Agenda Version
This Preliminary Official Statement and the information contained herein are subject to completion or amendment. These securities may not be sold, nor may offers to buy them be accepted, prior to the time the Official Statement is delivered in final form. Under no circumstances shall this Preliminary Official Statement constitute an offer to sell or the 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.
PRELIMINARY OFFICIAL STATEMENT DATED ___________, 2026
NEW ISSUE—BOOK-ENTRY ONLY Ratings : S&P: “AA” (Insured) S&P: “__” (Underlying)
See “CONCLUDING INFORMATION—Ratings”
In the opinion of Anzel Galvan LLP, San Francisco, California, Bond Counsel, under existing law and subject to certain qualifications described herein, the interest on the 2026 Bonds is excludable from gross income for federal income tax purposes. In addition, interest on the 2026 Bonds is not an item of tax preference for purposes of the federal alternative minimum tax imposed on individuals; however, interest on the 2026 Bonds may affect the federal alternative minimum tax applicable to certain corporations. In the further opinion of Bond Counsel, such interest is exempt from California personal income taxes. See “TAX MATTERS.” $[PAR]*
SUCCESSOR AGENCY TO THE
REDEVELOPMENT AGENCY OF THE CITY OF SANTA MONICA
2026 TAX ALLOCATION REFUNDING BONDS
Dated: Delivery Date Due: August 1, as shown on the inside front cover page The Successor Agency to the Redevelopment Agency of the City of Santa Monica 2026 Tax Allocation Refunding Bonds (the “2026 Bonds”) will be delivered as fully registered bonds, registered in the name of Cede & Co. as nominee of The Depository Trust Company, New York, New York, and will be available to Beneficial Owners in integral multiples of $5,000 under the book-entry system maintained by DTC. Beneficial Owners will not be entitled to receive delivery of bonds representing their ownership interest in the 2026 Bonds. The principal of and interest (which interest is due February 1 and August 1 of each year, commencing August 1, 2026) on the 2026 Bonds will be payable by U.S. Bank Trust Company, National Association, as Trustee (the “Trustee”), to DTC for subsequent disbursement to DTC Participants, so long as DTC or its nominee remains the registered owner of the 2026 Bonds. See the caption “THE 2026 BONDS—Book-Entry System.”
The 2026 Bonds are being issued pursuant to an Indenture of Trust, dated as of April 1, 2026, by and between the Trustee and the Successor Agency to the Redevelopment Agency of the City of Santa Monica (the “Successor Agency”): (i) to refund certain bonds issued by the former Redevelopment Agency of the City of Santa Monica (the “Former Agency”), as described under the caption “REFUNDING PLAN”; (ii) to pay the premium for a municipal bond insurance policy for the 2026 Bonds; (iii) to pay the premium for a municipal debt service reserve insurance policy for the 2026 Bonds; and (iv) to pay certain other costs of issuance of the 2026 Bonds.
The 2026 Bonds are subject to optional and mandatory sinking fund redemption prior to maturity. See the caption “THE 2026 BONDS—Redemption.”
The 2026 Bonds are limited obligations of the Successor Agency payable solely from and secured by tax increment revenues deposited in the Redevelopment Property Tax Trust Fund and payable from amounts on deposit therein after payments of certain County of Los Angeles administrative costs, payments to certain taxing agencies, and certain other obligations, and from the amounts on deposit in certain funds held under the Indenture as more fully described herein. Taxes levied on the property within the Former Agency’s project areas on that portion of the taxable valuation over and above the taxable valuation of the base year property tax roll will be deposited in the Redevelopment Obligation Retirement Fund and administered by the Successor Agency and the Trustee in accordance with the Indenture.
The scheduled payment of principal of and interest on the 2026 Bonds when due will be guaranteed under a municipal bond insurance policy to be issued concurrently with the delivery of the 2026 Bonds by ___________. See the captions “INTRODUCTION—Bond Insurance” and “BOND INSURANCE” and Appendix I—“SPECIMEN MUNICIPAL BOND INSURANCE POLICY.”
[INSURER LOGO]
This cover page of the Official Statement contains information for quick reference only. It is not a complete summary of the 2026 Bonds. Investors should read the entire Official Statement to obtain information essential to the making of an informed investment decision. Attention is hereby directed to certain risk factors more fully described herein.
The 2026 Bonds are not a debt of the City of Santa Monica, the State of California, or any of its political subdivisions (except the Successor Agency), and neither said City or State, nor any of its political subdivisions (except the Successor Agency), is liable hereon, nor in any event shall the 2026 Bonds be payable out of any funds or properties other than those of the Successor Agency. The 2026 Bonds do not constitute an indebtedness within the meaning of any constitutional or statutory debt limitation or restriction. The principal of and interest on the 2026 Bonds are payable solely from Tax Revenues (as defined herein) allocated to the Successor Agency after the payment of certain costs and other obligations payable on a senior basis as described herein and other funds as set forth in the Indenture.
The 2026 Bonds are offered, when, as and if issued, subject to the approval of Anzel Galvan LLP, San Francisco, California, Bond Counsel. Certain legal matters will be passed on for the Successor Agency by the City Attorney of the City of Santa Monica, as counsel to the Successor Agency, and Anzel Galvan LLP, as Disclosure Counsel to the Successor Agency, for the Underwriter by its counsel, Stradling Yocca Carlson & Rauth, LLP, Newport Beach, California, for the Trustee by its counsel and for the 2026 Insurer by its counsel. It is anticipated that the 2026 Bonds will be available for delivery through the facilities of DTC on or about April __, 2026. [STIFEL LOGO]
Dated: ________________, 2026
* Preliminary; subject to change.
Attachment B
MATURITY SCHEDULE
Base CUSIP†
_____
$[PAR]*
SUCCESSOR AGENCY TO THE
REDEVELOPMENT AGENCY OF THE CITY OF SANTA MONICA
2026 TAX ALLOCATION REFUNDING BONDS
Maturity Date
(August 1)
Principal
Amount
Interest
Rate Yield Price CUSIP†
$__________ _____% Term Bond due August 1, 20__ Yield: _____% - Price: _____ CUSIP† : _____
$__________ _____% Term Bond due August 1, 20__ Yield: _____% - Price: _____ CUSIP† : _____
* 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© 2026 CUSIP Global Services. All rights reserved. CUSIP® data herein is provided by CUSIP Global Services. This data is not intended to create a database and does not serve in any way as a substitute for the CGS database. CUSIP® numbers are provided for convenience of reference only.
None of the Underwriter, the Successor Agency or the City, or their agents or counsel, assume responsibility for the accuracy of such numbers.
Attachment B
SUCCESSOR AGENCY TO THE
REDEVELOPMENT AGENCY OF THE CITY SANTA MONICA
Santa Monica, California
CITY COUNCIL AND
SUCCESSOR AGENCY MEMBERS
Caroline Torosis, Mayor
Jesse Zwick, Mayor Pro Tem
Lana Negrete
Dan Hall
Ellis Raskin
Barry Snell
Natalya Zernitskaya
SUCCESSOR AGENCY/CITY STAFF
Oliver Chi, City Manager
Susan Cline, Assistant City Manager
Denise Anderson-Warren, Interim Secretary/City Clerk
Oscar Santiago, Director of Finance
Heidi von Tongeln, Interim City Attorney
Susan Cola, Assistant City Attorney
SPECIAL SERVICES
Bond Counsel and Disclosure Counsel
Anzel Galvan LLP
San Francisco, California
Municipal Advisor
Urban Futures, Inc.
Walnut Creek, California
Fiscal Consultant
HdL Coren & Cone
Diamond Bar, California
Trustee
U.S. Bank Trust Company, National Association
Los Angeles California
Verification Agent
Causey Public Finance, LLC
Denver, Colorado
Attachment B
GENERAL INFORMATION ABOUT THIS OFFICIAL STATEMENT
No Offering May Be Made Except by this Official Statement. No dealer, broker, salesperson or other person has been authorized by the Successor Agency or the Underwriter to give any information or to make any representations with respect to the 2026 Bonds other than as contained in this Official Statement, and, if given or made, such other information or representation must not be relied upon as having been given or authorized by the Successor Agency or the Underwriter.
Use of Official Statement. This Official Statement is submitted in connection with the sale of the 2026 Bonds described in this Official Statement and may not be reproduced or used, in whole or in part, for any other purpose. This Official Statement does not constitute a contract between any 2026 Bond owner and the Successor Agency or the Underwriter.
Preparation of this Official Statement. The information contained in this Official Statement has been obtained from sources that are believed to be reliable, but this information is not guaranteed as to accuracy or completeness. The Underwriter has provided the following sentence for inclusion in this Official Statement: The Underwriter has reviewed the information in this Official Statement in accordance with, and as part of, its responsibilities to investors under the federal securities laws as applied to the facts and circumstances of this transaction, but the Underwriter does not guarantee the accuracy or completeness of such information.
Estimates and Forecasts. When used in this Official Statement and in any continuing disclosure made by the Successor Agency, the words or phrases “will likely result,” “are expected to,” “will continue,” “is anticipated,” “estimate,” “project,” “forecast,” “expect,” “intend” and similar expressions identify “forward looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements are subject to risks and uncertainties that could cause actual results to differ materially from those contemplated in such forward-looking statements. Any forecast is subject to such uncertainties.
Inevitably, some assumptions used to develop the forecasts will not be realized and unanticipated events and circumstances may occur. Therefore, there are likely to be differences between forecasts and actual results, and those differences may be material.
This Official Statement speaks only as of its date, and the information and expressions of opinion contained in this Official Statement are subject to change without notice. Neither the delivery of this Official Statement nor any sale of the 2026 Bonds will, under any circumstances, create any implication that there has been no change in the affairs of the Successor Agency or the other parties described in this Official Statement, since the date of this Official Statement.
Document Summaries. All summaries of the Indenture or other documents contained in this Official Statement are made subject to the provisions of such documents and do not purport to be complete statements of any or all such provisions. All references in this Official Statement to the Indenture and such other documents are qualified in their entirety by reference to such documents, which are on file with the Successor Agency.
No Unlawful Offers or Solicitations. This Official Statement does not constitute an offer to sell or a solicitation of an offer to buy in any state in which such offer or solicitation is not authorized or in which the person making such offer or solicitation is not qualified to do so or to any person to whom it is unlawful to make such offer or solicitation.
No Registration with the SEC. The issuance and sale of the 2026 Bonds have not been registered under the Securities Act of 1933 or the Securities Exchange Act of 1934, both as amended, in reliance upon exemptions provided thereunder by Sections 3(a)(2) and 3(a)(12), respectively, for the issuance and sale of municipal securities.
Public Offering Prices. The Underwriter may offer and sell the 2026 Bonds to certain dealers and dealer banks and banks acting as agents at prices lower than the public offering prices stated on the inside cover page of this Official Statement, and the Underwriter may change such public offering prices from time to time.
Bond Insurer. _____________ (the “2026 Insurer”) makes no representation regarding the 2026 Bonds or the advisability of investing in the 2026 Bonds. In addition, the 2026 Insurer has not independently verified, makes no representation regarding, and does not accept any responsibility for the accuracy or completeness of this Official Statement or any information or disclosure contained herein, or omitted herefrom, other than with respect to the accuracy of the information regarding the 2026 Insurer, supplied by the 2026 Insurer and presented under the heading “BOND INSURANCE” and “Appendix I—SPECIMEN MUNICIPAL BOND INSURANCE POLICY”.
Website. The City of Santa Monica maintains an Internet website. The information maintained on such website is not a part of this Official Statement and should not be relied upon in making an investment decision with respect to the 2026 Bonds.
Attachment B
[INSERT LOCATION MAP]
Attachment B
[INSERT MAP OF REDVELOPMENT PROJECT AREAS]
Attachment B
TABLE OF CONTENTS
i
INTRODUCTION ...........................................................1 Authority and Purpose ..............................................1 The City and the Successor Agency .........................1 The Project Areas......................................................2 Security for the 2026 Bonds; Tax Allocation
Financing...............................................................3 Senior Obligations ....................................................4 Issuance of Parity Debt.............................................4 Tax-Exemption on 2026 Bonds................................5 Bond Insurance .........................................................5 Reserve Account.......................................................5 Audited Financial Statements...................................5 Further Information...................................................6 REFUNDING PLAN.......................................................6 General......................................................................6 Verification of Mathematical Computations ............7 Estimated Sources and Uses of Funds......................7 THE 2026 BONDS ..........................................................8 Authority for Issuance ..............................................8 Description of the 2026 Bonds .................................8 Book-Entry System...................................................9 Redemption...............................................................9 Annual Debt Service...............................................11 SECURITY FOR THE 2026 BONDS...........................11 General....................................................................11 Tax Revenues..........................................................13 Redevelopment Obligation Retirement Fund;
Deposit of Tax Revenues....................................15 Transfer of Amounts by Trustee.............................15 Tax Increment Financing ........................................17 Recognized Obligation Payment Schedule.............19
Last and Final Recognized Obligation Payment
Schedule ..............................................................22 Statutory Pass-Through Payments..........................24 BofA Credit Agreement..........................................24 Issuance of Additional Indebtedness ......................25 BOND INSURANCE ....................................................26 PROPERTY TAXATION IN CALIFORNIA...............26
Property Tax Collection Procedures.......................26 Unitary Property .....................................................29 Article XIIIA of the State Constitution...................30 Appropriations Limitation – Article XIIIB.............31 Articles XIIIC and XIIID of the State
Constitution.........................................................31 Proposition 87.........................................................32 Redevelopment Plan Limits....................................32 Appeals of Assessed Values...................................32 Proposition 8...........................................................33 Propositions 218 and 26..........................................33 Future Initiatives.....................................................34
THE SUCCESSOR AGENCY TO THE
REDEVELOPMENT AGENCY OF THE CITY OF
SANTA MONICA.........................................................34 THE EARTHQUAKE PROJECT AREA......................35
General....................................................................35 The Redevelopment Plan; No Financial Limits .....35
Land Use.................................................................36 Largest Property Taxpayers....................................37 Historical Assessed Values.....................................40 Levy and Collections..............................................40 Assessment Appeals...............................................41 Office Vacancy Rates.............................................42 Transfers of Ownership ..........................................43 New Development..................................................43
PROJECTED TAX REVENUES AND DEBT
SERVICE COVERAGE................................................44 RISK FACTORS ...........................................................45 Reduction in Taxable Value ...................................46 Concentration of Ownership...................................46 Risks to Real Estate Market....................................47 Reduction in Inflation Rate.....................................47 Levy and Collection of Taxes.................................47 City Declaration of Fiscal Distress.........................48 State Budget Issues.................................................49 Recognized Obligation Payment Schedule.............50
Last and Final Recognized Obligation Payment
Schedule..............................................................52 Parity and Subordinate Debt...................................53 Challenges to Dissolution Act................................53 Bankruptcy and Foreclosure...................................54 Estimated Revenues................................................55 Hazardous Substances............................................55 Natural Disasters.....................................................56 Climate Change and Sea Level Rise.......................59 Cybersecurity..........................................................60 Changes in the Law ................................................60 Investment Risk ......................................................60 Secondary Market...................................................61 IRS Audit of Tax-Exempt Bond Issues..................61 Loss of Tax Exemption...........................................61 Bonds Are Limited Obligations..............................61 Bond Insurance.......................................................62 Limitations on Remedies........................................63 No Acceleration ProvisionError! Bookmark not defined.
TAX MATTERS ...........................................................63 General....................................................................63 Original Issue Premium and Discount....................64 Post Issuance Matters.............................................64 CONCLUDING INFORMATION................................65 Underwriting...........................................................65 Municipal Advisor..................................................65 Verification of Mathematical Computations..........66
Legal Opinion.........................................................66 Litigation ................................................................66 Ratings....................................................................67 Continuing Disclosure ............................................68 Miscellaneous.........................................................69 Attachment B
ii
APPENDIX A FISCAL CONSULTANT REPORT............................................................................................... A-1 APPENDIX B SUMMARY CERTAIN PROVISIONS OF THE INDENTURE ...................................................B-1 APPENDIX C FORM OF BOND COUNSEL OPINION.......................................................................................C-1 APPENDIX D BOOK-ENTRY ONLY SYSTEM.................................................................................................. D-1
APPENDIX E ANNUAL COMPREHENSIVE FINANCE REPORT FOR FISCAL YEAR ENDED JUNE 30, 2025.................................................................................................................................E-1 APPENDIX F STATE DEPARTMENT OF FINANCE LETTER.........................................................................F-1 APPENDIX G FORM OF CONTINUING DISCLOSURE CERTIFICATE......................................................... G-1 APPENDIX H SUPPLEMENTAL INFORMATION—THE CITY OF SANTA MONICA AND COUNTY OF LOS ANGELES.............................................................................................................................. H-1 APPENDIX I SPECIMEN MUNICIPAL BOND INSURANCE POLICY............................................................I-1 Attachment B
1 $[PAR]*
SUCCESSOR AGENCY TO THE
REDEVELOPMENT AGENCY OF THE CITY OF SANTA MONICA
2026 TAX ALLOCATION REFUNDING BONDS
INTRODUCTION
This Official Statement, including the cover page, is provided to furnish information in connection with the sale by the Successor Agency to the Redevelopment Agency of the City of Santa Monica (the “Successor Agency”) of its $[PAR]* 2026 Tax Allocation Refunding Bonds (the “2026 Bonds”). Capitalized terms used herein and not defined have the meanings set forth in Appendix B— “SUMMARY OF CERTAIN PROVISIONS OF THE INDENTURE.”
Authority and Purpose
The 2026 Bonds are being issued pursuant to the Constitution and laws of the State of California (the “State”), including Article 11 (commencing with Section 53580) of Chapter 3 of Part 1 of Division 2 of Title 5 of the Government Code (the “Bond Law”), the Community Redevelopment Law of the State of California, constituting Part 1 of Division 24 of the Health and Safety Code (the “Redevelopment Law”), the Dissolution Act (as defined below) and an Indenture of Trust, dated as of April 1, 2026 (the “Indenture”), by and between the Successor Agency and U.S.
Bank Trust Company, National Association, as trustee (the “Trustee”). See the caption “THE 2026 BONDS—Authority for Issuance.” The 2026 Bonds and any additional debt (“Parity Debt”) issued as bonds pursuant to the Indenture are collectively referred to herein as the “Bonds.” The 2026 Bonds are being issued to: (i) refund the Redevelopment Agency of the City of Santa Monica Earthquake Recovery Redevelopment Project 2006 Tax Allocation Refunding Bonds, Series A (the “2006 Bonds”), which are outstanding in the aggregate principal amount of $15,875,000, and the Redevelopment Agency of the City of Santa Monica Earthquake Recovery Redevelopment Project 2011 Tax Allocation Bonds (the “2011 Bonds”), which are outstanding in the aggregate principal amount of $41,050,000, as described under the caption “REFUNDING PLAN— General”; (ii) pay the premium for a municipal bond insurance policy (the “2026 Policy”) for the 2026 Bonds; (iii) pay the premium for a municipal debt service reserve insurance policy for the 2026 Bonds (the “2026 Reserve Policy”); and (iv) pay certain other costs of issuance of the 2026 Bonds.
See the caption “REFUNDING PLAN—Estimated Sources and Uses of Funds.” The City and the Successor Agency
The City of Santa Monica, California (the “City”), is in the western portion of the County of Los Angeles (the “County”). It is bordered by the City of Los Angeles on three sides and by the Pacific Ocean to the west. The City encompasses an area slightly greater than eight square miles and has an estimated population of 93,212 as of January 1, 2025.
The City is a full-service city that provides residents with a police department, fire department, a regional transportation network, water, refuse and recycling, street maintenance, parking, public wi-fi, a high speed fiber optic network, parks, affordable housing, economic * Preliminary; subject to change.
Attachment B
2 development, library services, rent control, recreational, cultural and educational services. It was incorporated as a general law city in 1886 and became a charter city in 1945.
See Appendix H—“SUPPLEMENTAL INFORMATION—THE CITY OF SANTA MONICA AND COUNTY OF LOS ANGELES” for more general information about the City and the County.
The Former Agency was activated by ordinance of the City Council adopted on August 13, 1957, pursuant to the Redevelopment Law. The City Council served as the governing body of the Former Agency and exercised all the rights, powers, duties and privileges of the Former Agency.
On June 29, 2011, Assembly Bill No. 26 (“AB X1 26”) was enacted as Chapter 5, Statutes of 2011, together with a companion bill, Assembly Bill No. 27 (“AB X1 27”). A lawsuit entitled California Redevelopment Association, et al. v. Matosantos, et al., was brought in the State Supreme Court challenging the constitutionality of AB X1 26 and AB X1 27. In a published decision (53 Cal. 4th 231 (Dec. 29, 2011)), the State Supreme Court largely upheld AB X1 26, invalidated AB X1 27, and held that AB X1 26 may be severed from AB X1 27 and enforced independently. As a result of AB X1 26 and the decision of the State Supreme Court, as of February 1, 2012, all redevelopment agencies in the State, including the Former Agency, were dissolved, and successor agencies were designated as successor entities to the former redevelopment agencies to expeditiously wind down the affairs of the former redevelopment agencies.
The primary provisions of AB X1 26 relating to the dissolution and winding down of former redevelopment agency affairs are Parts 1.8 (commencing with Section 34161) and 1.85 (commencing with Section 34170) of Division 24 of the Health & Safety Code of the State, as amended on June 27, 2012 by Assembly Bill No. 1484 (“AB 1484”), enacted as Chapter 26, Statutes of 2012, and as further amended on September 22, 2015 by Senate Bill 107 (“SB 107”), enacted as Chapter 325, Statutes of 2015 (collectively, as amended from time to time, the “Dissolution Act”).
Pursuant to Section 34173 of the Dissolution Act, the City Council of the City serves as the successor agency to the Former Agency. Subdivision (g) of Section 34173 of the Dissolution Act, which was added by AB 1484, expressly affirms that the Successor Agency is a separate public entity from the City, that the two entities shall not merge and that the liabilities of the Former Agency will not be transferred to the City, nor will the assets of the Former Agency become assets of the City.
The Project Areas
The 2026 Bonds are principally payable from Tax Revenues. Tax Revenues generally consist of tax increment revenues deposited, or eligible for deposit, into the Successor Agency’s Redevelopment Property Tax Trust Fund after payment of certain County of Los Angeles administrative costs, payments to certain taxing agencies, and other certain senior payments, as described herein. Tax Revenues are generated within the Santa Monica Earthquake Redevelopment Project (the “Earthquake Project Area”), the Downtown Redevelopment Project Area (the “Downtown Project Area”), the Ocean Park Redevelopment Project Area 1A (“Ocean Park Project Area 1A”) and the Ocean Park Redevelopment Project Area 1B (“Ocean Park Project Area 1B”) (collectively, the “Project Areas”).
In Fiscal Year 2024-25, the Project Areas collectively generated tax increment revenues, after payments of certain County of Los Angeles administrative costs and payments to certain taxing Attachment B
3 agencies, totaling approximately $138 million. Of that amount, approximately $128 million (93 percent) of Tax Revenues were generated within the Earthquake Project Area. No bonds with a pledge or lien on the tax revenues from the Downtown Project Area, the Ocean Park Project Area 1A or the Ocean Park Project Area 1B senior to or on a parity with the 2026 Bonds will remain outstanding on the date the 2026 Bonds are issued. Given the relative magnitude of Tax Revenues generated within the Earthquake Project Area, the projections in this Official Statement assume that the Downtown Project Area, the Ocean Park Project Area 1A and the Ocean Park Project Area 1B will not generate tax increment revenues in the future. Accordingly, the discussion of historical and projected Tax Revenues in this Official Statement and in the Fiscal Consultant Report is limited to the Earthquake Project Area.
The Earthquake Project Area encompasses approximately 2.89 square miles or 35 percent of the City’s total land area of 8.3 square miles. The land within the Earthquake Project Area is predominantly used for residential and commercial purposes. See the caption “THE EARTHQUAKE PROJECT AREA” and the Fiscal Consultant Report attached hereto as Appendix A for more information with respect to the Earthquake Project Area.
Security for the 2026 Bonds; Tax Allocation Financing
Prior to the enactment of AB X1 26, the Redevelopment Law authorized the financing of redevelopment projects through the use of tax increment revenues. This method provided that the taxable valuation of the property within a redevelopment project area on the property tax roll last equalized prior to the effective date of the ordinance that adopts the redevelopment plan becomes the base year valuation. Assuming that the taxable valuation never drops below the base year level, the taxing agencies thereafter received that portion of the taxes produced by applying then current tax rates to the base year valuation, and the redevelopment agency was allocated the remaining portion produced by applying then current tax rates to the increase in valuation over the base year. Such incremental tax revenues allocated to a redevelopment agency were authorized to be pledged to the payment of agency obligations.
The Dissolution Act authorizes refunding bonds, including the 2026 Bonds, to be secured by a pledge of moneys deposited from time to time in a Redevelopment Property Tax Trust Fund held by a county auditor-controller with respect to a successor agency, which are equivalent to the tax increment revenues that were formerly allocated under the Redevelopment Law to the redevelopment agency and formerly authorized under the Redevelopment Law to be used for the financing of redevelopment projects.
The 2026 Bonds are secured by “Tax Revenues.” Tax Revenues generally consist of tax revenues generated within the Project Areas that are deposited or are available for deposit by the County Auditor-Controller in the Redevelopment Property Tax Trust Fund established for the Successor Agency (the “Redevelopment Property Tax Trust Fund” or “RPTTF”) established by the County Auditor-Controller for the Successor Agency, and payable from amounts on deposit therein after payments of certain administrative costs of the County.
The Indenture also permits certain other payments to be made to certain taxing agencies (under the Statutory Pass-Through Payments, as defined herein) by the Los Angeles County-Auditor Controller (the “County-Auditor Controller”) and payments to Bank of America, N.A. pursuant to that certain Credit Agreement dated as of May 1, 2008, between Bank of America, N.A., and the Successor Agency, as successor to the Former Agency (as amended or otherwise modified from time Attachment B
4 to time, the “BofA Credit Agreement”), prior to payment of debt service on the 2026 Bonds. The BofA Credit Agreement is secured solely by the former Housing Set-Aside (as defined herein) from the Earthquake Project Area according to its terms. Accordingly, the Successor Agency’s obligation to make payments thereunder is senior to the payment of debt service on the 2026 Bonds, but only to the extent tax revenues represent the former Housing Set Aside from the Earthquake Project Area.
See the caption “SECURITY FOR THE 2026 BONDS—Tax Increment Financing.” See also “— Senior Obligations” below.
Pursuant to the Indenture, the Successor Agency will deposit moneys derived from the Project Areas constituting Tax Revenues promptly upon receipt thereof into the Special Fund established under the Indenture and maintained within the Redevelopment Obligation Retirement Fund established pursuant to Section 34170.5(a) of the Dissolution Act. Moneys held in the Special Fund will be transferred to the Trustee at the times specified in the Indenture to make payments of principal of and interest on the 2026 Bonds, all as described further under the caption “SECURITY FOR THE 2026 BONDS.” The Indenture grants to Owners of the 2026 Bonds a pledge of, lien on, and security interest in the Tax Revenues and the Redevelopment Obligation Retirement Fund, including the Special Fund therein, and all amounts in the Redevelopment Property Tax Trust Fund, and will attach, be perfected and be valid and binding against all parties having claims of any kind in tort, contract or otherwise against the Successor Agency, irrespective of whether such parties have notice of the Indenture.
The Successor Agency has no power to levy property taxes and must look specifically to the allocation of taxes as described above. See the captions “SECURITY FOR THE 2026 BONDS” and “RISK FACTORS.”
Senior Obligations
The use of Tax Revenues to pay debt service on the 2026 Bonds is subject to the prior payment of permitted administrative costs of the County Auditor-Controller and Statutory PassThrough Payments. See the captions “PROPERTY TAXATION IN CALIFORNIA—Property Tax Collection Procedures—Property Tax Administrative Costs” and “SECURITY FOR THE 2026 BONDS—Tax Increment Financing—Tax Sharing” for a description of the County’s administrative costs and the Successor Agency’s obligation to make Statutory Pass-Through Payments.
The Indenture also allows for the use of Tax Revenues to pay make payments under the BofA Credit Agreement prior to debt service on the 2026 Bonds, but only to the extent tax revenues were pledged as security for such payments under the BofA Credit Agreement. The BofA Credit Agreement is secured solely by the former Housing Set-Aside (as defined herein) from the Earthquake Project Area according to its terms. See the caption “SECURITY FOR THE 2026 BONDS—BofA Credit Agreement” for a description of the Successor Agency’s obligations under the BofA Credit Agreement.
Issuance of Parity Debt
The Indenture permits the Successor Agency to issue Parity Debt to refund outstanding 2026 Bonds or other Parity Debt issued in the future, subject to compliance with certain requirements set forth in the Indenture. See “SECURITY FOR THE 2026 BONDS—Issuance of Additional Indebtedness.” Upon the issuance of the 2026 Bonds and the completion of the refunding of the 2006 Bonds and the 2011 Bonds described under the caption “REFUNDING PLAN,” no bonds with Attachment B
5 a pledge or lien on the Tax Revenues senior to or on a parity with the 2026 Bonds will remain outstanding except the BofA Credit Agreement, but only to the extent tax revenues were pledged as security for such payments under the BofA Credit Agreement.
Tax-Exemption on 2026 Bonds
In the opinion of Anzel Galvan LLP, San Francisco, California, Bond Counsel, under existing law and subject to certain qualifications described below, interest on the 2026 Bonds is excludable from gross income for federal income tax purposes under Section 103 of the Internal Revenue Code of 1986, as amended. Interest on the 2026 Bonds is not an item of tax preference for purposes of the federal alternative minimum tax imposed on individuals; however, such interest is taken into account in determining the annual adjusted financial statement income for the purpose of computing the alternative minimum tax imposed on certain corporations. In the further opinion of Bond Counsel, interest on the 2026 Bonds is exempt from California personal income taxes. See “TAX MATTERS.”
Bond Insurance
The scheduled payment of principal of and interest on the 2026 Bonds when due will be guaranteed under the 2026 Policy to be issued concurrently with the delivery of the 2026 Bonds by [INSURER] (the “2026 Insurer”). See the captions “—Authority and Purpose” and “BOND INSURANCE.”
Reserve Account
A subaccount (the “2026 Subaccount”) within the Reserve Account for the 2026 Bonds will be established pursuant to the Indenture in an amount equal to the initial Reserve Requirement for the 2026 Bonds of $_______, which will be satisfied by the delivery of the 2026 Reserve Policy by the 2026 Insurer. The Reserve Requirement for the 2026 Bonds will not increase, but may decrease, following the Closing Date. See “SECURITY FOR THE 2026 BONDS—Transfer of Amounts by Trustee—Reserve Account.” The Successor Agency is not required to fund a debt service reserve account in connection with the issuance of Parity Debt in the future.
Audited Financial Statements
The City’s Annual Comprehensive Financial Report for the fiscal year ended June 30, 2025 (the “City ACFR”) is attached to this Official Statement as Appendix E. The City ACFR includes the audited financial statements of the Successor Agency for the fiscal year ended June 30, 2025. Said financial statements were audited by LSL, LLP (the “Auditor”). The Auditor has not been asked to consent to the inclusion of the City ACFR, or audited financial statements of the Successor Agency therein, in this Official Statement and has not reviewed this Official Statement. See the caption “CONCLUDING INFORMATION—Audited Financial Statements.” As described in this Official Statement, the 2026 Bonds are payable from and secured by a pledge of Tax Revenues and certain funds and accounts established and held by the Trustee under the Indenture. The 2026 Bonds are not a debt of the City.
Attachment B
6 Further Information
Brief descriptions of the 2026 Bonds, the Indenture, the Successor Agency, the Former Agency and the City are included in this Official Statement. Such descriptions and information do not purport to be comprehensive or definitive. All references herein to the Indenture, the Bond Law, the Redevelopment Law, the Dissolution Act, the Constitution and the laws of the State as well as the proceedings of the Former Agency, the Successor Agency and the City are qualified in their entirety by reference to such documents. References herein to the 2026 Bonds are qualified in their entirety by the form thereof included in the Indenture and the information with respect thereto included herein copies of which are all available for inspection at the offices of the City Clerk, City of Santa Monica, 1685 Main Street, Santa Monica, California 90401.
REFUNDING PLAN
General
The Successor Agency expects to apply a portion of the proceeds of the 2026 Bonds, together with other funds on hand, to cause the defeasance of the 2006 Bonds and the 2011 Bonds on the date the 2026 Bonds are issued (the “Closing Date”), and to refund the 2006 Bonds and the 2011 Bonds on ________, 2026 (the “Redemption Date”) at a redemption price that is equal to the principal amount of said bonds then outstanding, plus accrued interest thereon, without premium. The 2006 Bonds and the 2011 Bonds to be refunded are described in the following tables and are referred to collectively in this Official Statement as the “Refunded Bonds.” Refunded 2006 Bonds
Maturity Date
(July 1)
Outstanding
Principal Amount Interest Rate CUSIP†
2026 $3,705,000 4.500% 802447 EX6
2027 3,870,000 4.600 802447 EY4
2028 4,050,000 5.000 802447 EZ1
2029 4,250,000 4.625 802447 FA5
Source: Stifel, Nicolaus & Company, Incorporated.
Refunded 2011 Bonds
Maturity Date
(July 1)
Outstanding
Principal Amount Interest Rate CUSIP†
2032 $ 7,105,000 5.000% 802447 FB3
2036 11,390,000 5.875 802447 FC1
2042 12,600,000 5.875 802447 FD9
2042 9,955,000 5.000 802447 FE7
Source: Stifel, Nicolaus & Company, Incorporated.
† 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© 2026 CUSIP Global Services. All rights reserved.
CUSIP® data herein is provided by CUSIP Global Services. This data is not intended to create a database and does not serve in any way as a substitute for the CGS database. CUSIP® numbers are provided for convenience of reference only. None of the Successor Agency, the City or the Underwriter or their agents or counsel assume responsibility for the accuracy of such numbers.
Attachment B
7 Pursuant to separate Escrow Agreements, each dated as of the Closing Date (collectively, the “Escrow Agreements”), by and between the Successor Agency and U.S. Bank Trust Company, National Association, as trustee and escrow agent for the Refunded Bonds (in such capacity, the “Escrow Agent”), the Successor Agency will cause a portion of the proceeds of the 2026 Bonds to be delivered to the Escrow Agent for deposit in the applicable escrow fund established under the Escrow Agreements (each, an “Escrow Fund” and collectively, the “Escrow Funds”). A portion of the amounts to be delivered by or on behalf of the Successor Agency to the Escrow Agent on the Closing Date, together with amounts transferred from funds and accounts established in connection with the Refunded Bonds, will be invested in federal securities, and the remainder will be held in cash, uninvested. Said federal securities will be scheduled to mature in such amounts and at such times and bear interest at such rates as to provide funds (together with cash deposits) that are sufficient to pay the regularly scheduled principal of and accrued interest on the Refunded Bonds through the Redemption Date and to pay the redemption price of the remaining outstanding amount of the Refunded Bonds on the Redemption Date.
The sufficiency of the deposits to each Escrow Fund for the purposes described above will be verified by Causey Public Finance, LLC, Denver, Colorado (the “Verification Agent”). Assuming the accuracy of such computations, as a result of the deposit and application of funds as provided in the Escrow Agreements, the applicable series of Refunded Bonds will be defeased pursuant to the provisions of the indenture of trust under which the Refunded Bonds Verification of Mathematical Computations
Upon issuance of the 2026 Bonds, the Verification Agent will deliver a report on the mathematical accuracy of certain computations based upon certain information and assertions provided to it by the Underwriter relating to the adequacy of the cash and/or the maturing principal of and interest on the federal securities to be deposited in the Escrow Funds to pay the respective redemption prices of the Refunded Bonds.
Estimated Sources and Uses of Funds
The estimated sources and uses of the 2026 Bonds and other available moneys are summarized as follows:
Total
Sources:
Principal Amount of 2026 Bonds $
[Plus/Less] Original Issue [Premium/Discount]
Plus Other Available Moneys(1)
Total Sources: $
Uses:
2006 Bonds Escrow Fund $
2011 Bonds Escrow Fund
Costs of Issuance(2)
Total Uses: $
(1) Consists of moneys on deposit in funds and accounts of the Refunded Bonds. (2) Includes fees and expenses of Bond and Disclosure Counsel, Municipal Advisor, Fiscal Consultant, Trustee, Escrow Agent, printing expenses, rating agency fees, Underwriter’s discount, premiums for the 2026 Policy and the 2026 Reserve Policy, and other miscellaneous costs.
Attachment B
8 THE 2026 BONDS
Authority for Issuance
The 2026 Bonds are authorized for issuance pursuant to the Indenture, the Bond Law, the Redevelopment Law and the Dissolution Act. Direction to undertake the issuance of the 2026 Bonds and the execution of the related documents was authorized by the Successor Agency pursuant to Resolution No. 49 (SA), adopted on January 13, 2026 (the “Resolution”), and by the Los Angeles County Third Supervisorial District Consolidated Oversight Board (the “Oversight Board”) pursuant to Resolution No. OB3 2026-62, adopted on February 10, 2026 (the “Oversight Board Resolution”).
Written notice of the Oversight Board Resolution was provided to the State Department of Finance (the “DOF”) pursuant to the Dissolution Act, and the DOF requested a review within five business days of such written notice. On _________, 2026, the DOF provided a letter to the Successor Agency stating that based on the DOF’s review and application of the law, the Oversight Board Resolution approving the 2026 Bonds to refund the Refunded Bonds is approved by the DOF.
A copy of DOF’s letter approving the issuance of the 2026 Bonds to refund the Refunded Bonds is attached to this Official Statement as Appendix F.
Description of the 2026 Bonds
The 2026 Bonds will be issued in fully registered form without coupons in denominations of $5,000 or any integral multiple thereof, so long as no 2026 Bond will have more than one maturity date. The 2026 Bonds will be dated as of their Closing Date.
Interest on the 2026 Bonds will be payable semiannually on February 1 and August 1 in each year, commencing on [August 1, 2026] (each, an “Interest Payment Date”). Each 2026 Bond will bear interest (calculated on the basis of a 360-day year comprised of twelve 30-day months) from the Interest Payment Date next preceding the date of authentication thereof, unless (a) it is authenticated after a Record Date and on or before the following Interest Payment Date, in which event it will bear interest from such Interest Payment Date; or (b) it is authenticated on or before [July 15, 2026], in which event it will bear interest from its Closing Date; provided, however, that if, as of the date of authentication of any 2026 Bond, interest thereon is in default, such 2026 Bond will bear interest from the Interest Payment Date to which interest has previously been paid or made available for payment thereon.
Interest on the 2026 Bonds (including the final interest payment upon maturity or redemption) is payable when due by wire or check of the Trustee mailed on the Interest Payment Date to the Owner thereof at such Owner’s address as it appears on the Registration Books at the close of business on the preceding Record Date; provided that at the written request of the Owner of at least $1,000,000 aggregate principal amount of the 2026 Bonds, which written request is on file with the Trustee as of any Record Date, interest on such 2026 Bonds will be paid on the succeeding Interest Payment Date by wire to such account in the United States as will be specified in such written request. The principal of the 2026 Bonds and premium, if any, upon redemption, are payable in lawful money of the United States of America upon presentation and surrender thereof at the Principal Corporate Trust Office of the Trustee.
Attachment B
9 Book-Entry System
DTC will act as securities depository for the 2026 Bonds. The 2026 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 certificate will be issued for each maturity of the 2026 Bonds, each in the aggregate principal amount of such maturity, and will be deposited with DTC. See Appendix D for further information with respect to DTC and its book-entry system.
Redemption*
Optional Redemption. The 2026 Bonds maturing on or prior to August 1, 20__ are not subject to optional redemption. The 2026 Bonds maturing on or after August 1, 20__, are subject to optional redemption prior to their respective maturity dates as a whole, or in part by lot, on any date on or after August 1, 20__, by such maturity or maturities as shall be directed by the Successor Agency (or in absence of such direction, pro rata by maturity and by lot within a maturity), from any source of available funds. Such optional redemption shall be at a redemption price equal to 100 percent of the principal amount to be redeemed, plus accrued but unpaid interest to the date fixed for redemption, without premium.
Mandatory Sinking Fund Redemption. The 2026 Bonds maturing August 1, 20__ and August 1, __ (the “2026 Term Bonds”) shall also be subject to mandatory redemption in whole, or in part by lot, on August 1 in each year, commencing August 1, 20__ and August 1, 20__, respectively, as set forth below, from sinking fund payments made by the Successor Agency to the Principal Account pursuant to the Indenture, at a redemption price equal to the principal amount thereof to be redeemed, without premium, in the aggregate respective principal amounts and on August 1 in the respective years as set forth in the following tables; provided however, that (y) in lieu of redemption thereof such 2026 Term Bonds may be purchased by the Successor Agency pursuant to the Indenture, and (z) if some but not all of such 2026 Term Bonds have been optionally redeemed pursuant to the provisions of the Indenture described under the caption “—Optional Redemption of 2026 Bonds,” the total amount of all future sinking fund payments shall be reduced by the aggregate principal amount of such 2026 Term Bonds so redeemed, to be allocated among such sinking fund payments in integral multiples of $5,000 as determined by the Successor Agency. 2026 Term Bonds of 20__
August 1 Principal Amount
* Preliminary, subject to change.
Attachment B
10 2026 Term Bonds of 20__
August 1 Principal Amount
Notice of Redemption; Rescission. The Trustee on behalf and at the expense of the Successor Agency shall mail (by first class mail, postage prepaid) notice of any redemption at least 20 but not more than 60 days prior to the redemption date, (i) to any Insurer and to the Owners of any Bonds designated for redemption at their respective addresses appearing on the Registration Books, (ii) to the Securities Depositories and (iii) post to the Electronic Municipal Market Access (“EMMA”) internet website maintained by the Municipal Securities Rulemaking Board and, if designated in a Written Request of the Successor Agency filed with the Trustee, to one or more additional Information Services; but such mailing shall not be a condition precedent to such redemption and neither failure to receive any such notice nor any defect therein shall affect the validity of the proceedings for the redemption of such Bonds or the cessation of the accrual of interest thereon. Such notice shall state the redemption date and the redemption price, shall state, in the case of an optional redemption described above, that such redemption is conditioned upon the timely delivery of the redemption price by the Successor Agency to the Trustee for deposit in the Redemption Account, shall designate the CUSIP number of the Bonds to be redeemed, shall state the individual number of each Bond to be redeemed or shall state that all Bonds between two stated numbers (both inclusive) or all of the Bonds Outstanding are to be redeemed, and shall require that such Bonds be then surrendered at the Principal Corporate Trust Office of the Trustee for redemption at the redemption price, giving notice also that (subject to timely delivery of the redemption price by the Successor Agency to the Trustee for reposit in the Redemption Account) further interest on such Bonds will not accrue from and after the redemption date, and that notice of optional redemption shall be canceled and annulled if for any reason funds will not be or are not available on the date fixed for redemption, as provided in the Indenture.
The Successor Agency has the right to rescind any notice of optional redemption by written notice to the Trustee on or prior to the date fixed for redemption and such recission does not constitute an Event of Default under the Indenture. Any such notice of optional redemption shall be canceled and annulled if for any reason funds will not be or are not available on the date fixed for redemption for the payment in full of the Bonds then called for redemption, and such cancellation shall not constitute an Event of Default under the Indenture. The Successor Agency and the Trustee shall have no liability to the Owners or any other party related to or arising from any such rescission or cancellation of redemption. The Trustee shall mail notice of such rescission of redemption in the same manner and to the same recipients as the original notice of redemption was sent.
Upon the payment of the redemption price of Bonds being redeemed, each check or other transfer of funds issued for such purpose shall, to the extent practicable, bear the CUSIP number identifying, by issue and maturity, the Bonds being redeemed with the proceeds of such check or other transfer.
Effect of Redemption. From and after the date fixed for redemption, if funds available for the payment of the redemption price of and interest on the Bonds so called for redemption shall have Attachment B
11 been duly deposited with the Trustee, such Bonds so called shall cease to be entitled to any benefit under the Indenture other than the right to receive payment of the redemption price and accrued interest to the redemption date, and no interest shall accrue thereon from and after the redemption date specified in such notice.
Purchase in Lieu of Redemption. In lieu of redemption of the Bonds, amounts on deposit in the Special Fund or in the Principal Account may also be used and withdrawn by the Successor Agency and the Trustee, respectively, at any time, upon the Written Request of the Successor Agency, for the purchase of the Bonds at public or private sale as and when and at such prices (including brokerage and other charges, but excluding accrued interest, which is payable from the Interest Account) as the Successor Agency may in its discretion determine. The par amount of any Bonds so purchased by the Successor Agency in any twelve-month period ending on August 1 in any year shall be credited towards and shall reduce the par amount of the Bonds required to be redeemed pursuant to a Supplemental Indenture on August 1 in each year; provided that evidence satisfactory to the Trustee of such purchase has been delivered to the Trustee by said August 1.
Annual Debt Service
The table below shows the annualized debt service on the 2026 Bonds, assuming no optional redemption prior to maturity.
Bond Year Ending
August 1 Principal Interest Total
2026
2027
2028
2029
2030
2031
2032
2033
2034
2035
2036
2037
2038
2039
2040
2041
2042
Total
Source: Stifel, Nicolaus & Company, Incorporated.
SECURITY FOR THE 2026 BONDS
General
The Dissolution Act requires the County Auditor-Controller to determine the amount of property taxes that would have been allocated to the Former Agency (pursuant to subdivision (b) of Attachment B
12 Section 16 of Article XVI of the State Constitution) had the Former Agency not been dissolved pursuant to the operation of AB X1 26, using current assessed values on the last equalized roll on August 20, and to deposit such amount in the Redevelopment Property Tax Trust Fund for the Successor Agency established and held by the County Auditor-Controller pursuant to the Dissolution Act. Section 34177.5(g) of the Dissolution Act provides that any bonds authorized to be issued by the Successor Agency will be considered indebtedness incurred by the dissolved Former Agency, with the same legal effect as if the bonds had been issued prior to the effective date of AB X1 26, in full conformity with the applicable provision of the Redevelopment Law that existed prior to that date; will be included in the Successor Agency’s Recognized Obligation Payment Schedule and will be secured by a pledge of, and lien on, and will be repaid from moneys deposited from time to time in the Redevelopment Property Tax Trust Fund established pursuant to the Dissolution Act. Property tax revenues pledged to any bonds authorized to be issued by the Successor Agency under the Dissolution Act, including the 2026 Bonds, are taxes allocated to the Successor Agency pursuant to subdivision (b) of Section 33670 of the Redevelopment Law and Section 16 of Article XVI of the State Constitution. See the caption “—Recognized Obligation Payment Schedule” and Appendix B—“SUMMARY CERTAIN PROVISIONS OF THE INDENTURE.” Pursuant to Section 33670(b) of the Redevelopment Law and Section 16 of Article XVI of the State Constitution, and as provided in the Redevelopment Plans for the Project Areas, taxes levied upon taxable property in the Project Areas each year by or for the benefit of the State, any city, county, district, or other public corporation (herein sometimes collectively called “taxing agencies”) after the effective date of the ordinance approving the redevelopment plan, or the respective effective dates of ordinances approving amendments to the redevelopment plan that added territory to the Project Areas, as applicable, are to be divided as follows:
(a) To Taxing Agencies: That portion of the taxes which would be produced by the rate upon which the tax is levied each year by or for each of the taxing agencies upon the total sum of the assessed value of the taxable property in the Project Areas as shown upon the assessment roll used in connection with the taxation of such property by such taxing agency last equalized prior to the effective date of the ordinance adopting the redevelopment plan, or the respective effective dates of ordinances approving amendments thereto that added territory to the Project Areas, as applicable (each, a “base year valuation”), will be allocated to, and when collected will be paid into, the funds of the respective taxing agencies as taxes by or for the taxing agencies on all other property are paid; and
(b) To the Former Agency/Successor Agency: Except for that portion of the taxes in excess of the amount identified in (a) above which are attributable to a tax rate levied by a taxing agency for the purpose of producing revenues in an amount sufficient to make annual repayments of the principal of, and the interest on, any bonded indebtedness approved by the voters of the taxing agency on or after January 1, 1989 for the acquisition or improvement of real property, which portion shall be allocated to, and when collected shall be paid into, the fund of that taxing agency (as discussed under the caption “PROPERTY TAXATION IN CALIFORNIA—Article XIIIA of the State Constitution”), that portion of the levied taxes each year in excess of such amount, annually allocated within the redevelopment plan limit, when collected will be paid into a special fund of the Former Agency. Section 34172(a) of the Dissolution Act provides that, for purposes of Section 16 of Article XVI of the State Constitution, the Redevelopment Property Tax Trust Fund will be deemed to be a special fund of the Successor Agency to pay the debt service on indebtedness incurred by the Former Agency or the Successor Agency to finance or refinance the redevelopment projects of the Former Agency.
Attachment B
13 That portion of the levied taxes described in paragraph (b) above constitutes the amount required under the Dissolution Act to be deposited by the County Auditor-Controller into the Redevelopment Property Tax Trust Fund. In addition, Section 34183 of the Dissolution Act effectively eliminates the January 1, 1989 date referred to in paragraph (b) above. SB 107 provides that debt service override revenues approved by the voters for the purpose of supporting pension programs or capital projects or programs related to the State Water Project that are not pledged to or not needed for debt service on Successor Agency debt will be allocated and paid to the entity that levies the override. No such overrides are pledged as security for the 2026 Bonds.
The 2026 Bonds are secured by “Tax Revenues.” Tax Revenues generally consist of tax revenues generated within the Project Areas that are deposited or are available for deposit in the Redevelopment Property Tax Trust Fund established by the County Auditor-Controller for the Successor Agency and payable from amounts on deposit therein after payments of certain administrative costs of the County Auditor-Controllers. The Indenture also permits Statutory PassThrough Payments by the County-Auditor Controller and payments to Bank of America, N.A. pursuant to the BofA Credit Agreement prior to payment of debt service on the 2026 Bonds, but only to the extent tax revenues were pledged as security for such payments under the BofA Credit Agreement, as described under the caption “SECURITY FOR THE 2026 BONDS—Tax Increment Financing.” See also “—Senior Obligations” below.
The Successor Agency has no power to levy and collect taxes, and various factors beyond its control could affect the amount of Tax Revenues available in any fiscal year (defined as July 1 through June 30) to pay the principal of and interest on the 2026 Bonds. See the captions “—Tax Increment Financing,” “—Recognized Obligation Payment Schedule,” “PROPERTY TAXATION IN CALIFORNIA” and “RISK FACTORS.”
The 2026 Bonds are not a debt of the City, the State, or any of its political subdivisions (except the Successor Agency), and neither said City or State, nor any of its political subdivisions (except the Successor Agency), is liable hereon, nor in any event shall the 2026 Bonds be payable out of any funds or properties other than those of the Successor Agency. The 2026 Bonds do not constitute an indebtedness within the meaning of any constitutional or statutory debt limitation or restriction.
Tax Revenues
The Indenture provides that, subject to certain senior payments described therein, all Tax Revenues, the Redevelopment Obligation Retirement Fund, including the Special Fund therein, and all amounts in the Redevelopment Property Tax Trust Fund are irrevocably pledged to secure the payment of the principal of and interest on the 2026 Bonds and all Parity Debt, without preference or priority for series, issue, number, dated date, sale date, date of execution or date of delivery. Such pledge constitutes a lien on and security interest in the Tax Revenues, the Redevelopment Obligation Retirement Fund, including the Special Fund therein, and all amounts in the Redevelopment Property Tax Trust Fund, and will attach, be perfected and be valid and binding against all parties having claims of any kind in tort, contract or otherwise against the Successor Agency, irrespective of whether such parties have notice of the Indenture; provided however, that the County AuditorController is authorized by Section 34183(a) of the Dissolution Act to use Tax Revenues to pay the County’s administrative costs allowed under Section 34182 and Section 95.3 of the Revenue and Taxation Code and is required by Section 34183(a)(1) of the Dissolution Act to pay the Statutory Pass-Through Payments to taxing entities (unless such payments are subordinated to payments on the Attachment B
14 2026 Bonds and Parity Debt pursuant to Section 33607.5(e) of the Redevelopment Law or Section 34177.5(c) of the Dissolution Act) and provided further that the Successor Agency may use Tax Revenues to make payments under the BofA Credit Agreement on a basis senior to the 2026 Bonds, but only to the extent tax revenues were pledged as security for such payments under the BofA Credit Agreement. Except for the Tax Revenues, such amounts and such funds and accounts, no other moneys, funds, accounts or properties of the Successor Agency are pledged to, or otherwise liable for, the payment of principal of or interest or redemption premium (if any) on the 2026 Bonds or Parity Debt except as provided in the following paragraph with respect to the 2026 Bonds and other Bonds. See the captions “—Statutory Pass-Through Amounts,” “—BofA Credit Agreement,” “PROPERTY TAXATION IN CALIFORNIA—Property Tax Collection Procedures—Property Tax Administrative Costs,” “—Tax Increment Financing—Tax Sharing,” and “—Elimination of Housing Set-Aside.”
The Indenture further provides that the Debt Service Fund and any fund or account or subaccounts created under the Indenture (other than the Costs of Issuance Fund and the Rebate Fund), including amounts on deposit therein (including proceeds of the 2026 Bonds), are irrevocably pledged under the Indenture to secure the payment of the principal of and interest on the 2026 Bonds and other Bonds without preference or priority for series issue, number, dated date, sale date, date of execution or date of delivery. Such pledge will constitute a first and exclusive lien on and security interest in the Debt Service Fund and any other fund or account created under the Indenture (except for the 2026 Subaccount of the Reserve Account, which will only secure the 2026 Bonds, and any subaccounts therein created in the future in connection with the issuance of Parity Debt, which subaccounts will only secure such Parity Debt), and including amounts on deposit therein (including proceeds of the 2026 Bonds), and will attach, be perfected and be valid and binding against all parties having claims of any kind in tort, contract or otherwise against the Successor Agency, irrespective of whether such parties have notice of the Indenture.
Under the Indenture, “Tax Revenues” is defined to mean all taxes that are deposited or available for deposit by the County Auditor-Controller in the Redevelopment Property Tax Trust Fund established for the Successor Agency, all as provided in Section 34172(d) of the Dissolution Act.
Under the Indenture, the Successor Agency and the Trustee acknowledge that Section 34177.5(g) of the Dissolution Act provides that the 2026 Bonds and Parity Debt are further secured by a pledge of, and lien on moneys deposited in the Redevelopment Property Tax Trust Fund held by the County Auditor Controller related to the Successor Agency, which moneys, subject to (i) the payment by the County Auditor Controller of certain amounts to the County for administrative costs allowed under Section 34182 and Section 95.3 of the Revenue and Taxation Code, the Statutory Pass-Through Payments to taxing entities (unless such payments are subordinated to payments on the 2026 Bonds and Parity Debt pursuant to Section 33607.5(e) of the Redevelopment Law or Section 34177.5(c) of the Dissolution Act), and (ii) the payments by the Successor Agency under the BofA Credit Agreement, but only to the extent tax revenues were pledged as security for such payments under the BofA Credit Agreement, constitute Tax Revenues as defined in the Indenture.
Taxes levied on the property within the Project Areas on that portion of the taxable valuation over and above the taxable valuation of the applicable base year property tax roll with respect to the various territories within the Project Areas will be deposited in the Redevelopment Property Tax Trust Fund for transfer by the County Auditor-Controller to the Successor Agency’s Redevelopment Obligation Retirement Fund on January 2 and June 1 of each year to the extent required for payments Attachment B
15 listed in the Successor Agency’s approved Recognized Obligation Payment Schedule in accordance with the requirements of the Dissolution Act. See the caption “—Recognized Obligation Payment Schedule.” Moneys deposited by the County Auditor-Controller into the Successor Agency’s Redevelopment Obligation Retirement Fund for payment of debt service on the 2026 Bonds will be transferred by the Successor Agency to the Trustee for deposit in the Debt Service Fund established under the Indenture and administered by the Trustee in accordance with the Indenture.
In consideration of the acceptance of the 2026 Bonds and other Bonds by those who will hold the same from time to time, the Indenture constitutes a contract between the Successor Agency and the Owners from time to time of the 2026 Bonds, and the covenants and agreements set forth in the Indenture to be performed on behalf of the Successor Agency will be for the equal and proportionate benefit, security and protection of all Owners of the 2026 Bonds and other Bonds without preference, priority or distinction as to security or otherwise of any of the 2026 Bonds and other Bonds over any of the others by reason of the number or date thereof or the time of sale, execution and delivery thereof, or otherwise for any cause whatsoever, except as expressly provided in the Indenture.
Redevelopment Obligation Retirement Fund; Deposit of Tax Revenues Pursuant to the Indenture, a special fund to be known as the “Special Fund” will be established and held by the Successor Agency within the Redevelopment Obligation Retirement Fund. The Special Fund will be held by the Successor Agency separate and apart from other funds of the Successor Agency.
Subject to the prior payments permitted by the Indenture, the Successor Agency will deposit all of the Tax Revenues received with respect to each Bond Year into the Special Fund promptly upon receipt thereof by the Successor Agency in accordance with the Indenture. Except as may be provided to the contrary in the Indenture or in any Supplemental Indenture or Parity Debt Instrument, upon receipt by the Successor Agency of money from the Redevelopment Property Tax Trust Fund requested in accordance with the Indenture, on each January 2 and June 1 or other date(s) on which Redevelopment Property Tax Trust Fund moneys are distributed to the Successor Agency, and deposit of such amounts into the Special Fund, all Tax Revenues received by the Successor Agency in excess of such amounts will be released from the pledge and lien under the Indenture and will be applied in accordance with the Redevelopment Law and the Dissolution Act, including but not limited to the payment of debt service on any subordinate debt. Prior to the payment in full of the principal of and interest and redemption premium (if any) on the Bonds and the payment in full of all other amounts payable under the Indenture and under any Supplemental Indentures or other Parity Debt Instrument, the Successor Agency will not have any beneficial right or interest in the moneys on deposit in the Special Fund, except as may be provided in the Indenture and in any Supplemental Indenture or other Parity Debt Instrument.
Transfer of Amounts by Trustee
The Indenture establishes a trust fund to be known as the “Debt Service Fund,” and an “Interest Account” and “Principal Account” therein (together with the Reserve Account and the 2026 Bonds Subaccount therein established under the Indenture), which will be held by the Trustee under the Indenture in trust. Moneys in the Special Fund will be transferred by the Successor Agency to the Trustee in the following amounts, at the following times, and deposited by the Trustee, on a prorata basis amongst series of Bonds, in the following respective special accounts, which are established in the Debt Service Fund, and in the following order of priority (provided that, if on the Attachment B
16 fifth (5th) Business Day prior to the date the Successor Agency is required to transfer amounts on deposit in the Special Fund to the Trustee amounts on deposit therein are insufficient to make the following deposits, taking into account amounts required to be transferred with respect to Bonds other than the 2026 Bonds, the Successor Agency will immediately notify the Trustee in writing of the amount of any such insufficiency and the Trustee will deposit amounts received from the Successor Agency into sub-accounts of the Interest Account and/or Principal Account, as applicable, on a pro-rata basis):
Interest Account. On or before the fifth (5th) Business Day preceding each Interest Payment Date, commencing with the Interest Payment Date of [August 1, 2026], the Successor Agency will withdraw from the Special Fund and transfer to the Trustee, for deposit in the Interest Account an amount which when added to the amount contained in the Interest Account on that date, will be equal to the aggregate amount of the interest becoming due and payable on the Outstanding Bonds on such Interest Payment Date. No such transfer and deposit need be made to the Interest Account if the amount contained therein is at least equal to the interest to become due on the next succeeding Interest Payment Date upon all of the Outstanding Bonds. All moneys in the Interest Account will be used and withdrawn by the Trustee solely for the purpose of paying the interest on the Bonds as it becomes due and payable. The Trustee will establish a “2026 Account” within the Interest Account for payment of interest due on the 2026 Bonds, and may establish sub-accounts within the Interest Account for the payment of interest due on other Bonds, provided that all such Bonds shall be paid on a parity basis.
Principal Account. On or before the fifth (5th) Business Day preceding August 1 in each year in which principal is due on any Bonds, the Successor Agency will withdraw from the Special Fund and transfer to the Trustee for deposit in the Principal Account an amount which, when added to the amount then contained in the Principal Account, will be equal to the principal becoming due and payable on the Outstanding Bonds, including pursuant to mandatory sinking account redemption, on the next August 1. No such transfer and deposit need be made to the Principal Account if the amount contained therein is at least equal to the principal to become due on the next August 1 on all of the Outstanding Bonds. All moneys in the Principal Account will be used and withdrawn by the Trustee solely for the purpose of paying the principal of the Bonds, including by mandatory sinking account redemption, as the same becomes due and payable. The Trustee will establish a “2026 Account” within the Principal Account for payment of principal due on the 2026 Bonds within the Principal Account for payment of principal due on the 2026 Bonds, and may establish additional subaccounts within the Principal Account for the payment of principal due on the 2026 Bonds and other Bonds, provided that all such Bonds will be paid on a parity basis.
Reserve Account. A separate account known as the “Reserve Account,” and a “2026 Subaccount” therein, will be established and held by the Trustee under the Indenture. The 2026 Subaccount will serve solely as security for payments of the 2026 Bonds payable by the Successor Agency pursuant to the Indenture.
The Reserve Requirement for the 2026 Bonds or any series (or multiple series) of Parity Debt for which a reserve account or fund is to be funded will be calculated, as of any date of computation, as the lesser of: (i) 125 percent of the average Annual Debt Service with respect to such series (or multiple series) of Bonds, (ii) Maximum Annual Debt Service with respect to such series (or multiple series) of Bonds, or (iii) with respect to such series (or multiple series) of Bonds, 10 percent of the original principal amount of such series (or multiple series) of Bonds (or, if such series (or multiple series) of Bonds has more than a de minimis amount of original issue discount or premium, 10 Attachment B
17 percent of the issue price of such series (or multiple series) of Bonds; provided, that in no event shall the Successor Agency, in connection with the issuance or incurrence of Parity Debt be obligated to deposit an amount in the Reserve Account (or subaccount thereof) which is in excess of the amount permitted by the applicable provisions of the Tax Code (as hereinafter defined) to be so deposited from the proceeds of tax-exempt bonds without having to restrict the yield of any investment purchased with any portion of such deposit and, in the event the amount of any such deposit into the Reserve Account (or subaccount thereof) is so limited, the Reserve Requirement with respect to the 2026 Bonds or any series (or multiple series) of Parity Debt for which a reserve is to be funded shall, in connection with the issuance of such Parity Debt, be increased only by the amount of such deposit as permitted by the Tax Code; and, provided further that the Successor Agency may meet all or a portion of the Reserve Requirement by depositing a Qualified Reserve Account Credit Instrument meeting the requirements of the Indenture.
The Reserve Requirement for the 2026 Bonds will be satisfied by the delivery of the 2026 Reserve Policy by the 2026 Insurer on the Closing Date with a stated policy amount of $__________.
The Successor Agency will have no obligation to replace the 2026 Reserve Policy or to fund the 2026 Subaccount of the Reserve Account with cash if, at any time that the 2026 Bonds are Outstanding, any rating assigned to the 2026 Insurer is downgraded, suspended or withdrawn or amounts are not available under the 2026 Reserve Policy, other than in connection with a draw on the 2026 Reserve Policy. See the caption “BOND INSURANCE.”
No Reserve Account Required for Parity Debt. The Indenture permits the issuance of Parity Debt without funding a reserve account for such Parity Debt. In the event the Successor Agency has insufficient revenues to pay debt service on the 2026 Bonds and Parity Debt, Tax Revenues would be applied pro-rata to the payment of the 2026 Bond and Parity Debt. See the captions “SECURITY FOR THE 2026 BONDS—Issuance of Additional Indebtedness” and “RISK FACTORS—Parity Debt Issued Without Reserve.”
The 2026 Subaccount of the Reserve Account established under the Indenture for the 2026 Bonds secures payment solely of the 2026 Bonds, and will not secure payment of Parity Debt. If the Successor Agency issues Parity Debt secured by a reserve account under a Supplemental Indenture, the Successor Agency will establish one or more separate subaccounts in the Reserve Account for the purpose of securing such Parity Debt. Such subaccounts within the Reserve Account will not be available to pay debt service on the 2026 Bonds. See Appendix B—“SUMMARY CERTAIN PROVISIONS OF THE INDENTURE” under the caption “SECURITY OF BONDS; FLOW OF FUNDS—Deposit of Amounts by Trustee—Reserve Account” for further information with respect to the procedure for drawing upon the Reserve Account and subaccounts therein.
Tax Increment Financing
General. Prior to the enactment of AB X1 26, the Redevelopment Law authorized the financing of redevelopment projects through the use of tax increment revenues. This method provided that the taxable valuation of the property within a redevelopment project area on the property tax roll last equalized prior to the effective date of the ordinance which adopts the redevelopment plan becomes the base year valuation. Assuming that the taxable valuation exceeds the base year level, the taxing agencies thereafter received that portion of the taxes produced by applying then current tax rates to the base year valuation, and the redevelopment agency was allocated the remaining portion produced by applying then current tax rates to the increase in Attachment B
18 valuation over the base year. Such incremental tax revenues allocated to a redevelopment agency were authorized to be pledged to the payment of agency obligations.
The Dissolution Act authorizes refunding bonds, including the 2026 Bonds, that are issued by a successor agency to be secured by a pledge of moneys deposited from time to time in a Redevelopment Property Tax Trust Fund held by a county auditor-controller with respect to that successor agency, which are equivalent to the tax increment revenues that were formerly allocated under the Redevelopment Law to the redevelopment agency and formerly authorized under the Redevelopment Law to be used for the financing of redevelopment projects, less amounts deducted pursuant to Section 34183(a) of the Dissolution Act for permitted administrative costs of the county auditor-controller. Under the Indenture, Tax Revenues consist of the amounts deposited or available for deposit from time to time in the Redevelopment Property Tax Trust Fund established pursuant to and as provided in the Dissolution Act. Successor agencies have no power to levy property taxes and must look specifically to the allocation of taxes as described above. See the caption “RISK FACTORS.”
Tax Sharing. The Redevelopment Law authorized redevelopment agencies to make contractual payments to school districts and other taxing agencies to alleviate any financial burden or detriments to such taxing agencies caused by a redevelopment project. The Former Agency did not enter into any pass-through agreements with respect to the Earthquake Project Area. Additionally, Sections 33607.5 and 33607.7 of the Redevelopment Law required mandatory tax sharing applicable to redevelopment projects adopted on or after January 1, 1994, or amended after January 1, 1994 in certain respects specified in such statutes (the “Statutory Pass-Through Payments”). Further, redevelopment project areas adopted on or after January 1, 1985 and prior to January 1, 1994 were subject to payments to schools and to other affected taxing agencies that elected to receive tax revenue payments set forth under Section 33676 of the Redevelopment Law (“33676 Payments”).
The Redevelopment Plan for the Earthquake Project Area was adopted on or after January 1, 1994; therefore, the Successor Agency is required to make Statutory Pass-Through Payments but not 33676 Payments. See the caption “—Statutory Pass-Through Payments” below for a description of the Successor Agency’s obligation to make Statutory Pass-Through Payments with respect to the Earthquake Project Area. See also the caption “PROPERTY TAXATION IN CALIFORNIA— Section 33676 Election.”
The Dissolution Act requires the County Auditor-Controller to distribute from the Redevelopment Property Tax Trust Fund amounts required to be distributed as Statutory PassThrough Payments to the taxing entities on each January 2 and June 1 before amounts are distributed by the County Auditor-Controller from the Redevelopment Property Tax Trust Fund to the Successor Agency’s Redevelopment Obligation Retirement Fund, unless: (i) Statutory Pass-Through Payment obligations have been made subordinate to debt service payments for the bonded indebtedness of the Successor Agency; (ii) the Successor Agency has reported, by filing a Notice of Insufficiency with the County Auditor-Controller, no later than the December 1 or May 1 preceding the applicable January 2 or June 1 distribution date, as applicable, that the total amount available to the Successor Agency from the Redevelopment Property Tax Trust Fund allocation to the Successor Agency’s Redevelopment Obligation Retirement Fund, from other funds transferred from the Former Agency and from funds that have or will become available through asset sales and all redevelopment operations, is insufficient to fund the Successor Agency’s enforceable obligations, Statutory PassThrough Payments and the Successor Agency’s administrative cost allowance for the applicable six-month period; and (iii) the County Auditor-Controller and the State Controller have concurred Attachment B
19 with the Successor Agency that there are insufficient funds for such purposes for the applicable sixmonth period.
The Dissolution Act provides for a procedure by which the Successor Agency may make Statutory Pass-Through Payments subordinate to the 2026 Bonds. The Successor Agency has not undertaken the requisite procedures to subordinate the Statutory Pass-Through Payments to the payment of debt service on the 2026 Bonds and, therefore, the pledge of Tax Revenues to secure the payment of debt service on the 2026 Bonds when due is subordinate to the Statutory Pass-Through Payments. See the caption “TAX REVENUES” for projections of Tax Revenues. See “THE EARTHQUAKE PROJECT AREA” for additional information regarding assessed values and Tax Revenues generated in the Earthquake Project Area.
Elimination of Housing Set-Aside. Before the dissolution of the Former Agency, the Redevelopment Law required the Former Agency to set aside not less than 20 percent of the gross tax increment allocated to the Former Agency from the Earthquake Project Area, i.e., the “Housing SetAside,” in the Former Agency’s Low and Moderate Income Housing Fund, to be expended for low and moderate income housing purposes. Generally, the Former Agency was authorized to use the Housing Set-Aside to pay debt service on bonds solely to the extent that the proceeds of such bonds were used to finance or refinance low and moderate income housing projects. In contrast, under the Redevelopment Law, the Former Agency was authorized to use the portion of tax increment that was not part of the Housing Set-Aside (the “Non-Housing Portion”) to pay debt service on all bonds and other indebtedness of the Former Agency incurred to finance or refinance redevelopment projects for the Earthquake Project Area, subject to limitations set forth in the indentures or other governing documents.
The Dissolution Act has eliminated the Low and Moderate Income Housing Fund and the requirement to deposit the Housing Set-Aside into such fund. The Redevelopment Property Tax Trust Fund flow of funds under the Dissolution Act makes no distinction between obligations that were, in whole or in part, secured by and payable from the Housing Set-Aside and obligations that were solely secured by and payable from the Non-Housing Portion. In effect, after the Former Agency’s dissolution, all of the Successor Agency’s outstanding obligations are paid from Redevelopment Property Tax Trust Fund disbursements without distinction between obligations related to housing and non-housing projects. However, the Dissolution Act did not affect the enforceability of any pledge made by the Former Agency of the former Housing Set-Aside to secure indebtedness. The BofA Credit Agreement, which pre-dates the Dissolution Act, is secured solely by the former Housing Set-Aside from the Earthquake Project Area according to its terms, and the 2026 Bonds are payable from the former Housing Set-Aside only after payment of debt service under the BofA Credit Agreement. See the caption “—BofA Credit Agreement.” Recognized Obligation Payment Schedule
On or before each February 1, with respect to each fiscal year, the Dissolution Act requires successor agencies to prepare and approve, and submit to the successor agency’s oversight board and the DOF for approval, a Recognized Obligation Payment Schedule pursuant to which enforceable obligations (as such term is defined in the Dissolution Act) of the successor agency are listed, together with the source of funds to be used to pay for each enforceable obligation. As defined in the Dissolution Act, “enforceable obligation” includes bonds, including the required debt service, reserve set-asides and any other payments required under an indenture or similar documents governing the issuance of the outstanding bonds of the former redevelopment agency, as well as other obligations Attachment B
20 such as loans, judgments or settlements against the former redevelopment agency, any legally binding and enforceable agreement that is not otherwise void as violating the debt limit or public policy, contracts necessary for the administration or operation of the successor agency, and amounts borrowed from the Low and Moderate Income Housing Fund. A reserve may be included on the Recognized Obligation Payment Schedule and held by the successor agency when required by the bond indenture or when the next property tax allocation will be insufficient to pay all obligations due under the provisions of the bond for the next payment due in the following half of the calendar year.
Under the Dissolution Act, the categories of sources of payments for enforceable obligations listed on a Recognized Obligation Payment Schedule are the following: (i) the Low and Moderate Income Housing Fund; (ii) bond proceeds; (iii) reserve balances; (iv) administrative cost allowance; (v) the Redevelopment Property Tax Trust Fund (but only to the extent that no other funding source is available or when payment from property tax revenues is required by an enforceable obligation or otherwise required under the Dissolution Act); or (vi) other revenue sources (including rents, concessions, asset sale proceeds, interest earnings, and any other revenues derived from the former redevelopment agency, as approved by the oversight board).
Under the Dissolution Act, if an enforceable obligation provides for an irrevocable commitment of revenue and where allocation of such revenues is expected to occur over time, the successor agency may petition the DOF to provide written confirmation that its determination of such enforceable obligation as approved in a Recognized Obligation Payment Schedule is final and conclusive, and reflects the DOF’s approval of subsequent payments made pursuant to the enforceable obligation. If the confirmation of approval is granted, then the DOF’s review of such payments in future Recognized Obligation Payment Schedules is limited to confirming that they are required by the prior enforceable obligation. In 2013, the DOF issued a final and conclusive determination that the 2006 Bonds and 2011 Bonds are enforceable obligations.
The Dissolution Act provides that, commencing on the date that the first Recognized Obligation Payment Schedule is valid, only those payments listed in the Recognized Obligation Payment Schedule may be made by the Successor Agency from the funds specified in the Recognized Obligation Payment Schedule. Each annual Recognized Obligation Payment Schedule may be amended once, provided that (i) the Successor Agency submits the amendment to DOF no later than October 1, (ii) the Oversight Board makes a finding that the amendment is necessary for the payment of approved enforceable obligations during the second half of the Recognized Obligation Payment Schedule period (from January 1 to June 30, inclusive), and (iii) the Successor Agency may only amend the amount requested for payment of approved enforceable obligations.
DOF must notify the Successor Agency and the County Auditor-Controller as to whether the Successor Agency’s requested amendment is approved at least 15 days before the January 2 property tax distribution.
The Recognized Obligation Payment Schedule must be submitted by the Successor Agency, after approval by the Oversight Board, to the County Administrative Officer, the County AuditorController, the DOF and the State Controller by February 1 in each year with respect to the Successor Agency’s payment obligations during the next fiscal year. If the Successor Agency does not submit an Oversight Board-approved Recognized Obligation Payment Schedule by such deadline, the City will be subject to a civil penalty equal to $10,000 per day for every day that the schedule is not submitted. Additionally, the Successor Agency’s administrative cost allowance will be reduced by 25 percent for any fiscal year for which the Successor Agency does not submit an Oversight Boardapproved Recognized Obligation Payment Schedule within 10 days of the February 1 deadline. If Attachment B
21 the Successor Agency fails to submit a Recognized Obligation Payment Schedule by the February 1 deadline, any creditor of the Successor Agency or the DOF or any affected taxing entity will have standing to, and may request a writ of mandate to, require the Successor Agency to immediately perform this duty. The Successor Agency has submitted each prior Recognized Obligation Payment Schedule on or before the statutory deadline. Such Recognized Obligation Payment Schedules have included, among other items, amounts required to pay debt service on outstanding indebtedness as well as its administrative cost allowance. For additional information regarding procedures under the Dissolution Act relating to late Recognized Obligation Payment Schedules and implications thereof on the 2026 Bonds, see the caption “RISK FACTORS—Recognized Obligation Payment Schedule.” With respect to each Recognized Obligation Payment Schedule submitted by the Successor Agency, the Dissolution Act requires the DOF to make a determination of the enforceable obligations and the amounts and funding sources available to pay approved enforceable obligations no later than April 15. Within five business days of the determination by the DOF, the Successor Agency may request additional review by the DOF and an opportunity to meet and confer on disputed items, if any. The DOF will notify the Successor Agency and the County Auditor-Controller as to the outcome of its review at least 15 days before the June 1 property tax distribution date preceding the applicable Recognized Obligation Payment Schedule period. Additionally, the County AuditorController may review a submitted Recognized Obligation Payment Schedule and object to the inclusion of any items that are not demonstrated to be enforceable obligations and may object to the funding source proposed for any items, provided that the County Auditor-Controller must provide notice of any such objections to the Successor Agency, the Oversight Board and the DOF at least 60 days prior to the next property tax distribution date.
See the caption “—Last and Final Recognized Obligation Payment Schedule” below for a description of the Last and Final Recognized Obligation Payment Schedule (a “Last and Final ROPS”) authorized by the Dissolution Act to be filed pursuant to SB 107. The Successor Agency is not currently eligible to file a Last and Final ROPS because the payments under the BofA Credit Agreement vary based on a variable rate of interest and are not set forth in a payment schedule.
The Dissolution Act provides that the scheduled payments on bonds issued by a successor agency with the approval of the oversight board and DOF shall be listed in the Recognized Obligation Payment Schedule and shall not be subject to further review and approval by DOF or the State Controller. To ensure the timely payment of debt service on the 2026 Bonds, the Successor Agency covenants in the Indenture on or before each February 1 (or at such earlier time as may be required by the Dissolution Act), for so long as any Bonds are outstanding, to submit an Oversight Board-approved Recognized Obligation Payment Schedule to the DOF and to the County AuditorController that includes, from the first Tax Revenues distributed to the Successor Agency on each January 2 and June 1 Redevelopment Property Tax Trust Fund distribution date to request:
(i) property tax revenues to be distributed from the Redevelopment Property Tax Trust Fund on each January 2 in an amount sufficient to pay all debt service coming due under the BofA Credit Agreement during the then-current Bond Year prior to any payment being made with respect to the 2026 Bonds or any Parity Debt or for any other purpose (specifically, the payments due on the following January 15 and July 15),
(ii) property tax revenues to be distributed from the Redevelopment Property Tax Trust Fund on each January 2 in an amount sufficient to pay all debt service coming due on the 2026 Attachment B
22 Bonds and any Parity Debt during the then-current Bond Year (specifically, the payments due on the following February 1 and August 1), and
(iii) any amount required to cure any deficiency in the Reserve Account pursuant to the Indenture or a reserve account established under any Parity Debt Instrument (including any amounts required due to a draw on any Qualified Reserve Account Credit Instrument (including the 2026 Reserve Policy) as well as all amounts due and owing to the 2026 Insurer under the Indenture or to any other Insurer).
The Successor Agency covenants in the Indenture to comply with the requirements of the Dissolution Act, including without limitation to file all required statements and hold all public hearings required under the Dissolution Act to assure compliance by the Successor Agency with its covenants under the Indenture. See Appendix B—“SUMMARY CERTAIN PROVISIONS OF THE INDENTURE.”
Last and Final Recognized Obligation Payment Schedule
SB 107 amended the Dissolution Act to permit a successor agency to submit a Last and Final ROPS for approval by the oversight board and the DOF if: (i) the successor agency’s only remaining debt is administrative costs and payments pursuant to enforceable obligations with defined payment schedules; (ii) all remaining obligations have been previously listed on a Recognized Obligation Payment Schedule and approved by the DOF; and (iii) the successor agency is not a party to outstanding or unresolved litigation. The Last and Final ROPS must list the remaining enforceable obligations of the successor agency in the following order: (A) enforceable obligations to be funded from the Redevelopment Property Tax Trust Fund: (B) enforceable obligations to be funded from bond proceeds or other legally or contractually dedicated or restricted funding sources: and (C) loans or deferrals authorized for repayment to the city that created the redevelopment agency or the successor to the former redevelopment agency’s housing functions and assets. The Last and Final ROPS must also include the total outstanding obligation and a schedule of remaining payments for each enforceable obligation described in (A) and (B) above, and the total outstanding obligation and an interest rate of 4 percent, for any loans or deferrals listed pursuant to (C) above. The Last and Final ROPS shall also establish the maximum amount of Redevelopment Property Tax Trust Funds to be distributed to the successor agency for each remaining fiscal year until all obligations have been fully paid. The approval of the DOF is required for any Last and Final ROPS to become effective.
The county auditor-controller shall also review the Last and Final ROPS and provide any objection to the inclusion of any items or amounts to the DOF.
Successor agencies may only amend an approved Last and Final ROPS twice. Approval by the oversight board and the DOF is required for any amendment to a Last and Final ROPS to become effective. The Dissolution Act provides the DOF with 100 days to approve or deny an amendment to a Last and Final ROPS. Each amended Last and Final ROPS approved by the DOF will become effective in the subsequent Redevelopment Property Tax Trust Fund distribution period. If an amended Last and Final ROPS is approved less than 15 days before the date of the property tax distribution, the Last and Final ROPS will not be effective until the subsequent Redevelopment Property Tax Trust Fund distribution period.
Any revenues, interest, and earnings of the successor agency, including proceeds from the disposition of real property, that are not authorized for use pursuant to the approved Last and Final ROPS shall be remitted to the county auditor-controller for distribution to the affected taxing entities.
Attachment B
23 A successor agency shall not expend more than the amount approved for each enforceable obligation listed on the approved Last and Final ROPS. The county auditor-controller shall no longer distribute property tax to the successor agency’s Redevelopment Property Tax Trust Fund once the aggregate amount of property tax allocated to the successor agency equals the total outstanding obligation approved in the Last and Final ROPS. Commencing on the effective date of the approved Last and Final ROPS, the successor agency shall not prepare or transmit annual Recognized Obligation Payment Schedules.
After the Last and Final ROPS is approved by the DOF, the county auditor-controller will continue to allocate moneys in the successor agency’s Redevelopment Property Tax Trust Fund pursuant to Section 34183 of the Dissolution Act; however, the county auditor-controller will allocate such moneys in each fiscal period, after deducting the county auditor-controller’s administrative costs, in the following order of priority: (A) pass-through payments pursuant to Section 34183(a)(1) of the Dissolution Act, (B) scheduled debt service payments on tax allocation bonds listed and approved in the Last and Final ROPS, (C) scheduled payments on revenue bonds listed and approved in the Last and Final ROPS, but only to the extent the revenues pledged for them are insufficient to make the payments and only if the successor agency’s tax increment revenues were also pledged for the repayment of bonds, (D) scheduled payments for debts and obligations listed and approved in the Last and Final ROPS to be paid from the Redevelopment Property Tax Trust Fund, (E) payments listed and approved on the Last and Final ROPS that were authorized but unfunded in prior periods, (F) repayment of loans and deferrals to the city that created the redevelopment agency or the successor to the former redevelopment agency’s housing functions and assets that are listed and approved on the Last and Final ROPS, and (G) any moneys remaining in the Redevelopment Property Tax Trust Fund after the payments and transfers described in (A) to (F), above, shall be distributed to taxing entities in accordance with Section 34183(a)(4) of the Dissolution Act.
If a successor agency sends a Notice of Insufficiency to the county auditor-controller stating that the total available amounts in the Redevelopment Property Tax Trust Fund will be insufficient to fund the successor agency’s current or future fiscal year obligations, and if the county auditorcontroller concurs that there are insufficient funds to pay the required obligations, the county auditorcontroller may divert subordinated pass-through payments to the successor agency pursuant to Section 34183(b) of the Dissolution Act. See the caption “—Tax Increment Financing.” The Successor Agency has not undertaken the requisite procedures to subordinate the Statutory PassThrough Payments to the payment of debt service on the 2026 Bonds. Accordingly, it will not be permitted to submit Notices of Insufficiency as described above in the event the total available amounts in the Redevelopment Property Tax Trust Fund are insufficient to fund the successor agency’s current or future fiscal year obligations.
The Successor Agency is not currently eligible to file a Last and Final ROPS because the payments under the BofA Credit Agreement vary based on a variable rate of interest and are not set forth in a payment schedule. The loan outstanding under the BofA Credit Agreement matures on June 1, 2028. Further, the Successor Agency has covenanted in the Indenture not to submit to the Oversight Board or the DOF a request for the final amendment permitted for its Last and Final ROPS without the prior written consent of the 2026 Insurer unless all amounts that could become due to the 2026 Insurer are included as a line item on the Last and Final ROPS, as amended.
Attachment B
24 Statutory Pass-Through Payments
Assembly Bill 1290 (Chapter 942, Statutes of 1993) (“AB 1290”), effective January 1, 1994, eliminated the statutory authority for negotiated pass-through agreements and provided a formula for mandatory tax sharing, applicable to redevelopment plans adopted on or after January 1, 1994 or amended after January 1, 1994 to add territory or make certain other amendments. These payments, which are to begin the fiscal year following the year a redevelopment plan was adopted (if after January 1, 1994) or the fiscal year following the year that a redevelopment plan’s original plan limitations would have taken effect (in the case of pre-1994 redevelopment plans), are calculated using the increase in revenue above the amount of revenue generated by the project area in the year that the redevelopment plan was adopted or the former limit would have been reached, as applicable.
Under the Dissolution Act, in particular Section 34183, the County Auditor-Controller is obligated to remit these Statutory Pass-Through Payments to the affected taxing entities from the Successor Agency’s RPTTF on each January 2 and June 1 RPTTF distribution date.
Generally speaking, the Statutory Pass-Through Payments are calculated as follows under the Redevelopment Law:
“Tier 1.” following the adoption of the project area or the expiration of the amended time limit, as applicable, and thereafter, 25 percent of tax increment revenues (after deducting the Housing Set-Aside amount); plus,
“Tier 2.” for the eleventh year following the triggering event and thereafter, 21 percent of revenues in excess of tenth year revenue (after deducting the Housing Set-Aside amount); plus, “Tier 3.” for the thirty-first year following the triggering event and thereafter, 14 percent of revenues in excess of thirtieth year revenues (after deducting the Housing Set-Aside amount).
The payments of the Statutory Pass-Through Payments to the affected taxing entities are allocated among each affected taxing entity in proportion to the share of property taxes each affected taxing entity received in the year funds are allocated. As indicated above, amounts specified as payable to affected taxing entities are computed after deducting the Housing Set-Aside amounts even though the Successor Agency no longer deposits such amounts into the Low and Moderate Income Housing Fund under the Dissolution Act.
The Successor Agency has not undertaken the requisite procedures to subordinate the Statutory Pass-Through Payments to the payment of debt service on the 2026 Bonds and, therefore, the pledge of Tax Revenues to secure the payment of debt service on the 2026 Bonds when due is subordinate to the Statutory Pass-Through Payments.
BofA Credit Agreement
On May 1, 2008, the Former Agency entered into the BofA Credit Agreement with Bank of America, N.A. The BofA Credit Agreement initially provided a line of credit of up to $50 million (the “Line of Credit”), secured by future property tax increment revenues from the Earthquake Project Area to the extent they represented the Housing Set-Aside. The Former Agency drew on the Line of Credit in full. In accordance with the BofA Credit Agreement, on January 30, 2012, the entire $50 million draw was converted to a term loan (the “Term Loan”). The Term Loan bears interest Attachment B
25 calculated by reference to the federal funds rate as described in the BofA Credit Agreement and matures on June 1, 2028. Equal payments of principal plus accrued interest are due semiannually on each January 15 and July 15. As of the date of this Official Statement, the Term Loan was outstanding in the principal amount of $7,575,757. The Successor Agency’s obligation to make payments under the BofA Credit Agreement from Tax Revenues is senior to the 2026 Bonds only to the extent such revenues represent the former Housing Set-Aside from the Earthquake Project Area.
Issuance of Additional Indebtedness
No Additional Senior Obligations. Under the Indenture, the Successor Agency has covenanted that it will not issue additional bonds or incur additional obligations that are payable from Tax Revenues on a senior basis to the 2026 Bonds or any Parity Debt issued or incurred in the future.
Upon the issuance of the 2026 Bonds and the completion of the refunding of the Refunded Bonds as described under the caption “REFUNDING PLAN” no bonds or other indebtedness with a pledge or lien on the Tax Revenues senior to the 2026 Bonds will remain outstanding except the BofA Credit Agreement (but only to the extent such revenues represent the former Housing SetAside from the Earthquake Project Area).
Parity Debt. Section 34177.5(a) of the Dissolution Act presently permits successor agencies to issue bonds or incur other indebtedness secured by property tax revenues comprised of former tax increment revenues required by the Dissolution Act to be deposited into the respective Redevelopment Property Tax Trust Fund for the applicable successor agency under limited circumstances, including to provide savings to the successor agency provided that (A) the total interest cost to maturity on the refunding bonds plus the principal amount of the refunding bonds shall not exceed the total remaining interest cost to maturity on the bonds or other indebtedness to be refunded plus the remaining principal of the bonds or other indebtedness to be refunded, and (B) the principal amount of the refunding bonds or the indebtedness will not exceed the amount required to defease the refunded bonds or other indebtedness, to establish customary debt service reserves, and to pay related costs of issuance. If the foregoing conditions are satisfied, the initial principal amount of the refunding bonds or indebtedness may be greater than the outstanding principal amount of the bonds or other indebtedness to be refunded. The successor agency may pledge to the refunding bonds or other indebtedness the revenues pledged to the bonds or other indebtedness being refunded, having the same lien priority as the pledge of the bonds or other obligations to be refunded.
In addition to the 2026 Bonds, the Successor Agency may issue Parity Debt to refund any outstanding 2026 Bonds or Parity Debt for savings, in such principal amount as will be determined by the Successor Agency. The Successor Agency may issue and deliver any such Parity Debt subject to the following conditions precedent:
(a) No Event of Default under the Indenture or an event of default under any Parity Debt Instrument will have occurred and be continuing unless cured by the issuance of such Parity Debt; (b) The Parity Debt must be issued to provide savings to the Successor Agency in compliance with Health and Safety Code Section 34177.5(a); (c) A Supplemental Indenture or Parity Debt Instrument must be adopted which must (i) state the applicable reserve requirement, if any, and the amount, if any, from the proceeds of sale of such Parity Debt or the stated amount of Qualified Reserve Account Credit Instrument to be Attachment B
26 deposited in a separate subaccount of the Reserve Account or other debt service reserve account or fund as provided in such Supplemental Indenture or Parity Debt Instrument, to be held as separate security for such series of Parity Debt; (ii) designate accounts and subaccounts within the Debt Service Fund, including within the Reserve Account if applicable, to be used in connection with such Parity Debt; and (iii) set forth such other provisions that are appropriate or necessary and are not inconsistent with the provisions of the Indenture;
(d) Such Supplemental Indenture or Parity Debt Instrument is not permitted to provide as a remedy for any event of default thereunder a declaration that all of such Parity Debt then outstanding, and the interest accrued thereon, is due and payable immediately; and (e) The Successor Agency must deliver to the Trustee a Written Certificate of the Successor Agency certifying that the conditions precedent to the issuance of such Parity Debt set forth in the Indenture have been satisfied.
Subordinate Obligations. The Successor Agency has various enforceable obligations that are, or will be, listed on the Successor Agency’s Recognized Obligation Payment Schedules and paid from moneys deposited in the Successor Agency’s Redevelopment Property Tax Trust Fund from time to time. Except as described in this Official Statement, the Successor Agency has determined that these obligations are either subordinate to the 2026 Bonds or not secured by a pledge of Tax Revenues. Nothing in the Indenture prevents the Successor Agency from issuing additional bonds or incurring other loans, advances or indebtedness payable from Tax Revenues on a subordinate basis to the 2026 Bonds.
BOND INSURANCE
[To come from 2026 Insurer]
PROPERTY TAXATION IN CALIFORNIA
Property Tax Collection Procedures
Classification. In the State, property which is subject to ad valorem taxes is classified as “secured” or “unsecured.” Secured and unsecured property is entered on separate parts of the assessment roll maintained by county assessors. The secured classification includes property on which any property tax levied by a county becomes a lien on that property. A tax levied on unsecured property does not become a lien against the taxed unsecured property, but may become a lien on certain other property owned by the taxpayer. Every tax which becomes a lien on secured property has priority over all other liens on the secured property arising pursuant to State law, regardless of the time of the creation of other liens. See the caption “RISK FACTORS—Bankruptcy and Foreclosure” for certain limitations on the priority of secured tax liens under federal law, however.
Generally, ad valorem taxes are collected by a county for the benefit of the various taxing agencies (cities, schools and special districts) that share in the ad valorem tax (each, a taxing entity) and successor agencies eligible to receive distributions from the respective Redevelopment Property Tax Trust Fund.
Attachment B
27 Collections. The method of collecting delinquent taxes is substantially different for secured and unsecured property. The exclusive means of enforcing the payment of delinquent taxes with respect to property on the secured roll is the sale of the property securing the taxes to the State for the amount of taxes which are delinquent. Counties have four ways of collecting unsecured personal property taxes: (i) initiating a civil action against the taxpayer; (ii) filing a certificate in the office of the county clerk specifying certain facts in order to obtain a judgment lien on certain property of the taxpayer; (iii) filing a certificate of delinquency for record in the county recorder’s office to obtain a lien on certain property of the taxpayer; and (iv) seizing and selling personal property, improvements or possessory interests belonging or assessed to the assessee.
Penalty. A 10 percent penalty is added to delinquent taxes which have been levied with respect to property on the secured roll. In addition, property on the secured roll on which taxes are delinquent is declared in default by operation of law and declaration of the tax collector on or about June 30 of each fiscal year. Such property may thereafter be redeemed by payment of the delinquent taxes and a delinquency penalty, plus a redemption penalty of 1.5 percent per month to the time of redemption. If taxes are unpaid for a period of five years or more, the property is deeded to the State and then is subject to sale by the county tax collector. A 10 percent penalty also applies to delinquent taxes with respect to property on the unsecured roll, and further, an additional penalty of
1.5 percent per month accrues with respect to such taxes beginning on varying dates related to the tax bill mailing date.
Delinquencies. The valuation of property is determined as of the January 1 lien date as equalized in August of each year and equal installments of taxes levied upon secured property become delinquent on the following December 10 and April 10. Taxes on unsecured property are due January 1 and become delinquent August 31. The County has not adopted the Alternative Method of Distribution of Tax Levies and Collections and of Tax Sale Proceeds (known as a “Teeter Plan”), as provided for in Section 4701 et seq. of the Revenue and Taxation Code of the State. Accordingly, the amount of tax increment revenues that are allocated to the Successor Agency depends upon the actual collections of taxes within the Project Areas. The Successor Agency receives adjustments for redemption payments on delinquent collections. In addition, the Successor Agency receives supplemental taxes and refunds, if any, are deducted from amounts available for deposit to the Redevelopment Property Tax Trust Fund. Substantial delinquencies in the payment of property taxes could impair the timely receipt by the Successor Agency of Tax Revenues.
Supplemental Assessments. California Revenue and Taxation Code Section 75.70 provides for the supplemental assessment and taxation of property as of the occurrence of a change of ownership or completion of new construction. Prior to the enactment of this law, the assessment of such changes was permitted only as of the next tax lien date following the change, which delayed the realization of increased property taxes from the new assessments for up to 14 months. Revenue and Taxation Code Section 75.70 provides increased revenue to the Redevelopment Property Tax Trust Fund to the extent that supplemental assessments of new construction or changes of ownership occur within the boundaries of the Project Areas subsequent to the January 1 lien date. To the extent that such supplemental assessments occur within the Project Areas, Tax Revenues may increase.
However, because supplemental assessments cannot be accurately projected, no provision has been made by the Fiscal Consultant to reflect the impact of supplemental assessments on Tax Revenues.
See the Fiscal Consultant Report attached to this Official Statement as Appendix A for a description of supplemental revenues historically allocated to the Successor Agency.
Attachment B
28 Property Tax Administrative Costs. In 1990, the State Legislature enacted Senate Bill (“SB”) 2557 (Chapter 466, Statutes of 1990) which allows counties to charge for the cost of assessing, collecting and allocating property tax revenues to local government jurisdictions in proportion to the tax-derived revenues allocated to each. SB 1559 (Chapter 697, Statutes of 1992) explicitly includes redevelopment agencies among the jurisdictions which are subject to such charges. In addition, Sections 34182 and 34183(a) of the Dissolution Act allow administrative costs of the County Auditor-Controller for the cost of administering the provisions of the Dissolution Act, as well as the foregoing SB 1559 amounts, to be deducted from Tax Revenues. Over the past five years, the County’s total administrative charge for the Earthquake Project Area, deducted from the Redevelopment Property Tax Trust Fund allocations to the Successor Agency, amounted to approximately 1.33 percent of the total gross tax revenue allocation to the Redevelopment Property Tax Trust Fund from such project area for such period. The Fiscal Consultant assumes that the County property tax administration will continue to be annually charged at this percentage factor to the gross tax revenue generated by the Earthquake Project Area in subsequent fiscal years. See the projections set forth in the Fiscal Consultant Report attached as Appendix A and under the caption “TAX REVENUES—Projected Tax Revenues” herein.
Pass-Through Agreements. Prior to 1994, under the Redevelopment Law, a redevelopment agency could enter into an agreement to pay tax increment revenues to any taxing agency that has territory located within a redevelopment project in an amount which in the redevelopment agency’s determination was appropriate to alleviate any financial burden or detriment caused by the redevelopment project. Such agreements normally provide for payment or pass-through of tax increment revenue directed to the affected taxing agency, and, therefore, are commonly referred to as pass-through agreements or tax sharing agreements. The Former Agency did not enter into any passthrough agreements with respect to the Earthquake Project Area.
Statutory Pass-Through Payments. The payment of Statutory Pass-Through Payments results from: (i) redevelopment plans adopted, on or after January 1, 1994 or redevelopment plan amendments which add territory in existing project areas after January 1, 1994; and (ii) redevelopment plan amendments that eliminate, extend or increase one or more limitations within a redevelopment plan (such as the removal of the time limit on the establishment of loans, advances and indebtedness). The calculation of the amount due to affected taxing entities is described in Sections 33607.5 and 33607.7 of the Redevelopment Law. See the caption “SECURITY FOR THE 2026 BONDS—Statutory Pass-Through Payments” for a discussion of the Successor Agency’s obligation to pay Statutory Pass-Through Payments to affected taxing agencies. Also see the caption “SECURITY FOR THE 2026 BONDS—Tax Increment Financing—Tax Sharing.” Section 33676 Election. Prior to the enactment of AB 1290, redevelopment project areas adopted between January 1, 1985 and prior to January 1, 1994 were subject to payments to schools and to other affected taxing agencies that elected to receive tax revenue payments set forth under Section 33676 of the Redevelopment Law (defined above as “33676 Payments”). The annual payments represent that portion of property taxes that are, or otherwise would be, calculated annually pursuant to subdivision (f) of Section 110.1 of the Revenue and Taxation Code (and referred to as the 2 percent inflation allocation). Because the Earthquake Project Area was adopted on or after January 1, 1994, no taxing entities within the Earthquake Project Area are entitled to receive or are receiving payments under Section 33676.
Recognized Obligation Payment Schedule. The Dissolution Act provides that, commencing on the date that the first Recognized Obligation Payment Schedule is valid, only those payments Attachment B
29 listed in the Recognized Obligation Payment Schedule may be made by the Successor Agency from the funds specified in the Recognized Obligation Payment Schedule. Before each February 1, with respect to the following fiscal year, the Dissolution Act requires successor agencies to prepare and submit to the successor agency’s oversight board and the DOF for approval, a Recognized Obligation Payment Schedule pursuant to which enforceable obligations of the successor agency are listed, together with the source of funds to be used to pay for each enforceable obligation. Tax Revenues will not be distributed from the Redevelopment Property Tax Trust Fund by the County AuditorController to the Successor Agency’s Redevelopment Obligation Retirement Fund without a duly approved and effective Recognized Obligation Payment Schedule obtained in sufficient time prior to each June 1 property tax distribution date. See the caption “SECURITY FOR THE 2026 BONDS— Recognized Obligation Payment Schedule” and “RISK FACTORS—Recognized Obligation Payment Schedule.” See also “SECURITY FOR THE 2026 BONDS—Last and Final Recognized Obligation Payment Schedule” for a description of the Last and Final ROPS authorized by the Dissolution Act pursuant to SB 107.
Unitary Property
Assembly Bill (“AB”) 2890 (Statutes of 1986, Chapter 1457) provides that, commencing with fiscal year 1988-89, assessed value derived from State-assessed unitary property (consisting mostly of operational property owned by utility companies) is to be allocated county-wide as follows: (i) each tax rate area will receive the same amount from each assessed utility received in the previous fiscal year unless the applicable county-wide values are insufficient to do so, in which case values will be allocated to each tax rate area on a pro rata basis; and (ii) if values to be allocated are greater than in the previous fiscal year, each tax rate area will receive a pro rata share of the increase from each assessed utility according to a specified formula. Additionally, the lien date on Stateassessed property was changed from March 1 to January 1.
AB 454 (Statutes of 1987, Chapter 921) further modified Chapter 1457 regarding the distribution of tax revenues derived from property assessed by the State Board of Equalization. AB 454 provides for the consolidation of all State-assessed property, except for regulated railroad property, into a single tax rate area in each county. AB 454 further provides for a new method of establishing tax rates on State-assessed property and distribution of property tax revenue derived from State-assessed property to taxing jurisdictions within each county in accordance with a new formula. Railroads will continue to be assessed and revenues allocated to all tax rate areas where railroad property is located. The intent of AB 2890 and AB 454 is to provide redevelopment agencies with their appropriate share of revenue generated from property assessed by the State Board of Equalization.
To administer the allocation of unitary tax revenues to redevelopment agencies, the County Auditor- Controller no longer includes the taxable value of utilities as part of the reported taxable values of a project area; therefore, the base year value of the Earthquake Project Area has been reduced by the amount of utility value that existed originally in the base year. In fiscal year 2025-26, the County Auditor-Controller is expected to allocate approximately $1.2 million of unitary tax revenue to the Earthquake Project Area. The projections of Tax Revenues in the Fiscal Consultants Report and this Official Statement assume that unitary revenues for fiscal year 2026-27 and each fiscal year thereafter will remain constant at the fiscal year 2025-26 amount. See the caption “TAX REVENUES—Projected Tax Revenues.”
Attachment B
30 Article XIIIA of the State Constitution
On June 6, 1978, State voters approved an amendment (commonly known as Proposition 13 or the Jarvis-Gann Initiative) which added Article XIIIA to the State Constitution. Article XIIIA limits the amount of ad valorem taxes on real property to 1 percent of “full cash value” of such property, as determined by the county assessor. Article XIIIA defines “full cash value” to mean “the county assessor’s valuation of real property as shown on the State fiscal year 1975-76 tax bill under ‘full cash value,’ or, thereafter, the appraised value of real property when purchased, newly constructed, or a change in ownership has occurred after the 1975 assessment.” Furthermore, the “full cash value” of all real property may be increased to reflect the rate of inflation, as shown by the consumer price index, not to exceed 2 percent per year, or may be reduced. Each year the State Board of Equalization announces the applicable adjustment factor. Since the adoption of Proposition 13, inflation has, in most years, exceeded 2 percent and the announced factor has reflected the 2 percent cap. The changes in the California Consumer Price Index from October of one year and October of the next year are used to determine the adjustment factor for the January assessment date.
The table below reflects the inflation adjustment factors for Fiscal Year 2026-27, the current Fiscal Year, and the 10 prior fiscal years.
Historical Inflation Adjustment Factors
Fiscal Year Inflation Adj. Factor
2016-17 1.525%
2017-18 2.000
2018-19 2.000
2019-20 2.000
2020-21 2.000
2021-22 1.036
2022-23 2.000
2023-24 2.000
2024-25 2.000
2025-26 2.000
2026-27 2.000
Article XIIIA has subsequently been amended to permit reduction of the “full cash value” base in the event of declining property values caused by substantial damage, destruction or other factors, and to provide that there would be no increase in the “full cash value” base in the event of reconstruction of property damaged or destroyed in a disaster and in other special circumstances.
Article XIIIA: (i) exempts from the 1 percent tax limitation taxes to pay debt service on:
(a) indebtedness approved by the voters prior to July 1, 1978; or (b) bonded indebtedness for the acquisition or improvement of real property approved on or after July 1, 1978, by two-thirds of the votes cast by the voters voting on the proposition; (ii) requires a vote of two-thirds of the qualified electorate to impose special taxes, or certain additional ad valorem taxes; and (iii) requires the approval of two-thirds of all members of the State Legislature to change any State tax laws resulting in increased tax revenues.
The validity of Article XIIIA has been upheld by both the State Supreme Court and the United States Supreme Court.
Attachment B
31 In the general election held on November 4, 1986, voters of the State approved two measures, Propositions 58 and 60, which further amended Article XIIIA. Proposition 58 amended Article XIIIA to provide that the terms “purchase” and “change of ownership,” for the purposes of determining full cash value of property under Article XIIIA, do not include the purchase or transfer of: (1) real property between spouses; and (2) the principal residence and the first $1,000,000 of other property between parents and children. This amendment to Article XIIIA may reduce the rate of growth of local property tax revenues.
Proposition 60 amended Article XIIIA to permit the State Legislature to allow persons over the age of 55 who sell their residence and buy or build another of equal or lesser value within two years in the same county to transfer the old residence assessed value to the new residence. As a result of the State Legislature’s action, the growth of property tax revenues may decline.
Legislation enacted by the State Legislature to implement Article XIIIA provides that all taxable property is shown at full assessed value as described above. In conformity with this procedure, all taxable property value included in this Official Statement is shown at 100 percent of assessed value and all general tax rates reflect the $1 per $100 of taxable value (except as noted).
Tax rates for voter-approved bonded indebtedness and pension liabilities are also applied to 100 percent of assessed value. No such tax rate overrides for bonded indebtedness are pledged to the 2026 Bonds.
Appropriations Limitation – Article XIIIB
On November 6, 1979, State voters approved Proposition 4 (also known as the Gann Initiative), which added Article XIIIB to the State Constitution. Article XIIIB limits the annual appropriations of the State and its political subdivisions to the level of appropriations for the prior fiscal year, as adjusted for changes in the cost of living, population and services rendered by the government entity. The “base year” for establishing such appropriations limit is State fiscal year 1978-79, and the limit is to be adjusted annually to reflect changes in population, consumer prices and certain increases in the cost of services provided by these public agencies.
Section 33678 of the Redevelopment Law provides that the allocation of taxes to a redevelopment agency for the purpose of paying principal of, or interest on, loans, advances, or indebtedness is not deemed to be the receipt by an agency of proceeds of taxes levied by or on behalf of an agency within the meaning of Article XIIIB, nor will such portion of taxes be deemed receipt of proceeds of taxes by, or an appropriation subject to the limitation of, any other public body within the meaning or for the purpose of the Constitution and laws of the State, including Section 33678 of the Redevelopment Law. The constitutionality of Section 33678 has been upheld in two State appellate court decisions. On the basis of these decisions, the Successor Agency does not believe that it is subject to Article XIIIB and has not adopted an appropriations limit.
Articles XIIIC and XIIID of the State Constitution
At the election held on November 5, 1996, Proposition 218 was passed by the voters of California. The initiative added Articles XIIIC and XIIID to the State Constitution. Provisions in the two articles affect the ability of local government to raise revenues. The 2026 Bonds are secured by sources of revenues that are not subject to limitation by Proposition 218. See the caption “— Propositions 218 and 26.”
Attachment B
32 Proposition 87
On November 8, 1988, the voters of the State approved Proposition 87, which amended Article XVI, Section 16 of the State Constitution to provide that property tax revenue attributable to the imposition of taxes on property within a redevelopment project area for the purpose of paying debt service on certain bonded indebtedness issued by a taxing entity (not the Former Agency or the Successor Agency) and approved by the voters of the taxing entity after January 1, 1989 will be allocated solely to the payment of such indebtedness, and not to redevelopment agencies. SB 107, which became effective on September 22, 2015, amended Section 34183(a)(1) of the Dissolution Act to provide that such debt service override revenues approved by the voters for the purpose of supporting pension programs or capital projects or programs related to the State Water Project that are not pledged to or not needed for debt service on successor agency debt will be allocated and paid to the entity that levies the override. No such overrides are pledged as security for the 2026 Bonds.
See “SECURITY FOR THE 2026 BONDS—General.”
Redevelopment Plan Limits
In 1993, the State legislature passed AB 1290, Chapter 942, Statutes 1993, which, among other things, required redevelopment agencies to adopt time limits in each redevelopment plan specifying: (i) the last date to incur debt for a redevelopment project; (ii) the last date to undertake redevelopment activity within a project area; (iii) the last date to collect tax increment revenue from a project area to repay debt; and (iv) a limitation on the number of dollars of taxes that could be allocated to the former redevelopment agency from the applicable project area.
SB 107, which became effective September 22, 2015, amended the Dissolution Act to provide that the time limits for receiving property tax revenues and the limitation on the amount of property tax revenues that may be received by the Former Agency and the Successor Agency set forth in the Redevelopment Plan are not effective for purposes of paying the Successor Agency’s enforceable obligations such as the 2026 Bonds. Accordingly, the projections set forth in this Official Statement and in the Fiscal Consultant Report attached to this Official Statement as Appendix A do not take into account the time and financial limitations set forth in the Redevelopment Plan for the Earthquake Project Area. See the captions “THE EARTHQUAKE PROJECT AREA.”
Appeals of Assessed Values
Pursuant to State law, a property owner may apply for a reduction of the property tax assessment for such owner’s property by filing a written application, in a form prescribed by the State Board of Equalization, with the appropriate county board of equalization or assessment appeals board.
In the County, a property owner desiring to reduce the assessed value of such owner’s property in any one year must submit an application to the County Assessment Appeals Board (the “Appeals Board”). Applications for any tax year must be submitted by November 30 of such tax year. Following a review of each application by the staff of the County Assessor’s Office, the staff makes a recommendation to the Appeals Board on each application which has not been rejected for incompleteness or untimeliness or withdrawn. The Appeals Board holds a hearing and either reduces or confirms the assessment. The Appeals Board generally is required to determine the outcome of appeals within two years of each appeal’s filing date. Any reduction in the assessment ultimately Attachment B
33 granted applies only to the year for which application is made and during which the written application is filed. The assessed value increases to its pre-reduction level for fiscal years following the year for which the reduction application is filed. However, if the taxpayer establishes through proof of comparable values that the property continues to be overvalued (known as “ongoing hardship”), the Assessor has the power to grant a reduction not only for the year for which application was originally made, but also for the then current year as well. Appeals for reduction in the “base year” value of an assessment, which generally must be made within three years of the date of change in ownership or completion of new construction that determined the base year, if successful, reduce the assessment for the year in which the appeal is taken and prospectively thereafter. Moreover, in the case of any reduction in any one year of assessed value granted for “ongoing hardship” in the then current year, and also in any cases involving stipulated appeals for prior years relating to base year and personal property assessments, the property tax revenues from which Tax Revenues are derived attributable to such properties will be reduced in the then current year. In practice, such a reduced assessment may remain in effect beyond the year in which it is granted. See the caption “THE EARTHQUAKE PROJECT AREA—Assessment Appeals” and Appendix A for information regarding the appeals pending with respect to the top 10 property taxpayers within the Earthquake Project Area.
Proposition 8
Proposition 8, approved in 1978 (California Revenue and Taxation Code Section 51(b)), provides for the assessment of real property at the lesser of its originally determined (base year) full cash value compounded annually by the inflation factor, or its full cash value as of the lien date, taking into account reductions in value due to damage, destruction, obsolescence or other factors causing a decline in market value. Reductions pursuant to Proposition 8 may be initiated by the County Assessor or requested by the property owner, and such reductions apply only to a single tax year.
After a roll reduction is granted pursuant to Proposition 8, the property is reviewed on an annual basis to determine its full cash value and the valuation is adjusted accordingly. This may result in further reductions or in value increases. Such increases must be in accordance with the full cash value of the property and may exceed the maximum annual inflationary growth rate allowed on other properties under Article XIIIA of the State Constitution. Once the property has regained its prior value, adjusted for inflation, it once again is subject to the annual inflationary factor growth rate allowed under Article XIIIA.
The County Assessor has the ability to use Proposition 8 criteria to apply blanket reductions in valuation to classes of property affected by particular negative economic conditions. The Successor Agency is aware that the County Assessor made such reductions to assessed values of residential property in the Earthquake Project Area and the City generally during the recession that started in 2008. The Fiscal Consultant Report does not assume any future reductions in assessed valuations as a result of Proposition 8, but there can be no assurance that additional Proposition 8 reductions will not be made in the future. See the caption “THE EARTHQUAKE PROJECT AREA.”
Propositions 218 and 26
On November 5, 1996, State voters approved Proposition 218—Voter Approval for Local Government Taxes—Limitation on Fees, Assessments, and Charges—Initiative Constitutional Attachment B
34 Amendment. Proposition 218 added Articles XIIIC and XIIID to the State Constitution, imposing certain vote requirements and other limitations on the imposition of new or increased taxes, assessments and property-related fees and charges. On November 2, 2010, California voters approved Proposition 26, the “Supermajority Vote to Pass New Taxes and Fees Act.” Proposition 26 amended Article XIIIC of the State Constitution by adding an expansive definition for the term “tax,” which previously was not defined under the State Constitution. Tax Revenues securing the 2026 Bonds are derived from property taxes which are outside the scope of taxes, assessments and property-related fees and charges which are limited by Proposition 218 and outside of the scope of taxes which are limited by Proposition 26.
Future Initiatives
Articles XIIIA, XIIIB, XIIIC and XIIID to the State Constitution and certain other propositions affecting property tax levies were each adopted as measures which qualified for the ballot pursuant to the State’s initiative process. From time to time other initiative measures could be adopted, further affecting Agency revenues or the Successor Agency’s ability to expend revenues.
THE SUCCESSOR AGENCY TO THE
REDEVELOPMENT AGENCY OF THE CITY OF SANTA MONICA
The Former Agency was established by the City Council of the City on August 13, 1957, pursuant to the Redevelopment Law. On June 29, 2011, AB X1 26 was enacted as Chapter 5, Statutes of 2011, together with a companion bill, AB X1 27. A lawsuit entitled California Redevelopment Association, et al. v. Matosantos, et al., was brought in the State Supreme Court challenging the constitutionality of AB X1 26 and AB X1 27. In a published decision (53 Cal. 4th 231 (Dec. 29, 2011)), the State Supreme Court largely upheld AB X1 26, invalidated AB X1 27, and held that AB X1 26 may be severed from AB X1 27 and enforced independently. As a result of AB X1 26 and the decision of the State Supreme Court, as of February 1, 2012, all redevelopment agencies in the State, including the Former Agency, were dissolved, and successor agencies were designated as successor entities to the former redevelopment agencies to expeditiously wind down the affairs of the former redevelopment agencies.
Pursuant to Section 34173 of the Dissolution Act, the City Council of the City serves as the successor agency to the Former Agency. Subdivision (g) of Section 34173 of the Dissolution Act, added by AB 1484, expressly affirms that the Successor Agency is a separate public entity from the City, that the two entities shall not merge and that the liabilities of the Former Agency will not be transferred to the City nor will the assets of the Former Agency become assets of the City.
The Successor Agency is governed by the seven-member legislative body (the “Board”) which consists of the City Council of the City. The Mayor acts as the Chair of the Board, the City Clerk as its Secretary, the City Manager serves as the chief administrative officer of the Successor, and the Director of Finance of the City as the chief financial officer of the Successor Agency.
All powers of the Successor Agency are vested in the Board. Pursuant to the Dissolution Act, the Successor Agency is a separate public body from the City and successor to the organizational status of the Former Agency, but without any legal authority to participate in redevelopment activities except to complete any work related to an approved enforceable obligation.
The Successor Agency is tasked with expeditiously winding down the affairs of the Former Agency pursuant to the procedures and provisions of the Dissolution Act. Under the Dissolution Act, many Attachment B
35 Agency actions are subject to approval by the Oversight Board, as well as review by the DOF. The State has strict laws regarding public meetings (known as the Ralph M. Brown Act) which generally make all Board and Oversight Board meetings open to the public in a similar manner as City Council meetings.
THE EARTHQUAKE PROJECT AREA
General
The 2026 Bonds are principally payable from Tax Revenues. Tax Revenues generally consist of tax increment revenues deposited, or eligible for deposit, into the Successor Agency’s Redevelopment Property Tax Trust Fund, after payment of certain County of Los Angeles administrative costs, Statutory Pass-Through Payments, and, with respect to the former Housing SetAside from the Earthquake Project Area, payments under the BofA Credit Agreement, as described herein.
In Fiscal Year 2024-25, the Project Areas collectively generated tax increment revenues, after payments of certain County of Los Angeles administrative costs and payments to certain taxing agencies, totaling approximately $138 million. Of that amount, approximately $128 million (93 percent) of Tax Revenues were generated within the Earthquake Project Area. Given the relative magnitude of Tax Revenues generated within the Earthquake Project Area, the projections in this Official Statement conservatively assume that the Downtown Project Area, the Ocean Park Project Area 1A and the Ocean Park Project Area 1B will not generate tax increment revenues in the future.
Accordingly, the discussion of historical and projected Tax Revenues in this Official Statement and in the Fiscal Consultant Report is limited to the Earthquake Project Area.
On January 17, 1994, the Northridge Earthquake occurred with serious consequences in the City. Selection of the Earthquake Project Area boundaries was guided by inclusion of the most severely damaged properties in need of public assistance for repair and recovery; approximately 90 percent of all red-tagged and approximately 80 percent of all yellow-tagged buildings in the City at the time of formation were included in the Earthquake Project Area. The Earthquake Project Area encompasses approximately 2.89 square miles or 35 percent of the City’s total land area of 8.3 square miles. The Earthquake Project Area is generally bounded by Pico Boulevard on the south, 26th Street on the east, Montana Avenue on the north and Pacific Coast Highway/Ocean Front Walk to the west.
The Redevelopment Plan; No Financial Limits
Under the Redevelopment Law, a city or county that activated a redevelopment agency was required to adopt, by ordinance, a redevelopment plan for each redevelopment project to be undertaken by the redevelopment agency. A redevelopment agency could only undertake those activities within a redevelopment project specifically authorized in the adopted redevelopment plan.
A redevelopment plan is a legal document, the content of which is largely prescribed in the Redevelopment Law, rather than a “plan” in the customary sense of the word.
In general, each redevelopment plan originally included specified time and financial limitations applicable to each project area. SB 107, which became effective September 22, 2015, amended the Dissolution Act to provide that the time limits for receiving property tax revenues and the limitation on the amount of property tax revenues that may be received by the Former Agency and the Successor Agency set forth in the applicable redevelopment plan are not effective for Attachment B
36 purposes of paying the Successor Agency’s enforceable obligations such as the 2026 Bonds.
Accordingly, the projections set forth in this Official Statement and in the Fiscal Consultant Report attached to this Official Statement as Appendix A were prepared without regard to the time and financial limitations set forth in the Redevelopment Plan for the Earthquake Project Area.
As previously described, on January 17, 1994, the Northridge Earthquake occurred with serious consequences in the City. The President declared the earthquake to be a major disaster under federal law. On June 21, 1994, pursuant to the Redevelopment Law, the Disaster Project Law, the California Constitution, and all applicable local codes and ordinances, the City adopted the Redevelopment Plan for the Project by Ordinance No. 1747 and established the Earthquake Project Area. Redevelopment of the Earthquake Project Area pursuant to the Redevelopment Plan to finance:
(1) planning, design and/or redevelopment of areas which in need of maintenance, repair, restoration, demolition or replacement as a result of the Northridge Earthquake; (2) protecting and promoting sound development and redevelopment of earthquake-stricken areas and injurious conditions through the employment of appropriate means; (3) installation of new or repairing or replacing existing public improvements, facilities and utilities in areas which are currently inadequately served with regard to such improvements, facilities and utilities; and (4) other means as determined appropriate by the Former Agency.
Land Use
The following table summarizes the current land use in the Earthquake Project Area by the number of parcels and by assessed value for fiscal year 2025-26. The assessed values shown have been reduced to reflect homeowner exemptions.
Table 1
Earthquake Project Area
Land Use by Net Taxable Assessed Value
Fiscal Year 2025-26
Land Use
Category
# of
Parcels
Net Taxable
Assessed Values
% of
Total
Residential 6,476 $ 9,469,565,651 41.77%
Commercial 1,014 10,351,010,797 45.66
Industrial 161 660,007,864 2.91
Vacant (1) 104 217,707,709 0.96
Miscellaneous 6 15,700,640 0.07
Recreational 13 67,584,739 0.30
Govt. Owned 2 50,328,165 0.22
Institutional 101 277,251,482 1.22
Exempt 357 -- 0.00
Subtotals: 8,234 $ 21,109,157,047 93.11%
Cross Reference (2) 753,621,623 3.32
Unsecured 808,270,899 3.57
Subtotals: $1,561,892,522 6.89%
Totals: 8,234 $22,671,049,569 100.00%
(1) Vacant parcels are not owned by governmental entities and total 18.81 acres according to Assessor’s maps and other County records.
(2) Represent possessory interest values assigned by the County Assessor in recognition of long-term leaseholds of property.
Source: Los Angeles County Assessor; HdL Coren & Cone.
Attachment B
37 As shown in the previous table, land within the Earthquake Project Area is predominantly used for residential (41.77 percent) and commercial (45.66 percent) purposes. See the Fiscal Consultant Report attached hereto as Appendix A for information regarding the categories of land uses.
Largest Property Taxpayers
The following table lists the ten largest payers of property taxes in the Earthquake Project Area for fiscal year 2025-26. See “RISK FACTORS – Concentration of Ownership” for a discussion regarding the risks associated with the concentration of ownership among the ten largest payers of property taxes in the Earthquake Project Area.
Table 2
Earthquake Project Area
Top Ten Property Taxpayers
Fiscal Year 2025-26
Property Owner
Total
Assessed
Value
% of Total
Assessed
Value
% of Total
Incremental
Value Primary Land Use
Douglas Emmett Inc. (1) (2) $1,447,285,053 6.38% 7.69% Commercial Office Buildings California Colorado Center LLC (1) 607,322,519 2.68 3.23 Commercial Office Buildings Water Garden Company LLC (1) 589,318,389 2.60 3.13 Commercial Office Buildings New Santa Monica Beach Hotel LLC (1) (2) 373,310,063 1.65 1.98 Regent Santa Monica Beach Hotel Verbena WRC LP (2) 276,555,444 1.22 1.47 Multi-Family Residential/Commercial Prudential Global Investment Management (2) 227,232,817 1.00 1.21 Multi-Family Residential/Commercial Santa Monica Proper JV LLC (1) (2) 208,318,314 0.92 1.11 Multi-Family Residential/Hotel Hart Arboretum LLC (2) 206,572,218 0.91 1.10 Multi-Family Residential Crown Farm Partners LLC (2) 172,697,446 0.76 0.92 Commercial Office Buildings Santa Monica Hotel Owner LLC (1) 169,387,277 0.75 0.90 Hilton Santa Monica Hotel & Suites Top Taxpayer Total Values: $4,277,999,540
Project Area Assessed Value: $22,671,049,569 18.87%
Project Area Incremental Value: $18,830,844,692 22.72%
(1) The respective total assessed values shown for these property owners include unsecured assessed values. See the Fiscal Consultant Report attached to this Official Statement as Appendix A for a breakdown of total assessed value by secured and unsecured values.
(2) Property has assessment appeals pending on secured and unsecured assessments. See “—Assessment Appeals” below.
Source: Los Angeles County Assessor; HdL Coren & Cone.
Douglas Emmett Inc. Douglas Emmett Inc. (“Douglas Emett”) is a publicly traded real estate investment company that owns and operates Class A office buildings and luxury apartment communities in coastal submarkets of Los Angeles, including Santa Monica, and in Honolulu.
Within the Earthquake Project Area, Douglas Emmet owns several office buildings across 15 parcels.
The buildings are concentrated in downtown Santa Monica near Third Street Promenade, Santa Monica Place, Main Street and Montana Avenue. Douglas Emmett also owns the apartment Attachment B
38 communities branded as 1221 Ocean Avenue and Pacific Plaza within the Earthquake Project Area, both of which appear on the unsecured roll.
California Colorado Center LLC. California Colorado Center LLC, an affiliate of BXP, Inc. (“BXP”), formerly Boston Properties Inc., owns two parcels within the Earthquake Project Area. The parcels have been developed as the Colorado Center. Colorado Center is a six‑building,
1.2‑million‑square‑foot office campus in Santa Monica’s media and entertainment district known as “Silicon Beach.” The campus spans a full 15‑acre city block and serves technology, media, and other office tenants. Colorado Center sits steps from the Metro E Line’s Bergamot Station, providing rail access to downtown Los Angeles. According to BXP, the buildings were acquired in 2016 and have an approximate age between 35 and 42 years. BXP reports that in the previous three years, two significant or large office tenants vacated their space at Colorado Center – HBO and Bird Global/Bird Rides Inc. (a micromobility company that operates shared electric scooters and e‑bikes for short‑distance urban transportation). However, BXP reports that Colorado Center has a current occupancy level of approximately 90 percent.
Water Garden Company LLC. Water Garden Company LLC (“Water Garden Company”), a real estate investment company advised and controlled by J.P. Morgan Asset Management, owns four parcels within the Earthquake Project Area comprising The Water Garden. The Water Garden is a 17‑acre, Class A office campus in Santa Monica’s “Silicon Beach” district, spanning multiple glass office towers and low‑rise buildings around lakes, fountains, and landscaped gardens. The complex includes approximately 1.27 million square feet of office space across eight buildings, with three levels of subterranean parking and extensive outdoor plazas and courtyards for tenants. J.P. Morgan Asset Management placed The Water Garden office campus up for sale in November 2022, reportedly seeking approximately $1.4 billion. To the Successor Agency’s knowledge, J.P. Morgan Asset Management continues to maintain its ownership interest in The Water Garden.
New Santa Monica Beach Hotel LLC. New Santa Monica Beach Hotel LLC (“New Santa Monica Beach Hotel”) is the owner of Regent Santa Monica Beach. The Regent Santa Monica Beach is a luxury oceanfront resort that originally opened in late 2023 following a $4 million renovation that refreshed its guestrooms and corridors, and enhanced accessibility features. The property was previously operated as the Loews Santa Monica Beach Hotel, which closed in early 2023 after the previous owner chose not to renew its lease. The Regent Santa Monica Beach offers 167 high‑end guestrooms and suites, along with resort amenities, and is located on the Santa Monica beachfront near the Santa Monica Pier along Ocean Avenue.
Verbena WRC LP. Verbena WRC LP (“Verbena”), a real estate investment partnership, owns 1420 5th Street in downtown Santa Monica. The property is a mixed‑use, primarily multifamily apartment building with ground‑floor commercial space. It is in the Downtown/Third Street Promenade neighborhood, a short walk from the beach and the Expo light‑rail terminus. Constructed in 2012, the building is a roughly 62,000‑square‑foot mid‑rise complex with approximately 50 residential units.
Prudential Global Investment Management. Prudential Global Investment Management, now known as PGIM, Inc. (“PGIM”), is the asset‑management arm of Prudential Financial, Inc., a publicly traded real estate company. PGIM owns 11 parcels within the Earthquake Project Area consisting of mixed‑use commercial properties, including a residential community branded The Charlie Santa Monica. The Charlie Santa Monica is in the Mid‑City neighborhood of Santa Monica Attachment B
39 and is marketed as a luxury apartment community. It consists of two low‑rise, Class A apartment buildings, along with ground‑floor retail space.
Santa Monica Proper JV LLC. Santa Monica Proper JV LLC (“Santa Monica Proper JV”), is the joint‑venture ownership entity for the Santa Monica Proper Hotel, a luxury lifestyle hotel developed by The Kor Group with Goldman Sachs as the lead capital partner. The hotel occupies a full‑block site in the City’s commercial corridor. Opened in 2019, it offers 267 guest rooms and suites divided between a restored 1920s landmark building and a contemporary new tower.
Amenities include a rooftop pool deck with a restaurant and bar, a lobby lounge, several additional food‑and‑beverage venues, roughly 8,000 square feet of meeting and event space, and nearly 7,000 square feet of ground‑floor retail.
Hart Arboretum LLC. Hart Arboretum LLC is the owner of The Plaza at the Arboretum. The Plaza at the Arboretum is a luxury rental community and convenience retail center. The property consists of five, seven-story buildings, with two central courtyards, with 350 apartment units and approximately 9,500 square feet of retail space.
Crown Farm Partners LLC. Crown Farm Partners LLC (“Crown Farm Partners”) is an affiliate of Northwestern Mutual’s real estate investment structure and functions as a holding vehicle for income‑producing property. Within the Earthquake Project Area, Crown Farm Partners owns a creative‑office campus branded as Colorado Campus. The property consists of multiple low‑rise industrial buildings that have been converted into roughly 73,000–92,000 square feet of office space on a two‑acre site in the City’s Colorado Avenue tech and media corridor.
Santa Monica Hotel Owner LLC. Santa Monica Hotel Owner LLC is the owner of the Hilton Santa Monica Hotel & Suites. The hotel offers 286 guest rooms and suites in an eight‑story building, with many rooms configured as larger suites aimed at families, business travelers, and visitors to the nearby “Silicon Beach” tech hub. Originally built in 1990 and long operated as the DoubleTree Suites by Hilton Santa Monica, the property underwent a two‑year renovation and was relaunched in 2021 as the Hilton Santa Monica Hotel & Suites, with redesigned interiors and upgraded amenities.
Unsecured Assessed Value. Some of the assessed value of property owned by the top ten property taxpayers in the Earthquake Project Area is unsecured value. By its nature, unsecured property is less stable than secured property because it consists of assets that are not permanently affixed to real estate. Accordingly, the assessed values of unsecured property are more likely to fluctuate from year to year due to factors such as depreciation of equipment, relocation or removal of assets, and changes in ownership of these movable items. These inherent characteristics make unsecured property less stable as a revenue source compared to secured property. The Fiscal Consultant notes that unsecured assessed value of property owned by the top ten property taxpayers in the Earthquake Project Area have remained relatively consistent from year to year in the previous [10] years.
See the Fiscal Consultant Report attached hereto as Appendix A for additional information regarding the ten largest property taxpayers.
Attachment B
40 Historical Assessed Values
The following table summarizes the historical assessed values and incremental assessed values of the Earthquake Project Area for the current fiscal year and the previous nine fiscal years.
Table 3
Earthquake Project Area
Historical Assessed Values
Fiscal
Year Secured (1) Unsecured
Total
Assessed
Values (1)
%
Change
Incremental
Assessed
Value (1)
%
Change
2016-17 $13,557,938,474 $485,966,354 $14,043,904,828 -- $10,226,866,951 -- 2017-18 14,240,201,293 486,420,839 14,726,622,132 4.86% 10,912,448,488 6.70% 2018-19 15,326,485,616 535,282,153 15,861,767,769 7.71 12,032,149,988 10.26 2019-20 16,682,592,901 611,624,420 17,294,217,321 9.03 13,455,325,030 11.83 2020-21 17,580,842,320 683,561,849 18,264,404,169 5.61 14,425,804,428 7.21 2021-22 18,161,857,953 680,646,088 18,842,504,041 3.17 15,003,904,300 4.01 2022-23 19,096,239,712 699,398,774 19,795,638,486 5.06 15,948,462,468 6.30 2023-24 20,177,327,691 752,081,586 20,929,409,277 5.73 17,083,258,808 7.12 2024-25 20,909,350,287 789,914,660 21,699,264,947 3.68 17,858,643,973 4.54 2025-26 21,862,778,670 808,270,899 22,671,049,569 4.48 18,830,844,692 5.44 (1) Include state assessed non-unitary utility property.
Source: Los Angeles County Assessor; HdL Coren & Cone.
Levy and Collections
As previously indicated, the County has not adopted a Teeter Plan. As a result, property tax payments are adjusted for delinquencies, redemptions, penalties or interest, and property tax revenues from the Earthquake Project Area reflect actual collections. The following table shows the property tax collection rates for the Earthquake Project Area for fiscal years 2020-21 through 2024-25. [The collections data for fiscal year 2025-26 is not yet available.] Table 4
Earthquake Project Area
Historical Collection Rates
Fiscal
Year
Original
Tax Levy
Current Year
Apportioned
Current Year
Supplemental
Revenue
Prior Year
Collections
Total
Apportioned
Current
Year
Collection %
Total
Collection %
2020-21 $151,109,962 $148,643,756 $3,468,192 $(1,383,395) $150,728,553 98.37% 99.75% 2021-22 151,218,434 149,259,985 4,011,256 (2,281,306) 150,989,935 98.70 99.85 2022-23 162,392,828 158,868,492 5,859,640 (2,820,308) 161,907,824 97.83 99.70 2023-24 178,959,107 175,303,396 5,772,515 (2,730,831) 178,345,081 97.96 99.66 2024-25 188,498,464 182,555,691 2,557,195 (3,932,990) 181,179,896 96.85 96.12 Source: Los Angeles County Assessor; HdL Coren & Cone.
Attachment B
41 Collection rates are a comparison of current year revenues to the adjusted tax roll assessed values at the end of each fiscal year. Prior year collections included supplemental revenues, escaped assessment revenues from prior years and penalties. According to the Fiscal Consultant, the collection rates for the Earthquake Project Area were comparable to the collection rates for other taxing entities within the County for each year shown. Collection rates have not been factored into the projections of Tax Revenues in this Official Statement or in the Fiscal Consultant Report.
Assessment Appeals
Property taxable values determined by the County Assessor may be subject to an appeal by the property owner. There are two basic types of assessment appeals provided for under California law. The first type of appeal, commonly referred to as a base year assessment appeal, involves a dispute on the valuation assigned by the Assessor immediately subsequent to a change in ownership or completion of new construction. If the base year value assigned by the Assessor is reduced, the valuation of the property cannot increase in subsequent years more than 2 percent annually unless and until another change in ownership and/or additional new construction activity occurs. The second type of appeal, commonly referred to as a Proposition 8 appeal, can result if factors occur causing a decline in the market value of the property to a level below the property’s then current taxable value.
Assessment appeals are annually filed with the County Assessment Appeals Board for a hearing and resolution. The resolution of an appeal may result in a reduction to the Assessor’s original taxable value and a tax refund to the property owner. A property owner can file for a regular assessment appeal with the County between July 2 and November 30. Revenue and Taxation Code Section 1604 allows up to two years for an assessment appeal to be decided. Six of the top ten taxpayers within the Earthquake Project Area currently have pending assessment appeals. Additional appeals to assessed values in the Earthquake Project Area may be filed from time to time in the future.
The Successor Agency cannot predict the extent of these appeals or their likelihood of success. However, for purposes of the projections of Tax Revenues shown in this Official Statement and the Fiscal Consultant Report attached hereto as Appendix A, the Fiscal Consultant reviewed appeals data from the County for fiscal years 2020-21 through 2025-26 as of December 24, 2025 to determine the impact pending appeals may have on Tax Revenues in the future. The Fiscal Consultant reports that for such period, as of December 24, 2025, there were 493 appeals pending with respect to assessed values in the Earthquake Project Area seeking a total reduction in assessed value of approximately $7 billion. According to the Fiscal Consultant Report and based on information provided by the County, the Fiscal Consultant estimates that, assuming a 15.04 percent reduction in assessed value (based on the average of actual reductions of assessed value for fiscal years 2020-21 through 2025-26 of 15.04 percent), the assessed values of the Earthquake Project Area would decrease by approximately $857 million resulting in a reduction in Tax Revenues of approximately $8.5 million. The projections of Tax Revenues from the Earthquake Project Area prepared by the Fiscal Consultant and set forth in this Official Statement take into account reductions in assessed values related to pending appeals based on such estimate.
With respect to pending appeals among the ten largest property taxpayers, the Fiscal Consultant reports that the maximum aggregate loss in assessed value is approximately $3.4 billion (or 15.12 percent of the Earthquake Project Area incremental assessed value for fiscal year 2025-26).
See the Fiscal Consultant Report attached to this Official Statement as Appendix A for more Attachment B
42 information with respect to assessment appeals within the Earthquake Project Area, including pending appeals of six of the ten largest property taxpayers.
Table 5
Earthquake Project Area
Historical Assessment Appeals Summary (1)
Total
No. of
Appeals
No. of
Resolved
Appeals
No. of
Successful
Appeals
Average
Reduction
No. of
Pending
Appeals
Value Under
Appeal from
Pending
Appeals
Estimated No.
of Appeals
Allowed
Estimated
Reduction on
Pending
Appeals
Allowed
811 318 259 15.04% 493 $6,993,518,114 402 $856,481,678 (2) (1) As of December 24, 2025.
(2) Estimated loss on pending appeals is included in the projections of Tax Revenues in the Fiscal Consultants Report and this Official Statement as a reduction in assessed values in fiscal year 2026-27. See the Fiscal Consultant Report and “PROJECTED TAX REVENUES AND DEBT SERVICE COVERAGE.”
Source: Los Angeles County Assessor as of December 24, 2025; HdL Coren & Cone.
Resolution of appeals is determined by factors unique to the individual assessment, such as vacancy and rental rates, circumstances of hardship, and comparable sales. An appeal may be withdrawn by the applicant, the County Assessment Appeals Board may deny or modify the appeal at hearing or by stipulation, or the final value may be adjusted to an amount other than the stated opinion of value.
The projections of Tax Revenues included in the Fiscal Consultant Report and this Official Statement assume that no Proposition 8 reductions or restorations will occur in fiscal year 2025-26 or any fiscal year thereafter.
Office Vacancy Rates
The Successor Agency’s ability to make payments on the 2026 Bonds will depend on various factors including the economic strength of the Earthquake Project Area. The Earthquake Project Area is subject to risks generally associated with urban real estate markets, including elevated office vacancies that can depress rental income, reduce market values, and weaken the tax base. High and sustained vacancy levels in income-producing office properties often provide a basis for property owners to seek reductions in assessed value through assessment appeals, particularly where actual income and occupancy no longer support existing tax assessments. Successful appeals can lead to lower assessed values and, consequently, lower property payments, which in turn would reduce incremental taxable value within the Earthquake Project Area and decrease the Tax Revenues allocated to the Redevelopment Property Tax Trust Fund to pay debt service on the 2026 Bonds.
Such market-driven changes in occupancy, valuation, and assessment appeal activity are beyond the Successor Agency’s control.
As previously described, based on the assessed value for fiscal year 2025-26, the land within the Earthquake Project Area is predominantly used for residential (41.77 percent) and commercial (45.66 percent) purposes. In addition, the properties owned by the three largest property taxpayers consist of office buildings that collectively account for approximately 12 percent and 14 percent of the assessed value and the incremental assessed value, respectively, within the Earthquake Project Area.
Attachment B
43 The City’s office market has shifted from a low‑vacancy, landlord‑favored environment before 2020 to a high‑vacancy, tenant‑favored one in 2025, with downtown Santa Monica particularly affected by remote work and corporate relocations. In 2019, Santa Monica’s office vacancy rate was estimated at approximately 13 percent, according to a Los Angeles Business Journal submarket summary, reflecting a tight pre‑pandemic market with strong demand from tech and media tenants. According to CBRE’s quarterly snapshot for the fourth quarter of 2025, the office vacancy rate within the City was approximately 26 percent (for Class A and Class B office space combined) and overall availability was near 36 percent. CBRE further reports that the West Los Angeles submarket (which includes Santa Monica, Century City, Beverly Hills, Westwood, etc.) posted a direct Class A vacancy rate of about 20 percent for the quarter, with overall availability near 31 percent (CBRE does not publish office space vacancy rates for the City broken-out by class). For comparison, CBRE’s Greater Los Angeles snapshot shows metro‑wide vacancy at 25.1 percent for the fourth quarter of 2025.
The projections of Tax Revenues set forth in the Fiscal Consultant Report attached as Appendix A and this Official Statement do not take into reductions in value resulting directly or indirectly from elevated office vacancy rates beyond the estimates described under caption “—Assessment Appeals” above. See “RISK FACTORS—Reduction in Taxable Value” and “— Risks to Real Estate Market.”
Transfers of Ownership
Changes in assessed valuations due to transfers of ownership occurring after the lien date for fiscal year 2025-26 (January 1, 2025) will affect taxable values for fiscal year 2026-27. After January 1, 2025, there have been 60 transfers of single family residential real property and 185 transfers of non-single family residential real property within the Earthquake Project Area where the sales price can be confirmed. Such sales are expected to increase fiscal year 2026-27 assessed values in the Earthquake Project Area by approximately $216 million. The projections of Tax Revenues set forth in the Fiscal Consultant Report attached as Appendix A and this Official Statement include the increase in assessed values in the Earthquake Project Area because of said sales.
New Development
According to the Fiscal Consultant, new development continues to occur within the Earthquake Project Area that is above and beyond changes of ownership. However, no additional assessed value has been included in the projections of Tax Revenues in the Fiscal Consultant Report and this Official Statement with respect to new development within the Earthquake Project Area.
Attachment B
44 PROJECTED TAX REVENUES AND DEBT SERVICE COVERAGE
As shown in Table 3, the total assessed value in the Earthquake Project Area has increased over 60 percent since fiscal year 2016-17 and approximately 20 percent since fiscal year 2021-22.
The Fiscal Consultant prepared projections of Tax Revenues from the Earthquake Project Area assuming 2 percent incremental growth in assessed values of real property commencing in fiscal year 2026-27 and each fiscal year thereafter and they are shown in Table 6. Other assumptions made by the Fiscal Consultant in calculating the projected Tax Revenues are described in the Fiscal Consultants Report. See Appendix A.
Table 6
Earthquake Project Area
Projection of Assessed Values and Tax Revenues
(Assuming 2% Annual Growth)
(000s Omitted)
(1) Represent the County’s Section 2557 charges and administrative collection fees of approximately 1.33 percent of gross tax increment.
See “PROPERTY TAXATION IN CALIFORNIA—Property Tax Collection Procedures—Property Tax Administrative Costs.” (2) Represent Statutory Pass-Through Payments. See “SECURITY FOR THE 2026 BONDS – Statutory Pass-Through Payments.” (3) Projected assessed values for fiscal year 2026-27 include (i) reductions in assessed values of approximately $857 million relating to pending assessment appeals (see “THE EARTHQUAKE PROJECT AREA—Assessment Appeals”), and (ii) increases in assessed values of approximately $216 million relating to transfers of ownership after January 1, 2025 (see “THE EARTHQUAKE PROJECT AREA—Transfers of Ownership”).
Source: HdL Coren & Cone.
Fiscal
Year
Total
Taxable
Assessed
Value
Total
Incremental
Assessed
Value
Gross
Tax
Increment
Less:
County
Administrative
Fees (1)
Less:
Statutory
Pass-Through
Payments (2)
Gross Tax
Revenues
2025-26 $22,671,050 $18,830,845 $189,535 $(2,518) $(50,955) $136,062 2026-27 22,531,034 18,690,829 188,135 (2,499) (50,537) 135,099 2027-28 22,970,596 19,130,391 192,531 (2,558) (52,119) 137,854 2028-29 23,418,950 19,578,745 197,014 (2,617) (53,860) 140,537 2029-30 23,876,271 20,036,066 201,588 (2,678) (55,636) 143,274 2030-31 24,342,738 20,502,533 206,252 (2,740) (57,447) 146,065 2031-32 24,818,535 20,978,330 211,010 (2,803) (59,295) 148,912 2032-33 25,303,847 21,463,642 215,863 (2,868) (61,179) 151,817 2033-34 25,798,866 21,958,661 220,814 (2,933) (63,101) 154,779 2034-35 26,303,785 22,463,580 225,863 (3,001) (65,062) 157,800 2035-36 26,818,803 22,978,598 231,013 (3,069) (67,062) 160,882 2036-37 27,344,121 23,503,916 236,266 (3,139) (69,102) 164,025 2037-38 27,879,945 24,039,740 241,624 (3,210) (71,183) 167,232 2038-39 28,426,486 24,586,281 247,090 (3,282) (73,305) 170,502 2039-40 28,983,957 25,143,753 252,664 (3,357) (75,470) 173,838 2040-41 29,552,578 25,712,374 258,351 (3,432) (77,678) 177,241 2041-42 30,132,572 26,292,367 264,151 (3,509) (79,930) 180,711 Attachment B
45 Table 7 shows projected debt service coverage based on total debt service on the 2026 Bonds assuming 2 percent incremental growth in assessed values of real property commencing in fiscal year 2026-27 and each fiscal year thereafter.
Table 7
Projected Debt Service Coverage
(Assuming 2% Annual Growth)
(000s Omitted)
(1) The Successor Agency’s obligation to make payments under the BofA Credit Agreement from Tax Revenues is senior to the 2026 Bonds only to the extent such revenues represent the former Housing Set-Aside from the Earthquake Project Area. (2) Represents Bond Year debt service. See “SECURITY FOR THE 2026 BONDS—Recognized Obligation Payment Schedule” for a description of the Successor Agency’s covenant to file Recognized Obligation Payment Schedules and the timing of anticipated distributions of Tax Revenues to the Successor Agency.
Source: HdL Coren & Cone; Stifel, Nicolaus & Company, Incorporated.
RISK FACTORS
The following information should be considered by prospective investors in evaluating the 2026 Bonds. However, the following does not purport to be an exhaustive listing of risks and other considerations which may be relevant to investing in the 2026 Bonds. In addition, the order in which the following information is presented is not intended to reflect the relative importance of any such risks.
Given the relative magnitude of Tax Revenues generated within the Earthquake Project Area and the assumption herein and the Fiscal Consultant Report that the Downtown Project Area, the Ocean Park Project Area 1A and the Ocean Park Project Area 1B will not generate tax increment revenues in the future, the following discussion is limited to the Earthquake Project Area.
Fiscal
Year
Gross Tax
Revenues
Less:
BofA Credit
Agreement
Payments (1)
Tax Revenues
Available for
Debt Service
2026 Bonds
Debt Service (2)*
Debt Service
Coverage*
2025-26 $136,062
2026-27 135,099
2027-28 137,854
2028-29 140,537
2029-30 143,274
2030-31 146,065
2031-32 148,912
2032-33 151,817
2033-34 154,779
2034-35 157,800
2035-36 160,882
2036-37 164,025
2037-38 167,232
2038-39 170,502
2039-40 173,838
2040-41 177,241
2041-42 180,711
Attachment B
46 Reduction in Taxable Value
Tax Revenues allocated to the Redevelopment Property Tax Trust Fund are determined by the amount of incremental taxable value in a project area and the current rate or rates at which property in the project area is taxed. The reduction of taxable values of property in the Earthquake Project Area caused by economic factors beyond the Successor Agency’s control, such as relocation out of the Earthquake Project Area by one or more major property owners, sale of property to a nonprofit corporation exempt from property taxation or the complete or partial destruction of such property caused by, among other eventualities, earthquake or other natural disaster, could cause a reduction in the Tax Revenues that provide for the repayment of and secure the 2026 Bonds. Such reduction in Tax Revenues could have an adverse effect on the Successor Agency’s ability to make timely payments of principal of and interest on the 2026 Bonds.
As described in greater detail under the caption “PROPERTY TAXATION IN CALIFORNIA—Article XIIIA of the State Constitution,” Article XIIIA provides that the full cash value base of real property used in determining taxable value may be adjusted from year to year to reflect the inflation rate, not to exceed a 2 percent increase for any given year, or may be reduced to reflect a reduction in the consumer price index, comparable local data or any reduction in the event of declining property value caused by damage, destruction or other factors (as described above).
Such measure is computed on a calendar year basis. Any resulting reduction in the full cash value base over the term of the 2026 Bonds could reduce Tax Revenues available to pay debt service on the 2026 Bonds when due.
In addition to the other limitations on and required application under the Dissolution Act of Tax Revenues on deposit in the Redevelopment Property Tax Trust Fund, as described in this Official Statement, the State electorate or Legislature could adopt a constitutional or legislative property tax reduction with the effect of reducing Tax Revenues allocated to the Redevelopment Property Tax Trust Fund and available to the Successor Agency. Although the federal and State Constitutions include clauses generally prohibiting the Legislature’s impairment of contracts, there are also recognized exceptions to these prohibitions. There is no assurance that the State electorate or Legislature will not at some future time approve additional limitations that could reduce the Tax Revenues and adversely affect the source of repayment and security of the 2026 Bonds.
Concentration of Ownership
Based upon the fiscal year 2025-26 locally assessed tax roll reported by the County Assessor, the ten largest property taxpayers in the Earthquake Project Area owned approximately 18.87 percent of the assessed value within the Earthquake Project Area and approximately 22.72 percent of the total incremental assessed value within the Earthquake Project Area. Concentration of ownership presents a risk in that if one or more of the largest property owners were to default on their taxes, or were to successfully appeal the tax assessments on property within the Earthquake Project Area, a substantial decline in Tax Revenues could result. Six of the ten largest property taxpayers within the Earthquake Project Area have pending assessment appeals. The Fiscal Consultant reports that the maximum aggregate loss in assessed value from pending appeals among the ten largest property taxpayers is approximately $3.4 billion (or 15.12 percent of the Earthquake Project Area incremental assessed value for fiscal year 2025-26). See the caption “THE EARTHQUAKE PROJECT AREA— Largest Property Taxpayers” for more information about these ten largest property taxpayers and see “THE EARTHQUAKE PROJECT AREA—Assessment Appeals” for information as to pending appeals of tax assessments.
Attachment B
47 Risks to Real Estate Market
The Successor Agency’s ability to make payments on the 2026 Bonds is dependent upon the economic strength of the Earthquake Project Area. The general economy of the Earthquake Project Area is subject to all of the risks generally associated with urban real estate markets. Real estate prices and development may be adversely affected by changes in general economic conditions, fluctuations in the real estate market and interest rates, unexpected increases in development costs, the supply of or demand for competitive properties in such area, the market value of property in the event of sale or foreclosure and other similar factors. Furthermore, real estate development within the Earthquake Project Area could be adversely affected by limitations of infrastructure or future governmental policies, including governmental policies to restrict or control development, changes in real estate tax rates and other operating expenses, zoning laws and laws relating to threatened and endangered species and hazardous materials and fiscal policies, as well as natural disasters (including, without limitation, earthquakes, wildfires and floods), which may result in uninsured losses. In addition, if there is a decline in the general economy of the Earthquake Project Area, the owners of property within the Earthquake Project Area may be less able or less willing to make timely payments of property taxes or may petition for reduced assessed valuation causing a delay or interruption in the receipt of Tax Revenues by the Successor Agency from the Earthquake Project Area.
Because assessed values do not necessarily indicate fair market values, the declines in fair market values in recent years may have been even greater than the declines in assessed valuations, although it is also possible that market values could be greater than assessed valuations at any given time. No assurance can be given that the individual parcel owners will pay property taxes in the future or that they will be able to pay such taxes on a timely basis. See the caption “—Bankruptcy and Foreclosure” for a discussion of certain limitations on the City’s ability to pursue judicial proceedings with respect to delinquent parcels.
Reduction in Inflation Rate
As described in greater detail previously, Article XIIIA of the State Constitution provides that the full cash value of real property used in determining taxable value may be adjusted from year to year to reflect the rate of inflation, not to exceed a 2 percent increase for any given year, or may be reduced to reflect a reduction in the consumer price index or comparable local data. Such measure is computed on a calendar year basis. Because Article XIIIA limits inflationary assessed value adjustments to the lesser of the actual inflationary rate or 2 percent, there have been years in which the assessed values were adjusted by actual inflationary rates, which were less than 2 percent. The Successor Agency is unable to predict if any adjustments to the full cash value of real property within the Earthquake Project Area, whether an increase or a reduction, will be realized in the future. See “PROPERTY TAXATION IN CALIFORNIA—Article XIIIA of the State Constitution.” Levy and Collection of Taxes
The Successor Agency has no independent power to levy or collect property taxes. Any reduction in the tax rate or the implementation of any constitutional or legislative property tax decrease could reduce the Tax Revenues, and accordingly, could have an adverse impact on the security for and the ability of the Successor Agency to pay debt service on the 2026 Bonds when due.
Attachment B
48 Likewise, delinquencies in the payment of property taxes by the owners of land in the Earthquake Project Area, and the impact of bankruptcy proceedings on the ability of taxing agencies to collect property taxes, could have an adverse effect on the Successor Agency’s ability to make timely payments on the 2026 Bonds. As discussed under the caption “PROPERTY TAXATION IN CALIFORNIA—Property Tax Collection Procedures—Delinquencies,” the County has not adopted a Teeter Plan. Accordingly, the amount of tax increment revenues that are allocated to the Successor Agency depends upon the actual collections of taxes within the Earthquake Project Area. The Successor Agency receives adjustments for redemption payments on delinquent collections. In addition, the Successor Agency receives supplemental taxes and refunds, if any, are deducted from amounts available for deposit to the Redevelopment Property Tax Trust Fund. Substantial delinquencies in the payment of property taxes could impair the timely receipt by the Successor Agency of Tax Revenues.
City Declaration of Fiscal Distress
On September 9, 2025, the City Council adopted a resolution identifying local fiscal distress (the “Fiscal Distress Resolution”) in response to a serious and worsening financial condition driven by both decreased revenues and increased liabilities, including ongoing litigation related to former City employee Eric Uller. The resolution was adopted as a tool to support a broader strategy for ongoing fiscal stability and an overall City realignment plan.
The City is a full‑service municipality that has historically relied on tourism- and travelrelated tax revenues, but it experienced a sudden 26.8 percent decline in General Fund revenues in fiscal year 2020‑21 due to the COVID‑19 pandemic. The decline prompted a 23.9 percent budget reduction and the elimination of 299 permanent and 122 temporary positions. Services remain below pre‑pandemic levels, numerous capital projects are unfunded, and the City’s fiscal year 2025‑26 General Fund budget includes $484.3 million in adjusted expenditures compared to $473.5 million in expected revenue, with forecasts showing a structural deficit and uncertainty that revenues will meet projections. Against this backdrop, the City has had repeated interactions with other governmental entities, regulatory bodies, and grant funding agencies, which revealed that the City’s current fiscal condition was not widely understood. The Fiscal Distress Resolution was adopted with the intention of filling that gap and serve as a clear factual statement of the City’s fiscal distress when seeking regulatory relief and funding.
A central driver of the City’s financial distress is the Uller matter. To date, the City has paid more than $229 million in settlements tied to alleged sexual abuse by former City employee Eric Uller occurring 20 to 30 years ago, largely funded by drawing down General Fund reserves and borrowing over $52 million from other City funds, leaving reserves at only 61 percent of pre‑pandemic levels; [178] additional claimants are seeking several million dollars more. These liabilities have severely depleted the City’s financial resources and are explicitly recognized in the Fiscal Distress Resolution as a key factor in the deterioration of the City’s fiscal condition, especially in light of California Assembly Bill 218 (2019) (“AB 218) and California Assembly Bill 452 (2023), which effectively eliminated the statute of limitations for sexual abuse claims. See the caption “CONCLUDING INFORMATION—Litigation” for additional information regarding the claims against the City relating to Uller.
Attachment B
49 In response, under the Fiscal Distress Resolution, the City Council updated its fiscal policy (originally adopted during the pandemic) to temporarily reduce the required General Fund operating contingency reserve from 15 percent to 12.5 percent of the following year’s operating and capital budget and subsidies, with a commitment to restore the reserve by 0.5 percent per year back to 15 percent if revenues recover. The Fiscal Distress Resolution also acknowledges broader economic risks, including potential federal policy changes (tariffs, mass deportations, tax cuts, deregulation) and a persistently inflationary environment with rising labor and goods costs, which compound the City’s challenges.
Taken together, these conditions—structural deficits, depleted reserves, significant interfund borrowing, uncertain revenues, rising costs, and substantial abuse-related liabilities—led the City Council to declare that Santa Monica is experiencing fiscal distress and to direct the City Manager to take all necessary steps to address, alleviate, and mitigate the distress.
As previously described, under the Dissolution Act, the Successor Agency is a separate public entity from the City, two entities shall not merge, and the liabilities of the Former Agency will not be transferred to the City nor will the assets of the Former Agency become assets of the City.
Furthermore, the 2026 Bonds are special obligations of the Successor Agency; and, except as provided in the Indenture, they are payable solely from Tax Revenues. However, a city’s financial distress can put downward pressure on assessed values over time by eroding the very services and conditions that make property desirable. As a city draws down reserves, delays capital projects, and struggles to maintain service levels, buyers and investors may begin to discount properties in that jurisdiction relative to nearby communities with stronger fiscal positions. At the margin, concerns about higher future taxes, reduced public safety and amenities and potential declines in the quality of infrastructure can weaken demand, which may be reflected in lower market prices and, over time, in reduced assessed values through the normal assessment and appeal process. Over an extended period of financial distress, the combination of service cuts, visual signs of underinvestment, and uncertainty about future policy responses can reinforce this effect, creating a feedback loop in which fiscal stress and softening assessments exacerbate one another.
As part of the Realignment Program, the City has committed approximately $60 million from reserves over the next two years to support business activity, public safety, and core maintenance, including doubling the size of the downtown police unit, enhancing visible security in key commercial areas, and investing in streetscape and corridor improvements to make business districts more attractive. The City is also streamlining a previously burdensome permitting process and reducing costs for outdoor dining to encourage new investment and faster tenant build‑outs. It is simultaneously pursuing operational budget adjustments, debt refinancing, and other cash‑saving measures that are projected to generate more than $30 million in additional revenue and cost savings over the next two years. These efforts are intended to help return the City’s General Fund to a positive structural position by mid‑2027. No assurance can be provided that the City’s finances will not materially adversely affect Tax Revenues in the future.
State Budget Issues
AB X1 26 and AB 1484 were enacted by the State Legislature and Governor as trailer bills necessary to implement provisions of the State’s budget acts for its fiscal years 2011-12 and 2012-13, respectively, and constituted efforts to address structural deficits in the State general fund budget. In general terms, these bills implemented a framework to transfer cash assets which were previously held by redevelopment agencies to cities, counties and special districts to fund core public services, Attachment B
50 with assets transferred to schools offsetting State general fund costs (then projected savings of $1.5 billion). There can be no assurance that additional legislation will not be enacted in the future to additionally implement provisions relating to the State budget or otherwise that may affect successor agencies or tax increment revenues, including Tax Revenues. See the caption “—Changes in the Law.”
SB 107, which made extensive amendments to the Dissolution Act, was enacted following the adoption of the State fiscal year 2015-16 budget, after having initially been presented as AB 113, a trailer bill to the State fiscal year 2015-16 budget. SB 107 changed the process for submitting Recognized Obligation Payment Schedules from a six-month to an annual process, authorized successor agencies to submit and obtain DOF approval of a Last and Final ROPS to govern all remaining payment obligations of successor agencies, altered the provisions governing the distribution of Redevelopment Property Tax Trust Fund moneys attributable to pension and State Water Project tax rate overrides and eliminated the impact of financial and time limitations in redevelopment plans for purposes of paying enforceable obligations, among other changes to the Dissolution Act. These statutory amendments impact the manner in which successor agencies claim Redevelopment Property Tax Trust Fund moneys for enforceable obligations and, for some successor agencies, impact the amount of Redevelopment Property Tax Trust Fund moneys that will be available for payment of a successor agency’s enforceable obligations.
Information about the State budget is regularly available at various State-maintained websites. Text of proposed and adopted budgets may be found at the website of the DOF, http://www.dof.ca.gov, under the heading “California Budget.” An impartial analysis of the budget is posted by the Legislative Analyst’s Office (the “LAO”) at http://www.lao.ca.gov. In addition, various State official statements, many of which contain a summary of the current and past State budgets and the impact of those budgets on cities in the State, may be found at the website of the State Treasurer, http://www.treasurer.ca.gov. The information referred to is prepared by the respective State agency maintaining each website and not by the Successor Agency or the Underwriter, and the Successor Agency and the Underwriter take no responsibility for the continued accuracy of these Internet addresses or for the accuracy, completeness or timeliness of information posted thereon, and such information is not incorporated herein by these references.
For additional information regarding the 2025-26 State Budget, see the DOF’s website at www.dof.ca.gov and the LAO’s website at www.lao.ca.gov.
None of the websites or webpages that are referenced above is in any way incorporated into this Official Statement. They are cited for informational purposes only. Neither the Successor Agency nor the Underwriter makes any representation whatsoever as to the accuracy or completeness of any of the information on such websites.
There can be no assurance that additional legislation will not be enacted in the future to additionally implement provisions relating to the State budget or otherwise that may affect successor agencies or tax increment revenues.
Recognized Obligation Payment Schedule
The Dissolution Act provides that, commencing on the date that the first Recognized Obligation Payment Schedule is valid thereunder, only those obligations listed in the Recognized Obligation Payment Schedule may be paid by the Successor Agency from the funds specified in the Attachment B
51 Recognized Obligation Payment Schedule. Before each February 1, with respect to the following fiscal year, the Dissolution Act requires successor agencies to prepare and submit to the successor agency’s oversight board and the DOF for approval, a Recognized Obligation Payment Schedule pursuant to which enforceable obligations (as described under the caption “SECURITY FOR THE 2026 BONDS—Recognized Obligation Payment Schedule”) of the successor agency are listed, together with the source of funds to be used to pay for each enforceable obligation. Tax Revenues will not be distributed from the Redevelopment Property Tax Trust Fund by the County AuditorController to the Successor Agency’s Redevelopment Obligation Retirement Fund without a duly approved and effective Recognized Obligation Payment Schedule obtained in sufficient time prior to the June 1 property tax distribution date. See the caption “SECURITY FOR THE 2026 BONDS— Recognized Obligation Payment Schedule.” In the event that the Successor Agency fails to file a Recognized Obligation Payment Schedule with respect to a fiscal year, the availability of Tax Revenues to the Successor Agency could be adversely affected for such period.
In the event that a successor agency fails to submit to the DOF an oversight board-approved Recognized Obligation Payment Schedule complying with the provisions of the Dissolution Act within five business days of the date upon which the Recognized Obligation Payment Schedule is to be used to determine the amount of property tax allocations, the DOF may determine if any amount should be withheld by the applicable county auditor-controller for payments for enforceable obligations from distribution to taxing entities pursuant to clause (iv) below, pending approval of a Recognized Obligation Payment Schedule. Upon notice provided by the DOF to the county auditorcontroller of an amount to be withheld from allocations to taxing entities, the county auditorcontroller must distribute to taxing entities any moneys in the Redevelopment Property Tax Trust Fund in excess of the withholding amount set forth in the notice, and the county auditor-controller must distribute withheld funds to the successor agency only in accordance with a Recognized Obligation Payment Schedule when and as approved by the DOF.
Typically, under the Redevelopment Property Tax Trust Fund distribution provisions of the Dissolution Act, the county auditor-controller is to distribute funds for each six-month period in the following order specified in Section 34183 of the Dissolution Act:
(i) First, to each local agency and school entity, to the extent applicable, amounts required for pass-through payments that such entity would have received under provisions of the Redevelopment Law, as those provisions read on January 1, 2011, including any contractual and statutory pass-through payments. Pension or State Water Project override revenues that are not pledged to or not needed for debt service on successor agency debt will be allocated and paid to the entity that levies the override;
(ii) Second, to the Successor Agency for payments listed in its Recognized Obligation Payment Schedule;
(iii) Third, to the Successor Agency for the administrative cost allowance, as defined in the Dissolution Act; and
(iv) Fourth, the remainder is distributed to the taxing entities in an amount proportionate to such taxing entity’s share of property tax revenues in the tax rate area in such fiscal year (without adjustment for pass-through obligations).
Attachment B
52 If the Successor Agency does not submit an Oversight Board-approved Recognized Obligation Payment Schedule within five business days of the date upon which the Recognized Obligation Payment Schedule is to be used to determine the amount of property tax allocations and the DOF does not provide a notice to the County Auditor-Controller to withhold funds from distribution to taxing entities, amounts in the Redevelopment Property Tax Trust Fund for such fiscal year would be distributed to taxing entities pursuant to clause (iv) above.
Additionally, regardless of whether Redevelopment Property Tax Trust Fund moneys are sufficient to pay all contractual and statutory pass-through payments and enforceable obligations, the County Auditor-Controller will disburse moneys to taxing agencies for contractual and statutory pass-through payments prior to disbursing any moneys to the Successor Agency for debt service on the 2026 Bonds or other enforceable obligations unless the Successor Agency files a Notice of Insufficiency in accordance with the procedure described in the Dissolution Act. The Successor Agency has not undertaken the requisite procedures to subordinate the Statutory Pass-Through Payments to the payment of debt service on the 2026 Bonds and, therefore, the pledge of Tax Revenues to secure the payment of debt service on the 2026 Bonds when due is subordinate to the Statutory Pass-Through Payments.
See the caption “SECURITY FOR THE BONDS—Recognized Obligation Payment Schedule” and Appendix B for a description of the Successor Agency’s covenant in the Indenture to file Recognized Obligation Payment Schedules.
The Dissolution Act also imposes certain penalties if the Successor Agency does not timely submit a Recognized Obligation Payment Schedule for each fiscal year. Specifically, a Recognized Obligation Payment Schedule must be submitted by the Successor Agency, after approval by the Oversight Board, to the County Administrative Officer, the County Auditor-Controller, the DOF and the State Controller by February 1 in each year with respect to the following Fiscal Year. If the Successor Agency does not submit an Oversight Board-approved Recognized Obligation Payment Schedule by such deadline, the City will be subject to a civil penalty equal to $10,000 per day for every day that the schedule is not submitted. Additionally, the Successor Agency’s administrative cost allowance will be reduced by 25 percent for any fiscal year for which the Successor Agency does not submit an Oversight Board-approved Recognized Obligation Payment Schedule within 10 days of the February 1 deadline. If the Successor Agency fails to submit a Recognized Obligation Payment Schedule by the February 1 deadline, any creditor of the Successor Agency or the DOF or any affected taxing entity shall have standing to, and may request a writ of mandate to, require the Successor Agency to immediately perform this duty. The Successor Agency has submitted each prior Recognized Obligation Payment Schedule on or before the statutory deadline.
Last and Final Recognized Obligation Payment Schedule
SB 107 amended the Dissolution Act to permit certain successor agencies with limited remaining obligations to submit a Last and Final ROPS for approval by the oversight board and the DOF. The Last and Final ROPS must list the remaining enforceable obligations of the successor agency, including the total outstanding obligation amount and a schedule of remaining payments for each enforceable obligation. The Last and Final ROPS shall also establish the maximum amount of Redevelopment Property Tax Trust Funds to be distributed to the successor agency for each remaining fiscal year until all obligations have been fully paid.
Attachment B
53 Any revenues, interest, and earnings of the successor agency, including proceeds from the disposition of real property, that are not authorized for use pursuant to the approved Last and Final ROPS shall be remitted to the county auditor-controller for distribution to the affected taxing entities.
A successor agency shall not expend more than the amount approved for each enforceable obligation listed on the approved Last and Final ROPS and once the successor agency has received Redevelopment Property Tax Trust Fund moneys equal to the amount of the total outstanding obligations approved in the Last and Final ROPS, the county auditor-controller will not allocate further Redevelopment Property Tax Trust Fund moneys to the successor agency.
Successor agencies may only amend an approved Last and Final ROPS twice. If the Successor Agency prepares and obtains DOF approval of a Last and Final ROPS and subsequently amends the Last and Final ROPS two times, the Successor Agency may be unable to make unexpected or unscheduled reserve deposits or payments due to the Insurers of 2026 Bonds or other Parity Debt.
See the caption “SECURITY FOR THE 2026 BONDS—Last and Final Recognized Obligation Payment Schedule” for a discussion of the requirements for a Last and Final ROPS and the mechanics for allocation of Redevelopment Property Tax Trust Fund moneys pursuant to an approved Last and Final ROPS.
The Successor Agency is not currently eligible to file a Last and Final ROPS because the payments under the BofA Credit Agreement vary based on a variable rate of interest and are not set forth in a payment schedule. The loan outstanding under the BofA Credit Agreement matures on June 1, 2028. The Successor Agency has covenanted in the Indenture not to submit to the Oversight Board or the California Department of Finance a request for the final amendment permitted for its Last and Final ROPS without the prior written consent of the 2026 Insurer unless all amounts that could become due to the 2026 Insurer are included as a line item on the Last and Final ROPS, as amended.
Parity and Subordinate Debt
The Indenture permits the issuance by the Successor Agency of certain refunding indebtedness which may have a lien upon the Tax Revenues on parity with the lien of the 2026 Bonds. The Successor Agency has covenanted not to issue any additional obligations with a lien on Tax Revenues senior to the lien of the 2026 Bonds. See “SECURITY FOR THE 2026 BONDS— Limitations on Additional Indebtedness” for a description of the conditions precedent to issuance of such additional obligations. The Indenture does not limit the issuance of tax allocation bonds or other indebtedness secured by a pledge of tax increment revenues subordinate to the pledge of Tax Revenues securing the 2026 Bonds.
Challenges to Dissolution Act
Several successor agencies, cities and other entities have filed judicial actions challenging the legality of various provisions of the Dissolution Act. One such challenge is an action filed on August 1, 2012, by Syncora Guarantee Inc. and Syncora Capital Assurance Inc. (collectively, “Syncora”) against the State, the State Controller, the State Director of Finance, and the County Auditor-Controller on his own behalf and as the representative of all other County Auditors in the State (Superior Court of the State of California, County of Sacramento, Case No. 34-2012- 80001215). Syncora is a monoline financial guaranty insurer domiciled in the State of New York Attachment B
54 and has provided bond insurance and other related insurance policies for bonds issued by former California redevelopment agencies.
The complaint alleged that the Dissolution Act, and specifically the “Redistribution Provisions” thereof (i.e., California Health and Safety Code sections 34172(d), 34174, 34177(d), 34183(a)(4), and 34188) violate the “contract clauses” of the United States and California Constitutions (U.S. Const. art. 1, §10, cl.1; Cal. Const. art. 1, §9) because they unconstitutionally impair the contracts among the former redevelopment agencies, bondholders and Syncora. The complaint also alleged that the Redistribution Provisions violate the “Takings Clauses” of the United States and California Constitutions (U.S. Const. amend. V; Cal Const. art. 1 §19) because they unconstitutionally take and appropriate bondholders’ and Syncora’s contractual right to critical security mechanisms without just compensation.
After hearing by the Sacramento County Superior Court on May 3, 2013, the Superior Court ruled that Syncora’s constitutional claims based on contractual impairment were premature. The Superior Court also held that Syncora’s takings claims, to the extent based on the same arguments, were also premature. Pursuant to a Judgment stipulated to by the parties, the Superior Court on October 3, 2013, entered its order dismissing the action. The Judgment, however, provides that Syncora preserves its rights to reassert its challenges to the Dissolution Act in the future. The Successor Agency does not guarantee that any reassertion of challenges by Syncora or that the final results of any of the judicial actions brought by others challenging the Dissolution Act will not result in an outcome that may have a material adverse effect on the Successor Agency’s ability to timely pay debt service on the 2026 Bonds.
Bankruptcy and Foreclosure
The payment of the property taxes from which Tax Revenues are derived and the ability of the County to foreclose the lien of a delinquent unpaid tax may be limited by bankruptcy, insolvency or other laws generally affecting creditors’ rights (such as the Soldiers’ and Sailors’ Relief Act of 1940 discussed below) or by the laws of the State relating to judicial foreclosure. In addition, the prosecution of a foreclosure action could be delayed due to crowded local court calendars or delays in the legal process. The various legal opinions to be delivered concurrently with the delivery of the 2026 Bonds (including Bond Counsel’s approving legal opinions) will be qualified as to the enforceability of the various legal instruments by bankruptcy, insolvency, reorganization, moratorium, or other similar laws affecting creditors’ rights, by the application of equitable principles and by the exercise of judicial discretion in appropriate cases.
Although bankruptcy proceedings would not cause the liens to become extinguished, bankruptcy of a property owner could result in a delay in prosecuting superior court foreclosure proceedings because federal bankruptcy laws may provide for an automatic stay of foreclosure and sale of tax sale proceedings. Such delay would increase the possibility of delinquent tax installments not being paid in full and thereby increase the likelihood of a delay or default in payment of the principal of and interest on the 2026 Bonds. Moreover, if the value of the subject property is less than the lien of property taxes, such excess could be treated as an unsecured claim by the bankruptcy court. Further, should remedies be exercised under the federal bankruptcy laws, payment of property taxes may be subordinated to bankruptcy law priorities. Thus, certain claims may have priority over property taxes in a bankruptcy proceeding even though they would not outside of a bankruptcy proceeding.
Attachment B
55 In addition, the United States Bankruptcy Code might prevent moneys on deposit in the Redevelopment Obligation Retirement Fund from being applied to pay interest on the 2026 Bonds and/or to redeem 2026 Bonds if bankruptcy proceedings were brought by or against a landowner and if the court found that such landowner had an interest in such moneys within the meaning of Section 541(a)(1) of the United States Bankruptcy Code.
Other laws generally affecting creditors’ rights or relating to judicial foreclosure may affect the ability to enforce payment of property taxes or the timing of enforcement thereof. For example, the Soldiers and Sailors Civil Relief Act of 1940 affords protections such as a stay in enforcement of the foreclosure covenant, a six-month period after termination of military service to redeem property sold to enforce the collection of a tax or assessment and a limitation on the interest rate on the delinquent tax or assessment to persons in military service if a court concludes that the ability to pay such taxes or assessments is materially affected by reason of such service.
Estimated Revenues
In estimating that Tax Revenues will be sufficient to pay debt service on the 2026 Bonds, the Successor Agency has made certain assumptions with regard to present and future assessed valuation in the Earthquake Project Area, future tax rates and percentage of taxes collected. The Successor Agency believes these assumptions to be reasonable, but there is no assurance that these assumptions will be realized. To the extent that the assessed valuation and the tax rates are less than expected, the Tax Revenues available to pay debt service on the 2026 Bonds will be less than those projected and such reduced Tax Revenues may be insufficient to provide for the payment of principal of, premium (if any) and interest on the 2026 Bonds.
Hazardous Substances
While governmental taxes, assessments, and charges are a common claim against the value of a taxable parcel, other less common claims may be relevant. One example is a claim with regard to a hazardous substance. The Successor Agency has no knowledge of any hazardous substances located in the Earthquake Project Area that, in its judgment, are reasonably likely to result in a material and adverse impact on total assessed values in the Earthquake Project Area. However, the Successor Agency has not undertaken, and does not intend to undertake, an independent investigation of the Earthquake Project Area for the purpose of identifying hazardous substances. However, the presence of hazardous substances with such an effect is possible, and there can be no assurance that previously unknown conditions will not be discovered in the future.
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 taxable 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 State and local laws with regard to hazardous substances are also stringent and similar. Under many of these laws, the owner (or operator) is obligated to remedy a hazardous substance condition of property whether or not the owner (or operator) has anything to do with creating or handling the hazardous substance. The effect, therefore, should any of the taxable 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. Further, such liabilities may arise not simply Attachment B
56 from the existence of a hazardous substance but from the method of handling it. All of these possibilities could significantly affect the value of the property that is realizable upon a delinquency and foreclosure.
Further, it is possible that liabilities may arise in the future with respect to any of the taxable 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 only 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 taxable parcel that is realizable upon a delinquency.
Natural Disasters
The City, like all California communities, may be subject to unpredictable seismic activity, high winds, wildfires, landslides or flooding in the event of unseasonable rainfall or other natural disasters. Seismically induced ground shaking has affected the City in the past and is expected to affect the City in the future.
Seismic Risks. Seismic activity represents a potential risk for damage to buildings, roads, and property within the Earthquake Project Area. The City is crossed by an active west–east trending fault system commonly referred to as the Santa Monica fault. The Santa Monica fault is a northdipping, high angle fault that extends for a distance of approximately 25 miles through the communities of Beverly Hills, Westwood, Santa Monica, and Pacific Palisades, before going offshore parallel to the Malibu coastline. The Santa Monica fault is one segment of a much longer system of faults, referred to as the Southern Frontal Fault System, that forms the southern boundary of the Transverse Ranges geomorphic province. Given its length, rupture on the Santa Monica fault on its own is estimated to be capable of generating a magnitude 6.8 earthquake.
Outside of the City, the San Andreas fault is the major active fault in the State, which is approximately 40 miles from the City. Several active or potentially active faults are located closer to the City, including the San Jacinto, the Palos Verdes, the Malibu Coast, and the Newport-Inglewood faults. Major recent earthquakes in the region occurred in 1987 (Whittier Narrows), 1994 (Northridge), and 2019 (Ridgecrest). The Northridge 1994 earthquake had a magnitude of 6.7 on the Richter scale and dramatically affected the City.
In addition, land that is susceptible to seismic activity may be subject to liquefaction during the occurrence of such event. According to the City’s Local Hazards Mitigation Plan, certain areas within the City are susceptible to liquefaction in the event of an earthquake. The areas include: (i) the coastline; (ii) the southwestern limits of the City, extending northward from Marina del Rey to the City’s southern boundary across Marine Park and eastward to near the southwestern corner of the Santa Monica airport; (iii) near the northeastern corner of the City, between Brentwood Country Club to the north and just south of Santa Monica Boulevard on the south; and (iv) an area approximately between Olympic Boulevard to the north, Pearl Street to the south, Gateway Boulevard on the east, and the southeast projection of Franklin Street on the west. A portion of the Earthquake Project Area is within the liquefaction hazard zones in the City. This fourth area extends into the east-central edge of the City. The City’s coastal bluffs and hillsides may also be subject to landslides and slope failures.
Attachment B
57 Offshore earthquakes off the coast of the City could also cause tsunamis and seiche. A tsunami is a sea wave generated by a submarine earthquake, landslide or volcanic eruption. A seiche is another form of earthquake-or landslide-induced wave or oscillation that can be generated in an enclosed body of water such as a lagoon or harbor. Certain parts of the City are within a tsunami hazard zone designated by the California Geological Survey. The zone within the City extends approximately 700 to 1,500 feet inland from the coast and places all structures and parking lots west of the Pacific Coast Highway and Appian Way within the area susceptible to tsunami inundation.
These structures include the Santa Monica Pier and buildings associated with it, in addition to the residential and commercial buildings on the west side of the roads mentioned above. North of the Pier, the inundation limits are defined by the base of the sea bluffs, as the height of the bluffs provide a natural constraint to the inland advancement of the runup. According to the City’s Local Hazards Mitigation Plan, significant damage to the base of the bluffs and Pacific Coast Highway can be expected. In the southwestern portion of the City, the inundation limits extend locally to Neilson Way. This places several multi-family residential structures within the hazard zone. In addition to the Pier, City-owned or managed facilities located in the inundation hazard zone include Beach Maintenance, the Santa Monica Urban Runoff Recycling Facility, and the Annenberg Community Beach House. Tsunamis and seiches have both caused damage in the Santa Monica area in the past.
An earthquake along one of the faults in the vicinity of the City, either known or unknown, could cause a number of casualties and extensive property damage, including within the Earthquake Project Area. The effects of such an earthquake could be aggravated by aftershocks and secondary effects such as fires, landslides, liquefaction and other threats to public health, safety and welfare. If an earthquake were to substantially damage or destroy taxable property within the Earthquake Project Area, the assessed valuation of such property would be reduced. Such a reduction of assessed valuations could result in a reduction of the Tax Revenues.
Flood Risks. A relatively small portion of the City along the coastline is within a 100-year flood zone susceptible to storm flooding and storm surges. The areas consist of the beach westsouthwest of Pacific Coast Highway north of the Pier, and approximately west of the Marvin Braude Bike Trail south of the Pier. According to the City’s Natural Hazards Mitigation Plan, 85 buildings are known to be located within the FEMA-mapped 100-year flood zone along. Several of these properties are City-owned. Most of the City is mapped as having a minimal flood hazard, with the majority of the City located outside the 500‐year flood zone. None of the property in the Earthquake Project Area is located within a within 100-year flood zone.
Flooding within the City may also be caused by failures of reservoirs and dams in the vicinity of the City. The Stone Canyon Reservoir is located about 4.1 miles northeast of the City near the residential neighborhood of Bel Air. It is owned and operated by the Los Angeles Department of Water and Power. It is an earthen embankment reservoir constructed in 1924 and has a storage capacity of about 3.4 billion gallons. Given its size, the Stone Canyon Reservoir’s dam is also under the jurisdiction of the California Division of Dam Safety. According to the City’s Natural Hazards Mitigation Plan, if the dam were to fail, the eastern portion of the City, in the area between about Olympic and Pico Boulevards, would be inundated. Specifically, the flood waters from Stone Canyon Reservoir are expected to have a peak velocity of 1 to 3 feet per second, have a maximum depth of 1 to 10 feet, and arrive in the eastern part of the City approximately an hour to an hour-anda-half after the dam failure. As of 2022, the California Division of Safety of Dams lists this reservoir as certified, with a satisfactory assessment, and with an “extremely high” downstream hazard. The extremely high downstream hazard is assigned to reservoirs that are expected to cause considerable loss of human life or would result in an inundation area with a population of 1,000 or more.
Attachment B
58 The portion of the city within the dam inundation failure zone for Stone Canyon reservoir is larger than the area susceptible to coastal flooding but is still limited. The southeastern edge of the Earthquake Project Area near the Santa Monica Freeway and Cloverfield Boulevard is within, or in very close proximity to, the dam inundation failure zone for Stone Canyon reservoir.
Wildfire Risks. In recent years, drought conditions in the State have led to increased risk of wildfire. In particular, certain electrical operators in the State have seen their distribution and transmission lines cause billions of dollars in property damage and the loss of lives. In 2023, as in several prior years, for example, devastating wildfires burned in various communities in the State, causing wide-spread damage. In 2025, communities in the County, including Pacific Palisades, Malibu and Altadena, experienced widespread devastation from wildfires causing losses of life, thousands of burned homes, and billions of dollars in property damage.
Although, historically, the City has not experienced a wildfire within its limits, the City is bordered to the north by natural areas that have burned in the past and could burn again in the future.
Moreover, recent past wildfires in California, including the devastating January 2025 fires in the Los Angeles region, have shown that wildfires can easily spread into developed areas, especially when wildfires burn at or near the wildland-urban interface (“WUI”), with ignited structures then sustaining and transmitting the fire from one building to the next.
The Palisades fire is currently considered the third most-damaging historical fire in California based on the number of structures destroyed. The damage caused by the Palisades fire is still being assessed, with a total cost not likely to be known for several years. Building safety assessments of the area burned indicates that 6,837 structures were destroyed, and another 973 structures were damaged.
Most of Pacific Palisades north of Sunset Boulevard burned. The Palisades fire prompted wildfire evacuation orders for the City after coming within one-half mile of the City limits. However, no land or structures in the City burned during the Palisades fire.
Following the January 2025 Palisades fire, CAL FIRE has issued a new map that places the northern portion of the City within a Very High Fire Hazard Zone. Narrow strips to the south of the Very High Fire Hazard Zone are also now considered as having a high and moderate fire hazard.
While no portion of the Earthquake Project Area is located within an area designated as a High or Very High Fire Hazard Zone by CalFire, the Earthquake Project Area is in very close proximity to the northern portion of the City that is within a Very High Fire Hazard Zone and the 2025 Palisades showed that urban landscapes can burn and transmit fire. In addition, there are at least three canyons in the southern flanks of the Santa Monica Mountains that could convey a wildfire to the northern city boundaries. Property damage within, or in the vicinity of, the Earthquake Project Area due to wildfires could result in a reduction of the Tax Revenues that secure the 2026 Bonds.
On January 16, 2025, Governor Gavin Newsom issued Executive Order N-10-25 (the “Governor’s Order) which canceled penalties, costs and interest on overdue property taxes within certain zip codes affected by the Palisades and Eaton Fires during calendar year 2025. This will likely cause a delay in the payment of property taxes by property owners in areas affected by Governor’s Order. Unless property owners within the affected areas pay their property taxes voluntarily or have mortgage impound accounts, it is possible bonds payable from property taxes in such areas will experience a need to draw on reserve accounts or a payment default. Although no area within the City is included in the Governor’s Order, in the event of a major fire or other natural disaster affecting the Earthquake Project Area, a similar order affecting the Earthquake Project Area Attachment B
59 could impact Tax Revenues and, therefore, the ability of the Successor Agency to make timely debt service payments on the 2026 Bonds.
The property within the Earthquake Project Area may also be at risk from other events of force majeure, such as damaging storms, fires and explosions, strikes, sabotage, pandemics, riots and spills of hazardous substances, among other events. The Successor Agency cannot predict what force majeure events may occur in the future.
Climate Change and Sea Level Rise
Climate change, including change caused by human activities, may have adverse effects on the Earthquake Project Area. As greenhouse gas emissions continue to accumulate in the atmosphere, climate change is expected to intensify, increasing the frequency, severity and timing of extreme weather events such as coastal storm surges, drought, wildfires, floods and heat waves, and raising sea levels.
To combat the possible effects of climate change on the City, in 2019, the City adopted its Climate Action and Adoption Plan (the “CAAP”). The CAAP is a comprehensive, community-driven roadmap to reduce greenhouse gas emissions. Building on past progress—already achieving a 20 percent emissions reduction below 1990 levels—the CAAP sets an interim target of reducing emissions 80 percent below 1990 levels by 2030, putting the City on a path to carbon neutrality by or before 2050. The CAAP identifies the City’s key climate risks, including extreme heat, drought, sea level rise, coastal flooding, and air quality degradation, and prioritizes protections for vulnerable populations. Adaptation actions are organized across four focus areas: climate ready community, water self-sufficiency, coastal flooding preparedness, and low carbon food & ecosystems. The CAAP commits public investment, coordinated governance, and ongoing community engagement, with regular progress reporting to ensure accountability.
Sea-level rise is the increase in the ocean’s surface height due to the melting of glaciers and sea ice as well as the thermal expansion of sea water at high temperatures. According to the City’s Natural Hazards Mitigation Plan, sea level rise in the City is anticipated to result not only in property damage and losses, but also disruption of schools, businesses, and transportation. The Santa Monica Pier, a major tourist destination and source of income for many, will be impacted by higher waves and a higher volume of water; both of these conditions can damage the structure. The City has estimated that sea level rise will cost the City millions of dollars in losses to City infrastructure and in non-market value associated with the public’s use of the beach and other coastal resources.
In an effort to counteract some of the impacts of seal level rise, the City has adopted a Local Coastal Program Land Use Plan (“LCP LUP”) that establishes policies and adaptation strategies.
These policies and strategies are to be implemented in phases as changes due to sea level rise occur.
The LCP LUP outlines policies for hazard zone properties, as well as a roadmap for adaptation to make the City more resilient to sea level rise. For instance, the City is exploring natural solutions to improve the biodiversity and resiliency of its beaches, while addressing the potential impacts of sea level rise. One such measure is a pilot program for dune creation in the North Beach area that successfully increased the height of the dunes and is now being expanded.
Projections of the impacts of global climate change on the City and the Earthquake Project Area are complex and depend on many factors that are outside the Successor Agency’s control. The various scientific studies that forecast the amount and timing of adverse impacts of climate change Attachment B
60 are based on assumptions contained in such studies, but actual events may vary materially. Also, the scientific understanding of climate change and its effects continues to evolve. Accordingly, while the City has considered climate change in its planning, the Successor Agency is unable to forecast with certainty when adverse impacts of climate change will occur or the extent of such impacts.
While the impacts of climate change may be mitigated by the City’s past and future investment in adaptation strategies, the Successor Agency can give no assurance about the net effects of those strategies and whether the City will be required to take additional adaptive mitigation measures.
Cybersecurity
The City, like other public and private entities, relies on a large and complex technology environment to conduct its operations, and consequently faces the threat of cybersecurity incidents.
Such incidents can result from unintentional events, or from deliberate attacks by unauthorized entities or individuals attempting to gain access to the information technology systems of the City to misappropriate assets or information or to cause operational disruption and damage. The City and its departments face cyber threats from time to time, including but not limited to hacking, viruses, malware, phishing, distributed denial-of-service, and other attacks on computers, networks, and systems. The City has not experienced a major cyber attack that resulted in a material compromise of the system, data loss, or financial loss.
The City is also reliant on other entities and service providers in connection with the administration of the 2026 Bonds, including without limitation, the County and the Trustee. No assurances can be given that the City’s security and operational control measures will guard against all cyber threats and attacks. The results of any attack on the City’s computer and informationtechnology systems could adversely affect the City’s or Successor Agency’s operations and damage the City’s digital networks and systems, and potential losses from such attacks, as well as the costs of defending against future attacks, could be substantial. In addition, cyber attacks could result in delays in receipt of Tax Revenues from the County Auditor-Controller, or transfer of Tax Revenues to the Trustee for payment of debt service on the 2026 Bonds.
Changes in the Law
There can be no assurance that the State electorate will not at some future time adopt initiatives or that the State Legislature will not enact legislation that will amend the Dissolution Act, the Redevelopment Law or other laws or the Constitution of the State resulting in a reduction of Tax Revenues, which could have an adverse effect on the Successor Agency’s ability to pay debt service on the 2026 Bonds.
Investment Risk
Funds held under the Indenture are required to be invested in Permitted Investments as provided under the Indenture. See Appendix B for a summary of the definition of Permitted Investments. The funds and accounts of the Successor Agency, into which a portion of the proceeds of the 2026 Bonds will be deposited and into which Tax Revenues are deposited, may be invested by the Successor Agency in any investment authorized by law. All investments, including the Permitted Investments and those authorized by law from time to time for investments by municipalities, contain a certain degree of risk. Such risks include, but are not limited to, a lower rate of return than expected and loss or delayed receipt of principal. See also the caption “—Bankruptcy and Foreclosure.”
Attachment B
61 Secondary Market
There can be no guarantee that there will be a secondary market for the 2026 Bonds, or, if a secondary market exists, that the 2026 Bonds can be sold for any particular price. Although the Successor Agency 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 Owners of the 2026 Bonds on a timely basis. See the caption “CONCLUDING INFORMATION—Continuing Disclosure” and Appendix G. Any failure to provide annual financial information, if required, does not give rise to monetary damages but merely an action for specific performance. Occasionally, because of general market conditions 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 the then prevailing circumstances. Such prices could be substantially different from the original purchase price.
IRS Audit of Tax-Exempt Bond Issues
The Internal Revenue Service has a program for the auditing of tax-exempt bond issues, including both random and targeted audits. It is possible that the 2026 Bonds will be selected for audit by the Internal Revenue Service. It is also possible that the market value of the 2026 Bonds might be affected as a result of such an audit of the 2026 Bonds (or by an audit of similar municipal obligations).
Loss of Tax Exemption
As discussed under the caption “TAX MATTERS,” in order to maintain the exclusion from gross income for federal income tax purposes of the interest on the 2026 Bonds, the Successor Agency have covenanted in the Indenture and the Tax Certificate relating to the 2026 Bonds not to take any action, or fail to take any action, if such action or failure to take such action would adversely affect the exclusion from gross income of interest on the 2026 Bonds under Section 103 of the Internal Revenue Code of 1986, as amended. Interest on the 2026 Bonds could become includable in gross income for purposes of federal income taxation retroactive to the date of issuance, as a result of acts or omissions of the Successor Agency subsequent to the issuance of the 2026 Bonds in violation of such covenants with respect to the 2026 Bonds. Should such an event of taxability occur, the 2026 Bonds are not subject to redemption by reason thereof and will remain outstanding until maturity or unless earlier redeemed pursuant to the redemption provisions of the Indenture.
Bonds Are Limited Obligations
Neither the faith and credit nor the taxing power of the Successor Agency (except to the limited extent set forth in the Indenture), the City, the State or any political subdivision thereof is pledged to the payment of the 2026 Bonds. The 2026 Bonds are special obligations of the Successor Agency; and, except as provided in the Indenture, they are payable solely from Tax Revenues. Tax Revenues could be insufficient to pay debt service on the 2026 Bonds as a result of delinquencies in the payment of property taxes or the insufficiency of proceeds derived from the sale of land within the Successor Agency following a delinquency in the payment of the applicable property taxes. As discussed under the caption “PROPERTY TAXATION IN CALIFORNIA—Property Tax Collection Procedures—Delinquencies,” under its current policies, the County Auditor-Controller distributes 100 percent of tax increment revenues allocated to each redevelopment successor agency in the Attachment B
62 County without regard to delinquencies in the payment of property taxes. However, there can be no assurance that such policies will not be changed in the future. The Successor Agency has no obligation to pay debt service on the 2026 Bonds in the event of insufficient Tax Revenues, except to the extent that money is available for such purpose in the Redevelopment Obligation Retirement Fund, the Debt Service Fund and the Reserve Account (and subaccounts therein).
Bond Insurance
In the event of default of the payment of the scheduled principal of or interest on the 2026 Bonds when all or some becomes due, the Trustee on behalf of any owner of the 2026 Bonds will have a claim under 2026 Policy for such payments. In the event the 2026 Insurer makes a payment to Owners of the 2026 Bonds under 2026 Policy, the 2026 Insurer will be subrogated to the rights of such Owners of the 2026 Bonds to direct and consent to remedies with respect to the 2026 Bonds.
The 2026 Insurer may direct and must consent to any remedies with respect to the 2026 Bonds and the 2026 Insurer’s consent may be required in connection with amendments to any applicable documents relating to the 2026 Bonds. See [Appendix B—“SUMMARY CERTAIN PROVISIONS OF THE INDENTURE—SECURITY OF BONDS; FLOW OF FUNDS—Provisions Relating to 2026 Insurance Policy.”]
The 2026 Insurer is expected to insure all the 2026 Bonds and will therefore have the ability to direct the actions of the Trustee give consents and waivers and take other actions without regard to the views of the owners of the 2026 Bonds. As a result, Owners of the 2026 Bonds may be limited in the rights and remedies they are able to exercise in the event of a default by the Successor Agency under the Indenture. The 2026 Insurer may have different business and other interests than the Owners of the 2026 Bonds.
The long-term ratings on the 2026 Bonds are dependent in part on the financial strength of the 2026 Insurer and its claims paying ability. The 2026 Insurer’s financial strength and claims paying ability are predicated upon a number of factors which could change over time. No assurance is given that the long-term ratings of the 2026 Insurer and the ratings on the 2026 Bonds will not be subject to downgrade and such event could adversely affect the market price of the 2026 Bonds or the marketability (liquidity) for the Bonds. See “CONCLUDING INFORMATION—Ratings” herein.
The obligations of the 2026 Insurer are unsecured contractual obligations and in an event of default by the 2026 Insurer, the remedies available may be limited by applicable bankruptcy law or state law related to insolvency of insurance companies.
Neither the Successor Agency nor the Underwriter has made independent investigation into the claims paying ability of the 2026 Insurer and no assurance or representation regarding the financial strength or projected financial strength of the 2026 Insurer is given. Thus, when making an investment decision, potential investors should carefully consider the ability of the Successor Agency to make the payments on the 2026 Bonds and the claims paying ability of the 2026 Insurer, particularly over the life of the investment. See “BOND INSURANCE” herein for further information regarding the 2026 Insurer and 2026 Policy, which includes further instructions for obtaining current financial information concerning the 2026 Insurer.
Attachment B
63 Limitations on Remedies
Remedies available to the Owners of the 2026 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 2026 Bonds or to preserve the tax-exempt status of the 2026 Bonds.
Enforceability of the rights and remedies of the Owners of the 2026 Bonds, and the obligations incurred by the Successor Agency, may become subject to the United States Bankruptcy Code and applicable bankruptcy, insolvency, reorganization, moratorium or similar laws relating to or affecting the enforcement of creditors’ rights generally, now or hereafter in effect, equity principles which may limit the specific enforcement under State law of certain remedies, the exercise by the United States of America of the powers delegated to it by the federal Constitution, the reasonable and necessary exercise, in certain exceptional situations, of the police powers inherent in the sovereignty of the State and its governmental bodies in the interest of serving a significant and legitimate public purpose and the limitations on remedies against governmental entities in the State.
See the caption “—Bankruptcy and Foreclosure.”
Bond Counsel has limited its opinion as to the enforceability of the 2026 Bonds and of the Indenture to the extent that enforceability may be limited by bankruptcy, insolvency, reorganization, fraudulent conveyance or transfer, moratorium or other similar laws affecting generally the enforcement of 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 Owners.
TAX MATTERS
General
In the opinion of Anzel Galvan LLP, San Francisco, California, Bond Counsel, under existing law and subject to certain qualifications described below, interest on the 2026 Bonds is excludable from gross income for federal income tax purposes under Section 103 of the Internal Revenue Code of 1986, as amended (the “Tax Code”). Interest on the 2026 Bonds is not an item of tax preference for purposes of the federal alternative minimum tax imposed on individuals; however, such interest is taken into account in determining the annual adjusted financial statement income for the purpose of computing the alternative minimum tax imposed on certain corporations. In the further opinion of Bond Counsel, interest on the 2026 Bonds is exempt from California personal income taxes. The proposed form of opinion of Bond Counsel with respect to the 2026 Bonds to be delivered on the date of issuance of the 2026 Bonds is attached as Appendix C.
The Tax Code contains a number of requirements that apply to the 2026 Bonds, and the Successor Agency has made certain representations and have covenanted to comply with each such requirement. Bond Counsel’s opinion assumes the accuracy of the representations made by the Successor Agency and is subject to the condition that the Successor Agency comply with the abovereferenced covenants. If the Successor Agency fails to comply with such covenants or if the representations are inaccurate or incomplete, interest on the 2026 Bonds could be included in gross income for federal income tax purposes retroactively to the date of issuance of the 2026 Bonds.
Except as expressly stated herein, Bond Counsel expresses no opinion regarding any tax consequences related to the ownership, sale or disposition of the 2026 Bonds, or the amount, accrual Attachment B
64 or receipt of interest on, the 2026 Bonds. Owners of the 2026 Bonds should consult their tax advisors regarding the applicability of any collateral tax consequences of owning the 2026 Bonds.
Original Issue Premium and Discount
If the initial offering price to the public at which a 2026 Bond is sold is less than the amount payable at maturity thereof, then such difference constitutes “original issue discount” for purposes of federal income taxes. If the initial offering price to the public at which a 2026 Bond is sold is greater than the amount payable at maturity thereof, then such difference constitutes “original issue premium” for purposes of federal income taxes.
Under the Tax Code, original issue discount is treated as interest excluded from federal gross income to the extent properly allocable to each owner thereof subject to the limitations described in the limitation described herein. The original issue discount accrues over the term to maturity of the 2026 Bond on the basis of a constant interest rate compounded on each interest or principal payment date (with straight-line interpolations between compounding dates). The amount of original issue discount accruing during each period is added to the adjusted basis of such 2026 Bonds to determine taxable gain upon disposition (including sale, redemption, or payment on maturity) of such 2026 Bond. The Tax Code contains certain provisions relating to the accrual of original issue discount in the case of purchasers of the 2026 Bonds who purchase the 2026 Bonds after the initial offering of a substantial amount of such maturity. Owners of such 2026 Bonds should consult their own tax advisors with respect to the tax consequences of ownership of 2026 Bonds with original issue discount, including the treatment of purchasers who do not purchase in the original offering, the allowance of a deduction for any loss on a sale or other disposition, and the treatment of accrued original issue discount on such 2026 Bonds under the federal alternative minimum tax.
Under the Tax Code, original issue premium is amortized on an annual basis over the term of the 2026 Bond (said term being the shorter of the 2026 Bond’s maturity date or its call date). The amount of original issue premium amortized each year reduces the adjusted basis of the owner of the 2026 Bond for purposes of determining taxable gain or loss upon disposition. The amount of original issue premium on a 2026 Bond is amortized each year over the term to maturity of the 2026 Bond on the basis of a constant interest rate compounded on each interest or principal payment date (with straight-line interpolations between compounding dates). Amortized 2026 Bond premium is not deductible for federal income tax purposes. Owners of premium 2026 Bonds, including purchasers who do not purchase in the original offering, should consult their own tax advisors with respect to federal income tax consequences of owning such 2026 Bonds.
Post Issuance Matters
The opinion of Bond Counsel is based on current legal authority, covers certain matters not directly addressed by such authorities, and represents Bond Counsel’s judgment as to the proper treatment of the 2026 Bonds for federal income tax purposes. It is not binding on the Internal Revenue Service (“IRS”) or the courts. Furthermore, Bond Counsel cannot give and has not given any opinion or assurance about the future activities of the Successor Agency, or about the effect of future changes in the Tax Code, the applicable regulations, the interpretation thereof or the enforcement thereof by the IRS.
Bond Counsel’s engagement with respect to the 2026 Bonds ends with the issuance of the 2026 Bonds, and, unless separately engaged, Bond Counsel is not obligated to defend the Successor Attachment B
65 Agency or the Owners of the 2026 Bonds regarding the tax-exempt status of the 2026 Bonds in the event of an audit examination by the IRS. Under current procedures, parties other than the Successor Agency and its appointed counsel, including the Owners, would have little, if any, right to participate in the audit examination process. Moreover, because achieving judicial review in connection with an audit examination of tax-exempt bonds is difficult, obtaining an independent review of IRS positions with which the Successor Agency legitimately disagrees, may not be practicable. Any action of the IRS, including but not limited to selection of the 2026 Bonds for audit, or the course or result of such audit, or an audit of bonds presenting similar tax issues may affect the market price for, or the marketability of, the 2026 Bonds, and may cause the Successor Agency or the Owners to incur significant expense.
Current and future legislative proposals, if enacted into law, clarification of the Tax Code or court decisions may cause interest on the 2026 Bonds to be subject, directly or indirectly, to federal income taxation, or otherwise prevent beneficial owners from realizing the full current benefit of the tax status of such interest. The introduction or enactment of any such legislative proposals, clarification of the Tax Code or court decisions may also affect the market price for, or marketability of, the 2026 Bonds. Prospective purchasers of the 2026 Bonds should consult their own tax advisors regarding any pending or proposed legislation, regulations or litigation, as to which Bond Counsel expresses no opinion.
CONCLUDING INFORMATION
Underwriting
The 2026 Bonds are being purchased by Stifel, Nicolaus & Company, Incorporated (the “Underwriter”) pursuant to a bond purchase agreement (the “Purchase Agreement”), by and between the Underwriter and the Successor Agency. The Underwriter has agreed to purchase the 2026 Bonds at a price of $__________ (being the aggregate principal amount thereof, [plus/less] an original issue [premium/discount] of $___________ and less an underwriter’s discount of $____________). The Purchase Agreement provides that the Underwriter will purchase all the 2026 Bonds if any are purchased. The obligation to make such purchase is subject to certain terms and conditions set forth in the Purchase Agreement, the approval of certain legal matters by counsel and certain other conditions.
The initial public offering prices stated on the inside front cover page of this Official Statement may be changed from time to time by the Underwriter. The Underwriter may offer and sell the 2026 Bonds to certain dealers (including dealers depositing 2026 Bonds into investment trusts), dealer banks, banks acting as agents and others at prices lower than said public offering prices.
Municipal Advisor
Urban Futures, Inc., Walnut Creek, California, has served as municipal advisor (“Municipal Advisor”) to the Successor Agency in connection with the 2026 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 this Official Statement. The Municipal Advisor is an independent advisory firm and is not engaged in the business of underwriting, trading or distributing municipal or other public securities. Compensation Attachment B
66 for the Municipal Advisor’s services is entirely contingent upon the sale and delivery of the 2026 Bonds.
Verification of Mathematical Computations
The Verification Agent, an independent accountant, upon delivery of the 2026 Bonds, will deliver a report on the mathematical accuracy of certain computations, contained in schedules provided to them that were prepared by the Successor Agency, relating to the sufficiency of the cash and/or the maturing principal of and interest on the escrow securities to be deposited in the respective escrow funds for the Refunded Bonds, to pay, when due, the principal, whether at maturity or upon prior redemption, interest and redemption premium with respect to the Refunded Bonds.
The Verification Agent’s report will include the statement that the scope of its engagement is limited to verifying the mathematical accuracy of the computations contained in such schedules provided to it, and that it has no obligation to update its report because of events occurring, or date or information coming to its attention, subsequent to the date of its report.
Legal Opinion
The opinion of Anzel Galvan LLP, San Francisco, California, Bond Counsel, approving the validity of the 2026 Bonds, stating that interest on the 2026 Bonds is exempt from federal personal income taxes and interest on the 2026 Bonds is exempt from California personal income taxes under present State income tax laws will be furnished to the Underwriter at the time of delivery of the 2026 Bonds at the expense of the Successor Agency. Compensation for Bond Counsel’s services is entirely contingent upon the sale and delivery of the 2026 Bonds.
A copy of the proposed form of Bond Counsel’s final approving opinion with respect to the 2026 Bonds is attached hereto as Appendix C. The legal opinion is only as to legality 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 2026 Bonds.
In addition, certain legal matters will be passed on for the Successor Agency by the City Attorney of the City, as counsel to the Successor Agency, and by Anzel Galvan LLP, as Disclosure Counsel, for the Underwriter by Stradling Yocca Carlson & Rauth, LLP, Newport Beach, California, as Underwriter’s Counsel, and for the Trustee by its counsel. Compensation for Disclosure Counsel and Underwriter’s Counsel is entirely contingent upon the sale and delivery of the 2026 Bonds.
Litigation
Successor Agency. There is no action, suit or proceeding known to the Successor Agency to be pending and notice of which has been served upon and received by the Successor Agency, or threatened, restraining or enjoining the execution or delivery of the 2026 Bonds or the Indenture or in any way contesting or affecting the validity of the foregoing or any proceedings of the Successor Agency taken with respect to any of the foregoing.
City of Santa Monica. As previously described, under the Dissolution Act, the Successor Agency is a separate public entity from the City, and the liabilities of the Former Agency will not be transferred to the City and vice versa. In addition, the 2026 Bonds are special obligations of the Successor Agency; and, except as provided in the Indenture, they are payable solely from Tax Attachment B
67 Revenues. However, because a city’s financial distress can put downward pressure on assessed values over time, as previously described, the Successor Agency has determined that the pending claims against the City relating to Eric Uller are potentially relevant to the making of an informed investment decision with respect to the 2026 Bonds.
Eric Uller, a former City employee, was indicted by the Los Angeles County District Attorney’s Office in 2018 on five counts of sexual offenses against four minors arising from alleged incidents dating back to 1989, when he was volunteering and/or working as a City employee at the Santa Monica Police Activities League (“SM‑PAL”). After pleading not guilty, Uller was released on bail and was later found dead in his residence of an apparent suicide prior to a scheduled court appearance in November 2018.
Following Uller’s arrest and subsequent death, hundreds of individuals filed suits against the City and SM‑PAL alleging abuse by Uller between the late 1980s and early 2000s while he was associated with SM‑PAL. To date, the City has settled approximately 230 cases tied to alleged sexual abuse by Uller in four settlement rounds totaling more than $290 million. A fifth round of [178] additional claims of alleged sexual abuse by Uller is currently pending.
AB 218 is a California law that significantly expanded the time and scope for bringing civil claims arising from childhood sexual assault, increasing potential liability for public entities and other institutions. AB 218, effective January 1, 2020, broadened the definition of childhood sexual abuse to “childhood sexual assault,” extended the civil statute of limitations so that survivors can sue until at least age 40 or within five years of discovering their injury, and opened a three‑year “lookback window” (2020–2022) that temporarily revived many previously time‑barred claims. AB 218 also permits treble damages where a plaintiff proves a cover‑up by an institution, further increasing exposure for entities that failed to take reasonable steps to prevent abuse.
The City cannot predict whether any of the pending Uller claims will be resolved, the amount of monetary settlements, if any, or whether additional claimants will come forward in the future. Accordingly, the City cannot predict with certainty the potential remaining costs of litigation relating to the Uller claims. The City intends to pursue reimbursement and coverage from its insurance carriers. However, there can be no assurance that such coverage will be available or, if available, in what amount. See “RISK FACTORS—City Declaration of Fiscal Distress.” Ratings
S&P Global Ratings (“S&P”) has assigned the 2026 Bonds the rating of “___” based upon the delivery of 2026 Policy by the 2026 Insurer at the time of issuance of the 2026 Bonds. S&P has also assigned the 2026 Bonds the underlying rating of “___” without respect to the delivery of the 2026 Policy for the 2026 Bonds.
There is no assurance that the criteria required to achieve a rating on the 2026 Bonds will not change during the period that the 2026 Bonds remain outstanding. Any downward revision or withdrawal of such ratings may have an adverse effect on the market price of the 2026 Bonds. Such ratings reflect only the current views and current rating criteria of S&P (which views and rating criteria could change at any time), and an explanation of the significance of such ratings may be obtained from S&P. Generally, a rating agency bases its ratings on the information and materials that are furnished to it (which may include information and material from the Successor Agency that is not included in this Official Statement) and on investigations, studies and assumptions of its own.
Attachment B
68 The Successor Agency has covenanted in the Continuing Disclosure Agreement to file notices of any rating changes on the 2026 Bonds on the Municipal Securities Rulemaking Board’s Electronic Municipal Market Access System for municipal securities disclosures, maintained on the Internet at http://emma.msrb.org/ (“EMMA”). See the caption “—Continuing Disclosure” and Appendix G. Notwithstanding such covenant, information relating to rating changes on the 2026 Bonds may be publicly available from S&P prior to such information being provided to the Successor Agency and prior to the date by which the Successor Agency is obligated to file a notice of rating change. Purchasers of the 2026 Bonds are directed to the rating agencies and their respective websites and official media outlets for the most current ratings with respect to the 2026 Bonds after the initial issuance of the 2026 Bonds.
The Successor Agency makes no representation as to the 2026 Insurer’s creditworthiness and no representation that the 2026 Insurer’s credit rating will be maintained in the future. S&P has previously taken action to downgrade the ratings of certain municipal bond insurers and has published various releases outlining the processes that S&P intends to follow in evaluating the ratings of financial guarantors. For some financial guarantors, the result of such evaluations could be a rating affirmation, a change in rating outlook, a review for downgrade or a downgrade. Potential investors are directed to S&P for additional information on S&P’s evaluations of the financial guaranty industry and individual financial guarantors, including the 2026 Insurer. See the caption “BOND INSURANCE” for further information relating to the 2026 Insurer.
Continuing Disclosure
The Successor Agency will covenant in its continuing disclosure certificate (the “Continuing Disclosure Certificate”) for the benefit of the holders and beneficial owners of the 2026 Bonds to provide, or cause a dissemination agent to provide, to the Municipal Securities Rulemaking Board through EMMA, certain financial information and other operating data on an annual basis no later than April 1 of each calendar year, commencing with the annual report for the fiscal year ended June 30, 2026 due no later than April 1, 2027, and to provide notice of certain enumerated events as required by Securities and Exchange Commission Rule 15c2-12(b)(5) under the Securities Exchange Act of 1934, as amended (the “Rule”). These covenants have been made to assist the Underwriter in complying with the Rule. The form of the Continuing Disclosure Certificate is attached to this Official Statement as Appendix G.
A default under the Continuing Disclosure Certificate is not a default under the Indenture and the sole remedy following a default is an action to compel specific performance by the Successor Agency with the terms of the Continuing Disclosure Certificate.
The Former Agency and the City have each previously entered into continuing disclosure undertakings under the Rule. Within the last five years, neither the City nor the Successor Agency failed to comply with their respective continuing disclosure undertakings under the Rule, except [______].
To assist the Successor Agency to comply with its continuing disclosure undertakings under the Rule, the Successor Agency has appointed the City’s Director of Finance to coordinate, on behalf the Successor Agency, the preparation and filing of annual disclosure reports by the Successor Agency and has adopted policies and procedures related thereto. In addition, the Successor Agency has engaged _____________ (the “Dissemination Agent”) to act as dissemination agent and to assist Attachment B
69 the City’s Director of Finance and other City staff with the preparation of documents and other information to be provided by the Dissemination Agent in the future in accordance with the Rule.
Miscellaneous
All of the preceding summaries of the Indenture, the Bond Law, the Dissolution Act, the Redevelopment Law, other applicable legislation, agreements and other documents 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. Reference is hereby made to such documents on file with the Successor Agency for further information in connection therewith.
This Official Statement does not constitute a contract with the purchasers of the 2026 Bonds.
Any statements made in this Official Statement involving matters of opinion or 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, on behalf of the Successor Agency, has been duly authorized by the Successor Agency.
SUCCESSOR AGENCY TO THE
REDEVELOPMENT AGENCY OF THE CITY OF
SANTA MONICA
By:
City Manager
City of Santa Monica, California
Attachment B
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APPENDIX A
FISCAL CONSULTANT REPORT
Attachment B
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APPENDIX B
SUMMARY CERTAIN PROVISIONS OF THE INDENTURE
The following is a brief summary of certain provisions of the Indenture of Trust (the “Indenture”) authorizing the 2026 Bonds that are not otherwise described in the text of this Official Statement. Such summary is not intended to be definitive, and reference is made to the actual Indenture (copies of which may be obtained from the Trustee) for the complete terms thereof.
Attachment B
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APPENDIX C
FORM OF BOND COUNSEL OPINION
Upon issuance of the 2026 Bonds, Anzel Galvan LLP, Bond Counsel, proposes to render its final approving opinion in substantially the following form:
[Closing Date]
Successor Agency to the Redevelopment Agency
of the City of Santa Monica
Santa Monica, California
Re: $_________ Successor Agency to the Redevelopment Agency of the City of Santa Monica 2026 Tax Allocation Refunding Bonds
Ladies and Gentlemen:
We have acted as Bond Counsel to the Successor Agency to the Redevelopment Agency of the City of Santa Monica (the “Successor Agency”) in connection with the issuance by the Successor Agency of $_________ Successor Agency to the Redevelopment Agency of the City of Santa Monica 2026 Tax Allocation Refunding Bonds (the “Bonds”). The Bonds are issued pursuant to the provisions of the Community Redevelopment Law (being Part 1 of Division 24 of the California Health and Safety Code), Part 1.85 (commencing with Section 34170) of Division 24 of the California Health and Safety Code), Article 11 (commencing with Section 53580) of Chapter 3 of Part 1 of Division 2 of Title 5 of the Government Code (the “Bond Law”), and an Indenture of Trust, dated as of April 1, 2026 (the “Indenture”), by and between the Successor Agency and U.S. Bank Trust Company, National Association, as trustee. Capitalized terms not otherwise defined herein shall have the meanings ascribed thereto in the Indenture.
In our capacity as Bond Counsel, we have examined such law and such certified proceedings, certifications, opinions and other documents as we have deemed necessary to render this opinion.
Regarding certain questions of law material to our opinion, we have assumed the correctness of certain legal conclusions contained in the written opinion of the General Counsel to the Successor Agency, without undertaking to verify the same by independent investigation.
We have assumed the genuineness of all documents and signatures presented to us, the authenticity of documents submitted as originals and the conformity to originals of documents submitted as copies. We have not undertaken to verify independently, and have assumed, the accuracy of the factual matters represented, warranted or certified in the documents, and of the legal conclusions contained in the opinion referred to in the preceding paragraph of this opinion.
Furthermore, we have assumed compliance with all covenants and agreements contained in the Bonds and the Indenture.
Based upon our examination of the foregoing, and in reliance thereon, we are of the opinion, under existing law, that:
Attachment B
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1. The Bonds constitute the valid and binding limited obligations of the Successor Agency.
2. The Indenture has been duly executed and delivered by, and constitutes the valid and binding agreement of, the Successor Agency. The Indenture creates a valid pledge, to secure the payment of the principal of and interest on the Bonds, of Tax Revenues and the other assets pledged therefor under the Indenture, subject to the provisions of the Indenture permitting the application thereof for the purposes and on the terms and conditions set forth in the Indenture.
3. Interest on the Bonds is excludable from gross income for federal income tax purposes and is not an item of tax preference for purposes of the federal alternative minimum tax imposed on individuals; however, interest on the Bonds is taken into account in determining annual adjusted financial statement income for the purpose of computing the alternative minimum tax imposed on certain corporations. The opinion set forth in the preceding sentence is subject to the condition that the Successor Agency must comply with all requirements of the Internal Revenue Code of 1986, as amended, that must be satisfied subsequent to the date hereof in order that the interest thereon be, and continue to be, excludable from gross income for federal income tax purposes. The Successor Agency has covenanted to comply with all applicable requirements. Failure to comply with certain of such requirements may cause interest on the Bonds to be included in gross income for federal income tax purposes retroactively to the date hereof.
4. Interest on the Bonds is exempt from personal income taxation imposed by the State of California.
Except as expressly stated in paragraphs 3 and 4, we express no opinion regarding any tax consequences related to the ownership, sale or disposition of the Bonds, or the amount, accrual or receipt of interest on, the Bonds. Owners of the Bonds should consult their tax advisors regarding the applicability of any collateral tax consequences of owning the Bonds.
Our opinion is limited to matters governed by the laws of the State of California and federal law. We assume no responsibility with respect to the applicability or the effect of the laws of any other jurisdiction. The rights of the owners of the Bonds and the enforceability of the Bonds and the Indenture are limited by bankruptcy, insolvency, reorganization, arrangement, fraudulent conveyance, moratorium and other laws affecting creditors’ rights, by the application of equitable principles, whether considered at law or in equity, and the exercise of judicial discretion in appropriate cases and by the limitations on legal remedies against public agencies in the State of California and laws relating to conflicts of interest.
We express no opinion as to any provision in the Bonds or the Indenture with respect to the indemnification, contribution, liquidated damages, penalty (including any remedy deemed to constitute a penalty), right of set-off, arbitration, judicial reference, choice of law, choice of forum, choice of venue, non-exclusivity of remedies, waiver or severability provisions contained therein, nor are we expressing any opinion with respect to the state or quality of title to or interest in any assets described in or as subject to the lien of the Indenture or the accuracy or sufficiency of the description contained therein of, or the remedies available to enforce liens on any assets thereunder.
We also express no opinion herein as to the accuracy, completeness or sufficiency of the Official Statement or other offering material relating to the Bonds and expressly disclaim any duty to Attachment B
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advise the owners of the Bonds with respect to matters contained in the Official Statement or other offering material.
This opinion is given as of the date hereof, and we assume no obligation to revise or supplement this opinion to reflect any facts or circumstances that may hereafter come to our attention, or any changes in law that may hereafter occur. Moreover, our opinions are not a guarantee of a particular result and are not binding on the Internal Revenue Service or any court; rather, our opinions represent our legal judgment based upon our review of existing law that we deem relevant to such opinions and in reliance upon the representations, opinions, and covenants referenced above. Our engagement with respect to this matter has terminated as of the date hereof.
Respectfully submitted,
Attachment B
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APPENDIX D
BOOK-ENTRY ONLY SYSTEM
The information in this Appendix concerning The Depository Trust Company (“DTC”), New York, New York, and DTC’s book-entry system has been obtained from DTC and the Successor Agency takes no responsibility for the completeness or accuracy thereof. The Successor Agency cannot and does not give any assurances that DTC, DTC Participants or Indirect Participants will distribute to the Beneficial Owners (a) payments of interest, principal or premium, if any, with respect to the 2026 Bonds, (b) certificates representing ownership interest in or other confirmation or ownership interest in the 2026 Bonds, or (c) redemption or other notices sent to DTC or Cede & Co., its nominee, as the registered owner of the 2026 Bonds, or that they will so do on a timely basis, or that DTC, DTC Participants or DTC Indirect Participants will act in the manner described in this Appendix. The current “Rules” applicable to DTC are on file with the Securities and Exchange Commission and the current “Procedures” of DTC to be followed in dealing with DTC Participants are on file with DTC.
The Depository Trust Company (“DTC”), New York, NY, will act as securities depository for the 2026 Bonds. The 2026 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 certificate will be issued for each maturity of the 2026 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 3.5 million issues of U.S. and non-U.S. equity issues, corporate and municipal debt issues, and money market instruments (from over 100 countries) that DTC’s participants (“Direct Participants”) deposit with DTC. DTC also facilitates the post-trade settlement among Direct Participants of sales and other securities transactions in deposited securities, through electronic computerized book-entry transfers and pledges between Direct Participants’ accounts. This eliminates the need for physical movement of securities certificates. Direct Participants include both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations. DTC is a wholly-owned subsidiary of The Depository Trust & Clearing Corporation (“DTCC”). DTCC is the holding company for DTC, National Securities Clearing Corporation and Fixed Income Clearing Corporation, all of which are registered clearing agencies.
DTCC is owned by the users of its regulated subsidiaries. Access to the DTC system is also available to others such as both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, and clearing corporations that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly (“Indirect Participants”). DTC has a Standard & Poor’s rating of AA+. The DTC Rules applicable to its Participants are on file with the Securities and Exchange Commission. More information about DTC can be found at www.dtcc.com.
Purchases of Bonds under the DTC system must be made by or through Direct Participants, which will receive a credit for the 2026 Bonds on DTC’s records. The ownership interest of each actual purchaser of each Bond (“Beneficial Owner”) is in turn to be recorded on the Direct and Indirect Participants’ records. Beneficial Owners will not receive written confirmation from DTC of Attachment B
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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 2026 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 Bonds, except in the event that use of the bookentry system for the 2026 Bonds is discontinued.
To facilitate subsequent transfers, all Bonds deposited by Direct Participants with DTC are registered in the name of DTC’s partnership nominee, Cede & Co., or such other name as may be requested by an authorized representative of DTC. The deposit of Bonds with DTC and their registration in the name of Cede & Co. or such other DTC nominee do not effect any change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the 2026 Bonds; DTC’s records reflect only the identity of the Direct Participants to whose accounts such Bonds are credited, which may or may not be the Beneficial Owners. The Direct and Indirect Participants will remain responsible for keeping account of their holdings on behalf of their customers.
Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. Beneficial Owners of Bonds may wish to take certain steps to augment the transmission to them of notices of significant events with respect to the 2026 Bonds, such as redemptions, tenders, defaults, and proposed amendments to the 2026 Bond documents. For example, Beneficial Owners of Bonds may wish to ascertain that the nominee holding the 2026 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 2026 Bonds within a maturity are being redeemed, DTC’s practice is to determine by lot the amount of the interest of each Direct Participant in such maturity to be redeemed.
Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect to Bonds unless authorized by a Direct Participant in accordance with DTC’s MMI Procedures.
Under its usual procedures, DTC mails an Omnibus Proxy to the Successor Agency as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co.’s consenting or voting rights to those Direct Participants to whose accounts Bonds are credited on the record date (identified in a listing attached to the Omnibus Proxy).
Principal, premium (if any), and interest payments on the 2026 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 Successor Agency or the Trustee, on payable date in accordance with their respective holdings shown on DTC’s records. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered in “street name,” and will be the responsibility of such Participant and not of DTC, the Trustee, or the Successor Agency, subject to any statutory or regulatory requirements as may be in effect from time to time. Principal, premium (if any), and interest payments with respect to the 2026 Bonds to Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC) is the responsibility of the Successor Attachment B
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Agency or the Trustee, disbursement of such payments to Direct Participants will be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners will be the responsibility of Direct and Indirect Participants.
DTC may discontinue providing its services as depository with respect to the 2026 Bonds at any time by giving reasonable notice to the Successor Agency or the Trustee. Under such circumstances, in the event that a successor depository is not obtained, certificates representing the 2026 Bonds are required to be printed and delivered.
The Successor Agency may decide to discontinue use of the system of book-entry-only transfers through DTC (or a successor securities depository). In that event, representing the 2026 Bonds will be printed and delivered to DTC in accordance with the provisions of the Indenture.
The information in this Appendix concerning DTC and DTC’s book-entry system has been obtained from sources that the Successor Agency believes to be reliable, but the Successor Agency takes no responsibility for the accuracy thereof.
Attachment B
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APPENDIX E
ANNUAL COMPREHENSIVE FINANCE REPORT FOR
FISCAL YEAR ENDED JUNE 30, 2025
Attachment B
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APPENDIX F
STATE DEPARTMENT OF FINANCE LETTER
Attachment B
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APPENDIX G
FORM OF CONTINUING DISCLOSURE CERTIFICATE
Attachment B
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APPENDIX H
SUPPLEMENTAL INFORMATION—
THE CITY OF SANTA MONICA AND COUNTY OF LOS ANGELES
Attachment B
I-1
APPENDIX I
SPECIMEN MUNICIPAL BOND INSURANCE POLICY
Attachment B