion of such amounts does not increase the Special Tax A levy on Final Mapped Property or Undeveloped Property; and (vi) provide an amount equal to Special Tax A delinquencies based on the historical delinquency rate for Special Tax A as determined by the CFD Administrator. “Special Tax B” means the special tax authorized by the qualified electors of CFD No. 56 to be levied within the boundaries of Tax Zone 2 of CFD No. 56 to pay for Services. 664
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“Special Tax B Requirement” means for any Fiscal Year that amount required, after ta king into account available amounts in any funds and accounts established to pay for Services, to pay the cost of Services, a pro rata share of Administrative Expenses, and an amount equal to Special Tax B delinquencies based on the historical delinquency rate for Special Tax B as determined by the CFD Administrator.
“Square Footage” or “Sq. Ft.” means the floor area square footage reflected on the original construction building permit, or as set forth in other official records maintained by the City’s Building Department or other appropriate means selected by CFD No. 56, issued for construction of Residential Property or Non -Residential Property, plus any square footage subsequently added to a building of Non-Residential Property after issuance of a buildin g permit for expansion or renovation of such building.
“State” means the State of California.
“Taxable Property” means, for each Fiscal Year, all of the Assessor’s Parcels within the boundaries of CFD No. 56 that are not exempt from the Special Taxes pursuant to law or Section E below. “Taxable Property Owner Association Property” means, for each Fiscal Year, all Assessor’s Parcels of Property Owner Association Property that are not exempt from the Special Taxes pursuant to Section E below.
“Taxable Public Property” means, for each Fiscal Year, all Assessor’s Parcels of Public Property that are not exempt from the Special Taxes pursuant to law or Section E below. “Tax Zone” means a mutually exclusive geographic area, within which particular Special Taxes may be levied pursuant to this Rate and Method of Apportionment. Attachment 1 identifies the three Tax Zones in CFD No. 56.
“Tax Zone 1” means the geographic area designated in Attachment 1 of this Rate and Method of Apportionment as Tax Zone 1, is consisten t with the boundary of TTM 20298, and is commonly referred to as the La Avenida/Woodside Homes project.
“Tax Zone 2” means the geographic area designated in Attachment 1 of this Rate and Method of Apportionment as Tax Zone 2, is consistent with the boundar y of TTM 20316, and is commonly referred to as the Parkside/New Home Company project.
“Tax Zone 3” means the geographic area designated in Attachment 1 of this Rate and Method of Apportionment as Tax Zone 3, is consistent with the boundary of TTM 18913 -4, and is commonly referred to as the Park Place PA 27/Lennar project.
“Tentative Tract Map” means a map: (i) showing a proposed subdivision of an Assessor’s Parcel(s) and the conditions pertaining thereto; (ii) that may or may not be based on a detailed sur vey; and (iii) that is not recorded by the County to create legal lots. “Total Tax Burden” means, for a Unit within a Land Use Class , for the Fiscal Year in which the Total Tax Burden is being calculated, the sum of (a) the Assigned Special Tax A for such Land Use Class for such Fiscal Year, plus (b) with respect to Tax Zone 1, the Special Tax of CFD No. 32 for such Land Use Class for such Fiscal Year; with respect to Tax Zone 2, the Special Tax B for such Land Use Class for such Fiscal Year; and with respe ct to Tax Zone 3, the Special Tax of CFD No. 23 for such Land Use Class for such Fiscal Year, plus (c) the ad valorem property taxes, special assessments, special taxes for any overlapping community facilities districts, and any other governmental fees, charges (other than fees or charges for services such as sewer and trash), taxes, and 665
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assessments (which do not include Contractual Impositions) collected by the County on ad valorem tax bills, plus (d) property owner association assessments (but excluding the refuse collection portion of such assessments), and that the CFD Administrator estimates would be levied or impose d on such Unit in such Fiscal Year if the residential dwelling unit thereon or therein had been completed and sold, and was subject to such fees, charges, taxes, and assessments in such Fiscal Year. “Trustee” means the trustee or fiscal agent under the Indenture. “TTM 18913-4” means Tentative Tract Map No. 18913-4, the area of which is located within CFD No. 56.
“TTM 20298” means Tentative Tract Map No. 20298, the area of which is located within CFD No. 56.
“TTM 20316” means Tentative Tract Map No. 20316, the area of which is located within CFD No. 56.
“Undeveloped Property” means, for each Fiscal Year, all Taxable Property not classified as Developed Property, Final Mapped Property, Taxable Public Property, or Taxable Property Owner Association Property.
“Unit” means an individual single -family detached or attached home, townhome, condominium, apartment, or other residential dwelling unit, including each separate living area within a half -plex, duplex, triplex, fourplex, or other residential structure.
