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AGREEMENTS
NOW, THEREFORE, in consideration of the preceding recitals and the mutual covenants hereinafter contained, the parties agree as follows:
Section 1. Establishment of District and Improvement Area No. 1 . The City has initiated and concluded proceedings pursuant to the Act for the establishment of the District, including designation of Improvement Area No. 1 therein, and identification of Future Annexation Area related thereto. Such proceedings included elections pursuant to Sections 53326 and 53327 of the California Government Code on (i) the question of the issuance of bonds for Improvement Area No. 1 of the District to finance the design, construction or acquisition of the below described authorized facilities, either directly or through the payment of fees charged by the City to fund capital improvements, (ii) the issue of the annual levy of special taxes on all taxable property within the Improvement Area No. 1 of the District pursuant to the terms of the Rate and Method of Apportionment of Special Taxes for Improvement Area No. 1 (for Improvement Area No. 1 and each future improvement area, an “RMA”), for the payment of principal and interest on the bonds of the District and the annual administrative expenses of the City and the District in levying and collecting such special taxes, paying the principal and interest on such bonds and providing for the registration, exchange and transfer of such bonds, including the fees of fiscal agents and paying agents, and any necessary replenishment for the reserve fund for such bonds, accumulation of funds for future bond payments, or the acquisition of authorized facilities and payment of authorized costs from the proceeds of such special taxes, and (iii) the question of the establishment of an appropriations limit for Improvement Area No. 1. This Agreement applies to Improvement Area No. 1 and each future improvement area (each, an “Improvement Area” ) designated out of the Future Improvement Area.
Section 2. Sale of Bonds; Authorized Facilities. The City intends to proceed with the sale of bonds in one or more series in each Improvement Area (herein, the “ Bonds”) for the District for the purpose of raising money eligible for use as payment for Authorized Facilities and/or Authorized Fees (described below) in accordance with this Agreement and City policies, in the maximum aggregate principal amount of not to exceed $ 53,200,000 (excluding Bonds described in Section 53364.2(e) of the Act) (the “Authorization”), initially allocated as follows: (i) for Improvement Area No. 1, $ 18,800,000 and (ii) for land within the Future Annexation Area, $34,400,000. The timing of the issuance and sale of each series of Bonds, the aggregate principal amount thereof, and the terms and conditions upon which they shall be sold shall be determined by the City. If multiple series of Bonds are to be issued, this Agreement is applicable to proceeds from all such series of such Bonds.
The authorized facilities (the “ Authorized Facilities”) eligible for reimbursement from Bond proceeds and City -wide fees eligible for reimbursement and advance funding (the “Authorized Fees”) from Bond proceeds are generally described in Exhibit A attached hereto.
The Authorized Facilities identified in Exhibit A represent all of the facilities that are eligible for acquisition; however Developer may not construct all of the Authorized Faci lities (e.g., some facilities may be constructed by City, other pub lic agencies or utilities, or other developers that require the construction of such facilities, or in concert with other developers).
“Available Construction Proceeds” shall be the proceeds of the sale of the Bonds net of costs of issuance, less the Formation Fees and Costs, capitalized interest, and any administration costs to be deducted therefrom, plus any interest earnings on such proceeds (“Net Bond Proceeds”), plus any Special Taxes that are authorized to be used to finance Authorized Facilities and Authorized Fees directly.
ITEM 12.1.
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Section 3. Tax Requirements. For any Bonds that are issued as federally tax - exempt, the City shall take all actions which, in the opinion of City’s bond counsel, are necessary in order to avoid classification of the Bonds as “arbitrage bonds” or the loss of tax exemption for the Bonds for any other reason.
Section 4. Amounts to Be Included in Bonds. The principal amount of each series of Bonds shall include an amount needed (i) to fund a reserve fund for the payment of principal and interest of such Bonds as is determined by the City to be necessary and appropriate, capitalized interest on such Bonds for such period as the City and the Developer shall determine is appropriate (if and to the extent not provided by the levy and collection of special taxes in advance of such Bond sale), (ii) the amount of the d iscount of the underwriter who purchases such Bonds, and (iii) other expenses incurred by the City in connection with the issuance and sale of such Bonds, including bond and disclosure counsel fees, legal fees, fees of the bank which will act as transfer agent, registrar and paying or fiscal agent for such Bonds, other fees and costs normally incidental to the sale of Bonds, and such other fees and costs enumerated in Section 53345.3 of the Act as the City determines are necessary and appropriate. The City may also include within the principal amount of a series of Bonds an amount determined by the City to equitably reimburse Developer, or any entities related thereto, for costs and expenses incurred by them which are related to the establishment of the Dis trict; provided that the City shall determine the amount to be so reimbursed on the basis of detailed itemizations of costs provided by Developer. (All of the foregoing fees, costs, and expenses described in this paragraph are hereinafter “Formation Fees and Costs.”) In no event shall Developer be reimbursed from Bond proceeds for (i) in- house administrative overhead (except that Developer shall be entitled to payment equal to four percent (4%) of actual construction costs as and for project and construction manag ement services), (ii) interest expense incurred by Developer on moneys advanced during the proceedings for formation of the District and issuance of Bonds, and during construction of the Authorized Facilities, and (iii) any other costs and expenses incurred by Developer which are not authorized by the Act.
Section 5. Design of Authorized Facilities.
(a) Conformance with Standards. Authorized Facilities to be acquired by the City shall be designed in conformance with all applicable City standards and requirements. Upon completion of the design of each such Authorized Facility to the satisfaction of the City; and when Developer has paid to the City all applicable plan checking and other fees, Developer shall notify City that the design of the Authorized Facility is completed.
(b) Reimbursement for Design . Developer may be reimbursed out of Available Construction Proceeds for such expenses incurred in designing those Authorized Facilities set forth in Exhibit A hereto, including all applicable plan checking and other fees paid, subject to the City’s determination of the amount to be so reimbursed pursuant to the terms hereof, and subject to the limitation that reimbursement in all cases is to be made from Available Construction Proceeds only. Reimbursement for design and for plan check services related to approval of the design for each Authorized Facility shall be made in one or more lump sum payments as and when the design for each Authorized Facility is approved, but only after City has received and approved all invoices for such services associated with the design of such Authorized Facility.
(c) Assumption of Design by City . Notwithstanding the preceding provisions of this Section, if the City determines that Developer is not proceeding with the design of an Authorized Facility to be constructed by Developer for acquisition by City on a reasonable schedule which ITEM 12.1.
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will enable the City to insure that construction of such Authorized Facility can be completed within the time specified in Section 6 hereof, the City may take over the design of the Authorized Facility by giving Developer written notice thereof. Upon rece ipt of such a notice, Developer shall surrender to the City all plans and specifications which have then been completed or which are in progress with respect to such Authorized Facility.
If the City takes over the design of an Authorized Facility as provided above, the City shall reimburse Developer from the Available Construction Proceeds for the approved expenses incurred in connection with the design of the Authorized Facility which hav e not previously been reimbursed, provided there are sufficient funds remaining, after payment for the Authorized Facilities, to do so. City shall be reimbursed from Available Construction Proceeds the expenses incurred to complete the design. If the Cit y takes over the design of other Authorized Facilities commenced by Developer, the cost of a portion of the plans for such Authorized Facilities taken over shall be eligible for fee credits to the extent fee credits are applicable hereunder for Authorized Facilities.
Section 6. Construction for Acquisition. The City shall only be required to acquire from Developer, and otherwise pay Developer for, the Authorized Facilities set forth in Exhibit A.
For those Authorized Facilities which Developer constructs, Developer shall proceed with the construction thereof in accordance with the approved plans and specifications.
For construction of Authorized Facilities under this Section, Developer shall comply with all of the following requirements to insure that the Authorized Facilities will be constructed as if they had been constructed under the direction and supervision, or under the authority of the City:
(a) Approval by City. The plans and specifications and form of contract documents shall be approved by the City Engineer and City Attorney for conformance with City Codes and policy.
(b) Contract Requirements . Developer shall require, and the specifications and contract documents shall require, all such contractors to pay prevailing wages in accordance with the California Labor Code.
To the extent bidding is required by the City the following shall apply:
(i) The bidding and contract award procedures shall be approved by the City Engineer for conformance with City codes and policy. Based on qualifications submitted by the contractors, the Developer, in consultation with the City Engineer, shall select a lis t of qualified bidders for each element of work. If the Developer determines that the nature of a particular element of the construction does not require a pre -qualified bid list, the Developer may allow a particular element of the work to be bid without a pre-qualified bid list.
(ii) The specifications and bid and contract documents shall require all contractors and subcontractors, to pay prevailing wages in accordance with the California Labor Code.
(iii) All contractors and subcontractors shall be required to provide proof of insurance coverage throughout the term of the construction of the Authorized Facilities.
(iv) No contractor or subcontractor may be listed on a bid proposal for the Authorized Facilities unless registered with the Department of Industrial Relations pursuant to Labor ITEM 12.1.
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Code Section 1725.5. No contractor or subcontractor may work on the Authorized Facilities unless registered with the Department of Industrial Relations pursuant to Labor Code Section 1725.5. Developer shall be responsible for ensuring that these contracto r registration requirements are adhered to since construction of the Authorized Facilities is subject to compliance monitoring and enforcement by the Department of Industrial Relations.
(v) Developer shall notify the Department of Industrial Relations within five (5) days of the award of the initial prime contract for the Authorized Facilities.
(vi) Developer shall comply with all federal, state and local laws, ordinances and regulations applicable to the construction of the Authorized Facilities.
(c) Proof of Insurance/Completion of Construction . All such contractors shall be required to provide proof of insurance coverage throughout the term of the construction of the Authorized Facilities which they will construct in conformance with the City’s standard procedures and requirements. Developer shall cause the Authorized Facilities to be constructed in an expeditious manner as determined by the City to be in accordance with project approvals and development progress. If Developer fails to expediti ously prosecute such construction of the Authorized Facilities to be constructed by Developer for acquisition by the City, the City shall have the right and may elect to take over the construction of such Authorized Facilities, or any part thereof, if it determines it is necessary for it to so proceed in order to protect the City’s interests.
If the City elects to so proceed, it shall notify Developer in writing that if Developer does not satisfy the City that construction is proceeding expeditiously on the construction of an Authorized Facility within 30 days after receipt of such notice, the City will take over the construction of such Authorized Facilities. If after receiving such a written notification Developer does not satisfy the City that they are proceeding expeditiously to construct that portion of the Authorized Facilities identified in the written notification to the satisfaction of the City, within 30 days from the date of receipt thereof, Developer shall relinquish to the City all design docum ents, and shall cooperate with the City in every way to ensure that the construction of the Authorized Facilities will be completed expeditiously.
Notwithstanding the provisions of this Section, the sources of funds to be utilized by the City for the construction of any such Authorized Facilities may include (i) the proceeds of the sale of Bonds of the District, (ii) the proceeds of applicable City d evelopment fees collected pursuant to the applicable codes, ordinances and policies of the City, (iii) proceeds from the sale of the bonds of another community facilities district or assessment district established over and including, property in the City, (iv) interest earnings on the reserve fund or improvement fund for Bonds of the District, to the extent such earnings are determined by the City to be available for construction of the Authorized Facilities, (v) the Developer’s subdivision bond or bonds to the extent applicable, (vi) any other performance security that may have been provided by Developer, and (vii) the Developer’s and/or contractors’ performance bonds. To the extent that such sources may be insufficient to pay for the construction of an Authorized Facility which will be constructed by the City pursuant to this Section, the City may either construct only those Authorized Facilities which can be constructed with such sources of funds which are available therefor, or the City may proceed to complete the Authorized Facilities and charge the Developer, the Developer’s bond or any contractor’s bond for the costs thereof. Nothing contained herein and no take -over of construction of Authorized Facilities by the City shall relieve a Developer of an y of its responsibilities under any development agreement or project approval relating to the Property.
Following completion of the Authorized Facilities taken over by the City, the City shall use the above-referenced sources to reimburse the Developer for any costs incurred by the Developer in ITEM 12.1.
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the construction of the Authorized Facilities that were not previously reimbursed to the Developer.
Section 7. Inspection and Approval of Construction. The City shall provide such level of inspection of the progress of construction of the Authorized Facilities to be constructed by Developer for acquisition or reimbursement therefor by the City as it deems necessary. The City may provide engineering and inspection services using City staff, contracting with the Sacramento County Public Works Agency, or contracting with any other entity for these services (in all cases referred to as the “City Inspectors” ). City Inspectors shall have access to the construction sites at all reasonable times for the purpose of conducting their inspections. Developer and its contractors shall reasonably cooperate in every way with the City Inspectors to ensure that they are afforded an adequate opportunity to inspect each and every aspect of the progress of construction of each and every such Authorized Facility.
Section 8. Liens. Upon the expiration of the time for the recording of claims of liens as prescribed by Section 3115 and 3116 of the California Civil Code, Developer shall provide to the City (as set forth in paragraph 9(a) below) such evidence or proof as the City shall reasonably require that all persons, firms and corporations supplying work, labor, materials, supplies and equipment to the construction of the Authorized Facilities, or portion thereof, constructed by Developer for acquisition by the City have been paid, and that no claims of liens have been recorded by or on behalf of any such person, firm or corporation. During construction of the Authorized Facilities, Developer shall provide, or cause its contractors to provide, conditional lien releases with respect to pending Requests for Payment (and unconditional lien releases for previously paid Requests for Payment), in accordance with the statutory requirements and as may be requested by City.
Section 9. Payment of Acquisition Price.
(a) Request for Payment of Acquisition Price. On the 30th day of each month following commencement of construction of any of the Authorized Facilities, or such other dates as are mutually agreeable by City and Developer, Developer will submit to City an invoice, or other form of request, for paymen t (the “Request for Payment”) of the Acquisition Price (as determined below) for the portion of each Authorized Facility constructed during the previous month. The Request for Payment shall be made on the form a ttached hereto as Exhibit B and include such necessary information (including invoices, receipts, worksheets and other evidence) in sufficient detail to allow the City to verify the Acquisition Price of such portions of the Authorized Facilities.
With the Request for Payment, Developer shall also submit copies of verifications of inspections conducted pursuant to Section 7 and lien releases pursuant to Section 8 above for the portions of the Authorized Facilities for which the Request for Payment is submitted.
(b) Determination of Acquisition Price/City Inspection. Upon submittal of a complete (as reasonably determined by City) Request for Payment, the City or the City and Other Public Entity, shall determine the Acquisition Price (or in the case of a reimbursement, the reimbursement amount, which hereinafter is i ncluded in the term “Acquisition Price”) to be paid by the City for the acquisition from Developer of the portions of the Authorized Facilities constructed by Developer during said prior month. City Ins pectors shall verify the type and quantity of work described in the Request for Payment as having been completed and confirms said work is completed in a satisfactory manner. City Inspectors shall transmit to the City’s Finance Department the findings of its review and then consult with the Finance Department as needed to determine the Acquisition Price. The Acquisition Price for the portion of an Authorized Facility shall include the actual cost of construction (or payment) thereof as determined by the contract prices as set forth in contracts and purchase orders entered into by Developer with its ITEM 12.1.
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contractors, and suppliers, in accordance with standards and procedures therefor as prescribed by the City. The City shall use its best efforts to determine the Acquisition Price within twenty (20) business days from receipt of a Request for Payment to determine the Acquisition Price. Upon determining the Acquisition Price, City shall promptly notify Developer in writing of such Acquisition Price.
(c) Payment of Acquisition Price. Within forty-five (45) days after receipt of a complete (as reasonably determined by City) Request for Payment, the City, through its fiscal agent, shall pay from the Available Construction Proceeds the Acquisition Price then due to Developer. If the Payment Request indicates that Developer is withholding from its contractor a retention of a least five percent (5%) of the contract price for the portion of the constructed Authorized Facility, then the full amount of the approved Acquisition Price shall be authorized for payment to Developer; if the Payment Request does not indicate the withholding by Developer of such five percent (5%) retention, then the amount to be paid to Developer shall be equal to the Acquisition Price, less a retention of five percent (5%) of the contract price for the portion of the constructed Authorized Facility. Upon completion of such Authorized Facility in its entirety, including all “Punch List” work, and acceptance of the Authorized Facility by the City, the City, through its fiscal agent, shall pay from the Available Construction Proceeds the balance of the Acquisition Price then due Developer for such Facility, including any 5% progress retention then paid by Developer or any 5% retentions previously retained by City with respect thereto. City may withhold payment from a Developer if the Developer requesting payment owes the City money on outstanding invoices or is delinquent in the payment of any special taxes, until such balance is brought to zero. For the purposes of clarity, acceptance of a completed Authorized Facility is not a condition precedent to the payment of the Acquisition Price of the Authorized Facility in accordance with this subsection.
(d) Payment Limited to Available Construction Proceeds . As noted hereunder, payments to Developer shall be payable solely from the Available Construction Proceeds. The amount to be paid to Developer shall be a reimbursement for actual costs incurred as determined by the City in accordance with this Agreement and shall not exceed the Developer’s cost thereof as reasonably determined by the City to be eligible under the Act to be part of the Acquisition Price of Authorized Facilities. All portions of the A uthorized Facilities not acquired with the Available Construction Proceeds shall nonetheless be constructed by the Developer, to the extent required by the project approvals. In the event Available Construction Proceeds are insufficient to pay the eligibl e Acquisition Price, any shortfall shall be the responsibility of the Developer, however Developer may request that all or any portion of such shortfall be reimbursed from additional series of Bonds for the District if and when such additional Bonds are is sued, and in such event the deferred amount will be eligible for reimbursement from proceeds of such future Bonds, to the extent funds are available.
Developer shall not be entitled to reimbursement for costs allocable to any Authorized Facility which has previously been acquired by the City and reimbursed from other sources, if, in the opinion of the City, such reimbursement would create a double payme nt to Developer(s) for such Authorized Facility, or component thereof.
(e) Annual Accounting of Available Construction Proceeds . At the request of Developer, which shall be not more than once a year during the term of this Agreement, City shall prepare and provide to Developer an accounting (an “Annual Accounting”) of the following: (i) the total amount of Available Construction Proceeds then on deposit in the Improvement Fund hereunder and deposited thereto from the prior fiscal year; (ii) the fiscal year tax roll submitted to the County Auditor-Controller; (iii) the amount of all charges and credits to the Improvement Fund during the prior fiscal year, including interest earnings on the funds therein and charges for City ITEM 12.1.
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administration and any third party consultant or administration fees; (iv) the amount of Authorized Fees then advanced on behalf of Developer pursuant to Section 16 below; and (v) the amount, if any, of outstanding payments then approved for payment to Dev eloper pursuant to approved Requests for Payment.
Section 10. Acquisition/Ownership of Facilities.
(a) Dedication of Authorized Facilities . Upon determination by Developer that an Authorized Facility is complete and ready for acceptance by the City, Developer shall execute and submit to City or other public agency or utility that will own and operate such Authorized Facility an offer of dedication (or other such instrument acceptable to the City or applicable public entity) irrevocably offering to transfer ownership of the Authorized Facility (the “Offer of Dedication”).
(b) Review of Completed Construction. Upon delivery to City or other public agency or utility of the Offer of Dedication and upon (i) completion of the construction of an Authorized Facility, (ii) receipt of written notification from City’s Inspectors that construction thereof has been completed in accordance with the plans and specifications thereof and the City’s or other entity’s standard requirements, and (iii) receipt of satisfactory proof, based on the records of Developer and the City and such certif ications as the City may require, that the requirements of Section 6 hereof have been satisfied, the City shall notify Developer in writing that the construction of the Authorized Facility has been satisfactorily completed. Upon receiving such notificatio n of a completed Authorized Facility, Developer shall forthwith file with the County Recorder of the County of Sacramento a Notice of Completion pursuant to the provision of Section 3093 of the California Civil Code. Developer shall furnish to the City a duplicate copy of each such Notice of Completion showing thereon the date of filing with the County Recorder. The costs incurred by the City in inspecting and approving the construction of the Authorized Facilities shall be paid by Developer, subject to r eimbursement from Available Construction Proceeds. Upon recordation of a Notice of Completion, the City or other entity shall accept the Authorized Facility offered and the one-year warranty period provided in paragraph 11(c) shall commence.
(c) Ownership of Facilities . Notwithstanding the fact that some of the Authorized Facilities, or components or segments thereof, to be constructed by Developer for acquisition by the City or other public agency or utility may be constructed in dedicated street rights -of-way or on property which has been or will be dedicated or offered for dedication to the City, District or other entity, such Authorized Facilities, or components or segments, shall be and remain the property of Developer, and Developer shal l be responsible for any loss or damage thereto or liability arising therefrom, until they are acquired by the City or other entity as provided in this Agreement. Such ownership by Developer shall likewise not be affected by any agreement which Developer may enter into with the City pursuant to the provisions of the Subdivision Map Act (Section 66410 et seq. of the California Government Code) which agreement may contain or include provisions with respect to the construction and ownership of Authorized Faci lities which provisions may seem to be contradictory to the provision of this Agreement. The provisions of this Section shall control.
(d) Maintenance of Authorized Facilities . Until an Authorized Facility is acquired by the City or other public agency or utility, Developer shall maintain it, and shall keep the same free of any liens and in good operating condition. Upon the acceptance of an Offer of Dedication of an Authorized Facility by the City or other entity, the City or other entity shall, except as otherwise provided in the Project Approvals, become responsible for its maintenance, subject to the warranty period in section 11(c).
ITEM 12.1.
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(e) Dedication of Rights -of-Way. Notwithstanding the preceding provisions of this Section, the City will not acquire any Authorized Facilities, unless and until the street, drainage or other utility rights of way where they are located have been irrevocably offered to the City for dedication.
(f) Expectations of the Parties. The City understands and agrees that (i ) Developer may be constructing Authorized Facilities prior to the availability of Available Construction Proceeds that will be used to pay for such Authorized Facilities, (ii) the City or the other public agencies that will own and operate such Authorized Facilities may be inspecting such Authorized Facilities and processing and completing payment requests for the payment on such Authorized Facilities with knowledge that there may be insufficient Available Construction Proceeds available at such time, (iii) the Authorized Facilities may be conveyed to and accepted by the City or other local agency that will own and operate such Authorized Facilities when there are insufficient Available Construction Proceeds to pay the Acquisition Prices of such Authorized Facilities, and (iv) in any such case, the payment of any approved payment requests for the Acquisition Prices of such Authorized Facilities will be deferred until there are sufficient Available Construction Proceeds available to pay the Acquisition Prices of such Authorized Facilities, at which time the City will, from time to time and in as many installments as necessary, promptly make such payments in accordance with this Agreement. At all times, Developer will be constructing such Authorized Facilities with the expectation that the Acquisition Prices for such Authorized Facilities will be paid solely from the Available Construction Proceeds. The conveyance of Authorized Facilities to the City or a local agency that will own and operate such Authorized Facilities prior to receipt of the Acquisition Prices for such Authorized Facilities shall not be construed as a dedication or gift, or a waiver of the payment of the Acquisition Prices, or any part thereof, for such Authorized Facilities.
Section 11. Improvement Security.
(a) Security Prior to Final Maps . Notwithstanding the provisions of this Agreement, Developer shall be required to agree to construct and to secure the construction and completion of construction of the Authorized Facilities, or portions thereof, as a condition precedent to the approval of final subdivision or parcel maps for portions of Developer’s Property as required by the City pursuant to Section 66462 and Sections 66499 through 66499.10 of the Government Code.
(b) Reduction in Amount of Improvement Bonds. The aggregate principal amount of the improvement bonds or other security provided by Developer pursuant to this Section shall be reduced by such amount as the City shall reasonably determine is appropriate upon receipt of the proceeds from the sale of the Bonds. The amount of the reduction of such aggregate principal amount shall be determined by the City based on the amount of each such improvement bond or other security which relates to the Authorized Facil ities to be constructed or acquired with the Available Construction Proceeds provided by the sale of the Bonds and Special Tax Revenues.
(c) Performance Bonds-One Year Warranty. Developer warrants to the City or other public agency or utility having jurisdiction that the Authorized Facilities constructed by Developer and acquired by the City shall be free from defects in workmanship or materials for a period of one year from the date of acceptance by the City. All subdivision and performance bonds shall provide, among other things, that the principal thereof, whether that be Developer or its contractor(s), guarantees that the completed Aut horized Facilities shall be free from defects resulting from faulty workmanship and materials for a period of one (1) year from the date of ITEM 12.1.
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acceptance by the City or other public entity, and the obligation of the surety shall extend to the fulfilling of that guarantee. At the end of said one -year period, and subject to certification from the City Engineer that any defects have been corrected, the obligation of the principal and surety named therein shall cease. For purposes of this Section 11, the correction of any defects in the Authorized Facility shall not mean the day -to-day upkeep or correction of normal wear and tear of the Authorized Fa cility (such as watering or weeding for landscape improvements, painting, graffiti removal, etc.).
Section 12. Gap Shortfall.
(a) “Gap Shortfall” Defined. The parties anticipate that a shortfall will occur between:
(i) the anticipated cost of the Authorized Facilities as determined from the actual construction and design contracts and related invoices therefor and the actual costs of all other Authorized Facilities, and (ii) the Net Bond Proceeds (hereafter referred to as the “Gap Shortfall.”)
(b) Reimbursement of Gap Shortfall to Developer . To cov er the Gap Shortfall, Developer agrees with the City to defer payment of the Gap Shortfall until and to the extent the District can impose and collect annual special taxes in excess of the amounts required annually to pay required debt service, replenish the debt service reserve fund, cure bond delinquencies and pay City administration costs associated therewith (“Available Special Tax Revenues”). In consideration of such deferral of payment of the Gap Shortfall, City covenants and agrees that the City shall levy and collect the special taxes against all properties within the District at the maximum rate permitted under the District and annually pay, after September 1st of each year, to Developer from Available Special Tax Revenues payments towards such deferred Gap Shortfall, for a period of ten (10) years (unless the Gap Shortfall is sooner paid in full) beginning with Available Special Tax Revenues in the first year the special tax is levied in the District (the “Gap Shortfall Period”); provided however, the Developer may elect to begin the 10 year period prior to the issuance of Bonds by giving a written request to the City; the levy shall thereafter be as defined in, permitted by and in accordance with Section E(1) of the R MA. After the expiration of the Gap Shortfall Period, City may use Available Special Tax Revenues for any other purpose authorized for the District, as determined by the Ci ty in its sole discretion. The method described herein of funding Authorized Facilities from accumulated Available Special Tax Revenues is known as the “Pay-As-You-Go” method of funding.
(c) Personal to Developer . Regardless of who pays the cost for any Authorized Facilities, the reimbursement of the Gap Shortfall hereunder shall be personal to Developer, shall not run with the land, and shall not be assigned by Developer without the written consent of the City, which shall not be unreasonably withheld.
(d) Payment of Authorized Fees in Advance of Available Construction Proceeds. The Developer may be required pursuant to the conditions of approval or the fee ordinance to pay the Authorized Fees for an Improvement Area prior to the availability of the Available Construction Proceeds to pay such Authorized Fees. In the event such Authorized Fees are paid prior to the availability of such Available Construction Proceeds, the amounts paid to the City shall be deemed to be deposits (each a “Deposit”) that are subject to refund by the City to Developer in the manner set forth in this Section 12. Any Deposits made to the City shall be deposited in a separate capital facilities account(s) and may be expended by the City in the ordinary course of business. The Developer acknowledges that the City may finance Authorized Fees with proceeds of tax-exempt bonds only if the City can meet certain requirements of federal tax law.
(e) Return of Deposits . If the Developer has made any Deposits, then following ITEM 12.1.
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deposit of Available Construction Proceeds with the City for the corresponding Authorized Fees, the City shall return to the Developer from the capital account in which the Deposits were deposited an amount equal to the Deposits paid by the Developer, with out interest or other earnings thereon. The City shall be so obligated to return an amount equal to such Deposits to the Developer only to the extent that an amount equivalent to the amount of the Deposits made by the Developer or merchant builder is depos ited with the City from the Available Construction Proceeds. An amount equal to such Deposits may be returned to the Developer from time to time as additional Available Construction Proceeds become available.
(f) Deposits Allocated First. Available Construction Proceeds used to pay Authorized Fees shall be allocated first for return of all Deposits prior to being allocated to the payment of Authorized Fees not previously deposited by the Developer. For example, if the Developer has paid $10,000 in Deposits, and Available Construction Proceeds become available in the amount of $15,000, the City shall apply the first $10,000 of the Available Construction Proceeds to the payment of the Authorized Fees that were paid by the Deposits (and, thereafter, ret urn the Deposits to the Developer) and use the remaining $5,000 of the Available Construction Proceeds to the payment of Authorized Fees not previously paid by the Deposits and identified in the payment request.
(g) Application of Deposits . Any Deposits that have not been returned to the Developer at the time it is determined that there will be no further Available Construction Proceeds available (now or in the future) shall be retained by the City and may be used (to the extent it has not already been so used) for the purposes for which the Authorized Fee was required, and the unrefunded Deposits shall constitute full and final payment for such Authorized Fees, without any increase of any kind.
(h) Expectations. The Developer may pay Authorized Fees (as Deposits) prior to the availability of Available Construction Proceeds to pay such Authorized Fees. Any Authorized Fees paid (as Deposits) by the Developer for an Improvement Area shall be made with the understanding that such Deposits will be returned from the Available Construction Proceeds if, and when, such Available Construction Proceeds become available. The payment of Deposits prior to the availability of the Available Construction Procee ds shall not be construed as a dedication or gift of the Authorized Fees, or a waiver of the return of the Deposits, it being the intention that the Authorized Fees be paid by the Available Construction Proceeds to the extent of the Available Construction Proceeds.
Section 13. Construction of Joint Community Facilities. The parties acknowledge that the Developer requested the City to into a “JCFA” with the Cordova Recreation and Park District (“CRPD”) and Sacramento County Water Agency (“SCWA”) pursuant to Section 53316.2 of the Act, with respect to the payment of impact fees or improvements benefitting CRPD and SCWA respectively, authorized to be paid in whole or in part from the Special Taxes or proceeds of Bonds of the District. The City and Developer agree to comply with the JCFA requirements and to perform any and all covenants and agreements applicable to them under the JCFA.
Section 14. Construction of Other Facilities. Developer shall also proceed expeditiously with the design and construction of the other improvements and facilities, other than the Authorized Facilities, which are necessary to the development of the Specific Plan and the provision of municipal services within the District and to the residents therein. Such other public improvements and facilities shall be designed and constructed on a schedule which will not delay or interfere in any way with the design and construction of the Authorized Facilities. The provisions of this Section shall not supersede those of any other agreement between Developer ITEM 12.1.
ATTACHMENT 3
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and the City.
Section 15. Indemnification; Insurance.
(a) Indemnity. Developer shall defend, indemnify and hold harmless the City, the District, and their officers, agents and employees from any and all liability, cost and expense in connection with the construction of the Authorized Facilities to be constructed by Devel oper for acquisition by the City, including, but not limited to, liability, costs, expense and claims arising under the procedures set forth in Section 6 of this Agreement. Developer shall also defend, indemnify and hold harmless the City, the District, and their officers, agents and employees from any and all liability, cost and expense in connection with the ownership of the Authorized Facilities to be constructed by Developer for acquisition by the City prior to the time the City accepts th e Authorized Facilities, whether or not such Authorized Facilities are to be acquired with Bond proceeds. The indemnity obligations of Developer as set forth herein shall terminate upon the end of the warranty period provided for in section 11(c).
(b) General Liability Insurance . Developer shall procure and provide, until construction of all of the Authorized Facilities to be constructed by Developer is completed and acceptance thereof by the City has occurred, a broad form comprehensive general liability policy of insurance, in a form acceptable to the City, naming the City, the District and their officers, agents and employees as additional insureds, having a single aggregate liability limit as to all coverages provided thereby in the amount of $2 ,000,000. Before commencing the construction of any Authorized Facility, Developer shall provide the City with a certification of insurance and endorsement as to such insurance, in a form acceptable to the City, and Developer shall upon each renewal of su ch insurance policy provide the City with a new certificate of insurance with respect thereto.
(c) Workers’ Compensation Insurance. Developer shall also furnish to the City, prior to commencing the construction of any Authorized Facility to be constructed by Developer for acquisition by the City, a certificate of insurance evidencing that Developer has procured and have in force a c urrent policy of workers’ compensation insurance in compliance with California law as to all workers to be employed by Developer in connection with the design and construction of the Authorized Facilities. Developer shall require each person, firm or corporation with whom it contracts in connection with the design and construction of the Authorized Facilities to provide and maintain such workers’ compensation insurance and a broad form comprehensive general liability insurance policy in the amount hereinabove specified and in a form acceptable to the City.
Developer shall provide to the City proof, in such form and at such intervals as set forth below, that each contractor with whom it contracts has procured and is maintaining such insurance.
(d) Reimbursement for Insurance Premiums . The premiums paid by Developer for the insurance required by this Section may be included in the Acquisition Price to be paid by the City for the Authorized Facilities to be constructed by Developer as an incidental cost.
Section 16. Advances of Authorized Fees. At any time Developer may request that City pay or prepay any Authorized Fees from Available Construction Proceeds, however acceptance of any Developer request to pay or prepay Authorized Fees shall be subject to the sole discretion of the City. To facilitate the tracking and administration of such fee advances, the City may require that such request be submitted in a specific format. The City does not expect to allow the use of Bond proceeds to prepay any other fees (other than Authorized Fees) unless such advance payment of fees serves a need of the City, as determined at the City’s sole discretion.
ITEM 12.1.
ATTACHMENT 3
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In the event Authorized Fees are paid or Authorized Facilities are funded from Available Construction Proceeds, Developer shall be entitled to fee credits, pursuant to City policies on fee credits, for Authorized Facilities that are acquired or constructed by the City and that are also included in the City’s fee programs.
If an Authorized Facility or component thereof has been acquired from the Developer using Available Construction Proceeds, any reimbursement to the City for such item which comes from other revenue sources and which is otherwise payable to the Developer will be paid to the District and will be used first to pay for other Authorized Facilities and, thereafter, to reduce outstanding Bonds. Other revenue sources include fee revenues paid by other development projects not owned by the Developer or direct reimb ursements from other development projects. If only a portion of the Acquisition Price for an Authorized Facility is paid to Developer using Available Construction Proceeds, then any reimbursement for such Authorized Facility which comes from other revenue sources shall be paid first to Developer until the balance of the Acquisition Price is paid to Developer, and thereafter any additional reimbursement from other revenue sources shall be paid to the City as provided above.
City acquisition or construction of an Authorized Facility shall not prevent Developer from receiving refunds of fees paid by development within the District that would have been off-set by fee credits, but for the timing of completion of the Authorized Facility. In particular, the City’s fee credits policy requires 20% of the anticipated fee credits to be reserved until the improvement generating such fee credits is accepted and a final accounting is completed. If the 80% amount allowed to be taken as fee credits is exhausted prior to completion of an Authorized Facility, City policy provides that some or all of the 20% amount reserved for fee credits will be paid by the City as a fee reimbursement, instead of being taken as fee credits, to the extent dev elopment within the District continues and fees for such improvement are paid prior to such completion. Payment of the Acquisition Price for such Authorized Facility shall not prevent City from providing any such fee refunds pursuant to City policy.
Section 17. Binding on Community Facilities District. The District is deemed to be a party to this Agreement to the extent permitted by California law, and all provisions hereof which apply to the City shall so apply to the District. The City Council of the City, acting for the District, shall perform all parts of this Agreement which require performance on the part of the District.
Section 18. Assignment. Developer may not assign this Agreement or any right or duty hereunder without the express written approval of the City. The City may condition any such approval on proof of the financial responsibility and experience of a proposed assignee to undertake and perform the duties and responsibilities of Developer under this Agreement. The City’s approval of an assignment of this Agreement and the rights and duties of Developer hereunder shall not be unreasonably withheld or delayed.
Section 19. Prompt Action. All consents, approvals and determinations required of either the City or Developer pursuant to this Agreement shall be promptly given or made, and shall not be unreasonably withheld.
Section 20. General. This Agreement contains the entire agreement between the parties with respect to the matters herein provided for, and may be amended by a subsequent written agreement signed on behalf of both parties. This Agreement is for the exclusive benefit of the parties and shall not be construed to confer any rights or benefits upon any persons other than the City and Developer. This Agreement shall, however, inure to the benefit of and be ITEM 12.1.
ATTACHMENT 3
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binding upon the successors and assigns of the parties. This Agreement shall be construed and governed by the Constitution and laws of the State of California. Should either party to this Agreement commence a court action or proceeding against the other party with respect to this Agreement or the design and acquisition or construction of the Authorized Facilities, the party prevailing in such action or proceeding shall be entitled to receive from the losing party its attorney’s fees, expert witness’ fees, court costs, and other costs incurred by it in prosecuting or defending such action or proceeding. The captions of the sections of this Agreement are provided for convenience only, and shall not have any bearing on the interpretation of any section hereof.
This Agreement may be executed in several counterparts, each of which shall be an original of the same Agreement.
[Signatures on following page.]
ITEM 12.1.
ATTACHMENT 3
[Signature page to Funding, Construction and Acquisition Agreement dated as of ______ 1, 2023]
IN WITNESS WHEREOF, the parties have caused this Agreement to be signed as of the date first above written.
CITY OF RANCHO CORDOVA,
a municipal corporation
By: _______________________________
Kim Juran
Administrative Services Director
LENNAR HOMES OF CALIFORNIA, LLC
a California limited liability company
By: _______________________________
Name: ____________________________
Title: _____________________________
ITEM 12.1.
ATTACHMENT 3
A-1
EXHIBIT A
List of Authorized Facilities and Authorized Fees
The City of Rancho Cordova Grantline 220 Community Facilities District No. 2023-1 (the “CFD”), Improvement Area No. 1 of the CFD, and each Improvement Area designated in the future in conjunction with subsequent annexations of all or any part of the Future Annexation Area or any other property is authorized to finance all or a portion of the costs of acquisition, construction, and improvement of facilities generally described as follows:
Facilities
The Facilities which are proposed to be financed with the proceeds of the sales of bonds of the proposed CFD, or the payment of the fees to the appropriate jurisdiction with respect to such facilities proposed to be financed with the proceeds of the sale of bonds of the proposed CFD, are generally described as follows:
- Park Improvements
- Chrysanthy Blvd Improvements
- Americanos Blvd Improvements
- In-tract Improvements for development within the CFD
Impact, Development Agreement and Specific Plan Fees for Facilities
- Transportation Impact Fee
- Sunrise Douglas Community Plan Roadway Impact Fee
- City Supplemental Transportation Fee
- Park Renovation Fee
- Sunrise Douglas Park Fee
- Sacramento County Water Agency Zone 40 Water Fee
Other
- Any other facilities serving substantially the same purpose as the above described facilities.
- Any other facilities permitted under the Mello -Roos Community Facilities Act of 1982, including the facilities described in Section 53313.5 of the California Government Code, as amended from time to time, provided that such facilities satisfy at least one of the following criteria: 1) augment, improve or expand existing District facilities that are primarily for the benefit of the District, or 2) repair or rehabilitate existing District facilities.
The foregoing description of the type of Facilities eligible to be financed is general in nature and includes any appurtenant work and incidental expenses related to the Facilities. The final nature and location of the facilities will be determined upon t he preparation of final plans and specifications for such facilities.
ITEM 12.1.
ATTACHMENT 3
B-1
EXHIBIT B
Payment Request Form
City of Rancho Cordova
Grantline 220 Community Facilities District No. 2023-1
Request for Payment
The undersigned (the “ Developer”) hereby requests payment pursuant to the Funding, Construction and Acquisition Agreement dated _________, 2024 (the “Agreement”), between the City of Rancho Cordova and LENNAR HOMES OF CALIFORNIA (“Developer”), in the total amount of $____________. (Capitalized terms used herein unless otherwise defined herein shall have the meanings ascribed thereto in the Agreement.) The payment requested is for the portion of the Authorized Facility that has been completed by Developer (the “Completed Work”) and is the subject of this request for payment, as more fully described in Schedule 1 attached hereto.
In connection with this request for payment, the undersigned hereby represents and warrants to City as follows:
1. The person executing this request on behalf of the Developer is duly authorized to do so and is knowledgeable as to the matters set forth herein.
2. The Completed Work described in Schedule 1 hereto has been constructed in accordance with the approved plans therefor.
3. The true and correct actual cost of the Completed Work for which payment is requested is set forth in Schedule 1.
4. Attached hereto are invoices, receipts, worksheets and other evidence of actual cost that are in sufficient detail to allow City Inspectors and City consultants to verify the actual cost of the Completed Work for which payment is requested. The amount requested hereby [excludes a retention of 5% of the amounts invoiced] [includes an amount previously retained from payment] pursuant to the terms of a construction contract.
5. There has not been filed with or served upon the Developer notice of any lien, right to lien or attachment upon, or claim affecting the right to receive the payment requested herein that has not been released or will not be released simultaneously with the payment of such obligation, other than materialman’s or mechanics’ liens accruing by operation of law. Copies of lien releases for all Completed Work for which payment is requested hereunder are attached hereto.
6. The Developer is in compliance with the terms and provisions of the Agreement.
Payment of the amount requested hereby should be made payable to:
and sent to:
at the following address:
ITEM 12.1.
ATTACHMENT 3
B-2
I(we) hereby declare under penalty of perjury that the above representations and warranties are true and correct.
Developer:
LENNAR HOMES OF CALIFORNIA,
a California corporation
By: _______________________________
Name: ____________________________
Title: ______________________________
_________________________________________________________________________
(ATTACHMENT)
SCHEDULE 1
Description of Completed Work and Cost
ITEM 12.1.
ATTACHMENT 3
Jo
nes Hall Draft of Dec. 5, 2023
PRELI
MINARY OFFICIAL STATEMENT DATED DECEMBER [20], 2023
NEW ISSUE-FULL – BOOK ENTRY NOT RATED
In the opinion of Jones Hall, A Professional Law Corporation, San Francisco, California, Bond Counsel, subject, however to ce rtain qualifications described herein, under existing law, the interest on the Bonds is excluded from gross income for federal income tax purposes and such interest is not an item of tax preference for purposes of the federal alternative minimum tax. Interest on the Bonds may be subject to the corporate alternative minimum tax. In the further opinion of Bond Counsel, such interest is exempt from California personal income taxes. See “TAX MATTERS” herein.
$_____________*
CITY OF RANCHO CORDOVA
GRANTLINE 220 COMMUNITY FACILITIES DISTRICT NO. 2023-1
IMPROVEMENT AREA NO. 1
SPECIAL TAX BONDS
SERIES 2024
Dated: Date of Delivery Due: September 1, as shown on inside cover Authority for Issuance. The above-captioned bonds (the “Bonds”) are being issued by the City of Rancho Cordova (the “City”) by and through Improvement Area No. 1 (the “Improvement Area No. 1”) of the City of Rancho Cordova Grantline 220 Community Facilities District No. 2023-1 (the “District”). The Bonds are special tax obligations of the City, authorized pursuant to the Mello -Roos Community Facilities Act of 1982, as amended, being California Government Code Section 53311, et seq. (the “Mello-Roos Act”), and are issued pursuant to a Fiscal Agent Agreement, dated as of January 1, 2024 (the “Fiscal Agent Agreement ”) by and between the City and U.S. Bank Trust Company, National Association , as fiscal agent (the “Fiscal Agent”). See “THE 2024 BONDS – Authority for Issuance.” Security and Sources of Payment. The Bonds are secured by and payable from a pledge of Special Tax Revenues (as defined herein) levied on property within Improvement Area No. 1 according to a rate and method of apportionment of special tax, including from the proceeds of any foreclosure actions brought following a delinquency in the payment of the Special Taxes (as defined herein), and from amounts held in certain funds under the Fiscal Agent Agreement, all as more fully described herein. The taxable real property within Improvement Area No. 1 consists of mostly undeveloped land planned primarily for single family residential development. Unpaid Special Taxes do not constitute a personal indebtedness of the owners of the parcels within Improvement Area No. 1. In the event of delinquency, proceedings may be conducted only against the parcel of real property securing the delinquent Special Tax. There is no assurance the owners will be able to pay the Specia l Tax or that they will pay such Special Tax even though financially able to do so. To provide funds for payment of the Bonds and the interest thereon as a result of any delinquent installments, the City will establish a Reserve Fund from Bond proceeds, as described herein. See “SECURITY FOR THE 2024 BONDS.”
Property in Improvement Area No. 1 subject to the Special Tax is comprised of land in the City of Rancho Cordova, Sacramento County, California, entitled for development of 209 single-family homes in six villages, as well as public and quasi -public uses, parks and open space not subject to the Special Tax. It is part of a larger development being undertaken by Lennar Homes of California , LLC, a California limited liability company (“Lennar Homes ”), that is anticipated to consist of a total of 573 single-family homes at build-out. Only the 209 single -family homes are currently in Improvement Area No. 1 and constitute security for the Bonds. See “IMPROVEMENT AREA NO. 1 ” and “OWNERSHIP OF PROPERTY WITHIN IMPROVEMENT AREA NO. 1.”
Use of Proceeds. The Bonds are being issued to (i) construct and acquire certain public facilities, including payment of fees related to public facilities, authorized for the District and Improvement Area No. 1 ; (ii) make a deposit into the debt service reserve fund for the Bonds; (iii) pay capitalized interest on a portion of the Bonds through and including September 1, 2024; and (iv) pay the costs of issuance of the Bonds. See “FINANCING PLAN.”
Bond Terms. Interest on the Bonds is payable semiannually on March 1 and September 1 of each year , commencing March 1, 2024. The Bonds will be issued in the denomination of $5,000 or integral multiples of $5,000 in excess thereof. The Bonds, when delivered, will be initially registered in the name of Cede & Co., as nominee of The Depository Trust Company ( “DTC”). DTC will act as securities depository for the Bonds.
See “THE 2024 BONDS – Description of the Bonds” and “APPENDIX G – DTC and the Book-Entry Only System.” Redemption. The Bonds are subject to optional redemption, mandatory sinking fund redemption, and special mandatory redemption from prepaid Special Taxes. See “THE 2024 BONDS – Redemption.” THE 2024 BONDS ARE SPECIAL LIMITED OBLIGATIONS OF THE CITY, PAYABLE SOLELY FROM THE SPECIAL TAX REVENUES AND CERTAIN OTHER FUNDS AND AMOUNTS HELD BY THE FISCAL AGENT UNDER THE FISCAL AGENT AGREEMENT. THE INFORMATION SET FORTH IN THIS OFFICIAL STATEMENT, INCLUDING INFORMATION UNDER THE HEADING “BOND OWNERS ’ RISKS,” SHOULD BE READ IN ITS ENTIRETY.
MATURITY SCHEDULE
(see inside cover)
This cover page contains certain information for quick reference only. It is not a summary of essential information about th e Bonds. Potential investors should read this entire Official Statement to obtain information essential for making an informed investment decisi on. Investment in the Bonds involves risks that may not be appropriate for some investors. See “BOND OWNERS ’ RISKS” for a discussion of special risk factors that should be considered in evaluating the investment quality of the Bonds.
The Bonds are offered when, as and if issued by the City and accepted by the Underwriter, subject to approval as to their legality by Jones Hall, A Professional Law Corporation, San Francisco, California, Bond Counsel, and subject to certain other conditions. Jones Hall , A Professional Law Corporation, also serves as disclosure counsel to the City. Certain matters will be passed upon for the City by Meyers Nave, A Professional Law Corporation, Sacramento, California, as City Attorney. Certain legal matters will be passed upon for the Underwriter by its counsel, Kutak Rock LLP, Irvine, California. It is anticipated that the Bonds, in book -entry form, will be available for delivery through the facilities of DTC on or about January 25, 2024*.
[PIPER LOGO]
The date of this Official Statement is: _________, 2024. ___________________________
* Preliminary; subject to change.
This Preliminary Official Statement and the information contained herein are subject to completion or amendment. These securities may not be sold nor may offers to buy be accepted prior to the time the Official Statement is delivered in final form. Under no circumstances shall this Preliminary Official Statement constitu te an offer to sell or a solicitation of an offer to buy nor shall there be any sale of these securities in any jurisdiction in which such offer solicitation or sale would be unlawful prior to registration or q ualification under the securities laws of such jurisdiction.
ITEM 12.1.
ATTACHMENT 4
MATURITY SCHEDULE
$__________ Serial Bonds
(Base CUSIP†: _______)
Maturity Principal Interest CUSIP†
(September 1) Amount Rate Yield Price ( )
$________ _____% Term Bond due September 1, ____, Yield: _____%, Price: _____%; CUSIP† _____
† Copyright 2023, American Bankers Association. CUSIP data herein are provided by CUSIP Global Services, managed by FactSet Research Systems Inc ., and are provided for convenience of reference only. Neither the City nor the Underwriter assumes any responsibility for the accuracy of these CUSIP data.
ITEM 12.1.
ATTACHMENT 4
CITY OF RANCHO CORDOVA
City Council
Linda Budge, Mayor
David M. Sander, Ph.D., Vice Mayor
Garrett Gatewood, Councilmember
Siri Pulipati, Councilmember
Donald Terry, Councilmember
Staff
Micah Runner, City Manager
Kim Juran-Karageorgiou, Administrative Services Director Stacy Leitner, City Clerk
Adam Lindgren of Meyers Nave, A Professional Law Corporation, City Attorney
SPECIAL SERVICES
Bond Counsel and Disclosure Counsel
Jones Hall, A Professional Law Corporation
San Francisco, California
Municipal Advisor
NHA Advisors, LLC
San Rafael, California
Special Tax Consultant
Goodwin Consulting Group, Inc.
Sacramento, California
Appraiser
Integra Realty Resources
Sacramento, California
Fiscal Agent
U.S. Bank Trust Company, National Association
Seattle, Washington
ITEM 12.1.
ATTACHMENT 4
TABLE OF CONTENTS
Page Page
INTRODUCTION ............................................ 1 FINANCING PLAN ......................................... 6 THE 2024 BONDS ......................................... 7 Authority for Issuance ................................. 7 Description of the Bonds ............................ 7 Redemption ................................................ 8 Transfer or Exchange of Bonds ................ 11
SECURITY FOR THE 2024 BONDS ............ 12
Special Taxes ........................................... 12 Special Tax Formula ................................. 13 Special Tax Fund ...................................... 17 Deposit and Use of Proceeds of Bonds .... 17
Delinquent Payments of Special Tax;
Covenant for Foreclosure ..................... 17
Reserve Fund ........................................... 19 Improvement Fund ................................... 21 No Additional Bonds, Except for Refunding21
DEBT SERVICE SCHEDULES .................... 22
IMPROVEMENT AREA NO. 1 ..................... 24
Formation and Background ...................... 24
Description and Location .......................... 24
Development in Improvement Area No. 1 27
THE FACILITIES .......................................... 33 Eligible Facilities ....................................... 33 Acquisition by the City and other Local
Agencies ............................................... 33
OWNERSHIP OF PROPERTY WITHIN
IMPROVEMENT AREA NO. 1 .................. 34
VALUE OF PROPERTY WITHIN
IMPROVEMENT AREA NO. 1 .................. 36
Appraised Values and Building Permits ... 36
Appraised Values ..................................... 36 Value to Special Tax Burden Ratios ......... 38
Priority of Lien ........................................... 41 Estimated Tax Burden on Single -Family
Home .................................................... 44 Special Tax Collections and Delinquencies45
BOND OWNERS’ RISKS ............................. 45
Limited Obligation of the City to Pay Debt
Service .................................................. 45 Concentration of Ownership ..................... 45
Levy and Collection of the Special Tax ..... 46
Property Tax Delinquencies ...................... 47
Property Values and Risks Related to
Development ........................................ 48 Future Property Development ................... 50
Other Possible Claims Upon the Value of
Taxable Property .................................. 51
Exempt Properties .................................... 51 FDIC/Federal Government Interests in
Properties ............................................. 52 Depletion of 2024 Reserve Account of the
Reserve Fund ....................................... 53 Bankruptcy Delays .................................... 54 Disclosure to Future Purchasers .............. 56
No Acceleration Provisions ....................... 56
Loss of Tax Exemption ............................. 56
IRS Audit of Tax-Exempt Bond Issues ..... 56
Voter Initiatives ......................................... 57 Case Law Related to the Mello -Roos Act
Voting .................................................... 57 Secondary Market for Bonds .................... 59
Pandemic Diseases .................................. 59 Cyber Security .......................................... 59 Potential Early Redemption of Bonds from
Prepayments ......................................... 60 LEGAL MATTERS ........................................ 60 Legal Opinion ............................................ 60 No Litigation .............................................. 60 TAX MATTERS ............................................. 61 CONTINUING DISCLOSURE ....................... 62
The City .................................................... 62 K. Hovnanian ............................................ 63 NO RATING .................................................. 63 UNDERWRITING ......................................... 63 PROFESSIONAL FEES ............................... 64
EXECUTION ................................................. 64
APPENDIX A Rate and Method of Apportionment of Special Tax APPENDIX B The Appraisal
APPENDIX C Summary of Certain Provisions of the Fiscal Agent Agreement APPENDIX D Sacramento County and City of Rancho Cordova Demographic Information APPENDIX E Form of Opinion of Bond Counsel
APPENDIX F Form of Continuing Disclosure Undertakings
APPENDIX G DTC and the Book-Entry Only System
ITEM 12.1.
ATTACHMENT 4
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__________________________________
OFFICIAL STATEMENT
__________________________________
$_________*
CITY OF RANCHO CORDOVA
GRANTLINE 220 COMMUNITY FACILITIES DISTRICT NO. 2023-1
IMPROVEMENT AREA NO. 1
SPECIAL TAX BONDS
SERIES 2024
This Official Statement, including the cover page and all appendices hereto, is provided to furnish certain information in connection with the issuance by the City of Rancho Cordova (the “City”) of the above-captioned bonds (the “Bonds”), for and on behalf of its Improvement Area No. 1 (“ Improvement Area No. 1 ”) of the City of Rancho Cordova Grantline 220 Community Facilities District No. 2023-1 (the “District”).
Any statements made in this Official Statement involving matters of opinion or of estimates, whether or not so expressly stated, are set forth as such and not as representations of fact, and no representation is made that any of the estimates will be realized. Definitions of certain terms used herein and not defined herein shall have the meaning set forth in the Fiscal Agent Agreement. See APPENDIX C.
INTRODUCTION
This introduction is not a summary of this Official Statement. It is only a brief description of and guide to, and is qualified by, more complete and detailed information contained in the entire Official Statement, including the cover page and attached appendices, and the documents summarized or described in this Official Statement. A full review should be made of the entire Official Statement. The offering of the Bonds to potential investors is made only by means of the entire Official Statement.
The District, Improvement Area No. 1 and Future Annexation Area. The District was established, Improvement Area No. 1 was designated as an improvement area within the District, and a future annexation area was created for the District (the “Future Annexation Area”), pursuant to proceedings conducted by the City under the Mello- Roos Community Facilities Act of 1982, as amended (Sections 53311, et seq., of the Government Code of the State of California) (the “Mello-Roos Act”).
The Bonds. The Bonds are issued pursuant to the p rovisions of the Mello-Roos Act, a Fiscal Agent Agreement, dated as of January 1, 2024 (the “Fiscal Agent Agreement”) between the City and U.S. Bank Trust Company, National Association , as fiscal agent (the “Fiscal Agent”), and a resolution adopted on December [18], 2023 by the City Council of the City , which authorized the issuance of the Bonds (the “Resolution”).
* Preliminary; subject to change.
ITEM 12.1.
ATTACHMENT 4
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Registration of Ownership of the Bonds. The Bonds are issued only as fully registered bonds in book-entry form, registered in the name of Cede & Co., as nominee of The Depository Trust Company ( “DTC”), without coupons, in the denomination of $5,000 or any integral multiple thereof and shall be dated as of and bear interest from the date of delivery thereof at the rate or rates set forth on the cover page hereof. Interest on the Bonds is payable on March 1 and September 1 of each year (each an “Interest Payment Date ”), commencing March 1, 2024. Ultimate purchasers of Bonds will not receive physical certificates representing their interest in the Bonds. So long as the Bonds are registered in the name of Cede & Co., as nominee of DTC, references herein to the Owners shall mean Cede & Co., and shall not mean the ultimate purchasers of the Bonds. Payments of the principal, premium, if any, and interest on the Bonds will be made directly to DTC, or its nominee, Cede & Co. so long as DTC or Cede & Co. is the registered owner of the Bonds. Disbursements of such payments to DTC ’s Participants is the responsibility of DTC and disbursements of such payments to the Beneficial Owners is the responsibility of DTC ’s Participants and Indirect Participants, as more fully described herein. See “APPENDIX G – DTC and the Book-Entry Only System.”
Use of Proceeds. Proceeds of the Bonds will primarily be used to finance a portion of the costs of acquiring and constructing certain public infrastructure improvements necessary for development in the District , including payment of fees related thereto (the “Facilities,” as described herein). The Facilities are anticipated to consist of public capital facilities, such as roadway, storm drain, water, sewer, and park improvements funded with development impact fees payable to the City and other local agencies in connection with the project . Proceeds of the Bonds will also be used t o make a deposit in the Reserve Fund (defined herein) , pay capitalized interest on a portion of the Bonds through and including September 1, 2024, and pay the cost of issuance of the Bonds.
Security and S ources of Payment of the Bonds. The Bonds are secured by, and payable from , “Special Tax Revenues ,” which are defined as the proceeds of the Special Taxes annually received by the City , excluding any interest and penalties thereon collected in connection with delinquent Special Taxes, less an amount equal to the Administrative Expense Priority, including all scheduled payments and delinquent payments thereof, and proceeds of the redemption or sale of property sold as a result of foreclosure of the lien of the Special Taxes. “Special Taxes ” means the special tax levied on taxable real property within the boundaries of Improvement Area No. 1 under the Rate and Method of Apportionment of Special Tax for Improvement Area No. 1 (the “Special Tax Formula” ), and “Administrative Expense Priority” means (i) for Fiscal Year 2023-24, $30,000, and (ii) for each subsequent year, an amount equal to the preceding fiscal year ’s Administrative Expense Priority plus an additional 2% of such amount.
The Bonds are also payable from amounts held in certain funds and accounts pursuant to the Fiscal Agent Agreement, including the 2024 Reserve Account of the Reserve Fund, all as more fully described herein. The Special Tax applicable to each taxable parcel in Improvement Area No. 1 will be levied and collected according to the tax liability determined by the application of the Special Tax Formula, which is set forth in APPENDIX A hereto. The Special Taxes represent fixed liens on the parcels of land subject to a Special Tax in Improvement Area No. 1 and failure to pay the Special Taxes could result in proceedings to foreclose tit le to the delinquent property. The Special Taxes do not constitute the personal indebtedness of the owners of taxed parcels and no proceedings to collect directly from an owner is permitted. See “SECURITY FOR THE 2024 BONDS – Special Tax Formula” and “APPENDIX A – Rate and Method of Apportionment of Special Tax.”
ITEM 12.1.
ATTACHMENT 4
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Pursuant to the Mello-Roos Act, the Resolution of Formation (as defined herein), and the Fiscal Agent Agreement, so long as any Bonds are outstanding, the City will annually levy the Special Tax against all taxable land within Improvement Area No. 1 in accordance with the proceedings for the authorization and issuance of the Bonds and to make provision for the collection of the Special Tax in amounts which will be sufficient to pay interest on, principal of and redemption premium (if any) on the Bonds as such becomes due and payable and to replenish the Reserve Fund (as defined herein) as necessary. See “SECURITY FOR THE 2024 BONDS – Special Taxes” herein.
On August 7, 2023 , the City Council, as legislative body of the CFD and Improvement Area No. 1, established the bonded indebtedness limit for the District in the principal amount of not to exceed $53,200,000 (excluding bonds described in Section 53364.2(e) of the Mello-Roos Act) (the “Authorization”), initially allocated as follows: (i) for Improvement Area No. 1, $18,800,000 and (ii) for land within the Future Annexation Area, $ 34,400,000. The Bonds are the first series of bonds being issued by the City for Improvement Area No. 1, and additional bonds secured on parity with the Bonds may only be issued for refunding purposes.
In connection with the issuance of the Bonds, the City will direct the Fiscal Agent to establish a “Reserve Fund,” and within the Reserve Fund, the “2024 Reserve Account,” which will be funded in an amount equal to the Reserve Requirement (described herein) with respect to the Bonds. Amounts in the 2024 Reserve Account of the Reserve Fund are available for payment of the Bonds in the event of delinquencies in the payment of the Special Taxes to the extent of such delinquencies. See “SECURITY FOR THE 2024 BONDS – Reserve Fund.” If there are additional delinquencies after depletion of funds in the Reserve Fund, the City is not obligated to pay the Bonds, or supplement the Reserve Fund.
Property Subject to the Special Tax. Property in Improvement Area No. 1 subject to the Special Tax is comprised of land in the City of Rancho Cordova, Sacramento County, California, entitled for development of 209 single -family homes, as well as public and quasi - public uses, parks and open space not subject to the Special Tax. The 209 homes planned for Improvement Area No. 1 are being developed by Lennar Homes of California, LLC, a California limited liability company (“ Lennar Homes”), and marketed as Verdant II, Viridian II, Celedon , Jade and Midori. The development of the 209 planned homes are part of a larger development that is anticipated to consist of a total of 573 single -family homes at build -out. Only the 209 single-family homes are currently in Improvement Area No. 1 and constitute security for the Bonds.
In connection with a land banking transaction, on May 26, 2023, Lennar Homes transferred the 209 lots in Improvement Area No. 1 (the “Land Bank Lots”) to AG EHC II (LEN) CA 2, L.P., a Delaware limited partnership (the “Land Bank Owner”). In connection therewith, Lennar Homes and the Land Bank Owner entered into that certain Option Agreement, dated May 26, 2023 (the “Lennar Option Agreement ”) whereby Lennar Homes has the option, but not the obligation, to purchase the Land Bank Lots from the Land Bank Owner beginning on May 26, 2023 and extending through September 10, 2026 (unless sooner terminated pursuant to the Lennar Option Agreement).
As of October 15, 2023 , Lennar Homes was under construction on 19 models and 49 production homes, and anticipates opening its model complex in December 2023. See the table on the following page and “IMPROVEMENT AREA NO. 1” and “OWNERSHIP OF PROPERTY WITHIN IMPROVEMENT AREA NO. 1” for additional details.
ITEM 12.1.
ATTACHMENT 4
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Grantline 220 Community Facilities District No. 2023-1
Improvement Area No. 1 – Special Tax Bonds
Status of Development – As of October 15, 2023
Project No. Lots
Building
Permits
Pulled(1)
Units
Completed
and Closed
to
Individuals
Units
Completed
and owned
by
Developer
Units under
Construction(1)
Finished
Lots
Final Map
Lots
Verdant II 72 20 0 0 20 72 72
Viridian II 33 15 0 0 15 33 33
Celedon 51 15 0 0 15 51 51
Jade 50 15 0 0 15 50 50
Midori 3 3 0 0 3 3 3
Total 209 68 0 0 68 209 209
(1) Consists of 19 model homes and 49 production homes.
Source: Lennar Homes.
Value of Property. Property in Improvement Area No. 1 is security for the Special Tax.
The City ordered preparation of an appraisal report dated October 19, 2023 and a bring-forward letter dated November 30, 2023 (together, the “Appraisal”), of the estimated value of the taxable land within Improvement Area No. 1 as of a date of value of October 15, 2023 and confirming a “not -less-than value” of such property as of November 30, 2023 , prepared by Integra Realty Resources, Sacramento, California (the “Appraiser”). The Appraiser indicated a value estimate of $ 41,663,000 as of the date of value, and is subject to the conditions and qualifications set forth therein. The Appraisal is set forth in its entirety as APPENDIX B hereto.
The description herein of the Appraisal is intended for limited purposes only; the Appraisal should be read in its entirety. In considering the estimates of value evidenced by the Appraisal, it should be noted that the Appraisal is based upon a number of standard and special assumptions that affected the estimates as to value, in addition to the assumption of completion of the Facilities expected to be funded with the proceeds of the Bonds. See “VALUE OF PROPERTY WITHIN IMPROVEMENT AREA NO. 1.”
The principal amount of the direct and overlapping debt in Improvement Area No. 1 is$9,492,705*, which consists of the estimated amount of Bonds ($9,000,000*) and $492,705 of overlapping general obligation and CFD bond debt. Consequently, the estimated value of property in Improvement Area No. 1 subject to the Special Tax lien ($41,663,000), is approximately 4.4* times the principal amount of the direct and overlapping debt in Improvement Area No. 1 . This is an average , and individual parcels may have value -to-lien ratios that are substantially different. See “VALUE OF PROPERTY WITHIN IMPROVEMENT AREA NO. 1 – Value to Special Tax Burden Ratios.”
Land may annex into Improvement Area No. 1 or a separate improvement area established for the District from the Future Annexation Area upon the unanimous approval of the owner(s) thereof, without any further proceedings of the City Council. Currently, no annexations into Improvement Area No. 1 are contemplated and per the Fiscal Agent Agreement, parity special tax bonds can only be issued for refunding purposes.
Risks of Investment. Investment in the Bonds involves risks that may not be appropriate for some investors. See “BOND OWNERS’ RISKS” for a discussion of special
* Preliminary; subject to change.
ITEM 12.1.
ATTACHMENT 4
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factors that should be considered, in addition to the other matters set forth herein, in considering the investment quality of the Bonds.
Limited Obligation of the City. The general fund of the City is not liable and the full faith and credit of the City is not pledged for the payment of the interest on, or principal of or redemption premiums, if any, on the Bonds. The Bonds are not secured by a legal or equitable pledge of or charge, lien or encumbrance upon any property of the City or any of its income or receipts, except the Special Tax Revenues and amounts in certain funds established under the Fiscal Agent Agreement as described herein . The Bonds are special limited obligations of the City, and neither the City Council, the City nor any officer or employee thereof shall be liable for the payment of the interest on or principal of or redemption premiums, if any, on the Bonds other than from the Special Tax Revenues and amounts in certain funds established under the Fiscal Agent Agreement as described herein.
Summary of Inf ormation. Brief descriptions of certain provisions of the Fiscal Agent Agreement and certain other documents are included herein. The descriptions and summaries of documents herein do not purport to be comprehensive or definitive, and reference is made to each such document for the complete details of all its respective terms and conditions, copies of which are available for inspection at the office of the City. All statements herein with respect to certain rights and remedies are qualified by reference to laws and principles of equity relating to or affecting creditors’ rights generally. Capitalized terms used in this Official Statement and not otherwise defined herein have the meanings ascribed to such terms in the Fiscal Agent Agreement. See “APPENDIX C – Summary of Certain Provisions of the Fiscal Agent Agreement.” The information and expressions of opinion herein speak only as of the date of this Official Statement and are subject to change without notice. Neither delivery of this Official Statement, any sale made hereunder, nor any future use of this Official Statement shall, under any circumstances, create any implication that there has been no change in the affairs of the City or Improvement Area No. 1 since the date hereof.
ITEM 12.1.
ATTACHMENT 4
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FINANCING PLAN
The Bonds are being issued to (i) construct and acquire certain public facilities, including payment of fees related to public facilities, authorized for the District and Improvement Area No. 1 (referred to herein as the Facilities) ; (ii) make a deposit into the 2024 Reserve Account of the Reserve Fund equal to the Reserve Requirement with the Bonds; (iii) fund capitalized interest on a portion of the Bonds through and including September 1, 2024; and (iv) pay the costs of issuance of the Bonds.
A summary of the estimated sources and uses of funds associated with the sale of the Bonds follows:
Estimated Sources of Funds:
Principal Amount of the Bonds $
Plus/less: [Net] Original Issue Premium/Discount
Total $
Estimated Uses of Funds:
Deposit to Improvement Fund $
Deposit to 2024 Reserve Account of Reserve Fund(1)
Deposit to Capitalized Interest Account of Bond Fund(2) Costs of Issuance(3)
Total $
(1) Equal to the Reserve Requirement with respect to the Bonds. (2) Used to pay capitalized interest on a portion of the Bonds through and including September 1, 2024.
(3) Used to pay costs of issuance of the Bonds, including initial fees, expenses and charges of the Fiscal Agent, costs of printing the preliminary and final Official Statements, administrative fees of the City, Underwriter ’s discount, Municipal Advisor, fees of Bond Counsel and Disclosure Counsel, and other costs of issuance.
ITEM 12.1.
ATTACHMENT 4
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THE 2024 BONDS
Authority for Issuance
The Bonds are issued pursuant to the Fiscal Agent Agreement, the Resolution adopted by the City Council on December [18], 2023, and the Mello-Roos Act.
On August 7, 2023 , the City Council, as legislative body of the CFD and Improvement Area No. 1, established the bonded indebtedness limit for the CFD in the principal amount of not to exceed $ 53,200,000 (excluding bonds described in Section 53364.2(e) of the Act) (the “Authorization”), initially allocated as follows: (i) for Improvement Area No. 1, $ 18,800,000 and (ii) for land within the Future Annexation Area, $ 34,400,000. Under the provisions of the Mello - Roos Act, since there were fewer than 12 registered voters residing within Improvement Area No. 1 at any point during the 90 -day period preceding the adoption of the City ’s resolution forming the District on August 7, 2023 ( the “Resolution of Formation ”), the sole qualified elector was the developer/landowner who was entitled to cast one vote for each acre or portion of an acre of land owned within Improvement Area No. 1 . The landowner voted to incur the indebtedness and to approve the annual levy of Special Taxes to be collected within Improvement Area No. 1 , for the purpose of paying for the Facilities, including repaying any indebtedness of Improvement Area No. 1, replenishing reserve funds and paying administrative expenses.
The Bonds are the first series of bonds being issued by the City for Improvement Area No. 1 and the District; after issuance of the Bonds, additional bonds secured on parity with the Bonds may only be issued for refunding purposes.
Description of the Bonds
The Bonds are being issued as fully registered bonds, registered in the name of Cede & Co. as nominee of The Depository Trust Company ( “DTC”), and will be available to ultimate purchasers in the denomination of $5,000 or any integral multiple thereof, under the book -entry system maintained by DTC. Ultimate purchasers of Bonds will not receive physical certificates representing their interest in the Bonds. So long as the Bonds are registered in the name of Cede & Co., as nominee of DTC, references herein to the Owners shall mean Cede & Co., and shall not mean the ultimate purchasers of the Bonds. Payments of the principal, premium, if any, and interest on the Bonds will be made directly to DTC, or its nominee, Cede & Co., by U.S. Bank Trust Company, National Association, as the fiscal agent, registrar and transfer agent (the “Fiscal Agent”) for the Bonds, so long as DTC or Cede & Co. is the registered owner of the Bonds. Disbursements of such payments to DTC’s Participants is the responsibility of DTC and disbursements of such payments to the Beneficial Owners is the responsibility of DTC ’s Participants and Indirect Participants, as more fully described herein. See “APPENDIX G – DTC and the Book-Entry Only System.”
The Bonds will be dated as of and bear interest from the date of delivery thereof at the rates and mature in the amounts and years, as set forth on the cover page hereof. The principal of the Bonds and premiums due upon the redemption thereof, if any, will be payable in lawful money of the United States of America at the principal corporate trust office of the Fiscal Agent in Seattle, Washington , or such other place as designated by the Fiscal Agent, upon presentation and surrender of the Bonds.
ITEM 12.1.
ATTACHMENT 4
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Interest on the Bonds, computed on the basis of a 360-day year consisting of twelve 30- day months, will be paid in lawful money of the United States of America semiannually on March 1 and September 1 of each year (each an “Interest Payment Date ”), commencing March 1, 2024. Interest on the Bonds (including the final interest payment upon maturity or earlier redemption) is payable by check of the Fiscal Agent mailed on each Interest Payment Date by first class mail to the registered Owner thereof at such registered Owner’s address as it appears on the registration books maintained by the Fiscal Agent at the close of business on the 15th day of the calendar month preceding the Interest Payment Date (the “Record Date”), or by wire transfer made on such Interest Payment Date upon written instructions received by the Fiscal Agent on or before the Record Date preceding the Interest Payment Date, of any Owner of $1,000,000 or more in aggregate principal amount of Bonds; provided that so long as any Bonds are in book-entry form, payments with respect to such Bonds shall be made by wire transfer, or such other method acceptable by the Fiscal Agent, to DTC. See “APPENDIX G – DTC and the Book-Entry Only System.”
Each Bond shall bear interest from the Interest Payment Date next preceding the date of authentication thereof unless (i) it is authenticated on an Interest Payment Date, in which event it shall bear interest from such date of authentication, or (ii) it is authenticated prior to an Interest Payment Date and after the close of business on the Record Date preceding such Interest Payment Date, in which event it shall bear interest from such Interest Payment Date, or (iii) it is authenticated prior to the Record Date preceding the first Interest Payment Date, in which event it shall bear interest from the dated date; provided, however, that if at the time of authentication of a Bond, interest is in default thereon, such Bond shall bear interest from the Interest Payment Date to which interest has previously been paid or made available for payment thereon. So long as the Bonds are registered in the name of Cede & Co., as nominee of DTC, payments of the principal, premium, if any, and interest on the Bonds will be made directly to DTC, or its nominee, Cede & Co. Disbursements of such payments to DTC ’s Participants is the responsibility of DTC and disbursements of such payments to the Beneficial Owners is the responsibility of DTC ’s Participants and Indirect Participants, as more fully described herein.
See “APPENDIX G - DTC and the Book-Entry Only System.”
Redemption
Optional Redemption. The Bonds are subject to optional redemption from any source of available funds (other than prepayments of the Special Tax by property owners), in whole or in part among maturities as specified by the City and by lot within a maturity, on any date on and after September 1, 20__ at the following respective redemption prices (expressed as percentages of the principal amount of the Bonds to be redeemed), plus accrued interest thereon to the date of redemption:
Redemption Dates
Redemption
Price
September 1, 20__ through August 31, 20__ 103%
September 1, 20__ through August 31, 20__ 102
September 1, 20__ through August 31, 20__ 101
September 1, 20__ and any date thereafter 100
Mandatory Redemption from Prepayments. The 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 ITEM 12.1.
ATTACHMENT 4
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Date at the following respective redemption prices (expressed as percentages of the principal amount of the Bonds to be redeemed), plus accrued interest thereon to the date of redemption:
Redemption Dates
Redemption
Price
Interest Payment Dates through and including March 1, 20__ 103% September 1, 20__ and March 1, 20__ 102
September 1, 20__ and March 1, 20__ 101
September 1, 20__ and any Interest Payment Date thereafter 100
See “BOND OWNERS’ RISKS – Potential Early Redemption of Bonds from Prepayments” for a discussion of the potential for the Bonds to be priced with original issue premium and then be redeemed from Special Tax prepayments prior to maturity.
Mandatory Sinking Fund Redemption. The Bonds maturing September 1, 20__ and September 1, 20__ (the “Term Bonds”) are subject to mandatory sinking payment redemption in part on September 1, 20__ and September 1, 20__, 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 respective principal amounts as set forth in the following tables:
September 1, 20__ Term Bonds
Mandatory
Redemption Date
(September 1)
Sinking Fund
Payment
September 1, 20__ Term Bonds
Mandatory
Redemption Date
(September 1)
Sinking Fund
Payment
The amounts in the foregoing table shall be reduced pro rata, in order to maintain substantially uniform debt service, as a result of any prior partial optional redemption or mandatory redemption of the Bonds.
In lieu of redemption, moneys in the Bond Fund may be used and withdrawn by the Fiscal Agent for purchase of Outstanding 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 Bonds be purchased at a price in excess of the principal amount thereof, plus interest accrued to the date of purchase.
Redemption Procedure by Fiscal Agent. The Fiscal Agent shall cause notice of any redemption to be mailed by first class mail, postage prepaid, at least 20 days but not more than ITEM 12.1.
ATTACHMENT 4
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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 Bonds designated for redemption, at their addresses appearing on the 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 Bonds.
Such notice shall state the redemption date and the redemption price and, if less than all of the then Outstanding Bonds are to be called for redemption, shall designate the CUSIP numbers and bond numbers of the Bonds to be redeemed by giving the individual CUSIP number and number of each Bond to be redeemed or shall state that all Bonds between two stated numbers, both inclusive, are to be redeemed or that all of the Bonds of one or more maturities have been called for redemption, shall state as to any Bond called in part the principal amount thereof to be redeemed, and shall require that such 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 Bonds will not accrue from and after the redemption date.
The City has the right to rescind any notice of the optional redemption of Bonds. Any notice of redemption shall be cancelled and annulled if for any reason funds will not be or are not available on the date fixed for redemption for the payment in full of the Bonds then called for redemption, and such cancellation shall not constitute an event of default.
Upon the payment of the redemption price of Bonds being redeemed, each check or other transfer of funds issued for such purpose shall, to the extent practicable, bear the CUSIP number identifying, by issue and maturity, the Bonds being redeemed with the proceeds of such check or other transfer.
Whenever provision is made in the Fiscal Agent Agreement for the redemption of less than all of the Bonds of any maturity, the Fiscal Agent shall select the Bonds to be redeemed, from all 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 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 Bond or Bonds, of the same series and maturity, of authorized denominations in aggregate principal amount equal to the unredeemed portion of the Bond or Bonds.
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 Bonds so called for redemption shall have been deposited in the Bond Fund, such Bonds so called shall cease to be entitled to any benefit under the Fiscal Agent Agreement other than the right to receive payment of the redemption price, and no interest shall accrue thereon on or after the redemption date specified in such notice.
ITEM 12.1.
ATTACHMENT 4
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Transfer or Exchange of Bonds
So long as the Bonds are registered in the name of Cede & Co., as nominee of DTC, transfers and exchanges of Bonds shall be made in accord ance with DTC procedures. See APPENDIX G. Any Bond may, in accordance with its terms, be transferred or exchanged by the person in whose name it is registered, in person or by his duly authorized attorney, upon surrender of such Bond for cancellation, accompanied by delivery of a duly written instrument of transfer in a form approved by the Fiscal Agent. Whenever any Bond or Bonds shall be surrendered for transfer or exchange, the City shall execute and the Fiscal Agent shall authenticate and deliver a new Bond or Bonds, for a like aggregate principal amount of Bonds of authorized denominations and of the same maturity. The cost for any services rendered or any expenses incurred by the Fiscal Agent in connection with any such transfer or exchange shall be paid by the City. The Fiscal Agent shall collect from the Owner requesting such transfer any tax or other governmental charge required to be paid with respect to such transfer or exchange.
No transfers or exchanges of Bonds shall be required to be made (i) within 15 days prior to the date established by the Fiscal Agent for selection of Bonds for redemption or (ii) with respect to a Bond after such Bond has been selected for redemption.
ITEM 12.1.
ATTACHMENT 4
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SECURITY FOR THE 2024 BONDS
The Bonds are secured by and payable from a first pledge of the proceeds of the “Special Tax Revenues,” defined in the Fiscal Agent Agreement as the proceeds of the Special Taxes annually received by the City , excluding any interest and penalties thereon collected in connection with delinquent Special Taxes, less an amount equal to the Administrative Expense Priority, including all scheduled payments and delinquent payments thereof, and proceeds of the redemption or sale of property sold as a result of foreclosure of the lien of the Special Taxes. “Administrative Expense Priority” means (i) for Fiscal Year 2023-24, $30,000, and (ii) for each subsequent year, an amount equal to the preceding fiscal year ’s Administrative Expense Priority plus an additional 2% of such amount.
All of the Special Tax Revenues and all moneys deposited in the Bond Fund and, until disbursed as provided herein, the Special Tax Fund are hereby pledged to secure the repayment of the Bonds. In addition, the 2024 Bonds shall be secured by a pledge of all amounts in the Reserve Fund, and a series of Additional Bonds may be secured by a reserve account within the Reserve Fund or a separate reserve fund, as provided in the applicable Supplemental Agreement for such Series. Such pledge shall constitute a first lien on the Special Tax Revenues and said amounts.
The Special Tax Revenues and all moneys deposited into said funds are pledged to the payment of the principal of, and interest and any premium on, the Bonds as provided in the Fiscal Agent Agreement and in the Mello -Roos Act until all of the Bonds have been paid and retired or until moneys or Federal Securities (as defined in the Fiscal Agent Agreement) have been set aside irrevocably for that purpose. The City may issue additional bonds secured on a parity with the Bonds only for refunding purposes; see “–Additional Bonds” below.
Amounts in the Costs of Issuance Fund established under the Fiscal Agent Agreement are not pledged to the repayment of the Bonds. The Facilities are not in any way pledged to the repayment of the Bonds. Any proceeds of condemnation, destruction or other disposition of any Facilities are not pledged to the repayment of the Bonds and are free and clear of any lien or obligation imposed under the Fiscal Agent Agreement.
Special Taxes
A Special Tax applicable to each taxable parcel in Improvement Area No. 1 will be levied and collected according to the tax liability determined by the City through the application of the Special Tax Formula prepared by Goodwin Consulting Group, Inc., Sacramento, California (the “Special Tax Consultant ”) and set forth in APPENDIX A hereto, for all taxable properties in Improvement Area No. 1 . Interest and principal on the Bonds is payable from the annual Special Taxes to be levied and collected on such property within Improvement Area No. 1, from amounts held in certain funds and accounts established under the Fiscal Agent Agreement and from the proceeds, if any, from the sale of such property for delinquency of such Special Taxes.
The Special Taxes are exempt from the property tax limitation of Article XIIIA of the California Constitution, pursuant to Section 4 thereof as a “special tax ” authorized by a two- thirds vote of the qualified electors. The levy of the Special Taxes was authorized by the City pursuant to the Mello-Roos Act in a maximum amount determined according to the Special Tax Formula approved by the City. See “Special Tax Formula” below and “APPENDIX A – Rate and Method of Apportionment of Special Tax.”
ITEM 12.1.
ATTACHMENT 4
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The amount of Special Taxes that the City may levy in any year on taxable property in Improvement Area No. 1, from which principal and interest on the Bonds is to be paid, is limited by the maximum rates approved by the qualified electors within Improvement Area No. 1 which are set forth as the “Maximum Special Tax” in the Special Tax Formula. Under the Special Tax Formula, Special Taxes will be levied annually in an amount not in excess of the Maximum Special Tax for the purpose of making payments on the Bonds. The Special Taxes and any interest earned on the Special Taxes shall constitute a trust fund for the principal of and interest on the Bonds pursuant to the Fiscal Agent Agreement and, so long as the amount levied for principal of and interest on these obligations remains unpaid, the Special Taxes and investment earnings thereon shall not be used for any other purpose, except as permitted by the Fiscal Agent Agreement, and shall be held in trust for the benefit of the owners thereof and shall be applied pursuant to the Fiscal Agent Agreement. The Special Tax Formula apportions the Special Tax Requirement (as defined in the Special Tax Formula and described below) among the taxable parcels of real property within Improvement Area No. 1 according to the rate and methodology set forth in the Special Tax Formula. See “– Special Tax Formula” below. See also “APPENDIX A – Rate and Method of Apportionment of Special Tax.”
The City may levy the Special Tax at the Maximum Special Tax rate authorized by the qualified electors within Improvement Area No. 1 as set forth in the Special Tax Formula if conditions so require and the City has covenanted to annually levy the Special Taxes in an amount at least sufficient to pay the Special Tax Requirement (as defined below). Because each Special Tax levy for payment of the Bonds is limited to the Maximum Special Tax rates authorized as set forth in the Special Tax Formula, no assurance can be given that, in the event of Special Tax delinquencies, the amount of the Special Tax Requirement will in fact be collected in any given year. See “BOND OWNERS’ RISKS – Levy and Collection of the Special Tax” herein. The Special Taxes are collected for the City by the County in the same manner and at the same time as ad valorem property taxes.
In addition to the Maximum Special Tax rate limitation in the Special Tax Formula, Section 53321(d) of the Mello -Roos 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.
Special Tax Formula
The Special Tax authorized under the Mello -Roos Act applicable to land within Improvement Area No. 1 will be levied and collected according to the tax liability determined by the City through the application of the appropriate amount or rate as described in the Special Tax Formula (defined terms set forth below in this section have the meanings set forth in the Special Tax Formula) set forth in “APPENDIX A – Rate and Method of Apportionment of Special Tax.” The Special Tax will be levied each year from parcels within Improvement Area No. 1 in an amount at least sufficient to pay debt service on outstanding Bonds and administrative expenses. The Special Tax is expected to be collected at the same time and in the same manner as ad valorem property taxes. The City reserves the right to collect the taxes in another manner if required to meet annual obligations of Improvement Area No. 1.
Each year, the City will determine the Special Tax Requirement for the upcoming fiscal year. The “Special Tax Requirement” is defined in the Special Tax Formula as the amount necessary in any fiscal year (i) to pay principal and interest on Bonds which are due in the ITEM 12.1.
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calendar year which begins in such fiscal year, (ii) to pay periodic costs for the Bonds, including but not limited to , credit enhancement, liquidity support and rebate payments on the Bonds, (iii) to replenish reserve funds to the extent such replenishment was not included in the computation of the Special Tax Requirement in a previous fiscal year , (iv ) to cure any delinquencies in the payment of principal or interest on Bonds which have occurred in the prior fiscal year or, based on prior delinquencies, are expected to occur in the current fiscal year , (v) to pay Administrative Expenses, and (vi) to pay directly for Authorized Facilities, so long as such levy under this clause (vi) does not increase the Special Tax on Final Map Property or Undeveloped Property (as defined in the Special Tax Formula) . The Special Tax Requirement components in clauses (i) and (ii) may be reduced in any fiscal year by (a) interest earnings on, or surplus balances in, funds and accounts for the Bonds to the extent that such earnings or balances are available to apply against debt service pursuant to the Indenture, Bond resolution, or other legal document that set forth these terms, ( b) in the sole and absolute discretion of the City, proceeds received by the City from the collection of penalties associated with delinquent Special Taxes; and (c) any other revenues available to pay such costs as determined by the City.
Parcels Subject to the Special Tax. The City will prepare a list of the parcels subject to the Special Tax using the records of the City and the County Assessor. The City has the authorization to tax all parcels within Improvement Area No. 1 except tax-exempt parcels as described in the Special Tax Formula.
Each Fiscal Year, the Administrator shall: (i) assign each Parcel of Taxable Property to the appropriate Development Class, (ii) for Developed Property, categorize each Parcel as Single Family Property or Other Property, (iii) for Single Family Property, determine within which Village each Parcel of Developed Property is located and the number of Residential Units on the Parcel; (iv) for Other Property, determine the Acreage of each Parcel; and (v) determine the Special Tax Requirement for the Fiscal Year. In addition, the Administrator shall, on an ongoing basis, monitor the Tentative Map, Final Maps, and Building Permits to determine if there are any proposed Land Use Changes that would change the Expected Maximum Special Tax Revenues.
If the Expected Maximum Special Tax Revenues will be revised pursuant to a proposed Land Use Change, the Administrator shall apply the steps set forth in Section D of the Special Tax Formula . In any Fiscal Year, if it is determined that: (i) a parcel map for property in Improvement Area No. 1 was recorded after January 1 of the prior Fiscal Year (or any other date after which the Assessor will not incorporate the newly -created Parcels into the then current tax roll), (ii) because of the date the parcel map was recorded, the Assessor does not yet recognize the new Parcels created by the parcel map, and (iii) one or more of the newly - created Parcels is in a different Development Class and/or Land Use Category than other Parcels created by the subdivision, the Administrator shall calculate the Special Taxes for the property affected by recordation of the parcel map by determining the Special Taxes that apply separately to the property within each Development Class and/or Land Use Category, then applying the sum of the individual Special Taxes to the Parcel that was subdivided by recordation of the parcel map.
Assignment of Maximum Special Tax. The Special Tax Formula describes in detail the precise method for assigning the Maximum Special Tax to parcels within Improvement Area No. 1, which generally provides that each year the City will use the definitions contained in the Special Tax Formula to classify each parcel as tax -exempt or taxable. Changes to maximum ITEM 12.1.
ATTACHMENT 4
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special tax rates due to Land Use Changes are handled per Section D of the Special Tax Formula. See APPENDIX A.
Maximum Special Tax Rates. The Maximum Special Tax for a Parcel of Developed Property or Final Map Property is the greater of (i) the Base Special Tax set forth in Table 1 to the Special Tax Formula which is reproduced below, or, (ii) the Maximum Special Tax determined pursuant to Section D of the Special Tax Formula . The Base Special Tax rates for Fiscal Year 2024-25 are set forth in the following table. For additional details, see APPENDIX A.
Grantline 220 Community Facilities District No. 2023-1
Improvement Area No. 1 – Special Tax Bonds
Base Special Tax Rates – Developed Property and Final Map Property
Tax Zone Land Use Category
Fiscal Year 2024-25
Base Special Tax (1)(2)
Tax Zone 1 Single Family Property $2,346.00 per Residential Unit / SFD Lot Other Property $24,202.56 per Acre
Tax Zone 2 Single Family Property $2,653.02 per Residential Unit / SFD Lot Other Property $27,118.74 per Acre
Tax Zone 3 Single Family Property $2,825.40 per Residential Unit / SFD Lot Other Property $23,302.92 per Acre
Tax Zone 4 Single Family Property $3,234.42 per Residential Unit / SFD Lot Other Property $26,873.94 per Acre
Tax Zone 5 Single Family Property $3,637.32 per Residential Unit / SFD Lot Other Property $29,251.56 per Acre
(1) On July 1, 2025 and each July 1 thereafter, the Maximum Special Taxes shall be increased by 2% of the amount in effect in the previous fiscal year.
(2) Represents the Maximum Special Tax rates based on currently -expected land uses in Improvement Area No. 1. Subject to change pursuant to Section D of the RMA.
Source: Goodwin Consulting Group, Inc.
In addition to the Maximum Special Tax rate limitation in the Special Tax Formula, Section 53321(d) of the Mello -Roos 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.
Levy of Special Tax . Once the Special Tax Requirement has been determined for a particular Fiscal Year, the Special Tax will be levied according to the following steps:
Step 1: The Special Tax shall be levied Proportionately on each Parcel of Developed Property up to 100% of the Maximum Special Tax for each Parcel until the amount levied is equal to the Special Tax Requirement, prior to applying any Capitalized Interest that is available.
Step 2: If additional revenue is needed after Step 1 in order to meet the Special Tax Requirement after Capitalized Interest has been applied to reduce the Special Tax Requirement, the Special Tax shall be levied Proportionately on each Parcel of Final Map Property up to 100% of the Maximum Special Tax for each Parcel of Final Map Property.
ITEM 12.1.
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Step 3: If additional revenue is needed after Step 2 in order to meet the Special Tax Requirement, the Special Tax shall be levied Proportionately on each Parcel of Undeveloped Property up to 100% of the Maximum Special Tax for each Parcel of Undeveloped Property.
Step 4: If additional revenue is needed after Step 3, the Special Tax shall be levied Proportionately on each Parcel of Taxable Welfare Exemption Property, up to 100% of the Maximum Special Tax for each Parcel of Taxable Welfare Exemption Property.
Step 5: If additional revenue is needed after Step 4, the Special Tax shall be levied Proportionately on each Parcel of Taxable Owners Association Property, up to 100% of the Maximum Special Tax for each Parcel of Taxable Owners Association Property.
Step 6: If additional revenue is needed after Step 5, the Special Tax shall be levied Proportionately on each Parcel of Taxable Public Property, up to 100% of the Maximum Special Tax for each Parcel.
Termination of the Special Tax . The Special Tax will be levied until all Bonds have been repaid and all authorized facilities have been funded ; however, Special Taxes cannot be levied under any circumstance after fiscal year 2063-64.
Prepayment of the Special Tax . The Special Tax obligation assigned to a particular parcel within Improvement Area No. 1 can be prepaid, which will release the parcel making the prepayment from the Mello- Roos special tax lien. Section H of the Special Tax Formula sets forth a detailed formula by which the prepayment for a parcel can be calculated. Proceeds of such prepayment will be used to redeem a portion of the Bonds. See “THE 2024 BONDS – Redemption.”
Projected Fiscal Year 2024-25 Special Tax Levy . The following table shows the projected Fiscal Year 2024-25 special tax levy by tax zone for Improvement Area No. 1
Grantline 220 Community Facilities District No. 2023-1
Improvement Area No. 1 – Special Tax Bonds
Projected Fiscal Year 2024-25 Special Tax Levy by Tax Zone(1)
Tax Zone
Projected FY 2024-25
Maximum Special Tax
Projected FY 2024-25
Actual Special Tax (2)
Tax Zone 1 $168,912 $151,798
Tax Zone 2 87,550 80,850
Tax Zone 3 144,095 129,826
Tax Zone 4 161,721 145,839
Tax Zone 5 10,912 10,912
Totals $573,190 $519,225
(1) Based on building permits issued by October 15, 2023 and final maps recorded by June 30, 2023. (2) Includes anticipated debt service due in 2025 on the 2024 Bonds and estimated administrative expenses in the amount of $30,600. The Administrative Expense Priority for Fiscal Year 2023-24 is $30,000 and escalates by 2% per year.
Sources: Goodwin Consulting Group, Inc.
ITEM 12.1.
ATTACHMENT 4
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Special Tax Fund
When received, the Special Tax Revenues are required under the Fiscal Agent Agreement to be deposited into a Special Tax Fund to be held by the City in trust for the benefit of the City and the Owners of the Bonds. Within the Special Tax Fund, the City will establish and maintain two accounts, (i) the Debt Service Account, to the credit of which the City will deposit, immediately upon receipt, all Special Tax Revenue s, and (ii) the Surplus Account, to the credit of which the City will deposit surplus Special Tax Revenue as described below. Moneys in the Special Tax Fund will be disbursed as provided below and, pending any disbursement, will be subject to a lien in favor of the Owners of the Bonds.
All Special Tax Revenue will be deposited in the Debt Service Account upon receipt.
No later than 10 Business Days prior to each Interest Payment Date, the City will withdraw from the Debt Service Account of the Special Tax Fund and transfer (i) to the Fiscal Agent for deposit in the Reserve Fund, an amount which when added to the amount then on deposit therein, is equal to the Reserve Requirement, and (ii) to the Fiscal Agent for deposit in the Bond Fund an amount, taking into account any amounts then on deposit in the Bond Fund, such that the amount in the Bond Fund equals the principal, including any mandatory sinking fund payments, premium, if any, and interest due on the Bonds on the next Interest Payment Date. At such time as deposits to the Debt Service Account equal the principal, including any mandatory sinking fund payments, premium if any, and interest becoming due on the Bonds for the current Bond Year and the amount needed to restore the balance of the Reserve Fund to the Reserve Requirement, the amount in the Debt Service Account in excess of such amount may, at the discretion of the City, be transferred to the Surplus Account, which will occur on or after September 15th of each year.
Moneys in the Surplus Account may, at the City ’s discretion, be transferred to the Improvement Fund to pay for costs of the Facilities, to pay the principal of, premium, if any, and interest on the Bonds or to replenish the Reserve Fund to the amount of the Reserve Requirement, but are not pledged to payment of the Bonds. See “–Assignment of Maximum Special Tax” above.”
Deposit and Use of Proceeds of Bonds
The Bonds are additionally secured by certain amounts generated from proceeds of the Bonds, together with interest earnings thereon pledged under the Fiscal Agent Agreement.
The proceeds of the initial purchase of the Bonds shall be paid to the Fiscal Agent, who shall deposit such proceeds in the 2024 Costs of Issuance Fund, the Improvement Fund, the Bond Fund (for capitalized interest) and the Reserve Fund established under the Fiscal Age nt Agreement. See APPENDIX C for information on use of the moneys, including investment earnings thereon, in the various funds established under the Fiscal Agent Agreement. See also “– Reserve Fund” and “– Improvement Fund” below.
Delinquent Payments of Special Tax; Covenant for Foreclosure
The Special Tax will be collected in the same manner and the same time as ad valorem property taxes, except at the City ’s option, the Special Taxes may be billed directly to property owners. In the event of a delinquency in the payment of any installment of Special Taxes, the City is authorized by the Mello -Roos Act to order institution of an action in superior court to foreclose the lien therefore.
ITEM 12.1.
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In the Fiscal Agent Agreement t he City covenants for the benefit of the Owners of the Bonds that it will annually on or before September 1 of each year review the public records of the County of Sacramento relating to the collection of the Special Tax in order to determine the amount of the Special Tax collected in the prior Fiscal Year, and if the City determines on the basis of such review that the amount so collected is deficient it will enforce the lien of the Special Taxes by commencing, or cause to be commenced, foreclosure proceedings to judgment and sale in such manner and upon such timing as advised by legal counsel, taking into account the amounts delinquent, the estimate cost of legal proceedings, the status of Special Tax collections and available debt service reserves, under the following circumstances:
(a) if the amount so collected is deficient by more than 5% of the total amount of the Special Tax levied in such Fiscal Year, it will enforce the lien on all delinquent parcels; or
(b) if property owned by any single property owner in Improvement Area No. 1 is delinquent on four consecutive semi -annual Special Tax installments (irrespective of the total delinquencies in Improvement Area No. 1 ) it will enforce the lien against such property.
Under the Mello-Roos Act, foreclosure proceedings are instituted by the bringing of an action in the superior court of the county in which the parcel lies, naming the owner and other interested persons as defendants. The action is prosecuted in the same manner as other civil actions. In such action, the real property subject to the special taxes may be sold at a judicial foreclosure sale for a minimum price which will be sufficient to pay or reimburse the delinquent Special Taxes.
The owners of the Bonds benefit from the Reserve Fund established pursuant to the Fiscal Agent Agreement; however, if delinquencies in the payment of the Special Taxes are significant enough to completely deplete the Reserve Fund, there could be a default or a delay in payments of principal and interest to the Owners of the Bonds pending prosecution of foreclosure proceedings and receipt by the City of the proceeds of foreclosure sales.
Additionally, it is possible that no bids are received at a foreclosure sale. Provided that it is not levying the Special Tax at the Maximum Special Tax rates set forth in the Special Tax Formula, the City may adjust the Special Taxes levied on all property within Improvement Area No. 1 subject to the Special Tax to provide an amount required to pay debt service on the Bonds, and to replenish the Reserve Fund , provided however such adjustment may not exceed the Maximum Special Tax or include an increase 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.
Under current law, a judgment debtor (property owner) has at least 140 days from the date of service of the notice of levy in which to redeem the property to be sold. If a judgment debtor fails to redeem and the property is sold, his or her only remedy is an action to set aside the sale, which must be brought within 90 days of the date of sale. If, as a result of such an action a foreclosure sale is set aside, the judgment is revived , and the judgment creditor is entitled to interest on the revived judgment as if the sale had not been made (California Code of Civil Procedure Section 701.680).
ITEM 12.1.
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Foreclosure by court action is subject to normal litigation delays, the nature and extent of which are largely dependent upon the nature of the defense, if any, put forth by the debtor and the condition of the calendar of the superior court of the county. Such foreclosure actions can be stayed by the superior court on generally accepted equitable grounds or as the result of the debtor’s filing for relief under the Federal bankruptcy laws. The Mello -Roos Act provides that, upon foreclosure, the Special Tax lien will have the same lien priority as is provided for ad valorem taxes and special assessments. See “VALUE OF PROPERTY WITHIN IMPROVEMENT AREA NO. 1 – Priority of Lien.”
Teeter Plan. In 1949, the California Legislature enacted an alternative method for the distribution of property taxes to local agencies. This method, known as the “Teeter Plan,” is found in Sections 4701-4717 of the California Revenue and Taxation Code. Upon adoption and implementation of this method by a county board of supervisors, local agencies for which the county collects property taxes and certain other public agencies and taxing areas located in the county receive annually the full amount of their shares of property taxes and other impositions collected on the secured roll, including delinquent property taxes which have yet to be collected.
While the county bears the risk of loss on unpaid delinquent taxes, it retains the penalties associated with delinquent taxes when they are paid. In turn, the Teeter Plan provides participating local agencies with stable cash flow and the elimination of collection risk.
The Board of Supervisors of Sacramento County has adopted the Teeter Plan, and the County elects to apply its Teeter Plan to the collection of the Special Taxes annually. As such, the City anticipates that the Teeter Plan will be applicable to the Special Tax levied in Improvement Area No. 1, but no assurance can be given that it will continue in any or all of the years that the Bonds are outstanding. To the extent that the County ’s Teeter Plan continues in existence and is carried out as adopted, and to the extent the County does not discontinue the Teeter Plan with respect to the City or Improvement Area No. 1, the County’s Teeter Plan may help protect owners of the Bonds from the risk of delinquencies in the payment of Special Taxes. However, there can be no assurance that the County will not modify or eliminate its Teeter Plan, or choose to remove Improvement Area No. 1 or particular delinquent parcels from its Teeter Plan in any year while the Bonds are outstanding.
Once adopted, a county’s Teeter Plan will remain in effect in perpetuity unless the board of supervisors orders its discontinuance or unless, prior to the commencement of a fiscal year, a petition for discontinuance is received and joined in by resolutions of the governing bodies of not less than two-thirds of the participating districts in the county. An electing county may, however, decide to discontinue the Teeter Plan with respect to any levying agency in the county if the board of supervisors, by action taken not later than July 15 of a fiscal year, elects to discontinue the procedure with respect to such levying agency and the rate of secured tax delinquencies in that agency in any year exceeds 3% of the total of all taxes and assessments levied on the secured roll by that agency.
Reserve Fund
Under the Fiscal Agent Agreement, the Fiscal Age nt established the Reserve Fund and the 2024 Reserve Account therein, which is available for payment of the Bonds in the event of delinquencies in the payment of the Special Taxes to the extent of such delinquencies.
The City is required to maintain on deposit in the 2024 Reserve Account of the Reserve Fund an amount that is equal to the Reserve Requirement with respect to the Bonds. The “Reserve Requirement” means the least of (i) 125% of the average Annual Debt Service with ITEM 12.1.
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respect to the Bonds; (ii) Maximum Annual Debt Service with respect to the Bonds; and (iii) 10% of the original principal amount of the Bonds (or, if the Bonds have more than a de minimis amount of original issue discount or premium, 10% of the issue price of the Bonds); provided, that—
(a) if a parity reserve fund for multiple series of Bonds is established, references to the applicable series of Bonds shall mean all bonds covered by such parity reserve fund;
(b) in no event shall the City be obligated to deposit an amount in any reserve fund in excess of the amount permitted by the applicable provisions of the Code to be so deposited from the proceeds of tax -exempt bonds without having to restrict the yield of any investment purchased with any portion of such deposit and, if the amount of any such deposit is so limited, the Reserve Requirement shall be only the amount of such deposit as permitted by the Code;
(c) the City may meet all or a portion of the Reserve Requirement with respect to any series of bonds by depositing a Qualified Reserve Fund Credit Instrument in accordance with the Fiscal Agent Agreement; and
(d) the Reserve Requirement shall be set at the time of issuance of a series of bonds and shall not increase thereafter but may decrease as a result of prepayment of the Special Tax.
Amounts deposited in the Reserve Fund will be used and withdrawn by the Fiscal Agent solely for the purpose of making transfers to the Bond Fund in the event of any deficiency at any time in the Bond Fund of the amount then required for payment of the principal of, and interest on, the Bonds secured by the Reserve Fund. Whenever a transfer is made from the Reserve Fund to the Bond Fund due to a deficiency in the Bond Fund, the Fiscal Agent will provide written notice thereof to the City. If there are additional delinquencies after depletion of funds in the Reserve Fund, the City is not obligated to pay the Bonds or supplement the Reserve Fund.
Whenever, on the Business Day prior to any Interest Payment Date, the amount in the Reserve Fund exceeds the then applicable Reserve Requirement, the Fiscal Agent will transfer an amount equal to the excess from the Reserve Fund to the Bond Fund or the Improvement Fund as provided below, except that investment earnings on amounts in the Reserve Fund may be withdrawn from the Reserve Fund for purposes of making payment to the Federal government to comply with rebate requirements.
Moneys in the Reserve Fund will be invested and deposited in accordance with the Fiscal Agent Agreement. Interest earnings and profits resulting from the investment of moneys in the Reserve Fund and other moneys in the Reserve Fund will remain therein until the balance exceeds the Reserve Requirement; any amounts in excess of the Reserve Requirement will be transferred to the Improvement Fund, if the Facilities have not been completed, or if the Facilities have been completed, to the Bond Fund to be used for the payment of the principal of and interest on the Bonds in accordance with the Fiscal Agent Agreement.
The City has the right at any time to cause the Fiscal Agent to release funds from the Reserve Fund, in whole or in part, by tendering to the Fiscal Agent an irrevocable standby or direct-pay letter of credit or surety bond issued by a commercial bank or insurance company (a “Qualified Reserve Fund Credit Instrument ”), provided certain conditions are met, including ITEM 12.1.
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that the long-term credit rating of such bank or insurance company is rated at least “AA” (without regard to qualifier) by S&P or Moody’s.
Whenever the balance in the Reserve Fund exceeds the amount required to redeem or pay the Outstanding Bonds, including interest accrued to the date of payment or redemption and premium, if any, due upon redemption, and making any other transfer required under the Fiscal Agent Agreement, the Fiscal Agent will transfer the amount in the Reserve Fund to the Bond Fund to be applied, on the next succeeding Interest Payment Date, to the payment and redemption of all of the Outstanding Bonds. If the amount so transferred from the Reserve Fund to the Bond Fund exceeds the amou nt required to pay and redeem the Outstanding Bonds, the balance in the Reserve Fund will be transferred to the City, after payment of any amounts due the Fiscal Agent, to be used for any lawful purpose of the City.
Improvement Fund
Under the Fiscal Agent Agreement, the Fiscal Agent established an “Improvement Fund,” which is held and used by the Fiscal Agent to pay the costs of the Facilities.
Disbursements from the Improvement Fund will be made by the Fiscal Agent in accordance with written requests of the City.
Before any payment from the Improvement Fund shall be made, the City shall file or cause to be filed with the Fiscal Agent a written request of the City for disbursement of moneys from such fund. Such withdrawals shall be implemented by the City pursuant to the terms and requirements of the Acquisition Agreement (described below). The Fiscal Agent need not make any such payment if it has received notice of any lien, right to lien or attachment upon, or claim affecting the right to receive payment of, any of the moneys to be so paid, that has not been released or will not be released simultaneously with such payment. The Fiscal Agent shall not incur any liability for any disburs ement from the Improvement Fund made in reliance upon any requisition. When the City determines that all of the costs of the Facilities to be financed with proceeds of the Bonds have been paid, the City shall provide written notification of such determination to the Fiscal Agent and direct the Fiscal Agent to transfer any remaining balance in any Improvement Fund into the Bond Fund. See “THE FACILITIES – Acquisition by the City.”
No Additional Bonds, Except for Refunding
The Resolution of Formation authorizes the issuance of up to $ 18,800,000 of bonded indebtedness for Improvement Area No. 1 ; the Bonds represent the first series of bonds and under the provisions of the Fiscal Agent Agreement the City is precluded from issuing additional bonds secured by the Special Taxes on parity with the Bonds, except for refunding bonds issued under the Mello-Roos Act.
As an alternative to issuing additional parity bonds, the City may issue bonds for Improvement Area No. 1 secured by Special Taxes on a subordinate basis to the Bonds.
ITEM 12.1.
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DEBT SERVICE SCHEDULES
Debt Service Schedule. The annual debt service on the Bonds based on the interest rates and maturity schedule set forth on the cover of this Official Statement is set forth below (assuming no early redemptions).
City of Rancho Cordova
Grantline 220 Community Facilities District No. 2023-1
Improvement Area No. 1 – Special Tax Bonds
Debt Service Schedule
Period Ending
Sept. 1
Bonds
Principal
Bonds
Interest(1)
Bonds
Total Debt Service
Total
_____________
(1) A portion of the interest on the Bonds due through September 1, 2024 will be paid from capitalized interest.
Source: Underwriter.
ITEM 12.1.
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Projected Debt Service Coverage . The projected debt service coverage for Fiscal Year 2024-25 is set forth below, and is based on the current status of development and only the Bonds outstanding. To the extent that development status changes , the debt service coverage may be different than what is shown. The Bonds have been structured so there is at least 110% debt service coverage in every year the Bonds are outstanding.
City of Rancho Cordova
Grantline 220 Community Facilities District No. 2023-1
Improvement Area No. 1 – Special Tax Bonds
Projected Fiscal Year 2024-25 Debt Service Coverage(1)(2)
Maximum
Special Tax Developed
and Final Map
Property(3)
Priority
Administration(4)
Estimated Debt
Service*
Debt Service Coverage
from Developed and
Final Map Property*
$573,190 ($30,600) $488,625 111.04%
* Preliminary; subject to change.
(1) Pursuant to Section 53321(d) of the Government Code, the special tax levied against any assessor's parcel for which an occupancy permit for private residential use has been issued shall not be increased as a consequence of delinquency or default by the owner of any other assessor's parcel within the District by more than 10% above the amount that would have been levied in the fiscal year had there never been any such delinquencies or defaults. (2) Based on currently-expected land uses in Improvement Area No. 1. Subject to change pursuant to Section D of the RMA. (3) Includes projected Maximum Special Tax revenues based on the status of development as of October 15, 2023. Assumes no future development.
(4) As defined in the Fiscal Agent Agreement. Equals $30,000 in Fiscal Year 2023-24, escalating by 2% per year thereafter.
Sources: Piper Sandler & Co.; Goodwin Consulting Group, Inc.
ITEM 12.1.
ATTACHMENT 4
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IMPROVEMENT AREA NO. 1
Formation and Background
On July 3, 2023, the City Council adopted a Resolution of Intention to form the District , designate Improvement Area No. 1 as an improvement area therein, and establish the Future Annexation Area, to levy a special tax and to incur bonded indebtedness for the purpose of financing the Facilities and making contributions to certain public facilities. After conducting a noticed public hearing, on August 7, 2023 , the City Council adopted the Resolution of Formation, which established the District , designated Improvement Area No. 1 therein, and created the Future Annexation Area , approved the Special Tax Formula for Improvement Area No. 1 and set forth the necessity to incur bonded indebtedness for the District and Improvement Area No. 1 in a total amount not to exceed $ 53,200,000 (excluding bonds or notes described in Section 53364.2(e) of the Mello-Roos Act), initially allocated as follows: (i) for Improvement Area No. 1, $ 18,800,000 and (ii) for the portion of the District that is not currently in Improvement Area No. 1, $34,400,000. On the same day, an election was held within Improvement Area No. 1 in which Lennar Homes, as the sole eligible landowner voters in the District, approved the proposed bonded indebtedness and the levy of the Special Tax within Improvement Area No. 1.
See “OWNERSHIP OF PROPERTY WITHIN IMPROVEMENT AREA NO. 1” below.
Description and Location
General. The development ongoing in the District is referred to by the City as the “Grantline 220” or “Pradera Ranch” project, and is generally located at the southwest corner of Grant Line Road and C hrysanthy Boulevard in the “Suncreek Specific Plan” area of the City.
Pradera Ranch is planned for a total of 573 residential lots, a multifamily project, two neighborhood parks, a school, several open space parcels, and supporting associated infrastructure.
The 209 units represent the first phase of the project, with an additional 364 residential units located within the Future Annexation Area established for the District. Accordingly, on build-out, Lennar Homes anticipates a total of 573 single- family homes. Only the land within Improvement Area No. 1 constitutes security for the Bonds.
The greater Rancho Cordova area is a mature suburban area, which encompasses all types of land uses, including single-family and multifamily residential, retail, office and industrial, and has experienced continued growth since the mid 1980 ’s. This area currently is a substantial suburban office market within the Sacramento region, as well as a major employment center, most of which is located along U.S. Highway 50 which traverses the City.
For certain demographic information relating to the City and the County , see “APPENDIX D – Sacramento County and City of Rancho Cordova Demographic Information.”
Maps. The following page s show the boundary map of the District , including Improvement Area No. 1 therein.
ITEM 12.1.
ATTACHMENT 4
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[Insert CFD Boundary Map]
ITEM 12.1.
ATTACHMENT 4
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[Insert Site Plan Map]
ITEM 12.1.
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Development in Improvement Area No. 1
Lennar Homes has provided the following information with respect to development within Improvement Area No. 1 . 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. Since the ownership of the parcels is subject to change, the development plans outlined below may not be continued by the subsequent owner if the parcels are sold, although development by any subsequent owner will be subject to the Development Agreement and the policies and requirements of the City. No assurance can be given that the plans or projections detailed below will actually occur.
Overview. The development ongoing in the District is referred to by the City as the “Grantline 220” or “Pradera Ranch” project, and is generally located at the southwest corner of Grant Line Road and C hrysanthy Boulevard in the “Suncreek Specific Plan” area of the City.
The land within Improvement Area No. 1 consists of 209 residential lots with lot sizes ranging from 4,725 to 7,200 square feet. Lennar Homes is developing the 209 lots into five residential communities, known as Verdant II, Viridian II, Celedon, Midori and Jade at Pradera Ranch.
The 209 units represent the first phase of the project (sometimes referred to as “Unit 1” and “Unit 2”), with an additional 364 residential units (sometimes referred to as “Units 3 -5”) located within the Future Annexation Area established for the District. Accordingly, on build-out, Lennar Homes anticipates a total of 573 single-family homes. Only the land within Improvement Area No. 1 constitutes security for the Bonds.
Development Agreement – General. The City entered into a Development Agreement, dated January 21, 2014 (the “ Development Agreement ”) with Grantline & Chrysanthy 220 Investors, LLC, a California limited liability company (“Chrysanthy 220 ”), which subsequently assigned its rights and obligations thereunder to Lennar Homes. All of the property in Improvement Area No. 1 and the Future Annexation Area is subject to the requirements of the Development Agreement. The Development Agreement was entered into in accordance with Sections 65864 through 65869.5 of the California Government Code, as implemented through applicable provisions of the City Code.
The Development Agreement is the primary implementation tool for the development ongoing in Improvement Area No. 1 and is intended to create a binding contract between the City and Lennar Homes (as assignee of Chrysanthy 220) , and their assigned successors in interest, which set forth the needed infrastructure improvements, park dedication requirements, timing and method for financing improvements and other specific performance obligations of the City and Lennar Homes and its successors, including obligations related to development of the property in the District, with the terms, conditions, rules, regulations, entitlements, vested rights and other provisions relating to the development of the property in the District according to the entitlements. Included are provisions relating to infrastructure improvements, public dedication requirements, landscaping amenities and other obligations of the parties. The Development Agreement has a 30 -year term, runs with the property, and may be modified only by mutual consent of the City and Lennar Homes. With the Development Agreement in place, subject to compliance with the terms of the Development Agreement, construction of homes within Improvement Area No. 1 may occur upon City approval of subdivision maps, satisfaction of certain design requirements and conditions of such maps and issuance of building permits.
Improvements. The Development Agreement sets forth the responsibility of Lennar Homes and its successors for a portion of the costs of certain public improvements required for ITEM 12.1.
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its development ; Lennar Homes does not believe any of these improvements will impair its ability to timely obtain building permits.
Funding of the Improvements with the proceeds of the Bonds will satisfy a portion, but not all, of the relevant obligations of Lennar Homes for infrastructure improvements required by the Development Agreement. The improvements not funded from the Bonds or Special Taxes are required to be funded by Lennar Homes and subsequent successors in interest. See “THE IMPROVEMENTS” below.
No Affordable Units. There are no affordable unit requirements within Improvement Area No. 1.
Flood Hazard Map Information. According to the Federal Emergency Management Agency’s flood insurance rate maps (Flood Area Panel Number 06067C-0240J, with an effective date of July 19, 2018), the developable portions of the property in Improvement Area No. 1 are located within Flood Zone X, described as areas of minimal flooding (outside of the 100 and 500-year floodplains).
Seismic Conditions. The developable portions of the property in Improvement Area No. 1 are not located within a seismic special studies zone, designated by the California State Division of Mines and Geology, in accordance with the Alquist -Priolo Special Study Zone Act of 1972.
Wildfire Hazards. Land in Improvement Area No. 1 is not located in a High or Very High Fire Hazard Severity Zone (FHSZ), as defined by CAL FIRE.
Environmental Mitigation. According to Lennar Homes, all environmental mitigation requirements have been met for all of the 209 lots within Improvement Area No. 1.
Entitlements/Product Lines. The entitlements for the project permit a development proposal related to a particular parcel to proceed through tentative map subdivision and design - review permitting processes to final mapping provided the development application is in accord with the entitlements and the final map conditions. Lennar Homes has received all necessary approvals to develop the 209 lots within Improvement Area No. 1 , including, but not limited to, approval of Specific Plan Zoning and a Development Agreement, and subsequently received a Section 404 (wetlands) permit, California Water Board Section 401 Certification, and U.S. Fish and Wildlife Service Biological Opinion. Lennar Homes has also received a grading permit and site improvement plans to complete all planned 209 units in Improvement Area No. 1.
Final small-lot subdivision maps have been received for all 209 residential units in Improvement Area No. 1. Lennar Homes is developing the property in Improvement Area No. 1 in five product lines: Verdant II, Viridian II, Celedon, Midori and Jade . Each home in each product line will be a single-family, detached home.
Additional information regarding sales and pricing for each product line follows:
ITEM 12.1.
ATTACHMENT 4
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Grantline 220 Community Facilities District No. 2023-1
Improvement Area No. 1 – Special Tax Bonds
Status of Development – As of October 15, 2023
Project No. Lots
Building
Permits
Pulled(1)
Units
Completed
and Closed
to
Individuals
Units
Completed
and owned
by
Developer
Units under
Construction(1)
Finished
Lots
Final Map
Lots
Verdant II 72 20 0 0 20 72 72
Viridian II 33 15 0 0 15 33 33
Celedon 51 15 0 0 15 51 51
Jade 50 15 0 0 15 50 50
Midori 3 3 0 0 3 3 3
Totals 209 68 0 0 68 209 209
(1) Consists of 19 model homes and 49 production homes.
Source: Lennar Homes.
Grantline 220 Community Facilities District No. 2023-1
Improvement Area No. 1 – Special Tax Bonds
Base Pricing – As of October 15, 2023
Project
No. of
Lots
Floorplan
Sq. Ft.
Base Pricing(1)
Verdant II 72 1,579 – 2,528 $536,990 – 643,990
Viridian II 33 1,596 – 2,609 $565,990 – 670,990
Celedon 51 1,765 – 2,966 $598,990 – 718,990
Jade 50 1,991 – 3,025 $638,990 – 739,990
Midori 3 2,510 – 3,308 $700,000 – 779,000
Totals 209
_______________
(1) Base Pricing as of October 15, 2023. Excludes upgrades, concessions, and other offsets in pricing.
Source: Lennar Homes.
Backbone and In -Tract Infrastructure. The conditions of development for the project require the construction of various improvements at various times. As of October 2, 2023, all required backbone and in -tract infrastructure was in place for the development and sale of the 209 planned single-family homes in Improvement Area No. 1.
Land-Banking Arrangement With AG . In connection with a land banking transaction, on May 26, 2023, Lennar Homes transferred all 209 lots in Improvement Area No. 1 (the “Land Bank Lots”) to AG EHC II (LEN) CA 2, L.P., a Delaware limited partnership (the “Land Bank Owner”). In connection therewith, Lennar Homes and the Land Bank Owner entered into that certain Option Agreement, dated May 26, 2023 (the “Lennar Option Agreement ”) whereby Lennar Homes has the option, but not the obligation, to purchase the Land Bank Lots from the Land Bank Owner beginning on May 26, 2023 and extending through September 10, 2026 (unless sooner terminated pursuant to the Lennar Option Agreement).
Lennar Homes is responsible for making special tax payments while the Lennar Option Agreement is in place. In the event that Lennar Homes does not exercise its option or the right to purchase the lots expires or is terminated, the Land Bank Owner being an investor only and not a homebuilder, would likely attempt to sell such lots to another merchant builder. Under the Lennar Option Agreement, Lennar has the option to take -down lots in accordance with the following take-down schedule:
ITEM 12.1.
ATTACHMENT 4
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Lennar Option Agreement – Take-Down Schedule
Cumulative Lot Absorptions by Lot Type
Option
Period
Date Option
Period
Expires Lot A Lot B Lot C Lot D Lot E Total
1 06/10/2023 0 0 0 0 0 0
2 07/10/2023 0 0 0 0 0 0
3 08/10/2023 3 3 3 4 3 16
4 09/10/2023 7 7 7 8 7 36
5 10/10/2023 11 11 11 12 11 56
6 11/10/2023 15 15 15 16 15 76
7 12/10/2023 19 19 19 20 19 96
8 01/10/2024 23 23 23 24 23 116
9 02/10/2024 27 27 27 28 27 136
10 03/10/2024 31 31 31 32 31 156
11 04/10/2024 35 35 35 36 35 176
12 05/10/2024 39 39 39 40 39 196
13 06/10/2024 43 43 43 44 43 216
14 07/10/2024 47 47 47 48 47 236
15 08/10/2024 51 51 51 52 51 256
16 09/10/2024 55 55 55 56 55 276
17 10/10/2024 59 59 59 60 59 296
18 11/10/2024 63 63 63 64 63 316
19 12/10/2024 67 67 67 68 67 336
20 01/10/2025 71 71 71 72 71 356
21 02/10/2025 75 75 75 76 75 376
22 03/10/2025 79 79 79 80 79 396
23 04/10/2025 83 83 83 84 83 416
24 05/10/2025 87 87 87 88 87 436
25 06/10/2025 91 90 90 92 92 455
26 07/10/2025 95 90 90 96 92 463
27 08/10/2025 99 90 90 100 92 471
28 09/10/2025 103 90 90 104 92 479
29 10/10/2025 107 90 90 108 92 487
30 11/10/2025 111 90 90 112 92 495
31 12/10/2025 111 90 90 118 92 501
32 01/10/2026 111 90 90 124 92 507
33 02/10/2026 111 90 90 130 92 513
34 03/10/2026 111 90 90 136 92 519
35 04/10/2026 111 90 90 142 92 525
36 05/10/2026 111 90 90 148 92 531
37 06/10/2026 111 90 90 154 92 537
38 07/10/2026 111 90 90 160 92 543
39 08/10/2026 111 90 90 166 92 549
40 09/10/2026 111 90 90 190 92 573
_____________
Source: Lennar Homes.
COVID-19. Except as described herein, Lennar Homes has not experienced any material increases in costs, or any development or home sale delays resulting from decisions to reduce financing for the projects, inability to obtain financing, work stoppages, reduced attendance of workers, lack of or delays in the delivery of building materials or the ability to obtain necessary inspections and approvals, which Lennar Homes attributes to the COVID -19 pandemic. To date, Lennar Homes has continued to fund and implement its projects as described in this Official Statement and intends to do so to complete such projects. However, the development of Improvement Area No. 1 is subject to delays caused by the COVID -19 pandemic. As the impacts caused by the outbreak evolve, there could be an adverse impact on the timing and costs of the Sage neighborhood. See “BOND OWNERS’ RISKS – Pandemic Diseases.” Lennar Homes cannot predict the ultimate effects of the COVID -19 outbreak or whether any such effects would have a material adverse effect on the ability to develop the project as planned.
ITEM 12.1.
ATTACHMENT 4
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Sources and Uses. The following table shows Lennar Homes’ estimated sources and uses of funds for the construction of the backbone infrastructure and in -tract infrastructure needed for the 209 lots within Improvement Area No. 1. A portion of these costs are eligible for reimbursement from the proceeds of the Bonds and other District sources.
Table 1
City of Rancho Cordova
Grantline 220 Community Facilities District No. 2023-1
Improvement Area No. 1 – Special Tax Bonds
Lennar Homes – Sources and Uses
(As of December 1, 2023)
CASH FLOW Total
Complete
12/1/2023
Remainder
2023 2024
2025
INFLOW
Land Sales
Estimated Bond proceeds
Credits/Reimb
Gas/JT
Credits: SVSP & Other
PH1 Cost Reimb. From Adjacent
Owners
Cost Share Adjacent Owners
Total
OUTFLOW
Land Purchase
Intracts - PH1
Intracts - PH2
Infrastructure
Common Costs
Fish & Game/Wetland
Credits given to Adjacent Owners
Total
Net
Developer Self Fund Amount
______________________
Source: Lennar Homes.
Although Lennar Homes expects to have sufficient funds available to complete its development in Improvement Area No. 1 as described in this Official Statement, there can be no assurance that amounts necessary to finance the development costs will be available from Lennar Homes or any other source when needed. Neither Lennar Homes, nor any of its related entities are under any legal obligation of any kind to expend funds for the development of and construction of homes on its property in Improvement Area No. 1. Any contributions by Lennar Homes or any related parties to fund the costs of such development are entirely voluntary.
If and to the extent that internal funding are inadequate to pay the costs to complete the planned development by Lennar Homes within Improvement Area No. 1 and other financing is not put into place, there could be a shortfall in the funds required to complete the planned development by Lennar Homes in Improvement Area No. 1.
Except as described in this Official Statement and except for those consents, permits, authorizations, certifications and approvals of governmental entities required in the ordinary ITEM 12.1.
ATTACHMENT 4
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course of development, Lennar Homes has no actual knowledge of any impediment to construction or obtaining land use entitlements which could be reasonably expected to have a material adverse effect on its ability to complete the planned development of its property within Improvement Area No. 1 as described in the Official Statement. Although the information in this Official Statement reflects the current development expectations of the Developer, no assurance can be given that lot acquisition from the Land Bank Owner or home construction and sales will be carried out on the schedule and according to the plans described herein, or that the lot acquisition from the Land Bank Owner or home construction and sale plans or base prices set forth herein will not change after the date of this Official Statement. The Developer reserves the right to change its development at any time without notice. Additionally, homes under contract to be sold may not result in closed escrows as sales contracts are subject to cancellation.
ITEM 12.1.
ATTACHMENT 4
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THE FACILITIES
Eligible Facilities
The Facilities eligible to be financed by the District (including Improvement Area No. 1 therein) 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 and other local agencies for development within the District (including Improvement Area No. 1 therein) , as well as incidental expenses as authorized by the Mello-Roos Act.
The proceeds of the Bonds will be used for a portion of the cost of the public improvements (and/or development impact fees) eligible to be financed with the proceeds of the 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, of which Improvement Area No. 1 forms a part.
Table 2
City of Rancho Cordova
Grantline 220 Community Facilities District No. 2023-1
Improvement Area No. 1 – Special Tax Bonds
Expected Cost of Facilities
Facility Category Estimated Cost
Roadway and Transportation Improvements $18,929,000
Sewer improvements 6,300,000
Total $25,229,000
Source: CFD Hearing Report, dated August 2023.
Acquisition by the City and other Local Agencies
In connection with the issuance of the Bonds, the City and Lennar Homes will enter into a Funding, Construction and Acquisition Agreement dated as of January 1, 2024 (the “Acquisition Agreement”) which provides that Lennar Homes (or successors) will construct (or cause to be constructed or funded) the Facilities. As components of the Facilities are completed, proceeds of a portion of the 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 Bond proceeds, will be the responsibility of Lennar Homes.
It is also anticipated that the City will enter into joint community facilities agreements with the Cordova Recreation and Park District , the Sacramento County Water Agency (SCWA), and/or the Sacramento Regional County Sanitation District so that a portion of the proceeds of the Bonds and other special tax bonds issued for the District may finance the development impact fees and/or Facilities to be acquired by those local agencies.
ITEM 12.1.
ATTACHMENT 4
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The Special Tax Formula provides that the funding of Improvement costs can also be made from collections of the Special Tax available as the “pay-as-you-go” component of Special Taxes. 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.
OWNERSHIP OF PROPERTY WITHIN IMPROVEMENT AREA NO. 1
Unpaid Special Taxes do not constitute a personal indebtedness of the owners of the parcels within Improvement Area No. 1 . 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 Improvement Area No. 1 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 Improvement Area No. 1.
Lennar Homes has provided the respective information set forth under the heading “OWNERSHIP OF PROPERTY WITHIN IMPROVEMENT AREA NO. 1 ” 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 Lennar Homes 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 2024 BONDS” and “BOND OWNERS’ RISKS” herein.
Current Ownership. As noted above, Lennar Homes is land -banking the lots within Improvement Area No. 1. Accordingly, all 209 planned units are currently owned by the Land Bank Owner, with take -downs to Lennar Homes anticipated per a negotiated take -down option schedule. See “– IMPROVEMENT AREA NO. 1 – Development in Improvement Area No. 1.”
No homes are currently owned by individual homeowners.
Land Bank Owner. The Land Bank Owner is an affiliate of, and managed by, Angelo Gordon & Co., L.P. (“Angelo Gordon ”). Angelo Gordon is a privately -held alternative investment firm founded in 1988 and headquartered in New York, with associated offices across the United States, Europe and Asia. Angelo Gordon manages approximately $52 billion across a broad range of credit and real estate strategies. Affiliates of the Land Bank Owner have entered into land banking arrangements with Lennar Corporation and its affiliated entities on more than 200 residential development projects. Neither the Land Bank Owner nor Angelo Gordon is a developer or a merchant builder.
Lennar Homes. Lennar Homes is based in Irvine, California. Lennar Homes has been in the business of developing residential real estate communities in California since 1996. On February 1, 2022, Lennar Homes of California, Inc., a California corporation, was converted to a California limited liability company and is now known as Lennar Homes of California, LLC, a California limited liability company (“ Lennar Homes”). All references herein to Lennar Homes prior to February 1, 2022 shall mean Lennar Homes of California, Inc. a California corporation, ITEM 12.1.
ATTACHMENT 4
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and all references herein to Lennar Homes on and after February 1, 2022 shall mean Lennar Homes of California, LLC, a California limited liability company.
Lennar Homes is wholly-owned by U.S. Home, LLC, a Delaware limited liability company (“U.S. Home”). U.S. Home is wholly -owned by Lennar Corporation, which is based in Miami, Florida. Founded in 1954, Lennar Corporation completed its initial public offering in 1971 and listed its common stock on the New York Stock Exchange in 1972. Lennar Corporation’s Class A and Class B common stock are listed on the New York Stock Exchange under the symbols “LEN” and “LEN.B.” respectively. Lennar Corporation is one of the largest homebuilders in the United States based on home sales revenues and net earnings, and operates under a number of brand names, including Lennar Homes and U.S. Home. Lennar Homes primarily develops residential communities both within the Lennar family of builders and through consolidated and unconsolidated partnerships in which Lennar Homes maintains an interest.
Lennar Corporation is subject to the informational requirements of the Exchange Act and in accordance therewith files reports, proxy statements and other information with the SEC.
Such filings, particularly the Annual Report on Form 10 -K and its most recent Quarterly Report on Form 10-Q, set forth, among other things, certain data relative to the consolidated results of operations and financial position of Lennar Corporation and its consolidated subsidiaries, including Lennar Homes, as of such dates.
The SEC maintains a website that contains reports, proxy and other information statements and other information regarding registrants that file electronically with the SEC, including Lennar Corporation. The address of such website is www.sec.gov. All documents filed by Lennar Corporation pursuant to the requirements of the Exchange Act after the date of this Periodic Report will be available for inspection in such manner as the SEC prescribes.
Copies of Lennar Corporation’s Annual Report and related financial statements, prepared in accordance with generally accepted accounting standards, are available from Lennar Corporation’s website at www.lennar.com. The foregoing website addresses and references to filings with the SEC are given for reference and convenience only, and the information on such websites and on file with the SEC does not form a part of this Official Statement and is not incorporated by reference herein. No representation is made in this Official Statement as to the accuracy or adequacy of the information contained on such websites.
Lennar Corporation and Lennar Homes are not 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 or the Underwriter.
ITEM 12.1.
ATTACHMENT 4
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VALUE OF PROPERTY WITHIN IMPROVEMENT AREA NO. 1
Assessed Values and Building Permits
The following table shows the assessed valuation of taxable property within Improvement Area No. 1 for Fiscal Year 2023-24. Given the ongoing development of land within Improvement Area No. 1, the City has ordered an appraisal of such land, as described below under “– Appraised Values.” The following table also provides the number of building permits issued.
Table 3
City of Rancho Cordova
Grantline 220 Community Facilities District No. 2023-1
Improvement Area No. 1 – Special Tax Bonds
Assessed Valuation
Fiscal
Year
Land
Assessed
Value
Improvement
Assessed
Value
Total
Assessed
Value
Number of
Permits
Issued(1)
2023-24 $14,694,520 $0 $14,694,520 0
(1) Represents the number of parcels for which a building permit for new construction was issued prior to June 1 of the prior fiscal year.
Sources: Sacramento County Assessor's Office; Goodwin Consulting Group, Inc.
Appraised Values
General. The value of taxable property within Improvement Area No. 1 is a critical factor in determining the investment quality of the Bonds. In order to obtain a more accurate estimate of the value of land in Improvement Area No. 1 , the City ordered preparation of an appraisal report dated October 19, 2023 and a bring -forward letter dated November 30, 2023 (together, the “Appraisal”), of the estimated value of the taxable land within Improvement Area No. 1 as of the October 15, 2023 date of value and confirming a “not-less-than value” of such property as of November 30, 2023 . 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.
The Appraisal estimated the market value of all of the land in Improvement Area No. 1 , which, as of the date of value, encompasses approximately 52 acres and was planned for 209 single-family residential homes.
Value Estimate . The appraised valuation excludes the value of all portions of the property in Improvement Area No. 1 designated for public and quasi -public purposes and assumes completion of infrastructure funded by the 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 that certain proceeds of the Bonds are available to finance certain improvements and/or fees.
The value estimate for the property as of the date of value of October 15, 2023 and confirmed as a “not -less-than-value” as of November 30, 2023 , using the methodologies ITEM 12.1.
ATTACHMENT 4
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described in the Appraisal and subject to the limiting and hypothetical conditions and general and special assumptions set forth in the Appraisal is $41,663,000.
Valuation Methodology. The market value of the appraised property was estimated by utilizing the sales comparison approach and land residual analysis to value of the subject ’s lots.
In valuing the subject lots, the Appraiser selected benchmark lot categories. In the sales comparison approach, adjustments were applied to the prices of comparable bulk lot transactions, and a market value for the benchmark lot categories were concluded. Finally, the Appraiser utilized a land residual analysis, which was reconciled with the sales comparison approach conclusion. In the land residual analysis (a variation of the cost approach and income capitalization approaches combined), all direct and indirect costs are deducted from an estimate of the anticipated gross sales price of the improved product; the resultant net sales proceeds are then discounted to present value at an anticipated rate over the development and absorption period to indicate the residual value of the lots.
According to the Appraiser, i n a shifting market that currently exists, the land residual analysis is considered to be the most applicable approach to value. The sales comparison approach is typically a lagging indicator of value in a rapidly expansionary or contracting market.
According to the Appraiser, t here has been a lack of recent lot sales within the region due to homebuilders putting off the decision to purchase more lots due to the recent rise in interest rates. However, there is a very recent lot sale within the City of Elk Grove, which provides further support for the sales comparison approach. Therefore, each approach is given equal reliance to arrive at an estimate of market value.
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 Bonds will be used to fund certain improvements and/or fees. The estimate of market value accounts for the impact of the lien of the Special Taxes securing the 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 value conclusions are based on the following hypothetical conditions that may affect the assignment results. A hypothetical condition is a condition contrary to known fact on the effective date of the appraisal but is supposed for the purpose of analysis. The value conclusions are subject to the following extraordinary assumptions that may affect the assignment results. An extraordinary assumption is uncertain information accepted as fact. If the assumption is found to be false as of the effective date of the appraisal, The Appraiser reserves the right to modify the value conclusions.
• 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.
• 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 ITEM 12.1.
ATTACHMENT 4
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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 Improvement Area No. 1 ; 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 Improvement Area No. 1 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 principal amount of the direct and overlapping debt in Improvement Area No. 1 is9,492,705
*, which consists of the estimated amount of Bonds ($9,000,000*) and $492,705 of overlapping general obligation and CFD bond debt. Consequently, the estimated value of property in Improvement Area No. 1 subject to the Special Tax lien ($41,663,000), is approximately 4.4* times the principal amount of the direct and overlapping debt in Improvement Area No. 1. This is an average and individual parcels may vary considerably from this average.
In comparing the value of the real property within Improvement Area No. 1 to the principal amount of the Bonds and other direct and overlapping debt for Improvement Area No. 1, 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 Improvement Area No. 1 cannot be foreclosed upon as a whole to pay delinquent Special Taxes of the owners of such parcels within Improvement Area No. 1 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 Improvement Area No. 1 could, without the consent of the City and in certain cases without the consent of the owners of the land within Improvement Area No. 1 , impose additional taxes or assessment liens on the
* Preliminary; subject to change.
ITEM 12.1.
ATTACHMENT 4
-39-
land within Improvement Area No. 1 . The purpose would be to finance additional regional or local public improvements or services. The lien created on the land within Improvement Area No. 1 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 Improvement Area No. 1 or home loans may be obtained by ultimate homeowners.
The deeds of trust securing such debt on property within Improvement Area No. 1, however, will be in a junior position to the lien of the Special Tax.
The land within Improvement Area No.1 is located within the boundary of an Elk Grove Unified School District community facility district, pursuant to which a n annual special tax of $200 per parcel will be levied following issuance of a building permit. As additional development occurs in Improvement Area No. 1 the Elk Grove USD CFD lien amount may be larger than what is shown.
ITEM 12.1.
ATTACHMENT 4
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Value-to-lien Ratios by Development Status. The following table shows the projected status of development and value-to- lien ratios by village in Improvement Area No. 1 for fiscal year 2024-25, based on the status of development as of October 15, 2023 and assuming no further development. Value-to-lien ratios on individual parcels may vary considerably from any average.
Table 4
City of Rancho Cordova
Grantline 220 Community Facilities District No. 2023-1
Improvement Area No. 1 – Special Tax Bonds
Value-to-Lien Ratios by Development Status – Projected for Fiscal Year 2024-25
Development
Status (1)
No. of
Parcels
Appraised
Value (2)
Projected
FY 2024-25
Maximum
Special Tax*
Projected
FY 2024-25
Special Tax
Levy (3)*
Percent of
Projected
Special Tax
Levy*
CFD
Bonds (4)*
Overlapping
Debt (5)*
Total
Debt*
Average
Appraised
Value-to-
Lien*
Developed Property
Verdant II 20 $4,786,000 $46,920 $46,920 9.0% $813,289 $47,149 $860,438 5.6 : 1 Viridian II 15 3,650,000 39,795 39,795 7.7 689,793 35,362 725,155 5.0 : 1 Celedon 15 3,815,000 42,381 42,381 8.2 734,612 35,362 769,974 5.0 : 1 Jade 15 3,815,000 48,516 48,516 9.3 840,959 35,362 876,320 4.4 : 1 Midori 3 826,000 10,912 10,912 2.1 189,143 7,072 196,215 4.2 : 1 Subtotal 68 $16,892,000 $188,525 $188,525 36.3% $3,267,796 $160,306 $3,428,102 4.9 : 1
Final Map Property
Verdant II 52 $8,716,000 $121,992 $104,878 20.2% $1,817,902 $122,587 $1,940,489 4.5 : 1 Viridian II 18 3,089,000 47,754 41,055 7.9 711,624 42,434 754,058 4.1 : 1 Celedon 36 6,574,000 101,714 87,445 16.8 1,515,726 84,868 1,600,593 4.1 : 1 Jade 35 6,392,000 113,205 97,323 18.7 1,686,953 82,510 1,769,463 3.6 : 1 Midori 0 0 0 0 0.0 0 0 0 N/A
Subtotal 141 $24,771,000 $384,665 $330,700 63.7% $5,732,204 $332,399 $6,064,603 4.1 : 1
Total 209 $41,663,000 $573,190 $519,225 100.0% $9,000,000 $492,705 $9,492,705 4.4 : 1
* Preliminary; subject to change.
(1) Development status based on the Appraisal Report and as of the October 15, 2023 date of value of the Appraisal. (2) Appraised values were allocated to the individual parcels based on the expected development and lot status for each parcel, a s reported in the Appraisal. The allocated appraised values are not indicative of the market values of the villages or the individual lots. (3) Includes building permits issued prior to October 15, 2023, final maps recorded prior to June 30, 2023, and assumes no further development. Includes debt service due in 2025 on the 2024 Bonds and estimated administrative expenses in the amount of $30,600. The Administrative Expense Priority for Fiscal Year 2023-24 is $30,000. (4) Consists of the par amount of the 2024 Bonds. Allocated based on the Projected Fiscal Y ear 2024-25 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 parcel and assessed value as of FY 2023-24. Does not include any PACE liens secured by assessments or special taxes on the property.
Sources: Integra Realty Resources, Inc.; Piper Sandler & Co.; California Municipal Statistics, Inc.; Goodwin Consulting Group, Inc.
ITEM 12.1.
ATTACHMENT 4
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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 Improvement Area No. 1 for Fiscal Year 2024-25.
Table 5
City of Rancho Cordova
Grantline 220 Community Facilities District No. 2023-1
Improvement Area No. 1 – Special Tax Bonds
Value-to-Lien Ratio Ranges – Projected for Fiscal Year 2024-25
Appraised
Value-to-Lien
Category
No. of
Parcels*
Appraised
Value (1)
Projected
FY 2024-25
Special Tax
Levy (2)*
Percent of
Projected
Special Tax
Levy*
CFD
Bonds(3)*
Overlapping
Debt (4)* Total Debt*
Average
Appraised
Value-to-
Lien*
5:1 to 10:1 35 $8,436,000 $86,715 16.7% $1,503,082 $82,510 $1,585,593 5.3 : 1 3:1 to 5:1 174 33,227,000 432,510 83.3 7,496,918 410,195 7,907,112 4.2 : 1 Totals 209 $41,663,000 $519,225 100.0% $9,000,000 $492,705 $9,492,705 4.4 : 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, a s reported in the Appraisal. The allocated appraised values are not indicative of the market values of the villages or the individual lots. (2) Includes building permits issued prior to October 15, 2023, final maps recorded prior to June 30, 2023, and assumes no further development.
Includes debt service due in 2025 on the 2024 Bonds and estimated administrative expenses in the amount of $30,600. The Administrative Expense Priority for Fiscal Year 2023-24 is $30,000.
(3) Consists of the par amount of the 2024 Bonds. Allocated based on the Projected Fiscal Y ear 2024-25 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 parcel and assessed value as of F iscal Year 2023-24. Does not include any PACE liens secured by assessments or special taxes on the property.
Sources: Integra Realty Resources, Inc.; Piper Sandler & Co.; California Municipal Statistics, Inc.; Goodwin Consulting Group , Inc.
Priority of Lien
The principal of and interest on the Bonds are payable from the Special Tax authorized to be collected within Improvement Area No. 1, and payment of the Special Tax is secured by a lien on certain real property within Improvement Area No. 1 . 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 Improvement Area No. 1 . 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 Improvement Area No. 1. 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 Improvement Area No. 1, may be placed upon property in Improvement Area No. 1 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.
ITEM 12.1.
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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 November 1, 2023. 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 Underwriter 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 Improvement Area No. 1 in whole or in part. The second column shows the assessed value of the area common to Improvement Area No. 1 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 Improvement Area No. 1 . 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 Improvement Area No. 1 . See Table 8 for estimated amounts of these parcel charges, assessments and special taxes for Fiscal Year 2023-24.
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 2023-24, and given that no individual homeowners yet own property in Improvement Area No. 1, none of the parcels within Improvement Area No. 1 had a PACE lien.
ITEM 12.1.
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Table 6
City of Rancho Cordova
Grantline 220 Community Facilities District No. 2023-1
Improvement Area No. 1 – Special Tax Bonds
Direct and Overlapping Indebtedness
As of November 1, 2023
2023-24 Local Secured Assessed Valuation: $14,694,655
DIRECT AND OVERLAPPING TAX AND ASSESSMENT DEBT: % Applicable Debt Los Rios Community College District General Obligation Bonds 0.006% $ 22,090 Elk Grove Unified School District General Obligation Bonds 0.029 125,457 Elk Grove Unified School District Community Facilities District No. 1 0.245 492,705 City of Rancho Cordova Community Facilities District No. 2023-1, IA 1 100.000 0 (1) TOTAL DIRECT AND OVERLAPPING TAX AND ASSESSMENT DEBT $640,252
OVERLAPPING GENERAL FUND DEBT:
Sacramento County General Fund Obligations 0.007% $ 7,028 Sacramento County Pension Obligation Bonds 0.007 28,736 Sacramento County Board of Education Certificates of Participation 0.007 143 Elk Grove Unified School District Certificates of Participation 0.029 3,207 City of Rancho Cordova Certificates of Participation 0.117 14,148 Sacramento Metropolitan Fire General Fund Obligations 0.016 1,226 Sacramento Metropolitan Fire Pension Obligation Bonds 0.016 4,184 Cordova Recreation and Park District General Fund Obligations 0.073 4,399 TOTAL GROSS OVERLAPPING GENERAL FUND DEBT $63,071
Less: Sacramento County supported obligations 734 TOTAL NET OVERLAPPING GENERAL FUND DEBT $62,337
GROSS COMBINED TOTAL DEBT $703,323 (2)
NET COMBINED TOTAL DEBT $702,589
Ratios to 2023-24 Local Secured Assessed Valuation:
Direct Debt ($0) ...................................................................... 0.00% Total Direct and Overlapping Tax and Assessment Debt ....... 4.36% Gross Combined Total Debt .................................................... 4.79% Net Combined Total Debt ........................................................ 4.78%
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(1) 2024 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.
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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 2024-25.
Table 7
City of Rancho Cordova
Grantline 220 Community Facilities District No. 2023-1
Improvement Area No. 1 – Special Tax Bonds
Sample Tax Bill – Fiscal Year 2024-25
Tax Zone 2 Tax Zone 3 Tax Zone 4
Net Taxable Value Amount Amount Amount
Estimated Market Values (1) $622,000.00 $652,040.00 $698,440.00 Less: Homeowner's Exemption (7,000.00) (7,000.00) (7,000.00) Net Taxable Value $615,000.00 $645,040.00 $691,440.00
Ad Valorem Property Taxes Rate Amount Amount Amount
Base Property Tax 1.0000% $6,150.00 $6,450.40 $6,914.40 Los Rios College General Obligation Bond 0.0318% 195.57 205.12 219.88 Elk Grove Unified General Obligation Bond 0.0192% 118.08 123.85 132.76 Total Ad Valorem Property Taxes 1.0510% $6,463.65 $6,779.37 $7,267.03
Parcel Charges, Assessments, and Special Taxes (2)(3) Amount Amount Amount Water and Drainage Studies - SCWA 13 $6.92 $6.92 $6.92 Elk Grove USD CFD No. 1 200.00 200.00 200.00
Rancho Cordova CFD No. 2018-2 139.62 139.62 139.62
CRPD CFD No. 2018-1 590.66 590.66 590.66
Transit Related Services Zone 2 132.85 132.85 132.85 Rancho Cordova Lighting District 2012-1 2.56 2.56 2.56 Rancho Cordova CFD 2014-2 555.60 555.60 555.60
Rancho Cordova CFD No. 2013-2 650.62 650.62 650.62
Grantline 220 CFD No. 2023-1 (3) 2,601.00 2,770.00 3,171.00 Total Parcel Charges, Assessments, and Special Taxes $4,879.83 $5,048.83 $5,449.83
Total Taxes $11,343.48 $11,828.20 $12,716.86
Total Effective Tax Rate 1.82% 1.81% 1.82%
(1) Represents the estimated market values for the smallest floor plans in Viridian II, Celedon, and Jade, as reported in the App raisal. (2) Except where otherwise noted, based on Fiscal Year 2023-24 tax rates. (3) Does not include any PACE assessments or special taxes. (4) Equal to the applicable Maximum Special Tax rate in F iscal Year 2023-24.
Sources: Integra Realty Resources, Inc.; Goodwin Consulting Group, Inc.
ITEM 12.1.
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Special Tax Collections and Delinquencies
Fiscal Year 2023-24 is the first fiscal year during which the Special Tax will be levied, with the first payment due in December 2023. Accordingly, there is no history of collections and delinquencies. The levy of Special Taxes in Improvement Area No. 1 is currently covered by the Teeter Plan in the County. See “SECURITY FOR THE 2024 BONDS – Delinquent Payments of Special Tax; Covenant for Superior Court Foreclosure –Teeter Plan.”
BOND OWNERS’ RISKS
The purchase of the 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 Bonds.
Limited Obligation of the City to Pay Debt Service
The City has no obligation to pay principal of and interest on the 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 Bonds.
Concentration of Ownership
All of the land within Improvement Area No. 1 is currently owned and controlled, directly or indirectly, by Lennar Homes. Although there will be transfers of ownership of this property as development progresses and home sales are closed, the timely payment of the Bonds depends upon the willingness and ability of all of the owners of taxable property within Improvement Area No. 1 to pay the Special Taxes when due. The only assets of the owners of property within Improvement Area No. 1 which constitute security for the Bonds are such owners’ real property holdings located within Improvement Area No. 1 , 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 Improvement Area No. 1 , choose to default on payments of the Special Tax on parcels. Also see “– Bankruptcy Delays” below.
Development of undeveloped property within Improvement Area No. 1 may be subject to unexpected delays, disruptions and changes which may affect the willingness and ability of the homebuilder or other property owners to pay the Special Taxes when due. Certain infrastructure improvements remain to be completed in order for homes to be completed on the timeline currently expected by Lennar Homes. No assurance can be given that the proposed residential development will be partially or fully completed, and for purposes of evaluating the investment quality of the 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 “IMPROVEMENT AREA NO. 1.”
ITEM 12.1.
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Levy and Collection of the Special Tax
General. The principal source of payment of principal of and interest on the Bonds is the proceeds of the annual levy and collection of the Special Tax against property within Improvement Area No. 1.
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 Bonds.
In addition to the maximum annual Special Tax rate limitation in the Special Tax Formula, Section 53321(d) of the Mello-Roos Act provides that the special tax levied against any parcel for which an occupancy permit for private residential use has been issued may not be increased as a consequence of delinquency or default by the owner of any other parcel within a community facilities district by more than 10% above the amount that would have been levied in such fiscal year had there never been any such delinquencies or defaults. In cases of significant delinquency, these factors may result in defaults in the payment of principal of and interest on the Bonds.
No Relationship Between Property Value and Special Tax Levy. Because the Special Tax Formula 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 Improvement Area No. 1 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 Improvement Area No. 1 subject to a Special Tax and their proportionate share of debt service on the Bonds, and certainly not a direct relationship.
Factors that Could Lead to Special Tax Deficiencies. The following are some of the factors that might cause the levy of the Special Tax on any particular parcel of Taxable Property to vary from the Special Tax that might otherwise be expected:
Transfers to Governmental Entities. The number of parcels in Improvement Area No. 1 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.
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 2024 BONDS – Delinquent Payments of Special Tax; Covenant for Superior Court Foreclosure ” and in the Mello-Roos Act, ITEM 12.1.
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is subject to the same penalties and the same procedure, sale and lien priority in case of delinquency as is provided for ordinary ad valorem property taxes. Under these procedures, if taxes are unpaid for a period of five years or more, the property is deeded to the State and then is subject to sale by the County.
If sales or foreclosures of property are necessary, there could be a delay in payments to owners of the Bonds pending such sales or the prosecution of foreclosure proceedings and receipt by the City of the proceeds of sale if the Reserve Fund is depleted . See “SECURITY FOR THE 2024 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 Improvement Area No. 1. 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 Improvement Area No. 1 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 Improvement Area No. 1 ; this would decrease the value to lien ratios of parcels in Improvement Area No. 1.
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 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 Improvement Area No. 1 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 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 Bonds. See “SECURITY FOR THE 2024 BONDS – Reserve Fund,” and “SECURITY FOR THE 2024 BONDS – Delinquent Payments of Special Tax; Covenant for Superior Court Foreclosure.”
ITEM 12.1.
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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 2024 BONDS – Delinquent Payments of Special Tax; Covenant for Superior Court Foreclosure”); and increasing the levy of Special Taxes against non -delinquent property owners in Improvement Area No. 1 , 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 Improvement Area No. 1 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 Improvement Area No. 1 is a critical factor in determining the investment quality of the Bonds. If a property owner defaults in the payment of the Special Tax, the 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 Improvement Area No. 1.
Current Challenges to the Homebuilding Industry . No assurances can be given that the timing of construction of homes and/or sale of homes to individual homeowners projected by Lennar Homes in this Official Statement will be accomplished. Due to the current state of world affairs, the pace of homebuilding and sale of homes to individual homeowners in Improvement Area No. 1 may be adversely affected by a variety of factors, including rising interest rates, inflation and changes in economic conditions, increases in certain construction costs, droughts and water shortages or other environmental factors, workforce shortages and supply chain disruptions. For example, mortgage rates have recently hit multi -decade highs. Additionally, homebuilders are currently experiencing a known supply chain disruption with respect to obtaining electrical transformers needed for new development. Further, the recent increases in interest rates may slow the demand for new residential homes and a combination of historically high new home prices and rising interest rates may price some homebuyers out of entry -level homes. High inflation could force prospective homebuyers to account for other costs over purchasing a new home at a higher interest rate. See “VALUE OF PROPERTY WITHIN IMPROVEMENT AREA NO. 1 – Appraised Values – Currently Changing Market Conditions” above.
ITEM 12.1.
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Although such factors are not currently having a significant impact on the overall development of homes in Improvement Area No. 1, the impacts caused by such factors are evolving and no prediction can be made with respect to the ultimate effects of these factors on Lennar Homes’s ability to sell and close homes in Improvement Area No. 1. These external factors, if and as they arise, could have a material adverse effect on the ability to develop the homes in Improvement Area No. 1 as planned, and no assurance can be provided that Lennar Homes will be able to (a) complete in whole or in any part, or within any particular time, its construction of homes within Improvement Area No. 1; (b) avoid additional material increases in development costs or delays resulting from work stoppages, reduced attendance of workers and shortages or delays in the delivery of building materials; or (c) sell homes, and close home sales or not experience purchase contract cancellations, due to an economic downturn driven by rising interest rates, inflation or other changes in economic conditions.
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 Improvement Area No. 1, like those in much of California, may be subject to unpredictable seismic activity, including earthquakes. See “IMPROVEMENT AREA NO. 1 – 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 land in Improvement Area No. 1 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 Improvement Area No. 1 . Drought conditions have been present in the State numerous times in the recent past. Although much of the State, including property in the City, is now out of the worst drought category, the City cannot predict when worsening drought conditions and concomitant water -reduction requirements will return, what effect drought conditions could have on property values, or whether or to what extent water reduction requirements may affect the development of Improvement Area No. 1.
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 ITEM 12.1.
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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 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 Lennar Homes believes that no federally listed endangered or threatened species would be affected by the proposed development within Improvement Area No. 1, 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 Improvement Area No. 1 or reduce the value of undeveloped property.
Future Property Development
Continuing development of the parcels in Improvement Area No. 1 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 Improvement Area No. 1 may also be affected by development in surrounding areas, which may compete with the property in Improvement Area No. 1.
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 made significant ITEM 12.1.
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changes to many aspects of the Code that could have an impact on future property development, although to-date none have been widespread.
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 IMPROVEMENT AREA NO. 1 –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 Improvement Area No. 1 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 Improvement Area No. 1 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 Improvement Area No. 1 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 Improvement Area No. 1 subject to a Special Tax and may be secured by a lien on a parity with the lien of the Special Tax securing the 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 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 Improvement Area No. 1 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 2024 BONDS – Special Tax Formula.”
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 ITEM 12.1.
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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 Bonds are outstanding.
FDIC. In the event that any financial institution making any loan which is secured by real property within Improvement Area No. 1 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 City 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 ITEM 12.1.
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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 Improvement Area No. 1 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 Bonds.
Depletion of 2024 Reserve Account of the Reserve Fund
The 2024 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 2024 BONDS – Reserve Fund.” The 2024 Reserve Account of the Reserve Fund will be used to pay principal of and interest on the Bonds if insufficient funds are available from the proceeds of the levy and collection of the Special Tax against property within Improvement Area No. 1. If the 2024 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 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 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 2024 Reserve Account of the Reserve Fund will be depleted and not be replenished by the levy and collection of the Special Taxes.
ITEM 12.1.
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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 2024 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 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 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 Bonds and the possibility of delinquent Special Taxes not being paid in full.
To the extent that property in Improvement Area No. 1 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 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.
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.
ITEM 12.1.
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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 Improvement Area No. 1 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.”
ITEM 12.1.
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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 Improvement Area No. 1 or the lending of money secured by property in Improvement Area No.
1. The Mello-Roos Act and the City’s Mello-Roos 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 Mello -Roos 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 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 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 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 Bonds might become includable in gross income for purposes of federal income taxation retroactive to the date the Bonds were issued as a result of future acts or omissions of the 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 Bonds were to become includable in gross income for purposes of federal income taxation, the 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 2024 BONDS – Redemption.”
Future legislative proposals, if enacted into law, clarification of the Code or court decisions may cause interest on the 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 Bonds will be selected for audit by the IRS. It is also possible that the market value of such Bonds might be affected as a result of such an audit (or by an audit of similar bonds or securities).
ITEM 12.1.
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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 City. Subject to overriding federal constitutional principles, such collection may be materially and adversely affected by voter-approved initiatives, possibly to the extent of creating cash- flow problems in the payment of outstanding obligations such as the Bonds.
Proposition 218 – Voter Approval for Local Government Taxes —Limitation on Fees, Assessments, and Charges —Initiative Constitutional Amendment, added Articles XIIIC and XIIID to the California Constitution, imposing certain vote requirements and other limitations on the imposition of new or increased taxes, assessments and property-related fees and charges.
On November 2, 2010, California voters approved Proposition 26, entitled the “Supermajority Vote to Pass New Taxes and Fees Act. ” Section 1 of Proposition 26 declares that Proposition 26 is intended to limit the ability of the State Legislature and local government to circumvent existing restrictions on increasing taxes by defining the new or expanded taxes as “fees.” Proposition 26 amended Articles XIIIA and XIIIC of the State Constitution. The amendments to Article XIIIA limit the ability of the State Legislature to impose higher taxes (as defined in Proposition 26) without a two-thirds vote of the Legislature. Article XIIIC requires that all new local taxes be submitted to the electorate before they become effective. 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 bond authorization for Improvement Area No. 1 were each authorized by not less than a two- thirds vote of the landowners within Improvement Area No. 1 who constituted the qualified electors at the time of such voted authorization. The City believes, therefore, that issuance of the 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 Voting
On August 1, 2014, the California Court of Appeal, Fourth Appellate District, issued its opinion in City of San Diego v. Melvin Shapiro, et al. (D063997). The case involved a Convention Center Facilities District (the “CCFD”) established by the City of San Diego. The CCFD is a financing district established under 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 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 ITEM 12.1.
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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 Improvement Area No. 1 , there were fewer than 12 registered voters within Improvement Area No. 1 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 Improvement Area No. 1.
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 Improvement Area No. 1 in compliance with all applicable requirements of the Mello -Roos Act and, pursuant to Sections 53341 and 53359 of the Mello -Roos Act, the statute of limitations period to challenge the validity of the special tax has expired. Because the San Diego Court expressly stated that it did not consider the facts presented by Improvement Area No. 1 and the ITEM 12.1.
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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 Bonds or, if a secondary market exists, that any 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 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 Bonds for audit examination, or the course or result of any IRS audit or examination of the Bonds or obligations that present similar tax issues as the Bonds.
Pandemic Diseases
In recent years, public health authorities have warned of threats posed by outbreaks of disease and other public health threats. Pandemic diseases arising in the future could have significant adverse health and financial impacts throughout the world, leading to loss of jobs and personal financial hardships, and/or actions by federal, State and local governmental authorities to contain or mitigate the effects of an outbreak.
Taxpayer assistance measures may include deferral of due dates of property taxes, which was an assistance program during the COVID -19 pandemic, and with or without a deferral some taxpayers may be unable to make their property and Special Tax payments. No assurance can be given that the property tax payment dates will not be deferred in the future, which may cause a delay in the receipt of Special Taxes. In addition, home values may be affected by a reduction in demand stemming from personal finances, or general widespread economic circumstances resulting from pandemic diseases.
Cyber Security
The City, like many other public and private entities, relies on computer and other digital networks and systems to conduct its operations. As a recipient and provider of personal, private or other sensitive electronic information, the City is potentially subject to multiple cyber threats, including without limitation hacking, viruses, ransomware, malware and other attacks. No assurance can be given that the City ’s efforts to manage cyber threats and attacks will be successful in all cases, or that any such attack will not materially impact the operations or finances of the City or Improvement Area No. 1, or the administration of the Bonds. The City is also reliant on other entities and service providers in connection with the administration of the Bonds, including without limitation the County tax collector for the levy and collection of Special Taxes, the Fiscal Agent, and the dissemination agent. No assurance can be given that the City, Improvement Area No. 1 and these other entities will not be affected by cyber threats and attacks in a manner that may affect the Bond owners.
ITEM 12.1.
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Potential Early Redemption of Bonds from Prepayments
Property owners within Improvement Area No. 1, including Lennar Homes 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 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 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 City 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 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 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 Improvement Area No. 1, or the issuance of the Bonds, the Fiscal Agent Agreement, the Continuing Disclosure Agreement or the purchase contract with respect to the 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 Bonds for federal income tax purposes, or (vi) in any other way questions the status of the Bonds under State tax laws or regulations.
ITEM 12.1.
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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 Bonds is excluded from gross income for federal income tax purposes and such interest is not an item of tax preference for purposes of the federal alternative minimum tax. Interest on the Bonds may be subject to the corporate alternative minimum tax.
The opinions set forth in the preceding paragraph are subject to the condition that the 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 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 Bonds.
Tax Treatment of Original Issue Discount and Premium. If the initial offering price to the public at which a 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 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 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 Bonds to determine taxable gain upon disposition (including sale, redemption, or payment on maturity) of such Bond. The Tax Code contains certain provisions relating to the accrual of original issue discount in the case of purchasers of the Bonds who purchase the Bonds after the initial offering of a substantial amount of such maturity. Owners of such Bonds should consult their own tax advisors with respect to the tax consequences of ownership of 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 Bonds is sold to the public.
Under the Tax Code, original issue premium is amortized on an annual basis over the term of the Bond (said term being the shorter of the 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 Bond for purposes of determining taxable gain or loss upon disposition. The amount of original issue premium on a Bond is amortized each year over the term to maturity of the Bond on the basis of a constant interest rate compound ed on each interest 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 Bonds, including purchasers who do not purchase in the original offering, should consult their own tax advisors with respect ITEM 12.1.
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to State of California personal income tax and federal income tax consequences of owning such Bonds.
California Tax Status. In the further opinion of Bond Counsel, interest on the 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 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 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 Bonds, or as to the consequences of owning or receiving interest on the Bonds, as of any future date. Prospective purchasers of the 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 Bonds should also be aware that the ownership or disposition of, or the accrual or receipt of interest on, the 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 Bonds, the ownership, sale or disposition of the Bonds, or the amount, accrual or receipt of interest on the Bonds.
CONTINUING DISCLOSURE
The City
The City has covenanted for the benefit of owners of the Bonds to provide certain financial information and operating data relating to Improvement Area No. 1 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 2022-23 (due by April 1, 2024) and to provide notices of the occurrence of certain enumerated events. Additionally, Lennar Homes has covenanted for the benefit of owners of the Bonds to provide certain information by April 1 and October 1 of any fiscal year (commencing April 1, 2024) with respect to the property owned by it and its Affiliates (as defined in the Continuing Disclosure Certificate) within Improvement Area No. 1 (the “Developer Semi-Annual Report”) to owners of the Bonds (so long as it and the Land Bank Owner (during the term of the responsible for a certain percentage of the Special Taxes), as described in the Developer Semi-Annual Report, and to provide notices of the occurrence of certain enumerated events.
The City Annual Report and the Developer Semi-Annual Report and notices of listed events will be filed with the Municipal Securities Rulemaking Board. The covenants of the City ITEM 12.1.
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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 and the Semi-Annual Reports for Lennar Homes is summarized in “APPENDIX F – Form of Continuing Disclosure Undertakings.”
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 retain s Goodwin Consulting Group, Inc. to serve as dissemination agent with respect to the filings to be made with respect to the Bonds and its other undertakings under the Rule.
Lennar Homes
Lennar Homes is not an obligated party under the Rule but has voluntarily agreed to provide semi-annual continuing disclosure for the benefit of Bondowners. Lennar Homes will enter into a Continuing Disclosure Certificate (Developer) covenanting to provide certain information regarding the development of its property and notice of certain material events as they occur until such time as Lennar Homes and the Land Bank Owner (during the term of the Lennar Option Agreement) own property in Improvement Area No. 1 responsible for less than 20% of the special tax levy for Improvement Area No. 1.
Lennar Homes represents that, other than as disclosed in this paragraph, to the actual knowledge of Lennar Homes, Lennar Homes has not failed in any material respect to comply with any previous undertaking by it to provide periodic continuing disclosure reports or notices of material events with respect to community facilities districts or assessment districts in California within the past five years. However, (i) in connection with the $16,780,000 California Municipal Finance Authority Special Tax Revenue Bonds BOLD Program Series 2020B, Lennar Homes inadvertently failed to file the initial Semi- Annual Report by the due date of May 1, 2021, but filed a curative report on May 21, 2021; and (ii) in connection with the $5,795,000 City of Rancho Cordova Grantline 208 Community Facilities District No. 2018 -1 Special Tax Bonds, Series 2021B, Lennar Homes inadvertently failed to file the initial annual report by the due date of April 1, 2022, but filed a curative report on September 21, 2022.
NO RATING
The City has not obtained a formal credit rating on the Bonds and does not anticipate obtaining one on the Bonds in the future. Prospective purchasers of the Bonds are required to make independent determinations as to the credit quality of the Bonds and their appropriateness as an investment.
UNDERWRITING
The Bonds are being purchased by Piper Sandler & Co. , as underwriter (the “Underwriter”), at a purchase price of $____________ (which represents the aggregate principal amount of the Bonds ($____________), [plus/minus] [net] original issue [premium/discount] of $____________, and less an Underwriter’s discount of $____________).
ITEM 12.1.
ATTACHMENT 4
-64-
The purchase agreement relating to the Bonds provides that the Underwriter will purchase all of the Bonds, if any are purchased, the obligation to make such purchase being subject to certain terms and conditions set forth in such purchase agreement.
The Underwriter may offer and sell the Bonds to certain dealers and others at prices lower than the off ering 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 Bonds, some or all of fees or other compensation payable to certain professionals is contingent upon the issuance and delivery of the 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 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 and Improvement Area No. 1.
CITY OF RANCHO CORDOVA
By:
Chief Financial Officer
ITEM 12.1.
ATTACHMENT 4
A-1
APPENDIX A
RATE AND METHOD OF APPORTIONMENT OF SPECIAL TAX
ITEM 12.1.
ATTACHMENT 4
B-1
APPENDIX B
THE APPRAISAL
ITEM 12.1.
ATTACHMENT 4
C-1
APPENDIX C
SUMMARY OF CERTAIN PROVISIONS OF THE FISCAL AGENT AGREEMENT
ITEM 12.1.
ATTACHMENT 4
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 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 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, 2023.
CITY OF RANCHO CORDOVA, COUNTY OF SACRAMENTO
AND STATE OF CALIFORNIA
Population Estimates
Calendar Years 2019 through 2023, as of January 1
Calendar Year
City of
Rancho Cordova
County of
Sacramento
State of
California
2019 77,259 1,538,054 39,605,361
2020 78,333 1,553,157 39,648,938
2021 79,480 1,579,186 39,286,510
2022 80,156 1,573,366 39,078,674
2023 81,117 1,572,453 38,940,231
Source: State Department of Finance.
ITEM 12.1.
ATTACHMENT 4
D-2
Employment and Industry
The unemployment rate in the Sacramento --Roseville--Arden-Arcade MSA was 4.5 percent in August 2023, up from a revised 4.2 percent in July 2023, and below the year -ago estimate of 3.7 percent. This compares with an unadjusted unemployment rate of 5.1 percent for California and 3. 9 percent for the nation during the same period. The unemployment rate was 4.1 percent in El Dorado County, 4.0 percent in Placer County, 4.7 percent in Sacramento County, and 4.7 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 2018 through 2022.
SACRAMENTO-ARDEN ARCADE-ROSEVILLE MSA
(El Dorado, Placer, Sacramento, Yolo Counties)
Employment by Industry
(March 2022 Benchmark)
2018 2019 2020 2021 2022
Civilian Labor Force (1) 1,088,500 1,101,200 1,095,600 1,107,800 1,124,500 Employment 1,047,200 1,061,100 998,400 1,036,700 1,082,500 Unemployment 41,200 40,100 97,200 71,100 42,000
Unemployment Rate 3.8% 3.6% 8.9% 6.4% 3.7%
Wage and Salary Employment (2)
Agriculture 9,100 8,700 8,300 9,000 8,600
Mining and Logging 400 500 500 500 500
Construction 64,500 69,400 70,200 74,900 76,800
Manufacturing 36,000 36,800 36,100 37,700 40,300
Wholesale Trade 28,400 28,600 26,600 26,900 28,300
Retail Trade 102,000 100,500 95,100 100,600 100,800
Transportation, Warehousing and Utilities 29,500 32,200 34,300 37,500 40,500 Information 12,400 11,900 10,200 10,100 10,500
Finance and Insurance 36,700 35,200 34,800 34,100 33,200 Real Estate and Rental and Leasing 16,800 17,300 16,900 17,700 19,100 Professional and Business Services 136,000 137,300 133,500 140,600 147,500 Educational and Health Services 159,800 166,600 164,000 168,800 175,400 Leisure and Hospitality 106,200 109,600 83,900 93,600 108,700 Other Services 34,200 35,400 31,000 33,300 36,100
Federal Government 14,100 14,200 14,800 14,500 14,300
State Government 120,400 121,900 121,700 127,300 128,700 Local Government 103,500 105,300 98,900 98,400 102,900
Total, All Industries (3) 1,009,900 1,031,300 980,700 1,025,400 1,072,300
(1) Labor force data is by place of residence; includes self -employed individuals, unpaid family workers, household domestic workers, and workers on strike.
(2) Industry employment is by place of work; excludes self-employed individuals, unpaid family workers, household domestic workers, and workers on strike.
(3) Totals may not add due to rounding.
Source: State of California Employment Development Department.
ITEM 12.1.
ATTACHMENT 4
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, 2022.
CITY OF RANCHO CORDOVA
Principal Employers
As of June 2022
Employer
Number of
Employees
Percent of Total
Employment
VSP Global 1,600 3.32%
Franklin Templeton 1,200 2.49
Cordova Folsom Unified School District 1,017 2.11
Accentcare Home Health 727 1.51
Health Net Federal Services 700 1.45
The Permanente Medical Group 559 1.16
Kaiser Foundation Hospitals 497 1.03
Plexus Optix, Inc 428 0.89
Nidec Motor Corporation 400 0.83
Automotive Importing Manufacturing 303 0.63
Source: City of Rancho Cordova, Comprehensive Annual Financial Report for the Fiscal Year Ended June 30, 2022.
ITEM 12.1.
ATTACHMENT 4
D-4
Major Employers
The following table lists the major employers within the County as of October 2023, in alphabetical order.
COUNTY OF SACRAMENTO
Major Employers
As of October 2023
Employer Name Location Industry
Aerojet Rocketdyne Inc Rancho Cordova Aerospace Industries (mfrs) 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 Colliers International Ltd Sacramento Real Estate
Corrections Department Sacramento State Govt-Correctional Institutions Delta Dental of California Rancho Cordova Medical Insurance Plans Disabled American Veterans Sacramento Veterans' & Military Organizations Employment Development Dept Sacramento Outplacement Consultants Environmental Protection Agcy Sacramento State Government-Air/Water/Solid Waste Manage 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 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, 2024 1st Edition.
ITEM 12.1.
ATTACHMENT 4
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 2020 through 2023.
CITY OF RANCHO CORDOVA, COUNTY OF SACRAMENTO, THE STATE OF CALIFORNIA
AND THE UNITED STATES
Effective Buying Income
As of January 1, 2020 through 2023
Year Area
Total Effective
Buying Income
(000s’ Omitted)
Median Household
Effective Buying
Income
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
2023 City of Rancho Cordova $2,533,621 $71,022
County of Sacramento 51,865,551 70,001
California 1,461,799,662 77,175
United States 11,454,846,397 65,326
Source: Claritas, LLC.
ITEM 12.1.
ATTACHMENT 4
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 the first two quarters of calendar year 2023 in the City were reported to be $ 1,035,026,923, a 2.75% decrease in the total taxable sales of $ 1,064,325,404 reported during the first two quarters of calendar year 2022.
CITY OF RANCHO CORDOVA
Taxable Transactions
(Dollars in Thousands)
Retail and Food Services Stores Total All Outlets
Number
of Permits
Taxable
Transactions
Number
of Permits
Taxable
Transactions
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
2022 1,429 1,390,475 2,682 2,171,811
Source: California Department of Tax and Fee Administration
Total taxable sales during the first two quarters of calendar year 2023 in the County were reported to be $ 17,430,150,622, a 2.28% increase over the total taxable sales of $17,837,639,070 reported during the first two quarters calendar year 2022.
COUNTY OF SACRAMENTO
Taxable Transactions
(Dollars in Thousands)
Source: California Department of Tax and Fee Administration Retail and Food Services Stores Total All Outlets
Number
of Permits
Taxable
Transactions
Number
of Permits
Taxable
Transactions
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
2022 26,589 24,679,703 44,158 36,511,260
ITEM 12.1.
ATTACHMENT 4
D-7
Construction Activity
The following tables show a five -year summary of the valuation of building permits issued in the City and the County.
CITY OF RANCHO CORDOVA
Total Building Permit Valuations
(Dollars in Thousands)
2018 2019 2020 2021 2022
Permit Valuation
New Single-family $104,525.9 $158,521.8 $164,435.7 $171,194.6 $186,410.7 New Multi-family 3,069.2 0.0 0.0 0.0 18,935.0
Res. Alterations/Additions 3,798.0 3,492.2 7,657.0 6,503.1 6,202.0 Total Residential 111,393.1 162,014.0 172,092.7 177,697.7 211,547.7
New Commercial 10,152.0 2,320.7 28,635.4 2,672.0 12,093.0 New Industrial 11,662.0 366.0 0.0 0.0 2,030.0
New Other 805.7 1,336.2 2,150.6 5,970.7 11,624.9
Com. Alterations/Additions 26,283.6 24,046.0 34,812.6 67,569.2 35,436.7 Total Nonresidential 48,903.3 28,068.9 65,598.6 76,211.9 61,184.6
New Dwelling Units
Single Family 217 561 575 552 620
Multiple Family 50 0 0 0 149
TOTAL 267 561 575 552 769
Source: Construction Industry Research Board, Building Permit Summary.
COUNTY OF SACRAMENTO
Total Building Permit Valuations
(Dollars in Thousands)
2018 2019 2020 2021 2022
Permit Valuation
New Single-family $1,069,568.4 $1,108,399.9 $1,008,391.7 $1,310,379.5 $1,183,213.4 New Multi-family 158,647.0 265,188.8 467,418.7 323,462.6 413,368.8 Res. Alterations/Additions 276,723.6 293,210.5 262,864.6 276,570.4 373,409.6 Total Residential 1,504,939.0 1,666,799.2 1,738,675.0 1,910,412.5 1,969,991.8
New Commercial 303,806.0 666,664.3 449,494.3 197,946.8 268,582.0 New Industrial 14,151.1 31,851.4 31,155.0 83,171.4 38,163.3 New Other 128,325.7 105,555.1 75,356.7 104,932.9 155,071.3 Com. Alterations/Additions 518,663.2 700,604.0 335,458.0 320,447.6 432,950.0 Total Nonresidential 964,946.0 1,504,674.8 891,464.0 706,498.7 894,766.6
New Dwelling Units
Single Family 3,589 3,981 3,588 4,205 3,832
Multiple Family 1,272 2,008 2,868 2,266 3,419
TOTAL 4,861 5,989 6,456 6,471 7,251
Source: Construction Industry Research Board, Building Permit Summary.
ITEM 12.1.
ATTACHMENT 4
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
Grantline 220 Community Facilities District No. 2023-1
Improvement Area No. 1, Special Tax Bonds Series 2024
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 January 1, 2024 , by and between the City and U.S. Bank Trust Company, National Association, as fiscal agent (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.
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 ITEM 12.1.
ATTACHMENT 4
D-2
tax. The opinions set forth in the preceding sentences 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.
Interest on the Bonds may be subject to the corporate alternative minimum tax. 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. Moreover, our opinions are not a guarantee of a particular result, and are not binding on the Internal Revenue Service or any court; rather, our opinions represent our legal judgment based upon our review of existing law that we deem relevant to such opinions and in reliance upon the representations, opinions, and covenants referenced above.
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
F-1
APPENDIX F
FORM OF CONTINUING DISCLOSURE UNDERTAKINGS
CONTINUING DISCLOSURE CERTIFICATE
(City)
$_________
CITY OF RANCHO CORDOVA
GRANTLINE 220 COMMUNITY FACILITIES DISTRICT NO. 2023-1
IMPROVEMENT AREA NO. 1
SPECIAL TAX BONDS
SERIES 2024
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 January 1, 2024 (the “Fiscal Agent Agreement”), by and between the City and U.S. Bank Trust Company, 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 S.E.C. Rule 15c2 - 12(b)(5).
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.
“District” means the City of Rancho Cordova Grantline 220 Community Facilities District No. 2023-1.
ITEM 12.1.
ATTACHMENT 4
F-2
“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.
“Improvement Area No. 1” means Improvement Area No. 1 of the District.
“Listed Events” means any of the events listed in Section 5(a) of this Disclosure Certificate.
“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, com mencing April 1 , 2024, with the report for the 2022-23 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( b). 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 such effect.
(c) The Dissemination Agent shall:
ITEM 12.1.
ATTACHMENT 4
F-3
(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:
(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 IMPROVEMENT AREA NO. 1 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.
(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 Improvement Area No. 1.
ITEM 12.1.
ATTACHMENT 4
F-4
(7) Until the fiscal year in which the Special Tax levied on the developed property in Improvement Area No. 1 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 in Improvement Area No. 1.
(c) For so long as there is any owner of property in Improvement Area No. 1 whose properties collectively represent 1 0% or more of the Special Taxes , the following information regarding the status of development in Improvement Area No. 1:
(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 City.
(3) Assessed valuation of property shown on County Assessor’s tax rolls with no “improvements” value in Improvement Area No. 1 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.
(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 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.
ITEM 12.1.
ATTACHMENT 4