Jones Hall Draft of December 28, 2023
PRELIMINARY OFFICIAL STATEMENT DATED JANUARY ___, 2024
NEW ISSUE-FULL BOOK ENTRY NOT RATED
In the opinion of Jones Hall, A Professional Law Corporation, San Francisco, California, Bond Counsel, subject, however, to certain qualifications described in this Official Statement, under existing law, the interest on the 2024 Bonds is excluded from gross income for federal income tax purposes and such interest is not an item of tax preference for purposes of the federal alternative minimum tax.
Interest on the 2024 Bonds may be subject to the corporate alternative minimum tax. In the further opinion of Bond Counsel, interest on the 2024 Bonds is exempt from State of California personal income tax. See “TAX MATTERS.” $________*
WEST PATTERSON FINANCING AUTHORITY
COMMUNITY FACILITIES DISTRICT NO. 2018-1 (VILLAGES OF PATTERSON)
SPECIAL TAX BONDS
SERIES 2024
Dated: Date of Delivery Due: September 1, as shown on inside cover The bonds captioned above (the “2024 Bonds”) are being issued by the West Patterson Financing Authority (the “Authority”) by and through its Community Facilities District No. 2018-1 (Villages of Patterson) (the “District”). The 2024 Bonds are special tax obligations of the Authority, authorized pursuant to the Mello-Roos Community Facilities Act of 1982, as amended, being California Government Code Section 53311, et seq. (the “Act”), and are issued pursuant to a Fiscal Agent Agreement dated as of October 1, 2021, as supplemented and amended by Supplemental Agreement No. 1 to Fiscal Agent Agreement dated as of February 1, 2024 (together, the “Fiscal Agent Agreement”) by and between the Authority and U.S. Bank Trust Company, National Association, as successor fiscal agent (the “Fiscal Agent”). The 2024 Bonds are being issued to (i) construct and/or acquire certain public facilities authorized to be financed by the District, (ii) increase the amount in a reserve fund, and (iii) pay the costs of issuing the 2024 Bonds. Interest on the 2024 Bonds is payable semiannually on March 1 and September 1 of each year, commencing September 1, 2024.
The 2024 Bonds are being issued as fully registered bonds, registered in the name of Cede & Co., as nominee of The Depository Trust Company (“DTC”), and will be available to ultimate purchasers in the denomination of $5,000 or any integral multiple thereof, under the book-entry system maintained by DTC. See “APPENDIX F – DTC AND THE BOOK-ENTRY SYSTEM.” The 2024 Bonds will be secured on a parity basis with outstanding special tax bonds issued for the District in 2021 in the original amount of $4,465,000 (the “2021 Bonds” and together with the 2024 Bonds and additional parity bonds that may be issued in the future, the “Bonds”).
The 2024 Bonds (together with parity special tax bonds) are secured by and payable from a pledge of Special Tax Revenues (as defined herein) derived from Special Taxes (as defined herein) to be levied by the Authority on real property within the boundaries of the District, from the proceeds of any foreclosure actions brought following a delinquency in the payment of the Special Taxes, and from amounts held in certain funds under the Fiscal Agent Agreement, all as more fully described herein. Unpaid Special Taxes do not constitute a personal indebtedness of the owners of the parcels within the District. In the event of delinquency, proceedings may be conducted only against the parcel of real property securing the delinquent Special Tax. There is no assurance the owners will be able to pay the Special Tax or that they will pay a Special Tax even though financially able to do so. The 2024 Bonds are also secured by amounts in a parity reserve fund established for the Bonds. See “SECURITY FOR THE BONDS.” The District is located in the City of Patterson, in Stanislaus County, California, and is currently being developed for residential uses and includes completed homes. The City lies in the Central Valley of the State, approximately 90 miles southeast of San Francisco and 90 miles south of Sacramento. The City is located on State Route 33, adjacent to U.S. Interstate 5 and approximately 18 miles southwest of Modesto. Special Taxes can only be levied on Developed Property (as defined herein). There are 448 residential parcels (comprising 472 residential units) classified as Developed Property and therefore subject to the Special Tax on the Fiscal Year 2024-25 County tax roll, including 325 residential parcels/units owned by individuals; home construction is ongoing and additional residential units will be subject to the Special Tax in future fiscal years. See “SPECIAL TAX REVENUES AND VALUE OF PROPERTY IN THE DISTRICT.” The District was formed with an adjacent future annexation area and expansion of the District is expected. See “THE DISTRICT” and “OWNERSHIP OF PROPERTY WITHIN THE DISTRICT.”
The 2024 Bonds are subject to optional and mandatory redemption prior to maturity as described herein. See “THE BONDS – Redemption.”
NEITHER THE FAITH AND CREDIT NOR THE TAXING POWER OF THE AUTHORITY, THE CITY OF PATTERSON, THE
COUNTY OF STANISLAUS, THE STATE OF CALIFORNIA OR ANY POLITICAL SUBDIVISION THEREOF IS PLEDGED TO THE PAYMENT OF THE 2024 BONDS. THE 2024 BONDS DO NOT CONSTITUTE A DEBT OF THE AUTHORITY WITHIN THE MEANING OF ANY STATUTORY OR CONSTITUTIONAL DEBT LIMITATION. THE INFORMATION SET FORTH IN THIS OFFICIAL STATEMENT, INCLUDING INFORMATION UNDER THE HEADING “SPECIAL RISK FACTORS,” SHOULD BE READ IN ITS ENTIRETY.
This cover page contains certain information for general reference only. It is not a summary of all of the provisions of the 2024 Bonds. Prospective investors must read the entire Official Statement to obtain information essential to the making of an informed investment decision. See “SPECIAL RISK FACTORS” herein for a discussion of the special risk factors that should be considered, in addition to the other matters and risk factors set forth herein, in evaluating the investment quality of the 2024 Bonds.
The 2024 Bonds are offered when, as and if issued, subject to approval as to their legality by Jones Hall, a Professional Law Corporation, San Francisco, California, Bond Counsel. Certain legal matters will also be passed on for the Authority by Jones Hall, as Disclosure Counsel and by Churchwell White LLP as counsel to the Authority. Certain legal matters will also be passed on for the Underwriter by Kutak Rock LLP, Irvine, California, as counsel to the Underwriter. It is anticipated that the 2024 Bonds will be available for delivery through the facilities of DTC on or about January ___, 2024. [Hilltop logo]
The date of this Official Statement is _______, 2024
_______________________________
* Preliminary, subject to change.
This Preliminary Official Statement and the information contained herein are subject to completion or amendment. These securities may not be sold nor may offers to buy be accepted prior to the time the Official Statement is delivered in final form. Under no circumstances will this Preliminary Official Statement constitute an offer to sell or a solicitation of an offer to buy nor will there be any sale of these securities in any jurisdiction in which such offer solicitation or sale would be unlawful.
MATURITY SCHEDULE
SERIAL BONDS
Maturity Date
(September 1)
Principal
Amount
Interest
Rate
Price or
Yield
CUSIP†
(____)
$ % %
$___________ _______% Term Bond Due September 1, ____ Price: _______% CUSIP†: _______ $___________ _______% Term Bond Due September 1, ____ Price: _______% CUSIP†: _______ ___________________
† CUSIP® is a registered trademark of the American Bankers Association. CUSIP Global Services (CGS) is managed on behalf of the American Bankers Association by FactSet Research Systems Inc. Copyright (c) 2024 CUSIP Global Services.
All rights reserved. CUSIP® data herein is provided by CUSIP Global Services. This data is not intended to create a database and does not serve in any way as a substitute for the CGS database. CUSIP® numbers are provided for convenience of reference only. None of the City, the Underwriter or their agents or counsel take any responsibility for the accuracy of such numbers.
WEST PATTERSON FINANCING AUTHORITY /
CITY OF PATTERSON
(STANISLAUS COUNTY, CALIFORNIA)
Board of Directors / City Council
Michael Clauzel, Chair / Mayor (At Large)
Shivaugn Alves, Board member / Council member (District A) Jessica Romero, Board member / Council member (District B) Dominic Farinha, Board member / Council member (District C) Carlos Roque, Board member / Council member (District D) Authority / City Staff
Ken Irwin, Executive Director / City Manager
Jennifer Riedeman, Treasurer / Finance Director
Aracely Alegre, Secretary / City Clerk
____________________________
SPECIAL SERVICES
Bond and Disclosure Counsel
Jones Hall, A Professional Law Corporation
San Francisco, California
Municipal Advisor
Del Rio Advisors, LLC
Modesto, California
Special Tax Consultant
Goodwin Consulting Group, Inc.
Sacramento, California
Appraiser
Integra Realty Resources
Sacramento, California
Fiscal Agent
U.S. Bank Trust Company, National Association
Los Angeles, California
GENERAL INFORMATION ABOUT THIS OFFICIAL STATEMENT
Deemed Final. The Preliminary Official Statement has been deemed final as of its date by the Authority, in accordance with SEC Rule 15c2-12.
No Offering May Be Made Except by this Official Statement. No dealer, broker, salesperson or other person has been authorized by the Authority or the Underwriter to give any information or to make any representations with respect to the 2024 Bonds other than as contained in this Official Statement, and if given or made, such other information or representation must not be relied upon as having been authorized by the Authority or the Underwriter. This Official Statement does not constitute an offer to sell or the solicitation of an offer to buy in any state in which such offer or solicitation is not authorized or in which the person making such offer or solicitation is not qualified to do so or to any person to whom it is unlawful to make such offer or solicitation.
Effective Date. This Official Statement speaks only as of its date, and the information and expressions of opinion contained in this Official Statement are subject to change without notice. Neither the delivery of this Official Statement nor any sale of the 2024 Bonds will, under any circumstances, create any implication that there has been no change in the affairs of the Authority or property in the District since the date of this Official Statement.
Use of this Official Statement. This Official Statement is submitted in connection with the sale of the 2024 Bonds referred to herein and may not be reproduced or used, in whole or in part, for any other purpose. This Official Statement is not a contract with the purchasers of the 2024 Bonds.
Preparation of this Official Statement. The information contained in this Official Statement has been obtained from sources that are believed to be reliable, but this information is not guaranteed as to accuracy or completeness.
The Underwriter has provided the following sentence for inclusion in this Official Statement: The Underwriter has reviewed the information in this Official Statement in accordance with, and as part of, its responsibilities to investors under the federal securities laws as applied to the facts and circumstances of this transaction, but the Underwriter does not guarantee the accuracy or completeness of such information.
Document References and Summaries. All references to and summaries of the Fiscal Agent Agreement or other documents contained in this Official Statement are subject to the provisions of those documents and do not purport to be complete statements of those documents.
Stabilization of and Changes to Offering Prices. The Underwriter may overallot or take other steps that stabilize or maintain the market price of the 2024 Bonds at a level above that which might otherwise prevail in the open market. If commenced, the Underwriter may discontinue such market stabilization at any time. The Underwriter may offer and sell the 2024 Bonds to certain dealers, dealer banks and banks acting as agent at prices lower than the public offering prices stated on the cover page of this Official Statement, and those public offering prices may be changed from time to time by the Underwriter. 2024 Bonds are Exempt from Securities Laws Registration. The issuance and sale of the 2024 Bonds have not been registered under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, in reliance upon exemptions for the issuance and sale of municipal securities provided under Section 3(a)(2) of the Securities Act of 1933 and Section 3(a)(12) of the Securities Exchange Act of 1934.
Estimates and Projections. Certain statements included or incorporated by reference in this Official Statement constitute “forward-looking statements” within the meaning of the United States Private Securities Litigation Reform Act of 1995, Section 21E of the United States Securities Exchange Act of 1934, as amended, and Section 27A of the United States Securities Act of 1933, as amended. Such statements are generally identifiable by the terminology used such as “plan,” “expect,” “estimate,” “budget” or other similar words.
THE ACHIEVEMENT OF CERTAIN RESULTS OR OTHER EXPECTATIONS CONTAINED IN SUCH FORWARDLOOKING STATEMENTS INVOLVE KNOWN AND UNKNOWN RISKS, UNCERTAINTIES AND OTHER FACTORS WHICH
MAY CAUSE ACTUAL RESULTS, PERFORMANCE OR ACHIEVEMENTS DESCRIBED TO BE MATERIALLY DIFFERENT FROM ANY FUTURE RESULTS, PERFORMANCE OR ACHIEVEMENTS EXPRESSED OR IMPLIED BY SUCH FORWARDLOOKING STATEMENTS. THE AUTHORITY DOES NOT PLAN TO ISSUE ANY UPDATES OR REVISIONS TO THOSE
FORWARD-LOOKING STATEMENTS IF OR WHEN ANY EXPECTATIONS, OR EVENTS, CONDITIONS OR CIRCUMSTANCES ON WHICH SUCH STATEMENTS ARE BASED OCCUR. -iTABLE OF CONTENTS
Page Page
INTRODUCTION................................................1 SOURCES AND USES OF FUNDS ..................5
THE BONDS ......................................................6 Authority for Issuance ....................................6 Description of the 2024 Bonds .......................6
Redemption ....................................................7 Transfer or Exchange of 2024 Bonds ............9
SECURITY FOR THE BONDS ........................10
Limited Obligation.........................................10 Pledge of Special Tax Revenues and Other
Amounts ...................................................10 Special Taxes...............................................11 Special Tax Methodology.............................12
Levy of Annual Special Tax; Maximum
Special Tax ..............................................15 Special Tax Fund .........................................15 Delinquent Payments of Special Tax;
Covenant for Superior Court Foreclosure 16
Parity Reserve Fund ....................................18 Bond Fund....................................................19 Improvement Fund .......................................20 Parity Bonds .................................................20 Discharge of Fiscal Agent Agreement .........22
Amendment of Fiscal Agent Agreement ......23
DEBT SERVICE SCHEDULE ..........................25
THE AUTHORITY ............................................26 THE DISTRICT ................................................26 Location and Description of the District,
Future Annexation Area and Vicinity........26
Development in the District ..........................28 THE IMPROVEMENTS....................................29
Eligible Facilities...........................................29 Anticipated Use of Bond Proceeds ..............29
OWNERSHIP OF PROPERTY WITHIN THE
DISTRICT.....................................................30 Individual Homeowners................................30 KB.................................................................30 K. Hovnanian................................................32 Trivo .............................................................33
SPECIAL TAX REVENUE AND VALUE OF
PROPERTY WITHIN THE DISTRICT..........34
Assessed Valuation......................................34 The Appraisal ...............................................35 Value to Special Tax Burden Ratios ............37
Estimated Maximum Special Tax Proceeds
and Debt Service Coverage.....................41
Overlapping Liens and Priority of Lien .........42
Estimated Tax Burden on Single-Family
Home........................................................44 Special Tax Collections and Delinquencies .45
SPECIAL RISK FACTORS ..............................46
Limited Obligation of the Authority to Pay
Debt Service.............................................46 Concentration of Ownership.........................46
Appraised Values .........................................46 Property Values and Property Development47
Levy and Collection of Special Taxes ..........50
Bankruptcy and Foreclosure Delays ............51
Parity Taxes and Special Assessments;
Private Debt .............................................52 Tax Delinquencies........................................53 No Acceleration Provisions ..........................53 Ballot Initiatives ............................................53 Voter Initiatives.............................................54 Case Law Related to the Mello-Roos Act
Voting .......................................................54 Pandemic Diseases .....................................56 Cyber Security..............................................56
CONSTITUTIONAL LIMITATIONS ON
TAXATION AND APPROPRIATIONS .........57
CONTINUING DISCLOSURE..........................58
UNDERWRITING.............................................58 MUNICIPAL ADVISOR ....................................58 LEGAL OPINION .............................................58 TAX MATTERS................................................59 NO RATINGS...................................................60 NO LITIGATION...............................................60 EXECUTION ....................................................60 APPENDIX A – The City of Patterson and Stanislaus County Demographic Information APPENDIX B – Rate and Method of Apportionment of Special Tax APPENDIX C – The Appraisal
APPENDIX D – Form of Continuing Disclosure Undertakings APPENDIX E – Form of Opinion of Bond Counsel
APPENDIX F – DTC and the Book-Entry System
-1-
OFFICIAL STATEMENT
$________________*
WEST PATTERSON FINANCING AUTHORITY
COMMUNITY FACILITIES DISTRICT NO. 2018-1
(VILLAGES OF PATTERSON)
SPECIAL TAX BONDS
SERIES 2024
This Official Statement, including the cover page and all appendices hereto, is provided to furnish certain information in connection with the issuance by the West Patterson Financing Authority (the “Authority”) by and through its Community Facilities District No. 2018-1 (Villages of Patterson) (the “District”) of the bonds captioned above (the “2024 Bonds”).
Any statements made in this Official Statement involving matters of opinion or of estimates, whether or not so expressly stated, are set forth as such and not as representations of fact, and no representation is made that any of the estimates will be realized. Definitions of certain terms used herein and not defined herein have the meaning set forth in the Fiscal Agent Agreement.
INTRODUCTION
This introduction is not a summary of this Official Statement. It is only a brief description of and guide to, and is qualified by, more complete and detailed information contained in the entire Official Statement, including the cover page and attached appendices, and the documents summarized or described in this Official Statement. A full review should be made of the entire Official Statement. The offering of the 2024 Bonds to potential investors is made only by means of the entire Official Statement.
Authority for Issuance. The 2024 Bonds are issued pursuant to the provisions of the Mello-Roos Community Facilities Act of 1982, as amended (Sections 53311, et seq., of the Government Code of the State of California) (the “Act”) and pursuant to a Fiscal Agent Agreement dated as of October 1, 2021, as supplemented and amended by a Supplemental Agreement No. 1 to Fiscal Agent Agreement dated as of February 1, 2024 (together, the “Fiscal Agent Agreement”) between the Authority and U.S. Bank Trust Company, National Association, as successor fiscal agent (the “Fiscal Agent”) and a resolution adopted by the Board of Directors of the Authority (the “Board”) on January ___, 2024 (the “Resolution of Issuance”), which authorized the issuance of the 2024 Bonds payable from Special Taxes (as defined herein) levied on property within the District according to a methodology approved by the Authority.
The Authority. The Authority is a joint exercise of powers authority organized and existing under and pursuant to the provisions of the California Government Code. The Authority was formed on June 5, 2001, and is a separate legal entity from the City and the District, constituting a public instrumentality of the State located in the County. The Authority is -2-
governed by a five-member Board. The members of the City Council of the City constitute the members of the Board. See “THE AUTHORITY.”
The District. The District is located in the City of Patterson (the “City”), in Stanislaus County (the “County”), California (the “State”) and is currently being developed for residential uses and includes completed homes. The City lies in the Central Valley of the State, approximately 90 miles southeast of San Francisco and 90 miles south of Sacramento. The City is located on State Route 33, adjacent to U.S. Interstate 5 and approximately 18 miles southwest of Modesto. For additional demographic information on the City and County, see “APPENDIX A – The City of Patterson and Stanislaus County Demographic Information.” There are approximately 172 acres in the District developing into residential uses. The Special Tax can only be levied on Developed Property; there is no authority to levy on undeveloped property. “Developed Property” per the Special Tax Formula (described herein) is comprised of taxable parcels in the District for which a building permit for new construction was issued by the City prior to June 1 of the preceding Fiscal Year.
There are 448 residential parcels (comprising 472 residential units) classified as Developed Property and therefore subject to the Special Tax on the Fiscal Year 2024-25 County tax roll, including 325 residential parcels/units owned by individuals; home construction is ongoing and additional residential units will be subject to the Special Tax in future fiscal years.
The following three developers have been active in the District:
• KB Home North Bay LLC, a Delaware limited liability company (“KB”), • K. Hovnanian Homes Northern California, Inc., a California corporation (“K. Hovnanian”), and
• VOP 2.1 LLC, a California limited liability company, which owns taxable property in the District through its affiliate Trivo LLC, a California limited liability company (together, “Trivo”).
The District was formed with an adjacent future annexation area and residential home expansion of the District, both in the undeveloped portion of the District and in the future annexation area, is expected, along with additional bonds secured on parity with the 2024 Bonds. See “THE DISTRICT” and “OWNERSHIP OF PROPERTY WITHIN THE DISTRICT.” Estimated Value of Property in the District. Taxable property in the District is security for the Special Tax. Because the land in the District is under development and includes homes owned by homeowners and on the County tax roll as completed homes, as well as completed homes not on the tax roll and homes under construction, the City determined an estimated value of property in the District by using both the County assessed valuation for the completed homes on the tax roll and additionally ordered an appraisal for an estimation of the value of the remainder of the taxable parcels in the District. The aggregate value estimate for the appraised properties as of the November 1, 2023 date of value, using the methodologies described in the Appraisal and subject to the limiting conditions and special assumptions set forth in the Appraisal, and based on the ownership of the property as of that date, is $69,223,500. When combined with the County assessed valuation of $131,952,427 for parcels in the District which were not appraised, the total estimated value of parcels in the District per the Appraisal is -3-
$201,175,927. This estimate of value is approximately 15.17* times the $13,260,000* aggregate principal amount of the Bonds (consisting of the 2024 Bonds and the 2021 Bonds); there is no overlapping land-secured debt. See “SPECIAL TAX REVENUE AND VALUE OF PROPERTY WITHIN THE DISTRICT.” Also see “APPENDIX C – The Appraisal.” Bond Terms. The 2024 Bonds will be dated as of and bear interest from the date of delivery thereof at the rate or rates set forth on the cover page of this Official Statement.
Interest on the 2024 Bonds is payable on March 1 and September 1 of each year (each an “Interest Payment Date”), commencing September 1, 2024. The 2024 Bonds will be issued without coupons in denominations of $5,000 or any integral multiple thereof.
Registration of Ownership of 2024 Bonds. The 2024 Bonds will be issued only as fully registered bonds in book-entry form, registered in the name of Cede & Co., as nominee of The Depository Trust Company (“DTC”). Ultimate purchasers of 2024 Bonds will not receive physical certificates representing their interest in the 2024 Bonds. So long as the 2024 Bonds are registered in the name of Cede & Co., as nominee of DTC, references herein to the Owners will mean Cede & Co., and will not mean the ultimate purchasers of the 2024 Bonds. Payments of the principal, premium, if any, and interest on the 2024 Bonds will be made directly to DTC, or its nominee, Cede & Co. so long as DTC or Cede & Co. is the registered owner of the 2024 Bonds. Disbursements of such payments to DTC’s Participants is the responsibility of DTC and disbursements of such payments to the Beneficial Owners is the responsibility of DTC’s Participants and Indirect Participants, as more fully described herein.
Use of Proceeds. Proceeds of the 2024 Bonds will primarily be used to finance a portion of the costs of acquiring and constructing certain public infrastructure improvements (the “Improvements”), as further described herein. The Improvements consist generally of school district facilities, as well as City facilities for water, wastewater, drainage, roadway and other infrastructure improvements (including environmental mitigation costs) necessary for development of property within the District. Construction of the backbone infrastructure and in‐ tract work for home development is complete. Additional Improvements will be completed as additional development occurs and additional parcels are annexed into the District and may be financed by additional bonds to be issued in the future, as described below, or other sources.
See “THE IMPROVEMENTS.” Proceeds of the 2024 Bonds will also be used to provide for a deposit to a debt service reserve account for the 2024 Bonds (described below) available for payment on the 2024 Bonds, and to pay cost of the issuance of the 2024 Bonds.
Parity Bonds. The maximum authorized indebtedness for the District is $90,000,000. In 2021, the Authority issued for and on behalf of the District, the West Patterson Financing Authority Community Facilities District No. 2018-1 (Villages of Patterson) Special Tax Bonds, Series 2021 (the “2021 Bonds”), in the initial principal amount of $4,465,000. The 2024 Bonds are the second series of bonds being issued by the District and additional special tax bonds are expected to be issued on a parity basis in the future for additional public infrastructure. So long as the 2024 Bonds are outstanding, any future bonds issued for the District and secured on parity with the 2024 Bonds (herein, “Additional Bonds”) are required to meet certain conditions of issuance as set forth in the Fiscal Agent Agreement and no bonds having a lien senior to the lien of the Bonds are allowed. See “SECURITY FOR THE BONDS – Future Parity Bonds.” _____________
* Preliminary; subject to change.
-4-
Source of Payment of the Bonds. The Bonds (consisting of the 2024 Bonds, the 2021 Bonds and any future Additional Bonds) are payable from and secured by the “Special Tax Revenues,” which is defined as the amount derived from the proceeds of special taxes (“Special Taxes”) received by the Authority, including all scheduled payments and delinquent payments thereof, interest and penalties thereon and proceeds of the redemption or sale of property sold as a result of foreclosure of the lien of the Special Taxes, net of administration charges of the County. The Special Tax can only be levied on Developed Property within the District, there is no authority to levy on undeveloped property. The 2024 Bonds are also payable from amounts held in certain funds and accounts pursuant to the Fiscal Agent Agreement, including a reserve fund, all as more fully described herein. The Special Tax applicable to each taxable parcel in the District will be levied and collected according to the tax liability determined by the Board through the application of a rate and method of apportionment of Special Tax for the District (the “Special Tax Formula”), which has been approved by the Board acting as the legislative body of the District. The Special Taxes represent liens on the parcels of land subject to a Special Tax and failure to pay the Special Taxes could result in proceedings to foreclose the delinquent property. The Special Taxes do not constitute the personal indebtedness of the owners of taxed parcels. See “SECURITY FOR THE BONDS – Special Tax Methodology” and “APPENDIX B – Rate and Method of Apportionment of Special Tax.”
Reserve Fund. Under the Fiscal Agent Agreement, the Fiscal Agent has established a parity Reserve Fund (the “Reserve Fund”) for all series of the Bonds, which will be increased at the time of issuance of the 2024 Bonds to the amount of the Reserve Requirement (defined herein), which amount is available to be transferred to the Bond Fund in the event of delinquencies in the payment of the Special Taxes, to the extent of such delinquencies. The Reserve Fund is required to be maintained at the Reserve Requirement from moneys available under the Fiscal Agent Agreement in order to further secure the payment of principal of and interest on the Bonds. See “SECURITY AND SOURCES OF PAYMENT FOR THE BONDS – Parity Reserve Fund.”
Redemption of Bonds Before Maturity. The 2024 Bonds are subject to optional redemption, mandatory sinking fund redemption and special mandatory redemption from prepaid Special Taxes. See “THE BONDS – Redemption.”
Risks of Investment. See the section of this Official Statement entitled “SPECIAL RISK FACTORS” for a discussion of special factors that should be considered, in addition to the other matters set forth herein, in considering the investment quality of the 2024 Bonds.
Limited Obligation of the Authority. The Authority is not liable (except as specifically set forth in the Fiscal Agent Agreement) and the full faith and credit of the Authority is not pledged for the payment of the interest on, or principal of or redemption premiums, if any, on the 2024 Bonds. The 2024 Bonds are not secured by a legal or equitable pledge of or charge, lien or encumbrance upon any property of the Authority or any of its income or receipts, except the money in certain funds established under the Fiscal Agent Agreement, and neither the payment of the interest on nor principal of or redemption premiums, if any, on the 2024 Bonds is a general debt, liability or obligation of the Authority. The 2024 Bonds do not constitute an indebtedness of the Authority within the meaning of any constitutional or statutory debt limitation or restrictions and neither the Board, the Authority nor any officer or employee thereof are liable for the payment of the interest on or principal of or redemption premiums, if any, on the 2024 Bonds other than from the proceeds of the Special Taxes and the money in certain funds established under the Fiscal Agent Agreement, as provided in the Fiscal Agent Agreement. -5-
Summary of Information. Brief descriptions of certain provisions of the Fiscal Agent Agreement, the 2024 Bonds and certain other documents are included herein. The descriptions and summaries of documents herein do not purport to be comprehensive or definitive, and reference is made to each such document for the complete details of all its respective terms and conditions, copies of which are available for inspection at the office of the Authority. All statements herein with respect to certain rights and remedies are qualified by reference to laws and principles of equity relating to or affecting creditors’ rights generally. Capitalized terms used in this Official Statement and not otherwise defined herein have the meanings ascribed to such terms in the Fiscal Agent Agreement. The information and expressions of opinion herein speak only as of the date of this Official Statement and are subject to change without notice. Neither delivery of this Official Statement, any sale made hereunder, nor any future use of this Official Statement shall, under any circumstances, create any implication that there has been no change in the affairs of the Authority or the District since the date hereof.
Any statements made in this Official Statement involving matters of opinion or of estimates, whether or not so expressly stated, are set forth as such and not as representations of fact, and no representation is made that any of the estimates will be realized.
SOURCES AND USES OF FUNDS
A summary of the estimated sources and uses of funds associated with the sale of the 2024 Bonds follows:
Sources of Funds:
Principal Amount of 2024 Bonds $
Less/Plus [Net] Original Issue Discount/Premium
Total $
Uses of Funds:
Deposit to Improvement Fund $
Deposit to Reserve Fund(1)
Costs of Issuance(2)
Total $
(1) Equals the amount, when added to the existing amount in the Reserve Fund, equals the Reserve Requirement for the Bonds.
(2) Includes fees of bond and disclosure counsel, initial fees, expenses and charges of the Fiscal Agent, costs of printing the Official Statement, administrative fees of the Authority, special tax consultant fees, appraiser fees, Underwriter’s discount, fees of the municipal advisor, and other costs of issuance. -6-
THE BONDS
Authority for Issuance
The 2024 Bonds are issued by the Authority pursuant to the Fiscal Agent Agreement, the Resolution of Issuance, and the Act.
On October 16, 2018, the Board adopted Resolution No. 2018-04 (the “Resolution of Formation”), which formed the District and followed a Resolution of Intention adopted by the Board on September 4, 2018. The District was established and authorized to incur bonded indebtedness in an aggregate principal amount not to exceed $90,000,000 at a special election in the District held on the same day. Under the provisions of the Act, since there were fewer than 12 registered voters residing within the District at a point during the 90-day period preceding the adoption of the Resolution of Formation, the qualified electors entitled to vote in the special election consisted of the various owners of all the taxable land in the District, who cast one vote for each gross acre or portion of an acre of land owned within the District. The landowners voted to incur the indebtedness and to approve the annual levy of Special Taxes to be collected within the District, for the purpose of paying for the Improvements, including repaying any indebtedness of the District and paying the administrative expenses of the District.
Description of the 2024 Bonds
Bond Terms. The 2024 Bonds will be dated as of and bear interest from the date of delivery thereof at the rates and mature in the amounts and years, as set forth on the cover page hereof. The 2024 Bonds are being issued in the denomination of $5,000 or any integral multiple thereof.
Interest on the 2024 Bonds will be payable semiannually on March 1 and September 1 of each year (each an “Interest Payment Date”), commencing September 1, 2024. The principal of the 2024 Bonds and premiums due upon the redemption thereof, if any, will be payable in lawful money of the United States of America at the principal corporate trust office of the Fiscal Agent in Los Angeles, California, or such other place as designated by the Fiscal Agent, upon presentation and surrender of the 2024 Bonds; provided that so long as any 2024 Bonds are in book-entry form, payments with respect to such 2024 Bonds will be made by wire transfer, or such other method acceptable to the Fiscal Agent, to DTC.
Book-Entry Only System. The 2024 Bonds are being issued as fully registered bonds, registered in the name of Cede & Co., as nominee of The Depository Trust Company (“DTC”), and will be available to ultimate purchasers under the book-entry system maintained by DTC.
Ultimate purchasers of 2024 Bonds will not receive physical certificates representing their interest in the 2024 Bonds. So long as the 2024 Bonds are registered in the name of Cede & Co., as nominee of DTC, references herein to the Owners will mean Cede & Co., and will not mean the ultimate purchasers of the 2024 Bonds. The Fiscal Agent will make payments of the principal, premium, if any, and interest on the 2024 Bonds directly to DTC, or its nominee, Cede & Co., so long as DTC or Cede & Co. is the registered owner of the 2024 Bonds.
Disbursements of such payments to DTC’s Participants is the responsibility of DTC and disbursements of such payments to the Beneficial Owners is the responsibility of DTC’s Participants and Indirect Participants, as more fully described herein. See “APPENDIX F – DTC and the Book-Entry System” below.
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Calculation and Payment of Interest. Interest on the 2024 Bonds will be computed on the basis of a 360-day year consisting of twelve 30-day months. Interest on the 2024 Bonds (including the final interest payment upon maturity or earlier redemption) is payable by check of the Fiscal Agent mailed on each Interest Payment Date by first class mail to the registered Owner thereof at such registered Owner’s address as it appears on the registration books maintained by the Fiscal Agent at the close of business on the Record Date preceding the Interest Payment Date, or by wire transfer made on such Interest Payment Date upon written instructions received by the Fiscal Agent on or before the Record Date preceding the Interest Payment Date, of any Owner of $1,000,000 or more in aggregate principal amount of 2024 Bonds; provided that so long as any 2024 Bonds are in book-entry form, payments with respect to such 2024 Bonds will be made by wire transfer, or such other method acceptable to the Fiscal Agent, to DTC. See “APPENDIX F – DTC and the Book-Entry System” below.
Each 2024 Bond will bear interest from the Interest Payment Date next preceding the date of authentication thereof unless (i) it is authenticated on an Interest Payment Date, in which event it will bear interest from such date of authentication, or (ii) it is authenticated prior to an Interest Payment Date and after the close of business on the Record Date preceding such Interest Payment Date, in which event it will bear interest from such Interest Payment Date, or (iii) it is authenticated prior to the Record Date preceding the first Interest Payment Date, in which event it will bear interest from the Dated Date; provided, however, that if at the time of authentication of a 2024 Bond, interest is in default thereon, such 2024 Bond will bear interest from the Interest Payment Date to which interest has previously been paid or made available for payment thereon. So long as the 2024 Bonds are registered in the name of Cede & Co., as nominee of DTC, payments of the principal, premium, if any, and interest on the 2024 Bonds will be made directly to DTC, or its nominee, Cede & Co. Disbursements of such payments to DTC’s Participants is the responsibility of DTC and disbursements of such payments to the Beneficial Owners is the responsibility of DTC’s Participants and Indirect Participants, as more fully described herein. See “APPENDIX F – DTC and the Book-Entry System” below.
Redemption*
Optional Redemption. The 2024 Bonds are subject to optional redemption from any source of available funds prior to maturity, in whole, or in part among maturities as specified by the Authority and by lot within a maturity, on any date on or after September 1, ______, at the following respective redemption prices (expressed as percentages of the principal amount of the 2024 Bonds to be redeemed), plus accrued interest thereon to the date of redemption:
Redemption Dates
Redemption
Price
September 1, _____ through August 31, _____ 103%
September 1, _____ through August 31, _____ 102
September 1, _____ through August 31, _____ 101
September 1, _____ and thereafter 100
Mandatory Redemption From Prepayments. The 2024 Bonds are subject to mandatory redemption from prepayments of the Special Tax by property owners, in whole or in part among maturities as specified by the Authority and by lot within a maturity, on any Interest Payment Date at the following respective redemption prices (expressed as percentages of the ____________
* Preliminary; subject to change.
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principal amount of the 2024 Bonds to be redeemed), plus accrued interest thereon to the date of redemption:
Redemption Dates
Redemption
Price
September 1, 2024 through March 1, _____ 103%
September 1, _____ and March 1, _____ 102
September 1, _____ and March 1, _____ 101
September 1, _____ and Interest Payment Dates thereafter 100 Mandatory Sinking Fund Redemption. The 2024 Bonds maturing September 1, ______ and ______ (the “Term 2024 Bonds”) are subject to mandatory sinking payment redemption in part on September 1, ______ and September 1, _______, respectively, and on each _____1 thereafter to maturity, by lot, at a redemption price equal to 100% of the principal amount thereof to be redeemed, without premium, in the aggregate respective principal amounts as set forth in the following tables:
Term 2024 Bonds of _________
Mandatory
Redemption Date
(September 1)
Sinking Fund
Payment
$
Term 2024 Bonds of _________
Mandatory
Redemption Date
(September 1)
Sinking Fund
Payment
$
The amounts in the foregoing tables will be reduced pro rata, in order to maintain a substantially similar debt service profile, as a result of any prior partial optional redemption or mandatory redemption of the 2024 Bonds.
Purchase In Lieu of Redemption. In lieu of redemption, moneys in the Bond Fund may be used and withdrawn by the Fiscal Agent for purchase of Outstanding 2024 Bonds, upon the filing with the Fiscal Agent of an Officer’s Certificate requesting such purchase, at public or private sale as and when, and at such prices (including brokerage and other charges) as such Officer’s Certificate may provide, but in no event may 2024 Bonds be purchased at a price in excess of the principal amount thereof, plus interest accrued to the date of purchase.
Redemption Procedure by Fiscal Agent. The Fiscal Agent will cause notice of any redemption to be mailed by first class mail, postage prepaid, at least 20 days but not more than 60 days prior to the date fixed for redemption, to the Securities Depositories and to one or more Information Services, and to the respective registered Owners of any 2024 Bonds designated -9-
for redemption, at their addresses appearing on the 2024 Bond registration books in the Principal Office of the Fiscal Agent; but such mailing is not a condition precedent to such redemption and failure to mail or to receive any such notice, or any defect therein, will not affect the validity of the proceedings for the redemption of such 2024 Bonds.
Such notice will state the redemption date and the redemption price and, if less than all of the then Outstanding 2024 Bonds are to be called for redemption, will designate the CUSIP numbers and 2024 Bond numbers of the 2024 Bonds to be redeemed by giving the individual CUSIP number and 2024 Bond number of each 2024 Bond to be redeemed or will state that all 2024 Bonds between two stated 2024 Bond numbers, both inclusive, are to be redeemed or that all of the 2024 Bonds of one or more maturities have been called for redemption, will state as to any 2024 Bond called in part the principal amount thereof to be redeemed, and will require that such 2024 Bonds be then surrendered at the Principal Office of the Fiscal Agent for redemption at the said redemption price, and will state that further interest on such 2024 Bonds will not accrue from and after the redemption date.
Whenever provision is made in the Fiscal Agent Agreement for the optional redemption of less than all of the 2024 Bonds of any maturity, the Fiscal Agent as directed by the Authority will select the 2024 Bonds to be redeemed, from all 2024 Bonds or such given portion thereof of such maturity by lot in any manner which the Authority in its sole discretion deems appropriate.
Upon surrender of 2024 Bonds redeemed in part only, the Authority will execute and the Fiscal Agent will authenticate and deliver to the registered Owner, at the expense of the Authority, a new 2024 Bond or 2024 Bonds, of the same series and maturity, of authorized denominations in aggregate principal amount equal to the unredeemed portion of the 2024 Bond or 2024 Bonds.
Rescission of Notice of Redemption. The Authority has the right to rescind any notice of the optional redemption of 2024 Bonds under the Fiscal Agent Agreement by written notice to the Fiscal Agent on or prior to two Business Days prior the date fixed for redemption. Any notice of redemption will be cancelled and annulled if for any reason funds will not be or are not available on the date fixed for redemption for the payment in full of the 2024 Bonds then called for redemption. Neither the Authority nor the Fiscal Agent will have any liability to the Owners or any other party related to or arising from such rescission of redemption.
Effect of Redemption. From and after the date fixed for redemption, if funds available for the payment of the principal of, and interest and any premium on, the 2024 Bonds so called for redemption are deposited in the Bond Fund, such 2024 Bonds so called will cease to be entitled to any benefit under the Fiscal Agent Agreement other than the right to receive payment of the redemption price, and no interest will accrue thereon on or after the redemption date specified in such notice.
Transfer or Exchange of 2024 Bonds
So long as the 2024 Bonds are registered in the name of Cede & Co., as nominee of DTC, transfers and exchanges of 2024 Bonds will be made in accordance with DTC procedures. See “APPENDIX F – DTC and the Book-Entry System.” Any 2024 Bond may, in accordance with its terms, be transferred or exchanged by the person in whose name it is registered, in person or by his duly authorized attorney, upon surrender of such 2024 Bond for cancellation, accompanied by delivery of a duly written instrument of transfer in a form approved by the Fiscal Agent. Whenever any 2024 Bond or 2024 Bonds are surrendered for transfer or exchange, the Authority will execute and the Fiscal Agent will authenticate and deliver a new 2024 Bond or 2024 Bonds, for a like aggregate principal amount of 2024 Bonds of authorized -10-
denominations and of the same maturity. The cost for any services rendered or any expenses incurred by the Fiscal Agent in connection with any such transfer or exchange will be paid by the Authority. The Fiscal Agent will collect from the Owner requesting such transfer any tax or other governmental charge required to be paid with respect to such transfer or exchange.
No transfers or exchanges of 2024 Bonds will be required to be made (i) within 15 days prior to the date established by the Fiscal Agent for selection of 2024 Bonds for redemption or (ii) with respect to a 2024 Bond after such 2024 Bond has been selected for redemption.
SECURITY FOR THE BONDS
The Bonds (consisting of the 2024 Bonds, 2021 Bonds and any future Additional Bonds) are limited obligations and not general obligations of the Authority, payable solely from the Special Taxes and the funds pledged therefor under the Fiscal Agent Agreement. Neither the faith and credit of the Authority nor of the City, the State or any political subdivision thereof is pledged to the payment of the 2024 Bonds.
Although the Special Tax as described herein is levied against taxable parcels within the District, it does not constitute a personal indebtedness of the owners of property within the District. There is no assurance that the property owners will be financially able to pay the annual Special Tax or that they will pay such tax even if financially able to do so. See “SPECIAL RISK FACTORS.”
THE AUTHORITY HAS NO OBLIGATION TO REPLENISH THE RESERVE FUND AS
DESCRIBED HEREIN EXCEPT FROM SPECIAL TAXES, INCLUDING DELINQUENT SPECIAL TAXES THAT ARE PAID OR COLLECTED FROM FORECLOSURE SALES.
Limited Obligation
The 2024 Bonds are special, limited obligations of the Authority, payable and secured by the Special Tax and certain amounts held in funds under the Fiscal Agent Agreement. The 2024 Bonds do not constitute a charge against the general credit of the Authority, and under no circumstances is the Authority obligated to pay principal of or redemption premiums, if any, or interest on the 2024 Bonds except from the Special Taxes and other moneys pledged thereto under the Fiscal Agent Agreement. Neither the City, the State nor any public agency (other than the Authority) is obligated to pay the principal of or redemption premiums, if any, or interest on the 2024 Bonds, and neither the faith and credit nor the taxing power of the Authority, the City, the State or any public agency thereof is pledged to the payment of the principal of or redemption premiums, if any, or interest on the 2024 Bonds. The payment of the principal of or redemption premiums, if any, or interest on the 2024 Bonds does not constitute a debt, liability or obligation of the Authority, the City, the State or any public agency (other than the Authority, to the limited extent set forth in the Fiscal Agent Agreement).
Pledge of Special Tax Revenues and Other Amounts
All of the Special Tax Revenues and all moneys deposited in the Bond Fund and, until disbursed as provided in the Fiscal Agent Agreement, in the Improvement Fund and the Special Tax Fund are pledged to secure the repayment of the Bonds. Such pledge shall constitute a first lien on the Special Tax Revenues and said amounts. The Special Tax Revenues and all moneys deposited into such funds (except as otherwise provided in the Fiscal Agent -11-
Agreement) are dedicated in their entirety to the payment of the principal of, including any mandatory sinking fund payments, and interest and any premium on, the Bonds as provided in the Fiscal Agent Agreement and in the Act until all of the Bonds have been paid and retired or until moneys or Federal Securities have been set aside irrevocably for that purpose in accordance with the Fiscal Agent Agreement.
The Bonds are also secured by a first pledge of all moneys deposited in the Reserve Fund established for the Bonds under the Fiscal Agent Agreement. See “Parity Reserve Fund” below.
Amounts in a Costs of Issuance Fund created for any Series of Bonds are not pledged to the repayment of any Series of the Bonds. The facilities acquired with the proceeds of the Bonds are not in any way pledged to pay the debt service on the Bonds. Any proceeds of condemnation, destruction or other disposition of any facilities financed with the proceeds of the Bonds are not pledged to pay the debt service on the Bonds and are free and clear of any lien or obligation imposed hereunder.
Special Taxes
The Bonds are payable from and secured by proceeds of the Special Taxes received by the Authority, including all scheduled payments and delinquent payments thereof, interest and penalties thereon and proceeds of the redemption or sale of property sold as a result of foreclosure of the lien of the Special Taxes, less an amount equal to the Administrative Expense Priority, and net of administration charges of the County (the “Special Tax Revenues”). “Administrative Expense Priority” is the amount $26,010 for Fiscal Year 2023-24, and for each subsequent year, an amount equal to the preceding fiscal year’s Administrative Expense Priority plus an additional 2% of such amount.
The Special Tax can only be levied on “Developed Property,” which is defined in the Special Tax Formula as parcels in the District for which a building permit for new construction was issued by the City prior to June 1 of the preceding Fiscal Year.
A Special Tax applicable to each taxable parcel in the District will be levied and collected according to the tax amount determined by the Board of the Authority, acting as the legislative body of the District, through the application of the Special Tax Formula prepared by Goodwin Consulting Group, Inc., Sacramento, California (the “Special Tax Consultant”) and set forth in APPENDIX B hereto for all taxable properties in the District. Prior to remittance of the Special Tax collections to the Authority, the County deducts and retains a County administration fee.
Interest and principal on the Bonds is payable from the annual Special Tax Revenues to be paid to the Authority from Special Tax levies and collections on taxable property within the District, from amounts held in the funds and accounts established under the Fiscal Agent Agreement and from the proceeds, if any, from the sale of such property for delinquency of such Special Taxes.
The Special Taxes are exempt from the property tax limitation of Article XIIIA of the California Constitution, pursuant to Section 4 thereof as a “special tax” authorized by a twothirds vote of the qualified electors. The levy of the Special Taxes was authorized by the Authority pursuant to the Act in an amount determined according to the Special Tax Formula approved by the Authority. See “–Special Tax Methodology” below and “APPENDIX B – Rate and Method of Apportionment of Special Tax.”
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All of the Special Tax Revenues and all moneys deposited in the Bond Fund, the Reserve Fund and, until disbursed as provided in the Fiscal Agent Agreement, in the Improvement Fund and the Special Tax Fund are pledged to secure the repayment of the Bonds. Such pledge will constitute a first lien on the Special Tax Revenues and said amounts.
The Special Tax Revenues and all moneys deposited into the such funds (except as otherwise provided in the Fiscal Agent Agreement) are dedicated to the payment of the principal of, including any mandatory sinking fund payments, and interest and any premium on, the Bonds as provided in the Fiscal Agent Agreement and in the Act until all of the Bonds have been paid and retired or defeased in accordance with the Fiscal Agent Agreement.
The amount of Special Taxes that the District may levy in any year, and from which principal and interest on the Bonds is to be paid, is strictly limited by the maximum rates approved by the qualified electors within the District which are set forth as the annual “Maximum Special Tax” in the Special Tax Formula. Under the Special Tax Formula, Special Taxes for the purpose of making payments on the Bonds will be levied annually in an amount not in excess of the Maximum Special Tax. The Special Taxes and any interest earned on the Special Taxes constitute a trust fund for the principal of and interest on the Bonds pursuant to the Fiscal Agent Agreement and, so long as the principal of and interest on the Bonds remains unpaid, the Special Taxes and investment earnings thereon will not be used for any other purpose, except as permitted by the Fiscal Agent Agreement, and will be held in trust for the benefit of the Owners thereof and will be applied pursuant to the Fiscal Agent Agreement. The Special Tax Formula apportions the Special Tax Requirement (as defined below) among the Developed Property within the District according to the rate and methodology set forth in the Special Tax Formula. See “– Special Tax Methodology,” below.
The Authority will levy the Special Taxes in an amount at least sufficient to pay the Special Tax Requirement (as defined below). Because each Special Tax levy is limited to the Maximum Special Tax rates authorized as set forth in the Special Tax Formula, no assurance can be given that, in the event of Special Tax delinquencies, an amount equal to the Special Tax Requirement will in fact be collected in any given year. See “SPECIAL RISK FACTORS – Tax Delinquencies.”
Amounts in the Costs of Issuance Fund are not pledged to the repayment of the Bonds.
The facilities acquired with the proceeds of the Bonds are not in any way pledged to pay the debt service on the Bonds. Any proceeds of condemnation, destruction or other disposition of any facilities financed with the proceeds of the Bonds are not pledged to pay the debt service on the Bonds and are free and clear of any lien or obligation imposed under the Fiscal Agent Agreement.
Special Tax Methodology
The Special Tax authorized under the Act applicable to land within the District will be levied and collected according to the tax liability determined by the Authority through the application of the appropriate amount or rate as described in the Special Tax Formula.
Capitalized terms set forth in this section and not otherwise defined have the meanings set forth in the Special Tax Formula. See “APPENDIX B – Rate and Method of Apportionment of Special Tax” for a copy of the Special Tax Formula, as supplemented.
Only Developed Property is Subject to the Special Tax. The Special Tax can only be levied only on Developed Property, there is no authority to levy on undeveloped property. As noted above, Developed Property is comprised of taxable parcels in the District for which a -13-
building permit for new construction was issued by the City prior to June 1 of the preceding Fiscal Year. The Special Tax will be levied, up to 100% of the Maximum Special Tax assigned to each Parcel, until the amount levied is equal to the Special Tax Requirement.
Determination of Special Tax Requirement. Each year, the Authority will determine the Special Tax Requirement of the District for the upcoming Fiscal Year. The “Special Tax Requirement” includes the following items:
(i) debt service on the bonds issued for the District;
(ii) administrative expenses and County fees;
(iii) any amounts needed to replenish bond reserve funds and to pay for Bond delinquencies in the previous Fiscal Year; and
(iv) pay-as-you-go expenditures for authorized improvements.
The Special Tax Requirement is the basis for the amount of Special Tax to be levied within the District. In no event may the Authority levy a Special Tax in any year above the Maximum Special Tax identified for each parcel set forth in the Special Tax Formula.
The Special Tax Formula designates an initial Tax Zone within the District, consisting of all land in the District at the time of formation. Additional Tax Zones may be created when property is annexed to the District, and separate Maximum Special Taxes will be identified for property within the new Tax Zone at the time of annexation. The Assessor’s Parcels included within a new Tax Zone established when such Parcels are annexed to the CFD will be identified by Assessor’s Parcel Number in the Unanimous Approval Form that is signed by the owner(s) of the Parcels at the time of annexation. Each Fiscal Year, the Administrator will identify the current Assessor’s Parcel number for all Parcels of Taxable Property within the District and determine within which Tax Zone each Assessor’s Parcel is located. Upon each annexation of property into the District, the Administrator will update “Attachment 1” to the Special Tax Formula to include the new Assessor’s Parcels number(s). No Special Tax will be levied on Public Property, except as otherwise provided in Sections 53317.3 and 53317.5 of the Act. “Public Property” means any property within the boundaries of the District that is owned by or irrevocably offered for dedication to the federal government, State of California or other local governments or public agencies. See “APPENDIX B – Rate and Method of Apportionment of Special Tax,” for identification of the tax zones set forth in the Special Tax Formula.
Maximum Special Tax Rates. The base year Maximum Special Tax rates were set for Fiscal Year 2017-18. Beginning July 1, 2018 and each July 1 thereafter, all of the Maximum Special Taxes increases by 2% of the amount in effect for the prior Fiscal Year. -14-
The Maximum Special Tax applicable to the Developed Property is established in the Special Tax Formula for Fiscal Year 2022-23 as follows:
West Patterson Financing Authority
Community Facilities District No. 2018-1 (Villages of Patterson) Maximum Special Tax for Fiscal Year 2024-25
Land Use
Class
Maximum Special Tax
Fiscal Year 2024-25(1)
Single Family Detached Property $1,889.58 per Unit
Single Family Attached Property $1,137.20 per Unit
Multi-Family Lower Density Property $804.08 per Unit
Multi-Family Higher Density Property $620.30 per Unit
Affordable Single Family Property $557.12 per Unit
Affordable Multi-Family Property $367.58 per Unit
Non-Residential Property $3,446.06 per Net Acre
(1) On each July 1, all of the Maximum Special Tax shown in the table increases by an amount equal to 2% of the amount in effect for the prior fiscal year.
Source: Goodwin Consulting Group, Inc.
Limitation on Increases in Special Tax Levy. If owners are delinquent in the payment of Special Taxes, the Authority may not increase Special Tax levies to make up for delinquencies for prior Fiscal Years above the Maximum Special Tax rates specified for each category of property within the District. In addition, Section 53321(d) of the Act provides that the special tax levied against any parcel for which an occupancy permit for private residential use has been issued may not be increased as a consequence of delinquency or default by the owner of any other parcel within a community facilities district by more than 10% above the amount that would have been levied in such Fiscal Year had there never been any such delinquencies or defaults. In cases of significant delinquency, these limitations may result in defaults in the payment of principal of and interest on the Bonds. See “SPECIAL RISK FACTORS.”
Manner of Collection. The Special Taxes are collected for the Authority by the County in the same manner and at the same time as ad valorem property taxes. However, the Authority may directly bill the Special Tax, may collection Special Taxes at a different time or in a different manner, and may collection delinquent Special Taxes through foreclosure or other available methods.
Prepayment of the Special Tax. The Special Tax obligation applicable to an Assessor’s Parcel in the District may be prepaid and the obligation of the Assessor’s Parcel to pay the Special Tax permanently satisfied, in full or in part, under the conditions described in the Special Tax Formula, provided that a prepayment may be made only if there are no delinquent Special Taxes with respect to such Assessor’s Parcel at the time of prepayment. The Prepayment Amount is generally calculated based on the Bond Redemption Amount plus the Remaining Facilities Amount, Redemption Premium, Defeasance Requirement and other fees and expenses, all as specified in APPENDIX B.
Two multifamily parcels (APNs 047-059-011 and 047-059-012) improved with 138 completed units have prepaid the Special Taxes and are therefore not included in District information contained in this Official Statement.
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Termination of the Special Tax. The Special Tax will be levied and collected until principal and interest on Bonds have been repaid and authorized facilities to be constructed directly from Special Tax proceeds have been completed, however in no event shall Special Taxes be levied after Fiscal Year 2071-72.
Levy of Annual Special Tax; Maximum Special Tax
The annual Special Tax will be calculated by the Authority and levied to provide money for debt service on the Bonds, replenishment of the Reserve Fund, certain delinquencies, administration of the District, and for payment of pay-as-you-go expenditures (to the extent permitted by the Authority) of the authorized District-funded facilities not funded from Bond proceeds. In no event may the Authority levy a Special Tax in any year above the Maximum Special Tax identified for each parcel as set forth in the Special Tax Formula.
Each Fiscal Year prior to the sale of Bonds, the Maximum Special Tax is levied on all Parcels of Developed Property within the District. Each Fiscal Year after Bonds have been sold, the Administrator will determine the Special Tax Requirement, and the Special Tax will be levied Proportionately on each Parcel of Developed Property up to 100% of the Maximum Special Tax assigned to each Parcel of Developed Property until the amount levied is equal to the Special Tax Requirement. See “APPENDIX B – Rate and Method of Apportionment of Special Tax.” The Special Tax Formula provides that the Maximum Special Tax may be increased by 2% in each Fiscal Year. See “– Special Tax Methodology – Maximum Special Tax Rates” above. The Authority has covenanted in the Fiscal Agent Agreement to apply the 2% increase in each Fiscal Year.
The Authority has also covenanted in the Fiscal Agent Agreement to fix and levy the amount of Special Taxes within the District required for the payment of principal of and interest on any outstanding Bonds of the District becoming due and payable during the ensuing year, including any necessary replenishment or expenditure of the amounts within the Reserve Fund and an amount estimated to be sufficient to pay the Administrative Expenses during such year, all in accordance with the Special Tax Formula. The Special Tax is authorized to be levied in an amount not to exceed the Maximum Special Tax levy as described in the Special Tax Formula notwithstanding that a lower amount is sufficient to pay debt service on the Bonds. See “APPENDIX B – Rate and Method of Apportionment of Special Tax” for a copy of the Special Tax Formula.
The Special Tax Formula provides a mechanism whereby the Authority may utilize the pay-as-you-go component to pay for a portion of the cost of Improvements not funded by proceeds of the bonds issued for the District. In the event the pay-as-you-go component is utilized, proceeds of the annual Special Tax levy will first be used to pay the Special Tax Requirement (which include debt service payments on the Bonds) other than pay-as-you-go expenditures. See “THE IMPROVEMENTS” and “SPECIAL TAX REVENUE AND VALUE OF PROPERTY WITHIN THE DISTRICT.”
Special Tax Fund
When received, the Special Tax Revenues are required under the Fiscal Agent Agreement to be deposited into a Special Tax Fund to be held by the Treasurer in trust for the benefit of the Authority and the Owners of the Bonds. Within the Special Tax Fund, the Authority will establish and maintain a Prepayment Account and a Surplus Account, to the credit of which the Authority will respectively deposit prepayments of Special Taxes and -16-
surplus Special Tax Revenue, if any, as described below. Moneys in the Special Tax Fund will be disbursed as provided below and, pending any disbursement, will be subject to a lien in favor of the Owners of the Bonds.
As soon as practicable after the receipt by the Authority of any Special Tax Revenues, other than from prepayments of Special Taxes, or the transfer of amounts to the Special Tax Fund pursuant to the terms of the Fiscal Agent Agreement, but no later than ten Business Days after such receipt or transfer, the Treasurer shall withdraw from the Special Tax Fund and transfer to the Fiscal Agent:
(i) for deposit in the Bond Fund, an amount, taking into account any amounts then on deposit in the Bond Fund, such that the amount in the Bond Fund equals the principal, premium, if any, and interest due on the Bonds during the thencurrent Bond Year; and (ii) for deposit in the Reserve Fund, an amount, taking into account amounts then on deposit in the Reserve Fund, so that the amount in the Reserve Fund equals the Reserve Requirement.
At such time as deposits to the Special Tax Fund other than from prepayment of Special Taxes equal the principal, premium if any, and interest becoming due on the Bonds for the current Bond Year and the amount needed to restore the Reserve Fund balance to the Reserve Requirement, the amount in the Special Tax Fund in excess of such amount shall be transferred by the Authority, on or after September 2nd of each year, to the Surplus Account and such moneys transferred shall be free of the pledge for payment of the Bonds.
Prepayment Account. As soon as practicable after the receipt by the Authority of any Special Tax Revenues derived from prepayments of the Special Tax, the Authority shall, from the money in the Special Tax Fund constituting such prepayments, deposit in the Prepayment Account the amount of money constituting such prepayments, and all money in the Prepayment Account shall be used and withdrawn by the Authority for deposit in the Bond Fund to implement a mandatory redemption of Bonds.
Surplus Account. From time to time, the Authority may withdraw from the Surplus Account of the Special Tax Fund amounts needed to pay Administrative Expenses in excess of the Administrative Expense Priority, costs of the acquisition and construction of Facilities, or any other District costs authorized under the Act. Moneys in the Surplus Account may, at the Authority’s discretion, also be used to pay the principal of, premium, if any, and interest on the Bonds or to replenish the Reserve Fund to the amount of the Reserve Requirement.
Delinquent Payments of Special Tax; Covenant for Superior Court Foreclosure The Special Tax will be collected in the same manner and the same time as ad valorem property taxes, except at the Authority’s option, the Special Taxes may be billed directly to property owners or collected at a different time to meet the Authority’s financial obligations. In the event of a delinquency in the payment of any installment of Special Taxes, the Authority is authorized by the Act to order institution of an action in superior court to foreclose the lien therefor.
The Authority has covenanted in the Fiscal Agent Agreement with and for the benefit of the Owners of the Bonds that it will annually on or before September 1 of each year review the -17-
public records of the County relating to the collection of the Special Tax in order to determine the amount of the Special Tax collected in the prior Fiscal Year, and if the Authority determines on the basis of such review that the amount so collected is deficient by more than 5% of the total amount of the Special Tax levied in such Fiscal Year, it will within 30 days thereafter institute foreclosure proceedings as authorized by the Act in order to enforce the lien of the delinquent installment of the Special Tax against each separate lot or parcel of land in the District for which such installment of the Special Tax is delinquent, and will diligently prosecute and pursue such foreclosure proceedings to judgment and sale; provided, that if the Authority determines on the basis of such review that the amount so collected is (i) deficient by less than 5% of the total amount of the Special Tax levied in the District in such Fiscal Year, but that property owned by any single property owner in the District is delinquent by more than $5,000 with respect to the Special Tax due and payable by such property owner in such Fiscal Year, or (ii) as to any property owned by any single property owner in the District, delinquent cumulatively by more than $3,000 with respect to the current and past Special Tax due (irrespective of the total delinquencies in the District), then the Authority will institute, prosecute and pursue such foreclosure proceedings in the time and manner provided in the Fiscal Agent Agreement against each such property owner.
Under the Act, foreclosure proceedings are instituted by the bringing of an action in the superior court of the county in which the parcel lies, naming the owner and other interested persons as defendants. The action is prosecuted in the same manner as other civil actions. In such action, the real property subject to the special taxes may be sold at a judicial foreclosure sale for a minimum price, which will be sufficient to pay or reimburse the delinquent special taxes.
The owners of the Bonds benefit from the Reserve Fund established pursuant to the Fiscal Agent Agreement; however, if delinquencies in the payment of the Special Taxes with respect to the Bonds are significant enough to completely deplete the amounts in the reserve accounts in the Reserve Fund, there could be a default or a delay in payments of principal and interest to the owners of the Bonds pending prosecution of foreclosure proceedings and receipt by the Authority of the proceeds of foreclosure sales. Provided that it is not levying the Special Tax at the Maximum Special Tax rates set forth in the Special Tax Formula, the Authority may adjust (but not to exceed the Maximum Special Tax and subject to the limitation described under the caption “–Special Tax Methodology – Limitation on Increases in Special Tax Levy” above) the Special Taxes levied on all property within the District subject to the Special Tax to provide an amount required to pay debt service on the Bonds and to replenish the reserve accounts in the Reserve Fund.
Under current law, a judgment debtor (property owner) has at least 120 days from the date of service of the notice of levy in which to redeem the property to be sold. If a judgment debtor fails to redeem and the property is sold, his or her only remedy is an action to set aside the sale, which must be brought within 90 days of the date of sale. If, as a result of such an action a foreclosure sale is set aside, the judgment is revived and the judgment creditor is entitled to interest on the revived judgment as if the sale had not been made (California Code of Civil Procedure Section 701.680).
Foreclosure by court action is subject to normal litigation delays, the nature and extent of which are largely dependent upon the nature of the defense, if any, put forth by the debtor and the condition of the calendar of the superior court of the county. Such foreclosure actions can be stayed by the superior court on generally accepted equitable grounds or as the result of the debtor’s filing for relief under the Federal bankruptcy laws. The Act provides that, upon -18-
foreclosure, the Special Tax lien will have the same lien priority as is provided for ad valorem taxes and special assessments. See “SPECIAL TAX REVENUE AND VALUE OF PROPERTY WITHIN THE DISTRICT – Overlapping Liens and Priority of Lien.” No assurances can be given that the real property subject to a judicial foreclosure sale will be sold or, if sold, that the proceeds of sale will be sufficient to pay any delinquent Special Tax installment. The Act does not require the District to purchase or otherwise acquire any lot or parcel of property foreclosed upon if there is no other purchaser at such sale.
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 postjudgment interest and authorized costs, unless the consent of the owners of 75% of the outstanding Bonds is obtained. However, under Section 53356.6 of the Act, the District, as judgment creditor, is entitled to purchase any property sold at foreclosure using a “credit bid,” where the District could submit a bid crediting all or part of the amount required to satisfy the judgment for the delinquent amount of the Special Tax. If the District becomes the purchaser under a credit bid, the District must pay the amount of its credit bid into the redemption fund established for the Bonds, but this payment may be made up to 24 months after the date of the foreclosure sale.
Parity Reserve Fund
In order to further secure the payment of principal of and interest on the Bonds, a Reserve Fund (the “Reserve Fund”) was established and is held by the Fiscal Agent pursuant to the Fiscal Agent Agreement. The amount on deposit in the Reserve Fund will be increased from proceeds of the 2024 Bonds to the amount of the “Reserve Requirement” for the outstanding Bonds, which as of any date of calculation is an amount equal to the least of (i) Maximum Annual Debt Service (as defined in the Fiscal Agent Agreement) on the Bonds, (ii) 125% of average Annual Debt Service (as defined in the Fiscal Agent Agreement) as of the date of issuance of the Bonds, or (iii) 10% of the initial offering price to the public of the Bonds.
Separate reserve accounts for each series of Bonds are established within the Reserve Fund for accounting purposes.
All amounts deposited in the Reserve Fund will be used and withdrawn by the Fiscal Agent solely for the purpose of making transfers to the Bond Fund in the event of any deficiency at any time in the Bond Fund of the amount then required for payment of the principal of, and interest on, the Bonds. Whenever transfer is made from a Reserve Account in the Reserve Fund to the Bond Fund due to a deficiency in the Bond Fund, the Fiscal Agent will provide written notice thereof to the Authority.
Whenever, on the Business Day prior to any Interest Payment Date, the amount in the Reserve Fund exceeds the then applicable Reserve Requirement, the Fiscal Agent will provide notice to the Authority of the amount of the excess. The Authority will advise the Fiscal Agent of the amount, if any, of any transfer required to be made under the Fiscal Agent Agreement, and otherwise direct the Fiscal Agent to transfer an amount equal to the excess from the Reserve Fund to the Improvement Fund, if the Improvements have not been completed as of the date of such transfer, or if the Improvements have been completed, to the Bond Fund to be used for the payment of the principal of and interest on the 2024 Bonds in accordance with the Fiscal Agent Agreement. However, to the extent that such excess results from the prepayment of Special Taxes and redemption of 2024 Bonds in accordance with the Fiscal Agent Agreement, such -19-
amount will be transferred to the Prepayment Account and applied to the corresponding redemption of 2024 Bonds.
Investment earnings on amounts in the reserve accounts in the Reserve Fund may be withdrawn therefrom for purposes of making payment to the federal government to comply with the rebate provisions of the Fiscal Agent Agreement.
Whenever the balance in a reserve account in the Reserve Fund exceeds the amount required to redeem or pay the outstanding bonds, including interest accrued to the date of payment or redemption and premium, if any, due upon redemption, and make any other transfer required under the Fiscal Agent Agreement, the Fiscal Agent will transfer the amount therein to the Bond Fund to be applied, on the next succeeding Interest Payment Date, to the payment and redemption of all of the outstanding bonds of the series of bonds to which the excess relates. If the amount so transferred from a reserve account in the Reserve Fund to the Bond Fund exceeds the amount required to pay and redeem the outstanding bonds of such series, the balance therein will be transferred to the Authority, after payment of any amounts due the Fiscal Agent, to be used for any lawful purpose of the Authority.
Moneys in the reserve accounts in the Reserve Fund will be invested and deposited in accordance with the Fiscal Agent Agreement and investment income thereon will be subject to rebate requirements under applicable tax laws.
Bond Fund
A Bond Fund (the “Bond Fund”) for the Bonds will be established under the Fiscal Agent Agreement, to be held by the Fiscal Agent. Moneys in the Bond Fund will be held in trust by the Fiscal Agent for the benefit of the Owners of the Bonds, will be disbursed for the payment of the principal of, and interest and any premium on, the Bonds as provided in the Fiscal Agent Agreement, and, pending such disbursement, will be subject to a lien in favor of the Owners of the Bonds.
Within the Bond Fund there will be established the “Prepayment Account,” which will be used exclusively for the administration of any prepayments of Special Taxes to assure the timely redemption of Bonds. Monies in the Prepayment Account will be used to redeem Bonds on the redemption date specified in the notice to the Fiscal Agent given pursuant to the Fiscal Agent Agreement. In the event all of the Special Taxes are prepaid in full, the Prepayment Account will be closed.
On each Interest Payment Date, the Fiscal Agent will withdraw from the Bond Fund and pay to the Owners of the Bonds the principal of, and interest and any premium, then due and payable on the Bonds, including any amounts due on the Bonds by reason of the sinking payments or any optional redemption of the Bonds.
If amounts in the Bond Fund are insufficient to pay regularly scheduled payments of principal of and interest on any series of bonds, the Fiscal Agent shall withdraw from the Reserve Fund established for such series of bonds to the extent of any funds therein, the amount of such insufficiency, and the Fiscal Agent will provide written notice to the Authority of the amounts so withdrawn from the Reserve Fund. Amounts so withdrawn from the Reserve Fund will be deposited in the Bond Fund.
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If, after the foregoing transfer, there are insufficient funds in the Bond Fund to make the payments provided for to pay regularly scheduled payments of principal of and interest on the Bonds, the Fiscal Agent will apply the available funds:
(i) first to the payment of interest on the Bonds,
(ii) then to the payment of principal due on the Bonds other than by reason of sinking payments, and
(iii) then to payment of principal due on the Bonds by reason of sinking payments.
Any sinking payment not made as scheduled will be added to the sinking payment to be made on the next sinking payment date.
Moneys in the Bond Fund shall be invested and deposited in accordance with the Agreement. If ten days before any Interest Payment Date it appears to the Fiscal Agent that there is a danger of deficiency in the Bond Fund and that the Fiscal Agent may be unable to pay regularly scheduled debt service on the Bonds in a timely manner, the Fiscal Agent will report to the Authority such fact. The Authority covenants to increase the levy of the Special Taxes in the next Fiscal Year (subject to the maximum amount authorized by the Resolution of Formation and set forth in the Special Tax Formula) in accordance with the procedures set forth in the Act for the purpose of curing Bond Fund deficiencies.
Improvement Fund
Under the Fiscal Agent Agreement, there is established an Improvement Fund, which is to be held in trust by the Fiscal Agent and will be disbursed as provided in the Fiscal Agent Agreement for the payment or reimbursement of the costs of the construction and acquisition of the Improvements. Interest earnings from the investment of amounts in the Improvement Fund will be retained in the Improvement Fund to be used for the purposes of the Improvement Fund.
Prior to disbursement, amounts on deposit in the Improvement Fund will be subject to a lien in favor of the Owners of the Bonds.
Disbursements from the Improvement Fund will be made by the Fiscal Agent upon receipt of a certificate from the Authority substantially in the form attached to the Fiscal Agent Agreement, which will (i) set forth the amount required to be disbursed, the purpose for which the disbursement is to be made, the person to which the disbursement is to be paid and state that such disbursement is for a reimbursable cost; and (ii) certify that no portion of the amount then being requested to be disbursed was set forth in any certificate previously filed requesting disbursement.