B. ASSIGNMENT TO LAND USE CATEGORIES
Each Fiscal Year, beginning with Fiscal Year 2022 -23, all Taxable Property within CFD No. 56 shall be organized into Tax Zone 1, Tax Zone 2, or Tax Zone 3, and then classified as Develo ped Property, Final Mapped Property, Taxable Public Property, Taxable Property Owner Association Property, or Undeveloped Property, and shall be subject to Special Taxes in accordance with the Rate and Method of Apportionment as determined pursuant to Sections C and D below.
Assessor’s Parcels of Developed Property shall be further classified as: Single Family Attached Property, Single Family Detached Property, or Other Residential Property (for Special Tax A); Single Family Detached Dwelling Unit, Multipl e Family Dwelling Unit, or Gated Community Attached Dwelling Unit (for Special Tax B); or Non -Residential Property. For Special Tax A, Assessor’s Parcels of Single Family Property in Tax Zone 1 shall be assigned to Land Use Classes 1 through 9, Single Fam ily Property in Tax Zone 2 shall be assigned to Land Use Classes 12 through 24, and Single Family Property in Tax Zone 3 shall be assigned to Land Use Classes 27 through 38, as listed in Tables 1, 2, and 3 below based on the Residential Floor Area of the U nits on such Assessor’s Parcels. Also for Special Tax A, Other Residential Property and Non -Residential Property shall be assigned to Land Use Classes 10 and 11, respectively, in Tax Zone 1, Land Use Classes 25 and 26 in Tax Zone 2, and Land Use Classes 39 and 40 in Tax Zone 3.
C. MAXIMUM SPECIAL TAX
1. Special Tax A
At least 30 days prior to the issuance of Bonds, the Assigned Special Tax A on Developed Property (set forth in Tables 1, 2, and 3 below) shall be analyzed in accordance with and subject to th e conditions set forth in this Section C. At such time, CFD No. 56 shall select and engage a Price Point Consultant and the CFD Administrator shall request the Price Point 666
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Consultant to prepare a Price Point Study setting forth the Minimum Sale Price of U nits within each Land Use Class.
Tax Zone 1 and Tax Zone 2
If based upon such Price Point Study the CFD Administrator calculates that the Total Tax Burden, excluding property owner association assessments, applicable to Units within one or more Land Use Cl asses of Single Family Property to be constructed within Tax Zone 1 or Tax Zone 2 exceeds 1.95% of the Minimum Sale Price of such Units, the Assigned Special Tax A shall be reduced to the extent necessary to cause the Total Tax Burden, excluding property o wner association assessments, that shall apply to Units within such Land Use Class(es) not to exceed 1.95% of the Minimum Sale Price of such Units.
Tax Zone 3
If based upon such Price Point Study the CFD Administrator calculates that the Total Tax Burden applicable to Units within one or more Land Use Classes of Single Family Property to be constructed within Tax Zone 3 exceeds 2.34% of the Minimum Sale Price of Units of Single Family Detached Property or 2.64% of the Minimum Sale Price of Units of Single Family Attached Property, the Assigned Special Tax A shall be reduced to the extent necessary to cause the Total Tax Burden that shall apply to Units within such Land Use Class(es) not to exceed 2.34% or 2.64% of the Minimum Sale Price of Units of Single Family Detached Property or Single Family Attached Property, respectively. In addition, if based upon such Price Point Study the CFD Administrator calculates that the Total Tax Burden, excluding property owner association assessments, applicable to Units wi thin one or more Land Use Classes of Single Family Property to be constructed within Tax Zone 3 exceeds
1.95% of the Minimum Sale Price of such Units, the Assigned Special Tax A shall be reduced to the extent necessary to cause the Total Tax Burden, exclud ing property owner association assessments, that shall apply to Units within such Land Use Class(es) not to exceed 1.95% of the Minimum Sale Price of such Units.
Each Assigned Special Tax A reduction for a Land Use Class shall be calculated by the CFD Administrator separately, and it shall not be required that such reduction be proportionate among Land Use Classes. In connection with any reduction in the Assigned Special Tax A, the Backup Special Tax A shall also be reduced by the CFD Administrator based o n the percentage reduction in Maximum Special Tax A revenues within the Tentative Tract Map area(s) where the Assigned Special Tax A reductions occurred. Upon determining the reductions, if any, in the Assigned Special Tax A and Backup Special Tax A requi red pursuant to this Section C, the CFD Administrator shall complete the Certificate of Modification of Special Tax substantially in the form attached hereto as Exhibit A (the “Certificate of Modification”), shall execute such completed Certificate of Modi fication, and shall deliver such executed Certificate of Modification to CFD No. 56. Upon receipt thereof, if in satisfactory form, CFD No. 56 shall execute such Certificate of Modification. The reduced Assigned Special Tax A and Backup Special Tax A spe cified in such Certificate of Modification shall become effective upon the execution of such Certificate of Modification by CFD No. 56.
