53 equal to the Reserve Requirement, and to pay all current expenses. There is, however, no assurance that the total amount of the Special Tax that could be levied and collected against taxable parcels in the District will be at all times sufficient to pay the amounts required to be paid by the Indenture, even if the Special Tax is levied at the Maximum Special Tax rates. See “— Enforcement Delays – Bankruptcy.” No assurance can be given that the real property subject to sale or foreclosure will be sold, or if sold, that the proceeds of sale will be sufficient to pay any delinquent installments of the Special Tax. The Act does not require the City to purchase or otherwise acquire any lot or parcel of property to be sold at foreclosure if there is no other purchaser at such sale. The Act and the Indenture do specify that the Special Tax will have the same lien priority as for ad valorem property taxes in the case of delinquency. Section 53356.6 of the Act requires that property sold pursuant to foreclosure under the Act be sold for not less than the amount of judgment in the foreclosure action, plus post judgment interest and authorized costs, unless the consent of the owners of 75% of the Outstanding Bonds is obtained.
Prior to July 1, 1983, the right of redemption from foreclosure sales was limited to a period of one year from the date of sale. Under legislation effective July 1, 1983, the statutory right of redemption from such foreclosure sales has been repealed. However, a period of 20 days must elapse after the date on which the notice of levy of the interest in real property was served on the judgment debtor before the sale of such lot or parcel can be made. Furthermore, if the purchaser at the sale is the judgment creditor (e.g., the District), an action may be commenced by the delinquent property owner within 90 days after the date of sale to set aside such sale. The constitutionality of the aforementioned legislation, which repeals the one year redemption period, has not been tested and there can be no assurance that, if tested, such legislation will be upheld. (Section 701.680 of the Code of Civil Procedure of the State.)
Property Values
The value of the property within the District is a critical factor in determining the investment quality of the Bonds. If a property owner is delinquent in the payment of Special Taxes, the District’s only remedy is to commence foreclosure proceedings against the delinquent parcel in an attempt to obtain funds to pay the Special Taxes. Land development and land values could be adversely affected by economic and other factors beyond the District and the City’s control, such as a general economic downturn, adverse judgments in future litigation that could affect the scope, timing or viability of development, relocation of employers out of the area, stricter land use regulations, shortages of water, electricity, natural gas or other utilities, destruction of property caused by earthquake, flood or other natural disasters, environmental pollution or contamination, or unfavorable economic conditions which will adversely impact the security underlying the Special Taxes.
The Appraisal Report indicates the Appraiser’s opinion as to the market value of the properties referred to therein as of the date and under the conditions specified therein. The Appraiser’s opinion reflects conditions prevailing in the applicable market as of the Date of Value. The Appraiser’s opinion does not predict the future value of the subject property, and there can be no assurance that market conditions will not change adversely in the future. See “THE DISTRICT — Appraisal Report” and “APPENDIX C — APPRAISAL REPORT.” Prospective purchasers of the Bonds should not assume that the taxable land within the District could be sold for the appraised amount at a foreclosure sale for delinquent Special Taxes. In arriving at the estimate of market value of the Appraised Property, the Appraiser assumes that any sale will be unaffected by undue stimulus and will occur following a reasonable marketing period, which is not always present in a foreclosure sale. See Appendix C for a description of other assumptions made by the Appraiser and for the definitions and limiting conditions used by the Appraiser. Any event which causes one of the Appraiser’s assumptions to be untrue could result in a reduction of the value of the taxable land and improvements within the District from the market value estimated by the Appraiser.
54 No assurance can be given that any bid will be received for a parcel with delinquent Special Taxes offered for sale at foreclosure or, if a bid is received, that such bid will be sufficient to pay all delinquent Special Taxes.
See “SOURCES OF PAYMENT FOR THE BONDS — Special Taxes — Proceeds of Foreclosure Sales.” Neither the District nor the City has evaluated development risks. Since these are largely business risks of the type that the landowner customarily evaluates individually, and inasmuch as changes in land ownership may well mean changes in the evaluation with respect to any particular parcel, the District is issuing the Bonds without regard to any such evaluation. Thus, the creation of the District and the issuance of the Bonds in no way implies that either the City or the District has evaluated these risks or the reasonableness of these risks. On the contrary, the City and the District have made no such evaluation and are undertaking acquisition and construction of the facilities being financed by the Bonds even though these risks may be serious and may ultimately halt or slow the progress of land development and forestall the realization of Taxable Property values in the event of delinquency and foreclosure.
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 Special 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.
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 have 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 levied upon the remaining acreage might not be sufficient to pay principal of and interest on the Bonds when due and a default would occur with respect to the payment of such principal and interest.
Climate Change
According to the California Climate Change Fourth Assessment for the Inland Desert Regions, which was published in 2018, the region covering the City, the region will continue to experience, among other things, (a) extremely high maximum temperatures, (b) increased energy needs for cooling to compensate for a rise in temperatures, and (c) increased water stress in an already water-limited region. Such climate change risks may exacerbate the impact of natural disasters listed below. See “— Geologic, Topographic and Climatic Conditions.” 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 a designated fault zone and located in an area of minimal flood hazard.
55 The City shares many of the hazards associated with earthquakes faults in Southern California. There are three major faults and several minor faults that could impact the City. The major faults include the San Andreas Fault near San Gorgonio Pass, the Palm Desert Fault, and the Elsinore Fault. Historically, the San Andreas Fault is the most active among the fault network that cuts through rocks of the California coastal region. The entire San Andreas Fault system is more than 800 miles long and extends to depths of at least 10 miles within the earth. The San Andreas Fault in California forms a continuous, narrow break in the earth’s crust that extends from northern California southward to Cajon Pass near San Bernardino; southeastward from Cajon Pass. Several branching faults, including the San Jacinto and Banning faults, share the movement of the crustal plates as the fault continues to the south east, on to the Salton Sea and on to Baja California Sea of Cortez. Recent studies of the eastern section of the San Andreas near San Gorgonio Pass reveal that this area is more advanced in the cycle of strain accumulation than the western area at the Cajon Pass. Another major fault zone that traverses Riverside County is the Elsinore Fault. The Elsinore Fault Zone is one of the largest in southern California. The main trace of the Elsinore fault zone has only seen one historical event greater than magnitude 5.2 – the earthquake of 1910, a magnitude 6 shock near Temescal Valley.
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 Special Taxes when due. CAL FIRE has made recommendations of Very High Fire Severity Zones for the City.
In the event of a severe earthquake, fire, flood or other natural disaster, there may be significant damage to both property and infrastructure in the District. As a result, a substantial portion of the property owners may be unable or unwilling to pay the Special Taxes when due. In addition, the value of land in the District could be diminished in the aftermath of such a natural disaster, reducing the resulting proceeds of foreclosure sales in the event of delinquencies in the payment of the Special Taxes.
Flood Zone
The City has experienced numerous winter storm flood and high wind damages in the past. On August 20, 2023, Hurricane Hilary caused an overflow of a major drainage channel and the Spanish Walk neighborhood in North Palm Desert flooded. The Mayor of the City made a Proclamation of Local Emergency on August 20, 2023. This will allow the City of Palm Desert to submit for maximum reimbursements of damages incurred in the City. Governor Newsom Declared a State of Emergency, which will allow for the State to request a Federal Emergency be declared by FEMA. Heavy rains can lead to problems with storm drainage and create localized flood problems. The District is not located within a Special Flood Hazard Area. flood problems. The District is not located within a Special Flood Hazard Area.
Drought
California has been subject to droughts from time-to-time in the past. The State of California is currently in a statewide drought with regions ranging from severe drought to exceptional drought. Riverside County is experiencing severe to extreme drought conditions. Water service to the City and the District is provided by the CVWD. CVWD faces various challenges in the continued supply of water to the City. A description of these challenges as well as a variety of other operating information with respect to CVWD is included in certain disclosure documents prepared by CVWD. CVWD periodically prepares official statements and other disclosure documents in connection with its bonds and other obligations. CVWD has also entered into certain continuing disclosure agreements pursuant to which CVWD is contractually obligated for the benefit of owners of certain of its outstanding obligations to file certain annual reports, including audited financial statements and notice of certain events, pursuant to Rule 15c2-12 promulgated under the Securities Exchange Act of 1934, as amended
56 (“Rule 15c2-12”). Such official statements, other disclosure documents, annual reports and notices (collectively, the “CVWD Information”) are filed with the Municipal Securities Rulemaking Board’s Electronic Municipal Market Access system (“EMMA”) at http://emma.msrb.org. The CVWD Information is not incorporated herein by reference thereto, and the City makes no representation as to the accuracy or completeness of such information.
CVWD HAS NOT ENTERED INTO ANY CONTRACTUAL COMMITMENT WITH THE CITY, THE
TRUSTEE OR THE OWNERS OF THE BONDS TO PROVIDE CVWD INFORMATION TO THE CITY OR THE OWNERS OF THE BONDS.
Although the City does not believe any future drought would impact development in the District, no assurances can be given in this regard and no assurance can be given that a future drought affecting homes in the District would not result in decreased values. In the event that the CVWD’s water supply is severely limited or cut off by virtue of future actions beyond its control resulting from ongoing or future drought conditions, development within the District may be delayed or even stopped. Should the City need to restrict development, it must do so Citywide and cannot single out the District property in restricting development activity. In turn, the anticipated diversity of ownership of land within the District could also be reduced. Furthermore, such an increased period of concentrated ownership of undeveloped land increases the potential negative impact of any bankruptcy or other financial difficulties experienced by the owners of undeveloped land in the District.
Hazardous Substances
While government taxes, assessments and charges are a common claim against the value of a parcel, other less common claims may also be relevant. One of the most serious in terms of the potential reduction in the value of a parcel is a claim with regard to a hazardous substance. In general, the owners and operators of a parcel may be required by law to remedy conditions relating to releases or threatened releases of hazardous substances. The federal Comprehensive Environmental Response, Compensation and Liability Act of 1980, sometimes referred to as “CERCLA” or the “Super Fund Act,” is the most well-known and widely applicable of these laws, but California laws with regard to hazardous substances are also stringent and similar in effect. Under many of these laws, the owner (or operator) is obligated to remedy a hazardous substance condition of a parcel whether or not the owner (or operator) had anything to do with creating or handling the hazardous substance. The effect, therefore, should any of the parcels within the District be affected by a hazardous substance, is to reduce the marketability and value by the costs of remedying the condition.
The District is not aware of the presence of any federally or state classified hazardous substances in violation of any environmental laws, located on the property within the District. However, it is possible that such materials do currently exist and that the District is not aware of them.
It is possible that property in the District may be liable for hazardous substances in the future as a result of the existence, currently, of a substance presently classified as hazardous but which has not been released or the release of which is not presently threatened, or the existence, currently, on the property of a substance not presently classified as hazardous but which may in the future be so classified. Additionally, such liabilities may arise not simply from the existence of a hazardous substance but from the method of handling such substance. All of these possibilities could have the effect of reducing the value of the applicable property.
Cybersecurity
The City, like many other public and private entities, relies on a large and complex technology environment to conduct its operations. As a recipient and provider of personal private or sensitive information, the City is subject to multiple cyber threats including, but not limited to, hacking, viruses, malware and other attacks on computer and other sensitive digital networks and systems. Entities or individuals may attempt to gain unauthorized access to the City’s digital systems for the purposes of misappropriating assets or information or causing operational disruption and damage. To date, the City has not experienced an attack on its computer operating systems which resulted in a breach of its cybersecurity system that are in place. However, no assurances
57 can be given that the City’s effort to manage cyber threats and attacks will be successful or that any such attack will not materially impact the operations or finances of the City.
Depletion of Reserve Account
The Reserve Account 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 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 Account are used to pay debt service on the 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 Account 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 Account 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 Bonds will be fully replenished from the proceeds of the levy and collection of the Special Tax.
Enforcement Delays – Bankruptcy
The payment of the Special Tax and the ability of the District to foreclose the lien of a delinquent unpaid tax, as discussed in “SOURCES OF PAYMENT FOR THE BONDS,” may be limited by bankruptcy, insolvency or other laws generally affecting creditors’ rights or by the laws of the State of California 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 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 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 Bonds and the possibility of delinquent tax 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.
Increasing Mortgage Interest Rates
Between approximately November 2021 and January 2024, mortgage interest rates for 30-year mortgage loans have increased from approximately 3.1% to [___]%. Increases in mortgage interest rates could have a negative impact on the estimated absorption rates of the planned for-sale residential units in the District described herein. With respect to entry-level households, increased mortgage interest rates may adversely impact the affordability of homes and may increase mortgage payment levels for owning a lower-priced home relative to renting a residence, thereby making purchasing less attractive. With respect to move-up households, higher mortgage interest rates may impact the desire of current homeowners to move from their present home due to the fact that their present home likely has a relatively low mortgage interest rate. In addition, in such instances, a new home would likely have a higher interest rate on a new mortgage loan as well as a higher purchase price and property taxes. Such considerations may decrease the desire for move-up households to purchase a new home.
58 The foregoing factors could reduce demand for and/or the ability to achieve the sales prices of the planned forsale homes within the District as described herein.
Impact of Economic Conditions on the Development in the District Certain events and factors which negatively affect the regional, State and national economies could have an adverse effect on the pace at which the Developer can complete future 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 Project in the District and the real estate market in general cannot be predicted.
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 Taxes may be limited in certain respects with regard to parcels in which the Federal Deposit Insurance Corporation (the “FDIC”), or other federal government entities such as Fannie Mae or Freddie Mac, has or obtains an interest.
In the case of the FDIC, in the event that any financial institution making a loan which is secured by parcels is taken over by the FDIC and the applicable Special Tax is not paid, the remedies available to the District may be constrained. The FDIC’s policy statement regarding the payment of state and local real property taxes (the “Policy Statement”) provides that taxes other than ad valorem taxes which are secured by a valid lien in effect before the FDIC acquired an interest in a property will be paid unless the FDIC determines that abandonment of its interests is appropriate. The Policy Statement provides that the FDIC generally will not pay installments of non-ad valorem taxes which are levied after the time the FDIC acquires its fee interest, nor will the FDIC recognize the validity of any lien to secure payment except in certain cases where the 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 Special Taxes 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 assessments if foreclosure would impair the federal government interest. This means that, unless Congress has otherwise provided, if a federal government entity owns a parcel of Taxable Property but does not pay taxes and assessments levied on the parcel (including Special Taxes), the
59 applicable state and local governments cannot foreclose on the parcel to collect the delinquent taxes and assessments.
Moreover, unless Congress has otherwise provided, if the federal government has a mortgage interest in the parcel and the District wishes to foreclose on the parcel as a result of delinquent Special Taxes, the property cannot be sold at a foreclosure sale unless it can be sold for an amount sufficient to pay delinquent taxes and assessments on a parity with the Special Taxes and preserve the federal government’s mortgage interest.
The District’s remedies may also be limited in the case of delinquent Special Taxes with respect to parcels in which other federal agencies (such as the Internal Revenue Service and the Drug Enforcement Administration) have or obtain an interest.
Direct and Overlapping Indebtedness
The ability of an owner of property within the District to pay the applicable Special Taxes could be affected by the existence of other taxes and assessments imposed upon taxable parcels. See “THE DISTRICT — Direct and Overlapping Debt” herein. The City and other public agencies whose boundaries overlap those of the District could impose additional taxes or assessment liens on the property within the District in order to finance public improvements or services to be located or provided inside of or outside of such area. The lien created on the property within the District through the levy of such additional taxes may be on a parity with the lien of the Special Taxes applicable to the property within the District.
The imposition of additional liens on a parity with the Special Taxes may reduce the ability or willingness of property owners to pay the Special Taxes and increase the possibility that foreclosure proceeds will not be adequate to pay delinquent Special Taxes.
Effect of Parity Bonds on Credit Quality
The District may at any time after the issuance and delivery of the Bonds issue Parity Bonds to finance additional facilities in an aggregate amount not to exceed $50,000,000 (including the Bonds and the 2021 Bonds) payable from the Net Taxes and secured by a lien and charge upon such amounts equal to the lien and charge securing the Bonds and any other Parity Bonds theretofore issued pursuant to the Indenture. Parity 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 “SOURCES OF PAYMENT FOR THE BONDS – Parity Bonds.” If Parity Bonds are issued, the value-to-lien ratio of certain parcels subject to the levy of Special Taxes may be lower than the ratios set forth in this Official Statement. Furthermore, if Parity Bonds are issued, the owners of the Bonds will not have any prior claim on the Special Taxes levied on the property within the District but will have an equal claim with the owner of the Parity Bonds on the Net Taxes.
The District expects to issue additional series of bonds up to the remaining balance of bond authorization, which bonds are expected to be secured by Net Taxes on a parity with the Bonds. Such Parity Bonds are expected to be issued once further development occurs.
Payment of Special Taxes is not a Personal Obligation of the Property Owners An owner of a taxable parcel is not personally obligated to pay Special Taxes. Rather, Special Taxes are an obligation which is secured only by a lien against the taxable parcel. If the value of a taxable parcel is not sufficient, taking into account other liens imposed by public agencies, to secure fully Special Taxes, the District has no recourse against the property owner.
60 No Acceleration Provision
The Indenture does not contain a provision allowing for the acceleration of the Bonds in the event of a payment default or other default under the terms of the Bonds or the Indenture.
Limited Obligations
The Bonds and interest thereon are not payable from the general funds of the City. Except with respect to the Net Taxes, neither the credit nor the taxing power of the District or the City is pledged for the payment of the Bonds or the interest thereon, and, except as provided in the Indenture, no Owner of the Bonds may compel the exercise of any taxing power by the District or the City or force the forfeiture of any City or District property. The principal of, premium, if any, and interest on the Bonds are not a debt of the City or a legal or equitable pledge, charge, lien or encumbrance upon any of the City’s or the District’s property or upon any of the City’s or the District’s income, receipts or revenues, except the Net Taxes and other amounts pledged under the Indenture.
The District’s legal obligations with respect to any delinquent Special Taxes are limited to: (i) payments from the Reserve Account to the extent of funds on deposit therein; and (ii) the institution of judicial foreclosure proceedings under certain circumstances with respect to any parcels for which Special Taxes are delinquent. See the caption “SOURCES OF PAYMENT FOR THE BONDS—Special Taxes—Proceeds of Foreclosure Sales.” The Bonds cannot be accelerated in the event of any default.
The obligation to pay Special Taxes does not constitute a personal obligation of the current or subsequent owners of the respective parcels which are subject to such liens. See the caption “—Payment of the Special Tax is Not a Personal Obligation of the Property Owners.” Enforcement of Special Tax payment obligations by the District is limited to judicial foreclosure in the Superior Court of California, County of Riverside. There is no assurance that any current or subsequent owner of a parcel subject to a Special Tax lien will be able to pay the amounts due or that such owner will choose to pay such amounts even though financially able to do so.
Failure by owners of the parcels to pay Special Tax installments when due, delay in foreclosure proceedings, or the inability of the District to sell parcels that have been subject to foreclosure proceedings for amounts sufficient to cover the delinquent installments of Special Taxes levied against such parcels may result in the inability of the District to make full or timely payments of debt service on the Bonds, which may in turn result in the depletion of the Reserve Account. See the caption “—Enforcement Delays – Bankruptcy.” Ballot Initiatives
Articles XIII A, XIII B, XIII C, and XIII D of the California Constitution were adopted pursuant to measures qualified for the ballot pursuant to the State’s constitutional initiative process. From time to time, other initiative measures could be adopted by California voters. The adoption of any such initiative might place limitations on the ability of the State, the City, or other local agencies to increase revenues or to increase appropriations.
Proposition 218
An initiative measure entitled “The Right to Vote on Taxes Act” (“Proposition 218”) was approved by the voters at the November 5, 1996 statewide general election. Among other things, Proposition 218 added a new Article XIII C to the California Constitution which states that “. . . the initiative power shall not be prohibited or otherwise limited in matters of reducing or repealing any local tax, assessment, fee or charge.” The Act provides for a procedure which includes notice, hearing, protest and voting requirements to alter the rate and method of apportionment of an existing special tax. However, the Act prohibits a legislative body from adopting any resolution to reduce the rate of any special tax or terminate the levy of any special tax pledged to repay any debt incurred pursuant to the Act unless such legislative body determines that the reduction or termination of the special tax would not interfere with the timely retirement of that debt. While the application of Proposition 218 in this context has not yet been interpreted by the courts and the matter is not completely free from doubt, it is not likely
61 that Proposition 218 has conferred on the voters the power to effect a repeal or reduction of the Special Tax if the result thereof would be to impair the security of the Bonds.
It may be possible, however, for voters or the City Council, acting as the legislative body of the District, to reduce the Special Taxes in a manner which does not interfere with the timely repayment of the Bonds, but which does reduce the maximum amount of Special Taxes that may be levied in any year below the existing levels.
Therefore, no assurance can be given with respect to the future levy of Special Taxes in amounts greater than the amount necessary for the timely retirement of the Bonds. Nevertheless, to the maximum extent that the law permits it to do so, the District will covenant that it will not initiate proceedings under the Act to reduce the maximum Special Tax rates for the District. The District also will covenant that, in the event an initiative is adopted which purports to reduce or otherwise alter the Rate and Method, it will commence and pursue legal action in order to preserve its ability to comply with the foregoing covenant. However, no assurance can be given as to the enforceability of the foregoing covenants.
Litigation with Respect to Community Facilities Districts Shapiro. The California Court of Appeal, Fourth Appellate District, Division One, issued its opinion in City of San Diego v. Melvin Shapiro (2014) 228 Cal.App.4th 756 (the “San Diego Decision”). The case involved a Convention Center Facilities District (the “CCFD”) established by the City of San Diego (“San Diego”). The CCFD is a financing district much like a community facilities district established under the provisions of the Act.
The CCFD is comprised of all of the real property in San Diego. However, the special tax to be levied within the CCFD was to be levied only on hotel properties located within the CCFD.
The election authorizing the special tax was limited to owners of hotel properties and lessees of real property owned by a governmental entity on which a hotel is located. Thus, the election was not a registered voter election. Such approach to determining who would constitute the qualified electors of the CCFD was modeled after Section 53326(c) of the Act, which generally provides that, if a special tax will not be apportioned in any tax year on residential property, the legislative body may provide that the vote shall be by the landowners of the proposed district whose property would be subject to the special tax. The Court held that the CCFD special tax election was invalid under the California Constitution because Article XIIIA, Section 4 thereof and Article XIIIC, Section 2 thereof require that the electors in such an election be the registered voters within the district.
Horizon. The Sacramento County Superior Court issued a tentative ruling in Horizon Capital Investments, LLC v. City of Sacramento et al. (Case No. 34-2017-80002661). That ruling subsequently became the court’s final order. As described below, this case involved an election to approve the levy of a special tax within a community facilities district (“CFD”) formed under the Act. In 2017, the City of Sacramento initiated proceedings to form a CFD to finance certain costs to operate and maintain a streetcar line. As permitted by the Act, the proposed district included non-contiguous parcels of non-residential property. Because there were fewer than 12 registered voters residing within the territory of the proposed CFD, the City Council submitted the special tax proposed to be levied within the proposed CFD to the owners of land within the proposed CFD, as required by the Act. The proposed special tax received the requisite two-thirds vote in the landowner election. Petitioners Horizon Capital Investments, LLC et al. filed a writ of mandate and complaint for reverse validation and declaratory relief.
Petitioners argued, and the superior court agreed in its final ruling, that under section 4(a) of article XIII A of the California Constitution (which provides that “Cities, Counties and special districts, by a two-thirds vote of the qualified electors of such district [sic], may impose special taxes on such district…”) the phrase “qualified electors” means the registered voters of the entire City of Sacramento and not just the owners of the property within the boundaries of the proposed CFD. Citing the San Diego Decision, the tentative ruling states that the phrase “qualified electors of the district” refers to the registered voters of the entity imposing the special tax, which in this case was the City of Sacramento. Because the vote within the proposed CFD was by landowners only and not by all registered voters in the City of Sacramento, the final ruling states that the special tax is invalid.
The superior court’s final ruling is not binding upon other courts within the State and does not directly apply to the District, the Special Tax, or the Bonds. The City of Sacramento did not appeal the decision.
62 The Special Tax Election in the District. With respect to the San Diego Decision, the facts of such case show that there were thousands of registered voters within the CCFD (viz., all of the registered voters in San Diego). At the time of the landowner elections to authorize the Special Tax for the District, there were no registered voters within the District. In the San Diego Decision, the court expressly stated that it was not addressing the validity of landowner voting to impose special taxes pursuant to the Act in situations where there are fewer than 12 registered voters. Thus, by its terms, the court’s holding in the San Diego Decision does not apply to the Special Tax election in the District. Moreover, Section 53341 of the Act provides that any “action or proceeding to attack, review, set aside, void or annul the levy of a special tax…shall be commenced within 30 days after the special tax is approved by the voters.” Similarly, Section 53359 of the Act provides that any action to determine the validity of bonds issued pursuant to the Act be brought within 30 days of the voters approving the issuance of such bonds.
The petitioners in Horizon filed the writ of mandate within 30 days of the landowner election. Landowners in the District approved the levy of Special Tax in accordance with the Rate and Method on May 13, 2021. Based on Sections 53341 and 53359 of the Act and analysis of existing laws, regulations, rulings, and court decisions, the City believes that no successful challenge to the Special Tax being levied in accordance with the Rate and Method may now be brought. In connection with the issuance of the Bonds, Bond Counsel expects to deliver its opinion in the proposed form attached hereto as Appendix B.
Loss of Tax Exemption
As discussed under the heading “TAX EXEMPTION,” interest on the Bonds could cease to be excluded from gross income for purposes of federal income taxation, retroactive to the date the Bonds were issued, as a result of future acts or omissions of the District. In addition, it is possible that future changes in applicable federal tax laws could cause interest on the Bonds to be included in gross income for federal income taxation or could otherwise reduce the equivalent taxable yield of such interest and thereby reduce the value of the Bonds.
No Ratings – Limited Secondary Market
The District has not applied to have the Bonds rated by any nationally recognized bond rating company, and it does not expect to do so in the future.
There can be no guarantee that there will be a secondary market for the Bonds or, if a secondary market exists, that such Bonds can be sold for any particular price. The Bonds and beneficial interest therein may be transferred, only in authorized denominations.