Upon completion of the Improvements, the Fiscal Agent will transfer the amount, if any, remaining in the Improvement Fund to the Bond Fund for application to the payment of principal of and interest on the Bonds in accordance with the Fiscal Agent Agreement, and the Improvement Fund will be closed. See “THE IMPROVEMENTS.” Parity Bonds
The Resolution of Formation authorizes the issuance of up to $90,000,000 of bonds, of which the 2021 Bonds represented the first series and the 2024 Bonds represent the second -21-
series. The Authority expects that it will, by a Supplemental Agreement to the Fiscal Agent Agreement, authorize the issuance of one or more additional series of bonds payable from Special Taxes and secured by the Special Taxes on a parity with the 2021 Bonds and 2024 Bonds (“Additional Bonds”), as development progresses in the District and upon compliance by the Authority with the conditions set forth in the Fiscal Agent Agreement, which include the following:
(i) No default in the Bonds will have occurred and then be continuing; (ii) The Supplemental Agreement providing for the issuance of the Additional Bonds will specify the purpose for which such Additional Bonds are being issued, which will be to provide moneys needed to construct and acquire the facilities, by depositing into the Improvement Fund the proceeds of such Additional Bonds to be so applied, or to refund all or part of the Bonds or Additional Bonds then outstanding, by depositing in trust with the Fiscal Agent, moneys or Federal Securities in the amount necessary to discharge all liability of the Authority with respect to the bonds to be refunded as provided in the Fiscal Agent Agreement;
(iii) The Supplemental Agreement providing for the issuance of the Additional Bonds will also require that there be deposited into a subaccount in the Reserve Fund, or into a separate parity reserve fund, forthwith upon the receipt of the proceeds of the sale of such series, an amount at least equal to the reserve requirement with respect to the outstanding Additional Bonds of the series to which it relates, which deposit may be made from the proceeds of the sale of such series or by the Authority or from both such sources, as provided in the Supplemental Agreement;
(iv) The Additional Bonds of such series will be payable as to principal on September 1 in each year in which principal becomes due, and will be payable as to interest semiannually on March 1 and September 1, except that the first installment of interest may be payable on either March 1 or September 1; (v) Fixed serial maturities or sinking fund payments, or any combination thereof, will be established in amounts sufficient to provide for the retirement of all of the Additional Bonds of such series on or before their respective maturity dates; (vi) After giving effect to the issuance of such series of Additional Bonds:
(a) For each Bond Year, projected Maximum Special Taxes (net of County administration charges) in each Fiscal Year are equal to or greater than one hundred ten percent (110%) of maximum Debt Service due in the Bond Year that begins in the corresponding Fiscal Year; and
(b) The aggregate value of all parcels in the District subject to the Special Tax and not delinquent in the payment of any Special Taxes then due and owing, including then existing improvements and any facilities to be constructed or acquired with the proceeds of the proposed series of Bonds, as determined by an MAI appraisal or, in the alternative, the assessed value of all such parcels and improvements thereon (and improvements to be financed from proceeds of the Bonds proposed to be issued) as shown on the then current County tax roll, or by a combination of both methods is at least 4.00 times the sum of (1) the aggregate principal amount of all Bonds then outstanding plus -22-
(2) the aggregate principal amount of the series of Bonds proposed to be issued, plus (3) the aggregate principal amount of any bonds then outstanding and payable from assessments which are a lien against property in the District, plus (4) a portion of the aggregate principal amount of all Mello-Roos bonds, other than Bonds then outstanding, and payable at least partially from special taxes to be levied on parcels of land subject to the Special Tax within the District (the “Other Mello-Roos Bonds”) equal to the aggregate principal amount of the Other Mello-Roos Bonds multiplied by a fraction, the numerator of which is the amount of special taxes levied for the Other Mello-Roos Bonds on parcels of land within the District subject to the Special Tax and not delinquent in the payment of any Special Taxes then due and owing, and the denominator of which is the total amount of special taxes levied for the Other Mello-Roos Bonds on all parcels of land subject to the Special Tax against which the special taxes are levied to pay the Other Mello-Roos Bonds and not delinquent in the payment of any Special Taxes then due and owing (such fraction to be determined based upon the special taxes which could be levied the year in which maximum annual debt service on the Other Mello-Roos Bonds occurs), based upon information from the most recent available fiscal year.
Notwithstanding the foregoing, if a developer or developers of property in the District deposit with the Fiscal Agent cash or a letter of credit from a reputable bank which is acceptable to the Authority, in an amount (the “Letter of Credit Amount”) equal to the shortfall in the valuation of the property in the District to meet the value-to-lien requirement set forth in the preceding paragraph, the Letter of Credit Amount will be excluded from the debt computation under the foregoing clause (vi)(b). Any such letter of credit deposited with the Fiscal Agent will remain in effect, and the Letter of Credit Amount will not be reduced or the letter of credit thereafter terminated, until satisfaction of the foregoing clause (vi)(b) with respect to the amount by which the letter of credit is proposed to be reduced, or with respect to the Letter of Credit Amount in connection with the proposed termination of the letter of credit.
Nothing in the Fiscal Agent Agreement will prevent or be construed to prevent the Supplemental Agreement providing for the issuance of Additional Bonds from pledging or otherwise providing, in addition to the security given or intended to be given by the Fiscal Agent Agreement, additional security for the benefit of such Additional Bonds or any portion thereof.
Discharge of Fiscal Agent Agreement
Under the Fiscal Agent Agreement, if the Authority pays and discharges the entire indebtedness on all or any portion of the bonds outstanding under the Fiscal Agent Agreement in any one or more of the following ways:
(i) by well and truly paying or causing to be paid the principal of, and interest and any premium on, such outstanding bonds, as and when the same become due and payable; (ii) by depositing with the Fiscal Agent, in trust, at or before maturity, money which, together with (in the event that all of the bonds are to be defeased) the amounts then on deposit in the funds and accounts provided for in the Fiscal Agent Agreement, is fully sufficient to pay such outstanding bonds, including all principal, interest and redemption premiums; or (iii) by irrevocably depositing with the Fiscal Agent, in trust, cash and federal securities in such amount as the Authority determines as confirmed by an independent certified -23-
public accountant will, together with the interest to accrue thereon and (in the event that all of the bonds are to be defeased) moneys then on deposit in the fund and accounts provided for in the Fiscal Agent Agreement, be fully sufficient to pay and discharge the indebtedness on such bonds (including all principal, interest and redemption premiums) at or before their respective maturity dates;
and if such bonds are to be redeemed prior to the maturity thereof, notice of such redemption will have been given as in the Fiscal Agent Agreement provided or provision satisfactory to the Fiscal Agent will have been made for the giving of such notice, then, at the election of the Authority, and notwithstanding that any bonds will not have been surrendered for payment, the pledge of the Special Taxes and other funds provided for in the Fiscal Agent Agreement and all other obligations of the Authority under the Fiscal Agent Agreement with respect to such outstanding bonds will cease and terminate, except only the obligations of the Authority assuring (a) the exclusion of interest on the bonds from the gross income of the Owners of the bonds as provided in the Fiscal Agent Agreement and (b) the payment to the Owners of the bonds not so surrendered and paid all sums due thereon and all amounts owing to the Fiscal Agent; and thereafter Special Taxes will not be payable to the Fiscal Agent.
Amendment of Fiscal Agent Agreement
The Fiscal Agent Agreement and the rights and obligations of the Authority and of the Owners of the bonds issued under the Fiscal Agent Agreement may be modified or amended at any time by a Supplemental Agreement pursuant to the affirmative vote at a meeting of Owners, or with the written consent without a meeting, of the Owners of at least 60% in aggregate principal amount of the bonds then outstanding, exclusive of bonds disqualified as provided in the Fiscal Agent Agreement. No such modification or amendment will (i) extend the maturity of any bond or reduce the interest rate thereon, or otherwise alter or impair the obligation of the Authority to pay the principal of, and the interest and any premium on, any bond, without the express consent of the Owner of such bond, or (ii) permit the creation by the Authority of any pledge or lien upon the Special Taxes superior to or on a parity with the pledge and lien created for the benefit of the bonds (except as otherwise permitted by the Act, the laws of the State or the Fiscal Agent Agreement), or reduce the percentage of bonds required for the amendment hereof.
The Fiscal Agent Agreement and the rights and obligations of the Authority and of the Owners may also be modified or amended at any time by a Supplemental Agreement, without the consent of any Owners, only to the extent permitted by law and only for any one or more of the following purposes:
(i) to add to the covenants and agreements of the Authority contained in the Fiscal Agent Agreement, other covenants and agreements thereafter to be observed, or to limit or surrender any right or power herein reserved to or conferred upon the Authority;
(ii) to make modifications not adversely affecting any outstanding series of bonds in any material respect;
(iii) to make such provisions for the purpose of curing any ambiguity, or of curing, correcting or supplementing any defective provision contained in the Fiscal Agent Agreement, or in regard to questions arising thereunder, as the Authority and the -24-
Fiscal Agent may deem necessary or desirable, and which shall not adversely affect the rights of the Owners of the bonds; and
(iv) to make such additions, deletions or modifications as may be necessary or desirable to assure compliance with Section 148 of the Tax Code relating to required rebate of excess investment earnings to the United States or otherwise as may be necessary to assure exclusion from gross income for federal income tax purposes of interest on the bonds or to conform with the temporary and permanent regulations promulgated under the Tax Code.
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DEBT SERVICE SCHEDULE
The annual debt service on the 2024 Bonds, based on the interest rates and maturity schedule set forth on the cover of this Official Statement, is set forth below, together with the debt service due on the 2021 Bonds, which are payable on a parity basis.
West Patterson Financing Authority
Community Facilities District No. 2018-1 (Villages of Patterson) Special Tax Bonds – Parity Debt Service
Year Ending
(Sept. 1)
2021 Bonds
Debt Service
2024 Bonds
Principal
2024 Bonds
Interest
2024 Bonds
Debt Service
2024
2025
2026
2027
2028
2029
2030
2031
2032
2033
2034
2035
2036
2037
2038
2039
2040
2041
2042
2043
2044
2045
2046
2047
2048
2049
2050
2051
2052
2053
2054
______________
Source: Underwriter.
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THE AUTHORITY
The following information relating to the Authority is included only for the purpose of supplying general information regarding the Authority. The Bonds are not payable from any of the Authority’s revenues or assets other than the Special Tax Revenues and amounts specifically pledged therefor under the Fiscal Agent Agreement.
The Authority was established as a joint exercise of powers authority pursuant to Section 6500, et seq., of the California Government Code (the “Joint Powers Act”) and a Joint Exercise of Powers Agreement, by and between the City and the former Redevelopment Agency of the City, dated June 5, 2001. The Authority is authorized, among other things, to provide financing for public capital improvements and working capital for the City and the former Redevelopment Agency, and to purchase obligations of local agencies, all as authorized by the Joint Powers Act. The Authority is governed by a five-member Board, which is comprised of the individuals who also act as members of the City Council of the City.
THE DISTRICT
Location and Description of the District, Future Annexation Area and Vicinity The District is located in the City, which lies in the Central Valley of the State, approximately 90 miles southeast of San Francisco and 90 miles south of Sacramento and approximately 18 miles southwest of Modesto, along State Route 33, adjacent to U.S. Interstate 5.
Interstate 5 is a major north-south freeway that travels to Sacramento and Redding to the north, before continuing on into Oregon, Washington and eventually Canada. To the south, Interstate 5 provides access to the metropolitan areas of Los Angeles and San Diego, before terminating at the Mexico border. State Highway 99 is also located in proximity to the City to the east and generally parallels Interstate 5, providing access to Sacramento to the north, and Fresno and Bakersfield to the south, before merging with Interstate 5 at the Grapevine.
Property in the District is located within the City, generally north of Walnut Avenue, between North First Street and Sycamore Avenue, as shown on the map on the following page The District was formed comprising approximately 204 gross acres. Two multifamily parcels (APNs 047-059-011 and 047-059-012) improved with 138 completed units have prepaid the Special Taxes and are therefore not included in District information contained in this Official Statement. The remaining land in the District comprises approximately 172 gross acres. The District was formed with an adjacent future annexation area designation, and residential expansion of the District both in the undeveloped acreage in the District as well as the future annexation area is expected, along with the issuance of Additional Bonds.
In accordance with the Resolution of Formation, parcels within the future annexation area are authorized to be annexed into the District only with the unanimous approval of the owner or owners of each parcel at the time of the proposed annexation, without any requirement for further public hearings or additional proceedings. Representatives of owners of land in the future annexation area expect that sales of parcels in the future annexation area will occur over the next several years.
Map. A map showing the current boundaries of the District, as well as the parcels in the future annexation area, is shown on the following page. -27-
[Reserved for boundary map]
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Development in the District
Note that the Special Tax can only be levied on Developed Property, which is comprised of taxable parcels in the District for which a building permit for new construction was issued by the City prior to June 1 of the preceding Fiscal Year. There is no authority to levy on undeveloped property.
Overview. The District was formed comprising approximately 204 gross acres; however, two multifamily parcels (APNs 047-059-011 and 047-059-012) improved with 138 completed units have prepaid the Special Taxes and are therefore not included in District information contained in this Official Statement. The remaining land in the District comprises approximately 172 gross acres.
There are 448 residential parcels (comprising 472 residential units) classified as Developed Property and therefore subject to the Special Tax on the Fiscal Year 2024-25 County tax roll, including 325 residential parcels/units owned by individuals; home construction is ongoing and additional residential units will be subject to the Special Tax in future fiscal years.
For additional information, see "OWNERSHIP OF PROPERTY WITHIN THE DISTRICT." Backbone and In-Tract Infrastructure. Basic (sometimes referred to as “backbone”) infrastructure (including water, sewer, roads and drainage) and in tract improvements for development and sale residential developments has been completed or is underway by the builders active in the District.
Utilities. All typical urban utility services are available for land in the District, and will be extended to the future annexation area as final mapped lots are created and annexed into the District. These utilities include electric power, natural gas, telephone, cable television, water, refuse, sanitary sewer and storm water facilities. The City provides water, refuse, sanitary sewer, and storm water facilities, and police and fire services. The Turlock Irrigation District provides electricity to the District. Pacific Gas & Electric provides natural gas.
Telecommunications are provided by Frontier Communications. -29-
THE IMPROVEMENTS
Eligible Facilities
The Bonds will provide a funding source for moneys expended for a portion of the cost of the Improvements. The Improvements eligible to be financed by the District are set forth in an exhibit to the Resolution of Formation and include, but are not limited to, the following:
Water Improvements: potable and non-potable water and water system infrastructure, including oversizing, that is required for development of land in the District, including but not limited to water wells and storage systems and treatment.
Drainage System Improvements: onsite and off-site backbone drainage and storm drainage improvements, including oversizing, designed to meet the needs of development in the District.
Wastewater Improvements: wastewater collection and treatment system facilities, including oversizing, including but not limited to pipelines and all appurtenances thereto, manholes, tie-in to existing main line; force mains, lift stations, odor-control facilities, sewer treatment plant improvements and permitting related thereto, and related sewer system improvements, ponds, subsystems, equipment and mitigation measures, within or outside of the District, which are required, necessary or desirable for development of land in the District.
Transportation Improvements: transportation facilities and improvements, including but not limited to roadway design; project management; bridge crossings and culverts; clearing, grubbing, and demolition; grading, soil import/export, paving (including slurry seal) and related land acquisition and mitigation measures, within or outside of the District, which are required, necessary or desirable for development of land in the District.
Fire Safety Improvements: construction of fire department facilities and acquisition of equipment necessary to serve the development, or the refurbishment or remodeling of same.
School Facilities: acquisition, construction and equipping of elementary, middle and high school facilities (and related school district support facilities) which serve all of the Villages of Patterson students generated and a portion of the student population residing and expected by the Patterson Joint Unified School District (“PJUSD”) to reside in the District, including reimbursement for financing costs, costs of carry or other amounts incurred or expended pending funding by the CFD.
Community Center: a portion of the cost to construct the proposed community center for the City.
Anticipated Use of Bond Proceeds
Proceeds of the 2024 Bonds are expected to be used by the City as contributions to new school facilities and the cost of construction of a wastewater treatment plant to be undertaken by the City to facilitate new development. [Confirm]
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OWNERSHIP OF PROPERTY WITHIN THE DISTRICT
Unpaid Special Taxes do not constitute a personal indebtedness of K. Hovnanian, KB or any other current or subsequent owners of the property within the District. There is no assurance that K. Hovnanian, KB or any other current or subsequent owners of the property within the District will have the ability to pay the Special Taxes or that, even if they have the ability, they will choose to pay the Special Taxes. An owner may elect to not pay the Special Taxes when due and cannot be legally compelled to do so. Neither the Authority nor any Bond Owner will have the ability at any time to seek payment directly from the owners of property within the District of the Special Tax or the principal or interest on the Bonds, or the ability to control who becomes a subsequent owner of any property within the District. As a result, other than as provided in this Official Statement, no financial statements or information is, or will be, provided about K. Hovnanian, KB, Trivo or any other current or subsequent property owner.
Special Taxes will not be levied on the properties in the future annexation area unless and until the owner(s) of such properties unanimously elect to have such properties annexed into the District. No assurance can be given that any properties in the future annexation area will be annexed into the District, and if so, when any such annexations would occur. The Bonds are secured only by the Special Taxes to be levied on property within the District and moneys available under the Fiscal Agent Agreement. See “SECURITY FOR THE BONDS” and “SPECIAL RISK FACTORS” herein.
Representatives of K. Hovnanian, and KB and Trivo, respectively, have provided the information set forth below. No assurance can be given that all information is complete. In addition, any Internet addresses included below are for reference only, and the information on those Internet sites is not a part of this Official Statement or incorporated by reference into this Official Statement.
Individual Homeowners
As shown in more detail in Table 2 herein, as of November 1, 2023, there were 325 individual homeowners within the District. This number will continue to grow as merchant homebuilders KB and K. Hovnanian continue to sell and close homes that are currently under construction and/or completed to individuals.
KB
Development by KB (Single-Family For-Sale). KB is developing homes in the District as part of three separate neighborhoods: Turnleaf, Acacia, and Sycamore.
Information about KB. As previously defined in this Official Statement “KB” is KB Home North Bay LLC, a Delaware limited liability company. KB is a wholly-owned subsidiary of KB Home, a Delaware corporation (“KB Home”), whose principal executive offices are located in Los Angeles, California. KB Home is a publicly traded company listed on the New York Stock Exchange under the ticker symbol “KBH.”
Founded in 1957, KB Home constructs and sells homes through its operating subsidiaries under the name KB Home. KB Home’s ongoing principal operations are in nine states, including California, Arizona, Nevada, Washington, Idaho, Colorado, Texas, Florida, and North Carolina, within 45 major markets. KB Home first developed homes in California in 1963.
KB Home’s homebuilding operations offer a variety of homes designed primarily for first-time, -31-
move-up and active adult homebuyers, including attached and detached single-family homes, townhomes and condominiums.
KB Home is subject to the informational reporting requirements of the Securities Exchange Act of 1934, amended (the “Exchange Act”), and in accordance therewith is obligated to annual, quarterly and current reports, proxy statements and other information with the Securities Exchange Commission (the “SEC”). Such filings set forth, among other things, certain data relative to the consolidated results of operations and financial position of KB Home and its subsidiaries. KB Home’s SEC filings are available to the public over the Internet at the SEC’s website at www.sec.gov, and at KB Home’s website at www.kbhome.com.
The foregoing internet websites and references to filings with the SEC are included for reference only, and the information on these internet sites and on file with the SEC are not a part of this Official Statement and are not incorporated by reference into this Official Statement.
No representation is made in this Official Statement as to the accuracy or adequacy of the information contained on such internet sites. Neither KB nor KB Home is obligated to advance funds to pay for development or construction costs or to pay ad valorem property taxes or the Special Taxes, and investors should not rely on the information and financial statements contained on such internet sites in evaluating whether to buy, hold or sell the 2024 Bonds. -32-
K. Hovnanian
Development by K. Hovnanian (Single-Family For-Sale). K. Hovnanian is developing homes in the District as part of its “Aspire at Apricot Grove” neighborhood. K. Hovnanian is developing 219 homes within this neighborhood.
Information about K. Hovnanian. As previously defined in this Official Statement “K.
Hovnanian” is K. Hovnanian Homes Northern California, Inc., a California corporation. K.
Hovnanian Homes Northern California, Inc. is wholly-owned by K. Hovnanian Homes which is headquartered in Matawan, New Jersey. K. Hovnanian Homes is a diversified real estate company, publicly traded on the New York Stock Exchange under the symbol HOV. The decision makers for the developer are Kevin Kimball, Region President, and Tim Collison, Region Controller.
K. Hovnanian Homes is subject to the informational requirements of the Securities Exchange Act of 1934, as amended, and in accordance therewith files reports, proxy statements and other information with the SEC. Such filings, particularly the Annual Report on Form 10-K and its most recent Quarterly Report on Form 10-Q, may be inspected and copied at the public reference facilities maintained by the SEC at 450 Fifth Street, N.W., Washington, D.C. 20549 at prescribed rates. Such files can also be accessed over the Internet at the SEC’s website at www.sec.gov.
For further information on K. Hovnanian, see its Internet homepage located at www.khov.com. The foregoing internet websites and references to filings with the SEC are included for reference only, and the information on these internet sites and on file with the SEC are not a part of this Official Statement and are not incorporated by reference into this Official Statement. No representation is made in this Official Statement as to the accuracy or adequacy of the information contained on such internet sites. Neither K. Hovnanian nor K. Hovnanian Homes is obligated to advance funds to pay for development or construction costs or to pay ad valorem property taxes or the Special Taxes, and investors should not rely on the information and financial statements contained on such internet sites in evaluating whether to buy, hold or sell the 2024 Bonds.
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Trivo
Development by Trivo (Multi-Family For-Rent). Trivo has 3 triplex buildings (9 residential units) under construction and 9 triplex buildings (27 residential units) completed in the District. These represent a portion of a larger, planned 132 multi-family residential units (88 two-bedroom units and 44 three-bedroom units) spread across multiple buildings. Phase 1 of the project, which is currently underway, is planned for 16 buildings (48 residential units); completion is expected by the end of 2023, and Trivo reports that it has seen strong leasing activity. Phase 2 of the project is “ready to issue (RTI) shovel ready.” All of the triplex units in the District are for-rent products, currently owned and operated by Trivo. Based on studies commissioned by Trivo, rents are projected to be affordable to a large portion of the existing population based on average and median incomes in the area.
Of the 9 triplex buildings constructed, there are three different plan types, with average unit sizes ranging from 1,136 to 1,614 square feet, and consisting of 2-bedroom/2-bathrooms for the smallest floorplans up to 3-bedroom/2.5-bathrooms for the largest. Based on information provided by Andrea Marin, Community Director at Villages of Patterson Triplexes, all units come with full kitchen appliances, vinyl plank and carpeted floors, either a full‐size or stackable washer and dryer, air conditioning, cable ready, extra storage closets, and one‐ or two‐car garages (Plan 1 has a one‐car garage, and Plans 2 and 3 have two‐car garages). Utilities, including water, sewer, and trash are paid by the tenant. Tenants are also responsible for electricity and renter’s insurance.
Information about Trivo. As used in this Official Statement, “Trivo” means, collectively, Trivo LLC, a California limited liability company, and VOP 2.1 LLC, a California limited liability company. VOP 2.1 LLC is the primary development entity, and the manager of Trivo LLC. Trivo LLC is 50% owned by VOP 2.1 LLC. Alicia Barclay serves as the manager of both VOP 2.1 LLC and Trivo LLC. Trivo has been involved in the project since 2005. -34-
SPECIAL TAX REVENUE AND VALUE OF PROPERTY WITHIN THE DISTRICT The Special Tax is levied on each taxable parcel within the District and only the respective individual parcel is responsible for such Special Tax. In comparing the aggregate value of the taxable property within the District and the principal amount of the Bonds, it should be noted that only the assessor’s parcel of real property upon which there is a delinquent Special Tax can be foreclosed upon. All of the taxable property within the District cannot be foreclosed upon as a whole to pay delinquent Special Taxes unless all of the property is subject to delinquent Special Taxes. Individual parcels may be foreclosed upon to pay delinquent Special Taxes levied against such parcels only. See “SECURITY FOR THE BONDS” and “SPECIAL RISK FACTORS.”
The principal amount of the Bonds is not allocated pro-rata among the parcels within the District; rather, the annual Special Taxes for the District are billed annually for each taxable parcel within the District in accordance with the applicable Special Tax Formula. Upon sale of developed parcels, the buyer typically acquires the property subject to the unpaid portion of any general taxes and special taxes levied against the parcel purchased. General taxes and special taxes are not required to be removed from the property and are not required to be, but may be, paid off in full upon transfer of property or upon development of the property.
Because the land in the District is under development and includes homes owned by homeowners and parcels, including homes under construction, not assessed for a complete improvement value ($300,000 or more) by the Stanislaus County Assessor, the City determined an estimated value of property in the District by using both the County assessed valuation for the completed homes on the tax roll for Fiscal Year 2023-24 and additionally ordered an appraisal for an estimation of the value of the remainder of the taxable parcels in the District.
Assessed Valuation
Assessed Value. Article XIIIA of the California Constitution (Proposition 13) defines “full cash value” to mean “the county assessor’s valuation of real property as shown on the 1975-76 bill under ‘full cash value’, or, thereafter, the appraised value of real property when purchased or newly constructed or when a change in ownership has occurred after the 1975 assessment,” subject to exemptions in certain circumstances of property transfer or reconstruction. The “full cash value” is subject to annual adjustment to reflect increases, not to exceed 2 percent for any year, or decreases in the consumer price index or comparable local data, or to reflect reductions in property value caused by damage, destruction or other factors.
Because of the general limitation to 2% per year in increases in full cash value of properties which remain in the same ownership, the county tax roll does not reflect values uniformly proportional to actual market values. No assurance can be given that should a parcel with delinquent Special Taxes be foreclosed and sold for the amount of the delinquency, that any bid will be received for such property, or if a bid is received that such bid will be sufficient to pay such delinquent installments.
-35-
Parcels in the District currently subject to the Special Tax had assessor valuations for the years shown as follows:
Fiscal
Year
Land
Assessed
Value
Improvement
Assessed
Value
Other
Assessed
Value
Total
Assessed
Value
Number of
Permitted
Parcels (1)
2020-21 $3,736,074 $0 $0 $3,736,074 38
2021-22 14,265,679 33,992,695 75,640 48,334,014 153
2022-23 28,004,638 59,202,075 0 87,206,713 281
2023-24 50,734,271 105,222,055 0 155,956,326 403
(1) Represents the number of parcels for which a building permit for new construction was issued prior to June 1 of the prior fiscal year, but not prior to June 1, 2017. Excludes parcels for which the special tax has been prepaid starting in the year each parcel became exempt from the special tax levy.
Sources: Stanislaus County Assessor’s Office; Goodwin Consulting Group, Inc.
The Appraisal
General. To comply with internal policies and in order to provide an estimate of value of certain taxable property within the District, the Authority ordered an appraisal of the land in the District by Integra Realty Resources, Sacramento, California (the “Appraiser”), which prepared an appraisal report with a date of value of November 1, 2023 (the “Appraisal”). The Appraisal was prepared at the request of the Authority. The Appraisal is set forth in its entirety in APPENDIX C. The description herein of the Appraisal is intended for limited purposes only; the Appraisal should be read in its entirety. The conclusions reached in the Appraisal are subject to certain assumptions and qualifications which are set forth in the Appraisal.
Property Appraised. A portion of the appraised properties consist of 189 improved single‐family residential lots, including 99 completed single‐family homes within the boundaries of the District not currently assessed for a complete improvement value ($300,000 or more) by the Stanislaus County Assessor. These completed homes are represented by three product lines (subdivisions); the smallest floor plan being constructed within each product line was appraised for each subdivision. As such, a “not‐less‐than” estimate of market value for the smallest floor plan constructed within the District was appraised and assigned to each applicable Assessor’s parcel. The balance of the appraised single‐family residential lots comprises 90 lots with homes under construction and are appraised herein as finished single‐ family residential lots, with no contributory value given to the partial home construction.
In addition, a portion of the appraised properties consists of 9 completed triplex buildings (27 completed units) and 3 triplex buildings under construction (9 units under construction). The current owner of this component of the subject plans to complete this 48‐unit multifamily project, configured as triplex units (3 rental units on one taxable parcel). The 3 triplexes with units under construction are appraised as land, with no contributory value given to the partial triplex construction.
Value Estimates. The aggregate value estimate for the appraised properties as of the November 1, 2023 date of value, using the methodologies described in the Appraisal and subject to the limiting conditions and special assumptions set forth in the Appraisal, and based on the ownership of the property as of that date, is $69,223,500. When combined with the County assessed valuation of the taxable property in the District not appraised of $131,952,427, the total estimated value of parcels in the District is $201,175,927. -36-
The estimated value of the properties appraised, by ownership is set forth in the following table.
Owner
No. of
Parcels
Appraised
Value
KB Home North Bay LLC 67 $16,765,500
K. Hovnanian 42 6,930,000
Trivo 3 7,648,000
Individual Homeowners(1) 80 37,880,000
Total 192 $69,223,500
(1) Consists entirely of homes without a complete assessment for structural improvements by County Assessor.
Source: Integra Realty Resources, Inc.
Valuation Methodology. Three approaches to value are typically considered when developing a market value opinion for real property. These are the cost approach, the sales comparison approach, and the income capitalization approach. Use of the approaches in Appraisal is summarized as follows:
The valuation began by employing the sales comparison approach to estimate the not‐less‐ than market value for the completed single‐family homes, based on the smallest floor plan being marketed within each project with a completed home. Then, the market value of the residential lots was estimated by utilizing the sales comparison approach and land residual analysis. In valuing the subject lots, we selected benchmark lot category. In the sales comparison approach, adjustments were applied to the prices of comparable bulk lot transactions, and a market value for the benchmark lot category was concluded. Finally, the Appraisal utilized a land residual analysis, which was reconciled with the sales comparison approach conclusion. In the land residual analysis (a variation of the cost approach and income capitalization approaches combined), all direct and indirect costs are deducted from an estimate of the anticipated gross sales price of the improved product; the resultant net sales proceeds are then discounted to present value at an anticipated rate over the development and absorption period to indicate the residual value of the lots.
In a dynamic market that currently exists, the land residual analysis gains applicability (can consider data points closer to real time than bulk lot sales). Depending on recent activity for lot sales, the sales comparison approach can be a lagging indicator of value in a dynamic market.
There has been a general lack of recent lot sales within the region. Given the information cited above, the Appraiser noted that the direct sales comparison approach is considered a supporting indicator to the land residual analysis, which considers the current prices achieved for new home sales. However, since the difference in value between approaches is 1.30%, a concluded finished lot value consist with the sales comparison approach or $165,000 was deemed appropriate.
The subject property also contains 12 triplexes (36 units) under a single ownership operated as a rental community, of which nine triplex buildings (27 units) are complete and occupied and three triplex buildings (nine units) are under construction. In order to value the completed triplex buildings, the Appraiser utilized the income capitalization approach to value.
Comparable sales were arrayed as a support of reasonableness of the indication of value derived via the income capitalization approach. It is the Appraiser’s opinion the income capitalization approach adequately analyzes the subject’s income‐producing characteristics and was relied upon in the valuation of this portion of the subject. Finally, in order to estimate market value of the underlying land of the triplex lots under construction, the Appraiser deducts vertical construction costs from the previously concluded completed triplex value. -37-
The cumulative, or aggregate, value of the appraised properties represents the sum of the value estimates concluded for each ownership interest, which is not equivalent to the market value of the appraised properties in bulk.
Appraisal Limitations; Hypothetical Condition. In considering the estimate of value evidenced by the Appraisal, the Appraisal is based upon a number of standard and special assumptions which affect the estimates as to value, which includes the hypothetical condition of the Appraisal that the estimates of value provided herein presume various capital improvements have been financed with the proceeds of the 2024 Bonds.
The estimate of value accounts for the impact of the lien of the Special Taxes securing the Bonds. No assurance can be given that the foregoing valuation can or will be maintained during the period of time that the Bonds are outstanding in that the City has no control over the market value of the property within the District or the amount of additional indebtedness that may be issued in the future by other public agencies, the payment of which, through the levy of a tax or an assessment, may be on a parity with the Special Taxes. See “–Overlapping Liens and Priority of Lien” below.
For a description of certain risks that might affect the assumptions made in the Appraisal, see “SPECIAL RISK FACTORS” herein and “APPENDIX B – THE APPRAISAL.” Value to Special Tax Burden Ratios
In comparing the value of the real property within the District and the principal amount of the Bonds, it should be noted that only the real property upon which there is a delinquent Special Tax can be foreclosed upon, and the real property within the District cannot be foreclosed upon as a whole to pay delinquent Special Taxes of the owners of such parcels within the District unless all of the property is subject to a delinquent Special Tax. In any event, individual parcels may be foreclosed upon separately to pay delinquent Special Taxes levied against such parcels.
Other public agencies whose boundaries overlap those of the District could, without the consent of the City and in certain cases without the consent of the owners of the land within the District, impose additional taxes or assessment liens on the land within the District. Property owners can also voluntarily add Property Assessed Clean Energy (PACE) assessment liens on their property to finance energy efficiency improvements. The lien created on the land within the District through the levy of such additional taxes or assessments may be on a parity with the lien of the Special Tax. In addition, owners of land in the District may obtain loans secured by a foreclosable deed of trust security interest in their property. The deeds of trust securing such debt on property within the District, however, will be subordinate to the lien of the Special Tax.
The following table shows value-to-lien ratios for parcels in the District. These ratios are averages, and the value-to-lien ratios for individual parcels can, and do, vary widely. -38-
Table 1
West Patterson Financing Authority
CFD No. 2018-1 (Villages of Patterson)
Value to Lien Ratios by Status of Development for
Projected Fiscal Year 2024-25 Special Tax Levy
Development Status (1)
No. of
Parcels
No. of
Expected
Units
Combined
Value (2)
Projected
FY 2024-25
Maximum
Special Tax
Projected
FY 2024-25
Special Tax
Levy (3)
Percent of
Projected
Special
Tax Levy
CFD
Bonds(4)*
Average
Combined
Value-to-Lien*
Aspire at Apricot Grove
Finished Homes 124 124 $68,540,374 $234,308 $234,308 27.5% $4,129,494 16.60 Finished Homes - Appraised 36 36 17,640,000 68,025 68,025 8.0 1,198,885 14.71 Under Construction 2 2 804,676 3,779 3,779 0.4 66,605 12.08 Under Construction - Appraised 42 42 6,930,000 79,362 79,362 9.3 1,398,700 4.95 Turnleaf at Patterson Ranch
Finished Homes 121 121 62,607,377 228,639 228,639 26.8 4,029,587 15.54 Finished Homes - Appraised 57 57 26,220,000 107,706 107,706 12.6 1,898,235 13.81 Under Construction - Appraised 9 9 1,485,000 17,006 17,006 2.0 299,721 4.95 Acacia at Patterson Ranch
Finished Homes - Appraised 4 4 1,900,000 7,558 7,558 0.9 133,209 14.26 Under Construction - Appraised 25 25 4,125,000 47,240 47,240 5.5 832,559 4.95 Sycamore at Patterson Ranch
Finished Homes - Appraised 2 2 990,000 3,779 3,779 0.4 66,605 14.86 Under Construction - Appraised 14 14 2,285,500 26,454 26,454 3.1 466,233 4.90 Villages of Patterson Triplex
Finished Triplexes - Appraised 9 27 7,300,000 21,710 21,710 2.5 382,625 19.08 Under Construction - Appraised 3 9 348,000 7,237 7,237 0.8 127,542 2.73 Total 448 472 $201,175,927 $852,804 $852,804 100.0% $15,030,000 13.38 * Preliminary, subject to change.
(1) The projected Fiscal Year 2024-25 special tax levy is based on all building permits issued by the City prior to November 1, 2023. The construction status and neighborhood names reflect what is shown in the Appraisal, dated November 29, 2023. For each category, the units included in the Appraisal are marked as appraised. The Fiscal Year 2023-24 assessed values are used for all other categories. (2) Appraised values were allocated to the individual parcels based on the expected development and development status for each parcel, as reported in the Appraisal.
The allocated appraised values are not indicative of the market values of the neighborhoods or ownership groupings. Includes the Fiscal Year 2023-24 assessed values for parcels that were not appraised.
(3) Includes the debt service due in 2025 on the Series 2021 Special Tax Bonds, the estimated debt service due in 2025 on the Series 2024 Special Tax Bonds, an estimated $48,683 in administrative expenses, and an estimated $53,271 to directly fund facilities. Does not include prepaid parcels. (4) Includes the $4,385,000 outstanding par amount of the Series 2021 Special Tax Bonds and $10,645,000 par amount of the Series 2024 Special Tax Bonds. Allocated based on the projected Fiscal Year 2024-25 special tax levy. Does not include any overlapping debt.
Sources: Integra Realty Resources, Inc.; Hilltop Securities, Inc.; Stanislaus County Assessor’s Office; Goodwin Consulting Group, Inc. -39-
Table 2
West Patterson Financing Authority
CFD No. 2018-1 (Villages of Patterson)
Property Ownership by Share of Projected Fiscal Year 2024-25 Special Tax Levy Owner (1)
No. of
Parcels
No. of
Expected
Units
Combined
Value(2)
Projected
FY 2024-25
Maximum
Special Tax
Projected
FY 2024-25
Special Tax
Levy(3)
Percent of
Projected
Special
Tax Levy
CFD
Bonds(4)*
Average
Combined
Value-to-Lien*
Individual Homeowners 325 325 $169,027,751 $614,114 $614,114 72.0% $10,823,271 15.62:1 KB Home North Bay LLC 67 67 16,765,500 126,602 126,602 14.8 2,231,259 7.51:1 K. Hovnanian 44 44 7,734,676 83,142 83,142 9.7 1,465,304 5.28:1 Trivo LLC 12 36 7,648,000 28,947 28,947 3.4 510,166 14.99:1 Total 448 472 $201,175,927 $852,804 $852,804 100.0% $15,030,000 13.38:1 * Preliminary, subject to change.
(1) Based on ownership information as of November 1, 2023. May not reflect recent sales. (2) Appraised values were allocated to the individual parcels based on the expected development and development status for each parcel, as reported in the Appraisal. The allocated appraised values are not indicative of the market values of the neighborhoods or ownership groupings. Includes the Fiscal Year 2023-24 assessed values for parcels that were not appraised.
(3) Includes the debt service due in 2025 on the Series 2021 Special Tax Bonds, the estimated debt service due in 2025 on the Series 2024 Special Tax Bonds, an estimated $48,683 in administrative expenses, and an estimated $53,271 to directly fund facilities. Does not include prepaid parcels. (4) Includes the $4,385,000 outstanding par amount of the Series 2021 Special Tax Bonds and $10,645,000 par amount of the Series 2024 Special Tax Bonds.
Allocated based on the projected Fiscal Year 2024-25 special tax levy. Does not include any overlapping debt.
Sources: Integra Realty Resources, Inc.; Hilltop Securities, Inc. Stanislaus County Assessor’s Office; Goodwin Consulting Group, Inc. -40-
Value to Lien Ratio Categories. The following table set forth value-to-lien-ratio categories, based on projected or maximum special tax rates (as indicated), and certain other assumptions detailed therein.
Table 3
West Patterson Financing Authority
CFD No. 2018-1 (Villages of Patterson)
Combined Value-to-Lien Ratios
Combined
Value-to-Lien
Category
No. of
Parcels
No. of
Expected
Units
Combined
Value(1)
Projected
Fiscal Year
2023-24
Special
Tax Levy(2)
Percent of
Projected
Special Tax
Levy
CFD
Bonds(3)*
Average
Combined
Value-to-Lien*
20:1 to 30:1 73 91 $47,017,549 $142,643 16.7% $66,605 20.16:1 10:1 to 20:1 282 282 138,984,878 532,862 62.5 11,838,640 15.60:1 5:1 to 10:1 90 90 14,825,500 170,062 19.9 2,997,213 4.95:1 3:1 to 5:1 3 9 348,000 7,237 0.8 127,542 2.73:1
Totals 448 472 $201,175,927 $852,804 100.0% $15,030,000 13.38:1 * Preliminary; subject to change.
(1) Appraised values were allocated to the individual parcels based on the expected development and development status for each parcel, as reported in the Appraisal. The allocated appraised values are not indicative of the market values of the neighborhoods or ownership groupings. Includes the Fiscal Year 2023-24 assessed values for parcels that were not appraised. (2) Includes building permits issued prior to November 1, 2023. Includes the debt service due in 2025 on the Series 2021 Special Tax Bonds and the estimated debt service for the Series 2024 Special Tax bonds, an estimated $48,683 in administrative expenses, and $53,271 for direct funding of facilities. (3) Includes the $4,385,000 outstanding par amount of the Series 2021 Special Tax Bonds and $10,645,000 par amount of the Series 2024 Special Tax Bonds. Allocated based on the projected Fiscal Year 2024-25 special tax levy. Does not include any overlapping debt.
Sources: Integra Realty Resources, Inc.; Hilltop Securities, Inc.; Goodwin Consulting Group, Inc. -41-
Estimated Maximum Special Tax Proceeds and Debt Service Coverage The Special Tax Formula is structured to produce Special Tax Revenues from the Maximum Special Tax which, when applied to the projected debt service on the Bonds, is anticipated to result in a debt service coverage ratio of at least 110% for the life of the Bonds, as shown in the table below.
Table 4
West Patterson Financing Authority
Community Facilities District No. 2018-1 (Villages of Patterson) Projected Revenues from Levy of Special Taxes and Project Debt Service Coverage Fiscal Year
Ending
Projected
Maximum
Special Tax(2)
Priority
Administrative
Expenses(3)
Net Projected
Maximum
Special Tax
Series 2021
Debt Service
Series
2024
Debt
Service*
Debt Service
Coverage
Maximum
Special Tax*
2024 (4) $708,261 ($26,010) $682,251 $209,200 $291,259 136.33% 2025 852,804 (26,530) 826,274 213,150 537,250 110.11
2026 869,863 (27,061) 842,803 216,950 547,000 110.32
2027 887,257 (27,602) 859,655 220,600 556,250 110.66
2028 905,003 (28,154) 876,849 223,600 570,000 110.49
2029 923,110 (28,717) 894,393 231,400 578,000 110.50
2030 941,569 (29,291) 912,277 233,800 590,500 110.67
2031 960,398 (29,877) 930,521 241,000 602,250 110.35
2032 979,606 (30,475) 949,132 242,800 618,250 110.23
2033 999,202 (31,084) 968,118 249,400 628,250 110.31
2034 1,019,186 (31,706) 987,480 255,600 637,500 110.57
2035 1,039,568 (32,340) 1,007,228 261,400 651,000 110.39 2036 1,060,357 (32,987) 1,027,370 266,800 663,500 110.43 2037 1,081,568 (33,647) 1,047,921 271,800 680,000 110.10 2038 1,103,195 (34,320) 1,068,876 276,400 695,250 110.01 2039 1,125,265 (35,006) 1,090,259 280,600 709,250 110.14 2040 1,147,768 (35,706) 1,112,061 289,400 717,000 110.50 2041 1,170,722 (36,420) 1,134,301 292,600 733,750 110.52 2042 1,194,136 (37,149) 1,156,987 300,400 749,000 110.25 2043 1,218,020 (37,892) 1,180,128 302,600 767,750 110.26 2044 1,242,382 (38,649) 1,203,733 309,400 779,750 110.52 2045 1,267,223 (39,422) 1,227,801 315,600 800,250 110.03 2046 1,292,569 (40,211) 1,252,358 321,200 813,750 110.34 2047 1,318,421 (41,015) 1,277,406 331,200 825,500 110.44 2048 1,344,787 (41,835) 1,302,952 335,400 845,500 110.34 2049 1,371,686 (42,672) 1,329,013 344,000 863,250 110.09 2050 1,399,117 (43,526) 1,355,591 351,800 878,750 110.16 2051 1,427,107 (44,396) 1,382,711 358,800 897,000 110.11 2052 1,455,649 (45,284) 1,410,365 0 1,277,750 110.38
2053 1,484,759 (46,190) 1,438,569 0 1,307,750 110.00
2054 1,514,455 (47,114) 1,467,342 0 1,333,500 110.04
* Preliminary, subject to change.
(1) Pursuant to Section 53321(d) of the Government Code, the special tax levied against any assessor's parcel for which an occupancy permit for private residential use has been issued shall not be increased as a consequence of delinquency or default by the owner of any other assessor's parcel within the District by more than 10% above the amount that would have been levied in the fiscal year had there never been any such delinquencies or defaults. (2) Includes projected maximum special tax revenues based on the status of development in the CFD as of November 1, 2023.
Assumes no future development. Does not include prepaid parcels. (3) Equals $25,000 in fiscal year 2021-22, escalated by 2% per year. (4) Actual special tax levy for Fiscal Year 2023-24 was $708,261.46.
Sources: Hilltop Securities, Inc.; Goodwin Consulting Group, Inc. -42-
Overlapping Liens and Priority of Lien
The principal of and interest on the Bonds are payable from the Special Tax authorized to be collected within the District, and payment of the Special Tax is secured by a lien on certain real property within the District. Such lien is co-equal to and independent of the lien for general taxes and any other liens imposed under the Act, regardless of when they are imposed on the property in the District. The imposition of additional special taxes, assessments and general property taxes will increase the amount of independent and co-equal liens which must be satisfied in foreclosure.
The Authority, the County and certain other public agencies are authorized by the Act to form other community facilities districts and improvement areas and, under other provisions of State law, to form special assessment districts, either or both of which could include all or a portion of the land within the District.
Set forth on the following page is an overlapping debt table showing the existing direct and overlapping bonded debt payable with respect to property within the District. This table has been prepared by California Municipal Statistics, Inc. as of the date indicated, and is included for general information purposes only. The Authority has not reviewed the data for completeness or accuracy and makes no representations in connection therewith.
There can be no assurance that owners of property in the District, or any subsequent owner will not petition for the formation of other community facilities districts or for a special assessment district or districts and that parity special taxes or special assessments will not be levied by the County or some other public agency to finance additional public facilities, however no other special districts are currently contemplated by the Authority.
Private liens, such as deeds of trust securing loans obtained by owners of property in the District, may be placed upon property in the District at any time. Under State law, the Special Taxes have priority over all existing and future private liens imposed on property subject to the lien of the Special Taxes.
-43-
Table 5
West Patterson Financing Authority
Community Facilities District No. 2018-1 (Villages of Patterson) Summary of Overlapping Debt
2023-24 Local Secured Assessed Valuation: $160,374,019
DIRECT AND OVERLAPPING TAX AND ASSESSMENT DEBT: % Applicable Debt 12/1/23 Yosemite Community College District General Obligation Bonds 0.181% $ 436,647 Patterson Joint Unified School District General Obligation Bonds 3.871 2,384,240 West Patterson Public Financing Authority Community Facilities District No. 2018-1 100.000 4,385,000(1) TOTAL DIRECT AND OVERLAPPING TAX AND ASSESSMENT DEBT $7,205,887 OVERLAPPING GENERAL FUND DEBT:
Stanislaus County Certificates of Participation 0.244% $ 10,964 Stanislaus County Office of Education Certificates of Participation 0.244 975 Patterson Joint Unified School District Certificates of Participation 3.871 385,595 City of Patterson General Fund Obligations 5.368 94,153 Turlock Mosquito and Vector Control Pension Obligation Bonds 0.596 7,561 TOTAL OVERLAPPING GENERAL FUND DEBT $499,248
COMBINED TOTAL DEBT $7,705,135 (2)
Ratios to 2020-21 Assessed Valuation:
Direct Debt ($4,385,000).................................................................................. 2.73% Total Direct and Overlapping Tax and Assessment Debt ................................... 4.49% Combined Total Debt ......................................................................................... 2.80% ________________________
(1) Mello-Roos Act bonds to be sold.
(2) Excludes tax and revenue anticipation notes, enterprise revenue, mortgage revenue and non-bonded capital lease obligations.
Source: California Municipal Statistics, Inc.
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Estimated Tax Burden on Single-Family Home
Based on market values for parcels with single family detached homes in the District as estimated in the Appraisal., the Special Tax Administrator has projected that the overall tax burden for the smallest floorplan homes in the District will be approximately 1.84% to 1.89%, as shown in the following table. The projected overall tax burden for larger floorplan homes is expected to be smaller, as a percentage of the projected assessed value of the homes.
Table 6
West Patterson Financing Authority
CFD No. 2018-1 (Villages of Patterson)
Estimated Fiscal Year 2023-24 Tax Bills
Neighborhood:
Aspire
at Apricot
Grove
Turnleaf
at Patterson
Ranch
Acacia
at Patterson
Ranch
Sycamore
at Patterson
Ranch
Net Taxable Value Amount Amount Amount Amount
Estimated Market Values (1) $490,000 $460,000 $475,000 $495,000 Less: Homeowner’s Exemption (7,000) (7,000) (7,000) (7,000) Net Taxable Value $483,000 $453,000 $468,000 $488,000
Ad Valorem Property Taxes Rate Amount Amount
Base Property Tax 1.000000% $4,830 $4,530 $4,680 $4,880 Patterson Unif - Bond 01A 0.024990 121 113 117 122
Patterson Unif - Bond 01B 0.007317 35 33 34 36
Patterson Unif - Bond 2008A 0.009547 46 43 45 47
Patterson Unif - 2016 GO Refunding 0.006119 30 28 29 30 Patterson Unif - Bond 2018 A 0.042528 205 193 199 208
Patterson 2022 GOB Series A 0.050396 243 228 236 246
YCCD - Bond 2007 C 0.010324 50 47 48 50
YCCD - Bond 2015 Refunding 0.000489 2 2 2 2
Yosemite 2020 GOB Refunding Series A/B 0.006385 31 29 30 31 Yosemite 2022 GOB Refunding 0.005910 29 27 28 29
Total Ad Valorem Property Taxes 1.164005% $5,622 $5,273 $5,448 $5,680 Parcel Charges, Assessments, and Special Taxes Amount Amount Patterson Ambulance District $27 $27 $27 $27
City of Patterson CFD 2018-02 919 919 953 919
Public Safety CFD 2003-1 618 618 618 618
Turlock Mosquito Abatement 5 5 5 5
WPFA CFD No. 2018-1
(2) 1,853 1,853 1,853 1,853
Total Parcel Charges, Assessments, and Special Taxes $3,422 $3,422 $3,456 $3,422 Total Taxes $9,044 $8,695 $8,903 $9,102
Total Effective Tax Rate 1.85% 1.89% 1.87% 1.84%
(1) Represents the base retail values for parcels with single family detached homes in the District, as estimated in the Appraisal. (2) Equal to the applicable maximum special tax rate for single family detached property in Fiscal Year 2023-24.
Sources: Stanislaus County Tax Collector’s Office; Goodwin Consulting Group, Inc. -45-
Special Tax Collections and Delinquencies
The following table shows a history of Special Tax collections and delinquencies in the District.
Table 7
West Patterson Financing Authority
CFD No. 2018-1 (Villages of Patterson)
Special Tax Collections and Delinquencies
As of the end of fiscal year As of November 15, 2023
Fiscal
Year
Amount
Levied
Number of
Parcels
Delinquent
Amount
Delinquent
Percentage
Delinquent
Number of
Parcels
Delinquent
Amount
Delinquent
Percentage
Delinquent
2021-22 $85,087 3 $23,688 27.84% 0 $0 0.00%
2022-23 $316,671 0 $0 0.00% 0 $0 0.00%
2023-24 $510,358 5 $5,449 1.07% 2 $2,724 0.53%
Sources: Stanislaus County Tax Collector’s Office; Goodwin Consulting Group, Inc. -46-
SPECIAL RISK FACTORS
The purchase of the 2024 Bonds described in this Official Statement involves a degree of risk that may not be appropriate for some investors. The following includes a discussion of some of the risks which should be considered before making an investment decision.
Limited Obligation of the Authority to Pay Debt Service The Authority has no obligation to pay principal of and interest on the Bonds in the event Special Tax collections are delinquent, other than from amounts, if any, on deposit in the applicable reserve accounts within the Reserve Fund or funds derived from the tax sale or foreclosure and sale of parcels on which levies of the Special Tax are delinquent, nor is the Authority obligated to advance funds to pay such debt service on the Bonds. The Bonds are not general obligations of the Authority but are limited obligations of the Authority and the District payable solely from the proceeds of the Special Tax and certain funds held under the Fiscal Agent Agreement, including amounts deposited in the Reserve Fund and investment income thereon, and the proceeds, if any, from the sale of property subject to the Special Tax in the event of a foreclosure. See “SECURITY FOR THE BONDS.” Any tax for the payment of the Bonds will be limited to the Special Tax to be collected on property in the District that is subject to the Special Tax.
Concentration of Ownership
Owners of property are not personally obligated to pay the Special Tax attributable to their property. Rather, the Special Tax is an obligation only against the parcel of property, secured by the amount which could be realized in a foreclosure proceeding against the property, and not by any promise of the owner to pay. If the value of the property is not sufficient, taking into account other obligations also constituting a lien against the property, the Authority, Fiscal Agent and owners of the Bonds have no recourse against the owner, such as filing a lawsuit to collect money.
Failure of one of the merchant builders or any future owner of significant property subject to the Special Taxes in the District to pay installments of Special Taxes when due could cause the depletion of amounts in the Reserve Fund prior to reimbursement from the resale of foreclosed property or payment of the delinquent Special Tax and, consequently, result in the delinquency rate reaching a level that would cause an insufficiency in collection of the Special Tax to meet the District’s obligations on the Bonds. In that event, there could be a delay or failure in payments on the Bonds. See “SPECIAL RISK FACTORS – Bankruptcy and Foreclosure Delays” below and “SECURITY FOR THE BONDS – Delinquent Payments of Special Tax; Covenant for Superior Court Foreclosure.”
Appraised Values
The Appraisal estimates the market value of certain taxable property in the District. This market value is merely the present opinion of the Appraiser, and is subject to the assumptions and limiting conditions stated in the Appraisal. The Authority has not sought the present opinion of any other appraiser of the value of such property. A different present opinion of value might be rendered by a different appraiser.
The opinion of value relates to sale by a willing seller to a willing buyer as of the date of valuation, each having similar information and neither being forced by other circumstances to sell -47-
or to buy. Consequently, the opinion is of limited use in predicting the selling price at a foreclosure sale, because the sale is forced and the buyer may not have the benefit of full information.
In considering the estimates of value evidenced by the Appraisal, it should be noted that the Appraisal is based upon a number of standard and extraordinary assumptions and limitations which affect the estimates as to value, as set forth in the Appraisal. In addition, the opinion of market value in the Appraisal is a present opinion. It is based upon present facts and circumstances. Differing facts and circumstances may lead to differing opinions of value. The appraised market value is not evidence of future value because future facts and circumstances may differ significantly from the present.
No assurance can be given that the single property in the District could be sold in a foreclosure for the estimated market value contained in the Appraisal. Such sale is the primary remedy available to Bondowners if such property should become delinquent in the payment of Special Taxes.
Property Values and Property Development
The value of taxable property within the District is a critical factor in determining the investment quality of the Bonds. If a property owner defaults in the payment of the Special Tax, the District’s only remedy is to foreclose on the delinquent property in an attempt to obtain funds with which to pay the delinquent Special Tax. As of the date of this Official Statement, there is only a single parcel of land in the District subject to the Special Tax; although it is contemplated that parcels in the future annexation area may be annexed into the District in the future, no assurances can be given that this will occur, or if it does occur, when such annexations may occur. Land development and land values in the District and the future annexation area could be adversely affected by economic and other factors beyond the District’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.
The Appraisal sets forth certain assumptions of the Appraiser in estimating the market value of the Appraised Property as of the date indicated. No assurance can be given that the values are accurate if these assumptions are incorrect or that the values will not decline in the future if one or more events, such as natural disasters or adverse economic conditions, occur.
See “SPECIAL TAX REVENUES AND VALUE OF PROPERTY IN THE DISTRICT – The Appraisal” above.
Neither the Authority nor the Underwriter have evaluated development risks related to the District. Since these are largely business risks of the type that property owners customarily evaluate individually, and inasmuch as changes in land ownership may well mean changes in the evaluation with respect to any particular parcel, the Authority 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 the District or the Authority has evaluated these risks or the reasonableness of these risks.
The following is a discussion of specific risk factors that could affect the timing or scope of property development in the District or the value of property in the District. -48-
Land Development. Land values are influenced by the level of development in the area in many respects.
First, undeveloped or partially developed land is generally less valuable than developed land and provides less security to the owners of the Bonds should it be necessary for the District to foreclose on undeveloped or partially developed property due to the nonpayment of Special Taxes.
Second, failure to complete development on a timely basis could adversely affect the land values of those parcels that have been completed. Lower land values would result in less security for the payment of principal of and interest on the Bonds and lower proceeds from any foreclosure sale necessitated by delinquencies in the payment of the Special Tax. See “SPECIAL TAX REVENUE AND VALUE OF PROPERTY WITHIN THE DISTRICT – Value to Special Tax Burden Ratios.” No assurance can be given that the proposed development within the District and future annexation area will be completed, and in assessing the investment quality of the Bonds, prospective purchasers should evaluate the risks of non-completion.
Risks of Real Estate Investment Generally. Continuing development in the District may be adversely affected by changes in general or local economic conditions, fluctuations in the real estate market, increased construction costs, development, financing and marketing capabilities of individual property owners, water or electricity shortages, and other similar factors. Development in the District may also be affected by development in surrounding areas, which may compete with the District. In addition, land development operations are subject to comprehensive federal, state and local regulations, including environmental, land use, zoning and building requirements. There can be no assurance that proposed land development operations within the District will not be adversely affected by future government policies, including, but not limited to, governmental policies to restrict or control development, or future growth control initiatives. There can be no assurance that land development operations within the District will not be adversely affected by these risks.
Natural Disasters. The value of land in the District in the future can be adversely affected by a variety of natural occurrences, particularly those that may affect infrastructure and other public improvements and private improvements on the land in the District and the continued habitability and enjoyment of such private improvements. For example, the areas in and surrounding the District, like those in much of the State, may be subject to earthquakes or other unpredictable seismic activity, however, the District is not located in a seismic special studies zone.
Other natural disasters could include, without limitation, landslides, floods, droughts or tornadoes. One or more natural disasters could occur and could result in damage to improvements of varying seriousness. The damage may entail significant repair or replacement costs and that repair or replacement may never occur either because of the cost, or because repair or replacement will not facilitate habitability or other use, or because other considerations preclude such repair or replacement. Under any of these circumstances there could be significant delinquencies in the payment of Special Taxes, and the value of the land in the District may well depreciate.
Recent California Drought. The area around the District, like most of the State, is prone to occasional drought. For example, the State experienced an extended drought period that began in 1987 and continued until the winter of 1992-93. California is also currently facing one of the most severe droughts on record. In January 2014, Governor Brown declared a drought State of Emergency and directed state officials to take all necessary actions to prepare for water shortages and directed local officials to reduce water usage by 20%. Recently, the City has achieved water -49-
consumption reduction through implementing planned water efficiency programs to address occasional drought conditions. The volatility of weather patterns make it difficult to predict how long drought conditions will persist, or how often they may reoccur. However, when drought conditions do occur, it can affect community water usage for the duration of the drought as cities and water agencies implement drought management plans that require water usage reduction.
Legal Requirements. Other events that may affect the value of land in the District include changes in the law or application of the law. Such changes may include, without limitation, local growth control initiatives, local utility connection moratoriums and local application of statewide tax and governmental spending limitation measures. Development in the District may also be adversely affected by the application of laws protecting endangered or threatened species.
Hazardous Substances. Any discovery of a hazardous substance detected on property within the District would affect the marketability and the value of some or all of the property in the District. In that event, the owners and operators of land within the District may be required by law to remedy conditions of the parcel relating to releases or threatened releases of hazardous substances. The federal Comprehensive Environmental Response, Compensation and Liability Act of 1980, sometimes referred to as “CERCLA” or the “Superfund Act,” is the most well-known and widely applicable of these laws. California laws with regard to hazardous substances are also applicable to property within the District and are as stringent as the federal laws. Under many of these laws, the owner (or operator) is obligated to remedy a hazardous substance condition of property whether or not the owner (or operator) has anything to do with creating or handling the hazardous substance. The effect, therefore, should any of the parcels be contaminated by a hazardous substance is to reduce the marketability and value of the land by the costs of remedying the condition, because the purchaser, upon becoming owner, will become obligated to remedy the condition just as is the seller.
The market value of the Appraised Property set forth in the Appraisal does not take into account the possible reduction in marketability and value of such property by reason of the possible liability of the owner (or operator) for the remedy of a hazardous substance condition on the property. Although the Authority is not aware that the owner (or operator) of the Appraised Property has a current liability for a hazardous substance with respect thereto, it is possible that such liabilities do currently exist and that the Authority is not aware of them.
Further, it is possible that liabilities may arise in the future with respect to land in the District resulting from the existence, currently, on land of a substance presently classified as hazardous but which has not been released or the release of which is not presently threatened, or may arise in the future resulting from the existence, currently, on the parcel of a substance not presently classified as hazardous but which may in the future be so classified. Further, such liabilities may arise not simply from the existence of a hazardous substance but from the method of handling it.
All of these possibilities could significantly affect the value of land within the District that is realizable upon a foreclosure sale.
Endangered and Threatened Species. It is illegal to harm or disturb any plants or animals in their habitat that have been listed as endangered species by the United States Fish & Wildlife Service under the Federal Endangered Species Act or by the California Fish & Game Commission under the California Endangered Species Act without a permit. Although the City believes that no federally listed endangered or threatened species would be affected by the proposed development within the District, other than any that are permitted by the entitlements already received, the discovery of an endangered plant or animal could delay development within the District or reduce the value of such property.
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Levy and Collection of Special Taxes
General. The principal source of payment of principal of and interest on the Bonds is the proceeds of the annual levy and collection of the Special Tax against property within the District.
As of the date of this Official Statement, there is only a single parcel in the District and subject to the Special Tax; however, in the future, additional parcels may be annexed into the District.
Limitation on Maximum Special Tax Rate. The annual levy of the Special Tax is subject to the Maximum Special Tax for each parcel authorized in the Special Tax Formula. The levy cannot be made at a higher rate even if the failure to do so means that the estimated proceeds of the levy and collection of the Special Tax, together with other available funds, will not be sufficient to pay debt service on the Bonds.
In addition to the Maximum Special Tax rate limitation in the Special Tax Formula, Section 53321(d) of the Act provides that the special tax levied against any parcel for which an occupancy permit for private residential use has been issued may not be increased as a consequence of delinquency or default by the owner of any other parcel within a community facilities district by more than 10% above the amount that would have been levied in such Fiscal Year had there never been any such delinquencies or defaults. In cases of significant delinquency, these factors may result in defaults in the payment of principal of and interest on the Bonds.
No Relationship Between Property Value and Special Tax Levy. Because the Special Tax formula set forth in the Special Tax Formula is not based on property value, the levy of the Special Tax will rarely, if ever, result in a uniform relationship between the value of particular parcels of Taxable Property and the amount of the levy of the Special Tax against those parcels.
Thus, there will rarely, if ever, be a uniform relationship between the value of the parcels of Taxable Property and their proportionate share of debt service on the Bonds, and certainly not a direct relationship.
Factors that Could Lead to Special Tax Deficiencies. The following are some of the factors that might cause the levy of the Special Tax on any particular parcel of Taxable Property to vary from the Special Tax that might otherwise be expected:
Transfers to Governmental Entities. The number of parcels of Taxable Property could be reduced through the acquisition of Taxable Property by a governmental entity and failure of the government to pay the Special Tax based upon a claim of exemption or, in the case of the federal government or an agency thereof, immunity from taxation, thereby resulting in an increased tax burden on the remaining Taxable Parcels (up to the Maximum Special Tax for each such Taxable Parcel) and, therefore, potentially insufficient funds available to pay det service on the Bonds.
Property owned by governmental entities is generally exempt from the levy of Special Taxes under the Act. However, pursuant to Section 53317.3 of the Act, if property not otherwise exempt from the Special Tax is acquired by a “public entity,” the Special Tax will continue to be levied on such property and will be enforceable against such public entity. Notwithstanding this provision of the Act, uncertainty exists as to whether property owned by a public entity could be successfully foreclosed upon to satisfy the amount of Special Taxes owed and there is no assurance that a governmental entity acquiring a parcel of Taxable Property would continue to pay the Special Taxes levied on such parcel.
Property Tax Delinquencies. Failure of the owners of Taxable Property to pay property taxes (and, consequently, the Special Tax), or delays in the collection of or inability to collect the -51-
Special Tax by tax sale or foreclosure and sale of the delinquent parcels, could result in a deficiency in the collection of Special Tax revenues. Because the District was formed in 2021, a history of Special Tax collection and delinquency rates in the District is not available.
Delays Following Special Tax Delinquencies and Foreclosure Sales. The Fiscal Agent Agreement generally provides that the Special Tax is to be collected in the same manner as ordinary ad valorem property taxes are collected and, except as provided in the special covenant for foreclosure described in “SECURITY FOR THE BONDS – Delinquent Payments of Special Tax; Covenant for Superior Court Foreclosure” and in the Act, is subject to the same penalties and the same procedure, sale and lien priority in case of delinquency as is provided for ordinary ad valorem property taxes. Under these procedures, if taxes are unpaid for a period of five years or more, the property is deeded to the State and then is subject to sale by the County.
If sales or foreclosures of property are necessary, there could be a delay in payments to owners of the Bonds pending such sales or the prosecution of foreclosure proceedings and receipt by the Authority of the proceeds of sale if the Reserve Fund is depleted. See “SECURITY FOR THE BONDS – Delinquent Payments of Special Tax; Covenant for Superior Court Foreclosure.” The ability of the Authority to collect interest and penalties specified by State law and to foreclose against properties having delinquent Special Tax installments may be limited in certain respects with regard to properties in which the Federal Deposit Insurance Corporation (the “FDIC”) has or obtains an interest. The FDIC would obtain such an interest by taking over a financial institution that has made a loan that is secured by property within the District.
Other laws generally affecting creditors’ rights or relating to judicial foreclosure may affect the ability to enforce payment of Special Taxes or the timing of enforcement of Special Taxes. For example, the Soldiers and Sailors Civil Relief Act of 1940 affords protections such as a stay in enforcement of the foreclosure covenant, a six-month period after termination of military service to redeem property sold to enforce the collection of a tax or assessment and a limitation on the interest rate on the delinquent tax or assessment to persons in military service if the court concludes the ability to pay such taxes or assessments is materially affected by reason of such service.
Bankruptcy and Foreclosure Delays
The payment of the Special Tax and the ability of the District to foreclose the lien of a delinquent unpaid tax, as discussed in “SECURITY FOR THE BONDS — Delinquent Payments of Special Tax; Covenant for Superior Court Foreclosure,” 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. 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 Special Taxes to become extinguished, bankruptcy of a property owner could result in a delay in prosecuting superior court foreclosure proceedings and could result in the possibility of delinquent Special Tax installments not being paid in full. Such a delay would increase the likelihood of a delay or default in payment of the principal of and interest on the Bonds. To the extent that property in the District continues to be owned by a single (or limited number of) property owner(s), the chances are increased that the -52-
Reserve Fund established for the Bonds could be fully depleted during any such delay in obtaining payment of delinquent Special Taxes. As a result, sufficient moneys would not be available in the Reserve Fund for transfer to the Bond Fund to make up shortfalls resulting from delinquent payments of the Special Tax and thereby to pay principal of and interest on the Bonds on a timely basis.
To the extent that bankruptcy or similar proceedings were to involve the currently single property owner (or a future large property owner), the chances would increase the likelihood that the Bond Reserve Fund could be fully depleted during any resulting delay in receiving payment of delinquent Special Taxes. As a result, sufficient monies would not be available in the Bond Reserve Fund for transfer to the Bonds Redemption Account to make up any shortfalls resulting from delinquent payments of the Special Tax and thereby to pay principal of and interest on the Bonds on a timely basis.
Parity Taxes and Special Assessments; Private Debt
The Authority, the City, the County and certain other public agencies are authorized by the Act to form other community facilities districts and improvement areas and, under other provisions of State law, to form special assessment districts, either or both of which could include all or a portion of the land within the District.
Property in the District is currently subject to certain overlapping tax and assessment liens, as shown in the overlapping debt statement. Property in the District is also subject to the special tax of a recently formed community facilities districts to fund services and known as Community Facilities District No. 2021-2 (Villages of Patterson Public Safety/Fire Protection Services) which authorized an annual special tax of approximately $0.052 per square foot for Fiscal Year 2018-16.
The property is not currently subject to any other special tax or assessment liens (other than the lien of the Special Tax). See “SPECIAL TAX REVENUE AND VALUE OF PROPERTY WITHIN THE DISTRICT – Overlapping Liens and Priority of Lien.” In general, as long as the Special Tax is collected on the County tax roll, the Special Tax and all other taxes, assessments and charges also collected on the tax roll are on a parity, that is, are of equal priority. Questions of priority become significant when collection of one or more of the taxes, assessments or charges is sought by some other procedure, such as foreclosure and sale.
In the event of proceedings to foreclose for delinquency of Special Taxes securing the Bonds, the Special Tax will be subordinate only to existing prior governmental liens, if any. Otherwise, in the event of such foreclosure proceedings, the Special Taxes will generally be on a parity with the other taxes, assessments and charges, and will share the proceeds of such foreclosure proceedings on a pro-rata basis. Although the Special Taxes will generally have priority over nongovernmental liens on a taxable parcel, regardless of whether the non-governmental liens were in existence at the time of the levy of the Special Tax or not, this result may not apply in the case of bankruptcy. See “–Bankruptcy and Foreclosure Delays” above.
There can be no assurance that property owner(s) within the District will not petition for the formation of other community facilities districts and improvement areas or for a special assessment district or districts and that parity special taxes or special assessments will not be levied by the County or some other public agency to finance additional public facilities. In addition to liens for special taxes or assessments to finance public improvements of benefit to land within the District, owners of property may obtain loans from banks or other private sources which loans may be secured by a lien on land in the District. Such loans would increase amounts owed by the -53-
owner(s) of such land with respect to development of its property in the District. However, the lien of such loans would be subordinate to the lien of the Special Taxes.
Tax Delinquencies
Under provisions of the Act, the Special Taxes will be billed to the properties within the District on the regular property tax bill(s) sent to owner(s) of such property. Such Special Tax installments are due and payable, and bear the same penalties and interest for nonpayment, as do regular property tax installments. Special Tax installment payments cannot be made separately from property tax payments. Therefore, the unwillingness or inability of a property owner to pay regular property tax bills as evidenced by property tax delinquencies may also indicate an unwillingness or inability to make regular property tax payments and Special Tax payments in the future.
The annual Special Tax will be billed and collected in two installments payable without penalty by December 10 and April 10. In the event such Special Taxes are not timely paid, moneys available to pay debt service on the Bonds becoming due on the subsequent respective March 1 and September 1 may be insufficient, except to the extent moneys are available in the Reserve Fund.
In the event of non-payment of Special Taxes, funds in the Reserve Fund, if available, may be used to pay principal of and interest on the Bonds. If funds in the Reserve Fund for the Bonds are depleted, 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 to the Bond holders pursuant to the Fiscal Agent Agreement. However, no replenishment from the proceeds of a Special Tax levy can occur as long as the proceeds that are collected from the levy of the Special Tax against property within the District at the maximum Special Tax rates, together with other available funds, remains insufficient to pay all such amounts. Thus it is possible that the Reserve Fund will be depleted and not be replenished by the levy of the Special Tax.
See “SECURITY FOR THE BONDS — Delinquent Payments of Special Tax; Covenant for Superior Court Foreclosure” for a discussion of the provisions which apply, and procedures which the Authority is obligated to follow, in the event of delinquency in the payment of Special Taxes.
See also “SECURITY FOR THE BONDS — Special Tax Methodology – Limitation on Increases in Special Tax Levy” for a discussion of the limitations imposed by the Special Tax Formula and the Act applicable to Special Tax increases.
No Acceleration Provisions
The Bonds do 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 Fiscal Agent Agreement. Under the Fiscal Agent Agreement, a Bondowner is given the right for the equal benefit and protection of all Bondowner similarly situated to pursue certain remedies. So long as the Bonds are in book-entry form, DTC will be the sole Bondowner and will be entitled to exercise all rights and remedies of Bondowner.
Ballot Initiatives
From time to time, initiative measures qualify for the State ballot pursuant to the State’s constitutional initiative process and those measures could be adopted by California voters. The adoption of any such initiative might place limitations on the ability of the State, the Authority, the -54-
County or other local districts to increase revenues or to increase appropriations or on the completion of development in the District. See “–Property Values and Property Development – Land Development” above. See also “–Voter Initiatives” below.
Voter Initiatives
Under the California Constitution, the power of initiative is reserved to the voters for the purpose of enacting statutes and constitutional amendments. Since 1978, the voters have exercised this power through the adoption of Proposition 13 and similar measures, including Proposition 218, which was approved in the general election held on November 5, 1996, and Proposition 26, which was approved on November 2, 2010.
Any such initiative may affect the collection of fees, taxes and other types of revenue by local agencies such as the District. Subject to overriding federal constitutional principles, such collection may be materially and adversely affected by voter-approved initiatives, possibly to the extent of creating cash-flow problems in the payment of outstanding obligations such as the Bonds.
Proposition 218—Voter Approval for Local Government Taxes—Limitation on Fees, Assessments, and Charges—Initiative Constitutional Amendment, added Articles XIIIC and XIIID to the California Constitution, imposing certain vote requirements and other limitations on the imposition of new or increased taxes, assessments and property-related fees and charges.
On November 2, 2010, California voters approved Proposition 26, entitled the “Supermajority Vote to Pass New Taxes and Fees Act”. Section 1 of Proposition 26 declares that Proposition 26 is intended to limit the ability of the State Legislature and local government to circumvent existing restrictions on increasing taxes by defining the new or expanded taxes as “fees.” Proposition 26 amended Articles XIIIA and XIIIC of the State Constitution. The amendments to Article XIIIA limit the ability of the State Legislature to impose higher taxes (as defined in Proposition 26) without a two-thirds vote of the Legislature. Article XIIIC requires that all new local taxes be submitted to the electorate before they become effective. Taxes for general governmental purposes require a majority vote and taxes for specific purposes (“special taxes”) require a two-thirds vote.
The Special Taxes and the Bonds were each authorized by not less than a two-thirds vote of the landowners within the District who constituted the qualified electors at the time of such voted authorization. The District believes, therefore, that issuance of the Bonds does not require the conduct of further proceedings under the Act, Proposition 218 or Proposition 26.
Like their antecedents, Proposition 218 and Proposition 26 are likely to undergo both judicial and legislative scrutiny before the impact on the District can be determined. Certain provisions of Proposition 218 and Proposition 26 may be examined by the courts for their constitutionality under both State and federal constitutional law, the outcome of which cannot be predicted.
Case Law Related to the Mello-Roos Act Voting
On August 1, 2014, the California Court of Appeal, Fourth Appellate District, issued its opinion in City of San Diego v. Melvin Shapiro, et al. (D063997). The case involved a Convention Center Facilities District (the “CCFD”) established by the City of San Diego. The CCFD is a financing district established under San Diego’s city charter (the “Charter”) and was intended to -55-
function much like a community facilities district established under the Act. The CCFD was comprised of all of the real property in the entire city. However, the CCFD special tax was to be levied only on properties in the CCFD that were improved with a hotel.
At the election to authorize the CCFD special tax, the CCFD proceedings limited the electorate to owners of hotel properties and lessees of real property owned by a governmental entity on which a hotel was located. Registered voters in the City of San Diego were not permitted to vote. This definition of the qualified electors of the CCFD was based on 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 community facilities district whose property would be subject to the special tax.
The San Diego Court held that the CCFD special tax election did not comply with the Charter and with applicable provisions of the California Constitution -- specifically Article XIIIA, section 4 (“Cities, Counties and special districts, by a two-thirds vote of the qualified electors of such district, may impose special taxes on such district….”) and Article XIIIC, section 2(d) (“No local government may impose, extend, or increase any special tax unless and until that tax is submitted to the electorate and approved by a two-thirds vote.”) -- because the electors in the CCFD election should have been the registered voters residing within the CCFD (the boundaries of which were coterminous with the boundaries of the City of San Diego).
As to the District, there were no registered voters within the District at the time of the election to authorize the Special Taxes. Significantly, the San Diego Court expressly stated that it was not addressing the validity of a landowner election to impose special taxes on property pursuant to the Act in situations where there are fewer than 12 registered voters. Therefore, by its terms, the San Diego Court’s holding does not apply to the special tax election in the District.
Moreover, Sections 53341 and 53359 of the Act establish a limited period of time in which special taxes levied under the Act may be challenged by a third party:
53341. Any action or proceeding to attack, review, set aside, void, or annul the levy of a special tax or an increase in a special tax pursuant to [the Act] shall be commenced within 30 days after the special tax is approved by the voters . . . . 53359. An action to determine the validity of bonds issued pursuant to [the Act] or the validity of any special taxes levied pursuant to [the Act] . . . shall . . . be commenced within 30 days after the voters approve the issuance of the bonds or the special tax . . . .
Landowner voters approved the Special Taxes and the issuance of bonds for the District in compliance with all applicable requirements of the Act on June 2, 2021. Therefore, pursuant to Sections 53341 and 53359 of the Act, the statute of limitations period to challenge the validity of the Special Tax has expired.
Because the San Diego Court expressly stated that it did not consider the facts presented by the District and because the period for challenging the Special Taxes has passed, the Authority believes the Special Taxes are valid and cannot be challenged. -56-
Pandemic Diseases
In recent years, public health authorities have warned of threats posed by outbreaks of disease and other public health threats. Pandemic diseases arising in the future could have significant adverse health and financial impacts throughout the world, leading to loss of jobs and personal financial hardships, and/or actions by federal, State and local governmental authorities to contain or mitigate the effects of an outbreak.
Taxpayer assistance measures may include deferral of due dates of property taxes, which was an assistance program during the COVID-19 pandemic, and with or without a deferral some taxpayers may be unable to make their property and Special Tax payments. No assurance can be given that the property tax payment dates will not be deferred in the future, which may cause a delay in the receipt of Special Taxes. In addition, home values may be affected by a reduction in demand stemming from personal finances, or general widespread economic circumstances resulting from pandemic diseases.
Cyber Security
The City, like many other public and private entities, relies on computer and other digital networks and systems to conduct its operations. As a recipient and provider of personal, private or other sensitive electronic information, the City is potentially subject to multiple cyber threats, including without limitation hacking, viruses, ransomware, malware and other attacks. The City’s technology department has conducted cybersecurity training, the uses spam filtering, routinely sends out e-mails to staff regarding cyber security in an attempt to keep staff informed of cyber security risks, and plans a more robust to be in place by mid-2022. No assurance can be given that the City’s efforts to manage cyber threats and attacks will be successful in all cases, or that any such attack will not materially impact the operations or finances of the City or the District, or the administration of the Bonds. The City is also reliant on other entities and service providers in connection with the administration of the Bonds, including without limitation the County tax collector for the levy and collection of Special Taxes, the Fiscal Agent, and the dissemination agent. No assurance can be given that the City, the District and these other entities will not be affected by cyber threats and attacks in a manner that may affect the Bond owners. -57-
CONSTITUTIONAL LIMITATIONS ON TAXATION AND APPROPRIATIONS Article XIIIA of the California Constitution, commonly known as “Proposition 13,” provides that each county will levy the maximum ad valorem property tax permitted by Proposition 13 and will distribute the proceeds to local agencies in accordance with an allocation formula based in part on pre-Proposition 13 ad valorem property tax rates levied by local agencies.
Article XIIIA limits the maximum ad valorem tax on real property to 1% of “full cash value,” which is defined as the County Assessor’s valuation of real property as shown on the 1975-76 tax bill under full cash value, or, thereafter, the appraised value of real property when purchased, newly constructed, or a change in ownership has occurred after the 1975 assessment. The full cash value may be adjusted annually to reflect increases of no more than 2% per year or decreases in the consumer price index or comparable local data, or declining property value caused by damage, destruction or other factors.
Article XIIIA exempts from the 1% tax limitation any taxes to repay indebtedness approved by the voters prior to July 1, 1978, and requires a vote of two-thirds of the qualified electorate to impose Special Taxes or any additional ad valorem, sales, or transaction taxes on real property. In addition, Article XIIIA requires the approval of two-thirds of all members of the State Legislature to change any State laws resulting in increased tax revenues. On June 3, 1986, California voters approved an amendment to Article XIIIA of the California Constitution to allow local governments and school districts to raise their property tax rates above the constitutionally mandated 1% ceiling for the purpose of paying off certain new general obligation debt issued for the acquisition or improvement of real property and approved by two-thirds of the votes cast by the qualified electorate. If any such voter-approved debt is issued, it may be on a parity with the lien of the Special Tax on the parcels within the District.
State and local government agencies in the State, and the State itself are subject to annual appropriation limits, imposed by Article XIIIB of the State Constitution. Article XIIIB prohibits government agencies and the State from spending “appropriations subject to limitation” in excess of the appropriations limits imposed. “Appropriations subject to limitation” are authorizations to spend “proceeds of taxes,” which consist of tax revenues, certain state subventions and certain other funds, including proceeds from regulatory licenses, user charges or other fees to the extent that such proceeds exceed the cost reasonably borne by such entity in providing the regulation, product or service. No limit is imposed on appropriations of funds which are not “proceeds of taxes” such as debt service on indebtedness existing or authorized before January 1, 1979, or subsequently authorized by the voters, appropriations required to comply with mandates of courts or the federal government, reasonable user charges or fees and certain other non-tax funds.
Articles XIIIC and Article XIIID similarly involve limitations on the ability of the State and local governments to impose taxes, fees and charges. See “SPECIAL RISK FACTORS – Voter Initiatives.”
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CONTINUING DISCLOSURE
The Authority, for and on behalf of the District, has covenanted for the benefit of owners of the 2024 Bonds to provide certain financial information and operating data relating to the District by not later than nine months after the end of the Authority’s fiscal year (presently June 30) in each year (the “Authority Annual Report”) commencing with its report for the 2023-24 fiscal year (due April 1, 2025) and to provide notices of the occurrence of certain enumerated events.
The Authority Annual Report and notices of listed events will be filed with the Municipal Securities Rulemaking Board via its EMMA website. The covenants of the Authority have been made in order to assist the Underwriter in complying with Securities Exchange Commission Rule 15c2-12(b)(5) (the “Rule”). The specific nature of the information to be contained in the Annual Report, the Developer Periodic Reports or the notices of listed events by the City and KB is summarized in “APPENDIX D — Forms of Continuing Disclosure Certificate.” The Authority believes that for the past 5-year period it currently is in material compliance with all of its continuing disclosure undertakings. The Authority has engaged Goodwin Consulting Group to assist with the preparation and filing of its continuing disclosure reports, including as to the District, in order to ensure compliance with future continuing disclosure obligations. [Underwriter to Confirm]
UNDERWRITING
The Bonds were purchased through negotiation by Hilltop Securities, Inc., as underwriter (the “Underwriter”). The Underwriter agreed to purchase the Bonds at a price of $_________ (which is equal to the par amount of the Bonds, less a net original issue discount of $_________ and less the Underwriter’s discount of $_________). The initial public offering prices set forth on the cover page hereof may be changed by the Underwriter. The Underwriter may offer and sell the Bonds to certain dealers and others at a price lower than the public offering prices set forth on the cover page hereof.
MUNICIPAL ADVISOR
The Authority 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 is an independent financial advisory firm and is not engaged in the business of underwriting, trading or distributing municipal securities or other public securities.
LEGAL OPINION
The validity of the Bonds and certain other legal matters are subject to the approving opinion of Jones Hall, a Professional Law Corporation, Bond Counsel. A complete copy of the proposed form of Bond Counsel opinion is set forth in “APPENDIX E – Form of Opinion of Bond -59-
Counsel,” and the final opinion will be made available to registered owners of the Bonds at the time of delivery. The fees of Bond Counsel are contingent upon the sale and delivery of the Bonds.
TAX MATTERS
In the opinion of Jones Hall, A Professional Law Corporation, San Francisco, California, Bond Counsel, subject, however to the qualifications set forth below, under existing law, the interest on the 2024 Bonds is excluded from gross income for federal income tax purposes and such interest is not an item of tax preference for purposes of the federal alternative minimum tax.
Interest on the 2024 Bonds may be subject to the corporate alternative minimum tax.
The opinions set forth in the preceding paragraph are subject to the condition that the District comply with all requirements of the Internal Revenue Code of 1986, as amended (the “Tax Code”) that must be satisfied subsequent to the issuance of the 2024 Bonds. The District has covenanted to comply with each such requirement. Failure to comply with certain of such requirements may cause the inclusion of such interest in gross income for federal income tax purposes to be retroactive to the date of issuance of the 2024 Bonds.
If the initial offering price to the public (excluding bond houses and brokers) at which a 2024 Bond is sold is less than the amount payable at maturity thereof, then such difference constitutes “original issue discount” for purposes of federal income taxes and State of California personal income taxes. If the initial offering price to the public (excluding bond houses and brokers) at which a 2024 Bond is sold is greater than the amount payable at maturity thereof, then such difference constitutes “original issue premium” for purposes of federal income taxes and State of California personal income taxes. De minimis original issue discount and original issue premium is disregarded.
Under the Tax Code, original issue discount is treated as interest excluded from federal gross income and exempt from State of California personal income taxes to the extent properly allocable to each owner thereof subject to the limitations described in the first paragraph of this section. The original issue discount accrues over the term to maturity of the 2024 Bond on the basis of a constant interest rate compounded on each interest or principal payment date (with straight-line interpolations between compounding dates). The amount of original issue discount accruing during each period is added to the adjusted basis of such 2024 Bonds to determine taxable gain upon disposition (including sale, redemption, or payment on maturity) of such 2024 Bond. The Tax Code contains certain provisions relating to the accrual of original issue discount in the case of purchasers of the 2024 Bonds who purchase the 2024 Bonds after the initial offering of a substantial amount of such maturity. Owners of such 2024 Bonds should consult their own tax advisors with respect to the tax consequences of ownership of 2024 Bonds with original issue discount, including the treatment of purchasers who do not purchase in the original offering, the allowance of a deduction for any loss on a sale or other disposition, and the treatment of accrued original issue discount on such 2024 Bonds under federal individual and corporate alternative minimum taxes.
Under the Tax Code, original issue premium is amortized on an annual basis over the term of the 2024 Bond (said term being the shorter of the 2024 Bond’s maturity date or its call date).
The amount of original issue premium amortized each year reduces the adjusted basis of the owner of the 2024 Bond for purposes of determining taxable gain or loss upon disposition. The amount of original issue premium on a 2024 Bond is amortized each year over the term to maturity of the 2024 Bond on the basis of a constant interest rate compounded on each interest or principal -60-
payment date (with straight-line interpolations between compounding dates). Amortized 2024 Bond premium is not deductible for federal income tax purposes. Owners of premium 2024 Bonds, including purchasers who do not purchase in the original offering, should consult their own tax advisors with respect to State of California personal income tax and federal income tax consequences of owning such 2024 Bonds.
In the further opinion of Bond Counsel, interest on the 2024 Bonds is exempt from California personal income taxes.
Owners of the 2024 Bonds should also be aware that the ownership or disposition of, or the accrual or receipt of interest on, the 2024 Bonds may have federal or state tax consequences other than as described above. Bond Counsel expresses no opinion regarding any federal or state tax consequences arising with respect to the 2024 Bonds other than as expressly described above.
NO RATINGS
The Authority has not applied to a rating agency for the assignment of a rating to the 2024 Bonds and does not contemplate applying for a rating.
NO LITIGATION
At the time of delivery of and payment for the 2024 Bonds, the Authority Attorney will deliver his opinion that to the best of its knowledge there is no action, suit, proceeding, inquiry or investigation at law or in equity before or by any court or regulatory agency pending against the Authority affecting its existence or the titles of its officers to office or seeking to restrain or to enjoin the issuance, sale or delivery of the 2024 Bonds, the application of the proceeds thereof in accordance with the Fiscal Agent Agreement, or the collection or application of the Special Tax to pay the principal of and interest on the 2024 Bonds, or in any way contesting or affecting the validity or enforceability of the 2024 Bonds, the Fiscal Agent Agreement or any action of the Authority contemplated by any of said documents, or in any way contesting the completeness or accuracy of this Official Statement or any amendment or supplement thereto, or contesting the powers of the Authority or its authority with respect to the 2024 Bonds or any action of the Authority contemplated by any of said documents.
EXECUTION
The execution and delivery of this Official Statement by the Authority has been duly authorized by the Board on behalf of the District.
WEST PATTERSON FINANCING AUTHORITY
By:
Executive Director
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APPENDIX A
THE CITY OF PATTERSON AND STANISLAUS COUNTY DEMOGRAPHIC INFORMATION The District is located in the City of Patterson (“City”) in Stanislaus County (“County”), California (“State”). The financial and economic data for the City are presented for information purposes only. The Bonds are not a debt or obligation of the City, the West Patterson Financing Authority (“Authority”), the County or the State, but are a limited obligation of the Authority secured solely by the funds held pursuant to the Fiscal Agent Agreement.
The County is located approximately 90 minutes southeast from both the City of San Francisco and Silicon Valley, and is known as the heartland of California’s Central Valley. The City lies in the central area of the County.
With a current population of 24,317, the City is a rural, small town surrounded by agricultural land. With agriculture as its primary economic base, orchards of apricots, almonds and walnuts, as well as row crops of dry beans, tomatoes, broccoli, spinach, peas and melons play an important role in Patterson’s history. Patterson is the apricot capital of the world.
Municipal Government
The City Council of the City is composed of five members, a Mayor and four Council Members, elected at large by the citizens of Patterson. The Mayor serves a two-year term, and Council Members serve four-year overlapping terms. The Mayor presides over the meetings and performs other ceremonial duties. As the policy-making legislative body, the City Council is responsible for the enactment of all programs, policies and services of the City.
The City Council acts upon all legislative matters concerning the City, approving and adopting all ordinances, resolutions, contracts and other matters requiring overall policy decisions and leadership. The Council appoints the City Manager, City Attorney and various other commissions, boards and citizen advisory committees, all of which ensure broad-based input into the affairs of the City.
Population
The following table lists population figures for the County and City for the last five calendar years for which data is available.
Table A-1
CITY OF PATTERSON, STANISLAUS COUNTY,
STATE OF CALIFORNIA
Population Estimates, as of January 1
2019 2020 2021 2022 2023
Patterson 23,086 23,150 23,658 24,142 24,317
Stanislaus County 553,131 554,931 551,353 548,719 545,939 State of California 39,605,361 39,648,938 39,286,510 39,078,674 38,940,231 Source: California State Department of Finance.
A-2
Principal Employers
The following table shows the principal employers in the City for fiscal year ending June 30, 2022.
PRINCIPAL EMPLOYERS
City of Patterson
As of June 30, 2022
Employer
Number of
Employees
Patterson Joint Unified School District 759
Amazon Fulfillment Center 702
CVS Caremaker Distribution Center 521
Grainger Distribution Center 433
Walmart Supercenter 296
City of Patterson 248
Traina Foods 201
King’s Roofing 139
Restoration Hardware 137
Advanced Linen Service 85
Total – Top Ten 3,521
Total City-Wide Employment 10,200
Source: City of Patterson Comprehensive Annual Financial Report for Fiscal Year 2021-22.
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Employment and Industry
The unemployment rate in Stanislaus County was 6.5 percent in July 2023, down from a revised 6.8 percent in June 2023, and above the year-ago estimate of 5.3 percent. This compares with an unadjusted unemployment rate of 4.8 percent for California and 3.8 percent for the nation during the same period. The following sets forth employment information for the Modesto MSA in the County for the prior five years.
Table A-2
MODESTO MSA, STANISLAUS COUNTY
Civilian Labor Force, Employment and Unemployment; Employment by Industry (Annual Averages)
March 2022 Benchmark
2018 2019 2020 2021 2022
Civilian Labor Force (1) 243,100 242,900 242,500 240,200 242,300 Employment 227,300 228,100 215,900 220,200 229,100
Unemployment 15,700 14,800 26,600 20,000 13,100
Unemployment Rate 6.5% 6.1% 11.0% 8.3% 5.4%
Wage and Salary Employment: (2)
Agriculture 14,400 14,900 14,500 14,000 14,200
Mining, Logging, and Construction 10,200 10,500 9,800 10,700 11,400 Manufacturing 21,600 21,400 21,200 21,800 22,800
Wholesale Trade 6,300 6,200 5,900 5,600 5,700
Retail Trade 23,200 22,800 21,900 23,000 23,200
Transportation, Warehousing & Utilities 7,900 8,700 9,000 9,100 9,900 Information 1,000 1,000 800 800 800
Financial Activities 5,300 5,300 5,100 4,900 5,000
Professional & Business Services 15,400 15,300 15,100 15,400 15,300 Educational & Health Services 33,600 34,700 34,600 35,000 35,700 Leisure & Hospitality 19,300 19,200 15,800 18,200 20,600 Other Services 5,800 5,900 5,100 5,500 6,100
Federal Government 800 800 900 700 700
State Government 2,200 2,100 2,100 2,000 2,200
Local Government 26,600 27,400 25,900 25,700 26,800
Total, All Industries 193,600 196,200 187,600 192,400 200,300 (1) Labor force data is by place of residence; includes self-employed individuals, unpaid family workers, household domestic workers, and workers on strike.
(2) Industry employment is by place of work; excludes self-employed individuals, unpaid family workers, household domestic workers, and workers on strike.
(3) Totals may not add due to rounding.
Source: State of California Employment Development Department.
A-4
The following tables list the major employers in the County as of September 2023.
Table A-3
STANISLAUS COUNTY
Major Employers
(As of September 2023)
Employer Name Location Industry
Amazon Fulfillment Ctr Patterson Mail Order Fulfillment Service Bartles & Jaymes Co Modesto Wineries (mfrs)
Bronco Wine Co Ceres Wineries (mfrs)
Conagra Brands Inc Oakdale Food Products (whls)
Del Monte Foods Inc Modesto Food Products & Manufacturers Duarte Nursery Inc Hughson Nurserymen
E & J Gallo Winery Modesto Wineries (mfrs)
Emanuel Medical Ctr Turlock Hospitals
Foster Farms Turlock Poultry Processing Plants (mfrs)
Frito-Lay Inc Modesto Potato Chips (whls)
Health Services Agency Modesto Clinics
Memorial Medical Ctr Modesto Hospitals
Modesto Bee Modesto Newspapers (publishers/Mfrs)
Modesto Irrigation District Modesto Utilities
Oak Valley Hospital District Oakdale Health Care Management Pacific Southwest Contnr LLC Modesto Corrugated & Solid Fiber Boxes (mfrs) Patterson City Office Modesto City Government-Executive Offices Stanislaus County Welfare Dept Modesto Government Offices-County Storer Coachways Modesto Buses-Charter & Rental
Sysco Central Ca-Whls Rstrnt Modesto Food Products (whls) Temsa Turlock Nonclassified Establishments
Turlock Irrigation District Turlock Electric Companies
USPS Modesto Post Offices
Vsp Products Inc Newman Dried/Dehydrated Fruits Vegetables Walmart Modesto Department Stores
Source: State of California Employment Development Department; extracted from America’s Labor Market Information System Employer Database, 2023 2nd Edition.
A-5
Building Activity
The following charts show the total number of residential building permits issued in the City and the County, the value of those permits and the value of non-residential permits, for each of the last five calendar years for which data is available, from calendar years 2018 through 2022.
Table A-4
CITY OF PATTERSON
Total Building Permit Valuations
(Valuations In Thousands)
2018 2019 2020 2021 2022
Permit Valuation
New Single-family $7,000.5 $5,251.7 $22,943.8 $24,297.3 $35,964.2 New Multi-family 0.0 765.2 0.0 0.0 5,040.2
Res. Alterations/Additions 536.1 16.0 83.6 210.7 1,473.6 Total Residential 7,536.6 6,032.9 23,027.4 24,508.0 42,478.0 New Commercial 10,290.4 4,181.5 1,609.9 2,504.1 3,997.1 New Industrial 0.0 0.0 0.0 0.0 0.0
New Other 1,385.1 926.5 888.0 1,616.0 4,209.2
Com. Alterations/Additions 1,442.5 1,561.6 226.1 780.9 1,149.1 Total Nonresidential 13,118.0 6,669.6 2,724.0 4,901.0 9,355.4 New Dwelling Units
Single Family 26 28 98 86 84
Multiple Family 0 4 0 0 30
TOTAL 26 32 98 86 114
Source: Construction Industry Research Board, Building Permit Summary.
Table A-5
STANISLAUS COUNTY
Total Building Permit Valuations
(Valuations in Thousands)
2018 2019 2020 2021 2022
Permit Valuation
New Single-family $141,972.2 $117,995.9 $138,915.1 $138,915.1 $217,803.9 New Multi-family 1,268.9 19,128.6 18,152.6 18,152.6 12,867.1 Res. Alterations/Additions 33,278.3 36,671.9 31,153.4 31,153.3 40,236.7 Total Residential 176,519.4 173,796.4 188,221.1 188,221.0 270,907.7 New Commercial 96,200.9 97,980.1 65,798.9 65,798.9 131,558.5 New Industrial 12,626.4 30,302.6 17,429.8 17,429.8 120.0 New Other 87,441.3 30,777.0 30,371.3 30,371.3 54,393.4
Com. Alterations/Additions 54,449.5 104,465.8 68,270.3 68,270.3 155,867.6 Total Nonresidential 250,718.1 263,525.5 181,870.3 181,870.3 341,939.5 New Dwelling Units
Single Family 684 561 646 646 842
Multiple Family 10 178 110 110 109
TOTAL 694 739 756 756 951
Source: Construction Industry Research Board, Building Permit Summary.
A-6
Taxable Sales
A summary of historic taxable sales within the City during the past five years in which data is available is shown in the following table. Total taxable sales during the first quarter of calendar year 2023 in the City of Patterson were reported to be $254,375,593, a 3.50% increase over the total taxable sales of $245,764,498 reported during calendar year 2022.
Table A-6
CITY OF PATTERSON
Taxable Transactions
(Dollars In Thousands)
Retail Stores Total All Outlets
Number
of Permits
Taxable
Transactions
Number
of Permits
Taxable
Transactions
2018 296 $234,336 432 $480,660
2019 288 257,099 433 505,236
2020 305 256,562 472 570,363
2021 317 751,927 463 1,061,667
2022 329 721,281 489 1,081,592
Source: State Department of Tax and Fee Administration.
A summary of historic taxable sales within the County during the past five years in which data is available is shown in the following table. Total taxable sales during the first quarter of calendar year 2023 in the County were reported to be $2,917,482,064 a 3.89% decrease of the total taxable sales of $3,035,468,974 reported during calendar year 2022.
Table A-7
STANISLAUS COUNTY
Taxable Transactions
(Dollars in Thousands)
Retail Stores Total All Outlets
Number
of Permits
Taxable
Transactions
Number
of Permits
Taxable
Transactions
2018 7,297 $6,245,295 11,647 $9,298,941
2019 7,442 6,465,963 12,084 9,679,826
2020 8,329 6,882,397 13,500 10,087,295
2021 7,848 8,695,930 12,854 12,336,565
2022 7,903 8,659,163 13,158 12,972,355
Source: State Department of Tax and Fee Administration.
A-7
Effective Buying Income
“Effective Buying Income” is defined as personal income less personal tax and nontax payments, a number often referred to as “disposable” or “after-tax” income. Personal income is the aggregate of wages and salaries, other labor-related income (such as employer contributions to private pension funds), proprietor’s income, rental income (which includes imputed rental income of owner-occupants of non-farm dwellings), dividends paid by corporations, interest income from all sources, and transfer payments (such as pensions and welfare assistance). Deducted from this total are personal taxes (federal, state and local), nontax payments (fines, fees, penalties, etc.) and personal contributions to social insurance.
According to U.S. government definitions, the resultant figure is commonly known as “disposable personal income.”
The following table summarizes the total effective buying income for the City, the County, the State and the United States for the period 2019 through 2023.
Table A-8
CITY OF PATTERSON, STANISLAUS COUNTY,
STATE OF CALIFORNIA
Effective Buying Income
As of January 1, 2019 through 2023
Year Area
Total Effective
Buying Income
(000’s Omitted)
Median Household
Effective Buying
Income
2019 City of Patterson $435,633 $53,695
Stanislaus County 11,772,166 51,340
California 1,183,264,399 62,637
United States 9,017,967,563 52,841
2020 City of Patterson $469,838 $63,143
Stanislaus County 12,241,056 55,212
California 1,243,564,816 65,870
United States 9,487,165,436 55,303
2021 City of Patterson $492,209 $64,872
Stanislaus County 12,472,918 55,452
California 1,290,894,604 67,956
United States 9,809,944,764 56,790
2022 City of Patterson $541,652 $70,358
Stanislaus County 13,889,615 63,128
California 1,452,426,153 77,058
Unite States 11,208,582,541 64,448
2023 City of Patterson $561,791 $69,561
Stanislaus County 14,125,584 63,716
California 1,461,799,662 77,175
United States 11,454,846,397 65,326
Source: Claritas, LLC.
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APPENDIX B
RATE AND METHOD OF APPORTIONMENT OF SPECIAL TAX
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APPENDIX C
THE APPRAISAL
D-1
APPENDIX D
FORM OF CONTINUING DISCLOSURE AGREEMENT
This CONTINUING DISCLOSURE AGREEMENT (this “Disclosure Agreement”) is executed and delivered by the WEST PATTERSON FINANCING AUTHORITY (the “Authority”) in connection with the execution and delivery of its West Patterson Financing Authority Community Facilities District No. 2018-1 (Villages of Patterson) Special Tax Bonds Series 2024 (the “Bonds”). The Bonds are being executed and delivered pursuant to a Fiscal Agent Agreement, dated as of October 1, 2021, as supplemented and amended by Supplemental Agreement No. 1 to Fiscal Agent Agreement dated as of February 1, 2024 (together, the “Fiscal Agent Agreement”) by and between the Authority and U.S. Bank Trust Company, National Association, as successor fiscal agent (the “Fiscal Agent”).
The Authority covenants and agrees as follows:
Section 1. Purpose of the Disclosure Agreement. This Disclosure Agreement is being executed and delivered by the Authority for the benefit of the holders 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 above and in the Fiscal Agent Agreement, which apply to any capitalized term used in this Disclosure Agreement unless otherwise defined in this Section 2, the following capitalized terms shall have the following meanings:
“Annual Report” means any Annual Report provided by the Authority pursuant to, and as described in, Sections 3 and 4 of this Disclosure Agreement. “Annual Report Date” means the date that is nine months after the end of the Authority’s fiscal year (currently April 1 based on the Authority’s fiscal year end of June 30). “Dissemination Agent” means Goodwin Consulting Group, Inc., or any successor Dissemination Agent designated in writing by the Authority and which has filed with the Authority a written acceptance of such designation.
“Listed Events” means any of the events listed in Section 5(a) of this Disclosure Agreement.
“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 repository of disclosure information that may be designated by the Securities and Exchange Commission as such for purposes of the Rule in the future. “Official Statement” means the final official statement executed by the Authority in connection with the issuance of the Bonds.
“Participating Underwriter” shall mean any of the original underwriters of the Bonds. “Rule” means Rule 15c2-12(b)(5) adopted by the Securities and Exchange Commission under the Securities Exchange Act of 1934, as it may be amended from time to time.
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Section 3. Provision of Annual Reports.
(a) The Authority shall, or shall cause the Dissemination Agent to, not later than the Annual Report Date, commencing April 1, 2025, with the report for the 2023-24 fiscal year, provide to the MSRB, in an electronic format as prescribed by the MSRB, an Annual Report that is consistent with the requirements of Section 4 of this Disclosure Agreement. Not later than 15 Business Days prior to the Annual Report Date, the Authority shall provide the Annual Report to the Dissemination Agent (if other than the Authority). If by 15 Business Days prior to the Annual Report Date the Dissemination Agent (if other than the Authority) has not received a copy of the Annual Report, the Dissemination Agent shall contact the Authority to determine if the Authority is in compliance with the previous sentence. The Annual Report may be submitted as a single document or as separate documents comprising a package, and may include by reference other information as provided in Section 4 of this Disclosure Agreement; provided that the audited financial statements of the Authority may be submitted separately from the balance of the Annual Report, and later than the Annual Report Date, if not available by that date. If the Authority’s fiscal year changes, it shall give notice of such change in the same manner as for a Listed Event under Section 5(c). The Authority 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 the Authority hereunder. (b) If the Authority does not provide (or cause the Dissemination Agent to provide) an Annual Report by the Annual Report Date, the Authority shall provide (or cause the Dissemination Agent to provide) to the MSRB, in an electronic format as prescribed by the MSRB, a notice in the form required by the MSRB.
(c) With respect to each Annual Report, the Dissemination Agent shall:
(i) determine prior to each Annual Report Date the then-applicable rules and electronic format prescribed by the MSRB for the filing of annual continuing disclosure reports; and
(ii) if the Dissemination Agent is other than the Authority , file a report with the Authority certifying that the Annual Report has been provided pursuant to this Disclosure Agreement, and stating the date it was provided.
Section 4. Content of Annual Reports. The Authority’s Annual Report shall contain or incorporate by reference the following:
(a) The Authority’s audited financial statements prepared in accordance with generally accepted accounting principles as promulgated to apply to governmental entities from time to time by the Governmental Accounting Standards Board. If the Authority’s audited financial statements are not available by the Annual Report Date, the Annual Report shall contain unaudited financial statements in a format similar to the financial statements contained in the Official Statement, and the audited financial statements shall be filed in the same manner as the Annual Report when they become available.
(b) The following information:
(i) Principal amount of all outstanding bonds of the District.
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(ii) Balance in the Improvement Fund.
(iii) Balance in debt service reserve fund, and statement of the reserve fund requirement. Statement of projected reserve fund draw, if any. (iv) Balance in other funds and accounts held by Issuer or fiscal agent related to the Bonds.
(v) Additional debt authorized by the Authority and payable from or secured by assessments or special taxes with respect to property within the District. (vi) The Special Tax levy, the delinquency rate, total amount of delinquencies, number of parcels delinquent in payment for the five most recent fiscal years. (vii) Notwithstanding the June 30th reporting date for the Annual Report, the following information shall be reported as of the last day of the month immediately preceding the date of the Annual Report rather than as of June 30th. Identity of each delinquent taxpayer responsible for 5 percent or more of total special tax/assessment levied, and the following information: assessor parcel number, assessed value of applicable properties, amount of Special Tax levied, amount delinquent by parcel number and status of foreclosure proceedings. If any foreclosure has been completed, summary of results of foreclosure sales or transfers.
(viii) Most recently available total assessed value of all parcels subject to the special tax or assessment.
(ix) List of landowners and assessor’s parcel number of parcels subject to 20 percent or more of the Special Tax levy including the following information: development status to the extent shown in Authority records, land use classification, assessed value (land and improvements).
(c) In addition to any of the information expressly required to be provided under this Disclosure Agreement, the Authority shall provide such further material 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.
(d) 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 Authority or related public entities, which are available to the public on the MSRB’s Internet web site or filed with the Securities and Exchange Commission. The Authority shall clearly identify each such other document so included by reference.
Section 5. Reporting of Significant Events.
(a) The Authority shall give, or cause to be given, notice of the occurrence of any of the following Listed Events with respect to the Bonds:
(1) Principal and interest payment delinquencies.
(2) Non-payment related defaults, if material.
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(3) Unscheduled draws on debt service reserves reflecting financial difficulties.
(4) Unscheduled draws on credit enhancements reflecting financial difficulties.
(5) Substitution of credit or liquidity providers, or their failure to perform. (6) 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.
(7) Modifications to rights of security holders, if material. (8) Bond calls, if material, and tender offers.
(9) Defeasances.
(10) Release, substitution, or sale of property securing repayment of the securities, if material.
(11) Rating changes.
(12) Bankruptcy, insolvency, receivership or similar event of the City or other obligated person.
(13) The consummation of a merger, consolidation, or acquisition involving the Authority or an obligated person, or the sale of all or substantially all of the assets of the Authority 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. (14) Appointment of a successor or additional trustee or the change of name of a trustee, if material.
(15) Incurrence of a financial obligation of the Authority, if material, or agreement to covenants, events of default, remedies, priority rights, or other similar terms of a financial obligation of the Authority, any of which affect security holders, if material (for the definition of “financial obligation,” see clause (e) below).
(16) Default, event of acceleration, termination event, modification of terms, or other similar events under the terms of a financial obligation of the Authority, any of which reflect financial difficulties (for the definition of “financial obligation,” see clause (e) below).
(b) Whenever the Authority obtains knowledge of the occurrence of a Listed Event, the Authority shall, or shall cause the Dissemination Agent (if not the Authority) to, file a notice D-5
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 Listed Events described in subsections (a)(8) and (9) 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 Bond holders. (c) The Authority acknowledges that the events described in subparagraphs (a)(2), (a)(7), (a)(8) (if the event is a Bond call), (a)(10), (a)(13), (a)(14) and (a)(15) of this Section 5 contain the qualifier “if material” and that subparagraph (a)(6) also contains the qualifier “material” with respect to certain notices, determinations or other events affecting the tax status of the Bonds. The Authority 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 Authority obtains knowledge of the occurrence of any of these Listed Events, the Authority 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 Authority will cause a notice to be filed as set forth in paragraph (b) above.
(d) For purposes of this Disclosure Agreement, any event described in paragraph (a)(12) above is considered to occur when any of the following occur: the appointment of a receiver, fiscal agent, or similar officer for the Authority 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 Authority, 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 Authority. (e) For purposes of Section 5(a)(15) and 5(a)(16), “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 Municipal Securities Rulemaking Board consistent with the Rule.
Section 6. Identifying Information for Filings with the MSRB. All documents provided to the MSRB pursuant to this Disclosure Agreement shall be accompanied by identifying information as prescribed by the MSRB.
Section 7. Termination of Reporting Obligation. The Authority’s obligations under this Disclosure Agreement shall terminate upon the legal defeasance, prior redemption or payment in full of all of the Bonds. If such termination occurs prior to the final maturity of the Bonds, the Authority shall give notice of such termination in the same manner as for a Listed Event under Section 5(c).
Section 8. Dissemination Agent. The Authority 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 Dissemination Agent, with or without appointing a successor Dissemination Agent. Any Dissemination Agent may resign by providing 30 days’ written notice to the Authority.
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Section 9. Amendment; Waiver. Notwithstanding any other provision of this Disclosure Agreement, the Authority may amend this Disclosure Agreement, and any provision of this Disclosure Agreement may be waived, provided that the following conditions are satisfied:
(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; (b) the undertakings herein, as proposed to be amended or waived, would, in the opinion of nationally recognized bond counsel, have complied with the requirements of the Rule at the time of the primary offering of the Bonds, after taking into account any amendments or interpretations of the Rule, as well as any change in circumstances; and (c) the proposed amendment or waiver either (i) is approved by holders of the Bonds in the manner provided in the Fiscal Agent Agreement for amendments to the Fiscal Agent Agreement 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.
If the annual financial information or operating data to be provided in the Annual Report is amended pursuant to the provisions hereof, the first Annual Report filed pursuant hereto containing the amended operating data or financial information shall explain, in narrative form, the reasons for the amendment and the impact of the change in the type of operating data or financial information being provided.
If an amendment is made to this Disclosure Agreement modifying the accounting principles to be followed in preparing financial statements, the Annual Report for the year in which the change is made shall present a comparison between the financial statements or information prepared on the basis of the new accounting principles and those prepared on the basis of the former accounting principles. The comparison shall include a qualitative discussion of the differences in the accounting principles and the impact of the change in the accounting principles on the presentation of the financial information, in order to provide information to investors to enable them to evaluate the ability of the Authority to meet its obligations. To the extent reasonably feasible, the comparison shall be quantitative.
A notice of any amendment made pursuant to this Section 9 shall be filed in the same manner as for a Listed Event under Section 5(b).
Section 10. Additional Information. Nothing in this Disclosure Agreement shall be deemed to prevent the Authority 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 Authority 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 Authority 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.
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Section 11. Default. If the Authority fails to comply with any provision of this Disclosure Agreement, the Participating Underwriter or 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 Authority 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 Fiscal Agent Agreement, and the sole remedy under this Disclosure Agreement in the event of any failure of the Authority to comply with this Disclosure Agreement shall be an action to compel performance.
Section 12. Duties, Immunities and Liabilities of Dissemination Agent. (a) The Dissemination Agent shall have only such duties as are specifically set forth in this Disclosure Agreement, and the Authority agrees to indemnify and save the Dissemination Agent, its officers, directors, employees and agents, harmless against any loss, expense and liabilities which they may incur arising out of or in the exercise or performance of its powers and duties hereunder, including the costs and expenses (including attorneys fees) of defending against any claim of liability, but excluding liabilities due to the Dissemination Agent’s negligence or willful misconduct. The Dissemination Agent shall have no duty or obligation to review any information provided to it by the Authority hereunder, and shall not be deemed to be acting in any fiduciary capacity for the Authority, the Bond holders or any other party. The obligations of the Authority under this Section shall survive resignation or removal of the Dissemination Agent and payment of the Bonds.
(b) The Dissemination Agent shall be paid compensation by the Authority for its services provided hereunder in accordance with its schedule of fees as amended from time to time, and shall be reimbursed for all expenses, legal fees and advances made or incurred by the Dissemination Agent in the performance of its duties hereunder.
Section 13. Beneficiaries. This Disclosure Agreement shall inure solely to the benefit of the Authority, the Dissemination Agent, the Participating Underwriter and the holders and beneficial owners from time to time of the Bonds, and shall create no rights in any other person or entity.
Section 14. Counterparts. This Disclosure Agreement 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.
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IN WITNESS WHEREOF, the parties hereto have executed this Disclosure Certificate as of the date first above written.
WEST PATTERSON FINANCING
AUTHORITY, for and on behalf of West
Patterson Financing Authority Community
Facilities District No. 2018-1 (Villages of
Patterson)
By:
Authorized Officer
GOODWIN CONSULTING GROUP, INC.,
as Dissemination Agent
By:
Authorized Officer
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APPENDIX E
FORM OF OPINION OF BOND COUNSEL
________________, 2024
Board of Directors
West Patterson Financing Authority
1 Plaza
Patterson, California 95363
OPINION: $____________ West Patterson Financing Authority Community Facilities District No. 2018-1 (Villages of Patterson) Special Tax Bonds, Series 2024 Members of the Board:
We have acted as bond counsel to the West Patterson Financing Authority (the “Authority”) in connection with the issuance by the Authority of its $____________ West Patterson Financing Authority Community Facilities District No. 2018-1 (Villages of Patterson) Special Tax Bonds, Series 2024 (the “Bonds”), pursuant to the Mello-Roos Community Facilities Act of 1982, as amended, constituting Section 53311, et seq. of the California Government Code (the “Act”) and a Fiscal Agent Agreement dated as of October 1, 2021, as supplemented and amended by a Supplemental Agreement No. 1 to Fiscal Agent Agreement dated as of February 1, 2024 (together, the “Fiscal Agent Agreement”) by and between the Authority, for and on behalf of the West Patterson Financing Authority Community Facilities District No. 2018- 1 (Villages of Patterson), and U.S. Bank Trust Company, National Association, as successor fiscal agent. We have examined the law and such certified proceedings and other papers as we deem necessary to render this opinion.
As to questions of fact material to our opinion, we have relied upon representations of the Authority contained in the Fiscal Agent Agreement, and in the certified proceedings and other certifications of public officials furnished to us, without undertaking to verify the same by independent investigation.
Based upon the foregoing, we are of the opinion, under existing law, as follows:
1. The Authority is duly created and validly existing as a public body, corporate and politic, with the power to adopt the resolution authorizing the issuance of the Bonds (the “Resolution”), enter into the Fiscal Agent Agreement and perform the agreements on its part contained therein, and issue the Bonds.
2. The Bonds have been duly authorized, executed and delivered by the Authority and are valid and binding limited obligations of the Authority, payable solely from the sources provided therefor in the Fiscal Agent Agreement.
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3. The Fiscal Agent Agreement has been duly entered into by the Authority and constitutes a valid and binding obligation of the Authority enforceable upon the Authority.
4. Pursuant to the Act, the Fiscal Agent Agreement creates a valid lien on the funds pledged by the Fiscal Agent Agreement.
3. The 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. The opinions set forth in the preceding sentence are subject to the condition that the Authority comply with all requirements of the Internal Revenue Code of 1986 that must be satisfied subsequent to the issuance of the Bonds in order that interest thereon be, or continue to be, excluded from gross income for federal income tax purposes. The Authority has covenanted to comply with each such requirement. Failure to comply with certain of such requirements may cause the inclusion of interest on the Bonds in gross income for federal income tax purposes to be retroactive to the date of issuance of the Bonds.
6. The interest on the Bonds is exempt from personal income taxation imposed by the State of California.
Interest on the Bonds may be subject to the corporate alternative minimum tax. We express no opinion regarding other federal tax consequences arising with respect to the ownership, sale or disposition of the Bonds, or the amount, accrual or receipt of interest on the Bonds.
The rights of the owners of the Bonds and the enforceability of the Bonds, the Resolution and the Fiscal Agent Agreement may be subject to bankruptcy, insolvency, reorganization, moratorium and other similar laws affecting creditors’ rights generally, and by equitable principles, whether considered at law or in equity.
This opinion is given as of the date hereof, and we assume no obligation to revise or supplement this opinion to reflect any facts or circumstances that may hereafter come to our attention, or any changes in law that may hereafter occur. Moreover, our opinions are not a guarantee of a particular result, and are not binding on the Internal Revenue Service or any court; rather, our opinions represent our legal judgment based upon our review of existing law that we deem relevant to such opinions and in reliance upon the representations and covenants referenced above. Our engagement with respect to this matter has terminated as of the date hereof.
Respectfully submitted,
A Professional Law Corporation
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APPENDIX F
DTC AND THE BOOK-ENTRY SYSTEM
Book-Entry System
DTC will act as securities depository for the Bonds. The Bonds will be issued as fullyregistered bonds registered in the name of Cede & Co. (DTC’s partnership nominee). One fully-registered Bond will be issued for each maturity of the Bonds, each in the aggregate principal amount of such maturity, and will be deposited with DTC. DTC 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 securities that its participants (the “Participants”) deposit with DTC. DTC also facilitates the settlement among Participants of securities transactions, such as transfers and pledges, in deposited securities through electronic computerized book-entry changes in Participants’ accounts, thereby eliminating the need for physical movement of securities certificates. “Direct Participants” include securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations. DTC is owned by a number of its Direct Participants and by the New York Stock Exchange, Inc., the American Stock Exchange, Inc. and the National Association of Securities Dealers, Inc. Access to the DTC system is also available to others such as securities brokers and dealers, banks, and trust companies that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly (“Indirect Participants”). The Rules applicable to DTC and its Participants are on file with the Securities and Exchange Commission.
Purchases of the 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, but Beneficial Owners are 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 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 Participants with DTC are registered in the name of DTC’s partnership nominee, Cede & Co. The deposit of Bonds with DTC and their registration in the name of Cede & Co. effect no change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the Bonds; DTC’s records reflect only the identity of the Direct Participants to whose accounts such securities are credited, which may or may not be the Beneficial Owners. The 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.
Redemption notices shall be sent to Cede & Co. If less than all of the bonds within an issue are being redeemed, DTC’s practice is to determine by lot the amount of the interest of F-2
each Direct Participant in such issue to be redeemed. Neither DTC nor Cede & Co. will consent or vote with respect to the Bonds. Under its usual procedures, DTC mails an Omnibus Proxy to an issuer 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 the Bonds are credited on the record date (identified in a listing attached to the Omnibus Proxy).
Principal, mandatory redemption and interest payments on the Bonds will be made to DTC. DTC’s practice is to credit Direct Participants’ accounts on payment dates in accordance with their respective holdings shown on DTC’s records unless DTC has reason to believe that it will not receive payment on the date payable. 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 Fiscal Agent or the Authority, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of principal and interest to DTC is the responsibility of the Authority or the Fiscal Agent, disbursement of such payments to Direct Participants shall be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners shall be responsibility of Direct and Indirect Participants.
The Authority cannot and does not give any assurances that DTC, DTC Participants or others will distribute payments of principal, interest or premium with respect to the Bonds paid to DTC or its nominee as the registered owner, or will distribute any redemption notices or other notices, to the Beneficial Owners, or that they will do so on a timely basis or will serve and act in the manner described in this Official Statement. The Authority is not responsible or liable for the failure of DTC or any DTC Participant to make any payment or give any notice to a Beneficial Owner with respect to the Bonds or an error or delay relating thereto.
The foregoing description of the procedures and record-keeping with respect to beneficial ownership interests in the Bonds, payment of principal, interest and other payments on the Bonds to DTC Participants or Beneficial Owners, confirmation and transfer of beneficial ownership interests in such Bonds and other related transactions by and between DTC, the DTC Participants and the Beneficial Owners is based solely on information provided by DTC.
Accordingly, no representations can be made concerning these matters and neither the DTC Participants nor the Beneficial Owners should rely on the foregoing information with respect to such matters, but should instead confirm the same with DTC or the DTC Participants, as the case may be.
Discontinuance of Book-Entry System
DTC may discontinue providing its services with respect to the Bonds at any time by giving notice to the Fiscal Agent and discharging its responsibilities with respect thereto under applicable law or the Authority may terminate participation in the system of book-entry transfers through DTC or any other securities depository at any time. In the event that the book-entry system is discontinued, the Authority will execute, and the Fiscal Agent will authenticate and make available for delivery, replacement Bonds in the form of registered bonds. In addition, the principal of and redemption premium, if any, on the Bonds will be payable as set forth in the Fiscal Agent Agreement and summarized in the Official Statement under the caption “THE BONDS – Description of the Bonds.” Bonds will be transferable and exchangeable on the terms and conditions provided in the Fiscal Agent Agreement and summarized in the Official Statement under the caption “THE BONDS – Transfer or Exchange of Bonds.”