This Preliminary Official Statement and the information contained herein are subject to completion or amendment. Under no circumstances shall this Preliminary Official Statement constitute 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 qualification of the securities laws of such jurisdiction. This Preliminary Official Statement and the information contained herein are subject to completion or amendment. Under no circumstances shall this Preliminary Official Statement constitute 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 qualification of the securities laws of such jurisdiction. PRELIMINARY OFFICIAL STATEMENT DATED SEPTEMBER __, 2023 This Preliminary Official Statement and the information contained herein are subject to completion or amendment. Under no circumstances shall this Preliminary Official Statement constitute 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 qualification of the securities laws of such jurisdiction.
This Preliminary Official Statement and the information contained herein are subject to completion or amendment. Under no circumstances shall this Preliminary Official Statement constitute 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 qualification of the securities laws of such jurisdiction.
NEW ISSUE - BOOK-ENTRY ONLY NO RATING
In the opinion of Norton Rose Fulbright US LLP, Los Angeles, California, Bond Counsel, under existing statutes, regulations, rulings and judicial decisions, and assuming compliance with the tax covenants in the documents pertaining to the 2023 Bonds and requirements of the Internal Revenue Code of 1986, interest on the 2023 Bonds is not included in the gross income of the owners of the 2023 Bonds for federal income tax purposes. In the further opinion of Bond Counsel, interest on the 2023 Bonds is not an item of tax preference for purposes of the federal alternative minimum tax. It is also the opinion of Bond Counsel that, under existing law, interest on the 2023 Bonds is exempt from personal income taxes of the State of California. See “TAX MATTERS” herein.
STATE OF CALIFORNIA COUNTY OF SAN BERNARDINO
$17,500,000
CITY OF RIALTO
COMMUNITY FACILITIES DISTRICT NO. 2020-1
(EL RANCHO VERDE)
SPECIAL TAX BONDS
SERIES 2023
Dated: Date of Delivery Due: September 1, as shown on the inside front cover This cover page and the inside cover page contain certain information for general reference only. Such information is not a summary of this issue. City of Rialto Community Facilities District No. 2020-1 (El Rancho Verde) (the “District”) has not and does not contemplate making an application to any rating agency for the assignment of a rating to the 2023 Bonds. Investors must read the entire Official Statement, including the sections entitled “SPECIAL RISK FACTORS” and “CONCLUDING INFORMATION – No Ratings on the 2023 Bonds” to obtain information essential to making an informed investment decision with respect to the 2023 Bonds.
The City of Rialto Community Facilities District No. 2020-1 (El Rancho Verde) Special Tax Bonds, Series 2023 (the “2023 Bonds”) are being issued and delivered to (i) finance certain capital facilities of the City of Rialto (the “City”) and the West Valley Water District, including capital fees, (ii) fund a reserve fund for the 2023 Bonds, and (iii) pay the costs of issuing the 2023 Bonds and forming the district. See “ESTIMATED SOURCES AND USES OF FUNDS” and PLAN OF FINANCE” herein. The 2023 Bonds are authorized pursuant to the Mello-Roos Community Facilities Act of 1982, as amended, and pursuant to a Fiscal Agent Agreement, dated as of October 1, 2023 (the “Fiscal Agent Agreement”), between the City of Rialto Community Facilities District No. 2020-1 (El Rancho Verde) (the “District”) and U.S. Bank Trust Company, National Association, as Fiscal Agent (the “Fiscal Agent”). The 2023 Bonds are limited obligations of the District payable solely from annual Special Taxes (as defined herein) to be levied on taxable land within the District and from certain other funds pledged under the Fiscal Agent Agreement, all as further described herein. The Special Taxes are to be levied according to the Rate and Method of Apportionment of Special Tax approved by the City Council of the City and the qualified electors within the District. See “THE DISTRICT –Rate and Method of Apportionment of Special Taxes” herein. The City Council of the City is the legislative body of the District.
Interest on the 2023 Bonds will be payable on March 1, 2024, and semiannually thereafter on each March 1 and September 1. Individual purchases may initially be made in principal amounts of $5,000 or any integral multiple thereof and will be in book-entry form only. The 2023 Bonds are issuable in fully registered form and when issued will be registered in the name of Cede & Co., as nominee of The Depository Trust Company, New York, New York (“DTC”).
The 2023 Bonds are subject to optional redemption, mandatory redemption from prepayments, and mandatory sinking fund redemption prior to maturity as set forth herein. See “THE 2023 BONDS – Redemption” herein.
Subject to certain conditions, additional obligations on a parity basis with the 2023 Bonds (collectively, the “Bonds”), may be issued in the future by the District. See “THE 2023 BONDS – Additional Series of Bonds” herein.
NEITHER THE FAITH AND CREDIT NOR THE TAXING POWER OF THE DISTRICT (EXCEPT AS PLEDGED IN THE FISCAL AGENT AGREEMENT), THE CITY, THE COUNTY OF SAN BERNARDINO, THE STATE OF CALIFORNIA OR ANY POLITICAL SUBDIVISION THEREOF IS PLEDGED TO THE PAYMENT OF THE 2023 BONDS. EXCEPT FOR THE SPECIAL TAXES, NO OTHER REVENUES OR TAXES ARE PLEDGED TO THE PAYMENT OF THE 2023 BONDS. THE 2023 BONDS ARE NOT GENERAL OR SPECIAL OBLIGATIONS OF THE CITY NOR GENERAL OBLIGATIONS OF THE DISTRICT, BUT ARE LIMITED OBLIGATIONS OF THE DISTRICT PAYABLE SOLELY FROM SPECIAL TAXES AND AMOUNTS HELD UNDER THE FISCAL AGENT AGREEMENT AS MORE FULLY DESCRIBED HEREIN.
Maturity Schedule
(see inside front cover page)
The 2023 Bonds are offered when, as and if issued, subject to the approval as to their legality by Norton Rose Fulbright US LLP, Bond Counsel. Certain legal matters will be passed on for the District by Norton Rose Fulbright US LLP, Disclosure Counsel, for the District and the City by Burke, Williams and Sorensen, LLP, as City Attorney, and for the Underwriter by Kutak Rock LLP, Irvine, California, as counsel to the Underwriter, and for the landowner by its counsel. It is anticipated that the 2023 Bonds will be available for delivery in book-entry form on or about October __, 2023. [PIPER SANDLER LOGO]
Dated: October ___, 2023
$17,500,000
CITY OF RIALTO
COMMUNITY FACILITIES DISTRICT NO. 2020-1
(EL RANCHO VERDE)
SPECIAL TAX BONDS
SERIES 2023
MATURITY SCHEDULE
$________________ Serial Bonds
Base CUSIP† No. _________
Maturity Date
September 1
Principal
Amount
Interest
Rate
Reoffering
Yield
CUSIP†
Suffix
$___________ ____% Term Bonds due September 1, 20__, Yield ____% CUSIP† No. _______
CITY COUNCIL
OF THE CITY OF RIALTO, CALIFORNIA
Legislative Body of the
CITY OF RIALTO COMMUNITY FACILITIES DISTRICT NO. 2020-1 (El Rancho Verde)
Deborah Robertson, Mayor
Andy Carrizales, Mayor Pro Tem
Ed Scott, Councilmember
Rafael Trujillo, Councilmember
Joe Baca, Councilmember
____________________
CITY OFFICIALS
Henry Garcia, Interim City Manager
Arron Brown, Deputy City Manager
Edward J. Carrillo, Treasurer
Barbara McGee, City Clerk
Eric Vail, City Attorney
Professional Services
MUNICIPAL ADVISOR
Fieldman, Rolapp & Associates, Inc.
Irvine, California
BOND COUNSEL AND DISCLOSURE COUNSEL
Norton Rose Fulbright US LLP
Los Angeles, California
FISCAL AGENT
U.S. Bank Trust Company, National Association
San Francisco, California
SPECIAL TAX CONSULTANT & CFD ADMINISTRATOR
Webb Municipal Finance, LLC
Riverside, California
APPRAISER
Stephen G. White, MAI
Fullerton, California
INTRODUCTION 1
Purpose of Official Statement 1
Authority for Issuance and Use of Proceeds 1
The City 1
The District 2
Property Ownership 2
Security and Sources of Payment of the 2023 Bonds 3
Appraisal 4
Additional Series of Bonds 4
Risk Factors 5
Continuing Disclosure 5
Miscellaneous 5
ESTIMATED SOURCES AND USES OF FUNDS 5
PLAN OF FINANCE 6
THE 2023 BONDS 7
General 7
Authority for Issuance 7
Debt Service Schedule 9
Redemption 10
Book-Entry Only System 12
SECURITY FOR THE 2023 BONDS 14
Pledge of Special Taxes 14
Special Tax Fund 15
Prepayment of Special Taxes 17
Covenant to Commence Foreclosure Proceedings 17
Value-to-Lien Ratios 18
No Obligation of the City Upon Delinquency 18
Other Indebtedness and Obligations 18
THE DISTRICT 25
General 25
Property Ownership and Development Status 25
Rate and Method of Apportionment of Special Taxes 32
Estimated Maximum Special Tax Proceeds and Debt Service Coverage 35 Appraised Property Value 35
Appraised Value-to-Lien Ratios 37
Direct and Overlapping Governmental Obligations 40
Estimated Tax Burden 42
SPECIAL RISK FACTORS 43
Risks of Real Estate Secured Investments Generally 43
Limited Obligations 43
Insufficiency of Special Taxes 43
Depletion of 2023 Reserve Account 45
Risk of Structural or Wildland Fires 45
Natural Disasters 45
Hazardous Substances 46
Parity Taxes and Special Assessments 46
Disclosures to Future Purchasers 47
Special Tax Delinquencies 47
Non-Cash Payments of Special Taxes 48
Payment of the Special Tax is not a Personal Obligation of the Owners 48 Appraised Valuations; Value-to-Lien Ratios 48
FDIC/Federal Government Interests in Properties 49
Bankruptcy and Foreclosure 50
No Acceleration Provision 50
Loss of Tax Exemption 51
Limitations on Remedies 51
No Ratings and Limited Secondary Market 51
Proposition 218 51
Litigation regarding Community Facilities Districts 52
Ballot Initiatives 53
Extraordinary Redemption from Prepaid Special Taxes 54
Climate Change 54
Cybersecurity 54
CONTINUING DISCLOSURE 55
TAX MATTERS 56
CONCLUDING INFORMATION 58
Absence of Material Litigation 58
Approval of Legality 58
No General Obligation of City or District 58
The Municipal Advisor 59
No Ratings on the 2023 Bonds 59
Underwriting 59
Miscellaneous 59
APPENDIX A – INFORMATION RELATING TO THE CITY OF RIALTO AND SAN BERNARDINO COUNTY A-1 APPENDIX B FORM OF BOND COUNSEL’S OPINION B-1
APPENDIX C – SUMMARY OF CERTAIN PROVISIONS OF THE FISCAL AGENT AGREEMENT C-1 APPENDIX D – RATE AND METHOD OF APPORTIONMENT
OF SPECIAL TAX D-1
APPENDIX E – BOOK-ENTRY ONLY SYSTEM E-1
APPENDIX F – FORMS OF CONTINUING DISCLOSURE UNDERTAKINGS F-1 APPENDIX G - APPRAISAL REPORT G-1
GENERAL INFORMATION ABOUT THIS OFFICIAL STATEMENT
Use of Official Statement. This Official Statement is submitted in connection with the offer and sale of the 2023 Bonds referred to herein and may not be reproduced or used, in whole or in part, for any other purpose. This Official Statement is not to be construed as a contract with the purchasers of the 2023 Bonds.
Estimates and Forecasts. This Official Statement contains statements which, to the extent they are not recitations of historical fact, constitute “forward-looking statements,” within the meaning of the United States Private Securities Litigation Reform Act of 1995, Section 21E of the United States Exchange Act of 1934, as amended, and Section 27A of the United States Securities Act of 1933, as amended. In this respect, such forward-looking statements are generally identified by the use of words “estimate,” “project,” “plan,” “budget,” “anticipate,” “expect,” “intend,” or “believe” or the negative thereof or other variations thereon or comparable terminology.
The achievement of certain results or other expectations contained in such forward-looking statements involves known or unknown risks, uncertainties and other factors which may cause actual results, performance or achievements to be significantly different than those expressed or implied by such forward-looking statements. These risks and uncertainties include, but are not limited to, uncertainties relating to economic conditions, the effect of changes in the amounts and timing of receipt of revenues, the availability and sufficiency of Special Taxes, change in circumstances adversely affecting the projected use of proceeds, and risks involving pertinent court decisions. The District does not plan to issue any updates or revisions to those forward-looking statements if or when its expectations, or events, conditions or circumstances on which such statements are based change. Potential investors are cautioned that such statements are only predictions and that actual events or results may differ materially. In evaluating such statements, potential investors should specifically consider the various factors which could cause actual events or results to differ materially from those indicated by such forward-looking statements.
Limit of Offering. No dealer, broker, salesperson or other person has been authorized by the District or the City to give any information or to make any representations in connection with the offer or sale of the 2023 Bonds other than those contained herein and if given or made, such other information or representation must not be relied upon as having been authorized by the District or the City, the Municipal Advisor or the Underwriter. This Official Statement does not constitute an offer to sell or the solicitation of an offer to buy nor shall there be any sale of the 2023 Bonds by a person in any jurisdiction in which it is unlawful for such person to make such an offer, solicitation or sale.
Involvement of Underwriter. The Underwriter has provided the following statement for inclusion in this Official Statement: The Underwriter has reviewed the information in this Official Statement in accordance with, and as a part of, its responsibilities to investors under the Federal Securities Laws as applied to the facts and circumstances of this transaction, but the Underwriter does not guarantee the accuracy or completeness of such information.
The information and expressions of opinions herein are subject to change without notice and neither delivery of this Official Statement nor any sale made hereunder shall, under any circumstances, create any implication that there has been no change in the affairs of the District or the City or any other entity described or referenced herein since the date hereof. All summaries of the documents referred to in this Official Statement are made subject to the provisions of such documents, respectively, and do not purport to be complete statements of any or all of such provisions.
Stabilization of Prices. In connection with this offering, the Underwriter may overallot or effect transactions which stabilize or maintain the market price of the 2023 Bonds at a level above that which might otherwise prevail in the open market. Such stabilizing, if commenced, may be discontinued at any time. The Underwriter may offer and sell the 2023 Bonds to certain dealers and others at prices lower than the public offering prices set forth on the inside front cover page hereof and said public offering prices may be changed from time to time by the Underwriter.
THE 2023 BONDS HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, IN RELIANCE UPON AN EXCEPTION FROM THE REGISTRATION REQUIREMENTS CONTAINED IN SUCH ACT. THE 2023 BONDS HAVE NOT BEEN REGISTERED OR QUALIFIED UNDER THE SECURITIES LAWS OF ANY STATE.
VICINITY MAP
Southern California
$17,500,000*
CITY OF RIALTO
COMMUNITY FACILITIES DISTRICT NO. 2020-1
(El Rancho Verde)
SPECIAL TAX BONDS
SERIES 2023
This Official Statement, which includes the cover page, table of contents and appendices hereto, is provided to furnish information in connection with the sale, issuance and delivery of City of Rialto Community Facilities District No. 2020-1 (El Rancho Verde) Special Tax Bonds, Series 2023, in the principal amount of $17,500,000* (the “2023 Bonds”).
INTRODUCTION
This Introduction is not a summary of this Official Statement. It is only a brief description of and guide to, and is qualified by, more complete and detailed information contained in the entire Official Statement, including the cover page and appendices hereto, and the documents summarized or described herein. All references herein to any document are qualified by the terms of such document in its entirety. A full review should be made of the entire Official Statement. The offering of the 2023 Bonds to potential investors is made only by means of the entire Official Statement.
Purpose of Official Statement
The purpose of this Official Statement, which includes the cover page, table of contents and appendices hereto (the “Official Statement”), is to provide information concerning the sale of $17,500,000* aggregate principal amount of the City of Rialto Community Facilities District No. 2020-1 (El Rancho Verde) Special Tax Bonds, Series 2023 (the “2023 Bonds”). Capitalized terms used but not defined herein shall have the meanings set forth in the Fiscal Agent Agreement, dated as of October 1, 2023 (the “Fiscal Agent Agreement”), by and between the City of Rialto Community Facilities District No. 2020-1 (El Rancho Verde) (the “District”) and U.S. Bank Trust Company, National Association, as fiscal agent (the “Fiscal Agent”). See APPENDIX C – “SUMMARY OF CERTAIN PROVISIONS OF THE FISCAL AGENT AGREEMENT” herein.
Authority for Issuance and Use of Proceeds
The 2023 Bonds are authorized by and are being issued by the District pursuant to certain resolutions adopted by the City Council of the City of Rialto, California, acting as the legislative body of the District (the “City Council’), the Fiscal Agent Agreement, and in accordance with the Mello-Roos Community Facilities Act of 1982, as amended, constituting Chapter 2.5 (commencing with Section 53311) of Division 2 of Title 5 of the California Government Code (the “Act”). See “THE 2023 BONDS – Authority for Issuance” herein.
Proceeds of the 2023 Bonds will be used to (i) finance certain capital facilities of the City of Rialto (the “City”) and the West Valley Water District (the “Water District”), including capital fees, (ii) fund a reserve fund for the 2023 Bonds, and (iii) pay the costs of issuing the 2023 Bonds and forming the District. See “ESTIMATED SOURCES AND USES OF FUNDS” and “PLAN OF FINANCE.” The City
The City is located in the western portion of the County of San Bernardino (the “County”), approximately 60 miles east of the City of Los Angeles and just west of the City of San Bernardino. The City was incorporated in 1911, and is organized as a general law city with a Council-Manager form of government. The City encompasses an area of approximately 22 square miles and, as of January 1, 2023, had an estimated population of approximately 102,985 as reported by the California Department of Finance. For certain information regarding the City and the County, see “APPENDIX A –INFORMATION RELATING TO THE CITY OF RIALTO AND SAN BERNARDINO COUNTY.” The 2023 Bonds are not a debt of the City in any respect.
The District
The District was formed and established by the City on July 14, 2020 pursuant to the Act, following a public hearing by the City Council, as legislative body of the District, and a landowner election which authorized the incurrence of bonded indebtedness and approved the levy of special taxes. On September 13, 2022, the qualified electors of the District approved modifications to the District eliminating the designation of improvement areas within the District, modifying the boundaries of the District to eliminate certain nontaxable property, increasing the maximum bonded indebtedness for the District from $40,000,000 to $50,000,000 (the “Bonds”) and approving the levy of a modified facilities special tax (the “Special Taxes” or “Special Tax A”), and a modified services special tax (“Special Tax B”). The Special Tax B is not pledged to the 2023 Bonds.
The 2023 Bonds in the principal amount of $17,500,000* is the first series of Bonds to be issued by the District. At a later date, additional series of Bonds, up to an amount equal to $32,500,000,* may be issued on a parity with the 2023 Bonds. See “THE 2023 BONDS – Authority for Issuance.” The District consists of the newly developed master-planned community known as “River Ranch” which is planned to consist of 776 detached single-family homes in six neighborhoods on an approximately 183-acre site located along River Ranch Parkway, at the northeast edge of the City. District boundaries are at the end of Country Club Drive, ¼ mile northeast of Riverside Avenue, and several blocks north of Highland Avenue and the 210 Freeway. The River Ranch development will feature a park near the entrance to the community, extensive walking trails, a dogpark and community play area, a recreation center with clubhouse, pool, splash park, fire pits, outdoor kitchen as well as adjacent parks with a basketball court, tot lots and a playground.
There are six different product types of detached homes that are all currently under construction in five (5) separate tax rate zones (the “Zones”) within the District: The Cove (small lot/condominium plan – Zone 5), Blueridge (Zone 2), Ridgewater (Zone 3), Summerbrooke (Zone 3), Edgestone (Zone 1) and Stonecreek (Zone 4).
The first builder sales of completed homes closed in November 2022 in the Blueridge, Ridgewater and Summerbrooke product types. The other product types have followed thereafter, including the first closings in Edgestone to occur in October 2023. As of September ___, 2023, building permits have been issued for [379] homes. As of September ___, 2023, there are [151] completed homes owned by individual homeowners, and a total of [67] pending builder sales.
Property Ownership
As of September ___, 2023, the ownership of the lots upon which the 776 homes have been or are anticipated to be constructed are as follows: Lennar Homes of California, LLC (the “Developer”) owned [134] lots ([27] completed and unclosed (including 14 model homes), [106] under construction and 1 vacant lot); AG Essential Housing CA 4, L.P. (“AG4”), a land bank holding land subject to an option agreement with the Developer, owned [491] lots ([49] homes under construction and [442] vacant lots ([8] of which were taken down by the Developer pursuant to the Option Agreement but for which the deed of trust conveying such lots had not yet been recorded)); and individual homeowners owned [151] completed homes. Multiple take downs and transfers are scheduled from AG4 to the Developer through June 2024. The Developer has estimated buildout of the River Ranch development by August 2026. For more detailed information about the Developer and the development plans for the property in the District, see “THE DISTRICT - Property Ownership and Development Status.” Security and Sources of Payment of the 2023 Bonds
The 2023 Bonds and any additional series of Bonds are secured by a first pledge of all of the Special Taxes and other amounts deposited in the Special Tax Fund (except for moneys to be deposited in the Administrative Expense Account, and amounts in the Reserve Accounts which secure specific Series of Bonds). See “SECURITY FOR THE 2023 BONDS” and APPENDIX C – “SUMMARY OF CERTAIN PROVISIONS OF THE FISCAL AGENT AGREEMENT.” “Special Taxes” is defined in the Fiscal Agent Agreement to mean the special tax requirement for facilities authorized to be levied by the District on parcels within the District in accordance with the Resolution of Change, the Act and the voter approval obtained at the September 13, 2022 modification election within the District and any additional special taxes authorized to be levied by the District from time to time that are pledged by the District to the repayment of the Bonds, together with the proceeds collected from the sale of property pursuant to the foreclosure provisions of the Fiscal Agent Agreement for the delinquency of such Special Taxes remaining after the payment of all the costs related to such foreclosure actions, including, but not limited to, all legal fees and expenses, court costs, consultant and title insurance fees and expenses.
The 2023 Bonds were sized based on at least 110% coverage from the Special Taxes generated by Developed Property within the District (consisting of the 379 parcels that have been issued building permits as of [July 15, 2023]), at Assigned rates pursuant to the Rate and Method (as defined herein), net of administrative costs. The Special Taxes will be levied on current and future designated Developed Property at 100% of the Assigned rates for the first thirty years, with surplus amounts paying for pay-as-you-go authorized facilities.
The Special Taxes will be levied by the District and collected by the San Bernardino County Treasurer-Tax Collector in the same manner and at the same time as ad valorem property taxes. The District has covenanted in the Fiscal Agent Agreement to cause foreclosure proceedings to be commenced and prosecuted against parcels with delinquent Special Taxes under certain circumstances. For a more detailed description of the foreclosure covenant see “SECURITY FOR THE 2023 BONDS - Covenant to Commence Foreclosure Proceedings.” There is no assurance that the property within the District can be sold for the appraised value described herein, or for a price sufficient to pay the principal of and interest on the 2023 Bonds in the event of a default in payment of Special Taxes by the current landowners or future landowners within the District. See “SPECIAL RISK FACTORS — Appraised Valuations; Value-to-Lien Ratios” and APPENDIX G — “APPRAISAL REPORT” herein.
Reserve Account for the 2023 Bonds and Related Parity Bonds As additional security for the 2023 Bonds and any additional series of Bonds which constitute Related Parity Bonds (as defined below), the Fiscal Agent Agreement provides for the establishment of the 2023 Reserve Account within the Special Tax Fund in the amount of the 2023 Reserve Requirement. As of the date of issuance of the 2023 Bonds, the 2023 Reserve Requirement will be fully funded in the amount of $________* from the proceeds of the 2023 Bonds. The 2023 Reserve Requirement is defined in the Fiscal Agent Agreement to mean, as of any date of calculation, an amount equal to the least of (i) 10% of the issue price of the 2023 Bonds and Related Parity Bonds (as defined pursuant to section 148 of the Internal Revenue Code of 1986 (the “Code”)), or (ii) Maximum Annual Debt Service on the Outstanding 2023 Bonds and Related Parity Bonds, or (iii) 125% of the average Annual Debt Service of the Outstanding 2023 Bonds and Related Parity Bonds, as determined by the District, provided, however that in no event shall the amount calculated exceed the amount on deposit in the 2023 Reserve Account on the date of issuance of the 2023 Bonds (if they are the only Bonds covered by the 2023 Reserve Account) or the most recently issued series of Related Parity Bonds (if any Related Parity Bonds are covered by the 2023 Reserve Account) except in connection with any increase associated with the issuance of Related Parity Bonds. Related Parity Bonds is defined as any series of Bonds for which (y) proceeds or funds are deposited into the 2023 Reserve Account so that the balance therein is equal to the 2023 Reserve Requirement following issuance of such series of Bonds and (z) the related Supplemental Fiscal Agent Agreement specifies that the 2023 Reserve Account shall act as a reserve for the payment of the principal of, and interest and any premium on, such series of Bonds. See “SECURITY FOR THE BONDS – Special Tax Fund – 2023 Reserve Account.” Appraisal
An appraisal of the taxable property within the District, dated August 2, 2023 (the “Appraisal Report”), was prepared by Stephen G. White, MAI, Fullerton, California (the “Appraiser”) in connection with issuance of the 2023 Bonds. The purpose of the Appraisal Report was to ascertain the “as is” market value of the fee simple estate as of the July 15, 2023 date of value for the six product types of taxable property in the District, which consisted cumulatively of 151 detached single-family homes owned by individual homeowners, 14 completed model homes owned by the Developer, 13 completed homes owned by the Developer, 106 homes under construction owned by the Developer, 49 homes under construction owned by AG4, 1 near-finished lot owned by the Developer and 442 near-finished lots owned by AG4. Subject to the assumptions and limitations contained in the Appraisal Report, the Appraiser estimated that the fee simple interest in the subject property, subject to the lien of the Special Taxes, had an estimated aggregate value of $210,630,000.
The overall aggregate value-to-lien ratio based on the estimated appraised values from the Appraisal Report, and the estimated par amount of the 2023 Bonds of $17,500,000* is 12.04 to 1.* There is no assurance that the property within the District can be sold for the appraised value described herein, or for a price sufficient to pay the principal of and interest on the 2023 Bonds in the event of a default in payment of Special Taxes by the current landowner or future landowners within the District. See “SPECIAL RISK FACTORS — Appraised Valuations; Value-to-Lien Ratios” and APPENDIX G — “APPRAISAL REPORT” herein.
Additional Series of Bonds
At the September 13, 2022 modification election, the qualified electors authorized the District to incur bonded indebtedness in one or more series in an amount not to exceed $50,000,000. The 2023 Bonds in the principal amount of $17,500,000* is the first series of Bonds to be issued by the District. At a later date, additional series of Bonds, up to an amount equal to $32,500,000,* may be issued on a parity with the 2023 Bonds. See “THE 2023 BONDS – Additional Series of Bonds” herein.
Other taxes and/or special assessments with liens equal in priority to the continuing lien of the Special Taxes, including special taxes levied within the District by the Rialto Unified School District CFD No. 2019-1, may also be levied in the future on the property within the District which could adversely affect the willingness of the owners of the taxable parcels within the District to pay the Special Taxes when due. See “SPECIAL RISK FACTORS—Parity Taxes and Special Assessments” herein.
Risk Factors
Investment in the 2023 Bonds involves risks that may not be appropriate for some investors. See “SPECIAL RISK FACTORS” for a discussion of certain risk factors which should be considered, in addition to the other matters set forth in this Official Statement, in considering the investment quality of the 2023 Bonds.
Continuing Disclosure
In order to assist the Underwriter in complying with Rule 15c2-12(b)(5) adopted by the Securities and Exchange Commission under the Securities Exchange Act of 1934, as the same may be amended from time to time, the District has covenanted to provide certain financial information and operating data and notices of certain enumerated events relating to the District. See “CONTINUING DISCLOSURE” herein.
Miscellaneous
The summaries of and references to all documents, statutes, reports and other instruments referred to herein do not purport to be complete, comprehensive or definitive, and each such summary and reference is qualified in its entirety by reference to each such document, statute, report or other instrument. Included in this Official Statement are summaries of certain provisions of the Fiscal Agent Agreement and the Appraisal Report. Copies of the Fiscal Agent Agreement and the Appraisal Report are available for inspection at the offices of the City, and copies of such documents will be provided by the City upon request and payment of duplication costs. See also APPENDIX G — “APPRAISAL REPORT” herein.
ESTIMATED SOURCES AND USES OF FUNDS
The proceeds from the sale of the 2023 Bonds will be deposited into the following funds and accounts established under the Fiscal Agent Agreement:
SOURCES
Principal Amount of 2023 Bonds
Plus/Less: Net Original Issue Premium/Discount
Less: Underwriter’s Discount
Total Sources
USES
Acquisition and Construction Fund
Costs of Issuance Account (1)
2023 Reserve Account (2)
2023 Capitalized Interest Subaccount of the Interest Account(3) Total Uses
___________________________
(1) Includes printing costs, appraisal costs, filing and recording fees, fees and charges of the Fiscal Agent and its legal counsel, expenses incurred by the City in connection with the issuance of the 2023 Bonds, legal fees and charges, including bond counsel and disclosure counsel, and financial advisor’s fees, and other costs, charges and fees in connection with the foregoing. (2) Equal to the 2023 Reserve Requirement with respect to the 2023 Bonds as of their date of delivery. (3) For payment of a portion of interest due on the 2023 Bonds through September 1, 2024.
PLAN OF FINANCE
A portion of the proceeds of the 2023 Bonds will be used to finance certain capital facilities for the City and the Water District, including certain capital facilities fees relating to public facility improvements serving properties within the District and elsewhere in the City. Such eligible facilities, fees and estimated costs are set forth in the following table. In addition, Special Taxes collected for Fiscal Year 2023-24 will be deposited into the Special Tax Fund to be used to pay debt service due on the 2023 Bonds on September 1, 2024 and for Administrative Expenses for Fiscal Year 2023-24.
Description of Financed Capital Facilities & Fees
Estimated Amount
City of Rialto Development Impact Fees
General Facilities
$ 768,240
Police Facilities
675,120
Fire Facilities
325,920
Library Facilities
194,000
Street Facilities
54,320
Wastewater Collection
1,117,440
Wastewater Treatment
1,603,270
Regional Traffic Facilities
2,741,608
Subtotal Eligible Development Impact Fees:
$ 7,479,918
City of Rialto Improvements
Street Improvements (Spine Rd)
$ 1,756,756
Traffic Signal
350,000
Offsite Design, Planning, and Engineering (15%)
316,013
Street Improvements - PA 2 & 3
1,956,956
Street Improvements - PA 5 & 6
2,138,352
Street Improvements - PA 1 & 4
2,007,070
Onsite Design, Planning, and Engineering (15%)
915,357
Subtotal Eligible City Improvements:
$ 9,440,504
Total City of Rialto
$16,920,422
West Valley Water District Fees
Water System Connection Fee
$ 8,594,976
Fire Flow Charge
929,648
Subtotal Eligible Fees:
$ 9,524,624
West Valley Water District Improvements
Backbone - 30" waterline, 12" Waterline
$ 5,379,529
Intract Water Improvements - PA 2 & 3
2,249,340
Intract Water Improvements - PA 5 & 6
1,762,846
Intract Water Improvements - PA 1 & 4
1,696,409
Design, Planning, and Engineering (15%)
1,663,219
Subtotal Eligible City Improvements:
$12,751,343
Total West Valley Water District
$22,275,967
Total Eligible Facilities
$39,196,389
____________
Source: Lennar Homes of California, LLC.
THE 2023 BONDS
General
The 2023 Bonds will be dated the date of their delivery and will mature in the amounts and on the dates set forth on the cover page of this Official Statement. The 2023 Bonds will be issued in fully registered form in denominations of $5,000 each or any integral multiple of $5,000.
The 2023 Bonds will bear interest at the annual rates set forth on the cover page of this Official Statement, payable semiannually on each March 1 and September 1, commencing March 1, 2024 (each, an “Interest Payment Date”). Interest will be calculated on the basis of a 360-day year composed of twelve 30-day months.
Principal of and interest on the 2023 Bonds (including the final interest payment upon maturity or earlier redemption), is payable by check of the Fiscal Agent mailed by first class mail to the registered Owner thereof at such registered Owner’s address as it appears on the registration books maintained by the Fiscal Agent at the close of business on the Record Date preceding the Interest Payment Date, or by wire transfer made on such Interest Payment Date upon written instructions of any Owner of $1,000,000 or more in aggregate principal amount of 2023 Bonds delivered to the Fiscal Agent prior to the applicable Record Date, which instructions will continue in effect until revoked in writing, or until such 2023 Bonds are transferred to a new Owner. Each 2023 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 Closing Date.
The principal of the 2023 Bonds and any premium on the 2023 Bonds are payable in lawful money of the United States of America upon surrender of the 2023 Bonds at the Principal Office of the Fiscal Agent.
Authority for Issuance
District Proceedings. The 2023 Bonds are the first series of Bonds to be issued by the District and are authorized and issued pursuant to the Act and the Fiscal Agent Agreement. In addition, as required by the Act, the City Council has taken the following actions with respect to establishing and modifying the District and authorizing issuance of the 2023 Bonds:
Resolutions of Intention: On June 9, 2020, the City Council adopted a resolution stating its intention to establish the District and to authorize the levy of a special tax therein. On the same day the City Council adopted a resolution stating its intention to incur indebtedness for the purpose of financing the Facilities.
Resolution of Formation: Following a noticed public hearing, the City Council adopted, on July 14, 2020, a resolution (the “Resolution of Formation”) which established the District and authorized the levy of a special tax within the District.
Resolution of Necessity and Calling Election. On July 14, 2020, the City Council adopted a resolution declaring the necessity to incur bonded indebtedness in an amount not to exceed $20,000,000 for each improvement area within the District and calling an election by the landowners within the District for the same date on the issues of the levy of the Special Tax, the incurring of bonded indebtedness and the establishment of an appropriations limit.
Landowner Election and Declaration of Results: On July 14, 2020, an election was held in which the qualified landowner electors within the District approved a ballot proposition authorizing the issuance of bonds in the not to exceed amount of $20,000,000 for each improvement area within the District to finance the construction of the Facilities, the levy of a special tax and the establishment of an appropriations limit for the District. On July 14, 2020, the City Council adopted a resolution under which the City Council approved the canvass of the votes and declared the District to be fully formed with the authority to levy the Special Taxes, to incur the bonded indebtedness and to have the established appropriations limit.
Special Tax Lien and Levy: A Notice of Special Tax Lien for the District was recorded in the real property records of San Bernardino County on August 5, 2020.
Ordinance Levying Special Taxes: On July 28, 2020, the City Council adopted an ordinance authorizing the levy of the Special Tax within the District.
Resolution of Consideration: On August 9, 2022, the City Council adopted a resolution stating its intention to (i) eliminate of the designation of improvement areas within the District; (ii) modify the original rates and methods of apportionment to consolidate into one rate and method of apportionment and increase certain special tax rates; (iii) increase the maximum bonded indebtedness for the District to not to exceed $50,000,000 within the District; (iv) modify the boundaries of the District to eliminate certain nontaxable property; and (v) revise the appropriations limit for the District.
Resolution Calling Election. On September 13, 2022, the City Council adopted a resolution calling an election by the landowners within the District for the same date on the above changes to the District.
Landowner Election on Change and Declaration of Results: On September 13, 2022, an election was held in which the qualified landowner electors within the District approved the above changes to the District. On September 13, 2022, the City Council adopted a resolution of change under which the City Council approved the canvass of the votes and declared the changes approved with the authority to levy the modified Special Taxes, and to incur the bonded indebtedness in an amount not to exceed $50,000,000.
Amended and Restated Special Tax Lien and Levy: A Notice of Special Tax Lien for the District was recorded in the real property records of San Bernardino County on October 22, 2022.
Ordinance Levying Special Taxes: On September 27, 2022, the City Council repealed the previously adopted ordinance and adopted an ordinance authorizing the levy of the modified Special Tax within the District.
Resolution Authorizing Issuance of the Bonds: On September ___, 2023, the City Council adopted a resolution approving issuance of the 2023 Bonds in an amount not to exceed $20,000,000 for the District.
City’s Goals and Policies. As required by the Act, the City adopted Goals and Policies for Community Facilities Districts in November 2005, which were supplemented by its Debt Issuance and Management Policy adopted in August 2017 (the “Goals and Policies”). The Goals and Policies establish an order of priority for projects to be financed by community facilities districts and certain credit quality requirements for bonds issued by community facilities districts and improvement areas therein, namely a 3:1 ratio of property value to the lien of the 2023 Bonds and other public indebtedness secured by a lien on real property currently existing against the properties to be taxed. Property value may be based on an appraisal or on assessed values as indicated on the county assessor’s tax roll.
The Goals and Policies also require that, for residential property, the maximum annual special tax, together with ad valorem property taxes, and all other special assessments or special taxes collected or to be collected on the annual tax bill for each developed parcel at the time of bond issuance, may not exceed 2% of such parcel’s projected assessed value. The 2023 Bonds are expected to comply with the Goals and Policies.
Debt Service Schedule
The following table presents the annualized debt service on the 2023 Bonds (including sinking fund payments), assuming there are no optional redemptions.
Year Ending September 1
Principal
Interest
Total Debt Service
2024(1)
2025
2026
2027
2028
2029
2030
2031
2032
2033
2034
2035
2036
2037
2038
2039
2040
2041
2042
2043
2044
2045
2046
2047
2048
2049
2050
2051
2052
2053
2054
2055
2056
2057
2058
Total
_____________________________
Source: Underwriter
Debt service due on March 1, 2024 and September 1, 2024 is expected to be paid from special taxes levied and collected for Fiscal Year 2023-24 and the 2023 Capitalized Interest Subaccount of the Interest Account.
Redemption
Optional Redemption.* The 2023 Bonds maturing on or after September 1, 2031 are subject to redemption prior to maturity at the option of the District on any date, on or after September 1, 2030, as a whole or in part, by lot, from any available source of funds at the following redemption prices (expressed as a percentage of the principal amount of 2023 Bonds to be redeemed), together with accrued interest thereon to the date fixed for redemption:
Redemption Dates
Redemption Prices
September 1, 2030 through August 31, 2031
103%
September 1, 2031 through August 31, 2032
102%
September 1, 2032 through August 31, 2033
101%
September 1, 2033 and any day thereafter
100%
Special Mandatory Redemption from Special Tax Prepayments. The 2023 Bonds are subject to mandatory redemption prior to maturity on any Interest Payment Date, on or after March 1, 2024, as a whole or in part, in a manner determined by the District from prepayments of Special Taxes at the following redemption prices (expressed as a percentage of the principal amount of 2023 Bonds to be redeemed), together with accrued interest thereon to the date fixed for redemption:
Redemption Dates
Redemption Prices
March 1, 2024 and each March 1 and September 1 through and including March 1, 2031 103%
September 1, 2031 and March 1, 2032
102%
September 1, 2032 and March 1, 2033
101%
September 1, 2033 and each March 1 and September 1 thereafter 100%
In connection with such redemption, the District may also apply amounts in the 2023 Reserve Account which will be in excess of the 2023 Reserve Requirement as a result of such Special Tax prepayment to redeem 2023 Bonds as set forth above.
Mandatory Sinking Fund Redemption. The Term 2023 Bonds maturing on September 1, 20__, on September 1, 20__ and on September 1, 20__ are subject to mandatory redemption, in part by lot, on September 1 in each year commencing September 1, 20__ with respect to the Term 2023 Bonds maturing on September 1, 20__, commencing September 1, 20__ with respect to the Term 2023 Bonds maturing on September 1, 20__, and commencing September 1, 20__ with respect to the Term 2023 Bonds maturing on September 1, 20__, from the Sinking Fund Payments that have been deposited into the Redemption Account at a redemption price equal to the principal amount thereof to be redeemed, without premium, plus accrued interest thereon to the date of redemption as set forth in the following schedule; provided, however, that (i) in lieu of redemption thereof, the Term 2023 Bonds may be purchased by the District and tendered to the Fiscal Agent, and (ii) if some but not all of the Term 2023 Bonds have been redeemed, the total amount of all future Sinking Fund Payments will be reduced by the aggregate principal amount of the Term 2023 Bonds so redeemed, to be allocated among such Sinking Fund Payments on a pro rata basis (as nearly as practicable) in integral multiples of $5,000 as determined by the District in a written notice to the Fiscal Agent.
Term 2023 Bonds Maturing on September 1, 20__
Redemption Date
(September 1)
Principal Amount
(maturity)
Term 2023 Bonds Maturing on September 1, 20__
Redemption Date
(September 1)
Principal Amount
(maturity)
Term 2023 Bonds Maturing on September 1, 20__
Redemption Date
(September 1)
Principal Amount
(maturity)
Selection of 2023 Bonds for Redemption. If less than all of the 2023 Bonds Outstanding are to be redeemed, the portion of any 2023 Bond of a denomination of more than $5,000 to be redeemed shall be in the principal amount of $5,000 or an integral multiple thereof. In selecting portions of such 2023 Bonds for redemption, the Fiscal Agent shall treat such 2023 Bonds as representing that number of 2023 Bonds of $5,000 denominations which is obtained by dividing the principal amount of such 2023 Bonds to be redeemed in part by $5,000. The Fiscal Agent shall promptly notify the District in writing of the 2023 Bonds, or portions thereof, selected for redemption.
Notice of Redemption. When 2023 Bonds are due for redemption, the Fiscal Agent shall give notice, in the name of the District, of the redemption of such 2023 Bonds. At least 20 days but no more than 60 days prior to the redemption date, the Fiscal Agent shall mail a copy of the notice of redemption, by first class mail, postage prepaid, to the respective Owners thereof at their addresses appearing on the Bond Register. The actual receipt by the Owner of any 2023 Bond or the original purchaser of any 2023 Bond of notice of such redemption shall not be a condition precedent to redemption, and neither the failure to receive nor any defect in such notice shall affect the validity of the proceedings for the redemption of such 2023 Bonds, or the cessation of interest on the redemption date. A certificate by the Fiscal Agent that notice of such redemption has been given as herein provided shall be conclusive as against all parties and the Owner shall not be entitled to show that he or she failed to receive notice of such redemption.
If at the time of mailing of any notice of optional redemption there has not been deposited with the Fiscal Agent moneys sufficient to redeem all the 2023 Bonds called for redemption, such notice shall state that it is subject to the deposit of the redemption moneys with the Fiscal Agent not later than the opening of business on the redemption date and will be of no effect unless such moneys are so deposited.
Partial Redemption of 2023 Bonds. Upon surrender of any 2023 Bond to be redeemed in part only, the District shall execute and the Fiscal Agent shall authenticate and deliver to the Bondowner, at the expense of the District, a new 2023 Bond or 2023 Bonds of authorized denominations equal in aggregate principal amount to the unredeemed portion of the 2023 Bonds surrendered, with the same interest rate and the same maturity.
Effect of Notice and Availability of Redemption Money. Notice of redemption having been duly given, as provided in the Fiscal Agent Agreement, and the amount necessary for the redemption having been made available for that purpose and being available therefor on the date fixed for such redemption:
(1) The 2023 Bonds, or portions thereof, designated for redemption shall, on the date fixed for redemption, become due and payable at the redemption price thereof as provided in the Fiscal Agent Agreement, anything in the Fiscal Agent Agreement or in the 2023 Bonds to the contrary notwithstanding; (2) Upon presentation and surrender thereof at the office of the Fiscal Agent, the redemption price of such 2023 Bonds shall be paid to the Owners thereof; (3) As of the redemption date the 2023 Bonds, or portions thereof so designated for redemption shall be deemed to be no longer Outstanding and such 2023 Bonds, or portions thereof, shall cease to bear further interest; and (4) As of the date fixed for redemption no Owner of any of the 2023 Bonds, or portions thereof so designated for redemption, shall be entitled to any of the benefits of the Fiscal Agent Agreement or any Supplemental Fiscal Agent Agreement, or to any other rights, except with respect to payment of the redemption price and interest accrued to the redemption date from the amounts so made available.
Book-Entry Only System
The Depository Trust Company (“DTC”) will act as securities depository for the 2023 Bonds. The 2023 Bonds will be issued as fully-registered securities registered initially in the name of Cede & Co. (DTC’s partnership nominee). One fully-registered bond will be issued for the 2023 Bonds of each maturity and each interest rate, in the initial aggregate principal amount of such maturity of such series. See APPENDIX E – “BOOK-ENTRY ONLY SYSTEM.” Additional Series of Bonds
In addition to the 2023 Bonds, the District may issue additional Series of Bonds up to an amount equal to $32,500,000,* on a parity with the 2023 Bonds. Any such Series will constitute Bonds under the Fiscal Agent Agreement and will be secured by a lien on the Special Taxes (other than the Special Taxes to be deposited into the Administrative Expense Account of the Special Tax Fund) and funds pledged for the payment of the Bonds thereunder on a parity with all other Bonds Outstanding under the Fiscal Agent Agreement. The 2023 Reserve Account secures the 2023 Bonds and any Related Parity Bonds. The District may issue such additional Series subject to the following specific conditions precedent:
Compliance. The District will be in compliance with the Fiscal Agent Agreement and all Supplemental Fiscal Agent Agreements or will be in compliance immediately following the issuance of such Series, and issuance of a Series will not cause the District to exceed the District’s limitation on debt.
Purpose. The purposes for which such Series of Bonds are to be issued; provided, that the proceeds of the sale of such Series of Bonds will be applied only for the purpose of providing funds to (A) pay the costs of the Project, (B) refund any Bonds issued under the Fiscal Agent Agreement, (C) pay capitalized interest on such Series of Bonds, (D) pay Costs of Issuance incurred in connection with the issuance of such Series of Bonds, and (E) make any deposit to the 2023 Reserve Account or establish and fund a separate Reserve Account required pursuant to the Fiscal Agent Agreement; Same Payment Dates. The Supplemental Fiscal Agent Agreement providing for the issuance of such Series will provide that interest thereon shall be payable on Interest Payment Dates, and principal thereof shall be payable on September 1 in any year in which principal is payable on such Series (provided that there shall be no requirement that any Series pay interest on a current basis).
Separate Funds; Reserve Account Deposit. The Supplemental Fiscal Agent Agreement may provide for a separate Reserve Account securing such Series at a reserve requirement to be specified in the Supplemental Fiscal Agent Agreement, or, if the Supplemental Fiscal Agent Agreement specifies that the 2023 Reserve Account will act as a reserve for the payment of the principal of, and interest and any premium on, such Series of Bonds (constituting Related Parity Bonds), the Supplemental Fiscal Agent Agreement will provide for an amount to be deposited into the 2023 Reserve Account of the Special Tax Fund so that the balance on deposit in the 2023 Reserve Account is increased to an amount at least equal to the 2023 Reserve Requirement following the issuance of such Series of Bonds; and an amount at least equal to the 2023 Reserve Requirement will thereafter be maintained in the 2023 Reserve Account. Such deposit will be made as provided in the Supplemental Fiscal Agent Agreement providing for the issuance of such additional Series and may be made from the proceeds of the sale of such additional Series or from other funds.
Aggregate Value-to-Lien. The aggregate CFD Value of all Taxable Property shall be at least three (3) times the sum of: (i) the aggregate principal amount of all Bonds then Outstanding, plus (ii) the aggregate principal amount of the additional Series proposed to be issued, plus (iii) the aggregate principal amount of any fixed assessment liens on the parcels in the CFD subject to the levy of Special Taxes, plus (iv) a portion of the aggregate principal amount of any and all other community facilities district bonds then outstanding and payable at least partially from special taxes to be levied on parcels of land within the CFD (the “Other District Bonds”) equal to the aggregate outstanding principal amount of the Other District Bonds multiplied by a fraction, the numerator of which is the amount of special taxes levied for the Other District Bonds on parcels of land within the CFD subject to the Special Taxes, and the denominator of which is the total amount of special taxes levied for the Other District Bonds on all parcels of land against which such special taxes are levied to pay the Other District Bonds based upon information from the most recent available Fiscal Year. CFD Value is defined in the Fiscal Agent Agreement as the value established by appraisal, assessed value or both of property subject to the special tax. See “APPENDIX C - SUMMARY OF CERTAIN PROVISIONS OF THE FISCAL AGENT AGREEMENT” herein for the complete definition.
Aggregate Coverage. For each Fiscal Year after issuance of the proposed Series, the maximum amount of the Special Taxes that may be levied for such Fiscal Year under the Ordinance, the Fiscal Agent Agreement and any Supplemental Fiscal Agent Agreement on all parcels then classified as Taxable Property or to be classified as Taxable Property in the subsequent Fiscal Year not then delinquent in the payment of any prior or current years’ Special Taxes, less the Administrative Expense Requirement for each respective Fiscal Year, shall be at least 110% of the total Annual Debt Service of the then Outstanding Bonds and the proposed Series of Bonds for each Bond Year that commences in each such Fiscal Year.
Certificates. The District will deliver to the Fiscal Agent a Certificate of Authorized Representative of the District certifying that the conditions precedent to the issuance of such Series set forth in paragraphs (a) through (f) above have been satisfied.
Opinion. An Opinion of Bond Counsel to the effect that execution of the Supplemental Fiscal Agent Agreement has been duly authorized by the District in accordance with the Fiscal Agent Agreement and that such Series, when duly executed by the District and authenticated and delivered by the Fiscal Agent, will be valid and binding obligations of the District.
Notwithstanding the foregoing, the District may issue bonds to refund all or a portion of one or more Series without the need to satisfy the requirements of paragraphs (e) and (f) above, and, in connection therewith, the Certificate of Authorized Representative of the District in paragraph (g) above need not make reference to paragraphs (e) and (f); provided a certification is made that Maximum Annual Debt Service on all Outstanding Bonds following the issuance of such refunding bonds is less than or equal to Maximum Annual Debt Service on all Outstanding Bonds prior to the issuance of such refunding bonds.
The District may also issue any other bonds or otherwise incur debt secured by a pledge of the Special Taxes (other than the Special Taxes to be deposited into the Administrative Expense Account of the Special Tax Fund) which are subordinate to the pledge securing the 2023 Bonds.
SECURITY FOR THE 2023 BONDS
Pledge of Special Taxes
General. The Special Taxes are the primary security for repayment of the 2023 Bonds. The 2023 Bonds are secured by a first pledge of the Special Taxes and all moneys deposited in the Special Tax Fund (except for moneys to be deposited in the Administrative Expense Account and Reserve Accounts other than the 2023 Reserve Account). The Special Taxes and all moneys deposited into these funds (except as otherwise provided in the Fiscal Agent Agreement) are dedicated to the payment of the principal of, and interest and any premium on, the 2023 Bonds as provided in the Fiscal Agent Agreement and in the Act until all of the 2023 Bonds have been paid and retired or until moneys or Federal Securities have been set aside irrevocably for that purpose under the Fiscal Agent Agreement. The Administrative Expense Requirement is defined to mean for any Fiscal Year an amount equal to $30,000 for Fiscal Year 2023-24 escalating by two percent per each Fiscal Year thereafter.
So long as any Bonds issued under the Fiscal Agent Agreement are Outstanding, the District has covenanted in the Fiscal Agent Agreement to levy the Special Tax in an amount sufficient, together with other amounts on deposit in the Special Tax Fund and available for such purpose, to pay (1) the principal of and interest on the Bonds when due, (2) the Administrative Expenses, and (3) any amounts required to replenish the 2023 Reserve Account of the Special Tax Fund to the 2023 Reserve Requirement or to replenish any other reserve account to the reserve requirement established under a Supplemental Fiscal Agent Agreement.
The Special Taxes will be levied by the District and collected by the San Bernardino County Treasurer-Tax Collector in the same manner and at the same time as ad valorem property taxes. In the event that the Special Taxes are not received when due, the only sources of funds available to pay the debt service on the 2023 Bonds are amounts held by the Fiscal Agent in the Special Tax Fund (other than the Administrative Expenses), including amounts held in the 2023 Reserve Account therein, and foreclosure proceeds resulting from the sale of delinquent parcels if and when available. In the event that delinquencies occur in the receipt of the Special Taxes within the District in any Fiscal Year, the District may increase its Special Tax levy in the following Fiscal Year up to the maximum amount permitted under the joa Method of Apportionment of Special Taxes (the “Rate and Method”) except for the 10% limit on residential properties. Although the Special Tax levy may be increased, Special Taxes resulting from the increased levy will not become available to cure any delinquencies until actually collected. In addition, an increase in the Special Tax levy may adversely affect the ability or willingness of property owners to pay their Special Taxes. See “THE DISTRICT– Rate and Method of Apportionment of Special Taxes” herein for a description of the District’s procedures for levying Special Taxes, and “SPECIAL RISK FACTORS” herein.
Special Taxes. The Fiscal Agent Agreement defines “Special Taxes” as the special tax requirement for facilities authorized to be levied by the District on parcels within the District in accordance with the Resolution of Formation, the Act and the voter approval obtained at the September 13, 2022 modification election in the District and any additional special taxes authorized to be levied by the District within the District from time to time that are pledged by the District to the repayment of the Bonds, together with the proceeds collected from the sale of property pursuant to the foreclosure provisions of the Fiscal Agent Agreement for the delinquency of such Special Taxes remaining after the payment of all the costs related to such foreclosure actions, including, but not limited to, all legal fees and expenses, court costs, consultant and title insurance fees and expenses.
Limited Obligation. ALL OBLIGATIONS OF THE DISTRICT UNDER THE FISCAL AGENT AGREEMENT AND THE BONDS ARE NOT GENERAL OBLIGATIONS OF THE CITY OR THE DISTRICT, BUT ARE LIMITED OBLIGATIONS, PAYABLE SOLELY FROM THE SPECIAL TAX REVENUES AND THE FUNDS PLEDGED THEREFORE UNDER THE FISCAL AGENT AGREEMENT. THE FAITH AND CREDIT OF THE CITY, THE DISTRICT OR THE STATE OF CALIFORNIA OR ANY POLITICAL SUBDIVISION THEREOF IS NOT PLEDGED TO THE PAYMENT OF THE BONDS.
Special Tax Fund
Pursuant to the Fiscal Agent Agreement, there is established a “Special Tax Fund” to be held and maintained by the Fiscal Agent. In the Special Tax Fund, there is further established and created an Interest Account (and one or more Capitalized Interest Subaccounts therein), a Principal Account, a Redemption Account, one or more Reserve Accounts and an Administrative Expense Account.
The amounts on deposit in the foregoing funds will be held by the Fiscal Agent, and the Fiscal Agent shall invest and disburse the amounts in such funds and accounts in accordance with the provisions of the Fiscal Agent Agreement and shall disburse investment earnings thereon in accordance with the provisions of the Fiscal Agent Agreement.
The District will, on each date on which it receives Special Taxes, transfer the Special Taxes to the Fiscal Agent for deposit in the Special Tax Fund to be held in accordance with the terms of the Fiscal Agent Agreement. The Fiscal Agent will transfer the amounts on deposit in the Special Tax Fund on the dates and in the amounts set forth in the Fiscal Agent Agreement in the following order of priority:
The Administrative Expense Account of the Special Tax Fund; The Interest Account of the Special Tax Fund;
The Principal Account of the Special Tax Fund;
The Redemption Account of the Special Tax Fund;
Each Reserve Account of the Special Tax Fund;
The Surplus Special Tax Account of the Acquisition and Construction Fund; and The Surplus Fund.
Administrative Expense Account. Upon receipt of Special Taxes from the District for deposit in the Special Tax Fund, the Fiscal Agent will transfer from the Special Tax Fund and deposit in the Administrative Expense Account of the Special Tax Fund an amount equal to the Administrative Expense Requirement for the Bond Year, to be disbursed by the Fiscal Agent to pay Administrative Expenses. Moneys in the Administrative Expense Account are not pledged to the repayment of the Bonds.
Interest Account and Principal Account. Upon receipt of Special Taxes from the District for deposit in the Special Tax Fund, the principal of and interest due on the Bonds until maturity, other than principal due upon redemption, shall be paid by the Fiscal Agent from the Principal Account and the Interest Account of the Special Tax Fund, respectively. At least five Business Days prior to each March 1 and September 1, the Fiscal Agent shall make the following transfers from the Special Tax Fund first to the Interest Account and then to the Principal Account; provided, however, that to the extent that deposits have been made in the Interest Account or the Principal Account from the proceeds of the sale of an issue of the Bonds, or otherwise, the transfer from the Special Tax Fund need not be made; and provided, further, that, if amounts in the Special Tax Fund are inadequate to make the foregoing transfers, then any deficiency shall be made up by an immediate transfer from the applicable Reserve Account:
(1) To the Interest Account, an amount such that the balance in the Interest Account five Business Days prior to each Interest Payment Date shall be equal to the installment of interest due on the Bonds on said Interest Payment Date and any installment of interest due on a previous Interest Payment Date which remains unpaid. Moneys in the Interest Account shall be used for the payment of interest on the Bonds as the same become due. Moneys in the 2023 Capitalized Interest Subaccount within the Interest Account shall be transferred to the Interest Account for payment of a portion of the interest due on the 2023 Bonds through September 1, 2024. (2) To the Principal Account, an amount such that the balance in the Principal Account five Business Days prior to September 1 of each year, commencing September 1, 2024 shall at least equal the principal payment due on the Bonds maturing on such September 1 and any principal payment due on a previous September 1 which remains unpaid. Moneys in the Principal Account shall be used for the payment of the principal of such Bonds as the same become due at maturity.
Redemption Account. On each September 1 on which a Sinking Fund Payment is due, after the deposits have been made to the Interest Account and the Principal Account of the Special Tax Fund, the Fiscal Agent shall next transfer into the Redemption Account of the Special Tax Fund from the Special Tax Fund the amount needed to make the balance in the Redemption Account five Business Days prior to each September 1 equal to the Sinking Fund Payment due on any Outstanding Bonds on such September 1; provided, however, that, if amounts in the Special Tax Fund are inadequate to make the foregoing transfers, then any deficiency shall be made up by an immediate transfer from the applicable Reserve Account, if funded. Moneys so deposited in the Redemption Account shall be used and applied by the Fiscal Agent to call and redeem Term Bonds in accordance with the Sinking Fund Payment schedule set forth in the Fiscal Agent Agreement or any Supplemental Fiscal Agent Agreement.
All prepayments of Special Taxes shall be deposited in the Redemption Account to be used to redeem Bonds on the next date for which notice of redemption can timely be given. 2023 Reserve Account. Moneys in the 2023 Reserve Account shall be used solely for the purpose of paying the principal of, including Sinking Fund Payments, and interest on any 2023 Bonds and Related Parity Bonds when due in the event that the moneys in the Interest Account and the Principal Account of the Special Tax Fund are insufficient therefor or moneys in the Redemption Account of the Special Tax Fund are insufficient to make a Sinking Fund Payment when due. If the amounts in the Interest Account, the Principal Account or the Redemption Account of the Special Tax Fund are insufficient to pay the principal of, including Sinking Fund Payments, or interest on any 2023 Bonds and Related Parity Bonds when due, the Fiscal Agent shall withdraw from the 2023 Reserve Account for deposit in the Interest Account, the Principal Account or the Redemption Account of the Special Tax Fund, as applicable, moneys necessary for such purposes.
Whenever moneys are withdrawn from the 2023 Reserve Account, after making the required transfers under the Fiscal Agent Agreement, the Fiscal Agent shall transfer to the 2023 Reserve Account from available moneys in the Special Tax Fund, or from any other legally available funds which the District elects to apply to such purpose, the amount needed to restore the amount of such 2023 Reserve Account to the 2023 Reserve Requirement. Moneys in the Special Tax Fund shall be deemed available for transfer to the 2023 Reserve Account only if the Fiscal Agent determines that such amounts will not be needed to make the deposits required to be made to the Interest Account, the Principal Account or the Redemption Account of the Special Tax Fund. If amounts in the Special Tax Fund or otherwise transferred to replenish the 2023 Reserve Account are inadequate to restore the 2023 Reserve Account to the 2023 Reserve Requirement, then the District shall include the amount necessary to restore fully the 2023 Reserve Account to the 2023 Reserve Requirement in the next annual Special Tax levy to the extent of the maximum permitted Special Tax rates.
Prepayment of Special Taxes
Under the Rate and Method, the owner of a parcel may voluntarily prepay the Special Tax obligation for a parcel in whole or in part. Any voluntary prepayment of Special Taxes will result in a special mandatory redemption of the Bonds. See “THE BONDS—Redemption—Special Mandatory Redemption from Special Tax Prepayments” and “SPECIAL RISK FACTORS – Extraordinary Redemption From Prepaid Special Taxes.” Covenant to Commence Foreclosure Proceedings
The District covenants in the Fiscal Agent Agreement that it will determine or cause to be determined, no later than March 1 and August 1 of each year, whether or not any owners of the property within the District are delinquent in the payment of Special Taxes and, if such delinquencies exist, the District will order and cause to be commenced no later than April 15 (with respect to the March 1 determination date) or September 1 (with respect to the August 1 determination date), foreclosure proceedings and diligently prosecute, an action in the superior court to foreclose the lien of any Special Taxes or installment thereof not paid when due, provided, however, that the District shall not be required to order the commencement of foreclosure proceedings if (i) the total Special Tax delinquency in the District for such Fiscal Year is less than five percent (5%) of the total Special Tax levied in such Fiscal Year, or (ii) the amount in the 2023 Reserve Account is equal to the 2023 Reserve Requirement and the amount in any reserve account established for Bonds that are not Related Parity Bonds is equal to its applicable reserve requirement. Notwithstanding the foregoing, if the District determines that any single property owner in the District is delinquent in the payment of four (4) or more installments of the Special Tax, then it will diligently institute, prosecute and pursue foreclosure proceedings against such property owner. Commencement of any judicial foreclosure proceedings includes the District’s efforts to collect the delinquent Special Taxes by sending subsequent notice of delinquency and a demand for immediate payment thereof.
There could be a default or a delay in payments to the owners of the 2023 Bonds pending prosecution of foreclosure proceedings and receipt by the District of foreclosure sale proceeds, if any, and subsequent transfer of those proceeds constituting Special Taxes to the Special Tax Fund.
Under the Act, the City has the power to use a foreclosure judgment to purchase the subject property by credit bid at foreclosure sale, in which event the City would have no obligation to pay such credit bid for 24 months.
Notwithstanding any provision of the Act or other law of the State to the contrary, in connection with any foreclosure related to delinquent Special Taxes, the Fiscal Agent Agreement authorizes the District to do the following:
The District may credit bid at any foreclosure sale, without any requirement that funds be set aside in the amount so credit bid, in the amount specified in the Act, or such lesser amount as provided in the Fiscal Agent Agreement or otherwise under the Act.
The District may use amounts in the Surplus Fund to pay costs of foreclosure of delinquent Special Taxes in accordance with the Fiscal Agent Agreement.
IN THE EVENT FORECLOSURE OR FORECLOSURES ARE NECESSARY, THERE MAY BE A DELAY IN PAYMENTS TO BOND OWNERS PENDING PROSECUTION OF THE FORECLOSURE PROCEEDINGS AND RECEIPT BY THE DISTRICT OF THE PROCEEDS OF THE FORECLOSURE SALE; IT IS ALSO POSSIBLE THAT NO BID FOR THE PURCHASE PRICE OR APPLICABLE PROPERTY WOULD BE RECEIVED AT THE FORECLOSURE SALE. SEE “SPECIAL RISK FACTORS.” NOTWITHSTANDING ANY OTHER PROVISION OF THE FISCAL AGENT AGREEMENT TO THE CONTRARY, THE CITY IS NOT OBLIGATED TO ADVANCE AVAILABLE FUNDS FROM THE CITY TREASURY TO CURE ANY DEFICIENCY IN THE SPECIAL TAX FUND ESTABLISHED UNDER THE FISCAL AGENT AGREEMENT.
Value-to-Lien Ratios
The Bonds are secured by Special Taxes which may include amounts realized upon foreclosure sale of delinquent parcels. Therefore, the ability of the District to meet debt service on the Bonds may depend on the ability of delinquent parcels to generate sufficient proceeds upon foreclosure sale to pay delinquent Special Taxes.
The appraised value of the parcels within the District is $210,830,000, as of July 15, 2023, which is 12.04* times the aggregate principal amount of 2023 Bonds issued and 9.55* times the aggregate total direct and overlapping debt within the District, including the 2023 Bonds and overlapping general obligation debt. See “THE DISTRICT – Appraised Value-to-Lien Ratios” and “- Direct and Overlapping Governmental Obligations” herein. See also, “APPENDIX G – APPRAISAL REPORT.” No Obligation of the City Upon Delinquency
The City is under no obligation to transfer any funds of the City into the Special Tax Fund or any other funds or accounts under the Fiscal Agent Agreement for the payment of the principal of or interest on the 2023 Bonds if a delinquency occurs in the payment of any Special Taxes.
Although the Act authorizes the District to cause a foreclosure action to be commenced and diligently prosecuted to completion, the Act does not impose on the District or the City any obligation to purchase or acquire any parcel of property sold at a foreclosure sale if there is no other purchaser at such sale. Notwithstanding the above, the City does have the ability to use the foreclosure judgment to purchase the property by credit bid at a foreclosure sale, in which case the City would have no obligation to pay such credit bid for 24 months.
Other Indebtedness and Obligations
At the September 13, 2022 modification election, the qualified electors authorized the District to incur Bonds in an amount not to exceed $50,000,000. The 2023 Bonds constitute the first series of the total authorization of $50,000,000 of Bonds. At a later time, additional Series of Bonds, up to an amount equal to $32,500,000,* may be issued on a parity with the 2023 Bonds.
The properties within the District are subject to annual special taxes for services for the District (“Special Tax B”). For the 2024-25 Fiscal Year, the Special Tax B was $351.23 per Residential Unit. Special Tax B shall be increased by the lesser of the percent change in the Consumer Price Index or three percent (3%) for each Fiscal Year after Fiscal Year 2023-24. Undeveloped Property is not subject to Special Tax B. The Special Tax B is not pledged to the 2023 Bonds.
The properties in the District are subject to other existing authorized indebtedness payable from taxes and assessments that may be levied. Existing authorized indebtedness is shown in Table 8 under “THE DISTRICT – Direct and Overlapping Debt and Other Obligations” herein.
Additionally, parcels within the District are subject to a special tax levied and collected by Rialto Unified School District CFD No. 2019-1. For Fiscal Year 2023-24, the assigned tax ranged from $563 to $841 per dwelling unit. This special tax contains an annual escalator of 2% per year. The Rialto Unified School District CFD No. 2019-1 is authorized to issue up to $12 million of special tax bonds secured by the special tax revenues generated by such community facilities district. The Developer estimates that at full buildout of the River Ranch Project, the property within the District will also bear 100% of the total special taxes levied by Rialto Unified School District CFD No. 2019-1. The special taxes levied by Rialto Unified School District CFD No. 2019-1 are parity liens on any parcel of property taxed by both the District and Rialto Unified School District CFD No. 2019-1. [The remainder of this page is intentionally left blank.] ZONES
TRACT MAP
VICINITY MAPS
THE DISTRICT
General
Description and Location. The District consists of an approximately 183-acre newly developed master-planned community known as “River Ranch” which is planned to consist of 776 detached single-family homes among six neighborhoods. The development is located along River Ranch Parkway, at the northeast edge of the City with boundaries at the end of Country Club Drive, ¼ mile northeast of Riverside Avenue, and several blocks north of Highland Avenue and the 210 Freeway.
Immediate Surroundings. River Ranch is located at the north edge of the urban area of Rialto with a mix of nearby residential neighborhoods, with school, religious and commercial uses farther south toward the 210 Freeway, and open space and sand/gravel/industrial uses to the north as part of the expansive Lytle Creek/Cajon Wash through this area.
To the south/southwest of River Ranch and extending to the north side of Riverside Drive are various neighborhoods of single family homes built from the 1950’s through the mid 1980’s, with a few newer custom or rebuilt homes. The homes generally range in size from 1,500 square feet to approximately 3,000 square feet, with a few larger estate homes ranging up to 6,500 square feet. Across Riverside Dr. and extending south to the north side of the 210 Freeway are large areas of single family neighborhoods, as well as two elementary school campuses and one middle school campus in Rialto Unified School District, and a large church property. The nearest shops and retail for River Ranch are located in commercial centers on both sides of Riverside Drive at the 210 Freeway and include a market, quick serve and fast food restaurants, service commercial and office.
To the northwest of the northerly part of River Ranch is much open space and vacant land including a water storage facility for West San Bernardino County Water District. This area, comprising 571 acres, was annexed into the City in July 2016 and is part of the Lytle Creek Ranch Specific Plan which also includes River Ranch development. Lytle Creek and Cajon Wash extend along the north and east sides of the River Ranch development, with more than 1,200 acres of this area preserved in perpetuity as part of the Cajon Creek Conservation Bank established by Vulcan Materials Company. The area is managed as wildlife habitat and provides protected habitat for many plant, bird and mammal species. Vulcan Materials Company operates various mining and quarry sites along the Cajon Wash, including the approximate 100-acre site adjacent to the southeast of the southerly part of the River Ranch development.
The River Ranch community is located within the boundaries of the Rialto Unified School District. The neighborhood is served by Hughbanks Elementary School, Kolb Middle School and Carter High School.
See APPENDIX A – “Information RELATING TO THE CITY OF RIALTO and SAN BERNARDINO County” for certain demographic information on the City and the County.
Property Ownership and Development Status
The following information regarding the ownership and planned development of the property in the District has been provided by the Developer for use in this Official Statement and has not been independently confirmed or verified by the District or the Underwriter. Neither the District nor the Underwriter makes any representation as to the accuracy or adequacy of this information or the absence of any material change after the date of this Official Statement. There may be material adverse changes in this information after the date of this Official Statement.
As the proposed land development progresses and homes are sold, it is expected that the ownership of the land within the District will become more diversified. No assurance can be given that development of the land within the District will occur in the timeframe currently projected or in the configuration or intensity described herein, or that the Developer will or will not retain ownership of any of the land within the District.
The 2023 Bonds and the Special Taxes are not personal obligations of any landowners, including the Developer, and, in the event that a landowner defaults in the payment of the Special Taxes, the District may proceed with judicial foreclosure but has no direct recourse to the assets of any landowner. As a result, other than as provided herein, no financial statements or information is, or will be, provided about the Developer or any other landowners. The 2023 Bonds are secured solely by the Special Taxes and other amounts pledged under the Fiscal Agent Agreement. See “SECURITY FOR THE 2023 BONDS” and “SPECIAL RISK FACTORS” in this Official Statement.
Lennar Homes
The River Ranch project will be developed by Lennar Homes of California, LLC, a California limited liability company (previously defined as the “Developer”), which is based in Irvine, California. The Developer has been in the business of developing residential real estate communities in California since 1996. The Developer is wholly-owned by U.S. Home, LLC, a Delaware limited liability company (formerly U.S. Home Corporation, a Delaware corporation) (“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 of California, LLC and U.S. Home. The Developer primarily develops residential communities both within the Lennar Corporation family of builders and through consolidated and unconsolidated partnerships in which Lennar Corporation maintains an interest.
Lennar Corporation is subject to the informational requirements of the 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 the Developer, 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 Official Statement 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 internet addresses referenced in the paragraphs above are included for reference purposes only and the information on these internet sites are not a part of this Official Statement and are not incorporated by reference into this Official Statement. No representation is made in this Official Statement as to the accuracy or adequacy of the information contained on these internet sites.
Landbank Arrangement
The Developer sold 522 of the 776 lots located in the District (the “Land Bank Lots”) to AG Essential Housing CA 4, L.P., a Delaware limited partnership (“AG4”) in order to set up a land banking structure. AG4 will transfer 254 lots that are not Land Bank Lots back to Developer. As of September 1, 2023 one such lot had been transferred back to the Developer with the remaining 253 lots anticipated to be transferred by October 15, 2023.
To facilitate the land banking structure for the District, the Developer and AG4 entered into that certain Option Agreement, dated February 26, 2021 (the “Lennar Option Agreement”) whereby the Developer has the option, but not the obligation, to purchase the 522 Land Bank Lots from AG4 pursuant to a takedown schedule agreed upon between the Developer and AG4.
The Developer and AG4 further memorialized their rights and obligations under the Lennar Option Agreement by recording that certain Memorandum of Option Agreement in the Official Records of San Bernardino County on February 26, 2021, as Instrument No. 2021-001337 (the “Memorandum of Lennar Option”).
In addition to the Option Agreement, the Developer and AG4 entered into a Construction Agreement (“Lennar Construction Agreement”) granting the Developer the right to enter upon the Land Bank Lots for the purpose of, among other things, constructing model homes, dwelling units and related subdivision improvements on the Land Bank Lots before the Developer acquires the Land Bank Lots from AG4.
The Developer’s planned development of the Land Bank Lots includes the construction of 522 single-family residential homes and the sale of such homes to individual homebuyers. Pursuant to the terms and conditions of the Lennar Option Agreement, the Developer is required to, among other things, cause the completion and satisfaction of the certain on-site and offsite improvements to the Land Bank Lots. During the term of the Lennar Option Agreement, the Developer is obligated to pay all taxes on the Land Bank Lots, including the Special Taxes.
Under the terms of the Lennar Option Agreement, AG4 agreed to provide the Developer the exclusive right and option to purchase the Land Bank Lots in consideration for (a) an initial option payment, which payment has been made to AG4; (b) the covenants of the Developer to timely pay the option payments under the Lennar Option Agreement on a monthly basis in arrears; and (c) upon exercise of the option, the payment of the purchase price for each set of lots acquired.
The Land Bank Lots must be purchased in certain groups and in a specified order, although the Developer may acquire more lots than scheduled and at earlier times so long as the identified lots are acquired by the applicable takedown date. In addition, pursuant to the Lennar Option Agreement and the Lennar Construction Agreement and with some limitations, AG4 has granted the Developer a license to enter upon the property to construct homes before it acquires the lots from AG4. It is the Developer’s intention to substantially complete all horizontal and vertical development on the lots it acquires prior to the applicable takedown.
The failure to acquire the lots in the specified order will result in the payment of a premium in addition to the purchase price. Under the Lennar Option Agreement, the Land Bank Lots must be acquired pursuant to the following schedule, although the Lennar Option Agreement contains provision allowing for one month extensions on acquisition of lots subject to the payment of an extension fee and other conditions:
[The remainder of this page is intentionally left blank.] Takedown Schedule
Under Lennar Option Agreement
(Land Bank Lots Only)
Acquisition Date
Lot A (TR 20204)
Lot B (TR 20205)
Lot C (TR 20205)
Lot D (TR 20206)
Lot E (TR 20207)
Lot F (TR 20208)
Lot G (TR 20209)
Cumulative Number of Lots Acquired
Status as of _____1, 2023
3/15/22
2 2
2 3
9 Acquired
4/15/22
5/15/22
4 13
Acquired
6/15/22
7/15/22
8/15/22
9/15/22
8 8
8 8
45 Acquired
10/15/22
8 8
8 8
77 Acquired
11/15/22
10 87
Acquired
12/15/22
8 8
8 10
8 129
Acquired
1/15/23
2/15/23
8 8
8 10
8 171
Acquired
3/15/23
2 173
Acquired
4/15/23
8 8
8 10
8 215
Acquired
5/15/23
6/15/23
8 8
8 10
8 257
Acquired
7/15/23
8/15/23
8 8
8 10
8 299
Acquired
9/15/23
8 307
10/15/23
8 8
8 8
10 8
357
11/15/23
12/15/23
8 7
7 8
10 8
405
1/15/24
8 413
2/15/24
8 8
10 8
447
3/15/24
8 455
4/15/24
8 5
10 8
486
5/15/24
8 494
6/15/24
8 8
4 8
522
50 73
73 87
32 108
99 522
_________________________
Note 1: The table above represents the minimum lots to be acquired per the Lennar Option Agreement. As of August 15, 2023, the Developer has acquired 317 lots from AG4.
The option under the Lennar Option Agreement expires on the earlier of (i) the last date permitted for the final takedown specified on the takedown schedule and the expiration of any applicable cure period, or (ii) the date the Developer has acquired all of the Land Bank Lots in accordance with the Lennar Option Agreement. The failure to timely acquire lots could result in the termination of the option and the Developer will no longer have a right to purchase any of the remaining units under the Lennar Option Agreement. In the event that the Developer does not exercise its option on the Land Bank Lots or the right to purchase the Land Bank Lots expires or is terminated, AG4 being an investor only and not a homebuilder, would likely attempt to sell such Land Bank Lots to another merchant builder.
Under the Lennar Construction Agreement, the Developer has agreed to use commercially reasonable efforts to construct all of the on-site and off-site improvements and obtain the requisite governmental permits and approvals necessary to create finished lots on the Land Bank Lots. The Lennar Construction Agreement contains various dates for completion of work in phases.
During the term of the Lennar Option Agreement and the Lennar Construction Agreement, the Developer is obligated to pay all taxes on the Land Bank Lots.
Development Plan
The River Ranch development is planned to consist of 776 detached single-family homes among six neighborhoods that are all currently under construction: The Cove (small lot/condominium plan), Blueridge, Ridgewater, Summerbrooke, Edgestone and Stonecreek. River Ranch will feature the Arroyo Lifestyle Park near the entrance to the community, extensive walking trails, a dogpark and community play area, a recreation center with clubhouse, pool, splash park, fire pits, outdoor kitchen as well as adjacent parks with a basketball court, tot lots and a playground.
The following table describes the development status as of July 15, 2023, and includes all of the lots in the District including those that are the subject of the Option Agreement with AG4. [The remainder of this page is intentionally left blank.] TABLE 1
CITY OF RIALTO
COMMUNITY FACILITIES DISTRICT NO. 2020-1 (El Rancho Verde)
DEVELOPMENT STATUS
(AS OF [JULY 15], 2023)
Plan
Sq. Feet
Number of Units
Units With Closed Escrows to Individual Homeowners
Completed Units (Not Closed)(1)
Units Under Construction
Units in Escrow with Individual Homeowners
Semi- or Near-finished Vacant Lots
The Cove
Plan 1
1,577
51 4
0 10
4 37
Plan 2
1,606
52 4
1 10
5 37
Plan 3
1,705
50 4
1 10
5 35
Plan 4
1,937
52 4
1 10
6 37
Subtotal
205
16 3
40 20
146
Blueridge
Plan 1
1,547
33 14
2 6
3 11
Plan 2
1,705
33 5
0 7
4 21
Plan 3
1,843
34 8
2 5
3 19
Plan 4
2,064
34 10
1 6
4 17
Subtotal
134
37 5
24 14
68 Ridgewater
Plan 1
1,792
18 9
0 6
3 3
Plan 2
2,064
18 0
0 0
0 18
Plan 3
2,203
56 11
2 9
5 34
Plan 4
2,590
60 14
1 9
3 36
Subtotal
152
34 3
24 11
91 Summerbrooke
Plan 1
1,950
17 10
1 5
1 1
Plan 2
2,091
30 12
5 8
3 5
Plan 3
2,238
28 10
6 8
1 4
Subtotal
75 32
12 21
5 10
Edgestone
Plan 1
2,253
44 0
0 7
1 37
Plan 2
2,547
49 0
1 6
3 42
Plan 3
2,700
39 0
1 6
2 32
Subtotal
132
0 2
19 6
111
Stonecreek
Plan 1
2,140
18 8
0 7
4 3
Plan 2
2,809
17 7
0 6
1 4
Plan 3
3,325
20 8
1 7
4 4
Plan 4
4,122
23 9
1 7
2 6
Subtotal
78 32
2 27
11 17
TOTALS
776
151
27 155
67 443
(1) Includes 14 model homes owned by the Developer.
Source: Lennar Homes of California, LLC.
The estimated base pricing range of the units within each plan, as well as the construction start date and projected closeout date for all 776 units in the Project, assuming that the Developer acquires all of the Land Bank Lots from AG4, is set forth in Table 2 below.
TABLE 2
CITY OF RIALTO
COMMUNITY FACILITIES DISTRICT NO. 2020-1 (El Rancho Verde)
ESTIMATED BASE PRICING AND CLOSEOUT
(AS OF ____, 2023)
Plan
Number of Units
Base Home
Price Range
Construction
Start Date
Estimated
Closeout Date
The Cove
205
$501,780 – $541,640
July 2022
August 2026
Blueridge
134
$535,220 - $590,990
April 2022
June 2025
Ridgewater
152
$557,185 - $675,580
April 2022
March 2024
Summerbrooke
75 $572,235 – $622,220
March 2022
April 2024
Edgestone
132
$618,490 - $663,323
April 2023
March 2026
Stonecreek
78 $627,050 - $876,780
May 2022
May 2024
TOTAL
776
___________________
Source: Lennar Homes of California, LLC.
Required Infrastructure. All backbone infrastructure required to build-out all 776 lots has been completed, with internal streets complete and utilities stubbed to each lot. [As of _______, 2023, the remaining land development costs of approximately $___________ relate to landscaping, perimeter walls, and bond exoneration. All development impact fees have been paid.] Entitlement Status. Other than certificates of occupancy and other permits required in the normal course of home construction, all discretionary entitlements required to complete the development and sales of homes in the District have been received.
The District is located within the Lytle Creek Ranch Specific Plan, within an approximate 183-acre portion of Neighborhood 2. Tentative Tract Map No. 20092 was approved by the City Council on September 10, 2019 to create six developable lots to facilitate a 776-lot residential subdivision. The more specific approvals for the residential development are by the final maps for Tract Nos. 20204, 20205, 20206, 20207, 20208 and 20209 which were recorded from March 31, 2022 through May 3, 2023. In addition, the Condominium Plans for The Cove were recorded from September 29, 2022 through March 24, 2023.
Conditions of Approval. All conditions of approval required for the issuance of building permits within the project have been satisfied, and none of the remaining infrastructure improvements are required to be completed as a condition of receiving building or occupancy permits.
Except as described in this Official Statement and except for those consents, permits, authorizations, certifications and approvals of governmental entities required in the ordinary course of development, the Developer 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 the District as described in the Official Statement.
Financing Plan. As of ________, 2023, the Developer had expended approximately $___ million in land acquisition, improvements, home construction costs, and other development costs (excluding interest) related to the River Ranch project. As of _______, 2023, the Developer anticipates expending an additional approximately $___ million in acquisition (including taking down lots from AG4), development, construction, and marketing costs for the River Ranch project.
To date, the Developer has financed its land acquisition, site development and home construction costs related to its property in the District through internally generated funds. The Developer believes that such funding sources will be sufficient to complete its proposed development in the District as described herein. No assurance can be given that amounts necessary to fund the remaining planned development of the Developer’s property within the District will be available when needed. Neither the Developer nor any other entity or person is under any legal obligation of any kind to expend funds for the development of the Developer’s property in the District. Any contributions by the Developer or any other entity or person to fund the costs of such development are entirely voluntary. If and to the extent the aforementioned sources are inadequate to pay the costs to complete the Developer’s planned development within the District, the remaining portions of such development may not be completed.
The Developer anticipates, but is not obligated, to acquire all of the Land Bank Lots from AG4.
Although the Developer expects to have sufficient funds available to complete its planned development in the District commensurate with the development timing described in this Official Statement, there can be no assurance that amounts necessary to finance the remaining development and home construction costs will be available from the Developer or any other source when needed. Neither the Developer, 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 the District, or the payment of ad valorem property taxes or the Special Taxes. Any contributions by the Developer to fund the costs of such development are entirely voluntary.
If and to the extent that internal funding, including but not limited to home sales revenues, are inadequate to pay the costs to complete the planned development by the Developer within the District and other financing by the Developer is not put into place, there could be a shortfall in the funds required to complete the planned development by the Developer in the District, and the remaining portions of the Developer’s project in the District may not be completed.
Rate and Method of Apportionment of Special Taxes
The following is a synopsis of the provisions of the Rate and Method. This synopsis does not purport to be comprehensive and should be read in conjunction with the complete text of the Rate and Method, including its attachments, which is attached hereto as “APPENDIX D – RATE AND METHOD OF APPORTIONMENT OF SPECIAL TAX.” All capitalized terms not defined in this section have the meanings set forth in APPENDIX D.
Each Fiscal Year, each Assessor’s Parcel within the boundaries of the District shall be classified as Taxable Property or Exempt Property. In addition, all Taxable Property within the District shall be classified as Developed Property, Approved, Undeveloped Property, or Provisional Property, and all such Taxable Property shall be subject to the levy of Special Taxes in accordance with the Rate and Method. Furthermore, each Assessor’s Parcel of Developed Property shall be classified according to its applicable Land Use Class according to its applicable Zone and land use type based on its Building Square Footage as applicable.
For each Fiscal Year, the CFD Administrator shall calculate the Special Tax Requirement for Facilities and levy Special Tax A on all Taxable Property in accordance with the following steps:
Step 1: The Special Tax A shall be levied Proportionately on all Assessor’s Parcels of Developed Property up to 100% of the applicable Assigned Special Tax A to satisfy the Special Tax Requirement for Facilities; Step 2: If additional monies are needed to satisfy the Special Tax Requirement for Facilities after Step 1 has been completed, the Special Tax A shall be levied Proportionately on all Assessor’s Parcels of Approved Property up to 100% of the Maximum Special Tax A for Approved Property; Step 3: If additional monies are needed to satisfy the Special Tax Requirement for Facilities after Step 1 has been completed, the Special Tax A shall be levied Proportionately on all Assessor’s Parcels of Undeveloped Property up to 100% of the Maximum Special Tax A for Undeveloped Property; Step 4: If additional monies are needed to satisfy the Special Tax Requirement for Facilities after the first three steps have been completed, then the Special Tax A amount determined in Step 1 shall be increased Proportionately on all Assessor’s Parcels of Developed Property up to 100% of the Maximum Special Tax A for Developed Property; and Step 5: If additional monies are needed to satisfy the Special Tax Requirement for Facilities after the first four steps have been completed, then the Special Tax A shall be levied Proportionately on all Assessor’s Parcels of Provisional Property up to 100% of the Maximum Special Tax A for Provisional Property.
In the event Building Permits have been issued prior to May 1st of the previous Fiscal Year for one or more Residential Units on a single Assessor’s Parcel causing such Assessor’s Parcel to be classified as Developed Property, and the County has not yet assigned final Assessor’s Parcel Number(s) to such Residential Unit(s) in accordance with the Final Map applicable to such Assessor’s Parcel, then the amount of the Special Tax A levy on such Assessor’s Parcel shall be determined as follows: (1) the CFD Administrator shall first determine an amount of the Maximum Special Tax A for such Assessor’s Parcel, based on the classification of such Assessor’s Parcel as Undeveloped Property; (2) the amount of the Special Tax A and levy for the Residential Units on such Assessor’s Parcel for which Building Permits have been issued shall be determined based on the Assigned Special Tax A for Developed Property, and such amount shall be levied as Developed Property in accordance with Step 1 above; and (3) the amount of the Special Tax A on the Taxable Property in such Assessor’s Parcel not subject to the Special Tax A levy in clause (2) shall be equal to (A) the percentage of the Maximum Special Tax A rate levied on all other Undeveloped Property pursuant to Step 2 above multiplied by the total of the amount determined in clause (1), less (B) the amount determined in clause (2).
Notwithstanding the above, under no circumstances will the Special Tax levied against any Assessor’s Parcel of Developed Property for which an occupancy permit for private residential use has been issued be increased by more than ten percent as a consequence of delinquency or default by the owner of any other Assessor’s Parcel within the District.
Special Tax A shall be levied for a period not to exceed fifty (50) Fiscal Years commencing with Fiscal Year 2023-24, provided however that the Special Tax A may cease to be levied in an earlier Fiscal Year if the CFD Administrator has determined that all required interest and principal payments on Outstanding Bonds have been paid.
Beginning in fiscal year 2023-24, the Special Tax in the amount of $__________ was levied on ____ parcels within the District. [The remainder of this page is intentionally left blank.] TABLE 3
CITY OF RIALTO
COMMUNITY FACILITIES DISTRICT NO. 2020-1 (El Rancho Verde)
ASSIGNED SPECIAL TAXES
Land Use
Residential Floor Area
No. of Units/Parcels(1)
Fiscal Year 2024-25 Assigned Special Tax Per Unit(2)
Projected Fiscal Year 2024-25 Special Tax Per Unit
Total Projected Fiscal Year 2024-25 Special Tax Levy(3) Percent of Total
Zone 1
Residential Property
Less than 2,301 sq. ft.
7 $ 2,703
$2,703
$ 18,921
1.82%
Residential Property
2,301 sq. ft. to 2,450 sq. ft.
0 0
0 0
0.00 Residential Property
2,451 sq. ft. to 2,600 sq. ft.
6 2,795
2,795
16,769
1.61 Residential Property
Greater than 2,600 sq. ft.
6 2,841
2,841
17,044
1.64 Approved Property
N/A
111
29,918
0 0
0.00 Zone 2
Residential Property
Less than 1,800 sq. ft.
43 $ 2,438
$2,438
$104,825
10.06%
Residential Property
1,800 sq. ft. or Greater
37 2,688
2,688
99,445
9.55 Approved Property
N/A
51 25,630
0 0
0.00 Zone 3
Residential Property
Less than 2,500 sq. ft.
111
$ 2,759
$2,759
$306,260
29.40%
Residential Property
2,500 sq. ft. or Greater
30 2,892
2,892
86,751
8.33 Approved Property
N/A
5 23,078
0 0
0.00 Undeveloped Property
N/A
1 23,078
0 0
0.00 Zone 4
Residential Property
Less than 2,701 sq. ft.
25 $ 2,897
$2,897
$ 72,420
6.95%
Residential Property
2,701 sq. ft. to 2,950 sq. ft.
13 3,014
3,014
39,183
3.76 Residential Property
2,951 sq. ft. to 3,200 sq. ft.
0 0
0 0
0.00 Residential Property
3,201 sq. ft. to 3,450 sq. ft.
16 3,249
3,249
51,979
4.99 Residential Property
3,451 sq. ft. to 3,700 sq. ft.
0 0
0 0
0.00 Residential Property
3,701 sq. ft. to 3,950 sq. ft.
0 0
0 0
0.00 Residential Property
Greater than 3,950 sq. ft.
18 3,601
3,601
64,811
6.22 Approved Property
N/A
15 19,725
0 0
0.00 Zone 5
Residential Property
Less than 1,701 sq. ft.
33 $ 2,377
$2,377
$ 78,428
7.53%
Residential Property
1,701 sq. ft. to 1,900 sq. ft.
17 2,458
2,458
41,789
4.01 Residential Property
Greater than 1,900 sq. ft.
17 2,540
2,540
43,177
4.14 Approved Property
N/A
5 34,555
0 0
0.00 Undeveloped Property
N/A
18 34,555
0 0
0.00 Totals
585
$1,041,803
100.00%
(1) For parcels of Residential Property, reflects the number of units developed or under development as of July 15, 2023. For parcels of Approved Property or Undeveloped Property, reflects the number of parcels as of July 15, 2023, according to San Bernardino County. At buildout the CFD will have a total of 776 units. (2) For parcels of Approved Property and Undeveloped Property, the Maximum Special Tax per Acre is shown. (3) Includes the debt service requirement for Fiscal Year 2024-25, the Fiscal Year 2024-25 administrative expense requirement of $30,600, and an adjustment to increase the Special Tax levy equal to 100% of the Assigned Special Tax rate for Developed Property.
Source: Webb Municipal Finance, LLC
Estimated Maximum Special Tax Proceeds and Debt Service Coverage The Rate and Method is structured to produce Special Tax revenues from the Assigned Special Tax A net of Administrative Expense Requirement, which, when applied to the projected debt service on the 2023 Bonds, is anticipated to result in a debt service coverage ratio of at least 110% for the anticipated life of the 2023 Bonds. The following table shows the estimated debt service coverage for the 2023 Bonds for Fiscal Year 2024-25.
TABLE 4
CITY OF RIALTO
COMMUNITY FACILITIES DISTRICT NO. 2020-1
(El Rancho Verde)
ESTIMATED DEBT SERVICE COVERAGE
Bond Year Ending
(September 1)
Total Assigned Facilities Special Tax from Developed Property(1) Less: Priority Administrative
Net Total Assigned Facilities Special Tax
Est. Bonds Debt Service
Coverage from Net Total Assigned Special Tax from Developed Property(1) 2025
$1,041,803
$30,600
$1,011,203
$917,594
110.20%
_____________
(1) Coverage has been calculated based on the total Assigned Special Taxes for 379 parcels of Developed Property as of ______, 2023. The actual special tax levy for FY 2024-25 will be calculated to include debt service costs, the Fiscal Year 2024-25 administrative expense requirement of $30,600, and an adjustment to increase the Special Tax levy equal to 100% of the Assigned Special Tax rate for all Developed Property as of May 1, 2024.
Source: Webb Municipal Finance, LLC. Estimated Bonds debt service provided by Piper Sandler & Co.
Pursuant to Section 53321(d) of the Act, the special tax levied against any assessor’s parcel for which an occupancy permit for private residential use has been issued shall not be increased as a consequence of delinquency or default by the owner of any other assessor’s parcel within the district by more than 10% above the amounts that would have been levied in that fiscal year had there never been any such delinquencies or defaults. As a result, it is possible that the District may not be able to increase the tax levy to the Assigned Special Tax in all years. However, subject to the limitations on the District’s ability to levy the necessary amount of Special Taxes as imposed by Section 53321(d) of the Act, the District can levy Special Taxes on Undeveloped Property to make up all or a portion of such shortfall.
Appraised Property Value
The information below is only a summary of certain information contained in the Appraisal Report. The Appraisal Report is reprinted herein as Appendix G. The information below is qualified in its entirety by the complete Appraisal Report. The District makes no representation as to the accuracy or completeness of the Appraisal Report.
The Appraisal Report. The 2023 Bonds are secured by Special Taxes which may include amounts realized upon foreclosure sale of delinquent parcels. Therefore, the ability of the District to meet debt service on the 2023 Bonds may depend on the ability of delinquent parcels to generate sufficient proceeds upon foreclosure sale to pay delinquent Special Taxes. The City commissioned Stephen G. White, MAI, Fullerton, California (the “Appraiser”) to ascertain the “as is” market value of the fee simple estate for the six product types of taxable property in the District. As of the date of value for the Appraisal Report (July 15, 2023) 151 single-family homes were owned by individual homeowners, 14 completed model homes were owned by the Developer, 13 completed homes were owned by the Developer, 106 homes under construction were owned by the Developer, 49 homes under construction were owned by AG4, 1 near-finished lot was owned by the Developer and 442 finished lots were owned by AG4. The Appraiser estimated that, as of the July 15, 2023 date of value of the Appraisal Report, the “as is” market value of the fee simple estate (subject to the lien of the Special Taxes) of all the taxable land and improvements within the District was $210,630,000, which is approximately 12.04* times the aggregate principal amount of the 2023 Bonds. Below is a table summarizing the components of the market value of the taxable property within the six product types within the District as detailed in the Appraisal Report.
TABLE 5
CITY OF RIALTO
COMMUNITY FACILITIES DISTRICT NO. 2020-1 (El Rancho Verde)
APPRAISAL VALUE SUMMARY
Product Type
No. of Lots
Appraised Value
The Cove
Individual Owners (completed-closed homes)
16 $ 7,840,000
Lennar Ownership (completed-unclosed homes)
3 1,200,000
Lennar/AG4 Ownership (homes under construction)
40 8,640,000
AG4 Ownership (vacant lots)
146
21,730,000
205
$ 39,410,000
Blueridge
Individual Owners (completed-closed homes)
37 $ 19,240,000
Lennar Ownership (completed-unclosed homes)
5 2,100,000
Lennar/AG4 Ownership (homes under construction)
24 5,820,000
Lennar/AG4 Ownership (vacant lots)
68 10,800,000
134
$ 37,960,000
Ridgewater
Individual Owners (completed-closed homes)
34 $ 19,550,000
Lennar Ownership (completed-unclosed homes)
3 1,380,000
Lennar/AG4 Ownership (homes under construction)
24 5,920,000
AG4 Ownership (vacant lots)
91 15,820,000
152
$ 42,670,000
Summerbrooke
Individual Owners (completed-closed homes)
32 $18,400,000
Lennar Ownership (completed-unclosed homes)
12 5,520,000
Lennar/AG4 Ownership (homes under construction)
21 4,620,000
AG4 Ownership (vacant lots)
10 1,740,000
75 $ 30,280,000
Edgestone
Lennar Ownership (completed-unclosed homes)
2 $ 1,000,000
Lennar/AG4 Ownership (homes under construction)
19 4,050,000
AG4 Ownership (vacant lots)
111
19,850,000
132
$ 24,900,000
Stonecreek
Individual Owners (completed-closed homes)
32 $ 22,400,000
Lennar Ownership (completed-unclosed homes)
2 1,200,000
Lennar/Ag4 Ownership (homes under construction)
27 8,260,000
AG4 Ownership (vacant lots)
17 3,550,000
78 $ 35,410,000
TOTALS
776
$210,630,000
_____________
Source: Appraisal Report.
An updated Appraisal Report has not been requested by the City or the District or completed by the Appraiser since the original date of value. On the date of issuance of the 2023 Bonds, the Appraiser will certify that the Appraiser is aware that acts and events may have occurred since the date of value of the Appraisal Report which could result in both positive and negative effects on the market value of the appraised property. However, the Appraiser has not performed additional research or valuation analysis specific to the subject property since the date of the Appraisal Report. The Appraisal Report’s value estimates reflect certain assumptions set forth in the Appraisal Report including that all costs reported by the Developer are accurate, including but not limited to the remaining impact fees and lot costs. Any variance in costs could impact the value conclusions reported in the Appraisal Report. For a full description of the assumptions relied upon by the Appraiser, as well as a description of the valuation methodology, see APPENDIX G – “APPRAISAL REPORT.” The Appraisal Report was prepared in accordance with and subject to the requirements of The Appraisal Standards for Land Secured Financing as published by the California Debt and Investment Advisory Commission, the Uniform Standards of Professional Appraisal Practice (USPAP) of the Appraisal Foundation, and the Code of Professional Ethics and the Standards of Professional Appraisal Practice of the Appraisal Institute. See APPENDIX G – “APPRAISAL REPORT.” Appraised Value-to-Lien Ratios
The tables below show the projected aggregate value to burden ratio for the 776 lots that were the subject of the Appraisal Report based on the appraised values set forth in the Appraisal Report and the principal amount of the 2023 Bonds. The following value-to-lien ratios only represent estimated averages for the taxable property within the District. No assurance can be given that the amounts shown in these tables will conform to those ultimately realized in the event of a foreclosure action following delinquency in the payment of the Special Taxes. [The remainder of this page is intentionally left blank.] TABLE 6
CITY OF RIALTO
COMMUNITY FACILITIES DISTRICT NO. 2020-1 (El Rancho Verde)
APPRAISED VALUE-TO-LIEN RATIOS BY PROPERTY OWNER
(As of July 15, 2023)
Property Owner(1)
Parcel Count(2)
Parcel Count at Buildout(3)
Maximum Special Tax
Percent of Maximum Special Tax
Projected Fiscal Year 2024-25 Special Tax Levy (4)
Percent of Projected Fiscal Year 2024-25 Special Tax Levy Total Appraised Value(5)
2023 Bonds* (6)
Aggregate Value-to- Lien Ratio*
Individual Homeowners
Completed
151
151
$ 460,415
20.87%
$ 420,327
40.35%
$ 87,430,000
$ 7,060,568
12.38:1
AG Essential Housing CA 4, LP
Under Construction(7)
37 42
$ 115,620
5.24%
$ 97,155
9.33%
$ 8,800,468
$ 1,631,991
5.39:1
Vacant Lot
236
434
1,177,263
53.36 110,889
10.64 72,060,588
1,862,697
38.69:1
AG Essential Housing CA 4, LP Subtotal
273
476
$1,292,883
58.60%
$ 208,044
19.97%
$ 80,861,056
$ 3,494,689
23.14:1
Lennar Homes of California, LLC
Completed
27 27
$ 85,662
3.88%
$ 75,771
7.27%
$ 12,400,000
$ 1,272,782
9.74:1
Under Construction
97 113
341,721
15.49 314,971
30.23 28,509,532
5,290,821
5.39:1
Vacant Lot
9 9
25,708
1.17 22,690
2.18 1,429,412
381,141
3.75:1
Lennar Homes of California, LLC Subtotal
133
149
$ 453,091
20.54%
$ 413,432
39.68%
$ 42,338,944
$ 6,944,744
6.10:1
Totals
557
776
$2,206,389
100.00%
$1,041,803
100.00%
$210,630,000
$17,500,000
12.04:1
______________________________________
(1) Based upon ownership information and development status as of July 15, 2023. (2) Parcel Count reflects the total number of valid parcels as of July 15, 2023, according to San Bernardino County. (3) Reflects the total parcel count once CFD 2020-1 is fully developed and all parcels have subdivided. (4) Includes the debt service requirement, the Fiscal Year 2024-25 administrative expense requirement of $30,600, and an adjustment to increase the Special Tax levy equal to 100% of the Assigned Special Tax rate for Developed Property. (5) Based on the Appraisal Report dated August 2, 2023. (6) Allocated based on the projected Fiscal Year 2024-25 Special Tax Levy. (7) At the date of the Appraisal Report, 8 lots were acquired by the Developer pursuant to the Option Agreement, but the deed conveying ownership had not yet been recorded.
Source: Webb Municipal Finance, LLC.
TABLE 7
CITY OF RIALTO
COMMUNITY FACILITIES DISTRICT NO. 2020-1 (El Rancho Verde)
VALUE-TO-LIEN STRATIFICATION FOR PARCELS OF DEVELOPED PROPERTY (As of July 15, 2023)
Estimated Appraised
Value-to-Lien Ratio Range(1)
No. of Parcels
Percent of Total of 351 Taxed
Parcels
Aggregate
Appraised
Value(2)
Percent of
Appraised Value of 351 Taxed Parcels
Projected
Fiscal Year
2024-25 Levy(3)
Percent of Total Projected Fiscal Year 2024-25 Levy
2023 Bonds*
Estimated Aggregate Value-to-Lien Ratio*
Less than 5.00:1(3)
79 22.51%
$ 16,098,178
11.14%
$ 233,218
22.39%
$ 3,917,550
4.11:1
Between 5.00:1 to 6.99:1
94 26.78
28,640,000
19.81 312,487
29.99 5,249,100
5.46:1
Between 7.00:1 to 8.99:1
3 0.85
1,260,000
0.87 8,690
0.83 145,980
8.63:1
Between 9.00:1 to 10.99:1
24 6.84
11,140,000
7.71 67,080
6.44 1,126,802
9.89:1
Between 11.00:1 to 12.99:1
136
38.75 76,930,000
53.21 376,054
36.10 6,316,877
12.18:1
Greater than 13.00:1(5)
15 4.27
10,500,000
7.26 44,273
4.25 743,691
14.12:1
TOTAL
351
100.00%
$144,568,178
100.00%
$1,041,803
100.00%
$17,500,000
8.26:1
______________________________________
(1) Value-to-Lien Ratios based upon principal amount of the 2023 Bonds and Appraised Value. (2) Based on the Appraisal Report dated August 2, 2023. (3) Includes the debt service requirement, the Fiscal Year 2024-25 administrative expense requirement of $30,600, and an adjustment to increase the Special Tax levy equal to 100% of the Assigned Special Tax rate for Developed Property. (4) Minimum estimated Value-to-Lien is 3.45:1.
(5) Maximum estimated Value-to-Lien is 14.39:1.
Totals may not add due to rounding.
Source: Webb Municipal Finance, LLC.
Direct and Overlapping Governmental Obligations
Properties in the District are within the jurisdiction of a number of overlapping local agencies providing public services and assessing property taxes, assessments, special taxes and other charges on the property in the District. Many of these local agencies have outstanding debt. The following table details the direct and overlapping debt currently encumbering property within the District.
TABLE 8
CITY OF RIALTO
COMMUNITY FACILITIES DISTRICT NO. 2020-1 (El Rancho Verde)
DETAILED DIRECT AND OVERLAPPING DEBT
_______________________
(1) Appraised Valuation is as of July 15, 2023.
(2) Amount outstanding is equal to the principal amount of the 2023 Bonds. (3) Additional bonded debt or available bond authorization may exist but is not shown because a tax was not levied for Fiscal Year 2022-2023. (4) Parity bonds may be issued with respect to the remaining estimated $32,500,000 in bond authorization. (5) Percentage applicable determined by Fiscal Year 2022-2023 Equalized Roll Assessed Value information.
Source: Webb Municipal Finance, LLC.
In addition to the bonded indebtedness set forth in Table 8, any general obligation bonds currently authorized but not issued within the District will likely be issued and new general obligation bonds may be authorized at future elections. New community facilities districts or special assessment districts may be formed which include all or a portion of the District, resulting in the issuance of more bonds and the levy of additional special taxes or other taxes and assessments on parcels within the District. In addition to the Special Taxes, the property owners in the District will be required to pay the general ad valorem property taxes for their parcels. See “SPECIAL RISK FACTORS—Parity Taxes and Special Assessments” and “—Appraised Valuations; Value-to-Lien Ratios.” [Remainder of Page Intentionally Left Blank]
Estimated Tax Burden
The following table sets forth the estimated total tax burden on the average Fiscal Year 2024-25 tax levy for individually owned lots of developed property within each Zone in the District, based on estimated tax rates for Fiscal Year 2024-25.
TABLE 9
CITY OF RIALTO
COMMUNITY FACILITIES DISTRICT NO. 2020-1 (El Rancho Verde) AVERAGE FISCAL YEAR 2024-25 TAX OBLIGATION(1)
FOR INDIVIDUALLY OWNED PARCELS OF DEVELOPED PROPERTY
Zone 1
Zone 2
Zone 3
Zone 4
Zone 5
Average Projected Home Value(2)
$585,067
$499,900
$537,222
$654,525
$450,025
Ad Valorem Property Taxes:
Basic Levy (1.0000%)
$5,850.67
$4,999.00
$5,372.22
$6,545.25
$4,500.25
San Bernardino Community College (0.04500%)
$263.28
$224.96
$241.75
$294.54
$202.51
Rialto Unified School District (0.07460%)
$436.46
$372.93
$400.77
$488.28
$335.72
San Bernardino Valley Municipal Water (0.13000%)
$760.59
$649.87
$698.39
$850.88
$585.03
Total General Property Taxes
$7,310.99
$6,246.75
$6,713.13
$8,178.94
$5,623.51
Assessment, Special Taxes & Parcel Charges:
Rialto LLMD 2
$4.01
$4.01
$4.01
$4.01
$4.01
Rialto Vector Control
$5.62
$5.62
$5.62
$5.62
$5.62
Rialto SLD 1
$7.59
$7.59
$7.59
$7.59
$7.59
Rialto USD CFD 2019-1
$713.13
$569.87
$640.97
$802.27
$569.87
Rialto CFD 2020-1 Services(3)
$351.23
$351.23
$351.23
$351.23
$351.23
Rialto CFD 2020-1 Facilities(3)
$2,775.47
$2,553.38
$2,787.31
$3,172.13
$2,438.71
Total Assessment Charges
$3,857.06
$3,491.70
$3,796.73
$4,342.85
$3,377.03
Average Total Property Tax
$11,168.05
$9,738.45
$10,509.86
$12,521.80
$9,000.54
Average Effective Tax Rate
1.91%
1.95%
1.96%
1.91%
2.00%
______________________________________
(1) Average FY 2024-25 tax rates based upon FY [2022-23] overlapping taxes and assessments. (2) Average Projected Home Value is based upon average home prices within each Zone as provided in the Price Point Study performed by Empire Economics dated 8/2/2023. (3) Reflects average projected FY 2024-25 Rialto CFD 2020-1 services special tax for parcels of Developed Property. (4) Reflects average projected FY 2024-25 Rialto CFD 2020-1 facilities special tax for parcels of Developed Property.
Source: Webb Municipal Finance, LLC.
Fiscal Year 2023-24 Levy
In the first year of the levy, Special Tax in the amount of $__________ was levied on [379] parcels within the District. Special Taxes collected for Fiscal Year 2023-24 will be deposited into the Special Tax Fund to be used to pay debt service due on the 2023 Bonds on September 1, 2024 and for Administrative Expenses for Fiscal Year 2023-24. Since Special Taxes are not yet due, data on collection and delinquencies of the Special Tax is unavailable.
SPECIAL RISK FACTORS
The purchase of the 2023 Bonds involves significant investment risks and, therefore, the 2023 Bonds may not be suitable investments for many investors. The following is a discussion of certain risk factors which should be considered, in addition to other matters set forth herein, in evaluating the investment quality of the 2023 Bonds. This discussion does not purport to be comprehensive or definitive. The occurrence of one or more of the events discussed herein could adversely affect the ability or willingness of property owners in the District to pay their Special Taxes when due. Such failures to pay Special Taxes could result in the inability of the District to make full and punctual payments of debt service on the 2023 Bonds. In addition, the occurrence of one or more of the events discussed herein could adversely affect the value of the property in the District. See “SPECIAL RISK FACTORS — Appraised Valuations; Value-to-Lien Ratios” and “— No Ratings and Limited Secondary Market” below.
Risks of Real Estate Secured Investments Generally
The Owners of the 2023 Bonds will be subject to the risks generally incident to an investment secured by real estate, including, without limitation, (i) adverse changes in local market conditions, such as changes in the market value of real property in the vicinity of the District, the supply of or demand for competitive properties in such area, and the market value of residential property or commercial buildings and/or sites in the event of sale or foreclosure; (ii) changes in real estate tax rates and other operating expenses, governmental rules (including, without limitation, zoning laws and laws relating to endangered species and hazardous materials) and fiscal policies; (iii) natural disasters (including, without limitation, earthquakes, wildfires and floods), which may result in uninsured losses; (iv) adverse changes in local market conditions; and (v) increased delinquencies due to rising mortgage costs and other factors.
Other factors that could adversely affect property values in the District include, among others, relocation of employers out of the area, shortages of water, electricity, natural gas or other utilities, and destruction of property caused by man-made disasters.
Limited Obligations
The 2023 Bonds and interest thereon are not payable from the general funds of the City. Except with respect to the Special Taxes, neither the credit nor the taxing power of the District or the City is pledged for the payment of the 2023 Bonds or the interest thereon, and, except as provided in the Fiscal Agent Agreement, no Owner of the 2023 Bonds may compel the exercise of any taxing power by the District or the City or force the forfeiture of any City or District property. The principal of, premium, if any, and interest on the 2023 Bonds are not a debt of the City or a legal or equitable pledge, charge, lien or encumbrance upon any of the City’s or the District’s property or upon any of the City’s or the District’s income, receipts or revenues, except the Special Taxes and other amounts pledged under the Fiscal Agent Agreement.
Insufficiency of Special Taxes
Given limitations in the Act regarding increases in Special Taxes on residential parcels to address Special Tax delinquencies, the potential coverage to respond to delinquencies is approximately 110% of Annual Debt Service. Notwithstanding that the maximum Special Taxes that may be levied in the District exceeds debt service due on the 2023 Bonds, the Special Taxes collected could be inadequate to make timely payment of debt service either because of nonpayment or because property becomes exempt from taxation.
If for any reason property within the District becomes exempt from taxation by reason of ownership by a non-taxable entity such as the federal government, another public agency or other organization determined to be exempt, subject to the limitations of the maximum authorized rates, the Special Tax will be reallocated to the remaining taxable properties within the District. This could result in certain owners of property paying a greater amount of the Special Tax and could have an adverse impact upon the ability and willingness of the owners of such property to pay the Special Tax when due.
The Act provides that, if any property within the District not otherwise exempt from the Special Tax is acquired by a public entity through a negotiated transaction, or by gift or devise, the Special Tax will continue to be levied on and enforceable against the public entity that acquired the property. In addition, the Act provides that, if property subject to the Special Tax is acquired by a public entity through eminent domain proceedings, the obligation to pay the Special Tax with respect to that property is to be treated as if it were a special assessment and be paid from the eminent domain award. The constitutionality and operation of these provisions of the Act have not been tested in the courts. Due to problems of collecting taxes from public agencies, if a substantial portion of land within the District became exempt from the Special Tax because of public ownership, or otherwise, the Maximum Special Taxes which could be levied upon the remaining property within those areas might not be sufficient to pay principal of and interest on the 2023 Bonds when due and a default could occur with respect to the payment of such principal and interest.
Moreover, if a substantial portion of land within the District became exempt from the Special Tax because of public ownership, or otherwise, the maximum Special Tax which could be levied upon the remaining property within the District might not be sufficient to pay principal of and interest on the 2023 Bonds when due and a default could occur with respect to the payment of such principal and interest.
Impact of Economic Conditions on Development within the District Certain events and factors which negatively affect the regional, State and national economies could have an adverse effect on the pace at which the current or any future developers in the District can complete the future homes, and demand by, and the ability of individuals to purchase homes within the District. Such events and factors could include rising inflation and interest rates, persistent supply chain issues and global market instability caused by geopolitical events. Any adverse impact of the foregoing and other economic factors on the project in the District and the real estate market in general cannot be predicted.
Increasing Mortgage Interest Rates; Recent Bank Failures Since approximately November 2021, interest rates for mortgage loans have increased significantly. Increases in mortgage interest rates could have a negative impact on the estimated absorption rates of the planned for-sale residential units in the District described herein. With respect to entry-level households, increased mortgage interest rates may adversely impact the affordability of homes and may increase mortgage payment levels for owning a lower-priced home relative to renting a residence, thereby making purchasing less attractive. With respect to move-up households, higher mortgage interest rates may impact the desire of current homeowners to move from their present home due to the fact that their present home likely has a relatively low mortgage interest rate. In addition, in such instances, a new home would likely have a higher interest rate on a new mortgage loan as well as a higher purchase price and property taxes. Such considerations may decrease the desire for move-up households to purchase a new home. The foregoing factors could reduce demand for and/or the ability to achieve the sales prices of the planned for-sale homes within the District as described herein.
Rising interest rates have resulted in unexpected runs on deposits of certain regional banks resulting in the Federal Deposit Insurance Corporation (the “FDIC”) in recent months being appointed as receiver for Silicon Valley Bank (“SVB”) on March 10, 2023, Signature Bank (“Signature Bank”), on March 12, 2023, and First Republic Bank (“First Republic Bank”) on May 1, 2023. At the time of appointment as receiver, SVB, a large California based bank was the 16th largest bank in the United States, Signature Bank, a large New York based bank was the 29th largest bank in the country, and as of the end of 2022, First Republic Bank, a large California based bank, was the 14th largest bank in the United States. With First Republic Bank’s failure, the failures constituted the third, fourth, and second largest bank failures, respectively, in United States history. In each case, the FDIC indicated that all deposits at each institution would be honored, regardless of the dollar amount. The District cannot predict whether future changes in financial markets may occur which may impact interest rates, availability of mortgage loans, or availability of funding which impact development in the District.
Concentration of Ownership
Based on development and ownership status as of July 15, 2023 (and assuming no further development activity and transfer of ownership), individual homeowners would be responsible for approximately 40.35% and 59.65%, respectively, of the projected Fiscal Year 2024-25 Special Tax levy.
The timely payment of principal of and interest on the 2023 Bonds depends upon the willingness and ability of the current and future property owners in the District to pay the Special Taxes prior to delinquency. General and local economic conditions and governmental requirements or restrictions may affect the willingness of the current property owners, or any successor property owners, to pay the Special Taxes, and there is no assurance that the current property owners, or any successor property owners, will pay such Special Taxes even if financially able to do so. Due to the concentration of ownership of the property within the District, a failure by Lennar or any successor property owner thereto to pay the Special Taxes may result in a default in the payment of debt service on the 2023 Bonds. See “THE DISTRICT - Property Ownership and Development Status.” Depletion of 2023 Reserve Account
The 2023 Reserve Account is maintained in an amount equal to the 2023 Reserve Requirement. See “SECURITY AND SOURCES OF PAYMENT FOR THE 2023 BONDS —Special Tax Fund – 2023 Reserve Account.” Funds in the 2023 Reserve Account may be used to pay principal of and interest on the 2023 Bonds and any Related Parity Bonds in the event the proceeds of the levy and the collection of the Special Taxes against the property in the District is not sufficient. If the 2023 Reserve Account is depleted, the funds can be replenished from the proceeds of the levy and collection of the Special Tax that are in excess of the amount required to pay Administrative Expenses and principal and interest on the 2023 Bonds and any Related Parity Bonds. However, no replenishment of the 2023 Reserve Account from the proceeds of the Special Taxes can occur as long as the proceeds that are collected from the levy of the Special Taxes at the maximum tax rates (subject to the limitations of the Act), together with available funds, remain insufficient to pay all such amounts. Thus, it is possible that the 2023 Reserve Account will be depleted and not replenished by the levy of the Special Taxes.
Risk of Structural or Wildland Fires
The District is located in an area of increased risk for utility associated wildfires pursuant to the California Public Utilities Commission Fire-Threat Map. The District is located in a High Fire Threat District – Tier 2 (excluding a small area of The Cove and Ridgewater neighborhoods which are not in an elevated fire threat area). Mitigation measures in such areas typically include no build zones, fuel modification areas and recommended construction features. Fire hazards increase with any drought period, and are highest for structures at the fringe of forested or wildland areas. In addition to the damage caused directly by a foothill fire, further damage may be caused by resulting mudslides during subsequent rains.
In the event of damage to real property within the District, the property owner could become unwilling or unable to pay the Special Taxes when due.
Natural Disasters
The District, like all California communities, may be subject to unpredictable seismic activity, fires, flood, or other natural disasters. Southern California is a seismically active area. Seismic activity, wildfires and other natural disasters represents a potential risk for damage to buildings, roads, bridges, and property within the District. In addition, land susceptible to seismic activity may be subject to liquefaction during the occurrence of such event.
In the event of a severe earthquake, fire, flood or other natural disaster, there may be significant damage to both property and infrastructure in the District. As a result, a substantial portion of the property owners may be unable or unwilling to pay the Special Taxes when due. In addition, the value of land in the District could be diminished in the aftermath of such a natural disaster, reducing the resulting proceeds of foreclosure sales in the event of delinquencies in the payment of the Special Taxes.
The District is located in an Alquist-Priolo Earthquake Fault Zone. Pursuant to the Lytle Creek Ranch Specific Plan Environmental Impact Report Addendum, the potential risks associated with faults, seismic ground shaking and liquefaction would be mitigated to a less than significant level by certain mitigation measures. These measures include items such as engineered foundation design, post-tension/structural slabs, and use of subdrains and buttress or stabilization fills in certain areas, [which have been or are being implemented in homes within the District].
The District is located in Zone X of FEMA Flood Zone designations which indicates areas that are determined to be outside of the 100- and 500-year floodplains and out of a Special Flood Hazard Area.
No assurance can be given that there will be no natural disasters in the future that will impact the District or to the extent to which any future natural disasters may impact the property in the District.
Hazardous Substances
The presence of hazardous substances on a parcel may result in a reduction in the value of a parcel. In general, the owners and operators of a parcel 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 taxed parcels be affected by a hazardous substance, is to reduce the marketability and value of the parcel by the costs of remedying the condition, because the purchaser, upon becoming owner, will become obligated to remedy the condition just as is the seller.
The District is not aware of the presence of any federally or state classified hazardous substances in violation of any environmental laws, located on the property within the District. However, it is possible that such materials do currently exist and that the District is not aware of them.
Further, it is possible that liabilities may arise in the future with respect to any of the parcels resulting from the existence, currently, on the parcel of a substance presently classified as hazardous but which has not been released or the release of which is not presently threatened or may arise in the future resulting from the existence, currently on the parcel of a substance not presently classified as hazardous but which may in the future be so classified. Further, such liabilities may arise not simply from the existence of a hazardous substance but from the method of handling it. All of these possibilities could significantly affect the value of a parcel that is realizable upon a delinquency.
Parity Taxes and Special Assessments
Property within the District is subject to taxes and assessments imposed by public agencies also having jurisdiction over the land within the District. See “THE DISTRICT —Direct and Overlapping Governmental Obligations.” The Special Taxes and any penalties thereon will constitute a lien against the lots and parcels of land on which they will be annually imposed until they are paid. Such lien is on a parity with all special taxes and special assessments levied by the City and other agencies and is co-equal to and independent of the lien for general property taxes regardless of when they are imposed upon the same property. The Special Taxes have priority over all existing and future private liens imposed on the property except, possibly, for liens or security interests held by the Federal Deposit Insurance Corporation. See “SPECIAL RISK FACTORS — Bankruptcy and Foreclosure” below.
Developed Property within the District is also subject to annual Special Tax B pursuant to the Rate and Method. For the 2023-24 Fiscal Year, the Special Tax B was $341 per Residential Unit. Special Tax B shall be increased by the lesser of the percent change in the Consumer Price Index or three percent (3%) for each Fiscal Year after Fiscal Year 2023-24. See “THE DISTRICT - Direct and Overlapping Governmental Obligations.” Neither the City nor the District has control over the ability of other entities and districts to issue indebtedness secured by special taxes, ad valorem taxes or assessments payable from all or a portion of the property within the District. In addition, the landowners within the District may, without the consent or knowledge of the City, petition other public agencies to issue public indebtedness secured by special taxes, ad valorem taxes or assessments. Any such special taxes, ad valorem taxes or assessments may have a lien on such property on a parity with the Special Taxes and could reduce the estimated value-to-lien ratios for property within the District described herein.
Disclosures to Future Purchasers
The willingness or ability of an owner of a parcel to pay the Special Tax, even if the value of the parcel is sufficient, may be affected by whether or not the owner was given due notice of the Special Tax authorization at the time the owner purchased the parcel, was informed of the amount of the Special Tax on the parcel should the Special Tax be levied at the maximum tax rate and the risk of such a levy, and, at the time of such a levy, has the ability to pay it as well as pay other expenses and obligations. The City caused Notices of Special Tax lien to be recorded in the Office of the Recorder for the County against each parcel. 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 property within the District or lending of money thereon.
The Act requires the subdivider (or its agent or representative) of a subdivision to notify a prospective purchaser or long-term lessor of any lot, parcel, or unit subject to a Mello-Roos special tax of the existence and maximum amount of such special tax using a statutorily prescribed form. California 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 the above requirements, or failure by a purchaser or lessor to consider or understand the nature and existence of the Special Tax, could adversely affect the willingness and ability of the purchaser or lessor to pay the Special Tax when due.
Special Tax Delinquencies
Special Taxes are the primary source for the repayment of the 2023 Bonds, and delinquencies could result in a draw on the 2023 Reserve Account and, if the 2023 Reserve Account were to be depleted, could cause a default in payment on the 2023 Bonds.
Under provisions of the Act, the Special Taxes, from which funds necessary for the payment of principal of, and interest on, the 2023 Bonds are derived, are customarily billed to the properties within the District on the ad valorem property tax bills sent to owners of such properties. The Act currently provides that such Special Tax installments are due and payable and are subject to the same lien priority in the case of delinquency as are ad valorem property tax installments.
See “SECURITY AND SOURCES OF PAYMENT FOR THE 2023 BONDS — Covenant to Commence Foreclosure Proceedings,” for a discussion of the provisions which apply, and procedures which the District is obligated to follow under the Fiscal Agent Agreement, in the event of delinquencies in the payment of Special Taxes. See “THE DISTRICT—Special Tax Levies and Delinquencies” for a history of Special Tax delinquency rates in the District. See “SPECIAL RISK FACTORS — Bankruptcy and Foreclosure” below, for a discussion of the policy of the Federal Deposit Insurance Corporation regarding the payment of special taxes and assessments and limitations on the District’s ability to foreclose on the lien of the Special Taxes in certain circumstances.
Non-Cash Payments of Special Taxes
Under the Act, the City Council as the legislative body of the District may reserve to itself the right and authority to allow the owner of any taxable parcel to tender a 2023 Bond in full or partial payment of any installment of the Special Taxes or the interest or penalties thereon. A 2023 Bond so tendered is to be accepted at par and credit is to be given for any interest accrued thereon to the date of the tender. Thus, if 2023 Bonds can be purchased in the secondary market at a discount, it may be to the advantage of an owner of a taxable parcel to pay the Special Taxes applicable thereto by tendering a 2023 Bond. Such a practice would decrease the cash flow available to the District to make payments with respect to other 2023 Bonds then outstanding; and, unless the practice was limited by the District, the Special Taxes paid in cash could be insufficient to pay the debt service due with respect to such other 2023 Bonds. In order to provide some protection against the potential adverse impact on cash flows which might be caused by the tender of 2023 Bonds in payment of Special Taxes, the Fiscal Agent Agreement includes a covenant pursuant to which the District will not authorize owners of taxable parcels to satisfy Special Tax obligations by the tender of 2023 Bonds unless the District shall have first obtained a report of an Independent Financial Consultant certifying that doing so would not result in the District having insufficient Special Tax revenues to pay the principal of and interest on all Outstanding 2023 Bonds when due.
Payment of the Special Tax is not a Personal Obligation of the Owners An owner of a taxable parcel is not personally obligated to pay the Special Tax. Rather, the Special Tax is an obligation which is secured only by a lien against the taxable parcel. If the value of a taxable parcel is not sufficient, taking into account other liens imposed by public agencies, to secure fully the Special Tax, the District has no recourse against the owner.
Appraised Valuations; Value-to-Lien Ratios
The value of land within the District is an important factor in evaluating the investment quality of the 2023 Bonds. In the event that a property owner defaults in the payment of Special Tax installments, the District’s only remedy is to judicially foreclose on that property. Prospective purchasers of the 2023 Bonds should not assume that the property within the District could be sold for the appraised value described in this Official Statement at a foreclosure sale for delinquent Special Tax installments or for an amount adequate to pay delinquent Special Tax installments. Reductions in property values within the District due to a downturn in the economy or the real estate market, events such as earthquakes, droughts, or floods, stricter land use regulations, threatened or endangered species or other events may adversely impact the security underlying the Special Taxes.
The values of taxable property set forth in the various tables herein are based upon the property values determined by the Appraiser. The Appraisal Report was prepared for the purpose of estimating the market value of such property as of July 15, 2023 in its as is condition on the basis of certain assumptions and limiting conditions. The appraised values for the completed-closed homes were not determined on a bulk sale basis, and value may be substantially less if all the properties were subject to foreclosure at the same time.
Prospective purchasers of the 2023 Bonds should not assume, however, that such parcels could be sold for the appraised amount described herein at the present time or at a foreclosure sale for delinquent Special Taxes. See the Appraisal Report included as Appendix G hereto for a brief description of the analysis used and assumptions made by the Appraiser. The actual value of the property is subject to future events that might render invalid the assumptions relied upon by the Appraiser in determining the appraised value.
No assurance can be given that the estimated value-to-lien ratios as set forth in “THE DISTRICT — Appraised Value-to-Lien Ratios” will be maintained over time. As discussed herein, many factors that are beyond the control of the District could adversely affect the property values within the District. The District does not have any control over the amount of additional indebtedness that may be issued by other public agencies, the payment of which through the levy of a tax or an assessment is on a parity with the Special Taxes. A decrease in the assessed values in the District or an increase in the indebtedness secured by taxes and amounts with parity liens on property in the District, or both, could result in a lowering of the value-to-lien ratios of the property in the District. See “THE DISTRICT — Appraised Value-to-Lien Ratios” herein.
No assurance can be given that any bid will be received for a parcel with delinquent Special Taxes offered for sale at foreclosure or, if a bid is received, that such bid will be sufficient to pay all delinquent Special Taxes. See “SECURITY AND SOURCES OF PAYMENT FOR THE 2023 BONDS —Covenant to Commence Foreclosure Proceedings.” FDIC/Federal Government Interests in Properties
The ability of the District to collect interest and penalties specified by the Act and to foreclose the lien of delinquent Special Taxes may be limited in certain respects with regard to parcels in which the FDIC, or other federal government entities such as Fannie Mae, Freddie Mac, the Drug Enforcement Agency, the Internal Revenue Service or other federal agency, has or obtains an interest.
In the case of FDIC, in the event that any financial institution making a loan which is secured by parcels is taken over by the FDIC and the applicable Special Tax is not paid, the remedies available to the District may be constrained. The FDIC’s policy statement regarding the payment of state and local real property taxes (the “Policy Statement”) provides that taxes other than ad valorem taxes which are secured by a valid lien in effect before the FDIC acquired an interest in a property will be paid unless the FDIC determines that abandonment of its interests is appropriate. The Policy Statement provides that the FDIC generally will not pay installments of non-ad valorem taxes which are levied after the time the FDIC acquires its fee interest, nor will the FDIC recognize the validity of any lien to secure payment except in certain cases where the Resolution Trust Corporation had an interest in property on or prior to December 31, 1995. Moreover, the Policy Statement provides that, with respect to parcels on which the FDIC holds a mortgage lien, the FDIC will not permit its lien to be foreclosed out by a taxing authority without its specific consent, nor will the FDIC pay or recognize liens for any penalties, fines or similar claims imposed for the nonpayment of taxes.
The FDIC has taken a position similar to that expressed in the Policy Statement in legal proceedings brought against Orange County in United States Bankruptcy Court and in Federal District Court. The Bankruptcy Court issued a ruling in favor of the FDIC on certain of such claims. Orange County appealed that ruling, and the FDIC cross-appealed. On August 28, 2001, the Ninth Circuit Court of Appeals issued a ruling favorable to the FDIC except with respect to the payment of pre-receivership liens based upon delinquent property tax.
The District is unable to predict what effect the application of the Policy Statement would have in the event of a delinquency with respect to parcels in which the FDIC has or obtains an interest, although prohibiting the lien of the FDIC to be foreclosed out at a judicial foreclosure sale would prevent or delay the foreclosure sale.
In the case of Fannie Mae and Freddie Mac, in the event a parcel of taxable property is owned by a federal government entity or federal government sponsored entity, such as Fannie Mae or Freddie Mac, or a private deed of trust secured by a parcel of taxable property is owned by a federal government entity or federal government sponsored entity, such as Fannie Mae or Freddie Mac, the ability to foreclose on the parcel or to collect delinquent Special Taxes may be limited. Federal courts have held that, based on the supremacy clause of the United States Constitution, in the absence of Congressional intent to the contrary, a state or local agency cannot foreclose to collect delinquent taxes or assessments if foreclosure would impair the federal government interest. This means that, unless Congress has otherwise provided, if a federal government entity owns a parcel of taxable property but does not pay taxes and assessments levied on the parcel (including Special Taxes), the applicable state and local governments cannot foreclose on the parcel to collect the delinquent taxes and assessments.
Moreover, unless Congress has otherwise provided, if the federal government has a mortgage interest in the parcel and the District wishes to foreclose on the parcel as a result of delinquent Special Taxes, the property cannot be sold at a foreclosure sale unless it can be sold for an amount sufficient to pay delinquent taxes and assessments on a parity with the Special Taxes and preserve the federal government’s mortgage interest. For a discussion of risks associated with taxable parcels within the District becoming owned by the federal government, federal government entities or federal government sponsored entities, see “— Insufficiency of Special Taxes.” The District’s remedies may also be limited in the case of delinquent Special Taxes with respect to parcels in which other federal agencies (such as the Internal Revenue Service and the Drug Enforcement Administration) have or obtain an interest.
Bankruptcy and Foreclosure
Bankruptcy, insolvency, and other laws generally affecting creditors’ rights could adversely impact the interests of Beneficial Owners of the 2023 Bonds. The payment of property owners’ taxes and the ability of the District to foreclose the lien of a delinquent unpaid Special Tax pursuant to its covenant to pursue judicial foreclosure proceedings may be limited by bankruptcy, insolvency or other laws generally affecting creditors’ rights or by the laws of the State relating to judicial foreclosure. See “SECURITY AND SOURCES OF PAYMENT FOR THE 2023 BONDS — Covenant to Commence Foreclosure Proceedings.” In addition, the prosecution of a foreclosure could be delayed due to many reasons, including crowded local court calendars or lengthy procedural delays.
Although a bankruptcy proceeding would not cause the Special Taxes to become extinguished, the amount of any Special Tax lien could be modified if the value of the property falls below the value of the lien. If the value of the property is less than the lien, such excess amount could be treated as an unsecured claim by the bankruptcy court. In addition, bankruptcy of a property owner could result in a delay in prosecuting Superior Court foreclosure proceedings. Such delay would increase the likelihood of a delay or default in payment of delinquent Special Tax installments and the possibility of delinquent Special Tax installments not being paid in full.
The various legal opinions to be delivered concurrently with the delivery of the 2023 Bonds (including Bond Counsel’s approving legal opinion) will be qualified, as to the enforceability of the various legal instruments, by moratorium, bankruptcy, reorganization, insolvency or other similar laws affecting the rights of creditors generally.
Moreover, the ability of the District to commence and prosecute enforcement proceedings may be limited by bankruptcy, insolvency and other laws generally affecting creditors’ rights (such as the Soldiers’ and Sailors’ Relief Act of 1940) and by the laws of the State relating to judicial foreclosure.
No Acceleration Provision
The 2023 Bonds do not contain a provision allowing for the acceleration of the 2023 Bonds in the event of a payment default or other default under the 2023 Bonds or the Fiscal Agent Agreement.
Inflation Reduction Act
Changes enacted by federal tax legislation (the Public Law No. 217-169, also referred to as the “Inflation Reduction Act”) were enacted into law on August 16, 2022. The Inflation Reduction Act (H.R. 5376, 117th Congress) includes a 15% alternative minimum tax to be imposed on the “adjusted financial statement income,” as defined in the Inflation Reduction Act, of certain corporations for tax years beginning after December 31, 2022. Interest on the 2023 Bonds will be included in the “adjusted financial statement income” of such corporations for purposes of computing such alternative minimum tax.
IRS Audit of Tax-Exempt Securities Issues
The IRS has initiated an expanded program for the auditing or examination of tax-exempt securities issues, including both random and targeted audits. It is possible that the 2023 Bonds will be selected for audit or examination by the IRS. It is also possible that the market value of the 2023 Bonds might be affected as a result of such an audit of the 2023 Bonds (or by an audit of similar bonds or securities).
Loss of Tax Exemption
As discussed under the caption “TAX MATTERS,” interest on the 2023 Bonds could become includable in gross income for federal income tax purposes retroactive to the date of issuance of the 2023 Bonds as a result of a failure by the District to comply with certain provisions of the Code. In addition, the introduction or enactment of any of legislation could adversely affect the market value or liquidity of the 2023 Bonds. Should an event of taxability occur, the 2023 Bonds are not subject to early redemption and will remain outstanding to maturity or until redeemed under the redemption provisions of the Fiscal Agent Agreement.
Limitations on Remedies
Remedies available to the Beneficial Owners of the 2023 Bonds may be limited by a variety of factors and may be inadequate to assure the timely payment of principal of and interest on the 2023 Bonds or to preserve the tax-exempt status of the 2023 Bonds.
Bond Counsel has limited its opinion as to the enforceability of the 2023 Bonds and of the Fiscal Agent Agreement to the extent that enforceability may be limited by bankruptcy, insolvency, reorganization, fraudulent conveyance, or transfer, moratorium, or other similar laws affecting generally the enforcement of creditors’ rights, by equitable principles and by the exercise of judicial discretion. The lack of availability of certain remedies or the limitation of remedies may entail risks of delay, limitation, or modification of the rights of the Beneficial Owners of the 2023 Bonds.
No Ratings and Limited Secondary Market
The District has not applied to have the 2023 Bonds rated by any nationally recognized bond rating company and it does not expect to do so in the future.
There can be no guarantee that there will be a secondary market for the 2023 Bonds or, if a secondary market exists, that the 2023 Bonds can be sold at all or for any particular price. Although the District has committed to provide certain financial and operating information on an annual basis, there can be no assurance that such information will be available to Beneficial Owners on a timely basis. See “CONTINUING DISCLOSURE.” The failure to provide the required annual financial information does not give rise to monetary damages but merely an action for specific performance. Occasionally, because of general market conditions, lack of current information, or because of adverse history or economic prospects connected with a particular issue, secondary marketing practices in connection with a particular issue are suspended or terminated. Additionally, prices of issues for which a market is being made will depend upon then prevailing circumstances. Such prices could be substantially different from the original purchase price.
Proposition 218
An initiative measure commonly referred to as the “Right to Vote on Taxes Act” (the “Initiative”) was approved by the voters of the State of California at the November 5, 1996 general election. The Initiative added Article XIIIC and Article XIIID to the California Constitution. According to the “Title and Summary” of the Initiative prepared by the California Attorney General, the Initiative limits “the authority of local governments to impose taxes and property-related assessments, fees and charges.” The provisions of the Initiative have not yet been interpreted by the courts, although several lawsuits have been filed requesting the courts to interpret various aspects of the Initiative. The Initiative could potentially impact the Special Taxes available to the District to pay the principal of and interest on the 2023 Bonds as described below.
Among other things, Section 3 of Article XIII states that “. . . the initiative power shall not be prohibited or otherwise limited in matters of reducing or repealing any local tax, assessment, fee or charge.” The Act provides for a procedure which includes notice, hearing, protest and voting requirements to alter the rate and method of apportionment of an existing special tax. However, the Act prohibits a legislative body from adopting any resolution to reduce the rate of any special tax or terminate the levy of any special tax pledged to repay any debt incurred pursuant to the Act unless such legislative body determines that the reduction or termination of the special tax would not interfere with the timely retirement of that debt. On July 1, 1997, a bill was signed into law by the Governor of the State enacting Government Code Section 5854, which states that:
“Section 3 of Article XIIIC of the California Constitution, as adopted at the November 5, 1996, general election, shall not be construed to mean that any owner or beneficial owner of a municipal security, purchased before or after that date, assumes the risk of, or in any way consents to, any action by initiative measure that constitutes an impairment of contractual rights protected by Section 10 of Article I of the United States Constitution.” Accordingly, although the matter is not free from doubt, it is likely that the Initiative has not conferred on the voters the power to repeal or reduce the Special Taxes if such reduction would interfere with the timely retirement of the 2023 Bonds.
It may be possible, however, for voters or the City Council acting as the legislative body of the District to reduce the Special Taxes in a manner which does not interfere with the timely repayment of the 2023 Bonds, but which does reduce the maximum amount of Special Taxes that may be levied in any year below the existing levels. Furthermore, no assurance can be given with respect to the future levy of the Special Taxes in amounts greater than the amount necessary for the timely retirement of the 2023 Bonds. Therefore, no assurance can be given with respect to the levy of Special Taxes for Administrative Expenses. Nevertheless, to the maximum extent that the law permits it to do so, the District will covenant in the Fiscal Agent Agreement that it will not initiate proceedings under the Act to reduce the maximum Special Tax rates on parcels within the District to an amount that is less than the sum of the estimated Administrative Expenses and 110% of gross debt service in each future Bond Year on all Bonds to remain Outstanding after the reduction is approved. In connection with the foregoing covenant, the District has made a finding and determination that any elimination or reduction of Special Taxes below the foregoing level would interfere with the timely retirement of the 2023 Bonds. The District also will covenant in the Fiscal Agent Agreement that, in the event an initiative is adopted which purports to alter the Rate and Method, it will commence and pursue legal action in order to preserve its ability to comply with the foregoing covenant. However, no assurance can be given as to the enforceability of the foregoing covenants.
The interpretation and application of the Initiative will ultimately be determined by the courts with respect to a number of the matters discussed above, and it is not possible at this time to predict with certainty the outcome of such determination or the timeliness of any remedy afforded by the courts. See “SPECIAL RISK FACTORS — Limitations on Remedies.” Litigation regarding Community Facilities Districts
Shapiro. The California Court of Appeal, Fourth Appellate District, Division One, issued its opinion in City of San Diego v. Melvin Shapiro (2014) 228 Cal.App.4th 756 (the “San Diego Decision”). The case involved a Convention Center Facilities District (the “CCFD”) established by the City of San Diego (“San Diego”). The CCFD is a financing district much like a community facilities district established under the provisions of the Act. The CCFD is comprised of all of the real property in San Diego. However, the special tax to be levied within the CCFD was to be levied only on hotel properties located within the CCFD.
The election authorizing the special tax was limited to owners of hotel properties and lessees of real property owned by a governmental entity on which a hotel is located. Thus, the election was not a registered voter election. Such approach to determining who would constitute the qualified electors of the CCFD was modeled after Section 53326(c) of the Act, which generally provides that, if a special tax will not be apportioned in any tax year on residential property, the legislative body may provide that the vote shall be by the landowners of the proposed district whose property would be subject to the special tax. The Court held that the CCFD special tax election was invalid under the California Constitution because Article XIIIA, Section 4 thereof and Article XIIIC, Section 2 thereof require that the electors in such an election be the registered voters within the district.
Horizon. The Sacramento County Superior Court issued a ruling in Horizon Capital Investments, LLC v. City of Sacramento et al. (Case No. 34-2017-80002661), which was a case involving an election to approve the levy of a special tax within a community facilities district (“CFD”) formed under the Act.
In 2017, the City of Sacramento initiated proceedings to form a CFD to finance certain costs to operate and maintain a streetcar line. As permitted by the Act, the proposed district included non-contiguous parcels of non-residential property. Because there were fewer than 12 registered voters residing within the territory of the proposed CFD, the City Council submitted the special tax proposed to be levied within the proposed CFD to the owners of land within the proposed CFD, as required by the Act. The proposed special tax received the requisite two-thirds vote in the landowner election.
Petitioners Horizon Capital Investments, LLC et al. filed a writ of mandate and complaint for reverse validation and declaratory relief. Petitioners argued, and the superior court agreed in its final ruling, that under section 4(a) of article XIII A of the California Constitution (which provides that “Cities, Counties and special districts, by a two-thirds vote of the qualified electors of such district [sic], may impose special taxes on such district…”) the phrase “qualified electors” means the registered voters of the entire City of Sacramento and not just the owners of the property within the boundaries of the proposed CFD. Citing the San Diego Decision, the tentative ruling states that the phrase “qualified electors of the district” refers to the registered voters of the entity imposing the special tax, which in this case was the City of Sacramento. Because the vote within the proposed CFD was by landowners only and not by all registered voters in the City of Sacramento, the final ruling states that the special tax is invalid.
The superior court’s final ruling is not binding upon other courts within the State and does not directly apply to the District, the Special Taxes, or the 2023 Bonds. The City of Sacramento did not appeal the superior court’s ruling.
Special Tax Election in the District. With respect to the San Diego Decision, the facts of such case show that there were thousands of registered voters within the CCFD (viz., all of the registered voters in San Diego). The election held in the District had less than 12 registered voters at the time of the election to authorize the Special Taxes. In the San Diego Decision, the court expressly stated that it was not addressing the validity of landowner voting to impose special taxes pursuant to the Act in situations where there are fewer than 12 registered voters. Thus, by its terms, the court’s holding in the San Diego Decision does not apply to the Special Tax election in the District. Moreover, Section 53341 of the Act provides that any “action or proceeding to attack, review, set aside, void or annul the levy of a special tax…shall be commenced within 30 days after the special tax is approved by the voters.” Similarly, Section 53359 of the Act provides that any action to determine the validity of bonds issued pursuant to the Act be brought within 30 days of the voters approving the issuance of such bonds. The petitioners in Horizon filed the writ of mandate within 30 days of the landowner election. Voters in the District approved Special Tax on September 13, 2022. Based on Sections 53341 and 53359 of the Act and analysis of existing laws, regulations, rulings and court decisions, the District believes that no successful challenge to the Special Tax being levied in accordance with the Rate and Method may now be brought.
Ballot Initiatives
Articles XIIIC and XIIID were adopted pursuant to measures qualified for the ballot pursuant to California’s constitutional initiative process. On March 6, 1995, in the case of Rossi v. Brown, the State Supreme Court held that an initiative can repeal a tax ordinance and prohibit the imposition of further such taxes and that the exemption from the referendum requirements does not apply to initiatives. From time to time, other initiative measures could be adopted by California voters. The adoption of any such initiative might place limitations on the ability of the State, the City, or local districts to increase revenues or to increase appropriations. See “SPECIAL RISK FACTORS — Risks of Real Estate Secured Investments Generally” herein.
Extraordinary Redemption from Prepaid Special Taxes
The 2023 Bonds are subject to redemption in whole or in part from Special Tax Prepayments on any Interest Payment Date (see “THE 2023 BONDS - Redemption”), which could occur if an owner of a taxable parcel chooses to prepay all or a portion of its Special Tax. The resulting redemption of 2023 Bonds that were purchased at a price greater than the applicable redemption price could reduce the otherwise expected yield on such 2023 Bonds.
Climate Change
Numerous scientific studies on global climate change show that, among other effects on the global ecosystem, sea levels will rise, extreme temperatures will become more common, wildfires will become more common and intense, and extreme weather events will become more frequent as a result of increasing global temperatures attributable to atmospheric pollution. For example, the Fourth National Climate Assessment, published by the U.S. Global Change Research Program, in November 2018 (NCA4) finds that more frequent and intense extreme weather and climate-related events, as well as changes in average climate conditions, are expected to continue to damage infrastructure, ecosystems and social systems over the next 25 to 100 years. Sea level rise may particularly impact coastal areas throughout California. No assurance can be given that climate change in the future that will not impact the District or the extent to which climate change may impact the property in the District.
Cybersecurity
As a recipient and provider of personal, private, and sensitive information, the City faces multiple cyber threats including, but not limited to, hacking, viruses, malware and other attacks on computers and other sensitive digital networks and systems. Despite security measures, information technology and infrastructure may be vulnerable to attacks by hackers or breached due to employee error, malfeasance or other disruptions. Increasingly, businesses and government entities are being targeted by cyber-attacks seeking to obtain confidential data or disrupt critical services. A rapidly changing cyber risk landscape may introduce new vulnerabilities which hackers may exploit in attempts to effect breaches or service disruptions. Any such breach could compromise networks and the information stored there could be disrupted, accessed, publicly disclosed, lost or stolen. Any such disruption, access, disclosure or other loss of information could result in legal claims or proceedings, liability under laws that protect the privacy of personal information, regulatory penalties, operations and the services provided which could ultimately adversely affect the Special Taxes.
No assurance can be given that the security and operational control measures of the City will be successful in guarding against any and each cyber threat or breach, or that any such attack will not materially impact the operations or finances of the City or the District, or the administration of the 2023 Bonds. Although the City maintains insurance coverage for cyber security losses in the amount of $12 million per occurrence and $70 million program aggregate limits, subject to a $50,000 self-insured retention per claim, should a successful breach ever occur, the cost of any such disruption or remedying damage caused by future attacks could be substantial and in excess of such insurance coverage.
The City is also reliant on other entities and service providers in connection with the administration of the 2023 Bonds, including without limitation the County tax collector for the levy and collection of Special Taxes, the Fiscal Agent, and the dissemination agent. No assurance can be given that the City, the District and these other entities will not be affected by cyber threats and attacks in a manner that may adversely affect the Bond owners.
The City actively manages its networks and systems to ensure that City systems are properly secured and protected, however, no assurances can be given that the City’s security and operational control measures will be successful in guarding against any and each cyber threat and attack. To date, the City has not experienced any cyberattacks that have resulted in major operational disruptions or financial consequences. The City currently maintains insurance coverage with respect to certain information security and privacy liability claims.
CONTINUING DISCLOSURE
District Continuing Disclosure. The District has covenanted for the benefit of the Owners and Beneficial Owners of the 2023 Bonds pursuant to a Continuing Disclosure Agreement, dated the date of issuance of the 2023 Bonds (the “Issuer Continuing Disclosure Agreement”), by and between the District and Webb Municipal Finance, LLC, as Dissemination Agent, to provide certain financial information and operating data relating to the District (the “Annual Report”) no later than March 1 following the end of each fiscal year, commencing with the report for Fiscal Year 2022-23, and to provide notices of the occurrence of certain enumerated events through the EMMA System. The specific nature of the information to be contained in the Annual Report and the enumerated events is set forth in APPENDIX F – “FORMS OF CONTINUING DISCLOSURE UNDERTAKINGS.” The initial Annual Report due on March 1, 2024 may incorporate this Official Statement by reference in lieu of items requirements other than filing of the City’s annual comprehensive financial report (“ACFR”).
The City and its related governmental entities have made other undertakings pursuant to the Rule in connection with prior debt issuances. A review of compliance by the City over the past five years indicates the following:
(A) City of Rialto Community Facilities District No. 2006-1 (Elm Park) (i) failed to timely file under an existing undertaking the City’s ACFR and certain financial information and operating data for Fiscal Year 2020-21 and did not successfully file the City’s ACFR under all CUSIP numbers as required, (ii) failed to timely file the City’s ACFR for Fiscal Years 2021-22 and 2017-18 and (iii) failed to timely file the City’s ACFR for Fiscal Year 2019-20 when available after filing the unaudited City ACFR; and (B) City of Rialto Community Facilities District No. 2019-1 (Foothill/Spruce) failed to timely file the City’s ACFR for Fiscal Year 2021-22.
Remedial filings have been made and the City and its related governmental entities are in compliance with their previous undertakings. The District believes that its procedures with the Dissemination Agent will be sufficient in the normal due course to assure substantial compliance with the Issuer Continuing Disclosure Agreement with respect to the 2023 Bonds.
Developer Continuing Disclosure. The Underwriter does not consider the Developer to be an “obligated person” with respect to the 2023 Bonds for purposes of the Rule. Notwithstanding the foregoing, to provide updated information with respect to the development within the District, the Developer will execute a continuing disclosure certificate (the “Developer Continuing Disclosure Certificate”) pursuant to which it will covenant to provide semiannual reports until satisfaction of certain conditions set forth in the Developer Continuing Disclosure Certificate. The semiannual reports to be provided by the Developer will contain updates regarding the development within the District as outlined in Section 4 of the Developer Continuing Disclosure Certificate attached hereto as APPENDIX F-2. In addition to its semiannual reports, the Developer will agree to provide notices of certain events set forth in the Developer Continuing Disclosure Certificate.
The Developer’s obligations under the Developer Continuing Disclosure Certificate will terminate upon the earliest to occur of: (a) the legal defeasance, prior redemption, or payment in full of all the 2023 Bonds; or (b) at such time as ___ residential units in the District have been conveyed to individual homeowners.
To the actual knowledge of the Developer, other than as disclosed in this Official Statement, in the last five years, the Developer has not failed to comply in any material respects with its previous continuing disclosure undertakings, specifically regarding its requirement to provide developer periodic reports or to provide notice of occurrence of enumerated events. However, (i) in connection with a continuing disclosure obligation entered into with respect to the $12,850,000 County of El Dorado District No. 2014-1 (Carson Creek) Special Tax Bonds Series 2016, the Developer was late in filing the periodic reports due on April 1, 2017 and October 1, 2017; the oversight was discovered in late January, 2018, and the Developer promptly filed a curative report on February 1, 2018; (ii) in connection with the $16,780,000 California Municipal Finance Authority Special Tax Revenue Bonds BOLD Program Series 2020B, the Developer 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 (iii) in connection with the $5,795,000 City of Rancho Cordova Grantline 208 Community Facilities District No. 2018-1 Special Tax Bonds, Series 2021B, the Developer 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.
TAX MATTERS
Federal Tax Exemption
In the opinion of Norton Rose Fulbright US LLP, Los Angeles, California, Bond Counsel to the District, under existing statutes, regulations, rulings and judicial decisions, and assuming compliance by the District and the City with certain covenants in the Fiscal Agent Agreement, the Tax Certificate and other documents pertaining to the 2023 Bonds and requirements of the Code, regarding the use, expenditure and investment of proceeds of the 2023 Bonds and the timely payment of certain investment earnings to the United States, interest on the 2023 Bonds is not included in the gross income of the owners of the 2023 Bonds for federal income tax purposes. Failure to comply with such covenants and requirements may cause interest on the 2023 Bonds to be included in gross income retroactive to the date of issuance of the 2023 Bonds.
In the further opinion of Bond Counsel, interest on the 2023 Bonds is not treated as an item of tax preference for purposes of the federal alternative minimum tax.
Ownership of, or the receipt of interest on, tax-exempt obligations may result in collateral federal income tax consequences to certain taxpayers, including, without limitation, financial institutions, property and casualty insurance companies, certain foreign corporations doing business in the United States, certain S corporations with excess passive income, individual recipients of Social Security or Railroad Retirement benefits, taxpayers that may be deemed to have incurred or continued indebtedness to purchase or carry tax-exempt obligations and taxpayers who may be eligible for the earned income tax credit. Bond Counsel expresses no opinion with respect to any collateral tax consequences and, accordingly, prospective purchasers of the 2023 Bonds should consult their tax advisors as to the applicability of any collateral tax consequences.
Certain requirements and procedures contained or referred to in the Fiscal Agent Agreement, the Tax Certificate or other documents pertaining to the 2023 Bonds may be changed, and certain actions may be taken or not taken, under the circumstances and subject to the terms and conditions set forth in such documents, upon the advice or with the approving opinion of counsel nationally recognized in the area of tax-exempt obligations. Bond Counsel expresses no opinion as to the effect of any change to any document pertaining to the 2023 Bonds or of any action taken or not taken where such change is made or action is taken or not taken without the approval of Norton Rose Fulbright US LLP or in reliance upon the advice of counsel other than Norton Rose Fulbright US LLP with respect to the exclusion from gross income of the interest on the 2023 Bonds for federal income tax purposes.
Bond Counsel’s opinion is not a guarantee of result, but represents its legal judgment based upon its review of existing statutes, regulations, published rulings and judicial decisions and the representations and covenants of the District and the City described above. No ruling has been sought from the Internal Revenue Service (the “IRS”) with respect to the matters addressed in the opinion of Bond Counsel, and Bond Counsel’s opinion is not binding on the IRS. The IRS has an ongoing program of examining the tax exempt status of the interest on municipal obligations. If an examination of the 2023 Bonds is commenced, under current procedures the IRS is likely to treat the District as the “taxpayer,” and the owners of the 2023 Bonds would have no right to participate in the examination process. In responding to or defending an examination of the tax-exempt status of the interest on the 2023 Bonds, the District may have different or conflicting interests from the owners. Additionally, public awareness of any future examination of the 2023 Bonds could adversely affect the value and liquidity of the 2023 Bonds during the pendency of the examination, regardless of its ultimate outcome.
Tax Accounting Treatment of Bond Premium and Original Issue Discount Bond Premium. To the extent a purchaser acquires a 2023 Bond at a price in excess of the amount payable at its maturity, such excess will constitute “bond premium” under the Code. The Code and applicable Treasury Regulations provide generally that bond premium on a tax-exempt obligation is amortized over the remaining term of the obligation (or a shorter period in the case of certain callable obligations) based on the obligation's yield to maturity (or shorter period in the case of certain callable obligations). The amount of premium so amortized reduces the owner’s basis in such obligation for federal income tax purposes, though such amortized premium is not deductible for federal income tax purposes. This reduction in basis will increase the amount of any gain (or decrease the amount of any loss) recognized for federal income tax purposes upon a sale or other taxable disposition of the obligation. Bond Counsel is not opining on the accounting for bond premium or the consequence to a 2023 Bond purchaser of purchasing a 2023 Bond with bond premium. Accordingly, persons considering the purchase of 2023 Bonds with bond premium should consult their own tax advisors with respect to the determination of bond premium on such 2023 Bonds for federal income tax purposes and with respect to the state and local tax consequences of owning and disposing of such 2023 Bonds.
Original Issue Discount. The excess, if any, of the stated redemption price at maturity of 2023 Bonds of a particular maturity over the initial offering price to the public of the 2023 Bonds of that maturity at which a substantial amount of such 2023 Bonds is sold to the public is “original issue discount.” Original issue discount accruing on a 2023 Bond is treated as interest excluded from the gross income of the owner thereof for federal income tax purposes under the same conditions and limitations as are applicable to interest payable on such 2023 Bond. Original issue discount on a 2023 Bond of a particular maturity purchased pursuant to the initial public offering at the initial public offering price at which a substantial amount of the 2023 Bonds of that maturity is sold to the public accrues on a semiannual basis over the term of the 2023 Bond on the basis of a constant yield; and within each semiannual period accrues on a ratable daily basis. The amount of original issue discount on a 2023 Bond accruing during each period is added to the adjusted basis of such 2023 Bond, which will affect the amount of taxable gain upon disposition (including sale, redemption or payment on maturity) of such 2023 Bond. The Code includes certain provisions relating to the accrual of original issue discount in the case of purchasers that purchase 2023 Bonds other than at the initial offering price and pursuant to the initial public offering. Bond Counsel is not opining on the accounting for or consequence to a 2023 Bond purchaser of purchasing a 2023 Bond with original issue discount. Accordingly, persons considering the purchase of 2023 Bonds with original issue discount should consult their own tax advisors with respect to the determination of original issue discount on such 2023 Bonds for federal income tax purposes and with respect to the state and local tax consequences of owning and disposing of such 2023 Bonds.
Information Reporting and Backup Withholding
Interest paid on the 2023 Bonds will be subject to information reporting in a manner similar to interest paid on taxable obligations. Although such reporting requirement does not, in and of itself, affect the excludability of such interest from gross income for federal income tax purposes, such reporting requirement causes the payment of interest on the 2023 Bonds to be subject to backup withholding if such interest is paid to beneficial owners who (a) are not “exempt recipients,” and (b) either fail to provide certain identifying information (such as the beneficial owner’s taxpayer identification number) in the required manner or have been identified by the IRS as having failed to report all interest and dividends required to be shown on their income tax returns. Generally, individuals are not exempt recipients, whereas corporations and certain other entities are exempt recipients. Amounts withheld under the backup withholding rules from a payment to a beneficial owner are allowed as a refund or credit against such beneficial owner’s federal income tax liability so long as the required information is furnished to the IRS.
State Tax Exemption
In the further opinion of Bond Counsel, interest on the 2023 Bond is exempt from personal income taxes imposed by the State of California.
Future Developments
Existing law may change to reduce or eliminate the benefit to owners of the 2023 Bonds of the exclusion of the interest on the 2023 Bonds from gross income for federal income tax purposes or of the exemption of interest on the 2023 Bonds from State of California personal income taxation. Any proposed legislation, whether or not enacted, or administrative action, whether or not taken, could also affect the value and marketability of the 2023 Bonds. Prospective purchasers of the 2023 Bonds should consult their own tax advisors with respect to any proposed or future change in tax law. A copy of the form of opinion of Bond Counsel relating to the 2023 Bonds is included in “APPENDIX B” hereto.
CONCLUDING INFORMATION
Absence of Material Litigation
There is no controversy of any nature now pending against and notice of which has been received by the City or the District or, to the best knowledge of their respective officers, threatened, seeking to restrain or enjoin the issuance, sale, execution or delivery of the 2023 Bonds or in any way contesting or affecting the validity of the 2023 Bonds or any proceedings of the District taken with respect to the issuance or sale thereof or the pledge or application of any moneys or security provided for the payment of the 2023 Bonds or the use of the 2023 Bond proceeds. There are no pending lawsuits against and notice of which has been received by the City or the District that challenge the validity of the 2023 Bonds, the corporate existence of the City or the District, or the title of the officers thereof to their respective offices.
Approval of Legality
The proceedings in connection with the issuance of the 2023 Bonds are subject to the approval as to their legality by Norton Rose Fulbright US LLP, Los Angeles, California, Bond Counsel for the District. Bond Counsel undertakes no responsibility for the accuracy, completeness or fairness of the information contained in this Official Statement. The legal opinion relates only to the legality of the 2023 Bonds and is not intended to be, nor is it to be interpreted or relied upon, as a disclosure document or an express or implied recommendation as to the investment quality of the 2023 Bonds. A copy of the proposed form of Bond Counsel’s final approving opinion with respect to the 2023 Bonds is attached hereto as APPENDIX B. Fees payable to Bond Counsel are contingent on the successful sale and delivery of the 2023 Bonds.
Certain legal matters will be passed on for the District and for the City by Burke Williams & Sorensen LLP, Los Angeles, California, City Attorney, and by Norton Rose Fulbright US LLP, Los Angeles, California, Disclosure Counsel.
No General Obligation of City or District
The 2023 Bonds are not general obligations of the City or the District, but are limited obligations of the District payable solely from the Special Taxes and certain amounts held under the Fiscal Agent Agreement. Any tax for the payment of the 2023 Bonds shall be limited to the Special Taxes to be collected within the jurisdiction of the District.
The Municipal Advisor
The District has retained Fieldman, Rolapp & Associates, Inc., Irvine, California (the “Municipal Advisor”), as municipal advisor in connection with the authorization, issuance, sale and delivery of the 2023 Bonds. The Municipal Advisor is a registered Municipal Advisor (as defined in Section 15B of the Securities Exchange Act of 1934, as amended) and has acted as municipal advisor to the District concerning the 2023 Bonds. The Municipal Advisor is not obligated to undertake, and has not undertaken to make, an independent verification or to assume responsibility for the accuracy, completeness or fairness of the information contained in the Official Statement or any of the other legal documents. Fees paid to the Municipal Advisor are contingent upon the sale and delivery of the 2023 Bonds.
No Ratings on the 2023 Bonds
The District has not made, and does not contemplate making, any application for a rating on the 2023 Bonds. No such rating should be assumed based upon any other District rating that may be obtained. Prospective purchasers of the 2023 Bonds are required to make independent determinations as to the credit quality of the 2023 Bonds and their appropriateness as an investment. Should a Bondowner elect to sell a 2023 Bond prior to maturity, no representations or assurances can be made that a market will have been established or maintained for the purchase and sale of the 2023 Bonds. The Underwriter assumes no obligation to establish or maintain such a market and is not obligated to repurchase any of the 2023 Bonds at the request of the owner thereof.
Underwriting
The 2023 Bonds are being purchased by Piper Sandler & Co., Inc. (the “Underwriter”) at a purchase price of $_______________ (equal to the par amount of the 2023 Bonds being issued less an Underwriter’s discount of $______________ plus/less a net original issue premium/discount of $____________) pursuant to a bond purchase agreement between the District and the Underwriter (the “Purchase Agreement”). The Purchase Agreement provides that the Underwriter will purchase all of the 2023 Bonds if any are purchased, the obligation to make such purchase, if made, being subject to certain terms and conditions set forth in the Purchase Agreement, the approval of certain legal matters and certain other conditions.
The Underwriter may offer and sell 2023 Bonds to certain dealers and others at a price other than the offering price. The offering price may be changed from time to time by the Underwriter.
Miscellaneous
All of the preceding summaries of the Fiscal Agent Agreement, other applicable legislation, agreements and other documents are made subject to the provisions of such documents and do not purport to be complete statements of any or all of such provisions. Reference is hereby made to such documents on file with the City for further information in connection therewith.
This Official Statement does not constitute a contract with the purchasers of the 2023 Bonds.
Any statements made in this Official Statement involving matters of opinion or of estimates, whether or not so expressly stated, are set forth as such and not as representations of fact, and no representation is made that any of the estimates will be realized.
The execution and delivery of this Official Statement by the City Manager of the City has been duly authorized by the City on behalf of the City of Rialto Community Facilities District No. 2020-1 (El Rancho Verde).
CITY OF RIALTO
COMMUNITY FACILITIES DISTRICT NO. 2020-1
(EL RANCHO VERDE)
City Manager of the City of Rialto, California, acting on behalf of the City of Rialto Community Facilities District No. 2020-1 (El Rancho Verde)
APPENDIX A
GENERAL INFORMATION RELATING TO
THE CITY OF RIALTO AND SAN BERNARDINO COUNTY
The following information relating to the City of Rialto, California (the “City”) and the County of San Bernardino (the “County”) is provided for informational purposes only. The 2023 Bonds (as defined in the forepart of this Official Statement) are payable solely as described in this Official Statement. Neither the 2023 Bonds nor the obligation of the City to make payments on the bonds constitute an indebtedness of the City, the State of California, or any of its political subdivisions within the meaning of any constitutional or statutory debt limitation or restriction.
The economic and demographic data contained in this Appendix A are the latest available, but are as of dates and for periods before the economic impact of the COVID 19 pandemic and measures instituted to slow it. Accordingly, they are not necessarily indicative of the current financial condition or future prospects of the City, the County or the region or of expected revenues to the General Fund. See “SPECIAL RISK FACTORS – COVID 19 (Coronavirus) Pandemic” in the forepart of this Official Statement.
General
The City. The City is located in the western portion of the County of San Bernardino (the “County”), approximately 60 miles east of the City of Los Angeles and just west of the City of San Bernardino. The City was incorporated in 1911 and is organized as a general law city with a Council-Manager form of government. The City is approximately four miles wide and eight and one-half miles long, encompassing 22 square miles. The City is served by Interstate Freeways 210, 215, 10 and 15.
The County. The County is located in Southern California and was established by an act of the State Legislature on April 23, 1853, which formed the County over an area formerly composing the eastern part of the County of Los Angeles. The County encompasses an area of over 20,000 square miles and includes twenty-four incorporated cities. It is bordered on the west by Los Angeles County, on the east by the State of Arizona and the State of Nevada, on the north by Inyo and Kern Counties, and on the south by Orange and Riverside Counties. The County is the largest county in the State of California in terms of geographical area.
Municipal Government
The City provides general government services either with its own employees or through contracts. The City has a Council-Manager form of municipal government. The City Council appoints the City Manager who is responsible for the day-to-day administration of City business and the coordination of all departments. The Mayor is elected at large to serve a four-year term. The four Council Members are elected to serve staggered four-year terms. The City Council is composed of five members elected biannually at large to four-year staggered terms. The current members of the City Council, term expiration and their current Council position are as follows:
City Council
Term Expires
Position
Deborah Robertson
November 2024
Mayor
Andy Carrizales
November 2026
Mayor Pro Tem
Rafael Trujillo
November 2024
Councilmember
Ed Scott
November 2026
Councilmember
Joe Baca
November 2024
Councilmember
Current City Management Staff includes the following:
Henry Garcia – Interim City Manager. [more to follow]
Arron Brown – Deputy City Manager. Mr. Brown has 20 years of various government experience working for municipalities, a joint powers agency, the County of Riverside, and the State of California. Arron started his public service career with four years in the military and is an honorably discharged disabled veteran of the United States Marine Corps. Mr. Brown has a multifaceted background in information technology, marketing, project management, public procurement, and human resources. He came to the City from the City of Palm Springs where he was the Deputy City Manager and managed numerous capital improvement projects such as the $36 million Palm Springs International Airport ticket wing expansion project. Mr. Brown earned a Bachelor of Science degree in Business Administration with a concentration in Information Systems and a Master of Business Administration degree with a concentration in Management, both from California Baptist University. Arron also holds numerous certifications such as Certified Government Chief Information Officer (CGCIO) and the Society for Human Resources Management Senior Certified Professional (SHRM-SCP).
Municipal Services
The City provides a full range of services to its residents with [410] full-time employees as of June 30, 2023. Major services such as attorney, library, transit, street sweeping, and landscape maintenance are provided through contractual arrangements. The City provides services such as fire, police, affordable housing, economic development, planning, community compliance, recreation programs, humane services, park and facilities maintenance, street maintenance, city engineering, and administrative management services with city employees.
Population
The following table shows a historical comparison of the respective populations of the City, the County and the State for the last five years.
Table A-1
City of Rialto, San Bernardino,
and the State Of California
Population Comparison(1)
Year
City of
Rialto
San Bernardino
County
State of
California
2019
102,733
2,165,876
39,605,361
2020
102,813
2,175,424
39,648,938
2021
103,760
2,179,007
39,286,510
2022
103,406
2,180,777
39,078,674
2023
102,985
2,182,056
38,940,231
___________________
(1) As of January 1.
Source: State Department of Finance, 2010 Benchmark for Years 2019-2020 and 2020 Benchmark for Years 2021-2023.
Assessed Valuation
The following table sets forth the historical assessed valuations for secured and unsecured property within the City for the fiscal years shown.
TABLE A-2
CITY OF RIALTO
ASSESSED VALUE OF ALL TAXABLE PROPERTY
Roll
Year
Secured
Unsecured
Total
2023
$13,058,304,982
$1,784,411,182
$14,842,716,164
2022
11,562,543,427
1,486,672,063
13,049,215,490
2021
10,549,431,826
1,338,753,843
11,888,185,669
2020
9,520,084,370
1,240,843,552
10,760,927,922
2019
9,038,669,651
912,396,270
9,951,065,921
2018
8,277,155,422
868,370,316
9,145,525,738
2017
7,105,006,388
802,045,794
7,907,052,182
2016
6,677,551,639
659,303,329
7,336,854,968
2015
6,291,027,118
646,168,256
6,937,195,374
2014
5,885,181,579
578,031,980
6,463,213,559
_____________________
Source: City of Rialto.
The following table sets forth property tax levies and collections for the City for the fiscal years shown.
TABLE A-3
CITY OF RIALTO
TAX LEVIES AND COLLECTIONS
(Fiscal Year Ended June 30)
Fiscal Year
Total Tax Levy for
Fiscal Year
Collections within the
Fiscal Year of the Levy
Collections
in Subsequent Years
Total Collections to Date
Amount
Percent of Levy
Amount
Percent
of Levy
2013
$22,604,425
$22,503,375
99.55%
$101,049
$22,604,425
100.00%
2014
21,095,830
20,913,162
99.13 182,668
21,095,830
100.00
2015
24,231,424
24,045,621
99.23 185,803
24,231,424
100.00
2016
23,902,218
23,750,424
99.36 151,765
23,902,189
100.00
2017
23,719,160
23,608,043
99.53 110,730
23,718,773
100.00
2018
31,445,680
31,292,569
99.51 152,743
31,445,312
100.00
2019
34,643,458
34,544,095
99.71 99,342
34,643,437
100.00
2020
37,223,333
37,079,154
99.61 144,179
37,223,333
100.00
2021
39,826,549
39,708,855
99.70 117,694
39,826,549
100.00
2022
44,085,823
43,804,013
99.36 281,810
44,085,823
100.00
_______________________
NOTE: Amounts exclude debt service levies and former redevelopment agency property tax increments.
Source: County of San Bernardino Auditor-Controller; City of Rialto.
Largest Secured Taxpayers
The following table sets forth the largest 2021-22 local secured taxpayers in the City by taxable assessed value.
TABLE A-4
CITY OF RIALTO
LARGEST 2021-22 LOCAL SECURED TAXPAYERS
2021-22 % of
Property Owner Primary Land Use Assessed Valuation Total(1)
1. Target Corporation Commercial $ 496,815,045 4.15%
2. Prologis-Macquarie US LLC Industrial 490,746,651 4.10
3. El Rivino Industrial I LLC Industrial 335,688,815 2.81
4. Amazon Com Service Inc. Industrial 242,788,604 2.03
5. Niagra Bottling LLC Industrial 196,066,809 1.64
6. Liberty Property LP Industrial 186,461,939 1.56
7. Fedex Ground Package System Inc. Industrial 175,896,858 1.47
8. GPT BTS Linden Avenue Owner Industrial 135,584,513 1.13
9. B9 Kline Ranch Owner LLC Industrial 123,719,453 1.03
10. MRE Propco LP 113,950,968 0.95
TOTAL $2,497,719,655 20.87%
(1) 2021-22 Assessed Valuation: $12,226,951,239
__________________________
Source: HdL Coren & Cone; City of Rialto ACFR Fiscal Year 2021-22.
Income
The U.S. Census Bureau American Community Survey reports that the median income of households in the City for 2021 is $69,982 compared to $84,907 for the State and $69,717 for the nation.
Employment and Industry
The following table summarizes the annual average civilian labor force, employment and unemployment in the County for the calendar years 2018 through 2022.
Table A-5
San Bernardino
Civilian Labor Force, Employment and Unemployment
(Annual Averages)
2018
2019
2020
2021
2022
Civilian Labor Force(1)
955,100
967,100
974,700
992,200
1,008,500
Employment
915,800
929,800
880,900
918,600
967,200
Unemployment
39,200
37,400
93,800
73,600
41,300
Unemployment Rate
4.1%
3.9%
9.6%
7.4%
4.1%
Wage and Salary Employment:(2)
Total Farm
2,200
2,500
2,300
2,300
2,400
Mining and Logging
800
700
900
1,000
1,100
Construction
37,800
39,000
38,100
39,200
40,900
Manufacturing
56,600
55,400
52,200
52,500
54,600
Wholesale Trade
40,500
41,500
41,100
41,800
42,500
Retail Trade
88,300
87,000
81,800
85,600
88,200
Transportation, Warehousing, Utilities
87,100
96,300
110,800
127,700
136,100
Information
5,300
5,000
4,100
4,400
5,100
Finance and Insurance
12,700
13,600
13,400
33,500
13,210
Real Estate and Rental and Leasing
9,000
9,800
9,700
10,300
11,200
Professional and Business Services
80,900
85,000
83,900
92,100
99,300
Educational and Health Services
124,500
135,000
129,100
129,700
135,600
Leisure and Hospitality
76,900
78,100
63,700
71,600
79,300
Other Services
23,000
22,900
20,300
21,800
24,100
Federal Government
13,500
13,800
14,400
6,300
6,100
State Government
13,100
13,500
13,500
13,400
13,200
Local Government
100,400
101,700
96,100
95,100
101,400
Total, All Industries (3)
772,700
801,000
775,400
808,200
854,200
_______________________________
(1) Labor force data is by place of residence; includes self-employed individuals, unpaid family workers, household domestic workers, and workers on strike. (2) Industry employment is by place of work; excludes self-employed individuals, unpaid family workers, household domestic workers, and workers on strike. (3) Totals may not add due to rounding.
Source: Labor Division of the California State Employment Development Department, March 2020 Benchmark.
Major Employers
The following table lists the major employers within the County:
Table A-6
County of San Bernardino
Major Employers – Listed Alphabetically
(As of January 2022)
Employer Name
Location
Industry
Amazon Fulfillment Ctr
Redlands
Mail Order Fulfillment Service
Amazon Fulfillment Ctr
San Bernardino
Mail Order Fulfillment Service
Arrowhead Regional Medical Ctr
Colton
Hospitals
Bear Mountain
Big Bear Lake
Skiing Centers & Resorts
Big Bear Mountain Resorts
Big Bear Lake
Resorts
Burlington Distribution Ctr
San Bernardino
Distribution Centers (whls)
California State Univ Sn
San Bernardino
Schools-Universities & Colleges Academic
Dignity Health Cmnty Hosp-Sn
San Bernardino
Hospitals
Environmental Systems Research
Redlands
Geographics Information Systems
Fedex Ground
Bloomington
Delivery Service
Inland Empire Health Plan
Rancho Cucamonga
Health Plans
Loma Linda Univ Health Board
Loma Linda
Univ/Clg-Governing Body/Regent/Trustee
Loma Linda University Med Ctr
Loma Linda
Hospitals
Mountain High Ski Resort
Wrightwood
Skiing Centers & Resorts
Ontario International Airport
Ontario
Airports
Ontario-Montclair School Dist
Ontario
School Districts
Patton State Hospital
Patton
Hospitals
Redlands Community Hospital
Redlands
Hospitals
San Antonio Regional Hospital
Upland
Hospitals
San Bernardino County Sch Supt
San Bernardino
Schools & Educational Services NEC
San Bernardino County Sheriff
San Bernardino
County Government-General Offices
St Bernardine Medical Ctr
San Bernardino
Hospitals
St Mary's Medical Ctr
Apple Valley
Hospitals
Transportation Department
YRC Freight
San Bernardino
Bloomington
State Government-Transportation Programs
Trucking-Motor Freight
Source: California Employment Development Department, extracted from The America’s Labor Market information System (ALMIS) Employer Database, 2023 2nd Edition.
Commercial Activity
The number of establishments selling merchandise subject to sales tax and the valuation of taxable transactions in the City is presented in the following table.
Table A-7
City of Rialto
Taxable Retail Sales
Number of Permits and Valuation of Taxable Transactions (Dollars in Thousands)
Total Retail and
Food Services
Total All Outlets
Taxable
Transactions
Number of Permits
Taxable
Transactions
2018
$ 804,442
1,791
$1,759,274
2019
882,892
1,943
1,880,217
2020
916,844
2,311
1,972,235
2021
3,385,629
2,179
4,653,920
2022
3,569,656
2,245
5,015,008
Sources: California Department of Tax and Fee Administration, Taxable Sales – Cities by Type of Business.
The number of establishments selling merchandise subject to sales tax and the valuation of taxable transactions in the County is presented in the following table.
Table A-8
San Bernardino
Taxable Retail Sales
Number of Permits and Valuation of Taxable Transactions (Dollars in Thousands)
Number
of Permits
Taxable
Transactions
2018
61,838
$40,554,024
2019
64,771
41,768,748
2020
71,145
43,265,512
2021
66,585
55,378,097
2022
68,480
59,992,846
Source: California Department of Tax and Fee Administration, Taxable Sales – By County (2018- 2022 data).
Housing
As of January 1, 2023, the California Department of Finance reported that there were 20,239 single family detached units in the City, 788 single family attached units, 5,515 multifamily housing units and 1,688 mobile home units. The vacancy rate is approximately 2.4%.
Construction Activity
The following tables show a five year summary of the valuation of building permits issued in the City and the County.
Table A-9
City of Rialto
Building Permit Valuation
2018
2019
2020
2021
2022
Permit Valuation
Single-family dwelling
$3,401,547
$15,054,141
$ 54,522
$5,067,290
$ 943,087
Multi-family
0 0
0 0
0 Res. Alterations/Additions
801,827
1,143,213
267,602
31,645
175,300
Total Residential
$4,203,374
$16,197,354
$322,124
$5,098,935
$1,118,387
Hotels & Motels
0 0
0 0
0 Non-Housekeeping Shelter
0 0
0 0
0 Amusement and Recreation
0 0
0 0
0 Churches
0 0
0 0
0 Industrial & Manufacturing
2,418
111,571,554
0 0
0 Parking Garages
0 0
0 0
0 Service Stations
181,116
0 0
0 0
Hospitals
0 0
0 0
0 Offices
0 914,056
0 0
0 Public Works
0 0
0 0
0 Schools Education
908,371
3,348,272
0 0
0 Stores, Mercantile & Warehouses
12,895,273
22,359,113
0 0
200,000
Other Non-Residential Buildings
515,868
956,392
0 0
8,363,088
Structures Other Than Buildings
3,001,049
3,199,608
741,281
100,000
321,000
Non-Residential Alterations
15,891,000
108,956,410
7,437,068
0 269,271
Residential Garages
13,708
225,926
4,750
5,000
0 Total Nonresidential
$33,408,803
$251,531,331
$8,183,099
$105,000
$9,153,359
New Dwelling Units
Single Family
16 59
1 19
7 Multiple Family
0 0
0 0
0 Total
16 59
1 19
7 Source: Construction Industry Research Board, Annual Building Permit Summary.
Table A-10
County of San Bernardino
Building Permit Valuation
2018
2019
2020
2021
2022
Permit Valuation
New Single-family
$1,114,777,827
$1,078,797,667
$934,304,422
1,086,398,163
$1,028,474,447
New Multi-family
268,564,946
232,079,305
143,366,170
310,255,425
345,433,503
Res. Alterations/Additions
71,937,836
139,761,121
61,788,531
88,244,125
89,903,254
Total Residential
$1,455,280,609
$1,450,638,093
$1,139,459,123
$1,484,897,713
$1,463,811,204
New Commercial
$211,175,724
$413,404,484
$237,588,657
$218,357,692
$389,536,575
New Industrial
387,108,590
476,322,279
330,960,066
385,616,522
588,067,879
New Other
388,145,460
365,127,043
486,398,444
273,490,954
819,692,658
Alterations/Additions
93,699,940
122,245,823
9,748,343
288,180,759
277,379,266
Total Nonresidential
$1,080,129,714
$1,377,099,629
$1,064,695,510
$1,165,645,927
$2.074,676,378
New Dwelling Units
Single Family
3,311
4,096
3,631
4,376
3,701
Multiple Family
1,775
1,884
910
2,636
2,852
Total
5,086
5,980
4,541
7,012
6,553
Source: Construction Industry Research Board, Annual Building Permit Summary.
Development Activity within the City
The following are examples of recently completed and currently planned economic development projects in the City. The City makes no assurance whether or when any of the below-listed on-going economic development projects will be completed.
Housing. RC Hobbs recently completed two communities, Serrano Village, a gated community with 33 detached single family homes, and Santiago, a community with 49 detached single family homes. Monte Vista Homes is currently selling detached single family homes in its 24 home community, Acacia Trails. Richmond American Homes is currently selling detached single family homes in its Seasons at Acacia community within the City.
Commercial. Over 17,000 square feet of industrial warehouse building space was recently completed by Renaissance Commerce Center, LLC.
Civic Uses. The City recently completed several projects including the construction of the $3 million Fire Station 205, the Community Resource Center ADA Improvement project and the Cactus Trails project, a multi-use path along the west side of Cactus Avenue, from Rialto Avenue to Baseline Road.
APPENDIX B
FORM OF BOND COUNSEL’S OPINION
[Closing Date]
City of Rialto Community Facilities
District No. 2020-1 (El Rancho Verde)
23920 Valencia Boulevard, Suite 295
Rialto, California 91355
Re: $[principal amount] City of Rialto Community Facilities District No. 2020-1 (El Rancho Verde) Special Tax Bonds, Series 2023 Ladies and Gentlemen:
We have acted as bond counsel to the City of Rialto Community Facilities District No. 2020-1 (El Rancho Verde) (the “District”) in connection with the issuance of $[principal amount] aggregate principal amount of City of Rialto Community Facilities District No. 2020-1 (El Rancho Verde) Special Tax Bonds, Series 2023 (the “2023 Bonds”), pursuant to the provisions of the Mello-Roos Community Facilities Act of 1982, as amended, being Chapter 2.5, Part 1, Division 2, Title 5, of the Government Code of the State of California (the “Act”), and pursuant to a Fiscal Agent Agreement, dated as of October 1, 2023 (the “Fiscal Agent Agreement”), by and between the District and U.S. Bank Trust Company, National Association, as fiscal agent (the “Fiscal Agent”). Capitalized terms not otherwise defined herein shall have the meanings ascribed to them in the Fiscal Agent Agreement As bond counsel, we have examined applicable provisions of the Act and copies certified to us as being true and complete copies of the proceedings of the City of Rialto (the “City”) and the District, acting through the City Council of the City, as its legislative body, for the authorization and issuance of the 2023 Bonds, including the Fiscal Agent Agreement and the Tax Certificate executed by the District in connection with the issuance of the 2023 Bonds (the “Tax Certificate”). Our services as bond counsel were limited to an examination of such proceedings and to the rendering of the opinions set forth below. In this connection we have also examined such certificates of public officials and officers of the City and the District as we have considered necessary for the purposes of this opinion.
We have assumed the genuineness of all documents and signatures presented to us. We have not undertaken to verify independently, and have assumed, the accuracy of the factual matters represented, warranted or certified in the documents. Furthermore, we have assumed compliance with all covenants and agreements contained in the Fiscal Agent Agreement and the Tax Certificate.
Based upon the foregoing we are of the opinion, under existing law, as follows:
1. The Fiscal Agent Agreement has been duly and validly authorized, executed and delivered by the District and constitutes the legally valid and binding obligation of the District, enforceable against the District in accordance with its terms.
2. The 2023 Bonds constitute valid and binding limited obligations of the District as provided in the Fiscal Agent Agreement, and are entitled to the benefits of the Fiscal Agent Agreement.
3. The 2023 Bonds are secured by a valid pledge of the Special Taxes and all moneys in the funds and accounts under the Fiscal Agent Agreement, including all amounts derived from the investment of such moneys, subject to the application thereof on the terms and conditions as set forth in the Fiscal Agent Agreement.
4. Under existing statutes, regulations, rulings and judicial decisions, and assuming compliance by the District and the City with certain covenants in the Indenture and the Tax Certificate and requirements of the Internal Revenue Code of 1986 (the “Code”) regarding the use, expenditure and investment of proceeds of the 2023 Bonds and the timely payment of certain investment earnings to the United States, interest on the 2023 Bonds is not included in gross income for federal income tax purposes. Failure to comply with such covenants and requirements may cause interest on the 2023 Bonds to be included in gross income for federal income tax purposes retroactive to the date hereof.
5. Under current law, interest on the 2023 Bonds is not treated as an item of tax preference for purposes of the alternative minimum tax.
6. Under existing law interest on the 2023 Bonds is exempt from personal income taxes of the State of California.
The Code imposes certain requirements that must be met subsequent to the issuance and delivery of the 2023 Bonds for interest thereon to be and remain excluded from the gross income of the owners thereof for federal income tax purposes. Noncompliance with such requirements could cause the interest on the 2023 Bonds to be included in the gross income of the owners thereof retroactive to the date of issuance of the 2023 Bonds. The District and the City are making representations relevant to the determination of, and are covenanting to comply with the applicable provisions of the Code to maintain, the exclusion of interest on the 2023 Bonds from the gross income of the owners thereof for federal income tax purposes. In reaching our opinions described above, we have relied on, and have assumed the accuracy of, such representations and the present and future compliance by the District and the City with their covenants. Further, except as expressly stated above, we express no opinion as to any federal or state tax consequence of the receipt or accrual of interest on, or the ownership or disposition of, the 2023 Bonds.
Certain requirements and procedures contained or referred to in the Fiscal Agent Agreement, the Tax Certificate or other documents pertaining to the 2023 Bonds may be changed, and certain actions may be taken or not taken, under the circumstances and subject to the terms and conditions set forth in such documents, upon the advice or with the approving opinion of counsel nationally recognized in the area of tax-exempt obligations. With respect to the exclusion from gross income of the interest on the 2023 Bonds for federal income tax purposes, we express no opinion as to the effect of any change to any document pertaining to the 2023 Bonds or of any action taken or not taken where such change is made or action is taken or not taken without our approval or in reliance upon the advice of counsel other than Norton Rose Fulbright US LLP.
The opinions expressed in paragraphs 1 and 2 above are qualified to the extent the enforceability of the 2023 Bonds and the Fiscal Agent Agreement may be limited by applicable bankruptcy, insolvency, debt adjustment, reorganization, moratorium or similar laws or equitable principles relating to or limiting creditors’ rights generally or as to the availability of any particular remedy. The enforceability of the 2023 Bonds and the Fiscal Agent Agreement is subject to the effect of general principles of equity, including, without limitation, concepts of materiality, reasonableness, good faith and fair dealing, to the possible unavailability of specific performance or injunctive relief, regardless of whether considered in a proceeding in equity or at law, and to the limitations on legal remedies against governmental entities in California.
No opinion is expressed herein on the accuracy, completeness or fairness of the Official Statement or other offering material relating to the 2023 Bonds.
Our opinions are based on existing law, which is subject to change. Such opinions are further based on our knowledge of facts as of the date hereof. We assume no duty to update or supplement our opinions to reflect any facts or circumstances that may thereafter come to our attention or to reflect any changes in any law that may thereafter occur or become effective. Moreover, our opinions are not a guarantee of result and are not binding on the Internal Revenue Service. Rather, such opinions represent our legal judgment based upon our review of existing law that we deem relevant to such opinions and in reliance upon the representations and covenants referenced above.
This opinion is limited to the laws of the State of California and the federal laws of the United States.
Respectfully submitted,
APPENDIX C
SUMMARY OF CERTAIN PROVISIONS
OF THE FISCAL AGENT AGREEMENT
APPENDIX D
RATE AND METHOD OF APPORTIONMENT OF SPECIAL TAX
APPENDIX E
BOOK-ENTRY ONLY SYSTEM
None of the District, the Fiscal Agent or the Underwriter can or do give any assurances that DTC, the Participants or others will distribute payments of principal of or interest on the 2023 Bonds paid to DTC or its nominee as the registered owner, or will distribute any prepayment notices or other notices, to the Beneficial Owners, or that they will do so on a timely basis or will serve and act in the manner described in this Official Statement. None of the District, the Fiscal Agent or the Underwriter are responsible or liable for the failure of DTC or any Participant to make any payment or give any notice to a Beneficial Owner with respect to the 2023 Bonds or an error or delay relating thereto.
The following information concerning The Depository Trust Company, New York, New York (“DTC”) and DTC’s book-entry system has been obtained from sources that the District and the Underwriter believe to be reliable, but neither the District or the Underwriter take responsibility for the accuracy thereof. Capitalized terms used herein and not otherwise defined herein shall have the meanings set forth in this Official Statement and in APPENDIX C — “SUMMARY OF FISCAL AGENT AGREEMENT.” DTC will act as securities depository for the 2023 Bonds. The 2023 Bonds will be issued as fully registered securities registered in the name of Cede & Co. (DTC’s partnership nominee) or such other name as may be requested by an authorized representative of DTC. One fully-registered Bond certificate will be issued for each maturity of the 2023 Bonds, each in the aggregate principal amount of such maturity, and will be deposited with DTC.
DTC, the world’s largest securities depository, is a limited-purpose trust company organized under the New York Banking Law, a “banking organization” within the meaning of the New York Banking Law, a member of the Federal Reserve System, a “clearing corporation” within the meaning of the New York Uniform Commercial Code, and a “clearing agency” registered pursuant to the provisions of Section 17A of the Securities Exchange Act of 1934. DTC holds and provides asset servicing for over 3.6 million issues of U.S. and non-U.S. equity issues, corporate and municipal debt issues, and money market instruments (from over 100 countries) that DTC’s participants (“Direct Participants”) deposit with DTC. DTC also facilitates the post trade settlement among Direct Participants of sales and other securities transactions in deposited securities, through electronic computerized book-entry transfers and pledges between Direct Participants’ accounts. This eliminates the need for physical movement of securities certificates. Direct Participants include both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations. DTC is a wholly-owned subsidiary of The Depository Trust & Clearing Corporation (“DTCC”). DTCC is the holding company for DTC, National Securities Clearing Corporation and Fixed Income Clearing Corporation, all of which are registered clearing agencies. DTCC is owned by the users of its regulated subsidiaries. Access to the DTC system is also available to others such as both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, and clearing corporations that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly (“Indirect Participants”). DTC has an S&P Global Ratings rating of AA+. The DTC Rules applicable to its Participants are on file with the Securities and Exchange Commission. More information about DTC can be found at www.dtcc.com.
Purchases of 2023 Bonds under the DTC system must be made by or through Direct Participants, which will receive a credit for the 2023 Bonds on DTC’s records. The ownership interest of each actual purchaser of each 2023 Bond (“Beneficial Owner”) is in turn to be recorded on the Direct and Indirect Participants’ records. Beneficial Owners will not receive written confirmation from DTC of their purchase. Beneficial Owners are, however, expected to receive written confirmations providing details of the transaction, as well as periodic statements of their holdings, from the Direct or Indirect Participant through which the Beneficial Owner entered into the transaction. Transfers of ownership interests in the 2023 Bonds are to be accomplished by entries made on the books of Direct and Indirect Participants acting on behalf of Beneficial Owners.
Beneficial Owners will not receive certificates representing their ownership interests in 2023 Bonds, except in the event that use of the book-entry system for the 2023 Bonds is discontinued.
To facilitate subsequent transfers, all 2023 Bonds deposited by Direct Participants with DTC are registered in the name of DTC’s partnership nominee, Cede & Co., or such other name as may be requested by an authorized representative of DTC. The deposit of 2023 Bonds with DTC and their registration in the name of Cede & Co. or such other DTC nominee do not effect any change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the 2023 Bonds; DTC’s records reflect only the identity of the Direct Participants to whose accounts such 2023 Bonds are credited, which may or may not be the Beneficial Owners. The Direct and Indirect Participants will remain responsible for keeping account of their holdings on behalf of their customers.
Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. Beneficial Owners of 2023 Bonds may wish to take certain steps to augment the transmission to them of notices of significant events with respect to the 2023 Bonds, such as redemptions, tenders, defaults, and proposed amendments to the 2023 Bond documents. For example, Beneficial Owners of 2023 Bonds may wish to ascertain that the nominee holding the 2023 Bonds for their benefit has agreed to obtain and transmit notices to Beneficial Owners. In the alternative, Beneficial Owners may wish to provide their names and addresses to the registrar and request that copies of notices be provided directly to them.
Redemption notices shall be sent to DTC. If less than all of the 2023 Bonds within an issue are being redeemed, DTC’s practice is to determine by lot the amount of the interest of each Direct Participant in such issue to be redeemed.
Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect to 2023 Bonds unless authorized by a Direct Participant in accordance with DTC’s MMI Procedures. Under its usual procedures, DTC mails an Omnibus Proxy to the City, as the issuer of the 2023 Bonds, as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co.’s consenting or voting rights to those Direct Participants to whose accounts 2023 Bonds are credited on the record date (identified in a listing attached to the Omnibus Proxy).
Redemption proceeds, distributions, and dividend payments on the 2023 Bonds will be made to Cede & Co., or such other nominee as may be requested by an authorized representative of DTC. DTC’s practice is to credit Direct Participants’ accounts upon DTC’s receipt of funds and corresponding detail information from the City or the Fiscal Agent, on payable date in accordance with their respective holdings shown on DTC’s records.
Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered in “street name,” and will be the responsibility of such Participant and not of DTC, the Fiscal Agent, or the City, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of redemption proceeds, distributions, and dividend payments to Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC) is the responsibility of the City or the Fiscal Agent, disbursement of such payments to Direct Participants will be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners will be the responsibility of Direct and Indirect Participants.
DTC may discontinue providing its services as depository with respect to the 2023 Bonds at any time by giving reasonable notice to the District or the Fiscal Agent. Under such circumstances, in the event that a successor depository is not obtained, certificates for the 2023 Bonds are required to be printed and delivered in such principal amount or amounts, in authorized denominations, and registered in whatever name or names DTC shall designate.
The District may decide to discontinue use of the system of book-entry-only transfers through DTC (or a successor securities depository). In that event, certificates for the 2023 Bonds will be printed and delivered in such principal amount or amounts, in authorized denominations, and registered in whatever name or names DTC shall designate.
The information in this section concerning DTC and DTC’s book-entry system has been obtained from sources that the District believe to be reliable, but the District does not take any responsibility for the accuracy thereof.
Risks Regarding the Book-Entry Only System
AS LONG AS CEDE & CO. OR ITS SUCCESSOR IS THE REGISTERED HOLDER OF THE 2023 BONDS, AS NOMINEE OF DTC, REFERENCES HEREIN TO THE REGISTERED HOLDERS OF THE 2023 BONDS SHALL MEAN CEDE & CO., AS AFORESAID, AND SHALL NOT MEAN THE BENEFICIAL OWNERS OF THE 2023 BONDS. ANY FAILURE OF DTC TO ADVISE ANY PARTICIPANT, OR OF ANY PARTICIPANT TO NOTIFY ANY BENEFICIAL OWNER, OF ANY NOTICE AND ITS CONTEXT OR EFFECT WILL NOT AFFECT THE VALIDITY OR SUFFICIENCY OF THE PROCEEDINGS RELATING TO THE REDEMPTION OF THE 2023 BONDS CALLED FOR REDEMPTION OR OF ANY OTHER ACTION PREMISED ON SUCH NOTICE. Each person for whom a Participant acquires an interest in the 2023 Bonds, as nominee, may desire to make arrangements with such Participant to receive a credit balance in the records of such Participant, and may desire to make arrangements with such Participant to have all notices of redemption or other communications to DTC, which may affect such person, forwarded in writing by such Participant and to receive notification of all interest payments.
NONE OF THE CITY, THE AUTHORITY, THE FISCAL AGENT OR THE UNDERWRITER WILL HAVE ANY RESPONSIBILITY OR OBLIGATION WITH RESPECT TO THE PAYMENTS TO THE DIRECT PARTICIPANTS, ANY INDIRECT PARTICIPANTS OR THE BENEFICIAL OWNERS, THE SELECTION OF THE BENEFICIAL INTERESTS IN THE 2023 BONDS TO BE REDEEMED IN THE EVENT OF REDEMPTION OF LESS THAN ALL 2023 BONDS OF A PARTICULAR MATURITY OR THE PROVISION OF NOTICE TO THE DIRECT PARTICIPANTS, ANY INDIRECT PARTICIPANTS OR THE BENEFICIAL OWNERS WITH RESPECT TO THE 2023 BONDS. NO ASSURANCE CAN BE GIVEN BY THE CITY, THE AUTHORITY THE FISCAL AGENT OR THE UNDERWRITER THAT DTC, DIRECT PARTICIPANTS, INDIRECT PARTICIPANTS OR OTHER NOMINEES OF THE BENEFICIAL OWNERS WILL MAKE PROMPT TRANSFER OF PAYMENTS TO THE BENEFICIAL OWNERS, THAT THEY WILL DISTRIBUTE NOTICES, INCLUDING REDEMPTION NOTICES (REFERRED TO ABOVE), RECEIVED AS THE REGISTERED OWNER OF THE 2023 BONDS TO THE BENEFICIAL OWNERS, THAT THEY WILL DO SO ON A TIMELY BASIS, OR THAT DTC WILL ACT IN THE MANNER DESCRIBED IN THIS OFFICIAL STATEMENT.
In the event the District determines not to continue the book-entry system or DTC determines to discontinue its services with respect to the 2023 Bonds, and the District does not select another qualified securities depository, the District shall deliver one or more 2023 Bonds in such principal amount or amounts, in authorized denominations, and registered in whatever name or names, as DTC shall designate. In such event, transfer and exchanges of 2023 Bonds will be governed by the provisions of the Fiscal Agent Agreement.
APPENDIX F
FORMS OF CONTINUING DISCLOSURE UNDERTAKINGS
APPENDIX F-1
FORM OF ISSUER CONTINUING DISCLOSURE AGREEMENT
This Continuing Disclosure Agreement (the “Disclosure Agreement”), dated as of October 1, 2023, is executed and delivered by the City of Rialto Community Facilities District No. 2020-1 (El Rancho Verde) (the “CFD”) and Webb Municipal Finance, LLC, as dissemination agent (the “Dissemination Agent”) hereunder, in connection with the issuance of the $17,500,000 City of Rialto Community Facilities District No. 2020-1 (El Rancho Verde) Special Tax Bonds, Series 2023 (the “2023 Bonds”). The 2023 Bonds are being issued pursuant to provisions of a Fiscal Agent Agreement, dated as of October 1, 2023 (the “Fiscal Agent Agreement”), by and between the CFD and U.S. Bank Trust Company, National Association, as fiscal agent (the “Fiscal Agent”). The CFD and the Dissemination Agent covenant and agree as follows:
Section 1. Purpose of the Disclosure Agreement. This Disclosure Agreement is being executed and delivered by the CFD and the Dissemination Agent for the benefit of the holders and beneficial owners of the 2023 Bonds and in order to assist the Participating Underwriter in complying with the Rule (as defined below).
Section 2. Definitions. In addition to the definitions set forth in the Fiscal Agent Agreement, which apply to any capitalized term used in this Disclosure Agreement, unless otherwise defined in this Section, the following capitalized terms shall have the following meanings:
“Annual Report” shall mean any Annual Report provided by the CFD pursuant to, and as described in, Sections 3 and 4 of this Disclosure Agreement. “CFD” means City of Rialto Community Facilities District No. 2020-1 (El Rancho Verde), a community facilities district organized and existing under the laws of the State of California, and such area of land comprising that community facilities district. “City” means the City of Rialto, California.
“Disclosure Representative” shall mean the City Manager of the City of Rialto or his or her designee, or such other officer or employee as the CFD shall designate in writing to the Fiscal Agent and Dissemination Agent from time to time. “Dissemination Agent” shall mean Webb Municipal Finance LLC, or any successor Dissemination Agent designated in writing by the CFD and which has filed with the CFD a written acceptance of such designation. “EMMA” shall mean the Municipal Securities Rulemaking Board’s Electronic Municipal Market Access System for Municipal Securities disclosures, maintained on the internet at http://emma.msrb.org. “Listed Events” shall mean any of the events listed in Section 5(a) of this Disclosure Agreement. “MSRB” shall mean the Municipal Securities Rulemaking Board established pursuant to Section 15B(b)(1) of the Securities Exchange Act of 1934 or any other entity designated or authorized by the SEC to receive reports pursuant to the Rule. Until otherwise designated by the MSRB or the U.S. Securities and Exchange Commission, filings with the MSRB are to be made through the EMMA website. “Official Statement” shall mean the final Official Statement, dated September __, 2023, relating to the 2023 Bonds. “Participating Underwriter” shall mean the original underwriter of the 2023 Bonds required to comply with the Rule in connection with the offering of the 2023 Bonds. “Rule” shall mean Rule 15c2-12 adopted by the U.S. Securities and Exchange Commission under the Securities Exchange Act of 1934, as the same may be amended from time to time.
Section 3. Provision of Annual Reports.
(a) The CFD shall, or shall cause the Dissemination Agent to, not later March 1 of each year, commencing March 1, 2024 with the report for the 2022-23 fiscal year, provide to the MSRB, in an electronic format accompanied by identifying information as prescribed by the MSRB, an Annual Report which is consistent with the requirements of Section 4 of this Disclosure Agreement. The Annual Report may be submitted as a single document or as separate documents comprising a package, and may include by reference other information as provided in Section 4 of this Disclosure Agreement; provided that the audited financial statements of the City may be submitted separately from the balance of the Annual Report, and later than the date required above for the filing of the Annual Report if not available by that date; and provided further that the initial Annual Report due on March 1, 2024 may incorporate the Official Statement by reference in lieu of items 4(b) through (f). 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). (b) Not later than fifteen (15) business days prior to the date specified in subsection (a) above for providing the Annual Report to the MSRB, the CFD shall provide the Annual Report to the Dissemination Agent (if other than the CFD). If by such date, the Dissemination Agent has not received a copy of the Annual Report, the Dissemination Agent shall contact the CFD to determine if the CFD is in compliance with the first sentence of this subsection (b). The CFD shall provide a written certification with each Annual Report furnished to the Dissemination Agent to the effect that such Annual Report constitutes the Annual Report required to be furnished by it hereunder. (c) If the Dissemination Agent is unable to verify that an Annual Report has been provided to the MSRB by the date required in subsection (a), the Dissemination Agent shall send a notice in a timely manner to the MSRB in substantially the form attached as Exhibit A, or in such other form as prescribed or acceptable to the MSRB. (d) The Dissemination Agent (if other than the CFD) shall, if and to the extent, the CFD has provided an Annual Report in final form to the Dissemination Agent for dissemination, file a report with the CFD certifying that the Annual Report has been provided to the MSRB pursuant to this Disclosure Agreement, and stating the date it was provided.
Section 4. Content of Annual Reports. The CFD’s Annual Report shall contain or incorporate by reference the following:
(a) Audited financial statements of the City 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 City’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 Official Statement, and the audited financial statements shall be filed in the same manner as the Annual Report when they become available. (b) The balance in the Reserve Account as of September 30 held under the Fiscal Agent Agreement. (c) Total assessed valuation (per the San Bernardino County Assessor records) of all parcels currently subject to the Special Tax within the CFD, showing the total assessed valuation for all land and the total assessed valuation for all improvements within the CFD and distinguishing between the assessed value of developed property and undeveloped property. (d) Identification of each parcel within the CFD for which any Special Tax payment is delinquent, together with the following information respecting each such parcel: (A) the amount delinquent; (B) the date of each delinquency; (C) in the event a foreclosure complaint has been filed respecting such delinquent parcel and such complaint has not yet been dismissed, the date on which the complaint was filed; and (D) in the event a foreclosure sale has occurred respecting such delinquent parcel, a summary of the results of such foreclosure sale. (e) The principal amount of prepayments of the Special Tax with respect to the CFD for the prior Fiscal Year. (f) A land ownership summary listing property owners responsible for more than five percent (5%) of the annual Special Tax levy, as shown on the San Bernardino County Assessor’s last equalized tax roll prior to the September next preceding the Annual Report date.
Any or all of the items listed above may be included by specific reference to other documents, including the audited financial statements, official statements of debt issues of the City or related public entities, which have been available to the public on the MSRB’s internet website or filed with the U.S. Securities and Exchange Commission. The CFD shall clearly identify each such other document so included by reference in the applicable Annual Report.
Section 5. Reporting of Significant Events.
(a) Pursuant to the provisions of this Section 5, the CFD shall give, or cause to be given, notice of the occurrence of any of the following Listed Events with respect to the 2023 Bonds, which notice shall be given in a timely manner, not in excess of ten (10) business days after the occurrence of such Listed Event:
Principal and interest payment delinquencies;
Non-payment related defaults, if material;
Unscheduled draws on debt service reserves reflecting financial difficulties; Unscheduled draws on credit enhancements reflecting financial difficulties; Substitution of credit or liquidity providers, or their failure to perform; Adverse tax opinions, the issuance by the Internal Revenue Service of proposed or final determinations of taxability, Notices of Proposed Issue (IRS Form 5701-TEB) or other material notices or determinations with respect to the tax status of the security, or other material events affecting the tax status of the security; Modifications to rights of security holders, if material; Bond calls, if material, and tender offers;
Defeasances;
Release, substitution, or sale of property securing repayment of the securities, if material Rating changes;
Bankruptcy, insolvency, receivership or similar event of the CFD; The consummation of a merger, consolidation, or acquisition involving the CFD or the sale of all or substantially all of the assets of the CFD, other than in the ordinary course of business, the entry into a definitive agreement to undertake such an action or the termination of a definitive agreement relating to any such actions, other than pursuant to its terms, if material; Appointment of a successor or additional trustee or the change of name of a trustee, if material; Incurrence of a financial obligation of the CFD, if material, or agreement to covenants, events of default, remedies, priority rights, or other similar terms of a financial obligation of the CFD, any of which affect security holders, if material; and Default, event of acceleration, termination event, modification of terms, or other similar events under the terms of a financial obligation of the CFD, any of which reflect financial difficulties.
The term “financial obligation” means a (i) debt obligation; (ii) derivative instrument entered into in connection with, or pledged as security or a source of payment for, an existing or planned debt obligation; or (iii) guarantee of (i) or (ii). The term “financial obligation” shall not include municipal securities as to which a final official statement has been provided to the MSRB consistent with the Rule. (b) The CFD shall, in a timely manner not later than nine (9) business days after its occurrence, notify the Dissemination Agent in writing of the occurrence of a Notice Event. Such notice shall instruct the Dissemination Agent to report the occurrence pursuant to subsection (c) and shall be accompanied by a Certification. Such notice or Certification shall identify the Notice Event that has occurred, include the text of the disclosure that the CFD desires to make, contain the written authorization of the CFD for the Dissemination Agent to disseminate such information, and identify the date the Issuer desires for the Dissemination Agent to disseminate the information (provided that such date is not later than the tenth business day after the occurrence of the Notice Event). (c) The Dissemination Agent is under no obligation to notify the CFD or the Disclosure Representative of an event that may constitute a Notice Event. In the event the Dissemination Agent so notifies the Disclosure Representative, the Disclosure Representative will within two business days of receipt of such notice (but in any event not later than the tenth business day after the occurrence of the Notice Event, if the CFD determines that a Notice Event has occurred), instruct the Dissemination Agent that either (i) a Notice Event has not occurred and no filing is to be made or (ii) a Notice Event has occurred and the Dissemination Agent is to report the occurrence pursuant to subsection (d) of this Section 5, together with a Certification. Such Certification shall identify the Notice Event that has occurred, include the text of the disclosure that the CFD desires to make, contain the written authorization of the CFD for the Dissemination Agent to disseminate such information, and identify the date the CFD desires for the Dissemination Agent to disseminate the information (provided that such date is not later than the tenth business day after the occurrence of the Notice Event). (d) If the Dissemination Agent has been instructed by the CFD as prescribed in subsection (b) or (c) of this Section 5 to report the occurrence of a Notice Event, the Dissemination Agent shall promptly file a notice of such occurrence with MSRB.
Section 6. Termination of Reporting Obligation. The CFD’s obligations under this Disclosure Agreement shall terminate upon the legal defeasance, prior redemption or payment in full of all the 2023 Bonds. If such termination occurs prior to the final maturity of the 2023 Bonds, the CFD shall give notice of such termination in the same manner as for a Listed Event under Section 5(b).
Section 7. Dissemination Agent.
(a) The CFD hereby appoints and engages Webb Municipal Finance, LLC, as the Dissemination Agent to assist it in carrying out its obligations under this Disclosure Agreement. The Dissemination Agent shall not be responsible in any manner for the content of any notice or report prepared by the CFD pursuant to this Disclosure Agreement. The CFD may replace the Dissemination Agent with or without cause. If at the time there is no designated Dissemination Agent appointed by the CFD, the CFD shall be the Dissemination Agent and undertake or assume its obligations hereunder. Any company succeeding to all or substantially all of the Dissemination Agent’s corporate trust business shall be the successor to the Dissemination Agent hereunder without the execution or filing of any paper or any further act. The Dissemination Agent may resign its duties hereunder by giving 30-days written notice to the CFD. (b) The Dissemination Agent shall be paid compensation by the CFD for its services provided hereunder in accordance with its schedule of fees agreed to between the Dissemination Agent and the CFD from time to time and for all expenses, legal fees and advances made or incurred by the Dissemination Agent in the performance of its duties hereunder. The Dissemination Agent shall have no duty or obligation to review any information provided to it by the CFD hereunder and shall not be deemed to be acting in any fiduciary capacity for the CFD, holders or beneficial owners or any other party. The Dissemination Agent may rely and shall be protected in acting or refraining from acting upon any direction from the CFD or an opinion of nationally recognized bond counsel.
Section 8. Amendment; Waiver. Notwithstanding any other provision of this Disclosure Agreement, the CFD, and the Dissemination Agent may amend this Disclosure Agreement (and the Dissemination Agent shall agree to any amendment so requested by the CFD, provided the Dissemination Agent shall not be obligated to enter into any amendment increasing or affecting its duties or obligations), and any provision of this Disclosure Agreement may be waived, provided that in the opinion of nationally recognized bond counsel, such amendment or waiver is permitted by the Rule.
In the event of any amendment or waiver of a provision of this Disclosure Agreement, the CFD shall describe such amendment in the next Annual Report, and shall include, as applicable, a narrative explanation of the reason for the amendment or waiver.
If the annual financial information or operating data to be provided in the Annual Report is amended pursuant to the provisions hereof, the first annual financial information filed pursuant hereto containing the amended operating data or financial information shall explain, in narrative form, the reasons for the amendment and the impact of the change in the type of operating data or financial information being provided.
If an amendment is made to the undertaking specifying the accounting principles to be followed in preparing financial statements, the annual financial information for the year in which the change is made shall present a comparison between the financial statements or information prepared on the basis of the new accounting principles and those prepared on the basis of the former accounting principles. The comparison shall include a qualitative discussion of the differences in the accounting principles and the impact of the change in the accounting principles on the presentation of the financial information, in order to provide information to investors to enable them to evaluate the ability of the CFD to meet its obligations. To the extent reasonably feasible, the comparison shall be quantitative. A notice of the change in the accounting principles shall be sent to the MSRB in the same manner as for a Listed Event under Section 5(b). No amendment to this Agreement which modifies the duties or rights of the Dissemination Agent shall be made without the prior written consent of the Dissemination Agent.
Section 9. Additional Information. Nothing in this Disclosure Agreement shall be deemed to prevent the CFD from disseminating any other information, using the means of dissemination set forth in this Disclosure Agreement or any other means of communication, or including any other information in any Annual Report or notice of occurrence of a Listed Event, in addition to that which is required by this Disclosure Agreement. If the CFD chooses to include any information in any Annual Report or notice of occurrence of a Listed Event in addition to that which is specifically required by this Disclosure Agreement, the CFD shall have no obligation under this Disclosure Agreement to update such information or include it in any future Annual Report or notice of occurrence of a Listed Event.
Section 10. Default. In the event of a failure of the CFD, or the Dissemination Agent to comply with any provision of this Disclosure Agreement, any Participating Underwriter or any holder or beneficial owner of the 2023 Bonds may take such actions as may be necessary and appropriate, including seeking mandate or specific performance by court order, to cause the CFD, or the Dissemination Agent, as the case may be, to comply with its respective obligations under this Disclosure Agreement. A default under this Disclosure Agreement shall not be deemed an Event of Default under the Fiscal Agent Agreement, and the sole remedy under this Disclosure Agreement in the event of any failure of the CFD, or the Dissemination Agent to comply with this Disclosure Agreement shall be an action to compel performance.
Section 11. Duties, Immunities and Liabilities of Dissemination Agent. The Dissemination Agent shall have only such duties as are specifically set forth in this Disclosure Agreement, and the CFD agrees to indemnify and save the Dissemination Agent, and its, officers, directors, employees and agents, harmless against any loss, expense and liabilities which they may incur arising out of or in the exercise or performance of its powers and duties hereunder, including the costs and expenses (including attorney’s fees) of defending against any claim of liability, but excluding liabilities due to the Dissemination Agent’s negligence or willful misconduct. The Dissemination Agent may rely and shall be protected in acting or refraining from acting upon any direction from the CFD or an opinion of nationally recognized bond counsel. The obligations of the CFD under this Section shall survive resignation or removal of the Dissemination Agent and payment of the 2023 Bonds.
Section 12. Notices. Any notices or communications to or among any of the parties to this Disclosure Agreement may be given as follows:
To the CFD: City of Rialto Community Facilities District No. 2020-1 (El Rancho Verde) c/o City of Rialto
150 South Palm Avenue
Rialto, California 92376
Attention: City Manager
To the Dissemination Agent: Webb Municipal Finance, LLC 3788 McCray Street
Riverside, CA 92506
Attention: Matt Chesney
Section 13. Beneficiaries. This Disclosure Agreement shall inure solely to the benefit of the CFD, the City, the Dissemination Agent, the Participating Underwriter and holders and beneficial owners from time to time of the 2023 Bonds, and shall create no rights in any other person or entity.
Section 14. Counterparts. This Disclosure Agreement may be executed in several counterparts, each of which shall be an original and all of which shall constitute but one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have executed this Disclosure Agreement as of the date first written above.
CITY OF RIALTO COMMUNITY FACILITIES DISTRICT NO. 2020-1 (EL RANCHO VERDE) By:______________________________________
City Administrator/City Manager of the City of Rialto, acting in its capacity as the legislative body of City of Rialto Community Facilities District No. 2020-1 (El Rancho Verde)
WEBB MUNICIPAL FINANCE, LLC,
as Dissemination Agent
______________________________________
Authorized Representative
EXHIBIT A
NOTICE TO MUNICIPAL SECURITIES RULEMAKING
BOARD OF FAILURE TO FILE ANNUAL REPORT
Name of Issuer: City of Rialto Community Facilities District No. 2020-1 (El Rancho Verde) Name of Bond Issue: City of Rialto Community Facilities District No. 2020-1 (El Rancho Verde) Special Tax Bonds, Series 2023 Date of Issuance: October ___, 2023
NOTICE IS HEREBY GIVEN that the CFD has not provided an Annual Report with respect to the above-named 2023 Bonds as required by the Continuing Disclosure Agreement, dated October 1, 2023, with respect to the 2023 Bonds. [The CFD anticipates that the Annual Report will be filed by _____________.] Date: __________, 20_ Webb Municipal Finance, LLC,
as Dissemination Agent
By:
Title:
cc: City Manager, City of Rialto
APPENDIX F-2
FORM OF DEVELOPER CONTINUING DISCLOSURE CERTIFICATE
This Developer Continuing Disclosure Certificate (the “Developer Disclosure Certificate”) is executed and delivered by Lennar Homes of California, LLC, a California limited liability company (the “Developer”), as of October 1, 2023, in connection with the issuance of $17,500,000 aggregate principal amount of the City of Rialto Community Facilities District No. 2020-1 (El Rancho Verde) Special Tax Bonds, Series 2023 (the “2023 Bonds”). The 2023 Bonds are being issued under the Fiscal Agent Agreement, dated as of October 1, 2023 (the “Fiscal Agent Agreement”), by and between the City of Rialto Community Facilities District No. 2020-1 (El Rancho Verde) (the “CFD”) and U.S. Bank Trust Company, National Association. The Developer covenants and agrees as follows:
Section 1. Purpose of the Developer Disclosure Certificate. This Developer Disclosure Certificate is being executed and delivered by the Developer for the benefit of the Owners.
Section 2. Definitions. In addition to the definitions set forth in the Fiscal Agent Agreement, which apply to any capitalized term used in this Developer Disclosure Certificate unless otherwise defined in this Section, the following capitalized terms shall have the following meanings:
“Affiliate” of another Person means any other Person directly or indirectly controlling, controlled by, or under common control with, such other Person; for purposes hereof, “control”, “controlling” and “controlled” means the power to direct the management and policies of a Person, directly, or indirectly, whether through the ownership of voting securities, by contract or otherwise. “Assumption Agreement” means an undertaking of a Major Owner, or an Affiliate thereof (as applicable), for the benefit of the Beneficial Owners of the 2023 Bonds to assume the terms and obligations of “Developer” under this Developer Disclosure Certificate (as modified for such Major Owner’s development and financing plans with respect to the Property), whereby such Major Owner or Affiliate agrees to provide annual reports and notices of significant events, setting forth the information described in sections 4 and 5 hereof, respectively, with respect to the portion of the property in the CFD owned by such Major Owner and/or its Affiliates. “Beneficial Owner” shall mean any person which (a) has the power, directly or indirectly, to vote or consent with respect to, or to dispose of ownership of, any 2023 Bonds (including persons holding 2023 Bonds through nominees, depositories or other intermediaries), or (b) is treated as the owner of any 2023 Bonds for federal income tax purposes. “CFD” shall mean City of Rialto Community Facilities District No. 2020-1 (El Rancho Verde). “Developer Representative” shall mean the president, CEO, chief financial officer or general counsel of the General Partner of the Developer or his or her designee, or such other officer or employee as the Developer shall designate in writing to the Dissemination Agent from time to time. “Dissemination Agent” shall mean Webb Municipal Finance, LLC, in its capacity as dissemination agent hereunder, or any successor dissemination agent designated in writing by the Developer and which has filed with the Developer a written acceptance of such designation. “Event of Bankruptcy” means, with respect to a Person, that such Person files a petition or institutes a proceeding under any act or acts, state or federal, dealing with or relating to the subject or subjects of bankruptcy or insolvency, or under any amendment of such act or acts, either as a bankrupt or as an insolvent, or as a debtor, or in any similar capacity, wherein or whereby such Person asks or seeks or prays to be adjudicated a bankrupt, or is to be discharged from any or all of such Person’s debts or obligations, or offers to such Person’s creditors to effect a composition or extension of time to pay such Person’s debts or asks, seeks or prays for reorganization or to effect a plan of reorganization, or for a readjustment of such Person’s debts, or for any other similar relief, or if any such petition or any such proceedings of the same or similar kind or character is filed or instituted or taken against such Person, or if a receiver of the business or of the property or assets of such Person is appointed by any court, or if such Person makes a general assignment for the benefit of such Person’s creditors. “Listed Events” shall mean any of the events listed in Section 5(a) of this Developer Disclosure Certificate. “Major Owner” shall mean an owner (including all Affiliates of such owner that own land within the CFD) of land in the CFD responsible in the aggregate for [20]% or more of the annual Special Taxes levied in the CFD. “MSRB” shall mean the Municipal Securities Rulemaking Board established pursuant to Section 15B(b)(1) of the Securities Exchange Act of 1934 or any other entity designated or authorized by the Securities and Exchange Commission to receive reports. Until otherwise designated by the MSRB or the Securities and Exchange Commission, filings with the MSRB are to be made through the Electronic Municipal Marketplace Access (EMMA) website of the MSRB, currently located at http://emma.msrb.org. “Owner” shall mean the person in whose name any 2023 Bonds shall be registered. “Participating Underwriter” shall mean the original underwriter of the 2023 Bonds required to comply with the Rule in connection with the offering of the 2023 Bonds. “Person” means an individual, a corporation, a partnership, a limited liability company, an association, a joint stock company, a trust, any unincorporated organization or a government or political subdivision thereof. “Property” means, at the time of inquiry, all real property within the CFD on which Special Taxes have been levied by the CFD then-owned by (i) Developer and its Affiliates that are not subject to a separate continuing disclosure agreement and (ii) property conveyed from the Developer to a Major Owner for which an Assumption Agreement was not executed. For avoidance of doubt, any parcel that is exempt from the Special Taxes shall not be considered Property for purposes of this Developer Disclosure Certificate. “Report Date” means August 1 and February 1 of each year, commencing February 1, 2024. “Semi-Annual Report” shall mean any Semi-Annual Report provided by the Developer or Major Owner, as applicable, pursuant to, and as described in, Sections 3 and 4 of this Developer Disclosure Certificate. “Special Taxes” shall mean the special taxes to be levied within the CFD pursuant to the Fiscal Agent Agreement.
Section 3. Provision of Semi-Annual Reports.
(a) With respect to each parcel of the Property until the obligations with respect to such parcel have terminated in accordance with Section 6, the Developer shall, or upon written request shall cause the Dissemination Agent to, not later than the Report Date, provide or cause to provide to the MSRB a Semi-Annual Report which is consistent with the requirements of Section 4 of this Developer Disclosure Certificate, with a copy to the CFD and the Participating Underwriter. Not later than fifteen (15) calendar days prior to each Report Date (the “Notification Date”), the Developer shall provide the Semi-Annual Report to the Dissemination Agent for filing with the MSRB or notify the Dissemination Agent that the Developer intends to file the Semi-Annual Report directly with the MSRB prior to Report Date. If the Dissemination Agent does not receive the Semi-Annual Report or notification that the Developer will file the Semi-Annual Report with MSRB by the Notification Date, the Dissemination Agent will send a notice to the Developer reminding it of the obligation to provide the Annual Report by the Report Date. When providing the Semi-Annual Report to the Dissemination Agent or the MSRB, as the case may be, the Developer shall provide a written notification to the Dissemination Agent, the CFD and the Participating Underwriter to the effect that such Semi-Annual Report constitutes the Semi-Annual Report required to be furnished by the Developer hereunder. The Dissemination Agent, the CFD and the Participating Underwriter may conclusively rely upon such written notification of the Developer, and shall have no duty or obligation to review such Semi-Annual Report. The Semi-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 Developer Disclosure Certificate. (b) If the Dissemination Agent is unable to verify that a Semi-Annual Report has been provided to the MSRB by the Report Date, the Dissemination Agent shall send a notice to the MSRB in substantially the form attached as Exhibit A. (c) The Dissemination Agent shall, to the extent information is known to it, file a report with the Developer, the CFD and the Participating Underwriter certifying that the Semi-Annual Report has been provided pursuant to this Developer Disclosure Certificate, stating the date it was provided.
Section 4. Content of Semi-Annual Reports. The Developer’s Semi-Annual Report shall contain or incorporate by reference the following:
(1) an update on the information contained in the Official Statement solely with respect to the Developer, its Affiliates, ownership of the Property, the Developer’s development plan, the Developer’s financing plan, the Developer’s lenders, if any, and contractual arrangements of the Developer or any Affiliates (including, if material to the Developer’s development plan or the Developer’s financing plan, other loans of such Affiliates) as set forth under the section of the Official Statement captioned “THE DISTRICT – Property Ownership and Development Status.” (2) A description of any sales of the Property including the identification of each buyer and identification of the Property so sold. (3) Any material change in the ownership structure of the Developer and its Affiliates that own Property in the CFD. (4) The assumption of any obligation by a Major Owner pursuant to Section 6.
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 Developer or related public entities, that have been submitted to each of the MSRB or the Securities and Exchange Commission. If the document included by reference is a final official statement, it must be available from the MSRB. The Developer shall clearly identify each such other document so included by reference in the Semi-Annual Report.
Section 5. Reporting of Significant Events.
(a) With respect to each parcel of the Property until the obligations with respect to such parcel have terminated in accordance with Section 6, pursuant to the provisions of this Section 5, the Developer shall give, or cause to be given, notice of the occurrence of any of the following events, if material to the ability of the Developer to pay the Special Taxes prior to delinquency:
(1) failure to pay any real property taxes (including any Special Taxes, assessments, fees or charges) levied within the CFD on the Property prior to such real property taxes becoming delinquent; (2) substantial damage to or destruction of any structures on the Property; (3) receipt of a written notice of a monetary default by the Developer or its Affiliates, or the occurrence of a non-monetary event of default that is beyond the applicable cure period, on any loan secured by the Property; and (4) the occurrence of an Event of Bankruptcy with respect to the Developer, or any Affiliate of the Developer. (b) Whenever Developer Representative obtains knowledge of the occurrence of a Listed Event, the Developer Representative shall as soon as possible determine if such event would be material to the ability of the Developer to pay the Special Taxes prior to delinquency. (c) If the Developer Representative has determined that the occurrence of a Listed Event would be material to the ability of the Developer to pay the Special Taxes prior to delinquency, the Developer Representative shall, within ten (10) Business Days of obtaining actual knowledge of the occurrence of a Listed Event, or as soon as reasonably practicable thereafter, promptly file a notice with the MSRB (providing a copy to the CFD, the Participating Underwriter and the Dissemination Agent) or direct the Dissemination Agent in writing to file such notice pursuant to subsection (d). (d) If the Dissemination Agent has been instructed by the Developer Representative to report the occurrence of a Listed Event, the Dissemination Agent shall file a notice of such occurrence with the MSRB.
Section 6. Duration of Reporting Obligation. All of the Developer’s obligations hereunder shall commence on such date as the Property owned by the Developer and its Affiliates are responsible for payment of 20% or more of the Special Taxes and shall terminate upon the earlier to occur of (i) as to all of the Property, upon the legal defeasance, prior redemption or payment in full of all the 2023 Bonds, (ii) as to all of the Property, at such time as the Property that has not received a certificate of occupancy owned by the Developer and its Affiliates are no longer responsible for payment of 20% or more of the Special Taxes actually levied, (iii) as to all of the Property, the date on which all Special Taxes on the Property are paid or prepaid in full, (iv) as to any specific parcel of the Property, when the certificate of occupancy has been issued for such parcel, or (v) as to any specific parcel of the Property that does not require a certificate of occupancy but is adjacent to a parcel that does and such parcel is part of the development on the adjacent property (such as access roads, surface parking, etc.), when the certificate of occupancy is issued for the adjacent parcel.
If a portion of the Property is conveyed to a Person that, upon such conveyance, will be a Major Owner, the obligations of Developer hereunder with respect to such Property owned by such Major Owner or its Affiliates shall be assumed by such Major Owner or by an Affiliate thereof and the Developer obligations hereunder will be terminated as to the portion of the Property conveyed to such Major Owner. In order to effect such an assumption, such Major Owner or Affiliate shall enter into an Assumption Agreement. The Developer shall provide a copy of the executed Assumption Agreement to the CFD and the Participating Underwriter. The Developer shall not be relieved of its obligations with respect to such portion of the Property conveyed to the Major Owner until such a Major Owner or Affiliate has entered into the Assumption Agreement.
Section 7. Dissemination Agent. The Developer may, from time to time, appoint or engage a Dissemination Agent to assist it in carrying out its obligations under this Developer Disclosure Certificate, and may discharge any such Dissemination Agent, with or without appointing a successor Dissemination Agent. The Dissemination Agent shall not be responsible in any manner for the content of any notice or report prepared by the Developer pursuant to this Developer Disclosure Certificate. The initial Dissemination Agent shall be Webb Municipal Finance, LLC. The Dissemination Agent may resign by providing thirty days written notice to the Developer and the CFD. The Dissemination Agent shall have no duty to prepare any information report nor shall the Dissemination Agent be responsible for filing any report not provided to it by the Developer in a timely manner and in a form suitable for filing.
Section 8. Amendment; Waiver. Notwithstanding any other provision of this Developer Disclosure Certificate, the Developer may amend this Developer Disclosure Certificate (and the Dissemination Agent shall agree to any amendment so requested by the Developer) provided, the Dissemination Agent shall not be obligated to enter into any such amendment that modifies or increases its duties or obligations hereunder, and any provision of this Developer Disclosure Certificate may be waived, provided that the following conditions are satisfied:
(1) If the amendment or waiver relates to the provisions of Sections 3(a), 4, or 5(a), it may only be made in connection with a change in circumstances that arises from a change in legal requirements, change in law, or change in the identity, nature or status of an obligated person with respect to the 2023 Bonds, or the type of business conducted; and (2) The amendment or waiver either (i) is approved by the Owners of the 2023 Bonds in the same manner as provided in the Fiscal Agent Agreement for amendments to the Fiscal Agent Agreement with the consent of Owners, or (ii) does not, in the opinion of nationally recognized bond counsel, materially impair the interests of the Owners or Beneficial Owners of the 2023 Bonds.
In the event of any amendment or waiver of a provision of this Developer Disclosure Certificate, the Developer shall describe such amendment in the next Semi-Annual Report, and shall include, as applicable, a narrative explanation of the reason for the amendment or waiver and its impact on the type of information being presented by the Developer.
Section 9. Additional Information. Nothing in this Developer Disclosure Certificate shall be deemed to prevent the Developer from disseminating any other information, using the means of dissemination set forth in this Developer Disclosure Certificate or any other means of communication, or including any other information in any Semi-Annual Report or notice of occurrence of a Listed Event, in addition to that which is required by this Developer Disclosure Certificate. If the Developer chooses to include any information in any Semi-Annual Report or notice of occurrence of a Listed Event in addition to that which is specifically required by this Developer Disclosure Certificate, the Developer shall have no obligation under this Developer Disclosure Certificate to update such information or include it in any future Semi-Annual Report or notice of occurrence of a Listed Event.
Section 10. Filings with the MSRB. All financial information, operating data, financial statements, notices, and other documents provided to the MSRB in accordance with this Developer Disclosure Certificate shall be provided in an electronic format prescribed by the MSRB and shall be accompanied by identifying information as prescribed by the MSRB.
Section 11. Default. In the event of a failure of the Developer or the Dissemination Agent to comply with any provision of this Developer Disclosure Certificate, the Dissemination Agent, at the request of the Owners of at least 25% of the aggregate principal amount of the outstanding 2023 Bonds, shall (but only to the extent funds in any amount satisfactory to the Dissemination Agent have been provided to it or it has been otherwise indemnified to its satisfaction from any cost, liability, expense or additional charges whatsoever related thereto, including without limitation, fees and expenses of its attorneys), or any Owner may, take such actions as may be necessary and appropriate, including seeking mandate or specific performance by court order, to cause the Developer to comply with its obligations under this Developer Disclosure Certificate. A default under this Developer Disclosure Certificate shall not be deemed an event of default under the Fiscal Agent Agreement and the sole remedy under this Developer Disclosure Certificate in the event of any failure of the Developer or the Dissemination Agent to comply with this Developer Disclosure Certificate shall be an action to compel performance.
Section 12. Notices. Any notice or other communication to be given pursuant to this Developer Disclosure Certificate (including Semi-Annual Reports and certifications related thereto) may be given by (i) mail, (ii) unsecured email with an imaged or scanned attachment (such as a .pdf), or (iii) fax machine or other similar electronic transmission, with confirmation of receipt of such transmission, to the party entitled thereto at its address set forth below, or at such other address as such party may provide to the other party in writing from time to time, namely:
To the CFD: City of Rialto Community Facilities District No. 2020-1 (El Rancho Verde) c/o City of Rialto
150 South Palm Avenue
Rialto, California 92376
Attention: City Manager
To the Developer: Lennar Homes of California, LLC
________________________________
________________________________
________________________________
Attention: _______________________
To the Dissemination Agent: Webb Municipal Finance, LLC 3788 McCray Street
Riverside, CA 92506
Attention: Matt Chesney
Section 13. Beneficiaries. This Developer Disclosure Certificate shall inure solely to the benefit of the CFD, the Developer, the Participating Underwriter and Owners, from time to time of the 2023 Bonds, and shall create no rights in any other person or entity.
LENNAR HOMES OF CALIFORNIA, LLC,
a California limited liability company
By:__________________________________________
Name:________________________________________
Title:_________________________________________
The undersigned hereby agrees to act as Dissemination Agent pursuant to the foregoing Developer Continuing Disclosure Certificate
DISSEMINATION AGENT
WEBB MUNICIPAL FINANCE, LLC
By:
Its:
EXHIBIT A
NOTICE TO MSRB OF FAILURE TO FILE SEMI-ANNUAL REPORT
Name of Issuer: City of Rialto Community Facilities District No. 2020-1 (El Rancho Verde) Name of Bond Issue: City of Rialto Community Facilities District No. 2020-1 (El Rancho Verde) Special Tax Bonds, Series 2023 Date of Issuance: October __, 2023
NOTICE IS HEREBY GIVEN that the Developer has not provided a Semi-Annual Report with respect to the above-named 2023 Bonds as required by the Developer Continuing Disclosure Certificate, dated as of October 1, 2023, with respect to the 2023 Bonds. [The Developer anticipates that the Semi-Annual Report will be filed by _____________.] Dated:_______________
Dissemination Agent,
on behalf of the Developer
cc: CFD
Participating Underwriter
APPENDIX G
APPRAISAL REPORT
2 26
28 46
46 46
A-3
A-9
A-1
B-3
B-1
B-3
C-1
C-2
D-1
E-3
016.285915.1
E-1
F-1-4
F-2
F-7
F-2-1
F-12
F-1
G-1
ii
i
Preliminary, subject to change.
Preliminary, subject to change.
† CUSIP is a registered trademark of the American Bankers Association. CUSIP Global Services (CGS) is managed on behalf of the American Bankers Association by FactSet Research Systems Inc. Copyright © 2023 CUSIP Global Services. All rights reserved. The CUSIP numbers are not intended to create a database and do not serve in any way as a substitute for CUSIP service. CUSIP numbers have been assigned by an independent company not affiliated with the District and are included solely for the convenience of the registered owners of the 2023 Bonds. None of the District, the City, the Underwriter or the Municipal Advisor are responsible for the selection or uses of these CUSIP numbers, and no representation is made as to their correctness on the applicable 2023 Bonds or as included herein. The CUSIP number for a specific maturity is subject to being changed after the issuance of the 2023 Bonds as a result of various subsequent actions including, but not limited to, a refunding in whole or in part or as a result of the procurement of secondary market portfolio insurance and other similar enhancement by investors that is applicable to all or a portion of certain maturities of the 2023 Bonds. * Preliminary, subject to change.
* Preliminary, subject to change.
* Preliminary, subject to change.
* Preliminary, subject to change.
* Preliminary, subject to change.
* Preliminary, subject to change.
* Preliminary, subject to change.
* Preliminary, subject to change.
* Preliminary, subject to change.
* Preliminary, subject to change.
8/29/23
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