Although the District has committed to provide certain financial and operating information, there can be no assurance that such information will be available to Bond owners on a timely basis. The failure to provide the required annual financial information does not give rise to monetary damages but merely an action for specific performance. Occasionally, because of general market conditions, lack of current information, the absence of a credit rating for the Bonds or because of adverse history or economic prospects connected with a particular issue, secondary marketing practices in connection with a particular issue are suspended or terminated. Additionally, prices of issues for which a market is being made will depend upon then prevailing circumstances. Such prices could be substantially different from the original purchase price.
Limitations on Remedies
Remedies available to the Owners of the Bonds may be limited by a variety of factors and may be inadequate to assure the timely payment of principal of and interest on the Bonds or to preserve the tax-exempt status of interest on the Bonds.
Bond Counsel has limited its opinion as to the enforceability of the Bonds and of the Indenture to the extent that enforceability may be limited by bankruptcy, insolvency reorganization, fraudulent conveyance or transfer, moratorium or other similar laws affecting generally the enforcement of creditor’s rights, by equitable principles and by the exercise of judicial discretion and by limitations on remedies against public agencies in the
63 State of California. The lack of availability of certain remedies or the limitation of remedies may entail risks of delay, limitation or modification of the rights of the Owners.
Potential Early Redemption of Bonds from Prepayments
Property owners within the District are permitted to prepay their Special Taxes pursuant to the Rate and Method. Such prepayments will result in an extraordinary redemption of the Bonds on the Interest Payment Date for which timely notice may be given under the Indenture following the receipt of the prepayment. The resulting redemption of Bonds purchased at a price greater than par could reduce the otherwise expected yield on such Bonds. See “THE BONDS — Redemption — Extraordinary Redemption from Special Tax Prepayments.” District Not Included in Teeter Plan
Although the Riverside County Board of Supervisors has adopted the Alternative Method of Distribution of Tax Levies and Collections and of Tax Sale Proceeds (the “Teeter Plan”) which allows each entity levying secured property taxes in the County to draw on the amount of property taxes levied rather than the amount actually collected, as provided for in Section 4701 et seq. of the California Revenue and Taxation Code, and the City’s ad valorem taxes are included in the Teeter Plan, the District will not be 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.
CONTINUING DISCLOSURE
Pursuant to the District Continuing Disclosure Agreement, the District will covenant for the benefit of the holders and Beneficial Owners of the Bonds to provide certain financial information and operating data relating to the District by April 1 of each year (the “Annual Report”), commencing with the report for April 1, 2024, and to provide the notices of enumerated events will be filed with EMMA. The specific nature of the information to be contained in the Annual Report and the notice of enumerated events is set forth in “APPENDIX E — FORM OF DISTRICT CONTINUING DISCLOSURE AGREEMENT.” These covenants have been made in order to assist the Underwriter in complying with subsection (b)(5) of Rule 15c2-12 (the “Rule”).
The District, which is the obligated party under the Disclosure Agreement, has previously entered into an undertaking pursuant to the Rule. Within the last five years, certain filings relating to the public debt obligations of the City and its related entities were incomplete or not made in a timely manner, as required under then outstanding continuing disclosure obligations of the City and its related entities. [INSERT INFORMATION] Pursuant to a Developer Continuing Disclosure Certificate to be executed by UPI and Toll, UPI and Toll will agree to provide, or cause to be provided, to EMMA certain information relating to the development of the Project on a semi-annual basis and notices of certain enumerated events. Furthermore, UPI intends to request the assistance of DPFG, LLC in the preparation of the semi-annual filings. The specific nature of the information to be contained in the Annual Report and the notice of enumerated events is set forth in “APPENDIX E — FORM OF DEVELOPER CONTINUING DISCLOSURE CERTIFICATE.”
TAX EXEMPTION
The Internal Revenue Code of 1986, as amended (the “Code”), establishes certain requirements which must be met subsequent to the issuance and delivery of the Bonds for interest thereon to be and remain excluded from gross income for federal income tax purposes. Noncompliance with such requirements could cause interest on the Bonds to be included in gross income for federal income tax purposes retroactive to their date of issue.
These requirements include, but are not limited to, provisions which limit how the proceeds of the Bonds may be spent and invested, and generally require that certain investment earnings be rebated on a periodic basis to the United States of America. The City has made certifications and representations and have covenanted to maintain the exclusion of the interest on the Bonds from gross income for federal income tax purposes pursuant to Section 103 of the Code.
64 In the opinion of Richards, Watson & Gershon, A Professional Corporation, Bond Counsel, under existing law and assuming the accuracy of such certifications and representations by, and compliance with such covenants of the City, interest on the Bonds is excluded from gross income for federal income tax purposes and is not an item of tax preference for purposes of the federal alternative minimum tax; however, for tax years beginning after December 31, 2022, interest on the Bonds included in adjusted financial statement income of certain corporations is not excluded from the federal corporate alternative minimum tax. Bond Counsel is also of the opinion that, under existing law, interest on the Bonds is exempt from State of California personal income taxes. Bond counsel expresses no opinion as to any other tax consequences regarding the Bonds.
Under the Code, interest on the Bonds may be subject to a federal branch profits tax imposed on certain foreign corporations doing business in the United States and to a federal tax imposed on excess net passive income of certain S corporations. Under the Code, the exclusion of interest from gross income for federal income tax purposes may have certain adverse federal income tax consequences on items of income, deduction or credit for certain taxpayers, including financial institutions, certain insurance companies, recipients of Social Security and Railroad Retirement benefits, those deemed to incur or continue indebtedness to acquire or carry tax-exempt obligations, and individuals otherwise eligible for the earned income tax credit. The applicability and extent of these and other tax consequences will depend upon the particular tax status or other tax items of the owner of the Bonds. Bond Counsel will express no opinion regarding these and other such consequences.
Bond Counsel has not undertaken to advise in the future whether any circumstances or events occurring after the date of issue of the Bonds may affect the tax status of interest on the Bonds. Legislation affecting taxexempt obligations is regularly considered by the United States Congress and may also be considered by the California legislature. Court proceedings may also be filed, the outcome of which could modify the tax treatment of obligations such as the Bonds. No assurance can be given that legislation enacted or proposed, or actions by a court, after the date of issue of the Bonds, will not eliminate, or directly or indirectly reduce the benefit of the exclusion of interest on the Bonds from gross income for federal income tax purposes, or have an adverse effect on the market value or marketability of the Bonds. Investors should consult their own financial and tax advisors to analyze the importance of these risks.
For example, federal tax legislation enacted on December 22, 2017, reduced corporate tax rates, modified individual tax rates, eliminated many deductions, and generally eliminated the tax-exempt advance refunding of tax-exempt bonds and other tax advantaged bonds, among other things. In addition, investors in the Bonds should be aware that future legislative actions might increase, reduce, or otherwise change (including retroactively) the financial benefits and the treatment of all or a portion of the interest on the Bonds for federal income tax purposes for all or certain taxpayers. In all such events, the market value of the Bonds may be adversely affected and the ability of holders to sell their Bonds in the secondary market may be reduced. The Bonds are not subject to special mandatory redemption, and the interest rates on the Bonds are not subject to adjustment, in the event of any such change.
Certain requirements and procedures contained or referred to in relevant documents may be changed and certain actions may be taken, under the circumstances and subject to the terms and conditions set forth in such documents, upon the advice or with the approving opinion of nationally recognized bond counsel. Bond Counsel expresses no opinion as to any Bond, or the interest thereon, if any such change occurs or action is taken upon the advice or approval of bond counsel other than Richards, Watson & Gershon, A Professional Corporation.
If the issue price of a Bond (the first price at which a substantial amount of the bonds of a maturity are sold to the public) is less than the stated redemption price at maturity of such Bond, the difference constitutes original issue discount, the accrual of which is excluded from gross income for federal income tax purposes to the same extent as interest on the Bonds. Further, such original issue discount accrues actuarially on a constant yield method over the term of each such Bond and the basis of each Bond acquired at such initial offering price by an initial purchaser thereof will be increased by the amount of such accrued original issue discount. The accrual of original issue discount may be taken into account as an increase in the amount of tax-exempt income for purposes of determining various other tax consequences of owning such Bonds. Purchasers who acquire Bonds with
65 original issue discount are advised that they should consult with their own independent tax advisors with respect to the state and local tax consequences of owning such Bonds.
If the issue price of a Bond is greater than the stated redemption price at maturity of such Bond, the difference constitutes original issue premium, the amortization of which is not deductible from gross income for federal income tax purposes. Original issue premium is amortized over the period to maturity of such Bond based on the yield to maturity of that Bond (or, in the case of a Bond callable prior to its stated maturity, the amortization period and yield may be required to be determined on the basis of an earlier call date that results in the lowest yield on that Bond), compounded semiannually. For purposes of determining gain or loss on the sale or other disposition of such Bond, the purchaser is required to decrease such purchaser’s adjusted basis in such Bond by the amount of premium that has amortized to the date of such sale or other disposition. As a result, a purchaser may realize taxable gain for federal income tax purposes from the sale or other disposition of such Bond for an amount equal to or less than the amount paid by the purchaser for that Bond. A purchaser of that Bond in the initial public offering at the issue price for that Bond who holds it to maturity (or, in the case of a callable Bond, to its earlier call date that results in the lowest yield on that Bond) will realize no gain or loss upon its retirement.
Payments of interest on tax-exempt obligations, including the Bonds, are generally subject to IRS Form 1099-INT information reporting requirements. If an owner of a Bond is subject to backup withholding under those requirements, then payments of interest will also be subject to backup withholding. Those requirements do not affect the exclusion of such interest from gross income for federal income tax purposes.
Prospective purchasers of the Bonds should consult their own independent tax advisers regarding pending or proposed federal and state tax legislation and court proceedings, and prospective purchasers of the Bonds at other than their original issuance at the respective prices indicated on the inside cover of this Official Statement should also consult their own tax advisers regarding other tax considerations such as the consequences of market discount, as to all of which Bond Counsel expresses no opinion.
Bond Counsel’s engagement with respect to the Bonds ends with the issuance of the Bonds, and, unless separately engaged, Bond Counsel is not obligated to defend the City or the owners of the Bonds regarding the tax status of interest thereon in the event of an audit examination by the IRS. The IRS has a program to audit taxexempt obligations to determine whether the interest thereon is includible in gross income for federal income tax purposes. If the IRS does audit the Bonds, under current IRS procedures, the IRS will treat the City as the taxpayer and the beneficial owners of the Bonds will have only limited rights, if any, to participate in the audit or to obtain and participate in judicial review of such audit. Any action of the IRS, including but not limited to selection of the Bonds for audit, or the course or result of such audit, or an audit of other obligations presenting similar tax issues, may affect the market value of the Bonds. A copy of the proposed form of opinion of Bond Counsel is attached hereto as Appendix B.
LEGAL OPINION
The legal opinion of Bond Counsel approving the validity of the Bonds, in substantially the form set forth as Appendix B hereto, will be made available to purchasers of the Bonds at the time of original delivery of the Bonds. Certain legal matters will be passed upon for the City and the District by Best Best & Krieger LLP, Indian Wells, California, City Attorney, and for the District by Best Best & Krieger LLP, Riverside, California, Disclosure Counsel, for the Underwriter by Kutak Rock LLP, Irvine, California, and for the Trustee by its counsel.
Bond Counsel undertakes no responsibility to the purchasers of the Bonds for the accuracy, completeness or fairness of this Official Statement.
ABSENCE OF LITIGATION
In connection with the issuance of the Bonds, the City Attorney will deliver an opinion to the effect that, to their actual knowledge, after due inquiry and investigation, there is no action, suit, proceeding or investigation at law or in equity before or by any court, public board or body, pending or threatened, or any unfavorable decision,
66 ruling or finding, against or affecting the District, which would adversely impact the District’s ability to complete the transactions described in, or contemplated by, the Indenture or this Official Statement, restrain or enjoin the collection of the Special Taxes, or in any way contest or affect the validity of the Bonds, the Indenture, the Special Taxes, or the transactions described herein.
NO RATING
The District has not made, and does not contemplate making, an application to any rating organization for the assignment of a rating on the Bonds.
UNDERWRITING
The Bonds are being purchased by Piper Sandler & Co. (the “Underwriter”). [The Underwriter has agreed to purchase the Bonds at a price of $_______ (being the $_______ aggregate principal amount of the Bonds, less an Underwriter’s discount of $______ and plus original issue premium of $_______).] The bond purchase agreement relating to the Bonds provides that the Underwriter will purchase all of the Bonds if any are purchased, the obligation to make such purchase being subject to certain terms and conditions set forth in the Bond Purchase Agreement, the approval of certain legal matters by counsel and certain other conditions. The Underwriter’s compensation is contingent upon the successful issuance of the Bonds.
Under certain circumstances, the Underwriter may offer and sell the Bonds to certain dealers and others at prices lower or yields higher than those stated on the page immediately following the cover page of this Official Statement. The offering prices may be changed from time to time by the Underwriter.
FINANCIAL INTERESTS
The fees being paid to the Underwriter and its counsel and the Trustee are contingent upon the issuance and delivery of the Bonds. From time to time Best Best & Krieger LLP represents the Underwriter on matters unrelated to the Bonds.
MUNICIPAL ADVISOR
The City has retained Del Rio Advisors, LLC, of Modesto, California, as municipal advisor (the “Municipal Advisor”) in connection with the issuance of the Bonds. The Municipal Advisor is not obligated to undertake, and has not undertaken to make, an independent verification or assume responsibility for the accuracy, completeness, or fairness of the information contained in this Official Statement. The Municipal Advisor has assisted the City with the structure, timing and terms for the sale of the Bonds. Del Rio Advisors, LLC, is an independent municipal advisory firm and is not engaged in the business of underwriting, trading or distributing municipal securities or other public securities.
MISCELLANEOUS
So far as any statements made in this Official Statement involve matters of opinion, assumptions, projections, anticipated events or estimates, whether or not expressly stated, they are set forth as such and not as presentations of fact, and actual results may differ substantially from those set forth therein. Neither this Official Statement nor any statement that may have been made verbally or in writing is to be construed as a contract with the Owners of the Bonds.
The summaries of certain provisions of the Bonds, statutes and other documents or agreements referred to in this Official Statement do not purport to be complete, and reference is made to each of them for a complete statement of their provisions. Copies are available for review by making requests to the City.
67 The execution and delivery of this Official Statement by the City Treasurer has been duly authorized by the City Council of the City of Palm Desert acting in its capacity as the legislative body of the District.
CITY OF PALM DESERT COMMUNITY FACILITIES
DISTRICT NO. 2021-1 (UNIVERSITY PARK)
By:
Veronica Chavez, Finance Director
APPENDIX A
RATE AND METHOD OF APPORTIONMENT OF SPECIAL TAX
For the City of Palm Desert Community Facilities District No. 2021-1 (University Park), County of Riverside, State of California
A Special Tax shall be levied on all Taxable Property within the boundaries of the City of Palm Desert Community Facilities District No. 2021-1 (University Park) (“CFD No. 2021-1”) and collected each Fiscal Year commencing in Fiscal Year 2021-22, in an amount determined by the CFD Administrator through the application of the procedures described below. All of the real property within CFD No. 2021-1, 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 Map.
An Acre means 43,560 square feet of land.
“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 Government Code of the State of California. “Administrative Expenses” means the actual or reasonably estimated costs related to the administration of CFD No. 2021-1 including, but not limited to: the costs of preparing and computing the Special Tax (whether by the City or designee thereof or both); the costs of collecting the Special Taxes (whether by the City, 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, CFD No. 2021-1, or any designee thereof complying with arbitrage rebate requirements, including without limitation rebate liability costs and periodic rebate calculations; the costs to the City, CFD No. 2021-1, or any designee thereof complying with disclosure or reporting requirements of the City or CFD No. 2021-1, associated with applicable federal and State laws; the costs associated with preparing Special Tax disclosure statements and responding to public inquiries regarding the Special Taxes; the costs to the City, CFD No. 2021-1, or any designee thereof related to an appeal of the Special Tax; and the City’s annual administration fees and third party expenses. Administrative Expenses shall also include amounts estimated or advanced by the City or CFD No. 2021-1 for any other administrative purposes of CFD No. 2021-1, including but not limited to attorney’s fees and other costs related to commencing and pursuing any foreclosure of delinquent Special Taxes. “Annual Special Tax” means the Special Tax actually levied in any Fiscal Year on any Assessor’s Parcel. “Apartment Property” means an Assessor’s Parcel of Developed Property on which all or any portion of a structure or structures with multiple Apartment Units are located, and such Apartment Units are offered for rent and are not available for sale to individual owners. If Apartment Property is subsequently reclassified as Single Family Property, Special Taxes levied on such reclassified Assessor’s Parcels shall be modified to match those of Single Family Property, provided that the Building Square Footage of such Single Family Property can be determined by the CFD Administrator. Otherwise, the property will continue to be classified as Apartment Property.
“Apartment Unit” means one (1) for-rent residential unit on Apartment Property. “Approved Property” means all Assessor’s Parcels of Taxable Property: (i) that are included in a Final Map that was recorded prior to the January 1st preceding the Fiscal Year in which the Special Tax is being levied,
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and (ii) that have not been issued a Building Permit on or prior to the May 1st preceding the Fiscal Year in which the Special Tax is being levied.
“Assessor” means the Assessor of the County of Riverside. “Assessor’s Parcel” means a lot or parcel shown on an Assessor’s Parcel Map with an assigned Assessor’s Parcel Number.
“Assessor’s Parcel Map” means an official map of the Assessor designating parcels by Assessor’s Parcel Number.
“Assessor’s Parcel Number” means the number assigned to an Assessor’s Parcel by the County for purposes of identification.
“Assigned Special Tax” means the Special Tax of that name described in Section C.1 below. “Backup Special Tax” means the Special Tax of that name described in Section C.2 below. “Bonds” means any bonds or other Debt of CFD No. 2021-1, whether in one or more series, secured by the levy of Special Taxes.
“Building Permit” means a building permit for construction of a Residential Unit within CFD No. 2021- 1 issued by the City.
“Building Square Footage” means all of the square footage of usable area within the perimeter of a residential structure or dwelling unit, as applicable, not including any carport, walkway, garage, overhang, or similar area. The determination of Building Square Footage shall be made by reference to the Building Permit(s) issued for such Assessor’s Parcel and/or by reference to appropriate records kept by the City. “Calendar Year” means the period commencing January 1st of any year and ending the following December 31.
“CFD Administrator” means an authorized representative of the City, or designee thereof, responsible for determining the Special Tax Requirement, for preparing the Special Tax roll and/or calculating the Backup Special Tax.
“CFD No. 2021-1” means the City of Palm Desert Community Facilities District No. 2021-1 (University Park).
“City” means the City of Palm Desert, California.
“Council” means the City Council of the City acting as the legislative body of CFD No. 2021-1 under the Act.
“County” means the County of Riverside, California.
“Debt” means any binding obligation to pay or repay a sum of money, including obligations in the form of bonds, certificates of participation, long-term leases, loans from government agencies, or loans from banks, other financial institutions, private businesses, or individuals, or long-term contracts. “Debt Service” means for each Fiscal Year, the total amount of principal and interest payable on any Outstanding Bonds during the Calendar Year commencing on January 1st of such Fiscal Year.
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“Developed Property” means for each Fiscal Year, all Taxable Property, exclusive of Provisional Property, for which a Building Permit was issued prior to May 1st of the previous Fiscal Year. An Assessor’s Parcel classified as Developed Property but for which the Building Permit that caused such Assessor’s Parcel to be classified as Developed Property has been cancelled and/or voided prior to the Fiscal Year for which Special Taxes are being levied shall be reclassified as Approved Property, provided that and only if the levy of the Special Tax less Administrative Expenses after such reclassification shall not be less than 1.1 times the annual Debt Service on all Outstanding Bonds. If Bonds have not been issued, an Assessor’s Parcel classified as Developed Property for which such a Building Permit has been cancelled and/or voided shall be reclassified as Approved Property.
“Exempt Property” means for each Fiscal Year, all Assessor’s Parcels designated as being exempt from Special Taxes pursuant to Section H below.
“Final Map” means a subdivision of property by recordation of a final map, parcel map, or lot line adjustment, pursuant to the Subdivision Map Act (California Government Code Section 66410 et seq.) or recordation of a condominium plan pursuant to California Civil Code 4285 that creates individual Lots for which Building Permits may be issued without further subdivision. “Fiscal Year” means the period starting on July 1 and ending the following June 30. “Indenture” means the indenture, fiscal agent agreement, resolution or other instrument pursuant to which Bonds are issued, as modified, amended and/or supplemented from time to time, and any instrument replacing or supplementing the same.
“Land Use Class” means any of the classes listed in Table 1 and Table 2 under Section C.1 below. “Lot” means a parcel created by a Final Map capable of conveyance or rental, separate from adjacent parcels or dwelling units and/or on which one or more Residential Units can be constructed. “Lower Income Households Welfare Exemption Property” means, for each Fiscal Year, an Assessor’s Parcel that is entitled 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 County Assessor’s roll finalized as of January 1 of the previous Fiscal Year; provided that such property is not exempt from the Special Tax if 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 Tax and the Special Tax shall be enforceable against the property. “Maximum Special Tax” means for each Assessor’s Parcel, the maximum Special Tax, determined in accordance with Sections C.3 and C.4 below, which may be levied in a given Fiscal Year on such Assessor’s Parcel of Taxable Property.
“Non-Residential Property” means all Assessor’s Parcels of Developed Property for which a building permit has been issued for the purpose of constructing one or more non-residential units or facilities. “Outstanding Bonds” means all Bonds, which are deemed to be outstanding under the Indenture. “Prepayment Amount” means the amount required to prepay the Special Tax Obligation in full for an Assessor’s Parcel as described in Section F.1 below or in part for an Assessor’s Parcel as described in Section F.2 below.
“Property Owner Association Property” means any Assessor’s Parcel within the boundaries of CFD No. 2021-1 owned in fee by a property owner association, including any master or sub- association. “Proportionately” or “Proportionate” means for Developed Property, that the ratio of the actual Special Tax levy to the applicable Assigned Special Tax or Backup Special Tax is equal for all Assessor’s Parcels of
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Developed Property. For Approved Property or Undeveloped Property, “Proportionately” means that the ratio of the actual Special Tax levy per Acre to the Maximum Special Tax per Acre is equal for all Assessor’s Parcels of Approved Property or Undeveloped Property. “Proportionately” may similarly be applied to other categories of Taxable Property as listed in Section D below.
“Provisional Property” means all Assessor’s Parcels of Public Property, Property Owner Association Property, Non-Residential Property or property that would otherwise be classified as Exempt Property pursuant to the provisions of Section H, but cannot be classified as Exempt Property because to do so would reduce the Acreage of all Taxable Property below the required minimum Acreage as set forth in Section H. “Provisional Welfare Property” means all Assessor’s Parcels of Lower Income Households Welfare Exemption Property that would otherwise be classified as Exempt Property pursuant to the provisions of Section H, but cannot be classified as Exempt Property because to do so would reduce the Acreage of all Taxable Property below the required minimum Acreage as set forth in Section H. “Public Property” means any property within the boundaries of CFD No. 2021-1, which is owned by, or irrevocably offered for dedication to the federal government, the State of California, the County, the City or any other public agency; provided however that (i) any property owned by a public agency and leased to a private entity and subject to taxation under Section 53340.1 of the Act and (ii) any property subject to taxation pursuant to Section 53317.3 of the Act shall be taxed and classified in accordance with its use. “Residential Property” means all Assessor’s Parcels of Developed Property for which a Building Permit has been issued for the purpose of constructing one or more Residential Units. “Residential Unit” means each separate residential dwelling unit that comprises an independent facility capable of conveyance or rental, separate from adjacent residential dwelling units. “Single Family Property” means all Assessor’s Parcels of Residential Property not classified as Apartment Property.
“Special Tax” means any special tax levied within CFD No. 2021-1 pursuant to the Act and this Rate and Method of Apportionment of Special Tax.
“Special Tax Obligation” means the total obligation of an Assessor’s Parcel of Taxable Property to pay the Special Tax for the remaining life of CFD No. 2021-1. “Special Tax Requirement” means that amount required in any Fiscal Year to: (i) pay regularly scheduled Debt Service on all Outstanding Bonds; (ii) pay periodic costs on the Outstanding Bonds, including but not limited to, credit enhancement and rebate payments on the Outstanding Bonds; (iii) pay Administrative Expenses; (iv) pay any amounts required to establish or replenish any reserve funds for all Outstanding Bonds; (v) accumulate funds to pay directly for acquisition or construction of facilities, provided that the inclusion of such amount does not cause an increase in the Special Tax to be levied on Approved Property, Undeveloped Property, or Provisional Property, until the date that all Bonds have been issued; and (vi) pay for reasonably anticipated delinquent Special Taxes based on the delinquency rate for Special Taxes levied in the previous Fiscal Year; less (vii) a credit for funds available to reduce the Special Tax levy, as determined by the CFD Administrator pursuant to the Indenture. “State” means the State of California.
“Taxable Property” means all of the Assessor’s Parcels within the boundaries of CFD No. 2021-1, which are not exempt from the levy of the Special Tax pursuant to law or Section H below. “Trustee” means the trustee or fiscal agent under the Indenture.
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“Undeveloped Property” means, for each Fiscal Year, all Taxable Property not classified as Developed Property, Approved Property or Provisional Property.
“Zone 1” means the area within CFD No. 2021-1 depicted as such in Exhibit A hereto. “Zone 2” means the area within CFD No. 2021-1 depicted as such in Exhibit A hereto. “Zone 3” means the area within CFD No. 2021-1 depicted as such in Exhibit A hereto.
B. LAND USE CLASSIFICATION
Each Fiscal Year, beginning with Fiscal Year 2021-22, each Assessor’s Parcel within CFD No. 2021-1 shall be classified as Taxable Property or Exempt Property. In addition, all Taxable Property shall further be classified as Developed Property, Approved Property, Undeveloped Property, Provisional Welfare Property, or Provisional Property, and all such Taxable Property shall be subject to the levy of Special Taxes in accordance with this Rate and Method of Apportionment of Special Tax determined pursuant to Section C below.
Furthermore, each Assessor’s Parcel of Developed Property shall be classified as Single Family Property, Apartment Property, or Non-Residential Property. Finally, each Assessor’s Parcel of Single Family Property shall be classified according to its applicable Land Use Class based on its Building Square Footage.
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C. SPECIAL TAX RATES
1. Assigned Special Tax for Developed Property and Provisional Welfare Property The Assigned Special Tax applicable to an Assessor’s Parcel classified as Developed Property or Provisional Welfare Property commencing in Fiscal Year 2021-22 shall be determined pursuant to Tables 1, 2 and 3 below.
Table 1
Zone 1 Assigned Special Tax Rates
Land Use
Class Land Use Type
Building
Square Footage
Assigned
Special Tax
1 Single Family Property ≥ 2,500 $2,300 per Residential Unit 2 Single Family Property 2,400 – 2,499 $2,225 per Residential Unit 3 Single Family Property 2,300 – 2,399 $2,175 per Residential Unit 4 Single Family Property 2,200 – 2,299 $2,100 per Residential Unit 5 Single Family Property 2,100 – 2,199 $2,025 per Residential Unit 6 Single Family Property 2,000 – 2,099 $1,925 per Residential Unit 7 Single Family Property 1,900 – 1,999 $1,600 per Residential Unit 8 Single Family Property 1,800 – 1,899 $1,550 per Residential Unit 9 Single Family Property < 1,800 $1,275 per Residential Unit 10 Non-Residential Property NA NA
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Table 2
Zone 2 Assigned Special Tax Rates
Land Use
Class Land Use Type
Building Square
Footage Assigned Special Tax
1 Single Family Property ≥ 3,400 $3,025 per Residential Unit 2 Single Family Property 3,200 – 3,399 $2,975 per Residential Unit 3 Single Family Property 3,000 – 3,199 $2,875 per Residential Unit 4 Single Family Property 2,800 – 2,999 $2,800 per Residential Unit 5 Single Family Property 2,600 – 2,799 $2,675 per Residential Unit 6 Single Family Property 2,400 – 2,599 $2,625 per Residential Unit 7 Single Family Property 2,200 – 2,399 $2,600 per Residential Unit 8 Single Family Property 2,000 – 2,199 $2,575 per Residential Unit 9 Single Family Property < 2,000 $2,475 per Residential Unit 10 Non-Residential Property NA NA
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Table 3
Zone 3 Assigned Special Tax Rates
Land Use
Class Land Use Type
Building
Square Footage
Assigned
Special Tax
1 Single Family Property ≥ 2,500 $2,300 per Residential Unit 2 Single Family Property 2,400 – 2,499 $2,225 per Residential Unit 3 Single Family Property 2,300 – 2,399 $2,175 per Residential Unit 4 Single Family Property 2,200 – 2,299 $2,100 per Residential Unit 5 Single Family Property 2,100 – 2,199 $2,025 per Residential Unit 6 Single Family Property 2,000 – 2,099 $1,925 per Residential Unit 7 Single Family Property 1,900 – 1,999 $1,600 per Residential Unit 8 Single Family Property 1,800 – 1,899 $1,550 per Residential Unit 9 Single Family Property < 1,800 $1,275 per Residential Unit 10 Apartment Property NA $750 per Residential Unit
11 Non-Residential Property NA NA
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On each July 1, commencing July 1, 2022, the Assigned Special Tax for Developed Property and Provisional Welfare Property shall be increased by two percent (2%) of the amount in effect in the prior Fiscal Year.
2. Backup Special Tax for Developed Property and Provisional Welfare Property The Backup Special Tax for Developed Property and Provisional Welfare Property commencing in Fiscal Year 2021-22 shall be $15,419 per Acre for Zone 1, $19,322 per Acre for Zone 2 and $22,662 per Acre for Zone
3. Each July 1, commencing July 1, 2022, the Backup Special Tax for Developed Property and Provisional Welfare Property shall be increased by two percent (2%) of the amount in effect in the prior Fiscal Year.
For the purpose of calculating the Backup Special Tax, the land area applicable to Apartment Property shall be computed from the Acreage of the Lot on which the Apartment Property is located, with the Acreage for such Lot allocated equally among all of the Apartment Property located or to be located on such Lot.
3. Maximum Special Tax for Developed Property and Provisional Welfare Property The Maximum Special Tax for Developed Property and Provisional Welfare Property shall be the greater of the Assigned Special Tax for Developed Property and Provisional Welfare Property or the Backup Special Tax for Developed Property and Provisional Welfare Property.
4. Maximum Special Tax for Provisional Property, Approved Property and Undeveloped Property The Maximum Special Tax for Provisional Property, Approved Property, and Undeveloped Property commencing in Fiscal Year 2021-22 shall be $15,419 per Acre for Zone 1, $19,322 per Acre for Zone 2 and $22,662 per Acre for Zone 3.
Each July 1, commencing July 1, 2022, the Maximum Special Tax for Provisional Property, Approved Property and Undeveloped Property shall be increased by two percent (2%) of the amount in effect in the prior Fiscal Year.
D. METHOD OF APPORTIONMENT
For each Fiscal Year, commencing Fiscal Year 2021-22, the CFD Administrator shall levy the Special Tax on all Taxable Property in accordance with the following steps:
Step 1: The Special Tax shall be levied Proportionately on each Assessor’s Parcel of Developed Property at up to 100% of the applicable Assigned Special Tax as needed to satisfy the Special Tax Requirement.
Step 2: If additional monies are needed to satisfy the Special Tax Requirement after Step 1 has been completed, the Special Tax shall be levied Proportionately on each Assessor’s Parcel of Approved Property in an amount up to 100% of the Maximum Special Tax for Approved Property.
Step 3: If additional monies are needed to satisfy the Special Tax Requirement after Step 2 has been completed, the Special Tax shall be levied Proportionately on each Assessor’s Parcel of Undeveloped Property in an amount up to 100% of the Maximum Special Tax for Undeveloped Property.
Step 4: If additional monies are needed to satisfy the Special Tax Requirement after the first three steps have been completed, then the Special Tax amount determined in Step 1 shall be increased Proportionately on each Assessor’s Parcel of Developed Property in an amount up to 100% of the Maximum Special Tax for Developed Property.
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Step 5: If additional monies are needed to satisfy the Special Tax Requirement after the first four steps have been completed, then the Special Tax shall be levied Proportionately on each Assessor’s Parcel of Provisional Welfare Property in an amount up to 100% of the Maximum Special Tax for Provisional Property.
Step 6: If additional monies are needed to satisfy the Special Tax Requirement after the first four steps have been completed, then the Special Tax shall be levied Proportionately on each Assessor’s Parcel of Provisional Property in an amount up to 100% of the Maximum Special Tax for Provisional Property.
Notwithstanding the above, under no circumstances will the Special Tax levied in any Fiscal Year against any Assessor’s Parcel of Residential Property for which an occupancy permit for private residential use has been issued be increased as a result of a delinquency or default in the payment of the Special Tax applicable to any other Assessor’s Parcel within CFD No. 2021-1 by more than ten percent (10%) above what would have been levied in the absence of such delinquencies or defaults.
E. COLLECTION OF SPECIAL TAXES
Collection of the Special Tax shall be made by the County in the same manner as ordinary ad valorem property taxes are collected and the Special Tax shall be subject to the same penalties and the same lien priority in the case of delinquency as ad valorem taxes; provided, however, that the Council may provide for (i) other means of collecting the Special Tax, including direct billings thereof to the property owners; and (ii) judicial foreclosure of delinquent Special Taxes.
F. PREPAYMENT OF SPECIAL TAX OBLIGATION
1. Prepayment in Full
Property owners may prepay and permanently satisfy the Special Tax Obligation by a cash settlement with the City as permitted under Government Code Section 53344. The following definitions apply to this Section F:
“CFD Public Facilities Costs” means $30,000,000 or such lower number as (i) shall be determined by the CFD Administrator as sufficient to acquire or construct the facilities to be financed under the Act and financing program for CFD No. 2021-1, or (ii) shall be determined by the Council concurrently with a covenant that it will not issue any more Bonds (except refunding bonds).
“Construction Fund” means the fund (regardless of its name) established pursuant to the Indenture to hold funds, which are currently available for expenditure to acquire or construct the facilities or pay fees authorized to be funded by CFD No. 2021-1.
“Future Facilities Costs” means the CFD Public Facilities Costs minus (i) costs previously paid from the Construction Fund to acquire or construct the facilities, (ii) monies currently on deposit in the Construction Fund, and (iii) monies currently on deposit in an escrow or other designated fund that are expected to be available to finance CFD Public Facilities Costs.
“Outstanding Bonds” means all Previously Issued Bonds, which remain outstanding as of the first interest and/or principal payment date following the current Fiscal Year excluding Bonds to be redeemed at a later date with proceeds of prior Special Tax prepayments.
“Previously Issued Bonds” means all Bonds that have been issued prior to the date of prepayment.
The Special Tax Obligation applicable to an Assessor’s Parcel of Developed Property, Approved Property, Undeveloped Property, or Provisional Property that has been included in a Final Map may be prepaid and the obligation to pay the Special Tax for such Assessor’s Parcel permanently satisfied as described herein, provided that a prepayment may be made with respect to a particular Assessor’s Parcel only if there are no
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delinquent Special Taxes with respect to such Assessor’s Parcel at the time of prepayment. An owner of an Assessor’s Parcel eligible to prepay the Special Tax Obligation shall provide the CFD Administrator with written notice of intent to prepay and designate or identify the company or agency that will be acting as the escrow agent, if any. The CFD Administrator shall provide the owner with a statement of the Prepayment Amount for such Assessor’s Parcel within thirty (30) days of the request and may charge a reasonable fee for providing this service.
Prepayment must be made at least 60 days prior to any redemption date for the CFD No. 2021-1 Bonds to be redeemed with the proceeds of such prepaid Special Taxes, unless a shorter period is acceptable to the Trustee and the City.
The Prepayment Amount shall be calculated for each applicable Assessor’s Parcel or group of Assessor’s Parcels as follows (capitalized terms are defined below):
Bond Redemption Amount
plus Redemption Premium
plus Future Facilities Costs
plus Defeasance Amount
plus Administrative Fees and Expenses
less Reserve Fund Credit
less Capitalized Interest Credit
Equals: Prepayment Amount
The Prepayment Amount shall be determined as of the proposed prepayment date as follows:
1. Confirm that no Special Tax delinquencies apply to such Parcel.
2. For an Assessor’s Parcel of Developed Property, compute the Maximum Special Tax for the Assessor’s Parcel as though all Assessor’s Parcels of Taxable Property within CFD No. 2021-1 have been built out.
For an Assessor’s Parcel of Approved Property or Undeveloped Property for which a Building Permit has been issued, compute the Maximum Special Tax for the Parcel as though it was already designated as Developed Property, based upon the Building Permit which has been issued for the Assessor’s Parcel. For an Assessor’s Parcel of Approved Property or Undeveloped Property for which a Building Permit has not been issued or Provisional Property to be prepaid, compute the Maximum Special Tax for the Assessor’s Parcel.
3. Divide the Maximum Special Tax derived pursuant to paragraph 2 by the estimated total amount of Special Taxes that could be levied at build out of all Assessor’s Parcels of Taxable Property based on the applicable Maximum Special Tax for all such Assessor’s Parcels of Taxable Property not including any Parcels for which the Special Tax obligation has been previously prepaid.
4. Multiply the quotient derived pursuant to paragraph 3 by the principal amount of the Outstanding Bonds to determine the amount of Outstanding Bonds to be redeemed with the Prepayment Amount (the “Bond Redemption Amount”).
5. Multiply the Bond Redemption Amount by the applicable redemption premium, if any, on the Outstanding Bonds to be redeemed (the “Redemption Premium”).
6. Determine the Future Facilities Costs.
7. Multiply the quotient derived pursuant to paragraph 3 by the amount determined pursuant to paragraph 6 to determine the portion of the Future Facilities Costs applicable to the Assessor’s Parcel (the “Future Facilities Amount”).
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8. Determine the amount needed to pay interest on the Bond Redemption Amount from the first bond interest and/or principal payment date following the current Fiscal Year until the earliest redemption date for the Outstanding Bonds on which Bonds can be redeemed from Special Tax prepayments.
9. Determine the Special Taxes levied on the Assessor’s Parcel in the current Fiscal Year which have not yet been paid.
10. Determine the amount the CFD Administrator reasonably expects to derive from the investment of the Bond Redemption Amount and the Redemption Premium from the date of prepayment until the redemption date for the Outstanding Bonds to be redeemed with the Prepayment Amount.
11. Add the amounts derived pursuant to paragraphs 8 and 9 and subtract the amount derived pursuant to paragraph 10 (the “Defeasance Amount”).
12. Verify the administrative fees and expenses associated with the prepayment, including the cost to invest the Prepayment Amount, the cost of redeeming the Outstanding Bonds, and the cost of recording notices to evidence the prepayment of the Special Tax obligation for the Assessor’s Parcel and the redemption of Outstanding Bonds (the “Administrative Fees and Expenses”).
13. The reserve fund credit (the “Reserve Fund Credit”) shall equal the lesser of: (a) the expected reduction in the reserve requirement (as defined in the Indenture), if any, associated with the redemption of Outstanding Bonds as a result of the prepayment, or (b) the amount derived by subtracting the new reserve requirement (as defined in the Indenture) in effect after the redemption of Outstanding Bonds as a result of the prepayment from the balance in the reserve fund on the prepayment date, but in no event shall such amount be less than zero.
14. If any capitalized interest for the Outstanding Bonds will not have been expended at the time of the first interest and/or principal payment following the current Fiscal Year, a capitalized interest credit shall be calculated by multiplying the quotient computed pursuant to paragraph 3 by the expected balance in the capitalized interest fund after such first interest and/or principal payment (the “Capitalized Interest Credit”).
15. The amount to prepay the Special Tax Obligation is equal to the sum of the Bond Redemption Amount, the Redemption Premium, the Future Facilities Amount, the Defeasance Amount and the Administrative Fees and Expenses, less the Reserve Fund Credit and the Capitalized Interest Credit.
16. From the Prepayment Amount, the Bond Redemption Amount, the Redemption Premium, and Defeasance Amount shall be deposited into the appropriate fund as established under the Indenture and be used to redeem Outstanding Bonds or make Debt Service payments. The Future Facilities Amount shall be deposited into the Construction Fund. The Administrative Fees and Expenses shall be retained by the CFD.
The Prepayment Amount may be sufficient to redeem an amount other than a $5,000 increment of CFD No. 2021-1 Bonds. In such cases, the increment above $5,000 or integral multiple thereof will be retained in the appropriate fund established under the Indenture to redeem CFD No. 2021-1 Bonds to be used with the next prepayment of CFD No. 2021-1 Bonds.
The CFD Administrator will confirm that all previously levied Special Taxes have been paid in full. With respect to any Assessor’s Parcel for which the Special Tax Obligation is prepaid in full, once the CFD Administrator has confirmed that all previously levied Special Taxes have been paid, the Council shall cause a suitable notice to be recorded in compliance with the Act, to indicate the prepayment of the Special Tax and the release of the Special Tax lien on such Assessor’s Parcel, and the obligation of the owner of such Assessor’s Parcel to pay the Special Tax shall cease.
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Notwithstanding the foregoing, no Special Tax prepayment shall be allowed unless the aggregate amount of Maximum Special Taxes less Administrative Expenses that may be levied on Taxable Property, respectively, after the proposed prepayment is at least 1.1 times the Debt Service on all Outstanding Bonds in each Fiscal Year.
2. Partial Prepayment
The Special Tax on an Assessor’s Parcel of Developed Property, Approved Property, Undeveloped Property, or Provisional Property that has been included in a Final Map may be partially prepaid. The amount of the prepayment shall be calculated as in Section F.1; except that a partial prepayment shall be calculated according to the following formula:
PP = (PE-A) x F+A
These terms have the following meaning:
PP = the partial prepayment
PE = the Prepayment Amount calculated according to Section F.1 F = the percentage by which the owner of the Assessor’s Parcel(s) is partially prepaying the Special Tax Obligation
A = the Prepayment Administrative Fees and Expenses from Section F.1 The owner of any Assessor’s Parcel who desires such partial prepayment shall notify the CFD Administrator of (i) such owner’s intent to partially prepay the Special Tax Obligation, (ii) the percentage by which the Special Tax Obligation shall be prepaid, and (iii) the company or agency that will be acting as the escrow agent, if any. The CFD Administrator shall provide the owner with a statement of the amount required for the partial prepayment of the Special Tax Obligation for an Assessor’s Parcel within sixty (60) days of the request and may charge a reasonable fee for providing this service.
With respect to any Assessor’s Parcel that is partially prepaid, the City shall (i) distribute the funds remitted to it according to Section F.1., and (ii) indicate in the records of CFD No. 2021-1 that there has been a partial prepayment of the Special Tax Obligation and that a portion of the Special Tax with respect to such Assessor’s Parcel, equal to the outstanding percentage (1.00 - F) of the Maximum Special Tax, shall continue to be levied on such Assessor’s Parcel.
Notwithstanding the foregoing, no partial prepayment shall be allowed unless the aggregate amount of Maximum Special Taxes less Administrative Expenses that may be levied on Taxable Property, respectively, after the proposed partial prepayment is at least 1.1 times the Debt Service on all Outstanding Bonds in each Fiscal Year.
G. TERM OF SPECIAL TAX
The Special Tax shall be levied as long as necessary to meet the Special Tax Requirement for a period not to exceed forty-five (45) Fiscal Years commencing with Fiscal Year 2021-22, provided however that the Special Tax will cease to be levied in an earlier Fiscal Year if the CFD Administrator has determined that all required interest and principal payments on CFD No. 2021-1 Bonds have been paid.
H. EXEMPTIONS
The CFD Administrator shall classify as Exempt Property (i) Assessor’s Parcels of Public Property, (ii) Assessor’s Parcels of Property Owner Association Property, (iii) Assessor’s Parcels which are used as places of worship and are exempt from ad valorem property taxes because they are owned by a religious organization, (iv) Assessor’s Parcels with public or utility easements making impractical their utilization for other than the purposes set forth in the easement, (v) Lower Income Households Welfare Exemption Property, and (vi) Assessor’s Parcels classified as Non-Residential Property as determined reasonably by the CFD Administrator, provided that no such
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classification would reduce the sum of all Taxable Property in CFD No. 2021-1 to less than 44.86 Acres in Zone 1, 48.84 Acres in Zone 2 or 11.12 Acres in Zone 3. Assessor’s Parcels of Lower Income Households Welfare Exemption Property which cannot be classified as Exempt Property because such classification would reduce the sum of all Taxable Property in CFD No. 2021-1 to less than 44.86 Acres in Zone 1, 48.84 Acres in Zone 2 or
11.12 Acres in Zone 3 shall be classified as Provisional Welfare Property and will continue to be subject to the CFD No. 2021-1 Special Taxes accordingly. Assessor’s Parcels which cannot be classified as Exempt Property because such classification would reduce the sum of all Taxable Property in CFD No. 2021-1 to less than 44.86 Acres in Zone 1, 48.84 Acres in Zone 2 or 11.12 Acres in Zone 3 shall be classified as Provisional Property and will continue to be subject to the CFD No. 2021-1 Special Taxes accordingly. Tax exempt status for the purpose of this paragraph will be assigned by the CFD Administrator in the chronological order in which property becomes eligible for classification as Exempt Property, except for Non-Residential Property, which will be assigned tax exempt status only after all other eligible property types have been classified as Exempt Property.
If the use of an Assessor’s Parcel of Exempt Property changes so that such Assessor’s Parcel is no longer classified as one of the uses set forth in the first paragraph of Section H above that would make such Assessor’s Parcel eligible to be classified as Exempt Property, such Assessor’s Parcel shall cease to be classified as Exempt Property and shall be deemed to be Taxable Property.
I. APPEALS AND INTERPRETATIONS
Any property owner claiming that the amounts or application of the Special Taxes is not correct may file a written notice of appeal with the CFD Administrator not later than twelve months after having paid the first installment of the Special Taxes that are disputed. The CFD Administrator shall promptly review the appeal, and if necessary, meet with the property owner, consider written and oral evidence regarding the amount of the Special Taxes, and rule on the appeal. If the decision of the CFD Administrator requires that the Special Taxes for an Assessor’s Parcel be modified or changed in favor of the property owner, a cash refund shall not be made but an adjustment shall be made to the Special Taxes on that Assessor’s Parcel in the subsequent Fiscal Year(s) to compensate for the overpayment of the Special Taxes.
Any landowner who pays the Special Tax and claims the amount of the Special Tax levied on his or her Assessor’s Parcel is in error shall first consult with the CFD Administrator regarding such error not later than thirty-six (36) months after first having paid the first installment of the Special Tax that is disputed. If following such consultation, the CFD Administrator determines that an error has occurred, then the CFD Administrator shall take any of the following actions, in order of priority, in order to correct the error:
i. Amend the Special Tax levy on the landowner’s Assessor’s Parcel(s) for the current Fiscal Year prior to the payment date,
ii. Require the CFD to reimburse the landowner for the amount of the overpayment to the extent of available CFD funds, or
iii. Grant a credit against, eliminate or reduce the future Special Taxes on the landowner’s Assessor’s Parcel(s) in the amount of the overpayment.
If following such consultation and action by the CFD Administrator the landowner believes such error still exists, such person may file a written notice of appeal with the Council. Upon the receipt of such notice, the Council or designee may establish such procedures as deemed necessary to undertake the review of any such appeal. If the Council or designee determines an error still exists, the CFD Administrator shall take any of the actions described as (i), (ii) and (iii) above, in order of priority, in order to correct the error.
The Council or designee thereof shall interpret this Rate and Method of Apportionment of Special Tax for purposes of clarifying any ambiguities and make determinations relative to the administration of the Special Tax and any landowner appeals. The decision of the Council or designee shall be final.
Exhibit A
Zone Descriptions
A
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A
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A
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A
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A
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A
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A
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A
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A
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A
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A
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A
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A
-95
A
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A
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A
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A
-99
A
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A
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A
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A
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A
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A
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APPENDIX B
FORM OF OPINION OF BOND COUNSEL
Upon issuance of the Bonds, Richards, Watson & Gershon, A Professional Corporation, Bond Counsel, proposes to render its final approving opinion in substantially the following form:
[Closing Date]
APPENDIX C
APPRAISAL REPORT
APPENDIX D
SUMMARY OF THE INDENTURE
The following is a summary of certain provisions of the Indenture which are not described elsewhere.
This summary does not purport to be comprehensive and reference should be made to the Indenture for a full and complete statement of the provisions thereof.
APPENDIX E
FORMS OF DISTRICT CONTINUING DISCLOSURE AGREEMENT
AND DEVELOPER CONTINUING DISCLOSURE CERTIFICATE
THIS CONTINUING DISCLOSURE AGREEMENT dated as of ______, 2024 (the “Disclosure Agreement”) is executed and delivered by and between the City of Palm Desert Community Facilities District No. 2021-1 (University Park) (the “District”) and Willdan Financial Services as Dissemination Agent in connection with the issuance of [$__________] City of Palm Desert Community Facilities District No. 2021-1 (University Park) Special Tax Bonds, Series 2024 (the “Bonds”). The Bonds are issued pursuant to a Bond Indenture, dated as of July 1, 2021 (the “Original Indenture”) as supplemented by the First Supplemental Indenture, dated [March 1, 2024] (the “First Supplemental Indenture” together with the “Original Indenture” referred to as the “Indenture”), between the City and U.S. Bank Trust Company, National Association, as trustee (the “Trustee”). The District covenants and agrees as follows:
SECTION 1. Purpose of the Disclosure Agreement. This Disclosure Agreement is being executed and delivered by the District for the benefit of the Owners and Beneficial Owners of the Bonds and in order to assist the Participating Underwriter in complying with the Rule (defined below).
SECTION 2. Definitions. In addition to the definitions set forth in the Indenture, which apply to any capitalized term used in this Disclosure Agreement unless otherwise defined in this Section, the following capitalized terms shall have the following meanings:
“Annual Report” shall mean any Annual Report provided by the District pursuant to, and as described in, Sections 3 and 4 of this Disclosure Agreement.
“Beneficial Owner” shall mean any person, which has or shares the power, directly or indirectly, to make investment decisions concerning ownership of any Bonds (including persons holding Bonds through nominees, depositories or other intermediaries).
“City” means the City of Palm Desert, County of Riverside, California. “Disclosure Representative” shall mean the City Manager, Director of Finance of the City or the designee of any one of such officers, or such other officer or employee as the City Manager shall designate in writing from time to time.
“Dissemination Agent” shall mean the Willdan Financial Services, or any successor Dissemination Agent designated in writing by the District and which has filed with the District a written acceptance of such designation. “EMMA” shall mean the Electronic Municipal Market Access system of the MSRB. “Financial Obligation” means a (i) debt obligation; (ii) derivative instrument entered into in connection with, or pledged as security or a source of payment for, an existing or planned debt obligation; or (iii) guarantee of (i) or (ii). The term Financial Obligation shall not include municipal securities as to which a final official statement has been provided to the MSRB consistent with the Rule. “Listed Events” shall mean any of the events listed in Section 5 of this Disclosure Agreement and any other event legally required to be reported pursuant to the Rule. “MSRB” shall mean the Municipal Securities Rulemaking Board and any successor entity designated under the Rule as the repository for filings made pursuant to the Rule. “Official Statement” means the Official Statement, dated [__________, 2024], relating to the Bonds.
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“Participating Underwriter” shall mean Piper Sandler & Co. “Repository” shall mean the MSRB or any other entity designated or authorized by the Securities and Exchange Commission to receive reports pursuant to the Rule. Unless otherwise designated by the MSRB or the Securities and Exchange Commission, filings with the MSRB are to be made through the EMMA website of the MSRB, currently located at http://emma.msrb.org.
“Rule” shall mean Rule 15c2-12 adopted by the Securities and Exchange Commission under the Securities Exchange Act of 1934, as the same may be amended from time to time. “State” shall mean the State of California.
SECTION 3. Provision of Annual Reports.
(a) The District shall, or shall cause the Dissemination Agent to, not later than April 1 of each year, commencing April 1, 2024, provide to the Repository an Annual Report which is consistent with the requirements of Section 4 of this Disclosure Agreement. The Annual Report may be submitted as a single document or as separate documents comprising a package, and may cross-reference other information as provided in Section 4 of this Disclosure Agreement; provided that the audited financial statements of the District, if any are prepared, 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 they are not available by that date. If the District’s fiscal year changes, it shall give notice of such change in the same manner as for a Listed Event under Section 5. The District shall provide a written certification with each Annual Report furnished to the Dissemination Agent to the effect that such Annual Report constitutes the Annual Report required to be furnished by it hereunder. The Dissemination Agent may conclusively rely upon such certification of the District and shall have no duty or obligation to review such Annual Report. (b) Not later than five (5) days prior to the date for the filing of an Annual Report, the District shall provide the Annual Report to the Dissemination Agent (if other than the District). If by five (5) days prior to such date, the Dissemination Agent has not received a copy of the Annual Report, the Dissemination Agent shall contact the District to inquire if the District is in compliance with subsection (a). (c) If the District is unable to provide to the Repository an Annual Report by the date required in subsection (a), the Dissemination Agent, in a timely manner, shall send a notice to the Repository in the form required by the Repository stating that the Annual Report has not been filed and, if provided by the District, the date the District anticipates the filing to be made.
(d) The Dissemination Agent shall:
(i) determine each year prior to date for providing the Annual Report the name and address of the Repository if other than the MSRB; and
(ii) file a report with the District certifying that the Annual Report has been provided to the Repository pursuant to this Disclosure Agreement and stating the date it was provided to the Repository.
SECTION 4. Content of Annual Reports. The District’s Annual Report shall contain or include by reference the following:
(a) Financial Statements. The audited financial statements of the District for the prior fiscal year, if any have been prepared and which, if prepared, shall be prepared in accordance with generally accepted accounting principles as promulgated to apply to governmental entities from time to time by the Governmental Accounting Standards Board; provided, however, that the District may, from time to time, if required by federal or state legal requirements, modify the basis upon which its financial statements are prepared. In the event that the District shall modify the basis upon which its financial statements are prepared, the District shall provide the information referenced in Section 8(b) below regarding such modification. If the District is preparing audited
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financial statements and such audited financial statements are not available by the time the Annual Report is required to be filed pursuant to Section 3(a), the Annual Report shall contain unaudited financial statements, and the audited financial statements shall be filed in the same manner as the Annual Report when they become available.
(b) Financial and Operating Data. To the extent not included in the audited financial statements of the District, the Annual Report shall also include the following additional items:
(i) principal amount of Bonds outstanding as of the September 2 preceding the filing of the Annual Report;
(ii) the balance in each fund under the Indenture and the Reserve Requirement as of the September 2 preceding the filing of the Annual Report;
(iii) an update of Table 3 and Table 4 in the Official Statement based on the most recent Special Tax levy preceding the date of the Annual Report and on the assessed values of property for the current Fiscal Year;
(iv) a statement regarding the amount of Special Tax prepayments, if any, in the Fiscal Year for which the Annual Report is prepared;
(v) the status of any foreclosure actions being pursued by the District with respect to delinquent Special Taxes;
(vi) a table showing the total Special Taxes levied and the total Special Taxes collected for the prior fiscal year and the total Special Taxes that, as of December 31, remain unpaid for each prior fiscal year in which Special Taxes were levied and the number of delinquent parcels in the District; (vii) a list of the property owners within the District responsible for 5% or more of the Special Tax levy for the current Fiscal Year, if any, the percentage of the Special Tax levy for which each such property owner is responsible, and whether any of such owners, as of December 31 preceding the Annual Report, was delinquent in the payment of Special Taxes;
(viii) with respect to the Special Tax levy for the Fiscal Year beginning on the July 1 immediately preceding the April 1 due date by which the Annual Report is required to be filed with EMMA, a statement of the percentage of the annual Special Tax levy for which Developed Property is responsible; and (ix) any information not already included under 1 through 8 above that the District is required to file in its annual report pursuant to the provisions of the Mello-Roos Community Facilities Act of 1982, as amended, with the California Debt and Investment Advisory Commission.
Any or all of the items listed above may be included by specific reference to other documents, including official statements of debt issues of the District or related public entities, which have been submitted to each of EMMA or the Securities and Exchange Commission. If the document included by reference is a final official statement, it must be available from the MSRB. The District shall clearly identify each such other document so included by reference.
In the event that the District shall modify the basis upon which its financial statements are prepared, the Dissemination Agent shall provide a notice of such modification to the Repository, including the information set forth in Section 8(b) below.
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SECTION 5. Reporting of Significant Events.
(a) The District shall give, or cause to be given, notice of the occurrence of any of the following Listed Events with respect to the Bonds:
(i) Principal and interest payment delinquencies.
(ii) Non-payment related defaults, if material.
(iii) Unscheduled draws on debt service reserves reflecting financial difficulties. (iv) Unscheduled draws on credit enhancements reflecting financial difficulties. (v) Substitution of credit or liquidity providers, or their failure to perform. (vi) Adverse tax opinions, the issuance by the Internal Revenue Service of proposed or final determinations of taxability, Notices of Proposed Issue (IRS Form 5701-TEB) or other material notices or determinations with respect to the tax status of the security, or other material events affecting the tax status of the security.
(vii) Modifications to rights of security holders, if material. (viii) Bond calls, if material, and tender offers.
(ix) Defeasances.
(x) Release, substitution, or sale of property securing repayment of the securities, if material. (xi) Rating changes.
(xii) Bankruptcy, insolvency, receivership or similar event of the City or other obligated person. (xiii) The consummation of a merger, consolidation, or acquisition involving the City or an obligated person, or the sale of all or substantially all of the assets of the City or an obligated person (other than in the ordinary course of business), the entry into a definitive agreement to undertake such an action, or the termination of a definitive agreement relating to any such actions, other than pursuant to its terms, if material. (xiv) Appointment of a successor or additional fiscal agent or the change of name of the fiscal agent, if material.
(xv) Incurrence of a financial obligation of the City, if material, or agreement to covenants, events of default, remedies, priority rights, or other similar terms of a financial obligation of the City, any of which affect security holders, if material (for the definition of “financial obligation,” see clause (e)). (xvi) Default, event of acceleration, termination event, modification of terms, or other similar events under the terms of a financial obligation of the City, any of which reflect financial difficulties (for the definition of “financial obligation,” see clause (e)).
(b) Whenever the District obtains knowledge of the occurrence of a Listed Event, the District shall, or shall cause the Dissemination Agent to, file a notice of such occurrence with the MSRB, in an electronic format as prescribed by the MSRB, in a timely manner not in excess of 10 business days after the occurrence of the Listed Event.
Notwithstanding the foregoing, notice of a Listed Event described in subsection (a)(viii) above need not be given under this subsection any earlier than the notice (if any) of the underlying event is given to holders of affected Bonds under the Trustee Agreement.
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(c) The District acknowledges that the events described in subparagraphs (a)(ii), (a)(vii), (a)(viii) (if the event is a bond call), (a)(x), (a)(xiii), (a)(xiv) and (a)(xv) of this Section 5 contain the qualifier “if material” and that subparagraph (a)(xi) also contains the qualifier “material” with respect to certain notices, determinations or other events affecting the tax status of the Bonds. The District shall cause a notice to be filed as set forth in paragraph (b) above with respect to any such event only to the extent that it determines the event’s occurrence is material for purposes of U.S. federal securities law. Whenever the District obtains knowledge of the occurrence of any of these Listed Events, the District will as soon as possible determine if such event would be material under applicable federal securities law. If such event is determined to be material, the City District cause a notice to be filed as set forth in paragraph (b) above.
The Dissemination Agent shall not be responsible for determining whether an event is material. (d) For purposes of this Disclosure Certificate, any event described in paragraph (a)(xii) above is considered to occur when any of the following occur: the appointment of a receiver, fiscal agent, or similar officer for the City in a proceeding under the United States Bankruptcy Code or in any other proceeding under state or federal law in which a court or governmental authority has assumed jurisdiction over substantially all of the assets or business of the City, or if such jurisdiction has been assumed by leaving the existing governing body and officials or officers in possession but subject to the supervision and orders of a court or governmental authority, or the entry of an order confirming a plan of reorganization, arrangement, or liquidation by a court or governmental authority having supervision or jurisdiction over substantially all of the assets or business of the City. (e) For purposes of Section 5(a)(xv) and (xvi), “financial obligation” means a (i) debt obligation; (ii) derivative instrument entered into in connection with, or pledged as security or a source of payment for, an existing or planned debt obligation; or (iii) guarantee of (i) or (ii). The term financial obligation shall not include municipal securities as to which a final official statement has been provided to the MSRB consistent with the Rule.
SECTION 6. Termination of Reporting Obligation. The obligations of the District under this Disclosure Agreement shall terminate upon the legal defeasance, prior redemption or payment in full of all of the Bonds.
SECTION 7. Dissemination Agent. The District may, from time to time, appoint or engage a Dissemination Agent to assist it in carrying out its obligations under this Disclosure Agreement, and may discharge any such Dissemination Agent, with or without appointing a successor Dissemination Agent. The Dissemination Agent may resign by providing thirty days written notice to the District and the Trustee. The Dissemination Agent shall not be responsible for the content of any report or notice prepared by the District and shall have no duty to review any information provided to it by the District. The Dissemination Agent shall have no duty to prepare any information report nor shall the Dissemination Agent be responsible for filing any report not provided to it by the District in a timely manner and in a form suitable for filing.
SECTION 8. Amendment; Waiver.
(a) Notwithstanding any other provision of this Disclosure Agreement, the District may amend this Disclosure Agreement, and any provision of this Disclosure Agreement may be waived, provided that the following conditions are satisfied:
(1) If the amendment or waiver related to the provisions of Sections 3(a), 4, or 5, it may only be made in connection with a change in circumstances that arises from a change in legal requirements, change in law, or change in the identity, nature or status of an obligated person with respect to the Bonds, or the type of business conducted;
(2) The undertaking hereunder, as amended or taking into account such waiver, would, in the opinion of nationally recognized bond counsel, have complied with the requirements of the Rule at the time of the original execution and delivery of the Bonds, after taking into account any amendments or interpretations of the Rule, as well as any change in circumstances; and
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(3) The amendment or waiver either (i) is approved by the Owners of the Bonds in the same manner as provided in the Indenture for amendments to the Indenture with the consent of Owners, or (ii) does not, in the opinion of nationally recognized bond counsel, materially impair the interests of the Owners or Beneficial Owners of the Bonds.
(b) In the event of any amendment or waiver of a provision of this Disclosure Agreement, the District shall describe such amendment in the next Annual Report, and shall include, as applicable, a narrative explanation of the reason for the amendment or waiver and its impact on the type (or, in the case of a change of accounting principles, on the presentation) of financial information or operating data being presented by the District. In addition, if the amendment is related to the accounting principles to be followed in preparing financial statements, (i) notice of such change shall be given in the same manner as for a Listed Event under Section 5(a), and (ii) the Annual Report for the year in which the change is made should present a comparison (in narrative form and also, if feasible, in quantitative form) between the financial statements as prepared on the basis of the new accounting principles and those prepared on the basis of the former accounting principles.
SECTION 9. Format of Filings with Repository. Any report or filing with the Repository pursuant to this Disclosure Agreement must be submitted in electronic format, accompanied by such identifying information as is prescribed by the Repository.
SECTION 10. Additional Information. Nothing in this Disclosure Agreement shall be deemed to prevent the District from disseminating any other information, using the means of dissemination set forth in this Disclosure Agreement or any other means of communication, or including any other information in any Annual Report or notice of occurrence of a Listed Event, in addition to that which is required by this Disclosure Agreement. If the District chooses to include any information in any Annual Report or notice of occurrence of a Listed Event, in addition to that which is specifically required by this Disclosure Agreement, the District shall have no obligation under this Disclosure Agreement to update such information or include it in any future Annual Report or notice of occurrence of a Listed Event.
SECTION 11. Default. In the event of a failure of the District to comply with any provision of this Disclosure Agreement, any Owner or Beneficial Owner of the Bonds may take such actions as may be necessary and appropriate, including seeking mandate or specific performance by court order, to cause the District to comply with its obligations under this Disclosure Agreement. A default under this Disclosure Agreement shall not be deemed an Event of Default under the Indenture, and the sole remedy under this Disclosure Agreement in the event of any failure of the District to comply with this Disclosure Agreement shall be an action to compel performance and the District shall have no monetary liability to any person as a result of any failure to comply with the terms of this Disclosure Agreement.
SECTION 12. Duties, Immunities and Liabilities of Dissemination Agent. The Dissemination Agent shall have only such duties as are specifically set forth in this Disclosure Agreement, and the District agrees, to the extent permitted by law, to indemnify and save the Dissemination Agent, its officers, directors, employees and agents, harmless against any loss, expense and liabilities which it may incur arising out of or in the exercise or performance of its powers and duties hereunder, including the costs and expenses (including attorney’s fees) of defending against any claim of liability, but excluding liabilities due to the Dissemination Agent’s negligence or willful misconduct. The Dissemination Agent shall be paid compensation by the District for its services provided hereunder in accordance with its schedule of fees as amended from time to time and all expenses, legal fees and advances made or incurred by the Dissemination Agent in the performance of its duties hereunder. In performing its duties hereunder, the Dissemination Agent shall not be deemed to be acting in any fiduciary capacity for the District, the Owners, or any other party. The obligations of the District under this Section shall survive resignation or removal of the Dissemination Agent and payment of the Bonds.
SECTION 13. Notices. Any notices or communications to or among any of the parties to this Disclosure Agreement may be given as follows:
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To the District: City of Palm Desert
Community Facilities District No. 2021-1 (University Park) 73510 Fred Waring Drive
Palm Desert, CA 992260
Attention: Director of Finance
To the Dissemination Agent: Willdan Financial Services
27368 Via Industria #200
Temecula, CA 92590
SECTION 14. Beneficiaries. This Disclosure Agreement shall inure solely to the benefit of the District, the Dissemination Agent, the Participating Underwriter and Owners and Beneficial Owners from time to time of the Bonds, and shall create no rights in any other person or entity.
SECTION 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 PALM DESERT COMMUNITY FACILITIES
DISTRICT NO. 2021-1 (UNIVERSITY PARK)
By:
Karina Quintanilla, Mayor
WILLDAN FINANCIAL SERVICES, as Dissemination
Agent
By:
Authorized Officer
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EXHIBIT A
FORM OF NOTICE TO THE MUNICIPAL SECURITIES RULEMAKING BOARD OF FAILURE TO
FILE ANNUAL REPORT
Name of Issuer: City of Palm Desert Community Facilities District No. 2021-1 (University Park) Name of Bond Issue: $________ City of Palm Desert Community Facilities District No. 2021-1 (University Park) Special Tax Bonds, Series 2024
Date of Issuance: _____, 2024
NOTICE IS HEREBY GIVEN that the City of Palm Desert Community Facilities District No. 2021-1 (University Park) (the “District”) has not provided an Annual Report with respect to the above-named Bonds as required by Section 3 of the Disclosure Agreement of the District, dated the Date of Issuance. The District anticipates that the Annual Report will be filed by ______________________.
Dated: ________________
WILLDAN FINANCIAL SERVICES,
as Dissemination Agent
By:
Authorized Officer
FORM OF DEVELOPER CONTINUING DISCLOSURE CERTIFICATE – UPI $_________
CITY OF PALM DESERT
COMMUNITY FACILITIES DISTRICT NO. 2021-1
(UNIVERSITY PARK)
SPECIAL TAX BONDS, SERIES 2024
This Continuing Disclosure Certificate (University Park Investor, LLC) (the “Disclosure Certificate”) is executed and delivered by the undersigned (the “Property Owner”) and DPFG, LLC as dissemination agent (the “Dissemination Agent”) in connection with the issuance of the bonds captioned above (the “Bonds”) by the City of Palm Desert Community Facilities District No. 2021-1 (University Park) (the “District”). The Bonds (defined below) are being issued pursuant to a resolution adopted by the City Council of the City, acting as legislative body of the District on [__________, 2024], and a Bond Indenture, dated as of July 1, 2021 (the “Original Indenture”) as supplemented by the First Supplemental Indenture, dated [March 1, 2024] (the “First Supplemental Indenture” together with the “Original Indenture” referred to as the “Indenture”), by and between the District and U.S. Bank Trust Company, National Association, as Trustee (the “Trustee”).
The Property Owner covenants and agrees as follows:
Section 1. Purpose of the Disclosure Certificate. This Disclosure Certificate is being executed and delivered by the Property Owner for the benefit of the holders and beneficial owners of the Bonds.
Section 2. Definitions. In addition to the definitions set forth above and in the Indenture, which apply to any capitalized term used in this Disclosure Certificate unless otherwise defined in this Section, the following capitalized terms shall have the following meanings:
“Affiliate” means any person presently directly (or indirectly through one or more intermediaries) currently under managerial control of the Property Owner, and about whom information could be material to potential investors in their investment decision regarding the Bonds (including without limitation information relevant to the proposed development of the Property or the Property Owner’s ability to pay the Special Taxes related to the Property prior to delinquency).
“Assumption Agreement” means an undertaking of an Obligated Owner, or an Affiliate thereof, for the benefit of the holders and beneficial owners of the Bonds containing terms substantially similar to this Disclosure Certificate (as modified for such Obligated Owner’s development and financing plans with respect to the Property), whereby such Obligated Owner or Affiliate agrees to provide Periodic Reports and notices of significant events, setting forth the information described in sections 4 and 5 hereof, respectively, with respect to the portion of the Property owned by such Obligated Owner and its Affiliates and, at the option of the Property Owner or such Obligated Owner, agrees to indemnify the Dissemination Agent (if any) pursuant to a provision substantially in the form of Section 11 hereof.
“Dissemination Agent” means the DPFG, LLC, or any successor Dissemination Agent designated in writing by the Property Owner, and which has filed with the Property Owner, the District and the Trustee a written acceptance of such designation, and which is experienced in providing dissemination agent services such as those required under this Disclosure Certificate.
“District” means City of Palm Desert Community Facilities District No. 2021-1 (University Park). “Listed Events” means any of the events listed in Section 5(a) of this Disclosure Certificate. “MSRB” means the Municipal Securities Rulemaking Board, which has been designated by the Securities and Exchange Commission as the sole repository of disclosure information for purposes of the Rule, or any other
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repository of disclosure information that may be designated by the Securities and Exchange Commission as such for purposes of the Rule in the future.
“Obligated Owner” means, as of any Report Date, an owner of all or a portion of the Property that represents more than 20% of the aggregate special tax obligation in the Planned Development. “Official Statement” means the final official statement executed by the District in connection with the issuance of the Bonds.
“Participating Underwriter” means Piper Sandler & Co., the original Underwriter of the Bonds. “Periodic Report” means any Periodic Report provided by the Property Owner pursuant to, and as described in, Sections 3 and 4 of this Disclosure Certificate. “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 political subdivision thereof. “Planned Development” means the development plan for the Property described in the Official Statement under “PROPERTY OWNERSHIP AND THE DEVELOPMENT” as such information has been updated, if any, in a prior Periodic Report.
“Property” means the property owned by the Property Owners or an Affiliate in the District and subject to the Special Taxes as of the date of determination and (ii) the property in the District that the Property Owners or an Affiliate sold to a Obligated Owner who has not assumed the undertakings of this Disclosure Certificate under Section 6(b) that is owned by such Obligated Owner as of the date of determination. “Report Date” means April 1 of any fiscal year.
“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. “Special Taxes” means the special taxes of the District levied on taxable property within the District.
Section 3. Provision of Periodic Reports.
(a) The Property Owner shall, or, upon written direction of the Property Owner the Dissemination Agent shall, not later than the Report Date, commencing April 1, 2024, file with the MSRB a Periodic Report which is consistent with the requirements of Section 4 of this Disclosure Certificate. Not later than 15 calendar days prior to the Report Date, the Property Owner shall provide the Periodic Report to the Dissemination Agent (if different from the Property Owner). The Property Owner shall provide a written certification with (or included as a part of) each Periodic Report furnished to the Dissemination Agent (if different from the Property Owner) to the effect that such Periodic Report constitutes the Periodic Report required to be furnished by it under this Disclosure Certificate. The Dissemination Agent may conclusively rely upon such certification of the Property Owner and shall have no duty or obligation to review the Periodic Report. The Periodic Report may be submitted as a single document or as separate documents comprising a package, and may incorporate by reference other information as provided in Section 4 of this Disclosure Certificate. (b) If the Dissemination Agent does not receive a Periodic Report by 15 calendar days prior to the Report Date, the Dissemination Agent shall send a reminder notice to the Property Owner that the Periodic Report has not been provided as required under Section 3(a) above. The reminder notice shall instruct the Property Owner to determine whether its obligations under this Disclosure Certificate have terminated (pursuant to Section 6 below) and, if so, to provide the Dissemination Agent with a notice of such termination in the same manner as for a Listed Event (pursuant to Section 5 below). If the Property Owner does not provide, or cause the Dissemination Agent to provide, a Periodic Report to the MSRB by the Report Date as required in subsection (a) above, the
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Dissemination Agent shall, in a timely manner, send a notice to the MSRB in substantially the form attached hereto as Exhibit A, with a copy to the Trustee (if other than the Dissemination Agent), the District, the Participating Underwriter and the Property Owner.
(c) With respect to the Periodic Report, the Dissemination Agent shall, to the extent the Periodic Report has been furnished to it, file the Periodic Report with the MSRB and file a report with the Property Owner (if the Dissemination Agent is other than the Property Owner), the District and the Participating Underwriter certifying that the Periodic Report has been provided pursuant to this Disclosure Certificate, stating the date it was provided to and filed with the MSRB.
Section 4. Content of Periodic Reports. The Property Owner’s Periodic Report shall contain or incorporate by reference the information set forth in Exhibit B, any or all of which may be included by specific reference to other documents, including official statements of debt issues of the Property Owner or related public entities, which have been submitted to the MSRB or the Securities and Exchange Commission. If the document included by reference is a final official statement, it must be available from the MSRB. The Property Owner shall clearly identify each such other document so included by reference.
In addition to any of the information expressly required to be provided in Exhibit B, the Property Owner’s Periodic Report shall include such further information, if any, as may be necessary to make the specifically required statements, in the light of the circumstances under which they are made, not misleading.
Section 5. Reporting of Significant Events.
(a) The Property Owner shall give, or cause to be given, notice of the occurrence of any of the following Listed Events with respect to itself or the Property, if material:
(i) bankruptcy or insolvency proceedings commenced by or against the Property Owner and, if known, any bankruptcy or insolvency proceedings commenced by or against any Affiliate of the Property Owner which is reasonably likely to have a significant impact on the Property Owner’s ability to pay Special Taxes or to sell or develop the Property; (ii) failure to pay any taxes, special taxes (including the Special Taxes) or assessments due with respect to the Property on or prior to the delinquency date to the extent that such failure is not promptly cured by the Property Owner upon discovery thereof; (iii) filing of a lawsuit of which the Property Owner is aware against the Property Owner or an Affiliate of the Property Owner seeking damages, which is reasonably likely to have a significant impact on the Property Owner’s ability to pay Special Taxes or to sell or develop the Property; (iv) material damage to or destruction of any of the improvements on the Property; and (v) any payment default or other material default by the Property Owner on any loan with respect to the construction of improvements on the Property. (b) Whenever the Property Owner obtains knowledge of the occurrence of a Listed Event, the Property Owner shall as soon as possible determine if such event would be material under applicable Federal securities law.
(c) If the Property Owner determines that knowledge of the occurrence of a Listed Event would be material under applicable Federal securities law, the Property Owner shall, or shall cause the Dissemination Agent to, promptly file a notice of such occurrence with the MSRB, with a copy to the Trustee, the District and the Participating Underwriter.
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Section 6. Duration of Reporting Obligation.
(a) All of the Property Owner’s obligations hereunder shall commence on the date hereof and shall terminate (except as provided in Section 11) on the earliest to occur of the following:
(i) upon the legal defeasance, prior redemption or payment in full of all the Bonds, or (ii) if on any date Property Owner is responsible for less than twenty percent (20%) of the aggregate special tax obligation of the property within the District, or (iii) the date on which the Property Owner prepays in full all of the Special Taxes attributable to 50% or more of the Property.
The Property Owner shall give notice of the termination of its obligations under this Disclosure Certificate in the same manner as for a Listed Event under Section 5. Nothing herein shall require any person (including, without limitation, the District and the Participating Underwriter) to confirm the satisfaction of any condition for termination of the Property Owner’s obligations hereunder pursuant to this Section 6. (b) If a portion of the Property owned by the Property Owner, or any Affiliate of the Property Owner, is conveyed to a Person that, upon such conveyance, will be an Obligated Owner, the obligations of the Property Owner hereunder with respect to the property in the District owned by such Obligated Owner and its Affiliates may be assumed by such Obligated Owner or by an Affiliate thereof, and the Property Owner’s obligations hereunder with respect to such property will be terminated. In order to effect such assumption, such Obligated Owner or Affiliate shall enter into an Assumption Agreement in form and substance reasonably satisfactory to the District and the Participating Underwriter.
Section 7. Dissemination Agent. The Property Owner may, from time to time, appoint or engage a Dissemination Agent to assist the Property Owner in carrying out its obligations under this Disclosure Certificate, and may discharge any such Dissemination Agent, with or without appointing a successor Dissemination Agent.
The initial Dissemination Agent shall be DPFG, LLC. The Dissemination Agent may resign by providing thirty days’ written notice to the District, the Property Owner and the Trustee.
Section 8. Amendment; Waiver. Notwithstanding any other provision of this Disclosure Certificate, the Property Owner may amend this Disclosure Certificate, and any provision of this Disclosure Certificate may be waived, provided that the following conditions are satisfied (provided, however, that the Dissemination Agent shall not be obligated under any such amendment that modifies or increases its duties or obligations hereunder without its written consent thereto):
(a) if the amendment or waiver relates to the provisions of sections 3(a), 4 or 5(a), 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 an obligated person with respect to the Bonds, or type of business conducted; and
(b) the proposed amendment or waiver either (i) is approved by holders of the Bonds in the manner provided in the Indenture with the consent of holders, or (ii) does not, in the opinion of nationally recognized bond counsel, materially impair the interests of the holders or beneficial owners of the Bonds.
Section 9. Additional Information. Nothing in this Disclosure Certificate shall be deemed to prevent the Property Owner from disseminating any other information, using the means of dissemination set forth in this Disclosure Certificate or any other means of communication, or including any other information in any Periodic Report or notice of occurrence of a Listed Event, in addition to that which is required by this Disclosure Certificate.
If the Property Owner chooses to include any information in any Periodic Report or notice of occurrence of a Listed Event in addition to that which is specifically required by this Disclosure Certificate, the Property Owner
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shall have no obligation under this Disclosure Certificate to update such information or include it in any future Periodic Report or notice of occurrence of a Listed Event.
Section 10. Default. In the event of a failure of the Property Owner to comply with any provision of this Disclosure Certificate, the Trustee shall (upon written direction and only to the extent indemnified to its satisfaction from any liability, cost or expense, including fees and expenses of its attorneys), and the Participating Underwriter and any holder or beneficial owner of the Bonds may, take such actions as may be necessary and appropriate, including seeking mandate or specific performance by court order, to cause the Property Owner to comply with its obligations under this Disclosure Certificate. A default under this Disclosure Certificate shall not be deemed an Event of Default under the Indenture, and the sole and exclusive remedy under this Disclosure Certificate in the event of any failure of the Property Owner to comply with this Disclosure Certificate shall be an action to compel performance.
Section 11. Duties, Immunities and Liabilities of Dissemination Agent. The Dissemination Agent shall have only such duties as are specifically set forth in this Disclosure Certificate, and the Property Owner agrees to indemnify and save the Dissemination Agent, its officers, directors, employees and agents (each, an “Indemnified Party”), harmless against any loss, expense and liability which it may incur arising out of or in the exercise or performance of its powers and duties hereunder, including the reasonable costs and expenses (including attorneys’ fees) of defending against any claim of liability, but excluding losses, liabilities, costs and expenses due to an Indemnified Party’s negligence or willful misconduct or failure to perform its duties hereunder. The Dissemination Agent shall be paid compensation for its services provided hereunder from the Administrative Expense Fund established under the Indenture in accordance with the Dissemination Agent’s schedule of fees as amended from time to time, which schedule, as amended, shall be reasonably acceptable, and all reasonable expenses, reasonable legal fees and advances made or incurred by the Dissemination Agent in the performance of its duties hereunder.
The Dissemination Agent shall have no duty or obligation to review any information provided to it hereunder and shall not be deemed to be acting in any fiduciary capacity for the District, the Property Owner, the Trustee, the Bond owners, or any other party. The obligations of the Property Owner under this Section shall survive resignation or removal of the Dissemination Agent and payment of the Bonds.
Section 12. Notices. Any notice or communications to be among any of the parties to this Disclosure Certificate may be given as follows:
To the Issuer: City of Palm Desert
Community Facilities District No. 2021-1(University Park) 73510 Fred Waring Drive
Palm Desert, California 92260
Attention: Director of Finance
To the Trustee: U.S. Bank Trust Company, National Association 633 West 5th Street, 24th Floor
Los Angeles, California 90071
Attn: Global Corporate Trust Services LM-CA-T24T
To the Participating Underwriter: Piper Sandler & Co.
2321 Rosecrans Ave., Suite 3200
El Segundo, California 90245
Attention: Public Finance
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To the Dissemination Agent: DPFG, LLC
26840 Aliso Viejo Pkwy, Suite 110
Aliso Viejo, California 92656
Attention: Compliance Group
To the Property Owner: University Park Investor, LLC
801 San Ramon Valley Blvd., Suite F
Danville, California 94526
Attention: Ravi Nandwana
provided, however, that all such notices, requests or communication may be made by telephone and promptly confirmed by writing. Any person may, by notice given as aforesaid to the other persons listed above, designate a different address or telephone number(s) to which subsequent notices or communications should be sent.
Section 13. Beneficiaries. This Disclosure Certificate shall inure solely to the benefit of the District, the Property Owner (its successors and assigns), the Trustee, the Dissemination Agent, the Participating Underwriter and holders and beneficial owners from time to time of the Bonds, and shall create no rights in any other person or entity. All obligations of the Property Owner hereunder shall be assumed by any legal successor to the obligations of the Property Owner as a result of a sale, merger, consolidation or other reorganization.
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Section 14. Counterparts. This Disclosure Certificate may be executed in several counterparts, each of which shall be regarded as an original, and all of which shall constitute one and the same instrument.
Date: ______, 2024
UNIVERSITY PARK INVESTOR, LLC
By: ______________________________________________
Name: ___________________________________________
Title: ____________________________________________
ACCEPTED AND AGREED TO:
DPFG, LLC
as Dissemination Agent
By:
Authorized Signatory
EXHIBIT A
NOTICE OF FAILURE TO FILE PERIODIC REPORT
Name of Issuer: City of Palm Desert Community Facilities District No. 2021-1 (University Park) Name of Bond Issue: City of Palm Desert Community Facilities District No. 2021-1 (University Park) Special Tax Bonds, Series 2024
Date of Issuance: ________, 2024
NOTICE IS HEREBY GIVEN that University Park Investor, LLC (the “Obligated Owner”) has not provided a Periodic Report with respect to the above-named bonds as required by that certain Continuing Disclosure Certificate, dated _______, 2024. The Obligated Owner anticipates that the Periodic Report will be filed by _________________.
Dated:
DPFG, LLC
By:
Its:
cc: Trustee
District
Participating Underwriter
Property Owner/Obligated Owner
EXHIBIT B
PERIODIC REPORT
$_______
CITY OF PALM DESERT
COMMUNITY FACILITIES DISTRICT NO. 2021-1
(UNIVERSITY PARK)
SPECIAL TAX BONDS, SERIES 2024
This Periodic Report is hereby submitted under Section 4 of the Continuing Disclosure Certificate (the “Disclosure Certificate”) dated ________, 2024, executed by the undersigned (the “Property Owner”) in connection with the issuance of the above-captioned bonds by City of Palm Desert Community Facilities District No. 2021-1 (University Park) (the “District”).
Capitalized terms used in this Periodic Report but not otherwise defined have the meanings given to them in the Disclosure Certificate.
I. Property Ownership and Development
The information in this section is provided as of ____________________ (this date must be not more than 30 days before the date of this Periodic Report).
A. Property currently owned by the Property Owner (the “Property”) in the District (the “District”):
Development name:
Number of lots (acreage):
B. Status of land development, intract improvements, or construction activities with respect to the Property:
C. Status of building permits and any significant amendments or material changes to the description of land use or development entitlements for the Property described in the Official Statement or the Periodic Report last filed in accordance with the Disclosure Certificate:
D. Status of Special Tax payments on all parcels of Property owned by the Property Owner or its Affiliates:
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E. Aggregate property in the District sold (closed escrows) by the Property Owner to end users:
Since the Date of Issuance of the
Bonds
Since the Last Periodic Report
Acres
For-sale homes
Acres
For-sale homes
For bulk land sales only (excluding sales of finished lots or completed buildings).
F. Status of any land purchase contracts with other merchant builders or owners other than end users, with regard to the Property.
G. Updates, if any, to tables in “PROPERTY OWNERSHIP AND THE DEVELOPMENT” in the Official Statement.
II. Legal and Financial Status of Property Owner
Unless such information has previously been included or incorporated by reference in a Periodic Report, describe any change in the legal structure of the Property Owner or its Affiliates or the financial condition and financing plan of the Property Owner or its Affiliates that would materially and adversely interfere with its ability to complete its development plan described in the Official Statement.
III. Change in Development or Financing Plans
Unless such information has previously been included or incorporated by reference in a Periodic Report, and other than as provided in Section I, describe any development plans or financing plans relating to the Property that are materially different from the proposed development and financing plan described in the Official Statement.
IV. Other Material Information
In addition to any of the information expressly required above, provide such further information, if any, as may be necessary to make the specifically required statements, in the light of the circumstances under which they are made, not misleading.
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Certification
The undersigned Property Owner hereby certifies that this Periodic Report constitutes the Periodic Report required to be furnished by the Property Owner under the Disclosure Certificate.
ANY STATEMENTS REGARDING THE PROPERTY OWNER, THE DEVELOPMENT OF THE PROPERTY, THE PROPERTY OWNER’S FINANCING PLAN OR FINANCIAL CONDITION, OR THE
BONDS, OTHER THAN STATEMENTS MADE BY THE PROPERTY OWNER IN AN OFFICIAL
RELEASE, OR FILED WITH THE MUNICIPAL SECURITIES RULEMAKING BOARD, ARE NOT AUTHORIZED BY THE PROPERTY OWNER. THE PROPERTY OWNER IS NOT RESPONSIBLE FOR THE ACCURACY, COMPLETENESS OR FAIRNESS OF ANY SUCH UNAUTHORIZED STATEMENTS.
THE PROPERTY OWNER HAS NO OBLIGATION TO UPDATE THIS PERIODIC REPORT OTHER THAN AS EXPRESSLY PROVIDED IN THE DISCLOSURE CERTIFICATE.
Dated:_________________
UNIVERSITY PARK INVESTOR, LLC
By:
Name:
Title:
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FORM OF DEVELOPER CONTINUING DISCLOSURE CERTIFICATE – TOLL $_________
CITY OF PALM DESERT
COMMUNITY FACILITIES DISTRICT NO. 2021-1
(UNIVERSITY PARK)
SPECIAL TAX BONDS, SERIES 2024
This Continuing Disclosure Certificate (Toll) (the “Disclosure Certificate”) is executed and delivered by the undersigned (the “Developer”) and [__________] as dissemination agent (the “Dissemination Agent”) in connection with the issuance of the bonds captioned above (the “Bonds”) by the City of Palm Desert Community Facilities District No. 2021-1 (University Park) (the “District”). The Bonds (defined below) are being issued pursuant to a resolution adopted by the City Council of the City, acting as legislative body of the District on [__________, 2024], and a Bond Indenture, dated as of July 1, 2021 (the “Original Indenture”) as supplemented by the First Supplemental Indenture, dated [March 1, 2024] (the “First Supplemental Indenture” together with the “Original Indenture” referred to as the “Indenture”), by and between the District and U.S. Bank Trust Company, National Association, as Trustee (the “Trustee”).
The Developer covenants and agrees as follows:
Section 1. Purpose of the Disclosure Certificate. This Disclosure Certificate is being executed and delivered by the Developer for the benefit of the holders and beneficial owners of the Bonds.
Section 2. Definitions. In addition to the definitions set forth above and in the Indenture, which apply to any capitalized term used in this Disclosure Certificate unless otherwise defined in this Section, the following capitalized terms shall have the following meanings:
“Affiliate” means any person presently directly (or indirectly through one or more intermediaries) currently under managerial control of the Developer, and about whom information could be material to potential investors in their investment decision regarding the Bonds (including without limitation information relevant to the proposed development of the Property or the Developer’s ability to pay the Special Taxes related to the Property prior to delinquency).
“Assumption Agreement” means an undertaking of an Obligated Person, or an Affiliate thereof, for the benefit of the holders and beneficial owners of the Bonds containing terms substantially similar to this Disclosure Certificate (as modified for such Obligated Person’s development and financing plans with respect to the Property), whereby such Obligated Person or Affiliate agrees to provide Periodic Reports and notices of significant events, setting forth the information described in sections 4 and 5 hereof, respectively, with respect to the portion of the Property owned by such Obligated Person and its Affiliates and, at the option of the Developer or such Obligated Person, agrees to indemnify the Dissemination Agent (if any) pursuant to a provision substantially in the form of Section 11 hereof.
“Dissemination Agent” means the [_________], or any successor Dissemination Agent designated in writing by the Developer, and which has filed with the Developer, the District and the Trustee a written acceptance of such designation, and which is experienced in providing dissemination agent services such as those required under this Disclosure Certificate.
“District” means City of Palm Desert Community Facilities District No. 2021-1 (University Park). “Listed Events” means any of the events listed in Section 5(a) of this Disclosure Certificate. “MSRB” means the Municipal Securities Rulemaking Board, which has been designated by the Securities and Exchange Commission as the sole repository of disclosure information for purposes of the Rule, or any other
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repository of disclosure information that may be designated by the Securities and Exchange Commission as such for purposes of the Rule in the future.
“Obligated Person” means, as of any Report Date, an owner of all or a portion of the Property that represents more than 20% of the aggregate special tax obligation in the Planned Development. “Official Statement” means the final official statement executed by the District in connection with the issuance of the Bonds.
“Participating Underwriter” means Piper Sandler & Co., the original Underwriter of the Bonds. “Periodic Report” means any Periodic Report provided by the Developer pursuant to, and as described in, Sections 3 and 4 of this Disclosure Certificate.
“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 political subdivision thereof. “Planned Development” means the development plan for the Property described in the Official Statement under “PROPERTY OWNERSHIP AND THE DEVELOPMENT” as such information has been updated, if any, in a prior Periodic Report.
“Property” means the property owned by the Developer or an Affiliate in the District and subject to the Special Taxes as of the date of determination and (ii) the property in the District that the Developer or an Affiliate sold to a Obligated Person who has not assumed the undertakings of this Disclosure Certificate under Section 6(b) that is owned by such Obligated Person as of the date of determination. “Report Date” means April 1 of any fiscal year.
“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. “Special Taxes” means the special taxes of the District levied on taxable property within the District.
Section 3. Provision of Periodic Reports.
(a) The Developer shall, or, upon written direction of the Developer the Dissemination Agent shall, not later than the Report Date, commencing April 1, 2024, file with the MSRB a Periodic Report which is consistent with the requirements of Section 4 of this Disclosure Certificate. Not later than 15 calendar days prior to the Report Date, the Developer shall provide the Periodic Report to the Dissemination Agent (if different from the Developer). The Developer shall provide a written certification with (or included as a part of) each Periodic Report furnished to the Dissemination Agent (if different from the Developer) to the effect that such Periodic Report constitutes the Periodic Report required to be furnished by it under this Disclosure Certificate. The Dissemination Agent may conclusively rely upon such certification of the Developer and shall have no duty or obligation to review the Periodic Report. The Periodic Report may be submitted as a single document or as separate documents comprising a package, and may incorporate by reference other information as provided in Section 4 of this Disclosure Certificate.
(b) If the Dissemination Agent does not receive a Periodic Report by 15 calendar days prior to the Report Date, the Dissemination Agent shall send a reminder notice to the Developer that the Periodic Report has not been provided as required under Section 3(a) above. The reminder notice shall instruct the Developer to determine whether its obligations under this Disclosure Certificate have terminated (pursuant to Section 6 below) and, if so, to provide the Dissemination Agent with a notice of such termination in the same manner as for a Listed Event (pursuant to Section 5 below). If the Developer does not provide, or cause the Dissemination Agent to provide, a Periodic Report to the MSRB by the Report Date as required in subsection (a) above, the Dissemination
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Agent shall, in a timely manner, send a notice to the MSRB in substantially the form attached hereto as Exhibit A, with a copy to the Trustee (if other than the Dissemination Agent), the District, the Participating Underwriter and the Developer.
(c) With respect to the Periodic Report, the Dissemination Agent shall, to the extent the Periodic Report has been furnished to it, file the Periodic Report with the MSRB and file a report with the Developer (if the Dissemination Agent is other than the Developer), the District and the Participating Underwriter certifying that the Periodic Report has been provided pursuant to this Disclosure Certificate, stating the date it was provided to and filed with the MSRB.
Section 4. Content of Periodic Reports. The Developer’s Periodic Report shall contain or incorporate by reference the information set forth in Exhibit B, any or all of which may be Developer or related public entities, which have been submitted to the MSRB or the Securities and Exchange Commission. If the document included by reference is a final official statement, it must be available from the MSRB. The Developer shall clearly identify each such other document so included by reference.
In addition to any of the information expressly required to be provided in Exhibit B, the Developer’s Periodic Report shall include such further information, if any, as may be necessary to make the specifically required statements, in the light of the circumstances under which they are made, not misleading.
Section 5. Reporting of Significant Events.
(a) The Developer shall give, or cause to be given, notice of the occurrence of any of the following Listed Events with respect to itself or the Property, if material:
(i) bankruptcy or insolvency proceedings commenced by or against the Developer and, if known, any bankruptcy or insolvency proceedings commenced by or against any Affiliate of the Developer which is reasonably likely to have a significant impact on the Developer’s ability to pay Special Taxes or to sell or develop the Property;
(ii) failure to pay any taxes, special taxes (including the Special Taxes) or assessments due with respect to the Property on or prior to the delinquency date to the extent that such failure is not promptly cured by the Developer upon discovery thereof; (iii) filing of a lawsuit of which the Developer is aware against the Developer or an Affiliate of the Developer seeking damages, which is reasonably likely to have a significant impact on the Developer’s ability to pay Special Taxes or to sell or develop the Property; (iv) material damage to or destruction of any of the improvements on the Property; and (v) any payment default or other material default by the Developer on any loan with respect to the construction of improvements on the Property.
(b) Whenever the Developer obtains knowledge of the occurrence of a Listed Event, the Developer shall as soon as possible determine if such event would be material under applicable Federal securities law. (c) If the Developer determines that knowledge of the occurrence of a Listed Event would be material under applicable Federal securities law, the Developer shall, or shall cause the Dissemination Agent to, promptly file a notice of such occurrence with the MSRB, with a copy to the Trustee, the District and the Participating Underwriter.
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Section 6. Duration of Reporting Obligation.
(a) All of the Developer’s obligations hereunder shall commence on the date hereof and shall terminate (except as provided in Section 11) on the earliest to occur of the following:
(i) upon the legal defeasance, prior redemption or payment in full of all the Bonds, or (ii) if on any date Developer is responsible for less than twenty percent (20%) of the aggregate special tax obligation of the property within the District, or (iii) the date on which the Developer prepays in full all of the Special Taxes attributable to 50% or more of the Property.
The Developer shall give notice of the termination of its obligations under this Disclosure Certificate in the same manner as for a Listed Event under Section 5. Nothing herein shall require any person (including, without limitation, the District and the Participating Underwriter) to confirm the satisfaction of any condition for termination of the Developer’s obligations hereunder pursuant to this Section 6. (b) If a portion of the Property developed by the Developer, or any Affiliate of the Developer, is conveyed to a Person that, upon such conveyance, will be an Obligated Person, the obligations of the Developer hereunder with respect to the property in the District owned by such Obligated Person and its Affiliates may be assumed by such Obligated Person or by an Affiliate thereof, and the Developer’s obligations hereunder with respect to such property will be terminated. In order to effect such assumption, such Obligated Person or Affiliate shall enter into an Assumption Agreement in form and substance reasonably satisfactory to the District and the Participating Underwriter.
Section 7. Dissemination Agent. The Developer may, from time to time, appoint or engage a Dissemination Agent to assist the Developer in carrying out its obligations under this Disclosure Certificate, and may discharge any such Dissemination Agent, with or without appointing a successor Dissemination Agent. The initial Dissemination Agent shall be [_________]. The Dissemination Agent may resign by providing thirty days’ written notice to the District, the Developer and the Trustee.
Section 8. Amendment; Waiver. Notwithstanding any other provision of this Disclosure Certificate, the Developer may amend this Disclosure Certificate, and any provision of this Disclosure Certificate may be waived, provided that the following conditions are satisfied (provided, however, that the Dissemination Agent shall not be obligated under any such amendment that modifies or increases its duties or obligations hereunder without its written consent thereto):
(a) if the amendment or waiver relates to the provisions of sections 3(a), 4 or 5(a), 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 an obligated person with respect to the Bonds, or type of business conducted; and
(b) the proposed amendment or waiver either (i) is approved by holders of the Bonds in the manner provided in the Indenture with the consent of holders, or (ii) does not, in the opinion of nationally recognized bond counsel, materially impair the interests of the holders or beneficial owners of the Bonds.
Section 9. Additional Information. Nothing in this Disclosure Certificate shall be deemed to prevent the Developer from disseminating any other information, using the means of dissemination set forth in this Disclosure Certificate or any other means of communication, or including any other information in any Periodic Report or notice of occurrence of a Listed Event, in addition to that which is required by this Disclosure Certificate. If the Developer chooses to include any information in any Periodic Report or notice of occurrence of a Listed Event in addition to that which is specifically required by this Disclosure Certificate, the Developer shall have no obligation
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under this Disclosure Certificate to update such information or include it in any future Periodic Report or notice of occurrence of a Listed Event.
Section 10. Default. In the event of a failure of the Developer to comply with any provision of this Disclosure Certificate, the Trustee shall (upon written direction and only to the extent indemnified to its satisfaction from any liability, cost or expense, including fees and expenses of its attorneys), and the Participating Underwriter and any holder or beneficial owner of the Bonds may, take such actions as may be necessary and appropriate, including seeking mandate or specific performance by court order, to cause the Developer to comply with its obligations under this Disclosure Certificate. A default under this Disclosure Certificate shall not be deemed an Event of Default under the Indenture, and the sole and exclusive remedy under this Disclosure Certificate in the event of any failure of the Developer to comply with this Disclosure Certificate shall be an action to compel performance.
Section 11. Duties, Immunities and Liabilities of Dissemination Agent. The Dissemination Agent shall have only such duties as are specifically set forth in this Disclosure Certificate, and the Developer agrees to indemnify and save the Dissemination Agent, its officers, directors, employees and agents (each, an “Indemnified Party”), harmless against any loss, expense and liability which it may incur arising out of or in the exercise or performance of its powers and duties hereunder, including the reasonable costs and expenses (including attorneys’ fees) of defending against any claim of liability, but excluding losses, liabilities, costs and expenses due to an Indemnified Party’s negligence or willful misconduct or failure to perform its duties hereunder. The Dissemination Agent shall be paid compensation for its services provided hereunder from the Administrative Expense Fund established under the Indenture in accordance with the Dissemination Agent’s schedule of fees as amended from time to time, which schedule, as amended, shall be reasonably acceptable, and all reasonable expenses, reasonable legal fees and advances made or incurred by the Dissemination Agent in the performance of its duties hereunder.
The Dissemination Agent shall have no duty or obligation to review any information provided to it hereunder and shall not be deemed to be acting in any fiduciary capacity for the District, the Developer, the Trustee, the Bond owners, or any other party. The obligations of the Developer under this Section shall survive resignation or removal of the Dissemination Agent and payment of the Bonds.
Section 12. Notices. Any notice or communications to be among any of the parties to this Disclosure Certificate may be given as follows:
To the Issuer: City of Palm Desert
Community Facilities District No. 2021-1(University Park) 73510 Fred Waring Drive
Palm Desert, California 92260
Attention: Director of Finance
To the Trustee: U.S. Bank Trust Company, National Association 633 West 5th Street, 24th Floor
Los Angeles, California 90071
Attn: Global Corporate Trust Services LM-CA-T24T
To the Participating Underwriter: Piper Sandler & Co.
120 Vantis, Suite 330
Aliso Viejo, California 92656
Attention: Public Finance
To the Developer: [Toll Brothers]
350 Commerce, Suite 200
Irvine, CA 92602
Attention: Salvador Avila
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provided, however, that all such notices, requests or communication may be made by telephone and promptly confirmed by writing. Any person may, by notice given as aforesaid to the other persons listed above, designate a different address or telephone number(s) to which subsequent notices or communications should be sent.
Section 13. Beneficiaries. This Disclosure Certificate shall inure solely to the benefit of the District, the Developer (its successors and assigns), the Trustee, the Dissemination Agent, the Participating Underwriter and holders and beneficial owners from time to time of the Bonds, and shall create no rights in any other person or entity. All obligations of the Developer hereunder shall be assumed by any legal successor to the obligations of the Developer as a result of a sale, merger, consolidation or other reorganization.
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Section 14. Counterparts. This Disclosure Certificate may be executed in several counterparts, each of which shall be regarded as an original, and all of which shall constitute one and the same instrument.
Date: ______, 2024
[TOLL BROTHERS]
By: ______________________________________________
Name: ___________________________________________
Title: ____________________________________________
EXHIBIT A
NOTICE OF FAILURE TO FILE PERIODIC REPORT
Name of Issuer: City of Palm Desert Community Facilities District No. 2021-1 (University Park) Name of Bond Issue: City of Palm Desert Community Facilities District No. 2021-1 (University Park) Special Tax Bonds, Series 2024
Date of Issuance: ________, 2024
NOTICE IS HEREBY GIVEN that [TOLL BROTHERS] (the “Obligated Person”) has not provided a Periodic Report with respect to the above-named bonds as required by that certain Continuing Disclosure Certificate, dated _______, 2024. The Obligated Person anticipates that the Periodic Report will be filed by _________________.
Dated:
[TOLL BROTHERS]
By:
Its:
cc: Trustee
District
Participating Underwriter
Developer/Obligated Person
EXHIBIT B
PERIODIC REPORT
$_______
CITY OF PALM DESERT
COMMUNITY FACILITIES DISTRICT NO. 2021-1
(UNIVERSITY PARK)
SPECIAL TAX BONDS, SERIES 2024
This Periodic Report is hereby submitted under Section 4 of the Continuing Disclosure Certificate (the “Disclosure Certificate”) dated ________, 2024, executed by the undersigned (the “Developer”) in connection with the issuance of the above-captioned bonds by City of Palm Desert Community Facilities District No. 2021-1 (University Park) (the “District”).
Capitalized terms used in this Periodic Report but not otherwise defined have the meanings given to them in the Disclosure Certificate.
I. Development
The information in this section is provided as of ____________________ (this date must be not more than 30 days before the date of this Periodic Report).
A. Property currently developed by the Developer (the “Property”) in the District (the “District”):
Development name:
Number of lots (acreage):
B. Status of land development, intract improvements, or construction activities with respect to the Property:
C. Status of building permits and any significant amendments or material changes to the description of land use or development entitlements for the Property described in the Official Statement or the Periodic Report last filed in accordance with the Disclosure Certificate:
D. Status of Special Tax payments on all parcels of Property of the Developer or its Affiliates:
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E. Aggregate property in the District sold (closed escrows) by the Developer to end users:
Since the Date of Issuance of the
Bonds
Since the Last Periodic Report
Acres
For-sale homes
Acres
For-sale homes
For bulk land sales only (excluding sales of finished lots or completed buildings).
F. Status of any land purchase contracts with other merchant builders or owners other than end users, with regard to the Property.
G. Updates, if any, to tables in “PROPERTY OWNERSHIP AND THE DEVELOPMENT” in the Official Statement.
II. Legal and Financial Status of Developer
Unless such information has previously been included or incorporated by reference in a Periodic Report, describe any change in the legal structure of the Developer or its Affiliates or the financial condition and financing plan of the Developer or its Affiliates that would materially and adversely interfere with its ability to complete its development plan described in the Official Statement.
III. Change in Development or Financing Plans
Unless such information has previously been included or incorporated by reference in a Periodic Report, and other than as provided in Section I, describe any development plans or financing plans relating to the Property that are materially different from the proposed development and financing plan described in the Official Statement.
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IV. Other Material Information
In addition to any of the information expressly required above, provide such further information, if any, as may be necessary to make the specifically required statements, in the light of the circumstances under which they are made, not misleading.
Certification
The undersigned Developer hereby certifies that this Periodic Report constitutes the Periodic Report required to be furnished by the Developer under the Disclosure Certificate.
ANY STATEMENTS REGARDING THE DEVELOPER, THE DEVELOPMENT OF THE PROPERTY, THE DEVELOPER’S FINANCING PLAN OR FINANCIAL CONDITION, OR THE
BONDS, OTHER THAN STATEMENTS MADE BY THE DEVELOPER IN AN OFFICIAL RELEASE,
OR FILED WITH THE MUNICIPAL SECURITIES RULEMAKING BOARD, ARE NOT AUTHORIZED BY THE DEVELOPER. THE DEVELOPER IS NOT RESPONSIBLE FOR THE ACCURACY, COMPLETENESS OR FAIRNESS OF ANY SUCH UNAUTHORIZED STATEMENTS.
THE DEVELOPER HAS NO OBLIGATION TO UPDATE THIS PERIODIC REPORT OTHER THAN AS EXPRESSLY PROVIDED IN THE DISCLOSURE CERTIFICATE.
Dated:_________________
[TOLL BROTHERS]
By:
Name:
Title:
APPENDIX F
BOOK-ENTRY ONLY SYSTEM
The information in this Appendix F concerning DTC and DTC’s book-entry only system has been obtained from sources that the District and the Underwriter believe to be reliable, but neither the District nor the Underwriter takes any responsibility for the completeness or accuracy thereof. The following description of the procedures and record keeping with respect to beneficial ownership interests in the Bonds, payment of principal, premium, if any, accreted value and interest on the Bonds to DTC Participants or Beneficial Owners, confirmation and transfers of beneficial ownership interests in the Bonds and other related transactions by and between DTC, the DTC Participants and the Beneficial Owners is based solely on information provided by DTC.
The Depository Trust Company (“DTC”), New York, NY, will act as securities depository for the Bonds.
The Bonds will be issued as fully-registered securities registered in the name of Cede & Co. (DTC’s partnership nominee) or such other name as may be requested by an authorized representative of DTC. One fully registered bond will be issued for each annual maturity of the Bonds, each in the aggregate principal amount of such annual maturity, and will be deposited with DTC.
DTC, the world’s largest securities depository, is a limited-purpose trust company organized under the New York Banking Law, a “banking organization” within the meaning of the New York Banking Law, a member of the Federal Reserve System, a “clearing corporation” within the meaning of the New York Uniform Commercial Code, and a “clearing agency” registered pursuant to the provisions of Section 17A of the Securities Exchange Act of 1934. DTC holds and provides asset servicing for over 3.6 million issues of U.S. and non-U.S. equity issues, corporate and municipal debt issues, and money market instruments (from over 100 countries) that DTC’s participants (“Direct Participants”) deposit with DTC. DTC also facilitates the post-trade settlement among Direct Participants of sales and other securities transactions in deposited securities, through electronic computerized book-entry transfers and pledges between Direct Participants’ accounts. This eliminates the need for physical movement of securities certificates. Direct Participants include both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations. DTC is a wholly-owned subsidiary of The Depository Trust & Clearing Corporation (“DTCC”). DTCC is the holding company for DTC, National Securities Clearing Corporation and Fixed Income Clearing Corporation, all of which are registered clearing agencies. DTCC is owned by the users of its regulated subsidiaries. Access to the DTC system is also available to others such as both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, and clearing corporations that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly (“Indirect Participants”). DTC has a Standard & Poor’s rating of AA+.
The DTC Rules applicable to its Participants are on file with the Securities and Exchange Commission. More information about DTC can be found at www.dtcc.com.
Purchases of Bonds under the DTC system must be made by or through Direct Participants, which will receive a credit for the Bonds on DTC’s records. The ownership interest of each actual purchaser of each Bond (“Beneficial Owner”) is in turn to be recorded on the Direct and Indirect Participants’ records. Beneficial Owners will not receive written confirmation from DTC of their purchase. Beneficial Owners are, however, expected to receive written confirmations providing details of the transaction, as well as periodic statements of their holdings, from the Direct or Indirect Participant through which the Beneficial Owner entered into the transaction. Transfers of ownership interests in the Bonds are to be accomplished by entries made on the books of Direct and Indirect Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interests in the Bonds, except in the event that use of the book-entry system for the Bonds is discontinued.
To facilitate subsequent transfers, all Bonds deposited by Direct Participants with DTC are registered in the name of DTC’s partnership nominee, Cede & Co., or such other name as may be requested by an authorized representative of DTC. The deposit of Bonds with DTC and their registration in the name of Cede & Co. or such other DTC nominee do not affect any change in beneficial ownership. DTC has no knowledge of the actual
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Beneficial Owners of the Bonds; DTC’s records reflect only the identity of the Direct Participants to whose accounts such Bonds are credited, which may or may not be the Beneficial Owners. The Direct and Indirect Participants will remain responsible for keeping account of their holdings on behalf of their customers.
Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. Beneficial Owners of Bonds may wish to take certain steps to augment the transmission to them of notices of significant events with respect to the Bonds, such as redemptions, tenders, defaults, and proposed amendments to the Bond documents. For example, Beneficial Owners of Bonds may wish to ascertain that the nominee holding the Bonds for their benefit has agreed to obtain and transmit notices to Beneficial Owners. In the alternative, Beneficial Owners may wish to provide their names and addresses to the registrar and request that copies of notices be provided directly to them.
Redemption notices shall be sent to DTC. If less than all of the Bonds within a maturity are being redeemed, DTC’s practice is to determine by lot the amount of the interest of each Direct Participant in such maturity to be redeemed.
Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect to Bonds unless authorized by a Direct Participant in accordance with DTC’s MMI Procedures. Under its usual procedures, DTC mails an Omnibus Proxy to the District as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co.’s consenting or voting rights to those Direct Participants to whose accounts Bonds are credited on the record date (identified in a listing attached to the Omnibus Proxy).
Redemption proceeds, distributions, and dividend payments on the Bonds will be made to Cede & Co., or such other nominee as may be requested by an authorized representative of DTC. DTC’s practice is to credit Direct Participants’ accounts upon DTC’s receipt of funds and corresponding detail information from the District or the Trustee, on payable date in accordance with their respective holdings shown on DTC’s records. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered in “street name,” and will be the responsibility of such Participant and not of DTC, the Trustee, or the District, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of redemption proceeds, distributions, and dividend payments to Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC) is the responsibility of the District or the Trustee, disbursement of such payments to Direct Participants will be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners will be the responsibility of Direct and Indirect Participants.
A Bond Owner shall give notice to elect to have its Bonds purchased or tendered, through its Participant, to the Trustee, and shall effect delivery of such Bonds by causing the Direct Participant to transfer the Participant’s interest in the Bonds, on DTC’s records, to the Trustee. The requirement for physical delivery of Bonds in connection with an optional tender or a mandatory purchase will be deemed satisfied when the ownership rights in the Bonds are transferred by Direct Participants on DTC’s records and followed by a book-entry credit of tendered Bonds to the Trustee’s DTC account.
DTC may discontinue providing its services as depository with respect to the Bonds at any time by giving reasonable notice to the District or the Trustee. Under such circumstances, in the event that a successor depository is not obtained, physical certificates are required to be printed and delivered.
The District may decide to discontinue use of the system of book-entry only transfers through DTC (or a successor securities depository). In that event, bonds will be printed and delivered to DTC.
THE TRUSTEE, AS LONG AS A BOOK-ENTRY ONLY SYSTEM IS USED FOR THE BONDS, WILL SEND ANY NOTICE OF REDEMPTION OR OTHER NOTICES TO OWNERS ONLY TO DTC. ANY
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FAILURE OF DTC TO ADVISE ANY DTC PARTICIPANT, OR OF ANY DTC PARTICIPANT TO NOTIFY
ANY BENEFICIAL OWNER, OF ANY NOTICE AND ITS CONTENT OR EFFECT WILL NOT AFFECT
THE VALIDITY OF SUFFICIENCY OF THE PROCEEDINGS RELATING TO THE REDEMPTION OF THE BONDS CALLED FOR REDEMPTION OR OF ANY OTHER ACTION PREMISED ON SUCH NOTICE.
APPENDIX G
CITY OF PALM DESERT INFORMATION
GENERAL ECONOMIC DATA CONCERNING
THE CITY OF PALM DESERT AND THE COUNTY OF RIVERSIDE
The following information concerning the City of Palm Desert, the County of Riverside and surrounding areas is included only for the purpose of supplying general information regarding the community. The Bonds are not an obligation of the City.
The following information concerning the City and surrounding areas are included only for the purpose of supplying general information regarding the community. The Local Obligations and the Bonds are not a debt of the City, the State, or any of its political subdivisions and neither said City, said State, nor any of its political subdivisions is liable therefor.
Overview
The City of Palm Desert (the “City”), incorporated in November 26, 1973 as a general law city, became a charter city through the adoption of Ordinance 858 by the City Council on January 8, 1998. The City is located in the Coachella Valley and is approximately mid-way between the cities of Indio and Palm Springs, 117 miles east of Los Angeles, 118 miles northeast of San Diego and 515 miles southeast of San Francisco.
The City occupies an area of approximately 26 square miles. Elevation of the City is 243 feet and the mean temperature is 73.1 degrees. Except in summer, the weather is mild and annual average rainfall is 3.38 inches. According to the State of California Department of Finance, the City population as of January 1, 2023, was approximately 50,615.
Government
The City Council is comprised of five members, elected to four-year terms every two years. In 2020, changes were made to the City’s elections as a result of a legal settlement related to the California Voting Rights Act. A new downtown district, comprising about 20% of the City’s population was created which is represented by one (1) elected City Council member and a larger surrounding district, comprising about 80% of the City’s population was created, which is represented by four (4) elected City Council members. The City implements ranked choice voting. The general municipal election is conducted in November of even-numbered years, and councilmembers are sworn in and take office at the first meeting in December following each election.
The City Council selects one of its members to serve as Mayor for a one-year term and appoints a City Manager to conduct the day to day business of the City and the City Clerk. The City Attorney is appointed by City Council. The City operates as “Contract City” utilizing, primarily, agreements with other governmental entities, private companies and individuals to provide services. Contracted services include police and fire protection provided through the County, animal control, health services, legal services and landscape maintenance.
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TABLE G-1
CITY OF PALM DESERT
CITY COUNCIL MEMBERS
Name Office
Karina Quintanilla Mayor
Jan Harnik Mayor Pro Tem
Gina Nestande Council Member
Evan Trubee Council Member
Kathleen Kelly Council Member
Labor Force and Employment
The main sources of revenue in the City are derived from tourism and sales tax. Historically, the unemployment rate in the City has been lower than that for the County and the State.
Table H-2 represents the labor patterns in the City, the County, and the State, from 2018 through 2022.
TABLE G-2
CITY OF PALM DESERT, RIVERSIDE COUNTY AND
STATE OF CALIFORNIA
CIVILIAN LABOR FORCE, EMPLOYMENT, AND UNEMPLOYMENT
(2018 through 2022)
Year and Area Labor Force Employment Unemployment Unemployment Rate 2018
City 4,600 23,500 1,100 4.4
County 1,090,100 1,041,700 48,400 4.2
State 19,289,500 18,469,900 819,600 4.2
2019
City 24,800 23,800 1,000 4.2
County 1,108,100 1,061,500 46,600 7.3
State 19,413,200 18,617,900 795,300 4.1
2020
City 25,300 22,500 2,800 11.0
County 1,121,100 1,008,000 113,000 10.1
State 18,971,600 17,047,600 1,924,000 10.1
2021
City 25,100 23,500 1,700 6.7
County 1,133,000 1,050,000 83,000 7.3
State 18,973,400 17,586,300 1,387,100 7.3
2022
City 25,700 24,700 1,000 4.1
County 1,152,100 1,104,100 48,000 4.2
State 19,252,000 18,440,900 811,100 4.2
_____________________
Sources: State of California Employment Development Department and U.S. Department of Labor, Bureau of Labor Statistics.
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TABLE G-3
CITY OF PALM DESERT
TAXABLE RETAIL SALES DATA
(2018 through 2022)
Retail and Food Services 2022(1) 2021 2020 2019 2018
Motor Vehicle and Parts Dealers $ 99,246,260 $ 104,112,043 $ 71,778,937 $ 65,093,550 $ 82,725,948 Home Furnishings and Appliance Stores 132,222,879 136,522,312 104,329,445 122,046,532 132,768,970 Bldg. Matrl. and Garden Equip. and Supplies 124,524,328 114,070,049 91,177,849 84,436,299 82,014,590 Food and Beverage Stores 101,174,758 97,769,886 90,480,466 81,813,404 77,869,295 Gasoline Stations 73,998,256 68,632,423 48,423,179 69,984,089 67,733,653 Clothing and Clothing Accessories Stores 302,316,173 280,644,228 171,418,164 253,045,206 250,503,344 General Merchandise Stores 443,641,889 406,430,767 331,666,692 358,374,011 341,563,319 Food Services and Drinking Places 321,399,596 267,916,540 161,636,255 252,836,165 238,890,591 Other Retail Group 212,907,452 213,601,679 182,370,379 191,502,580 165,413,351 Total Retail and Food Services $1,811,431,591 $1,689,699,927 $1,253,281,366 $1,479,131,836 $1,439,483,061 All Other Outlets $456,756,726 $ 334,880,981 $ 254,088,731 $ 324,470,184 $ 313,228,922 Total All Outlets $2,268,188,317 $2,024,580,908 $1,507,370,097 $1,803,602,020 $1,752,711,983 _____________________
(1) Last year available.
Sources: California Department of Tax and Fee Administration.
Utilities
Water, sewage treatment and wastewater disposal are provided by the Coachella Valley Water District.
Southern California Gas Company supplies natural gas to the City and electric power is provided by the Southern California Edison Company. Waste Disposal is provided by Burrtec Waste & Recycling Services.
Transportation
Inter-City transportation is provided by SunLine Transit Agency which provides service throughout the entire Coachella Valley. The City’s central highways are California Highway 111 and 74 which connect to US Interstate 10 and to California Highway 62 and 86.
Shipping is provided by numerous truck carriers which have overnight service to Los Angeles, San Francisco, San Diego and Phoenix. Rail transportation is provided by the Southern Pacific Railroad located in Indio, 10 miles east of the City, and by Amtrak, which has two stations located in Coachella Valley.
A full service airport is located in Palm Springs, 12 miles northwest of the City, with approximately seven carriers providing service. The airport has an 8,500 foot runway and general aviation facilities. There is also a private airport in Bermuda Dunes, eight miles northeast of the City.
Community Services
The City provides both police and fire protection through contracts with the County of Riverside.
The Riverside County Public Library System provides library services to the City. The City/County also operates a 43,000 square foot public library on the College of the Desert campus which is jointly used by the public and the College of the Desert.
The Desert Willow Golf Resort, two championship 18-hole, public golf course, is located on approximately 540 acres in the northern area of the City. This golf course also features a 33,000 square foot clubhouse with restaurant, dining and banquet facilities. The City also is home to five other public golf courses and resorts and 20 private or semi-private golf clubs and resorts.
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Population
The following sets forth the City, the County and the State population estimates as of January 1 for the years 2019-2023:
TABLE G-4
CITY OF PALM DESERT,
RIVERSIDE COUNTY AND STATE OF CALIFORNIA
Estimated Population
(2019-2023)
Year
(January 1)
City of
Palm Desert
Riverside
County
State of
California
2019 53,695 2,419,057 39,605,361
2020 53,828 2,440,719 39,648,938
2021 50,683 2,418,727 39,286,510
2022 50,626 2,430,976 39,078,674
2023 50,615 2,439,234 38,940,231
_________________________
Source: State of California Department of Finance, Demographic Research Unit.
Employment and Industry
The unemployment rate in the Riverside-San Bernardino-Ontario MSA was 5.1 percent in November 2023, up from a revised 5.1 percent in October 2023, and above the year-ago estimate of 4.1 percent. This compares with an unadjusted unemployment rate of 4.9 percent for California and 3.5 percent for the nation during the same period. The unemployment rate was 5.1 percent in Riverside County, and 5.0 percent in San Bernardino County.
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The following table summarizes the civilian labor force, employment and unemployment in the County for calendar years 2018-2022.
TABLE G-5
RIVERSIDE-SAN BERNARDINO
METROPOLITAN STATISTICAL AREA
(RIVERSIDE COUNTY)
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CIVILIAN LABOR FORCE, EMPLOYMENT AND UNEMPLOYMENT
(Annual Averages)
TITLE 2018 2019 2020 2021 2022(1)
Civilian Labor Force(2) 2,045,200 2,075,200 2,095,800 2,125,300 2,160,600 Civilian Employment 1,957,500 1,991,200 1,888,900 1,968,700 2,071,200 Civilian Unemployment 87,700 84,000 206,900 156,600 89,400 Civilian Unemployment Rate 4.3% 4.0% 9.9% 7.4% 4.1%
Total, All Industries(3) 1,521,100 1,568,100 1,509,900 1,588,800 1,674,200 Total Farm 14,500 15,400 14,100 13,700 13,900
Total Nonfarm 1,506,600 1,552,700 1,495,800 1,575,100 1,660,300 Goods Producing 206,800 209,700 202,200 207,700 216,400 Mining and Logging 1,200 1,200 1,300 1,400 1,600
Construction 105,200 107,200 104,900 110,100 115,200
Manufacturing 100,400 101,300 96,000 96,100 99,600
Durable Goods 65,700 65,700 61,200 60,000 61,100
Nondurable Goods 34,700 35,600 34,800 36,200 38,500
Service Providing 1,299,800 1,343,100 1,293,700 1,367,400 1,443,900 Trade, Transportation & Utilities 379,400 395,100 406,900 443,200 464,500 Wholesale Trade 66,100 67,700 65,600 67,400 69,700
Retail Trade 181,200 180,700 168,800 177,000 180,600
Transportation, Warehousing &
Utilities
132,100 146,600 172,500 198,800 214,200
Information 11,400 11,500 9,600 9,700 10,200
Financial Activities 44,600 45,000 44,100 45,200 46,800 Finance & Insurance 25,300 24,800 24,600 24,400 24,600
Real Estate & Rental & Leasing 19,300 20,200 19,500 20,700 22,200 Professional & Business Services 151,400 157,900 154,800 169,400 179,100 Professional, Scientific &
Technical Services
42,700 44,000 42,900 46,100 49,300
Management of Companies &
Enterprises
8,300 8,800 8,600 8,700 8,700
Administrative & Support &
Waste Services
100,400 105,100 103,400 114,600 121,200
Private Educational & Health
Services
239,500 250,300 248,800 254,300 266,400
Private Educational Services 19,400 19,900 18,100 18,100 20,000 Health Care & Social
Assistance
220,100 230,400 230,600 236,200 246,300
Leisure & Hospitality 170,600 175,900 141,300 160,200 179,600 Arts, Entertainment &
Recreation
19,800 20,500 13,900 17,200 20,000
Accommodation & Food
Services
150,900 155,400 127,400 143,000 159,600
Other Services 45,800 46,200 40,200 43,600 47,900
Government 257,200 261,200 248,000 242,000 249,400
Federal Government 20,700 21,100 22,100 21,100 20,900
State Government 30,600 31,100 31,300 30,400 28,300
Local Government 205,900 209,000 194,600 190,500 200,300 ___________________________
(1) Latest year available.
(2) Civilian labor force data are by place of residence; include self-employed individuals, unpaid family workers, household domestic workers, & workers on strike. Data may not add due to rounding. The unemployment rate is calculated using unrounded data. (3) Industry employment is by place of work; excludes self-employed individuals unpaid family workers, household domestic workers, & workers on strike. Data may not add due to rounding.
Source: State of California Employment Development Department.
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TABLE G-6
COUNTY OF RIVERSIDE
Major Employers
(2024)
Employer Name Location Industry
1882 Cantina Temecula Restaurants
Abbott Vascular Inc Temecula Hospital Equipment & Supplies-Mfrs Abbott Vascular Inc Temecula Hospital Equipment & Supplies-Mfrs Amazon Fulfillment Ctr Moreno Valley Mail Order Fulfillment Service Citrus Club La Quinta Clubs
Coachella Valley Unified SCH Thermal School Districts
Collins Aerospace Riverside Aircraft Components-Manufacturers Corona City Hall Corona City Hall
Corona Regional Medical Ctr Corona Hospitals
Department-Corrections-Rehab Norco Government Offices-State Desert Regional Medical Ctr Palm Springs Hospitals
Eisenhower Health Rancho Mirage Hospitals
Fantasy Springs Resort Casino Indio Casinos
Jurupa School District Supt Riverside School Districts
KSL Development Corp La Quinta Golf Courses
Riverside Community Hospital Riverside Hospitals
Riverside County Admin Ctr Riverside Government Offices-County Riverside County Office of Edu Riverside Schools
Riverside County Public Health Riverside Government Offices-County Riverside University Health Moreno Valley Hospitals
Southwest Healthcare System Temecula Health Care Management Starcrest of California Perris Online Retailers & Marketplaces ________________________
Source: State of California Employment Development Department.
$_______
CITY OF PALM DESERT
COMMUNITY FACILITIES DISTRICT NO. 2021-1
(UNIVERSITY PARK)
SPECIAL TAX BONDS, SERIES 2024
BOND PURCHASE AGREEMENT
________, 2024
City of Palm Desert
Community Facilities District No. 2021-1 (University
Park)
73510 Fred Waring Drive
Palm Desert, CA 92260
Ladies and Gentlemen:
Piper Sandler & Co., 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 the City of Palm Desert Community Facilities District No. 2021-1 (University Park) (the “Community Facilities District”), which upon acceptance will be binding upon the Underwriter and the Community Facilities District. The agreement of the Underwriter to purchase the Bonds (as hereinafter defined) is contingent upon the Community Facilities District satisfying all of the obligations imposed upon them under this Purchase Agreement. This offer is made subject to the Community Facilities District’s acceptance by the execution of this Purchase Agreement and its delivery to the Underwriter at or before 11:59 P.M., local time, on the date hereof, and, if not so accepted, will be subject to withdrawal by the Underwriter upon notice delivered to the Community Facilities District at any time prior to the acceptance hereof by the Community Facilities District. All capitalized terms used herein, which are not otherwise defined, shall have the meaning provided for such terms in that certain Bond Indenture, dated as of July 1, 2021 (the “Original Indenture”), as supplemented by the First Supplemental Indenture, dated as of [March 1, 2024] (the “First Supplemental Indenture” together with the “Original Indenture” is referred to as the “Indenture”), by and between the Community Facilities District and U.S. Bank Trust Company, 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 Palm Desert Community Facilities District No. 2021-1 (University Park) Special Tax Bonds, Series 2024 (the “Bonds”), dated the Closing Date (as hereinafter defined), bearing interest at the rates and maturing on the dates and in the principal amounts set forth in Exhibit A hereto. The Bonds shall be subject to redemption as set forth in the Indenture and Official Statement.
2 The purchase price for the Bonds shall be $_______ (being 100% of the aggregate principal amount thereof, plus an original issue premium of $_______ and less an Underwriter’s discount of $________).
The Underwriter agrees to make a bona fide public offering of all of the Bonds initially at the public offering prices (or yields) set forth in Exhibit A attached hereto and incorporated herein by 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, provided that the Underwriter shall not change the interest rates set forth in Exhibit A. The Bonds may be offered and sold to certain dealers at prices lower than such initial offering prices.
The Bonds shall be substantially in the form described in, shall be issued and secured under the provisions of, and shall be payable from the Net Taxes as provided in the Indenture, the Preliminary Official Statement (as hereinafter defined), and the Mello-Roos Community Facilities Act of 1982, as amended (Section 53311 et seq. of the Government Code of the State of California) (the “Community Facilities District Act”). The issuance of the Bonds has been duly authorized by the City Council of the City of Palm Desert (the “City”), as the legislative body for the Community Facilities District pursuant to a resolution (the “Community Facilities District Resolution of Issuance”) adopted on _______, 2024.
The proceeds of the Bonds will be used to: (i) finance the acquisition of certain public improvements needed with respect to the development of property located within the Community Facilities District, including public improvements to be owned by the City and water and sewer facilities to be owned and operated by the Coachella Valley Water District; (ii) fund a reserve account for the Bonds; and (iii) pay costs of issuance for the Bonds.
The Bonds are being issued on a parity with the $15,200,000 initial par amount City of Palm Desert Community Facilities District No. 2021-1 (University Park) Special Tax Bonds, Series 2021 (the “2021 Bonds”).
The Bonds shall be substantially in the form described in, shall be issued and secured under the provisions of, and shall be payable from special taxes pledged thereto as provided in the Indenture. (a) The Community Facilities District hereby acknowledges that the Underwriter is entering into this Purchase Agreement in reliance on the representations, warranties and agreements made by the Community Facilities District herein.
The Community Facilities District acknowledges and agrees that (i) the purchase and sale of the Bonds pursuant to this Purchase Agreement is an arm’s-length commercial transaction between the Community Facilities District and the Underwriter, (ii) in connection therewith and with the discussions, undertakings and procedures leading up to the consummation of such transaction, the Underwriter is and has been acting solely as principal and not as the agent or fiduciary of the Community Facilities District, (iii) the Underwriter has not assumed an advisory or fiduciary responsibility in favor of the Community Facilities District with respect to (a) the offering of the Bonds or the process leading thereto (whether or not the Underwriter, or any affiliate of the Underwriter, has advised or is currently advising the Community Facilities District on other matters) or (b) any other obligations to the Community Facilities District with respect to the offering contemplated hereby, except the obligations expressly set forth in this Purchase Agreement or otherwise imposed by law, (iv) the Underwriter has financial interests that differ from those of the Community Facilities District
3 and (v) the Community Facilities District has consulted their own legal, financial and other advisors to the extent they have deemed appropriate in connection with this transaction. The Community Facilities District acknowledges that it has previously provided the Underwriter with an acknowledgement of receipt of the required Underwriter disclosure under Rule G-17 of the Municipal Securities Rulemaking Board (“MSRB”). The Community Facilities District acknowledges and represents that it has engaged Del Rio Advisors, LLC (the “Municipal Advisor”), as its municipal advisor (as defined in Securities and Exchange Commission Rule 15Ba1) and will rely solely on the financial advice of the Municipal Advisor 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 _____, 2024, relating to the Bonds, which, together with the cover page, inside cover page and appendices thereto is herein called the “Preliminary Official Statement.” By its acceptance of this Purchase Agreement, the Community Facilities District hereby consents to 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 Richards, Watson & Gershon, A Professional Corporation, Bond Counsel (“Bond Counsel”), Best Best & Krieger LLP, 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 subsection (b)(5) of Securities and Exchange Commission Rule 15c2-12 (the “Rule”), the Community Facilities District will undertake pursuant to the Continuing Disclosure Agreement, in the form attached to the Official Statement as an appendix, to provide annual reports and notices of certain enumerated events. A description of this undertaking is set forth in the Preliminary Official Statement and will also be set forth in the Official Statement.