The Special Tax A reductions required pursuant to this section shall be reflected in an amended notice of Special Tax li en, which CFD No. 56 shall cause to be recorded with the County Recorder as soon as practicable after execution of the Certificate of Modification by CFD No. 56. The reductions in this section apply to Single Family Property, but not to Other Residential Property or Non-Residential Property.
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a. Developed Property
1) Maximum Special Tax A
The Maximum Special Tax A that may be levied in any Fiscal Year for each Assessor’s Parcel classified as Developed Property shall be the greater of (i) the amount derived by application of the Assigned Special Tax A or (ii) the amount derived by application of the Backup Special Tax A. The Maximum Special Tax A shall not increase in future years, other than as calculated pursuant to Section C.1.a.3 below.
2) Assigned Special Tax A
The Assigned Special Tax A that may be levied in any Fiscal Year for each Land Use Class is shown below in Tables 1, 2, and 3.
TABLE 1
TAX ZONE 1
ASSIGNED SPECIAL TAX A – DEVELOPED PROPERTY
Land
Use
Class
Description
Residential
Floor Area
(Square
Footage)
Assigned
Special Tax A
1 Single Family Property < 1,801 $2,758 per Unit
2 Single Family Property 1,801 – 1,900 $2,845 per Unit
3 Single Family Property 1,901 – 2,000 $2,868 per Unit
4 Single Family Property 2,001 – 2,100 $2,935 per Unit
5 Single Family Property 2,101 – 2,200 $3,066 per Unit
6 Single Family Property 2,201 – 2,300 $3,102 per Unit
7 Single Family Property 2,301 – 2,400 $3,169 per Unit
8 Single Family Property 2,401 – 2,500 $3,255 per Unit
9 Single Family Property > 2,500 $3,349 per Unit
10 Other Residential Property $48,482 per Acre
11 Non-Residential Property $48,482 per Acre
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TABLE 2
TAX ZONE 2
ASSIGNED SPECIAL TAX A – DEVELOPED PROPERTY
Land
Use
Class
Description
Residential
Floor Area
(Square
Footage)
Assigned
Special Tax A
12 Single Family Property < 901 $2,184 per Unit
13 Single Family Property 901 – 1,000 $2,371 per Unit
14 Single Family Property 1,001 – 1,100 $2,542 per Unit 15 Single Family Property 1,101 – 1,200 $2,693 per Unit 16 Single Family Property 1,201 – 1,300 $2,924 per Unit 17 Single Family Property 1,301 – 1,400 $3,175 per Unit 18 Single Family Property 1,401 – 1,500 $3,283 per Unit 19 Single Family Property 1,501 – 1,600 $3,340 per Unit 20 Single Family Property 1,601 – 1,700 $3,436 per Unit 21 Single Family Property 1,701 – 1,800 $3,561 per Unit 22 Single Family Property 1,801 – 1,900 $3,778 per Unit 23 Single Family Property 1,901 – 2,000 $4,221 per Unit 24 Single Family Property > 2,000 $4,406 per Unit
25 Other Residential Property $76,571 per Acre
26 Non-Residential Property $76,571 per Acre
TABLE 3
TAX ZONE 3
ASSIGNED SPECIAL TAX A – DEVELOPED PROPERTY
Land
Use
Class
Description
Residential
Floor Area
(Square
Footage)
Assigned
Special Tax A
27 Single Family Detached Property < 1,101 $2,508 per Unit 28 Single Family Detached Property 1,101 – 1,300 $2,694 per Unit 29 Single Family Detached Property 1,301 – 1,500 $3,368 per Unit 30 Single Family Detached Property 1,501 – 1,700 $3,421 per Unit 31 Single Family Detached Property 1,701 – 1,900 $3,672 per Unit 32 Single Family Detached Property 1,901 – 2,100 $4,153 per Unit 33 Single Family Detached Property > 2,100 $4,515 per Unit 34 Single Family Attached Property < 1,301 $2,716 per Unit 35 Single Family Attached Property 1,301 – 1,500 $2,880 per Unit 36 Single Family Attached Property 1,501 – 1,700 $3,452 per Unit 37 Single Family Attached Property 1,701 – 1,900 $3,554 per Unit 38 Single Family Attached Property > 1,900 $3,885 per Unit 39 Other Residential Property $125,970 per Acre
40 Non-Residential Property $125,970 per Acre
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3) Backup Special Tax A
The Backup Special Tax A shall be $3,009 per Unit for Single Family Property in Tax Zone 1, $3,175 in Tax Zone 2, and $3,525 in Tax Zone 3.
However, if the Expected Residential Lot Count does not equal 106 for Single Family Property in Tax Zone 1, 303 in Tax Zone 2, and 73 in Tax Zone 3, and the City has not issued Bonds, then the Backup Special Tax A for Designated Buildable Lots of Single Family Property in each Tax Zone shall be calculated according to the following formulas: