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policies and requirements of the City. No assurance can be given that the plans or projections detailed below will actually occur.
Development Agreement. The City and CP Sunridge, LLC entered into a Development Agreement for the project dated April 3, 2006 (as amended to date, the “Development Agreement”), in accordance with Sections 65864 through 65869.5 of the California Government Code, as implemented through City ordinance. The Development Agreement was assigned to the Master Developer, as a successor-in-interest. Development of property in the District is subject to the Development Agreement as well as the Sunridge Specific Plan. The Development Agreement creates a binding contract which sets forth the needed infrastructure improvements, park dedication requirements, timing and method for financing improvements and other specific performance obligations of the City and the developers in the District for development of the Montelena project, including the terms, conditions, rules, regulations, entitlements, vested rights and other provisions relating to the development according to the existing entitlements. Included are provisions relating to infrastructure improvements, public dedication requirements, landscaping amenities and other obligations of the parties.
The Development Agreement also sets forth the responsibility of the Master Developer and its successors for a portion of the costs of certain public improvements required for its development. Funding of the Facilities with Bond proceeds will satisfy a portion, but not all, of the relevant obligations of the District for infrastructure improvements required by the Development Agreement. The improvements not funded from Bond proceeds or Special Taxes will be funded by the Developer or others as merchant homebuilders. See “THE FACILITIES” below.
The Development Agreement runs with the property and may be modified only by mutual consent of the City and the successors to the original party thereto, in a manner consistent with the existing entitlements. With the Development Agreement in place, subject to compliance with the terms of the Development Agreement, construction of homes within the District may occur upon City approval of subdivision maps, satisfaction of certain design requirements and conditions of such maps and issuance of building permits. The Development Agreement will be binding on the all successor owner-developers of property in the District, if any.
In 2021, the Development Agreement was extended to May 3, 2031 (with respect to Villages 3, 5, and 7), and to July 19, 2031 (with respect to the Villages 1, 2, 4, 6, and 8 and vacant parcels in 9, and 10), respectively.
Infrastructure and Utilities. The Master Developer is undertaking construction of the necessary backbone and in-tract infrastructure for the development of the planned 806 units in the District. See “THE FACILITIES” below. Public utilities, including electricity, natural gas, water, and telephone service, are available at the perimeter of the District and will be extended as site development is completed, including in connection with construction of the Facilities. The public utilities and other services that will serve the District include the following.
Water: Sacramento County Water Agency
Sewer: Sacramento Area Sewer District
Electricity: Sacramento Municipal Utility District
Gas: Pacific Gas & Electric
Entitlements and Expected Development in Villages. The Master Developer is not a merchant homebuilder. The Master Developer has been developing the land within the District
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consistent with the current approved land uses, which primarily consist of residential neighborhoods, with the goal of selling finished lots to Premier Chrysanthy, LLC and the Merchant Builders, or entering into Fee Builder Agreement with Premier Homes, as described herein.
Permitted land uses are configured to reinforce the neighborhood identity and sense of community. For more information on the Master Developer, Premier Chrysanthy, LLC and the Merchant Builders, see “OWNERSHIP OF PROPERTY IN THE DISTRICT.” The following table shows entitlements and expected development by Village. As shown in the table, final maps have recorded in all 10 Villages.
Table 1
City of Rancho Cordova
Community Facilities District No. 2014-1 (Montelena)
Entitlements and Expected Development by Village
Village
No. of
Lots
Planned
Lot Type(s)
Entitlement
Status
Village 1 80 55’ x 85’ Final Map
Village 2 78 55’ x 85’ Final Map
Village 3 125 55’ x 85’ Final Map
Village 4 55 50’ x 105’ Final Map
Village 5 59 60’ x 105’ Final Map
Village 6 38 60’ x 105’ Final Map
Village 7 152 40’ x 80’ Final Map
Village 8 81 45’ x 100’ Final Map
Village 9 82 45’ x 100’ Final Map
Village 10 87 45’ x 100’ Final Map
Totals 806 -- --
Source: The Master Developer.
Development to Date. The Master Developer (and its affiliates) have been constructing the backbone infrastructure and in-tract improvements necessary for development of the planned 806 single-family homes in the District. As of March 31, 2022, off-site improvements were complete and approximately 87% of on-site (in-tract) improvements had been completed.
Villages 1–10 in-tracts are nearly complete, with streets having been paved and nearly all of the lots in “finished lot” condition. Street lights, which experienced supply chain issues, in Villages 1, 2, 4, 6 and 8 are the lone remaining in-tract improvements to install. Street light installation is under way and is expected to be completed in all villages by April 20, 2022.
Backbone infrastructure required for the project included storm drain, sewer, water pipe and gas and electrical installations to supply the various villages along Cobble Brook Drive and Montelena Drive. Additionally, Chrysanthy Boulevard and Rancho Cordova Parkway were widened, lighted and landscaped. Interior streets were developed concurrent with the backbone improvements. All the backbone infrastructure has now been completed with respect to the entire project.
The Master Developer estimates the total backbone and in-tract development costs at $57,000,000, of which $49,800,000 has been completed as of March 31, 2022, with the remainder
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anticipated to be spent later in 2022. For a table showing the Master Developer’s anticipates sources and uses of funds for the build-out of the project, see Table 3 below.
Current Development Status by Village. The following table shows the development status of lots within the District, by Village, as of April 1, 2022.
Table 2
City of Rancho Cordova
Community Facilities District No. 2014-1 (Montelena)
Expected Product Types by Village
As of April 1, 2022
Village
No.
No. of
Lots Builder
Units Completed,
Sold and Closed
to Homeowners
Units Completed
and Owned by
Developer
Homes Under
Construction
Finished
Lots
1 & 2 127 Pulte 0 0 0 127
3 125 Richmond American 0 0 8 125
4 & 6 93 Pulte 0 0 0 93
5 & 7 211 Premier 0 0 65 146
8 81 Premier 0 0 12 69
9 & 10 169 Premier 139 3 24 3
Totals 806 139 3 109 563
Sources: The Master Developer; Premier Homes; Pulte; Richmond American.
Villages 9 and 10 (169 lots) (Premier Homes). The Master Developer began buildingout the District starting with Villages 9 and 10. On July 24, 2018, the Master Developer and Premier Chrysanthy, LLC entered into a Purchase and Sale Agreement for the Master Developer to sell all 169 lots planned for Villages 9 and 10. To date, all 169 lots in Villages 9 and 10 have transferred to Premier Chrysanthy, LLC, which has completed 4 model homes and pulled building permits for an additional 162 production homes.
The Purchase and Sale Agreement between the Master Developer and Premier Chrysanthy, LLC provides that the Master Developer will provide the financing for the construction of the homes in Villages 9 and 10 to Premier Chrysanthy, LLC. The arrangement is similar to a revolving line of credit, which Premier Chrysanthy, LLC draws upon from the Master Developer as needed each month to pay for home construction costs and overhead. As homes are finished and sold to individual homeowners, amounts owed by Premier Chrysanthy, LLC to the Master Developer are repaid. Before homes are sold to individual homeowners, however, Premier Chrysanthy, LLC has title to the lots and is responsible for payment of the Special Taxes and property taxes thereon.
The 4 model homes in Villages 9 and 10 represent the two different product lines being marketed by Premier Homes (“Elan at Montelena” and “Esprit at Montelena”), as described below. Elan at Montelena. This product consists of 3 single-family homes on 45x100 ft lots. Model construction was completed in April 2021, and the model complex is open.
Production home construction has also begun and the first units were completed in December 2019. There are three plan sizes ranging from 1,904 to 3,234 square feet, with base pricing currently ranging from $616,900 to $ 786,900. Sales information as of April 1, 2022 is in Table 2.
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Esprit at Montelena. This product consists of 3 single-family homes on 45x100 ft lots. Model construction was completed in April 2021, and the model complex is open.
Like Elan, Espirit is ongoing. There are three plan sizes ranging from 1,524 to 2,174 square feet, with base pricing currently ranging from $575,900 to $629,900. In addition to the Sales information as of April 1, 2022 is provided in Table 2, there are 24 homes under construction and in contract with individual homeowners. Each of the 24 homes is expected to close escrow by July 31, 2022
Villages 5 and 7 (211 lots) (Premier Homes). The Master Developer and Premier Homes have entered into a Fee Builder Agreement with respect to the lots planned for Villages 5 and 7. Under this arrangement, the Master Developer retains title to the lot during the time period when Premier Homes is constructing the home thereon. Title to the lot transfers from the Master Developer to the individual homeowner purchasing the home.
As with the homes being constructed by Premier Homes in Villages 9 and 10, the Master Developer will provide the financing for the construction of the homes in Villages 5 and 7 to Premier Homes. The arrangement is similar to a revolving line of credit, which Premier Homes draws upon from the Master Developer as needed each month to pay for home construction costs and overhead. As homes are finished and sold to individual homeowners, amounts owed by Premier Homes to the Master Developer are repaid. Before homes are sold to individual homeowners, however, the Master Developer retains title to the lots and is responsible for payment of the Special Taxes and property taxes thereon (unlike in Villages 9 and 10).
Villages 5 and 7 are building-out into the following communities: Echelon (Village 5) and Elevate (Village 7), with 7 (3 in Village 5 and 4 in Village 7) floor plans and current base pricing of $756,900 to 885,900 in Village 5 and $534,900 to $584,900 in Village 7. In addition to the sales information as of April, 1, 2022 provided in Table 2, there are 12 Village 5 homes and 18 Village 7 homes under construction and in contract with individual homeowners. Closings are expected to begin in June 2022 in Village 5 and May 2022 in Village 7.
Village 8 (81 lots) (Premier Homes). The 81 lots planned for Village 8 are a continuation of the production homes being built in Villages 9 and 10, and will utilize the same model homes.
An affiliate of the Master Developer (Summit Chrysanthy Development, LLC) and Premier Homes have entered into a Fee Builder Agreement with respect to the lots planned for Village 8. Under this arrangement, the Master Developer retains title to the lot during the time period when Premier Homes, LLC is constructing the home thereon. Title to the lot transfers from the Master Developer to the individual homeowner purchasing the home.
As with the homes being constructed by Premier Homes in Villages 9 and 10, the Master Developer will provide the financing for the construction of the homes in Village 8 to Premier Homes. The arrangement is similar to a revolving line of credit, which Premier Homes draws upon from the Master Developer as needed each month to pay for home construction costs and overhead. As homes are finished and sold to individual homeowners, amounts owed by Premier Homes to the Master Developer are repaid. Before homes are sold to individual homeowners, however, the Master Developer retains title to the lots and is responsible for payment of the Special Taxes and property taxes thereon (unlike in Villages 9 and 10).
Villages 1 and 2 (127 lots) (Pulte). The Master Developer sold the 127 lots in Villages 1 and 2 to Pulte Homes in January 2022. The lots are in finished lot condition. Pulte Homes plans
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to develop Villages 1 and 2 into the “Ascent at Montelena” community, with 4 floor plans (ranging in size from 2,526 to 2,973 square feet) and current base pricing from $666,000 to $716,000.
Pulte is underway on models for these villages, with production homes anticipated to commence in June 2022 and first closings to individual homeowners by December 2022.
Villages 4 and 6 (93 lots) (Pulte). The Master Developer sold the 93 lots in Villages 4 and 6 to Pulte Homes in January 2022. The lots are in finished lot condition. Pulte Homes plans to develop Villages 4 and 6 into the “Solis at Montelena” and “Vistas at Montelena” communities, with 6 floor plans between both communities (ranging in size from 2,817 to 3,404 square feet) and base pricing from $670,000 to $785,000. Pulte anticipates starting models for these villages in June 2022, with production homes anticipated to commence in July 2022 and first closings to individual homeowners by January 2023.
Village 3 (125 lots) (Richmond American). The Master Developer sold the 125 lots in Village 3 to Richmond American. The lots are in finished lot condition. Richmond American plans to develop this village into the “Seasons at Montelena” community, with 5 floor plans (ranging in size from approximately 1,400 square feet to 3,040 square feet) and base pricing from $574,950 to $731,950. Richmond American has started construction on models for this village and production home construction ________________. First closings to individual homeowners are anticipated by _____ 20__.
The foregoing discussion is subject to market conditions and no assurance can be provided this development timeline will be achieved. The partners within the Master Developer have no obligation to contribute equity to the Master Developer should it not have sufficient funds to complete development on this timeline or at all. See “– Master Developer Sources and Uses of Funds,” and “OWNERSHIP OF PROPERTY WITHIN THE DISTRICT – Master Developer.” Master Developer Sources and Uses of Funds
The Master Developer has provided the following table showing the estimated sources and uses for the Master Developer (and its affiliates) related to the development and sale of the 806 single-family homes planned for the District, as of April 1, 2022.
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Table 3
City of Rancho Cordova
Community Facilities District No. 2014-1 (Montelena)
Master Developer Proposed Financing Plan
As of April 1, 2022(1)
Total Budget
%
Complete
Through
April 1, 2022
Expected
Remainder
2022
Expected
2023
Expected
2024
Sources of Funds
Sales of Finished Lots $58,896,000 100.00% $58,896,000 -- -- -- Sales of Homes 292,914,135 24.40 71,469,092 $86,168,468 $118,200,159 $17,076,416 CFD – Estimated Proceeds(2) 18,000,000 58.75 10,574,828 7,425,172 -- -- Credits/Reimbursements 3,100,000 46.67 1,446,758 1,000,000 653,242 -- Total Sources of Funds $372,910,135 38.18% $142,386,678 $94,593,640 $118,853,401 $17,076,416 Uses of Funds
On-site Construction (In-tracts) $52,627,526 100.00% $52,627,526 -- -- -- Off-site Construction 4,455,097 100.00 4,455,097 -- -- -- Home Construction 127,233,294 31.52 40,100,503 $39,275,674 $41,471,030 $6,386,087 Fees & Permits 39,148,028 49.35 19,321,204 11,105,743 8,721,081 -- Service & Warranty 1,383,000 30.15 417,000 360,000 501,000 105,000 Field Expenses 10,899,660 30.01 3,270,565 3,190,381 4,009,762 428,952 Selling & Marketing 14,804,237 43.25 6,403,236 4,058,087 3,915,813 427,101 General & Administrative 14,999,780 36.39 5,458,466 4,497,911 4,515,207 528,196 Property Taxes 852,731 39.89 340,157 313,000 188,918 10,656 Total Uses of Funds $266,403,353 49.70% $132,393,754 $62,800,796 63,322,811 7,885,992 NET CASH FLOW $106,506,782 9.38% $9,992,924 $31,792,844 $55,530,590 $9,190,424 (1) Estimated as of April 1, 2022; actual amount may differ. (2) Estimate for proceeds of 2022 Bonds and 2023 Bonds; actual amounts may differ.
Source: The Master Developer.
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THE FACILITIES
Eligible Facilities
The Facilities eligible to be financed by the District are set forth in the Resolution of Formation and consist of roadway and transportation improvements, including roadway design, project management, grading, and construction of roadways, including curbs, gutters, sidewalks, pavement, street lighting, dry utilities, soundwalls and landscaping, as well as drainage facilities, park improvements and other miscellaneous improvements. Authorized Facilities also include sanitary sewer facilities, water facilities and other capital improvements for which developer impact fees are payable to the City for development within the District, as well as incidental expenses as authorized by the Mello-Roos Act.
The proceeds of the 2022 Bonds will be used to reimburse the Master Developer for a portion of the cost of the public improvements (and/or development impact fees) eligible to be financed with the proceeds of the 2022 Bonds (the “Facilities,” as described below). See “FINANCING PLAN” for additional details. The following table estimates the cost of the Facilities needed for development of property in the District as of the date of the formation of the District in 2014. The Master Developer’s current sources and uses of funds related to the Facilities, as well as homebuilding costs, is set forth in Table 3.
Table 4
City of Rancho Cordova
Community Facilities District No. 2014-1 (Montelena)
Expected Cost of Facilities
Facility Category Estimated Cost
Roadways $26,427,884
Sanitary Sewer Facilities 3,590,529
Water Facilities 5,543,176
Drainage Facilities 4,034,936
Park and Open Space Improvements 6,895,470
Development Impact and Other Fees 24,136,073
Engineering and Other Costs 3,107,541
Total $73,735,609
Source: CFD Hearing Report, dated May 2014.
Acquisition by the City and other Local Agencies
Acquisition Agreement. In connection with the formation of the District, the City and the Master Developer entered into a Funding, Construction and Acquisition Agreement, dated June 6, 2014 (the “Acquisition Agreement”), which provides that the original landowners in the District (or successors such as the Master Developer) will construct (or cause to be constructed or funded) the Facilities. As components of the Facilities are completed, proceeds of a portion of special tax bonds issued for the District (including the 2022 Bonds) will be used to pay all or a part of the purchase price of various Facilities pursuant to the terms of the Acquisition Agreement.
The portion of the cost of construction of the Facilities, which will not be provided from Bonds or proceeds of the Special Taxes, will be the responsibility of the Master Developer.
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Pay-As-You-Go Financing. The Acquisition Agreement and the Special Tax Formula provide that the funding of the costs of the Facilities can be made from collections of the Special Tax available as the “pay-as-you-go” component of Special Taxes. The Acquisition Agreement provides that the City will levy the maximum special tax rate on Developed Property and Final Map Property (as such terms are defined in the Special Tax Formula) and annually pay, after September 1st of each year, to the successors under the Acquisition Agreement, “Available Special Tax Revenues” generated by excess Special Taxes for a period of 10 years starting in Fiscal Year 2020-21 (or such other year as agreed between the City and the successors under the Acquisition Agreement).
Accordingly, the pay-as-you-go funding component is expected to provide for funding of the cost of a portion of the Facilities (both improvements and fees) in excess of the amount provided from bond proceeds (if such proceeds are not sufficient) through annual Special Tax collections in excess of the amount needed to pay the debt service. [Remainder of Page Intentionally Left Blank]
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OWNERSHIP OF PROPERTY WITHIN THE DISTRICT
Unpaid Special Taxes do not constitute a personal indebtedness of the owners of the parcels within the District. There is no assurance that an owner or any subsequent owners have the ability to pay the Special Taxes or that, even if they have the ability, they will choose to pay such taxes. An owner may elect to not pay the Special Taxes when due and cannot be legally compelled to do so. Neither the City nor any Bondowner 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.
The Master Developer has provided the respective information set forth under the heading “OWNERSHIP OF PROPERTY WITHIN THE DISTRICT” below. No assurance can be given that all information is complete. No assurance can be given that development of the property will be completed, or that it will be completed in a timely manner. The Special Taxes are not personal obligations of the Developer or of any subsequent landowners; the Bonds are secured only by the Special Taxes and moneys available under the Fiscal Agent Agreement. See “SECURITY FOR THE 2022 BONDS” and “BOND OWNERS’ RISKS” herein.
Ownership and Development Status
Property Ownership by Share of Projected Tax Levy. The following table shows the property ownership by share of the projected Fiscal Year 2022-23 special tax levy, based on ownership as of March 30, 2022.
Table 5
City of Rancho Cordova
Community Facilities District No. 2014-1 (Montelena)
Property Ownership by Share of Projected Fiscal Year 2022-23 Special Tax Levy Projected Projected Percent of
FY 2022-23 FY 2022-23 Projected
No. of Maximum Facilities Facilities
No. of Expected Appraised Facilities Special Tax
Special
Tax
Owner Construction Status (2) Village Parcels Units Acres Value Special Tax Levy (3) Levy Pulte Home Company, LLC Improved Lots 1 and 2 1 127 22.739 $24,892,000 $184,066 $184,066 15.76% Improved Lots 4 1 55 10.21 $11,275,000 $79,714 $79,714 6.82% Improved Lots 6 1 38 9.319 $8,436,000 $55,075 $55,075 4.71% Subtotal 3 220 42.268 $44,603,000 $318,855 $318,855 27.30% Richmond American
Homes Improved Lots 3 118 118 20.06 $23,128,000 $171,022 $171,022 14.64% Homes Under Construction 3 7 7 1.19 $1,997,800 $10,145 $10,145 0.87% Subtotal 125 125 21.25 $25,125,800 $181,168 $181,168 15.51% Premier Homes (Master
Developer) Improved Lots 5 36 36 6.29 $7,633,733 $52,176 $52,176 4.47% Homes Under Construction 5 23 23 4.25 $6,933,308 $33,335 $33,335 2.85% Improved Lots 7 110 110 9.37 $17,825,291 $159,427 $159,427 13.65% Homes Under Construction 7 42 42 3.67 $10,560,822 $60,872 $60,872 5.21% Improved Lots 8 69 69 10.02 $12,630,319 $100,004 $100,004 8.56% Homes Under Construction 8 12 12 1.74 $3,269,378 $17,392 $17,392 1.49% Improved Lots 9 and 10 3 3 0.44 $549,144 $4,348 $4,348 0.37% Homes Under Construction 9 and 10 25 25 2.81 $6,811,204 $36,234 $36,234 3.10% Completed Homes - Elan 9 and 10 2 2 0.21 $1,234,001 $2,899 $2,899 0.25% Subtotal 322 322 38.79 $67,447,200 $466,687 $466,687 39.95% Individual Homeowners Completed Homes - Elan 9 and 10 69 69 7.46 $42,573,000 $100,004 $100,004 8.56% Completed Homes - Esprit 9 and 10 65 65 7.57 $37,050,000 $94,207 $94,207 8.06% Not Appraised 9 and 10 5 5 0.67 $3,289,667 $7,247 $7,247 0.62% Subtotal 139 139 15.70 $82,912,667 $201,458 $201,458 17.25% Total 589 806 118.00 $220,088,667 $1,168,168 $1,168,168 100.00% (1) Includes building permits issued and final maps recorded prior to March 30, 2022. Assumes no further development.
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(2) Construction status as provided in the appraisal report. (3) Pursuant to the RMA, the City will levy at least the Maximum Facilities Special Tax on Developed Property and Final Map Property in fiscal year 2022-23. (4) Includes the $10,000,000 par amount of the Series 2021 Special Tax Bonds and the $8,660,000 anticipated par amount of the Series 2022 Tax Bonds. Allocated based on the Projected FY 2022-23 Facilities Special Tax Levy. (5) Includes the overlapping debt liens listed under "Direct and Overlapping Tax and Assessment Debt" in the overlapping debt report prepared by California Municipal Statistics, Inc. The overlapping debt report is based on the parcels and assessed values as of FY 2021-22. Does not include any PACE liens secured by assessments or special taxes on the property.
Sources: Integra Realty Resources, Inc.; Piper Sandler & Co.; Goodwin Consulting Group, Inc.
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Master Developer and Affiliated Land-Owners
General. At the time of formation of the District, all of the land within the District was owned by Montelena Douglas, LLC, Chrysanthy Road Investment, LLC and Douglas Cordova Commercial, LLC (collectively, the “Affiliated Land-Owners”), all of which are entities comprised of a management team that is responsible for the day-to-day management of the entitlement and development operations, and a group of capital investors that provide equity for the operations and development of the project. Over-time the Affiliated Land-Owners have sold, and will continue to sell, land in the District to the Master Developer for the installation of backbone infrastructure and further sale to Premier Chrysanthy, LLC or the Merchant Builders.
MDRE Development LLC, a California limited liability company (previously defined as the “Master Developer”), is a legal entity separate from the Affiliated Land-Owners but comprised of the same managing principals and capital members. The entity was formed for the purpose of commencing land development and marketing of individual villages to merchant builders to separate the dealer activities of this entity from the investment purpose of the Affiliated LandOwners.
The managing members (the “Members”) of the Master Developer are Charles Somers and Kevin Webb. Mr. Somers is President and Chief Executive Officer of SBM Management Services, which is a services company with 11,000 employees headquartered in McClellan, California. Mr. Somers experience with real estate is 30 years.
Mr. Webb serves as President of Summit Development and has more than 35 years of real estate experience. At Summit, he oversees all operations of the land acquisition, planning, entitlements, development, construction, and marketing. Prior to joining Summit Development, Mr. Webb led Watt Communities’ Northern California Division from 2012 to 2021. He began his real estate development career with Watt Investment Properties in 1986, with the development, construction, and asset management over several classes of real estate, including office/commercial, parking structures, business parks, and other commercial projects. He also oversaw the Southern California residential real estate division in the early 2000s where he was responsible for successfully developing over six separate in-fill residential projects in Southern California. While at Watt, he acquired, developed, and built over 800 in-fill single family detached and attached homes in and around the Sacramento region.
Day-to-day operations of the Master Developer with respect to development within the District are overseen by Don Ferrante. Mr. Ferrante has over 30 years of experience in the real estate, construction and homebuilding industry. Prior to joining the Master Developer, he spent 23 years with a mid-size privately-owned regional builder doing business in California, Arizona and Texas. At this privately-owned regional builder, Mr. Ferrante rose to the position of Corporate Controller and also oversaw the purchasing departments in all building jurisdictions. Mr. Ferrante has a Bachelor’s degree in Accounting from San Diego State University, a Master’s degree in Taxation from Golden Gate University, and is a Certified Public Accountant (although currently with inactive status).
Development Experience. Recent development experience of the principals of the Master Developer (affiliated entities wherein the managing members are at least one of the three principals of the Master Developer), is illustrated by the following projects:
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Table 6
City of Rancho Cordova
Community Facilities District No. 2014-1 (Montelena)
Master Developer (and Affiliates) Development Experience Project Name City
No. of
Residential
Lots Owner/Developer Status
Douglas 98 Rancho Cordova 54 Watt Communities 50% Complete Mariposa Creek Citrus Heights 15 Watt Communities Complete Mitchell Village Citrus Heights 258 Watt Communities Complete Development Schedule. The Affiliated Land-Owners originally acquired the property in the District in February 1, 2008. As noted above, the Affiliated Land-Owners have sold, and will continue to sell, land in the District to the Master Developer for the installation of backbone infrastructure and further sale to Premier Chrysanthy, LLC or other merchant homebuilders. See “THE DISTRICT – Current and Anticipated Development in the District.” Financing Plan. The development of the backbone infrastructure improvements required to be installed by the Master Developer, and payment of the Special Taxes by the Master Developer will be funded through a combination of the following; (i) owner capital via periodic capital calls from investor members of the Master Developer; (ii) internal funds generated from sales of lots to merchant builders; and (iii) proceeds from the sale of bonds. The Master Developer provided its current projected schedule of sources and uses for the proposed development of the District in Table 3, above. The Master Developer has provided no assurances to the City or the Underwriter that the sources of financing that will actually be available to the Master Developer will be sufficient to complete its currently projected property development and project construction.
Premier Chrysanthy, LLC and Premier Homes
Premier Chrysanthy, LLC. Premier Chrysanthy, LLC is a special purpose limited liability company organized and existing under the laws of the State of California, which is 51% owned by Premier Homes, a privately-held merchant builder active in the Sacramento area (“Premier Homes”), and 49% owned by Chrysanthy Road Investments, LLC, which is an affiliate of the Master Developer. Premier Chrysanthy, LLC has only one current purpose, which is to acquire lots from the Master Developer and construct homes thereon. Officers and employees of Premier Chrysanthy, LLC are officers and employees of Premier Homes.
Premier Homes. Premier Homes is a merchant homebuilder that is active in the Sacramento area, founded in 1994 and headquartered in Granite Bay, California. In addition to selling homes in its “Elan at Montelena” and “Esprit at Montelena” neighborhoods in the District through the Premier Chrysanthy, LLC, and building homes in Villages 5, 7, and 8 in accordance with a Fee Builder Agreement. Premier Homes is selling homes in its “Premier Soleil” neighborhood in Granite Bay, California. Premier Homes has also constructed and sold homes in the cities of Sacramento, El Dorado Hills, Lincoln, West Sacramento, Incline Village, Plumas Lakes and other locations.
Premier Homes is a privately-held corporation, owned and controlled by the Yttrup family.
The President of Premier Homes is Kevin Yttrup. Mr. Yttrup is a second generation home builder and has been designing and building homes for more than 40 years. Mr. Yttrup founded Premier Homes in 1994. Its model homes have won accolades and awards from both his peers and home
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buyers alike. In recent years, these communities featuring Premier built products have received awards: Granite Bay, Serrano in El Dorado Hills and Catta Verdera in Lincoln.
Through Premier Chrysanthy, LLC, the building division of Premier Homes (sometimes referred to as “Element Built”), is building homes in the “Elan at Montelena” and “Esprit at Montelena” neighborhoods, as described above. Element Built is also currently engaged in building homes in the “Zinfandel Ridge” community in Plymouth, CA and the “Paso Fino” community in Davis, CA.
In addition to its Element Built operations, Premier Homes is building homes in its “Premier Soleil” community in Granite Bay, California. This subdivision is planned for 52 single-family homes ranging in size from 1,714 to 3,163 square feet, to be built and sold in two phases, with base home prices ranging from $750,000 to $900,000. The community also features the “Sol House” with a shared pool, spa, lawn and other amenities. Two model homes for the community are open, and 14 homes have been reserved.
Premier Homes has also completed the following other subdivisions, which are now fully built-out:
“Serenity” in Serrano, El Dorado Hills, CA. This community, consisting of 45 single-family homes, was completed in 2016.
“Monte Azul” in Catta Verdera, Lincoln, CA. This community, consisting of 24 single-family homes, was completed in 2015.
“Stone Harbor” in West Sacramento, CA. This community, consisting of 58 singlefamily homes, was completed in 2014. “Gateway” in Lincoln, CA. This community, consisting of 38 single-family homes, was completed in 2014.
“Alexandria” in Granite Bay, CA. This community, consisting of 10 single-family homes, was completed in 2012.
For further information on Premier Homes, see its Internet homepage located at www.premierhomesca.com. The website address is given for reference and convenience only, and the information on the website may be incomplete or inaccurate and has not been reviewed by the City or the Underwriter. Nothing on this website is a part of this Official Statement or incorporated into this Official Statement by reference and no representation is made in this Official Statement as to the accuracy or adequacy of the information contained on the internet site.
Pulte Homes
General. As previously defined herein, “Pulte” or “Pulte Homes” is Pulte Home Company, LLC, a Michigan limited liability company. Pulte is a wholly-owned subsidiary of PulteGroup Inc., which is a publicly traded company whose common stock is listed on the New York Stock Exchange under the symbol “PHM.”
PulteGroup is subject to the informational reporting requirements of the Securities Exchange Act of 1934, as amended, and in accordance therewith is obligated to file reports, proxy
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statements, and other information, including financial statements, with the SEC. Such filings, including particularly MDC’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021, as filed with the SEC, set forth, among other things, certain data relative to such consolidated results of operations and financial position of PulteGroup and its subsidiaries as of such date. The SEC maintains an internet web site that contains reports, proxy and information statements and other information regarding registrants that file electronically with the SEC, including PulteGroup. The address of such internet web site is www.sec.gov. All documents subsequently filed by PulteGroup pursuant to the requirements of the Exchange Act after the date of this Official Statement will be available for inspection in such manner as the SEC prescribes.
Copies of PulteGroup’s Annual Report and related financial statements, prepared in accordance with generally accepted accounting standards, are also available from PulteGroup on PulteGroup’s website at www.pultegroupinc.com.
The foregoing internet websites and references to filings with the SEC are included for reference only, and the information on such websites 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 websites. Neither Pulte nor PulteGroup is obligated to advance funds for construction or development 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 websites in evaluating whether to buy, hold or sell the Bonds. The information contained on such websites may be incomplete or inaccurate and has not been reviewed by the City, the District or the Underwriter.
Financing Plan. To date, Pulte has financed its site development, and home construction costs related to its respective neighborhoods in the District through internally generated funds (which may include home sales revenues). Pulte intends to use internal sources (which may include home sales revenue) to fund the remaining home construction costs and carrying costs related to the development of its properties within the District. However, home sales revenue from Pulte’s projects in the District are not segregated and set aside for completing its development within the District.
Although Pulte expects to have sufficient funds available to complete its development activities in the District, commensurate with the development timing described in this Official Statement, there can be no assurance, however, that amounts necessary to finance the remaining development and home construction costs will be available to Pulte when needed. Neither Pulte nor any other entity or person is under any legal obligation of any kind to expend funds for the development of Pulte’s property in the District, or the payment of ad valorem property taxes or the Special Taxes. Any contributions by Pulte or any other entity or person to fund the costs of such development are entirely voluntary.
If and to the extent that the aforementioned sources are inadequate to pay the costs to complete the planned development by Pulte within the District, and other financing is not put into place, there could be a shortfall in the funds required to complete the planned development by Pulte or to pay ad valorem property taxes or Special Taxes related to Pulte’s property in the District, and the remaining portions of such development may not be completed. Many factors beyond Pulte’s control, or a decision by Pulte to alter its current plans, may cause the actual sources and uses to differ from the projections. See “SPECIAL RISK FACTORS” herein for a discussion of risk factors.
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COVID-19 Impact. The COVID-19 pandemic and related public health and governmental authorities’ orders and actions could have a material adverse effect on Pulte’s ability to complete its neighborhoods within the District in the time frame and budget, and at the sales prices, described in this Official Statement. See “BOND OWNERS’ RISKS – COVID-19 Pandemic.” As of March 31, 2022, Pulte has experienced increases in certain construction costs, supply chain delays, labor shortages, and increased cycle time for home deliveries. However, Pulte has not experienced any significant development delays resulting from work stoppages, reduced attendance of workers, or the ability to obtain necessary inspections and approvals for homes, which may be attributed, directly or indirectly, to the COVID-19 pandemic. While the cost increases and delays may have been and may continue to be intermittently affected by COVID19, the majority of cost increases and delays can be attributable to the strength of the housing market and the result of vendors not anticipating the scale of the demand for housing materials.
Although the recent cost increases and construction delays are not currently having a significant impact on the overall development of homes in the District, the impacts caused by the outbreak are evolving and no prediction can be made with respect to the ultimate effects of the COVID-19 outbreak and related public health and governmental authorities’ orders and actions (including, without limitation, the scope of restrictions under the current or any amended County or State of California orders), on Pulte’s ability to continue to sell and close homes in the District.
Such effects, if and as they arise, could have a material adverse effect on the ability to develop the homes in the District as planned, and no assurance can be provided that Pulte will be able to (a) complete in whole or in any part, or within any particular time, its construction of homes within the District; (b) avoid additional material increases in development costs or delays resulting from work stoppages, reduced attendance of workers, shortages or delays in the delivery of building materials, and/or delays in obtaining necessary inspections and approvals; or (c) sell homes, and close home sales or not experience purchase contract cancellations, due to in each case to public health or governmental restrictions, further spread of COVID-19, an economic downturn driven by the pandemic, or otherwise.
Richmond American
General. As previously defined herein, “Richmond American” is Richmond American Homes of Maryland, Inc., a Maryland corporation. Richmond American is a wholly-owned subsidiary of M.D.C. Holdings, Inc., a Delaware corporation (“MDC”). MDC is a publicly traded company whose common stock is listed on the New York Stock Exchange under the symbol “MDC.” Richmond American and its predecessor entity have been building homes in California since 1986. Richmond American’s Southern California division based in Irvine, California, is responsible for the development of Richmond American’s projects in Improvement Area A.
MDC has two primary operations, homebuilding, and financial services. MDC’s homebuilding operations consist of wholly-owned subsidiary companies that build and sell homes under the name “Richmond American Homes.” MDC’s financial services operations include subsidiary companies that provide mortgage financing, place title insurance and homeowner insurance for Richmond American’s homebuyers, and provide general liability insurance for MDC subsidiaries and most of Richmond American’s subcontractors.
MDC is subject to the informational reporting requirements of the Securities Exchange Act of 1934, as amended, and in accordance therewith is obligated to file reports, proxy statements, and other information, including financial statements, with the SEC. Such filings, including
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particularly MDC’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021, as filed with the SEC on February 1, 2022, set forth, among other things, certain data relative to such consolidated results of operations and financial position of MDC and its subsidiaries as of such date. The SEC maintains an internet web site that contains reports, proxy and information statements and other information regarding registrants that file electronically with the SEC, including MDC. The address of such internet web site is www.sec.gov. All documents subsequently filed by MDC pursuant to the requirements of the Exchange Act after the date of this Official Statement will be available for inspection in such manner as the SEC prescribes.
Copies of MDC’s Annual Report and related financial statements, prepared in accordance with generally accepted accounting standards, are also available from MDC on MDC’s website at www.mdcholdings.com.
The foregoing internet websites and references to filings with the SEC are included for reference only, and the information on such websites 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 websites. Neither Richmond American nor MDC is obligated to advance funds for construction or development 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 websites in evaluating whether to buy, hold or sell the 2022 Bonds. The information contained on such websites may be incomplete or inaccurate and has not been reviewed by the City, the District or the Underwriter.
Financing Plan. To date, Richmond American has financed its site development, and home construction costs related to its respective neighborhoods in the District through internally generated funds (which may include home sales revenues). Richmond American intends to use internal sources (which may include home sales revenue) to fund the remaining home construction costs and carrying costs related to the development of its properties within the District. However, home sales revenue from Richmond American’s projects in the District are not segregated and set aside for completing its development within the District.
Although Richmond American expects to have sufficient funds available to complete its development activities in the District, commensurate with the development timing described in this Official Statement, there can be no assurance, however, that amounts necessary to finance the remaining development and home construction costs will be available to Richmond American when needed. Neither Richmond American nor any other entity or person is under any legal obligation of any kind to expend funds for the development of Richmond American’s property in the District, or the payment of ad valorem property taxes or the Special Taxes. Any contributions by Richmond American or any other entity or person to fund the costs of such development are entirely voluntary.
If and to the extent that the aforementioned sources are inadequate to pay the costs to complete the planned development by Richmond American within the District, and other financing is not put into place, there could be a shortfall in the funds required to complete the planned development by Richmond American or to pay ad valorem property taxes or Special Taxes related to Richmond American’s property in the District, and the remaining portions of such development may not be completed. Many factors beyond Richmond American’s control, or a decision by Richmond American to alter its current plans, may cause the actual sources and uses to differ from the projections. See “SPECIAL RISK FACTORS” herein for a discussion of risk factors.
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COVID-19 Impact. The COVID-19 pandemic and related public health and governmental authorities’ orders and actions could have a material adverse effect on Richmond American’s ability to complete its neighborhoods within the District in the time frame and budget, and at the sales prices, described in this Official Statement. See “BOND OWNERS’ RISKS – COVID-19 Pandemic.”
As of March 31, 2022, Richmond American has experienced increases in certain construction costs, supply chain delays, labor shortages, and increased cycle time for home deliveries. However, Richmond American has not experienced any significant development delays resulting from work stoppages, reduced attendance of workers, or the ability to obtain necessary inspections and approvals for homes, which may be attributed, directly or indirectly, to the COVID-19 pandemic. While the cost increases and delays may have been and may continue to be intermittently affected by COVID-19, the majority of cost increases and delays can be attributable to the strength of the housing market and the result of vendors not anticipating the scale of the demand for housing materials.
Although the recent cost increases and construction delays are not currently having a significant impact on the overall development of homes in the District, the impacts caused by the outbreak are evolving and no prediction can be made with respect to the ultimate effects of the COVID-19 outbreak and related public health and governmental authorities’ orders and actions (including, without limitation, the scope of restrictions under the current or any amended County or State of California orders), on Richmond American’s ability to continue to sell and close homes in the District. Such effects, if and as they arise, could have a material adverse effect on the ability to develop the homes in the District as planned, and no assurance can be provided that Richmond American will be able to (a) complete in whole or in any part, or within any particular time, its construction of homes within the District; (b) avoid additional material increases in development costs or delays resulting from work stoppages, reduced attendance of workers, shortages or delays in the delivery of building materials, and/or delays in obtaining necessary inspections and approvals; or (c) sell homes, and close home sales or not experience purchase contract cancellations, due to in each case to public health or governmental restrictions, further spread of COVID-19, an economic downturn driven by the pandemic, or otherwise.
Individual Homeowners
As noted above, Premier Chrysanthy, LLC has opened 4 model homes in the District, and sales are ongoing. As of March 31, 2022, there were 139 individual homeowners within the District. See Table 2, above.
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VALUE OF PROPERTY WITHIN THE DISTRICT
Assessed Values and Building Permits
The following table shows a history of assessed valuation of land in the District, as well as building permits issued, since Fiscal Year 2021-22.
Table 7
City of Rancho Cordova
Community Facilities District No. 2014-1 (Montelena)
History of Assessed Values and Building Permits
Fiscal
Year
Land
Assessed
Value
Improvement
Assessed
Value
Total
Assessed
Value
Number of
Permits
Issued(1)
2019-20 $21,847,477 $0 $21,847,477 4
2020-21 22,662,316 4,343,591 27,005,907 49
2021-22 35,653,362 25,051,794 60,705,156 166
(1) Represents the number of parcels for which a building permit for new construction was issued prior to June 30 of the prior fiscal year.
Sources: Sacramento County Assessor's Office; Goodwin Consulting Group, Inc.
Appraised Values
General. The value of taxable property within the District is a critical factor in determining the investment quality of the 2022 Bonds. Given the ongoing development in the District and in order to obtain a more accurate estimate of the value of land than the current assessed valuation of property in the District, the City ordered preparation of an appraisal report (the “Appraisal”), setting forth the estimated value of the taxable land within the District as of the March 31, 2022 date of value. The Appraisal was prepared by Integra Realty Resources, Sacramento, California (the “Appraiser”). The Appraisal is set forth in APPENDIX B hereto. 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, conditions and qualifications which are set forth in the Appraisal.
Value Estimate. The Appraisal estimated the market value of all of the taxable land in the District, which is planned for 806 residential units. The appraised valuation excludes the value of all portions of the property in the District designated for public and quasi-public purposes and assumes completion of infrastructure funded by the 2022 Bonds and accounts for the impact of the lien of the Special Tax. The following estimate represents the market value of the property to be subject to the Special Tax, based on the hypothetical condition certain impact fees to be financed by the 2022 Bonds have been paid. The value estimate for the property as of the date of value, using the methodologies described in the Appraisal and subject to the limiting and hypothetical conditions and general and special assumptions set forth in the Appraisal is $220,088,667.
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Table 8
City of Rancho Cordova
Community Facilities District No. 2014-1 (Montelena)
Value by Ownership (as of March 31, 2022)
Lots/
Homes
Lot/
Unit Value
Remaining
Site
Development
Costs
Permits
and Fees
Value Per
Component
Market Value
(Rd.)
Pulte Home Company, LLC
Improved Lots - Villages 1/2 127 $196,000 - - $196,000 $24,892,000 Improved Lots - Village 4 55 $205,000 - - $205,000 $11,275,000 Improved Lots - Village 6 38 $222,000 - - $222,000 $8,436,000 Total - Pulte Home Company, LLC 220 $44,603,000
Richmond American Homes
Improved Lots - Village 3 118 $196,000 - - $196,000 $23,128,000 Homes Under Construction - Village 3 7 $196,000 - $89,400 $285,400 $1,997,800 Total - Richmond American Homes 125 $25,125,800
Premier Homes (Master Developer)
Improved Lots - Village 5 36 $222,000 ($9,952) - $212,048 $7,633,728 Homes Under Construction - Village 5 23 $222,000 ($9,952) $89,400 $301,448 $6,933,304 Improved Lots - Village 7 110 $172,000 ($9,952) - $162,048 $17,825,280 Homes Under Construction - Village 7 42 $172,000 ($9,952) $89,400 $251,448 $10,560,816 Improved Lots - Village 8 69 $193,000 ($9,952) - $183,048 $12,630,312 Homes Under Construction - Village 8 12 $193,000 ($9,952) $89,400 $272,448 $3,269,376 Improved Lots - Village 9/10 3 $193,000 ($9,952) - $183,048 $549,144 Homes Under Construction - Village 9/10 25 $193,000 ($9,952) $89,400 $272,448 $6,811,200 Completed Homes - Elan 2 $617,000 - - $617,000 $1,234,000(1) Total - Premier Homes (Master Developer) 322 $67,447,160 Individual Homeowners
Completed Homes - Elan 69 $617,000 - - $617,000 $42,573,000(1) Completed Homes - Esprit 65 $570,000 - - $570,000 $37,050,000(1) Total - Individual Homeowners 133 $79,623,000
Aggregate, or Cumulative, Appraised Values 801 $216,799,000 Aggregate, or Cumulative, Assessed Values 5 $3,289,667
Total Aggregate, or Cumulative, Value 806 $220,088,667
(1) Not-less-than amount, based on smallest floorplan.
Sources: The Appraisal.
Hypothetical Condition. The market value estimated by the Appraiser is based on a hypothetical condition. A hypothetical condition is defined by USPAP as “a condition, directly related to a specific assignment, which is contrary to what is known by the appraiser to exist on the effective date of the assignment results, but is used for the purpose of the analysis.” It is a hypothetical condition of the Appraisal that the proceeds from the 2022 Bonds will be used to reimburse the Master Developer for completed infrastructure and finance certain impact fees otherwise due for the construction of Facilities. The market value estimated in the Appraisal is based on the hypothetical condition certain impact fees to be financed by the 2022 Bonds have been paid. The estimate of market value accounts for the impact of the lien of the Special Taxes securing the 2022 Bonds.
Assumptions and Limiting Conditions. In considering the estimate of value evidenced by the Appraisal, the Appraisal is based upon a number of limiting conditions and standard and extraordinary assumptions which affect the estimates as to value, including, among others, the following.
• The valuation analysis did not include review of a current title report of all properties to determine any possible conditions of title affecting the properties appraised. The Appraiser accepts no responsibility for matters pertaining to title.
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• The Appraiser has also assumed that there is no hazardous material on or in the property that would cause a loss in value. Should future conditions and events involving hazardous material reduce the level of permitted development or delay the completion of any projected development, the value of the undeveloped land would likely be reduced from that estimated by the Appraiser. See “BOND OWNERS’ RISKS – Land Values” and “– Hazardous Substances” below. See “APPENDIX B – The Appraisal” hereto for a description of certain assumptions made by the Appraiser.
Accordingly, because the Appraiser arrived at an estimate of current market value based upon certain conditions and assumptions which may or may not be fulfilled, no assurance can be given that should the parcels become delinquent due to unpaid Special Taxes, and be foreclosed upon and offered for sale for the amount of the delinquency, that any bid would be received for such property or, if a bid is received, that such bid would be sufficient to pay such delinquent Special Taxes.
Limitations of Appraisal Valuation. Property values may not be evenly distributed throughout the District; thus, certain parcels may have a greater value than others. This disparity is significant because in the event of nonpayment of the Special Tax, the only remedy is to foreclose against the delinquent parcel. 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 “– Priority of Lien” below. For a description of certain risks that might affect the assumptions made in the Appraisal, see “BOND OWNERS’ RISKS” herein.
Value to Special Tax Burden Ratios
The Appraisal sets forth the combined value of all taxable property within the District to be not less than $220,088,667, subject to the limiting conditions stated therein. (See “– The Appraisal” above and APPENDIX B hereto.) The principal amount of the direct and overlapping debt in the District is $20,054,169*, which consists of the estimated amount of 2022 Bonds ($18,660,000*) and $1,394,169 of overlapping general obligation and CFD bond debt.
Consequently, the estimated value of property in the District subject to the Special Tax lien is approximately 11.0* times the principal amount of the direct and overlapping debt in the District.
In comparing the value of the real property within the District to the principal amount of the 2022 Bonds and other direct and overlapping debt for the District, 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. The purpose would be to finance additional regional or local public improvements or services. The lien created * Preliminary; subject to change.
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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, construction loans may be obtained by the developers of property in the District or home loans may be obtained by ultimate homeowners.
The deeds of trust securing such debt on property within the District, however, will be in a junior position to the lien of the Special Tax.
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Value-to-lien Ratios by Ownership. The following table shows the projected status of development and value-to-lien ratios in the District for Fiscal Year 2022-23, based on ownership as of March 31, 2022, and assuming no further development. Value-to-lien ratios on individual parcels may vary considerably from any average.
Table 9
City of Rancho Cordova
Community Facilities District No. 2014-1 (Montelena)
Value-to-Lien Ratios by Property Ownership for Projected Fiscal Year 2022-23 Special Tax Levy Development Status (1)
No. of
Parcels
No. of
Expected
Units Acres
Estimated
Value (2)
Projected
FY 2022-23
Maximum
Facilities
Special
Tax
Projected
FY 2022-23
Facilities
Special
Tax
Levy (3)
Percent
of
Projected
Facilities
Special
Tax Levy
Bonds
CFD* (4)
Overlapping
Debt (5) Total Debt*
Average
Appraised
Value-toLien*
Developed Property
Village 3 7 7 1.19 $1,372,000 $10,145 $10,145 0.9% $162,060 $3,165 $165,225 8.3:1 Village 5 23 23 3.82 $5,145,307 $33,335 $33,335 2.9% $532,481 $61,250 $593,732 8.7:1 Village 7 42 42 3.57 $7,074,220 $60,872 $60,872 5.2% $972,357 $103,583 $1,075,940 6.6:1 Village 9 and 10 166 166 18.78 $89,797,016 $240,590 $240,590 20.6% $3,843,127 $758,620 $4,601,746 19.5:1 Subtotal 238 238 27.36 $103,388,544 $344,943 $344,943 29.5% $5,510,025 $926,618 $6,436,643 16.1:1 Final Map Property
Village 1 and 2 1 127 22.74 $24,892,000 $184,066 $184,066 15.8% $2,940,223 $15,877 $2,956,100 8.4:1 Village 3 118 118 20.06 $23,753,800 $171,022 $171,022 14.6% $2,731,861 $53,361 $2,785,222 8.5:1 Village 4 1 55 10.21 $11,275,000 $79,714 $79,714 6.8% $1,273,325 $6,717 $1,280,042 8.8:1 Village 5 36 36 6.72 $9,421,734 $52,176 $52,176 4.5% $833,449 $95,870 $929,319 10.1:1 Village 6 1 38 9.32 $8,436,000 $55,075 $55,075 4.7% $879,752 $6,107 $885,858 9.5:1 Village 7 110 110 9.47 $21,311,893 $159,427 $159,427 13.6% $2,546,650 $271,270 $2,817,920 7.6:1 Village 8 81 81 11.76 $15,899,697 $117,397 $117,397 10.0% $1,875,261 $9,229 $1,884,489 8.4:1 Village 9 and 10 3 3 0.37 $1,710,000 $4,348 $4,348 0.4% $69,454 $9,121 $78,575 21.8:1 Subtotal 351 568 90.65 $116,700,123 $823,225 $823,225 70.5% $13,149,975 $467,551 $13,617,526 8.6:1 Total 589 806 118.00 $220,088,667 $1,168,168 $1,168,168 100.0% $18,660,000 $1,394,169 $20,054,169 11.0:1 * Preliminary; subject to change.
(1) Includes building permits issued and final maps recorded prior to March 30, 2022. Assumes no further development. (2) Appraised values were allocated to the individual parcels based on the expected development and lot status for each parcel, as reported in the Appraisal. The allocated appraised values are not indicative of the market values of the villages or the individual lots. Includes fiscal year 2021-22 assessed values for parcels that were not appraised. (3) Pursuant to the RMA, the City will levy at least the Maximum Facilities Special Tax on Developed Property and Final Map Property in fiscal year 2022-23. (4) Includes the $10,000,000 par amount of the Series 2021 Special Tax Bonds and the $8,660,000* par amount of the Series 2022 Tax Bonds. Allocated based on the Projected FY 2022-23 Facilities Special Tax Levy.
(5) Includes the overlapping debt liens listed under "Direct and Overlapping Tax and Assessment Debt" in the overlapping debt report prepared by California Municipal Statistics, Inc. The overlapping debt report is based on the parcels and assessed values as of FY 2021-22. Does not include any PACE liens secured by assessments or special taxes on the property.
Sources: Integra Realty Resources, Inc.; Piper Sandler & Co.; Goodwin Consulting Group, Inc.
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Value-to-lien Ratios by Village and Development Status. The following table shows the status of development and valueto-lien ratios in the District for Fiscal Year 2022-23. Value-to-lien ratios on individual parcels may vary considerably from any average.
Table 10
City of Rancho Cordova
Community Facilities District No. 2014-1 (Montelena)
Value-to-Lien Ratios by Village and Development Status for Projected Fiscal Year 2022-23 Special Tax Levy Owner
Construction
Status (2) Village
No. of
Parcels
No. of
Expected
Units Acres
Estimated
Value
Projected
FY 2022-23
Maximum
Facilities
Special Tax
Projected
FY 2022-23
Facilities
Special Tax
Levy (3)
Percent of
Projected
Facilities
Special
Tax Levy
CFD
Bonds* (4)
Overlapping
Debt (5) Total Debt*
Average
Appraised
Value-toLien*
Pulte Home Company, LLC Improved Lots 1 and 2 1 127 22.739 $24,892,000 $184,066 $184,066 15.76% $2,940,223 $15,877 $2,956,100 8.4:1 Improved Lots 4 1 55 10.21 $11,275,000 $79,714 $79,714 6.82% $1,273,325 $6,717 $1,280,042 8.8:1 Improved Lots 6 1 38 9.319 $8,436,000 $55,075 $55,075 4.71% $879,752 $6,107 $885,858 9.5:1 Subtotal 3 220 42.268 $44,603,000 $318,855 $318,855 27.30% $5,093,300 $28,701 $5,122,001 8.7:1 Richmond American Homes Improved Lots 3 118 118 20.06 $23,128,000 $171,022 $171,022 14.64% $2,731,861 $53,361 $2,785,222 8.3:1 Homes Under Construction 3 7 7 1.19 $1,997,800 $10,145 $10,145 0.87% $162,060 $3,165 $165,225 12.1:1 Subtotal 125 125 21.25 $25,125,800 $181,168 $181,168 15.51% $2,893,921 $56,526 $2,950,447 8.5:1 Premier Homes/
Master Developer Improved Lots 5 36 36 6.29 $7,633,732 $52,176 $52,176 4.47% $833,449 $95,870 $929,319 8.2:1 Homes Under Construction 5 23 23 4.25 $6,933,308 $33,335 $33,335 2.85% $532,481 $61,250 $593,732 11.7:1 Improved Lots 7 110 110 9.37 $17,825,290 $159,427 $159,427 13.65% $2,546,650 $271,270 $2,817,920 6.3:1 Homes Under Construction 7 42 42 3.67 $10,560,822 $60,872 $60,872 5.21% $972,357 $103,583 $1,075,940 9.8:1 Improved Lots 8 69 69 10.02 $12,630,319 $100,004 $100,004 8.56% $1,597,444 $7,861 $1,605,305 7.9:1 Homes Under Construction 8 12 12 1.74 $3,269,378 $17,392 $17,392 1.49% $277,816 $1,367 $279,184 11.7:1 Improved Lots 9 and 10 3 3 0.44 $549,144 $4,348 $4,348 0.37% $69,454 $9,121 $78,575 7.0:1 Homes Under Construction 9 and 10 25 25 2.81 $6,811,204 $36,234 $36,234 3.10% $578,784 $75,185 $653,970 10.4:1 Completed Homes - Elan 9 and 10 2 2 0.21 $1,234,001 $2,899 $2,899 0.25% $46,303 $6,080 $52,383 23.6:1 Subtotal 322 322 38.79 $67,447,200 $466,687 $466,687 39.95% $7,454,739 $631,588 $8,086,327 8.3 : 1 Individual Homeowners Completed Homes - Elan 9 and 10 69 69 7.46 $42,573,000 $100,004 $100,004 8.56% $1,597,444 $376,942 $1,974,386 21.6:1 Completed Homes - Esprit 9 and 10 65 65 7.57 $37,050,000 $94,207 $94,207 8.06% $1,504,839 $258,733 $1,763,571 21.0 : 1 Not Appraised 9 and 10 5 5 0.67 $3,289,667 $7,247 $7,247 0.62% $115,757 $41,679 $157,436 20.9 : 1 Subtotal 139 139 15.70 $82,912,667 $201,458 $201,458 17.25% $3,218,040 $677,354 $3,895,394 21.3 : 1 Total 589 806 118.00 $220,088,667 $1,168,168 $1,168,168 100.00% $18,660,000 $1,394,169 $20,054,169 11.0:1 * Preliminary; subject to change.
(1) Includes building permits issued and final maps recorded prior to March 30, 2022. Assumes no further development. (2) Construction status as provided in the appraisal report. (3) Pursuant to the RMA, the City will levy at least the Maximum Facilities Special Tax on Developed Property and Final Map Property in fiscal year 2022-23. (4) Includes the $10,000,000 par amount of the Series 2021 Special Tax Bonds and the $8,660,000* par amount of the Series 2022 Tax Bonds. Allocated based on the Projected FY 2022-23 Facilities Special Tax Levy. (5) Includes the overlapping debt liens listed under "Direct and Overlapping Tax and Assessment Debt" in the overlapping debt report prepared by California Municipal Statistics, Inc. The overlapping debt report is based on the parcels and assessed values as of FY 2021-22. Does not include any PACE liens secured by assessments or special taxes on the property.
Sources: Integra Realty Resources, Inc.; Piper Sandler & Co.; Goodwin Consulting Group, Inc.
ITEM 12.1. ATTACHMENT 4
Jones Hall Draft of May 5, 2022
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Value-to-lien Ratios By Category. The following table sets forth the projected value-to-lien ratios by category for parcels in the District for Fiscal Year 2022-23.
Table 11
City of Rancho Cordova
Community Facilities District No. 2014-1 (Montelena)
Value-to-Lien Ratio Ranges
Projected for Fiscal Year 2022-23
Appraised
Value-to-Lien
Category
No. of
Parcels
No. of
Expected
Units Acres
Estimated
Value (1)
Projected
FY 2022-23
Facilities
Special Tax
Levy (2)
Percent of
Projected
Facilities
Special Tax
Levy
CFD
Bonds* (3)
Overlapping
Debt (4) Total Debt*
Average
Appraised
Value-toLien*
20:1 to 25:1 125 125 14.16 $74,882,991 $181,168 15.51% $2,893,921 $568,724 $3,462,644 21.6:1 15:1 to 20:1 16 16 1.74 $9,263,677 $23,189 1.99% $370,422 $114,711 $485,133 19.1:1 10:1 to 15:1 67 67 9.99 $19,011,690 $97,106 8.31% $1,551,141 $140,968 $1,692,110 11.2:1 5:1 to 10:1 381 598 92.11 $116,930,309 $866,705 74.19% $13,844,516 $569,766 $14,414,282 8.1:1 Total 589 806 118.00 $220,088,667 $1,168,168 100.00% $18,660,000 $1,394,169 $20,054,169 11.0:1 * Preliminary; subject to change.
(1) Appraised values were allocated to the individual parcels based on the expected development and lot status for each parcel, as reported in the Appraisal. The allocated appraised values are not indicative of the market values of the villages or the individual lots. Includes fiscal year 2021-22 assessed values for parcels that were not appraised. (2) Includes building permits issued and final maps recorded prior to March 30, 2022. Assumes no further development. Pursuant to the RMA, the City will levy at least the Maximum Facilities Special Tax on Developed Property and Final Map Property in fiscal year 2022-23. (3) Includes the $10,000,000 par amount of the Series 2021 Special Tax Bonds and the $8,660,000 anticipated par amount of the Series 2022 Tax Bonds. Allocated based on the Projected FY 2022-23 Facilities Special Tax Levy.
(4) Includes the overlapping debt liens listed under "Direct and Overlapping Tax and Assessment Debt" in the overlapping debt report prepared by California Municipal Statistics, Inc. The overlapping debt report is based on the parcels and assessed values as of FY 2021-22. Does not include any PACE liens secured by assessments or special taxes on the property. (5) The City does not anticipate levying a Facilities Special Tax on Undeveloped Property in fiscal year 2022-23.
Sources: Integra Realty Resources, Inc.; Piper Sandler & Co.; Goodwin Consulting Group, Inc.
ITEM 12.1. ATTACHMENT 4
Jones Hall Draft of May 5, 2022
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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 Mello-Roos 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 City, the County and certain other public agencies are authorized by the Mello-Roos 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. In addition, property owners can voluntarily agree to incur Property Assessed Clean Energy (PACE) liens on their properties.
There can be no assurance that the developers 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, however no other special districts are currently contemplated by the City or the developers.
Private liens, such as deeds of trust securing loans obtained by developers of land in the District, may be placed upon property in the District at any time. Under California law, the Special Taxes have priority over all existing and future private liens imposed on property subject to the lien of the Special Taxes.
Set forth below is a statement of direct and overlapping public bonded debt (the “Overlapping Debt Report”) prepared by California Municipal Statistics, Inc. as of March 1, 2022.
The Overlapping Debt Report includes only such information as has been reported to California Municipal Statistics, Inc. by the issuers of the debt described therein and by others. The Overlapping Debt Report is included for general informational purposes only. Neither the City nor the District makes any representation as to its completeness or accuracy.
The first column in the table names each public agency which has outstanding bonded debt as of the date of the report and whose territory overlaps the District in whole or in part. The second column shows the assessed value of the area common to the District and the other public agency (overlapping territory), as a percentage of the total assessed value of the other public agency. This percentage, multiplied by the total outstanding bonded debt of each overlapping agency (which is not shown in the table) produces the amount shown in the third column, which is the apportionment of each overlapping agency’s outstanding debt to taxable property in the District. In addition to the bonded debt shown in the Overlapping Debt Report, various local agencies, including the City, levy additional parcels charges, assessments and special taxes on parcels in the District.
The Overlapping Debt Report does not include PACE debt secured by assessments or special taxes on any property. Based on the Special Tax Consultant’s review for Fiscal Year 2021-22, none of the parcels within the District had a PACE lien.
ITEM 12.1. ATTACHMENT 4
Jones Hall Draft of May 5, 2022
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Table 12
City of Rancho Cordova
Community Facilities District No. 2014-1 (Montelena)
Direct and Overlapping Indebtedness
As of March 1, 2022
2021-22 Local Secured Assessed Valuation: $60,705,156
DIRECT AND OVERLAPPING TAX AND ASSESSMENT DEBT: % Applicable Debt 4/1/22 Los Rios Community College District General Obligation Bonds 0.026% $ 131,171 Elk Grove Unified School District General Obligation Bonds 0.141 437,516 Elk Grove Unified School District Community Facilities District No. 1 0.462 825,480 City of Rancho Cordova Community Facilities District No. 2014-1 100.000 10,000,000 (1) TOTAL DIRECT AND OVERLAPPING TAX AND ASSESSMENT DEBT $11,394,167 OVERLAPPING GENERAL FUND DEBT:
Sacramento County General Fund Obligations 0.032% $ 40,691 Sacramento County Pension Obligation Bonds 0.032 198,319 Sacramento County Board of Education Certificates of Participation 0.032 836 Elk Grove Unified School District Certificates of Participation 0.141 16,029 City of Rancho Cordova Certificates of Participation 0.575 74,066 Sacramento Metropolitan Fire General Fund Obligations 0.078 6,279 Sacramento Metropolitan Fire Pension Obligation Bonds 0.078 23,779 Cordova Recreation and Park District General Fund Obligations 0.352 22,941 TOTAL GROSS OVERLAPPING GENERAL FUND DEBT $382,940
Less: Sacramento County supported obligations 4,358
TOTAL NET OVERLAPPING GENERAL FUND DEBT $378,582
GROSS COMBINED TOTAL DEBT $11,777,107 (2)
NET COMBINED TOTAL DEBT $11,772,749
Ratios to 2021-22 Local Secured Assessed Valuation:
Direct Debt ($10,000,000)....................................................16.47% Total Direct and Overlapping Tax and Assessment Debt .....18.77% Gross Combined Total Debt..................................................19.40% Net Combined Total Debt......................................................19.39% _____________
(1) Excludes 2022 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.
ITEM 12.1. ATTACHMENT 4
Jones Hall Draft of May 5, 2022
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Estimated Tax Burden on a Single-Family Home
The following table sets forth the estimated total tax burden on a single-family home based on projected tax rates for Fiscal Year 2021-2022.
Table 13
City of Rancho Cordova
Community Facilities District No. 2014-1 (Montelena)
Sample Tax Bill for Fiscal Year 2021-22
Net Taxable Value Amount
Estimated Market Values (1) $570,000.00
Less: Homeowner's Exemption (7,000.00)
Net Taxable Value $563,000.00
Ad Valorem Property Taxes Rate Amount
Base Property Tax 1.0000% $5,630.00
Los Rios College General Obligation Bond 0.0249 140.19
Elk Grove Unified General Obligation Bond 0.0367 206.62 Total Ad Valorem Property Taxes 1.0616% $5,976.81
Parcel Charges, Assessments, and Special Taxes (2) Amount Water and Drainage Studies - SCWA 13 $6.92
Elk Grove USD CFD No. 1 200.00
CRPD CFD No. 2014-1 449.44
Transit Services District Zone 2 85.46
Rancho Cordova Lighting District 2012-1 2.56
Rancho Cordova CFD 2014-2 336.30
Rancho Cordova CFD No. 2013-2 594.72
Rancho Cordova CFD No. 2014-1 (3) 1,420.92
Total Parcel Charges, Assessments, and Special Taxes $3,096.32 Total Taxes $9,073.13
Total Effective Tax Rate 1.59%
(1) Represents the estimated market values for the smallest floor plan in the Esprit project. (2) Does not include any PACE assessments or special taxes. (3) Equal to the applicable Facilities Maximum Special Tax rate in FY 2021-22.
Sources: Integra Realty Resources, Inc.; Goodwin Consulting Group, Inc.
ITEM 12.1. ATTACHMENT 4
Jones Hall Draft of May 5, 2022
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Special Tax Collections and Delinquencies
Special Taxes have been levied on taxable property in the District since Fiscal Year 2019-
20. A history of collections and delinquencies is set forth in the following table. The levy of Special Taxes in the District is currently covered by the Teeter Plan in the County. See “SECURITY FOR THE 2022 BONDS – Delinquent Payments of Special Tax; Covenant for Superior Court Foreclosure –Teeter Plan.”
Table 14
City of Rancho Cordova
Community Facilities District No. 2014-1 (Montelena)
Special Tax Collections and Delinquencies
Fiscal
Year
Facilities
Special Tax
Levied
Number of
Parcels
Delinquent
Amount
Delinquent
Percentage
Delinquent
2019-20(1) $230,810 0 $0 0.00% (1)
2020-21 $235,427 0 $0 0.00% (1)
(1) The Sacramento County Tax Collector's Office reports that all prior year delinquent amounts were remitted to the City through the Teeter Plan. Delinquency information for Fiscal Year 2021-22 will not be available until July 2022.
Sources: Sacramento County Tax Collector's Office; Goodwin Consulting Group, Inc.
BOND OWNERS’ RISKS
The purchase of the 2022 Bonds involves a degree of risk that may not be appropriate for some investors. The following includes a discussion of some of the risks that should be considered before making an investment decision. This discussion does not purport to be comprehensive or definitive or a complete statement of all factors that may be considered as risks in evaluating the credit quality of the 2022 Bonds.
Limited Obligation of the City to Pay Debt Service
The City has no obligation to pay principal of and interest on the 2022 Bonds if Special Tax collections are delinquent or insufficient, other than from amounts, if any, on deposit in the Reserve Fund or funds derived from the tax sale or foreclosure and sale of parcels for Special Tax delinquencies. The City is not obligated to advance funds to pay debt service on the 2022 Bonds.
Concentration of Ownership
Nearly all of the land in the District is owned by the Master Developer (and its affiliates), or one of the Merchant Builders. Although there will be transfers of ownership of this property as development progresses and home sales are closed, the timely payment of the 2022 Bonds depends upon the willingness and ability of all of the owners of taxable property within the District to pay the Special Taxes when due. The only assets of the owners of property within the District which constitute security for the 2022 Bonds are such owners’ real property holdings located within the District, and each parcel may only be foreclosed against for delinquent Special Taxes levied against such parcel. If the current landowners choose to pay some but not all of the Special Taxes, they may, as owners of parcels in the District, choose to default on payments of the Special Tax on parcels. Also see “– Bankruptcy Delays” below.
ITEM 12.1. ATTACHMENT 4
Jones Hall Draft of May 5, 2022
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Development of undeveloped property within the District may be subject to unexpected delays, disruptions and changes which may affect the willingness and ability of the two homebuilders or other property owners to pay the Special Taxes when due. Certain infrastructure improvements remain to be completed in order to complete construction of the remaining homes in the District. No assurance can be given that the remaining proposed residential development will be partially or fully completed, and for purposes of evaluating the investment quality of the 2022 Bonds, prospective purchasers should consider the possibility that such parcels will remain vacant and only partially improved. See the information set forth under the caption “THE DISTRICT – Development in the District.”
Levy and Collection of the Special Tax
General. The principal source of payment of principal of and interest on the 2022 Bonds is the proceeds of the annual levy and collection of the Special Tax against property within the District.
Limitation on Maximum Annual Special Tax Rate. The annual levy of the Special Tax is subject to the maximum annual Special Tax rate 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 2022 Bonds.
In addition to the maximum annual 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 2022 Bonds.
No Relationship Between Property Value and Special Tax Levy. Because 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 in the District subject to a Special Tax 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 in the District subject to a Special Tax and their proportionate share of debt service on the 2022 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 in the District subject to a Special Tax 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 taxed parcels.
ITEM 12.1. ATTACHMENT 4
Jones Hall Draft of May 5, 2022
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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 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. See “– Property Tax Delinquencies” below.
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 2022 BONDS – Delinquent Payments of Special Tax; Covenant for Superior Court Foreclosure” and in the Mello-Roos 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 2022 Bonds pending such sales or the prosecution of foreclosure proceedings and receipt by the City of the proceeds of sale if the Reserve Fund is depleted. See “SECURITY FOR THE 2022 BONDS – Delinquent Payments of Special Tax; Covenant for Superior Court Foreclosure.”
The ability of the City 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. See “ – FDIC/Federal Government Interests in Properties” below.
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.
Overlapping Tax Districts. The land in the District is also located within the boundaries of various local agencies that could issue debt in the future payable from special taxes or other amounts levied on the parcels in the District; this would decrease the value to lien ratios of parcels in the District.
Property Tax Delinquencies
General. Delinquencies in the payment of property taxes and, consequently, the Special Taxes, can occur because the owners of delinquent parcels may not have received property tax bills from the County in a timely manner, including situations in which the County initially sent property tax bills to the property developer or merchant builder at a time when the parcels in
ITEM 12.1. ATTACHMENT 4
Jones Hall Draft of May 5, 2022
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question had already been sold to individual homeowners. Delinquencies can also reflect economic difficulties and duress by the property owner.
Numerous future delinquencies by the owners of Taxable Property in the District in the payment of property taxes (and, consequently, the Special Taxes, which are collected on the ordinary property tax bills) when due could result in a deficiency in Special Tax Revenues necessary to pay debt service on the 2022 Bonds, which could in turn result in the depletion of the Reserve Fund, prior to reimbursement from the resale of foreclosed property or payment of the delinquent Special Tax. In that event, there could be a delay or failure in payments of the principal of and interest on the 2022 Bonds. See “SECURITY FOR THE 2022 BONDS – Reserve Fund,” and “SECURITY FOR THE 2022 BONDS – Delinquent Payments of Special Tax; Covenant for Superior Court Foreclosure.”
The City intends to take certain actions designed to mitigate the impact of future delinquencies, including: enforcing the lien of the Special Taxes through collection procedures that will include foreclosure actions under certain circumstances (see “SECURITY FOR THE 2022 BONDS – Delinquent Payments of Special Tax; Covenant for Superior Court Foreclosure”); and increasing the levy of Special Taxes against non-delinquent property owners in the District, to the extent permitted under the Special Tax Formula and the Mello-Roos Act and to the extent the Special Taxes are not already being levied at the Maximum Annual Special Tax rate.
Any future decline in home values in the District could result in property owner unwillingness or inability to pay mortgage payments, as well as ad valorem property taxes and Special Taxes, when due. Under such circumstances, bankruptcies are likely to increase.
Bankruptcy by homeowners with delinquent Special Taxes would delay the commencement and completion of foreclosure proceedings to collect delinquent Special Taxes.
It is possible that laws could be enacted in the future to assist homeowners in default in the payment of mortgages and property taxes. It is further possible that federal laws could be enacted that would adversely impact the ability of the City to foreclose on parcels with delinquent Special Taxes. No assurance can be given that any such laws will be enacted, or if enacted will be effective in assisting affected homeowners.
Property Values and Risks Related to Development
The value of Taxable Property within the District is a critical factor in determining the investment quality of the 2022 Bonds. If a property owner defaults in the payment of the Special Tax, the City’s only remedy is to foreclose on the delinquent property in an attempt to obtain funds with which to pay the delinquent Special Tax. Land values could be adversely affected by economic and other factors beyond the City’s control, such as a general economic downturn, relocation of employers out of the area, shortages of water, electricity, natural gas or other utilities, destruction of property caused by earthquake, flood, wildfires, or other natural disasters, environmental pollution or contamination, or unfavorable economic conditions.
The following is a discussion of specific risk factors that could affect the value of property in the District.
Risks Related to Availability of Mortgage Loans. In the past, market events have adversely affected the availability of mortgage loans to homeowners, including potential buyers
ITEM 12.1. ATTACHMENT 4
Jones Hall Draft of May 5, 2022
-59-
of homes within the District. Any such unavailability in the future could hinder the ability of the current homeowners to resell their homes, or the sale of newly completed homes in the future.
Natural Disasters. The value of the Taxable Property 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 Taxable Property and the continued habitability and enjoyment of such private improvements.
The areas in and surrounding the District, like those in much of California, may be subject to unpredictable seismic activity, including earthquakes. See “THE DISTRICT – Description and Location.”
Other natural disasters could include, without limitation, floods, wildfires, droughts or tornadoes. One or more natural disasters could occur and could result in damage to improvements of varying seriousness. Although the District is not in a high-risk area (or a special fire hazard severity zone) for wildfires, landslides, floods, or tornadoes, natural disasters such as these are unpredictable and may occur anywhere throughout the State, with devastating consequences. In particular, large fires have impacted other parts of the City and County in recent years. 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 Taxable Property may well depreciate or disappear.
Droughts. The State is subject from time-to-time to drought conditions, which could have an impact on future development in the District. California is once again entering a drought, after recovering from a multi-year drought a few years ago, as proclaimed by the Governor in a declaration of drought emergency. During the previous drought, in 2015, for the first time in State history, the Governor of California directed the State Water Resources Control Board (“SWRCB”) to implement mandatory water reductions in cities and towns across California to reduce water usage by 25 percent. In addition, the proclamation gave State water officials more flexibility to manage supply throughout California under drought conditions. On May 17, 2016, the SWRCB rescinded these mandatory water reductions due to an improved water supply outlook. The SWRCB also granted individual water suppliers broad control over future conservation orders.
The City cannot predict what water restrictions might be implemented during the current drought or any future drought, what effect drought conditions could have on property values, or whether or to what extent water reduction requirements may affect the District.
Legal Requirements. Other events that may affect the value of Taxable Property 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.
Hazardous Substances. One of the most serious risks in terms of the potential reduction in the value of Taxable Property is a claim with regard to a hazardous substance. In general, the owners and operators of Taxable Property may be required by law to remedy conditions of the parcel relating to releases or threatened releases of hazardous substances. The federal Comprehensive Environmental Response, Compensation and Liability Act of 1980, sometimes referred to as “CERCLA” or the “Superfund Act,” is the most well-known and widely applicable of
ITEM 12.1. ATTACHMENT 4
Jones Hall Draft of May 5, 2022
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these laws, but California laws with regard to hazardous substances are also stringent and similar.
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 Taxable Property be affected by a hazardous substance, is to reduce the marketability and value of the parcel by the costs of remedying the condition, because the purchaser, upon becoming owner, will become obligated to remedy the condition.
The property values set forth in this Official Statement do not take into account the possible reduction in marketability and value of any of the Taxable Property by reason of the possible liability of the owner or operator for the remedy of a hazardous substance condition of the parcel.
Although the City is not aware that the owner or operator of any of the Taxable Property has such a current liability with respect to any of the Taxable Property, it is possible that such liabilities do currently exist and that the City is not aware of them.
Further, it is possible that liabilities may arise in the future with respect to any of the Taxable Property resulting from the existence, currently, on the parcel of a substance presently classified as hazardous but that 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 that 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 Taxable Property that is realizable upon a delinquency.
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 Master Developer 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 (which allow for the impact of development and specify the mitigation required), the discovery of an endangered plant or animal could delay development of vacant property in the District or reduce the value of undeveloped property.
Future Property Development
Continuing development of the parcels in the District may be adversely affected by changes in general or local economic conditions, fluctuations in or a deterioration of the real estate market, increased construction costs, development, financing and marketing capabilities of the developer, water or electricity shortages, discovery on the undeveloped property of any plants or animals in their habitat that have been listed as endangered species, changes in law, and other similar factors. Development in the District may also be affected by development in surrounding areas, which may compete with the property in the District.
For example, H.R. 1 of the 115th U.S. Congress, known as the “Tax Cuts and Jobs Act,” was enacted into law on December 22, 2017 (the “Tax Act”). The Tax Act makes significant changes to many aspects of the Code that could have an impact on future property development.
The Tax Act reduces the amount of mortgage interest expense and state local income tax and property tax expense that individuals may deduct from their gross income for federal income tax purposes, which could increase the cost of home ownership within the District and could adversely
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affect the sale of homes by the developers. However, neither the City nor the developers can predict the effect that the Tax Act may have on the cost of home ownership or the price of homes in the District, the rate at which homes in the District are sold to individual homeowners, or the ability or willingness of homeowners to pay special taxes or property taxes on taxable property within the District. The appraised values in the Appraisal do not take into account any of potential impacts of the Tax Act on home values or home sales in the District.
Other Possible Claims Upon the Value of Taxable Property While the Special Taxes are secured by the Taxable Property, the security only extends to the value of such Taxable Property that is not subject to priority and parity liens and similar claims.
The table in the section entitled “VALUE OF PROPERTY WITHIN THE DISTRICT – Priority of Lien” shows the presently outstanding amount of governmental obligations (with stated exclusions), the tax or assessment for which is or may become an obligation of one or more of the parcels in the District subject to a Special Tax. The table also states the additional amount of general obligation bonds the tax for which, if and when issued, may become an obligation of one or more of the parcels in the District subject to a Special Tax. The table does not specifically identify which of the governmental obligations are secured by liens on one or more of the parcels in the District subject to a Special Tax.
In addition, other governmental obligations may be authorized and undertaken or issued in the future, the tax, assessment or charge for which may become an obligation of one or more of the parcels in the District subject to a Special Tax and may be secured by a lien on a parity with the lien of the Special Tax securing the 2022 Bonds.
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 2022 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 non-governmental liens on a parcel of Taxable Property, 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 Delays” below.
Exempt Properties
Certain properties are exempt from the Special Tax in accordance with the Special Tax Formula and the Mello-Roos Act, which provides that properties or entities of the state, federal or local government are exempt from the Special Tax; provided, however, that property within the District acquired by a public entity through a negotiated transaction or by gift or devise, which is not otherwise exempt from the Special Tax, will continue to be subject to the Special Tax. See “SECURITY FOR THE 2022 BONDS – Special Tax Formula.”
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In addition, although the Mello- Roos Act provides that if property subject to the Special Tax is acquired by a public entity through eminent domain proceedings, the obligation to pay the Special Tax with respect to that property is to be treated as if it were a special assessment, the constitutionality and operation of these provisions of the Mello- Roos Act have not been tested, meaning that such property could become exempt from the Special Tax. The Mello- Roos Act further provides that no other properties or entities are exempt from the Special Tax unless the properties or entities are expressly exempted in a resolution of consideration to levy a new special tax or to alter the rate or method of apportionment of an existing special tax.
FDIC/Federal Government Interests in Properties
General. The ability of the City to foreclose the lien of delinquent unpaid Special Tax installments may be limited with regard to properties in which the FDIC, the Drug Enforcement Agency, the Internal Revenue Service, or other federal agency has or obtains an interest.
Federal courts have held that, based on the supremacy clause of the United States Constitution, in the absence of Congressional intent to the contrary, a state or local agency cannot foreclose to collect delinquent taxes or assessments if foreclosure would impair the federal government interest.
The supremacy clause of the United States Constitution reads as follows: “This Constitution, and the Laws of the United States which shall be made in Pursuance thereof; and all Treaties made, or which shall be made, under the Authority of the United States, shall be the supreme Law of the Land; and the Judges in every State shall be bound thereby, any Thing in the Constitution or Laws of any State to the contrary notwithstanding.” This means that, unless Congress has otherwise provided, if a federal governmental entity owns a parcel that is subject to Special Taxes but does not pay taxes and assessments levied on the parcel (including Special Taxes), the applicable state and local governments cannot foreclose on the parcel to collect the delinquent taxes and assessments.
Moreover, unless Congress has otherwise provided, if the federal government has a mortgage interest in the parcel and the City wishes to foreclose on the parcel as a result of delinquent Special Taxes, the property cannot be sold at a foreclosure sale unless it can be sold for an amount sufficient to pay delinquent taxes and assessments on a parity with the Special Taxes and preserve the federal government’s mortgage interest. In Rust v. Johnson (9th Circuit; 1979) 597 F.2d 174, the United States Court of Appeal, Ninth Circuit held that the Federal National Mortgage Association (“FNMA”) is a federal instrumentality for purposes of this doctrine, and not a private entity, and that, as a result, an exercise of state power over a mortgage interest held by FNMA constitutes an exercise of state power over property of the United States.
The City has not undertaken to determine whether any federal governmental entity currently has, or is likely to acquire, any interest (including a mortgage interest) in any of the parcels subject to the Special Taxes, and therefore expresses no view concerning the likelihood that the risks described above will materialize while the 2022 Bonds are outstanding.
FDIC. In the event that any financial institution making any loan which is secured by real property within the District is taken over by the FDIC, and prior thereto or thereafter the loan or loans go into default, resulting in ownership of the property by the FDIC, then the ability of the
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District to collect interest and penalties specified by State law and to foreclose the lien of delinquent unpaid Special Taxes may be limited.
The FDIC’s policy statement regarding the payment of state and local real property taxes (the “Policy Statement”) provides that property owned by the FDIC is subject to state and local real property taxes only if those taxes are assessed according to the property’s value, and that the FDIC is immune from real property taxes assessed on any basis other than property value.
According to the Policy Statement, the FDIC will pay its property tax obligations when they become due and payable and will pay claims for delinquent property taxes as promptly as is consistent with sound business practice and the orderly administration of the institution’s affairs, unless abandonment of the FDIC’s interest in the property is appropriate. The FDIC will pay claims for interest on delinquent property taxes owed at the rate provided under state law, to the extent the interest payment obligation is secured by a valid lien. The FDIC will not pay any amounts in the nature of fines or penalties and will not pay nor recognize liens for such amounts.
If any property taxes (including interest) on FDIC-owned property are secured by a valid lien (in effect before the property became owned by the FDIC), the FDIC will pay those claims. The Policy Statement further provides that no property of the FDIC is subject to levy, attachment, garnishment, foreclosure or sale without the FDIC’s consent. In addition, the FDIC will not permit a lien or security interest held by the FDIC to be eliminated by foreclosure without the FDIC’s consent.
The Policy Statement states that the FDIC generally will not pay non-ad valorem taxes, including special assessments, on property in which it has a fee interest unless the amount of tax is fixed at the time that the FDIC acquires its fee interest in the property, nor will it recognize the validity of any lien to the extent it purports to secure the payment of any such amounts. Special taxes imposed under the Mello-Roos Act and a special tax formula which determines the special tax due each year are specifically identified in the Policy Statement as being imposed each year and therefore covered by the FDIC’s federal immunity. The Ninth Circuit issued a ruling on August 28, 2001, in which it determined that the FDIC, as a federal agency, is exempt from special taxes levied under the Act.
The City is unable to predict what effect the application of the Policy Statement would have in the event of a delinquency in the payment of Special Taxes on a parcel within the District in which the FDIC has or obtains an interest, although prohibiting the lien of the Special Taxes to be foreclosed out at a judicial foreclosure sale could reduce or eliminate the number of persons willing to purchase a parcel at a foreclosure sale. Such an outcome could cause a draw on the Reserve Fund and perhaps, ultimately, if enough property were to become owned by the FDIC, a default in payment on the 2022 Bonds.
Depletion of 2022 Reserve Account of the Reserve Fund
The 2022 Reserve Account of the Reserve Fund is to be maintained at an amount equal to the Reserve Requirement as defined in the Fiscal Agent Agreement. See “SECURITY FOR THE 2022 BONDS – Reserve Fund.” The 2022 Reserve Account of the Reserve Fund will be used to pay principal of and interest on the 2022 Bonds if insufficient funds are available from the proceeds of the levy and collection of the Special Tax against property within the District. If the 2022 Reserve Account of the Reserve Fund is depleted, it can be replenished from the proceeds of the levy and collection of the Special Taxes that exceed the amounts to be paid to the owners of the 2022 Bonds under the Fiscal Agent Agreement. However, because the Special Tax levy is limited to the annual Maximum Annual Special Tax rates, it is possible that no replenishment
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would be achieved if the Special Tax proceeds, together with other available funds, remain insufficient to pay all such amounts. Thus, it is possible that the 2022 Reserve Account of the Reserve Fund will be depleted and not be replenished by the levy and collection of the Special Taxes.
Bankruptcy Delays
The payment of the Special Tax and the ability of the City to foreclose the lien of a delinquent unpaid Special Tax, as discussed in “SECURITY FOR THE 2022 BONDS,” may be limited by bankruptcy, insolvency or other laws generally affecting creditors’ rights or by the laws of the State of California relating to judicial foreclosure. The various legal opinions to be delivered concurrently with the delivery of the 2022 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 or any other person claiming an interest in the property could result in a delay in superior court foreclosure proceedings and could result in the possibility of Special Tax installments not being paid in part or in full. Such a delay would increase the likelihood of a delay or default in payment of the principal of and interest on the 2022 Bonds.
In addition, the amount of any lien on property securing the payment of delinquent Special Taxes could be reduced if the value of the property were determined by the bankruptcy court to have become less than the amount of the lien, and the amount of the delinquent Special Taxes in excess of the reduced lien could then be treated as an unsecured claim by the court. Any such stay of the enforcement of the lien for the Special Tax, or any such delay or non-payment, would increase the likelihood of a delay or default in payment of the principal of and interest on the 2022 Bonds and the possibility of delinquent Special Taxes not being paid in full.
To the extent that property in the District continues to be owned by a limited number of property owners, the chances are increased that the Reserve Fund 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 to make up shortfalls resulting from delinquent payments of the Special Tax and thereby to pay principal of and interest on the 2022 Bonds on a timely basis.
On July 30, 1992, the United States Court of Appeals for the Ninth Circuit issued its opinion in a bankruptcy case entitled In re Glasply Marine Industries. In that case, the court held that ad valorem property taxes levied by Snohomish County in the State of Washington after the date that the property owner filed a petition for bankruptcy were not entitled to priority over a secured creditor with a prior lien on that property. The court upheld the priority of unpaid ad valorem taxes imposed before the bankruptcy petition (the “pre-petition taxes”), but unpaid taxes imposed after the filing of the bankruptcy petition (“post-petition taxes”) were declared to be unsecured “administrative expenses” of the bankruptcy estate, and were therefore held to be payable from the bankruptcy estate only after payment of all secured creditors. As a result, the secured creditor of the property was able to foreclose on the property and retain all of the proceeds of the sale except for the amount of the pre-petition taxes.
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According to the court’s ruling, as administrative expenses, post-petition taxes would have to be paid, but only if the debtor had sufficient assets not subject to other perfected security interests to do so. In certain circumstances, payment of such administrative expenses may also be allowed to be deferred. Once the property is transferred out of the bankruptcy estate (through foreclosure or otherwise) it would at that time again become subject to and would secure liens for then current and future ad valorem taxes.
Glasply was controlling precedent on bankruptcy courts in the State of California for several years subsequent to the date of the Ninth Circuit’s holding. Pursuant to state law, the lien date for general ad valorem property taxes levied in the State of California is the January 1 preceding the fiscal year for which the taxes are levied. Under the Glasply holding, a bankruptcy petition filing would have prevented the lien for general ad valorem property taxes levied in fiscal years subsequent to the filing of a bankruptcy petition from attaching and becoming a lien so long as the property was a part of the estate in bankruptcy. However, the Glasply holding was for the most part subsequently rendered inoperative with respect to the imposition of a lien for and the collection of ad valorem taxes by amendments to the federal Bankruptcy Code (Title 11 U.S.C.) which were part of the Bankruptcy Reform Act of 1994 (the “Bankruptcy Reform Act”) passed by Congress during the later part of 1994. The Bankruptcy Reform Act added a provision to the automatic stay section of the Bankruptcy Code which, pursuant to Section 362(b)(18) thereof, excepts from the Bankruptcy Code’s automatic stay provisions, “the creation of a statutory lien for an ad valorem property tax imposed by . . . a political subdivision of a state, if such tax comes due after the filing of the petition” by a debtor in bankruptcy court. The effect of this provision is to continue the secured interest of ad valorem taxes on real property (i.e., post-petition taxes) in effect during the period following the filing of a bankruptcy petition, including during the period bankruptcy proceedings are pending.
Without further clarification by the courts or Congress, the original rationale of the Glasply holding could, however, still result in the treatment of post-petition special taxes as “administrative expenses,” rather than as tax liens secured by real property, at least during the pendency of bankruptcy proceedings. This treatment might result from the fact that, although the lien of special taxes is of record from the date of the filing of a Notice of Special Tax Lien, the actual special tax is levied annually. As noted above, special taxes have a different lien date than the lien date for general ad valorem taxes in the State of California noted above. The lien of a Mello-Roos special tax attaches upon recordation of the notice of the special tax lien, as provided for in Section 53328.3 of the Act, as opposed to the annual January 1 lien date for general ad valorem taxes.
Thus, in deciding whether the original Glasply ruling is applicable to a bankruptcy proceeding involving special taxes rather than general ad valorem property taxes, a court might consider the differences in the statutory provisions for creation of the applicable tax lien (general ad valorem or special tax) in determining whether there is a basis for post petition special taxes to be entitled to a lien on the property during pending bankruptcy proceedings. If a court were to apply Glasply to eliminate the priority of the special tax lien as a secured claim against property with respect to post-petition levies of the Special Taxes made against property owners within the District who file for bankruptcy, collections of the Special Taxes from such property owners could be reduced as the result of being treated as “administrative expenses” of the bankruptcy estate. Also, and most importantly, is the fact that the original holding in Glasply and the mitigation of that holding by the Bankruptcy Reform Act of 1994 both appear to be applicable only to general ad valorem taxes, and, therefore, the exemption from the automatic stay in Section 362(b)(18) discussed above may not be applicable to special taxes since they were not expressly mentioned or provided for in this section, nor defined to be included within the term “ad valorem taxes.”
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Disclosure to Future Purchasers
The City has recorded a notice of the Special Tax lien in the Office of the County Recorder.
While title companies normally refer to such notices in title reports, there can be no guarantee that such reference will be made or, if made, that a prospective purchaser or lender will consider such special tax obligation in the purchase of a parcel of land or a home in the District or the lending of money secured by property in the District. The Mello-Roos Act and the City’s MelloRoos Act Goals and Policies require the subdivider of a subdivision (or its agent or representative) to notify a prospective purchaser or long-term lessor of any lot, parcel, or unit subject to a MelloRoos special tax of the existence and maximum amount of such special tax using a statutorily prescribed form. California Civil Code Section 1102.6b requires that in the case of transfers other than those covered by the above requirement, the seller must at least make a good faith effort to notify the prospective purchaser of the special tax lien in a format prescribed by statute. Failure by an owner of the property to comply with these requirements, or failure by a purchaser or lessor to consider or understand the nature and existence of the Special Tax, could adversely affect the willingness and ability of the purchaser or lessor to pay the Special Tax when due.
No Acceleration Provisions
The 2022 Bonds do not contain a provision allowing for their acceleration in the event of a payment default or other default under the terms of the 2022 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 Bondowners similarly situated to pursue certain remedies. So long as the 2022 Bonds are in book-entry form, DTC will be the sole Bondowner and will be entitled to exercise all rights and remedies of Bondholders, in accordance with its procedures and rules.
Loss of Tax Exemption
As discussed under the caption “TAX MATTERS,” interest on the 2022 Bonds might become includable in gross income for purposes of federal income taxation retroactive to the date the 2022 Bonds were issued as a result of future acts or omissions of the City in violation of its covenants in the Fiscal Agent Agreement. The Fiscal Agent Agreement does not contain a special redemption feature triggered by the occurrence of an event of taxability. As a result, if interest on the 2022 Bonds were to become includable in gross income for purposes of federal income taxation, the 2022 Bonds would continue to remain outstanding until maturity unless earlier redeemed pursuant to optional redemption, mandatory sinking fund redemption or special mandatory redemption upon prepayment of the Special Taxes. See “THE 2022 BONDS – Redemption.”
Future legislative proposals, if enacted into law, clarification of the Code or court decisions may cause interest on the 2022 Bonds to be subject, directly or indirectly, to federal income taxation or to be subject to or exempted from state income taxation, or otherwise prevent Bondowners from realizing the full current benefit of the tax status of such interest.
IRS Audit of Tax-Exempt Bond Issues
The Internal Revenue Service (the “IRS”) has initiated an expanded program for the auditing of tax-exempt bond issues, including both random and targeted audits. It is possible that the 2022 Bonds will be selected for audit by the IRS. It is also possible that the market value of
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such 2022 Bonds might be affected as a result of such an audit (or by an audit of similar bonds or securities).
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 2022 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. Special 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 2022 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 City believes, therefore, that issuance of the 2022 Bonds does not require the conduct of further proceedings under the Act, Proposition 218 or Proposition 26.
Case Law Related to the Mello-Roos Act
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 the City’s charter (the “Charter”) and was intended to function much like a community facilities district established under the Mello-Roos 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
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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 Mello-Roos 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 City’s 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 fewer than 12 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 residential property pursuant to the Mello-Roos 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 Mello-Roos 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 Mello-Roos 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 Mello-Roos Act] or the validity of any special taxes levied pursuant to [the Mello-Roos Act] … shall …. be commenced within 30 days after the voters approve the issuance of the bonds or the special tax …
Section 53326(b) of the Mello-Roos Act defines the authorized voters for an election in which the special taxes will be levied on residential property: “Except as otherwise provided in subdivision (c), if at least 12 persons, who need not necessarily be the same 12 persons, have been registered to vote within the territory of the proposed community facilities district for each of the 90 days preceding the close of the protest hearing, the vote shall be by the registered voters of the proposed district, with each voter having one vote. Otherwise, the vote shall be by the landowners of the proposed district and each person who is the owner of land at the close of the protest hearing, or the authorized representative thereof, shall have one vote for each acre or portion of an acre of land that he or she owns within the proposed community facilities district not exempt from 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 Mello-Roos Ac and, pursuant to Sections 53341 and 53359 of the Mello-Roos Act, the statute of limitations period to challenge the validity
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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 City believes the Special Taxes are valid and cannot be challenged.
Secondary Market for Bonds
There can be no guarantee that there will be a secondary market for the 2022 Bonds or, if a secondary market exists, that any 2022 Bonds can be sold for any particular price. Prices of bond issues for which a market is being made will depend upon then-prevailing circumstances.
Such prices could be substantially different from the original purchase price.
No assurance can be given that the market price for the 2022 Bonds will not be affected by the introduction or enactment of any future legislation (including without limitation amendments to the Internal Revenue Code), or changes in interpretation of the Internal Revenue Code, or any action of the IRS, including but not limited to the publication of proposed or final regulations, the issuance of rulings, the selection of the 2022 Bonds for audit examination, or the course or result of any IRS audit or examination of the 2022 Bonds or obligations that present similar tax issues as the 2022 Bonds.
COVID-19 Pandemic
The spread of the COVID-19 coronavirus pandemic, and responses intended to slow its spread, may result in negative impacts to the homebuilding operations and sales of homes within the District. In addition, 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 by the City for the payment of the Bonds.
To date, despite various shelter-in-place and similar orders, neither the Master Developer nor Premier Chrysanthy, LLC nor any of the merchant builders has experienced any material stoppage in development or construction activities with respect to the development of its property in the District. [Confirm]
The COVID-19 outbreak is ongoing, and its duration and severity and economic effects are uncertain in many respects. Uncertain too are the additional actions that may be taken by federal, State and local governmental authorities to contain or mitigate the effects of the outbreak.
Negative impacts on the collection of Special Taxes could occur because Special Tax payments are deferred, or some taxpayers may be unable to make their property and special tax payments.
Additionally, the value of property on future secured property tax rolls could be reduced, which will not be known until the applicable tax roll is released. The negative impacts of COVID-19 and efforts to contain its spread may reduce or negatively affect the pace of development activity in the District, as well as home sales, home prices, property values and/or the ability or willingness of property owners to pay Special Taxes levied upon their property, all of which could impact the City’s ability to pay debt service on the Bonds.
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. No
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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 2022 Bonds. The City is also reliant on other entities and service providers in connection with the administration of the 2022 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.
Potential Early Redemption of Bonds from Prepayments
Property owners within the District, including the Master Developer, the merchant builderes, and individual homeowners, are permitted to prepay their Special Tax obligation at any time. Such prepayments could also be made from the proceeds of bonds issued by or on behalf of an overlapping special assessment district or community facilities district. Such prepayments will result in a redemption of the Bonds on the interest payment date for which timely notice may be given under the Fiscal Agent Agreement following the receipt of the prepayment. The resulting redemption of Bonds that were purchased at a price greater than par could reduce the otherwise expected yield on such Bonds.
LEGAL MATTERS
Legal Opinion
The legal opinion of Jones Hall, A Professional Law Corporation, San Francisco, California, Bond Counsel, approving the validity of the 2022 Bonds will be made available to purchasers at the time of original delivery and is attached in substantially final form as APPENDIX E.
Jones Hall, A Professional Law Corporation, San Francisco, California, has served as Disclosure Counsel to the City. Meyers Nave, A Professional Law Corporation, Sacramento, California, will pass upon certain legal matters for the City as its City Attorney. Kutak Rock LLP, Irvine, California, is serving as counsel to the Underwriter.
No Litigation
At the time of delivery of the 2022 Bonds, the City will certify that there is no action, suit, proceeding, inquiry or investigation, at law or in equity, before or by any court, public board or body, pending with respect to which the District has been served with process or threatened, which (i) in any way questions the powers of the City Council or the City, (ii) in any way questions the validity of any proceeding taken by the City Council in connection with the issuance of the 2022 Bonds, (iii) wherein an unfavorable decision, ruling or finding could have a material adverse effect on the transactions contemplated by the purchase contract with respect to the 2022 Bonds, (iv) which, in any way, could adversely affect the validity or enforceability of the resolutions of the City Council adopted in connection with the formation of the District or the issuance of the 2022 Bonds, the Fiscal Agent Agreement, the Continuing Disclosure Agreement or the purchase contract with respect to the 2022 Bonds, (v) to the knowledge of the City, which in any way questions the exclusion from gross income of the recipients thereof of the interest on the 2022
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Bonds for federal income tax purposes, or (vi) in any other way questions the status of the 2022 Bonds under State tax laws or regulations.
TAX MATTERS
Federal Tax Status. 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 2022 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.
The opinions set forth in the preceding paragraph are subject to the condition that the City 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 2022 Bonds in order that the interest thereon be, and continue to be, excludable from gross income for federal income tax purposes.
The City has made certain representations and covenants in order to comply with each such requirement. Inaccuracy of those representations, or failure to comply with certain of those covenants, may cause the inclusion of such interest in gross income for federal income tax purposes, which may be retroactive to the date of issuance of the 2022 Bonds.
Tax Treatment of Original Issue Discount and Premium. If the initial offering price to the public at which a 2022 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 at which a 2022 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 are 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 2022 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 2022 Bonds to determine taxable gain upon disposition (including sale, redemption, or payment on maturity) of such 2022 Bond. The Tax Code contains certain provisions relating to the accrual of original issue discount in the case of purchasers of the 2022 Bonds who purchase the 2022 Bonds after the initial offering of a substantial amount of such maturity. Owners of such 2022 Bonds should consult their own tax advisors with respect to the tax consequences of ownership of 2022 Bonds with original issue discount, including the treatment of purchasers who do not purchase in the original offering to the public at the first price at which a substantial amount of such 2022 Bonds is sold to the public.
Under the Tax Code, original issue premium is amortized on an annual basis over the term of the 2022 Bond (said term being the shorter of the 2022 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 2022 Bond for purposes of determining taxable gain or loss upon disposition.
The amount of original issue premium on a 2022 Bond is amortized each year over the term to maturity of the 2022 Bond on the basis of a constant interest rate compounded on each interest
ITEM 12.1. ATTACHMENT 4
Jones Hall Draft of May 5, 2022
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or principal payment date (with straight-line interpolations between compounding dates).
Amortized bond premium is not deductible for federal income tax purposes. Owners of premium 2022 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 2022 Bonds.
California Tax Status. In the further opinion of Bond Counsel, interest on the 2022 Bonds is exempt from California personal income taxes.
Other Tax Considerations. Current and future legislative proposals, if enacted into law, clarification of the Tax Code or court decisions may cause interest on the 2022 Bonds to be subject, directly or indirectly, to federal income taxation or to be subject to or exempted from state income taxation, or otherwise prevent beneficial owners from realizing the full current benefit of the tax status of such interest. The introduction or enactment of any such legislative proposals, clarification of the Tax Code or court decisions may also affect the market price for, or marketability of, the 2022 Bonds. It cannot be predicted whether or in what form any such proposal might be enacted or whether, if enacted, such legislation would apply to bonds issued prior to enactment.
The opinions expressed by Bond Counsel are based upon existing legislation and regulations as interpreted by relevant judicial and regulatory authorities as of the date of such opinion, and Bond Counsel has expressed no opinion with respect to any proposed legislation or as to the tax treatment of interest on the 2022 Bonds, or as to the consequences of owning or receiving interest on the 2022 Bonds, as of any future date. Prospective purchasers of the 2022 Bonds should consult their own tax advisors regarding any pending or proposed federal or state tax legislation, regulations or litigation, as to which Bond Counsel expresses no opinion.
Owners of the 2022 Bonds should also be aware that the ownership or disposition of, or the accrual or receipt of interest on, the 2022 Bonds may have federal or state tax consequences other than as described above. Other than as expressly described above, Bond Counsel expresses no opinion regarding other federal or state tax consequences arising with respect to the 2022 Bonds, the ownership, sale or disposition of the 2022 Bonds, or the amount, accrual or receipt of interest on the 2022 Bonds.
CONTINUING DISCLOSURE
The City
The City has covenanted for the benefit of owners of the 2022 Bonds to provide certain financial information and operating data relating to the District by not later than nine months after the end of the City’s fiscal year (presently June 30) in each year (the “City Annual Report”) commencing with its report for Fiscal Year 2021-22 (due by April 1, 2023) and to provide notices of the occurrence of certain enumerated events. The City Annual Report and notices of listed events will be filed with the Municipal Securities Rulemaking Board. The covenants of the City 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 or the notices of listed events by the City is summarized in “APPENDIX F – Form of Continuing Disclosure Undertakings.”
ITEM 12.1. ATTACHMENT 4
Jones Hall Draft of May 5, 2022
-73-
A review of the City’s compliance with prior continuing disclosure undertakings in the last five years indicates that the City has been in compliance during such period.
The City has retained Goodwin Consulting Group, Inc. to serve as dissemination agent with respect to the filings to be made with respect to the 2022 Bonds and its other undertakings under the Rule.
Master Developer
The Master Developer is not an obligated party under the Rule, but has voluntarily agreed to provide ongoing continuing disclosure for the benefit of Bondowners. The Master Developer will enter into a Continuing Disclosure Certificate (Developer) covenanting to provide certain information regarding the development of its property and notice of certain enumerated events if they occur until such time as the Master Developer and its affiliates no longer own property in the District that is responsible for at least 20% of the special tax levy for the District. The specific nature of the information to be contained in the ongoing reports and enumerated events is summarized in “APPENDIX F – Form of Continuing Disclosure Undertakings.” A review of the Master Developer’s compliance with prior continuing disclosure undertakings in the last five years indicates that the Master Developer has been in compliance during such period. [Confirm]
Pulte Homes
Pulte Homes is not an obligated party under the Rule, but has voluntarily agreed to provide ongoing continuing disclosure for the benefit of Bondowners. Pulte Homes will enter into a Continuing Disclosure Certificate (Developer) covenanting to provide certain information regarding the development of its property and notice of certain enumerated events if they occur until such time as Pulte Homes and its affiliates no longer own property in the District that is responsible for at least 20% of the special tax levy for the District. The specific nature of the information to be contained in the ongoing reports and enumerated events is summarized in “APPENDIX F – Form of Continuing Disclosure Undertakings.” A review of Pulte Homes’s compliance with prior continuing disclosure undertakings in the last five years indicates that the Master Developer has been in compliance during such period. [Confirm]
NO RATING
The City has not obtained a credit rating on the 2022 Bonds and does not anticipate obtaining one on the 2022 Bonds in the future. Prospective purchasers of the 2022 Bonds are required to make independent determinations as to the credit quality of the 2022 Bonds and their appropriateness as an investment.
UNDERWRITING
The 2022 Bonds are being purchased by Piper Sandler & Co. (the “Underwriter”), at a purchase price of $____________ (which represents the aggregate principal amount of the 2022
ITEM 12.1. ATTACHMENT 4
Jones Hall Draft of May 5, 2022
-74-
Bonds ($____________), [plus/minus][net] original issue [premium/discount] of $____________, and less an Underwriter’s discount of $____________).
The purchase agreement relating to the 2022 Bonds provides that the Underwriter will purchase all of the 2022 Bonds, if any are purchased, the obligation to make such purchase being subject to certain terms and conditions set forth in such purchase agreement.
The Underwriter may offer and sell the 2022 Bonds to certain dealers and others at prices lower than the offering prices stated on the inside cover page hereof. The offering prices may be changed from time to time by the Underwriter.
PROFESSIONAL FEES
In connection with the issuance of the 2022 Bonds, some or all of fees or other compensation payable to certain professionals is contingent upon the issuance and delivery of the 2022 Bonds. Those professionals include:
Piper Sandler & Co., as the Underwriter;
Jones Hall, A Professional Law Corporation, as Bond Counsel and Disclosure Counsel;
Kutak Rock LLP, as Underwriter’s Counsel;
Goodwin Consulting Group, Inc., as Special Tax Consultant; NHA Advisors, LLC, as Municipal Advisor; and
U.S. Bank Trust Company, National Association, as Fiscal Agent for the 2022 Bonds.
EXECUTION
The execution and delivery of the Official Statement by the City has been duly authorized by the City Council, acting as the legislative body of the District.
CITY OF RANCHO CORDOVA
By:
Chief Administrative Officer
A-1
APPENDIX A
RATE AND METHOD OF APPORTIONMENT OF SPECIAL TAX
B-1
APPENDIX B
THE APPRAISAL
C-1
APPENDIX C
SUMMARY OF CERTAIN PROVISIONS OF THE FISCAL AGENT AGREEMENT
D-1
APPENDIX D
SACRAMENTO COUNTY AND CITY OF RANCHO CORDOVA
DEMOGRAPHIC INFORMATION
The following information concerning the City of Rancho Cordova (the “City”) and the County of Sacramento (the “County”) is included only for the purpose of supplying general information regarding the area of the City and County. The 2022 Bonds are not a debt of the City, the County, the State of California (the “State”) or any of its political subdivisions, and neither the City, the County, the State nor any of its political subdivisions is liable therefor.
General
The City. The City was incorporated on July 1, 2003, is located in the northeastern portion of the County, 10 miles east of downtown Sacramento and 90 miles northeast of San Francisco.
Organized as a General Law City under State law, the City operates under the Council-Manager form of government with five members elected to the Council, one of which serves as mayor for a year.
The County. The County was incorporated in 1850 as one of the original 27 counties of the State. The County’s largest city, the City of Sacramento serves as the seat of government for both the County and the State. Sacramento became the State Capital in 1854. The County is the major component of the Sacramento Metropolitan Statistical Area (“SMSA”), which includes Sacramento, El Dorado, and Placer Counties. The County encompasses approximately 994 square miles in the northern portion of the Central Valley, which is California’s prime agricultural region. The County is bordered by Contra Costa and San Joaquin Counties on the south, Amador and El Dorado Counties on the east, Placer and Sutter Counties on the north, and Yolo and Solano Counties on the west. The County extends from the low delta lands between the Sacramento and San Joaquin rivers north to about ten miles beyond the State Capitol and east to the foothills of the Sierra Nevada Mountains. The southernmost portion of the County has direct access to the San Francisco Bay.
Population
The following table lists population estimates for the City, the County and the State for the last five calendar years, as of January 1, 2022.
CITY OF RANCHO CORDOVA, COUNTY OF SACRAMENTO
AND STATE OF CALIFORNIA
Population Estimates
Calendar Years 2018 through 2022, as of January 1
Calendar Year
City of
Rancho Cordova
County of
Sacramento
State of
California
2018 75,815 1,525,099 39,519,535
2019 77,259 1,538,054 39,605,361
2020 79,139 1,585,055 39,538,223
2021 79,536 1,580,624 39,303,157
2022 80,359 1,576,618 39,185,605
Source: State Department of Finance.
ITEM 12.1. ATTACHMENT 4
Jones Hall Draft of May 5, 2022
D-2
Employment and Industry
The unemployment rate in the Sacramento--Roseville--Arden-Arcade MSA was 3.7 percent in March 2022, up from a revised 4.4 percent in February 2022, and below the year-ago estimate of 7.6 percent. This compares with an unadjusted unemployment rate of 4.2 percent for California and 3.8 percent for the nation during the same period. The unemployment rate was 3.3 percent in El Dorado County, 2.8 percent in Placer County, 4.0 percent in Sacramento County, and 3.7 percent in Yolo County.
The table below provides information about employment rates and employment by industry type for the Sacramento MSA (which includes Sacramento, Placer, Yolo and El Dorado Counties) for the calendar years 2017 through 2021.
SACRAMENTO-ARDEN ARCADE-ROSEVILLE MSA
(El Dorado, Placer, Sacramento, Yolo Counties)
Employment by Industry
(March 2021 Benchmark)
2017 2018 2019 2020 2021
Civilian Labor Force (1) 1,074,000 1,088,300 1,100,800 1,091,700 1,099,300 Employment 1,024,800 1,046,900 1,060,300 994,000 1,028,800 Unemployment 49,200 41,500 40,500 97,700 70,500
Unemployment Rate 4.6% 3.8% 3.7% 9.0% 6.4%
Wage and Salary Employment (2)
Agriculture 9,800 9,100 8,700 8,300 9,000
Mining and Logging 400 500 500 600 700
Construction 58,700 64,500 69,400 70,200 74,100
Manufacturing 35,700 36,000 36,800 36,100 37,500
Wholesale Trade 26,500 28,400 28,600 26,500 26,400
Retail Trade 101,400 102,000 100,500 95,200 101,100
Transportation, Warehousing and Utilities 27,400 29,500 32,200 34,300 37,100 Information 12,600 12,400 11,900 10,200 10,000
Finance and Insurance 37,400 36,700 35,200 34,800 34,300 Real Estate and Rental and Leasing 15,200 16,800 17,300 16,900 17,400 Professional and Business Services 132,400 136,000 137,200 132,500 136,700 Educational and Health Services 153,600 159,800 166,600 164,000 168,400 Leisure and Hospitality 103,300 106,200 109,600 83,900 92,800 Other Services 33,000 34,200 35,400 31,000 32,600
Federal Government 14,200 14,100 14,200 14,800 14,500
State Government 118,400 120,400 121,900 121,700 126,800 Local Government 102,600 103,500 105,300 98,900 98,000
Total, All Industries (3) 982,500 1,009,900 1,031,300 979,700 1,017,200
(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.
ITEM 12.1. ATTACHMENT 4
Jones Hall Draft of May 5, 2022
D-3
Principal Employers
The following table shows the principal employers in the City, as shown in the City’s Comprehensive Annual Financial Report for fiscal year ending June 30, 2021.
CITY OF RANCHO CORDOVA
Principal Employers
As of June 2021
Employer
Number of
Employees
Percent of Total
Employment
VSP Global 1,639 4.00%
Franklin Templeton 1,476 3.60
Health Net Federal Services 1,177 2.90
Cordova Folsom Unified Sch. Dis. 1,150 2.80
Accentcare Home Health 742 1.80
The Permanente Medical Group 628 1.50
California Dept. of Child Support Sv. 450 1.10
Nidec Motor Corporation 400 1.00
Dignity Health 324 0.80
Source: City of Rancho Cordova, Comprehensive Annual Financial Report for the Fiscal Year Ended June 30, 2021.
ITEM 12.1. ATTACHMENT 4
Jones Hall Draft of May 5, 2022
D-4
Major Employers
The following table lists the major employers within the County as of April 2022, in alphabetical order.
COUNTY OF SACRAMENTO
MAJOR EMPLOYERS- LISTED ALPHABETICALLY
As of April 2022
Employer Name Location Industry
Aerojet Rocketdyne Inc Rancho Cordova Aerospace Industries (mfrs) Agreeya Solutions Folsom Information Technology Services AMPAC FINE CHEMICALS LLC Rancho Cordova Electronic Equipment & Supplies-Mfrs Apple Distribution Ctr Elk Grove Distribution Centers (whls) California Department-Crrctns Sacramento Insurance Agents Brokers & Service California State Univ Scrmnt Sacramento Schools-Universities & Colleges Academic Corrections Department Sacramento State Govt-Correctional Institutions Dept of Transportation In Ca Sacramento Government Offices-State Disabled American Veterans Sacramento Veterans' & Military Organizations Employment Development Dept Sacramento Outplacement Consultants Environmental Protection Agcy Sacramento State Govt-Air/Water/Solid Waste Management Intel Corp Folsom Semiconductor Devices (mfrs)
Kaiser Permanente South Sacramento Hospitals
L A Care Health Plan Sacramento Health Plans
Mercy General Hospital Sacramento Hospitals
Mercy San Juan Medical Ctr Carmichael Hospitals
Sacramento Bee Sacramento Newspapers (publishers/Mfrs)
Sacramento Municipal Utility Sacramento Utility Contractors Sacramento Municipal Utility Sacramento Electric Contractors Securitas Security Svc USA Sacramento Security Guard & Patrol Service State Compensation Ins Fund Sacramento Insurance
Summit Funding Inc Sacramento Real Estate Loans
Sutter Medical Ctr-Sacramento Sacramento Hospitals
Villara Building Systems Mcclellan Building Contractors Water Resource Dept Sacramento Government Offices-State Source: State of California Employment Development Department, extracted from The America’s Labor Market Information System (ALMIS) Employer Database, 2022 2nd Edition.
ITEM 12.1. ATTACHMENT 4
Jones Hall Draft of May 5, 2022
D-5
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 2018 through 2022.
CITY OF RANCHO CORDOVA, COUNTY OF SACRAMENTO,
THE STATE OF CALIFORNIA AND THE UNITED STATES
Effective Buying Income
As of January 1, 2018 through 2022
Year Area
Total Effective
Buying Income
(000s’ Omitted)
Median Household
Effective Buying
Income
2018 City of Rancho Cordova $1,670,182 $52,992
County of Sacramento 38,238,821 54,343
California 1,113,648,181 59,646
United States 8,640,770,229 50,735
2019 City of Rancho Cordova $1,747,688 $54,335
County of Sacramento 40,651,806 56,387
California 1,183,264,399 62,637
United States 9,017,967,563 52,841
2020 City of Rancho Cordova $1,882,411 $57,795
County of Sacramento 42,705,779 59,288
California 1,243,564,816 65,870
United States 9,487,165,436 55,303
2021 City of Rancho Cordova $2,040,016 $62,867
County of Sacramento 45,067,224 62,945
California 1,290,894,604 67,956
United States 9,809,944,764 56,790
2022 City of Rancho Cordova $2,246,178 $68,685
County of Sacramento 51,287,459 70,279
California 1,452,426,153 77,058
United States 11,208,582,541 64,448
Source: The Nielsen Company (US), Inc for year 2018; Claritas, LLC for 2019 through 2022.
ITEM 12.1. ATTACHMENT 4
Jones Hall Draft of May 5, 2022
D-6
Commercial Activity
A summary of historic taxable sales within the City and the County during the past five years in which data is available is shown in the following tables. Total taxable sales during calendar year 2021 in the City were reported to be $1,982,419,939, a 16.51% increase over the total taxable sales of $1,701,471,773 reported during calendar year 2020.
CITY OF RANCHO CORDOVA
Taxable Transactions
(Dollars in Thousands)
Retail Stores Total All Outlets
Number
of Permits
Taxable
Transactions
Number
of Permits
Taxable
Transactions
2017 1,274 1,000,266 2,169 1,512,491
2018 1,311 1,101,787 2,345 1,619,685
2019 1,355 1,170,421 2,487 1,672,142
2020 1,512 1,089,203 2,788 1,655,571
2021 1,404 1,341,196 2,597 1,982,420
Source: State Department of Tax and Fee Administration.
Total taxable sales during calendar year 2021 in the County were reported to be $33,875,839,793, a 39.33% increase over the total taxable sales of $27,173,405,614 reported during calendar year 2020.
COUNTY OF SACRAMENTO
Taxable Transactions
(Dollars in Thousands)
Retail Stores Total All Outlets
Number
of Permits
Taxable
Transactions
Number
of Permits
Taxable
Transactions
2017 24,501 16,729,885 37,317 24,405,149
2018 24,853 17,593,375 39,066 25,443,669
2019 25,530 18,156,992 40,858 26,717,621
2020 28,055 18,488,106 45,361 27,173,406
2021 25,936 23,764,691 42,482 33,875,840
Source: State Department of Tax and Fee Administration.
ITEM 12.1. ATTACHMENT 4
Jones Hall Draft of May 5, 2022
D-7
Building and Construction
The following tables show a five-year summary of the valuation of building permits issued in the City and the County. Annual figures are not yet available for calendar year 2021.
CITY OF RANCHO CORDOVA
Total Building Permit Valuations
(Dollars in Thousands)
2016 2017 2018 2019 2020
Permit Valuation
New Single-family $94,307.0 $62,318.3 $104,525.9 $158,521.8 $164,435.7 New Multi-family 0.0 25,608.8 3,069.2 0.0 0.0
Res. Alterations/Additions 3,858.3 4,198.9 3,798.0 3,492.2 7,657.0 Total Residential 98,165.3 92,126.0 111,393.1 162,014.0 172,435.7 New Commercial 9,167.8 1,740.8 10,152.0 2,320.7 28,635.4 New Industrial 0.0 0.0 11,662.0 366.0 0.0
New Other 17,122.3 1,769.7 805.7 1,336.2 2,150.6
Com. Alterations/Additions 21,979.6 1,579.5 26,283.6 24,046.0 34,812.6 Total Nonresidential 48,269.7 5,090.0 48,903.3 28,068.9 65,598.6 New Dwelling Units
Single Family 319 217 217 561 575
Multiple Family 0 199 50 0 0
TOTAL 319 316 267 561 575
Source: Construction Industry Research Board, Building Permit Summary.
COUNTY OF SACRAMENTO
Total Building Permit Valuations
(Dollars in Thousands)
2016 2017 2018 2019 2020
Permit Valuation
New Single-family $611,073.6 $744,066.3 $1,069,568.4 $1,108,399.9 $1,008,390.7 New Multi-family 651,308.2 242,222.8 158,647.0 265,188.8 467,418.7 Res. Alterations/Additions 255,821.8 214,028.1 276,723.6 293,210.5 262,864.6 Total Residential 1,518,203.6 1,200,317.2 1,504,939.0 1,666,799.2 1,738,674.0 New Commercial 489,080.1 298,496.5 303,806.0 666,664.3 449,494.3 New Industrial 150.0 3,026.0 14,151.1 31,851.4 31,155.0 New Other 126,750.6 112,607.4 128,325.7 105,555.1 75,356.7 Com. Alterations/Additions 418,862.1 265,764.7 518,663.2 700,604.0 335,458.0 Total Nonresidential 1,034,842.8 679,894.6 964,946.0 1,504,674.8 891,464.0 New Dwelling Units
Single Family 2,676 3,174 3,589 3,981 3,588
Multiple Family 609 1,761 1,272 2,008 2,868
TOTAL 3,285 4,935 4,861 5,989 6,456
Source: Construction Industry Research Board, Building Permit Summary.
E-1
APPENDIX E
FORM OF OPINION OF BOND COUNSEL
[Closing Date]
City Council
City of Rancho Cordova
2729 Prospect Park Drive
Rancho Cordova, California 95670
OPINION: $___________ City of Rancho Cordova Community Facilities District No. 2014-1 (Montelena) Special Tax Bonds Series 2022
Members of the City Council:
We have acted as bond counsel to the City of Rancho Cordova (the “City”) in connection with the delivery by the City of the above-referenced bonds (the “Bonds”), issued pursuant to the provisions of the Mello-Roos Community Facilities Act of 1982, as amended, being California Government Code Section 53311, et seq. (the “Act”), and pursuant to a Fiscal Agent Agreement, dated July 1, 2021, as supplemented and amended by a Supplemental Agreement No. 1 to Fiscal Agent Agreement, dated June 1, 2022, by and between the City and U.S. Bank Trust Company, National Association (as successor to U.S. Bank National Association), as fiscal agent (together, the “Fiscal Agent Agreement”). We have examined the Act, an executed copy of the Fiscal Agent Agreement 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 City 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 our examination we are of the opinion, under existing law, that:
1. The City is duly organized and existing under the laws of the State of California, with power to enter into the Fiscal Agent Agreement, to perform the agreements on its part contained therein, and to issue the Bonds.
2. The Bonds have been duly authorized, executed and delivered by the City and are legal, valid and binding obligations of the City.
3. The Fiscal Agent Agreement has been duly approved by the City and constitutes a legal, valid and binding obligation of the City, enforceable against the City in accordance with its terms.
4. Pursuant to the Act, the Fiscal Agent Agreement establishes a valid lien on and pledge of the Special Tax Revenues (as defined in the Fiscal Agent Agreement) and the other sources pledged for the security of the Bonds.
ITEM 12.1. ATTACHMENT 4
Jones Hall Draft of May 5, 2022
D-2
5. 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 paragraph are subject to the condition that the City comply with all requirements of the Internal Revenue Code of 1986, as amended, 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 City has covenanted to comply with each of such requirements. 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 delivery of the Bonds.
6. The interest on the Bonds is exempt from personal income taxation imposed by the State of California.
We express no opinion regarding any other tax consequences arising with respect to the ownership, sale or disposition of, 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 and the Fiscal Agent Agreement may be subject to bankruptcy, insolvency, reorganization, moratorium and other similar laws affecting creditors’ rights heretofore or hereafter enacted and may also be subject to the exercise of judicial discretion in accordance with principles of equity or otherwise in appropriate cases.
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. Our engagement with respect to this matter has terminated as of the date hereof.
Respectfully submitted,
A Professional Law Corporation
ITEM 12.1. ATTACHMENT 4
Jones Hall Draft of May 5, 2022
F-1
APPENDIX F
FORM OF CONTINUING DISCLOSURE UNDERTAKINGS
CONTINUING DISCLOSURE CERTIFICATE
(City)
$_________
CITY OF RANCHO CORDOVA
COMMUNITY FACILITIES DISTRICT NO. 2014-1 (MONTELENA)
SPECIAL TAX BONDS
SERIES 2022
THIS CONTINUING DISCLOSURE CERTIFICATE (the “Disclosure Certificate”) is executed and delivered by the City of Rancho Cordova, a public body, corporate and politic, organized and existing under and by virtue of the laws of the State of California (the “City”), in connection with the issuance of the bonds captioned above (the “Bonds”). The Bonds are being issued pursuant to a Fiscal Agent Agreement, dated as of July 1, 2021, as supplemented and amended by a Supplemental Agreement No. 1 to Fiscal Agent Agreement, dated June 1, 2022 (together, the “Fiscal Agent Agreement”), by and between the City and U.S. Bank Trust Company, National Association (as successor to U.S. Bank National Association), as fiscal agent (the “Fiscal Agent”). The City hereby covenants and agrees as follows:
Section 1. Purpose of the Disclosure Certificate. This Disclosure Certificate is being executed and delivered by the City 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.
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 Certificate unless otherwise defined in this Section, the following capitalized terms shall have the following meanings:
“Annual Report” means any Annual Report provided by the City pursuant to, and as described in, Sections 3 and 4 of this Disclosure Certificate. “Annual Report Date” means the date that is nine months after the end of the City’s fiscal year (currently April 1 based on the City’s fiscal year end of June 30). “Dissemination Agent” means Goodwin Consulting Group, or any successor Dissemination Agent designated in writing by the City and which has filed with the City a written acceptance of such designation.
“EMMA System” means the Electronic Municipal Market Access system of the MSRB or such other electronic system designated by the MSRB or the Securities and Exchange Commission for compliance with the Rule.
“Listed Events” means any of the events listed in Section 5(a) of this Disclosure Certificate.
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“MSRB” means the Municipal Securities Rulemaking Board, 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 City in connection with the issuance of the Bonds.
“Participating Underwriter” means Piper Sandler & Co., as the initial underwriter 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.
Section 3. Provision of Annual Reports.
(a) The City shall, or shall cause the Dissemination Agent to, not later than the Annual Report Date, commencing April 1, 2023, with the report for the 2021-22 fiscal year, provide to the MSRB through the EMMA System an Annual Report that is consistent with the requirements of Section 4 of this Disclosure Certificate. Not later than 15 Business Days prior to the Annual Report Date, the City shall provide the Annual Report to the Dissemination Agent (if other than the City). If by 15 Business Days prior to the Annual Report Date the Dissemination Agent (if other than the City) has not received a copy of the Annual Report, the Dissemination Agent shall contact the City to determine if the City 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 Certificate; provided that the audited financial statements of the City 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 City’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 City 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 City hereunder. (b) If the City does not provide, or cause the Dissemination Agent to provide, an Annual Report by the Annual Report Date as required in subsection (a) above, the Dissemination Agent shall provide in a timely manner to the MSRB through the EMMA System, in an electronic format as prescribed by the MSRB, a notice to that effect. (c) The Dissemination Agent shall:
(1) determine each year prior to the Annual Report Date the then-applicable rules and electronic format prescribed by the MSRB for the filing of annual continuing disclosure reports; and
(2) if the Dissemination Agent is other than the City, file a report with the City and the Participating Underwriter certifying that the Annual Report has been provided pursuant to this Disclosure Certificate, and stating the date it was provided.
Section 4. Content of Annual Reports. The City’s Annual Report shall contain or incorporate by reference the following documents and information:
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(a) 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 Issuer’s audited financial statements are not available by the time the Annual Report is required to be filed pursuant to Section 3(a), the Annual Report shall contain unaudited financial statements in a format similar to the financial statements contained in the final Official Statement, and the audited financial statements shall be filed in the same manner as the Annual Report when they become available. This submission should be made with the following caveat:
THE CITY’S ANNUAL FINANCIAL STATEMENT IS PROVIDED SOLELY TO COMPLY WITH THE SECURITIES EXCHANGE COMMISSION STAFF’S INTERPRETATION OF RULE 15c2-12. NO FUNDS OR ASSETS OF THE CITY (OTHER THAN THE PROCEEDS OF THE
SPECIAL TAXES LEVIED FOR THE DISTRICT AND SECURING THE BONDS) ARE
REQUIRED TO BE USED TO PAY DEBT SERVICE ON THE BONDS AND THE CITY IS NOT
OBLIGATED TO ADVANCE AVAILABLE FUNDS FROM THE CITY TREASURY TO COVER ANY DELINQUENCIES. INVESTORS SHOULD NOT RELY ON THE FINANCIAL CONDITION OF THE CITY IN EVALUATING WHETHER TO BUY, HOLD OR SELL THE BONDS. (b) The following additional items, indicating information as of the previous September 30th, with respect to the Bonds:
(1) Principal amount of Bonds outstanding under the Fiscal Agent Agreement.
(2) Balance in Reserve Fund and each reserve account therein. (3) Table indicating Special Tax levy, amount collected, delinquent amount and percent delinquent for the most recent year, and whether the Special Tax levy is covered by the Teeter Plan. (4) Status of foreclosure proceedings and summary of results of foreclosure sales, if any.
(5) Identity of any delinquent taxpayer representing more than 5% of levy and value-to-lien ratios of applicable properties (using assessed values unless more accurate information is available without charge to the City).
(6) Aggregate assessed value for all parcels in the District. (7) Until the fiscal year in which the Special Tax levied on the developed property in the District is greater than or equal to the annual debt service on the Bonds, the number of building permits issued by the City for single family residential homes in such fiscal year.
(c) For so long as there is any owner of property in the District whose properties in the District collectively represent 10% or more of the Special
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Taxes, the following information regarding the status of development in the District:
(1) Significant amendments to land use entitlements.
(2) Status of any legislative, administrative and judicial challenges to the construction of the development known to the Issuer. (3) Assessed valuation of property shown on County Assessor’s tax rolls with no “improvements” value in the District for the current (as of the date of the report) fiscal year.
(4) List of landowners (as shown County Assessor’s tax roll) and assessor’s parcel number(s) of parcels held by owners whose properties collectively represent 10% or more of the Special Taxes for the current (as of the date of the report) fiscal year. (5) Number of building permits issued by the City for property in the District for the reported fiscal year.
(d) In addition to any of the information expressly required to be provided under paragraphs (a), (b) and (c) of this Section, the Issuer shall provide such further information, if any, as may be necessary to make the specifically required statements, in the light of the circumstances under which they are made, not misleading.
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 City 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 City shall clearly identify each such other document so included by reference.
Section 5. Reporting of Listed Events.
(a) The City 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.
(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) Rating Changes.
(7) Adverse tax opinions, the issuance by the Internal Revenue Service of proposed or final determinations of taxability, Notices of
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Proposed Issue (IRS Form 5701-TEB) or other material notices or determinations with respect to the tax status of the Bonds, or other material events affecting the tax status of the Bonds.
(8) Modifications to rights of security holders, if material. (9) Bond calls, if material, and tender offers.
(10) Defeasances.
(11) Release, substitution, or sale of property securing repayment of the securities, if material.(12) Bankruptcy, insolvency, receivership or similar event of the City.
(13) The consummation of a merger, consolidation, or acquisition involving the City, or the sale of all or substantially all of the assets of the City (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 Fiscal Agent or the change of name of the Fiscal Agent, if material.
(15) Incurrence of a financial obligation of the City, if material, or agreement to covenants, events of default, remedies, priority rights, or other similar terms of a financial obligation of the City, any of which affect security holders, if material (for a definition of “financial obligation,” see clause (e)).
(16) Default, event of acceleration, termination event, modification of terms, or other similar events under the terms of a financial obligation of the City, any of which reflect financial difficulties (for a definition of “financial obligation,” see clause (e)).
(b) Whenever the City obtains knowledge of the occurrence of a Listed Event, the City shall, or shall cause the Dissemination Agent (if not the City) to, file a notice of such occurrence with the MSRB through the EMMA System, 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 Bonds under the Indenture. (c) The City 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 City 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 City obtains knowledge of the occurrence of any of these Listed Events, the City will as soon as possible determine if such event would be material under applicable federal securities law. If such event is determined to be material, the City will cause a notice to be filed as set forth in paragraph (b) above.
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(d) For purposes of this Disclosure Certificate, 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 City in a proceeding under the United States Bankruptcy Code or in any other proceeding under state or federal law in which a court or governmental authority has assumed jurisdiction over substantially all of the assets or business of the City, or if such jurisdiction has been assumed by leaving the existing governing body and officials or officers in possession but subject to the supervision and orders of a court or governmental authority, or the entry of an order confirming a plan of reorganization, arrangement, or liquidation by a court or governmental authority having supervision or jurisdiction over substantially all of the assets or business of the City. (e) For purposes of Section 5(a)(15) and (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 under the Disclosure Certificate shall be accompanied by identifying information as prescribed by the MSRB.
Section 7. Termination of Reporting Obligation. The City’s obligations under this Disclosure Certificate shall terminate upon the legal defeasance, prior redemption or payment in full of all of the Bonds. If such termination occurs prior to the final maturity of the Bonds, the City shall give notice of such termination in the same manner as for a Listed Event under Section 5(c).
Section 8. Dissemination Agent. The City may, from time to time, appoint or engage a Dissemination Agent to assist it in carrying out its obligations under this Disclosure Certificate, and may discharge any such Agent, with or without appointing a successor Dissemination Agent.
The initial Dissemination Agent will be Goodwin Consulting Group, Inc.
Section 9. Amendment; Waiver. Notwithstanding any other provision of this Disclosure Certificate, the City may amend this Disclosure Certificate, and any provision of this Disclosure Certificate 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 (1) 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 (2) does not, in the opinion of the Fiscal Agent or nationally recognized bond counsel, materially impair the interests of the holders or beneficial owners of the Bonds.
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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 financial information 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 the undertaking specifying the accounting principles to be followed in preparing financial statements, the annual financial information 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 City to meet its obligations. To the extent reasonably feasible, the comparison shall be quantitative. A notice of the change in the accounting principles shall be filed in the same manner as for a Listed Event under Section 5(c).
Section 10. Additional Information. Nothing in this Disclosure Certificate shall be deemed to prevent the City from disseminating any other information, using the means of dissemination set forth in this Disclosure Certificate or any other means of communication, or including any other information in any Annual Report or notice of occurrence of a Listed Event, in addition to that which is required by this Disclosure Certificate. If the City chooses to include any information in any Annual Report or notice of occurrence of a Listed Event in addition to that which is specifically required by this Disclosure Certificate, the City shall have no obligation under this Disclosure Certificate to update such information or include it in any future Annual Report or notice of occurrence of a Listed Event.
Section 11. Identifying Information for Filings with EMMA. All documents provided to EMMA under this Disclosure Certificate will be accompanied by identifying information as prescribed by the MSRB.
Section 12. Default. In the event of a failure of the City to comply with any provision of this Disclosure Certificate, 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 City to comply with its obligations under this Disclosure Certificate. A default under this Disclosure Certificate shall not be deemed an Event of Default under the Fiscal Agent Agreement, and the sole remedy under this Disclosure Certificate in the event of any failure of the City to comply with this Disclosure Certificate shall be an action to compel performance.
Section 13. Duties, Immunities and Liabilities of Dissemination Agent. The Dissemination Agent shall have only such duties as are specifically set forth in this Disclosure Certificate, and the City agrees to indemnify and save the Dissemination Agent, its officers, directors, employees and agents, harmless against any loss, expense and liabilities which it may incur arising out of or in the exercise or performance of its powers and duties hereunder, including the costs and expenses (including 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 hereunder and shall not be deemed to be acting in any fiduciary capacity for the City, the Fiscal Agent, the Bond
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owners or any other party. The obligations of the City under this Section shall survive resignation or removal of the Dissemination Agent and payment of the Bonds.
Section 14. Beneficiaries. This Disclosure Certificate shall inure solely to the benefit of the City, the Fiscal Agent, the Dissemination Agent, the Participating Underwriter and holders and beneficial owners from time to time of the Bonds, and shall create no rights in any other person or entity.
Section 15. Counterparts. This Disclosure Certificate may be executed in several counterparts, each of which shall be regarded as an original, and all of which shall constitute one and the same instrument.
Date: _________, 2022
CITY OF RANCHO CORDOVA for and on
behalf of CITY OF RANCHO CORDOVA
COMMUNITY FACILITIES DISTRICT NO.
2014-1 (MONTELENA)
By:
Authorized Officer
AGREED AND ACCEPTED:
GOODWIN CONSULTING GROUP,
as Dissemination Agent
By:
Name:
Title:
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CONTINUING DISCLOSURE CERTIFICATE
(Developer)
Relating to:
$_________
CITY OF RANCHO CORDOVA
COMMUNITY FACILITIES DISTRICT NO. 2014-1 (MONTELENA)
SPECIAL TAX BONDS
SERIES 2022
THIS CONTINUING DISCLOSURE CERTIFICATE (DEVELOPER) (the “Disclosure Certificate”) dated as of _____________, 2022, is executed and delivered by ________________ (the “Developer”) in connection with the issuance by the City of Rancho Cordova (the “City”) of its $_________ City of Rancho Cordova Community Facilities District No. 2014-1 (Montelena) Special Tax Bonds Series 2022 (the “Bonds”). The Bonds are being executed and delivered pursuant to a Fiscal Agent Agreement, dated as of July 1, 2021, as supplemented and amended by a Supplemental Agreement No. 1 to Fiscal Agent Agreement, dated June 1, 2022 (together, the “Fiscal Agent Agreement”), by and between the City and U.S. Bank Trust Company, National Association (as successor to U.S. Bank National Association), as fiscal agent (the “Fiscal Agent”).
The Developer covenants and agrees as follows:
Section 1. Purpose of the Disclosure Certificate. This Disclosure Certificate is being executed and delivered by the Developer for the benefit of the holders and beneficial owners of the Bonds.
Section 2. Definitions. In addition to the definitions set forth above and in the Fiscal Agent Agreement, which apply to any capitalized term used in this Disclosure Certificate unless otherwise defined in this Disclosure Certificate, the following capitalized terms shall have the following meanings:
“Affiliate” of another Person means (a) a Person directly or indirectly owning, controlling, or holding with power to vote, 5% or more of the outstanding voting securities of such other Person, (b) any Person, 5% or more of whose outstanding voting securities are directly or indirectly owned, controlled, or held with power to vote, by such other Person, and (c) any Person directly or indirectly controlling, controlled by, or under common control with, such other Person.
For purposes hereof, control means the power to exercise a controlling influence over the management or policies of a Person, unless such power is solely the result of an official position with such Person.
“Assumption Agreement” means an undertaking of a Major Owner, or an Affiliate thereof, for the benefit of the holders and beneficial owners of the Bonds containing terms substantially similar to this Disclosure Certificate (as modified for such Major Owner’s development and financing plans with respect to the District), whereby such Major Owner or Affiliate agrees to provide Periodic Reports and notices of significant events, setting forth the information described in sections 4 and 5 hereof, respectively, with respect to the portion of the property in the District owned by such Major Owner and its Affiliates and, at the option of the Developer or such Major Owner, agrees to indemnify the Dissemination Agent (if any) pursuant to a provision substantially in the form of Section 11 hereof.
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“Dissemination Agent” means the entity acting in its capacity as Dissemination Agent hereunder, or any successor Dissemination Agent designated in writing by the Developer and which has filed with the Developer, the City, and the Fiscal Agent a written acceptance of such designation, and which is experienced in providing dissemination agent services such as those required under this Disclosure Certificate.
“District” means the City of Rancho Cordova Community Facilities District No. 2014-1 (Montelena).
“EMMA” shall mean the Municipal Securities Rulemaking Board’s Electronic Municipal Market Access System for municipal securities disclosures, maintained on the Internet at http://emma.msrb.org/.
“Listed Events” means any of the events listed in Section 5(a) of this Disclosure Certificate. “Major Owner” means, as of any Report Date, an owner of land in the District that is responsible in the aggregate for 20% or more of the Special Taxes in the District anticipated to be levied at any time during the then-current fiscal year. “Official Statement” means the final official statement executed by the City in connection with the issuance of the Bonds.
“Participating Underwriter” means Piper Sandler & Co., the original underwriter of the Bonds.
“Periodic Report” means any Periodic Report provided by the Developer pursuant to, and as described in, Sections 3 and 4 of this Disclosure Certificate. “Person” means an individual, a corporation, a partnership, a limited liability company, an association, a joint stock company, a trust, any unincorporated organization or a government or political subdivision thereof.
“Property” means the property in the District that is owned by the Developer or any Affiliate of the Developer.
“Report Date” means October 1 and April 1 of each year. If, in any year, the Report Date falls on a Saturday, Sunday, or a holiday, such Report Date shall be extended to the next following day that is not a Saturday, Sunday, or holiday.
“Special Taxes” means the special taxes of the District levied on taxable property within the District.
Section 3. Provision of Periodic Reports.
(a) The Developer shall, or, upon written direction of the Developer the Dissemination Agent shall, not later than the Report Date, commencing April 1, 2022, file or cause to be filed with EMMA a Periodic Report which is consistent with the requirements of Section 4 of this Disclosure Certificate with a copy to the Participating Underwriter and the City. Not later than 15 calendar days prior to the Report Date, the Developer shall provide the Periodic Report to the Dissemination Agent (if different from the Developer). The Developer shall provide a written
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certification with (or included as a part of) each Periodic Report furnished to the Dissemination Agent (if different from the Developer), the Participating Underwriter and the City to the effect that such Periodic Report constitutes the Periodic Report required to be furnished by it under this Disclosure Certificate. The Dissemination Agent, the Participating Underwriter and the City may conclusively rely upon such certification of the Developer and shall have no duty or obligation to review the Periodic Report. The Periodic Report may be submitted as a single document or as separate documents comprising a package and may incorporate by reference other information as provided in Section 4 of this Disclosure Certificate. (b) If the Dissemination Agent does not receive a Periodic Report by 15 calendar days prior to the Report Date, the Dissemination Agent shall send a reminder notice to the Developer that the Periodic Report has not been provided as required under Section 3(a) above. The reminder notice shall instruct the Developer to determine whether its obligations under this Disclosure Certificate have terminated (pursuant to Section 6 below) and, if so, to provide the Dissemination Agent with a notice of such termination in the same manner as for a Listed Event (pursuant to Section 5 below). If the Developer does not provide, or cause the Dissemination Agent to provide, a Periodic Report to EMMA by the Report Date as required in subsection (a) above, the Dissemination Agent shall send a notice to EMMA to that effect in the form prescribed by the MSRB, with a copy to City and the Participating Underwriter. (c) With respect to the Periodic Report, the Dissemination Agent shall, to the extent the Periodic Report has been furnished to it, file the Periodic Report with EMMA and file a report with the Developer (if the Dissemination Agent is other than the Developer), the City and the Participating Underwriter certifying that the Periodic Report has been provided pursuant to this Disclosure Certificate, stating the date it was provided to and filed with EMMA.
Section 4. Content of Periodic Reports. The Developer’s Periodic Report shall contain or incorporate by reference the information set forth in Exhibit B relating to the Developer, any or all of which may be included by specific reference to other documents, including official statements of debt issues of the Developer or related public entities, which have been submitted to EMMA or the Securities and Exchange Commission. If the document included by reference is a final official statement, it must be available from EMMA. The Developer shall clearly identify each such other document so included by reference.
In addition to any of the information expressly required to be provided in Exhibit B, the Developer’s Periodic Report shall include such further information, if any, as may be necessary to make the specifically required statements, in the light of the circumstances under which they are made, not misleading.
Section 5. Reporting of Significant Events.
(a) The Developer shall give, or cause to be given, notice of the occurrence of any of the following Listed Events with respect to itself or the Property, if material:
(i) bankruptcy or insolvency proceedings commenced by or against the Developer and, if known, any bankruptcy or insolvency proceedings commenced by or against any Affiliate of the Developer that is reasonably likely to have a significant impact on the Developer’s ability to pay Special Taxes on its Property or to sell or develop the Property;
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(ii) failure to pay any taxes, special taxes (including the Special Taxes) or assessments due with respect to the Property on or prior to the delinquency date; (iii) filing of a lawsuit of which the Developer is aware against the Developer or an Affiliate seeking damages, which is reasonably likely to have a significant impact on the Developer’s ability to pay Special Taxes on its Property or to sell or develop the Property; (iv) material damage to or destruction of any of the improvements on the Property; and
(v) any payment default or other material default by the Developer on any loan with respect to the construction of improvements on the Property. (b) Whenever the Developer obtains knowledge of the occurrence of a Listed Event, the Developer shall as soon as possible determine if such event would be material under applicable Federal securities law.
(c) If the Developer determines that knowledge of the occurrence of a Listed Event would be material under applicable Federal securities law, the Developer shall, or shall cause the Dissemination Agent to, promptly file a notice of such occurrence with EMMA, with a copy to the City and the Participating Underwriter.
Section 6. Duration of Reporting Obligation.
(a) All the Developer’s obligations hereunder shall commence on the date hereof and terminate (except as provided in Section 11) on the earliest to occur of the following:
(i) upon the legal defeasance, prior redemption or payment in full of all the Bonds, or
(ii) at such time as Property owned by the Developer is no longer responsible for payment of 20% or more of the Special Taxes levied in the District, or (iii) the date on which the Developer prepays in full all of the Special Taxes attributable to the Property.
The Developer shall give notice of the termination of its obligations under this Disclosure Certificate in the same manner as for a Listed Event under Section 5. (b) If a portion of the Property owned by the Developer, or any Affiliate of the Developer, is conveyed to a Person that, upon such conveyance, will be a Major Owner, the obligations of the Developer hereunder with respect to the property in the District owned by such Major Owner and its Affiliates may be assumed by such Major Owner or by an Affiliate thereof, and if so assumed the Developer’s obligations hereunder with respect to such portion of the Property will be terminated. In order to effect such an assumption, such Major Owner or Affiliate shall enter into an Assumption Agreement. If not so assumed, the Developer shall report the information, as applicable to the transferee, required herein so long as the transferee is a Major Owner.
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Section 7. Dissemination Agent. The Developer may, from time to time, appoint or engage a Dissemination Agent to assist the Developer in carrying out its obligations under this Disclosure Certificate, and may discharge any such Dissemination Agent, with or without appointing a successor Dissemination Agent. The initial Dissemination Agent shall be the Developer. The Dissemination Agent may resign by providing thirty days’ written notice to the City, the Participating Underwriter and the Developer.
Section 8. No Amendment. The Developer may not amend this Disclosure Certificate.
Section 9. Additional Information. Nothing in this Disclosure Certificate shall be deemed to prevent the Developer from disseminating any other information, using the means of dissemination set forth in this Disclosure Certificate or any other means of communication, or including any other information in any Periodic Report or notice of occurrence of a Listed Event, in addition to that which is required by this Disclosure Certificate. If the Developer chooses to include any information in any Periodic Report or notice of occurrence of a Listed Event in addition to that which is specifically required by this Disclosure Certificate, the Developer shall have no obligation under this Disclosure Certificate to update such information or include it in any future Periodic Report or notice of occurrence of a Listed Event.
Section 10. Default. In the event of a failure of the Developer to comply with any provision of this Disclosure Certificate, the Participating Underwriter and any holder or beneficial owner of the Bonds may, take such actions as may be necessary and appropriate, including seeking mandate or specific performance by court order, to cause the Developer to comply with its obligations under this Disclosure Certificate. A default under this Disclosure Certificate shall not be deemed an Event of Default under the Fiscal Agent Agreement, and the sole and exclusive remedy under this Disclosure Certificate in the event of any failure of the Developer to comply with this Disclosure Certificate shall be an action to compel performance. Neither the Developer nor the Dissemination Agent shall have any liability to any holder or beneficial owner of the Bonds or any other party for monetary damages or financial liability of any kind whatsoever arising from or relating to this Disclosure Certificate.
Section 11. Duties, Immunities and Liabilities of Dissemination Agent. The Dissemination Agent shall have only such duties as are specifically set forth in this Disclosure Certificate, and the Developer agrees to indemnify and save the Dissemination Agent, its officers, directors, employees and agents (each, an “Indemnified Party”), harmless against any loss, expense and liabilities which it may incur arising out of or in the exercise or performance of its powers and duties hereunder, including the reasonable costs and expenses (including attorneys’ fees) of defending against any claim of liability, but excluding loss, liabilities, costs and expenses due to an Indemnified Party’s negligence or willful misconduct or failure to perform its duties hereunder.
The Dissemination Agent shall be paid compensation for its services provided hereunder in accordance with its schedule of fees as amended from time to time, which schedule, as amended, shall be reasonably acceptable, and all reasonable expenses, reasonable legal fees and advances made or incurred by the Dissemination Agent in the performance of its duties hereunder. The Dissemination Agent shall have no duty or obligation to review any information provided to it hereunder and shall not be deemed to be acting in any fiduciary capacity for the City, the Developer, the Fiscal Agent, the Bond owners, or any other party. The obligations of the Developer under this Section shall survive resignation or removal of the Dissemination Agent and payment of the Bonds.
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Section 12. Notices. Any notice or communications to be among any of the parties to this Disclosure Certificate may be given by regular, overnight or electronic mail as follows:
To the Developer MDRE Development LLC
Attn: Kevin Webb
5241 Arnold Ave.
McClellan, CA 95652
Email: [email protected]
[OR] Pulte Homes
_____________
_____________
_____________
Email: ________________
To the City: City of Rancho Cordova
Attn: CFD Administrator
2729 Prospect Park Drive
Rancho Cordova, CA 95670
Email: _________________
To the Participating
Underwriter: Piper Sandler & Co.
_____________
_____________
Email: [email protected]
Any person may, by written notice to the other persons listed above, designate a different address or telephone number(s) to which subsequent notices or communications should be sent.
ITEM 12.1. ATTACHMENT 4
Jones Hall Draft of May 5, 2022
F-15
Section 13. Beneficiaries. This Disclosure Certificate shall inure solely to the benefit of the City, the Developer (its successors and assigns), the Dissemination Agent, the Participating Underwriter and holders and beneficial owners from time to time of the Bonds and shall create no rights in any other person or entity. All obligations of the Developer hereunder shall be assumed by any legal successor to the obligations of the Developer as a result of a sale, merger, consolidation or other reorganization.
Section 14. Counterparts. This Disclosure Certificate may be executed in several counterparts, each of which shall be an original and all of which shall constitute but one and the same instrument.
IN WITNESS WHEREOF, the Developer has executed this Disclosure Certificate as of the date first above written.
MDRE Development LLC,
a California limited liability company
By: ______________________________
Name: ___________________________
Title: _____________________________
ITEM 12.1. ATTACHMENT 4
Jones Hall Draft of May 5, 2022
F-16
EXHIBIT B
PERIODIC REPORT
Relating to:
$_________
CITY OF RANCHO CORDOVA
COMMUNITY FACILITIES DISTRICT NO. 2014-1 (MONTELENA)
SPECIAL TAX BONDS
SERIES 2022
This Periodic Report is hereby submitted under Section 4 of the Continuing Disclosure Certificate (Developer) (the “Disclosure Certificate”) dated ________, 2022 executed by _______________ (the “Developer”) in connection with the issuance of special tax bonds by the City of Rancho Cordova (the “City”) with respect to the City of Rancho Cordova Community Facilities District No. 2014-1 (Montelena) (the “District”).
Capitalized terms used in this Periodic Report but not otherwise defined have the meanings given to them in the Disclosure Certificate.
I. Property Ownership and Development
The information in this section is provided as of ____________________ (this date must be not more than 60 days before the date of this Periodic Report).
A. Property currently owned by the Developer or its Affiliates (if any) in the District (the “Property”):
Development name:
Number of lots (acreage if not subdivided):
B. Status of land development or construction activities:
______________________________________________________________________ ______________________________________________________________________ C. Number of building permits pulled during the reporting period and the aggregate number of building permits for the Property developed by the Developer or an Affiliate (if any), and any significant amendments to land use or development entitlements:
______________________________________________________________________ ______________________________________________________________________ D. Aggregate property sold, optioned or leased by the Developer or an Affiliate (if any) to end users or merchant builders:
ITEM 12.1. ATTACHMENT 4
Jones Hall Draft of May 5, 2022
F-17
Since the Date of Issuance
of the Bonds
Since the Last Periodic
Report
Acres* ____
Lots ____
Acres* ____
Lots ____
* For bulk land sales only (excluding sales of finished lots or completed buildings).
E. Any updates to ownership of the Property by the Developer or an Affiliate (if any), as stated in the Official Statement, and any other changes in ownership, whether acquisition of land in the District by the Developer or an Affiliate (if any), or sales of land in the District to other property owners, distinguishing between (i) end users (e.g., single family homeowners), (ii) developers and (iii) merchant builders.
______________________________________________________________________ ______________________________________________________________________ II. Legal and Financial Status of Developer
Unless such information has previously been included or incorporated by reference in a Periodic Report, describe any change in the legal structure of the Developer or the financial condition and financing plan of the Developer that would materially and adversely interfere with its ability to complete its development plan described in the Official Statement. ______________________________________________________________________ ______________________________________________________________________ III. Change in Development or Financing Plans
Unless such information has previously been included or incorporated by reference in a Periodic Report, describe any development plans or financing plans relating to the Property that are materially different from the proposed development and financing plan described in the Official Statement.
______________________________________________________________________ ______________________________________________________________________ IV. Official Statement Updates
Unless such information has previously been included or incorporated by reference in a Periodic Report, describe any other significant changes in the information relating to the Developer or the Property contained in the Official Statement under the heading “THE DISTRICT – Development in the District” that would materially and adversely interfere with the Developer’s ability to develop and sell the Property as described in the Official Statement. ______________________________________________________________________ ______________________________________________________________________
ITEM 12.1. ATTACHMENT 4
Jones Hall Draft of May 5, 2022
F-18
V. Other Material Information
In addition to any of the information expressly required above, provide such further information, if any, as may be necessary to make the specifically required statements, in the light of the circumstances under which they are made, not misleading. _____________________________________________________________________ ______________________________________________________________________ Certification
The undersigned Developer hereby certifies that this Periodic Report constitutes the Periodic Report required to be furnished by the Developer under the Disclosure Certificate.
ANY STATEMENTS REGARDING THE DEVELOPER, THE DEVELOPMENT OF THE PROPERTY, THE DEVELOPER’S FINANCING PLAN OR FINANCIAL CONDITION, OR THE
BONDS, OTHER THAN STATEMENTS MADE BY THE DEVELOPER IN AN OFFICIAL
RELEASE, OR FILED WITH THE MUNICIPAL SECURITIES RULEMAKING BOARD, ARE NOT AUTHORIZED BY THE DEVELOPER. THE DEVELOPER IS NOT RESPONSIBLE FOR THE
ACCURACY, COMPLETENESS OR FAIRNESS OF ANY SUCH UNAUTHORIZED STATEMENTS.
THE DEVELOPER HAS NO OBLIGATION TO UPDATE THIS PERIODIC REPORT OTHER THAN AS EXPRESSLY PROVIDED IN THE DISCLOSURE CERTIFICATE.
Dated:
_____________,
__________________________
By: ______________________________
Name: ___________________________
Title: _____________________________
ITEM 12.1. ATTACHMENT 4
Jones Hall Draft of May 5, 2022
G-1
APPENDIX G
DTC AND THE BOOK-ENTRY ONLY SYSTEM
The following description of the Depository Trust Company (“DTC”), 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 interest in the Bonds and other related transactions by and between DTC, the DTC Participants and the Beneficial Owners is based solely on information provided by DTC. 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.
Neither the issuer of the Bonds (the “Issuer”) nor the trustee, fiscal agent or paying agent appointed with respect to the Bonds (the “Agent”) take any responsibility for the information contained in this Appendix.
No assurances can be given that DTC, DTC Participants or Indirect Participants will distribute to the Beneficial Owners (a) payments of interest, principal or premium, if any, with respect to the Bonds, (b) certificates representing ownership interest in or other confirmation or ownership interest in the Bonds, or (c) redemption or other notices sent to DTC or Cede & Co., its nominee, as the registered owner of the Bonds, or that they will so do on a timely basis, or that DTC, DTC Participants or DTC Indirect Participants will act in the manner described in this Appendix. The current “Rules” applicable to DTC are on file with the Securities and Exchange Commission and the current “Procedures” of DTC to be followed in dealing with DTC Participants are on file with DTC.
1. The Depository Trust Company (“DTC”), New York, NY, will act as securities depository for the securities (the “Securities”). The Securities will be issued as fully-registered securities registered in the name of Cede & Co. (DTC’s partnership nominee) or such other name as may be requested by an authorized representative of DTC. One fully-registered Security certificate will be issued for each issue of the Securities, each in the aggregate principal amount of such issue, and will be deposited with DTC. If, however, the aggregate principal amount of any issue exceeds $500 million, one certificate will be issued with respect to each $500 million of principal amount, and an additional certificate will be issued with respect to any remaining principal amount of such issue.
2. DTC, the world’s largest securities depository, is a limited-purpose trust company organized under the New York Banking Law, a “banking organization” within the meaning of the New York Banking Law, a member of the Federal Reserve System, a “clearing corporation” within the meaning of the New York Uniform Commercial Code, and a “clearing agency” registered pursuant to the provisions of Section 17A of the Securities Exchange Act of 1934. DTC holds and provides asset servicing for over 3.5 million issues of U.S. and non-U.S. equity issues, corporate and municipal debt issues, and money market instruments (from over 100 countries) that DTC’s participants (“Direct Participants”) deposit with DTC. DTC also facilitates the post-trade settlement among Direct Participants of sales and other securities transactions in deposited securities, through electronic computerized book-entry transfers and pledges between Direct Participants’ accounts. This eliminates the need for physical movement of securities certificates. Direct Participants include both U.S. and non-U.S. securities brokers and dealers, banks, trust
ITEM 12.1. ATTACHMENT 4
Jones Hall Draft of May 5, 2022
G-2
companies, clearing corporations, and certain other organizations. DTC is a wholly-owned subsidiary of The Depository Trust & Clearing Corporation (“DTCC”). DTCC is the holding company for DTC, National Securities Clearing Corporation and Fixed Income Clearing Corporation, all of which are registered clearing agencies. DTCC is owned by the users of its regulated subsidiaries. Access to the DTC system is also available to others such as both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, and clearing corporations that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly (“Indirect Participants”). DTC has a Standard & Poor’s rating of AA+. The DTC Rules applicable to its Participants are on file with the Securities and Exchange Commission. More information about DTC can be found at www.dtcc.com.
3. Purchases of Securities under the DTC system must be made by or through Direct Participants, which will receive a credit for the Securities on DTC’s records. The ownership interest of each actual purchaser of each Security (“Beneficial Owner”) is in turn to be recorded on the Direct and Indirect Participants’ records. Beneficial Owners will not receive written confirmation from DTC of their purchase. Beneficial Owners are, however, expected to receive written confirmations providing details of the transaction, as well as periodic statements of their holdings, from the Direct or Indirect Participant through which the Beneficial Owner entered into the transaction. Transfers of ownership interests in the Securities are to be accomplished by entries made on the books of Direct and Indirect Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interests in Securities, except in the event that use of the book-entry system for the Securities is discontinued.
4. To facilitate subsequent transfers, all Securities deposited by Direct Participants with DTC are registered in the name of DTC’s partnership nominee, Cede & Co., or such other name as may be requested by an authorized representative of DTC. The deposit of Securities with DTC and their registration in the name of Cede & Co. or such other DTC nominee do not effect any change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the Securities; 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 Direct and Indirect Participants will remain responsible for keeping account of their holdings on behalf of their customers.
5. Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. Beneficial Owners of Securities may wish to take certain steps to augment the transmission to them of notices of significant events with respect to the Securities, such as redemptions, tenders, defaults, and proposed amendments to the Security documents. For example, Beneficial Owners of Securities may wish to ascertain that the nominee holding the Securities for their benefit has agreed to obtain and transmit notices to Beneficial Owners. In the alternative, Beneficial Owners may wish to provide their names and addresses to the registrar and request that copies of notices be provided directly to them.
6. Redemption notices will be sent to DTC. If less than all of the Securities within an issue are being redeemed, DTC’s practice is to determine by lot the amount of the interest of each Direct Participant in such issue to be redeemed.
7. Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect to Securities unless authorized by a Direct Participant in accordance with DTC’s MMI
ITEM 12.1. ATTACHMENT 4
Jones Hall Draft of May 5, 2022
G-3
Procedures. Under its usual procedures, DTC mails an Omnibus Proxy to 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 Securities are credited on the record date (identified in a listing attached to the Omnibus Proxy).
8. Redemption proceeds, distributions, and dividend payments on the Securities will be made to Cede & Co., or such other nominee as may be requested by an authorized representative of DTC. DTC’s practice is to credit Direct Participants’ accounts upon DTC’s receipt of funds and corresponding detail information from Issuer or Agent, on payable date in accordance with their respective holdings shown on DTC’s records. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered in “street name,” and will be the responsibility of such Participant and not of DTC, Agent, or Issuer, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of redemption proceeds, distributions, and dividend payments to Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC) is the responsibility of Issuer or Agent, disbursement of such payments to Direct Participants will be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners will be the responsibility of Direct and Indirect Participants.
9. A Beneficial Owner will give notice to elect to have its Securities purchased or tendered, through its Participant, to the Agent, and will effect delivery of such Securities by causing the Direct Participant to transfer the Participant’s interest in the Securities, on DTC’s records, to the Agent. The requirement for physical delivery of Securities in connection with an optional tender or a mandatory purchase will be deemed satisfied when the ownership rights in the Securities are transferred by Direct Participants on DTC’s records and followed by a book-entry credit of tendered Securities to the Agent’s DTC account.
10. DTC may discontinue providing its services as depository with respect to the Securities at any time by giving reasonable notice to Issuer or Agent. Under such circumstances, in the event that a successor depository is not obtained, Security certificates are required to be printed and delivered.
11. Issuer may decide to discontinue use of the system of book-entry-only transfers through DTC (or a successor securities depository). In that event, Security certificates will be printed and delivered to DTC.
12. The information in this section concerning DTC and DTC’s book-entry system has been obtained from sources that Issuer believes to be reliable, but Issuer takes no responsibility for the accuracy thereof.
MEMORANDUM
City Council Staff Report - Page 1 of 3
ITEM 12.2.
DATE: May 16, 2022
TO: Honorable Mayor and Council Members
FROM: Michelle Mingay, Senior Finance Analyst
SUBJECT: A RESOLUTION AUTHORIZING THE ISSUANCE OF SPECIAL
REFUNDING TAX BONDS FOR AND ON BEHALF OF THE CITY OF
RANCHO CORDOVA SUNRIDGE ANATOLIA COMMUNITY
FACILITIES DISTRICT NO. 2003-1
RECOMMENDATION
Adopt the Resolution.
RESULT OF RECOMMENDED ACTION
Adoption of this resolution will authorize the sale of Special Tax Bonds (the “Bonds”) for and on behalf of Community Facilities District No. 2003-1 (Sunridge Anatolia) for the purpose of refunding: (1) City of Rancho Cordova Sunridge Anatolia Community Facilities District No. 2003-1 Special Tax Refunding Bonds Series 2012 (the “2012 Bonds”) issued in the amount of $24,370,000 on December 19, 2012, which refunded bonds issued in 2003; and (2) City of Rancho Cordova Sunridge Anatolia Community Facilities District No. 2003-1 2014 Junior Lien Special Tax Bonds (the “2014 Junior Lien Bonds”) issued in the amount of $11,230,000 on January 23, 2014.
BACKGROUND
Community Facilities District No. 2003-1 (Sunridge Anatolia) (“CFD 2003-1”) or (the “District”) was formed in 2003 to assist in the financing of infrastructure improvements necessary for development of the land in the District. Through various City Council actions, the City Council has declared the necessity to incur bonded indebtedness in a maximum principal amount not to exceed $75,000,000, not including refunding bonds.
Based on the current status of the property within the District, the total assessed value of the property within the District is approximately $1.3 billion. This has created an opportunity for the District to issue special tax refunding bonds to reduce the annual special tax levy on taxpayers within the District. Based on the expected par amount of $29.15 million, the assessed value compared to bonded debt lien would be in excess of 16:1, which exceeds the required 4:1 value to lien requirement.
The financing-related resolution approves the sale of the Bonds in an amount not to exceed $31.5 million, approves the Supplemental Agreement No. 5 to Fiscal Agent Agreement,
City Council Staff Report - Page 2 of 3
approves the Bond Purchase Agreement, approves the Preliminary Official Statement, and authorizes related documents on behalf of the District. Descriptions of these documents are as follows:
Supplemental Agreement No. 5 to Fiscal Agent Agreement: The Supplemental Agreement No. 5 to Fiscal Agent Agreement allows U.S. Bank to act on behalf of the City to provide for the issuance of the Bonds, the disbursement of proceeds of the Bonds, the disposition of the special taxes securing the Bonds, and the administration and payment of the Bonds.
Bond Purchase Agreement: The Bond Purchase Agreement is a legally binding document between the issuer (City on behalf of the District) and an underwriter (Piper Sandler & Co.) establishing the terms of the Bond sale. The underwriter will put the Bonds on the market at the price and yield established during the Bond pricing call and agreed to by the City, currently scheduled for the week of May 23rd. Approximately two weeks later the City delivers the Bonds to the underwriter and the underwriter pays the City for them, and investors purchase the Bonds from the underwriter.
Preliminary Official Statement: The preliminary Official Statement is a document that serves as the offering prospectus for the Bonds used by the underwriter to market the Bonds and indicates the security (special taxes) and source of payment for the Bonds. It is the City’s disclosure document relied on by Bond investors for making a purchase decision and discloses associated investment risks. A final version of the Official Statement is produced once the pricing is determined.
Assuming the City Council approves this financing, staff will work with the Bond finance team to determine the final Bond sizing, and the preliminary Official Statement will be finalized and posted electronically for investors to review. Assuming the market remains stable, the City; NHA Advisors, LLC, the City’s Municipal Advisor; and Piper Sandler & Co., the bond underwriter, will hold a pre-pricing call the week of May 23, 2022 to review bond market conditions and the preliminary interest rates, after which, the Bonds will be sold. An authorized officer will then execute, on behalf of the City, a Bond Purchase Agreement with Piper Sandler & Co., finalizing the bond interest rates and setting the delivery date.
FISCAL IMPACT AND FUNDING SOURCE
None. The Special Tax Bonds are secured solely by the Special Taxes levies within the District and are not a debt of the City’s General Fund. Costs of issuance are payable solely from Bond proceeds.
In accordance with Government Code 5852.1, the following information consists of estimates of certain costs and charges for the Bonds that have been provided by NHA Advisors, LLC, the City’s municipal advisor, which has been represented by such party to have been provided in good faith as of May 5, 2022: (1) estimated true interest cost of the Bonds: 4.05%; (2) estimated finance charge of the Bonds (sum of all fees and charges paid to third parties):
$698,595; (3) estimated amount of proceeds of the Bonds received by the City (net of finance charges, reserves and capitalized interest, if any): $32,605,492; and (4) estimated total payment amount (sum total of all payments to pay debt service on the Bonds plus the finance charge not paid with proceeds of the Bonds) calculated to the final maturity of the Bonds:
$44,982,551.
ATTACHMENT(S)
City Council Staff Report - Page 3 of 3
1. Resolution
2. Anatolia Supp5FisAg 2022 Bonds v3
3. BPA - City of Rancho Cordova Sunridge Anatolia CFD No. 2003-1 2022 Bonds
4. 2022 POS - Rancho Cordova (Sunridge Anatolia) v3
ITEM 12.2. ATTACHMENT 1
Resolution No. XX-2022 Page 1 of 5
CITY COUNCIL OF THE CITY OF RANCHO CORDOVA
RESOLUTION NO. XX-2022
RESOLUTION AUTHORIZING THE ISSUANCE OF SPECIAL TAX BONDS
FOR AND ON BEHALF OF THE CITY OF RANCHO CORDOVA SUNRIDGE
ANATOLIA COMMUNITY FACILITIES DISTRICT
NO. 2003-1, APPROVING AND DIRECTING THE EXECUTION OF A
SUPPLEMENTAL FISCAL AGENT AGREEMENT, APPROVING THE FORM
OF PRELIMINARY OFFICIAL STATEMENT, APPROVING SALE OF SUCH
BONDS, AND APPROVING OTHER RELATED DOCUMENTS AND ACTIONS RESOLVED, by the City Council of the City of Rancho Cordova (the "City") that:
WHEREAS, the City Council has conducted proceedings under and pursuant to the Mello-Roos Community Facilities Act of 1982, as amended (the "Act"), to form the Sunridge Anatolia Community Facilities District No. 2003-1 (the "District"), to authorize the levy of special taxes upon the land within the District, and to issue bonds secured by said special taxes for the purpose of providing moneys for the construction and acquisition of improvements within the District; and
WHEREAS, following a vote of landowners in the District authorizing the levy of a special tax and the issuance of bonds, the City Council, as legislative body of the District, authorized the issuance of special tax bonds of the City for the District in the maximum principal amount of not to exceed $75,000,000 (the “Authorization”) and caused bonds to be issued for the District, including the following:
(i) in the original principal amount of $24,370,000 on December 19, 2012 designated City of Rancho Cordova Sunridge Anatolia Community Facilities District No. 2003-1 Special Tax Refunding Bonds Series 2012 (the “2012 Bonds”) pursuant to a Supplemental Agreement No. 3, which refunded bonds issued in 2003; (ii) on a subordinate basis to the 2012 Bonds, in the original principal amount of $11,230,000 on January 23, 2014, designated City of Rancho Cordova Sunridge Anatolia Community Facilities District No. 2003-1 2014 Junior Lien Special Tax Bonds (the “2014 Junior Lien Bonds”);
(iii) in the original principal amount of $34,725,000 on August 2, 2016 designated City of Rancho Cordova Sunridge Anatolia Community Facilities District No. 2003-1 Special Tax Bonds Series 2016 (the “2016 Bonds”), issued pursuant to a Supplemental Agreement No. 4, which refunded bonds issued in 2005 and 2007 and provided additional capital; and
WHEREAS, the City has determined that debt service savings associated with the 2012 Bonds and the 2014 Junior Lien Bonds (together, the “Prior Bonds”) can be achieved by refunding the Prior Bonds, and, after due investigation and deliberation the City has determined that it is in the interests of the City and the District at this time for the City Council, as legislative body of the District, to authorize a series of refunding special tax bonds designated City of Rancho Cordova Sunridge Anatolia Community Facilities District No. 2003-1 Special Tax Refunding Bonds Series 2022 (the "2022 Bonds") to accomplish the refunding; and
ITEM 12.2. ATTACHMENT 1
Resolution No. XX-2022 Page 2 of 5
WHEREAS, there has been submitted to the City Council a Supplemental Agreement No. 5 to Fiscal Agent Agreement (the "Fifth Supplement") to supplement that Fiscal Agent Agreement dated as of November 1, 2003, as supplemented by the Supplemental Agreement No. 1 to Fiscal Agent Agreement dated as of December 1, 2005, Supplemental Agreement No. 2 to Fiscal Agent Agreement dated as of August 1, 2007, Supplemental Agreement No. 3 to Fiscal Agent Agreement dated as of December 1, 2012 and Supplemental Agreement No. 4 to Fiscal Agent Agreement dated as of August 1, 2016 (together, the “Original Fiscal Agent Agreement”) and to provide for the issuance of the 2022 Bonds for the District, and the City Council, with the aid of City staff, has reviewed the Fifth Supplement and found it to be in proper order, and now desires to approve the Fifth Supplement and the issuance of the 2022 Bonds; and
WHEREAS, the City proposes to sell the 2022 Bonds to Piper Sandler & Co. (the "Underwriter") pursuant to the terms of a Bond Purchase Agreement (the "Bond Purchase Agreement") by and between the City and the Underwriter, and the Underwriter proposes to offer the 2022 Bonds to the investing public by means of a Preliminary Official Statement (the "Preliminary Official Statement"); and
WHEREAS, it appears that each of said documents and instruments which are now before this meeting is in appropriate form and is an appropriate document or instrument to be executed and delivered for the purpose intended; and
WHEREAS, all conditions, things and acts required to exist, to have happened and to have been performed precedent to and in the issuance of the 2022 Bonds as contemplated by this Resolution and the documents referred to herein exist, have happened and have been performed in due time, form and manner as required by the laws of the State of California, including the Act.
NOW, THEREFORE, IT IS HEREBY ORDERED as follows:
Section 1. Pursuant to the Act, this Resolution, the Original Fiscal Agent Agreement and the Fifth Supplement, special tax bonds of the City for the District designated as "City of Rancho Cordova Sunridge Anatolia Community Facilities District No. 2003-1 Special Tax Refunding Bonds Series 2022" in an aggregate principal amount not to exceed $33,000,000 are hereby authorized to be issued. The 2022 Bonds shall be executed in the form set forth in and otherwise as provided in the Fifth Supplement. This Council finds and determines that the 2022 Bonds should be issued to save debt service costs on the Prior Bonds.
In furtherance of the issuance of the 2022 Bonds, the City Council hereby makes the following findings and determinations: (i) it is prudent in the management and development of the City and the District to issue the 2022 Bonds for the purpose of providing moneys for the refunding of the Prior Bonds to achieve debt service cost savings, (ii) the 2022 Bonds and the District are in compliance with the City's guidelines for issuance of Mello-Roos bonds, and (iii) the 2022 Bonds shall not be issued unless the value of the real property within the District subject to the special tax to pay debt service on the 2022 Bonds and the 2016 Bonds, based upon the current assessed valuation of property in the District and/or an appraisal of property in the District, or both as to portions of the property in the District, is at least three times the combined principal amount of the 2012 Bonds and the proposed 2022 Bonds to be secured by a special tax levied pursuant to the Act on property within the District.
ITEM 12.2. ATTACHMENT 1
Resolution No. XX-2022 Page 3 of 5
The City hereby finds that the 2022 Bonds shall constitute “refunding bonds” within the meaning of the Act because the proceeds thereof will be used to refund the Prior Bonds. For the purposes of these proceedings for the issuance of the refunding, the City hereby determines that the following condition is preliminarily met and the issuance of the 2022 Bonds shall be subject to it: (i) the total net interest cost to maturity of the refunding component of the 2022 Bonds plus the principal amount of the refunding component of the 2022 Bonds is less than (ii) the total net interest cost to maturity of the Prior Bonds plus the principal amount of the Prior Bonds to be refunded. The City further finds and determines that it would be prudent in the management of its fiscal affairs to issue the 2022 Bonds to refund the Prior Bonds.
The City Council hereby approves the Fifth Supplement in the form presented to the City Council at this meeting. The City Manager, the Administrative Services Director or any interim officer of such position, or such other person or persons as either of them may designate (collectively, the "Authorized Officers") are each hereby authorized and directed to execute the Fifth Supplement, for and in the name and on behalf of the City and the District, in such form, together with any additions thereto or changes therein deemed necessary or advisable by the Authorized Officer executing such document upon consultation with Bond Counsel. The proceeds of the 2022 Bonds shall be applied by the City for the purposes and in the amounts as set forth in the Fifth Supplement. The City Council hereby authorizes the execution, delivery and performance by the City of the Fifth Supplement as an Authorized Officer deems appropriate.
Section 2. The City Council hereby approves the Bond Purchase Agreement between the City and the Underwriter in the form presented to the City Council at this meeting. The Authorized Officers are each hereby authorized and directed to accept the offer of the Underwriter to purchase the 2022 Bonds contained in the Bond Purchase Agreement and to execute the Bond Purchase Agreement, for and in the name and on behalf of the City and the District, in such form, together with any additions thereto or changes therein deemed necessary or advisable by the Authorized Officer executing such document upon consultation with Bond Counsel, provided that no additions or changes shall authorize an aggregate principal amount of 2022 Bonds in excess of $33,000,000 or result in a true interest rate in excess of 4.75% or result in an underwriter’s discount in excess of 0.65% of the aggregate principal amount of the 2022 Bonds. The City Council hereby authorizes the delivery and performance by the City of the Bond Purchase Agreement.
The City Council hereby finds and determines that the sale of the 2022 Bonds at negotiated sale as contemplated by the Bond Purchase Agreement will result in a lower overall cost.
Section 3. The City Council hereby approves the Preliminary Official Statement in the form presented to the City Council at this meeting. The Authorized Officers are each hereby authorized and directed to execute a final Official Statement (the "Official Statement"), for and in the name and on behalf of the City and the District, in such form, together with any additions thereto or changes therein deemed necessary or advisable by the Authorized Officer executing such document upon consultation with the City’s Bond Counsel. The City Council hereby authorizes and directs the Underwriter to distribute copies of said Preliminary Official Statement to persons who may be interested in the purchase of the 2022 Bonds and to deliver copies of the Official Statement to all actual purchasers of the 2022 Bonds. The City Council hereby authorizes the delivery by the City of the Preliminary Official Statement and the Official Statement.
ITEM 12.2. ATTACHMENT 1
Resolution No. XX-2022 Page 4 of 5
The City Council hereby authorizes and directs an Authorized Officer on behalf of the City to deem “final,” pursuant to Rule 15c2-12 of the Securities Exchange Act of 1934, the Preliminary Official Statement prior to its distribution to prospective purchasers of the 2022 Bonds.
Section 4. The City hereby covenants, for the benefit of the owners of the 2022 Bonds, to commence and diligently pursue to completion any foreclosure action regarding delinquent installments of any amount levied as a special tax for the payment of interest or principal of the 2022 Bonds, said foreclosure action to be commenced and pursued as more completely set forth in the Original Fiscal Agent Agreement and the Fifth Supplement.
Section 5. The 2022 Bonds, when executed, shall be delivered to the Fiscal Agent for authentication. The Fiscal Agent is hereby requested and directed to authenticate the 2022 Bonds by executing the Fiscal Agent's certificate of authentication and registration appearing thereon, and to deliver the 2022 Bonds, when duly executed and authenticated, to the Underwriter in accordance with written instructions executed on behalf of the City by the Mayor and/or one or more of the Authorized Officers, which instructions such officers are each hereby authorized, for and in the name and on behalf of the City, to execute and deliver to the Fiscal Agent. Such instructions shall provide for the delivery of the 2022 Bonds to the Underwriter or its designee in accordance with the Bond Purchase Agreement, upon payment of the purchase price therefor.
Section 6. All actions heretofore taken by the officers and agents of the City with respect to the establishment of the District and the sale and issuance of the 2022 Bonds are hereby approved, confirmed and ratified, and the proper officers of the City are each hereby authorized and directed to do any and all things and take any and all actions and execute any and all certificates, agreements and other documents, which they, or any of them, may deem necessary or advisable in order to consummate the lawful issuance and delivery of the 2022 Bonds in accordance with this Resolution including a continuing disclosure undertaking, an escrow agreement and/or refunding instructions related to the Prior Bonds and obtaining a rating and/or bond insurance, and any certificate, agreement, and other document described in the documents herein approved. Any document herein approved and executed and delivered by any one of the Authorized Officers shall be a valid and binding agreement of the City.
ITEM 12.2. ATTACHMENT 1
Resolution No. XX-2022 Page 5 of 5
Section 7. This Resolution shall take effect from and after its adoption. * * * * *
I hereby certify that the foregoing Resolution was duly adopted by the City Council of the City of Rancho Cordova, California, at a regularly scheduled meeting thereof, held on the _______ day of ____________, 2022, by the following vote of the City Council:
AYES: COUNCILMEMBERS
NOES: COUNCILMEMBERS
ABSENT: COUNCILMEMBERS
ABSTAIN: COUNCILMEMBERS
_______________________________________
Mayor
ATTEST:
City Clerk of the City of Rancho Cordova
Jones Hall Draft 4.25.22
SUPPLEMENTAL AGREEMENT NO. 5 TO FISCAL AGENT AGREEMENT
by and between
CITY OF RANCHO CORDOVA
and
U.S. BANK TRUST COMPANY, NATIONAL ASSOCIATION,
as Fiscal Agent
Dated as of __________, 2022
Relating to:
$_______________
City of Rancho Cordova
Sunridge Anatolia Community Facilities District No. 2003-1 Special Tax Refunding Bonds
Series 2022
ITEM 12.2. ATTACHMENT 2
-iTABLE OF CONTENTS
SECTION 1. Supplement to Original Fiscal Agent Agreement ...................................................................2
ARTICLE XIV
2022 BONDS
Section 14.01. Definitions ..................................................................................................3 Section 14.02. Authorization of 2022 Bonds......................................................................4 Section 14.03. Terms of 2022 Bonds.................................................................................4 Section 14.04. Redemption of 2022 Bonds .......................................................................5 Section 14.05. Form of 2022 Bonds; Authentication and Delivery.....................................7 Section 14.06. Application of Proceeds of Sale of 2022 Bonds.........................................8 Section 14.07. 2022 Costs of Issuance Fund ....................................................................9 Section 14.08. Security for 2022 Bonds.............................................................................9 Section 14.09. Effect of this Article XIV .............................................................................9 SECTION 2. Attachment of Exhibit F to Original Fiscal Agent Agreement ...............................................10 SECTION 3. Additional Amendments to Original Fiscal Agent Agreement...............................................10 SECTION 4. Partial Invalidity ....................................................................................................................10 SECTION 5. Execution in Counterparts ....................................................................................................11 SECTION 6. Governing Law .....................................................................................................................11 EXHIBIT A - FORM OF 2022 BONDS
ITEM 12.2. ATTACHMENT 2
SUPPLEMENTAL AGREEMENT NO. 5 TO FISCAL AGENT AGREEMENT
THIS SUPPLEMENTAL AGREEMENT NO. 5 TO FISCAL AGENT AGREEMENT (this “Supplemental Agreement No. 5” or “Agreement”), dated as of __________, 2022, is by and between the CITY OF RANCHO CORDOVA, California, a municipal corporation and public body, corporate and politic, organized and existing under and by virtue of the Constitution and laws of the State of California (the "City") for and on behalf of the Sunridge Anatolia Community Facilities District No. 2003-1, a community facilities district (the “District”) formed by the City in 2003, and U.S. BANK TRUST COMPANY, NATIONAL ASSOCIATION (formerly U.S. Bank National Association), national banking association duly organized and existing under the laws of the United States of America with a corporate trust office located in Seattle, Washington, as fiscal agent (the "Fiscal Agent") under a Fiscal Agent Agreement dated as of November 1, 2003 as supplemented by a Supplemental Agreement No. 1 to Fiscal Agent Agreement dated as of December 1, 2005, Supplemental Agreement No. 2 to Fiscal Agent Agreement dated as of August 1, 2007, Supplemental Agreement No. 3 to Fiscal Agent Agreement dated as of December 1, 2012 and Supplemental Agreement No. 4 to Fiscal Agent Agreement dated as of August 1, 2016 (collectively, the “Original Fiscal Agent Agreement”) by and between the Fiscal Agent and the City.
RECITALS :
WHEREAS, the City Council of the City (the “City Council”) has formed the District under the provisions of the Mello-Roos Community Facilities Act of 1982, as amended (Section 53311, et seq. of the California Government Code) (the “Act”) and its Resolution No. 52-2003, adopted by the City Council of the City on August 4, 2003;
WHEREAS, the City Council, as the legislative body of the District, is authorized under the Act to levy special taxes (the “Special Taxes”) to pay for the costs of the District and to authorize the issuance of bonds secured by the Special Taxes under the Act; WHEREAS, the City Council, as legislative body of the District, authorized the issuance of special tax bonds of the City for the District in the maximum principal amount of not to exceed $75,000,000 (not including refunding bonds, the “Authorization”) and caused bonds to be issued for the District, including the following:
(i) in the original principal amount of $24,370,000 on December 19, 2012 designated City of Rancho Cordova Sunridge Anatolia Community Facilities District No. 2003-1 Special Tax Refunding Bonds Series 2012 (the “2012 Bonds”) pursuant to a Supplemental Agreement No. 3, which refunded bonds issued in 2003; (ii) on a subordinate basis to the 2012 Bonds, in the original principal amount of $11,230,000 on January 23, 2014, designated City of Rancho Cordova Sunridge Anatolia Community Facilities District No. 2003-1 2014 Junior Lien Special Tax Bonds (the “2014 Junior Lien Bonds”);
(iii) in the original principal amount of $34,725,000 on August 2, 2016 designated City of Rancho Cordova Sunridge Anatolia Community Facilities District No. 2003-1 Special Tax ITEM 12.2. ATTACHMENT 2
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Bonds Series 2016 (the “2016 Bonds”), pursuant to a Supplemental Agreement No. 4, which refunded bonds issued in 2005 and 2007, and provided additional capital; the 2012 Bonds and 2014 Junior Lien Bonds are herein referred to as the “Prior Bonds.” WHEREAS, the City desires to issue a series of refunding special tax bonds designated “City of Rancho Cordova Sunridge Anatolia Community Facilities District No. 2003-1 Special Tax Refunding Bonds Series 2022” (the "2022 Bonds") in order to refund the Prior Bonds so as to produce savings in the interest cost, and in connection therewith the City Council of the City adopted its Resolution No. ____-2022 on ________, 2022 authorizing the issuance of the 2022 Bonds;
WHEREAS, Section 5.17 of the Original Fiscal Agent Agreement authorizes the issuance by Supplemental Agreement of Additional Bonds (as such terms are defined in the Original Fiscal Agent Agreement) secured under the Original Fiscal Agent Agreement on parity with the 2016 Bonds;
WHEREAS, this Supplemental Agreement No. 5 is a “Supplemental Agreement” as defined in Section 1.03 of the Original Fiscal Agent Agreement; the 2022 Bonds are secured under the Original Fiscal Agent Agreement, as amended and supplemented by this Supplemental Agreement No. 5, on parity with the 2016 Bonds, which will remaining outstanding after issuance of the 2022 Bonds;
WHEREAS, the City and the Fiscal Agent desire to enter into this Supplemental Agreement No. 5 pursuant to the Original Fiscal Agent Agreement, more particularly Section
5.17 thereof, to provide for the issuance, payment and administration of the 2022 Bonds; WHEREAS, in providing for the issuance of the 2022 Bonds, it is necessary to supplement and amend the Original Fiscal Agent Agreement, as more particularly provided herein, as such supplements and amendments are authorized by Sections 5.17 and 8.05 of the Original Fiscal Agent Agreement; and
WHEREAS, the City has determined that all acts and proceedings required by law necessary to make the 2022 Bonds, when executed by the City for the District, authenticated and delivered by the Fiscal Agent and duly issued, the valid, binding and legal special obligations of the City for the District, and to constitute the Original Fiscal Agent Agreement, as previously amended and supplemented and as supplemented hereby, a valid and binding agreement for the uses and purposes herein and therein set forth, in accordance with its terms, have been done or taken, and the execution and delivery of this Supplemental Agreement No. 5 have been in all respects duly authorized.
AGRE EMENT :
NOW, THEREFORE, in consideration of the premises and the mutual agreements herein contained, and for other consideration the receipt and sufficiency of which are hereby acknowledged, the parties hereto do hereby agree as follows:
SECTION 1. Supplement to Original Fiscal Agent Agreement. In accordance with the provisions of Section 5.17 and 8.05 of the Original Fiscal Agent Agreement, the Original Fiscal ITEM 12.2. ATTACHMENT 2
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Agent Agreement is hereby amended by adding a new article thereto, to be designated as Article XIV. Such Article XIV shall read in its entirety as follows:
ARTICLE XIV
2022 BONDS
Section 14.01. Definitions. Unless the context otherwise requires, the terms defined in this Section 14.01 shall, for all purposes of this Article XIV but not for any other purposes of this Agreement, have the respective meanings specified in this Section 14.01. All terms defined in Section 1.03 of the Original Fiscal Agent Agreement and not otherwise defined in this Section
14.01 shall, when used in this Article XIV, have the respective meanings given to such terms in Section 1.03.
“Article XIV” means this Article XIV which is hereby incorporated in and made a part of the Original Fiscal Agent Agreement pursuant to this Supplemental Agreement No. 5, together with all amendments of and supplements to this Article XIV entered into pursuant to the provisions of Section 8.01.
“Closing Date” means __________, 2022, being the date upon which there was a physical delivery of the 2022 Bonds in exchange for the amount representing the purchase price of the 2022 Bonds by the Original Purchaser.
"Continuing Disclosure Agreement" means any Continuing Disclosure Agreement or Continuing Disclosure Certificate entered into with respect to any series of Bonds. "Escrow Agent" means the U.S. Bank Trust Company, National Association, or a successor escrow agent appointed pursuant to the Escrow Agreement. "Escrow Agreement" means the Escrow Agreement dated as of __________, 2022 by and between the City and the Escrow Agent.
"Escrow Fund" means the Escrow Fund established with respect to the 2012 Bonds pursuant to the Escrow Agreement.
“Irrevocable Refunding Instructions” means the Irrevocable Refunding Instructions dated as of __________, 2022 given by the City to the 2014 Fiscal Agent. “2014 Fiscal Agent” means the Fiscal Agent, in its capacity as fiscal agent for the 2014 Junior Lien Bonds.
“2022 Costs of Issuance Fund” means the fund by that name established and held by the Fiscal Agent pursuant to Section 14.07.
“2022 Costs of Issuance” means items of expense payable or reimbursable directly or indirectly by the City and related to the authorization, sale and issuance of the 2022 Bonds, which items of expense shall include, but not be limited to, printing costs, costs of reproducing and binding documents, closing costs, filing and recording fees, initial fees, expenses and charges of the Fiscal Agent including its first annual administration fee, expenses incurred by ITEM 12.2. ATTACHMENT 2
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the City in connection with the issuance of the 2022 Bonds, financial advisor fees, 2022 Bond (underwriter's) discount or underwriting fee, rating fee, legal fees and charges, including bond counsel, disclosure counsel, charges for execution, transportation and safekeeping of the 2022 Bonds and other costs, charges and fees in connection with the foregoing. “2022 Costs of Issuance Fund” means the fund by that name established and held by the Fiscal Agent pursuant to Section 14.07.
“Original Purchaser” means, Piper Sandler & Co., the first purchaser of the 2022 Bonds upon their delivery by the Fiscal Agent on the Closing Date.
Section 14.02. Authorization of 2022 Bonds. 2022 Bonds in the aggregate principal amount of __________ Million __________ Hundred __________ Thousand Dollars ($_______________), are hereby authorized to be issued as Additional Bonds under and subject to the terms of this Agreement, the Act, and other applicable laws of the State of California.
Section 14.03. Terms of 2022 Bonds.
(A) Form; Denominations. The 2022 Bonds shall be issued as fully registered Bonds without coupons in the denomination of $5,000 or any integral multiple in excess thereof. (B) Date of Bonds. The 2022 Bonds shall be dated the Closing Date. (C) CUSIP Identification Numbers. “CUSIP” identification numbers shall be imprinted on the 2022 Bonds, but such numbers shall not constitute a part of the contract evidenced by the 2022 Bonds and any error or omission with respect thereto shall not constitute cause for refusal of any purchaser to accept delivery of and pay for the 2022 Bonds. In addition, failure on the part of the City or the Fiscal Agent to use such CUSIP numbers in any notice to Owners shall not constitute an event of default or any violation of the City’s contract with such Owners and shall not impair the effectiveness of any such notice. (D) Maturities, Interest Rates. The 2022 Bonds shall mature and become payable on September 1 in each of the years, and shall bear interest at the rates per annum, based on a 360-day year comprised of 12, 30-day months as follows:
Maturity Principal Interest CUSP
(September 1) Amount Rate (75211R)
2022
2023
2024
2025
2026
2027
2028
2029
2030
2031
2032
2033
2034
2037
ITEM 12.2. ATTACHMENT 2
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The 2022 Bonds maturing in ______ is a term bond and shall be referred to herein as the “Term 2022 Bond”.
(E) Interest and Method of Payment. Interest on the 2022 Bonds shall be payable on [September 1, 2022] and on each Interest Payment Date thereafter as provided in Section
2.02(E) of this Agreement, with the Closing Date as used therein being the Closing Date as defined in Section 14.01, and payments shall be made on the 2022 Bonds as provided in Section 2.02(F)
Section 14.04. Redemption of 2022 Bonds.
(A) Redemption. (i) Optional Redemption.
The 2022 Bonds shall be subject to optional redemption from any source of available funds other than Prepayments of the Special Tax by property owners, prior to maturity, in whole, or in part among series and maturities as shall be specified by an Officer's Certificate of the City and by lot within a maturity, on any date on or after September 1, ____, at an amount equal to the principal amount of the 2022 Bonds to be redeemed, plus accrued interest thereon to the date of redemption, without premium. (ii) Mandatory Redemption From Prepayments.
The 2022 Bonds shall be subject to mandatory redemption from Prepayments of the Special Tax by property owners, in whole or in part among maturities as shall be specified by the City and by lot within a maturity, on any Interest Payment Date at the following respective redemption prices (expressed as percentages of the principal amount of the 2022 Bonds to be redeemed), plus accrued interest thereon to the date of redemption:
Redemption Dates
Redemption
Price
September 1, ____ and any Interest Payment Date through March 1, 2024
103%
September 1, ____ and March 1, ____ 102
September 1, ____ and March 1, ____ 101
September 1, ____ and any Interest Payment Date thereafter 100 ITEM 12.2. ATTACHMENT 2
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(iii) Mandatory Sinking Payment Redemption. The Term 2022 Bond maturing September 1, ____, is subject to mandatory sinking payment redemption in part on September 1, ____, and on each September 1 thereafter to maturity, by lot, at a redemption price equal to one hundred percent (100%) of the principal amount thereof to be redeemed, without premium, in the aggregate principal amounts as set forth in the following table:
Mandatory
Redemption Date
(September 1)
Sinking Fund
Payment
(Maturity)
The amounts in the foregoing table shall be reduced pro rata, in order to maintain substantially level debt service on the 2022 Bonds, as a result of any prior partial optional redemption or mandatory redemption of the 2022 Bonds.
(B) Notice to Fiscal Agent. The City shall give the Fiscal Agent an Officer's Certificate containing notice of its intention to redeem 2022 Bonds pursuant to subsections (i) and (ii) not less than sixty (60) days prior to the applicable redemption date. (C) Purchase of Bonds in Lieu of Redemption. In lieu of redemption under Section
14.04(A), moneys in the 2022 Bond Fund may be used and withdrawn by the Fiscal Agent for purchase of Outstanding 2022 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 2022 Bonds be purchased at a price in excess of the principal amount thereof, plus interest accrued to the date of purchase and any premium which would otherwise be due if such 2022 Bonds were to be redeemed in accordance with this Agreement. (D) Redemption Procedure by Fiscal Agent. The Fiscal Agent shall cause notice of any redemption to be mailed by first class mail, postage prepaid, at least twenty (20) days but not more than sixty (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 2022 Bonds designated for redemption, at their addresses appearing on the 2022 Bond registration books in the Principal Office of the Fiscal Agent; but such mailing shall not be a condition precedent to such redemption and failure to mail or to receive any such notice, or any defect therein, shall not affect the validity of the proceedings for the redemption of such 2022 Bonds.
Such notice shall state the redemption date and the redemption price and, if less than all of the then Outstanding 2022 Bonds are to be called for redemption, shall designate the CUSIP numbers and 2022 Bond numbers of the 2022 Bonds to be redeemed by giving the individual CUSIP number and 2022 Bond number of each 2022 Bond to be redeemed or shall state that all 2022 Bonds between two stated 2022 Bond numbers, both inclusive, are to be redeemed or that all of the 2022 Bonds of one or more maturities have been called for redemption, shall state as to any 2022 Bond called in part the principal amount thereof to be redeemed, and shall require that such 2022 Bonds be then surrendered at the Principal Office of the Fiscal Agent for redemption at the said redemption price, and shall state that further interest on such 2022 Bonds will not accrue from and after the redemption date.
ITEM 12.2. ATTACHMENT 2
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Any notice of optional redemption may indicate that such redemption will be conditional upon the Fiscal Agent having sufficient moneys available on the date specified to cause the redemption to occur as provided in the notice.
Whenever provision is made in this Agreement for the redemption of less than all of the 2022 Bonds of any maturity, the Fiscal Agent shall select the 2022 Bonds to be redeemed, from all 2022 Bonds or such given portion thereof of such maturity by lot in any manner which the Fiscal Agent in its sole discretion shall deem appropriate.
Upon surrender of 2022 Bonds redeemed in part only, the City shall execute and the Fiscal Agent shall authenticate and deliver to the registered Owner, at the expense of the City, a new 2022 Bond or 2022 Bonds, of the same series and maturity, of authorized denominations in aggregate principal amount equal to the unredeemed portion of the 2022 Bond or 2022 Bonds. (E) 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 2022 Bonds so called for redemption shall have been deposited in the Bond Fund, such 2022 Bonds so called shall cease to be entitled to any benefit under this Agreement other than the right to receive payment of the redemption price, and no interest shall accrue thereon on or after the redemption date specified in such notice.
All 2022 Bonds redeemed or purchased by the Fiscal Agent pursuant to this Section shall be canceled by the Fiscal Agent. The Fiscal Agent shall destroy the canceled 2022 Bonds and issue a certificate of destruction thereof to the City.
Section 14.05. Form of 2022 Bonds; Authentication and Delivery. (A) Form of 2022 Bonds. The 2022 Bonds, the form of Fiscal Agent’s certificate of authentication, and the form of assignment to appear thereon, shall be substantially in the respective forms set forth in Exhibit A attached hereto and by this reference incorporated herein, with necessary or appropriate variations, omissions and insertions, as permitted or required by this Agreement and the Act.
(B) Execution of 2022 Bonds. The 2022 Bonds shall be executed on behalf of the City by the Mayor of the City Council thereof and the City Clerk who are in office on the date of adoption of this Agreement or at any time thereafter, and the seal of the City shall be impressed, imprinted or reproduced by facsimile signature thereon. If any officer whose signature appears on any 2022 Bond ceases to be such officer before delivery of the 2022 Bonds to the Owner, such signature shall nevertheless be as effective as if the officer had remained in office until the delivery of the 2022 Bonds to the Owner. Any 2022 Bond may be signed and attested on behalf of the City by such persons as at the actual date of the execution of such 2022 Bond shall be the proper officers of the City although at the nominal date of such 2022 Bond any such person shall not have been such officer of the City.
Only such of the 2022 Bonds as shall bear thereon a certificate of authentication in the form set forth in Exhibit A, manually executed and dated by the Fiscal Agent, shall be valid or obligatory for any purpose or entitled to the benefits of this Agreement, and such certificate of the Fiscal Agent shall be conclusive evidence that such 2022 Bonds have been duly authenticated and delivered hereunder and are entitled to the benefits of this Agreement.
ITEM 12.2. ATTACHMENT 2
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(C) Authentication and Delivery of 2022 Bonds. At any time after the execution of Supplemental Agreement No. 5 and delivery by the City of an Officer’s Certificate that the requirements of Section 5.17 for the issuance of the 2022 Bonds as Additional Bonds have been met, the City may issue the 2022 Bonds for the District in the aggregate principal amount set forth in Section 14.02 and deliver the 2022 Bonds to the Original Purchaser. The Authorized Officers of the City are hereby authorized and directed to deliver any and all documents and instruments necessary to cause the issuance of the 2022 Bonds in accordance with the provisions of the Act and this Agreement, as supplemented by Supplemental Agreement No. 5, to authorize the payment of 2022 Costs of Issuance and costs of the Project by the Fiscal Agent from the proceeds of the 2022 Bonds and to do and cause to be done any and all acts and things necessary or convenient for delivery of the 2022 Bonds to the Original Purchaser. The provisions of Sections 2.06 through 2.13 of the Original Fiscal Agent Agreement shall apply to the 2022 Bonds in a like manner as applied to the Prior Bonds.
Section 14.06. Application of Proceeds of Sale of 2022 Bonds. (a) The proceeds of the purchase of the 2022 Bonds by the Original Purchaser in the amount of $_________ (being 100% of the aggregate principal amount thereof, plus net original issue premium of $_________, less an Underwriter’s discount of $_________), shall be paid to the Fiscal Agent, who shall forthwith set aside, pay over and deposit such proceeds on the Closing Date as follows:
(i) Transfer to the Escrow Agent for deposit under and pursuant to the Escrow Agreement, $______________;
(i) Transfer to the 2014 Fiscal Agent for disposition as provided in the Irrevocable Refunding Instructions, $______________;
(ii) Deposit in the 2022 Bond Reserve Account of the Reserve Fund, $______________; and
(iii) Deposit in the 2022 Costs of Issuance Fund, $______________. (b) In addition to the moneys received under subsection (a), on the Closing Date the Fiscal Agent, as fiscal agent for the 2012 Bonds and the 2014 Junior Lien Bonds, and the City shall forthwith cause the following amounts to be transferred to the Escrow Agent for deposit under and pursuant to the Escrow Agreement and to the 2014 Fiscal Agent for deposit under the Irrevocable Refunding Instructions as follows:
(i) $______________ held by the Fiscal Agent (as fiscal agent for the 2012 Bonds) in the Reserve Fund attributable to the 2012 Bonds, together with any additional amount held therein, shall be paid to the Escrow Agent for deposit under and pursuant to the Escrow Agreement;
(ii) $______________ held by the 2014 Fiscal Agent in the Reserve Fund attributable to the 2014 Junior Lien Bonds, together with any additional amount held therein, shall be transferred to the Bond Fund for payment of the 2014 Junior Lien Bonds as provided in the Irrevocable Refunding Instructions;
(iii) $______________ held by the Fiscal Agent (as fiscal agent for the 2012 Bonds) in the Bond Fund for the 2012 Bonds, together with any additional amount held ITEM 12.2. ATTACHMENT 2
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therein, shall be paid to the Escrow Agent for deposit under and pursuant to the Escrow Agreement;
(iv) $______________ held by the 2014 Fiscal Agent in the Bond Fund for payment of debt service on the 2014 Junior Lien Bonds, together with any additional amount held therein, shall be added to the Bond Fund for payment of the 2014 Junior Lien Bonds as provided in the Irrevocable Refunding Instructions; (v) $______________ held by the City in the Special Tax Fund attributable to the 2012 Bonds shall as of the Closing Date be transferred to the Escrow Agent for deposit under and pursuant to the Escrow Agreement.
(c) In addition to the moneys received under subsections (a) and (b), on or before the Closing Date the City shall forthwith cause the following amounts to be transferred:
(i) [to the Escrow Agent for deposit under and pursuant to the Escrow Agreement, $______________ held by the City in the Special Tax Fund attributable to the 2012 Bonds;]
(ii) to the 2014 Fiscal Agent for deposit under and pursuant to the Irrevocable Refunding Instructions, $______________ held by the City in the Special Tax Fund attributable to the 2014 Junior Lien Bonds.
The Fiscal Agent may, in its discretion, establish a temporary fund or account in its books and records to facilitate transfers required under this Section 14.06.
Section 14.07. 2022 Costs of Issuance Fund. There is hereby established a separate fund to be known as the “2022 Costs of Issuance Fund”, which shall be held by the Fiscal Agent in trust. Amounts in the Costs of Issuance Fund shall be disbursed from time to time to pay 2022 Costs of Issuance, as set forth in an Officer's Certificate containing respective amounts to be paid to the designated payees, signed by an Authorized Officer or a designee thereof and delivered to the Fiscal Agent. The Fiscal Agent shall pay all 2022 Costs of Issuance upon receipt of an invoice from any such payee which requests payment in an amount which is less than or equal to the amount set forth with respect to such payee in such Officer's Certificate, or upon receipt of an Officer's Certificate requesting payment of a 2022 Costs of Issuance not listed on the initial Officer's Certificate delivered to the Fiscal Agent on the Closing Date. The Fiscal Agent shall maintain the 2022 Costs of Issuance Fund for a period of 90 days from the Closing Date and then shall transfer any moneys remaining therein, including any investment earnings thereon, to the Bond Fund and the 2022 Costs of Issuance Fund shall be closed.
Thereafter, every invoice received by the Fiscal Agent shall be submitted to the Treasurer for payment.
Section 14.08. Security for 2022 Bonds. The 2022 Bonds shall be Additional Bonds which shall be secured in the manner and to the extent set forth in Articles IV and V, and in this Article XIV.
Section 14.09. Effect of this Article XIV. Except as in this Article XIV expressly provided or except to the extent inconsistent with any provision of this Article XIV, the 2022 Bonds shall be deemed to be “Bonds” under and within the meaning of Section 1.03, and every term and condition contained in the foregoing provisions of this Agreement shall apply to the 2022 Bonds ITEM 12.2. ATTACHMENT 2
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with full force and effect, with such omissions, variations and modifications thereof as may be appropriate to make the same conform to this Article XIV.
SECTION 2. Attachment of Exhibit F to Original Fiscal Agent Agreement. The Original Fiscal Agent Agreement is hereby further amended by incorporating therein an Exhibit F setting forth the form of the 2022 Bonds, which shall read in its entirety as set forth in Exhibit A attached hereto and hereby made a part hereof.
SECTION 3. Additional Amendments to Original Fiscal Agent Agreement. The Original Fiscal Agent Agreement is hereby further amended as follows:
(A) Section 1.03 of the Agreement is hereby amended by adding thereto the following:
“2022 Bonds” means the City of Rancho Cordova Community Facilities District No. 2003-1 Special Tax Refunding Bonds, Series 2022, authorized to be issued under Section 14.02.
“Supplemental Agreement No. 5” means Supplemental Agreement No. 5 to Fiscal Agent Agreement, dated as of __________, 2022, between the City, for and on behalf of the District, and the Fiscal Agent.
(B) Section 4.03(A) of the Agreement is hereby amended by adding thereto, as a new second sentence thereof, the following: “There is also hereby created within the Reserve Fund a separate account designated as the “2022 Bond Reserve Account” which account is hereby established for purposes of accounting for the use and disposition of 2022 Bonds, a portion of the proceeds of which will be deposited to such 2022 Bond Reserve Account pursuant to Section 14.06, and amounts in such account shall for all purposes of this Agreement be deemed to be part of the amounts on deposit in the Reserve Fund and amounts in such 2022 Bond Reserve Account and any earnings thereon in such 2022 Bond Reserve Account shall be drawn upon in the same manner, according to the same terms and pro rata with all other accounts in the Reserve Fund whenever a draw is made on the Reserve Fund under this Section 4.03.” (C) References in the Original Fiscal Agent Agreement to the 2003 Bonds and/or any separate series of Bonds, which, if the context requires reference to all outstanding Bonds secured on parity, shall be deemed to refer to “Bonds” as defined in the Original Fiscal Agent Agreement in order to maintain the parity relationship of the outstanding Bonds secured on parity, which as of the date of this Supplemental Agreement No. 5 are the 2016 Bonds and 2022 Bonds.
(D) Section 5.17(of the Agreement is amended in its entirety to hereafter be as follows:
“The City covenants that it will not issue Additional Bonds secured on parity with the 2022 Bonds and 2016 Bonds, except for refunding bonds issued under the Act.” SECTION 4. Partial Invalidity. If any section, paragraph, sentence, clause or phrase of this Supplemental Agreement No. 5 shall for any reason be held illegal, invalid or unenforceable, such holding shall not affect the validity of the remaining portions of this Supplemental Agreement No. 5. The City hereby declares that it would have entered into this Supplemental Agreement No. 5 and each and every other Section, paragraph, sentence, clause or phrase hereof and authorized the issue of the 2022 Bonds pursuant thereto irrespective of ITEM 12.2. ATTACHMENT 2
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the fact that any one or more Sections, paragraphs, sentences, clauses, or phrases of this Supplemental Agreement No. 5 may be held illegal, invalid or unenforceable.
SECTION 5. Execution in Counterparts. This Supplemental Agreement No. 5 may be executed in several counterparts, each of which shall be an original and all of which shall constitute but one and the same instrument.
SECTION 6. Governing Law. This Supplemental Agreement No. 5 shall be construed and governed in accordance with the laws of the State of California applicable to contracts made and performed in such State.
ITEM 12.2. ATTACHMENT 2
[Signature Page to Supplemental Agreement No. 5 to
Fiscal Agent Agreement dated as of __________, 2022]
IN WITNESS WHEREOF, the City and the Fiscal Agent have caused this Supplemental Agreement No. 5 to Fiscal Agent Agreement to be executed as of __________, 2022.
CITY OF RANCHO CORDOVA
By:
Administrative Services Director
U.S. BANK TRUST COMPANY, NATIONAL
ASSOCIATION,
as Fiscal Agent
By:
Authorized Officer
ITEM 12.2. ATTACHMENT 2
A-1
EXHIBIT F TO FISCAL AGENT AGREEMENT
EXHIBIT A
FORM OF 2022 BONDS
UNITED STATES OF AMERICA
STATE OF CALIFORNIA
No. $
CITY OF RANCHO CORDOVA
SUNRIDGE ANATOLIA COMMUNITY FACILITIES DISTRICT NO. 2003-1 SPECIAL TAX REFUNDING, SERIES 2022
INTEREST RATE MATURITY DATE BOND DATE CUSIP
September 1, ____ ________, 2022
REGISTERED OWNER: CEDE & CO.
PRINCIPAL AMOUNT: DOLLARS
The City of Rancho Cordova (the “City”) for and on behalf of the City of Rancho Cordova Sunridge Anatolia Community Facilities District No. 2003-1 (the “District”), for value received, hereby promises to pay solely from the Special Tax (as hereinafter defined) to be collected in the District or amounts in certain funds and accounts held under the Agreement (as hereinafter defined), to the Registered Owner named above, or registered assigns (the “Owner”), on the Maturity Date set forth above, unless redeemed prior thereto as hereinafter provided, the Principal Amount set forth above, and to pay interest on such principal amount from the Bond Date shown above, or from the most recent Interest Payment Date (as hereinafter defined) to which interest has been paid or duly provided for, semiannually on March 1 and September 1, commencing __________ (the “Interest Payment Dates”), at the Interest Rate set forth above, until the principal amount hereof is paid or made available for payment. The principal of this 2022 Bond is payable to the Owner hereof in lawful money of the United States of America upon presentation and surrender of this 2022 Bond at the principal corporate trust office of U.S. Bank Trust Company, National Association in Seattle, Washington (the “Fiscal Agent”). Interest on this 2022 Bond shall be paid by check of the Fiscal Agent mailed by first class mail on each Interest Payment Date to the Owner hereof as of the close of business on the 15th day of the month preceding the month in which the Interest Payment Date occurs (the “Record Date”) at such Owner's address as it appears on the registration books maintained by the Fiscal Agent, or by wire transfer made on such Interest Payment Date upon written instructions delivered to the Fiscal Agent by the applicable Record Date of any Owner of $1,000,000 or more in aggregate principal amount of 2022 Bonds.
This 2022 Bond is one of a duly authorized issue of bonds approved by resolution of the City Council of the City on _____________, 2022, pursuant to the Mello-Roos Community ITEM 12.2. ATTACHMENT 2
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Facilities Act of 1982, as amended, Sections 53311, et seq., of the California Government Code (the “Mello-Roos Act”) for the purpose of providing moneys to refund special tax bonds issued in 2012 and 2014, and is one of the bonds designated “City of Rancho Cordova Sunridge Anatolia Community Facilities District No. 2003-1 Special Tax Refunding Bonds Series 2022” (the “2022 Bonds”). The issuance of the 2022 Bonds and the terms and conditions thereof are provided for by a Fiscal Agent Agreement dated as of November 1, 2003, as supplemented by a Supplemental Agreement No. 1 to Fiscal Agent Agreement dated as of December 1, 2005, Supplemental Agreement No. 2 to Fiscal Agent Agreement dated as of August 1, 2007, Supplemental Agreement No. 3 to Fiscal Agent Agreement dated as of December 1, 2012, Supplemental Agreement No. 4 to Fiscal Agent Agreement dated as of August 1, 2016, and Supplemental Agreement No. 5 to Fiscal Agent Agreement dated as of __________, 2022 (together, the “Agreement”) by and between the City and the Fiscal Agent and this reference incorporates the Agreement herein, and by acceptance hereof the Owner of this 2022 Bond assents to said terms and conditions. The Agreement is authorized under, this 2022 Bond is issued under and both are to be construed in accordance with, the laws of the State of California.
Pursuant to the Mello-Roos Act, the Agreement and the Resolution, the principal of and interest on this 2022 Bond are payable, on a parity with previously issued bonds of the District, solely from the annual special tax authorized under the Mello-Roos Act to be collected within the District (the “Special Tax”) and certain funds held under the Agreement.
Interest on this 2022 Bond shall be payable from the Interest Payment Date next preceding the date of authentication hereof, unless (i) it is authenticated on an Interest Payment Date, in which event it shall bear interest from such Interest Payment Date, or (ii) such date of authentication is after a Record Date but on or prior to an Interest Payment Date, in which event interest will be payable from such Interest Payment Date, or (iii) such date of authentication is prior to the first Record Date, in which event interest will be payable from the 2022 Bond Date shown above; provided however, that if at the time of authentication of this 2022 Bond, interest is in default hereon, this 2022 Bond shall bear interest from the Interest Payment Date to which interest has previously been paid or made available for payment hereon.
Any tax for the payment hereof shall be limited to the Special Tax, except to the extent that provision for payment has been made by the City as may be permitted by law. The 2022 Bonds do not constitute obligations of the City for which the City is obligated to levy or pledge, or has levied or pledged, general or special taxation other than described herein above.
Optional Redemption. The 2022 Bonds are subject to optional redemption from any source of available funds, other than from Prepayments of the Special Tax by property owners, prior to maturity, in whole, or in part among maturities as shall be specified by an Officer's Certificate of the City and by lot within a maturity, on any date on or after September 1, ______, at an amount equal to the principal amount of the 2022 Bonds to be redeemed, plus accrued interest thereon to the date of redemption, without premium.
Mandatory Redemption From Prepayments. The 2022 Bonds are subject to mandatory redemption from Prepayments of the Special Tax by property owners, in whole or in part among maturities as shall be specified by the City and by lot within a maturity, on any Interest Payment Date at the following respective redemption prices (expressed as percentages of the principal amount of the 2022 Bonds to be redeemed), plus accrued interest thereon the date of redemption:
ITEM 12.2. ATTACHMENT 2
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Redemption Dates
Redemption
Price
September 1, ____ and any Interest Payment Date through March 1, 2024
103%
September 1, ____ and March 1, ____ 102
September 1, ____ and March 1, ____ 101
September 1, ____ and any Interest Payment Date thereafter 100 The Term 2022 Bond maturing September 1, _____ is subject to mandatory sinking payment redemption in part on September 1, ____, and on each September 1 thereafter to maturity, by lot, at a redemption price equal to one hundred percent (100%) of the principal amount thereof to be redeemed, without premium, in the aggregate principal amounts as set forth in the following tables:
Mandatory
Redemption Date
(September 1)
Sinking Fund
Payment
(Maturity)
The amounts in the foregoing table shall be reduced pro rata, in order to maintain substantially level debt service on the 2022 Bonds, as a result of any prior partial optional redemption or mandatory redemption of the 2022 Bonds.
Notice of redemption with respect to the 2022 Bonds to be redeemed shall be given to the Owners thereof, in the manner, to the extent and subject to the provisions of the Agreement.
Any notice of optional redemption may be made conditional upon the Fiscal Agent having sufficient moneys available on the date specified to cause the redemption to occur as provided in the notice.
This 2022 Bond shall be registered in the name of the Owner hereof, as to both principal and interest. Each registration and transfer of registration of this 2022 Bond shall be entered by the Fiscal Agent in books kept by it for this purpose and authenticated by its manual signature upon the certificate of authentication endorsed hereon.
No transfer or exchange hereof shall be valid for any purpose unless made by the registered owner, by execution of the form of assignment endorsed hereon, and authenticated as herein provided, and the principal hereof, interest hereon and any redemption premium shall be payable only to the registered owner or to such Owner's order. The Fiscal Agent shall require the Owner requesting transfer or exchange to pay any tax or other governmental charge required to be paid with respect to such transfer or exchange. No transfer or exchange hereof shall be required to be made (i) within 15 days prior to the date established by the Fiscal Agent for selection of 2022 Bonds for redemption or (ii) with respect to a 2022 Bond after such 2022 Bond has been selected for redemption.
The Agreement and the rights and obligations of the City thereunder may be modified or amended as set forth therein. The principal of the 2022 Bonds is not subject to acceleration upon a default under the Agreement or any other document.
ITEM 12.2. ATTACHMENT 2
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This 2022 Bond shall not become valid or obligatory for any purpose until the certificate of authentication hereon endorsed shall have been dated and manually signed by the Fiscal Agent.
It is hereby certified, recited and declared that all acts, conditions and things required by law to exist, happen and be performed precedent to and in the issuance of this 2022 Bond have existed, happened and been performed in due time, form and manner as required by law, and that the amount of this 2022 Bond, together with all other indebtedness of the City, does not exceed any debt limit prescribed by the laws or Constitution of the State of California.
Unless this 2022 Bond is presented by an authorized representative of The Depository Trust Company to the Fiscal Agent for registration of transfer, exchange or payment, and any 2022 Bond issued is registered in the name of Cede & Co. or such other name as requested by an authorized representative of The Depository Trust Company and any payment is made to Cede & Co., ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL since the registered owner hereof, Cede & Co., has an interest herein.
IN WITNESS WHEREOF, the City of Rancho Cordova has caused this 2022 Bond to be executed in its name and on its behalf with the facsimile signatures of its Mayor and its City Clerk, all as of the Bond Date stated above.
CITY OF RANCHO CORDOVA
By:
Mayor
By:
City Clerk
ITEM 12.2. ATTACHMENT 2
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FISCAL AGENT'S CERTIFICATE OF AUTHENTICATION
This is one of the 2022 Bonds described in the Resolution and the Agreement.
Dated: _____________, 2022
U.S. BANK TRUST COMPANY,
NATIONAL ASSOCIATION,
as Fiscal Agent
By:
Authorized Officer
ITEM 12.2. ATTACHMENT 2