(d) Except as the Underwriter and the Community Facilities District may otherwise agree, the Community Facilities District will deliver to the Underwriter, at the offices of Bond Counsel in 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 Trustee in the manner provided for in the Indenture and the Community Facilities District Act at 8:30 a.m. California time, on _______, 2024 (the “Closing Date”), and the Underwriter will accept such delivery and pay the purchase price of the Bonds as set forth in the second paragraph of this Section by wire transfer, payable in federal or other immediately available funds (such delivery and payment being herein referred to as the “Closing”). The Bonds shall be in fully registered book-entry form (which may be typewritten) and shall be registered in the name of Cede & Co., as nominee of DTC.
4 2. Representations, Warranties and Covenants of the Community Facilities District.
The Community Facilities District represents, warrants and covenants to the Underwriter:
(a) The Community Facilities District is duly organized and validly existing as a community facilities district under the laws of the State of California (the “State”), and has the full legal right, power and authority, among other things, (i) upon satisfaction of the conditions in this Purchase Agreement and the Indenture, to issue the Bonds as provided herein, and (ii) to secure the Bonds in the manner set forth in the Indenture.
(b) The City Council has the full legal right, power and authority to adopt the resolutions in connection with the initial formation of the Community Facilities District and the levy of the Special Taxes (the “Community Facilities District Resolutions”) and has caused to be recorded in the real property of records of the County of Riverside, a notice of special tax lien (the “Notice of Special Tax Lien” and together, with the Community Facilities District Resolutions, and the Community Facilities District Resolution of Issuance, the “Resolutions and Formation Documents”), and the Community Facilities District has the full legal right, power and authority (i) to enter into this Purchase Agreement, the Indenture, the Continuing Disclosure Agreement, and the Acquisition Agreement dated June 24, 2021 (the “Acquisition Agreement”), by and among the City, University Park Investor, LLC (the “Developer”) and the Community Facilities District (collectively, the “Community Facilities District Documents”), (ii) to issue, sell and deliver the Bonds to the Underwriter as provided herein, and (iii) to carry out and consummate all other transactions on its part contemplated by the Official Statement and each of the Community Facilities District Documents, and the Community Facilities District and the City Council have complied with all provisions of applicable law, including the Community Facilities District Act, in all matters relating to such transactions. (c) The Community Facilities District has duly authorized (i) the execution and delivery by the Community Facilities District of the Bonds and the execution, delivery and due performance by the Community Facilities District of its obligations under the Community Facilities District Documents, (ii) the distribution and use of the Preliminary Official Statement and execution, delivery and distribution of the Official Statement, and (iii) the taking of any and all such action as may be required on the part of the Community Facilities District to carry out, give effect to and consummate the transactions on its part contemplated by such instruments. All consents or approvals necessary to be obtained by the Community Facilities District in connection with the foregoing have been received, and the consents or approvals so received are still in full force and effect. (d) The Resolutions and Formation Documents have been duly adopted by the City Council and are in full force and effect; and the Community Facilities District Documents, when executed and delivered by the Community Facilities District and the other party thereto, will constitute a legal, valid and binding obligation of the Community Facilities District enforceable against the Community Facilities District in accordance with their terms, except as enforceability thereof may be limited by bankruptcy, insolvency or other laws affecting creditors’ rights generally. (e) When delivered to the Underwriter, the Bonds will have been duly authorized by the City Council and duly executed, issued and delivered by the Community Facilities District and will constitute legal, valid and binding special obligations of the Community Facilities District enforceable against the Community Facilities District in accordance with their respective terms, except as enforceability thereof may be limited by bankruptcy, insolvency or other laws affecting creditors’ rights generally, and will be entitled to the benefit and security of the Indenture.
5 (f) The information (excluding information under the caption “PROPERTY OWNERSHIP AND THE DEVELOPMENT” and information relating to The Depository Trust Company (“DTC”) and its book-entry system) contained in the Preliminary Official Statement is, and as of the Closing Date such information (excluding information under the caption “PROPERTY OWNERSHIP AND THE DEVELOPMENT” and information relating to DTC and its book-entry system)” in the Official Statement will be true and correct in all material respects, and the Preliminary Official Statement does not as of its date and the Official Statement will not as of the Closing Date contain any untrue or misleading statement of a material fact or omit to state any material fact (excluding in each case information under the caption “PROPERTY OWNERSHIP AND THE DEVELOPMENT” and information relating to DTC and its book-entry system) necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading. (g) If, at any time prior to the earlier of (i) receipt of notice from the Underwriter that the Official Statement is no longer required to be delivered under Rule 15c2-12 or (ii) the Closing (as described in Section 1(d) above), any event known to the officers of the Community Facilities District participating in the issuance of the Bonds occurs with respect to the Community Facilities District or the City as a result of which the Official Statement as then amended or supplemented might include an untrue 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, the Community Facilities District shall promptly notify the Underwriter in writing of such event. Any information supplied by the Community Facilities District for inclusion in any amendments or supplements to the Official Statement will not contain any untrue or misleading statement of a material fact relating to the Community Facilities District or the City or omit to state any material fact relating to the Community Facilities District or the City necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading. (h) Neither the adoption of the Resolutions and Formation Documents, the execution and delivery of the Community Facilities District Documents, nor the consummation of the transactions on the part of the Community Facilities District contemplated herein or therein or the compliance by the Community Facilities District with the provisions hereof or thereof will conflict with, or constitute on the part of the Community Facilities District, a violation of, or a breach of or default under, (i) any material indenture, mortgage, commitment, note or other agreement or instrument to which the Community Facilities District is a party or by which it is bound, (ii) any provision of the State Constitution or (iii) any existing law, rule, regulation, ordinance, judgment, order or decree to which the Community Facilities District or the City (or the members of the City Council or any of its officers in their respective capacities as such) is subject, in each instance that would have a material adverse effect on the ability of the Community Facilities District to perform its obligations under the Community Facilities District Documents.
(i) The Community Facilities District has never been in default at any time, as to principal of or interest on any obligation which it has issued, which default may have an adverse effect on the ability of the Community Facilities District to consummate the transactions on its part under the Community Facilities District Documents, except as specifically disclosed in the Official Statement; and except as provided in the Indenture, the Community Facilities District has not entered into any contract or arrangement of any kind which might give rise to any lien or encumbrance on the Special Taxes.
(j) Except as is specifically disclosed in the Official Statement, to the best knowledge of the Community Facilities District, there is no action, suit, proceeding, inquiry or
6 investigation, at law or in equity, before or by any court, public board or body, pending with respect to which the Community Facilities District or the City has been served with process or threatened against the Community Facilities District or the City, which in any way questions the powers of the City Council, the City or the Community Facilities District, or the validity of any proceeding taken by the City Council in connection with the issuance of the Bonds, or wherein an unfavorable decision, ruling or finding could materially adversely affect the transactions contemplated by the Community Facilities District Documents, or which, in any way, could adversely affect the validity or enforceability of the Resolutions and Formation Documents, the Bonds or the Community Facilities District Documents or, to the knowledge of the Community Facilities District, which in any way questions the exclusion from gross income of the recipients thereof of the interest on the Bonds for federal income tax purposes or in any other way questions the status of the Bonds under State tax laws or regulations. (k) Any certificate signed by an official of the Community Facilities District authorized to execute such certificate and delivered to the Underwriter in connection with the transactions contemplated by the Community Facilities District Documents shall be deemed a representation and warranty by the Community Facilities District to the Underwriter as to the truth of the statements therein contained.
(l) The Community Facilities District has not been notified of any listing or proposed listing by the Internal Revenue Service to the effect that it is a Community Facilities District whose arbitrage certifications may not be relied upon.
(m) The Bonds will be paid from Net Taxes (as defined in the Indenture) received by the Community Facilities District and amounts held in certain funds and accounts established and pledged under the Indenture.
(n) The Special Taxes may lawfully be levied in accordance with the rate and method of apportionment of the Special Tax relating to the Community Facilities District (the “Rate and Method”), the Resolutions and Formation Documents as described in the Preliminary Official Statement and the Official Statement, and, when levied, will be secured by a lien on the property on which they are levied.
(o) The Indenture creates a valid pledge of, and first lien upon the Net Taxes deposited thereunder, and the amounts held in certain funds and accounts established and pledged under the Indenture, subject in all cases to the provisions of the Indenture permitting the application thereof for the purposes and on the terms and conditions set forth therein. (p) Except as disclosed in the Preliminary Official Statement and the Official Statement, in the last five years, neither the City, nor the Community Facilities District, nor any other entity for which the City Council is the legislative body, has failed to comply with any undertaking under Rule 15c2-12 in any material respect.
The Community Facilities District hereby consents to 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 consents to 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
7 Official Statement, the Official Statement, the Joint Community Facilities Agreement dated as of June 8, 2021 (the “CVWD JCFA”), by and among the City, the Coachella Valley Water District, and the Developer with respect to the Bonds, this Purchase Agreement, and the other Community Facilities District Documents in connection with the transactions contemplated by this Purchase Agreement.
The Community Facilities District covenants with the Underwriter that the Community Facilities District will cooperate with the Underwriter (at the cost of the Underwriter), in qualifying the Bonds for offer and sale under the securities or Blue Sky laws of such jurisdictions of the United States as the Underwriter may reasonably request; provided, however, that the Community Facilities District shall not be required to consent to suit or to service of process, or to qualify to do business, in any jurisdiction. The Community Facilities District consents to the use by the Underwriter of the Community Facilities District Documents in the course of its compliance with the securities or Blue Sky laws of the various jurisdictions.
The execution and delivery of this Purchase Agreement by the Community Facilities District shall constitute a representation by the Community Facilities District to the Underwriter that the representations and warranties contained in this Section 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 the accuracy in all material respects of the statements of the officers and other officials of the Community Facilities District made in any certificates or other documents furnished pursuant to the provisions hereof, to the performance by the Community Facilities District of their obligations to be performed hereunder at or prior to the Closing Date and to the following additional conditions:
(a) At the Closing Date, the Community Facilities District Resolutions and the Community Facilities District Documents shall be in full force and effect, and shall not have been amended, modified or supplemented, except as may have been agreed to in writing by the Underwriter, and there shall have been taken in connection therewith, with the issuance of the Bonds, and with the transactions contemplated thereby, 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 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, the United States of America, or of any department, division, agency or instrumentality of either thereof, or under any applicable court or administrative decree or order, or under any loan agreement, note, resolution, indenture, contract, agreement or other instrument to which the Community Facilities District is a party or is otherwise subject or bound, and the performance by the Community Facilities District of its obligations under the Bonds, the Community Facilities District Resolutions, the Indenture, the other Community Facilities District Documents, 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, 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
8 agreement, note, resolution, indenture, contract, agreement or other instrument to which the Community Facilities District is a party or is otherwise subject or bound, in any manner which would materially and adversely affect the performance by the Community Facilities District of its obligations under the Indenture, the other Community Facilities District Documents, the Bonds or the performance of the conditions precedent to be performed by the Community Facilities District hereunder. (c) 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.
(d) 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 indirectly, of imposing federal income taxation upon such interest as would be received by any owners of the Bonds beyond the extent to which such interest is subject to taxation as of the date hereof; or
2. Legislation introduced in or enacted (or resolution passed) by the Congress or an order, decree or injunction issued by any court of competent jurisdiction, or an order, ruling, regulation (final, temporary or proposed), press release or other form of notice issued or made by or on behalf of the Securities and Exchange Commission (the “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 under or other requirements of the Securities Act of 1933, as amended (the “Securities Act”), or that the Indenture is not exempt from qualification under or other requirements of the Trust Indenture Act of 1939, as amended (the “Trust Indenture Act”), or that the issuance, offering or sale of obligations of the general character of the Bonds, including any or all underlying arrangements, as contemplated hereby or by the Official Statement or otherwise is or would be in violation of the federal securities laws as amended and then in effect; or
3. A general suspension of trading on the New York Stock Exchange or other major exchange shall be in force, or minimum or maximum prices for trading shall have been fixed and be in force, or maximum ranges for prices for securities shall have been required and be in
9 force on any such exchange, whether by virtue of determination by that exchange or by order of the SEC or any other governmental authority having jurisdiction; or
4. The introduction, proposal or enactment of any amendment to the federal or State Constitution or any action by any federal or State court, legislative body, regulatory body or other authority materially adversely affecting the tax status of the Community Facilities District, its property, income, securities (or interest thereon), the validity or enforceability of Special Taxes, or the ability of the Community Facilities District to issue the Bonds as contemplated by the Indenture and the Official Statement; or
5. Any event occurring, or information becoming known which, in the reasonable judgment of the Underwriter, makes untrue in any material respect any statement or information contained in the Preliminary Official Statement or in the Official Statement, or has the effect that the Preliminary Official Statement or the Official Statement contains any untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; or
6. Any national securities exchange, the Comptroller of the Currency, or any other governmental authority, shall impose as to the Bonds, or obligations of the general character of the Bonds, any material restrictions not now in force, or increase materially those now in force, with respect to the extension of credit by, or the charge to the net capital requirements of, the Underwriter; or
7. There shall have occurred (1) an outbreak or escalation of hostilities or the declaration by the United States of a national emergency or war or (2) any other calamity or crisis in the financial markets of the United States or elsewhere or the escalation of such calamity or crisis, the effect of which on the financial markets of the United States is such as, in the reasonable judgment of the Underwriter, would materially adversely affect the market for or market price of the Bonds; or
8. 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; or
9. A general banking moratorium shall have been declared by federal or State authorities having jurisdiction and be in force; or
10. A material disruption in securities settlement, payment or clearance services affecting the Bonds shall have occurred; or
11. Any new restriction on transactions in securities materially affecting the market for securities (including the imposition of any limitation on interest rates) or the extension of credit by, or a charge to the net capital requirements of, underwriters shall have been established by
10 the New York Stock Exchange, the SEC, any other federal or State agency or the Congress of the United States, or by Executive Order; or
12. A decision by a court of the United States shall be rendered, or a stop order, release, regulation or no-action letter by or on behalf of the SEC or any other governmental agency having jurisdiction of the subject matter shall have been issued or made, to the effect that the issuance, offering or sale of the Bonds, including the underlying obligations as contemplated by this Purchase Agreement or by the Official Statement, or any document relating to the issuance, offering or sale of the Bonds, is or would be in violation of any provision of the federal securities laws at the Closing Date, including the Securities Act, the Securities Exchange Act of 1934, as amended and the Trust Indenture Act; or
13. Any proceeding shall have been commenced or be threatened in writing by the SEC against the City or the Community Facilities District; or (e) 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 and Bond Counsel:
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 Resolutions and Formation Documents, together with a certificate dated as of the Closing Date of the City Clerk to the effect that the Community Facilities District Resolutions are true, correct and complete copies of the ones duly adopted by the City Council;
4. The Continuing Disclosure Agreement executed and delivered by the Community Facilities District and Willdan Financial Services, as dissemination agent;
5. An unqualified approving opinion of Bond Counsel for the Bonds in the form attached to the Official Statement;
6. A supplemental opinion or opinions of Bond Counsel, dated the Closing Date and addressed to the Community Facilities District and the Underwriter, to the effect that:
(i) 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 (including the Act);
(ii) The City Council of the City, acting as legislative body of the Community Facilities District, has the full legal right, power and authority to adopt the Resolutions and Formation Documents;
(iii) the statements contained in the Official Statement under the captions “INTRODUCTION – Sources of Payment for the Bonds,” “INTRODUCTION – Description of the Bonds,” “THE BONDS” (other than information relating to DTC and its book-entry only system
11 and information in the section entitled “Debt Service Schedule”, as to which no opinion is expressed), “SOURCES OF PAYMENT FOR THE BONDS,” “TAX EXEMPTION,” and in Appendices B and E thereto, excluding any material that may be treated as included under such captions by reference to other documents, insofar as such statements expressly summarize certain provisions of the Indenture and Bond Counsel’s final opinion are accurate in all material respects; (iv) this Purchase Agreement and the Continuing Disclosure Agreement have been duly executed and delivered by, and constitute valid and binding obligations of, the Community Facilities District, subject to bankruptcy, insolvency, reorganization, moratorium and other laws affecting enforcement of creditors’ rights in general and to the application of equitable principles if equitable remedies are sought;
(v) 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; and
(vi) 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.
7. The letter of Disclosure Counsel, dated the Closing Date and addressed to the Community Facilities District and to the Underwriter, to the effect that, without having undertaken to determine independently the accuracy or completeness of the statements contained in the Official Statement, but on the basis of their participation in conferences with representatives of the Community Facilities District, the Special Tax Consultant and others, and their examination of certain documents, nothing has come to their attention which has led them to believe that the Preliminary Official Statement as of its date and the date of this Purchase Agreement and the Official Statement as of its date and as of the Closing Date contained or contains any untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading (except that no opinion or belief need be expressed as to any financial statements or other financial, statistical or engineering data or forecasts, numbers, charts, estimates, projections, assumptions, or expressions of opinion, any information about valuation, appraisals, absorption, archeological or environmental matters, or any information with respect to the City, or about DTC or the book-entry-only system);
8. A certificate dated the Closing Date and signed by an authorized representative of the Community Facilities District or an authorized designee, on behalf of the Community Facilities District substantially in the form attached hereto as Exhibit F;
9. An opinion of the City Attorney of the City, dated the date of Closing and addressed to the Underwriter and the City, to the effect that:
(i) The City is duly organized and validly existing as a municipal corporation and charter city under and by virtue of the Constitution and laws of the State; (ii) The Resolutions and Formation Documents were duly adopted
12 at meetings of the City Council, acting as legislative body of the Community Facilities District which were called and held under law and with all public notice required by law and at which a quorum was present and acting throughout, and the Resolutions and Formation Documents are in full force and effect and have not been amended or repealed;
(iii) To their current actual knowledge, there is 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 with respect to which the Community Facilities District has been served with process or threatened, in any way affecting the existence of the City, the Community Facilities District or the titles of the Community Facilities District’s officials to their respective offices, or seeking to restrain or to enjoin the issuance, sale or delivery of the Bonds or the application of the proceeds thereof in accordance with the Indenture, or the collection or application of the Special Taxes to pay the principal of and interest on the Bonds, or in any way contesting or affecting the validity or enforceability of the Bonds, the Community Facilities District Documents or any action of the Community Facilities District contemplated by any of said documents, or in any way contesting the completeness or accuracy of the Preliminary Official Statement or of the Official Statement or the powers of the Community Facilities District or its authority with respect to the Bonds, the Community Facilities District Documents or any action on the part of the Community Facilities District contemplated by any of said documents, wherein an unfavorable decision, ruling, or finding could materially adversely affect the validity or enforceability of the Bonds or the Community Facilities District Documents; and
(iv) To their 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.
10. A certificate dated the Closing Date from Willdan Financial Services (the “Special Tax Consultant” or the “Dissemination Agent”) addressed to the Community Facilities District and the Underwriter to the effect that: (i) the Special Tax if collected in the maximum amounts permitted pursuant to the Rate and Method of Apportionment of Special Taxes of the Community Facilities District as of the Closing Date would generate at least budgeted administrative expenses plus 110% of the annual debt service payable with respect to the Bonds and 2021 Bonds in each year, based on such assumptions and qualifications as shall be acceptable to the Underwriter; (ii) the statements in the Official Statement provided by the Special Tax Consultant concerning Special Taxes in the Community Facilities District and all information supplied by it for use in the Official Statement were as of the date of the Official Statement and are as of the Closing Date true and correct, and do not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading; (iii) the Dissemination Agent has the full power to enter into and deliver the Continuing Disclosure Agreement and to perform its duties as Dissemination Agent thereunder; (iv) as of the Closing Date, the Dissemination Agent has executed and delivered the Continuing Disclosure Agreement and, assuming due authorization, execution and delivery by the Community Facilities District, the Continuing Disclosure Agreement is a valid, legal and binding agreement of the Dissemination Agent, enforceable in accordance with its terms, except as such enforcement may be limited by bankruptcy, insolvency, reorganization or other similar laws affecting the enforcement of creditors’ rights in
13 general and by general equity principles (regardless of whether such enforcement is considered in a proceeding in equity or at law); and (v) to the best knowledge of the Dissemination Agent, after due inquiry, no consent, approval, authorization or other action by any governmental or regulatory authority having jurisdiction over the Dissemination Agent that has not been obtained by the Dissemination Agent is or will be required for the execution and delivery of the Continuing Disclosure Agreement or the performance by the Dissemination Agent of its duties and obligations thereunder;
11. Certified copies of the general resolution of the Trustee authorizing the execution and delivery of certain documents by certain officers of the Trustee, which resolution authorizes the execution of the Indenture and the Escrow Agreement and the authentication of the Bonds;
12. 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 have full power and authority to perform its duties under the Indenture; (ii) the Trustee is duly authorized to execute and deliver the Indenture, to accept the obligations created by the Indenture and to authenticate the Bonds pursuant to the terms of the Indenture; (iii) no consent, approval, authorization or other action by any governmental or regulatory authority having jurisdiction over the Trustee that has not been obtained is or will be required for the authentication of the Bonds or the consummation by the Trustee of the other transactions contemplated to be performed by the Trustee in connection with the authentication of the Bonds and the acceptance and performance of the obligations created by the Indenture; (iv) to the best of its knowledge, compliance with the terms of the Indenture will not conflict with, or result in a violation or breach of, or constitute a default under, any loan agreement, indenture, bond, note, resolution or any other agreement or instrument to which the Trustee is a party or by which it is bound, or any law or any rule, regulation, order or decree of any court or governmental agency or body having jurisdiction over the Trustee or any of its activities or properties; and (v) there is no action, suit, proceeding or investigation, at law or in equity, before or by any court or governmental agency, public board or body pending against the Trustee or threatened against the Trustee which in the reasonable judgment of the Trustee would affect the existence of the Trustee or in any way contest the validity or enforceability of the Indenture or contesting the powers of the Trustee or its authority to enter into and perform its obligations under the Indenture;
13. An opinion of counsel to the Trustee dated the Closing Date, addressed to the Underwriter, and the Community Facilities District to the effect that the Trustee is a national banking association duly organized and validly existing under the laws of the United States having full power and being qualified to enter into, accept and agree to the provisions of the Indenture, and that such documents have been duly authorized, executed and delivered by the Trustee, and, assuming due execution and delivery by the other parties thereto, constitutes the legal, valid and binding obligation of the Trustee, enforceable in accordance with its terms, subject to bankruptcy, insolvency, reorganization, moratorium and other laws affecting the enforcement of creditors’ rights in general and except as such enforceability may be limited by the application of equitable principles if equitable remedies are sought, and that the Bonds have been duly authenticated;
14. A certificate of the Community Facilities District dated the Closing Date, in a form acceptable to Bond Counsel, that the Bonds are not arbitrage bonds within the meaning of Section 148 of the Internal Revenue Code of 1986, as amended;
14 15. A Letter of Representations of Developer in connection with the printing of the Preliminary Official Statement dated the date of the Preliminary Official Statement, substantially in the form attached as part of Exhibit D hereto or as such Letter of Representations may be modified with the approval of the Underwriter and Bond Counsel, and a Bring-Down Certificate of the Developer dated the Closing Date, substantially in the form attached as part of Exhibit E hereto;
16. A Letter of Representations of AG EHC II Toll CA 2 LP (“Toll”) in connection with the printing of the Preliminary Official Statement dated the date of the Preliminary Official Statement, substantially in the form attached as part of Exhibit D hereto or as such Letter of Representations may be modified with the approval of the Underwriter and Bond Counsel, and a BringDown Certificate of Toll dated the Closing Date, substantially in the form attached as part of Exhibit E hereto
17. The Continuing Disclosure Certificate of the Developer, substantially in the form attached as an appendix to the Official Statement;
18. The Continuing Disclosure Certificate of Toll, substantially in the form attached as an appendix to the Official Statement;
19. An opinion or opinions of counsel to the Developer, dated the date of the Closing addressed to the Community Facilities District and the Underwriter, in form and substance acceptable to the Underwriter and Bond Counsel;
20. An opinion or opinions of counsel to Toll, dated the date of the Closing addressed to the Community Facilities District and the Underwriter, in form and substance acceptable to the Underwriter and Bond Counsel;
21. An opinion of Kutak Rock LLP, counsel to the Underwriter (“Underwriter’s Counsel”), dated the date of Closing and addressed to the Underwriter in form and substance acceptable to the Underwriter;
22. [Parity Certificate and/or Opinion regarding 2021 Bonds]
23. A certificate in form and substance as set forth in Exhibit C hereto of Capital Realty Analysts, La Quinta, California, the appraiser of the property within the Community Facilities District, dated as of the Closing Date; and
24. Such additional legal opinions, certificates, instruments and other documents as the Underwriter and Bond Counsel may reasonably request to evidence the truth and accuracy, as of the date hereof and as of the Closing Date, of the material representations and warranties of the Community Facilities District contained herein, and of the statements and information contained in the Official Statement and the due performance or satisfaction by the Community Facilities District at or prior to the Closing of all agreements then to be performed and all conditions then to be satisfied by the Community Facilities District in connection with the transactions contemplated hereby and by the Indenture and the Official Statement.
If the Community Facilities District shall be unable to satisfy the conditions to the obligations of the Underwriter to purchase, accept delivery of and pay for the Bonds contained in this Purchase Agreement, or if the obligations of the Underwriter to purchase, accept delivery of and pay for the
15 Bonds shall be terminated for any reason permitted by this Purchase Agreement, this Purchase Agreement shall terminate and neither the Community Facilities District nor the Underwriter shall be under any further obligation hereunder, except that the respective obligations of the Underwriter and the Community Facilities District set forth in Section 5 hereof shall continue in full force and effect.
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 B, with such modifications as may be appropriate or necessary, in the reasonable judgment of the Underwriter, the Community Facilities District and Bond Counsel, to accurately reflect, as applicable, the sales price or prices or the initial offering price or prices to the public of the Bonds. (b) Except as otherwise set forth in Exhibit A attached hereto, the Community Facilities District will treat the first price at which 10% of each maturity of the Bonds (the “10% test”), identified under the column “10% Test Satisfied” in Exhibit A, is sold to the public as the issue price of that maturity (if different interest rates apply within a maturity, each separate CUSIP number within that maturity will be subject to the 10% test). At or promptly after the execution of this Purchase Agreement, the Underwriter shall report to the Community Facilities District the price or prices at which it has sold to the public each maturity of Bonds. If at that time the 10% test has not been satisfied as to any maturity of the Bonds, the Underwriter agrees to promptly report to the Community Facilities District the prices at which it sells the unsold Bonds of that maturity to the public. That reporting obligation shall continue, whether or not the Closing Date has occurred, until the 10% test has been satisfied as to the Bonds of that maturity or until all Bonds of that maturity have been sold to the public, provided that, the Underwriter’s reporting obligation after the Closing Date may be at reasonable periodic intervals or otherwise upon request of the Community Facilities District or Bond Counsel. (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, identified under the column “Hold the Offering Price Rule Used,” as of the date of this Purchase Agreement, the maturities, if any, of the Bonds for which the Underwriter represents that (i) the 10% test has been satisfied (assuming orders are confirmed by the close of the business day immediately following the date of this Purchase Agreement) and (ii) the 10% test has not been satisfied and for which the Community Facilities District and the Underwriter agree that the restrictions set forth in the next sentence shall apply, which will allow the Community Facilities District to treat the initial offering price to the public of each such maturity as of the sale date as the issue price of that maturity (the “hold-the-offering-price rule”). So long as the hold-the-offeringprice 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.
16 The Underwriter shall promptly advise the Community Facilities District when it has sold 10% of that maturity of the Bonds to the public at a price that is no higher than the initial offering price to the public, if that occurs prior to the close of the fifth (5th) business day after the sale date. (d) The Underwriter confirms that:
(i) any selling group agreement and any third-party distribution agreement relating to the initial sale of the Bonds to the public, together with the related pricing wires, contains or will contain language obligating each dealer who is a member of the selling group and each brokerdealer that is a party to such third-party distribution agreement, as applicable:
(A)(i) to report the prices at which it sells to the public the unsold Bonds of each maturity allocated to it, whether or not the Closing Date has occurred, until either all Bonds of that maturity allocated to it have been sold or it is notified by the Underwriter that the 10% test has been satisfied as to the Bonds of that maturity, provided that, the reporting obligation after the Closing Date may be reasonable periodic intervals or otherwise upon request of the Underwriter and (ii) to comply with the hold-the-offering-price rule, if applicable, if and for so long as directed by the Underwriter,
(B) to promptly notify the Underwriter of any sales of Bonds that, to its knowledge, are made to a purchaser who is a related party to an underwriter participating in the initial sale of the Bonds to the public (each such term being used as defined below), and (C) to acknowledge that, unless otherwise advised by the dealer or brokerdealer, the Underwriter shall assume that each order submitted by the dealer or broker-dealer is a sale to the public.
(ii) any selling group agreement relating to the initial sale of the Bonds to the public, together with the related pricing wires, contains or will contain language obligating each dealer that is a party to a third-party distribution agreement to be employed in connection with the initial sale of the Bonds to the public to require each broker-dealer that is a party to such third-party distribution agreement to (A) report the prices at which it sells to the public the unsold Bonds of each maturity allocated to it, whether or not the Closing Date has occurred, until either all Bonds of that maturity allocated to it have been sold or it is notified by the Underwriter or the dealer that the 10% test has been satisfied as to the Bonds of that maturity, provided that, the reporting obligation after the Closing Date may be at reasonable periodic intervals or otherwise upon request of the Underwriter or the dealer, and (B) comply with the hold-the-offering-price rule, if applicable, if and for so long as directed by the Underwriter or the dealer and as set forth in the related pricing wires. (e) The Community Facilities District acknowledges that, in making the representation set forth in this section, the Underwriter will rely on (i) in the event a selling group has been created in connection with the initial sale of the Bonds to the public, the agreement of each dealer who is a member of the selling group to comply with the requirements for establishing 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 issue price of the Bonds, including, but not limited
17 to, its agreement to comply with the hold-the-offering-price rule, if applicable to the Bonds, as set forth in the third-party distribution agreement and the related pricing wires. (f) The Underwriter acknowledges that sales of any Bonds to any person that is a related party to an underwriter participating in the initial sale of the Bonds to the public (each such term being used as defined below) shall not constitute sales to the public for purposes of this section.
Further, for purposes of this section:
(i) “public” means any person other than an underwriter or a related party; (ii) “underwriter” means (A) any person that agrees pursuant to a written contract with the Community Facilities District (or with the lead underwriter to form an underwriting syndicate) to participate in the initial sale of the Bonds to the public and (B) any person that agrees pursuant to a written contract directly or indirectly with a person described in clause (A) to participate in the initial sale of the Bonds to the public (including a member of a selling group or a party to a thirdparty distribution agreement participating in the initial sale of the Bonds to the public); (iii) a purchaser of any of the Bonds is a “related party” to an underwriter if the underwriter and the purchaser are subject, directly or indirectly, to (A) more than 50% common ownership of the voting power or the total value of their stock, if both entities are corporations (including direct ownership by one corporation of another), (B) more than 50% common ownership of their capital interests or profits interests, if both entities are partnerships (including direct ownership by one partnership of another), or (C) more than 50% common ownership of the value of the outstanding stock of the corporation or the capital interests or profit interests of the partnership, as applicable, if one entity is a corporation and the other entity is a partnership (including direct ownership of the applicable stock or interests by one entity of the other); and (iv) “sale date” means the date of execution of this Purchase Agreement by all parties.
5. Expenses. Whether or not the transactions contemplated by this Purchase Agreement are consummated, the Underwriter shall be under no obligation to pay, and the Community Facilities District shall pay all expenses and costs of the Community Facilities District incident to the performance of its obligations in connection with the authorization, execution, sale and delivery of the Bonds to the Underwriter, including, without limitation, printing costs, initial fees of the Trustee and Escrow Agent, including fees and disbursements of their counsel, if any, fees and disbursements of Bond Counsel, Disclosure Counsel and other professional advisors employed by the City, costs of preparation, printing, signing, transportation, delivery and safekeeping of the Bonds. The Underwriter shall pay all out-of-pocket expenses of the Underwriter, including, without limitation, advertising expenses, the California Debt and Investment Advisory Commission fee, CUSIP Services Bureau charges, regulatory fees imposed on new securities issuers and any and all other expenses incurred by the Underwriter in connection with the public offering and distribution of the Bonds, including fees and disbursements of Underwriter’s Counsel. Any meals in connection with or adjacent to meetings, rating agency presentations, pricing activities or other transaction-related activities shall be considered an expense of the transaction and included in the expense component of the Underwriter’s discount.
6. Notices. Any notice of other communication to be given to the Community Facilities District under this Purchase Agreement may be given by delivering the same in writing to the City of Palm Desert, 73510 Fred Waring Drive, Palm Desert, CA 92260, Attention: City Manager; any notice
18 or other communication to be given to the Underwriter under this Purchase Agreement may be given by delivering the same in writing to Piper Sandler & Co., 120 Vantis Drive, Suite 330, Aliso Viejo, California 92656, Attention: Public Finance.
7. Parties In Interest. This Purchase Agreement is made solely for the benefit of the Community Facilities District and Underwriter (including any successors or assignees of the Underwriter) and no other person shall acquire or have any right hereunder or by virtue hereof.
8. Survival of Representations and Warranties. The representations and warranties of the Community Facilities District under this Purchase Agreement shall remain operative and in full force and effect, regardless of any investigations made by or on behalf of the Underwriter and shall survive the delivery and payment for the Bonds and the Closing.
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 Prior Agreements. This Purchase Agreement supersedes and replaces all prior negotiations, agreements and understanding among the parties hereto in relation to the sale of the Bonds by the Community Facilities District.
12. Governing Law. This Purchase Agreement shall be governed by the laws of the State of California.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK; EXECUTION PAGE FOLLOWS]
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,
PIPER SANDLER & CO., as Underwriter
By:
Authorized Officer
The foregoing is hereby agreed to and
accepted as of the date first above written:
CITY OF PALM DESERT COMMUNITY
FACILITIES DISTRICT NO. 2021-1
(UNIVERSITY PARK)
By:
Authorized Officer
Time of Execution: _____________ p.m. California time
[EXECUTION PAGE OF BOND PURCHASE AGREEMENT]
EXHIBIT A
$______
CITY OF PALM DESERT
COMMUNITY FACILITIES DISTRICT NO. 2021-1
(UNIVERSITY PARK)
SPECIAL TAX BONDS, SERIES 2024
Maturity
(September 1)
Principal
Amount
Interest
Rate Yield Price
10% Test
Satisfied*
10% Test
Not
Satisfied
Subject to
Hold-TheOfferingPrice Rule
2024
2025
2026
2027
2028
2029
2030
2031
2032
2033
2034
20__(T)
20__(T)
20__(T)
20__(T)
_________________
(T) Term Bond.
(C) Priced to optional call at [par] on September 1, 20___. *At the time of execution of this Purchase Agreement and assuming orders are confirmed by the close of the business day immediately following the date of this Purchase Agreement.
EXHIBIT B
$_______
CITY OF PALM DESERT
COMMUNITY FACILITIES DISTRICT NO. 2021-1
(UNIVERSITY PARK)
SPECIAL TAX BONDS, SERIES 2024
FORM OF ISSUE PRICE CERTIFICATE
The undersigned, as underwriter of the above-referenced bonds (the “Bonds”) pursuant to that certain Bond Purchase Agreement, dated [BPA Date], by and between Community Facilities District No. 2021-1 (University Park) (the “Issuer”) and the undersigned, acting through its authorized representative, hereby certifies as set forth below with respect to the sale and issuance of the Bonds.
1. Sale of the Bonds. As of the date of this certificate, at least 10% of each Maturity of the Bonds was sold to the Public at the respective price (“Sale Price”) listed in Schedule A.
2. The aggregate of the Sale Prices of the Bonds is $________ (the “Issue Price”).
3. Based upon our experience in marketing and maintaining a market for obligations having terms and credit arrangements similar to those underlying the Bonds, the Reserve Requirement contemplated under the Bond Indenture, dated as of July 1, 2021, as supplemented by the First Supplemental Indenture, dated as of [March 1, 2024], by and between the Issuer and U.S. Bank Trust Company, National Association, as trustee, pursuant to which the Bonds are being issued, was a vital and necessary factor in marketing the Bonds to the public and is both reasonably required and necessary to the maintenance of an orderly market for the Bonds.
4. The weighted average maturity of the Bonds is _____ years.
5. The Yield on the Bonds is _______%, being the discount rate which, when used in computing the present worth of all payments of principal and interest to be paid on the Bonds, computed on the basis of a 360-day year and semi-annual compounding produces an amount equal to the Issue Price of the Bonds[, computed with the following adjustment. The Bonds maturing (i) on September 1, 20__, and (ii) on September 1, 20__ are the only Bonds that are subject to optional redemption before maturity and have an Initial Offering Price that exceeds their stated redemption price at maturity by more than one-fourth of one percent multiplied by the product of their stated redemption price at maturity and the number of complete years to their first optional redemption date.
Accordingly, in computing the Yield on the Bonds, such Bonds were treated as retired on their optional redemption date or at maturity to result in the lowest Yield on the Bonds.].
7. [None of the Bonds subject to mandatory early redemption has a stated redemption price that exceeds the initial offering price of such bond by more than one-fourth of one percent multiplied by the product of its stated redemption price at maturity and the number of years to its weighted average maturity date.]
8. [None of the Bonds is subject to optional redemption within five years of the Issue Date of the Bonds, and none of the Bonds subject to optional redemption has an initial offering price that exceeds its stated redemption price at maturity by more than one-fourth of one percent multiplied
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by the product of its stated redemption price at maturity and the number of complete years to its first optional redemption date.]
9. Defined Terms.
(a) Issuer means City of Palm Desert Community Facilities District No. 2021-1 (University Park).
(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 interest 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 (i) any person that agrees pursuant to a written contract with the Issuer (or with the lead underwriter to form an underwriting syndicate) to participate in the initial sale of the Bonds to the Public, and (ii) any person that agrees pursuant to a written contract directly or indirectly with a person described in clause (i) of this paragraph to participate in the initial sale of the Bonds to the Public (including a member of a selling group or a party to a retail distribution agreement participating in the initial sale of the Bonds to the Public).
Other capitalized terms used but not defined herein shall have the respective meanings ascribed to such terms in the Certificate Regarding Compliance with Certain Tax Matters (the “Tax Certificate”) executed by the Issuer and the City of Palm Desert (the “City”) with respect to the Bonds.
The representations set forth in this Certificate are limited to factual matters only. Nothing in this Certificate represents the undersigned’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 and the City with respect to certain of the representations set forth in the Tax Certificate relating to the Bonds and with respect to compliance with the federal income tax rules affecting the Bonds, and by Richards, Watson & Gershon, A Professional Corporation, in connection with rendering its opinion that the interest on the Bonds is excluded from gross income for federal income tax purposes, the preparation of the Internal Revenue Service Form 8038-G, and other federal income tax advice that it may give to the Issuer and the City from time to time relating to the Bonds.
IN WITNESS WHEREOF, the undersigned has caused this Certificate to be executed on the date first written above.
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PIPER SANDLER & CO.
By:_______________________________________
Name:_____________________________________
Title:______________________________________
EXHIBIT C
CITY OF PALM DESERT
COMMUNITY FACILITIES DISTRICT NO. 2021-1
(UNIVERSITY PARK)
SPECIAL TAX BONDS, SERIES 20244
CERTIFICATE OF APPRAISER
The undersigned hereby states and certifies:
1. That he or she is an authorized principal of Capital Realty Analysts, La Quinta, California (the “Appraiser”) and as such is familiar with the facts herein certified and is authorized and qualified to certify the same.
2. That the Appraiser has prepared an appraisal report dated December 20, 2023, with a date of value as of December 15, 2023 (the “Appraisal Report”), on behalf the City of Palm Desert Community Facilities District No. 2021-1 (University Park) (the “Community Facilities District”) and in connection with the Official Statement dated [BPA Date] (“Official Statement”), concerning the City of Palm Desert Community Facilities District No. 2021-1 (University Park) Special Tax Bonds, Series 2024 (the “Bonds”).
3. That the Appraiser hereby consents to the reproduction and use of the Appraisal Report appended to the Preliminary Official Statement and the Official Statement. The Appraiser also consents to the references to the Appraiser and the Appraisal made in the Preliminary Official Statement and the Official Statement.
4. In the opinion of the Appraiser the assumptions made in the Appraisal Report are reasonable.
5. That the Official Statement has been reviewed on behalf of the Appraiser and to the best knowledge of the Appraiser the statements concerning the Appraisal Report and the value of the property contained under the captions “INTRODUCTION – Appraisal Report,” “THE DISTRICT – Appraisal Report,” and “APPENDIX C – APPRAISAL REPORT” are true, correct and complete in all material respects 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 the light of the circumstances under which they were made, not misleading.
6. Each of the parcels appraised by the Appraiser is encompassed within the Community Facilities District as set forth in the boundary map of the Community Facilities District and 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 taxes.
7. That, as of the date of the Official Statement and as of the date hereof, the Appraisal Report appended to the Official Statement, to the best of my knowledge and belief, and subject to all of the Limiting Conditions and Major Assumptions set forth in the Appraisal Report, does not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements contained therein, in the light of the circumstances under which they were made, not
C-25
misleading, and no events or occurrences have been ascertained by us or have come to our attention that would materially and adversely affect the conclusions as to the market value of the appraised property stated in the Appraisal Report. However, we have not performed any procedures since the date of the Appraisal Report to obtain knowledge of such events or occurrences nor are we obligated to do so in the future.
8. The Appraisal Report complies with the Appraisal Standards for Land-Secured Financings issued by the California Debt and Investment Advisory Commission dated July, 2004.
The Community Facilities District and Piper Sandler & Co., as underwriter, are entitled to rely on the Certificate.
Dated: [Closing Date]
CAPITAL REALTY ANALYSTS
By:
EXHIBIT D
FORM OF LETTER OF REPRESENTATIONS
CITY OF PALM DESERT
COMMUNITY FACILITIES DISTRICT NO. 2021-1 (UNIVERSITY PARK) SPECIAL TAX BONDS, SERIES 2024
LETTER OF REPRESENTATIONS OF [UNIVERSITY PARK INVESTOR, LLC] [AG EHC II TOLL CA 2 LP]
[POS Date]
City of Palm Desert
Community Facilities District No. 2021-1 (University Park) 73510 Fred Waring Drive
Palm Desert, CA 92260
Piper Sandler & Co.
120 Vantis Drive, Suite 330
Aliso Viejo, CA 92656
Ladies and Gentlemen:
Reference is made to the City of Palm Desert Community Facilities District No. 2021-1 (University Park) Special Tax Bonds, Series 2024 (the “Bonds”) and to the Bond Purchase Agreement to be entered into in connection therewith (the “Purchase Agreement”). This Letter of Representations of [University Park Investor, LLC] [AG EHC II Toll CA 2 LP] (the “Letter of Representations”) is delivered pursuant to and in satisfaction of Section 3(E)(15) of the Purchase Agreement. Capitalized terms used herein and not otherwise defined have the meanings ascribed to them in the Purchase Agreement.
The undersigned certifies and represents that he is duly authorized on behalf of [University Park Investor, LLC, a Delaware limited liability company] [AG EHC II Toll CA 2 LP, a California limited partnership] (the “Developer”), to execute and deliver this Letter of Representations in connection with the issuance, sale and delivery by the City of Palm Desert Community Facilities District No. 2021-1 (University Park) (the “Community Facilities District”) of the Bonds. The Bonds are described in the Preliminary Official Statement dated [POS Date] relating to the Bonds (the “Preliminary Official Statement”).
Except as otherwise described in the Preliminary Official Statement, the Developer’s current expectations are that the Developer shall remain the party responsible for the construction of the
D-27
horizontal infrastructure 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.
As used in this Letter of Representations, the term “Actual Knowledge of the Undersigned” means the actual knowledge that the undersigned currently has as of the date of this Letter of Representations or has obtained through (i) interviews with such officers and responsible employees of the Developer as the undersigned has reasonably determined are likely, in the ordinary course of his or her respective duties, to have knowledge of the matters set forth in this Letter of Representations, and (ii) reviews of documents reasonably available to the undersigned and which the undersigned reasonably deemed necessary for the undersigned to execute this Letter of Representations. 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. The undersigned has not contacted any individuals who are no longer employed by, or associated with, the Developer.
As used in this Letter of Representations, the term “Relevant Entity” of the Developer means any entity presently directly or indirectly through one or more intermediaries controlling, controlled by or under common control with the Developer, and about whom information could be material to potential investors in their investment decision regarding the Bonds (including without limitation information relevant to the proposed development of the property owned by the Developer in the Community Facilities District, or to the Developer’s ability to pay the special taxes levied by the Community Facilities District on property owned by the Developer (“Special Taxes”) prior to delinquency).
As used in this Letter of Representations, the term “Property” means the property currently owned by the Developer within the Community Facilities District as described in the Preliminary Official Statement.
The undersigned certifies that he or she is familiar with the facts set forth in this Letter of Representations, and further hereby certifies to the Actual Knowledge of the Undersigned as follows on behalf of the Developer:
(1) The Developer has been duly organized in the [State of Delaware and validly exists in good standing under the laws of the State of California] [State of California] and has or will have prior to the Closing, as required, all requisite corporate right, power and authority:
(i) to execute and deliver this Letter of Representations and [to execute and deliver the Acquisition Agreement and the CVWD JCFA], and, at Closing, the Continuing Disclosure Agreement of the Developer substantially in the form attached as Appendix F to the Preliminary Official Statement, with such additional changes as may be agreed to by the Developer (the “Developer Continuing Disclosure Agreement”),
(ii) to own, develop and sell the Property, as described in the Preliminary Official Statement,
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(iii) to carry on its business as described in the Preliminary Official Statement, and
(iv) to perform its obligations under [the Acquisition Agreement, the CVWD JCFA], and the Developer Continuing Disclosure Agreement. (2) The Developer agrees to execute at Closing the Developer Continuing Disclosure Agreement.
(3) 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 to comply in all material respects with previous continuing disclosure undertakings in a written certificate or agreement executed by it to provide periodic continuing disclosure reports or notices of material events respecting securities offerings in California during Developer's period of ownership of the Property.
(4) To the Actual Knowledge of the Undersigned, the execution and delivery of [the Acquisition Agreement, the CVWD JCFA], or the Developer Continuing Disclosure Agreement, and the performance by the Developer of its obligations under [the Acquisition Agreement, the CVWD JCFA], or the Developer Continuing Disclosure Agreement, 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.
(5) To the Actual Knowledge of the Undersigned, neither the Developer nor any of its Relevant Entities is currently in material default on any loans, lines of credit, agreements, or other contractual or financial obligations, or in breach of any applicable law, regulation, judgment or decree, and no event has occurred and is continuing that would constitute such a default or breach, the result of which could materially adversely affect the ability of the Developer:
(i) to own, develop and sell the Property, as described in the Preliminary Official Statement,
(ii) to pay Special Taxes on the Property (to the extent the responsibility of the Developer) prior to delinquency,
(iii) to carry on its business as described in the Preliminary Official Statement, or
(iv) to perform its obligations under [the Acquisition Agreement, the CVWD JCFA], or the Developer Continuing Disclosure Agreement. (6) Except as disclosed in the Preliminary Official Statement, to the Actual Knowledge of the Undersigned, the Developer has not assumed any obligations under any loans, lines of credit, agreements, or other contractual or financial arrangements, or any applicable judgment or decree, which could materially adversely affect the ability of the Developer:
(i) to own, develop and sell the Property, as described in the Preliminary Official Statement,
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(ii) to pay Special Taxes on the Property (to the extent the responsibility of the Developer) prior to delinquency,
(iii) to carry on its business as described in the Preliminary Official Statement, or
(iv) to perform its obligations under [the Acquisition Agreement, the CVWD JCFA], or the Developer Continuing Disclosure Agreement. (7) Except as described in the Preliminary Official Statement, to the Actual Knowledge of the Undersigned, the Developer has no loans outstanding and unpaid and no lines of credit that are secured by the Property.
(8) To the Actual Knowledge of the Undersigned, the Developer is able to pay its bills as they become due and no legal proceedings are pending against the Developer (with proper service of process having been accomplished) or, to the Actual Knowledge of the Undersigned, threatened in writing in which the Developer may be adjudicated as bankrupt or discharged from any and all of its debts or obligations, or granted an extension of time to pay its debts or obligations, or be allowed to reorganize or readjust its debts, or be subject to control or supervision of the Federal Deposit Insurance Corporation (9) To the Actual Knowledge of the Undersigned, the Developer is able to pay its bills as they become due and no legal proceedings are pending against the Developer (with proper service of process having been accomplished) or to the Actual Knowledge of the Undersigned, threatened in writing in which the Developer may be adjudicated as bankrupt or discharged from any 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 could have a materially adverse impact on the ability of the Developer to develop its Property as described in the Preliminary Official Statement, or to pay the Special Taxes 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. (10) The Developer is not currently in default in, or, during its period of ownership of the Property, has ever defaulted to any material extent in, the payment of special taxes or assessments in connection with the Community Facilities District or any other community facilities districts or assessment districts in California that was not cured prior to the institution of any enforcement action with a court of law.
(11) Except as disclosed in the Preliminary Official Statement, to the Actual Knowledge of the Undersigned, there is no litigation, inquiry, investigation or administrative proceeding of any nature pending against the Developer (with service of process to the Developer having been accomplished), or to the Actual Knowledge of the Undersigned, overtly threatened in writing against the Developer, or to the Actual Knowledge of the Undersigned, pending or overtly threatened in writing against any Relevant Entity of the Developer, in each case which, if successful, could:
(i) materially adversely affect the ability of the Developer to own, develop and sell the Property, as described in the Preliminary Official Statement, (ii) materially adversely affect the ability of the Developer to pay Special Taxes on the Property (to the extent the responsibility of the Developer) prior to delinquency,
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(iii) materially adversely affect the ability of the Developer to carry on its business as described in the Preliminary Official Statement, (iv) materially adversely affect the ability of the Developer to perform its obligations under [the Acquisition Agreement, the CVWD JCFA], or the Developer Continuing Disclosure Agreement,
(v) challenge, question the validity or enforceability of, or restrain or enjoin the performance of, the Special Taxes, the Bonds, the Community Facilities District Resolution of Issuance, the Indenture, the Developer Continuing Disclosure Agreement or the Bond Purchase Agreement, or
(vi) restrain or enjoin collection of Special Taxes or other sums to be pledged to pay the principal of and interest on the Bonds.
(12) Except as disclosed in the Preliminary Official Statement:
(i) to the Actual Knowledge of the Undersigned, the Developer and its Relevant Entities are solvent;
(ii) except as set forth in this paragraph, neither the Developer nor, to the Actual Knowledge of the Undersigned, any of its Relevant Entities, has filed for bankruptcy or been declared bankrupt in the last 10 years; and
(iii) to the Actual Knowledge of the Undersigned, there are no proceedings pending (with service of process to the Developer having been accomplished) or overtly threatened in writing in which the Developer or any of its Relevant Entities may be adjudicated as bankrupt, become the debtor in a bankruptcy proceeding, be discharged from any or all of its respective debts or obligations, be granted an extension of time to pay its respective debts or obligations, or be granted a reorganization or readjustment of its respective debts or obligations.
(13) As of the date hereof, the information in the sections of the Preliminary Official Statement entitled “INTRODUCTION – The District” (paragraphs four and five only) [“PROPERTY OWNERSHIP AND THE DEVELOPMENT” and “CONTINUING DISCLOSURE” (paragraph three only)] [“PROPERTY OWNERSHIP AND THE DEVELOPMENT” and “CONTINUING DISCLOSURE” (paragraph three only)] concerning the Developer and its Relevant Entities, the Property, the Developer’s development and financing plans, and the Developer’s contractual arrangements (but, under all captions, excluding any information cited as coming from a source other than the Developer, and excluding any information regarding any appraisal, any absorption study, and market value ratio and annual special tax ratio, and except that no belief or view is expressed as to (a) any financial statements and other financial, statistical, economic, demographic, or engineering data or forecasts, numbers, charts, tables, graphs, estimates, projections, assumptions, or expressions of opinion, or (b) any information about valuation, appraisals, market absorption, archaeological, or environmental matters) is true and correct in all material respects, and contains no untrue statement of a material fact and does not omit any material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading.