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Local Assistance Procedures Manual Exhibit 12-G
Required Federal-Aid Contract Language
September 2020
EXHIBIT 12-G REQUIRED FEDERAL-AID CONTRACT LANGUAGE
(For Local Assistance Construction Projects)
The following language must be incorporated into all Local Assistance Federal-aid construction contracts.
The following language, with minor edits, was taken from the Code of Federal Regulations.
MAINTAIN RECORDS AND SUBMIT REPORTS DOCUMENTING YOUR PERFORMANCE UNDER THIS
SECTION
1. DISADVANTAGED BUSINESS ENTERPRISES (DBE) ................................................................................ 2 A. NONDISCRIMINATION STATEMENT .............................................................................................. 2 B. CONTRACT ASSURANCE ............................................................................................................... 3 C. PROMPT PROGRESS PAYMENT ................................................................................................... 3 D. PROMPT PAYMENT OF WITHHELD FUNDS TO SUBCONTRACTORS....................................... 3 E. TERMINATION AND SUBSTITUTION OF DBE SUBCONTRACTORS .......................................... 4 F. COMMITMENT AND UTILIZATION .................................................................................................. 5
2. BID OPENING ................................................................................................................................................. 6
3. BID RIGGING ................................................................................................................................................. 6
4. CONTRACT AWARD ..................................................................................................................................... 6
5. CONTRACTOR LICENSE .............................................................................................................................. 6
6. CHANGED CONDITIONS .............................................................................................................................. 6 A. DIFFERING SITE CONDITIONS ....................................................................................................... 6 B. SUSPENSIONS OF WORK ORDERED BY THE ENGINEER ......................................................... 6 C. SIGNIFICANT CHANGES IN THE CHARACTER OF WORK .......................................................... 7
7. BEGINNING OF WORK, TIME OF COMPLETION AND LIQUIDATED DAMAGES ...................................... 7
8. BUY AMERICA ............................................................................................................................................... 7
9. QUALITY ASSURANCE ................................................................................................................................. 8
10. PROMPT PAYMENT FROM THE AGENCY TO THE CONTRACTORS ........................................................ 8
11. FORM FHWA-1273 REQUIRED CONTRACT PROVISIONS FEDERAL-AID CONTRACTS ....................... 8
12. DBE RUNNING TALLY OF ATTAINMENTS ................................................................................................. 8
13. FEMALE AND MINORITY GOALS ............................................................................................................... 21
14. TITLE VI ASSURANCES .............................................................................................................................. 22
15. USE OF UNITED STATES-FLAG VESSELS (CARGO PREFERENCE ACT) ............................................. 23
16. FEDERAL TRAINEE PROGRAM ................................................................................................................. 23
EXHIBIT E 1280
Local Assistance Procedures Manual Exhibit 12-G
Required Federal-Aid Contract Language
September 2020
1. DISADVANTAGED BUSINESS ENTERPRISES (DBE)
The contractor, subrecipient or subcontractor shall take necessary and reasonable steps to ensure that DBEs have opportunity to participate in the contract (49 CFR 26). To ensure equal participation of DBEs provided in 49 CFR 26.5, the Agency shows a contract goal for DBEs. The prime contractor shall make work available to DBEs and select work parts consistent with available DBE subcontractors and suppliers.
The prime contractor shall meet the DBE goal shown elsewhere in these special provisions or demonstrate that they made adequate good faith efforts to meet this goal.
It is the prime contractor’s responsibility to verify that the DBE firm is certified as DBE at date of bid opening and document the record by printing out the California Unified Certification Program (CUCP) data for each DBE firm. A list of DBEs certified by the CUCP can be found here.
All DBE participation will count toward the California Department of Transportation’s federally mandated statewide overall DBE goal.
Credit for materials or supplies the prime contractor purchases from DBEs counts towards the goal in the following manner:
100 percent counts if the materials or supplies are obtained from a DBE manufacturer. 60 percent counts if the materials or supplies are obtained from a DBE regular dealer. Only fees, commissions, and charges for assistance in the procurement and delivery of materials or supplies count if obtained from a DBE that is neither a manufacturer nor regular dealer. 49 CFR
26.55 defines "manufacturer" and "regular dealer."
The prime contractor receives credit towards the goal if they employ a DBE trucking company that performs a commercially useful function as defined in 49 CFR 26.55(d)(1) as follows:
The DBE must be responsible for the management and supervision of the entire trucking operation for which it is responsible on a particular contract, and there cannot be a contrived arrangement for the purpose of meeting DBE goals.
The DBE must itself own and operate at least one fully licensed, insured, and operational truck used on the contract.
The DBE receives credit for the total value of the transportation services it provides on the Contract using trucks it owns, insures, and operates using drivers it employs. The DBE may lease trucks from another DBE firm, including an owner-operator who is certified as a DBE. The DBE who leases trucks from another DBE receives credit for the total value of the transportation services the lessee DBE provides on the Contract. The DBE may lease trucks without drivers from a non-DBE truck leasing company. If the DBE leases trucks from a non-DBE truck leasing company and uses its own employees as drivers, it is entitled to credit for the total value of these hauling services. A lease must indicate that the DBE has exclusive use of and control over the truck. This does not preclude the leased truck from working for others during the term of the lease with the consent of the DBE, so long as the lease gives the DBE absolute priority for use of the leased truck. Leased trucks must display the name and identification number of the DBE. a. Nondiscrimination Statement
The contractor, subrecipient or subcontractor will never exclude any person from participation in, deny any person the benefits of, or otherwise discriminate against anyone in connection with the award and performance of any contract covered by 49 CFR 26 on the basis of race, color, sex, or national origin. In administering the Local Agency components of the DBE Program Plan, the contractor, subrecipient or subcontractor will not, directly, or through contractual or other arrangements, use criteria or methods of administration that have the effect of defeating or substantially impairing accomplishment of the objectives of the DBE Program Plan with respect to individuals of a particular race, color, sex, or national origin.
EXHIBIT E 1281
Local Assistance Procedures Manual Exhibit 12-G
Required Federal-Aid Contract Language
September 2020
b. Contract Assurance
Under 49 CFR 26.13(b):
The contractor, subrecipient or subcontractor shall not discriminate on the basis of race, color, national origin, or sex in the performance of this contract. The contractor shall carry out applicable requirements of 49 CFR 26 in the award and administration of federal-aid contracts. Failure by the contractor to carry out these requirements is a material breach of this contract, which may result in the termination of this contract or such other remedy as the recipient deems appropriate, which may include, but is not limited to:
a. Withholding monthly progress payments;
b. Assessing sanctions;
c. Liquidated damages; and/or
d. Disqualifying the contractor from future bidding as non-responsible. c. Prompt Progress Payment
The prime contractor or subcontractor shall pay to any subcontractor, not later than seven days after receipt of each progress payment, unless otherwise agreed to in writing, the respective amounts allowed the contractor on account of the work performed by the subcontractors, to the extent of each subcontractor’s interest therein. In the event that there is a good faith dispute over all or any portion of the amount due on a progress payment from the prime contractor or subcontractor to a subcontractor, the prime contractor or subcontractor may withhold no more than 150 percent of the disputed amount. Any violation of this requirement shall constitute a cause for disciplinary action and shall subject the licensee to a penalty, payable to the subcontractor, of 2 percent of the amount due per month for every month that payment is not made.
In any action for the collection of funds wrongfully withheld, the prevailing party shall be entitled to his or her attorney’s fees and costs. The sanctions authorized under this requirement shall be separate from, and in addition to, all other remedies, either civil, administrative, or criminal. This clause applies to both DBE and non-DBE subcontractors.
d. Prompt Payment of Withheld Funds to Subcontractors
The Agency may hold retainage from the prime contractor and shall make prompt and regular incremental acceptances of portions, as determined by the Agency, of the contract work, and pay retainage to the prime contractor based on these acceptances. The Agency shall designate one of the methods below in the contract to ensure prompt and full payment of any retainage kept by the prime contractor or subcontractor to a subcontractor. The Agency shall include either Method 1, Method 2, or Method 3 below and delete the other two.
Method 1: No retainage will be held by the Agency from progress payments due to the prime contractor.
Prime contractors and subcontractors are prohibited from holding retainage from subcontractors. Any delay or postponement of payment may take place only for good cause and with the Agency’s prior written approval. Any violation of these provisions shall subject the violating contractor or subcontractor to the penalties, sanctions, and other remedies specified in Section 7108.5 of the California Business and Professions Code and Section 10262 of the California Public Contract Code. This requirement shall not be construed to limit or impair any contractual, administrative or judicial remedies, otherwise available to the contractor or subcontractor in the event of a dispute involving late payment or nonpayment by the contractor, deficient subcontractor performance and/or noncompliance by a subcontractor. This clause applies to both DBE and non-DBE subcontractors.
Method 2: No retainage will be held by the Agency from progress payments due to the prime contractor.
Any retainage kept by the prime contractor or by a subcontractor must be paid in full to the earning subcontractor within seven (7) days after the subcontractor’s work is satisfactorily completed. Any delay or postponement of payment may take place only for good cause and with the Agency’s prior written approval. Any violation of these provisions shall subject the violating contractor or subcontractor to the penalties, sanctions, and remedies specified in Section 7108.5 of the California Business and Professions Code and Section 10262 of the California Public Contract Code. This requirement shall not be construed to limit or impair any contractual, administrative or judicial remedies, otherwise available to the contractor or subcontractor in the event of a dispute involving late payment or nonpayment by the contractor, deficient subcontractor performance and/or noncompliance by a subcontractor. This clause applies to both DBE and non-DBE subcontractors.
EXHIBIT E 1282
Local Assistance Procedures Manual Exhibit 12-G
Required Federal-Aid Contract Language
September 2020
Method 3: The Agency shall hold retainage from the prime contractor and shall make prompt and regular incremental acceptances of portions, as determined by the Agency of the contract work and pay retainage to the prime contractor based on these acceptances. The prime contractor or subcontractor shall return all monies withheld in retention from all subcontractors within seven (7) days after receiving payment for work satisfactorily completed and accepted including incremental acceptances of portions of the contract work by the Agency. Any delay or postponement of payment may take place only for good cause and with the Agency’s prior written approval. Any violation of these provisions shall subject the violating prime contractor or subcontractor to the penalties, sanctions, and other remedies specified in Section 7108.5 of the California Business and Professions Code and Section 10262 of the California Public Contract Code. This requirement shall not be construed to limit or impair any contractual, administrative or judicial remedies otherwise available to the contractor or subcontractor in the event of a dispute involving late payment or nonpayment by the contractor; deficient subcontractor performance and/or noncompliance by a subcontractor. This clause applies to both DBE and non-DBE subcontractors.
Any violation of these provisions shall subject the violating prime contractor or subcontractor to the penalties, sanctions and other remedies specified therein. These requirements shall not be construed to limit or impair any contractual, administrative, or judicial remedies otherwise available to the prime contractor or subcontractor in the event of a dispute involving late payment or nonpayment by the prime contractor, deficient subcontract performance, or noncompliance by a subcontractor. e. Termination and Substitution of DBE Subcontractors
The prime contractor shall utilize the specific DBEs listed to perform the work and supply the materials for which each is listed unless the contractor obtains the Agency’s written consent. The prime contractor shall not terminate or substitute a listed DBE for convenience and perform the work with their own forces or obtain materials from other sources without prior written authorization from the Agency. Unless the Agency’s prior written consent is provided, the contractor shall not be entitled to any payment for work or material unless it is performed or supplied by the listed DBE on the Exhibit 15-G Construction Contract DBE Commitment form, included in the Bid.
The Agency authorizes a request to use other forces or sources of materials if the bidder shows any of the following justifications:
1. Listed DBE fails or refuses to execute a written contract based on plans and specifications for the project.
2. The Local Agency stipulated that a bond is a condition of executing the subcontract and the listed DBE fails to meet the Local Agency’s bond requirements.
3. Work requires a contractor's license and listed DBE does not have a valid license under Contractors License Law.
4. Listed DBE fails or refuses to perform the work or furnish the listed materials (failing or refusing to perform is not an allowable reason to remove a DBE if the failure or refusal is a result of bad faith or discrimination).
5. Listed DBE's work is unsatisfactory and not in compliance with the contract.
6. Listed DBE is ineligible to work on the project because of suspension or debarment.
7. Listed DBE becomes bankrupt or insolvent.
8. Listed DBE voluntarily withdraws with written notice from the Contract
9. Listed DBE is ineligible to receive credit for the type of work required.
10. Listed DBE owner dies or becomes disabled resulting in the inability to perform the work on the Contract.
11. The Agency determines other documented good cause.
The prime contractor shall notify the original DBE of the intent to use other forces or material sources and provide the reasons, allowing the DBE 5 days to respond to the notice and advise the prime contractor and the Agency of the reasons why the use of other forces or sources of materials should not occur.
The prime contractor’s request to use other forces or material sources must include:
EXHIBIT E 1283
Local Assistance Procedures Manual Exhibit 12-G
Required Federal-Aid Contract Language
September 2020
1. One or more of the reasons listed in the preceding paragraph.
2. Notices from the prime contractor to the DBE regarding the request.
3. Notices from the DBEs to the prime contractor regarding the request.
If a listed DBE is terminated or substituted, the prime contractor must make good faith efforts to find another DBE to substitute for the original DBE. The substitute DBE must perform at least the same amount of work as the original DBE under the contract to the extent needed to meet or exceed the DBE goal. f. Commitment and Utilization
Note: In the Agency’s reports of DBE participation to Caltrans, the Agency must display both commitments and attainments.
The Agency’s DBE program must include a monitoring and enforcement mechanism to ensure that DBE commitments reconcile to DBE utilization.
The bidder shall submit the Exhibit 15-G Construction Contract DBE Commitment, included in the Bid book.
This exhibit is the bidder’s DBE commitment form. If the form is not submitted with the bid, the bidder must remove the form from the Bid book before submitting their bid.
The bidder shall complete and sign Exhibit 15-G Construction Contract DBE Commitment included in the contract documents regardless of whether DBE participation is reported. The bidder shall provide written confirmation from each DBE that the DBE is participating in the Contract. A copy of a DBE's quote serves as written confirmation. If a DBE is participating as a joint venture partner, the bidder shall submit a copy of the joint venture agreement.
If the DBE Commitment form, Exhibit 15-G, is not submitted with the bid, it must be completed and submitted by all bidders to the Agency within five (5) days of bid opening. If the bidder does not submit the DBE Commitment form within the specified time, the Agency will find the bidder’s bid nonresponsive.
The prime contractor shall use each DBE subcontractor as listed on Exhibit 12-B Bidder’s List of Subcontractors (DBE and Non-DBE), and Exhibit 15-G Construction Contract DBE Commitment form unless they receive authorization for a substitution.
The Agency shall request the prime contractor to:
1. Notify the Resident Engineer or Inspector of any changes to its anticipated DBE participation
2. Provide this notification before starting the affected work
3. Maintain records including:
Name and business address of each 1st-tier subcontractor Name and business address of each DBE subcontractor, DBE vendor, and DBE trucking company, regardless of tier
Date of payment and total amount paid to each business (see Exhibit 9-F Monthly Disadvantaged Business Enterprise Payment)
If the prime contractor is a DBE contractor, they shall include the date of work performed by their own forces and the corresponding value of the work.
Before the 15th of each month, the prime contractor shall submit a Monthly DBE Trucking Verification (LAPM Exhibit 16-Z1) form.
If a DBE is decertified before completing its work, the DBE must notify the prime contractor in writing of the decertification date. If a business becomes a certified DBE before completing its work, the business must notify the prime contractor in writing of the certification date. The prime contractor shall submit the notifications. Upon work completion, the prime contractor shall complete a Disadvantaged Business Enterprises (DBE) Certification Status Change, Exhibit 17-O, form and submit the form within 30 days of contract acceptance.
Upon work completion, the prime contractor shall complete Exhibit 17-F Final Report – Utilization of
EXHIBIT E 1284
Local Assistance Procedures Manual Exhibit 12-G
Required Federal-Aid Contract Language
September 2020
Disadvantage Business Enterprises (DBE), First-Tier Subcontractors and submit it within 90 days of contract acceptance. The Agency will withhold $10,000 until the form is submitted. The Agency releases the withhold upon submission of the completed form.
2. BID OPENING The Agency publicly opens and reads bids at the time and place shown on the Notice to Contractors.
3. BID RIGGING The U.S. Department of Transportation (DOT) provides a toll-free hotline to report bid rigging activities. Use the hotline to report bid rigging, bidder collusion, and other fraudulent activities. The hotline number is (800) 424-9071. The service is available 24 hours 7 days a week and is confidential and anonymous. The hotline is part of the DOT's effort to identify and investigate highway construction contract fraud and abuse and is operated under the direction of the DOT Inspector General.
4. CONTRACT AWARD If the Agency awards the contract, the award is made to the lowest responsible and responsive bidder.
5. CONTRACTOR LICENSE
The Contractor must be properly licensed as a contractor from contract award through Contract acceptance (Public Contract Code § 10164).
6. CHANGED CONDITIONS
a. Differing Site Conditions
1. During the progress of the work, if subsurface or latent physical conditions are encountered at the site differing materially from those indicated in the contract or if unknown physical conditions of an unusual nature, differing materially from those ordinarily encountered and generally recognized as inherent in the work provided for in the contract, are encountered at the site, the party discovering such conditions shall promptly notify the other party in writing of the specific differing conditions before the site is disturbed and before the affected work is performed.
2. Upon written notification, the engineer will investigate the conditions, and if it is determined that the conditions materially differ and cause an increase or decrease in the cost or time required for the performance of any work under the contract, an adjustment, excluding anticipated profits, will be made and the contract modified in writing accordingly. The engineer will notify the contractor of the determination whether or not an adjustment of the contract is warranted.
3. No contract adjustment which results in a benefit to the contractor will be allowed unless the contractor has provided the required written notice.
4. No contract adjustment will be allowed under this clause for any effects caused on unchanged work. (This provision may be omitted by the Local Agency, at their option.) b. Suspensions of Work Ordered by the Engineer
1. If the performance of all or any portion of the work is suspended or delayed by the engineer in writing for an unreasonable period of time (not originally anticipated, customary, or inherent to the construction industry) and the contractor believes that additional compensation and/or contract time is due as a result of such suspension or delay, the contractor shall submit to the engineer in writing a request for adjustment within 7 calendar days of receipt of the notice to resume work. The request shall set forth the reasons and support for such adjustment.
2. Upon receipt, the engineer will evaluate the contractor's request. If the engineer agrees that the cost and/or time required for the performance of the contract has increased as a result of such suspension and the suspension was caused by conditions beyond the control of and not the fault of the contractor, its suppliers, or subcontractors at any approved tier, and not caused by weather, the engineer will make an adjustment (excluding profit) and modify the contract in writing accordingly. The contractor will be notified of the engineer's determination whether or not an adjustment of the contract is warranted.
3. No contract adjustment will be allowed unless the contractor has submitted the request for adjustment within the time prescribed.
EXHIBIT E 1285
Local Assistance Procedures Manual Exhibit 12-G
Required Federal-Aid Contract Language
September 2020
4. No contract adjustment will be allowed under this clause to the extent that performance would have been suspended or delayed by any other cause, or for which an adjustment is provided or excluded under any other term or condition of this contract. c. Significant Changes in the Character of Work
1. The engineer reserves the right to make, in writing, at any time during the work, such changes in quantities and such alterations in the work as are necessary to satisfactorily complete the project.
Such changes in quantities and alterations shall not invalidate the contract nor release the surety, and the contractor agrees to perform the work as altered.
2. If the alterations or changes in quantities significantly change the character of the work under the contract, whether such alterations or changes are in themselves significant changes to the character of the work or by affecting other work cause such other work to become significantly different in character, an adjustment, excluding anticipated profit, will be made to the contract.
The basis for the adjustment shall be agreed upon prior to the performance of the work. If a basis cannot be agreed upon, then an adjustment will be made either for or against the contractor in such amount as the engineer may determine to be fair andequitable.
3. If the alterations or changes in quantities do not significantly change the character of the work to be performed under the contract, the altered work will be paid for as provided elsewhere in the contract.
4. The term “significant change” shall be construed to apply only to the following circumstances:
When the character of the work as altered differs materially in kind or nature from that involved or included in the original proposed construction; or When a major item of work, as defined elsewhere in the contract, is increased in excess of 125 percent or decreased below 75 percent of the original contract quantity. Any allowance for an increase in quantity shall apply only to that portion in excess of 125 percent of original contract item quantity, or in case of a decrease below 75 percent, to the actual amount of work performed.
7. BEGINNING OF WORK, TIME OF COMPLETION AND LIQUIDATED DAMAGES The Contractor shall begin work within 15 calendar days after the issuance of the Notice to Proceed.
This work shall be diligently prosecuted to completion before the expiration of WORKING DAYS beginning on the fifteenth calendar day after the date shown on the Notice to Proceed. per day, for each and every
calendar days’ delay in finishing the work in excess of the number of working days prescribed above.
8. BUY AMERICA
Furnish steel and iron materials to be incorporated into the work with certificates of compliance and certified mill test reports. Mill test reports must indicate where the steel and iron were melted and manufactured. Steel and iron materials must be produced in the U.S. except:
1. Foreign pig iron and processed, pelletized, and reduced iron ore may be used in the domestic production of the steel and iron materials [60 Fed Reg 15478 (03/24/1995)];
2. If the total combined cost of the materials does not exceed the greater of 0.1 percent of the total bid or $2,500, materials produced outside the U.S. may be used.
Production includes:
1. Processing steel and iron materials, including smelting or other processes that alter the physical form or shape (such as rolling, extruding, machining, bending, grinding, and drilling) or chemical composition;
2. Coating application, including epoxy coating, galvanizing, and painting, that protects or enhances the value of steel and iron materials.
15 The Contractor shall pay to the City/County Stockton the sum of $3,200
EXHIBIT E 1286
Local Assistance Procedures Manual Exhibit 12-G
Required Federal-Aid Contract Language
September 2020
9. QUALITY ASSURANCE
The Local Agency uses a Quality Assurance Program (QAP) to ensure a material is produced to comply with the Contract. The Local Agency may examine the records and reports of tests the prime contractor performs if they are available at the job site. Schedule work to allow time for QAP.
10. PROMPT PAYMENT FROM THE AGENCY TO THE CONTRACTORS
The Agency shall make any progress payment within 30 days after receipt of an undisputed and properly submitted payment request from a contractor on a construction contract. If the Agency fails to pay promptly, the Agency shall pay interest to the contractor, which accrues at the rate of 10 percent per annum on the principal amount of a money judgment remaining unsatisfied. Upon receipt of a payment request, the Agency shall act in accordance with both of the following:
1. Each payment request shall be reviewed by the Agency as soon as practicable after receipt for the purpose of determining that it is a proper payment request.
2. Any payment request determined not to be a proper payment request suitable for payment shall be returned to the contractor as soon as practicable, but not later than seven (7) days, after receipt. A request returned pursuant to this paragraph shall be accompanied by a document setting forth in writing the reasons why the payment request is not proper.
11. FORM FHWA-1273 REQUIRED CONTRACT PROVISIONS FEDERAL-AID CONTRACTS (Excluding ATTACHMENT A - EMPLOYMENT AND MATERIALS PREFERENCE FOR APPALACHIAN
DEVELOPMENT HIGHWAY SYSTEM OR APPALACHIAN LOCAL ACCESS ROAD CONTRACTS)
12. DBE RUNNING TALLY OF ATTAINMENTS
After submitting an invoice for reimbursement that includes a payment to a DBE, but no later than the 10th of the following month, the prime contractor/consultant shall complete and email the Exhibit 9- F: Disadvantaged Business Enterprise Running Tally of Payments to [email protected] with a copy to the Agency.
[The following 12 pages must be physically inserted into the contract without modification.]
EXHIBIT E 1287
Local Assistance Procedures Manual Exhibit 12-G
Required Federal-Aid Contract Language
September 2020
FHWA-1273 -- Revised May 1, 2012
REQUIRED CONTRACT
PROVISIONS FEDERAL-AID
CONSTRUCTION CONTRACTS
EXHIBIT E 1288
Local Assistance Procedures Manual Exhibit 12-G
Required Federal-Aid Contract Language
September 2020
I. General
II. Nondiscrimination
III. No segregated Facilities
IV. Davis-Bacon and Related Act Provisions
V. Contract Work Hours and Safety Standards Act Provisions VI. Subletting or Assigning the Contract
VII. Safety: Accident Prevention
VIII. False Statements Concerning Highway Projects
IX. Implementation of Clean Air Act and Federal Water Pollution Control Act
X. Compliance with Government wide Suspension and Debarment Requirements
XI. Certification Regarding Use of Contract Funds for Lobbying
ATTACHMENTS
A. Employment and Materials Preference for Appalachian Development Highway System or Appalachian Local Access Road Contracts (included in Appalachian contracts only)
I. GENERAL
1. Form FHWA-1273 must be physically incorporated in each construction contract funded under Title 23 (excluding emergency contracts solely intended for debris removal). The contractor (or subcontractor) must insert this form in each subcontract and further require its inclusion in all lower tier subcontracts (excluding purchase orders, rental agreements and other agreements for supplies or services).
The applicable requirements of Form FHWA-1273 are incorporated by reference for work done under any purchase order, rental agreement or agreement for other services. The prime contractor shall be responsible for compliance by any subcontractor, lower-tier subcontractor or service provider.
Form FHWA-1273 must be included in all Federal-aid design-build contracts, in all subcontracts and in lower tier subcontracts (excluding subcontracts for design services, purchase orders, rental agreements and other agreements for supplies or services). The design-builder shall be responsible for compliance by any subcontractor, lower-tier subcontractor or service provider.
Contracting agencies may reference Form FHWA-1273 in bid proposal or request for proposal documents, however, the Form FHWA-1273 must be physically incorporated (not referenced) in all contracts, subcontracts and lower-tier subcontracts (excluding purchase orders, rental agreements and other agreements for supplies or services related to a construction contract).
2. Subject to the applicability criteria noted in the following sections, these contract provisions shall apply to all work performed on the contract by the contractor's own organization and with the assistance of workers under the contractor's immediate superintendence and to all work performed on the contract by piecework, station work, or by subcontract.
3. A breach of any of the stipulations contained in these Required Contract Provisions may be sufficient grounds for withholding of progress payments, withholding of final payment, termination of the contract, suspension / debarment or any other action determined to be appropriate by the contracting agency and FHWA.
4. Selection of Labor: During the performance of this contract, the contractor shall not use convict labor for any purpose within the limits of a construction project on a Federal-aid highway unless it is labor performed by convicts who are on parole, supervised release, or probation. The term Federal-aid highway does not include roadways functionally classified as local roads or rural minor collectors.
II. NONDISCRIMINATION
The provisions of this section related to 23 CFR Part 230 are applicable to all Federal-aid construction contracts and to all related construction subcontracts of $10,000 or more. The provisions of 23 CFR Part 230 are not applicable to material supply, engineering, or architectural service contracts.
In addition, the contractor and all subcontractors must comply with the following policies: Executive Order 11246, 41 CFR 60, 29 CFR 1625- 1627, Title 23 USC Section 140, the Rehabilitation Act of 1973, as amended (29 USC 794), Title VI of the Civil Rights Act of 1964, as amended, and related regulations including 49 CFR Parts 21, 26 and 27; and 23 CFR Parts 200, 230, and 633.
The contractor and all subcontractors must comply with: the requirements of the Equal Opportunity Clause in 41 CFR 60-1.4(b) and, for all construction contracts exceeding $10,000, the Standard Federal Equal Employment Opportunity Construction Contract Specifications in 41 CFR 60-4.3.
Note: The U.S. Department of Labor has exclusive authority to determine compliance with Executive Order 11246 and the policies of the Secretary of Labor including 41 CFR 60, and 29 CFR 1625-1627.
The contracting agency and the FHWA have the authority and the responsibility to ensure compliance with Title 23 USC Section 140, the Rehabilitation Act of 1973, as amended (29 USC 794), and Title VI of the Civil Rights Act of 1964, as amended, and related regulations including 49 CFR Parts 21, 26 and 27; and 23 CFR Parts 200, 230, and 633.
The following provision is adopted from 23 CFR 230, Appendix A, with appropriate revisions to conform to the U.S. Department of Labor (US DOL) and FHWA requirements.
1. Equal Employment Opportunity: Equal employment opportunity (EEO) requirements not to discriminate and to take affirmative action to assure equal opportunity as set forth under laws, executive orders, rules, regulations (28 CFR 35, 29 CFR 1630, 29 CFR 1625-1627, 41 CFR 60 and 49 CFR 27) and orders of the Secretary of Labor as modified by the provisions prescribed herein, and imposed pursuant to 23 U.S.C. 140 shall constitute the EEO and specific affirmative action standards for the contractor's project activities under this contract. The provisions of the Americans with Disabilities Act of 1990 (42 U.S.C. 12101 et seq.) set forth under 28 CFR 35 and 29 CFR 1630 are incorporated by reference in this contract. In the execution of this contract, the contractor agrees to comply with the following minimum specific requirement activities of EEO:
a. The contractor will work with the contracting agency and the Federal Government to ensure that it has made every good faith effort to provide equal opportunity with respect to all of its terms and conditions of employment and in their review of activities under the contract.
b. The contractor will accept as its operating policy the following statement:
"It is the policy of this Company to assure that applicants are employed, and that employees are treated during employment, without regard to their race, religion, sex, color, national origin, age or disability. Such action shall include: employment, upgrading, demotion, or transfer; recruitment or recruitment advertising; layoff or termination; rates of pay or other forms of compensation; and selection for training, including apprenticeship, pre-apprenticeship, and/or on-the-job training." FHWA-1273 -- Revised May 1, 2012
EXHIBIT E 1289
Local Assistance Procedures Manual Exhibit 12-G
Required Federal-Aid Contract Language
September 2020
2. EEO Officer: The contractor will designate and make known to the contracting officers and EEO Officer who will have the responsibility for and must be capable of effectively administering and promoting and active EEO program and who must be assigned adequate authority and responsibility to do so.
3. Dissemination of Policy: All members of the contractor's staff who are authorized to hire, supervise, promote, and discharge employees, or who recommend such action, or who are
substantially involved in such action, will be made fully cognizant of, and will implement, the contractor's EEO policy and contractual responsibilities to provide EEO in each grade and classification of employment. To ensure that the above agreement will be met, the following actions will be taken as a minimum:
a. Periodic meetings of supervisory and personnel office employees will be conducted before the start of work and then not less often than once every six months, at which time the contractor's EEO policy and its implementation will be reviewed and explained. The meetings will be conducted by the EEO Officer.
b. All new supervisory or personnel office employees will be given a thorough indoctrination by the EEO Officer, covering all major aspects of the contractor's EEO obligations within thirty days following their reporting for duty with the contractor. c. All personnel who are engaged in direct recruitment for the project will be instructed by the EEO Officer in the contractor's procedures for locating and hiring minorities and women. d. Notices and posters setting forth the contractor's EEO policy will be placed in areas readily accessible to employees, applicants for employment and potential employees.
e. The contractor's EEO policy and the procedures to implement such policy will be brought to the attention of employees by means of meetings, employee handbooks, or other appropriate means.
4. Recruitment: When advertising for employees, the contractor will include in all advertisements for employees the notation: "An Equal Opportunity Employer." All such advertisements will be placed in publications having a large circulation among minorities and women in the area from which the project work force would normally be derived.
a. The contractor will, unless precluded by a valid bargaining agreement, conduct systematic and direct recruitment through public and private employee referral sources likely to yield qualified minorities and women. To meet this requirement, the contractor will identify sources of potential minority group employees, and establish with such identified sources
procedures whereby minority and women applicants may be referred to the contractor for employment consideration. b. In the event the contractor has a valid bargaining agreement providing for exclusive hiring hall referrals, the contractor is expected to observe the provisions of that agreement to the extent that the system meets the contractor's compliance with EEO contract provisions. Where implementation of such an agreement has the effect of discriminating against minorities or women, or obligates the contractor to do the same, such implementation violates Federal nondiscrimination provisions. c. The contractor will encourage its present employees to refer minorities and women as applicants for employment.
Information and procedures with regard to referring such applicants will be discussed with employees.
5. Personnel Actions: Wages, working conditions, and employee benefits shall be established and administered, and personnel actions of every type, including hiring, upgrading, promotion, transfer, demotion, layoff, and termination, shall be taken without regard to race, color, religion, sex, national origin, age or disability.
The following procedures shall be followed:
a. The contractor will conduct periodic inspections of project sites to insure that working conditions and employee facilities do not indicate discriminatory treatment of project site personnel. b. The contractor will periodically evaluate the spread of wages paid within each classification to determine any evidence of discriminatory wage practices.
c. The contractor will periodically review selected personnel actions in depth to determine whether there is evidence of discrimination.
Where evidence is found, the contractor will promptly take corrective action. If the review indicates that the discrimination may extend beyond the actions reviewed, such corrective action shall include all affected persons.
d. The contractor will promptly investigate all complaints of alleged discrimination made to the contractor in connection with its obligations under this contract, will attempt to resolve such complaints, and will take appropriate corrective action within a reasonable time. If the investigation indicates that the discrimination may affect persons other than the complainant, such corrective action shall include such other persons. Upon completion of each investigation, the contractor will inform every complainant of all of their avenues of appeal.
6. Training and Promotion:
a. The contractor will assist in locating, qualifying, and increasing the skills of minorities and women who are applicants for employment or current employees. Such efforts should be aimed at developing full journey level status employees in the type of trade or job classification involved.
b. Consistent with the contractor's work force requirements and as permissible under Federal and State regulations, the contractor shall make full use of training programs, i.e., apprenticeship, and on-the-job training programs for the geographical area of contract performance. In the event a special provision for training is provided under this contract, this subparagraph will be superseded as indicated in the special provision. The contracting agency may reserve training positions for persons who receive welfare assistance in accordance with 23 U.S.C. 140(a). c. The contractor will advise employees and applicants for employment of available training programs and entrance
requirements for each.
d. The contractor will periodically review the training and promotion potential of employees who are minorities and women and will encourage eligible employees to apply for such training and promotion.
EXHIBIT E 1290
Local Assistance Procedures Manual Exhibit 12-G
Required Federal-Aid Contract Language
September 2020
7. Unions: If the contractor relies in whole or in part upon unions as a source of employees, the contractor will use good faith efforts to obtain the cooperation of such unions to increase opportunities for minorities and women. Actions by the contractor, either directly or through a contractor's association acting as agent, will include the procedures set forth below:
a. The contractor will use good faith efforts to develop, in cooperation with the unions, joint training programs aimed toward qualifying more minorities and women for membership in the unions and increasing the skills of minorities and women so that they may qualify for higher paying employment.
b. The contractor will use good faith efforts to incorporate an EEO clause into each union agreement to the end that such union will be contractually bound to refer applicants without regard to their race, color, religion, sex, national origin, age or disability. c. The contractor is to obtain information as to the referral practices and policies of the labor union except that to the extent such information is within the exclusive possession of the labor union and such labor union refuses to furnish such information to the contractor, the contractor shall so certify to the contracting agency and shall set forth what efforts have been made to obtain such information.
d. In the event the union is unable to provide the contractor with a reasonable flow of referrals within the time limit set forth in the collective bargaining agreement, the contractor will, through independent recruitment efforts, fill the employment vacancies without regard to race, color, religion, sex, national origin, age or disability; making full efforts to obtain qualified and/or qualifiable minorities and women. The failure of a union to provide sufficient referrals (even though it is obligated to provide exclusive referrals under the terms of a collective bargaining agreement) does not relieve the contractor from the requirements of this paragraph. In the event the union referral practice prevents the contractor from meeting the obligations pursuant to Executive Order 11246, as amended, and these special provisions, such contractor shall immediately notify the contracting agency.
8. Reasonable Accommodation for Applicants / Employees
with Disabilities: The contractor must be familiar with the requirements for and comply with the Americans with Disabilities Act and all rules and regulations established there under.
Employers must provide reasonable accommodation in all
employment activities unless to do so would cause an undue hardship.
9. Selection of Subcontractors, Procurement of Materials and Leasing of Equipment: The contractor shall not discriminate on the grounds of race, color, religion, sex, national origin, age or disability in the selection and retention of subcontractors, including procurement of materials and leases of equipment. The contractor shall take all necessary and reasonable steps to ensure nondiscrimination in the administration of this contract. a. The contractor shall notify all potential subcontractors and suppliers and lessors of their EEO obligations under this contract. b. The contractor will use good faith efforts to ensure subcontractor compliance with their EEO obligations.
FHWA-1273 -- Revised May 1, 2012
10. Assurance Required by 49 CFR 26.13(b):
a. The requirements of 49 CFR Part 26 and the State DOT’s U.S.
DOT-approved DBE program are incorporated by reference. b. The contractor or subcontractor shall not discriminate on the basis of race, color, national origin, or sex in the performance of this contract. The contractor shall carry out applicable requirements of 49 CFR Part 26 in the award and administration of DOT-assisted contracts. Failure by the contractor to carry out these requirements is a material breach of this contract, which may result in the termination of this contract or such other remedy as the contracting agency deems appropriate.
11. Records and Reports: The contractor shall keep such records as necessary to document compliance with the EEO requirements.
Such records shall be retained for a period of three years following the date of the final payment to the contractor for all contract work and shall be available at reasonable times and places for inspection by authorized representatives of the contracting agency and the FHWA.
a. The records kept by the contractor shall document the following:
(1) The number and work hours of minority and non-minority group members and women employed in each work classification on the project;
(2) The progress and efforts being made in cooperation with unions, when applicable, to increase employment opportunities for minorities and women; and
(3) The progress and efforts being made in locating, hiring, training, qualifying, and upgrading minorities and women.
b. The contractors and subcontractors will submit an annual report to the contracting agency each July for the duration of the project, indicating the number of minority, women, and nonminority group employees currently engaged in each work classification required by the contract work. This information is to be reported on Form FHWA-1391. The staffing data should represent the project work force on board in all or any part of the last payroll period preceding the end of July. If on-the-job training is being required by special provision, the contractor will be required to collect and report training data. The employment data should reflect the work force on board during all or any part of the last payroll period preceding the end of July.
III. NONSEGREGATED FACILITIES
This provision is applicable to all Federal-aid construction contracts and to all related construction subcontracts of $10,000 or more.
The contractor must ensure that facilities provided for employees are provided in such a manner that segregation on the basis of race, color, religion, sex, or national origin cannot result. The contractor may neither require such segregated use by written or oral policies nor tolerate such use by employee custom. The contractor's obligation extends further to ensure that its employees are not assigned to perform their services at any location, under the contractor's control, where the facilities are segregated. The term "facilities" includes waiting rooms, work areas, restaurants and other eating areas, time clocks, restrooms, washrooms, locker rooms, and other storage or dressing areas, parking lots, drinking fountains, recreation or entertainment areas, transportation, and housing provided for employees. The contractor shall provide separate or single-user restrooms and necessary dressing or sleeping areas to assure privacy between sexes.
EXHIBIT E 1291
Local Assistance Procedures Manual Exhibit 12-G
Required Federal-Aid Contract Language
September 2020
IV. DAVIS-BACON AND RELATED ACT PROVISIONS
This section is applicable to all Federal-aid construction projects exceeding $2,000 and to all related subcontracts and lower-tier subcontracts (regardless of subcontract size). The requirements apply to all projects located within the right-of-way of a roadway that is functionally classified as Federal-aid highway. This excludes roadways functionally classified as local roads or rural minor collectors, which are exempt. Contracting agencies may elect to apply these requirements to other projects.
The following provisions are from the U.S. Department of Labor regulations in 29 CFR 5.5 “Contract provisions and related matters” with minor revisions to conform to the FHWA-1273 format and FHWA program requirements.
1. Minimum wages
a. All laborers and mechanics employed or working upon the site of the work, will be paid unconditionally and not less often than once a week, and without subsequent deduction or rebate on any account (except such payroll deductions as are permitted by regulations issued by the Secretary of Labor under the Copeland Act (29 CFR part 3)), the full amount of wages and bona fide fringe benefits (or cash equivalents thereof) due at time of payment computed at rates not less than those contained in the wage determination of the Secretary of Labor which is attached hereto and made a part hereof, regardless of any contractual relationship which may be alleged to exist between the contractor and such laborers and mechanics.
Contributions made or costs reasonably anticipated for bona fide fringe benefits under section 1(b)(2) of the Davis-Bacon Act on behalf of laborers or mechanics are considered wages paid to such laborers or mechanics, subject to the provisions of paragraph 1.d. of this section; also, regular contributions made or costs incurred for more than a weekly period (but not less often than quarterly) under plans, funds, or programs which cover the particular weekly period, are deemed to be constructively made or incurred during such weekly period. Such laborers and mechanics shall be paid the appropriate wage rate and fringe benefits on the wage
determination for the classification of work actually performed, without regard to skill, except as provided in 29 CFR 5.5(a)(4).
Laborers or mechanics performing work in more than one
classification may be compensated at the rate specified for each classification for the time actually worked therein: Provided, That the employer's payroll records accurately set forth the time spent in each classification in which work is performed. The wage determination (including any additional classification and wage rates conformed under paragraph 1.b. of this section) and the Davis-Bacon poster (WH–1321) shall be posted at all times by the contractor and its subcontractors at the site of the work in a prominent and accessible place where it can be easily seen by the workers.
b. (1) The contracting officer shall require that any class of laborers or mechanics, including helpers, which is not listed in the wage determination and which is to be employed under the contract shall be classified in conformance with the wage determination. The contracting officer shall approve an additional classification and wage rate and fringe benefits therefore only when the following criteria have been met:
FHWA-1273 -- Revised May 1, 2012
(i) The work to be performed by the classification requested is not performed by a classification in the wage determination; and (ii) The classification is utilized in the area by the construction industry; and
(iii) The proposed wage rate, including any bona fide fringe benefits, bears a reasonable relationship to the wage rates contained in the wage determination.
(2) If the contractor and the laborers and mechanics to be employed in the classification (if known), or their
representatives, and the contracting officer agree on the classification and wage rate (including the amount designated for fringe benefits where appropriate), a report of the action taken shall be sent by the contracting officer to the Administrator of the Wage and Hour Division, Employment Standards
Administration, U.S. Department of Labor, Washington, DC 20210. The Administrator, or an authorized representative, will approve, modify, or disapprove every additional classification action within 30 days of receipt and so advise the contracting officer or will notify the contracting officer within the 30-day period that additional time is necessary.
(3) In the event the contractor, the laborers or mechanics to be employed in the classification or their representatives, and the contracting officer do not agree on the proposed classification and wage rate (including the amount designated for fringe benefits, where appropriate), the contracting officer shall refer the questions, including the views of all interested parties and the recommendation of the contracting officer, to the Wage and Hour Administrator for determination. The Wage and Hour Administrator, or an authorized representative, will issue a determination within 30 days of receipt and so advise the contracting officer or will notify the contracting officer within the 30-day period that additional time is necessary.
(4) The wage rate (including fringe benefits where appropriate) determined pursuant to paragraphs 1.b.(2) or 1.b.(3) of this section, shall be paid to all workers performing work in the classification under this contract from the first day on which work is performed in the classification.
c. Whenever the minimum wage rate prescribed in the contract for a class of laborers or mechanics includes a fringe benefit which is not expressed as an hourly rate, the contractor shall either pay the benefit as stated in the wage determination or shall pay another bona fide fringe benefit or an hourly cash equivalent thereof.
d. If the contractor does not make payments to a trustee or other third person, the contractor may consider as part of the wages of any laborer or mechanic the amount of any costs reasonably anticipated in providing bona fide fringe benefits under a plan or program, Provided, That the Secretary of Labor has found, upon the written request of the contractor, that the applicable standards of the Davis-Bacon Act have been met. The Secretary of Labor may require the contractor to set aside in a separate account assets for the meeting of obligations under the plan or program.
EXHIBIT E 1292
Local Assistance Procedures Manual Exhibit 12-G
Required Federal-Aid Contract Language
September 2020
2. Withholding
The contracting agency shall upon its own action or upon written request of an authorized representative of the Department of Labor, withhold or cause to be withheld from the contractor under this contract, or any other Federal contract with the same prime contractor, or any other federally-assisted contract subject to DavisBacon prevailing wage requirements, which is held by the same prime contractor, so much of the accrued payments or advances as may be considered necessary to pay laborers and mechanics, including apprentices, trainees, and helpers, employed by the contractor or any subcontractor the full amount of wages required by the contract. In the event of failure to pay any laborer or mechanic, including any apprentice, trainee, or helper, employed or working on the site of the work, all or part of the wages required by the contract, the contracting agency may, after written notice to the contractor, take such action as may be necessary to cause the suspension of any further payment, advance, or guarantee of funds until such violations have ceased.
3. Payrolls and basic records
a. Payrolls and basic records relating thereto shall be maintained by the contractor during the course of the work and preserved for a period of three years thereafter for all laborers and mechanics working at the site of the work. Such records shall contain the name, address, and social security number of each such worker, his or her correct classification, hourly rates of wages paid (including rates of contributions or costs anticipated for bona fide fringe benefits or cash equivalents thereof of the types described in section 1(b)(2)(B) of the Davis-Bacon Act), daily and weekly number of hours worked, deductions made and actual wages paid.
Whenever the Secretary of Labor has found under 29 CFR
5.5(a)(1)(iv) that the wages of any laborer or mechanic include the amount of any costs reasonably anticipated in providing benefits under a plan or program described in section 1(b)(2)(B) of the Davis-Bacon Act, the contractor shall maintain records which show that the commitment to provide such benefits is enforceable, that the plan or program is financially responsible, and that the plan or program has been communicated in writing to the laborers or mechanics affected, and records which show the costs anticipated or the actual cost incurred in providing such benefits. Contractors employing apprentices or trainees under approved programs shall maintain written evidence of the registration of apprenticeship programs and certification of trainee programs, the registration of the apprentices and trainees, and the ratios and wage rates prescribed in the applicable programs.
b. (1) The contractor shall submit weekly for each week in which any contract work is performed a copy of all payrolls to the contracting agency. The payrolls submitted shall set out accurately and completely all of the information required to be maintained under 29 CFR 5.5(a)(3)(i), except that full social security numbers and home addresses shall not be included on weekly transmittals.
Instead the payrolls shall only need to include an individually identifying number for each employee ( e.g. , the last four digits of the employee's social security number). The required weekly payroll information may be submitted in any form desired. Optional Form WH–347 is available for this purpose from the Wage and Hour Division Web site at
http://www.dol.gov/esa/whd/forms/wh347instr.htm or its successor site. The prime contractor is responsible for the submission of copies of payrolls by all subcontractors. Contractors and subcontractors shall maintain the full social security number and FHWA-1273 -- Revised May 1, 2012
current address of each covered worker, and shall provide them upon request to the contracting agency for transmission to the State DOT, the FHWA or the Wage and Hour Division of the Department of Labor for purposes of an investigation or audit of compliance with prevailing wage requirements. It is not a violation of this section for a prime contractor to require a subcontractor to provide addresses and social security numbers to the prime contractor for its own records, without weekly submission to the contracting agency.
(2) Each payroll submitted shall be accompanied by a “Statement of Compliance,” signed by the contractor or subcontractor or his or her agent who pays or supervises the payment of the
persons employed under the contract and shall certify the following:
(i) That the payroll for the payroll period contains the information required to be provided under §5.5 (a)(3)(ii) of Regulations, 29 CFR part 5, the appropriate information is being maintained under §5.5 (a)(3)(i) of Regulations, 29 CFR part 5, and that such information is correct and complete;
(ii) That each laborer or mechanic (including each helper, apprentice, and trainee) employed on the contract during the payroll period has been paid the full weekly wages earned, without rebate, either directly or indirectly, and that no deductions have been made either directly or indirectly from the full wages earned, other than permissible deductions as set forth in Regulations, 29 CFR part 3;
(iii) That each laborer or mechanic has been paid not less than the applicable wage rates and fringe benefits or cash equivalents for the classification of work performed, as specified in the applicable wage determination incorporated into the contract. (3) The weekly submission of a properly executed certification set forth on the reverse side of Optional Form WH–347 shall satisfy the requirement for submission of the “Statement of Compliance” required by paragraph 3.b.(2) of this section. (4) The falsification of any of the above certifications may subject the contractor or subcontractor to civil or criminal prosecution under section 1001 of title 18 and section 231 of title 31 of the United States Code.
c. The contractor or subcontractor shall make the records required under paragraph 3.a. of this section available for inspection, copying, or transcription by authorized
representatives of the contracting agency, the State DOT, the FHWA, or the Department of Labor, and shall permit such representatives to interview employees during working hours on the job. If the contractor or subcontractor fails to submit the required records or to make them available, the FHWA may, after written notice to the contractor, the contracting agency or the State DOT, take such action as may be necessary to
cause the suspension of any further payment, advance, or guarantee of funds. Furthermore, failure to submit the required records upon request or to make such records available may be grounds for debarment action pursuant to 29 CFR 5.12.
EXHIBIT E 1293
Local Assistance Procedures Manual Exhibit 12-G
Required Federal-Aid Contract Language
September 2020
FHWA-1273 -- Revised May 1, 2012
4. Apprentices and trainees
a. Apprentices (programs of the USDOL).
Apprentices will be permitted to work at less than the predetermined rate for the work they performed when they are employed pursuant to and individually registered in a bona fide apprenticeship program registered with the U.S. Department of Labor, Employment and Training Administration, Office of Apprenticeship Training, Employer and Labor Services, or with a State Apprenticeship Agency recognized by the Office, or if a person is employed in his or her first 90 days of probationary employment as an apprentice in such an apprenticeship program, who is not individually registered in the program, but who has been certified by the Office of Apprenticeship Training, Employer and Labor Services or a State Apprenticeship Agency (where appropriate) to be eligible for probationary employment as an apprentice.
The allowable ratio of apprentices to journeymen on the job site in any craft classification shall not be greater than the ratio permitted to the contractor as to the entire work force under the registered program. Any worker listed on a payroll at an apprentice wage rate, who is not registered or otherwise employed as stated above, shall be paid not less than the applicable wage rate on the wage determination for the classification of work actually performed. In addition, any apprentice performing work on the job site in excess of the ratio permitted under the registered program shall be paid not less than the applicable wage rate on the wage determination for the work actually performed. Where a contractor is performing construction on a project in a locality other than that in which its program is registered, the ratios and wage rates (expressed in percentages of the journeyman's hourly rate) specified in the contractor's or subcontractor's registered program shall be observed.
Every apprentice must be paid at not less than the rate specified in the registered program for the apprentice's level of progress, expressed as a percentage of the journeymen hourly rate specified in the applicable wage determination. Apprentices shall be paid fringe benefits in accordance with the provisions of the apprenticeship program. If the apprenticeship program does not specify fringe benefits, apprentices must be paid the full amount of fringe benefits listed on the wage determination for the applicable classification. If the Administrator determines that a different practice prevails for the applicable apprentice classification, fringes shall be paid in accordance with that determination.
In the event the Office of Apprenticeship Training, Employer and Labor Services, or a State Apprenticeship Agency recognized by the Office, withdraws approval of an apprenticeship program, the contractor will no longer be permitted to utilize apprentices at less than the applicable predetermined rate for the work performed until an acceptable program is approved.
b. Trainees (programs of the USDOL).
Except as provided in 29 CFR 5.16, trainees will not be permitted to work at less than the predetermined rate for the work performed unless they are employed pursuant to and individually registered in a program which has received prior approval, evidenced by formal certification by the U.S. Department of Labor, Employment and Training Administration.
The ratio of trainees to journeymen on the job site shall not be greater than permitted under the plan approved by the Employment and Training Administration.
Every trainee must be paid at not less than the rate specified in the approved program for the trainee's level of progress, expressed as a percentage of the journeyman hourly rate specified in the applicable wage determination. Trainees shall be paid fringe benefits in accordance with the provisions of the trainee program. If the trainee program does not mention fringe benefits, trainees shall be paid the full amount of fringe benefits listed on the wage determination unless the Administrator of the Wage and Hour Division determines that there is an apprenticeship program associated with the corresponding journeyman wage rate on the wage determination which provides for less than full fringe benefits for apprentices. Any employee listed on the payroll at a trainee rate who is not registered and participating in a training plan approved by the Employment and Training Administration shall be paid not less than the applicable wage rate on the wage determination for the classification of work actually performed. In addition, any trainee performing work on the job site in excess of the ratio permitted under the registered program shall be paid not less than the applicable wage rate on the wage determination for the work actually performed.
In the event the Employment and Training Administration withdraws approval of a training program, the contractor will no longer be permitted to utilize trainees at less than the applicable predetermined rate for the work performed until an acceptable program is approved.
c. Equal employment opportunity. The utilization of apprentices, trainees and journeymen under this part shall be in conformity with the equal employment opportunity requirements of Executive Order 11246, as amended, and 29 CFR part 30.
d. Apprentices and Trainees (programs of the U.S. DOT).
Apprentices and trainees working under apprenticeship and skill training programs which have been certified by the Secretary of Transportation as promoting EEO in connection with Federal-aid highway construction programs are not subject to the requirements of paragraph 4 of this Section IV. The straight time hourly wage rates for apprentices and trainees under such programs will be established by the particular programs. The ratio of apprentices and trainees to journeymen shall not be greater than permitted by the terms of the particular program.
5. Compliance with Copeland Act requirements. The contractor shall comply with the requirements of 29 CFR part 3, which are incorporated by reference in this contract.
6. Subcontracts. The contractor or subcontractor shall insert Form FHWA-1273 in any subcontracts and also require the subcontractors to include Form FHWA-1273 in any lower tier subcontracts. The prime contractor shall be responsible for the compliance by any subcontractor or lower tier subcontractor with all the contract clauses in 29 CFR 5.5.
7. Contract termination: debarment. A breach of the contract clauses in 29 CFR 5.5 may be grounds for termination of the contract, and for debarment as a contractor and a subcontractor as provided in 29 CFR 5.12.
EXHIBIT E 1294
Local Assistance Procedures Manual Exhibit 12-G
Required Federal-Aid Contract Language
September 2020
FHWA-1273 -- Revised May 1, 2012
8. Compliance with Davis-Bacon and Related Act requirements.
All rulings and interpretations of the Davis-Bacon and Related Acts contained in 29 CFR parts 1, 3, and 5 are herein incorporated by reference in this contract.
9. Disputes concerning labor standards. Disputes arising out of the labor standards provisions of this contract shall not be subject to the general disputes clause of this contract. Such disputes shall be resolved in accordance with the procedures of the Department of Labor set forth in 29 CFR parts 5, 6, and 7. Disputes within the meaning of this clause include disputes between the contractor (or any of its subcontractors) and the contracting agency, the U.S.
Department of Labor, or the employees or their representatives.
10. Certification of eligibility.
a. By entering into this contract, the contractor certifies that neither it (nor he or she) nor any person or firm who has an interest in the contractor's firm is a person or firm ineligible to be awarded Government contracts by virtue of section 3(a) of the DavisBacon Act or 29 CFR 5.12(a)(1). b. No part of this contract shall be subcontracted to any person or firm ineligible for award of a Government contract by virtue of section 3(a) of the Davis-Bacon Act or 29 CFR 5.12(a)(1). c. The penalty for making false statements is prescribed in the U.S.
Criminal Code, 18 U.S.C. 1001.
V. CONTRACT WORK HOURS AND SAFETY STANDARDS
ACT
The following clauses apply to any Federal-aid construction contract in an amount in excess of $100,000 and subject to the overtime provisions of the Contract Work Hours and Safety Standards Act.
These clauses shall be inserted in addition to the clauses required by 29 CFR 5.5(a) or 29 CFR 4.6. As used in this paragraph, the terms laborers and mechanics include watchmen and guards.
1. Overtime requirements. No contractor or subcontractor contracting for any part of the contract work which may require or involve the employment of laborers or mechanics shall require or permit any such laborer or mechanic in any workweek in which he or she is employed on such work to work in excess of forty hours in such workweek unless such laborer or mechanic receives
compensation at a rate not less than one and one-half times the basic rate of pay for all hours worked in excess of forty hours in such workweek.
2. Violation; liability for unpaid wages; liquidated damages. In the event of any violation of the clause set forth in paragraph (1.) of this section, the contractor and any subcontractor responsible therefor shall be liable for the unpaid wages. In addition, such contractor and subcontractor shall be liable to the United States (in the case of work done under contract for the District of Columbia or a territory, to such District or to such territory), for liquidated damages. Such liquidated damages shall be computed with respect to each individual laborer or mechanic, including watchmen and guards, employed in violation of the clause set forth inparagraph(1.) of this section, in the sum of $10 for each calendar day on which such individual was required or permitted to work in excess of the standard workweek of forty hours without payment of the overtime wages required by the clause set forth in paragraph (1.) of this section.
3. Withholding for unpaid wages and liquidated damages. The FHWA or the contacting agency shall upon its own action or upon written request of an authorized representative of the Department of Labor withhold or cause to be withheld, from any moneys payable on account of work performed by the contractor or subcontractor under any such contract or any other Federal contract with the same prime contractor, or any other federally-assisted contract subject to the Contract Work Hours and Safety Standards Act, which is held by the same prime contractor, such sums as may be determined to be necessary to satisfy any liabilities of such contractor or subcontractor for unpaid wages and liquidated damages as provided in the clause set forth in paragraph (2.) of this section.
4. Subcontracts. The contractor or subcontractor shall insert in any subcontracts the clauses set forth in paragraph (1.) through (4.) of this section and also a clause requiring the subcontractors to include these clauses in any lower tier subcontracts. The prime contractor shall be responsible for compliance by any subcontractor or lower tier subcontractor with the clauses set forth in paragraphs (1.) through (4.) of this section.
VI. SUBLETTING OR ASSIGNING THE CONTRACT
This provision is applicable to all Federal-aid construction contracts on the National Highway System.
1. The contractor shall perform with its own organization contract work amounting to not less than 30 percent (or a greater percentage if specified elsewhere in the contract) of the total original contract price, excluding any specialty items designated by the contracting agency. Specialty items may be performed by subcontract and the amount of any such specialty items performed may be deducted from the total original contract price before computing the amount of work required to be performed by the contractor's own organization (23 CFR 635.116).
a. The term “perform work with its own organization” refers to workers employed or leased by the prime contractor, and equipment owned or rented by the prime contractor, with or without operators. Such term does not include employees or equipment of a subcontractor or lower tier subcontractor, agents of the prime contractor, or any other assignees. The term may include payments for the costs of hiring leased employees from an employee leasing firm meeting all relevant Federal and State regulatory requirements. Leased
employees may only be included in this term if the prime contractor meets all of the following conditions:
(1) the prime contractor maintains control over the supervision of the day-to-day activities of the leased employees;
(2) the prime contractor remains responsible for the quality of the work of the leased employees;
(3) the prime contractor retains all power to accept or exclude individual employees from work on the project; and
(4) the prime contractor remains ultimately responsible for the payment of predetermined minimum wages, the submission of payrolls, statements of compliance and all other Federal regulatory requirements.
b. "Specialty Items" shall be construed to be limited to work that requires highly specialized knowledge, abilities, or equipment not ordinarily available in the type of contracting organizations qualified and expected to bid or propose on the contract as a whole and in general are to be limited to minor components of the overall contract.
EXHIBIT E 1295
Local Assistance Procedures Manual Exhibit 12-G
Required Federal-Aid Contract Language
September 2020
2. The contract amount upon which the requirements set forth in paragraph (1) of Section VI is computed includes the cost of material and manufactured products which are to be purchased or produced by the contractor under the contract provisions.
3. The contractor shall furnish (a) a competent superintendent or supervisor who is employed by the firm, has full authority to direct performance of the work in accordance with the contract requirements, and is in charge of all construction operations (regardless of who performs the work) and (b) such other of its own organizational resources (supervision, management, and engineering services) as the contracting officer determines is necessary to assure the performance of the contract.
4. No portion of the contract shall be sublet, assigned or otherwise disposed of except with the written consent of the contracting officer, or authorized representative, and such consent when given shall not be construed to relieve the contractor of any responsibility for the fulfillment of the contract. Written consent will be given only after the contracting agency has assured that each subcontract is evidenced in writing and that it contains all pertinent provisions and requirements of the prime contract.
5. The 30% self-performance requirement of paragraph (1) is not applicable to design-build contracts; however, contracting agencies may establish their own self-performance requirements.
VII. SAFETY: ACCIDENT PREVENTION
This provision is applicable to all Federal-aid construction contracts and to all related subcontracts.
1. In the performance of this contract the contractor shall comply with all applicable Federal, State, and local laws governing safety, health, and sanitation (23 CFR 635). The contractor shall provide all safeguards, safety devices and protective equipment and take any other needed actions as it determines, or as the contracting officer may determine, to be reasonably necessary to protect the life and health of employees on the job and the safety of the public and to protect property in connection with the performance of the work covered by the contract.
2. It is a condition of this contract, and shall be made a condition of each subcontract, which the contractor enters into pursuant to this contract, that the contractor and any subcontractor shall not permit any employee, in performance of the contract, to work in surroundings or under conditions which are unsanitary, hazardous or dangerous to his/her health or safety, as determined under construction safety and health standards (29 CFR 1926)
promulgated by the Secretary of Labor, in accordance with Section 107 of the Contract Work Hours and Safety Standards Act (40 U.S.C. 3704).
3. Pursuant to 29 CFR 1926.3, it is a condition of this contract that the Secretary of Labor or authorized representative thereof, shall have right of entry to any site of contract performance to inspect or investigate the matter of compliance with the construction safety and health standards and to carry out the duties of the Secretary under Section 107 of the Contract Work Hours and Safety Standards Act (40 U.S.C.3704).
VIII. FALSE STATEMENTS CONCERNING HIGHWAY
PROJECTS
This provision is applicable to all Federal-aid construction contracts and to all related subcontracts.
In order to assure high quality and durable construction in conformity with approved plans and specifications and a high degree of reliability on statements and representations made by engineers, contractors, suppliers, and workers on Federal-aid highway projects, it is essential that all persons concerned with the project perform their functions as carefully, thoroughly, and honestly as possible.
Willful falsification, distortion, or misrepresentation with respect to any facts related to the project is a violation of Federal law. To prevent any misunderstanding regarding the seriousness of these and similar acts, Form FHWA-1022 shall be posted on each Federal-aid highway project (23 CFR 635) in one or more places where it is readily available to all persons concerned with the project:
18 U.S.C. 1020 reads as follows:
"Whoever, being an officer, agent, or employee of the United States, or of any State or Territory, or whoever, whether a person, association, firm, or corporation, knowingly makes any false statement, false representation, or false report as to the character, quality, quantity, or cost of the material used or to be used, or the quantity or quality of the work performed or to be performed, or the cost thereof in connection with the submission of plans, maps, specifications, contracts, or costs of construction on any highway or related project submitted for approval to the Secretary of Transportation; or
Whoever knowingly makes any false statement, false
representation, false report or false claim with respect to the character, quality, quantity, or cost of any work performed or to be performed, or materials furnished or to be furnished, in connection with the construction of any highway or related project approved by the Secretary of Transportation; or
Whoever knowingly makes any false statement or false
representation as to material fact in any statement, certificate, or report submitted pursuant to provisions of the Federal-aid Roads Act approved July 1, 1916, (39 Stat. 355), as amended and
supplemented;
Shall be fined under this title or imprisoned not more than 5 years or both."
IX. IMPLEMENTATION OF CLEAN AIR ACT AND FEDERAL
WATER POLLUTION CONTROL ACT
This provision is applicable to all Federal-aid construction contracts and to all related subcontracts.
By submission of this bid/proposal or the execution of this contract, or subcontract, as appropriate, the bidder, proposer, Federal-aid construction contractor, or subcontractor, as appropriate, will be deemed to have stipulated as follows:
1. That any person who is or will be utilized in the
performance of this contract is not prohibited from receiving an award due to a violation of Section 508 of the Clean Water Act or Section 306 of the Clean Air Act.
2. That the contractor agrees to include or cause to be included the requirements of paragraph (1) of this Section X in every subcontract, and further agrees to take such action as the contracting agency may direct as a means of enforcing such requirements.
EXHIBIT E 1296
Local Assistance Procedures Manual Exhibit 12-G
Required Federal-Aid Contract Language
September 2020
FHWA-1273 -- Revised May 1, 2012
X. CERTIFICATION REGARDING DEBARMENT, SUSPENSION,
INELIGIBILITY AND VOLUNTARY EXCLUSION
This provision is applicable to all Federal-aid construction contracts, design-build contracts, subcontracts, lower-tier subcontracts, purchase orders, lease agreements, consultant contracts or any other covered transaction requiring FHWA approval or that is estimated to cost $25,000 or more – as defined in 2 CFR Parts 180 and 1200.
1. Instructions for Certification – First Tier Participants:
a. By signing and submitting this proposal, the prospective first tier participant is providing the certification set out below. b. The inability of a person to provide the certification set out below will not necessarily result in denial of participation in this covered transaction. The prospective first tier participant shall submit an explanation of why it cannot provide the certification set out below.
The certification or explanation will be considered in connection with the department or agency's determination whether to enter into this transaction. However, failure of the prospective first tier participant to furnish a certification or an explanation shall disqualify such a person from participation in this transaction. c. The certification in this clause is a material representation of fact upon which reliance was placed when the contracting agency determined to enter into this transaction. If it is later determined that the prospective participant knowingly rendered an erroneous certification, in addition to other remedies available to the Federal Government, the contracting agency may terminate this
transaction for cause of default.
d. The prospective first tier participant shall provide immediate written notice to the contracting agency to whom this proposal is submitted if any time the prospective first tier participant learns that its certification was erroneous when submitted or has become erroneous by reason of changed circumstances.
e. The terms "covered transaction," "debarred," "suspended," "ineligible," "participant," "person," "principal," and "voluntarily excluded," as used in this clause, are defined in 2 CFR Parts 180 and 1200. “First Tier Covered Transactions” refers to any covered transaction between a grantee or subgrantee of Federal funds and a participant (such as the prime or general contract). “Lower Tier Covered Transactions” refers to any covered transaction under a First Tier Covered Transaction (such as subcontracts). “First Tier Participant” refers to the participant who has entered into a covered transaction with a grantee or subgrantee of Federal funds (such as the prime or general contractor). “Lower Tier Participant” refers any participant who has entered into a covered transaction with a First Tier Participant or other Lower Tier Participants (such as subcontractors and suppliers).
f. The prospective first tier participant agrees by submitting this proposal that, should the proposed covered transaction be entered into, it shall not knowingly enter into any lower tier covered transaction with a person who is debarred, suspended, declared ineligible, or voluntarily excluded from participation in this covered transaction, unless authorized by the department or agency entering into this transaction.
g. The prospective first tier participant further agrees by submitting this proposal that it will include the clause titled "Certification Regarding Debarment, Suspension, Ineligibility and Voluntary Exclusion-Lower Tier Covered Transactions," provided by the department or contracting agency, entering into this covered transaction, without modification, in all lower tier covered transactions and in all solicitations for lower tier covered transactions exceeding the $25,000 threshold.
h. A participant in a covered transaction may rely upon a certification of a prospective participant in a lower tier covered transaction that is not debarred, suspended, ineligible, or voluntarily excluded from the covered transaction, unless it knows that the certification is erroneous. A participant is responsible for ensuring that its principals are not suspended, debarred, or otherwise ineligible to participate in covered transactions. To verify the eligibility of its principals, as well as the eligibility of any lower tier prospective participants, each participant may, but is not required to, check the Excluded Parties List System website (https://www.epls.gov/), which is compiled by the General Services Administration. i. Nothing contained in the foregoing shall be construed to require the establishment of a system of records in order to render in good faith the certification required by this clause. The knowledge and information of the prospective participant is not required to exceed that which is normally possessed by a prudent person in the ordinary course of business dealings.
j. Except for transactions authorized under paragraph (f) of these instructions, if a participant in a covered transaction knowingly enters into a lower tier covered transaction with a person who is suspended, debarred, ineligible, or voluntarily excluded from participation in this transaction, in addition to other remedies available to the Federal Government, the department or agency may terminate this transaction for cause or default.
* * *
2. Certification Regarding Debarment, Suspension,Ineligibility and Voluntary Exclusion – First Tier Participants:
a. The prospective first tier participant certifies to the best of its knowledge and belief, that it and its principals:
(1) Are not presently debarred, suspended, proposed for debarment, declared ineligible, or voluntarily excluded from participating in covered transactions by any Federal department or agency;
(2) Have not within a three-year period preceding this proposal been convicted of or had a civil judgment rendered against them for commission of fraud or a criminal offense in connection with obtaining, attempting to obtain, or performing a public (Federal, State or local) transaction or contract under a public transaction; violation of Federal or State antitrust statutes or commission of embezzlement, theft, forgery, bribery, falsification or destruction of records, making false statements, or receiving stolen property;
(3) Are not presently indicted for or otherwise criminally or civilly charged by a governmental entity (Federal, State or local) with commission of any of the offenses enumerated in paragraph (a)(2) of this certification; and
(4) Have not within a three-year period preceding this
application/proposal had one or more public transactions (Federal, State or local) terminated for cause or default. b. Where the prospective participant is unable to certify to any of the statements in this certification, such prospective participant shall attach an explanation to this proposal.
EXHIBIT E 1297
Local Assistance Procedures Manual Exhibit 12-G
Required Federal-Aid Contract Language
September 2020
2. Instructions for Certification - Lower Tier Participants:
(Applicable to all subcontracts, purchase orders and other lower tier transactions requiring prior FHWA approval or estimated to cost $25,000 or more - 2 CFR Parts 180 and 1200)
a. By signing and submitting this proposal, the prospective lower tier is providing the certification set out below.
b. The certification in this clause is a material representation of fact upon which reliance was placed when this transaction was entered into. If it is later determined that the prospective lower tier participant knowingly rendered an erroneous certification, in addition to other remedies available to the Federal Government, the department, or agency with which this transaction originated may pursue available remedies, including suspension and/or debarment.
c. The prospective lower tier participant shall provide immediate written notice to the person to which this proposal is submitted if at any time the prospective lower tier participant learns that its certification was erroneous by reason of changed circumstances. d. The terms "covered transaction," "debarred," "suspended," "ineligible," "participant," "person," "principal," and "voluntarily excluded," as used in this clause, are defined in 2 CFR Parts 180 and 1200. You may contact the person to which this proposal is submitted for assistance in obtaining a copy of those regulations. “First Tier Covered Transactions” refers to any covered transaction between a grantee or subgrantee of Federal funds and a participant (such as the prime or general contract). “Lower Tier Covered Transactions” refers to any covered transaction under a First Tier Covered Transaction (such as subcontracts). “First Tier Participant” refers to the participant who has entered into a covered transaction with a grantee or subgrantee of Federal funds (such as the prime or general contractor). “Lower Tier Participant” refers any participant who has entered into a covered transaction with a First Tier Participant or other Lower Tier Participants (such as subcontractors and suppliers). e. The prospective lower tier participant agrees by submitting this proposal that, should the proposed covered transaction be entered into, it shall not knowingly enter into any lower tier covered transaction with a person who is debarred, suspended, declared ineligible, or voluntarily excluded from participation in this covered transaction, unless authorized by the department or agency with which this transaction originated.
f. The prospective lower tier participant further agrees by submitting this proposal that it will include this clause titled "Certification Regarding Debarment, Suspension, Ineligibility and Voluntary Exclusion-Lower Tier Covered Transaction," without modification, in all lower tier covered transactions and in all solicitations for lower tier covered transactions exceeding the $25,000 threshold. g. A participant in a covered transaction may rely upon a certification of a prospective participant in a lower tier covered transaction that is not debarred, suspended, ineligible, or voluntarily excluded from the covered transaction, unless it knows that the certification is erroneous. A participant is responsible for ensuring that its principals are not suspended, debarred, or otherwise ineligible to participate in covered transactions. To verify the eligibility of its principals, as well as the eligibility of any lower tier prospective participants, each participant may, but is not required to, check the Excluded Parties List System website (https://www.epls.gov/), which is compiled by the General Services Administration.
FHWA-1273 -- Revised May 1, 2012
h. Nothing contained in the foregoing shall be construed to require establishment of a system of records in order to render in good faith the certification required by this clause. The knowledge and normally possessed by a prudent person in the ordinary course of business dealings.
i. Except for transactions authorized under paragraph e of these instructions, if a participant in a covered transaction knowingly enters into a lower tier covered transaction with a person who is suspended, debarred, ineligible, or voluntarily excluded from participation in this transaction, in addition to other remedies available to the Federal Government, the department or agency with which this transaction originated may pursue available remedies, including suspension and/or debarment.
* * * * *
Certification Regarding Debarment, Suspension, Ineligibility and Voluntary Exclusion--Lower Tier Participants:
1. The prospective lower tier participant certifies, by submission of this proposal, that neither it nor its principals is presently debarred, suspended, proposed for debarment, declared
ineligible, or voluntarily excluded from participating in covered transactions by any Federal department or agency.
2. Where the prospective lower tier participant is unable to certify to any of the statements in this certification, such prospective participant shall attach an explanation to this proposal. * * * * *
XI. CERTIFICATION REGARDING USE OF CONTRACT FUNDS
FOR LOBBYING
This provision is applicable to all Federal-aid construction contracts and to all related subcontracts which exceed $100,000 (49 CFR 20).
1. The prospective participant certifies, by signing and submitting this bid or proposal, to the best of his or her knowledge and belief, that:
a. No Federal appropriated funds have been paid or will be paid, by or on behalf of the undersigned, to any person for influencing or attempting to influence an officer or employee of any Federal agency, a Member of Congress, an officer or employee of Congress, or an employee of a Member of Congress in
connection with the awarding of any Federal contract, the making of any Federal grant, the making of any Federal loan, the entering into of any cooperative agreement, and the extension, continuation, renewal, amendment, or modification of any Federal contract, grant, loan, or cooperative agreement. b. If any funds other than Federal appropriated funds have been paid or will be paid to any person for influencing or attempting to influence an officer or employee of any Federal agency, a Member of Congress, an officer or employee of Congress, or an employee of a Member of Congress in connection with this Federal contract, grant, loan, or cooperative agreement, the undersigned shall complete and submit Standard Form-LLL, "Disclosure Form to Report Lobbying," in accordance with its instructions.
EXHIBIT E 1298
Local Assistance Procedures Manual Exhibit 12-G
Required Federal-Aid Contract Language
September 2020
2. This certification is a material representation of fact upon which reliance was placed when this transaction was made or entered into. Submission of this certification is a prerequisite for making or entering into this transaction imposed by 31 U.S.C. 1352.
Any person who fails to file the required certification shall be subject to a civil penalty of not less than $10,000 and not more than $100,000 for each such failure.
3. The prospective participant also agrees by submitting its bid or proposal that the participant shall require that the language of this certification be included in all lower tier subcontracts, which exceed information of participant is not required to exceed that which is $100,000 and that all such recipients shall certify and disclose accordingly.
EXHIBIT E 1299
Local Assistance Procedures Manual Exhibit 12-G
Required Federal-Aid Contract Language
September 2020
13. FEMALE AND MINORITY GOALS
To comply with Section II, "Nondiscrimination," of "Required Contract Provisions Federal-Aid Construction Contracts," the following are for female and minority utilization goals for Federal-aid construction contracts and subcontracts that exceed $10,000:
The nationwide goal for female utilization is 6.9 percent.
The goals for minority utilization [45 Fed Reg 65984 (10/3/1980)] are as follows:
MINORITY UTILIZATION GOALS
Economic
Area
Goal
(Percent)
174
Redding CA:
Non-SMSA (Standard Metropolitan Statistical Area) Counties:
CA Lassen; CA Modoc; CA Plumas; CA Shasta; CA Siskiyou; CA Tehama
6.8 175
Eureka, CA
Non-SMSA Counties:
CA Del Norte; CA Humboldt; CA Trinity
6.6 176
San Francisco-Oakland-San Jose, CA:
SMSA Counties:
28.9 7120 Salinas-Seaside-Monterey, CA
CA Monterey
7360 San Francisco-Oakland
CA Alameda; CA Contra Costa; CA Marin; CA San Francisco; CA San Mateo
25.6 7400 San Jose, CA
CA Santa Clara, CA
7485 Santa Cruz, CA
CA Santa Cruz
19.6 14.9
7500 Santa Rosa
CA Sonoma
9.1 8720 Vallejo-Fairfield-Napa, CA
CA Napa; CA Solano
17.1 Non-SMSA Counties:
CA Lake; CA Mendocino; CA San Benito
23.2 177
Sacramento, CA:
SMSA Counties:
6920 Sacramento, CA
CA Placer; CA Sacramento; CA
Yolo Non-SMSA Counties
CA Butte; CA Colusa; CA El Dorado; CA Glenn; CA Nevada; CA Sierra; CA Sutter; CA Yuba
16.1 14.3
178
Stockton-Modesto, CA:
SMSA Counties:
5170 Modesto, CA 12.3
CA Stanislaus
8120 Stockton, CA
CA San Joaquin
24.3 Non-SMSA Counties
CA Alpine; CA Amador; CA Calaveras; CA Mariposa; CA Merced; CA Tuolumne
19.8 179
Fresno-Bakersfield, CA
SMSA Counties:
19.1 26.1
0680 Bakersfield, CA
CA Kern
2840 Fresno, CA
EXHIBIT E 1300
Local Assistance Procedures Manual Exhibit 12-G
Required Federal-Aid Contract Language
September 2020
CA Fresno
Non-SMSA Counties:
CA Kings; CA Madera; CA Tulare
23.6 180
Los Angeles, CA:
SMSA Counties:
0360 Anaheim-Santa Ana-Garden Grove, CA 11.9
CA Orange
4480 Los Angeles-Long Beach, CA 28.3
CA Los Angeles
6000 Oxnard-Simi Valley-Ventura, CA
CA Ventura
6780 Riverside-San Bernardino-Ontario, CA
21.5 19.0
CA Riverside; CA San Bernardino
7480 Santa Barbara-Santa Maria-Lompoc, CA 19.7
CA Santa Barbara
Non-SMSA Counties
CA Inyo; CA Mono; CA San Luis Obispo
24.6 181
San Diego, CA:
SMSA Counties
16.9 7320 San Diego, CA
CA San Diego
Non-SMSA Counties 18.2
CA Imperial
For the last full week of July during which work is performed under the contract, the prime contractor and each non material-supplier subcontractor with a subcontract of $10,000 or more must complete Form FHWA PR-1391 (Appendix C to 23 CFR 230). Submit the forms by August 15.
14. TITLE VI ASSURANCES
During the performance of this Agreement, the contractor, for itself, its assignees and successors in interest (hereinafter collectively referred to as CONTRACTOR) agrees as follows:
a. Compliance with Regulations: CONTRACTOR shall comply with the regulations relative to nondiscrimination in federally assisted programs of the Department of Transportation, Title 49, Code of Federal Regulations, Part 21, as they may be amended from time to time, (hereinafter referred to as the REGULATIONS), which are herein incorporated by reference and made a part of this agreement.
b. Nondiscrimination: CONTRACTOR, with regard to the work performed by it during the AGREEMENT, shall not discriminate on the grounds of race, color, sex, national origin, religion, age, or disability in the selection and retention of sub-applicants, including procurements of materials and leases of equipment. CONTRACTOR shall not participate either directly or indirectly in the discrimination prohibited by Section 21.5 of the Regulations, including employment practices when the agreement covers a program set forth in Appendix B of the Regulations. c. Solicitations for Sub-agreements, Including Procurements of Materials and Equipment: In all solicitations either by competitive bidding or negotiation made by CONTRACTOR for work to be performed under a Sub- agreement, including procurements of materials or leases of equipment, each potential sub-applicant or supplier shall be notified by CONTRACTOR of the CONTRACTOR’S obligations under this Agreement and the Regulations relative to nondiscrimination on the grounds of race, color, or national origin. d. Information and Reports: CONTRACTOR shall provide all information and reports required by the Regulations, or directives issued pursuant thereto, and shall permit access to its books, records, accounts, other sources of information, and its facilities as may be determined by the California Department of Transportation or FHWA to be pertinent to ascertain compliance with such
EXHIBIT E 1301
Local Assistance Procedures Manual Exhibit 12-G
Required Federal-Aid Contract Language
September 2020
Regulations or directives. Where any information required of CONTRACTOR is in the exclusive possession of another who fails or refuses to furnish this information, CONTRACTOR shall so certify to the California Department of Transportation or the FHWA as appropriate, and shall set forth what efforts CONTRACTOR has made to obtain the information. e. Sanctions for Noncompliance: In the event of CONTRACTOR’s noncompliance with the nondiscrimination provisions of this agreement, the California Department of Transportation shall impose such agreement sanctions as it or the FHWA may determine to be appropriate, including, but not limited to:
i. withholding of payments to CONTRACTOR under the Agreement within a reasonable period of time, not to exceed 90 days; and/or
ii. cancellation, termination or suspension of the Agreement, in whole or in part. f. Incorporation of Provisions: CONTRACTOR shall include the provisions of paragraphs (1) through (6) in every sub-agreement, including procurements of materials and leases of equipment, unless exempt by the Regulations, or directives issued pursuant thereto.
CONTRACTOR shall take such action with respect to any sub-agreement or procurement as the California Department of Transportation or FHWA may direct as a means of enforcing such provisions including sanctions for noncompliance, provided, however, that, in the event CONTRACTOR becomes involved in, or is threatened with, litigation with a sub-applicant or supplier as a result of such direction, CONTRACTOR may request the California Department of Transportation enter into such litigation to protect the interests of the State, and, in addition, CONTRACTOR may request the United States to enter into such litigation to protect the interests of the United States.
15. USE OF UNITED STATES-FLAG VESSELS (CARGO PREFERENCE ACT) The CONTRACTOR agrees1. To utilize privately owned United States-flag commercial vessels to ship at least 50 percent of the gross tonnage (computed separately for dry bulk carries, dry cargo liners, and tankers) involved, whenever shipping any equipment, material, or commodities pursuant to this contract, to the extent such vessels are available at fair and reasonable rates for United States-flag commercial vessels.
2. To Furnish within 20 days following the date of loading for shipments originating within the United State or within 30 working days following the date of loading for shipments originating outside the United States, a legible copy of a rated “on-board” commercial ocean bill-of-lading in English for each shipment of cargo described in paragraph (1) of this section to both the Contracting Officer (through the prime contractor in the case of subcontractor bills-of-lading) and to the Division of National Cargo, Office of Market Development, Maritime Administration, Washington, DC 20590.
3. To insert the substance of the provisions of this clause in all subcontracts issued pursuant to this contract.
Federal Trainee Program Special Provisions
(to be used when applicable)
16. FEDERAL TRAINEE PROGRAM
For the Federal training program, the number of trainees orapprentices is .
This section applies if a number of trainees or apprentices is specified in the special provisions.
As part of the prime contractor’s equal opportunity affirmative action program, provide on-the-job training to develop full journeymen in the types of trades or job classifications involved.
The prime contractor has primary responsibility for meeting this training requirement.
If the prime contractor subcontracts a contract part, they shall determine how many trainees or apprentices are to be trained by the subcontractor. Include these training requirements in each subcontract.
Where feasible, 25 percent of apprentices or trainees in each occupation must be in their 1st year of apprenticeship or training.
zero
EXHIBIT E 1302
Local Assistance Procedures Manual Exhibit 12-G
Required Federal-Aid Contract Language
September 2020
Distribute the number of apprentices or trainees among the work classifications on the basis of the prime contractor’s needs and the availability of journeymen in the various classifications within a reasonable recruitment area.
Before starting work, the prime contractor shall submit to the City/County of Stockton :
1. Number of apprentices or trainees to be trained for each classification
2. Training program to be used
3. Training starting date for each classification
The prime contractor shall obtain the City/County of Stockton approval for this submitted information before the prime contractor starts work. The City/County of Stockton credits the prime contractor for each apprentice or trainee the prime contractor employs on the job who is currently enrolled or becomes enrolled in an approved program.
The primary objective of this section is to train and upgrade minorities and women toward journeyman status.
The prime contractor shall make every effort to enroll minority and women apprentices or trainees, such as conducting systematic and direct recruitment through public and private sources likely to yield minority and women apprentices or trainees, to the extent they are available within a reasonable recruitment area and show that they have made the efforts. In making these efforts, the prime contractor shall not discriminate against any applicant for training.
The prime contractor shall not employ as an apprentice or trainee an employee:
1. In any classification in which the employee has successfully completed a training course leading to journeyman status or in which the employee has been employed as a journeyman
2. Who is not registered in a program approved by the US Department of Labor, Bureau of Apprenticeship and Training
The prime contractor shall ask the employee if the employee has successfully completed a training course leading to journeyman status or has been employed as a journeyman. The prime contractor’s records must show the employee's answers to the questions.
In the training program, the prime contractor shall establish the minimum length and training type for each classification. The City/County of Stockton and FHWA approves a program if one of the following is met:
1. It is calculated to:
Meet the your equal employment opportunity responsibilities Qualify the average apprentice or trainee for journeyman status in the classification involved by the end of the training period
2. It is registered with the U.S. Department of Labor, Bureau of Apprenticeship and Training, and it is administered in a way consistent with the equal employment responsibilities of Federal-aid highway construction contracts
The prime contractor shall obtain the State's approval for their training program before they start work involving the classification covered by the program.
The prime contractor shall provide training in the construction crafts, not in clerk-typist or secretarial-type positions. Training is allowed in lower level management positions such as office engineers, estimators, and timekeepers if the training is oriented toward construction applications. Training is allowed in the laborer classification if significant and meaningful training is provided and approved by the division office. Off-site training is allowed if the training is an integral part of an approved training program and does not make up a significant part of the overall training.
EXHIBIT E 1303
Local Assistance Procedures Manual Exhibit 12-G
Required Federal-Aid Contract Language
September 2020
The City/County of Stockton reimburses the prime contractor 80 cents per hour of training given an employee on this contract under an approved training program:
1. For on-site training
2. For off-site training if the apprentice or trainee is currently employed on a Federal-aid project and prime contractor does at least one of the following:
a. Contribute to the cost of the training
b. Provide the instruction to the apprentice or trainee c. Pay the apprentice's or trainee's wages during the off-site training period
3. If the prime contractor complies with this section.
Each apprentice or trainee must:
1. Begin training on the project as soon as feasible after the start of work involving the apprentice's or trainee's skill
2. Remain on the project as long as training opportunities exist in the apprentice's or trainee's work classification or until the apprentice or trainee has completed the training program The prime contractor shall furnish the apprentice or trainee with a copy of the program that the prime contractor will comply with in providing the training
EXHIBIT E 1304
Appendix E of the Title VI Assurances
(US DOT Order 1050.2A)
During the performance of this contract, the contractor, for itself, its assignees, and successors in interest (hereinafter referred to as the “contractor”) agrees to comply with the following nondiscrimination statutes and authorities; including but not limited to:
Pertinent Nondiscrimination Authorities:
• Title VI of the Civil Rights Act of 1964 (42 U.S.C. § 2000d et seq., 78 stat. 252), (prohibits discrimination on the basis of race, color, national origin); and 49 CFR Part 21.
• The Uniform Relocation Assistance and Real Property Acquisition Policies Act of 1970, (42 U.S.C. § 4601), (prohibits unfair treatment of persons displaced or whose property has been acquired because of Federal or Federal-aid programs and projects);
• Federal-Aid Highway Act of 1973, (23 U.S.C. § 324 et seq.), (prohibits discrimination on the basis of sex);
• Section 504 of the Rehabilitation Act of 1973, (29 U.S.C. § 794 et seq.), as amended, (prohibits discrimination on the basis of disability); and 49 CFR Part 27;
• The Age Discrimination Act of 1975, as amended, (42 U.S.C. § 6101 et seq.), (prohibits discrimination on the basis of age);
• Airport and Airway Improvement Act of 1982, (49 U.S.C. § 4 71, Section 4 7123), as amended, (prohibits discrimination based on race, creed, color, national origin, or sex);
• The Civil Rights Restoration Act of 1987, (PL 100-209), (Broadened the scope, coverage and applicability of Title VI of the Civil Rights Act of 1964, The Age Discrimination Act of 1975 and Section 504 of the Rehabilitation Act of 1973, by expanding the definition of the terms “programs or activities” to include all of the programs or activities of the Federal-aid recipients, subrecipients and contractors, whether such programs or activities are Federally funded or not);
• Titles II and III of the Americans with Disabilities Act, which prohibit discrimination on the basis of disability in the operation of public entities, public and private transportation systems, places of public accommodation, and certain testing entities (42 U.S.C. §§ 12131-12189) as implemented by Department of Transportation regulations at 49 C.F.R. parts 37 and 38;
• The Federal Aviation Administration's Nondiscrimination statute (49 U.S.C. § 47123) (prohibits discrimination on the basis of race, color, national origin, and sex);
• Executive Order 12898, Federal Actions to Address Environmental Justice in Minority Populations and Low-Income Populations, which ensures discrimination against minority populations by discouraging programs, policies, and activities with disproportionately high and adverse human health or environmental effects on minority and low-income populations; • Executive Order 13166, Improving Access to Services for Persons with Limited English Proficiency, and resulting agency guidance, national origin discrimination includes discrimination because of limited English proficiency (LEP). To ensure compliance with Title VI, you must take reasonable steps to ensure that LEP persons have meaningful access to your programs (70 Fed. Reg. at 74087 to 74100);
• Title IX of the Education Amendments of 1972, as amended, which prohibits you from discriminating because of sex in education programs or activities (20 U.S.C. 1681 et seq).
1 BOND FOR FAITHFUL PERFORMANCE
KNOW ALL MEN BY THESE PRESENTS:
That we, _______________________________, a STATE OF CA PARTNERSHIP as Principal and
, a corporation, organized and existing under the laws of the State of and duly authorized to transact business under the laws of the State of California, as Surety, are held and firmly bound unto the City of Stockton, a municipal corporation, duly created and existing under and by virtue of the laws of the State of California, as obligee, in the just and full sum of FOUR HUNDRED ONE THOUSAND SIX HUNDRED SEVENTY AND 00/100 DOLLARS ($401,670.00), in lawful money of the United States of America (being 100% of the contract price) for the payment whereof well and truly to be made to the said CITY, the said Principal and Surety bind themselves, their successors and assigns, jointly and severally, firmly by these presents.
The condition of the foregoing obligation is such that the above bounded Principal has simultaneously entered into a contract with the CITY, to do and perform the following work, to wit:
REAL-TIME TRAFFIC FLOW MONITORING
PROJECT NO. WT17026 / FEDERAL PROJECT NO. CML-5008(180) NOW, THEREFORE, if the above bounded Principal, CONTRACTOR, Company or
Corporation or its Subcontractor, shall well and truly perform the work contracted to be done under said contract, then this obligation to be null and void; otherwise to remain in full force and effect.
No prepayment or delay in payment and no change, extension, addition or alteration of any provision of said contract, or in said plans or specifications agreed to between the said CONTRACTOR and the said CITY, and no forbearance on the part of the said CITY shall operate to relieve any Surety or Sureties from liability on this bond, and consent by said Surety is hereby given, and the said Surety hereby waives the EXHIBIT 2
1307
2 provisions of Sections 2819 and 2845 of the Civil Code of the State of California.
SIGNED AND SEALED on
APPROVED AS TO SURETY: By
PRINCIPAL
SURETY
APPROVED AS TO FORM & CONTENT:
LORI M. ASUNCION
OFFICE OF THE CITY ATTORNEY
By
ATTORNEY-IN-FACT
By
ACTING CITY ATTORNEY
EXHIBIT 2
1308
1 BOND FOR LABOR AND MATERIAL
KNOW ALL MEN BY THESE PRESENTS:
That we, ST. FRANCIS ELECTRIC, LLC, a STATE OF CA PARTNERSHIP, as Principal and , a corporation, organized and existing
under the laws of the State of and duly authorized to transact business under the laws of the State of California, as Surety, are held and firmly bound unto the City of Stockton, a municipal corporation, duly created and existing under and by virtue of the laws of the State of California, and unto any and all material suppliers, persons, companies, or corporations furnishing materials, provisions, provender or other supplies used in, upon, for or about the performance of the work contemplated to be executed or performed under the contract hereinafter mentioned, and all persons, companies, or corporations renting or hiring teams, or implements of machinery, for or contributing to said work and all persons who perform work or labor upon the same, and all persons who supply both work and materials, and whose claims have not been paid by the contractor, company or corporation in the just and full sum of FOUR HUNDRED ONE THOUSAND SIX HUNDRED SEVENTY AND 00/100 DOLLARS ($401,670.00), in lawful money of the United States of America (being 100% of the contract price) for the payment whereof well and truly to be made to said City of Stockton and to said persons jointly and severally, the said principal and Surety bind themselves, their successors and assigns, jointly and severally, firmly by these presents.
The condition of the foregoing obligations is such that the above bounden Principal has simultaneously entered into a contract of even date herewith, with the CITY, to do and perform the following work, to-wit:
REAL-TIME TRAFFIC FLOW MONITORING
PROJECT NO. WT17026 / FEDERAL PROJECT NO. CML-5008(180) NOW, THEREFORE, if the above bounden Principal, CONTRACTOR, Company or Corporation or its Subcontractor, fail to pay for all materials, provisions, provender, or other supplies, or teams, used in, upon, for or about the performance of the work contracted to be done, or for any work or labor done thereon of any kind, the Surety on EXHIBIT 2
1309
2 this bond will pay the same, in an amount not exceeding the sum specified in this bond, provided that any and all claims hereunder shall be filed and proceedings had in connection therewith as required by the provisions of Division 3, Part 4, Title 15, Chapter 5, Article 1 of the Civil Code of California, provided that in case suit is brought upon this bond, a reasonable attorney's fee shall be awarded by the Court to the prevailing party in said suit; said attorney's fee to be fixed as costs in said suit, and to be included in the judgment therein rendered.
No prepayment or delay in payment and no change, extension, addition or alteration of any provision of said contract or in said plans or specifications agreed to between the said CONTRACTOR and the said CITY and no forbearance on the part of the said CITY shall operate to relieve any surety or sureties from liability on this bond, and consent to make such alterations without further notice to or consent by any such surety is hereby given, and the said sureties hereby waive the provisions of Sections 2819 and 2845 of the Civil Code of the State of California.
SIGNED AND SEALED on .
APPROVED AS TO SURETY: By
PRINCIPAL
SURETY
APPROVED AS TO FORM & CONTENT:
LORI M. ASUNCION
OFFICE OF THE CITY ATTORNEY
By
ATTORNEY-IN-FACT
By
ACTING CITY ATTORNEY
EXHIBIT 2
1310
City of Stockton
Legislation Text
File #: 22-0522, Version: 1
ADOPT RESOLUTION TO AUTHORIZE THE LED STREET LIGHTS CONVERSION, PHASE 5
PROJECT
RECOMMENDATION
It is recommended that the City Council adopt a resolution to:
1. Approve the Notice of Exemption No. NOE67-21 under the California Environmental Quality Act for the LED Street Lights Conversion, Phase 5, Project No. WT22017.
2. Approve the plans and specifications for the LED Street Lights Conversion, Phase 5, Project No. WT22017.
3. Transfer funds in the amount of $122,867.34 from the Street Light LED Replacement, Project No. WD19017, to the LED Street Lights Conversion, Phase 5, Project No. WT22017.
4. Transfer funds in the amount of $100,000 from the Residential Street Light LED Replacement, Project No. WT22005, to the LED Street Lights Conversion, Phase 5, Project No. WT22017.
5. Authorize the City Manager to accept Pacific Gas & Electric LED Street Lights Incentive Program funds totaling approximately $24,950.
6. Award a Construction Contract in the amount of $701,790 to Bear Electrical Solutions, Inc. of Alviso, CA, for the LED Street Lights Conversion, Phase 5, Project No. WT22017.
It is also recommended that the City Manager be authorized to take appropriate and necessary actions to carry out the purpose and intent of this resolution.
Summary
The Fiscal Year (FY) 2021-22 Capital Improvement Plan (CIP) Budget approved $500,000 in Measure K Maintenance Funds to convert a portion of the City’s high-pressure sodium (HPS) residential street light inventory to light-emitting diode (LED) luminaires. HPS lights use substantially more energy and converting to LED luminaires will lower ongoing operating costs. The LED Street Lights Conversion, Phase 5, Project No. WT22017, will include converting 2,200 HPS streetlights north of the Calaveras River (Attachment A). Public Works estimates annual energy savings of approximately $94,600 from this Phase 5 conversion. Additionally, Public Works applied for and will receive Pacific Gas & Electric (PG&E) LED Street Lights Incentive Program funds totaling approximately $24,950, which will be applied to the sixth phase of this project.
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File #: 22-0522, Version: 1
On November 18, 2021, the City received 10 bids for this project. The apparent lowest bidder, Net Electric, Inc., failed to honor their bid and sign a Construction Contract. Public Works’ staff and the City Attorney’s Office determined Net Electric, Inc.’s bid to be non-responsive. Staff recommends that Council reject Net Electric, Inc.’s bid and award of the Construction Contract to the second-lowest responsive bidder, Bear Electrical Solutions, Inc., in the amount of $701,790. Staff also recommends that Council adopt a resolution approving Notice of Exemption No. NOE67-21 under the California Environmental Quality Act (CEQA) and approving the plans and specifications for the project.
Construction is anticipated to begin in early summer 2022 and be completed by fall 2022, weather permitting.
DISCUSSION
Background
The City has an inventory of approximately 19,000 streetlights. The majority of these lights utilize HPS as a light source, which until recently was the most efficient light source available. However, recent improvements to LED technology have increased efficiency and reduced initial product cost, and LED streetlights are the new preferred light source. LED streetlights use less energy and have a longer luminaire lifetime than HPS, which reduces ongoing costs for electricity and general maintenance. Staff recognized the potential savings to be achieved by converting the City’s street light inventory and developed a plan for an incremental conversion starting with the higher wattage HPS streetlights located on arterial roads. Conversion of these lights generates the most significant reduction in electrical consumption with an average of 60 percent, which yields the greatest financial and carbon footprint impact.
Council previously authorized the LED Street Lights Conversion, Phase 1, 2, and 3 projects, which provided the conversion of 4,100 (200-watt), 1,600 (150-watt), and 5,600 (100-watt) street light fixtures. The conversion projects were completed in December 2014, August 2015, and March 2017, respectively. These prior phases have provided for the conversion of all residential streetlights in south Stockton, plus all streetlights located along arterial and collector roadways Citywide.
Phase 4 of the project was canceled, and the funding was allocated to the Street Lights LED Replacement, Project No. WD19017, to replace failing LED lights with new LED fixtures supplied by the manufacturer. The LED Street Lights Conversion, Phase 5, project will include converting 2,200 HPS streetlights primarily north of the Calaveras River (Attachment A). After completion of this project, there will be approximately 5,500 streetlights remaining for future LED conversion.
On July 26, 2016, Council adopted a Community Workforce and Training Agreement (CWTA). The CWTA became effective August 25, 2016, and applies to all Public Works projects over $1 million that are bid after that date. On July 16, 2019, by Motion No. 2019-07-16-1403, Council extended the CWTA term to August 25, 2024. The CWTA was not applied to this project because the engineer’s estimate was less than $1 million.
Present Situation
On October 28, 2021, the LED Street Lights Conversion, Phase 5, Project No. WT22017, was advertised for bids. On November 18, 2021, 10 bids were received with the following results:
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File #: 22-0522, Version: 1
COMPANY NAME BID AMOUNT ADJUSTED BID AMOUNT
(local preference applied)
Net Electric, Inc. $ 683,378 $ 683,378
(San Leandro, CA)
Bear Electrical Solutions, Inc. $ 701,790 $ 701,790
(Alviso, CA)
Pro-Cal Lightning, Inc. $ 713,000 $ 713,000
(Vista, CA)
St. Francis Electric, LLC $ 726,000 $ 726,000
(San Leandro, CA)
Pacific Excavations, Inc. $ 739,000 $ 739,000
(Elk Grove, CA)
T&S Intermodal Maintenance, $ 818,000 $ 777,100
Inc. (Stockton, CA)
Tennyson Electric, Inc. $ 786,300 $ 786,300
(Livermore, CA)
Ample Electric, Inc. $ 875,400 $ 875,400
(Winters, CA)
Ray’s Electric $ 905,000 $ 905,000
(Oakland, CA)
Saboo, Inc. $1,478,254 $1,478,254
(Brentwood, CA)
Engineer’s Estimate $ 592,000
The requirements of the Stockton Municipal Code (SMC) section 3.68.090, Local Business Preference, apply to this project. T&S Intermodal Maintenance, Inc. is located within the City of Stockton and is entitled to a five percent bid preference. Application of the Local Business Preference has no effect on the bid order. The Local Employment Ordinance, SMC section 3.68.095, also applies to this contract.
On May 4, 2022, Net Electric, Inc., the apparent lowest bidder, requested a price increase to their bid in the amount of $38,000 due to material cost increases and refused to sign the Construction Contract. The City determined Net Electric, Inc.’s bid to be non-responsive and to have no merit based on the contract bid provisions and California Contract Code.
Per California Contract Code section 20174, “The City Council may award a construction contract to the next lowest responsible bidder on refusal or failure of the successful bidder to execute the contract.” Net Electric, Inc. was provided a deadline of May 11, 2022, after multiple prior attempts to sign the Construction Contract. Public Works’ staff and the City Attorney’s Office determined that Net City of Stockton Page 3 of 4 Printed on 7/5/2022
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File #: 22-0522, Version: 1
Electric, Inc.’s failure to comply with the Special Provisions and California Contract Code section 20174 resulted in a non-responsive bid (Attachment B).
The bid from Bear Electrical Solutions, Inc., the second-lowest responsive bidder, is regular in all respects. Bear Electrical Solutions, Inc. has the proper license to perform the work. Staff recommends Council approve the plans and specifications for the project and award a Construction Contract to Bear Electrical Solutions, Inc. of Alviso, CA, in the amount of $701,790.
Public Works applied for and will receive PG&E LED Street Lights Incentive Program funds totaling approximately $24,950 and estimates annual energy savings of approximately $94,600 from this Phase 5 conversion. Once Phase 5 is completed, and the incentive is received, staff anticipates returning to Council with an LED Street Lights Conversion, Phase 6 project.
The project is in conformance with the City’s General Plan, pursuant to California Government Code section 65402, and is categorically exempt from the requirements of CEQA as specified under Section 15301(c) of the CEQA guidelines. The activities related to this project constitute a discretionary project under the City’s jurisdiction and qualifies as a project that does not have a significant effect on the environment. The resolution will approve the filing of Notice of Exemption No. NOE67-21 under CEQA.
Construction is anticipated to begin in summer 2022 and be completed by fall 2022, weather permitting.
FINANCIAL SUMMARY
The FY 2021-22 CIP Budget approved $500,000 in Measure K Maintenance Funds for the LED Street Lights Conversion, Phase 5, Project No. WT22017. The current unencumbered balance is not sufficient to award a Construction Contract to Bear Electrical Solutions, Inc. in the amount of $701,790.
The resolution includes the following actions to provide sufficient funding to award a Construction Contract and to fund all other construction related costs to complete the project:
1. Transfer funds in the amount of $122,867.34 from the Street Light LED Replacement, Project No. WD19017 (General Capital Fund), to the LED Street Lights Conversion, Phase 5, Project No. WT22017.
2. Transfer funds in the amount of $100,000 from the Residential Street Light LED Replacement, Project No. WT22005 (Gas Tax), to the LED Street Lights Conversion, Phase 5, Project No.
WT22017.
There is no impact to the City’s General Fund or any other unrestricted fund as a result of taking the recommended actions.
Attachment A - Vicinity Map
Attachment B - City’s Letter of Response
City of Stockton Page 4 of 4 Printed on 7/5/2022
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LED Street Lights Conversion Phase 5, Project No. WT22017 q
Legend
Maintenance District
DISTRICT
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ATTACHMENT A 1315
ATTACHMENT B
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Resolution No.
STOCKTON CITY COUNCIL
RESOLUTION APPROVING THE NOTICE OF EXEMPTION NO. NOE67-21,
APPROVING THE PLANS AND SPECIFICATIONS, TRANSFERRING FUNDING, AND
AWARDING A CONSTRUCTION CONTRACT FOR THE LED STREET LIGHTS CONVERSION, PHASE 5, PROJECT NO. WT22017
On November 18, 2021, the City Clerk of the City of Stockton opened, examined, and publicly declared the sealed proposals or bids offered for the LED Street Lights Conversion, Phase 5, Project No. WT22017; and
The project will convert 2,200 high-pressure sodium streetlights located north of the Calaveras River to light-emitting diode luminaires (LED); and Bear Electrical Solutions, Inc. is the lowest responsive bidder in the amount of $701,790 and its bid is regular in all respects; and
The project is categorically exempt from the requirements of the California Environmental Quality Act (CEQA) as specified under section 15301(c) of the CEQA Guidelines, because this is a discretionary project under the City’s jurisdiction and qualifies as a project which has been determined to not have a significant effect on the environment; now, therefore,
BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF STOCKTON, AS FOLLOWS:
1. The City Council approves the filing of Notice of Exemption No. NOE67-21 under CEQA for the LED Street Lights Conversion, Phase 5, Project No. WT22017, a copy of which is attached as Exhibit 1 and incorporated by this reference.
2. The City Council approves the plans and specifications for the LED Street Lights Conversion, Phase 5, Project No. WT22017.
3. The City Council approves the transfer of funds in the amount of $122,867.34 from the Street Light LED Replacement, Project No. WD19017, to the LED Street Lights Conversion, Phase 5, Project No. WT22017.
4. The City Council approves the transfer of funds in the amount of $100,000.00 from the Residential Street Light LED Replacement, Project No. WT22005, to the LED Street Lights Conversion, Phase 5, Project No. WT22017.
5. The City Manager is hereby authorized to accept Pacific Gas & Electric LED Street Lights Incentive Program funds totaling approximately $24,950.00. //
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6. The City Council awards a Construction Contract between the City of Stockton and Bear Electrical Solutions, Inc. in the amount of $701,790,00 and the City Manager is authorized and directed to execute same, a copy of which is attached as Exhibit 2 and incorporated by this reference.
7. The City Manager is hereby authorized to take whatever actions are necessary and appropriate to carry out the purpose and intent of this Resolution.
PASSED, APPROVED, and ADOPTED July 12, 2022 .
_________________________
KEVIN J. LINCOLN II
Mayor of the City of Stockton
ATTEST:
___________________________
ELIZA R. GARZA, CMC
City Clerk of the City of Stockton
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EXHIBIT 1 1319
Local Construction Contract – BEAR ELECTRICAL SOLUTIONS, INC – PROJECT NO. WT22017 (Updated 12/31/20)
CONSTRUCTION CONTRACT
This contract is made and entered into on _____________, by and between BEAR ELECTRICAL SOLUTIONS, INC., a STATE OF CALIFORNIA CORPORATION, with a business address at 1252 STATE STREET P.O. BOX 924, ALVISO, CA 95002, hereinafter called "CONTRACTOR," and CITY OF STOCKTON, a municipal corporation, hereinafter called "CITY."
W I T N E S S E T H:
WHEREAS, plans and specifications for the construction of LED STREET LIGHTS CONVERSION PHASE 5 (PROJECT NO. WT22017), hereinafter called “PROJECT,” were regularly adopted by Council Resolution No. __________________, on _________________; and
WHEREAS, the contract for said work was regularly awarded to CONTRACTOR, by Council Resolution No. __________________, on ________________.
NOW, THEREFORE, in consideration of the promises and of the mutual covenants herein contained, the parties hereto expressly agree as follows:
CONTRACTOR agrees:
1. SCOPE OF SERVICES. To do the work and furnish all the labor, materials, tools, equipment, and insurance required for the construction of PROJECT in accordance with the plans and specifications adopted on _____________, by Council Resolution No. __________________ . The "contract documents," which include the bid documents, project plans, specifications, all letters of clarification, and the City of Stockton Standard Specifications and Plans, are incorporated into and made a part of this contract by this reference to the same extent as if fully set forth.
2. COMPENSATION. To do and perform the work contemplated hereby in a good and workmanlike manner and to furnish all labor, materials, tools, and equipment necessary therefore at the prices specified in Exhibit A, attached hereto and by reference made a part hereof, under the direction of and to the complete satisfaction of the Director of Public Works of the City of Stockton. Total compensation for services and reimbursement for costs shall not exceed $701,790.00, or as otherwise mutually agreed to in a Contract Change Order.
3. INSURANCE. CONTRACTOR shall not commence any work before obtaining, and shall maintain in force at all times during the duration and performance of this contract, the policies of insurance specified in Exhibit B, which is attached to this contract and incorporated by this reference, and as provided in the “contract documents” including Section 7-1.06 of the City of Stockton Standard Specifications and Plans as adopted on September 27, 2016, by Council Resolution No. 2016-09-27, effective September 27, 2016.
EXHIBIT 2 Page 1 of 49 1320
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It shall be a requirement under this agreement that any available insurance proceeds broader than or in excess of the specified minimum insurance coverage requirements and/or limits shall be available to the Additional Insured.
Furthermore, the requirements for coverage and limits shall be (1) the minimum coverage and limits specified in this Agreement; or (2) the broader coverage and maximum limits of coverage of any insurance policy or proceeds available to the named Insured; whichever is greater.
The Additional Insured coverage under the CONTRACTOR’s policy shall be “primary and non-contributory” and will not seek contribution from the City of Stockton’s insurance or self-insurance and shall be at least as broad as ISO CG 20 01 04 13.
The limits of insurance required in this agreement may be satisfied by a combination of primary and umbrella or excess insurance. Any umbrella or excess insurance shall contain or be endorsed to contain a provision that such coverage shall also apply on a primary and non-contributory basis for the benefit of the City of Stockton (if agreed to in a written contract or agreement) before the City of Stockton’s own insurance or selfinsurance shall be called upon to protect it as a named insured.
All self-insured retentions (SIR) must be disclosed to the CITY’s Risk Management for approval and shall not reduce the limits of liability. Payment Bond in the amount of the self-insured retention (SIR) may be required.
Policies containing any self-insured retention (SIR) provision shall provide or be endorsed to provide that the SIR may be satisfied by either the named insured or the CITY.
The CITY reserves the right to obtain a full certified copy of any insurance policy and endorsements.
Failure to exercise this right shall not constitute a waiver of right to exercise later.
CONTRACTOR shall maintain insurance as required by this contract to the fullest amount allowed by law and shall maintain insurance for a minimum of five years following the completion of this project. In the event contractor fails to obtain or maintain completed operations coverage as required by this agreement, the City at its sole discretion may purchase the coverage required and the cost will be paid by contractor.
CONTRACTOR agrees to include with all Subcontractors in their subcontract the same requirements and provisions of this agreement including the indemnity and insurance requirements to the extent they apply to the scope of the Subcontractor’s work.
Subcontractors hired by CONTRACTOR agree to be bound to CONTRACTOR and the CITY in the same manner and to the same extent as CONTRACTOR is bound to the CITY under the Contract Documents. Subcontractor further agrees to include these same provisions with any Sub-subcontractor. A copy of the CITY Contract Document Indemnity EXHIBIT 2 Page 2 of 49 1321
Local Construction Contract – BEAR ELECTRICAL SOLUTIONS, INC – PROJECT NO. WT22017 (Updated 12/31/20)
and Insurance provisions will be furnished to the Subcontractor upon request. The General CONTRACTOR shall require all sub-contractors to provide a valid certificate of insurance and the required endorsements included in the agreement prior to commencement of any work and contractor will provide proof of compliance to the City.
4. INDEMNITY AND HOLD HARMLESS. With the exception that this section shall in no event be construed to require indemnification by Contractor to a greater extent than permitted under the public policy of the State of California, Contractor shall indemnify, protect, defend with counsel approved by City and at Contractor’s sole cost and expense, and hold harmless City, its Mayor, Council, officials, representatives, agents, employees, and volunteers from and against any and all claims, causes of action, liabilities, judgments, awards, losses, liens, claims, stop notices, damages, expenses, and costs (including without limitation attorneys’ fees, expert and consultant fees, and other expenses of litigation) of every nature, including, but not limited to, death or injury to persons, or damage to property, which arise out of or are in any way connected with the work performed, materials furnished, or services provided under this Agreement, or from any violation of any federal, State, or municipal law or ordinance, or City Policy, by Contractor or Contractor’s officers, agents, employees, volunteers or subcontractors.
Contractor shall not be obligated to indemnify or defend City for claims finally determined by a court of law or arbitrator to arise from the active negligence or willful misconduct of the City. It is the intent of the Parties that this indemnity obligation is at least as broad as is permitted under California law. To the extent California Civil Code sections 2782, et seq., limit the defense or indemnity obligations of Contractor to City, the intent hereunder is to provide the maximum defense and indemnity obligations allowed by Contractor under the law. The indemnity set forth in this section shall not be limited by insurance requirements or by any other provision of this Agreement.
With exception that this section shall in no event be construed to require indemnification, including the duty to defend, by Contractor to a greater extent than permitted under the public policy of the State of California, the parties agree that Contractor’s duty to defend City is immediate and arises upon the filing of any claim against the City for damages which arise out of or are in any way connected with the work performed, materials furnished, or services provided under this Agreement by Contractor or Contractor’s officers, agents, employees, volunteers or subcontractors. Contractor’s duties and obligations to defend the City shall apply regardless of whether or not the issue of the City’s liability, breach of this Agreement, or other obligation or fault has been determined.
Contractor shall be immediately obligated to pay for City’s defense costs of the claim, including, but not limited to, court costs, attorney’s fees and costs, expert consultant and witness fees and costs, other witness fees, document reproduction costs, arbitration fees, and, if after final judgment an appeal is pursued, all of such costs for the appeal.
At the conclusion of the claim, if there is any determination or finding of sole active negligence or willful misconduct on the part of the City, City will then reimburse Contractor for amounts paid in excess of Contractor’s proportionate share of responsibility for the damages within 30 days after Contractor provides City with copies of all bills and expenses incurred in the defense of the claim(s). It is agreed between the EXHIBIT 2 Page 3 of 49 1322
Local Construction Contract – BEAR ELECTRICAL SOLUTIONS, INC – PROJECT NO. WT22017 (Updated 12/31/20)
parties that this reimbursement provision assures Contractor is not obligated to defend or indemnify City in an amount greater than provided for under California law, including, without limitation, California Civil Code sections 2782, 2782.6, and 2782.8.
With the exception that this section shall in no event be construed to require indemnification by Contractor to a greater extent than permitted under the public policy of the State of California, and in addition to the other indemnity obligations in this Agreement, Contractor shall indemnify, defend, and hold harmless City, its Mayor, Council, officials, representatives, agents, employees, and volunteers from and against all claims, losses, expenses, and costs including, but not limited to, attorneys’ fees, arising out of any claim brought against the City by an employee, office, agent, or volunteer of Contractor, regardless of whether such claim may be covered by any applicable workers compensation insurance. Contractor’s indemnification obligation is not limited in any way by any limitation on the amount or type of damages, compensation, or benefits payable by or for the Contractor under workers’ compensation acts, disability acts, or other employee benefit acts.
The City’s acceptance of the insurance certificates required under this Agreement does not relieve the CONTRACTOR from its obligation under this paragraph. The indemnification obligations of this section shall survive the termination of this agreement.
Any exceptions to this language may result in a proposal being deemed non-responsive.
CONTRACTOR/Subcontractor's responsibility for such defense and indemnity obligations shall survive the termination or completion of this agreement for the full period of time allowed by law.
The defense and indemnification obligations of this agreement are undertaken in addition to, and shall not in any way be limited by, the insurance obligations contained in this agreement. If any section, subsection, sentence, clause or phrase of this indemnification is for any reason held to be invalid or unconstitutional, such decision shall not affect the validity of the remaining portions of this indemnification.
5. STANDARD PLANS AND SPECIFICATIONS. The performance of said work and the furnishing of said materials shall be executed in accordance with Section 8-
1.04B of the City of Stockton Standard Specifications and Plans as adopted on September 27, 2016, by Council Resolution No. 2016-09-27-1213, effective September 27, 2016, and the provisions of the issued project specifications.
The Director of Public Works will furnish CONTRACTOR a weekly statement showing the number of days charged to the contract for the preceding week, the number of days specified for completion of the contract, and the number of days remaining to complete the contract. CONTRACTOR will be allowed one (1) week in which to file a written protest setting forth in what respects said weekly statement is incorrect, otherwise the statement shall be deemed to have been accepted by CONTRACTOR as correct.
EXHIBIT 2 Page 4 of 49 1323
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6. WORKING DAYS. This work shall be diligently prosecuted to completion before the expiration of 50 WORKING DAYS beginning on the tenth calendar day after the date shown on the Notice to Proceed. It is agreed by the parties to the contract that in case all the work called for under the contract in all parts and requirements, is not finished or completed within the number of days as set forth, damage will be sustained by the CITY, and that it is and will be impracticable and extremely difficult to ascertain the actual damage which CITY will sustain in the event of and by reason of such delay; and it is therefore agreed that CONTRACTOR will pay to CITY the sum of ONE THOUSAND EIGHT HUNDRED DOLLARS AND NO/100 DOLLARS ($1,800) per day for each and every calendar day's delay in finishing the work in excess of the number of days prescribed; and CONTRACTOR agrees to pay said liquidated damages as herein provided, and in case the same are not paid, agrees that CITY, may deduct the amount thereof from any monies due or that may become due CONTRACTOR under the contract.
It is further agreed that in case the work called for under the contract is not finished and completed in all parts and requirements within the number of days as specified, the CITY shall have the right to increase the number of days or not, as may seem best to serve the interest of CITY, and if the CITY decides to increase the said number of days, the CITY shall further have the right to charge to CONTRACTOR, CONTRACTOR's heirs, assigns or sureties, and to deduct from the final payment for the work, all or any part, as may be deemed proper, the liquidated damages as specified or the actual cost of engineering, inspection, superintendence, and other overhead expenses which are directly chargeable to the contract, and which accrue during the period of such extension, whichever is greater, except the cost of final surveys and preparation of final estimate shall not be included in such charges.
A working day shall not include, nor shall CONTRACTOR be assessed with liquidated damages nor the additional cost of engineering and inspection during any delay beyond the time named for the completion of the work caused by acts of God or of the public enemy, acts of CITY, fire, floods, epidemics, quarantine restrictions, strikes, and freight embargoes and subject to approval by the Director of Public Works, inability to get materials ordered by CONTRACTOR or subcontractor due to such causes provided that CONTRACTOR shall notify the Director of Public Works in writing of the causes of delay within five (5) working days from the beginning of any such delay, and the Director shall ascertain the facts and the extent of the delay, and Director's findings of the facts thereon shall be final and conclusive.
If CONTRACTOR is delayed by reason of alterations made in these specifications, or by any act of the Director of Public Works or of the CITY, not contemplated by the contract, the time of completion shall be extended proportionately and CONTRACTOR shall be relieved during the period of such extension of any claim for liquidated damages, engineering or inspection charges or other penalties. CONTRACTOR shall have no claim for any other compensation for any such delay.
EXHIBIT 2 Page 5 of 49 1324
Local Construction Contract – BEAR ELECTRICAL SOLUTIONS, INC – PROJECT NO. WT22017 (Updated 12/31/20)
7. CONFORMANCE TO APPLICABLE LAWS. Contractor shall comply with all applicable Federal, State, and Municipal laws, rules, and ordinances. Contractor shall not discriminate in the employment of persons or in the provision of services under this Contract on the basis of any legally protected classification, including race, color, national origin, ancestry, sex or religion of such person.
a. TITLE VI
Title VI of the Civil Rights Act of 1964 requires that “no person in the United States shall, on the grounds of race, color, or national origin, be excluded from participation in, be denied the benefits of, or be subjected to discrimination under any program or activity receiving federal financial assistance.” (42 USC Section 2000d)
http://www.dol.gov/oasam/regs/statutes/titlevi.htm.
The City of Stockton requires compliance with the requirements of Title VI in all of its programs and activities regardless of funding source. b. DISCRIMINATION AND HARASSMENT POLICY
The City of Stockton has a Discrimination and Harassment Policy (Exhibit C). The purpose of this policy is to reaffirm the CITY’s commitment to demonstrating respect for all individuals by strictly prohibiting discrimination and harassment, including sexual harassment in the workplace, to define the types of behavior and conduct prohibited by this policy, and to set forth a procedure for reporting, investigating, and resolving complaints of discrimination and harassment in the workplace.
c. LABOR STANDARDS PROVISIONS/CALIFORNIA LABOR CODE
The bidder shall understand that conditions set forth in Chapter 1, Part 7, Division 2 of the California Labor Code shall be considered part of the contract agreement.
https://leginfo.legislature.ca.gov/faces/codes_displayText.xhtml?lawCode= LAB&division=2.&title=&part=7.&chapter=1.&article=2.
d. PREVAILING WAGE
CONTRACTOR and any subcontractor shall pay each employee engaged in the trade or occupation not less than the prevailing hourly wage rate. In accordance with the provisions of Section 1770 of the Labor Code, the Director of Department of Industrial Relations of the State of California has determined the general prevailing wage and employer payments for health and welfare, pension, vacation, travel time, and subsistence pay as provided for in Section 1773.1, apprenticeship or other training programs EXHIBIT 2 Page 6 of 49 1325
Local Construction Contract – BEAR ELECTRICAL SOLUTIONS, INC – PROJECT NO. WT22017 (Updated 12/31/20)
authorized by Section 3093 and similar purposes applicable to the work to be done. CONTRACTOR performing the work under this contract shall obtain a copy of the wage rate determination and shall distribute copies to each subcontractor. As the wage determination for each craft reflects an expiration date, it shall be the prime CONTRACTOR and each subcontractor's responsibility to insure that the prevailing wage rates of concern is current and paid to the employee.
i. The CONTRACTOR performing the work shall be responsible for obtaining a copy of the State wage rate determination. State wage rates may be obtained at
http://www.dir.ca.gov/OPRL/pwd/Determinations/Northern/Northern.pd f. The CONTRACTOR shall be responsible for posting said wage rates at a prominent location at the worksite and shall maintain same in a good readable condition for the duration of the work.
ii. Should the CONTRACTOR choose to work on a Saturday, Sunday or on a holiday recognized by the Labor Unions, the CONTRACTOR shall reimburse the CITY the actual cost of engineering, inspection, superintendence, and or other overhead expenses which are directly chargeable to the contract. Should such work be undertaken at the request of the CITY, reimbursement will not be required. To conform strictly with the provisions of Division 2, Part 7, Chapter 1, Article 2, of the Labor Code of the State of California. To forfeit as a penalty to CITY the sum of TWENTY-FIVE AND NO/100 DOLLARS ($25.00) for each laborer, worker, or mechanic employed by CONTRACTOR, or by any subcontractor under CONTRACTOR, in the execution of this contract, for each calendar day during which any laborer, worker, or mechanic is required or permitted to work more than eight (8) hours and who is not paid the general prevailing rate of per diem wages for holiday and overtime work in violation of the provisions of Sections 1770 to 1781 of the Labor Code of the State of California. That all sums forfeited under the provisions of the foregoing sections shall be deducted from the payments to be made under the terms of this contract.
iii. The CONTRACTOR to whom the contract is awarded shall insure that the prime and each subcontractor will in accordance with Section 1776 of the Labor Code, maintain certified payroll records. A copy of said records shall be provided with each invoice to the Public Works Department, Attention Contract Compliance Officer. It shall be the CONTRACTOR’S responsibility to obtain copies of the current prevailing wage rate determination for all subcontractors. Additionally, certified payroll records must be uploaded to the DIR website as required by labor code.
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Local Construction Contract – BEAR ELECTRICAL SOLUTIONS, INC – PROJECT NO. WT22017 (Updated 12/31/20)
iv. The CONTRACTOR shall comply with the provisions established in Section 1777.5 of the Labor Code concerning the 1) certified approval by local joint apprenticeship committees for the employment and training of apprentices, and 2) contribution of funds to administer and conduct apprenticeship programs, if applicable to the job.
e. LOCAL EMPLOYMENT ORDINANCE
Pursuant to Stockton Municipal Code Section 3.68.095 the CONTRACTOR and all subcontractors shall make a good faith effort to employ at least 50 percent of the workforce on this project from local residents, as measured by total labor work hours. Failure of any CONTRACTOR or subcontractor to comply with these requirements shall be deemed a material breach of the contract or subcontract. CONTRACTORS and subcontractors shall maintain records necessary for monitoring their compliance with section
3.68.095.
CITY agrees:
8. COMPENSATION. To pay CONTRACTOR for the work herein
contemplated in the following manner: Progress payments will be made on or about the first day of each calendar month, in such sum as shall make the aggregate of payment up to such day equal to ninety-five percent (95%) of the proportional contract price, upon the basis of the progress certificate of the Director of Public Works as to the amount of work done and the proportional amount of the contract price represented therefore; and all of the remaining part of the contract price not as aforesaid paid, shall be paid at the expiration of thirty-five (35) days from the completion of said work of construction and the certification by the Director of Public Works of such completion.
9. SECURITIES. Pursuant to Section 22300 of the Public Contract Code, CONTRACTOR will be permitted, at its request and sole expense, to substitute securities for any monies withheld by the CITY to ensure performance under the contract. Said securities will be deposited either with the CITY or with a State or federally chartered bank as escrow agent. Securities eligible for this substitution are those listed in Section 16430 of the California Government Code or bank or savings and loan certificates of deposit.
CONTRACTOR shall be the beneficial owner of any securities substituted for monies withheld and shall receive any interest thereon.
10. CHANGE ORDERS. CITY reserves the right to make such alterations, deviations, additions to or omissions from the plans and specifications, including the right to increase or decrease the quantity of any item or portion of the work, as may be deemed by the Engineer to be necessary or advisable and to require such extra work as may be determined by the Engineer to be required for the proper completion or construction of the whole work contemplated.
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Local Construction Contract – BEAR ELECTRICAL SOLUTIONS, INC – PROJECT NO. WT22017 (Updated 12/31/20)
Any such changes will be set forth in a contract change order which will specify, in addition to the work done in connection with the change made, adjustment of contract time, if any, and the basis of compensation for such work. A contract change order will not become effective until approved by the City Manager and/or the City Council.
Processing of change orders shall be in accordance with Section 4-1.05A of the City of Stockton Standard Specifications and Plans as adopted by Council on September 27, 2016, by Resolution No. 2016-09-27-1213, effective September 27, 2016, or as otherwise amended by Council. When the compensation for an item of work is subject to adjustment under the provisions of Standard Specifications and Plans, Section 4-1.05A, CONTRACTOR shall, upon request, promptly furnish the Engineer with adequate detailed cost data for such item of work.
11. AUDITS. CITY reserves the right to periodically audit all charges made by CONTRACTOR to CITY for services under the contract. Upon request, CONTRACTOR agrees to furnish CITY, or a designated representative, with necessary information and assistance.
CONTRACTOR agrees that CITY or its delegate will have the right to review, obtain and copy all records pertaining to performance of the contract. CONTRACTOR agrees to provide CITY or its delegate with any relevant information requested and shall permit CITY or its delegate access to its premises, upon reasonable notice, during normal business hours for the purpose of interviewing employees and inspecting and copying such books, records, accounts, and other material that may be relevant to a matter under investigation for the purpose of determining compliance with this requirement.
CONTRACTOR further agrees to maintain such records for a period of three (3) years after final payment under the contract.
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NOTE: The City of Stockton is now using the online insurance program PINS Advantage. Once you have been awarded a contract you will receive an email from the City’s online insurance program requesting you to forward the email to your insurance provider(s). Please see attached flyer regarding PINS Advantage.
Exhibit B:
Insurance Requirements for Construction Contracts
Contractor shall procure and maintain for the duration of the contract,and for five (5) years thereafter , insurance against claims for injuries to persons or damages to property which may arise from or in connection with the performance of the work hereunder by the Contractor, their agents, representatives, employees, or subcontractors. In the event contractor fails to obtain or maintain completed operations coverage as required by this agreement, the City, at its sole discretion, may purchase the coverage required and the cost will be paid by the contractor.
MINIMUM SCOPE AND LIMIT OF INSURANCE
Coverage shall be at least as broad as:
1. Commercial General Liability (CGL): Insurance Services Office (ISO) Form CG 00 01 covering CGL on an “occurrence” basis, including products and completed operations, property damage, bodily injury and personal & advertising injury with limits no less than $2,000,000 per occurrence. If a general aggregate limit applies, either the general aggregate limit shall apply separately to this project/location (ISO CG 25 03 or 25 04) or the general aggregate limit shall be twice the required occurrence limit.
2. Automobile Liability: Insurance Services Office Form CA 0001 covering Code 1 (any auto), with limits no less than $2,000,000 per accident for bodily injury and property damage.
3. Workers’ Compensation insurance as required by the State of California, with Statutory Limits, and Employers’ Liability insurance with a limit of no less than $1,000,000 per accident for bodily injury or disease.
4. Surety Bonds as described below.
It shall be a requirement under this agreement that any available insurance proceeds broader than or in excess of the specified minimum insurance coverage requirements and/or limits shall be available to the Additional Insured. Furthermore, the requirements for coverage and limits shall be (1) the minimum coverage and limits specified in this Agreement; or (2) the broader coverage and maximum limits of coverage of any Insurance policy or proceeds available to the named insured; whichever is greater. No
representation is made that the minimum insurance requirements of this agreement are sufficient to cover the obligations of the Contractor under this agreement.
Limits of Insurance
The limits of insurance required in this agreement may be satisfied by a combination of primary and umbrella or excess insurance. Any umbrella or excess insurance shall contain or be endorsed to contain a provision that such coverage shall also apply on a primary and non-contributory basis before the City’s own insurance or self-insurance shall be called upon to protect it as a named insured.
Other Insurance Provisions
The insurance policies are to contain, or be endorsed to contain, the following provisions:
Additional Insured Status
The City of Stockton, its officers, officials, employees, and volunteers are to be covered as additional insureds on the CGL policy with respect to liability arising out of work or operations performed by or on behalf of the Contractor including materials, parts, or equipment furnished in connection with such work or operations. General liability coverage can be provided in the form of an endorsement to the Contractor’s insurance (at least as broad as ISO Form CG 20 10 11 85 or if not available, through the addition of both CG 20 10, CG 20 26, CG 20 33, or CG 20 38; and CG 20 37 if a later edition is used). Additional insured Name of Organization shall read “City of Stockton, its officers, officials, employees, and volunteers.” Policy shall cover City of Stockton, its officers, officials, employees, and volunteers for all locations work is done under this contract.
Primary Coverage
The Additional Insured coverage under the Contractor’s policy shall be “primary and non-contributory” and will not seek contribution from the City’s insurance or selfinsurance and shall be at least as broad as CG 20 01 04 13. The City of Stockton does not accept endorsements limiting the Contractor’s insurance coverage to the sole negligence of the Named Insured.
Claims Made Policies – (Note – applicable only to professional and/or pollution liability)
If any coverage required is written on a claims-made coverage form:
1. The retroactive date must be shown, and this date must be before the execution date of the contract or the beginning of contract work.
2. Insurance must be maintained and evidence of insurance must be provided for at least five (5) years after completion of contract work.
3. If coverage is canceled or non-renewed, and not replaced with another claims-made policy form with a retroactive date prior to the contract effective, or start of work date, the Contractor must purchase extended reporting period coverage for a minimum of five (5) years after completion of contract work.
4. A copy of the claims reporting requirements must be submitted to the City of Stockton for review.
5. If the services involve lead-based paint or asbestos identification/remediation, the Contractors Pollution Liability policy shall not contain lead-based paint or asbestos exclusions. If the services involve mold identification/remediation, the Contractors Pollution Liability policy shall not contain a mold exclusion, and the definition of Pollution shall include microbial matter, including mold.
Notice of Cancellation
Each insurance policy required above shall provide that coverage shall not be canceled, except with notice to the City of Stockton.
Waiver of Subrogation
Contractor hereby grants to City of Stockton a waiver of any right to subrogation which any insurer of said Contractor may acquire against the City of Stockton by virtue of the payment of any loss under such insurance. Contractor agrees to obtain any endorsement that may be necessary to affect this waiver of subrogation, but this provision applies regardless of whether or not the City of Stockton has received a waiver of subrogation endorsement from the insurer. The Workers’ Compensation policy shall be endorsed with a waiver of subrogation in favor of the City of Stockton for all work performed by the Contractor, its employees, agents and subcontractors.
Self-Insured Retentions
All Self-insured retentions must be disclosed to Risk Management for approval and shall not reduce the limits of liability. The City of Stockton may require the Contractor to purchase coverage with a lower retention or provide proof of ability to pay losses and related investigations, claim administration, and defense expenses within the retention.
The policy language shall provide, or be endorsed to provide, that the self-insured retention may be satisfied by either the named insured or City of Stockton.
Acceptability of Insurers
Insurance is to be placed with insurers with a current A.M. Best’s rating of no less than A:VII, unless otherwise acceptable to the City of Stockton.
Verification of Coverage
Contractor shall furnish the City of Stockton with original certificates and amendatory endorsements or copies of the applicable policy language effecting coverage required by this clause. All certificates and endorsements are to be received and approved by the City of Stockton Risk Services before work commences. However, failure to obtain the required documents prior to the work beginning shall not waive the Contractor’s obligation to provide them. The City of Stockton reserves the right to require complete, certified copies of all required insurance policies, including endorsements required by these specifications, at any time.
Contractor shall, prior to the commencement of work under this Agreement, provide the City of Stockton with a copy of its declarations page(s) and endorsement page(s) for each of the required policies.
Subcontractors
Contractors shall require and verify that all subcontractors, or other parties hired for this work, purchase and maintain coverage for indemnity and insurance requirements as least as broad as specified in this agreement to the extent they apply to the scope of the subcontractor’s work with the same certificate of insurance requirements and naming as additional insureds all parties to this contract. Contractor shall include the following language in their agreement with Subcontractors: Subcontractors hired by Contractor agree to be bound to Contractor and City in the same manner and to the same extent as Contractor is bound to City under the contract documents and provide a valid certificate of insurance and the required endorsements included in the agreement as proof of compliance prior to commencement of any work and to include this same requirement for any subcontractors they hire for this work. A copy of the owner contract document indemnity and insurance provisions will be furnished to the subcontractor upon request. Contractor shall provide proof of such compliance and verification to the City upon request.
Surety Bonds
Contractor shall provide the following Surety Bonds:
1. Bid bond
2. Performance bond
3. Payment bond (or Labor and Material bond)
4. Maintenance bond
The Payment Bond and the Performance Bond shall be in a sum equal to one hundred percent (100%) of the contract price. If the Performance Bond provides for a one-year warranty a separate Maintenance Bond is not necessary. If the warranty period specified in the contract is for longer than one year a Maintenance Bond equal to 10% of the contract price is required. Bonds shall be duly executed by a responsible corporate surety, authorized to issue such bonds in the State of California and secured through an authorized agent with an office in California.
Special Risks or Circumstances
City of Stockton reserves the right to modify these requirements, including limits, based on the nature of the risk, prior experience, insurer, coverage, or other special circumstances.
Certificate Holder Address
Proper address for mailing certificates, endorsements and notices shall be:
City of Stockton
Attn: City Risk Services
400 E Main Street, 3rd Floor – HR
Stockton, CA 95202
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BOND FOR FAITHFUL PERFORMANCE
KNOW ALL MEN BY THESE PRESENTS:
That we, BEAR ELECTRICAL SOLUTIONS, INC., a STATE OF CALIFORNIA CORPORATION, as Principal and
, a corporation, organized and existing under the laws of the State of and duly authorized to transact business under the laws of the State of California, as Surety, are held and firmly bound unto the City of Stockton, a municipal corporation, duly created and existing under and by virtue of the laws of the State of California, as obligee, in the just and full sum of SEVEN HUNDRED ONE THOUSAND SEVEN HUNDRED NINETY DOLLARS AND 00/100 DOLLARS ($701,790), in lawful money of the United States of America (being 100% of the contract price) for the payment whereof well and truly to be made to the said CITY, the said Principal and Surety bind themselves, their successors and assigns, jointly and severally, firmly by these presents.
The condition of the foregoing obligation is such that the above bounded Principal has simultaneously entered into a contract with the CITY, to do and perform the following work, to wit:
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EXHIBIT 2 Page 46 of 49 1365
LED STREET LIGHTS CONVERSION PHASE 5
(PROJECT NO. WT22017)
NOW, THEREFORE, if the above bounded Principal, CONTRACTOR, Company or Corporation or its subcontractor, shall well and truly perform the work contracted to be done under said contract, then this obligation to be null and void; otherwise to remain in full force and effect.
No prepayment or delay in payment and no change, extension, addition or alteration of any provision of said contract, or in said plans or specifications agreed to between the said CONTRACTOR and the said CITY, and no forbearance on the part of the said CITY shall operate to relieve any Surety or Sureties from liability on this bond, and consent by said Surety is hereby given, and the said Surety hereby waives the provisions of Sections 2819 and 2845 of the Civil Code of the State of California.
SIGNED AND SEALED on
APPROVED AS TO SURETY: By:
PRINCIPAL
SURETY
APPROVED AS TO FORM & CONTENT:
LORI M. ASUNCION
ACTING CITY ATTORNEY
By:
ATTORNEY-IN-FACT
By:
DEPUTY CITY ATTORNEY
EXHIBIT 2 Page 47 of 49 1366
BOND FOR LABOR AND MATERIAL
KNOW ALL MEN BY THESE PRESENTS:
That we, BEAR ELECTRICAL SOLUTIONS, INC., a STATE CALIFORNIA CORPORATION, as Principal and , corporation,
organized and existing under the laws of the State of and duly authorized to transact business under the laws of the State of California, as Surety, are held and firmly bound unto the City of Stockton, a municipal corporation, duly created and existing under and by virtue of the laws of the State of California, and unto any and all material suppliers, persons, companies, or corporations furnishing materials, provisions, provender or other supplies used in, upon, for or about the performance of the work contemplated to be executed or performed under the contract hereinafter mentioned, and all persons, companies, or corporations renting or hiring teams, or implements of machinery, for or contributing to said work and all persons who perform work or labor upon the same, and all persons who supply both work and materials, and whose claims have not been paid by the contractor, company or corporation in the just and full sum of SEVEN HUNDRED ONE THOUSAND SEVEN HUNDRED NINETY DOLLARS AND 00/100 DOLLARS ($701,790), in lawful money of the United States of America (being 100% of the contract price) for the payment whereof well and truly to be made to said CITY and to said persons jointly and severally, the said principal and Surety bind themselves, their successors and assigns, jointly and severally, firmly by these presents.
The condition of the foregoing obligations is such that the above bounden Principal has simultaneously entered into a contract of even date herewith, with the CITY, to do and perform the following work, to-wit:
LED STREET LIGHTS CONVERSION PHASE 5
(PROJECT NO. WT22017)
NOW, THEREFORE, if the above bounden Principal, CONTRACTOR, Company or Corporation or its subcontractor, fail to pay for all materials, provisions, provender, or other supplies, or teams, used in, upon, for or about the performance of the work EXHIBIT 2 Page 48 of 49 1367
contracted to be done, or for any work or labor done thereon of any kind, the Surety on this bond will pay the same, in an amount not exceeding the sum specified in this bond, provided that any and all claims hereunder shall be filed and proceedings had in connection therewith as required by the provisions of Division 3, Part 4, Title 15, Chapter 5, Article 1 of the Civil Code of California, provided that in case suit is brought upon this bond, a reasonable attorney's fee shall be awarded by the Court to the prevailing party in said suit; said attorney's fee to be fixed as costs in said suit, and to be included in the judgment therein rendered.
No prepayment or delay in payment and no change, extension, addition or alteration of any provision of said contract or in said plans or specifications agreed to between the said CONTRACTOR and the said CITY and no forbearance on the part of the said CITY shall operate to relieve any surety or sureties from liability on this bond, and consent to make such alterations without further notice to or consent by any such surety is hereby given, and the said sureties hereby waive the provisions of Sections 2819 and 2845 of the Civil Code of the State of California.
SIGNED AND SEALED on .
APPROVED AS TO SURETY: By:
PRINCIPAL
SURETY
APPROVED AS TO FORM & CONTENT:
LORI M. ASUNCION
ACTING CITY ATTORNEY
By:
ATTORNEY-IN-FACT
By:
DEPUTY CITY ATTORNEY
EXHIBIT 2 Page 49 of 49 1368
City of Stockton
Legislation Text
File #: 22-0304, Version: 1
APPROVE A RESOLUTION AUTHORIZING AN INITIAL ISSUANCE OF SPECIAL TAX BONDS FOR AND ON BEHALF OF THE CITY OF STOCKTON COMMUNITY FACILITIES DISTRICT NO. 2019-1 (CANNERY PARK II), APPROVING AND DIRECTING THE EXECUTION OF A FISCAL
AGENT AGREEMENT, APPROVING THE FORM OF PRELIMINARY OFFICIAL STATEMENT,
APPROVING SALE OF SUCH BONDS, AND APPROVING OTHER RELATED DOCUMENTS AND
ACTIONS
RECOMMENDATION
It is recommended that City Council adopt a resolution to:
1. Authorize the issuance and sale of Special Tax Bonds, payable from Special Taxes for and on behalf of the City of Stockton No. 2019-1 (Cannery Park II), in the estimated amount of $9,410,000 (not-to-exceed $10,000,000); and
2. Approve and direct the execution of a Fiscal Agent agreement, approving the form of the Preliminary Official Statement, approving the sale of such bonds, and approving other related documents and actions.
Summary
The City Council (the “Council”) of the City of Stockton (the “City”) has conducted proceedings under and pursuant to the Mello-Roos Community Facilities Act of 1982, as amended, to form the “City of Stockton Community Facilities District No. 2019-1 (Cannery Park II)” (the “CFD”), to authorize the levy of special taxes upon the land within the CFD, and to issue bonds secured by said special taxes for the purpose of providing moneys for the construction and acquisition of authorized improvements for the CFD.
The Council, as the legislative body of the District, authorized the issuance of special tax bonds for the CFD in the maximum principal amount of not-to-exceed $25,000,000, and the City now desires to issue the first series of bonds (the “2022 Bonds”) in the expected amount of $9,410,000 and a not-toexceed amount of $10,000,000.
Developments generally require the construction of certain public improvements that cannot be readily funded solely by property tax proceeds, impact fees or other traditional governmental funding mechanisms. As the development continues to progress, Holman Investors, LLC (the “Developer”) requested the City start the process to issue the first series of bonds in the CFD.
Adopting the resolution is necessary to complete the issuance process for the first series of bonds.
The City Attorney’s office has approved the resolutions as to form.
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DISCUSSION
Background
In 2005, the City formed the City of Stockton, Community Facilities District No. 2005-1 (Cannery Park) (the “2005 CFD”). The 2005 CFD encompassed the entire the 450-acre Cannery Park Master Plan area that was annexed to the City and originally approved in 2004 and designated for a variety of land uses ranging from more than 1,000 single or multi-family residential units to parks, an elementary school, fire station, business park as well as commercial and offices uses, and developable in accordance with a Development Agreement entered into in October 2004 (with a 20- year term). The original Cannery Park plans submitted in 2003 by the Developer were for 1,400 residential units, 1,100 of them single-family homes and the remainder apartments or condominiums.
The 2005 CFD did not immediately undergo development largely due to the slow-down in the real estate market, neighbor concerns about water usage and regulatory delays associated with the construction of a bridge and utility infrastructure over Bear Creek.
In 2019, due to changes in development plans since formation of the 2005 CFD, the Developer requested that a large portion of the 2005 CFD be removed from the 2005 CFD and encompassed within a newly formed district. In April 2019, the City complied with the request and accepted participation in a new community facilities district as a form of prepayment of obligations related to the existing 2005 CFD. The portion of the CFD removed from the 2005 CFD is now subject to special taxes of the newly created adjoining district, the “City of Stockton Community Facilities District No. 2019-1 (Cannery Park II)” which is comprised of undeveloped land owned by Holman Investors, LLC and currently two merchant builders. The CFD comprises the Plan Areas B, C (excluding two industrial parcels), D and E of the Cannery Park Master Plan and has a total bond authorization of $25,000,000.
The CFD is comprised of the remaining 278± acres in the Cannery Park Master Plan. The project is planned for approximately 515 single-family homes, 206 multi-family units, and approximately 128 acres of non-residential uses including: light industrial / business park, business park / commercial, highway commercial and commercial office. LGI Homes has acquired 387 single-family lots and KB Home has acquired 128 single-family lots.
Below is a table of the status of current development in the CFD:
Completed Homes: Individual Homeowners 32
Remaining Lots: LGI Homes 355
Remaining Lots: KB Home 128
Total Homes 515
The Rate and Method of Apportionment
Parcels within the CFD pay a maximum special tax based on the rate and method of apportionment of special tax, commonly referred to as the “RMA”.
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Each year, the City will approve the annual costs for the CFD. The annual costs will include:
· Debt service (i.e., principal and interest on bonds) - Special Tax A (see below) · Annual services special tax - Special Tax B (see below) · Administrative expenses
· Replenishment of the reserve fund for bonds (when necessary) · An amount equal to estimated special tax delinquencies The annual costs funded by the levy of the special tax will be determined by subtracting other available revenues, such as reimbursement payments, fees, funds available from prepaid special taxes, interest earnings on the bond reserve fund, or receipts of delinquent special taxes from previous fiscal years. The City will then apply the Special Tax Formula to determine the special tax levy for each parcel.
The tax formula is made up of two parts:
Special Tax A: This tax will be collected to finance the construction of capital infrastructure. The maximum annual facilities special tax for each single-family residential unit in each of the improvement areas in the proposed new CFD will be $1,600 per home, and a maximum annual special tax of $7,500 per acre multi-family, $4,500 per acre commercial, and $4,145 per acre for light industrial. These rates will not increase during the life of the district. Upon payoff of final bonds, or July 1, 2059, whichever comes first, Special Tax A reverts to a transition component that is added to Special Tax B and will be used to pay for area maintenance of specific infrastructure financed with Special Tax A.
Special Tax B: This tax is levied to finance services related to police and criminal justice, fire, ambulance and paramedic, parks, parkways, roads, streets, open space, and maintenance and operation of any city real property or other tangible property with an estimated useful life of five or more years, including incidental expenses related to any authorized service. The purpose of the tax is to offset the net negative financial impacts of residential development. Special Tax B in FY 2022- 23 will be $585 a year for single-family homes and $386 for multi-family homes and will grow annually at a maximum rate not to exceed 4%, in perpetuity. The City’s service costs increased at or above the rate of inflation for many years, and inflationary increases are necessary to sustain the City’s service levels.
Facilities and Services to be Funded
The types of public facilities proposed to be funded by bond proceeds include the construction of public capital infrastructure facilities in the project area, including multiple neighborhood parks, major roads, sound walls, landscaping, traffic signals, bridges, sanitary sewer, water, drainage systems, storm water basin and pump station, public access and bike path improvements. The bonds sold for the CFD will reimburse the Developer for advance funding of these public infrastructure needs, all of which will be dedicated to the City upon completion.
The types of services to be funded are a portion of costs related to police and criminal justice, fire, ambulance and paramedic services, and services related to parks, parkways, and open space.
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Maintenance and operation of any city real property or other tangible property with an estimated useful life of five or more years, including incidental expenses related to any authorized service, will also be addressed.
In addition, certain incidental expenses authorized by the Mello-Roos Community Facilities Act of 1982 can be financed, including but not limited to, the cost of planning, engineering, and designing the facilities; costs associated with the creation of the CFD; issuance of bonds for the CFD; and determination of the amount of taxes and the collection and payment thereof.
Documents to be Approved
There are several documents to be approved as part of the proposed resolution to authorize the issuance and sale of the 2022 Bonds.
· Fiscal Agent Agreement (Exhibit 1): This agreement governs the terms and conditions of the 2022 Bonds and identifies the net proceeds of the 2022 Bonds will be used for the following purposes:
o Make a deposit to the Project (Improvement) Fund
o Fund a Debt Service Reserve Fund
o Fund capitalized interest on the 2022 Bonds
o Pay the costs of issuing the 2022 Bonds
· Official Statement (Exhibit 2): Disclosure Counsel prepared this document, that upon Council authorization, will be distributed by the Underwriter and is used as the primary marketing document to prospective bond purchasers. The agenda packet includes the preliminary official statement (“POS”) deemed to be essentially final. A final version of this document, called the final official statement (“OS”), is estimated to be made available shortly after the 2022 Bonds are sold and will reflect all of the final bond sale information. A table of contents identifies critical topics such as the plan of finance, security for the 2022 Bonds, information on the CFD, continuing disclosure, the foreclosure covenant, and the form of opinion of Bond Counsel.
· The Continuing Disclosure Agreement (included as an exhibit to the Official Statement):
This agreement governs the terms and conditions whereby the City will provide the holders of the 2022 Bonds an annual report updating the status of development in much the same form as some of the tables in the OS. In addition, should a material event occur, as listed in the agreement, the City will provide immediate disclosure to the holders of the 2022 Bonds. In addition, LGI Homes and KB Home and any other merchant builder or developer will provide semi-annual disclosures to the holders of the 2022 Bonds on the status of current development until such time as they own property in the CFD responsible for less than 20% of the annual special tax levy.
· Bond Purchase Agreement (Exhibit 3): RBC Capital Markets as Underwriter will execute this document agreeing to purchase the 2022 Bonds contingent upon the City satisfying the obligations imposed within the agreement. The Underwriter agrees to make a public offering of the 2022 bonds when authorized by the Council.
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· Funding Construction and Acquisition Agreement (Exhibit 4): This agreement governs the terms and conditions by which the Developer will submit projects to the City for sign off, acquisition and reimbursement from proceeds of the 2022 Bonds.
Financing Schedule
Assuming approval, the financing calendar outlines the remaining steps and the timeline to complete the sale and closing of the 2022 Bonds. It is anticipated that the financing team will participate on a due diligence call the week of July 11th, post the POS during the week of July 18th, conduct the sale on August 3rd, finalize the documents and post the OS during the week August 8th and close on August 17th.
Financing Team
The financing team consists of representatives from the appropriate City vendor pools:
· Municipal Advisor: Del Rio Advisors, LLC
· Bond Counsel: Jones Hall
· Underwriter: RBC Capital Markets
· Fiscal Agent: U.S. Bank National Association
FINANCIAL SUMMARY
The Rate and Method of Apportionment includes a Special Tax A of $1,600 per single-family home, $7,500 per acre for multi-family, and from $4,145 to $4,500 for light industrial and commercial that will support the remaining infrastructure associated with the development. At the payoff of bonds, a transition component will be added to the Special Tax B to pay for the City’s ongoing maintenance of the capital facilities that were financed.
The Rate and Method of Apportionment also includes a Special Tax B of $585 per single family parcel and $386 for multi-family parcel in FY 2022-23 that addresses the City’s costs to service the new homes and to maintain the City’s infrastructure. This amount will annually increase by up to 4% to keep pace with inflation and the City’s service delivery costs.
To determine the value of all property within the boundaries of the CFD, factoring in the current status of home construction, IRR prepared an appraisal report dated May 20, 2022, with a valuation date of May 4, 2022. The appraisal report reflects an aggregate market value of $94.7 million, consisting of $5.0 million of assessed value of homes owned by homeowners on the tax roll and $89.7 million of appraised value of completed homes not yet sold, homes under construction, finished lots and final mapped lots. Assuming the 2022 Bonds are sold in the amount of $9,410,000, the value-to lien of the CFD to the total market value of the CFD will be approximately 10.06:1.
There is no financial obligation to the City. Repayment of the debt is secured solely from special taxes on property owners within the CFD and certain funds held under the Fiscal Agent Agreement.
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Based on current market interest rates as of May 26, 2022, the expected principal amount to be issued on the 2022 Bonds is $9,410,000. Interest on the bonds will be payable March 1 and September 1 of each year, commencing March 1, 2022. Principal will be payable on September 1 of each year commencing September 1, 2024 with the final maturity on September 1, 2052.
Below is a table of the estimated costs of issuance for the 2022 Bonds:
Role Company Fee
Bond Counsel Fee and Expenses Jones Hall $52,000.00
Disclosure Counsel Jones Hall $35,000.00
Municipal Advisor Del Rio Advisors LLC $43,250.00
Special Tax Consultant Willdan $10,000.00
City Administration Fee City of Stockton $59,550.00
Fiscal Agent U.S. Bank $6,500.00
Appraiser Integra Realty Resources $23,500.00
Absorption Consultant The Gregory Group $8,400.00
Printing of Official Statement TBD $7,500.00
Contingency / Rounding Miscellaneous $15,511.39
Total Estimated Costs $261,211.39
Below is a table of the estimated sources and uses of funds for the 2022 Bonds:
Sources of Funds
Par Amount $9,410,000.00
Net Premium / Discount $0.00
Total Sources of Funds $9,410,000.00
Uses of Funds
Project (Improvement) Fund $8,000,000.00
Reserve Fund (Parity) $654,700.00
Capitalized Interest $414,103.61
Costs of Issuance $261,211.39
Underwriter’s Discount $79,985.00
Total Uses of Funds $9,410,000.00
SB 450 COMPLIANCE:
In compliance with SB 450, the good faith estimates set forth herein are provided with respect to the 2022 Bonds. Such good faith estimates have been provided to the City by the Municipal Advisor. Each estimate is based on the City’s financing plan and current market conditions, including market interest rates prevailing at the time of preparation of the estimate.
Principal Amount: The estimated aggregate principal amount of the 2022 Bonds to be sold is $9,410,000.00.
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True Interest Cost: The estimated true interest cost of the 2022 Bonds, which means the rate necessary to discount the amounts payable on the respective principal and interest payment dates to the purchase price received for the 2022 Bonds, is 5.510315%.
Finance Charge: The estimated finance charge for the 2022 Bonds, which means the sum of all fees and charges paid to third parties (or costs associated with the 2022 Bonds), is $341,196.39 consisting of $261,211.39 in fixed costs of issuance and $79,985.00 for the underwriter’s discount.
Amount of Proceeds to be Received: The estimate of the amount of proceeds to be received by the City from the sale of the 2022 Bonds, less the finance charge of the 2022 Bonds, as estimated above, and less estimated reserves and capitalized interest, is $8,000,000.00.
Total Payment Amount. The estimated total payment amount, which means the sum total of all payments to pay debt service on the 2022 Bonds, plus the finance charge for the 2022 Bonds, as described above, not paid with the proceeds of the 2022 Bonds, calculated to the final maturity of the 2022 Bonds, is $19,445,147.45.
The foregoing estimates are good faith estimates only. The actual figures may differ from the estimates owing to (a) differences between assumptions regarding the date of the sale of the 2022 Bonds, the principal amount of 2022 Bonds sold, the amortization of the 2022 Bonds, and market interest rates at the time of sale of the 2022 Bonds and, (b) other market conditions, (c) changes in the City’s financing plan, and/or (d) a combination of such factors.
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Resolution No.
STOCKTON CITY COUNCIL
A RESOLUTION AUTHORIZING AN INITIAL ISSUANCE OF SPECIAL TAX BONDS
FOR AND ON BEHALF OF THE CITY OF STOCKTON COMMUNITY FACILITIES DISTRICT NO. 2019-1 - CANNERY PARK II, APPROVING AND DIRECTING THE
EXECUTION OF A FISCAL AGENT AGREEMENT, APPROVING THE FORM OF
PRELIMINARY OFFICIAL STATEMENT, APPROVING SALE OF SUCH BONDS, AND
APPROVING OTHER RELATED DOCUMENTS AND ACTIONS
The City Council (the “Council”) of the City of Stockton (the “City”) has conducted proceedings under and pursuant to the Mello-Roos Community Facilities Act of 1982, as amended, Chapter 2.5 of Part 1 of Division 2 of Title 5, commencing at section 53311, of the California Government Code (the “Act”), to form “City of Stockton Community Facilities District No. 2019-1 (Cannery Park II) (the “CFD”), to authorize the levy of special taxes upon the land within the District, and to issue bonds secured by said special taxes for the purpose of providing moneys for the construction and acquisition of authorized improvements for the District; and
The Council, as legislative body of the District, authorized the issuance of special tax bonds of the City for the District in the maximum principal amount of not to exceed $25,000,000, and the City now desires to issue the first series of the bonds (the “Bonds”); and
The Council, as legislative body of the District, has obtained and disclosed all of the information required to be obtained and disclosed related to the Bonds under section 5852.1 of the California Government Code in the staff report accompanying this Resolution; and
There has been submitted to the City Council a Fiscal Agent Agreement (the “Fiscal Agent Agreement”), attached as Exhibit 1 and incorporated herein by this reference, between the City and U.S. Bank Trust Company, National Association, as fiscal agent, providing for the issuance and terms of the Bonds of the City for the District, and the Council, with the aid of City staff, has reviewed the Fiscal Agent Agreement and found it to be in proper order, and now desires to approve the Fiscal Agent Agreement, the issuance of the Bonds and the execution of those and related documents; and The City proposes to sell the Bonds to RBC Capital Markets, as underwriter (the “Underwriter”), pursuant to the terms of a Bond Purchase Agreement by and between the City and the Underwriter, and the Underwriter proposes to offer the Bonds to the investing public by means of a Preliminary Official Statement, attached as Exhibit 2 and incorporated herein by this reference, and the Council, with the aid of City staff, has reviewed the Bond Purchase Agreement, attached as Exhibit 3 and incorporated herein 1376
by this reference, and the Preliminary Official Statement and found them to be in proper order, and now desires to approve said documents; and
The City desires to acquire the facilities in accordance with the provisions of the Act and to enter into a Funding, Construction and Acquisition Agreement for such purpose; and
All conditions, things and acts required to exist, to have happened and to have been performed precedent to and in the issuance of the Bonds as contemplated by this Resolution and the documents referred to herein exist, have happened and have been performed in due time, form and manner as required by the laws of the State of California, including the Act; now, therefore,
BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF STOCKTON, AS FOLLOWS:
1. This Council finds and determines that it is prudent in the management and development of land in the City and the District to issue the Bonds for the purpose of providing moneys for the construction and acquisition of authorized improvements for the District.
2. For the purposes of these proceedings in and for the District, the Act shall be the authority for the issuance of the Bonds.
3. Pursuant to the Act, this Resolution and the Fiscal Agent Agreement, special tax bonds of the City for the District designated as “City of Stockton Community Facilities District No. 2019-1 (Cannery Park II) Special Tax Bonds Series 2022” in an aggregate principal amount estimated at $9,410,000 (not to exceed $10,000,0000 are hereby authorized to be issued. The Bonds shall be executed in the form set forth in, and otherwise as provided in, the Fiscal Agent Agreement.
The Bonds shall not be issued unless the value of the real property within the District subject to the special tax to pay debt service on the Bonds, based on assessed values and/or an appraisal by an independent appraiser hired by the City for the purpose of determining such value, is at least three (3) times the proposed principal amount of the Bonds proposed to be issued and secured by a special tax levied pursuant to the Act on property within the District.
4. The Council hereby approves the Fiscal Agent Agreement and the terms therein, substantially in the form presented to the Council at this meeting. The City Manager, Chief Financial Officer or such other person or persons as any of them may designate (collectively, the “Authorized Officers”), each acting alone or together with any other Authorized Officer, are each hereby authorized and directed to execute the Fiscal Agent Agreement, for and in the name and on behalf of the City and the District, in such form, together with any additions thereto or changes therein deemed necessary or advisable by the Authorized Officer executing such document upon consultation with 1377
Jones Hall, A Professional Law Corporation, as bond counsel to the City (“Bond Counsel”). The proceeds of the Bonds shall be applied by the City for the purposes and in the amounts as set forth in the Fiscal Agent Agreement. The Council hereby authorizes the delivery and performance by the City of the Fiscal Agent Agreement.
5. The City hereby covenants, for the benefit of the owners of the Bonds, to commence and diligently pursue to completion any foreclosure action regarding delinquent installments of any amount levied as a special tax for the payment of interest or principal of the Bonds, said foreclosure action to be commenced and pursued as more completely set forth in the Fiscal Agent Agreement.
6. The Council hereby approves the Preliminary Official Statement with respect to the Bonds, in substantially the form on file with the City Clerk. Distribution of the Preliminary Official Statement by the City and the Underwriter is hereby approved, and, prior to the distribution of the Preliminary Official Statement, and each Authorized Officer, each acting alone or together with any other Authorized Officer, is authorized and directed, on behalf of the City, to deem the Preliminary Official Statement “final” pursuant to Rule 15c2-12 under the Securities Exchange Act of 1934 (the “Rule”). The execution of the final Official Statement, which shall include such changes and additions thereto deemed advisable by the Authorized Officer executing the same, and such information permitted to be excluded from the Preliminary Official Statement pursuant to the Rule, is hereby approved for delivery to the purchasers of the Bonds, and each Authorized Officer, each acting alone or together with any other Authorized Officer, is authorized and directed to execute and deliver the final Official Statement for and on behalf of the City, to deliver to the Underwriter a certificate with respect to the information set forth therein and to deliver to the Underwriter the Continuing Disclosure Undertaking in substantially the form on file with the City Clerk, together with such changes and additions thereto deemed advisable by the Authorized Officer executing the same.
7. The Council hereby approves the Bond Purchase Agreement in substantially the form on file with the City Clerk; provided, that the aggregate principal amount of Bonds shall not exceed $10,000,000 or result in an underwriter’s discount in excess of 1.0%, or a true interest cost in excess of 6.50%. Subject to the foregoing parameters, an Authorized Officer is hereby authorized and directed to execute the Bond Purchase Agreement in substantially the form on file with the City Clerk, together with such changes and additions thereto deemed advisable by the Authorized Officer executing the same.
The Council hereby finds and determines that the sale of the Bonds at negotiated sale as contemplated by the Bond Purchase Agreement will result in a lower overall cost.
8. The Council hereby approves the Funding, Construction and Acquisition Agreement, attached as Exhibit 4 and incorporated herein by this reference. Each Authorized Officer, acting alone is hereby authorized and directed to execute the Funding, Construction and Acquisition Agreement, for and in the name and on behalf of the City and the District, in such form, together with any additions thereto or changes therein deemed necessary or advisable by the Authorized Officer executing such document upon 1378
consultation with Bond Counsel. The Council hereby authorizes the delivery and performance by the City of the Funding, Construction and Acquisition Agreement.
9. All actions heretofore taken by the officers, employees and agents of the City with respect to the establishment of the District and the Improvement Areas and the sale and issuance of the Bonds are hereby approved, confirmed and ratified, and the Authorized Officers of the City are hereby authorized and directed to do any and all things and take any and all actions and execute any and all certificates, agreements and other documents, which they, or any of them, may deem necessary or advisable in order to consummate the lawful issuance and delivery of the Bonds in accordance with this resolution, and any certificate, agreement, and other document described in the documents herein approved. All actions to be taken by a specified Authorized Officer as specified herein, may be taken by the Authorized Officer (including any person holding such office on an interim basis) or any designee, with the same force and effect as if taken by such Authorized Officer.
10. The City Manager is hereby authorized to take whatever actions are necessary and appropriate to carry out the purpose and intent to this Resolution.
PASSED, APPROVED, and ADOPTED July 12, 2022 .
KEVIN J. LINCOLN II
Mayor of the City of Stockton
ATTEST:
ELIZA R. GARZA, CMC
City Clerk of the City of Stockton
1379
FISCAL AGENT AGREEMENT
by and between
CITY OF STOCKTON
and
U.S. BANK TRUST COMPANY, NATIONAL ASSOCIATION,
as Fiscal Agent
Dated as of _____________ 1, 2022
Relating to:
$_______________
City of Stockton
Community Facilities District No. 2019-1 (Cannery Park II) Special Tax Bonds
Series 2022
EXHIBIT 1 1380
i
TABLE OF CONTENTS
ARTICLE I
STATUTORY AUTHORITY AND DEFINITIONS
Section 1.01. Authority for this Agreement......................................................................................... 3 Section 1.02. Agreement for Benefit of Bondowners ......................................................................... 3 Section 1.03. Definitions..................................................................................................................... 3
ARTICLE II
THE 2022 BONDS
Section 2.01. Principal Amount; Designation ...................................................................................12 Section 2.02. Terms of the 2022 Bonds ...........................................................................................12 Section 2.03. Redemption ................................................................................................................13 Section 2.04. Form of Bonds............................................................................................................16 Section 2.05. Execution of Bonds.....................................................................................................16 Section 2.06. Transfer of Bonds.......................................................................................................16 Section 2.07. Exchange of Bonds ....................................................................................................17 Section 2.08. Bond Register.............................................................................................................17 Section 2.09. Temporary Bonds.......................................................................................................17 Section 2.10. Bonds Mutilated, Lost, Destroyed or Stolen ...............................................................17 Section 2.11. Limited Obligation.......................................................................................................18 Section 2.12. Book-Entry Only System ............................................................................................18 Section 2.13. No Acceleration ..........................................................................................................19
ARTICLE III
ISSUANCE OF BONDS
Section 3.01. Issuance and Delivery of Bonds.................................................................................20 Section 3.02. Application of Proceeds of Sale of 2022 Bonds .........................................................20 Section 3.03. Special Tax Fund........................................................................................................20 Section 3.04. Improvement Fund .....................................................................................................22 Section 3.05. Costs of Issuance Fund..............................................................................................23 Section 3.06. Surplus Fund ..............................................................................................................23
ARTICLE IV
PLEDGE OF NET TAXES; RESERVE FUND
Section 4.01. Pledge of Net Taxes and Other Amounts...................................................................25 Section 4.02. Reserve Fund.............................................................................................................25
ARTICLE V
OTHER COVENANTS OF THE CITY
Section 5.01. Punctual Payment ......................................................................................................28 Section 5.02. Limited Obligation.......................................................................................................28 Section 5.03. Extension of Time for Payment ..................................................................................28 Section 5.04. Against Encumbrances...............................................................................................28 Section 5.05. Books and Accounts...................................................................................................28 Section 5.06. Protection of Security and Rights of Owners..............................................................28 Section 5.07. Collection of Special Taxes; Transfer of Net Taxes ...................................................29 Section 5.08. Covenant to Foreclose ...............................................................................................29 Section 5.09. Additional Bonds.........................................................................................................30 Section 5.10. Compliance with Law; Completion of Project .............................................................33 Section 5.11. Continuing Disclosure to Owners ...............................................................................33 Section 5.12. Private Activity Bond Limitation ..................................................................................33 Section 5.13. Federal Guarantee Prohibition ...................................................................................33 Section 5.14. No Arbitrage ...............................................................................................................33 EXHIBIT 1 1381
ii
Section 5.15. Maintenance of Tax-Exemption..................................................................................33 Section 5.16. Yield of the 2022 Bonds .............................................................................................34 Section 5.17. Annual State Reports ................................................................................................. 34 Section 5.18. Further Assurances ....................................................................................................34
ARTICLE VI
INVESTMENTS; DISPOSITION OF INVESTMENT PROCEEDS;
LIABILITY OF THE CITY
Section 6.01. Deposit and Investment of Moneys in Funds .............................................................35 Section 6.02. Rebate of Excess Investment Earnings to the United States.....................................36 Section 6.03. Limited Obligation.......................................................................................................36
ARTICLE VII
THE FISCAL AGENT
Section 7.01. Appointment of Fiscal Agent.......................................................................................37 Section 7.02. Liability of Fiscal Agent...............................................................................................37 Section 7.03. Information..................................................................................................................39 Section 7.04. Notice to Fiscal Agent................................................................................................. 39 Section 7.05. Compensation, Indemnification ..................................................................................40
ARTICLE VIII
MODIFICATION OR AMENDMENT OF THIS AGREEMENT
Section 8.01. Amendments Permitted..............................................................................................41 Section 8.02. Owners’ Meetings.......................................................................................................41 Section 8.03. Procedure for Amendment with Written Consent of Owners......................................42 Section 8.04. Disqualified Bonds......................................................................................................42 Section 8.05. Effect of Supplemental Agreement.............................................................................42 Section 8.06. Endorsement or Replacement of Bonds Issued After Amendments ..........................43 Section 8.07. Amendatory Endorsement of Bonds ..........................................................................43 Section 8.08. Opinion of Counsel Regarding Supplemental Agreement..........................................43
ARTICLE IX
MISCELLANEOUS
Section 9.01. Benefits of Agreement Limited to Parties ...................................................................44 Section 9.02. Successor is Deemed Included in All References to Predecessor ............................44 Section 9.03. Discharge of Agreement.............................................................................................44 Section 9.04. Execution of Documents and Proof of Ownership by Owners ...................................45 Section 9.05. Waiver of Personal Liability ........................................................................................45 Section 9.06. Notices to and Demands on City and Fiscal Agent ....................................................45 Section 9.07. Partial Invalidity ..........................................................................................................46 Section 9.08. Unclaimed Moneys.....................................................................................................46 Section 9.09. Applicable Law ...........................................................................................................46 Section 9.10. Conflict with Act..........................................................................................................46 Section 9.11. Conclusive Evidence of Regularity.............................................................................46 Section 9.12. Payment on Business Day .........................................................................................46 Section 9.13. Counterparts...............................................................................................................46
EXHIBIT A FORM OF BOND
EXHIBIT B OFFICER’S CERTIFICATE REQUESTING DISBURSEMENT FROM
IMPROVEMENT FUND
EXHIBIT 1 1382
1 FISCAL AGENT AGREEMENT
THIS FISCAL AGENT AGREEMENT (the “Agreement”) is made and entered into as of _____________ 1, 2022, by and between the City of Stockton, California, a charter city and public body, corporate and politic, organized and existing under and by virtue of the Constitution and laws of the State of California (the “City”) for and on behalf of City of Stockton Community Facilities District No. 2019-1 (Cannery Park II) (the “District”), and U.S. Bank Trust Company, National Association, a national banking association organized under the laws of the United States of America as fiscal agent (the “Fiscal Agent”).
W I T N E S S E T H :
WHEREAS, the City Council of the City has conducted proceedings under and pursuant to the Mello-Roos Community Facilities Act of 1982, as amended, Chapter 2.5 of Part 1 of Division 2 of Title 5, commencing at section 53311, of the California Government Code (the “Act”) and Resolution No. 2019-065-21-1503-01 of the City Council adopted on May 21, 2019, to form “City of Stockton Community Facilities District No. 2019-1 (Cannery Park II) (the “District”), to authorize the levy of special taxes upon the land within the District, and to issue bonds secured by said special taxes for the purpose of providing moneys for the construction and acquisition of authorized improvements for the District; and WHEREAS, the City Council, as the legislative body of the District, is authorized under the Act to levy special taxes to pay for the costs of facilities within the District and to authorize the issuance of bonds secured by said special taxes under the Act; and WHEREAS, under the provisions of the Act, on __________, 2022, the City Council of the City adopted its Resolution No. 2022-____________ (the “Resolution”), which resolution, among other matters, authorized the issuance of the City of Stockton Community Facilities District No. 2019-1 (Cannery Park II) Special Tax Bonds, Series 2022 to provide moneys for the construction and acquisition of improvements within the District and provided that said issuance would be in accordance with the Act and this Agreement, and authorized the execution hereof; and
WHEREAS, it is in the public interest and for the benefit of the City, the District, the persons responsible for the payment of special taxes and the Owners of the Bonds that the City enter into this Agreement to provide for the issuance of the Bonds, the disbursement of proceeds of the Bonds, the disposition of the special taxes securing the Bonds and any additional bonds authorized to be issued hereunder and the administration and payment of the Bonds; and
WHEREAS, the City has determined that all things necessary to cause the Bonds, when authenticated by the Fiscal Agent for the District and issued as in the Act, the Resolution and this Agreement provided to be legal, valid and binding and special obligations of the City for the District in accordance with their terms, and all things necessary to cause the creation, authorization, execution and delivery of this Agreement and the creation, authorization, execution and issuance of the Bonds, subject to the terms hereof, have in all respects been duly authorized.
EXHIBIT 1 1383
2 NOW, THEREFORE, in consideration of the covenants and provisions herein set forth and for other valuable consideration the receipt and sufficiency of which are hereby acknowledged, the parties hereto do hereby agree as follows:
EXHIBIT 1 1384
3 ARTICLE I
STATUTORY AUTHORITY AND DEFINITIONS
Section 1.01. Authority for this Agreement. This Agreement is entered into pursuant to the provisions of the Act and the Resolution.
Section 1.02. Agreement for Benefit of Bondowners. The provisions, covenants and agreements herein set forth to be performed by or on behalf of the City shall be for the equal benefit, protection and security of the Owners. All of the Bonds, without regard to the time or times of their issuance or maturity, shall be of equal rank without preference, priority or distinction of any of the Bonds over any other thereof, except as expressly provided in or permitted by this Agreement. The Fiscal Agent may become the Owner of any of the Bonds in its own or any other capacity with the same rights it would have if it were not Fiscal Agent.
Section 1.03. Definitions. Unless the context otherwise requires, the terms defined in this Section 1.03 shall, for all purposes of this Agreement, of any Supplemental Agreement, and of any certificate, opinion or other document herein mentioned, have the meanings herein specified. All references herein to “Articles,” “Sections” and other subdivisions are to the corresponding Articles, Sections or subdivisions of this Agreement, and the words “herein,” “hereof,” “hereunder” and other words of similar import refer to this Agreement as a whole and not to any particular Article, Section or subdivision hereof. “Additional Bonds” means any series of bonds other than the 2022 Bonds issued pursuant to Section 5.09.
“Administrative Expenses” means any or all of the following:
(a) the expenses directly related to the administration of the District, including, but not limited to, the costs of computing the Special Taxes and preparing the annual Special Tax collection schedules (whether by the City or a designee thereof or both); the costs of collecting the Special Taxes (whether by San Joaquin County, the City or otherwise); the costs of remitting the Special Taxes to the Fiscal Agent; the costs associated with preparing Special Tax disclosure statements and responding to the public inquiries regarding the Special Taxes; the costs of the City, the District or any designee thereof related to an appeal of the Special Tax; (b) the costs of the Fiscal Agent (including its legal counsel) in the discharge of the duties of the Fiscal Agent pertaining to the Bonds required under this Fiscal Agent Agreement and any Supplemental Agreement;
(c) the costs of the City or any designee thereof of complying with the City, the District, or obligated person disclosure requirements associated with applicable federal or state securities laws of the Act pertaining to the Bonds; (d) any amounts required to be rebated to the federal government; and (e) all other costs and expenses of the City (including, but not limited to, an allocable share of the salaries of the City staff directly related to the foregoing, a proportionate amount of City general administrative overhead related to the foregoing, and amounts advanced by the City for any administrative purpose of the District, EXHIBIT 1 1385
4 including costs related to prepayments of Special Taxes, recordings related to such prepayments and satisfaction of Special Taxes, amounts advanced to ensure maintenance of tax exemption, and the costs of prosecuting foreclosure of delinquent Special Taxes, which amounts advanced are subject to reimbursement from other sources, including proceeds of foreclosure) and the Fiscal Agent incurred in connection with the discharge of their respective duties hereunder and in any way related to the administration of the District and all actual costs and expenses incurred in connection with the administration of the Bonds.
“Agreement” means this Fiscal Agent Agreement, as it may be amended or supplemented from time to time by any Supplemental Agreement. “Annual Debt Service” means, for each Bond Year and each Series of Outstanding Bonds, the sum of (i) the interest due on the respective Series of Outstanding Bonds in such Bond Year, assuming that such Outstanding Bonds are retired as scheduled, and (ii) the principal amount of the respective Series of Outstanding Bonds, including any mandatory sinking fund payments, due in such Bond Year.
“Authorized Officer” means the City Manager, Chief Financial Officer, City Clerk, City Attorney, including any deputy, acting or interim officer holding such position, or any other officer or employee authorized by the City Council of the City or by an Authorized Officer to undertake the action referenced in this Agreement as required to be undertaken by an Authorized Officer.
“Bond Counsel” means Jones Hall, A Professional Law Corporation, and its successors; or any other attorney at law or firm of attorneys selected by the City, of nationally recognized standing in matters pertaining to the federal tax exemption of interest on bonds issued by states and political subdivisions, and duly admitted to practice law before the highest court of any state of the United States of America.
“Bond Year” means each twelve-month period beginning on September 2 in any year and extending to the next succeeding September 1, both dates inclusive; except that the first Bond Year shall begin on the Closing Date and end on ___________ 1, 2023. “Bonds” means the 2022 Bonds and any Additional Bonds.
“Business Day” means any day other than (i) a Saturday or a Sunday or (ii) a day on which banking institutions in the state in which the Principal Office of the Fiscal Agent is located are authorized or obligated by law or executive order to be closed. “CDIAC” means the California Debt and Investment Advisory Commission of the office of the State Treasurer of the State of California or any successor agency or bureau thereto. “Chief Financial Officer” means the duly acting Chief Financial Officer of the City, or if the City has no Chief Financial Officer, such officer of the City serving a similar role. “City” means the City of Stockton, California, and any successor thereto. “Closing Date” means __________, 2022, the date upon which there is a physical delivery of the 2022 Bonds in exchange for the amount representing the purchase price of the 2022 Bonds by the Original Purchaser.
EXHIBIT 1 1386
5 “Code” means the Internal Revenue Code of 1986 as in effect on the date of issuance of the Bonds or (except as otherwise referenced herein) as it may be amended to apply to obligations issued on the date of issuance of the Bonds, together with applicable temporary and final regulations promulgated, and applicable official public guidance published, under the Code.
“Continuing Disclosure Certificate” means the Continuing Disclosure Certificate, dated as of the Closing Date, by and between the City and Willdan Financial Services, or successors, in its capacity as Dissemination Agent, as originally executed and as it may be amended from time to time in accordance with the terms thereof. “Cost of Issuance” means items of expense payable or reimbursable directly or indirectly by the City and related to the authorization, sale and issuance of the Bonds, which items of expense shall include, but not be limited to, printing costs, costs of reproducing and binding documents, closing costs, filing and recording fees, initial fees, expenses and charges of the Fiscal Agent, including its first annual administration fee, and expenses and fees of counsel to the Fiscal Agent, expenses incurred by the City in connection with the issuance of the Bonds, financial advisor fees, Bond (underwriter’s) discount or underwriting fee, legal fees and charges, including bond counsel, charges for execution, transportation and safekeeping of the Bonds and other costs, charges and fees in connection with the foregoing. “Costs of Issuance Fund” means the fund by that name established pursuant to Section 3.05(A).
“DTC” means the Depository Trust Company, and its successors and assigns. “Debt Service” means the scheduled amount of interest and amortization of principal payable on the Bonds during the period of computation, excluding amounts scheduled during such period which relate to principal which has been retired before the beginning of such period. “Depository” means (a) initially, DTC, and (b) any other Securities Depository acting as Depository pursuant to Section 2.12.
“District” means the City of Stockton Community Facilities District No. 2019-1 (Cannery Park II) formed pursuant to the Resolution of Formation. “Fair Market Value” means the price at which a willing buyer would purchase the investment from a willing seller in a bona fide, arm’s length transaction (determined as of the date the contract to purchase or sell the investment becomes binding) if the investment is traded on an established securities market (within the meaning of Section 1273 of the Code) and, otherwise, the term “Fair Market Value” means the acquisition price in a bona fide arm’s length transaction (as referenced above) if (i) the investment is a certificate of deposit that is acquired in accordance with applicable regulations under the Code, (ii) the investment is an agreement with specifically negotiated withdrawal or reinvestment provisions and a specifically negotiated interest rate (for example, a guaranteed investment contract, a forward supply contract or other investment agreement) that is acquired in accordance with applicable regulations under the Code, (iii) the investment is a United States Treasury Security—State and Local Government Series that is acquired in accordance with applicable regulations of the United States Bureau of Public Debt, or (iv) the investment is the Local Agency Investment Fund of the State of California, but only if at all times during which the investment is held its yield is reasonably EXHIBIT 1 1387
6 expected to be equal to or greater than the yield on a reasonably comparable direct obligation of the United States.
“Federal Securities” means any of the following which are non-callable and which at the time of investment are legal investments under the laws of the State of California for funds held by the Fiscal Agent (the Fiscal Agent entitled to rely upon investment direction from the City as a certification that such investment constitutes a legal investment). (i) Direct general obligations of the United States of America (including obligations issued or held in book-entry form on the books of the United States Department of the Treasury) and obligations, the payment of principal of and interest on which are directly or indirectly guaranteed by the United States of America, including, without limitation, such of the foregoing which are commonly referred to as “stripped” obligations and coupons; or
(ii) Any of the following obligations of the following agencies of the United States of America: (a) direct obligations of the Export-Import Bank, (b) certificates of beneficial ownership issued by the Farmers Home Administration, (c) participation certificates issued by the General Services Administration, (d) mortgage-backed bonds or passthrough obligations issued and guaranteed by the Government National Mortgage Association, (e) project notes issued by the United States Department of Housing and Urban Development, and (f) public housing notes and bonds guaranteed by the United States of America.
“Fiscal Agent” means the Fiscal Agent appointed by the City and acting as an independent fiscal agent with the duties and powers herein provided, its successors and assigns, and any other corporation or association which may at any time be substituted in its place, as provided in Section 7.01.
“Fiscal Year” means the twelve-month period extending from July 1 in a calendar year to June 30 of the succeeding year, both dates inclusive. “Gross Taxes” means the proceeds of the Special Taxes received by the City, including any scheduled payments and any prepayments thereof, interest thereon and proceeds of the redemption or sale of property sold as a result of foreclosure of the lien of the Special Taxes to the amount of said lien and interest thereon. “Gross Taxes” does not include any penalties collected in connection with delinquent Special Taxes or any interest in excess of the interest due on the Bonds.
“Improvement Fund” means the fund by that name established pursuant to Section 3.04(A) hereof.
“Information Services” means “EMMA” or the “Electronic Municipal Market Access” system of the Municipal Securities Rulemaking Board; or, in accordance with then-current guidelines of the Securities and Exchange Commission, such other services providing information with respect to called bonds as the City may designate in an Officer’s Certificate delivered to the Fiscal Agent.
“Interest Payment Dates” means March 1 and September 1 of each year, commencing March 1, 2023.
EXHIBIT 1 1388
7 “Maximum Annual Debt Service” means, for each Series of Outstanding Bonds, the largest Annual Debt Service for any Bond Year after the calculation is made through the final maturity date of the respective Series of Outstanding Bonds. “Net Taxes” means Gross Taxes minus amounts set aside to pay Administrative Expenses.
“Officer’s Certificate” means a written certificate of the City signed by an Authorized Officer.
“Ordinance” means any ordinance of the City levying the Special Taxes. “Original Purchaser” means the first purchaser of the Bonds from the City. “Outstanding,” when used as of any particular time with reference to Bonds, means (subject to the provisions of Section 8.04) all Bonds except (i) Bonds theretofore canceled by the Fiscal Agent or surrendered to the Fiscal Agent for cancellation; (ii) Bonds paid or deemed to have been paid within the meaning of Section 9.03; and (iii) Bonds in lieu of or in substitution for which other Bonds shall have been authorized, executed, issued and delivered by the City pursuant to the Agreement or any Supplemental Agreement. “Owner” or “Bondowner” means any person who shall be the registered owner of any Outstanding Bond.
“Participating Underwriter” shall have the meaning ascribed thereto in the Continuing Disclosure Certificate.
“Permitted Investments” means any of the following, to the extent that they are lawful investments for City funds at the time of investment, and are acquired at Fair Market Value (the Fiscal Agent is entitled to rely upon investment direction from the City as a certification that such investment constitutes a Permitted Investment):
(i) Federal Securities;
(ii) any of following obligations of federal agencies not guaranteed by the United States of America: (a) debentures issued by the Federal Housing Administration; (b) participation certificates or senior debt obligations of the Federal Home Loan Mortgage Corporation or Farm Credit Banks (consisting of Federal Land Banks, Federal Intermediate Credit Banks or Banks for Cooperatives); (c) bonds or debentures of the Federal Home Loan Bank Board established under the Federal Home Loan Bank Act, bonds of any federal home loan bank established under said act and stocks, bonds, debentures, participations and other obligations of or issued by the Federal National Mortgage Association, the Student Loan Marketing Association, the Government National Mortgage Association and the Federal Home Loan Mortgage Corporation; and (d) bonds, notes or other obligations issued or assumed by the International Bank for Reconstruction and Development;
(iii) interest-bearing demand or time deposits (including certificates of deposit) in federal or State of California chartered banks (including the Fiscal Agent and its affiliates), provided that (a) in the case of a savings and loan association, such demand or time deposits shall be fully insured by the Federal Deposit Insurance EXHIBIT 1 1389
8 Corporation, or the unsecured obligations of such savings and loan association shall be rated in one of the top two rating categories by a nationally recognized rating service; (b) in the case of a bank, such demand or time deposits shall be fully insured by the Federal Deposit Insurance Corporation, or the unsecured obligations of such bank (or the unsecured obligations of the parent bank holding company of which such bank is the lead bank) shall be rated at the time of purchase in one of the top two rating categories by a nationally recognized rating service; and (c) U.S. dollar denominated deposit accounts, federal funds and banker’s acceptances with domestic commercial banks, which may include the Trustee, its parent holding company, if any, and their affiliates, which have a rating on their short term certificates of deposit on the date of purchase of “A” or better by S&P, maturing no more than 360 days after the date of purchase, provided that ratings on holding companies are not considered as the rating of the bank;
(iv) repurchase agreements with a registered broker/dealer subject to the Securities Investors Protection Corporation Liquidation in the event of insolvency, or any commercial bank provided that: (a) the unsecured obligations of such bank shall be rated in one of the top two rating categories by a nationally recognized rating service, or such bank shall be the lead bank of a banking holding company whose unsecured obligations are rated in one of the top two rating categories by a nationally recognized rating service; (b) the most recent reported combined capital, surplus and undivided profits of such bank shall be not less than $100 million; (c) the repurchase obligation under any such repurchase obligation shall be required to be performed in not more than thirty (30) days; (d) the entity holding such securities as described in clause (c) shall have a pledged first security interest therein for the benefit of the Fiscal Agent under the California Commercial Code or pursuant to the book-entry procedures described by 31 C.F.R. 306.1 et seq. or 31 C.F.R. 350.0 et seq. and are rated in one of the top two rating categories by a nationally recognized rating service; (v) bankers acceptances endorsed and guaranteed by banks described in clause (iv) above;
(vi) obligations, the interest on which is exempt from federal income taxation under Section 103 of the Code and which are rated in the one of the top two rating categories by a nationally recognized rating service;
(vii) money market funds which invest solely in Federal Securities or in obligations described in the preceding clause (ii) of this definition, or money market funds which are rated in the highest rating category by Standard & Poor’s Ratings Services or Moody’s Investor Service, including such funds for which the Fiscal Agent, its affiliates or subsidiaries provide investment advisory or other management services or for which the Fiscal Agent or an affiliate of the Fiscal Agent serves as investment administrator, shareholder servicing agent, and/or custodian or subcustodian, notwithstanding that (a) the Fiscal Agent or an affiliate of the Fiscal Agent receives and retains a fee for services provided to the fund, (b) the Fiscal Agent collects fees for services rendered pursuant to this Agreement, which fees are separate from the fees received from such funds, and (c) services performed for such funds and pursuant to this Agreement may at times duplicate those provided to such funds by the Fiscal Agent or an affiliate of the Fiscal Agent;
EXHIBIT 1 1390
9 (viii) units of a taxable government money market portfolio comprised solely of obligations listed in (i) and (iv) above, such funds for which the Fiscal Agent, its affiliates or subsidiaries provide investment advisory or other management services or for which the Fiscal Agent or an affiliate of the Fiscal Agent serves as investment administrator, shareholder servicing agent, and/or custodian or subcustodian, notwithstanding that (a) the Fiscal Agent or an affiliate of the Fiscal Agent receives and retains a fee for services provided to the fund, (b) the Fiscal Agent collects fees for services rendered pursuant to this Agreement, which fees are separate from the fees received from such funds, and (c) services performed for such funds and pursuant to this Agreement may at times duplicate those provided to such funds by the Fiscal Agent or an affiliate of the Fiscal Agent;
(ix) any investment which is a legal investment for proceeds of the Bonds at the time of the execution of such agreement, and which investment is made pursuant to an agreement between the City or the Fiscal Agent or any successor Fiscal Agent and a financial institution or governmental body whose long term debt obligations are rated in one of the top two rating categories by a nationally recognized rating service; (x) commercial paper which at the time of purchase is of “prime” quality of the highest ranking or of the highest letter and numerical rating as provided for by Moody’s Investors Service, or Standard and Poor’s Corporation, of issuing corporations that are organized and operating within the United States and having total assets in excess of five hundred million dollars ($500,000,000) and having an “AA” or higher rating for the issuer’s debentures, other than commercial paper, as provided for by Moody’s Investors Service or Standard and Poor’s Corporation, and provided that purchases of eligible commercial paper may not exceed 180 days maturity nor represent more than 10 percent of the outstanding paper of an issuing corporation; (xi) any general obligation of a bank or insurance company whose long term debt obligations are rated in one of the two highest rating categories of a national rating service;
(xii) shares in a common law trust established pursuant to Title 1, Division 7, Charter 5 of the Government Code of the State which invests exclusively in investments permitted by Section 53635 of Title 5, Division 2, Chapter 4 of the Government Code of the State, as it may be amended;
(xiii) shares in the California Asset Management Program; or (xiii) the Local Agency Investment Fund established pursuant to Section 16429.1 of the Government Code of the State of California, provided, however, that the Fiscal Agent shall be permitted to make investments and withdrawals in its own name and the Fiscal Agent may restrict investments in the such fund if necessary to keep moneys available for the purposes of this Fiscal Agent Agreement. (xiv) any other lawful investment for City funds.
“Prepayment” means moneys received by the City from the prepayment of Special Taxes as provided in the “Rate, Method of Apportionment, and Manner of Collection of Special Tax” applicable to the District.
EXHIBIT 1 1391
10 “Principal Office” means the corporate trust office of the Fiscal Agent set forth in Section 9.06, or such other or additional offices as may be designated by the Fiscal Agent. “Project” means the acquisitions and improvements described in the Resolution of Formation, including Administrative Expenses related thereto. “Qualified Reserve Fund Credit Instrument” means an irrevocable standby or direct-pay letter of credit or surety bond issued by a commercial bank or insurance company and deposited with the Fiscal Agent pursuant to Section 4.02, provided that all of the following requirements are met: (a) the long-term credit rating of such bank or insurance company is rated at the time of issuance in the “AA” category or higher by S&P or Moody’s (without regard to qualifier); (b) such letter of credit or surety bond has a term of at least 12 months; (c) such letter of credit or surety bond has a stated amount at least equal to the portion of the Reserve Requirement with respect to which funds are proposed to be released pursuant to Section
4.02; and (d) the Fiscal Agent is authorized pursuant to the terms of such letter of credit or surety bond to draw thereunder an amount equal to any deficiencies which may exist from time to time in the Special Tax Fund for the purpose of making payments required pursuant to Section 4.02 or the amount to be restored to the Reserve Fund if not timely renewed or extended.
“Rate and Method” means the “Rate, Method of Apportionment, and Manner of Collection of Special Tax” established for the District in the Resolution of Formation, as it may be amended from time to time.
“Record Date” means the 15th day of the month next preceding the month of the applicable Interest Payment Date whether or not such day is a Business Day. “Regulations” means temporary and permanent regulations promulgated under the Code.
“Reserve Fund” means the fund by that name established pursuant to Section 4.02(A). “Reserve Requirement” means, as of the date of any calculation, an amount equal to the lesser of (a) Maximum Annual Debt Service on the respective Outstanding Bonds covered by the Reserve Fund, (b) 125% of the average Annual Debt Service on the respective Outstanding Bonds covered by the Reserve Fund, or (c) 10% of the original principal amount of the respective Bonds covered by the Reserve Fund (or the issue price of the respective Bonds excluding accrued interest, if the net original issue discount or premium is less than 98% or more than 102% of the principal amount of the respective Bonds), as calculated by the City; provided, that (1) in no event shall the City, in connection with the issuance of Additional Bonds covered by the Reserve Fund pursuant to a Supplemental Agreement be obligated to deposit an amount in the Reserve Fund which is in excess of the amount permitted by the applicable provisions of the Code to be so deposited from the proceeds of tax-exempt bonds without having to restrict the yield of any investment purchased with any portion of such deposit and, in the event the amount of any such deposit into the Reserve Fund is so limited, the Reserve Requirement shall, in connection with the issuance of such Additional Bonds, be increased only by the amount of such deposit as permitted by the Code, and (2) the City may meet all or a portion of the Reserve Requirement by depositing a Qualified Reserve Fund Credit Instrument in the Reserve Fund in accordance with Section 4.02(A).
EXHIBIT 1 1392
11 “Resolution” means Resolution No. 2022-___________ adopted by the City Council of the City on ___________, 2022, which resolution, among other matters, authorized the issuance of the Bonds.
“Resolution of Formation” means Resolution No. 2019-065-21-1503-01 of the City Council adopted on May 21, 2019, establishing the District for the purpose of providing for the financing of certain public facilities in and for such District. “Securities Depositories” means The Depository Trust Company; and, in accordance with then current guidelines of the Securities and Exchange Commission, such other addresses and/or such other securities depositories as the City may designate in an Officer’s Certificate delivered to the Fiscal Agent.
“Series” means a series of Bonds issued under this Fiscal Agent Agreement. “Special Tax Fund” means the fund by that name established by Section 3.03(A). “Special Taxes” means the special taxes defined as “Special Tax A” in the Rate and Method and levied within the District defined in the pursuant to the Act, the Ordinance and this Agreement.
“Supplemental Agreement” means an agreement the execution of which is authorized by a resolution which has been duly adopted by the City under the Act and which agreement is amendatory of or supplemental to this Agreement, but only if and to the extent that such agreement is specifically authorized hereunder.
“Teeter Plan” means the County of San Joaquin’s program of distributing special taxes as described under the Alternative Method of Distribution of Tax Levies and Collections and of Tax Sale Proceeds, as provided for in Sections 4701 through 4717, inclusive, of the Revenue and Taxation Code of the State of California.
“Term 2022 Bonds” means the 2022 Bonds maturing on September 1, _____, September 1, _____, and September 1, _____.
“2022 Bonds” means the City of Stockton Community Facilities District No. 2019-1 (Cannery Park II) Special Tax Bonds, Series 2022.
“2022 Reserve Account” means the account within the Reserve Fund by that name established pursuant to Section 4.02(A).
EXHIBIT 1 1393
12 ARTICLE II
THE 2022 BONDS
Section 2.01. Principal Amount; Designation. The 2022 Bonds in the aggregate principal amount of $_______________ are hereby authorized to be issued by the City for the District under and subject to the terms of the Resolution and this Agreement, the Act and other applicable laws of the State of California. The 2022 Bonds shall be designated the “ City of Stockton Community Facilities District No. 2019-1 (Cannery Park II) Special Tax Bonds Series 2022.”
Section 2.02. Terms of the 2022 Bonds.
(A) Form; Denominations. The 2022 Bonds shall be issued as fully registered Bonds without coupons in denominations of $5,000 or any integral multiple thereof. The 2022 Bonds shall be lettered and numbered in a customary manner as determined by the Fiscal Agent.
(B) Date of the 2022 Bonds. The 2022 Bonds shall be dated the Closing Date. (C) CUSIP Identification Numbers. “CUSIP” identification numbers shall be imprinted on the 2022 Bonds, but such numbers shall not constitute a part of the contract evidenced by the 2022 Bonds and any error or omission with respect thereto shall not constitute cause for refusal of any purchaser to accept delivery of and pay for the 2022 Bonds.
In addition, failure on the part of the City or the Fiscal Agent to use such CUSIP numbers in any notice to Owners shall not constitute an event of default or any violation of the City’s contract with such Owners and shall not impair the effectiveness of any such notice. (D) Maturities. The 2022 Bonds shall be issued as term bonds and shall mature and become payable as follows:
Maturity Principal Interest Maturity Principal Interest (Sept 1) Amount Rate (Sept 1) Amount Rate
(E) Interest. The 2022 Bonds shall bear interest at the rates set forth above payable on the Interest Payment Dates in each year. Interest shall be calculated on the basis of a 360-day year composed of twelve 30-day months. Each 2022 Bond shall bear interest from the Interest Payment Date next preceding the date of authentication thereof unless (i) it is authenticated on an Interest Payment Date, in which event it shall bear interest from such date of authentication, or (ii) it is authenticated prior to an Interest Payment Date and after the close of business on the Record Date preceding such Interest Payment Date, in which event it shall bear interest from such Interest Payment Date, or (iii) it is authenticated prior to the Record EXHIBIT 1 1394
13 Date preceding the first Interest Payment Date, in which event it shall bear interest from the Closing Date; provided, however, that if at the time of authentication of a 2022 Bond, interest is in default thereon, such 2022 Bond shall bear interest from the Interest Payment Date to which interest has previously been paid or made available for payment thereon. (F) Method of Payment. Interest on the 2022 Bonds (including the final interest payment upon maturity or earlier redemption) is payable by check of the Fiscal Agent mailed on the Interest Payment Dates by first class mail to the registered Owner thereof at such registered Owner’s address as it appears on the registration books maintained by the Fiscal Agent at the close of business on the Record Date preceding the Interest Payment Date, or by wire transfer made on such Interest Payment Date upon written instructions received by the Fiscal Agent on or before the Record Date preceding the Interest Payment Date of any Owner of $1,000,000 or more in aggregate principal amount of 2022 Bonds; provided that so long as any 2022 Bonds are in book-entry form, payments with respect to such 2022 Bonds shall be made by wire transfer or such other method acceptable to the Fiscal Agent and to the Depository. The principal of the 2022 Bonds and any premium on the 2022 Bonds are payable in lawful money of the United States of America upon surrender of the 2022 Bonds at the Principal Office of the Fiscal Agent. All 2022 Bonds paid by the Fiscal Agent pursuant to this Section shall be cancelled by the Fiscal Agent. The Fiscal Agent shall destroy the cancelled 2022 Bonds in accordance with its records retention policy then in effect.
Section 2.03. Redemption.
(A) Redemption Dates.
(i) Optional Redemption. The 2022 Bonds are subject to optional redemption from any source of available funds other than Prepayments prior to maturity, in whole, or in part among maturities as specified by the City and by lot within a maturity, on any Interest Payment Date on or after September 1, ____, at the following respective redemption prices (expressed as percentages of the principal amount of the 2022 Bonds to be redeemed), plus accrued interest thereon to the date of redemption:
Redemption Dates Redemption Price
September 1, ____ and March 1, ____ 103%
September 1, ____ and March 1, ____ 102
September 1, ____ and March 1, ____ 101
September 1, ____ and Interest Payment Dates thereafter 100 (ii) Mandatory Redemption From Prepayments. The 2022 Bonds shall be subject to mandatory redemption from Prepayments of the Special Tax by property owners, in whole or in part among maturities as shall be specified by the City and by lot within a maturity, on any Interest Payment Date at the following respective redemption prices (expressed as percentages of the principal amount of the 2022 Bonds to be redeemed), plus accrued interest thereon to the date of redemption:
Redemption Dates Redemption Price
Interest Payment Dates through March 1, ____ 103%
September 1, ____ and March 1, ____ 102
September 1, ____ and March 1, ____ 101
September 1, ____ and Interest Payment Dates thereafter 100 EXHIBIT 1 1395
14 (iii) Mandatory Sinking Fund Redemption. The 2022 Bonds maturing September 1, ____, September 1, ____ and September 1, ____ (the “Term 2022 Bonds”) are subject to mandatory sinking payment redemption in part on September 1, ____, September 1, ____ and September 1, ____, respectively, and on each September 1 thereafter to maturity, by lot, at a redemption price equal to 100% of the principal amount thereof to be redeemed, without premium, in the aggregate respective principal amounts as set forth in the following tables:
Term Bonds Due September 1, ______
Mandatory
Redemption Date
(September 1)
Sinking Fund
Payment
Term Bonds Due September 1, ______
Mandatory
Redemption Date
(September 1)
Sinking Fund
Payment
Term Bonds Due September 1, ______
Mandatory
Redemption Date
(September 1)
Sinking Fund
Payment
The amounts in the foregoing tables shall be reduced pro rata, at the direction of the City in an Officer’s Certificate, in order to maintain substantially uniform debt service, as a result of any prior partial optional or mandatory redemption of the Term 2022 Bonds pursuant to Section 2.03(A)(i) or (ii) above. In the event of a redemption pursuant to Section 2.03(A)(i) or (ii), the City shall provide the Fiscal Agent with a revised sinking fund schedule giving effect to the redemption so completed.
In lieu of redemption under this Section 2.03, moneys in the Special Tax Fund may be used and withdrawn by the Fiscal Agent for purchase of Outstanding 2022 Bonds, upon the filing with the Fiscal Agent of an Officer’s Certificate requesting such purchase, at public or private sale as and when, and at such prices (including brokerage and other charges) as such EXHIBIT 1 1396
15 Officer’s Certificate may provide, but in no event may 2022 Bonds be purchased at a price in excess of the principal amount thereof, plus interest accrued to the date of purchase. (B) Notice to Fiscal Agent. The City shall give the Fiscal Agent an Officer’s Certificate containing notice of its intention to redeem 2022 Bonds pursuant to Section
2.03(A)(i) and (ii) not less than 60 days prior to the applicable redemption date. (C) Redemption Procedure by Fiscal Agent; Rescission. The Fiscal Agent shall cause notice of any redemption to be mailed by first class mail, postage prepaid, at least 20 days but not more than 60 days prior to the date fixed for redemption, to the Securities Depositories and to one or more Information Services, and to the respective registered Owners of any 2022 Bonds designated for redemption, at their addresses appearing on the 2022 Bond registration books in the Principal Office of the Fiscal Agent; but such mailing shall not be a condition precedent to such redemption and failure to mail or to receive any such notice, or any defect therein, shall not affect the validity of the proceedings for the redemption of such 2022 Bonds.
Such notice shall state the redemption date and the redemption price and, if less than all of the then Outstanding 2022 Bonds are to be called for redemption, shall designate the CUSIP numbers and 2022 Bond numbers of the 2022 Bonds to be redeemed by giving the individual CUSIP number and 2022 Bond number of each 2022 Bond to be redeemed or shall state that all 2022 Bonds between two stated 2022 Bond numbers, both inclusive, are to be redeemed or that all of the 2022 Bonds of one or more maturities have been called for redemption, shall state as to any 2022 Bond called in part the principal amount thereof to be redeemed, and shall require that such 2022 Bonds be then surrendered at the Principal Office of the Fiscal Agent for redemption at the said redemption price, and shall state that further interest on such 2022 Bonds will not accrue from and after the redemption date.
Upon the payment of the redemption price of 2022 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, of the 2022 Bonds being redeemed with the proceeds of such check or other transfer.
The City has the right to rescind any notice of the redemption of 2022 Bonds under Section 2.03(A)(i) by written notice to the Fiscal Agent on or prior to two Business Days prior the date fixed for redemption. Any notice of redemption shall be cancelled and annulled if for any reason funds will not be or are not available on the date fixed for redemption for the payment in full of the 2022 Bonds then called for redemption, and such cancellation shall not constitute an event of default. The City and the Fiscal Agent have no liability to the Owners or any other party related to or arising from such rescission of redemption. The Fiscal Agent shall mail notice of such rescission of redemption in the same manner as the original notice of redemption was sent under this Section.
Whenever provision is made in this Agreement for the redemption of less than all of the 2022 Bonds of any maturity, the Fiscal Agent shall select the 2022 Bonds to be redeemed, from all 2022 Bonds or such given portion thereof of such maturity by lot in any manner which the Fiscal Agent in its sole discretion shall deem appropriate.
Upon surrender of 2022 Bonds redeemed in part only, the City shall execute and the Fiscal Agent shall authenticate and deliver to the registered Owner, at the expense of the City, a new 2022 Bond or 2022 Bonds, of the same series and maturity, of authorized denominations in EXHIBIT 1 1397
16 an aggregate principal amount equal to the unredeemed portion of the 2022 Bond or 2022 Bonds.
(D) Effect of Redemption. From and after the date fixed for redemption, if funds available for the payment of the principal of, and interest and any premium on, the 2022 Bonds so called for redemption shall have been deposited in the Special Tax Fund, such 2022 Bonds so called shall cease to be entitled to any benefit under this Agreement other than the right to receive payment of the redemption price, and no interest shall accrue thereon on or after the redemption date specified in such notice.
All 2022 Bonds redeemed and purchased by the Fiscal Agent pursuant to this Section shall be canceled by the Fiscal Agent. The Fiscal Agent shall destroy the cancelled 2022 Bonds it has received in accordance with its records retention policy then in effect.
Section 2.04. Form of Bonds. The 2022 Bonds, the form of Fiscal Agent’s certificate of authentication and the form of assignment, to appear thereon, shall be substantially in the forms, respectively, set forth in Exhibit A attached hereto and by this reference incorporated herein, with necessary or appropriate variations, omissions and insertions, as permitted or required by this Agreement, the Resolution and the Act.
Section 2.05. Execution of Bonds. The Bonds shall be executed on behalf of the City by the Mayor and the City Clerk of the City who are in office on the date of adoption of this Agreement or at any time thereafter, and the seal of the City may be impressed, imprinted or reproduced by facsimile thereon. If any officer whose signature appears on any Bond ceases to be such officer before delivery of the Bonds to the Owner, such signature shall nevertheless be as effective as if the officer had remained in office until the delivery of the Bonds to the Owner.
Any Bond may be signed and attested on behalf of the City by such persons as at the actual date of the execution of such Bond shall be the proper officers of the City although at the nominal date of such Bond any such person shall not have been such officer of the City.
Only such Bonds as shall bear thereon a certificate of authentication in substantially the form set forth in Exhibit A, executed and dated by the Fiscal Agent, shall be valid or obligatory for any purpose or entitled to the benefits of this Agreement, and such certificate of authentication of the Fiscal Agent shall be conclusive evidence that the Bonds registered hereunder have been duly authenticated, registered and delivered hereunder and are entitled to the benefits of this Agreement.
Section 2.06. Transfer of Bonds. Any Bond may, in accordance with its terms, be transferred, upon the books required to be kept pursuant to the provisions of Section 2.08 by the person in whose name it is registered, in person or by his duly authorized attorney, upon surrender of such Bond for cancellation, accompanied by delivery of a duly written instrument of transfer in a form acceptable to the Fiscal Agent. The cost for any services rendered or any expenses incurred by the Fiscal Agent in connection with any such transfer shall be paid by the City. The Fiscal Agent shall collect from the Owner requesting such transfer any tax or other governmental charge required to be paid with respect to such transfer.
Whenever any Bond or Bonds shall be surrendered for transfer, the City shall execute and the Fiscal Agent shall authenticate and deliver a new Bond or Bonds, for a like aggregate principal amount of Bonds of authorized denominations and of the same maturity.
EXHIBIT 1 1398
17 No transfers of Bonds shall be required to be made (i) within 15 days prior to the date established by the Fiscal Agent for selection of Bonds for redemption or (ii) with respect to a Bond after such Bond has been selected for redemption.
The transferor of any Bond shall also provide or cause to be provided to the Fiscal Agent all information necessary to allow the Fiscal Agent to comply with any applicable tax reporting obligations, including without limitation any cost basis reporting obligations under Internal Revenue Code Section 6045. The Trustee may rely on the information provided to it and shall have no responsibility to verify or ensure the accuracy of such information.
Section 2.07. Exchange of Bonds. Bonds may be exchanged at the Principal Office of the Fiscal Agent for a like aggregate principal amount of Bonds of authorized denominations and of the same maturity. The cost for any services rendered or any expenses incurred by the Fiscal Agent in connection with any such exchange shall be paid by the City. The Fiscal Agent shall collect from the Owner requesting such exchange any tax or other governmental charge required to be paid with respect to such exchange.
No exchanges of Bonds shall be required to be made (i) within 15 days prior to the date established by the Fiscal Agent for selection of Bonds for redemption or (ii) with respect to a Bond after such Bond has been selected for redemption.
Section 2.08. Bond Register. The Fiscal Agent will keep or cause to be kept, at its Principal Office, sufficient books for the registration and transfer of the Bonds (the “Bond Register”), which books shall show the series number, date, amount, rate of interest and Owner of each Bond and shall at all times be open to inspection by the City during regular business hours upon reasonable notice; and, upon presentation for such purpose, the Fiscal Agent shall, under such reasonable regulations as it may prescribe, register or transfer or cause to be registered or transferred, on said books, the ownership of the Bonds as hereinbefore provided.
Section 2.09. Temporary Bonds. The Bonds may be initially issued in temporary form exchangeable for definitive Bonds when ready for delivery. The temporary Bonds may be printed, lithographed or typewritten, shall be of such denominations as may be determined by the City, and may contain such reference to any of the provisions of this Agreement as may be appropriate. Every temporary Bond shall be executed by the City upon the same conditions and in substantially the same manner as the definitive Bonds. If the City issues temporary Bonds it will execute and furnish definitive Bonds without delay and thereupon the temporary Bonds shall be surrendered, for cancellation, in exchange for the definitive Bonds at the Principal Office of the Fiscal Agent or at such other location as the Fiscal Agent shall designate, and the Fiscal Agent shall authenticate and deliver in exchange for such temporary Bonds an equal aggregate principal amount of definitive Bonds of authorized denominations. Until so exchanged, the temporary bonds shall be entitled to the same benefits under this Agreement as definitive Bonds authenticated and delivered hereunder.
Section 2.10. Bonds Mutilated, Lost, Destroyed or Stolen. If any Bond shall become mutilated, the City shall execute, and the Fiscal Agent shall authenticate and deliver, a new Bond of like tenor and principal amount in exchange and substitution for the Bond so mutilated, but only upon surrender to the Fiscal Agent of the Bond so mutilated. Every mutilated Bond so surrendered to the Fiscal Agent shall be canceled by it and destroyed by the Fiscal Agent in accordance with its records retention policy then in effect. If any Bond shall be lost, destroyed or stolen, evidence of such loss, destruction or theft may be submitted to the Fiscal Agent and, if such evidence be satisfactory to it and indemnity for the Fiscal Agent and the City satisfactory to EXHIBIT 1 1399
18 the Fiscal Agent shall be given, the City shall execute, and the Fiscal Agent shall authenticate and deliver, a new Bond of like tenor and principal amount in lieu of and in substitution for the Bond so lost, destroyed or stolen. The City may require payment of a sum not exceeding the actual cost of preparing each new Bond delivered under this Section and of the expenses which may be incurred by the City and the Fiscal Agent for the preparation, execution, authentication and delivery. Any Bond delivered under the provisions of this Section in lieu of any Bond alleged to be lost, destroyed or stolen shall constitute an original additional contractual obligation on the part of the City whether or not the Bond so alleged to be lost, destroyed or stolen is at any time enforceable by anyone, and shall be equally and proportionately entitled to the benefits of this Agreement with all other Bonds issued pursuant to this Agreement.
Section 2.11. Limited Obligation. All obligations of the City under this Agreement and the Bonds shall be special obligations of the City, payable solely from the Net Taxes and the funds pledged therefore hereunder. Neither the full faith and credit nor the taxing power of the City (except to the limited extent set forth herein) or the State of California or any political subdivision thereof is pledged to the payment of the Bonds.
Section 2.12. Book-Entry Only System. DTC shall act as the initial Depository for the Bonds. One Bond for each maturity of the Bonds shall be initially executed, authenticated, and delivered as set forth herein as a separate fully registered certificate (in printed or typewritten form). Upon initial execution, authentication, and delivery, the ownership of the Bonds shall be registered in the Bond Register kept by the Fiscal Agent for the Bonds in the name of Cede & Co, as nominee of DTC or such nominee as DTC shall appoint in writing.
The Authorized Officers and the Fiscal Agent are hereby authorized to take any and all actions as may be necessary and not inconsistent with this Agreement to qualify the Bonds for the Depository’s book-entry system, including the execution of the Depository’s required representation letter.
With respect to Bonds registered in the Bond Register in the name of Cede & Co, as nominee of DTC, the Fiscal Agent shall not have any responsibility or obligation to any broker-dealer, bank, or other financial institution for which DTC holds Bonds as Depository from time to time (the “DTC Participants”) or to any person for which a DTC Participant acquires an interest in the Bonds (the “Beneficial Owners”). Without limiting the immediately preceding sentence, the Fiscal Agent shall not have any responsibility or obligation with respect to (i) the accuracy of the records of DTC, Cede & Co, or any DTC Participant with respect to any ownership interest in the Bonds, (ii) the delivery to any DTC Participant, any Beneficial Owner, or any other person, other than DTC, of any notice with respect to the Bonds, including any notice of redemption or mandatory tender, (iii) the selection by the Depository of the beneficial interests in the Bonds to be redeemed in the event the City elects to redeem the Bonds in part, (iv) the payment to any DTC Participant, any Beneficial Owner, or any other person, other than DTC, of any amount with respect to the principal of or interest on the Bonds, or (v) any consent given or other action taken by the Depository as Owner of the Bonds.
The Fiscal Agent may treat as and deem DTC to be the absolute Owner of each Bond for which DTC is acting as Depository for the purpose of payment of the principal of and interest on such Bonds, for the purpose of giving notices of prepayment and other matters with respect to such Bonds, for the purpose of registering transfers with respect to such Bonds, and for all purposes whatsoever. The Fiscal Agent shall pay all principal of and interest on the Bonds only to the Owners as shown on the Registration Books, and all such payments shall be EXHIBIT 1 1400
19 valid and effective to fully satisfy and discharge all obligations with respect to the principal of and interest on the Bonds to the extent of the sum or sums so paid.
No person other than an Owner, as shown on the Bond Register, shall receive a physical Bond. Upon delivery by DTC to the Fiscal Agent of written notice to the effect that DTC has determined to substitute a new nominee in place of Cede & Co., and subject to the transfer provisions in Section 2.06 hereof, references to “Cede & Co.” in this Section 2.12 shall refer to such new nominee of DTC.
DTC may determine to discontinue providing its services with respect to the Bonds at any time by giving written notice to the Fiscal Agent and the City during any time that the Bonds are Outstanding, and discharging its responsibilities with respect thereto under applicable law. The City may terminate the services of DTC with respect to the Bonds if it determines that DTC is unable to discharge its responsibilities with respect to the Bonds or that continuation of the system of book-entry transfers through DTC is not in the best interest of the Beneficial Owners, and the City shall mail notice of such termination to the Fiscal Agent.
Upon the termination of the services of DTC as provided in the previous paragraph, and if no substitute Depository willing to undertake the functions hereunder can be found which is able to undertake such functions upon reasonable or customary terms, or if the City determines that it is in the best interest the Beneficial Owners of the Bonds that they be able to obtain certificated Bonds, the Bonds shall no longer be restricted to being registered in the Bond Register of the Fiscal Agent in the name of Cede & Co., as nominee of DTC, but may be registered in whatever name or names the Owners shall designate at that time, in accordance with Section 2.06.
To the extent that the Beneficial Owners are designated as the transferee by the Owners, in accordance with Section 2.06, the Bonds will be delivered to such Beneficial Owners as soon as practicable.
Section 2.13. No Acceleration. The principal of the Bonds shall not be subject to acceleration hereunder. Nothing in this Section 2.13 shall in any way prohibit the prepayment or redemption of Bonds under Section 2.03 hereof, or the defeasance of the Bonds and discharge of this Agreement under Section 9.03 hereof.
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20 ARTICLE III
ISSUANCE OF BONDS
Section 3.01. Issuance and Delivery of Bonds. At any time after the execution of this Agreement, the City may issue the Bonds for the District in the aggregate principal amount set forth in Section 2.01 or as authorized in any supplemental agreement and deliver such Bonds to the Original Purchaser. The Authorized Officers of the City are hereby authorized and directed to deliver any and all documents and instruments necessary to cause the issuance of Bonds in accordance with the provisions of the Act, the Resolution and this Agreement, to authorize the payment of Costs of Issuance of the Bonds from the proceeds of the Bonds and to do and cause to be done any and all acts and things necessary or convenient for delivery of the Bonds to the Original Purchaser.
Section 3.02. Application of Proceeds of Sale of 2022 Bonds. The proceeds of the purchase of the 2022 Bonds by the Original Purchaser in the amount of $____________, which represents the aggregate principal amount of the Bonds ($___________), plus net original issue premium of $____________, less an Underwriter’s discount of $____________, shall be paid to the Fiscal Agent, who shall forthwith set aside, pay over and deposit such proceeds on the Closing Date as follows:
(i) Deposit in the Improvement Fund $____________;
(ii) Deposit in the 2022 Reserve Account of the Reserve Fund $____________, equaling the initial Reserve Requirement; (iii) Deposit in the Costs of Issuance Fund $____________; and (iv) Deposit in the Interest Account of the Special Tax Fund $____________.
The Fiscal Agent may establish such temporary funds or accounts as reasonably necessary to complete the foregoing deposits.
Section 3.03. Special Tax Fund.
(A) Establishment and Disbursements. There is hereby established as a separate fund to be held by the Fiscal Agent, the Community Facilities District No. 2019-1 (Cannery Park II) Special Tax Bonds Special Tax Fund to be held by the Fiscal Agent for the benefit of the Owners. Except for the portion of any Prepayment to be deposited to the Redemption Account as specified in an Officer’s Certificate delivered to the Fiscal Agent, the Fiscal Agent shall, on each date on which Net Taxes are received from the City (pursuant to Section 5.07), deposit the Net Taxes in the Special Tax Fund. The Fiscal Agent shall transfer the Net Taxes on deposit in the Special Tax Fund on the dates and in the amounts set forth in this Section, in the following order of priority:
(1) To the Interest Account of the Special Tax Fund;
(2) To the Principal Account of the Special Tax Fund;
(3) To the Redemption Account of the Special Tax Fund;
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21 (4) To the Reserve Fund; and
(5) To the Surplus Fund.
(B) Interest Account and Principal Account of the Special Tax Fund. The principal of and interest due on the Bonds until maturity, other than principal due upon optional or special mandatory redemption, shall be paid by the Fiscal Agent from the Principal Account and the Interest Account of the Special Tax Fund, respectively. For the purpose of assuring that the payment of principal of and interest on the Bonds will be made when due (including mandatory sinking fund payments), at least one Business Day prior to each Interest Payment Date, the Fiscal Agent shall transfer from the Special Tax Fund, first to the Interest Account and then to the Principal Account, the amount required to pay interest on and principal of the Bonds (including mandatory sinking fund payments) on the immediately succeeding Interest Payment Date; provided, that to the extent that deposits have been made in the Interest Account or the Principal Account from the proceeds of the sale of an issue of the Bonds, or otherwise, the transfer from the Special Tax Fund need not be made. (C) Redemption Account of the Special Tax Fund.
(1) In accordance with the City’s election to call 2022 Bonds for optional redemption as set forth in Section 2.03(A)(i), or to call Additional Bonds for optional redemption as set forth in any Supplemental Agreement for Additional Bonds, the Fiscal Agent shall transfer from the Special Tax Fund and deposit in the Redemption Account of the Special Tax Fund moneys available for the purpose and sufficient to pay the principal, interest and premium, if any, payable on the 2022 Bonds or Additional Bonds called for optional redemption.
(2) The portion of any Prepayment specified in an Officer’s Certificate delivered to the Fiscal Agent to be deposited to the Redemption Account pursuant to Section 3.03(A), shall be deposited to the Redemption Account and applied on the redemption date established pursuant to Section 2.03(A)(ii) for the 2022 Bonds, and in any Supplemental Agreement for any Additional Bonds, for the payment of the principal, interest and the premium, if any, payable on the 2022 Bonds or Additional Bonds to be redeemed with such Prepayments.
(3) Moneys set aside in the Redemption Account shall be used solely for the purpose of redeeming Bonds and shall be applied on or after the redemption date to the payment of principal, interest and premium, if any, on the Bonds to be redeemed; provided, that in lieu or partially in lieu of such call and redemption, moneys deposited in the Redemption Account may be used to purchase Outstanding Bonds in the manner hereinafter provided. Purchases of Outstanding Bonds may be made by the City at public or private sale as and when and at such prices as the City may in its discretion determine but only at prices (including brokerage or other expenses) not more than par plus accrued interest, plus, in the case of moneys set aside for an optional redemption, the premium applicable at the next following call date according to the premium schedule established for such Bonds. Any accrued interest payable upon the purchase of Bonds may be paid from the amount reserved in the Interest Account of the Special Tax Fund for the payment of interest on the next following Interest Payment Date.
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22 (D) Reserve Fund. After making the transfers required by the foregoing provisions of this Section 3.03, the Fiscal Agent shall, after taking into account amounts then on deposit in the Reserve Fund (including the accounts therein), transfer amounts needed from the Special Tax Fund to the Reserve Fund so that the amount in the Reserve Fund equals the Reserve Requirement for each Series of Bonds.
(E) Surplus Fund. After making the transfers required by the foregoing provisions of this Section 3.03, as soon as practicable after each September 2, the Fiscal Agent shall transfer all remaining amounts in the Special Tax Fund to the Surplus Fund, unless on or prior to such date, it has received an Officer’s Certificate directing that certain amounts be retained in the Special Tax Fund because the City has assumed such amounts would be available in the Special Tax Fund in calculating the amount of the levy of Special Taxes for such Bond Year pursuant to Section 5.07.
(F) Investment. Moneys in the Special Tax Fund shall be invested and deposited in accordance with Section 6.01. Interest earnings and profits resulting from such investment and deposit shall be retained in the Special Tax Fund to be used for the purposes thereof.
Section 3.04. Improvement Fund.
(A) Establishment of Improvement Fund. There is hereby established as a separate fund to be held by the Fiscal Agent, the Community Facilities District No. 2019-1 (Cannery Park II) Special Tax Bonds Improvement Fund to the credit of which a deposit shall be made as required by Section 3.02. Moneys in the Improvement Fund shall be held in trust and shall be disbursed as provided in subsection (B) of this Section for the payment or reimbursement of costs of the Project. Prior to disbursement, amounts on deposit in the Improvement Fund shall be subject to a lien in favor of the Owners of the Bonds. (B) Procedure for Disbursement. Disbursements from the Improvement Fund shall be made by the Fiscal Agent upon receipt of an Officer’s Certificate substantially in the form of Exhibit B attached hereto which shall:
(i) set forth the amount required to be disbursed, the purpose for which the disbursement is to be made, the person to which the disbursement is to be paid and state that such disbursement is for a Project cost; and (ii) certify that no portion of the amount then being requested to be disbursed was set forth in any Officer’s Certificate previously filed requesting disbursement.
Each such Officer’s Certificate shall be sufficient evidence to the Fiscal Agent of the facts stated therein and the Fiscal Agent shall have no duty to confirm the accuracy of such facts.
(C) Investment. Moneys in the Improvement Fund and the accounts established thereunder shall be invested and deposited in accordance with Section 6.01. Interest earnings and profits from the investment of amounts in the Improvement Fund shall be retained by the Fiscal Agent in the Improvement Fund to be used for the purposes of the Improvement Fund. (D) Closing of Fund. Upon the earlier of three years after the Closing Date or the filing of an Officer’s Certificate stating that the portion of the Project to be financed from the EXHIBIT 1 1404
23 Improvement Fund has been completed and that all costs of such portion of the Project have been paid, the Fiscal Agent shall transfer the amount, if any, remaining in the Improvement Fund to the Special Tax Fund for application to the payment of principal of and interest on the Bonds, and the Improvement Fund shall be closed.
Section 3.05. Costs of Issuance Fund.
(A) Establishment of Costs of Issuance Fund. There is hereby established as a separate fund to be held by the Fiscal Agent, the Community Facilities District No. 2019-1 (Cannery Park II) Special Tax Bonds Costs of Issuance Fund, to the credit of which a deposit shall be made as required by Section 3.02. Moneys in the Costs of Issuance Fund shall be held in trust by the Fiscal Agent and shall be disbursed as provided in subsection (B) of this Section for the payment or reimbursement of Costs of Issuance of the Bonds. (B) Disbursement; Closing of Fund. Amounts in the Costs of Issuance Fund shall be disbursed from time to time to pay Costs of Issuance, as set forth in an Officer’s Certificate containing respective amounts to be paid to the designated payees, signed by an Authorized Officer or a designee thereof and delivered to the Fiscal Agent. The Fiscal Agent shall pay all Costs of Issuance of the Bonds upon receipt of an invoice from any such payee which requests payment in an amount which is less than or equal to the amount set forth with respect to such payee in such Officer’s Certificate, or upon receipt of an Officer’s Certificate requesting payment of a Cost of Issuance not listed on the initial Officer’s Certificate delivered to the Fiscal Agent on the Closing Date of the Bonds. Each such Officer’s Certificate shall be sufficient evidence to the Fiscal Agent of the facts stated therein and the Fiscal Agent shall have no duty to confirm the accuracy of such facts.
The Fiscal Agent shall maintain the Costs of Issuance Fund for a period of 3 months from the Closing Date of the Bonds and then shall transfer any moneys remaining therein, including any investment earnings thereon, to the Improvement Fund, unless such fund has been closed, in which event the moneys shall be transferred to the Special Tax Fund and the Costs of Issuance Fund shall be closed. Thereafter, any cost of issuance invoice received by the Fiscal Agent shall be submitted to the Chief Financial Officer for payment. (C) Investment. Moneys in the Costs of Issuance Fund shall be invested and deposited in accordance with Section 6.01. Interest earnings and profits resulting from said investment shall be retained by the Fiscal Agent in the Costs of Issuance Fund to be used for the purposes of the Costs of Issuance Fund.
Section 3.06. Surplus Fund.
(A) Establishment of Surplus Fund. There is hereby established as a separate fund to be held by the Fiscal Agent, the Community Facilities District No. 2019-1 (Cannery Park II) Special Tax Bonds Surplus Fund, to the credit of which a deposit shall be made as required by Section 3.03(E). Moneys in the Surplus Fund shall be held in trust by the Fiscal Agent for the benefit of the City.
(B) Disbursement. The amounts in the Surplus Fund are not pledged to the repayment of the Bonds and may be used by the City for any lawful purpose. Moneys deposited in the Surplus Fund shall be transferred by the Fiscal Agent upon the direction of the City, as set forth in an Officer’s Certificate delivered to the Fiscal Agent.
EXHIBIT 1 1405
24 (C) Investment. Moneys in the Surplus Fund shall be invested and deposited in accordance with Section 6.01. Interest earnings and profits resulting from said investment shall be retained by the Fiscal Agent in the Surplus Fund to be used for the purposes of such fund.
EXHIBIT 1 1406
25 ARTICLE IV
PLEDGE OF NET TAXES; RESERVE FUND
Section 4.01. Pledge of Net Taxes and Other Amounts. All of the Net Taxes and all moneys deposited in the Special Tax Fund, the Reserve Fund and, until disbursed as provided herein, in the Improvement Fund, are hereby pledged to secure the repayment of the Bonds.
Such pledge shall constitute a first lien on the Net Taxes and said amounts. The Net Taxes and all moneys deposited into such funds (except as otherwise provided herein) are hereby dedicated in their entirety to the payment of the principal of, including any mandatory sinking fund payments, and interest and any premium on, the Bonds as provided herein and in the Act until all of the Bonds have been paid and retired or until moneys or Federal Securities have been set aside irrevocably for that purpose in accordance with Section 9.03.
Amounts in the Costs of Issuance Fund for any Series of Bonds are not pledged to the repayment of the Bonds. The facilities acquired with the proceeds of the Bonds are not in any way pledged to pay the Debt Service on the Bonds. Any proceeds of condemnation, destruction or other disposition of any facilities financed with the proceeds of the Bonds are not pledged to pay the Debt Service on the Bonds and are free and clear of any lien or obligation imposed hereunder.
Notwithstanding any provision contained in this Agreement to the contrary, Net Taxes deposited in the Surplus Fund shall no longer be considered to be pledged to the Bonds, and none of the Surplus Fund shall be construed as a trust fund held for the benefit of the Owners.
Section 4.02. Reserve Fund.
(A) Establishment of Fund. There is hereby established as a separate fund to be held by the Fiscal Agent, the Community Facilities District No. 2019-1 (Cannery Park II) Special Tax Bonds Reserve Fund, and within the Reserve Fund shall be established a 2022 Reserve Account, to the credit of which a deposit shall be made as required by Section 3.02 and deposits shall be made as provided in Section 3.03(D). Unless otherwise set forth in a Supplemental Agreement, for each Series of Additional Bonds covered by the Reserve Fund, the Fiscal Agent shall establish a separate account within the Reserve Fund for each such Series, which account shall be maintained purely for accounting purposes, and amounts in all accounts within the Reserve Fund shall be pledged to all Bonds equally and ratably. Moneys in each account of the Reserve Fund shall be held in trust by the Fiscal Agent for the benefit of the Owners of the Bonds as a reserve for the payment of principal of, and interest on, the Bonds and shall be subject to a lien in favor of the Owners of the Bonds.
The City has the right at any time to cause the Fiscal Agent to release funds from the Reserve Fund, in whole or in part, by tendering to the Fiscal Agent: (1) a Qualified Reserve Fund Credit Instrument, and (2) an opinion of Bond Counsel stating that such release will not, of itself, cause the interest on the Bonds to become includable in gross income for purposes of federal income taxation. Upon tender of such items to the Fiscal Agent, the Fiscal Agent will transfer such funds from the Reserve Fund to the City. Prior to the expiration of any Qualified Reserve Fund Credit Instrument, the City is obligated either to replace such Qualified Reserve Fund Credit Instrument with a new Qualified Reserve Fund Credit Instrument, or to deposit or cause to be deposited with the Fiscal Agent an amount of funds such that the funds on deposit in the Reserve Fund together with all Qualified Reserve Fund Credit Instruments held by the Fiscal Agent is at least equal to the Reserve Requirement (which funds may come from a draw by the Fiscal Agent on the Qualified Reserve Fund Credit Instrument prior to its expiration).
EXHIBIT 1 1407
26 Any Qualified Reserve Fund Credit Instrument deposited with the Fiscal Agent shall contain instructions to the Fiscal Agent with respect to the purpose and use thereof. (B) Use of Fund. Except as otherwise provided in this Section, all amounts deposited in the Reserve Fund shall be used and withdrawn by the Fiscal Agent solely for the purpose of making transfers to the Special Tax Fund one Business Day prior to any Interest Payment Date for which there is a deficiency in the amount required for payment of the principal of, and interest on, the Bonds on such Interest Payment Date. Whenever transfer is made from the Reserve Fund to the Special Tax Fund due to a deficiency in the Special Tax Fund, the Fiscal Agent shall provide written notice thereof to the Chief Financial Officer.
To the extent the Fiscal Agent is required to draw on amounts in the Reserve Fund, the Fiscal Agent shall draw on such amounts from any accounts within the Reserve Fund on a pro rata basis based upon the amounts produced by calculating the Reserve Requirement for each Series of Bonds related to such accounts; provided, that because the accounts are established within the Reserve Fund solely for the purpose of complying with federal tax law, nothing in this Section shall be construed to limit the availability of amounts in any account within the Reserve Fund to pay debt service on any Series of Bonds. (C) Transfer of Excess of Reserve Requirement. Whenever the amount in the Reserve Fund exceeds the then applicable Reserve Requirement, the Fiscal Agent shall provide written notice to the Chief Financial Officer of the amount of the excess. The Chief Financial Officer shall advise the Fiscal Agent in writing of the amount, if any, of any transfer required pursuant to Section 4.02(D) and 6.02 below, and otherwise direct the Fiscal Agent to transfer an amount equal to the excess from the Reserve Fund to the Improvement Fund, if the Project has not been completed as of the date of such transfer, or if the Project has been completed, to the Special Tax Fund to be used for the payment of the principal of and interest on the Outstanding Bonds covered by the Reserve Fund in accordance with Section 3.03; provided, that to the extent that such excess results from the Prepayment of Special Taxes and redemption of Bonds as provided in an Officer’s Certificate in accordance with this Agreement, such amount shall be transferred to the Redemption Account and applied to the corresponding special mandatory redemption of Bonds.
(D) Transfer for Rebate Purposes. Investment earnings on amounts in the Reserve Fund may be withdrawn from the Reserve Fund for purposes of making payment to the federal government to comply with Section 6.02.
(E) Transfer When Balance Exceeds Outstanding Bonds. Whenever the balance in the Reserve Fund exceeds the amount required to redeem or pay the Outstanding Bonds covered by the Reserve Fund, including interest accrued to the date of payment or redemption and premium, if any, due upon redemption, and after making any transfer required under Section 4.02(D) above and upon receipt of an Officer’s Certificate directing it to do so, the Fiscal Agent shall transfer the amount in the Reserve Fund to the Special Tax Fund to be applied, on the next succeeding Interest Payment Date to the payment and redemption, in accordance with Section 3.03, of all such Outstanding Bonds. In the event that the amount so transferred from the Reserve Fund to the Special Tax Fund exceeds the amount required to pay and redeem the Outstanding Bonds covered by the Reserve Fund, the balance in the Reserve Fund shall be transferred to the City, after payment of any amounts due the Fiscal Agent hereunder, to be used for any lawful purpose of the City.
EXHIBIT 1 1408
27 Notwithstanding the foregoing, no amounts shall be transferred from the Reserve Fund pursuant to this Section 4.02(E) until after the calculation, pursuant to Section 6.02, of any amounts due to the federal government following payment of the respective Series of Bonds and withdrawal of any such amount under Section 4.02(D) for purposes of making such payment to the federal government, and payment of any fees and expenses due to the Fiscal Agent.
(F) Investment. Moneys in the Reserve Fund shall be invested and deposited in accordance with Section 6.01. Interest earnings and profits resulting from such investment and deposit shall be retained in the Reserve Fund to be used and disbursed as provided in this Section 4.02.
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28 ARTICLE V
OTHER COVENANTS OF THE CITY
Section 5.01. Punctual Payment. The City will punctually pay or cause to be paid the principal of, and interest and any premium on, the Bonds when and as due in strict conformity with the terms of this Agreement, and it will faithfully observe and perform all of the conditions covenants and requirements of this Agreement and all Supplemental Agreements and of the Bonds.
Section 5.02. Limited Obligation. The Bonds are limited obligations of the City on behalf of the District and are payable solely from and secured solely by the Net Taxes and the amounts in certain funds created hereunder as, and to the extent, set forth in Section 4.01.
Section 5.03. Extension of Time for Payment. In order to prevent any accumulation of claims for interest after maturity, the City shall not, directly or indirectly, extend or consent to the extension of the time for the payment of any claim for interest on any of the Bonds and shall not, directly or indirectly, be a party to the approval of any such arrangement by purchasing or funding said claims for interest or in any other manner. In case any such claim for interest shall be extended or funded, whether or not with the consent of the City, such claim for interest so extended or funded shall not be entitled, in case of default hereunder, to the benefits of this Agreement, except subject to the prior payment in full of the principal of all of the Bonds then Outstanding and of all claims for interest which shall not have been so extended or funded.
Section 5.04. Against Encumbrances. The City will not encumber, pledge or place any charge or lien upon any of the Net Taxes or other amounts pledged to the Bonds superior to or on a parity with the pledge and lien herein created for the benefit of the Bonds, except as permitted by this Agreement.
Section 5.05. Books and Accounts. The City will keep, or cause to be kept, proper books of record and accounts, separate from all other records and accounts of the City, in which complete and correct entries shall be made of all transactions of the City relating to the Special Taxes. Such books of record and accounts shall at all times during business hours be subject to the inspection of the Fiscal Agent and the Owners of not less than 10% of the principal amount of the Bonds then Outstanding, or their representatives duly authorized in writing.
The Fiscal Agent will keep, or cause to be kept, proper books of record and accounts, separate from all other records and accounts of the Fiscal Agent, in which complete and correct entries shall be made of all transactions relating to the expenditure of amounts disbursed from the Special Tax Fund, the Reserve Fund and the Costs of Issuance Fund. Such books of record and accounts shall at all times during business hours and upon reasonable prior notice, be subject to the inspection of the City and the Owners of not less than 10% of the principal amount of the Bonds then Outstanding, or their representatives duly authorized in writing. The Fiscal Agent may establish and maintain for so long as is necessary one or more temporary funds and accounts under this Agreement.
Section 5.06. Protection of Security and Rights of Owners. The City will preserve and protect the security of the Bonds and the rights of the Owners, and will warrant and defend their rights against all claims and demands of all persons. From and after the delivery of any of the Bonds by the City, the Bonds shall be incontestable by the City.
EXHIBIT 1 1410
29 Section 5.07. Collection of Special Taxes; Transfer of Net Taxes. The City shall comply with all requirements of the Act so as to assure the timely collection of the Special Taxes, including without limitation, the enforcement of delinquent Special Taxes.
On or within 5 Business Days of each June 1, the Fiscal Agent shall provide the Chief Financial Officer with a notice stating the amount then on deposit in the Special Tax Fund, the Reserve Fund and the Surplus Fund. The receipt of such notice by the Chief Financial Officer shall in no way affect the obligations of the Chief Financial Officer under the following two paragraphs. Upon receipt of such notice, the Chief Financial Officer shall ascertain the relevant parcels on which the Special Taxes are to be levied, taking into account any parcel splits during the preceding and then current year.
The City shall effect the levy of the Special Taxes each Fiscal Year in accordance with the Ordinance such that the computation of the levy is complete before the final date on which the County Treasurer-Tax Collector will accept the transmission of the Special Tax amounts for the parcels within the District for inclusion on the next secured real property tax roll. Upon the completion of the computation of the amounts of the levy, the City shall prepare or cause to be prepared, and shall transmit to the County Treasurer-Tax Collector such data as the County Treasurer-Tax Collector requires to include the levy of the Special Taxes on the next secured real property tax roll.
The City shall fix and levy the amount of Special Taxes within the District required for the payment of principal of and interest on any outstanding Bonds of the District becoming due and payable during the ensuing Bond Year, including any necessary replenishment or expenditure of the Reserve Fund for the Bonds and an amount estimated to be sufficient to pay the Administrative Expenses during such year, all in accordance with the rate and method of apportionment of the Special Taxes for the District and the Ordinance. In any event, the Special Taxes so levied shall not exceed the authorized amounts as provided in the proceedings pursuant to the Resolution of Formation.
The Special Taxes shall be payable and be collected in the same manner and at the same time and in the same installment as the general taxes on real property are payable, and have the same priority, become delinquent at the same times and in the same proportionate amounts and bear the same proportionate penalties and interest after delinquency as do the general taxes on real property. Notwithstanding the foregoing, the Special Taxes may be collected in such other manner as the City shall prescribe if necessary to pay the debt service on the Bonds.
The City covenants that it will receive Net Taxes in trust for the Owners and will instruct the Chief Financial Officer to deposit all Net Taxes with the Fiscal Agent at least three Business Days prior to each Interest Payment Date, and the City shall have no beneficial right or interest in the amounts so deposited, except as provided by this Agreement. All such Net Taxes shall be disbursed, allocated and applied solely to the uses and purposes set forth in this Agreement, and shall be accounted for separately and apart from all other money, funds, accounts or other resources of the City.
Section 5.08. Covenant to Foreclose. The City hereby covenants with and for the benefit of the Owners of the Bonds that it will annually on or before October 1 of each year review the public records of the County of San Joaquin relating to the collection of the Special Tax in order to determine the amount of the Special Tax collected in the prior Fiscal Year, and if the City determines on the basis of such review that:
EXHIBIT 1 1411
30 (a) the amount so collected is deficient by more than 5% of the total amount of the Special Tax levied in such Fiscal Year, it will within 30 days thereafter institute foreclosure proceedings as authorized by the Act in order to enforce the lien of the delinquent installment of the Special Tax against each separate lot or parcel of land in the District for which such installment of the Special Tax is delinquent, and will diligently prosecute and pursue such foreclosure proceedings to judgment and sale; or
(b) the amount so collected is deficient by less than 5% of the total amount of the Special Tax levied in the District in such Fiscal Year, but that property owned by any single property owner in the District is delinquent by more than $3,000 with respect to the Special Tax due and payable by such property owner in such Fiscal Year and prior Fiscal Year(s), it will within 30 days thereafter institute foreclosure proceedings as authorized by the Act in order to enforce the lien of the delinquent installment of the Special Tax against each such property, and will diligently prosecute and pursue such foreclosure proceedings to judgment and sale.
The Chief Financial Officer shall notify legal counsel of any such delinquency of which it is aware, and such legal counsel shall commence, or cause to be commenced, such actions to collect such delinquencies and subsequent foreclosure proceedings in such a manner as such counsel deems appropriate.
Notwithstanding the foregoing, the City's obligation to pursue foreclosure shall be at the option of the City so long as (i) the Teeter Plan is in effect with respect to any delinquent parcel meeting the conditions above, and (ii) there is no then-outstanding draw on any amounts in the Reserve Fund.
Section 5.09. Additional Bonds. (a) In addition to the 2022 Bonds, the City may, by a Supplemental Agreement, authorize the issuance additional Bonds, payable from Net Taxes and secured, unless otherwise provided in the Supplemental Agreement, by the Net Taxes equally and ratably with Bonds previously issued, and the City may issue, and the Fiscal Agent may authenticate and deliver to the purchaser thereof, Bonds of any series so established, in such principal amount as shall be determined by the City, but only upon compliance by the City with the requirements set forth in the Supplemental Agreement, and subject to the following specific conditions, which are hereby made conditions precedent to the issuance of any such additional series of bonds:
(i) No default in the Bonds shall have occurred and then be continuing. (ii) The Supplemental Agreement providing for the issuance of the Additional Bonds shall specify the purpose for which such Additional Bonds being issued, which shall be one or more of the following:
(A) to provide moneys needed to construct and acquire a portion of the Project, by depositing into the Improvement Fund the proceeds of such Additional Bonds to be so applied, or
(B) to refund all or part of the Bonds or Additional Bonds then Outstanding, by depositing in trust with the Fiscal Agent, moneys or Federal Securities in the amount necessary to discharge all liability of the City with respect to the bonds to be refunded as provided in Section 9.03.
EXHIBIT 1 1412
31 The Supplemental Agreement may, but is not required, provide for the payment of expenses incidental to such purposes, including the costs of issuance of such Additional Bonds, interest on Bonds of such Series for any period authorized under the Act and, in the case of Bonds issued to refund other Bonds, expenses incident to calling, redeeming, paying or otherwise discharging the Bonds to be refunded.
(iii) The Bonds of such Series shall be payable as to principal on September 1 in each year in which principal becomes due, and shall be payable as to interest semiannually on March 1 and September 1, except that the first installment of interest may be payable on either March 1 or September 1 and shall be for a period not longer than six (6) months.
(iv) Fixed serial maturities or Sinking Fund Payments, or any combination thereof, shall be established in amounts sufficient to provide for the retirement of all of the Bonds of such Series on or before their respective maturity dates. (v) The aggregate principal amount of all additional Series of Bonds plus the Series 2022 Bonds shall not exceed $25,000,000, being the total amount of Bonds for the District authorized to be issued.
(vi) After giving effect to the issuance of such Series of Bonds:
(A) Projected Maximum Special Taxes plus projected investment earnings on amounts held in the Reserve Fund to be transferred to the Special Tax Fund pursuant to the terms of this Fiscal Agent Agreement for each Bond Year are equal to or greater than one hundred ten percent (110%) of maximum Debt Service for each Bond Year that the Bonds and Additional Bonds will be outstanding; provided that such projection of investment earnings on amounts held in the Reserve Fund may assume an investment rate equal to the City's average portfolio rate available to the City at the time of determination; and (B) The aggregate value of all parcels in the District subject to the Special Tax, including then existing improvements and any facilities to be constructed or acquired with the proceeds of the proposed series of Bonds, as determined by an MAI appraisal or, in the alternative, the assessed value of all such parcels and improvements thereon (and improvements to be financed from proceeds of the Bonds proposed to be issued) as shown on the then current County tax roll, or by a combination of both methods, is at least 3.00 times the sum of (i) the aggregate principal amount of all Bonds then outstanding plus (ii) the aggregate principal amount of the series of Bonds proposed to be issued, plus (iii) the aggregate principal amount of any bonds then outstanding and payable from assessments which are a lien against property in the District , plus (iv) a portion of the aggregate principal amount of all Mello-Roos bonds, other than Bonds then outstanding, and payable at least partially from special taxes to be levied on parcels of land subject to the Special Tax within the District (the "Other Mello-Roos Bonds") equal to the aggregate principal amount of the Other Mello-Roos Bonds multiplied by a fraction, the numerator of which is the amount of special taxes levied for the Other Mello-Roos Bonds on parcels of land within the District subject to the Special Tax, and the denominator of which is the total amount of special taxes levied for the Other Mello-Roos Bonds on all EXHIBIT 1 1413
32 parcels of land subject to the Special Tax against which the special taxes are levied to pay the Other Mello-Roos Bonds (such fraction to be determined based upon the special taxes which could be levied the year in which maximum annual debt service on the Other Mello-Roos Bonds occurs), based upon information from the most recent available fiscal year.
Notwithstanding the preceding paragraphs of this subsection (vi), if a developer shall have deposited with the Fiscal Agent cash or a letter of credit from a reputable bank which is acceptable to the City, in an amount (the “Letter of Credit Amount”) equal to the shortfall in the valuation of the property in the District to meet the value-to-lien requirement set forth in the preceding paragraph, the Letter of Credit Amount shall be excluded from the debt computation under this subsection (ii). Any such letter of credit deposited with the Fiscal Agent shall remain in effect, and the Letter of Credit Amount shall not be reduced or the letter of credit thereafter terminated, until satisfaction of the preceding paragraphs of this subsection (B) with respect to the amount by which the letter of credit is proposed to be reduced, or with respect to the Letter of Credit Amount in connection with the proposed termination of the letter of credit.
Additional Bonds may be issued for the purpose of refunding any outstanding Bonds without meeting the foregoing conditions of this subsection (vi) so long as debt service on the refunding Bonds in each Bond Year is less than debt service on the Bonds refunded.
Nothing in this Agreement shall be interpreted to prohibit issuance of bonds or Additional Bonds secured on a subordinate basis to the Bonds.
Nothing in this Section or in this Agreement contained shall prevent or be construed to prevent the Supplemental Agreement providing for the issuance of Additional Bonds from pledging or otherwise providing, in addition to the security given or intended to be given by this Agreement, additional security for the benefit of such Additional Bonds or any portion thereof. (b) Proceedings for Issuance of Additional Series of Bonds. Whenever the City shall determine to issue an additional Series of Bonds, the City shall authorize the execution of a Supplemental Fiscal Agent Agreement specifying the principal amount and prescribing the forms of Bonds of such additional Series and providing the terms, conditions, distinctive designation, denominations, methods of numbering, date, maturity date or dates, interest rate or rates (or the manner of determining same), interest payment dates, redemption provisions (including the amount and dates of Sinking Fund Payments, if any), place or places of payment of principal or redemption price, if any, application of the proceeds thereof and any other provisions respecting the Bonds of such Series not inconsistent with the terms of this Fiscal Agent Agreement.
Before such additional Series of Bond shall be issued and delivered, the Fiscal Agent shall receive a Certificate of the City stating that, to the best knowledge of the City after reasonable investigation, the requirements of Section 5.09(a) are met, and the City shall file the following documents with the Fiscal Agent:
(i) an executed copy of the Supplemental Fiscal Agent Agreement authorizing such Series.
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33 (ii) a certificate of an independent special tax consultant showing that the requirements of clause (A) of subsection (vii) of Section 5.09(a) are satisfied. (iii) a valuation of taxable property within the District , showing that the requirements of clause (B) of subsection (vi) of Section 5.09 (a) are satisfied. (v) an Opinion of Counsel that the execution of the Supplemental Fiscal Agent Agreement has been duly authorized by the City in accordance with this Fiscal Agent Agreement; that all actions required to be taken by the City with respect to the issuance of the additional Series of Bonds have been taken; that such Series, when duly executed by the City and authenticated and delivered by the Fiscal Agent, will be valid and binding limited obligations of the City; that upon the delivery of such Series the aggregate principal amount of Bonds then Outstanding will not exceed the amount permitted by law or by the Fiscal Agent Agreement; and that the issuance of such Series will not cause the interest on any Bonds previously issued to be includable in the gross income of any Bonds for purposes of federal income taxation.
Section 5.10. Compliance with Law; Completion of Project. The City will comply with all applicable provisions of the Act and the law in completing the acquisition and construction of the Project; provided that the City shall have no obligation to advance any funds to complete the Project in excess of the amounts available therefor in the Improvement Fund.
Section 5.11. Continuing Disclosure to Owners. The City hereby covenants and agrees that it will comply with and carry out all of the provisions of the Continuing Disclosure Certificate.
Notwithstanding any other provision of this Agreement, failure of the City to comply with the Continuing Disclosure Certificate shall not be considered a default hereunder; however, any Participating Underwriter or any holder or beneficial owner of the 2022 Bonds may take such actions as may be necessary and appropriate to compel performance by the City of its obligations thereunder, including seeking mandate or specific performance by court order.
Section 5.12. Private Activity Bond Limitation. The City shall assure that the proceeds of the 2022 Bonds are not so used as to cause the 2022 Bonds to satisfy the private business tests of Section 141(b) of the Code or the private loan financing test of Section 141(c) of the Code.
Section 5.13. Federal Guarantee Prohibition. The City shall not take any action or permit or suffer any action to be taken if the result of the same would be to cause any of the 2022 Bonds to be “federally guaranteed” within the meaning of Section 149(b) of the Code.
Section 5.14. No Arbitrage. The City shall not take, or permit or suffer to be taken by the Fiscal Agent or otherwise, any action with respect to the gross proceeds of the 2022 Bonds which if such action had been reasonably expected to have been taken, or had been deliberately and intentionally taken, on the Closing Date for the 2022 Bonds would have caused the 2022 Bonds to be “arbitrage bonds” within the meaning of Section 148 of the Code and Regulations.
Section 5.15. Maintenance of Tax-Exemption. The City shall take all actions necessary to assure the exclusion of interest on the 2022 Bonds from the gross income of the Owners of the 2022 Bonds to the same extent as such interest is permitted to be excluded from gross income under the Code as in effect on the date of issuance of the 2022 Bonds.
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34 Section 5.16. Yield of the 2022 Bonds. In determining the yield of the 2022 Bonds to comply with Section 5.14 and 6.02 hereof, the City will take into account redemption (including premium, if any) in advance of maturity based on the reasonable expectations of the City, as of the closing date of the 2022 Bonds, without regard to whether or not redemption moneys are received or 2022 Bonds are redeemed.
Section 5.17. Annual State Reports. The following requirements shall apply to each Series of the Bonds:
(A) CDIAC Annual Reporting. Not later than October 30 of each calendar year, beginning with the October 30 first succeeding the date of the Bonds, and in each calendar year thereafter until the October 30 following the final maturity of the Bonds, the City shall prepare and supply the California Debt and Investment Advisory Commission, by mail, postage prepaid, with the information required to be supplied by Government Code Section 53359.5(b).
The annual reporting shall be made using such form or forms as may be prescribed by CDIAC. (B) CDIAC Other Reporting. If within 10 days prior to any Interest Payment Date it appears to the Fiscal Agent that there is a danger of deficiency in the Special Tax Fund and that the Fiscal Agent may be unable to pay regularly scheduled debt service on the Bonds in a timely manner or if the Fiscal Agent is unable to pay principal, interest and premium, if any, due on any Interest Payment Date for the Bonds due to insufficient funds in the Special Tax Fund, or if funds are withdrawn from the Reserve Fund to pay principal and/or interest on the Bonds, then in accordance with Government Code Section 53359.5(c), the Fiscal Agent shall notify the Chief Financial Officer in writing of such fact, and the Chief Financial Officer shall notify CDIAC of such fact within 10 days of such Interest Payment Date. (C) Governing Body Annual Reporting. Not later than January 1, 2021, and at least once a year thereafter, the Chief Financial Officer shall file a report with the City Council in accordance with the requirements of Government Code Section 53411, which report shall contain: (a) the amount of Special Taxes collected and expended; and (b) the status of the Project financed by the Bonds.
(D) Amendment. The reporting requirements of this Section shall be amended from time to time, without action by the City or the Fiscal Agent, to reflect any amendments to Section 53359.5(b) or Section 53359.5(c) of the Act or Government Code Section 53411. (E) No Liability. None of the City and its officers, agents and employees, or the Fiscal Agent shall be liable for any inadvertent error in reporting the information required by this Section.
Section 5.18. Further Assurances. The City will adopt, make, execute and deliver any and all such further resolutions, instruments and assurances as may be reasonably necessary or proper to carry out the intention or to facilitate the performance of this Agreement, and for the better assuring and confirming unto the Owners of the rights and benefits provided in this Agreement.
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35 ARTICLE VI
INVESTMENTS; DISPOSITION OF INVESTMENT PROCEEDS;
LIABILITY OF THE CITY
Section 6.01. Deposit and Investment of Moneys in Funds. Subject in all respects to the provisions of Section 6.02, moneys in any fund or account created or established by this Agreement and held by the Fiscal Agent, shall be invested by the Fiscal Agent in Permitted Investments, as directed pursuant to an Officer’s Certificate filed with the Fiscal Agent at least 2 Business Days in advance of the making of such investments. In the absence of any such Officer’s Certificate, the Fiscal Agent shall invest any such moneys in Permitted Investments described in clause (vii) of the definition thereof which by their terms mature prior to the date on which such moneys are required to be paid out hereunder provided, however, that any such investment shall be made by the Fiscal Agent only if, prior to the date on which such investment is to be made, the Fiscal Agent shall have received an Officer’s Certificate specifying a specific money market fund and, if no such Officer’s Certificate is so received, the Fiscal Agent shall hold such moneys uninvested. Subject in all respects to the provisions of Section 6.02, moneys in any fund or account created or established by this Agreement and held by the Chief Financial Officer shall be invested by the Chief Financial Officer in any lawful investments that the City may make, which by their terms mature prior to the date on which such moneys are required to be paid out hereunder. Obligations purchased as an investment of moneys in any fund shall be deemed to be part of such fund or account, subject, however, to the requirements of this Agreement for transfer of interest earnings and profits resulting from investment of amounts in funds and accounts.
The Fiscal Agent or the City may act as principal or agent in the acquisition or disposition of any investment. Neither the Fiscal Agent nor the City shall incur any liability for losses arising from any investments made pursuant to this Section. Any losses arising from any investments made pursuant to this Section shall be offset against interest earnings and profits retained in the same fund.
Except as otherwise provided in the next sentence, all investments of amounts deposited in any fund or account created by or pursuant to this Agreement, or otherwise containing gross proceeds of the Bonds (within the meaning of Section 148 of the Code), shall be acquired, disposed of, and valued (as of the date that valuation is required by this Agreement or the Code) at Fair Market Value. Investments in funds or accounts (or portions thereof) that are subject to a yield restriction under applicable provisions of the Code and (unless valuation is undertaken at least annually) investments in the Reserve Fund shall be valued by the City at their present value (within the meaning of Section 148 of the Code). For purposes of any Fair Market Value determination hereunder, the Fiscal Agent shall be entitled to conclusively rely on an Officer’s Certificate of the City and shall be fully protected in relying thereon.
Investments in any and all funds and accounts may be commingled in a separate fund or funds for purposes of making, holding and disposing of investments, notwithstanding provisions herein for transfer to or holding in or to the credit of particular funds or accounts of amounts received or held by the Fiscal Agent or the Chief Financial Officer hereunder, provided that the Fiscal Agent or the Chief Financial Officer, as applicable, shall at all times account for such investments strictly in accordance with the funds and accounts to which they are credited and otherwise as provided in this Agreement.
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36 The Fiscal Agent or the City, as applicable, shall sell or present for redemption, any investment security whenever it shall be necessary to provide moneys to meet any required payment, transfer, withdrawal or disbursement from the fund or account to which such investment security is credited and neither the Fiscal Agent nor the City shall be liable or responsible for any loss resulting from the acquisition or disposition of such investment security in accordance herewith.
The City acknowledges that to the extent regulations of the Comptroller of the Currency or other applicable regulatory entity grant the City the right to receive brokerage confirmations of security transactions as they occur, the City specifically waives receipt of such confirmations to the extent permitted by law. The Fiscal Agent will furnish the City periodic cash transaction statements which include detail for all investment transactions made by the Fiscal Agent hereunder.
Section 6.02. Rebate of Excess Investment Earnings to the United States. The City covenants to calculate and rebate to the federal government, in accordance with the Regulations, excess investment earnings to the extent required by Section 148(f) of the Code.
The City shall notify the Fiscal Agent of any amounts determined to be due to the federal government, and the Fiscal Agent shall, upon receipt of an Officer’s Certificate of the City, withdraw such amounts from the Reserve Fund pursuant to Section 4.02(D), and pay such amounts to the federal government as required by the Code and the Regulations. In the event of any shortfall in amounts available to make such payments under Section 4.02(D), the Fiscal Agent shall notify the Chief Financial Officer in writing of the amount of the shortfall and the Chief Financial Officer shall make such payment from any amounts available in the Special Tax Fund. Any fees or expenses incurred by the Fiscal Agent or the City under or pursuant to this Section 6.02 shall be Administrative Expenses. The Fiscal Agent may rely conclusively upon the City’s determinations, calculations and certifications required by this Section. The Fiscal Agent shall have no responsibility to independently make any calculation or determination or to review the City’s calculations hereunder.
In order to provide for the administration of this Section 6.02, the City may provide for the employment of independent attorneys, accountants and consultants compensated on such reasonable basis as the City may deem appropriate.
Section 6.03. Limited Obligation. The City’s obligations hereunder are limited obligations of the City on behalf of the District and are payable solely from and secured solely by the Net Taxes and the other amounts pledged to the Bonds hereunder.
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37 ARTICLE VII
THE FISCAL AGENT
Section 7.01. Appointment of Fiscal Agent. U.S. Bank Trust Company, National Association, at its Principal Office, is hereby appointed Fiscal Agent for the Bonds. The Fiscal Agent undertakes to perform such duties, and only such duties, as are specifically set forth in this Agreement, and no implied covenants or obligations shall be read into this Agreement against the Fiscal Agent.
Any company into which the Fiscal Agent may be merged or converted or with which it may be consolidated or any company resulting from any merger, conversion or consolidation to which it shall be a party or any company to which the Fiscal Agent may sell or transfer all or substantially all of its corporate trust business, provided such company shall be eligible under the following paragraph of this Section, shall be the successor to such Fiscal Agent without the execution or filing of any paper or any further act, anything herein to the contrary notwithstanding.
The City may remove the Fiscal Agent initially appointed, and any successor thereto, and may appoint a successor or successors thereto, but any such successor shall be a bank, national banking association or trust company having a combined capital (exclusive of borrowed capital) and surplus of at least $50,000,000, including, for such purpose, the combined capital and surplus of any parent holding company, and subject to supervision or examination by federal or state authority. If such bank, national banking association or trust company publishes a report of condition at least annually, pursuant to law or to the requirements of any supervising or examining authority above referred to, then for the purposes of this Section 7.01, combined capital and surplus of such bank, national banking association or trust company shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published.
The Fiscal Agent may at any time resign by giving written notice to the City and by giving to the Owners notice by mail of such resignation. Upon receiving notice of such resignation, the City shall promptly appoint a successor Fiscal Agent by an instrument in writing. Any resignation or removal of the Fiscal Agent shall become effective upon acceptance of appointment by the successor Fiscal Agent.
If no appointment of a successor Fiscal Agent shall be made pursuant to the foregoing provisions of this Section within 30 days after the Fiscal Agent shall have given to the City written notice or after a vacancy in the office of the Fiscal Agent shall have occurred by reason of its inability to act, the Fiscal Agent or any Bondowner may apply to any court of competent jurisdiction to appoint a successor Fiscal Agent. Said court may thereupon, after such notice, if any, as such court may deem proper, appoint a successor Fiscal Agent.
Section 7.02. Liability of Fiscal Agent. The recitals of facts, covenants and agreements herein and in the Bonds contained shall be taken as statements, covenants and agreements of the City, and the Fiscal Agent assumes no responsibility for the correctness of the same, or makes any representations as to the validity or sufficiency of this Agreement or of the Bonds, or shall incur any responsibility in respect thereof, other than in connection with the duties or obligations herein or in the Bonds assigned to or imposed upon it. The Fiscal Agent shall not be liable in connection with the performance of its duties hereunder, except for its own negligence or willful misconduct. The Fiscal Agent assumes no responsibility or liability for any information, EXHIBIT 1 1419
38 statement or recital in any offering memorandum or other disclosure material prepared or distributed with respect to the issuance of the Bonds. The Fiscal Agent has no liability regarding the use of the proceeds from the purchase of the Bonds deposited in funds held by the City.
In the absence of bad faith, the Fiscal Agent may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Fiscal Agent and conforming to the requirements of this Agreement, including all Officer’s Certificates of the City meeting such requirements; but in the case of any such certificates or opinions by which any provision hereof are specifically required to be furnished to the Fiscal Agent, the Fiscal Agent shall be under a duty to examine the same to determine whether or not they conform to the requirements of this Agreement. Except as provided above in this paragraph, the Fiscal Agent shall be protected and shall incur no liability in acting or proceeding, or in not acting or not proceeding, in good faith, reasonably and in accordance with the terms of this Agreement, upon any resolution, order, notice, request, consent or waiver, certificate, statement, affidavit, or other paper or document which it shall in good faith reasonably believe to be genuine and to have been adopted or signed by the proper person or to have been prepared and furnished pursuant to any provision of this Agreement, and the Fiscal Agent shall not be under any duty to make any investigation or inquiry as to any statements contained or matters referred to in any such instrument.
The Fiscal Agent shall not be liable for any error of judgment made in good faith by a responsible officer unless it shall be proved that the Fiscal Agent was negligent in ascertaining the pertinent facts.
No provision of this Agreement shall require the Fiscal Agent to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder, or in the exercise of any of its rights or powers, if it shall have reasonable grounds for believing that repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it.
The Fiscal Agent shall be under no obligation to exercise any of the rights or powers vested in it by this Agreement at the request or direction of any of the Owners pursuant to this Agreement unless such Owners shall have offered to the Fiscal Agent reasonable security or indemnity against the costs, expenses and liabilities which might be incurred by it in compliance with such request or direction.
The Fiscal Agent shall not be considered in breach of or in default in its obligations hereunder or progress in respect thereto in the event of unavoidable delay in the performance of such obligations due to unforeseeable causes beyond its control and without its fault or negligence, including, but not limited to, Acts of God or of the public enemy or terrorists, acts of a government, acts of the other party, fires, floods, epidemics, quarantine restrictions, strikes, freight embargoes, earthquakes, explosion, mob violence, riot, inability to procure or general sabotage or rationing of labor, equipment, facilities, sources of energy, material or supplies in the open market, litigation or arbitration involving a party or others relating to zoning or other governmental action or inaction pertaining to the project, malicious mischief, condemnation, and unusually severe weather or delays of suppliers or subcontractors due to such causes or any similar event and/or occurrences beyond the control of the Fiscal Agent.
The Fiscal Agent may become the owner of the Bonds with the same rights it would have if it were not the Fiscal Agent.
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39 The Fiscal Agent shall not be concerned with or accountable to anyone for the subsequent use or application of any moneys which shall be released or withdrawn in accordance with the provisions hereof.
The permissive right of the Fiscal Agent to do things enumerated in this Agreement shall not be construed as a duty and it shall not be answerable for other than its negligence or willful misconduct.
Section 7.03. Information. The Fiscal Agent shall provide to the City such information relating to the Bonds and the funds and accounts maintained by the Fiscal Agent hereunder as the City shall reasonably request, including but not limited to quarterly statements reporting funds held and transactions by the Fiscal Agent.
Section 7.04. Notice to Fiscal Agent. The Fiscal Agent may rely and shall be protected in acting or refraining from acting upon any Officer’s Certificate, notice, resolution, request, consent, order, certificate, report, facsimile transmission, electronic mail, warrant, Bond or other paper or document believed by it to be genuine and to have been signed or presented by the proper party or proper parties and given in accordance with the requirements hereof. The Fiscal Agent may execute any of the powers hereunder or perform any duties hereunder either directly or by or through agents or attorneys and the Fiscal Agent shall not be responsible for any misconduct or negligence on the part of any agent or attorney appointed with due care by it hereunder. The Fiscal Agent may consult with counsel, who may be counsel to the City, with regard to legal questions, and the opinion of such counsel shall be full and complete authorization and protection in respect of any action taken or suffered by it hereunder in good faith and in accordance therewith.
The Fiscal Agent shall have the right to accept and act upon instructions, including funds transfer instructions (“Instructions”) given pursuant to this Agreement and delivered using Electronic Means by an Authorized Officer (or his or her designee) (“Electronic Means” shall mean the following communications methods: e-mail, facsimile transmission, secure electronic transmission containing applicable authorization codes, passwords and/or authentication keys issued by the Fiscal Agent, or another method or system specified by the Fiscal Agent as available for use in connection with its services hereunder); provided, however, that the City shall provide to the Fiscal Agent an incumbency certificate for each person with the authority to provide such Instructions and containing specimen signatures of such persons, which incumbency certificate shall be amended by the City whenever a person is to be added or deleted from the listing. If the City elects to give the Fiscal Agent Instructions using Electronic Means and the Fiscal Agent in its discretion elects to act upon such Instructions, the Fiscal Agent’s understanding of such Instructions shall be deemed controlling. The City understands and agrees that the Fiscal Agent cannot determine the identity of the actual sender of such Instructions and that the Fiscal Agent shall conclusively presume that directions that purport to have been sent by an Authorized Officer (or designee) listed on the incumbency certificate provided to the Fiscal Agent have been sent by such Authorized Officer (or designee). The City shall be responsible for ensuring that only Authorized Officers (or their designees) transmit such Instructions to the Fiscal Agent and that the City is solely responsible to safeguard the use and confidentiality of applicable user and authorization codes, passwords and/or authentication keys upon receipt by the City. The Fiscal Agent shall not be liable for any losses, costs or expenses arising directly or indirectly from the Fiscal Agent’s reliance upon and compliance with such Instructions notwithstanding such directions conflict or are inconsistent with a subsequent written instruction. The City agrees: (i) to assume all risks arising out of the use of Electronic Means to submit Instructions to the Fiscal Agent, including without limitation the risk of the EXHIBIT 1 1421
40 Fiscal Agent acting on unauthorized Instructions, and the risk of interception and misuse by third parties; (ii) that it is fully informed of the protections and risks associated with the various methods of transmitting Instructions to the Fiscal Agent and that there may be more secure methods of transmitting Instructions than the method(s) selected by the City; (iii) that the security procedures (if any) to be followed in connection with its transmission of Instructions provide to it a commercially reasonable degree of protection in light of its particular needs and circumstances; and (iv) to notify the Fiscal Agent immediately upon learning of any compromise or unauthorized use of the security procedures.
The Fiscal Agent shall not be bound to recognize any person as the Owner of a Bond unless and until such Bond is submitted for inspection, if required, and his title thereto satisfactorily established, if disputed.
Whenever in the administration of its duties under this Agreement the Fiscal Agent shall deem it necessary or desirable that a matter be proved or established prior to taking or suffering any action hereunder, such matter (unless other evidence in respect thereof be herein specifically prescribed) may, in the absence of willful misconduct on the part of the Fiscal Agent, be deemed to be conclusively proved and established by a certificate of the City, and such certificate shall be full warrant to the Fiscal Agent for any action taken or suffered under the provisions of this Agreement or any Supplemental Agreement upon the faith thereof, but in its discretion the Fiscal Agent may, in lieu thereof, accept other evidence of such matter or may require such additional evidence as to it may seem reasonable.
Section 7.05. Compensation, Indemnification. The City shall pay to the Fiscal Agent from time to time reasonable compensation for all services rendered as Fiscal Agent under this Agreement, and also all reasonable expenses, charges, counsel fees and other disbursements, including those of their attorneys, agents and employees, incurred in and about the performance of their powers and duties under this Agreement, but the Fiscal Agent shall not have a lien therefor on any funds at any time held by it under this Agreement. The City further agrees, to the extent permitted by applicable law, to indemnify and save the Fiscal Agent, its officers, employees, directors and agents harmless against any costs, claims, damages, expenses or liabilities, including, without limitation, fees and expenses of its attorneys which it may incur in the exercise and performance of its powers and duties hereunder which are not due to its negligence or willful misconduct. The obligation of the City under this Section shall survive resignation or removal of the Fiscal Agent under this Agreement and payment of the Bonds and discharge of this Agreement.
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41 ARTICLE VIII
MODIFICATION OR AMENDMENT OF THIS AGREEMENT
Section 8.01. Amendments Permitted. This Agreement and the rights and obligations of the City and of the Owners of the Bonds may be modified or amended at any time by a Supplemental Agreement pursuant to the affirmative vote at a meeting of Owners, or with the written consent without a meeting, of the Owners of at least 60% in aggregate principal amount of the Bonds then Outstanding, exclusive of Bonds disqualified as provided in Section 8.04. No such modification or amendment shall (i) extend the maturity of any Bond or reduce the interest rate thereon, or otherwise alter or impair the obligation of the City to pay the principal of, and the interest and any premium on, any Bond, without the express consent of the Owner of such Bond, or (ii) permit the creation by the City of any pledge or lien upon the Net Taxes superior to or on a parity with the pledge and lien created for the benefit of the Bonds (except as otherwise permitted by the Act, the laws of the State of California or this Agreement), or reduce the percentage of Bonds required for the amendment hereof. No such amendment may modify any of the rights or obligations of the Fiscal Agent without its written consent.
This Agreement and the rights and obligations of the City and of the Owners may also be modified or amended at any time by a Supplemental Agreement, without the consent of any Owners, only to the extent permitted by law and only for any one or more of the following purposes:
(A) to add to the covenants and agreements of the City in this Agreement contained, other covenants and agreements thereafter to be observed, or to limit or surrender any right or power herein reserved to or conferred upon the City; (B) to make modifications not adversely affecting any outstanding series of Bonds of the City in any material respect, including in connection with the issuance of Additional Bonds in accordance with this Agreement;
(C) to make such provisions for the purpose of curing any ambiguity, or of curing, correcting or supplementing any defective provision contained in this Agreement, or in regard to questions arising under this Agreement, as the City and the Fiscal Agent may deem necessary or desirable, and which shall not adversely affect the rights of the Owners of the Bonds; and
(D) to make such additions, deletions or modifications as may be necessary or desirable to assure compliance with Section 148 of the Code relating to required rebate of excess investment earnings to the United States or otherwise as may be necessary to assure exclusion from gross income for federal income tax purposes of interest on the Bonds or to conform with the Regulations.
No such amendment may modify any of the rights or obligations of the Fiscal Agent without its written consent.
Section 8.02. Owners’ Meetings. The City may at any time call a meeting of the Owners. In such event the City is authorized to fix the time and place of said meeting and to provide for the giving of notice thereof and to fix and adopt rules and regulations for the conduct of said meeting.
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42 Section 8.03. Procedure for Amendment with Written Consent of Owners. The City and the Fiscal Agent may at any time enter into a Supplemental Agreement amending the provisions of the Bonds or of this Agreement or any Supplemental Agreement, to the extent that such amendment is permitted by Section 8.01, to take effect when and as provided in this Section. A copy of such Supplemental Agreement, together with a request to Owners for their consent thereto, if such consent is required under Section 8.01, shall be mailed by first class mail, by the Fiscal Agent to each Owner of Bonds Outstanding, but failure to mail copies of such Supplemental Agreement and request shall not affect the validity of the Supplemental Agreement when assented to as in this Section provided.
If consent of the Owners is required under Section 8.01, such Supplemental Agreement shall not become effective unless there shall be filed with the Fiscal Agent the written consents of the Owners of at least 60% in aggregate principal amount of the Bonds then Outstanding (exclusive of Bonds disqualified as provided in Section 8.04) and a notice shall have been mailed as hereinafter in this Section provided. Each such consent shall be effective only if accompanied by proof of ownership of the Bonds for which such consent is given, which proof shall be such as is permitted by Section 9.04. Any such consent shall be binding upon the Owner of the Bonds giving such consent and on any subsequent Owner (whether or not such subsequent Owner has notice thereof) unless such consent is revoked in writing by the Owner giving such consent or a subsequent Owner by filing such revocation with the Fiscal Agent prior to the date when the notice hereinafter in this Section provided for has been mailed.
After the Owners of the required percentage of Bonds shall have filed their consents to the Supplemental Agreement, the City shall mail a notice to the Owners in the manner hereinbefore provided in this Section for the mailing of the Supplemental Agreement, stating in substance that the Supplemental Agreement has been consented to by the Owners of the required percentage of Bonds and will be effective as provided in this Section (but failure to mail copies of said notice shall not affect the validity of the Supplemental Agreement or consents thereto). Proof of the mailing of such notice shall be filed with the Fiscal Agent. A record, consisting of the papers required by this Section 8.03 to be filed with the Fiscal Agent, shall be proof of the matters therein stated until the contrary is proved. The Supplemental Agreement shall become effective upon the filing with the Fiscal Agent of the proof of mailing of such notice, and the Supplemental Agreement shall be deemed conclusively binding (except as otherwise herein above specifically provided in this Article) upon the City and the Owners of all Bonds at the expiration of 60 days after such filing, except in the event of a final decree of a court of competent jurisdiction setting aside such consent in a legal action or equitable proceeding for such purpose commenced within such sixty-day period.
Section 8.04. Disqualified Bonds. Bonds owned or held for the account of the City, excepting any pension or retirement fund, shall not be deemed Outstanding for the purpose of any vote, consent or other action or any calculation of Outstanding Bonds provided for in this Article VIII, and shall not be entitled to vote upon, consent to, or take any other action provided for in this Article VIII. Upon request, the City shall provide an Officer’s Certificate to the Fiscal Agent listing those Bonds which are disqualified pursuant to this Section 8.04.
Section 8.05. Effect of Supplemental Agreement. From and after the time any Supplemental Agreement becomes effective pursuant to this Article VIII, this Agreement shall be deemed to be modified and amended in accordance therewith, the respective rights, duties and obligations under this Agreement of the City and all Owners of Bonds Outstanding shall thereafter be determined, exercised and enforced hereunder subject in all respects to such EXHIBIT 1 1424
43 modifications and amendments, and all the terms and conditions of any such Supplemental Agreement shall be deemed to be part of the terms and conditions of this Agreement for any and all purposes.
Section 8.06. Endorsement or Replacement of Bonds Issued After Amendments. The City may determine that Bonds issued and delivered after the effective date of any action taken as provided in this Article VIII shall bear a notation, by endorsement or otherwise, in form approved by the City, as to such action. In that case, upon demand of the Owner of any Bond Outstanding at such effective date and presentation of his Bond for that purpose at the Principal Office of the Fiscal Agent or at such other office as the City may select and designate for that purpose, a suitable notation shall be made on such Bond. The City may determine that new Bonds, so modified as in the opinion of the City is necessary to conform to such Owners’ action, shall be prepared, executed and delivered. In that case, upon demand of the Owner of any Bonds then Outstanding, such new Bonds shall be exchanged at the Principal Office of the Fiscal Agent without cost to any Owner, for Bonds then Outstanding, upon surrender of such Bonds.
Section 8.07. Amendatory Endorsement of Bonds. The provisions of this Article VIII shall not prevent any Owner from accepting any amendment as to the particular Bonds held by him, provided that due notation thereof is made on such Bonds.
Section 8.08. Opinion of Counsel Regarding Supplemental Agreement. The Fiscal Agent shall be furnished, upon request, an opinion of counsel that any Supplemental Agreement entered into by the City and the Fiscal Agent complies with the provisions of this Article VIII, is enforceable against the City, does not adversely impact the tax-exempt status of the interest on the Bonds, and the Fiscal Agent may conclusively rely upon such opinion.
EXHIBIT 1 1425
44 ARTICLE IX
MISCELLANEOUS
Section 9.01. Benefits of Agreement Limited to Parties. Nothing in this Agreement expressed or implied, is intended to give to any person other than the City, the Fiscal Agent and the Owners, any right, remedy, claim under or by reason of this Agreement. Any covenants, stipulations, promises or agreements in this Agreement contained by and on behalf of the City shall be for the sole and exclusive benefit of the Owners and the Fiscal Agent.
Section 9.02. Successor is Deemed Included in All References to Predecessor.
Whenever in this Agreement or any Supplemental Agreement either the City or the Fiscal Agent is named or referred to, such reference shall be deemed to include the successors or assigns thereof, and all the covenants and agreements in this Agreement contained by or on behalf of the City or the Fiscal Agent shall bind and inure to the benefit of the respective successors and assigns thereof whether so expressed or not.
Section 9.03. Discharge of Agreement. If the City shall pay and discharge the entire indebtedness on all or any portion of the Bonds Outstanding in any one or more of the following ways:
(A) by well and truly paying or causing to be paid the principal of, and interest and any premium on, such Bonds Outstanding, as and when the same become due and payable;
(B) by depositing with the Fiscal Agent, in trust, at or before maturity, money which, together with (in the event that all of the Bonds are to be defeased) the amounts then on deposit in the funds and accounts provided for in Sections 3.03 and 4.02, is fully sufficient to pay such Bonds Outstanding, including all principal, interest and redemption premiums; or
(C) by irrevocably depositing with the Fiscal Agent, in trust, cash and Federal Securities in such amount as the City shall determine as confirmed by an independent certified public accountant will, together with the interest to accrue thereon and (in the event that all of the Bonds are to be defeased) moneys then on deposit in the fund and accounts provided for in Sections 3.03 and 4.02, be fully sufficient to pay and discharge the indebtedness on such Bonds (including all principal, interest and redemption premium, if any) at or before their respective maturity dates; and if such Bonds are to be redeemed prior to the maturity thereof notice of such redemption shall have been given as in this Agreement provided or provision satisfactory to the Fiscal Agent shall have been made for the giving of such notice, then, at the election of the City, and notwithstanding that any Bonds shall not have been surrendered for payment, the pledge of the Net Taxes and other funds provided for in this Agreement and all other obligations of the City under this Agreement with respect to such Bonds Outstanding shall cease and terminate, except only the obligations of the City (i) under Section 5.15 (Maintenance of Tax-Exemption) and (ii) to pay or cause to be paid to the Owners of the Bonds not so surrendered and paid all sums due thereon and all amounts owing to the Fiscal Agent pursuant to Section 7.05; and thereafter Special Taxes shall not be payable to the Fiscal Agent. Notice of such election shall be filed with the Fiscal Agent.
EXHIBIT 1 1426
45 Any funds thereafter held by the Fiscal Agent upon payments of all fees and expenses of the Fiscal Agent, which are not required for said purpose, shall be paid over to the City.
Section 9.04. Execution of Documents and Proof of Ownership by Owners. Any request, declaration or other instrument which this Agreement may require or permit to be executed by Owners may be in one or more instruments of similar tenor, and shall be executed by Owners in person or by their attorneys appointed in writing.
Except as otherwise herein expressly provided, the fact and date of the execution by any Owner or his attorney of such request, consent, declaration or other instrument, or of such writing appointing such attorney, may be proved by the certificate of any notary public or other officer authorized to take acknowledgments of deeds to be recorded in the state in which he purports to act, that the person signing such request, declaration or other instrument or writing acknowledged to him the execution thereof, or by an affidavit of a witness of such execution, duly sworn to before such notary public or other officer.
Except as otherwise herein expressly provided, the ownership of registered Bonds and the amount, maturity, number and date of holding the same shall be proved by the registry books.
Any request, consent, declaration or other instrument or writing of the Owner of any Bond shall bind all future Owners of such Bond in respect of anything done or suffered to be done by the City or the Fiscal Agent in good faith and in accordance therewith.
Section 9.05. Waiver of Personal Liability. No member, officer, agent or employee of the City shall be individually or personally liable for the payment of the principal of, or interest or any premium on, the Bonds; but nothing herein contained shall relieve any such member, officer, agent or employee from the performance of any official duty provided by law.
Section 9.06. Notices to and Demands on City and Fiscal Agent. Any notice or demand which by any provision of this Agreement is required or permitted to be given or served by the Fiscal Agent to or on the City may be given or served by being deposited postage prepaid in a post office letter box, by overnight courier or by electronic means (with receipt confirmed by telephone) addressed (until another address is filed by the City with the Fiscal Agent) as follows:
City of Stockton
425 N. El Dorado Street
Stockton, California 95202
Attention: Chief Financial Officer
Tel: (209) 937-8908
Any notice or demand which by any provision of this Agreement is required or permitted to be given or served by the City to or on the Fiscal Agent may be given or served by being deposited postage prepaid in a post office letter box, by overnight courier or by electronic means (with receipt confirmed by telephone) addressed (until another address is filed by the Fiscal Agent with the City) as follows:
U.S. Bank Trust Company, National Association
633 West 5th Street, 24th Floor LM-CA-T24T
Los Angeles, California 90071
EXHIBIT 1 1427
46 Attention: Corporate Trust Department
Tel: (213) 615-6052
Section 9.07. Partial Invalidity. If any Section, paragraph, sentence, clause or phrase of this Agreement shall for any reason be held illegal or unenforceable, such holding shall not affect the validity of the remaining portions of this Agreement. The City hereby declares that it would have adopted this Agreement and each and every other Section, paragraph, sentence, clause or phrase hereof and authorized the issue of the Bonds pursuant thereto irrespective of the fact that any one or more Sections, paragraphs, sentences, clauses, or phrases of this Agreement may be held illegal, invalid or unenforceable.
Section 9.08. Unclaimed Moneys. Anything contained herein to the contrary notwithstanding, any moneys held by the Fiscal Agent in trust for the payment and discharge of the principal of, and the interest and any premium on, the Bonds which remains unclaimed for 2 years after the date when the payments of such principal, interest and premium have become payable, if such moneys was held by the Fiscal Agent at such date, shall be repaid by the Fiscal Agent to the City as its absolute property free from any trust, and the Fiscal Agent shall thereupon be released and discharged with respect thereto and the Bond Owners shall look only to the City for the payment of the principal of, and interest and any premium on, such Bonds.
Section 9.09. Applicable Law. This Agreement shall be governed by and enforced in accordance with the laws of the State of California applicable to contracts made and performed in the State of California.
Section 9.10. Conflict with Act. In the event of a conflict between any provision of this Agreement with any provision of the Act as in effect on the Closing Date, the provision of the Act shall prevail over the conflicting provision of this Agreement.
Section 9.11. Conclusive Evidence of Regularity. Bonds issued pursuant to this Agreement shall constitute conclusive evidence of the regularity of all proceedings under the Act relative to their issuance and the levy of the Special Taxes.
Section 9.12. Payment on Business Day. In any case where the date of the maturity of interest or of principal (and premium, if any) of the Bonds or the date fixed for redemption of any Bonds or the date any action is to be taken pursuant to this Agreement is other than a Business Day, the payment of interest or principal (and premium, if any) or the action need not be made on such date but may be made on the next succeeding day which is a Business Day with the same force and effect as if made on the date required and no interest shall accrue for the period from and after such date.
Section 9.13. Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed an original.
EXHIBIT 1 1428
[Signature page to Fiscal Agent Agreement dated as of September 1,, 2022] IN WITNESS WHEREOF, THE CITY OF STOCKTON, for and on behalf of its Community Facilities District No. 2019-1 (Cannery Park II), has caused this Fiscal Agent Agreement to be signed by its Chief Financial Officer, and U.S. BANK TRUST COMPANY, NATIONAL ASSOCIATION, in token of its acceptance of the duties hereunder, has caused this Fiscal Agent Agreement to be signed in its corporate name by its officers identified below, all as of the day and year first above written.
CITY OF STOCKTON, for and on behalf of
its Community Facilities District No. 2019-1
(Cannery Park II)
By:
Chief Financial Officer
U.S. BANK TRUST COMPANY, NATIONAL
ASSOCIATION, as Fiscal Agent
By:
Its: Authorized Officer
EXHIBIT 1 1429
A-1
EXHIBIT A
FORM OF BOND
UNITED STATES OF AMERICA
STATE OF CALIFORNIA
No. __________ $____________
CITY OF STOCKTON
COMMUNITY FACILITIES DISTRICT NO. 2019-1 (CANNERY PARK II) SPECIAL TAX BONDS SERIES 2022
INTEREST RATE: MATURITY DATE: BOND DATE: CUSIP:
September 1, 20__ ______, 2022
REGISTERED OWNER: CEDE & CO.
PRINCIPAL AMOUNT: DOLLARS
The City of Stockton (the “City”) for and on behalf of City of Stockton Community Facilities District No. 2019-1 (Cannery Park II), for value received, hereby promises to pay solely from the Net Taxes to be collected in the District or amounts in certain funds and accounts held under the Agreement (as hereinafter defined), to the Registered Owner named above, or registered assigns (the “Owner”), on the Maturity Date set forth above, unless redeemed prior thereto as hereinafter provided, the Principal Amount set forth above, and to pay interest on such principal amount from the Bond Date shown above, or from the most recent Interest Payment Date (as hereinafter defined) to which interest has been paid or duly provided for, semiannually on March 1 and September 1, commencing March 1, 2023 (the “Interest Payment Dates”), at the Interest Rate set forth above, until the principal amount hereof is paid or made available for payment. The principal of this Bond is payable to the Owner hereof in lawful money of the United States of America upon presentation and surrender of this Bond at the principal corporate trust office of U.S. Bank Trust Company, National Association in Los Angeles, California (the “Fiscal Agent”). Interest on this Bond shall be paid by check of the Fiscal Agent mailed by first class mail on each Interest Payment Date to the Owner hereof as of the close of business on the 15th day of the month preceding the month in which the Interest Payment Date occurs whether or not such day is a Business Day (the “Record Date”) at such Owner’s address as it appears on the registration books maintained by the Fiscal Agent, or by wire transfer made on such Interest Payment Date upon written instructions delivered to the Fiscal Agent by the applicable Record Date of any Owner of $1,000,000 or more in aggregate principal amount of Bonds.
This Bond is one of a duly authorized issue of bonds approved by resolution of the City Council of the City on ___________, 2022 pursuant to the Mello-Roos Community Facilities Act of 1982, as amended, Sections 53311, et seq., of the California Government Code (the “MelloRoos Act”) for the purpose of providing moneys for the construction and acquisition of EXHIBIT 1 1430
A-2
improvements for its Community Facilities District No. 2019-1 (Cannery Park II), and is one of the bonds designated “City of Stockton Community Facilities District No. 2019-1 (Cannery Park II) Special Tax Bonds Series 2022” (the “Bonds”). The issuance of the Bonds and the terms and conditions thereof are provided for by a Fiscal Agent Agreement, dated as of __________ 1, 2022, by and between the City and the Fiscal Agent (the “Agreement”) and this reference incorporates the Agreement herein, and by acceptance hereof the Owner of this Bond assents to said terms and conditions. The Agreement is authorized under, this Bond is issued under and both are to be construed in accordance with, the laws of the State of California.
Pursuant to the Mello-Roos Act, the Agreement and the Resolution, the principal of and interest on this Bond are payable solely from Net Taxes (as defined in the Agreement) and the amounts in certain funds held under the Agreement.
Interest on this Bond shall be payable from the Interest Payment Date next preceding the date of authentication hereof, unless (i) it is authenticated on an Interest Payment Date, in which event it shall bear interest from such Interest Payment Date, or (ii) such date of authentication is after a Record Date but on or prior to an Interest Payment Date, in which event interest will be payable from such Interest Payment Date, or (iii) such date of authentication is prior to the first Record Date, in which event interest will be payable from the Bond Date shown above; provided however, that if at the time of authentication of this Bond, interest is in default hereon, this Bond shall bear interest from the Interest Payment Date to which interest has previously been paid or made available for payment hereon.
Any tax for the payment hereof shall be limited to the Special Tax, except to the extent that provision for payment has been made by the City as may be permitted by law. The Bonds do not constitute obligations of the City for which the City is obligated to levy or pledge, or has levied or pledged, general or special taxation other than described herein above.
The Bonds are subject to optional redemption from any source of available funds other than Prepayments prior to maturity, in whole, or in part among maturities as specified by the City and by lot within a maturity, on any Interest Payment Date on or after September 1, ____, at the following respective redemption prices (expressed as percentages of the principal amount of the Bonds to be redeemed), plus accrued interest thereon to the date of redemption:
Redemption Dates Redemption Price
September 1, ____ and March 1, ____ 103%
September 1, ____ and March 1, ____ 102
September 1, ____ and March 1, ____ 101
September 1, ____ and Interest Payment Dates thereafter 100 The Bonds shall be subject to mandatory redemption from Prepayments of the Special Tax by property owners, in whole or in part among maturities as shall be specified by the City and by lot within a maturity, on any Interest Payment Date at the following respective redemption prices (expressed as percentages of the principal amount of the Bonds to be redeemed), plus accrued interest thereon to the date of redemption:
Redemption Dates Redemption Price
Interest Payment Dates through March 1, ____ 103%
September 1, ____ and March 1, ____ 102
September 1, ____ and March 1, ____ 101
September 1, ____ and Interest Payment Dates thereafter 100 EXHIBIT 1 1431
A-3
The Bonds maturing September 1, ____, September 1, ____ and September 1, ____ (the “Term Bonds”) are subject to mandatory sinking payment redemption in part on September 1, ____, September 1, ____ and September 1, ____, respectively, and on each September 1 thereafter to maturity, by lot, at a redemption price equal to 100% of the principal amount thereof to be redeemed, without premium, in the aggregate respective principal amounts as set forth in the following tables:
Term Bonds Due September 1, ______
Mandatory
Redemption Date
(September 1)
Sinking Fund
Payment
Term Bonds Due September 1, ______
Mandatory
Redemption Date
(September 1)
Sinking Fund
Payment
Term Bonds Due September 1, ______
Mandatory
Redemption Date
(September 1)
Sinking Fund
Payment
The amounts in the foregoing tables shall be reduced pro rata, in order to maintain substantially uniform debt service, as a result of any prior partial optional redemption or mandatory redemption of the Bonds.
Notice of redemption with respect to the Bonds to be redeemed shall be given to the Owners thereof, in the manner, to the extent and subject to the provisions of the Agreement.
This Bond shall be registered in the name of the Owner hereof, as to both principal and interest. Each registration and transfer of registration of this Bond shall be entered by the Fiscal Agent in books kept by it for this purpose and authenticated by its manual signature upon the certificate of authentication endorsed hereon.
EXHIBIT 1 1432
A-4
No transfer or exchange hereof shall be valid for any purpose unless made by the registered owner, by execution of the form of assignment endorsed hereon, and authenticated as herein provided, and the principal hereof, interest hereon and any redemption premium shall be payable only to the registered owner or to such Owner’s order. The Fiscal Agent shall require the Owner requesting transfer or exchange to pay any tax or other governmental charge required to be paid with respect to such transfer or exchange. No transfer or exchange hereof shall be required to be made (i) within 15 days prior to the date established by the Fiscal Agent for selection of Bonds for redemption or (ii) with respect to a Bond after such Bond has been selected for redemption.
The transferor of any Bond shall also provide or cause to be provided to the Fiscal Agent all information necessary to allow the Fiscal Agent to comply with any applicable tax reporting obligations, including without limitation any cost basis reporting obligations under Internal Revenue Code Section 6045. The Trustee may rely on the information provided to it and shall have no responsibility to verify or ensure the accuracy of such information.
The Agreement and the rights and obligations of the City thereunder may be modified or amended as set forth therein. The principal of the Bonds is not subject to acceleration upon a default under the Agreement or any other document.
This Bond shall not become valid or obligatory for any purpose until the certificate of authentication hereon endorsed shall have been dated and manually signed by the Fiscal Agent.
It is hereby certified, recited and declared that all acts, conditions and things required by law to exist, happen and be performed precedent to and in the issuance of this Bond have existed, happened and been performed in due time, form and manner as required by law, and that the amount of this Bond, together with all other indebtedness of the City, does not exceed any debt limit prescribed by the laws or Constitution of the State of California.
Unless this Bond is presented by an authorized representative of The Depository Trust Company to the Fiscal Agent for registration of transfer, exchange or payment, and any Bond issued is registered in the name of Cede & Co. or such other name as requested by an authorized representative of The Depository Trust Company and any payment is made to Cede & Co., ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL since the registered owner hereof, Cede & Co., has an interest herein.
EXHIBIT 1 1433
A-5
IN WITNESS WHEREOF, the City of Stockton has caused this Bond to be dated September 15, 2022 and to be signed by the Mayor of the City and countersigned by the City Clerk of the City.
Mayor
City Clerk
FISCAL AGENT’S CERTIFICATE OF AUTHENTICATION
This is one of the Bonds described in the Resolution and the Agreement.
Dated: _____________, 2022
U.S. BANK TRUST COMPANY, NATIONAL
ASSOCIATION, as Fiscal Agent
By:
Authorized Signatory
EXHIBIT 1 1434
A-6
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned do(es) hereby sell, assign and transfer unto (Name, address and Tax identification Number of Assignee) the within-mentioned registered Bond and hereby irrevocably constitute(s) and appoint(s) , attorney,
to transfer the same on the registration books of the Fiscal Agent with full power of substitution in the premises.
Dated: ________________
Signature Guaranteed:
NOTE: Signature(s) must be guaranteed by a
member firm of the New York Stock Exchange or a
commercial bank or trust company.
NOTE: The signature(s) on this Assignment must
correspond with the name(s) as written on the face of
the within Bond in every particular without alteration or enlargement or any change whatsoever.
EXHIBIT 1 1435
B-1
EXHIBIT B
City of Stockton
Community Facilities District No. 2019-1 (Cannery Park II) Special Tax Bonds Series 2022
OFFICER’S CERTIFICATE REQUESTING DISBURSEMENT
FROM IMPROVEMENT FUND
REQUISITION NO. _____
The undersigned hereby states and certifies that:
(i) I am an “Authorized Officer,” as such term is defined in that certain Fiscal Agent Agreement, dated as of _____________ 1, 2022 (the “Fiscal Agent Agreement”), by and between the City and U.S. Bank Trust Company, National Association, as fiscal agent (the “Fiscal Agent”) and as such, am familiar with the facts herein certified and am authorized to certify the same;
(ii) under Section 3.04(B) of the Fiscal Agent Agreement, the undersigned hereby requests and authorizes the Fiscal Agent to disburse from the Improvement Fund established under the Fiscal Agent Agreement to each payee designated on Schedule A attached hereto and by this reference incorporated herein, the amount set forth opposite such payee, for payment or reimbursement of previous payment of a cost of the Project (as that term is defined in the Fiscal Agent Agreement) as described on attached Schedule A;
(iii) no portion of the amount herein requested to be disbursed was set forth in any Officer’s Certificate previously filed requesting disbursement; (iv) there has not been filed with or served upon the City a stop notice or any other notice of any lien, right to lien or attachment upon, or claim affecting the right to receive payment of, any of the money payable to the person named in this Officer’s Cetificate, which has not been released or will not be released with the payment of such obligation, other than materialmen's or mechanics' liens accruing by mere operation of laws; and
(v) in the case of each payment made under any contract for installation or construction, insofar as such obligation was incurred for work, materials, equipment or supplies, such work was actually performed or such materials, equipment or supplies were actually installed in furtherance of the Project or delivered at the site for that purpose or delivered for storage or fabrication at a place or places approved by the City.
Dated: _______________ CITY OF STOCKTON
______________________________________
By: Authorized Officer
EXHIBIT 1 1436
B-2
SCHEDULE A
Payee Name and Address Purpose of Obligation Amount
EXHIBIT 1 1437
PRELIMINARY OFFICIAL STATEMENT DATED JULY ___, 2022
NEW ISSUE–FULL BOOK-ENTRY NOT RATED
In the opinion of Jones Hall, A Professional Law Corporation, San Francisco, California, Bond Counsel, subject, however to certain qualifications described herein, under existing law, the interest on the Bonds is excluded from gross income for federal income tax purposes and such interest is not an item of tax preference for purposes of the federal alternative minimum tax. In the further opinion of Bond Counsel, such interest is exempt from California personal income taxes. See “TAX MATTERS.” $____________*
CITY OF STOCKTON
COMMUNITY FACILITIES DISTRICT NO. 2019-1 (CANNERY PARK II)
SPECIAL TAX BONDS
SERIES 2022
Dated: Date of Delivery Due: September 1, as shown on inside cover The City of Stockton (the “City”) is issuing the above-captioned bonds (the “Bonds”) for its Community Facilities District No. 2019-1 (Cannery Park II) (the “District”) under the Mello-Roos Community Facilities Act of 1982 (the “Act”), the Resolution of Issuance (as defined herein), and a Fiscal Agent Agreement, dated as of August 1, 2022 (the “Fiscal Agent Agreement”), by and between the City and U.S. Bank Trust Company, National Association, as fiscal agent (the “Fiscal Agent”). See “THE BONDS – Authority for Issuance.” The Bonds are being issued to (i) construct and/or acquire certain public facilities authorized for the District, (ii) establish a debt service reserve fund for the Bonds, (iii) pay the costs of issuing the Bonds and (iv) pay a portion of the interest on the Bonds through September 1, 2023. See “FINANCING PLAN.”
The Bonds are payable from the Net Taxes (as defined herein) received by the City from special taxes levied on property within the District according to the rate and method of apportionment of special tax for the District. The Bonds are secured by a first pledge of the Net Taxes and the moneys on deposit in certain funds held by the Fiscal Agent under the Fiscal Agent Agreement. The Bonds represent the first series of special tax bonds issued for the District and additional series of parity bonds are anticipated in the future. See “SECURITY FOR THE BONDS.”
Interest on the Bonds is payable on March 1, 2023, and semiannually thereafter on each September 1 and March 1. The Bonds will be issued in denominations of $5,000 or integral multiples of $5,000. The Bonds, when delivered, will be initially registered in the name of Cede & Co., as nominee of The Depository Trust Company (“DTC”). DTC will act as securities depository for the Bonds. See “THE BONDS – Description of the Bonds” and “APPENDIX G – DTC and the Book-Entry Only System.” The Bonds are subject to optional redemption, mandatory sinking fund redemption and special mandatory redemption from prepaid special taxes. See “THE BONDS – Redemption.”
The Bonds, the interest thereon, and any premiums payable on the redemption of any Bonds, are not an indebtedness of the City (except to the limited extent described in this Official Statement), the State of California (the “State”) or any of their respective political subdivisions. None of the City (except to the limited extent described in this Official Statement), the State or any of its political subdivisions is liable for the Bonds. Neither the faith and credit nor the taxing power of the City (except to the limited extent described in this Official Statement) or the State or any of their respective political subdivisions is pledged to the payment of the Bonds. Other than the Net Taxes, no taxes are pledged to the payment of the Bonds. The Bonds do not constitute a general obligation of the City, but are limited obligations of the City payable solely from the Net Taxes as more fully described in this Official Statement.
MATURITY SCHEDULE
(see inside cover)
This cover page contains certain information for quick reference only. It is not a summary of essential information about the Bonds. Potential investors should read this entire Official Statement to obtain information essential for making an informed investment decision. Investment in the Bonds involves risks that may not be appropriate for some investors. See “SPECIAL RISK FACTORS” for a discussion of special risk factors that should be considered in evaluating the investment quality of the Bonds.
The Bonds are offered when, as and if issued by the City and accepted by the Underwriter, subject to approval as to their legality by Jones Hall, A Professional Law Corporation, San Francisco, California, Bond Counsel, and subject to certain other conditions. Jones Hall, A Professional Law Corporation, is also serving as disclosure counsel to the City. Certain matters will be passed upon for the City by the City Attorney, and for the Underwriter by Kutak Rock LLP. It is anticipated that the Bonds, in book-entry form, will be available for delivery through the facilities of DTC on or about ______________, 2022. [RBC logo]
The date of this Official Statement is: ________________, 2022. ___________________________
*Preliminary; subject to change.
This Preliminary Official Statement and the information contained herein are subject to completion or amendment. Under no circumstances shall this Preliminary Official Statement constitute an offer to sell or a solicitation of an offer to buy nor shall there be any sale of these securities in any jurisdiction in which such offer solicitation or sale would be unlawful prior to registration or qualification under the securities laws of such jurisdiction.
Exhibit 2 1438
MATURITY SCHEDULE
$ _______________ Serial Bonds
(Base CUSIP†: __________)
Maturity Principal Interest
(September 1) Amount Rate Yield Price CUSIP†
$ ___ __% Term Bond due September 1, 20___, Yield: __%, Price: __%, CUSIP† No. _______ $ ___ __% Term Bond due September 1, 20___, Yield: __%, Price: __%, CUSIP† No. _______
† CUSIP Copyright 2022, American Bankers Association. CUSIP data herein are provided by CUSIP Global Services, managed by Standard & Poor’s Capital IQ, and are provided for convenience of reference only. Neither the City nor the Underwriter assumes any responsibility for the accuracy of these CUSIP data. Neither the City nor the Underwriter takes any responsibility for the accuracy of the CUSIP data.
Exhibit 2 1439
CITY OF STOCKTON, CALIFORNIA
City Council
Kevin J. Lincoln II, Mayor
Christina Fugazi, Vice Mayor and Councilmember, District 5 Sol Jobrack, Councilmember, District 1
Dan Wright, Vice Mayor and Councilmember, District 2
Paul Canepa, Councilmember, District 3
Susan Lenz, Councilmember, District 4
Kimberly Warmsley, Councilmember, District 6
City Staff
Harry E. Black, City Manager
Kimberly Trammel, Chief Financial Officer
Jayden Sangha, Assistant Chief Financial Officer
Kevin Beltz, Program Manager III Debt and Treasury
Eliza Garza, City Clerk
Lori M. Asuncion, Acting City Attorney
____________________________
SPECIAL SERVICES
Municipal Advisor
Del Rio Advisors, LLC
Modesto, California
Bond Counsel and Disclosure Counsel
Jones Hall, A Professional Law Corporation
San Francisco, California
Special Tax Consultant
Willdan Financial Services
Temecula, California
Appraiser
Integra Realty Resources – Sacramento
Sacramento, California
Absorption Consultant
The Gregory Group
Folsom, California
Fiscal Agent
U.S. Bank Trust Company, National Association
Los Angeles, California
Exhibit 2 1440
i
TABLE OF CONTENTS
Page Page
INTRODUCTION ............................................... 1
ESTIMATED SOURCES AND USES OF
FUNDS........................................................... 5 THE BONDS...................................................... 6 Authority for Issuance .................................... 6 Description of the Bonds ................................ 6 Redemption*.................................................. 7 Transfer or Exchange of Bonds ..................... 9
SECURITY FOR THE BONDS........................10
Pledge of Special Taxes ..............................10 Special Taxes ..............................................10 Special Tax Methodology.............................11
Annual Special Tax; Maximum Special
Tax...........................................................12 Levy and Collection of Special Taxes ..........13
Special Tax Fund.........................................13 Reserve Fund ..............................................14 Delinquent Payments; Teeter Plan;
Covenant for Superior Court
Foreclosure..............................................16 Additional Bonds ..........................................18 DEBT SERVICE SCHEDULE..........................21
THE DISTRICT ................................................23 Formation of the District...............................23 Location and Description of the District
and the Immediate Area ..........................23
Environmental Matters ................................. 25 Development Agreement and
Subdivision Agreement............................25
Current and Anticipated Development in
the District................................................25 The Improvements .......................................26 Master Developer’s Financing Plan .............27
Market Absorption Report ............................28
OWNERSHIP OF PROPERTY WITHIN THE
DISTRICT ....................................................30 Top Taxpayers .............................................30 The Master Developer ................................. 32 KB Home......................................................32 LGI Homes...................................................33
VALUE OF PROPERTY WITHIN THE
DISTRICT AND SPECIAL TAX BURDEN ...35
Assessed Valuation......................................35 The Appraisal ...............................................36 Value to Special Tax Burden Ratios ............38
Overlapping Liens and Priority of Lien .........41
Special Tax Collection and Delinquency
Rate..........................................................42 Sample Tax Bill ............................................43 SPECIAL RISK FACTORS ..............................44
Limited Obligation of the City to Pay
Debt Service.............................................44 Levy and Collection of the Special Tax ........44
Concentration of Ownership.........................45
Appraised Values .........................................45 Property Values and Property
Development............................................46 Other Possible Claims Upon the Value
of Taxable Property..................................48 Bankruptcy and Foreclosure Delays ............49
FDIC/Federal Government Interests in
Properties.................................................50 No Acceleration Provisions ..........................51 Loss of Tax Exemption................................. 51 IRS Audit of Tax-Exempt Bond Issues.........51
Voter Initiatives.............................................51 Case Law Related to the Mello-Roos
Act............................................................52 COVID-19.....................................................53 Cybersecurity ...............................................53 TAX MATTERS................................................53 LEGAL MATTERS ...........................................55 Legal Opinion ...............................................55 No Litigation .................................................55 CONTINUING DISCLOSURE..........................56
The City........................................................56 KB Home......................................................56 LGI Homes ...................................................57 NO RATINGS...................................................57 UNDERWRITING.............................................57 MUNICIPAL ADVISOR ....................................58 EXECUTION ....................................................59 APPENDIX A – Rate and Method of Apportionment of Special Tax APPENDIX B – The Appraisal
APPENDIX C – The Absorption Report
APPENDIX D – San Joaquin County and City of Stockton Demographic Information APPENDIX E – Form of Opinion of Bond Counsel
APPENDIX F – Forms of Continuing Disclosure Undertakings APPENDIX G – DTC and the Book-Entry Only System
APPENDIX H – Summary of Certain Provisions of the Fiscal Agent Agreement Exhibit 2 1441
GENERAL INFORMATION ABOUT THIS OFFICIAL STATEMENT
Use of Official Statement. This Official Statement is submitted in connection with the sale of the Bonds referred to herein and may not be reproduced or used, in whole or in part, for any other purpose. This Official Statement is not to be construed as a contract with the purchasers of the Bonds. Statements contained in this Official Statement which involve estimates, forecasts or matters of opinion, whether or not expressly so described herein, are intended solely as such and are not to be construed as a representation of facts.
Estimates and Forecasts. When used in this Official Statement and in any continuing disclosure by the District or the City, in any press release and in any oral statement made with the approval of an authorized officer of the District or the City, the words or phrases “will likely result,” “are expected to,” “will continue,” “is anticipated,” “estimate,” “project,” “forecast,” “expect,” “intend” and similar expressions may identify “forward looking statements.” 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. The information and expressions of opinion herein are subject to change without notice, and neither the delivery of this Official Statement nor any sale made hereunder shall, under any circumstances, give rise to any implication that there has been no change in the affairs of the District or the City since the date hereof.
Limit of Offering. No dealer, broker, salesperson or other person has been authorized by the City or the Underwriter to give any information or to make any representations other than those contained herein and, if given or made, such other information or representation must not be relied upon as having been authorized by any of the foregoing. This Official Statement does not constitute an offer to sell or the solicitation of an offer to buy nor shall there be any sale of the Bonds by a person in any jurisdiction in which it is unlawful for such person to make such an offer, solicitation or sale.
Involvement of Underwriter. The Underwriter has reviewed the information in this Official Statement in accordance with, and as a part of, its responsibilities to investors under the federal securities laws as applied to the facts and circumstances of this transaction, but the Underwriter does not guarantee the accuracy or completeness of such information. The information and expressions of opinions herein are subject to change without notice and neither delivery of this Official Statement nor any sale made hereunder shall, under any circumstances, create any implication that there has been no change in the affairs of the City or the District since the date hereof. All summaries of the Fiscal Agent Agreement or other documents referred to in this Official Statement, are made subject to the provisions of such documents, respectively, and do not purport to be complete statements of any or all of such provisions.
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITER MAY OVERALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE BONDS OFFERED HEREBY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET.
SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME. THE UNDERWRITER
MAY OFFER AND SELL THE BONDS TO CERTAIN DEALERS, INSTITUTIONAL INVESTORS AND
OTHERS AT PRICES LOWER THAN THE PUBLIC OFFERING PRICE STATED ON THE COVER PAGE
HEREOF AND SAID PUBLIC OFFERING PRICE MAY BE CHANGED FROM TIME TO TIME BY THE UNDERWRITER.
THE BONDS HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, IN RELIANCE UPON AN EXCEPTION FROM THE REGISTRATION REQUIREMENTS CONTAINED IN SUCH ACT. THE BONDS HAVE NOT BEEN REGISTERED OR QUALIFIED UNDER THE SECURITIES LAWS OF ANY STATE.
The City maintains an Internet website, but the information on that website is not incorporated in this Official Statement.
Exhibit 2 1442
1 _________________________
OFFICIAL STATEMENT
_________________________
$____________*
CITY OF STOCKTON
COMMUNITY FACILITIES DISTRICT NO. 2019-1 (CANNERY PARK II)
SPECIAL TAX BONDS
SERIES 2022
This Official Statement, including the cover page, inside cover and attached appendices, is provided to furnish information regarding the bonds captioned above (the “Bonds”) to be issued by the City of Stockton (the “City”) on behalf of the City of Stockton Community Facilities District No. 2019-1 (Cannery Park II) (the “District”).
Any statements made in this Official Statement involving matters of opinion or of estimates, whether or not so expressly stated, are set forth as such and not as representations of fact, and no representation is made that any of the estimates will be realized. Definitions of certain terms used herein and not defined herein have the meaning set forth in the Fiscal Agent Agreement. See “APPENDIX H – Summary of Certain Provisions of the Fiscal Agent Agreement.”
INTRODUCTION
This introduction is not a summary of the entire Official Statement. It is only a brief description of and guide to, and is qualified by, more complete and detailed information contained throughout the Official Statement, including the cover page, inside cover and attached appendices, and documents summarized or described in this Official Statement. A full review should be made of the entire Official Statement. The offering of the Bonds to potential investors is made only by means of the entire Official Statement.
Authority for Issuance. The Bonds are issued pursuant to the provisions of the MelloRoos Community Facilities Act of 1982, as amended (Sections 53311, et seq., of the Government Code of the State of California) (the “Act”) and pursuant to a Fiscal Agent Agreement dated as of August 1, 2022 (the “Fiscal Agent Agreement”) between the City and U.S. Bank Trust Company, National Association, as fiscal agent (the “Fiscal Agent”), and a resolution (the “Resolution of Issuance”) adopted on [July 12], 2022 by the City Council of the City (the “City Council”), as legislative body of the District. See “THE BONDS – Authority for Issuance.”
The City and the County. The City whose boundaries encompass approximately 64.8 square miles, is located in the center of San Joaquin County (the “County”) in California’s San Joaquin Valley, 78 miles east of the San Francisco Bay area, 345 miles north of Los Angeles and 45 miles south of Sacramento. The Stockton Metropolitan Statistical Area, which encompasses the entire County, covers approximately 1,400 square miles. The City is a municipal corporation and a charter city, duly organized and existing under the constitution and * Preliminary; subject to change.
Exhibit 2 1443
2 laws of the State. For economic and demographic information regarding the area in and around the City, see “APPENDIX D – San Joaquin County and City of Stockton Demographic Information.”
Description of the Bonds. The Bonds will be issued in denominations of $5,000 or any integral multiple of $5,000. Interest is payable semiannually on each March 1 and September 1, commencing March 1, 2023. The Bonds will be initially issued only in book-entry form and registered to Cede & Co. as nominee of The Depository Trust Company (“DTC”), which will act as securities depository of the Bonds. Principal and interest (and premium, if any) on the Bonds is payable by the Fiscal Agent to DTC, which remits such payments to its Participants for subsequent distribution to the registered owners as shown on the Fiscal Agent’s books. See “THE BONDS.”
Use of Proceeds. Proceeds of the Bonds will primarily be used to finance a portion of the costs of acquiring and constructing certain public infrastructure improvements authorized to be financed by the District (the “Improvements,” as described herein). The Improvements consist generally of roadway, water, drainage, wastewater, and other infrastructure improvements necessary for completion of development of property within the District. The cost of a portion of the Improvements will be reimbursed by the proceeds of the Bonds and may also be reimbursed using pay-as-you go financing from the Special Tax. See “THE IMPROVEMENTS.” Proceeds of the Bonds will also be used to establish a reserve fund (described below) available for payment on the Bonds and to provide initial administration costs and to pay the costs of the issuance of the Bonds.
The District and Current Property Ownership. Land in the District is located south of Eight Mile Road, west of Highway 99 and east of the Union Pacific Railroad tracks in the City.
Taxable property in the consists primarily of land developing into 721 single-family residential units. Eight Mile Road Investors, LLC and Holman Investors LLC (together, the “Master Developer”) is the master developer for the project and has been building necessary infrastructure to sell the 721 currently planned single-family residential lots to merchant homebuilders. Taxable land in the District also includes a multifamily residential site planned for 210 multi-family residential units and 4 parcels currently zoned for non-residential uses, 3 of which the Master Developer desires to rezone to residential uses in the future as described herein; however, no assurance can be given such rezone will take place or the timing related thereto.
The Master Developer has sold 515 of the 721 currently planned residential lots to two merchant homebuilders: KB Home North Bay, LLC, a California limited liability company (“KB Home”), is building out Village A, B and C (128 total lots), and LGI Homes – California, LLC, a California limited liability company (“LGI Homes”), is building out Villages E1, E2, F1 and F2 (387 total lots). The remaining 206 planned residential lots are owned by the Master Developer.
Homebuilding activity is underway by KB Home and LGI Homes. As of June 15, 2022, LGI had sold and delivered 26 homes to individual homeowners.
See “THE DISTRICT” and “OWNERSHIP OF PROPERTY WITHIN THE DISTRICT” for additional details on ongoing development in the District.
Security and Sources of Payment for the Bonds. The City Council annually levies special taxes on the property in the District (the “Special Taxes”) in accordance with the Rate, Method of Apportionment and Manner of Collection of Special Tax for City of Stockton Community Facilities District No. 2019-1 (Cannery Park II) (the “Special Tax Formula”), which Exhibit 2 1444
3 is attached as APPENDIX A to this Official Statement. The Bonds are secured by and payable from a first pledge of the “Net Taxes,” which are comprised of Gross Taxes less Administrative Expenses. “Gross Taxes” is defined in the Fiscal Agent Agreement as the proceeds of the “Special Tax A” levied for facilities pursuant to the Special Tax Formula and received by the City, including any scheduled payments and any prepayments thereof and interest thereon, and proceeds of the redemption or sale of property sold as a result of foreclosure of the lien of the Special Taxes to the amount of said lien and interest thereon. “Gross Taxes” does not include any penalties collected in connection with delinquent Special Taxes or any interest in excess of the interest due on the Bonds. The Bonds are also secured by certain funds and accounts established and held under the Fiscal Agent Agreement. In particular, a debt service reserve fund (the “Reserve Fund”), and within the Reserve Fund, the “2022 Reserve Account,” established in connection with the issuance of the Bonds in an amount equal to the Reserve Requirement (as defined herein) for the Bonds as of their date of delivery. See “SECURITY FOR THE BONDS.”
Pursuant to the Act, the Resolution of Issuance, and the Fiscal Agent Agreement, so long as any Bonds are outstanding, the City will annually levy the Special Tax against all land within the District taxable under the Act in accordance with the Special Tax Formula and to make provision for the collection of the Special Tax in amounts which will be sufficient to pay interest on, principal of and redemption premium (if any) on the Bonds as such becomes due and payable and to replenish the Reserve Fund as necessary. See “SECURITY FOR THE BONDS – Special Tax Methodology” and “APPENDIX A – Rate and Method of Apportionment of Special Tax.”
Unpaid Special Taxes do not constitute a personal indebtedness of the owners of any of the parcels within the District. In the event of delinquency, proceedings may be conducted only against the real property on which the Special Tax is delinquent. The unpaid Special Taxes are not required to be paid upon sale of property within the District.
Covenant to Foreclose. The City has covenanted in the Fiscal Agent Agreement to cause foreclosure proceedings to be commenced and prosecuted against certain parcels with delinquent installments of the Special Taxes. For a more detailed description of the foreclosure covenant, see “SECURITY FOR THE BONDS – Delinquent Payments; Covenant for Superior Court Foreclosure.”
Additional Bonds. The maximum bond authorization for the District is $25,000,000.
The Bonds represent the first series of bonds issued under the authorization and additional series of parity bonds are anticipated as development progresses. See “SECURITY FOR THE BONDS – Additional Bonds.”
Value Estimate of Property in the District. Taxable real property within the District is security for the Special Tax securing the Bonds and is comprised of both developed and undeveloped property. To obtain an estimate of the value of the 515 single-family homes being developed by KB Home and LGI Homes in the District, the City ordered an appraisal (the “Appraisal”), with a date of value of May 4, 2022, prepared by Integra Realty Resources, Sacramento, California (the “Appraiser”). The Appraisal is described herein under the caption “VALUE OF PROPERTY WITHIN THE DISTRICT AND SPECIAL TAX BURDEN – The Appraisal” and attached hereto in its entirety as APPENDIX B. As described further herein, the appraised value of the 515 single-family homes being developed by KB Home and LGI Homes is not less than $90,172,000. The Appraiser also noted that the 4 non-residential sites and 1 multi-family residential site that are subject to the Special Tax had an assessed value of Exhibit 2 1445
4 $4,965,466, for a total estimated value of taxable property in the District of not less than $95,137,466.
Based upon the $95,137,466 estimated total valuation of taxable property in the District and an estimated principal amount of Bonds of $9,410,000*, as well as overlapping landsecured debt attributable to those parcels of $375,452, for a total direct and overlapping debt amount of $9,785,452*, the value-to-lien ratio for such property is approximately 9.72* to 1; provided, however, that the value-to-lien ratio of individual parcels may vary significantly. See “VALUE OF PROPERTY WITHIN THE DISTRICT AND SPECIAL TAX BURDEN – Value to Special Tax Burden Ratios.”
Market Absorption Report. In connection with the issuance of the Bonds, the City hired The Gregory Group, Folsom, California (the “Absorption Consultant”) to perform market absorption study services related to the 515 single-family homes being developed by KB Home and LGI Homes. The Absorption Consultant’s report (the “Absorption Report”) describes the planned development based on information available as of May 2022, and is attached hereto as APPENDIX C. The Absorption Consultant estimates that the 515 single-family residential homes being developed by KB Home and LGI Homes will be absorbed by the end of 2027, in accordance with the absorption schedule set forth in the Absorption Report and summarized herein. See “THE DISTRICT – Market Absorption Report” and APPENDIX C.
Redemption of Bonds Before Maturity. The Bonds are subject to optional redemption, mandatory sinking fund redemption and special mandatory redemption from prepaid Special Taxes. See “THE BONDS – Redemption.”
Risk Factors Associated with Purchasing the Bonds. Investment in the Bonds involves risks that may not be appropriate for some investors. See “SPECIAL RISK FACTORS” for a discussion of certain risk factors which should be considered, in addition to the other matters set forth in this Official Statement, in considering the investment quality of the Bonds. In particular, no assurance can be given that the timing of construction of homes and/or sale of homes projected by KB Home and LGI Homes in this Official Statement will be accomplished. Neither the City nor the Underwriter can predict the impact of COVID-19 on home production and home sales activities or the willingness of current owners of land in the District or any subsequent owner, to pay the Special Taxes securing the Bonds. See “SPECIAL RISK FACTORS – COVID-19.”
Limited Obligation of the City. The Bonds, the interest thereon, and any premiums payable on the redemption of any Bonds, are not an indebtedness of the City (except to the limited extent described in this Official Statement), the State of California (the “State”) or any of their respective political subdivisions. None of the City (except to the limited extent described in this Official Statement), the State or any of its political subdivisions is liable for the Bonds. Neither the faith and credit nor the taxing power of the City (except to the limited extent described in this Official Statement) or the State or any of their respective political subdivisions is pledged to the payment of the Bonds.
Other than the Net Taxes, no taxes are pledged to the payment of the Bonds. The Bonds do not constitute a general obligation of the City, but are limited obligations of the City payable solely from the Net Taxes as more fully described in this Official Statement. * Preliminary; subject to change.
Exhibit 2 1446
5 Summary of Information. Brief descriptions of certain provisions of the Fiscal Agent Agreement and certain other documents are included herein. The descriptions and summaries of documents herein do not purport to be comprehensive or definitive, and reference is made to each such document for the complete details of all its respective terms and conditions, copies of which are available for inspection at the office of the City. All statements herein with respect to certain rights and remedies are qualified by reference to laws and principles of equity relating to or affecting creditors’ rights generally. Capitalized terms used in this Official Statement and not otherwise defined herein have the meanings ascribed to such terms in the Fiscal Agent Agreement. See “APPENDIX H – Summary of Certain Provisions of the Fiscal Agent Agreement.” The information and expressions of opinion herein speak only as of the date of this Official Statement and are subject to change without notice. Neither delivery of this Official Statement, any sale made hereunder, nor any future use of this Official Statement shall, under any circumstances, create any implication that there has been no change in the affairs of the City or the District since the date hereof.
ESTIMATED SOURCES AND USES OF FUNDS
A summary of the estimated sources and uses of funds associated with the sale of the Bonds follows.
Sources
Principal Amount of Bonds $
Plus/Less: [Net] Original Issue Premium/Discount
Total Sources $
Uses
Improvement Fund $
Capitalized Interest (1)
Deposit to 2022 Reserve Account of Reserve Fund (2)
Costs of Issuance (3)
Total Uses $
(1) Used to pay interest on a portion of the Bonds through September 1, 2023. (2) Equal to the Reserve Requirement with respect to the Bonds as of their date of delivery. (3) Includes, among other things, the fees and expenses of Bond Counsel and Disclosure Counsel, the Fiscal Agent, the Municipal Advisor, the Appraiser, the Absorption Consultant, and the Special Tax Administrator, Underwriter’s discount, as well as the cost of printing the preliminary and final Official Statements.
Exhibit 2 1447
6 THE BONDS
This section generally describes certain of the terms of the Bonds contained in the Fiscal Agent Agreement. See “APPENDIX H – Summary of Certain Provisions of the Fiscal Agent Agreement.”
Authority for Issuance
The Bonds are issued pursuant to the Fiscal Agent Agreement, the Resolution of Issuance, and the Act. On May 21, 2019, the City Council adopted Resolution No. 1503-01 (the “Resolution of Formation”), which formed the District. The District was established and authorized to incur bonded indebtedness in an aggregate principal amount not to exceed $25,000,000 at a special election in the District held on the same day. The Bonds are the first series to be issued under the authorization and additional series of parity bonds are expected to be issued in the future, as development progresses.
Description of the Bonds
The Bonds are being issued as fully registered bonds, registered in the name of Cede & Co. as nominee of The Depository Trust Company (“DTC”), and will be available to ultimate purchasers in the denomination of $5,000 or any integral multiple thereof, under the book-entry system maintained by DTC. Ultimate purchasers of Bonds will not receive physical certificates representing their interest in the Bonds. So long as the Bonds are registered in the name of Cede & Co., as nominee of DTC, references herein to the Owners will mean Cede & Co., and will not mean the ultimate purchasers of the Bonds.
Payments of the principal, premium, if any, and interest on the Bonds will be made directly to DTC, or its nominee, Cede & Co., so long as DTC or Cede & Co. is the registered owner of the Bonds. Disbursements of such payments to DTC’s participants is the responsibility of DTC, and disbursements of such payments to the Beneficial Owners is the responsibility of DTC’s participants and indirect participants, as more fully described in “APPENDIX G – DTC and the Book-Entry Only System.”
The Bonds will be dated as of, and bear interest from, the date of their delivery at the rates contained, and mature in the amounts and years shown on the inside cover page of this Official Statement.
The principal of, and any redemption premium due with respect to, the Bonds will be payable in lawful money of the United States of America at the principal corporate trust office of the Fiscal Agent in Los Angeles, California, or such other place as designated by the Fiscal Agent, upon presentation and surrender of the Bonds. Interest on the Bonds, computed on the basis of a 360-day year consisting of twelve 30-day months, will be paid in lawful money of the United States of America semiannually on March 1 and September 1 of each year (each an “Interest Payment Date”), commencing March 1, 2023.
Interest on the Bonds (including the final interest payment upon maturity or earlier redemption) is payable by check of the Fiscal Agent mailed on each Interest Payment Date by first class mail to the registered Owner thereof at such registered Owner’s address as it appears on the registration books maintained by the Fiscal Agent at the close of business on the 15th day of the calendar month preceding the Interest Payment Date (the “Record Date”), or by wire transfer made on such Interest Payment Date upon written instructions received by the Fiscal Exhibit 2 1448
7 Agent on or before the Record Date preceding the Interest Payment Date, of any Owner of $1,000,000 or more in aggregate principal amount of Bonds; provided that so long as any Bonds are in book-entry form, payments with respect to such Bonds will be made by wire transfer, or such other method acceptable by the Fiscal Agent, to DTC. See “APPENDIX G – DTC and the Book-Entry Only System.”
Each Bond will bear interest from the Interest Payment Date next preceding the date of authentication thereof unless (i) it is authenticated on an Interest Payment Date, in which event it will bear interest from such date of authentication, or (ii) it is authenticated prior to an Interest Payment Date and after the close of business on the Record Date preceding such Interest Payment Date, in which event it will bear interest from such Interest Payment Date, or (iii) it is authenticated prior to the Record Date preceding the first Interest Payment Date, in which event it will bear interest from the dated date; provided, however, that if at the time of authentication of a Bond, interest is in default thereon, such Bond will bear interest from the Interest Payment Date to which interest has previously been paid or made available for payment thereon.
So long as the Bonds are registered in the name of Cede & Co., as nominee of DTC, payments of the principal, premium, if any, and interest on the Bonds will be made directly to DTC, or its nominee, Cede & Co. Disbursements of such payments to DTC’s participants is the responsibility of DTC and disbursements of such payments to the Beneficial Owners is the responsibility of DTC’s direct participants and indirect participants, as more fully described herein. See “APPENDIX G – DTC and the Book-Entry Only System.” Redemption*
Optional Redemption. The Bonds are subject to optional redemption from any source of available funds prior to maturity, in whole, or in part among maturities as specified by the City and by lot within a maturity, on any date on or after September 1, ______, at the following respective redemption prices (expressed as percentages of the principal amount of the Bonds to be redeemed), plus accrued interest thereon to the date of redemption:
Redemption Dates Redemption Price
September 1, _____ through August 31, _____
September 1, _____ through August 31, _____
September 1, _____ through August 31, _____
September 1, _____ and thereafter
Mandatory Redemption from Prepayments. The Bonds are subject to mandatory redemption from Prepayments of the Special Tax by property owners, in whole or in part among maturities as specified by the City and by lot within a maturity, on any Interest Payment Date at the following respective redemption prices (expressed as percentages of the principal amount of the Bonds to be redeemed), plus accrued interest thereon to the date of redemption:
Redemption Dates Redemption Price
Interest Payment Dates through March 1, _____
September 1, _____ and March 1, _____
September 1, _____ and March 1, _____
September 1, _____ and Interest Payment Dates thereafter * Preliminary; subject to change.
Exhibit 2 1449
8 Mandatory Sinking Fund Redemption. The Bonds maturing September 1, ____ and September 1, ____ (the “Term Bonds”) are subject to mandatory sinking payment redemption in part on September 1, ____ and September 1, ____, respectively, and on each September 1 thereafter to maturity, by lot, at a redemption price equal to 100% of the principal amount thereof to be redeemed, without premium, in the aggregate respective principal amounts as set forth in the following tables:
Term Bonds Due September 1, ____
Mandatory
Redemption Date
(September 1)
Sinking Fund
Payment
Term Bonds Due September 1, ____
Mandatory
Redemption Date
(September 1)
Sinking Fund
Payment
The amounts in the foregoing tables will be reduced pro rata, in order to maintain substantially uniform debt service, as a result of any prior partial optional redemption or mandatory redemption of the Term Bonds.
Purchase In Lieu of Redemption. In lieu of redemption, moneys in the Redemption Account may be used and withdrawn by the Fiscal Agent for purchase of outstanding Bonds, upon the filing with the Fiscal Agent of an Officer’s Certificate requesting such purchase, at public or private sale as and when, and at such prices (including brokerage and other charges) as such Officer’s Certificate may provide, but in no event may Bonds be purchased at a price in excess of the principal amount thereof, plus interest accrued to the date of purchase.
Redemption Procedure by Fiscal Agent. The Fiscal Agent will cause notice of any redemption to be mailed by first class mail, postage prepaid, at least 20 days but not more than 60 days prior to the date fixed for redemption, to the Securities Depositories and to one or more Information Services, and to the respective registered Owners of any Bonds designated for redemption, at their addresses appearing on the Bond registration books in the principal office of the Fiscal Agent; but such mailing is not a condition precedent to such redemption and failure to mail or to receive any such notice, or any defect therein, will not affect the validity of the proceedings for the redemption of such Bonds.
Such notice will state the redemption date and the redemption price and, if less than all of the then outstanding Bonds are to be called for redemption, will designate the CUSIP numbers and Bond numbers of the Bonds to be redeemed by giving the individual CUSIP number and Bond number of each Bond to be redeemed or will state that all Bonds between two stated Bond numbers, both inclusive, are to be redeemed or that all of the Bonds of one or more maturities have been called for redemption, will state as to any Bond called in part the Exhibit 2 1450
9 principal amount thereof to be redeemed, and will require that such Bonds be then surrendered at the principal office of the Fiscal Agent for redemption at the said redemption price, and will state that further interest on such Bonds will not accrue from and after the redemption date.
Whenever provision is made in the Fiscal Agent Agreement for the redemption of less than all of the Bonds of any maturity, the Fiscal Agent will select the Bonds to be redeemed, from all Bonds or such given portion thereof of such maturity by lot in any manner which the Fiscal Agent in its sole discretion deems appropriate. Upon surrender of Bonds redeemed in part only, the City will execute and the Fiscal Agent will authenticate and deliver to the registered Owner, at the expense of the City, a new Bond or Bonds, of the same series and maturity, of authorized denominations in aggregate principal amount equal to the unredeemed portion of the Bond or Bonds.
City’s Right to Rescind. The City has the right to rescind any notice of the optional redemption of Bonds and such notice may be cancelled and annulled if for any reason funds will not be or are not available on the date fixed for redemption for the payment in full of the Bonds then called for redemption. Neither the City nor the Fiscal Agent will have any liability to the Owners of the Bonds or any other party related to any such rescission of redemption.
Effect of Redemption. From and after the date fixed for redemption, if funds available for the payment of the principal of, and interest and any premium on, the Bonds so called for redemption are deposited in the Redemption Account, such Bonds so called will cease to be entitled to any benefit under the Fiscal Agent Agreement other than the right to receive payment of the redemption price, and no interest will accrue thereon on or after the redemption date specified in such notice.
Transfer or Exchange of Bonds
So long as the Bonds are registered in the name of Cede & Co., as nominee of DTC, transfers and exchanges of Bonds will be made in accordance with DTC procedures. See APPENDIX G. Any Bond may, in accordance with its terms, be transferred or exchanged by the person in whose name it is registered, in person or by his duly authorized attorney, upon surrender of such Bond for cancellation, accompanied by delivery of a duly written instrument of transfer in a form approved by the Fiscal Agent. Whenever any Bond(s) will be surrendered for transfer or exchange, the City will execute and the Fiscal Agent will authenticate and deliver a new Bond(s), for a like aggregate principal amount of Bond(s) of authorized denominations and of the same maturity. The City will pay the cost for any services rendered or any expenses incurred by the Fiscal Agent in connection with any such transfer or exchange. The Fiscal Agent will collect from the Owner requesting such transfer any tax or other governmental charge required to be paid with respect to such transfer or exchange.
No transfers or exchanges of Bonds will be required to be made (i) within 15 days prior to the date established by the Fiscal Agent for selection of Bonds for redemption or (ii) with respect to a Bond after that Bond has been selected for redemption.
Exhibit 2 1451
10 SECURITY FOR THE BONDS
Pledge of Special Taxes
The Bonds are secured by and payable from a first pledge of the Net Taxes. The Bonds are secured by and payable from a first pledge of the “Net Taxes,” which are comprised of Gross Taxes less Administrative Expenses. “Gross Taxes” is defined in the Fiscal Agent Agreement as the proceeds of the Special Taxes (i.e., “Special Tax A” levied for facilities under the Special Tax Formula) received by the City, including any scheduled payments and any prepayments thereof and interest thereon, and proceeds of the redemption or sale of property sold as a result of foreclosure of the lien of the Special Taxes to the amount of said lien and interest thereon. “Gross Taxes” does not include any penalties collected in connection with delinquent Special Taxes or any interest in excess of the interest due on the Bonds. The Bonds are also secured by the Reserve Fund held under the Fiscal Agent Agreement and, subject to prior disbursement to pay costs of the Improvements, moneys in the Improvement Fund. Until disbursed as provided in the Fiscal Agent Agreement, moneys in the Special Tax Fund, are pledged to the payment of the principal of, and interest and any premium on, the Bonds, as provided in the Fiscal Agent Agreement and in the Act, until all the Bonds have been paid and retired, or until moneys or Federal Securities have been set aside irrevocably for that purpose.
The Improvements are not pledged to pay the debt service on the Bonds. Any proceeds of condemnation, destruction or other disposition of any Improvements are not pledged to pay the debt service on the Bonds and are free and clear of any lien or obligation imposed under the Fiscal Agent Agreement.
Special Taxes
Special Taxes applicable to each taxable parcel in the District will be levied and collected according to the tax liability determined by the City Council through the application of the Special Tax Formula, the complete copy of which is set forth in APPENDIX A hereto, for all taxable properties in the District, by Willdan Financial Services, Temecula, California, the special tax consultant for the District (the “Special Tax Consultant”). Interest and principal on the Bonds is payable from the annual Special Taxes to be levied and collected on taxable property within the District, from amounts held in the funds and accounts established under the Fiscal Agent Agreement (other than the Rebate Fund) and from the proceeds, if any, from the sale of such property for delinquency of such Special Taxes. As used herein, Special Tax refers only to “Special Tax A” levied for facilities under the Special Tax Formula.
The Special Taxes are exempt from the property tax limitation of Article XIIIA of the California Constitution, pursuant to Section 4 thereof as a “special tax” authorized by a twothirds vote of the qualified electors. The levy of the Special Taxes was authorized by the City pursuant to the Act in an amount determined according to the Special Tax Formula approved by the City. See “–Special Tax Methodology” below and “APPENDIX A – Rate and Method of Apportionment of Special Tax.”
The amount of Special Taxes that the District may levy in any year, and from which principal and interest on the Bonds is to be paid, is strictly limited by the maximum rates approved by the qualified electors within the District which are set forth as the “Maximum Annual Special Tax” in the Special Tax Formula. Under the Special Tax Formula, Special Taxes for the purpose of making payments on the Bonds will be levied annually in an amount, not in excess of the annual Maximum Annual Special Tax. The Special Taxes and any interest Exhibit 2 1452
11 earned on the Special Taxes constitute a trust fund for the principal of and interest on the Bonds pursuant to the Fiscal Agent Agreement and, so long as the principal of and interest on these obligations remains unpaid, the Special Taxes and investment earnings thereon will not be used for any other purpose, except as permitted by the Fiscal Agent Agreement, and will be held in trust for the benefit of the owners thereof and will be applied pursuant to the Fiscal Agent Agreement. The Special Tax Formula apportions the Annual Costs (as defined in the Special Tax Formula and described below) among the taxable parcels of real property within the District according to the rate and methodology set forth in the Special Tax Formula. See “–Special Tax Methodology” below. See also “APPENDIX A – Rate and Method of Apportionment of Special Tax.”
The City may levy the Special Tax at the Maximum Annual Special Tax rate, which has been authorized by the qualified electors within the District, as set forth in the Special Tax Formula, if conditions so require. The City does not expect to need to levy at the Maximum Annual Special Tax rate for Fiscal Year 2022-23 or future years. However, the City has covenanted to annually levy the Special Taxes in an amount at least sufficient to pay the Annual Costs (as defined below). Because each year’s Special Tax levy is limited to the Maximum Annual Special Tax rates authorized as set forth in the Special Tax Formula, no assurance can be given that, in the event of Special Tax delinquencies, the amount of the Annual Costs will in fact be collected in any given year. See “SPECIAL RISK FACTORS – Levy and Collection of the Special Tax” herein. The Special Taxes are collected for the City by the County in the same manner and at the same time as ad valorem property taxes.
Special Tax Methodology
The Special Tax authorized under the Act applicable to land within the District will be levied and collected according to the tax liability determined by the City through the application of the appropriate amount or rate as described in the Special Tax Formula set forth in “APPENDIX A – Rate and Method of Apportionment of Special Tax” and in accordance with the Act. See “SPECIAL RISK FACTORS – Levy and Collection of Special Tax.” Capitalized terms set forth in this section and not otherwise defined have the meanings set forth in the Special Tax Formula.
Determination of Annual Facilities Costs. Each year, the City will determine the Annual Facilities Costs of the District for the upcoming Fiscal Year. The “Annual Facilities Costs” includes the following items (less any applicable credits for available revenues):
(i) Administrative Expenses (including charges levied by the County); (ii) Debt Service on to be paid from Special Taxes;
(iii) Amounts needed to replenish bond reserve funds;
(iv) Amounts needed to cure any delinquencies in the payment of principal or interest on Bonds, which have occurred in the prior Fiscal Year and to fund any foreseeable deficiency of the amount to be available for the payment of principal or interest on Bonds, which are expected to occur in such Fiscal Year; and
(v) Pay-as-you-go construction expenditures for Authorized Facilities.
The Annual Facilities Costs are the basis for the amount of Special Tax to be levied within the District. In no event may the City levy a Special Tax in any year above the Maximum Annual Special Tax identified for each parcel in the Special Tax Formula.
Exhibit 2 1453
12 Parcels Subject to the Special Tax. Each Fiscal Year, the Administrator will prepare a list of the parcels subject to the Special Tax using the records of the City and the County Assessor. The City will tax all parcels within the District except property that is exempt from the Special Tax pursuant to the Special Tax Formula. A Taxable Parcel that is acquired by a public agency after the District has been formed will remain subject to the Special Tax unless a “trade” resulting in no loss of Special Taxes can be made, as described in the Special Tax Formula.
Annual Special Tax Levy. The Special Tax will be levied each year by calculating the Annual Costs, which needs to be generated by the Taxable Parcel in the District; the Special Tax (up to maximum allowable amount) will be levied against each Taxable Parcel until the total scheduled Special Taxes equals the Annual Facilities Costs, however the Special Tax Formula establishes a priority for which properties will be levied a Special Tax, with “Developed Parcels” receiving a Special Tax levy prior to “Final Map Parcels” and “Undeveloped Parcels,” all as defined in the Special Tax Formula. For residential use parcels, “Developed Parcel” means that a building permit was pulled by May 1 of the Fiscal Year preceding the levy. See the Special Tax Formula in APPENDIX A.
Termination of the Special Tax. The Special Tax will be levied and collected (up to maximum allowable amount) for as long as needed to pay the principal and interest on the Bonds and other costs incurred in order to construct and acquire the authorized District-funded facilities and to pay the Annual Facilities Costs. The Special Tax Formula provides that the Special Tax may not be levied on any parcel in the District after Fiscal Year 2058-59. When all Annual Facilities Costs incurred by the District have been paid, the Special Tax will cease to be levied.
Prepayment of the Special Tax. The Special Tax Formula provides that landowners may permanently satisfy all or a portion of the Special Tax by a cash settlement with the City.
The amount of the prepayment required is to be calculated according to a formula set forth in the Special Tax Formula, which is generally based on the parcel’s share of the outstanding Bonds, remaining facilities costs which have not been bonded, the reserve fund, fees, call premiums, negative arbitrage and any expenses incurred by the City in connection with the prepayment and expected future facilities costs.
Annual Special Tax; Maximum Special Tax
The annual Special Tax will be calculated by the City and levied each year to meet the Annual Costs. However, in no event may the City levy a Special Tax in any year above the Maximum Annual Special Tax identified for each parcel in the Special Tax Formula. The Maximum Annual Special Tax rates for single-family residential parcels is $1,600 per parcel (without an escalator). For taxable Nonresidential Use parcels, Final Map Parcels, and Undeveloped Parcels, the Special Tax is based upon the gross acres or number of units planned for such parcels. See “APPENDIX A – Rate and Method of Apportionment of Special Tax.”
In addition to the maximum annual Special Tax rate limitation in the Special Tax Formula, Section 53321(d) of the Act provides that the special tax levied against any parcel for which an occupancy permit for private residential use has been issued may not be increased as a consequence of delinquency or default by the owner of any other parcel within a community facilities district by more than 10% above the amount that would have been levied in such Fiscal Year had there never been any such delinquencies or defaults. The debt service on the Bonds has been structured so that an annual Special Tax levy only on residential properties will be Exhibit 2 1454
13 sufficient for annual payments on the Bonds, however in cases of significant delinquencies, default in the payment of principal of and interest on the Bonds may occur.
The Special Tax levy may include a pay-as-you-go component. The Special Tax Formula provides a mechanism whereby the City may utilize the pay-as-you-go component to pay for and/or reimburse developers of property in the District for a portion of the cost of Improvements not funded by proceeds of the bonds issued for the District. In the event it is utilized, proceeds of the annual Special Tax levy will first be used to pay the Annual Costs other than pay-as-you-go expenditures and second, if the levy included a pay-as-you-go component, for authorized facilities costs not funded from Bond proceeds.
Levy and Collection of Special Taxes
The City shall cause Special Taxes in an amount corresponding to Annual Costs to be levied each Fiscal Year in accordance with the Ordinance such that the computation of the levy is complete before the final date on which the County Treasurer-Tax Collector will accept the transmission of the Special Tax amounts for the parcels within the District for inclusion on the next secured real property tax roll. Upon the completion of the computation of the amounts of the levy, the City shall prepare or cause to be prepared, and shall transmit to the County Treasurer-Tax Collector such data as the County Treasurer-Tax Collector requires to include the levy of the Special Taxes on the next secured real property tax roll.
The City shall fix and levy the amount of Special Taxes within the District required for the payment of principal of and interest on any outstanding Bonds of the District becoming due and payable during the ensuing Bond Year, including any necessary replenishment or expenditure of the Reserve Fund for the Bonds and an amount estimated to be sufficient to pay the Administrative Expenses during such year, all in accordance with the rate and method of apportionment of the Special Taxes for the District and the Ordinance. In any event, the Special Taxes so levied shall not exceed the authorized amounts as provided in the proceedings pursuant to the Resolution of Formation.
The Special Taxes shall be payable and be collected in the same manner and at the same time and in the same installment as the general taxes on real property are payable, and have the same priority, become delinquent at the same times and in the same proportionate amounts and bear the same proportionate penalties and interest after delinquency as do the general taxes on real property.
Special Tax Fund
The City covenants that it will receive Net Taxes in trust for the Owners and will instruct the Chief Financial Officer to deposit all Net Taxes with the Fiscal Agent at least three Business Days prior to each Interest Payment Date, and the City shall have no beneficial right or interest in the amounts so deposited, except as provided by this Agreement. All such Net Taxes shall be disbursed, allocated and applied solely to the uses and purposes set forth in this Agreement, and shall be accounted for separately and apart from all other money, funds, accounts or other resources of the City.
Pursuant to the Fiscal Agent Agreement, the Fiscal Agent establishes as a separate fund to be held by the Fiscal Agent for the benefit of the owners of the Bonds, the Special Tax Fund. The Fiscal Agent is required to deposit the Special Taxes in the Special Tax Fund and Exhibit 2 1455
14 thereafter transfer the Net Taxes on the dates and in the amounts in the following order of priority:
(1) To the Interest Account of the Special Tax Fund, at least one Business Day prior to each Interest Payment Date, the amount required to pay interest the Bonds on the immediately succeeding Interest Payment Date; provided, that to the extent that deposits have been made in the Interest Account from the proceeds of the sale of an issue of the Bonds, or otherwise, the transfer from the Special Tax Fund need not be made;
(2) To the Principal Account of the Special Tax Fund, at least one Business Day prior to each Interest Payment Date, the amount required to pay principal of the Bonds (including mandatory sinking fund payments) on the immediately succeeding Interest Payment Date; provided, that to the extent that deposits have been made in the Interest Account from the proceeds of the sale of an issue of the Bonds, or otherwise, the transfer from the Special Tax Fund need not be made; (3) To the Redemption Account of the Special Tax Fund, moneys needed for the purpose of redeeming Bonds called for optional redemption prior to maturity, to be applied on or after the redemption date to the payment of principal, interest and premiums, if any, on the Bonds to be redeemed;
(4) To the Reserve Fund, after taking into account amounts then on deposit in the Reserve Fund, the amounts needed so that the amount in the Reserve Fund equals the Reserve Requirement; and
(5) To the Surplus Fund, as soon as practicable after each September 2, all remaining amounts in the Special Tax Fund. The amounts in the Surplus Fund are not pledged to the repayment of the Bonds and may be used by the City for any lawful purpose. Moneys deposited in the Surplus Fund shall be transferred by the Fiscal Agent upon the direction of the City.
Reserve Fund
The Fiscal Agent Agreement establishes the Reserve Fund, and within the Reserve Fund, the 2022 Reserve Account, to be held by the Fiscal Agent, to the credit of which a deposit shall be made upon issuance of the Bonds in the amount of the Reserve Requirement with respect to the Bonds as of the date of their delivery. Moneys in the 2022 Reserve Account of the Reserve Fund shall be held in trust by the Fiscal Agent for the benefit of the Owners of the Bonds as a reserve for the payment of principal of, and interest on, the Bonds and will be subject to a lien in favor of the Owners of the Bonds.
Upon delivery of the Bonds, the amount on deposit in the 2022 Reserve Account of the Reserve Fund will be established by depositing certain proceeds of the Bonds in the amount of the “Reserve Requirement” for the Bonds, which means , as of the date of any calculation, an amount equal to the lesser of (a) Maximum Annual Debt Service on the respective Outstanding Bonds covered by the Reserve Fund, (b) 125% of the average Annual Debt Service on the respective Outstanding Bonds covered by the Reserve Fund, or (c) 10% of the original principal amount of the respective Bonds covered by the Reserve Fund (or the issue price of the respective Bonds excluding accrued interest, if the net original issue discount or premium is less than 98% or more than 102% of the principal amount of the respective Bonds), as calculated by Exhibit 2 1456
15 the City. However, in no event will the City, in connection with the issuance of Additional Bonds covered by the Reserve Fund be obligated to deposit an amount in the Reserve Fund which is in excess of the amount permitted by the applicable provisions of the Tax Code to be so deposited from the proceeds of tax-exempt bonds without having to restrict the yield of any investment purchased with any portion of such deposit and, in the event the amount of any such deposit into the Reserve Fund is so limited, the Reserve Requirement will, in connection with the issuance of such Additional Bonds, be increased only by the amount of such deposit as permitted by the Code, and the District may meet all or a portion of the Reserve Requirement by depositing a Qualified Reserve Fund Credit Instrument in the Reserve Fund as described above.
The City is required to maintain an amount of money or other security equal to the Reserve Requirement in the Reserve Fund at all times that the Bonds are outstanding. Except as otherwise provided in the Fiscal Agent Agreement, all amounts deposited in the Reserve Fund will be used and withdrawn by the Fiscal Agent solely for the purpose of making transfers to the Special Tax Fund in the event of any deficiency of the amount required for payment of the principal of, and interest on, the Bonds on such Interest Payment Date.
Whenever the amount in the Reserve Fund exceeds the then applicable Reserve Requirement, the Fiscal Agent will transfer an amount equal to the excess from the Reserve Fund to the Improvement Fund, if the Project has not been completed as of the date of such transfer, or if the Project has been completed, to the Special Tax Fund to be used for the payment of the principal of and interest on the Outstanding Bonds, except that investment earnings on amounts in the Reserve Fund may be withdrawn from the Reserve Fund for purposes of making payment to the Federal government to comply with rebate requirements.
The City has the right at any time to cause the Fiscal Agent to release funds from the Reserve Fund, in whole or in part, by tendering to the Fiscal Agent: (1) a Qualified Reserve Fund Credit Instrument, and (2) an opinion of Bond Counsel stating that such release will not, of itself, cause the portion of the interest on the Bonds to become includable in gross income for purposes of federal income taxation. Upon tender of such items to the Fiscal Agent, the Fiscal Agent will transfer such funds from the Reserve Fund to the City. Prior to the expiration of any Qualified Reserve Fund Credit Instrument, the City is obligated either to replace such Qualified Reserve Fund Credit Instrument with a new Qualified Reserve Fund Credit Instrument, or to deposit or cause to be deposited with the Fiscal Agent an amount of funds such that the funds on deposit in the Reserve Fund together with all Qualified Reserve Fund Credit Instruments held by the Fiscal Agent is at least equal to the Reserve Requirement (which funds may come from a draw by the Fiscal Agent on the Qualified Reserve Fund Credit Instrument prior to its expiration). Any Qualified Reserve Fund Credit Instrument deposited with the Fiscal Agent shall contain instructions to the Fiscal Agent with respect to the purpose and use thereof.
Under the Fiscal Agent Agreement, a “Qualified Reserve Fund Credit Instrument” is defined as an irrevocable standby or direct-pay letter of credit or surety bond issued by a commercial bank or insurance company, provided that all of the following requirements are met:
(a) the long-term credit rating of such bank or insurance company is rated at the time of issuance in the “AA” category or higher by S&P or Moody’s (without regard to qualifier); (b) such letter of credit or surety bond has a term of at least 12 months; (c) such letter of credit or surety bond has a stated amount at least equal to the portion of the Reserve Requirement; and (d) the Fiscal Agent is authorized pursuant to the terms of such letter of credit or surety bond to draw thereunder an amount equal to any deficiencies which may exist from time to time in the Special Exhibit 2 1457
16 Tax Fund for the purpose of making payments required pursuant to the Fiscal Agent Agreement or the amount to be restored to the Reserve Fund if not timely renewed or extended.
If a Qualified Reserve Fund Credit Instrument were obtained in the future, and the longterm credit rating of the provider thereof was downgraded after the date of issuance of such Qualified Reserve Fund Credit Instrument, the City would not be obligated to replace the Qualified Reserve Fund Credit Instrument or otherwise fund the Reserve Fund.
Delinquent Payments; Teeter Plan; Covenant for Superior Court Foreclosure General. The Special Tax will be collected in the same manner and the same time as ad valorem property taxes, except at the City’s option, the Special Taxes may be billed directly to property owners or collected at a different time to meet the City’s financial obligations. In the event of a delinquency in the payment of any installment of Special Taxes, the City is authorized by the Act to order institution of an action in superior court to foreclose the lien therefor.
Teeter Plan. In 1949, the California Legislature enacted an alternative method for the distribution of property taxes to local agencies. This method, commonly known as the Teeter Plan, is set forth in Sections 4701-4717 of Revenue and Taxation Code of the State of California. The San Joaquin County Board of Supervisors (the “Board of Supervisors”) approved implementation of the Teeter Plan in November 1993, both as to general and special taxes entered and collected on the secured tax roll.
Generally, the Teeter Plan provides for a tax distribution procedure by which secured roll taxes, special taxes and assessments are distributed to taxing agencies within a county included in the Teeter Plan on the basis of the tax levy, rather than on the basis of actual tax collections. A county then receives all future delinquent tax payments, penalties and interest, and a complex tax redemption distribution system for all taxing agencies is avoided. In connection with the Teeter Plan, a county can advance to the participating taxing agencies an amount equal to 95% of the total then-prior years’ delinquent secured property taxes, 100% of the total then-prior years’ delinquent secured special taxes, including the associated penalties and interest, and 100% of the then-current year’s secured roll levy.
The Teeter Plan remains in effect unless the Board of Supervisors orders discontinuance. The County policy provides that it may order discontinuance of the Teeter Plan as to special taxes for the next year if the rate of delinquency for a taxing district exceeds 3% in any Fiscal Year. Unless and until the Board of Supervisors orders discontinuance of the Teeter Plan with respect to the District, the City is credited with 100% of the scheduled Special Tax payments without regard to actual amounts collected. The City can give no assurance, however, that the Teeter Plan will be continued in future years.
If any tax or assessment which was distributed to a Teeter Plan participant is subsequently changed by correction, cancellation or refund, a pro rata adjustment for the amount of the change is made on the records of the treasurer of the County and the County Auditor. Such an adjustment would be an offset to future distributions of tax revenues to the District.
So long as the County maintains its policy of collecting taxes pursuant to said procedures and the City meets the Teeter Plan requirements, the City will receive 100% of the annual installments levied on taxable parcels in the District without regard to actual collections.
No assurance can be given that the County will continue to include special taxes levied within Exhibit 2 1458
17 community facilities districts in the Teeter Plan, and the County could decide to discontinue the inclusion of such special taxes in the Teeter Plan at any time, or to discontinue the Teeter Plan in its entirety.
Foreclosure Covenant. The City has covenanted in the Fiscal Agent Agreement with and for the benefit of the Owners of the Bonds that it will annually on or before October 1 of each year review the public records of the County of San Joaquin relating to the collection of the Special Tax in order to determine the amount of the Special Tax collected in the prior Fiscal Year, and if the City determines on the basis of such review that:
Aggregate Delinquencies. The amount so collected is deficient by more than 5% of the total amount of the Special Tax levied in such Fiscal Year, it will within 30 days thereafter institute foreclosure proceedings as authorized by the Act in order to enforce the lien of the delinquent installment of the Special Tax against each separate lot or parcel of land in the District for which such installment of the Special Tax is delinquent, and will diligently prosecute and pursue such foreclosure proceedings to judgment and sale; or
Individual Delinquencies. The amount so collected is deficient by less than 5% of the total amount of the Special Tax levied in the District in such Fiscal Year, but that property owned by any single property owner in the District is delinquent by more than $3,000 with respect to the Special Tax due and payable by such property owner in such Fiscal Year and prior Fiscal Year(s), it will within 30 days thereafter institute foreclosure proceedings as authorized by the Act in order to enforce the lien of the delinquent installment of the Special Tax against each such property, and will diligently prosecute and pursue such foreclosure proceedings to judgment and sale..
The Chief Financial Officer shall notify legal counsel of any such delinquency of which it is aware, and such legal counsel shall commence, or cause to be commenced, such actions to collect such delinquencies and subsequent foreclosure proceedings in such a manner as such counsel deems appropriate.
Notwithstanding the foregoing, the City's obligation to pursue foreclosure shall be at the option of the City so long as (i) the Teeter Plan is in effect with respect to any delinquent parcel meeting the conditions above, and (ii) there is no then-outstanding draw on any amounts in the Reserve Fund.
Foreclosure Proceedings. Under the Act, foreclosure proceedings are instituted by the bringing of an action in the superior court of the county in which the parcel lies, naming the owner and other interested persons as defendants. The action is prosecuted in the same manner as other civil actions. In such action, the real property subject to the special taxes may be sold at a judicial foreclosure sale for a minimum price that will be sufficient to pay or reimburse the delinquent special taxes.
The Owners of the Bonds benefit from the Reserve Fund established pursuant to the Fiscal Agent Agreement; however, if delinquencies in the payment of the Special Taxes with respect to the Bonds are significant enough to completely deplete the Reserve Fund, there could be a default or a delay in payments of principal and interest to the owners of the Bonds pending prosecution of foreclosure proceedings and receipt by the City of the proceeds of foreclosure sales. Provided that it is not levying the Special Tax at the Maximum Annual Special Tax rates set forth in the Special Tax Formula, the City may adjust (but not to exceed Exhibit 2 1459
18 the Maximum Annual Special Tax and subject to the limitation described under the caption “– Special Tax Methodology – Limitation on Increases of Special Tax Levy” above) the Special Taxes levied on all property within the District subject to the Special Tax to provide an amount required to pay debt service on the Bonds and to replenish the Reserve Fund.
Under current law, a judgment debtor (property owner) has at least 120 days from the date of service of the notice of levy in which to redeem the property to be sold. If a judgment debtor fails to redeem and the property is sold, his or her only remedy is an action to set aside the sale, which must be brought within 90 days of the date of sale. If, as a result of such an action a foreclosure sale is set aside, the judgment is revived and the judgment creditor is entitled to interest on the revived judgment as if the sale had not been made (California Code of Civil Procedure Section 701.680).
Foreclosure by court action is subject to normal litigation delays, the nature and extent of which are largely dependent upon the nature of the defense, if any, put forth by the debtor and the condition of the calendar of the superior court of the county. Such foreclosure actions can be stayed by the superior court on generally accepted equitable grounds or as the result of the debtor’s filing for relief under the Federal bankruptcy laws. The Act provides that, upon foreclosure, the Special Tax lien will have the same lien priority as is provided for ad valorem taxes and special assessments. See “VALUE OF PROPERTY WITHIN THE DISTRICT AND SPECIAL TAX BURDEN – Overlapping Liens and Priority of Lien.” No assurances can be given that the real property subject to a judicial foreclosure sale will be sold or, if sold, that the proceeds of sale will be sufficient to pay any delinquent Special Tax installment. The Act does not require the District to purchase or otherwise acquire any lot or parcel of property foreclosed upon if there is no other purchaser at such sale.
Section 53356.6 of the Act requires that property sold pursuant to foreclosure under the Act be sold for not less than the amount of judgment in the foreclosure action, plus postjudgment interest and authorized costs, unless the consent of the owners of 75% of the outstanding Bonds is obtained. However, under Section 53356.6 of the Act, the District, as judgment creditor, is entitled to purchase any property sold at foreclosure using a “credit bid,” where the District could submit a bid crediting all or part of the amount required to satisfy the judgment for the delinquent amount of the Special Tax. If the District becomes the purchaser under a credit bid, the District must pay the amount of its credit bid into the redemption fund established for the Bonds, but this payment may be made up to 24 months after the date of the foreclosure sale.
Additional Bonds
The Bonds are the first series of special tax bonds issued for the District and additional parity bonds (“Additional Bonds”) are anticipated to be issued as development progresses.
Issuance of Additional Bonds requires compliance by the City with the following conditions:
(i) No default in the Bonds shall have occurred and then be continuing. (ii) The Supplemental Agreement providing for the issuance of the Additional Bonds shall specify the purpose for which such Additional Bonds being issued, which shall be one or more of the following:
Exhibit 2 1460
19 (A) to provide moneys needed to construct and acquire a portion of the Project, by depositing into the Improvement Fund the proceeds of such Additional Bonds to be so applied, or
(B) to refund all or part of the Bonds or Additional Bonds then Outstanding, by depositing in trust with the Fiscal Agent, moneys or Federal Securities in the amount necessary to discharge all liability of the City with respect to the bonds to be refunded. (iii) The Bonds of such Series shall be payable as to principal on September 1 in each year in which principal becomes due, and shall be payable as to interest semiannually on March 1 and September 1, except that the first installment of interest may be payable on either March 1 or September 1 and shall be for a period not longer than 6 months. (iv) Fixed serial maturities or Sinking Fund Payments, or any combination thereof, shall be established in amounts sufficient to provide for the retirement of all of the Bonds of such Series on or before their respective maturity dates.
(v) The aggregate principal amount of all additional Series of Bonds plus the 2022 Bonds shall not exceed $25,000,000, being the total amount of Bonds for the District authorized to be issued.
(vi) After giving effect to the issuance of such Series of Bonds:
(A) Projected Maximum Special Taxes plus projected investment earnings on amounts held in the Reserve Fund to be transferred to the Special Tax Fund pursuant to the terms of this Fiscal Agent Agreement for each Bond Year are equal to or greater than 110% of maximum Debt Service for each Bond Year that the Bonds and Additional Bonds will be outstanding; provided that such projection of investment earnings on amounts held in the Reserve Fund may assume an investment rate equal to the City's average portfolio rate available to the City at the time of determination; and (B) The aggregate value of all parcels in the District subject to the Special Tax, including then existing improvements and any facilities to be constructed or acquired with the proceeds of the proposed series of Bonds, as determined by an MAI appraisal or, in the alternative, the assessed value of all such parcels and improvements thereon (and improvements to be financed from proceeds of the Bonds proposed to be issued) as shown on the then current County tax roll, or by a combination of both methods, is at least 3.00 times the sum of (i) the aggregate principal amount of all Bonds then outstanding plus (ii) the aggregate principal amount of the series of Bonds proposed to be issued, plus (iii) the aggregate principal amount of any bonds then outstanding and payable from assessments which are a lien against property in the District, plus (iv) a portion of the aggregate principal amount of all Mello-Roos bonds, other than Bonds then outstanding, and payable at least partially from special taxes to be levied on parcels of land subject to the Special Tax within the District (the “Other Mello-Roos Bonds”) equal to the aggregate principal amount of the Other Mello-Roos Bonds multiplied by a fraction, the numerator of which is the amount of special taxes levied for the Other Mello-Roos Bonds on parcels of land within the District subject to the Special Tax, and the denominator of which is the total amount of special taxes levied for the Other Mello-Roos Bonds on all parcels of land subject to the Special Tax against which the special taxes are levied to pay the Other Mello-Roos Bonds (such fraction to be determined based upon the special taxes which could be levied the year in which Exhibit 2 1461
20 maximum annual debt service on the Other Mello-Roos Bonds occurs), based upon information from the most recent available fiscal year.
Notwithstanding the preceding paragraphs of this subsection (vi), if a developer shall have deposited with the Fiscal Agent cash or a letter of credit from a reputable bank which is acceptable to the City, in an amount (the “Letter of Credit Amount”) equal to the shortfall in the valuation of the property in the District to meet the value-to-lien requirement set forth in the preceding paragraph, the Letter of Credit Amount shall be excluded from the debt computation under this subsection. Any such letter of credit deposited with the Fiscal Agent shall remain in effect, and the Letter of Credit Amount shall not be reduced or the letter of credit thereafter terminated, until satisfaction of the preceding paragraphs of this subsection (B) with respect to the amount by which the letter of credit is proposed to be reduced, or with respect to the Letter of Credit Amount in connection with the proposed termination of the letter of credit.
Additional Bonds may be issued for the purpose of refunding any outstanding Bonds without meeting the foregoing conditions of this subsection (vi) so long as debt service on the refunding Bonds in each Bond Year is less than debt service on the Bonds refunded.
Nothing in the Agreement prohibits issuance of bonds or Additional Bonds secured on a subordinate basis to the Bonds, or prevents the City from pledging or otherwise providing, in addition to the security given or intended to be given by the Agreement, additional security for the benefit of such Additional Bonds or any portion thereof.
Exhibit 2 1462
21 DEBT SERVICE SCHEDULE
The annual debt service on the Bonds, based on the interest rates and maturity schedule set forth on the inside cover of this Official Statement (assuming no early redemptions), is set forth below.
City of Stockton
Community Facilities District No. 2019-1 (Cannery Park II) Special Tax Bonds Series 2022
Debt Service Schedule*
Period Ending
(Sept. 1)
Bonds
Principal
Bonds
Interest
Bonds
Total
* Preliminary; subject to change.
Source: Underwriter.
The Special Tax Formula is structured to produce Net Taxes from the levy of the Maximum Annual Special Tax on residential properties which, when applied to the projected annual debt service on the Bonds, is anticipated to result in a debt service coverage ratio of at least 110% for the life of the Bonds.
Exhibit 2 1463
22 The projected annual debt service coverage on the Bonds (based on the Maximum Annual Special Tax and the projected debt service on the Bonds) is shown below.
City of Stockton
Community Facilities District No. 2019-1 (Cannery Park II) Special Tax Bonds Series 2022
Debt Service Coverage Based on Maximum Annual Special Tax (1) * Period
Ending
(Sept. 1)
Maximum
Special Tax
Revenue(2)
Administrative
Costs Net Revenue
Total
Debt Service*(3)(4)
Debt Service
Coverage*(3)
2023 $113,600.00 $25,000.00 $88,600.00
2024 824,000.00 25,500.00 798,500.00 $652,950.00 122.29% 2025 824,000.00 26,010.00 797,990.00 650,518.76 122.67
2026 824,000.00 26,530.20 797,469.80 652,831.26 122.16
2027 824,000.00 27,060.80 796,939.20 649,631.26 122.68
2028 824,000.00 27,602.02 796,397.98 651,175.00 122.30
2029 824,000.00 28,154.06 795,845.94 652,206.26 122.02
2030 824,000.00 28,717.14 795,282.86 652,725.00 121.84
2031 824,000.00 29,291.48 794,708.52 652,731.26 121.75
2032 824,000.00 29,877.31 794,122.69 652,225.00 121.76
2033 824,000.00 30,474.86 793,525.14 651,206.26 121.85
2034 824,000.00 31,084.36 792,915.64 654,112.50 121.22
2035 824,000.00 31,706.04 792,293.96 651,212.50 121.66
2036 824,000.00 32,340.17 791,659.83 652,775.00 121.28
2037 824,000.00 32,986.97 791,013.03 653,531.26 121.04
2038 824,000.00 33,646.71 790,353.29 653,481.26 120.95
2039 824,000.00 34,319.64 789,680.36 652,625.00 121.00
2040 824,000.00 35,006.04 788,993.96 650,962.50 121.20
2041 824,000.00 35,706.16 788,293.84 653,493.76 120.63
2042 824,000.00 36,420.28 787,579.72 649,950.00 121.18
2043 824,000.00 37,148.68 786,851.32 650,600.00 120.94
2044 824,000.00 37,891.66 786,108.34 654,700.00 120.07
* Preliminary; subject to change.
(1) Maximum Special Tax is shown on a fiscal year basis. In addition to the Maximum Special Tax rate set forth in the Special Tax Formula, Section 53321(d) of the Act provides that the special tax levied against any parcel for which an occupancy permit for private residential use has been issued may not be increased as a consequence of delinquency or default by the owner of any other parcel within a community facilities district by more than 10% above the amount that would have been levied in such fiscal year had there never been any such delinquencies or defaults. (2) FY2022-23 based on 71 parcels classified as "Developed" as defined in the RMA. Future Years based on residential parcels in villages (A, B, C, E1, E2, F1 and F2).
(3) Debt service shown on a calendar year basis.
(4) Debt service and debt service coverage based on the Bonds. Does not include overlapping debt.
Source: The Underwriter and Willdan Financial Services.
Exhibit 2 1464
23 THE DISTRICT
Formation of the District
On May 21, 2019, the City Council adopted the Resolution of Formation, which formed the District. On the same day, an election was held within the District in which a single land0- developer, comprising all of the qualified landowners in the District, approved the proposed bonded indebtedness in the maximum aggregate principal amount of $25,000,000 and the levy of the Special Tax in accordance with the Special Tax Formula. The Bonds are the first series to be issued under the authorization and additional series of parity bonds are expected to be issued in the future, as development progresses.
Location and Description of the District and the Immediate Area The District. The District is generally located south of Eight Mile Road, west of Highway 99 Frontage Road, east of the Union Pacific Railroad tracks, and north of George Lincoln Mosher Elementary School, within the City of Stockton, San Joaquin County, California.
The District represents a portion of the 450-acre Cannery Park Master Plan area that was annexed to the City and originally approved in 2004 and designated for a variety of land uses ranging from more than 1,000 single or multi-family residential units to parks, an elementary school, fire station, business park as well as commercial and offices uses, and developable in accordance with a Development Agreement entered into in October 2004 (with a 20-year term). Land located outside the District but within the Cannery Park Master Plan does not provide security for the Bonds.
The City. The City is within San Joaquin County within the Central Valley of California, commonly referred to as one of the most diverse and productive agricultural areas in the world.
The original city was founded on the San Joaquin River, in the northern San Joaquin Valley.
The City is located in and along the eastern Sacramento-San Joaquin Delta; the largest estuary on the west coast of the Western Hemisphere with over 700 miles of waterways (per the State Department of Water Resources). Stockton is located approximately 45 miles south of Sacramento and 80 miles east of San Francisco. The City currently occupies a total area of 64.8 square miles.
Map. The map on the following page shows the boundary of the District.
Exhibit 2 1465
24 [Reserved for CFD Boundary Map]
Exhibit 2 1466
25 Environmental Matters
Flood Zone. According to the Federal Emergency Management Agency (FEMA) National Flood Insurance Program, Flood Insurance Rate Map (FIRM), the subject is located within Zone X (areas outside of the 0.2% annual chance flood plain), as reflected by FEMA map panel 06077C0320F (dated October 16, 2009).
Seismic Conditions. According to the Seismic Safety Commission, the subject properties are located within Zone 3, which is considered to be the lowest risk zone in California. There are only two zones in California: Zone 4, which is assigned to areas near major faults; and Zone 3, which is assigned to all other areas of more moderate seismic activity. In addition, the subject is not located in a Fault-Rupture Hazard Zone (formerly referred to as an Alquist-Priolo Special Study Zone), as defined by Special Publication 42 (revised January 1994) of the California Department of Conservation, Division of Mines and Geology.
Fire Hazard. Land in the District is not located within a High Fire Hazard Severity Zone or Very High Fire Hazard Severity Zone as defined by CalFIRE.
Development Agreement and Subdivision Agreement
Development Agreement. The City entered into a Development Agreement in October 2004 (as amended to date, the “Development Agreement”) with Holman Investors, LLC, which Development Agreement also binds successors in interest. The Development Agreement’s purpose is to preserve existing policies, rules and regulations with respect to the Cannery Park project. All of the property in the District is subject to the requirements of the Development Agreement. The Development Agreement was entered into in accordance with Sections 65864 through 65869.5 of the California Government Code, as implemented through the Stockton City Code. The Development Agreement runs with the property and is set to expire in October 2024.
Subdivision Agreement. The City entered into a Subdivision Agreement in December 2005 (as amended to date, the “Subdivision Agreement”) with Holman Investors, LLC. The Subdivision Agreement is the primary implementation tool for the development of the Cannery Park project and creates a binding contract between the City and Holman Investors, LLC, and its successors in interest, which sets forth the needed infrastructure improvements, park dedication requirements, timing and method for financing improvements and other specific performance obligations of the City and Holman Investors, LLC and its successors, including obligations related to development of the property in the District, with the terms, conditions, rules, regulations, entitlements, vested rights and other provisions relating to the development of the property in the District. Included are provisions relating to infrastructure improvements, public dedication requirements, landscaping amenities and other obligations of the parties.
The Subdivision Agreement runs with the property, and may be modified only by mutual consent of the parties. With the Subdivision Agreement in place, subject to compliance with the terms of the Subdivision Agreement, construction of homes within the District may occur upon City approval of subdivision maps, satisfaction of certain design requirements and conditions of such maps and issuance of building permits.
Current and Anticipated Development in the District
Current Zoning/Entitlements. Taxable property in the consists primarily of land developing into 721 single-family residential units. The Master Developer is the master Exhibit 2 1467
26 developer for the project and has been building necessary infrastructure to sell all 721 currently planned residential lots to merchant homebuilders. Taxable land in the District also includes a multifamily residential site planned for 210 multi-family residential units and 4 parcels currently zoned for non-residential uses, 3 of which the Master Developer desires to rezone to residential uses in the future as described below; however, no assurance can be given such rezone will take place or the timing related thereto.
Of the total 721 planned residential units, KB Home is building out Village A, B and C (128 total lots) and LGI Homes is building out Villages E1, E2, F1 and F2 (387 total lots). The remaining 206 lots are owned by the Master Developer. Homebuilding activity is underway by KB Home and LGI Homes. As of June 15, 2022, LGI had sold and delivered 26 homes to individual homeowners. See “OWNERSHIP OF PROPERTY WITHIN THE DISTRICT” for additional details.
Master Developer’s Plans to Re-Zone Certain Parcels. Taxable land in the District currently includes 4 non-residential parcels and one multi-family residential site. The Master Developer plans to submit to the City applications to rezone 4 out of the 5 undeveloped parcels, resulting in additional single-family residential (SFR) units in the District. Anticipated timing would be for the Master Developer to seek approval for the rezone of these parcels, first with the City of Stockton Planning Commission in fall 2022, followed by City Council approval in spring 2023. If such approvals were received, and backbone improvements required for development were completed (including the planned Holman Road Bridge), residential development could commence as early as summer 2023. However, no assurance can be given such rezone will take place or the timing related thereto.
Unless and until the parcels are re-zoned, the parcels are subject to a per acre special tax in accordance with the Special Tax Formula. If certain parcels were re-zoned to singlefamily residential uses, each residential unit would be subject to a $1,600 per unit special tax, in accordance with the Special Tax Formula. See APPENDIX A.
The Master Developer’s plans with respect to the 4 non-residential parcels and 1 multifamily residential parcel in the District are set forth in the following table.
APN
Large
Lot Acreage Current Land Use
Re-Zoned Land Use
(Not Yet Approved)
122-020-033 4 19.70 Business Park/Commercial Business Park/Commercial 122-020-032 4 12.34 Business Park/Commercial 250 – 300 MFR units 122-020-038 (por) 5A 44.18 Highway Commercial 257 SFR units 122-020-038 (por) 5B 11.70 MFR 122-020-043 6 11.89 Commercial Office 64 SFR units
___________
Source: Master Developer.
The Improvements
The City expects to utilize proceeds of the Bonds to reimburse costs expended for infrastructure facilities constructed and necessary to facilitate development in the District, including transportation improvements, water and wastewater system improvements, drainage system improvements, sound walls, landscaping and certain incidental expenses.
The Master Developer reports that all backbone infrastructure required for the 515 single-family homes being developed by KB Home and LGI Homes in the District is complete.
Exhibit 2 1468
27 The following table shows improvements funded to-date and anticipated for the remainder of the District.
List of Key Backbone Improvements within the District
As of June 1, 2022
Contract Estimated Percent Cost Incurred CFD 2019-1
Improvement Cost Cost(1)(2) Complete to Date Funded
Holman Road - Phase 1 $ 922,686.00 100.00% $ 922,686.00 - PFC Jess Mizener Street 2,834,429.00 100.00 2,834,429.00 - Nash Drive Roundabout 646,725.00 100.00 646,725.00 -
Dry Utilities - Holman Road Phase 1 462,639.00 100.00 462,639.00 - Dry Utilities - PFC Jesse Mizener 574,622.00 80.00 459,697.60 - Dry Utilities - Nash Drive Roundabout 28,464.00 100.00 $28,464.00 - Holman Road/ PFC Jesse Mizener Signal 457,054.00 90.00 411,348.60 - Holman Road - Phase 1 - Landscaping 221,143.00 40.00 $88,457.20 $221,143.00 Woodbridge Irrigation District Box Culvert 977,255.00 100.00 977,255.00 977,255.00 Holman Road Bridge 6,296,150.00 5.00 314,807.50 6,296,150.00 Holman Road Bridge - CM, Permit Compliance 608,005.00 10.00 60,800.50 608,005.00 Holman Road - Phase 2 and Dry Utilities $4,798,371.00 0.00 4,798,371.00 Eight Mile Road Widening and Dry Utilities 4,500,000.00 0.00 4,500,000.00 Tri-Valley Drive and Dry Utilities 850,000.00 0.00 850,000.00 Collector A and Dry Utilities 850,000.00 0.00 850,000.00 Cannery Drive and Dry Utilities 1,450,000.00 0.00 1,450,000.00 Signature Drive and Dry Utilities 1,250,000.00 0.00 1,250,000.00
Totals $14,029,172.00 $13,698,371.00 $7,207,309.40 $21,800,924.00 Total Contract and Estimated Cost(1) $27,727,543.00
(1) Estimates, subject to change.
(2) Anticipated to be financed from various bond issuances.
Source: Master Developer.
The Special Tax Formula provides that the funding of Improvement costs can also be made from collections of the Special Tax available as the “pay-as-you-go” component of Special Taxes. The pay-as-you-go funding component could provide for funding of the cost of the Improvements in excess of the amount provided from Bond proceeds through annual Special Tax collections in excess of the amount needed to pay the debt service. See “SECURITY AND SOURCES OF PAYMENT FOR THE BONDS – Special Tax Methodology.” Master Developer’s Financing Plan
Cost Incurred for the Improvements. The Master Developer has expended over $14 million dollars on the construction and installation of Improvements for the District to date. An additional $13.7 million are estimated to be required to complete the project.
The Improvements already completed include various road improvements (Holman Road – Phase 1 and Jess Mizener Street) and dry utilities. Major future Improvements consist of completion of the Holman Road Bridge (already underway), Holman Road – Phase 2, Eight Mile Road widening and related dry utilities.
Funding Sources. The Master Developer has used, and intends to use, the following sources of funds to finance the Improvements for the development:
• Equity sources available to the Master Developer;
Exhibit 2 1469
28 • Sales of lots in the District to merchant builders and other end users; • Proceeds of special tax bonds secured by land within the District; and • Pay-as-you-go Special Taxes available to the Master Developer under the Acquisition Agreement (see “–Acquisition Agreement” below).
Notwithstanding the belief of the Master Developer that it will have sufficient funds to complete its planned development, no assurance can be given that sources of financing available to the Master Developer will be sufficient to complete such development as currently anticipated. While the Master Developer has made internal financing available in the past for similar activities, there can be no assurance whatsoever of its willingness or ability to do so in the future. Neither the Master Developer nor any of its affiliates has any legal obligation of any kind to make any such funds available or to obtain loans or lines of credit. If and to the extent that internal financing, loan proceeds, lines of credit, or bond proceeds are inadequate to pay the costs to complete the Master Developer’s planned development, there could be a shortfall in the funds required to complete such proposed development and portions of such development might not be completed.
Acquisition Agreement. In connection with the issuance of the Bonds, the City and the Master Developer will enter into a Funding, Construction and Acquisition Agreement (the “Acquisition Agreement”) which provides that the Master Developer will construct (or cause to be constructed or funded) the Improvements, and the City, upon completion of construction and acceptance (or through progress payments on segments of a particular Improvement prior to completion of the entire Improvement), will purchase the Improvements or reimburse the Master Developer for expended amounts from the proceeds of the Bonds and/or Special Taxes on a pay-as-you-go basis. The Master Developer will be responsible for the portion of the cost of construction of the Improvements not paid with Bond proceeds.
The Rate and Method provides that the funding of Improvement costs can also be made from collections of the Special Tax available as the “pay-as-you-go” component of Special Taxes. The pay-as-you-go funding component is expected to provide for funding of the cost of a portion of the Improvements in excess of the amount provided from bond proceeds (if such proceeds are not sufficient) through annual Special Tax collections in excess of the amount needed to pay the debt service. Pursuant to current City policy, the City contemplates utilizing this funding mechanism during the expected build-out of the District or 20 years, whichever is shorter.
Market Absorption Report
In connection with the issuance of the Bonds, the City hired The Gregory Group, Folsom, California (the “Absorption Consultant”) to perform market absorption study services related to the 515 single-family homes being developed by KB Home and LGI Homes. The Absorption Consultant’s report (the “Absorption Report”) describes the planned development based on information available as of May 2022, and is attached hereto as APPENDIX C.
The Absorption Report included market pricing and absorption analysis for the 515 single-family homes planned for the District, and being marketed/sold by KB Home and LGI Homes. The absorption analysis is based on information provided by the Master Developer, KB Home and LGI Homes to the Absorption Consultant (as well as estimates by the Absorption Consultant) which includes an estimate as to when the villages opened for sales, infrastructure Exhibit 2 1470
29 development, grading schedules, marketing considerations and anticipated market conditions.
Furthermore, there are expected to be (and the market can sustain) several different projects selling simultaneously within each product type but built by different builders. Additional factors considered in predicting absorption rates are:
• The desirability of Cannery Park II as a new-home destination including the availability and affordability of housing
• Increasing new-home sales within the subject market area • Limited future inventory in the subject market area
• Current absorption rates for similar product types within the subject market area • Overall strong economic conditions and excellent housing conditions within the North Central Valley Region.
The Absorption Consultant concludes that the District can absorb between 1.00 and 1.25 sales per week per product offering (1.13 sales per week) for all of the product offerings over the marketing life of the development given the pricing (with home sizes ranging from 1,342 to 3,061 square feet and base prices range from $504,900 to $631,000).
Based on the foregoing and as set forth in more detail in the Absorption Report, the Absorption Consultant’s conclusions on absorption of the 515 single-family homes planned by KB Home and LGI Homes is 5.46 years, are set forth in the following tablet:
Project/Village
Merchant
Builder
Total
Units
Sold as
of
3/31/22
Remainder
2022 2023 2024 2025 2026 2027
The Preserve at Creekside KB Home 128 0 0 22 52 52 2 -- Cannery Park LGI Homes 387 32 49 65 65 65 65 46
Totals/Averages 515 32 49 87 117 117 67 46
___________
Note: The number of units that are being absorbed in the above table are based on home sales (i.e., entering into a contract) and are not based on actual closings to individual homeowners.
Source: Absorption Consultant.
Neither the City nor the Underwriter is obligated to make, and neither has undertaken to make, an independent verification of the information contained in the Absorption Report and neither the City nor the Underwriter assumes responsibility for the accuracy or completeness of the Absorption Report. The Absorption Report should be read in its entirety, and a complete copy thereof is set forth as APPENDIX C – THE ABSORPTION REPORT.
Exhibit 2 1471
30 OWNERSHIP OF PROPERTY WITHIN THE DISTRICT
Unpaid Special Taxes do not constitute a personal indebtedness of the owners of the parcels within the District. There is no assurance that the present property owners or any subsequent owners will have the ability to pay the Special Taxes or that, even if they have the ability, they will choose to pay the Special Taxes. An owner may elect to not pay the Special Taxes when due and cannot be legally compelled to do so. Neither the City nor any Bondowner will have the ability at any time to seek payment directly from the owners of property within the District of the Special Tax or the principal or interest on the Bonds, or the ability to control who becomes a subsequent owner of any property within the District.
The Master Developer, KB Home and LGI Homes have provided the respective information set forth in the section entitled “OWNERSHIP OF PROPERTY WITHIN THE DISTRICT.” In addition, any Internet addresses included below are for reference only, and the information on those Internet sites is not a part of this Official Statement or incorporated by reference into this Official Statement. Certain other information contained below has been obtained from the Appraisal. For more detailed information on the ownership of undeveloped lots in the District, see the Appraisal attached hereto as APPENDIX B.
No assurance can be given that development of the property will be completed, or that it will be completed in a timely manner. The Special Taxes are not personal obligations of the developers or of any subsequent landowners; the Bonds are secured only by the Special Taxes and moneys available under the Fiscal Agent Agreement. See “SECURITY FOR THE BONDS” and “SPECIAL RISK FACTORS” herein.
Top Taxpayers
The table on the following page shows the anticipated top payers of the Special Taxes in the District, based on the projected Fiscal Year 2022-23 Special Tax levy amount. Additional information concerning the Master Developer, KB Home and LGI Homes follows thereafter.
Exhibit 2 1472
31 Table 1
City of Stockton
Community Facilities District No. 2019-1 (Cannery Park II) Top Payers of Projected Fiscal Year 2022-23 Special Tax Levy Property Owner (1)
No. of
Parcels
Number of
Assessable
Lots
Total
Assessed /
Appraised
Values (2)
Bonded
Debt (3)
Other
Overlapping
Land Secured
Debt (4)
Aggregate
Bond
Indebtedness
Maximum
Special Tax
Percentage
of Maximum
Special Tax
Estimated
FY 2022-23
Special Tax
Levy
Value to
Aggregate
Bonded
Debt
LGI Homes - California LLC 179 361 $63,542,000 $6,596,136 $221,990 $6,818,126 $577,600 39.25% $72,000 9.32 KB HOME NORTH BAY LLC 3 128 17,152,000 2,338,796 10,559 2,349,355 204,800 13.92% 0 7.30 Individual Homeowners 26 26 9,478,000 475,068 30,583 505,651 41,600 2.83% 41,600 18.74 HOLMAN INVESTORS LLC 5 0 4,965,466 0 112,321 112,321 647,579 44.01% 0 44.21 Total 213 515 $95,137,466 $9,410,000 $375,452 $9,785,452 $1,471,579 100.00% $113,600 9.72 (1) Ownership as of June 15, 2022.
(2) Based on Appraisal Report dated May 27, 2022. Appraised values were assigned to completed and final mapped lots. Assessed Values were utilized for the vacant parcels currently designated for high density residential, commercial and industrial uses. (3) Bonded Debt allocated by Maximum Special Taxes for Developed and Final Mapped parcels. (4) Overlapping Debt provided by CalMuni as of June 1, 2022.Source: FY 2021-22 San Joaquin County Secured Roll, Appraisal Report by Integra Realty Resources, Willdan Financial Services Exhibit 2 1473
32 The Master Developer
Holman Investors LLC (“Holman”), and its affiliate Eight Mile Road Investors, LLC (“Eight Mile Road” and together with Holman, the “Master Developer”), is a local Stockton investment entity whose principals are Howard Arnaiz, Russell Ray, and Matt Arnaiz. Holman has been in business since October 2001. The Master Developer originally owned all of the land in the District, having acquired the land in 2002. The Master Developer was the entity that originally requested the District to be formed by the City in anticipation of facilitating new development of the property for the mixed uses anticipated by the Cannery Park Master Plan.
Current business activities of the Master Developer, in addition to maintaining the existing industrial-use space in the District, include leasing land to farmers, preserving entitlements, infrastructure and master planning. Holman is currently working with the City to pursue the permitting necessary to construct the Holman Road Bridge and allow for City utilities to be extended north of Bear Creek which will facilitate development of its holdings in those areas.
KB Home
KB Home North Bay, LLC, the developer of the land in the District and referred to herein as KB Home, is a subsidiary of KB Home, a Delaware corporation (“KB Home Corporation”), a public company whose common stock is traded on the New York Stock Exchange under the symbol “KBH”. Founded in 1957 and headquartered in Los Angeles, California, KB Home Corporation, through its affiliates, constructs and sells homes through its operating divisions in 7 states and 35 metropolitan markets of the United States.
KB Home purchased 128 lots from the Master Developer. KB Home plans to build out these units within “The Preserve at Creekside” neighborhood. The first homes in the neighborhood are expected to be sold and closed to individual homeowners in late 2023, and the final homes in the neighborhood by the end of 2026. KB Home’s plans are summarized as follows:
Project/Village
No. of
Lots
Floor
Plans
Square
Footage
Base
Pricing
The Preserve at Creekside 128 6 1,769 – 3,093 $504,900 and up KB Home anticipates the following absorption schedule for its 128 lots in the District.
Project/Village
No. of
Lots
Sold as
of
3/31/22
Remainder
2022 2023 2024 2025 2026 2027
The Preserve at Creekside 128 0 0 20 48 48 12 --
To date, KB Home has financed its land acquisition and various site development costs related to its development within the District through internally generated funds. KB Home expects to use home sales and internal funding to complete the development. However, home sales revenues for KB Home projects in the District are not segregated and set aside for completing its projects in the District. Home sales revenue is swept daily from KB Home’s divisions for use in operations, to pay down debt and for other corporate purposes and might get diverted to other KB Home needs at the discretion of KB Home management. Notwithstanding the foregoing, KB Home believes that it will have sufficient funds available to complete its Exhibit 2 1474
33 proposed development in the District, commensurate with the development timing described in this Official Statement.
Although KB Home expects to have sufficient funds available to complete its development in the District, commensurate with the development timing described in this Official Statement, there can be no assurance, however, that amounts necessary to finance the remaining development and home construction costs will be available from KB Home or any other source when needed. Neither KB Home, nor its parent, KB Home Corporation, nor any of its related entities are under any legal obligation of any kind to expend funds for the remaining development of and construction of homes on its property in the District. Any contributions by KB Home to fund the costs of such development and home construction are entirely voluntary.
KB Home Corporation is subject to the informational requirements of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and in accordance therewith files reports, proxy statements and other information, including financial statements, with the Securities and Exchange Commission (the “SEC”). Such filings, particularly KB Home Corporation’s Annual Report on Form 10-K for its most recent fiscal year, as filed by KB Home with the SEC, set forth certain data relative to the consolidated results of operations and financial position of KB Home Corporation and its subsidiaries, including KB Home, as of such date.
The SEC maintains an Internet web site that contains reports, proxy and information statements and other information regarding registrants that file electronically with the SEC, including KB Home Corporation. The address of such Internet web site is www.sec.gov. All documents subsequently filed by KB Home Corporation pursuant to the requirements of the Exchange Act after the date of this Official Statement will be available for inspection in such manner as the SEC prescribes. The Internet address and references to filings with the SEC are included for reference only, and the information on these Internet sites and on file with the SEC are not a part of this Official Statement and are not incorporated by reference into this Official Statement.
KB Home’s website address is www.kbhome.com. The website address is given for reference and convenience only. The information on the website may be incomplete or inaccurate and has not been reviewed by the City or the Underwriter. Nothing on the website is a part of this Official Statement or incorporated into this Official Statement by reference.
LGI Homes
LGI Homes – California, LLC (defined as LGI Homes) is engaged in the design and construction of homes across Texas, Arizona, Florida, Georgia, New Mexico, North Carolina, South Carolina, Colorado, Washington, Tennessee, Minnesota, Oklahoma, Alabama, Oregon, California, Nevada, West Virginia, Virginia and Pennsylvania. Since commencing operations in 2003, LGI Homes and its affiliates have constructed and sold over 50,000 homes. LGI Homes’ parent company is listed on the NASDAQ stock exchange under the ticker symbol “LGIH.” LGI Homes purchased 387 lots from the Master Developer. LGI Homes plans to build out these units within its “Cannery Park” neighborhood. LGI Homes’ first homes in the neighborhood were sold and conveyed to individual homeowners in April 2022, and the final homes in the neighborhood are expected to be conveyed to individual homeowners by the end of 2025. LGI Homes’ plans are summarized as follows:
Exhibit 2 1475
34 Community
No. of
Lots
Floor
Plans
Square
Footage
Base
Pricing
Cannery Park 387 5 1,342 – 2,215 $501,900 and up
As of June 15, 2022, LGI Homes had obtained building permits for 95 homes and had 24 homes in escrow that had not yet closed. To date, LGI Homes has financed its land acquisition and various site development costs related to its development within the District through internally generated funds. LGI Homes expects to use home sales and internal funding to complete the development. However, home sales revenues for LGI Homes projects in the District are not segregated and set aside for completing its projects in the District. Home sales revenue is swept daily from LGI Homes’ divisions for use in operations, to pay down debt and for other corporate purposes and might get diverted to other LGI Homes needs at the discretion of LGI Homes management. Notwithstanding the foregoing, LGI Homes believes that it will have sufficient funds available to complete its proposed development in the District, commensurate with the development timing described in this Official Statement.
As of June 15, 2022, LGI Homes estimated it had remaining costs of approximately $2,000,000 to be incurred for horizontal improvements to its land in the District and approximately $80,000,000 for the construction and sale of the homes it intended to build in the District. Although LGI Homes expects to have sufficient funds available to complete its development in the District, commensurate with the development timing described in this Official Statement, there can be no assurance that amounts necessary to finance the remaining development and home construction costs will be available from LGI Homes or any other source when needed. Neither LGI Homes, nor its parent, nor any of its related entities are under any legal obligation of any kind to expend funds for the remaining development of and construction of homes on its property in the District. Any contributions by LGI Homes to fund the costs of such development and home construction are entirely voluntary.
LGI Homes, Inc., which is the parent company to LGI Homes, is subject to the informational requirements of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and in accordance therewith files reports, proxy statements and other information, including financial statements, with the Securities and Exchange Commission (the “SEC”).
Such filings, particularly its Annual Report on Form 10-K for its most recent fiscal year, as filed with the SEC, set forth certain data relative to the consolidated results of operations and financial position of LGI Homes, Inc. and its subsidiaries, as of such date.
The SEC maintains an Internet web site that contains reports, proxy and information statements and other information regarding registrants that file electronically with the SEC, including LGI Homes, Inc. The address of such Internet web site is www.sec.gov. All documents subsequently filed by LGI Homes, Inc. pursuant to the requirements of the Exchange Act after the date of this Official Statement will be available for inspection in such manner as the SEC prescribes. The Internet address and references to filings with the SEC are included for reference only, and the information on these Internet sites and on file with the SEC are not a part of this Official Statement and are not incorporated by reference into this Official Statement.
LGI Homes, Inc.’s website address is www.lgihomes.com. The website address is given for reference and convenience only. The information on the website may be incomplete or inaccurate and has not been reviewed by the City or the Underwriter. Nothing on the website is a part of this Official Statement or incorporated into this Official Statement by reference.
Exhibit 2 1476
35 VALUE OF PROPERTY WITHIN THE DISTRICT AND SPECIAL TAX BURDEN The value of the land within the District is a critical factor in determining the investment quality of the Bonds. If a property owner defaults in the payment of the Special Tax, the City’s only remedy is to foreclose on the delinquent property in an attempt to obtain funds with which to pay the delinquent Special Tax. Although a portion of the District is developed, a variety of economic, political, and natural occurrences incapable of being accurately predicted can affect land values and eventual completion of development. See “SPECIAL RISK FACTORS – Property Values and Property Development.”
Unpaid Special Taxes do not constitute a personal indebtedness of the owners of the parcels within the District, and the owners have made no commitment to pay the principal of or interest on the Bonds or to support payment of the Bonds in any manner. There is no assurance that the owners have the ability to pay the Special Taxes or that, even if they have the ability, they will choose to pay such taxes. An owner may elect to not pay the Special Taxes when due and cannot be legally compelled to do so. Neither the City nor any Bondholder will have the ability at any time to seek payment from the owners of property within the District of any Special Tax or any principal or interest due on the Bonds, or the ability to control who becomes a subsequent owner of any property within the District.
Assessed Valuation
In connection with valuing property in the District, the Appraiser has obtained the 2021- 22 County Assessed Valuation of certain property in the District. In addition, to comply with internal policies and in order to provide a more accurate valuation of the 515 single-family residential parcels being developed by KB Homes and LGI Homes in the District, the City ordered an appraisal of such land. See “– The Appraisal.” Due to the recent and ongoing nature of development of homes in the District, the County assessed valuations are not in all cases reflective of most current development status, as is the case with certain properties in the District. As provided by Article XIII A of the California Constitution, county assessors’ assessed values are to reflect market value as of the date the property was last assessed (or 1975, whichever is more recent), increased by a maximum of 2% per year. Properties may be reassessed by the County only upon a change of at least 51% ownership of existing property or upon new construction. The assessed values of parcels in the District thus reflect, for undeveloped parcels, the estimate of the County Assessor (the “Assessor”) of market value when acquired (or 1975, whichever is later), possibly increased by 2% per year, and for parcels on which construction has occurred since their date of acquisition, the Assessor’s estimate of market value as of the time of construction, possibly increased by 2% per year. The actual market value of parcels in the District, if sold at foreclosure, may be higher or lower than the Assessor’s assessed values, depending upon the date of the Assessor’s most recent assessment. The actual fair market value of any parcel can often be more accurately established through an arms-length sale or an appraisal by an independent appraiser.
Because of the general limitation to 2% per year in increases in full cash value of properties that remain in the same ownership, the County tax roll does not reflect values uniformly proportional to actual market values. No assurance can be given that, should a parcel with delinquent Special Taxes be foreclosed and sold for the amount of the delinquency, any bid will be received for such property, or if a bid is received that such bid will be sufficient to pay such delinquent installments.
Exhibit 2 1477
36 The Appraisal
General. At the request of the City, Integra Realty Resources, Sacramento, California (the “Appraiser”) prepared an Appraisal Report with a date of value of May 4, 2022 (the “Appraisal”). The Appraisal is set forth in its entirety in APPENDIX B hereto. The description herein of the Appraisal is intended for limited purposes only; the Appraisal should be read in its entirety. The conclusions reached in the Appraisal are subject to certain assumptions and qualifications which are set forth in the Appraisal.
Property Appraised. The Appraisal estimates the value of the 515 single-family residential parcels being developed by KB Homes and LGI Homes in the District. It also notes the assessed values for the 4 non-residential parcels and 1 multi-family residential parcel not appraised. The 14 completed single-family homes within the boundaries of the District (as of the date of the Appraisal) are not currently assessed for a complete improvement value by the San Joaquin County Assessor; as such, a “not-less-than” estimate of market value based on the smallest floor plan constructed was appraised and assigned to each respective assessor’s parcel within the District.
Value Estimates. The Appraiser was requested to provide a market value of the appraised properties by assessor’s parcel, as welI as a cumulative, or aggregate, value of all taxable property in the District, as of the date of inspection (value). The Appraiser has concluded a value estimate of $95,137,466 for taxable property in the District, as shown below.
Table 2
City of Stockton
Community Facilities District No. 2019-1 (Cannery Park II) Estimate of Aggregate Value of Taxable Property in District Lots/Homes/
Parcels
Lot/
Home Value
Permits
and Fees
Remaining Site
Development
Costs
Value per
Component
Market Value
(Rd.)
KB Home North Bay LLC
Partially Improved Lots - Village A 50 $181,000 -- $(47,000) $134,000 $6,700,000 Partially Improved Lots - Village B 33 181,000 -- (47,000) 134,000 4,422,000 Partially Improved Lots - Village C 45 181,000 -- (47,000) 134,000 6,030,000 Total 128 $17,152,000
LGI Homes - California LLC
Improved Lots - Village E1 129 181,000 -- -- 181,000 $23,349,000 Improved Lots - Village E2 100 181,000 -- -- 181,000 18,100,000 Improved Lots - Village F1 2 181,000 -- -- 181,000 362,000 Under Construction - Village F1 56 181,000 $43,000 -- 224,000 12,544,000 Completed Home - Village F1 1 -- --- -- 485,000 485,000* Partially Improved Lots - Village F2 85 181,000 -- (47,000) 134,000 11,390,000 Total 373 $66,230,000
Individual Homeowners
Completed Home - Village F1 14 -- --- -- 485,000 6,790,000* Total 14 $6,790,000
Aggregate, or Cumulative, Appraised Values 515 $90,172,000 Aggregate, or Cumulative, Assessed Values 5 $4,965,466
Total Aggregate, or Cumulative, Value 520 $95,137,466
______________
* Not-less-than value.
Source: Integra Realty Resources.
Exhibit 2 1478
37 The estimate of value above represents a “not-less-than” value due to the fact the Appraiser was requested to provide a market value of the smallest floor plan on each singlefamily residential lot improved with a completed home without an assessed improvement value assigned. The valuation accounts for the impact of the lien of the Special Tax and excludes property in the District designated for public and quasi-public purposes and not subject to the Special Tax of the District.
Appraisal Methodology. In the Appraisal, the Appraiser provides estimates of market value of the appraised properties by ownership and Assessor’s parcel, as well as an aggregate, or cumulative value of the properties. The Appraiser used the sales comparison approach to value to determine the market value of each component comprising the appraised properties (being partially improved residential lots, finished residential lots, partially completed homes, completed homes without assessed values and the industrial parcels).
The cumulative, or aggregate, value of the appraised properties represents the sum of the value estimates concluded for each ownership interest, which is not equivalent to the market value of the District as a whole. Since the vested property owners have a number of lot(s) that could sell in bulk to one buyer within 12 months, no discounting was necessary. For additional details, see APPENDIX B.
Hypothetical Condition. The market value estimated by the Appraiser is based on a hypothetical condition. A hypothetical condition is defined by USPAP as “a condition, directly related to a specific assignment, which is contrary to what is known by the appraiser to exist on the effective date of the assignment results, but is used for the purpose of the analysis.” The estimate of market value is subject to the hypothetical condition that certain of the proceeds from the Bonds are available to reimburse for infrastructure improvements completed. The estimate of market value accounts for the impact of the Lien of the Special Taxes securing the Bonds.
Extraordinary Assumptions and Limiting Conditions. In considering the estimate of value evidenced by the Appraisal, the Appraisal is based upon a number of standard and special assumptions that affect the estimates as to value, some of which include that there were no adverse soil conditions, toxic substances or other environmental hazards that may interfere or inhibit development of the appraised properties. If, at some future date, items are discovered that are determined to have a detrimental impact on value, the Appraiser reserves the right to amend the opinion of value stated in the Appraisal. For more information and a complete description of certain other assumptions made by the Appraiser, see “APPENDIX B – The Appraisal.”
Because the Appraiser arrived at an estimate of current market value based upon certain assumptions which may or may not be fulfilled, no assurance can be given that, should the parcels become delinquent due to unpaid Special Taxes, and be foreclosed upon and offered for sale for the amount of the delinquency, any bid would be received for such property or, if a bid is received, that such bid would be sufficient to pay such delinquent Special Taxes.
No assurance can be given that the estimated absorption will be achieved or attained over an extended period of time; real estate is cyclical in nature, and it is impossible to accurately forecast and project specific demand over a projected absorption period. See “SPECIAL RISK FACTORS – Property Values and Property Development.” Exhibit 2 1479
38 Limitations of Appraised or Assessed Valuation. Property values may not be evenly distributed throughout the District; thus, certain parcels may have a greater value than others.
This disparity is significant because in the event of nonpayment of the Special Tax, the only remedy is to foreclose against the delinquent parcel.
No assurance can be given that the foregoing valuation can or will be maintained during the period of time that the Bonds are outstanding in that the City has no control over the market value of the property within the District or the amount of additional indebtedness that may be issued in the future by other public agencies, the payment of which, through the levy of a tax or an assessment, may be on a parity with the Special Taxes. See “– Overlapping Liens and Priority of Lien” below.
For a description of certain risks that might affect the assumptions made in the Appraisal, see “SPECIAL RISK FACTORS” herein.
Value to Special Tax Burden Ratios
The value of the land within the District is a critical factor in determining the investment quality of the Bonds. If a property owner defaults in the payment of a Special Tax, the County’s only remedy is to foreclose on the delinquent property in an attempt to obtain funds with which to pay the delinquent Special Taxes. See “SECURITY FOR THE BONDS - Delinquent Payments; Covenant for Superior Court Foreclosure” and “SPECIAL RISK FACTORS - Bankruptcy and Foreclosure Delays.” Reductions in District property values due to a downturn in the economy, natural disasters such as earthquakes or floods, stricter land use regulations or other events could have an adverse impact on the security for payment of the Special Taxes.
The Special Tax is levied on each parcel within the District and only the respective individual parcel is responsible for its allocated Special Tax.
Based upon the $95,137,466 estimated total valuation of taxable property in the District and an estimated principal amount of Bonds of $9,410,000*, as well as overlapping landsecured debt attributable to those parcels of $375,452, for a total direct and overlapping debt amount of $9,785,452*, the value-to-lien ratio for such property is approximately 9.72* to 1; provided, however, that the value-to-lien ratio of individual parcels may vary significantly.
In comparing the value of the real property within the District and the principal amount of the Bonds, it should be noted that only the real property upon which there is a delinquent Special Tax can be foreclosed upon, and the real property within the District cannot be foreclosed upon as a whole to pay delinquent Special Taxes of the owners of such parcels within the District unless all of the property is subject to a delinquent Special Tax. In any event, individual parcels may be foreclosed upon separately to pay delinquent Special Taxes levied against such parcels.
Value-to-Lien Ratios by Development Status and by Ranges. Table 3 on the following pages summarize the value-to-lien ratios of property in the District against the Bonds and overlapping debt in the District, by development status for purposes of application of the Special Tax Formula. Table 4 on the following page summarizes the appraised value-to-lien ratios of residential property in the District against the Bonds, by value-to-lien ratio ranges (excluding the two industrial zoned parcels).
* Preliminary; subject to change.
Exhibit 2 1480
39 Table 3
City of Stockton
Community Facilities District No. 2019-1 (Cannery Park II) Maximum Special Tax, Projected Fiscal Year 2022-23 Special Tax Levy, Allocable Debt and Value-to-Lien Ratios by Development Status Land Use
No. of
Parcels
Number of
Assessable
Lots
Assessed /
Appraised
Values (3)
Bonded
Debt (4)
Other
Overlapping
Land Secured
Debt
Aggregate
Bond
Indebtedness
Percentage
of Bonded
Debt
Maximum
Special Tax
Percentage
of
Maximum
Special Tax
Estimated
FY 2022-23
Special Tax
Levy
Developed (1) 71 71 $19,819,000 $1,297,301 $83,514 $1,380,815 14.11% $113,600 7.72% $113,600 Undeveloped - Final Map 137 444 70,353,000 8,112,699 179,617 8,292,316 84.74 710,400 48.27 0 Undeveloped - Other Land Uses (2) 5 0 4,965,466 0 112,321 112,321 1.15 647,579 44.01 0 Total 213 515 $95,137,466 $9,410,000 $375,452 $9,785,452 100.00% $1,471,579 100.00% $113,600 (1) Per the RMA, parcels are classified as "Developed" if a building permit is issued before May 1 of the preceding fiscal year. (2) Parcel 122-020-190 is within CFD 2019-1 boundary and subject to the Special Tax as defined per the RMA. The parcel is classified as Industrial with structure improvements per San Joaquin County Secured Roll. However, because the buildings existed before the formation of the CFD, the parcel will be classified as Undeveloped until it is further developed.(3) Based on Appraisal Report dated May 27, 2022. Appraised values were assigned to completed and final mapped lots. Assessed Values were utilized for the vacant parcels currently designated for high density residential, commercial and industrial uses. (4) Bonded Debt allocated by Maximum Special Taxes for Developed and Final Mapped parcels Source: FY 2021-22 San Joaquin County Secured Roll, Appraisal Report by Integra Realty Resources, Willdan Financial Services Exhibit 2 1481
40 Table 4
City of Stockton
Community Facilities District No. 2019-1 (Cannery Park II) Estimated Valuation of District Property and Value-to-Lien Ratios by Range (Debt Allocated Based on Maximum Special Tax)
Value to
Bonded Debt
Number of
Parcels
Number of
Assessable
Lots
Total
Assessed /
Appraised
Values (1)
Bonded
Debt (2)
Other
Overlapping
Land Secured
Debt (3)
Aggregate
Bond
Indebtedness
Maximum
Special Tax
Percentage of
Maximum
Special Tax
FY 2022-23
Estimated
Special
Tax Levy
Greater than 20:1 20 15 $12,240,466 $274,078 $129,965 $404,042 $671,579 45.64% $24,000 15:1 to 19.99:1 0 0 0 0 0 0 0 0.00 0
10:1 to 14.99:1 56 56 12,544,000 1,023,223 65,871 1,089,094 89,600 6.09 89,600 5:1 to 9.99:1 137 444 70,353,000 8,112,699 179,617 8,292,316 710,400 48.27 0 Total 213 515 $95,137,466 $9,410,000 $375,452 $9,785,452 $1,471,579 100.00% $113,600 (1) Based on Appraisal Report dated May 27, 2022. Appraised values were assigned to completed and final mapped lots. Assessed Values were utilized for the vacant parcels currently designated for high density residential, commercial and industrial uses. (2) Bonded Debt allocated by Maximum Special Taxes for Developed and Final Mapped parcels (3) Overlapping Debt provided by CalMuni as of June 1, 2022.
Source: FY 2021-22 San Joaquin County Secured Roll, Appraisal Report by Integra Realty Resources, Willdan Financial Services Exhibit 2 1482
41 Overlapping Liens and Priority of Lien
The principal of and interest on the Bonds are payable from the Special Tax authorized to be collected within the District, and payment of the Special Tax is secured by a lien on certain real property within the District. Such lien is co-equal to and independent of the lien for general taxes and any other liens imposed under the Act, regardless of when they are imposed on the property in the District. The imposition of additional special taxes, assessments and general property taxes will increase the amount of independent and co-equal liens which must be satisfied in foreclosure. The City, the County and certain other public agencies are authorized by the Act to form other community facilities districts and improvement areas and, under other provisions of State law, to form special assessment districts, either or both of which could include all or a portion of the land within the District.
Other public agencies whose boundaries overlap those of the District could, without the consent of the City and in certain cases without the consent of the owners of the land within the District, impose additional taxes or assessment liens on the land within the District. The lien created on the land within the District through the levy of such additional taxes or assessments may be secured on parity with the lien of the Special Tax. In addition, construction loans may be obtained by the homebuilder owners and home loans are likely to be obtained by ultimate homeowners. The deeds of trust securing such debt on property within the District, however, will be subordinate to the lien of the Special Tax.
For example, additional CFD obligations on land in the District include City of Stockton Community Facilities District No. 2018-3 (Citywide Services and Maintenance). This CFD levies special taxes that pay for authorized public services, which special taxes are on a parity to the lien securing the Special Taxes securing the Bonds.
There can be no assurance that the current owners, or any subsequent owner, will not petition for the formation of other community facilities districts and improvement areas or for a special assessment district or districts and that parity special taxes or special assessments will not be levied by the County or some other public agency to finance additional public facilities, however no other special districts are currently contemplated or foreseen by the City.
Set forth on the following page is an overlapping debt table showing the existing authorized indebtedness payable with respect to property within the District. This table has been prepared by California Municipal Statistics Inc. as of the date indicated, and is included for general information purposes only. The City has not reviewed the data for completeness or accuracy and makes no representations in connection therewith.
Exhibit 2 1483
42 Table 5
City of Stockton
Community Facilities District No. 2019-1 (Cannery Park II) Summary of Overlapping Bonded Debt
As of June 1, 2022
2021-22 Local Secured Assessed Valuation: $16,597,967
DIRECT AND OVERLAPPING TAX AND ASSESSMENT DEBT: % Applicable Debt 6/1/22 San Joaquin Delta Community College District General Obligation Bonds 0.017% $ 32,864 Lodi Unified School District General Obligation Bonds 0.083 251,677 Lodi Unified School District SFID No. 1 General Obligation Bonds 0.211 90,911 City of Stockton Community Facilities District No. 2019-1 100.000 - (1) TOTAL DIRECT AND OVERLAPPING TAX AND ASSESSMENT DEBT $375,452
OVERLAPPING GENERAL FUND DEBT:
San Joaquin County Certificates of Participation 0.018% $11,036 Lodi Unified School District Certificates of Participation 0.083 8,382 City of Stockton Pension Obligation Bonds 0.063 33,700
TOTAL OVERLAPPING GENERAL FUND DEBT $53,118
COMBINED TOTAL DEBT $428,570 (2)
Ratios to 2021-22 Assessed Valuation:
Direct Debt ($0)..................................................................... 0.00% Total Direct and Overlapping Tax and Assessment Debt ...... 2.26% Combined Total Debt ............................................................. 2.58% _____________
(1) Excludes the Bonds to be sold.
(2) Excludes tax and revenue anticipation notes, enterprise revenue, mortgage revenue and non-bonded capital lease obligations.
Source: California Municipal Statistics, Inc.
Special Tax Collection and Delinquency Rate
The first year for levy and collection of the Special Taxes will be for Fiscal Year 2022-23; accordingly, there is no delinquency history.
Future delinquencies in the payment of property taxes (including the Special Taxes) with respect to property in the District could result in draws on the Reserve Fund established, and perhaps, ultimately, a default in the payment on the Bonds. See “SPECIAL RISK FACTORS.” Exhibit 2 1484
43 Sample Tax Bill
The following table summarizes the representative property tax bill for single-family residential property in the District.
Table 6
City of Stockton
Community Facilities District No. 2019-1 (Cannery Park II) Representative Property Tax Bill for Fiscal Year 2021-22(1)
ASSESSED VALUATION AND PROPERTY TAXES
Assessed Values (2) $485,000.00
Percent of
Assessed
Value
Projected
Amount
AD VALOREM PROPERTY TAXES 1.0000% $4,850.00
ASSESSMENTS, SPECIAL TAXES, AND PARCEL CHARGES (3)
Lodi USD Bond 2012R 0.0088% $42.68
Lodi USD Bond 2015R 0.0022 10.66
Lodi SFID Bond 2016R 0.0233 113.00
Lodi USD Bond 2017 0.0108 52.38
Lodi USD Bond 2017R 0.0231 112.02
Lodi SFID 1 Bond 2018 0.0020 9.70
Lodi USD Bond 2020 0.0434 210.48
Lodi USD Bond 2021 0.0145 70.32
Lodi SFID 1 Bond 2020 0.0259 125.60
SJ Delta College Bond 2015R 0.0088 42.68
SJ Delta College Bond 2018D 0.0028 13.58
SJ Delta College Bond 2020R 0.0019 9.20
SJ Delta College Bond 2021R 0.0028 13.58
Cannery Park Zn 2B Storm Drain 29.12
Water Zone 2 2.31
SJC MOSQ & VCTR CONT 11.22
SJAFCA FLDOM 9.06
CSA No. 53 4.00
Flood Zone 9 6.97
SJC MOSQUITO ABA 1.43
Cannery Park LMAD No. 96-2 Zone A-10 429.61
CFD 2019-1 Cannery Park II (Facilities) 1,600.00
CFD 2019-1 Cannery Park II (Services) 562.43
Total Assessments, Special Taxes, and Parcel Charges $3,482.03 PROJECTED TOTAL PROPERTY TAXES $8,332.03
PROJECTED TOTAL EFFECTIVE TAX RATE 1.72%
(1) Sample tax bill for a single-family home with the median land use and median home value. (2) Assessed value reflects estimated total assessed value.
Source: Willdan Financial Services & County of San Joaquin.
Exhibit 2 1485
44 SPECIAL RISK FACTORS
The purchase of the Bonds described in this Official Statement involves a degree of risk that may not be appropriate for some investors. The following includes a discussion of some of the risks which should be considered before making an investment decision. This discussion does not purport to be comprehensive or definitive or a complete statement of all factors that may be considered as risks in evaluating the credit quality of the Bonds.
Limited Obligation of the City to Pay Debt Service
The City has no obligation to pay principal of and interest on the Bonds in the event Special Tax collections are delinquent, other than from amounts, if any, on deposit in the Reserve Fund or funds derived from the tax sale or foreclosure and sale of parcels on which levies of the Special Tax are delinquent, nor is the City obligated to advance funds to pay such debt service on the Bonds. The Bonds are not general obligations of the City but are limited obligations of the City and the District payable solely from the proceeds of the Special Tax and certain funds held under the Fiscal Agent Agreement, including amounts deposited in the Reserve Fund and investment income thereon, and the proceeds, if any, from the sale of property subject to the Special Tax in the event of a foreclosure. See “SECURITY FOR THE BONDS.” Any tax for the payment of the Bonds will be limited to the Special Tax to be collected within the jurisdiction of the District.
Levy and Collection of the Special Tax
General. The principal source of payment of principal of and interest on the Bonds is the proceeds of the annual levy and collection of the Special Tax against property within the District.
Limitation on Maximum Annual Special Tax Rate. The annual levy of the Special Tax is subject to the maximum annual Special Tax rate authorized in the Special Tax Formula. The levy cannot be made at a higher rate even if the failure to do so means that the estimated proceeds of the levy and collection of the Special Tax, together with other available funds, will not be sufficient to pay debt service on the Bonds.
In addition to the maximum annual Special Tax rate limitation in the Special Tax Formula, Section 53321(d) of the Act provides that the special tax levied against any parcel for which an occupancy permit for private residential use has been issued may not be increased as a consequence of delinquency or default by the owner of any other parcel within a community facilities district by more than 10% above the amount that would have been levied in such Fiscal Year had there never been any such delinquencies or defaults. In cases of significant delinquency, these factors may result in defaults in the payment of principal of and interest on the Bonds.
No Relationship Between Property Value and Special Tax Levy. Because the Special Tax Formula is not based on property value, the levy of the Special Tax will rarely, if ever, result in a uniform relationship between the value of particular Taxable Parcels and the amount of the levy of the Special Tax against those parcels. Thus, there will rarely, if ever, be a uniform relationship between the value of the Taxable Parcels and their proportionate share of debt service on the Bonds, and certainly not a direct relationship.
Exhibit 2 1486
45 Factors that Could Lead to Special Tax Deficiencies. The following are some of the factors that might cause the levy of the Special Tax on any particular Taxable Parcels to vary from the Special Tax that might otherwise be expected:
Transfers to Governmental Entities. The number of Taxable Parcels could be reduced through the acquisition of Taxable Parcels by a governmental entity and failure of the government to pay the Special Tax based upon a claim of exemption or, in the case of the federal government or an agency thereof, immunity from taxation, thereby resulting in an increased tax burden on the remaining taxed parcels.
Property Tax Delinquencies. Failure of the owners of Taxable Parcels to pay property taxes (and, consequently, the Special Tax), or delays in the collection of or inability to collect the Special Tax by tax sale or foreclosure and sale of the delinquent parcels, could result in a deficiency in the collection of Net Taxes. For a summary of recent Special Tax collection and delinquency rates in the District, see “VALUE OF PROPERTY WITHIN THE DISTRICT AND SPECIAL TAX BURDEN” herein.
Concentration of Ownership
A substantial amount of taxable land within the District is owned by the Master Developer, KB Home and LGI Homes. The owner of property in the District is not personally obligated to pay the Special Tax attributable to the owner’s property. Rather, the Special Tax is an obligation only against the parcel of property, secured by the amount which could be realized in a foreclosure proceeding against the property, and not by any promise of the owner to pay. If the value of the property is not sufficient, taking into account other obligations also constituting a lien against the property, the City, Fiscal Agent and owners of the Bonds have no recourse against the owner, such as filing a lawsuit to collect money.
Failure of the Master Developer, KB Home, LGI Homes or any future owner of significant property subject to the Special Taxes in the District to pay installments of Special Taxes when due could cause the depletion of the Reserve Fund prior to reimbursement from the resale of foreclosed property or payment of the delinquent Special Tax and, consequently, result in the delinquency rate reaching a level that would cause an insufficiency in collection of the Special Tax to meet the District’s obligations on the Bonds. In that event, there could be a delay or failure in payments on the Bonds. See “SPECIAL RISK FACTORS – Bankruptcy and Foreclosure Delays” below and “SECURITY FOR THE BONDS – Delinquent Payments; Covenant for Superior Court Foreclosure.”
Development of undeveloped property within the District may be subject to unexpected delays, disruptions and changes which may affect the willingness and ability of landowners to pay the Special Taxes when due. Certain infrastructure improvements remain to be completed in order to complete construction of the remaining homes in the District. No assurance can be given that the remaining proposed residential development will be partially or fully completed, and for purposes of evaluating the investment quality of the Bonds, prospective purchasers should consider the possibility that such parcels will remain vacant and only partially improved.
Appraised Values
The Appraisal estimates the market value of certain taxable property within the District.
This market value is merely the present opinion of the Appraiser, and is subject to the assumptions and limiting conditions stated in the Appraisal. The City has not sought the Exhibit 2 1487
46 present opinion of any other appraiser of the value of the taxed parcels. A different present opinion of value might be rendered by a different appraiser.
The opinion of value relates to sale by a willing seller to a willing buyer as of the date of valuation, each having similar information and neither being forced by other circumstances to sell or to buy. Consequently, the opinion is of limited use in predicting the selling price at a foreclosure sale, because the sale is forced and the buyer may not have the benefit of full information.
In considering the estimates of value evidenced by the Appraisal, it should be noted that the Appraisal is based upon a number of standard and special assumptions which affect the estimates as to value, as well as the hypothetical condition of the Improvements having been completed, as set forth in the Appraisal (see APPENDIX B hereto). The improvements to be financed by the Bonds were not in place as of the date of inspection; thus, the value estimate is subject to a hypothetical condition (of such improvements being in place).
In addition, the opinion is a present opinion. It is based upon present facts and circumstances. Differing facts and circumstances may lead to differing opinions of value. The appraised market value is not evidence of future value because future facts and circumstances may differ significantly from the present.
No assurance can be given that any of the appraised property in the District could be sold in a foreclosure for the estimated market value contained in the Appraisal. Such sale is the primary remedy available to Bondowners if that property should become delinquent in the payment of Special Taxes.
Property Values and Property Development
The value of taxable property within the District is a critical factor in determining the investment quality of the Bonds. If a property owner defaults in the payment of the Special Tax, the City’s only remedy is to foreclose on the delinquent property in an attempt to obtain funds with which to pay the delinquent Special Tax. Land values could be adversely affected by economic and other factors beyond the City’s control, such as a general economic downturn, relocation of employers out of the area, shortages of water, electricity, natural gas or other utilities, destruction of property caused by earthquake, flood, wildfires, or other natural disasters, environmental pollution or contamination, or unfavorable economic conditions.
Neither the District nor the City has evaluated development risks related to the development of land in the District. Since these are largely business risks of the type that property owners customarily evaluate individually, and inasmuch as changes in land ownership may well mean changes in the evaluation with respect to any particular parcel, the District is issuing the Bonds without regard to any such evaluation. Thus, the creation of the District and the issuance of the Bonds in no way implies that the District or the City has evaluated these risks or the reasonableness of these risks.
The following is a discussion of specific risk factors that could affect the timing or scope of property development in the District or the value of property in the District.
Land Development. Land values are influenced by the level of development in the area in many respects.
Exhibit 2 1488
47 First, undeveloped or partially developed land is generally less valuable than developed land and provides less security to the Owners of the Bonds should it be necessary for the District to foreclose on undeveloped or partially developed property due to the nonpayment of Special Taxes.
Second, failure to complete development on a timely basis could adversely affect the land values of those parcels that have been completed. Lower land values would result in less security for the payment of principal of and interest on the Bonds and lower proceeds from any foreclosure sale necessitated by delinquencies in the payment of the Special Tax. See “VALUE OF PROPERTY WITHIN THE DISTRICT AND SPECIAL TAX BURDEN – Value to Special Tax Burden Ratios.” No assurance can be given that the proposed development within the District will be completed, and in assessing the investment quality of the Bonds, prospective purchasers should evaluate the risks of non-completion.
Neither KB Home Sacramento, Inc., LGI Homes nor any other person provides any assurances that the project currently envisioned for the land in the District will be completed, or that available sources of financing that will actually be available and sufficient to complete such projected development. Developers have no obligation to the City or to owners of the Bonds to complete the project.
Risks of Real Estate Investment Generally. Continuing development of land within the District may be adversely affected by changes in general or local economic conditions, fluctuations in the real estate market, increased construction costs, development, financing and marketing capabilities of individual property owners, water or electricity shortages, and other similar factors. Development in the District may also be affected by development in surrounding areas, which may compete with the District. In addition, land development operations are subject to comprehensive federal, state and local regulations, including environmental, land use, zoning and building requirements. There can be no assurance that proposed land development operations within the District will not be adversely affected by future government policies, including, but not limited to, governmental policies to restrict or control development, or future growth control initiatives. There can be no assurance that land development operations within the District will not be adversely affected by these risks.
Natural Disasters. The value of the parcels in the District in the future can be adversely affected by a variety of natural occurrences, particularly those that may affect infrastructure and other public improvements and private improvements on the parcels in the District and the continued habitability and enjoyment of such private improvements. For example, the areas in and surrounding the District, like those in much of the State, may be subject to earthquakes or other unpredictable seismic activity. See “THE DISTRICT – Environmental Matters.” Other natural disasters could include, without limitation, landslides, floods, droughts or tornadoes. One or more natural disasters could occur and could result in damage to improvements of varying seriousness. The damage may entail significant repair or replacement costs and that repair or replacement may never occur either because of the cost, or because repair or replacement will not facilitate habitability or other use, or because other considerations preclude such repair or replacement. Under any of these circumstances there could be significant delinquencies in the payment of Special Taxes, and the value of the parcels may well depreciate.
Legal Requirements. Other events that may affect the value of a parcel include changes in the law or application of the law. Such changes may include, without limitation, local Exhibit 2 1489
48 growth control initiatives, local utility connection moratoriums and local application of statewide tax and governmental spending limitation measures. Development in the District may also be adversely affected by the application of laws protecting endangered or threatened species.
Hazardous Substances. Any discovery of a hazardous substance detected on property within the District would affect the marketability and the value of some or all of the property in the District. In that event, the owners and operators of a parcel within the District may be required by law to remedy conditions of the parcel relating to releases or threatened releases of hazardous substances. The federal Comprehensive Environmental Response, Compensation and Liability Act of 1980, sometimes referred to as “CERCLA” or the “Superfund Act,” is the most well-known and widely applicable of these laws. State law with regard to hazardous substances are also applicable to property within the District and are as stringent as the federal laws. Under many of these laws, the owner (or operator) is obligated to remedy a hazardous substance condition of property whether or not the owner (or operator) has anything to do with creating or handling the hazardous substance. The effect, therefore, should any of the parcels be contaminated by a hazardous substance is to reduce the marketability and value of the parcel by the costs of remedying the condition, because the purchaser, upon becoming owner, will become obligated to remedy the condition just as is the seller.
The values set forth in the Appraisal do not take into account the possible reduction in marketability and value of any of the parcels within the District by reason of the possible liability of the owner (or operator) for the remedy of a hazardous substance condition on a parcel.
Although the City is not aware that the owner (or operator) of any of the property within the District has a current liability for a hazardous substance with respect to any of the parcels, it is possible that such liabilities do currently exist and that the City is not aware of them.
Further, it is possible that liabilities may arise in the future with respect to any of the parcels within the District resulting from the existence, currently, on the parcel of a substance presently classified as hazardous but which has not been released or the release of which is not presently threatened, or may arise in the future resulting from the existence, currently, on the parcel of a substance not presently classified as hazardous but which may in the future be so classified. Further, such liabilities may arise not simply from the existence of a hazardous substance but from the method of handling it. All of these possibilities could significantly affect the value of a parcel within the District that is realizable upon a foreclosure sale.
Endangered and Threatened Species. It is illegal to harm or disturb any plants or animals in their habitat that have been listed as endangered species by the United States Fish & Wildlife Service under the Federal Endangered Species Act or by the California Fish & Game Commission under the California Endangered Species Act without a permit. The discovery of an endangered plant or animal could delay development of undeveloped property in the District or reduce the value of such property.
Other Possible Claims Upon the Value of Taxable Property While the Special Taxes are secured by the Taxable Parcels in the District, the security only extends to the value of such property that is not subject to priority and parity liens and similar claims. The table in the section entitled “VALUE OF PROPERTY WITHIN THE DISTRICT AND SPECIAL TAX BURDEN – Overlapping Liens and Priority of Lien” shows the presently outstanding amount of governmental obligations (with stated exclusions), the tax or assessment for which is or may become an obligation of one or more of the Taxable Parcels.
The table also states the additional amount of general obligation bonds the tax for which, if and Exhibit 2 1490
49 when issued, may become an obligation of one or more of the Taxable Parcels. The table does not specifically identify which of the governmental obligations are secured by liens on one or more of the Taxable Parcels.
The City, the County and certain other public agencies are authorized by the Act to form other community facilities districts and improvement areas and, under other provisions of State law, to form special assessment districts, either or both of which could include all or a portion of the land within the District. Other governmental obligations may be authorized and undertaken or issued in the future, the tax, assessment or charge for which may become an obligation of one or more of the parcels of taxable property and may be secured by a lien on a parity with the lien of the Special Tax securing the Bonds.
In general, as long as the Special Tax is collected on the County tax roll, the Special Tax and all other taxes, assessments and charges also collected on the tax roll are on a parity, that is, are of equal priority. Questions of priority become significant when collection of one or more of the taxes, assessments or charges is sought by some other procedure, such as foreclosure and sale. In the event of proceedings to foreclose for delinquency of Special Taxes securing the Bonds, the Special Tax will be subordinate only to existing prior governmental liens, if any.
Otherwise, in the event of such foreclosure proceedings, the Special Taxes will generally be on a parity with the other taxes, assessments and charges, and will share the proceeds of such foreclosure proceedings on a pro rata basis. Although the Special Taxes will generally have priority over non-governmental liens on a Taxable Parcel, regardless of whether the nongovernmental liens were in existence at the time of the levy of the Special Tax or not, this result may not apply in the case of bankruptcy. See “– Bankruptcy and Foreclosure Delays” below.
Bankruptcy and Foreclosure Delays
The Fiscal Agent Agreement generally provides that the Special Tax is to be collected in the same manner as ordinary ad valorem property taxes are collected and, except as provided in the special covenant for foreclosure described in “SECURITY FOR THE BONDS – Delinquent Payments of Special Tax; Covenant for Superior Court Foreclosure” and in the Act, is subject to the same penalties and the same procedure, sale and lien priority in case of delinquency as is provided for ordinary ad valorem property taxes. Under these procedures, if taxes are unpaid for a period of five years or more, the property is deeded to the State and then is subject to sale by the County.
If sales or foreclosures of property are necessary, there could be a delay in payments to owners of the Bonds pending such sales or the prosecution of foreclosure proceedings and receipt by the City of the proceeds of sale if the Reserve Fund is depleted. See “SECURITY FOR THE BONDS – Delinquent Payments; Covenant for Superior Court Foreclosure.” The ability of the City to collect interest and penalties specified by State law and to foreclose against properties having delinquent Special Tax installments may be limited in certain respects with regard to properties in which the Federal Deposit Insurance Corporation (the “FDIC”) has or obtains an interest. The FDIC would obtain such an interest by taking over a financial institution that has made a loan that is secured by property within the District.
The payment of the Special Tax and the ability of the City to foreclose the lien of a delinquent unpaid Special Tax may also be limited by bankruptcy, insolvency or other laws generally affecting creditors’ rights or by the laws of the State of California relating to judicial foreclosure. The various legal opinions to be delivered concurrently with the delivery of the Exhibit 2 1491
50 Bonds (including Bond Counsel’s approving legal opinion) will be qualified as to the enforceability of the various legal instruments by bankruptcy, insolvency, reorganization, moratorium and other similar laws affecting creditors’ rights, by the application of equitable principles and by the exercise of judicial discretion in appropriate cases.
Other laws generally affecting creditors’ rights or relating to judicial foreclosure may affect the ability to enforce payment of Special Taxes or the timing of enforcement of Special Taxes. For example, the Soldiers and Sailors Civil Relief Act of 1940 affords protections such as a stay in enforcement of the foreclosure covenant, a six-month period after termination of military service to redeem property sold to enforce the collection of a tax or assessment and a limitation on the interest rate on the delinquent tax or assessment to persons in military service if the court concludes the ability to pay such taxes or assessments is materially affected by reason of such service.
To the extent that property in the District continues to be owned by a limited number of property owners, the chances are increased that the Reserve Fund could be fully depleted during any such delay in obtaining payment of delinquent Special Taxes. As a result, sufficient moneys would not be available in the Reserve Fund to make up shortfalls resulting from delinquent payments of the Special Tax and thereby to pay principal of and interest on the Bonds on a timely basis.
FDIC/Federal Government Interests in Properties
General. The ability of the District to foreclose the lien of delinquent unpaid Special Tax installments may be limited with regard to properties in which the Federal Deposit Insurance Corporation (the “FDIC”), the Drug Enforcement Agency, the Internal Revenue Service, or other federal agency has or obtains an interest.
Federal courts have held that, based on the supremacy clause of the United States Constitution, in the absence of Congressional intent to the contrary, a state or local agency cannot foreclose to collect delinquent taxes or assessments if foreclosure would impair the federal government interest.
The supremacy clause of the United States Constitution reads as follows: “This Constitution, and the Laws of the United States which shall be made in Pursuance thereof; and all Treaties made, or which shall be made, under the Authority of the United States, shall be the supreme Law of the Land; and the Judges in every State shall be bound thereby, any Thing in the Constitution or Laws of any State to the contrary notwithstanding.” This means that, unless Congress has otherwise provided, if a federal governmental entity owns a parcel that is subject to Special Taxes within the District but does not pay taxes and assessments levied on the parcel (including Special Taxes), the applicable state and local governments cannot foreclose on the parcel to collect the delinquent taxes and assessments.
Moreover, unless Congress has otherwise provided, if the federal government has a mortgage interest in the parcel and the District wishes to foreclose on the parcel as a result of delinquent Special Taxes, the property cannot be sold at a foreclosure sale unless it can be sold for an amount sufficient to pay delinquent taxes and assessments on parity with the Special Taxes and preserve the federal government’s mortgage interest. In Rust v. Johnson (9th Circuit; 1979) 597 F.2d 174, the United States Court of Appeal, Ninth Circuit held that the Federal National Mortgage Association (“FNMA”) is a federal instrumentality for purposes of this Exhibit 2 1492
51 doctrine, and not a private entity, and that, as a result, an exercise of state power over a mortgage interest held by FNMA constitutes an exercise of state power over property of the United States.
No Acceleration Provisions
The Bonds do not contain a provision allowing for their acceleration in the event of a payment default or other default under the terms of the Bonds or the Fiscal Agent Agreement.
Under the Fiscal Agent Agreement, a Bondowner is given the right for the equal benefit and protection of all Bondowners similarly situated to pursue certain remedies. So long as the Bonds are in book-entry form, DTC will be the sole Bondowner and will be entitled to exercise all rights and remedies of Bond holders, in accordance with its procedures and rules.
Loss of Tax Exemption
As discussed under the caption “TAX MATTERS,” interest on the Bonds might become includable in gross income for purposes of federal income taxation retroactive to the date the Bonds were issued as a result of future acts or omissions of the City in violation of its covenants in the Fiscal Agent Agreement. The Fiscal Agent Agreement does not contain a special redemption feature triggered by the occurrence of an event of taxability. As a result, if interest on the Bonds were to become includable in gross income for purposes of federal income taxation, the Bonds would continue to remain outstanding until maturity unless earlier redeemed pursuant to optional redemption, mandatory sinking fund redemption or special mandatory redemption upon prepayment of the Special Taxes.
IRS Audit of Tax-Exempt Bond Issues
The Internal Revenue Service (the “IRS”) has initiated an expanded program for the auditing of tax-exempt bond issues, including both random and targeted audits. It is possible that the Bonds will be selected for audit by the IRS. It is also possible that the market value of such Bonds might be affected as a result of such an audit of such Bonds (or by an audit of similar bonds or securities).
Voter Initiatives
From time to time, initiative measures qualify for the State ballot pursuant to the State’s constitutional initiative process and those measures could be adopted by State voters. The adoption of any such initiative might place limitations on the ability of the State, the City, the County or other local districts to increase revenues or to increase appropriations or on the ability of the landowners to complete the development of the District. See “– Property Values and Property Development” above.
Under the State Constitution, the power of initiative is reserved to the voters for the purpose of enacting statutes and constitutional amendments. Since 1978, the voters have exercised this power through the adoption of Proposition 13 and similar measures, including Proposition 218, which was approved in the general election held on November 5, 1996, and Proposition 26, which was approved on November 2, 2010.
Any such initiative may affect the collection of fees, taxes and other types of revenue by local agencies such as the District. Subject to overriding federal constitutional principles, such collection may be materially and adversely affected by voter-approved initiatives, possibly to the Exhibit 2 1493
52 extent of creating cash-flow problems in the payment of outstanding obligations such as the Special Tax Bonds.
Proposition 218—Voter Approval for Local Government Taxes—Limitation on Fees, Assessments, and Charges—Initiative Constitutional Amendment, added Articles XIIIC and XIIID to the 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, State voters approved Proposition 26, entitled the “Supermajority Vote to Pass New Taxes and Fees Act”. Section 1 of Proposition 26 declares that Proposition 26 is intended to limit the ability of the State Legislature and local government to circumvent existing restrictions on increasing taxes by defining the new or expanded taxes as “fees.” Proposition 26 amended Articles XIIIA and XIIIC of the State Constitution. The amendments to Article XIIIA limit the ability of the State Legislature to impose higher taxes (as defined in Proposition 26) without a two-thirds vote of the Legislature. Article XIIIC requires that all new local taxes be submitted to the electorate before they become effective. Taxes for general governmental purposes require a majority vote and taxes for specific purposes (“special taxes”) require a two-thirds vote.
The Special Taxes and the Bonds were each authorized by not less than a two-thirds vote of the landowners within the District who constituted the qualified electors at the time of such voted authorization. The District believes, therefore, that issuance of the Bonds does not require the conduct of further proceedings under the Act, Proposition 218 or Proposition 26.
Like their antecedents, Proposition 218 and Proposition 26 are likely to undergo both judicial and legislative scrutiny before the impact on the District can be determined. Certain provisions of Proposition 218 and Proposition 26 may be examined by the courts for their constitutionality under both State and federal constitutional law, the outcome of which cannot be predicted.
Case Law Related to the Mello-Roos Act
On August 1, 2014, the California Court of Appeal, Fourth Appellate District, issued its opinion in City of San Diego v. Melvin Shapiro, et al. (D063997). The case involved a Convention Center Facilities District (the “CCFD”) established by the City of San Diego. The CCFD is a financing district established under San Diego’s city charter (the “Charter”) and was intended to function much like a community facilities district established under the Act. The CCFD was comprised of all of the real property in the entire city. However, the CCFD special tax was to be levied only on properties in the CCFD that were improved with a hotel.
At the election to authorize the CCFD special tax, the CCFD proceedings limited the electorate to owners of hotel properties and lessees of real property owned by a governmental entity on which a hotel was located. Registered voters in the City of San Diego were not permitted to vote. This definition of the qualified electors of the CCFD was based on Section 53326(c) of the Act, which generally provides that, if a special tax will not be apportioned in any tax year on residential property, the legislative body may provide that the vote shall be by the landowners of the proposed community facilities district whose property would be subject to the special tax. The San Diego Court held that the CCFD special tax election did not comply with its Charter and with applicable provisions of the State Constitution -- specifically Article XIIIA, section 4 (“Cities, Counties and special districts, by a two-thirds vote of the qualified electors of such district, may impose special taxes on such district . . ..”) and Article XIIIC, section 2(d) (“No Exhibit 2 1494
53 local government may impose, extend, or increase any special tax unless and until that tax is submitted to the electorate and approved by a two-thirds vote.”) -- because the electors in the CCFD election should have been the registered voters residing within the CCFD (the boundaries of which were coterminous with the boundaries of the City of San Diego).
As to the District, there were no registered voters within the District at the time of the election to authorize the Special Taxes. Significantly, the San Diego Court expressly stated that it was not addressing the validity of a landowner election to impose special taxes on property pursuant to the Act in situations where there are fewer than 12 registered voters. Therefore, by its terms, the San Diego Court’s holding does not apply to the special tax election in the District.
Moreover, Sections 53341 and 53359 of the Act establish a limited period of time in which special taxes levied under the Act may be challenged by a third party, which time period has now passed.
COVID-19
The COVID-19 pandemic remains ongoing. Although to date, development of taxable property in the District has not been materially adversely impacted by COVID-19, the continued spread of COVID-19, and responses intended to slow its spread, may result in negative impacts to the homebuilding operations and sales of homes within the District. There can be no assurances that the spread of the virus and any future shelter in place orders and social distancing requirements imposed by the State of California, or other State or local mandates and/or other responses intended to slow its spread will not materially adversely impact the pace of sales of lots or homes or the willingness of owners of land in the District, including the Master Developer, KB Home, LGI Homes, or individual homeowners, to pay the Special Taxes securing the Bonds. In addition, no assurance can be given that the property tax payment dates will not be deferred in the future, which may cause a delay in the receipt of Net Taxes by the City for the payment of the Bonds. Finally, stock and municipal bond markets in the U.S. and globally have seen significant volatility attributed to COVID-19 concerns over the past few years; there can be no assurances that these or other concerns that emerge later will not materially adversely impact the secondary market for the Bonds.
Cybersecurity
The City, like most other public and private entities, relies on computer and other digital technology and systems to conduct its operations, including with respect to the District and the Bonds. As a recipient and provider of personal, private or other sensitive electronic information, the City is subject to multiple cyber threats, including without limitation hacking, viruses, ransomware, malware and other attacks. No assurance can be given that the efforts of the City to manage cyber threats and attacks will be successful in all cases, or that any such attack will not materially impact the operations or finances of the City, or the administration of the Bonds.
The City is also reliant on other entities and service providers in connection with the administration of the Bonds, including without limitation the County tax collector for the levy and collection of Special Taxes and the Fiscal Agent for the administration of the Bonds. No assurance can be given that the City and these other entities will not be affected by cyber threats and attacks in a manner that may material adversely affect the Bond owners.
TAX MATTERS
Exhibit 2 1495
54 Federal Tax Status. In the opinion of Jones Hall, A Professional Law Corporation, San Francisco, California, Bond Counsel, subject, however to the qualifications set forth below, under existing law, the interest on the Bonds is excluded from gross income for federal income tax purposes and such interest is not an item of tax preference for purposes of the federal alternative minimum tax.
The opinions set forth in the preceding paragraph are subject to the condition that the City comply with all requirements of the Internal Revenue Code of 1986, as amended (the “Tax Code”) that must be satisfied subsequent to the issuance of the Bonds in order that the interest thereon be, and continue to be, excludable from gross income for federal income tax purposes.
The City has made certain representations and covenants in order to comply with each such requirement. Inaccuracy of those representations, or failure to comply with certain of those covenants, may cause the inclusion of such interest in gross income for federal income tax purposes, which may be retroactive to the date of issuance of the Bonds.
Tax Treatment of Original Issue Discount and Premium. If the initial offering price to the public at which a Bond is sold is less than the amount payable at maturity thereof, then such difference constitutes “original issue discount” for purposes of federal income taxes and State of California personal income taxes. If the initial offering price to the public at which a Bond is sold is greater than the amount payable at maturity thereof, then such difference constitutes “original issue premium” for purposes of federal income taxes and State of California personal income taxes. De minimis original issue discount and original issue premium are disregarded.
Under the Tax Code, original issue discount is treated as interest excluded from federal gross income and exempt from State of California personal income taxes to the extent properly allocable to each owner thereof subject to the limitations described in the first paragraph of this section. The original issue discount accrues over the term to maturity of the Bond on the basis of a constant interest rate compounded on each interest or principal payment date (with straightline interpolations between compounding dates). The amount of original issue discount accruing during each period is added to the adjusted basis of such Bonds to determine taxable gain upon disposition (including sale, redemption, or payment on maturity) of such Bond. The Tax Code contains certain provisions relating to the accrual of original issue discount in the case of purchasers of the Bonds who purchase the Bonds after the initial offering of a substantial amount of such maturity. Owners of such Bonds should consult their own tax advisors with respect to the tax consequences of ownership of Bonds with original issue discount, including the treatment of purchasers who do not purchase in the original offering to the public at the first price at which a substantial amount of such Bonds is sold to the public.